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TREAS.
HJ
10
.A13P4
v .318
U.S. Department of the Treasury
PRESS RELEASES
FOR RELEASE AT 2:30 P.M
September 1, 1992
V
Office of Financing
202-219-3350
TREASURY’S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling
approximately $ 22,000 million, to be issued September 10, 1992.
This offering will result in a paydown for the Treasury of about
$1,400 million, as the maturing bills are outstanding in the
amount of $23,405 million. Tenders will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public Debt,
Washington, D. C. 20239-1500, Tuesday, September 8, 1992,
prior to 12:00 noon for noncompetitive tenders and prior to
1:00 p.m., Eastern Daylight Saving time, for competitive tenders.
The two series offered are as follows:
91-day bills (to maturity date) for approximately
$11,000 million, representing an additional amount of bills
dated June 11, 1992
and to mature
December 10, 1992
(CUSIP No. 912794 ZV 9), currently outstanding in the amount
of $ 11,876 million, the additional and original bills to be
freely interchangeable.
182-day bills (to maturity date) for approximately
$ 11,000 million, representing an additional amount of bills
dated
March 12, 1992
and to mature March 11, 1993
(CUSIP No. 912794 B3 7), currently outstanding in the amount
of $ 13,800 million, the additional and original bills to be
freely interchangeable.
The bills will be issued on a discount basis under competi
tive 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 September 10, 1992. 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 competi
tive 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 $ 1,047 million as agents for foreign and international
monetary authorities, and $4,910 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 5176-1 (for 13-week series) or Form PD 5176-2 (for 26-week
series)
NB-1960
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 2
Each bid must state the par amount of bills bid for, which
must be a minimum of $10,000. Bids over $10,000 must be in mul
tiples of $5,000. A bidder submitting a competitive bid for its
own account, whether bidding directly or submitting bids through
a depository institution or government securities broker/dealer,
may not submit a noncompetitive bid for its own account in the
same auction.
Competitive bids must show the discount rate desired,
expressed in two decimal places, e.g., 7.10%. Fractions may not
be used. A single bidder, as defined in Treasury's single bidder
guidelines, may submit competitive tenders at more than one dis
count rate, but the Treasury will not recognize, at any one rate,
any bid in excess of 35 percent of the public offering. A com
petitive bid by a single bidder at any one rate in excess of 35
percent of the public offering will be reduced to the 35 percent
limit. The public offering for any one bill is the amount offered
for sale in the offering announcement, less bills allotted to Fed
eral Reserve Banks for their own account and for the account of
foreign and international authorities in exchange for maturing
bills.
Noncompetitive bids do not specify a discount rate. A
single bidder should not submit a noncompetitive bid for more than
$1,000,000. A noncompetitive bid by a single bidder in excess of
$1,000,000 will be reduced to that amount. A bidder may not sub
mit a noncompetitive bid if the bidder holds a position, in the
bills being auctioned, in "when-issued" trading or in futures or
forward contracts. A noncompetitive bidder may not enter into any
agreement to purchase or sell or otherwise dispose of the bills
being auctioned, nor may it commit to sell the bills prior to the
designated closing time for receipt of competitive bids.
The following institutions may submit tenders for accounts
of customers: depository institutions, as described in Section
19(b)(1)(A), excluding those institutions described in subpara
graph (vii), of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A));
and government securities broker/dealers that are registered with
the Securities and Exchange Commission or noticed as government
securities broker/dealers pursuant to Section 15C(a)(1) of the
Securities Exchange Act of 1934. Others are permitted to submit
tenders only for their own account.
For competitive bids, the submitter must submit with the
tender a customer list that includes, for each customer, the name
of the customer and the amount and discount rate bid by each cus
tomer. A separate tender and customer list should be submitted
for each competitive discount rate. Customer bids may not be
aggregated by discount rate on the customer list.
For noncompetitive bids, the customer list must provide,
for each customer, the name of the customer and the amount bid.
For mailed tenders, the customer list must be submitted with the
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 3
tender. For other than mailed tenders, the customer list should
accompany the tender. If the customer list is not submitted with
the tender, information for the list must be complete and avail
able for review by the deadline for submission of noncompetitive
tenders. The customer list must be received by the Federal
Reserve Bank by auction day.
All bids submitted on behalf of trust estates must identify
on the customer list for each trust estate the name or title of
the trustee(s), a reference to the document creating the trust
with date of execution, and the employer identification number
of the trust.
A competitive bidder must report its net long position in
the bill being offered when the total of all its bids for that
bill and its net long position in the bill equals or exceeds $2
billion, with the position to be determined as of one half-hour
prior to the closing time for the receipt of competitive tenders.
A net long position includes positions, in the bill being auc
tioned, in when-issued trading and in futures and forward con
tracts, as well as holdings of outstanding bills with the same
CUSIP number as the bill being offered. Bidders who meet this
reporting requirement and are customers of a depository institu
tion or a government securities broker/dealer must report their
positions through the institution submitting the bid on their
behalf. A submitter, when submitting a competitive bid for a
customer, must report the customer's net long position in the
security being offered when the total of all the customer's bids
for that security, including bids not placed through the submit
ter, and the customer's net long position in the security equals
or exceeds $2 billion.
Tenders from bidders who are making payment by charge to a
funds account at a Federal Reserve Bank and tenders from bidders
who have an approved autocharge agreement on file at a Federal
Reserve Bank will be received without deposit. Full payment for
the par amount of bills bid for must accompany tenders from all
others, including tenders for bills to be maintained on the bookentry records of the Department of the Treasury. An adjustment
will be made on all accepted tenders accompanied by payment in
full for the difference between the payment submitted and the
price determined in the auction.
Public announcement will be made by the Department of the
Treasury of the amount and discount rate range of accepted bids for
the auction. In each auction, noncompetitive bids for $1,000,000
or less without stated discount rate from any one bidder will be
accepted in full at the weighted average discount rate (in two
decimals) of accepted competitive bids. Competitive bids will then
be accepted, from those at the lowest discount rates through suc
cessively higher discount rates, up to the amount required to meet
the public offering. Bids at the highest accepted discount rate
will be prorated if necessary. Each successful competitive bidder
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 4
will pay the price equivalent to the discount rate bid. Noncom
petitive bidders will pay the price equivalent to the weighted
average discount rate of accepted competitive bids. The calcula
tion of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923.
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.
No single bidder in an auction will be awarded bills in an
amount exceeding 35 percent of the public offering. The deter
mination of the maximum award to a single bidder will take into
account the bidder's reported net long position, if the bidder
has been required to report its position.
Notice of awards will be provided to competitive bidders
whose bids have been accepted, whether those bids were for their
own account or for the account of customers. No later than 12:00
noon local time on the day after the auction, the appropriate
Federal Reserve Bank will notify each depository institution that
has entered into an autocharge agreement with a bidder as to the
amount to be charged to the institution's funds account at the
Federal Reserve Bank on the issue date. Any customer that is
awarded $500 million or more of securities in an auction must
furnish, no later than 10:00 a.m. local time on the day after the
auction, written confirmation of its bid to the Federal Reserve
Bank or Branch where the bid was submitted. If a customer of a
submitter is awarded $500 million or more through the submitter,
the submitter is responsible for notifying the customer of the
bid confirmation requirement.
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
by the issue date, by a charge to a funds account or pursuant to
an approved autocharge agreement, in cash or other immediatelyavailable funds, or in definitive Treasury securities maturing
on or before the settlement date but which are not overdue as
defined in the general regulations governing United States secu
rities. Also, maturing securities held on the book-entry records
of the Department of the Treasury may be reinvested as payment for
new securities that are being offered. Adjustments will be made
for differences between the par value of the maturing definitive
securities accepted in exchange and the issue price of the new
bills.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76 as applicable, Treasury's single bidder guide
lines , 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.
4/17/92
TREASURY NEWS
Department of the Treasury
WMr:
Washington, D.C.
Telephone 2 0 2 -6 2 2 -2 9 6 0
REàSüRÏ
EMBARGOED FOR RELEASE
September 3, 1992
11:00 a.m.
Contact:
Anne Kelly Williams
(202) 622-2960
Treasury announces details of auction experiment
The Treasury Department today announced that it will conduct
a single-price auction experiment which will include all auctions
of two-year and five-year Treasury notes from September 1992
through August 1993. The Treasury had announced previously that
it would experiment with the single-price auction format, under
which all successful bidders obtain securities at the same price.
"This is another step in our ongoing efforts to improve the
government securities market and to minimize the cost to the
taxpayer of financing the federal debt," said Treasury Secretary
Nicholas F. Brady.
Currently, the Treasury uses a multiple-price auction
format, in which successful competitive bidders are awarded
securities at whatever yields are specified in their bids. With
the single-price method, all successful bidders in the two-year
and five-year note auctions will receive the securities at a
common price.
Treasury securities of all other maturities will continue to
be auctioned using the multiple-price format. All rules
applicable to bidding under the current auction method will
remain applicable to bidding in the single-price auctions.
The Treasury Department has decided to begin this experiment
after careful consideration and extensive consultation with
market participants, academic experts, and other knowledgeable
parties. The Treasury will consider the single-price auction
experiment to have been a success if it reduces the U.S.
government's financing costs, whether by encouraging more
aggressive bidding by auction participants or by attracting more
bidders to the auctions.
NB-1961
FOR RELEASE AT 12:30 P.M.
September 3, 1992
CONTACT: SCOTT DYKEMA
(202) 622-2960
JAMES H. FALL, III
Deputy Assistant Secretary
U.S. Department of the Treasury
Remarks before the
Columbia University/Korea Economic Institute
U.S.-Korea Academic Symposium, III
New York City
September 3, 1992
Introduction
It is a pleasure to speak to you this afternoon and to be
part of this timely symposium. As most of you know, developments
in the Korean financial sector have been of keen interest to the
Treasury Department during the past several years. Our interest
is driven by the practical reality that U.S. and other foreign
financial institutions want to be a part of the growing Korean
economy. Korea can benefit from this competition. A fair, open
environment for domestic and foreign institutions will further
the country's growth potential, and increasingly enable Korea to
play a role in the global expansion of financial markets.
The next few years will be crucial as foreign institutions
assess the Korean government's policy reaction to demand from
abroad and the major liberalization taking place in other markets
in Asia.
I will focus my remarks today on Treasury's perspective
regarding Korea's role in an increasingly integrated global
economy, and on our view of the current status of financial
sector liberalization in Korea.
The global context has set the stage for a range of
significant changes that are, in our judgment, increasing the
urgency and benefits of financial liberalization. These
developments are motivating the policy decisions and directions
of various economies as they respond to an intensified
competitive environment in the financial and securities fields.
2
Asia, Eastern Europe, and the newly independent states of the
former Soviet Union are all embracing fundamental market reforms.
At the same time, economic integration in North America, Western
Europe, and Southeast Asia is strengthening and expanding
economic ties within these regions. These developments are
intensifying the competition for investment capital.
Those nations which have moved the quickest to open their
trade, investment, and financial regimes seem to have benefitted
greatly from increased investment flows and development of their
financial markets. We must not underestimate the role played by
financial services liberalization in attracting investment. U.S.
companies routinely cite unhampered access to their traditional
suppliers of banking services and modern financial
infrastructures as important incentives to invest.
A number of countries are already acting decisively. In the
context of the North American Free Trade Agreement, for example,
Mexico has committed to opening its financial services sector to
significant foreign investment and to further liberalizing its
financial and capital markets. Capital movements to Mexico
actually began a couple of years ago in anticipation of these
measures, when global financial institutions began to realize the
significant policy adjustment to which Mexican leaders were
committed.
Important changes are also taking place in several Asian
financial markets. For instance, Indonesia has made deregulation
and modernization of the financial sector a principal focus of
its wide ranging and successful economic reform program.
Virtually all restrictions on capital flows have been removed.
Interest rates and credit ceilings have been deregulated to
mobilize savings, and directed credit schemes have been
significantly reduced. By improving efficiency and lowering the
costs of intermediation in the banking sector, a series of
reforms has increased private and foreign participation, and
expanded the range of financial products and activities. These
reforms have enhanced Indonesia’s ability to attract foreign
investment. More than $17 billion in foreign investment has been
recorded in the last two years alone to finance the country's
current account deficit.
Thailand has made particular progress in deregulating and
liberalizing its securities market. The mid—1991 computerization
of trading and improvements in share registration have
established the Securities Exchange of Thailand as a modern
exchange. In early 1992, Thailand enacted legislation setting up
an SEC—like regulation system which has helped improve investor
confidence. Further important measures were enacted to expand
the scope of business activities in which securities firms can
engage..
3
Treasury has welcomed developments in the rapidly
liberalizing markets in Southeast Asia, and we are intensifying
our regular dialogue to explore common interests and set forth an
informal basis for sharing ideas.
Korea1s Role
Korea has been successful in reaping the benefits of an open
international trade regime, and has become a leading economic
player among its neighbors and around the globe. Over the last
decade, Korea's real GNP growth averaged an enviable 10 percent
annually. Per capita GNP reached $6,500 in 1991, placing Korea
among the world's upper middle income countries. Korean
companies have achieved international prominence in areas such as
ship building, automobile production, iron and steel,
electronics, and textiles, and are emerging giants in certain
consumer fields.
Korea has also experienced some growing pains. Wages have
risen disproportionally to productivity, eroding competitiveness
in some areas. Booming economic conditions over a period of
several years have led to troubling levels of inflation. While
trade and current account deficits have emerged in recent years,
we believe, as do many international experts, that the underlying
strength of the economy enables Korea to sustain such deficits.
I believe I am joined by many credible economic analysts who see
no evidence of any significant threat to Korea's economic
performance. In addition, while external debt has increased,
Korea's cost of servicing that debt has declined substantially
over the past few years, registering only 5.8 percent of export
earnings in 1991, compared to roughly 31 percent in 1987. Net
external debt totalled only 4.6 percent of GNP in 1991, compared
to 17.4 percent in 1987, and you may recall that in the early
1980's there was talk of Korea's being among the sovereign
borrowers most entangled in the "debt crisis." Improving
economic indicators in the first half of 1992 further suggest
that the Korean economy is stabilizing and primed for a new stage
of growth.
Given the determination with which Korea has pursued exportled development strategies and encouraged its companies to invest
abroad, it is clear that Korea has become an integrated member of
the international economy. In the Asia Pacific region in
particular, Korea is an active and increasingly vocal economic
participant. The magnitude of Korea's growing involvement in the
region is exemplified by the enormous increase in the total value
of Korean investment in Southeast Asia, roughly 920 percent from
1988 to 1991. Trade flows have increased on a similar scale: the
level of Korean exports to the ASEAN economies is fast
approaching that of its exports to the EC, Korea's third largest
export market. Korea has also taken a leadership role in seeking
I
4
the establishment of a United Nations-backed investment
information center to promote investment throughout the Asia
Pacific region.
Like many of its global competitors, Korea has recognized
and capitalized on the fundamental shift taking place in many
parts of Asia where open-market strategies are attracting muchneeded investment and technology flows. However, Korea's own
investment environment, and the state of its financial sector in
particular, stand in stark contrast to its neighbors'. A number
of potential investors and others are perplexed about this.
Korea's restrictive financial sector, more than that of any
other country in the region, is having a direct and
unquestionably disturbing impact on foreign investors'
perceptions of the Korean market as a potential investment site.
Limited financing capabilities, stringent capital and foreign
exchange controls, real interest rates well above those
accessible in international capital markets, and excessive
government intervention in the market are leading foreign
companies to choose more welcoming economies for their
investments. Domestic manufacturing firms are likewise suffering
from the prohibitive capital costs resulting from the system's
inefficiencies.
Significantly, the number of new foreign investment projects
in Korea declined by 22 percent between 1987 and 1991. Foreigninvested manufacturing projects declined by 66 percent during the
same period. In a cross-country comparison of new foreign
investment flows as a percentage of GNP in East Asia, Korea ranks
only ninth, behind Singapore, Hong Kong, Malaysia, Thailand,
Taiwan, the Philippines, China and Indonesia. Just as alarming
are the cases of foreign companies already established in Korea
which are pulling their investments out due at least in part to
their difficulties in securing local financing. These facts
speak for themselves and serve as a clear signal for the
political leadership in Korea.
In order to reverse these trends, Korean authorities must
modify their policy approach away from government control of
capital markets. The Korean government's current emphasis on
micromanagement and protection of the financial sector seems to
the outside observer as inefficient for an economy of Korea's
size, sophistication, and capital needs. Korea's advanced stage
of development brings with it a responsibility to be more
innovative in market opening and liberalization, rather than be a
hesitant observer of progress made elsewhere, including other
Asian countries.
Now is the time for Korea to act. Korea's impressive
economic progress provides a strong foundation from which to
press forward with liberalizing policy measures. What is needed
5
is a clearly directed, publicly stated policy that recognizes
defensiveness through protectionism is a thing of the past, and
that living up to Korea's accomplishments and successes in the
global market place requires strong, self-confident leadership.
Status of Financial Sector Liberalization
The Treasury Department has been closely involved in an
effort to enhance market access and encourage broader
liberalization of Korea's financial, capital, and exchange
markets. To this end, Treasury has held periodic Financial
Policy Talks with the Korean Ministry of Finance since early
1990. These are not simply technical matters for the financial
experts. Indeed, broader economic considerations are at stake
for both economies, as demonstrated by the agreement between
President Bush and President Roh at their January summit to
resolve differences in the financial field.
From our perspective we can say that, through the Financial
Policy Talks, some piecemeal progress has been made on individual
difficulties faced by U.S. banks and securities companies
operating in Korea. This progress is commendable. However, it
has become apparent that only with fundamental liberalization of
the financial market will U.S. and other foreign firms be
accorded true equality of competitive opportunity in the Korean
market.
In the fall of 1991, the dialogue between the Treasury
Department and the Ministry of Finance began to focus on the need
to think about financial issues in systemic and long-run terms.
At our most recent round of talks in March, MOF presented a
workplan to develop a three-staged "Blueprint for Financial
Deregulation and Market Opening." We welcomed this as a positive
and important step in our dialogue, and an indication of Korea's
recognition of its responsibilities. I know many of you have
been talking about this blueprint during this symposium. Our
Korean colleagues are to be commended for carrying out the
blueprint formulation process in a transparent fashion, meeting
the deadlines they set for themselves, and identifying the
crucial problem areas needing attention.
There appears to be general agreement that stringent
controls on interest rates, foreign exchange, and capital flows;
pervasive directed credit schemes; and the lack of indirect
monetary policy tools have led to severe distortions in Korea's
financial market and inhibited it from keeping up with the rest
of the economy. The environment has also prevented foreign
financial firms operating in Korea from being able to compete on
a level playing field.
6
We have some differences of opinion regarding how best to
approach these problems. For example, the blueprint sets forth
macroeconomic preconditions for implementation of measures
addressing some of the key problem areas I have just outlined.
These conditions include a balance or surplus in the current
account, lower inflation, and a narrowing of domestic and
international interest rate differentials. In our view, such an
approach puts the cart before the horse. For example,
liberalizing interest rates and lifting capital controls in a
coordinated fashion would help bring domestic interest rates in
line with international rates more quickly and with fewer
distortions to the economy.
Liberalization must occur under the strong leadership of the
government if Korea is to attain its macroeconomic objectives.
We believe strongly that measures to address the core problems
should be tackled in the short term, rather than in the long term
as currently envisioned by the blueprint.
Stages I and II of the blueprint, which include short and
medium term measures in the banking, securities, and money market
areas, have been formulated and implementation of some measures
has begun. A few of the highlights include: enhancing
regulatory transparency; easing restrictions on hedging
opportunities for foreign financial institutions; according
national treatment to foreign financial institutions for purposes
of stock market investment; and expanding the exchange rate
fluctuation band.
As the Korean authorities prepare Stage III, they are
consulting with the World Bank, International Monetary Fund, and
several Korean think tanks. Stage III, which we understand will
reflect the outcome of these studies, is expected to be completed
by the end of this year or very early next year.
Until the key issues are addressed satisfactorily, the
development of the Korean financial system will continue to be
hampered, placing a drag on the economy as a whole. Perhaps most
important, international capital markets will assess Korea's
commitment to liberalization based on the substance and timing of
measures in these crucial areas. Without clear commitments and
consistent implementation, Korea will find itself losing capital
inflows and related technology to more open, inviting markets.
Demands for financial sector deregulation and liberalization
are coming not only from outside Korea's borders, but from Korean
financial firms as well. Korean banks and securities companies
are the primary victims of the government's industrial policies,
which have saddled the banks with enormous amounts of non
performing loans, and probably have stunted innovation and
modernization of the financial industry. The future
competitiveness of Korea's financial industry and the economy as
7
a whole will depend on the ability of its banks and securities
companies to access international capital markets, develop and
offer more advanced financial products, and have greater control
over their lending, deposit taking, and investment practices.
Increased competition in the market would provide the best
opportunity for Korean firms to develop their skills in product
development and risk management. Recent demands by Korean
financial firms to ease excessive government regulation of the
market confirm that liberalization is in Korea's national
interest.
Conclusion
Throughout Asia others are moving fast to open their markets
to foreign competition and integrate their financial systems into
global capital markets. Their efforts have resulted in increased
investment flows and enhanced market efficiency.
The foundation exists for Korea to move forward as well:
strong growth, sound corporate management, and a geographic
location in a region synonymous with high growth and competitive
potential all combine to create a supporting environment for
liberalization. Prompt liberalization and financial market
strengthening are even more imperative if the Korean financial
system hopes to meet the enormous demand for capital that would
come with reunification. As the world has learned from the
German experience, the circumstances under which reunification
occurs are highly unpredictable both in their timing and economic
impact. It is very unlikely that micromanagement of the
financial sector will be either flexible or efficient enough to
respond to the untold demands reunification will place on the
South Korean economy.
Formulation of the "Blueprint for Financial Deregulation
and Market Opening" indicates that policy changes may be
unfolding. The challenge remains for the Korean authorities to
follow through with their stated commitment by speedy
implementation of measures for fundamental financial sector
liberalization. Making these commitments binding in the Uruguay
Round would provide the clear signal that markets would need to
restore their confidence in Korea.
0
PUBLIC DEBT NEWS
D epartm ent of the T reasury • Bureau of the Public D ebt • W ashington, D C 20239
FOR RELEASE AT 3:00 PM
September 4, 1992
Contact: Peter Hollenbach
(202) 219-3302
PUBLIC DEBT ANNOUNCES ACTIVITY FOR
SECURITIES IN THE STRIPS PROGRAM FOR AUGUST 1992
Treasury’s Bureau of the Public Debt announced activity figures for the month of August 1992, of
securities within the Separate Trading of Registered Interest and Principal of Securities program,
(STRIPS).
Dollar Amounts in Thousands
Principal Outstanding
(Eligible Securities)
$635,506,236
Held in Unstripped Form
$484,364,466
Held in Stripped Form
$151,141,770
$12,351,825
Reconstituted in August
The accompanying table gives a breakdown of STRIPS activity by individual loan description.
The balances in this table are subject to audit and subsequent revision. These monthly figures are
included in Table VI of the Monthly Statement of the Public Debt, entitled "Holdings of Treasury
Securities in Stripped Form." These can also be obtained through a recorded message on
(202) 874-4023.
o0o
PA-106
TABLE VI— HOLDINGS OF TREASURY SECURITIES IN STRIPPED FORM, AUGUST 31, 1992
26
(In thousands)
Principal Amount Outstanding
Loan Description
Portion Held in
Unstripped Form
Maturity Date
Total
Reconstituted
This Month'
Portion Held in
Stripped Form
115/8% Note C-1994 ....................................
11/15/94 ....................
$6,658,554
$5,028,154
$1,630,400
$148,800
11-1/4% Note A-1995 ....................................
2/15/95 ......................
6.933.861
5,664.421
1,269,440
33.120
11-1/4% Note B-1995 ....................................
5/15/95 ......................
7,127,086
4,960.206
2.166.880
77,600
10-1/2% Note C-1995 ....................................
8/15/95 ......................
7,955,901
6.015.9Q1
1,940,000
120.000
9-1/2% Note D-1995 .....................................
11/15/95 ....................
7,318,550
5,011.750
2.306,800
60,400
8-7/8% Note A-1996 .....................................
2/15/96 ......................
8,415.019
7,898,219
516,800
182,400
100,800
7 3/8% Note C-1996 .....................................
5/15/96 ......................
20,085,643
19,504,843
580,800
7-1/4% Note D-1996 .....................................
11/15/96 ....................
20,258,810
18,562,010
1,696,800
42,400
8-1/2%-Note A-1997 .....................................
5/15/97 ......................
9,921,237
8.847,237
1,074,000
112,000
8-5/8% Note B-1997 .....................................
8/15/97 ......................
9,362,836
8.599.636
763.200
-0-
8-7/8% Note C-1997 .....................................
11/15/97 ........ ...........
9,808,329
8,377,929
1,430,400
65,600
8-1/8% Note A-1998 .....................................
2/15/98 ......................
9.159,068
8,967,388
191,680
-0-
9% Note B-1998 ............................................
5/15/98 ......................
9,165,387
8,744,987
420,400
80,000
9-1/4% Note C-1998 .....................................
8/15/98 . . .
8-7/8% Note D-1998 .....................................
11/15/98 ....................
9,902,875
9.347,675
555.200
-0-
8-7/8% Note A -1999 .....................................
2/15/99 ......................
9,719,623
9,602.823
116.800
-01,600
11 142 64fi
9-1/8% Note B-1999 .....................................
5/15/99 ......................
10,047,103
9,170,303
876,800
8% Note C-1999 ............................................
8/15/99 ......................
10.163.644
10,076.119
87,525
0-
7 7/8% Note 0-1999 .....................................
11/15/99 ..................
10,773.960
10.769.160
4.800
-0-
.().
8-1/2% Note A-2000 .....................................
2/15/00 ........
10 671 a n
M 67303!
8-7/8% Note B-2000 .....................................
5/15/00 ......................
10,496,230
10,381.030
115,200
0-
8-3/4% Note C-2000 .....................................
8/15/00 ......................
11,080,646
10.983.846
96,800
-0-
i
8-1/2% Note D-2000 .....................................
11/15/00 .................
11,519,682
11,349.682
170,000
-0-
7-3/4% Note A-2001 •.....................................
2/15/01 ......................
11,312,802
11,246.402
66,400
-0-
8% Note 8-2001 ............................................
5/15/01 ......................
12.398.083
12.085.083
313,000
-0-
7-7/8% Note C-2001
.....................................
8/15/01 ......................
12.339,185
12.182,385
156.800
-0-
7-1/2% Note D-2001
.....................................
11/15/01 ...............
24.226,102
24,226.102
-0-
-0-
7-1/2% Note A-2002 .....................................
5/15/02 ....................
11,714,417
11,642,097
72,320
132.000
6 3/8% Note B-2002 .....................................
8/15/02 ......................
11,749,270
11,718.870
30.400
-0-
11-5/8% Bond 2004 .......................................
11/15/04 ..................
8.301,806
5.002.606
3.299.200
1,462.400
12% Bond 2005 ............................................
5/15/05 ........ .............
4,260,758
2.939,708
1,321.050
756.850
10-3/4% Bond 2005 .......................................
8/15/05 ......................
9,269,713
8.636.113
633.600
516,000
9-3/8% Bond 2006 .........................................
2/15/06 ......................
4,755,916
4,755,916
-0-
-0-
11-3/4% Bond 2009-14
11/15/14
6,005.584
1,745,584
4,260.000
566.400
579,200
................................
...............
11-1/4% Bond 2015 .......................................
2/15/15 ......................
12,667,799
2.790,199
9.877,600
10-5/8% Bond 2015 .......................................
8/15/15 ......................
7.149,916
1,999,836
5,150.080
319,040
9-7/8% Bond 2015 ........................................
11/15/15 ...................
6.899.859
2,887,059
4,012,800
1,201,600.
9 1/4% Bond 2016 ........................................
2/15/16 ......................
7,266,854
6,622.054
644,800
0-
7-1/4% Bond 2016 .........................................
5/15/16 ............ .......
18.823,551
18,120.351
703,200
284,000
7-1/2% Bond 2016 .........................................
11/15/16 .......
18,864,448
17,313.568
1,550.880
-0 -
8-3/4% Bond 2017 .........................................
5/15/17 .................
18,194,169
6.928.089
11,266,080
489.120
8-7/8% Bond 2017 .........................................
8/15/17 ...................
14.016,858
9,362,458
4,654.400
64,000
9-1/8% Bond 2018
5/15/18 .................
8,708,639
2,041,439
6,667,200
40.000
9% Bond 2018
.......................................
..............................................
11/15/18 .................
9.032,870
2,228,470
6,804,400
868.000
8-7/8% 8ond 2019 .........................................
2/15/19 ......................
19.250.798
7.191,598
12,059.200
465,600
8-1/8% Bond 2019 .........................................
8/15/19 ......................
20,213.832
13,258.632
6,955.200
177,600
8-1/2% Bond 2020 .........................................
2/15/20 ......................
10.228.868
4,598.468
5.630.400
53.200
8-3/4% Bond 2020 .........................................
5/15/20 ......................
10,158,883
2,294,883
7.864,000
162.720
8-3/4% Bond 2020 .........................................
8/15/20 ......................
21.418,606
5.313,166
16.105.440
558,400
7 7/8% Bond 2021 ........................................
2/15/21 ......................
11,113,373
9,750,173
1,363.200
252.800
8-1/8% Bond 2021 .........................................
5/15/21 ......................
11,958,888
6.121,768
5.837.120
426.240
8-1/8% Bond 2021 .........................................
8/15/21 ....................
12.163.482
10,243.482
1,920,000
519.360
..............................................
11/15/21 ....................
32.798.394
19.221.319
13,577.075
1.432.575
7-1/4% Bond 2022 .........................................
8/15/22 ......................
10.352.790
10.351.190
1.600
-0-
635.506.236
484.364.466
151,141,770
12,351,825
8% Bond 2021
Total ................................................................
'Effective May I, 1987, securities held m stripped form were eligible for reconstitution to the» unstripped form.
Note: On the 4th workday of each month a recording of Table VI will be available after 1 00 pm. The telephone number is (202) 874-4023. The balances in this table are subject to audit and subsequent
adjustments.
FFB 202-622-245
FEDERAL FINANCING BANK ACTIVITY
Charles D. Haworth, Secretary, Federal Financing Bank (FFB),
announced the following activity for the month of July 1992.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $177.7 billion on July 31, 1992,
posting a decrease of $3,148.3 million from the level on June 30,
1992. This net change was the result of decreases in holdings of
agency debt of $1,550.7 million, in holdings of agency assets of
$1,589.5 million, and in holdings of agency-guaranteed loans of
$8.2 million. FFB made 30 disbursements in July.
Attached to this release are tables presenting FFB July
loan activity and FFB holdings as of July 31, 1992.
NB-1963
Page 2 öf 3
FEDERAL FINANCING BANK
JULY 1992 ACTIVITY
BORROWER
AMOUNT
FINAL
INTEREST INTEREST
OF ADVANCE MATURITY RATE
RATE
DATE
(semiannual)
(not semi
annual)
AGENCY DEBT
FEDERAL DEPOSIT INSURANCE CORPORATION
Note No. 0006
Advance #1
7/1 $15,159,954,180.82
10/1/92
3.778%
52,694,000,000.00
10/1/92
3.778%
7/1
7/15
7/17
7/21
7/24
7/24
7/28
7/31
8,393.00
1,944,934.00
2,606,399.00
513,617.15
226,593.00
5,769,225.00
73,684.62
162,889.00
1/3/95
1/3/95
12/11/95
1/3/95
12/11/95
12/11/95
12/11/95
12/11/95
5.299%
4.761%
5.194%
4.712%
5.072%
5.072%
5.139%
5.244%
7/28
4,356,879.99 11/16/92
3.411%
RESOLUTION TRUST CORPORATION
Note No. 0015
Advance #1
7/1
GOVERNMENT-GUARANTEED LOANS
GENERAL SERVICES ADMINISTRATION
Miami Law Enforcement
Miami Law Enforcement
Foley Square Courthouse
Memphis 1RS Service Center
Foley Square Courthouse
Foley Square Office Bldg.
Foley Square Courthouse
Foley Square Courthouse
ICTC Buildina
Advance #35
RURAL ELECTRIFICATION ADMINISTRATION
Sugar Land Telephone #210A
Oglethorpe Electric #335
SSouth Texas Electric #109
SSouth Texas Electric #109
SSouth Texas Electric #109
SSouth Texas Electric #109
SAssociated Electric #020
SAssociated Electric #132
SAssociated Electric #132
SAssociated Electric #132
SAssociated Electric #132
SAssociated Electric #132
SAssociated Electric #132
SAssociated Electric #132
SAssociated Electric #132
SAssociated Electric #132
SAssociated Electric #132
SAssociated Electric #132
7/1
7/24
7/24
7/24
7/24
7/24
7/27
7/27
7/27
7/27
7/27
7/27
7/27
7/27
7/27
7/27
7/27
7/27
4,000,000.00
23,362,000.00
1,758,856.48
1,172,527.24
1,046,899.46
1,427,590.16
283,717.90
12,769,134.29
9,930,122.91
7,565,807.70
16,361,059.43
9,930,122.91
13,120,804.37
6,792,447.03
14,195,931.76
9,098,466.34
13,458,148.17
11,325,695.11
1/3/17
1/2/24
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
12/31/13
7.319%
7.390%
6.984%
6.984%
6.984%
6.984%
6.998%
6.998%
6.998%
6.998%
6.998%
6.998%
6.998%
6.998%
6.998%
6.998%
6.998%
6.998%
TENNESSEE VALLEY AUTHORITY
Seven States Enercrv Corporation
Note A-92-12
Sinterest rate buydown
7/31
331,847,537.04 10/30/92 3.377%
7.253%
7.323%
6.924%
6.924%
6.924%
6.924%
6.938%
6.938%
6.938%
6.938%
6.938%
6.938%
6.938%
6.938%
6.938%
6.938%
6.938%
6.938%
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
Page 3 of 3
FEDERAL FINANCING BANK
(in millions)
Program
Agency Debt:
Export-Import Bank
Federal Deposit Insurance Corporation
NCUA-Central Liquidity Fund
Resolution Trust Corporation
Tennessee Valley Authority
U.S. Postal Service
sub-total*
Julv 31. 1992
$
8,150.0
15,160.0
5.0
52,694.0
8,475.0
9.903.4
94,387.4
June 30. 1992
$
8,150.0
15,160.0
5.0
53,694.7
9,025.0
9.903.4
95,938.1
Net Change
7/1/92-7/31/92
$
0.0
0.0
0.0
-1,000.7
-550.0
0.0
-1,550.7
FY '92 Net Change
10/1/91-7/31/92
$
-3,111.0
6,864.0
-108.6
-10,188.4
-3,400.0
1.702.8
-8,241.1
Agency Assets:
Fanners Home Administration
DHHS-Health Maintenance Org.
DHHS-Medical Facilities
Rural Electrification Admin.-CBO
Small Business Administration
sub-total*
43,209.0
55.2
64.2
4,598.9
4.5
47,931.8
44,784.0
61.2
72.5
4,598.9
4.7
49,521.2
-1,575.0
-6.0
-8.3
0.0
-ot?
-1,589.5
-7,485.0
-6.0
-11.6
-65.0
-1.7
-7,569.3
Government-Guaranteed Loans:
DOD-Foreign Military Sales
DEd.-Student Loan Marketing Assn.
DEPCO-Rhode Island
DHUD-Community Dev. Block Grant
DHUD-Public Housing Notes +
General Services Administration +
DOI-Guam Power Authority
DOI-Virgin Islands
NASA-Space Communications Co. +
DON-Ship Lease Financing
Rural Electrification Administration
SBA-Small Business Investment Cos.
SBA-State/Local Development Cos.
TVA-Seven States Energy Corp.
DOT-Section 511
DOT-WMATA
sub-total*
4,398.1
4,820.0
125.0
184.7
1,853.2
750.8
27.7
23.7
0.0
1,576.2
18,226.5
155.6
641.4
2,401.0
19.6
177.0
35,380.5
4,416.0
4,820.0
125.0
186.6
1,853.2
735.2
27.7
23.9
0.0
1,576.2
18,199.2
161.4
644.5
2,423.2
19.6
177.0
35,388.7
-17.9
0.0
0.0
-1.9
0.0
15.7
0.0
-0.2
0.0
0.0
27.4
-5.9
-3.1
-22.3
-0.0
0.0
<N
00
1
-201.8
-30.0
125.0
-19.9
-50.2
90.2
-0.7
-0.8
-32.7
-48.3
-370.4
-89.5
-46.9
-46.1
-1.7
0.0
-723.6
$ 177,699.7
$ 180,848.0
$ -3,148.3
$ -16,534.1
grand-total*
♦figures may not total due to rounding
+does not include capitalized interest
TREASURY NEWS
Department of the Treasury
Washington, D.C
FOR RELEASE AT 2:30 P.M.
September 8, 1992
CONTACT:
Telephone 2 0 2 -6 2 2 -2 9 6 0
Office of Financing
202-219-3350
TREASURY’S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling
approximately $ 21,200 million, to be issued September 17, 1992.
This offering will result in a paydown for the Treasury of about
$2,175 million, as the maturing bills are outstanding in the
amount of $ 23,363million. Tenders will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public Debt,
Washington, D. C. 20239-1500,
Monday, September 14, 1992,
prior to 12:00 noon for noncompetitive tenders and prior to
1:00 p.m., Eastern Daylight Saving time, for competitive tenders.
The two series offered are as follows:
91 -day bills (to maturity date) for approximately
$ 1 0 , 6 0 0 million, representing an additional amount of bills
dated December 19, 1991
and to mature December 17, 1992
(CUSIP No. 912794 ZB 3), currently outstanding in the amount
of $ 25,027 million, the additional and original bills to be
freely interchangeable.
182 “day bills for approximately $ 1 0 , 6 0 0 million, to be
dated
September 17, 1992 and to mature March 18, 1993
(CUSIP
No. 912794 B5 2 ).
The bills will be issued on a discount basis under competi
tive 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 September 17, 1992. 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 competi
tive 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 $ 1,121 million as agents for foreign and international
monetary authorities, and $ 5 , 2 4 3 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 5176-1 (for 13-week series) or Form PD 5176-2 (for 26-week
series).
NB-1964
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 2
Each bid must state the par amount of bills bid for, which
must be a minimum of $10,000. Bids over $10,000 must be in mul
tiples of $5,000. A bidder submitting a competitive bid for its
own account, whether bidding directly or submitting bids through
a depository institution or government securities broker/dealer,
may not submit a noncompetitive bid for its own account in the
same auction.
Competitive bids must show the discount rate desired,
expressed in two decimal places, e.g., 7.10%. Fractions may not
be used. A single bidder, as defined in Treasury's single bidder
guidelines, may submit competitive tenders at more than one dis
count rate, but the Treasury will not recognize, at any one rate,
any bid in excess of 35 percent of the public offering. A com
petitive bid by a single bidder at any one rate in excess of 35
percent of the public offering will be reduced to the 35 percent
limit. The public offering for any one bill is the amount offered
for sale in the offering announcement, less bills allotted to Fed
eral Reserve Banks for their own account and for the account of
foreign and international authorities in exchange for maturing
bills.
Noncompetitive bids do not specify a discount rate. A
single bidder should not submit a noncompetitive bid for more than
$1,000,000. A noncompetitive bid by a single bidder in excess of
$1,000,000 will be reduced to that amount. A bidder may not sub
mit a noncompetitive bid if the bidder holds a position, in the
bills being auctioned, in "when-issued” trading or in futures or
forward contracts. A noncompetitive bidder may not enter into any
agreement to purchase or sell or otherwise dispose of the bills
being auctioned, nor may it commit to sell the bills prior to the
designated closing time for receipt of competitive bids.
The following institutions may submit tenders for accounts
of customers: depository institutions, as described in Section
19(b)(1)(A), excluding those institutions described in subpara
graph (vii), of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A));
and government securities broker/dealers that are registered with
the Securities and Exchange Commission or noticed as government
securities broker/dealers pursuant to Section 15C(a)(1) of the
Securities Exchange Act of 1934. Others are permitted to submit
tenders only for their own account.
For competitive bids, the submitter must submit with the
tender a customer list that includes, for each customer, the name
of the customer and the amount and discount rate bid by each cus
tomer. A separate tender and customer list should be submitted
for each competitive discount rate. Customer bids may not be
aggregated by discount rate on the customer list.
For noncompetitive bids, the customer list must provide,
for each customer, the name of the customer and the amount bid.
For mailed tenders, the customer list must be submitted with the
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 3
tender. For other than mailed tenders, the customer list should
accompany the tender. If the customer list is not submitted with
the tender, information for the list must be complete and avail
able for review by the deadline for submission of noncompetitive
tenders. The customer list must be received by the Federal
Reserve Bank by auction day.
All bids submitted on behalf of trust estates must identify
on the customer list for each trust estate the name or title of
the trustee(s), a reference to the document creating the trust
with date of execution, and the employer identification number
of the trust.
A competitive bidder must report its net long position in
the bill being offered when the total of all its bids for that
bill and its net long position in the bill equals or exceeds $2
billion, with the position to be determined as of one half-hour
prior to the closing time for the receipt of competitive tenders.
A net long position includes positions, in the bill being auc
tioned, in when-issued trading and in futures and forward con
tracts, as well as holdings of outstanding bills with the same
CUSIP number as the bill being offered. Bidders who meet this
reporting requirement and are customers of a depository institu
tion or a government securities broker/dealer must report their
positions through the institution submitting the bid on their
behalf. A submitter, when submitting a competitive bid for a
customer, must report the customer's net long position in the
security being offered when the total of all the customer's bids
for that security, including bids not placed through the submit
ter, and the customer's net long position in the security equals
or exceeds $2 billion.
Tenders from bidders who are making payment by charge to a
funds account at a Federal Reserve Bank and tenders from bidders
who have an approved autocharge agreement on file at a Federal
Reserve Bank will be received without deposit. Full payment for
the par amount of bills bid for must accompany tenders from all
others, including tenders for bills to be maintained on the bookentry records of the Department of the Treasury. An adjustment
will be made on all accepted tenders accompanied by payment in
full for the difference between the payment submitted and the
price determined in the auction.
Public announcement will be made by the Department of the
Treasury of the amount and discount rate range of accepted bids for
the auction.
In each auction, noncompetitive bids for $1,000,000
or less without stated discount rate from any one bidder will be
accepted in full at the weighted average discount rate (in two
decimals) of accepted competitive bids. Competitive bids will then
be accepted, from those at the lowest discount rates through suc
cessively higher discount rates, up to the amount required to meet
the public offering. Bids at the highest accepted discount rate
will be prorated if necessary. Each successful competitive bidder
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 4
will pay the price equivalent to the discount rate bid. Noncom
petitive bidders will pay the price equivalent to the weighted
average discount rate of accepted competitive bids. The calcula
tion of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923.
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.
No single bidder in an auction will be awarded bills in an
amount exceeding 35 percent of the public offering. The deter
mination of the maximum award to a single bidder will take into
account the bidder's reported net long position, if the bidder
has been required to report its position.
Notice of awards will be provided to competitive bidders
whose bids have been accepted, whether those bids were for their
own account or for the account of customers. No later than 12:00
noon local time on the day after the auction, the appropriate
Federal Reserve Bank will notify each depository institution that
has entered into an autocharge agreement with a bidder as to the
amount to be charged to the institution's funds account at the
Federal Reserve Bank on the issue date. Any customer that is
awarded $500 million or more of securities in an auction must
furnish, no later than 10:00 a.m. local time on the day after the
auction, written confirmation of its bid to the Federal Reserve
Bank or Branch where the bid was submitted. If a customer of a
submitter is awarded $500 million or more through the submitter,
the submitter is responsible for notifying the customer of the
bid confirmation requirement.
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
by the issue date, by a charge to a funds account or pursuant to
an approved autocharge agreement, in cash or other immediatelyavailable funds, or in definitive Treasury securities maturing
on or before the settlement date but which are not overdue as
defined in the general regulations governing United States secu
rities. Also, maturing securities held on the book-entry records
of the Department of the Treasury may be reinvested as payment for
new securities that are being offered. Adjustments will be made
for differences between the par value of the maturing definitive
securities accepted in exchange and the issue price of the new
bills.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76 as applicable, Treasury's single bidder guide
lines, 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.
4/17/92
UBLIC DEBT NEWS f
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
September 8, 1992
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $11,049 million of 13-week bills to be issued
September 10, 1992 and to mature December 10, 1992 were
accepted today (CUSIP: 912794ZV9).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2.90%
2.92%
2.91%
Investment
Rate_____Price
2.96%
99.267
2.98%
99.262
2.97%
99.264
Tenders at the high discount rate were allotted 2%.
The investment rate is the equivalent coupon-issue yield.
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
25,245
35,827,110
11,095
40,670
141,130
23,030
2,309,950
13,745
9,795
35,605
16,230
746,490
861.190
$40,061,285
Accepted
25,245
9,793,015
11,095
40,670
67,130
23,030
89,530
13,745
9,795
35,605
16,230
63,190
861.190
$11,049,470
Type
Competitive
Noncompetitive
Subtotal, Public
$35,713,820
1.388.920
$37,102,740
$6,702,005
1.388.920
$8,090,925
2,610,155
2,610,155
348.390
$40,061,285
348.390
$11,049,470
Federal Reserve
Foreign Official
Institutions
TOTALS
An additional $177, 610 thousand of bills will be
issued to foreign official institutions for new cash.
/
NB-1965
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
September 8, 1992
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $11,002 million of 26-week bills to be issued
September 10, 1992 and to mature March 11, 1993 were
accepted today (CUSIP: 912794B37).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2.94%
2.95%
2.95%
Investment
Rate_____Price
3.03%
98.514
3.04%
98.509
3.04%
98.509
Tenders at the high discount rate were allotted 99%.
The investment rate is the equivalent coupon-issue yield.
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
23,085
36,773,915
12,380
131,590
21,195
29,470
1,551,130
14,660
8,585
28,085
11,800
763,390
618.190
$39,987,475
Accented
23,085
9,939,600
12,380
79,590
21,195
26,460
74,630
14,660
8,585
28,085
11,800
143,340
618.190
$11,001,600
Type
Competitive
Noncompetitive
Subtotal, Public
$35,986,775
993.360
$36,980,135
$7,000,900
993.360
$7,994,260
2,300,000
2,300,000
707.340
$39,987,475
707.340
$11,001,600
Federal Reserve
Foreign Official
Institutions
TOTALS
An additional $381 ,860 thousand of bills will :
issued to foreign official institutions for new cash.
NB-1966
TREASURY NEWS
Department of the Treasury
TEXT AS PREPARED FOR DELIVERY
Washington, D.C
CONTACT:
Telephone 2 0 2 -6 2 2 -2 9 6 0
Claire Buchan
202-622-2910
REMARKS BY
DEPUTY SECRETARY OF THE TREASURY JOHN E. ROBSON
AMERICAN ELECTRONICS ASSOCIATION
WASHINGTON INSIDERS' BREAKFAST
WASHINGTON, D.C.
SEPTEMBER 9, 1992
Good morning. Thank you for inviting me to speak here
today, and for providing me with the opportunity to recognize the
proud tradition of the American electronics industry, and the
vital role it has played in the country's economic growth and the
international competitiveness of American enterprise.
AEA estimates that the U.S. electronics industry employs
approximately 2.4 million American workers, making it the
nation's largest manufacturing sector. And despite fierce
competition from abroad, your industry reported almost $19
billion in exports for the first quarter of 1992 alone. As a
former pharmaceutical company CEO, I feel a kindred appreciation
for the enormous contributions that dynamic, high-tech fields
like yours are making to fuel economic growth, to create jobs,
and to maintain American commercial leadership. I salute you for
those accomplishments.
But it is not enough to rest on past laurels. Today we
stand on the threshold of a new century, a time when American
businesses face the unprecedented challenges of a global economy.
Yes, it is a time of challenge. But it is also a time rich with
opportunities for continued success and growth.
Today I will talk about some things which government can and
should do to help us seize those opportunities, and spur economic
growth, entrepreneurial initiative and international
competitiveness. Equally important, I will also talk about some
things government should not do.
This Administration has been most attentive to the
importance of keeping America's high-tech industries strong and
competitive. President Bush has specifically recognized the
importance of the electronics industry through several actions,
including a proposal now before Congress to invest almost $18
million to support seven Manufacturing Technology Centers. By
N B - 1967
2
providing technology demonstration, training programs, advice on
manufacturing operations, and information on government
resources, these facilities will help keep your companies on the
frontier of innovation. That is one thing government can do.
But there are others* For example, the President has also
called for a permanent R&D tax credit, a permanent resolution of
R&D allocation expenses, an investment tax allowance, a
moratorium on unnecessary regulations, and a capital gains tax
cut.
All of us in this room recognize that America can meet the
challenges of tomorrow only by investing today. And that is why
the President has proposed an Investment Tax Allowance and a
permanent R&D tax credit. I don't have to tell you that, as a
percentage of GNP, U.S. business invests less than its
competitors in Germany or Japan — or that this hurts America's
economic growth, job creation and competitiveness. But I will
tell you that it is time for us to arrest this trend.
The Investment Tax Allowance would help do that by giving
firms additional first year depreciation on the purchase price of
newly acquired productive equipment.
And equally vital to our economic future is to make the
Research and Development tax credit permanent. I don't need to
explain to this gathering that this proposal of the President's,
which Congress has failed to adopt three years in a row, will
stimulate private sector investment in R&D and the technological
advancement upon which America's long-term prosperity depends.
The initials "R&D" stand for "Research and Development".
But they stand for much more:
R&D stands for jobs. It's a simple formula — private
investment in R&D leads to technological innovations. New
technology creates new products and new companies. And that
creates jobs. And we don't have to look far for proof of the
R&D-equals-jobs formula. For, from personal computers to pocket
faxes, from high fidelity to fiber optics, the new technologies
discovered and developed by the American electronics industry
have generated tens of thousands of jobs.
R&D also stands for enhanced international competitiveness
for American enterprises. And R&D stands for higher
productivity, higher incomes, and a better quality of life for
all Americans. Again the formula is simple. For, as the private
sector invests in R&D and creates new products and new
technology, productivity rises, and as productivity rises,
workers earn more.
3
But providing additional incentives for research and
investment isn't enough. People must be free to pursue
entrepreneurial opportunity without unreasonable burdens, and
government can give them some entrepreneurial elbow room by
loosening the chokehold of regulation which is throttling
business. The President has tackled this problem head on. He
imposed a moratorium on new regulations, and has moved to roll
back needless regulation through the work of the Council on
Competitiveness.
Through the promotion of these and other measures — legal
system reform, payroll tax simplification, a capital gains tax
reduction, inducements for savings, reform and modernization of
the banking system, and the North American Free Trade Agreement - the Bush Administration is fighting to create an environment
which will assure that American businesses can continue to
outwork, outproduce, and outsmart the rest of the world.
These are
Administration
and to prepare
century. What
some of the steps the government of this
is trying to take to spur growth and innovation
America for the economic challenges of the 21st
about things government should not do?
One thing government should not do is stick its nose into
decisions on executive compensation. These are decisions that
must be made by the marketplace and the vehicles of corporate
governance. Yet we have all seen the media stories of executives
whose compensation was way out of line with their companies'
performance. Naturally, these cases have angered shareholders.
And, not surprisingly, the issue has become politicized and
spawned a variety of frequently bad, populist-flavored proposals.
It won't come as a surprise that many of the bad proposals
come from Congress, ever anxious to get its mitts on other
people's money. Some members advocate an outright ceiling on
executive pay. Others want to bar the business expense tax
deduction for compensation over a certain amount.
But Congress shouldn't be anywhere near this stuff. These
proposals amount to the kind of government wage-setting so
ruinously employed in the former communist economies of Eastern
Europe and the Soviet Union. We have urged that they abandon
these practices in favor of free market economics, and it would
be a supreme irony if we ourselves were now to adopt them. These
intrusive legislative proposals should be resolutely opposed.
The SEC has also entered the executive compensation fray.
To its credit, the agency has resisted efforts to set ceilings on
pay, and has used its regulatory authority to see that
shareholders are better informed on executive compensation.
4
One SEC proposal would require a company's board of
directors to publicly explain and defend its compensation
decisions in the proxy statement. This proposal hits exactly the
right targets: accountability of directors and a better-informed
shareholder-marketplace.
Another SEC proposal would clarify the presentation of
executive compensation data in proxy statements, and a third
would require a five-year history of a firm's "shareholder
returns" in stock price performance and dividends compared to S&P
500 average stocks and a group of "peer" companies.
The biggest risk in these efforts to address executive
compensation is that the approaches will tend to oversimplify the
subject. Executive compensation is extremely complicated and
quite situation-specific. These decisions do not lend themselves
to any sort of uniform "cookie-cutter" formulas. That is why you
must leave those decisions squarely in the hands of the board of
directors, and then insure that the directors are held squarely
accountable for their executive compensation decisions by wellinformed shareholders who are reasonably empowered to remove and
change directors in the corporate electoral process.
Another place government shouldn't mess around is employee
stock options. This is an especially important employee
incentive for industries, like yours, which deals with innovative
new technologies.
I know something about stock options. I have held and
exercised them, granted them broadly to my company's employees,
and watched them work as a powerful incentive for motivating,
attracting and retaining talented people. You and I know the
importance of stock options. But there are others who are about
to take actions that will put stock options on the endangered
species list.
I refer specifically to the accounting idea, now being
considered by the Financial Accounting Standards Board, at least
one U.S. Senator, and possibly the SEC, to require companies to
record the "expense" of stock options as a charge against income.
Who would be hurt most by this idea?
The start-up firms
and smaller companies which are the typical model for electronics
and other high-tech businesses, that's who. And the companies
which frequently lack the resources to pay significant cash
compensation, that's who. Companies like these use stock options
to provide reward potential to scientific and technical
entrepreneurs, and to attract and retain the necessary technical
and management talent. For these companies, employee stock
options are not a luxury. They are a necessity.
5
But this isn't only a small company issue — big companies
need employee stock options, too. Firms of all sizes use them,
and all would be hurt if stock options are eviscerated by an
accounting rule.
Certainly there is no issue of adequate disclosure to
shareholders, since the SEC has long required all the pertinent
data on stock options to be laid out in proxy statements in great
detail. But there are technical issues like how to value
something whose worth is totally dependent on the unknown future
performance of a business. And how do you avoid the perverse
result that the more successful a venture becomes, and the more
its stock price rises, the greater the hit to its earnings will
be when its employees exercise the options.
Given all this, you might ask yourself why FASB and members
of Congress are considering this accounting change for stock
options which will deter their use.
The accounting experts will tell you that stock options have
value, and, therefore, they must be reflected as a compensation
expense in the company's profit and loss statements. This, they
maintain, is required by the rules of sound financial
scorekeeping — textbook accounting, if you will.
But even if the accounting experts are technically correct,
and I don't concede that they are, why in the name of little
green eyeshades would you want to sacrifice a proven and
important employee incentive — one that stimulates innovation
and economic growth — on the altar of accounting theology?
That is obviously a very bad trade. And it is unimaginable
that FASB, members of Congress, or anyone else would want to
damage this valuable tool for economic growth when there is so
little to gain by doing so.
Yet it seems to me that the stock option problem is only one
example of a lot of questionable trades Big Government is making
in the regulatory arena. Government is giving away too much in
economic growth and entrepreneurial elbow room for too little,
and often only imagined, improvements in quality of life.
But in fact it's much worse. Because economic opportunity,
entrepreneurial initiative and the spirit of commerce that has
been the hallmark of American society since the beginning of the
Republic is suffocating, suffocating in an avalanche of
regulations, forms, accountants, lawyers, lawsuits, technical
experts, and paper shuffling that, as far as I can see, do very
little except distract us from what really matters, burden us
with immense, unnecessary costs, and advance the quality of life
6
in America not a jot.
This is not just missing the forest for the trees. This is
looking at the leaves and pine needles! And it must stop!
But I do not believe this tidal wave of regulation will
stop, and most importantly, start getting rolled back — even
with the considerable effort we have made in the Bush
Administration — even with the resistance of energetic
industrial associations like yours — until the working men and
women in America realize that it is their jobs, and their
pocketbooks, and their standard of living, that are at stake.
Then, maybe then, we will see a national rebellion against
excessive regulation, excessive lawsuits, and the excesses of
other enemies of economic growth, competitiveness, productivity
and entrepreneurism.
That is what it is going to take. I hope that all of you in
this room will be active participants in such a movement. And I
can assure you that the Bush Administration will continue to
devote its full energies to stop those unnecessary and non
productive burdens.
C/er the last 50 years, you, the members of the American
Electronics Association, have been at the forefront of
entrepreneurism. From silicon to software, from the field of
digital technology to the battlefield of Desert Storm, the
American electronics industry has produced new technologies and
industries which have helped build the world's largest economy
and made the U.S. the world's number one producer of goods and
services.
I know that the electronics industry shares the vision held
by the Bush Administration of a future in which American
enterprise will continue to lead the world in the development of
new technologies and new markets. And it is appropriate here and
now that we dedicate our mutual efforts to these ends.
Thank you.
# # #
TREASURY NEWS
Department of the Treasury
FOR IMMEDIATE RELEASE
SEPTEMBER 9, 1992
Washington, D.C.
KcÂhU* T C0NTACT;
Telephone 2 0 2 -6 2 2 -2 9 6 0
KEITH CARROLL
202-622-2930
TREASURY SECRETARY NICHOLAS F. BRADY
U.S. CUSTOMS COMMISSIONER CAROL HALLETT:
COMMITTED TO REBUILDING CUSTOMS AIR
FACILITIES DESTROYED BY HURRICANE ANDREW
Miami, Fla.— Treasury Secretary Nicholas F. Brady and U.S.
Customs Commissioner Carol Hallett today said the Bush
Administration is committed to fully restoring and rebuilding the
Customs Service's air facilities in south Florida hit by
Hurricane Andrew.
Customs Miami Air Branch stationed at Homestead Air Force
Base was completely destroyed and the C3I facility at Richmond
Heights also suffered considerable damage. The equipment and
facilities destroyed are used extensively to combat illegal drug
smuggling into the country along the Florida coast.
While in Florida, Secretary Brady said, "We are committed to
rebuilding the Customs Service's air facilities which were
destroyed by Hurricane Andrew. These facilities are vital to the
enforcement efforts in the Miami area and are crucial in stemming
the flow of illegal drugs into the country."
Customs Commissioner Carol Hallett added, "Despite the
extensive damage and devastation, drug smugglers should not view
this as an opportunity. With all of the heartbreak our employees
have endured, through their dedication and hard work our complete
response and monitoring capabilities have been restored. I can
assure you that we will deal with any and all attempts to violate
the law."
The Administration submitted to Congress on September 8
its request of $34.5 million in emergency funding to rebuild the
Customs facilities. This funding is part of the President's
emergency request to aid the victims in Florida and Louisiana
affected by Hurricane Andrew.
oOo
NB 1968
TREASURY RESPONDS TO THE PEOPLE AND COMMUNITIES OF SOUTH FLORIDA
AND LOUISIANA HIT BY HURRICANE ANDREW
The U.S. Treasury Department reacted swiftly to ease the
burdens of the people and businesses which were affected by the
destruction of Hurricane Andrew. Following are Treasury bureaus'
hurricane relief highlights.
U.S. CUSTOMS SERVICE
Customs used their air fleet to support federal, state, and
local relief efforts. Customs is working with contractors who
handle seized assets to coordinate the distribution of some
seized goods to hurricane victims.
INTERNAL REVENUE SERVICE
The IRS has extended until December 15 upcoming tax
deadlines for all individuals and businesses in stricken areas.
IRS personnel are providing advice and needed materials at FEMA
relief sites in Florida. Penalties will be abated for overdue
deposits of payroll and excise taxes that are made up by October
15.
BUREAU OF ALCOHOL, TOBACCO, AND FIREARMS
The ATF will rebate the excise tax value of tobacco and
alcohol products lost in the storm, unless otherwise insured.
ATF advisors are at FEMA sites for business owners who seek
relief. Also, 45 ATF agents are working with Dade County Metro
police to help provide general public safety assistance.
FINANCIAL MANAGEMENT SERVICE
Social Security and other government checks are arriving on
time. FMS is implementing an emergency check release plan for
those hurricane victims who receive federal benefits. Social
Security, civil service retirement, Veterans benefits and other
payments have been released early to ensure a timely arrival.
FMS has established an emergency disbursing site to provide on
site check issue for the SBA and electronic payment links with
FMS's Regional Financial Centers in Birmingham and Kansas City.
FMS is also working with the U.S. Post Office to make sure
notices are posted, letting people know where they can pick up
their checks.
BUREAU OF PUBLIC DEBT
The bureau announced it will expedite replacement or payment
of U.S. Savings Bonds for bond owners in stricken areas in south
Florida and Louisiana. The bureau is waiving the normal sixmonth holding period for residents of the affected area who hold
Series EE bonds so that hurricane victims have faster access to
funds.
OFFICE OF THE COMPTROLLER OF THE CURRENCY
OCC has granted authority for banks to set up emergency bank
branches. Because an increase in payment delinquencies is
expected, OCC issued a bulletin to bankers and examiners
recognizing that "prudent efforts to adjust or alter terms on
existing loans in areas affected by the hurricane should not be
subject to examiner criticism."
OFFICE OF THRIFT SUPERVISION
OTS granted authority for thrifts to set up emergency
branches, and will consider temporary waivers of the Qualified
Thrift Lender requirements for thrifts that continue to meet
capital requirements. Wherever possible, OTS staff will act as a
liaison with other federal agencies in the effort to cut red tape
and ease the rebuilding process.
RESOLUTION TRUST CORPORATION
RTC is using special relief guidelines designed to prevent
mortgage delinquencies. In addition, the RTC is providing
housing to Dade County for use as temporary shelters under a
three month leasing arrangement for $1. 65 housing units have
already been provided to Dade County for this purpose.
U.S. SECRET SERVICE
Soon after the hurricane, special agents assisted Miami
police in maintaining civil order and controlling traffic.
TREASURY NEWS
Department of the Treasury
Washington, D.C.
Telephone 202-622-2960
TREASURY RESPONDS TO THE PEOPLE AND COMMUNITIES OF SOUTH FLORIDA
AND LOUISIANA HIT BY HURRICANE ANDREW
The U.S. Treasury Department reacted swiftly to ease the
burdens of the people and businesses which were affected by the
destruction of Hurricane Andrew. Following are Treasury bureaus'
hurricane relief highlights.
U.S. CUSTOMS SERVICE
Customs used their air fleet to support federal, state, and
local relief efforts. Customs is working with contractors who
handle seized assets to coordinate the distribution of some
seized goods to hurricane victims.
INTERNAL REVENUE SERVICE
The IRS has extended until December 15 upcoming tax
deadlines for all individuals and businesses in stricken areas.
IRS personnel are providing advice and needed materials at FEMA
relief sites in Florida. Penalties will be abated for overdue
deposits of payroll and excise taxes that are made up by October
15.
BUREAU OF ALCOHOL, TOBACCO, AND FIREARMS
The ATF will rebate the excise tax value of tobacco and
alcohol products lost in the storm, unless otherwise insured.
ATF advisors are at FEMA sites for business owners who seek
relief. Also, 45 ATF agents are working with Dade County Metro
police to help provide general public safety assistance.
FINANCIAL MANAGEMENT SERVICE
Social Security and other government checks are arriving on
time. FMS is implementing an emergency check release plan for
those hurricane victims who receive federal benefits. Social
Security, civil service retirement, veterans benefits and other
payments have been released early to ensure a timely arrival.
FMS has established an emergency disbursing site to provide on
site check issue for the SBA and electronic payment links with
FMS's Regional Financial Centers in Birmingham and Kansas City.
FMS is also working with the U.S. Post Office to make sure
notices are posted, letting people know where they can pick up
their checks.
BUREAU OF PUBLIC DEBT
The bureau announced it will expedite replacement or payment
of U.S. Savings Bonds for bond owners in stricken areas in south
Florida and Louisiana. The bureau is waiving the normal sixmonth holding period for residents of the affected area who hold
Series EE bonds so that hurricane victims have faster access to
funds.
OFFICE OF THE COMPTROLLER OF THE CURRENCY
OCC has granted authority for banks to set up emergency bank
branches. Because an increase in payment delinquencies is
expected, OCC issued a bulletin to bankers and examiners
recognizing that "prudent efforts to adjust or alter terms on
existing loans in areas affected by the hurricane should not be
subject to examiner criticism."
OFFICE OF THRIFT SUPERVISION
OTS granted authority for thrifts to set up emergency
branches, and will consider temporary waivers of the Qualified
Thrift Lender requirements for thrifts that continue to meet
capital requirements. Wherever possible, OTS staff will act as a
liaison with other federal agencies in the effort to cut red tape
and ease the rebuilding process.
RESOLUTION TRUST CORPORATION
RTC is using special relief guidelines designed to prevent
mortgage delinquencies. In addition, the RTC is providing
housing to Dade County for use as temporary shelters under a
three month leasing arrangement for $1. 65 housing units have
already been provided to Dade County for this purpose.
U.S. SECRET SERVICE
Soon after the hurricane, special agents assisted Miami
police in maintaining civil order and controlling traffic.
Agenda
for American
Renewal
1
I.
Introduction:
The Challenge
A m erica sta n d s at the
edge of a new era, a new cen
tury. Here is my bridge to the
other shore: An Agenda for
American Renewal — diagnos
ing the economic problems we
face, setting forth the princi
ples to guide our actions, and
explaining the approach I am
pursuing.
Over p ast w eeks I have
been discussing some of the el
ements of my economic agen
da. In coming weeks I will be
expanding on my ideas. This
docum ent show s how the
pieces fit together.
It is im p ortan t to step
back for a m om ent, to take
stock of w here we are as a
great nation in the broader
sweep of history.
The American people have
ju st com pleted the g rea test
mission of all, the triumph of
dem ocratic ca p ita lism over
im p e r ia listic com m unism .
Mission accomplished.
Throughout history, when
long wars end, people have
been confronted with the prob
lems of converting to peace
time and establishing a new
basis for securing peace and
prosperity.
In w artim e, the costs of
Government are always high.
Domestic needs are not fully
m et. In tim es of conflict, a
good nation tries to look after
its poor, its sick, its elderly, its
less privileged members, but
not as completely as it should
or would like to.
Today, this year, for the
first tim e sin ce D ecem ber
1941, the United States is not
engaged in a war, hot or cold.
We are a nation at peace.
But being at peace with others
and being at peace with our
selv es are d ifferent th in gs.
The one we have achieved.
The other, we can and will.
The American people rec
ognize this historical w ater
shed. They want and deserve a
peacetime system of taxation,
a peacetime freedom from un
necessary intrusion into our
lives, a peacetime commitment
to sound money, a peacetime
dedication to unfinished work
and unsolved problems close to
home.
At the
sam e
tim e,
Americans are aware of epic
changes in the world and the
economy. They sense the dis
quiet in many of the industri
alized democracies that have
been our partners in the long
struggle. Our own economy
has been going through some
profound changes. And I un-
" W e are a nation at
peace. But being at
peace with others and
being at peace with
ourselves are different
things. The one we have
achieved. The other, we
can and will. "
2
derstand how difficult change
can be, particularly for those
who feel its effects most direct
ly. Americans sense we face an
era of great opportunity, but
that there are also great risks
if we fail to choose wisely.
We must now demonstrate
our unique ability to tra n s
form anxiety into regenera
tion. Only in America do we
have the people, the resources,
the economic strength — and
especially the principles and
ideals — to pick up the chal
lenge.
F o r A m e r ic a to be s a f e a n d
s tr o n g
we
m u st
m eet
th e
d e f in in g c h a lle n g e o f th e ’9 0 s :
to w in th e e c o n o m ic c o m p e t i
tio n
— to w in th e p e a c e .
The United States must be
a military superpower, an ex
port superpower, a n d an eco
nomic superpower.
My approach is to look
forward — to open new mar
kets, prepare our people to
com pete, to stren g th en the
American family, to save and
invest — so we can win.
T his fu ture d ep en d s on
economic growth, but not for
the few at the expense of the
many, not for the present at
the expense of the future.
In this country, we have
always preferred an entrepre
neurial capitalism that grows
from the bottom up, not fhe
top down, a capitalism that be
gins on Main Street and ex
tends to Wall Street, not the
other way around.
Nor have we been taken in
by th e view my op ponent
p refers, th a t G overnm ent
should accumulate capital —
by taxing it and borrowing it
from the people, and investing
it according to some industrial
policy design.
My agenda is for an inclu
sive America, not an exclusive
America — and certainly not a
reclusive one. We w ill chal
lenge the world with an inter
national economic and trade
strategy that will promote free
trade arrangements east and
w est, north and so u th , to
strengthen our global econom
ic reach and complement our
worldwide security presence.
At the same time, we need to
foster the capabilities at home
that will keep us in the lead.
Developed economies need
developing minds. To help pre
pare all our children for a con
stantly changing workplace, I
want to make radical changes
in our education system. Each
child should graduate w ith
skills, self-discipline, and selfconfidence.
I will sharpen the competi
tive edge of our businesses by
encouraging entrepreneurial
capitalism and small business,
deploying advances in R&D
and technology, and reforming
our leg a l sy stem so it no
longer puts us at a global dis
advantage.
My agenda promotes eco
nomic secu rity for w orking
men and women through job
training that will ease adjust
ments and provide people with
new capabilities for work in
the face of com petition and
change. And I will enable fam
ilies to concentrate on building
for th„ future by giving them
the m eans to protect th em
selves against today’s cost of
health care, and by making it
easier to build tomorrow’s re
tirement security. I want our
efforts to reach out to all our
citizen s, leavin g no one be
hind, because we will need the
work, aspiration, and energy
of each and every American.
Finally, since our competi
tive stren gth and en trep re
neurial spirit must flow from
th e p riv a te secto r, I w ill
strea m lin e G overn m ent to
meet changing needs.
We can empower America
to reach a grand goal: a $10
trillion economy by the first
years of the 21st Century.
3
When P resid en t Reagan
and I assumed office in 1981,
the U.S. economy was about
$3 trillion. We’ve almost dou
bled th at over the p ast 12
years. So I know we can nearly
double it again through sus
tainable real growth over the
coming decade.
With a $10 trillion econo
my, we could provide the re
sources, private and public, to
satisfy our most ambitious so
cial and fin an cial req u ire
m ents. We could sim ultane
ously renew America and pay
down our national debt.
So now let me turn to how
we can meet the challenge and
reach our goal.
II.
The Context
Five Changes
Underway in the
Economy
The U .S . econom y has
been working its way through
five profound changes. They
establish the context for my
agenda.
The first great change in
our economy is ironically due
to our very success in ending
the Cold War. Since our super
power rival of the la st h alf
century has dropped out of the
race, we are now able to do
something we have all hoped
for since the close of World
War II — lighten the load of
the defense burden.
/# y
I he first great
change in our econom y
is ironically due to our
In the short run, this ad
justment has meant cutbacks
and lay-offs in many in d u s
tries that have depended on
defense spending. We m ust
ease this transition. But in the
medium and long run, reduc
tions in defense spending will
free up m any new resources
for our people and economy.
Second, it seem s that al
most every time you open the
business pages you can find a
story about a major U.S. cor
poration that is restructuring
itself. Our industries are in
the process of transform ing
themselves from old-style hier
archical organizations to socalled “flattened pyram ids.”
This new industrial organiza
tion emphasizes a skills-based
workplace, “lean production,”
a “just in time” inventory, and
short product cycles rather
than m ass production. Our
com panies are in teg ra tin g
R&D, m an u factu rin g, and
marketing into a seamless web
of innovation. This is a revolu
tion as dramatic as the one
w hen H enry Ford led the
country from craft-based pro
duction to mass manufactur
ing early in this century.
very success in ending
the Cold War.
... w e are now able to
do som ething w e have
all hoped fo r since the
close o f W orld War II—
lighten the load o f the
defense burden, i
4
We have to m ake th ese
a d a p ta tio n s
su cceed
if
A m erica’s in d u stries are to
keep ahead of their interna
tion al co m p etito rs. S trong
sales and productivity increas
es are the prerequ isites for
creating more jobs, boosting
w ages,
and
u p grad in g
benefits. In fact, it is partly be
cause of these changes that
our annual growth in manu
facturing productivity over the
past 10 years was over 50%
h igh er th an in the C arter
years. It’s vh y American firms
lead the world in exports.
N e v e r th e le ss ,
th ese
changes also have produced
layoffs and relocations among
both blue and w h ite collar
workers. Middle-aged bread
w in n ers
are
w ond erin g
whetner their company will be
the next to make announce
ments, and they worry about
their jobs, h ealth care, and
pension rights. Some are also
troubled by the prospect that
after sacrificing to send their
kids to college — often the
first generation to attend —
that these children’s diplomas
may not be golden tickets to
security.
Third, the 1980s w iped
away the dismal economic per
formance of the late '70s. We
enjoyed the longest peacetime
expansion in U.S. history, last
ing seven and a half years. We
created over 21 million jobs,
more than all the new jobs in
the oth er major in d u str ia l
co u n tries and the rest of
Western Europe combined. Yet
great booms produce excesses,
and this time too many compa
nies, too many financial insti
tutions, and too many house
holds took on too much debt.
entered the 1980s with some
14,000 commercial banks and
4,600 savin gs and loans. In
comparison, Canada had about
160, and Jap an had under
100. The vast majority of those
sm all U.S. banks and S&Ls
op erated in a h ea v ily con
trolled en v iro n m en t where
their costs of funds were limit
ed by ceilings on your pass
book accounts. Other regula
tions restricted competition by
imposing costs and inefficien
cies on savers and borrowers.
We have been p aying
down that debt — and lower
interest rates have helped us
do it. Millions of people have
refinanced hom es at low er
rates, reducing mortgage pay
ments by as much as $1,200 to
$1,500 a year. When compa
nies restructured, they paid
down debt, strengthened bal
ance sh eets, and positioned
th em selves to enjoy greater
profits when stronger growth
resu m es. T his process w ill
leave our economy leaner and
more powerful. Many firms al
ready are. But while that debt
was being paid down, people
bought fewer goods, and com
p an ies put less m oney into
new investments and jobs. The
process is largely over, but it
has left consumers and compa
nies a little cautious.
In the late ’70s, this out-ofdate system was buffeted by
record interest and inflation
rates; it was ch allenged by
competition from new financial
services. As in any other line
of business, the less efficient
institutions could not survive.
But because our banks and
S&Ls held insured deposit ac
counts for most hardworking
Americans, the streamlining
process had to be managed in
a way th a t enabled the
Government to protect your
sa v in g s. In effect, the
Government picked up these
costs so your savings would be
safe.
F ourth, we en tered the
’80s with a banking system de
signed 50 years earlier — an
incongruous relic in an era
when billions of dollars can be
sent around the world in a mi
crosecond. The United States
This process, too, is near
ing its end. A strong economy
must have a good banking and
financial system so entrepre
neurs can get capital, busi
n e sse s and farm s can get
loans, and fam ilies can buy
0
homes and cars. We will have
a more com petitive and effi
cient financial system that will
serve companies and families
b etter. Over th e next few
years, the Government will ac
tually gain revenues from the
sales of billions of dollars of
assets that it acquired from
banks and S&Ls as it protect
ed savers. But this process has
left lenders cautious. Business
borrowing rates and mortgage
rates are way down, but it’s
still too hard for small busi
nesses :o gain access to capital
and credit. We are still taxing
capital too much.
The final economic change
is perhaps the most far-reach
ing of all: No nation is an is
land today. We are part of a
global economy. To grow is to
trade; to expand is to compete.
One manufacturing job out of
every six depends directly on
our exports. One acre out of
every three is sowed for sale
abroad.
This international econom
ic interdependence has three
implications.
One, when growth slumps
abroad, it drags our economy
down with it. Both W estern
Europe (especially Germany)
and Japan are going through
major readjustm ents — and
that has contributed to our
sluggishness.
Two, it m eans th a t if
America is going to be strong
and grow ing in the 2 1 st
Century, we m ust be ready,
able, and w illing to compete
around the globe. We need to
en cou rage en trep re n e u r ia l
capitalism and investment at
home, and at the same time
ensure that our labor force re
mains the best in the world.
"No nation is an
island today. We are
p a rt o f a global
econom y To grow is to
trade; to expand is to
com pete. One
manufacturing jo b out
Three, we need to seize op
p ortu n ities to develop new
markets, particularly in areas
th a t, have p o ten tia l for
significant growth in the fu
ture. One of the other benefits
of the end of the Cold War is
the extraordinary potential to
expand trade and sales to hun
dreds of millions of potential
custom ers who not long ago
were the ca p tiv es of our
enemies.
III.
Start w ith
Strengths
In developing an agenda
for the future, we should take
a clear-eyed look at our
strengths as well as weakness
es. Not surprisingly, the other
side has conveniently skipped
over our cou n try’s m any
strengths. Frankly, they want
you to believe America is over
the hill and past its prime. But
they have no more right to
o f every six depends
directly on our exports.
One acre out o f every
three is sow ed fo r sale
abroad."
6
convince you the economy is
worse than it is for political
advantage than I have to un
derstate the problems. So let
me just note several key facts.
■
■
■
own homes, as compared
w ith 59% in Japan and
40% in Germany.
■
The M isery Index — the
sum of inflation and unem
ploym en t — is down to
10.8% today, from 19.6%
in 1980.
In flation h as fa llen to
roughly 3%, the lowest in
a quarter of a century (ex
cept for 1986).
Interest rates are at a 20
year low. Mortgage rates
are now n the 8% range,
h a lf th e rate P resid en t
Reagan encountered in his
first year. Thanks to these
low rates, more people can
afford to own a home today
th an at any tim e sin ce
1973.
■
With exports of $622 bil
lion, the U.S. is the world’s
largest exporting nation.
Exports increased by 40%
during my Administration.
■
We produce 25% of the
world’s total output with
5% of the world’s popula
tion.
■
■
■
W hile unem ploym ent is
still far too high, the share
of the working age popula
tion with jobs during my
adm inistration has aver
aged 62.2%, the highest in
U.S. history.
The United States has the
h igh est home ownership
rate of all major industri
alized countries: 66% of
U.S. households own their
The U.S. sends more of its
students on to higher edu
cation — 68% — than any
other country, well above
the 32% rate in Germany
and 30% in Japan. And
52% of these U.S. students
are women, as compared
w ith 26% in Japan -and
38% in Germany.
The
p ro d u ctiv ity
of
American workers is ap
p roxim ately 26% above
those in Germany and 30%
above those in Japan.
I do not mean to suggest
either that everything is well
or that we do not need to lead
and manage the changes tak
ing place in the world and at
home more actively. We do.
But you can ’t chart the
stars if you think the sky is
fa llin g . We m ust know our
strengths before we build on
them. Over the past 12 years,
we increased the U.S. economy
by about $2.8 trillion — that’s
like creating the total size of
the Germ an econom y tw ice
over. So I know our goal of a
$10 trillion economy is attain
able.
We’re also in a strong posi
tion internationally. But we’re
goin g to need the n a tio n a l
adaptability and capability to
keep leading our competitors.
And. we must have the courage
of our convictions to say “no”
to the wrong sort of changes
for the future — false promis
es based on false premises —
changes we cannot afford at
this key moment in the world
economic competition.
IV.
Guiding
Principles
B efore o u tlin in g the
specifics of my agenda, I want
to set out four guiding princi
p les. An e ffe c tiv e s tr a te g y
m u st be d yn am ic. As new
problems or opportunities pre
sent themselves, we will need
to make adjustments. Guiding
principles will ensure we fol
low a consistent path and help
sh ape our p o licies into the
future.
7
First, start with the ba
sics: We are a nation of special
individuals, not special inter
ests. Individuals gain primary
strength, protection, and in
spiration from their families
and communities, not the legal
system or Government social
serv ic es. People find th eir
friends and their enjoyment in
volu n tary a sso cia tio n w ith
one another, not in some bu
reaucrat’s paint-by-numbers
dream.
Individuals, families, com
m u n ities. T h a t’s w here we
start.
Second, we have to keep to
the fu n d am en tals of sound
economic growth: lower tax
rates, lim its on Government
spending, greater competition,
le ss econom ic reg u la tio n ,
sound money, and more open
trade that can free trem en
dous private in itia tiv e and
growth.
Experience has shown that
these are the steps we need to
tak e to create jobs, ra ise
wages, spur entrepreneurs, ex
pand capital and investment,
and build businesses.
Third, in the ’90s Govern
ment can build on these fun
damentals by offering opportu
nity and hope for individuals,
fam ilies, and com m unities.
There is a conservative agenda
for h elp in g p eople, for r e
sponding to their needs. And
we’ve seen that these are ap
proaches that work.
We prefer a hand up to a
handout. We want to empower
people to m ake th eir own
choices, to break away from
dependency. We want to give
individuals and families eco
nomic security by giving them
the capital, the capabilities,
and the confidence to decide
for th e m se lv e s. We w ant
everyone to have a stake in so
c ie ty , to own property, so
everyone will build something
with it for themselves and our
country. W hereas my oppo
nent’s approach may place a
premium on redistribution and
“leveling,” our programs will
unleash initiative, reward suc
c ess, and en cou rage e x c e l
lence. Our approach is to give
p eople the power to work,
save, and be their best.
F in a lly , all our p olicies
must be brought together ef
fectively if we are to prosper
as a people and su ck ed as a
nation. America must have ap
propriate new approaches for
the changes at home — just as
we’ve launched new policies to
lead and m anage change
abroad. We must recognize the
interrelationship between do
m estic and foreign policy —
between economic and security
policy. At the same time, we
W e have to keep to
the fundam entals o f
sound econom ic
grow th: low er tax rates,
limits on Governm ent
spending, greater
com petition, less
econom ic regulation,
sound money, and m ore
open trade that can free
trem endous private
irirtia+'ve and grow th. "
8
must execute our agenda more
e ffe c tiv e ly w ith a new
Congress, state and local gov
ernments, and the private sec
tor. Our aim must be to press
our p o licies to g eth er, as a
package, to make America se
cure and strong.
Therefore, my Agenda for
American Renewal mandates
action on six interconnected
fronts. Because we face com
plex problems, no one solution
will suffice. The whole of these
elem en ts w ill be a solution
greater than the sum of its
parts:
■
Challenging the World: A
Strategic Global Economic
and Trade Policy
■
Preparing Our Children
for th e 2 1 st C entury
Economy
■
S h a rp en in g B u s in e s s ’
C om p etitiv e Edge: E n
couraging Entrepreneurial
Capitalism
■
Promoting Economic S e
curity for Working People
■
Leaving No One Behind:
Economic Opportunity for
Every American
■
“Rightsizing” Government
This is how America will
create a $10 trillion economy.
V.
Challenging
the World:
A Strategic
Global Economic
and Trade Policy
During the Cold War, we
built a global security struc
ture to contain and counter
the Soviet Union and commu
nist aggression. We forged mil
ita ry a llia n c e s across the
Atlantic and Pacific that un
derpinned that structure. In
the post-C old War era, we
need a strategic global eco
nomic and trade policy that
will ensure our position as an
economic and export su per
power as well.
We are well positioned to
achieve this goal. We enjoy the
largest fully integrated market
in the world; th is g iv es us
leverage with other countries
that want access to our mar
ket. Once the Congress enacts
the N orth A m erican Free
Trade Agreem ent (NAFTA),
our position w ill be further
stren g th en ed . NAFTA w ill
open an important market, a
M exican econom y w hose
growth prospects will quickly
transform its expanding in
dustries and consumers into
excellent American customers.
Equally important, the in te
g ra tio n of U n ited S ta te s ,
Mexican, and Canadian capa
bilities will improve our global
com petitiveness by enabling
Am erican firms to purchase
inputs at lower costs. This will
help U.S. firms to stay in the
forefront of high wage, high
value-added production.
Our geopolitical position is
also advantageous. The United
States is both a Pacific and a
European power; our political
and security ties link us with
the largest and most rapidly
growing economies across both
oceans. Our trans-Pacific trade
already exceeds, our Atlantic
trade; that’s one reason why
we helped launch an organiza
tion for Asia-Pacific Economic
Cooperation that will further
strengthen our economic ties
w ith th a t region. Our own
n eigh b ors — from C en tral
America to Chile — want to
build bridges of trade with us
so th ey can build b etter
economies for their people.
“The b all of lib e r ty ,”
Jefferson once wrote, “is now
so well in motion that it will
roll around the globe.” He was
right.
Freedom
h as
rolled
through Eastern Europe, the
form er S o v iet U n ion , and
Latin America — and the ball
/
is now in our court. Free peo
ple and free markets develop
hand in hand. People value
American values. People want
to buy what we have to sell.
E n g lish is the la n g u a g e of
freedom a n d business.
Our political and economic
ties are complemented by the
appeal of American culture all
around the world. This is a
new “soft power” we can em
ploy. Today, our m ovies,
music, and videos are among
our top-selli lg exports.
F in a lly , as the prim ary
founder and the most sig n i
ficant proponent of the GATT
global trading system, we con
tinue to have a strong hand as
long as we use it to truly open
m arkets, including our own.
The key to America’s growth,
expansion, and innovation has
always been our openness to
trade, investment, ideas, and
people.
Therefore, the next steps in
my strategic trade policy are to
secure C ongressional agree
ment to NAFTA and to com
plete the global trade negotia
tions — the so called Uruguay
Round negotiations in GATT.
Our NAFTA agreem ent will
open doors for American busi
n e sse s, w orkers, and con
sumers. It will create good jobs.
Nevertheless, I expect a tough
fight in the Congress in early
1993 because of those special
in terests who herd together
with a protectionist purpose.
The global trade negotiations,
in turn, could be very close to a
breakthrough if the U nited
States continues to act as a
strong world leader. There is a
proposed draft text that estab
lish e s the o u tlin es of a
significant new GATT agree
ment. Once we assure cuts in
the su bsid ized agricu ltu ral
trade along the lines of that
text — to enable our farmers to
secure their competitive advan
tage — I believe we will be able
to com plete the U ruguay
Round agreement.
An improved global trad
ing system is, however, only a
base for freer trad e, for
stronger investm ent ties, for
increased global growth. We
need to sta rt to develop a
strategic network of free trade
agreements [FTAs] across the
Atlantic and the Pacific and in
our own hemisphere. This net
work will stand in sharp con
trast to the backward blocs of
economic isolation. If we are to
be a true export superpower,
we cannot be tied down to one
region. Instead, my intent is to
use our attractive dom estic
market as the basis of a mus
cular free trade policy that
w ill stren g th en A m erica’s
glob al econom ic reach and
complement our worldwide se
curity presence.
//r
t r e e people and free
markets develop hand
in hand. People value
American values. People
w ant to buy w hat we
have to sell. 1
10
By fo cu sin g on op en in g
markets, I also believe we can
reduce structural barriers to
competition in North America,
Western Europe, Japan, and
elsew here. Com petition will
en cou rage en trep re n e u r ia l
capitalism — at the expense of
en tren ch ed
in te r e sts —
spurring even greater global
growth.
More sp ecifically, I w ill
need to secu re from the
Congress additional trade ne
gotiating authority within the
first half of 1993. To overcome
the special interests and the
protectionists, I will need a
mandate from the American
people. If America is going to
be an export and economic su
perpower, the U.S. President
must take a strong stand on
the negotiation of trade and
econom ic a g reem en ts. The
Congress will read vacillation
and equivocation as weakness,
and the national interest will
lose out to the logrolling trade
offs of Congressional business
as usual. That’s one very big
issue at stake in this election.
With new negotiating au
th o rity , I w ill pursue new
trading and economic opportu
nities in Latin America under
my E n terp rise for the
Americas Initiative, starting
with Chile. I would also like to
work tow ards FTAs w ith
Poland, Hungary, and Czecho
slovakia by the end of my sec
ond term. And I would explore
the possibility of a connection
betw een NAFTA and the
ASEAN FTA, or AFTA. It will
not take long for other coun
tries to begin to express their
interest in new trade and busi
ness ties with us. For example,
leaders in Australia and Korea
have already spoken of their
interest in forging closer eco
nomic ties.
Some see new threats, oth
ers see old enemies. I see new
markets, new opportunities,
new jobs.
As we develop th is eco
nomic and trading network for
the 21st Century, I will fight
hard to prom ote A m erican
trading interests. For exam
ple, I am committed to a siz
able Export E n h an cem en t
Program [EEP] to ensure that
our farmers can go head-tohead w ith th e E uropean
Community’s subsidized agri
cu ltu ra l exp orts. We know
from our experience with mili
tary security that the key to
econom ic secu rity m u st be
based on “Peace T hrough
S tren g th ” — not u n ila tera l
disarmament. That’s why I re
cently announced the largest
quantity of wheat ever avail
able under our EEP program
— alm ost 30 m illion m etric
tons to 28 customers.
I w ill en su re th at our
Exlm Bank and the Overseas
Private Investm ent Corpora
tion (OPIC) work with teams
of our ambassadors to develop
trade and investment opportu
nities for U.S. firms. We've al
ready begun this with the six
ASEAN countries — and it’s
working. I w ill particularly
stress helping America’s small
b u sin e ssp e o p le to develop
trading opportunities. These
companies look sm all — but
they trade big. I know. I start
ed my own. And I have visited
small factories all across the
United States that first sur
vived and then prospered by
taking on the foreign competi
tion. I know Americans can do
it.
VI.
Preparing Our
Children for the
21st Century
Economy
In the 21st C entury our
greatest national resource will
be our people. Materials, ma
chines, and methods will come
and go, but th e A m erican
worker will remain the key to
our economic security. Since
the w orkplace of th e 2 1st
C entury w ill be co n sta n tly
changing, we need to prepare
the American people to adapt
to and direct the proces» of
11
change. Therefore, our kids
must arrive at school ready to
grow, and they need schools
where they will learn how to
keep learning all their lives.
Our
N ew
A m erican
Schools will help prepare our
children to become the con
tributing citizens of tomorrow.
Equally important, we want to
enhance ch ild ren ’s sen se of
self-w orth, their confidence,
their sense of participation in
a larger community and soci
ety. This is the conservative
philosophy of empowerment,
helping people to help them
selves.
I w ant to do my best to
help all children come into the
world as truly “created eq ual/
T hat’s why I am more than
doubling funding for a H e a lth y
S t a r t in itia tiv e that targets
communities with high infant
mortality rates. We are also
increasing prenatal care, nu
trition services, and substance
abuse treatment for pregnant
women. And I want everyone
to spread the word that every
parent must share the gift of
good health w ith their ch il
dren.
We need to focus especial
ly on the preschool years, so
that children coming to school
are h ea lth y and curious.
F u n d in g for the W omen,
Infants and Children N utri
tion Assistance program (WIC)
has grown 258% between 1980
and 1992; my request for an
ad d ition al $240 m illion for
1993 brings the annual cost to
$2.8 billion.
I have also increased fund
ing for the H e a d S t a r t pro
gram by 127% — for a total of
$2.8 billion in 1993. That in
cludes an additional $600 mil
lion increase for next year —
an unprecedented 27% annual
jump — so that a year of H e a d
S t a r t w ill be a v a ila b le for
every elig ib le four-year old
whose parents want to partici
pate. (Under my budget, a l
most 800,000 children will re
ceive a year of H e a d S t a r t be
fore en terin g elem en ta ry
school.)
'M a te ria ls, machines,
and m ethods will come
and go, but the
American w orker will
remain the key to our
econom ic security. Since
the workplace o f the
21st Century will be
constantly changing, we
need to prepare the
American people to
adapt to and direct the
process o f change.
Therefore, our kids m ust
arrive a t school ready to
Child im m unizations are
also v ita l to safegu ard our
kids’ health. Every year since
1981-82, 95% or more of the
children entering elementary
school have been immunized
a g a in st the v a ccin e-p re
ventable diseases. Now we are
focusing greater attention on
preschool children. My 1993
budget calls for an 18% in
crease in child immunization
grants.
I want the United States
to offer opportunity and en
courage excellence; we must be
fully capable of competing in a
global economy. Therefore, it
grow, and they need
schools w here they will
team h ow to keep
learning all their lives. "
12
is imperative that our educa
tio n a l sy ste m prepare and
point the way for our children.
As in th e p a st, ed u cation
should be the ladder that the
child of m odest m eans can
climb to better him or her self.
Our current school system
is falling short of these needs
— and the poor are hurt most.
Only 19 out of 66 public high
schools in Chicago graduate
more than half their students,
and many of these graduates
can barely read or write.
Our educational establish
m ent is caught in a sort of
time warp, a system created
for an oth er age w hen the
needs were not the same, chil
dren grew up differently, and
adults rarely changed jobs.
