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TREAS.
HJ
10
. A13P4
v.323
u.s.
Department of the Treasury
PRESS RELEASES
TREASURY NEWS
Department of the Treasury
Washington, D.C.
FOR IMMEDIATE RELEASE
May 21, 1993
•
.
Telephone 202-622-2960
TREASURY ANNOUNCES PENALTY AGAINST CHECK EXPRESS INC.
The Department of the Treasury on Friday announced that Check Express Inc., a
check-cashing service, has agreed to pay a civil money penalty of $20,000 for failure to file
timely currency transaction reports to the Internal Revenue Service (IRS).
The violations occurred during 1986-1989, and involved the cashing of checks of
more than $10,000 by Check Express, which has multiple locations and is headquartered in
Tampa, Fla. The case was developed through a Bank Secrecy Act (BSA) compliance
examination conducted by the IRS.
"This penalty represents a complete settlement of Check Express Inc. 's BSA civil
liability for these violations and should encourage all financial institutions to implement
effective BSA compliance programs," said Ronald Noble, Assistant Secretary for
Enforcement.
To ensure compliance with the Act, Check Express has installed an automated system
to capture information on transactions which must be reported under the BSA. Subsequent
IRS examinations of Check Express, Inc. and its affiliated corporations indicate it has been in
compliance with the Act since 1989.
In its deliberations, Treasury noted Check Express' active cooperation with federal
and local law enforcement officials investigating possible abuses of the check-cashing
industry. Check Express was not under criminal investigation and the Treasury has no
evidence that it or any of its employees or officers engaged in any BSA-related criminal
activity.
The collection of a civil money penalty from Check Express for BSA violations
reflects Treasury's continuing effort to enforce BSA compliance by nonbank financial
institutions such as casinos, check cashers, currency dealers and exchangers, issuers and
redeemers of money orders and traveler's checks, and transmitters of funds.
LB-201
"
ft--Q
Contact: Michelle Smith
(202) 622-2960
(MORE)
..
,·,0, •
The BSA requires banks and other nonbank financial institutions to keep certain
records, to file currency transaction reports with the Treasury on all cash transactions of
more than $10,000, and, under some circumstances, to file reports on the international
transportation of currency, traveler'S checks and other monetary instruments in bearer form.
The purpose of the reports and records required under the BSA is to assist the government's
efforts in criminal, tax and regulatory investigations and proceedings.
-30-
FOR RELEASE AT 2:30 P.M.
May 21, 1993
CONTACT:
Office of Financing
202/219-3350
TREASURY'S 52-WEEK BILL OFFERING
The Treasury will auction approximately $14,750 million of
52-week Treasury bills to be issued June 3, 1993. This offering
will provide about $450 million of new cash for the Treasury, as
the maturing 52-week bill is currently outstanding in the amount
of $14,296 million. In addition to the maturing 52-week bills,
there are $23,479 million of maturing 13-week and 26-week bills.
Federal Reserve Banks hold $8,871 million of bills for their
own accounts in the three maturing issues. These may be refunded
at the weighted average discount rate of accepted competitive
tenders.
Federal Reserve Banks hold $3,495 million of the three
maturing issues as agents for foreign and international monetary
authorities. These may be refunded within the offering amount at
the weighted average discount rate of accepted competitive
tenders. Additional amounts may be issued for such accounts if
the aggregate amount of new bids exceeds the aggregate amount of
maturing bills. For purposes of determining such additional
amounts, foreign and international monetary authorities are
considered to hold $1,010 million of the maturing 52-week issue.
Tenders for the bills will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public
Debt, Washington, D. C. This offering of Treasury securities is
governed by the terms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356, published as a final rule on
January 5, 1993, and effective March 1, 1993) for the sale and
issue by the Treasury to the public of marketable Treasury bills,
notes, and bonds.
Details about the new security are given in the attached
offering highlights.
000
Attachment
LB-202
HIGHLIGHTS OF TREASURY OFFERING OF 52-WEEK BILLS
TO BE ISSUED JUNE 3, 1993
May 21, 1993
Offering Amount .
.
.
.
.
.
$14,750 million
Description of Offering:
Term and type of security .
CUSIP number . . .
Auction date . . .
Issue date . . .
Maturity date .
Original issue date . • . .
Maturing amount. . .
...
Minimum bid amount
Multiples • . . . .
364-day bill
912794 K8 6
May 27, 1993
June 3, 1993
June 2, 1994
June 3, 1993
$14,296 million
$10,000
$1,000
Submission of Bids:
Noncompetitive bids
Accepted in full up to $1,000,000
at the average discount rate of
accepted competitive bids.
(1) Must be expressed as a discount rate
with two decimals, e.g., 7.10%.
(2 ) Net long position for each bidder
must be reported when the sum of the
total bid amount, at all discount
rates, and the net long position are
$2 billion or greater.
(3) Net long position must be reported
one half-hour prior to the closing
time for receipt of competitive bids.
Competitive bids
Maximum Recognized Bid
at a single Yield
35% of public offering
Maximum Award .
35% of public offering
.
.
.
Receipt of Tenders:
Noncompetitive tenders
Prior to 12:00 noon Eastern Daylight
Saving time on auction day.
Prior to 1:00 p.m. Eastern Daylight
Saving time on auction day.
Competitive tenders
payment Terms .
.
.
.
.
.
.
Full payment with tender or by charge
to a funds account at a Federal
Reserve bank on issue date.
~
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Monthfy' Treasury Statement
,il,; 9t ges:~jrn~and Outlays
of the United States Government
For Fiscal Year 1993 Through April 30, 1993, and Other Periods
Highlight
This month's publication has been realigned to the FY 1994 Budget, released by the
Office of Management and Budget on April 8, 1993.
The statutory debt limit has been temporarily increased to $4,370 billion through September 30, 1993,
by an Act of Congress April 6, 1993.
RECEIPTS, OUTLAYS, AND SURPLUS/DEFICIT
THROUGH APRIL 1993
1000
Contents
Summary, page 2
B
I
L
L
I
o
N
S
800
Receipts, page 6
Outlays, page 7
600
Means of financing, page 20
400
Receipts/outlays by month, page 26
Federal trust funds/securities, page 28
200
Receipts by source/outlays by
function, page 29
o
Explanatory notes, page 30
Compiled and Published by
Department of the Treasury
Financial Management Service
Introduction
The Monthly Treasury Statement of Receipts and Outlays of the Untted States
Government (MTS) IS prepared by the Financial Management Service, Department of
the Treasury. and after approval by the Fiscal Assistant Secretary of the Treasury, IS
normally released on the 15th workday of the month following the reporting month.
The publication IS based on data provided by Federal entities, disbursing officers,
and Federal Reserve banks
of receipts are treated as deductions from gross receipts, revolVing and management fund receipts, reimbursements and refunds of monies preViously expended are
treated as deductions from gross outlays, and Interest on the publiC debt (public
Issues) IS recognized on the accrual basIs Malar Information sources include
accounting data reported by Federal entities, disbursing officers, and Federal
Reserve banks.
Audience
The MTS IS published to meet the needs of: Those responsible for or Interested
In the cash position of the Treasury, Those who are responsible for or Interested in
the Government's budget results, and individuals and businesses whose operations
depend upon or are related to the Government's financial operations.
Triad of Publications
The MTS is part of a triad of Treasury finanCial reports. The Daily Treasury
Statement IS published each working day of the Federal Government. It provides
data on the cash and debt operations of the Treasury based upon reporting of the
Treasury account balances by Federal Reserve banks. The MTS is a report of
Government receipts and outlays, based on agency reporting. The US. Government
Annual Report is the official publication of the detailed receipts and outlays of the
Government. It is published annually in accordance with legislative mandates given
to the Secretary of the Treasury.
Disclosure Statement
This statement summarizes the finanCial activities of the Federal Government
and off-budget Federal entitles conducted in accordance with the Budget of the U.S.
Government, ie, receipts and outlays of funds, the surplus or deficit, and the means
of financing the deficit or disposing of the surplus. Information is presented on a
modified cash basis: receipts are accounted for on the basis of collections; refunds
Data Sources and Information
The Explanatory Notes section of this publication provides information concerning the flow of data into the MTS and sources of information relevant to the MTS.
Table 1. Summary of Receipts, Outlays, and the Deficit/Surplus of the U.S. Government, Fiscal Years 1992 and 1993,
by Month
[$ millions]
Period
FY 1992
October
November
December
January
February
March
April
May
June
July
August
September
Year-to-Date
FY 1993
October
November
December
January
February
March
April
Year-to-Date
Receipts
Outlays
Deficit/Surplus (-)
78,070
73,100
103.642
104.037
62.752
72.132
138.357
62.189
120.883
79.056
78.106
118.189
114,665
117,784
106.178
119.697
111.926
122.844
123.760
108.963
117.098
122.204
102.810
'112.728
36.595
44.684
2.536
15.660
49.174
50.712
-14.597
46.774
-3.785
43.148
24.704
-5,461
21,090,513
21,380,657
2290,144
76.832
74.633
113.690
112.718
66.138
83,453
132.122
125.627
107.361
152.637
82.903
113.732
128.030
124.034
48.795
32.728
38.946
-29.815
47.594
44.577
-8.088
659,586
834,323
174,737
'Outlays for September 1992 have been Increased by $161 million for the Department of
Veterans Affairs to record unreported disbursements made to financing accounts
'The receipt. outlay and defiCit figures differ from the FY 1994 Budget, released by the Office
of Management and Budget on April 8. 1993, by $254 million due mainly to revISions In data
follOWing the release of the Final September Monthly Treasury Statement.
Note: The receipt and outlay figures for FY 1992 and FY 1993 have been revised to reflect a
reclassification of the account "Recoveries, 011 Spill Liability Trust fund" from an offsetllng
governmental receipt to a governmental receipt
2
Summary of Budget and Off-Budget Results and Financing of the U.S. Government, April 1993 and
Other Periods
Table 2.
[$ millions]
Classification
Total on-budget and off-budget results:
Total receipts
Budget
Estimates
Full Fiscal
Year'
Current
Fiscal
Year to Date
This
Month
Prior
Fiscal Year
to Date
(1992)
Budget
Estimates
Next Fiscal
Year (1994)'
132,122
659,586
1,145,685
632,089
1,251,263
96,413
35,709
480,708
178,879
833,909
311,776
455,941
176,149
913,137
338,126
124,034
834,323
1,467,639
816,853
1,515,318
101,861
22,174
683,661
150,662
1,200,409
267,230
674,108
142,745
1,235,895
279,423
+8,088
-174,737
-321,954
-184,764
-264,055
On-budget surplus (+) or deficit (-)
Off-budget surplus (+) or deficit (-)
-5,448
+13,535
-202,953
+28,216
-366,500
+44,546
-218,167
+33,403
-322,758
+58,703
Total on-budget and off-budget financing
-8,088
174,737
321,954
184,764
264,055
5,464
-18,945
5,394
147,019
18,293
9,425
303,958
18,789
-793
179,226
379
5,159
270,551
On-budget receipts .
Off-budget receipts
................
Total outlays
On-budget outlays
Off-budget outlays
..................
Total surplus (+) or deficit (-)
Means of financing:
Borrowing from the public .
Reduction of operating cash, increase (-)
By other means
'These flgures are based on the FY 1994 Budget. released by the Offlce of Management and
Budget on Apnl S, 1993.
Figure 1.
.. No Transactions.
Note: Details may not add to totals due to rounding
Monthly Receipts, Outlays, and Budget Deficit/Surplus of the U.S. Government, Fiscal Years 1992 and 1993
$ billions
.
,,
J
"
'.
"
'-
........ ,
,
,
\", ...... ..I
,
"
\'
,
,:
, , ""
.,'
Receipts
Deficit( -)/Surplus
Oct.
Dec.
Feb.
Apr.
Jun.
Aug.
Oct.
FY
FY
92
93
3
Dec.
Feb.
Apr.
-6,496
Figure 2.
Monthly Receipts of the U.S. Government, by Source, Fiscal Years 1992 and 1993
$ billions
ITotal Receipts I
1
Oct.
Dec.
Feb.
Apr.
Jun.
Aug.
FY
Dec.
Feb.
Apr.
FY
92
Figure 3.
Oct.
93
Monthly Outlays of the U.S. Government, by Function, Fiscal Years 1992 and 1993
$ billions
1~n~~~~--------------------------------1
Total Outlays
1
1
Oct.
Dec.
Feb.
Apr.
FY
FY
92
93
4
Table 3.
Summary of Receipts and Outlays of the U.S. Government, April 1993 and Other Periods
[$ millions]
Classification
This Month
Current
Fiscal
Year to Date
Comparable
Prior Period
Budget
Estimates
Full Fiscal Year'
Budget Receipts
Individual income taxes
Corporation income taxes
Social insurance taxes and contributions:
Employment taxes and contributions (off-budget) ............
Employment taxes and contributions (on-budget)
Unemployment insurance
Other retirement contributions
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts
56,137
17,795
303,278
61,048
285,488
52,517
515,315
106,261
35,709
9,455
3,581
431
4,168
1,898
1,544
1,404
178,879
48,749
10,473
2,807
27,097
7,525
10,507
29,224
176,149
48,876
8,929
2,802
26,214
6,656
9,869
214,591
311,776
84,490
25,768
4,782
47,628
12,594
19,192
17,880
.................................................
132,122
659,586
632,089
1,145,685
(On-budget) ..................................................
96,413
480,708
455,941
833,909
.................................................
35,709
178,879
176,149
311,776
Legislative Branch
The Judiciary
......................
Executive Office of the President
Funds Appropriated to the President
Department of Agriculture
Department of Commerce
Department of Defense-Military
Department of Defense-Civil
Department of Education
Department of Energy ...
Department of Health and Human Services, except Social
Security
Department of Health and Human Services, Social Security
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury:
Interest on the Public Debt
Other
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:
Resolution Trust Corporation
Other
Allowances
Undistributed offsetting receipts:
Interest
Other
233
314
21
366
6,172
321
26,036
2,471
2,268
1,434
1,453
1,345
122
8,350
42,560
1,651
166,217
17,308
18,725
9,676
1,431
1,330
112
9,209
36,883
1,517
163,775
16,344
17,402
8,819
2,847
2,635
241
11,829
66,915
3,179
277,304
29,496
30,907
17,522
27,424
23,889
2,290
590
975
4,129
329
2,653
164,490
169,318
14,698
3,747
6,302
26,610
3,145
218,893
147,585
159,362
14,168
3,767
5,770
26,657
2,814
217,836
292,788
298,943
26,018
7,544
10,554
46,812
5,545
36,464
17,970
1,388
4,307
518
-604
1,249
3,294
33
163,014
8,111
22,519
3,379
6
8,373
21,352
478
164,086
4,416
319,965
3,464
-19
8,273
20,930
263
294,658
7,005
35,406
6,516
1,350
14,082
37,163
840
-2,698
1
-12,452
5,493
3,957
16,374
-3,907
25,949
-403
-2,935
-40,922
-19,638
-38,698
-20,941
-81,801
-37,165
...................................................
124,034
834,323
816,853
1,467,639
(On-budget) ..................................................
101,861
683,661
674,108
1,200,409
.................................................
deficit (-) ....................................
22,174
150,662
142,745
267,230
+8,088
-174,737
-184,764
-321,954
(On-budget) ..................................................
-5,448
-202,953
-218,167
-366,500
+28,216
+33,403
+44,546
Total Receipts
(Off-budget)
Budget Outlays
Total outlays
(Off-budget)
Surplus (+) or
(Off-budget)
.................................................
+13,535
'Outlays for September 1992 have been Increased by $161 million for the Department of
Veterans Affairs. to record unreported disbursements made to financing accounts
No Transactions
Note: Details may not add to totals due to rounding
'These figures are based on the FY 1994 Budget, released by the Office of Management and
Budget on April 8, 1993.
21ncludes a reclassification from an offsetting governmental receipt to a governmental receipt
of $9 million for FY 1992 and $3 million for FY 1993 for the account "Recoveries, 0,1 Spill Liability
Trust fund"
5
Table 4.
Receipts of the U.S. Government, April 1993 and Other Periods
[$ millions]
--
-
Classificatron
Individual income taxes:
Withheld
Presidential Election Campaign Fund
Other
Total-Individual income taxes ........................ .
Corporation income taxes ................................... .
Social insurance taxes and contributions:
Employment taxes and contnbutlons:
Federal old-age and SUrviVorS Ins. trust fund:
Federal Insurance Contnbutions Act taxes
Self-Employment ContributIOns Act taxes
Deposits by States
Other
Total-FOASI trust fund
Federal disability Insurance trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes
Receipts from railroad retirement account
Deposits by States
Other
Total-FDI trust fund
Federal hospital Insurance trust fund:
Federal Insurance Contributions Act taxes
Self-Employment ContributIOns Act taxes
Receipts from Railroad Retirement Board
Deposits by States
Total-FHI trust fund
Railroad retirement accounts:
Rail industry pension fund
Railroad Social Security equivalent benefit
Total-Employment taxes and contributions
Unemployment insurance:
State taxes deposited in Treasury
Federal Unemployment Tax Act taxes
Railroad unemployment taxes
Railroad debt repayment
Total-Unemployment insurance
Gross
Receipts
I
Refunds
(Deduct)
I
R
. t
ecelp s
Gross
Receipts
I
Refunds
(Oeduct)
I
R
i ts
ece p
21,315
1,477
56,137
356,860
Gross
Receipts
I
I (Deduct)
Refunds
Receipts
245,510
258.394
16
98.450
32.691
6
44.755
77,452
Prior Fiscal Year to Date
Current Fiscal Year to Date
This Month
7
95,526
53,582
9,672
341,043
55,554
285,488
61,048
65,014
12,497
52,517
148.933
10.142
303,278
17,795
70,720
23.664
8.592
23,664
8.592
(' ')
(' ')
(' ')
(")
153.588
7.987
-12
153.588
7.987
-12
6
(' ')
(' ')
r ')
148.933
10.142
6
32.256
32.256
161.563
161.563
159.081
159.081
2.536
917
2.536
917
16.464
853
16.464
853
15.959
1.108
15.959
1.108
-1
-1
19,272
n
n
n
3.453
3.453
17.316
17.316
17.067
17.067
6.433
2.674
6.433
2.674
43.710
2.671
43.710
2.671
43.097
3.302
43.097
3.302
-3
-3
9.107
9.107
46.378
46.378
46.400
46.400
196
152
196
152
1.325
1.054
8
1.317
1.054
1.417
1.060
2
1.416
1.060
45.164
45.164
227.635
8
227.628
225.026
2
225.024
29
2.718
852
9
1
7.802
2.635
56
54
7.802
2.561
56
54
6.361
2.532
107
17
29
3.581
10.547
10.473
9.018
2,718
881
9
1
3.609
74
74
89
89
6.361
2.443
107
17
8.929
Other retirement contributions:
Federal employees retirement - employee
contributions
Contributions for non-federal employees
422
9
422
9
2.749
58
2.749
58
2,741
60
2,741
60
Total-Other retirement contributions
431
431
2.807
2.807
2.802
2.802
Total-Social insurance taxes and
contributions ....................................... .
Excise taxes:
Miscellaneous excise taxes 1
Airport and airway trust fund
Highway trust fund
Black lung disability trust fund
49,205
29
49,176
240,990
82
240,908
236,845
91
236,755
2.151
401
1.588
55
-49
5
70
2.199
396
1.517
55
15.815
1.016
10.352
370
277
10
170
15.538
1.006
10.183
370
13.918
2.653
9.870
366
410
13.507
2.646
9.694
366
7
176
.................................... .
4,194
27
4,168
27,554
457
27,097
26,807
593
26,214
Estate and gift taxes ....................................... ..
1,922
25
1,898
7,710
185
7,525
6,854
198
6,656
Customs duties .............................................. .
1,607
63
1,544
10,955
449
10,507
10,317
448
9,869
Miscellaneous Receipts:
Deposits of earnings by Federal Reserve banks
All other
1.117
287
(' ')
1.117
287
7.239
22.137
153
7.239
1.984
12.572
22.024
4
12.572
2.020
Total-Excise taxes
Total -
Miscellaneous receipts ...................... ..
1,404
(' ')
1,404
9,377
153
9,224
14,595
4
14,591
Total -
Receipts ....................................... .
155,057
22,935
132,122
724,166
64,579
659,586
701,475
69,385
632,089
Total -
On-budget
119,348
22,935
96,413
545,287
64,579
480,708
525,326
69,385
455,941
Total -
Off-budget
35,709
178,879
178,879
176,149
35,709
No Transactions
llncludes amounts for windfall profits tax pursuant to P L 96-223
21nCIudes a reclasSification from an offsettmg governmental receipt to a governmental receipt
of $9 million for FY 1992 and $3 million for FY 1993 for the account ·Recoverles. a,l SPill Liability
(. 'J Less than $500,000
Note Details may not add to totals due to rounding
Trust fund
6
176,149
Table 5. Outlays of the U.S. Government, April 1993 and Other Periods
[$ millions]
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross IAPPlicablel Outlays
Outlays
Receipts
Gross IAPPlicablel 0 tl
Outlays
Receipts
u ays
Gross IAPPlicablel 0 tl
Outlays
Receipts
u ays
Classification
Legislative Branch:
Senate
House of Representatives
Joint items
....................
Congressional Budget Office
Architect of the Capitol
Library of Congress
Government Printing Office:
Revolving fund (net)
General fund appropriations
General Accounting Office
United States Tax Court
Other Legislative Branch agencies
Proprietary receipts from the public
Intrabudgetary transactions
Total-Legislative Branch ................................
The Judiciary:
Supreme Court of the United States
Courts of Appeals. District Courts. and other judicial
services
Other
Total-The Judiciary
.....................................
Executive Office of the President:
Compensation of the President and the White House
Office
Office of Management and Budget
Other
Total-Executive Office of the President
..............
Funds Appropriated to the President:
International Security ASSistance:
Guaranty reserve fund
Foreign military financing grants
Economic support fund
Military assistance
Peacekeeping Operations
...................
Other
...........
Proprietary receipts from the public
International Development Assistance:
Multilateral ASSistance:
Contribution to the International Development
Association
International organizations and programs . . . . . . . . . . . . .
Other
................
Agency for International Development:
Functional development assistance program
Sub-Saharan Africa development assistance
Operating expenses
Payment to the Foreign Service retirement and
disability fund
Other
Proprietary receipts from the public
Intrabudgetary transactions
Total-Agency for International Development
Peace Corps
Overseas Private Investment Corporation
Other
Total-InternatiOnal Development Assistance
269
453
45
13
137
191
-1
10
50
4
2
-1
10
50
4
2
-1
6
61
264
20
19
(oo)
(oo)
-7
233
1,470
2
14
1
236
3
2
289
23
(oo)
314
(
5
4
17
268
447
45
13
131
191
249
450
47
13
121
171
6
61
264
20
19
-4
-7
39
65
258
19
19
1,453
1,447
14
18
1,288
43
1,247
66
("')
1,345
1,330
(
1
6
5
4
-4
15
248
445
47
13
116
171
39
65
258
19
19
-4
-4
1,431
18
289
23
1.289
43
314
1,346
( )
5
7
8
5
7
8
24
33
65
24
33
65
21
31
60
21
31
60
21
21
122
122
112
112
493
3,249
2,275
-5
17
21
151
3,249
2,275
-5
617
3,359
2,232
128
21
20
14
-8
136
165
1
1
4
-14
32
285
6,050
195
2
27
195
2
27
224
124
19
37
10
136
165
1
..
)
17
1
4
..
342
17
..
)
414
1,247
66
1,330
327
203
3,359
2,232
128
21
20
-327
740
5,637
380
21
-380
722
5,328
6,377
562
186
309
562
186
309
630
171
348
630
171
348
224
1,057
1,057
1,148
1,148
124
19
37
789
377
274
789
377
274
842
282
264
842
282
264
38
2
50
36
-50
359
28
498
330
-498
335
26
465
309
-465
217
52
165
1,800
527
1.273
1.723
491
1.232
13
3
7
15
(oo)
13
-13
7
111
45
51
134
6
111
-88
44
120
167
47
173
3
120
-6
45
464
68
396
3.064
666
2.397
3.205
667
2.538
283
-14
22
7.373
6
-7.067
7
164
7.252
205
8,350
17,194
28
1.067
(oo)
29
1,651
-223
283
-2
1.067
161
7.373
6
(oo)
(oo)
1.156
-1.156
-1
7
366
16,944
-1
...........
1
6
(oo)
-223
International Monetary Programs
Military Sales Programs:
Special defense acquisition fund
Foreign military sales trust fund
Kuwait civil reconstruction trust fund
Proprietary receipts from the public
Other
Total-Funds Appropriated to the President
38
59
7
2
21
43
316
Total-International Security Assistance
Total-Multilateral Assistance
(oo)
38
60
7
2
21
43
1,285
7
139
(oo)
7.067
8,594
-14
165
54
6.359
6
7,985
-1
7.252
151
-6.359
6
9,209
Table 5.
Outlays of the U.S. Government, April 1993 and Other Periods-Continued
[$ millions)
Classification
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross IAPPlicablel Outlays
Outlays
Receipts
Gross IAPPlicable I Outlays
Outlays
Receipts
Gross IAPPlic.able! Outlays
Receipts
Outlays
Department of Agriculture:
Agricultural Research Service
Cooperative State Research Service
Extension Service
Animal and Plant Health Inspection Service
Food Safety and Inspection Service
Agricultural Marketing Service
Farm Service Agency
Credit accounts.
Agricultural credit Insurance fund
Rural housing Insurance fund
Other
Watershed and flood prevenllOn operations
Conservation programs
Conservation operations
Salaries and expenses
Other
68
37
27
51
54
31
559
224
435
252
231
293
297
503
388
-21
1,020
1,969
(
.. )
..)
(" ')
(
16
18
64
145
19
16
18
64
145
19
127
1,755
339
810
123
629
6,142
52
323
111
17
6
-82
19
589
131
40
1,835
494
1,784
141
19,288
145
1,045
Total-Farm Service Agency
171
245
68
37
27
51
54
31
416
52
435
252
231
293
297
502
413
241
231
256
282
515
4
413
241
231
256
282
511
1,398
1,847
-378
122
1,389
2,580
1,663
1.836
-274
745
(
(
..)
3,246
.. )
..)
(
127
1,755
339
810
123
110
1,705
329
758
95
2,897
6,966
323
510
310
131
38
-684
173
652
101
23
1,761
705
15,086
145
13,490
150
(' ')
..
( )
110
1,705
329
758
95
3.499
3,467
510
Foreign assistance programs
Rural Development Administration:
Rural development insurance fund
Rural water and waste disposal grants
Other
Rural Electrification Administration
Federal Crop Insurance Corporation
Commodity Credit CorporallOn:
Price support and related programs
NallOnal Wool Act Program
2,382
141
Food and Nutrition Service:
Food stamp program
State child nutrition programs
Women, infants and children programs
Other
2,126
589
237
28
2,126
589
237
28
14,373
4,224
1,748
431
14,373
4,224
1,748
431
13,449
4,016
1.611
399
13,449
4.016
1,611
399
2,981
2,981
20,776
20,776
19,475
19,475
130
19
111
130
19
111
850
199
746
850
199
746
829
117
685
829
117
685
260
260
1,795
1,795
1.632
1,632
63
-75
373
25
640
348
-640
-150
367
19
715
348
-715
Total-Food and Nutrition Service
Forest Service:
National forest system
Forest service permanent appropriations
Other
Total-Forest Service
Department
Economic
Bureau of
Promotion
..
(
.......................
SCience and Technology
National Oceanic and Atmospheric Administration
Patent and Trademark Office
National Institute of Standards and Technology
Other
Total-Science and Technology
Other
Proprietary receipts from the public
Intrabudgetary transactions
Offsetting governmental receipts
)
206
4
598
3
75
..)
2
2,519
321
4,202
284
2
1.955
265
4,145
369
101
21
-194
440
9.345
150
-150
6,172
53,794
11,235
42,560
47,771
10,888
36,883
16
42
31
15
42
31
64
218
182
12
51
218
182
68
200
178
25
43
200
178
174
18
19
8
1,026
40
129
45
16
24
1,010
40
129
21
936
61
115
52
14
3
172
18
19
5
922
61
115
52
219
4
215
1,239
40
1,199
1,164
14
1,149
40
67
67
-67
)
91
-3
(")
(' ')
40
-91
-3
(")
(")
119
1,651
130
1,517
7,513
(
1,341
..
(
)
(
336
67
10
27
-10
..
( )
(' ')
(
321
1,770
27
.......................
279
..)
(
of Commerce:
Development Administration
the Census
of Industry and Commerce
Total-Department of Commerce
39
66
Other
Proprietary receipts from the public
Intrabudgetary transactions
Total-Department of Agriculture
150
17
6
124
23
)
15
8
..
..
..
(
)
1,646
Table 5.
Outlays of the U.S. Government, April 1993 and Other Periods-Continued
[$ millions]
This Month
Current Fiscal Year to Date
Gross IAPPlicablel 0 tI
Outlays
Receipts
u ays
Gross IAPPlicable lOti
Outlays
Receipts
u ays
Prior Fiscal Year to Date
Classification
Department of Defense-Military:
Military personnel:
Department of the Army
Department of the Navy
Department of the Air Force
Total-Military personnel
Operation and maintenance:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
Total-Operation and maintenance.
Procurement:
Department of the
Department of the
Department of the
Defense agencies
Army
Navy
Air Force
..............
Total-Procurement
Research. development. test. and evaluation:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
Total-Research, development, test and evaluation
Gross IAPPlicable
Outlays
Receipts
I
Outla s
y
3,271
3,033
2,378
3,271
3,033
2,378
17,397
16,627
12,832
17,397
16,627
12,832
18,051
16,308
11,530
18,051
16,308
11,530
8,682
8,682
46,856
46,856
45,889
45,889
2,166
2,208
2,468
2,046
2,166
2,208
2,468
2,046
14,051
13,980
13,911
10,674
14,051
13,980
13,911
10,674
15,743
15,496
15,057
6,447
15,743
15,496
15,057
6,447
8,888
8,888
52,617
52,617
52,742
52,742
963
2,576
1,700
312
963
2,576
1,700
312
6,709
17,215
14,551
2.018
6,709
17,215
14,551
2,018
7,085
18,805
15,679
1.980
7,085
18,805
15.679
1.980
5,551
5,551
40,493
40,493
43.548
43.548
563
795
815
785
563
795
815
785
3.587
4,625
7.546
5.275
3.587
4.625
7.546
5.275
3.505
4.545
7.037
4.867
3.505
4.545
7.037
4.867
2.958
2,958
21.033
21.033
19.954
19.954
Military construction
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
98
63
80
131
98
63
80
131
597
506
684
889
597
506
684
889
483
567
575
631
483
567
575
631
Total-Military construction
373
373
2.676
2.676
2.256
2.256
108
75
105
8
108
75
105
8
764
485
526
49
764
485
526
44
890
448
490
20
890
448
490
16
-22
2
117
4
117
4
-633
1.273
321
20
6
2,526
Family housing:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
Revolving and management funds:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
Trust funds:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
Proprietary receipts from the public:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies
Intrabudgetary transactions:
Department of the Army
Department of the Navy
Department of the Air Force
Defense agencies:
Defense cooperation account
Voluntary separation Incentive fund
Other
Offsetting governmental receipts:
Department of the Army
Defense agencies:
Defense cooperation account
Total-Department of Defense-Military
..)
(
-22
2
-633
(
(' ')
..)
(
-11
27
75
-4
)
..)
.. )
(
(
-419
-419
(
26.126
..)
(
91
26.036
9
(
..)
29
22
58
11
-27
-75
4
441
-33
15
441
-33
15
.............
..
2
3
18
3
5
18
5
2
..)
(
10
18
18
4
58
27
20
-50
211
184
263
-227
-211
-184
-263
227
(
..)
1.271
(
..)
4
321
20
6
2.525
..)
(
(
..)
10
20
17
-1
-50
124
242
197
89
-124
-242
-197
-89
125
493
106
125
493
106
186
706
15
186
706
15
-2
-949
-34
-2
-949
-34
-251
-251
-381
-381
..)
166.741
18
-18
9
-9
38
-38
4.910
-4.910
523
166,217
5,606
163,775
169,381
Table 5.
Outlays of the U.S. Government, April 1993 and Other Periods-Continued
[$ millions]
---.
Classification
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross [APPlicable [ Outlays
Outlays
Receipts
Gross [APPlicable [ Outlays
Receipts
Outlays
Gross !APPlicable[ Outlays
Outlays
Receipts
Department of Defense-Civil
C llf p"" l,f E(l~)lrleers
C\.Jf1:-' trlJCtlorl
77
117
105
~Jeneral
Opt::>ldtlon and maintenance. general
Ollle'l
Plopllf'tary receipts from the public
22
299
Total--Corps of Engineers
Military retirement
Payment to military retirement fund
Retired pay
Military retirement fund
Intrabudgetary transactions
Education benefits
Other
Proprietary receipts from the public
Total-Office of Elementary and Second any
Education
Office of Bilingual Education and Minority Languages
Affairs
Office of Special Education and Rehabilitative Services:
Special education
Rehabilitation services and disability research
Special Institutions for persons with disabilities
Office of Vocational and Adult Education
Office of Postsecondary Education:
College housing loans
Student financial assistance
Federal family education loans
Higher education
Howard UniverSity
Other
........................
Department of Energy:
A tomlc energy defense activities
Energy programs
General sCience and research activities
Energy supply. Rand D activities
Uranium supply and enrichment activities
Fossil energy research and development
Energy conservation
Strategic petroleum reserve
Nuclear waste disposal fund
Other
Total-Energy programs
Power Marketing Administration
Departmental administration
Proprietary receipts from the publiC
Intrabudgetary transactions
Offsetting governmental receipts
Total-Department of Energy
.. )
12.273
11,169
(
(
(
2.171
..)
19
4
14.910
-12.273
113
40
(
23
2,471
17,436
600
42
165
1
8
600
42
165
1
8
816
............................
95
603
835
661
-95
95
2,003
.. )
11,169
2
5
14,910
-12,273
113
37
-5
14.172
-11,169
113
64
3
6
14,172
-11,169
113
61
-6
128
17,308
16,448
104
16,344
4,007
725
966
9
46
4,007
725
966
9
46
4,017
594
937
7
41
4,017
594
937
7
41
816
5,753
5,753
5,596
5,596
30
30
121
121
111
111
236
166
11
204
236
166
11
204
1,615
1,202
79
971
1,615
1,202
79
971
1,454
1,204
60
481
1,454
1,204
60
481
13
-13
548
151
38
16
43
-34
5,163
2,926
428
120
5
12
4,711
2,939
407
118
9
42
)
9
5,163
2,926
428
120
5
-30
4,711
2,939
407
118
9
13
741
8,652
43
8,609
8,196
42
8,154
213
200
38
213
200
-38
171
209
9
30
45
-9
37
171
209
-37
22
2,268
18,806
81
18,725
17,482
80
17,402
975
975
6,434
6,434
6,343
6,343
127
227
96
32
42
90
18
21
(
127
227
96
32
42
90
18
20
840
1,551
658
232
285
275
147
95
2
840
1,551
658
232
285
275
147
93
757
1,555
784
242
259
112
179
345
2
757
1,555
784
242
259
112
179
343
654
(
653
4,081
2
4,079
4,234
2
4,232
235
48
161
74
48
-304
-12
1,232
271
841
840
251
807
49
33
251
-1,846
-144
-49
2,704
8,819
.. )
(
(
2,493
(
Office of Educational Research and Improvement
Departmental management
Proprietary receipts from the public
2.253
2.099
12,273
(
548
151
38
16
Total-Office of Postsecondary Education
120
603
835
661
.. )
.. )
19
5
Department of Education:
Office of Elementary and Secondary Education:
Compensatory education for the disadvantaged
Impact aid
School Improvement programs
Chicago litigation settlement
Indian education
Other
120
590
803
981
-120
2.374
2.171
. . . . . . . . . .. . . . . . . . .
590
803
981
277
(
Total-Department of Defense-Civil
Total-Department of Education
22
77
117
105
-22
.. )
(
753
30
45
2,290
..
.. )
)
304
-12
(
1,899
.. )
465
10
..)
..
..
)
)
6
391
271
-1,327
- 166
-6
1,434
2,176
9,676
(
..
1,327
-166
11,852
..
( )
1.846
-144
11,523
Table 5. Outlays of the U.S. Government, April 1993 and Other Periods-Continued
[$ millions]
Classification
Department of Health and Human Services, except Social
Security:
Public Health Service:
Food and Drug Administration
Health Resources and Services Administration
Indian Health Service
Centers for Disease Control .............
National Institutes of Health
Substance Abuse and Mental Health Services
Administration
Agency for Health Care Policy and Research
Assistant secretary for health
Total-Public Health Service
Federal hospital insurance trust fund:
Benefit payments
Administrative expenses and construction . . . . . . . . . . . .
Interest on normalized tax transfers
Quinquennial transfers to the general fund from FHI
Total-FHI trust fund
Federal supplementary medical insurance trust fund:
Benefit payments
...........
Administrative expenses and construction
Total-FSMI trust fund
Other
Total-Health Care Financing Administration
................
Total-Social Secunty Administration
Administration for children and families:
Family support payments to States
Low Income home energy assistance
.............
Refugee and entrant assistance
Community Services Block Grant
Payments to States for afdc work programs
Intenm assistance to States for legalization ............
Payments to States for child care assistance
Social services block grant
Children and families services programs
Payments to States for foster care and adoption
assistance
Other
Total-Administration for children and families
Administration on aging
Office of the Secretary
Propnetary receipts from the public
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross IAPPlicablel Outlays
Outlays
Receipts
Gross IAPPlicablel 0 II
Outlays
Receipts
u ays
Gross IAPPlicablel 0 II
Outlays
Receipts
u ays
67
198
160
101
1,036
(")
67
198
160
101
1,036
439
1,270
951
748
5,724
281
11
-47
1,585
33
72
1,806
10,823
6,651
3,704
6,651
3,704
8,159
161
436
1,270
951
748
5,724
430
1,165
850
603
4,972
1,585
33
72
1,592
58
94
10,821
9,764
43,033
26,148
43,033
26,148
38,087
24,659
38,087
24,659
8,159
161
51,730
695
51,730
695
45,755
720
45,755
720
8,321
8,321
52,425
52,425
46,474
46,474
4,667
141
4,667
141
29,810
843
29,810
843
28,126
900
28,126
900
4,808
4,808
30,653
30,653
29,026
29,026
-66
-66
73
73
-10
-10
23,417
23,417
152,332
152,332
138,236
138,236
1,532
67
3,439
1,532
67
3,439
4,614
472
14,459
4,614
472
14,459
4,424
487
10,718
4,424
487
10,718
5,038
5,038
19,545
19,545
15,629
15,629
1,272
61
35
32
61
8
35
323
221
1,272
61
35
32
61
8
35
323
221
9,223
956
230
253
421
80
189
1,755
2,068
9,223
956
230
253
421
80
189
1,755
2,068
9,049
904
159
271
343
419
9,049
904
159
271
343
419
1,654
2,292
1,654
2,292
166
166
1,412
..)
1,412
(' ')
1,361
1,361
(
(")
(")
16,451
281
11
-47
1,807
Health Care Financing Administration:
Grants to States for Medicaid
Payments to health care trust funds
Social Security Administration:
Payments to Social Security trust funds
Special benefits for disabled coal miners
Supplemental security income program
This Month
(")
3
3
2,213
2,213
16,585
16,585
16,451
5
36
5
36
-1,387
248
124
248
124
-9,016
96
1,387
11
9,016
3
427
1,165
850
603
4,972
1.592
58
94
3
7,930
9.761
96
-7,930
Table 5.
Outlays of the U.S. Government, April 1993 and Other Periods-Continued
[$ millions]
Department 01 Health and Human Services. except Social
Secunty:-Contlnued
Inlr abudgetary transactions
QUinquennial transfers to the general fund
From FHI. FOASI and FDI
Payments for health Insurance for the aged
Federal hospital Insurance trust fund
Federal supplementary medical Insurance trust fund
Payments for tax and other credits
Federal hospital Insurance trust fund
Other
Total-Department of Health and Human Services,
except Social Security ., ..............................
Department of Health and Human Services, Social
Security (ott-budget):
Federal old-age and survivors Insurance trust fund'
Benefit payments
Administrative expenses and construction
Payment to railroad retirement account
Interest expense on Interfund borrowings
Interest on normalized tax transfers
QUinquennial transfers to the general fund from
FOASI
Total-FOASI trust fund
Federal disability Insurance trust fund
Benefit payments
Administrative expenses and construction
Payment to railroad retirement account
Interest on normalized tax transfers
QUinquennial transfers to the general fund from FDI
Total-FDI trust fund
Propnetary receipts from the public
Intrabudgetary transactions 1
Total-Department of Health and Human Services,
Social Security(off-budget) , .............................
Department of Housing and Urban Development:
Housing programs
PubliC enterprise funds
Credit accounts:
Federal houSing administration fund
Housing for the elderly or handicapped fund
Other
Rent supplement payments
Homeownershlp assistance
Rental housing assistance
Rental housing development grants
Low-rent publiC housing
PubliC housing grants
College housing grants
Lower Income housing assistance
Section 8 contract renewals
Other
Total-Housing programs
PubliC and Indian Housing programs'
Low-rent publiC housing-Loans and other expenses
Payments for operation of low-Income housing
prOlects
Community Partnerships Against Crime
Total-Public and Indian Housing programs
Government National Mortgage Association:
Management and liquidating functions fund
Guarantees of mortgage-backed secuntles
Total-Government National Mortgage Association
Community Planning and Development
Community Development Grants
Other
Total-Community Planning and Development
Gross IAPPlicablel Outlays
Outlays
Receipts
-3,704
28,811
-3,704
1,387
Prior Fiscal Year to Date
Current Fiscal Year to Date
This Month
Classlfication
Gross IAPPlic.able
Outlays
Receipts
I Outlays
Gross
Outlays
IApplicable
I Outlays
Receipts
-25,667
-25,667
-23,990
-23,990
-481
-481
-669
-669
164,490
155,518
9,019
7,932
147,585
27,424
173,509
22,267
163
22.267
163
153.105
1.104
153.105
1.104
145.035
1.092
145.035
1.092
22.430
22.430
154.209
154.209
146.127
146,127
2.912
82
2.912
82
19,214
519
19,214
519
17,187
502
17,187
502
2.994
19,734
19,734
17,689
2,994
(
..)
-1,535
(* *)
(* *)
-1,535
-4,624
r
17,689
(* *)
*)
-4,624
-4,454
n
-4,454
23,889
(* *)
23,889
169,319
(* *)
169,318
159,362
(* *)
159,362
4
6
-1
43
40
3
18
41
-23
612
399
28
5
8
51
873
58
-261
341
28
5
8
51
3,975
374
404
419
165
33
47
382
13
496
1.401
11
6.479
1,348
12
5,965
644
4
33
47
383
12
509
1,158
12
6,221
793
12
4,354
387
53
212
2
1,111
224
2
4,379
793
165
33
47
382
13
496
1.401
11
6.479
1,348
12
1,611
258
3
33
47
383
12
509
1,158
11
6,221
793
12
1,774
15,601
4,389
11,213
15,809
4,783
11,027
7
6
129
23
106
142
29
113
216
11
216
11
1,380
56
1,380
56
1,202
12
233
232
1,565
23
1,542
1,356
(
(* 0)
..)
(
53
212
2
1,111
224
2
2,710
937
.. )
.. )
..
(
)
..)
(
..
)
..
(
)
1.202
12
29
1,326
.. )
(
46
98
-53
691
2
956
-2
-266
1,094
2
1.404
-2
-309
46
99
-53
691
959
268
1,094
1.406
-312
246
42
9
246
33
1,837
234
67
1,837
167
1,753
247
63
1,753
184
288
9
279
2,071
67
2,004
2,000
63
1,937
(
12
(
Table 5.
Outlays of the U.S. Government, April 1993 and Other Periods-Continued
[$ millions]
This Month
Classification
Gross IAPPlicable
Outlays
Receipts
Department of Housing and Urban Development:Continued
Management and Administration
Other
Proprietary receipts from the public
Total-Department of Housing and Urban
Development .............................................
Department of the Interior:
Land and minerals management:
Bureau of Land Management:
Management of lands and resources
Fire protection
Other
Minerals Management Service
Office of Surface Mining Reclamation and
Enforcement
74
6
3,357
Current Fiscal Year to Date
I Outlays
Gross IApplicable
Outlays
Receipts
335
21
21
74
6
-21
1,067
2,290
20,284
60
10
16
66
60
10
16
66
Prior Fiscal Year to Date
I Outlays
Gross IAPPlicable
Outlays
Receipts
I OutIays
316
23
149
335
21
-149
5,586
14,698
20,599
335
335
72
72
116
414
116
414
315
75
174
375
315
75
174
375
149
316
23
-149
6,430
14,168
26
26
177
177
175
175
176
176
1,115
1,115
1,114
1,114
22
28
32
81
19
18
149
163
277
380
119
83
17
149
163
194
380
102
164
137
345
384
123
72
2
22
28
15
81
16
19
164
137
273
384
104
182
20
162
1,087
100
987
1,153
91
1,062
189
117
189
117
769
839
769
839
579
780
579
780
306
306
1,608
1,608
1,360
1,360
107
21
17
7
107
21
9
804
123
147
14
804
123
133
657
254
210
11
657
254
198
Total-Bureau of Indian Affairs
145
7
137
1,075
14
1,061
1,120
11
1,109
Territorial and international affairs
Departmental offices
Proprietary receipts from the public
Intrabudgetary transactions
Offsetting governmental receipts
16
12
16
12
-151
-69
168
73
168
73
-1,179
-86
223
56
1,070
4
223
56
-1,070
-82
-4
1,176
3,767
42
246
1,924
1,068
433
750
1,238
451
190
-37
-246
288
5,770
Total-Land and minerals management
Water and science:
Bureau of Reclamation:
Construction program
Operation and maintenance
Other
Geological Survey
Bureau of Mines
Total-Water and science
Fish and wildlife and parks:
United States Fish and Wildlife Service
National Park Service
Total-Fish and wildlife and parks
Bureau of Indian Affairs:
Operation of Indian programs
Indian tribal funds
Other
151
...............
Total-Department of the Interior .......................
Department of Justice:
Legal activities
Federal Bureau of Investigation
Drug Enforcement Administration
Immigration and Naturalization Service
Federal Prison System
Office of Justice Programs
Other
Intrabudgetary transactions
Offsetting governmental receipts
Total-Department of Justice ...........................
Department of Labor:
Employment and Training Administration:
Training and employment services
Community Service Employment for Older Americans
Federal unemployment benefits and allowances
State unemployment insurance and employment service
operations
Payments to the unemployment trust fund
Advances to the unemployment trust fund and other
funds
-69
1,179
.. )
-86
178
590
5,039
9
1,745
1,198
453
888
1,288
558
687
-187
50
188
246
81
171
175
72
94
-3
-50
59
975
6,631
316
30
11
316
30
11
40
911
222
(
769
188
246
81
171
184
..)
72
94
-3
1,034
13
(
(
..)
..
(
-82
)
1,293
3,747
4,943
54
1,924
1,068
433
750
1,280
451
190
-37
274
1,745
1,198
453
888
1,233
558
687
-187
-274
328
6,302
6,058
2,142
225
90
2,142
225
90
2,089
232
68
2,089
232
68
40
911
81
6.430
81
6.430
76
76
222
506
506
135
135
Table 5.
Outlays of the U.S. Government, April 1993 and Other Periods-Continued
[$ millions]
Current Fiscal Year to Date
This Month
Class Iflcatlon
Department of Labor:-Contlnued
Ur1t'rnplovment trust fund
F('(1er ill~State unemployment Insurance
State unemployment benefits
State administrative expenses
Federal administrative expenses
Veterans employment and training
Repayment of advances from the general fund
Railroad unemployment Insurance
Other
Total- Unemployment trust fund
Other
Total-Employment and Training Administration
Pension Benefit Guaranty Corporation
Employment Standards Administration'
Salaries and expenses
Special benefits
Black lung disability trust fund
Other
Occupational Safety and Health Administration
Bureau of Labor Statistics
Other
Proprietary receipts from the public
Intrabudgetary transactions
Gross
Outlays
[APPlicable[ Outlays
Receipts
Gross [APPlicable
Outlays
Receipts
I Outlays
Prior Fiscal Year to Date
Gross
Outlays
IApplicable
I Outlays
Receipts
3,142
203
11
16
3,142
203
11
16
21,936
1,937
70
103
21,936
1,937
70
103
21,611
1,817
147
100
21,611
1,817
147
100
8
2
8
2
48
12
48
12
59
14
59
14
3,381
3,381
24,105
24,105
23,750
23,750
5
5
45
45
44
44
4,917
4,917
33,624
33,624
26,393
26,393
-23
484
-601
448
17
179
54
9
22
17
31
134
-91
358
134
-91
358
72
163
163
252
-2
-7,462
137
-146
367
68
184
125
270
-448
26,610
27,398
65
288
17
179
54
9
22
17
31
(' ')
1,085
72
163
163
252
2
(' ')
739
-291
137
-146
367
68
184
125
270
-1
-448
-1,094
-7,462
4,129
27,697
176
33
176
33
1,205
268
1,205
268
1,130
173
1,130
173
33
5
33
5
119
236
57
119
236
57
113
221
58
113
221
58
Total-Administration of Foreign Affairs
246
246
1,886
1,886
1,696
1,696
International organizations and Conferences
Migration and refugee assistance
International narcotics control
Other
Proprietary receipts from the publiC
Intrabudgetary transactions
OffsetMg governmental receipts
26
37
13
7
26
37
13
7
895
401
80
49
895
401
80
49
824
293
74
41
824
293
74
41
Total-Department of Labor
.............................
Department of State:
AdmlnlstrallOn of Foreign Affairs:
Salaries and expenses
AcqulslllOn and maintenance of buildings abroad
Payment to Foreign Service retirement and disability
fund
Foreign Service retirement and disability fund
Other
..............................
-1,094
4,217
88
1,087
.. )
(
-165
("J
..)
(
741
..)
(
-165
-113
3,145
2,814
26,657
..
(
)
-113
(0
oJ
329
329
3,146
876
2
16
876
2
16
8,154
87
127
8,154
87
127
7,592
71
75
7,592
71
75
894
894
8,368
8,368
7,737
7,737
Natronal Highway Traffic Safety Administration
24
24
140
140
133
133
Federal Railroad Administration:
Grants to National Railroad Passenger Corporation
Other
83
37
83
37
345
211
10
345
202
376
179
9
376
170
120
119
557
10
547
555
9
546
Total-Department of State
Department of Transportation:
Federal Highway Administration
Highway trust fund'
Federal-aid highways
Other
Other programs
Total-Federal Highway Administration
Total-Federal Railroad Administration
14
2,814
Table 5.
Outlays of the U.S. Government, April 1993 and Other Periods-Continued
[$ millions]
Classification
Department of Transportation:-Continued
Federal TranSit Administration:
Formula grants
Discretionary grants
Other
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross IAPPlicablel Outlays
Outlays
Receipts
Gross IAPPlicablel 0 II
Outlays
Receipts
u ays
Gross IAPPlicablel 0 II
Outlays
Receipts
u ays
352
352
~13
~13
4
4
1,214
618
196
1,214
618
196
1,222
685
276
1,222
685
276
200
200
1,353
1,353
1,404
1,404
99
201
17
190
99
201
17
190
1,124
1,147
111
1,330
1,124
1,147
111
1,330
962
998
118
1,231
962
998
118
1,231
508
508
3,712
3,712
3,309
3,309
(. 'j
~1
(. 'j
2
~1
(. 'j
~1
Total-Federal AViation Administration
708
707
5,066
2
5,064
4,713
4,712
Coast Guard'
Operating expenses
Acquisition, construction, and improvements
Retired pay
Other
283
35
108
283
35
108
1,393
241
259
186
Federal Aviation Administration:
Operations
Airport and airway trust fund:
Grants-in-aid for airports
Facilities and equipment
Research, engineering and development
Operations
Total-Airport and airway trust fund
Other
Total-Coast Guard
Maritime Administration
Other
Proprietary receipts from the public
Intrabudgetary transactions
Offsetting governmental receipts
Total-Department of Transportation ...................
Department of the Treasury:
Departmental offices:
Exchange stabilization fund
Other
Financial Management Service:
Salaries and expenses
Payment to the Resolution Funding Corporation
Claims. Judgements, and relief acts
Other
Total-Financial Management Service
Federal FinanCing Bank
Bureau of Alcohol. Tobacco and Firearms:
Salaries and expenses
Internal revenue collections for Puerto Rico
United States Customs Service
Bureau of EngraVing and Printing
United States Mint
Bureau of the Public Debt
Internal Revenue Service:
Processing tax returns and assistance
Tax law enforcement
Information systems
Payment where earned income credit exceeds liability
for tax
Health Insurance supplement to earned income credit
Refunding Internal revenue collections, interest
Other
Total-Internal Revenue Service
(. 'j
(. 'j
1,467
151
343
143
3
1,467
151
343
139
3
1,393
241
259
183
426
(. 'j
426
2,104
3
2,100
2,080
3
2,077
203
45
107
2
96
43
757
217
450
209
641
196
(. 'j
(. 'j
358
8
2
284
188
(. 'j
307
8
2
~3
322
~22
(. 'j
~1
1
~2
~2
~3
38
~8
2,653
19,233
339
18,893
18,239
404
17,836
~137
~138
~694
6
~700
14
98
98
-957
16
9
14
-966
16
25
587
25
9
25
587
25
9
136
1,751
333
98
136
1,751
333
98
142
1,751
552
103
142
1,751
552
103
645
645
2,319
2,319
2,548
2,548
~104
2,763
110
~109
~109
~103
-103
~104
36
12
189
10
36
12
189
10
209
125
1,099
~13
~13
~36
19
19
216
115
1,034
14
28
173
209
125
1,099
~36
216
115
1,034
14
28
173
63
134
63
134
208
480
136
208
480
136
948
2,270
731
948
2,270
731
990
2,143
648
990
2,143
648
1,123
80
94
20
1,123
80
94
20
8,331
550
1,064
91
(. 'j
8,331
550
1,064
91
6,310
407
2,208
83
3
6,310
407
2,208
79
2,140
2,140
13,986
(. 'j
13,986
12,789
3
12,785
15
Table 5.
Outlays of the U.S. Government, April 1993 and Other Periods-Continued
[$ millions]
------
---------"-
!
ClassIfication
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross !APPlicable! Outlays
Outlays
Receipts
Gross IAPPlicablel Outla s
Outlays
Receipts
Y
Gross IAPPlicablel Outla s
Outlays
Receipts
y
Department of the Treasury:-Continued
United States Secret Service
Comptroller of the Currency
Office of Thrift Supervlson
Interest on the public debt
Public Issues (accrual basIs)
Special Issues (cash basIs)
Total-Interest on the pubhc debt
Department of Veterans Affairs:
Veterans Health Administration:
Medical care
Other
Veterans Benefits Administration
PubliC enterprise funds
Loan guaranty revolving fund
Other
Compensation and pensions
Readjustment benefits
Post-Vietnam era veterans education account
Insurance funds
National service life
United States government hfe
Veterans special life
Other
Total-Veterans Benefits AdministratIOn
203
108
309
24
20
295
200
149
178
156
295
21
-7
17,159
807
-4
17,159
811
119,629
43,380
-4
119,629
43,385
123,395
40,696
5
123,395
40,691
17,965
-4
17,970
163,010
-4
163,014
164,091
5
164,086
6
38
36
1,167
36
-1.167
26
-38
1,319
26
-1,319
-1,502
-52
-7,874
416
-7,874
-416
-10.118
52
378
-10,118
-378
19,374
15
19,358
173,021
1,895
171,126
170,551
2,048
168,502
1,122
6
22
1,122
-16
8,240
463
149
8,240
314
7.967
251
147
7,967
103
123
19
2,800
54
16
1,827
896
11,140
536
74
903
445
11,140
536
74
4776
5639
9,543
454
87
106
1
8
6
631
11
76
-3
631
11
-20
-3
984
18
99
-2
3,133
15,190
13,718
12,599
42
87
334
674
333
674
381
620
173
86
2,800
54
16
50
67
106
11
6
4
3,254
121
(
.................
Environmental Protection Agency:
Program and research operations
Abatement, control, and compliance
Water Infrastructure financing
Hazardous substance superfund
Other
Proprietary receipts from the publiC
Intrabudgetary transactions
Offsetting governmental receipts
..
4,512
924
451
96
1,472
(
..)
37
-37
236
(. ')
..)
-236
(")
(
25
-25
516
-516
-8
-19
22,519
21,798
679
520
1,411
765
456
6
530
735
1,196
812
469
-107
-250
-6
130
3,379
3,581
-63
76
-49
12
22
3
-25
25
-25
12
22
-3
3
6
-2
)
68
157
142
128
39
205
(")
15
(")
-8
4,307
24,893
68
157
142
128
39
-15
530
735
1,196
812
486
2,374
17
107
-250
-1
...............
General Services Administration:
Real property act,v,lies
Personal property actiVities
Information Resources Management Service
Federal property resources actiVities
General actiVities
Proprietary receipts from the publiC
Total-General Services Administration
309
227
128
42
87
Construction
Departmental administration
Proprietary receipts from the public
National service hfe
United States government hfe
Other
Intrabudgetary transactions
Total-Environmental Protection Agency
55
48
13
-1,502
. . . . . . . . . . . .. . . . . . . . .
Total-Department of Veterans Affairs
3
2
6
Other
Proprietary receipts from the pubhc
Receipts from off-budget federal entllieS
Intra budgetary transactions
Offsetting governmental receipts
Total-Department of the Treasury
55
51
15
535
17
-608
78
-64
2
-11
................
-604
518
3,509
-608
78
-64
2
-11
-25
25
-25
12
22
.. )
(' ')
(
( )
-604
..
16
9
..
(
)
688
415
96
1,199
..
(
88
223
9,543
454
87
984
18
4
-2
11,400
)
381
620
242
..)
-242
245
-245
-19
1,833
19,965
(
4
17
95
-250
..
( )
679
517
1,411
765
439
-95
-250
116
3,464
17
-63
76
-49
12
22
-17
17
-19
Table 5" Outlays of the U"S" Government, April 1993 and Other Periods-Continued
[$ millions)
This Month
Classification
Gross IAPPlicable
Outlays
Receipts
National Aeronautics and Space Administration:
Research and development
Space flight. control. and data communications
.. . . . . .. . . ...
Construction of facilities
Research and program management
.. . . . . .. . . ...
Other
Total-National Aeronautics and Space
Administration ............................................
Office of Personnel Management:
Government payment for annuitants. employees health
and life insurance benefits
Payment to civil service retirement and disability fund
Civil service retirement and disability fund
...........
Employees health benefits fund
Employees life insurance fund
Retired employees health benefits fund
Other
Intrabudgetary transactions:
Civil service retirement and disability fund:
General fund contributions
Other
Total-Office of Personnel Management
Small Business Administration:
Public enterprise funds:
Business loan fund
Disaster loan fund
Other
Other
...............
...........
Total-Small Business Administration
..................
Other independent agencies:
Action
Board for International Broadcasting
Corporation for Public Broadcasting
District of Columbia:
Federal payment
Other
............
Equal Employment Opportunity Commission
Export-Import Bank of the United States
Federal Communications Commission
Federal Deposit Insurance Corporation:
Bank Insurance fund
...........
Savings association insurance fund
FSLlC resolution fund
Federal Emergency Management Agency:
Public enterprise funds
Disaster relief
Emergency management planning and assistance
Other
Federal Trade Commission
Interstate Commerce Commission
Legal Services Corporation
National Archives and Records Administration
National Credit Union Administration:
Credit union share insurance fund
Central liquidity facility
Other
I Outlays
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross IAPPlicablel
Outlays
Receipts
Outlays
Gross IAPPlicable lOti
Outlays
Receipts
u ays
620
443
60
125
620
443
60
125
4.105
2.995
332
932
9
4.105
2.995
332
932
9
3.750
3.134
252
1.129
8
3.750
3.134
252
1.129
8
1,249
1,249
8,373
8,373
8,273
8,273
369
369
2.135
2.135
1.969
1.969
2.966
1.318
110
1
19
1.363
121
("")
19.694
-200
-602
65
19.694
7.992
690
5
103
("")
("")
-25
-33
-33
20.129
-409
-544
19
20.129
8.364
763
5
65
-4
-25
3,294
31,437
10,084
21,352
30,419
9,489
20,930
616
268
29
296
429
294
9
633
280
33
112
476
307
12
(" ")
187
-26
20
296
(" ")
157
-27
21
111
732
478
1,058
795
263
119
135
319
112
126
327
691
3
115
1.140
70
1.256
29
691
-34
115
-115
41
2.966
-45
-11
(" ")
-4
(" ")
8.773
1.307
5
(" ")
8.192
1.292
5
(" ")
103
4,780
1,485
57
20
3
50
56
40
1
("")
-21
3
50
130
97
33
1,210
16
7
16
7
119
135
319
1
21
13
16
171
4
1
21
-158
11
698
3
132
744
77
1.215
23
698
-21
132
-472
54
1.074
7
162
1.455
13
173
-381
-6
-12
5.697
4
1.961
10.541
432
891
-4.845
-428
1.071
12.810
-6
3.778
7.600
201
1,476
5.211
-208
2.302
125
178
13
33
9
4
31
13
13
413
1.112
132
188
53
25
238
117
192
221
1.112
132
188
53
25
238
117
241
424
150
183
52
25
182
106
174
("")
112
178
13
33
9
4
31
13
68
424
150
183
52
25
182
106
4
12
1
-4
323
75
45
204
250
-23
443
358
(" ")
34
75
16
-289
("")
5
12
-4
(" ")
17
24
("")
(" ")
(" ")
-29
112
126
327
37
(" ")
-239
-109
-24
Table 5.
Outlays of the U.S. Government, April 1993 and Other Periods-Continued
[$ millions]
This Month
C lasslfication
Gross IAPPlicablel Outlays
Outlays
Receipts
Other Independent agencles:-Continued
Natlorlri,1 Endowment for the Arts
Natlon(ll Endowment for the Humanlt.es
Natlon~1 Labor Relations Board
Nuclear Regulatory Commission
Panama Canal Commission
Postal Service
PubliC enterprise funds (off-budget)
Payment to the Postal Service fund
IAPPlicabl~(
Receipts
Gross IAPPlicablel Outla s
Outlays
Receipts
Y
Gross
Outlays
102
81
97
1.188
327
292
-2.104
130
26.369
393
171
44
171
44
180
180
180
180
(.o)
(.o)
(.oj
(' 'J
( )
-88
90
6
-620
621
43
5
1.686
6
-602
602
42
1.625
5
-602
602
42
("J
1.625
2.724
2.666
-1.138
30
26.909
130
25
14
25
14
(00)
-88
90
6
93
47
4,252
250
(
.. )
250
(
.. )
-620
621
43
5
1.686
6
387
387
2,724
(
.. )
0 tl
u ays
102
85
101
1.301
-30
-19
102
85
101
1.301
277
300
3,113
30
Railroad Retlfement Board
Federal Windfall subSidy
Federal payments to the railroad retlfement accounts
Regional rail transportation protective account
Rail Industry pension fund
Advances from FOASDI fund
OASDI certifications
Administrative expenses
Interest on refunds of taxes
Supplemental annUity pension fund
Other
Intra budgetary transactions
Social Security eqUivalent benefit account
Payments from other funds to the railroad
retlfement trust funds
Other
Prior Fiscal Year to Date
12
12
20
163
-52
-3
12
12
20
163
42
44
NatlurI.ll SCience Foundation
Current Fiscal Year to Date
(.o)
307
319
29.013
102
81
97
1.188
273
297
28.096
55
-5
-1.727
393
..
(.o)
5
2,666
-14
-14
-44
-44
-180
-180
Total-Railroad Retirement Board
670
670
4.636
4,636
4,518
4,518
Resolution Trust Corporation
Securities and Exchange Commission
Smithsonian Institution
Tennessee Valley AuthOrity
United States Information Agency
Other
522
10
40
832
92
43
3.220
8.748
59
229
4.944
623
708
21.200
119
-12,452
59
229
1.261
623
588
35,128
64
221
2.199
592
723
31,171
6
-2,698
10
40
217
92
37
1,384
2
125
3,957
64
221
815
590
598
7,382
10,080
-2,697
61,443
68,403
-6,960
93,255
72,923
20,332
(.o)
(00)
(00)
( )
Total-Other independent agencies
....................
Undistributed offsetting receipts:
Other Interest
Employer share, employee retirement:
Legislative Branch
United States Tax Court'
Tax court Judges surVivors annUity fund
The JudiCiary
JudiCial survivors annuity fund
Department of Defense-CIvil
MIlitary retirement fund
Department of Health and Human Services:
Federal old-age and surVivors Insurance fund (offbudget)
Federal employer contributions
Payments for military service credits
Federal disability Insurance trust fund (off-budget):
Federal employer contributions
Payments for military service credits
Federal hospital Insurance trust fund
Federal employer contributions
Payments for military service credits
Department of State
Foreign Service retlfement and disability fund
Office of Personnel Management
C,v,l service retlfement and disability fund
Independent agencies
Court of veterans appeals retirement fund
Total-Employer share, employee retirement
615
(.o)
..)
(
(
..)
3,682
(.o)
(00)
(00)
(00)
..
.. )
(
-1.099
-1,099
-7,663
-7,663
-9,515
-9,515
-460
-460
-3,087
-3,087
-2,935
-2,935
-49
-49
-330
-330
-317
-317
-185
-185
-1,309
-1,309
-1,283
-1,283
-13
-13
-65
-65
-57
-57
-931
-931
-5,563
-5.563
-5.416
-5,416
-2,737
-2,737
-18,017
-18.017
-19,523
-19,523
18
Table 5.
Outlays of the U.S. Government, April 1993 and Other Periods-Continued
[$ millions]
Classification
Undistributed offsetting receipts:-Continued
Interest received by trust funds:
The Judiciary:
Judicial survivors annuity fund
Department of Defense-Civil
Corps of Engineers
Military retirement fund
..................
Education benefits fund
Soldiers' and airmen's home permanent fund
Other
........... ...............
Department of Health and Human Services:
Federal old-age and survivors insurance trust fund
(off-budget)
Federal disability insurance trust fund (off-budget)
Federal hospital insurance trust fund
Federal supplementary medical insurance trust fund
Department of Labor:
Unemployment trust fund ...............
Department of State:
Foreign Service retirement and disability fund
Department of Transportation:
Highway trust fund
Airport and airway trust fund
Oil spill liability trust fund
Department of Veterans Affairs:
National service life insurance fund
...........
United States government life Insurance Fund
Environmental Protection Agency
National Aeronautics and Space Administration
Office of Personnel Management
Civil service retirement and disability fund
Independent agencies:
Railroad Retirement Board
Other
Other
Total-Interest received by trust funds
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross !APPlicable!
Outlays
Receipts
Outlays
Gross !APPlicable! 0 tl
Outlays
Receipts
u ays
Gross !APPlicable! 0 tI
Outlays
Receipts
u ays
-5
-5
-9
-9
-8
-8
(")
(")
-156
-156
(' ')
(")
-5
-5
-5
-4,936
-30
-15
-5
-4,936
-30
-15
-8
-4,510
-33
-6
-8
-4,510
-33
-6
(")
(")
-50
-18
-10
-19
-50
-18
-10
-19
-12,597
-538
-5,247
-934
-12,597
-538
-5,247
-934
-11,096
-542
-4,977
-878
-11,096
-542
-4,977
-878
-21
-21
-1,388
-1,388
-2,114
-2,114
(")
(")
-268
-268
-253
-253
-3
-4
-3
-4
(")
(")
-757
-563
-39
-757
-563
-39
-785
-644
-4
-785
-644
-4
-541
-6
-1
-1
-541
-6
-1
-1
-540
-6
-2
-1
-540
-6
-2
-1
-2
-2
(")
(")
-1
-1
-32
-32
-12,480
-12,480
-11,755
-11,755
-40
-40
(")
(")
-557
-7
-6
-470
2
-68
-470
2
-68
-40,922
-38,698
-37
-37
-557
-7
-6
-403
-403
-40,922
198
-198
-3,140
198
-3,338
Total outlays "', .. ,", .... " .... " .. " .... , .... , ............ ,
142,266
18,231
Total on-budget ...........................................
115,840
13,980
Total off-budget ...........................................
26,425
4,252
Rents and royalties on the outer continental shelf lands
. ........................... .
Sale of major assets
Total-Undistributed offsetting receipts ................
1,622
-1,622
-58,939
1,622
-60,561
124,034
960,093
125,769
101,861
780,417
96,756
22,174
179,676
29,013
150,662
-38,698
1 ,417
-1,417
-58,221
1,417
-59,639
834,323
949,976
133,122
816,853
683,661
779,134
105,026
674,108
170,841
28,096
142,745
Total surplus (+) or deficit ................................