Money alone is not the an
swer — the United States al
ready spends more per pupil
than any other country but
Switzerland. And funding for
the Education Department has
increased 41% over my term.
The an sw er is a radical
overhaul of our educational
system. If we want to change
our cou n try, w e’ve got to
change our sch ools. T h a t’s
what my America 2000 pro
gram is all about.
Our kids can’t beat world
class competition if they can’t
m eet world-class standards.
We are moving ahead with the
developm ent of th ese s ta n
dards in m ath, scien ce ,
English, history, geography,
arts, and civics.
Second, we need voluntary
national achievement tests to
m easure the progress of our
stu d en ts. That way we can
compare the performance of
different schools in helping
our children achieve the na
tional standards.
Third, we need to give
schools, the flexibility to be
come educational en trep re
neurs — to figure out the best
ways to motivate our children,
use technology, include par
ents, and involve new types of
tea ch ers. We w ill crea te
“Education Enterprise Zones.”
There is no particular reason
why schools have to end at
3 p.m. so that students can sit
in front of th e TV for five
hours a day. We need to free
school a d m in istra to rs and
teachers from rules, regula
tions, and reports that have
become a poor substitute for
student achievement; we can
do away with red tape once we
institute a new testing system
that evaluates schools not on
the basis of how many forms
th ey com p lete, but of how
many minds they prepare.
F in a lly , we m u st tak e
school choice off the adminis
trator’s desk and put it back
on the kitchen table. Choice is
critical to the success of the
whole, integrated overhaul of
our ed u ca tio n a l system .
C m petition, the underlying
principle for this radical re
form, will not work unless we
give consumers the ability to
choose.
Wealthy fam ilies already
have this choice for their chil
dren. Many of the people that
you saw at the D em ocratic
National Convention have this
choice for their children. Why
shouldn’t you have this choice
for your children?
C h icago’s public school
teach ers — 46% of them —
sen d th eir k id s to p rivate
schools. But my opponent and
his special interest supporters
don’t think you should have
the same choice unless you are
privileged enough to afford it.
One of the greatest educatio n a l in n o v a tio n s in th is
country was the passage of the
GI Bill after World War II. No
one told my generation that a
vet couldn’t go to Notre Dame
or Brigham Young or Baylor or
Howard or Yeshiva.
So I w ant a “GI B ill for
Children” to help give lower
and middle incom e fam ilies
the means to select any school:
13
public, private, or religious. I
also want scholarships avail
ab le to be sp en t on a fte r
school, Saturday and summer
academic programs.
For those who argue that
my approach will weaken the
public school system, I would
remind them that the first GI
Bill was a tremendous boon for
public universities. Or listen
to Starr Parker, a small busi
ness owner actively .promoting
choice in the Black communi
ty, who put it this way: “The
rich have choice now. When I
was on welfare, there was no
way I could put my child in
school. It’s ^ime we stop con
demning the poor to a monop
oly education system.”
W e’ve a lrea d y m ade
significant progress in starting
th is radical reform agenda.
Some 44 states, and over 1700
com m u n ities, have already
adopted my new national edu
cation stra teg y — A m erica
2000. Indeed, this progress of
fers a good exam p le of my
com m itm en t to pursue my
agen d a w h eth er or not
Congress dawdles. If Congress
balks, I will work with gover
nors, state legislators, commu
nity officials, and the private
sector.
I hope the new Congress
will not remain an apple pol
isher for the educational es
tablishment and special inter
ests that want to resist this
revolution. A new system of
education in this country is
probably the most important
ingredient over time in mak
ing America the winning eco
nomic and export superpower
in the post-Cold War era.
This must not only be my
agenda, but yours, too. I will
fight to give p a ren ts in
America the right to choose
the school their children will
attend, but you need to help,
too. After you check out of
work, check into your child’s
homework. Talk to your child’s
teacher. Join your local PTA.
My approach — America 2000
— relies on parental, business,
and community involvem ent
in creating new schools that
break the mold.
I put the family at the cen
ter of our society. Government
m ust try to help fam ilies —
not replace them . W hen it
comes to choices for our chil
dren, parents really do know
best. We should increase the
range of choices available to
parents, and Government as
sistance should be targeted to
those families most in need.
The other side may talk
about sim ilar problems, but
they are approaching them
with a fundamentally different
ideology. You can see the con-
§ i \l\lea lth y families
already have this choice
fo r their children. M any
o f the people that you
saw at the Democratic
National Convention
have this choice fo r their
children. Why shouldn't
you have this choice for
your children?"
14
trast not only in education,
but in health care, or in the
debate that took place over my
child care proposal, which we
fought for and m anaged to
enact into law. The opposition
prefers uniformity to variety
and choice. Because they place
a higher value on “leveling” so
ciety, they will tend to rely on
Government bureaucracies to
offer “standard service.” My
approach to education, child
care, health care, and other
topics is to rely on a diverse
private sector to supply the
service and to empower fami
lies to make their own choices.
I don’t want to pull everyone
down to make them equal. I
want to give everyone the tools
to climb as high as they can
dream.
VII.
Sharpening
Business'
Competitive
Edge:
Encouraging
Entrepreneurial
Capitalism
Our ultimate success as an
economic superpower is depen
dent on encouraging the entre
preneurial spirit of our private
businesses. I call it entrepre
neurial capitalism, and I saw
it work when I started a small
business in Texas. I also call it
common sense.
th e co m p etitiv e
American business:
You allow people to keep
m ost of w hat they produce,
and they will produce more
than they can use, the rest
being capital. You invite peo
ple to risk failure by allowing
them to keep the rewards of
success, and they w ill keep
trying until they succeed.
■
strengthen small business;
■
support c iv ilia n R&D
linked to a research exten
sion network; and
■
reform our co stly legal
system.
When ca p ita l is taxed
lightly, it becdmes abundant.
When it is taxed heavily, as it
is now, it becom es scarce,
available only to those at the
top, who need it least of all.
That’s not what I want. Even
Jesse Jackson put it this way:
“Subtract capital from capital
ism and all that’s left is the
‘ism ’.” If capital were abun
d an t, labor would becom e
scarcer. And the unem ploy
m ent lin e s w ould sh rin k .
That’s what I want.
So I want to cut the capital
gains- ta x and in d ex it for
inflation. I want to create en
terprise zones in inner city
and rural areas. I w ant to
make the R&D tax credit per
manent. I want to provide an
additional first-year deprecia
tion allowance for purchases of
property.
Those are fundam entals.
In addition, there are three
other ways we need to sharpen
edge
of
A.
Strengthen
Small Business
S m all b u sin e ss is the
backbone of a growing econo
my. Small businesses create
two thirds of our new jobs;
they account for 39% of our
GNP.
I am seeking to aid small
businesses by reducing costly
tax and regulatory burdens,
in crea sin g access to credit,
and removing barriers to com
petition.
I h ave ta k en ste p s d e
signed specifically to ease the
tax burden on small business
es. For example, the IRS has
proposed regulations to allow
sm all b u sin esses to deposit
payroll ta x es on a m onthly
basis. And it has released a
ruling allowing over 16 million
sole proprietors to deduct tax
preparation fees as a business
expense rather than as a limit
ed itemized deduction.
15
I want to build on these
actions. For example, we are
w orking on a S in g le Wage
Reporting System that would
perm it b u sin esses to report
state and federal wage infor
mation through a single enti
ty, thereby consolidating tax
reporting requirem ents and
reducing the burden.
In coming weeks I will talk
more about ways we can en
courage small businesspeople
and the jobs they create.
On the regulatory front, I
have extended for one year the
freeze on paperwork and un
necessary federal regulation
that I imposed last winter; the
federal regulatory weight hits
small businesses particularly
hard. I have also instructed
federal agen cies to look for
ways to modify existing regu
lations that impose a special
econom ic burden on sm all
business. For example, to in
crease access to cap ital for
small businesses, the SEC has
announced proposals to reduce
and in some cases elim inate
the public disclosure require
ment for small companies is
suing stock.
Since small businesses are
particularly vulnerable when
credit is tight, we have to help
them as our financial system
is restructuring. That’s why
we have authorized over $6
b illio n in gen eral b u sin e ss
loan guarantees through SBA
in 1992 — an increase of more
than 5 0 # above 1991.
S B A ’s N ew
E ngland
Lending and Recovery Project
is a pilot effort that extends
credit to viable sm all firms
when access is limited because
banks are having difficulty. If
it works well and is needed,
I’ll expand the project to other
regions. We also have worked
with bank regulators to base
real estate values on income
earning potential rather than
liq u id ation value. We have
taken steps to restructure the
sm all b u sin e ss in v estm en t
program, the only venture cap
ital program in the Govern
ment. And we are developing
ways to offer special financing
to exporting entrepreneurs.
Through its procurement
a ssis ta n c e program , SBA
helped sm all b u sin esses se
cure federal contracts worth
over $35 billion in FY 90 —
almost 20% of all prime con
tracts let during that year.
To ensure that small busi
nesses can help their commu
nities overcome disasters, we
will be pressing forward with
approximately $1.7 billion in
lo w -in terest loans to sm all
b u sin e ss e s
in
Florida,
L o u isia n a , C aliforn ia, and
elsewhere.
f am seeking to aid
small businesses by
reducing costly tax and
regulatory burdens,
increasing access to
credit and removing
barriers to
com petition. "
16
Finally, we need to help
small b us;n ess by removing
burdens to com petition. My
health care reforms would re
duce costs for small businesses
w ithout costly G overnm ent
m an d ates or h ig h er ta x es.
Enactment of my legislation to
establish uniform federal law
on product liability would re
lieve a major co m p etitiv e
handicap that is keeping new
products from th e m arket,
boosting insurance costs sky
high, and killing jobs.
B.
Support Civilian R&D
To be the world’s economic
leader tomorrow, we clearly
have to in v est in R&D and
new technologies today. Given
the pace of change, we have to
both come up with new inven
tions and organize ourselves to
deploy new technology without
delay.
The changes in industrial
organization that I described
earlier have three major impli
cations for technology development. First, the more rapid
product d ev elo p m en t cycle
places a premium on bringing
an idea quickly from the lab to
the marketplace. Second, we
need to put new technologies
to work in all applications in
order to reap the full competi
tive and econom ic benefits
from our R&D. W hile
Americans invented VCR tech
nology and the FAX machine,
we did not capitalize on their
exDlosive popularity. Third, we
need to rely increasingly on
flexible, agile manufacturing,
rather than old style mass pro
duction. We should have the
capability to make a variety of
products quickly and economi
cally — a process character
ized by short product cycles,
but also high quality output.
Taken together, these de
velopments emphasize decen
tralization — an approach ex
a ctly op p osite to my oppo
n e n t’s “n a tio n a l in d u str ia l
policies” led by Government
bureaucrats. We need to get
technology development, pro
duction, and marketing closer
to the consumer, not further
away. M oreover, my oppo
nent’s call for a cut in support
for university-based research
will hurt the development of
cutting edge technology.
My agenda w ill increase
funding for basic research and
complement that work with a
focus on applied research and
development. Despite cuts by
Congress, we have managed to
increase funding for basic re
search by 26% since 1989 - - t o
a record level. We are support
ing applied R&D through a
series of new , high p ay-off
in v estm en ts
in
critica l
technologies:
■
a H igh
Perform ance
Computing and Communi
cations Initiative that will
enable the development of
a thousand-fold increase in
com puting cap ab ility by
1996 and a one hundred
fold increase in communi
cations speed.
■
an in itia tiv e to im prove
the m a n u fa ctu rin g and
performance of m aterials
— improvements that will
enable advances in a wide
range of other tech n olo
gies.
■
an expanded program in
b io tech n o lo g y research
w ith a p p lica tio n s in
h ealth , agricu ltu re, and
environmental protection.
■
the estab lish m en t of the
U .S . A dvanced B a ttery
consortium, a jointly-fund
ed four-year effort to de
velop an advanced battery
for an e m issio n s-fr e e
electric car.
■
a sign ificant increase in
our aeronautics research
budget, underscoring the
im portance we place on
the U .S. aeronautics in
dustry in an increasingly
competitive global market
place.
17
■
the establishment of seven
c
region al m an u facturin g
technology centers for the
d istrib u tio n of m odern
manufacturing tools, such
as computer-aided design,
numerically-controlled ma
chines, and robotics.
Reform Our
Legal System
T hese efforts to develop
and apply new technologies
need to be complemented by
the identification and removal
of barriers to the private sec
tor’s ability to bring new prod
ucts and services to the mar
ket. That’s why my regulatory
reform efforts — including a
process that subjects regula
tio n s to a c o m p etitiv en ess
analysis while still protecting
health and safety, and a pro
posal to “sunset” regulations
— are critical to supporting
our en h a n ced tech n ology
development.
Just take one example: my
opp onent h as proposed a
major new Federal Govern
ment investment in the field of
national telecom m unications
netw orks at the exact tim e
that our private sector is seek
ing to develop such a network
on its own, but has been
stopped from doing so by fed
eral regulations.
tA*A m e ric a has
suffered a civil litigation
Our competitive edge will
be dulled if businesses are contin u a lly h an dicap p ed by a
leg a l sy stem th a t serv es
lawyers but frightens people.
Therefore, another component
of my agenda is a reform of the
American civil justice system.
A m erica has su ffered a
civil litigation explosion. Over
the past 30 years, federal law
su its h ave a lm o st trip led .
Instead of being fast, fair, and
affordable, our civil ju stice
system is slow, expensive, and*
putting us at a global disad
vantage.
Long delays in dispute res
olution waste valuable judicial
resources, force early settle
ment by those who cannot af
ford to wait, discourage those
who have meritorious su its,
and encourage frivolous suits
by those who hope to leverage
unjust settlements. High puni
tiv e dam age aw ards are
p assed on to con su m ers
through h igh er p rices, job
cuts, higher insurance, and
fewer new products.
According to a soon-to-be
released study by the National
Association of Manufacturers,
Americans spend up to $200
billion a year ju st on direct
explosion. Over the past
30 years, federal
lawsuits have almost
tripled. Instead o f being
fast fair, and affordable,
our civil justice system is
slow, expensive, and
putting us a t a global
disadvantage . "
18
costs to lawyers. That does not
even count lawyers on payrolls
or the money spent on court
settlements.
Our legal system is killing
our international competitive
ness. Other nations do not face
high domestic litigation costs.
Foreign companies only need
6% of the product liability in
surance our firms must carry
because we do not have uni
form state standards for prod
uct lia b ility and p u n itiv e
damages.
The litigation explosion af
fects everyone. High liability
costs have closed playgrounds
and pools, forcing kids on to
the street with nothing to do.
Some companies are afraid to
offer products at home that
are available overseas because
they fear the liability.
My product lia b ility re
form legislation confronts the
trial lawyers head on. I want
to stop wide variation among
states’ product liability rules;
stop important products from
being kept off the market; stop
excessive litigation costs with
more money going to lawyers
than to injured consumers; cut
excessive insurance rates; and
end excessive consumer costs.
My ‘'Access to Justice Act
of 1992” is intended to restore
fairness and efficiency to the
nation’s civil ju stice system
through: alternatives to feder
al civil trials such as alterna
tive dispute resolution; incen
tives for pre-litigation settle
ment, including pre-complaint
notification; and a “loser pays”
rule requiring the loser to pay
the winner’s legal fees in suits
in v o lv in g federal d iv er sity
jurisdiction.
We also need to continue
our work with the states to en
courage fundamental change
at the state and local level.
Lawyers, especially trial
lawyers, are a powerful vested
interest in our society. They
are w ell rep resen ted in
Congress and high on the lists
of political contributors. My
opponent knows them very
well. But this is a problem too
im p ortan t to lea v e to th e
lawyers and their friends in
high places. We must sue each
other less and care for each
other more.
VIII.
Promoting
Economic
The American businesses
of the 21st Century will need
workers who will bring them
to life and keep them ahead of
our competition. To be able to
contribute and concentrate,
working men and women will
w ant to know that they can
enjoy econom ic opportunity
and secu rity . We can only
achieve true security by devel
oping people’s capability, not
dependency. And we can best
supply security through the
p rivate sector, not G overn
ment bureaucracies.
It w ill be G overn m ent’s
role to expedite workers’ ad
justm ents in a fast-changing
m arketplace, provide people
the means to work and take
care of their families, and arm
people to face the future by
em p ow erin g them to m ake
their own choices. In particu
lar, we can enable families to
focus on building a future by
alleviating their fears about
one of the single biggest costs
and problems that can knock
them back: health care. And
we can help foster retirement
security through encouraging
portable pension savings.
A.
Job Training
G iven th e ra p id ity of
change in the in tern ational
and domestic marketplace, we
have to prepare people for the
prospect of changing jobs and
le a r n in g new s k ills m any
times throughout the course of
a productive life. Therefore,
19
we need a range of job training
and placement services — for
young people, factory workers,
w hite collar em ployees, and
particularly during this peri
od. defense industry workers.
of adding new skills and train
ing; and (3) a tripling of the re
sources currently devoted to
training and worker adjust
ment, an allocation of $10 bil
lion over five years.
That’s why one important
portion of my r e c e n tly -a n
nounced workforce adjustment
initiative is designed to shift
the Governm ent away from
the old narrowly defined, ex
p en siv e, and le ss effectiv e
trade adjustm ent assistance
that paid people off without
giving them real help to get
back the work.
This proposal builds on my
January plan to stream line
the federal job training system
through “one-stop shopping” in
every community. Experience
has d em on strated th a t the
m ost effective train ing and
placement services are those
closely developed with local
employers through private in
dustry councils. That way the
training is designed to develop
sk ills th a t em ployers know
they will need.
Work means more than in
come to Americans. It is also
fundamental to people’s self
esteem , their self-confidence,
and th e resp ect of o th ers.
These are attitu d es, values,
th at I w ant to encourage. I
w ant all A m ericans to be
builders — for their families,
their communities, their coun
try. To encourage the work
ethic, we need to make every
effort to match people with the
jobs created by our entrepre
neurial capitalism.
The three key features of
my job training proposal are:
(1) universal coverage, so all
dislocated workers will have
access to basic transition as
sistance and training support;
(2) skill grant vouchers of up
to $3000 to help meet the costs
My expanded job training
efforts will also be specially
d esigned to help th ose who
may need to change jobs or
careers as a result of NAFTA
or oth er trad e a g reem en ts
and the downsizing of our de
fense-related industries. But
we will ensure that we offer
training and placement to all
workers.
These dislocated workers
would be eligible to receive
three types of assistance: (1)
transition-assistance that in
cludes skills assessment, coun
seling, job-search assistance,
and job referral; (2) training
assistance in the form of skill
gran ts; and (3) tra n sitio n
" W o r k means m ore
than income to
Americans. It is also
fundam ental to
people's self-esteem ,
their self<onfidence,
and the respect o f
others. These are
attitudes, values, that I
want to encourage. I
w ant all Americans to
be builders — fo r their
families, their
communities, their
country."
20
income support where neces
sary for workers com pleting
retraining.
I’ve also proposed a
specially-targeted Youth Skills
Initiative.
A new Y outh T rainin g
Corps will provide economical
ly and socially disadvantaged
young people with intensive
vocational training through 55
residential YTC centers na
tionwide; these centers will be
located p rim arily in rural
areas and will seek to utilize
converted defense facilities,
putting them to good use. The
YTC will draw from the mili
tary’s high level of leadership
and training expertise by giv
ing a hiring preference to indi
vid u als le a v in g our arm ed
forces. The discipline that tri
umphed in Desert Storm can
win at home, too.
I will also complement the
YTC with a “Treat and Train”
program to strengthen exist
ing youth drug training pro
grams.
To help meet the needs of
young people not planning to
go on to college, I will expand
the N ational Youth Appren
ticeship Program that I began
in January. This program of
fers high school juniors and se
niors a combination of class
room instruction and a struc
tured, paid, work-experience
program. I want student ap
p ren tices to receive both a
high school diplom a and a
widely recognized certificate of
sk ill com petency. S tu d en ts
will also have the opportunity
to con tin u e tra in in g at the
post-secondary level.
I started my Apprentice
ship Program as a demonstra
tion program in 6 states; in my
second term, I \yill expand it to
all 50.
Finally, I will more than
double the size of the present
JROTC program, a very suc
cessful and popular partner
ship between the military and
schools. JROTC em phasizes
self-discipline, values, citizen
ship, personal responsibility,
and staying in school — it’s a
first class alternative to drugs
and gangs. My goal is to estab
lish 2,900 JROTC u n its by
1994. Initially, we will expand
this program in inner-city high
schools, but I want to make
JROTC available to every high
school across the country that
requests it. This program is
another way in which we can
relate the successful experi
ence of America’s veterans to
the next generation.
B.
Affordable
Health Care for
All Americans
The economic security of
men and women requires a
m ajor reform of the U .S.
health care system. The pre
se n t sy stem provid es high
quality, high-tech m edicine,
but at an unacceptable price:
spending has increased at a
rate two to three tim es the
rest of the economy; thirtyfour million Americans have
no health insurance; and mil
lio n s more are afraid to
change jobs for fear of losing
their health insurance.
My program will build on
the strengths of the system —
consumer choice, innovation,
and state of the art medicine
— while controlling costs and
expanding access.
I want to guarantee access
to health insurance for all poor
fam ilies through tax credits
(or vouchers for th o se who
don’t pay taxes) sufficient to
pay for a basic health insur
ance plan ($3,750 for a family).
Other low and middle income
families would get tax relief to
partially offset the cost of their
h ea lth in su ra n ce. In to ta l,
som e 95 m illion A m ericans
will benefit.
21
My program also includes:
■
■
provisions that encourage
small businesses to develop
less costly health care in
surance networks for their
employees by combining re
sources to achieve broader
risk sharing, economies of
scale, and p u rch asin g
power;
“job lock” protection for em
ployees and their families
so that they will not lose
coverage if and when a per
son changes jobs;
■
guaranteed insurability so
that people with “preexist
ing” illnesses cannot be de
nied a job or health cover
age on the job;
■
100% tax deductibility of
health care premiums paid
by the self-em ployed, as
compared to the present
25% deductibility;
■
malpractice reforms that
will reduce the number of
u n n ecessary procedures
performed on patients and
thereby reduce the cost of
medical care; and
■
reforms to encourage wide
spread use of electronic
billing to save an estimated
$11 billion a year in paper
costs.
Taken together, my pro
gram would cut health care
costs by $394 billion over five
years through preventive care,
malpractice reform, reducing
defensive medicine, encourag
ing enrollment in cost-effective
h ea lth p la n s, arm in g co n
sum ers w ith in form ation
about cost and quality, and
elim in a tin g a d m in istra tiv e
waste and unnecessary paper
work.
I believe we can provide
access to affordable h ealth
care for all Americans, while
preserving choice for patients
and their families in selecting
doctors, hospitals, health care
programs, and em ploym ent.
My approach, in contrast with
my opposition, relies on the
private sector to deliver health
care serv ic es. B ut I would
make the market work for us
by en h a n cin g co m p etitio n ,
which will cut costs. My mal
practice reform s would cut
costs further by removing the
fear of lawsuits that leads to
wasteful procedures.
I firm ly b eliev e th a t a
move to national health insur
ance, as some of my opponents
want, would be a major, irre
trievable mistake. That course
would turn over the h ealth
care sector — a full 13% of our
econom y — to the G overn
m ent. The resu lt would be
more bureaucracy, rationed
f believe we can
provide access to
affordable health care
fo r all Americans, while
preserving choice fo r
patients and their
families in selecting
doctors, hospitals,
health care programs,
and em ploym ent"
22
care, inefficiency, and, in the
end, even higher costs.
My o p p o n en t’s “play or
pay’’ approach winds up in the
same place as nationalized,
bureaucratic health insurance
— but th rou gh a d ifferen t
route. And it is likely to kill a
lot of jobs along the way, especially in sm a ll b u sin e sse s.
Increasing the costs of labor —
the “play” in his approach —
will lead b u sin esses to hire
fewer workers. Offering the al
tern a tiv e of G overnm entsponsored health care paid for
with new taxes on payrolls —
the “pay” — w ill dump the
problem in the lap of a
Government b reaucracy with
the costs paid for by business
es and workers.
c
Pension Portability
I have also been concerned
about the ability of workers to
preserve their retirement pen
sions as they change jobs. This
is a growing need because of
the increased likelihood that
most workers will have more
than one em ployer over the
course of their working years.
I proposed an in itia tiv e
last year to increase pension
portability, expand pension
coverage, and simplify the law
governing pension plans. And
I am pleased that I was able to
sign a law this summer that
incorporated my portability
proposal. The new law e n
hances retirement security by
permitting workers to transfer
accrued pension benefits di
rectly to an IRA or to their
new employer’s pension plan.
Despite this improvement,
I believe we must continue to
look for ways to make it easier
for workers who change jobs to
take pensions with them. We
need to eliminate incentives to
“cash o u t” b en efits and in
crease incentives to save for
the future.
Job tra in in g , afford
able health care, retirem ent
secu rity — when com bined
with a new system of educa
tion and entrepreneurial, com
petitive business, we can offer
working men and women real
economic security in the 21st
Century.
IX.
Leaving No
One Behind:
Economic
Opportunity for
Every American
For over 200 y ears, the
m ost ex cep tio n a l asp ect of
American society has been the
belief, the hope, that this is a
land where people can make a
better life for themselves and
their children. It’s this spirit,
th e com m itm en t to the
A m erican D ream , th a t has
made our country and our so
ciety the most dynamic in the
world.
If we are going to use that
energy to drive us forward into
the 21st Century, we will need
to tap the aspirations of each
and every one of our citizens.
No one should be left behind
for want of opportunity.
Many of the programs that
I have d iscu sse d above —
health care for all Americans,
child care, job training, pen
sion portability, a new compet
itive school system based on*
community involvem ent and
choice for all American fami
lies — support my plan to em
power all Americans to make
their own choices and better
their lives. But I believe we
need to do more for certain cit
izens who have fallen too far
behind.
My p h ilo so p h y for e n
abling all Americans to share
the American Dream is sim
ple: it’s based on property and
work. Our urban and welfare
programs must be designed to
en ab le people to break the
cycle of poverty, get back on
their feet, get back to work,
and take resp o n sib ility for
th eir own choices and their
own lives.
23
I disagree with the failed
logic of “welfare rights” and its
em p h asis on en titlem en t. I
disagree with “income mainte
nance” strategies — strategies
that merely maintain poverty
and contain potential.
Our goal sh ould not be
more dependence — but rather
a
new
D ecla ra tio n
of
Independence — to help peo
ple develop the hum an and
financial capital to share the
A m erican Dream . We have
taken the first step with our
implementation of the welfareto-work logic of the Fam ily
Support Act of 1988. We have
been encouraging flexible and
in n o v a tiv e im p lem en ta tio n
through waivers that enable
s ta te s to d evelop new pro
gram s to en h an ce p aren tal
and family responsibility and
to insist on education and job
training for those on welfare.
W elfare policies won’t work
unless people do.
In our in n er c itie s , we
need to restore hope by clear
ing aw ay the h an d icap of
crime, building a core of prop
erty owners, creating business
in ce n tiv es, restorin g in fra
stru ctu re, and focusing our
program s on work and
discipline.
Enterprise zones can cre
ate solid economic foundations
in d istressed com m u n ities.
Our “Weed and S eed ” effort
can help reclaim and revitalize
impoverished and em battled
com m unities by elim in atin g
the fear of drugs and violence,
targeting coordinated human
services program s, and im
proving the housing stock and
infrastructure.
We also need to extend op
portunity by enabling lower
income families to build assets
— for example, by allowing aid
recipients to accumulate high
er savings without losing their
eligibility.
" R / l y philosophy fo r
enabling all Americans
to share the American
Dream is sim ple: its
based on property and
work. Our urban and
welfare program s must
be designed to enable
people to break the
cycle o f poverty g et
back on their fe e t g et
And we need to expand
homeowner opportunities for
lower and middle income fami
lie s. For exam p le, HOPE
grants enable more inner-city
people to own th eir own
homes. Our $5,000 tax credit
for first-tim e hom e buyers
would help; so would permit
tin g voucher r ec ip ien ts to
apply their rental subsidies to
ward the purchase of a home.
We can en h an ce the
choice, q u a lity , and a v a il
ability of housing through af
fordable rent subsidies in the
form of housing vouchers, and
through our “Perestroika in
Public Housing” program that
widens opportunities for pub
lic housing tenants to change
the management of troubled
projects.
back to work, and take
responsibility fo r their
own choices and their
own lives. I
24
This property and workbased approach need not be
more expensive than the tradi
tional w elfare bureaucracy.
For example, over the past 12
years, federal spending for low
incom e a s sis ta n c e doubled
even after inflation — from
$9.1 billion in 1980 to $18.3
billion this year «both in 1992
dollars). This year, HUD is
providing housing assistance
to 4.6 million low-income fami
lies, up from 3.1 m illion in
1980. I have tried to rechannel
some of this funding to vouch
ers b ecau se th ey are more
cost effectiv e than con
structing new public housing
units. F irthermore, families
w ould n ’t have to w ait five
years for the units to be built,
and the vouchers give families
more choice.
For too long, Congress has
stubbornly refused to discard
failed programs that perpetu
ate welfare dependency. No
doubt, many of these programs
were w ell in ten tio n ed . But
now we know better. Give us a
chance to try a different ap
proach that will empower peo
ple to help th em selv es, to
build some capital for their
families, to make choices that
develop self-respect and disci
pline. That’s the real way to
offer economic opportunity for
every American, to leave no
one behind.
X.
"Rightsizing"
Government
My blueprint envisages an
important Government role to
m ake a secu re and stron g
America. But it is also impor
ta n t th at G overnm ent not
siphon off more private re
sources than are absolutely
necessary to perform the func
tions that will help us win the
economic competition. Because
an overweight Government —
serving itself seconds rather
than serving the people first —
will weigh us down in the race
of a new era.
Much of my agenda can be
accomplished simply by redi
recting current funding away
from bu eaucracies and to
wards people. My agenda em
powers people with the means
to work, own property, build
capital, raise families, and be
effective contributors within
our private market economy.
Some of my ideas — legal and
h ea lth care reform s, for
example — should even help
us save money.
Contrary to the assertions
of some politicians and special
interest groups, spending as a
p ercentage of the n a tio n ’s
GDP has been going up, not
down. In 1991, the Federal
Government spent 23.5% of
w hat our n a tio n produced.
That compares with 17.6% in
1965, 19.9% in 1970, 22.0% in
1975, and 22.3% in 1980. So
not only has G overnm ent
grown as the econom y has
grown, but Government is tak
ing a bigger sh a re. The
American people are not taxed
too little . The A m erican
Government spends too much.
In my acceptance speech I
noted some of the efforts I will
make to hold down spending. I
have proposed cap p in g the
growth of mandatory spend
ing, other than social security.
That would still permit spend
ing at present levels plus an
adjustm ent for inflation and
population growth. Yet th is
cap would save $294 billion
over five years.
To start to implement this
cap, I have proposed over $72
b illio n in specific sp en d in g
cuts for “mandatory” programs
(FY93-97). If you add th ese
proposed cuts to others I have
previously called for but which
Congress has not yet enacted,
my specific cuts would total
about $132 billion over five
years. I have also proposed
the ou trigh t elim in a tio n of
246 sp ecific d iscretio n a ry
programs.
By way of comparison, my
opponent has specifically pro
posed less than $5 billion in
25
cuts in mandatory programs.
And he has singled out only
one program for elimination —
th e h on eyb ee su b sid y pro
gram, which his running mate
voted four times to retain.
Furthermore, I proposed
freezing all other spending,
and I will enforce this freeze
by vetoing any bill Congress
sends me that spends more
than I asked for in my budget.
I’ve asked Congress for the
line item veto, a disciplinary
tool used effectiv ely by the
governors of 43 states. This
veto authority is important not
only to help cut, but to in
crease a President’s leverage
with a Congress that seeks to
tax more and spend more.
G overnm ent should be
subject to the discipline of a
balanced budget amendment.
S ta te govern m en ts operate
that way. Businesses operate
th at way. F a m ilies operate
th a t w ay. And g iven the
breakdown of Congressional
discipline, we need an amend
m ent to en su re th a t the
Federal Government operates
that way, too. If we had had
such an amendment years ago,
we wouldn’t be paying almost
$200 billion dollars a year now
on interest for the debt left us
by earlier Congresses.
I also believe taxpayers
should have the right to direct
10^ of their tax payments to
reduce debt and sp en d in g
through a “check-off” on their
tax forms. If all taxpayers took
the full 10% , the cut would be
about $50 billion. That’s only
3*T of the Federal budget of
about $1.5 trillion. Since feder
al spending has been growing
at a rate of about 8 % per year,
even this proposed cut would
still enable spending to grow;
it would ju st grow more
slowly.
Some editorialists dismiss
my checkoff proposal, but the
American people seem to like
it, and I think I know why. My
proposal traces its roots to an
Am erican tra d itio n . At the
turn of th is cen tu ry, m any
people were concerned that
the G overnm ent e s ta b lis h
ment was slipping away from
the people it was supposed
serve. This movement led to
such venerable “gimmicks” as
referenda, the right of recall,
and the direct election of U.S.
Senators. The idea of term
lim its for S en a to rs and
C ongressm en, which I fully
support, is another reform of
this type. At the time each was
proposed, the con ven tion al
th in k ers chuckled at the
ch an ges. The sam e is true
today. G iven the com p lete
breakdown in spending disci
pline in C ongress, it ’s tim e
U G o v e rn m e n t should
be subject to the
discipline o f a balanced
budget amendment.
State governm ents
operate that way.
Businesses operate that
way. Families operate
that way. A n d given the
breakdown o f
Congressional discipline,
we need an
am endm ent to ensure
that the Federal
Governm ent operates
that way, to o ."
26
that we insist on compensat
ing reforms that give the peo
ple a bigger say in the direc
tion of Federal Government
spending. I say it’s time to give
the people the power to cut the
deficit. .
The size and structure of
the Government also needs to
be slim m ed
down and
changed. The organization of
the F ed eral G overnm ent
reflects ways of doing business
that are now 30 to 50 years
old. C om panies all across
America have been restructur
ing, cutting costs, becoming
more efficient — preparing to
be more competitive in a fast
changing m arketplace. I be
lieve the Federal Government
can and should do the same
thing. I believe a streamlining
of the F ederal G overnm ent
should include three elements:
First, I will cut the operat
ing budget of the E xecutive
Office of the President by 33%
if Congress agrees to subject
its operations to a cut of the
sam e size. W ith few er
Congressional staffers badger
ing the Executive Branch, I
know we can cut costs by that
amount. Second, I believe all
federal em p lo y ees ea rn in g
above $75,000 a year should
be subject to a 5% pay cut;
other Americans have tigh t
ened their belts, and so should
the better-paid federal work
ers. Finally, I believe we can
restru ctu re and reduce the
size of the Executive Branch
through a co n so lid a tio n of
agencies and bureaus that will
enable us to do our job better.
Why should the F ed eral
Government be the only large
organization in America that
continually adds size and of
fices, and never gets rid of
anything? Therefore, I w ill
submit a streamlined reorga
nization plan for the Executive
Branch to the new Congress —
and I hope they take the hint,
too.
Let me give you an exam
ple. In m any resp ects, th e
Arms Control and D isarm a
ment Agency, or ACDA, is a
creature of the Cold War. It
needs to adapt to the times. Its
highl> trained scientists and
engineers are a valuable re
source. Some of them can sup
port our efforts to stem and re
v erse th e p ro lifera tio n of
weapons of mass destruction.
But others may be well suited
to work at weapons destruc
tion and defense conversion —
tran sform in g the g en iu s of
modern day swords into 21st
Century plowshares.
M u ltiply th is id ea by a
hundred, or even a thousand,
others. We can get rid of some
ta sk s, conduct others more
efficiently, and add new ones
where appropriate to support
my agenda.
I also am committed to re
ducing the tax burden on tb:
American people. I have said
that I will propose to further
reduce taxes across-the-board,
provided we pay for those cuts
with specific spending reduc
tions that I consider appropri
ate, so that we do not increase
the deficit.
To illustrate the kinds of
tax cuts we could achieve if we
discipline spending: just con
sid er w hat we could do if
Congress acted on the $132
billion in specific spending re
ductions that I have already
proposed. These savings alone
could finance an across-theboard rate cut of 1 percent, a
reduction of the sm all b u si
ness tax rate from 15% to 10%,
an increase in small business
ex p en sin g of in v estm en t in
equipment, and a reduction of
the capital gains tax.
In sum , my direction is
clear — I want to spend less
and tax le ss . My opponent
wants to spend more and tax
more.
I b eliev e th e F ederal
Government cam reallocate its
almost $1.5 trillion in spend
ing more effectively if we im
plem ent my agenda. The re
ductions in defense spending
that we have already begun
27
w ill provide som e of th ese
funds, and I don’t want them
w asted in a torren t of new
spending programs designed
by a horde of special interests.
I honestly believe that this
is the only way to get the size
and spending of Government
under control. I know that se
rious-m inded people believe
we need to increase revenues
to close the deficit. But it won’t
work. I have seen too many
times that efforts to close the
deficit by in c r e a sin g ta x es
have only turned out to give
Congress a license to spend
more money. There’s a reason
for this. Spending is power for
Congressmen. That’s how they
show influence, and placate
th eir frie n d s, the in te r e st
groups. If you give Congress
men more tax money, they will
spend it.
XI.
A Strategy for
Implementation
This year is an important
turning point for the United
States. We are entering a new
era, and for the first time in
many years, it appears that
Congress w ill have 150 new
faces for the President to work
with. That’s why I’m asking
for a mandate for my program.
That’s why I have promised
that I will meet with all new
members — all 150 or more —
before they are besieged by the
special interests and perma
nent staffs.
I also believe we need to
take another step to ensure
that the new Congress does
not become like the old one.
The root of the present prob
lem is political contributions
from organized special inter
ests through political action
committees, or PACS. In the
run up to the 1980 elections,
PACs raised and contributed
$55 million to political candi
dates. In the same time period
before the ’90 elections, PACs
spent about $160 million. The
other party doesn’t want to do
an y th in g about it, b ecau se
they are the biggest recipients.
I want to put them to the test.
I want a new Congress to stay
clean. So an important part of
my new legislative agenda will
be a sim p le b ill to ab olish
PACs subsidized by corpora
tio n s, u n io n s, and trade
associations.
I am committed to making
my program work with Con
gress. B etw een the election
and the convening of a new
Congress, I will lay out an im
p lem en ta tio n plan for my
agenda. I intend to be ready to
present the new Congress a
first-year plan to carry out the
legislative proposals described
in this agenda:
n B e tw e e n the
election and the
convening o f a new
Congress, I will lay out
an implementation plan
for my agenda. I intend
to be ready to present
the n ew Congress a
first-year plan to carry
out the legislative
proposals described in
this agenda."
A rad ical ov erh a u l of
American education to em
phasize excellence, stan
dards, competition, entre
preneurial schools, and a
“G.I. B ill for K ids” that
will give parents a choice
of schools
structure, ensure functions
fit new n eed s, and cut
salaries at higher levels
■
Reform of our legal system
■
A package to clear away
crime, build business, and
put people to work in our
inner cities
■
An expansion of Civilian
R&D linked1to new appli
cations
■
Ban on PAC contributions
■
Lim its on Congressional
terms
My job training programs
My health care reforms
A package to cut spending,
in clu d in g a cap on the
grow th of m andatory
sp en d in g , a ta x p a y e r s’
“checkoff” to reduce the
debt, a line-item veto, and
a balanced budget amend
ment
Tax cuts paid for through
spending reductions and
growth, including reduc
tio n s to spur en tr e p r e
n eu ria l ca p ita lism and
small business
NAFTA
New trade negotiating au
thority so we can conclude
new Free Trade A g ree
ments across the Atlantic,
the Pacific, and in our own
hemisphere
A Government reorganiza
tion plan to streamline the
Now I know I may not be
able to get everything I want
in the exact way I want it. But
your support for a mandate to
get it done would give me mo
mentum. I intend to fight for
this agenda, fight as hard as I
can to get as much as I can,
and then come back again to
get more.
If Congress h esita tes on
some fronts, I intend to keep
m oving forw ard. You have
seen that we can im plem ent
back-to-work welfare reform
by granting waivers that en
able the states to do the job
more effectively. Similarly, 44
sta te s and more th an 1700
communities have started to
implement my educational re
form s w h ile C on gress has
sta lled . We can get a great
deal done at th e s ta te and
local levels.
I will work with governors,
state legislatures, local gov
ernments, and the private sec
tor to pursue my agen d a.
While I want a Congress that
can help me do the job, I’m
committed to getting the job
done one way or the other.
29
T his is my A genda for
American Renewal. With the
end of the long Cold War, we
can target peace, prosperity,
and prom ise at hom e. The
American people want that.
The American people deserve
that.
At the same time, Ameri
cans recognize that the great
even ts of recent years have
shaken the world, and it will
never be the same. If we are to
succeed as a nation and as a
people, if we are to hold true to
all th a t has m ade A m erica
“the last, best hope of earth,”
th en our ren ew a l at hom e
must £: the same time enable
us to make the 21st Century
another American Century.
My Agenda draws together
our people and our Govern
ment to take on this challenge.
We will create a $10 trillion
econom y. We w ill renew
A m erica. We w ill win the
peace.
My approach to this chal
lenge is fundamentally differ
en t from my o p p o n en t’s. I
want to stim u late entrepre
neurial capitalism. I want to
help people by enabling them
to make their own decisions
about health, education, job
training, and child care from a
variety of competing alterna
tives. I want to supply services
through the private sector. I
believe people should sue each
other less and care for each
other more. I w ant Govern
m ent to spend less and tax
less. I will fight without hesi
tation for a free and fair flow
of trade, cap ital, and ideas
around the world. I believe
America should compete, not
retreat.
I know tim es have been
d iffic u lt
for too m any
Americans. I have sought to
-explain the cau ses of th ese
problems and what I will do
about them. Of course you will
have change. The question is
what kind of change. You face
a serious choice. And I ask,
when you step into that voting
booth, please consider careful
ly which candidate’s agenda
for change fits best with your
beliefs, America’s experience,
and our hopes for la s tin g
peace and prosperity.
" W i t h the end o f the
long Cold War, w e can
target peace, prosperity,
and prom ise a t home.
The American people
w ant th at The
American people
deserve th a t"
TREASURY NEWS
Department of the Treasury
Washington, D.C
FOR RELEASE AT 2:30 P.M.
11, 1992 t
September
CONTACT:
Telephone 202-622-2960
Office of Financing
202-219-3350
TREASURY’S 52-WEEK BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for approximately $ 13,750 million of 364 -day
Treasury bills to be dated S e p t e m b e r 24, 1992 and to mature
S e p tember 23, 1993
(CUSIP No. 912794 E3 4). This issue will
provide about $1,175 million of new cash for the Treasury,
as the maturing 52-week bill is outstanding in the amount of
$12,563 million. Tenders will be received at Federal Reserve
Banks and Branches and at the Bureau of the Public Debt, Washing
ton, D. C. 20239-1500, Thursday, S e p t e m b e r 17, 1992,
prior to
12:00 noon for noncompetitive tenders and prior to 1:00 p.m.,
Eastern D a y l i g h t Saving time, for competitive tenders.
The bills will be issued on a discount basis under competi
tive 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 Sep t e m b e r 24, 1992. In addition to the
maturing 52-week bills, there are $ 23,216 million of maturing
bills which were originally issued as 13-week and 26-week bills.
The disposition of this latter amount will be announced next
week. Federal Reserve Banks currently hold $ 3,243 million as
agents for foreign and international monetary authorities, and
$ 6,954 million for their own account. These amounts represent
the combined holdings of such accounts for the three issues of
maturing bills. Tenders from Federal Reserve Banks for their
own account and as agents for foreign and international mone
tary 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 $ 130
million of the original 52-week issue. Tenders for
bills to be maintained on the book-entry records of the Depart
ment of the Treasury should be submitted on Form PD 5176-3.
NB-1969
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 2
Each bid must state the par amount of bills bid for, which
must be a minimum of $10,000. Bids over $10,000 must be in mul
tiples of $5,000. A bidder submitting a competitive bid for its
own account, whether bidding directly or submitting bids through
a depository institution or government securities broker/dealer,
may not submit a noncompetitive bid for its own account in the
same auction.
Competitive bids must show the discount rate desired,
expressed in two decimal places, e.g., 7.10%. Fractions may not
be used. A single bidder, as defined in Treasury's single bidder
guidelines, may submit competitive tenders at more than one dis
count rate, but the Treasury will not recognize, at any one rate,
any bid in excess of 35 percent of the public offering. A com
petitive bid by a single bidder at any one rate in excess of 35
percent of the public offering will be reduced to the 35 percent
limit. The public offering for any one bill is the amount offered
for sale in the offering announcement, less bills allotted to Fed
eral Reserve Banks for their own account and for the account of
foreign and international authorities in exchange for maturing
bills.
Noncompetitive bids do not specify a discount rate. A
single bidder should not submit a noncompetitive bid for more than
$1,000,000. A noncompetitive bid by a single bidder in excess of
$1,000,000 will be reduced to that amount. A bidder may not sub
mit a noncompetitive bid if the bidder holds a position, in the
bills being auctioned, in "when-issued" trading or in futures or
forward contracts. A noncompetitive bidder may not enter into any
agreement to purchase or sell or otherwise dispose of the bills
being auctioned, nor may it commit to sell the bills prior to the
designated closing time for receipt of competitive bids.
The following institutions may submit tenders for accounts
of customers: depository institutions, as described in Section
19(b)(1)(A), excluding those institutions described in subpara
graph (vii), of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A));
and government securities broker/dealers that are registered with
the Securities and Exchange Commission or noticed as government
securities broker/dealers pursuant to Section 15C(a)(1) of the
Securities Exchange Act of 1934. Others are permitted to submit
tenders only for their own account.
For competitive bids, the submitter must submit with the
tender a customer list that includes, for each customer, the name
of the customer and the amount and discount rate bid by each cus
tomer. A separate tender and customer list should be submitted
for each competitive discount rate. Customer bids may not be
aggregated by discount rate on the customer list.
For noncompetitive bids, the customer list must provide,
for each customer, the name of the customer and the amount bid.
For mailed tenders, the customer list must be submitted with the
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 3
tender. For other than mailed tenders, the customer list should
accompany the tender. If the customer list is not submitted with
the tender, information for the list must be complete and avail
able for review by the deadline for submission of noncompetitive
tenders. The customer list must be received by the Federal
Reserve Bank by auction day.
All bids submitted on behalf of trust estates must identify
on the customer list for each trust estate the name or title of
the trustee(s), a reference to the document creating the trust
with date of execution, and the employer identification number
of the trust.
A competitive bidder must report its net long position in
the bill being offered when the total of all its bids for that
bill and its net long position in the bill equals or exceeds $2
billion, with the position to be determined as of one half-hour
prior to the closing time for the receipt of competitive tenders.
A net long position includes positions, in the bill being auc
tioned, in when-issued trading and in futures and forward con
tracts, as well as holdings of outstanding bills with the same
CUSIP number as the bill being offered. Bidders who meet this
reporting requirement and are customers of a depository institu
tion or a government securities broker/dealer must report their
positions through the institution submitting the bid on their
behalf. A submitter, when submitting a competitive bid for a
customer, must report the customer's net long position in the
security being offered when the total of all the customer's bids
for that security, including bids not placed through the submit
ter, and the customer's net long position in the security equals
or exceeds $2 billion.
Tenders from bidders who are making payment by charge to a
funds account at a Federal Reserve Bank and tenders from bidders
who have an approved autocharge agreement on file at a Federal
Reserve Bank will be received without deposit. Full payment for
the par amount of bills bid for must accompany tenders from all
others, including tenders for bills to be maintained on the bookentry records of the Department of the Treasury. An adjustment
will be made on all accepted tenders accompanied by payment in
full for the difference between the payment submitted and the
price determined in the auction.
Public announcement will be made by the Department of the
Treasury of the amount and discount rate range of accepted bids for
the auction. In each auction, noncompetitive bids for $1,000,000
or less without stated discount rate from any one bidder will be
accepted in full at the weighted average discount rate (in two
decimals) of accepted competitive bids. Competitive bids will then
be accepted, from those at the lowest discount rates through suc
cessively higher discount rates, up to the amount required to meet
the public offering. Bids at the highest accepted discount rate
will be prorated if necessary. Each successful competitive bidder
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 4
will pay the price equivalent to the discount rate bid. Noncom
petitive bidders will pay the price equivalent to the weighted
average discount rate of accepted competitive bids. The calcula
tion of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923.
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.
No single bidder in an auction will be awarded bills in an
amount exceeding 35 percent of the public offering. The deter
mination of the maximum award to a single bidder will take into
account the bidder's reported net long position, if the bidder
has been required to report its position.
Notice of awards will be provided to competitive bidders
whose bids have been accepted, whether those bids were for their
own account or for the account of customers. No later than 12:00
noon local time on the day after the auction, the appropriate
Federal Reserve Bank will notify each depository institution that
has entered into an autocharge agreement with a bidder as to the
amount to be charged to the institution's funds account at the
Federal Reserve Bank on the issue date. Any. customer that is
awarded $500 million or more of securities in an auction must
furnish, no later than 10:00 a.m. local time on the day after the
auction, written confirmation of its bid to the Federal Reserve
Bank or Branch where the bid was submitted. If a customer of a
submitter is awarded $500 million or more through the submitter,
the submitter is responsible for notifying the customer of the
bid confirmation requirement.
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
by the issue date, by a charge to a funds account or pursuant to
an approved autocharge agreement, in cash or other immediatelyavailable funds, or in definitive Treasury securities maturing
on or before the settlement date but which are not overdue as
defined in the general regulations governing United States secu
rities. Also, maturing securities held on the book-entry records
of the Department of the Treasury may be reinvested as payment for
new securities that are being offered. Adjustments will be made
for differences between the par value of the maturing definitive
securities accepted in exchange and the issue price of the new
bills.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76 as applicable, Treasury's single bidder guide
lines, 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.
4/17/92
TREASURY NEWS
Department of the Treasury
FOR IMMEDIATE RELEASE
September 13, 1992
Washington, D.C.
Telephone 202-622-2960
CONTACT: Scott Dykema
202-622-2960
Statement by Secretary Nicholas F. Brady
Re: European Monetary System and German interest rates
We welcome the action taken this weekend to realign the EMS
(European Monetary System) and we are especially pleased that the
Bundesbank intends to reduce interest rates Monday morning. This
is a positive development for world markets and will help fulfill
President Bush's long-standing efforts to ensure the
strengthening of world growth.
NB-1970
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
September 14, 1992
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $10,642 million of 13-week bills to be issued
September 17, 1992 and to mature December 17, 1992 were
accepted today (CUSIP: 912794ZB3).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2.87%
2.89%
2.89%
Investment
Rate
2.93%
2.95%
2.95%
Price
99.275
99.269
99.269
Tenders at the high discount rate were allotted 36%.
The investment rate is the equivalent coupon-issue yield.
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
32,770
32,835,195
10,185
28,600
244,165
26,835
1,974,045
21,960
11,760
21,145
24,425
949,695
626.315
$36,807,095
Accented
32,770
9,338,800
10,185
28,600
57,685
20,435
187,205
15,560
11,760
21,145
24,425
267,495
626.315
$10,642,380
Type
Competitive
Noncompetitive
Subtotal, Public
$32,638,555
1.118.350
$33,756,905
$6,473,840
1.118.350
$7,592,190
2,793,080
2,793,080
257.110
$36,807,095
257.110
$10,642,380
Federal Reserve
Foreign Official
Institutions
TOTALS
An additional $139,490 thousand of bills will be
issued to foreign official institutions for new cash.
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
September 14, 1992
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $10,618 million of 26-week bills to be issued
September 17, 1992 and to mature March 18, 1993 were
accepted today (CUSIP: 912794B52).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2.89%
2.91%
2.90%
Investment
Rate
2.97%
2.99%
2.98%
Price
98.539
98.529
98.534
Tenders at the high discount rate were allotted 4%.
The investment rate is the equivalent coupon-issue yield
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
19,080
35,536,965
9,060
18,600
31,215
17,335
1,889,805
13,415
3,350
24,565
8,545
722,160
442.940
$38,737,035
Accented
19,080
9,852,980
9,060
18,600
21,615
11,575
43,245
8,615
3,350
24,565
8,545
154,240
442.940
$10,618,410
Type
Competitive
Noncompetitive
Subtotal, Public
$34,734,675
738.170
$35,472,845
$6,616,050
738.170
$7,354,220
2,450,000
2,450,000
814.190
$38,737,035
814.190
$10,618,410
Federal Reserve
Foreign Official
Institutions
TOTALS
An additional $460,210 thousand of bills will be
issued to foreign official institutions for new cash.
NB-1972
This is background by Senior ïreas. officiai. Embargoed
til 4:30 p.m. EDT. Sense of what he said plus special
quotes
1) Did Germany go far enough? A) That is not a
question I’m willing to speculate on. We certainly welcome
the action that was taken. We have said for some time that
tensions were building and that there were only two
options for relieving them (realignment of currencies-reduction of interest rates by the Bundesbank).
It was a highly significant event. And as you
can see from world markets the effect has been very
beneficial.
Q)How much was U.S. involved:
A) We did have consultations with the G-7 deputies on
Wednesday night and Thursday.
With the G-7 ministerial coming up this weekend
and the vote in France coming up this weekend... and the
continuing pressures., it became clear the situation
couldn't be sustained without some extraordinary
action.
We think interest rate reductions In Gerany are very
important. The officials took the view that they didn't
want to face another week of the type (that they faced
last week).
Q) Asked if the German rate cuts and EMS
realignment will do much ? the official said
These are quite significant actions (Germany
rate moves, EMS realignment ) They set a new direction,
send an extremely important message to the market. The
markets recognize that an important turning point has
taken place.
The markets take the view that the turning point
has come and they are looking at a sltutionat where German
rates will not go back up again.
Q) Is there any understanding of what the Fed
response will be? MWe haven’t had that discussion."
q) Does it create more room for easing by •
Fed?
A) Have to see how the market develops and how
the economy develops. That's a decision the Fed has to
make.
The important thing is that the long effort by
the Secretary and the President to emphasize world growth
has turned out to be successful"
W e have taken the view that German rates had
been too high for too long and that point has been clearly
accepted by everybody now.
This is a pretty good example of successful
policy coordiation.
Q) Satisfied with actions to date by Japan and
Germany?
A) The appropriate policy decisions have been
made. They have established the appropriate direction of
change. Now we have to see if they are as effective as we
hoped.
We're ver - pleased...
Q) Impact on G-7 meeting?
A) The Impact on the atmostphere should be very positive.
A lot of the tension in the G-7 has effectively been
defused by these actions. It will allow for a much more
constructive discussion.
* alluding to claims by analysts that the
dollar's drop recently was indicative of a weak U.S.
economy, the officailo said the movement (in recent weeks)
of the dollar was "quite small."
This was politicized unnecessarily. The dollar's
fall was a residual effect of the tensions in Europe and
not a judgemnt about the the U.S. economy.
The dollar has more than recovered that ground
in a single trading hour.
Q) What is U.S. dollar policy?
A) W e’re not seeking a depreciaion of the dollar. We are
not following a policy of benign neglect.
The intervention was unsuccesful (in summer)
because of the enormous attractiveness of the D=mark.
Q) Are you looking for stability in the dollar?
A) W e’ve had stability. We have not had unstable or
disorderly markets. We are still relatively in the range
where we have been over the past several yearas.
Except when there was the brief breakout when
the dollar went to new historical iow s-( penetrated 1.40
D-mark, we’re baok near 1.50 now).
q) Why intervene if not disorderly markets?
A) The point of the intervention was to send a signal to
the markets that we thought currencies were appropriately
priced and we were not seeking a depreciation of the
dollar.
"We then let the market find its level. Now
we’ve had action that goes some ways to relieve the
tensions (in currency markets)
Q) Need for more German interest rate cuts?
A) We have to appraise what the effect of these policy
actions are.
Notations: Paris Club met today on Russia debt.
(informal). First such meeting. The official said T h e
hope is that we can do a formal Paris Club rescheduling
sooner rather than later.
W e are negotiating how to give Mr. Yeltsin the
breathing space that was promisted at the time of the G-7
summit
Q) change the cut off date?
A) Said basically, that old cut off date applied to
former Soviet Union. MNow we have a different situauon.
The Soviet Union no longer exists and Russia is addressing
the quesiton of its debt burden"
He made point that Paris Club must tackle
question of debt arrears, but noted Russia current on U.S.
payments.
Q) Is the timing of Paris Club reschedule tied
to IMF full standby?
A) We are com m itted to negotiating a resch ed u ling on the
basis of the first credit tranche.
“But there will be a link between the Paris Club
rescheduing and the standby11 such as a clause that would
allow the creditors to pull back the rescheduling if the
standby doesn't go ahead.
Offical said: “Russia’s balance payments needs will be
very substanital in 19 93-W e know the situation will be
similar to 1992.“ (no precise number)
(Although Russia’s crop prospects have improved,
there will be “shortfalls" in 1992-93 winter).
(Other topics at G-7 will be Uruguay Round,
estpecially liberations of financiaol servicesk and report
by U.S. on quota increease (Congress back in session).
Q) Contingency plan on "no" vote on Maastricht?
A) Not aware they (French) have any contingency
plans."
“They expect a yes vote."
(Russians will be invited at some point to join
the G-7 meeting).
Q) Stabilization fund for ruble?
A) It will take some time. It will not happen until after
there is a standby program and we see what the performance
is. Within a matter of weeks (after a standby agreement is
inked) we’ll take a look at how to proceed (with
stabilization fund)
Q) Does Bundesbank hurt its credibility by its
rate cut-knuckling under to outside pressure to ease?
a) The official said he didn't agree with that
assessment, he said Germany had made progress on
inflation, and economic growth was slowing sharply. So
these factors justified the easing of monetary policy.
Q) Didn’t it take a crisis for everybody to m oveisn't that a indictment on the coordiination process?
A)We have never made the case that the coordination
process is perfect." ....."But the important thing is that
these things get resolved for the good of the overall
objective of world growth. In this case they were
resolved. It’s worked once again, very, very well."
PU BLIC D E B T NEW S
Department o f the Treasury
•
Bureau of the Public D ebt • W ashington, D C 20239
F O R IM M E D IA T E R E L E A S E
Septem ber 15, 1992
C ontact: P e te r H ollenbach
(202) 219-3302
BUREAU OF THE PUBLIC DEBT A ID S SAVINGS B O N D S OW NERS
IN HAWAII AFFECTED BY HURRICANE IN IK I
The B ureau of the Public D ebt took action to assist victims of H u rrican e Iniki th a t hit H aw aii
by expediting the replacem ent or paym ent of U n ited States Savings Bonds for owners in the
affected areas. T he em ergency procedures are effective im m ediately for paying agents and
owners on the following islands: K ahoolaw e, K auai, Lanai, M aui, N iihau and O ahu. T he
emergency procedures will rem ain in effect through O ctober 31, 1992.
Public D ebt's action waives the norm al six-month m inim um holding p erio d for Series E E
savings bonds presented to authorized paying agents for red em p tio n by residents of the affected
areas. M ost financial institutions serve as paying agents for savings bonds.
The replacem ent of bonds lost or destroyed will also b e expedited by Public D ebt. B ond
owners should com plete form P D -1048, available at m ost financial institutions or the F ed eral
Reserve Bank. They should include as m uch inform ation as possible about the lost bonds on
the form. This inform ation should include how the bonds w ere inscribed, social security
num ber, approxim ate dates of issue, bond denom inations and serial num bers if available. T he
com pleted form m ust be certified by a notary public o r an officer of a financial institution.
C om pleted form s should be forw arded to Public D e b t’s Savings B ond O perations Office
located a t 200 T hird St., Parkersburg, W est V irginia 26106-1328. B ond owners should w rite
the words "H urricane Iniki" on the front of th eir envelopes to help speed the processing of
claims.
Public D ebt is the Treasury bureau responsible for handling the processing of savings bonds.
oOo
PA-107
FOR RELEASE AT 2:30 P.M.
September 15, 1992
CONTACT:
Office of Financing
202-219-3350
TREASURY'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling approxi
mately $20,400 million, to be issued September 24, 1992.
This
offering will result in a paydown for the Treasury of about $ 2,825
million, as the maturing bills are outstanding in the amount of
$23,216 million.
Tenders will be received at Federal Reserve
Banks and Branches and at the Bureau of the Public Debt, Washing
ton, D. C. 20239-1500, Monday, September 21, 1992,
prior to
12:00 noon for noncompetitive tenders and prior to 1:00 p.m.,
Eastern Daylight Saving time, for competitive tenders.
The two
series offered are as follows:
91 -day bills (to maturity date) for approximately
$10,200 million, representing an additional amount of bills
dated
June 25, 1992.
and to mature December 24, 1992
(CUSIP No. 912794 ZW 7), currently outstanding in the amount
of $11,650 million, the additional and original bills to be
freely interchangeable.
182-day bills for approximately $ 10,200 million, to be
dated September 24, 1992 and to mature March 25, 1993
(CUSIP
No. 912794 B6 0).
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 September 24, 1992. In addition to the
maturing 13-week and 26-week bills, there are $ 12,563 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 aggre
gate amount of maturing bills held by them.
For purposes of deter
mining such additional amounts, foreign and international monetary
authorities are considered to hold $ 2,959 million of the original
13-week and 26-week issues.
Federal Reserve Banks currently hold
$ 3,089 million as agents for foreign and international monetary
authorities, and $ 6,954 million for their own account.
These
amounts represent the combined holdings of such accounts for the
three issues of maturing bills.
Tenders for bills to be maintained
on the book-entry records of the Department of the Treasury should
be submitted on Form PD 5176-1 (for 13-week series) or Form
PD 5176-2 (for 26-week series).
NB-1973
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 2
Each bid must state the par amount of bills bid for, which
must be a minimum of $10,000. Bids over $10,000 must be in mul
tiples of $5,000. A bidder submitting a competitive bid for its
own account, whether bidding directly or submitting bids through
a depository institution or government securities broker/dealer,
may not submit a noncompetitive bid for its own account in the
same auction.
Competitive bids must show the discount rate desired,
expressed in two decimal places, e.g., 7.10%. Fractions may not
be used. A single bidder, as defined in Treasury's single bidder
guidelines, may submit competitive tenders at more than one dis
count rate, but the Treasury will not recognize, at any one rate,
any bid in excess of 35 percent of the public offering. A com
petitive bid by a single bidder at any one rate in excess of 35
percent of the public offering will be reduced to the 35 percent
limit. The public offering for any one bill is the amount offered
for sale in the offering announcement, less bills allotted to Fed
eral Reserve Banks for their own account and for the account of
foreign and international authorities in exchange for maturing
bills.
Noncompetitive bids do not specify a discount rate. A
single bidder should not submit a noncompetitive bid for more than
$1,000,000. A noncompetitive bid by a single bidder in excess of
$1,000,000 will be reduced to.that amount. A bidder may not sub
mit a noncompetitive bid if the bidder holds a position, in the
bills being auctioned, in "when-issued" trading or in futures or
forward contracts. A noncompetitive bidder may not enter into any
agreement to purchase or sell or otherwise dispose of the bills
being auctioned, nor may it commit to sell the bills prior to the
designated closing time for receipt of competitive bids.
The following institutions may submit tenders for accounts
of customers: depository institutions, as described in Section
19(b)(1)(A), excluding those institutions described in subpara
graph (vii), of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A));
and government securities broker/dealers that are registered with
the Securities and Exchange Commission or noticed as government
securities broker/dealers pursuant to Section 150(a)(1) of the
Securities Exchange Act of 1934. Others are permitted to submit
tenders only for their own account.
For competitive bids, the submitter must submit with the
tender a customer list that includes, for each customer, the name
of the customer and the amount and discount rate bid by each cus
tomer . A separate tender and customer list should be submitted
for each competitive discount rate. Customer bids may not be
aggregated by discount rate on the customer list.
For noncompetitive bids, the customer list must provide,
for each customer, the name of the customer and the amount bid.
For mailed tenders, the customer list must be submitted with the
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 3
'tender. For other than mailed tenders, the customer list should
accompany the tender. If the customer list is not submitted with
the tender, information for the list must be complete and avail
able for review by the deadline for submission of noncompetitive
tenders. The customer list must be received by the Federal
Reserve Bank by auction day.
All bids submitted on behalf of trust estates must identify
on the customer list for each trust estate the name or title of
the trustee(s), a reference to the document creating the trust
with date of execution, and the employer identification number
of the trust.
A competitive bidder must report its net long position in
the bill being offered when the total of all its bids for that
bill and its net long position in the bill equals or exceeds $2
billion, with the position to be determined as of one half-hour
prior to the closing time for the receipt of competitive tenders.
A net long position includes positions, in the bill being auc
tioned, in when-issued trading and in futures and forward con
tracts, as well as holdings of outstanding bills with the same
CUSIP number as the bill being offered. Bidders who meet this
reporting requirement and are customers of a depository institu
tion or a government securities broker/dealer must report their
positions through the institution submitting the bid on their
behalf. A submitter, when submitting a competitive bid for a
customer, must report the customer's net long position in the
security being offered when the total of all the customer's bids
for that security, including bids not placed through the submit
ter, and the customer's net long position in the security equals
or exceeds $2 billion.
Tenders from bidders who are making payment by charge to a
funds account at a Federal Reserve Bank and tenders from bidders
who have an approved autocharge agreement on file at a Federal
Reserve Bank will be received without deposit. Full payment for
the par amount of bills bid for must accompany tenders from all
others, including tenders for bills to be maintained on the bookentry records of the Department of the Treasury. An adjustment
will be made on all accepted tenders accompanied by payment in
full for the difference between the payment submitted and the
price determined in the auction.
Public announcement will be made by the Department of the
Treasury of the amount and discount rate range of accepted bids for
the auction. In each auction, noncompetitive bids for $1,000,000
or less without stated discount rate from any one bidder will be
accepted in full at the weighted average discount rate (in two
decimals) of accepted competitive bids. Competitive bids will then
be accepted, from those at the lowest discount rates through suc
cessively higher discount rates, up to the amount required to meet
the public offering. Bids at the highest accepted discount rate
will be prorated if necessary. Each successful competitive bidder
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 4
will pay the price equivalent to the discount rate bid. Noncom
petitive bidders will pay the price equivalent to the weighted
average discount rate of accepted competitive bids. The calcula
tion of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923.
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.
No single bidder in an auction will be awarded bills in an
amount exceeding 35 percent of the public offering. The deter
mination of the maximum award to a single bidder will take into
account the bidder's reported net long position, if the bidder
has been required to report its position.
Notice of awards will be provided to competitive bidders
whose bids have been accepted, whether those bids were for their
own account or for the account of customers. No later than 12:00
noon local time on the day after the auction, the appropriate
Federal Reserve Bank will notify each depository institution that
has entered into an autocharge agreement with a bidder as to the
amount to be charged to the institution's funds account at the
Federal Reserve Bank on the issue date. Any customer that is
awarded $500 million or more of securities in an auction must
furnish, no later than 10:00 a.m. local time on the day after the
auction, written confirmation of its bid to the Federal Reserve
Bank or Branch where the bid was submitted. If a customer of a
submitter is awarded $500 million or more through the submitter,
the submitter is responsible for notifying the customer of the
bid confirmation requirement.
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
by the issue date, by a charge to a funds account or pursuant to
an approved autocharge agreement, in cash or other immediatelyavailable funds, or in definitive Treasury securities maturing
on or before the settlement date but which are not overdue as
defined in the general regulations governing United States secu
rities. Also, maturing securities held on the book-entry records
of the Department of the Treasury may be reinvested as payment for
new securities that are being offered. Adjustments will be made
for differences between the par value of the maturing definitive
securities accepted in exchange and the issue price of the new
bills.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76 as applicable, Treasury's single bidder guide
lines, 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.
4/17/92
Department of the Treasury
Washington, D.C.
FOR IMMEDIATE RELEASE
September 16, 1992
' j s \ Irt'
TREASURY NEWS
Telephone 202-622-2960
DFPT OF TUF .CONTACT: Keith Carroll
' ' ' }tit ¡ntASURY
202-622-2930
Statement of Secretary of the Treasury
Nicholas F. Brady
on Millicent Fenwick
Millicent Fenwick was a family friend of 50 years and I will
miss her. She served Bernardsville, Somerset County, the state
of New Jersey and the United States with selfless dedication.
She was a champion of the people and carried out her duties with
strong conviction and courage.
You always knew where Mrs. Fenwick stood and whether you
agreed with her or not, you knew her position was grounded in
principle and carried out with the public trust in mind.
All of us in New Jersey have lost a leader and a friend.
oOo
NB-1974
TREASURY NEWS
Department of the Treasury
FOR IMMEDIATE RELEASE
SEPTEMBER 16, 1992
Washington, D.C.
Telephone 202-622-2960
CONTACT: ANNE KELLY WILLIAMS
(202) 622-2960
TREASURY TRANSMITS LEGISLATION TO
PROVIDE EMERGENCY REGULATORY RELIEF AUTHORITY TO
BANKING AND THRIFT REGULATORS
The Treasury Department today transmitted legislation to
Congress to provide emergency waiver authority to banking and
thrift regulators (including credit unions). This legislation is
a result of Secretary Nicholas F. Brady's meeting with regulators
and representatives of the banking community in Florida last
Wednesday. The legislation grants regulators the discretion to
modify or waive regulatory constraints that obstruct the flow of
banking and credit services to major disaster areas — after
taking into consideration any effects these actions may have on
the safety and soundness of the banking institutions. This
legislation has the support of all federal banking agencies.
"The recent disasters of Hurricanes Andrew and Iniki have
destroyed homes and businesses and shattered the local economies
in Florida, Louisiana, and Hawaii," said Secretary Brady.
"Current law does not provide regulators with sufficient
flexibility to deal with the impact of national disasters. Our
legislation provides the regulators with this critical
flexibility to promote the rebuilding efforts while maintaining
the safety and soundness of the banking system."
In addition to weighing safety and soundness considerations,
the legislation requires that:
o
regulatory agencies modify or waive regulatory
requirements only to the extent that they restrict
activities or operations that would benefit major
disaster or emergency areas;
o
any such action must be taken within one year from the
date on which the President declares an emergency or
major disaster;
o
all such actions must be published in the Federal
Register to ensure openness and accountability.
NB-1975
Today's legislation was the first formal action taken by the
Hurricane Andrew Task Force formed by Treasury last week (see
attached list of members.) This follows up a series of actions
already taken by the regulators including:
o
Issuance of the Joint Interagency Statement (OCC. OTS.
Federal Reserve and FDIcn on Supervisory Practices
Regarding Depository Institutions and Borrowers
Affected bv Hurricane Andrew which encourages bankers
to work with borrowers in communities affected by the
recent hurricane. The statement notes that prudent
efforts to adjust or alter terms on existing loans in
these areas should not be subject to examiner
criticism.
o
The Office of the Comptroller of the Currency (OCC) has
waived procedures by banks to establish temporary
branch facilities at new locations within communities
damaged by Hurricane Andrew and has delayed or
postponed examinations of South Miami banks.
o
The Office of Thrift Supervision (OTS) has written to
CEOs of thrifts in the affected areas to urge them
specifically to work with borrowers to restructure or
increase loans, consider temporarily waiving charges
for late payments, take advantage of the Community
Investment and the Affordable Housing Programs in their
areas and in general reach out to communities and
assess credit needs.
o
The National Credit Union Association (NCUA) postponed
regulatory examinations of credit unions in the
affected areas; urged affected credit unions to adopt
liberal emergency lending policies and keep their loan
windows open, instructed affected credit unions they
could waive scheduled payments for up to 90 days for
their members and could waive or reduce interest
charges on emergency loans.
#
#
#
HURRICANE ANDREW TASK FORCE
John Dugan
Assistant Secretary for Domestic Finance
Treasury Department
Robert Miailovich
Director of Supervision
The Federal Deposit Insurance Corporation (FDIC)
Richard Spillenkothen
Director of Bank Supervision and Regulation
The Federal Reserve
Kevin Bailey
Executive Assistant to the Senior Deputy Comptroller
for Bank Supervision and Operations
Office of Comptroller of the Currency (OCC)
Caryn Gorman
Assistant Director, Major Cases
Office of Thrift Supervision (OTS)
Michael Riley
Director of Examinations and Insurance
National Credit Union Association (NCUA)
D E P A R T M E N T O F THE T R E A S U R Y
W ASHINGTON
GENERAL COUNSEL
September 16, 1992
Honorable Dan Quayle
President of the Senate
Washington, D.C.
20510
Dear Mr. President:
There is transmitted herewith a legislative proposal to
relieve the regulatory burden on depository institutions and
credit unions that are doing business or that seek to do business
in an emergency or major disaster area, and a section-by-section
analysis of the proposal.
Hurricane Andrew devastated large areas of south
Florida and south-central Louisiana, destroying homes and
businesses. Local economies were shattered. Now Hurricane Iniki
has wreaked similar havoc on the Island of Kauai.
On September 9, Secretary Brady travelled to south
Florida to meet with local banks and their regulators and discuss
measures that would facilitate the fullest possible participation
by banks in the rebuilding effort. In the course of that meeting
it became clear that in this period of severe economic distress,
rules and regulations written for normal times are inhibiting
banks from providing critical services — particularly credit
services — to these ravaged communities.
For example, the banking laws generally require that an
appraisal be conducted in connection with most loan transactions
that are secured by real estate. Compliance with this rule by
traditional appraisal methods is virtually impossible — and
unnecessary — when entire neighborhoods have been destroyed.
Ample credit and other banking services are never
needed more than in times of emergency or major disaster. To
ensure that credit is available where it is most essential, we
are proposing legislation that would grant the federal banking
agencies discretion to modify or waive regulatory constraints —
after full consideration of safety and soundness demands — that
interfere with the flow of banking services to emergency or major
disaster areas.
like those
Andrew and
regulatory
activities
This legislation is strictly intended to solve problems
that have arisen in areas stricken by Hurricanes
Iniki. The regulators could modify or waive
requirements only to the extent that they impede
or operations in an emergency or major disaster area,
and such an action could be taken only within one year from the
date on which the emergency or major disaster is declared by the
President. Any such regulatory action must be published in the
Federal Register to ensure proper accountability.
We believe that this is a sound approach to problems
that have surfaced in the wake of Hurricanes Andrew and Iniki,
and that are likely to arise in connection with future
emergencies or major disasters. It would permit the regulators
to respond promptly and flexibly as regulatory obstacles are
identified, speeding economic recovery in major disaster areas.
It would be appreciated if you would lay the draft
legislation before the Senate. Identical draft legislation has
been transmitted to the Speaker of the House.
The Office of Management and Budget has advised that
there is no objection from the standpoint of the Administration'
program to the submission of this proposed legislation to the
Congress and that its enactment would be in accord with the
program of the President.
Sincerely,
.
§ .
'eanne S . Archibald
General Counsel
Enclosures
A BILL
To relieve the regulatory burden on depository institutions and
credit unions that are doing business or that seek to do
business in an emergency or major disaster area and for
other purposes.
1
Be it enacted by the Senate and House of Representatives of
2
the United States of America in Congress assembled,
3
SECTION 1.
4
INSTITUTIONS.
5
EMERGENCY EXEMPTIONS FROM REGULATIONS FOR DEPOSITORY
The Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.)
6
is amended by adding at the end thereof the following new
7
section:
8
"SEC. 42. EMERGENCY EXEMPTIONS FROM REGULATORY REQUIREMENTS.
"(a) IN GENERAL.—
9
Notwithstanding any other provision
10
of law and subject to subsection (b), each appropriate
11
Federal banking agency is authorized, as necessary or
12
appropriate, to waive, modify or otherwise change any of its
13
regulatory
14
institutions under its supervision that are doing business
15
or that seek to do business in an emergency or major
16
disaster area.
requirements applicable to insured depository
" (b) DETERMINATION REQUIRED.—
17
An appropriate Federal
18
banking agency may waive, modify or otherwise change any of
19
its regulatory requirements pursuant to subsection (a) only
20
if:
21
22
"(1) it k^s considered, after consultation with
the other Federal banking agencies, whether such action
2
2
is likely to threaten the safety and soundness of the
2
insured depository institutions?
3
"(2) such action is limited to the activities or
4
operations that insured depository institutions are
5
doing or seek to do in the emergency or major disaster
6
area; and
7
” (3) such action is taken with respect to a
8
particular emergency or major disaster area within one
9
year from the date on which the President determines,
10
pursuant to section 301 of the Disaster Relief and
11
Emergency Assistance Act (42 U.S.C. § 5141), that an
12
emergency or major disaster exists in such area.
13
appropriate Federal banking agency may determine the
14
period for which any waiver, modification or change in
15
its regulatory requirements made pursuant to this
16
section may remain in effect.
17
M (c) DEFINITION.—
The
For purposes of this section, the
18
term Emergency or major disaster area' means an area in
19
which the President, pursuant to sections 102 and 301 of the
20
Disaster Relief and Emergency Assistance Act (42 U.S.C. §§
21
5122, 5141), has determined that an emergency or major
22
disaster exists.
23
"(d) PUBLICATION REQUIRED.—
Any action taken by an
24
appropriate Federal banking agency under subsection (a)
25
shall be published in the Federal Register and shall not be
26
subject to the requirements of the Administrative Procedure
3
2
Act.
"(e) EXCEPTION.—
2
This section shall not apply to
3
sections 102 and 202 of the Flood Disaster Protection Act of
4
1973, as amended, 42 U.S.C. §§ 4012a and 4106.".
5
6
SEC. 2.
EMERGENCY EXEMPTIONS FROM REGULATIONS FOR CREDIT UNIONS.
The Federal Credit Union Act (12 U.S.C. 1751 et seg.) is
7
amended by adding at the end of Title II the following new
8
section:
9
10
11
"SEC. 215. EMERGENCY EXEMPTIONS FROM REGULATORY
REQUIREMENTS.
"(a) IN GENERAL.—
Notwithstanding any other provision
12
of law and subject to subsection (b), the National Credit
13
Union Administration is authorized, as necessary or
14
appropriate, to waive, modify or otherwise change any of its
15
regulatory
16
under its supervision that are doing business or that seek
17
to do business in an emergency or major disaster area.
18
requirements applicable to insured credit unions
"(b) DETERMINATION REQUIRED.—
The National Credit
19
Union Administration may waive, modify or otherwise change
20
any of its regulatory requirements pursuant to subsection
21
(a) only if—
22
"(1) it has considered whether such action is
23
likely to threaten the safety and soundness of the
24
insured credit unions?
25
26
"(2) such action is limited to the activities or
operations that insured credit unions are doing or seek
4
to do in the emergency or major disaster area? and
2
2
” (3) such action is taken with respect to a
3
particular emergency or major disaster area within one
4
year from the date on which the President determines,
5
pursuant to section 301 of the Disaster Relief and
6
Emergency Assistance Act (42 U.S.C. § 5141), that an
7
emergency or major disaster exists in such area.
8
National Credit Union Administration may determine the
9
period for which any waiver, modification or change in
10
its regulatory requirements made pursuant to this
11
section may remain in effect.
12
" (c) DEFINITION.—
The
For purposes of this section, the
13
term 1emergency or major disaster area* means an area in
14
which the President, pursuant to sections 102 and 301 of the
15
Disaster Relief and Emergency Assistance Act (42 U.S.C. §§
16
5122, 5141), has determined that an emergency or major
17
disaster exists.
"(d) PUBLICATION REQUIRED.—
18
Any action taken by the
19
National Credit Union Administration under subsection (a)
20
shall be published in the Federal Register and shall not be
21
subject to the requirements of the Administrative Procedure
22
Act.
23
” (e) EXCEPTION.—
This section shall not apply to
24
sections 102 -and 202 of the Flood Disaster Protection Act of
25
1973, as amended, 42 U.S.C. §§ 4012a and 4106.'*
SECTION-BY-SECTION ANALYSIS
SEC. 1. EMERGENCY EXEMPTIONS FROM REGULATIONS FOR DEPOSITORY
INSTITUTIONS. This section generally allows each appropriate
Federal banking agency, under certain criteria, to waive, modify
or otherwise change any of its regulatory requirements applicable
to insured depository institutions under, its supervision that are
doing business or that seek to do business in an emergency or
major disaster area. An appropriate Federal banking agency may
take such an action only after it has considered, in consultation
with the other Federal banking agencies, whether such action is
likely to threaten the safety and soundness of the insured
depository institutions. Moreover, any waiver or modification
must be limited to the activities or operations that insured
depository institutions are doing or seek to do in the emergency
or major disaster area, and must be taken with respect to a
particular emergency or major disaster area within one year from
the date on which the President determines that an emergency or
major disaster exists in such area.
SEC. 2. EMERGENCY EXEMPTIONS FROM REGULATIONS FOR CREDIT UNIONS.
This section generally allows the National Credit Union
Administration, under certain criteria, to waive, modify or
otherwise change any of its regulatory requirements applicable to
insured credit unions under its supervision that are doing
business or that seek to do business in an emergency or major
disaster area. The NCUA must consider whether such action is
likely to threaten the safety and soundness of the insured credit
unions. Moreover, any waiver or modification must be limited to
the activities or operations that insured credit unions are doing
or seek to do in the emergency or major disaster area, and must
be taken with respect to a particular emergency or major disaster
area within one year from the date on which the President
determines that an emergency or major disaster exists in such
area.
FOR RELEASE AT 2:30 P.M
September 16, 1992
CONTACT: Office of Financing
202/219-3350
TREASURY TO AUCTION 2-YEAR AND 5-YEAR NOTES
TOTALING $25,000 MILLION
The Treasury will auction $14,500 million of 2-year notes
and $10,500 million of 5-year notes to refund $19,000 million
of securities maturing September 30, 1992, and to raise about
$6,000 million new cash. The $19,000 million of maturing secu
rities are those held by the public, including $1/400 million
currently held by Federal Reserve Banks as agents for foreign
and international monetary authorities.
As the Treasury announced on September 3. 1992. the
2- and 5-vear note auctions in September will be the first
ones in the vear-lona Treasury experiment with the singleprice auction format. All competitive and noncompetitive
awards will be at the highest yield of accepted competitive
tenders.
The $25,000 million is being offered to the public, and
any amounts tendered by Federal Reserve Banks as agents for
foreign and international monetary authorities will be added
to that amount.
In addition to the public holdings, Federal Reserve Banks,
for their own accounts, hold $1,905 million of the maturing
securities that may be refunded by issuing additional amounts
of the new securities.
Details about each of the new securities are given in the
attached highlights of the offerings and in the official offer
ing circulars.
oOo
Attachment
NB-1976
HIGHLIGHTS OF TREASURY OFFERINGS TO THE PUBLIC
OF 2-YEAR AND 5-YEAR NOTES TO BE ISSUED SEPTEMBER 30, 1992
September 16, 1992
Amount Offered to the Public ... $14,500 million
$10,500 million
Description of Security:
Term and type of security ..... 2-year notes
Series and CUSIP designation ... Series AE-1994
(CUSIP No. 912827 G8 9)
Maturity date ................. September 30, 1994
Interest rate ................. To be determined based on
the highest accepted bid
Investment yield .............. To be determined at auction
Premium or discount ........... To be determined after auction
Interest payment dates ........ March 31 and September 30
Minimum denomination available . $5,000
5-year notes
Series R-1997
(CUSIP No. 912827 G9 7)
September 30, 1997
To be determined based on
the highest accepted bid
To be determined at auction
To be determined after auction
March 31 and September 30
Terms of Sale:
Method of sale ................
Competitive tenders ...........
Yield auction
Must be expressed as
an annual yield, with two
decimals, e.g., 7.10%
Noncompetitive tenders ........ Accepted in full
up to $5,000,000
Accrued interest payable
by investor ................... None
Kev Dates:
Receipt of tenders ............
a) noncompetitive ...........
b) competitive ................
Settlement (final payment
due from institutions):
a) funds immediately
available to the Treasury ..*
b) readily-collectible check ...
$1,000
Yield auction
Must be expressed as
an annual yield, with two
decimals, e.g., 7.10%
Accepted in full
up to $5,000,000
None
Tuesday, September 22, 1992
prior to 12:00 noon, EDST
prior to 1:00 p.m., EDST
Wednesday, September 23, 1992
prior to 12:00 noon, EDST
prior to 1:00 p.m., EDST
Wednesday, September 30, 1992
Monday, September 28, 1992
Wednesday, September 30, 1992
Monday, September 28, 1992
ATREASURY NEWS
Department of the Treasury
Telephone 2 0 2 -6 2 2 -2 9 6 0
Washington, D.C
TEX'11 AS PREPARED FOR DELIVERY
Contact:
Scott Dykema
(202)
622-2960
THE PROSPECT OF HEMISPHERIC INTEGRATION:
GROWTH AND OPPORTUNITY FOR AMERICANS — NORTH AND SOUTH
Remarks prepared for delivery by
The Honorable 01in L. Wethington*
Assistant Secretary of the Treasury for International Affairs
at the
Florida International Bankers Association
Miami, Florida
September 17, 1992
I'm pleased to speak to you today about the Bush
Administration's Enterprise for the Americas Initiative and the
North American Free Trade Agreement.
By responding to and shaping the course of change, these two
initiatives are benefitting people abroad and here at home. They
hold great promise for future prosperity. They demonstrate the
linkage between foreign and domestic policy in the new global
economy. And they are consistent with values that helped make
this country the world's leading economic power — open trade and
investment.
Reflect for a minute on the dramatic change that has taken
place in Latin America. A decade ago, this region was the front
line of the Third World debt crisis: exports plummeted? interest
charges on the region's huge debt soared? new loans and
investment dried up? capital fled in massive volumes. The
international banking and financial system was threatened as the
difficulties of debt service spread from country to country. The
Latin American people suffered deeply as their incomes declined,
social services were trimmed, and inflation skyrocketed.
* -
These remarks were delivered by Treasury Deputy Assistant
Secretary James Fall because of a last-minute scheduling
conflict of Mr. Wethington's .
NB-1977
Now, however, the US and Latin America are working together
in a partnership based on mutual respect rather than on
dependency. In the 1990s, a new Latin America has emerged from
the crisis of the 1980s. The revolution has been quiet but
dramatic. Evidence of change is now everywhere, including in the
formerly war-torn countries of Central America:
o
Real growth — negative in the 1980s — now averages
approximately three percent for the region. For
Mexico, Chile, Argentina, and Venezuela, GDP is
increasing in the range of four to nine percent.
o
Inflation has been reduced by two-thirds since 1989.
o
Latin America's reserves have doubled.
o
Some $40 billion in private capital flowed into the
region last year, eight times the flow in 1989.
(Bear
in mind that flows were negative for years in the mid1980s.) More than half of the new flow is in the form
of equity, which will now contribute to the region's
permanent capital base and support productive
investment.
o
Latin stock markets are booming, with spectacular
returns to investors of over 100 percent in 1991 alone.
U.S. companies are increasing their investments in
response to more open investment climates, more
positive growth prospects, and reduced trade barriers.
Latin firms are also increasingly raising equity in the
U.S. through public offerings or private placements.
But the advantages to the people of the region are not only
economic. In Latin America, free societies are following free
markets. Democratically elected governments are now in place
from Santiago to Managua to Buenos Aires. And many are
predicting that the last bastion of Communism in this hemisphere,
about 90 miles south of here, isn't long for this world.
Today I'd like to briefly review the Administration's policy
toward Latin America and the benefit it holds for America,
including the just-announced North American Free Trade Agreement,
or ''NAFTA.'' The NAFTA stands as a model for future trade
liberalization in this hemisphere and throughout the world.
Our Economic Policy in Latin America
This Administration's economic policy in Latin America has
achieved four fundamental goals. We have reduced debt, changed
the tenor of hemispheric relations, supported free market
reforms, and layed the groundwork for a hemispheric free trade
zone. I'll address each of these areas in turn.
2
First, this Administration has addressed the debt crisis in
Latin America under what has been labelled the "Brady Plan.”
This strategy, unveiled in March of 1989, has been a success.
Its key premise was straightforward: recognition by banks and
governments that outstanding debt was not worth its face value.
This was essential to a financial workout and was the basis for
realistic negotiations between the debtor nations and creditor
banks on debt and debt service reduction. Debt and debt service
reduction has made sense, and has helped spur new investment and
growth in the region. And it gave the debtor nations incentive
to continue their reform efforts by offering hope of reduced debt
burdens.
Following the most recent agreements in principle with
Argentina and Brazil, almost all the major debtor nations have
reached debt reduction or refinancing agreements with their
commercial banks. These cover 92 percent of the major debtors*
outstanding commercial bank debt, or some $240 billion. When the
Argentine and Brazilian agreements are completed, we expect the
strategy to have produced over $50 billion in effective debt
reduction, while lifting much of the remaining debt burden from
the debtors* backs through market-based collateralization.
The agreements have restructured commercial bank debt into
tradeable securities to broaden its appeal and usability in
markets. A whole new market for LDC debt has developed as a
result, which will subject both borrowers and lenders to the
discipline of the market. For the international financial
community, and especially for U.S. banks, the Latin debt crisis
of the 1980s is now clearly behind them. Exposure and risk have
declined, while capital has increased. The workout has been
considerably less painful for commercial banks than the bleak
market they faced in 1988. Billions of dollars are now flowing
back into profits or serving as a buffer against other loan
losses.
Second, the our Latin American policy has changed the tenor
of relations in the region. The President*s Enterprise for the
Americas Initiative (EAI), announced in 1990, is transforming the
hemisphere. This is a three-part initiative involving trade,
investment and debt reduction. Dependency has been replaced by
mutual respect and a new partnership between North and South.
Through open trade and investment — rather than providing more
and more aid — we*re establishing a system where all nations
benefit from increasing flows of capital and commerce.
Third, because free markets lead not only to prosperity but
also to free societies, we have supported market reforms
throughout the region. The EAI is built on the principle that
development and prosperity will come to Latin America through
creating the kind of open an liberal investment climate in those
countries that will attract the capital needed for development —
3
both in the return of Latin American "flight capital" and in new
foreign direct investment. We have supported this policy by
offering relief from AID, Ex-Im, CCC and PL-480 debt to those
countries that adopt major economic reforms, including investment
reform. We have also supported investment sector reform loans by
multilateral institutions such as the World Bank and the InterAmerican Development Bank.
Fourth, we have, through the NAFTA, laid the groundwork for
a future hemispheric free trade zone. 1*11 return to that
subject at length in a moment.
The Benefits to America of Our Latin American Economic Policy
First I'd like to describe some of the domestic benefits
Americans — and Floridians — receive from our trade, investment
and debt policies in Latin America. The simple fact is that,
when Latin American economies are healthy and growing, our own
economy directly benefits through increasing exports and exportrelated jobs. For example:
o
Since 1988, nearly 70 percent of U.S. economic growth
has derived from increased exports.
o
1 in 7 dollars of U.S. exports now go to Latin America,
which is our fastest growing regional export market.
o
We've seen an 80 percent increase in exports to the
region in the past 4 years. First quarter 1992 exports
surged more than 32 percent over first quarter 1991
levels.
o
This isn't just trade with Mexico: exports to 19
countries increased by more than 20 percent each
between the first quarter of 1991 and the first quarter
of 1992.
o
We are extremely competitive in this region. We
account for 57% of this region's imports from
industrial countries — vs. 29% for Europe and 11% for
Japan. At the same time, we had a trade surplus with
the region of $886 million last year.
o
Florida, because of its location and the efforts of
people like you, has also benefitted from stronger
economies to the south. In 1990, Florida exported $7.7
billion to the region — up $2.5 billion from 1987. In
1990, Florida was far and away the largest US state in
exports to the Caribbean Basin.
The bottom line, of course, is jobs for American workers.
4
The North American Free Trade Agreement
When the NAFTA is approved by Congress, we can expect even
more benefits to flow to the American worker. NAFTA reduces
barriers to trade and investment between the three nations. Most
tariff and other barriers are immediately dropped — although a
few are phased out over ten or fifteen year periods to ease the
transition in sensitive industries. This is also the first trade
agreement to include significant environmental provisions.
NAFTA*s benefits flow directly from impressive figures such as
these:
o
The combined NAFTA market will contain over 360 million
customers and a combined total output of over $6
trillion.
o
Today, Canada and Mexico are our first and third
largest trading partners. US exports to Canada support
approximately 1.5 million US jobs — including 113,000
that were created between 1988 and 1990. And our
exports to Mexico have almost tripled since 1987 — now
supporting over 600,000 US jobs.
o
Virtually all studies agree that NAFTA will produce a
net increase in US jobs. A recent International Trade
Commission study found a high degree of unanimity
regarding the job effects of NAFTA” — with studies
projecting net job gains of 90,000 to 180,000 jobs.
At the same time, this Administration has recognized that
the NAFTA may entail some adjustment in particular industries.