+8,088
-174,737
-184,764
Total on-budget ...........................................
-5,448
-202,953
-218,167
Total off-budget ...........................................
+13,535
+28,216
+33,403
MEMORANDUM
Receipts offset against outlays
[$ millions]
Current
Fiscal Year
to Date
Proprietary receipts
Receipts from off-budget federal entities
Intrabudgetary transactions
Governmental receipts
Total receipts offset against outlays
Comparable Period
Prior Fiscal Year
24,626
23,210
118,701
~
144,400
109,806
5,890
138,906
'Outlays have been Increased by $16 million In September 1992 for unreported disbursements
'Includes FICA and SECA tax cred,ts, non-contributory military service credits, special benefits
for the aged, and cred,t for unnegot,ated OASI benefit checks
'Includes a decrease ,n net outlays of $22 million lor amortizat,on of zero coupon bonds
'Includes a reclassification from an offsetting governmental receipt to a governmental receipt
of $9 million for FY 1992 and $3 million for FY 1993 for the account "Recoveries, Oil Spill Liability
Trust fund"
made to finanCing accounts
'Outlays have been increased by $144 million in September 1992 for unreported disburse·
ments made to financing accounts by the Guaranty and Indemnity fund
... No Transactions
(0 0) Less than $500,000
Note: Details may not add to totals due to rounding
19
Table 6.
Means of Financing the Deficit or Disposition of Surplus by the U.S. Government, April 1993 and Other Periods
[$ millions)
Net Transactions
( ) denotes net reduction of either
liability or asset accounts
Assets and Liabilities
Directly Related to
Budget Oll·budget Activity
Account Balances
Current Fiscal Year
Beginning of
Fiscal Year to Date
This Month
This Year
LiabilIty accounts:
Bcmowlng Irom the publiC
Public debt SeCUrities, Issued under general FInanCIng authorities,
Obligations of the United States, Issued by
United States Treasury
Federal Financing Bank
Total, public debt securlttes
This Year
I This Month
23,504
189,464
226,670
4,049,621
15,000
4,215,580
15,000
4,239,084
15,000
23,504
189,464
226,670
4,064,621
4,230,580
4,254,084
-5
5,744
-34
5,292
231
1,836
1,032
81,090
1,003
80,639
998
86,382
17,756
184,138
225,065
3,984,565
4,150,946
4,168,702
Plus premium on public debt seCUritIes
Less discount on publiC debt seCUrities
Total public debt securitIes net of Premium and
discount
I Prior Year
Close of
This month
Agency SeCUrities, Issued under special financing authorities (see
Schedule B for other Agency borrowing, see Schedule C)
570
2,247
-1,762
18,030
19,707
20,277
18,326
186,385
223,303
4,002,595
4,170,654
4,188,979
12,840
39,534
48,685
1,016,453
1,043,147
1,055,987
-22
168
4,607
12,415
12,605
12,583
12,862
39,365
44,077
1,004,038
1,030,542
1,043,404
Total borrowing from the public
5,464
147,019
179,226
2,998,556
3,140,112
3,145,575
Accrued Interest payable to the public
Allocations of special drawing rights
Deposit funds
Miscellaneous liability accounts (includes checks outstanding etc,)
5,913
126
388
8,853
5,404
-242
41
7,557
7,463
-187
-1,473
44,212
7,216
6,422
2,143
43,703
6.848
6,075
847
49,616
6,974
6,463
9,700
20,744
159,778
185,038
3,058,550
3,197,584
3,218,328
521
18,424
-17,313
-980
-3,236
2,857
24,586
34,203
6,752
14,799
7,273
33,223
18,945
-18,293
-379
58,789
21,551
40,496
160
-3,164
2,000
208
12,111
-10,018
8,787
-8,018
8,947
-8,018
160
-1,164
208
2,093
769
929
681
-90
1
12,063
-696
-9,211
-27
32
-139
-8
19,699
6,692
-15,381
-73
31,762
5,315
-24,502
-101
31,762
5,996
-24,592
-100
Total federal seCUrities
Deduct
Federal seCUrities held as Investments of government accounts
(see Schedule D)
Less discount on federal securities held as investments of
government accounts
Net federal securities held as investments of government
accounts
Total liability accounts ................................................... .
Asset accounts (deduct)
Cash and monetary assets:
US Treasury operating cash:'
Federal Reserve account
Tax and loan note accounts
Balance
Special drawing rights
Total holdings
SDR certificates Issued to Federal Reserve banks
Balance
Reserve pOSition on the U,S, quota In the IMF:
U S subSCription to International Monetary Fund:
Direct quota payments
Maintenance of value adJustments
Letter of credit Issued to IMF
Dollar deposits With the IMF
Recelvable,Payable (-) for Interim maintenance of value
ad,ustments
9
-457
413
-17
-1,167
-297
-754
134
2,541
-133
9,770
12,177
12,312
2,839
1,068
20,714
(oo)
23,842
(00)
22,071
24.910
22,078
-15,847
20,410
94,494
56,568
78,646
542
339
5,905
-1,681
1,279
1,480
-1,405
1,417
-19,968
2·1,591
23,052
-1,411
-3,815
3,992
-5,837
-3,272
4,331
., ..... ,., ......................................... ..
28,865
-14,770
454
94,544
50,909
79,774
Excess of liabilities (+) or assets (-) .................................. ..
-8,122
+174,548
+184,584
+2,964,006
+3,146,676
+3,138,554
34
189
180
155
189
-8,088
+174,737
+184,764
+3,146,831
+3,138,743
Balance
Loans to International Monetary Fund
Other cash and monetary assets
Total cash and monetary assets
Net activity, guaranteed loan financing
Net activity, direct loan financing
Miscellaneous asset accounts
Total asset accounts
Transactions not applied to current year's surplus or deficit (see
Schedule a for Details)
Total budget and oll·budget federal entities (financing of deficit (+)
or disposition of surplus (-)) ...... ' .......... , ............ , .............. .
'Maior so,,':es 01 Information used to determine Treasury"s operating cash Income Include the
+2,964,006
(oo)
69
'The guaranteed and direct loan financing accounts have been Increased In September 1992
by $144 million and $17 million respectively, to record unreported credit reform activity for the
Department of Veterans AffairS
No Transactions
( •• ) Less than $500,000
Note' Details may not add to totals due to rounding
Oali~ 8ala"ce \\I res from Federal Reserve Banks, reporting from the Bureau of PubliC Oebt.
t"ansfers through the Treasury Financial Communication System and reconclltng Wires
fro""" Interna Re .. enue Centers Operating cash IS presented on a modified cash basIs, deposits
are reflecte,: as received and Withdrawals are reflected as processed
eleCrC''''C
20
Table 6. Schedule A-Analysis of Change in Excess of Liabilities of the U.S. Government, April 1993 and
Other Periods
[$ millions]
Fiscal Year to Date
Classification
This Month
I
This Year
...
Excess of liabilities beginning of period:
Based on composition of unified budget In preceding period
Adjustments during current fiscal year for changes in composition
of unified budget:
Reclassification of the Disaster Assistance Liquidating Account,
FEMA. to a budgetary status
Revisions by federal agencies to the prior budget results
Reclassification of thrift savings plan clearing accounts to a
non-budgetary status
Prior Year
3,146,515
2,964,066
160
-59
3,146.676
2,964,006
2,674,125
Budget surplus (-) or deficit:
Based on composition of unified budget in prior fiscal yr
Changes in composition of unified budget
-8,088
174,737
184,764
Total surplus (-) or deficit (Table 2)
-8,088
174,737
184,764
Excess of liabilities beginning of period (current basis)
2,673.445
(' ')
680
..)
(
Total-on-budget (Table 2)
5.448
202,953
218,167
Total-off-budget (Table 2)
-13,535
-28,216
-33.403
-34
-189
-180
Transactions not applied to current year's surplus or deficit:
Seigniorage
Proceeds from sales of loan assets with recourse
Profit on sale of gold
Total-transactions not applied to current year's surplus or
deficit
Excess of liabilities close of period .................................. .
....
(
(
)
)
-34
-189
-180
3,138,554
3,138,554
2,858,709
Table 6. Schedule 8-Securities isued by Federal Agencies Under Special Financing Authorities, April 1993 and
Other Periods
[$ millions]
Net Transactions
(-) denotes net reduction of either
Liability accounts
Account Balances
Current Fiscal Year
I
Classification
Fiscal Year to Date
This Month
I
This Year
..
Agency securities, issued under special finanCing authorities:
Obligations of the United States, issued by
Export-Import Bank of the United States
Federal Deposit Insurance Corporation:
Bank insurance fund
FSlIC resolution fund
Obligations guaranteed by the United States, issued by:
Department of Defense:
Family housing mortgages
Department of Housing and Urban Development:
Federal Housing Administration
Department of the Interior:
Bureau of Land Management
Department of Transportation:
Coast Guard:
Family housing mortgages
Obligations not guaranteed by the United States, issued by:
Legislative Branch:
Architect of the Capitol
Department of Defense:
Homeowners assistance mortgages
Independent agencies:
National Archives and Records Administration
Postal Service
Tennessee Valley Authority
Beginning of
Prior Year
-2
-194
..)
(
4
(
..
)
-38
..
This Month
)
(
.. )
(
..
)
-3.956
93
1,137
93
943
93
943
..)
7
7
7
83
301
259
263
13
13
13
(
..
(
8
1
This Year
(
Close of
This month
-5
)
(
.. )
(
..)
162
169
170
302
302
302
16,015
17,921
18,485
18,030
19,707
20,277
-1
564
570
Total, agency securities .......................................... .
.. No Transactions
(' ') Less than $500,000
Note: Details may not add to totals due to rounding
21
2.471
2,119
2,247
-1,762
Table 6.
Schedule C (Memorandum)-Federal Agency Borrowing Financed Through the Issue of Public Debt Securities,
April 1993 and Other Periods
[$ millions]
~-~
-
--- -
~
--- -
Account Balances
Current Fiscal Year
Transactions
Classification
Fiscal Year to Date
This Month
I
This Year
Borrowing from the Treasury:
Funds Appropriated to the President
Agency for International Development:
Housing and other credit guaranty programs
Overseas Pnvate Investment Corporation
Department of Agriculture
Foreign assistance programs
Commodity Credit Corporation
Farm Service Agency
Agriculture credit Insurance fund
Self-help housing land development fund
Rural housing Insurance fund
Rural Development Administration
Rural development Insurance fund
Rural development loan fund
Federal Crop Insurance Corporation:
Federal crop Insurance corporation fund
Rural Electnflcatlon Administration
Rural commUnication development fund
Rural electnflcatlon and telephone revolving fund
Rural Telephone Bank
Department of Commerce:
Federal ship financing fund. NOAA
Department of Education:
Guaranteed student loans
College housing and academic facilities fund
College housing loans
Department of Energy:
Isotope production and distribution fund
Bonneville power administration fund
Department of Housing and Urban Development:
Housing programs:
Federal Housing Administration
Housing for the ederly and handicapped
Public and Indian housing:
Low-rent public housing
Department of the Intenor:
Bureau of Reclamation Loans
Bureau of Mines, Helium Fund
Bureau of Indian Affairs:
RevolVing funds for loans
Department of Justice
Federal pnson industnes, Incorporated
Department of State
Repatnation loans
Department of Transportation:
Federal Railroad Administration:
Railroad rehabilitation and Improvement
financing funds
Settlements of railroad litigation
Amtrak COrridor Improvement loans
Regional rail reorganization program
Federal AViation Administration
Aircraft purchase loan guarantee program
Department of the Treasury
Federal Financing Bank revolVing fund
Department of Veterans AffairS:
Loan guaranty revolVing fund
Guaranty and Indemnity fund
Direct loan revolVing fund
Vocational rehabilitation revolVing fund
EnVIronmental Protection Agency:
Abatement, control, and compliance loan program
Small BUSiness Administration'
BUSiness loan and revolVing fund
Beginning of
Prior Year
This Year
I This
Close of
This month
Month
2
2
(•• j
125
(•• j
125
(•• j
125
2
30
1,780
68
3.964
~2,465
70
17.282
107
19,466
138
21.246
96
68
(•• j
~6.736
5.526
5,498
(•• j
5.594
116
360
~2.354
1.989
2.233
2.349
12
41
2
~513
1.545
(•• j
1.574
2
1.586
2
113
113
113
25
7.905
763
25
7.985
770
25
7.995
772
2.090
156
524
2.090
156
524
2.090
156
524
9
1.906
12
2.306
12
2,406
8.774
8.959
8.959
50
50
50
2
252
4
252
4
252
8
11
11
20
20
20
8
~39
~39
2
39
2
39
8
-39
2
39
.j
n
r .j
10
2
91
10
~2
100
3
500
n
2
6
208
~7.323
185
1.079
2
(•• j
3
~1
6
(•• j
8
r
(•• j
~1
(•• j
~5,309
~23,615
~7,355
149,422
131,116
125,807
1,192
175
514
183
.j
(•• j
460
13
(•• j
921
40
1,730
1
243
49
1,730
1,435
223
1,731
1
3
4
11
11
(•• j
r
1
2
11
22
11
Table 6. Sch.edule C (Memorandum)-Federal Agency Borrowing Financed Through the Issue of Public Debt Securities
'
Apnl 1993 and Other Periods-Continued
[$ millions]
Account Balances
Current Fiscal Year
Transactions
Classification
Beginning of
Fiscal Year to Date
This Month
I
This Year
Borrowing for the Treasury.-Contlnued
Other independent agencies:
Export·import of the United States
Federal Emergency Management Agency:
National insurance development fund
Pennsylvania Avenue Development Corporation:
Land aquisition and development fund
Railroad Retirement Board:
Railroad retirement account
Social Security equivalent benefit account
Smithsonian Institution:
John F. Kennedy Center parking facilities
Tennessee Valley Authority
Total agency borrowing from the Treasury
financed through public debt securities issued
12
249
..................
Borrowing from the Federal Financing Bank:
Funds Appropriated to the President:
Foreign military sales
Department of Agriculture:
Rural Electrification Administration
Farmers Home Administration:
Agriculture credit insurance fund
Rural housing insurance fund
Rural development insurance fund
Department of Defense:
Department of the Navy
Defense agencies
Department of Education:
Student Loan Marketing Association
Department of Health and Human Services,
Except Social Security:
Medical facilities guarantee and loan fund
Department of Housing and Urban Development:
Low rent housing loans and other expenses
Community Development Grants
Department of Interior:
Territorial and International affairs
Department of Transportation:
Federal Railroad Administration
Department of the Treasury:
Financial Management Service
General Services Administration:
Federal buildings fund
National Aeronautics and Space Administration:
Space flight, control and data communications
Small Business Administration:
Business loan and investment fund
Independent agencies:
Export·lmport Bank of the United States
Federal Deposit Insurance Corporation:
Bank insurance fund
National Credit Union Administration
Pennsylvania Avenue Development Corporation
Postal Service
Resolution Trust Corporation
Tennessee Valley Authority
Washington Metropolitan Transit Authority
Total borrowing from the Federal Financing Bank
This Year
Prior Year
117
I This Month
Close of
This month
88
193
205
8
-147
18
26
26
3
7
73
76
76
1,743
1,695
2,128
2,670
2,128
4.164
2,128
4,413
20
150
20
150
20
150
-1,531
-15,741
-23,405
206,410
192,200
190,669
-7
-135
-132
4,344
4,216
4.209
41
-135
-222
22,742
22,566
22,607
-1,350
-1,350
-1,030
-2,030
12,858
26,446
3,675
12.858
26,446
3,675
11.508
26,446
3.675
-48
-48
1,624
-48
1,624
-96
1,624
-96
-30
-30
4,820
4,790
4,790
-21
-25
-3
124
120
99
..)
-52
-32
-50
-11
1,853
174
1,801
142
1,801
142
-28
-1
51
23
23
-1
-1
19
18
18
125
74
53
699
1,202
1,234
(
-22
-72
33
535
31
-33
-70
-102
782
724
711
-950
-2,623
7,692
6,743
6,743
-1,000
-6,660
10,160
4,500
3,500
6
-2,820
-160
36
537
--13,865
-1,270
3,572
-109
26
1,350
-3,319
-2,591
78
9,903
46,536
9.592
177
107
10,440
35,490
8,482
177
113
10,440
32,671
8,322
177
-5,311
-23,617
--7,355
164,427
146,121
140,810
-12
................
No Transactions
Note: ThiS table Includes lending by the Federal FinanCing Bank accomplished by the purchase
of agency financial assets. by the acquISition of agency debt seCUrities. and by direct loans on
behalf of an agency The Federal FinanCing Bank borrows from Treasury and Issues ItS own
securities and In turn may loan these funds to agencies In lieu of agencies borroWing directly
through Treasury or Issuing their own securities
(' 'J Less than $500.000
Note Details may not add to totals due to rounding
23
Table 6.
Schedule D-Investments of Federal Government Accounts in Federal Securities, April 1993 and
Other Periods
[$ millions]
-----
Securities Held as Investments
Current Fiscal Year
Net Purchases or Sales (-)
Classification
Fiscal Year to Date
Beginning of
This Month
I Prior Year
This Year
Federal funds:
Department of Agriculture
Department of Commerce
Department of Defense-MIlitary
Defense cooperation account
Department of Energy
Department of Housing and Urban Development:
Housing programs
Federal housing administration fund'
Public debt securities
Government National Mortgage Association:
Management and liqUidating functions fund:
Public debt securities
Agency securities
Guarantees of mortgage-backed securities:
Public debt securities
Agency securities
Other
Department of the Interior:
Public debt securities
Department of Labor
Department of Transportation
Department of the Treasury
Department of Veterans Affairs:
Canteen service revolving fund
Guaranty and Indemnity fund
Veterans reopened Insurance fund
Servicemen's group life insurance fund
Independent agencies:
Export-Import Bank of the United States
Federal Emergency Management Agency:
National Insurance development fund
Federal Deposit Insurance Corporation:
Bank Insurance fund
FSLlC resolution fund:
Public debt securities
Savings association insurance fund
National Credit Union Administration
Postal Service
Tennessee Valley AuthOrity
Other
Other
Total Federal funds
4
3
-2
-1
5
8
6
12
11
-26
75
-2.020
233
-2.935
358
2.032
3.513
38
3.671
12
3,745
124
-535
-442
5.858
5.199
5.323
..)
2
2
6
60
8
60
9
60
40
253
2.699
62
245
2.911
62
250
2.952
62
252
2.333
15,480
781
3,462
2.566
16.252
830
5.251
2.686
16.256
834
5.350
43
41
40
..)
509
198
520
148
511
148
(
2
7
342
13
4
120
4
3
99
353
776
53
1.888
1.267
4.901
21
-1.115
-1
-3
(
-9
.............................................
Trust funds:
Legislative BranCh:
Library of Congress
United States Tax Court
Other
The JudiCiary
JudiCial retirement funds
Department of Agriculture
Department of Commerce
Department of Defense-Military:
Voluntary separation incentive fund
Other
Department of Defense-CIvil'
Military retirement fund
Other
..)
2
-50
-142
-8
(
127
86
127
88
47
174
-122
-196
49
543
468
347
-618
-1.766
-1.245
4.664
3.516
2.898
-3
6
3
620
9
-2
19
-594
428
318
2.066
-614
54
188
-499
208
263
4.334
-1.529
59
..)
1.319
340
2.392
4.679
2.239
765
2.410
728
762
2.707
6.125
1.617
820
2.578
725
768
2,710
6,745
1.625
819
2.597
475
935
(
..)
4.018
13
56.611
123
57.072
123
57.547
123
475
935
4,031
56,734
57,194
57,669
..)
(.. )
(
(
..5
..
)
)
4
27
4
4
27
4
4
27
..)
..)
(
(
..12
..
)
)
12
1
..)
193
6
205
5
(
205
5
(
(
30
4
903
-7
(
..
)
160
873
149
903
153
-843
28
9.263
259
10.735
345
87.753
1.098
97.859
1.329
97.016
1.357
(
(
(
24
I This Month
..4)
(
Total public debt securities
Total agency securities
This Year
Close ot
This month
..2)
..
)
(
(
(
..
)
.. )
Table 6.
Schedule D-Investments of Federal Government Accounts in Federal Securities, April 1993 and
Other Periods-Continued
[$ millions]
Securities Held as Investments
Current Fiscal Year
Net Purchases or Sales (-)
Classification
Fiscal Year to Date
Beginning of
This Month
I Prior Year
This Year
This Year
I This Month
Close of
This month
Trust Funds-Continued
Department of Health and Human Services. except Social Security:
Federal hospital insurance trust fund:
Public debt securities
...............
Federal supplementary medical insurance trust fund
. . . . . . .. . . . . . . . .
Other
Department of Health and Human Services. Social Security:
Federal old-age and survivors insurance trust fund:
Public debt securities
...........
Federal disability insurance trust fund
Department of the Interior:
Public debt securities . . . . . . . . . . . .
. . . . . . . . . . . . ..
Department of Labor:
Unemployment trust fund ...........
Other
.......................
. ...........
Department of State:
Foreign Service retirement and disability fund
.............
Other
. ............
Department of Transportation:
Highway trust fund
. . . . . . . . .. . .
. . . ........
Airport and airway trust fund ................
..............
Other
Department of the Treasury
Department of Veterans Affairs:
General post fund national homes . . . . . . . . . . .
National service life insurance:
............
Public debt securities
Government life insurance fund
...............
Veterans special life insurance fund
Environmental Protection Agency
. .. ............
National Aeronautics and Space Administration
...........
Office of Personnel Management:
Civil service retirement and disability fund:
...........
Public debt securities
..............
Employees health benefits fund
Employees life insurance fund
Retired employees health benefits fund
Independent agencies:
Harry S. Truman memorial scholarship trust fund
........... .....
Japan-United States Friendship Commission
Railroad Retirement Board
......... ..
.....................
Other
765
431
(")
3.158
2.395
53
8.168
2.191
88
120.647
18.534
621
123.040
20,498
673
123.805
20.929
673
11.590
470
27.191
-1.346
31.067
537
306.524
12.918
322.125
11.101
333.715
11.571
53
-148
36
336
134
188
856
-9
-5.865
-9
-12.238
-8
35.133
52
28,413
51
29.269
42
-24
221
12
222
5.999
(")
(")
6.244
12
6.220
12
1.706
-2.270
133
-8
1.977
-202
132
(")
20.962
15.090
1.399
184
22.278
12.952
1.518
208
22.668
12.820
1.532
176
5
2
34
39
39
147
-6
20
750
(")
-201
-12
-4
349
-1
11.310
134
1.406
4,456
16
11.532
130
1.434
4.865
16
11,457
129
1,426
5.205
16
749
372
545
155
190
611
(")
(")
284.430
5.993
12.604
1
286.818
6.319
13.136
1
285.179
6.365
13.149
1
48
17
11.694
202
48
17
11.721
272
390
-132
14
-33
-75
-2
-8
341
-1.639
47
13
(")
(")
1
-4
(")
(' ')
27
70
194
167
483
16
47
17
11.527
104
12.365
38.598
44.654
959.719
985.952
998.317
.................................................
12,365
38,598
44,654
959,719
985,952
998,317
Grand total ..................................................................
12,840
39,534
48,685
1,016,453
1,043,147
1,055,987
Total public debt securities
Total trust funds
Note: Investments are in public debt securities unless otherwise noted.
Note: Details may not add to totals due to rounding.
No Transactions
(' ') Less than $500,000
25
Table 7.
Receipts and Outlays of the U.S. Government by Month, Fiscal Year 1993
-_.
[$ millions)
__..
I
I
I
!
Classlhcatlon
I
Oct
I
I
Nov.
Dec.
Jan.
March
Feb.
April
June
July
Aug.
Sept.
'I
I
Receipts:
Individual Income taxes
Corporation Income laxes
SOCIal Insurance taxes and
May
Fiscal
Year
To
Date
Com·
parable
PeriOd
Prior
F.Y.
37287
2096
33.097
1,478
51 171
22.950
73.704
3.212
23.947
792
27.935
12.724
56.137
17.795
303,278
61,048
285,488
52,517
28.135
1.034
426
3.670
1.027
1.666
1,491
30.264
2.270
366
4.082
954
1.503
619
31.252
245
421
4.014
959
1.539
1.140
28.209
844
363
3.307
888
1.310
881
31,623
2.259
369
3,342
822
1,347
1,638
32,980
240
432
4.514
977
1.598
2,051
45.164
3.581
431
4.168
1,898
1.544
1.404
227,628
10,473
2,807
27,097
7,525
10,507
9,224
225,024
8,929
2,802
26,214
6,656
9,869
14,591
76,832
74,633 113,690 112,718
66,138
83,453 132,122
659,586
......
......
contributions
Employment taxes and
contribuilons
Unemployment Insurance
Other retirement contributions
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts
Total-Receipts this year
...........
(On·budget)
........................
55,056
51,219
89,594
90,130
41,037
57,259
96,413
480,708
(OH·budget)
........................
21,776
23,414
24,096
22,589
25,100
26,194
35,709
178,879
''''''
632,089
/1.((;/-R('(('f{J/I {lfIor IClJr
'8. WI!
'J 11111 IIIJ04.' 11I4.lIr
"'5~"
7:'.13:' 138,3,17
IUn 11 //£/,(('/!
.1'.:' 18
.11I.8IN
811151
'V.S8:'
.Is. V.I.'
4.1,,168 10J33:
455,941
10i1 I'lid~('{,
_"U)<5_")
_'~._'V{)
.'J4W!
_'4.155
:'J'1>6
.'h.564
350:'5
176,149
204
135
18
211
162
22
193
183
14
221
222
21
195
157
12
196
172
14
233
314
21
1,453
1,345
122
1,431
1,330
112
334
3.393
521
414
137
245
285
5,328
5,637
629
270
260
-27
218
74
368
168
242
483
283
-27
396
-315
2.397
625
2,538
1,034
1,653
5.397
290
2.277
3.347
285
3.344
3.301
228
1.263
3.253
231
1,022
3,367
202
4.019
4.144
94
1,977
4,195
321
15,554
27,005
1,651
10,004
26,879
1,517
9.210
6,526
5,698
3.613
7.265
5,327
9.118
8,140
6.974
4,385
6.986
5,027
5,656
7,154
5,736
6.192
7.657
6.179
8,682
8,888
5.551
46,856
52,617
40,493
45,889
52,742
43,548
3,002
393
219
2,752
427
218
3,337
500
264
2,636
333
263
2,930
251
275
3.418
400
284
2,958
373
296
21,033
2,676
1,819
19,954
2,256
1,843
905
-30
32
109
-3
238
676
-3
-59
559
-2
-1,250
93
-652
-91
-298
-2
562
-59
1,392
-40
-628
2,873
-5,161
-169
25.954
19.947
28,947
18,938
22,003
24,392
26,036
166,217
163,775
2.493
2.334
1.714
2.506
2.675
1.391
2.509
2,664
1.549
2.438
2.903
780
2.459
2,714
1,266
2.432
3.167
1.542
2,471
2.268
1,434
17,308
18,725
9,676
16,344
17,402
8,819
1,438
1.476
1.573
1.348
1.546
1.633
1.806
10,821
9,761
6.215
7,299
5,592
6.555
6.320
8.117
5.981
6.171
6,003
7,423
6,272
8,539
6,651
8,321
43,033
52,425
38,087
46,474
4.851
3.247
4.691
3)73
3.270
386
4.985
7.723
3,483
3.680
529
1.874
3.811
3.746
2049
4,745
4,069
2,025
4,808
3,638
5,038
30,653
26,220
19,545
29,026
24,649
15,629
2.178
-4.271
2.132
-4.269
2.507
-9.901
2.536
-796
2.626
-5079
2,394
-5.428
2,213
-5,050
16,585
-34,793
16,451
-32,492
21.530
2.771
-1523
21.508
2.638
-5
43838
5.145
-21
267
465
-1.515
22.230
2.840
-9
22.406
2.880
-16
22,430
2,994
-1.535
154,209
19,734
-4,625
146,127
17,689
-4,454
r,_',
Outlays
Legislative Branch
The JudiCiary
Executive Office of the PreSident
Funds Appropnated to the PreSident:
International Security ASSistance
International Development
ASSistance
Other
Department of Agriculture
Foreign aSSistance, special export
programs and Commodity Credit
Corporation
Other
Department of Commerce
Department of Defense:
Military
Military personnel
Operation and maintenance
Procurement
Research. development. test. and
evaluatton
Military construction
Family hOUSing
ReVOlVing and management
funds
Defense cooperatton account
Other
Total Military
Civil
Department of EducaltOn
Department of Energy
Department of Health and Human
Services. except SOCial Secunty
PUbliC Health Service
Health Care FinanCing Administration
Grants to States for Medicaid
Feeeral hospital Ins trust fund
Federal supp rnee Ins trust
fund
Other
SOCial Security Admlnlstratton
Admlnlstratton for children and
families
Other
Department of Health and Human
Ser.lces SOCIal Security
Feeeral old·age and survivors Ins
trust fund
Feeeral disability Ins trust fund
Other
n
26
n
Table 7.
Receipts and Outlays of the U.S. Government by Month, Fiscal Year 1993-Continued
[$ millions]
Classification
Oct.
Nov.
Dec.
Jan.
Feb.
March
April
May
June
July
Aug.
Sept.
Fiscal
Year
To
Date
Comparable
Period
Prior
F.Y.
Outlays-Continued
Department of Housing and Urban
Development
Department of the Interior
Department of Justice
Department of Labor:
Unemployment trust fund
Other.
Department of State
Department of Transportation:
Highway trust fund
Other.
Department of the Treasury:
Interest on the public debt
Other
Department of Veterans Affairs
Compensation and pensions
National service life
United States government life
Other
Environmental Protection Agency
General Services Administration
National Aeronautics and Space
Administration
Office of Personnel Management
Small Business Administration
Independent agencies:
Fed. Deposit Ins. Corp.:
Bank insurance funds
Savings association fund
FSLlC resolution fund
Postal Service:
Public enterprise funds (offbudget)
Payment to the Postal Service
lund
Resolution Trust Corporation
Tennessee Valley Authority
Other independent agencies
Undistributed offsetting receipts
Employer share, employee
retirement
Interest received by trust funds
Rents and royalties on outer
continental shelf lands
Other.
2.591
698
1.215
2.053
500
913
2,232
447
849
1,786
517
794
1,764
477
677
1,982
518
880
2,290
590
975
14,698
3,747
6.302
14,168
3,767
5,770
3,041
626
900
3,119
-288
365
3,459
410
529
3.584
521
371
3,519
277
247
4,001
212
405
3,381
747
329
24,105
2,505
3,145
23,750
2,908
2,814
1,479
1,454
1,486
1,490
1,320
1,646
1,061
1,302
852
1,308
1,165
1.676
878
1,775
8,241
10,653
7,662
10,173
17,978
137
22,506
-904
51,678
536
18,062
575
16,813
4,152
18,007
2,229
17,970
1,388
163,014
8,111
164,086
4,416
2,623
37
1
1,400
439
165
79
27
1
1,610
511
-478
2,694
51
2
1,377
510
734
80
65
2
1,470
437
-662
1,422
55
1
1,147
383
383
1,441
91
2
2,532
581
468
2,800
69
1
1,437
518
-604
11,140
395
11
10,973
3,379
6
9,543
743
18
9,661
3,464
-19
1,098
3,090
113
1,317
2,586
95
1,266
2,986
44
1,092
3,330
-1
1,008
2,886
41
1,344
3,180
154
1,249
3,294
33
8,373
21,352
478
8,273
20,930
263
97
-87
232
1
339
-848
-3
30
-514
-26
-102
-3,035
-389
779
-397
-6
123
-381
-6
-12
-4,845
-428
1,071
5,211
-208
2,302
-452
327
349
-677
-10
-504
-1,138
-2,104
-1,727
69
-2,578
271
2,326
-3,628
307
1,195
-1,392
115
1,345
30
-566
140
1,125
-622
72
1,416
-967
140
1,711
30
-2,698
217
1,291
130
-12,452
1,261
10,408
393
3,957
815
9,588
-2,498
-443
-2,511 -2,522
-4,952 -34,461
-2,624
9
-2,564
-530
-2,560
-143
-2,737
-403
-18,017
-40,922
-19,523
-38,698
-36
-245
-427
-198
-1.622
-1,417
(<0)
(' ')
834,323
......
683,661
......
150,662
+28,216
......
......
......
......
147,019
179,226
(<0)
-12
n
-442
-261
(<0)
(<0)
r .)
Totals this year:
......................... 125,627 107,361 152,637 82,903 113,732 128,030 124,034
(On-budget) ........................ 103,787 83,442 116,575 84,928 89,276 103,792 101,861
Total outlays
(Off-budget)
........................
24,237
22,174
-48,795 -32,728 -38,946 +29,815 -47,594 -44,577
+8,088
-174,737
........................ -48,731 -32,223 -26,981 +5,201 -48,238 -46,533 -5,448
+644 +1,957 +13,535
-65
-505 -11,965 +24,614
........................
-202,953
Total-surplus (+) or deficit (-)
(On-budget)
(Off-budget)
Total borrowing from the public
.....
....
TOlai-ouliars prior rcar
21,841
-1,552
23,91~
61,969
36,061
21,078
-2,025
-8,355
24,456
30,689
37,727
5,464
114,665 11 7,784 106.178 119.697 111,9]6 12],844 1]3. 760
816.1153
(On-hud"c!)
94.675
95,490
95.479
97.136
88,703
99,899 102.724
674,108
(Otl-bud"c!)
19.990
2].294
10.699
22,561
23.22]
22,945
21.035
142.745
-2.536 -15.660 -49.174 -50,712 +14,597
-184. 764
TOlai-surph" (+) or dc/inl 1-) prior
rear
(On-hudgc!)
(OfJ-hudge!)
- 36.595 -44.6114
-37.457 -44.6117 -15.3]8 -17,254 -49,718 -54.331
+862
+3 + 1],79::
+1.594
+544
No transactions
(- 0) Less than $500,000
Note. Details may not add to totals due to rounding
27
+608
-:! 11i.l67
+3.619 +13.9119
+33.403
Table 8.
Trust Fund Impact on Budget Results and Investment Holdings as of April 30, 1993
[$ millions]
-----
Fiscal Year to Date
This Month
ClasSification
Beginning of
Receipts
Trust receipts. outlays, and investments
held:
Airport
Black lung disability
Federal disability Insurance
Federal employees life and health
Federal employees retirement
Federal hospital Insurance
Federal old-age and survivors Insurance
Federal supplementary medical Insurance
Highways
Military advances
Railroad retirement
Military retirement
Unemployment
Veterans life Insurance
All other trust
Outlays
Excess
21,335
53,744
181.669
34,927
10,940
7.067
3.027
24.871
19.258
784
4.608
13,137
382,557
111.266
343,287
111.266
39,269
41.191
13.137
271,291
232,022
39,269
85,483
29
-5,050
405,148
142
619,154
142
-214,007
-5.050
405.006
619,012
-214,007
16.711
16.711
659,586
834,323
Total trust fund receipts and outlays
and investments held from Table 60 ..........................................
Less Interfund transactions
63,823
9.495
50,686
9.495
Trust fund receipts and outlays on the baSIS
of Tables 4 & 5
54.328
Total Federal fund receipts and outlays
Less Interfund transactions
80,433
29
Federal fund receipts and outlays on the
baSIS of Table 4 & 5
80.404
85.453
2.610
2.610
132,122
124,034
...............
Excess
-2,142
13
-1,348
765
969
1,319
27.460
4,274
1,944
-306
-1.438
9,962
-4,847
162
2.484
1.416
9.356
34.232
4.983
1.520
1.156
403
1.254
4.692
39
729
Less offsetting proprietary receipts
Outlays
3,712
358
19.734
-765
20,366
52.425
154,209
30.653
8.996
7,373
4.465
14.910
24,105
622
2.124
-108
1
595
30
-1,583
1.035
11.802
175
639
89
-243
-917
1,311
-76
386
400
55
3.589
Receipts
This Year
508
54
2.994
-30
2,998
8.321
22.430
4.808
881
1.067
646
2.171
3,381
115
343
Net budget receipts & outlays
Securities held as Investments
Current Fiscal Year
8,088
1,570
371
18.386
I
This Month
15,090
12,952
12,820
12,918
18,598
290,626
120,647
306,524
18,534
20,962
11,101
19,456
293,271
123,040
322,125
20.498
22,278
11,571
19,516
291,608
123,805
333,715
20,929
22,668
11,527
87,753
35,133
12,850
8,556
11,694
97,859
28.413
13,096
10,169
11,721
97,016
29,269
13,012
10,668
959,719
985,952
998,317
-174,737
Note Details may not add to totals due to rounding.
No transactions
Note Interfund receipts and outlays are transactions between Federal funds and trust funds
such as Federal payments and contnbutlons. and Interest and profits on Investments In Federal
secUrities They have no net effect on overall budget receipts and outlays Since the receipts side of
such transactions IS offset against bugdet outlays In this table, tnterfund receipts are shown as an
adjustment to arnve at total receipts and outlays of trust funds respectively
28
Close of
This Month
Table 9. Summary of Receipts by Source, and Outlays by Function of the U.S. Government, April 1993
and Other Periods
[$ millions]
Classification
This Month
Fiscal Year
To Date
Comparable Period
Prior Fiscal Year
56,137
17,795
303,278
61,048
285,488
52,517
45,164
3,581
431
4,168
1,898
1,544
1,404
227,628
10,473
2,807
27,097
7,525
10,507
9,224
225,024
8.929
2,802
26,214
6,656
9,869
14,591
132,122
659,586
632,089
27,192
536
1,444
431
1,709
2,666
173,246
11,451
9,860
3,066
12,598
17,140
~3,961
~17,247
2,591
987
3,695
8,883
11,816
20,408
25,420
4,332
1,581
655
16,585
19,326
5,540
29,242
56,775
74,424
129,483
173,932
22,680
8,766
7,763
115,915
170,763
12,213
9,954
2,619
12,017
11,617
12,585
18,080
4,657
28,010
50,595
67,923
119,164
163,786
20,149
8,230
7,852
117,579
~2,935
~19,638
~20,941
124,034
834,323
816,853
RECEIPTS
Individual income taxes
Corporation income taxes
Social insurance taxes and contributions:
Employment taxes and contributions
Unemployment insurance
Other retirement contributions
Excise taxes
Estate and gift taxes
Customs .. '
Miscellaneous ..
Total ........................................................ .
NET OUTLAYS
National defense
International affairs
General science, space, and technology
Energy
Natural resources and environment
Agriculture ..
Commerce and housing credit
........... .
Transportation
Community and Regional Development
Education, training, employment and social services
Health ........... .
Medicare
Income security
Social Security
Veterans benefits and services
Administration of justice ...
General government
Interest ..... .
Undistributed offsetting receipts
Total ........................................................ .
Note: Details may not add to totals due to rounding.
29
Explanatory Notes
employees' salaries which are withheld for Individual Income taxes, and
for savings bond allotments. Outlays are stated net of offsetting
collections and refunds representing reimbursements as authOrized by
law, refunds of money previously expended, and receipts of revolving and
management funds. Federal credit programs subject to the Federal Credit
Reform Act of 1990 use the cash basis of accontlng. Budgetary outlays of
subsidy and administrative expenses are recorded in the program
account. Interest on the public debt (public issues) is recognized on the
accrual basis. Outlays of off-budget Federal entities and activity of the
financing and liquidating accounts subject to credit reform are excluded
from budget outlay totals.
1. Flow of Data Into Monthly Treasury Statement
The Monthly Treasury Statement (MTS) IS assembled from data In the
central accounting system The major sources of data Include monthly
accounting repons by Federal entities and disbursing officers. and daily
repons from the Federal Reserve banks. These repons detail accounting
transactions affecting receipts and outlays of the Federal Government
and off-budget Federal entities. and their related effect on the assets and
liabilities of the U S Government Information IS presented In the MTS on
a modified cash basIs
2. Notes on Receipts
Receipts Included In the report are classified Into the following major
categories (1) budget receipts and (2) offsetting collections (also called
applicable receipts) Budget receipts are collections from the public that
result from the exefCIse of the Government's sovereign or governmental
powers. excluding receipts offset against outlays. These collections, also
called governmental receipts. consist mainly of tax receipts (including
sOCIal Insurance taxes), receipts from court fines, certain licenses, and
deposits of earnings by the Federal Reserve System. Refunds of receipts
are treated as deductions from gross receipts.
Offsetting collections are from other Government accounts or the
public that are of a business-type or market-oriented nature. They are
classified Into two major categories: (1) offsetting collections credited to
appropriations or fund accounts, and (2) offsetting receipts (i.e., amounts
deposited in receipt accounts). Collections credited to appropriation or
fund accounts normally can be used without appropriation action by
Congress. These occur in two instances (1) when authorized by law,
amounts collected for materials or services are treated as reimbursements to appropriations and (2) in the three types of revolving funds
(public enterprise, intragovernmental, and trust); collections are netted
against spending, and outlays are reported as the net amount.
Offsetting receipts in receipt accounts cannot be used without being
appropriated. They are subdivided into two categories: (1) proprietary
receipts-these collections are from the public and they are offset against
outlays by agency and by function, and (2) intragovernmental fundsthese are payments into receipt accounts from Governmental appropriation or funds accounts. They finance operations Within and between
Government agencies and are credited with collections from other
Government accounts. The transactions may be intra budgetary when the
payment and receipt both occur within the budget or from receipts from
off-budget Federal entities In those cases where payment is made by a
Federal entity whose budget authority and outlays are excluded from the
budget totals.
Intra budgetary transactions are subdivided into three categories:
(1) interfund transactions, where the payments are from one fund group
(either Federal funds or trust funds) to a receipt account in the other fund
group; (2) Federal intrafund transactions, where the payments and
receipts both occur within the Federal fund group; and (3) trust intrafund
transactions, where the payments and receipts both occur within the trust
fund group.
Offsetting receipts are generally deducted from budget authority and
outlays by function, by subfunctlon, or by agency. There are four types of
receipts, however, that are deducted from budget totals as undistributed
offsetting receipts. They are: (1) agencies' payments (including payments
by off-budget Federal entities) as employers into employees retirement
funds, (2) Interest received by trust funds, (3) rents and royalties on the
Outer Continental Shelf lands, and (4) other interest (i.e., interest collected
on Outer Continental Shelf money In deposit funds when such money is
transferred Into the budget).
4. Processing
The data on payments and collections are reported by account symbol
into the central accounting system. In turn, the data are extracted from
this system for use in the preparation of the MTS.
There are two major checks which are conducted to assure the
consistency of the data reported:
1. Verification of payment data. The monthly payment activity reported by
Federal entities on their Statements of Transactions is compared to the
payment activity of Federal entities as reported by disbursing officers.
2. Verification of collection data. Reported collections appearing on
Statements of Transactions are compared to deposits as reported by
Federal Reserve banks.
5. Other Sources of Information About Federal Government
Financial Activities
• A Glossary of Terms Used in the Federal Budget Process, March
1981 (Available from the U.S. General Accounting Office, Gaithersburg,
Md. 20760). This glossary provides a basic reference document of
standardized definitions of terms used by the Federal Government in the
budgetmaking process.
• Daily Treasury Statement (Available from GPO, Washington, D.C.
20402, on a subscription basis only). The Daily Treasury Statement is
published each working day of the Federal Government and provides data
on the cash and debt operations of the Treasury.
• Monthly Statement of the Public Debt of the United States
(Available from GPO, Washington, D.C. 20402 on a subscription basis
only). This publication provides detailed information concerning the public
debt.
• Treasury Bulletin (Available from GPO, Washington, D.C. 20402, by
subscription or single copy). Quarterly. Contains a mix of narrative, tables,
and charts on Treasury issues, Federal financial operations, international
statistiCS, and special reports.
• Budget of the United States Government, Fiscal Year 19 _
(Available from GPO, Washington, D.C. 20402). This publication is a
single volume which provides budget information and contains:
-Appendix, The Budget of the United States Government, FY 19_
-The United States Budget in Brief, FY 19 _
-Special Analyses
-HistOrical Tables
-Management of the United States Government
-Major Policy Initiatives
3. Notes on Outlays
Outlays are generally accounted for on the basis of checks issued by
Government disburSing officers, and cash payments made. Certain
intragovernmental outlays do not require issuance of checks. An example
would be charges made against appropriations representing a part of
• United States Government Annual Report and Appendix (Available
from Financial Management Service, U.S. Department of the Treasury,
Washington, D.C. 20227). This annual report represents budgetary
results at the summary level. The appendix presents the individual receipt
and appropriation accounts at the detail level.
30
Scheduled Release
The release date for the May 1993 Statement will be 2:00 pm EST June 21, 1993.
For sale by the Superintendent of Documents, U.S. Government Printing
Office, Washington, DC. 20402 (202) 783-3238 The subscription price is
$27.00 per year (domestic), $33.73 per year (foreign).
No single copies are sold.
UBLIC DEBT NEWS
Department of the Treasury •
FOR IMMEDIATE RELEASE
Ma y 24, 1993
Bureau of the Public Debt • Washington, DC 20239
I :pr' , .... C<?NTACT: Office of Financing
.. - " '.
: 'I: ~, "
:~::)
(j
';.
202 - 219 - 3350
RESULTS OF TREASURY'S. AUCTION OF 13-WEEK BILLS
lillY
Li
j~
(.
U . (/ . J
I
Tenders for $12,021 million of '"i3-~E!e1t (bills to be issued
May 27, 1993 and to mature August 26, 1993 were
accepted today (CUSIP: 912794'E16'),.
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.04%
3.07%
3.06%
Investment
Rate
3.10%
3.14%
3.12%
Price
99.232
99.224
99.227
Tenders at the high discount rate were allotted 63%.
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
25,360
32,873,677
8,150
26,216
23,601
17,292
1,295,405
6,663
3,730
25,866
12,413
641,102
745,640
$35,705,115
Accepted
25,360
10,711,607
8,150
26,216
23,601
17,282
149,155
6,663
3,730
25,866
12,413
265,052
745,640
$12,020,735
Type
Competitive
Noncompetitive
subtotal, Public
$30,912,215
1,194,360
$32,106,575
$7,227,835
1,194,360
$8,422,195
2,924,500
2,924,500
674,040
$35,705,115
674,040
$12,020,735
Federal Reserve
Foreign Official
Institutions
TOTALS
An additional $131,160 thousand of bills will be
issued to foreign official institutions for new cash.
LB-203
&)
UBLIC DEBT NEWS ~..~
~i-AS~
.
Department of the Treasury •
FOR IMMEDIATE RELEASE
May 24, 1993
Bureau of the Pt'lID»~-o~bt • Washington DC 20239
ilL-Ie tl~
:iC0l-1~1': Office of Financing
. 53-'.{J
202-219-3350
1/
;
RESULTS OF TREASURY' ~/j~~tT.i~ ;Or_ 26-WEEK BILLS
. . ;;041
Tenders for $12,001 million of 26-week bills to be issued
May 27, 1993 and to mature Nov~mber26, 1993 were
accepted today (CUSIP: 912794G65).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.17%
3.19%
3.19%
Investment
Rate
3.27%
3.29%
3.29%
Price
98.389
98.378
98.378
Tenders at the high discount rate were allotted 96%.
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
21,729
36,762,291
5,560
25,575
26,205
18,445
1,293,290
4,685
6,530
18,639
7,297
585,471
507,509
$39,283,226
Accepted
21,729
10,990,291
5,560
25,575
26,205
18,405
258,290
4,685
6,530
18,639
7,297
110,191
507,509
$12,000,906
Type
Competitive
Noncompetitive
Subtotal, Public
$34,463,561
830,230
$35,293,791
$7,181,241
830,230
$8,011,471
3,000,000
3,000,000
989,435
$39,283,226
989,435
$12,000,906
Federal Reserve
Foreign Official
Institutions
TOTALS
An additional $192,665 thousand of bills will be
issued to foreign official institutions for new cash.
LB-204
TEXT AS PREPARED FOR DELIVERY
Embargoed for release until
10:00 a.m., May 25, 1993
STATEMENT OF THE HONORABLE
LA WRENCE SUMMERS
UNDER SECRETARY OF THE TREASURY
FOR INTERNATIONAL AFFAIRS
BEFORE THE
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
SUBCOMMITTEE ON INTERNATIONAL FINANCE AND MONETARY POLICY
UNITED STATES SENATE
May 25, 1993
Mr. Chairman and Members of the Committee:
It is a pleasure to be here today to present the Treasury Department's spring 1993
Report on International Economic and Exchange Rate Policy.
The title of the Report is becoming increasingly outmoded. The distinction between
domestic and international economic policy no longer exists, if it ever did. Today, for
example, exports and imports each account for roughly 11 percent of national income. In
recent years, over half of U.S. income growth and almost all of our growth in manufacturing
jobs have been due to growth in exports.
It used to be said that when the U.S. sneezed, the world caught a cold. The opposite
is equally true today. Our prosperity is linked inextricably tu the maintenance of a SL ung
world economy, open international trading system, and stable global financial markets.
Global Growth
This reality underlies the Clinton Administration's international economic policy.
This policy starts from the critical premise that a strong, competitive economy is the most
effective international economic policy. We recognize that, while the battle of imports and
exports may be fought at the border, domestic policies, in the final analysis, will determine
the outcome.
LB-20S
2
The President has outlined a bold and ambitious program to reduce the budget
deficit and revitalize the American economy. The success of this effort will depend
importantly on preserving and strengthening an open, growing world economy. It is for this
reason that we have placed emphasis on and effort into reinvigorating the G-7 economic
policy coordination process.
The President's economic program has brought us new credibility in the international
economic arena; it has strengthened our hand in encouraging our major trading partners to
take complementary actions to strengthen growth in their own countries. We have also
succeeded in changing the atmosphere in the meetings, from confrontation to frank
discussion, by avoiding public lecturing and recognizing that each country must decide its
policies on the basis of its national interests. But increasingly, where economic growth is
concerned, national interests and international imperatives coincide. Finally, we are
improving the analytical framework for the surveillance of our economies.
The need for effective cooperation with our G-7 partners has never been clearer than
now. We are in the third year of sub-par growth and the prospects for sustained recovery
are by no means certain. The United States is experiencing a modest recovery, but with
inadequate job creation. Growth in Europe is weak, unemployment high and rising, and
recovery still in the distance. Japan is expected to grow only l.3 percent this year, the
lowest rate in nearly 20 years, and its growing external surplus continues to be a drag on the
rest of the world.
We have made a beginning and the initial fruits of this effort are being realized.
However, we are not out of the woods and more must be done. The prospect of significant
U.S. budget deficit reduction and improved saving and investment have been received
favorably by the most critical judge, the markets. Long-term interest rates have declined
substantially. Some have suggested that the decline reflects a weak economy. However,
forecasts for the economy are up, the stock market has increased and credit quality spreads
have narrowed. This suggests that the interest rate decline is due to greater confidence in
deficit reduction and not a weaker economy. It would be tragic, however, if the nay-sayers
succeeded in defeating the President's program, with the end result being both higher
interest rates and a weaker economy.
Japan\ latest ~timulus package is a useful first step but needs to be sustained. The
economy is operating well below productive capacity, and consumer and investor confidence
is weak. As a result, the trade surplus continues to rise, with new forecasts indicating it
could reach over 3 percent of GOP next year.
What the world and Japan needs is a multi-year commitment to use fiscal policy to
achieve domestic demand-led growth and to promote substantial external adjustment. The
authorities are now in the process of formulating the guidelines for spending in the fiscal
1994 budget.
We hope these guidelines will send a message that the April 1993
3
supplemental stimulus package will be reinforced
support for domestic demand.
In
next year's budget with continued
In Europe, interest rates have come down from their peaks. The pace of decline
needs to quicken, however, if the current recession is to be brought to an early end.
Moreover, structural reforms, particularly in labor markets, are required urgently to produce
greater wage and price flexibility. This would permit economies to adjust more effectively
to external developments, without damaging growth, especially given the constraints on
exchange rate adjustments.
Negotiations with China, Taiwan and South Korea
A growing world economy and an open international trade and payments system are
like two blades of a scissors. You need both to cut to your objective, increased U.S. exports.
It is for this reason that President Clinton is committed to a "prompt and successful
completion of the [Uruguay] Round" and to implementation of the NAFfA. It also is the
basis for our efforts to confront bilaterally the special problems posed by countries with
chronic export surpluses, including those that use their exchange and payments systems to
impede imports.
In 1992, U.S. exports to China, Taiwan and Korea totalled $37 billion. Exports to
Taiwan grew by 15 percent and to China by 19 percent, far exceeding the 6.2 percent growth
in total U.S. exports. However, to reach our full potential in these expanding markets, it
is essential that their foreign exchange systems be open so that their importers are able to
purchase and pay for foreign goods and services.
China
The Chinese economy has grown enormously in rl -.:nt years and continues to exhibit
tremendous potential. Growth last year exceeded 12 percent and in the first quarter this
year reached 14 percent on an annual basis. While the economy is now showing signs of
overheating, with inflation accelerating, China probably will continue to sustain high real
growth over the coming decade. With China increasingly npeding high tech imports, the
United States has a good chance of sustaining strong growtL in exports to China.
That potential for growth appears to be restrained, however, by the opaque and
arbitrary foreign exchange system which simply turns away potential importers. Foreign and
American joint ventures in China report that they cannot obtain even the small amount of
foreign exchange in the swap centers that they are allocated under government regulations.
This shortage of foreign exchange is so severe that Chinese enterprises are beginning to turn
once again to the black market. The situation has been exacerbated by companies' hoarding
foreign exchange for their own use or for private trading, possibly in offshore financial
markets. Hoarding has reduced the supply of foreign exchange to the swap centers and
increased pressure for depreciation of the renminbi.
4
Last year China sustained global trade and current account surpluses, although they
declined substantially from 1991 levels. China's bilateral surplus with the United States
increased from almost $13 billion in 1991 to over $18 billion in 1992. These outcomes, as
well as the pervasive and inflexible restrictions on access to foreign exchange in China, have
led Treasury to conclude that China manipulates its foreign exchange system in a manner
that prevents effective balance of payments adjustment.
In my recent negotiations with officials from the People's Bank of China, I strongly
reiterated the point made by many others in this Administration that China's trade surplus
with the United States is a very serious matter that must be addressed by Chinese action
now. I stressed that China's foreign exchange controls were acting as trade barriers and
were limiting the ability of U.S. firms to export to China. These exchange restrictions will
have a bearing on progress made towards China's entry into the GAIT.
I also stressed in my talks with Chinese officials that, while China's current account
surplus may be on a declining trend in 1992-93, this appeared to be occurring only because
China's economy is overheating, with high growth and rising inflation appro:lching a danger
zone. As growth drops to a more sustainable pace, we could expect China's import growth
to diminish and the current account to remain in surplus. In that context, a liberalized
foreign exchange regime would be necessary to promote the correction of payments
imbalances. I also suggested that overall reform of China's foreign exchange system would
contribute to a sounder, more evenly paced macroeconomic policy.
These negotiations will continue in the coming months. I believe that the Chinese
authorities share our reform goals, although, unfortunately, they will not commit to a specific
timetable for implementation of reforms. We will continue to seek action, both in China
and other high growth Asian economies, in order to secure access for exports of U.S. goods
and services.
Korea and Taiwan
In the past, both Korea and Taiwan were determined to be currency manipulators.
While Taiwan was cited as recently as last December, we do not at this time believe that
eitl .::r Korea or Taiwan IT,e~ts the criteria for that determination.
Korea's global trade and current accounts remain in deficit, albeit substantially
reduced from 1991 levels. We have discerned no activity in the foreign exchange market
which would signify intervention to influence the exchange rate. However, Korea maintains
a system of foreign exchange and capital controls that limit trade and investment flows and
th~reby dampen the influence of market forces in the foreign exchange market.
In our recent contacts with Korean officials, we have stressed that these controls limit
our ability to export to and invest in Korea, and particularly limit the scope of our financial
institutions' activities in Korea. We will sustain our efforts to promote market opening.
5
Taiwan's overall current account remains large but fell significantly from 1991. While
the United States remains in bilateral deficit with Taiwan, it does not appear at this time
that Taiwan is intervening in the exchange market to limit appreciation of the New Taiwan
(NT) dollar. Furthermore, Taiwan's capital controls do not appear to be constraining
capital inflows or appreciation of the NT dollar, although the existence of these controls
leaves the potential for future interference in exchange rate movements.
Treasury is actively engaged in negotiations with the Taiwan authorities to eliminate
the capital controls that can deter potential demand for the NT dollar and to open further
its financial services markets to U.S. institutions.
Conclusion
Sound growth in our principal trading partners, coupled with open trade and
payments systems, is increasingly essential to the health of the U.S. economy. We have
reinvigorated cooperation with other major countries and have begun to see prospects for
enhanced growth, but more must be done. U.S. exports to the emerging economic powers
of Asia are growing, but not achieving their full potential. At the present time, only China
is found to be manipulating its foreign exchange system; however, we remain attentive to
the policies of Korea and Taiwan as well.
DEPARTMENT OF THE TREASURY
REPORT TO THE CONGRESS
ON
INTERNATIONAL ECONOMIC AND EXCHANGE RATE POLICY
MAY 1993
Embargoed for release until
10:00 a.m., May 25, 1993
DEPARTMENT OF THE TREASURY
REPORT TO THE CONGRESS
ON
INTERNATIONAL ECONOMIC AND EXCHANGE RATE POLICY
MAY 1993
Embargoed for release until
. 10:00 a.m., May 25, 1993
TABLE OF CONTENTS
Part I
Summary and Conclusions
Part II
Global Economic Developments, Impact on U.S. Balance of Payments,
and the G-7 Response
Economic Situation in the G-7 Countries
Developments in Foreign Exchange Markets
U.S. Balance of Payments
New G-7 Cooperative Approach to Growth
Part III
1
4
7
10
12
Asian Newly Industrialized Economies and China
Taiwan
South Korea
China
16
20
22
- 1-
PART I: SUMMARy AND CONCLUSIONS
This interim report discusses developments in U. S. international economic policy,
including exchange rate policy, since the fifth annual report to Congress submitted in
December 1992. These reports are required under Section 3005 of the Omnibus Trade and
Competitiveness Act of 1988.
While economic recovery is clearly underway in North America, real growth in Japan
and Europe is extremely weak:. Japan is experiencing its slowest growth in twenty years.
Stagnation characterizes most European countries. The U.S. recovery is itself moderate,
with limited creation of new jobs. A burgeoning surplus in Japan's current account is
threatening to reverse the considerable progress achieved in reducing the external imbalances
of the latter part of the 1980s. A positive development in almost all industrial countries is
the further ebbing of inflation.
In the face of these developments, the new Administration has sought to reinvigorate
the coordination of economic policy among the major industrial countries to strengthen the
world economy. In particular, it has sought to create an environment more conducive to
frank: and informal discussion; suggested ways to improve the analytical framework for
considering key issues; and recognized that coordination must take account of national
differences and interests rather than seek a common approach. This effort is already
producing results. The Finance Ministers and Central Bank Governors of the seven Summit
countries (G-7) have agreed that their national objectives of increased growth converge with
their international interests and are seeking to implement cooperative policies that reflect
their differing economic conditions:
for the United States and Canada, improved domestic savings and investment,
primarily through substantial reductions in fiscal deficits;
for Europe, measures to stimulate private demand and combat rising
unemployment, particularly through further declines in interest rates as a result
of implementation of medium-term budget consolidation plans and containment
of labor costs and inflation pressures; and
for Japan, substantial stimulus of domestic demand, which will contribute to
reduction of its large external surplus.
Implementation of these policies will lay the basis for sustainable economic growth
and reduction of unemployment in the G-7 countries and other market economies. Passage
of President Clinton's economic program is the essential U. S. contribution to this agreed
approach. In addition, the G-7 are agreed that all must undertake a broad range of structural
reforms in order to increase their long-term growth potential, and that a further opening of
the international trading system is indispensable for maximizing world growth.
-2-
Because of the differing economic conditions and prospects among major countries,
the U.S. trade and current account deficits widened somewhat in 1992 and are likely to
increase further in 1993. Nevertheless, the U.S. competitive position is strong; the current
trend of widening external deficits should slow and eventually reverse course, provided that
the G-7 growth strategy outlined above is achieved.
The dollar's value has not changed much in recent months on a trade-weighted basis.
However, this overall stability largely reflected offsetting moves against different currencies.
A moderate appreciation against European currencies was mainly attributable to the differing
prospects for interest rates in Europe and the United States. A decline vs. the yen can be
seen as a reflection of forces tending to limit and ultimately reverse Japan's widening trade
surplus.
The Administration believes that exchange rates should reflect economic fundamentals
and that attempts to artificially influence or manipulate exchange rates are inappropriate. At
the same time, excessive volatility of exchange rates is counterproductive for growth.
Consequently, the United States remains ready to cooperate in exchange markets with its G-7
partners.
Exchange rate policies of emerging trading powers such as China, Korea and Taiwan
continued to receive the close attention of U.S. authorities. These countries have at various
times in the past been deemed to be "manipulating" the exchange rate of their currencies vs.
the dollar in the meaning of Section 3004 of the Omnibus Trade and Competitiveness Act of
1988. The Treasury Department has held a combination of formal and informal talks with
the authorities of these countries aimed at encouraging the removal of measures which do or
might discourage appreciation of their currencies in response to market forces.
In this report, Treasury has concluded that China manipulates its foreign exchange
system. China's global trade and current accounts remained in surplus in 1992, although
these surpluses have declined somewhat, and its foreign reserves have increased further. Its
bilateral surplus with the United States widened. Despite these factors, China continues to
maintain significant limits on foreign exchange activity which impede balance of payments
adjustments by restricting imports.
It is Treasury's judgement that Taiwan is no longer manipulating its currency. A
significant element in the analysis underlying this conclusion is that Taiwan's global current
account and trade surpluses narrowed significantly in 1992, and its bilateral surplus with the
United States declined. However, the Department remains seriously concerned that
significant restrictions on foreign exchange trading and international capital transactions
remain and may be reducing demand for the NT dollar. Although the depreciation of that
currency in recent months was not the consequence of official actions that could be deemed a
manipulation, Treasury notes that the instruments needed for manipulation are still in place.
-3-
As in the December 1992 Report, the Treasury Department does not find that South
Korea has been manipulating the exchange rate of the won. South Korea continues to
register deficits in its trade and current accounts, although they narrowed sharply in 1992.
Korea's bilateral trade balance with the United States registered a surplus and foreign
reserves increased to the highest level ever recorded. However, the authorities do not appear
to be intervening in the exchange market to prevent an appreciation of the won.
-4-
PART II: GLOBAL ECONOMIC DEVELOPMENTS.
IMPACT ON U.S. BALANCE OF PAYMENTS. AND THE G-7 RESPONSE
A. ECONOMIC SITUATION IN THE G-7 COUNTRIES
Growth
Real GDP growth in the G-7 countries in 1993 now shows a clear distinction between
an expanding North America and a Europe and Japan in recession/stagnation. The U.S.
recovery appears clearly on track -- although growth remains unusually moderate for a
recovery period -- while Canada also is on an expansionary path. The International
Monetary Fund (IMF) now projects (see Table 1 below) U.S. real GDP growth of 3.2% on a
year-over-year basis for both 1993 and 1994, while Canada is expected to grow at a 3.2%
rate this year and 4.4% in 1994.
Table 1
G-7 Real GDP Growth
(% change y/y)
United States
Japan
Germany *
France
United Kingdom
Italy
Canada
Total G-7
1992
1993F
1994F
2.1%
1.3
2.0
1.4
-0.6
0.9
0.9
3.2%
1.3
-1.3
0.0
1.4
0.3
3.2
3.2%
3.5
1.7
2.3
3.1
1.9
4.4
1.6
1.9
3.0
* All Germany; comparable figures for GDP growth in western Germany only are 1.5 %,
-2.0% and 1.2%. F
= forecast;
source: IMP, World Economic Outlook, April 1993
Growth in Japan has decelerated sharply; last year's performance was the lowest in
nearly 20 years. Exports were strong, however, as Japan's markets in Asia experienced
solid growth and recovery in North America continued. The stock market and land price
declines have made both borrowers and lenders more cautious, and the earlier boom in
private investment led to a build-up of plant and equipment that may now seem excessive to
business decision makers. Thus consumption and private investment spending are likely to
remain subdued for some time. The Japanese authorities have announced a substantial fiscal
expansion package, to be put into effect this year. While this package is a welcome first
step, a sustained effort is needed to put Japan back on its potential growth path and to reduce
-5-
its large external surpluses. The IMF staffs projection of 1.3% real GDP growth for Japan
this year includes the estimated impact of the fiscal program in the current calendar year.
Thus it appears that the fiscal package has served more to prevent a recession or near
recession than to guarantee a strong expansion. With this in mind, the Fund's projection that
Japanese growth will snap back to 3.5 % in 1994 without further policy action could be
optimistic.
The outlook for Europe is very disappointing. Of the four largest countries, only the
United Kingdom is expected to show measurable positive growth in 1993, and the low
forecast of only 1.4% growth for this year follows two recession years. The decline in
German interest rates since last summer's peaks is an encouraging sign, but the cautious
nature of the Bundesbank's action, together with the normal lags in the impact of monetary
policy, will likely mean that recovery in Europe is delayed until 1994. For the EC as a
whole, the IMF sees essentially no growth (+0.1 %) this year and only 2.2 % for 1994.
Inflation
Inflation has been declining in most G-7 countries, and low inflation for the G-7 as a
group is likely to continue. IMF projections for consumer price increases (see Table 2
below) show inflation at the lowest aggregate rates (excepting the 1986-88 period when world
petroleum prices fell sharply) since the early 196Os.
Table 2
G-7 Consumer Price Inflation
(% change y/y)
1992
1993F
1994F
United States
Japan
Germany *
France
United Kingdom
Italy
Canada
3.0%
1.6
4.5
2.3
3.8
5.4
1.5
3.0%
1.0
4.4
2.0
2.1
5.7
2.3
3.1%
1.5
2.5
2.5
4.0
5.2
2.0
Total G-7
3.0
2.8
2.9
* All Germany; comparable figures for western Germany only are 4.0%,3.8% and 2.1 %.
F= forecast; source: IMF, World Economic Outlook, April 1993
While Italy continues to have the highest inflation rate among the G-7 (although the
rate is now declining), inflation in Germany has been of major concern, in part because high
interest rates in Germany to contain inflation have spread to other European countries and
impeded economic recovery. However, Germany's inflation outlook is slowly improving.
Consumer price inflation has been raised temporarily by the one percentage point rise in
-6-
value added tax on January 1, which added about half a point to the year-over-year rate for
western Germany (4.2% in March 1993). Significantly lower wage settlements this year -in the 3 to 3-1/2 % range, vs. 5-1/2 to 6% last spring -- should contribute to a lower inflation
picture which should be visible in coming months. Slower monetary growth is also now
evident.
External Account Developments
The most important development in the external accounts of the G-7 countries has
been Japan's record high and rising trade and current account surpluses. IMF projections
for the G-7 are shown in Table 3.
Table 3
G-7 Current Account Balances
($ billions ( % GDP»
1992
United States
Japan
Germany *
France
United Kingdom
Italy
Canada
Total G-7
1993F
1994F
-$62.4
+ 117.6
-25.9
+ 2.5
-21.1
-25.2
-23.6
(-1.0)
( 3.2)
(-1.3)
( 0.2)
(-2.0)
(-2.1)
(-4.2)
-$101
+137
-27
+2
-26
-16
-19
(-1.6)
( 3.4)
(-1.4)
( 0.2)
(-2.8)
(-1.6)
(3.3)
-$131
+128
-24
+3
-26
-14
-15
(-2.0)
( 3.0)
(-1.2)
( 0.3)
(-2.7)
(-1.3)
(-2.4)
-38.1
(-0.2)
-49
(-0.3)
-79
(-0.5)
* All Germany
F= forecast; source: IMF, World Economic Outlook, April 1993
The IMF's forecast of a modest decline in the Japanese surplus next year is open to
doubt. (In the preceding two years, the Fund tended to underestimate the surplus
significantly.) With projected stronger growth in Europe and Canada, and continued solid
growth in the United States (3.2%) and in Asian developing countries (6-1/2%), Japanese
exports should continue to grow. (Using Bank of Japan price deflators to derive indices of
Japanese export and import volumes indicates that the volume of Japanese exports grew 8.0%
in 1991 and 5.3% in 1992, while the volume of imports grew only 2.6% in 1991 and
actually fell 1.4% in 1992.) Imports are likely to remain weak: as the Japanese economy
grows below trend performance. The yen's rise earlier this year, if sustained, would
eventually provide some counterweight to the forces tending to increase Japan's surpluses.
On balance, however, it is still possible that Japan's surpluses could increase rather than
decrease next year.
-7-
The Fund also may have overestimated U.S. current account deficits for 1993 and
1994. While the U.S. deficit is expected to rise to over $100 billion by 1994 (see the section
on the U.S. balance of payments), the moderate nature of the U.S. expansion and the strong
competitive· position of U.S. exports (of both goods and services) should help restrain the rise
in the trade and current account deficits of the United States.