So, transition rules and safeguards for sensitive industries are
built into the NAFTA. Sensitive sectors receive transition
periods of from 10 to 15 years. Safeguards in the agreement
allow reimposition of tariffs in certain industries if imports
"surge” and threaten US jobs. Of course, traditional trade law
remedies — such as antidumping and countervailing duty cases —
are still available in all sectors.
To help support the small number of workers who may be
displaced, President Bush recently announced an ambitious job
retraining program. This program will assure that our workers
have the training and skills necessary to compete — and win —
in the today*s global marketplace. All dislocated workers are
eligible under the program, which will use a market-based system
of vouchers for people to seek the kind of training they want in
the fields they choose.
NAFTA and Financial Services
Let me move to the financial services sector implications of
NAFTA, which is our area of particular responsibility at the
5
Treasury Department. In this sector, we have negotiated a NAFTA
chapter that we believe gives the industry dramatic new
opportunities — particularly in the Mexican market.
Mexico intends to move to a modern and efficient financial
system. The decision to privatize its banks, nationalized ten
years ago, is one example of this 180 degree change in policy.
NAFTA opens to American financial firms a Mexican market now
virtually closed. More specifically, the financial services
chapter provides:
o
The right to establish financial institutions in the
territory of the other parties?
o
Commitment that our financial institutions receive the
same treatment as domestically owned firms — so-called
"national treatment"?
o
The chapter commits the governments to transparency in
the regulatory process and prompt action on
applications ?
o
Firms obtain access to a formal dispute settlement
procedure ?
o
The parties are obligated to take no measures that
would restrict currently permitted cross-border trade
in financial services. They have guaranteed that their
residents are free to purchase financial services in
the other countries' territory.
During a short transition period - which ends no later than
January 1, 2000 - Mexico will be able to impose limits on the
size of some categories of financial firms and on the aggregate
market share of the foreign-owned firms. We believe that these
limits provide sufficient scope for US firms. During the
transition period, the size of individual banks will .be limited
to 1.5 percent of the entire system as measured by net capital.
(This implies a maximum capital currently of around $100 million
for individual banks. The minimum capital will be around $10
million, or the same as for a Mexican-owned bank.) Total market
share for foreign banks will be limited to 8 percent of the
system's net capital in the first year and will rise to 15
percent on January 1, 1999.
This market share limitation will be eliminated on January
1, 2000. Mexico reserves the right to reimpose an aggregate
limit for three years, but only if the market share of the U.S.
and Canadian banks reaches 25 percent prior to January 1, 2004.
Similar arrangements will be applicable to securities firms.
Their market share limitation will be increased from ten to
6
twenty percent over the transition period, and be eliminated
entirely on January 1, 2000. The individual market share
limitation for securities firms during the transition period will
be 4 percent.
Insurance firms will have a slightly different transitional
regime. There, U.S. firms will have the option of going into
Mexico as a joint venture or as a wholly owned subsidiary. US
participation in joint ventures will be allowed to increase from
30 percent in 1994 to 51 percent in 1998 to 100 percent ownership
by January 1, 2000. Those US insurers already involved in joint
ventures can increase to 100 percent ownership even earlier — on
January 1, 1996. There will be no aggregate or individual market
share limitations for insurance joint ventures.
Foreign insurers that enter the Mexican market as whollyowned subsidiaries will be subject to market share limitations.
The aggregate market share limitation begins at 6 percent and
increases to 12 percent until the limitation is completely lifted
on January 1, 2000. During this transition period, the
individual firm's market share limitation will be 1.5 percent.
Other types of financial firms - leasing and factoring will not be subject to individual firm limits, but will have an
aggregate market share limitation until January 1, 2000.
Mexico has agreed to create a new type of financial
intermediary called a limited scope financial company. It will
be able to engage in, for example, consumer finance, mortgage
lending, or act as a credit card bank. The kind of firm will not
be allowed to accept deposits from the public, but may fund
itself in Mexico's capital markets.
What kind of benefits can you, as international bankers,
expect to flow from these market-opening provisions? The Mexican
government is committed to making Latin America's largest
financial market private, efficient and attractive to foreign
capital. By establishing in Mexico, you will get access to this
rapidly growing financial market. The peso-denominated loan
portfolio of Mexican banks increased by 50 percent in 1990 and by
a similar amount in 1991. Total loans outstanding amounted to 90
billion dollars at the end of April.
You will also be able to market all the other financial
services that a Mexican bank can undertake to offer. Further,
you will be able to establish a holding company which can have
subsidiaries that engage in banking, securities, foreign exchange
trading, leasing and factoring. These auxiliary activities are
significant. For example, leasing company assets amount to well
over 3 billion dollars and factoring companies have assets
approaching 3 billion dollars. In addition, Mexico's stock
market, the largest in Latin America, has developed rapidly.
7
NAFTA as a Model for Global Free Trade
To some, NAFTA may wrongly be seen as a first step towards a
world characterized by hostile and exclusive regional trading
blocs. In reality, the opposite is true. Free trade agreements
like NAFTA add momentum to the global drive towards free trade
and support, rather than undercut, efforts in the GATT. The GATT
agreement itself contemplates regional free trade zones, and
NAFTA is consistent with the GATT. In fact, in many areas, the
NAFTA provides greater trade liberalization commitments than the
GATT has been able to provide so far.
Trading blocs will emerge only if the parties retreat within
themselves, and erect barriers to foreign trade. This is clearly
not the path we intend to take. In his economic program —
titled an "Agenda for American Renewal" — President Bush
announced his intention to both conclude the Uruguay Round of
GATT and to begin developing a "strategic network of free trade
agreements across the Atlantic and the Pacific and in our own
hemisphere."
NAFTA will serve as the catalyst for such a network. Other
countries will recognize the benefits of launching their economic
boats on the surging tide of free trade and free markets — or
risk becoming stranded on a low-growth, protectionist shore.
Countries need to make the kind of free trade and open investment
reforms NAFTA requires in order to win in the global competition
for goods, capital and technology.
Others appear already willing to join us. On their own,
other Latin American and Caribbean countries are establishing
agreements among themselves to reduce barriers to trade and
investment — within the Southern Cone countries, the Andean
Pact, Central America, and the CARICOM group of countries. The
Presidents goal of hemispheric free trade — and the regional
growth and prosperity that accompany it — is within our grasp if
we persevere.
# # #
8
L i d ft A r
A A !
D
Ô.
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
September 17, 1992
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 52-WEEK BILLS
Tenders for $13,790 million of 52-week bills to be issued
September 24, 1992 and to mature September 23, 1993 were
accepted today (CUSIP: 912794E34).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3. 02%
3. 03%
3. 02%
Investment
Rate
3.13%
3.14%
3.13%
Price
96.946
96.936
96.946
Tenders at the high discount rate were allotted 7%
The investment rate is the equivalent coupon-issue
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
12,200
38,123,070
6,620
10,815
9,740
12,330
1,685,530
8,375
1,760
10,200
5,120
944,015
234.630
$41,064,405
Accepted
12,200
13,030,710
6,620
10,815
9,740
10,470
188,530
6,445
1,760
10,200
5,120
263,085
234.630
$13,790,325
Type
Competitive
Noncompetitive
Subtotal, Public
$37,733,000
401.405
$38,134,405
$10,458,920
401.405
$10,860,325
2,800,000
2,800,000
130.000
$41,064,405
130.000
$13,790,325
Federal Reserve
Foreign Official
Institutions
TOTALS
An additional $1,090,000 thousand of bills will be
issued to foreign official institutions for new cash.
N B - 1978
Removal Notice
The item identified below has been removed in accordance with FRASER's policy on handling
sensitive information in digitization projects due to copyright protections.
Citation Information
Document Type: Transcript
Number of Pages Removed: 9
Author(s):
Title:
Date:
Treasury Under Secretary For International Affairs, David Mulford Briefing (Topic: The
IMF/World Bank annual meetings)
1992-09-17
Journal:
Volume:
Page(s):
URL:
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
TREASURY NEWS
Washington, D.C
Department of the Treasury
EMBARGOED UNTIL 8:45 AM
AS PREPARED FOR DELIVERY
Telephone 202-622-2960
CONTACT: DESIREE TUCKER-SORINI
(202) 622-2920
The Honorable
Nicholas F. Brady
Remarks to the
CNN WORLD ECONOMIC DEVELOPMENT CONGRESS
Washington, D.C.
September 18, 1992
"THE NEW MOBILITY"
Thank you, Tom [Johnson].
with this distinguished group.
I am pleased to be here today
We have the great good fortune to be living on the leading
edge of the 21st century. That statement may seem premature —
the more widely accepted calculation would still give us seven
years to reach the hundred year mark.
But when the history of
our age is written by the industrious scholars of future
generations, it seems clear that they will locate the central
turning point — the end of one era and the beginning of the next
— in the critical 2- or 3-year period from which we are now
emerging. The fall of the Berlin Wall, the collapse of the
Soviet Union, the dawn of markets and democracies in the East and
Latin America, and the restructuring of economic relationships
throughout the world — these are the heralds of the next
millennium and the harbingers of a new economic order.
And to find our way in this new world, we must have a clear,
articulated sense of where we are heading. For with change come
uncertainty and opportunity. Without a sure knowledge of the
economic landscape, uncertainty can paralyze and opportunity can
be missed. So today I would like to set out my view of that
landscape and of the route we will take to cross it.
To begin, we must understand the nature of the profound
economic transition through which America and the world have
passed during the last four years. In my view, this transition
has had two distinct elements: a series of significant but
temporary disruptions, and more important, a structural and
permanent change in the organization of economic competition.
This transition is greater than any we have seen since the end of
the Second World War — in some ways greater than any since the
Industrial Revolution of the 19th century.
NB - 1979
First, let me give you some examples of the significant but
temporary disruptions:
•
The victory in the Cold War will bring immeasurable
benefits to the world economy as we reduce the enormous
burden of military spending. But the benefits of peace
did not come free: this country now shows the strain
of having carried the burden of the free world's
defense for almost 50 years. The strain becomes most
clear when we look at the transition to a peacetime
economy and the difficult adjustment that is involved
for defense workers, military families and their
communities — strains being felt not only by workers
in California and New England, but in Poland and Russia
as well.
These are adjustments that we have made at war's end in
the past, and we will work through them again. Indeed,
when America last went through a comparable period —
the first Truman Administration, just after World War
II — gross national product actually fell 19% in a
single year. This puts today's positive growth of over
2% in perspective — and we should also keep in mind
that Truman's second term, after the restructuring was
well in hand, saw the economy grow by almost 25% in
four years. Yet the knowledge that today's ills are
temporary does not lessen the strain now on the people
involved or on the economy as a whole.
•
Second, the volume of debt in every segment of American
society over the last four years has been at
historically high levels. Those levels, however, are
at last beginning to decline as businesses strengthen
their balance sheets and as the baby boomers become the
parents of the 1990s, watching their budgets, saving
for their retirement and their kids' education.
Reducing the country's debt sets the stage for renewed
growth in the long term — even though it has meant
slower growth in the short term.
•
Third, economic growth has been hindered by a financial
system weakened first by overexposure to Third World
Debt, then by failed savings and loans, and most
recently by declining real estate markets. U.S. banks,
thrifts and insurance companies have become hesitant to
provide the credit needed to fuel the economy. But the
Third World Debt crisis is now behind us and the S&L
cleanup nearly complete. Banks are more liquid than
they have been in decades, better capitalized than at
any time since 1966, have the highest earnings in a
decade, and are poised to finance expansion.
2
•
Fourth, the restructuring process that has been going
on in American industry over the last several years is
nearly finished.
•
Finally, we have been in a period of restrained world
growth. Most observers, however, including the IMF in
its updated outlook, expect that growth in the United
States and throughout the industrialized world will
increase significantly in 1993. This growth will in
large part be the result of a U .S .-led G-7 consensus on
growth. Japan's recently designed fiscal stimulus
package, the largest in its history, certainly supports
that trend. And amid Europe's response to the current
turmoil this week lies the solution to strengthened
European growth. Lower interest rates in Europe are
inevitable if that continent is to return to growth.
It is important that a return to growth be accomplished
as soon as possible.
These five conditions have formed a significant brake on
economic growth in the short term. And their cumulative effect
on our whole economy has been much greater than the sum of their
parts: by undermining business and consumer attitudes, they have
created an additional, independent restraint on growth.
Fortunately, each of these factors is now on the road to
resolution. But as that resolution occurs, we will see even more
clearly the significant long-term transformation of economic
competition — a transformation that technology has made possible
in the last decade. The old industrial age is fading and being
replaced by a new global economy, characterized by a new mobility
of capital, ideas and information.
That long-term transformation is the topic of this
conference: the increasing globalization of the market for goods
and services of every kind. Twenty years ago most businesses
could find their customers on a road map; today they need a world
map. Today's new mobility has become a way of life not only in
our travel, but in our daily work:
•
In today's market, businesses are not bound to a
particular country by the dictates of geography. Over
an electronic network, separate elements of the
production process can be directed from anywhere in the
world.
•
What is more, information and intellectual capital have
become increasingly important parts of the production
process. As this happens, new businesses are created
that depend less on physical capital and more on skills
and know-how that are not limited to a particular
location. These new businesses are in fact becoming
3
leading industries of the new century: Microsoft, for
example, has a total stock market value of $22 billion;
Amgen, a leading biotechnology company, has a stock
market value of $9 billion; and McCaw Cellular's is $5
billion.
•
Improvements in transportation combined with new
information and communication systems have dramatically
shortened the transportation "pipeline” for goods,
allowing companies to maintain "just-in-time" inventory
methods even with far flung suppliers. An aircraft
factory in Central California can fax a parts order to
a supplier in Leeds, England and receive the components
by air courier the next day.
•
Capital moves around the world at the touch of a button
— without government approval — to wherever it will
bring the highest return, whether that is Paris, Texas
or Paris, France. To put the mobility of capital in
perspective, each day well in excess of $1 trillion of
international transactions move through or are settled
at the New York Federal Reserve Bank.
These changes have transformed the economic order that has
existed through most of our lives. This is understandably
unsettling to workers and their families. Vigorous international
competition has caused some of our nation's largest and most
well-known companies to restructure, not only General Motors, but
also Ford, IBM, AT&T and others.
American workers go to the
parts shelf and see labels that concern them. As George Shultz
recently remarked:
A few months ago I saw a snapshot of a shipping label
for some integrated circuits produced by an American
firm. It said, "Made in one or more of the following
countries: Korea, Hong Kong, Malaysia, Singapore,
Taiwan, Mauritius, Thailand, Indonesia, Mexico,
Philippines. The exact country of origin is unknown."
That label says a lot about where current trends are
taking us.
But those who try to convince Americans that they are
diminished in the new economic world of free trade and the new
mobility are wrong.
4
In the United States, the fact is that the new mobility will
create millions of new and better jobs — and these export-based
jobs pay, on average, 17% more than the average wage. Other
countries will also gain jobs and increase their standard of
living. What is more, the new mobility will increase standards
of living in developing countries around the world. As a result
they will buy more high-value-added products from the U.S. That
is why Mexico has increased its imports from Michigan and
Illinois and why our industrial states stand to benefit.
This new mobility that characterizes the world economy has
an exact parallel in the political sphere. Just as world
commerce flows ever more freely across national borders, the
invigorating breeze of political freedom has swept through much
of the former communist world. Indeed, the new mobility of
information — epitomized by CNN and the personal computer —
played a central role in destroying the old authoritarian
regimes.
Those who would make political hay out of people's fears of
increased trade are doing so for narrow political advantage.
They are the newest members of the Flat Earth Society. Most of
the economic conditions that are giving America its leadership in
the industries of this new world economy — industries like
pharmaceuticals, software, telecommunications, aerospace, and
computers — are reinforced by trade, and will continue to give
us economic leadership if we follow policies that nurture these
conditions•
The fact is, Americans do best when the competition is tough
— we do best by being more creative, more entrepreneurial, more
innovative. And in tomorrow's world, where intellectual capital
will be as important as physical capital, innovation, which is
the application of intellectual capital to the process of
production, will produce more jobs than traditional advantages
in physical costs.
In this we Americans are fortunate. Innovation and change
are our heritage — from that summer's day in 1776 when we
established a new theory of government to the most recent flight
of the space shuttle Atlantis. Americans are uniquely well
positioned to succeed in the innovation-driven world of the 21st
century.
But the challenge — for policymakers and for private
enterprise of all countries — will be maintaining and improving
the conditions for innovation and growth. This will not only
involve domestic policies, but equally important the completion
of treaties such as NAFTA in this hemisphere and GATT on a
worldwide scale.
5
What are the conditions that count in this country? First
and foremost, competition — unfettered by government
interference. The areas in which America — or any country — is
strongest internationally are those in which there is substantial
domestic competition. When the U.S. has a strong competitive
industry, it is a leader internationally and a provider of
attractive jobs domestically. There are over 5,000 software
companies in the United States, competing against subsidized
companies in Japan, France, and elsewhere — yet this fragmented
U.S. industry has 75% of the world's market share.
Second, investment. The pharmaceutical companies in my home
state of New Jersey are world class because they have invested
and reinvested. We must develop policies that increase the
amount of investment in America and that lengthen the horizon of
that investment to allow sensible, long-term management
decisions; policies that direct capital to productive investment,
not government coffers.
Third, education. The new mobility will reward a highly
skilled, educated workforce. Government policies that facilitate
this skill development and make it available to everyone will be
critical for future gains in national productivity. I refer not
just to general education, but industry-specific training as
well.
Finally, trade. If competition is the lever with which a
country will increase its productivity in the 21st century, trade
is the fulcrum. As an industry develops new products, it must be
able to sell them in the widest possible market. As the new
mobility raises the living standards of previously underdeveloped
countries, it will create almost 4 1/2 billion potential new
customers for the world's goods. And trade has the added merit
of ensuring that each country — indeed, each region — benefits
from the stiff wind of competition in increasing its productivity
and thus raising its standard of living.
For the last four years President Bush has set forth a
program to pursue exactly^those policies. His administration has
strived to shape a competitive environment by fighting
unnecessary government regulation and resisting calls to shield
our industries from world competition. And we have sponsored
programs to encourage the development of small businesses —
through tax incentives, regulatory relief, and expansion of
credit availability -- which create two-thirds of the jobs in our
country.
To spur investment, we have reduced capital costs by
achieving the lowest interest rates and lowest inflation levels
in a generation — and we propose to reduce costs even further
through differential capital gains tax rates and a lower tax
burden on businesses and individuals.
6
We have proposed ambitious education reforms — both in
general schooling and specialized training. Our America 2000
program, including school choice and the creation of national
testing standards, would ensure we have the best trained, most
highly skilled people to do tomorrow's jobs. Workers who lose
jobs in one area must have help retraining; the Administration's
proposals would replace the fragmentation of current Federal
programs with a coordinated, market-driven system, and triple the
funding currently provided for training.
We have acted vigorously to ensure free, open and growing
markets around the world. The recently completed North American
Free Trade Agreement with Canada and Mexico will link us with our
neighbors to thè North and South to create an historic trade
partnership.
And finally, we have been at the forefront of international
efforts to increase world growth.
There are those who will say that, while this analysis is
right, the prescription is wrong. International competition,
they will say, is destructive — tracie saps jobs, choice guts
schools, incentives to invest help only the rich. All these
critics have to offer — tricked up in the latest jargon — are
the tired remedies of protectionism, taxes, and government
direction.
But we cannot hold on to the old world, and we should not
want to. As we embark on the 21st century, we must do so with
daring, foresight — and a little pride. We know what we must do
to take advantage of the new mobility, to succeed in the new
world economy; indeed we are doing it now. Americans in
particular have every reason to be optimistic about this new
world, for the field of play is our native one: creating,
risking, competing, achieving. With optimism, energy and
commitment, we can meet the challenges of this new century
together. Thank you.
###
7
TREASURY NEWS
Department of the Treasury
Prepared for Delivery
September 18, 1992
Washington, D.C.
Telephone 202-622-2960
Contact: Rich Myers
(202) 622-2930
REMARKS BY SECRETARY NICHOLAS F. BRADY
SIGNING OF THE PROPOSED TAX TREATY WITH MEXICO
SEPTEMBER 18, 1992
It's my pleasure to welcome to the Treasury Department Pedro
Aspe, Mexico*s Secretary of Finance and Public Credit.
Secretary Aspe joins us today for the signing of the first
tax treaty between the United States and Mexico. The treaty is a
significant milestone in economic relations between our two
nations, especially when seen against the historic backdrop of
the North American Free Trade Agreement.
The proposed tax treaty will complement NAFTA, an important
initiative in President Bush's economic growth agenda, and
improve the investment climate in both the U.S. and Mexico,
building on an already vibrant economic partnership.
The tax treaty will benefit U.S. residents that are
shareholders in Mexican companies, and those who license
technology into Mexico, and such diverse groups as students,
artists, athletes and charities.
Like other U.S. tax treaties, it specifies how income earned
in the U.S. and Mexico may be taxed by the other country. It
prevents double taxation through foreign tax credits or by
exempting the income from further tax.
The treaty also provides for administrative cooperation
between the tax authorities of the two countries to prevent
income tax evasion.
The Administration will seek approval of the tax treaty from
the U.S. Congress, and Secretary Aspe will seek approval from the
Mexican Congress.
Under the leadership of President Bush and President
Salinas, our two nations have forged an economic partnership on
many fronts.
NB-1980
First, we have largely solved the Latin American debt
crisis, and the economic stability of the Americas is better
because of this.
Second, we have made great strides in advancing a new vision
of economic growth for our hemisphere as embodied in the
Enterprise for the Americas Initiative (EAI). Our neighbors in
Latin America and the Caribbean have responded with enthusiasm to
the prospect of increased trade, investment and growth. Their
commitment to economic reform, led by Mexico, is producing
results.
And finally, with the NAFTA, we will achieve the world*s
largest and richest trading zone — a single North American
market with 360 million consumers and $6 trillion in annual
output. NAFTA will create jobs on both sides of the border and
forge opportunities for prosperity that only open markets and
unfettered competition can bring.
Today's treaty signing is representative of the close
economic partnerships developing between the United States and
our neighbors to the South, including Mexico.
#####
FOR RELEASE:
September 18, 1992
CONTACT:
RICH MYERS
202-622-2930
FACT SHEET
PROPOSED INCOME TAX CONVENTION WITH MEXICO
The Treasury Department announced today the signing of a
proposed income tax treaty between the United States and Mexico.
The proposed treaty was signed in Washington on September 18,
1992, by Secretary of the Treasury, Nicholas Brady for the United
States, and Secretary of Finance and Public Credit Pedro Aspe,
for Mexico. The proposed treaty is subject to ratification. It
would be the first such treaty between the two countries.
The basic purposes of the treaty are to avoid double
taxation of income and to prevent fiscal evasion. By
establishing clear rules of taxing jurisdiction, reducing the
overall tax on investment income flowing between the two
countries, granting relief from double taxation, and providing
for cooperation between the tax authorities, the proposed treaty
would improve the climate for bilateral investment and contribute
to expanded economic and cultural relations between the two
countries. It is regarded by both countries as a significant
complement to the proposed North American Free Trade Agreement.
In particular, the proposed treaty establishes rules for the
taxation of various categories of income in the country in which
the income arises (the "source” country) and confirms that the
country of residence of the beneficial owner of the income will
avoid double taxation by providing a foreign tax credit. In the
case of dividends, interest, branch taxes, and royalties, the
proposed treaty sets specific ceilings on the rate of tax which
may be imposed at source. For dividends, the maximum rate is 5
percent on dividends from corporations to shareholders owning
more than 10 percent of the voting stock. For other dividends,
the rate is 15 percent for the first five years that the treaty
is in effect and then declines to 10 percent. In the case of
interest, the maximum rate of tax at source is 15 percent,
reduced to 10 percent on interest on bank loans and on publicly
traded securities.
More...
NB-1981
2
u.s. - Mexico Tax Treaty
After five years, the 15 percent rate is reduced to 10 percent on
interest paid by banks or by purchasers of machinery and
equipment on credit, and the 10 percent rate is reduced to 4.9
percent on interest on bank loans and on publicly traded
securities. Exemptions apply to interest paid to or by either
government, on certain loans from government banks, and on
interest derived by certain pension funds. The branch tax rate
is 5 percent on the dividend equivalent amount and 10 percent on
excess interest; the latter is reduced to 4.9 percent after five
years for bank branches. Royalties may be taxed at source at not
more than 10 percent of the gross amount.
The proposed treaty permits a tax at source on certain gains
on the sale of corporate shares by substantial shareholders.
The proposed treaty includes a provision for reciprocal
recognition of certain charitable organizations, based on common
rules and procedures in both countries, and provides for
competent authority cooperation in enforcing compliance. Under
this provision, U.S. taxpayers may deduct contributions to
Mexican charities, subject to the same limitations that apply to
domestic contributions.
The limitation of benefits, or "treaty shopping,” provision
in the treaty includes an expansion of some of the safe harbor
standards to include participation by residents of Canada, Mexico
and the United States once the North American Free Trade
Agreement is in force.
Mexico's asset tax is not covered as an income tax under the
proposed treaty, but there are provisions to ensure that its
application does not contravene income tax benefits provided by
the treaty.
The proposed treaty is subject to ratification. It will
enter into force when both countries have completed their
constitutional requirements and have so notified each other. The
withholding rate provisions affecting dividends, interest, and
royalties will take effect on the first day of the second month
after the entry into force if that takes place prior to July 1,
and otherwise on the January 1 following entry into force. With
respect to other taxes, the treaty will apply to taxable periods
on or after the first day of January of the year following the
entry into force of the treaty.
Copies of the proposed treaty may be obtained from the
Office of Public Affairs, Room 2315, Department of the Treasury,
Washington, D.C., 20220, telephone (202) 622-2960.
###
L( • .'j ,
.
-*r.^£- v >Ci_
CONVENTION BETWEEN THE GOVERNMENT OF THE UNITED STATES
OF AMERICA AND THE GOVERNMENT OF THE UNITED MEXICAN
STATES FOR THE AVOIDANCE OF DOUBLE TAXATION AND
THE PREVENTION OF FISCAL EVASION WITH RESPECT
TO TAXES ON INCOME
The Government of the United States of America and the
Government cf the Unite d Mexican States, desiring to conclude a
convention for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income,
which shall hereafter be referred to as the "Convention," have
agreed as follows:
-
2-
ARTICLE 1
-
General Scope
1.
This Convention shall apply to persons who are
residents of one or both of the Contracting States, except as
otherwise provided in the Convention.
2.
The Convention shall not restrict in any manner any
exclusion, exemption, deduction, credit, or other allowance now
or hereafter accorded:
a) by the laws of either Contracting State; or
b) by any other agreement between the Contracting
States.
3.
Notwithstanding any provision of the Convention except
paragraph 4, a Contracting State may tax its residents (as
determined under Article 4 (Residence)), and by reason of
citizenship may tax its citizens, as if the Convention had not
come into effect.
For this purpose, the term "citizen" shall
include a former citizen whose loss of citizenship had as one of
its principal purposes the avoidance of tax, but only for a
period of 10 years following such loss.
4.
The provisions of paragraph 3 shall not affect
a)
the benefits conferred by a Contracting State under
paragraph 2 of Article 9 (Associated Enterprises), under
paragraphs 1(b) and 3 of Article 19 (Pensions, Annuities,
Alimony, and Child Support), and under Articles 22 (Exempt
Organizations), 24 (Relief From Double Taxation), 25
(Non-Discrimination), and 26 (Mutual Agreement Procedure);
and
-3-
b)
the benefits conferred by a Contracting State under
Articles 20 (Government Service), 21 (Students), and 28
(Diplomatic Agents and Consular Officers), upon individuals
who are neither citizens of, nor lawful permanent residents
in, that State.
ARTICLE 2
Taxes Covered by the Convention
39
This Convention applies to income taxes imposed by each
of the Contracting States.
2.
There shall be regarded as taxes on income all taxes
imposed on total income or any part of income, including tax on
gains derived from the alienation of- movable or immovable
property.
3.
The existing taxes to which this Convention shall apply
are :
a)
in the United States:
the Federal income taxes
imposed by the Internal Revenue Code (but excluding the
accumulated earnings tax, the personal holding company tax,
and social security taxes), and the excise taxes imposed on
insurance premiums paid to foreign insurers and the excise
taxes with respect to private foundations to the extent
necessary to implement the provisions of paragraph 4 of
Article 22 (Exempt Organizations).
The Convention shall,
however, apply to the excise taxes imposed on insurance
-4-
premiums paid to foreign insurers only to the extent that
the risks covered by such premiums are not reinsured with a
person not entitled to exemption from such taxes under this
or any other convention which applies to these taxes.
b)
in Mexico:
the income tax imposed by the Income
Tax Law.
4.
The Convention shall apply also to any identical or
substantially similar taxes which are imposed after the date of
signature of the Convention in addition to, or in place of, the
existing taxes.
The competent authorities of the Contracting
States shall notify each other of any significant changes which
have been made in their respective taxation laws and of any
official published material concerning the application of the
Convention, including explanations, regulations, rulings, or
judicial decisions.
ARTICLE 3
General Definitions
1.
For the purposes of this Convention, unless the context
otherwise requires, it is understood that:
a)
the term "person" includes an individual or legal
person, including a company, a corporation, a trust, a
partnership, an association, an estate, and any other body
of persons;
-5-
b) the term "company" means any body corporate or any
entity which is treated as a body corporate for tax
purposes?
c) the terms "enterprise of a Contracting State" and
■enterprise of the other Contracting State" mean,
respectively, an enterprise carried on by a resident of a
Contracting State and an enterprise carried on by a
resident of the other Contracting State;
d) the term "international traffic* means any
transport by a ship or aircraft, except when such transport
is solely between places in the other Contracting State?
e) the term "competent authority” means:
(i) in the United States, the Secretary of the
Treasury or his authorized representative? and
(ii) in Mexico, the Ministry of Finance and
Public Credit;
f) the term "United States " means the United States
defined in the Internal Revenue Code ?
g) the term "Mexico" means Mexico as defined in the
Federal Fiscal Code?
' h) the term ■national" means
(i) any individual possessing the nationality of
a Contracting State? and
(ii) any legal person, association, or other
entity deriving its status as such from the law in
force in a Contracting State.
-
2.
6-
As regards the application of the Convention by a
Contracting State, any term npt defined therein shall, unless
the context otherwise requires, have the meaning which it has
under the laws of that State concerning the taxes to which the
Convention applies.
ARTICLE 4
Residence
1.
For the purposes of this Convention, the term "resident
of a Contracting State" means any person who, under the laws of
that State, is liable to tax therein by reason of his domicile,
residence, place of management, place of incorporation, or any
other criterion of a similar nature.
However, this term does
not include any person who is liable to tax in that State in
respect only of income from sources in that State.
2.
Where by reason of the provisions of paragraph 1, an
individual is a resident of both Contracting States, then his
residence shall be determined as follows:
a)
he shall be deemed to be a resident of the State in
which he has a permanent home available to him? if he has a
permanent home available to him in both Contracting States,
he shall be deemed to be a resident of the State with which
his
personal and economic relations are closer (center of
vital interests)?
-7-
b) if the State in which he has his center of vital
interests cannot be determined, or if he does not have a
permanent home available to him in either State, he shall
be deemed to be a resident of the State in which he has an
habitual abode;
c) if he has an habitual abode in both States or in
neither of them, he shall be deemed to be a resident of the
State of which he is a national;
d) in any other case, the competent authorities of the
Contracting States shall settle the question by mutual
agreement.
3.
Where by reason of the provisions of paragraph 1 a
person other than an individual is a resident of both
Contracting States, such person shall not be treated as a
resident of either Contracting State for purposes of this
Convention.
ARTICLE 5
Permanent Establishment
1.
For the purposes of this Convention, the term
"permanent establishment" means a fixed place of business
through which the business of an enterprise is wholly or partly
carried on.
i
-
2.
8-
The term "permanent establishment* includes especially:
a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop; and
f) a mine, an oil or gas well, a quarry, or any other
place of extraction of natural resources.
3.
The term "permanent establishment" shall also include a
building site or construction or installation project, or an
installation or drilling rig or ship used for the exploration or
exploitation of natural resources, or supervisory activity in
connection therewith, but only if such building site,
construction or activity lasts more than six months.
4.
Notwithstanding the preceding provisions of this
Article, the term "permanent establishment" shall be deemed not
to include:
a) the use of facilities solely for the purpose of
storage, display, or delivery of goods or merchandise
belonging to the enterprise;
b) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of
storage, display, or delivery;
c) the maintenance of a stock of goods or merchandise
belonging to the enterprise solely for the purpose of
processing by another enterprise;
-9-
d) the maintenance of a fixed place of business solely
for the purpose of purchasing goods or merchandise, or of
collecting information, for the enterprise;
e) the maintenance of a fixed place of business solely
for the purpose of advertising, supplying information,
scientific research, or for the preparations relating to
the placement of loans, or for similar activities which
have a preparatory or auxiliary character, for the
enterprise ;
f) the maintenance of a fixed place of business solely
for any combination of the activities mentioned in subpara
graphs a) to e), provided that the total activity of the
combination is of a preparatory or auxiliary character.
5. Notwithstanding the provisions of paragraphs 1 and 2,
where a person - other than an agent of an independent status to
whom paragraph 7 applies - is acting in a Contracting State on
behalf of an enterprise of the other Contracting State, that
enterprise shall be deemed to have a permanent establishment in
the first-mentioned State in respect of any activities which
that person undertakes for the enterprise, if such person:
a) has and habitually exercises in that State an
authority to conclude contracts in the name of the
enterprise, unless the activities of such person are
limited to those mentioned in paragraph 4 which, if
exercised through a fixed place of business, would not make
this fixed place of business a permanent establishment
under the provisions of that paragraph; or
-
10
-
b) has no such authority but habitually processes in
the first-mentioned State on behalf of the enterprise goods
or merchandise maintained in that State by that enterprise,
provided that such processing is carried on using assets
furnished, directly or indirectly, by that enterprise or
any associated enterprise.
6. Notwithstanding the foregoing provisions of this
Article, an insurance enterprise of a Contracting State shall,
except in regard to reinsurance, be deemed to have a permanent
/
establishment in the other Contracting State if it collects
premiums in the territory of that other State or insures risks
situated therein through a representative other than an agent of
an independent status to whom paragraph 7 applies.
7.
An enterprise shall not be deemed to have a permanent
establishment in a Contracting state merely because it carries
on business in that State through a broker, general commission
agent, or any other agent of an independent status, provided
that such persons are acting in the ordinary course of their
business and that in their commercial or financial relations
with the enterprise conditions are not made or imposed that
differ from those generally agreed to by independent agents.
8.
The fact that a company which is a resident of a
Contracting State controls or is controlled by a company which
a
resident of the other Contracting State, or which carries
on business in that other State (whether through a permanent
establishment or otherwise),.shall not of itself constitute
Pi'hhor
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e
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of
the
O th e r.
-
11 -
ARTICLE 6
Income From immovable Property (Real Property)
1.
Income derived by a resident of a Contracting State
from immovable property (real property), including income from
agriculture or forestry, situated in the other Contracting State
may be taxed in that other State.
2.
The term "immovable property" shall have the meaning
which it has under the law of the Contracting State in which the
property in question is situated.
The term shall in any case
include property accessory to immovable property, livestock and
equipment used in agriculture and forestry, rights to which the
provisions of general law respecting landed property apply,
usufruct of immovable property and rights to variable or fixed
payments as consideration for the working of, or the right to
work, mineral deposits, sources and other natural resources.
Ships, boats, aircraft, and containers shall not be regarded as
immovable property.
3.
The provisions of paragraph 1 shall apply to income
derived from the direct use, letting, or use in any other form
of immovable property.
4.
The provisions of paragraphs 1 and 3 shall also apply
to the income from immovable property of an enterprise and to
income from immovable property used for the performance of
independent personal services.
-
5.
12
-
A resident of a Contracting State who is liable to tax
in the other Contracting State on income from real property
situated in the other Contracting State may elect for any
taxable year to compute the tax on such income on a net basis as
if such income were attributable to a permanent establishment in
such other State.
Any such election shall be binding for the
taxable year of the election and all subsequent taxable years
unless the competent authority of the Contracting State in which
the immovable property is situated agrees to terminate the
election.
ARTICLE 7
Business Profits
1.
The business profits of an enterprise of a Contracting
State shall be taxable only in that State unless the enterprise
carries on or has carried on business in the other Contracting
State through a permanent establishment situated therein.
If
the enterprise carries on or has carried on business as
aforesaid, the business profits of the enterprise may be taxed
in the other State but only so much of them as is attributable to
a) that permanent establishment;
b) sales in that other State of goods or merchandise
of the same or similar kind as the goods or merchandise
sold through that permanent establishment.
-13-
However, the profits derived from the sales described in subparagraph, (b) shall not be taxable in the other State if the
enterprise demonstrates that such sales have been carried out
for reasons other than obtaining a benefit under this
Convention.
2.
Subject to the provisions of paragraph 3, where an
enterprise of a Contracting State carries on or has carried on
business in the other Contracting State through a permanent
establishment situated therein, there shall in each Contracting
State be attributed to that permanent establishment the business
profits which it might be expected to make if it were a distinct
and independent enterprise engaged in the same or similar
activities under the same or similar conditions.
3.
In determining the business profits of a permanent
establishment, there shall be allowed as deductions expenses
which are incurred for the purposes of the permanent
establishment, including executive and general administrative
expenses so incurred, whether in the State in which the
permanent establishment is situated or elsewhere.
However, no
such deduction shall be allowed in respect of such amounts, if
any, paid (otherwise than towards reimbursement of actual
expenses) by the permanent establishment to the head office of
the enterprise or any of its other offices by way of royalties,
fees or other similar payments in return for the use of patents
or other rights, by way of commission, for specific services
-14-
performed or for management, or except in the case of a banking
enterprise, by way of interest on moneys lent to the permanent
establishment.
4.
No business profits shall be attributed to a permanent
establishment by reason of the mere purchase by that permanent
establishment of goods or merchandise for the enterprise.,
5.
For the purposes of this Convention, the business
profits to be attributed to the permanent establishment shall
include only the profits or losses derived from the assets or
activities of the permanent establishment and shall be
determined by the same method year by year unless there is good
and sufficient reason to the contrary.
6.
Where business profits include items of income which
are dealt with separately in other Articles of the Convention,
then the provisions of those Articles shall not be affected by
the provisions of this Article.
ARTICLE 8
Shipping and Air Transport
1.
Profits of an enterprise of a Contracting State from
the operation of ships or aircraft in international traffic
shall be taxable only in that State.
2.
For the purposes of this Article, profits from the
"•peration of ships or aircraft in international traffic include
profits derived from the rental of ships or aircraft on a full
-15-
- (time or voyage) 'basis.
They also include profits from the
rental of ships or aircraft on a bareboat basis if such ships or
aircraft are operated in international traffic by the lessee and
such rental profits are accessory to other profits described in
paragraph 1.
The operation of ships or aircraft in
international traffic by an enterprise does not include
transportation by any other means of transport provided directly
by such enterprise or the provision of overnight accommodation.
3.
Profits of an enterprise of a Contracting State from
the use, demurrage or rental of containers (including trailers,
barges, and related equipment for the transport of containers)
used in international traffic shall be taxable only in that
State.
4.
The provisions of paragraphs 1 and 3 shall also apply
to profits from participation in a pool, a joint business, or an
international operating agency.
ARTICLE 9
Associated Enterprises
1.
Where:
a) an enterprise of a Contracting State participates
directly or indirectly in the management, control, or
capital of an enterprise of the other Contracting State; or
b) the same persons participate directly or indirectly
in the management, control, or capital of an enterprise of
a Contracting State and an enterprise of the other
Contracting State,
and in either case conditions are made or imposed between the
two enterprises in their commercial or financial relations which
differ from those which would be made between independent
enterprises, then any profits which, but for those conditions,
would have accrued to one of the enterprises, but by reason of
those conditions have not so accrued, may be included in the
profits of that enterprise and taxed accordingly.
2.
Where a Contracting State includes in the profits of an
enterprise of that State, and taxes accordingly, profits on
which an enterprise of the other Contracting State has been
charged to tax in that other State, and the profits so included
are profits which would have accrued to the enterprise of the
first-mentioned State if the conditions made between the two
enterprises had been those which would have been made between
independent enterprises, then that other State, shall in
-17-
accordance with paragraph 2 of Article 26
(Mutual Agreement procedure), make a corresponding adjustment to
the amount of the tax charged therein on those profits if it
agrees with the adjustment made by the first-mentioned
Contracting State.
In determining such adjustment, due regard
shall be paid to the other provisions of this convention and the
competent authorities of the Contracting States shall if
necessary consult each other.
3.
The provisions of paragraph 1 shall not limit any
provisions of the law of either Contracting State which permit
the distribution, apportionment, or allocation of income,
deductions, credits, or allowances between persons, whether or
not residents of a Contracting State, owned or controlled
directly or indirectly by the same interests when necessary in
order to prevent evasion of taxes or clearly to reflect the
income of any such persons.
ARTICLE 10
Dividends
1.
Dividends paid by a company which is a resident of a
Contracting State to a resident of the other Contracting State
may be taxed in that other State.
2.
Such dividends may also be taxed in the Contracting
State of which the company paying the dividends is a resident,
and according to the laws of that State.
However, if the
beneficial owner of the dividends is a resident of the other
-18-
Contracting State, except as provided in paragraph 3, the tax so
charged shall not exceed:
a) 5 percent of the gross amount of the dividend if
the beneficial owner is a company which owns at least 10
percent of the voting stock of the company paying the
dividends;
b) 10 percent of the gross amount of the dividends in
other cases.
This paragraph shall not affect the taxation of the company in
respect of the profits out of which the dividends are paid.
3.
For a period of five years from the date on which the
provisions of this Article take effect, the rate of 15 percent
will apply in place of the rate provided in subparagraph b) of
paragraph 2.
4.
The term "dividends" as used in this Article means
income from shares or other rights, not being debt-claims,
participating in profits, as well as income from other corporate
rights which is subjected to the same taxation treatment as
income from shares by the laws of the State of which the company
making the distribution is a resident.
5.
The provisions of paragraphs 1, 2 and 3 shall not apply
if the beneficial owner of the dividends, being a resident of a
Contracting State, carries on or has carried on business in the
-19-
other Contracting State, of which the company paying the
dividends is a resident, through a permanent establishment
situated therein, or performs or has performed in that other
State independent personal services from a fixed base situated
therein, and the dividends are attributable to such permanent
establishment or fixed base.
In such case the provisions of
Article 7 (Business Profits) or Article 14 (Independent Personal
Services), as the case may be, shall apply.
6.
A Contracting State may not impose any tax on dividends
paid by a company which is not a resident of that State, except
insofar as the dividends are paid to a resident of that State or
the dividends are attributable to a permanent establishment or a
fixed base situated in that State.
ARTICLE 11
Interest
1.
Interest arising in a Contracting State and paid to a
resident of the other Contracting State may be taxed in that
other State.
2.
Such interest may also be taxed in the Contracting
State in which it arises and according to the laws of that
-
State.
20 -
However, if the beneficial owner of the interest is a
resident of the other Contracting State, except as provided in
paragraph 3, the tax so charged shall not exceed:
a) 4.9 percent of the gross amount of interest derived
from:
(i)
loans granted by banks, including investment
banks and savings banks, and insurance
companies;
(ii)
bonds or securities that are regularly and
substantially traded on a recognized
securities market;
b) 10 percent of the gross amount of interest if the
beneficial owner is not a person described in subparagraph
a) and the interest is:
(i)
paid by banks, including investment banks
and savings banks;
(ii)
paid by the purchaser of machinery and
equipment to a beneficial owner that is the
seller of the machinery and equipment in
connection with a sale on credit; and
c) 15 percent of the gross amount of the interest in
all other cases.
For purposes of this paragraph, interest paid on back-to-back
loans will be taxed in accordance with the domestic law of the
State in which the interest arises.
-
3.
21-
For a period of five years from the date on which the
provisions of this Article take effect:
a) the rate of 10 percent shall apply in place of the
rate provided in subparagraph a) of paragraph 2; and
b) the rate of 15 percent shall apply in place of the
rate provided in subparagraph b) of paragraph 2.
4.
Notwithstanding the provisions of paragraphs 2 and 3,
interest referred to in paragraph 1 may only be taxed in the
Contracting State in which the beneficial owner is a resident
if:
a) the beneficial owner is a Contracting State, a
political subdivision or local authority?
b) the interest is paid by any of the persons
mentioned in subparagraph a)?
c) the beneficial owner is a trust, company, or other
organization constituted and operated exclusively to
administer or provide benefits under one or more plans
established to provide pension, retirement or other
employee benefits and its income is generally exempt from
tax in that Contracting State?
d) the interest arises in the United States and is
paid in respect of a loan for a period of not less than
three years made, guaranteed, or insured, or a credit for
such period extended, guaranteed, or insured, by the Banco
Nacional de Comercio Exterior, S.N.C. or Nacional
Financiera, S.N.C.? or
-
e)
22-
the interest arises in Mexico and is paid in
respect of a loan for a period of not less than three years
made, guaranteed, or insured, or a credit for such period
extended, guaranteed, or insured, by the Export-Import Bank
or the Overseas Private investment Corporation.
5.
The term "interest" as used in this Convention means
income from debt-claims of every kind, whether or not secured by
a mortgage and whether or not carrying a right to participate in
the debtor's profits, and in particular, income from government
securities, and income from bonds or debentures, including
premiums or prizes attaching to such securities, bonds, or
debentures, as well as all other income that is treated as
income from money lent by the taxation law of the Contracting
State in which the income arises.
6.
The provision's of paragraphs 1, 2 and 3 shall not apply
if the beneficial owner of the interest, being a resident of a
Contracting State, carries on or has carried on business in the
other Contracting State, in which the interest arises, through a
permanent establishment situated therein, or performs or has
performed in that other State independent personal services from
a fixed base situated therein, and the interest is attributable
to such permanent establishment or fixed base.
In such case the
provisions of Article 7 (Business Profits) or Article 14
(Independent Personal Services), as the case may be, shall
apply.
-23-
7.
Interest shall be deemed to arise in a Contracting
State when the payer is that State itself or a political
subdivision, local authority, or resident of that State.
Where,
however, the person paying the interest, whether he is a
resident of a Contracting State or not, has in a Contracting
State a permanent establishment or a fixed base and such
interest is borne by such permanent establishment or fixed base,
then such interest shall be deemed to arise in the State in
which the permanent establishment or fixed base is situated.
8.
Where there is a special relationship between the payer
and the beneficial owner or between both of them and some other
person and the amount of the interest, for whatever reason,
exceeds the amount which would have been agreed upon by the
payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to
the last-mentioned amount.
In such case the excess part of the
payments shall remain taxable according to the laws of each
Contracting State, due regard being had to the other provisions
of this Convention.
-24-
ARTICLE 11A
Branch Tax
1.
A company which is a resident of a Contracting State
may be subject in the other Contracting State to a tax in
addition to the tax allowable under the other provisions of this
Convention.
2.
Such additional tax, however, may not exceed:
a) 5 percent of the "dividend equivalent amount" of
the business profits of the company which are effectively
connected (or treated as effectively connected) with the
conduct of a trade or business in the other Contracting
State and which are either attributable to a permanent
establishment in that other State or subject to a tax in
that other State under Article 6 (Income from immovable
Property (Real Property)) or Article 13 (Capital Gains);
and
b) 10 percent of the excess, if any, of:
(i) interest deductible in one or more taxable
years in computing the corporation's profits that are
either attributable to a permanent establishment in
the other Contracting State or subject to tax
B
-25-
in that other State under Article 6 (Income from
Immovable Property (Real Property)) or Article 13
(Capital Gains), over
(ii) the interest paid by or from such permanent
establishment or trade or business.
In the case of
the persons referred to in subparagraph (a)(i) of
paragraph 2 of Article 11 (Interest), the tax imposed
under this subparagraph shall not be levied at a rate
in excess of 4.9 percent, after a period of five years
from the date on which Article 11 takes effect.
ARTICLE 12
Royalties
1.
Royalties arising in a Contracting State and paid to a
resident of the other Contracting State may be taxed in that
other State.
2.
However, such royalties may also be taxed in the
Contracting State in which they arise and according to the laws
of that State, but if the beneficial owner is a resident of the
other Contracting State, the tax so charged shall not exceed 10
percent of the gross amount of the royalty.
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3.
The term "royalties" as used in this Convention means
payments of any kind received as a consideration for the^use of,
or the right to use, any copyright of literary, artistic, or
scientific work, including motion picture films and works on
film or tapes or other means of reproduction for use in
connection with television, any patent, trademark, design or
model, plan, secret formula or process, or other like right or
property, or for information concerning industrial, commercial,
or scientific experience as well as for the use of or the right
to use industrial, commercial, or scientific equipment not
constituting immovable property referred to in Article 6.
The
term "royalties" also includes gains derived from the alienation
of any such right or property which are contingent on the
productivity, use, or disposition thereof,
4.
The provisions of paragraphs 1 and 2 shall not apply if
the beneficial owner of the royalties, being a resident of a
Contracting State, carries on or has carried on business in the
other Contracting State, in which the royalties arise, through a
permanent establishment situated therein, or performs or has
performed in that other State independent personal services from
a fixed base situated therein, and the royalties are
attributable to such permanent establishment or fixed base.
In
such case the provisions cf Article 7 (Business Profits) or
Article 14 (Independent Personal Services), as the case may be,
shall apply.
-275.
Where there is a special relationship between the payer
and the beneficial owner or between both of them and some other
person and the amount of the royalties, for whatever reason,
exceeds the amount which would have been agreed upon by the
payer and the beneficial owner in the absence of such
relationship, the provisions of this Article shall apply only to
the last-mentioned amount.
In such case the excess part of the
payments shall remain taxable according to the laws of each
Contracting State, due regard being had to the other provisions
of the Convention.
6.
Royalties shall be deemed to arise in a Contracting
State when the payer is that State itself, a political
subdivision, a local authority or a resident of that State.
However,
a) Where the person paying the royalties, whether he
is a resident of a Contracting State or not, has in a
Contracting State a permanent establishment or a fixed base
in connection with which the liability to pay the royalties
was incurred, and such royalties are borne by such
permanent establishment or fixed base, then such royalties
shall be deemed to arise in that State in which the
permanent establishment or fixed base is situated? or
b) where subparagraph a) does not operate to deem
royalties as arising in either Contracting State and the
royalties relate to the use of, or the right to use, in one
of the Contracting States, any property or right described
in paragraph 3, they shall be deemed to arise in that
State.
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ARTICLE 13
Capital Gains
1.
Gains derived by a resident of a Contracting State from
the alienation of immovable property, as defined in Article 6,
and situated in the other Contracting State may be taxed in that
other State.
2.
For the purposes of this Article, the term "immovable
property situated in the other Contracting State" includes:
a) immovable property referred to in Article 6 (Income
from Immovable Property (Real Property)) which is situated
in that other Contracting State,
b) an interest in a partnership, trust, or estate to
the extent that its assets consist of immovable property
situated in that other State,
c) shares or comparable interests in a company or
other legal person that is, or is treated as, a resident of
that other Contracting State, the assets of which company
consist or consisted at least 50 percent, by value, of
immovable property situated in that other Contracting
State, and
d) any other right that allows the use or enjoyment of
immovable property situated in that other Contracting
State.
-29-
3.' Gains from the alienation'of personal property which
are attributable to a permanent establishment which an
enterprise of a Contracting State has or had in the other
Contracting State, or which are attributable to a fixed base
which is or was available to a resident of a Contracting State
in the other Contracting State for the purpose of performing
independent personal services, and gains from the alienation of
such a permanent establishment (alone or with the whole
enterprise) or such a fixed base, may be taxed in that other
State.
4.
In addition to gains taxable in accordance with the
provisions of the preceding paragraphs of this Article, gains
derived by a resident of a Contracting State from the alienation
of stock, participation, or other rights in the capital of a
company or other legal person which is a resident of the other
Contracting State may be taxed in that other Contracting State
if the recipient of the gain, during the 12-month period
preceding such alienation, had a participation, directly or
indirectly, of at least 25 percent in the capital of that
company or other legal person.
Such gains shall be deemed to
arise in that other State to the extent necessary to avoid
double taxation.
5.
Gains derived by an enterprise of a Contracting State
from the alienation of ships, aircraft, and containers
(including trailers, barges, and related equipment for the
-30-
transport of containers) used principally in international
traffic shall be taxable only in that State.
6.
Gains described in Article 12 (Royalties) shall be
taxable only in accordance with the provisions of Article 12.
7.
Gains from the alienation of any property other than
property referred to in paragraphs 1 through 6 shall be taxable
only in the Contracting State of which the alienator is a
resident.
ARTICLE 14
Independent Personal Services
l|
Income derived by an individual who is a resident of a
Contracting State from the performance cf personal services or
other activities of a similar nature in an independent capacity
shall be taxable only in that State, unless:
a) such resident has a fixed base in the other
Contracting State which he regularly makes use of in the
course of performing his activities; in such case, the
other State may tax the income from services performed in
that other State which is attributable to that fixed base?
or
b) the resident is present in the other Contracting
State for a period or periods exceeding in the aggregate
-31-
183 days within a 12-month period; in such case, the other
State may .tax the income attributable to activities
performed in that other State*
2.
The term "personal services" includes especially
independent scientific, literary or artistic activities,
educational or teaching activities, as well as independent
activities of physicians, lawyers, engineers, architects,
dentists and accountants.
ARTICLE 15
Dependent Personal Services
1.
Subject to the provisions of Articles 16 (Directors*
Fees), 19 (Pensions, Annuities, Alimony, and Child Support) and
20 (Government Service), salaries, wages, and other similar
remuneration derived by a resident of a Contracting State in
respect of an employment shall be taxable only in that State
unless the employment is exercised in the other Contracting
State.
If the employment is so exercised, such remuneration as
is derived therefrom may be taxed in that other State.
2.
Notwithstanding the provisions of paragraph 1,
remuneration derived by a resident of a Contracting State in
respect of an employment exercised in the other Contracting
State shall be taxable only in the first-mentioned State if:
-32-
a) the recipient is present in the other Stat e for a
period or periods not exceeding in the aggregate 183 days
in a 12 month period;
b) the remuneration is paid by, or on behalf of, an
employer who is not a resident of the other State; and
c) the remuneration is not borne by a permane nt
establishment or a fixed base which the employer has in the
other State.
ARTICLE 16
Directors' Fees
Directors' fees and similar payments derived by a resident
of a Contracting State for services performed outside such
Contracting State in his capacity as a director or over seer of a
company which is a resident of the other Contracting St ate may
be taxed in that other State.
-33-
ARTICLE 17
Limitation on Benefits
1.
A person that is a resident of a Contracting State and
derives income from the other Contracting State shall be
entitled under this Convention to relief from taxation in that
other Contracting State only if such person is:
a) an individual;
b) a Contracting State, or a political subdivision or
local authority thereof?
c) engaged in the active conduct of a trade or
business in the first-mentioned State (other than the
business of making or managing investments, unless these
activities are banking or insurance activities carried on
by a bank or insurance company) and the income derived from
the other Contracting State is derived in connection with,
or is incidental to, that trade or business;
d) either
(i) a company in whose principal class of shares
there is substantial and regular trading on a
recognized securities exchange located in either of
the States
-34-
(ii) a company which, is wholly owned, directly or
indirectly, by a resident of that Contracting State in
whose principal class of shares there is such
substantial and regular trading on a recognized
securities exchange located in either of the States;
or
(iii) a company which is
A) wholly owned, directly or indirectly, by
residents of any state that is a party to the
North American Free Trade Agreement ("NAFTA") in
whose principal class of shares there is such
substantial and regular trading on a recognized
securities exchange; and
B) more than 50 percent owned, directly or
indirectly, by residents of either Contracting
State in whose principal class of shares there is
such substantial and regular trading on a
recognized securities exchange located in such a
State;
-35-
e) an entity that is a not-for-profit organization
(including a pension fund or private foundation) and that,
by virtue of that status, is generally Exempt from income
taxation in its Contracting State of residence, provided
that more than half of the beneficiaries, members or
participants, if any, in such organization are entitled,
under this Article, to the benefits of this Convention?
f) a person that satisfies both of the following
conditions:
(i) more than 50 percent of the beneficial
interest in such person (or in the case of a company,
more than 50 percent of the number of shares of each
class of the company's shares) is owned, directly or
indirectly, by persons entitled to the benefits of
this convention under subparagraphs a), b), d) or e)?
and
(ii) less than 50 percent of the gross income of
such person is used, directly or indirectly, to meet
liabilities (including liabilities for interest or
royalties) to persons not entitled to the benefits of
this Convention under subparagraphs a), b), d) or e)?
or
g) a person claiming benefits under Articles 10
(Dividends), 11 (Interest), 11A (Branch Tax), or 12
(Royalties) that satisfies the following conditions:
i
-36-
(i) more than 30 percent of the beneficial
interest in such person (or, in the case of a company,
more than 30 percent of the number of shares of each
class of the company's shares) is owned, directly or
indirectly, by persons resident in a Contracting State
and entitled to the benefits of this Convention under
subparagraphs a), b), d), or e);
(ii) more than 60 percent of the beneficial
interest in such person (or, in the case of a company,
more than 60 percent of the number of shares of each
class of the company's shares) is owned, directly or
indirectly, by persons resident in a state that is a
party to NAFTA; and
(iii)
A) less than 70 percent of the gross income
of such person is used directly or indirectly to
meet liabilities (including liabilities for
interest or royalties) to persons that are not
entitled to the benefits of this Convention under
subparagraphs a), b), d), or e); and
B) less than 40 percent of the gross income
of such person is used directly or indirectly to
meet liabilities (including liabilities for
interest or royalties) to persons that are
neither entitled to the benefits of this
-37-
Convention under subparagraphs a), b), d), or e)
nor residents of a state that is a party to NAFTA.
A resident of a state that is a party to NAFTA shall only be
considered as owning a beneficial interest (or share) under
subparagraph (g)(ii) if that state has a comprehensive income
tax Convention with the Contracting State from which the income
is derived and if the particular dividend, profit or income
subject to the branch tax, interest, or royalty payment, in
respect of which benefits under this Convention are claimed,
would be subject to a rate of tax under that Convention that is
no less favorable than the rate of tax applicable to such
resident under Articles 10 (Dividends), 11 (Interest), 11A
(Branch Tax), or 12 (Royalties) of this Convention.
2.
A person which is not entitled to the benefits of the
Convention pursuant to the provisions of paragraph 1 may,
nevertheless, demonstrate to the competent authority of the
State in which the income arises that such person should be
granted the benefits of the Convention.
For this purpose, one
of the factors the competent authorities shall take into account
is whether the establishment, acquisition, and maintenance of
such person and the conduct of its operations did not have as
one of its principal purposes the obtaining of benefits under
the Convention.
-38-
ARTICLE 18
Artistes and Athletes
1.
Notwithstanding the provisions of Articles 14
(Independent Personal Services) and 15 (Dependent Personal
Services), income derived by a resident of a Contracting State
as an entertainer, such as a theatre, motion picture, radio, or
television artiste, or a musician, or as an athlete, from his
personal activities as such exercised in the other Contracting
State, may be taxed in that other State, except where the amount
of the remuneration derived by such entertainer or athlete,
including expenses reimbursed to him or borne on his behalf,
from such activities does not exceed $3,000 United States
dollars or its equivalent in Mexican pesos for the taxable year
concerned.
The other Contracting State may impose tax by
withholding on the entire amount of all gross receipts derived
by such entertainer or athlete during the taxable year
concerned, provided that such entertainer or athlete is entitled
to receive a refund of such taxes when there is no tax liability
for such taxable year in accordance with the provisions of this
Convention.
2.
Where income in respect of activities exercised by an
entertainer or an athlete in his capacity as such accrues not to
the
entertainer or athlete but to another person, that income of
that other person may, notwithstanding the provisions of
-39-
Articles 7 (Business Profits), 14 (Independent Personal
Services), and 15 (Dependent Personal Services) be taxed in the
Contracting State in which the activities of the entertainer or
athlete are exercised, unless it is established that neither the
entertainer or athlete nor persons related thereto participate
directly or indirectly in the profits of that other person in
any manner, including the receipt of deferred remuneration,
bonuses, fees, dividends, partnership distributions, or other
distributions.
3.
Notwithstanding the provisions of paragraphs 1 and 2,
income derived by a resident of a Contracting State as an
entertainer or athlete shall be exempt from tax by the other
Contracting State if the visit to that other State is
substantially supported by public funds of the first-mentioned
State or a political subdivision or local authority thereof.
ARTICLE 19
Pensions, Annuities, Alimony, and
Child Support
1.
Subject to the provisions of Article 20 (Government
Service):
a) pensions and other similar remuneration derived and
beneficially owned by a resident of a Contracting State in
consideration of past employment by that individual or
another individual resident of the same Contracting State
shall be taxable only in that State; and
b) social security benefits and other public pensions
paid by a Contracting State to a resident of the other
Contracting State or a citizen of the United States shall
be taxable only in the first-mentioned State.
2.
Annuities derived and beneficially owned by an
individual resident of a Contracting State shall be taxable only
in that State.
The term "annuities" as used in this paragraph
means a stated sum paid periodically at stated times during a
specified number of years, under an obligation to make the
payments in return for adequate and full consideration (other
than services rendered).
3.
Alimony and child support payments made by a resident
of a Contracting State to a resident of the other Contracting
State shall be taxable only in the first-mentioned State.
The
term "alimony" as used in this paragraph means periodic payments
made pursuant to a written separation agreement or a decree of
divorce, separate maintenance, or compulsory support.
The term
"child support" as used in this paragraph means periodic
payments for the support of a minor child made pursuant to a
written separation agreement or a decree of divorce, separate
maintenance, or compulsory support.
-41-
ARTICLE 20
Government Service
1.
(a) Remuneration, other than a pension, paid by a
Contracting State or a political subdivision or local
authority thereof to an individual in respect of services
rendered to that State or subdivision or authority shall be
taxable only in that State.
(b)
However, such remuneration shall be taxable only
in the other Contracting State if the services are rendered
in that State and the individual is a resident of that
State who:
(i) is a national of that State; or
(ii) did not become a resident of that State
solely for the purpose of rendering the services.
2.
(a) Any pension paid directly by, or out of funds
created by, a Contracting State or a political subdivision
or a local authority thereof to an individual in respect of
services previously rendered to that State or subdivision
or authority shall be taxable only in that State.
(b) However, such pension shall be taxable only in the
other Contracting State if the individual is a resident of,
and a national of, that State.
-42-
3.
es 14 (Independent Personal
The provisions of Articl
Services), 15 (Dependent Personal Services), 16 (Directors'
Fees), 18 (Artistes and Athletes) , and 19 (Pensions, Annuities,
Alimony, and Child Support) shall apply to remuneration and
pensions in respect of commercial or industrial activities
carried on by a Contracting State or a political subdivision or
a local authority thereof.
ARTICLE 21
Students
Payments which a student or business apprentice who is or
was immediately before visiting a Contracting State a resident
of the other Contracting State* and who is present in the
first-mentioned State solely for the purpose of his education or
training receives for the purpose of his maintenance, education
or training shall not be taxed in that State, provided that such
payments arise from sources, or are remitted from, outside that
State
-43-
ARTICLE 22
Exempt Organizations
1.
An organization resident in a Contracting State which
is operated exclusively for religious, scientific, literary,
educational or other charitable purposes shall be exempt from
tax in the other Contracting State in respect of items of
income, if and to the extent that:
a) such organization is exempt from tax in the firstmentioned Contracting State, and
b) the items of income of such organization would be
exempt from tax in the other Contracting State if received
by an organization recognized in such other Contracting
State as exempt from tax as an organization with religious,
scientific, literary, educational, or other charitable
purposes.
2.
If the Contracting States agree that a provision of
Mexican law provides standards for organizations authorized to
receive deductible contributions that are essentially equivalent
to the standards of United States law for public charities:
a) an organization determined by Mexican authorities
to meet such standards shall be treated, for purposes of
grants by United States private foundations and public
charities, as a public charity under United States law, and
b) contributions by a citizen or resident of the
United States to such an organization shall be treated as
-44-
char i table contributions to a public charity under United
States law.
However, contributions described in subparagraph b) shall not be
deductible in any taxable year to the extent that they exceed an
amount determined by applying the limitations of the laws of the
United States in respect to the deductibility of charitable
contributions to public charities (as they may be amended from
time to time without changing the general principle hereof) to
the income of such citizen or resident arising in Mexico.
The
preceding sentence shall not be interpreted to allow in any
taxable year deductions for charitable contributions in excess
of the ¿mount allowed under the limitations of the laws of the
United States in respect to the deductibility of charitable
contributions .*
3.
If the Contracting States agree that United States law
provides standards for public charities that are essentially
equivalent to the standards of Mexican law for organizations
authorized to receive deductible contributions, contributions by
a resident of Mexico to an organization determined by the United
States authorities to meet the standards for public charities
shall be treated as deductible contributions under Mexican law.
However, such contributions shall not be deductible in any
taxable year to the extent that they exceed an amount determined
by applying the limitations of the laws of Mexico in respect to
the deductibility of contributions to organizations authorized
-45-
to receive deductible contributions (as they may be amended from
time to time without changing the general principle hereof) to
the income of such resident arising in the United States.
The
preceding sentence shall not be interpreted to allow in any
taxable year deductions for contributions in excess of the
amount allowed under the limitations of the laws of Mexico in
respect to the deductibility of contributions.
4.
A religious, scientific, literary, educational or other
charitable organization which is resident in Mexico and which
has received substantially all of its support from persons other
than citizens or residents of the United States shall be exempt
in the United States from the United States excise taxes imposed
with respect to private foundations.
ARTICLE 23
Other Income
Items of income of a resident of a Contracting State not
dealt with in the foregoing Articles of this Convention and
arising in the other Contracting State may be taxed in that
other State.
-46-
ARTICLE 24
Relief From Double Taxation
1.
In accordance with the provisions and subject to the
limitations of the law of the Contracting States (as it may be
amended from time to time without changing the general principle
hereof), a Contracting State shall allow to a resident of that
State and, in the case of the United States to a citizen of the
United States, as a credit against the income tax of that State:
a) the income tax paid to the other Contracting State
by or on behalf of such resident or citizen; and
b) in the case of a company owning at least 10 percent
of the voting stock of a company which is a resident of the
other Contracting State and from which the first-mentioned
company receives dividends, the income tax paid to the
other State by or on behalf of the distributing company
with respect to the profits out of which the dividends are
paid.
For purposes of this paragraph, the taxes referred to in
paragraphs 3 and 4 of Article 2 (Taxes Covered) shall be treated
as income taxes, including any profits tax imposed on
distributions but only to the extent such tax is imposed on
earnings and profits as calculated under the tax accounting
rules of the Contracting State of the beneficial owner of such
distribution.
-47-
2. Where in accordance with the provisions of the
Convention income derived by a resident of Mexico is exempt from
tax in that State, Mexico may nevertheless, in calculating the
amount of tax on the remaining income of such resident, take
into account the exempted income.
3.
For the purposes of allowing relief from double
taxation pursuant to this Article, income derived by a resident
of a Contracting State which may be taxed in the other
Contracting State in accordance with this Convention (other than
solely by reason of citizenship in accordance with paragraph 2
of Article 1 (General Scope)) shall be deemed to arise in that
other State.
Except as provided in Article 13 (Capital Gains),
the preceding sentence is subject to such source rules in the
domestic laws of the Contracting States as apply for purposes of
limiting the foreign tax credit.
4.
Where a United States citizen is a resident of Mexico:
a)
With respect to items of income obtained by said
citizen that are exempt from United States tax or that are
subject to a reduced rate of United States tax, Mexico
shall allow as a credit against Mexican tax, subject to the
provisions of Mexican tax law regarding credit for foreign
tax, only the tax paid, if any, that the United States may
impose under the provisions of this Convention,, other than
taxes that may be imposed solely by reason of citizenship
of the taxpayer;
-48-
b) For purposes of computing United States tax, the
United States shall allow as a credit against Uni ted.States
tax the income tax paid to Mexico after the credit referred
to in subparagraph a); but the credit so allowed shall not
reduce that portion of the United States tax that is
creditable against the Mexican tax in accordance with
subparagraph a);
c) For the exclusive purpose of relieving double
taxation in the United States under subparagraph b) items
of income referred to in subparagraph a) shall be deemed to
arise in Mexico to the extent necessary to avoid double
taxation of such income under subparagraph b).
ARTICLE 25
Non-Discrimination
1.
Nationals of a Contracting State shall not be subjected
in the other Contracting State to any taxation or any
requirement connected therewith which is other or more
burdensome than the taxation and connected requirements to which
nationals of that other State in the same circumstances are or
may be subjected.
However, a national of a Contracting State
who is subject to tax in that State on worldwide income and a
national of the other Contracting State who is not taxed in the
-49-
first-mentioned State on worldwide income are not in the same
circumstances.
2.
The taxation on a permanent establishment which an
enterprise of a Contracting State has in the other Contracting
State shall not be less favorably levied in that other State
than the taxation levied on enterprises of that other State
carrying on the same activities.
This provision shall not be
construed as obliging a Contracting State to grant to residents
of the other Contracting State any personal allowances, reliefs,
and reductions for taxation purposes on account of civil status
or family responsibilities which it grants to its own residents.
3.
Nothing in this Article shall be construed as
preventing either of the Contracting States from imposing the
tax described in Article 11A (Branch Tax) or, in the case of
Mexico, from denying a deduction for presumed expenses (without
regard to where such expenses are incurred) to an individual
resident of the United States who elects to be subject to tax in
Mexico on a net basis with respect to income from real property.
4.
Except where the provisions of paragraph 1 of Article 9
(Associated Enterprises), paragraph 8 of Article 11 (Interest),
or paragraph 5 of Article 12 (Royalties) apply, interest,
royalties, and other disbursements paid by a resident of a
Contracting State to a resident of the other Contracting State
s h a ll,
fo r
the purposes of determining the taxable profits of
-50
the first-mentioned resident, be deductible under the same
conditions as if they had been paid to a resident of the
first-mentioned State.
5.
Enterprises of a Contracting State, the capital of
which is wholly or partly owned or controlled, directly or
indirectly, by one or more residents of the other Contracting
State, shall not be subjected in the first-mentioned State to
any taxation or any requirement connected therewith which is
other or more burdensome than the taxation and connected
requirements to which other similar enterprises of the
first-mentioned State are or may be subjected.
6.
The provisions of this Article shall, notwithstanding
the provisions of Article 2 (Taxes Covered), apply to all taxes
imposed by a Contracting State or a political subdivision or
local authority thereof.
ARTICLE 26
Mutual Agreement Procedure
1.
Where a person considers that the actions of one or
both of the Contracting States result or will result for him in
taxation not in accordance with the provisions of this
Convention,
he may, irrespective of the remedies provided by the
domestic law of those States, present his case to the competent
-51-
authority of the Contracting State of which he is a resident or
national.
2.
The competent authority shall endeavor, if the
objection appears to it to be justified and if it is not itself
able to arrive at a satisfactory solution, to resolve the case
by mutual agreement with the competent authority of the other
Contracting State, with a view to the avoidance of taxation
which is not in accordance with the Convention, provided that
the competent authority of the other Contracting State is
notified of the case within four and a half years from the due
date or the date of filing of the return in that other State,
whichever is later.
In such case, any agreement reached shall
be implemented within ten years from the due date or the date of
filing of the return in that other State, whichever is later, or
a longer period if permitted by the domestic law of that other
State.
3.
The competent authorities of the Contracting States
shall endeavor to resolve by mutual agreement any difficulties
or doubts arising as to the interpretation or application of the
Convention.
They may also consult together regarding cases not
provided for in the Convention.
4.
The competent authorities of the Contracting States may
communicate with each other directly for the purpose of reaching
an agreement in the sense of the preceding paragraphs.
5.
If any difficulty or doubt arising as to the
interpretation or application of this Convention cannot be
resolved by the competent authorities pursuant to the previous
paragraphs of this Article, the case may, if both competent
authorities and the taxpayer(s) agree, be submitted for
arbitration, provided that the taxpayer agrees in writing to be
bound by the decision of the arbitration board.
The decision of
the arbitration board in a particular case shall be binding on
both States with respect to that case.
The procedures shall be
established between the States by notes to be exchanged through
diplomatic channels.
The provisions of this paragraph shall
have effect after the States have so agreed through the exchange
of diplomatic notes.
ARTICLE 27
Exchange of Information
1.
The competent authorities shall exchange information as
provided in the Agreement Between the United States of America
and the United Mexican States for the Exchange of information
with Respect to Taxes signed on November 9, 1989.
-53-
2.
In the event such Agreement is terminated, the
competent authorities of the Contracting States shall exchange
such information as is necessary for carrying out the provisions
of this Convention or to administer and enforce the domestic
laws of the Contracting States concerning taxes covered by the
Convention insofar as the taxation thereunder is not contrary to
the Convention.
The exchange of information is not restricted
by Article 1 (General Scope).
Any information received by a
Contracting State shall be treated as secret in the same manner
as information obtained under the domestic laws of that State
and shall be disclosed only to individuals or authorities
(including judicial and administrative bodies) involved in the
determination, assessment, collection, and administration of,
the recovery and collection of claims derived from, the
enforcement or prosecution in respect of, or the determination
of appeals in relation to, the taxes which are the subject of
the Convention.
Such individuals or authorities shall use the
information only for such purposes.
These individuals or
authorities may disclose the information in public court
proceedings or in judicial decisions.
-54-
3.
For the purposes of this Article, the Convention shall
aPPlYf notwithstanding the provisions of Article 2 (Taxes
Covered), to all federal taxes.
ARTICLE 28
Diplomatic Agents and Consular Officers
Nothing in this Convention shall affect the fiscal
privileges of diplomatic agents or consular officers under the
general rules of international law or under the provisions of
special agreements.
ARTICLE 29
Entry Into Force
1.
The Contracting States shall notify each other when
their respective constitutional and statutory requirements for
the entry into force of this Convention have been satisfied.
The Convention will enter into force on the date of receipt of
the later of such notifications.
2.
The provisions of the Convention shall have effect:
a)
in respect of taxes imposed in accordance with
Articles 10 (Dividends), 11 (Interest), and 12 (Royalties),
for amounts paid or credited on or after the first day of
-55
the second month next following the date on which the
Convention enters into force if the Convention enters into
force prior to July 1 of that year; otherwise, on the first
day of January of the year following the year in which the
Convention enters into force;
b)
in respect of other taxes, for taxable periods
beginning on or after the first day of January of the year
following the year in which the Convention enters into
force.
3.
The existing agreement between the United Mexican
States and the United States of America for the avoidance of
double taxation of income derived from the operation of ships or
aircraft in international traffic concluded by exchange of notes
of August 7, 1989, shall terminate upon the entry into force of
the Convention.
However, the provisions of the said agreement
shall continue in effect until the provisions of the Convention,
in accordance with the provisions of paragraph 2(b), shall have
effect.
ARTICLE 30
Termination
R
This Convention shall remain in force until terminated
by a Contracting State.
Either Contracting State may terminate
the Convention at any time after five years from the date on
which the Convention enters into force, provided that at least
-56-
si x months prior no tice of termination has been given through
di plomatic channels .
In such event, the Convention shall cease
to have effect:
a)
in re spect of taxes imposed in accordance with
Articles 10 (D ividends), 11 (Interest), and 12 (Royalties)
/
for amounts pa id or credited on or after the first day of
the second mon th next following the expiration of the six
months period;
b)
in re spect of other taxes, for taxable periods
beginning on or after the first day of January next
following the expiration of the six months period.
IN WITNESS WHEREOF, the undersigned, being duly authorized
by their respective Governments, have signed this Convention.
DONE at Washington D.C., in duplicate, in the English and
Spanish languages, both texts being equally authentic, this
eighteenth day of September, 1992.
FOR THE GOVERNMENT OF THE
UNITED STATES OF AMERICA:
FOR THE GOVERNMENT OF THE
UNITED MEXICAN STATES:
PROTOCOL
At the moment of signing the Convention between the
Government of the United States of America and the Government of
the United Mexican States for the Avoidance of Double Taxation
and the Prevention of Fiscal Evasion with respect to Taxes on
Income, the undersigned have agreed upon the following
provisions which shall be an integral part of the Convention.
1.
With reference to paragraphs 1(f) and (g) of Article 3
(Definitions),
When referred to in a geographical sense, Mexico and the
United States include the areas of the seabed and subsoil
adjacent to their respective territorial seas in which they may
exercise rights in accordance with domestic legislation and
international law.
2.
With reference to paragraph 1 of Article 4 (Residence),
For purposes of paragraph 1 of Article 4 it is understood that:
a) Mexico shall consider a United States citizen or an
alien admitted to the United States for permanent residence
(a "green card" holder) to be a resident of the United States
only if the individual has a substantial presence in the United
States or would be a resident of the United States and not of
another country under the principles of subparagraph a) and b)
of paragraph 2 of that Article;
b) a partnership, estate, or trust is a resident of a
Contracting State only to the extent that the income it
derives is subject to tax in that State as the income of a
resident, either in the hands of the partnership, estate or
trust, or in the hands of its partners or beneficiaries;
-
2
-
c) the term "resident" also includes a Contracting
State or a political subdivision or local authority thereof.
3. With reference to Articles 5 (Permanent Establishment), 6
(Income from Immovable Property (Real Property)), 7 (Business
Profits) and 12 (Royalties^
It is understood that the asset tax imposed by Mexico shall
not be applied to residents of the United States that are not
subject to tax under the terms of Articles 5 and 7 of this
Convention, except for the assets referred to in paragraph 2 of
Article 6 and in paragraph 3 of Article 12 that are furnished by
those residents to a resident of Mexico.
In the former case,
Mexico shall grant a credit against the tax on such assets in an
amount equal to the income tax that would be imposed under the
Mexican Income Tax Law on the gross income (if any) referred to
in paragraph 1 of Article 6, whether or not the resident of the
United States makes the election under paragraph 5 of Article 6
to be taxed on a net basis, provided less than 50 percent of the
United States resident's gross income from such assets is used
directly or indirectly to meet liabilities (including
liabilities for interest) to persons who are not United States
residents.
In the latter case, Mexico shall grant a credit
against the tax on such assets in an amount equal to the income
tax that would have been imposed on the royalties paid (if any)
applying the rate of tax provided in the Mexican Income Tax Law
instead of the rate provided in Article 12.
-3-
4.
With reference to Article 7 (Business Profits)»
Nothing in this Article shall affect the application of any
law of a Contracting State relating tu the determination of the
tax liability of a person in any case where the information
available to the competent authority of that State is inadequate
to determine the profits to be attributed to a permanent
establishment or in the cases covered by Article 23 of the
Income Tax Law of Mexico, provided that, on the basis of the
available information, the determination of the profits of the
permanent establishment is consistent with the principles stated
in this Article.
5. With reference to paragraph 3 of Article 7 (Business
Profits),
'
Expenses allowed as a deduction include a reasonable
allocation of research and development expense, interest, and
other expenses incurred in the taxable year for the purposes of
the enterprise as a whole (or the part thereof which includes
the permanent establishment), regardless of where incurred, but
only to the extent that such expenses have not been deducted by
such enterprise and are not reflected in other deductions
allowed to the permanent establishment, such as the deduction
for the cost of goods sold or of the value of the purchases.
6.
w i t h reference to Article 8 (Shipping and Air Transport),
Residents of the United States, whose profits derived from
Mexico may not be taxed by Mexico in accordance with the
provisions of Article 8 of the Convention, may not be subject to
the Mexican assets tax on the assets used to produce such
-47•
With reference to Article 9 (Associated Enterprises),
The provisions of paragraph 2 shall not apply in the case
of fraud, gross negligence, or willful default.
8.
With reference to paragraphs 2 and 3 of Article 10
(Dividends),
a) In the case of the United States, subparagraph a) of
paragraph 2 shall not apply to dividends paid by a United States
Regulated Investment Company or a Real Estate Investment Trust.
Subparagraph b) of paragraph 2 and paragraph 3 shall apply in
the case of dividends paid by a Regulated Investment Company.
In the case of dividends paid by a Real Estate Investment Trust,
subparagraph b) of paragraph 2 and paragraph 3 shall apply if
the beneficial owner of the dividends is an individual holding a
less than 10 percent interest in the real estate investment
trust; otherwise the rate of withholding applicable under
domestic law shall apply.
b) If the United States agrees in a treaty with another
country to impose a lower rate on dividends than the rate
specified in subparagraph a) of paragraph 2, both Contracting
States shall apply that lower rate instead of the rate specified
in subparagraph a) of that paragraph.
9. With reference to paragraph 3 of Article 7 (Business
Profits),. paragraph 4 of Article 10 (Dividends), and paragraph 5
of Article 11 (Interest),
If the law of a Contracting State calls for a payment to be
characterized in whole or in part as a dividend or limits the
deductibility of such payment because of thin capitalization
-5-
rules or because the relevant debt instrument includes an equity
interest, the Contracting State may treat such payment in
accordance with such law.
10. With reference to paragraphs 2, 3, and 4 of Article 11
(interest),
a) The provisions of paragraphs 2, 3, and 4 shall not apply
to a Mexican resident that is a holder of a residual interest in
a U.S. real estate mortgage investment conduit (REMIC) with
respect to any excess inclusion.
Upon notification of the
United States competent authority by the Mexican competent
authority that, after this treaty takes effect, Mexico has
authorized the marketing of securitized mortgages in a manner
identical to a REMIC, the provisions of paragraphs 2, 3, and 4
also shall not apply to a U.S. resident that is a holder of an
interest in any such entity with respect to income that is
comparable to an excess inclusion.
Moreover, if either of the
Contracting States develops an entity that, although not
identical to a REMIC, is substantially similar to a REMIC or an
instrument that is substantially similar to a residual interest
in a REMIC, the competent authorities of the Contracting States
shall consult to determine whether the treatment provided in
this paragraph for REMlCs shall apply to such instrument or
entity.
b) With reference to subparagraph b(ii) of paragraph 2 of
Article 11, the rate specified shall apply only if the
beneficial owner of the interest is the original seller of the
-
machinery and equipment.
6
-
If the original seller transfers the
beneficial ownership of the interest, the-identity of the
transferee will determine the rate of tax that may be charged
upon the interest by the Contracting State in which the interest
arises.
11.
With reference to paragraph 3 of Article 12 (Royalties),
It is understood that the term "information concerning
industrial, commercial or scientific experience" will be defined
in accordance with paragraph 12 of the Commentary on Article 12
(Royalties) of the 1977 Model Convention for the Avoidance of
Double Taxation with Respect to Taxes on Income and on Capital
of the Organization for Economic Cooperation and Development.
12.
With reference to paragraph 2 of Article 13 (Capital Gains),
The term "immovable property situated in the other
Contracting State," as described in this paragraph, when the
United States is that other Contracting State includes a United
States real property interest.
13.
With reference to paragraph 4 of Article 13 (Capital Gains),
For purposes of this paragraph, no tax shall apply in the
case of a transfer of property between members of a group of
companies that file a consolidated tax return, to the extent
that the consideration received by the transferor consists of
participation or other rights in the capital of the transferee
or of another company resident in the same Contracting State
that owns directly or indirectly 80 percent or more of the
voting rights and value of the transferee, if:
-7-
a) the transferor and transferee are companies
resident in the same Contracting State;
b) before and immediately after the transfer, the
transferor or the transferee owns, directly or indirectly,
80 percent or more of the voting rights and value of the
other, or a company resident in the same Contracting
State
owns directly or indirectly (through companies resident in
the same Contracting State) 80 percent or more of the
voting rights and value of each of them; and
c) for the purpose of determining gain on any
subsequent disposition,
(i) the initial cost of the asset for the
transferee is determined based on the cost it had for
the transferor, increased by any cash or other
property paid, or
(ii) the gain is measured by another method that
gives substantially the same result.
Notwithstanding the foregoing, if cash or property other
than such participation or other rights is received, the amount
of the gain (limited to the amount of cash or other property
received), may be taxed by the other Contracting State.
14. With reference to paragraph 1 of Article 14 (Independent
Personal Services),
Article 14 shall also apply to income derived by a company
which is a resident of the United States from the furnishing of
personal services through a fixed base in Mexico in accordance
-
8-
with subparagraph a) of paragraph 1.
In that case, the company
may compute the tax on the income from such services on a net
basis as if that income were attributable to a permanent
establishment in Mexico.
15. With reference to paragraph 2 of Article 11 (Interest),
paragraph 2 of Article 11A (Branch Tax), and paragraph 1 of~
Article 17 (Limitation on Benefits),
a) For purposes of subparagraph c of paragraph 1 of
Article 17 and paragraph 2 of Article 11A, the term "trade
or business" means, in the case of Mexico, activities
carried on through a permanent establishment as defined in
the Income Tax Law of Mexico.
b) For purposes of subparagraph a(ii) of paragraph 2
of Article 11 and subparagraph d) of paragraph 1 of Article
17, the term "recognized securities exchange" means:
(i) the NASDAQ System owned by the National
Association of Securities Dealers, Inc. and any stock
exchange registered with the Securities and Exchange
Commission as a national securities exchange for
purposes of the Securities Exchange Act of 1934;
(ii) stock exchanges duly authorized under the
terms of the Stock Market ("Mercado de Valores") Law
of January 2, 1975; and
(iii) any other stock exchange agreed upon by the
competent authorities of the Contracting States.
c) For purposes of subparagraph f(ii) of paragraph 1
of Article 17, the term "gross income" means gross
i
receipts, or where an enterprise is engaged in a business
which includes the manufacture or production of goods,
gross receipts reduced by the direct costs of labor and
materials attributable to such manufacture or production
and paid or payable out of such receipts.
d)
the provisions of subparagraphs d(iii) and g of
paragraph 1 of Article 17 shall only take effect when NAFTA
enters into force.
16.
With reference to Article 18 (Artistes and Athletes),
Remuneration derived by an entertainer or athlete who is a
resident of a Contracting State shall include remuneration for
any personal activities performed in the other Contracting State
relating to that individual's reputation as an entertainer or
athlete.
The provisions of this Article shall not apply to
auxiliary or supporting personnel, such as technicians, or to
managers or coaches, who shall remain subject to the provisions
of Articles 14 and 15.
17. With reference to paragraphs 1, 2, and 3 of Article 22
(Exempt Organizations),
a) The certification made by a Contracting State of the
status of a resident of that State as an organization which is
operated exclusively for religious, scientific, literary,
educational or other charitable purposes and exempt from tax in
that State shall be accepted by the other Contracting State for
the purpose of allowing such organization to be exempt from tax
in that other Contracting State in accordance with the
-
provisions of paragraph 1.
10
-
However, if the competent authority
of the other Contracting State determines that granting an
exemption is inappropriate in a specific case or circumstance,
the exemption may be denied after consultation with the
competent authority of the first Contracting State,
b) The Contracting States agree that:
(i) Article 70-B of the Mexican Income Tax Law and
section 509(a)(1) and (2), except for organizations
described in section 170(b)(1)(A)(i ), of the United States
Internal Revenue Code, as interpreted by the governing
regulations and administrative rulings of Mexico and the
United States, respectively, in effect on the date of the
signing of this Convention, provide essentially equivalent
standards for organizations within their coverage, within
the meaning of paragraphs 2 and 3; and
(ii) Therefore, a finding by the tax authorities of
Mexico that an organization qualifies under Article 70-B,
or by the United States tax authorities that an
organization qualifies under section 509(a)(1) or (2),
except for an organization described in section
170(b)(1)(A)(i), shall be accepted by the other Contracting
State for the purpose of extending to such organization the
benefits provided for in paragraphs 2 and 3.
However, if
the competent authority of the other Contracting State
determines that granting such benefits is inappropriate
with respect to a particular organization or type of
-
11 -
organization, such benefits may be denied after
consultation' with the competent authority of the first
Contracting State.
18. With reference to paragraph 5 of Article 26 (Mutual
Agreement Procedure)^
a) After a period of three years after the entry into force
of this Convention, the competent authorities shall consult in
order to determine whether it is appropriate to make the
exchange of diplomatic notes referred to in paragraph 5 of
Article 26 (Mutual Agreement Procedure).
b) If the competent authorities of both States agree to
submit a disagreement regarding the interpretation or
application of this convention in a specific case to arbitration
according to paragraph 5 of Article 26, the following procedures
will apply:
(i) If, in applying paragraphs 1 to 4 of Article 26,
the competent authorities fail to reach an ag reement within
two years of the date on which the case was submitted to
one of the competent authorities, they may ag ree to invoke
arbitration in a specific case, but only afte r fully
exhausting the procedures available for parag raphs 1 to 4
of Article 26.
The competent authorities wil 1 not accede
to arbitration with respect to matters concer ning the tax
policy or domestic law of either State.
-
12
-
(ii) The competent authorities shall establish an
arbitration board for each specific case in the following
manner:
A.
An arbitration board shall consist of not
fewer than three members.
Each competent authority
shall appoint the same number of members, and these
members shall agree on the appointment of the other
member(s).
The competent authorities may issue
further instructions regarding the criteria for
selecting the other member(s) of the arbitration
board.
B.
Arbitration board member(s) (and their
staffs) upon their appointment must agree in writing
to abide by and be subject to the applicable
confidentiality and disclosure provisions of both
States and the Convention.
In case those provisions
conflict, the most restrictive condition will apply.
(iii) The competent authorities may agree on and
instruct the arbitration board regarding specific rules of
procedure, such as appointment of a chairman, procedures
for reaching a decision, establishment of time limits,
etc.
Otherwise, the arbitration board shall establish its
own rules of procedure consistent with generally accepted
principles of equity.
(iv) Taxpayers and/or their representatives shall be
afforded the opportunity to present their views to the
arbitration board.
-13-
(v) The arbitration board shall decide each specific
case on the basis of the convention, giving due
consideration to the domestic laws of the States and the
principles of international law.
The arbitration board
will provide to the competent authorities an explanation of
its decision.
The decision of the arbitration, board shall
be binding on both States and the taxpayer(s) with respect
to that case.
While the decision of the arbitration board
shall not have precedential effect, it is expected that
such decisions ordinarily will be taken into account in
subsequent competent authority cases involving the same
taxpayer(s), the same issue(s), and substantially similar
facts, and may also be taken into account in other cases
where appropriate.
(vi) Costs for the arbitration procedure will be borne
in the following manner:
A.
Each State shall bear the cost of
remuneration for the member(s) appointed by it, as
well as for its representation in the proceedings
before the arbitration board;
B.
The cost of remuneration for the other
member(s ) and all other costs of the arbitration board
shall be shared equally between the States; and
C.
The arbitration board may decide on a
different allocation of costs.
-14-
However / if it deems appropria te in a spec if ic case, in
view of the nature of the^case and the rol es of the
parties , the competent authori ty of one of the States may
require the taxpayer(s) to agr ee to bear that State's sha
of the costs as a prerequisite fo r arbitra tion.
(v ii) The competent autho ri ties may agree to mod ify i
supplement these procedures; however, they shall continue
to be bound by the general principles established herein.
19. With reference to paragraph 1 of Article 27 (Exchange of
Information),
If the Agreement between the United States of America and
the United Mexican States for the Exchange of Tax Information
should be terminated, the Contracting States shall promptly
endeavor to conclude a protocol to this Convention to accomplish
the purposes of this Article.
20.
With reference to Article 30 (Termination),
When the competent authority of one of the Contracting
States considers that the law of the other Contracting State is
or may be applied in a manner that eliminates or significantly
limits a benefit provided by the Convention, that State shall
inform the other Contracting State in a timely manner and may
request consultations with a view to restoring the balance of
benefits of the Convention.
If so requested, the other State
shall begin such consultations within three months of the date
of such request.
-15-
If the Contracting States are unable to agree on the way in
which the Convention should be modified to restore the balance
of benefits, the affected State may terminate the Convention in
accordance with the procedures of paragraph 1, notwithstanding
the five year period referred to in that paragraph, or take such
other action regarding this Convention as may be permitted under
the general principles of international law.
IN WITNESS WHEREOF, the undersigned, being duly authorized
by their respective Governments, have signed this Protocol.
DONE at Washington D.C., in duplicate, in the English and
Spanish languages, both texts being equally authentic, this
eighteenth day of September, 1992.
FOR THE GOVERNMENT OF THE
UNITED STATES OF AMERICA:
FOR THE GOVERNMENT OF THE
UNITED MEXICAN STATES:
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CNN Interview with Treasury Undersecretary David Mulford on the Group of Seven Upcoming
Meeting
1992-09-18
Journal:
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Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
September 19/ 1992
STATEMENT OP THE GROUP OP SEVEN
FINANCE MINISTERS AND CENTRAL BANK GOVERNORS
The Ministers and Governors reaffirm the commitment made by
their Heads of State and Government at the Munich Summit to
strengthen world growth without rekindling inflation. Since
then, measures to reinforce economic recovery have been taken,
including interest rate reductions in a number of countries, as
well as the recent announcement of the Japanese stimulus package.