On the latter point, Chart 1 shows the value of the dollar (and yen and DM) in
relation to the currencies of a number of major trading partners, adjusted for differences in
national inflation rates. These real trade-weighted exchange rates for the three most
important world currencies are at least a rough measure of national trade price competitiveness. The chart shows that the dollar has maintained the competitive position it regained by
early 1988, with only moderate fluctuations since that time on a real trade-weighted basis.
The yen, on the other hand, has risen to levels which are now the highest in the period
shown (January 1980 - April 1993). The DM has shown less dramatic changes.
Exchange rate movements for the period since early October 1992 are described in greater
detail below.
Chart 1
R.I T.... w8lghtwd Exchange RaIIIt ~
for the .,.... v_............... 80(1 to 93(4
140
140
130 ~--------------~------~~~----------~-r 130
, "'"
,
t-' ,': ".,
,
I
8
••
I
\
~
I ' ,",
."
,I
.... 120 4--------------+--~~.'~'~,~'.----~~------~~
120
,
•
N
GO
,,,,t.
,
;.,I,",," '-\.'.:...... .
,'I
a-
d 110 4--------+~--------~~~~----~~--~--~110
.·"··.. 4: ".
: ..... :
....:....
GO
a....
it
]
:,.',
.........:.
~
100
....:.. .',.',
I
," "
•••••••
4--L~~~~'~"~'~'~-~'~~~~----r------------r100
, "" ...: -......
"
,',
""-
".:"
90
•
:
4-~~----~--------------JL----~~-4~T--r
90
80
80
80/1 81 /1 82/1 8311 84/1 8511 8811 tf1/1 8811 89/1 90/1 91 /1 92/1 8!11
=~ In c:ompa~_;
=~.a In compeIitiveneaa.
Noea: A rile 1n1he index
• falin the indaIl
-soc.rce: JP MoIgan; 1980 trade waIahIs (1 e Industrial and 22 deYeIof* Ig
c:ourtries; 1980-82
=100.
Dafa . . ttwuApril30.1993).
B. DEVELOPMENTS IN FOREIGN EXCHANGE MARKETS
Overview
Since early October 1992, the dollar has declined by approximately 8 % vs. the
Japanese yen and has appreciated by approximately 11 % vs. the German mark. On a tradeweighted basis, the dollar rose by 0.1 %.
-8-
The main factor affecting dollar movements against European currencies was the
difference in cyclical conditions in the United States and Europe. The dollar firmed amid a
recovery in the U.S. economy and a downturn in Europe, which contributed to expectations
in the market that interest rate differentials unfavorable to dollar placements would narrow.
Meanwhile, Japan's economic slowdown weighed on the yen, although the effect on the
yen/dollar exchange rate was mitigated by uncertainty about the U.S. presidential election
and, later, about the policy direction of the new Administration.
Subsequently, cyclical disparities between the United States and Japan were
overshadowed by market perceptions that the G-7 countries, and perhaps the United States in
particular, would favor appreciation of the yen as a means of addressing Japan's trade
surplus. Also, there was a broader concern in the market that the United States might
welcome a decline of the dollar against other currencies as well.
Chart 2
Dollar VS. Yen and Mark
Since October 1992
8.
~
~ 120
:':
>G»
8.
..... : .....: ..... : •........ 1.6
•••••• "
:: 115
c
~ 110
....,
1.65 ~
.,
...........
.: ... : ........:'•... :. ....
.••......
125
1.55
1.5
,0'
.' .
:' ......:
Japanese
Yen
German
M~
1.45
Ii
:E
c:::
as
E
--:~_'----=-::--_...L...-----;:;--_---'-_-;--_--'_----;::-;-_'--_":-:-_---'-_----:-_---:":::-:"!
1.4 ~
Oct
Nov
Dec
Jan
Feb
.:Mar
Apr
i:L::-:\:=-"
1 ()'()1-82
~
()5..()O.G3
Source: daily opening N.Y. rates
Differin2 Economic Cycles
The pace of the U.S. economy in the fourth quarter of 1992 led market participants to
believe that prospects for further monetary easing by the Federal Reserve had all but ended.
Expectations of fiscal stimulus measures under the new Administration were also a factor.
Meanwhile, deteriorating economic conditions in Europe encouraged expectations that
interest rates there would trend lower. Some European central banks began lowering interest
rates in the weeks following the September currency crisis in the European Monetary
System. The Bundesbank lowered its official rates in February, but the market remained
unconvinced that a monetary easing cycle had definitively begun in Germany. Subsequently,
it became apparent that further easing by the Bundesbank would proceed very gradually.
Moreover, the market was disappointed with "soft" U.S. economic growth in the first
quarter and early second quarter of 1993. Consequently, there was little incentive to take on
-9long dollar positions, particularly amid only a gradual narrowing of interest rate differentials
unfavorable to dollar placements. Declines in German money rates and, in April, a further
official interest reduction by the Bundesbank did not materially change this situation.
The market also viewed Japan's economic adjustment, particularly the decline in
domestic demand and the involuntary accumulation of inventories, with mounting concern.
The political situation in Japan compounded the market's caution toward yen assets.
However, the market saw that, relative to Europe, Japan had little scope for further reducing
its already low interest rates and better prospects for economic recovery. Although confined
to a narrow range against the dollar, the yen appreciated in terms of European currencies.
There were signs in the first quarter of 1993 that the Japanese economy was nearing a
cyclical bottom and would soon be poised to begin a recovery. The Bank of Japan's action
to lower interest rates in early February was welcomed in the market and contributed to the
emergence of more positive market sentiment toward yen assets amid a rebound in the
Japanese stock market and expectations of a fiscal stimulus to support economic recovery.
Market Perceptions of Official Policies
Amid signs of slow growth in the United States and a steeper than expected decline in
Continental European economies, the yen appreciated to a record level of i 109.25 in April.
A key factor in this appreciation was the belief in the market that the G-7 countries viewed a
higher yen as a means of addressing Japan's widening trade surplus.
The yen's appreciation was particularly sharp during February, when many market
participants expected the G-7 to make a pronouncement specifically in favor of a higher yen.
However, the February G-7 meeting did not result in such a call. Ahead of another G-7
meeting in April, Japanese officials expressed concern about prospects for further yen
appreciation, and there were reports of Japanese intervention to curb the yen's rise. The
U.S. authorities were also reported to have intervened at one point. The April meeting also
produced no specific references to the yen, and exchange rates have remained relatively
steady since.
The clarification of U.S. policies on exchange rates was designed to keep the market's
focus on the real issues of the economic policies that are needed among G-7 countries to
support sustainable, non-inflationary economic growth. As stated in the communique of the
April G-7 meeting, a cooperative strategy for non-inflationary growth, based on sound
policies, structural reforms, and more open trade, will foster conditions in currency markets
that will reflect economic fundamentals. The major challenge that the G-7 faces is to restore
growth and to ensure that the composition of growth contributes to the reduction of trade
imbalances.
-10C. U.S. BALANCE OF PAYMENTS SITUATION
The U.S. trade and current account deficits rose in 1992, after declining for four
consecutive years. This reversal was not unexpected, since the U.S. economy was in a
recovery mode while major trading partners were heading into recession. Thus, the
deterioration in the U.S. external position is not seen as symptomatic of a decline in U.S.
competitiveness, but rather as the result of cyclical factors.
The trade deficit rose to $96 billion in 1992, compared with $73 billion for 1991.
Reflecting the cyclical situation, U.S. exports slowed while imports grew over 9% after a
very slight decline in 1991. U. S. export performance was characterized by a slight fall in
exports to Europe and Japan in value terms, but increases to all other major geographic
areas. Exports to Latin America, especially Mexico, rose sharply. Overall, export growth
was substantially below rates of recent years, when the trade deficit was declining.
Imports picked-up from near stagnation in 1991. The pick-up was primarily in finished
manufactures, notably capital and consumer goods. Reflecting the impetus from stronger
U.S. growth, increases in imports were spread across geographic areas and supplier
countries.
On a regional basis, the largest contributors to the total trade balance deterioration of
$23 billion were W. Europe (-$12 billion), Japan (-$6 billion), and China (-$5.5 billion).
Table 4
U.S. Trade with Selected Areas: 1991&92
($ billion; data from Survey of Current Business)
Country
or Region
EXQQrts to
1992
1991
ImQQrts from
1991 1992
Balance
1992
1991
W. Europe
Japan
China
Asian NIEs
L. America
116.8
47.2
6.3
44.4
63.2
114.4
46.9
7.5
46.9
75.3
101.9
91.5
19.0
59.2
63.0
111.4
96.9
25.7
62.4
69.2
+14.9
-44.3
-12.7
-14.8
0.3
+3.0
-50.0
-18.2
-15.5
+6.2
R.O.W.
Uti
148.3
154.8
169.9
-16.8
-21.8
TOTAL
416.0
439.3
489.4
535.5
-73.4
-96.3
By contrast with the merchandise trade b~ance, the balance on trade in services
recorded a substantial surplus ($55 billion) in 1992, $10 billion higher than the 1991 surplus.
Trade in a wide range of services has emerged as a major area of U.S. competitive advantage, recording steadily rising surpluses in recent years.
-11-
Net investment income also reflected the relative cyclical position. Receipts on U.S.
direct investments abroad, weakened by the recession in Europe, fell while the reviving U. S.
economy produced a shift from losses to modest gains on foreign direct investments in this
country. The overall surplus on net investment income fell to $10 billion, a $6 billion
decline which partially offset the gain on services transactions.
Given the relatively modest size of balances in other categories of transactions, the
current account balance has tended to move with the trade balance over time. For 1992, the
current account deficit rose -- after adjustment to remove the one-time influence of foreign
transfers in support of Desert Storm -- by $16 billion, compared with $23 billion for the
trade deficit.
Table 5
U.S. Trade and Current Account: 1987; 1991-2
($ billion: data from Survey of Current Business)
Balance
1987
1991
1992
Trade
Services
Investment Income
Transfers
-160
8
11
-23
-73
45
16
-34*
-96
55
10
-31
Current Account
-163
-46*
-62
*Adjusted to exclude $42 billion in transfers from allies in support of Desert Storm.
Recorded net capital inflows totalled $75.6 billion, of which $24.3 billion was
accounted for by private flows while the remainder reflected official transactions. (The
difference between the current account deficit and the recorded capital flow is categorized as
the "statistical discrepancy".) By contrast with the large inflows of recent years, there was a
small outflow from the United States by foreign direct investors in 1992, which combined
with continued investment activity abroad by U.S. direct investors to generate a net direct
investment outflow of $39 billion. Foreign purchases of U.S. securities rose by $14 billion,
while there was a substantial net inflow ($47 billion) through banking channels.
Prospects for 1993 and 1994
The relative growth performance of the United States and major trading partners is
expected to dominate the trade and current account outlook for 1993 and into 1994.
o
Based on present prospects for U.S. and foreign growth, it seems likely that the U.S.
trade and current account deficits will increase this year and next, with an expanding
trade deficit overwhelming a further increase in the net surplus on trade in services.
-12o
The trade deficit probably will rise to well over $100 billion this year, and the current
account deficit may well reach or exceed $100 billion in 1994.
A sustained upward trend in the deficits could be of particular concern if the gap
became so large that very rapid export growth was required just to keep the gap from
widening further. (For example, when the trade deficit was at its peak in 1987, exports were
only about 60% as large as imports. This meant that exports had to grow nearly 1-1/2 times
as fast as imports just to avoid further increases in the deficit. At present, exports total over
80% of imports.)
There are important differences between the present situation and the episode of rising
deficits during the mid-1980s, however.
o
The U.S. competitive position is strong in merchandise trade as well as the growing
services industries. Exports are sluggish because some overseas markets are not
growing.
o
U.S. national saving should increase, rather than deteriorate as was the case during
the 1980s, particularly with adoption of the President's economic program.
o
Important sources of surging imports during the first half of the 1980s are no longer
present.
An increasing share of U.S. sales by Japanese auto firms is now sourced in the
United States. Thus, imports of Japanese autos have declined as a percent of
Japanese market share. Moreover, total Japanese market share has declined,
reflecting the more competitive position of U.S. auto makers.
Exchange rate changes have reduced the strong competitive advantage
previously enjoyed by the Asian NIEs.
D. NEW G-7 COOPERATIVE APPROACH TO GROWTH
Two major, interrelated international economic challenges presented themselves to the
new Administration upon taking office: 1) reinvigorating the G-7 process in order to 2) help
strengthen the global economic recovery. The need for concerted G-7 action was made clear
by the moderate nature of the U.S. recovery, continued sub-par prospects in the other major
countries, and growing external imbalances. At the same time, there were concerns over the
G-7' s inability in recent years to agree to a common approach to promoting growth due to
cyclical divergences in performance among countries and differences in economic priorities.
Revitalizing the G-7 is a high priority of the Administration because of the
increasingly significant impact of global trade and capital flows on U.S. economic prospects.
-13Rising net exports of goods and services accounted for 40 percent of U. S. growth between
1987 and 1991 and contributed importantly to new, comparatively high-paying jobs. Thus,
the slowdown in overseas markets in 1992 and continued weak prospects in 1993 are of
particular concern. In addition, the recent Group of Ten (G-I0) study on International
Capital Movements and Foreign Exchange Markets underscores the importance of efforts by
the major industrial countries to implement compatible policies in order to ensure efficient
and stable financial markets.
Against the backdrop of continued economic uncertainty, the United States took the
lead beginning earlier this year in coordinating a new cooperative G-7 approach which would
1) ensure a strong recovery that created jobs and 2) establish the basis for sustainable growth
over the medium term. Rapid and tangible progress has been made over the past few
months.
At an informal G-7 Ministerial meeting in London on February 27, Secretary Bentsen
presented the President's economic program to his G-7 colleagues. The new program was
well-received as both a serious contribution to world growth and a tangible reflection of the
U.S. commitment to enhanced G-7 coordination. By making politically difficult choices on a
comprehensive deficit reduction plan -- something our allies have recommended for some
time now -- the United States gained valuable credibility which enhanced the possibility of
eliciting complementary policy actions by others, particularly Japan and Germany.
The new U. S. approach reflects changes in tone as well as substance in fostering a
new cooperative G-7 approach to growth. As noted earlier, the U. S. has sought to foster a
more results-oriented process that encourages more frank and informal discussions. To
enhance the quality of G-7 surveillance over economic developments, a common analytical
framework is being developed to improve the comparability of economic data across
countries. To facilitate actions toward mutually desired goals, this new approach recognizes
the need to take into account national differences and interests, rather than seeking a common
approach, which too often proves elusive and which may not be appropriate given the unique
circumstances in each country.
Recent actions by the United States, Germany, and Japan reflect the convergence of
national objectives and international interests:
1)
The President's economic program offers a blueprint for sustainable growth this year
and into the future. The new package's inclusion of substantial deficit reduction
measures totaling $500 billion over five years and measures to increase public and
private investment are critical to improving U.S. competitiveness and growth
prospects.
2)
The 13 trillion yen ($119 billion) Japanese fiscal stimulus package represents a
positive step toward boosting domestic demand and reducing the growing trade
surplus. Further actions may be warranted, however. Most analysts estimate that
only about half of this package clearly represents a direct addition to domestic
,
-14demand. As noted earlier, the IMF forecasts only 1.3% Japanese growth this year
after accounting for the stimulus package. The Japanese economy is operating below
its potential, and a sustained fiscal stimulus is the most effective means for increasing
growth in a timely fashion. Japan's strong fiscal and net public debt positions provide
ample room for further action in this regard.
3)
The pace of reductions in German interest rates may be quickening. Just prior to the
recent G-7 Ministerial, monetary authorities cut the Lombard rate by 112 a percentage
point to 8.5% (reducing short-term interest rates to levels some 220 basis points
below September 1992 rates). Recent Bundesbank actions and comments appear to
reflect the view that the balance of risks in the German economy have swung from
inflation to stagnation. Accelerated action to reduce interest rates appears warranted.
The Solidarity Pact among German labor, business, and federal and state governments
should help contain wage increases and reduce government borrowing over the
medium-term, enhancing the scope for a further easing of interest rates.
Recent Japanese and German measures to increase growth represent significant
complements to the President's economic program that should result over time in increased
U.S. exports and jobs as economic growth picks up in Europe and Japan. At the same time,
the United States has made clear that more actions may be warranted to ensure a strong
recovery. For its part, the United States must implement the President's program in order to
maintain the momentum of current policy directions, including further complementary policy
measures in Japan and Germany. G-7 countries will continue to monitor the impact of these
actions and have reaffirmed their continued commitment to close cooperation in exchange
markets.
-15PART TIl: NEWLY INDUSTRIALIZED ASIAN ECONOMIES AND CHINA
Under Section 3004 of the Omnibus Trade and Competitiveness Act of 1988, the
Secretary is required, on an annual basis, to "consider whether countries manipulate the rate
of exchange between their currency and the United States dollar for purposes of preventing
effective balance of payments adjustment or gaining unfair advantage in international trade.
If the Secretary considers that such manipulation is occurring with respect to countries that
(1) have material global current account surpluses and (2) have significant bilateral trade
surpluses with the United States, the Secretary of the Treasury shall take action to initiate
negotiations ... on an expedited basis ... for the purpose of ensuring that such countries
regularly and promptly adjust the rate of exchange between their currencies and the United
States dollar to permit effective balance of payments adjustments and to eliminate unfair
advantage. "
In the first report (fall 1988), Treasury determined that Taiwan and Korea
manipulated their currencies within the meaning of the legislation. Following bilateral
negotiations, Treasury concluded that, while significant problems remained, Taiwan (as of
the fall 1989 report) and Korea (as of the spring 1990 report) were no longer manipulating
their currencies. These findings were reaffirmed in fall 1990, spring 1991, and fall 1991.
The applicability of Section 3004 to China was first considered in fall of 1990; in that report
and in the spring and fall 1991 reports, Treasury noted that China's exchange rate controls
were of serious concern but did not find that currency manipulation was occurring.
In the spring and fall 1992 reports, Treasury reaffirmed its determination that Korea
was not manipulating its currency. However, with regard to Taiwan, Treasury determined
that Taiwan was once again manipulating its currency, as it was using central bank
intervention and restrictions on foreign exchange transactions and capital flows to constrain
demand for the NT dollar, even though its external surpluses were increasing.
With respect to China, Treasury found that China was also manipulating its currency.
The basis for the changed judgement was the continued devaluation of the administered
exchange rate, despite growing external surpluses, and the significant control exercised by
the authorities over foreign exchange swap center rates which had also depreciated since the
emergence of the large surpluses.
As a result of these manipulation findings, Treasury initiated negotiations with China
and Taiwan during 1992. The remainder of this chapter describes the results of those
negotiations, as well as recent balance of payments and exchange rate developments, and
assesses the foreign exchange systems of China, Taiwan, and Korea.
-16TAIWAN
Taiwan continues to have a material global current account surplus and a significant
bilateral trade surplus with the United States. However, it is the judgement of the Treasury
Department that Taiwan is not at this time manipulating the rate of exchange between the
New Taiwan (NT) dollar and the U.S. dollar for purposes of preventing effective balance of
payments adjustment or gaining unfair competitive advantage in international trade.
Notwithstanding this determination, and particularly in view of the fact that Taiwan
continues to have large external imbalances (including a $9.4 billion trade surplus with the
United States in 1992), the Treasury Department remains seriously concerned that restrictions
maintained by Taiwan on foreign exchange transactions and capital flows continue to reduce
market demand for the NT dollar and thereby amount, in effect, to indirect manipulation of
the exchange rate.
Despite several rounds of negotiations during 1992, Taiwan appears unwilling to
remove the restrictions that can constrain demand for the NT dollar and unwilling to
guarantee that it will not again engage in practices that constitute direct manipulation of the
exchange rate. Permitting the full range of market forces to determine the level of demand
for the NT dollar would likely contribute to further adjustment of the existing bilateral trade
imbalance.
Trade and Economic Developments
Significant adjustment seems to be taking place in Taiwan's overall external
imbalances. The current account surplus fell 34 percent to $7.9 billion in 1992 (3.8 percent
of GDP) from $12.0 billion in 1991 (6.8 percent of GDP). This decline was attributable
both to a smaller overall merchandise trade surplus, which fell to $9.5 billion from $13.3
billion in 1991 (a decline of 29 percent) and to a larger deficit in services and income, which
rose to $4.7 billion in 1992 compared to $3.5 billion in 1991.
However, recent adjustment in Taiwan's bilateral trade surplus with the United States
has been rather modest. The 1992 surplus of $9.4 billion represents only a slight decline
from $9.8 billion in 1991, less than half the adjustment that occurred in 1991. Data for the
first three months of 1993 show a continued decline in the imbalance. U.S. exports to
Taiwan grew 15.3 percent in 1992 compared to 1991, substantially faster than the 6.3
percent growth in overall U.S. exports.
Taiwan ended 1992 with $82.3 billion in foreign exchange reserves, equal to roughly
14 months of imports, and, after Germany, had the world's second largest holdings. By
comparison, the industrial countries, on average, hold non-gold reserves equivalent to 2-3
months of import cover.
-17Exchange Rate Developments
Market pressures have resulted in a depreciation of the NT dollar since the December
1992 report, which is likely to impede further reduction of the bilateral imbalance. The
exchange rate stood at NT$ 25.96 per U.S. dollar on May 19. The NT dollar has depreciated 2.2 percent since end-1992, and 5.7 percent since it reached a record high in July 1992.
The NT$ appreciated a scant 1.3 percent during 1992. The recent decline of the NT dollar
and consequent increase in Taiwan's global competitiveness would have been even greater if
exchange rate changes against non-dollar currencies and inflation differentials are taken into
account.
The NT dollar has declined even more markedly against the Japanese yen -- 13
percent since end-1992 alone. As Taiwan purchases most of its imports from Japan (30
percent in 1992) and the United States (21 percent in 1992); a depreciation of this magnitude
will raise import prices and increase inflationary pressures in Taiwan's domestic economy.
Exchange Rate System
Taiwan retains a variety of controls and restrictions that provide scope for currency
manipulation. Collectively, these controls help to limit the volume of trading in Taiwan's
foreign exchange market, which remains small and thin. As a consequence, the central bank
can still exert strong influence in the foreign exchange market. The key controls described
below were covered more fully in the fall 1992 report; no significant changes have occurred
since that report.
The lack of transparency in activities of the central bank means that it continues to
retains the ability to intervene directly in the exchange market, use proxies to intervene
indirectly, or manage purchases by state-owned corporations.
Ceilings on foreign exchange liabilities, which vary from bank to bank, still affect
forward trading in the NT dollar. The ceilings also constrain the ability of foreign bank
branches, including branches of U.S. banks, to offer foreign currency loans in Taiwan and to
use swap funding for local currency lending. In place of the quantitative limits imposed by
these ceilings, prudential concerns in this area could be addressed through other means, such
as through risk-based capital requirements that apply to the financial institution as a whole.
The scope of the forward foreign exchange market is restricted by a number of rules
that prohibit transactions for non-trade-related purposes, limit trading to authorized banks,
impose a sizeable deposit guarantee, and limit the maximum forward period to one year.
These restrictions also prevent foreign banks and securities firms both in and outside of
Taiwan from hedging capital in Taiwan's onshore market.
Non-trade-related capital inflows and outflows are limited to $5 million per firm or
individual (capital flows for trade purposes are unlimited). The amount of cash an individual
may carry in and out of Taiwan is limited to NT$40,OOO (about $1,5(0).
-18The ability of foreign institutional investors to invest in Taiwan (Le., in NT dollardenominated financial instruments) is constrained by government regulation, in part due to
fears that such investment will increase the demand for NT dollars. Restrictions include a
cap on the aggregate amount of foreign investment in the stock market, limits on the amount
of capital that can be brought in by anyone investor, and a minimum time that must elapse
before capital and earnings can be repatriated. Investment by foreign individuals is
prohibited altogether. Efforts by Taiwan to improve the attractiveness of its financial
markets could increase foreign interest and promote capital inflows that could lead to
increased demand for the NT dollar.
Exchange Rate Negotiations
After determining that Taiwan was manipulating its currency under Section 3004,
treasury held four meetings with the Taiwan authorities during the course of 1992. Despite
these negotiations, Taiwan has not made any significant changes in the array of controls and
practices that provide the authorities with sufficient scope to manipulate or strongly influence
the exchange rate. During the last round of negotiations, the central bank promised publicly
to review its controls with the intention of removing those that are unnecessary, a commitment that it has not fulfilled. No significant action has subsequently been taken, though
Taiwan has taken several very modest steps to remove impediments to appreciation of the
NT dollar. 1 The Taiwan authorities appear to hope that, by retaining a capability to
manipulate or strongly influence the exchange rate, they will be able to slow or avoid the
gradual internationalization of the NT dollar that should accompany the island's growing
economic stature as a global trader and investor.
Assessment
The present determination represents a change from Treasury's assessments of May
and December 1992 that, in the context of Taiwan's large and increasing external
imbalances, the system of exchange and capital controls maintained by the central bank, as
well as its direct and indirect involvement in the exchange market, constituted manipulation
of the currency.
Three developments described above have led to our changed determination. First,
the array of controls on capital inflows and exchange transactions maintained by the central
bank do not appear at this time to be directly constraining appreciation of the NT dollar.
Second, it does not appear that the central bank has been intervening in the exchange market
to dampen pressures for appreciation. Instead, on a number of occasions during the past
The foreign exchange liabilities ceiling for all commercial banks was raised in two
stages from $19.2 billion to $20.6 billion. Also, the ceiling on investment by a foreign
institutional investor was effectively raised from $50 million to $100 million (after the first
$50 million is brought in, an institutional investor can apply to bring in another $50 million).
1
-19several months it appears to have intervened in the market to support the NT dollar. Finally,
significant adjustment seems to be taking place in Taiwan's overall current account surplus.
With regard to the outlook for further reduction in Taiwan's trade imbalance with the
United States, the imbalance may grow without NT dollar appreciation in the months ahead.
In view of the lack of appreciation in the NT dollar during 1992, Taiwan's exporters may
become even more competitive in world markets, particularly in the U.S. market as our own
economy grows more rapidly than Taiwan's other export markets.
Consequently, Treasury remains concerned that, if strong market pressures for NT
dollar appreciation recur in the period ahead, Taiwan might again resort to currency
manipulation, using instruments at its disposal, in order to limit the rise of the NT dollar.
Taiwan expects that its economy will continue to grow strongly. Taiwan has targeted GNP
growth of 7 percent in 1993, up from 6.1 percent in 1992. Interest-rate differentials between
NT dollar- and U. S. dollar-denominated assets appear to be increasing as monetary policy
tightens in response to re-emerging inflationary pressures. Confidence in Taiwan's stock
market seems to be growing, which has fueled foreign interest and spurred capital inflows
from foreign institutional investors. Political uncertainty has diminished with the election of
a new Legislative Yuan in December 1992 and the appointment of a new premier and cabinet
in February 1993.
Because of the serious nature of these concerns, Treasury will continue to monitor
Taiwan's exchange rate policies closely in the period leading up to the next report to
Congress to determine whether the authorities are again manipulating the exchange rate of
Taiwan's currency and to ensure that the exchange rate is playing an appropriate role in
adjustment of Taiwan's external imbalances, including its bilateral trade surplus with the
United States.
In this regard, Treasury would view official actions or practices that interfere with the
role of market forces in exchange rate determination -- such as intervention in the foreign
exchange market to dampen pressures for appreciation or maintenance of restrictions on
foreign exchange transactions or capital inflows that appear to constrain NT dollar
appreciation -- as an effort by the authorities to manipulate the exchange rate to inhibit
effective balance of payments adjustment and gain unfair competitive advantage in international trade.
Furthermore, Treasury will use further discussions to seek changes in Taiwan's
exchange rate policies and restrictions on capital movements with respect to both their impact
on external adjustment, and their harmful effect on U.S. financial firms in Taiwan. Finally,
with regard to Taiwan's accession to the GATT and the economic and political benefits
GATT membership will bring, the United States has noted that, under the GATT Articles,
Taiwan must negotiate a special exchange arrangement with GATT members to ensure that
Taiwan cannot use exchange rate policies to frustrate the intent of GATT trade provisions.
-20-
SOUTH KOREA
The Treasury Department does not find the Korean authorities to be manipulating the
exchange rate directly to gain unfair competitive advantage in international trade or to
prevent effective balance of payments adjustments. Korea's external deficits were reduced
significantly in 1992 as economic growth slowed following the implementation of stabilization policies in late 1991 and throughout 1992. There continues to be little evidence that the
Korean central bank is intervening in the exchange market, and the level of activity of other
government-owned foreign exchange banks in the market has been minimal since the fall
1992 report. Treasury remains concerned, however, about the continued prevalence of
stringent foreign exchange and capital controls that thwart the influence of market forces in
the determination of Korea's exchange rate and trade and investment flows. Such controls
frustrate the emergence of a truly market-determined exchange rate.
Recent Developments
The Korean economy in 1992 experienced the consolidation of a process of adjustment after the 1990-91 period of overheated growth. Real GNP growth slowed to 4.7
percent, compared to 8.4 percent in 1991 and 9.4 percent in 1990. At the same time,
substantial progress was made in addressing the effects of two years of excessive domestic
demand caused in part by expansive financial policies initiated in 1989. Consumer price
inflation in 1992, at 4.5 percent (down from 9.3 percent in 1991), was the lowest in six
years.
In 1992, the current account deficit was cut nearly in half to $4.6 billion (1.6 percent
of GNP) from $8.7 billion in 1991 (3.1 percent of GNP). Stabilization policies to cool
domestic demand and the overheated construction sector resulted in import growth of just
under 1 percent, compared to 17.7 percent a year earlier. Although export growth declined
from 10.3 percent in 1991 to 7.9 percent in 1992, exports grew faster than imports for the
first time since 1988. The overall trade deficit fell in 1992 to $2.2 billion from $7 billion in
1991.
According to the U.S. Department of Commerce, the United States recorded a
bilateral trade deficit with Korea of $2.1 billion in 1992, compared to $1.5 billion in 1991.
Korean data show a slight surplus for the United States in 1992, and indicate that Korea also
had deficits with Japan, the EC, and China, but surpluses with countries in Southeast Asia
and Latin America.
In the capital account, overall net capital inflows totalled $7.8 billion in 1992, up
from $4.2 billion a year earlier. The increase is largely the result of a rise in long-term
capital inflows following the limited opening of the Korean stock market to foreign investment in January 1992. The level of Korea's net foreign debt declined by 8.2 percent from
$11.9 billion in 1991 to $11 billion in 1992 (3.7 percent of GNP). Korea's debt service ratio
is estimated to have remained stable in 1992 at 6 percent.
-21Korea's foreign exchange reserves maintained an upward trend in 1992 in conjunction
with the continued improvement in the external accounts, rising $3.4 billion to $17.1 billion
(2.7 months of import coverage), the highest level ever recorded.
As of May 19, 1993, the exchange rate stood at 801.1 won per dollar, representing a
nominal depreciation of 1.2 percent since the end of 1992. Since the inception of the market
average rate (MAR) system on March 2, 1990 (see fall 1992 report for description of this
system), the won has depreciated against the dollar by 15 percent, due largely to higher
inflation in Korea and the emergence of trade and current account deficits in 1990.
Foreign Exchange and Capital Controls
.
A broad array of controls on foreign exchange and capital account transactions in
Korea continues to prevent market forces from playing a fully effective role in exchange rate
determination, distorts trade and investment flows, and constitutes a potential channel for
Korean monetary authorities to influence the exchange rate.
The so-called "real demand rule," which requires foreign exchange banks to obtain
and review documentation of an underlying commercial transaction for most foreign
exchange transactions, continues to impede the development of the Korean foreign exchange
market and financial sector as a whole. Korea's restrictive terms for deferred import
payment, especially regulations that limit payback periods to only a fraction of international
norms, continue to be of key concern, as are tight restrictions on off-shore financing
alternatives. While there have been a few limited steps since the fall 1992 report to ease
controls in some of these areas, much remains to be done to enhance the role of market
forces in the determination of the exchange rate and trade and investment flows. Reaching
the Korea's stated goal of integrating the Korean financial sector into global capital markets
will require the Korean authorities to take bolder steps toward shortening significantly the list
of prohibited foreign exchange and capital transactions and to move forward with broadbased reform of the financial sector.
Status of Financial Policy Talks
Although no formal Financial Policy Talks (FPT) have been held between Treasury
and Ministry of Finance officials since the last report, informal dialogue has continued as
Korea moves toward completion of the Financial Sector Liberalization Blueprint (FSLB)
announced in the March 1992 FPT (see fall 1992 report for further discussion). A parallel
package of reform measures to deregulate the domestic financial industry is under formulation as well. While the two plans overlap in a number of key areas, the FSLB addresses to a
greater extent issues relating to increased market access and other aspects of the internationalization of Korea's financial sector. The final measures of both plans will be incorporated
into Korea's "Five Year New Economy Plan," slated for completion in June 1993.
Treasury's assessment of Korea's reform efforts will focus on both the substance and
timing of the implementation of policies which target the lifting of foreign exchange and
capital controls; liberalization of interest rates; elimination of directed credit schemes;
-22adoption of indirect means of monetary control; further opening of the stock market to
foreign investment; and enhancement of local currency funding sources for U.S. and other
foreign fmancial institutions operating in Korea.
CHINA
As China maintains significant restrictions on all aspects of foreign exchange activity
in China, it is Treasury's judgement that China manipulates its foreign exchange system by
restricting imports and that this action impedes effective balance of payments adjustment. Of
particular concern are China's priority list of permissible imports and restrictions on access
to foreign exchange. Moreover, China maintained a global current account surplus in 1992
and a large bilateral trade surplus with the United States. There have been no significant
changes in China's foreign exchange system since the December 1992 Exchange Rate Report
to Congress.
Trade and Economic Developments
China's global trade and current account surpluses remain substantial although they
continued to fall in 1992. China reported that merchandise imports rose 26 percent in 1992
to $80.6 billion while merchandise exports rose 18 percent to $85 billion. As a result,
according to Chinese figures, China's merchandise trade surplus dropped from $8.2 billion in
1991 to about $4.4 billion in 1992. Rapid import growth was fueled by strong domestic
demand and rapid growth of GDP. China's smaller trade surplus contributed to a decline in
China's current account surplus from $13.3 billion in 1991 to a reported $6.4 billion in
1992. Reserves increased by $2.6 billion to reach $46.9 billion in September 1992, about 7
months of import cover.2 China's current account surpluses have allowed China to meet its
debt service obligations with ease. While China's total external debt increased from $60.6
billion in 1991 to $69.3 billion in 1992, its debt service ratio has remained at about 11
percent.
China's bilateral trade surplus with the United States continued to grow rapidly in
1992. According to U.S. data, Chinese exports to the United States increased 37 percent to
reach $25.7 billion. Toys, sporting goods, clothing, and footwear continue to be the largest
categories of Chinese exports. Chinese imports from the United States rose 19 percent to
reach $7.5 billion. Aircraft, fertilizers, measuring equipment, and wheat were the largest
2 In December 1992, Chinese authorities announced they would change the method used
to calculate China's official reserves. Henceforth, foreign exchange held by the Bank of
China will not be included in official reserves since it represents the deposits of state
enterprises in the Bank of China (a bank controlled by the central government which
specializes in foreign exchange transactions). According to the new calculations, China's
official reserves for September 1992 would fall from $46.9 billion to $25.0 billion. With the
central authorities maintaining a high degree of control over the use of funds held by
enterprises in the Bank of China, the higher figure would be more appropriate.
-23categories of imports from the United States in 1992. China's trade surplus with the United
States rose from $12.7 billion in 1991 to $18.3 billion, an increase of 44 percent. In 1992,
China had the second largest trade surplus with the United States after Japan. U.S.
Commerce Department information for January-March 1993 indicates that China's trade
surplus with the United States increased $0.8 billion over January-March 1992.
In other economic developments, China's economy grew at an estimated annual rate
of 12.8 percent in 1992. Chinese economic growth was spurred by a reform drive early in
1992 and by rapid increases in investment and the money supply. Investment in fixed assets
jumped 38 percent over a year earlier while M2 increased 31 percent. In addition, China's
domestic saving and investment rates remain high. In 1992, gross national savings stood at
36 percent of GNP while gross domestic investment stood at 34 percent. China's high level
of national savings has allowed the country to maintain modest current account surpluses
while investing a large portion of GNP. Chinese inflation remained a reported 5.4 percent in
1992, although it appears to be accelerating. The end of period inflation rate was over 7
percent while urban inflation reached 12 percent in 1992.
In the future, the Chinese economy faces a real threat of economic overheating unless
the authorities take steps to prevent excessive growth of the money supply and investment.
So far the Chinese authorities have not taken such steps. High economic growth continues to
affect China's external sector, with preliminary indications that rapid growth in imports may
substantially diminish China's trade and overall current account surpluses in 1993. According to Chinese trade figures for January-March 1993, China's imports rose 25 percent over
the same period a year earlier while China's exports rose only 7 percent, leaving a global
trade deficit of $1.2 billion. 3 But this cyclical development does not provide the promise of
correction of the underlying structural imbalances sustained, in part, by distorted exchange
markets.
China's Foreign Exchange System
China operates a dual exchange rate system. The official exchange rate is set daily
and generally applies to priority imports for state enterprises under the State Plan. China's
second exchange rate, the "swap" rate, is determined in foreign exchange adjustment centers.
Joint ventures, foreign invested enterprises, and domestic trading firms with access to foreign
exchange may buy and sell foreign exchange and foreign exchange quotas at the swap
centers. Swap center rates are established through an open bidding system (15 centers) or as
the State Administration of Exchange Control matches applications for foreign exchange
(approximately 85 centers).
Chinese trade figures appear to be undergoing-revision. The same trade report
indicated a 32 percent drop in exports to Hong Kong and a 97 percent increase in exports to
the United States. Changes in Chinese rules of origin and statistical methods may account
for part of the change in trade figures.
3
-24China continues to maintain extensive restrictions on access to foreign exchange. For
goods on the restricted list, an enterprise must receive a license from the Ministry of Foreign
Trade and Economic Cooperation (MOFfEC)4 before it may buy foreign exchange in the
swap centers. For those goods that do not require MOFTEC approval, access is based on a
priority list of uses of foreign exchange drawn up in conformity with state industrial policy.
The authorities generally discourage purchases of foreign exchange to finance imports of
goods not formally approved by the government. In April 1992 the authorities issued new
guidelines outlining priorities for access to foreign exchange in the swap centers. Preferred
access was given to those purchasing foreign exchange for agricultural inputs and products,
interest payments and remittances, technology imports, and inputs to key construction
projects. Access to swap centers was also granted for purchases of foreign exchange for
industrial inputs, educational materials, and some spare parts. Purchases of foreign exchange
for a wide range of consumer and lUXUry goods (cigarettes, wine, clothing, household
appliances, and film) are prohibited. These limits on access to the swap centers act as
barriers to trade since importers cannot purchase foreign exchange to import a wide range of
goods.
Treasury's November 1991, May 1992, and December 1992 Reports to Congress
contain additional detail on China's foreign exchange system.
Exchange Rate Developments
Since 1980, the Chinese currency has experienced substantial depreciations against
major currencies. From 1980 to 1992, the renminbi (as measured at the official exchange
rate) depreciated 73 percent versus the D.S. dollar, 85 percent versus the yen, and 71
percent versus the ECD. The depreciation of China's exchange rate has improved China's
trade and China's current account positions. In particular, the devaluations of 21 percent in
1989 and 10 percent in 1990 helped China move from a current account deficit of $4.3
billion in 1989 to a current account surplus of $13.8 billion in 1991.
Administered Rate: On May 14, 1993, the official rate of the renminbi stood at
5.74 yuan/dollar. This represents a nominal depreciation of 7.8 percent since the adoption of
the "managed float" system in Apri11991. In 1992, authorities held the official rate
relatively constant from January through August, but allowed the rate to depreciate towards
the end of the year. By December 31, 1992, the official exchange rate had depreciated 5.5
percent over a year earlier. For the first three months of 1993, the official exchange rate has
remained relatively constant at approximately 5.75 yuan/dollar.
Swap Rate: For the week ending May 14, 1993, the average swap center rate stood
at 8.04 yuan/dollar. The swap rate depreciated 23.5 percent in 1992 due largely to increased
demand for imports, rapid monetary growth, fears of renewed inflation, and speculation that
4 Formerly the Ministry of Foreign Economic Relations and Trade (MOFERT).
-25the Chinese authorities would devalue in preparation for entry into GATT. In 1993, the
renminbi reached a low of 8.41 yuan/dollar in February and has since appreciated slightly to
8.04 yuan/dollar. This represents a depreciation of 10 percent since year-end 1992. It
appears the Chinese government has intervened in the swap centers to prevent further
depreciation of the currency.
The gap between the official and swap center exchange rates has continued to widen,
from 10 percent in January 1992 to 40 percent on May 14, 1993.
Exchange Rate Negotiations
Treasury held negotiations with the People's Bank of China in April 1993. In these
negotiations, Treasury urged the Chinese to improve access to foreign exchange. In
particular, Treasury urged Chinese officials to lengthen the list of imports for which foreign
exchange is available and to commit to a timetable for reform. Treasury also urged Chinese
officials to move quickly to full current account convertibility, on the ground that such action
would eliminate the need for the highly regulated foreign exchange allocation system now in
place, which was driving foreign exchange trading to the informal market. These reforms
would benefit the Chinese economy more broadly by improving economic efficiency, while
addressing many of the U.S. concerns. Once such reforms were undertaken, market forces
would then play a greater role in determining the exchange rate response to developments in
the external payments position.
Treasury believes that foreign exchange restrictions form an integral part of China's
overall trade regime. As such, these restrictions cannot be separated from larger trade
questions affecting U.S.-China economic relations. Easing restrictions on access to foreign
exchange would represent a step toward liberalizing China's trade regime, reducing the
bilateral trade imbalance, and improving economic relations between China and the United
States.
In 1992, China began more serious preparations for entry into the GATT. Treasury
believes that China's accession to the GATT would be a positive step toward integrating
China into the international economic community and beneficial for both China and the
United States. Treasury notes that GATT Article XV contains two obligations with respect
to exchange restrictions: 1) that GATT members shall not, by exchange action, frustrate the
intent of the GAIT trade provisions; and 2) that members may apply exchange restrictions
only in accordance with the Fund Articles. As it accedes to the GATT, China must bring its
exchange system into conformity with GAIT Article XV and the IMF Articles of
Agreement.
Assessment
While China has committed itself to reform of its trade regime in the context of the
market access Memorandum of Understanding (MOU) and GATT, similar commitments have
-26-
not been made with respect to its foreign exchange system. Chinese officials have expressed
general support for reform of the system, including: eliminating the requirement for
surrender of foreign exchange, liberalizing access to the swap centers, and making the
system more transparent. Chinese authorities have also set forth the long-term objectives of
unifying the dual exchange rates and making the currency convertible. However, they have
not indicated the specific nature of the steps they plan to take, and have not committed to
specific measures or the timing of reform.
While China's current account surplus may diminish in 1993, its foreign exchange
restrictions continue to impede balance of payments adjustment and contribute to large
bilateral trade surpluses. In 1992 and early 1993, no significant changes were made in
China's foreign exchange regime, and the authorities continue to maintain limits on access to
foreign exchange. Therefore, it is Treasury's judgement that China is manipulating its
foreign exchange system in a manner that prevents effective balance of payments adjustment
within the meaning of Section 3004. We urge the Chinese authorities to take steps to
liberalize access to foreign exchange by eliminating the pervasive foreign exchange
restrictions that impede the external payments adjustment process.
ASIAN NIES AND CHINA: TRADE AND CURRENCY G-lANGES
Cumulative Change against US$ as of May 19, 1993 [1 ]
(Plaza)
Since:
HKS
Won
SingaporeS
NTS
Yen
OM
Yuan
(Initial Repon)
~
end-86
end-87
.!.!¥.H[88
end-89
end-90
end-91
end-92
1.1%
11.7%
36.4%
56.1%
118.4%
78.0%
-48.1%
0.8%
7.5%
34.4%
36.8%
44.0%
19.6%
-35.0%
0.4%
-l.l%
23.5%
10.0%
11.5%
-1.5%
-35.0%
l.l%
-11.3%
25.2%
11.3%
14.0%
11.3%
-35.0%
1.0%
-15.3%
17.7%
0.8%
29.6%
4.3%
-17.3%
0.9%
-10.6%
7.7%
4.4%
224%
-7.7%
-8.8%
0.7%
-4.5%
0.4%
-0.8%
12.7%
-6.2%
--4.8%
0.2%
-1.2%
1.9%
-21%
126%
-0.1%
0.8%
Rate on 5/19/93
HKS
7.73
801.10
1.61
25.96
110.85
1.62
5.72
W
S$
NT$
Y
OM
Yuan •
,. rate on 5/4'93
I. (- ) signifies depredation against the U.S. dollar.
U.S. Trade Balance with Asian NIEs and China [2 ]
(U.s. S billions)
1985
1986
1987
1988
1989
1990
1991
1992
1992
Jan-Mar
Hong Kong
Korea
Singapore
Taiwan
-5.6
-4.1
-0.8
-1l.7
-5.9
-6.4
-1.3
-14.3
-5.9
-8.9
-21
-17.2
-4.6
-8.9
-22
-12.6
-3.4
-6.3
-1.6
-13.0
-2.8
-4.1
-1.8
-11.2
-l.l
-1.5
-1.2
-9.8
-0.7
-21
-1.7
-9.4
-0.1
0.2
-0.4
-23
0.3
-0.5
-0.1
-20
Total NIEs
-22.1
-27.8
-34.1
-28.2
-24.3
-19.8
-13.7
-13.9
-27
-22
0.0
-1.7
-2.8
-3.5
-6.2
-10.4
-12.7
-18.3
-3.4
-4.2
-22.1
-29.5
-36.9
-31.7
-30.5
-30.3
-26.4
-32.1
-6.1
-6.4
-132.1
-1527
-1521
-118.5
-108.6
-101.7
-66.2
-84.3
-11.2
-20.6
China
NIEs + China
Total U.S.
Trade Bal
2 U.S. customs value data, not seasonally adjusted.
Totals may not_~q!!al sum of components due to roundin ....
1993
Jan-Mar
I
tv
~
I
-
TREASURY NEWS
Department of the Treasury
Washington, D.C.
FOR RELEASE AT 2:30 P.M.
May 25, 1993
..V~..
A
·.··.·.!
Telephone 202-622-2960
CONTACT: Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $24,000 million, to be issued June 3,
1993. This offering will provide about $525 million of new cash
for the Treasury, as the maturing 13-week and 26-week bills are
outstanding in the amount of $23,479 million. In addition to the
maturing 13-week and 26-week bills, there are $14,296 million of
maturing 52-week bills. The disposition of this latter amount
was announced last week.
Federal Reserve Banks hold $8,871 million of bills for their
own accounts in the three maturing issues. These may be refunded
at the weighted average discount rate of accepted competitive
tenders.
Federal Reserve Banks hold $2,721 million of the three
maturing issues as agents for foreign and international monetary
authorities. These may be refunded within the offering amount
at the weighted average discount rate of accepted competitive
tenders. Additional amounts may be issued for such accounts if
the aggregate amount of new bids exceeds the aggregate amount
of maturing bills.
For purposes of determining such additional
amounts, foreign and international monetary authorities are
considered to hold $1,711 million of the original 13-week and
26-week issues.
Tenders for the bills will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public
Debt, Washington, D. C. This offering of Treasury securities
is governed by the terms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356, published as a final rule on
January 5, 1993, and effective March 1, 1993) for the sale and
issue by the Treasury to the public of marketable Treasury bills,
notes, and bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
LB-206
HIGHLIGHTS OF TREASURY OFFERINGS OF WEEKLY BILLS
TO BE ISSUED JUNE 3, 1993
May 25, 1993
Offering Amount .
.
.
Description of Offering:
Term and type of security . . . . .
CUSIP number
. . . . . . .
Auction date . . .
. . . .
Issue date . . . .
....
Maturity date . . . . . . . . . . .
Original issue date .
...
Currently outstanding
Minimum bid amount
Multiples . . . . .
$12,000 million
$12,000 million
91-day bill
912794 F5 8
June 1, 1993
June 3, 1993
September 2, 1993
March 4, 1993
$11,744 million
$10,000
$ 1,000
182-day bill
912794 G7 3
June 1, 1993
June 3, 1993
December 2, 1993
June 3, 1993
$10,000
$ 1,000
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids .
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids.
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10%.
(2) Net long position for each bidder must be
reported when the sum of the total bid
amount, at all discount rates, and the net
long position is $2 billion or greater.
(3) Net long position must be determined as of
one half-hour prior to the closing time for
receipt of competitive tenders.
Competitive bids
Maximum Recognized Bid
at a Single yield
Maximum Award .
.
.
.
Receipt of Tenders:
Noncompetitive tenders
Competitive tenders
Payment Terms .
35% of public offering
.
.
35% of public offering
Prior to 12:00 noon Eastern Daylight Saving time
on auction day
Prior to 1:00 p.m. Eastern Daylight Saving time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
UBLIC DeEBT NEWS
• '.
Department of the Treasury • Bureau of the
r (- .-.
i
f
Publi~ Debtb :~-"i. Washington, DC 20239
run (' I :.JJ' 1/ . ; -
FOR IMMEDIATE RELEASE
May 25, 1993
\J
.:..
-
.
v Qdft~T:
Office of Financing
202-219-3350
I '
RESULTS OF TREASURy"S'J{UCT-I.oN 9F 2-YEAR NOTES
Tenders for $15,779 million of 2-year notes, Series W-1995,
to be issued June 1, 1993 and to mature May 31, 1995
were accepted today (CUSIP: 912827K92).
The interest rate on the notes will be 4 1/8%. All
competitive tenders at yields lower than 4.17% were accepted in
full.
Tenders at 4.17% were allotted 40%. All noncompetitive and
sucessful competitive bidders were allotted securities at the yield
of 4.17%, with an equivalent price of 99.915. The median yield
was 4.15%; that is, 50% of the amount of accepted competitive bids
were tendered at or below that yield. The low yield was 4.09%;
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
27,328
50,777,243
14,888
223,305
123,038
31,817
2,196,764
42,984
18,184
62,160
12,957
449,684
243,297
$54,223,649
Accepted
27,328
14,465,463
14,888
108,305
85,038
29,817
553,764
42,984
18,184
62,160
12,957
114,684
243,297
$15,778,869
The $15,779 million of accepted tenders includes $769
million of noncompetitive tenders and $15,010 million of
competitive tenders from the public.
In addition, $918 million of tenders was awarded at the
high yield to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $809 million
of tenders was also accepted at the high yield from Federal
Reserve Banks for their own account in exchange for maturing
securities.
LB-207
_.0
V
TREASURY NEWS
Department of the Treasury
Washington, D.C.
Telephone 202-622-2960
statement of the Honorable Ronald K. Noble
Assistant secretary for Enforcement
united states Department of the Treasury
before the
Committee on Banking, Finance and Orban Affairs
u.s. House of Representatives
May 25, 1993
Mr. Chairman and members of the Committee, I welcome your
comprehensive review of the Government's money laundering
programs.
It comes as Treasury is performing a parallel review
of its financial enforcement program, and we hope that our
efforts will be complementary.
As Assistant Secretary for Enforcement, I have been delegated by
the Secretary responsibility for Treasury's overall anti-money
laundering programs and regulatory authority for the Bank SecrecY
Act.
It is a high priority of mine to use these authorities
efficiently and effectively in order to maximize their benefit to
law enforcement and minimize their burdens on financial
institutions.
With me today is Faith Hochberg, my principal Deputy Assistant
Secretary, who will have major
responsi~ility
in this area.
She
comes to Treasury most recently from the Office of Thrift
Supervision.
As a former federal prosecutor, she has a strong
background in fighting financial crime which will serve her well
in addressing the money laundering issue.
LB~
- 2 -
Before proceeding, I would like to introduce the other members of
this Treasury panel.
They also have prepared statements which we
propose be entered in the record, and each will make a few brief
remarks.
All of us will be available for the Committee's
questions.
with us today are --
Donald K. Vogel, Assistant Commissioner (criminal
Investigation), Internal Revenue Service;
John E. Hensley, Assistant Commissioner (Enforcement), u.S.
Customs Service.
Brian M. Bruh, Director, Financial Crimes Enforcement
Network; and
Peter G. Djinis, Director, Office of Financial Enforcement
What is Money 1.
Money laundering is the process of taking the proceeds of
criminal activity and making it appear legal.
Money laundering
has been called the "lifeblood" of crime because, without
cleansing the profits of crime, the criminal enterprise cannot
flourish.
While drug money laundering captures the most public
-
3 -
attention, money laundering sustains every criminal activity
engaged in for profit, which is to say all crime but crimes of
passion or vengeance.
R.sponsibilities of Treasury
As the guardian of the integrity of our financial system,
Treasury has a multi-faceted role in detecting and preventing
money laundering.
This was recognized when Congress entrusted us
as the agency with exclusive authority for the recordkeeping and
currency reporting authority under the Bank Secrecy Act (BSA).
The Bank Secrecy Act was Congress's first response to money
laundering before they even knew what to call it.
In 1970,
Congress had three concerns when it enacted the BSA.
First,
banks were not required by law to keep records for a sufficient
time necessary to reconstruct transactions in later tax and
criminal cases.
Second, it recognized that concentrations of
cash are often correlated to criminal activity.
Finally,
criminals of all sorts were sending the proceeds of their
abroad to take advantage of foreign bank secrecy laws.
c~imes
Hence,
the misnomer Bank Secrecy Act, which would be more accurate_y
called the Anti-Bank Secrecy Act.
In light of these three issues, Congress gave the Secretary of
the Treasury the responsibility to prescribe the records
- 4 -
financial institutions must maintain in order to be able to
reconstruct financial transactions for use in criminal, tax and
regulatory investigations and proceedings.
The Act authorized
the currency reporting obligations we will discuss today.
Finally, it gives Treasury broad authority to prescribe antimoney laundering procedures for banks and other businesses
designated as financial institutions under the Act.
Violations
of the Act carry heavy civil and criminal sanctions.
Over the years, the Bank Secrecy Act was used creatively to
prosecute money laundering which had become epidemic in the
Southeastern United States as the cocaine problem grew.
It
became apparent in the early 1980's that more specific criminal
authority was needed to prosecute the act of money laundering
itself.
In 1986, following recommendations of the President's
Commission on organized Crime, Congress enacted the crime of
money laundering, which is found at section 1956 and 1957 of
title 18.
We share investigatory responsibilities for the crime
of money laundering with the Justice Department and Postal
Service.
The Nature of the Money Laundering Problem
I would like to turn to the nature of money laundering.
can be no mincing of words.
There
While dollar estimates of the
problem are at best calculated guesses, it is safe to say that
-
5 -
the United States has an enormous money laundering problem,
reflecting its drug, financial crime, and tax evasion problems.
This is a problem we can never solve as long as there are greed
and profit in crime and domestic drug demand.
We need to take a
hard look at what we are up against and set realistic
expectations for the Administration and Congress against which we
measure success.
Our task is complicated by the size and diversity of our
financial system.
The possible avenues for money laundering at
home and abroad are endless.
I can walk out of the Treasury
building and find three places in every block where I could
launder cash by sending a transmittal of funds or buying money
orders or traveller's checks -- everywhere from a bank, to a
liquor store, to a telegraph agency.
All in amounts that will
avoid currency reporting and may not raise suspicion.
We see examples of drug money laundering organizations willing to
incur the expense of laundering in smaller and smaller amounts.
A favorite currency method is through
small amounts of postal money orders.
th~
purchase of relatively
Over an la-month period,
the Postal Service discovered that money launderers methodically
purchased over $200,000,000 in Postal money orders by going from
post office to post office in New York state.
- 6 -
Once the funds go abroad, either through our financial system or
by being physically smuggled, there is virtually a smorgasbord of
business structures, supported by the laws of dozens of
countries, that serve to obscure ownership and frustrate the
government's ability to unravel schemes.
Funds can be moved
among corporate entities and financial institutions in many
countries in the blink of the eye through wire funds transfers,
making the untangling more and more difficult at every stage.
In the fight against money laundering, especially in the drug
area, the government faces an uphill battle.
To take the case of
our best known enemy, the Colombian cartels, we are up against
sophisticated international businesses supported by the best
professional assistance, from lawyers to financial advisors, that
money can buy.
They have almost unlimited resources to finance
money laundering organizations whose company loyalty and
efficiency is assured by a combination of generous compensation
and the point of a gun.
They can send
ar~ies
of people to launder money and have
equipment and counterintelligence capability worthy of the
intelligence community.
These groups are nothing if not
resilient; they can almost instantly respond to changes in
government enforcement efforts.
Financially, they can withstand
,
enormous seizures, tolerate every-increasing laundering costs,
and still turn an obscene profit.
- 7 -
The fundamental institutional differences between these
organizations and any government is apparent and can make for
unevenly matched sides.
Governments are sometimes very slow to
change and the slightest drain on our limited resources can lead
to very difficult choices.
While money launderers know no
international boundaries, a whole new set of complications exist
for
u.s.
agencies as our investigatory trail leads abroad.
The Government's Response
Nevercheless, we remain convinced that our best hope at doing
meaningfu1 damage to the drug traffickers or other criminal
organizations is to attack money laundering through any and all
means at our disposal.
Our measure of success in the face of a
problem this complex is not easily reduced to numbers and
statistics.
The goal is to make money laundering as difficult
and expensive as possible, to disrupt its flow at home and
abroad, to seize assets and punish perpetrators vigorously.
We are successful and have been successful in our ability to
match wits with the money launderers through more creative
financial analysis and investigative action, by working better
and smarter and more harmoniously with the resources we have, and
by closing the doors of many United states financial institutions
to money launderers.
We have generally made the United states a
less hospitable environment for money laundering at every stage
- 8 -
of the money laundering process -- from cash placement to
reinvestment.
We have developed a basic formula -- a combination of prevention,
detection, and punishment.
over another.
It is not a matter of emphasizing one
All three must be done in concert and done well.
The formula only works on a basis of cooperation.
Domestically,
we are working to cooperate better among federal agencies and to
work as partners with state and local authorities, both law
enforcement and regulatory authorities.
We are looking to the
states to complement federal efforts, particularly in the area of
non-bank financial institutions.
On our part, we are committed
to giving states training and assistance and ready access to
federal information.
Internationally, we have made great strides in the last few years
in increasing the awareness of the international community that
money laundering is a shared problem and that there must be a
common response.
Force the united
Through the work of the Financial Action Task
s~ '~~s ~as
helped set the international standard
for domestic anti-money laundering programs and international
cooperation in money laundering investigations, prosecutions and
forfeitures.
We are reaching out through negotiation and
training, both through international organizations and with
individual countries, to increase the network of countries
committed to action and organized to be able to cooperate. Every
-
9 -
major money laundering operation of recent years involved
activity in multiple countries and were brought to successful
conclusion in concert with foreign law enforcement.
Perhaps the most important element of cooperation where we have
achieved the best results is with financial institutions.
Initially, banks were part of the problem rather than an aspect
of the solution.
However, over the last several years, the
cooperation of financial institutions, especially banks, with law
enforcement has generally been excellent.
We have reversed the
situation leading to the hearings of this committee in 1985
following-the Bank of Boston case where compliance with the Bank
Secrecy and awareness of money laundering was dismal.
Today,
banks have become our first line of defense against money
laundering through good compliance with the Bank Secrecy Act and
alert reporting of suspicious activity.
Recently we had a graphic example of this cooperation.
A banker
in New England called Treasury to say that one of his customers
had requested a large wire transfer to his account at a bank in a
western state.
The western bank had advised the New England
banker that the customer intended to withdraw the funds
transferred in cash and have it delivered by armored car to the
airport.
The two banks
the government.
a~reed
that one of them needed to contact
When the call came, IRS immediately called its
field offices in both cities.
It was determined that the person
- 10 -
was under investigation by another federal agency for a major
fraudulent scheme and was about to flee the country.
This is but
one example of the invaluable assistance being provided by banks
every day.
Requlatory Reassessment
I am acutely aware that we have a responsibility to financial
institutions to make sure that we use the information they
provide and that we strike a balance between the costs we impose
and the benefits we derive.
Thi& administration has heard the
complaints of banks that the Bank Secrecy Act has become too
burdensome.
Their concerns have been listened to and we are
asking ourselves a number of hard questions that need immediate
and careful consideration:
Is the structure we have to address the money
laundering problem effective?
What are the
bureaucratic impediments to doing a better job?
Have we adequately engaged the help of state and local
law enforcement and regulatory authorities?
Do we need all of the data we now collect from banks?
Have we put too much attention on currency reporting at
the expense of other anti-money laundering measures?
-
11 -
How can we better deploy our limited resources in a
time of budgetary down-sizing?
Are the banks concerns legitimate, and are their
complaints well-founded?
How can we achieve the same
law enforcement results at less cost and burden to
financial institutions?
Have we implemented the regulatory authorities of the
Bank Secrecy Act in a way that addresses the currency
money laundering landscape?
I am committed to coming up with answers to these and other
questions.
Over the next year Treasury will undertake a thorough
review of the Bank Secrecy Act to evaluate how reporting may be
able to be simplified without jeopardizing the law enforcement
utility of the system.
followup and re
r
I am also committed to review our
'onsiveness on reports of suspicious
transactions.
As long as there is crime and cash is a medium of exchange, it
must be understood that currency reporting by banks and other
financial institutions, in some form, is an essential component
of any effective anti-money laundering system in the United
States.
In this country, with its geographic size and volume and
diversity of financial institutions, suspicious transaction
- 12 -
reporting alone will not work.
As the panel will discuss, the
Bank Secrecy Act reports are being used and being used, both in
support of tax and law enforcement cases and, through improvement
in technology and techniques by FinCEN, for targeting suspicious
activity.
From law enforcement's standpoint, the only issue is
not whether there should be currency reporting, but can we
achieve comparable law enforcement results with a less burdensome
system.
Conclusion
As I said-earlier, Mr. Chairman, I do not bring to you today
answers to the questions raised or solutions to the problems
identified.
What I do bring is a fresh perspective, an unbiased
approach and a willingness to work with the Committee, the
Congress, -the financial institutions and other federal regulatory
and enforcement agencies to address the issues candidly and
cooperatively search for solutions.
TEXT AS PREPARED FOR DELIVERY
EMBARGOED UNTIL DELIVERED
(Expected at approximately 10 a.m.)
STATEMENT OF TIlE HONORABLE
LAWRENCE SUMMERS
UNDER SECRETARY OF THE TREASURY
FOR INTERNATIONAL AFFAIRS
BEFORE THE
COMMITIEE ON SMALL BUSINESS
U.S. HOUSE OF REPRESENTATIVES
May 26,1993
Mr. Chairman and Members of the Committee:
It is a pleasure to be here today. The Treasury Department's spring 1993 Report on
International Economic and Exchange Rate Policy has been presented to the House and
Senate Banking Committees, and I am appearing before the Small Business Committee to
discuss the report's findings and other issues.
The title of the Report is becoming increasingly outmoded. The distinction between
domestic and international economic policy no longer exists, if it ever did. Today, for
example, exports and imports each account for roughly 11 percent of national income. In
recent years, over half of U.S. income growth and almost all of our growth in manufacturing
jobs have been due to growth in exports.
It used to be said that when the U.S. sneezed, the world caught a cold. The opposite
is equally true today. Our prosperity is linked inextricably to the maintenance of a strong
world economy, open international trading system, and stable global financial markets.
Global Growth
This reality underlies the Clinton Administration's international economic policy.
This policy starts from the critical premise that a strong, competitive economy is the most
effective international economic policy. We recognize that, while the battle of imports and
exports may be fought at the border, domestic policies, in the final analysis, will determine
the outcome.
LB-209
2
The President has outlined a bold and ambitious program to reduce the budget
deficit and revitalize the American economy. The success of this effort will depend
importantly on preserving and strengthening an open, growing world economy. It is for this
reason that we have placed emphasis on and effort into reinvigorating the G-7 economic
policy coordination process.
The President's economic program has brought us new credibility in the international
economic arena; it has strengthened our hand in encouraging our major trading partners to
take complementary actions to strengthen growth in their own countries. We have also
succeeded in changing the atmosphere in the meetings, from confrontation to frank
discussion, by avoiding public lecturing and recognizing that each country must decide its
policies on the basis of its national interests. But increasingly, where economic growth is
concerned, national interests and international imperatives coincide. Finally, we are
improving the analytical framework for the surveillance of our economies.
The need for effective cooperation with our G-7 partners has never been clearer than
now. We are in the third year of sub-par growth and the prospects for sustained recovery
are by no means certain. The United States is experiencing a modest recovery, but with
inadequate job creation. Growth in Europe is weak, unemployment high and rising, and
recovery still in the distance. Japa:1 is expected to grow only 1.3 percent this year, the
lowest rate in nearly 20 years, and i: .::rowing external surplus continues to be a drag on the
rest of the world.
We have made a beginning and the initial fruits of this effort are being realized.
However, we are not out of the woods and more must be done. The prospect of significant
U.S. budget deficit reduction and Improved saving and investment have been received
favorably by the most critical judge, the markets. Long-term interest rates have declined
substantially. Some have suggested that the decline reflects a weak ecclomy. However,
forecasts for the economy are up, the stock market has increased and credit quality spreads
have narrowed. This suggests that the interest rate decline is due to greater confidence in
deficit reduction and not a weaker economy. It would be tragic, however, if the nay-sayers
succeeded in defeating the President's program, with the end result being both higher
interest rates and a weaker economy.
Japan's latest stimulus package is a useful first step but needs to be sustained. The
economy is operating well below productive capacity, and consumer ar :} investor confidence
is weak. As a result, the trade surplus continues to rise, with new l.Jrecasts indicating it
could reach over 3 percent of GDP next year.
What the world and Japan needs is a multi-year commitment to use fiscal policy to
achieve domestic demand-led growth and to promote substantial external adjustment. The
authorities are now in the process of formulating the guidelines for spending in the fiscal
1994 budget. We hope these guidelines will send a message that the April 1993
3
supplemental stimulus package will be reinforced in next year's budget with continued
support for domestic demand.
In Europe, interest rates have come down from their peaks. The pace of decline
needs to quicken, however, if the current recession is to be brought to an early end.
Moreover, structural reforms, particularly in labor markets, are required urgently to produce
greater wage and price flexibility. This would permit economies to adjust more effectively
to external developments, without damaging growth, especially given the constraints on
exchange rate adjustments.
Ne~otiations
with China Taiwan and South Korea
A growing world economy and an open international trade and payments system are
like two blades of a scissors. You need both to cut to your objective, increased U.S. exports.
It is for this reason that President Clinton is committed to a "prompt and successful
completion of the [Uruguay] Round" and to implementation of the NAFfA It also is the
basis for our efforts to confront bilaterally the special problems posed by countries with
chronic export surpluses, including those that use their exchange and payments systems to
impede imports.
In 1992, U.S. exports to China, Taiwan and Korea totalled $37 billion. Exports to
Taiwan grew by 15 percent and to China by 19 percent, far exceeding the 6.2 percent growth
in total U.S. exports. However, to reach our full potential in these expanding markets, it
is essential that their foreign exchange systems be open so that their importers are able to
purchase and pay for foreign goods and services.
China
The Chinese economy has grown enormously in recent years and continues to exhibit
tremendous potential. Growth last year exceeded 12 percent and in the first quarter this
year reached 14 percent on an annual basis. While the economy is now showing signs of
overheating, with inflation accelerating, China probably will continue to sustain high real
growth over the coming decade. With China increasingly needing high tech imports, the
United States has a good chance of sustaining strong growth in exports to China.
That potential for growth appears to be restrained, however, by the opaque and
arbitrary foreign exchange system which simply turns away potential importers. Foreign and
American joint ventures in China report that they cannot obtain even the small amount of
foreign exchange in the swap centers that they are allocated under government regulations.
This shortage of foreign exchange is so severe that Chinese enterprises are beginning to tum
once again to the black market. The situation has been exacerbated by companies' hoarding
foreign exchange for their own use or for private trading, possibly in offshore financial
markets. Hoarding has reduced the supply of foreign exchange to the swap centers and
increased pressure for depreciation of the renminbi.
4
Last year China sustained global trade and current account surpluses, although they
declined substantially from 1991 levels. China's bilateral surplus with the United States
increased from almost $13 billion in 1991 to over $18 billion in 1992. These outcomes, as
well as the pervasive and inflexible restrictions on access to foreign exchange in China, have
led Treasury to conclude that China manipulates its foreign exchange system in a manner
that prevents effective balance of payments adjustment.
In my recent negotiations with officials from the People's Bank of China, I strongly
reiterated the point made by many others in this Administration that China's trade surplus
with the United States is a very serious matter that must be addressed by Chinese action
now. I stressed that China's foreign exchange controls were acting as trade barriers and
were limiting the ability of U.S. firms to export to China. These exchange restrictions will
have a bearing on progress made towards China's entry into the GAIT.