These measures will strengthen the global economic recovery and
foster greater stability of exchange markets.
Ministers and Governors expressed concern about the recent
volatility in world financial markets. They agreed on the
importance of restoring stable and long-lasting exchange rate
relationships. The Ministers and Governors will continue to
cooperate and to monitor closely economic and financial
conditions in their countries and will take appropriate
additional actions as needed to achieve sustained growth and
greater currency stability.
The Ministers and Governors also met with representatives of
the Russian Federation and discussed Russia*s reform program.
They urged Russia to intensify its efforts to implement
comprehensive economic reform. They also urged the World Bank to
form a technical assistance support group for Russia to discuss
bilateral and multilateral technical assistance.
CONTACT: Scott Dykema
(202)622-2960
FOR IMMEDIATE RELEASE
September 19 , 1992
Statement of Secretary of the Treasury
Nicholas F. Brady
on G-7 Meeting
The G-7 had a full discussion of the outlook for the world
economy and recent exchange market developments. There was
recognition that a number of actions have been taken which will
help strengthen world economic recovery. The G-7 agreed on the
importance of restoring stability in exchange markets in Europe.
There was broad recognition that measures to strengthen recovery
would also foster greater exchange market stability.
We also met with representatives of the Russian Federation
to discuss Russia’s reform program and their request for debt
rescheduling. The G-7 encouraged the Russian government to
intensify efforts to implement comprehensive economic reform. W
also made progress on the issue of rescheduling Russia’s debt an
expect to reach a decision in the near future.
Thank you.
I will be glad to take your questions.
-30-
NB-1982
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Treasury Secretary Nicholas Brady News Conference Following a Meeting of the G-7
Date:
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Federal Reserve Bank of St. Louis
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TREASURY NEWS
Department of the Treasury
Washington, D.C
Telephone 202-622-2960
TEXT AS PREPARED
Remarks by
Secretary of the Treasury
Nicholas F. Brady
at the Morning Session of
the Interim Committee
of the International Monetary Fund
September 20, 1992
World Economic Outlook
Thank you, Mr. Chairman. The world economy stands at a defining moment in
history. A partnership of nations has produced democracy and free markets
throughout the world.
We are finally on a path to peace and prosperity.
Market principles are ascendent everywhere as nations seek to build a better
tomorrow. The countries of the former Soviet Union and Eastern Europe have
rejected central planning. Developing countries have turned away from statist
rule. Now the major industrial economies can devote their resources to a more
productive future.
Strong and sustained growth is needed to make this vision a reality. It will
solidify the links between our countries and create a truly integrated world
economy. It is an absolute prerequisite for meeting the challenges of the 21st
century.
The industrial countries bear a special responsibility for a strong and
growing world economy. These nations must lead by example. If we cannot build
strong economies and adhere to market principles, we cannot expect reforming
countries to follow.
Over the past year, the United States has sought a global consensus to
strengthen world growth. A beginning has been made in implementing concrete
actions.
Several major countries have cut interest rates. Japan has adopted a large
and welcome package of fiscal stimulus. Inflation has declined sharply in most
countries. The fruits of these efforts are beginning to appear.
However, we must be vigilant to ensure that the engines of growth do not
slow. Growth remains below potential in many major industrial countries, and
unemployment is at unacceptable levels.
N B - 1 983
2
In the United States, we have had five successive quarters of expansion.
Inflation and interest rates are at the lowest levels in 25 years. Our trade
deficit has been reduced significantly and we are taking actions to reduce our
budget deficit. The President has proposed an Agenda for American Renewal to
increase our growth potential over the longer term.
Recent developments in world currency markets highlight the importance of
strengthening growth. Policy measures for a stronger world economy are consistent
with and will complement efforts to promote greater stability of exchange markets.
We must also demonstrate our commitment to market principles by tackling
structural rigidities. We cannot expect to achieve the benefits of free markets
unless we extend market principles across borders. Bringing the Uruguay Round to
a rapid and successful conclusion remains of paramount importance. The North
American Free Trade Agreement and the Enterprise for Americas' Initiative
complement the broader global effort and demonstrate U.S. commitment to a world of
freer trade and open markets.
Strong global growth will also assist the transformation in Eastern Europe
and the former Soviet Union. The demise of communism in these countries and the
move towards democracy and free markets represents one of the greatest
opportunities in our lifetimes for peace and prosperity. It is a challenge that
we must meet collectively through cooperation and hard work. We will return to
this topic this afternoon.
Turning to the developing countries, it is clear that economic growth and
development depend upon self-help and external support. The combination of major
market-opening reforms and commercial bank debt reduction has helped to revitalize
Latin American economies. The debt crisis of the 1980s is largely over for the
major debtors and the banking system. The resulting economic turn-around has been
impressive. Liberalization and privatization have attracted substantial new
capital flows.
We welcome the substantial adjustment efforts in many other developing
countries which are helping to produce stronger growth. However, many of the
poorest countries in Africa have not yet experienced the same degree of success.
Their economic difficulties have been compounded by drought and political unrest.
Increasing efforts have been made in recent years to support reforming
countries with deeper debt relief, bilateral forgiveness, grants, and more
targeted official assistance programs. These efforts should continue. But
financial relief in the absence of strong adjustment cannot assure success.
Continued economic reforms, global growth, access to markets, and stronger private
sectors remain crucial.
Mr. Chairman, we have an unprecedented opportunity before us to unite our
nations in the pursuit of peace and prosperity on the basis of market principles.
We need strong growth to make this opportunity a reality. We are making
significant progress and have the means at hand to achieve success. Thank you.
TREASURY NEWS
Department of the Treasury
Washington, D.C
Telephone 202-622-2960
TEXT AS PREPARED FOR DELIVERY
Remarks by
Secretary of the Treasury
Nicholas F. Brady
at the Afternoon Session of
the Interim Committee
of the International Monetary Fund
Washington
September 20, 1992
Eastern Europe and the Former Soviet Union
Thank you, Mr. Chairman. The transformation of the countries
of Eastern Europe and the former Soviet Union to market economies
will be one of the most difficult and challenging undertakings of
our lifetime. Clearly, the reforming countries themselves will bear
the primary burden of the transformation and it will take time.
But I believe success will be achieved because the people of
these countries increasingly understand the benefits of democracy
and free enterprise, because the international financial
institutions have stepped forward with their invaluable assistance,
and because our governments are ready to do their part.
Today, we see many hopeful signs of progress. Poland, the
first country to implement a bold reform program, is on the verge of
resuming active cooperation with the IMF. Hungary has attracted
widespread foreign investment as a result of its structural reforms
and has dramatically improved its creditworthiness. The Czech and
Slovak Federal Republic has put in place a macroeconomic policy
framework and made progress on privatization through its innovative
voucher system. And both Bulgaria and Albania have solid
stabilization programs.
We have been especially heartened by the momentum of reform in
the Baltic states, and we welcome the recent adoption of IMFsupported programs by Estonia and Latvia. Ukraine and Kazakhstan
have also made a commitment to reform, but more work needs to be
done to put in place comprehensive economic programs.
We are pleased that the IMF and Russia are moving forward under
a three-phased strategy of cooperation.
N B - 1 984
2
We have been impressed by President Yeltsin's and Prime
Minister Gaydar's recognition that bold reforms, rather than
gradualism, are the course to building a strong private sector. In
these circumstances, the $1 billion first credit tranche released by
the IMF to Russia was merited.
We strongly urge Russia and the IMF to intensify discussions on
economic reform in order to reach the second phase of cooperation ——
a full IMF program —— as soon as possible. In this connection,
Russia will need to establish a positive record under the first
credit tranche arrangement before a full IMF program can be
implemented, or the currency stabilization fund could then qo into
effect.
Moreover, fiscal and monetary policies in Russia must be
tightened to avoid hyperinflation. Expenditures must be brought
firmly under control to reduce the role of the state and deficit
financing. Inter—enterprise arrears must be addressed, and workable
arrangements among members of the ruble area must be developed.
Furthermore, structural reform must be intensified to achieve
the benefits of a strong private sector and macroeconomic
stabilization. In this connection, we welcome the recent
announcement of energy price increases and of the privatization
plans to be shortly implemented. The World Bank will play a key
role in fostering structural reform in Russia and the recent
agreement on the $600 million import rehabilitation loan is an
important first step.
These actions should establish a solid basis for promoting
sustained growth and strengthening Russia's relations with the
international financial community.
I
recognize that it is much easier to advocate tough policy
prescriptions than it is for those struggling with the upheavals and
fr^^-^sh-ips of transformation to implement them. But history shows
that these policies are the most likely to succeed. A good start
has been made on this path. All of us must redouble our efforts to
ensure success. Thank you.
TEXT AS PREPARED FOR DELIVERY
STATEMENT OF
SECRETARY OF THE TREASURY
THE HONORABLE NICHOLAS F. BRADY
MEETING OF THE DEVELOPMENT COMMITTEE
OF THE WORLD BANK AND
THE INTERNATIONAL MONETARY FUND
WASHINGTON, D.C.
SEPTEMBER 21. 1992
Mr. Chairman, fellow Governors, and distinguished
guests. It is a pleasure for me to welcome the
Development Committee to Washington and to participate in its
important discussions.
Today's difficult economic environment requires that we work
together to encourage a full range of capital flows to developing
countries to advance our shared objective of reducing poverty and
promoting sustainable development.
The establishment of a sound economic policy framework is
fundamental to investor confidence and investment flows. We
therefore welcome the demonstrated commitment of a growing number
of developing countries to reforms supported by the World Bank
and the IMF. These reforms, in some cases supplemented by
arrangements on debt and debt service reduction, are having a
positive impact in efficiently mobilizing financial resources.
The underlying message is clear: the efforts of the Bretton
Woods Institutions to promote hospitable, open environments which
attract private-source flows should also be maintained.
The international debt strategy has been a success. In
Latin America, the combination of market-oriented reforms and the
reduction of bank debt has boosted investor confidence,
stimulated substantial private capital flows, and improved growth
prospects. Bilateral creditors are also providing significant
debt relief, grants and other concessional flows for the poorest
countries.
NB-1985
/
;
2
Trade and investment liberalization is a key means for
enhancing private resource transfers to developing countries and
accelerating growth. Accordingly, the U.S. Administration
remains strongly committed to a successful conclusion of the
Uruguay Round and continuing reductions of tariff and non-tariff
barriers for both goods and services.
The United States will continue working to achieve an IDA-10
replenishment which promotes sustainable development in the
Bank's poorest and least creditworthy members.
Poverty
reduction, environmental protection, and the promotion of a sound
economic environment must remain at the forefront of the IDA
agenda. Increased financial support for IDA from certain higher
income developing countries should be encouraged.
Strengthened efforts should be made to concentrate
concessional resources on the poorest countries — particularly
those committed to appropriate macroeconomic policies and
effective strategies for poverty reduction. Excessive and
unproductive military expenditure should be discouraged.
Emphasis must be on improved lending quality and
effectiveness. In this context, we welcome the establishment by
the World Bank of a Task Force to look at the problem of project
implementation and the development quality of the loan portfolio.
We look forward to considering Management's strategy for
addressing this critical issue.
I
would also like to call specific attention to the tragic
drought now devastating southern Africa. This clearly merits the
priority attention of the donor community. The United States is
responding quickly and substantially to this extraordinary
humanitarian crisis. We urge other donors to do the same.
Liberalized investment regimes can provide a major economic
stimulus. Competition for available investment capital is likely
to remain intense. Investors will go where the policy and
regulatory environment is fair and stable. We are encouraged
therefore by the increased attention developing countries are
placing on open investment regimes to encourage foreign and
domestic investors and we welcome the efforts of the World Bank
and the Inter-American Bank to promote investment reforms.
Environment and development must be approached as an
integrated whole. The World Bank must play an important role in
addressing these concerns in its projects and programs. It must
also move to strengthen its own internal policies and procedures
to protect the environment especially in energy efficiency and
water resources.
3
In closing, Mr. Chairman, I would like to extend my strong
support for the efforts of the World Bank Group and the IMF to
support the efforts of the former Soviet Republics in their
transition to market economies. I would also like to thank you,
Mr. Chairman, for your highly professional stewardship of the
Committee over the last two years.
Pool Report # 1
Friday Sept.
,
i?
,1992
location: Treasury Department Conference Room across from
Treasury Secretary Nicholas Brady's office (3rd floor)
Event: U.S.-Japan bilateral meeting ahead of Saturday G-7
Japanese Finance Minister Tsutomu Hata, a translator and press
officer were in the room, admiring the fireplace, joking about
how old the wood must be.
Brady enters the room, smiling, extends his hand to shake hands
with Hata and says: Hi how are you? Good to see you again. When
did you get here?
Hata, via a translator, smiled back, shook hands and said "about
40 minutes ago." Everybody laughed.
Brady: "Well, we're very grateful you'd come meet with us ahead
of our meetings tomorrow. It's very helpful to have this kind of
consultation."
Reporter: Are you going to discuss intervention?
Brady just smiled and remained silent as U.S. press officers
shouted that there could be no questions during the photo op.
Hata, said, according to Japanese reporter; "We will have a lot
of discussions about the world economic situation." He laughed,
waved off the question, joking to the reporters-something like:
"Leave me out of this question, .ion't ask me."
Brauy, then laughed (and since Hata was speaking in Japanese
without being translated) said, "Get it?" to the reporters.
Reporters were escorted out of the room, other officials came in
the room— including Olin Wethington.
-
0
-
STATEMENT BY OLIN L. WETHINGTON
GOVERNOR FOR THE UNITED STATES OF AMERICA
IDB AND IIC BOARDS OF GOVERNORS
SEPTEMBER 19, 1992
I am extremely pleased to be here today for a discussion of the
current activities of the IDB. This also is an important
opportunity for all of us to share our thinking about the future
of the IDB Bank Group and its role in supporting the economic and
social progress of its borrowing members.
When we met six months ago in Santo Domingo we had an opportunity
to review the progress of the Bank and its borrowing members
dating back to the time of our decision to fund a $26.5 billion
capital replenishment in 1989.
We noted the dramatic advances in the region and the
contributions of the Bank in fostering that progress. Again, I
want to congratulate the President of the Bank, the Management
and the Board of Directors for the success they have achieved in
implementing the ambitious IDB-7 mandate.
REVIEW OF THE PROGRAMS OF THE IDB
Since 1989, under the able leadership of Enrique Iglesias, the
IDB experienced the following important achievements:
The Bank has been reorganized and operates far more
effectively. Country economic strategies help shape the
loan pipeline and project teams from different departments
now ensure that projects are consistent with overall country
strategies.
—
The IDB has fortified its environmental protection efforts.
Country programming now incorporates evaluation of the
environmental aspects of lending projects, a difficult but
important first step in creating economically sustainable
development.
—
Sector lending has been an integral part of the Bank's
economic approach to help speed the pace of reform.
—
The Bank is playing a central role in supporting debt
reduction under both the Brady Plan and under the Enterprise
for the Americas Initiative. While there is still work to
N B - 19 8 6
-
2-
be done in some countries, we are putting Latin America*s
debt crisis behind us.
Investment reform has become a central policy focus.
IDB financing is helping privatize state-run enterprises.
ADVANCES IN THE LATIN AMERICAN AND CARIBBEAN REGION
We want recognize once again all those who helped foster the
economic advances of Latin American and Caribbean governments in
the face of the formidable challenges of the 1980*s. Those
advances have been guided by a sense of vision and determination
among Latin leaders, assisted by the work of the IDB. Today,
while much remains to be accomplished, many countries are well
along in implementing major economic reforms. Hope and
opportunity continue to grow. As confidence in the region
rebounds, capital is flowing into Latin America and the Caribbean
with renewed vigor: US$40 billion in 1991 as compared to US$13
billion in 1990 and US$4 billion in 1989.
As I indicated, the debt crisis is steadily being put behind us,
particularly with the prospect of major new Brady Plan commercial
debt agreements on the near horizon. In some countries,
bilateral debt burdens are being further reduced by the debt
reduction component of President Bush*s Enterprise for the
Americas Initiative.
Many countries are making dramatic strides in strengthening the
prospects for growth through liberalized trade and investment
regimes. Clearly, the IDB's Investment Sector Loan Program is
making a major contribution to improve the investment climate for
both domestic and foreign participants. The Multilateral
Investment Fund promises to advance the trend toward
liberalization significantly. Moreover, trade framework
agreements under the Enterprise Initiative hold great promise for
a dynamic trading region which can complement a liberalized
global trading environment. The recent conclusion of a North
American Free Trade Agreement is a major advance which can have
benefits throughout the region by accelerating economic
integration and growth.
While there are difficult economic and social problems yet to be
addressed in the region, on balance, economic advances have been
sound — growth is rebounding; inflation is subsiding; markets
are opening; and trade is flourishing.
THE FUTURE ROLE OF THE IDB
As the United States noted when the IDB Governors met in Santo
Domingo, we remain favorably disposed to increasing the resources
-3of the Bank. We firmly believe that the basic challenge for the
Bank is support for a market oriented economic approach driven by
a growing and dynamic private sector. At the same time, we
recognize that the challenges facing the region are different
from those that shaped the Seventh Replenishment.
As the economies of the region move toward recovery and growth,
the Bank must help ensure that the benefits of economic growth
are shared by all segments of society throughout the Latin
American and Caribbean Region. History shows that the
alternative to broadly distributed economic opportunity is a
disaffected economic underclass which can undermine political
stability and economic advancement.
In our view the Bank has a critical role to play in ensuring
broad based social and economic advancement in the region. As we
head into the next century we believe the priority areas of
activity for the Bank must be:
o
Maintenance of Sound Economic Conditions and Policies;
o
Economic Growth with Broad Social Participation, which
includes:
o
o
o
Sustainable Poverty Alleviation and Social
Infrastructure,
Improvement of Public Administration and
Governance,
Business Opportunities for the Poor;
o
Environmental Protection; and,
o
Increased Generation of Private Domestic Savings and
Capital Flows.
I would like to discuss in some detail our views as we consider
shifting the focus of the Bank and how the Bank might go about
achieving its social and development objectives in the years
ahead. Broadly speaking, I would first note that several key
requirements must guide our activities if success is to be
assured in the years ahead. These include:
o
Maintenance of complementary roles between the IDB and
other IFIs, particularly the World Bank;
o
Country programs linked to maintenance of sound policy
environment monitored through Board approval of country
economic and social memoranda;
o
Emphasis on careful project design with focus on
sustainability, implementation and evaluation;
-4o
Targeted and tightly defined use of concessional
resources;
o
Reduced and well focused non-project lending to advance
governance, and traditional economic reform or debt
enhancements for the poorer countries.
o
Tighter integration and coordination of IDB programs to
support private sector development to include the Bank,
IIC and the Multilateral Investment Fund; and,
o
Increased emphasis on private flows of capital and
reduced dependence on official capital as countries
reform and advance;
Economic Opportunity and Social Equity Lending
As I have indicated already, we believe the most difficult and
the primary challenge facing the Bank in the decades ahead is to
ensure that economic opportunity and government services are
broadly distributed. The Bank must help lead in attacking the
base causes of poverty and a structural economic underclass if
democracy and economic growth are to be sustained. Government
services and opportunities for social and economic advancement
must be made available to the entire population of member
countries.
We believe that fully 50 percent of the bank's lending should
support economic opportunity, social sector development and
governance objectives in all borrowing member countries. Broadly
speaking, we would outline the following mandate for the Bank in
these areas; the Bank should:
—
stimulate entrepreneurs and employment generating industry,
especially in poor population centers.
—
stimulate savings through self-sustaining social investment
funds, such as retirement and workers compensation.
—
support domestic capital formation and financial
intermediation.
—
develop productive employment through small and medium scale
enterprise and agriculture; and where required provide
appropriate alternatives to illicit drug production.
—
accelerate future economic growth and competitiveness
through investment in education, particularly basic
education.
develop worker skills through retraining to match needs of
revitalized private sector.
-5improve economic efficiency and relieve rural poverty
through the expansion of basic agriculture.
—
ensure economically sustainable development through an
ambitious program of environmental protection.
—
improve work force and living standards through family
planning and primary health, with an emphasis on
maternal/chiId health care.
—
improve living standards and economic efficiency through
water supply, sanitation and upgrading of housing targeted
to urban poor.
—
expand economic dynamism through attention to role of women
in economic development.
I would add a strong note of caution. In efforts to reduce
poverty, poorly designed non-sustainable projects can raise
countries' debt service obligations with little or no lasting
benefit. Therefore, Bank lending to reduce poverty must include
only projects which have an identified priority in a Country
Lending Strategy. The project should be financed only if
institutional arrangements and policies needed for program
success are in place. In addition, the program must be
financially sustainable. Finally, and perhaps most importantly,
the activity must be consistent with the needs of those who are
expected to benefit from it.
Public participation is an essential component of Bank activities
to address social needs. The Bank must put in place mechanisms
to work closely with affected populations in the selection,
design, execution and evaluation of its programs. We believe
that the role of the Bank's field offices in borrowing countries
must be examined carefully in light of this requirement. The
offices must be restructured and be made fully relevant to the
Bank's lending and development activities, with a strong mandate
on close collaboration with local groups and affected populations
and project identification, execution and evaluation.
Traditional Infrastructure Projects
Traditional infrastructure also remains a priority for Bank
lending. We continue to note that in many Latin American and
Caribbean economies, the lack of traditional infrastructure
remains a basic constraint to economic development perpetuating
the conditions of poverty. There is a strong need for
transportation, communication and energy. It is our view that
the Bank must continue to play a well-defined role in this area
and we suggest that approximately 30 percent of its lending be
directed accordingly.
-
6-
We believe the Bank's infrastructure lending should focus on the
poorer economies which still lack access to other sources of
capital. As noted earlier, many countries have reformed and
opened up their economies. Capital, which had fled the country,
is now returning. In addition, several countries, such as
Mexico, Chile and Venezuela, have recently tapped international
credit markets. As these economies grow, private sources of
funding will play an increasingly larger role in financing their
development, particularly for large, traditional infrastructure
projects.
Policy-Based Lending
Under IDB-7, the Bank is providing substantial levels of policybased lending to support macroeconomic adjustment and debt
reduction packages. Many countries in the region have
successfully utilized financing under this program aggressively
to open up their previously protected economies and to reduce
debt burdens under the Brady Plan. In many countries, where
capital has begun to flow from other sources, the IFIs can return
to their primary development task of poverty alleviation and
investment in social sectors and infrastructure.
However, over the next several years, we envision that the IDB
will still be required to provide some level of policy-based
lending in support of adjustment and debt agreements. This is
especially true for smaller countries which are still working to
complete their economic restructuring. In addition, there may be
some need for governance-oriented policy based lending to help
countries enact regulatory and administrative reforms, such as
land titling measures, to help spread the benefits of economic
growth to all segments of society. Accordingly, in our view
policy-based lending should remain at a level not to exceed 15
percent of lending.
Programs in Support of the Private Sector
The Bank Group currently has numerous programs to support private
sector development with each program providing an essential
development service to the region. Currently, these include the
IDB's programs, principally small projects and global credit
loans, the activities of the Inter American Investment
Corporation and soon, the Multilateral Investment Fund.
As the private sector increasingly becomes a force behind
economic growth, we believe it is essential to sharply improve
efficiency and effectiveness of the Bank Group's private sector
programs. The Bank group must be in a position to be provide an
integrated, flexible and dynamic response for a full range of
private sector requirements, including small scale entrepreneurs
up through privatizing state owned industries. These activities
-7 -
must be reinforced by a Bank presence to maintain an enabling
macroeconomic and structural policy environment.
To accomplish this objective, we are proposing a strong emphasis
on the activities of the IIC within the Bank Group, recognizing
its private sector and entrepreneurial orientation. We propose
that the programs of the IDB, the IIC and the MIF be implemented
by a fully integrated management and operations team. Our
objective is to ensure that the Bank's private sector activities
are able to mobilize the appropriate mix of expertise and funds.
We also consider it appropriate that future capital contributions
for the IIC be provided by the Bank itself in addition to the
Bank acting as financial market intermediary for IIC operations.
The activities of the Multilateral Investment Fund also must
support the investment activities of the Bank Group in a tightly
integrated manner. It is clear to us that MIF support for policy
reforms, worker training and development of small scale
entrepreneurs should complement bank activities, rather than
substitute for them. Grants and concessional loans provided by
the MIF should selectively augment IIC and IDB resources, and
only in cases where added concessionality is clearly warranted.
In addition, because MIF funds are scarce, they should be used to
address clearly identified investment constraints where there is
a high probability for successful resolution of the problem.
Lending to Privatized SOEs
I would like to expand a bit further on our thinking regarding
the Bank's role in privatization. In many cases, state-owned
enterprises (SOEs) throughout Latin America and the Caribbean are
poised to move to the private sector. However, the absence of a
credit history or relationship with private lenders can be a
strong disincentive to a company's taking the final step to
becoming private.
We believe that the Bank Group should have the tools to fully
support privatization. As the Bank does now, it should provide
resources to a country to devise a cohesive national
privatization plan. Once a specific SOE is targeted for
privatization, the Bank can support financial, managerial and
marketing expertise to determine whether a company can be
competitive. These services can be provided through the OC or
the MIF on a reimbursable basis.
If a company does not have realistic prospects for being fully
competitive, it should be closed to avoid further drains on
fragile national fiscal plans. In such cases the MIF could be
available to help train displaced workers.
-
8-
When a company has a potential to be profitable, the Bank can
help to restructure it for entry into the competitive private
sector. For some companies, a degree of transitional financing
may be needed until they can establish a record which would allow
them to tap private sources of finance on their own.
Without endorsing any specific proposal, we think the Bank might
usefully explore whether in selected cases, the IDB Ordinary
Capital window might also be used to lend to eligible companies
during a limited transitional period. This might include the
possibility of lending without a sovereign guarantee. We offer
this suggestion in the expectation that it could be of interest
to some Governors and, if so, we would be willing to examine the
proposal further.
I would add a strong cautionary note. If we were to incorporate
such a capability into our lending programs, I think it would be
necessary to define the program tightly. We would want to
sharply limit the eligibility requirements and time frame for
available financing. I would also expect we would have to limit
the program to a small percentage of IDB's annual lending and
total country exposure. Finally, we might also recommend that
from the outset, any such IDB lending would require the presence
of private cofinancing. This would ensure that our basic purpose
of moving the company toward its objective of relying fully on
private commercial finance is being realized.
Facilitating the Flow of Commercial Loans
The Bank also has an essential role in helping countries in the
region attract private commercial lenders. Although we have seen
some recent progress, in general commercial lenders have been
slow to return to full, voluntary participation in providing
capital to the region. As the level of non-project lending
tapers off, a catalytic bank role in generating private flows
becomes more compelling.
We urge the Bank to continue to press policies which attract
capital flows to the region, including foreign direct and
portfolio investment, trade receipts and the return of flight
capital. The Bank can also continue to work aggressively to
attract parallel and independent private financing to Bank
operations. This can be especially important for newly
privatized SOEs.
As many of you are aware, we continue to strongly oppose current
cofinancing practices by some other MDBS which share preferred
creditor status with commercial lenders, including Complementary
Financing Scheme arrangements and the use of guarantees. We
believe that those types of practices only serve to weaken the
preferred creditor status of MDBs and inhibit the emergence of
fully mature relations between borrowers and lenders.
-9We do however, see room for a more aggressive Bank role in
working to associate voluntary parallel commercial finance and
equity investment with Bank operations. We believe that in all
Bank operations and especially with the fundamentally
restructured private sector approach, much greater attention
should be given to attracting private financing to Bank supported
operations.
The Need for Concessional Resources —
FSO II
Despite exceptional economic strides in recent years, several
countries in the region have not made the desired economic
advances. These countries are still not in a position to accept
financing on ordinary capital terms. Therefore, to support
needed macroeconomic reforms and make the necessary investments
in health, education, and infrastructure we recognize that the
Bank will have to continue providing lending on concessional
terms to the poorest borrowers.
We are in an era, however, when the demand for increasingly
scarce concessional funds is expanding throughout all regions of
the world.
We believe that some level of additional donor contributions to
the FSO will be needed over the next several years. However, we
believe that the resource base is already present in the IDB to
foster a creative “approach which can ensure a substantial level
of concessional lending. We are proposing to restructure the^
Fund for Special Operations (FSO), moving to a second generation
of operations, or FSO II.
In restructuring the FSO, we propose to move away from an FSO
which serves as a direct lender to an FSO which provides interest
support on OC loans. This is similar to the current activities
of the Intermediate Financing Facility. In doing so, we
recognize it may be difficult to meet fully existing FSO
maturities. In addition, the FSO II would continue to provide
technical assistance on a grant or loan basis.
According to our initial analysis, we believe we can provide a
significant amount of concessional lending and technical
assistance over the next four years with contributions from
donors, net income from the OC combined with existing net income
from the FSO itself. In addition, when existing FSO reflows
become available in 1998 and beyond, we propose that they can be
redeployed to continue the buy-down program, as needed. We
recognize that some of these changes may require us to revisit
the IDB Charter.
-
10 -
The Future Financial Structure of the Bank
Let me now turn to the future financial structure of the Bank.
All of the above represents an extremely ambitious mandate for
the Bank as it approaches the 21st century. In reviewing the
program priorities and organization of the IDB, we see a need to
use this capital increase, the Eighth, to position the bank to
meet the needs of its borrowers for a period of time well into
the future.
Over the past four years, Bank administration has improved
dramatically and rules of procedure and decision-making by the
Board of Directors have been strengthened. We believe these
policy changes must remain in effect.
Bank lending has grown dramatically to address the challenges
facing the region. The Bank has processed large amounts of fast
disbursing non-project lending which was required along with an
increased level of project lending. In fact, when in 1989
Governors agreed to a $26.5 billion increase with a $22.5 billion
four year lending program, they in effect agreed to a subsequent
capital increase to begin in 1994.
Most of us recognize that the current trends in lending growth
cannot be sustained at the same pace. Now that the Bank has
approached an annual commitment level of $7 billion it must begin
to tailor its annual lending program to meet the shifting needs
of its borrowers. The Bank recognizes that lending targets and
country lending allocations simply are not an appropriate basis
on which to plan the lending activities of the Bank Group.
We are suggesting that the Bank be managed on the basis of a
sustainable lending level concept. This would mean that for the
Eight Replenishment, the Bank would be provided a level of
capital which can sustain its lending operations for an
indefinite period. We are prepared to explore a healthy capital
increase to accommodate the Bank's lending requirements. In
addition, in pursuit of our objective to integrate the managerial
and financial activities of the IIC, we are prepared to consider
a capital increase which would allow the Bank sufficient capacity
to act as a market intermediary for the IIC, as well.
We believe that with the financial and operational maturation of
the Bank, capital subscriptions for the Eighth Increase should be
paid in over a five year period. As I indicated, the Eighth
Increase would be structured in a way to fund Bank operations for
a period significantly beyond the five year paid-in capital
period. This is the current practice in other MDBs.
Subscriptions for the restructured FSO may have to be paid in
over four years.
-li
lt will also be necessary, in the context of the Eighth
Replenishment to consider the mix of lending among the various
country groups. As I indicated earlier, we believe strongly that
the time for binding country allocations and targets has passed.
Instead the Bank must build its portfolio on the basis of
prudential considerations with primary attention to its role as a
development lender.
As a development institution, the Banks resources increasingly
must be allocated to those countries which do not have access to
alternative sources of capital. In addition, we believe that
consideration of graduation for some countries is overdue. As
country per capita GDP advances, the Bank must graduate countries
from concessional resources and ordinary capital as appropriate.
Finally, the Bank must continue its efforts to achieve the
administrative and operational efficiencies needed for a modern,
tightly integrated financial institution. We are seeking to use
the ample resources of the Bank in an ambitious program of
financial engineering.
With a greater emphasis on social investment and additional
responsibilities for Bank capital, there is a need to protect the
Bank's income levels. It is increasingly urgent, therefore, that
unnecessary administrative expenditure be cut from operating
expenses. Headquarters operations and field offices must be
examined from the ground up. Where programs are redundant or of
marginal value — they must be cut or eliminated.
Environmental Programs of the Bank
As the IDB continues to move
effort for Latin America and
adapting development lending
be sustained over the longer
to the forefront of the development
the Caribbean, the Bank must lead in
to ensure that economic growth can
term.
Public participation is at the heart of environmental awareness.
We believe the Bank can be a dynamic leader in this area. We
encourage early and continuing dialogue between the Bank and
affected populations in borrowing countries.
Urgent areas for attention include recruitment and training of
qualified staff, a stronger Bank role and policies in protecting
forests, energy efficiency and conservation on the demand side
and promotion of renewables, and development of integrated water
resource policies.
CONCLUSION
In conclusion, I realize that we have laid out an extremely
ambitious program that will require thoughtful debate among
Governors. We have set our sights high to assist in the
-
12 -
formation of a mature lending institution that can respond to the
changing needs of the region.
^PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt) f ; jj/j/ashington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
September 21, 1992
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $10,246 million of 13-week bills to be issued
September 24, 1992 and to mature December 24, 1992 were
accepted today (CUSIP: 912794ZW7).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2. 90%
2. 92%
2. 91%
Investment
Rate
2.96%
2.98%
2.97%
Price
99.267
99.262
99.264
Tenders at the high discount rate were allotted 13
The investment rate is the equivalent coupon-issue
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
27,725
36,746,420
9,690
38,935
328,325
32,220
2,273,945
20,280
8,175
24,700
20,165
1,036,590
727.650
$41,294,820
Accepted
27,725
8,784,620
9,690
38,935
110,825
30,480
136,025
10,280
8,175
24,700
20,165
317,140
727.650
$10,246,410
Type
Competitive
Noncompetitive
Subtotal, Public
$37,427,000
1.247.310
$38,674,310
$6,378,590
1.247.310
$7,625,900
2,153,810
2,153,810
466.700
$41,294,820
466.700
$10,246,410
Federal Reserve
Foreign Official
Institutions
TOTALS
N B - 1987
Tenders for $10,268 million of 26-week bills to be issued
September 24, 1992 and to mature March 25, 1993 were
accepted today (CUSIP: 912794B60).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
LOW
High
Average
Discount
Rate
2. 90%
2. 93%
2. 93%
Investment
Rate
2.98%
3.01%
3.01%
Price
98.534
98.519
98.519
Tenders at the high discount rate were allotted 50
The investment rate is the equivalent coupon-issue
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
26,660
29,962,365
7,070
30,015
27,195
37,020
1,698,605
15,100
6,430
26,260
10,290
614,005
648.275
$33,109,290
Accepted
26,660
9,225,755
7,070
30,015
27,095
36,520
48,605
12,600
6,430
26,260
10,290
162,505
648.275
$10,268,080
Type
Competitive
Noncompetitive
Subtotal, Public
$29,290,380
1.042.410
$30,332,790
$6,449,170
1.042.410
$7,491,580
2,000,000
2,000,000
776.500
$33,109,290
776.500
$10,268,080
Federal Reserve
Foreign Official
Institutions
TOTALS
NB-1988
PREPARED FOR DELIVERY
September 22, 1992
Contact:
Anne Kelly Williams
202-622-2960
-REMARKS BY
DEPUTY SECRETARY OF THE TREASURY JOHN E. ROBSON
FINANCIAL ACCOUNTING STANDARDS BOARD
NORWALK, CONNECTICUT
SEPTEMBER 22, 1992
Good morning and thanks to the Financial Accounting
Standards Board for inviting me here to share a few thoughts with
you. I have genuinely looked forward to this trip because of the
importance of the work you do.
I
should begin by emphasizing that, while this is my first
trip to your offices, FASB and I are not strangers. For, as a
former corporate lawyer, CEO of a large publicly held
multinational company, dean of a business school where, of
course, accounting was a required subject, director of several
publicly held corporations, and now a U.S. Treasury official,
your rulings and proposals have criss-crossed my business and
professional life on numerous occasions.
But I must confess that in my mind's-eye I have had an image
of FASB working in a Delphic setting and periodically issuing its
solemn pronouncements which thunder down on a submissive public
to be instantly and faithfully implemented like one of the
commandments. So it is comforting to find myself before a group
of men and women who seem to look and sound pretty much like the
rest of us.
But this new-found sense of comfort does not lead me to
underestimate the reach or potential impact of what you do here
at FASB. And, while FASB may not be a household word amongst the
general public, your decisions affect the jobs and lives of
millions of men and women. Because FASB's decisions about how
something must be accounted for, influence their employers'
investment in plant, equipment and research, how their pensions
are established and funded, how their employers are regulated by
government, whether it is or is not a good idea to source a
component from abroad or build an overseas factory, or make a
loan, or grant a stock option, or whether a business files for
bankruptcy.
NB-1989
2
And because of the potential real-world influence of FASB's
decisions, I thought it would be worthwhile to spend a few
minutes sketching what I believe will be the profile of the
future economy so that we may see more clearly the context in
which you will be making those decisions.
There is little question that our domestic economic
environment is already undergoing change. Many of the factors
now at work have contributed to the recent sluggish U.S. economy,
such as the cutback in defense spending following our victory in
the Cold War, the paydown of accumulated debt by business and
consumers, and a weakened financial system sobered by the S&L and
commercial real estate market collapses and cautious to lend.
But these are by and large transitory factors that time and the
inherent adaptability of the American economy will overcome.
But beyond these often painful transitional factors, there
are forces at work that are creating profound and durable
alterations that will define the shape and set the tone for the
economies of the world and the lives of the people in them
through the next century. And what will be the characteristics
of the 21st Century economy?
Foremost, it will be a thoroughly interdependent and
integrated global marketplace. There will be no place to hide
from the competitive forces at work even in geographically
distant places. There will be no economic Fortress America — or
for that matter — any economic fortress any place. If you need
persuading on this point just consider that since 1986 exports
have provided nearly a third of America's economic growth, and
the fact that our major export markets — Canada, Japan and
Europe — have recently been suffering economic downturns is a
large contributor to our own economic woes. And if you need
further evidence of global economic inter-connectedness, look at
what has been happening in the past few weeks in the world
currency markets, driven by the interaction of one or another of
the European economies upon the others.
Another feature of the 21st Century economy will be mobility
— mobility of capital, mobility of workers, mobility of
productive assets, mobility of supply sources, and mobility of
technical knowledge. Already we are witnessing swift and massive
capital flows as money seeks the highest return.
A companion of that mobility will be what we might describe
as "site indifference," that is the location of economic
transactions will be solely driven by economic considerations.
Already we see many products that bear a "Made in America" label
and have been invented here, designed elsewhere, contain
substantial components that were produced abroad, may be
assembled anywhere, and marketed in both the U.S. and foreign
markets•
3
I
believe we will see business organizations, by necessity,
become more flexible, even protean, as they configure and
reconfigure themselves to respond to global competitive pressures
and to take advantage of new opportunities to establish or expand
market positions, reduce costs, or capitalize on new technology.
Thus I see the restructuring of businesses as a continuous
process essential“to growth and competitive survival. And I also
see a trend towards smaller, more flexible business units.
One very positive feature of the 21st Century economy will
be the emergence as new players in the global economy of
somewhere between three and four billion people who have
historically been outside the economic loop. I refer to the
peoples of China, India, Latin America, the former Soviet Union,
Eastern Europe, and parts of the Pacific. Think of the exciting
opportunities presented by the new economic role of this
multitude, whether you are making, selling, or buying a product
or service.
I
also believe that the future economic environment -- where
the hallmark will be continuous, high velocity change — will
have profound implications for both employers and employees. I
expect the complete disappearance, if it has not already largely
vanished, of the time-honored reciprocal exchange of employee
loyalty for lifetime employment. Employers will not hesitate to
downsize, lay off, close or relocate facilities, reorganize, and
take whatever actions are needed to become more efficient and
competitive. Lean and mean it is. And there isn’t much patience
with inefficiency.
On the employee side, loyalty has eroded and the traditional
notion of a linear career, that is a working life that begins
with a new first job and ends with a retirement party and a gold
watch, is pretty much a relic of the past. Working lives will
increasingly become lives of rapid change, a succession of
organizational ties, with the need for the continuing acquisition
of new skills and knowledge.
A H of this raises complicated issues of how individuals
prepare for lives of change in the workplace and how companies
vill attract, compensate, motivate and retain a nomadic
workforce, and, at the same time, implement the organizational
characteristics essential to maintain competitive superiority in
the 21st Century economy: flexibility; efficiency;
responsiveness; mobility; and creativity.
This will be a challenging environment in which to operate.
But I believe that the American people and our business
organizations are well positioned to succeed in this new economic
environment and continue America's economic preeminence. I say
this based not on blind patriotism but on some hard facts —
facts which show America to be:
4
The world's largest and strongest economy with the
highest standard of living;
—
The most productive economy;
—
The world's leading exporter;
The most prolific in the development of high technology
products and scientific advancement;
And to have a history of adaptability to change and
creative entreprenuerism that enables us to meet these
challenges and conquer them.
Indeed, I think that if we have difficultly in winning the
peace^— and by that I mean the contest for future economic
preeminence — it will be because of self-inflicted wounds.
Those wounds can be inflicted by our failure to do some things we
should do to assure that we seize the opportunities of the future
— such as improve our educational system, pursue open and nonrestrictive trade policies, cut capital gains taxes, and revamp
our tax system so that we stop taxing corporate profits twice.
But there are other ways in which we can wound our ability to
meet the economic challenges of the 21st Century. And one of
those is if we continue to bury ourselves in a tangle of
regulation that stunts economic growth and discourages
entrepreneurism. That is where FASB comes into the picture.
You are professionals. You have responsibilities to carry
out your professional duties with integrity and skill. But,
consistent with that, I cannot imagine that everyone in this room
does not also want to do all within his or her power to help this
country succeed in the rough and tumble economic environment of
the 21st Century. So it seems to me that FASB's approach to the
issues that come before it ought to take into account the value
of contributing to America's economic success. And by that I
mean, particularly in the frequent situations where there is some
decisional latitude, avoiding actions that will make it more
difficult for American enterprises to attract the talent
necessary to compete effectively, or to attain the mobility,
flexibility, efficiency, and responsiveness essential to their
success.
Let me give you an example. That is the matter of the
accounting treatment for stock options.
As it turns out, I know something about stock options. As a
corporate executive and as a director of several firms, I have
held them, exercised them, and granted them broadly to employees.
I have watched stock options perform a very important role as an
incentive for the attraction, retention and motivation of first
rate talent. I believe in stock options and I think that they
5
will perform an increasingly important role in compensating and
attracting the kinds of people who are going to be critical to
the future economic success of American business.
We all know that there is a debate underway as to whether
there should be a change in the accounting treatment of stock
options — and-specif itsally-whether-they must be reflected in a
firm's income statement at some point in the chain of grant,
vesting, and exercise, in ways different from the treatment which
they now receive. The issues here are complex and open to honest
dispute. On the one hand, the argument is made that, since stock
options have some value, it is obligatory from the standpoint of
sound accounting that this value be reflected in the income
statement•
On the other hand, the task of determining a value for these
options is a highly speculative one, since the value is entirely
based on unknown future economic performance. Now, I don't think
it would be particularly useful for me to debate with you here
the question of whether stock options have value, or the question
of, if they do, how much. But even if, as a technical matter,
stock options do have value, and even if that value could in some
way be credibly computed, it's very clear to me that if the
accounting approach that requires option value to be run through
the income statement is adopted, the use of stock options will be
discouraged.
And it is also worth pointing out that, under current
regulatory treatment, everyone is completely aware of the
presence and the economic potential for the optionees of stock
options in any public company since they are required to be set
out in great detail in the proxy statements. No one is ignorant.
No one is deceived.
So my question to you is this: in these circumstances, why
would you want to exercise your professional discretion to
discourage the use of a valuable compensatory incentive that has
shown particular importance in the high tech arena and in startup
businesses in biotechnology and other similar areas. These are
exactly the kind of businesses that we want to foster in this
country if we are going to maintain a strong, competitive
position in a global economy of the future.
So it seems to me that, in dealing with this problem, you
would want to take every possible step to enhance stock options
and promote their use, and thereby advance entrepreneurism and
the competitive prospects of American enterprises. Here, it
seems to me, technical perfection ought to yield to
considerations of fostering economic growth, jobs, and the
welfare of the American people. And that is why I have strongly
argued, and will continue to argue, for leaving the rules
affecting the accounting for stock options as they are.
6
Let me now turn to a second topic before you — that is the
matter of market value accounting, as it applies financial
institutions.
Here again is an example of potential divergence between
accounting rules and the practicalities and economic consequences
in the real world of finance.
Some accountants — and our friends at the Securities and
Exchange Commission — seem to love market value accounting.
Indeed, the SEC appears to be on a mission to impose its
regulatory will on the banks' securities holdings without waiting
for resolution by the accounting community or anyone else.
However, in a recent Peat Marwick study commissioned by the
Association of Reserve City Bankers, users of financial
statements showed only mild interest in market value data, were
skeptical about its usefulness and comparability, and evinced
much more interest in data on credit quality and problem assets.
In any event, the advocates of market value accounting
apparently believe that accounting for assets at historic values
always distorts the economic picture of a firm, and that
disclosure of current asset values always provides creditors and
investors with a truer and more relevant evaluation of the
financial health of an institution and the success of its
investment strategy.
But the advocates of market value accounting fail to
recognize the distortions that can result from partial market
value accounting — that is applying market values only to
certain assets and ignoring liabilities. And with respect to a
bank's securities portfolio, they fail to see that in the real
world there is a real difference between investment and trading
accounts held by commercial banks — a difference we think FASB's
exposure draft would eliminate with harmful results for the
lending environment.
Under FASB's exposure draft historic cost accounting could
be used only for those securities for which the investor —
categorically and with no exceptions — has the "positive intent
and ability to hold to maturity." Now, how often can anv
investor truthfully say he has a "positive intent and ability" to
hold an investment until maturity? Institutions — like
individuals — often make genuine investment decisions with no
intention of future trading, but with the realization that in a
dynamic economy it is quite possible that the investment could be
sold before its maturity.
This is particularly true for commercial banks, where the
investment account often serves as an important tool of liquidity
management. The exposure draft states that a security may not be
classified as held to maturity if, among other things, it might
7
be sold in response to changes in general liquidity needs. This
poses a serious dilemma for banks: either hold all securities to
maturity — and thus be unable to respond to increased loan
demand by liquidating investments — or mark the investment
portfolio to market. Any bank that chooses the latter route is,
in effect, opting for more volatile earnings and capital.
Among other consequences, the net effect of the market value
approach may be an increased unwillingness on the part of banks
to fulfill their proper role in the economy by assuming and
managing longer-term risks. This is, of course, directly
contrary to the Administrations efforts to put banks back in the
lending business, improve credit availability and get the economy
moving again.
Of course there are other general considerations that I am
sure FASB weighs in considering its rulings. Obviously the
practicality of implementing a prescribed accounting regime is
something that must be considered, and perhaps more important,
the cost of implementing an accounting rule weighed against the
benefits of the particular requirement. Frankly, the weighing of
costs and benefits is something that doesn’t go on enough in the
government regulatory process.
My overall point is simple. I expect there will be numerous
instances of potential conflict between your opinions as
accounting experts and the interests of this country in
stimulating economic growth and winning the economic contest that
lies ahead. I hope you will want to manage your professional
affairs so that you do not ignore the economic consequences of
what you do and put the things that really count for people and
businesses in this country ahead of narrow technical
considerations.
Some of you may remember the wonderful World War II story
and movie, "Bridge on the River Kwai," where a British officer
and his unit, who were prisoners of war of the Japanese, built a
railroad bridge under the supervision of their captors. The
bridge was a tremendous feat of engineering and professional
determination, but there was a problem. It would directly aid
the Japanese war effort in Southeast Asia. Ultimately the bridge
was blown up by allied forces. I certainly hope you do not
believe that accountancy demands the kind of goal-blind
professionalism that the British officer displayed. We all need
to blow up more of the bridges that hinder economic growth.
What underlies what I have tried to say here today is not a
desire to criticize FASB or accountants. Rather, it is my deep
concern that not only today’s economy, but American prospects for
success in the competitive economic environment of the 21st
Century are being undermined by pernicious overregulation which
is turning America into a nation preoccupied with process and
8
paper shuffling rather than economic growth and entrepreneurial
initiative.
I
have been the head of a Federal regulatory agency. I have
run a number of Federal regulatory programs. And I have been the
CEO of a company regulated by the Federal Government. So I think
I know something about t:he effect of“regulation on economic
activity. It can be crushing. And it seems to me that we have
more and more become a country of rules and regulations. I am
confident of one thing, and that is that a set of rules breeds a
set of uncertainties which in turn breeds more rules, which
breeds new uncertainties, etc., etc., etc. This is a process
that ends in suffocation. Indeed, we need to be rolling back the
rules and regulations that have already fallen upon us so we
create more entrepreneurial elbow room.
Recently I saw some work tracing the decline and fall of
ancient civilizations. And I would like to quote a passage about
ancient Egypt. The text catalogued the multiple economic
restraints the Pharaohs had imposed on people. Then it went on
say, Mthe people no longer had any initiative and endured
constraints, administrative pressure, irritating inspections and
beatings. This inhumane regime led to an attitude of dull
endurance in the population. After a period of brilliance, the
Egyptian economy collapsed...as did her political stability.”
I
do not mean to suggest that this will be the fate of the
United States. It will not be. But it is worth keeping in mind
that bit of ancient history — and others like it — as we
perform our respective professional tasks.
To that end, it is my hope that the Treasury Department and
FASB will maintain an open and active dialogue to discuss matters
of mutual interest. We look forward to that.
Thank you again for having me here today.
# # #
TEXT AS PREPARED FOR DELIVERY
REMARKS BY
SECRETARY OF THE TREASURY
THE HONORABLE NICHOLAS F. BRADY
OPENING CEREMONIES OF THE ANNUAL MEETINGS
OF THE INTERNATIONAL MONETARY FUND
AND THE WORLD BANK
WASHINGTON, D.C.
September 22, 1992
Chairman Berrada, Managing Director Camdessus, President
Preston, fellow Governors and distinguished guests.
On behalf of the President of the United States, it is my
honor to welcome you to Washington for the Annual Meetings of the
IMF and World Bank. We stand on the threshold of a new era that
all of us have been seeking for more than 40 years. We must not
let the problems of the moment blind us to the opportunities now
open to us. Our challenge is to overcome the problems and begin
building the brighter future for the generations to follow.
During the past four years in which I have served with you
as a Governor of the IMF and World Bank, we have witnessed
profound changes in the world in which we live. The Cold War is
over, the nations of Eastern Europe and the former Soviet Union
have set themselves free. Developing countries are undertaking
bold free market reforms. The debt crisis is largely over for
major debtors and the banking system. The competition between
state control and market economies has been decisively won by
those who put their faith in the individual and the market and
their people have benefitted.
Working together, in a spirit of cooperation and
partnership, we have created a foundation for peace and
prosperity in our time. The IMF and the World Bank have served
us particularly well in helping to establish this foundation.
Hgwever, to fulfill the promise of the future, we must build upon
our successes of yesterday and today.
First and foremost, we must build a stronger world economy,
one solidly committed to global growth. For when growth occurs
the world's money is attracted to projects which produce jobs,
thereby reducing poverty and creating a higher standard of
living. Contrariwise, when interest rates remain high for
whatever reason, the returns on investment stay sterile in the
banking system.
N B -1990
2
Second, the essence of growth is trade and its badge is
competition.
Nothing in the events of the last few days should
deter our joint efforts to complete the Uruguay Round. It is far
better to light a candle than to curse the darkness.
Third, we must strengthen our arrangements to coordinate
economic policies to provide a rejuvenated and stable
international monetary system that can deal with the historic
changes taking place as well as differing national economic
priorities.
We have reason for optimism. The events of the past four
years show what we can accomplish when we apply our collective
energies to work. The challenges ahead of us pale in comparison
with the difficulties that have already been overcome. And the
IMF, the World Bank and their sister organizations have proven
since the days of Bretton Woods that they have the fibre to lead
us forward.
Today begins the start of a new effort to build a better
world. A year from now, let the world look back and say that
today we made a good beginning.
I wish to convey the good wishes of the American people as
you undertake your historic task. Thank you very much.
f£
FOR IMMEDIATE RELEASE
Tuesday, September 22, 1992
CONTACT: RICH MYERS
(202) 622-2930
STATEMENT BY TREASURY SECRETARY NICHOLAS F. BRADY
Re: Payroll Tax Deposit Reform
September 22, 1992
Reducing regulatory burden for small businesses is an
integral part of the Bush administration's economic agenda.
Two-thirds of all new jobs are created by small businesses and
President Bush is committed to fueling these engines of economic
growth. The new payroll tax rules unshackle small businesses
from a costly burden of needless paperwork and confusing red
tape. They are simpler, more user-friendly, and will encourage
voluntary compliance.
#####
NB-1991
iederar Tmonoing bank
WS
H
WASHINGTON, D.C. 20220
* M £ Tr p a aid'
*
September 22,
1992
FEDERAL FINANCING BANK ACTIVITY
Charles D. Haworth, Secretary, Federal Financing Bank (FFB),
announced the following activity for the month of August 1992.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $174.0 billion on August 31, 1992,
posting a decrease of $3,697.1 million from the level on July 31,
1992. This net change was the result of decreases in holdings of
agency debt of $3,492.2 million, in holdings of agency assets of
$200.0 million, and in holdings of agency-guaranteed loans of
$4.9 million. FFB made 32 disbursements in August.
Attached to this release are tables presenting FFB August
loan activity and FFB holdings as of August 31, 1992.
N B - 1992
CM
O
CM
CL
FFB 202-622-2450
CO
Page 2 of 3
FEDERAL FINANCING BANK
AUGUST 1992 ACTIVITY
BORROWER
AMOUNT
FINAL
INTEREST INTEREST
OF ADVANCE MATURITY RATE
RATE
DATE
(semiannual)
G O V E R N M E N T -G U A R A N T E E D
(not semi
annual)
LOAN S
GENERAL SERVICES ADMINISTRATION
Foley Square Courthouse
Miami Law Enforcement
Foley Square Courthouse
Memphis 1RS Service Center
ICTC Building
8/14
8/18
8/21
8/21
8/25
$ 3,457,711.00 12/11/95 5.054%
1,805,363.00
1/3/95 4.487%
57,499.00 12/11/95 4.855%
533,868.75
1/3/95 4.381%
2,415,265.82 11/16/92 3.355%
RURAL ELECTRIFICATION ADMINISTRATION
WRECI Electric #353
Baldwin County Elec. #361
©Arizona Electric #242A
Randolph Electric #359
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Allegheny Electric #093A
©Cooperative Power #005
©Cooperative Power #130A
©Cooperative Power #130A
8/4
8/12
8/24
8/26
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
8/31
5,299,000.00
4,147,000.00
8,329,728.80
2,000,000.00
80,775,942.21
1,692,001.32
1,860,126.98
1,471,610.80
1,739,734.75
1,512,486.71
2,138,112.62
1,850,273.67
2,355,654.16
2,832,193.74
2,818,639.11
2,055,103.05
4,737,388.10
2,259,246.77
2,271,396.00
2,357,592.43
2,012,157.37
2,615,712.08
2,675,703.31
3,792,528.00
11,377,583.99
7,585,055.98
12/31/25
12/31/25
12/31/20
9/30/94
12/31/12
12/31/1212/31/12
12/31/12
12/31/12
12/31/12
12/31/12
12/31/12
12/31/12
12/31/12
12/31/12
12/31/12
12/31/12
12/31/12
12/31/12
12/31/13
12/31/13
12/13/13
12/31/13
12/31/13
12/31/13
12/31/13
7.156%
7.205%
7.063%
4.499%
6.837%
6.837%
6.837%
6.837%
6.837%
6.837%
6.837%
6.837%
6.837%
6.837%
6.837%
6.837%
6.837%
6.837%
6.837%
6.878%
6.878%
6.878%
6.878%
6.878%
6.878%
6.878%
TENNESSEE VALLEY AUTHORITY
Seven States Enercrv Corporation
Note A-92-13
©interest rate buydown
8/31
467,924,818.67 11/30/92 3.359%
7.093%
7.141%
7.002%
4.474%
6.780%
6.780%
6.780%
6.780%
6.780%
6.780%
6.780%
6.780%
6.780%
6.780%
6.780%
6.780%
6.780%
6.780%
6.780%
6.820%
6.820%
6.820%
6.820%
6.820%
6.820%
6.820%
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
cjtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
Page 3 of 3
FEDERAL FINANCING BANK
(in millions)
Proaram
Agency Debt:
Export-Import Bank
Federal Deposit Insurance Corporation
NCUA-Central Liquidity Fund
Resolution Trust Corporation
Tennessee Valley Authority
U .S . Postal Service
sub-total*
Auaust 31. 1992
$
8,150.0
15,160.0
0.0
50,406.8
7,275.0
9.903.4
90,895.2
Julv 31. 1992
$
8,150.0
15,160.0
5.0
52,694.0
8,475.0
9.903.4
94,387.4
Agency Assets:
Farmers Home Administration
DHHS-Health Maintenance Org.
DHHS-Medical Facilities
Rural Electrification Admin.-CBO
Small Business Administration
sub-total*
43,009.0
55.2
64.3
4,598.9
4.4
47,731.8
43,209.0
55.2
64.2
4,598.9
4.5
47,931.8
Government-Guaranteed Loans:
DOD-Foreign Military Sales
DEd.-Student Loan Marketing Assn.
DEPCO-Rhode Island
DHUD-Community Dev. Block Grant
DHUD-Public Housing Notes +
General Services Administration +
DOI-Guam Power Authority
DOI-Virgin Islands
NASA-Space Communications Co. +
DON-Ship Lease Financing
Rural Electrification Administration
SBA-Small Business Investment Cos.
SBA-State/Local Development Cos.
TVA-Seven States Energy Corp.
DOT-Section 511
DOT-WMATA
sub-total*
4,387.0
4,820.0
125.0
176.9
1,853.2
759.1
27.7
23.7
0.0
1,576.2
18,238.0
148.6
636.9
2,407.1
19.2
177.0
35,375.6
4,398.1
4,820.0
125.0
184.7
1,853.2
750.8 .
27.7
23.7
0.0
1,576.2
18,226.5
155.6
641.4
2,401.0
19.6
177.0
35,380.5
grand-total*
*figures may not: total due to rounding
+does not include capitalized interest
$ 174,002.6
$ 177,699.7
Net Change
8/1/92-8/31/92
$
0.0
0.0
-5.0
-2,287.2
-1,200.0
Q.p
-3,492.2
FY '92 Net Change
__10/1/91-8/31/92
$
-3,111.0
6,864.0
-113.6
-12,475.5
-4,600.0
1.702.8
-11,733.3
-200.0
0.0
0.1
0.0
-0.1
-200.0
-7,685.0
-6.0
-11.5
-65.0
-1.8
-7,769.3
-11.1
0.0
0.0
-7.8
0.0
8.3
0.0
0.0
0.0
0.0
11.4
-7.0
-4.5
6.2
-0.4
0 T0
-4.9
-213.0
-30.0
125.0
-27.6
-50.2
98.5
-0.7
-0.8
-32.7
-48.3
-359.0
-96.5
-51.4
-39.9
-2.1
0.0
-728.5
$ -3,697.1
$ -20,231.1
TREASURY NEWS
Telephone 202-622-2960
Washington, D.C.
Department of the Treasury
For Immediate Release
September 22,
1992
Monthly Release of U.S. Reserve Assets
The Treasury Department today released U.S. reserve assets data
for the month of August 1992.
As indicated in this table, U.S. reserve assets amounted to
78,474 million at the end of August 1992, up from 77,370 million in
July 1992.
U.S. Reserve Assets
(in millions of dollars)
End
of
Month
Total
Reserve
Assets
Gold
Stock 1/
Special
Drawing
Rights 2/3/
Foreign
Currencies .4/
Reserve
Position
in IMF 2/
1992
July
77,370
11,059
11,702
44,984
August
78,474
11,059
12,193
45,460
1/
Valued at $42.2222 per fine troy ounce.
2/
Beginning July 1974, the IMF adopted a technique for valuing the
SDR based on weighted average of exchange rates for the
currencies of selected member countries. The U.S. SDR holdings
and reserve position in the IMF also are valued on this basis
beginning July 1974.
3/
Includes allocations of SDRs by the IMF plus transactions in SDRs
4/
Valued at current market exchange rates.
N B -1993
FOR RELEASE AT 2:30 P.M.
September 22, 1992
CONTACT:
Office of Financing
202-219-3350
TREASURY'S WEEKLY BILL OFFERING
The Department of the Treasury/ hy this public notice,
invites tenders for two series of Treasury bills totaling
approximately $20,400 million, to be issued October 1, 1992.
This offering will result in a paydown for the Treasury of about
$ 3,000 million, as the maturing bills are outstanding in the
amount of $ 23,411 million. Tenders will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public Debt,
Washington, D. C. 20239-1500, Monday, September 28, 1992
prior to 12:00 noon for noncompetitive tenders and prior to
1:00 p.m., Eastern Daylight Saving time, for competitive tenders.
The two series offered are as follows:
91-day bills (to maturity date) for approximately
$ 10,200 million, representing an additional amount of bills
dated
July 2, 199 2
and to mature December 31, 19 92
(CUSIP No. 912794 ZX 5), currently outstanding in the amount
of $ 11,735 million, the additional and original bills to be .
freely interchangeable.
182-day bills for approximately $ 10,200 million, to be
dated October 1 , 1992
and to mature
April 1 , 1993
(CUSIP
No. 912794 B7 8).
The bills will be issued on a discount basis under competi
tive and noncompetitive bidding, and at maturity their par amount
will be payable without interest. Both series of bills will be
issued entirely in book-entry form in a minimum amount of $10,000
and in any higher $5,000 multiple, on the records either of the
Federal Reserve Banks and Branches, or of the Department of the
Treasury.
The bills will be issued for cash and in exchange for
Treasury bills maturing
October 1, 1992.
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 competi
tive 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 $ 2,713 million as agents for foreign and international
monetary authorities, and $ 5,427 million for their own account.
Tenders for bi^ls to be maintained on the book-entry records
of the Department of the Treasury should be submitted on Form
PD 5176-1 (for 13-week series) or Form PD 5176-2 (for 26-week
series).
NB-1994
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 2
Each bid must state the par amount of bills bid for, which
must be a minimum of $10,000. Bids over $10,000 must be in mul
tiples of $5,000. A bidder submitting a competitive bid for its
own account, whether bidding directly or submitting bids through
a depository institution o r ,government securities broker/dealer,
may not submit a noncompetitive bid for its own account in the
same auction.
Competitive bids must show the discount rate desired,
expressed in two decimal places, e.g., 7.10%. Fractions may not
beused. A single bidder, as defined in Treasury's single bidder
guidelines, may submit competitive tenders at more than one dis
count rate, but-the Treasury will not recognize, at any one rate,
any bid in excess of 35 percent of the public offering. A com
petitive bid by a single bidder at any one rate in excess of 35
percent of the public offering will be reduced to the 35 percent
limit. The public offering for any one bill is the amount offered
for sale in the offering announcement, less bills allotted to Fed
eral Reserve Banks for their own account and for the account of
foreign and international authorities in exchange for maturing
bills.
Noncompetitive bids do not specify a discount rate. A
single bidder should not submit a noncompetitive bid for more than
$1,000,000. A noncompetitive bid by a single bidder in excess of
$1,000,000 will be reduced to that amount. A bidder may not sub
mit a noncompetitive bid if the bidder holds a position, in the
bills being auctioned, in "when-issued" trading or in futures or
forward contracts. A noncompetitive bidder may not enter into any
agreement to purchase or sell or otherwise dispose of the bills
being auctioned, nor may it commit to sell the bills prior to the
designated closing time for receipt of competitive bids.
The following institutions may submit tenders for accounts
of customers; depository institutions, as described in Section
19(b)(1)(A), excluding those institutions described in subpara
graph (vii), of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A));
and government securities broker/dealers that are registered with
the Securities and Exchange Commission of noticed as government
securities broker/dealers pursuant to Section 15C(a)(1) of the
Securities Exchange Act of 1934. Others are permitted.to submit
tenders only for their own account.
For competitive bids, the submitter must submit with the
tender a customer list that includes, for each customer, the name
of the customer and the amount and discount rate bid by each cus
tomer . A separate tender and customer list should be submitted
for each competitive discount rate. Customer bids may not be
aggregated by discount rate on the customer list.
For noncompetitive bids, the customer list must provide,
for each customer, the name of the customer and the amount bid.
For mailed tenders, the customer list must be submitted with the
4/17/92
TREASURY'S -13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 3
tender. For other than mailed tenders, the customer list should
accompany the tender. If the customer list is not submitted with
the tender, information for the list must be complete and avail
able for review by the deadline for submission of noncompetitive
tenders. The customer list must be received by the Federal
Reserve Bank by auction day.
All bids submitted on behalf of trust estates must identify
on the customer list for each trust estate the name or title of
the trustee(s), a reference to the document creating the trust
with date of execution, and the employer identification number
of the trust.
A competitive bidder must report its net long position in
the bill being offered when the total of all its bids for that
bill and its net long position in the bill equals or exceeds $2
billion, with the position to be determined as of one half-hour
prior to the closing time for the receipt of competitive tenders.
A net long position includes positions, in the bill being auc
tioned, in when-issued trading and in futures and forward con
tracts, as well as holdings of outstanding bills with the same
CUSIP number as the bill being offered. Bidders who meet this
reporting requirement and are customers of a depository institu
tion or a government securities broker/dealer must report their
positions through the institution submitting the bid on their
behalf. A submitter, when submitting a competitive bid for a
customer, must report the customer's net long position in the
security being offered when the total of all the customer's bids
for that security, including bids not placed through the submit
ter, and the customer's net long position in the security equals
or exceeds $2 billion.
Tenders from bidders who are making payment by charge to a
funds account at a Federal Reserve Bank and tenders from bidders
who have an approved autocharge agreement on file at a Federal
Reserve Bank will be received without deposit. Full payment for
the par amount of bills bid for must accompany tenders from all
others, including tenders for bills to be maintained on the bookentry records of the Department of the Treasury. An adjustment
will be made on all accepted tenders accompanied by payment in
full for the difference between the payment submitted and the
price determined in the auction.
Public announcement will be made by the Department of the
Treasury of the amount and discount rate range of accepted bids for
the auction. In each auction, noncompetitive bids for $1,000,000
or less without stated discount rate from any one bidder will be
accepted in full at the weighted average discount rate (in two
decimals) of accepted competitive bids. Competitive bids will then
be accepted, from those at the lowest discount rates through suc
cessively higher discount rates, up to the amount required to meet
the public offering. Bids at the highest accepted discount,rate
will be prorated if necessary. Each successful competitive bidder
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 4
will pay the price equivalent to the discount rate bid. Noncom
petitive bidders will pay the price equivalent to the weighted
average discount rate of accepted competitive bids. The calcula
tion of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923.
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.
No single bidder in an auction will be awarded bills in an
amount exceeding 35 percent of the public offering. The deter
mination of the maximum award to a single bidder will take into
account the bidder's reported net long position, if the bidder
has been required to report its position.
Notice of awards will be provided to competitive bidders
whose bids have been accepted, whether those bids were for their
own account or for the account of customers. No later than 12:00
noon local time on the day after the auction, the appropriate
Federal Reserve Bank will notify each depository institution that
has entered into an autocharge agreement with a bidder as to the
amount to be charged to the institution's funds account at the
Federal Reserve Bank on the issue date. Any customer that is
awarded $500 million or more of securities in an auction must
furnish, no later than 10:00 a.m. local time on the day after the
auction, written confirmation of its bid to the Federal Reserve
Bank or Branch where the bid was submitted. If a customer of a
submitter is awarded $500 million or more through the submitter,
the submitter is responsible for notifying the customer of the
bid confirmation requirement.
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
by the issue date, by a charge to a funds account or pursuant to
an approved autocharge agreement, in cash or other immediatelyavailable funds, or in definitive Treasury securities maturing
on or before the settlement date but which are not overdue as
defined in the general regulations governing United States secu
rities. Also, maturing securities held on the book-entry records
of the Department of the Treasury may be reinvested as payment for
new securities that are being offered. Adjustments will be made
for differences between the par value of the maturing definitive
securities accepted in exchange and the issue price of the new
bills.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76 as applicable, Treasury's single bidder guide
lines, 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.
4/17/92
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
September 22, 1992
'^ tic v l?
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 2-YEAR NOTES
Tenders for $14,548 million of 2-year notes, Series AE-1994,
to be issued September 30, 1992 and to mature September 30, 1994
were accepted today (CUSIP: 912827G89).
The interest rate on the notes will be 4%.
All competitive tenders at yields lower than 4.00%
were accepted in full. Tenders at 4.00% were allotted 3%.
All noncompetitive and successful competitive bidders were
allotted securities at the yield of 4.00%, with an equivalent
price of 100.000.
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
16,015
42,592,180
23,515
80,760
82,245
40,105
1,641,405
44,250
15,005
49,585
16,680
438,075
288.950
$45,328,770
Accented
16,015
13,:94,450
23,515
32,260
33,445
30,255
177,545
40,250
15,005
49,585
11,680
34,575
288.950
$14,547,530
The $14,548 million of accepted tenders includes $788
million of noncompetitive tenders and $13,760 million of
competitive tenders from the public.
In addition, $688 million of tenders was awarded at the
high yield
to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $1,505 million
of tenders was also accepted at the high yield from Federal
Reserve Banks for their own account in exchange for maturing
securities.
T he m e d ia n y i e l d w a s 3 . 9 8 %; t h a t i s , 50% o f t h e a m o u n t o f
a c c e p t e d c o m p e t i t i v e b i d s were t e n d e r e d a t o r b e l o w t h a t y i e l d .
The lo w y i e l d w a s 3 . 9 3 %; t h a t i s , 5% o f t h e a m o u n t o f a c c e p t e d
c o m p e t i t i v e b id s w e r e t e n d e r e d a t o r b e lo w t h a t y i e l d .
NB-1995
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
u
CONTACT?
FOR IMMEDIATE RELEASE
September 22, 1992
^ M £ /o U
Office of Financing
202-219-3350
RELEASE OF STATISTICS FROM SINGLE-PRICE TREASURY AUCTIONS
The Treasury will be releasing a new statistic after each of
the auctions in the single-price experiment.
Beginning with
today1s two-year note auction, the Treasury will release the median
of the accepted competitive tenders at the time that the auction
results are announced, or soon thereafter..
The median is the
midpoint of all accepted competitive bids; that is, 50 percent of
the amount of accepted competitive bids are tendered at or below
the median yield.
The Treasury will not publish an average yield
for the accepted competitive bids in the single-price auctions, as
that statistics does not have the same significance a.s in
multiple-price auctions.
In addition, the low yield that will be released after each
single-price auction will represent the yield at or below which 5
percent of the amount of the accepted competitive bids were
tendered.
All other statistics that the Treasury usually releases will
also be included in the announcements of single-price auction
results.
They are the high yield (at which all awards will be
made), the allotment ratio at the high yield, the amounts tendered
and accepted by each Federal Reserve district and by the Treasury,
and the volume of noncompetitive awards to private investors,
Federal Reserve Banks, and foreign and international monetary
authorities.
0 0 0
NB-1996
TREASURY NEWS
Department of the Treasury
Washington, D.C.
'RY
TEXT AS PREPARED FOR DELIVERY
Address by
Secretary of the Treasury
Nicholas F. Brady
at the Annual Meetings
of the IMF and World Bank
Washington
September 23, 1992
Chairman Berrada, Managing Director Camdessus, President
Preston, fellow Governors, distinguished guests.
I
want to welcome the more than 20 countries which have become
members of the IMF and World Bank over the past year, including •
Russia, Ukraine, and Switzerland. The Fund and Bank have at long
last become truly universal institutions.
We are at the threshold of a new era we have been seeking for
more than 40 years. The enormous economic and political change of
the last four years has brought us close to our common dream of
global peace and prosperity.
At the start of the Cold War 50 years ago, Dwight Eisenhower
said, " A world in arms is not spending money alone. It is spending
the sweat of its laborers, the genius of its scientists, the hopes
of its children.” We are free of these burdens of the Cold War
struggle, and we are witnessing the dawn of a new era of human
achievement.
The competition between political philosophies and economic
ideas is over. Those who put their faith in the individual and the
market have won. The benefit will be a world of greater freedom,
faster growth, higher productivity, more jobs, and a better life.
The Triumph of Market Principles
Countries all over the world are demonstrating their commitment
to market principles and have made sweeping changes in their
policies. We are seeing tangible results.
The triumph of market principles is perhaps most dramatically
demonstrated by events in the former Soviet Union and Eastern
Europe. The people of these countries have made a clear choice, not
just to reform central planning, but to replace it as rapidly as
possible with market systems. Their conviction is strong enough to
make them willing to undergo the enormous hardships arising from
complete economic transformation.
N B -1997
2
There have been setbacks along the way and that is to be
expected given the magnitude of the task. The progress, however,
has been impressive. In the space of less than one year, Russia has
freed prices, cut its fiscal deficit, liberalized its exchange rate,
and is about to embark on an ambitious privatization program.
Estonia and Latvia have already reached agreement on Fund-supported
adjustment programs. In Eastern Europe, Poland is successfully
implementing comprehensive reforms, Hungary is attracting extensive
foreign investment and the Czech and Slovak Federal Republic has
made major progress on stabilization and privatization. These
countries and others have earned our support as they continue on the
road to stabilization, reform and growth.
In the developing countries, sound market-based policies and
commercial bank debt reduction are revitalizing economies,
particularly in Latin America. The fruits of these actions are
evident. Growth in several countries now ranges from 4 to 6
percent, inflation has plummeted, private capital flows have soared
and access to world capital markets is being restored.
Most major debtor nations have reached debt reduction or
refinancing agreements with their commercial banks. These
agreements cover 92 percent or some $240 billion, of their
outstanding commercial bank debt. And, for the major debtors and
the banking system, it is no exaggeration to say that the debt
crisis of the 1980s is largely over. This is an impressive
achievement.
This revitalization has not touched every corner of the world.
An important lesson for these developing countries is that debt
reduction alone cannot produce dramatically improved economic
performance. Sound market-based policies, the key to sustained
growth, are an integral part of the solution.
Building a Stronger Tomorrow
Our successes in recent years make it all the more imperative
that we develop a strong strategy for sustaining reform and raising
global living standards.
Let me begin with the role of the major industrial countries.
Our first priority must be to resume strong growth. For when growth
occurs, the world*s money is attracted to projects which produce
jobs, thereby reducing poverty and creating a higher standard of
living. On the other hand, when interest rates remain high for
whatever reason, the returns on investment remain sterile in the
banking system. The choice is clear.
Reforming countries also need trade and investment links with
growing industrial economies to be able to translate their policy
improvements into growth. And we can hardly expect reforming
countries to maintain their commitment to market-based systems if
our own economies are failing to perform.
3
The recovery is underway. We are determined, however, to
strengthen that recovery. Interest rates have been reduced in most
countries, including the first cut in German interest rates in five
years. Japan has introduced the largest fiscal stimulus package in
its history which will increase domestic growth and the demand for
imports.
In the United States, we have experienced five quarters of
growth. Inflation and interest rates have been reduced to the
lowest level in 25 years. We are bringing our budget deficits down.
The President has proposed an Agenda for American Renewal to
increase our long-term growth potential.
The major industrial countries are committed to strengthen
world growth. We stand ready to take appropriate additional actions
to achieve sustained growth and greater currency stability.
Strengthening Arrangements for Economic Policy Coordination
The present world economy highlights the need to strengthen our
economic policy coordination efforts. The basic premise of policy .
coordination remains valid. A sound world economy requires that the
major countries pursue policies that are consistent with our overall
objectives and produce a convergence of performance at a higher
level of growth. A stable international monetary system is also
essential for success.
/
Policy coordination has worked, sometimes with fanfare,
sometimes quietly. In the 1980s, it helped to reduce the wide
divergence in economic policies and performance. As a result, our
economies prospered, price stability was restored, external
imbalances declined, and exchange rates were more stable.
Recently, our economic performance has again diverged, creating
new uncertainties. We have had to seek a new consensus, this time
on the priority for growth. That consensus was clear at Munich and
concrete steps to enhance growth have since been taken.
However, the world has changed significantly since the
coordination process was developed. Capital markets have grown
dramatically in size and complexity. Daily transactions in the
foreign exchange market are approaching $1 trillion. This is
roughly double the total reserves of the major industrial countries
and well beyond the resources governments can bring to bear in the
markets. I’he channels through which bapital moves have become more
diverse with the creation of new derivative products and the number
of market participants has grown. The speed of international
transactions has increased dramatically with the introduction of new
technology. New ways of cooperating must be developed to fit the
changed circumstances of this new world.
It is for this reason that President Bush has called on the
world to further strengthen our international economic and monetary
systems. There is a clear need for a better understanding of the
4
changing face of financial markets and the implications for the
international monetary system.
Therefore, as Chairman of the Group of Ten, I am proposing that
the G-10 undertake an examination of global capital flows, their
size and movements, and their implications for the international
monetary system. This analysis will complement the work of the IMF
and could serve as the basis for G-7 Finance Ministers to consider
proposals and recommendations to fulfill the mandate of the Heads of
State and Governments to strengthen their cooperation and to
intensify their efforts to remove obstacles to growth.
Extending Market Principles
Market-based principles must also be extended throughout and
across nations to build a better tomorrow.
In our own countries, we must intensify efforts to achieve
structural reforms. These reforms will reduce obstacles to growth,
increase efficiency and productivity, and create greater economic
dynamism and competition.
In the past few years, more and more countries have recognized
the importance of trade liberalization. They understand that the
rising tide of trade lifts the economic growth of all countries.
Let me say unequivocally that the United States remains fully
committed to the multilateral trading system. A rapid and
successful conclusion of the Uruguay Round is our top trade policy
priority. We cannot afford to lose the gains from increased trade
and investment that this confidence-building agreement would create.
The Role of the International Financial Institutions
The international financial institutions have been central to
all of this progress. Over more than forty years, we have entrusted
them with the job of guiding and supporting the course of reform in
widely different economies around the globe. It is clear their
success is reflected in their universal membership.
As important as the international financial institutions have
been, we will expect no less of them in the future. They must
remain at the center of the effort to spread market principles,
support the implementation of sound and effective economic policies,
and promote world growth. They are at the center of the world's
efforts to help transform the countries of Eastern Europe and the
former Soviet Union.
Adequate resources are essential for this job. The United
States remains strongly committed to passage of legislation
providing for the IMF quota increase. We are also committed to an
IDA-10 replenishment that will support the environmentally
sustainable development efforts of the poorest, least creditworthy
countries. Progress also requires further attention to ensuring
5
that all parts of society participate in growth.
Conclusion I
We must not let the problems of the moment blind us to the
opportunities now before us. Our challenge is to overcome the
problems and to seize this once-in-a-lifetime opportunity to build a
brighter future. Our goal must be an integrated global market
economy that produces growth and prosperity, as well as peace and
democracy, shared by all.
Today begins the start of a new effort to build a better world.
A year from now, let the world look back and say that we made a good
beginning.
LM
V f FH
XJBLIG»DEBT NEWS
Department of the Treasury • Bureau of the Public Debt
Washington, DC 20239
OEPT. Of THE TRE&SU \
FOR IMMEDIATE RELEASE
September 23, 1992
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 5-YEAR NOTES
Tenders for $10,514 million of 5-year notes, Series R-1997,
to be issued September 30, 1992 and to mature September 30, 1997
were accepted today (CUSIP: 912827G97).
The interest rate on the notes will be 5-1/2%. All competi
tive tenders at yields lower than 5.54% were accepted in full. Tender I
at 5.54% were allotted 57%. All noncompetitive and successful competi
tive bidders were allotted securities at the yield of 5.54%, with an
equivalent price of 99.827. The median yield was 5.50%; that is, 50%
of the amount of accepted competitive bids were tendered at or below
that yield. The low yield was 5.45%; that is, 5% of the amount of
accepted competitive bids were tendered at or below that yield.
TENDERS RECEIVED AND ACCEPTED (in thpusands)
Location
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTALS
Received
20,127
22,176,957
16,572
33,513
56,425
28,999
1,096,968
17,663
12,208
38,012
10,234
192,847
90,170
$23,790,695
Accented
20,127
9,731,557
16,572
33,513
56,425
28,996
265,468
17,663
12,208
38,012
10,234
192,847
90.170
$10,513,792
The $10,514 million of accepted tenders includes $542
million of noncompetitive tenders and $9,972 million of
competitive tenders from the public.
In addition, $1,203 million of tenders was awarded at the
high yield
to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $400 million
of tenders was also accepted at the high yield from Federal
Reserve Banks for their own account in exchange for maturing
securities.
N B - 1998
/7 89
ina
EMBARGOED UNTIL 1:30 P.M.
PREPARED FOR DELIVERY
September 24, 1992
Uu ¿ü 82
Contact:
Anne Kelly Williams
202-622-2960
REMARKS BY
DEPUTY SECRETARY OF THE TREASURY JOHN E. ROBSON
TRI-CITY SMALL BUSINESS/SMALL BANK REGULATORY BURDEN LUNCHEON
UNIVERSITY OF TEXAS-TYLER BUSINESS SCHOOL
TYLER, TEXAS
SEPTEMBER 24, 1992
Good afternoon, and thanks to the good people here at the
University of Texas at Tyler Business School for providing me
with the opportunity to relive my old days as the dean and
professor of management at Emory University*s Business School,
and to discuss something that's on all our minds these days —
the overregulation of small businesses and banks.
All of us in this room know that the American economy is
undergoing fundamental changes that have caused its sluggish
performance. The defense conversion brought on by our triumphal
victory in the Cold War, the transformation of more and more
industries into leaner, skill-based organizations, the paying
down of corporate and consumer debt, a lending-cautious financial
system hamstrung by anachronistic laws, and the emergence of a
high velocity, intensely competitive global economy have
substantially altered the business environment for American
enterprises. And there is no denying that these changes have
been painful for many Americans.
And yet, these are mainly transitional difficulties that we
will overcome. And I have a fundamental optimism about the
future. I do not believe the pundits and politicians who tear
down America — and who describe this country as economically
decrepit and past her prime. Because, however you measure, the
United States is still the preeminent economic power in the
world. For example, with just one twentieth of the world*s
population, we produce one fourth of its goods and services and
more than one third of its high-tech products. And we are the
world's leading exporter.
The President knows that our transitional economic
difficulties have made many Americans uncertain about their own,
their children's, and our country's future. But he also knows
that we will work through these tough transitional problems, and,
that if given enough entrepreneurial elbow room, America will
continue to outwork, outproduce and outsmart the rest of the
NB-1999
2
world. Which is why the President has laid the foundation for
the future by unveiling his Agenda for American Renewal, an
integrated, comprehensive economic plan which builds on our
strengths and will prepare American businesses to compete in the
next century.
One transitional difficulty which we must overcome is the
credit crunch, which has hit small businesses particularly hard.
President Bush is a former Texas businessmen himself — he knows
what it's like to sweat over a P&L statement and try to meet a
payroll. The President also knows that small business is the
backbone of our nation's economy, employing 57 percent of our
private workforce, accounting for 39 percent of our Gross
Domestic Product, and generating over two-thirds of all net new
private sector jobs. But most importantly, he knows that
America's small businesses cannot perform their role as the
engine for economic growth without access to credit.
The credit crunch has many causes. They include a bornagain conservatism in bankers, lender caution induced by the
recent recession, the searing experience of the savings and loan
collapse, overbuilding of real estate in the 1980s, fear of legal
exposure by bank directors and officers, and a new emphasis by
bank management on building up capital levels.
We also know that many banks feel besieged by the 7,000 or
so bank and thrift examiners across the country. No doubt there
are still some examiners out there in the field who are not
implementing our anti-credit crunch policies the way we want.
But that is precisely why several months ago we established a
parallel appeals process for bankers who feel victimized by
unprofessional examiner conduct, or think the credit crunch
guidelines have not been properly applied. We have invited banks
to appeal to higher levels of regulatory agencies, and frankly,
we have not received many RSVPs.
I have heard the reasons why bankers have not used this
appeals process — how they fear examiner revenge. But we have
said from the start that examiner retribution will not be
tolerated. Bankers cannot have it both ways — complaining to us
about examiner abuses, but refusing to use the appeals process
created expressly for the purpose of correcting those abuses.
And if you are the operator of a small business sitting in a bank
trying to get a loan, and a banker tells you, "Geez, I'd love to
do it, but the examiners won't let me,” insist that he use the
parallel appeals process and get back to you with the outcome.
It is not my purpose to bash bankers for the credit crunch.
But I do think it is time for banks to step up to the plate and
start making loans again. The economy needs those loans at the
margin, especially the character loans that helped build this
country. I understand the caution in the industry after this
3
difficult period, but banking is the business of making loans to
provide needed capital. It is not risk-free — and it is not
intended to be so. So we urge bankers to step forward and make
loans to sound borrowers and work with them during their
temporary difficulties.
I concede that regulatory practices have contributed to the
credit crunch. One reason is that, having witnessed the fate of
S&L regulators who were deemed too lax by Congress, it didn't
take a weatherman for examiners to know which way the wind was
blowing. The message was loud and clear — when in doubt,
criticize the loan.
That is why we at Treasury have focused so much of our anti
credit crunch effort on regulatory issues — trying to ensure
that examiners use balance and common sense in the regulatory
process. But there is one thing we cannot do. And that is
abandon our regulatory responsibilities to foster the safety and
soundness of financial institutions. I would hope you would not
want us to do so. And frankly, blaming all the credit crunch on
examiners is like blaming a bad baseball season on the umpires.
With that said, let me tell you what we have been trying to
do in our three-pronged attack to combat the credit crunch.
The first prong of attack is to revise regulatory policy and
practices to ease the credit crunch. Over 35 guidelines have
been issued to provide bank and thrift examiners in the field
with specific instructions aimed at credit crunch issues.
Examples of these new instructions include:
Instructions that encourage lenders to work with
borrowers experiencing temporary difficulty.
Guidelines to ensure banks' valuation of real estate is
based on ability to generate income over time, not on
liquidation value.
Expanding the capital base from which banks may lend by
approving an increase in the amount of purchased
mortgage servicing rights and purchased credit card
relationships.
And,
—
Instructions to examine each credit on its own merits
rather than, for example, lumping all real estate loans
together.
The second prong of our attack on the credit crunch is a
broad communications effort to make sure examiners are applying
the letter and spirit of these new guidelines in the field. To
4
accomplish that, we have held three national meetings of
examiners at which Secretary Brady or I have spoken. Bank and
thrift regulators have held numerous educational meetings with
their examiner corps. And in May, I met with Texas bank
examiners in Houston to discuss current problems banks are
experiencing in Texas. The message we give at all of these
gatherings is straightforward — bring common sense and balance
into the examination process and follow the new guidelines.
Treasury*s third prong of attack expands on this
communication effort by bringing bankers, borrowers, business
people and regulators together at the same time and place to
discuss the credit crunch. We have held over 350 of these
meetings across the country to open a dialogue on credit crunch
issues, and to make sure that each group understands the other's
perspectives. I travelled to Houston in May to discuss these
efforts at the Urban Land Institute's National Convention, and
met with Texas Bankers at the Houston Federal Reserve Offices to
discuss Texas banking issues. Tomorrow morning I'll be at a
similar meeting in Dallas with the Board of Directors and senior
officers of the Dallas Federal Reserve Bank.
And Secretary Brady has recently expanded this
communications effort by calling for a nationwide series of
meetings that will focus on three main areas —— the restructuring
and/or rollover of commercial real estate loans; acquisition,
development and construction financing of residential and multi
family housing; and small business loans. Bankers and borrowers
will come together with officials from the Office of Thrift
Supervision and the Comptroller of the Currency to allow open
discussion of these issues and of possible regulatory abuses.
But regulatory overzealousness associated with the credit
crunch is also a symptom of a broader and more dangerous disease
which has eaten away at our country's economic growth. And that
disease is the spread of excessive government regulation.
The Bush Administration has dug in against overregulation
through several actions. The President has imposed a moratorium
on new regulations, attacked needless regulation through the
Council on Competitiveness, and proposed regulatory relief
measures in a number of areas.
The Treasury Department has played an active role in the
President's regulatory initiative. It has taken a number of
regulatory actions that will promote economic growth, and has
identified for elimination or modification 175 existing
regulations. While it is often difficult to quantify precisely
the economic impact of these reforms, I am happy to say that,
when fully implemented, these reforms could result in annual
savings to the economy of almost $1 billion.
s
5
One significant example of these reforms is a brand new set
of IRS regulations which significantly simplify the payroll tax
reporting rules for the nation's nearly six million employers.
Under the new guidelines, which are published in today's Federal
Register, most small businesses will now only have to deposit
their employment taxes once a month, similar to how they pay
monthly bills like rent and electricity. Other employers will
deposit their taxes on fixed days of the week. Either way, the
deposit schedule will be set yearly, and the IRS will notify
employers at the beginning of each year which category their
businesses fit into. This change will free employers from the
costly task of constantly monitoring payroll taxes, and allow
small businesses to focus on what they do best — create jobs.
Earlier in this speech I prodded banks to do their jobs by
providing credit for businesses, but the Administration also
believes we must allow bankers to do their job. Which is why the
Treasury has worked to ease the regulatory burdens on banks by
sending to Congress the Credit Availability and Regulatory Relief
Act. This bill would repeal many of the needless,
Congressionally-imposed burdens that require banks to spend more
time filling out forms than making loans.
The legislation would let bankers be bankers by repealing a
number of onerous statutory requirements contained in last year's
Federal Deposit Insurance Corporation Improvement Act, or
"FDICIA''. It would eliminate the requirement to develop socalled "tripwire" regulations, which would allow government to
micromanage many aspects of a bank's operations, including
minimum earnings levels and employee compensation. It would make
auditors auditors again, not policeman or regulators, and would
advance the goals of the Community Reinvestment Act while
reducing its needless paperwork requirements.
But the disease of overregulation has even spread beyond its
traditional areas into corporate governance decisions like
executive compensation and employee stock options. And it won't
come as a surprise that a Congress ever anxious to get its mitts
on other people's money has led the charge. Some members
advocate an outright ceiling on executive pay. Others want to
bar the business expense tax deduction for compensation over a
certain amount.
Yes, there have been some well-publicized cases of apparent
mismatch between executive pay and corporate performance. But
Congress shouldn't be anywhere near this stuff. These
legislative proposals amount to the kind of government wage
setting so ruinously employed in the former communist economies
of Eastern Europe and the Soviet Union, and it would be a supreme
irony if we ourselves were now to adopt them. These decisions do
not lend themselves to any sort of uniform "cookie-cutter"
6
formulas, and they must be left to the marketplace and the
vehicles of corporate governance.
Another place government shouldn't mess around in is
employee stock options. I know something about stock options. I
have held and exercised them, granted them broadly to my
company's employees, and watched them work as powerful incentives
for motivating, attracting and retaining talented people. But
there are others who are considering actions that could put stock
options on the endangered species list.
I refer specifically to the accounting idea, now being
considered by the Financial Accounting Standards Board, at least
one U.S. Senator, and possibly the SEC, to require companies to
record the "expense” of stock options as a charge against income.
Never mind that for many companies, stock options are not a
luxury, but a necessity. Never mind that these companies would
be hurt if stock options are eviscerated by an accounting rule.
The accounting experts say that stock options have value, and,
therefore, they must be reflected as a compensation expense in
the company's profit and loss statements.
But even if the accounting experts are technically correct,
and I don't concede that they are, why in the name of little
green eyeshades would you want to sacrifice a proven and
important employee incentive — one that stimulates innovation
and economic growth — on the altar of accounting theology?
That is obviously a very bad trade. And it is unimaginable
that FASB, members of Congress, or anyone else would want to
damage this valuable tool for economic growth when there is so
little to gain by doing so.
I have told you how the Administration's anti-credit crunch
and regulatory reform efforts will help banks get back into the
business of making loans. But let me now return to how the
President's Agenda for American Renewal will provide particular
help for small business.
The President knows that we must ensure that government
helps economic growth, entrepreneurial opportunity and job
creation by providing incentives for American small businesses.
To accomplish this, the President just yesterday proposed a fiveyear, $20 billion initiative for small businesses. The
initiative includes:
—
Reducing the lowest corporate tax-rate for small
businesses from 15 percent to 10 percent.
Helping small business startup by increasing the
equipment deduction limit from $10,000 to $25,000.
1
7
Eliminating capital gains taxes on newly-issued small
business stock.
Permitting the immediate write-off of up to $2,500 of
the front-end costs of starting a new business.
And,
Simplifying the tax laws so that most small businesses
can file one or two-page tax returns.
The Bush Administration is committed to making government an
ally of American enterprise, not an adversary. Towards that end,
the President has also proposed a permanent R&D tax credit and an
Investment Tax Allowance to stimulate private sector investment
and technical innovation. He has proposed a capital gains tax
cut to lower the cost of capital, and the creation of enterprise
zones in our inner cities and rural areas. He has called for the
reform of our legal and health care systems, which have produced
an avalanche of lawyers, lawsuits, and paper shuffling that has
burdened American businesses with unnecessary costs. And he has
vigorously pursued free and open trade polices which will
increase U.S. exports and spur economic growth.
This is the agenda the next Bush Administration will carry
out in the next four years. And this is President Bush's vision
of the future — a strong, sound banking system that meets the
needs of the American people and businesses, and a business
environment which allows American enterprise to prosper.
I know you share this vision. And we at the Treasury
Department and in the Administration look forward to working with
you to see that it becomes a reality as our country enters the
next American Century.
Thank you.
# # #
* *'• ' J* U t Í M r vor- =
EMBARGOED UNTIL Is 15 PM
PREPARED FOR DELIVERY
September 25, 1992
.
Contact:
,
Anne Kelly Williams
202-622-2960
REMARKS BY
DEPUTY SECRETARY OF THE TREASURY JOHN E. ROBSON
INDEPENDENT BANKERS ASSOCIATION OF TEXAS
18TH ANNUAL CONVENTION
DALLAS, TEXAS
SEPTEMBER 25, 1992
Good afternoon. It is a pleasure for me to join this 18th
annual convention of the Independent Bankers Association of
Texas. I'd like to congratulate you on your skill and tenacity
over the past few years in weathering some pretty rough storms.
So I salute you for your accomplishments.
Indeed the banking industry, which continues to show
increasing signs of stability and profitability, ought to be
feeling pretty good these days. The most recent FDIC Quarterly
Banking Profile showed bank earnings at a record high for the
second consecutive quarter, and earnings of $15.7 billion for the
first six months of 1992, more than 33 percent higher than the
same period of 1991. Troubled assets at commercial banks fell
below $100 billion for the first time since the end of 1990, and
banks of all sizes and in all regions showed improvement in their
average ratio of troubled assets to total assets.
That is tremendous progress of which you can be rightfully
proud. In fact, it is this progress that enabled us to convince
the FDIC to hold the line on Bank Insurance Fund premiums for 76
percent of American banks, and to hold the increase to as little
as possible for the rest of the banks. But I don't think it's
time yet to declare final victory or overdose on complacency.
These early signs of industry profitability are still subject to
the forces at work in a changing, difficult and increasingly
complex economy. Which is why the Bush Administration will
continue to pursue its commitment to ensuring a financial system
that is modern, competitive, safe, sound and financially strong - one that can perform its critical role as the provider of
credit to American businesses and consumers.
All of us in this room know that the American economy is
undergoing some fundamental changes. The defense conversion
brought on by our triumphal victory in the Cold War, the
transformation of more and more industries into leaner, skillNB-2000
2
based organizations, the paying down of corporate and consumer
debt, a lending-cautious financial system hamstrung by
anachronistic laws and excessive regulation, and the emergence of
a high velocity, intensely competitive global economy have
altered the business environment for American enterprises. And
there is no denying that these changes have been painful for many
Americans.
The President knows that these transitional difficulties
have made many Americans, and many American banks and businesses,
uncertain about the future. But he also knows that if given
enough entrepreneurial elbow room, America will continue to
outwork, outproduce and outsmart the rest of the world. Which is
why the President has laid the foundation for the future by
unveiling his Agenda for American Renewal, an integrated,
comprehensive economic plan which builds on our strengths and
will prepare Americans and American businesses to compete in the
next century.
One crucial part of the President's Agenda calls for rolling
back excessive regulation. I am sure many of you participated in
a nationwide survey conducted by your parent organization, the
Independent Bankers Association of America, so the following
number won't shock you, but it is worth repeating — the 1,861
banks that responded to the survey estimated that the costs of
complying with regulations ate up an astonishing 42 percent of
net income. Now that is horrifying!
So the Bush Administration has tackled the problem of
overregulation head on. The President has imposed a moratorium
on new regulations, attacked needless regulation through the
Council on Competitiveness, and has proposed regulatory relief
measures in a number of areas.
The Treasury Department has played an active role in the
President's regulatory initiative. We have taken a number of
regulatory actions that will promote economic growth and reduce
or simplify regulatory burdens. Altogether we have identified
for elimination or modification 175 existing regulations. And
while it is often difficult to quantify precisely their economic
impact, I am happy to say that, when fully implemented, these
reforms could result in annual savings to businesses and the
economy of almost $1 billion.
One significant example of these reforms is a brand new set
of IRS regulations, announced this week, which significantly
simplify the payroll tax reporting rules for the nation's nearly
six million employers, including many of you in this room. Under
the new guidelines, most small businesses will now only have to
deposit their employment taxes once a month. Other employers
will deposit their taxes on fixed days of the week. Either way,
the deposit schedule will be set yearly. This change will free
3
employers from the costly task of constantly monitoring payroll
taxes, and allow businesses to focus on selling products and
services and creating jobs.
The Administration has paid particular attention to easing
the burden of regulation on bankers. In one key action, the
Treasury Department has asked Congress to enact our Credit
Availability and Regulatory Relief Act. This legislation would
let bankers be bankers by curtailing many of the Congressionallyimposed burdens that require banks to spend more time filling out
forms than making loans.
Specifically, the proposed law would repeal a number of
excessive statutory requirements contained in last year's mis
named "Federal Deposit Insurance Corporation Improvement Act”.
For example, it would eliminate the requirement to develop socalled "tripwire" regulations, which would allow government to
micromanage many aspects of a bank1s operations, including
minimum earnings levels and employee compensation. It would make
auditors be auditors again, not policeman or regulators, and
would advance the substantive goals of the Community Reinvestment
Act while reducing its needless paperwork requirements. In
short, it would help get government off your back.
But there is one thing that our regulatory relief proposal
would not do. It will not compromise the safety and soundness of
our financial institutions. The Administration will continue to
target needless regulatory burdens. But at the same time, we
must not abdicate our regulatory responsibilities.
Another economic problem where regulation has had an impact
is credit availability. There's no question that regulatory
policies and practices have contributed to the credit crunch.
One reason is that, having witnessed the fate of S&L regulators
who were deemed too lax by Congress, it didn't take a weatherman
for examiners to figure out which way the wind was blowing. The
message was loud and clear — when in doubt, criticize the loan.
So at Treasury, we have focused much of our anti-credit
crunch effort on regulatory issues — with the goal of ensuring
that examiners use balance and common sense in the regulatory
process. Our anti-credit crunch campaign is a three-pronged
attack.
The first prong of attack is to revise regulatory policy and
practices to ease the credit crunch. Over 35 guidelines have
been issued to provide bank and thrift examiners in the field
with specific instructions aimed at credit crunch issues.
Examples of these new guidelines include:
Instructions that encourage lenders to work with
borrowers experiencing temporary difficulty.
4
Guidelines to ensure that valuation of real estate is
based on the ability to generate income over time, not
on liquidation value.
Expanding the capital base from which banks may lend by
increasing the includible amount of purchased mortgage
servicing rights and purchased credit card
relationships.
And,
Instructions to examine each credit on its own merits
rather than, for example, lumping all real estate loans
together.
The second prong of our attack on the credit crunch is a
broad communications effort to make sure examiners are applying
the letter and spirit of these new anti-credit crunch guidelines
in the field. To accomplish that, we have held three national
meetings of examiners at which Secretary Brady or I have spoken.
Bank and thrift regulators have held numerous educational
meetings with their examiner corps. And I have met with bank
examiners in several cities, including Houston, to discuss
current problems banks are experiencing. The message given at
all of these gatherings has been straightforward — bring common
sense and balance into the examination process and follow the new
guidelines.
Treasury's third prong of attack expands on this
communication effort by bringing bankers, borrowers, business
people and regulators together at the same time and place to
discuss the credit crunch. We have held over 350 of these
meetings across the country to open a dialogue on credit crunch
issues, and to make sure that each group understands the other's
perspectives. I travelled to Houston in May to discuss these
efforts at the Urban Land Institute's National Convention, and
met with Texas Bankers at the Houston Federal Reserve Offices to
discuss Texas banking issues. And this morning I met here with
the Board of Directors and senior officers of the Dallas Federal
Reserve Bank.
Secretary Brady has recently expanded this communications
effort by calling for a nationwide series of credit crunch
meetings, including one here in Dallas next month. These
meetings will bring bankers and borrowers together with officials
from the Office of Thrift Supervision and the Comptroller of the
Currency to allow open discussion of possible regulatory abuses,
and to focus on three main areas — the restructuring and/or
rollover of commercial real estate loans; acquisition,
development and construction financing of residential and multi
family housing; and small business loans.
5
It would be naive of me to believe that every one of the
7,000 or so bank and thrift examiners is uniformly and correctly
applying our anti-credit crunch guidelines and using balance and
common sense in the field. I do not doubt that there are some
overzealous examiners out there. But that is precisely why
several months ago we established a parallel appeals process for
bankers who feel victimized by unprofessional examiner conduct,
or think credit crunch guidelines have not been properly applied.
We have invited banks to appeal to higher levels of regulatory
agencies, and frankly, we have not received many RSVPs.
I
have heard the reasons why bankers have not used this
appeals process — how they fear examiner revenge. But we have
said from the start that examiner retribution will not be
tolerated. And bankers cannot have it both ways — complaining
to us about examiner abuses, but refusing to use the appeals
process created expressly for that purpose.
If the anti-credit crunch guidelines are being ignored or
misapplied by examiners in the field, we want to hear about it.
And if specific allegations of inappropriate conduct are
verified, prompt and appropriate action will be taken.
So we have persistently, and with all the energy we can
muster, tried to combat the credit crunch on a number of fronts.
And while it is not my purpose to bash bankers for the credit
crunch, I think it is time for banks to step up to the plate and
start making loans again. I know that demand for credit is not
strong, and I understand the caution in the industry after this
difficult period. But banking is the business of making loans to
provide needed capital. It is not risk-free — and it is not
intended to be so. And so we urge bankers to step forward
aggressively and make loans to sound borrowers and work with them
during their temporary difficulties.
At the same time — while we prod bankers to do their job —
we must allow bankers to do their job. For one thing, that means
we should resolutely fight the market value accounting efforts of
the SEC and the Financial Accounting Standards Board.
Just two days ago I travelled to the headquarters of the
Financial Accounting Standards Board in Connecticut so that I
could look them in the eye and tell them what I thought about
this market value accounting issue, and how I worried that a
bean-counter mentality was going to create a harmful divergence
between accounting rules and the practicalities in the real world
of financial institutions.
I
told them that the net effect of adopting a market value
accounting regime could be an increased unwillingness on the part
of banks to assume and manage longer term risks and fulfill their
traditional and proper role in the economy.
6
I
told them that the FASB proposal on the accounting
treatment for the securities portfolios of financial institutions
would, as a practical matter, require every bank to mark their
entire securities portfolio to market, with the undesirable
consequences of creating volatility in bank earnings statements
and capital accounts and depriving financial institutions of a
valuable tool in meeting changes in liquidity needs.
I asked the FASB people to recall the World War II movie,
"Bridge on the River Kwai," where a British officer and his unit,
who were prisoners of war of the Japanese, built a railroad
bridge under the supervision of their captors. The bridge was a
tremendous feat of engineering and professional determination,
but there was a problem. It would directly aid the Japanese war
effort. Ultimately, the bridge was blown up by allied forces.
And I told the FASB people that I did not believe that
accountancy demanded the kind of consequence-blind
professionalism that the British officer displayed. We all need
to blow up more of the bridges that hinder economic flexibility
and growth.
Yet it seems to me that the mark-to-market accounting
problem is only one example of a lot of questionable trades being
made in the regulatory arena. Too much in economic growth and
entrepreneurial elbow room is being given for too little. And
economic opportunity, entrepreneurial initiative and the spirit
of commerce that have been the hallmark of America since the
beginning of the Republic are suffocating, suffocating in an
avalanche of unnecessary regulations, forms, accountants,
lawyers, lawsuits, technical experts, and paper shuffling that,
as far as I can see, do very little except distract us from what
really matters, burden us with unnecessary costs, and advance the
quality of life in America not one jot.
This is not just missing the forest for the trees. This is
inspecting the leaves and pine needles! And it must stop!
But it will take more than the considerable effort we have
made in the Bush Administration — and more than the resistance
of energetic associations like yours — to stop and roll back the
tidal wave of regulation. Because the seed of regulatory reform
must be planted in the hearts, homes and businesses of the
American people. It will not take root inside the Washington
Beltway.
More than 200 years ago, our founding fathers ignited a
revolution against the oppression of a far away government.
Their cry was "no taxation without representation," and the rest,
as they say, is history. Now, the time has come once again for
the American people, and for American banks and businesses, to
rise against Federal, state and local governments that would
7
limit their economic freedom by excessive regulation —
against "strangulation through regulation."
to rebel
I am convinced that nothing short of a national rebellion
will break the chokehold of overregulation that has throttled
small businesses and banks. And to be motivated to mount such a
rebellion, the working men and women in America must realize that
it is their jobs, and their pocketbooks, and their standard of
living, that are at stake. Then, maybe then, we will see a
national uprising against excessive regulation, excessive
lawsuits, and the excesses of other enemies of economic growth,
competitiveness, productivity and entrepreneurism.
That is what it is going to take. I hope that all of you in
this room will be active participants in such a movement. And I
can assure you that the Bush Administration will continue to
devote its full energies to stop excessive regulation. We are
committed to making government an ally of American business and
banks, not an adversary. And we will strive to create an
environment marked by economic growth, entrepreneurial
opportunity and job creation.
I know you share this vision. And we at the Treasury
Department and in the Administration look forward to working with
you to see that it becomes a reality as our country enters the
next American Century.
Thank you.
ÜÜ '
•vJ
M
i
-'
:
TREASURY NEWS
I M I
WÈÊÊÈÊÈÊBÊm
tment of the Treasury
Washington, D.C.
Telephone 202-622-2960
01 in L . Wethi ngtoh \j£ jpf:*c, ■
Assistant Secretary for International Affaire
U.S, Department of the Treasury
Remarks for the Session on
"Capital Flows, Investment, and Growth"
Ninth General Meeting of the Pacific Economic Cooperation Council
San Francisco
September 24, 1992
Int roduct ion
Our topic today give us an opportunity to discuss one of the
key aspects of the success of the Pacific region: the ability to
attract a significant share of global capital flows to fuel high
growth.
It is appropriate that we pay a great deal of attention
to this subject because it is at the heart of the region's
prospects for further economic integration as well as for strong
economic performance.
According to the 1992 U.N. World Investment Report, Asian
destinations dominate foreign direct investment flows into
developing countries. The region received $19.5 billion, or 61
percent of total flows, in 1990. Indeed, over the last decade,
most of the developing countries receiving the largest average
annual inflows of direct investment were Pacific countries,
including Singapore, Malaysia, China, Hong Kong, Thailand, and
Taiwan.
Pacific countries are also among ti.a leaders of the
developing world in building securities markets.
In the last
decade, stock markets, supported in part by foreign capital,
emerged throughout the region, and several were among the best
performing markets in the world in 1991.
Growing Regional Diversification of Investment and Trade Flows
At the moment, we are witnessing an important evolution in
the international sources of capital inflows into the Pacific
region: they are becoming more diverse. While the stock of
Japanese direct investment in developing and industrializing Asia
remains considerably larger than that of the United States,
recent flows from the United States are accelerating. U.S.
direct investment outflows to developing and industrializing Asia
tripled in 1990 and rose 12 percent in 1991.
In the immediate future, we are likely to see some leveling
off in Japanese influence over other Asian capital and investment
markets as a consequence of the difficulties in Japan's own
financial markets. In the case of direct investment alone,
H B-2001
2
outflows from Japan to Asia fell 14 percent in 1990 and 16
percent in 1991.
At the same time, we are seeing other players enter the
ranks of important foreign investors in the region, particularly
Taiwan, Singapore, Hong Kong, and Korea.
In 1991, outward FDI
flows from these newly industrializing economies (NIEs) surpassed
those of both Japan and the U.S. in Malaysia and Indonesia, and
were almost as large as Japan’s in Thailand. Taiwan alone was
the largest single foreign investor in Malaysia and Vietnam in
1991.
I see no evidence of a trend toward a trade or investment
economic bloc in Asia, nor of a dominant role for any major
industrial power.
In fact, developments seem to be going in the
opposite direction.
A trend toward diversification now characterizes the
region’s trading patterns. Developing and industrializing Asian
countries are increasingly turning to new suppliers within their
own region for their imports. Japan's share of developing and
industrializing Asia's imports has declined only slightly from
23.7 percent in 1985 to 21.5 percent in 1991. The U.S share has
remained unchanged at roughly 15 percent. But devexoping and
industrializing Asia now buys 33.1 percent of its imports from
other countries within the region, compared to 23.7 percent in
1985. At the same time, the region’s trade with the rest of the
world remains very large. By comparison, only 40 percent of
Europe's trade is with the rest of the world.
Moreover, I do not believe that we are witnessing the
emergence of a yen monetary bloc, despite the increase in yendenominated international transactions. Recent research also
suggests no clear pattern in the influence exerted by different
major financial centers on interest rates in different Asian
financial markets; some reflect rates in Tokyo and ethers rates
in New York.
In our view, the greater dispersion of economic power and
diversification of trade and investment flows will serve the
region well. As any investor knows, diversification can be a
significant source of strength and stability.
U.S. Economic Re1ations with the Pacific Region
Our own trade patterns remain the most diverse of any major
industrial country or region. In our post-war international
economic relations, we have avoided regional specialization and a
one-sided mercantilist strategy, and have instead chosen broadbased global engagement, open markets, and expanded two-way
trade.
3
In the wake of NAFTA and EAIj we have been accused of an
excessive focus on Latin America. Latin America is increasingly
important to U.S. economic interests, but our trade with
developing and industrializing Asia remains larger and is
growing. Today, developing and industrializing Asia accounts for
18.9 percent of U.S. trade, up from 15.6 percent in 1985. Latin
America's share of our trade has remained roughly constant at
about 14 percent.
In short, our trade and investment ties with
the region remain critical and will continue to promote mutually
beneficial economic integration and growth.
In addition, I would like to highlight certain elements of
the domestic U.S. economic picture which augur well for Pacific
and global economic performance. The U.S. economy has been
undergoing substantial adjustment for some time. Partly as a
result, a restoration of strong economic growth is likely to come
sooner for the U.S. than for a number of the other major
industrial countries.
We have also become a low-capital-cost country.
Indeed, a
1992 OECD study found the overall cost of capital to be lower in
the U.S. than in Japan and about even with Germany, The U.S.
inflation rate for 1992 and 1993 is expected to be around 3
percent, St or below the rate for all the industrial countries as
a group.
The United States has the largest, most liquid and most
efficient capital markets in the world. Our stock market remains
near its record highs, as other major markets struggle at levels
of four or five years ago. The onjoing sluggish performance in
the Nikkei is generating a retrenchment by Japanese investors,
with diminished capital outflows to the Pacific region.
All of these factors, the willingness to adjust and
restructure in the face of international competition rather than
avoid it, low capital costs, and efficient, open capital markets
will sustain the United States in its role as a global focal
point for economic integration in the post-Cold War period.
Future Capital Flows to the Pacific Region:_.The. Policy
Environment
As we look to the future as a region, we are entering an era
of intense competition for global capital. Other regions must
mobilize financing for major tasks: the economic transformation
of the former Soviet Union and Eastern Europe, ongoing reform and
strengthened growth throughout Latin America, and economic
recovery in the major industrial nations.
In this context, no country can be confident of needed
capital inflows in the absence of an attractive environment.
an attractive environment cannot be provided through a few
And
4
special incentives.
It depends on a whole complex of policies
spanning direct investment, capital market regulation, monetary
policy, financial services, and foreign exchange controls, as
well as the overall economic and regulatory environment.
The interdependence among these policies is crucial.
Foreign investors need more than the legal right to invest.
o
They need to be able to secure local financing and access to
local savings.
o
They need access to foreign exchange through freely
operating markets open to domestic and foreign customers
alike.
o
They need access to traditional suppliers of banking
services and modern financial infrastructures.
o
They need a stable monetary environment without wide
fluctuations in inflation and interest rates.
o
They need the freedom to make their own decisions about
where to lend, what plant and equipment to build, and what
products to produce.
o •
They need the right and practical means to repatriate
profits without impediment.
The Contribution of Foreign Investment to Recipient Countries
If countries fail to take a comprehensive approach to the
policy environment for foreign investment, foreign investors have
other options and the crucial boost that foreign investors can
make to development and growth is diminished. roreign investment
is an effective vehicle for promoting technology transfer,
increased labor skills, export expansion, and capital formation.
If we look at the contribution of foreign direct investment
in individual countries of developing and industrializing Asia,
we can see some significant differences.
In Malaysia, Thailand,
and Indonesia, foreign direct investment in the manufacturing
sector accounts for 10, 8 and 6 percent respectively of total
capital formation. But, for other countries, the contribution to
overall investment is still relatively small. In Korea, the
Philippines, and China, the share is around 1 percent or lower.
While part of the variation is
countries’ overall economic size, I
also some very clear policy reasons
The countries with low ratios share
clearly due to differences in
would suggest that there are
for these differing shares.
certain characteristics:
5
use, to varying degrees, of capital and foreign
exchange controls;
distorted, and frequently high, capital costs;
government intervention in capital allocation;
a variety of constraints on foreign financial service
providers’ activities, ranging from inability to enter
the market, to limits on the services which can be
provided, to denial of access to domestic funds.
I would urge countries to review these policies very
seriously. Asia, like other regions, will be in competition for
scarce global capital in the years ahead. The countries that win
this competition will be those which construct a policy
environment which encourages private investment, domestic and
foreign alike. Countries which do not liberalize will lose the
competition.
It is perfectly clear that official bilateral flows will no
longer make a major contribution to the development and growth of
middle- and upper-income developing countries.
I would suggest
therefore that the payoff from government activity directed at
trying to increase official inflows will be small. Asian and
other governments would be better advised to work on generating
an appropriate regime for attracting private investment.
I might add that this is not just an issue for the
developing and industrializing countries cf Asia.
I believe that
Japan could benefit greatly from an increase in investment
inflows over their current exceptionally low levels. Japan's
cumulative inward direct investment was $23 billion in 1991,
while its cumulative outward direct investment was $352 billion.
Its current investment regime has some serious impediments, such
as the access problems created by the keiretsu and disincentives
to portfolio investment stemming from the difficulties foreigners
have in exercising shareholder rights.
Financial Services Liberalization
As part of the effort to construct a supportive policy
environment for capital inflows, we must not underestimate the
role played by financial services liberalization in attracting
investment. U.S. companies routinely cite access to financial
service providers of their choice and to modern financial
infrastructures as important incentives to invest.
The United States has underway a number of bilateral
discussions to further liberalization progress in certain key
areas. We have bilateral financial policy talks with Korea,
Taiwan, China, and Japan. And we are expanding our dialogue with
6
a number of rapidly liberalizing markets in Southeast Asia. But
financial services liberalization is an issue which merits a
broad, comprehensive, cross-country approach.
President Bush's recent call for a strategic network of free
trade agreements with Pacific countries will lead us in the
direction of enlarged consultations among our governments in the
financial policy area. While it may be too early to talk about
the structure of regional trade and investment arrangements, we
can contemplate the possibility of future regional arrangements
covering financial market liberalization. This can deepen the
process of multilateral liberalization.
Furthermore, as you all know, we are engaged in a major
effort in the context of the Uruguay Round to establish standards
for financial services liberalization. * Unfortunately, a number
of countries in the Pacific region have hung back from this
effort -- in some cases, even countries which have made
significant liberalization progress but refute to commit
themselves formally and permanently to maintaining their
openness.
The failure of many Asian countries to provide strong
commitments in the Uruguay Round for financial market
liberalization is a fundamental misreading of our mutual economic
and financial interests and ignores the capital needs of this
outward-oriented, high-growth region. As a region, we should be
united on this issue and at the forefront of Uruguay Round
financial services liberalization.
Foreign Investment and Economic Integration
In general, international investment flows, both inward and
outward, are a potent force for successful economic integration.
Both recipient and investing countries benefit because the
international competitiveness and efficiency of both are
increased. The production process can be allocated to different
countries based on comparative advantage.
As a consequence, international investment has a major
impact on trade flows. In the United States, for example, trade
between multinationally affiliated companies accounted for 26.7
percent of total U.S. exports and 17.9 percent of total U.S.
imports in 1989. The evidence suggests that international
investment flows have contributed to an expansion in U.S. trade
flows in both directions. In the developing region with which
the U.S, historically has had the strongest investment ties,
Latin America, we have seen strong growth in both exports and
imports in recent years. Thus, international investment flows
may well act to restrain the size of external imbalances. This
is a significant potential benefit which has important
7
implications in the Pacific context, given large U.S. bilateral
external imbalances with some countries in the region.
Conclusion
In summary, let me reiterate several key aspects of recent
regional economic developments which bear heavily on the regional
outlook as we move into the post-Cold War era.
o
the growing diversification of investment and trade ties
within the region;
o
the importance of capital inflows to the economic success of
a number of the best~perfornnng countries in the region;
o
the crucial role played by investment flows in the region's
economic integration and these flows' potential role in
helping to reduce large external imbalances;
o
the substantial variation in financial/capital market
policies among countries of the region which will result in
differences in countries' ability to attract foreign
capital, particularly in the context of increasingly intense
competition for global capital.
If we put these developments together, we get a clear
picture of the contribution that expanding investment flows can
make to regional growth and integration, as well as to decreasing
the disparity in economic size and income levels among the
countries of the region. But these expanded flows cannot be
taken for granted. Deliberate and comprehensive policy
strategies clearly play a major role in encouraging inflows.
Many of the developing and industrializing countries of the
Pacific have served as models of market-oriented development and
growth in the post-WWII period.
I would submit that if they are
to continue to serve as models in the post-Cold War era they must
adopt open, market-oriented policies with respect to financial
and capital markets. A good immediate step would be to come
forward with strong commitments for financial services
liberalization in the Uruguay Round.
CONTACT:
FOR IMMEDIATE RELEASE
September 25, 1992
ANNE KELLY WILLIAMS
(202) 622-2960
Treasury applauds CFTC conferees' action
The Treasury Department lauded the agreement reached by the
conferees on the Commodity Futures Trading Commission (CFTC)
reauthorization legislation yesterday as a key break in the
legislative logjam. The agreement addressed two critical reforms
recommended by the 1987 Presidential Task Force on Market
Mechanisms (The Brady Commission).
The first reform vests one agency, the Federal Reserve, with
the authority to oversee and coordinate margin requirements in
the "one market" of equity-related instruments — stocks, stock
options and stock index futures. This step will allow the
government to help avoid the kind of major market disruptions
that occurred in October 1987 and again in October of 1989. The
second provision would allow the CFTC to clear up the legal
uncertainty concerning "swap" transactions.
"I applaud the conferees for their farsighted efforts in
unifying regulation for the 'one market'," said Treasury
Secretary Nicholas F. Brady. "This puts in place the final
recommendation of the President's 1987 Task Force on Market
Mechanisms." All of the other major recommendations have already
been implemented.
The Brady Commission proposals included:
o
one agency to coordinate the critical intermarket
regulatory issues (CFTC reauthorization legislation)
o
circuit breaker mechanisms coordinated between stocks
and stock index futures (adopted voluntarily by the
exchanges)
o
margins set at consistent levels between stocks and
stock index futures (CFTC reauthorization legislation)
o
unified clearing and settlement systems (Market Reform
Act of 1990)
o
enhanced information disclosure for large stock traders
(Market Reform Act of 1990)
#
NB-2002
#
#
TREASURY NEWS
Washington, D.C
Department of ihe Treasury
Telephone 2 0 2 -6 2 2 -2 9 6 0
For release upon delivery
Expected at 2:00 PM
September 29, 1992
STATEMENT OF THE HONORABLE JEROME H. POWELL
UNDER SECRETARY FOR FINANCE
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT
COMMITTEE ON WAYS AND MEANS
UNITED STATES HOUSE OF REPRESENTATIVES
SEPTEMBER 29, 1992
Thank you for inviting me to discuss the settlement
agreement that the government concluded with Salomon Brothers in
May 1992.
To summarize briefly the Treasury*s perspective on
that settlement, it was, in our view, a fair one.
The firm's
openness and cooperation during the investigation were taken into
account, but the charges against Salomon were very serious.
Salomon's misdeeds had posed a very real threat to the integrity
of this crucial market, and it was therefore appropriate that the
consequences for the firm be severe.
That said, I would point out that the Treasury was not
itself directly involved in formulating or negotiating the
settlement agreement.
Thus, on questions relating to the
specifics of that process, I would defer to my colleagues from
the enforcement agencies.
NB-2003
In my statement today, I will instead
2
concentrate on the role that the Treasury has played more broadly
in the thorough-going review and substantial change that the
government securities market has been subj ected to during the
last year.
Market and Auction Reforms
That topic forms the core of my answer to the first of the
questions posed in the letter of invitation to this hearing, that
is, what the Treasury's role has been in ensuring the integrity
of the market and of the auction process.
I would note that it
was Treasury officials who, in May and June of 1991, alerted the
Securities and Exchange Commission to suspicious behavior in the
Treasury securities market and provided related information to
the Department of Justice.
That timely action prompted the
investigations that eventually led to Salomon's admissions.
Throughout this period, the Treasury has taken the lead in
designing and implementing a comprehensive set of reforms, taking
into account both the identified problems and the potential for
improvement in the government securities market.
We have
approached this task with care, for even small mistakes in a
market this large can be very costly to the taxpayer.
In that
vein, we have generally invited public comment and debate on our
proposals for change.
But we have not been timid.
recent changes in this market is a long one.
The roster of
3
Last fall, the Treasury, the SEC, and the Federal Reserve
embarked on a wide-ranging study of the market that culminated in
the Joint Report on the Government Securities Market, which the
agencies presented to the Congress in January 1992.
The Joint
Report directly addressed problems that had surfaced with
disclosures by Salomon Brothers and made recommendations for
administrative and legislative reforms.
While no new legislation has been enacted, the bulk of the
administrative changes have already been implemented.
For
instance, we have taken measures to strengthen enforcement of
auction rules, including verification of large bids by customers
and closer monitoring of noncompetitive bidding.
We are in the
process of automating the bidding in Treasury auctions, which
will facilitate both participation by bidders and surveillance by
the Treasury.
In addition, we are releasing today a revised
version of the proposed uniform offering circular which contains
the rules governing Treasury auctions.
The new offering circular
will be published tomorrow for comment in the Federal Register.
In the Joint Report, the Treasury announced a new policy to
combat shortages or "squeezes” of particular Treasury securities.
The Treasury will provide additional quantities of a security to
the marketplace when an acute, protracted shortage develops.
The
reopening of security issues will reduce the incentives to c o m e r
a security and thereby reduce the potential for squeezes.
In
4
addition, a new interagency working group has been formed to
improve surveillance and strengthen coordination among the
various agencies in this area.
The Treasury has taken steps to broaden auction
participation, including allowing all government securities
brokers and dealers to submit bids for customers and permitting
any auction participant to bid without deposit, as long as a
valid autocharge agreement is in place.
The Treasury also has
raised the limit on noncompetitive bids in note and bond auctions
to accommodate more participants.
We have undertaken an intensive review of the auction method
itself.
This has resulted in our current experiment with a
single-price (or "Dutch") auction method.
This new method of
awarding all securities at a single price lowers the risk to
bidders of overpaying for securities, and will, we hope, also
encourage broader participation in the auctions.
With its
potential to encourage more aggressive bidding, the single-price
auction format could result in lower financing costs for the
federal government.
The first two Treasury auctions in our year
long experiment took place last week.
Together with the Subcommittee on Oversight, we have
strongly supported both legislation that would reinstate the
Treasury's rulemaking authority under the Government Securities
5
Act: of 1986, as well as the bill that would make false or
misleading written statements in connection with the issuance of
government securities explicit violations of the federal
securities laws.
We have also encouraged legislation that would
allow regulators access to information on large positions in
Treasury securities.
I could continue to enumerate our initiatives in this
market, but I will simply note that the Treasury has taken all
these actions because of our direct and paramount interest in
maintaining the fairness and integrity of the Treasury auction
process and the government securities market.
Moreover,
throughout the process, we have chosen market-oriented solutions
whenever possible to bolster the effectiveness and efficiency of
this very important market.
The Settlement Agreement with Salomon Brothers
The Treasury fully supports the settlement agreement reached
between Salomon and the U.S. government.
We believe that the
settlement agreement, together with other sanctions imposed on
Salomon by the Treasury and the Federal Reserve Bank of New York,
are a sufficient deterrent to violations of auction rules and to
anticompetitive behavior.
As you know, shortly after Salomon
Brothers' disclosure of auction violations, the Treasury
prohibited the firm from submitting bids for customers in
6
Treasury auctions, a sanction that was only recently lifted.
The
Federal Reserve Bank of New York also suspended its trading
activity with Salomon Brothers for two months starting in June
1992.
Furthermore, market participants have seen Salomon Brothers'
management forced out and have seen the firm's financial position
suffer as a result of its actions.
In addition to the sanctions
imposed by the government, Salomon has experienced extensive
losses of employees and clients, as well as significant damage to
its reputation.
The settlement agreement was negotiated directly between
Salomon and the enforcement agencies: the SEC and the Department
of Justice.
The Treasury was consulted and kept apprised of the
progress of the negotiations.
The Treasury also reviewed drafts
of certain documents related the settlement.
As the SEC and the
Department of Justice were directly involved in the settlement
negotiations, those agencies may be able to provide further
information on how the $290 million figure was reached.
Taxation Issues Related to the Salomon Brothers Settlement
I am not in a position to comment on Salomon Brothers' tax
situation, including the question of deductibility of the
settlement payments.
In response to your questions about the
7
alleged fictitious tax trades, I would stress that the settlement
agreement does not preclude potential adjustments to Salomon
Brothers' tax liability or the assessment of penalties, nor does
it preclude charges of tax fraud.
Specifically, the settlement
agreement reserves for the government the ability to bring future
actions against Salomon Brothers for any violation of Title 26 of
the U.S. Code.
The Departmental Offices of the Treasury played
no role with respect to the provision of the settlement agreement
excluding claims with respect to the Internal Revenue Code.
Other Issues
Mr. Chairman, in your letter, you requested information on
the administration of the $100 million restitution fund.
The
administration of this civil claims fund is described in detail
in the settlement document entitled "Final Judgment of Permanent
Injunction and Other Relief as to Salomon Inc and Salomon
Brothers Inc," filed with the U.S. District Court for the
Southern District of New York on May 20, 1992.
That document was
enclosed with the Treasury's response to your earlier letter.
As
the SEC is involved in administration of the fund, that agency
may be best able to provide additional information, should you
require it.
With regard to potential criminal charges stemming from the
Salomon Brothers violations, I can only mention that it is the
8
responsibility of the SEC to refer criminal violations of federal
securities laws to the Department of Justice, and it is the
responsibility generally of the Department of Justice to
prosecute criminal violations of federal law.
I suggest that you
inquire of those agencies as to the status of potential criminal
charges.
In closing, we appreciate the continuing interest of this
Subcommittee in ensuring that the Treasury can continue to
finance the public debt at the lowest possible cost to the
taxpayer.
Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURYfS AUCTION OF 13-WEEK BILLS
Tenders for $10,246 million of 13-week bills to be issued
October 1, 1992 and to mature December 31, 1992 were
accepted today (CUSIP: 912794ZX5).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2.72%
2.74%
2.73%
Investment
Rate____
2.78%
2.80%
2.79%
Price
99.312
99.307
99.310
Tenders at the high discount rate were allotted 12%.
The investment rate is the equivalent coupon-issue yield.
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
24,630
36,325,805
11,420
24,750
43,595
52,235
1,734,445
12,465
8,675
24,745
21,405
488,540
781.400
$39,554,110
Accepted
24,630
9,066,205
11,420
24,750
43,595
30,235
32,165
12,465
8,675
24,745
21,405
163,900
781.400
$10,245,590
Type
Competitive
Noncompetitive
Subtotal, Public
$34,722,515
1.290.160
$36,012,675
$5,413,995
1.290.160
$6,704,155
2,826,535
2,826,535
714.900
$39,554,110
714.900
$10,245,590
Federal Reserve
Foreign Official
Institutions
TOTALS
NB-2004
Pila PUBLIC DEBT NEWS
w m
Department of the Treasury •
Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
September 28, 1992
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $10,272 million of 26-week bills to be issued
October 1, 1992 and to mature April 1, 1993 were
accepted today (CUSIP: 912794B78).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2.85%
2 .8 6 %
2.85%
Investment
Rate_____Price
2.93%
98.559
2.94%
98.554
2.93%
98.559
Tenders at the high discount rate were allotted 18%.
The investment rate is the equivalent coupon-issue yield.
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
17,540
38,095,710
5,050
23,955
26,075
29,915
1,514,830
8,945
5,040
28,370
12,440
357,240
679.500
$40,804,610
Accented
17,540
9,310,410
5,050
23,955
21,975
20,895
73,750
8,945
5,040
28,370
12,440
63,740
679.500
$10,271,610
Type
Competitive
Noncompetitive
Subtotal, Public
$36,045,650
1.006.060
$37,051,710
$5,512,650
1.006.060
$6,518,710
2,600,000
2,600,000
1.152.900
$40,804,610
1.152.900
$10,271,610
Federal Reserve
Foreign Official
Institutions
TOTALS
NB-2005
PU BLIC D EBT NEW S
■■
11
j ~ u ¿-"i
55
i fi
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
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F O R IM M E D IA T E R E L E A S E
Septem ber 29, 1992
£ y« ■
Contact:^ P e te r H ollenbach
(202) 219-3302
TREASURY PU BLISH ES PR O PO SED O FFER IN G CIRCULAR
T he T reasury today m ade public a revised uniform offering circular for th e sale of
m arketable Treasury securities. T he circular will b e ap p ear in the Septem ber 30, 1992,
edition o f the F ed eral R egister as a proposed rule. T he uniform offering circular was first
published for com m ent on January 31, 1992. As a result o f com m ents received from the
public, Treasury m ade significant revisions to the proposed circular, and is publishing the
revised circular for additional comment.
T he com m ent p erio d will last 30 days. T he
Treasury believes th at this revised circular will provide clear and com prehensive rules for
auction participants and minimize regulatory burden.
oOo
!
FOR RELEASE AT 2:30 P.M.
September 29, 1992
CONTACT:
Office of Financing
° 202-219-3350
TREASURY’S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling
approximately $ 20,400 million, to be issued October 8, 1992
This offering will result in a paydown for the Treasury of about
$ 4,025 million, as the maturing bills are outstanding in the
amount of $ 24,415 million. Tenders will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public Debt,
Washington, D. C. 20239-1500, Monday, October 5, 1992,
prior to 12:00 noon for noncompetitive tenders and prior to
1:00 p.m., Eastern Daylight Saving time, for competitive tenders.
The two series offered are as follows:
91-day bills (to maturity date) for approximately
$ 10,200 million, representing an additional amount of bills
dated
July 9, 1992
and to mature January 7, 1993
(CUSIP No. 912794 ZY 3), currently outstanding in the amount
of $ 12,033 million, the additional and original bills to be
freely interchangeable.
182 -day bills (to maturity date) for approximately
$10,200 million, representing an additional amount of bills
dated April 9, 1992
and to mature
April 8, 1993
(CUSIP No. 912794 B8 6), currently outstanding in the amount
of $ 14,247 million, the additional and original bills to be
freely interchangeable.
The bills will be issued on a discount basis under competi
tive and noncompetitive bidding, and at maturity their par amount
will be payable without interest. Both series of bills will be
issued entirely in book-entry form in a minimum amount of $10,000
and in any higher $5,000 multiple, on the records either of the
Federal Reserve Banks and Branches, or of the Department of the
Treasury.
The bills will be issued for cash and in exchange for
Treasury bills maturing
October 8, 1992. 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 competi
tive 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 $ 2,297 million as agents for foreign and international
monetary authorities, and $ 5,004 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 5176-1 (for 13-week series) or Form PD 5176-2 (for 26-week
seriest).
NB-2006
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 2
Each bid must state the par amount of bills bid for, which
must be a minimum of $10,000. Bids over $10,000 must be in mul
tiples of $5,000. A bidder submitting a competitive bid for its
own account, whether bidding directly or submitting bids through
a depository institution or government securities broker/dealer,
may not submit a noncompetitive bid for its own account in the
same auction.
Competitive bids must show the discount rate desired,
expressed in two decimal places, e.g., 7.10%. Fractions may not
be used. A single bidder, as defined in Treasury's single bidder
guidelines, may submit competitive tenders at more than one dis
count rate, but the Treasury will not recognize, at any one rate,
any bid in excess of 35 percent of the public offering. A com
petitive bid by a single bidder at any one rate in excess of 35
percent of the public offering will be reduced to the 35 percent
limit. The public offering for any one bill is the amount offered
for sale in the offering announcement, less bills allotted to Fed
eral Reserve Banks for their own account and for the account of
foreign and international authorities in exchange for maturing
bills.
Noncompetitive bids do not specify a discount rate. A
single bidder should not submit a noncompetitive bid for more than
$1,000,000. A noncompetitive bid by a single bidder in excess of
$1,000,000 will be reduced to that amount. A bidder may not sub
mit a noncompetitive bid if the bidder holds a position, in the
bills being auctioned, in "when-issued" trading or in futures or
forward contracts. A noncompetitive bidder may not enter into any
agreement to purchase or sell or otherwise dispose of the bills
being auctioned, nor may it commit to sell the bills prior to the
designated closing time for receipt of competitive bids.
The following institutions may submit tenders for accounts
of customers: depository institutions, as described in Section
19(b)(1)(A), excluding those institutions described in subpara
graph (vii), of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A));
and government securities broker/dealers that are registered with
the Securities and Exchange Commission or noticed as government
securities broker/dealers pursuant to Section 15C(a)(1) of the
Securities Exchange Act of 1934. Others are permitted to submit
tenders only for their own account.
For competitive bids, the submitter must submit with the
tender a customer list that includes, for each customer, the name
of the customer and the amount and discount rate bid by each cus
tomer. A separate tender and customer list should be submitted
for each competitive discount rate. Customer bids may not be
aggregated by discount rate on the customer list.
For noncompetitive bids, the customer list must provide,
for each customer, the name of the customer and the amount, bid.
For mailed tenders, the customer list must be submitted with the
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 3
tender. For other than mailed tenders, the customer list should
accompany the tender. If the customer list is not submitted with
the tender, information for the list must be complete and avail
able for review by the deadline for submission of noncompetitive
tenders. The customer list must be received by the Federal
Reserve Bank by auction day.
All bids submitted on behalf of trust estates must identify
on the customer list for each trust estate the name or title of
the trustee(s), a reference to the document creating the trust
with date of execution, and the employer identification number
of the trust.
A competitive bidder must report its net long position in
the bill being offered when the total of all its bids for that
bill and its net long position in the bill equals or exceeds $2
billion, with the position to be determined as of one half-hour
prior to the closing time for the receipt of competitive tenders.
A net long position includes positions, in the bill being auc
tioned, in when-issued trading and in futures and forward con
tracts, as well as holdings of outstanding bills with the same
CUSIP number as the bill being offered. Bidders who meet this
reporting requirement and are customers of a depository institu
tion or a government securities broker/dealer must report their
positions through the institution submitting the bid on their
behalf. A submitter, when submitting a competitive bid for a
customer, must report the customer's net long position in the
security being offered when the total of all the customer's bids
for that security, including bids not placed through thè submit
ter, and the customer's net long position in the security equals
or exceeds $2 billion.
Tenders from bidders who are making payment by charge to a
funds account at a Federal Reserve Bank and tenders from bidders
who have an approved autocharge agreement on file at a Federal
Reserve Bank will be received without deposit. Full payment for
the par amount of bills bid for must accompany tenders from all
others, including tenders for bills to be maintained on the bookentry records of the Department of the Treasury. An adjustment
will be made on all accepted tenders accompanied by payment in
full for the difference between the payment submitted and the
price determined in the auction.
Public announcement will be made by the Department of the
Treasury of the amount and discount rate range of accepted bids for
the auction. In each auction, noncompetitive bids for $1,000,000
or less without stated discount rate from any one bidder will be
accepted in full at the weighted average discount rate (in two
decimals) of accepted competitive bids. Competitive bids will then
be accepted, from those at the lowest discount rates through suc
cessively higher discount rates, up to the amount required to meet
the public offering. Bids at the highest accepted discount rate
will be prorated if necessary. Each successful competitive bidder
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 4
will pay the price equivalent to the discount rate bid. Noncom
petitive bidders will pay the price equivalent to the weighted
average discount rate of accepted competitive bids. The calcula
tion of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923.
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.
No single bidder in an auction will be awarded bills in an
amount exceeding 35 percent of the public offering. The deter
mination of the maximum award to a single bidder will take into
account the bidder's reported net long position, if the bidder
has been required to report its position.
Notice of awards will be provided to competitive bidders
whose bids have been accepted, whether those bids were for their
own account or for the account of customers. No later than 12:00
noon local time on the day after the auction, the appropriate
Federal Reserve Bank will notify each depository institution that
has entered into an autocharge agreement with a bidder as to the
amount to be charged to the institution's funds account at the
Federal Reserve Bank on the issue date. Any customer that is
awarded $500 million or more of securities in an auction must
furnish, no later than 10:00 a.m. local time on the day after the
auction, written confirmation of its bid to the Federal Reserve
Bank or Branch where the bid was submitted. If a customer of a
submitter is awarded $500 million or more through the submitter,
the submitter is responsible for notifying the customer of the
bid confirmation requirement.
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
by the issue date, by a charge to a funds account or pursuant to
an approved autocharge agreement, in cash or other immediatelyavailable funds, or in definitive Treasury securities maturing
on or before the settlement date but which are not overdue as
defined in the general regulations governing United States secu
rities. Also, maturing securities held on the book-entry records
of the Department of the Treasury may be reinvested as payment for
new securities that are being offered. Adjustments will be made
for differences between the par value of the maturing definitive
securities accepted in exchange and the issue price of the new
bills.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76 as applicable, Treasury's single bidder guide
lines, 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.
4/17/92
PUBLIC DEBT NEWS
D epartm ent of the T reasury
•
Bureau of the Public D ebt • W ashington, D C 20239
CONTACT:
FO R IMMEDIATE RELEASE
September 30, 1992
Peter Hollenbach
(202) 219-3302
or
L. Richard Keyser
(202) 708-1591
TREASURY AUTHORIZES H U D CALL OF
FHA INSURANCE FUND DEBENTURES
The Departments of Treasury and Housing and Urban Development announced today the call of
all Federal Housing Administration (FHA) debentures, outstanding as of September 30, 1992, with
interest rates of 7 1/2 percent or higher. Debentures that have been registered on the books of the
Federal Reserve Bank of Philadelphia as of September 30,1992, are considered, "outstanding." The
date of the call for the redemption of the more than $150 million in debentures is January 1, 1993,
with the semi-annual interest due January 1, paid along with the debenture principal.
Debenture owners of record as of September 30,1992, will be notified by mail of the call and given
instructions for submission. Those owners who cannot locate the debentures should contact the
Federal Reserve Bank of Philadelphia (215) 574-6684 for assistance.
No transfers or denominational exchanges in debentures covered by this call will be made on or
after October 1,1992, nor will any special redemption purchases be processed. This does not affect
the right of the holder to sell or assign the debentures.
The Federal Reserve Bank of Philadelphia has been designated to process the redemptions and to
pay final interest on the called debentures. To ensure timely payment of principal and interest on
the debentures, they should be received by December 1, 1992, at:
The Federal Reserve Bank of Philadelphia
Securities Division
P.O. Box 90
Philadelphia, PA 19105-0090
oOo
FOR RELEASE AT 2:30 P.M.
September 30, 1992
CONTACT:
Office of Financing
202/219-3350
TREASURY TO AUCTION $9,750 MILLION OF 7-YEAR NOTES
The Treasury will auction $9,750 million of 7-year notes
to refund $6,190 million of 7-year notes maturing October 15,
1992, and to raise about $3,550 million new cash. The $6,190
million of maturing 7-year notes are those held by the public,
including $359 million currently held by Federal Reserve Banks
as agents for foreign and international monetary authorities.
The $9,750 million is being offered to the public, and
any amounts tendered by Federal Reserve Banks as agents for
foreign and international monetary authorities will be added
to that amount. Tenders for such accounts will be accepted at
the average price of accepted competitive tenders.
In addition to the public holdings, Federal Reserve Banks
for their own accounts hold $97 million of the maturing securi
ties 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
N B -2 0 0 7
HIGHLIGHTS OF TREASURY
OFFERING TO THE PUBLIC
OF 7-YEAR NOTES
TO BE ISSUED OCTOBER 15, 1992
September 30, 1992
Amount Offered:
To the public .................. $9,750 million
Description of Security:
Term and type of security ....... 7-year notes
Series and CUSIP designation .... H-1999
(CUSIP No. 912827 H2 1)
Maturity date ......... .
October 15, 1999
Interest rate .................. To be determined based on
the average of accepted bids
Investment yield ............... To be determined at auction
Premium or discount .... ....... To be determined after auction
Interest payment dates ......... April 15 and October 15
Minimum denomination available .. $ 1,000
Terms of Sale:
Method of sale ................. Yield auction
Competitive tenders ............ Must be expressed as an
annual yield, with two
decimals, e.g., 7.10%
Noncompetitive tenders ...... ... Accepted in full at the aver
age price up to $5,000,000
Accrued interest
payable by investor ............ None
Kev Dates:
Receipt of tenders .............
a) noncompetitive ............
b) competitive ...............
Settlement (final payment
due from institutions):
a) funds immediately
available to the Treasury ..
b) readily-collectible check ..
Wednesday, October 7, 1992
prior to 12:00 noon, EDST
prior to 1:00 p.m., EDST
Thursday, October 15, 1992
Tuesday, October 13, 1992
m
rtment of the Treasury
Washington, D.C.
Telephone 202-622-
STATEMENT OF JOHN P. SIMPSON
DEPUTY ASSISTANT SECRETARY
REGULATORY, TARIFF AND TRADE ENFORCEMENT
DEPARTMENT OF THE TREASURY
BEFORE THE
HOUSE COMMITTEE ON AGRICULTURE
September 30, 1992
Mr. Chairman and members of the Committee, I am pleased
to have the opportunity to appear before you this morning to
discuss those aspects of the North American Free Trade Agreement
related to rules of origin, and enforcement and administration of
the NAFTA.
Among the objectives we had in mind when we began
negotiation of the NAFTA eighteen months ago are three that are
of special interest to this Committee.
First, we wanted clear and predictable rules of origin
that could be understood by the commercial community and enforced
by customs administrations. As you know, rules of origin are the
rules that the NAFTA provides to determine whether a product
should be treated as a product of a NAFTA Party and thus eligible
for preferential treatment.
We believe that we have been largely successful in
developing rules of origin that meet our objective. The rules
are based on the concept of change in tariff classification. By
this we mean that any materials that are not wholly obtained in
one of the NAFTA Parties - for example, agricultural products
grown in a NAFTA Party or minerals extracted from its soil - must
undergo substantial processing that results in a specified change
in the tariff classification to which the materials are subject.
Tariff classification is founded on the international
Harmonized System nomenclature, which the United States, along
with Canada, Mexico, and many other nations have adopted as the
basis for their tariff laws. Rules of origin based on change in
tariff classification, which is the approach we used principally
for rules of origin in the U.S.-Canada Free Trade Agreement,
establish a standard that provides to both international traders
NB—2008
and domestic interests concerned about international competition
a clear understanding of the circumstances under which
preferential treatment is allowed.
Another objective in the NAFTA negotiations was to
ensure that the benefits of the Agreement are secured principally
to the Parties to the Agreement. Therefore, goods given
preference under the NAFTA must be either wholly obtained in a
NAFTA Party or, as I noted a moment ago, transformed in a NAFTA
Party by processing operations sufficiently substantial that we
are warranted in treating the resulting product as a product of a
NAFTA Party.
We are convinced that we have achieved this objective.
Although the negotiations with Canada and Mexico were long and
complex, and although the interests of each of the three Parties
are somewhat different, we have reached agreement on a set of
origin rules that strikes the appropriate balance between, on one
hand, giving our manufacturers access to the world market for
necessary materials and, on the other hand, ensuring that
products of non-NAFTA countries are not given preferential
treatment as a consequence of having been simply passed through
another NAFTA Party with insignificant processing.
This is especially true with respect to agricultural
goods. In the NAFTA we have built on the tough rules of origin
in the U.S.-Canada Free Trade Agreement, and for several of the
most sensitive products - including dairy and citrus - we have
strengthened the rules to secure the maximum benefits for NAFTA
producers.
A third objective in the NAFTA negotiations was to
ensure that the terms of the Agreement can be administered and
enforced by our customs administrations. Let me describe briefly
the elements of the NAFTA that satisfy us that this objective has
been achieved:
(1) Certificate of Origin - The NAFTA provides for a common
certificate, to be executed under penalty of law by a producer or
exporter, certifying that goods meet the NAFTA requirements for
preferential treatment. Any importer who claims preferential
treatment must have that certificate in his possession at the
time he files his claim. An importer who is aware of false
information on the certificate, or who has reason to know that
the information is likely to be false, is liable for penalties
under domestic law. Moreover, each of the NAFTA Parties has
agreed that any person subject to its jurisdiction who falsely
executes a Certificate of Origin will be liable for penalties
under its laws.
(2) Verification of Claims for Preference From the first day
of the negotiations we made it clear that NAFTA would have to
2
provide us with satisfactory opportunities to verify claims for
preferential treatment. Specifically, we needed to be able to
verify information on Certificates of Origin by direct visits to
the premises of exporters and producers in other NAFTA Parties.
As expected, this was a delicate issue for all three countries.
No one of us was prepared to allow activities by law enforcement
agents of another country to be carried out in our own
territories without substantial safeguards.
The NAFTA strikes the correct balance, respecting both
the need of each NAFTA Party to verify claims for preferential
treatment and the need to ensure the presence of appropriate
safeguards for its own citizens who are subject to a verification
visit by officials of another NAFTA Party. We are now satisfied
that NAFTA offers us both the means to detect abuses of the NAFTA
benefits, and the assurance that appropriate corrective action
will be taken by the other Parties when abuses are discovered.
The arrangements made in the NAFTA for coordination of
administrative matters, for cooperation in enforcement
activities, and for consultation in the event that difficulties
arise, offer the promise that NAFTA will function smoothly, and
that it will be of growing benefit to the economies of all the
Parties in years to come.
3
ÉÊÈ PUBLIC
DEBT NEWS
Department of the Treastiry • Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
October 5, 1992
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $10,221 million of 13-week bills to be issued
October 8, 1992 and to mature January 7, 1993 were
accepted today (CUSIP: 912794ZY3).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2.63%
2.67%
2.67%
Investment
Rate_____Price
2.69%
99.335
2.73%
99.325
2.73%
99.325
$1,435,000 was accepted at lower yields.
Tenders at the high discount rate were allotted 83%.
The investment rate is the equivalent coupon-issue yield.
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
30,855
29,916,710
17,010
43,465
30,480
36,070
1,703,820
8,770
6,405
26,410
23,510
720,720
986.180
$33,550,405
Accepted
30,855
8,856,135
17,010
43,465
30,480
25,900
91,750
8,770
6,405
26,410
23,510
74,130
986.180
$10,221,000
Type
Competitive
Noncompetitive
Subtotal, Public
$28,633,980
1.531.795
$30,165,775
$5,304,575
1.531.795
$6,836,370
2,503,930
2,503,930
880.700
$33,550,405
880.700
$10,221,000
Federal Reserve
Foreign Official
Institutions
TOTALS
NB-2009
Tenders for $10,213 million of 26-week bills to be issued
October 8, 1992 and to mature April 8, 1993 were
accepted today (CUSIP: 912794B86).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2.76%
2.78%
2.78%
Investment
Rate_____Price
2.84%
98.605
2.86%
98.595
2.86%
98.595
$4,000,000 was accepted at lower yields.
Tenders at the high discount rate were allotted 93%.
The investment rate is the equivalent coupon-issue yield.
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
24,865
31,148,745
9,450
20,625
20,600
27,175
1,325,130
13,130
7,380
28,125
11,790
875,245
682.420
$34,194,680
Accented
24,865
9,279,325
9,450
20,625
20,600
27,105
24,360
13,130
7,380
28,125
11,790
64,005
682.420
$10,213,180
Type
Competitive
Noncompetitive
Subtotal, Public
$30,144,860
1.033.120
$31,177,980
$6,163,360
1.033.120
$7,196,480
2,500,000
2,500,000
516.700
$34,194,680
516.700
$10,213,180
Federal Reserve
Foreign Official
Institutions
TOTALS
NB-2010
TREASURY NEWS
Wffiiwatm
Department of the Treasury
FOR IMMEDIATE RELEASE
OCTOBER 5, 1992
Washington, D.C.
DIPT. OF
Telephone 202-622-2960
CONTACT: Scott Dykema
(202) 622-2960
Statement by Treasury Secretary Nicholas F. Brady
Re: IMF Quota Increase
The approval by Congress of the International Monetary Fund
quota increase will help support the courageous free-market and.
democratic reforms in the former Soviet Union, Eastern Europe,
Latin America, and elsewhere around the world. By contributing
to a more prosperous world economy, this initiative will help
expand markets for U.S. exporters and increase jobs for American
workers.
oOo
NB-2011
EMBARGOED UNTIL 1:15 PM
PREPARED FOR DELIVERY
October 7, 1992
Contact:
Anne Kelly Williams
202-622-2960
REMARKS BY
DEPUTY SECRETARY OF THE TREASURY JOHN E. ROBSON
ROTARY CLUB OF WASHINGTON, D.C.
WASHINGTON, D.C.
OCTOBER 7, 1992
Good afternoon, and thank you for inviting me here to visit
with you today. As business and civic leaders, all of you in
this room are used to making difficult decisions — decisions
that affect not only your own future, but the futures of the
people in your firms, your families, and many others.
Exactly four weeks from today, you and the rest of America
will be asked to make another decision, a decision that will,
along with other economic forces now at work, influence
significantly the environment in which you will be making future
decisions. So today, I thought it would be appropriate to spend
some time sketching what I believe the future economy will look
like, so that we may see more clearly the broader context in
which you will be making those decisions.
There is little question that the domestic economic
environment is already undergoing change. Many factors have
contributed to the recent sluggish U.S. economy, such as the
cutback in defense spending following our victory in the Cold
War, the paydown of accumulated debt by business and consumers,
and a weakened financial system sobered by the S&L and commercial
real estate market collapses and cautious about lending. But
these are by and large transitory factors that time and the
inherent adaptability of the American economy will overcome.
But beyond these often painful transitional factors, there
are other forces at work that will, through the next century,
bring profound changes to both the economies of the world and the
lives of the people in them. And what will be these changes and
what will be the characteristics of the 21st Century economy?
Foremost, it will be a thoroughly interdependent and
integrated global marketplace. There will be no place to hide
from the competitive forces that will exist on*every continent
and criss-cross every ocean. Where you used to find your
customers, suppliers and competitors on a road map, you now must
use a world map. The U.S. will not be able to wall itself off to
create an economic Fortress America. Nor will our competitors.
NB—2012
2
If you need persuading on this point, then consider that
since 1986, exports have provided nearly one third of America|s
economic growth — and that the recent economic difficulties in
our major export markets in Canada, Japan and Europe have
measurably contributed to our own economic woes. And if you need
further evidence of global economic interconnectedness, look at
what has been happening lately in the world currency markets.
Another feature of the 21st Century economy will be a new
mobility — a mobility of capital, workers, productive assets,
supply sources, and technical knowledge. Already we are
witnessing swift and massive capital flows as money seeks the
highest return. But money will not be the only thing crossing
international borders.
A companion of this mobility will be what we might describe
as "site indifference" — where transactions will be driven
principally by economic rather than locational considerations.
Walk into any store today and you can pick off the shelf products
that have been invented in the United States, designed elsewhere,
had their components produced abroad, been assembled Lord-knowswhere, and are sold in both the U.S. and foreign markets.
I
believe we will also see business organizations, by
necessity, become more flexible, configuring and reconfiguring
themselves in an effort to respond to global competitive
pressures. And I expect that businesses will evolve into
smaller, more flexible units to take advantage of new
opportunities to establish or expand market positions, reduce
costs, or capitalize on new technology. I see the restructuring
of businesses as a continuous process essential to growth and
competitive survival. Lean, mean, flexible and responsive will
be in. Static, hidebound, lethargic, and inefficient will be
out.
Will this be a challenging environment in which to operate?
You bet it will! But I believe that the American people and
American businesses are well positioned to succeed in it. I say
this based not on blind patriotism but on some hard facts —
facts which show, among other things, that America is:
—
The world*s largest and most productive economy;
—
The world*s leading exporter;
—
The most prolific country in the development of high
technology products and scientific advancement;
And a nation with a history of adaptability to change
and creative entreprenuerism that enables us to meet
economic challenges and conquer them.
3
Another very positive feature of the 21st century economy
will be the emergence of somewhere between three and four billion
people as new players in the global economy. I refer to the
peoples of China, India, Latin America, the former Soviet Union,
Eastern Europe, and parts of the Pacific who have historically
been outside the economic loop. Just think of the exciting
opportunities presented by this multitude, whether you are
making, selling, or buying a product or service.
The combination of our own economy*s inherent strength and
the vast potential of new global markets puts us in excellent
position to seize the unprecedented opportunities of the 21st
century. Indeed, I think that if we fail to win the peace — and
by that I mean the contest for future economic preeminence — it
will be because we fail to take certain actions necessary to
secure that future: Actions like improving our educational
system; pursuing open trade policies; and cutting capital gains
taxes and otherwise revamping our tax system so that we lower the
cost of capital and spur investment and saving.
But there are other ways we can weaken our ability to meet
the economic challenges of the 21st century. One way is if we
continue to bury American businesses in a tangle of regulation
that stunts economic growth and discourages entrepreneurism. And
one of the most obvious victims of excessive regulation is small
business.
President Bush is a former businessmen himself -he knows
what it*s like to sweat over a P&L statement and meet a payroll.
He knows that small businesses are the backbone of our nation*s
economy, employing 57 percent of our private workforce, and
accounting for 39 percent of our Gross Domestic Product and over
two-thirds of all net new private sector jobs. And we don*t want
excess regulation to smother that splendid record.
So, the Bush Administration has dug in against
overregulation through several actions — President Bush*s
moratorium on new regulations, the work of the Council on
Competitiveness, and proposed regulatory relief measures in a
number of areas. The Treasury Department has joined this battle
by identifying 175 existing regulations which will be eliminated
or modified. And while it is often difficult to quantify
precisely the economic impact of these reforms, I am happy to say
that, when fully implemented, these reforms could result in
annual savings to the economy of almost $1 billion.
One significant example of these reforms are brand new IRS
regulations which significantly simplify the payroll tax
reporting rules for the nation*s employers. Under the new
guidelines, which go into effect January 1, most small businesses
will now only have to deposit their employment taxes once a
month. Other employers will deposit their taxes on fixed days of
4
the week. Either way, the deposit schedule will be set yearly.
This change will free employers from the costly task of
constantly monitoring payroll taxes, and allow small businesses
to focus on what they do best — create jobs.
Isn't that what's it's all about — creating jobs? And
isn't it time that we cured this disease of overregulation — a
disease which has led to a preoccupation with forms instead of
substance at all levels of government. We have become bogged
down in a morass of excessive regulation and constant litigation,
mired in a swamp filled with too many lawyers, accountants, and
bean-counters. Once we moved mountains and built railroads to
open economic opportunity for all. Now we have become too much a
nation of paper shufflers and form-filler-outers, dissipating our
national resources and energies on non-productive process instead
of directing them at the creation of jobs and economic
opportunities.
I promise you that the Bush Administration will do
everything in its power to see that this harmful trend is
arrested and rolled back. I hope that every person in this room
feels the same way about it. And I would like for us today to
dedicate our mutual efforts towards these ends.
But we can do more than roll back regulation to sharpen
American business' competitive edge in the 21st century.| We can
encourage the kind of entrepreneurial capitalism that built this
country by providing American small businesses with tax
incentives for investment.
We can reform this country's legal,
regulatory and health care systems, which have suffocated
businesses beneath an avalanche of costly lawsuits and paperwork.
And we can lower the cost of capital and improve access to credit
so that small businesses can get started or expand.
That is why President Bush has proposed a five-year, $20
billion initiative for small businesses that would, among other
things:
—
Reduce the lowest corporate tax-rate for small
businesses from 15 percent to 10 percent;
—
Increase the equipment deduction limit from $10,000 to
$25,000;
Eliminate capital gains taxes on newly-issued small
business stock;
—
Permit the immediate write-off of up to $2,500 of the
front-end costs of starting a new business;
And simplify the tax laws so that most small businesses
will be able to file one or two-page tax returns.
5
But along with regulatory relief and incentives for
investment, American businesses need reasonable access to credit
to expand their operations and invest in new equipment and new
technologies. And the Bush Administration is responding to these
needs by making a concerted, three-pronged attack to combat the
credit crunch.
The first prong of attack is to revise regulatory policy and
practices to ease the credit crunch. There is no doubt that
regulatory practices have contributed to the credit crunch. And
that is why we at Treasury have focused much of our anti-credit
crunch effort on regulatory issues — trying to ensure that
examiners use balance and common sense in the regulatory process.
We have issued or approved over 40 guidelines or regulatory
changes to provide bank and thrift examiners in the field with
specific instructions aimed at credit crunch issues.
The second prong of our attack on the credit crunch is a
legislative effort aimed at easing costly regulatory burdens on
banks. President Bush has sent to Congress the Credit
Availability and Regulatory Relief Act, a bill that would repeal
many of the needless, Congressionally—imposed mandates that
require banks to spend more time filling out forms than making
loans.
The legislation would let bankers be bankers by repealing a
number of onerous statutory requirements contained in last year's
Federal Deposit Insurance Corporation Improvement Act, or
''FDICIA''. It would eliminate provisions which would allow
government to micromanage many aspects of a bank's operations,
including minimum earnings levels and employee compensation. It
would make auditors be auditors again, not policeman or
regulators, and would advance the goals of the Community
Reinvestment Act while reducing needless paperwork requirements.
The third prong of our attack on the credit crunch is a
broad communications effort to make sure examiners are applying
the letter and spirit of these new guidelines in the field. We
have held three national meetings of examiners at which Secretary
Brady or I have spoken. Senior bank and thrift regulators have
met regularly with their examiner corps. And we have held over
350 meetings across the country to open a dialogue on credit
crunch issues between bankers, borrowers, business people and
regulators to make sure that each group understands the other's
perspectives. And the message we give at all of these gatherings
is straightforward — bring common sense and balance into the
examination process, and follow the new credit crunch guidelines.
Secretary Brady has recently broadened this communications
effort through a nationwide series of meetings that will focus on
three main areas — the restructuring or rollover of commercial
real estate loans; acquisition, development and construction
6
financing of residential and multi-family housing; and small
business loans. Bankers and borrowers will come together with
officials from the Office of Thrift Supervision and the
Comptroller of the Currency to allow open discussion of these
issues and identification of possible regulatory abuses.
But the best way for businesses to get the credit they need
is for banks to step up to the plate and start making loans
again. The economy needs those loans at the margin, especially
the character loans that helped build this country, and banks are
not making enough of them.
I understand the caution in the banking industry after this
difficult period. And I understand that some of the 7,000 or so
bank and thrift examiners across the country are not following
the anti-credit crunch guidelines, and are thereby contributing
to a more hesitant lending environment.
But banking is not taking deposits and investing them in
Treasury securities — it is taking reasonable risks and making
loans to sound borrowers to provide the capital needed to foster
economic activity. And there is a remedy for bankers who feel
they have not gotten a fair shake from the examiners.
Several months ago we established a parallel appeals process
for bankers who feel victimized by unprofessional examiner
conduct, or think the credit crunch guidelines have not been
properly applied. We invited banks to appeal to higher levels of
regulatory agencies, and frankly, we have not received many
RSVPs.
Bankers should use this appeals process. We have said from
the start that examiner retribution will not be tolerated. And
bankers cannot have it both ways — complaining about examiner
abuses, but refusing to use the appeals process created expressly
for the purpose of correcting those abuses.
From rolling back excessive regulation to easing the credit
crunch, the Bush Administration is committed to making government
an ally of American enterprise, not an adversary. Towards that
end, President Bush has proposed a permanent R&D tax credit and
an Investment Tax Allowance to stimulate private sector
investment and technical innovation. He has proposed a capital
gains tax cut, and the creation of enterprise zones in our inner
cities and rural areas. And he has vigorously pursued free and
open trade policies which will increase U.S. exports and spur
economic growth.
This is the Agenda for American Renewal the next Bush
Administration will carry out in the next four years, along with
proposals to cut government spending, reform our educational,
health care, and legal systems, and create an environment for
7
economic growth and entrepreneurism. And that is President
Bush's vision of the economic future — a business environment
which allows American enterprise to prosper. I know you share
this vision. And we at the Treasury Department and in the
Administration look forward to working with you to see that it
becomes a reality.
I have outlined before you today some of the transitional
changes which our economy has undergone in the wake of our
greatest triumph, the Cold War victory over communism. I have
also acknowledged that these changes have been painful for many
Americans. And it would be naive of me to stand before you and
deny that there are people and families out there who are
uncertain and uneasy about America*s present and future standing
on the eve of the 21st century.
But I will not acknowledge that this country is economically
decrepit or past its prime. Others might tear down America. I
will not, because I have a fundamental optimism about the future.
And because, however you measure, the United States is still the
preeminent economic power in the world. If we make the right
decisions, and if we do the things we need to do to seize the
opportunities before us, I am convinced we can be confident about
our future and our children's and grandchildren's future. We
have overcome tough challenges and before, and we will do so now.
Five hundred years ago, Columbus discovered America and
unveiled opportunities which had never been dreamed of by the
world that then existed. In no place on the earth were those
opportunities realized in any greater quantity or quality, and in
a richer or more humane way, than in the United States of
America. This country has upheld that tradition for more than
two centuries, and I can assure you that the Bush Administration
will uphold that tradition as we approach the new millennium, and
as we begin to decide what the next American century will look
like.
Thank you.
TREASURY NEWS
I»Department of the Treasury
Washington, D.C.
FOR RELEASE AT 2:30 P.M.
October 6, 1992
/.CONTACT:
Telephone 2 0 2 -6 2 2 -2 9 6 0
Office of Financing
202-219-3350
TREASURY’S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling
approximately $22,000 million, to be issued October 15, 1992.
This offering will result in a paydown for the Treasury of about
$ 1,425 million, as the maturing bills are outstanding in the
amount of $23,420 million. Tenders will be received at Federal’
Reserve Banks and Branches and at the Bureau of the Public Debt,
Washington, D. C. 20239-1500, Tuesday, October 13, 1992
prior to 12:00 noon for noncompetitive tenders and prior to
1:00 p.m., Eastern Daylight Saving time, for competitive tenders.
The two series offered are as follows:
91-day bills (to maturity date) for approximately
$11,000 million, representing an additional amount of bills
dated January 16, 1992
and to mature
January 14, 1993
(CUSIP No. 912794 ZZ 0), currently outstanding in the amount
of $ 24,827 million, the additional and original bills to be
freely interchangeable.
182-day bills for approximately $11,000 million, to be
dated October 15, 1992
and to mature April 15, 1993
(CUSIP
No. 912794 C2 8).
The bills will be issued on a discount basis under competi
tive and noncompetitive bidding, and at maturity their par amount
will be payable without interest. Both series of bills will be
issued entirely in book-entry form in a minimum amount of $10,000
and in any higher $5,000 multiple, on the records either of the
Federal Reserve Banks and Branches, or of the Department of the
Treasury.
The bills will be issued for cash and in exchange for
Treasury bills maturing October 15, 1992.
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 competi
tive 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 $2,104 million as agents for foreign and international
monetary authorities, and $4,918 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 5176-1 (for 13-week series) or Form PD 5176-2 (for 26-week
series).
NB-2013
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 2
Each bid must state the par amount of bills bid for, which
must be a minimum of $10,000. Bids over $10,000 must be in mul
tiples of $5,000. A bidder submitting a competitive bid for its
own account, whether bidding directly or submitting bids through
a depository institution or government securities broker/dealer,
may not submit a noncompetitive bid for its own account in the
same auction.
Competitive bids must show the discount rate desired,
expressed in two decimal places, e.g., 7.10%. Fractions may not
be used. A single bidder, as defined in Treasury's single bidder
guidelines, may submit competitive tenders at more than one dis
count rate, but the Treasury will not recognize, at any one rate,
any bid in excess of 35 percent of the public offering. A com
petitive bid by a single bidder at any one rate in excess of 35
percent of the public offering will be reduced to the 35 percent
limit. The public offering for any one bill is the amount offered
for sale in the offering announcement, less bills allotted to Fed
eral Reserve Banks for their own account and for the account of
foreign and international authorities in exchange for maturing
bills.
Noncompetitive bids do not specify a discount rate. A
single bidder should not submit a noncompetitive bid for more than
$1,000,000. A noncompetitive bid by a single bidder in excess of
$1,000,000 will be reduced to that amount. A bidder may not sub
mit a noncompetitive bid if the bidder holds a position, in the
bills being auctioned, in "when-issued" trading or in futures or
forward contracts. A noncompetitive bidder may not enter into any
agreement to purchase or sell or otherwise dispose of the bills
being auctioned, nor may it commit to sell the bills prior to the
designated closing time for receipt of competitive bids.
The following institutions may submit tenders for accounts
of customers: depository institutions, as described in Section
19(b)(1)(A), excluding those institutions described in subpara
graph (vii), of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A));
and government securities broker/dealers that are registered with
the Securities and Exchange Commission or noticed as government
securities broker/dealers pursuant to Section 15C(a)(1) of the
Securities Exchange Act of 1934. Others are permitted to submit
tenders only for their own account.
For competitive bids, the submitter must submit with the
tender a customer list that includes, for each customer, the name
of the customer and the amount and discount rate bid by each cus
tomer. A separate tender and customer list should be submitted
for each competitive discount rate. Customer bids may not be
aggregated by discount rate on the customer list.
For noncompetitive bids, the customer list must provide,
for each customer, the name of the customer and the amount bid.
For mailed tenders, the customer list must be submitted with the
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 3
tender. For other than mailed tenders, the customer list should
accompany the tender. If the customer list is not submitted with
the tender, information for the list must be complete and avail
able for review by the deadline for submission of noncompetitive
tenders. The customer list must be received by the Federal
Reserve Bank by auction day.
All bids submitted on behalf of trust estates must identify
on the customer list for each trust estate the name or title of
the trustee(s), a reference to the document creating the trust
with date of execution, and the employer identification number
of the trust.
A competitive bidder must report its net long position in
the bill being offered when the total of all its bids for that
bill and its net long position in the bill equals or exceeds $2
billion, with the position to be determined as of one half-hour
prior to the closing time for the receipt of competitive tenders.
A net long position includes positions, in the bill being auc
tioned, in when-issued trading and in futures and forward con
tracts, as well as holdings of outstanding bills with the same
CUSIP number as the bill being offered. Bidders who meet this
reporting requirement and are customers of a depository institu
tion or a government securities broker/dealer must report their
positions through the institution submitting the bid on their
behalf. A submitter, when submitting a competitive bid for a
customer, must report the customer's net long position in the
security being offered when the total of all the customer's bids
for that security, including bids not placed through the submit
ter, and the customer's net long position in the security equals
or exceeds $2 billion.
Tenders from bidders who are making payment by charge to a
funds account at a Federal Reserve Bank and tenders from bidders
who have an approved autocharge agreement on file at a Federal
Reserve Bank will be received without deposit. Full payment for
the par amount of bills bid for must accompany tenders from all
others, including tenders for bills to be maintained on the bookentry records of the Department of the Treasury, An adjustment
will be made on all accepted tenders accompanied by payment in
full for the difference between the payment submitted and the
price determined in the auction.
Public announcement will be made by the Department of the
Treasury of the amount and discount rate range of accepted bids for
the auction. In each auction, noncompetitive bids for $1,000,000
or less without stated discount rate from any one bidder will be
accepted in full at the weighted average discount rate (in two
decimals) of accepted competitive bids. Competitive bids will then
be accepted, from those at the lowest discount rates through suc
cessively higher discount rates, up to the amount required to meet
the public offering. Bids at the highest accepted discount rate
will be prorated if necessary. Each successful competitive bidder
4/17/92 •
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 4
will pay the price equivalent to the discount rate bid. Noncom
petitive bidders will pay the price equivalent to the weighted
average discount rate of accepted competitive bids. The calcula
tion of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923.
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.
No single bidder in an auction will be awarded bills in an
amount exceeding 35 percent of the public offering. The deter
mination of the maximum award to a single bidder will take into
account the bidder's reported net long position, if the bidder
has been required to report its position.
Notice of awards will be provided to competitive bidders
whose bids have been accepted, whether those bids were for their
own account or for the account of customers. No later than 12:00
noon local time on the day after the auction, the appropriate
Federal Reserve Bank will notify each depository institution that
has entered into an autocharge agreement with a bidder as to the
amount to be charged to the institution's funds account at the
Federal Reserve Bank on the issue date. Any customer that is
awarded $500 million or more of securities in an auction must
furnish, no later than 10:00 a.m. local time on the day after the
auction, written confirmation of its bid to the Federal Reserve
Bank or Branch where the bid was submitted. If a customer of a
submitter is awarded $500 million or more through the submitter,
the submitter is responsible for notifying the customer of the
bid confirmation requirement.
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
by the issue date, by a charge to a funds account or pursuant to
an approved autocharge agreement, in cash or other immediatelyavailable funds, or in definitive Treasury securities maturing
on or before the settlement date but which are not overdue as
defined in the general regulations governing United States secu
rities. Also, maturing securities held on the book-entry records
of the Department of the Treasury may be reinvested as payment for
new securities that are being offered. Adjustments will be made
for differences between the par value of the maturing definitive
securities accepted in exchange and the issue price of the new
bills.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76 as applicable, Treasury's single bidder guide
lines, 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.
4/17/92
FOR RELEASE. AT 3:00 PM
October 6, 1992
Contact: Peter Hollenbach
(202) 219-3302
PUBLIC DEBT ANNOUNCES ACTIVITY FOR
SECURITIES IN THE STRIPS PROGRAM FO R SEPTEM BER 1992
Treasury's B ureau of the Public Debt announced activity figures for the month of Septem ber 1992,
of securities within the Separate Trading of Registered Interest and Principal of Securities
program, (STRIPS).
Dollar Amounts in Thousands
Principal Outstanding
(Eligible Securities)
$635,50(5,216
H eld in Unstripped Form
$482,066,206
H eld in Stripped Form
$153,440,010
Reconstituted in September
$13,963,235
The accompanying table gives a breakdown of STRIPS activity by individual loan description.
T he balances in this table are subject to audit and subsequent revision. These monthly figures are
included in Table V I of the Monthly Statement of th e Public Debt, entitled "Holdings of Treasury
Securities in Stripped Form." These can also b e obtained through a recorded message on
(202) 874-4023.
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XJBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt / $ Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
October 7, 1992
RESULTS OF TREASURY'S AUCTION OF 7-YEAR NOTES
Tenders for $9,754 million of 7-year notes, Series H-1999,
to be issued October 15, 1992 and to mature October 15, 1999
were accepted today (CUSIP: 912827H21).
The interest rate on the notes will be 6 %. The range
of accepted bids and corresponding prices are as follows:
Low
High
Average
Yield
5.99%
6.05%
6.01%
Price
100.056
99.718
99.944
Tenders at the high yield were allotted 20%.
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
17,316
18,624,535
5,718
11,060
117,744
29,711
679,620
9,354
3,800
19,533
5,901
45,693
13,677
$19,583,662
Accepted
17,316
9,140,525
5,703
11,060
117,744
29,711
333,620
9,354
3,800
19,533
5,901
45,638
13.677
$9,753,582
The $9,754 million of accepted tenders includes $324
million of noncompetitive tenders and $9,430 million of
competitive tenders from the public.
In addition, $473 million of tenders was awarded at the
average price to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $97 million
of tenders was also accepted at the average price from Federal
Reserve Banks for their own account in exchange for maturing
securities.
NB-2014
FOR IMMEDIATE RELEASE
October 9, 1992
Cohtact:
Claire Buchan
(202) 622-2910
STATEMENT BY NICHOLAS F. BRADY
SECRETARY OF THE TREASURY
We are pleased that Congress has passed thé Depository
Institutions Disaster Relief Act of 1992, based on the Treasury's
Hurricane Andrew Task Force proposal. By removing regulatory
burdens, this legislation enables banks to provide credit more
freely to residents of Florida, Louisiana and Hawaii as they begin
rebuilding their homes, businesses, and communities. Its timely
passage shows that government and the private sector can work
together to forge meaningful solutions to real-life crises. It
also shows that regulatory burden must be relieved to stimulate the
flow of credit to the economy — something that Congress must
address next year.
#
NB
2015
#
#
#
Contact:
FOR IMMEDIATE RELEASE
October 9, 1992
Claire Buchan
(202) 622-2910
STATEMENT BY NICHOLAS F. BRADY
SECRETARY OF THE TREASURY
We are pleased that Congress has passed the Commodity
Futures Trading Commission reauthorization legislation. This
farsighted legislation, especially the margin provision, will
greatly enhance the stability and competitiveness of U.S.
financial markets. At the same time, the legislation's new
exemptive authority allows the CFTC to remove the cloud of legal
uncertainty that has threatened to disrupt the huge, global swaps
market.
The Administration first requested these reforms two years
ago, and I am delighted that they have been adopted. I am also
delighted that with the passage of this legislation, all of the
major recommendations made by the 1987 Presidential Task Force on
Market Mechanisms have now become a reality.
#
Attachment
NB - 2016
#
#
Fact Sheet on the Commodity Futures Trading Commission
reauthorization legislation
The Administration first requested key reforms in this arena
over two years ago in its effort to adapt fragmented financial
laws to the ”one market” of stock and stock derivative
instruments. Such reforms are crucial to help avoid the kinds of
major market disruptions that occurred in October of 1987 and
October of 1989.
With the enactment of the margin provision, all of the
major recommendations of the 1987 Presidential Task Force on
Market Mechanisms — which analyzed the October 1987 market break
— have now been implemented:
1.
One agency to coordinate critical intermarket issues.
(The Federal Reserve for margins).
2.
Circuit breakers adopted by the exchanges to allow
markets time to adjust to major market volatility.
3.
Harmonized Margins to apply to stock, stock options,
and stock index futures.
4.
Clearing systems coordinated across markets, as
required by the Market Reform Act of 1990.
5.
Large trader reporting systems, as required by the
Market Reform Act of 1990.
Taken together, these critical reforms recognize the ”one
market” reality and will help protect the system against the
recurrence of market breaks like October of 1987.
TREASURY NEWS
Department of the Treasury
Telephone 2 0 2 -6 2 2 -2 9 6 0
Washington, D.C.
AS PREPARED FOR DELIVERY
EMBARGOED UNTIL 12:30 PM EDT
OCTOBER 9, 1992
'-■'■c,URR
Remarks by
The Honorable Nicholas F. Brady
Secretary of the Treasury
before
THE CITY CLUB OF CLEVELAND
Cleveland, Ohio
October 9, 1992
Thank you, Scott [Fienerman, President, Board of Trustees,
The City Club of Cleveland]. It is a great pleasure to be here
with this distinguished group.
As we look at the world at the turn of the century — with
the perspective provided by the technological advances of the
last 100 years — it is a significantly smaller place. London
and Tokyo no longer seem to be faraway places. Today, you can
reach either place in less than a day. While the Pony Express
once took letters across our continent in eight days, entire
libraries may now be transmitted around the world in seconds.
At the same time, economic and political borders have
blurred with our ever expanding ability to move capital and
productive capacity to wherever they may be most effectively
employed. Our national economy has been transformed from a
largely self-sufficient and isolated continent to an island in
the world archipelago — an island whose prosperity is affected
directly and dramatically by developments across the oceans. It
no longer makes sense to think of our economy as a purely
domestic matter; there is no longer a clear distinction between
domestic and foreign policy. We must change as the world
changes.
And we have changed. To see how, we must understand the
nature of the profound economic transition through which America
and the world are passing. There are two distinct elements at
work: a series of significant but temporary disruptions, and
more important, a structural and permanent change in the
organization of economic competition. This permanent change is
greater than any we have seen since the end of the Second World
War — in some ways greater than any since the Industrial
Revolution of the 19th century.
First, let me give you some examples of the significant but
temporary disruptions:
NB-2017
o
The victory in the Cold War will bring immeasurable
benefits to the world economy as we reduce the enormous
burden of military spending. But the benefits of peace
did not come free: this country now shows the strain
of having carried the burden of the free world's
defense for almost 50 years. The strain becomes most
clear when we look at the transition to a peace-time
economy and the difficult adjustment that is involved
for defense workers, military families and their
communities — strains being felt not only by workers
in California and New England, but in Poland and Russia
as well.
In this country alone, the Defense Department has
estimated the shift to a peace-time economy has meant
the loss of over 1.6 million jobs in the last three
years. Without these job losses, the unemployment rate
today would be more than a full percentage point lower
than it is. Peace has its price.
These are adjustments that we have made at war's end in
the past, and we will work through them again. Indeed,
when America last went through a comparable period —
the first Truman Administration, just after World War
II — gross national product actually fell 19% in a
single year. This puts our economy's current growth of
over 2% in perspective. And the good news is that
during Truman's second term, after the restructuring
was well in hand, the economy grew by almost 25% in
four years. It stands to reason that once this
conversion to a peace-time economy is again completed,
the long-term implications for growth are positive.
o
Second, the volume of debt in every segment of American
society over the last four years has been at
historically high levels. Those levels, however, are
at last beginning to decline as businesses strengthen
their balance sheets and as the baby boomers become the
parents of the 1990s, watching their budgets, saving
for their retirement and their kids' education.
Reducing the country's debt sets the stage for renewed
growth in the long term — even though it has meant
significantly slower growth in the short term.
2
o
Third, economic growth has been hindered by a banking
system weakened first by overexposure to Third World
Debt, then by failed savings and loans, and most
recently by declining real estate markets. U.S. banks,
thrifts and insurance companies have not provided the
credit needed to fuel the economy. But the Third World
Debt crisis is now behind us, the S&L cleanup nearly
complete, and real estate problems are improving.
Banks are more liquid than they have been in decades,
better capitalized than at any time since 1966, have
the highest earnings in a decade, and are poised to
finance expansion.
o
Fourth, American
the last several
more productive,
meaner, and more
o
Finally, we have been in a period of restrained world
growth. The fact is that we are doing better
economically than Germany, Japan, the U.K. and other
trading partners. That provides little satisfaction to
Americans — but it is a fact.
industry has been restructuring over
years. Having taken steps to become
American industry is now leaner,
competitive.
Each of these five conditions has formed a significant brake
on economic growth in its own right, but when added together,
their combined effect has been much greater than the sum of their
parts. By undermining business and consumer attitudes, they have
created an additional, independent restraint on growth and added
to concerns about this country’s prospects.
But as each of these short-term factors is resolved, we must
still come to terms with the significant long-term transformation
of economic competition — ■ a transformation that technology has
made possible in the last decade. The old industrial age is
fading and being replaced by a new global economy, characterized
by a new mobility of capital, ideas and information. Twenty
years ago most businesses could find their customers on a road
map; today they need a world map. Today's new mobility has
affected every aspect of our lives, particularly our businesses
and daily work. Let me give you some examples:
o
In today's world, businesses are not bound to a
particular country by the dictates of geography. Over
an electronic network, separate elements of the
production process can be directed from anywhere in the
world. For example, personal computers may be designed
in the U.S., manufactured in Malaysia, and assembled in
3
Singapore, with the whole operation conducted by
management headquarters in the United States.
o
What is more, information and intellectual capital have
become increasingly important parts of the production
process. As this happens, new businesses are created
that depend less on physical capital and more on skills
and know-how that are not limited to a particular
location. These new businesses are in fact becoming
leading industries of the new century: Microsoft, for
example, has a total stock market value of $22 billion;
Amgen, a leading biotechnology company, has a stock
market value of $9 billion; and McCaw Cellular's is $5
billion.
o
Improvements in transportation combined with new
information and communication systems have dramatically
shortened the transportation "pipeline" for goods,
allowing companies to maintain "just-in-time" inventory
methods even with far flung suppliers. An aircraft
factory in Central California can fax a parts order to
a supplier in Leeds, England and receive the components
by air courier the next day.
o
Capital moves around the world at the touch of a button
— without government approval — to wherever it will
bring the highest return, whether that is Athens, Ohio
or Athens, Greece. To put the mobility of capital in
perspective, each day well in excess of $1 trillion of
transactions move through or are settled at the New
York Federal Reserve Bank.
These changes have transformed the economic order that has
existed through most of our lives. This is understandably
unsettling to workers and their families. Vigorous international
competition has caused some of our nation's largest and most
well-known companies to restructure, not only General Motors, but
also Xerox, IBM, AT&T and others.
American workers go to the
parts shelf and sees labels that concern them. As George Shultz
recently remarked:
A few months ago I saw a snapshot of a shipping label
for some integrated circuits produced by an American
firm. It said, "Made in one or more of the following
countries: Korea, Hong Kong, Malaysia, Singapore,
Taiwan, Mauritius, Thailand, Indonesia, Mexico,
Philippines. The exact country of origin is unknown."
4
Americans worry about what a label like that says about
their future. But those who try to convince Americans that they
should fear the new economic world of free trade and the new
mobility are wrong.
In the U.S., the fact is that the new mobility will create
millions of new and better jobs — and these export-based jobs^
pay, on average, 17% more than the average wage. Other countries
will also increase their standard of living. As a result they
will buy more high-value-added products from the U.S. That is
why Ohio has increased its exports to Mexico from $245 million to
$582 million over the last four years — an increase of 137
percent — and why other industrial states such as Pennsylvania
and Illinois, with export increases of 283 percent and 291
percent, respectively, are benefiting as well.
Those who would make political hay out of people's fears of
increased trade are doing so for narrow political advantage.
They are the newest members of the Flat Earth Society, refusing
to accept the reality of the changes in the world around them.
Most of the industries that are giving America its leadership in
this new world economy — industries like pharmaceuticals,
software, telecommunications, aerospace, and computers — - thrive
on trade, and will continue to give us economic leadership if we
follow policies that nurture trade.
The fact is, Americans do best when the competition is tough
— we do best by being more creative, more entrepreneurial, more
innovative. And in tomorrow's world, intellectual capital will
be as important as physical capital. Innovation, which is the
application of intellectual capital to the process of production,
will be a major source of the future's attractive, high-paying
jobs.
In this we Americans are fortunate. Innovation and change
are our heritage — from that summer's day in 1776 when we
established a new theory of government to the most recent flight
of the space shuttle Atlantis . Americans are uniquely well
positioned to succeed in the innovation-driven world of the 21st
century.
And for that reason, the goal of the Bush Administration
during the next four years will be — as it has been — not to
evade change, but to face it; not to stand in place, but to
advance — to guide our economy through a difficult structural
transformation and assure our competitive position in the new
5
world. Our single-minded goal is to create high value jobs in
the United States. And to accomplish that goal, President Bush
will be guided — % as he has been — by three strategic
objectives. And these three objectives are at the core of the
Presidents Agenda for American Renewal.
Secure the Peace
First, we must secure the peace. The most important event
of our generation — not just politically, but economically — is
the end of the Cold War. The nation must not allow a
generation's effort to be squandered by giving in to the calls to
turn inward, to shirk the burdens of world leadership. Instead
we must seize the initiative now so that our children will grow
up in a world of peace and prosperity, where the United States
aims its exports, not its missiles, at the former Soviet Union.
As Dwight Eisenhower said at the beginning of the Cold War almost
half a century ago, "A world in arms is not spending money alone.
It is spending the sweat of its laborers, the genius of its
scientists, the hopes of its children."
Securing the peace is not merely a matter of foreign policy;
it is at the heart of our domestic agenda as well. We must
recognize that in the post-Cold War world there is no real
distinction between foreign policy and domestic policy. Trade
negotiations affect domestic employment; education policy affects
future competitiveness; peace in the Middle East means secure
energy sources to fuel domestic production; and investment from
abroad means jobs for Americans.