I also stressed in my talks with Chinese officials that, while China's current account
surplus may be on a declining trend in 1992-93, this appeared to be occurring only because
China's economy is overheating, with high growth and rising inflation approaching a danger
zone. As growth drops to a more sustainable pace, we could expect China's import growth
to diminish and the current account to remain in surplus. In that context, a liberalized
foreign exchange regime would be necessary to promote the correction of payments
imbalances. I also suggested that overall reform of China's foreign exchange system would
contribute to a sounder, more evenly paced macroeconomic policy.
These negotiations will continue in the coming months. I believe that the Chinese
authorities share our reform goals, although, unfortunately, they will not commit to a specific
timetable for implementation of reforms. We will continue to seek action, both in China
and other high growth Asian economies, in order to secure access for exports of U.S. goods
and services.
Korea and Taiwan
In the past, both Korea and Taiwan were determined to be currency manipulators.
While Taiwan was cited as recently as last December, we do not at this time believe that
either Korea or Taiwan meets the criteria for that determination.
Korea's global trade and current accounts remain in deficit, albeit substantially
reduced from 1991 levels. We have discerned no activity in the foreign exchange market
which would signify intervention to influence the exchange rate. However, Korea maintains
a system of foreign exchange and capital controls that limit trade and investment flows and
thereby dampen the influence of market forces in the foreign exchange market.
In our recent contacts with Korean officials, we have stressed that these controls lirrJt
our ability to export to and invest in Korea, and particularly limit the scope of our financial
institutions' activities in Korea. We will sustain our efforts to promote market opening.
5
Taiwan's overall current account remains large but fell significantly from 1991. While
the United States remains in bilateral deficit with Taiwan, it does not appear at this time
that Taiwan is intervening in the exchange market to limit appreciation of the New Taiwan
(NT) dollar. Furthermore, Taiwan's capital controls do not appear to be constraining
capital inflows or appreciation of the NT dollar, although the existence of these controls
leaves the potential for future interference in exchange rate movements.
Treasury is actively engaged in negotiations with the Taiwan authorities to eliminate
the capital controls that can deter potential demand for the NT dollar and to open further
its financial services markets to U.S. institutions.
Conclusion
Sound growth in our principal trading partners, coupled with open trade and
payments systems, is increasingly essential to the health of the U.S. economy. We have
reinvigorated cooperation with other major countries and have begun to see prospects for
enhanced growth, but more must be done. U.S. exports to the emerging economic powers
of Asia are growing, but not achieving their full potential. At the present time, only China
is found to be manipulating its foreign exchange system; however, we remain attentive to
the policies of Korea and Taiwan as well.
FOR IMMEDIATE RELEASE
May 26, 1993
Contact: Michelle Smith
(202) 622-2960
STATEMENT BY TREASURY SECRETARY LLOYD BENTSEN
The proposed change in appraisal regulations is another step in our program to reduce
the impact of the credit crunch on small businesses and help create jobs for American
workers.
In some cases this change will reduce costs to borrowers by raising the threshold for
requiring appraisals. In other cases -- some small business loans when real estate is not the
primary source of repayment -- appraisal costs will be eliminated entirely.
In March, I stood with President Clinton as this Administration committed itself to
work actively to reduce the credit crunch felt by small businesses and farms. We recognized
that past initiatives to make credit more available were often little more than jawboning, so
this Administration set specific goals.
Our focus is on reevaluating bank regulations to cut through some of the red
tape which has needlessly hindered the loan process while making certain that we protect
safety and soundness of the institutions.
In addition to the action today, we've given our strongest banks and thrifts greater
flexibility to make loans to creditworthy customers, we're working to implement new appeals
procedures and eliminate costly duplicate supervision and we've developed policies to
identify and discourage discrimination in home mortgage lending.
The credit crunch program coordinated by the Treasury Department is a key
component of this Administration's effort to create jobs for American workers.
-30LB-210
RESULTS OF TREASURY'S AUCTION OF 5-YEAR NOTES
"_
-,
•.
II
j
Tenders for $11,034 million of 5-year notes, Series N-1998,
to be issued June 1, 1993 and to mature May 31, 1998
were accepted today (CUSIP: 912827L26).
The interest rate on the notes will be 5 3/8%. All
competitive tenders at yields lower than 5.39% were accepted in
full.
Tenders at 5.39% were allotted 8%. All noncompetitive and
sucessful competitive bidders were allotted securities at the yield
of 5.39%, with an equivalent price of 99.935. The median yield
was 5.37%; that is, 50% of the amount of accepted competitive bids
were tendered at or below that yield. The low yield was 5.33%;
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
13,935
32,694,815
9,759
110,691
78,724
25,279
777,442
32,197
7,185
26,986
11,564
429,878
63,918
$34,282,373
Accepted
13,935
10,497,295
9,759
110,691
22,724
15,279
137,442
32,197
7,185
26,986
11,554
85,198
63,868
$11,034,113
The $11,034 million of accepted tenders includes $558
million of noncompetitive tenders and $10,476 million of
competitive tenders from the public.
In addition, $671 million of tenders was awarded at the
high yield to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $635 million
of tenders was also accepted at the high yield from Federal
Reserve Banks for their own account in exchange for maturing
securities.
LB-211
(9
TREASURY NEWS
Department of the Treasury
.-
Washington, D.C.
Telephone 202-622-2960
,(
May 26, 1993
JACK R. DEVORE JR.
ASSISTANT SECRETARY FOR PUBLIC AFFAIRS AND PUBLIC LIAISON
Jack R. DeVore Jr. was sworn in as Assistant Secretary of the Treasury for Public
Affairs and Public Liaison on May 17, 1993.
In this position, De Vore advises the Secretary and his staff on the Department's
relations with the news media, the White House Press Office and other government
agencies, businesses, trade and professional organizations, consumer groups and the public.
De Vore's office establishes general policies for administering public affairs, business affairs,
consumer affairs and intergovernmental affairs programs in Treasury bureaus.
From 1972 until he joined Treasury DeVore was press secretary to U.S. Senator
Lloyd Bentsen, now Secretary of the Treasury. That included a key role in three Senate
races, a Presidential primary contest and a vice presidential campaign.
From 1970 to 1972 he was Business Development Manager at an El Paso bank. From
1964 to 1970 he was successively reporter, news director and news anchor at KTSM-TV-AMFM in EI Paso and a part-time correspondent for Time-Life News Service. From 1961 to
1964 he was a news reporter and anchor for KELP-TV-AM in EI Paso and from 1960 to
1961 he was a reporter and announcer at Southwestern broadcast stations.
De Vore has a B.A. in history from the University of Texas in EI Paso. He was born
on Oct. 20, 1938. He is married and has four children.
LB-212
Joint Release
Office of the ComptroUer of the Currency
Federal Deposit Insurance Corporation
Federal Reserve Board
Office of Thrift Supervision
May 26, 1993
Federal Agencies Propose New Rule on
Real Estate Appraisals
The Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance
Corporation (FDIC), the Federal Reserve Board, and the Office of Thrift Supervision
(OTS) today issued a joint proposed rule to amend their regulations on real estate
appraisals.
The agencies said the proposal would reduce regulatory burden by requiring
appraisals only when they enhance the safety and soundness of financial institutions
or otherwise further public policy. The proposed rule would:
•
Increase the threshold level for required appraisals from $100,000 to
$250,000;
•
Expand and clarify existing exemptions to appraisal
•
Identify additional circumstances when appraisals are not required.
requirements~
and
The agencies are proposing these amendments based on their experience in
implementing their current appraisal regulations. The proposed rule would limit
direct and indirect costs of real estate appraisals to borrowers, costs that the agencies
said can restrict the availability of credit.
For example, business loans under $1 million secured by real estate would not
require appraisals when real estate collateral is not the primary source of repayment.
The proposal also expands an existing exemption for transactions where real estate is
taken as collateral through "an abundance of caution." These changes will help
small- and medium-sized businesses obtain credit, the agencies said.
The proposed rule exempts from the agencies' real estate appraisal requirements
transactions that are insured or guaranteed by a U.S. government agency or
governrnent sponsored agency.
(more)
....,
The proposal also clarifies existing exemptions in the current regulation. The
claritications involve transactions not secured bv real estate, transactions related to
renewals of existing loans and the extension of additional credit on those loans, and
transactions involving purchase of loans or interests in pools of loans secured by real
estate.
Finally, the proposed rule reduces the number of minimum standards for the
performance of real estate appraisals. It reinstates the Departure Provision that
allows an appraiser to prepare an appraisal without complying with certain
provisions of the Uniform Standards of Professional Appraisal Practice (USP AP),
provided the appraisal report is not misleading. The proposal also clarifies the
circumstances in which a bank or thrift may use appraisals prepared for another
financial services institution.
The proposed rule will be published for public comment in the Federal Register.
The agencies are particularly seeking comments on loss history for real estate
transactions that involved appraisals, the effect of the proposed regulation on credit
availability, and the cost and time spent complying with the existing regulation.
# # # # #
UBLIC UEBT'olJNEWS
RESULTS OF -TREASURY'S AUqTI9N ,QF 52-WEEK BILLS
;
~.
1 '':
\.,'
-
Tenders for $14,761 million of 52-week bills to be issued
June 3, 1993 and to mature June 2, 1994 were
accepted today (CUSIP: 912794K86).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.39%
3.42%
3.40%
Investment
Rate
3.53%
3.56%
3.54%
Price
96.572
96.542
96.562
Tenders at the high discount rate were allotted 42%.
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
20,427
35,157,373
7,385
15,122
16,452
12,705
1,296,420
9,020
4,664
18,382
6,060
890,820
296,065
$37,750,895
AcceQted
20,427
13,242,373
7,385
15,122
16,452
12,125
473,920
7,440
4,664
18,382
6,060
640,820
296,065
$14,761,235
Type
Competitive
Noncompetitive
Subtotal, Public
$33,532,000
537,195
$34,069,195
$10,542,340
537,195
$11,079,535
3,400,000
3,400,000
281,700
$37,750,895
281,700
$14,761,235
Federal Reserve
Foreign Official
Institutions
TOTALS
LB-213
FOR RELEASE AT 2:30 P·.H.
May 27, 1993
CONXACT:
Office of Financing
202/219-3350
TREASURY TO AUCTION CASH MANAGEMENT BILL
The Treasury will auction approximately $7,000 million
of 13-day Treasury cash management bills to be issued
June 4, 1993.
Competitive tenders will be received at all Federal
Reserve Banks and Branches.
Noncompetitive tenders will
not be accepted.
Tenders will not be received at the
Bureau of the Public Debt, Washington, D. C.
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.
This offering of Treasury securities is governed by
the terms and conditions set forth in the Uniform Offering
Circular (31 CFR Part 356, published as a final rule on
January 5, 1993, and effective March 1, 1993) for the sale
and issue by the Treasury to the public of marketable
Treasury bills, notes, and bonds.
Details about the new security are given in the
attached offering highlights.
000
Attachment
LB-214
HIGHLIGHTS bF. TREASURY OFFERING
OF 13-DAY CASH MANAGEMENT BILL
May 27, 1993
Offering Amount . . . . . . $7,000 million
Description of Offering:
13-day Cash Management Bill
Term and type of security
· 912794 05 0
CUSIP number
June 2, 1993
Auction date
June 4, 1993
Issue date
· June 17, 1993
Maturity date
December 17, 1992
Original issue date .
· $23,968 million
Currently outstanding
$1,000,000
Minimum bid amount
$1,000,000
Multiples . . . . . .
$10,000
Minimum to hold amount
$1,000
Multiples . .
Submission of Bids:
Not accepted
(1) Must be expressed as a discount rate
with two decimals, e.g., 7.10%.
(2) Net long position for each bidder must
be reported when the sum of the total
bid amount, at all discount rates, and
the net long position is $2 billion or
greater.
(3) Net long position must be determined
as of one half-hour prior to the
closing time for receipt of competitive tenders.
Noncompetitive bids .
Competitive bids
Maximum Recognized Bid
at a single yield
35% of public offering
Maximum Award .
35% of public offering
.
.
Receipt of Tenders:
Noncompetitive tenders
Competitive tenders . .
Payment Terms .
.
.
.
.
Not accepted
Prior to 1:00 p.m. Eastern Daylight
Saving time on auction day
.
. Full payment with tender or by charge
to a funds account at a Federal
Reserve Bank on issue date
!
~. 1
_(i.i
"J'~ L/
• ....',' '--'I ... :
,
j
Contact: Chris Peacock
(202) 622-2960
FOR IMMEDIATE RELEASE
May 27, 1993
STATEMENT BY TREASURY SECRETARY LLOYD BENTSEN
Today's House vote was a victory for the American economy.
The vote should send a clear signal of change in Washington. A majority in the
House has agreed to stand with the President and support his battle to pass the biggest
deficit reduction bill in history -- $496 billion in cuts. They know we must cut the budget
to hold down interest rates over the long term, and that we must hold down interest
rates if we are to create jobs for American workers.
-30-
LB-215
Nli
federal
TE'VAVTu~Jl
finan~in9 r?:l~~ 1\
J:"~
WASHINGTON. DC
20220
~
J
I
May 28,1993
FEDERAL FINANCING BANK
Charles D. Haworth, Secretary, Federal Financing Bank (FFB),
announced the following activity for the month of April 1993.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $140.8 billion on April 30, 1993,
posting a decrease of $5,289.6 million from the level on
March 31, 1993. This net change was the result of decreases in
holdings of agency debt of $3,819.7 million, in holdings of
agency assets of $1,350.1 million, and in holdings of agencyguaranteed loans of $119.9 million.
FFB made 29 disbursements
and received 24 prepayments in April.
Attached to this release are tables presenting FFB April
loan activity and FFB holdings as of April 30, 1993.
LB-216
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Page 2 of 4
PEDERAL PINANCING BANK
APRIL 1993 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
INTEREST
MATURITY
RATE
(semiannual)
INTEREST
RATE
(not semiannual)
AGENCY DEBT
FEDERAL DEPOSIT INSURANCE CORPORATION
Note No. 0009
Advance *1
4/1 $ 4,500,000,000.00 07/01/93
3.077%
RESOLUTION TRUST CORPORATION
Note No. 0018
Advance *1
4/1
35,266,992,834.48 07/01/93
3.077%
GOVERNMENT - GUARANTEEp LOANS
RHODE ISLAND DEPOSITORS ECONOMIC PROTECTION CORPORATION
*DEPCO
4/1
52,794,377.65 07/01/93
3.077%
9,443,163.00
5,643,166.00
6,176,531.80
10,952,780.00
4,000,000.00
2,754,897.00
12/11/95
01/31/94
11/15/93
12/11/95
01/31/94
06/30/95
4.233%
3.266%
3.186%
4.226%
3.266%
40017%
3,278,640.92
2,711,049.37
2,529,262.72
4,786,191.79
3,337,010.44
4,510,862.06
4,489,951. 52
4,234,153.58
5,823,787.16
19,804,365.22
1,914,238.63
3,213,377.97
639,000.00
266,000.00
1,500,000.00
1,038,000.00
37,073,000.00
1,600,000.00
12/31/09
01/03/11
01/03/11
01/03/11
01/03/11
01/03/11
01/03/11
01/03/11
01/03/11
12/31/09
12/31/12
12/31/12
12/31/26
12/31/12
12/31/18
12/31/19
01/02/24
12/31/25
6.247%
6.296%
6.296%
6.296%
6.296%
6.296%
6.296%
6.296%
6.296%
6.247%
6.388%
6.388%
6.680%
6.090%
6.234%
6.368%
6.663%
6.493%
GENERAL SERVICES ADMINISTRATION
Foley Square Courthouse
Oakland Office Building
ICTC Building
Foley Square Office Bldg.
Oakland Office Building
HCFA Headquarters
4/15
4/16
4/20
4/27
4/27
4/30
RURAL ELECTRIFICATION ADMINISTRATION
@Tri-State *009
@Tri-State *009
@Tri-State *009
@Tri-State *009
@Tri-State *009
@Tri-State *009
@Tri-State *009
@Tri-State *009
@Tri-State *009
@Tri-State *037
@Tri-State *079
@Tri-State *079
Jackson Electric *381
Lewis River Telephone '378
Sho-Me Power *324
Brazos Electric *332
Oglethorpe Power *335
WRECI Electric Coop. *353
* maturity extension
@ interest rate buydown
4/5
4/5
4/5
4/5
4/5
4/5
4/5
4/5
4/5
4/5
4/5
4/5
4/6
4/12
4/14
4/21
4/30
4/30
6.199%
6.247\
6.247%
6.247%
6.247%
6.247%
6.247%
6.247\
6.247%
6.199%
6.338%
6.338%
6.625%
6.044%
6.186%
6.318%
6.608%
6.441%
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
Page 3 of 4
FBDBRAL FINANCING BANK
APRIL 1993 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
INTEREST
MATURITY
RATE
INTEREST·
RATE
(semiannual)
(not semiannual)
TENNESSEE VALLEY AUTHORITY
Seven States Energy corporation
Note A-93-12
Note A-93-13
4/30
4/30
$ 90,000,000.00 06/02/93
92,949,964.58 07/13/93
3.108%
3.108%
Page 4 of 4
FEDERAL FINANCING BANK
(in millions)
Program
Agency Debt:
Export-Import Bank
Federal Deposit Insurance Corporation
Resolution Trust Corporation
Tennessee Valley Authority
U.S. Postal Service
sub-total*
April 30. 1993
$ 6,742.6
3,500.0
32,670.6
6,675.0
10.439.9
60,028.1
March 31. 1993
$
6,742.6
4,500.0
35,490.3
6,675.0
10.439.9
63,847.8
Net Change
4/1/93-4/30/93
$
0.0
-1,000.0
-2,819.7
0.0
0.0
-3,819.7
FY 193 Net Change
1011/92-4/30/93
$
-949.9
-6,660.0
-13,865.3
-500.0
536.5
-21,438.7
Agency Assets:
Farmers Home Administration
DHHS-Health Maintenance Org.
DHHS-Medical Facilities
Rural Electrification Admin.-CBO
Small Business Administration
sub-total*
41,629.0
36.0
59.9
4,598.9
3.3
46,327.2
42,979.0
36.0
59.9
4,598.9
3A
47,677.3
-1,350.0
0.0
0.0
0.0
-1,350.1
-1,374.3
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 +
DOl-Guam Power Authority
DOl-Virgin Islands
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 *
4,209.2
4,790.0
52.8
142.4
1,801.0
1,347.8
0.0
23.1
1,528.3
18,008.0
106.0
601.7
1,646.7
18.0
177.0
34,451.9
4,215.7
4,790.0
74.3
142.5
1,801.0
1,308.9
0.0
23.1
1,528.3
17,966.5
113.5
606.5
1,806.5
18.0
177.0
34,571.7
-6.5
0.0
-21.5
-0.1
0.0
39.0
0.0
0.0
0.0
41. 5
-7.5
-4.8
-159.8
0.0
-135.0
-30.0
-72.2
-32.1
-52.3
571.0
-27.0
-0.6
-47.9
-135.0
-37.5
-32.0
-770.1
-1.1
2..s..2
_.2.&
-119.9
-801.8
=========
=========
========
========
$140,807.2
$146,096.8
$-5,289.6
$-23,614.8
grand-total*
*figures may not total due to rounding
+does not include capitalized interest
~
-1,350.0
-19.2
-4.4
0.0
=.Q.&
TEXT AS PREPARED
FOR DELIVERY
STATEMENT BY THE HONORABLE LAWRENCE SUMMERS
UNDER SECRETARY FOR INTERNATIONAL AFFAIRS
TREASURY DEPARTMENT
BEFORE THE
SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY,
TRADE, OCEANS AND THE ENVIRONMENT
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
May 27, 1993
Introduction
Mr. Chairman.
I very much appreciate the opportunity to testify
before this Committee.
I want to talk with you this afternoon
about the important stake that the United States has in
developing countries, and in encouraging their economic growth
and development. This stake is enormous.
Whether or not developing countries can achieve greater growth
and improve the living standards of their people will have far
reaching implications for the U.S. economy and for the well-being
of our own people.
It will also have a direct impact on the
political and security interests we have in these countries and
on the safety of the environment.
A growing portion of the world's economic action is taking place
in developing countries. Our own country cannot stand back from
this process. Our trade policies must encourage developing
countries to increase their exports. They need the wherewithal
that these exports create in order to grow and to address more
effectively the problems of poverty and the environment.
Our investment policies must look more to private initiative and
entrepreneurship. We need to tap resources from the private
sector and introduce greater creativity and ingenuity into the
development process within developing countries. Our aid
policies must do more to provide direct support for the poorest
people in developing countries where more than one billion
increasingly restive people are trying to survive on less than
one dollar a day.
LB-217
-
2 -
I would like to discuss the instruments of u.s. policy that are
available to help us in these three key areas -- trade,
investment, and aid. We must make a more determined effort to
integrate our work within these three areas and to promote
increased complementarity and coordination among a number of
different programs and activities.
This involves coordinating a number of different programs that
have a number of different objectives. There are activities
which look to the building of democracy in the countries of the
former Soviet Union and in central and Eastern Europe.
Other
activities seek to promote and maintain peace and to promote
economic growth and sustainable development in developing
countries. still other programs seek to address global problems
such as the environment, population, and Aids.
A number of different u.s. Government agencies are involved in
administering various aspects of these programs.
The Agency for
International Development administers our bilateral assistance
program, the State Department oversees our participation in the
United Nations and other international organizations, and
Treasury is responsible for our participation in the multilateral
development banks. Other agencies include those responsible for
export and investment promotion such as the Export-Import Bank,
the Overseas Private Investment Corporation, and the Trade and
Development Agency.
There are a number of other activities for which responsibility
is shared across agencies and that require inter-agency
coordination. These include debt reduction programs for the
poorest countries and international trade negotiations now
underway that we are committed to complete: the Uruguay Round,
which will increase world output and promote a more open trading
system, and the North American Free Trade Agreement, which will
set the stage for greater growth in the United States, Mexico,
and Canada.
u.s.
Economic Interests
The united states has an enormous economic stake in the countries
of the developing world, and in engaging them in economic growth
and development. Exports have been the main engine of U.S.
economic growth in recent years. Since the mid-1980's, over half
of our growth in income and almost all of our growth in
manufacturing jobs has resulted from expo~t growth.
Exports as a
share of our Gross Domestic Prcduct have _ncreased from about
four percent in 1959 to just under eleven percent today.
Developing countries are the fastest growing export market for
U.S. goods and services.
In 1992, developing countries took $177
billion in U.s. exports.
In real terms, this was an increase of
-
3 -
62 percent over 1987 and double the increase in our exports to
industrial countries over that same period. The impact was felt
in all sectors of the u.s. economy.
It had a sUbstantial effect
on our national income and created or sustained more than 3
million u.s. jobs.
If you look at just Latin America and the Caribbean, u.s. exports
increased in real terms from $43 billion in 1987 to nearly $75
billion in 1992. By 1992, we were exporting one and a half times
more to Latin America than we were to Japan.
Developing countries contain the largest concentrations of the
world's population -- 4.5 billion out of a total for the world of
5.4 billion in 1991. They also have great potential to increase
their economic strength in the years ahead. It is very much in
our national interest to help them achieve better lives and
higher standards of living for their people. As they grow and
develop, these countries can become better customers for exports
of u.s. goods and services.
The potential of developing country markets was pointed up just
last week when the International Monetary Fund released new
statistics measuring Gross Domestic Product in its member
countries.
These new statistics were based on an alternative
approach using purchasing power parities which take account of
international differences in prices.
The result was a sharp jump in the developing countries' share of
world output -- up to 34 percent from 18 percent under the old
method. The new figures for China gave that country a six
percent share of world output, three times its share under the
old method.
This made China the world's third largest economy,
instead of tenth, and placed it immediately behind the united
states and Japan.
Export-led growth is the best and most durable kind of growth.
This applies to the united states as well as to other countries.
This is the reason we have such a strong economic interest in
helping developing countries increase their growth. In this
respect, our development assistance policy and our trade and
investment policies go hand in hand.
Security and the Environment
The united states also has a national security stake in
developing countries and this is very closely related to their
economic health and viability. with stronger economies, our
allies among these countries will become stronger and more
effective partners. stronger economies will also help these
countries gain greater political stability. We want to avoid
policy failures that can contribute to political instability. We
-
4 -
want to avoid situations similar to Somalia, where a national
breakdown required our military intervention on humanitarian
grounds.
The United States also has a long-term environmental stake in
developing countries. This stake is shown quite clearly by our
interest in helping to preserve large tracts of tropical forests
in a number of developing countries. At least 60 percent of the
total land area in Brazil, the Congo, and Indonesia is covered by
forest and woodland. We need to work with these and other
countries with large forested areas, to preserve these valuable
natural resources. They are an irreplaceable source of
biological diversity and a necessary "sink" for cleaning and
renewing the earth's atmosphere.
This has been only a brief outline of the enormous stake I
believe we have in developing countries. This stake has multiple
dimensions and it will require increased coordination of the
multiple instruments we have at our disposal if we are to advance
our interests most effectively.
Let me turn now to the first of
the three areas that I wish to discuss.
The Importance of Trade
The first of these areas is trade policy. The united States has
a compelling interest in negotiating reduction of foreign trade
barriers and in promoting international integration globally and
regionally.
Under the "export activism" approach put forward by President
Clinton in his speech at American University, we have committed
ourselves to a "prompt and successful completion of the Uruguay
Round." We are working actively with members of the European
community and others to achieve a breakthrough on market access
by the July Economic Summit in Tokyo.
It is important that we do
so.
The Office of the U.S. Trade Representative has estimated that a
successful conclusion to the Uruguay Round would increase U.S.
output by more than $1 trillion over the next ten years, and that
world output would grow by more than $5 trillion over the same
period.
Developing countries also stand to benefit importantly
from such an increase in growth and a more open trading system.
For them, ,the benefits of trade will far outweigh the benefits
they rece1ve through our bilateral and multilateral assistance
programs.
Regionally, we are committed to the establishment of the North
American Free Trade Association (NAFTA). Together with Mexico
and Can~da, we are working to conclude supplemental agreements on
the enV1ronment and labor in time to implement the NAFTA
-
agreement
encourage
more than
1992, and
5 -
by January 1, 1994.
We believe this agreement will
further gains in u.s. exports to Mexico, which have
tripled from $12.4 billion in 1986 to $40.6 billion in
lay the ground for further increases.
Our trade promotion efforts are centered in the Export-Import
Bank, the Overseas Private Investment Corporation, and the Trade
and Development Agency. These programs aim to create new markets
for U.S. goods and services and to generate new jobs for our
people. They also enable the United states to forge market ties
and to facilitate the development of new product lines and
processes. This is particularly important in the environmental
area and in other areas where we have a technological and
commercial advantage.
The Role of Investment
The second area is investment. Our basic approach to economic
growth and development in developing countries recognizes the
importance of twin pillars that are needed to achieve success -the public sector and the private sector. We are convinced,
however, that investment must be centered in the private sector.
The trade promotion agencies that I have just mentioned can also
playa key role in this process.
Public sector investment provides the physical and social
infrastructure that is essential for greater growth and progress.
The public sector must also create the economic policy context
and the legal and regulatory framework that is essential for
increased private investment. The multilateral development banks
and our bilateral assistance programs are important players in
all of these areas.
We must recognize, however, that the future of developing
countries lies not with a diminishing pool of foreign economic
assistance, but with private initiative and entrepreneurial
activity. The Agency for International Development has already
taken a number of different initiatives to promote small-scale
and micro-entrepreneurial activity in its recipient countries.
The multilateral development banks are also active in this area.
The International Financial corporation (IFC) , the private sector
arm of the World Bank Group, recently played a leading role in
helping Russia launch its first privatization program, designing
and implementing the mass privatization of 2,000 retail shops in
the city of Nizhny Novgorod.
Increased attention should be focused on how to create additional
opportunities for private initiative and entrepreneurial
activities. These efforts should be financed with the help of
private sector financial institutions. The creativity and
-
6 -
ingenuity of these institutions are needed in the developing
world, as well as in Russia and the other states of the former
soviet Union.
In the past, the U.S. Government has consistently opposed efforts
to leverage our contributions to the multilateral de~elopment
banks through co-financing arrangements such as shar~ng of
preferred creditor status or the extension of guarantees. We
have taken this position because of our concerns about the
financial implications these activities might have for the
multilateral development banks and the borrowing countries. We
are now engaged in a review of that position, however, and
depending on its outcome, there may be room for new opportunities
in this area.
In the interim, the U.S. has supported an innovative approach
that allows commercial and export credit agency lenders to
receive adequate assurance of repayment for their lending to
countries in transition, such as Russia.
In the World Bank, the
normal prohibition against borrowing countries giving collateral
for loans can now be waived for the incremental output of
projects. This is expected to mobilize lending that would not
otherwise have been available to Russia.
The U.S. Export-Import Bank is developing a framework for lending
to the Russian oil and gas sector that will finance large amounts
of equipment and services needed to increase Russian capacity.
The security for these loans will be the incremental revenues
produced by the project. This new policy will not jeopardize the
World Bank's position, because collateralized lending will be
limited to incremental production only and the waiver is to
extend only up to five years.
The Need for Development Assistance
The third of these areas is international development assistance
or aid. The approach we are taking emphasizes that help should
be given first of all to those who are willing to help
themselves. We must also be prepared to support investments in
individual countries where we have overriding political or
strategic interests, or in international situations that arise
which engage these interests.
Our bilateral assistance program makes an important contribution
to 7conomic growth and development.
Its programs emphasize human
cap~tal development, particularly basic health, nutrition, and
the development of productive skills that will enable people to
build better lives.
This program is a particularly flexible instrument we have for
targeting specific U.S. interests in individual countries.
It
- 7 -
enables us to react quickly and to achieve political objectives
as well as to protect other interests that we may have in
recipient countries.
The multilateral development banks can also respond quickly and
well when they are called upon in times of trouble. This is
illustrated by the Summit Meeting in Tokyo in April, when we were
able to raise sUbstantial new funding for Russia, much of it
through the multilateral development banks. Another illustration
is the way we were able to get much needed financial support from
the banks for countries whose economies were adversely affected
by the Gulf War.
Our participation in these institutions is the most costeffective means we have for helping developing countries.
Last
year, the multilateral development banks made loan commitments to
their developing member countries in excess of $40 billion. Over
the last 50 years, since the establishment of the World Bank in
1944, cumulative commitments by that bank alone have amounted to
more than $220 billion.
Through contributions made by other countries and the banks'
borrowings in international capital markets, we are able to
leverage our relatively modest contributions by a large multiple,
particularly in the ordinary capital windows. This gives the
banks a financial strength and reach that is far beyond the
bilateral capability of any single donor, including ourselves.
This is illustrated very vividly in the figures for multilateral
development bank lending to fifteen of the top recipients of
USAID development assistance in FY 1992. In that year, AID
development assistance to these countries amounted to $600
million, while bank loan commitments totalled more than $9,800
million, or more than 16 times the total for AID.
In the World Bank, each dollar of paid-in capital contributed by
the U.S. has supported more than $118 in lending. The comparable
figures in the other multilateral banks for each dollar paid in
by the united States are: $83 in the African Development Bank,
$61 in the Asian Development Bank, and $40 in the Inter-American
Development Bank.
Even in the concessional windows, where all of the contributions
are paid in, the contributions from other governments multiply
our own, helping us achieve a level of support we could not
afford by ourselves. In the tenth replenishment of IDA, for
example, for each dollar paid in by the united States,
approximately six dollars ~ill be available for lending to the
poores~ countries, particularly those in Sub-Saharan Africa.
I
would also note that the trend in the u.S. share of contributions
to IDA has been consistently downward over the years and that the
share of other G-7 countries has been consistently upward.
-
8 -
Another important multilateral program is the united Nations
Development Program (UNDP). The state Department supervises our
participation in the UNDP. This organization provides technical
assistance and emphasizes the building of recipient country
capacity to manage their own development, policy planning, human
resource development, and environmental protection.
Its programs
frequently serve as the basis for follow on investments by both
bilateral and multilateral assistance programs or private sector
entities.
Helping the Poor
Poverty alleviation is one of the most important themes that we
want to emphasize in our development assistance programs. AID's
human capital developed programs have been created to address
this need. The fact that many of its activities are small scale
and managed from the field make these programs particularly
responsive to the needs of poor people and their grassroots
efforts. These programs are able to direct their support to the
rural areas where the most of the poor live in developing
countries.
Poverty alleviation is also the mandate of the multilateral
development banks.
It is particularly central to the
International Development Association (IDA), the concessional
lending affiliate of the World Bank Group.
IDA is the largest
single source of concessional funding for the poorest countries,
and a large proportion of this funding goes for purposes that
benefit the poorest and least-advantaged people.
Over the next three years, $22 billion is to go to countries with
per capita incomes less than $765 from resources of the tenth
replenishment (IDA 10). Of that amount, $11 billion will go to
the countries of Sub-Saharan Africa. We believe the need is
greatest in that region and it is a special focus of our
development concern.
The number of poor people in Sub-Saharan Africa went from 184
million in 1985 to 216 million in 1990. This is an increase of
more than 17 percent. Such increases are projected to continue
into the 1990's and beyond.
The figures for life expectancy, infant mortality, and primary
school enrollment are equally grim.
In 1980, life expectancy was
50, th7 lowest ~or any part of the developing world.
Ten years
la~er 1n 1990, 1t was 51, a very marginal increase at best and
st1ll much lower than the next lowest level for the developing
world, 59 in south Asia.
In 1980, the infant mortality rate in Sub-Saharan Africa was 126
per 1,000 live births.
By 1990, it was down to 107 per 1000 live
-
9
births, still the highest rate in the world and well above the
next highest rate, 92 in South Asia. The percentage of children
enrolled in primary school in Sub-Saharan Africa actually fell,
from 80 percent in 1980 to 69 percent in 1990.
Much more still needs to be done to help the poorest and most
heavily-indebted countries in this region. The region's external
debt is nearly three and a half times its annual export earnings,
and larger than its entire GNP. Most of the poorest countries
cannot even meet the interest payments corning due annually on
their debts to creditor governments. The debt overhang serves as
a major obstacle to investment, development, and growth in the
region.
Reducing the debt payments burden is vital to restoring
economic viability.
The Administration, therefore, is launching an initiative that
will enable us to join the rest of the international community in
reducing the non-concessional debts of the poorest countries that
are pursuing economic reform. The United States is the only
major country which is not currently reducing debt payments for
those countries in the Paris Club. We want this to change.
Coordination
Clearly, we have been talking about a broad range of activities
and there are many different and sometimes competing interests to
be taken into account. There is a high premium on coordination
among all of the agencies that are involved in these programs and
activities.
Coordination has been an important concern for a
number of us within the Administration. In putting together this
year's budget request, for example, we worked very closely
together, seeking to allocate our scarce budgetary resources in
ways that are both cost-effective and efficient.
Frankly, we cannot allow the various concerns that we have in
each of these areas to be divorced from the broader V1S10n that
we need for advancing our national interests. This is why we
need to place particular emphasis on coordination. One of the
principle coordinating mechanisms within the U.S. Government is
the National Advisory council on International Monetary and
Financial Policies (NAC).
This council is chaired by Treasury. For many years it has met
weekly at the staff level, advising on u.s. participation in the
international financial institutions and coordinating the
policies and practices of U.S. Government agencies that make
loans or engage in foreign financial or monetary transactions.
In addition, there is the Working Group on Multilateral Aid
(WGMA). This working group, also chaired by Treasury, helps
develop the U.S. position on multilateral development bank
-
10 -
lending activities.
Its members include representatives from
state, AID, Commerce, the Federal Reserve, Eximbank, and the
Office of the u.s. Trade Representative. They are regular
participants in weekly meetings of both the NAC and the WGMA.
In addition to these regular participants, Treasury has sought to
involve other agencies and to draw on their expertise on
technical issues.
For example, the Environmental Protection
Agency (EPA), the Council on Environmental Quality (CEQ), and the
National Oceans and Atmosphere Administration (NOAA) participate
in the WGMA to provide guidance on environmental issues and in
additional monthly meetings that are scheduled to evaluate
environmental impact assessments for multilateral development
bank loans.
Treasury also consults with other agencies in formulating the
u.s. negotiating position for replenishments of the multilateral
development banks.
Inter-agency approval is obtained prior to
conclusion of these negotiations and members of state, AID, and
OMB participate as members of the u.s. delegation at negotiating
sessions. We are currently working to improve staff level
coordination and tap into AID expertise on developmental issues
that can be applied to our work in the multilateral development
banks.
Conclusion
The President has made it clear that our first priority is to get
our own country back on the path to long-term and sustainable
economic growth. At the same time, we know that we can not
separate our own economic hopes and aspirations from those of
people in other countries, particularly the poorer people.
For our own good, we must make an investment in increasing
economic growth in developing countries and in maintaining the
health and well-being of the international economic system.
Greater economic growth is essential in these countries. Without
it, they will not have the domestic resources they need to
alleviate poverty and protect the environment.
All of '~;e programs and activities I have discussed today fit
withir
framework of international cooperation. Our job within
the U.~. Government is to coordinate these programs and
activities in a way that most effectively serves our important
national interests. The economic development we support must
promote greater growth in developing countries. This growth must
be sustainable over the long term.
It must also be designed to
help improve the lives of poor people in those countries and
provide increased protection for the environment.
-
11 -
with one billion people trying to survive on less than one dollar
a day, this is a moral imperative.
It is also an economic
imperative because the developing world represents the fastest
growing export market for u.s. goods and services. And it is a
security imperative because prosperous nations are most likely to
be peaceful ones.
May 28, 1993
LESLIE B. SAMUELS
ASSISTANT SECRETARY OF THE TREASURY FOR TAX POLICY
Leslie B. Samuels was sworn in as Assistant Secretary of the Treasury for Tax Policy
on May 20, 1993.
As Assistant Secretary for Tax Policy, Samuels will serve as the chief representative
of and advisor to the Secretary of the Treasury in the formulation and execution of domestic
and international tax policies and programs.
From 1968 until Samuels joined Treasury he was an associate, then a partner, of the
New York law firm Cleary, Gottlieb, Steen and Hamilton. In 1967 to 1968 he was an
attorney with the Gulf Oil Corp. in London.
He is a magna cum laude LL.B. of the Harvard Law School and was editor of the
Harvard Law Review 1964 to 1966. He has a B.S. in economics from the Wharton School
of Finance and Commerce (1960 to 1963) at the University of Pennsylvania. In 1966 to 1967
he had a Fulbright Fellowship at the London School of Economics and Political Science.
Samuels was a member of the Carter-Mondale transition team at the Treasury
Department in 1976 to 1977, a member of the New York State Bar Association and author
or co-author of a number of articles on taxation in professional reviews. He is married
to Dr. Augusta Gross and has a son and daughter. He was born in St. Louis, Missouri, on
November 10, 1942.
-30-
.•
TREASURY NEWS
Department of the Treasury
Washington, D.C.
FOR IMMEDIATE RELEASE
May 28,1993
''
..
..
~.......
'.
,,
ft--(l
Telephone 202-622-2960
CONTACT: Joan Logue-Kinder
(202) 622-2910
SECRETARY BENTSEN TO DISCUSS GROWfH, TRADE, RUSSIA
WITH FOREIGN OFFICIALS NEXT WEEK
Treasury Secretary Lloyd Bentsen will meet with top officials in Europe and
Russia next week to discuss growth, trade, and economic reforms in Russia and Eastern
Europe.
Secretary Bentsen will represent the United States at the annual meetings of the
Organization for Economic Cooperation and Development in Paris, Wednesday, June 2
and Thursday, June 3. He also will meet with top Russian officials in Moscow beginning
Thursday, June 3 through Saturday, June 5.
This is the fmal set of key meetings before the Tokyo Economic Summit. "These
meetings are an important forum for advancing the growth policies and trade policies
needed to put our people back to work. They will lay the groundwork for a Summit of
accomplishment and cooperation," Bentsen said.
"We must cooperate now to restore growth. We have succeeded in reinvigorating
economic policy coordination worldwide and our hard work is beginning to payoff. But
we cannot and will not relax until the job is done," Bentsen said.
"I also will talk with our OECD colleagues about completing the Uruguay Round
of trade talks. We'll make every effort to complete this agreement quickly. World
growth, to a large degree, depends on expanding world trade," Bentsen said.
LB-218
(MORE)
Bentsen was invited by Deputy Prime Minister Boris Fedorov to visit Moscow to
get an update on the progress of Russian President Boris Yeltsin's economic reform
prbgram and efforts to put state-owned enterprises into private hands.
"I look forward to meeting with top Russian officials. I'll be getting an update on
President Yeltsin's program for political reform and economic change, since he won his
April mandate," Bentsen said.
-30-
LIe DEBT NEWS
Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
June 1, 1993
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $12,018 million of 13-week bills to be issued
June 3, 1993 and to mature September 2, 1993 were
accepted today (CUSIP: 912794F58).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.06%
3.08%
3.08%
Investment
Rate
3.12%
3.15%
3.15%
Price
99.227
99.221
99.221
Tenders at the high discount rate were allotted 72%.
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
28,158
33,064,690
6,680
25,254
612,314
18,825
1,816,815
10,587
4,461
19,276
16,500
546,416
759,270
$36,929,246
Acce:gted
28,158
10,203,818
6,680
25,254
595,874
17,985
131,255
10,587
4,461
19,276
16,500
199,016
759,270
$12,018,134
Type
Competitive
Noncompetitive
Subtotal, Public
$32,280,935
1,238,281
$33,519,216
$7,369,823
1,238,281
$8,608,104
2,720,730
2,720,730
689,300
$36,929,246
689,300
$12,018,134
Federal Reserve
Foreign Official
Institutions
TOTALS
LB-219
UBLIC DEBT NEWS
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $12,031 million of 26-week bills to be issued
June 3, 1993 and to mature December 2, 1993 were
accepted today (CUSIP: 912794G73).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.20%
3.22%
3.22%
Investment
Rate
3.30%
3.32%
3.32%
Price
98.382
98.372
98.372
Tenders at the high discount rate were allotted 79%.
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
24,968
38,052,371
7,351
23,824
105,432
24,110
1,326,381
6,737
6,829
19,978
9,310
472,760
540 1 111
$40,620,162
Acce:gted
24,968
11,123,647
7,351
23,824
79,493
23,900
25,331
6,737
6,829
19,978
9,310
139,360
540 1 111
$12,030,839
Type
Competitive
Noncompetitive
Subtotal, Public
$36,068,155
868 1 107
$36,936,262
$7,478,832
868 1 107
$8,346,939
2,750,000
2,750,000
933 1 900
$40,620,162
933 1 900
$12,030,839
Federal Reserve
Foreign Official
Institutions
TOTALS
LB-220
II'
FOR RELEASE AT 2:30 P.M.
June 1, 1993
CONTACT:
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $24,000 million, to be issued June 10,
1993. This offering will not provide new cash for the Treasury,
as the maturing bills are outstanding in the amount of $23,996
million.
Federal Reserve Banks hold $5,422 million of the maturing
bills for their own accounts, which may be refunded within the
offering amount at the weighted average discount rate of accepted
competitive tenders.
Federal Reserve Banks hold $2,224 million as agents for
foreign and international monetary authorities, which may be
refunded within the offering amount at the weighted average
discount rate of accepted competitive tenders. Additional
amounts may be issued for such accounts if the aggregate amount
of new bids exceeds the aggregate amount of maturing bills.
Tenders for the bills will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public
Debt, Washington, D. C. This offering of Treasury securities
is governed by the terms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356, published as a final rule on
January 5, 1993, and effective March 1, 1993) for the sale and
issue by the Treasury to the public of marketable Treasury bills,
notes, and bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
·LB-221
HIGHLIGHTS OF TREASURY OFFERINGS OF WEEKLY BILLS
TO BE ISSUED JUNE 10, 1993
June 1, 1993
Offering Amount .
$12,000 million
$12,000 million
Description of Offering:
Term and type of security .
CUSIP number
Auction date
Issue date
Maturity date . . .
Original issue date
. . .
Currently outstanding
...
Minimum bid amount
Multiples . . . . . . .
91-day bill
912794 F6 6
June 7, 1993
June 10, 1993
September 9, 1993
March 11, 1993
$11,682 million
$10,000
$ 1,000
182-day bill
912794 G8 1
June 7, 1993
June 10, 1993
December 9, 1993
June 10, 1993
$ - - $10,000
$ 1,000
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids
Accepted in full up to $1,000,000 at the average
discount rate· of accepted competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10%
(2) Net long position for each bidder must be
reported when the sum of the total bid
amount, at all discount rates, and the net
long position is $2 billion or greater.
(3) Net long position must be determined as of
one half-hour prior to the closing time for
receipt of competitive tenders.
Competitive bids
Maximum Recognized Bid
at a Single yield
35% of. public offering
Maximum Award . . .
35% of public offering
. .
Receipt of Tenders:
Noncompetitive tenders
Competitive tenders
Payment Terms
Prior to 12:00 noon Eastern Daylight Saving time
on auction day
•
Prior to 1:00 p.m. Eastern Daylight Saving time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
FOR IMMEDIATE RELEASE
June 2, 1993
CONTACT: Chris Peacock
(202) 622-2960
BENTSEN AGGRESSIVELY PUSHES U.S. PRO-GROWTH PROGRAMS,
NEED FOR JAPAN TO OPEN MARKETS
Paris -- Treasury Secretary Lloyd Bentsen today called on major industrial nations
to join the United States in adopting pro-growth policies and urged Japan to open its
markets to foreign competition.
"Now that the threat of communism has receded, we will be defined by what we
are for, and not what we are against. What we are for is economic cooperation and
development for all nations, the overriding purpose of this organization. We now know
that prosperity can only be achieved through the market place. The spur of competition
is the only route to prosperity," Bentsen told members of the Organization for Economic
Cooperation and Development here for annual meetings.
Bentsen said the Clinton Administration recognizes the need for change and is
pursuing an ambitious program of economic revitalization, including the largest deficitcutting package in U.S. history. But he said U.S. efforts will only succeed with faster
growth in the rest of the world.
LB-222
-2-
"J apan's situation is of particular concern. This organization now forecasts that
Japan's growth this year will be less than 1 percent, despite the latest stimulus program,
and that it will be under its potential again next year. Japan's trade and current account
surpluses continue to expand, as domestic demand grows even more slowly than income.
These surpluses are a global problem. They are hurting world growth. That must
change," Bentsen told the OECD.
Bentsen said Japan has both the means and the need to expand domestic demand
and reduce its huge external trade surplus.
Bentsen also said opening world markets is essential to achieving world growth.
"Macroeconomic policies to promote growth must be complemented by trade policies to
preserve and extend the open international trading system. The foundation for this
Administration's trade policy will be 'export activism.' We want to expand trade not
reduce trade," Bentsen told the OECD.
-30-
.•
TREASURY NEWS
Department of the Treasury
Washington, D.C.
FOR IMMEDIATE RELEASE
June 2, 1993
''.'
..
'.
U.S. TREASURY SECRETARY BENTSEN TO VISIT STOCKHOLM
U.S. Treasury Secretary Lloyd Bentsen will visit Stockholm Saturday afternoon, June
5, 1993 to meet with Swedish Prime Minister Carl Bildt.
Secretary Bentsen will meet with the Prime Minister during a refueling stop while
returning to Washington from meetings in Moscow, where he is scheduled to meet with
Russian President Boris Yeltsin and other top Russian officials, and Paris, where he
represented the United States at the Organization for Economic Cooperation and
Development annual meetings. This is the final set of key meetings before the Tokyo
Economic Summit.
"These meetings are an important forum for advancing the growth policies and trade
policies needed to put our people back to work. They will lay the groundwork for a Summit
of accomplishment and cooperation," Secretary Bentsen said.
"We must cooperate now to restore growth. We have succeeded in reinvigorating
economic policy coordination worldwide and our hard work is beginning to payoff. But we
cannot and will not relax until the job is done," Secretary Bentsen said.
LB-223
,
.....,
ft--(l
Telephone 202-622-2960
CONTACT: Chris Peacock
(202) 622-2960
-30-
~.'
TEXT AS PREPARED FOR DELIVERY
FOR IMMEDIATE RELEASE
June 2,1993
CONTACf: Chris Peacock
(202) 622-2960
REMARKS OF TREASURY SECRETARY LLOYD BENTSEN
ON GROWTH AND EMPLOYMENT
OECD MINISTERIAL MEETING
PARIS, FRANCE
Chairman Dawkins, Secretary General Paye, fellow delegates: It is a pleasure to
attend my first OECD Ministerial. I want to bring you a message today of the need for
collective action to change the course of the world economy.
Now that the threat of communism has receded, we will be defined by what we
are for, not what we are against. What we are for is economic cooperation and
development for all nations, the overriding purpose of this organization. We now know
that prosperity can only be achieved through the market place. The spur of competition
is the only route to prosperity.
Our central challenges are to restore growth and to preserve and open the
multilateral trading system.
Why now? Because growth has been sluggish in the United States. Because in
many countries recovery is not yet under way. And because unemployment throughout
the OECD is more than 30 million, and still rising.
Some 60 nations outside of the OECD have opened their trading systems in the
last decade, and the prospect for growth depends critically on access to open markets.
Nowhere is this more important than in nations that now are building democratic and
market systems.
We must cooperate because the greatest threat to continued open trade is
stagnation. Experience teaches us that the momentum of integration slows when growth
slows, and that protectionism retreats with growth.
We can change the status quo, if we have the courage to act -- both individually
LB-224
2
and cooperatively. The policies we pursue will, of course, reflect specific conditions in
each of our economies and our own national interests. Fortunately, national imperatives
and international interests increasingly coincide.
The United States recognizes that we must change. That is why we have
embarked on an ambitious program of economic revitalization.
President Clinton has changed our national debate on economic policy. The
question Americans ask now is not whether there will be deficit reduction, but how to
make it substantial and lasting.
We have recognized that our competitiveness problems were made in Washington,
not in London, or Paris, or Bonn, or Tokyo. We know we cannot devalue our way to
prosperity. We have to get there by increasing investment in our country. We are doing
that in a substantive way, with some $500 billion in overall deficit reduction. And we are
doing it by increasing the incentives for investment both public and private.
We won an important victory for America's future last week, with the passage of
our economic package in the House. We will win in the Senate.
The markets are betting on our program and on our recovery.. Interest rates have
declined substantially. And the stock market is at record levels.
Our economy is recovering - at least moderately.
Inflation is under control,
productivity is rising, and production costs are rising only modestly. But we are
concerned because employment growth has been poor. Too many workers are on
unemployment lines rather than production lines. Additionally - as aggressive as our
deficit reduction plan is -- lasting deficit reduction will come only when we tame health
care costs. Those costs affect our economic performance, and that is a major reason we
are working on plans to bring them under control.
Our efforts to reduce our twin budget and trade deficits will only succeed with
faster growth in the rest of the world. The world cannot depend on growth in the
United S:5 to p. .,l' it out of recession.
Jap2..i:s
situat~on
is of partie".
Japan's growth this year will be less
~oncem.
1
T .... ~s orga
1 percent,
ltion fi(
despit{~le
)recasts that
latest s.unulus program,
and that it will be under its potential again next year. Japan's trade and current account
3
surpluses continue to expand, as domestic demand grows even more slowly than income.
These surpluses are a global problem. They are hurting world growth. That must
change.
Japan has both the means and the need to increase domestic demand and reduce
its external surplus. The recent fiscal stimulus package is a useful step, but it needs to
be sustained next year so there is no slippage, as there was last year. Fortunately,
Japan's fiscal position is strong, even after the stimulus announced in April. The
deterioration in revenues is largely due to slow growth, and that can be recouped as the
economy resumes more normal growth.
The outlook in Europe is even more troubling, and the room for maneuver is
even more limited. Unemployment is approaching 21 million, and most countries on the
continent are at or near recession.
The prospects for early recovery are uncertain. Recent declines in interest rates
should help. Given the current recession and diminishing wage and price pressures,
further substantial reductions are prudent.
European nations, particularly those with limited room for exchange rate changes,
need structural changes to increase the flexibility of labor markets. This can permit
adjustment to external shocks without sacrificing growth.
Macroeconomic policies to promote growth must be complemented by trade
.
policies to preserve and extend the open international trading system. The foundation
for this Administration's trade policy will be "export activism." We want to expand trade
not reduce trade.
I want to assure you that, in the words of President Clinton, America will
"compete, not retreat."
We want a prompt and successful conclusion of the trade talks,
and a fair and balanced agreement. A successful Uruguay Round agreement is, as the
G-7 finance ministers said last month, "indispensable to maximizing the world's growth
potential."
Strengthening the multilateral trade system also means that other countries,
particularly those with relatively closed markets, must now do more to catch up with the
open U.S. economy to level the playing field.
4
ing out to
Just as the world has changed dramatically, so must the OECD, by reach
Europ e has been
a broader range of countries. Your response to the nations of Easte rn
integration into
encouraging. It is time to do the same for Russia, to help it complete
o to join the
the world economy. Further, we also believe the time has come for Mexic
OECD as a full member.
Mr. Chairman, Mr. Secretary General, fellow delegates: We now must work
economy, and
together to secure our new peace with a strengthened and growing world
of failure is a
we must work together to preserve and expand open markets. The price
erity.
retreat into stagnation and protectionism. The reward of success is prosp
Thank you.
-30-
UBLIC DEBT: NEWS
FOR
June 2, 1993
RESULTS OF TREASURY'S .AUCTION ,OF 13 -DAY BILLS
Tenders for $7,010 million of 13-day bills to be issued
June 4, 1993 and to mature June 17, 1993 were
accepted today (CUSIP: 912794D50).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.01%
3.05%
3.04%
Investment
Rate
3.06%
3.09%
3.09%
Price
99.891
99.890
99.890
Tenders at the high discount rate were allotted 80%.
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
Accepted
o
o
32,043,000
6,545,000
o
o
o
o
5,000
5,000
1,660,000
460,000
o
o
o
o
o
500,000
o
o
o
o
o
o
o
o
$34,208,000
$7,010,000
$34,208,000
$7,010,000
$34,208,000
$7,010,000
o
o
Type
Competitive
Noncompetitive
subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
LB-225
o
o
o
o
$34,208,000
$7,010,000
DEPA.RTMENT OF THE TREASURY
WASHINGTON
REMARKS BY
SECRETARY OF THE TREASURY LLOYD BENTSEN
PRESS BRIEFING - HOTEL INTERCONTINENTAL
JUNE 2, 1993 - 5:00 P.M.
QUESTION: Can you give us a reaction to the -- what the Japanese
have offered in the way of financial services? Does this represent
a siqnificant step forward in market access?
SECRETARY BENTSEN: No, I can't -- I would leave that to Mickey
Kantor to further discuss.
QUESTION: Secretary Bentsen, was there any discussion, any concern
raised today about the strengthening Yen and the impact that may
have on global trade (garbled)?
SECRETARY BENTSEN: I know I don't recall, I don't recall what -anyone pointing to that issue. Let me further state that there
seems to have been some misunderstanding.
We are not seeking
appreciation of the Yen. We are not seeking appreciation ot the
Yen.
QUESTION: Could I quickly follOW up on that one because there is
some sort of (interrupted by the Secretary)
SECRETARY BENTSEN:
But I may not ...
(much laughter)
QUESTION:
I fully accept that that's a possibility. There has
been some suggestion that the Group of Seven Deputies will be
meeting tonight to discuss, among other things, currency. Is that
the case? And if I might just ask you about your remarks to the
meeting earlier today. You pressed Japan to be more forthcoming in
fiscal policy, and of course you made vary clear hints that and we
would like to see further reductions in European and German
interest rates.
Are you disappointed that there seems to be no
movement on that?
SECRETARY BENTSEN: No, we have had movement and that has been very
encouraging to rna. And that -- we first made that point and made
it strongly at the G-7 Meeting in London.
Since that time you
have seen reductions in the interest rate by the Bundesbank and
since by the French. We have been encouraged by that. Since that
time, where you had a contractionary budget on the part of the
Japanese, you saw a supplemental appropriation that does give some
modest growth. It's my opinion that they can do more in the way of
fiscal policy to stimulate that economy and I am very hopeful in
their 94 budget that they will do that.
2
QUESTION:
Mr. Secr etary the Japa nese Plan ninq Min ister , Mr.
Funa da, his spee ch to the OECD, seem ed to be tryin
to immu nize the
worl d aqai nst what he perc eive s to be the Unitq
ed
towa rds Japa n, in term s of the frame work agree ment . Stat es poli cy
sett inq num erica l tarq ets for redd ressi ng the currHe said that
bala nces is impo ssibl e, it refle cts -- it deni es the ent acco unt
mark et, the
very syste m of the mark et economy. It woul d requ ire
tryin
g to use
gove rnme nt cont rol over priv ate sect or deci sion
s
and
woul d
othe rwis e be a lous y ideaa.
(laug hter)
I
wond
ered
what
your
resp onse to that is?
SECRETARY BENTSEN:
We'r e work ing hard to try to open up thes e
mark ets. And we are not talki ng abou t just for
Unit ed state s,
we are talk ing abou t open ing up thos e mark ets torthe
all
belie ve that 's awfu lly impo rtant . with the imba lance coun tries , we
of trad e that
they have with the of the rest of the worl d, the imba
they have with our own coun try. So in no way is it "man lance that
aged trad e"
to talk abou t open ing up the mark et and the
bidd
ing on
telec omm unic ation s. In no way is it trmanaged trad e tr to
talk
abou t
work inq aqai nst regu latio ns that migh t furth er deny
fina
ncia
l
serv ices into that mark et. We are tryin g to open that
up
to
the
rest of the trad ing worl d.
QUESTION: But why do you think that it's nece ssary to
try to reac h
num erica l targ ets with the Japa nese ?
SECRETARY BENTSEN: Well , I think that is just
urem ent for
prog ress that miqh t have been made, I think thata'smeas
all that is.
QUESTION: If I can go baok to the Yen. You say that
the Unit ed
stat es is not seek ing an appr ecia tion.
Did
you
seek an
appr ecia tion ? Does this mean you are satis fied with
the
curr ent
leve ls?
SECRETARY
BENTSEN: I think inso far as the Yen I'd refe r you to
our
G-7 Meet ing in Apri l and the comments that were
made at that time .
QUESTION:
Mr. secr etary you have said rece ntly , as has the
Pres iden t and some Dem ocrat s in Cong ress, that
when the Pres iden t's
defi cit redu ction bill gets to the Sena te some chan
made . In term s of the energ y tax, firs t, do you antiges will be
cipa te that
the ener gy tax will have a lowe r rate , or bigg er exem
ption s, or
what ? What chan ges have you ... ?
SECRETARY BENTSEN: I am assum ing ther e will
some redu ction in
the ener gy tax, the BTU tax, but that 's somebe
thing
that has to be
nego tiate d with the sena te lead ersh ip, and the Chai
Fina nce Com mitte e and with the members of the Sena te, rman of the
that we have
not serio usly enga ged in, at that poin t.
QUESTION: Is it corr ect that you told members of the
Hous e that
you thou ght that redu cing the tax by a third was
the righ t orde r of
3
magnitude?
SECRETARY BENTSEN:
What you have to balance that with is the
amount of reductions in spending that you have to bring about. We
mustn't loose sight of the target of a five hundred billion dollar
reduction in the deficit. I think that is a principle that has to
be maintained. So achieving balance in that, I would not like to
Bee us get committed on one without having tollowed through the
other side.
QUESTION: But did you indicate to the members of the House that
you thought you could reduce the energy tax by a third, or is that
not a correct report of what you said?
SECRETARY BENTSEN:
David.
I have not committed to any specific number,
QUESTION: Mr. Secretary, what is to be your goal in the visit to
Russia and what was accomplished at this meeting today? Can you
answer that?
SECRETARY BENTSEN: What we were seeking to do here today, we were
seeking three things:
to work together for growth around the
world, to create jobs; and second, to advance the Uruguay Round
before the summit meeting in Tokyo that is coming up to try to open
up these markets and in addition to try to assists in the reform of
the political and economic reforms that Yeltsin is trying to bring
about after his mandate from the Russian people. And what we're
talking about doing in Russia is going over to meet with the
Russian leadership to see what progress is being made in those
reforms and when we're talking about the development banks, how the
amount ot money that we are talking about contributing there, or
loaning there, how that can be best implemented.
QUESTION: Are you happy with the noises coming out of Moscow, Mr.
Secretary, with regard to control of the Central Bank? Can you
shed some light on how policy is being set there and whether or not
there is in tact these announced reductions in credit for induBtry
have been -- are the sorts of things you would like to see in ...
SECRETARY BENTSEN: They are the sorts
see and what I have heard so far about
able to get in way of commitments and
that is encouraging to us. I'm seeing
inflation and our understanding, some
credit.
of things I would like to
what Mr. Fedorov has been
with Yeltsin's support of
some headway being made on
reduction in extension of
QUESTION: I'm stunned, Mr. Camdessus indicated that it might still
be still be another couple of months before the first tranche of
the STF was ready to be drawn down. Are you happy with the pace at
which the IMF is conducting the negotiations with Russia?
4
SECRETARY BENTSEN: Well, I hope they can resolve it sooner than
that. You're talking about the first billion and a hal!. That was
a conditional loan, but a sottening of the conditions, as you know.
It is my understanding that the IMF and the Russian negotiators
have not come to the final agreement yet for the release of that.
QUESTION:
Mr. Secretary, on China, the administration has said
that you're prepared to qive another year of MFN status for China,
but you want to Bee measurable progress on human rights and other
areas. How are you qoing to define measurable proqress in those
areas?
SECRETARY BENTSEN: I will leave that one to the President to do,
but what I further would like to see is that the Chinese open up
their markets more to U.S. exports. We have seen quite a bit of
protectionism in that regard.
QUESTION: Mr. secretary, on trade, the new Administration seems to
be intent on signing the Uruguay Round by December 15. How do you
expect to go around the French reluctance and that of other
European countries to sign on the agricultural part of the
agreement?
SECRETARY BENTSEN:
Well, we have made some headway on the
agricultural part, and I am pleased to see that, but I don't think
we should be waiting on serious offers on intellectual property
rights, or services. We ought to be continuing neqotiations, we
don't have a lot of time left. I would like very much to see it
wrapped up by December 15, that's the attitude of the Clinton
administration. And it's important, I think, that we put a fairly
early deadline on.
We have been negotiating on this, what now,
about seven years. And if you don't put a deadline on this fairly
soon, you are not going to get the serious ofters.
QUESTION: Let me prolong this, Mr. Secretary. The French say, and
apparently the Germans endorsed this position today at the FrenchGerman summit in Bonn, that there should be a global settlement and
in this settlement they expect the U.S. to renounce any unilateral
measures like the use of the Super 301. Under which conditions do
you think the U.S. congress could agree to such a settlement and to
accept to forgivQ about the ...
SECRETARY BENTSEN: I think that we have to continue to exercise
what rights we have insofar as discriminatory actions taken against
our products.
QUESTION:
Mr. Secretary, I am based in Brussels so if this
question seems off the wall, I'm from Brussels (laughter).
Is the United states for or against a single European currency?
SECRETARY BENTSEN:
(Laughter) That's one for the Europeans to
5
decide, no reason for us to try to meddle in their affairs so far
as that kind of determination -- that's theirs. I just met with a
bunch of French businessmen and one of them was asking me what we
were doing to support the European common community. And I said
we're quite supportive of it but that has to be your decision. He
was askinq why we weren' t more invol vea.
I twas amaz inq .
(Laughter)
QUESTION: At the end of your speech you mentioned how you would
like to see Mexico become a member of the OECD.
What's your
attitude towards I<orea's application and what's holding these
applicants up? I mean, well, they have been hanginq around now for
some years.
SECRETARY BENTSEN: Well, I think the question on the part of many
of the members is how far do they go in the way of additional new
members in tryinq to limit that to a degree. I think that's the
primary concern that I have heard voiced by others.
We feel
strongly about Mexico because ot what they have been able to do in
advancing their economy and privatizing and lowering tariffs,
openinq up trade, that they have qrown to the point that they are
deserving of membership.
QUESTION:
How do you teel about Korea?
SECRETARY BENTSEN:
I really haven't addressed that.
QUESTION: Mr. secretary, can you address the shipbuilding subsidy
issue that's been dragginq on without progress in OEeD for a number
of years. Is there any prospect in sight of a ....
SECRETARY BENTSEN: I'd refer that one to Mickey Kantor, and I'm
glad to.
(Laughter)
QUESTION: Mr. Secretary, can I just follow up on that question
about Super 301? Is it your view that a renewal of the super 301
is in the best interests of the United states and ... (garbled)
SECRETARY BENTSEN: Would you repeat the question then?
QUESTION: Yes, do you think that a renewal of it is in the best
interests ot the United States?
SECRETARY BENTSEN:
Conqress.
QUESTION:
Well, I think that we'll leave that to the
Mr. Secretary, can I ask you about the discussion on the
tomorrow? We understand that the Japanese side is -wants that to include a condemnation of managed trade. Obviously,
the United states doesn't. Do you know where that issue stands and
whether it is going to be resolved ...
communiqu~
6
SECRETARY BENTSEN:
QUESTION:
It's my understanding it was resolvQd today.
Can you tell us anything more about that, .....
SECRETARY BENTSEN: That's all I know -- but it's, -- that's all I
know, that they are in the process of trying to resolve it.
QUESTION:
Mr. Secretary, in your speech this morning, you said
that the U.S. can no longer lead the world economy out of its slump
alone. Is that a counterpart to what State Department officials
ara saying? (Laughter)
SECRETARY BENTSEN: Absolutely not. There is one superpower in the
world left and we're it; and the biggest, largest, most open market
of the major industrial powers.
QUESTION: Mr. Secretary, 1n your speech this morning you said -called again for further substantial reductions in European
industry, said that you had decided there has been some progress,
yet .....
SECRETARY BENTSEN:
that.
Did I use the word substantial?
I don't recall
QUESTION: Substantial is in there and this "substantial" has been
around for quite a while, so I wondered, do you still believe its
substantial?
SECRETARY BENTSEN: I think further reduction of interest rates in
Europe will be helpful.
QUESTION:
Mr. Secretary, since you have been talking about
interest rates in the last several months, the situation at home
has changed some. The Federal Reserve seems to be a little more on
guard about inflation. Are you concerned at all that that might
prematurely begin to raise interest rates before the u.s. recovery
1s solidly based?
SECRETARY BENTSEN:
Let me leave monetary policy to the Federal
Reserve. You knew I'd say that didn't you? (laughter)
QUESTION: Will there be a date and time certain in the communique
for the completion of the Uruguay Round?
SECRETARY BENTSEN: I don't know. And I'll tell Alan (Greenspan],
when I have breakfast with him next week, that that's what I said.
TREASURY
STAFF MEMBER:
Do we think we have gotten all of our
questions answered?
QUESTION:
Maybe
one more.
The OECD yesterday revised
its
7
expectations for the U.S. growth this year, do you agree with this?
SECRETARY BENTSEN:
Did what?
QUESTION: Revised down the expectations tor the growth of the U. S.
economy this year.
Are you in agreement with this downward
revision?
SECRETARY BENTSEN: Yes, I think there will be a downward revision
of that. I think their projection was 2.6%, wasn't it?
QUESTION:
What you are telling your colleagues, Mr. Secretary,
about your faith in the ability of the u.s. economy to qet out of
this slump it is in1 Are you concerned by the latest numbers, are
you optimistic that we're about to tUrn the corner?
SECRETARY BENTSEN: I am optimistic, David that, if the projections
for the year are not as -- not going to be as good as we had
originally anticipated and hoped for, and you are seeing those
kinds of revisions around the world, but there is an underlying
strength in that economy of ours and a substantial increase in
productivity, and hours-per-week-worked. I think that passing this
package is terribly important, having it through the House, helps,
you saw the stock market react, you saw the bond market react, but
it still has to pass that Senate, and I think if we can get it
through that Senate, that resolves those doubts, and I think we
will see a substantial improvement in confidence in that regard.
I think it then gives some certainty to business people as to what
the economic policies are and the success in cutting that deficit
ana the long term reduction of interest rates. I think those are
positive thinqs, that can result from it, ana I would be quite
optimistic about what that means for '94.
QUESTION: Do you feel personally responsible for, Mr. Secretary,
for winning that packaqe in the senate Finance committee?
SECRETARY BENTSEN: When you win it, when you win it by that few
votes 1 there are many fathers of that victory.
I'd like to
consider myself one of them.
TREASURY STAfF MEMBER:
Ladies and gentlemen the secretary will
take two more questions.
QUESTION:
One clarification if I could, on his question about
growth, the OECO revised downward the figure and then it wasn't
clear. You said you expect it will be revised downward again?
SECRETARY BENTSEN: No, no, no. I did not. No, I said it would be
revised downward from what we had anticipated when we were talking
about 3.1t.
QUESTION:
The
u.s. will revise its estimates?
8
SECRETARY BENTSEN:
That's my estimate, that we will revise it.