Let me give you an example. BMW, the German car maker,
recently decided to locate a plant in South Carolina, citing the
need for representation in the "largest, most competitive and
dynamic consumer market in the world." And the same ships that
will bring German parts to be assembled by South Carolina
workers, will take away finished cars to European markets and the
Far East.
Ensure America's Economic Leadership
Second, we must ensure America's economic leadership. In
the post-Cold War world this will mean opening free and growing
markets for our exports. In the 1980s, growth was fueled largely
by debt and consumption; in the 1990s, growth must come instead
from exports and investment. U.S. merchandise exports have
increased by about $195 billion over the last 5 years, and every
billion dollars in exports supports about 20,000 new jobs.
6
That's why we have acted vigorously to ensure free, open and
growing markets around the world. On Wednesday, President Bush,
Mexico's President Salinas and Canada's Prime Minister Mulroney
approved the North American Free Trade Agreement. NAFTA will
link us with our neighbors to the North and South to create an
historic trade partnership — a single market of over 360 million
people with a total output of $6-1/2 trillion. This newly
unified market will provide an unparalleled engine for growth and
jobs, and yet, if it hadn't been for President Bush's constant
urging, this agreement would never have been signed. Nothing
could provide a clearer example of the President's understanding
of the new global economy, or of his determination to pursue
effective strategies to open new markets for American products.
Ensuring America's economic leadership will also mean
adopting policies that foster savings and investment and promote
job creation. That means reducing the cost of capital — in
particular by reducing the capital gains tax — to encourage
investment. It means continuing to keep inflation and interest
rates under control. Short-term interest rates are currently at
their lowest in decades, and inflation is as low as it was in the
mid-60s. And it means fixing our regulatory policies to reduce
the burden government places on economic activity and ensure a
sound financial system that can provide the credit needed to
sustain economic growth.
And ensuring America's economic leadership means creating a
special environment in which small businesses can thrive. Twothirds of the jobs created in the United States are created by
small businesses, and we must not shackle the 4 million smaller
firms that are creating the new jobs workers need during this
transition. The Bush Administration is committed to providing
the incentives for these firms to flourish and is dedicated to
killing the regulations that throttle them. To this end,
President Bush recently announced a comprehensive program for
strengthening our nation's small businesses. This five-year, $20
billion initiative includes lowering the corporate tax rate for
small businesses; making up to $2500 in small business start-up
costs tax deductible; increasing equipment expensing; and
reducing paperwork burdens that fall heavily on small businesses.
7
Invest in America's Future
Finally, we must invest in America's future. Investment in
education, as well as in technology and in research, is the key
to increasing our workers' productivity. More than that,
education is the guarantee of job security. Our grandfathers may
have worked at a single job their entire lives. Today's employee
will, on average, have had five different careers by the time of
retirement. Education will be the key to mobility. If, as
students, American workers have learned how to learn, they will
have laid the foundation for a lifetime of new skills and
expanding opportunities.
So America's workforce must be the best educated to remain
the most productive. That means fixing our education system -by implementing President Bush's plan to develop schools that are
more accountable, to expand parental choice, to encourage states
to set meaningful education standards, and to reward merit in the
instruction of your youth.
And investing in America's future means not merely investing
in our students, but in our workforce. As we transform our
economy, we will not leave out those who must retrain as they
shift from one career to another. Workers who late in life lose
jobs in one area must have help retraining for the new jobs
created in other areas. The Administration's Worker Adjustment
and Youth Skills initiatives will replace the fragmentation of
current Federal programs with a coordinated, market-driven
system, and triple the funding currently provided for training.
And finally, investing in America's future means providing
affordable health care for all Americans, while controlling the
rising costs of health care. That is why President Bush proposed
a plan for comprehensive health reform last February, to make
health care more accessible by making health insurance more
affordable. The President's plan will not lead to rationing of
health care. It won't put people out of work or allow the
government to make your health care decisions. Believe me,
nothing is improved by putting it under the control of government
bureaucrats. That's why the President's plan leaves health care
choices in the hands of the people, not the bureaucrats.
These have been — and continue to be — our objectives.
They recognize the interconnection between foreign affairs and
domestic policy; they deal with the dynamic changes in the way
the world does business; and they encourage individual initiative
rather than fuel the engine of big government.
8
In short, the American people are being asked to make a
fundamental choice of values in November. We believe in the
people, not in bureaucracy. We believe in traditions like hard
work and the entrepreneurial spirit, not government omniscience.
We believe the governments job is to protect and defend, whether
at home or abroad; to enable people to go safely to their schools
and about their work; and to create the economic climate for
success. We trust the American people, not government, to
allocate resources, and we trust the American people to create
the strength to take on all comers in the world economy.
We need to remember that America's success is based on the
achievements of our people, not on government programs that wax
and wane. The beliefs that we share — our belief in a
government that works with and for the people and our belief in
the entrepreneurial spirit — these are the principles that have
stood the test of 200 years of change. These are the principles
that we should choose to guide a changing America through the
years ahead.
Thank you.
###
9
FOR RELEASE AT 12:00 NOON
October
9, 1992
CONTACT:
Office of Financing
202-219-3350
TREASURY’S 52-WEEK BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for approximately $ 1 4 , 2 5 0 million of 3 6 4 -day
Treasury bills to be dated October 22, 1992
and "to mature
October 21, 1993
(CUSIP No. 912794 E4 2). This issue will
provide about $ 1,175 million of new cash for the Treasury,
as the maturing 52-week bill is outstanding in the amount of
$ 1 3 , 0 7 5 million. Tenders will be received at Federal Reserve
Banks and Branches and at the Bureau of the Public Debt, Washing
ton, D. C. 20239-1500, Thursday, October 15, 1992,
prior to
12:00 noon for noncompetitive tenders and prior to 1:00 p.m.,
Eastern Daylight Saving time, for competitive tenders.
The bills will be issued on a discount basis under competi
tive and noncompetitive bidding, and at maturity their par amount
will be payable without interest. This series of bills will be
issued entirely in book-entry form in a minimum amount of $10,000
and in any higher $5,000 multiple, on the records either of the
Federal Reserve Banks and Branches, or of the Department of the
Treasury.
The bills will be issued for cash and in exchange for
Treasury bills maturing October 22, 1992.
In addition to the
maturing 52-week bills, there are $23,364 million of maturing
bills which were originally issued as 13-week and 26-week bills.
The disposition of this latter amount will be announced next
week. Federal Reserve Banks currently hold $ 2 , 6 8 4 million as
agents for foreign and international monetary authorities, and
$ 8 , 5 6 2 million for their own account. These amounts represent
the combined holdings of such accounts for the three issues of
maturing bills. Tenders from Federal Reserve Banks for their
own account and as agents for foreign and international mone
tary 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 $
5 3 0 million of the original 52-week issue.
Tenders for
bills to be maintained on the book-entry records of the Depart
ment of the Treasury should be submitted on Form PD 5176-3.
NB-2018
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 2
Each bid must state the par amount of bills bid for, which
must be a minimum of $10,000. Bids over $10,000 must be in mul
tiples of $5,000. A bidder submitting a competitive bid for its
own account, whether bidding directly or submitting bids through
a depository institution or government securities broker/dealer,
may not submit a noncompetitive bid for its own account in the
same auction.
Competitive bids must show the discount rate desired,
expressed in two decimal places, e.g., 7.10%. Fractions may not
be used. A single bidder, as defined in Treasury's single bidder
guidelines, may submit competitive tenders at mçre than one dis
count rate, but the Treasury will not recognize, at any one rate,
any bid in excess of 35 percent of the public offering. A com
petitive bid by a single bidder at any one rate in excess of 35
percent of the public offering will be reduced to the 35 percent
limit. The public offering for any one bill is the amount offered
for sale in the offering announcement, less bills allotted to Fed
eral Reserve Banks for their own account and for the account of
foreign and international authorities in exchange for maturing
bills.
Noncompetitive bids do not specify a discount rate. A
single bidder should not submit a noncompetitive bid for more than
$1,000,000. A noncompetitive bid by a single bidder in excess of
$1,000,000 will be reduced to that amount. A bidder may not sub
mit a noncompetitive bid if the bidder holds a position, in the
bills being auctioned, in "when-issued" trading or in futures or
forward contracts. A noncompetitive bidder may not enter into any
agreement to purchase or sell or otherwise dispose of the bills
being auctioned, nor may it commit to sell the bills prior to the
designated closing time for receipt of competitive bids.
The following institutions may submit tenders for accounts
of customers: depository institutions, as described in Section
19(b)(1)(A), excluding those institutions described in subpara
graph (vii), of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A));
and government securities broker/dealers that are registered with
the Securities and Exchange Commission or noticed as government
securities broker/dealers pursuant to Section 15C(a)(1) of the
Securities Exchange Act of 1934. Others are permitted to submit
tenders only for their own account.
For competitive bids, the submitter must submit with the
tender a customer list that includes, for each customer, the name
of the customer and the amount and discount rate bid by each cus
tomer. A separate tender and customer list should be submitted
for each competitive discount rate. Customer bids may not be
aggregated by discount rate on the customer list.
For noncompetitive bids, the customer list must provide,
for each customer, the name of the customer and the amount bid.
For mailed tenders, the customer list must be submitted with the
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 3
tender. For other than mailed tenders, the customer list should
accompany the tender. If the customer list is not submitted with
the tender, information for the list must be complete and avail
able for review by the deadline for submission of noncompetitive
tenders. The customer list must be received by the Federal
Reserve Bank by auction day.
All bids submitted on behalf of trust estates must identify
on the customer list for each trust estate the name or title of
the trustee(s), a reference to the document creating the trust
with date of execution, and the employer identification number
of the trust.
•I B I
A competitive bidder must report its net long position in
the bill being offered when the total of all its bids for that
bill and its net long position in the bill equals or exceeds $2
billion, with the position to be determined as of one half-hour
prior to the closing time for the receipt, of competitive tenders.
A net long position includes positions, in the bill being auc
tioned, in when-issued trading and in futures and forward con
tracts, as well as holdings of outstanding bills with the same
CUSIP number as the bill being offered. Bidders who meet this
reporting requirement and are customers of a depository institu
tion or a government securities broker/dealer must report their
positions through the institution submitting the bid on their
behalf. A submitter, when submitting a competitive bid for a
customer, must report the customer's net long position in the
security being offered when the total of all the customer's bids
for that security, including bids not placed through the submit
ter, and the customer's net long position in the security equals
or exceeds $2 billion.
Tenders from bidders who are making payment by charge to a
funds account at a Federal Reserve Bank and tenders from bidders
who have an approved autocharge agreement on file at a Federal
Reserve Bank will be received without denosit. Full payment for
the par amount of bills bid for must accompany tenders from all
others, including tenders for bills to be maintained on the bookentry records of the Department of the Treasury. An adjustment
will be made on all accepted tenders accompanied by payment in
full for the difference between the payment submitted and the
price determined in the auction.
Public announcement will be made by the Department of the
Treasury of the amount and discount rate range of accepted bids for
the auction.
In each auction, noncompetitive bids for $1,000,000
or less without stated discount rate from any one bidder will be
accepted in full at the weighted average discount rate (in two
decimals) of accepted competitive bids. Competitive bids will then
be accepted, from those at the lowest discount rates through suc
cessively higher discount rates, up to the amount required to meet
the public offering. Bids at the highest accepted discount rate
ke prorated if necessary. Each successful competitive bidder
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 4
will pay the price equivalent to the discount rate bid. Noncom
petitive bidders will pay the price equivalent to the weighted
average discount rate of accepted competitive bids. The calcula
tion of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923.
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.
No single bidder in an auction will be awarded bills in an
amount exceeding 35 percent of the public offering. The deter
mination of the maximum award to a single bidder will take into
account the bidder's reported net long position, if the bidder
has been required to report its position.
Notice of awards will be provided to competitive bidders
whose bids have been accepted, whether those bids were for their
own account or for the account of customers. No later than 12:00
noon local time on the day after the auction, the appropriate
Federal Reserve Bank will notify each depository institution that
has entered into an autocharge agreement with a bidder as to the
amount to be charged to the institution's funds account at the
Federal Reserve Bank on the issue date. Any customer that is
awarded $500 million or more of securities in an auction must
furnish, no later than 10:00 a.m. local time on the day after the
auction, written confirmation of its bid to the Federal Reserve
Bank or Branch where the bid was submitted. If a customer of a
submitter is awarded $500 million or more through the submitter,
the submitter is responsible for notifying the customer of the
bid confirmation requirement.
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
by the issue date, by a charge to a funds account or pursuant to
an approved autocharge agreement, in cash or other immediatelyavailable funds, or in definitive Treasury securities maturing
on or before the settlement date but which are not overdue as
defined in the general regulations governing United States secu
rities. Also, maturing securities held on the book-entry records
of the Department of the Treasury may be reinvested as payment for
new securities that are being offered. Adjustments will be made
for differences between the par value of the maturing definitive
securities accepted in exchange and the issue price of the new
bills.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76 as applicable, Treasury's single bidder guide
lines, 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.
4/17/92
AS PREPARED FOR DELIVERY
EMBARGOED UNTIL 12:40 PM (Colorado)
OCTOBER 12, 1992
CONTACT:
CLAIRE BUCHAN
202-622-2910
Remarks by
The Honorable Nicholas F. Brady
Secretary of the Treasury
before the
COLORADO SPRINGS CHAMBER OF COMMERCE
Colorado Springs, Colorado
October 12, 1992
Thank you, Bill [Hybl]. It is a great pleasure to be here
with the Colorado Springs Chamber of Commerce.
As we look at the world at the turn of the century — with
the perspective provided by the technological advances of the
last 100 years — it is a significantly smaller place. London
and Tokyo no longer seem to be faraway places. Today, you can
reach either place in less than a day. While the Pony Express
once took letters across our continent in eight days, entire
libraries may now be transmitted around the world in seconds.
At the same time, economic and political borders have
blurred with our ever expanding ability to move capital and
productive capacity to wherever they may be most effectively
employed. Our national economy has been transformed from a
largely self-sufficient and isolated continent to an island in
the world archipelago — an island whose prosperity is affected
directly and dramatically by developments across the oceans. It
no longer makes sense to think of our economy as a purely
domestic matter; there is no longer a clear distinction between
domestic and foreign policy. We must change as the world
changes.
To find our way in this new world, we must have a clear,
articulated sense of where we are heading, for with change come
uncertainty and opportunity. Without a sure knowledge of the
economic landscape, uncertainty can paralyze and opportunity can
be missed. So today I would like to set out my view of that
landscape and of“the route we will use to cross it.
To begin, we roust understand the nature of the profound
economic transition through which America and the world are
passing. There are two distinct elements at work: a series of
significant but temporary disruptions, and more important, a
structural and permanent change in the organization of economic
competition. This permanent change is greater than any we have
seen since the end of the Second World War — in some ways
greater than any since the Industrial Revolution of the 19th
century.
First, let me give you some examples of the significant but
temporary disruptions:
o
The end of the Cold War is inevitably accompanied by
the wrenching transition to a peacetime economy — a
transition we have made successfully in the past and
will successfully make again. Indeed, when America
last went through a comparable period — in the first
Truman Administration — gross national product
actually fell 19% in a single year, which puts today's
positive growth of over 2% in perspective. And we
should also keep in mind that Truman's second term,
after the restructuring was well in hand, saw the
economy grow by almost 25% in four years. It stands to
reason that once this conversion to a peace-time
economy is again completed, the long-term implications
for growth are positive.
o
Second, businesses are strengthening their over
leveraged balance sheets and households are paying down
debt. This sets the stage for renewed growth in the
long term, even though it has meant slower growth in
the short term.
o
Third, the banking system weakened by Third World Debt,
failed savings and loans, and declining real estate
markets has been hesitant to provide the credit needed
to fuel the economy. Many would argue that this is an
understatement. But the Third World Debt crisis is now
behind us, the S&L cleanup nearly complete, and real
estate problems are improving. Banks are more liquid
than they have been in decades, better capitalized than
at any time since 1966, have the highest earnings in a
decade, and are poised to finance expansion.
o
Fourth, American
the last several
more productive,
meaner, and more
industry has been restructuring over
years. Having taken step's to become
American industry is now leaner,
competitive.
2
o
Finally, we have been in a period of restrained world
growth. The fact is that we are doing better
economically than Germany, Japan, the U.K. and other
trading partners. That provides little satisfaction to
Americans — but it is a fact.
Each of these five conditions has formed a significant brake
on economic growth in its own right, but when added together,
their combined effect has been much greater than the sum of their
parts. By undermining business and consumer attitudes, they have
created an additional, independent restraint on growth and added
to concerns about this country*s prospects.
But as each of these temporary disruptions is resolved, we
must still come to terms with the significant long-term
transformation of economic competition that has occurred — a
transformation made possible by the explosion of technology that
has changed our world. As the world contracts and economic
borders become less distinct, the old industrial age is fading
and being replaced by a new global economy, characterized by the
mobility of capital, ideas and information.
Twenty years ago most businesses could find their customers
on a road map; now they need a world map. In the modern market,
businesses are not bound to a particular country by the dictates
of geography; over an electronic network, separate elements of
the production process can be directed from anywhere in the
world. Information and technology have become increasingly
important elements of production. Also, improvements in
transportation and communication systems have dramatically
shortened the "pipeline” for goods^ -Capital moves around the
world at the touch of a button to wherever it will bring the
highest return.
These changes have transformed the world that we have known
through most of our lives. This is understandably unsettling to
workers and their families — to all of us. Vigorous
international competition has caused some of our nation's largest
and most well-known companies to restructure, not only General
Motors, but also Xerox, IBM, AT&T and others. People wonder why.
American workers go to the parts bin and see labels that raise
questions about the future — labels that list components from
Hong Kong, Korea, Portugal, Singapore, Taiwan, Thailand and
Mexico. Americans worry about what a label like that says about
their future.
But those who try to convince Americans that they are
diminished in the new economic world of free trade and mobility
are wrong. The plain fact is that the new mobility will create
millions of new and better jobs in the U.S. — and these exportbased jobs pay, on average, 17% more than the average wage.
Other countries will also gain jobs and increase their standard
of living. The result: they will buy more high-value-added
products from us. That is why Michigan and Illinois have
increased their exports to Mexico, and why expanded trade
benefits all of our industrial states.
Those who would make political hay out of people*s fears of
increased trade are doing so for narrow political advantage.
Truly, they are the newest members of the Flat Earth Society,
failing to accept the reality of the changes in the world around
them. Most of the industries in which America leads the world —
such as pharmaceuticals, software, telecommunications, aerospace,
and computers — are industries that thrive on trade. They will
continue to give us economic leadership if we follow policies
that nurture expanded trade.
The fact is, Americans do best when the competition is tough
— we do best by being more creative, more entrepreneurial, more
innovative. And in tomorrow's world, innovation will be as
important as physical capital. In this we Americans are
fortunate. Innovation and change are our heritage — from that
summer's day in 1776 when we established a new theory of
government to the most recent flight of the space shuttle
Atlantis. Americans are uniquely well positioned to succeed in
the modern world of the 21st Century.
But the challenge — for policymakers and for private
enterprise of all countries — will be maintaining and improving
the conditions for innovation and growth. This will involve
strong and constant policies.
What are the policies that this country needs to succeed in
the 21st Century?
o
First and foremost, we need competition, unfettered by
increased government regulation. America is strongest
internationally in areas characterized by substantial
domestic competition. For example, there are over
5,000 software companies in the United States,
competing against companies in Japan, France, and
elsewhere — yet this fragmented U.S. industry has 75%
of the world's market share.
4
o
Second, investment. We must develop policies that
increase the amount of investment in America and allow
sensible, long-term management decisions — policies
that direct resources to entrepreneurial capitalism,
not government coffers.
o
Third, education. Policies that create a highly
skilled, educated workforce — not just general
education, but industry-specific training — will be
critical for future gains in national productivity.
o
Finally, trade. If competition is the lever with which
a country will increase its productivity in the 21st
Century, trade is the fulcrum. As an industry develops
new products, it must be able to sell them in the
widest possible market. As free trade raises the
living standards of previously underdeveloped
countries, it will create almost 4 1/2 billion
potential new customers for the world*s goods.
For the last four years President Bush has pursued exactly
these policies — which are at the heart of the specific
proposals the President has laid out for a second term in his
Agenda for American Renewal. Let's take competition. Believe
me: conditions would be very different now if the Administration
had not consistently and vigorously defended a competitive
environment by fighting unnecessary government regulation and
resisting calls to shield our industries from world competition.
The President has used his veto pen over and over again to
protect American business from the United States Congress. And
we have unfailingly gone to bat for small business — which
creates two-thirds of the jobs in our country — through tax
incentives, regulatory relief, expansion of credit availability
and the President's multi-billion dollar proposal to stimulate
investment in this important sector of the economy.
To spur investment generally, we have reduced capital costs
by achieving the lowest interest rates and lowest inflation
levels in a generation. We seek to reduce costs even further
through, for example, differential capital gains tax rates and
the elimination of double taxation of dividends. These policies
are designed to increase savings and investment, which in turn
increase productivity — the only means by which our standard of
living will continue to improve.
5
We have proposed ambitious education reforms — both in
general schooling and specialized training. Our America 2000
program, including school choice and the creation of national
testing standards, would ensure we have the best trained, most
highly skilled people to do tomorrow*s jobs. Workers who lose
jobs in one area must' have help retraining; the Administration’s
proposals would replace the fragmentation of current Federal
programs with a coordinated, market-driven system, and triple the
funding currently provided for training.
We have acted vigorously to ensure free, open and growing
markets around the world. Last week, President Bush, Mexico’s
President Salinas, and Canada's Prime Minister Mulroney approved
the North American Free Trade Agreement. NAFTA will link us with
our neighbors to the North and South to create an historic trade
partnership — a single market of over 360 million people with a
total output of $6-1/2 trillion.
This newly unified market will provide an unparalleled
engine for growth and jobs, and yet, if it hadn't been for
President Bush's constant urging, this agreement would never have
been signed. Nothing could provide a clearer example of the
President's understanding of the new global economy, or of his
determination to pursue effective strategies to open new markets
for our economy.
There are those who will say that, while this analysis is
right, the prescription is wrong. Competition, they will tell
you, both at home and abroad, is destructive — trade saps jobs,
choice guts schools, incentives to invest help only the rich.
„Btit. it is they who are wrong. All they have to offer — tricked
up in the latest jargon — are the tired remedies of
protectionism, taxes, and government direction.
But we cannot hold on to the old world, and we should not
want to. As we embark on the 21st century, we must do so with
daring, foresight — and good old American pride. We know what
we must do to succeed in the new world economy — and we are
doing it. Americans have every reason to be optimistic about
this new world, for the field of play is our native one:
creating, risking, competing, achieving. With optimism, energy,
commitment — and the continued leadership of George Bush — we
can meet the challenges of this new century together.
Thank you.
###
6
I TREASURY NEWS
Department of the Treasury
Telephone 2
Washington, D.C.
^C
AS PREPARED FOR DELIVERY
EMBARGOED UNTIL 8:00 AM (Colorado)
OCTOBER 13, 1992
CONTACT:
CLAIRE BUCHAN
202-622-2910
Remarks by
The Honorable Nicholas F. Brady
Secretary of the Treasury
before the
COLORADO ASSOCIATION OF COMMERCE AND INDUSTRY
Denver, Colorado
October 13, 1992
Thank you, Neil [Hinchman, Incoming Chairman, CACI]. It is
a great pleasure to be here this morning with the Colorado
Association of Commerce and Industry.
As we look at the world at the turn of the century — with
the perspective provided by the technological advances of the
last 100 years — it is a significantly smaller place. London
and Tokyo no longer seem to be faraway places. Today, you can
reach either place in less than a day. While the Pony Express
once took letters across our continent in eight days, entire
libraries may now be transmitted around the world in seconds.
At the same time, economic and political borders have
blurred with our ever expanding ability to move capital and
productive capacity to wherever they may be most effectively
employed. Our national economy has been transformed from a
largely self-sufficient and isolated continent to an island in
the world archipelago — an island whose prosperity is affected
directly and dramatically by developments across the oceans. It
no longer makes sense to think of our economy as a purely
domestic matter; there is no longer a clear distinction between
domestic and foreign policy. We must change as the world
changes.
To find our way in this new world, we must have a clear,
articulated sense of where we are heading, for with change come
uncertainty and opportunity. Without a sure knowledge of the
economic landscape, uncertainty can paralyze and opportunity can
be missed. So today I would like to set out my view of that
landscape and of the route we will use to cross it.
NB - 2020
To begin, we must understand the nature of the profound
economic transition through which America and the world are
passing. There are two distinct elements at work: a series of
significant but temporary disruptions, and more important, a
structural and permanent change in the organization of economic
competition. This permanent change is greater than any we have
seen since the end of the Second World War — in some ways
greater than any since the Industrial Revolution of the 19th
century.
First, let me give you some examples of the significant but
temporary disruptions:
o
The end of the Cold War is inevitably accompanied by
the wrenching transition to a peacetime economy — a
transition we have m a d e successfully in the past and
will successfully m a k e again. Indeed, when America
last went through a comparable period — in the first
Truman Administration — gross national product
actually fell 19% in a single year, which puts today's
positive growth of over 2% in perspective. And we
should also keep in m i n d that Truman's second term,
after the restructuring was well in hand, saw the
economy grow by a l most 25% in four years. It stands to
reason that once this conversion to a peace-time
economy is again completed, the long-term implications
for growth are positive.
o
Second, businesses are strengthening their over
leveraged balance sheets and households are paying down
debt. This sets the stage for renewed growth in the
long term, even t h ough it has meant slower growth in
the short term.
o
Third, the banking s y stem weakened by Third World Debt,
failed savings and loans, and declining real estate
markets has been h e s i t a n t to provide the credit needed
to fuel the economy. M a n y would argue that this is an
understatement. But the Third World Debt crisis is now
behind us, the S&L c l e a n u p nearly complete, and real
estate problems are improving. Banks are more liquid
than they have been in decades, better capitalized than
at any time since 1966, have the highest earnings in a
decade, and are poised to finance expansion.
o
Fourth, American
the last several
more productive,
meaner, and more
industry has been restructuring over
years.
Having taken steps to become
A m e r i c a n industry is now leaner,
competitive.
economically than Germany, Japan, the U.K. and other
trading partners. That provides little satisfaction to
Americans — but it is a fact.
Each of these five conditions has formed a significant brake
on economic growth in its own right, but when added together,
their combined effect has been much greater than the sum of their
parts. By undermining business and consumer attitudes, they have
created an additional, independent restraint on growth and added
to concerns about this country's prospects.
But as each of these temporary disruptions is resolved, we
must still come to terms with the significant long-term
transformation of economic competition that has occurred — a
transformation made possible by the explosion of technology that
has changed our world. As the w o r l d contracts and economic
borders become less distinct, the old industrial age is fading
and being replaced by a new global economy, characterized by the
mobility of capital, ideas and information.
Twenty years ago most businesses could find their customers
on a road map; now they need a world map. In the modern market,
businesses are not bound to a particular country by the dictates
of geography; over an electronic network, separate elements of
the production process can be directed from anywhere in the
world. Information and technology have become increasingly
important elements of production. Also, improvements in
transportation and communication systems have dramatically
shortened the "pipeline” for goods.
Capital moves around the
world at the touch of a button to wherever it will bring the
highest return.
These changes have t r a n s f o r m e d the world that we have known
through most of our lives. This is understandably unsettling to
workers and their families — to all of us. Vigorous
international competition has c a used some of our nation's largest
and most well-known companies to restructure, not only General
Motors, but also Xerox, IBM, AT&T and others. People wonder why.
American workers go to the parts bin and see labels that raise
questions about the future -- labels that list components from
Hong Kong, Korea, Portugal, Singapore, Taiwan, Thailand and
Mexico. Americans worry about what a label like that says about
their future.
But those who try to convince Americans that they are
diminished in the new economic world of free trade and mobility
are wrong. The plain fact is that the new mobility will create
millions of new and better jobs in the U.S. — and these exportbased jobs pay, on average, 17% more than the average wage.
Other countries will also gain jobs and increase their standard
of living. The result: they will buy more high-value-added
products from us. That is why Michigan and Illinois have
increased their exports to Mexico, and why expanded trade
benefits all of our industrial states.
Those who would make political hay out of people's fears of
increased trade are doing so for narrow political advantage.
Truly, they are the newest members of the Flat Earth Society,
failing to accept the reality of the changes in the world around
them. Most of the industries in which America leads the world —
such as pharmaceuticals, software, telecommunications, aerospace,
and computers — are industries that thrive on trade. They will
continue to give us economic leadership if we follow policies
that nurture expanded trade.
The fact is, Americans do best when the competition is tough
— we do best by being more creative, more entrepreneurial, more
innovative. And in tomorrow's world, innovation will be as
important as physical capital. In this we Americans are
fortunate. Innovation and change are our heritage — from that
summer's day in 1776 when we established a new theory of
government to the most recent flight of the space shuttle
Atlantis . Americans are uniquely well positioned to succeed in
the modern world of the 21st Century.
But the challenge — for policymakers and for private
enterprise of all countries — will be maintaining and improving
the conditions for innovation and growth. This will involve
strong and constant policies.
What are the policies that this country needs to succeed in
the 21st Century?
o
First and foremost, we need competition, unfettered by
increased government regulation. America is strongest
internationally in areas characterized by substantial
domestic competition. For example, there are over
5,000 software companies in the United States,
competing against companies in Japan, France, and
elsewhere — yet this fragmented U.S. industry has 75%
of the world's market share.
4
J789
H H H iB
develop pol
sensible, long-term management decisions — policies
that direct resources to entrepreneurial capitalism,
not government coffers.
o
Third, education. Folicies that create a highly
skilled, educated workforce — not just general
education, but industry-specific training — will be
critical for future gains in national productivity.
o
Finally, trade. If competition is the lever with which
a country will increase its productivity in the 21st
Century, trade is the fulcrum. As an industry develops
new products, it must be able to sell them in the
widest possible market. As free trade raises the
living standards of previously underdeveloped
countries, it will create almost 4 1/2 billion
potential new customers for the world's goods.
For the last four years President Bush has pursued exactly
these policies — which are at the heart of the specific
proposals the President has laid out for a second term in his
Agenda for American Renewal. Let's take competition. Believe
me: conditions would be very different now if the Administration
had not consistently and vigorously defended a competitive
environment by fighting unnecessary government regulation and
resisting calls to shield our industries from world competition.
The President has used his veto pen over and over again to
protect American business from the United States Congress. And
we have unfailingly gone to bat for small business — which
creates two-thirds of the jobs in our country — through tax
incentives, regulatory relief, expansion of credit availability
and the President's multi-billion dollar proposal to stimulate
investment in this important sector of the economy.
To spur investment generally, we have reduced capital costs
by achieving the lowest interest rates and lowest inflation
levels in a generation. We seek to reduce costs even further
through, for example, differential capital gains tax rates and
the elimination of double taxation of dividends. These policies
are designed to increase savings and investment, which in turn
increase productivity — the only means by which our standard of
living will continue to improve.
We have proposed ambitious education reforms — both in
general schooling and specialized training. Our America 2000
program, including school choice and the creation of national
testing standards, would ensure we have the best trained, most
highly skilled people to do tomorrow's jobs. Workers who lose
jobs in one area must have help retraining; the Administration's
proposals would replace the fragmentation of current Federal
programs with a coordinated, market-driven system, and triple the
funding currently provided for training.
We have acted vigorously to ensure free, open and growing
markets around the world. Last week, President Bush, Mexico's
President Salinas, and Canada's Prime Minister Mulroney approved
the North American Free Trade Agreement. NAFTA will link us with
our neighbors to the North and South to create an historic trade
partnership — a single market of over 360 million people with a
total output of $6-1/2 trillion.
This newly unified market will provide an unparalleled
engine for growth and jobs, and yet, if it hadn't been for
President Bush's constant urging, this agreement would never have
been signed. Nothing could provide a clearer example of the
President's understanding of the new global economy, or of his
determination to pursue effective strategies to open new markets
for our economy.
There are those who will say that, while this analysis is
right, the prescription is wrong. Competition, they will tell
you, both at home and abroad, is destructive — trade saps jobs,
choice guts schools, incentives to invest help only the rich.
But it is they who are wrong. All they have to offer — tricked
up in the latest jargon — are the tired remedies of
protectionism, taxes, and government direction.
But we cannot hold on to the old world, and we should not
want to. As we embark on the 21st century, we must do so with
daring, foresight — and good old American pride. We know what
we must do to succeed in the new world economy — and we are
doing it. Americans have every reason to be optimistic about
this new world, for the field of play is our native one:
creating, risking, competing, achieving. With optimism, energy,
commitment — and the continued leadership of George Bush — we
can meet the challenges of this new century together.
Thank you.
###
6
UBLIC DEBT NEWS
Department of the Treasury • Btireau of the PubifçPebt • Washington, DC 20239
FOR IMMEDIATE RELEASE jjo f5 3/ f
fi I
IQ
K/
^CONTACT:
Office of
Financing
vfy
i|
______
October 13, 1992
202-219-3350
RESULTS OF TREASURY/S AUCTION OF 13-WEEK BILLS
Tenders for $11,043 million of 13-week bills to be issued
October 15, 1992 and to mature January 14, 1993 were
accepted today (CUSIP: 912794ZZ0).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2.85%
2 .8 8 %
2 .8 8 %
Investment
Rate
2.91%
2.94%
2.94%
Price
99.280
99.272
99.272
$35,000 was accepted at lower yields.
Tenders at the high discount rate were allotted 53%.
The investment rate is the equivalent coupon-issue yield.
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
21,690
32,816,005
18,290
45,945
43,945
33,225
1,729,125
7,035
11,705
24,080
17,370
1,079,385
796.580
$36,644,380
Accepted
21,690
9,193,315
18,290
45,945
42,065
27,055
254,105
7,035
11,705
24,080
17,370
584,225.
796.580
$11,043,460
Type
Competitive
Noncompetitive
Subtotal, Public
$31,882,760
1.410.200
$33,292,960
$6,281,840
1.410.200
$7,692,040
2,517,820
2.517.820
333 r600
$36,644,380
833.600
$11,043,460
Federal Reserve
Foreign Official
Institutions
TOTALS
NB-2021
Tenders for $11,044 million of 26-week bills to be issued
October 15, 1992 and to mature April 15, 1993 were
accepted today (CUSIP: 912794C28).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2.94%
2.95%
2.95%
Investment
Rate
3.03%
3.04%
3.04%
Price
98.514
98.509
98.509
Tenders at the high discount rate were allotted 97%.
The investment rate is the equivalent coupon-issue yield.
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
19,830
38,036,400
4,415
19,455
17,325
50,290
2,006,495
11,700
8,230
25,750
9,640
581,915
598.900
$41,390,345
Accepted
19,830
10,166,815
4,415
19,455
17,325
38,735
21,465
11,700
8,230
25,750
9,640
101,665
598.900
$11,043,925
Type
Competitive
Noncompetitive
Subtotal, Public
$37,533,410
933.035
$38,466,445
$7,186,990
933.035
$8,120,025
2,400,000
2,400,000
523,900
$41,390,345
523.900
$11,043,925
Federal Reserve
Foreign Official
Institutions
TOTALS
NB-2022
1
beI
_
t
Department of the Treasury
Washington, D.C.
FOR RELEASE AT 2:30 P.M. 4
October 13, 1992
'¡'He T$r : CONTACT:
‘’L'
Hc f
Telephone 20
Office of Financing
202-219-3350
TREASURY’S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling approxi
mately $ 23,200 million, to be issued
October 22, 1992.
This
offering will result in a paydown for the Treasury of about $175
million, as the maturing bills are outstanding in the amount of
$23,364
million.
Tenders will be received at Federal Reserve
Banks and Branches and at the Bureau of the Public Debt, Washing
ton, D. C. 20239-1500, Monday, October 19, 1992,
prior to
12:00 noon for noncompetitive tenders and prior to 1:00 p.m . ,
Eastern Daylight Saving time, for competitive tenders.
The two
series offered are as follows:
91-day bills (to maturity date) for approximately
$ 11,600 million, representing an additional amount of bills
dated
July 23 , 1992
and to mature
January 21, 1993
(CUSIP No. 912794 A3 8 ), currently outstanding in the amount
of $ 12,001 million, the additional and original bills to be
freely interchangeable.
1 8 2 -day bills for approximately $11,600
million, to be
dated October 22, 1992
and to mature
April 22 , 199 3
(CUSIP
No. 912794 C3 6 ).
The bills will be issued on a discount basis undet‘ bdiftpetitive
and noncompetitive bidding, and at maturity their par amount will
be payable without interest.
Both series of bills will be issued
entirely in book-entry form in a minimum amount of $10,000 and in
any higher $5,000 multiple, on the records either of the Federal
Reserve Banks and Branches, or of the Department of the Treasury.
The bills will be issued for cash and in exchange for
Treasury bills maturing
October 22, 1992.
In addition to- the
maturing 13-week and 26-week bills, there are $13,075 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 aggre
gate amount of maturing bills held by them.
For purposes of deter
mining such additional amounts, foreign and international monetary
authorities are considered to hold $ 2,094 million of the original
13-week and 26-week issues.
Federal Reserve Banks currently hold
$2,624 million as agents for foreign and international monetary
authorities, and $8,562 million for their own account.
These
amounts represent the combined holdings of such accounts for the
three issues of maturing bills.
Tenders for bills to be maintained
on the book-entry records of the Department of the Treasury should
be submitted on Form PD 5176-1 (for 13-week series) or Form
p h 5176-2 (for 26-week series).
NB-2023
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 2
Each bid must state the par amount of bills bid for, which
must be a minimum of $10,000. Bids over $10,000 must be in mul
tiples of $5,000. A bidder submitting a competitive bid for its
own account, whether bidding directly or submitting bids through
a depository institution or government securities broker/dealer,
may not submit a noncompetitive bid for its own account in the
same auction.
Competitive bids must show the discount rate desired,
expressed in two decimal places, e.g., 7.10%. Fractions may not
be used. A single bidder, as defined in Treasury's single bidder
guidelines, may submit competitive tenders at more than one dis
count rate, but the Treasury will not recognize, at any one rate,
any bid in excess of 35 percent of the public offering. A com
petitive bid by a single bidder at any one rate in excess of 35
percent of the public offering will be reduced to the 35 percent
limit. The public offering for any one bill is the amount offered
for sale in the offering announcement, less bills allotted to Fed
eral Reserve Banks for their own account and for the account of
foreign and international authorities in exchange for maturing
bills.
Noncompetitive bids do not specify a discount rate. A
single bidder should not submit a noncompetitive bid for more than
$1,000,000. A noncompetitive bid by a single bidder in excess of
$1,000,000 will be reduced to that amount. A bidder may not sub
mit a noncompetitive bid if the bidder holds a position, in the
bills being auctioned, in "when-issued" trading or in futures or
forward contracts. A noncompetitive bidder may not enter into any
agreement to purchase or sell or otherwise dispose of the bills
being auctioned, nor may it commit to sell the bills prior to the
designated closing time for receipt of competitive bids.
The following institutions may submit tenders for accounts
of customers: depository institutions, as described in Section
19(b)(1)(A), excluding those institutions described.in subpara
graph (vii), of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A));
and government securities broker/dealers that are registered with
the Securities and Exchange Commission or noticed as government
securities broker/dealers pursuant to Section 15C(a)(1) of the
Securities Exchange Act of 1934. Others are permitted to submit
tenders only for their own account.
For competitive bids, the submitter must submit with the
tender a customer list that includes, for each customer, the name
of the customer and the amount and discount rate bid by each cus
tomer. A separate tender and customer list should be submitted
for each competitive discount rate. Customer bids may not be
aggregated by discount rate on the customer list.
For noncompetitive bids, the customer list must provide,
for each customer, the name of the customer and the amount bid.
For mailed tenders, the customer list must be submitted with the
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 3
tender. For other than mailed tenders, the customer list should
accompany the tender. If the customer list is not submitted with
the tender, information for the list must be complete and avail
able for review by the deadline for submission of noncompetitive
tenders. The customer list must be received by the Federal
Reserve Bank by auction day.
All bids submitted on behalf of trust estates must identify
on the customer list for each trust estate the name or title of
the trustee(s), a reference to the document creating the trust
with date of execution, and the employer identification number
of the trust.
A competitive bidder must report its net long position in
the bill being offered when the total of all its bids for that
bill and its net long position in the bill equals or exceeds $2
billion, with the position to be determined as of one half-hour
prior to the closing time for the receipt of competitive tenders.
A net long position includes positions, in the bill being auc
tioned, in when-issued trading and in futures and forward con
tracts, as well as holdings of outstanding bills with the same
CUSIP number as the bill being offered. Bidders who meet this
reporting requirement and are customers of a depository institu
tion or a government securities broker/dealer must report their
positions through the institution submitting the bid on their
behalf. A submitter, when submitting a competitive bid for a
customer, must report the customer's net long position in the
security being offered when the total of all the customer's bids
for that security, including bids not placed through the submit
ter, and the customer's net long position in the security equals
or exceeds $2 billion.
Tenders from bidders who are making payment by charge to a
funds account at a Federal Reserve Bank and tenders from bidders
who have an approved autocharge agreement on file at a Federal
Reserve Bank will be received without deposit. Full payment for
the par amount of bills bid for must accompany tenders from all
others, including tenders for bills to be maintained on the bookentry records of the Department of the Treasury. An adjustment
will be made on all accepted tenders accompanied by payment in
full for the difference between the payment submitted and the
price determined in the auction.
Public announcement will be made by the Department of the
Treasury of the amount and discount rate range of accepted bids for
the auction. In each auction, noncompetitive bids for $1,000,000
or less without stated discount rate from any one bidder will be
accepted in full at the weighted average discount rate (in two
decimals) of accepted competitive bids. Competitive bids will then
be accepted, from those at the lowest discount rates through suc
cessively higher discount rates, up to the amount required to meet
the public offering. Bids at the highest accepted discount rate
will be prorated if necessary. Each successful competitive bidder
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 4
will pay the price equivalent to the discount rate bid. Noncom
petitive bidders will pay the price equivalent to the weighted
average discount rate of accepted competitive bids. The calcula
tion of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923.
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.
No single bidder in an auction will be awarded bills in an
amount exceeding 35 percent of the public offering. The deter
mination of the maximum award to a single bidder will take into
account the bidder's reported net long position, if the bidder
has been required to report its position.
Notice of awards will be provided to competitive bidders
whose bids have been accepted, whether those bids were for their
own account or for the account of customers. No later than 12:00
noon local time on the day after the auction, the appropriate
Federal Reserve Bank will notify each depository institution that
has entered into an autocharge agreement with a bidder as to the
amount to be charged to the institution's funds account at the
Federal Reserve Bank on the issue date. Any customer that is
awarded $500 million or more of securities in an auction must
furnish, no later than 10:00 a.m. local time on the day after the
auction, written confirmation of its bid to the Federal Reserve
Bank or Branch where the bid was submitted. If a customer of a
submitter is awarded $500 million or more through the submitter,
the submitter is responsible for notifying the customer of the
bid confirmation requirement.
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
by the issue date, by a charge to a funds account or pursuant to
an approved autocharge agreement, in cash or other immediatelyavailable funds, or in definitive Treasury securities maturing
on or before the settlement date but which are not overdue as
defined in the general regulations governing United States secu
rities. Also, maturing securities held on the book-entry records
of the Department of the Treasury may be reinvested as payment for
new securities that are being offered. Adjustments will be made
for differences between the par value of the maturing definitive
securities accepted in exchange and the issue price of the new
bills.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76 as applicable, Treasury's single bidder guide
lines, 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.
4/17/92
üä PUBLIC DEBT NEWS
fsä
Department of the Tre^stiry
f
, Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
October 15, 1992
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 52-WEEK BILLS
Tenders for $14,274 million of 52-week bills to be issued
October 22, 1992 and to mature October 21, 1993 were
accepted today (CUSIP: 912794E42).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Discount
Rate
Low
High
Average
3 . 12 %
3.13%
3.12%
Investment
Rate
3.24%
3.25%
3.24%
Price
96.845
96.835
96.845
$10,000 was accepted at lower yields.
Tenders at the high discount rate were allotted 81%.
The investment rate is the equivalent coupon-issue yield.
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
8,830
34,137,005
4,905
34,855
7,225
12,460
1,058,830
3,525
1,840
12,780
3,120
687,670
217.615
$36,190,660
Accented
8,830
13,653,405
4,905
34,855
7,225
12,270
49,330
3,525
1,840
12,780
3,120
263,920
217.615
$14,273,620
Type
Competitive
Noncompetitive
Subtotal, Public
$32,069,310
356.350
$32,425,660
$10,152,270
356.350
$10,508,620
3,300,000
3 ,300.000
465.000
$36,190,660
465.000
$14,273,620
Federal Reserve
Foreign Official
Institutions
TOTALS
N B -20 24
Vu I
AS PREPARED FOR DELIVERY
CONTACT:
EMBARGOED UNTIL 12:45 PM (Indianapolis)
OCTOBER 16, 1992
DESIREE TUCKER-SORINI
202-622-2920
Remarks by
The Honorable Nicholas F. Brady
Secretary of the Treasury
before the
INDIANAPOLIS KIWANIS CLUB
Indianapolis, Indiana
October 16, 1992
Thank you, Marge [O'Laughlin, Treasurer, State of Indiana].
It is a great pleasure to be here in Indianapolis, and I
appreciate you inviting me to join you for lunch. I especially
want to thank Sheriff McAtee and Chief of Police Toler, who
changed their schedules so I could have the podium today.
Of course, I can't visit Indianapolis without praising
Indiana's favorite son. He's tough; he stands up for his team;
and he never gives up. No, I'm not talking about Bobby Knight in
the "final four". I'm talking about Dan Quayle — who has shown
over the last four years that he can take the heat. And he sure
showed this past week that he continues to be a fighter.
As we look at the world at the turn of the 21st century,
economic and political borders have blurred. Our national
economy has been transformed from a self-sufficient and isolated
continent to an island in the world archipelago — an island
whose prosperity is affected directly and dramatically by
development across the oceans. It no longer makes sense to think
in purely domestic terms; there is no longer a clear distinction
between domestic and foreign policy. Trade negotiations affect
domestic employment; education policy affects future
competitiveness; peace in the Middle East means secure energy
sources to fuel domestic production; and investment from abroad
means jobs for Americans.
We must change as the world around us changes and to do so,
we must understand the nature of the profound economic transition
through which America and the world are passing. There are two
separate and distinct elements at work: a series of significant
but temporary disruptions that will pass through the system, but
more important, a structural and permanent change in the
organization of world economic competition — in some ways
greater than any since the Industrial Revolution of the 19th
century.
NB - 2025
First, let me give you some examples of the significant but
temporary disruptions:
o
The victory in the Cold War will bring immeasurable
benefits to the world economy. But the benefits of
peace did not come without cost: this country now
shows the strain of having carried the burden of the
free world's defense for almost 50 years. In this
country alone, the Defense Department has estimated the
shift to a peace-time economy has meant the loss of
over 1.6 million jobs in the last three years. Without
these job losses, the unemployment rate today would be
more than a full percentage point lower than it is.
Peace has its price.
We have made adjustments at war's end before. Indeed,
at war's end in the first Truman Administration gross
national product fell 19% in a single year. This puts
our economy's current growth rate of over 2% in
perspective. During Truman's second term, after the
restructuring was in hand, the economy grew by almost
25% in four years.
o
Second, the volume of debt in every segment of American
society over the last four years has been at
historically high levels. Those levels, however, are
at last beginning to decline as businesses strengthen
their balance sheets and as the baby boomers become the
parents of the 1990s, watching their budgets, saving
for their retirement and their kids' education.
Reducing the country's debt sets the stage for renewed
growth in the long term — even though it has meant
significantly slower growth in the short term.
o
Third, economic growth has been hindered by a banking
system weakened by Third World Debt, failed savings and
loans, and declining real estate markets. But the
Third World Debt crisis is now behind us, the S&L
cleanup nearly complete, and real estate problems are
improving. And banks are more profitable and liquid
than they have been in decades.
o
Fourth, American industry has been restructuring over
the last several years. Having taken steps to become
more productive, American industry is now more
competitive. In 1988, our trade deficit in goods and
services was almost $102 billion; it had declined to
only $11.7 billion last year. We are winning the
battle for exports.
2
o
Fifth, the money supply — which provides the financing
for the country's growth — has been at the bottom of
the Fed's targets for most of the past three years.
And in recent months, M2 growth has been negative or
flat.
o
Finally, we have seen restrained world growth. We are
doing better economically than Germany, Japan, the U.K.
and other trading partners. That provides little
satisfaction to Americans — but it is a fact.
Each of these six conditions has formed a significant brake
on economic growth, but when added together, their combined
effect is greater than the sum of their parts. By undermining
business and consumer attitudes, they have created an additional,
independent restraint on growth and added to concerns about this
country's prospects.
But even as each of these temporary disruptions is resolved,
we must still come to terms with the long-term transformation of
economic competition that technology has made possible. Twenty
years ago most businesses could find their customers on a road
map; today they need a world map. This has affected our
businesses and daily work. Let me give you some examples:
o
In today's world, businesses are not bound to a
particular country by the dictates of geography. Over
an electronic network, separate elements of the
production process can be directed from anywhere in the
world. For example, the Hewlett Packard personal
computer is designed and marketed in Palo Alto,
engineered in Grenoble, France, components are made in
Malaysia, assembled in Singapore, and 50% of sales are
in the United States.
o
What is more, information and intellectual capital have
become increasingly important parts of the production
process. New businesses are created that depend less
on physical capital and more on skills and know-how.
These new businesses are becoming leading industries of
the new world: Microsoft, for example, has a total
stock market value of $22 billion; Amgen, a leading
biotechnology company, has a stock market value of $9
billion; and McCaw Cellular's is $5 billion. The
government cannot create these new businesses, it does
not have that capability.
3
o
Improvements in transportation combined with new
information and communication systems have dramatically
shortened the transportation "pipeline" for goods,
allowing companies to maintain "just-in-time” inventory
methods even with far flung suppliers. An aircraft
factory in Central California can fax a parts order to
a supplier in Leeds, England and receive the components
the next day.
o
Capital moves around the world at the touch of a button
— without government approval — to wherever it will
bring the highest return, whether that is Frankfort,
Indiana, or Frankfort, Germany. To put the mobility in
perspective, each day in excess of $1.5 trillion of
transactions are settled through the New York Federal
Reserve Bank.
These changes have transformed the economic order that has
existed through most of our lives. This is understandably
unsettling to us all. Vigorous international competition has
caused some of our nation's most well-known companies to
restructure, not only General Motors, but also Xerox, IBM, AT&T
and others.
American workers go to the parts shelf and see labels that
concern them. As George Shultz recently remarked:
I saw a snapshot of a shipping label for some
integrated circuits produced by an American firm. It
said, "Made in one or more of the following countries:
Korea, Hong Kong, Malaysia, Singapore, Taiwan,
Mauritius, Thailand, Indonesia, Mexico, Philippines.
The exact country of origin is unknown."
Americans worry about what a label like that says about
their own future. But those who try to convince Americans that
they should fear the new economic world of free trade and change
are wrong. Most of the industries that are giving America its
leadership in this new world economy — industries like
pharmaceuticals, software, telecommunications, aerospace, and
computers — thrive on trade. If competition is the lever with
which a country will increase its productivity in the 21st
Century, trade is the fulcrum.
The fact is that in the U.S. exports will create millions of
new and better jobs — which have paid, on average, 17% more than
the average wage. As other countries increase their standard of
living, they will buy more high-value-added products from the
U.S. That is why the U.S. has increased its exports to Mexico
from $14 billion to $33 billion over the last four years.
4
The fact is, Americans do best when the competition is tough
— we do best by being more creative, more entrepreneurial, more
innovative.
And in tomorrow’s world innovation will be a major
source of the future's attractive, high-paying jobs. In this we
Americans are fortunate. Innovation and change are our
heritage — from that summer's day in 1776 when we established a
new theory of government to the most recent flight of the space
shuttle Atlantis . Americans are uniquely well positioned to
succeed in the modern world of the 21st century.
For that reason, the goal of the Bush Administration during
the next four years will be — as it has been — not to evade
change, but to face it; not to stand in place, but to advance.
Our single-minded goal is to create high-value jobs in the United
States. To achieve this goal, we should do the following things.
Exports Equal Jobs
We must continue the spectacular success we have had over
the last four years in opening free and growing markets for our
exports. In the 1980s, growth was fueled largely by debt and
consumption; in the 1990s, growth must come instead from exports
and investment. U.S. merchandise exports have increased by about
$195 billion over the last 5 years, and every billion dollars in
exports supports about 20,000 new jobs. Simple multiplication
indicates that this growth in exports accounts for almost 4
million new jobs.
A week ago, President Bush approved the North American Free
Trade Agreement. NAFTA will link us with our neighbors to the
North and South to create a single market of over 360 million
people with a total output of $6-1/2 trillion. This newly
unified market will provide an unparalleled engine for growth and
jobs. Yet if it hadn't been for President Bush's initiative and
constant urging, this agreement would never have been signed.
Noting could provide a clearer example of the President's
understanding of the new global economy.
Small Business is the Key
Two-thirds of the jobs created in the United States are
created by small businesses. Only 11% of the workforce works for
the Fortune Five Hundred companies. We must not shackle the 4
million smaller firms that are creating the new jobs workers need
during this transition. The infant industries of today will be
the job generators of tomorrow.
5
To this end, President Bush recently announced a
comprehensive five-year, $20 billion initiative which includes
lowering the corporate tax rate for small businesses; making up
to $2500 in small business start-up costs tax deductible;
increasing equipment expensing; and reducing paperwork burdens
that fall heavily on small businesses.
Conditions that Attract Investment
Ensuring America's economic leadership will also mean
adopting policies that foster savings and reduce the cost of
capital to encourage investment. It means running the government
so inflation and interest rates remain low and today, short-term
interest rates and inflation are at their lowest in decades. It
means reducing the capital gains tax to spur investment. And it
means reducing unnecessary regulatory restrictions and correcting
the excesses of our legal system.
But let me give you an example of what having an attractive
investment environment can mean. BMW, with the whole world to
choose from, recently decided to locate its first plant outside
Germany in South Carolina. In the words of BMW "the exports we
plan from the U.S. factory, will strengthen BMW's global
competitiveness." Imagine German car models made by Americans
sold to Europeans and Japanese.
Invest in America's Future
Finally, we must invest in America's future. Investment in
education, as well as in technology and in research, is the key
to increasing our workers' productivity. More than that,
education is the guarantee of job security. Our grandfathers may
have worked at a single job their entire lives. Today's employee
will, on average, have had five different careers by the time of
retirement. Education will be the key to a productive future.
If, as students, American workers have learned how to learn, they
will have laid the foundation for a lifetime of new skills.
So America's workforce must be the best educated to remain
the most productive. That means fixing our education system —
by implementing President Bush's plan to develop schools that are
more accountable, to expand parental choice, and to encourage
states to set meaningful education standards.
As we transform our economy, we will not
must retrain as they shift from one career to
life. The Administration's Worker Adjustment
initiatives will triple the funding currently
training.
6
leave out those who
another late in
and Youth Skills
provided for re
And finally, investing in America's future means providing
affordable health care for all Americans, while controlling its
rising costs. That is why President Bush, in February, proposed
a plan for comprehensive health reform, to make health care more
accessible by making health insurance more affordable. The
President's plan will not lead to rationing of health care and
leaves health care choices in the hands of the people, not the
bureaucrats.
These objectives recognize the interconnection between
foreign affairs and domestic policy; they deal with the dynamic
changes in the way the world does business; and they emphasize
individual initiative rather than fuel the engine of big
government.
Some will say that this agenda is wrong. Competition, they
will tell you, both at home and abroad, is destructive — trade
saps jobs, choice guts schools, incentives to invest help only
the rich. But it is they who are wrong. All they offer —
dressed up in the latest jargon — are the tired remedies of
protectionism, increased taxes, and government direction. They
are the newest members of the Flat Earth Society, failing to
understand the world around them.
We cannot hold on to the old world, and we should not want
to. We know what we must do to succeed in the new world economy
After all, the field of play is our native one: creating,
risking, competing, achieving. With optimism, energy and
commitment, America can remain what it has always been: the ark
of the world's liberty and the engine of its prosperity. The
next American Century can be as bright and brilliant as the last
Thank you.
###
7
AS PREPARED FOR DELIVERY
EMBARGOED UNTIL 11:30 AM
OCTOBER 18, 1992
CONTACT:
DESIREE TUCKER-SORINI
202-622-2910
Remarks by
The Honorable Nicholas F. Brady
Secretary of the Treasury
before the
AMERICAN BANKERS ASSOCIATION
Boston, Massachusetts
October 18, 1992
Thank you, Alan [Tubbs]. It is a great pleasure to be with
the members of the American Bankers Association as you celebrate
your 118th Annual Convention.
Successive generations of ABA members have witnessed
tremendous change, not only in the way they conduct their
business, but in the way they live their lives. In 1875 — the
year the ABA was established — Mark Twain submitted to his
publisher the very first book manuscript prepared on a
typewriter: The Adventures of Tom Sawyer. Edmund Barbour had
just invented the first effective adding machine three years
earlier. Alexander Graham Bell would obtain a patent on the
first telephone one year later in 1876, and the first telephone
lines between New York and Boston would be strung in 1884.
(Presumably, it wasn't as important then to talk to your
regulators in Washington.)
As we look at the world at the turn of the 21st century
economic and political borders have blurred. Our national *
economy has been transformed from a self-sufficient and isolated
continent to an island in the world archipelago —— an island
whose prosperity is affected directly and dramatically by
development across the oceans. It no longer makes sense to think
in purely domestic terms; there is no longer a clear distinction
between domestic and foreign policy. Trade negotiations affect
domestic employment; education policy affects future
competitiveness; peace in the Middle East means secure energy
sources to fuel domestic production; and investment from abroad
means jobs for Americans.
NB-2026
We must change as the world around us changes, and to do so,
we must understand the nature of the profound economic transition
through which America and the world are passing. There are two
separate and distinct elements at work: a series of significant
but temporary disruptions that will pass through the system, but
more important, a structural and permanent change in the
organization of world economic competition —— in some ways
greater than any since the Industrial Revolution of the 19th
century.
It is this permanent change that demands the most
careful policies — and among the most important are policies to
ensure a strong and vigorous banking system.
But first, let me give you some examples of the significant
but temporary disruptions:
o
The victory in the Cold War will bring immeasurable
benefits to the world economy. But the benefits of
peace did not come without cost: this country now
shows the strain of having carried the burden of the
free world's defense for almost 50 years. In this
country alone, the Defense Department has estimated the
shift to a peace-time economy has meant the loss of
over 1.6 million jobs in the last three years. Without
these job losses, the unemployment rate today would be
more than a full percentage point lower than it is.
Peace has its price.
We have made adjustments at war's end before. Indeed,
at war's end in the first Truman Administration gross
national product fell 19% in a single year. This puts
our economy's current growth rate of over 2% in
perspective. During Truman's second term, after the
restructuring was in hand, the economy grew by almost
25% in four years.
o
Second, the volume of debt in every segment of American
society over the last four years has been at
historically high levels. Those levels, however, are
at last beginning to decline as businesses strengthen
their balance sheets and as the baby boomers become the
parents of the 1990s, watching their budgets, saving
for their retirement and their kids' education.
Reducing the country's debt sets the stage for renewed
growth in the long term — even though it has meant
significantly slower growth in the short term.
2
o
Third, economic growth has been hindered by a banking
system weakened by Third World Debt, failed savings and
loans, and declining real estate markets. But the
Third World Debt crisis is now behind us, the S&L
cleanup nearly complete, and real estate problems are
improving. And banks are more profitable and liquid
than they have been in decades.
o
Fourth, American industry has been restructuring over
the last several years. Having taken steps to become
more productive, American industry is now more
competitive. In 1988, our trade deficit in goods and
services was almost $102 billion; it had declined to
only $11.7 billion last year. We are winning the
battle for exports.
o
Fifth, the money supply — which provides the financing
for the country's growth — has been at the bottom of
the Fed's targets for most of the past three years.
And in recent months, M2 growth has been negative or
flat.
o
Finally, we have seen restrained world growth. We are
doing better economically than Germany, Japan, the U.K.
and other trading partners. That provides little
satisfaction to Americans — but it is a fact.
Each of these six conditions has formed a significant brake
on economic growth, but when added together, their combined
effect is greater than the sum of their parts. By undermining
business and consumer attitudes, they have created an additional,
independent restraint on growth and added to concerns about this
country's prospects.
But even as each of these temporary disruptions is resolved,
we must still come to terms with the long-term transformation of
economic competition that technology has made possible. Twenty
years ago most businesses could find their customers on a road
map; today they need a world map. This has affected our
businesses and daily work. Let me give you some examples:
o
In today's world, businesses are not bound to a
particular country by the dictates of geography. Over
an electronic network, separate elements of the
production process can be directed from anywhere in the
world. For example, the Hewlett Packard personal
computer is designed and marketed in California,
engineered in Grenoble, France, components are made in
Malaysia, assembled in Singapore, and sold in the
United States and abroad.
3
o
What is more, information and intellectual capital have
become increasingly important parts of the production
process. New businesses are created that depend less
on physical capital and more on skills and know-how.
These new businesses are becoming leading industries of
the new world: Microsoft, for example, has a total
stock market value of $23 billion; Amgen, a leading
biotechnology company, has a stock market value of $8
billion; and McCaw Cellular's is $4 billion. The
government cannot create these new businesses, it does
not have that capability.
o
Improvements in transportation combined with new
information and communication systems have dramatically
shortened the transportation "pipeline” for goods,
allowing companies to maintain "just-in-time" inventory
methods even with far flung suppliers. An aircraft
factory in Central California can fax a parts order to
a supplier in Leeds, England and receive the components
the next day.
o
Capital moves around the world at the touch of a button
— without government approval — to wherever it will
bring the highest return, whether that is Frankfort,
Indiana, or Frankfort, Germany. To put the mobility in
perspective, each day in excess of $1.5 trillion of
transactions are settled through the New York Federal
Reserve Bank.
These changes have transformed the economic order that has
existed through most of our lives. This is understandably
unsettling to us all. Vigorous international competition has
caused some of our nation's most well-known companies to
restructure, not only General Motors, but also Xerox, IBM, AT&T
and others.
American workers go to the parts shelf and see labels that
concern them. As George Shultz recently remarked:
I saw a snapshot of a shipping label for some
integrated circuits produced by an American firm. It
said, "Made in one or more of the following countries:
Korea, Hong Kong, Malaysia, Singapore, Taiwan,
Mauritius, Thailand, Indonesia, Mexico, Philippines.
The exact country of origin is unknown."
4
Americans worry about what a label like that says about
their own future. But those who try to convince Americans that
they should fear the new economic world of free trade and change
are wrong. Most of the industries that are giving America its
leadership in this new world economy — industries like
pharmaceuticals, software, telecommunications, aerospace, and
computers — thrive on trade. If competition is the lever with
which a country will increase its productivity in the 21st
Century, trade is the fulcrum.
The fact is that in the U.S. exports will create millions of
new and better jobs — which have paid, on average, 17% more than
the average wage. As other countries increase their standard of
living, they will buy more high-value-added products from the
U.S. That is why the U.S. has increased its exports to Mexico
from $14 billion to $33 billion over the last four years.
Our history proves that Americans do best when the
competition is tough — we do best by being more creative, more
entrepreneurial, more innovative.
And in tomorrow's world
innovation will be a major source of the future's attractive,
high-paying jobs. In this we Americans are fortunate.
Innovation and change are our heritage — from that summer's day
in 1776 when we established a new theory of government to the
most recent flight of the space shuttle Atlantis. Americans are
uniquely well positioned to succeed in the modern world of the
21st century.
For that reason, the goal of the Bush Administration during
the next four years will be — as it has been — not to evade
change, but to face it; not to stand in place, but to advance.
Our single-minded goal is to create high-value jobs in the United
States. To achieve this goal, we should do the following things.
Exports Equal Jobs
We must continue the spectacular success we have had over
the last four years in opening free and growing markets for our
exports. In the 1980s, growth was fueled largely by debt and
consumption; in the 1990s, growth must come instead from exports
and investment. U.S. merchandise exports have increased by about
$195 billion over the last 5 years, and every billion dollars in
exports supports about 20,000 new jobs. Simple multiplication
indicates that this growth in exports accounts for almost 4
million new jobs.
5
A week ago, President Bush approved the North American Free
Trade Agreement. NAFTA will link us with our neighbors to the
North and South to create a single market of over 360 million
people with a total output of $6-1/2 trillion. This newly
unified market will provide an unparalleled engine for growth and
jobs. Yet if it hadn't been for President Bush's initiative and
constant urging, this agreement would never have been signed.
Nothing could provide a clearer example of the President's
understanding of the new global economy.
Small Business is the Key
Two-thirds of the jobs created in the United States are
created by small businesses. Only 11% of the workforce works for
the Fortune Five Hundred companies. We must not shackle the 4
million smaller firms that are creating the new jobs workers need
during this transition. The infant industries of today will be
the job generators of tomorrow.
To this end, President Bush recently announced a
comprehensive five-year, $20 billion initiative which includes
lowering the corporate tax rate for small businesses; making up
to $2500 in small business start-up costs tax deductible;
increasing equipment expensing; and reducing paperwork burdens
that fall heavily on small businesses.
Conditions that Attract Investment
Ensuring America's economic leadership will also mean
adopting policies that foster savings and reduce the cost of
capital to encourage investment. It means running the government
so inflation and interest rates remain low, and today, short-term
interest rates and inflation are at their lowest in decades. It
means reducing the capital gains tax to spur investment. And it
means reducing unnecessary regulatory restrictions and correcting
the excesses of our legal system.
But let me give you an example of what having an attractive
investment environment can mean. BMW, with the whole world to
choose from, recently decided to locate its first plant outside
Germany in South Carolina. In the words of BMW, "the exports we
plan from the U.S. factory will strengthen BMW's global
competitiveness." Imagine German car models made by Americans
sold to Europeans and Japanese.
6
Invest in America's Future
Finally, we must invest in America's future. Investment in
education, as well as in technology and in research, is the key
to increasing our workers' productivity. More than that,
education is the guarantee of job security. Our grandfathers may
have worked at a single job their entire lives. Today's employee
will, on average, have had five different careers by the time of
retirement. Education will be the key to a productive future.
If, as students, American workers have learned how to learn, they
will have laid the foundation for a lifetime of new skills.
So America's workforce must be the best educated to remain
the most productive. That means fixing our education system
by implementing President Bush's plan to develop schools that are
more accountable, to expand parental choice, and to encourage
states to set meaningful education standards.
As we transform our economy, we will not
must retrain as they shift from one career to
life. The Administration's Worker Adjustment
initiatives will triple the funding currently
training.
leave out those who
another late in
and Youth Skills
provided for re
And finally, investing in America's future means providing
affordable health care for all Americans, while controlling its
rising costs. That is why President Bush, in February, proposed
a plan for comprehensive health reform, to make health care more
accessible by making health insurance more affordable. The
President's plan will not lead to rationing of health care and
leaves health care choices in the hands of the people, not the
bureaucrats.
These objectives recognize the interconnection between
foreign affairs and domestic policy; they deal with the dynamic
changes in the way the world does business; and they emphasize
individual initiative rather than fuel the engine of big
government.
A Banking Industry for the 21st Century
But of course, we cannot implement this strategy if we do
not have a strong, vigorous and independent banking system to
supply credit. And the Administration and your industry share a
common goal: to ensure that you run your business — not the
government. To this end, the President has articulated a fourpart strategy to equip your industry to enter the next century
and meet the competition head-to-head.
7
Regulatory relief will be the number one priority. The time
and money that banks are forced to spend on regulatory compliance
has reached a level that is intolerable to you, the
Administration, and every person in the country who must pay the
price of slower economic growth.
But there has been progress. In the past several weeks
Congress has actually adopted a number of the Bush
Administration's regulatory relief proposals. One was the
Depository Institutions Disaster Relief Act, which will provide
regulatory flexibility in areas devastated by the recent
hurricanes and the Los Angeles riots. You may think that this is
a limited provision, but let me remind you of one key fact —
this is the first banking legislation in a decade that does
nothing but reduce regulatory burden.
More important, at our urging Congress also passed
regulatory relief measures with the strong support of your
industry. These provisions have been attached to a housing bill,
and there have been some questions about whether the President
will sign this legislation. Let me say right here and right now:
I will strongly recommend that the President sign this
legislation.
It's high time to start lightening your load, and with this
start we can move forward next year with the Administration's
even broader proposal — the Credit Availability and Regulatory
Relief Act.
Second, in addition to regulatory relief, we need to re
establish a balanced approach to lending and risk taking. The
Democratic Congress has not only piled on new regulations — it
has second-guessed and publicly censured the regulators at every
turn, creating a climate of fear that has frozen these civil
servants in their tracks. Although we have consistently urged
them to exercise balanced judgement, examiners watch C-Span, too.
They have the same healthy sense of self-preservation that we all
have, and they tell us privately of their dread of being called
to testify before Congress. Obviously, this fear can't help but
inspire excessive caution as they look over your shoulders when
you lend. The result: an environment in which banks may not
assume their natural roles in their communities, and the whole
economy suffers.
We will continue to work hard to counteract this trend. We
have already sponsored hundreds of meetings to build bridges
among bankers, examiners, and borrowers, and we will carry on
until the job is done. We have worked with the regulators to
complete over 35 specific regulatory changes and clarifications
that will ease your compliance burden and facilitate lending.
8
And through the President's ongoing regulatory review and
moratorium, we will press for further reduction of unnecessary
rules and paperwork requirements. Just this week, we concluded a
successful collaborative effort with the regulatory agencies to
implement real estate loan-to—value ratios in a reasonable and
workable manner.
And perhaps most important to each and every one of you, the
banking industry's significantly improved condition enabled us to
convince the FDIC to hold the line on deposit insurance premiums
for 76 percent of American banks, and to hold the increase to as
little as possible for the rest of the banks.
Third, we must end the public utility model of bank
regulation. In the past four years, the Administration has
worked with you to prevent Congress from imposing everything from
government—designed bank accounts to interest rate controls on
credit card loans. As I said before, the government should not
run your business; you should. But harbor no illusions: the
Democratic leadership of the Congress will continue to try to
move you down the public utility path. This is no exaggeration:
I have heard it — in exactly those terms — straight from the
horse's mouth. So we must continue to work together to oppose
heavy-handed Congressional attempts to transform the banking
industry into a government program to allocate credit and banking
services.
jg g j !$S h
Fourth, we need a level playing field in financial services.
Your industry is subject to new challenges as the world changes,
but the old, arbitrary legal framework that governs the banking
system continues to restrict the ability of American banks to
compete. The Administration continues to believe that outdated
restrictions on products and geography must be eliminated. And
we intend to fight for these reforms while recognizing states'
rights and the legitimate demands of local communities.
But once again, if you do not believe that there are leading
Members of Congress who will do everything in their power to
prevent you from diversifying into new products and services, you
are sadly mistaken. They see you as a convenient target for
demagoguery that serves their political purposes, not as an
important national asset that is vital to economic growth.
In a similar vein, take the raft of news stories we've seen
recently about the so-called "December Surprise." The notion
that we are hiding some kind of commercial bank bailout is utter
nonsense; we have faced the problems in commercial banking
squarely from the outset. And as you well know, the banking
industry has had all-time record earnings in 1992. Stories of a
December collapse are simply ridiculous. In fact, the Washington
9
Post actually ran — under a blazing editorial page headline —
the names of ten large banks that it said are insolvent. Later,
the Post had to print a retraction — in a small box on page 32 - upon discovering that some of the identified banks are among
the very strongest in the country.
My point is simply this: you are an attractive target for
many in Congress and the media. Attacking banks serves their
purposes, from political gain to selling newspapers.
So we must
work together to ensure that the banking industry is able to
fulfill its intended role in achieving the Administration's —
and the American people's — goals of boosting exports, helping
small business and facilitating investment in the future.
Some will say that this agenda is wrong. Competition, they
will tell you, both at home and abroad, is destructive — trade
saps jobs, choice guts schools, incentives to invest help only
the rich. But it is they who are wrong. All they offer —
dressed up in the latest jargon — are the tired remedies of
protectionism, increased taxes, and government direction. They
are the newest members of the Flat Earth Society, failing to
understand the world around them.
We cannot hold on to the old world, and we should not want
to. We know what we must do to succeed in the new world economy.
After all, the field of play is our native one: creating,
risking, competing, achieving. With optimism, energy and
commitment, America can remain what it has always been: the ark
of the world's liberty and the engine of its prosperity. The
next American Century can be as bright and brilliant as the last.
Thank you.
# # #
10
Department of the Treasury • Bureau of the Public Debt • ^Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
October 19, 1992
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $11,609 million of 13-week bills to be issued
October 22, 1992 and to mature January 21, 1993 were
accepted today (CUSIP: 912794A38).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2. 92%
2. 95%
2 .94%
Investment
Rate
2.98%
3.01%
3.00%
Price
99.262
99.254
99.257
Tenders at the high discount rate were a Hotte«
The investment rate is the equivalent coupon-i:
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
26,065
28,871,450
12,525
34,885
32,555
28,795
1,528,975
12,205
5,910
23,045
23,900
658,415
810.000
$32,068,725
Accented
26,065
10,166,450
12,525
34,885
32,555
24,395
348,975
12,205
5,910
23,045
23,900
88,415
810.000
$11,609,325
Type
Competitive
Noncompetitive
Subtotal, Public
$27,407,400
1.335.765
$28,743,165
$6,948,000
1.335.765
$8,283,765
2,662,060
2,662,060
663.500
$32,068,725
663.500
$11,609,325
Federal Reserve
Foreign Official
Institutions
TOTALS
NB-2027
Department of the Treasury
Bureau of the Public Debt • Washington, DC 20239
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
October 19, 1992
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $11,610 million of 26-week bills to be issued
October 22, 1992 and to mature April 22, 1993 were
accepted today (CUSIP: 912794C36).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3. 09%
3. 11%
3. 10%
Investment
Rate
3.18%
3.20%
3.19%
Price
98.438
98.428
98.433
Tenders at the high discount rate were allotte*
The investment rate is the equivalent coupon-ii
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
16,475
29,282,375
6,435
25,710
16,705
17,205
1,616,830
6,520
7,300
23,045
11,015
572,640
562.025
$32,164,280
Accented
16,475
10,459,825
6,435
25,710
16,705
16,875
234,580
6,520
7,300
23,045
11,015
223,140
562.025
$11,609,650
Type
Competitive
Noncompetitive
Subtota1, Pubiic
$28,166,240
856.040
$29,022,280
$7,611,610
856.040
$8,467,650
2,600,000
2,600,000
542.000
$32,164,280
542.000
$11,609,650
Federal Reserve
Foreign Official
Institutions
TOTALS
NB-2028
TREASURY NEWS
Washington, D.C
Department of the Treasury
Telephone 202-622-2960
U.S. DEPARTMENT OF THE TREASURY
REGULATORY BURDEN REDUCTIONS
October 20, 1992
Fact Sheet
Regulatory reform is a key element of the economic growth
package presented by President Bush during his State of the Union
address on January 28, 1992. As the President has explained,
"Every regulation that reduces efficiency slaps a hidden tax on
the consumer."
For too long, needless regulations have burdened the
American economy. Banks and thrifts are besieged by excessive
applications and reporting forms, small businesses get trapped in
confusing payroll tax rules, and exporters find themselves less
able to manufacture and ship American goods because of costly
transport reguirements.
Responding to the Presidents initiative, the Treasury
Department and its regulatory offices and bureaus have carried
out a top-to-bottom review of all regulations, old and new.
Treasury set ambitious reform goals, and each bureau and office
took the necessary steps to tackle the job.
The results have been outstanding. So far, action has been
taken on 122 specific reforms that could save our economy almost
$1 billion every year, increase economic growth and
competitiveness, and reduce the credit crunch.
Listed below, by Treasury bureau, are some specific actions
of regulatory burden reduction that have been completed or
initiated.
Internal Revenue Service
•
Simplified Federal Employment Tax Deposit Rules. Simplifies
the rules for determining when payroll tax deposits are
required by businesses. A cost savings of roughly $450
million is estimated, based on reduced compliance costs for
almost 4 million businesses, particularly small employers.
NB-2029
(more)
Treasury Regulatory Reform
Fact Sheet - Page 2
United States Customs Service
•
Line Release Cargo Processing. Enables Customs to more
efficiently release and track highly repetitive, low-risk
imports through utilization of personal computers and bar
code technology. A cost savings of $69.9 million is
estimated, based on reduced importer filing burden,
expedited merchandise release and facilitated trade.
•
Eliminate Certain Broker Recordkeeping Requirements.
Eliminates a near-obsolete recordkeeping requirement. A
cost savings of $8 million is estimated, based on brokers
not being required to maintain certain records.
Office of Thrift Supervision
•
Interstate Branching. Permits nationwide branching by
Federal Savings associations. Enables thrifts to diversify
geographically and will promote cost savings and economies
of scale by enabling thrifts to consolidate their
operations. A short-term annual cost savings of $45.5
million is estimated for the thrift industry, based on
reduced expenditures resulting from branching.
•
Residential Bridge Loans. Revises risk-based capital
regulation to include in the 50 percent risk-weight category
certain prudently underwritten construction loans to finance
the building of pre-sold, 1-4 unit family residences. A
cost savings of $19 million is estimated, based on reduced
capital requirements and costs. This amount of reduced
capital would support $3 billion in additional loans.
Office of the Comptroller of the Currency
•
Real Estate Appraisals. Exempts additional real estaterelated financial transactions from the requirement to have
an appraisal in certain cases. A cost savings of $23.7
million is estimated, mostly for consumers.
•
Capital Treatment of Intangible Assets. Allows national
banks to include a higher value of intangible assets in
regulatory capital, thereby possibly increasing availability
of loanable funds.
(more)
Treasury Regulatory Reform
Fact Sheet - Page 3
Financial Management Service
•
Federal Payments Through the Automated Clearing House Method
— Reconcile with Private Industry Rules. Coordinates the
government Automated Clearing House rules with private
industry rules for financial institutions, Federal Reserve
Banks and Federal Agencies. A cost savings of $25.3 million
is estimated, based mostly on savings to the Federal
Government resulting from the conversion of an estimated 80
million Federal Tax Deposit paper coupons to electronic fund
transfers (savings approximately 30 cents per transaction).
Bureau of Alcohol. Tobacco & Firearms
•
Can Size. Allows distilled spirits to be marketed in 355 ml
size cans, rather than previously required 375 ml can. A
cost savings of $3 million is estimated, based on projected
reduced manufacturing costs and improved ability to take
advantage of technological advances.
•
Reduced Bottling Proof for Distilled Spirits. Allows the
bottling of distilled spirits as low as 60 proof, compared
with the previous minimum of 70 proof alcohol. A cost
savings of $5 million is estimated, based on projected
increased sales and reduced manufacturing costs.
•
Specifically Denatured Alcohol Users. Eliminates the need
to file for approval of a formula when the product is
manufactured out of tolerance. Affects approximately 2700
users and dealers in specially denatured alcohol. A cost
savings of $8.5 million is estimated, based on reduced
administrative costs and lost productivity while awaiting
formula approvals.
Bureau of Public Debt
•
Savings Bonds — Power of Attorney. Eases the restrictions
on the use of powers of attorney and accepts those in
compliance with state law. Affects bondowners who may wish
to have another individual conduct their bond transactions.
A cost savings of $5 million is estimated, based largely on
reduced legal and court costs.
#####
DEPARTMENT OF THE TREASURY
President's Regulatory Initiative:
January 28 - August 28, 1992
ESTIMATED COST SAVINGS
($ MILLIONS)
FOR REGULATORY INITIATIVE REFORMS
BUREAU OR OFFICE
COMPLETED
REFORMS
INITIATED
REFORMS
TOTAL
BUREAU OF ALCOHOL, TOBACCO & FIREARMS
18.94
18.25
37.19
UNITED STATES CUSTOMS SERVICE
71.93
10.24
82.17
128.90
170.8
299.70
23.70
0.65
24.35
OFFICE OF THRIFT SUPERVISION
COMPTROLLER OF THE CURRENCY
FINANCIAL MANAGEMENT SERVICE
—
2.55
2.55
INTERNAL REVENUE SERVICE
—
450.00
450.00
BUREAU OF THE PUBLIC DEBT
5.25
—
OFFICE OF FOREIGN ASSETS CONTROL
0.27
—
TOTAL DEPARTMENT OF THE TREASURY
248.99
Notes:
652.49
5.25
0.27
901.48
Estimated cost savings provided only for reforms where data can
reasonably be guantified; actual cost savings will be higher.
Reforms with a range of estimated cost savings are included at
midpoint range values.
Initiated reforms are advance notices of proposed rulemaking or
proposed rules approved for issuance for which final rules have not
been published.
AS PREPARED FOR DELIVERY
Contact: Rich Myers
202-622-2930
Secretary Nicholas F. Brady
Regulatory Reform Awards
October 20, 1992
Cash Room
As I start, I'd like to recognize the contributions that
Deputy Secretary Robson has made to this effort. John, your
commitment to regulatory reform is steadfast. For almost four
years, you have been a leading voice not just for Treasury, but
for the entire Administration, in our fight against unnecessary
regulation. On behalf of all of us, thanks for all you've done.
This morning, we are here to recognize and congratulate the
men and women who joined in that fight — the dedicated few who
know what it takes to wield the cleaver and cut the fat.
For too long, needless regulations have burdened our
economy. Banks and thrifts are besieged by myriad applications
and reporting forms — meaning they have less time and money to
make the loans our economy needs to grow. Small businesses get
trapped in the costly quicksand of semi-monthly and weekly tax
forms. Exporters find themselves less able to manufacture and
ship their goods, because they are forced to spend so much on
costly and confusing transport requirements.
Earlier this year, in his State of the Union address,
President Bush took a bold and unprecedented step in the fight
against the muck and mud of regulatory overkill. The President
called for a 90-day moratorium on new regulations that inhibit
economic growth, and he directed all departments to "carry out a
top-to-bottom review of all regulations, old and new.”
That was January 28. On January 29, the federal government
began to tackle the assignment head-on, and Treasury took action.
Our objective was clear: cut the red tape that strangles our
economy.
Treasury set ambitious goals for this initiative. After
combing through the Code of Federal Regulations, we identified
175 regulatory initiative reforms to be made. Then, each bureau
defined its mission and took the necessary steps to get the job
done. Notices of proposed rule makings were published; comments
were evaluated; and other agencies were consulted.
NB-2030
2
The result? So far, we've taken action on 122 specific
reforms that could save our economy at least $979 million every
year — and that does not include the savings in time and
paperwork that we could not quantify. Clearly, every Treasury
bureau is serious about cutting regulatory excess and
strengthening economic growth. Here are a few examples:
The Office of the Comptroller of the Currency reformed
regulations for real estate appraisals. The new rule
will save consumers over $20 million by lowering the
cost of financing.
Regulatory reform by the Financial Management Service
will coordinate federal government payments with the
private sector — translating into a savings of 30
cents for every financial transaction. That doesn’t
sound like much, until you realize there are 80 million
of these transactions every year — which means $24
million in savings for U.S. taxpayers.
The Bureau of Public Debt reformed regulations
.*
regarding power of attorney for Savings Bond holders.
Because of the improved rule, bond holders will now
save $5 million in legal costs formerly paid for
complying with overly strict regulations.
It is a true service to excel by ensuring the prudent and
efficient use of the taxpayers' money in the name of our nation's
economic strength. That's what the regulatory reform initiative
is all about.
Treasury has been tested and has met the test. The
dedicated men and women here today worked tirelessly. The
results are exceptional. That is the mark of teamwork in action,
and I am proud to congratulate you all.
Thank you.
###
FOR RELEASE AT 2:30 P.M.
October 20, 1992
CONTACT:
Office of Financing
202-219-3350
TREASURY'S WEEKLY BILL OFFERING
The Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling
approximately $ 23,600 million, to be issued October 29, 1992.
This offering will provide about $ 37 5 million of new cash for
the Treasury, as the maturing bills are outstanding in the amount
of $ 23,216 million. Tenders will be received at Federal Reserve
Banks and Branches and at the Bureau of the Public Debt, Washing
ton, D. C. 20239-1500,
Monday, October 26, 1992,
prior to
12:00 noon for noncompetitive tenders and prior to 1:00 p.m.,
Eastern
Standard
time, for competitive tenders. The two
series offered are as follows:
91-day bills (to maturity date) for approximately
$ 11,800 million, representing an additional amount of bills
dated
July 30, 1992
and to mature
January 28 , 1993
(CUSIP No. 912794 A4 6 ), currently outstanding in the amount
of $ 11,627 million, the additional and original bills to be
freely interchangeable.
182 -day bills for approximately $ 11,800 million, to be
dated
October 29, 1992 and to mature April 29, 1993
(CUSIP
No. 912794 C4 4).
The bills will be issued on a discount basis under competi
tive and noncompetitive bidding, and at maturity their par amount
will be payable without interest. Both series of bills will be
issued entirely in book-entry form in a minimum amount of $10,000
and in any higher $5,000 multiple, on the records either of the
Federal Reserve Banks and Branches, or of the Department of the
Treasury.
The bills will be issued for cash and in exchange for
Treasury bills maturing
October 29, 1992. 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 competi
tive 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 $ 2,327 million as agents for foreign and international
monetary authorities, and $ 4,997 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 5176-1 (for 13-week series) or Form PD 5176-2 (for 26-week
series).
NB-2031
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 2
Each bid must state the par amount of bills bid for, which
must be a minimum of $10,000. Bids over $10,000 must be in mul
tiples of $5,000. A bidder submitting a competitive bid for its
own account, whether bidding directly or submitting bids through
a depository institution or government securities broker/dealer,
may not submit a noncompetitive bid for its own account in the
same auction.
Competitive bids must show the discount rate desired,
expressed in two decimal places, e.g., 7.10%. Fractions may not
be used. A single bidder, as defined in Treasury's single bidder
guidelines, may submit competitive tenders at more than one dis
count rate, but the Treasury will not recognize, at any one rate,
any bid in excess of 35 percent of the public offering. A com
petitive bid by a single bidder at any one rate in excess of 35
percent of the public offering will be reduced to the 35 percent
limit. The public offering for any one bill is the amount offered
for sale in the offering announcement, less bills allotted to Fed
eral Reserve Banks for their own account and for the account of
foreign and international authorities in exchange for maturing
bills.
Noncompetitive bids do not specify a discount rate. A
single bidder should not submit a noncompetitive bid for more than
$1,000,000. A noncompetitive bid by a single bidder in excess of
$1,000,000 will be reduced to that amount. A bidder may not sub
mit a noncompetitive bid if the bidder holds a position, in the
bills being auctioned, in "when-issued" trading or in futures or
forward contracts. A noncompetitive bidder may not enter into any
agreement to purchase or sell or otherwise dispose of the bills
being auctioned, nor may it commit to sell the bills prior to the
designated closing time for receipt of competitive bids.
The following institutions may submit tenders for accounts
of customers: depository institutions, as described in Section
19(b)(1)(A), excluding those institutions described in subpara
graph (vii), of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A));
and government securities broker/dealers that are registered with
the Securities and Exchange Commission or noticed as government
securities broker/dealers pursuant to Section 15C(a)(1) of the
Securities Exchange Act of 1934. Others are permitted to submit
tenders only for their own account.
For competitive bids, the submitter must submit with the
tender a customer list that includes, for each customer, the name
of the customer and the amount and discount rate bid by each cus
tomer. A separate tender and customer list should be submitted
for each competitive discount rate. Customer bids may not be
aggregated by discount rate on the customer list.
For. noncompetitive bids, the customer list must provide,
for each customer, the name of the customer and the amount bid.
For mailed tenders, tjie customer list must be submitted with the
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 3
tender. For other than mailed tenders, the customer list should
accompany the tender. If the customer list is not submitted with
the tender, information for the list must be complete and avail
able for review by the deadline for submission of noncompetitive
tenders. The customer list must be received by the Federal
Reserve Bank by auction day.
All bids submitted on behalf of trust estates must identify
on the customer list for each trust estate the name or title of
the trustee(s), a reference to the document creating the trust
with date of execution, and the employer identification number
of the trust.
A competitive bidder must report its net long position in
the bill being offered when the total of all its bids for that
bill and its net long position in the bill equals or exceeds $2
billion, with the position to be determined as of one half-hour
prior to the closing time for the receipt of competitive tenders.
A net long position includes positions, in the bill being auc
tioned, in when-issued trading and in futures and forward con
tracts, as well as holdings of outstanding bills with the same
CUSIP number as the bill being offered. Bidders who meet this
reporting requirement and are customers of a depository institu
tion or a government securities broker/dealer must report their
positions through the institution submitting the bid on their
behalf. A submitter, when submitting a competitive bid for a
customer, must report the customer's net long position in the
security being offered when the total of all the customer's bids
for that security, including bids not placed through the submit
ter, and the customer's net long position in the security equals
or exceeds $2 billion.
Tenders from bidders who are making payment by charge to a
funds account at a Federal Reserve Bank and tenders from bidders
who have an approved autocharge agreement on file at a Federal
Reserve Bank will be received without deposit. Full payment for
the par amount of bills bid for must accompany tenders from all
others, including tenders for bills to be maintained on the bookentry records of the Department of the Treasury. An adjustment
will be made on all accepted tenders accompanied by payment in
full for the difference between the payment submitted and the
price determined in the auction.
Public announcement will be made by the Department of the
Treasury of the amount and discount rate range of accepted bids for
the auction. In each auction, noncompetitive bids for $1,000,000
or less without stated discount rate from any one bidder will be
accepted in full at the weighted average discount rate (in two
decimals) of accepted competitive bids. Competitive bids will then
be accepted, from those at the lowest discount rates through suc
cessively higher discount fates, up to the amount required to meet
the public offering. Bids at the highest accepted discount rate
will be prorated if necessary. Each successful competitive bidder
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 4
will pay the price equivalent to the discount rate bid. Noncom
petitive bidders will pay the price equivalent to the weighted
average discount rate of accepted competitive bids. The calcula
tion of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923.
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.
No single bidder in an auction will be awarded bills in an
amount exceeding 35 percent of the public offering. The deter
mination of the maximum award to a single bidder will take into
account the bidder's reported net long position, if the bidder
has been required to report its position.
Notice of awards will be provided to competitive bidders
whose bids have been accepted, whether those bids were for their
own account or for the account of customers. No later than 12:00
noon local time on the day after the auction, the appropriate
Federal Reserve Bank will notify each depository institution that
has entered into an autocharge agreement with a bidder as to the
amount to be charged to the institution's funds account at the
Federal Reserve Bank on the issue date. Any customer that is
awarded $500 million or more of securities in an auction must
furnish, no later than 10:00 a.m. local time on the day after the
auction, written confirmation of its bid to the Federal Reserve
Bank or Branch where the bid was submitted. If a customer of a
submitter is awarded $500 million or more through the submitter,
the submitter is responsible for notifying the customer of the
bid confirmation requirement.
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
by the issue date, by a charge to a funds account or pursuant to
an approved autocharge agreement, in cash or other immediatelyavailable funds, or in definitive Treasury securities maturing
on or before the settlement date but which are not overdue as
defined in the general regulations governing United States secu
rities. Also, maturing securities held on the book-entry records
of the Department of the Treasury may be reinvested as payment for
new securities that are being offered. Adjustments will be made
for differences between the par value of the maturing definitive
securities accepted in exchange and the issue price of the new
bills.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76 as applicable, Treasury's single bidder guide
lines, 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.
4/17/92
UA DEPARTMENT OF THE TREASURY
EXCHANGE STABILIZATION FUND
ANNUAL REPORT
FOR THE YEAR ENDED SEPTEMBER 30, 1991
Prepared for submission to the President and to the Congress pursuant to Section
10 of the Gold Reserve Act of 1934, as amended (31 U.S.C. 5302).
TABLE OF CONTENTS
Page
Policy and Operations Statements...... ........................ 1
Audit Report
(Issued July 21, 1992)
Opinion Letter of the Office of Inspector General........... 9
Statement of Financial Condition as of
September 30, 1991 and September 30, 1990................. 11
Statement of Income and Retained Earnings for
Fiscal Years Ended September 30, 1991 and
September 30, 1990.........................................12
Statement of Cash Flows for
Fiscal Years ended September 30, 1991 and
September 30, 1990......................................... 13
Supplemental Schedule to Reconcile Net
Income to Net Cash Flows from Operations
for Fiscal Years 1991 and1990............................. 14
Notes to the Financial Statements............................ 15
Report on Compliance with Laws and Regulations.............. 22
Report on International Accounting Controls................. 23
1
Exchange Stabilization Fund
Policy and Operations statements
Fiscal Year 1991
1.
The Nature and Functions of the ESF
The Gold Reserve Act of 1934 established a fund to be operated
by the Secretary of the Treasury, with the approval of the
President. Section 10 of the Act provided that "For the purpose of
stabilizing the exchange value of the dollar, the Secretary of the
Treasury, with the approval of the President, directly or through
such agencies as he may designate, is authorized, for the account
of the fund established in this section, to deal in gold and
foreign exchange and such other instruments of credit and
securities as he may deem necessary to carry out the purpose of
this section."
Reflecting termination of the fixed exchange rate system, the
1978 amendments to the IMF Articles of Agreement revised the
obligations of IMF members. Legislation enacted in 1976 (P.L. 94564, effective April 1, 1978, the date of entry into force of the
Second Amendment of the IMF Articles of Agreement) amended the
language of Section 10 of the Act to specify that the ESF is to be
utilized as the Secretary "may deem necessary to and consistent
with the United States obligations in the International Monetary
Fund." In 1977, P.L. 95-147 further amended Section 10 of the Gold
Reserve Act by substituting "necessary, consistent" for "necessary
to and consistent," inserting the phrase "regarding orderly
exchange arrangements and a stable system of exchange rates," and
specifying that "no loan or credit to a foreign government or
entity shall be extended by or through such Fund for more than six
months in any twelve-month period unless the President provides a
written determination to the Congress that unique or exigent
circumstances make such loan or credit necessary for a term greater
than six months."
Following its recodification, the statute now provides as
follows: "Consistent with the obligations of the Government in the
International Monetary Fund on orderly exchange arrangements and a
stable system of exchange rates, the Secretary or an agency
designated by the Secretary, with the approval of the President,
may deal in gold, foreign exchange, and other instruments of credit
and securities the Secretary considers necessary. However, a loan
or credit to a foreign entity or government of a foreign country
may be made for more than 6 months in a 12-month period only if the
President gives Congress a written statement that unique or
emergency circumstances require the loan or credit be for more than
6 months."
(31 U.S.C. 5302 (b))
2
To enable the Secretary of the Treasury to carry out the
provisions of Section 10, the Congress, in 1934, appropriated to
the ESF the sum of $2 billion out of the increment resulting from
the reduction in the "weight of the gold dollar." This amount was
deposited with the Treasurer of the United States, and the ESF
began operations in April 1934.
Operation of the ESF was
authorized for a period of two years, and the President, by procla
mation, extended the period for one additional year. Subsequently,
amendments to the Gold Reserve Act approved the continued operation
of the ESF through June 30, 1945, and Section 7 of the Bretton
Woods Agreements Act, approved July 31, 1945, continued its
operations permanently.
The Bretton Woods Agreements Act also
directed the Secretary of the Treasury to pay $1.8 billion from the
ESF to the International Monetary Fund (IMF), for the initial U.S.
quota subscription in the IMF, thereby reducing the ESF's
appropriated capital to $200 million.
Pursuant to the Special Drawing Rights Act of 1968 (P.L.90-349
and P.L. 94-564 approved October 18, 1976 and effective April 1,
1978), Special Drawing Rights (SDRs) allocated by the IMF to the
United States or otherwise acquired by the United States are
resources of the ESF. As of September 30, 1991, cumulative alloca
tions to (liabilities of) 1/ the United States totalled SDR 4,900
million ($6,703 million), and U.S. holdings (assets) of SDRs
totalled SDR 7,838 million ($10,722 million). 2/
SDRs can be
monetized through the issuance by the Secretary of the Treasury of
Special Drawing Right certificates to the Federal Reserve Banks.
The total amount of SDR certificates outstanding cannot exceed the
dollar equivalent of U.S./ESF holdings of SDRs; such certificates
are a liability of the ESF.
As of September 30, 1991, $10,018
million of Special Drawing Right certificates were outstanding.
On November 8, 1978, P.L. 95-612 was enacted:
"To provide
that the ESF shall not be available for the payment of adminis
trative expenses and for other purposes."
No administrative
expenses associated with the international affairs functions of the
Treasury Department were paid by the ESF in fiscal year 1991.
1/
2.1
These liabilities must be discharged only in the event of
liquidation of or U.S. withdrawal from the SDR Department of
the IMF or cancellation of SDRs.
The dollar value of the SDR changes daily with movements in
exchange rates. These figures are calculated on the basis of
the dollar/SDR rate as of September 30, 1991 ($1.36800 per
SDR) .
3
2.
Foreign Exchange Market
Overview. During fiscal year 1991, the dollar declined by 4.0
percent vs. the yen and rose by 6.2 percent vs. the DM. Exchange
rate movements primarily reflected changes in prospects for the
U.S. and other major countries' economies and for yields on U.S.
assets relative to yields on foreign assets. Developments in the
Gulf War and in the USSR at times prompted temporary surges in
demand for dollars.
In mid-February of 1991, the dollar reached historical lows
vs. the DM and some European currencies on pessimism about the U.S.
economy and a widening of interest rate differentials in favor of
foreign currency placements.
It subsequently appreciated amid a
resurgence of confidence in the U.S. economy during spring 1991,
after the quick conclusion of the Gulf War, and amid a fading of
the optimism unleashed earlier by German unification. But around
mid—summer, unexpected weak data on the U.S. economy undermined
earlier confidence, and the dollar declined over the rest of the
fiscal year.
Developments. In late 1990, market concerns over worsening
U.S. economic fundamentals gradually asserted themselves, despite
occasional limited increases in dollar demand for safe haven
reasons related to the Gulf War. After the turn of the year, the
dollar came under selling pressure because of a belief in the
market that a potentially lengthy war would drag heavily on the
U.S. economy.
Amid military action in the Gulf, the G-7 Finance Ministers
and Central Bank Governors agreed at their January 21 meeting to
strengthen cooperation and to monitor developments in exchange
markets, stating that they were "prepared to respond as appropriate
to maintain stability in international financial markets."
The
dollar reached an historical low of DM 1.4430 after the Bundesbank
raised interest rates on January 31 and the Federal Reserve lowered
interest rates on February 1.
Subsequently, limited concerted
dollar purchases by G-7 monetary authorities helped crystallize
market thinking that the dollar's decline had gone too far.
After the Gulf War ended quickly, the dollar rose rapidly. In
March, many market participants decided that the dollar had
bottomed out and made previously deferred dollar purchases.
The
U.S. economy was seen as likely to begin recovery around mid-year.
Also, demand for DM slackened as investor interest in the reunified
Germany proved cooler than expected and as deteriorating political
and economic conditions in the then USSR raised concern about
Germany's eastward exposure.
As spring began, market perceptions were that there was little
prospect of further Fed easing, even though price indicators showed
lessening inflation risks.
Dollar demand was not significantly
4
deterred by concerted intervention sales of dollars during the week
leading up to the April 28 G—7 meeting. In the event, the meeting
disappointed many market participants, who had anticipated that the
G-7 would call for appreciation of the mark.
Exchange rates showed no lasting response to an unexpected
reduction in the Federal Reserve's discount rate to 5-1/2 percent
from 6 percent and in the Fed funds rate to 5-3/4 percent from 6
percent at the end of April. Market attention turned instead to
the possibility of interest rate cuts overseas. In the following
weeks, interest rates were lowered in several European countries,
and expectations of monetary easing in Japan increased.
A surge in dollar demand ensued.
In early June, U.S.
employment data for May registered the first rise in non—farm
payroll in almost a year and the first rise in employment in the
manufacturing sector in fifteen months. Chairman Greenspan noted
an increase, though slight, in the likelihood of a stronger U.S.
recovery than had been expected previously. Secretary Brady said
that indicators suggested that the downturn was over.
Against many European currencies, the dollar appreciated to
levels not seen since the autumn of 1989.
It also appreciated
against the yen, which required some intervention support. The yen
began a rebound after mid-June following the release of data
showing an 11.2 percent annualized rate of growth in the Japanese
economy in the first quarter of 1991. But, the mark remained soft
into early July, amid uncertainties surrounding the Russian
Federation elections and a German court decision raising the
possibility that a withholding tax might be reimposed on interest
earnings on German assets.
Confidence in the dollar diminished in advance of the June 23
G-7 meeting, as the market grew cautious about the possibility that
the G-7 would decide to curb the dollar's rise. The G-7 reaffirmed
its "commitment to cooperate closely, taking account of the need
for orderly markets, if necessary through appropriately concerted
action in exchange markets." In retrospect, the G-7 meeting can be
seen as setting the stage for the dollar's decline from mid-summer
onward.
In following days, the Bundesbank made a symbolic sale of
dollars at the Frankfurt fixing.
Also, the German and the U.S.
monetary authorities indicated that they had agreed to reduce their
foreign exchange reserves in off-market dollar/mark transactions
with each other, and market participants erroneously inferred that
the authorities were preparing to intervene to support the DM.
In early July, the report of June employment data showed an
unexpected drop in non-farm payroll, which was seen in the market
as indicating that further dollar appreciation was unwarranted.
However, the dollar quickly jumped higher when the Bundesbank did
5
not raise German interest rates before
emerging indications of accelerating
response, the Bundesbank led a round of
Europe, which was followed by the
authorities.
its summer recess, despite
inflation in Germany.
In
coordinated intervention in
U.S. and other monetary
Market caution about intervention persisted after the London
economic summit in mid-July, and the dollar settled into a lower
trading range. The July 17 communigue from the summit reiterated
support for close cooperation in foreign exchange markets, monetary
and fiscal policies to foster low real interest rates, and economic
and political transformation of the Soviet Union.
Over the
following months, comments by various U.S., Japanese, and German
monetary officials strongly suggested to the market that none of
the major G-7 countries was dissatisfied with the easing of the
dollar.
The European currencies appreciated; the yen was
temporarily weighed on by concerns about Japanese securities firms'
compensation of their clients' losses and fraudulent loan practices
by some banks in Japan.
Thereafter, interest rate considerations increasingly governed
exchange rate trends. Uncertainty about the pace of the U.S.
recovery fostered a view among many market participants that the
Federal Reserve could ease its monetary stance, particularly as
Administration officials voiced concern about the "credit crunch"
and slow money growth. In early August, after July employment data
showed a second unexpected payroll decline, the Fed guided the Fed
funds rate to 5-1/2 percent from 5-3/4 percent. Other indicators
were seen as suggesting scope for further easing, and there were
indications of a shift in policy in favor of easing.
At mid-month, the Bundesbank Council met after its summer
recess and raised its Lombard rate by a smaller than expected 1/4
percentage point to 9.25 percent.
Some other European central
banks also raised rates.
Meanwhile, the yen was supported by
emerging repatriation of funds ahead of the end of Japan's fiscal
half year on September 30. Also seen as supporting the yen was the
growth of Japan's trade surplus.
The dollar temporarily spiked upward, mainly vs. the DM, in a
flight to quality in response to the short-lived August coup
attempt in the then-USSR.
But the dollar's downtrend steepened
thereafter.
In early September, the dollar settled into lower
trading ranges against the mark and the yen on market anticipation
of further U.S. monetary easing. At mid-month, the Federal Reserve
cut the discount rate to 5 percent from 5-1/2 percent and guided
the Fed funds rate another 1/4 percentage point lower to 5-1/4
percent, amid indications of decreasing price gains, weak demand,
and slowing money growth.
As the fiscal year ended, interest rate considerations pre
occupied the market. Attention focussed on Administration concerns
6
about the slow pace of the U.S. recovery and the possible need for
further monetary easing and on reports that U.S. monetary policy
had tilted even more toward easing. Meanwhile, the yen rose ahead
of the October 12 G-7 meeting on market perceptions that the G-7
would tolerate substantial appreciation of the yen.
3.
Foreign Currency Operations
During fiscal year (FY) 1991, the ESF engaged in market and
non-market transactions involving German marks and Japanese yen.
Also, ESF resources were used, on a case-by-case basis, to provide
short-term liquidity to foreign monetary authorities in connection
with their efforts to develop and implement economic adjustment
programs supported by the International Monetary Fund and by the
International Bank for Reconstruction and Development. During FY
1991, in accordance with this policy, the ESF entered into a short
term swap agreement with Romania and also received final repayment
by Honduras of drawings under a swap agreement entered into in FY
1990.
a)
German marks
In cooperation with other monetary authorities, the ESF made
net sales of $1,992.6 million equivalent of German marks in market
and non—market operations during FY 1991. This net amount does not
include the net repurchase, during the fiscal year, of $5,000
million equivalent of German marks which had been warehoused with
the Federal Reserve System. (At the end of the fiscal year, $2,000
million equivalent of German marks remained warehoused.)
It also
does not include the sale of $317.0 million equivalent of German
marks against SDRs noted in Section 4 below.
The ESF had valuation losses of $370.5 million on German mark
balances. Under ESF accounting practices, this loss on valuation
includes realized gains of $261.0 million on sales of German marks
in conjunction with warehousing operations but excludes any
prospective gain or loss on those German marks which had not been
repurchased from the Federal Reserve as of the end of the fiscal
year.
The ESF had net interest earnings of $676.3 million on
investment of German mark assets.
b)
Japanese yen
In cooperation with other monetary authorities, the ESF made
net sales of $1,485.0 million equivalent of yen in market and nonmarket operations during FY 1991.
The ESF had valuation gains of $356.8 million on yen balances
and interest earnings of $753.3 million on investment of yen
assets.
7
c)
Sterling
The ESF conducted no operations in sterling during FY 1991.
The ESF had valuation losses of $1.7 million on sterling balances
and earned interest of $2.9 million on sterling assets.
d)
Swiss francs
The ESF conducted no operations in Swiss francs during FY
1991. The ESF had valuation losses of $3.4 million on Swiss franc
balances and earned interest of $2.5 million on Swiss franc assets.
e)
Romania
In March 1991, the ESF participated in a multinational
financing arrangement for Romania.
The ESF's share was $40
million.
The other official creditor was the Bank for
International Settlements, acting for certain member central banks.
Drawings under this facility were made available in light of
scheduled disbursements under an IMF stand-by agreement and under
the oil import element of the IMF's Compensatory and Contingency
Financing Facility. Romania drew $40 million from the ESF in that
same month and repaid this amount in two parts during April. The
ESF received $0.1 million in interest.
f)
Honduras
Prior to the start of FY 1991, in June 1990, the ESF took part
in a $147.3 million multilateral financing arrangement for
Honduras, of which the ESF's share was $82.3 million, made
available in light of scheduled disbursements under an IMF Stand-by
Arrangement and various IBRD and Inter-American Development Bank
loans.
Honduras drew within the same month and made partial
repayments in July and August.
Final repayments totalling $34.8
million were made during FY 1991, in November. Interest totalling
$1.1 million was paid to the ESF in that month.
g)
Germany
In January 1991, the ESF renewed its $1 billion swap line with
the German Bundesbank for another year, to expire in January 1992.
h)
Mexico
A 1990 Stabilization Agreement with Mexico, providing a
reciprocal swap line of up to $300 million, remained in place. No
drawings were made during FY 1991.
4.
SDR Operations
1991.
ESF holdings of SDRs increased by SDR 178.5 million during FY
The ESF reimbursed the Treasury's General Fund for SDR 341.9
8
million received from the IMF as remuneration on the U.S. reserve
position in the IMF. Through the IMF, the ESF made net sales of
SDR 403.0 million in transactions involving sales of SDR 641.5
million against dollars and purchases of SDR 238.5 million against
German marks. The ESF earned net interest of SDR 240.4 million on
its SDR holdings and was assessed SDR 0.8 million for operating
expenses of the IMF's SDR Department.
5.
Income and Expense
During FY 1991, the ESF had net income of $1,764.2 million,
according to generally accepted accounting principles. Income from
interest totalled $1,851.2 million, consisting of $95.6 million in
interest on dollar holdings in U.S. Treasury obligations and
$1,755.6 million equivalent in interest on SDR holdings and foreign
currency investments, and interest on swap arrangements. A net
loss of $87.0 million on SDR and foreign currency holdings
occurred. This includes realized gains of $261.0 million on sales
of DM in conjunction with warehousing operations, $185.6 million on
other sales of foreign currency, and a realized loss of $68.1
million on SDRs; it also includes unrealized losses of $465.5
million on valuation of foreign currency holdings.
Taking into account the net income of $1,764.2 million, the
capital position of the ESF increased from $12,522.4 million at the
end of FY 1990 to $14,286.6 million at the end of FY 1991. (Totals
may not add due to rounding.)
D E P A R T M E N T O F THE T R E A S U R Y
W A S H IN G T O N
9
in s p e c t o r
g e n e r a l
OIG-92-050
A-WA-92-017
To the Secretary of the Treasury
We have audited the accompanying statements of financial
condition of the Exchange Stabilization Fund as of September 30,
1991 and 1990, and the related statements of income, retained
earnings and cash flows for the years then ended. These
financial statements are the responsibility of the Department of
the Treasury's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted government auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the Exchange Stabilization Fund as of September 30, 1991 and
1990, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted
accounting principles.
Donald E. Kirkendall
Inspector General
April 23, 1992
THE SECRETARY OF THE TREASURY
W A S H IN G T O N
10
Septsrber 24, 1992
Mr. Donald E. Kirkendall
Inspector General
Treasury Department
Washington, D.C. 20220
Dear Mr. Kirkendall:
Thank you for your audit report dated July 21, 1992 on
the Exchange Stabilization Fund for the fiscal year October 1,
1990 through September 30, 1991.
The operations of the Exchange Stabilization Fund,
which was established pursuant to Section 10 of the Gold Reserve
Act of 1934, are an important part of Treasury business and
confidential by nature. Your availability to perform this audit
is appreciated.
Sincerely,
Nicholas F. Brady
DEPARTMENT OF THE TREASURY
EXCHANGE STABILIZATION FUND
STATEMENT OF FINANCIAL CONDITION
AS OF SEPTEMBER 30,1991 AND SEPTEMBER 30,1990
(In Thousands)
(Note 1)
1991
ASSETS
1990
Cash and Cash Equivalents (Note 2)
Cash
U.S. Government Securities (Note 3)
$1,067,000
$1,067,000
2,377,850
1,862,636
17.711.347
15.130.263
Foreign Currency-Denominated
Assets (Note 4)
Total Cash and Cash Equivalents
Special Drawing Rights
21,156,197
18,059,899
10,721,922
10,665,870
2,930
37,930
Other Foreign Currency-Denominated
Assets (Note 4)
Accrued Interest Receivable:
Interest Receivable on U.S. Government
Securities
8,344
10,829
Interest Receivable on Foreign CurrencyDenominated Assets
Interest Receivable on Special Drawing Rights
135,079
94,827
133.354
166.181
Total Accrued Interest Receivable
Total Assets
276.777
271.837
$32,157,826
$29,035,536
LIA B ILITIES A N D C A PITA L
Accrued Charges Payable on Special
Drawing Rights Allocations
$83,178
$104,643
482
570
1,067,000
1,067,000
Special Drawing Rights Allocations (Note 6)
6,702,549
6,822,908
Special Drawing Rights Certificates (Note 6)
10.018.000
8.518.000
Accrued Charges Assessed for
International Monetary Fund
Administrative Expenses
Advance Payable to the U.S. Treasury (Note 5)
Total Liabilities
Appropriated Capital
Retained Earnings
Total Capital
Total Liabilities and C apital
17,871,209
16,513,121
200,000
200,000
14.086.617
12.322.415
14.286.617
12.522.415
$32,157,826
$29,035,536
The accompanying footnotes are an integral part of the financial statements.
12
DEPARTMENT OF THE TREASURY
EXCHANGE STABILIZATION FUND
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR FISCAL YEARS ENDED SEPTEMBER 30,1991 AND 1990
(In Thousands)
(Note 1)
___________ 1991__________
_____________1990_______
INCOME FROM OPERATIONS
U.S. Government Securities:
Interest Earned on U.S. Government Securities
$95,616
$84,482
Foreign Currency Denominated Assets:
Interest Earned on Foreign CurrencyDenominated Assets
890,333
1,434,975
Interest Earned on Foreign Currency
Agreements (Note 7):
90
0
0
1,692
0
354
399
Hungary
0
223
Mexico
0
22,630
0
815
0
91
Romania
Bolivia
Guyana
Honduras
Poland
Venezuela
Net Gain (Loss) on Foreign Currency Revaluation
and Transactions
Net Income on Foreign Currency
929
2.300.604
(18,896)
1,416,523
Denominated Assets
Special Drawing Rights:
Interest Earned
Interest Charges
871,365
923,370
(550,167)
(585,402)
(1,046)
(1,399)
Charges for International Monetary Fund
Administrative Expenses
Gain (Loss) on Special Drawing Rights Revaluation
325.146
(68,089)
Net Income on Special Drawing Rights
Net Income
RETAINED EARNINGS, BEGINNING OF THE FISCAL YEAR
RETAINED EARNINGS, END OF THE FISCAL YEAR
The accompanying footnotes are an integral part of the financial statements.
252,063
661,715
1,764,202
3,963,913
12,322,415
8.358.502
$14,086,617
$12,322,415
13
DEPARTMENT OF THE TREASURY
EXCHANGE STABILIZATION FUND
STATEMENT OF CASH FLOWS
FOR FISCAL YEARS ENDED SEPTEMBER 30,1991 AND 1990
(Notes 1 and 2)
(In Thousands)
1991
1990
$1,500,000
$0
Cash Flows from Operations:
Monetization of Special Drawing
Rights Certificates (Note 6)
Payments for Special Drawing Rights Received
by the U.S. Treasury as Interest on and
Repayment of U.S. Loans (Note 3)
Payments for Special Drawing Rights Received
as Remuneration by the U.S. Treasury (Note 3)
Receipts on Sale of Special Drawing Rights
Special Drawing Rights Purchased with German Marks
Drawings on Foreign Currency Agreements (Note 7)
Repayments of Foreign Currency Agreements (Note 7)
Interest Received on Foreign Currency
Agreements (Note 7)
Interest Received on Foreign Currency-Denominated
Assets Treated as Cash Equivalents
Revaluation of Foreign Currency-Denominated
Assets Treated as Cash Equivalents
Net Redemption of Foreign Currency-Denominated
Assets Not Treated as Cash Equivalents
(Exclusive of Foreign Currency Agreements)
Interest Received on U.S. Government Securities
0
(32,768)
(476,328)
(548,068)
878,350
596,747
(316,671)
0
(40,000)
(947,462)
74,762
1,371,772
1,164
26,605
1,396,211
871,061
(20,825)
2,292,383
(42)
223
81.787
99.677
3,096.298
3,712,280
Cash and Cash Equivalents at the
Beginning of the Fiscal Year
18.059.899
14.347.594
Cash and Cash Equivalents at the
End of the Fiscal Year
$21,156,197
$18,059,874
Net Increase in Cash and Cash Equivalents
The accompanying footnotes are an integral part of the financial statements.
14
SUPPLEMENTAL SCHEDULE TO
RECONCILE NET INCOME TO NET CASH FLOWS FROM OPERATIONS
FOR FISCAL YEARS ENDED SEPTEMBER 30,1991 AND 1990
(Note 1)
(In Thousands)
1990
1991
$3,963,913
$1,764,202
Net Income
Adjustments to Reconcile Net Income
to Net Cash Flows from Operations:
Items Affecting Net Income and
not Cash Flows from Operations:
Interest Earned on Foreign Currency-Denominated
Assets in Excess of Interest Received
(19,104)
(38,508)
Interest Received on Foreign Currency Agreements
in Excess of Interest Earned
721
(175)
(256)
(167)
(2,440)
(7,906)
Interest Received on Foreign Currency-Denominated
Assets Not Treated as Cash Equivalents
Revaluation of Interest Earned on Foreign
Currency-Denominated Assets
Net Loss on Revaluation of Foreign CurrencyDenominated Assets Not Treated as
Cash Equivalents
Net Income on Special Drawing Rights
(315)
511
(661.715)
(252.063)
(689,382)
(292,035)
Items Affecting Cash Flows from
ODerations and not Net Income:
Monetization of Special Drawing Rights
Certificates (Note 6)
0
1,500,000
Payment for Special Drawing Rights Received
by the U.S. Treasury as Interest on and
Repayment of U.S. Loans (Note 3)
(32,768)
0
Payment for Special Drawing Rights Received as
Remuneration by the U.S. Treasury (Note 3)
(476,328)
(548,068)
Receipts on Sale of Special Drawings Rights
878,350
596,747
Special Drawing Rights Purchased with German Marks
Drawings on Foreign Currency Agreements (Note 7)
Repayments on Foreign Currency Agreements (Note 7)
(316,671)
0
(40,000)
(947,462)
74,762
1,371,772
Net Redemption of Foreign Currency-Denominated
Assets Not Treated as Cash Equivalents
(Exclusive of Foreign Currency Agreements)
(42)
223
Interest Received on U.S. Government Securities
in Excess of Interest Earned
(2.695)
4.060
Net Cash Flows from Operations
The accompanying footnotes are an integral part of the financial statements.
1.624.131
437.749
$3,096,298
$3,712,280
15
NOTES TO THE FINANCIAL STATEMENTS
1.
Summary of Significant Accounting Policies
a.
The accounting policies applied by the Exchange
Stabilization Fund (ESF) conform with generally
accepted accounting principles and practices.
(1)
Assets, liabilities, income, and expenses are
recognized on the accrual basis of accounting.
(2)
In accordance with the statement of Financial
Accounting Standards Board (FASB) No. 52, "Foreign
Currency Translation,” foreign currency
denominated assets and liabilities are revalued
monthly to reflect fluctuations in market exchange
rates. These fluctuations in foreign currency
market exchange rates are reported in the
Statement of Income and Retained Earnings as "Net
Gain (Loss) on Foreign Currency Revaluation and
Transactions.” This account includes gains and
losses on sales of foreign currencies in addition
to revaluation gains and losses on forward
contract commitments and foreign currency holdings
and liabilities. However, any foreign currency
balance held under a short-term swap agreement
between the ESF and a foreign government or
monetary authority is carried at a valuation
determined by the exchange rate specified in the
agreement.
b.
The Special Drawing Right (SDR) is an official reserve
asset and a unit of account composed of a "basket" of
the currencies of the five International Monetary Fund
(IMF) members having the largest exports of goods and
services. These currencies are the U.S. dollar,
Japanese yen, German mark, French franc and United
Kingdom pound. The valuation rate for SDR holdings and
allocations is computed by the IMF based on the
exchange rates of these currencies. The SDR holdings
and allocations are revalued monthly based on the SDR
valuation rate, and a gain/loss on that revaluation is
recognized.
c.
Investments in U.S. Government securities are in nonmarketable instruments and are valued at cost. These
securities have short-term maturities. The rate of
interest paid on the securities is fixed at the time of
issue and is then redetermined on the first of each
month. The rate is based on the average investment
rate equivalent determined at the last auction of 91-
16
day or 92-day Treasury bills conducted in the previous
month.
d.
In Fiscal Year 1988, ESF began to apply the standards
contained in FASB No. 95, Statement of Cash Flows. The
Statement of Cash Flows replaces the older Statement of
Changes in Financial Position for private enterprises,
although the Comptroller General has made its use
optional in federal government reporting. FASB No. 95
requires, and ESF has provided in its financial
statements, the following:
(1)
a Statement of Cash Flows for Fiscal Year 1991 and
Fiscal Year 1990 explaining the changes during the
periods in cash and cash equivalents?
(2)
a determination of the investments which qualify
as cash equivalents; (See Note 2) and
(3)
a reconciliation of net income and net cash flow
from operating activities for Fiscal Year 1991 and
Fiscal Year 1990.
Other financial statements of the ESF have been prepared for
Government budget and accounting purposes. Such statements have
been prepared to conform with Office of Management and Budget
(OMB) guidelines and therefore may not correspond with the
financial statements contained herein.
2.
Cash and Cash Equivalents
In applying FASB No. 95, ESF is required to disclose its
policy for determining which items are treated as cash
equivalents. According to FASB No. 95, cash equivalents are
short-term, highly liquid investments that are both:
(a)
Readily convertible to known amounts of cash, and
(b)
So near their maturity that they present insignificant
risk of changes in value due to changes in interest
rates.
Generally, only investments with original maturities of three
months or less qualify under that definition. Accordingly, ESF's
U.S. Government Securities and foreign currency denominated
assets with original maturities of three months or less, except
for foreign currencies acquired under swap agreements with
developing countries, will be treated as cash equivalents.
17
3.
delated Party Transactions
a.
During Fiscal Year 1991, the ESF purchased $476.3 million
equivalent of Special Drawing Rights (SDRs) from the Treasury
General Fund, at rates calculated by the IMF.
The purchased
amount reflects SDRs received from the IMF by the Treasury as
remuneration on the U.S. reserve position in the IMF.
b.
The ESF invested dollars which were in excess of its
immediate needs in Bureau of Public Debt Special Issues and
United Stated Treasury Certificates of Indebtedness. These
securities, which are considered cash equivalents for financial
statement purposes, were purchased at cost and earned interest at
a rate of interest based on the average investment rate
equivalent determined at the last auction of 91-day or 92-day
Treasury bills conducted in the previous month. Purchases and
redemptions of the securities during Fiscal Year 1991 were as
follows (in thousands):
Balance at 10/1/90
Public Debt
Issues
U.S.
Certificates
Total
$
$ 1,858,532
$ 1,862,636
25,735,156
(25.571.0681
34,870,001
(34.354.7871
9,134,845
(8.783.7191
Add Investments
Less Redemptions
Balance at 9/30/91
4,104
6
355.230
S
2.022.620
$
2.377,850
c.
During Fiscal Year 1991, the ESF made net repurchases of
$5.0 billion equivalent of German marks which had previously been
sold to the Federal Reserve System under a standing commitment by
the System to warehouse foreign currency balances of the
Treasury. The maximum level for warehousing authorized by the
Federal Reserve was $10 billion during Fiscal Year 1991, but this
maximum has subsequently been lowered to $5 billion. Under the
terms applicable to warehousing up to and including Fiscal Year
1991, warehousing is a swap transaction in which the Treasury
sells foreign currencies to the Federal Reserve System for
dollars, with the agreement to repurchase the foreign currencies
at a later date, using the original rate of exchange. Such a
transaction could result in a realized gain or loss to the ESF
being recorded at the time the transaction is initiated,
depending on the relation of the exchange rate used in the swap
transaction to the cost of acquisition to the ESF of the foreign
currency being warehoused. Also, an unrealized gain or loss
could be recorded at the time of repurchase as a result of a
change in the market exchange rate over the period that the
Federal Reserve System holds the foreign currency.
18
As of September 30, 1991, $2.0 billion equivalent of German
marks were warehoused with the Federal Reserve. ESF's
warehousing of German marks had resulted in an unrealized gain of
$148.0 million as of that date, due to the change in the exchange
rate.
4.
Foreign Currency Denominated Assets
Operations of the ESF result in the fund's holding of various
foreign currencies. The ESF normally invests its foreign
currency holdings in interest bearing assets issued by or held
through foreign governments or monetary authorities. These
assets, except for $2.9 million and $37.9 million equivalent in
foreign currencies held at the end of Fiscal Years 1991 and 1990
respectively, are short-term and highly liquid investments that
will be treated as cash equivalents. At September 30, 1991 and
1990, the ESF held the following dollar equivalents (in
thousands):
1991
1990
$ 8,504,085
9,152,225
31,322
26,645
17,714,277
$ 5,548,586
9,527,316
32,020
25,509
34.762
15,168,193
(2.9301
$17.711.347
(37.9301
$15.130.263
Foreign Currency Denominated
Assets:
German Mark
Japanese Yen
Swiss Franc
English Pound Sterling
Honduran Lempiras
Total
Less: Non-Cash Equivalents
Cash Equivalent Portion
5.
______________ - 0 -
Advance Payable to the U.S. Treasury
In November 1978, the U.S. Treasury Department drew the
equivalent of $3 billion in foreign currencies on the United
States reserve position in the IMF. Simultaneously, the General
Fund of the Treasury transferred the $3 billion in foreign
currencies to ESF, whereby the ESF established a liability in an
equal dollar amount in the form of a non-interest bearing
advance. This transfer was made pursuant to the Bretton Woods
Agreement Act. During Fiscal Years 1980, 1981 and 1982 the ESF
repaid $1,933 billion of the outstanding advance.
The remaining advance, totaling $1,067 billion, would
normally have been repaid in Fiscal Year 1983. In order to avoid
depletion of ESF resources during the international monetary
situation which existed at the time, the Secretary approved the
19
indefinite deferral of this payment to the General Fund of the
Treasury.
6.
Special Drawing Rights Allocations and Certificates
Pursuant to the Special Drawing Rights Act of 1968, SDRs
allocated to or otherwise acquired by the United States are
resources of the ESF. SDRs, once allocated, are permanent
resources unless:
(a)
they are cancelled by an 85 percent majority decision
of the total voting power of the Board of Governors of
the IMF?
(b)
the Special Drawing Rights Department of the IMF is
liquidated?
(c)
the IMF is liquidated? or
(d)
the United States chooses to withdraw from the IMF or
terminate its participation in the Special Drawing
Rights Department.
Except for the payment of interest and charges on SDR
allocations to the United States, the payment of the ESF
liability related to SDR allocations is conditional on events
listed above, in which the United States has a substantial or
controlling voice. Allocations of SDRs were made on January 1,
1970, 1971, 1972, 1979, 1980 and 1981. Since 1981 the IMF has
made no further allocations of SDRs.
The Special Drawing Rights Act also authorized the
Secretary of the Treasury to issue SDR certificates to the
Federal Reserve Banks in return for dollar deposits in amounts
equal to the face value of the SDR certificates issued. The
certificates may be issued to finance the acquisition of SDRs
from other countries or to provide resources for financing other
ESF operations. The amount of SDR certificates outstanding
cannot exceed the value of SDR holdings. Moreover, SDR
certificates are to be redeemed by the ESF at such times and in
such amounts as the Secretary of the Treasury may determine.
In October 1990 the U.S. Treasury issued SDR certificates
to the Federal Reserve System in return for $1.5 billion. As of
September 30, 1991, the amount of SDR certificates outstanding
was $10,018 billion, while the value of SDR holdings was $10,722
billion, a difference of $704 million.
20
7.
Foreign Currency Agreements
Foreign Currency Agreements represent swap agreements between
the U.S. Treasury and various countries that provide for drawings
of dollars by those countries and/or drawings of foreign
currencies by the U.S. Treasury. Specifically, during Fiscal
Year 1991:
a. A 1967 Exchange Stabilization Agreement with Mexico,
providing a reciprocal swap line of up to $300 million, remained
in effect. No drawings were made under this agreement during the
fiscal year.
(The agreement was renewed in January 1992 for two
more years.)
b. A 1978 $1 billion swap arrangement with Germany was
renewed in January 1991. No drawings were made under this
agreement during Fiscal Year 1991.
(The arrangement was renewed
in December 1991 for one more year.)
c. The U.S. Treasury received final payment of principal and
interest on a multilateral short-term financing agreement with
Honduras which had come into effect during fiscal year 1990. The
agreement provided for financing totaling $147.3 million of which
the U.S. portion was $82.3 million. The full amount of the
agreement was drawn in Fiscal Year 1990. Honduras repaid $47.6
million of the financing in Fiscal Year 1990 and repaid the
balance of $34.7 million in November 1990, at which time the
agreement expired. Interest totaling $1,074,200 was paid to the
Treasury by Honduras in Fiscal Year 1991, of which $720,600 was
earned during Fiscal Year 1990.
d. In March 1991, the U.S. Treasury and the Bank for
International Settlements entered into a short-term financing
agreement with Romania. The agreement provided for financing
totaling $300 million of which the U.S. portion was $40 million.
In the same month, Romania drew and repaid the full amount of the
agreement. Interest totaling $90,000 was paid to the Treasury by
Romania.
8.
Subsequent Events
a.
During the period October 1, 1991 through April 23, 1992
the U.S. Treasury repurchased $2 billion equivalent of German
marks previously warehoused with the Federal Reserve System in
accordance with the warehousing agreement between itself and the
Federal Reserve System, described previously in Note 3. In
conjunction with the repurchase of warehoused German marks, the
Treasury Department and the Federal Reserve agreed, on March 20,
1992, upon new terms with respect to the pricing of any
warehousing transactions. Under the new terms, the warehousing
sales and repurchases of foreign currency will no longer be
21
conducted at a single exchange rate established at the time of
sale. Instead, the sale rate will be the prevailing spot
exchange rate, and the repurchase rate will be the prevailing
three-month forward rate at the time of sale. Also, during the
same period, the Federal Open Market Committee reduced the
maximum level for warehousing from $10 billion to $5 billion.
b. During the period October 1, 1991 through April 23, 1992,
the ESF made purchases of $150 million equivalent of Japanese
Yen. During the same period the ESF had sales of $1,003 billion
equivalent of German marks, of which $342 million represented the
purchase of SDRs against German marks in an arrangement through
the IMF. As of April 23, 1992, ESF had a net realized loss of
$6.2 million on its German mark holdings.
c. As of April 23, 1992, SDR certificates outstanding were
$10.0 billion while the value of SDR holdings was $10.9 billion,
a difference of $900 million. As mentioned in Note 6, the
Special Drawing Rights Act states that the amount of SDR
certificates outstanding cannot exceed the value of SDR holdings.
d. During the period October 1, 1991 through April 23, 1992,
the ESF sold $494 million equivalent of SDRs and had purchases of
$543 million equivalent of SDRs at rates calculated by the IMF.
Included in the SDR purchase amount are (a) purchases of SDRs
against German marks of $342 million (Note 8b); and (b) payments
for SDRs received from the IMF by the Treasury as remuneration on
the U.S. reserve position in the IMF ($201 million).
e. In January 1992, the U.S. Treasury entered into a short
term financing agreement with Panama. The agreement provided for
financing totaling $143 million. The full amount of the
agreement was drawn in the same month. Panama repaid $85 million
of the financing in February 1992 and the balance of $58 million
in March 1992, at which time the agreement expired. Interest
totaling $498 thousand was paid to the U.S. Treasury by Panama.
22
REPORT ON COMPLIANCE WITH LAWS AND REGULATIONS
We have examined the financial statements of the Exchange
Stabilization Fund (ESF) for the years ended September 30, 1991
and 1990, and issued our opinion thereon dated April 23, 1992.
We conducted our audit in accordance with generally accepted
auditing standards and Government Auditing Standards, issued by
the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement.
Compliance with laws and regulations applicable to the ESF
is the responsibility of Treasury*s management. As part of
obtaining reasonable assurance about whether the financial
statements are free of material misstatement, we performed tests
of ESF*s compliance with certain provisions of laws and
regulations. However, our objective was not to provide an
opinion on overall compliance with such provisions.
The results of our tests indicate that, with respect to the
items tested, ESF complied, in all material respects, with the
provisions referred to in the preceding paragraph. With respect
to items not tested, nothing came to our attention that caused us
to believe that ESF had not complied, in all material respects
with those provisions.
This report is intended for the information and use of
Treasury management officials and others authorized to receive
the report. This restriction is not intended to limit the
distribution of this report, which is a matter of public record.
Donald E. Kirkendall
Inspector General
April 23, 1992
23
REPORT ON INTERNAL ACCOUNTING CONTROLS
We have audited the financial statements of the Exchange
Stabilization Fund (ESF) for the years ended September 30, 1991
and 1990, and issued our opinion thereon dated April 23, 1992.
We conducted our audit in accordance with generally accepted
auditing standards and Government Auditing Standards, issued by
the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement.
In planning and performing our audit of the financial
statements of ESF for the year ended September 30, 1991, we
considered its internal control structure in order to determine
our auditing procedures for the purpose of expressing our opinion
on the financial statements and not to provide assurance on the
internal control structure.
Treasury management is responsible for establishing and
maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgements by management are
required to assess the expected benefits and related costs of
internal control structure policies and procedures. The
objectives of an internal control structure are to provide
management with reasonable, but not absolute, assurance that
assets are safeguarded against loss from unauthorized use or
disposition, and that transactions are executed in accordance
with managements authorization and recorded properly to permit
the preparation of financial statements in accordance with
generally accepted accounting principles. Because of inherent
limitations in any internal control structure, errors or
irregularities may nevertheless occur and not be detected. Also,
projection of any evaluation of the structure to future periods
is subject to the risk that procedures may become inadequate
because of changes in conditions or that the effectiveness of the
design and operation of policies and procedures may deteriorate.
For the purpose of this report, we have classified the
significant internal accounting control structure policies and
procedures in the following categories.
o
Cash,
o
Foreign currency denominated assets,
o
Special Drawing Rights,
o
United States Government securities,
24
o
Income from interest bearing assets,
o
Gain or loss on foreign currency and Special Drawing
Rights revaluation, and
o
Foreign currency agreements.
For all of the internal control structure categories listed
above, we obtained an understanding of the design of relevant
policies and procedures and whether they have been placed in
operation, and we assessed control risk.
Our consideration of the internal control structure would
not necessarily disclose all matters in the internal control
structure that might be material weaknesses under standards
established by the American Institute of Certified Public
Accountants. A material weakness is a reportable condition in
which the design or operation of one or more of the specific
internal control structure elements does not reduce to a
relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing
their assigned functions. We noted no matters involving the
internal control structure and its operation that we considered
to be material weaknesses as defined above.
This report is intended for the information and use of
Treasury management officials and others authorized to receive
the report. This restriction is not intended to limit the
distribution of this report, which is a matter of public record.
Inspector General
April 23, 1992
C o r p o r a te e x e c u tiv e s a n d in v e s to r s a lik e n e e d to a d o p t a lo n g - te r m v ie w in th e ir e c o n o m ic th in k in g
A n d fr a n k ly , th e g o v e r n m e n t n e e d s to d o th e s a m e .
September 1992
” ( S e c r e ta r y B r a d y )
TABLE OF CONTENTS
TITLE
PAGE NUMBER
MESSAGE FROM THE SECRETARY...........................................................................................1
FOREWORD........................................................................................................................................2
VISION STATEMENT AND MISSION......................................................................................... 3
POLICIES AND APPROACHES:
Anti-Drug Initiatives........................................................................................................................ 4
Banking and Thrift Industries.......................................................................................................... 5
International Trade and Finance...................................................................................................... 6
Money Laundering............................................................................................................................7
Modernize Facilities and Equipment.............................................................................................. 8
Financial Integrity and Financial Security.....................................................................................9
Simplify Regulations.......................................................................................................................10
Processing People, Cargo and Transactions................
11
Quality of Service............................................................................................................................ 12
Marketing......................................................................................................................................... 13
Security and Safety.......................................................................................................................... 14
HISTORY OF THE TREASURY DEPARTMENT.....................................................................15
TREASURY ORGANIZATION AND BUREAU SE A L S.........................................................17
TREASURY ORGANIZATION CHART
18
MESSAGE FROM THE SECRETARY
In these times of unprecedented global and domestic change, it is crucial that we
articulate our long-range policies in order to effectively deal with the issues facing our Nation.
This new document, “Framework for the Future,” is intended to help the Treasury Department
focus on issues of critical importance.
Our Department serves literally each and every American, and we have the responsibility
to meet the challenges of the future, just as we have met the challenges of the past two hundred
years — with determination and excellence. It has always been Treasury’s goal to provide our
customers and clients with the best possible service. Meeting that goal will depend upon
communication, which must flow throughout the Treasury organization, as well as to and from
our customers, other interested parties, and the public as a whole.
The discussions fostered by this presentation of ideas should help ensure that we are
addressing the issues which the American people think we should address. Let us use the
“Framework for the Future” to continue to present ideas that are innovative, realistic, achievable
and above all, a service to our Nation.
Nicholas F. Brady
Secretary of the Treasury
FOREWORD
The “Framework for the Future” has been designed to enhance the Department’s
planning, budgeting and decision making activities. The “Framework for the Future” presents
Treasury’s priorities for a two to five year period, and will be updated annually. It is not
intended to cover every single issue confronting the Treasury.
This document presents several specific policies designed to:
•
set priorities and focus the organization on key initiatives to make the best
use of its limited resources;
•
direct and guide the budget process; and
•
provide bureaus with a point of reference in their planning efforts.
Each policy is followed by proposed means of implementation. The Treasury
Department is a very large and diverse organization, so each policy or approach may not
necessarily apply to each bureau. This document has been designed to allow practical ways to
assess our achievements, without becoming an administrative burden.
John E. Robson
Deputy Secretary of the Treasury
2
VISION STATEMENT
We will sustain and strengthen our country’s position as a leading world economic power; we will
maintain worldwide confidence in the soundness of the United States Government’s financial condition;
and we will provide for the safety of our citizens through the elimination of illegal drug problems, money
laundering and violent crime.
MISSION
The mission of the Treasury Department is to formulate and recommend economic, fiscal and tax
policies; serve as the financial agent of the U. S. Government; enforce the law; protect the President and
other officials; and manufacture coins and currency.
Treasury’s functions are broad and critical to the nation’s well-being and include:
•
serving as the President’s principal advisor in formulating international
monetary, financial and trade policies;
•
developing policies that consider economic effects of tax and budget policy;
•
regulating national banks, the government securities markets and Federal and
State chartered thrifts;
•
selling securities needed to finance the Federal Government, and reporting on the
government’s financial condition;
collecting the proper amount of income tax revenue, at the least cost to the public
and with the highest degree of public confidence;
•
collecting revenue from imports, and excise taxes on alcoholic beverages and
tobacco products;
•
improving government-wide financial management;
•
disbursing payments to over 100 million citizens annually;
•
enforcing laws related to:
smuggling drugs and contraband;
trade, tax, and financial institution and telecommunications fraud;
exports of high technology and munitions;
counterfeiting and money laundering;
alcohol, tobacco, firearms, explosives and violent crimes; and
the protection of the President, Vice-President and others;
•
training law enforcement officers; and
•
manufacturing currency, coins and stamps for the nation’s commerce.
3
POLICIES AND APPROACHES
P O L IC Y #1: Focus on anti-drug initiatives as a major priority
for the Department
• Gather intelligence information and provide training for
domestic and foreign law enforcement agencies involved in drug
suppression
• Amplify interdiction efforts by improving air, sea and
land port of entry processing and inspection systems
"There is only one answer
to the drug problem in this
hemisphere and that is to
defeat these narco traffickers
who prey on our children, once
and for all," (President Bush,
December 3, 1990)
• Expand investigations, participate in task forces, and
enlist industry cooperation to disrupt illegal drug and firearms
transportation systems and routes
Canines Supporting Treasury
^ ^ .
Anti-Drug Initiatives
# of Canines
Students Graduated by the Federal Law
Enforcement Training Center
Thousands
Fiscal Year
Source: U.S. Customs Service
Source: Federal Law Enforcement Training Center
4
P O L IC Y #2: Strengthen the nation’s financial system to
promote economic growth and to meet the credit needs of the
country by ensuring bank and thrift financial integrity and the early
detection of systemic risks, and by removing unnecessary
restrictions on efficiency, profitability and competition
• Seek legislation and ensure the appropriateness of bank
and thrift regulations through regular reviews to increase
opportunities for banks and thrifts to strengthen earnings, attract
capital investment and allow the industry to be more competitive
• Ensure resources are available and efficiently deployed
to reduce systemic risks to the safety and soundness of banks and
thrifts by continuing to form and apply differential regulation to
healthy versus troubled banks and thrifts
"There can be no doubt
that fundamental reform is
needed. The banking system
is safe, but it is not as
efficient and competitive as
it ought to be. If we
expect to exert world
economic leadership in the
21st century, we must have a
modern, world-class
financial services system in
the U.S . " (Secretary Brady,
February 5, 1991)
• Implement the requirements of the Federal Deposit
Insurance Corporation Improvement Act of 1991 for more
effective examination and supervision of banks and thrifts while
avoiding unnecessary regulatory burden
• Pursue cost effective enforcement methods to resolve
nonviable bank and thrift problems quickly while providing the
maximum protection of assets
• Increase interaction among Treasury’s regulatory and
law enforcement bureaus to combat financial institution fraud
Net Income and Number of Thrifts
Q u arter
N et Incom e
N u m b e r of
Ending
in Millions of $
Thrifts
Jun.
Sep.
Dec.
Mar.
Jun.
Sep.
Dec.
Mar.
30,
30,
31,
31,
30,
30,
31,
31,
1990
1990
1990
1991
1991
1991
1991
1992
$(302)
$(774)
$(1,488)
$610
$275
$188
$753
$1,589
2,453
2,388
2,342
2,283
2,216
2,148
2,096
2,064
Covers all Thrifts insured by the Savings Association Insurance Fund.
Source: Office of Thrift Supervision
5
P O L IC Y #3: Promote a strong world economy and stable
international financial system to ensure the health of the U.S.
economy
• Coordinate macroeconomic policies among major
industrial and other nations to provide for an expanding U.S.
export market
• Foster cooperation with the monetary authorities of
other nations to ensure stability of exchange rates
• Promote U.S. and world economic interests through our
leadership role in the international financial institutions, including
the International Monetary Fund, the World Bank Group, and the
multilateral development banks
• Reduce overseas barriers to international capital
movements, trade, and the provision of financial services
• Promote economic cooperation and tax treaties with
developing countries, newly emerging democracies, and other
nations to further mutual economic, financial and security interests
• Generate effective enforcement and audit strategies to:
curtail illegal trade practices; regulate foreign commerce
(including the protection of intellectual property rights and the
importation of consumer and environmentally safe products);
regulate interstate commerce; and improve tax collection efforts
Billions
U.S. Exports
Excludes services and military goods
Source: Department of Commerce
6
.We must ensure
America's economic
leadership. In the
post-Cold War world,
this will mean ensuring
free, open and growing
markets for our exports.
In the 1980s, growth was
fueled largely by debt
and consumption; in the
1990s, growth must come
instead from exports and
investment...If we are
to take advantage of the
opportunity exports
represent, we must work
with our allies to
improve world economic
growth, to reduce
barriers to trade, and
to ensure political
stability abroad . "
(Secretary Brady,
July 23, 1992)
P O L IC Y #4: Deter and detect money laundering conducted
through businesses and financial institutions
• Identify and disrupt illegal cash flows through
increased interdictory and investigative efforts and by financial
institution oversight to detect illegal financial infrastructures
• Encourage foreign countries to adopt anti-money
laundering initiatives and to enter into reciprocal agreements with
the United States to share this financial information
• Devise regulatory changes and propose legislative
changes to eliminate loopholes used for money laundering in areas
such as wire transfers and non-bank financial institutions
"Money is the lifeblood of
criminal organizations. If
we are ever going to halt
the flow of ill-gotten gains
through our financial system
and across our borders we
must hit the business-side
by taking the profit out of
criminal activity."
(Secretary Brady,
October 4, '1996}
• Perform centralized analysis of financial intelligence
information and increase interaction among Treasury's regulatory
and law enforcement bureaus to combat money laundering and to
ensure compliance with the Bank Secrecy Act
Millions
Money Laundering Seizures by
U.S. Customs Service
Currency Transaction Report Filings
Millions
Fiscal Year
Source: U.S. Customs Service
1987
1988
1989
1990
1991
Required reports to Internal Revenue Service on cash transfers
over $10,000. The data is often helpful in the detection of money
laundering operations.
Source: Internal Revenue Service
7
POLICY #5: Modernize facilities and equipment, and
develop new and pioneering automation systems to more
efficiently handle current and future demands
• Modernize facilities and equipment to plan for:
increased demand on coin, currency and stamp production;
enhanced passenger and cargo facilitation at our borders; increased
demand for financial and electronic data processing expertise; and
more efficient payment and collection systems
• Develop modern financial, tax administration,
intelligence and management information systems consistent with
the 5-year Information Systems Plan, and eliminate unnecessary
systems
"One of the best ways to
preserve America's economic
leadership and our standard
of living is to create
incentives for investment in
the long-term productive
capacity of American
industry..." (Secretary
Brady, August 23, 1989)
United States Mint
Coins Manufactured
Billions
3
Billions
14
Five Cent
Ten Cent
Twenty-Five Cent
2
Fifty Cent
-
1970
1975
Source: United States Mint
1980
1985
1990
Billions
Bureau of Engraving and Printing
Note Deliveries
Fiscal Year
1970
1975
1980
Fiscal Year
Source: Bureau of Engraving and Printing
1985
1990
POLICY #6:
Strengthen the financial integrity and financial
security of the Treasury and the Federal Government as a whole,
via training, early detection, economic analysis and oversight in
order to limit and reduce the growth of federal outlays
• Improve cash management, internal controls and
financial oversight within the Department
• Take the lead in providing financial training and
consulting to other agencies and in standardizing accounting
systems government-wide
• Establish an early warning system to detect
irregularities in operating programs at Treasury and present
solutions at the earliest stage possible
"There has been strong
interest within the
Administration in creating a
mechanism to alert managers
to emerging financial
issues...[As a result, the
Treasury Department] created
the Early Warning System Task
Force to produce an
immediate, viable early
warning tool for the
Department of the Treasury."
(Early Warning System Task
Force Report, October, 1990)
• Revise economic analysis techniques to continually
improve government economic policy
Fiscal
Year
Percentage of On-Time Payments
Made by the Financial Management Service
Percent
Source: Financial Management Service
9
POLICY #7 :
Simplify and clarify regulation of both the
government and the private sector to enhance compliance with
laws, and to more effectively and efficiently implement laws
"The Administration will
continue its search-and-destroy
mission against the labyrinth of
applications, monthly forms,
and federal regulations that
unnecessarily harass business
and draw a bull's-eye on the
taxpayers' wallet." (Deputy
Secretary Robson, June 8, 1992)
• Reduce the regulatory and paperwork burden on our
customers
• Increase reviews of targeted areas that have the
potential for a large return on our investment of resources
• Support legislative and regulatory changes to close tax
loopholes, simplify tax laws to reduce taxpayer burden, and
respond to changes in the government securities markets
•
Emphasize the use of non-prescriptive regulations
$
$
Revenue Collected
in billions of dollars
BUREAUS
1986
1987
1988
1989
1990
1991
Internal Revenue
Service
$725
$809
$863
$942
$978
$1,002
Customs
$13
$15
$16
$16
$17
$16
Bureau of
Alcohol, Tobacco
& Firearms
$10
$10
$10
$10
$10
$13
TOTAL
$748
$834
$889
$968
$1,005
$1,031
Source: Financial Management Service and Bureau of Alcohol, Tobacco and Firearms
10
POLICY #8:
Form strategies for processing people, cargo and
transactions more efficiently
• Consolidate data bases and develop automated data
processing systems, financial models and book entry and delivery
systems to obtain quicker access to information and to replace
paper processing
"But even some of the
agency's most persistent
critics say that day-to-day
operations [referring to the
IRS 1991 tax filing season]
are generally the smoothest
in a long time." (The New
York Times, April 10, 1991)
• Improve methods to selectively process cargo,
conveyances, and people more expeditiously and at a lower cost at
ports of entry
Passengers Entering the United States
By Sea
By Land
Millions
1975
Millions
1980
1985
Fiscal Year
1990
1975
_
, .
By Air
Millions
1975
1980
1985
Fiscal Year
Source: U.S. Customs Service
11
1990
1980
1985
Fiscal Year
1990
POLICY #9:
Emphasize quality of service and customer
satisfaction in all Treasury activities
• Promote a quality team approach that respects the
contributions of all employees and delivers prompt, reliable service
to our customers
• Establish evaluation systems to monitor and ensure the
appropriate provision of services
"The improvement of quality
in products and the improvement
of quality in service —
these
are national priorities as
never before." (President BushA
November 2, 1989)
• Strengthen voluntary tax compliance by focusing on
assistance, education and outreach programs
• Develop methods to answer tax related questions and
other inquiries more quickly and accurately
• Initiate recruitment and training programs that maintain
a high quality work force
• Continually improve domestic and international law
enforcement training techniques and programs
Internal Revenue Service
Telephone Assistance Accuracy Rate
Percent
100
1988
1989
1990
Fiscal Year
Source: Internal Revenue Service
12
1991
1992
(thru 5/92)
POLICY #10:
Improve the marketing of Treasury products and
services, and increase Treasury’s ability to respond to changing
customer needs
• Conduct market research to optimize revenue collection
and regulatory program effectiveness
• Explore alternative methods of selling marketable
securities and promote Savings Bond sales using cost-effective
marketing techniques to render the lowest cost to the taxpayer
"U.S. Savings Bonds are
now the most widely-held
government securi ty in history,
and they remain a basic way for
all Americans to save and
invest. " (SecretaryBrady,
April 30, 1991)
• Design better marketing strategies for domestic and
international law enforcement training, and for coins, currency,
stamps, and financial consulting services
Sales of United States Savings Bonds
Billions
Source: Bureau of the Public Debt
13
POLICY #11:
Intensify the security of Treasury’s assets, and
provide for public safety and a reduction of violent crime through
strengthened enforcement programs
• Strengthen firearms, explosives and alcohol
enforcement programs with emphasis on interagency initiatives
• Improve methods of monitoring and preventing violent
crime, especially gang related incidents
• Research and develop effective security systems and
facilities to protect Treasury’s physical assets and data bases
• Train personnel and develop security systems and
methods to ensure optimal protection for Secret Service protectees
"(The Bureau of Alcohol,
Tobacco and Firearms developed)
specialized response teams that
respond within 24 hours to any
scene of a major explosion or a
suspected arson. ... Team
members determined the cause and
origin of the incident in 91% of
the cases."(Explosives Incidents
Report 1989)
• Provide a safe work environment for all Treasury
employees
Bombing and Incendiary Incidents
Reported to the Bureau of Alcohol, Tobacco and Firearms in 1991
14
HISTORY OF THE TREASURY DEPARTMENT
In April 1776, prior to the Declaration of Independence, the Continental Congress laid the
foundation for today’s Treasury Department by providing for a “Treasury Office” to administer
public finance. The Department of the Treasury was formally established in 1789, with 32 year old
Alexander Hamilton chosen as the first Secretary of the Treasury.
Two immediate needs were addressed: a source of income for the Federal Government and a
respected monetary system. In 1789, the United States Customs Service was established and for the
next 125 years, Customs’ import revenues were the main source of income to the government.
Revenues from Customs made possible a period of unprecedented growth including the opening of
the West, the Louisiana purchase, the purchase of Florida and Alaska, and the transcontinental
railroad.
In 1792, the United States Mint was established. Harnessed horses were used to drive the
crude machinery in the production of the early coins. Gold was used to produce $10, $5, and $2.50
coins. Other coins were made of silver or copper. Gold coins for general circulation continued to be
produced until 1933.
In the late 1700s, the first Bank of the United States was established. The National Banking
Act of 1863 empowered Treasury to charter National Banks. The Office of the Comptroller of the
Currency (OCC) now oversees national banks.
Securities have been sold by the government throughout the history of the United States. The
Bureau of the Public Debt (BPD) is responsible for borrowing the money necessary to operate the
government and for accurately accounting for the public debt. It was officially designated as a
bureau in 1940, although its authority to borrow money on the credit of the United States was a part
of the Constitution.
In 1789, Congress empowered the Treasury to maintain a system that would account for
government collections and disbursements. This responsibility fell upon the Register of the
Treasury. The accounting function had to address the challenges of the enormous growth of the
government, as well as fires in 1801, 1814, and 1833 which destroyed financial records. Today, the
Financial Management Service (FMS) manages the government disbursement and collection systems
and provides accounting and financial consulting services government-wide.
A number of Treasury bureaus had their origins in the mid 1800s. The Nation’s primary
source of revenue, customs fees, became insufficient to meet the Nation’s expenditures during the
Civil War. This led to the creation of what is now the Internal Revenue Service (IRS) in 1862.
Income tax was declared unconstitutional in 1895, but was reinstated in 1913.
In 1941, the first series E Savings Bond was issued to help finance an intense military
buildup in anticipation of war, thus forming the organization which later became the United States
Savings Bonds Division (SBD). Bonds were also sold door-to-door in 1862 to help finance the Civil
War. Later, small denominations bonds were used to finance the Spanish American War, and movie
stars helped advertise bonds during World War I.
15
The Bureau of Engraving and Printing (BEP) was established in 1862 to produce paper
currency. Four women and two men, housed in the basement of the Treasury building, separated
and sealed U.S. notes which had been printed by private bank note companies. By 1877, all U.S.
currency was printed by the Bureau. Today, the production process involves over 65 separate steps
and is regarded as one of the best in the world.
In 1865, the United States Secret Service was established for the sole purpose of suppressing
counterfeiting. They arrested over 200 counterfeiters in the first year, and saved the currency system
from possible collapse. Following the assassination of President McKinley in 1901, the Secret
Service was assigned the duty of protecting the President and his family. Their role has expanded
greatly since then to include protecting the Vice-President, foreign Heads of State and major
presidential candidates. The Secret Service’s uniformed division was created by Congress in 1922
when it was known as the White House Police.
Although the Bureau of Alcohol, Tobacco and Firearms (ATF) had its origins in 1791 when
Congress first taxed distilled spirits, it was not until 1862 that Congress authorized the hiring of
three detectives to aid in the apprehension of tax evaders. During the twenties and thirties, the
forerunners of today’s ATF agents, the “untouchables,” were a part of the IRS and were highly
visible in their fight to control alcohol and “gangster type weapons.” In 1951, tobacco tax collection
was assigned to a section of the IRS. During the 1960s, emphasis returned to firearms control after
the assassinations of President John F. Kennedy, Senator Robert F. Kennedy and the Rev. Dr. Martin
Luther King, Jr. In 1972, these responsibilities were consolidated and ATF was created. ATF now
has significant responsibilities in the fight against illegal drug trafficking and violent crime.
Another result of these assassinations was the formation of several commissions to study
crime in America. One proposal was that better law enforcement training be provided. This led to
the formation of the Federal Law Enforcement Training Center (FLETC), which now provides
training to over 70 law enforcement agencies.
The Office of Thrift Supervision (OTS) was created by the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989. The Act fundamentally changed the regulatory and
supervisory structure of the thrift industry to prevent further thrift industry crises.
An important part of Treasury’s evolving law enforcement efforts is the Financial Crimes
Enforcement Network (FinCEN), created within headquarters in April 1990. This vast computer
operation enriches coordination among law enforcement agencies by providing multi-source
intelligence and analytical information on money laundering and other financial crimes.
Treasury's Headquarters operations, known as Departmental Offices, oversees and
coordinates the work of all Treasury bureaus and plays a supporting role for the Secretary in
domestic finance, economic policy, tax policy, intelligence, and international affairs.
16
TREASURY ORGANIZATION
The Treasury Department is divided into tw elve bureaus and the Departmental Offices.
•
•
•
•
•
•
•
•
•
•
•
•
•
Bureau of Alcohol, Tobacco and Firearms
Bureau of Engraving and Printing
Bureau of the Public Debt
Federal Law Enforcement Training Center
Financial Management Service
Internal Revenue Service
Office of the Comptroller of the Currency
Office of Thrift Supervision
United States Customs Service
United States Mint
United States Savings Bonds Division
United States Secret Service
Departmental Offices
Treasury’s headquarters operation (Departmental Offices) serves as a holding company for
the Treasury and includes thirteen major components; some oversee individual bureaus, and others
perform department-wide or non-bureau-specific functions.
TREASURY BUREAU SEALS
17
THE DEPARTMENT OF i nfc TREASURY
TREASURY BUREAUSAssistant Secretary (Management) is the Chief Financial Officer (CFO).
FOR RELEASE AT 2:30 P.M.
October 21, 1992
CONTACT:
Office of Financing
202/219-3350
TREASURY TO AUCTION 2-YEAR AND 5-YEAR NOTES
TOTALING $25,750 MILLION
The Treasury will auction $15,000 million of 2-year notes
and $10,750 million of 5-year notes to refund $12,730 million
of securities maturing October 31, 1992, and to raise about
$13,025 million new cash. The $12,730 million of maturing
securities are those held by the public, including $665 million
currently held by Federal Reserve Banks as agents for foreign
and international monetary authorities.
Both the 2-year and 5-year note auctions will be conducted
in the single-price auction format. All competitive and
noncompetitive awards will be at the highest yield of accepted
competitive tenders.
The $25,750 million is being offered to the public, and
any amounts tendered by Federal Reserve Banks as agents for
foreign and international monetary authorities will be added
to that amount.
In addition to the public holdings, Federal Reserve Banks,
for their own accounts, hold $884 million of the maturing secu
rities that may be refunded by issuing additional amounts of
the new securities.
Details about each of the new securities are given in the
attached highlights of the offerings and in the official offer
ing circulars.
oOo
Attachment
2032
HIGHLIGHTS OF TREASURY OFFERINGS TO THE PUBLIC
OF 2-YEAR AND 5-YEAR NOTES TO BE ISSUED NOVEMBER 2, 1992
October 21, 1992
Amount offered to the Public ... $15,000 million
$10,750 million
Description of Security:
Term and type of s e c u r i t y ..... 2-year notes
Series and CUSIP designation ... Series AF-1994
(CUSIP No. 912827 H3 9)
Maturity d a t e ................. October 31, 1994
Interest rate ................. To be determined based on
the highest accepted bid
Investment yield .............. To be determined at auction
Premium or discount ........... To be determined after auction
Interest payment dates ........ April 30 and October 31
Minimum denomination available . $5,000
5-year notes
Series S-1997
(CUSIP No. 912827 H4 7)
October 31, 1997
To be determined based on
the highest accepted bid
To be determined at auction
To be determined after auctiora
April 30 and October 31
Terms of Sale:
Method of sale ....
Competitive tenders
$ 5 , 000,000
Yield auction
Must be expressed as
an annual yield, with two
decimals, e.g., 7.10%
Accepted in full up to
$5,000,000
None
None
Yield auction
Must be expressed as
an annual yield, with two
decimals, e.g., 7.10%
Accepted in full up to
Noncompetitive tenders .
Accrued interest payable
by investor ...........
Kev Dates:
Receipt of tenders ............ Tuesday, October 27, 1992
a) noncompetitive ............ prior to 12:00 noon, EST
b) competitive...............
prior to 1:00 p.m., EST
Settlement (final payment
due from institutions):
a) funds immediately
available to the Treasury ... Monday, November 2, 1992
b) readily-collectible check ... Thursday, October 29, 1992
•
$ 1,000
Wednesday, October 28, 1992
prior to 12:00 noon, EST
prior to 1:00 p.m., EST
Monday, November 2, 1992
Thursday, October 29, 1992
17
89
For Immediate Release
October 22,
1992
Monthly Release of U.S. Reserve Assets
The Treasury Department today released U.S. reserve assets data
for the month of September 1992.
As indicated in this table, U.S. reserve assets amounted to
78,527 million at the end of September 1992, up from 78,474 million
in August 1992.
U.S. Reserve Assets
(in millions of dollars)
End
of
Month
Total
Reserve
Assets
Gold
Stock 1/
Special
Drawing
Rights 2/3/
August
78,474
11,059
12,193
45,460
9,762
September
78,527
11,059
12,111
45,579
9,778
Foreign
Currencies 4/
Reserve
Position
in IMF 2/
1992
1/
Valued at $42.2222 per fine troy ounce.
2/
Beginning July 1974, the IMF adopted a technique for valuing the
SDR based on weighted average of exchange rates for the
currencies of selected member countries. The U.S. SDR holdings
and reserve position in the IMF also are valued on this basis
beginning July 1974.
3/
Includes allocations of SDRs by the IMF plus transactions in SDRs.
4/
Valued at current market exchange rates.
NB-2033
AS PREPARED FOR DELIVERY
EMBARGOED UNTIL 12:10 PM CDT
OCTOBER 23. 1992
CONTACT: DESIREE TUCKER-SORINI
202-622-2910
Remarks by
The Honorable Nicholas F. Brady
Secretary of the Treasury
before the
ECONOMIC OUTLOOK CONFERENCE
MIDDLE TENNESSEE STATE UNIVERSITY
Murfreesboro, Tennessee
October 23. 1992
Thank you, Joe [Rodgers]. It is a great pleasure to be here
in Murfreesboro, and I appreciate you inviting me to join you for
this conference.
As we look at the world at the turn of the 21st century,
economic and political borders have blurred. Our national
economy has been transformed from a self-sufficient and isolated
continent to an island in the world archipelago — an island
whose prosperity is affected directly and dramatically by
developments across the oceans. It no longer makes sense to
think in purely domestic terms; there is no longer a clear
distinction between domestic and foreign policy. Trade
negotiations affect domestic employment; education policy affects
future competitiveness; peace in the Middle East means secure
energy sources to fuel domestic production; and investment from
abroad means jobs for Americans.
We must change as the world around us changes and to do so,
we must understand the nature of the profound economic transition
through which America and the world are passing. There are two
separate and distinct elements at work: a series of significant
but temporary disruptions that will pass through the system, but
more important, a structural and permanent change in the
organization of world economic competition — in some ways
greater than any since the Industrial Revolution of the 19th
century.
First, let me give you some examples of the significant but
temporary disruptions:
NB
2034
o
The victory in the Cold War will bring immeasurable
benefits to the world economy. But the benefits of
peace did not come without cost: this country now
shows the strain of having carried the burden of the
free world's defense for almost 50 years. In this
country alone, the Defense Department has estimated the
shift to a peace-time economy has meant the loss of
over 1.6 million jobs in the last three years. Without
these job losses, the unemployment rate today would be
more than a full percentage point lower than it is.
Peace has its price.
We have made adjustments at war's end before. Indeed,
at war's end in the first Truman Administration gross
national product fell 19% in a single year. This puts
our economy's current growth rate of over 2% in
perspective. The good news is that during Truman's
second term, after the restructuring was in hand, the
economy grew by almost 25% in four years.
o
Second, the volume of debt in every segment of American
society over the last four years has been at
historically high levels. Those levels, however, are
at last beginning to decline as businesses strengthen
their balance sheets and as the baby boomers become the
parents of the 1990s, watching their budgets, saving
for their retirement and their kids' education.
Reducing the country's debt sets the stage for renewed
growth in the long term
even though it has meant
significantly slower growth in the short term.
o
Third, economic growth has been hindered by a banking
system weakened by Third World Debt, failed savings and
loans, and tax law changes in the '80s that first
caused overbuilding and then a decline in real estate
values. But the Third World Debt crisis is now behind
us, the S&L cleanup nearly complete, and real estate
markets are improving. And banks are more profitable
and liquid than they have been in decades.
o
Fourth, American industry has been restructuring over
the last several years. Having taken steps to become
more productive, American industry is now more
competitive. As evidence, in 1988, our trade deficit
in goods and services was almost $102 billion; it had
declined to only $11.7 billion last year. We are
winning the battle for exports.
2
o
Fifth, the money supply — which provides the financing
for the country's growth — has been at the bottom of
the Fed's targets for most of the past three years.
And in recent months, M2 growth has been negative or
flat.
o
Finally, we have seen restrained world growth. We are
doing better economically than Germany, Japan, the U.K.
and other trading partners. That may provide little
satisfaction to Americans — but it is a fact.
Each of these six conditions has formed a significant brake
on economic growth, but when added together, their combined
effect is greater than the sum of their parts. By undermining
business and consumer attitudes, they have created an additional,
independent restraint on growth and added to concerns about this
country's prospects.
But even as each of these temporary disruptions is resolved,
we must still come to terms with the long-term transformation of
economic competition that technology has made possible. Twenty
years ago most businesses could find their customers on a road
map; today they need a world map. This has affected our
businesses and daily work. Let me give you some examples:
o
In today's world, where goods flow freely across
national borders, businesses are not bound to a
particular country by the dictates of geography.
Increasingly, companies seek to source their components
and locate their factories wherever production needs
can be met most efficiently. For example, the Hewlett
Packard personal computer is designed and marketed in
Palo Alto, and engineered in Grenoble, France.
Components are made in Malaysia; it is assembled in
Singapore, and 50% of sales are in the United States.
o
What is more, information and intellectual capital have
become increasingly important parts of the production
process. New businesses are created that depend less
on tangible physical capital and more on skills and
know-how. These new businesses are becoming leading
industries of the new world: Microsoft, for example,
has a total stock market value of $22 billion; Amgen, a
leading biotechnology company, has a stock market value
of $9 billion; and McCaw Cellular's is $5 billion. The
government cannot create these new businesses, it does
not have that capability.
3
o
Improvements in transportation combined with new
information and communication systems have dramatically
shortened the transportation "pipeline” for goods,
allowing companies to maintain "just-in-time" inventory
methods even with far flung suppliers. An aircraft
factory in Central California can fax a parts order to
a supplier in Leeds, England and receive the components
the next day.
o
Capital moves around the world at the touch of a
keyboard — without government approval — to wherever
it will bring the highest return, whether that is
Athens, Tennessee, or Athens, Greece. To put the
mobility in perspective, each day in excess of $1.5
trillion of transactions are settled through the New
York Federal Reserve Bank.
These changes have transformed the economic order that has
existed through most of our lives. This is understandably
unsettling to us all. Vigorous international competition has
caused some of our nation's most well-known companies to
restructure, not only General Motors, but also Xerox, IBM, AT&T
and others.
American workers go to the parts shelf and see labels that
concern them. As George Shultz recently remarked:
I saw a snapshot of a shipping label for some
integrated circuits produced by an American firm. It
said, "Made in one or more of the following countries:
Korea, Hong Kong, Malaysia, Singapore, Taiwan,
Mauritius, Thailand, Indonesia, Mexico, Philippines.
The exact country of origin is unknown."
Americans worry about what a label like that says about
their own future. But those who try to convince Americans that
they should fear the new economic world of free trade and change
are wrong. Most of the industries that are giving America its
leadership in this new world economy — industries like
pharmaceuticals, software, telecommunications, aerospace, and
computers — thrive on trade. If competition is the lever with
which a country will increase its productivity in the 21st
Century, trade is the fulcrum.
4
The fact is that in the U.S. exports will create millions of
new and better jobs — which have paid, on average, 17% more than
the average wage. As other countries increase their standard of
living, they will buy more high-value-added products from the
U.S. For example, that is why the U.S. has increased its exports
to Mexico from $14 billion to $33 billion over the last four
years.
The fact is, Americans do best when the competition is tough
-- we do best by being more creative, more entrepreneurial, more
innovative.
And in tomorrow*s world innovation will be a major
source of the future's attractive, high-paying jobs. In this we
Americans are fortunate. Innovation and change — that's our
heritage — from that summer's day in 1776 when we established a
new theory of government to the most recent flight of the space
shuttle Atlantis . Americans are uniquely well positioned to
succeed in the modern world of the 21st century.
For that reason, the goal of the Bush Administration during
the next four years will be — as it has been — not to evade
change, but to face it; not to stand in place, but to advance.
Our single-minded goal is to create high-value jobs in the United
States. To achieve this goal, we should do the following things.
First, we must continue the spectacular success we have had
over the last four years in opening free and growing markets for
our exports. In the 1980s, growth was fueled largely by debt and
consumption; in the 1990s, growth must come instead from exports
and investment. U.S. merchandise exports have increased by about
$195 billion over the last 5 years, and every billion dollars in
exports supports about 20,000 new jobs. Simple math indicates
that this growth in exports accounts for almost 4 million new
jobs.
A week ago, President Bush approved the North American Free
Trade Agreement. NAFTA will link us with our neighbors to the
North and South to create a single market of over 360 million
people with a total output of $6-1/2 trillion. This newly
unified market will provide an unparalleled engine for growth and
jobs. Yet if it hadn't been for President Bush's initiative and
constant urging, this agreement would never have been signed.
Nothing could provide a clearer example of the President's
understanding of the new global economy.
5
Second, two-thirds of the jobs created in the United States
are created by small businesses. Only 11% of the workforce works
for the Fortune Five Hundred companies. We must not shackle the
4 million smaller firms that are creating the new jobs workers
need during this transition. The infant industries of today will
be the job generators of tomorrow.
To this end, President Bush recently announced a
comprehensive five-year, $20 billion initiative which includes
lowering the corporate tax rate for small businesses; making up
to $2500 in small business start-up costs tax deductible;
increasing equipment expensing; and reducing paperwork burdens
that fall heavily on small businesses.
Ensuring America's economic leadership will also mean
adopting policies that foster savings and reduce the cost of
capital to encourage investment. It means running the government
so inflation and interest rates remain low and today, short-term
interest rates and inflation are at their lowest in decades. It
means reducing the capital gains tax to spur investment. And it
means reducing unnecessary regulatory restrictions and correcting
the excesses of our legal system.
But let me give you an example of what having an attractive
investment environment can mean. BMW, with the whole world to
choose from, recently decided to locate its first plant outside
Germany in South Carolina. In the words of BMW "the exports we
plan from the U.S. factory, will strengthen BMW's global
competitiveness." Imagine German car models made by Americans
sold to Europeans and Japanese.
Finally, we must invest in America's future. Investment in
education, as well as in technology and in research, is the key
to increasing our workers' productivity. More than that,
education is the guarantee of job security. Our grandfathers may
have worked at a single job their entire lives. Today's employee
will, on average, have had five different careers by the time of
retirement. Education will be the key to a productive future.
If, as students, American workers have learned how to learn, they
will have laid the foundation for a lifetime of new skills.
So America's workforce must be the best educated to remain
the most productive. That means fixing our education system —
by implementing President Bush's plan to develop schools that are
more accountable, to expand parental choice, and to encourage
states to set meaningful education standards.
6
As we transform our economy, we will not
must retrain as they shift from one career to
life. The Administration's Worker Adjustment
initiatives will triple the funding currently
training.
leave out those who
another late in
and Youth Skills
provided for re
And finally, investing in America's future means providing
affordable health care for all Americans, while controlling its
rising costs. That is why President Bush, in February, proposed
a plan for comprehensive health reform, to make health care more
accessible by making health insurance more affordable. The
President's plan will not lead to rationing of health care and
leaves health care choices in the hands of the people, not the
bureaucrats.
These objectives recognize the interconnection between
foreign affairs and domestic policy; they deal with the dynamic
changes in the way the world does business; and they emphasize
individual initiative rather than fuel the engine of big
government.
Some will say that this agenda is wrong. Competition, they
will tell you, both at home and abroad, is destructive — trade
saps jobs, choice guts schools, incentives to invest help only
the rich. But it is they who are wrong. All they offer —
dressed up in the latest jargon — are the tired remedies of
protectionism, increased taxes, and government direction. They
are the newest members of the Flat Earth Society, failing to
understand the world around them.
We cannot hold on to the old world, and we should not want
to. We know what we must do to succeed in the new world economy.
After all, the field of play is our native one: creating,
risking, competing, achieving. With optimism, energy and
commitment, America can remain what it has always been: the ark
of the world's liberty and the engine of its prosperity. The
next American Century can be as bright and brilliant as the last.
Thank you.
###
7
FOR IMMEDIATE RELEASE
October 26, 1992
Contact:
Anne Kelly Williams
(202) 622-2960
Statement by
Secretary of the Treasury
Nicholas F. Brady
We find it amazing that the Chairman of the Senate Banking
Committee has chosen to schedule a hearing a week before election
day to discuss the condition of the banking industry. This
hearing is remarkable in several respects.
If the senator were seriously concerned about the health of
the industry, he has had countless opportunities to provide
genuine reform instead of holding a vacuous hearing the
week prior to a presidential election. Instead, he has now
scheduled it after the Senate has adjourned when he could have
done some genuine good by addressing fundamental reform during
the legislative session.
Perhaps the senator finds it politically opportune to jump
on the bandwagon of the fearmongers and doomsayers who are using
old data and flawed analysis as an election year gimmick to claim
our nation*s banking system is in trouble. But the facts are
c l e a r — the commercial banking system has raised bank capital to
the highest level since 1966, has enjoyed two straight quarters
of record profits, and the Bank Insurance Fund is replenished.
The banking industry and the country would be better served
if the leadership of the Senate Banking Committee spent less time
on counterproductive political posturing and more time on
enacting financial services reform.
#
NB-2035
#
#
EÜ
PUBLIC DEBf m W S
■ Ä
H
lijjj p
-----------------------------------------------------
________
y
-
Department of the Treasury • Bureau of the Public tìeb r * ¿Washington, DC 20239
'*<Q
CONTACT: Office of Financing
202-219-3350
FOR IMMEDIATE RELEASE
October 26, 1992
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $11,881 million of 13-week bills to be issued
October 29, 1992 and to mature January 28, 1993 were
accepted today (CUSIP: 912794A46).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2. 95%
2. 97%
2. 97%
Investment
Rate
3.01%
3.04%
3.04%
Price
99.254
99.249
99.249
Tenders at the high discount rate were allotted 71%
The investment rate is the equivalent coupon-issue
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
33,910
36,047,715
13,380
44,490
102,745
34,585
1,809,720
11,260
11,860
36,500
19,835
895,540
538.785
$39,600,325
Accepted
33,910
10,389,530
13,380
44,490
88,245
26,845
193,600
11,260
11,860
36,500
19,835
473,040
538.785
$11,881,280
Type
Competitive
Noncompetitive
Subtotal, Public
$35,231,145
1.137.880
$36,369,025
$7,512,100
1.137.880
$8,649,980
2,497,100
2,497,100
734.200
$39,600,325
734,200
$11,881,280
Federal Reserve
Foreign Official
Institutions
TOTALS
NB-2036
n ^PUBLIC DEBT NEWS
Department of the Treasury • Bureau of,the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
October 26, 1992
CONTACT: Office of Financing
n n ;Q Q ,
202-219-3350
y
yv 4 x
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $11,849 million of 26-week bills to be issued
October 29, 1992 and to mature April 29, 1993 were
accepted today (CUSIP: 912794C44).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.21%
3.23%
3.22%
Investment
Rate_____Price
3.31%
98.377
3.33%
98.367
3.32%
98.372
Tenders at the high discount rate were allotted 61%.
The investment rate is the equivalent coupon-issue yield.
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
22,335
32,375,780
12,670
29,825
31,195
33,330
1,724,075
23,785
5,590
29,135
7,025
807,435
337.020
$35,439,200
Accented
22,335
10,908,310
12,670
29,325
27,295
25,990
157,425
18,785
5,590
29,135
7,025
268,435
337.020
$11,849,340
Type
Competitive
Noncompetitive
Subtotal, Public
$31,397,265
689.635
$32,086,900
$7,807,405
689.635
$8,497,040
2,500,000
2,500,000
852.300
$35,439,200
852.300
$11,849,340
Federal Reserve
Foreign Official
Institutions
TOTALS
NB-2037
CONTACT:
FOR IMMEDIATE RELEASE
OCTOBER 27, 1992
Keith Carroll
202-622-2930
TREASURY DEPARTMENT ASSESSES STRUCTURING PENALTY
The Department of the Treasury announced today that it has
assessed a civil penalty of $26,430 against George T. Underhill,
III of Louisville, Kentucky for a violation of the Bank Secrecy
Act (BSA) anti-structuring provision. This is the first
structuring civil penalty assessed by Treasury.
This provision of the BSA was enacted to prevent individuals
from evading currency transaction reporting (CTR) by prescribing
penalties for those who break down amounts greater than $10,000
in currency into multiple transactions, each less than the
$10,000 threshold. The amount of the penalty reflects the total
of the currency involved in the structured transactions and as
required by statute was offset by a civil forfeiture.
In 1991, Mr. Underhill negotiated three cashier's checks for
currency, each under $10,000, at two branches of the same bank
during one business day in an attempt to evade the filing of a
CTR. The bank reported the transactions to the Government.
In announcing the penalty, Peter K. Nunez, Assistant
Secretary of the Treasury said, "Treasury is continuing its
enforcement of the Bank Secrecy Act by assessing civil penalties
against non-compliant financial institutions and individuals."
He praised the bank for reporting the transactions stating, "This
penalty reflects the continued cooperative relationship between
the banking community and Treasury." He also thanked United
States Attorney Joseph M. Whittle of the Western District of
Kentucky and his assistant, E. Brian Davis for their cooperation.
The BSA requires banks and other financial institutions to
keep certain records, file reports on currency transactions in
excess of $10,000 and file reports on the international
transportation of currency, travelers checks and other monetary
instruments in bearer form. The purpose of these records is to
assist the government in combatting money laundering as well as
for use in civil, criminal, tax and regulatory investigations.
oOo
NB-2038
~ D
FOR RELEASE AT 2:30 P.M.
v /
~
(
CONTACT-Office of Financing
‘•c ¿0.2^1.9-3350
October 27, 1992
TREASURY’S WEEKLY BILL OFFERING
The. Department of the Treasury, by this public notice,
invites tenders for two series of Treasury bills totaling
approximately $ 23,600 million, to be issued November 5 1 9 9 2
This offering will provide about $ 2$ million of new cash for
the Treasury, as the maturing bills are outstanding in the amount
of $ 23,586 million. Tenders will be received at Federal Reserve
Banks and Branches and at the Bureau of the Public Debt, Washing
ton, D. C. 20239-1500, Monday, November 2 , 1992
prior to
12:00 noon for noncompetitive tenders and prior’to 1:00 p.m.,
Eastern
Standard
time, for competitive tenders. The two
series offered are as follows:
91 -day bills (to maturity date) for approximately
$ 11,800 million, representing an additional amount of bills
dated August 6 , 1992
and to mature February 4 , 1 9 9 3
(CUSIP No. 912794 A5 3), currently outstanding in the amount
of $ 11,722 million, tne additional and original bills to be
freely interchangeable.
182 -day bills (to maturity date) for approximately
$ 11,800 million, representing an additional amount of bills
dated May 7, 1992
and to mature May 6 , 1 9 9 3
(CUSIP No. 912794 C5 1 ), currently outstanding in the amount
of $ K,451 million, the additional and original bills to be
freely interchangeable.
The bills will be issued on a discount basis under competi
tive and noncompetitive bidding, and at maturity their par amount
will be payable without interest. Both series of bills will be
issued entirely in book-entry form in a minimum amount of $10,000
and in any higher $5,000 multiple, on the records either of the
Federal Reserve Banks and Branches, or of the Department of the
Treasury.
The bills will be issued for cash and in exchange for
Treasury bills maturing
November 5, 1 9 9 2 . 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 competi
tive 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 , 9 1 7 million as agents for foreign .and international
monetary authorities, and $ 5,467 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 5176-1 (for 13-week series) or Form PD 5176-2 (for 26-week
series).
NB-2039
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 2
Each bid must state the par amount of bills bid for, which
must be a minimum of $10,000. Bids over $10,000 must be in mul
tiples of $5,000. A bidder submitting a competitive bid for its
own account, whether bidding directly or submitting bids through
a depository institution or government securities broker/dealer,
may not submit a noncompetitive bid for its own account in the
same auction.
Competitive bids must show the discount rate desired,
expressed in two decimal places, e.g., 7.10%. Fractions may not
be used. A single bidder, as defined in Treasury's single bidder
guidelines, may submit competitive tenders at more than one dis
count rate, but the Treasury will not recognize, at any one rate,
any bid.in excess of 35 percent of the public offering. A com
petitive bid by a single bidder at any one rate in excess of 35
percent of the public offering will be reduced to the 35 percent
limit. The public offering for any one bill is the amount offered
for sale in the offering announcement, less bills allotted to Fed
eral Reserve Banks for their own account and for the account of
foreign and international authorities in exchange for maturing
bills.
Noncompetitive bids do not specify a discount rate. A
single bidder should not submit a noncompetitive bid for more than
$1,000,000. A noncompetitive bid by a single bidder in excess of
$1,000,000 will be reduced to that amount. A bidder may not sub
mit a noncompetitive bid if the bidder holds a position, in the
bills being auctioned, in "when-issued" trading or in futures or
forward contracts. A noncompetitive bidder may not enter into any
agreement to purchase or sell or otherwise dispose of the bills
being auctioned, nor may it commit to sell the bills prior to the
designated closing time for receipt of competitive bids.
4
The following institutions may submit tenders for accounts
of customers: depository institutions, as described in Section
19(b)(1)(A), excluding those institutions described in subpara
graph (vii), of the Federal Reserve Act (12 U.S.C. 461(b)(1)(A));
and government securities broker/dealers that are registered with
the Securities and Exchange Commission or noticed as government
securities broker/dealers pursuant to Section 15C(a)(l) of the
Securities Exchange Act of 1934. Others are permitted to submit
tenders only for their own account.
For competitive bids, the submitter must submit with the
tender a customer list that includes, for each customer, the name
of the customer and the amount and discount rate bid by each cus
tomer. A separate tender and customer list should be submitted
for each competitive discount rate. Customer bids may not be
aggregated by discount rate on the customer list.
«\
For noncompetitive bids, the customer list must provide,
for each customer, the name of the customer and the amount bid.
For mailed tenders, the customer list must be submitted with the
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 3
tender. For other than mailed tenders, the customer list should
accompany the tender. If the customer list is not submitted with
the tender, information for the list must be complete and avail
able for review by the deadline for submission of noncompetitive
tenders. The customer list must be received by the Federal
Reserve Bank by auction day.
All bids submitted on behalf of trust estates must identify
on the customer list for each trust estate the name or title of
the trustee(s), a reference to the document creating the trust
with date of execution, and the employer identification number
of the trust.
A competitive bidder must report its net long position in
the bill being offered when the total of all its bids for that
bill and its net long position in the bill equals or exceeds $2
billion, with the position to be determined as of one half-hour
prior to the closing time for the receipt of competitive tenders.
A net long position includes positions, in the bill being auc
tioned, in when-issued trading and in futures and forward con
tracts, as well as holdings of outstanding bills with the same
CUSIP number as the bill being offered. Bidders who meet this
reporting requirement and are customers of a depository institu
tion or a government securities broker/dealer must report their
positions through the institution submitting the bid on their
behalf. A submitter, when submitting a competitive bid for a
customer, must report the customer's net long position in the
security being offered when the total of all the customer's bids
for that security, including bids not placed through the submit
ter, and the customer's net long position in the security equals
or exceeds $2 billion.
Tenders from bidders who are making payment by charge to a
funds account at a Federal Reserve Bank and tenders from bidders
who have an approved autocharge agreement on file at a Federal
Reserve Bank will be received without deposit. Full payment for
the par amount of bills bid for must accompany tenders from all
others, including tenders for bills to be maintained on the bookentry records of the Department of the Treasury. An adjustment
will be made on all accepted tenders accompanied by payment in
full for the difference between the payment submitted and the
price determined in the auction.
Public announcement will be made by the Department of the
Treasury of the amount and discount rate range of accepted bids for
the auction. In each auction, noncompetitive bids for $1,000,000
or less without stated discount rate from any one bidder will be
accepted 'in full at the weighted average discount rate, (in two
decimals) of accepted competitive bids. Competitive bids will then
be accepted, from those at the lowest discount rates through suc
cessively higher discount rates, up to the amount required to meet
the public offering. Bids at the highest accepted discount rate i
will be prorated if necessary. Each successful competitive bidder
4/17/92
TREASURY'S 13-, 26-, AND 52-WEEK BILL OFFERINGS, Page 4
will pay the price equivalent to the discount rate bid. Noncom
petitive bidders will pay the price equivalent to the weighted
average discount rate of accepted competitive bids. The calcula
tion of purchase prices for accepted bids will be carried to three
decimal places on the basis of price per hundred, e.g., 99.923.
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.
No single bidder in an auction will be awarded bills in an
amount exceeding 35 percent of the public offering. The deter
mination of the maximum award to a single bidder will take into
account the bidder's reported net long position, if the bidder
has been required to report its position.
Notice of awards will be provided to competitive bidders
whose bids have been accepted, whether those bids were for their
own account or for the account of customers. No later than 12:00
noon local time on the day after the auction, the appropriate
Federal Reserve Bank will notify each depository institution that
has entered into an autocharge agreement with a bidder as to the
amount to be charged to the institution's funds account at the
Federal Reserve Bank on the issue date. Any customer that is
awarded $500 million or more of securities in an auction must
furnish, no later than 10:00 a.m. local time on the day after the
auction, written confirmation of its bid to the Federal Reserve
Bank or Branch where the bid was submitted. If a customer of a
submitter is awarded $500 million or more through the submitter,
the submitter is responsible for notifying the customer of the
bid confirmation requirement.
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
by the issue date, by a charge to a funds account or pursuant to
an approved autocharge agreement, in cash or other immediatelyavailable funds, or in definitive Treasury securities maturing
on or before the settlement date but which are not overdue as
defined in the general regulations governing United States secu
rities. Also, maturing securities held on the book-entry records
of the Department of the Treasury may be reinvested as payment for
new securities that are being offered. Adjustments will be made
for differences between the par value of the maturing definitive
securities accepted in exchange and the issue price of the new
bills.
Department of the Treasury Circulars, Public Debt Series Nos. 26-76 and 27-76 as applicable, Treasury's single bidder guide
lines, 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.