There will be a modest reduction in it. Not the OECO's number, I'm
sure you understand that.
# - # - #
.•
TREASURY NEWS
Department of the Treasury
Washington, D.C.
FOR IMMEDIATE RELEASE
JUNE 3,1993
''
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Telephone 202-622-2960
CONTACT: Chris Peacock
(202) 622-2960
INFORMAL REMARKS ON RUSSIA
TREASURY SECRETARY LLOYD BENTSEN
ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT
PARIS, FRANCE
Thank you for the opportunity to speak briefly about Russia.
I leave in a few hours for Russia to take a first-hand look at privatization and talk
with Russia's leadership about this and the process of stabilizing the economy. I intend
to urge President Yeltsin to use the momentum he's gotten from the referendum
mandate to press his reform agenda as aggressively as possible.
I am also interested in discussing with the Russians, in particular Minister
Chernomyrdin, Russia's investment climate. I am concerned that they have not been
able to develop the tax and legal system that will attract the foreign capital and expertise
they so badly need, particularly in the energy sector.
In a country where one in every seven oil wells is not working for lack of spare
parts, and where valuable gas is being flared, foreign investment can playa critical role
in reviving this sector.
Things change so fast these days that we take a lot for granted. We must
remember that Russia is undergoing the most dramatic economic transformation
imaginable. It is the largest economy yet to attempt this shift to a market economy.
This is a defining moment in the reform process. There are three issues important to
the success of this effort.
First, stabilization. On that point, let
~
between the Russian government and the Ct
down inflation even more than it has come
L~
."">
say I'm pleased at the agreement
11 Bank. That ought to help in bringing
n already, and it should let Russia make
its first drawing under the IMF's new facility for countries in transition.
LB-226
2
Second, Russia must aggressively continue the process of privatization. I'm
impressed that 70,000 previously state-owned and operated enterprises are now part of
the private sector. This must continue as rapidly as possible.
Lastly, we must use the G-7 to assist in the restructuring process.
All OECD members should consider it in their best interest to support Russia in
its transition. I would urge everyone, G-7 nations and non G-7 nations, to support the
multilateral package recently announced in Tokyo. In particular, I urge you to support
three important initiatives announced by the United States.
First and foremost, is the Special Privatization and Restructuring Fund. President
Yeltsin has asked for this fund. State-owned enterprises are draining the central bank
and slowing the stabilization process. The fund would encourage an aggressive
privatization effort by assisting enterprises and communities in the period after
privatization.
Secondly, the proposal to create a Moscow-based coordination office will help to
remove bottlenecks from the aid implementation process and ensure that our bilateral
and multilateral monies are well spent.
Finally, the proposed multilateral program to support the denuclearization of
nuclear weapons will help remove the threat of nuclear accidents and ensure the long
run stability of this region.
I would like to end by noting our support for recent proposals for greater
cooperation between Russia and the OECD. This institution and its member nations
have expertise that can keep the pace of privatization and stabilization moving as rapidly
as possible.
-30-
· G·'· ~· · ·
TREASURY NEWS
Department of the Treasury
Washington, D.C.
REMARKS AS PREPARED FOR DELIVERY
FOR IMMEDIATE RELEASE
JUNE 3,1993
,,
'
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ft--(l
Telephone 202-622-2960
CONTACf: Chris Peacock
(202) 622-2960
REMARKS OF TREASURY SECRETARY LLOYD BENTSEN
ANGLO-AMERICAN PRESS CLUB
PARIS, FRANCE
Good morning. It's a pleasure to join you. This is a unique and prestigious
forum, and I want to thank you for the invitation to speak.
I'd like to keep things relatively informal, so perhaps I could make a few
observations, and then take some of your questions.
We came to Paris to help lay the foundation for a successful Economic Summit in
Tokyo. The road to the Summit began back in February with President Clinton's
econoITllc program.
In the United States, we know that our ability to lead globally depends on our
strength at home. Our major partners have been telling us to put our house in order for
years. The Clinton Administration understands that message, and we are acting on it.
We are attacking our problem head-on, with a program of almost $500 billion in
overall deficit reduction. The President understands that we cannot keep deluding
ourselves with wishful thinking that we can grow our way out of trouble, while falling
deeper and deeper in debt.
We know that there are no exchange rate silver bullets to resolve long-term
competitiveness problems. We understand that the problems we inherited were made in
LB-227
2
Washington, not in London, Paris, Bonn or Tokyo. And we are aware that the world's
largest debtor nation cannot remain the world's greatest power in perpetuity.
It took political courage to offer Congress the package of spending cuts and tax
increases that we put together -- 200 very specific cuts, fair taxes that largely affect our
more wealthy citizens and, for the first time, a broad-based energy tax. Not only that, we
cut entitlements. And we are creating incentives to increase investments that will make
us more competitive.
The financial markets are responding positively to our initiatives. Interest rates
are down substantially, and the stock market is at record levels. The markets believe our
program will make a long-term difference. Our approach also is changing the mind set
in Washington, and all across America.
Americans are no longer questioning if there will be deficit reduction. Taking
charge of our deficit problem is now accepted as a given. What they want to know is
how best to do it, and how quickly we can get started.
The answer is that we're moving with record speed. Last week, the House of
Representatives endorsed the President's plan. I am confident we will get it through the
Senate in good shape and get on with rebuilding the American economy.
The President's vision for domestic change and renewal is complemented by a
commitment to actively confront global problems. Today, the most pressing international
economic challenges are to strengthen global growth to create jobs, expand trade, and
secure the political and economic transformation in Russia. These are the focus of the
President's international economic policy initiatives. They are the focus of my trip to
3
Paris and Moscow this week. And they form the core of our agenda for the Summit in
Tokyo.
We have made a good first start on the growth agenda. In the United States,
Europe, and Japan, policies are moving in the right direction. Since our initial G-7
meeting back in February, European interest rates have corne down, and the conditions
are being laid for further reductions. Japan's stimulus package is a useful first step in
what we hope will be a sustained effort to strengthen domestic demand and reduce the
surplus.
We cannot afford to relax. Too much depends on this. The U.S. alone cannot
pull the industrial countries out of this slump. If we work together, we can grow
together.
The Administration's efforts to restore global growth are complemented by a new
commitment to expand trade. It is absolutely imperative that we preserve and expand
the multilateral trade system.
The Clinton Administration's approach to this challenge is a policy of "export
activism." Our markets are the largest and most open of the major industrialized
nations. Just as our markets are open, we expect others to open their markets to our
products, and to the products of other nations.
We are committed to achieving an early and successful conclusion to the Uruguay
Round of trade talks. Success means a fair and balanced agreement. Ambassador
Kantor and Secretary Brown made important progress this week toward closing the deal
on a Uruguay Round package for the Summit.
4
Countries with relatively closed markets must take more aggressive steps to
emulate the open markets we have in America. For four decades, we accepted
protectionism elsewhere as the price of stability and winning the Cold War. We cannot
sustain support for open markets in America if our major trading partners -- and the
emerging economic powers of the developing world -- continue to rely on export growth
and protect their industries from competition.
Let me say a few words about Japan, because Japan lies at the center of our
efforts to restore growth and to expand trade. We face a further erosion of the base of
support for maintaining free trade and a strong, open multilateral trading system unless
there is a fundamental change by Japan in its dealings with its trading partners.
Japan has two major challenges -- to reduce its huge trade surplus and to provide
greater access to foreign goods, services, and investment. Japan's trade surpluses, once
concentrated with the United States but now shared with all the major trading regions,
hurt world growth. And a variety of government barriers continue to frustrate market
access for foreign producers.
The Administration's approach to Japan will be directed at both these challenges.
Progress will benefit all countries, not just the United States.
Finally, the Administration has taken the lead in constructing a major multilateral
assistance initiative to support the economic and political transition in Russia. There's a
considerable amount of work to be done -- in a number of areas -- and it is in the
world's interest that we all contribute to the effort. It was for that reason that I asked
5
the OECD to consider establishing a closer relationship with Russia. Greater integration
in the world economy will reinforce the program of assistance developed in the G-7.
This is a defining moment in the reform process in Russia. I will be going to
Russia later today. I will meet with President Yeltsin, and I intend to compliment him
on his aggressive approach to reform. I hope he uses the political capital he won in the
referendum to add to the momentum of this transition.
Few would have predicted how far the Russians have come already. Inflation has
been cut in half since the beginning of this year, and the recent agreement with the
Central Bank should contribute to stabilization. The ambitious privatization program
will help lock in the move to a market economy. Lots of tough work lies ahead,
however.
For instance, Russia still must develop the body of commercial law that creates
the kind of Western-style business climate that allows businesses to operate and attracts
foreign investors -- in particular to the energy sector.
The Russian government places a particularly high priority on the Special
Privatization and Restructuring Fund. It deserves international support. It can ease the
transition from state-ownership to private hands. We also want to see an aide utilization
office in Moscow to make ceratin that every bit of money that goes to the transition
effort is spent wisely. And we also want to see the multilateral program to demilitarize
nuclear weapons pursued vigorously.
6
Perhaps most importantly, we hope to see the IMF and the Russian government
come to terms quickly on the conditions necessary to unlock valuable resources from the
newly created fund.
One of the central achievements of the G-7 package was to make it possible for
reforms by the Russians to be reinforced rapidly with new flows of finance. That's why
we applauded the establishment of the IMF's systematic transformation facility, and why
we hope that the Russians and the IMF come together soon on a program that will
permit rapid financial support.
Let me conclude by saying that Paris was an important stop on the way to the
Tokyo Summit. We are committed to an active, internationalist agenda. The President's
domestic program has been received well. And we have seen the beginnings of a new
consensus among the major economies of the world to do what's necessary to restore job
growth, expand trade, and support the historic transition in Russia.
Thank you very much.
-30-
FOR IMMEDIATE RELEASE
JUNE 3,1993
CONTACT: Chris Peacock
(202) 622-2960
STATEMENT OF TREASURY SECRETARY LLOYD BENTSEN
CONCLUDING OECD PRESS CONFERENCE
PARIS, FRANCE
I am impressed at the reception within the OECD community of our call for
cooperation in our most important job -- restoring global growth. The momentum we
generated here will contribute to an extremely productive and successful economic
summit next month.
It will also help us reach that goal to cooperate -- within the OECD community
and elsewhere -- in expanding open markets, and using the OECD to assist in the
integration of developing economies into the global economic system. In particular, I
believe this organization can offer significant assistance to Russia, the other states of the
former Soviet Union, the Eastern Bloc, and other nations elsewhere now seeking entry
into the global economy.
We have looked at a range of issues -- growth, employment, trade, and others -in our OECD and bilateral meetings. These discussions reinforce the fact that our
economic affairs are more closely linked than ever before; and that cooperation is
imperative to restore global growth.
-30-
LB-228
JJ:; I
FOR IMMEDIATE RELEASE
JUNE 4, 1993
"
I ..;' J ,j t
t.. b 0
Contact: Chris Peacock
(202) 622-2960
OPENING REMARKS OF TREASURY SECRETARY LLOYD BENTSEN
PRESS CONFERENCE IN MOSCOW
Good afternoon, I'd like to make a brief opening statement, and then take a few
questions.
Today I see evidence of Russia undergoing renewal and revival. I was last here in
1990, and in just a few years the country has been transformed. Russia and President
Yeltsin have our strongest support and encouragement as they implement the economic
reforms that will make this transformation a success.
I talked today with businessmen who are taking a chance creating small
companies. We know in the United States the importance of small businesses in creating
jobs and growth. I saw what was once a state-owned food refrigeration plant is now
privately owned. There is a feeling of excitement and discovery about what is taking
place here.
What I have seen here is impressive. But we must also remember how much
work remains to be done. First, inflation must be stopped. Privatization, which is going
forward so very quickly, must be completed and structural reforms put in place. The
government and its young reformers are working hard, and they have our support and
encouragement, and that of the rest of the world.
Although progress has been made on stabilization and slowing the growth of the
supply of money, I am concerned that prices continue to rise too quickly. The job of
stabilizing the economy is paramount. The other reforms -- structural and political and
the privatization effort -- depend on having a stable economy in which to operate.
In my talks today with Deputy Prime Minister Fedorov and Privatization Minister
Chubias, we discussed the critical issues involved in stabilizing the Russian economy so
that inflation can be controlled. And, we covered a number of issues involved in
converting state-owned entities into thriving, privately-owned corporations. I stressed the
point that these reforms must be continued. They are important to Russia's future.
LB-229
-2-
We are here in Moscow at a particularly important time, since the Constitutional
Assembly will begin meeting tomorrow. Drafting the documents that will guide the
course of a new nation is critical work. I recall the difficulties our founding fathers had
as they wrote our Constitution, but the effort was worth it. In our case, our Constitution
ushered in a new era in democracy. I hope the document produced here has a similar
effect for Russia.
Mr. Yeltsin has our strong support in the challenging job of restoring stability to
the Russian economy and getting it ready for integration into the global economic
community. I brought with me a strong message of support for President Yeltsin from
President Clinton. We will be working closely with our G-7 partners to create a special
privatization fund that can help encourage this process. And we will be working to
establish a special office here in Moscow to help break down bureaucratic hurdles that
can get in the way of delivering valuable international assistance.
We think both those items will contribute substantively to the job of transforming
the Russian economy.
I have seen an exceptional transformation in Russia, just in the few years since I
last visited. It is apparent from talking with businessmen and political leaders. They
have a spirit of excitement and anticipation about what is to come. I think there's a
momentum under way for economic change that cannot be stopped. I intend to tell
President Clinton about the important progress that is being made.
The remarkable successes I have seen here will allow me to tell our G-7 partners
when we meet in Tokyo next month how important it is that we all support this historic
change in course for Russia.
-30-
PUBLIC DEBT NEWS
i : ~ ; " \. .., :..
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Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR RELEASE AT 3:00 PM,,;i;:J
I I ~.; iJ
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i 2I I
June 4, 1993
Contact: Peter Hollenbach
(202) 2.19-3302
PUBLIC DEBT ANNOUNCES ACTIVITY FOR
SECURITIES IN THE STRIPS PROGRAM FOR MAY 1993
Treasury's Bureau of the Public Debt announced activity figures for the month of May 1993,
of securities within the Separate Trading of Registered Interest and Principal of Securities
program (STRIPS), are as follows:
Dollar Amounts in Thousands
Principal Outstanding
(Eligible Securities)
$700,256,571
Held in Unstripped Form
$516,599,506
Held in Stripped Form
$183,657,065
Reconstituted in May
$11,866,480
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."
Information about "Holdings of Treasury Securities in Stripped Form" is now available on the
Department of Commerce's Economic Bulletin Board (EBB). The EBB, which can be
accessed .using personal computers, is an inexpensive service provided by the Department of
Commerce. For more information concerning this service call 202-482-1986.
000
PA-124
21
TABLE VI-HOLDINGS OF TREASURY SECURITIES IN STRIPPED FORM, MAY 31, 1993
(In thousands)
J>roncopal Am"•••, OuISIanDIl9
LOW1 De-scrc1lOO
Ma'""" Da'e
TOIa!
Port"", Held on
PortIon Held on
Uns','IlI""l Form
Slropped Funn
RecorwMuIed
r.... MonIh'
$1I3.6ru
56.658.554
S4.841.354
$1.811.200
211~
6.933.861
5.411.141
1.462.120
4O.tw
1995
511~
1.121.086
4.J66.766
2.760.320
2240J
10 lrr"'. Nole C 1995
81'~
7.955.901
5.159.101
2.796.800
18.800
'/'~
2/,St96
7.318.550
3.935.350
3.383.200
35.200
8.416.984
7.404.184
1.012.800
89.600
51'St96
20.085.643
19.318."'3
107.200
0
20.258.810
18.033.210
2.225.600
14B.CXXl
9O.CXXl
11 YS' No"
C 1994
11 1'4-" Nole A 1~
B
11 114"-" Note
9·1i2"o NoI. 0 1995
No',
871ll'
A
1996
7 l/8' Nole C 1996
,'11S,94
7 114' Nole 01996
1I11St96
8
1997
51,St97
9.921.237
8.723.637
1.197.600
B 518~. No'e 8 1997
81 1St97
9.362.836
8.196.436
1.166.400
0
B 718"" No'e C ,997
1111St97
9.808.329
7.465.929
2.:142.400
8.CXXJ
8 118' No'e A 1998
2/,5198
9.159.068
8.270.428
888.640
16.800
2.153.400
58.CXXl
I.7"\, No', A
NoIe 81998
51,5198
9.165.387
1.011.967
9·114' Nole C 1998
81,5198
11.:142.646
10.:nl.646
1.012.000
21.600
871ll"" No.e 01998
11115198
9.902.875
7.870.875
2.032.000
220.800
~
B 71ll"'. Note A·I999
2115199
9.719.623
9.266.823
452.800
4O.CXXl
9· 1/8'>'0 Nole 8· 1999
5115199
10.047.103
8.218.303
1.828.800
35.200
8". No •• C 1999
8115:99
10.163.644
9.8JO.l~
333.500
{)
996.800
104.CXXl
6.800
771ll"\. Note 0 1999
11115199
10.713.960
9.777.160
8 I,r.:, Nolo A 2000
2/15100
lO.bf).U3:J
IO.I:J:.t.o:J:J
S40.00J
B 718". No.e B 2000
5115100
10.496.230
8.630.630
1.865.600
0
8 )14.,. No'e C 2000
8115100
11.080.646
10.072.'66
1.008.480
{)
S 112"". No.e 0 2000
11115100
11.519.682
10.058.082
1.461.600
0
7 l/4~. No.e A 200 1
2/,5101
11.312.002
11.246.402
66.400
{)
31.CXXl
8% No'e B2OO1
51,5101
12.398.0113
11.430.258
967.825
7 7IS". No.e C 200 1
8115101
12.339.185
12.147.185
192.000
{)
7 112"'. Nole 02001
11115101
24.226.102
24195.062
31.040
{).
1 112"". Nole A·2OO2
5115102
11.714.397
11.460.797
253.600
{)
6 l!8"1o Nole B·2OO2
8115102
23.859.015
23.822.215
36.800
{)
6·114". No'e A·2OO3
2115'03
23.563.952
23.563.952
0
{)
11115104
8.301.006
5.972.206
2.329.600
5.5.5.200
•2"". Bond 2005
5115105
4.260.758
3.426.508
834.250
420.CXXl
125.600
••
s,8~.
Bond 2004
10 l/4% Bond 2005
8115105
9.269.713
8.496.913
712.800
9 l/8"1o Bond 2006
2/15106
4.755.916
4.75.5.276
640
{).
11 l/4% Bond 2009·1
11115114
6.005.584
2.783.984
3.221.600
729.600
1.357.440
11 '14"10 Bond 2015
2115115
12.667.799
3.419.959
9.187.840
10 YS% Bond 2015
8115115
7.149.916
2.084.636
5.065.2110
508.~
971ll" Bond 2015
11115115
6.899.85.9
2.448.659
4.451.200
8OO.CXXl
952.CXXl
9 ./4'" Bond 2016
2/15116
1.266.854
5.848.454
1.418.400
71'4"" Bond 2016
5115116
18.823.551
18.157.951
665.600
11.200
11115116
18.864.448
17.918.608
945.840
250.160
7
112"" Bond 2016
8 l/4'" Bond 2017
5115117
18.194.169
4.598.329
13.595.840
549.600
8
Bond 2017
8115111
14.0,6.858
5.946.458
8.070.400
302.400
9 1'8". Bond 2018
5115118
8.708.639
7.241.4J!J
6467.200
67.200
11115<18
9.032.870
1.250.870
1.782.000
6OO.CXXJ
1'8~.
g~.
Bono 20 18
8
7~.
Bond 20'9
2115119
19.250.7911
5.783.598
13.467.200
190.-400
8
1I8~.
Bond 2019
8115119
20.213.832
14.827.912
5.385.920
592.000
8 • 2"". Bond 2020
2/15120
10.228.868
3.5i44.068
6.684.800
8 ],4' Bono 2020
5115120
10.158.883
2.446.403
7.712.480
116.800
8 314... Bond 2020
8115120
21.418.606
3.:147.406
18.071.200
195.680
:- 7'8-. Bond 2021
2/'5121
11.113.373
10.108.573
1.004.800
40.000
A 1.1l ... Bond 2021
5115121
11.958.888
4.802.408
7.156.480
181,120
B 1 8~. Bond 2021
8115/21
12
16J.~f1.1
A.:11'J.!l62
3.84J.5.20
1.15.2.000
8". Bond 2021
11115121
32.196.394
14,742,14'
18.056.250
949,000
8115122
10.352.190
10.167.190
185.600
{)
7
1 4·0 Bond 2022
758·. Bond 2022
11115122
7 1 8·. Bond 2022
2115I2J
I
{)
10.699.626
10406.826
292.800
{).
18.375.067
18.375.067
0
{).
700.256.571
I
516.599.506
I
183 657
.96511
11.866,48)
1
Bentsen in Moscow/Pool Report 11/Friday, June 4, 1991
Treasury
Minis~er
Seoretary
Fedorov
Lloyd
a~ ~he
Bentsen
Finance
met
Min1s~ry
with
trom
Deputy
abou~
Prime
9:05 a.m.
to 10 a.m. today. The meeting was conducted in Engli5h. Mr.
Bentsen's opening comment: "Your privatization efforts are
very impressive." Mr.
~en~sen
was accompan1eQ by several u.s.
including Alnba::tsador Thomus Pickering; Tre~sury
Undersecret~ry
L~wrence
Summers;
Treasury
1nt:~rnrlt.10nt11
~taffers Dav Id Lipton, Kurt Campbell dnd Ma.["X Sul;t:l i Jut:Sc::~1l
Nye,
director of the National Intelligence Board; Dan
officials,
speCXharQ,
a
depu~y
~o
S~robe
Talbo~~;
anQ JUQy Deane from
the U.S. embassy.
From the Finance
Minls~ry,
Mr.
Ben~sen's
mo~orcaQe
wen~
to
tour a
privatized wholesale food storage/refrigcration
facility call~d Hlyada Kombinat in Pr~obrazh~nsky, a largely
residential neighborhood. The enterprise employs 600. Mr.
Bentlilen walil greeted by the company director, Timur Burzenidze,
anQ DY Maxim 80YCKO, a young deputy to ueputy ~rlme Minister
Chubaia who translated. Without so much as a glance or tJ.
comm~nt, Mr. B~nts~n walk~d by doz~ns of anci~nt gray metal
carts piled high with tro~en beet carcasses. The carcasses,
skinned but not yet cut up, wero cxpoGed to the open air. Mr.
Bentsen did, however, pause for the cameras to examine
chickens that had been plucked and carerully and neatly boxed,
ready to go to market.
Mr. Durzenidze told Mr. Dentsen that the enterprise, now 100'
privatiz~d, was found~d in 1955 and most of the equipment was
installed in 19". "Quite a lot ot it i5 oDsolete," Mr.
Burzenidze eaid, deeoribing hiG plane for modernization.
"Where are they going to get the capital?" Mr. Bentsen asked.
"They are going to depeml on their own," Mr. 8oycXo replied.
The tour also stopped at a spot where a Swedish company haa
Installed refrigeration facilities in a joint venture that has
allowed the company to b~y wholesale food, package it and then
market it directly to M05COW rutail store5. And then the tour-Bentsen and his aides and the ambassador--walked by railroad
boxc~rs where more fro~en carcasses were being unloaded.
Mr.
Bentsen then spent an hour IMr. Bu~tlnlu~~'tt u!!.i.I,;t;:,
talking with Mr. Boyoko about the privatization program and
the voucher auctions. Frlc1ng the crlmeras aft~rwards, Mr.
Bentsen said: "I can't recall in history any country that has
made alii fast a move toward privatization. II He said Mr. Boycko
tolQ him that roughly
~ut
of HU5sian industry nas now been
privatized. "In April, you had as much as 5% of Ru::tBiun
industry privatized," he said. (Mr.
Boycko explained that
voucher auctions had been held in enterprises that represent
5' of Russian induet~ia1 emplQyrnent in April.)
:2
Bentsen said he was encouraged "to see GOO worKers who are
deeply concerned with the success of that ,mterpriae. Mr.
Buzenidze wa5 telling me that he can pay a nlgner waqe tnan
any othor of the whole houses in the city."
Hr.
"One ot the real problern5 15 c12pi t12l to tU:t"the:t" lDode:t"nize and
increase investment in equipment. They oan expand muoh taster
if they oet additional capital. What we are doing in the G-7
(the Group ot Seven industrialized countries) is tryin~ to
provide turther capital," Mr. Bentsen said.
After the lO-minute tour and half hour meeting,
headed to Spaso HOUSA for a lunch.
David wessel/wall st. Journal
Mr. Bentsen
DEPARTMENT OF THE TREASURY
\'.' 1\ S H INC ~
'-::J r-..
June 4, 19<;,3
MEMORANDUM FOR SECRETARY
BENTSE~
Munnell~
FROM:
Alicia H.
Assistant Secretary
for Economic Policy
SUBJECT:
Macroeconomic Consequences of A Failure to Enact the
Deficit Reduction Program
\
Attached is a study summarizing the consequences of a
congressional failure to follow through and enact the
Administration deficit reduction program, and return to the
high-deficit uncontrolled-budget drift of the past decade.
My
s~atf estimate that if the Administration deficit reductioIl
~loyr~m fails to be enacted, and markets become concerned t~~~
effective steps will be taken toward deficit reduction, then:
By 1998 GDP will be lower by roughly $50 billion per
and Americans will (II-:' ealnirlg less.
'l'hC:;:-€ilf"C2r
CDP 3~d earnings gap will r-ontinue to increase.
J'c~:::-,
By 1998 the u.S. government will be paying an additional
$45 billion per year in interest payments - and
th~re~fter the additional inte:::-est burden will lncrease.
In the short run, long-term interest rates are likely to
rise sharply by as much as 100 basis points, erasing the
progress made since the election. Historically, a
sharp rise in rates has driven down the Dow Jones
Industrial Average.
The Federal Reserve will corne under pressure to offset
the return to excessively loose fiscal policy. Monetary
:;:-estriction and higher interest rates are likely to
outweigh the short-run expansionary effect of less
def ici t reduction, and reduce GDP even in the siw:;:-t ... ~, ..
Their estimates are conservative:
plausible and persu~sive
justifications could be made for significantly higher estimates
=~ t~=
from a failure to en~ct the Arlministration ~eficit
reduction program.
===t=
Attachment
Economic Consequences of a Failure to Enact the Administration Deficit
Reduction Program
United States Treasury
Office of the Assistant Secretar), for Economic Policy
Assessment
Failure to enact the Administration's deficit reduction program - and a
consequent return to the high-deficit uncontrolled-budget policies of the pas~ decade would inflict severe damage on the American economy in the medium- and l~ng-run. It
would reduce American GDP below the level that it would otherwise attain by
approximately $50 billion per year by 1998. Thereafter the gap would increase: to
approximately $150 billion by 2003. Failure to reduce the deficit would increase debt
service paid by the U.S. government by approximately $45 billion in 1998, and by greater
~rnr.'.!r.ts in later years.
Failure to enart the Administr<ltinn deficit reduction program would cause
~'-lbst2.ntial disruption in financi:.l m:!! L-:::; in ~h.:: 5;10rt run. Government interest rates
cOilld rise by as much as 100 basis points. Consumer, business, and mortgage interc:st
rate:, are likely to rise by at least all mucn. In addition, the stOck market couid deciine
snarplY, as marKets recogruzed that the U.S. was returning to unsustainable tiscal
rnoll'r'PS
. -.- .
Th~
0!! aggreg:.:!~ -;;:-::ploymeTH 2.!!d ~·r(·d~ctiof! if! the: !1~:':! ye2!'
or two is difficult to assess because of offsetting factors of uncertain size. The failure to
reduce federal government spending and increase taxes would tend to increase private
spending. However, it would also immediately cause higher interest rates and reduced
private investment. And it would raise fears of inflation and of more restrictive
monetary policy. We project that GDP and employment would fall slightly from a
failure to enact the program. On bab,nee, we fir.d no reason to believe that failure of
deficit reduction would have any stimulative effeet even in the short run.
t:.'fft:.'t:t of
~ f2.il1.!!'~
Below are reported estimates of the costs In 1998 of failure to enact deficit
:-ed'.!ction. High interest rates signifieJ.il~I:v' s10'';'' t;-;c rate of gro'W1h of productivity aild
P0!,~!!!ial output ITl additior!, Americ:::l:: ;ny ~Lb~!::i!1tial extra costs a:; a result of hi~her
interest payments on the larger national debt. Much of this higher debt service will be
paid to citizens of foreign countries. shrinking the incomes of Americans.
Macroeconomic Costs in 1998 from a Failure to Enact the Administration's Economic
Pro!!T2:TI
(Billions of Dollars)
Slower Real GDP Growth
$50
Increase in Debt Service
$45
Decrease in Employment
Non-Interest Deficit Increase
170,000
$93
Short-Run Growth
Private sector forecasters and Trc;.L~lJr/s :::::·Tice of Economic Policy all agree lhat
fa.ilure to enact the Administration Jt:tiLit ;t:lluction package would affect output and
err.~loyment in the short run in three different w~vs:
do
Tne larger deficit hoosts producTion ;mci employment.
Fears of inflation and tighter monetary policy lower production and employment.
The reversal of recent interest rate declines depresses investment and
\:vlwuwptiv1l, aild !educ~s proGlic .. iiJll aiid ewpliJyill~ii".
There is relative consensus on the strength and power of the first two factors.
Under present circumstances, most private sector forecasters believe that fears of
inflation and of tighter monetary policy (factor two) would offset nearly all of the
notional boost to procinction given hy larger deficit" (factor one).
As to the third factor, one of the most encouraging economic development of the
pust year has been the pronoui1ced L.li iT! ijliere:;t rates as the extent of the new
Administration'S commitment to deficit reduction has become clear. Long-term bond
rate~ declined by 50 hasis points during tile eieC'tinn campaign, and by a further ~n h:t.si"
~Cir:lS after the e!.::..::tion as the tCOnuill;-: tJlUb1 ...lll1 wa.5 designed and announced. TIle:
bulk of this decline would be reversed it the Administration program were defeated, and
its credible romJ!1jtment to deficit reduction abandoned.
E'len a moder3.te reversal of rec::~~ ~j~cli~e,: !!i interest rates could cause a sh~rp
drop in the stock market; hIstorically, a sr.arp rise in rates has driven down the DowJones Industrial Average.
Long-Run Growth: The Benefits of Deficit Reduction
The Administration forec3..1it at the end of Jmuary that the defic!t-reduction
component of its economic program would raise national savings and investment, and
would boost the rate of growth of potential GOP - GOP when the economy does not
suffer from high unemployment - by 0.2 percentage points per year. A lower deficit
increases the pool of national savings directly. It allows America to increase investment
without a massive deterioration in its trade balance. In addition, reducing the deficit is
the only way to avoid further large tax increases in the future; expectation of such future
tax increases reduces investment and productivity growth today.
Economic developments since January give no reason to lower this estimate of the
effect of the Administration program on long-run potential. The strength of the bond
market response to the Administration's credible commitment to deficit reduction may
provide reason to raise this estimate: the private sector appears to value the security
against surprise inflation and taxation gained by reducing the deficit relatively highly. If
this high valuation leads to a larger boost in American investment than underlies the
Administration forecast, the long-run growtr: benefits from deficit reduction wouill 0-':
larger. The long-run growth benefits woulJ abo be larger if investment were assumeJ tv
h2.ve a tighter link to productivity grmvth than in standard macroeconomic models.
A failure to enact the Administration deficit reduction program eliminates this
expected acceleration of long-run potential output growth. The 0.2 percentage point per
year Administration estimate compounds to roughly $50 billion dollars by 1998: the
amount of real GOP then at risk from a failure to follow through on deficit reduction.
Though this shortfall in production carries Vv1th it little increase in unemployment, it
,,;:ould icsult in lo ....:cr wages eaffi.cd aJi.d profiis geIiCi"a.t.::d by; ca.ch ·w·Oi~Ci.
There are long run benefits from deficit reduction in addition to increased capital
accumulation. Deficit reduction will, indirectly, improve America's current account.
Deficit reduction will restore to future administrations their freedom to use fiscal policy
to fight recessions: the 1990 - 92 recession might well have ended much earlier had the
past administration felt free to stimulate the economy with fiscal policy when the
recession began.
Conclusion
Note that the principal costs of failing to pass the deficit reduction program are
Inng-nm costs. Slower capital accumulation reduces the rate of growth of
productivit~·.
and leaves Americans significantly poorer by 1998. For the short run, higher interest
r2te~ that a deficit reduction failure is likely to tr:.;;er would have 3 he2.vy, !;.eg2.tive
impact on financial markets.
Note also that the estimates presented here are conservative ones. They assign
moderate value to the interest rate spi:~e th~\t i-; likely to follow a failure of the deficit
J.
reduction effort. They use what Treasury staff regard a.';; the most probable assessment of
the channel from interest rates to GDP. They do not assume very strong links between
deficIt reduction and long-run potential outDut growth. Nevertheless. the costs of failure
to enact the Administration deficit reduction program are substantial:
S50 billion of lost G DP in 1998.
$45 billion of extra debt interest paid by the government in 1998.
Up to 100 basis points higher long-term interest rates, with accompanying
stock market declines.
~
Lower investment produced by higher interest rates and a greater likelihood of
monetary stringency.
DEPARTMENT OF THE TREASURY
WASHINGTON
JUN 4 1993
OFFICE OF FOREIGN ASSETS CONTROL
HAITIAN TRANSACTIONS REGULATIONS
31 C.F.R. Part 580
GENERAL NOTICE NO. 1
NOTIFICATION OF SPECIALLY DESIGNATED NATIONALS
OF THE DE FACTO REGIME IN HAITI
General Notice No. 1 announces the names of 35 entities and 83
individuals who have been determined by the Treasury Department to
be Specially Designated Nationals of the de facto regime in Haiti.
The persons identified on the attached list are included for one or
more of the following reasons: (1) they seized power illegally from
the democratically elected government of President Jean-Bertrand
Aristide on September 30, 1991, (2) they are substantially owned or
controlled by the de facto regime in Haiti, or (3) they have, since
12:23 p.m., e.d.t., October 4, 1991, acted or purported to act
directly or indirectly on behalf of the de facto regime in Haiti or
under the asserted authority thereof.
This action by the Office of Foreign Assets Control is pursuant to
the authority of Executive Order No. 12775 of October 4, 1991,
Executive Order No. 12779 of October 28, 1991, the International
Emergency Economic Powers Act, 50 U.S.C. 1701 et seq., and sections
580.303 and 580.307 of the Haitian Transactions Regulations, 31
C.F.R. Part 580.
U. S. persons are prohibited from engaging in transactions with
these entities and individuals unless the transactions are licensed
by the Office of Foreign Assets Control. Additionally, all assets
within u.S. jurisdiction owned or controlled by these entities or
indi viduals are blocked. U. S. persons are not prohibited, however,
from paying funds owed to these entities or individuals into
blocked Government of Haiti Account No. 021083909 at the Federal
Reserve Bank of New York, or, pursuant to specific licenses issued
by the Office of Foreign Assets Control, into blocked accounts held
in the names of the blocked parties in domestic U. S. financial
institutions.
WARNING: This list is not all-inclusive and will be updated from
time to time.
Unlicensed transactions with entities and
individuals who fall within the definition of the de facto regime
in Haiti found at section 580.303 of the Haitian Transactions
Regulations are prohibited.
R. Richar Newcomb
~ L/
D'rector
JI
Office of Foreign Assets ontrol
SPECIALLY DESIGNATED NATIONALS
OF THE DE FACTO REGIME IN HAITI
(INDIVIDUALS)
NAME
DOB
TITLE
ATOURISTE, Antoine,
Colonel
03 Jul 51
Director (Directeur), Center of
Central Information (C.I.C.C.)
[anti-narcotics]
AUGUSTIN, Henry Robert
(Henri-Robert), Colonel
21 Jun 51
Military Attache (Attache
Militaire), Venezuela
BACKER, Jacques (a.k.a.
BAKER, Jacques)
01 Mar 40
Minister (Ministre) of
Agriculture, Natural Resources
and Rural Development
(Ministere de l'Agriculture,
des Ressources Naturelles et du
Developpement Rural, a.k.a.
MARNDR)
Damien, Port-au-Prince, HaYti;
telephone 22-3457
Deputy Director (Directeur
Adjoint), National Water
Service (Service National d'Eau
Potable, a.k.a. SNEP)
Delmas 45 - Delmas Road, Portau-Prince, HaYti; telephone
46-3044
BARRAULT, Emmanuel
BAZIN, Marc L.
06 Mar 32
Prime Minister (Premier
Ministre)
BEAUBRUN, Mondesir,
Colonel
10 May 49
Commander of the Southern
Military Department
(Commandant, Departement
Militaire du Sud)
ADDRESS
BtLIZAIRE, Diderot
Deputy Minister (Depute
Ministre) of Foreign Affairs
and Worship
Boulevard Harry Truman, cite
de l'Exposition, Port-auPrince, HaYti; telephone 221647
BENJAMIN, Dumas
Deputy Governor General
Angle rue du Magasin de l' ttat
-2-
(Gouverneur Adjoint), Central
Bank, a.k.a Bank of the
Republic of Haiti (Banque de la
Republique d'HaYti, a.k.a. BRH)
et rue des Miracles, BP 1570,
Port-au-Prince, HaYti;
telephone 22-4700, 22-4142;
telex 0394; fax 22-2607
Boulevard Harry Truman, cite
de l'Exposition, Port-auPrince, HaYti; telephone 221647
BENotT, Franyois
02 May 36
Minister (Ministre) of Foreign
Affairs and Worship
IBIAMBY, Philippe,
Brigadier General
21 Sep 52
Chief of the General Staff
(Chef d'Etat-Majeur General) of
the Haitian Armed Forces, FAD'H
(Force Armee d'HaYti)
BLANC, Paul Ludovic
Deputy Director (Directeur
Adjoint), National Insurance,
a.k.a. Old Age Insurance
(Office National d'Assurance
Vieillesse, a.k.a. ONA)
Champ de Mars, Port-au-Prince,
HaYti; telephone 23-1655, 221644
BONCARD, Arnoux
21 Jan 35
Director (Directeur),
Government Industrial Park,
a.k.a. National Office for
Industrial Parks, National
Industrial Park Company
(Societe Nationale des Pares
Industriels, a.k.a. SONAPI)
122 East 40th Street,
Brooklyn, New York 11203, USA;
Industrial Park, P.O. Box
2345, Port-au-Prince, HaYti;
telephone 46-0099, 46-0177
BRANDT, Clifford
20 Apr 19
President and Director General,
Banque de l'Union Haitienne,
S.A. (a.k.a. BUH)
Angle rues Du Quai et
Bonne Foi, P.O. Box 275,
Port-au-Prince, HaYti;
telephone 22-1300, 230491/92, 23-0499
BRUTUS, Andre
06 Aug 43
Minister (Ministre) of Social
Affairs
rue de la Revolution, Port-auPrince, HaYti; telephone 222450; rue de Centre No. 134,
Port-au-Prince, HaYti
CALIXTE, Andre
13 Jul 40
Minister (Ministre) of
Information and Coordination
300 route de Delmas, Port-auPrince, HaYti; telephone 463229; telex 0238
-3-
Minister (Ministre) of
Education, Youth and Sports,
a.k.a. MENJS
CARRE, Max
CARRENARD, Philippe,
Colonel
14 May 49
Military Attache (Attache
Militaire), Santo Domingo,
Dominican Republic
CEDRAS, Raoul, Lieutenant
General
09 Jul 49
Chief of Staff (Commandant en
Chef) of the Haitian Armed
Forces, FAD'H (Force Armee
d'HaYti)
Boulevard Harry Truman, cite
de l'Exposition, Port-auPrince, HaYti; telephone 221036
CINE, Jean Robert
Deputy Director General
(Directeur Adjoint), Cement
Company (Le Ciment d'HaYti, SA,
a.k.a. CDH)
Office cite de l'Exposition,
Port-au-Prince, HaYti; telex
0216; Fond Mombin, Port-auPrinc~, Hayti; telephone 220048, 22-0072; fax 22-7955
CLAUDE, Bonivert
Governor General (Gouverneur
General), Central Bank, a.k.a.
Bank of the Republic of Haiti
(Banque de la Republique
d'HaYti, a.k.a. BRH)
Angle rue du Magasin de 1't1:at
et rue des Miracles, BP 1570,
Port-au-Prince, HaYti;
telephone 22-4700, 22-4142;
telex 0394; fax 22-2607
DELAUNAY, Joseph Gracien,
Colonel
21 Jan 49
Military Attache (Attache
Militaire), Rome
DELSOIN, Jean Robert
Deputy Minister (Depute
Ministre) of Commerce and
Industry
Port-au-Prince, Hayti
DEMOSTHENE, Paul
Deputy Minister (Depute
Ministre) of Planning and
External Cooperation
(Planification et Cooperation
Externelle)
Port-au-Prince, HaYti;
telephone 22-1027
DOUBY, Frantz, Colonel
19 Jan 48
Chief of Staff for Logistics,
G-4 of the Haitian Armed
Forces, FAD'H (Force Armee
d'HaYti)
-4-
DUPERVAL, Jean-Claude,
Major General
19 Feb 47
Assistant Commander in Chief
(Assistant Commandant en Chef)
of the Haitian Armed Forces,
FAD'H (Force Armee d'HaYti)
DUTREUIL, Jean-Marie
30 May 50
Deputy Director (Directeur
Adjoint), Office for Permanent
Maintenance of Road Network
(Service d'Entretien Permanent
du Reseau Routier National,
a.k.a. SEPRRN)
ELYSEE, Yonel "Son Son"
19 Jul 51
Delmas 95, Route Jacquet No.
15, Port-au-Prince, HaYti;
1761 S.W. 83rd Terrace,
Miramar, Florida 33025, USA;
Yonel Import-Export, HaYti
Deputy Minister (Depute
Ministre) of Economy and
Finance, a.k.a. MEF
FILS, Georges Henry
Boite Vertallis No. 1, Port~
au-Prince, HaYti; Varreux National Road, 10 Varreux
Road, Port-au-Prince, HaYti.
telephone 46-4479, 46-4379
Palais des Ministeres, Portau-Prince, HaYti; telephone
22-1628; telex 0207
FLORESTANT, Joseph
Lemoine, Colonel
18 Nov 49
Military Attache (Attache
Militaire), Washington, D.C.
FLORIVAL, Jean
01 Feb 30
Deputy Minister (Depute
Ministre) of Foreign Affairs
and Worship
Boulevard Harry Truman, cite
de l'Exposition, Port-auPrince, HaYti; telephone 221647
FORT, Wiener (a.k.a.
FORT, Weiner)
15 Oct 41
Minister (Ministre) of Economy
and Finance, a.k.a. MEF
Palais des Ministeres, PortaU-Prince, HaYti; telephone
22-1628; telex 0207
FRAN<;OIS, Guy
04 Apr 53
Deputy Minister (Depute
Ministre) of Interior and
National Defense (Interieur et
Defense Nationale)
Palais des Ministeres, PortaU-Prince, HaYti; telephone
22-1714
FRAN<;OIS, Joseph Michel,
Lieutenant Colonel
08 May 57
Commander of the Military
Department of the Metropolitan
Zone (Commandant, Departement
Militaire de la Zone
-5-
Metropolitaine, a.k.a. COMET)
GABRIEL, Jean-Robert,
.Colonel
11 Aug 58
Secretary of the General Staff
(Secretaire Etats-Majors
General) of the Haitian Armed
Forces, FAD'H (Force Armee
d'HaYti)
~OBY, Jean Brunel,
23 Sep 51
Officer of the Bureau of the
Inspector General Service
(Bureau Inspecteur General,
Grand Quartier General, a.k.a.
G.Q.G.)
GROSHOMME, Belony,
Colonel
12 Feb 48
Commander of
Department (Commandant,
Militaire de
JOSE, Jean-Eugene,
Colonel
10 Jun 52
Officer of the Bureau of the
Inspector General Service
(Bureau Inspecteur General,
Grand Quartier General, a.k.a.
G.Q.G.)
JOSEPH, Frantz
13 Oct 54
Director (Directeur), Office
for Permanent Maintenance of
Road Network (Service
d'Entretien Permanent du Reseau
Routier National, a.k.a.
SEPRRN)
Rue Nazon No. 21, Port-auPrince, HaYti; 10 N.E. 64th
Street, Miami, Florida 33138,
USA; Varreux - National Road,
10 Varreux Road, Port-auPrince, HaYti; telephone 464479, 46-4379
JUMELLE, Michele Cesar
Deputy Minister (Depute
Ministre) of Justice
Boulevard Harry Truman, cite
de l'Exposition, Port-auPrince, HaYti; telephone 220718
LAFONTANT, victorian
(a.k.a. LAFONTANT,
Victoriano)
Director (Directeur), National
water Service (Service National
d'Eau Potable, a.k.a. SNEP)
Delmas 45 - Delmas Road, Portau-Prince, HaYti; telephone
46-3044
LAGUERRE, Pierre Andre
Director General (Directeur
La Saline Boulevard, P.O. Box
~olonel
the Military
Artibonite Region
Departement
l'Artibonite)
-6-
General), Airport, a.k.a.
National Port Authority
(Autorite Portuaire Nationale,
a.k.a. APN)
616, Port-au-Prince, HaYti;
telephone 22-5076, 22-5300;
P.O. Box 1792, Port-au-Prince,
HaYti
LAINE, Saidel
Minister (Ministre) of Commerce
and Industry
port-au-Prince, HaYti
tAMuR,
Director (Directeur), National
Insurance, a.k.a. Old Age
Insurance (Office National
d'Assurance Vieillesse, a.k.a.
ONA)
Champ de Mars, Port-au-Prince,
HaYti; telephone 23-1655, 221644
Deputy Minister (Depute
Ministre) of Public Health
(sante Publique)
Palais des Ministeres, Port
au-Prince, HaYti; telephonb
22-1248; fax 22-4066
Margareth Lydia
LAROSILIERE, Fresnel
LESSAGE, Jodel, Colonel
19 Feb 54
Chief of the Senior
Headquarters (High Command)
(Chef du Premier Bureau, Grand
Quartier General, a.k.a.
G.Q.G.)
Director General (Directeur
General), Telephone Company
(Telecommunications d'HaYti,
SAM, a.k.a. TELECO)
LISSADE, Pierre
LOUIS, Michel, Colonel
29 Sep 49
Chief of the Office of Military
Attaches (Chef du Bureau des
Attaches Militaires)
LOUIS, Edy (Eddy),
Colonel
21 Jun 51
Military Attache (Attache
Militaire), Paris
MARC-CHARLES, Henry
Robert, Colonel
05 Jan 52
Officer Assigned to the General
Staff (Officiel de Service de
l'Etat Major)
MARC-NALLY, Lina
Deputy Director (Directeur
Adjoint), Accident/Insurance
Office, a.k.a. Workers'
J.J. Dessalines Boulevard,
P.O. Box 814, Port-au-Prince,
HaYti; telephone 45-2200
Chancerelles - cite Militaire,
P.O. Box 1012, Port-au-Prince,
HaYti; telephone 22-5176
-7-
Compensatlon, Sickness and
Maternity Insurance Agency
(Office d'Assurance
Maladie/Accident, a.k.a. Office
d'Assurance Accidents du
Travail, Maladie et Maternite,
a.k.a. OFATMA)
MATHURIN, Ginette Perodin
30 oct 53
Director (Directeur), Ministry
of Health Unit for Potable
Water, a.k.a. Community Health
and Drinking Water Posts
(Programme de Sante de l'Eau
Potable, a.k.a. Postes
Communautaires d'Hygiene et
d'Eau Potable, POCHEP)
MAYARD, Henry (Henri)
Max, Brigadier General
07 Feb 47
Inspector General (Inspecteur
General) of the Haitian Armed
Forces, FAD'H (Force Armee
d'HaYti)
MERZIER, Roland
Montagne Noir, Impasse
Monsieur Lafontant, HaYti;
Petite Place Cazeau, P.O. BoX
2580, Port-au-Prince, HaYti;
telephone 46-5407, 46-5607
Vice President, National Credit
Bank (Banque Nationale de
Credit, a.k.a. BNC)
Angle rue du Quai et rue des
Miracles, BP 1320, Port-auPrince, HaYti; telephone 220800, 22-3700; telex 0215
MICHEL, Oriol
05 Oct 46
Director General (Directeur
General), Cement Company (Le
Ciment d'HaYti, SA, a.k.a. CDH)
Teina Village, P.O. Box 575-1,
Port-au-Prince, HaYti; 7376
S.W. 113th Circle Place,
Miami, FL 33173; Office cite
de l'Exposition, Port-auPrince, HaYti; telex 0216;
Fond Mombin, Port-au-Prince,
HaYti; telephone 22-0048, 220072; fax 22-7955
NEY-PIERRE, Arnold
25 Sep 29
Director (Directeur),
Accident/Insurance Office,
a.k.a. Workers' Compensation,
Sickness and Maternity
Insurance Agency (Office
d'Assurance Maladie/Accident,
Avenue Nord Alexis 36, Portau-Prince, HaYti; Chancerelles
- cite Militaire, P.O. Box
1012, Port-au-Prince, HaYti;
telephone 22-5176
-8-
(a.k.a. Office d'Assurance
Accidents du Travail, Maladie
et Maternite, a.k.a. OFATMA)
Carl Michel,
General (retired)
~ICOLAS,
~ORVILUS,
Appollon Louis
PAUL, Max
08 May 37
Minister (Ministre) of Interior
and National Defense (Interieur
et Defense Nationale)
Palais des Ministeres, Port~
au-Prince, HaYti; telephone l
22-1714
06 May 42
Deputy Director (Directeur
Adjoint), Ministry of Health
unit for Potable Water, a.k.a.
Community Health and Drinking
Water posts (Programme de Sante
de l'Eau Potable, a.k.a. Postes
Communautaires d'Hygiene et
d'Eau Potable, a.k.a. POCHEP)
Canape Vert, Rue Jean
Baptisite No. 47, HaYti; 10~
Taunton Street, Hyde Park,
Massachusetts 02126, USA;
Petite Place Cazeau, P.O. Box
2580, Port-au-Prince, HaYti;
telephone 46-5407, 46-5607
17 May 45
Director General (Directeur
General), National Port
Authority, a.k.a. Airport
(Autorite Portuaire Nationale,
a.k.a. APN)
Bourdon, Impasse Iginac No.7,
HaYti; 1019 Lenox Road,
Brooklyn, New York 11712, USA;
La Saline Boulevard, P.O. Box
616, Port-au-Prince, HaYti;
telephone 22-5076, 22-5300;
P.O. Box 1792, Port-au-Prince,
HaYti
Deputy Director General
(Directeur Adjoint), Customs
(Administration Generale des
Douanes)
161 Route de Delmas, Port-auPrince, HaYti
PERICLES, Jacquelin
PIERRE-ANTOINE, Joseph,
Colonel
PIERRE-LOUIS, Jean
Carmelo (a.k.a. PIERRELOUIS, Jean Carmelot)
19 Mar 51
Chief Secretary of the Senior
Headquarters (Chef Secreta ire
Juridique du Grand Quartier
General, a.k.a. G.Q.G.)
Minister (Ministre) of Public
Works, Transport and
Communications (a.k.a. MTPTC)
Palais des Ministeres, BP
2002, Port-au-Prince, HaYti;
telephone 22-0300; telex 0353
-9-
Christ-Roi, Rue Mgr. Testard
No.6, port-au-Prince, HaYti;
890 S.W. 129th Place, Miami,
Florida 33184, USA; Paul VI
Avenue 104, Port-au-Prince,
HaYti; telephone 22-2958, 22·
4133
PIERRE LOUIS, Jean Herve
(a.k.a. PIERRE LOUIS,
Claude A.J. Herve)
12 Feb 58
Director General (Directeur
General), water Company, a.k.a.
Metropolitan Water Concern
(Centrale Autonome
Metropolitaine d'Eau Potable,
a.k.a. CAMEP)
~OISSON,
16 Feb 48
Commander (Commandant), 27th
Company, Fire Department (27eme
Compagnie, Corps Pompier)
PROSPER, Arnil
31 Jan 30
Director General (Directeur
General), customs
(Administration Generale des
Douanes)
PRUD'HOMME, Ernst,
Colonel
22 Sep 54
Adjutant General (AdjudantGeneral) of the Haitian Armed
Forces, FAD'H (Force Armee
d'HaYti)
QUALO, Reginald
17 Oct 53
Deputy Director General
(Directeur Adjoint), Telephone
Company (Telecommunications
d'HaYti, SAM, a.k.a. TELECO)
RENE, Marie-Alix, Colonel
28 Jul 51
Military Attache (Attache
Militaire) , Mexico
RIGAUD, Max
28 Jul 21
Director General (Directeur
General), Flour Company (La
Minoterie d'HaYti, a.k.a. MDH)
Lafitteau, P.O. Box 404, PortaU-Prince, HaYti; telephone
22-6508, 23-8502
Deputy Minister (Depute
Ministre) of Information and
Coordination
300 route de Delmas, Port-auPrince, HaYti; telephone 463229; telex 0238
Bernadin,
Colonel
ROM~US,
Wilhem
17 Rue Louverture, Port-auPrince, HaYti; 740 N.W. 129th
Terrace, Miami, Florida 33167,
USA; 161 Route de Delmas,
Port-au-Prince, HaYti
J.J. Dessalines Boulevard,
P.O. Box 814, Port-au-Prince,
HaYti; telephone 45-2200;
Delmas 75 Angle Rue Catalpa et
Mimosa, Port-au-Prince, HaYti;
7925 S.W. 153 Place, Miami,
Florida 33193, USA
-10-
ROMULUS, Dumarsais,
Colonel
18 Aug 48
Chief of Staff for Operations,
G-3 of the Haitian Armed
Forces, FAD'H (Force Armee
d'HaYti)
ROMULUS, Martial P.,
-::olonel
26 Feb 49
Assistant Military Bureau Chief
I
Deputy Minister (Depute
Ministre) of Education, Youth
and Sports, a.k.a. MENJS
ROUMAIN , Claude
SAINVIL, Ramus, Colonel
15 Sep 52
SENATUS, Moise
Boulevard Harry Truman, cite
de l'Exposition, Port-auPrince, HaYti; telephone 221036
Director (Directeur), Military
Academy (Academie Militaire)
Minister (Ministre) of Justice
Boulevard Harry Truman, cite
de l'Exposition, Port-auPrince, HaYti; telephone 220718
ST. DIC, Axel
31 Jan 49
Director General (Directeur
General), Electricity Company
(Electricite d'HaYti, a.k.a.
EDH)
rue Dante Destouches, Port-auPrince, HaYti; telephone 224600; telex 0113; Harry S
Truman Boulevard, P.O. Box
1753, Port-au-prince, HaYti;
telephone 23-4600, 22-4402;
fax 23-8750; rue Celcis No.
14, Canape Vert, Port-auPrince, HaYti
ST. FIRMIN, Jean
10 Jul 34
President, National Credit Bank
(Banque Nationale de Credit,
a.k.a. BNC)
126 Impasse H. Samsour, Delmas
105, Port-au-Prince, HaYti; 44
Underwood Place, N.W.,
Washington, D.C. 20012, USA;
Angle rue du Quai et rue des
Miracles, BP 1320, Port-auPrince, HaYti; telephone 220800, 22-3700; telex 0215
SYLVAIN, Diderot Lyonel
(Lionel), Colonel
10 Jun 50
Chief of Public Information
Service (Chef de Service
Renseignement General) of the
-11-
Haitian Armed Forces, FAD'H
(Force Armee d'HaYti)
THIMOTHEE, Maud
Deputy Minister (Depute
Ministre) of Social Affairs
rue de la Revolution, Port-auPrince, HaYti; telephone 22~
2450
pLYSSE, Robert
Deputy Minister (Depute
Ministre) of Agriculture,
Natural Resources and Rural
Development (Ministere de
l'Agriculture, des Ressources
Naturelles et du Developpement
Rural, a.k.a. MARNDR)
Darnien, Port-au-Prince,
telephone 22-3457
HaYti~
VALMOND, Hebert, Colonel
17 May 49
Chief of Staff for
Intelligence, G-2 of the
Haitian Armed Forces, FAD'H
(Force Armee d'HaYti)
VICTOR, Jean Andre
10 Sep 41
Minister (Ministre) of Planning
and External Cooperation
(Planification et Cooperation
Externelle)
Port-au-Prince, HaYti;
telephone 22-1027
Deputy Minister (Depute
Ministre) of Public Works,
Transport and Communications
(a.k.a. MTPTC)
Palais des Ministeres, BP
2002, Port-au-Prince, HaYti;
telephone 22-0300; telex 0353
Minister (Ministre) of Public
Health (Sante Publique)
Palais des Ministeres, Portau-Prince, HaYti; telephone
22-1248; fax 22-4066
VOLCY, Etzer
WESTERBANDT, Adrien
(a.k.a. WESTERBAND,
Adrien)
02 Dec 24
SPECIALLY DESIGNATED NATIONALS
OF THE DE FACTO REGIME IN HAITI
(ENTITIES)
27TH COMPANY, FIRE DEPARTMENT
(a.k.a. 27EME COMPAGNIE, CORPS POMPIER)
HaYti.
ACCIDENT/INSURANCE OFFICE
(a.k.a. OFFICE D'ASSURANCE MALADIE/ACCIDENT)
(a.k.a. OFATMA)
(a.k.a. WORKERS' COMPENSATION, SICKNESS AND MATERNITY
INSURANCE AGENCY)
(a.k.a. OFFICE D'ASSURANCE ACCIDENTS DU TRAVAIL, MALADIE ET
MATERNITE)
Chancerelles - Cite Militaire, P.O. Box 1012
Port-au-Prince, HaYti.
BANK OF THE REPUBLIC OF HAITI
(a.k.a. CENTRAL BANK OF HAITI)
(a.k.a. BANQUE DE LA REPUBLIQUE D'HAITI)
(a.k.a. BRH)
(f.k.a. BANQUE NATIONALE DE LA REPUBLIQUE D'HAITI)
Angle rue du Magasin de l'Etat et rue des Miracles, BP 1570,
Port-au-Prince, HaYti.
BANQUE DE L'UNION HAITIENNE, S.A.
(a.k.a. BUB)
Angle rues Du Quai et Bonne Foi
Boite Postale 275
Port-au-Prince, HaYti
BANQUE POPULAIRE HAITIENNE
(a. k. a. BPH)
Angle rues Eden et Quai
P.o. Box 1322
Port-au-Prince, HaYti
BUREAU OF THE INSPECTOR GENERAL SERVICE
(a.k.a. BUREAU INSPECTEUR GENERALE, GRAND QUARTIER GENERALE
(G.Q.G.»
HaYti.
CEMENT COMPANY
(a.k.a. LE CIMENT D'HAITI, SA)
( a . k . a. CDH)
Office cite de l'Exposition
Port-au-Prince, HaYti;
Fond Mombin
Port-au-Prince, HaYti.
-2-
ELECTRICITY COMPANY
(a.k.a. ELECTRICITE D'HAITI)
(a.k.a. ELECTRICITY OF HAITI)
(a.k.a. EDH)
rue Dante Destouches
Port-au-Prince, HaYti;
Harry S Truman Boulevard, P.o. Box 1753
Port-au-Prince, HaYti.
FLOUR COMPANY
(a.k.a. LA MINOTERIE D'HAITI)
(a.k.a MOH)
Lafitteau, P.O. Box 404
Port-au-Prince, HaYti.
HAITIAN ARMED FORCES
(a.k.a. FAD'H)
(a.k.a. FORCE ARMEE D'HAITI)
HaYti.
METROPOLITAN WATER CONCERN
(a.k.a. WATER COMPANY)
(a.k.a. CENTRALE AUTONOME METROPOLITAINE D'EAU POTABLE)
(a.k.a. CAMEP)
Paul VI Avenue 104
Port-au-Prince, HaYti.
MILITARY DEPARTMENT - ARTIBONITE REGION
(a.k.a. DEPARTEMENT MILITAIRE DE L'ARTIBONITE)
HaYti.
MILITARY DEPARTMENT OF THE METROPOLITAN ZONE
(a.k.a. DEPARTEMENT MILITAIRE DE LA ZONE METROPOLITAINE)
(a.k.a. COMET)
HaYti.
MINISTRY OF AGRICULTURE, NATURAL RESOURCES AND RURAL DEVELOPMENT
(a.k.a. MINISTERE DE L'AGRICULTURE, DES RES SOURCES
NATURELLES ET DU DEvELOPPEMENT RURAL)
(a.k.a. MARNDR)
Damien
Port-au-Prince, HaYti.
MINISTRY OF COMMERCE AND INDUSTRY
rue Legitime, Champ de Mars
Port-au-Prince, HaYti.
MINISTRY OF ECONOMY AND FINANCE
(a.k.a. MEF)
Palais des Ministeres
Port-au-Prince, HaYti.
-3-
MINISTRY OF EDUCATION, YOUTH AND SPORTS
(a.k.a. MENJS)
Boulevard Harry Truman, cite de l'Exposition
Port-au-Prince, HaYti.
MINISTRY OF FOREIGN AFFAIRS AND WORSHIP
Boulevard Harry Truman, cite de l'Exposition
Port-au-Prince, HaYti.
MINISTRY OF HEALTH UNIT FOR POTABLE WATER
(a.k.a. COKKUNITY HEALTH AND DRINKING WATER POSTS)
(a.k.a. PROGRAKKE DE SANTE DE L'EAU POTABLE)
(a.k.a. POSTES COKKUNAUTAIRES D'HYGIENE ET D'EAU POTABLE)
(a.k.a. POCHEP)
Petite Place Cazeau, P.O. Box 2580
Port-au-Prince, HaYti.
MINISTRY OF INFORMATION AND COORDINATION
300 route de Delmas
Port-au-Prince, HaYti.
MINISTRY OF INTERIOR AND NATIONAL DEFENSE
(a.k.a. MINISTERE DE L'INTERIEUR ET DEFENSE NATIONALE)
Palais des Ministeres
Port-au-Prince, HaYti.
MINISTRY OF JUSTICE
Boulevard Harry Truman, cite de l'Exposition
Port-au-Prince, HaYti.
MINISTRY OF PLANNING AND EXTERNAL COOPERATION
(a.k.a. MINISTERE DE LA PLANIFICATION ET COOPERATION
EXTERNELLE)
Palais des Ministeres, rue Monseigneur Guilloux
Port-au-Prince, HaYti.
MINISTRY OF PUBLIC HEALTH
(a.k.a. SANTE PUBLIQUE)
(a.k.a. MINISTRY OF PUBLIC HEALTH AND POPULATION)
(a.k.a. MINISTERE DE LA SANTE PUBLIQUE ET DE LA POPULATION)
(a.k.a. MINISTRY OF PUBLIC HEALTH AND HOUSING)
Palais des Ministeres
Port-au-Prince, HaYti.
MINISTRY OF PUBLIC WORKS, TRANSPORT AND COKKUNICATIONS
(a.k.a. MINISTERE DES TRAVAUX PUBLICS, TRANSPORT ET
COKKUNICATIONS)
(a.k.a. MTPTC)
Palais des Ministeres, BP 2002
Port-au-Prince, HaYti.
-4-
MINISTRY OF SOCIAL AFFAIRS
rue de la Revolution
Port-au-Prince, HaYti.
NATIONAL CREDIT BANK
(a.k.a. BANQUE NATIONALE DE CREDIT)
(a.k.a. BNC)
Angle rue du Quai et rue des Miracles, BP 1320
Port-au-Prince, HaYti.
NATIONAL INSURANCE
(a.k.a. OLD AGE INSURANCE)
(a.k.a. OFFICE NATIONAL D'ASSURANCE VIEILLESSE)
(a.k.a. ONA)
Champ de Mars
Port-au-Prince, HaYti.
NATIONAL OFFICE FOR INDUSTRIAL PARKS
(a.k.a. NATIONAL INDUSTRIAL PARK COMPANY)
(a.k.a. GOVERNMENT INDUSTRIAL PARK)
(a.k.a. SOCIETE NATIONALE DES PARCS INDUSTRIELS)
(a.k.a. SONAPI)
Industrial Park, P.o. Box 2345
Port-au-Prince, Hayti.
NATIONAL PORT AUTHORITY
(a.k.a. AUTORITE PORTUAIRE NATIONALE)
(a.k.a. PORT AUTHORITY)
(a.k.a. AIRPORT)
(a.k.a. APN)
La Saline Boulevard, P.o. Box 616
Port-au-Prince, HaYti;
P.O. Box 1792
Port-au-prince, HaYti.
NATIONAL WATER SERVICE
(a.k.a. SERVICE NATIONAL D'EAU POTABLE)
(a.k.a. SNEP)
Delmas 45 - Delmas Road
Port-au-Prince, HaYti.
OFFICE FOR PERMANENT MAINTENANCE OF ROAD NETWORK
(a.k.a. SERVICE D'ENTRETIEN PERMANENT DU RESEAU ROUTIER
NATIONAL)
(a.k.a. SERVICE D'ENTRETIEN DU RESEAU ROUTIER NATIONAL)
(a.k.a. SEPRRN)
(a.k.a. OFFICE OF ROAD MAINTENANCE)
Varreux - National Road, 10 Varreux Road, Port-au-prince,
HaYti.
-5-
OFFICE OF COSTOMS
(a.k.a. ADMINISTRATION GENERALE DES DOUANES)
161 Route de Delmas
Port-au-Prince, HaYti.
OFFICE OF MILITARY ATTACHES
(a.k.a. BUREAU DES ATTACHES MILITAIRES)
HaYti.
TELEPHONE COMPANY
(a.k.a. TELECOMMUNICATIONS D'HAITI, SAM)
(a.k.a. TELECO)
J.J. Dessalines Boulevard, P.o. Box 814
Port-au-Prince, HaYti.
.•
TREASURY NEWS
Department of the Treasury
Washington, D.C.
''
..
..
'.
~.......
,,
ft--(l
Telephone 202-622-2960
STATEMENT OF JEFFREY R. SHAFER
ASSISTANT SECRETARY FOR INTERNATIONAL AFFAIRS
DEPARTMENT OF THE TREASURY
BEFORE THE INSTITUTE OF INTERNATIONAL BANKERS
JUNE 7, 1993 -- WALDORF ASTORIA HOTEL, NEW YORK
Thank you for inviting me to join you for lunch. You have given me my first
opportunity to come to New York, America's premier international financial center,
since taking up my responsibilities for international affairs at the Treasury. In my
comments today, I will focus on two international goals of the Clinton Administration.
One is to boost growth at home and abroad. The second is to open markets in other
countries for world-class U. S. competitors. And with an audience of international
bankers, I will talk about financial services in this connection.
The Clinton Administration's Economic Program
The President's Economic Program is providing a new direction for the U.S.
economy by significantly reducing the budget deficit and thereby raising our national
saving. This will make room for more investment and the higher productivity that it
brings, with reduced reliance on foreign capital and the trade deficits that capital inflows
entail. This domestic agenda is supplemented by international activism in
macroeconomic coordination, as well as in trade. We must promote and coordinate our
domestic and international economic priorities if we are to achieve our goals in an era of
increasing global interdependence.
The first priority for all of the industrialized countries must be to restore
economic growth. The United States is now clearly on the recovery path, but the upturn
has been modest. In the twenty-five months since the March 1991 trough, total
household survey employment is up by only 1.5 percent, compared with 5.8 percent at
that point in typical postwar recoveries. Even after the good labor market news of last
Friday, the unemployment rate is still above its March 1991 level, while in past
recoveries the rate had fallen by about 1-3/4 percentage points by this time.
Economic trends elsewhere are much worse. Most of Western Europe is still on a
downward slide, with unemployment averaging more than 11 percent. And although
unemployment remains low in Japan, industrial output has been on a declining trend for
19 months, and firms are saddled with growing numbers of unneeded workers. If the
economy does not change course soon, rising unemployment could come to Japan too.
LB-230
- 2 -
Poor economic performance abroad clouds U.S. prospects for sustained growth.
Without growth abroad, our exports will contribute little to our expansion. At this point,
prospects are discouraging. While the OECD now foresees U.S. growth of 2.6 percent
this year, it forecasts recession in Europe (-0.3 percent), with the UK the only major
country starting to recover. Even for 1994, it sees only a weak recovery for Europe as a
whole (1.8 percent). Japan's prospects also look weak to the OECD, w.
ith growth projected to be only 1 percent in 1993 and still below potential next year.
The situation is more precarious than even these forecasts suggest -- for three
years now economists have had to revise down each successive round of forecasts, and
this continues. The latest OECD projections are lower than previous estimates for
Europe and Japan -- when this was supposed to be a year marked by clear signs of
recovery. Outside North America, it is not.
In response to these developments, the U.S. Administration has reinvigorated the
policy coordination process among the G-7 countries, with the aim of strengthening
world economic growth. These efforts have already borne some fruit, as coordinated
policies reflecting national circumstances have begun to be put in place.
A balanced program of reducing the federal budget deficit by $500 billion over 5
years, as proposed by President Clinton, was passed by the House of representatives and
is now under consideration in the Senate. This program will make a critical difference
to u.S. prospects for sustained growth, and it will make a real contribution to global
growth. By 1997, the deficit will decline from 5.2 percent to 2.8 percent of GDP, with
the financial resources freed up becoming available in global financial markets for
productive investment. The financial markets have anticipated this: long-term dollar
interest rates have fallen since the program was announced. Mter backing up a bit when
House passage seemed in doubt, they have receded again since that hurdle was crossed.
The Administration's program has enabled Treasury Secretary Bentsen to deal
from a position of strength in encouraging Japan and Europe to take action to
strengthen growth in their own countries. Macroeconomic coordination does not mean
that all must adopt uniform policies; rather domestic policies should recognize and
address national needs. Japan needs to adopt measures that augment domestic demand
and reduce its external trade surplus. We believe the fiscal stimulus package that has
been introduced in the Diet is a useful step; however, the Japanese economy will need
sustained fiscal stimulus if it is to recover on its own steam and not be a drag on other
countries. Low net debt and a general government surplus in Japan gives the
government considerable scope for fiscal action.
Lower interest rates are needed in Europe to help stimulate economic growth and
to begin to reduce unemployment. European interest rates have come down somewhat,
and bond markets have anticipated additional cuts in interest rates. The markets must
not be disappointed. It would help get a recovery started if they were pleasantly
-
3 -
surprised by more rapid declines in policy-controlled short-term interest rates.
To supplement efforts to boost growth through macroeconomic cooperation, the
President is seeking to promote market opening and thereby to expand opportunities for
American business.
u.s. Trade Policies
Our trade policies were established in the aftermath of the Second World War.
At that time, the United States repudiated its disastrous protectionist policies of the
1930s, choosing instead to lead the way to an open world trading system by example.
We were long tolerant of trade barriers elsewhere, as war-devastated countries regained
their" economic self-confidence step-by-step. We refrained from strong pressures to open
markets in the interests of Western solidarity in the face of Communism. And we did
not forcefully challenge barriers erected in developing countries that were pursuing
import substitution strategies.
Times have changed. Full economic recovery was achieved in Europe several
decades ago, and the competitive prowess of many countries in Europe and Asia clearly
rivals that of the U.S. today. In the developing world, import substitution policies have
failed. Clearly tolerance of protectionism hindered rather than favored development.
The world has followed the U.S. lead toward more open markets through
successive rounds of multilateral trade liberalization. A number of countries that
formerly had the highest protective walls have unilaterally lowered them in recent years.
(I have in mind Australia, New Zealand, Mexico and some other Latin American
countries.) But much more needs to be done .• There are benefits for consumers from
lower prices and wider choice to be reaped. There are gains to be secured from greater
efficiency through exploiting comparative advantage and economies of scale. And there
is a critical need to ensure -- both for those countries that are still struggling to get on a
sustained path to development and for others that are making the transition from failed
corru'nand economies -- opportunities to become integrated into global markets.
The choice is too often cast simplistically as one between free trade and
protectionism. The trading system is a means to an end, and that end is jobs and
prosperity. All countries must have the opportunity to share in the rewards that trade
brings, or it will not be supported. Trade cannot be a one-way street. U.S. markets for
most goods and services are the most open large markets in the world, and American
consumers have benefitted. But U.S. business and the workers it employs face too many
obstacles in their efforts to penetrate markets abroad.
The difference is striking in the pattern of trade in manufactured goods. U.S.
imports of manufactured goods are more than 7 percent of GDP. For the European
Community, they are in the 4-5 percent range, while Japanese imports of manufactured
- 4 -
goods are less than 2.5 percent of GDP. This is not comparative advantage at work: all
of these economies have manufacturing prowess. But inter-industry trade benefits even
advanced manufacturing economies by bringing competition and choice to the home
market.
Mutually open markets for goods, services, and investment are the foundation of
economic cooperation. And this is the new Administration goal. The President put this
well in his American University speech:
We will continue to welcome foreign products and services into our
markets, but insist that our products and services be able to enter theirs on
equal terms.
We will welcome foreign investment in our business knowing that with it
come new ideas, as well as capital, new technologies, new management
techniques and new opportunities for us to learn from one another and
grow. But as we welcome that investment, we insist that our investors
should be equally welcome in other countries.
This Administration is putting doctrine into practice through three initiatives.
First, we are spearheading the drive to conclude the Uruguay Round by December 15.
We have initiated intense negotiations with the European Community, Japan, and
Canada to put together a market access package by the Tokyo Summit on July 7 that will
be an essential component of a Round-concluding agreement.
Second, we are preparing to implement the North American Free Trade
Agreement (NAFfA). We are negotiating supplemental agreements on the
environment, labor standards, and import surges to complement the Agreement. We will
submit the Agreement and implementing legislation for passage this year to be able to
implement the Agreement by January 1, 1994.
And third, we are about to take up with Japan a new framework for addressing
long-standing problems of market access that will cover both sectoral and structural
issues. In all three efforts, financial market opening is a priority for us.
Market Access: Financial Services
The financial revolution has reduced the relevance of geography, and domestic
compartmentalization while providing extraordinary improvements in financial
products for consumers. There is little question that these extraordinary developments
have provided benefits to the U.S. and other economies. The Administration recognizes
the links between a strong and competitive financial sector and a healthy economy and
we intend to be strong advocates for the interests of U.S. financial firms.
mar~et
- 5 -
Access to foreign markets for U.S. financial firms is an essential component of a
strong financial system. We provide market access and national treatment to foreign
financial firms. In fact, we offer the most open onshore banking system in the world.
And all of you are testimony to this.
As of December 1992, nearly 700 foreign bank offices representing 300 bank
families from 61 countries were active in the United States.
Foreign banking assets have increased four-fold since 1980 and their market share
has nearly doubled; they -- should I say you -- now hold more than 20 percent of
all U.S. bank assets.
U.S. business loans held by foreign banks now account for more than one-third of
the entire U.S. market; in New York and California, foreign bank business loans
now account for more than half of the market.
We welcome foreign financial firms' activities in the U.S. market. Your presence
has brought extensive benefits to U.S. consumers and businesses. These include the
technologies and products that you have introduced and the lower interest rates for
domestic borrowers that your competition have helped engender. And jobs have been
created for Americans in the process. I note the estimate of your organization that
foreign banks supply 200,000 jobs and directly and indirectly add more than $11 billion
to GDP. In addition, your institutions facilitate U.S. participation in foreign trade and
investment.
But there needs to be more of a two-way street. Our firms are sometimes denied
access or face unnecessary barriers in competing abroad. Banks of some countries -- we
call them free riders -- enjoy the benefits of access to the U.S. market while they are
insulated from strong foreign competition at home.
Our objective in the present Uruguay Round negotiations is to open financial
markets abroad to U.S. firms, just as foreign financial firms have access to our markets.
This "market access activism," as some have called it, is consistent with the President's
statement that the U.S. must "compete, not retreat."
Our financial firms will succeed when given the opportunity to compete. They are
world-class competitors. This Administration is committed to promoting the interests of
U.S. financial institutions in foreign markets. Treasury's approach is pragmatic and
consists of multilateral, regional and bilateral components.
In the Uruguay Round negotiations, we will need to have offers from Japan and
countries with emerging markets that provide much more assurance of access than those
that have been tabled so far. Otherwise, if we bind our present practices on a most
favored nation basis, the present asymmetries could become frozen. It is for this reason
that the U.S. has taken an MFN exemption for financial services in its offer. It is our
- 6 -
intention to retain this position unless and until others undertake significant
liberalization that will provide meaningful market access for our financial firms.
From a regional perspective, the United States stands to make progress in its
pursuit of market access by entering into NAFT A. This agreement provides national
treatment following a short transition, and it contains a dispute settlement mechanism in
the hands of financial experts. Let me note, however, that the Agreement is not perfect;
it provides scope for future improvement in the areas of direct branching and crossborder provision of services.
Progress in our bilateral discussions with Japan has slowed in recent years. We
are seeking to reinvigorate the process, and Treasury is actively engaged in talks with the
Ministry of Finance in this regard. We hope for progress that will facilitate completion
of the Uruguay Round. This will require Japan to commit to take steps that will provide
for equality of competitive opportunity in such areas as underwriting, asset management,
cross-border operations, and insurance. In addition, we are hopeful that the new
framework to address structural and sectoral issues agreed by the President and the
Prime Minister will be in place by the Tokyo Summit. This will provide a forum for
continued progress in financial services.
Finally, in the context of the Uruguay Round and independently, the U.S. is also
engaged in bilateral discussions with a host of countries from the Pacific Rim, EC and
Latin America, the purpose of which is to improve market access for U.S. financial firms.
Conclusion
I cannot stress too much the importance that Treasury attaches to progress toward
market access for our financial services industry. In his confirmation hearings on
January 12, Secretary Bentsen noted that:
Treasury is extremely concerned that certain foreign countries take
advantage of our open financial markets yet do not give U.S. financial
firms a fair opportunity to compete in theirs. The touchstone of our policy,
including in international negotiations on financial services, is that we must
demand reciprocity.
The "bottom line" is that U.S. markets are open to foreign financial firms; we expect
foreign financial markets to be open to our financial firms.
Many of you are probably thinking: "the United States has impediments too; we
face them every day." I know you are going to ask me questions about some regulatory
matters. Yet there are also some respects in which foreign banks have advantages over
- 7 -
U.S. banks. There are also features of the U.S. financial regulatory structure that are a
constraint on foreign and domestic banks alike. But the numbers I cited earlier put
things in perspective. You are here in large numbers and with a large market share.
We are on the leading edge when it comes to market access.
I have talked about our objectives with respect to foreign markets to an audience
that is operating here because you have an interest in helping to make trade in financial
services a two-way street. Your voice should be raised to call for market opening in
other countries -- perhaps in your home country, but certainly also in third countries
where your parent institutions have interests parallel to U.S. firms. By working together
for shared interests, we will be able to continue to make progress towards a fully
integrated, competitive, innovative, and efficient global financial market.
TREASURY NEWS
Department of the Treasury
Washington, D.C.
~.......
•
.' '
...
..
'.
Telephone 202-622-2960
JEFFREY R. SHAFER
ASSISTANT SECRETARY OF THE TREASURY FOR INTERNATIONAL AFFAIRS
Jeffrey R. Shafer was sworn into office as Assistant Secretary of the Treasury for
International Mairs on May 21, 1993.
The Assistant Secretary for International Affairs advises and assists the Secretary,
the Deputy Secretary and the Under Secretary for International Mairs in the
formulation and execution of policies dealing with international monetary, financial, and
trade affairs. In particular, the Assistant Secretary for International Affairs focuses on
issues including: international economic policy coordination; economic and financial
relations with both industrialized and developing countries; foreign investment in the
United States; and U.S. policy with respect to the International Monetary Fund and the
multilateral development banks.
. The Assistant Secretary of the Treasury for International Affairs also serves as a
member of the Board of the Overseas Private Investment Corporation.
Prior to his nomination, Mr. Shafer was the Deputy Director of the Country
Studies and Economic Prospects Branch of the Department of Economics in the
Organization for Economic Cooperation and Development (OECD). The Branch is
responsible for drafting the annual surveys of member countries and for preparing
country analysis for review by the Economic Outlook. Mr. Shafer was previously Deputy
Director of the Policy Studies Branch of the OECD. He was also Chairman of the
editorial board of OECD Economic Studies from 1988 to 1993.
Mr. Shafer holds degrees in economics from Princeton (AB.) and Yale (M.Phil.
and Ph.D.). Before joining the OECD in 1984, he worked as a staff officer of the Board
of Governors of the Federal Reserve System, as senior international economist on the
staff of the Council of Economic Advisers, and as Vice President in the Research
Function of the Federal Reserve Bank of New York. He has published papers on a
range of international policy issues including the international monetary system,
macroeconomic adjustment, and the lender of last resort function in international
financial markets. He has been a visiting faculty member at Carnegie-Mellon and Yale
and an associate of the National Bureau of Economic Research.
Mr. Shafer is married and has two daughters.
,,
ft--(l
UBLIC DEBT,;NEWS
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
, ,
Tenders for $12,016 million of 13-week bills to be issued
June 10, 1993 and to mature September 9, 1993 were
accepted today (CUSIP: 912794F66).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.12%
3.14%
3.14%
Investment
Rate
3.19%
3.21%
3.21%
Price
99.211
99.206
99.206
Tenders at the high discount rate were allotted 50%.
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
21,080
36,029,071
4,770
36,378
306,653
25,920
1,523,958
9,017
7,866
22,146
12,110
453,329
814.733
$39,267,031
Acce}2ted
21,080
10,573,059
4,770
36,378
169,153
23,420
276,458
9,017
7,866
22,146
12,110
45,329
814.733
$12,015,519
Type
Competitive
Noncompetitive
Subtotal, Public
$34,612,712
1.319.264
$35,931,976
$7,361,200
1.319.264
$8,680,464
2,722,455
2,722,455
612.600
$39,267,031
612.600
$12,015,519
Federal Reserve
Foreign Official
Institutions
TOTALS
LB-231
Dq:~artment of the Treasury- •
FOR IMMEDIATE RELEASE
June 7, 1993
RESULTS OF
TREASUR¥~S
AUCTION OF 26-WEEK BILLS
Tenders for $12,076 million of 26-week bills to be issued
June 10, 1993 and to mature December 9, 1993 were
accepted today (CUSIP: 912794G81).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.28%
3.31%
3.30%
Investment
Rate
3.38%
3.41%
3.40%
Price
98.342
98.327
98.332
Tenders at the high discount rate were allotted 17%.
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
27,645
42,208,104
7,021
23,269
91,809
14,003
1,345,961
9,049
7,795
27,456
10,595
436,333
555,670
$44,764,710
Acce:gted
27,645
11,240,471
7,021
23,269
29,559
13,173
96,961
9,049
7,795
27,456
10,595
27,673
555,670
$12,076,337
Type
Competitive
Noncompetitive
Subtotal, Public
$40,279,620
906,790
$41,186,410
$7,591,247
906,790
$8,498,037
2,800,000
2,800,000
778,300
$44,764,710
778,300
$12,076,337
Federal Reserve
Foreign Official
Institutions
TOTALS
LB-232
Bentsen in Moscow
POOL REPORT 12 SATURDAY, JUNE 5, 1993
Treasury
Secretary Lloyd
Bentsen,
Ambassador Thomas
Pickering, Treasury Undersecretary Lawrence Summers and Joseph
Nye, director of the National Intelligence Board, met with Prime
Minister Chernomyrdin at his off ice at Staraya Ploschad from
about 9:20 a.m. to 9:45 a.m. The U.S. delegation entered from one
door as the Russian delegation entered from the other. The room
had a 30-foot long table with the U.S. on one side and the
Russians on the other. The prime minister was accompanied by
Boris Fyodorov and several of Fyodorov's aides. Bentsen, shaking
Chernomyrdin's hand,
said,
"I know how busy you are."
Chernomyrdin said something similar, mentioned Bentsen's coming
meeting with Yeltsin. Bentsen: "I hope we can have more time to
discuss things later, perhaps in the U. S. "
A senior U. S.
Treasury official later said that, among other things, Bentsen
and Chernomyrdin talked about the energy business, and the
potential for private investment in Russia's oil industry. "They
talked oil-man-to-oil-man," the senior official said.
The Bentsen delegation then drove to the Kremlin where the
same U.S. officials met with Yeltsin from roughly 10:05 to 10:30
a. m. (I wasn't present for the photo op.) After the meeting,
Bentsen made the five-minute walk from the building, which houses
Yeltsin's office, to Spassky gate to talk to the assembled press.
As he walked, Bentsen said that he told Yeltsin that there was
"far more in the way of private sector money available with
proper laws and the right atmosphere." He described Yeltsin as
"enthusiastic" about the $2-billion privatization fund that the
U.S. is proposing. He said it was "extraordinary" that Yeltsin
found time to meet with him, given the constitutional convention.
"He cancelled all his appointments yesterday, that's why we
didn't meet with him," Bentsen said. "Even his internal ones,"
Pickering added.
Summing up his trip, Bentsen said he was
"encouraged by the pace of the privatization, delighted with that
one. It looks like it's irreversible."
A senior Treasury official said there was "an evident bond
between
them
forged
from
their
politician-to-politician
discussion of Yeltsin's campaign in Vancouver. Yeltsin stressed
the great importance he attached to U.S. support at this very
critical moment in Russia." The official said Bentsen "stressed
the importance of progress on the privatization fund. Bentsen
emphasized the importance of stabilization. This was also
discussed with Fyodorov and Chernomyrdin."
"Secretary Bentsen referred to the success we had in getting
the House of Representatives to approve the $1.8 billion pledged
in Tokyo," the official said. Bentsen said to Yeltsin: "You can
understand the difficulties of dealing with a Congress." Yeltsin
laughed heartily.
outside in Red Square, just beyond Spassky Gate, Bentsen
talked with print and television reporters. "We had a very
interesting and productive meeting with the president," he said.
Bentsen referred to the writing of the u.s. constitution in 1789.
"When I think back to ... 1789 and our own difficulties," Bentsen
said he was impressed that Yeltsin is "putting one together in
such an expeditious way." He described Yeltsin as "confident"
that "there would be no stepping back."
In the Q&A, Bentsen said he told Yeltsin that "it was an
absolute imperative that they slow down inflation and they try
to get control of their credits." Referring to u.s. calls for
stepping up the pace of reform and controlling inflation, he
said, "If they are going to get the rest of the $28.4 billion
(that the West has promised) we'd have to have that kind of
stabilization."
"What I heard from President Yeltsin and Prime Minister
Chernomyrdin and Mr. Fyodorov is they're optimistic about being
able to stabilize the economy."
Asked about the internal conflicts, "Well, dealing with the
U.s. Congress I understand there will be conflicts. It won't
always be smooth, but I'm optimistic."
After fielding questions, Bentsen went to a security fence
in Red Square to shake hands with the people who had been drawn
by the knot of cameras and reporters. The first Russian women he
approached shied away at first, but shook his extended hand and
grinned broadly, displaying gold-capped teeth. The Russians
didn't appear to have any clue who Bentsen was, but several
American tourists approached and greeted the secretary by name.
Bentsen then left for the airport.
(Pool report written by David Wessel, Wall street Journal)
2
The status of workers as employees or independent
contractors for Federal employment and income tax purposes is
generally determined by an analysis of 20 factors derived from
the common law. The 20-factor test, which centers around the
service recipient's control over the worker and the services
performed, essentially requires a facts and circumstances
analysis of each case. Because of the subjective nature of the
20-factor test, it has been criticized as leading to imprecise
and unpredictable results, including cases in which similar
workers are classified differently.
Current tax law does not consistentlr favor status as either
an employee or an independent contractor.
However, in some
circumstances, misclassification may be advantageous to the
service provider, the recipient, or both, especiallY if one or
both parties desires to be less than fully compliant with the tax
laws. An employer may, for example, seek to shift costs to
workers by classifying them as independent contractors to the
extent that the employer perceives that it can do so without
increasing the overall compensation package. In these cases,
status as an independent contractor may be imposed on an employee
to avoid the overhead costs of withholding, the costs of the
employer's portion of Social Security and Medicare taxes,
unemployment insurance, workers compensation, and other fringe
benefits.
In other cases, both parties may seek to use
misclassification as a method to avoid full reporting of income.
Even if an independent contractor's gross income is reported to
the IRS on information returns, and the independent contractor
reports 100 percent of his or her income, the independent
contractor may have greater ability to reduce his or her reported
tax liability by overstating deductible business expenses.
The cases in which the employer unilaterally imposes
independent contractor status on its employees and the cases in
which there is collusion to avoid reporting income should be
distinguished from the misclassification issue generally. In
both cases, there is no real question as to whether the workers
are employees or independent contractors. Rather, the parties
involved essentially use misclassification as a guise for
avoiding the costs of Federal and state mandates designed to
1 Prior to 1984, compensation earned by independent
contractors was subject to lower rates for Social Security and
Medicare taxes than wage income. This disparity was believed to
create an incentive for misclassification. The differences were
actually less significant than it appeared, however. Although
tax rates were lower for self-employment income than for wages,
an independent contractor could not deduct self-employment taxes
while an employer could deduct its portion of Social Security and
Medicare taxes.
3
protect employees or, in the collusion case, for evading taxes.
Legislative Changes
Since the late 1970s, Congress, Treasury, and the Internal
Revenue Service have considered numerous proposals aimed at
resolving issues associated with the classification of workers as
employees or independent contractors. To date, legislation
dealing with the misclassification of employees as independent
contractors has focused primarily on relieving employers of what
has been viewed as the excessive penalties associated with honest
errors in classification of workers.
Prior to statutory changes, when the IRS reclassified a
worker as an employee, the employer was generally held liable for
the full amount of unwithheld income taxes and the unwithheld
employee share of Social Security and Medicare taxes for all
years open under the statute of limitations. In addition, the
employer remained liable for the employer share of Social
Security, Medicare and Federal unemployment insurance taxes, plus
interest on these amounts. Penalties also could be assessed.
The employer's liability for underwithholding was abated to the
extent that the employer could demonstrate that the misclassified
worker had paid income, Social Security and Medicare taxes on the
compensation received. Data to support this determination were
often difficult to obtain, however, especially if the worker was
no longer providing services to the employer.
section 530.
In response to a number of large retroactive
employment tax assessments in the 1970s, Congress provided
certain employers with general statutory relief from IRS
reclassification of workers from independent contractors to
employees. Section 530 of the Revenue Act of 1978 prohibits the
IRS from correcting erroneous classifications of workers as
independent contractors for employment tax purposes, including
prospective corrections, as long as the employer has a reasonable
basis for its treatment of the workers as independent
contractors. A reasonable basis includes reliance on (i)
judicial precedent, published rulings, letter rulings or
technical advice memoranda; (ii) a past IRS audit (although not
necessarily an employment tax audit) in which there was no
assessment attributable to the employment tax treatment of the
worker or of workers holding substantially similar positions;
(iii) a long-standing recognized practice of a significant
segment of the industry in which the worker was engaged; or (iv)
any other reasonable basis for the employer's treatment of the
worker.
The relief provided by section 530 is not available unless
the employer consistently treats the worker, and any other worker
holding a substantially similar position, as an independent
4
contractor and complies with the statutory requirements for
payments to independent contractors. For example, it is not
available if the employer has failed to comply with the
information reporting requirements associated with its treatment
of the worker as an independent contractor.
Section 530 applies solely for purposes of the employment
tax provisions of the Code.
It has no legal effect on a worker's
classification as an employee for income tax purposes, or the
worker's own tax treatment for any purpose. Thus, in theory,
section 530 can result in a "whipsaw" in which the worker is
simultaneously treated as an employee for his or her own tax
purposes, and thus not subject to self-employment taxes, and
treated as an independent contractor by the employer and, thus,
not subject to the employer portion of employment taxes.
Section 3509.
In the Tax Equity and Fiscal Responsibility
Act of 1982 Congress added section 3509 to the Code in order to
mitigate employers' liabilities for retroactive employment tax
assessments where section 530 relief was not available. section
3509 generally limits an employer's liability for failure to
withhold income, social Security, and Medicare taxes on payments
made to an employee whom it has misclassified as an independent
contractor. Under section 3509, an employer is liable for 1.5
percent of the wages paid to the employee, in lieu of the income
taxes that were not withheld, plus 20 percent of the employee's
portion of the Social Security and Medicare taxes on those wages.
If the employer has not complied with the information reporting
requirements associated with the treatment of the worker as an
independent contractor, however, these percentages are doubled to
3.0 and 40 percent, respectively. In addition, the employer's
liability under section 3509 cannot be reduced by any selfemployment or income taxes paid by the misclassified worker.
The relief provided by section 3509 is not available if the
employer has intentionally disregarded the withholding
requirements with respect to the employee. section 3509 also
does not relieve the employer of its liability for 100 percent of
the employer portion of Social Security and Medicare taxes.
The rules of section 3509 were developed in an attempt to
place employers and the Federal government in approximately the
same financial position, on average, in which they would have
been if the amount of taxes actually paid by the misclassified
employees had been determined and used to abate the employers'
liabilities, without the need actually to determine those
amounts. Thus, section 3509 has no effect on an employer's own
liability for Federal or State unemployment insurance taxes or
the employer portion of Social Security or Medicare taxes. Also,
in return for limiting the employer's liability for failure to
withhold employee taxes, section 3509 prohibits the employer from
reducing its own liability by recovering any tax determined under
5
the section from the employee, and, as discussed above, ~ives it
no credit for any taxes ultimately paid by the employee.
section 1706.
In the mid-1980s, some employers in the
technical services industry complained that the relief granted
under section 530 created an unfair advantage for certain of
their competitors. They noted that section 530 affects different
taxpayers differently, depending on whether they satisfy the
statutory conditions for relief.
In particular, employers that
have consistently misclassified their employees as independent
contractors are entitled to relief under section 530, while other
employers in the same industry (that, for example, have sometimes
taken more conservative positions on classification issues) are
not entitled to relief because they cannot satisfy the
consistency requirements of section 530. The crux of the
employers' complaints was that certain service providers in the
industry achieved unfair cost savings by treating the service
providers as independent contractors.3
As a result of these complaints, in section 1706 of the Tax
Reform Act of 1986, Congress excluded from the ambit of section
530 taxpayers that broker the services of engineers, designers,
drafters, computer programmers, systems analysts and "other
similarly skilled workers engaged in a similar line of work,"
effective for payments made after December 31, 1986. section
1706 applies exclusively to multi-party situations, i.e., those
involving (i) technical services workers, (ii) a business that
uses the workers, and (iii) a firm that supplies the workers to
the business. The effect of section 1706 is to deny section 530
relief solely to the firm that supplies the workers.
section
1706 did not affect the application of section 3509 to such
firms.
2 Under section 3509, as under prior law, the full amount of
the misclassified worker's gross compensation is subject to tax,
even though, if the worker had always been treated as an
employee, the employer would presumably have negotiated to reduce
wages to reflect the employer's liability for its portion of
Social Security and Medicare taxes, unemployment insurance,
workers compensation, and fringe benefits.
3 As explained above, however, misclassification of an
employee as an independent contractor does not necessarily result
in any cost savings.
cost savings could be achieved, however, if
the client is able to pay the independent contractor less than
the sum of the cash compensation, its portion of Social Security
and Medicare taxes, unemployment insurance, workers compensation,
and fringe benefits that it would have paid to an employee.
cost
savings also could be achieved if the misclassification is
accompanied by underreporting of income or an overstatement of
deductions by the worker.
6
Congress may have believed that the denial of section 530
relief to this group of taxpayers would cause most or all
technical services workers to be reclassified as employees.
section 1706 does not, however, actually require that the
individuals listed in the provision be treated as employees.
Rather, it merely requires them to be classified as employees or
independent contractors for employment tax purposes under the
usual common law tests, and permits the IRS to issue guidance
with respect to such classification.
Consequences of Misclassification
As discussed above, misclassification of workers does not
necessarily result in net revenue losses for the Federal
government. Because current Federal tax law does not
consistently favor status as either an employee or an independent
contractor, especially when the tax obligations of both the
business and the worker are taken into account, it is impossible
to determine a priori whether misclassification tends, on
average, to result in a net revenue gain or loss. Deliberate
misclassification, however, may tend to result in net revenue
losses to the extent the misclassification is undertaken to
obtain a net tax benefit for the employer and the worker.
For
example, if an employee is deliberately misclassified as an
independent contractor to relieve the employer of its withholding
obligation and to allow the worker to take advantage of
independent contractors' relatively greater opportunity to be
less than fully compliant with the tax laws, the reduction in the
employer's tax payments may not be fully offset by the increase
in the worker's tax payments.
Existing evidence suggests that this kind of deliberate
misclassification may pose a problem, especially where the
employer also fails to report the independent contractor's gross
income to the IRS on an information return.
IRS studies suggest
that the percentage of gross income voluntarily reported by
independent contractors generally is significantly lower when the
income is not reported to the IRS on Form 1099. This negative
correlation is stronger when the independent contractors are in
fact misclassified employees rather than true independent
contractors. Thus, a greater reduction in voluntary compliance
when Form 1099s are not filed suggests that, in these cases,
deliberate misclassification is being used to avoid full
compliance, as distinguished from cases in which
misclassification results from legitimate uncertainty.
In addition to the revenue loss that may result from
noncompliance associated with deliberate misclassification of
workers, both erroneous and deliberate misclassification may
adversely affect other tax and non-tax rules that are
specifically targeted at either employees or independent
contractors.
In particular, misclassification interferes with
7
the social goals underlying a worker's eligibility for employerprovided pensions, fringe benefits, unemployment insurance, and
workers compensation. To the extent that other significant
rights or privileges are made contingent on workers' employee
status, such as possible future changes to the health care
insurance system, the impact of misclassification outside of the
Federal tax system may be increased.
Current Proposals Addressing Misclassification
The Subcommittee's letter of invitation included a copy of
H.R. 5011, which was sponsored and introduced in the 102nd
Congress by the former chairman of the Subcommittee, Congressman
Barnard, to address issues related to noncompliance and
misclassification of workers.
In addition, the Subcommittee
staff provided for our review a number of possible additions and
modifications to H.R. 5011. The Department recognizes that H.R.
5011 and the related proposals raise important issues of tax
policy and administration and, accordingly, they merit careful
study. The Administration has not yet undertaken a full review
of misclassification issues and, given the broad scope of the
legislation, we cannot, at this time, comment specifically on
each of these proposals.
In general, however, we are encouraged that many of the
proposals are aimed at strengthening existing compliance
mechanisms with regard to independent contractors.
In that
connection, we note that the Administration's deficit reduction
package included a proposal that also appears in H.R. 5011 to
expand information reporting on Form 1099 to cover corporate
service providers. This proposal is included in the budget
reconciliation bill passed by the House of Representatives on May
27th.
The expansion of information reporting would change the
current law rule under which a payor is not required to report
payments to independent contractors that are organized as
corporations.
Concerns have arisen that this exception creates a
significant loophole by encouraging service providers to
incorporate (or merely claim to have incorporated) in order to
avoid the requirement that the payor file a Form 1099 reporting
payments for services. The expansion of information reporting to
cover corporate service providers will give the IRS additional
tools to address the compliance problems that are associated with
some classes of independent contractors. Previous studies have
shown that reporting of income on tax returns increases when that
income has been reported on an information return.
The Administration is mindful, however, that increased
reporting requirements impose additional administrative burdens
on payors.
Such increased burdens may not be warranted
particularly with regard to classes of payees that have a history
8
of compliance with the tax laws.
For this reason, the
Administration's proposal, as reflected in the budget
reconciliation bill and House committee report would give the
Treasury and IRS authority to exclude certain types of payments
and certain types of payees from the expanded reporting
requirements.
For example, required reporting of payments to
corporate service providers in certain regulated industries may
not be necessary to improve compliance because there is already a
high level of compliance among this group of payees.
H.R. 5011 also includes a proposal that would provide payors
with a mechanism to verify an independent contractor's taxpayer
identification number (TIN) prior to making payments. Under
current law, a TIN is subject to verification only after payments
have been made and the Form 1099 is filed.
Thus, an IRS
notification to the payor that the independent contractor has
provided an incorrect TIN, which triggers mandatory backup
withholding, is effective only in cases where the payor continues
to make payments to the independent contractor subsequent to the
notification.
If the payor were required to verify the TIN prior
to any payment to the independent contractor, however, the
verification system would effectively cut off the use of
incorrect TINs as a method of noncompliance. We note that the
IRS is in the process of conducting a pilot project in this area.
Accordingly, the Department believes that any broader
implementation of TIN verification should await the results of
the IRS pilot.
We believe that benefits of any further expansion of the
reporting system generally must be balanced against the increased
administrative burdens associated with such a change. In
addition, the Department would need to consider in much more
detail any proposal that would reduce or eliminate existing
sanctions against misclassification. In particular, it may be
premature to take such steps before significant experience is
gained with the effectiveness of alternative enforcement tools,
such as the expansion of information reporting to corporate
service providers. While, for various reasons, independent
contractors generally have lower voluntary reporting percentages
than employees, this problem appears to be attributable to a
subset of taxpayers deliberately using misclassification as means
to avoid full compliance. This is presumably one reason for the
apparent correlation noted above between noncompliance and
misclassification. In view of this correlation, it would still
be reasonable for the IRS to devote a significant amount of its
compliance efforts to the misclassification area even if it were
given better tools to encourage voluntary compliance in general.
We are encouraged that H.R. 5011 would repeal the section
530 moratorium on the IRS' issuance of guidance concerning
employee status. This prohibition has significantly reduced
taxpayers' ability to classify workers correctly as employees or
9
independent contractors, and its repeal would help min1m1ze
instances in which taxpayers are penalized for inadvertent
misclassification. The Department also generally favors further
consideration of modifications to section 530 that would
eliminate differences in treatment among otherwise similarlysituated taxpayers, such as the prior-audit safe harbor and the
prohibition against prospective worker reclassification.
H.R. 5011 would address the core noncompliance problem in
part by basing the penalties for failure to comply with the
information reporting requirements on the amount of compensation
required to be reported. It is not clear, however, that these
sanctions could be made strong enough to deter deliberate
noncompliance without creating the same potential for
overreaching as exists under current law. Presumably these
penalties could be increased where deliberate misclassification
or noncompliance with the information reporting requirements is
demonstrated. Unfortunately, such a showing is often difficult
to make. This difficulty is, in fact, one reason why the IRS has
found it hard to apply the existing 10-percent penalty for an
intentional failure to report the payment of compensation to an
independent contractor.
Instead of simply reducing or eliminating existing sanctions
against misclassification, it may be appropriate to consider
whether these sanctions (including exceptions like sections 3509
and 530) could be better targeted or otherwise improved. For
example, section 3509 has not been amended to reflect the
equalization of the Social Security and Medicare taxes paid by
independent contractors and those paid by employees and employers
that have occurred since its enactment. Again, however, the
Department would need to give careful consideration to any
changes to section 3509 to ensure that they did not provide
additional incentives to engage in deliberate misclassification,
thereby increasing compliance problems.
Finally, it is important to bear in mind that, as noted
above, misclassification is not merely a problem of tax
compliance. Under current law, a worker's classification as an
employee or independent contractor also affects the worker's
treatment under those statutory provisions that apply exclusively
to either employees or independent contractors, including, among
others, the two-percent floor on miscellaneous itemized
deductions, the fringe benefit and unemployment insurance
provisions of the Internal Revenue Code, workers' compensation,
wage and hour laws, and eligibility for Medicare and other social
and income security programs. Whether any of these differences
in treatment between employees and independent contractors should
be reexamined is an issue that is well beyond the scope of this
testimony. However, as these differences in treatment exist, the
IRS and other regulatory agencies must continue to play an
important role in the determination of workers' employment
10
status, and must have adequate tools with which to enforce these
determinations.
Conclusion
To conclude, worker misclassification is a long-standing and
difficult problem of tax policy, which the Treasury Department is
very interested in seeing resolved. Defining a simple set of
rules that provides tax equity among similarly-situated workers
and service recipients, maximizes compliance with the law, and
minimizes interference with legitimate differences in business
operations has proven extraordinarily difficult. The Department
appreciates the ongoing efforts by the members of this
Subcommittee and other individuals to address this problem and
would be pleased to work with the Subcommittee to develop these
ideas further.
Mr. Chairman, that concludes my formal statement. I will be
pleased to answer any questions that you or other Members may
wish to ask.
FOR RELEASE AT 2:30 P.M.
June 8, 1993
CONTACT:
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202/219 - 3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $24,000 million, to be issued June 17,
1993. This offering will result in a paydown for the Treasury of
about $6,975 million, as maturing bills total $30,978 million
(including the 13-day cash management bills issued June 4, 1993,
in the amount of $7,010 million).
Federal Reserve Banks hold $5,446 million of the maturing
bills for their own accounts, which may be refunded within the
offering amount at the weighted average discount rate of accepted
competitive tenders.
Federal Reserve Banks hold $4,422 million as agents for
foreign and international monetary authorities, which may be
refunded within the offering amount at the weighted average
discount rate of accepted competitive tenders. Additional
amounts may be issued for such accounts if the aggregate amount
of new bids exceeds the aggregate amount of maturing bills.
Tenders for the bills will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public
Debt, Washington, D. C. This offering of Treasury securities
is governed by the terms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356, published as a final rule on
January 5, 1993, and effective March 1, 1993) for the sale and
issue by the Treasury to the public of marketable Treasury bills,
notes, and bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
LB-234
HIGHLIGHTS OF TREASURY OFFERINGS OF WEEKLY BILLS
TO BE ISSUED JUNE 17, 1993
June S, 1993
Offering Amount .
$12,000 million
$12,000 million
91-day bill
912794 F7 4
June 14, 1993
June 17, 1993
September 16, 1993
March lS, 1993
$11,651 million
$10,000
$ 1,000
lS2-day bill
912794 E6 7
June 14, 1993
June 17, 1993
December 16, 1993
December 17, 1992
$14,7S3 million
$10,000
$ 1,000
Description of Offering:
Term and type of security
CUSIP number
Auction date
Issue date
Maturity date
Original issue date
Currently outstanding
Minimum bid amount
Multiples .
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids
Competitive bids
.
. .
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10%.
(2) Net long position for each bidder must be
reported when the sum of the total bid
amount, at all discount rates, and the net
long position is $2 billion or greater.
(3) Net long position must be determined as of
one half-hour prior to the closing time for
receipt of competitive tenders.
Maximum Recognized Bid
at a Single Yield
35% of public offering
Maximum Award .
35% of public offering
Receipt of Tenders:
Noncompetitive tenders
Competitive tenders
Payment Terms
Prior to 12:00 noon Eastern Daylight Saving time
on auction day
Prior to 1:00 p.m. Eastern Daylight Saving time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
TEXT AS PREPARED
FORDEUVERY
TESTIMONY OF RONALD K. NOBLE
ASSISTANT SECRETARY FOR ENFORCEMENT
DEPARTMENT OF THE TREASURY
BEFORE THE
SUBCOMMfITEE ON TREASURY, POSTAL SERVICE,
AND GENERAL GOVERNMENT
COMMfITEE ON APPROPRIATIONS
U.S. HOUSE OF REPRESENTATIVES
JUNE 9,1993
Mr. Chairman, thank you very much for this opportunity to lead off this
hearing examining the events surrounding the tragedy in Waco, Texas. This
administration is committed to finding the answer to what went wrong and we will learn
from this tragedy.
On February 28th, just outside Waco, Texas, the tranquility of the country was shattered.
At that time I was serving as a part-time consultant - as the designated, but not yet
nominated, Assistant Secretary of the Treasury for Enforcement - I learned that four
ATF agents were killed in a courageous effort to serve warrants on the Branch Davidian
compound near Waco, Texas. In my previous positions, I felt that I had some
understanding of the risks law enforcement officers encounter everyday, but I cannot
describe adequately, the powerful, personal experience the death and wounding of so
many agents has had on me.
Indeed, before my nomination and confirmation, I represented Secretary Bentsen at
three of the four funerals. I attended the funerals of Steven D. Willis, Robert J.
Williams, and Conway C. LeBleu. I would have attended all four but two of the funerals
were scheduled on the same day close in time, but too far apart in distance. The images
from those funerals have been replayed over and over in my mind. I remember being
struck by the outpouring of support from the communities of the agents and the
thousands of police officers who came from all over to pay tribute to their comrades who
died on that sad Sunday morning. The sense of camaraderie and the sense of a common
loss, in many ways, OV~;'."; ~elmed r-> .
LB-235
-2-
I was even more overwhelmed when I thought back to the day when I first learned of
this operation on February 26, 1993, the Friday before the operation was to take place.
On that day, if you recall, terrorists bombed the World Trade Center. Secret Service
and Customs facilities were heavily damaged, and there were reports of injuries to Secret
Service agents. These would be people for whom I would be responsible. In addition, as
a NYU law professor, many of my former students and current friends worked in or
travelled through the World Trade Center on a daily basis. I was concerned about all of
the people whom I knew and the innocent people whom I did not know.
It was on this day following this terrorist attack that I first learned about the BranchDavidians and Vernon Howell. The Office of the Assistant Secretary for Enforcement
was provided with a one page advisory. The purpose of the advisory was to keep the
front office from being surprised should ATF's execution of search and arrest warrants
near Waco, Texas receive public attention that would reach the office of the Assistant
Secretary for Enforcement. ATF was not required to notify the office of the Assistant
Secretary of Enforcement before executing search and arrest warrants which had been
approved by the U.S. Attorney's office and signed by a U.S. Magistrate. The operational
bureaus of the Department of the Treasury - just like the operational bureaus of the
Department of Justice - are given the discretion to decide how and when to execute
search and arrest warrants in order to maximize the likelihood of success and minimize
the likelihood of unnecessary danger to their agents and people generally. It is a
standing policy that the office of the Assistant Secretary of the Treasury for Enforcement
should be informed of any significant activities.
As I reflect back on February 26, 1993, I still remember what I was thinking on that
Friday: how could the execution of search and arrest warrants near Waco, Texas, receive
any noteworthy public attention in light of the World Trade Center bombing?
Nonetheless, the FYI advisory was received, and it generated questions in my mind
which I shared with the Acting Assistant Secretary for Enforcement. The questions
centered on the following: What steps would be taken to ensure the safety of people?
Why did the execution of these warrants need to occur in this fashion? Who had
reviewed and approved this plan? And, why did ATF believe that the approved plan
would succeed?
After those questions were answered, the operation went forward. We received
assurances that agents would be able to maintain the element of surprise and that
precautions were taken to minimize the risk to human life. We learned that an
undercover officer was inside the compound, and we were assured that if for any reason
the operation was compromised, it would be called off. We were told that this could be
the last opportunity to catch cult members unprepared and away from their weapons.
-3-
We know that A1Fs raid on the compound was conceived, developed and conducted by
experienced and skilled agents. The Special Response Teams' successes over the past
several years in the execution of search and arrest warrants have been exceptional. In
the hundreds of complex and dangerous operations conducted by the SRTs, Director
Higgins informs me, that only one SRT special agent has been injured by gunfire in the
past two years. Having said this, it is nonetheless evident that during the raid on the
Branch-Davidian Compound on February 28, 1993 something went wrong. We cannot
yet say what exactly went wrong.
The Secretary of the Treasury has directed that I oversee the investigation of ATF's role
in the Waco tragedy. It will be a thorough and objective review of ATF's investigation
and raid on the Branch Davidian compound. Treasury and the American public need to
know what happened on February 28, 1993 near Waco, Texas and why. A report will be
completed by September 1, 1993.
Until then, I will not pre-judge what the investigation will reveal, but I promise that I
will follow the evidence wherever it leads. There will be no stone left un-turned. I will
work diligently and methodically to ensure that a complete investigation and full
accounting is provided to the Secretary of the Treasury, the President and the American
people. Without prejudging the facts, I expect that this review will be even-handed and
searching, and will bring peace of mind to those who hunger after the truth. When I
telephoned the families of the slain agents, I promised their families that their losses will
not have been in vain. We will learn from this tragedy. The central issues to be
addressed by this investigation are:
•
•
•
•
•
•
•
•
How and why did Koresh and the Branch Davidians become targets for an
ATF investigation?
•
Was a raid such as that attempted here reasonably proportionate to the
criminal violations being investigated?
Was the raid plan well conceived?
Were alternatives (such as arresting Koresh outside of the compound) and
contingencies (such as a fall-back plan if faced with prepared armed
resistance) adequately considered?
Were the training and experience of the raid team members adequate to
meet the raid's objectives?
How and why did ATF lose the element of surprise?
Did the relevant decision-makers in ATF know the element of surprise had
been lost and did they understand the tactical implications of such a loss?
In the hours and days following the raid, did ATF make conflicting
statements about what had happened and if so, why?
4-
The Secretary insisted that whatever resources necessary would be available to carry out
the review. We have assembled some of the best investigators from Secret Service,
Customs, and IRS to conduct the interviews and prepare the report. We have support
from throughout Treasury. The General Counsel has provided attorneys and we have
asked the Inspector General to help in the formulation of the investigative plan and to
critique the investigation at key points. We have also selected three independent
reviewers from outside of the Department of the Treasury to monitor and guide the
investigation. The Secretary has asked each of them to provide him with their
independent advice and recommendations. This will ensure the credibility and
impartiality of our investigation. These reviewers, Chief Willie Williams of the Los
Angeles Police Department, Mr. Henry Ruth, former Watergate prosecutor, and Mr. Ed
Guthman, Pulitzer prize winning journalist, are men of exceptional distinction and, I
believe, unquestioned integrity. The independent reviewers are each expected to provide
their own independent assessments and comments on the investigation. The
commitment that I made to the families of the ATF agents and to the men and women
of the ATF will be met. We will know what happened and why. We expect the report
to be completed by September 1, 1993.
To date, we have thoroughly reviewed ATF's investigative file as well as over four
hundred interview statements taken in connection with the ongoing criminal prosecution
in Texas. We are currently interviewing ATF agents and have completed 115 interviews
of ATF personnel and have a similar number of additional interviews planned. It is our
intention to interview all ATF agents directly involved in the raid, as well as all
supervisory officials involved in the planning, review and approval of the raid. In
addition, we plan to interview others with information relevant to ATF's investigation of
the Branch Davidians, including former cult members and members of the media. We
are consulting experts in the field of tacticaV operational planning, command and
control and intelligence gathering. These experts come from major city police
departments and the military, and have substantial expertise in large scale raids.
I recently travelled to Dallas, Houston and New Orleans to meet with members of ATF's
Special Response Teams and other agents who were involved in the raid of the Branch
Davidian compound on February 28, 1993. It was my first official trip outside of
Washington since taking my oath of office. After I attended the funerals of the slain
agents and saw the impact on their comrades, I promised myself that if confirmed, I
would visit these brave and heroic men and women during my first official trip. I wanted
them to know that my impression of ATF would not be based on one incident. The men
and women of ATF are courageous and proficient law enforcement professionals.
Putting aside for a moment why the tragedy occurred, we cannot overlook that during
almost 30 minutes of uninterrupted gunfire, ATF men and women acted heroically and
bravely in protecting and tending to their wounded.
-5In addition to praising the fine work of ATF, I wanted to inform the agents personally
about the administrative review of the Waco tragedy, to answer their questions and to
listen. I expected them to question and to challenge any non-ATF review of its role in
the Waco tragedy. Instead, the scores of agents with whom I met, during my three-city
visit, welcomed a review of their operation. Although I expected some concern from
agents about a review done outside ATF, instead they were supportive. They, like the
Secretary of the Treasury, want the full story to be told, and they want the report of the
events to be comprehensive, uncompromising and impartial. The agents want everyone
to know what happened, and why.
I want to assure you that I have no higher priority than the safe and professional conduct
of the Department of the Treasury's law enforcement responsibilities.
As I have described, the review being undertaken by the Department of the Treasury in
close coordination with the Department of Justice will answer the questions, what
happened and why in Waco, Texas, on February 28, 1993. There are additional broader
questions which Justice and Treasury will address jointly.
For example:
•
•
•
•
•
•
What approach should law enforcement take to barricade situations?
Do we provide the best training and technologies to law
enforcement in order to address these situations?
What do we know about cults and other non-traditional groups and what
special law enforcement approaches do we need to take in dealing with
them?
Can we make better use of nan-traditional law enforcement disciplines
such as psychiatry, psychology, theology etc.?
What levels of law enforcement cooperation are necessary in dealing with
large scale, complex operations as were undertaken in Waco?
What is the appropriate mix of headquarters oversight and on site tactical
decisions?
These and other questions will be examined by a broad range of experts in order that all
of us in law enforcement can learn from the tragic experience in Waco.
Mr Chairman, this hearing will help us as we examine these broader issues and we look
forward to discussing the many issues that have been outlined by the Committee. I
would also like to thank the Chairman for respecting the delicate balance we must
follow. As you know, the Department of Justice is preparing a criminal prosecution
against swviving members of the Branch Davidian Sect. I know that you appreciate the
complexity and the importance of developing this case, and we appreciate your
assll:I'ances that this bearing will not create problems for the investigators and
prosecutors.
-6-
The government witnesses will attempt to answer every question that you and the
committee have regarding their personal knowledge of the events leading up to February
28, 1993. As we have discussed before, if there is a line of questioning that might raise
problems, we will try to provide the information to you in a less public forum. Again, I
would like to thank you and the committee for your consideration and we look forward
to working with you today and tomorrow. Furthermore, I will make myself available to
brief you and the Committee as soon as the Treasury administrative inquiry is
completed.
In conclusion, Mr. Chairman, as Assistant Secretary for Enforcement, I have a deep
commitment to learn from ATF's experience in Waco. The Assistant Secretary is
responsible for general oversight and policy development and implementation. Although
the day to day operational decisions are made by the bureau leadership, I have the
responsibility for overseeing the major actions of the bureaus. The review that I am
directing, will examine not only ATF's actions, but what role the Assistant Secretary
should assume in the future. It must also look at the balance between oversight and
tactical operational decision making, but it will also examine the challenges of dealing
with crises during periods of transition. I look forward to discussing these broader issues
with you in the months ahead.
I would be happy to try to answer any questions you might have. Thank you.
-30-
THE WHITE HOUSE
Office of the
Pre~s
Secretary
For Immediate Release
June 4, 1993
STATEMENT BY THE PRESIDENT
ON SANCTIONS AGAINST HAITI
One of the cornerstones of our foreign policy is to support the
global march toward democracy and to stand by the world's new
democracies. The promotion of democracy, which not only reflects
our values but also increases our security, is especially
important in our own Hemisphere. As part of that goal, I
consider it a high priority to return democracy to Haiti and to
return its democratically-elected President, Jean-Bertrand
Aristide, to his office.
We should recall Haiti's strides toward democracy just a few
years back.
Seven years ago, tired of the exploitative rule that
had left them the poorest nation in our Hemisphere, the Haitian
people rose up and forced the dictator Jean-Claude Duvalier to
flee.
In December 1990, in a remarkable exercise of democracy,
the Haitian people held a free and fair election -- and
two-thirds of them voted for President Aristide.
Nineteen months ago, however, that progress toward democracy was
thwarted when the Haitian military illegally and violently ousted
President Aristide from office.
Since taking office in January,
the United States Government has worked steadily with the
international community in an effort to restore President
Aristide and democracy to Haiti.
The OAS and United Nations
Special Envoy, Dante Caputo, has demonstrated great dedication
and tenacity. To support Mr. Caputo's effort, Secretary of State
Christopher in March named U.S. Ambassador Lawrence Pezzullo as
our Special Adviser for Haiti.
We and the international community have made progress.
The
presence of the International Civilian Mission has made a
concrete contribution to human rights in Haiti.
Mr. Caputo's
consultations with all the parties indicated that a negotiated
solution is possible.
Unfortunately, the parties in Haiti have not been willing to make
the decisions or take the steps necessary to begin democracy's
restoration.
And while they seek to shift responsibility,
Haiti's people continue to suffer.
In light of their own failure to act constructively, I have
determined that the time has come to increase the pressure on the
Haitian military, the de facto regime in Haiti and their
supporters.
The U.S. has been at the forefront of the international
commupity's e£forts to back up the UN/OAS negotiations with
sanctions and other measures.
Beginning in October 1991, we
2
froze all Haitian govcrnm~nt assets in the United States and
prohibited unlicensed financial transactions with Haitian
persons.
Today, I am actjnq to strengthen those eXisting
provisions in several ways.
First, I have signed a Proclamation pursuant to Section 212(f) of
the Immigration and NationaU ty Act prohibiting the entry into
the U.S. of Haitian nationals who impede the progress of
negotiations designed to restore constitutional government to
Haiti and of the iI~ediate relatives of such persons.
The
Secretary of State will determine the persons whose actions are
impeding a solution to the Haitian crisis. These people will be
barred from entering the United States.
Second, pursuant to the authority of the International Emergency
Economic Powers Act and the Executive Orders on the Haiti
emergency, I have directed the Secretary of the Treasury to
designate as "Specially ne~i9nated Nationals" those Haitians who
act for or on behalf of the Junta, or who make material,
financial or commercial contributions to the de facto regime or
the Haitian Armed Forces.
In effect, this measure will freeze
the personal assets of such persons subject to U.S. jurisdiction
and bar them from conducting any tran~actions whatsoever with the
individuals and entities named.
Third, I have directed Secretary Christopher to consult with the
OAS and its member states on ~ays to enhance enforcement of the
existing OAS sanctions program. And I have directed Secretary
Christopher and Ambassador Albright to consult with the UN and
member states on the possibility of creating a worldwide
sanctions program against Haiti.
Sanctions alone do not constitute a solution. The surest path
toward the restoration of democracy in Haiti is a negotiated
solution that assure~ the safety of all parties.
We will
therefore strongly support a continuation and intensification of
the negotiating effort. We will impress on all parties the need
to take seriously their own responsibilities for a successful
resolution to this impasse.
Our policy on Haiti is not a policy for Haiti alone.
It is a
policy in favor of democracy everywhere. Those who seek to
derail a return to constitutional qovcrnment -- whether in Haiti
or Guatemala
must Tecognize that we will not be swayed from
our purpose.
At the same time, indjviduals should not have to fear that
supporting democracy's restoration will ultimately pu~ their own
safety at risk. Those who have opposed President Aristide in the
past should recognize that, once President Aristide has returned,
we and the rest of the internationa 1 communi t.y will defend
assiduously their legitimate political Tights.
It is my hope that t.he measures we have announced today will
encourage greater effort and flcx1bility in the negoti~tions to
restore democracy and President ~ristide to Haiti.
# # #
DEPARTMENT
TREASURY
OF
THE
TREASURY
r.) NEW S
- - -_ _ _ _-..::::J7Hq:.-_ _ _ _ _ __
1500 PENNSYLVANIA AVENlJE, N.W.· WASHINGTON, D.C.. 20220. (202) 622-2960
June 8 , 1993
RONALD K. NOBLE
ASSISTANT SECRETARY OF THE TREASURY FOR
~FORCEMENT
Ronald K. Noble was sworn into office as Assistant Secretary of the Treasury for
Enforcement on May 4, 1993.
As Assistant Secretary for Enforcement, Noble is responsible for Treasury law
enforcement direction and policy and communication with other U.S. government
departments on these matters. This includes the suppression of narcotics and dangerous
drug smuggling, monitoring the movement of large amounts of currency in and out of
financial institutions, implementing U.S. government embargo programs, enforcing tariff
and trade regulation, collecting excise taxes on and regulating trade in tobacco, alcohol and
a rrns , and protecting the President, the Vice President and visiting heads of state.
From 1989 until he joined Treasury, Noble was a law professor at the New York
University School of Law. Prior to teaching, Noble spent a year as a Deputy Assistant
Attorney General and Special Counsel to Edward S. G. Dennis, Assistant Attorney General
in the Criminal Division of the U.S. Department of Justice in Washington.
Noble was Assistant United States Attorney in the Eastern District of Pennsylvania
from 1984 to 1988. In this position he successfully prosecuted the largest public corruption
case in the history of Philadelphia. It involved the Roofers Union, various judges, police
officers and other public officials. He also successfully prosecuted a cocaine conspiracy
involving 80 defendants who sold $50 million worth of cocaine a year. He received the
Director's Award for Superior Performance in 1988.
Prior to serving as an Assistant U.S. Attorney, Noble spent two years as the senior
law clerk to the Honorable Judge A. Leon Higgenbotham, Jr. of the United States Court
of Appeals for the Third Circuit in Philadelphia.
Noble has a J.D. from Stanford Law School, where he was articles editor of the
Stanford Law Review and president of the class of 1982. He earned a B.A. from the
University of New Hampshire where he majored in Economics and Business Administration
and has had articles published in various law journals. Noble was born in Ft. Dix, New
Jersey on Sept. 24, 1956.
-30-
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Document Type: Transcript
Number of Pages Removed: 22
Author(s):
Title:
Department of Treasury Press Briefing by Secretary of the Treasury Lloyd Bentsen
Date:
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URL:
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
AS PREPARED FOR DELIVERY
FOR IMMEDIATE RELEASE
JUNE 14, 1993
REMARKS OF LAWRENCE H. SUMMERS
UNDER SECRETARY OF THE TREASURY
FOR INTERNATIONAL AFFAIRS
BEFORE THE U.S. - KOREA BUSINESS COUNCIL
WASHINGTON, D.C.
It's a pleasure to be here meeting with corporate leaders of Korea and the United
States. As a Treasury official and an economic analyst, I find your focus this year on
financial sector liberalization to be highly appropriate. As we meet today, we have the
opportunity to highlight the tasks facing both our countries as we prepare our economies
to meet the twenty-first century.
The Challenges of the 1990s
The United States and Korea now confront the challenge of renewal in order to
keep pace with the rapidly evolving world. The United States is facing up to its
responsibilities to contribute to a growing global economy. Korea also has a major
responsibility to help make that happen. Importantly, we must work together to bring
about the changes needed if all our futures are to be secure and prosperous.
First, in the United States we are focusing on reinvigorating macroeconomic
coordination with our G-7 partners to spur economic growth. Growth in Europe is weak,
and little better in Japan, despite the stimulus program. Japan's large trade surplus
continues to grow and serve as a drag on other economies. We are seeking additional
action to spur growth.
We have worked hard to restore U.S. credibility in the international economic
arena. The President has offered a sound plan to reduce the U.S. budget deficit and
improve domestic savings and investment, with the emphasis on social and physical
infrastructure -- specifically roads, plant, and equipment to raise our future productivity.
The markets, which are the most critlcal judge, have responded positively with a
substantial decline in long-term interest rates. Most recently, signs of emerging strength
in job creation are generating some confidence that our growth may strengthen as well.
LB-236
-2Second, our focus on growth leads us to what we might call export activism -- for
services as well as goods. Korea, and its leaders of industry meeting here today, know
only too well that strong export growth can fuel rapid domestic expansion and rising
living standards. In the United States, our export growth offset weak domestic demand
growth in the United States until recently and kept our economy moving forward, albeit
slowly. Our export activism recognizes that we cannot have imports without exports, or
exports without imports. As President Clinton said "we must compete, not retreat."
Our export activism is directed at expanded trade, not managed trade. It is
directed at getting other countries to expand their imports, not reduce their exports.
Export activism recognizes that markets are not perfect and that governments sometimes
need to help contribute to a better functioning market. Now our governments need to
make markets more open.
Broadening this to a "market access activism" approach leads us in the financial
sector to open financial markets abroad to U.S. firms, just as foreign firms have access to
our market. Secretary Bentsen expressed this view when he voiced concern during his
confirmation hearing that some foreign countries still do not give U.S. banks and
securities firms a fair opportunity to compete in their financial markets. I think it is fair
to say that Korea could be counted among those countries, as I will detail in a few
moments.
Korea's Economic Future
The high growth achievements of Korea and other Asian nations have been
spectacular. These accomplishments have come as a result of hard work, high savings,
and an uncanny sense of the direction of global markets. Asian firms have moved swiftly
to capture major shares of key industrial markets and have provided low cost, high
quality products.
As we move towards the G-7 summit in Tokyo next month, I believe that many
global economic leaders will be looking beyond Japan. Many other Asian powerhouses
will be providing the basis for strong regional and perhaps even global growth as we
move into the twenty-first century. In the United States we have a keen appreciation of
Asian competitive skills and the potential expanse of Asian markets.
Our skill at developing a fully integrated, truly multilateral global economy will be
tested in the coming months. The United States will be hosting the next APEC
Ministerial in Seattle this fall and looks forward to that opportunity to solidify and
convey our regional aspirations. A United States dis-engaged from Asia will be a
United States diminished -- this Administration will not let this occur.
Korea's growing global influence is demonstrated by several unique and some
-3shared characteristics. Korea's importance to the United States is borne out by the fact
that it is the first bilateral visit of our President outside of the G-7. Korea's role in the
Uruguay Round, its high profile participation in APEC, and its border with one of the
world's few remaining hard-line communist regimes will generate tremendous challenges
and opportunities in the years to come. But if the Republic of Korea is to meet those
challenges it must build on the achievements of its first 45 years. There is much to be
proud of:
In 1962 per capita income was $82 and now exceeds $6700, more than doubling in
the last five years alone.
Over the past 30 years, Korea's real economic growth has averaged over 8
percent.
In 1962 Korea's exports totalled just $43 million, compared to $75 billion last
year.
Today, Korea is the United States' eighth largest trading partner. Korean
shipbuilding, steel, and construction firms are among the most respected
internationally, and many Korean consumer products have become household
names world-wide.
On the political front as well, the Republic of Korea has made truly impressive
strides, perhaps most clearly reflected by the election of President Kim Young Sam, the
first civilian President in more than 30 years. Like President Clinton, President Kim was
voted into office on an agenda for economic and political change. His ambitious anticorruption campaign has garnered strong popular support, giving him the confidence that
we hope will bring equally fundamental changes to the Korean view of its place in the
global economy. Competitiveness will continue to be paramount to every economy; the
opportunity to compete must be open to all players, whether domestic or foreign.
That is the real challenge facing Korea today: does it have the foresight to test
the economy's competitiveness, and in so doing strengthen it? Or, will barriers to
market access in Korea continue to dull the edge of Korean industry while remaining a
major irritant in relations with major trading partners? The next few weeks will provide
the answers to these questions as President Kim and his new government complete their
work on the five year economic plan.
Korean Financial Sector Reform: The Credibility Test
As many of you know, the Treasury Department has engaged the Korean Ministry
of Finance in Financial Policy Talks since early 1990. Over a year ago, in March 1992,
the Korean authorities committed to preparing a blueprint for financial sector
liberalization. Our interests in this process are two-fold.
-4First, we seek opportunity for all our competitive sectors. We want our industry
to be able to invest in Korea and once in Korea, to be able to continue operating on a
sound and equal footing. Korea's domestic market consists of increasingly sophisticated
individuals and firms, making Korea potentially attractive for a wide range of investment.
Second, our financial services industry is a global leader and should have full
access to this important market. Our own financial market is so open and competitive
that, to paraphrase Frank Sinatra, if our firms can make it here, they can make it
anywhere. Our banks, securities firms, and other financial services providers have
technological advantage in many products, including derivatives, syndicated loans, and
securitization. Broadened access to the Korean market would help U.S. firms diversify
internationally their asset portfolios. And the earnings of these financial firms are an
important offset to our merchandise trade deficit.
In the coming weeks the Korean administration will be finalizing its five year
economic plan, which will include a focus on the financial sector. The financial plan
should include the following:
First, decontrol domestic interest rates and cease reliance on "window guidance."
Second, ease restrictions on capital account and foreign exchange transactions
more generally, including restrictions on deferred payments for imports and on
underlying documentation required for foreign exchange transactions.
These restrictions impact most severely on foreign financial institutions,
given their natural business.
Third, abandon directed credit schemes, which limits banks' abilities to lend to
what they perceive to be the most profitable ventures.
Fourth, adopt more indirect means of monetary control, which would free banks
from mandatory purchases of government bonds and allow for freer movement of
capital flows.
Fifth, enhance foreign financial institutions' access to won funding sources which
serve no purpose but to limit the ability of foreign firms to do business in Korea.
Sixth, make the Korean regulatory environment transparent, consistent and open.
We believe that these measures are needed to open the Korean financial sector.
If such clear steps in the direction of market opening are undertaken in this new plan, I
believe we will see the initiation of an expanding bilateral economic relationship with
symbiotic benefits to both the United States and Korea.
-5From Korea's point of view, such steps would bring down painfully high domestic
interest rates and restore incentives to invest in Korea. Enhanced intellectual property
protection and a revamped foreign investment environment would also contribute to
attracting foreign investment and securing leading edge technology.
Steps to open further the stock market to foreign participation would increase the
capitalization of the Korean stock market and help Korean firms diversify away from an
overwhelming focus on debt financing. The Korean capital market would deepen with
such a forward moving approach, making a critically important contribution to Korea's
future.
Uruguay Round
Our bilateral efforts to promote financial sector opening are parallelled in the
Uruguay Round financial services negotiations. A major effort is underway to reach
agreement on market access issues among the G-7 countries by the time of the Tokyo
summit. Our efforts in financial services, however, have been hampered by the large
number of free riders. The most favored nation (MFN) provision of the Dunkel text
requires countries that have open financial markets to extend these benefits to all
countries, even those with closed markets. It provides little incentive for countries with
significant barriers to market access to liberalize.
It is for this reason that the United States has taken an MFN exemption in
financial services and it is our intention to retain that position unless and until others
undertake significant liberalization that will provide meaningful market access for our
financial firms. I would venture to say that without a substantially improved financial
services offer, Korea stands a chance of falling into that category. Korea's dependence
on an open international trade regime for the foundation of its economic success,
highlights Korea's need to take a leadership role in bringing the Uruguay Round to a
successful conclusion. An acceptable Uruguay Round financial services offer would also
enhance greatly the credibility of Korea's liberalization plan.
Conclusion
As Korea moves to join the OECD, a commendable goal, new standards of
economic behavior will be required. Announcing a far-ranging financial sector reform
plan, incorporating it into the Uruguay Round and achieving membership in the OECD
will make Korea a first class economic power. A strong financial sector will be key to
sustaining Korea's economic powerhouse, a goal now all the more important with
unification of the Korean peninsula looming on the horizon.
Korea and the United States both are launching new Administrations voted in
with a mandate for change. Like the U.S., Korea faces new challenges, both political
and economic, and the time has come to devise new approaches to these challenges.
-6-
With expanding trade and financial linkages a positive sum game, I believe that Korea
and the United States can work together to achieve our shared goals. We want to
succeed and we want Korea to succeed.
UBLIC DEBT NEWS
'j
\ ~
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $12,003 million of 13-week bills to be issued
June 17, 1993 and to mature September 16, 1993 were
accepted today (CUSIP: 912794F74).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.05%3.07%3.07%-
Investment
Rate
3.12%3.14%3.14%-
Price
99.229
99.224
99.224
Tenders at the high discount rate were allotted 54%-.
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
27,875
41,091,852
9,580
37,967
87,225
22,918
1,675,752
8,246
8,022
20,606
15,546
867,470
650,455
$44,523,514
Accegted
27,875
10,813,505
6,906
37,967
64,225
22,918
268,292
8,246
8,022
20,606
15,546
58,170
650,455
$12,002,733
Type
Competitive
Noncompetitive
Subtotal, Public
$39,320,058
1,191,876
$40,511,934
$6,799,277
1,191,876
$7,991,153
2,846,580
2,846,580
1,165,000
$44,523,514
1,165,000
$12,002,733
Federal Reserve
Foreign Official
Institutions
TOTALS
LB-237
UBLIC DEBT NEWS
Tenders for $12,007 million of 26-week bills to be issued
June 17, 1993 and to mature December 16, 1993 were
accepted today (CUSIP: 912794E67).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.17%
3.19%
3.19%
Investment
Rate
3.27%
3.29%
3.29%
Price
98.397
98.387
98.387
Tenders at the high discount rate were allotted 58%.
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
21,123
43,662,436
7,225
25,026
171,218
17,414
1,341,288
11,515
5,667
22,848
6,804
665,152
457,620
$46,415,336
AcceQted
21,123
11,303,688
7,225
25,026
64,718
16,574
32,959
11,515
5,667
22,848
6,804
31,472
457,620
$12,007,239
Type
Competitive
Noncompetitive
Subtotal, Public
$41,968,305
818,131
$42,786,436
$7,560,208
818,131
$8,378,339
2,600,000
2,600,000
1,028,900
$46,415,336
1,028,900
$12,007,239
Federal Reserve
Foreign Official
Institutions
TOTALS
LB-238
REMARKS AS PREPARED FOR DELIVERY
FOR IMMEDIATE RELEASE
JUNE 15, 1993
REMARKS OF TREASURY SECRETARY LLOYD BENTSEN
AMERICAN TRUCKING ASSOCIATIONS
WASHINGTON D.C.
Usually they prep me with briefing books on the groups I meet with, but I didn't
need one today. I just picked up the Washington Post yesterday, and I saw this ad and
found out what's on Tom Donohue's mind -- something to do with an energy tax.
Well, somebody at Treasury checked and found out that this little ad cost $13,000
to run. That's a lot of pick ups and deliveries, so I thought I'd show up in person, and
we could talk about this, and I'd save you guys from paying another $13,000!
By the way, I don't know how I get scheduled to give these speeches, but my
timing is always off. If this one isn't difficult enough, well, just before the House vote,
they had me talking to the oil people!
We've been making progress on the President's budget. Today, I want to tell you
about that progress, about growing the economy, about expanding trade in North
America, about things we're trying to do to turn this country around and to get the
deficit down, and about some of the hits on your industry to make that happen.
I was thinking about this. Last year, on this very day, very hour in fact, I was in
Texas having of all things a stretch of highway named after me. Highway 59 between
Laredo and Victoria -- maybe some of you know it. I think more of you will know it as
trade between Mexico and the United States expands.
When you help make improvements and bring jobs to your state, back home they
appreciate it and they want to give you credit for it. That's the nice part of public
sefVIce.