4/17/92
Department of the Treasury • Bureau o
FOR IMMEDIATE RELEASE
October 27. 1992
ihington, DC 20239
CONTACT: Office of Financing
DtPT op lug pp,«.
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 2-YEAR NOTES
Tenders for $15,087 million of 2-year notes, Series AF-1994,
to be issued November 2, 1992 and to mature October 31, 1994
were accepted today (CUSIP: 912827H39).
The interest rate on the notes will be 4-1/4%. All compe
titive tenders at yields lower than 4.37% were accepted in full.
Tenders at 4.37% were allotted 12%. All noncompetitive and sucessful competitive bidders were allotted securities at the yield of 4.37%
with an equivalent price of 99.773. The median yield was 4.35%; that
is, 50% of the amount of accepted competitive bids were tendered at or
below that yield. The low yield was 4.30%; that is, 5% of the amount
of accepted competitive bids were tendered at or below that yield.
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
32,605
46,759,030
18,315
176,195
194,740
54,685
1,647,,505
54,375
28,940
67,405
14,530
562,540
259.585
$49,870,450
Accepted
32,605
14,177,870
18,315
41,195
73,060
31,685
182,495
52,375
28,940
66,965
14,530
107,540
259.585
$15,087,160
The $15,087 million of accepted tenders includes $870
million of noncompetitive tenders and $14,217 million of
competitive tenders from the public.
In addition, $523 million of tenders was awarded at the
'high yield * to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $634 million
of tenders was also accepted at the high yield
from Federal
Reserve Banks for their own account in exchange for maturincr
securities.
^
NB-2040
TEXT AS PREPARED FOR DELIVERY
Contact:
Scott Dykema
(202) 622-2960
Ü.S. GLOBAL ECONOMIC LEADERSHIP IN THE POST-COLD WAR WORLD
Remarks by
The Honorable 01in L. Wethington
Assistant Secretary of the Treasury for International Affairs
at the
John F. Kennedy School of Government
Harvard University
October 27, 1992
Americans have had the opportunity to remake the world twice
before in this century alone. At the close of the First World
War, we chose unwisely to shrink from this task. We abdicated
the*mantle of global responsibility that was so new and
unfamiliar to us. We allowed others to construct a world order
that led to a second conflagration.
Fortunately, we learned from this tragic experience. At the
close of the Second World War — a war for which American
industrial strength determined the outcome — we accepted
responsibility. We worked with our allies to build institutions
like the UN, NATO and the Bretton Woods institutions to promote
world peace and prosperity. Unfortunately, the Soviet Union
forced confrontation in the post—war,period.
The Cold War was, in a sense, a third world war. The
various armed conflicts of the last four decades were the
individual battles of the Cold War. Who among us does not wonder
what greater economic and social achievement the world could have
made had this 45 year struggle not been necessary.
Centuries from now, when the history book writers condense
past eras into short paragraphs, schoolchildren will remember the
triumph of democracy and market principles as the political
achievement of the 20th century.
We are at the moment we-have awaited for 45 years. While we
seek a world safer, richer, freer and cleaner than the world of
yesterday, it will not automatically come to pass. The next era
NB-2041
will not spring forth fully formed, Athena-like. Rather, the
order is ours to create. but only if we have the imagination to
conceive it and the will to sustain it. If the great struggle
between the world's communist and capitalist camps no longer
provides the driving force for international developments, what
will replace it?
Characteristics of the Emerging World Order
Before seeking to sum up this Administration's response to
that question in the international economic field, I'd like first
— from the perspective of one involved in international
economics policy decision-making — to characterize the emerging
world order.
Let me begin by reviewing five elements that I believe
characterize the emerging world order:
One:
The increasing primacy of economic factors in the
exercise of power?
Two:
Despite the emergence of new economic powers, the
U.S. retains the capacity for decisive leadership
in our increasingly interdependent world economy?
Three:
Although there is a global shift to market
approaches, the success of this transformation is
not guaranteed and sharp differences remain over
the appropriate degree of government involvement
in the economy?
Four:
The integration of global capital markets limits
the capacity of governments to pursue economic
policies in isolation of development in the rest
of the world and to ignore the judgment of the
market ? and
Five:
Multilateralism is under pressure, but the world
is not moving inexorably toward three exclusive
economic blocs.
Let me discuss each of these points in greater detail:
The Primacy of Economics
The first characteristic may be conventional wisdom, but is
nonetheless true: a nation's position and influence in the
emerging world order will be defined principally in economic,
rather than in military, terms. Although economic matters may
not completely supplant military considerations, they at least
rival them in importance. As one involved in economic policy
making, I nonetheless recognize threats to our military security.
Yet today, after 45 years of sacrifice and struggle, we are
entering an era for which we have been waiting for decades — one
2
where we can shift the focus of our talents and resources towards
economic advancement and human well-being.
A corollary, however, to the rise in importance of economic
factors is that yesterday's military allies have become today's
principal economic competitors. Our relationship with many of
our closest partners takes on a complex mixture of cooperation
and competition. A second corollary is that the key to a
nation's global position will be its domestic economic strength - a subject that I'll return to in a moment.
The U.S. Position in the Emerging World Order
A second feature of the new environment is that Cold War
descriptions of the global distribution of power no longer hold.
The world is neither bipolar, nor would I add, unipolar; nor is
it multipolar in the sense of a number of competing camps. The
concept of polarity has lost its meaning in an interdependent
world. The United States is now the world's only remaining
military superpower, and is its largest and most powerful
economy. This awesome power still does not imply a unipolar
world where the U.S. single-handedly determines the direction of
events across all dimensions. Nor have we become a multipolar
world in the sense of a number of co-equal competing powers. We
find in today's world that coalitions among major powers shift
with regularity.
America's influence remains global. It is in many instances
decisive. But increasingly we lead by developing consensus,
rather than by command.
Three points may help put in perspective the U.S. economic
position in the emerging world order:
1) Since World War II, our primary foreign partners have
closed the gap with us — but the United States is still the
world's dominant economy.
2) Recent U.S. performance has been stronger than that of
our major industrial competitors.
3) The United States is well positioned to sustain its
leadership position in the global economy provided we remain
engaged internationally and further enhance our domestic economic
performance.
U.S. As the World's Dominant Economy
Many political pundits have taken to the fashionable
position that other industrialized countries, mainly Japan and
Germany, have surged forward and are on the verge of surpassing
3
us in the global economic competition. Some have heralded the
21st century as the "Pacific Century” portraying Japan, in
particular, as a highly disciplined society on an inexorable
march toward global preeminence. Others have asserted that the
21st century belongs to a reunited and reinvigorated Europe.
These forecasts are, in my judgment, much too premature.
It is true that Japan, Germany, and other industrialized
countries in the past several decades have made great strides in
closing the economic gap with the United States. Our 50% share
of the world economy immediately after World War II has declined
to a still remarkable 20% share today. Prosperity in other
industrialized countries has been both expected and encouraged by
successive U.S. Administrations. It is also the case that a
number of industrialized countries over the last several decades
have had much higher savings and investment rates and, because
they have not borne the burden of large defense expenditures,
have been able to concentrate their energy on certain civilian
technologies.
Nevertheless, although the gap has closed, the United States
remains the world's strongest economy and, I believe, is capable
of meeting the challenges necessary to maintain, and even
strengthen, its position well into the foreseeable years of the
21st century.
In 1991, U.S. economic output on a purchasing power basis
was 2 1/2 times Japan's and five times Germany's. In fact, U.S.
output is still larger than the entire European Community. Last
year, our gross domestic product (''GDP'') per capita was 18%
higher than Japan's and 15% greater than Germany's. Output per
worker adjusted for purchasing power was 30% greater than in
Japan and 11% greater than in Germany. The U.S. is the world's
largest exporter — larger than Japan or Germany. We shipped
$422 billion of merchandise in 1991, or 12.3% of the world's
total. U.S. export growth is outpacing growth in world trade
generally and, over the last five years, our exports have grown
40% faster than Germany's and 75% faster than Japan's.
U.S. spending on research and development — the key to
competitive success in the high-tech industries of the 21st
century — dwarfs the combined spending of Germany and Japan. In
1990, on a constant dollar basis adjusted for purchasing power
parity, U.S. spending on R & D was 47% greater than the combined
spending of Germany and Japan.
Recent Economic Performance
Not
dominant
War era,
Germany,
only does the United States continue to occupy a
position, but during these early years of the post-Cold
U.S. economic performance is outpacing that of Japan,
and most other industrialized countries. In Europe, the
4
cost of German reunification — resulting in high interest
rates — has dampened growth throughout the continent. In Asia,
the end of Japan's so-called "bubble economy" has resulted in
significant retrenchment. In the United States, we are going
through an adjustment, a significant part of which is related to
our conversion to a truly "peacetime" economy. Over the last
several years, a substantial part of the job loss in our
manufacturing sector has been in defense-related industries.
In 1991 the United States began a steady, albeit slow,
recovery and is now leading the world out of this economic
downturn. U.S. third quarter growth -- announced today — rose
at an annual rate of 2.7%. The United States is the only one of
the "Big Three" to have experienced six consecutive quarters of
positive growth. Both the OECD and the IMF forecast that in 1992
growth in the United States will be higher than in either Japan
or Germany, and will be greater than the average for the entire
OECD industrialized world. In addition, for 1993 the forecasts
by the IMF and the OECD are for stronger U.S. growth than in
either Europe or Japan.
Forecasts for growth in Japan have weakened as the year has
progressed. The root cause of slowing growth in Japan is very
weak domestic demand. Consumer demand is dampened because of the
decline in real personal income growth and decline in asset
values (for example, in land and equities). Japan is in the
midst of a three year decline in corporate profits. Inventories
remain high. Incentives for businesses to increase investment
are limited. The year-long decline in industrial production has
steepened. One bright spot in Japan's economy, the growth of its
external sector, has negative implications for world growth as a
whole. Because of the composition of Japan's August fiscal
stimulus package and delays in implementation, the package has
not had the projected effect of strengthening domestic demand.
In Germany, forecasts are also being revised downward for
the second half of 1992. Retail sales and industrial orders are
down and unemployment is rising in Germany. Private consumption,
which had been expected to recover by mid-year, is increasingly
seen as weak. Weaker than expected growth will hurt government
revenues and make Germany's ambitious budget deficit targets
harder to achieve.
Positioning for the Future
The U.S., in contrast, has laid the economic groundwork for
a more solid recovery over the next several years, than have most
other industrial nations. U.S. short-term interest rates are the
lowest among the G-7 industrialized nations. Inflation here is
down in the 3% range, compared with Germany in the 4-5% range and
Japan at about 2%.
5
Part of the reason the U.S. recovery is sluggish is the
actions being taken by U.S. businesses and consumers to reduce
their debt burdens I— thus placing them in a stronger, more
competitive position in the future. In 1991, U.S. household
liabilities, as a percentage of disposable income, were 13% lower
than Japanese household indebtedness.
(Comparable German figures
are not available.) U.S. consumer installment credit is falling
at a rate of 4.0% annually, as the baby-boomers shift from high
consumption in their early years to the higher savings patterns
typically associated with older groups. U.S. business is also
highly competitive with regard to the debt burden it must carry:
in 1990, U.S. non-financial firms* debt as a percentage of total
assets stood at 45% — compared with 62% in Germany and a
whopping 80% in Japan.
According to a 1992 OECD study, the overall cost of capital
that businesses have to pay for the money they put to productive
uses is lower in the U.S. than in Japan and about even with
Germany. Healthy U.S. equity markets reflect this same trend:
while the Dow hits new highs above 3300 points and Wall Street*s
new equity issues rebound, comparable markets abroad are
sluggish. Reflecting the bursting Japanese "bubble,** Tokyo's
Nikkei stock average has lost almost 60% of its value since
December 29, 1989. In the same period, the West German index
lost approximately 12 percent of its value — while the Dow rose
almost 23 percent.
These economic indicators still do not tell the whole story.
In Japan, many characteristics that worked well during the
industrial rebuilding and export-led growth stages of post-war
development may hinder its future performance. Japan has an
under-developed financial services sector, a system of dominant
major company groups (called "keiretsu”) that fosters
oligopolistic practices and limits new entrants, an inefficient
distribution system resulting in higher prices for the same goods
than elsewhere, high costs of land, and inadequate roads,
seaports and airports. Japan's homogeneity, which some count as
a strength, could become a weakness if it prevents Japan from
opening its borders to needed foreign labor or from tapping the
creative skills and ideas necessary in a global economy that
rewards innovation. Even Japan's export strength may prove a
weakness if it drives up protectionist pressures in overseas
markets.
In Germany, the costs of reunification have proven
unexpectedly high. The German government recognizes the problem,
but is only now moving to solve it. It is thus apparent that
these costs will persist for some time — imposing a burden on
European growth as high interest rates in Germany are transmitted
through the ERM to the rest of Europe. In addition, as the OECD
has also observed, German labor policies inflate labor costs
hurting the competitiveness of German industry. This may drive
6
German manufacturers into the newly emerging economies of Eastern
Europe or even the United States — witness BMW's recent decision
to build its only major plant outside Germany in South Carolina.
To sum up on our position in the emerging world order: We
are still the strongest economy, but our competitors have been
closing the gap since World War II. However, despite contrary
conventional wisdom, the U.S. is now outperforming its major
rivals and may be poised for stronger economic performance over
the medium term. The long-term future depends on how we tackle
important domestic challenges — such as encouraging private
initiative, improving education, and raising our savings and
investment rate. Many of the strengths that underlie the
impressive post war economic performance of our major competitors
remain and will serve them well in the future. Our future
position will have to be earned.
The Difficult Transition to the Market
The third element of the emerging order is the general
consensus that free market economics is the route to prosperity.
With the collapse of communism and centrally planned economies
worldwide, we can lay claim to the historical superiority of
market-based economies. It is our hope that free markets will
lead to freer and more democratic societies.
However, the process of reorienting economies which
previously were heavily dependent on state planning and
regulation will take considerable time. This will be the case,
most particularly, in the states of the former Soviet Union and
Eastern Europe. The transition to market economies will be
painful, frustrating, and in many cases prolonged, with the
process moving in fits and starts.
Moreover, while we should take satisfaction in the general
ascendancy of democratic capitalism, this does not mean there are
no longer substantial differences in approach among those
claiming a market orientation. Capitalism in the late 20th
century comes in many diverse forms. Debates are raging from
Prague to Brasilia about which of the various capitalistic models
can best serve the interests of societies that generally want to
move away from the failed policies of the past towards market
reforms. We witness varying levels of government intervention
within economies. How active governments should be will continue
as a central line of debate. Some, for example, call for a socalled "strategic trade policy" or an "industrial policy."
Both
are efforts through government intervention to provide an
artificial advantage in global competition. The debate becomes
even more complex when one factors in certain cultural modes of
operation and business practices not directly managed by
government, but rather tolerated as part of the country's "way of
doing business." The debate over how to neutralize or discipline
7
these Martificial” advantages in competition will be a central
ideological fault line in the emerging world order.
Capital Market Integration and Market Discipline
The fourth significant characteristic of the emerging world
order is that the integration of global capital markets limits
the capacity of governments to pursue economic policies in
isolation of developments in the rest of the world. The global
financial markets now constitute a virtual 24-hour a day judgment
on the economic policies of governments. The judgments of
markets regarding currency values impose varying degrees of
discipline on a nation*s economic policies. As we have recently
witnessed in Europe, ignoring the discipline of such markets is
not cost-free.
The integration of markets is made possible by the speed of
communication. Markets are connected by the instantaneous
communication between trading rooms around the world. The power
of markets to overwhelm governments with tremendous speed has
recently been seen in Europe. The substantial intervention in
currency markets by European governments — which some European
press estimate to be as high as 130 billion dollars during August
and September — is the latest dramatic example.
Multilateralism and Regionalism
My fifth and final point concerns the conflicting tendencies
toward multilateralism and regionalism in the world trading
system. Although the multilateral system is under pressure, I do
not accept the fashionable view that the world is breaking into
three competing regional economic blocs — a Western Hemispheric
bloc dominated by the United States, a Pacific yen bloc led by
Japan, and a unified Europe dominated by a unified Germany.
Without completely discounting the "three bloc world” as a long
term possibility, I believe the scenario misses the mark in a
number of ways:
Diversification of Power and Interests in Asia
Although Japan does have a strong economic position in Asia,
a ”yen bloc” in which Japan exercises dominant influence is not
emerging. The share of intra-regional trade in East Asia
increased from 33 percent in 1980 to 37 percent in 1989, but this
total level of intra-regional trade is still quite low in
comparison with the EC*s 60 percent. This increase in trade
within Asia can be attributed to the strong growth in the Asian
economies, rather than to a deliberate policy of those in the
region to focus on developing trading relationships within their
own ”bloc.”
8
Invoicing of Japanese trade in Asia in yen is increasing on
a long term basis, but still lags far behind comparable figures
for use of the dollar by the U.S. and the deutschemark by
Germany. Most Asian countries set their exchange rate using a
basket of currencies, with generally heavier weight assigned to
the U.S. dollar. The share of yen in official reserve holdings
in Asian countries grew substantially in the mid-1980s, due
primarily to the appreciation of the yen, but fell back in the
late 1980s to under 20%. There is increasing evidence that
Japanese interest rates influence those in certain other Asian
countries, but interest rates in most of Asia tend to be affected
more by a combination of a country's own macroeconomic policies
and broader global interest rates, including those of the United
States.
Commercial and financial links between Japan and Asian
countries have strengthened in recent years —
witness the rise
in Japanese direct investment in the region, the resulting
production linkages between Japanese companies and their local
affiliates in the region, and the influence of Japanese export
credits and development assistance on trade flows. However, the
most striking point regarding the distribution of economic power
within Asia has been its diversification. Trade among the
developing countries of Asia has grown faster than with either
Japan or the United States. Singapore, Taiwan, Korea and Hong
Kong have become major investors in the region, with in 1991
outward foreign direct investment by these countries surpassing
that of Japan in several significant Asian countries, including
Malaysia and Indonesia. Taiwan alone was the largest single
foreign investor in Malaysia and Vietnam in 1991. China is now
also beginning show economic strength on the world stage. It is
demonstrating a strong export capacity. The IMF estimates
China's reserves will total approximately $55 billion by the end
of this year.
While these other centers of economic influence in Asia are
developing, Japan has entered a period of domestic slowdown and
retrenchment. New Japanese investment in Asia has actually
declined the past several years, as has Japanese bank lending to
the region. If Japan's economic slowdown continues, it will
constrain the extension of Japanese economic influence in Asia.
Economic cooperation among countries in Asia will grow, but
we should not confuse strengthened regional economic ties with
exclusionary trading blocs. Asia will continue to be one of the
most diverse regions of the world and one closely tied into
global patterns of trade and investment.
The Maastricht Debate
With regard to Europe, economic and monetary integration is
undergoing political examination. We are witnessing not simply
9
adjustments to the path and timing of the integration process,
but a deepened reexamination of the fundamental issue of how much
authority should be yielded by sovereign states to central
European institutions — the so-called question of
"subsidiarity."
Europe is sharply divided on this question as
recent referenda on the Maastricht treaty indicate. The recent
tensions in the European Exchange Rate Mechanism reflect the
difficulties of taking the policy decisions necessary to converge
economic performance. Furthermore, with the disappearance of the
Soviet threat to the East, nationalistic tendencies within the
various states of Europe are reemerging. Moreover, the
complexity of the decision-making process within the Community is
affecting the ability of Europe to take collective action.
If Europe turns inward on its own intra-European political
and economic problems, the risk would increase that European
trading practices would emerge in a way that might tend to
exclude non-European states. The domestic economic difficulties
of certain individual European countries have, for example,
limited their ability and willingness to take risks in favoring
of concluding the trade liberalization process in the Uruguay
Round. This risk becomes more pronounced if economic growth
within Europe remains slow. Many private forecasters are now
making downward growth revisions for 1993. Although the
Bundesbank has indicated more flexibility recently and has
allowed some market interest rates to fall a bit, monetary policy
within Germany reflects concerns about the inflationary pressures
generated by the burden of reunification. Tight spending limits
and ambitious deficit targets set in the 1993 budget and the
medium-term fiscal program must still be implemented, but weakerthan-expected growth will hurt revenues and make it even more
difficult to reduce subsidies to the East.
Although the political leadership of Europe is seeking to
find ways to keep the process of economic integration moving
forward, it is apparent that is will be a more complicated and
elongated process than foreseen as recently as a year ago.
Economic Integration and Market Reform
in the Western Hemisphere
In contrast to the conflicting tendencies within Europe and
Asia, there is now strong political momentum for regional
economic integration in the Western Hemisphere reflected both in
the NAFTA and the President's Enterprise for the Americas
Initiative. Although the existing level of economic integration
within the Western Hemisphere is less than in Europe, the drive
among both the public and its leaders in this Hemisphere is
strong and is growing. And this goal is not being pursued in an
exclusive, beggar-thy-neighbor kind of way that will dampen the
growth of world trade. On the contrary, the North American Free
Trade Agreement which has just been negotiated will serve as the
10
catalyst for a network of open market arrangements across this
Hemisphere, and perhaps with other regions. Others in this
Hemisphere already appear more than willing to join with us.
At the same time, some Latin American and Caribbean
countries are establishing agreements among themselves to reduce
barriers to trade and investment— within the Southern Cone
countries, the Andean Pact, Central America, and the CARICOM
group of countries. The President's goal of hemisphere free
trade, and the regional growth and prosperity that accompany it,
is within our grasp within a matter of years rather than
decades — if we persevere.
To gauge how far we have come in the last few years, reflect
for a moment on the dramatic change that has taken place in Latin
America in the past few years. A decade ago, this region was the
front line of the Third World debt crisis; exports plummeted;
interest charges on the region's debt soared; new loans and
investment dried up; capital fled in massive amounts. The
international banking and financial system was threatened as the
difficulties of debt service spread from country to country. The
Latin American people suffered deeply as their incomes declined
and inflation skyrocketed.
Now, however, the United States and Latin America are
working together in a partnership based on mutual respect, rather
than dependency. This is accompanied by the realization that
real economic growth and higher standards of living will come
through trade, not aid. In the 1990s, a new Latin America has
emerged from the crisis of the 1980s. The revolution has been
quiet, but dramatic. Real growth— negative in the 1980s— now
averages approximately 3 percent in the region. Inflation has
been sharply reduced; reserves have doubled. Some $40 billion in
private capital flowed into the region last year— eight times the
flow in 1989. Democratic governments throughout the region are
committed to market reform.
These developments serve as the underpinnings for an open
economic integration in this region from which other countries
outside the region will benefit. The character of integration
within this Hemisphere will help catalyze multilateral trade
liberalization rather than reinforce movement toward exclusive
blocs.
Implications for U.S. International Economic Policy
I'd now like to move to the second part of my remarks, the
implications for U.S. international economic policy. Five
elements capture the Administration's policy response.
Strength Abroad Begins at Home
11
First, the Administration's international economic policy
starts with the premise that the global influence of the United
States is a function of our domestic economic strength. Views
differ sharply across the spectrum of American politics as to how
domestic economic strength can be enhanced, but the central
proposition appears self-evident: With the relative decline of
military factors as elements of influence in world affairs, the
economic dimension of international position is more important.
Our global task begins at home. Domestic policy is foreign
policy. We stay strong in the world only to the extent we stay
strong at home. The President's Agenda for American Renewal is
the basis for enhancing our domestic performance long term. It
properly focuses on stimulating private savings and investment,
on entrepreneurial capitalism, on constraining government
spending, on education and worker training, and on removing
government barriers to the efficient functioning of the market—
both domestically and internationally.
Developing a Domestic Constituency for Engagement
Second, we must maintain a strong domestic political
consensus for remaining engaged internationally. This consensus
appears to have weakened as the Soviet threat has disappeared and
concerns over U.S. domestic economic problems have deepened.
Although this desire to turn inward may simply be temporary, our
interconnectedness with the rest of the world is, I believe,
self-evident to most Americans. This Administration will
continue demonstrating to the public that domestic and foreign
policies are inextricably linked and that domestic policies are
responding to the new international realities. Effective
communication with the public can sustain a domestic mandate for
international leadership. This is the point diplomacy, politics,
and statecraft merge.
Effective Macro-Economic Coordination
Third, we must maintain effective coordination of macroeconomic policy with other governments, particularly with the G-7
group of the world's largest industrialized democracies.
The G-7, which represents roughly 60% of the world's GNP,
remains committed to addressing the most serious systemic issues
facing the world economy. Its success over the past several
years in developing the international debt strategy, responding
to the historic changes underway in Eastern Europe and in the
former Soviet Union and in achieving this year the consensus on
strengthening world growth demonstrates the kind of positive
impact it can have.
The most pressing short- and medium-term agenda for the G-7
is continued implementation of policies to strengthen world
economic growth. The G-7 should continue to search for ways to
12
strengthen the policy coordination process and to encourage
countries to share the burden of adjustment. This search will
involve an assessment — which Secretary Brady recently initiated
in his capacity as Chairman of the G-10 — of the implications of
recent developments in global capital markets for exchange
markets and the international monetary system. Our efforts to
strengthen the G-7 process are, in my view, unlikely to require
in the short term the creation of grand new structures or major
institutional reforms. Rather, what is required is commitment to
use the existing G-7 process to coordinate domestic economic
policies around common objectives. Institutional innovations
cannot substitute for policy commitments. Effective
macroeconomic coordination will require each party at one time or
another to bring to the table commitments to discipline their
domestic economic policies to ensure that the burden for
adjustment is shared among the leading countries of the world.
Supporting Market Reform
Fourth, the Administration is committed to supporting market
reform throughout the world. The revolution in Latin America,
the demise of command economies in Eastern Europe and in the
Soviet Union, as well as the continuing structural reform in
Africa and various parts of Asia, provides an historic
opportunity to shape the structure and policies of a large number
of economies and to consolidate their recent achievements by
facilitating their integration into the world economy. There is
a willingness on the part of many of the governments of these
reform-minded countries to involve outside participants.
Moreover, to the extent that the international community is
prepared to provide financial support for the reform process, it
can, to some extent, directly influence economic reforms which a
government undertakes.
The manner in which we support the reform process is
critical. There is a preference among many reforming economies
for multilateral over bilateral assistance. From the U.S.
perspective, this coincides with recognized budget constraints
and enables us tp leverage our participation in the various
multilateral financial institutions, such as the IMF, the World
Bank, and various regional multilateral development banks. The
IMF and World Bank have proved their usefulness in assisting the
reform process in Latin America, Asia, and the nascent
democracies of the former Soviet bloc. It is in the U.S.'s
interest to continue to support these institutions. The recent
approval by the Congress of the U.S. of its 12 billion dollar
share of the IMF quota increase demonstrates the U.S. continued
commitment to that institution. With an approximate 20% share in
each of the various multilateral institutions, every dollar of
U.S. money can be leveraged with four dollars from other donors.
As in other areas, we cannot act alone to force these
institutions down a particular path. But working in concert with
13
4
(
our allies, we can persuade the institutions to continue to
implement development through the market-based policies
reflective of today's emerging consensus. In this process, the
United States and the other G-7 countries should not permit the
permanent staff of these institutions to substitute their
judgments for those of the major shareholders.
A key goal of our support for the reform efforts of the
international financial institutions is to encourage as rapidly
as possible reliance on private flows of capital, rather than on
official aid flows for development. By adopting policies that
stress market reform, open trade, and protect investments, both
foreign and domestic capital can be enlisted in the development
effort. These flows can dwarf official assistance. The United
States should continue, as it has been, to work with the
multilateral lending institutions to direct an increasing part of
their program to support the development of the private sector.
Opening World Markets
Finally, the United States should maintain its intense
commitment to market opening around the world. The continued
effort to conclude the GATT/Uruguay Round reflects the high
priority the United States places on strengthening the
multilateral trading system. Despite the difficulties of certain
elements of the Round, such as agriculture, the leadership of the
G-7 recognizes the importance of the multilateral market opening
process to expanding global prosperity.
At the same time, the United States should continue to
pursue liberalization of markets at various levels —
multilateral, regional and bilateral. The Treasury's particular
interest in financial market liberalization is being pursued at
each of these levels. These multi-tiered efforts reinforce each
other. The regional market opening effort that the United States
has pursued in the Western Hemisphere is a natural byproduct of
the commitment to market reform that is taking place in this
region. The NAFTA does not raise additional barriers at the
border to trade and investment; instead, it lowers them and is
another step on the road toward global free trade.
Although, to some, NAFTA is seen as a first step in this
hemisphere to an exclusive regional trading bloc, the opposite is
in fact true. The NAFTA is consistent with GATT norms and
disciplines and in many areas actually provides greater
liberalization than the GATT has been able to achieve so far.
The countries of this Hemisphere have recognized that they need
the kind of free trade and open investment reforms which the
NAFTA requires in order to win in the global competition for
goods, capital and technology. Our approach toward integration
will enable other countries to share in the benefits of
liberalization.
14
Our regional and bilateral efforts can move forward as the
multilateral process unfolds. The President in his Agenda for
American Renewal proposes that, beyond the GATT/Uruguay Round
process, the United States should develop a "strategic network of
free trade agreements across the Atlantic and the Pacific and in
our own hemisphere."
Conclusions
The emerging post-war era is an era of opportunity. We
should not succumb to the pessimism of those that tear down
America1s capacity for leadership and the promise for ^the|
future — nor should we assume America1s future position in the
world does not have to be earned? on the contrary, it can only be
sustained with great effort. We must continue to develop
conscious policies supported by strong domestic economic
performance and public consensus which acknowledges the
interconnectedness of our domestic and international interests.
# # #
15
TREASURY NEWS
Department of the Treasury
Contact:
Washington, D.C.®^|
Telephone 202-622-2960
Anne Kelly Williams (202) 622-2960
Meg Brackney
(202) 395-3080
FOR IMMEDIATE RELEASE
October 28, 1992
JOINT STATEMENT OF
NICHOLAS F. BRADY,
SECRETARY OF THE TREASURY,
AND
RICHARD G. DARMAN,
DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET,
ON
BUDGET RESULTS FOR FISCAL YEAR 1992
SUMMARY
The Administration is today releasing the September Monthly
Treasury Statement of Receipts and Outlays of the United States
Government. The statement shows the actual financial totals for
the fiscal year ended September 30, 1992, as follows:
-- a deficit of $290.2 billion (4.9 percent of Gross
Domestic .Product (GDP));
-- total receipts of $1,091.7 billion (18.6 percent of GDP);
and
-- total outlays of $1,381.9 billion (23.6 percent of GDP).
Chart 1 illustrates the trends in outlays, receipts and the
deficit as a percentage of GDP between 1980 and 1992.
N B -2 0 4 2
1
BUDGET TOTALS AS A PERCENT OF GDP
PERCENT "
Table 1.
TOTAL RECEIPTS, OUTLAYS AND DEFICITS
(in billions of dollars)
1991 Actual
Receipts
Outlays
Deficits
1,054.3
1,323.8
-269.5
1992:
FY 1993 Budget Estimate.........
1,075.7
1,475.4
-399.7
Mid-Session Review Estimate.....
1,073.6
1,407.1
-333.5
Actual..........................
1,091.7
1,381.9
-290.2
2
DEFICIT
The actual FY 1992 deficit, $290.2 billion, is $109.5 billion
lower than the deficit estimated in the budget. The changes from
the budget deficit estimate reflect the impact of:
a $77.5 billion decrease in deposit insurance outlays;
a $16.0 billion decrease in other outlays; and
a $16.0 billion increase in receipts.
Compared to the deficit estimated in the Mid-Session Review
(MSR), the actual FY 1992 deficit, $290.2 billion, is $43.3
billion lower. The changes from the MSR deficit estimate reflect
the impact of:
an $8.4 billion decrease in deposit insurance outlays;
a $16.8 billion decrease in other outlays; and
an $18.1 billion increase in receipts.
RECEIPTS
Actual FY 1992 receipts were $1,091.7 billion, $16.0 billion
higher than the budget estimate and $18.1 billion higher than the
MSR estimate. Actual collections, the implementation of
regulatory changes and a delay in the effective dates in
legislative proposals were in large part responsible for the $2.1
billion reduction in receipts between the budget and MSR.
Failure to adopt legislative proposals increased actual receipts
by $6.2 billion relative to the MSR. Withholding of income and
payroll taxes on wages and salaries and deposits of earnings by
the Federal Reserve were all higher than anticipated, and
accounted for most of the remaining increase in receipts relative
to the MSR. Table 2 displays actual receipts and estimates from
the budget and MSR, by source.
Changes in Receipts According to Source
-- Individual income taxes were $476.5 billion, $2.3 billion
lower than the budget, estimate and $4.3 billion higher than
the MSR estimate. Lower projections of nominal income,
reflecting a slowing in inflation, and lower-than-estimated
final payments of 1991 liability were in large part
responsible for the $6.6 billion reduction in this source of
3
receipts between the budget and MSR estimates. Higher-thanestimated withheld and non-withheld taxes, and lower-thanestimated refunds, which were partially offset by lowerthan-expected net transfers from the social security trust
funds, were primarily responsible for the increase in
collections relative to the MSR estimate.
Corporation income taxes were $100.3 billion, $11.2 billion
higher than the budget estimate and $6.1 billion higher than
the MSR estimate. Higher projections of corporate profits
increased the estimate of this source of receipts by $5.2
billion between the budget and MSR. Failure to adopt
legislative proposals increased this source of receipts
relative to the MSR estimate by $6.2 billion.
Social insurance taxes and contributions were $2.8 billion
higher than the budget estimate of $410.9 billion and $3.3
billion higher than the MSR estimate of $410.4 billion. The
MSR estimate of this source of receipts was $0.4 billion
less than the budget estimate, reflecting lower projections
of nominal income. Lower-than-expected net transfers from
the social security trust funds to individual income taxes,
and higher-than-estimated railroad retirement taxes
accounted for $2.2 billion of the $3.3 billion increase in
this source of receipts relative to the MSR estimate.
Unemployment insurance taxes and other retirement
contributions were also higher than anticipated, and
accounted for $0.9 billion and $0.1 billion, respectively,
of the remaining difference relative to the MSR.
Miscellaneous receipts were $5.6 billion higher than the
budget estimate and $4.9 billion higher than the MSR
estimate. Deposits of earnings by the Federal Reserve
System accounted for most of the increase in this source of
receipts between the budget and MSR. Additional increases
in deposits of earnings by the Federal Reserve System,
reflecting higher-than-expected asset values on securities
denominated in foreign currencies, accounted for $3.8
billion of the increase in this source of receipts relative
to the MSR.
Other receipts, which include customs duties, excise taxes,
and estate and gift taxes, were $74.1 billion, $1.3 billion
below the budget estimate and $0.5 billion below the MSR
estimate.
4
OUTLAYS
Total outlays were $1,381.9 billion, $93.5 billion lower than the
budget estimate and $25.2 billion lower t.ian the outlays
estimated in the MSR. Deposit insurance was $77.5 billion lower
than the budget estimate and $8.4 billion below the MSR estimate.
Other outlays were $16.0 billion below the budget and $16.8
billion below the MSR.
The major differences in outlays between the budget and MSR
estimates and the FY 1992 actuals are described below. Table 3
displays actual outlays and estimates from the budget and MSR by
agency and major program.
Deposit Insurance. Total outlays for deposit insurance were $2.9
billion, $77.5 billion below the budget estimate of $80.4 billion
and $8.4 billion below the forecast in the MSR of $11.3 billion.
Resolution Trust Corporation. Outlays for the
Resolution Trust Corporation were $49.4 billion lower
than the budget estimate of $40.5 billion and $2.6
lower than the MSR estimate of -$6.4 billion. The
decline in the estimate from the budget to the MSR was
due to Congress' failure to enact additional funding
for the RTC. The difference from the MSR to the actual
outcome is attributable to higher sales of acquired
assets. The MSR estimate assumed $9 billion in
recoveries over the July to September period; actual
recoveries totalled $11.7 billion.
Bank Insurance Fund. Outlays for the Bank Insurance
Fund were $29.3 billion lower than the budget estimate
of $33.0 billion and $7.1 billion lower than the MSR
estimate of $10.8 billion. The difference from the
budget to the MSR is attributable to technical
reestimates of the resolution costs of failed banks.
The change from the MSR to the actual represents even
fewer bank resolutions combined with an increase in the
sale of assets under FDIC control.
FSLIC Resolution Fund. Outlays for the FSLIC
Resolution Fund were $1.4 billion higher than the
budget estimate of $7.0 billion and $1.3 billion higher
than the MSR estimate of $7.1 billion. Assistance
agreement payments and audit adjustments increasing the
principal on notes issued in conjunction with the
resolution of thrift failures in 1988 added $2 billion
to the MSR estimates. This was partially offset by
$0.7 billion in additional liquidation collections.
5
Other Outlay Changes
Department of Agriculture. Actual outlays for the Department of
Agriculture were $56.4 billion, $5.4 billion below the budget and
$2.9 billion below the MSR estimate. Outlays for the Food and
Nutrition Service were $1.0 billion below the budget and $0.9
billion below the MSR estimate due mostly to lower-than-forecast
participation and spending in food stamps.
Outlays for Commodity Credit Corporation (CCC) were $9.7 billion,
$2.2 billion below the budget and $0.8 billion below the MSR
estimate. The decrease in the estimate between the budget and
the MSR reflected more current crop forecasts than were available
in January. The decrease from the MSR estimate is largely
attributable to a decrease in funds required for the CCC working
capital fund and to lower-than-expected payments on export
guarantee program defaults.
Net outlays for the Rural Electrification Administration were
down $1.6 billion from the budget and $0.6 billion from the MSR
estimate due largely to increases in offsetting receipts
resulting from increased refinancings of loans at lower interest
rates.
Outlays for Farmer's Home Administration were $0.5 billion lower
than the budget and MSR estimates due to increases in offsetting
receipts. The additional receipts are a result of prepayments on
housing loans resulting from favorable market interest rates. In
addition, loan disbursements for long-term construction loan
programs were less than anticipated, and major automatic data
processing expenditures were delayed.
Department of Defense - Military. Outlays of the Department of
Defense - Military were $286.6 billion, $7.8 billion lower than
the budget estimate and $4.7 billion lower than the MSR estimate.
The MSR estimate was lower than the budget due to delayed
obligations in research and development programs, real property
maintenance, and certain operating accounts. The lower MSR
estimate also reflected delayed action on the environmental
supplemental. Actual outlays were lower than the MSR due to
slower than planned replacement of supply inventories and further
delays in obligations for the accounts mentioned above. The
decreases were partially offset by higher than anticipated
military personnel outlays, particularly for separation pay and
benefits.
Department of Education. Department of Education outlays were
$26.0 billion, $0.5 billion below the budget and $0.7 billion
below the MSR estimate. Outlays were lower than earlier
estimates due to a delay of obligations into FY 1993 pending
implementation by the States of recent legislative changes and
6
slower-than-anticipated State drawdowns in large State formula
grant programs.
Department of Health and Human Services. Actual outlays of the
Department of Health and Human Services were $539.4 billion, $4.7
billion below the budget and $4.8 billion below the MSR estimate.
The major components of this decrease were in Medicare and
Medicaid. Outlays for Medicaid were $4.7 billion below the
budget and $3.1 billion below the MSR estimate. Updated State
estimates of spending on Medicaid decreased the budget estimate
by $1.6 billion for the MSR. The difference between the MSR
estimate and the FY 1992 actual is largely because State payments
to hospitals with a disproportionate share of Medicaid patients
were lower than anticipated. Several States have decided not to
pay these adjustments until the State plan amendments are
approved by HHS.
Medicare outlays for FY 1992 were $132.3 billion, $0.5 billion
above the budget estimate and $1.0 billion below the MSR
estimate. The MSR Medicare estimate was increased from the
budget based on greater projected use of reimbursements to
skilled nursing facilities, home health agencies and other
factors. The difference between the MSR estimate and the actual
reflects the net impact of a $2.8 billion decrease in
supplementary medical insurance (SMI) outlays partially offset by
a $1.8 billion increase in hospital insurance (HI) outlays.
Outlays for physician expenditures under SMI were lower than
estimated due to delays caused by the new method of payment
introduced in FY 1992, which is unfamiliar to payors and
providers. The increase in hospital insurance outlays is due to
higher-than-anticipated inpatient hospital utilization over the
last six months. Increased utilization of the home health and
skilled nursing facility benefit also contributed to some of the
increase.
Outlays for supplemental security income and family support
payments to States were slightly lower than projected. Slower
spending was partly offset by higher-than-expected outlays for
the disability insurance portion of social security.
Department of Housing and Urban Development. Outlays were $24.5
billion, $0.3 billion above the budget estimate but $0.7 billion
below the MSR estimate. The outlay estimate increased from the
budget to the MSR for the Federal Housing Administration (FHA) to
adjust for higher-than-anticipated costs for property
disposition, and in anticipation of a surge in FHA refinancings.
Outlays were lower than estimated in the MSR because several
public housing modernization and other projects were not
completed by the end of the year.
7
Department of the Interior, Actual outlays were $6.6 billion,
$0.5 billion less than the budget and the MSR estimates.
Spending by the Bureaus of Reclamation and Indian Affairs was
lower than anticipated. Receipts from timber harvests in the
Pacific Northwest were lower than estimated, primarily due to
reduced cutting in order to protect the spotted owl.
Department of Labor. The Department of Labor's actual outlays
for FY 1992 were $2.8 billion above the budget estimate and $1.0
billion above the MSR estimate. Most of the increase occurred in
the Department's benefits programs and is attributable to higher
numbers of unemployed workers and longer benefit durations than
estimated in the budget and MSR.
Department of Transportation. The Department of Transportation's
actual outlays were $0.8 billion below the budget estimate and
$0.9 billion below the MSR projection. Federal Highway
Administration outlays were $0.6 billion lower than projected.
Highway spending was slower than anticipated, due to late
enactment of new, comprehensive legislation (the Intermodal
Surface Transportation Efficiency Act), that delayed by nearly
one quarter the availability of new funds. Outlays for transit
programs and the Coast Guard were also slightly below the budget
and MSR estimates.
Department of the Treasury. The Department of the Treasury's
outlays were higher than the budget estimate by $1.5 billion and
$0.5 billion higher than the MSR estimate. Internal Revenue
Service outlays were $1.0 billion higher than the budget estimate
and $0.8 billion higher than the MSR estimate. The difference
between the MSR and the FY 1992 actual is due partially to higher
interest on refunds of corporate and windfall profit taxes. Also
contributing was the increased use of the earned income tax
credit which was partially a result of IRS efforts to qualify
entitled recipients. Outlays for interest on the public debt
were $0.7 billion lower than the budget estimates and $0.4
billion higher than the MSR estimate. These changes in interest
on the public debt reflect the net impact of lower interest rates
and deficits, partly-offset by technical factors that increased
interest. These increases were partially offset in the exchange
stabilization fund (ESF). Net outlays were $0.7 billion below
the budget and the MSR estimates because of changes in interest
rates and capital gains and losses.
Export-Import Bank. Export-Import Bank outlays were $0.7 billion
lower than the budget and MSR estimates, primarily because loan
repayments were higher than estimated.
8
Table 2. — 1992 BUDGET RECEIPTS BY SOURCE
(fiscal years; in millions of dollars)
- 1p
1991
Actual
1992
Estimate
Budget Mid-Session
Actual
Change
Budget Mid -Session
Receipts bv Source
Indivioual income taxes...................
Corporation income taxes...................
Social insurance taxes and contributions:
l . ployme
taxes and contributions:
O n-budget............................
O ff-budget..................................
Subtotal, Employment taxes and contributions.................
Unemployment insurance.................................
Other retirement contributions........................
Subtotal, Social insurance taxes and contributions.......
Excise taxes................................
Estate and gift taxes..................................
Customs duties....................................
Miscellaneous receipts...................
Total, Receipts.........................................
O n-budget......................................
O ff-budget.................................................
467,827
98,086
478,749
89,031
472,129
94,189
476,465
100,270
-2 ,2 8 4
11,239
4,336
6,081
76,641
293.885
370,526
20,922
4,568
396,016
82,741
300,922
383,663
22,547
4.653
410,863
82,348
300,923
383,271
22,480
4,671
410,422
83,065
302.426
385,491
23,410
4,788
413,689
324
1,504
1,828
863
135
2,826
717
1,503
2,220
930
117
3,267
42,402
11,138
15,949
22.847
1,054,265
760,380
293,885
46,098
12,063
17,260
21.643
1,075,706
774,784
300,922
45,983
11,521
17,074
22.303
1,073,620
772,697
300,923
45,570
11,143
17,359
27.195
1,091,692
789,266
302,426
-5 2 8
-9 2 0
99
5.552
15,986
14,482
1,504
-4 1 3
-3 7 8
285
4,892
18,072
16,569
1,503
Table 3 . - - 1 9 9 2 BUDG ET OUTLAYS BY A G ENCY
(fiscal years; in millions of dollars)
1991
Actual
1992
Estimate
Budget Mid--Session
Actual
Change
Budget M id - Session
Outlays by Major Agency
Legislative branch and the Judiciary.......................................
Executive Office of the President..............................................
Funds Appropriated to the President:
International Security Assistance:
Foreign Military Financing....................................................
Economic Support Fund......................................................
Other........................................................................................
International development assistance..................................
International monetary programs..........................................
Military sales programs...........................................................
Other........................................................................................... ....
Subtotal, Funds Appropriated to the President.............
Agriculture:
Commodity Credit Corporation..............................................
Foreign assistance - P.L. 480...............................................
Federal Crop Insurance Corporation....................................
Rural Electrification Administration........................................
Farmers Home Administration...............................................
Food and Nutrition Service.....................................................
Forest Service...........................................................................
Other............................................................................... ...........
Subtotal, Agriculture...........................................................
i
4,285
193
5,131
199
5,095
198
4,976
190
-1 5 5
-9
-1 1 9
-8
5,567
4,321
-3 5 7
3,444
179
-1 ,4 3 8
8
11,724
4,107
3,282
-8 2
4,027
8
118
22
11,482
4,094
3,262
-2 9 6
3,670
8
283
42
11,063
4,399
2,938
-1 3 4
4,029
-6 8 6
305
258
11,108
292
-3 4 5
-5 2
2
-6 9 4
187
236
-3 7 4
305
-3 2 4
162
359
-6 9 4
22
216
45
10,110
753
770
100
6,629
28,065
3,001
4,691
54,119
11,961
1,234
936
627
4,971
33,095
3,122
5.848
61,794
10,564
1,234
936
-3 0 8
4,975
32,985
3,108
5.848
59,343
9,738
971
954
-9 3 4
4,455
32,096
3,293
5,862
56,436
-2 ,2 2 3
-2 6 4
18
-1,561
-5 1 6
-9 9 9
172
14
-5 ,3 5 8
-8 2 6
-2 6 4
18
-6 2 6
-5 2 0
-8 8 8
185
14
-2 ,9 0 7
Commerce.....................................................................................
Defense-Military:
Military Personnel......................................................................
Operation and Maintenance....................................................
Procurement...............................................................................
Research, Development, Test and Evaluation......................
Other............................................................................................
Subtotal, Defense-Military....................................................
2,585
2,867
2,869
2,567
-3 0 0
-3 0 3
83,439
101,769
82,028
34,589
-39,901
261,925
79,289
97,887
73,952
36,145
7,147
294,420
79,834
95,670
74,068
35,943
5,795
291,310
81,171
92,042
74,881
34,632
3,906
286,632
1,882
-5 ,8 4 5
929
-1 ,5 1 3
-3,241
-7 ,7 8 9
1,336
-3 ,6 2 7
813
-1,3 11
-1 .8 8 9
-4 ,6 7 8
Defense-Civil...............................................................................
26,543
27,890
28,014
28,265
375
251
Table 3. — 1992 BUDGET OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)
1992
1991
Actual
Estimate
Budget Mid--Session
Actual
25,339
12,459
26,528
15,719
26,712
15,711
26,047
15,439
-4 8 0
-2 8 0
-6 6 5
-2 7 2
Change
Budget M id - Session
Outlays bv Major Aaencv
Education..........................................................................................
Energy...............................................................................................
Health and Human Services — except Social Security:
Medicare.........................................................................................
Medicaid................................................................................ ........
Public Health Service...................................................................
Family Support Payments to States..........................................
Supplemental Security Income..................................................
Other................................................................................ ..............
Subtotal, Health and Human Services - - except
Social Security............................................... ......................
117,763
52,533
15,348
13,520
15,926
2.880
131,781
72,503
17,661
15,114
19,794
6.544
133,278
70,930
17,663
15,506
19,794
5,936
132,256
67,827
17,447
15,103
19,445
5.882
475
-4 ,6 7 5
-2 1 4
-1 0
-3 4 8
-6 6 2
-1 ,0 2 2
-3 ,1 0 3
-2 1 5
-4 0 2
-3 4 8
-5 4
217,969
263,397
263,107
257,961
-5 ,4 3 5
-5 ,1 4 5
Health and Human Services —
Social Security.......................
266,395
280.654
281.111
281.418
765
308
Subtotal, Health and Human Services..........................................
484,364
544,051
544,218
539,379
-4 ,6 7 2
-4 ,8 4 0
Housing and Urban Development.
Housing payments.......................................................................
Federal Housing Administration funds.....................................
Government National Mortgage Association...........................
Community development grants...............................................
Other...............................................................................................
Subtotal, Housing and Urban Development.......................
14,310
1,892
-2 8 0
2,941
3.889
22,751
15,044
1,196
-2 7 9
3,125
5.073
24,159
14,980
2,260
-2 9 4
3,125
5.127
25,200
14,389
2,456
-3 5 2
3,158
4,820
24,470
-6 5 5
1,260
-7 3
32
-2 5 3
311
-5 9 1
195
-5 8
32
-3 0 7
-7 3 0
6,096
8,244
7,094
9,367
7,095
9,583
6,555
9,826
-5 3 9
459
-5 4 1
242
3,808
28,434
1.798
34,040
4,083
38,210
2.091
44,384
4,333
39,900
1.971
46,204
4,281
41,294
1,589
47,163
198
3,084
-5 0 2
2,780
-5 2
1,394
-3 8 2
959
4,252
4,539
4,919
5,007
468
88
Interior..................... ........................................ ..................................
Justice.......................................|.......................................................
Labor:
Training and employment services............................................
Unemployment trust fund............................................................
O th er...............................................................................................
Subtotal, Labor.........................................................................
Table 3.— 1992 BUDGET OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)
1991
Actual
1992
Estimate
Budaet Mid--Session
Actual
14,539
3,857
7,241
4.866
30,503
16,149
3,747
7,944
5.526
33,367
16,149
3,746
8,077
5.530
33,503
15,511
3,614
8,155
5.279
32,560
-6 3 8
-1 3 3
211
-2 4 7
-8 0 7
-6 3 8
-1 3 2
78
-2 5 0
-9 4 3
-2 ,2 0 6
285,472
13,689
-2 0 .6 0 4
276,352
-1 ,6 0 0
292,992
16,868
-1 6 .3 7 8
291,882
-1 ,6 0 0
291,894
17,143
-1 4 .5 1 3
292,924
-2 ,3 4 5
292,330
17,904
-14 .46 1
293,428
-7 4 5
-6 6 1
1,035
1.917
1,546
-7 4 5
436
760
53
504
Department of Veterans Affairs..... ...........................................
Environmental Protection Agency..............................................
General Services Administration.................................................
National Aeronautics and Space Administration.....................
Office of Personnel Management...............................................
Small Business Administration....................................................
Other independent agencies:
District of Columbia...................................................................
Export-Import Bank......... .........................................................
Federal Deposit Insurance Corporation:
Bank insurance fund......... ...... .................. 1 .... 1....................
FSLIC resolution fund....... ....................................................
Other FDIC.................................................................................
Subtotal, Federal Deposit Insurance Corporation...........
31,214
5,770
487
13,878
34,808
613
33,603
5,948
444
13,819
36,141
502
33,923
6,042
613
13,817
35,885
610
33,737
5,932
469
13,961
35,596
394
134
-1 7
25
142
-5 4 5
-1 0 8
-1 8 6
-1 1 1
-1 4 4
144
-2 8 9
-2 1 6
636
-8 8
653
543
653
559
367
-1 1 9
-2 8 6
-6 6 2
-2 8 6
-6 7 8
7,363
8,556
-3 6
15,884
32,960
7,020
0
39,980
10,776
7,138
-2 0 5
17,709
3,666
8,469
-2 9 2
11,843
-2 9 ,2 9 4
1,449
-2 9 2
-2 8 ,1 3 8
-7 ,1 1 0
1,331
-8 7
-5 ,8 6 7
Federal Emergency Management Agency........... ................
870
1,152
1,226
1,406
254
180
Change
Budaet M id - Session
Outlavs bv Major Aaencv
Transportation:
Federal Highway Administration.............................................
Federal Transit Administration.................................................
Federal Aviation Administration...............................................
Other.............................................................................................
Subtotal, Transportation......................................................
Treasury:
Exchange Stabilization Fund....................................................
Interest on the public debt.......................................................
Other.............................................................................................
Subtotal, Treasury................................................................
Table 3 .--1 9 9 2 BUDGET OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)
1991
Actual
1992
Estimate
Budget MidI-Session
Actual
Change
Budget Mid--Session
Outlays bv Major Aaencv
Postal Service:
O n -b u d g e t........... ....................................................................
O ff-b u d get...................... ....... ........ .........................................
Subtotal, Postal Service..........................................................
511
1.317
1,828
511
825
1,335
511
1.117
1,628
511
879
1,390
0
54
54
0
-2 3 8
-2 3 8
Railroad Retirement Board..........................................................
Resolution Trust Corporation........................... .................. .......
Tennessee Valley Authority.........................................................
Other (net) ..................................................................................
Subtotal, other independent agencies................................
4,358
50,751
740
6.237
81,217
4,654
40,467
372
7,035
96,191
4,793
-6,3 61
1,036
7.044
28,287
4,843
-8 ,9 3 4
1,469
6.612
18,876
189
-49 ,40 1
1,097
-4 2 3
-7 7 ,3 1 4
50
-2 ,5 7 3
433
-4 3 1
-9 ,4 1 0
Allowances................................................. ......................................
0
-9 6
0
0
96
0
Undistributed offsetting receipts:
Employer share, employee retirement (on-b u dg et).............
Employer share, employee retirement (off-budget).............
Interest received by o n -b u d g et trust funds...................... •!•••
Interest received by off-budget trust funds.............................
Rents and royalties on the Outer Continental Shelf lands.....
Subtotal, undistributed offsetting receipts..........................
-3 0 ,4 0 2
-5 ,8 0 4
-5 0 ,4 2 6
-2 0 ,2 2 2
-3 .1 5 0
-1 1 0 ,0 0 5
-3 0 ,3 8 3
-6 ,0 9 5
-53,371
-2 3 ,8 5 3
-2 .2 8 2
-1 1 5 ,9 8 5
-3 0 ,4 5 7
-6 ,1 0 0
-5 3 ,3 1 2
-2 3 ,9 8 8
-2 .1 3 6
-1 1 5 ,9 9 3
-3 0 ,6 8 0
-6,1 01
-54,201
-2 3 ,6 3 7
-2 .4 9 8
-1 1 7 ,1 1 8
-2 9 7
-6
-8 3 0
216
-2 1 6
-1 ,1 3 3
-2 2 3
-1
-8 8 9
351
- 36?
-1 ,1 2 4
Total, Outlays....................................................................................
O n -b u d g e t...................................................................................
O ff-b u d get...................................................................................
1,323,757
1,082,070
241,687
1,475,439
1,223,909
251,530
1,407,144
1,155,005
252,139
1,381,895
1,129,336
252,559
-9 3 ,5 4 4
-9 4 ,5 7 3
1,029
-2 5 ,2 4 9
-2 5 ,6 6 9
420
O n -b u d g e t....................................................................................
O ff-b u d g et....................................................................................
-2 6 9 ,4 9 2
-3 2 1 ,6 8 9
52,198
-3 9 9 ,7 3 3
-4 4 9 ,1 2 5
49,392
-3 3 3 ,5 2 4
-3 8 2 ,3 0 8
48,784
-2 9 0 ,2 0 4
-340,071
49,867
109,529
109,054
475
43,320
42,237
1,083
NOTE: Detail may not add to totals due to rounding.
REASURY NEWS
Jl i
Department of the Treasury
Washington, D.C.
Telephone 202-622-2960
u
TEXT AS PREPARED FOR DELIVERY
°
I 57
Contact:
Scott Dykema
(202) 6 2 2 -2 9 6 0
THE PROMISE OF HEMISPHERIC INTEGRATION:
GROWTH AND OPPORTUNITY FOR AMERICANS — NORTH AND SOUTH
Remarks by
The Honorable Olin L. Wethington
Assistant Secretary of the Treasury for International Affairs
at the
Exchequer Club
Washington, D.C.
October 28, 1992
I'm pleased to speak to you today about the Bush
Administration's Enterprise for the Americas Initiative and the
North American Free Trade Agreement.
By responding to and shaping the course of change, these two
initiatives are benefitting people abroad and here at home. They
hold great promise for future prosperity. They demonstrate the
linkage between foreign and domestic policy in the new global
economy. And they are consistent with values that helped make
this country the world's leading economic power — open trade and
investment.
Reflect for a minute on the dramatic change that has taken
place in Latin America. A decade ago, this region was the front
line of the Third World debt crisis: exports plummeted; interest
charges on the region's huge debt soared; new loans and
investment dried up; capital fled in massive volumes. The
international banking and financial system was threatened as the
ifficulties of debt service spread from country to country. The
Latin American people suffered deeply as their incomes declined,
social services were trimmed, and inflation skyrocketed.
Now, however, the US and Latin America are working together
in a partnership based on mutual respect rather than on
dependency. In the 1990s, a new Latin America has emerged from
the crisis of the 1980s. The revolution has been quiet but
dramatic. Evidence of change is now everywhere, including in the
formerly war-torn countries of Central America:
NB-2043
o
Real growth — negative in the 1980s — now averages
approximately three percent for the region. For
Mexico, Chile, Argentina, and Venezuela, GDP is
increasing in the range of four to nine percent.
o
Inflation has been reduced by two-thirds since 1989.
o
Latin America's reserves have doubled.
o
Some $40 billion in private capital flowed into the
region last year, eight times the flow in 1989.
(Bear
in mind that flows were negative for years in the mid1980s.) More than half of the new flow is in the form
of equity, which will now contribute to the region's
permanent capital base and support productive
investment.
o
Latin stock markets are booming, with spectacular
returns to investors of over 100 percent in 1991 alone.
U.S. companies are increasing their investments in
response to more open investment climates, more
positive growth prospects, and reduced trade barriers.
Latin firms are also increasingly raising equity in the
U.S. through public offerings or private placements.
But the advantages to the people of the region are not only
economic. In Latin America, free societies are following free
markets. Democratically elected governments are now in place
from Santiago to Managua to Buenos Aires.
Today I'd like to briefly review the Administration's policy
toward Latin America and the benefit it holds for America,
including the North American Free Trade Agreement, or "NAFTA."
The NAFTA stands as a model for future trade liberalization in
this hemisphere and throughout the world.
Our Economic Policy in Latin America
This Administration's economic policy in Latin America has
achieved four fundamental goals. We have reduced debt, changed
the tenor of hemispheric relations, supported free market
reforms, and layed the groundwork for a hemispheric free trade
zone. I'll address each of these areas in turn.
First, this Administration has addressed the debt crisis in
Latin America under what has been labelled the "Brady Plan."
This strategy, unveiled in March of 1989, has been a success.
Its key premise was straightforward: recognition by banks and
governments that outstanding debt was not worth its face value.
This was essential to a financial workout and was the basis for
realistic negotiations between the debtor nations and creditor
banks on debt and debt service reduction. Debt and debt service
2
t
reduction has made sense, and has helped spur new investment and
growth in the region. And it gave the debtor nations incentive
to continue their reform efforts by offering hope of reduced debt
burdens.
Following the most recent agreements in principle with
Argentina and Brazil, almost all the major debtor nations have
reached debt reduction or refinancing agreements with their
commercial banks. These cover 92 percent of the major debtors'
outstanding commercial bank debt, or some $240 billion. When the
Argentine and Brazilian agreements are completed, we expect the
strategy to have produced over $50 billion in effective debt
reduction, while lifting much of the remaining debt burden from
the debtors' backs through market-based collateralization.
The agreements have restructured commercial bank debt into
tradeable securities to broaden its appeal and usability in
markets. A whole new market for LDC debt has developed as a
result, which will subject both borrowers and lenders to the
discipline of the market. For the international financial
community, and especially for U.S. banks, the Latin debt crisis
of the 1980s is now clearly behind them. Exposure and risk have
declined, while capital has increased. The workout has been
considerably less painful for commercial banks than the bleak
market they faced in 1988. Billions of dollars are now flowing
back into profits or serving as a buffer against other loan
losses.
Second, the our Latin American policy has changed the tenor
of relations in the region. The President's Enterprise for the
Americas Initiative (EAI), announced in 1990, is transforming the
hemisphere. This is a three-part initiative involving trade,
investment and debt reduction. Dependency has been replaced by
mutual respect and a new partnership between North and South.
Through open trade and investment — rather than providing more
and more aid — we're establishing a system where all nations
benefit from increasing flows of capital and commerce.
Third, because free markets lead not only to prosperity but
also to free societies, we have supported market reforms
throughout the region. The EAI is built on the principle that
development and prosperity will come to Latin America through
creating the kind of open an liberal investment climate in those
countries that will attract the capital needed for development —
both in the return of Latin American "flight capital" and in new
foreign direct investment. We have supported this policy by
offering relief from AID, Ex-Im, CCC and PL-480 debt to those
countries that adopt major economic reforms, including investment
reform. We have also supported investment sector reform loans by
multilateral institutions such as the World Bank and the InterAmerican Development Bank.
3
Fourth, we have, through the NAFTA, laid the groundwork for
a future hemispheric free trade zone. I'll return to that
subject at length in a moment.
The Benefits to America of Our Latin American Economic Policy
First I'd like to describe some of the domestic benefits
Americans receive from our trade, investment and debt policies in
Latin America. The simple fact is that, when Latin American
economies are healthy and growing, our own economy directly
benefits through increasing exports and export-related jobs. For
example:
o
Since 1988, nearly 70 percent of U.S. economic growth
has derived from increased exports.
o
1 in 7 dollars of U.S. exports now go to Latin America,
which is our fastest growing regional export market.
o
We've seen an 80 percent increase in exports to the
region in the past 4 years. First quarter 1992 exports
surged more than 32 percent over first quarter 1991
levels.
o
This isn't just trade with Mexico: exports to 19
countries increased by more than 20 percent each
between the first quarter of 1991 and the first quarter
of 1992.
o
We are extremely competitive in this region. We
account for 57% of this region's imports from
industrial countries — vs. 29% for Europe and 11% for
Japan. At the same time, we had a trade surplus with
the region of $886 million last year.
The bottom line, of course, is jobs for American workers.
The North American Free Trade Agreement
When the NAFTA is approved by Congress, we can expect even
more benefits to flow to the American worker. NAFTA reduces
barriers to trade and investment between the three nations. Most
tariff and other barriers are immediately dropped — although a
few are phased out over ten or fifteen year periods to ease the
transition in sensitive industries. This is also the first trade
agreement to include significant environmental provisions.
NAFTA's benefits flow directly from impressive figures such as
these:
o
The combined NAFTA market will contain over 360 million
customers and a combined total output of over $6
trillion.
4
o
Today, Canada and Mexico are our first and third
largest trading partners. US exports to Canada support
approximately 1.5 million US jobs — including 113,000
that were created between 1988 and 1990. And our
exports to Mexico have almost tripled since 1987 — now
supporting over 600,000 US jobs.
0
Virtually all studies agree that NAFTA will produce a
net increase in US jobs. A recent International Trade
Commission study found a high degree of unanimity
regarding the job effects of NAFTA” — with studies
projecting net job gains of 90,000 to 180,000 jobs.
At the same time, this Administration has recognized that
the NAFTA may entail some adjustment in particular industries.
So, transition rules and safeguards for sensitive industries are
built into the NAFTA. Sensitive sectors receive transition
periods of from 10 to 15 years. Safeguards in the agreement
allow reimposition of tariffs in certain industries if imports
"surge” and threaten US jobs. Of course, traditional trade law
remedies — such as antidumping and countervailing duty cases —
are still available in all sectors.
To help support the small number of workers who may be
displaced, President Bush recently announced an ambitious job
retraining program. This program will assure that our workers
have the training and skills necessary to compete — and win —
in the today*s global marketplace. All dislocated workers are
eligible under the program, which will use a market-based system
of vouchers for people to seek the kind of training they want in
the fields they choose.
NAFTA and Financial Services
1 would like to spend a few moments talking about the
financial services sector implications of NAFTA, which is my area
of particular responsibility at the Treasury Department. In this
sector, we have negotiated a NAFTA chapter that we believe gives
the industry dramatic new opportunities — particularly in the
Mexican market.
Mexico intends to move to a modern and efficient financial
system. The decision to privatize its banks, nationalized ten
years ago, is one example of this 180 degree change in policy.
NAFTA opens to American financial firms a Mexican market now
virtually closed. More specifically, the financial services
chapter provides:
o
The right to establish financial institutions in the
territory of the other parties;
o
Commitment that our financial institutions receive the
5
same treatment as domestically owned firms —
"national treatment";
so-called
o
The chapter commits the governments to transparency in
the regulatory process and prompt action on
applications;
o
Firms obtain access to a formal dispute settlement
procedure;
o
The parties are obligated to take no measures that
would restrict currently permitted cross-border trade
in financial services. They have guaranteed that their
residents are free to purchase financial services in
the other countries* territory.
During a short transition period - which ends no later than
January 1, 2000 - Mexico will be able to impose limits on the
size of some categories of financial firms and on the aggregate
market share of the foreign-owned firms. We believe that these
limits provide sufficient scope for US firms. During the
transition period, the size of individual banks will be limited
to 1.5 percent of the entire system as measured by net capital.
(This implies a maximum capital currently of around $100 million
for individual banks. The minimum capital will be around $10
million, or the same as for a Mexican-owned bank.) Total market
share for foreign banks will be limited to 8 percent of the
system*s net capital in the first year and will rise to 15
percent on January 1, 1999.
This market share limitation will be eliminated on January
1, 2000. Mexico reserves the right to reimpose an aggregate
limit for three years, but only if the market share of the U.S.
and Canadian banks reaches 25 percent prior to January 1, 2004.
Similar arrangements will be applicable to securities firms.
Their market share limitation will be increased from ten to
twenty percent over the transition period, and be eliminated
entirely on January 1, 2000. The individual market share
limitation for securities firms during the transition period will
be 4 percent.
Insurance firms will have a slightly different transitional
regime. There, U.S. firms will have the option of going into
Mexico as a joint venture or as a wholly owned subsidiary. US
participation in joint ventures will be allowed to increase from
30 percent in 1994 to 51 percent in 1998 to 100 percent ownership
by January 1, 2000. Those US insurers already involved in joint
ventures can increase to 100 percent ownership even earlier — on
January 1, 1996. There will be no aggregate or individual market
share limitations for insurance joint ventures.
6
Foreign insurers that enter the Mexican market as whollyowned subsidiaries will be subject to market share limitations.
The aggregate market share limitation begins at 6 percent and
increases to 12 percent until the limitation is completely lifted
on January 1, 2000. During this transition period, the
individual firm's market share limitation will be 1.5 percent.
Other types of financial firms - leasing and factoring will not be subject to individual firm limits, but will have an
aggregate market share limitation until January 1, 2000.
Mexico has agreed to create a new type of financial
intermediary called a limited scope financial company. It will
be able to engage in, for example, consumer finance, mortgage
lending, or act as a credit card bank. The kind of firm will not
be allowed to accept deposits from the public, but may fund
itself in Mexico's capital markets.
What kind of benefits can you, as international bankers,
expect to flow from these market-opening provisions? The Mexican
government is committed to making Latin America's largest
financial market private, efficient and attractive to foreign
capital. By establishing in Mexico, you will get access to this
rapidly growing financial market. The peso-denominated loan
portfolio of Mexican banks increased by 50 percent in 1990 and by
a similar amount in 1991. Total loans outstanding amounted to 90
billion dollars at the end of April.
You will also be able to market all the other financial
services that a Mexican bank can undertake to offer. Further,
you will be able to establish a holding company which can have
subsidiaries that engage in banking, securities, foreign exchange
trading, leasing and factoring. These auxiliary activities are
significant. For example, leasing company assets amount to well
over 3 billion dollars and factoring companies have assets
approaching 3 billion dollars. In addition, Mexico's stock
market, the largest in Latin America, has developed rapidly.
NAFTA as a Model for Global Free Trade
To some, NAFTA may wrongly be seen as a first step towards a
world characterized by hostile and exclusive regional trading
blocs. In reality, the opposite is true. Free trade agreements
like NAFTA add momentum to the global drive towards free trade
and support, rather than undercut, efforts in the GATT. The GATT
agreement itself contemplates regional free trade zones, and
NAFTA is consistent with the GATT. In fact, in many areas, the
NAFTA provides greater trade liberalization commitments than the
GATT has been able to provide so far.
Trading blocs will emerge only if the parties retreat within
themselves, and erect barriers to foreign trade. This is clearly
7
not the path we intend to take. In his economic program —
titled an "Agenda for American Renewal" — President Bush
announced his intention to both conclude the Uruguay Round of
GATT and to begin developing a "strategic network of free trade
agreements across the Atlantic and the Pacific and in our own
hemisphere."
NAFTA will serve as the catalyst for such a network. Other
countries will recognize the benefits of launching their economic
boats on the surging tide of free trade and free markets — or
risk becoming stranded on a low-growth, protectionist shore.
Countries need to make the kind of free trade and open investment
reforms NAFTA requires in order to win in the global competition
for goods, capital and technology.
Others appear already willing to join us. On their own,
other Latin American and Caribbean countries are establishing
agreements among themselves to reduce barriers to trade and
investment — within the Southern Cone countries, the Andean
Pact, Central America, and the CARICOM group of countries. The
President's goal of hemispheric free trade — and the regional
growth and prosperity that accompany it — is within our grasp if
we persevere.
# # #
8
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE ’RELEASE
October 28, 1992
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 5-YEAR NOTES
Tenders for $10,753 million of 5-year notes, Series S-1997,
to be issued November 2, 1992 and to mature October 31, 1997
were accepted today (CUSIP: 912827H47).
The interest rate on the notes will be 5-3/4%. All compe
titive tenders at yields lower than 5.84% were accepted in full.
Tenders at 5.84% were allotted 87%. All noncompetitive and sucessful competitive bidders were allotted securities at the yield of
5.84%, with an equivalent price of 99.615. The median yield was
5.79%; that is, 50% of the amount of accepted competitive bids were
tendered at or below that yield. The low yield was 5.73%; that is,
5% of the amount of accepted competitive bids were tendered at or
below that yield.
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
19,490
25,284,796
13,168
86,149
82,073
34,673
1,078,905
14;*800
5,940
33,465
9,236
460,850
76.712
$27,200,257
Accented
19,490
10,074,256
13,168
86,149
66,073
24,673
223,255
14,800
5,940
33,465
9,236
105,765
76.712
$10,752,982
The $10,753 million of accepted tenders includes $508
million of noncompetitive tenders and $10,245 million of
competitive tenders from the public.
In addition, $348 million of tenders was awarded at the
high yield
to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $250 million
of tenders was also accepted at the high yield from Federal
Reserve Banks for their own account in exchange for maturing
securities.
*
NB-2044
U
FOR IMMEDIATE RELEASE
October 29, 1992
Contact:
Anne Kelly Williams
(202) 622-2960
STATEMENT BY NICHOLAS F. BRADY
SECRETARY OF THE TREASURY
We are very pleased that the President has today signed the
Housing and Community Development Act of 1992, which includes
measures that improve federal oversight of Government-sponsored
enterprises (GSEs) and provide regulatory relief to the banking
industry.
The GSE provisions are the culmination of a process begun
nearly three years ago with a comprehensive Treasury study. At
the Administration's request, Congress has established a strong
regulatory framework to address the taxpayer risk posed by the
enormous GSEs engaged in housing finance — before any crisis
demanded action. This forward-looking legislation will greatly
enhance the stability, affordability, and availability of housing
finance well into the future.
In addition, the bank regulatory relief proposals included
in the bill are good news for banks, borrowers, and the economy
as a whole. Among other things, the legislation will prevent
regulatory micromanagement of employee compensation, provide
certain de minimis exceptions to real estate appraisal
requirements, reduce Real Estate Settlement Procedures Act
paperwork burdens, and alleviate Truth in Savings Act compliance
costs.
Staggering regulatory burden on the banking industry
restricts credit and impedes economic growth. We urge the next
Congress to build upon the provisions in this bill by adopting
all of the bank regulatory relief recommendations contained in
the Administration's proposed Credit Availability and Regulatory
Relief Act.
#
NB-2045
#
#
#
V C
FOR IMMEDIATE RELEASE
October 29, 1992
I
CONTACT: RICH MYERS
(202) 622-2930
TREASURY DEPARTMENT & IRS REQUEST COMMENTS ON 1993 BUSINESS PLAN
Treasury's Office of Tax Policy and the Internal Revenue
Service are developing a 1993 Business Plan that will identify
specific topics to be addressed through administrative guidance
next year.
Recommendations from the public are encouraged on the
specific issues that should be included in the Business Plan, the
manner in which those issues should be resolved, and any business
or other considerations that should be taken into account in
developing appropriate guidance. If multiple issues are
recommended in an area, their relative priorities should be
addressed.
Fred Goldberg, Treasury's Assistant Secretary for Tax
Policy, said, "We have found the 1992 Business Plan to be a
valuable tool for setting priorities and holding ourselves
accountable to the taxpaying public. And again for 1993, we want
to provide taxpayers with the certainty needed for sound business
planning and management."
Shirley Peterson, Commissioner of the IRS, said, "Public
input is vital for the Business Plan to be a success. We want
taxpayers to again be part of the process of developing a plan
that is fair, practical and dependable."
In developing the 1993 Business Plan, the Office of Tax
Policy and the IRS will consider comments submitted on the 1992
Business Plan for which guidance was not issued during 1992.
To ensure that the Office of Tax Policy and the IRS have
sufficient time to review the comments before publishing the 1993
plan, comments should be submitted by December 1, 1992, and
addressed to: Internal Revenue Service, Attn: Bruce Kipnis,
CC:FI&P, 1111 Constitution Ave. NW, Room 4007, Washington D.C.
20024.
#####
NB-2046
AS PREPARED FOR DELIVERY
EMBARGOED UNTIL 1:00 PM
OCTOBER 30, 1992
CONTACT: CLAIRE BUCHAN
202-622-2910
Remarks by
The Honorable Nicholas F. Brady
Secretary of the Treasury
before the
Commerce and Industry Association of New Jersey
Woodcliff Lake, New Jersey
October 30, 1992
Thank you, Marge [Roukema, Member of Congress]. It is a
great pleasure to be here in Woodcliff Lake, and I appreciate
having the opportunity to join you.
As we look at the world at the turn of the century, economic
and political borders have blurred. Our national economy has
been transformed from a self-sufficient and isolated continent to
an island in the world archipelago. It no longer makes sense to
think in purely domestic terms; there is no longer a clear
distinction between domestic and foreign policy. Trade
negotiations affect domestic employment; education policy affects
future competitiveness; peace in the Middle East means secure
energy sources to fuel domestic production; and investment from
abroad means jobs for Americans.
We must change as the world around us changes, and to do so
we must understand the nature of the profound economic transition
through which America and the world are passing. There are two
separate and distinct elements: a series of significant but
temporary disruptions that are passing through our economy, but
more important, a structural and permanent change in the
organization of world economic competition — in some ways
greater than any since the Industrial Revolution of the 19th
century.
First, let me give you some examples of the significant but
temporary disruptions:
NB-2047
o
The victory in the Cold War will bring immeasurable
benefits to the world economy. But the benefits of
peace did not come free: this country now shows the
strain of having carried the burden of the free world’s
defense for almost 50 years. In this country alone,
the Defense Department has estimated the shift to a
peace-time economy has meant the loss of over 1.6
million jobs in the last three years. Peace — and
leadership — always have their price.
But we have made adjustments at war’s end before.
Indeed, at war's end in the first Truman Administration
— gross national product fell 19% in a single year.
This puts our economy's current annual positive growth
rate of 2.7% in perspective.
o
Second, the volume of debt in every segment of American
society over the last four years has been at
historically high levels. Those levels, however, are
beginning to decline as businesses strengthen their
balance sheets and as the baby boomers become the
parents of the 1990s, watching their budgets, saving
for their retirement and their kids' education. Debt
service consumes a much smaller percentage of cash
flow, leaving more for consumption and investment.
o
Third, economic growth has been hindered by a weakened
banking system. But bank equity capital is at its
highest level since 1966, and banks are more profitable
and liquid than they have been in decades. The
industry is poised to finance expansion.
o
Fourth, American industry has been restructuring over
the last several years, taking steps to become more
productive and competitive. In 1988, our trade deficit
in goods and services was almost $102 billion; it was
only $11.7 billion last year. We are winning the
battle for exports.
o
Finally, there is a significant world economic
slowdown. Still, the U.S. economy is expanding roughly
twice as fast as Japan's, and Germany is experiencing
negative growth.
Each of these five conditions has formed a significant brake
on the economy, and when added together their combined effect has
been greater than the sum of their parts. Negative business and
consumer attitudes created an additional, independent restraint
on growth.
2
But because of our efforts, each of these temporary factors
is well on its way to resolution.
While we are not fully
satisfied with the current pace of expansion, this week's
announcement of a 2.7% real growth rate for the third quarter
shows that America is on the uptrend. It is worth noting that
the average rate of expansion for 1992 is now roughly equal to
the growth rate sustained over the last 25 years.
Yet even as we pass from a temporary downturn and restore
growth, we must still come to terms with the long-term
transformation of economic competition that technology has made
possible. Twenty years ago most businesses could find their
customers on a road map; today they need a world map. This has
affected our businesses and daily work. Let me give you some
examples:
o
In today's world, businesses are not bound to a
particular country by the dictates of geography. Over
an electronic network, separate elements of the
production process can be directed from anywhere in the
world. For example, the Hewlett Packard personal
computer — a popular model — is designed and marketed
from Palo Alto, engineered in Grenoble, France,
components are made in Malaysia, assembled in
Singapore, and 50% of sales are in the United States.
o
What is more, information and intellectual capital have
become increasingly important parts of the production
process. New businesses are created that depend less
on physical capital and more on skills and know-how.
These new businesses are becoming leading industries of
the new world: Microsoft, for example, has a total
stock market value of $22 billion; Amgen, a leading
biotechnology company, has a stock market value of $9
billion; and McCaw Cellular's is $5 billion. The
government cannot create these new businesses, it does
not have that capability.
o
Improvements in transportation combined with new
information and communication systems have dramatically
shortened the transportation "pipeline". An aircraft
factory in Central California can fax a parts order to
a supplier in Leeds, England and receive the components
the next day.
3
o
Capital moves around the world at the touch of a button
— without government approval — to wherever it will
bring the highest return, whether that is Berlin, New
Jersey or Berlin, Germany. Each day in excess of $1.5
trillion of transactions are settled through the New
York Federal Reserve Bank.
These changes have transformed the economic order that has
existed through most of our lives. This is understandably
unsettling to us all. Vigorous international competition has
caused some of our nation's most well-known companies to
restructure, not only General Motors, but also Xerox, IBM, AT&T
and others.
American workers go to the parts shelf and see labels that
concern them. As someone recently remarked:
I saw a snapshot of a shipping label for some
integrated circuits produced by an American firm. It
said, "Made in one or more of the following countries:
Korea, Hong Kong, Malaysia, Singapore, Taiwan,
Mauritius, Thailand, Indonesia, Mexico, Philippines.
The exact country of origin is unknown."
Americans worry about what a label like that says about
their own future, and this is a valid concern. But those who try
to convince Americans that they should fear the new economic
world of free trade and change are wrong. They are the newest
members of the Flat Earth Society, refusing to accept the reality
of the changes in the world around them. Most of the industries
that are giving America its leadership in this new world
economy — industries like pharmaceuticals, software,
telecommunications, aerospace, and computers thrive on trade.
In the U.S., the fact is that exports will create millions
of new and better jobs — which have paid, on average, 17% more
than the average wage. As other countries increase their
standard of living, they will buy more high-value-added products
from the U.S. That is why the U.S. has increased its exports to
Mexico from $14 billion to $33 billion over the last four years.
What is more, New Jersey has increased its exports to Mexico over
four years from $189 million to $452 million — an increase of
139%.
Plainly stated, Americans do best when the competition is
tough — we do best by being more creative, more entrepreneurial,
more innovative. Innovation, which is the application of
intellectual capital to the process of production, will be a
major source of the future's attractive, high-paying jobs.
4
And for that reason, the goal of the Bush Administration
during the next four years will be — as it has been — not to
evade change, but to face it; not to stand in place, but to
advance. Our single-minded goal is to create high value jobs in
the United States. To achieve this goal, we should do the
following things.
U.S. merchandise exports have increased by about $195
billion over the last 5 years, and every billion dollars in
exports supports about 20,000 new jobs. Simple multiplication
indicates that this growth in exports accounts for almost 4
million new jobs. In total, exports now support one in six
American manufacturing jobs.
We
growing
largely
instead
must build on our spectacular success in opening free and
markets for our exports. In the 1980s, growth was fueled
by debt and consumption; in the 1990s, growth must come
from exports and investment.
Two-thirds of the jobs created in the United States are
created by small businesses. Only 11% of the workforce works for
the Fortune Five Hundred companies. We must not shackle the 4
million smaller firms that are creating the new jobs workers need
during this transition. The infant industries of today will be
the job generators of tomorrow.
To this end, President Bush recently announced a
comprehensive five-year, $20 billion initiative which includes
lowering the corporate tax rate for small businesses; making up
to $2500 in small business start-up costs tax deductible;
increasing equipment expensing; and reducing paperwork burdens
that fall heavily on small businesses.
America still attracts investors. BMW, with the whole world
to choose from, recently decided to locate its first plant
outside Germany in South Carolina. In the words of BMW "the
exports we plan from the U.S. factory, will strengthen BMW's
global competitiveness.” Imagine German models made by Americans
sold to Europeans and Japanese.
Ensuring America's continued economic leadership will mean
adopting policies that foster savings and reduce the cost of
capital to encourage even greater investment. It means running
the government so that inflation and interest rates remain low —
and today, short-term interest rates and inflation are at their
lowest in decades. It means reducing unnecessary regulatory
restrictions and correcting the excesses of our legal system.
And it means reducing the capital gains tax to spur investment.
And while we*re on the subject of taxes, I have to talk for
a moment about Governor Clinton's "Putting People First" plan —
or as I refer to it — "Putting Taxes First" plan. In his own
plan, Governor Clinton says he will increase taxes by $150
billion, increase spending by $220 billion, and cut the deficit
in half. But his numbers don't add up. So if he is really going
to cut the deficit in half as he has repeatedly said, and we know
he'll spend at least $220 billion, then he'll have to tax more
than just the rich. He'll have to increase taxes on individuals
making about $36,600 and families making about $61,000.
As President Reagan's chief economic advisor Martin
Feldstein has said, "The numbers don't make any sense." The plan
is "politically dishonest and fiscally irresponsible."
What Bill Clinton is calling a tax increase on the wealthy
is nothing less than an attack on the most effective job creating
enterprises in the United States — this nation's small
businesses. Bill Clinton's tax increase hits right at the heart
of small farms and business proprietorships and partnerships.
About seventy-five percent of the top 2 percent are small
businesses — the kinds of businesses that create jobs in this
country. It is not hard to figure out who will be hurt — more
than a million of this nation's small businesses — working
Americans.
When we in New Jersey talk about tax increases and their
effect on jobs and business, we're not talking abstract theory.
We've been there. We ran the experiment for the country, and
here's what it showed: higher tax rates were followed by
businesses leaving the state and sharp economic decline. In a
global market economy, we don't need business disincentives like
that.
Rather than taxing people first, we must invest in America's
future — human capital. Investment in education, not just
technology and in research, is the key to increasing our workers'
productivity. More than that, education is the guarantee of job
security. Our grandfathers may have worked at a single job their
entire lives. Today's employee will, on average, have had five
different careers by the time of retirement. Education will be
the key to a productive future. If, as students, American
workers have learned how to learn, they will have laid the
foundation for a lifetime of new skills.
So America's workforce must be the best educated to remain
the most productive. That means fixing our education system —
by implementing President Bush's plan to develop schools that are
more accountable, to expand parental choice, and to encourage
states to set meaningful education standards.
6
As we transform our economy, we will not
must retrain as they shift from one career to
life. The Administration's Worker Adjustment
initiatives will triple the funding currently
training.
leave out those who
another late in
and Youth Skills
provided for re
Investing in America's future also means providing
affordable health care for all Americans, while controlling the
rising costs of health care. That is why President Bush, in
February, proposed a plan for comprehensive health reform, to
make health care more accessible by making health insurance more
affordable. The President's plan will not lead to rationing of
health care and leaves health care choices in the hands of the
people, not the bureaucrats.
These objectives recognize the interconnection between
foreign affairs and domestic policy; they deal with the dynamic
changes in the way the world does business; and they emphasize
individual initiative rather than fuel the engine of big
government.
Some will say that this agenda is wrong. Competition, they
will tell you, both at home and abroad, is destructive — trade
saps jobs, incentives to invest help only the rich. But it is
they who are wrong. All they offer — tricked up in the latest
jargon — are the tired, regressive remedies of protectionism,
taxes, and government direction. They are the newest members of
the Flat Earth Society — their narrow view prevents them from
seeing the new world around them.
They want Americans to forget
that when they elect a President, they elect the leader of the
Free World.
We cannot hold on to the old ways, and we should not want
to. We know what we must do to succeed in the new world economy.
After all, the field of play is our native one: creating,
risking, competing, achieving. With optimism, energy and
commitment, America can remain what it has always been: the ark
of the world's liberty and the engine of its prosperity. The
second American Century can be as bright and brilliant as the
first.
Thank you.
###
7
DEPT. Of THE TREASURY
FOR RELEASE AT 3:00 p.m.
October 30, 1992
Contact:
Anne Kelly Williams
(202) 622-2960
TREASURY ANNOUNCES MARKET BORROWING ESTIMATES
The Treasury Department today announced that its net market
borrowing for the October-December 1992 quarter is estimated to
be $87 billion, with a $30 billion cash balance on December 31.
The Treasury also announced that its net market borrowing for the
January-March 1993 quarter is estimated to be in a range of
$65 billion to $70 billion, with a $20 billion cash balance at
the end of March. The borrowing estimates assume that Congress
will not enact additional funding for thrift resolutions before
early next year, which will prevent significant Resolution Trust
Corporation spending during these two quarters.
In the quarterly announcement of its borrowing needs on
August 3, 1992, the Treasury estimated net market borrowing
during the October-December quarter to be in a range of $115
billion to $120 billion, assuming a $30 billion cash balance on
December 31. The higher-than-expected cash balance at the end of
September accounts for most of the cut in the market borrowing
estimate in the October-December quarter.
Actual market borrowing in the quarter ended September 30,
1992, was $72.4 billion, while the end-of-quarter cash balance
was $58.8 billion. On August 3, the Treasury had estimated
market borrowing for the July-September quarter to be $75
billion, with a $35 billion cash balance on September 30. A
reduction in the cash deficit accounted for the higher cash
balance and the reduction in market borrowing.
oOo
NB-2048
FOR RELEASE AT 2:30 P.M.
October 30, 1992
*’* '
'
’COtiffiCT:
Office of Financing
202/219-3350
TREASURY OFFERS $15,000 MILLION
OF 41-DAY CASH MANAGEMENT BILLS
The Department of the Treasury, by this public notice,
invites tenders for approximately $15,000 million of 41-day
Treasury bills to be issued November 6, 1992, representing an
additional amount of bills dated December 19, 1991, maturing
December 17, 1992 (CUSIP No. 912794 ZB 3).
Competitive tenders will be received at all Federal Reserve
Banks and Branches prior to 1:00 p.m., Eastern time, Thursday,
November 5, 1992. Each bid for the issue must be for a minimum
amount of $1,000,000. Bids over $1,000,000 must be in multiples
of $1,000,000. Bids must show the rate desired, expressed on
a bank discount rate basis with two decimals, e.g., 7.10%.
Fractions must not be used.
Noncompetitive bids will not be accepted. Tenders will not
be received at the Department of the Treasury, Washington, D. C.
The bills will be issued on a discount basis under competi
tive bidding, and at maturity their par amount will be payable
without interest. The bills will be issued entirely in book-entry
form in a minimum amount of $10,000 and in any higher $5,000 mul
tiple, on the records of the Federal Reserve Banks and Branches.
Additional amounts of the bills may be issued to Federal Reserve
Banks as agents for foreign and international monetary authorities
at the average price of accepted competitive tenders.
The following institutions may submit tenders for accounts
of customers: depository institutions, as described in Section
19(b)(1)(A), excluding those institutions described in subpara
graph (vii), of the Federal Reserve Act (12 U.S.C. 461(b) (1) (A));
and government securities broker/dealers that are registered with
the Securities and Exchange Commission or noticed as government
securities broker/dealers pursuant to Section 15C(a)(1) of the
Securities Exchange Act of 1934. Others are permitted to submit
tenders only for their own account. An institution submitting
a bid for customers must submit with the tender a customer list
that includes, for each customer, the name of the customer and the
amount bid at each rate. Customer bids may not be aggregated by
rate on the customer list. All bids submitted on behalf of trust
estates must provide, for each trust estate, the name or title of
the trustee(s), a reference to the document creating the trust with
the date of execution, and the employer identification number of
the trust.
N B -2 04 9
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A single bidder must report its net long position if the total
of all its bids for the security being offered and its position in
the security equals or exceeds $2 billion, with the position to be
determined as of one half-hour prior to the closing time for the
receipt of competitive tenders. A net long position includes posi
tions, in the security being auctioned, in "when issued" trading,
and in futures and forward contracts, as well as holdings of out
standing bills with the same maturity date and CUSIP number as the
new offering. Bidders who meet this reporting requirement and are
customers of a depository institution or a government securities
broker/dealer must report their positions through the institution
submitting the bid on their behalf. A submitter, when submitting
a competitive bid for a customer, must report the customer's net
long position in the security being offered when the total of all
the customer's bids for that security, including bids not placed
through the submitter, and the customer's net long position in the
security equals or exceeds $2 billion.
Tenders from bidders who are making payment by charge to a
funds account at a Federal Reserve Bank and tenders from bidders
who have an approved autocharge agreement on file at a Federal
Reserve Bank will be received without deposit. Full payment for
the par amount of bills bid for must accompany tenders from all
others.
Public announcement will be made by the Department of the
Treasury of the amount and range of accepted bids. Competitive
bids will then be accepted, from those at the lowest discount
rates through successively higher discount rates, up to the amount
required to meet the public offering. Bids at the highest accepted
discount rate will be prorated if necessary. Each successful com
petitive bidder will pay the price equivalent to the discount rate
bid. 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. Those submitting tenders will be advised of the
acceptance or rejection of their bids. The Secretary of the
Treasury expressly reserves the right to accept or reject any or
all bids, in whole or in part, and the Secretary's action shall
be final.
No single bidder in an auction will be awarded bills in an
amount exceeding 35 percent of the public offering. The deter
mination of the maximum award to a single bidder will take into
account the bidder's reported net long position, if the bidder
has been required to report its position.
Notice of awards will be provided by a Federal Reserve Bank
or Branch to bidders who have accepted bids, whether for their own
account or for the account of customers. No later than 12:00 noon
local time on the day following the auction, the appropriate Fed
eral Reserve Bank will notify each depository institution that has
entered into an autocharge agreement with a bidder as to the amount
3
to be charged to the institution's funds account at the Federal
Reserve Bank on the issue date. Any customer that is awarded $500
million or more of securities must furnish, no later than 10:00 a.m.
local time on the day following the auction, written confirmation
of its bid to the Federal Reserve Bank or Branch where the bid^
was submitted. A depository institution or government securities
broker/dealer submitting a bid for a customer is responsible for
notifying its customer of this requirement if the customer is
awarded $500 million or more as a result of bids submitted by
the depository institution or the broker/dealer.
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
by the issue date, by a charge to a funds account or pursuant to
an approved autocharge agreement, in cash or other immediatelyavailable funds, or in definitive Treasury securities maturing
on or before the settlement date but which are not overdue as
defined in the general regulations governing United States secu
rities. Adjustments will be made for differences between the par
value of the maturing definitive securities accepted in exchange
and the issue price of the new bills.
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 gov
ern the conditions of their issue. Copies may be obtained from
any Federal Reserve Bank or Branch.
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@FedFRASER