The hard part is when you cut a favorite program. Or you raise taxes. People
know it's to balance the budget, but they don't see the deficits going down. They only
see their taxes going up and they're frustrated, so they attach your name to those kinds
of programs, too.
LB-239
-2-
Remember 1984 -- Walter Mondale? He said flat out that he couldn't balance a
budget unless he raised taxes. He was right. The national debt has gone up almost
$3 trillion since then. But people attached his name to taxes, and he lost 49 states to
one.
I remember in the '70s, when we had the long lines at the pump, and we were
thinking about a 2S-cent gas tax. The Senator from Rhode Island said not only, "no," but,
well, "no" and pounded the desk. I asked why do you feel so strongly? And he said:
"When I passed a one-cent gas tax as the Governor of Rhode Island, they named it after
me and I'll never go for that again."
We're still running into that today. You still see the frustrations, because
Americans hate to lose. Whether it's entitlements, or tax exemptions, or a naval base in
their backyard -- they don't want to lose them.
But there is something that's different. Americans elected leaders in November -both a President and a Congress -- who don't want to see America lose. They aren't
worried about themselves. For a change, they're worried about America.
Here we have leadership who have taken on the most unpopular missions -cutting spending and raising taxes -- so that the country will stop losing.
Here we have a President who sent up a budget that wasn't dead on arrival like
the last four budgets have been. But he's not getting a lot of credit for that.
Here we have a Congress (especially on the House side) that's not milling around
over what goals need to be accomplished. But they aren't getting a lot of credit for
having a clear as a bell vision: fix the books -- not cook them!
As Secretary of the Treasury of the United States, I always feel obligated to tell
audiences how we're doing with the books -- and to do it in plain English and plain
math.
Well, we're doing lousy. I've been in office 147 days and have written $133 billion
in hot checks. Look at it this way: I've already written two times as many hot checks in
147 days as what we're talking about collecting in an energy tax in five year's time.
In fact, if I paid every trucker in the country a dollar for every mile he or she has
driven in an 18-wheeler this year, it wouldn't hit what we've already over spent. And
believe me, the Treasury Building doesn't have shelves stocked full of your delivered
goods to show for it. Just a pile of canceled checks.
This President and this Congress know where this will take us if we keep this up.
-3-
If we do nothing and keep up the status quo, instead of a $300 billion annual
deficit, you would see a $650 billion one by the end of the decade.
Instead of 14 percent of the budget going to interest charges, you would see 20
percent of the budget going to interest charges. That's like having a fixed cost of 20
cents on the dollar that buys you nothing, but it's the first bill come due every month.
If the status quo continued, and health care costs keep rising at the rate of the
past decade, by the year 2000 they would amount to one-fifth of GDP -- $4,300 for every
man, woman, and child in the United States.
If the status quo continued, and real hourly wages continued to follow the trend
of the 1980s, by the year 2000 average real hourly wages would be lower than at any
time since John Kennedy was President.
Enough is enough here. We can't keep the status quo. We can't end the 20th
century -- the American century --- in this shape. What will our kids wake up with in the
year 2000 -- the world's greatest democracy flat broke?
So back in February, the President detailed his plan to revive the economy. He
had specific ideas on where we'd cut some programs. And where we'd raise some
revenues. It was the first time I'd ever seen not a black box sent up to Congress -where you pick your own poison -- but a complete list of cuts.
He came in just like the new CEOs at IBM or GM have come in recently. They
have these proud companies that have lost money, and their job is to turn things around.
But there's a big difference between what a CEO can do in Washington and what
a CEO can do in Armonk or Detroit. In your end of the woods, CEOs are in control.
They can downsize. They can close plants, or layoff white collar workers, or scratch out
product spending, or cut fat. They can go to suppliers or shippers and say: "Hey, cut
your prices if you want our business." And they can do it all behind a shut door with a
board of a dozen looking on.
It's not so easy for a President, who in the wide open view of the press, must
please the majority of 535 very independent Senators and Representatives, please
thousands of lobbyists who don't want taxes slapped on their industries, please a hundred
million voters who don't want their programs cut, please every business -- large and
small, every farmer, every environmentalist, every group with some type of cause.
Oh, and by the way, he has to finish the job in 100 days!
-4-
And this President's task is even more difficult than any past President's task,
because nobody's dealt with the deficit in 12 years. In '81, the debt was under a trillion
dollars. Now it's over four trillion.
Believe me, President Clinton showed great courage to tackle the issue. The
House showed great courage to pass the bill -- and they did it in record time last month.
Now it's the Senate's turn to show the same courage, and I'm confident that will happen.
So far the legislation hasn't pleased everyone. Not everyone likes every piece of
it -- including some Democrats. Not everyone likes every change being made to it -including you, and Tom has made your case very clear to us.
But the President did the job of a good CEO. He made it sure clear where we
need to go in this country. People aren't arguing with his priorities. Everyone shares his
vision. Now the lawmakers are just arguing about how to get there.
How to get $500 billion in deficit reduction.
How to get 50% from spending cuts and 50% from tax increases. Let me point
something out, because there's a lot of misinformation on this one. The cynics say it's
too long on taxes and too short on cuts. The President's plan, as passed by the House,
has five times more spending cuts than President Bush achieved in his first year, and
more spending cuts than President Reagan achieved in his first year in office.
And the lawmakers are figuring out other goals the President set. Such as, how to
protect the most vulnerable in our society, how to make the tax code fairer, how to
preserve investments for small businesses that create jobs and make the economy grow,
and how to tax energy.
Let me say something about the energy tax. The Senate
President and said a BTU tax, in the form it passed the House,
Senate. The President heard them. But he is still in favor of a
so he told them to try another route (keeping in mind it had to
it because he didn't want to return to gridlock.
leadership came to the
would not pass the
broad-based energy tax,
be broad based). He did
It's like driving up a highway, and you come to a sign that says: "Road Closed
Ahead." So you find a detour.
I had House members from Texas tell me they'd vote for the bill in the House
only if they knew the Senate would change it and cut back on the energy tax.
-5-
What emerges from the Senate will be different from the one passed by the
House. That's why we have a conference process after both bodies pass their bills. But
I suspect in the end, the tax on fuel -- your contribution to deficit reduction -- will be no
more than it was when it passed the House.
You know, this is a long-term fix. We didn't get into this mess in the short term,
and we're not going to get out of it in the short term. It's going to be over the long haul.
But already I see positive signs out there.
Horne sales are up (an unbelievable 22 percent last month). Car sales are up.
Those are the two industries that have always brought us out of the doldrums.
Employment is up. 750,000 new jobs have been added since January.
And interest rates are down to 20-year lows. If you went out today and bought a
$120,000 tractor-trailer, you'd be paying $1,000 a year less in interest to finance it than if
you bought it in November. $1,600 less than if you bought it last summer.
People are always saying: "Don't raise my taxes," but the worst tax you can get
isn't an energy tax or a one point higher corporate tax rate. The worst tax is high
interest rates. Don't forget that's the killer. If the markets didn't believe our deficit
reduction package was for real, interest rates would shoot right back up -- trust me.
Now, one last thing I want to mention today is the North American Free Trade
Agreement. I know you're with us on this. You want to see it pass. You have some
concerns on size and weight standards and on investment rights. But you're trying to
work them out.
It will be a tough one to pass. Organized labor is against it, fighting it with
everything they have. They think it will mean jobs heading south, but those jobs can go
south now. I think it will mean products heading south.
Five years ago we had a trade deficit with Mexico. Now we have a $5 billion
trade surplus. U.S. exports to Mexico are triple their 1987 level. Think of what an
explosion in trade between our two countries would do for your business.
I meet with a lot of CEOs from big companies whose goods some of you probably
ship now and whose goods you might ship to Mexico one day. And when I ask them:
"What's the one thing government can do for you?" -- the answer isn't protectionism.
It's not bailouts. It's not less regulation. Over and over I hear: growth. They want
robust growth.
-6-
Look at the airline industry today, and they have a multitude of problems, but one
of their biggest is that business travel is off because so many companies have downsized.
Instead of a growing customer base, they have a shrinking one, and you've seen the
results.
I was in Paris two weeks ago, meeting with finance ministers from 20 some other
nations, and that's what we talked about, too -- growth. Growing economies.
You don't grow by closing doors. You grow by opening doors. By letting
companies compete fairly, under the same rules -- and that's what the North American
Fair Trade Agreement is all about. NAFTA commits Mexico to eliminating tariffs on
u.s. products, which now stand at more than twice the level of our tariffs on their
products.
There's a President in Mexico now (President Salinas), who is an extraordinary
man insofar as promoting reforms and lowering tariffs. He's going to be leaving office at
the end of 1994. We don't know who will succeed him or if the new President will be as
reform minded.
So there's a window open now. We need to pass the legislation. And once we
get the budget through, we're going to be working on NAFTA.
Now, I want to end today with a story John Kennedy used to tell about his early
days as a Senator.
He was participating in a floor debate and that caused him to move closer to the
front from his seat in the back row. He found himself sitting next to Carl Hayden, the
dean of the Senate who had entered Congress 40 years before. And Kennedy asked
Senator Hayden what changes had occurred in that time, and the Senator said: "In those
days, new members didn't speak."
Well not only do new members speak today -- business people speak, taxpayers
from across the country speak, lobbyists speak, the press speaks up, truckers speak up.
I don't know who doesn't speak up.
I just hope some people remember as they're speaking up to get what they want -or to keep their status quo -- that they'll remember to ask: "Why did Bill Clinton get
elected?"
To change America.
Thank you very much.
-30-
FOR RELEASE AT 2:30 P.M.
June 15, 1993
.!
...
CON'1'AC:~:,·
Office of Financing
202/219-3350
TREASURY·S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $24,000 million, to be issued June 24,
1993. This offering will provide about $50 million of new cash
for the Treasury, as the maturing bills are outstanding in the
amount of $23,950 million.
Federal Reserve Banks hold $4,863 million of the maturing
bills for their own accounts, which may be refunded within the
offering amount at the weighted average discount rate of accepted
competitive tenders.
Federal Reserve Banks hold $1,749 million as agents for
foreign and international monetary authorities, which may be
refunded within the offering amount at the weighted average
discount rate of accepted competitive tenders. Additional
amounts may be issued for such accounts if the aggregate amount
of new bids exceeds the aggregate amount of maturing bills.
Tenders for the bills will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public
Debt, Washington, D. C. This offering of Treasury securities
is governed by the terms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356, published as a final rule on
January 5, 1993, and effective March 1, 1993) for the sale and
issue by the Treasury to the public of marketable Treasury bills,
notes, and bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
LB-240
HIGHLIGHTS OF TREASURY OFFERINGS OF WEEKLY BILLS
TO BE ISSUED JUNE 24, 1993
June 15, 1993
Offering Amount .
$12,000 million
$12,000 million
Description of Offering:
Term and type of security .
CUSIP number
Auction date
Issue date
Maturity date
Original issue date
Currently outstanding
Minimum bid amount
Multiples .
91-day bill
912794 E3 4
June 21, 1993
June 24, 1993
September 23, 1993
September 24, 1992
$42,143 million
$10,000
$ 1,000
182-day bill
912794 G9 9
June 21, 1993
June 24, 1993
December 23, 1993
June 24, 1993
$10,000
$ 1,000
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids
Competitive bids
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10%
(2) Net long position for each bidder must be
reported when the sum of the total bid
amount, at all discount rates, and the net
long position is $2 billion or greater.
(3) Net long position must be determined as of
one half-hour prior to the closing time for
receipt of competitive tenders.
Maximum Recognized Bid
at a Single yield
35% of public offering
Maximum Award .
35% of public offering
Receipt of Tenders:
Noncompetitive tenders
Competitive tenders
Payment Terms .
Prior to 12:00 noon Eastern Daylight Saving time
on auction day
Prior to 1:00 p.m. Eastern Daylight Saving time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
statement of the Honorable Frank N. Newman
Under secretary for Domestic Finance
United states Department of the Treasury
before the
committee on Small Business
U.s. House of Representatives
June 16, 1993
Mr. Chairman and members of the Committee, I appreciate this
opportunity to discuss with you the Administration's efforts to
improve credit availability and to promote the growth and
vitality of small businesses.
Many of you have encouraged this
effort, and we believe the Program will be constructive for
months and years to come.
As you are all aware, the United states has spent over two
years in a very slow economic recovery.
A recovery from a
recession characterized, in part, by high corporate, public, and
personal indebtedness.
All business activity is subdued in this
type of economic environment.
Individuals reducing their
personal indebtedness and concerned about keeping their jobs, do
not spend much.
Businesses, unable to generate strong sales
growth and reducing their debt levels, do not seek much new
credit from financial institutions.
They tend to focus on
raising new equity in the stock market or elsewhere to
improve their debt-to-equity ratios.
LB-241
hel~
2
The banking and thrift industries, a crucial source of
business credit, mirror all these financial cross-currents.
They
are experiencing reduced demand for credit from businesses that
do not need to borrow to sell to consumers who are reluctant to
buy.
In addition, the financial services industry has been
recovering from lending excesses of the 1980s, including an
abundance of poor credits that resulted in major loan losses.
For many industries the recession was relatively mild, but for
depository institutions it was one of the worst downturns in
recent American history.
Hundreds of banks and thrifts failed in
the last five years and hundreds more suffered extensive loan
losses.
Banks and thrifts, like individuals and businesses, have
been reducing problem loans, reducing debt, and building equity.
The slow recovery has been particularly difficult for smalland medium-sized businesses.
Many of them tend not to have the
financial strength and staying power of large multi-market and
multi-product organizations.
As a result they do not have access
to as many sources of financing.
Many small businesses lack a
sufficient credit history to get credit from any but those few
lenders that have helped them since they began operations.
It is
especially difficult for small- and medium-sized businesses to
obtain equity financing.
The new Administration is committed to do everything
possible, consistent with sound economic policy, to stimulate
3
economic activity and to create more jobs.
Since small- and
medium-sized businesses are major job creators, we are giving
these businesses special attention.
In addition, small- and
medium-sized businesses often depend more than large companies on
commercial banks for credit, and they have indicated that the
availability of bank credit is unusually meager in this recovery.
Furthermore, many analysts and lenders have identified regulatory
impediments as a constraint on credit availability.
For these reasons, the Administration has committed itself
to increasing the availability of credit within the economy
generally and to small businesses in particular.
This commitment
has taken the form of an Administration Credit Availability
Program and a Cabinet-level Task Force on New and Growing
Businesses.
The remainder of my statement will outline the goals
and achievements of these two initiatives.
I.
The President's Credit Availability Program
On March 10, President Clinton announced a program of
regulatory and administrative changes to improve the availability
of credit, particularly to small- and medium-sized businesses,
farms, and low-income and minority borrowers and communities.
since then, the federal bank and thrift regulators have been
meeting at least weekly to discuss the initiatives and to resolve
4
any problems.
Moreover, we have made a special effort to
coordinate the regulatory programs of the four agencies.
I am pleased to report to the committee that nearly all of
the proposed regulatory changes have been implemented.
A status
report on all of the proposed changes is attached to my
statement.
At this time, I would like to take a few minutes to
discuss some of the more important items and then to highlight
our progress on those items still to be completed.
Program Progress
As of our target date of June 10, the federal bank and
thrift regulators completed the initial phase of the President's
Credit Availability Program.
To alleviate the apparent
reluctance by banks and thrifts to lend, we focused on the
following five regulatory areas.
First, the agencies took steps to eliminate impediments to
lending to small- and medium-sized businesses.
As you all are
aware, small businesses often rely heavily on commercial banks as
a source of funds for operating capital and expansion.
To
address this issue, the agencies on March 30 released an
Interagency Policy statement on the Documentation of Loans.
Under this policy statement, the strongest banks and thrifts can
make and carry some loans to small- and medium-sized businesses
5
and farms with only minimal documentation.
The total of such
loans at an institution will be limited to an amount equal to 20
percent of its total capital.
In addition, the agencies have clarified the examination and
rating procedures relating to the Special Mention category of
loans so that such loans are not improperly grouped with
classified loans.
Currently, bank examiners place weak loans
into one of three classification categories.
substandard, doubtful, and loss.
The categories are
Loans that are classified
generally have the potential for loss, or the loss has occurred.
These loans are carefully reviewed and examiners often require
the bank to set aside additional capital or reserves to back
loans in these categories.
Loans that are not classified, but
may have potential weaknesses that bank management should
address, are often placed in the Special Mention Asset category.
Small business loans are frequently placed in this category
because they involve judgement, which is very subjective.
In the past, the federal banking agencies and thrift
agencies used different terminologies and definitions for the
Special Mention Asset category.
Often, examiners grouped Special
Mention Assets and classified assets into a category called
"criticized assets."
By using the total of criticized assets, as
opposed to classified assets, the examiner put too much emphasis
on Special Mention Assets in judging the quality of the bank's
6
assets.
This treatment makes a serious difference when it is
noted that, historically, within two years of classification, net
charge-offs have averaged some 50 percent of loans classified as
doubtful, 10-20 percent of loans classified as substandard, but
only one to five percent of loans designated as Special Mention.
This illustrates just how harshly small business loans have been
evaluated in this context.
The agencies have thus adopted an Interagency Statement to
ensure that Special Mention assets are not grouped with
classified assets.
This action should address the concern that
the mis-categorization of loans has hindered small business
lending.
Second, the agencies took steps to reduce the burden of real
estate appraisals and to improve the climate for real estate
lending.
On June 4, the agencies published, in the Federal
Register, a proposed rule that would increase to $250,000 the
threshold level at or below which certified or licensed
appraisals are not required.
In addition, the proposed rule
would expand and clarify existing exemptions to the appraisal
requirement, identify additional circumstances when appraisals
are not mandated, and amend existing rules governing appraisal
content and appraiser independence.
The Administration is
concerned that ln some cases, appraisals may prove so expensive
7
that they make a sound small- or medium-sized business loan
uneconomical.
On May 5, the OCC published a proposed rule that revises its
Other Real Estate Owned, or OREO, regulation, which generally
concerns foreclosed property.
The proposed changes will:
(1)
increase and expand the options that a national bank may use to
dispose of OREO,
(2) standardize the legal and accounting
treatment of OREO, and (3) provide flexibility in the financing
of OREO.
This proposed rule will help banks move OR EO off their
balance sheets and into the hands of investors seeking to improve
the property.
The agencies have also issued an Interagency Policy
statement on the Review and Classification of Commercial Real
Estate Loans.
The statement reaffirms guidelines issued in
November 1991 to provide clear and comprehensive guidance to
ensure examiners review commercial real estate loans in a
consistent manner.
Further, the agencies have offered additional
guidance with respect to in-substance foreclosures and returning
nonaccrual loans to accrual status.
Guidance in both areas are
consistent with generally accepted accounting principles (GAAP).
Third, the agencies have taken steps to improve the fairness
and effectiveness of their appeals processes.
In particular,
each agency will ensure that it provides a fair and speedy review
8
of examination complaints.
The OCC has created a new Ombudsman
position to manage its appeals process.
The Ombudsman, who
reports solely and directly to the Comptroller, has the ability
to supersede any agency decision or action during the resolution
of the appeal.
The OCC's appeals process will require that
appeals are resolved in a fair, expeditious manner.
Fourth, the agencies are working to eliminate duplicative
examination processes and procedures.
They have announced an
agreement to better coordinate examinations and to streamline the
examination of multibank holding companies.
Fifth, the OCC has begun using new procedures to detect
discrimination in residential lending by national banks to ensure
that credit is made available broadly and fairly.
In addition to
revised examination procedures, the OCC will develop a pilot
program to use minority and non-minority "testers" to identify
discrimination in the way banks treat potential borrowers.
In
short, this Administration will not tolerate lending
discrimination.
Future steps
Some of the regulatory changes will take a longer time to
implement.
As the attached list indicates, these longer-term
items include a review of paperwork, corporate applications, and
9
documentation requirements.
These tasks involve a fine tuning of
existing requirements, which must be carried out carefully so as
not to exacerbate the problem.
The OCC has also committed to
rewrite and reorganize its regulations to make them clear and
accessible.
As a former banker, I can tell you that this will be
a major task.
One of the most difficult tasks we face is changing the very
cautious culture that pervades the regulatory agencies.
We had a
long recession that caused many problems for financial
institutions.
The regulatory agencies, down to the examiner
level, worked hard to minimize every risk they could, often
urging bankers to be as conservative as possible.
Now the
recession is over, and bankers must get back to prudent risktaking in support of economic growth.
Examiners must also adjust
to the new period of economic expansion, and they must be
comfortable that their supervisors will not reprimand them for
being more balanced, while still promoting safety and soundness.
To achieve this objective, we have developed these rules
which are clear enough for everyone to understand what is
expected.
In addition, there will be training sessions and
meetings for examiners with senior officials to explain the
Credit Availability Program.
series of meetings with
The Comptroller has already begun a
exa~iners
in each of his Office's
10
districts.
This intensive effort to communicate with everyone
about the new Program should speed its full implementation.
As with any proposal, its ultimate success depends on how
well it achieves its objectives.
The regulatory changes we have
adopted should enable banks and thrifts to increase credit
availability.
However, as I stated earlier, many factors affect
the aggregate lending pattern of depository institutions.
We have focused at the outset on regulatory and
administrative changes because these can be implemented in short
order, thereby freeing up much-needed credit as quickly as
possible, consistent with safety and soundness.
As we move
beyond the implementation stage, we will focus more closely on
legislative proposals to improve the availability of credit.
At
the same time, we will continue to review the regulatory
framework within which banks operate to identify any additional
burdens that must be addressed.
We very much consider this
Program an ongoing and cyclical one.
II.
Other Efforts to Promote Small Business Growth
I would like to turn now to some of the other Administration
efforts to promote small business growth.
For example, the
President's National Economic Council has established an
interagency working group on New and Growing Businesses to be co-
11
chaired by the Department of Commerce and the Small Business
Administration.
The Working Group will examine regulatory
burden, lending, capital delivery, technology, export promotion,
and other issues with a particular emphasis on the nexus between
these issues and job creation, innovation, and economic growth.
Within the Group, Treasury staff have been examining
proposals to promote small business growth, from the simple and
well-understood to the more theoretical.
For example, one simple
method of providing credit to the small business community is
through the Small Business Administration's Section 7(a) Program,
which guarantees bank loans to small businesses.
without the
guarantees these borrowers would not be able to obtain credit
under the same terms and conditions.
Funding the 7(a) Program
was part of the Administration's economic stimulus package and a
program that I am pleased to note has the strong support of
Chairman LaFalce and other members of the Committee.
As a result
of that bill's demise, a program that is widely supported and is
annually refunded has suddenly carne to a halt.
Refunding the
Section 7(a) program could get funds to small businesses quickly.
The banking industry strongly supports the program and can start
making new loans as soon as the guarantees become available.
Some of the more innovative proposals would facilitate
investment in small business organizations by investment
companies, enhance the development of a secondary market for
12
securitized small business loans, and create a government
sponsored enterprise for small business loans (as proposed by
Chairman LaFalce).
Each of these proposals recognizes the
benefits provided by the secondary markets we already have for
residential mortgages, school loans, credit card receivables,
auto loans, and so forth, and seeks to obtain the same benefits
through a secondary market for small business loans.
We support the efforts of Chairman LaFalce and others to
examine methods of promoting small business growth.
We have been
and will continue to work with Congress to craft legislation that
best serves the needs of both borrowers and lenders.
III. Conclusion
Enhancing the provision of credit to small- and medium-sized
businesses is a difficult task.
We have already made some
progress by implementing the President's Credit Availability
Program.
We will continue to look at additional potential
methods of improving credit availability to foster economic
growth.
I will be pleased to answer any questions the Committee may
have.
# # # # # # #
Attachment: Status of the Administration's Credit Availability Program
Type of Action
Agencies
Involved
Announcement of the Credit Availability Program: On March to, President
Clinton announced the program.
Interagency
Policy Statement
OCC,OTS,
FDIC, FRB
Completed
3/tO/93
Documentation of Loans: This action eliminates unnecessary documentation
requirements for small- and medium-sized business and farm loans.
Interagency
Pol icy Statement
OCC,OTS,
FDIC, FRB
Completed
3/30/93
Special Mention Assets: The agencies have clarified their examination
procedures to insure that special mention assets are not improperly placed in the
classified asset category.
Interagency
Policy Statement
OCC,OTS,
FDIC, FRB
Completed
6/tO/93
Real Estate Appraisals: The action would increase to $250,000 the threshold
level at or below which appraisals are not required.
Proposed Rule
aCC,OTS,
FDIC, FRB
Published in the
Federal Register
6/4/93
Other Real Estate Owned (OREO): The initiative will: (I) increase and expand
the options that a national bank may use to dispose of OREO, (2) standardize the
legal and accounting treatment of OREO, and (3) provide flexibility in the
financing of OREO.
Proposed Rule
acc
Published in the
Federal Register
5/5/93
Commercial Real Estate Loans: The statement reaffirms guidelines issued in
November 1991 to provide clear and comprehensive guidance to ensure
examiners review commercial real estate loans in a consistent manner.
Interagency
Pol icy Statement
OCC,OTS,
FDIC, FRB
Completed
6/tO/93
In-Substance Foreclosures: The agencies have offered additional guidance with
respect to reporting of in-substance foreclosures.
Interagency
Policy Statement
OCC,OTS,
FDIC, FRB
Completed
6/10/93
Returning Nonaccrual Loans to Accrual Status: The agencies have revised the
accounting for partially charged-off loans consistent with generally accepted
accounting principles (GAAP).
Interagency
Policy Statement
OCC,OTS,
FDIC, FRB
Completed
6/10/93
Completed Regulatory Changes
Status
Attachment Page 1
Completed Regulatory Changes
Type of Action
Agencies
Involved
Status
Appeals Process: The agencies have taken steps to ensure that their appeals
processes are fair and effective.
Agency Program
OCC,OTS,
FDIC, FRB
TheOCC
announced the
creation of an
Ombudsman on
6/10/93
Fair Lending Initiatives: The agencies will strengthen their enforcement of fair
lending laws by revising discrimination detection methods and revising their
consumer complaint systems. In addition to revised examination procedures, the
OCC will develop a pilot program to use minority and non-minority "testers" to
identify discrimination in the way banks treat potential borrowers.
Interagency
Pol icy Statement
OCC,OTS,
FDIC, FRB
Completed
6/10/93
Examination Coordination: The agencies are working to eliminate duplicative
examination processes and procedures. The agencies have announced an
agreement to better coordinate examinations and to streamline the examination of
multibank holding companies.
Interagency
Agreement
OCC,OTS,
FDIC, FRB
Completed
6/10/93
Excess Paperwork Burden: Each agency is individually performing a study of
its paperwork, corporate application, and documentation requirements.
Agency Program
OCC,OTS,
FDIC, FRB
To be
announced at a
later date
R~ulatory
Review: The OCC has committed to rewrite and reorganize its
regulations to make them clear and accessible.
Agency Program
OCC
To be
announced at a
later date
Effectiveness Measurement: The OCC is devising methods to measure the
effectiveness of the Credit Availability Program. For example, it plans to
document whether banks are taking advantage of the provisions of the
Interagency Policy Statement on Documentation for Loans.
Agency Program
OCC
To be
announced at a
later date
Future Steps
,
Attachment Page 2
FOR RELEASE AT 2:30 P.M.
June 16, 1993
CONTACT:
Office of Financing
202/219-3350
TREASURY TO AUCTION 2-YEAR AND 5-YEAR NOTES
TOTALING $27,000 MILLION
The Treasury will auction $16,000 million of 2-year notes
and $11,000 million of 5-year notes to refund $21,591 million of
publicly-held securities maturing June 30, 1993, and to raise
about $5,400 million new cash.
In addition to the public holdings, Federal Reserve Banks
hold $2,152 million of the maturing securities for their own
accounts, which may be refunded by issuing additional amounts
of the new securities.
The maturing securities held by the public include $3,313
million held by Federal Reserve Banks as agents for foreign
and international monetary authorities.
Amounts bid for these
accounts by Federal Reserve Banks will be added to the offering.
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.
Tenders will be received at Federal Reserve Banks and
Branches and at the Bureau of the Public Debt, Washington, D. C.
This offering of Treasury securities is governed by the terms and
conditions set forth in the Uniform Offering Circular (31 CFR
Part 356, published as a final rule on January 5, 1993, and
effective March 1, 1993) for the sale and issue by the Treasury
to the public of marketable Treasury bills, notes, and bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
LB-242
HIGHLIGHTS OF TREASURY OFFERINGS TO THE PUBLIC OF
2-YEAR AND 5-YEAR NOTES TO BE ISSUED JUNE 30, 1993
June 16,
Offering Amount .
Description of Offering:
Term and type of security
Series
CUSIP number
Auction date
Issue date
Dated date
Maturity date
Interest rate
Yield .
Interest Payment dates.
Minimum bid amount
Multiples .
Accrued interest
payable by investor
Premium or discount .
19~3
$16,000 million
,.,
$11,000 million
2-year notes
Series X-1995
912827 L3 4
June 22, 1993
June 30, 1993
June 30, 1993
June 30, 1995
Determined based on the
highest accepted bid
Determined at auction
December 31 and June 30
$5,000
$1,000
5-year notes
Series P-1998
912827 L4 2
June 23, 1993
June 30, 1993
June 30, 1993
June 30, 1998
Determined based on the
highest accepted bid
Determined at auction
December 31 and June 30
$1,000
$1,000
None
Determined at auction
None
Determined at auction
The followinq rules apply to all securities mentioned above:
Submission of Bids:
Accepted in full up to $5,000,000 at the highest accepted yield
Noncompetitive bids
(1) Must be expressed as a yield with two decimals, e.g., 7.10%
Competitive bids
(2) Net long position for each bidder must be reported when the
sum of the total bid amount, at all yields, and the net long
position is $2 billion or greater.
(3) Net long position must be determined as of one half-hour prior
to the closing time for receipt of competitive tenders.
Maximum Recognized Bid
35% of public offering
at a Single Yield
35% of public offering
Maximum Award .
Receipt of Tenders:
Prior to 12:00 noon Eastern Daylight Saving time on auction day
Noncompetitive tenders
Prior to 1:00 p.m. Eastern Daylight Saving time on auc~ion day
Competitive tenders
Full payment wi th tender or by charge to a funds accouri't
Payment Terms .
at a Federal Reserve Bank on issue date
FOR IMMEDIATE RELEASE
June 16, 1993
Contact: Jack DeVore
(202) 622-2960
STATEMENT BY TREASURY SECRETARY LLOYD BENTSEN
I am pleased that a majority on the Finance Committee has agreed on legislation
that meets -- even exceeds -- the President's request for $500 billion in deficit reduction.
The commitee proposal places more emphasis on spending cuts and less on tax increases,
as the President requested.
Our economy is picking up steam, fueled to a great extent by lower interest rates.
The President's courageous fight to end 12 years of inaction and cut the deficit is largely
responsible for these lower interest rates. Democratic committee members are to be
commended for this agreement which advances his program, an important step along the
path to enactment.
-30-
LB-243
Text as Prepared for Delivery
For immediate release
June 18, 1993
REMARKS OF TREASURY SECRETARY LLOYD BENTSEN
TV TOWN MEETING WITH REP. FINGERHUT
CLEVELAND, OHIO
Thank you.
I'd like to keep things very informal, so let me just make a few brief remarks.
Congressman Fingerhut may have a few words, and then we can take your questions.
I came to Cleveland for a couple of reasons. I wanted to get outside of
Washington's beltway to find out what's on your minds, and take that back to President
Clinton. And, I wanted to bring you a message about our economic program.
Many of you have followed this very closely, and it's still under development back
in Washington even as we are doing this program. What's important is that something is
being done about the deficit. We've got a President and a Congress who have realized
that it is time to fix the books, not cook the books.
It took courage for President Clinton to propose our program, and I don't think
either he or the House of Representatives are getting the credit they deserve for getting
this first step through in record time. You know, this is the first time in years a
presidential budget wasn't dead on arrival when it got to Capitol Hill.
There were members in the House, like Congressman Fingerhut, who knew we
had to do something about our deficits, but they had problems with some of the things
we in the administration were trying to do. They made a compelling argument about
their problems with the Btu tax. President Clinton and I listened to what the people of
Cleveland, and all across America were saying. We made it clear there would be
changes down the road. Those changes are being made right now, in the Senate. Once
the Senate is done with the bill, we'll look to see what the conference committee comes
up with to see if it meets our goals.
The important point here is that the Congress is moving forward with the job of
meeting those goals. What we're looking for is something that brings down the deficit by
about $500 billion overall.
LB-244
2
We're looking for something that does it with fair, broad-based energy taxes. We
want a more progressive income tax, with higher rates on the wealthiest 1.2 percent of
American taxpayers who benefitted the most in the last decade. We want a change in
the corporate income tax rate that will affect only 2,700 corporations with incomes of
over $10 million a year. We want necessary cuts in federal spending -- at least as much
in cuts as in taxes. And we want a package that encourages economic growth.
Let me tell you why it is so important that we get a comprehensive program into
place. This is my 150th day in office. So far, I've written about $l35 billion in hot
checks -- that's two or three times more than what our proposed energy tax would bring
in over five years. That's more than five times what the extra gasoline and diesel tax
would bring in. We've had to go out and borrow the money to cover those checks. Our
deficit this year may exceed $300 billion. If we do nothing, in a decade our deficit will
be more than $650 billion.
This year, 14 percent of the budget of the federal budget goes to pay for interest.
If we do not start solving this problem now, in ten years 20 percent of the budget will be
interest payments on our debt.
That's one reason we have to act.
The other reason is just as compelling. Look at the latest economic figures.
Unemployment is starting to come down. Nationally, we're at 6.9 percent. In Ohio, the
adjusted rate is 6.1 percent. In the Cleveland area, it's down more than a full percentage
point from the start of the year -- from 7.6 percent to 6.3 percent. Housing sales are up.
Auto sales are up. We've created about three-quarters of a million new jobs this year.
The economy is growing, slowly, but growing.
And, most importantly, interest rates are at a 20-year low, and our markets are
strong. That's because they anticipate that we'll get an aggressive program in place for
the long term.
Let me ask you: what happens if we don't deliver? I'll tell you. Interest rates will
spike back up. That's the cruelest tax of all, high interest rates. And the stock market
won't like it one bit. This fragile recovery that we've got going now, well, I'm concerned
we might step back into the recession we've been trying so hard to get out of.
There's a lot riding on this, and I'm sure you have some ideas or questions. I'm
here to listen, and answer your questions.
* * *
Text as Prepared for Delivery
For immediate release
June 18, 1993
REMARKS OF TREASURY SECRETARY LLOYD BENTSEN
19TH DISTRICT ROUNDTABLE DISCUSSION
CLEVELAND, OHIO
I'd like to keep things brief and informal, so that we have plenty of time for
questions. Perhaps I can make a few remarks, and then Congressman Fingerhut can
speak, and we can take your questions.
Wherever I go, people ask me how we're doing. I hate to tell you, but the answer
is lousy. That's the bad news. The good news is that we're on track to do a great deal
better.
Today I've been in office for 150 days. So far, I've written about $135 billion in
hot checks. We've had to go out and borrow the money to cover those checks. By the
end of the fiscal year, we will have spent more than $300 billion more than we took in.
We will have paid 14 percent of the entire federal budget for interest payments. We'll
have absolutely nothing to show for it but some cancelled checks and a bigger national
debt.
Let me tell you, if we do absolutely norhing, in ten years we'll be paying 20
percent of our budget for interest, and we'll have annual deficits of more than $650
billion.
Now, the good news is that our program is making excellent progress up on
Capitol Hill.
I want to tell you about that. President Clinton and the House of Representatives
aren't getting enough credit for what they've done. If cutting our budget deficit were
easy, someone would have done it years ago. If it were easy, we'd probably have
balanced budgets now.
But it's not easy. It's difficult, and it takes courage to make some very tough
decisions. President Clinton and the House of Representatives understand that our job
is to fix the books, not cook the books.
LB-245
2
We knew right off the bat that not everyone was going to be happy with every
element of the plan we proposed. Congressman Fingerhut here let us know that the
voters in the 19th District didn't like the Btu tax part of our plan. He and others made a
very persuasive case. We made it clear that we expected changes to be made in the
Senate. There were some courageous votes cast in the House to get the plan through.
Now, we're working with the Senate to get a package that gets our economy
growing again and meets the basic goals of what we set out to do. We want a
substantive amount of deficit reduction -- about $500 billion. We want a broad-based tax
on energy. We want at least a dollar in spending cuts for every dollar in taxes. We want
the tax changes to be fair. We want the top 1.2 percent of our taxpayers to carry a
bigger share of the load. We want a slightly higher rate for 2,700 of our largest
corporations.
The Democrats on the Senate Finance Committee have taken an important step
toward enacting a responsible program. They've even exceeded our deficit reduction
target.
We still have to see what happens in the full Senate, and what happens with the
conference committee. I'm confident that we'll see something that meets our goals.
It's very important that we get a substantial deficit reduction package in place.
We have a fragile recovery going on right now. There are encouraging signs out
there in the latest statistics. Interest rates are at their lowest point in 20 years. Here in
Cleveland, unemployment has fallen by more than a full percentage point since the start
of the year -- from 7.6 percent to 6.3 percent. That's good news. At the national level,
unemployment has finally edged under 7 percent for the first time in 18 months. That's
good news.
Since the start of the year, there have been three-quarters of a million new jobs
created. Auto sales are up. Housing sales are up. Inflation isn't moving much at all.
That's all good news. What we have is the beginnings of a recovery -- tentative and
slow, but an encouraging sign nevertheless.
If I could leave one message here today, it is that we must get a credible package
of deficit reduction in place. If we don't, you're going to see those interest rates spike
back up. If they go up, we run the very real risk of falling back into recession, and we
cannot allow that to happen. But I think we're going to have a good program passed in
Congress this year.
Thank you.
***
EMBARGOED UNTIL 10:00 A.M.
June 18, 1993
STATEMENT OF
MAURICE B. FOLEY
OFFICE OF TAX POLICY
DEPARTMENT OF THE TREASURY
BEFORE THE
SMALL BUSINESS COMMITTEE
U.S. SENATE
Chairman Lieberman and Members of the Committee:
I am pleased to have this opportunity to present testimony today concerning the
Administration's Empowerment Zone and Enterprise Community initiative. The
Administration's original proposal, as submitted as part of the budget, was modified slightly
by the Ways and Means·Committee. That modified version was included in H.R. 2264 as
approved by the House of Representatives on May 27, 1993.
My testimony today will describe for you the major features of L'1e Administration's
proposal. Before I get to that, however, I would like to outline some of the general
objectives and principles that were critical to the development of the proposal.
I.
General Objectives and Guiding Principles
A.
Tax Incentives As Part Of A Broader Strate~y. The Administration believes
that special consideration should be given to the problems of socially and economically
distressed urban and rural areas. A major objective of the Administration's proposal is to
encourage increased business activity in these areas by overcoming impediments to economic
development, such as high crime rates, inadequate public services, and a poorly educated and
unskilled labor force. A number of these impediments may be more appropriately addressed
by specific expenditure programs developed at the local level by private organizations and
local governments.
It is important to recognize that no combination of tax incentive,; will solve the
myriad of social and economic problems confronting these areas. Thus, the federal income
tax incentives that are proposed by the Administration represent only one component of a
more comprehensive approach to addressing these problems. The President has established a
working group on Community Empowerment, chaired by the National Economic Council.
This wor~;::-;g group consists of representatives from the Departments of Housing and Urban
Developmt;i1: (HUD), Labor, Health and Human Services, Agriculture and Treasury, the
Office of Management and Budget, the Small Business Administration, and other agencies.
The Administration also is currently working with Congress on a community development
LJ)aZ46
-2-
bank initiative, welfare reform. and other legislative initiatives, including a spending proposal
to direct existing resources under current federal programs to the 110 empowerment zones
and enterprise communities (hereinafter referred to collectively as "enterprise zones").
Andrew Cuomo from HUD has discussed this particular proposal in more detail.
The federal enterprise zone initiatives will be coordinated by an inter-agency
Enterprise Board. To further broaden the impact of this program, State and local
governments are required to work closely with local organizations and other private interests
to develop a strategic plan for improving the conditions in a nominated area before that area
is eligible for designation as enterprise zone.
The Administration's proposal is intended to attract and support small, large, new and
existing businesses. We recognize that tax incentives are unlikely to influence the behavior
of smaller and newer businesses that do not generate significant tax liabilities. These
businesses, however, will receive assistance from our community development bank
proposal, Treasury's program to relieve the credit crunch, and programs sponsored by the
Labor Department and HUD.
B.
Emphasis on Labor Incentives. Tax incentives can operate to lower the cost of
the two primary inputs for business -- labor and capital. The Administration has proposed a
tax incentive package that emphasizes subsidies for labor for two principal reasons. First,
labor tends to represent a larger operating cost than capital for most businesses. Second,
labor subsidies directly encourage higher employment, which is a key economic goal of the
initiative, while capital subsidies only do so indirectly. 1
Modest capital incentives for investments in tangible assets are aiso included. These
incentives will encourage the construction and rehabilitation of commercial and residential
real estate and the purchase of capital equipment. In addition to these incentIves, the
Administration's budget proposal also included a capital gains investmerat incentive not
limited to, but nevertheless applicable to, investments in certain enterprise zone businesses.
Our emphasis on labor incentives is supported by studies which indicate that the vast
majority of generous capital subsidies benefit the existing owners of capital, with only
modest, indirect benefits accruing to the labor force. Indeed, emphasizing capital subsidies
may lead to lower employment levels because businesses are encouraged to shift from labor
intensive to capital intensive operations.
C.
Balancing Effective Incentives And Budgetary Constraints. Among the more
difficult decisions reached in developing the Administration's proposal involved the number
of empowerment zones to recommend. Budget constraints severely restrict the resources
1 See, for example, the evaluation by the Congressional Research Service entitled
-Enterprise Zones: The Design of Tax Incentives."
-3available for the program. Another consideration is the absence of conclusive evidence
regarding how large federal incentives must be to attract significant business activity. In
addition, we believe that limiting the number of empowerment zones will greatly enhance the
government's ability to monitor the impact that various federal tax incentives and spending
initiatives have in distressed areas. This evidence will allow the government to determine
which initiatives have the greatest impact, and will enable the government to duplicate
successes in a cost-efficient manner. For these reasons, the Administration's proposal
recommends a two-tiered approach, involving the designation of 10 empowerment zones and
100 enterprise communities. We believe that an increase in the number of proposed
enterprise zones, accompanied by a dilution of the incentives, would significantly reduce the
potential for the success of this program.
ll.
Description of Proposal
A.
Designation of Enterprise Zones
1.
In general. As many as 110 enterprise zones, allocated between 10 empowerment
zones and 100 enterprise communities, would be designated in 1994 and 1995. A zone may
be either an urban zone, a rural zone, or an Indian reservation zone. Zones would be
designated only from areas nominated by State and local governments or a governing body of
an Indian reservation, and must meet certain specified objective criteria.
The Secretary of HUD, in consultation with the Enterprise Board, would designate up
to 71 urban zones. Of this number, as many as 6 may be designated as empowerment zones.
Of the urban empowerment zones, at least 1 would be in an urban area with a population of
500,000 or less. In addition, the total population within all the urban empowerment zones
may not exceed 750,000 at the time of designation.
Similarly, the Secretary of Agriculture in consultation with the Enterprise Board
would designate up to 33 rural zones, with as many as 3 designated as empowerment zones.
The Secretary of the Interior in consultation with the Enterprise Board would designate up to
6 Indian reservation tax enterprise zones, 1 of which may be designated as an empowerment
zone. 2
Zone designations generally would remain in effect for 10 years. An area's zone
designation may be revoked if the local government or State significantly modifies the
Rural enterprise zones will be located in areas that are (1) outside a metropolitan
statistical area as defined by the Secretary of Commerce, or (2) determined by the Secretary
of Agriculture to be a rural area. Indian reservation enterprise zones must be located on a
"reservation" as defined in either section 3(d) of the Indian Financing Act of 1974 (25
U.S.C. 1452(d», or section 4(10) of the Indian Child Welfare Act of 1978 (25 U.S.C.
1903(10».
2
-4-
boundaries or does not comply with its agreed-upon strategic plan for the zone (as described
below).3
2.
Eligibility criteria for ZQnes. TQ be eligible fQr designation, a nominated area is
required to satisfy all of the following objective criteria.
Population limits. A nominated area must have a population of at least 15,000 (5,000
for rural zones and no population minimum for Indian reservation zones) and a
population no greater than the lesser of (a) 200,000, or (b) 10 percent of the total
population of the city (30,000 for rural zones and no population maximum for Indian
reservation zones). 4
Geographic limitations. A nominated area must be contained within (a) a continuous
boundary or, except in the case of a rural area located in more than one State, not
more than 3 noncontiguous areas, (b) in the case of an urban zone, not more than two
States (in the case of a contiguous rural zone, not more than three contiguous States),
(c) no more than 20 square miles (1,000 square miles if a rural zone or an Indian
reservation zone) and (d) an area that does not include any portion of a central
business district that has a poverty rate less than 35 percent.
General distress. A condition of pervasive poverty, unemployment and general
distress (indicated by factors such as high crime rates or designation of the area as a
disaster area) must be present in each nominated area.
PoveIt)' rates. Each nominated area must have poverty rates of at least 20 percent in
each of the area's census tracts, poverty rates of at least 25 percent in at least 90
percent of the census tracts, and poverty rates of at least 35 percent in at least 50
percent of the census tracts. S
3 An area's designation as a zone may be revoked only after a hearing on the record at
which officials of the State and local governments (or Indian reservation) are given an
opportunity to participate and the governments have an opportunity to correct any
deficiencies found at the hearing. Any such revocation may take effect only on a prospective
basis.
In the case of an urban area in which the most populous city has a population of less
than 500,000, the zone may have a population of up to 50,000 (Le., instead of being subject
to the 10 percent cap).
4
Each noncontiguous area of a zone must satisfy these poverty reC!,uirements. In
addition, there are special rules for applying the poverty rate requirements. A census tract
with no population is treated as satisfying the 20-percent and 25-percent poverty rate
requirements, but is considered to have a zero poverty rate for purposes of the 35-percent
poverty rate requirement. The designating Secretary may reduce by 5 percentage points
S
-53.
Strategic plan. In order for a nominated area to be eligible for designation as an
enterprise zone, the local government and State in which the area is located would be
required to agree in writing that they would adopt (or continue to follow) a strategic plan
designed to advance the objectives of the federal enterprise zone proposal. The strategic plan
must6 (a) describe the coordinated economic, human, community and physical development
plan and related activities proposed for the nominated area, (b) describe the community
participation process and the extent to which local institutions and organizations have
contributed to the planning process, (c) identify the amount of State, local, and private
resources that would be available in the nominated area and the private/public partnerships to
be used (which may include participation by, and cooperation with, universities, community
development corporations, and other private and public entities), (d) identify the funding
requested under any federal program in support of the proposed economic, human,
community, and physical development and related activities, (e) identify baselines, methods,
and benchmarks for measuring the success of carrying out the strategic plan, and (f) not
include any action to assist any establishment in relocating from one area outside the
nominated area to the nominated area. 7
4.
Selection process and criteria. In designating zones from among the nominated areas,
the appropriate Secretary would take into account the effectiveness of the strategic plan
submitted and the assurances from the State and local governments that the strategic plan will
be implemented. In addition, the Enterprise Board may identify additional criteria to be
considered in the designation process.
B.
Description of tax incentives
The Administration's proposal contains seven tax incentives, all of which would be
available in empowerment zones and three of which would be available in enterprise
communities. These incentives are divided among labor incentives, capital incentives, and a
either the 20-percent, 25-percent, or 35-percent poverty rate requirement for up to 10 percent
of the zone's census tracts (or, if fewer, 5 census tracts).
Required elements of a strategic plan apply to an area located on an Indian reservation
only to the extent that the reservation governing body has legal authority to comply with such
requirements.
6
This limitation does not prohibit assistance for the expansion of an existing business
entity through the establishment of a new branch, affiliate, or subsidiary if (1) the
establishment of the new branch, affiliate, or subsidiary will not result in a decrease in
employment in the area of original location or in any other area where the existing business
conducts operations, and (2) there is no reason to believe that the new branch, affiliate or
subsidiary is being established with the intention of closing down the operations of the
existing business in the area of its original location or in any other area where the existing
business conducts operations.
7
-6savings incentive, and would be available as follows:
Incentives available in empowerment zones:
Labor Incentives:
Wage and training credit
Expansion of targeted jobs tax credit
Capital Incentives:
Increased section 179 expensing
Accelerated depreciation
Qualified enterprise zone facility bonds
Low-income housing credit expansion
Saving Incentive:
Zone resident empowerment savings credit
Incentives available in enterprise communities:
Capital Incentives:
Qualified enterprise zone facility bonds
Low-income housing credit expansion
Saving Incentive:
Zone resident empowerment savings credit
1.
Labor Incentives
Employment and training credit. A 25 percent credit against income tax liability
would be available to all employers for the first $20,000 of wages paid to each employee
who (1) is a zone resident (i&.., his or her principal place of abode is within the zoneS), and
(2) performs substantially all employment services within the zone in "- trade or business of
the employer. 9 This credit would encourage the employment of zone residents by lowering
the cost of labor for zone businesses.
To reduce the long-term cost of the credit, the rate of the credit is phased down after
Employers are expected to undertake reasonable measures to verify an employee's
residence within the zone, so that the employer will be able to substantiate any wage credit
claimed.
8
The credit is not available, however, with respect to any individual employed at any
facility described in present-law section 144(c)(6)(B) (i.e., a private or commercial golf
course, country club, massage parlor, hot tub facility, suntan facility, racetrack or other
facility used for gambling, and any store the principal business of which is the sale of
alcoholic beverages for consumption off premises).
9
-7-
seven years by 5 percentage points per year. Thus, the maximum credit in 2001 would be
20 percent of the first $20,000 of wages, in 2002 it would be 15 percent of such wages, in
2003 it would be 10 percent of such wages, and in 2004 it would be 5 percent of such
wages.
The maximum credit per qualified employee would be $5,000 per year (prior to the
phase down period). Wages paid to a qualified employee would continue to be eligible for
the credit if the employee earns more than $20,000, although only the first $20,000 of wages
would be eligible for the credit. 10 The wage credit would be available with respect to a
qualified employee, regardless of the number of other employees who work for the employer
or whether the employer meets the definition of an "enterprise zone business" (which applies
for certain other tax incentives described below). In addition, the credit is allowable to offset
up to 25 percent of alternative minimum tax liability.
Qualified wages would include the first $20,000 of "wages," defined as (1) salary and
wages as generally defined for FUTA purposes, and (2) certain training. and educational
expenses paid on behalf of a qualified employee, provided that (a) the expenses are paid to
an unrelated third party and are excludable from gross income of the employee under section
127, or (b) in the case of an employee under age 19, the expenses are incurred by the
employer in operating a youth training program in conjunction with local education officials.
The credit would be allowed with respect to both full-time and part-time employees.
However, the employee must be employed by the employer for a minimum period of at least
90 days. Wages are not eligible for the credit if paid to certain relatives of the employer or,
if the employer is a corporation or partnership, certain relatives of a person who owns more
than 50 percent of the employer. In addition, wages would not be eligible for the credit if
paid to a person who owns more than five percent of the stock (or capital or profits interests)
of the employer. An employer's deduction otherwise allowable for wages paid would be
reduced by the amount of credit claimed for that taxable year.
In designing this incentive, careful consideration was given to an incremental credit
intended to encourage only increased levels of employment. The primary argument in favor
of an incremental wage credit is that, in theory, it is a more cost-effective incentive.
However, we rejected such an approach for three reasons. First, an incremental credit
would be much more complex than a flat credit. As a result, many businesses (particularly
small businesses) would not take advantage of it or would not comply with its intricate
requirements. Second, unlike a flat credit, an incremental wage credit rrovides no support
for existing businesses that employ zone residents. We believe that preserving such
businesses is very important to a successful revitalization effort. Third, a major problem
To prevent avoidance of the $20,000 limit, all employers that are members of a
controlled group of corporations (or that are partnerships or proprietorships under common
control) would be treated asa single employer.
10
-8with distressed areas is that businesses typically leave the area once they become successful.
A flat wage credit, as opposed to an incremental credit, would encourage successful
businesses to stay.
Expansion of targeted jobs tax credit. The targeted jobs tax credit (TJTC) would be
expanded under the Administration's proposal so that a person who resides in an enterprise
zone would be a member of a targeted group for purposes of that credit. This credit would
encourage businesses both inside and outside the zones to hire zone residents. However, an
employer could not claim both a TJTC and a zone wage credit with respect to an employee's
wages in the same taxable year. Thus, employers located outside empowerment zones are
entitled to claim the 40-percent TJTC on up to $6,000 of qualified first-year wages paid to
employees who reside within an empowerment zone. Similarly, employers located within
empowerment zones may claim the TJTC with respect to a new employee who resides within
an empowerment zone as long as such employee's wages are not taken into account in
determining the employer's zone wage credit for that taxable year. An employer's deduction
otherwise allowed for wages is reduced by the amount of TITC claime.d for that taxable year.
2.
Capital Incentives
Eligible businesses. Unlike the labor incentives described above, the capital
incentives described below would be available only with respect to trade or business activities
that satisfy the criteria for an "enterprise zone business." These limitations are designed to
target the capital incentives to businesses that are likely to have a significant economic
impact in the zone, while limiting the possibility of abuse. An "enterprise zone business"
would be a corporation, partnership, or proprietorship if, for the taxable year, the following
conditions are satisfied: (1) the sole trade or business is the active conduct of a "qualified
business" (described below) within an enterprise zone, 11 (2) at least 80 percent of the total
gross income is derived from the active conduct of a qualified business within a zone; (3)
substantially all of the use of its tangible property occurs within a zone;, (4) substantially all
of its intangible property is used in, and is exclusively related to, the active conduct of such
business; (5) substantially all of the services performed by employees are performed within a
zone; (6) at least 35 percent of the employees are residents of the zonel2 ; and (7) no more
than five percent of the average of the aggregate unadjusted bases of the property owned by
the business is attributable to (a) certain financial property, or (b) collectibles not held
primarily for sale to customers in the ordinary course of an active trade or business. 13
11
This requirement does not apply to a sole proprietorship.
For this purpose, the term "employee" includes a self-employed individual (within the
meaning of section 401(c)(1».
12
13
An activity will cease to be a qualified enterprise zone business as of the date on
which the designation of the enterprise zone in which the activity is conducted is terminated,
except that the activity will continue to be a qualified enterprise zone business with respect to
-9-
A "qualified business" is any trade or business other than a trade or business that
consists predominantly of the development or holding of intangibles for sale or license, or a
business consisting of the operation of a facility described in section 144(c)(6)(B) (i.e., a
private or commercial golf course, country club, massage parlor, hot tub facility, suntan
facility, racetrack or other facility used for gambling, and any store the principal business of
which is the sale of alcoholic beverages for consumption off premises). Farming is also
excluded unless the unadjusted basis of the assets used by taxpayer in the business total
$500,000 or less. In addition, the leasing to others of any structure or building located
within an enterprise zone is not treated as a qualified business if less than 50 percent of the
gross rental income from the building or structure is derived from property leased to
enterprise zone businesses. The rental of tangible personal property to others is not a
qualified business if less than substantially all of the gross rental income from such property
is from enterprise zone businesses and from residents of an enterprise zone.
Activities of legally separate (even if related) parties are not aggregated for purposes
of determining whether an entity qualifies as an enterprise zone business. Notwithstanding
the particular incentives described below, investments in enterprise zone businesses are
subject to the general loss limitation rules ~, the passive loss rules and the at-risk
limitations) .
Certain of the investment incentives impose limitations based on the type of tangible
property used in an enterprise zone business. Such property, referred to as "qualified zone
property," is depreciable tangible property (including buildings), provided that: (1) such
property is acquired by the taxpayer from an unrelated party after the zone designation takes
effect; (2) the original use of the property in the zone commences with the taxpayerl4; and,
(3) substantially all of the use of the property is in the active conduct of an enterprise zone
business. In the case of property which is substantially renovated by the taxpayer, however,
such property need not be acquired by the taxpayer after zone designation or originally used
by the taxpayer within the zone if during any 24-month period after zone designation, the
additions to the taxpayer's basis in such property exceed the greater of 100 percent of the
taxpayer's basis in such property at the beginning of the period or $5,oooY
(1) the first taxable year of such activity, (2) any property placed in service before the date
of termination of the zone designation, and (3) any property placed in service after the date
of termination pursuant to a binding, written contract in effect before the termination date
(and at all times thereafter).
14 Thus, used property may constitute qualified zone property, so long as it has not
previously been used within the enterprise zone.
Qualified zone property does not include any property to which the alternative
depreciation system under section 168(g) applies, determined (1) without regard to section
168(g)(7), and (2) after application of section 280F(b).
15
-10Increased section 179 expensing. The expensing allowance for certain depreciable
business property provided under section 179 would be increased from $10,000 to $75,000
and extended to all qualified zone property, including buildings. This increase in the
expensing allowance would lower capital costs for small zone businesses and thereby
encourage investment.
As under present law, the section 179 expensing allowance is phased out for certain
taxpayers with investment in depreciable business property during the taxable year above a
specified threshold. For the allowance claimed with respect to qualified zone property, the
phaseout range is increased to $200,000-$350,000 of investment (exclusive of buildings)
made by the taxpayer during the taxable year.
Also as under present law, all component members of a controlled group are treated
as one taxpayer for purposes of the $75,000 limitation and the phaseout. The $75,000
expensing allowance applies at both the partnership and partner levels.
The increased expensing allowance applies for purposes of the alternative minimum
tax ~, it would not be treated as an adjustment for purposes of the alternative minimum
tax). The allowance claimed with respect to qualified zone property would be recaptured if
the property is not used predominantly in an enterprise zone business (under rules similar to
present-law section 179(d)(lO».
Accelerated depreciation. An enterprise zone business would determine its
depreciation deductions with respect to qualified zone property (other than such property that
is expensed under section 179) by using the following recovery period:;:
3-year property ............................. 2 years
5-year property ............................. 3 years
7-year property ............................ .4 years
10-year property ............................ 6 years
15-year property ............................ 9 years
20-year property ........................... 12 years
Nonresidential real property ............. 22 years
By lowering capital costs primarily for larger businesses, allowing accelerated
depreciation would encourage investment in the zone. The shorter recovery periods allowed
for qualified zone property of enterprise zone businesses would be allowed for alternative
minimum tax purposes.
Qualified enterprise zone facility bonds. A new category of tax-exempt private
activity bonds would be authorized for use in empowerment zones and enterprise
communities. "Qualified enterprise zone facility bonds" are bonds 95 percent or more of the
net proceeds of which are to be used to provide (1) qualified zone property for an enterprise
zone business, and (2) land located in the zone the use of which is functionally related and
-11-
subordinate to such a business. Qualified enterprise zone facility bonds would be exempt
from the general restrictions on financing the acquisition of land and existing property
(section 147(c)(I)(A) and (d».
The aggregate face amount of qualified enterprise zone facility bonds allocable to any
enterprise zone business may not exceed $3 million with respect to a particular zone. In
addition, the aggregate face amount of qualified enterprise zone bonds allocable to an
enterprise zone business in all zones may not exceed $20,000,000. Bonds satisfying these
requirements may be pooled and sold as part of a larger issue.
In certain circumstances an issue of qualified enterprise zone facility bonds would
continue to be treated as tax-exempt bonds despite the fact that the issue ceases to satisfy the
requirements relating to financing qualified zone property for an enterprise zone business.
This rule would apply if the issuer and the borrower in good faith attempted to satisfy the
applicable requirements and any noncompliance is corrected within a reasonable period after
the discovery of the non-compliance. However, no deduction would be allowed for interest
on any tax-exempt financing for any period in which the financed facility ceases to be used in
a zone or the principal user ceases to be an enterprise zone business. 16
Qualified enterprise zone facility bonds are allowed a 50-percent exclusion from the
otherwise applicable State private activity bond volume limitations. For a business in an
empowerment zone, more than 50 percent of which is owned by residents of that zone, the
bonds are allowed a 75-percent exclusion from the otherwise applicable State private activity
bond volume limitations.
The general rule requiring banks to forego a portion of their otherwise allowable
interest expense deduction if they invest in tax-exempt bonds does not apply to investments in
qualified enterprise zone facility bonds.
Low-income housing credit expansion. For purposes of the low-income housing
credit (LIRC), census tracts with poverty rates of 30 percent or more within an
empowerment zone or enterprise community would automatically qualify as "difficult to
develop" areas, as defined under section 42(d)(5)(C). In such tracts the eligible basis of
buildings for purposes of computing the credit is 130 percent of the cos( basis. Thus, for
LIHC projects in zones, the credit would be based on 91 percent of present value instead of
the regular LIHC rate of 70 percent of present value. The State credit cap would continue to
apply.
16 The termination of an empowerment zone's designation or any noncompliance due to
bankruptcy would not result in the loss of tax-exempt status of the bonds or the application of
the interest deduction disallowance rules.
-123.
Saving Incentive
Zone resident empowerment savings credit. A 50 percent credit would be available
for a zone employer's contribution to a defined contribution retirement plan on behalf of
employees who (1) are zone residents and (2) perform substantially all employment services
within the zone. The contribution eligible for the credit would be capped at 2 % of the
amount of the employee's compensation up to $35,000 per year. The employer's credit
would be in addition to any employment and training credit (described above). Employers
could make such contributions to the plan unilaterally or match an employee's contribution.
This incentive would be available for all zone employers. The retirement plan would have to
be a qualified defined contribution plan, other than an ESOP or stock bonus plan. Small
employers could make their contributions to simplified employee pensions. The employer
contribution would be required to be 100 percent vested.
m.
Other Relevant Budeet Proposals
A.
Targeted Capital Gains Exclusion. The Administration's budget proposal also
contains a significant incentive for investments in small businesses. U!lder the proposed
targeted capital gains exclusion, noncorporate investors who hold qualified small business
stock for at least 5 years would be permitted to exclude 50 percent of gains realized on the
disposition of their stock. A qualified small business is a subchapter C corporation with less
than $50 million of aggregate capitalization from January 1, 1993, throl.!gh the date the
taxpayer acquires stock in the corporation, that uses substantially all of its assets in the active
conduct of a trade or business during substantially all of the taxpayer's holding period. 17
Qualified small business stock must be acquired directly by an individual taxpayer (or
indirectly by an individual taxpayer through an investment partnership or other pass-through
entity) after December 31, 1992, and at its original issue (either directly from the corporation
or through an underwriter). Subchapter C corporations that hold stock in a qualified small
business would not qualify for the exclusion.
Individuals would be allowed to exclude 50 percent of capital gains realized upon the
disposition of qualified small business stock held over 5 years, and would apply their current
statutory rate on capital gains (either 15 or 28 percent) to the reduced amount of taxable
gain. Gain eligible for the exclusion would be limited to the greater of ten times the
investor's basis in the stock or $10 million for each qualified small business. One half of
any exclusion claimed would be treated as a tax preference item under the individual
alternative minimum tax.
B.
Expansion of the Earned Income Tax Credit. Under the Administration's budget
proposal, the earned income tax credit (EITC) would be expanded and increased by the
Certain activities, including personal service, banking, leasing, real estate, farming,
mineral extraction, and hospitality businesses, cannot be qualified small businesses.
17
-13amount necessary, when combined with a full-time, minimum wage job and available food
stamps, to lift a four-person family out of poverty. This proposal would have a significant
impact upon low-income workers living in distressed areas. The increase in the credit
amount would be phased in over a two-year period beginning after 1983. As under current
law, the income thresholds for both the phase-in and phase-out ranges would be adjusted
each year for changes in the cost-of-living.
The basic credit when fully phased-in would be increased for families with one child
to 34.4 percent of the first $6,000 of earned income (in 1994 dollars). Therefore, the
maximum basic credit amount for families with one qualifying child would be $2,062 (34.4%
of $6,000).18 The basic credit would be phased-out once adjusted gross income (or, if
greater, earned income) exceeds a certain threshold. The phase-out range for families with
one child would begin at $11,000, a lower level than current law, but would end at $23,760,
the same as projected under current law. The phase-out percentage would be 16.16 percent.
The basic credit percentage would also be increased for families with two or more
qualifying children. When fully phased-in, the basic credit percentage would be increased to
39.7 percent of the first $8,500 of earned income. Filers with earnings between $8,500 and
$11,000 would be entitled to the maximum credit of $3,371 (39.7% of $8,500).
The phase-out percentage for these families would be increased to 19.83 percent. As
in the case of the credit for families with one child, the credit would be phased out $tarting at
$11,000. However, the phase-out range for families with two or more children would extend
to $28,000, an increase of $4,240 over current law,, 9
The EITC would also be extended for the first time to low-income workers who do
not have children. Qualifying workers must be age 22 or older and may not be claimed as a
dependent on another taxpayer's return. For these workers, the basic credit would be 7.65
percent of their first $4,000 of earned income. In 1994, the phase-out range for these
workers would be between $5,000 and $9,000 of adjusted gross income (or, if greater,
earned income). The phase-out percentage would also be 7.65 percent.
The current-law supplemental young child credit and the supplemental health
insurance credit would be repealed.
18 For 1994, the Administration's proposal would increase the basic credit to 26.6 percent
of the first $6,000 of earned income.
19 For 1994 the credit rate would be increased to 31.6 percent of the first $8,500 of
earned income, and the phase-out percentage would be 15.8 percent. The phase-out range
would extend from $11,000 to $28,000.
-14-
This concludes my prepared remarks. I would be pleased to respond to your
questions.
DEPARTi\1E1'!T
c: F
-",
I-
******************************************
PRESS COVERAGE
OF SECRETARY BENTSEN'S TRIP
TO OECD MEETINGS AND MOSCOW
JUNE 1-5, 1993
******************************************
TV/RADIO COVERAGE
June 2:
Photo Op at opening OECD sessions
CBS Interview at OECD
CNN Interview at OECD
All three events were aired in Europe and the united
states.
June 3:
Anglo-American Press Club (about 50 reporters attended).
CNN used clips from remarks to this group.
June 4:
CNN morning business news show interview from Red Square
CNN general news interview from Red Square
CBS Morning News
NBC News interview with Bob Abernathy
AP Radio interviews
Press conference at Moscow Press Club
CNN aired entire business show interview and clips were
used from NBC, CNN, and press conference.
June 5:
All four networks filmed Red Square press conference after
meeting with Yeltsin.
CNN used the clips throughout the weekend and ABC, CBS,
and NBC did stories on the evening news.
PRINT COVERAGE
•
According to News Edge retrieval service, 81 separate
stories were written on the Moscow leg of the trip.
•
What follows is a sampling of print stories from the
OECD and Moscow legs of the trip.
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: Newspaper Article
Number of Pages Removed: 45
Author(s):
Title:
Bentsen's Moscow Trip to Aid Reform Highlights the Speed of Privatization
Date:
1993-06-07
Journal:
Wall Street Journal
Volume:
Page(s):
URL:
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
TREASURY NEWS
Department of the Treasurv
Washington, D.C.
FOR RELEASE AT 2:30 P.M.
June 18, 1993
CONTACT:
A
.
•
V
Telephone 202-622-2960
Office of Financing
202/219-3350
TREASURY'S 52-WEEK BILL OFFERING
The Treasury will auction approximately $15,250 million of
52-week Treasury bills to be issued July 1, 1993. This offering
will provide about $250 million of new cash for the Treasury, as
the maturing 52-week bill is currently outstanding in the amount
of $14,992 million.
In addition to the maturing 52-week bills,
there are $23,697 million of maturing 13-week and 26-week bills.
Federal Reserve Banks hold $9,625 million of bills for their
own accounts in the three maturing issues. These may be refunded
at the weighted average discount rate of accepted competitive
tenders.
Federal Reserve Banks hold $3,358 million of the three
maturing issues as agents for foreign and international monetary
authorities. These may be refunded within the offering amount at
the weighted average discount rate of accepted competitive
tenders. Additional amounts may be issued for such accounts if
the aggregate amount of new bids exceeds the aggregate amount of
maturing bills. For purposes of determining such additional
amounts, foreign and international monetary authorities are
considered to hold $910 million of the maturing 52-week issue.
Tenders for the bills will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public
Debt, Washington, D. C. This offering of Treasury securities is
governed by the terms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356, published as a final rule on
January 5, 1993, and effective March 1, 1993) for the sale and
issue by the Treasury to the public of marketable Treasury bills,
notes, and bonds.
Details about the new security are given in the attached
offering highlights.
000
Attachment
LB-247
HIGHLIGHTS OF TREASURY OFFERING OF 52-WEEK BILLS
TO BE ISSUED JULY 1, 1993
June 18, 1993
Offering Amount .
$15,250 million
Description of Offering:
Term and type of security .
CUSIP number
Auction date
Issue date
. . .
Maturity date
...
Original issue date
Maturing amount . . .
Minimum bid amount
. . .
Multiples.
.
364-day bill
912794 L4 4
June 24, 1993
July 1, 1993
June 30, 1994
July 1, 1993
$14,992 million
$10,000
$1,000
0
•
Submission of Bids:
Noncompetitive bids
Competitive bids
Accepted in full up to $1,000,000
at the average discount rate of
accepted competitive bids.
(1) Must be expressed as a discount rate
with two decimals, e.g., 7.10%.
(2) Net long position for each bidder
must be reported when the sum of the
total bid amount, at all discount
rates, and the net long position are
$2 billion or greater.
(3) Net long position must be reported
one half-hour prior to the closing
time for receipt of competitive bids.
Maximum Recognized Bid
at a Single Yield
35% of public offering
Maximum Award .
35% of public offering
Receipt of Tenders:
Noncompetitive tenders
Competitive tenders .
Payment Terms .
Prior to 12:00 noon Eastern Daylight
Saving time on auction day.
Prior to 1:00 p.m. Eastern Daylight
Saving time on auction day.
Full payment with tender or by charge
to a funds account at a Federal
Reserve bank on issue date.
UBLIC:DEBT NEWS
TR~ASURY'S
RESULTS OF
AUCTION OF 26-WEEK BILLS
Tenders for $12,177 million of 26-week bills to be issued
June 24, 1993 and to mature December 23, 1993 were
accepted today (CUSIP: 912794G99).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.18%
3.20%
3.19%
Investment
Rate
3.28%
3.30%
3.29%
Price
98.392
98.382
98.387
Tenders at the high discount rate were allotted 11%.
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
20,770
48,891,396
5,005
81,717
52,220
17,783
1,077,789
10,695
11,912
18,069
6,601
763,196
464,305
$51,421,458
AcceQted
20,770
11,385,002
5,005
37,217
27,220
16,893
57,674
10,695
8,352
18,069
6,601
118,946
464,305
$12,176,749
Type
Competitive
Noncompetitive
Subtotal, Public
$47,481,264
816,623
$48,297,887
$8,236,555
816,623
$9,053,178
2,500,000
2,500,000
623,571
$51,421,458
623 1 571
$12,176,749
Federal Reserve
Foreign Official
Institutions
TOTALS
An additional $65,629 thousand of bills will be
issued to foreign official institutions for new cash.
LB-248
UBLIC.DEBT NEWS
•
1-
i
Department of the Treasury •
l:r l"
du;/
Bureau
1..',
FOR IMMEDIATE RELEASE'
June 21, 1993
2
.: .
v,"
ofthe'pL'1J1k Debt
• Washington, DC 20239
!
,I
'-'
,)
.~'
J Ii
7
CONTACT: Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $12,111 million of 13-week bills to be issued
June 24, 1993 and to mature September 23, 1993 were
accepted today (CUSIP: 912794E34).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.08%
3.11%
3.10%
Investment
Rate
3.15%
3.18%
3.17%
Price
99.221
99.214
99.216
$2,900,000 was accepted at lower yields.
Tenders at the high discount rate were allotted 7%.
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
23,007
40,281,389
9,322
44,374
557,966
21,139
1,780,504
8,823
9,977
16,542
9,968
756,863
706,884
$44,226,758
Accepted
23,007
10,618,439
9,322
44,374
69,716
21,139
349,179
8,823
9,977
16,542
9,968
223,513
706,884
$12,110,883
$39,529,953
1,233,366
$40,763,319
$7,414,078
1.233,366
$8,647,444
2,481,110
2,481,110
982,329
$44,226,758
982,329
$12,110,883
Type
Competitive
Noncompetitive
Subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
An additional $103,471 thousand of bills will be
issued to foreign official institutions for new cash.
LB-249
FOR IMMEDIATE RELEASE
JUNE 21, 1993
Contact: Chris Peacock
(202) 622-2930
U.S., LUXEMBOURG TO NEGOTIATE NEW INCOME TAX CONVENTION
Representatives of the United States and the Grand Duchy of Luxembourg will
meet in Luxembourg during the week of December 6, 1993 to negotiate a new income
tax convention.
The current convention was signed in 1962, and it is now one of the oldest income
tax conventions that either country has in effect. It is intended that the new convention
will reflect the significant changes in each .country's tax laws and treaty policies that have
occurred during the past 30 years.
Person wishing to offer comments or suggestions on the issues to be addressed in
the new income tax convention should write to the Office of the International Tax
Counsel, Department of the Treasury, Washington, D.C. 20220.
-30-
LB-250
FQr Release UpQn Delivery
Expected at 10:00 a.m.
June 22, 1993
STATEMENT OF
LESLIE B. SAMUELS
ASSISTANT SECRETARY (TAX POLICY)
DEPARTMENT OF THE TREASURY
BEFORE THE
SUBCOMMITTEE ON SELECT REVENUE MEASURES
OF THE
HOUSE COMMITTEE ON WAYS AND MEANS
Mr. Chairman and Members of the Subcommittee:
I am pleased to present the views of the Administration on
the miscellaneQus tax proposals that are the subject of these
hearings. These proposals are described in the June 16, 1993
pamphlet prepared by the Joint committee on Taxation: ("JCT
Pamphlet"), and a June 1, 1993 Subcommittee announcement on "Tax
Issues Affecting The Health And Safety Of Inner-city Residents
And Other Miscellaneous Health-related Tax Issues."z
Congress and the Administration are currently in the process
of considering the budget reconciliation legislation. This
legislation represents the largest deficit reduction package in
the history Qf the Nation. The goals which have guided the
Administration in the budget reconciliation process should be
used as a guide as we consider the measures which are before the
Subcommittee today.
These goals include retaining progressivity and fairness in
the tax system: minimizing revenue increases and maximizing
spending cuts without placing an excessive burden on those least
able to afford it: encouraging economic growth: and ensuring that
the deficit does not increase. The Administration is unable to
support proposals that are incompatible with these goals.
The House and the Senate Finance Committee have passed a
revenue bill, H.R. 2264. The Administration supports the
position of the House and Senate Finance Committee that H.R. 2264
should not contain miscellaneous revenue losing provisions.
1 JQint Committee on Taxation,
Description of Miscellaneous
Tax PrQPQsals (JCS-8-93), June 16, 1993.
z ~
Press Release # 3, Subcommittee Qn Select Revenue
Measures, Committee on Ways and Means (June 1, 1993).
1
LB 251
Consequently, the Administration is opposed to expanding the
scope of that bill to include such proposals •. Moreover, we
believe that with respect to proposals that d1rectly relate to
the revenue reconciliation bill, it would be more appropriate to
state the Administration's position as part of the consideration
of that legislation.
The Subcommittee has before it over 170 proposals.
These
proposals are generally not presented as technical corrections,
but represent sUbstantive changes to a wide range of tax
provisions. Many of these proposals deal with complex provisions
of the law.
In many cases, the proposals raise questions of
whether existing law should be thoroughly reviewed and subject to
hearings.
For example, proposed amendments to the rules
applicable to S corporations suggest that it may be time to
review the treatment of S corporations. The last review of S
corporations took place in 1982. Since then, the number of S
corporations has nearly tripled. Moreover, changes in the tax
law, including the repeal of the General Utilities doctrine,
suggest that S corporations may be even more important today.
The Administration believes that all of the S corporation tax
proposals should be carefully considered in the context of a
comprehensive review of the S corporation rules.
This review
should consider among other things simplification and
rationalization of those rules.
We note that H.R. 13 and H.R. 17 contain certain
simplification provisions. Complexity in the tax law raises
serious compliance and administrative problems. These problems
have grown over time and now deserve serious attention.
Accordingly, we look forward to working with interested parties
and Congress in developing simplification proposals, including a
review of the simplification provisions of H.R. 13 and H.R. 17.
The Administration is also aware that many Subcommittee
members are interested in the miscellaneous tax proposals
contained in H.R. 13 and H.R. 17. While the Administration has
not been asked to testify on H.R. 13 and H.R. 17, we note for the
Subcommittee that a number of the items in those bills raise
significant tax policy concerns, which we would be pleased to
discuss at a later time.
In developing our positions on the proposals before the
Subcommittee today we have relied on a number of tax policy
principles. These principles include supporting tax
simplification efforts within the constraints of deficit
reduc~ion; opposing "rifleshot" measures that provide special tax
beneflts.to a ta~g7ted group of taxpayers; opposing purely
retroact1ve provls10ns that seek to supplant the judicial
p~ocess; and considering the administrability of each measure.
Flnally, to the extent that miscellaneous tax proposals represent
tax expenditures, the relevant cost to taxpayers, and the
2
proposed revenue
considered.
ra~sing
offsets, are important factors to be
The Subcommittee has announced that revenue raising measures
and other additional miscellaneous issues will be the subject of
future hearings. 3 The Administration's view with respect to
many of the proposals under consideration today assumes that
appropriate offsetting revenue measures will be proposed.
Consequently, even for tax proposals that are meritorious, they
must be offset by revenue raising provisions that are compatible
with the principles of deficit reduction. Moreover, even if
revenue-raising offsets can be identified, the Administration
will want to work with the Subcommittee and the Congress as a
whole to set priorities for the use of those revenues.
The remainder of my written statement is a detailed
discussion of the Administration's positions on the miscellaneous
tax proposals which are the subject of this hearing. The
discussion follows the order of the proposals described in the
JCT Pamphlet and the June 1, 1993 Subcommittee announcement.
3
See, Press Release #4, Subcommittee on Select
Measures, committee on Ways and Means (June 2, 1993).
3
Revenue
ADMINISTRATION POSITION ON
MISCELLANEOUS TAX PROPOSALS
A.
TAX ACCOUNTING PROVISIONS
1.
Treatment of contributions in Aid of Construction CH.R. 846)
Administration position. Do not oppose. The current treatment
of contributions in aid of construction ("CIACs") was added to
the Internal Revenue Code (the "Code") in 1986.
It could be a
argued that a CIAC represents prepaid income because it replaces
the income flow that the utility would have charged had it been
required to provide the contributed property with its own funds.
However, if the utility is generally restricted to a fixed rate
structure so that it cannot earn a return on the contributed
property, this prepaid income analysis does not appear
appropriate.
As a matter of tax policy, it is difficult to justify excluding
CIACs received by water or sewer companies but not other
utilities. Moreover, there are certain technical issues raised
by H.R. 846, such as whether the proposal should be effective for
binding contracts in effect on the date this committee acts,
instead of the date of enactment.
2.
Capitalization of Certain Costs Associated with Natural
Disasters
Administration Position. Do not support. The Administration is
aware of concerns regarding lost or damaged crops, such as the
problems of the wine industry caused by phylloxera B. The
proposal, however, allows current tax deductions for the cost of
assets that provide increased value to the industry beyond
restoring crops to their condition before the damage occurs.
For
example, the value of a vineyard could be substantially increased
from the use of new technologies related to irrigation systems,
drainage tiles and trellis systems.
From a tax policy
perspective, it appears appropriate to permit current tax
deductions for costs incurred to place a grove, orchard or
vineyard back into the state it was prior to destruction.
In the
case of a vineyard, for example, these deductions include the
costs of removal of infested plants, removal and disposal of old
assets, land preparation and the planting of new plants.
3.
Treatment of Platinum Fabricated into Items Used in a Trade
or Business
Administration Position.
Oppose.
4
Revenue Ruling 90-65 is the
correct interpretation of the tax law. The ruling held that if
economically recoverable precious metals are physically or
chemically fabricated into property used in a taxpayer's trade or
business, and the cost of those precious metals represents more
than half the cost of the new property, the cost of the precious
metals is nondepreciable and is accounted for separately from the
item into which the metals are fabricated. The ruling also
states that any change in method of accounting to conform with
the holding in the ruling must be made with the consent of the
Commissioner and a section 481(a) adjustment would be provided.
The proposal allows the change in method of accounting to comply
with Revenue Ruling 90-65 to be made on a cut-off basis for parts
placed in service in taxable years beginning after August 13,
1990. Allowing the change in accounting method to be made on a
cut-off basis inappropriately permits a deduction for platinum
fabricated into property in prior years, when capitalization was
the proper tax treatment.
B.
FINANCIAL INSTITUTIONS PROVISIONS
1.
Tax Incentives for Minority-owned" Financial Institutions
Administration Position. Oppose.
Incentives to assist minorityowned financial institutions should not be provided through the
tax system, particularly when the incentives are not based upon
economic circumstances. The failure to target the proposal to
disadvantaged persons results in a SUbstantial potential revenue
loss, which we estimate to be approximately $850 million over the
FY 1994-98 budget period.
In addition, the proposed change to the loss carryforward rules
would undermine policies of FIRREA directed at preventing
trafficking in loss carryforwards.
2.
Permit Common Trust Funds to Transfer Assets to Regulated
Investment Companies Without Taxation
Administration position. Do not oppose. This proposal is an
expansion of a related proposal from H.R. 13. This proposal, in
combination with the proposal from H.R. 13, provides that smaller
banks, without sufficient funds to create proprietary mutual
funds, may transfer their common trust funds to one or more
larger mutual funds.
A similar result could be achieved without
this amendment by dividing the trust fund and subsequently
converting the divided funds into RICs. The amendment allows
taxpayers to achieve this result in one step, although there are
some concerns about basis allocation rules.
5
3.
Treat Small Finance Companies as Small Banks for Bad Debt
Deduction Purposes.
Administration position. oppose. The reserve method may distort
both the timing and amount of deductions because it permits
deductions to be claimed before the associated losses occur. The
method may overstate the amount of deductions because the
anticipated losses are not discounted to present value.
If finance companies with assets under $500 million are given the
option of using the reserve method, it will be difficult to
distinguish other similar businesses with receivables on tax
policy grounds. As a result it would be difficult to prevent
further extension of this tax benefit to other similar
businesses.
In addition, the need for a tax subsidy to promote
finance company growth is not apparent.
Finance companies
doubled their market share relative to financial institutions
over the last two decades.
4.
Treatment of Consolidation of Certain Mutual Savings Bank
Life Insurance Departments
Administration Position. Do not oppose. The Administration does
not oppose this proposal as long as it is limited to
consolidation of life insurance departments of mutual savings
banks under section 594 under requirement of state law, the
provision applies only when the policyholders had no rights to
surplus and no voting rights prior to the consolidation, and
their approval was not required in order for the consolidation to
occur.
5.
Tax Treatment of Financial Asset Securitization Investment
Trusts CH.R. 2065)
Administration Position. Do not support. The Administration
generally supports efforts to remove barriers to the efficient
operation of the secondary market for receivables.
Current law
provides more favorable treatment for securitization of mortgages
than for offerings backed by non-mortgage receivables. Mortgages
received special treatment in 1986. Since 1986, the non-mortgage
asset-backed securities market has grown substantially.
The FASIT proposal, however, presents significant problems
regarding complexity, "phantom income," and overall revenue loss.
~he proposal's flexibility (e.g., the ability of the entity to
1ssue debt at any time and to issue multiple classes of equity)
creates the potential for income to completely escape taxation.
Moreover, the proposal's complexity raises serious concerns
reg~r~ing the,Internal Revenue Service's ("IRS") ability to
adm1n1ster th1s area and of the ability of taxpayers to comply
6
with the rules. The Administration is working with interested
parties and Congress to create a simplified structure which would
reduce the potential for abuse, while allowing the necessary
flexibility.
6.
Deductibility of Bad Debt Losses of Nonbank Lending
Institutions
Administration Position. Oppose. The rules concerning bad debts
of federally regulated financial institutions recognize their
special status which is not shared by non-federally regulated
institutions. There are no assurances in the case of unregulated
lenders that the debts will be worthless under general tax
principles when charged off for book purposes, or that uniform
charge-off standards will be applied.
In addition, the absence
of federal regulatory oversight provides unacceptable
opportunities for distortions, particularly in the form of
accelerated charge-offs.
Smaller, privately-held lenders not covered by the proposal would
be disadvantaged relative to their larger, publicly-held
competitors covered by the proposal.
C.
INSURANCE PROVISIONS
1.
Small Life Insurance Company Provisions
(a). Treatment of Small Life Insurance Companies Under the
Alternative Minimum Tax
Administration position. Oppose. The alternative minimum tax
("AMT") was designed to limit the extent to which taxpayers with
economic income could use special deductions and credits to
reduce tax liabilities. Allowing the small company deduction to
be used to reduce adjusted current earnings would conflict with
the purpose of the AMT. The legislative history to the Tax
Reform Act of 1986 specifically addresses the treatment of the
deduction for AMT purposes.
(b). Treatment of Policy Acquisition Expenses of Small Insurance
Companies
Administration position. Oppose. The adoption of rules that
require capitalization of policy acquisition costs improved the
measurement of economic income for all life insurance companies.
Small companies currently qualify for relatively favorable
acquisition cost treatment because a 5 year, rather than 10 year,
amortization period is permitted (in addition to the tax
advantage of the small life insurance company deduction).
No
policy justification exists for rules that provide certain small
7
life insurance companies additional cost advantages over their
competitors.
(c).
Capitalization of Policy Acquisition Expenses for Small
Life Insurance Companies
Administration position. Oppose. Adoption of the rules that
require policy acquisition costs to be capitalized rather than
expensed improved the measurement of economic income for all
insurance companies. There is no justification for assuming a
lower rate of policy acquisition costs for small companies.
Small life insurance companies already qualify for relatively
favorable acquisition expense treatment (as defined by the level
of policy acquisition expenses) because acquisition costs are
amortized over 60 months, rather than the general 120 month
period. There is no policy justification for rules which would
provide small life insurance companies with additional tax
advantages over their competitors.
2.
Treatment of Certain Personal Injury Liability Assignments
(H.R. 1416)
Administration position. Do not oppose. There appears to be no
policy justification, apart from revenue considerations, for
allowing less favorable tax treatment for work-related physical
injury claims than other physical injury claims.
3.
Treatment of Foreign Insurance Companies
Administration Position. Do not oppose, if made applicable on a
prospective basis. While the provisions of current law do not
violate our treaty obligations, we believe the proposed
amendments could improve the operation of the statute.
4.
Treatment of Certain Pension Business with Respect to
Employees of Charitable Organizations
Administration Position. Oppose. The choice of operating as a
for-profit business should carry with it the consequence of being
subjected to Federal taxation. The proposal would allow a single
taxpayer, Mutual of America, to pursue profits for the benefit of
private interests, yet not pay its full share of income tax
during the 5-year phaseout period. As a result the proposal
would grant Mutual of America a competitive advantage in the
market for pension plan administration.
8
5.
Treatment of Certain capital Gains and Losses of a Life
Insurance Company
Administration Position. Do not support. Although life
insurance companies do not get the benefit of section 1231 for
depreciable property used in connection with a non-insurance
business, this is one of many features of the taxation of life
insurance companies that do not conform to the taxation of noninsurance businesses. Any change in the taxation of life
insurance companies must be considered in connection with the
overall scheme of life insurance company taxation.
D.
PASS-THROUGH ENTITIES
1.
Treatment of Certain Large Partnerships Under the Passive
Loss Rules
Administration position. Do not oppose. Application of section
469(k) to large partnerships may facilitate simplified reporting
of partnership losses and eliminate the need for partners to
track accumulated passive losses.
2.
Family S corporations
Administration position. Do not support. If significant changes
are to be made to the treatment of S corporations, proposals
should be fashioned pursuant to a comprehensive, deliberate
process, rather than on a piecemeal basis. This approach
requires a careful consideration of the objectives of the S
corporation regime, how those objectives can better be achieved
and how any changes would interact with the other current forms
of business organization such as limited partnerships and limited
liability companies. The most recent comprehensive reform was
enacted by the Subchapter S Revision Act of 1982. That
legislation was preceded by detailed hearings on the problems
facing S corporations and the objectives to be achieved in
amending the rules. The Congress should follow a similar course
today if it is to consider such comprehensive reforms.
3.
Certain Trusts Eligible to Hold Stock in S Corporations
Administration position. Do not support. The Administration
understands the objectives of allowing customary estate planning
tools to be available in the case of a family-owned S
corporation. However, if significant changes, such as this
proposal, are to be made to the S corporation system, the
proposals should be fashioned pursuant to a comprehensive,
deliberate process, rather than on a piecemeal basis. This
approach requires a careful consideration of the objectives of
9
the S corporation regime, how those objectives can better be
achieved and how any changes would interact with the other
current forms of business organization such as limited
partnerships and limited liability companies. The most recent
comprehensive reform was enacted by the Subchapter S Revision Act
of 1982. That legislation was preceded by detailed hearings on
the problems facing S corporations and the objectives to be
achieved in amending the rules. The Congress should follow a
similar course today if it is to consider such comprehensive
reforms.
4.
Modifications to S Corporation Provisions
Administration position. Do not support.
If significant changes
are to be made to the S corporation system, proposals should be
fashioned pursuant to a comprehensive, deliberate process. This
approach requires a careful consideration of the objectives of
the S corporation regime, how those objectives can better be
achieved and how any changes would interact with the other
current forms of business organization such as limited
partnerships and limited liability companies. The most recent
comprehensive reform was enacted by the Subchapter S Revision Act
of 1982. That legislation was preceded by detailed hearings on
the problems facing S corporations and the objectives to be
achieved in amending the rules. The Congress should follow a
similar course today if it is to consider such comprehensive
reforms.
5.
Treatment of Safe-Harbor Leases of Membership Organizations
Administration Position. Oppose. This proposal to allow netting
of interest income and rental expense from safe harbor leases
applies to a select group of taxpayers and permits retroactive
relief.
It is the Administration's understanding that these
transactions were structured with knowledge that there was a
difficult tax issue regarding the application of section 277 to
the transactions.
In this circumstance, the issue of'
applicability of section 277 to safe harbor leasing should be
left to judicial resolution.
E.
COST RECOVERY PROVISIONS
1.
Depreciation of Semi-conductor Manufacturing Equipment
Administration position. Do not support. changes in depreciable
life of particular categories of property should be made only
after a detailed evaluation of the relevant economic and related
facts and circumstances and review of satisfactory evidence that
justifies a change. The Administration is not now aware of
10
information and analysis justifying a shorter 3-year recovery
period for semi-conductors and is interested in obtaining
additional relevant information.
In consulting relevant factors,
it has been suggested that depreciation benefits in other
countries should be taken into account. However, U.S.
depreciation lives should be determined by the economic life of
assets. A separate depreciable life for each asset based on
other nations' tax treatment of similar assets would be not be
administrable and would not be sound tax policy.
2.
Depreciation of Helicopters Used in Timber Management and
Harvesting
Administration Dosition.
Do not support. Changes in depreciable
life of particular categories of property should be made only
after a detailed evaluation of the relevant economic and related
facts and circumstances and review of satisfactory evidence that
justifies a change. The Administration is not now aware of
information and analysis justifying a shorter recovery period for
helicopters used in timber harvesting. Moreover, a narrow
proposed class is inconsistent with the basic structure of MACRS
depreciation, which consists of broad categories of recovery
periods to provide certainty and reduce administrative burdens.
3.
Allow Passenger Vessels Used in Domestic Trade to Qualify for
Merchant Marine Capital Construction Fund
Administration Position. Maritime issues are currently under
review by the National Economic Council. The CCF program is one
of the most generous tax subsidies in the Code since the economic
value of the tax benefits arising 'from the CCF program exceeds
the economic value of expensing acquired vessels.
Consequently,
extremely compelling arguments must be made to allow additional
benefits.
Vessels operated in domestic trade already receive protection
from foreign competition under the Jones Act. The Jones Act
provides that all vessels operated in the coastwise trade or
inland waterways must be U.S. owned, U.S. built, and U.S.
flagged.
4.
Treatment of Automobiles and Computers Under the Alternative
Minimum Tax
(a). Computers
Administration position. Alternative minimum tax depreciation
treatment is a subject of the Administration's budget proposals
currently under consideration by Congress. Thus, we believe it
11
would be more appropriate to state the Administration's position
on this proposal as part of the consideration of that
legislation.
(b).
Automobiles
Administration position. Alternative minimum tax depreciation
treatment is a subject of the Administration's budget proposals
currently under consideration by Congress. Thus, we believe it
would be more appropriate to state the Administration's position
on this proposal as part of the consideration of that
legislation.
S.
Increase Expensing for Passenger Automobiles
Administration position.
Increased expensing is a subject of the
Administration's budget proposals currently under consideration
by Congress. Thus, we believe it would be more appropriate to
state the Administration's position on this proposal as part of
the consideration of that legislation.
6.
Treatment of Leasehold Improvements to Nonresidential Real
Property
Administration position. Oppose. A principal reason for
including leasehold improvements in the same recovery class as
nonresidential real property was to simplify the Code and thereby
eliminate disputes as to allocations of construction costs
between assets that provide benefits only to the current tenant
and longer-lived improvements. The proposal is of particular
concern because it is quite broad.
It applies to both lessors
and lessees. Virtually any renovation of the interior of a
building would qualify. Moreover, the proposal does not require
rehabilitation to be relate to a specific lessee. Apparently, an
entire rehabilitation of a building, other than the structural
framework, would qualify.
F.
EMPLOYEE BENEFITS
1.
Taxation of Veterans' Benefits CH.R. 786)
Administration position. Support Administration's version ot
this legislation. The Administration supports the objective of
H.R: ?86 and has' submitted to Chairmen Rostenkowski and Moynihan
a s~m~lar proposal to amend section 134 intended to achieve
essentially the same result as H.R. 786. The Administration
would prefer the Administration's legislative language (and
explanatory committee report language).
12
2.
Benefits of Retired Military Personnel Serving as Instructors
in the Junior Reserve Officers' Training Corp (H.R. 736)
Administration Position. Oppose. Compensation paid by public
and private secondary schools should not be treated as a
qualified military benefit. These payments are in the nature of
compensation includable in income, regardless of whether a
particular teacher or administrator has previously been a member
of the military and is therefore particularly qualified for the
Junior Reserve Officers' Training Corp (JROTC) program.
3.
Nondiscrimination Rules Not to Apply to state Judicial
Pension Plans
Administration Position. Do not support. Under current
regulations, tax-qualified plans of governmental employers are
deemed to satisfy the non-discrimination requirements, as amended
by the Tax Reform Act of 1986 and subsequent legislation, for
plan years beginning before January I, 1996. The purpose of the
delayed effective date under current regulations is to provide
adequate time to develop appropriate rules for applying
nondiscrimination requirements to plans of governmental
employers. Although we expect that regulations issued for
governmental plans will recognize the distinct characteristics of
governmental employers, we do not believe that there is a
legitimate tax policy reason to provide a total exemption from
the nondiscrimination rules for anyone class of employees.
4.
Application of Basis Recovery Rules in the Case of a Refund
Feature
Administration Position: Support. This proposal would correct a
technical problem in section 72 that, in some cases, precludes
full basis recovery by annuitants.
5.
Treat ESOPs as Charitable organizations for Purposes of
Transferring stock in a Closely Held Corporation (H.R. 1807)
Administration Position. oppose. We do not believe that the
current charitable estate tax deduction for charitable remainder
trusts should be expanded to cover ESOPs.
6.
Excise tax on Nondeductible Contributions
Administration position. The Administration generally supports
the goals of the proposal. The problems that the proposal
attempts to address are legitimate. A solution that balances the
13
competing interests of maximizing contributions to underfunded
pension plans without allowing some employers to shelter
excessive amounts of income is appropriate. We believe that the
proposal represents a reasonable effort to balance those
interests. We note, however, that the proposal is not
necessarily the only way to address the problem and that this
issue would be better considered in the broader context of
comprehensive legislation relating to the funding of plans
guaranteed by the Pension Benefit Guaranty Corporation. The
Administration has formed an interagency working group on PBGC
issues and intends to propose legislation in the near future.
7.
Leased Employees
Administration Position. Oppose. The safe harbor alternative
would permit service recipients and leasing organizations to
circumvent the existing safe harbor limit on the percentage of
leased employees. This limit protects nonhighly compensated
employees by preventing avoidance of the nondiscrimination rules.
In addition, in a sector of the labor force characterized by high
turnover, the proposed five-year graded vesting is likely to
result in reduced benefits for rank-and-file employees who remain
employed with leasing organizations for a relatively short time.
8.
Deferred Compensation Plans for Volunteer Fire and Rescue
Personnel
Administration position. Oppose. The purpose of section 457 is
to limit the amount of deferred compensation provided by taxexempt and governmental employers. The proposal would
effectively allow certain fire and rescue personnel to defer up
to 100 percent of their compensation. There is no tax policy
reason for distinguishing employees who perform these services
from any other employees of tax-exempt or governmental employers.
9.
"Qualified Football Coaches Plan Technical Corrections Act
of 1993" CH.R. 1981)
Administration Position. 00 not support. The Administration has
concerns about permitting this tax-exempt organization to
maintain a 401(k) plan that was established after the general
grandfather deadline for tax-exempt organizations, that covers
individuals who are not its employees, and whose employers could
permit them to make salary reduction elective deferrals under
403(b) tax-sheltered annuities.
14
10.
Family and Medical Leave Accounts
Administration Position. Oppose. The proposal would
significantly expand the tax preference that is currently
provided for savings plans.
Because of the negative impact on
revenue, we do not believe that such an expansion is appropriate
at this time.
In addition, the proposal does not impose any
nondiscrimination test for contributions.
It is also unclear
whether it would be necessary that the account balance actually
be used for family and medical leave. We believe that Family and
Medical Leave Account plans could reduce employers' incentives to
sponsor traditional employee savings plans that provide greater
benefits to lower-paid employees.
G.
INDIVIDUAL INCOME TAX PROVISIONS
1.
Prohibition of Fees Assessed on Employees Who Elect to
Receive the Earned Income Tax Credit on an Advanced Basis
Administration position. Support. The advance payment option is
available so that recipients of the earned income tax credit may
obtain the benefit of the credit over' the course of the year,
rather than in a lump sum at the time they file their tax
returns. Allowing employers to charge a fee would be
inconsistent with the Administration's goal of providing the
maximum amount of this form of income support to low-income
workers.
2.
Require Employers to Include Earned Income Tax Credit
Information with Annual Wage (W-2) Statement
Administration position. Support. The Administration believes
that this provision will encourage more low-income workers who
are eligible for the earned income tax credit to claim the
credit.
3.
Enhanced Awareness of Advance Payment option of Earned Income
Tax Credit
Administration position. Oppose, if the proposal would require
the IRS to send individuals the Earned Income Credit Advance
Payment Certificate (W-5).
Individuals who receive this form
from the IRS may feel obligated to fill it out, even if they do
not want the advance payments.
If the notification required by
this proposal merely provides that the advance payment option is
available and the IRS receives an appropriation to offset its
administrative costs, we would not oppose this provision.
15
4.
Modify Rule for Construction Workers' Deduction for Travel
Expenses Paid or Incurred in Connection with Employment
Lasting One Year or More
Administration Position. Oppose. It has not been established
that the impact of the amendment of section 162(a) by the Energy
Policy Act of 1992 upon the construction industry is unique or
more burdensome than the impact upon other industries.
Deduction
of expenses for travel away from home may result in the deduction
of personal expenses as business expenses. A universally
applicable fixed time limit (as opposed to the rebuttable
presumption of prior law) is appropriate and should minimize
administrative disputes.
5.
"Fairness for Adopting Families Act" CH.R. 930)
Administration Position. Oppose.
extremely sympathetic to the needs
deduction should not be enacted at
deduction limited to special needs
justification.
6.
While the Administration is
of adoptive parents, this
this time. A more restricted
adoptions would have greater
Exclusion for certain Overseas Allowances Received by
certain Department of Defense Personnel
Administration Position. Do not oppose. Allowing civilian
employees of the Defense Department stationed overseas an
exclusion comparable to the exclusion for employees of the State
Department stationed overseas is reasonable.
7.
Choice of 15% Credit or Deduction for Interest on Student
Loans CH.R. 1667)
Administration Position. The Administration has proposed
comprehensive reform of the student loan system, which is
currently under consideration by Congress.
8.
Defer Gains from Real Property Condemnations
Administration Position. Oppose. The proposed amendment to
section 1033 is overly broad.
Investment of the proceeds from
condemned property in any other property within two years of the
condemnation would permit inappropriate deferral of gain.
9.
Deduction of State and Local Sewer and Water Fees
Administration Position.
Do not support.
16
Allowing a deduction
for state and local sewer and water fees would have a substantial
revenue impact. Deductibility may also create disparities
between taxpayers receiving these services from private utilities
and those receiving similar services from governmental entities.
10.
Extend certain Benefits to Soldiers Serving in Somalia
(H.R. 494)
Administration position. Do not support. This proposal would
preempt the Executive Branch's prerogative by providing "combat
zone" tax benefits without the Executive Order contemplated in
section ll2(c). The Administration has developed and will
support a proposal that extends the benefits of section 7508(a)
to personnel serving in Somalia.
11.
Charitable Deduction for Non-itemizers (H.R. 152)
Administration position. Oppose. The revenue impact of this
proposal would be SUbstantial. In addition, the IRS lacks the
resources to insure reasonable levels of compliance.
12.
Allow Taxpayers Receiving Unemployment Compensation to Elect
Federal Income Tax withholding
Administration position. Do not oppose.
Recipients of
unemployment compensation benefits may be subject to underpayment
penalties because of their failure to pay tax on the benefits
until they file their returns. optional withholding would allow
them to avoid this possibility.
It should also alleviate
collection problems for the IRS.
H.
ESTATE AND GIFT PROVISIONS
1.
Treatment of Retirement Benefits Under Community Property
Laws
Administration position. Support with technical modifications.
The Administration generally supports legislation to clarify the
availability of the marital deduction where the non-participant
spouse in a community property state predeceases the participant
spouse.
2.
Treatment of Land Subject to Permanent Conservation Easement
(H.R. 2031)
Administration position. Oppose. We believe that the deduction
allowed under current law for the grant of a charitable easement
17
is sufficient. The proposal would permit an exclusion for
surrounding land of unlimited value from the gross estate, rather
than the value of the charitable easement alone. The proposal
would be subject to abuse and would substantially erode the tax
base.
3.
Estate Tax Valuation of Family-owned Media Businesses
Administration position. Oppose. We are generally opposed to
special valuation rules targeted to specific industries. Current
law allows for the determination of appropriate estate tax values
for these types of businesses and should not be changed in the
manner proposed.
4.
Increase Maximum Reduction Under Special Use Valuation
Election CH.R. 1411)
Administration Position. Do not oppose.
that the maximum of $750,000 by which the
may be reduced under section 2032A is not
not oppose an appropriate increase in the
acceptable legislation.
5.
If Congress decides
value of real property
sufficient, we would
context of otherwise
Tax Treatment of Certain Disclaimers
Administration Position. Oppose. The proposal would open up the
statute of limitations for a one-year period. The United States
Supreme Court is scheduled to decide this issue in the case of
Irvine v. U.S. We believe that the issue should be resolved by
the courts.
6.
Estate Tax Recapture from Cash Leases of Specially Valued
Property
Administration Position.
prospective basis only.
7.
Support.
We support the proposal on a
Estate Tax Marital Credit for Certain Employees of
International Organizations (H.R. 770)
Administration Position. Support, with technical modifications.
The Administration believes that the proposal is consistent with
the United States' special role as host to international
organizations.
18
I.
1.
POREIGN TAX PROVISIONS
Treatment of Foreign Base Company Sales and Services Income
of Controlled Foreign Corporations in the European Community
Administration Position. Oppose. Although the European
Community is moving towards economic integration, the lack of
direct tax harmonization creates inappropriate tax-planning
opportunities.
2.
Pass-through Treatment for Certain Dividends Paid by a
Regulated Investment Company to Foreign Persons (H.R. 1891)
Administration position.
Do not oppose in part. We do not
oppose the provisions of the bill that would treat RIC dividends
as "interest-related dividends" to the extent attributable to
interest income that would be exempt from u.S. tax if earned
directly by a foreign person or as "short-term capital gain
dividends" to the extent attributable to the excess of short-term
capital gains over long-term capital losses. We also do not
oppose the proposed treatment of RIC shares for estate tax
purposes. We believe that these provisions will enhance the
ability of u.S. mutual funds to attract foreign investors and
eliminate needless complications now associated with the
structuring of vehicles for foreign investment in u.S.
securities. However, we oppose the provision that would treat
RIC dividends as "taxable interest dividends" to the extent
attributable to interest income that would be taxable if earned
directly by a foreign person. This provision would unilaterally
extend to foreign investors in u.S. RICs the benefits of the
reduced withholding rates for interest provided in our income tax
treaties, with no guarantee that comparable benefits will be
provided for u.s. investors by our treaty partners.
3.
Treatment of Software Licensing Income Earned by a Foreign
Sales Corporation
Administration position. At this time an inter-agency task force
is reviewing our export program.
It would be premature to
propose any change in these rules at this time.
4.
Expand Foreign Sales Corporation Exemption for Military
Property
Administration position. At this time an inter-agency task force
is reviewing our export program.
It would be premature to
propose any change in these rules at this time.
19
5.
Treatment of u.s. Bank Deposit Interest Received by
certain Netherlands Antilles Subsidiaries
Administration position. oppose. There is no tax policy justification for treating as foreign source bank deposit interest
that would otherwise be u.s. source.
6.
Carryforward of certain Pre-1987 Foreign Base Company Shipping Losses
Administration position. At this time an inter-agency task force
is reviewing our shipping program.
It would be premature to
propose any change in these rules at this time.
7.
Deferral of u.s. u.s. Tax on certain Reinvested Foreign Base
Company Shipping Income
Administration Position. At this time an inter-agency task force
is reviewing our shipping program.
It would be premature to
propose any change in these rules at this time.
8.
Treatment of Certain Investments of Earnings of Controlled
Foreign Corporations in u.s. Property
Administration Position. Oppose. We do not object to studying
the proposed changes, as the House version of H.R. 2264 would
require. However, we believe that it is important to consider
the proposed exception carefully, to ensure that it does not
undermine the general purposes of subpart F. We note, for
instance, that the proposal does not simply treat loans to
noncorporate and corporate U.S. persons identically. Unlike the
current corporate provision, it appears that the proposal would
provide an exception for loans made by a controlled foreign
corporation to a noncorporate u.s. entity that is 25-percent or
more owned by 10-percent u.s. shareholders of the controlled
foreign corporation.
9.
Election to Treat Controlled Contiguous Country Corporations
as Domestic Corporations
Administration Position. Oppose. Section l504(d) has no sound
tax policy basis. Extension of section l504(d) to all Canadian
and Mexican subsidiaries would therefore not further a tax policy
purpose and would effectively provide an election to claim losses
incurred by those subsidiaries.
20
10.
Revise Application of Interest Allocation Rules in the Case
of Certain Financial Service Providers
Administration Position. Do not oppose. This provision recognizes the disadvantage suffered by diversified multinationals
under the present interest allocation rules by virtue of the
dramatic differences in leverage associated with financial and
nonfinancial businesses. The provision raises, however, administrative concerns. The existing separate group rule is administrable, because it is limited to commercial and savings banks
that are required by federal or state regulation to operate
independently from any non-financial affiliates.
If the separate
group rule is expanded to include financial businesses that are
not subject to a legal requirement of independent operation,
anti-abuse rules will be necessary to prevent the transfer of
funds between financial and non-financial affiliates through
dividends, capital contributions, loans and other means. These
rules would be difficult to administer.
11.
Section 936 Treatment for Income from Investments in certain
South American Countries
Administration position. Oppose. Adding more countries to the
list of eligible borrowers would unacceptably dilute the benefits
of the program.
12.
Allocation to u.S. Source Income of Deductions for Taxes
Paid to State and Local Governments
Administration position. Oppose. The Supreme Court has held
that a state may tax foreign source income if the income has a
sufficient nexus with taxpayer activities in the state. Mobil
Oil Corp. v. commissioner of Taxes, 445 U.S. 425 (1980). As a
result, states can and do tax income that is treated as foreign
source for federal income tax purposes (~, foreign source
dividends, income from export sales). When a state tax is
imposed on foreign source income, it is related, and thus allocable, to foreign source income under the provisions of the Code
and Treasury regulations governing allocation of state tax
payments. These allocation rules are tax accounting rules that
permit an accurate determination of US and foreign source income
by matching expenses to the income to which they relate. The
expense allocation rules should not.be used to subsidize
taxpayers' earning of foreign source income.
21
13.
Commodities Income of a Controlled Foreign Corporation
Administration position. oppose. The "substantially all"
requirement should not be deleted from the statute, because it
plays an important role in ensuring that the exception is limited, as intended, to taxpayers actively engaged in a commodities
business.
14.
Increase in Reporting Threshold for Stock Ownership of a
Foreign Corporation
Administration position. Do Dot oppose. Although the basic
corporate information collected under section 6046 is valuable,
raising the reporting threshold to 10 percent does not significantly jeopardize that interest and would ease the filing burden
of u.s. shareholders holding minority interests. These persons
may find it difficult to obtain the information that must be
reported.
15.
Exempt Certain Income of Foreign Financing and Credit
Services Companies from the Rules Applicable to Passive
Foreign Investment Companies ("PFIC")
Administration position. Oppose. This proposal raises major
administrative problems. The PFIC provisions eliminate the
benefit of deferral for U.S. persons investing in foreign investment funds. The current and proposed exceptions are intended to
permit certain active businesses to retain deferral, to the
extent that the income would not otherwise be picked up under
subpart F. These are, however, very difficult lines to draw and
we think that, with the addition of the proposed exceptions, the
appropriate lines will have been drawn. Therefore, Treasury
should not be given authority to create additional exceptions.
16.
Extension of Period to Which Excess Foreign Taxes May be
Carried
Administration Position. Do Dot support. There is no apparent
reason for harmonizing the foreign tax credit carryover periods
with the carryover periods for NOLs. These provisions serve two
distinct purposes. While NOL carryover rules are designed to
perm~t averaging of income and loss over several years, the
cred~t carryover rules were intended to mitigate timing differences between u.S. and foreign laws. The section 904 "baskets"
~ere designed to foreclose averaging of high- and low-taxed
~ncome.
On the other hand, harmonizing the carryback rules is
sensible from an administrative prospective and should be
22
considered in connection with the simplification of the foreign
tax provisions.
J.
NATURAL RESOORCES PROVISIONS
1.
Timber Provisions (H.R. 1997)
(a).
Reduce Capital Gains on Timber for Domestic Processing
Administration position. Oppose. Creating a capital gains
indexation regime on an ad hoc, partial basis would be unfair and
could result in unjustified tax benefits.
It is more appropriate
to consider these proposals after Congress completes its work on
the deficit reduction legislation.
(b). Amend Certain Provisions Relating to the Export of Unprocessed Timber
Administration position. A provision relating to the export of
unprocessed timber is a subject of the budget reconciliation
proposals currently under consideration by Congress.
Thus, we
believe it would be more appropriate to state the
Administration's position on this proposal as part of the
consideration of that legislation.
2.
Repeal Related-party Sales Requirement for Nonconventional
Fuels Production Credit
Administration position. Do not oppose. There is no compelling
reason to limit the section 29 credit to situations where gas is
sold to an unrelated person. The purpose of the credit is
satisfied and there is little potential for abuse because the
selling price is not relevant to the credit amount.
3.
Tax Credit for Oil and Gas Produced from Marginal Properties
Administration position. Oppose. Marginal properties were
provided substantial tax advantages in recent tax legislation.
We have seen no evidence that tax liability is currently acting
as a barrier to production on these properties. Moreover, there
is no reason that marginal production credits should be subject
to more favorable treatment for AMT purposes than other tax
credits. Use of credits against AMT liability is contrary to the
purpose of the AMT to assure that taxpayers with economic income
are subject to tax.
23
4.
Determination of Independent oil and Gas Producer status
Proposal #1. Allow the per day barrel limitation to be computed
on an average annual basis, rather than a per day basis.
Administration position. support. A maximum level of refined
oil should be computed on an annual basis.
Proposal #2.
Increase the per day limitation to either 75,000
barrels or 100,000 barrels, presumably in conjunction with
proposal #1 above.
Administration position. Oppose. The current 50,000 barrels of
production threshold was carefully considered. There is no tax
policy reason for adjusting the threshold.
Proposal #3. Allow regulated public utilities who sell gas to
ignore sales of gas to customers in determining independent
producer status.
Administration position. Oppose~
Producers that are sufficiently integrated to sell at retail are probably large companies
of the type intended to be excluded from percentage depletion.
Regulated public utilities, which tend to be relatively large
companies, should not be given a favorable rule for purposes of
determining whether they qualify as independent producers.
5.
"The Renewables and Energy Efficiency Incentives Act of 1993"
(H.R. 2026)
Administration position. The Energy Policy Act of 1992 represented a careful consideration of many of the issues raised by
the proposals in H.R. 2026. Moreover, many of the other proposals are the subject of the energy tax proposals included in the
current budget legislation. Thus, we believe it would be more
appropriate to state the Administration's positions on these
proposals as part of the consideration of that legislation.
6.
Permit Energy Credits to Offset Alternative Minimum Tax
Administration position. Oppose. There is no reason that energy
credits should be subject to substantially more favorable treatment than other tax credits.
In addition, the purpose of the
AMT, to assure that taxpayers with economic income are subject to
tax, will be weakened if credits may be fully utilized against
it.
24
7.
Treatment of Certain Timber Activities Under the
Passive Loss Rules (H.R. 960)
Administration position. After the Forest Conference President
Clinton directed the Cabinet to develop a comprehensive and
balanced solution to timber-related economic and environmental
issues. A change in the tax law at this time would be premature.
As a result of the limited management services to be provided
with respect to small, family-owned timber farms, the 100 hour
material participation requirement in some cases may result in
treatment of these businesses as passive activities. However,
the proposal is overbroad in at least two respects. The justification for exempting these businesses from the regulatory
requirements is not apparent if non-family members provide more
hours of management services than family members or the farms are
not in fact small.
8.
Exclusion from Income of Utility Energy Conservation
Subsidies
Administration position. Oppose. Retroactive application of the
exclusion from gross income provided in the Energy Policy Act of
1992 will not serve its intended purpose of encouraging conservation subsidies by utilities.
K.
HOUSING TAX PROVISIONS
The low-income housing tax credit ("LIHTC"), since its
enactment in 1986, has grown significantly more complex, to the
point that it is one of the longest provisions in the Code. The
Administration believes that it is not in the best interest of
taxpayers or the government to further complicate these provisions. Consequently, it may be appropriate to review the lowincome housing tax provisions with a view toward making these
rules simpler and more administrable.
1.
Low-Income Housing Tax Credit -- Tenant Protection
Administration position. This proposal is currently included in
the Senate Finance Committee's budget reconciliation bill. Thus,
we believe it would be more appropriate to state the
Administration's position on this proposal as part of the
consideration of that legislation.
25
2.
Low-Income Housing Tax Credit -- Community Service Areas
Administration position. Do Dot support. The LIHTC is a credit
for housing and functionally related facilities.
Under this
proposal, community service buildings would qualify for, the ,
credit if they are "predominantly" used by tenants. Th1S m1ght
allow as much as 49 percent of the use to be for persons other
than residents.
3.
Low-Income Housing Tax Credit -- Rent Skewing
Administration position. This proposal is currently included in
the Senate Finance Committee's budget reconciliation bill. Thus,
we believe it would be more appropriate to state the
Administration's position on this proposal as part of the
consideration of that legislation.
4.
Low-Income Housing Tax Credit -- State Credit Authority
Limitation: Stacking Rule
Administration position. Do Dot support. This change would
effectively allow states to carryover unused authority for an
unlimited period. Although this change should have little
revenue impact, it could significantly reduce the flow of credits
to the national pool. This could result in an inefficient use of
the credit by benefiting States that could not use all of their
credit authority at the expense of the States that did use all of
their credit authority.
5.
Low-Income Housing Tax Credit -- Projects Financed by Tax
-Exempt Bonds
Administration Position. Oppose. This'proposal could increase
the federal benefits to developers of these projects beyond the
amount necessary as a subsidy.
6.
Low-Income Housing Tax Credit -- Qualified Census Tracts and
Difficult Development Areas
Administration Position. Oppose. This change would have a
significant revenue cost. The designation of an area as difficult to develop results in a significant increase in the amount
of the federal subsidy provided to projects developed in those
areas. Because the designation standards contained in the
proposal are not completely objective it is important that a
federal agency continue to oversee the designation of these
26
areas.
7.
Low-Income Housing Tax Credit -- State Credit Authority
Limitation: De Minimis Rule
Administration Position. Oppose. The proposal lacks objective
standards. The lack of uniform criteria for determining costs
could make this proposal difficult to administer and enforce.
8.
Low-Income Housing Tax Credit -- Project Eligible for
Rehabilitation Credit Even if Interior Walls not Preserved
Administration Position. Oppose. This change removes one of the
significant limitations on the availability of the rehabilitation
credit.
In effect, this change would merely increase the tax
benefits available for a narrow class of low-income housing tax
credit projects.
If the tax benefits for low income housing are
determined to be insufficient, a more direct approach to increasing those benefits should be taken.
9.
Low-Income Housing Tax Credit -- Rehabilitation Credit Income
Limit Not to Apply To Certain Low-Income Housing Projects
Administration Position. Oppose. The proposal would substantially expand the existing exception to the passive loss rules
for the rehabilitation credit. The proposed expansion would
principally benefit high-income individuals and would undermine
the passive activity loss rules enacted as part of the Tax Reform
Act of 1986.
10.
Low-Income Housing Tax Credit -- Tenant Occupancy
Requirement
Administration position. Oppose. The credit already provides a
sUbstantial subsidy to encourage developers to provide housing to
individuals and families with low-incomes (i.e., those below 50
or 60 percent of median income).
Because this proposal permits a
credit to be taken on units occupied by tenants whose incomes
exceed the current income thresholds, this proposal could reduce
the number of units available to tenants who qualify as lowincome tenants under present law.
If it is desirable to have the
LIHTC benefit people with even lower incomes, a more comprehensive proposal should be considered.
27
11.
Low-Income Housing Tax Credit -- Student Housing
Administration Position. This proposal is currently included in
the Senate Finance Committee's budget reconciliation bill. Thus,
we believe it would be more appropriate to state the
Administration's position on this proposal as part of the
consideration of that legislation.
12.
Low-Income Housing Tax Credit -- Tenant Occupancy
Requirement: De minimis Errors
Administration Position. This proposal is currently included in
the Senate Finance Committee's budget reconciliation bill. Thus,
we believe it would be more appropriate to state the
Administration's position on this proposal as part of the
consideration of that legislation.
13.
Low-Income Housing Tax Credit -- Tenant Occupancy
Requirement: Annual Recertification
Administration Position. This proposal is currently included in
the Senate Finance Committee's budget reconciliation bill. Thus,
we believe it would be more appropriate to state the
Administration's position on this proposal as part of the
consideration of that legislation.
14.
Low-Income Housing Tax Credit -- Credits in the Year of
Disposition
Administration position. Do not oppose.
For the portion of the
year up to the date on which the project is sold, the seller has
provided low-income housing and should receive the credit through
that date.
15.
Low-Income Housing Tax Credit -- Allocation Between Buyer
and Seller (exact days/mid-month convention)
Administration position. This proposal is currently included in
the Senate Finance Committee's budget reconciliation bill. Thus,
we believe it would be more appropriate to state the
Administration's position on this proposal as part of the
consideration of that legislation.
28
16.
Low-Income Housing Tax Credit -- Treasury Authority to Waive
Requirements Regarding Third-party Verification
Administration Position. This proposal is currently included in
the senate Finance Committee's budget reconciliation bill. Thus,
we believe it would be more appropriate to state the
Administration's position on this proposal as part of the
consideration of that legislation.
17.
Treatment of Certain Housing Cooperatives
Administration Position.
Do not support.
Although it may be
appropriate to treat income from parking and laundry facilities
(attributable to use by tenant-stockholders and their guests) as
patronage sourced, interest on reserves and rental income should
not be patronage sourced.
18.
Treatment of Rehabilitation Tax Credit with respect to
Certain Central Business Districts Under the Passive Loss
Rules
Administration Position.
19.
Treatment of Rehabilitation Tax Credit Under the Passive
Loss Rules (H.R. 1406)
Administration Position.
20.
See response to number 20, below.
See response to number 20, below.
Modification of Rehabilitation Tax Credit Limits Under the
Passive Loss Rules
Administration Position. Oppose. Proposals 18, 19 and 20 would
substantially expand the existing exception to the passive loss
rules for the rehabilitation credit. The proposed expansion
would principally benefit high-income individuals and would
undermine the passive activity loss rules enacted as part of the
Tax Reform Act of 1986.
In this regard, it is difficult to
justify additional special treatment at this time for the
rehabilitation credit as opposed to any other credit or
deduction. Treasury estimates that H.R. 1406 would result in a
revenue loss of about $1 billion during the FY 1994-98 budget
period.
29
21.
Treatment of Cooperatives owning Only Land (H.R. 1418)
Administration position. Do not oppose, if prospective.
The
Administration is not aware of any reason why land cooperatives
should not be entitled to the same treatment as housing cooperatives. However, the retroactive effective date (to December 31,
1987) is not appropriate.
22.
Decrease Recovery Period to 15 Years for certain Low-Income
Housing Property and Provide Other Special Rules
Administration position. Oppose. Generous tax advantages,
including substantial credits and relief from the passive loss
rules, already exist for low-income housing and rehabilitation.
Shortening the depreciable life to 15 years, doubling the exception to the passive loss rules (from $25,000 to $50,000), eliminating the income phaseout for the exception to the passive loss
rules, and reducing the depreciable life for AMT purposes (from
40 to 15 years) are not justified at this time. Moreover, these
additional advantages would apparently apply to the entire project, not just the rehabilitation expenditures.
L.
TAX-EXEMPT BOND PROVISIONS
At the present time, the Administration is in the process of
reviewing the nation's infrastructure needs, including the extent
to which tax-exempt bonds should be used to finance those needs.
On completion of this review, it is possible that the Administration may offer proposals to amend the tax-exempt bond provisions
of the Code to facilitate infrastructure financing.
1.
Definition of Private Activity Bonds - Private Benefit
Amount; Private Loan Exception For Housing Bonds
(a). Private Benefit Amount
Administration Position. Oppose. This proposal will have
significant revenue costs.
Further, this change would be a
reversal of one of the two major changes to tax-exempt bond rules
made by the Tax Reform Act of 1986. The benefit of tax-exempt
financing should be limited to State and local governments. This
change would result in a significant increase in the volume of
tax-exempt bonds, with this increase being attributable to
increased private benefit.
(b).
Private Loan Exception for Housing Bonds
Administration Position.
Oppose.
30
The proposal would allow up to
10 percent of each issue to be used to make private loans that
could not otherwise be financed on a tax-exempt basis. This
change, in effect, could allow every general obligation issue to
be increased in size to make loans for housing provided only that
the loans are marginally subsidized.
2.
certain Cooperative Research Agreements
Administration position. Oppose. The expansion of the basic
research concept is likely to result in for-profit entities
benefitting from the tax-exempt financing provided to 501(c) (3)
organizations. Under the proposal, almost any research would
qualify as "basic research" as long as no particular private
entity is entitled to preferential use of any product of the
research. Thus, tax-exempt bond financing would be available for
a large portion of the capital cost of all research facilities.
In addition, the change should not be made retroactively.
3.
Certain Output Facilities (H.R. 1938)
Administration Position. Do not oppose. Although this change
would have a slight revenue cost, it would simplify the tax laws
and would mean that output facilities are subject to the same
volume cap requirement as other bonds. There does not appear to
be any reason to treat output facilities more harshly than other
facilities. As a practical matter, the $15 million output limit
of current law may have little effect other than to create an
incentive for public power issuers to operate inefficiently.
4.
certain Volunteer Fire Departments (H.R. 219)
Administration position. Do not oppose. This proposal to allow
qualified volunteer fire departments to issue tax-exempt bonds
for ambulances and other emergency response vehicles is a reasonable expansion of their limited authority to issue tax-exempt
bonds under current law.
5.
spaceport Exempt Facility Bonds
Administration position. Oppose. This proposal would
principally benefit a single municipality in Florida.
Further,
there could be a significant revenue loss since these bonds would
not be subject to the volume cap.
31
6.
(a).
Qualified Mortgage Bonds - Home Improvement Loans; Two-Family
Housing; Cooperative Housing
Qualified home improvement loans
Administration Position. Do not support.
It may be appropriate
to review the dollar limitation on home improvement loans.
However, this type of change should be considered in the context
of a general review of the program.
(b).
New two-family residences
Administration position. Do not support. Residential projects
with more than one dwelling should be subject to the rules and
subsidy programs designed for multi-family housing.
(c).
Cooperative housing
Administration Position. Do not support.
In parts of the
country where cooperatives are common, mortgage revenue bond
financing may be effectively unavailable because of a variety of
technical problems related to ownership through a cooperative.
However, the proposal would make a variety of changes that, among
other things, effectively increase the purchase price limit for
cooperatives relative to other mortgage revenue bond financed
projects.
7.
Qualified Veterans' Mortgage Bonds
Administration Position. Do not support. The Qualified
Veterans' Mortgage Bond program continues to apply to only five
states as a grandfather rule and it is not appropriate to further
expand the program in this manner. Veterans' programs should
apply uniformly across the nation.
8.
Qualified Small-Issue Bonds
Administration Position. Do not oppose, with clarification.
The proposal to extend the one-year period to 90 days after
enactment of the extension of the small issue bond program is a
sensible change because the failure to extend the statutory
sunset date has caused projects to fail to qualify for small
issue bond financing.
This change should only apply to
facilities placed in service after June 30, 1991.
32
9.
Modification of Rules Governing Qualified 501Cc) (3) Bonds
Administration Position. Do not oppose. The primary effect of
this proposal is to eliminate the $150 million cap on nonhospital bonds issued on behalf of tax-exempt organizations.
Significantly, the $150 million cap generally applies only to
large private universities.
Large public universities and
50l(c) (3) hospitals are not subject to similar restrictions.
In
addition, the technical rules associated with the $150 million
cap have proven complex and difficult to administer. Repeal of
the cap would simplify the tax-exempt bond financing rules
applicable to tax-exempt universities, charities, hospitals and
other 50l(c) (3) organizations.
10. state Private Activity Bond Volume Limitation
Administration Position. Oppose. This provision would have a
significant revenue cost because the reallocation of unused
volume caps to States in need of volume cap is certain to result
in the immediate issuance of additional tax-exempt bonds.
Further, this change would eliminate a major rationale for the
ability of states to carryover unused volume cap, which is the
ability to save up cap for large projects.
In addition, the
administration of this program would result in a significant
burden for the IRS.
11.
(a).
Arbitrage Restrictions -- Six-month Expenditure Exception;
State Revolving Funds
6-month exception
Administration position. Do not support. Expansion of the
rebate exception to pre-1990 bond issues may not be appropriate
in all cases.
(b).
Revolving funds
Administration position. Oppose. The problems encountered by
issuers in connection with State revolving fund programs can be
avoided if issuers carefully account for bond proceeds. The
proposal would have a much broader impact than merely addressing
the perceived problem and could lead to abuse.
12.
(a).
certain Proposals Relating to the Tax Reform Act of 1986
Peabody Place
33
Administration Position. Oppose. This proposal would permit up
to $140 million of tax-exempt private activity bonds to be issued
in a manner that does not satisfy current law, including the
volume cap on private activity bonds. This proposal will effectively benefit only one taxpayer. Moreover, the project would
benefit from an "in progress" transitional rule even though the
bonds will not have been issued until 12 years after the related
tax law change.
(b). Kenosha, Wisconsin
Administration position. Oppose. Under the proposal, Kenosha
would be permitted to continue to rely on a transitional rule
that expired in 1990. The change would have an adverse revenue
impact and would permit the issuance of bonds that do not comply
with a number of current law limitations.
(c). Stanford University
Administration position. Oppose. The transition rules to the
1986 Act were designed for specific projects that were already
"in progress" at the time of the 1986 Act. Shifting the proceeds
of a transitioned issue to a new use is inconsistent with the
purpose of the transitional rules and is designed to avoid the
limitations in current law on large section 501(c) (3) institutions.
13.
(a).
Expand Exception to Pro Rata Disallowance of Bank Interest
Expense Related to Investment in Tax-exempt Bonds; Increase
Issues Level Exception; Modify Application of 501Cc) (3)
Borrowers
Increase small issuer exception
Administration position. Do not oppose. The justification for a
small issuer exception to the bank deductibility rules is legitimate, and a reasonable case can be made that $10 million limit
should be adjusted upward.
(b).
501Ccl(3) bonds
Administration position. Oppose. This proposal would have a
significant revenue cost. This change effectively increases the
$10 million small issuer limit by removing a significant category
of bonds from its coverage.
In addition, by providing every
501(C) (3) organization with its own annual $5 million limit, the
applicability and complexity of the small issuer rule would be
increased substantially.
34
14.
Certain Airport. Dock and Wharf Facilities
Administration Position. Oppose. This proposal would greatly
expand the types of privately used and owned property at airports
and docks qualifying for tax-exempt financing without sUbjecting
those bonds to the volume cap. Further, the proposal is vague in
its description of the type of property that would qualify as
transportation facilities.
M.
COMPLIANCE
1.
Accounting for Charges by Real Estate Reporting Persons for
Costs of Complying with Reporting Requirements of Code
section 6045
Administration position. Support. The Administration believes
that the proposal merely restates current law. However, there is
some concern that the Committee's action could create an inference that the proposal is a change to current law. The Committee
may wish to include appropriate "no i~ference" language in the
effective date of the provision.
2.
Direct Deposit of Tax Refunds
Administration position. Oppose. This proposal is not administrable at the present time.
IRS system capabilities cannot now
assure correct processing of the necessary account information,
so that individual A's refund does not end up in the account of
individual B. Moreover, the IRS would incur substantial costs in
manually transcribing the necessary account information, and this
process would not be error free.
Direct deposit is feasible for refunds from electronically filed
returns. The Committee should consider expansion of the electronic filing program, with appropriate modifications, if it
wishes to make direct deposit more widely available.
N.
EXCISE TAX PROVISIONS
1.
Harbor Maintenance Trust Fund Expenditure
(a).
Suspend Harbor Maintenance Tax When Harbor Maintenance
Trust Fund Exceeds a Specified Balance
Administration position. Oppose. The Administration has
concerns that, depending on the means of implementation, a cutoff could be disruptive. The Administration also believes that
35
any concerns over excess balances in the Harbor.Main~enance Trust
Fund would be ameliorated by the proposal descr1bed 1n (b) below.
(b).
Use of Harbor Maintenance Trust Fund for certain NOAA
Expenditures (H.R. 2094)
Administration position. Support if modified. A similar
proposal was contained in the Administration's budget. The
Administration would be concerned about any changes that differ
significantly from the budget proposal.
2.
Phaseout of Special Alcohol occupational Excise Taxes
Administration position. Oppose.
substantial revenue losses.
3.
The proposal would result in
Exemption from Retail Excise Tax for Truck Equipment Used to
Mix Explosive Chemicals CH.R. 1929)
Administration Position. Oppose. Equipment used to process,
prepare, or load explosive products is currently exempt from tax
under Treasury regulations. The additional exemption for containers used to transport components of explosive products is
inconsistent with the general principle of taxing truck bodies
that are reasonably suitable for use as part of a vehicle designed to transport a load over public highways. Moreover, the
retroactive date is inappropriate because it rewards noncompliant
taxpayers and penalizes taxpayers who complied with existing law.
4.
Limit on Transfers of Motorboat Fuels Tax Revenues to the
Boat Safety Account
Administration Position. Support. The Administration has
proposed this in the Coast Guard reauthorization legislation.
5.
Consolidate the Tax on Aviation Gasoline at One Point of
Collection
Administration Position. The taxation of fuels_and collection
points for such taxes are addressed by the Administration's
budget proposals currently under consideration by Congress.
Thus, we believe it would be more appropriate to state the
Administration's position on this proposal as part of the
consideration of that legislation.
36
6.
Wine Spirits -- Permit Whey, Tomatoes and other Agricultural
Products
Administration Position. Do not oppose, with clarifications.
Under the proposal, the definition of wine spirits would be
e~panded to include spirits derived from agricultural wine (i.e.,
w~ne made from agricultural products other than fruit) and other
than standard wine. Thus, nonstandard wine that is currently
wasted could be used to make wine spirits to fortify nonstandard
wines such as wine coolers. The proposal should be clarified to
provide that wine spirits made from other than standard wine may
not be used to fortify natural wine.
7.
Dedicate 1 cent Per Gallon of Tax on Diesel Fuel Used by
Railroads to a Newly Created Railway Trust Fund
Administration Position. The proposal relates to the
Administration's budget proposals currently under consideration
by Congress. Thus, we believe it would be more appropriate to
state the Administration's position on this proposal as part of
the consideration of that legislation.
O.
OTHER PROVISIONS
1.
Tax Credits for Indian Investments and Employment (H.R. 1325)
Administration Position. The creation of tax incentives for
economically distressed areas, including Indian reservations that
are economically distressed, is addressed in the Administration's
budget proposals currently under consideration by Congress.
Thus, we believe it would be more appropriate to state the
Administration's position on this proposal as part of the
consideration of that legislation.
2.
Alaska Native Corporations Standing with respect to Sales of
Losses
Administration position. Do not oppose. Relief to Alaska Native
Corporations ("ANCs") should be structured to minimize
administrative burdens on the IRS and the potential for the
assertion of collateral estoppel against the government.
3.
Tax Credit For contributions to certain Research Consortia
Administration position. Extension and modification of the
research and experimentation credit are addressed by of the
37
Administration's budget proposals currently under consideration
by Congress. Thus, we believe it would be more appropriate to
state the Administration's position on this proposal as part of
the consideration of that legislation.
4.
Enhance Deduction for Contributions of Computer Equipment to
Arts Institutions
Administration Position. Oppose. The special rule for contributions of scientific property for research was enacted in response
to studies that showed that universities were unable to meet the
rising costs of scientific equipment in such equipment-intensive
research areas as physics, chemistry and electrical engineering.
This rationale does not apply to contributions of equipment for
use in design research. Moreover, there is no evidence that the
costs of the equipment used in design research are rising.
In
fact, the cost of computer equipment, one of the principal tools
of design research, is generally falling.
5.
Extend the Exception For Debt-Financed Investments in Real
Property to certain Private Foundations
Administration Position. The treatment of exempt organizations'
real estate investments is addressed by the Administration's
budget proposals currently under consideration by Congress.
Thus, we believe it would be more appropriate to state the
Administration's position on this proposal as part of the
consideration of that legislation.
6.
Treatment Under the Passive Loss Rules of Closely Held C
corporations Engaged in Equipment Leasing
Administration Position. Oppose. There is no justification for
making a special exception to the passive activity rules for
closely-held C corporations engaged in equipment leasing so that
passive activity losses could offset, for example, portfolio
income.
7.
Treatment Under the At-Risk Rules of Real Property Acquired
by Foreclosure
Administration position. oppose. One of the principal purposes
of the at-risk rules is to limit the opportunity to claim inflated deductions by overvaluing property. Unrestricted nonrecourse
seller-financing would encourage overvaluation of the property to
which it relates. The proposal does not include explicit safe38
guards to prevent such overvaluation. The proposal neither
requires an appraisal nor limits the purchaser's at-risk amount
to the property's appraised value.
8.
Repeal Limitation on Farm Losses Under the Alternative
Minimum Tax
Administration Position. Do not oppose. The alternative minimum
tax (AMT) rules can deny a general partner in a farm syndicate
who is actively managing the farming activity, any deduction for
economic losses from the activity.
Because of his active
management, his losses would not be disallowed under the passive
loss rules. However, section 58(a) would result in a
disallowance of these losses for AMT purposes even though he is
an active participant in the farming activities. The repeal of
section 58(a) would result in conformity between regular tax and
AMT purposes for these losses. The repeal of section 58(a) could
result in a benefit for a small number of taxpayers.
9.
Extend "Placed-in-Service" Date for Project under section
204(al (ll (El of the Tax Reform Act of 1986
Administration position. Oppose. The debates regarding the
complex and extensive effective date provisions and special rules
relating to the Tax Reform Act of 1986 should not be reopened.
10. Exempt or Expand Safe Harbor from Accumulated Earnings Tax
for Widely-Held Corporations
Administration's Position. Do not support.
Creation of exceptions to the accumulated earnings tax ("AET") rules must be
carefully considered, particularly with respect to their coordination with other anti-avoidance provisions in the Code, including the personal holding company and foreign personal holding
company rules. Although changes in these rules may be justified,
they should await a thorough review of these anti-avoidance
provisions.
11.
Definition of Start-Up Companies Under Research Credit
Administration position.
Extension and modification of the
research and experimentation credit are addressed by the Administration's budget proposals currently under consideration by
Congress. Thus, we believe it would be more appropriate to state
the Administration's position on this proposal as part of the
consideration of that legislation.
39
12.
"The Environmental Remediation Tax Credit Act of 1993"
CH.R. 2340)
Administration Position. Do Dot support. Although we fully
support the goal of environmental cleanup, the proposal would be
complex and difficult to administer.
In addition, the proposal
would have significant revenue cost, and would not be the most
efficient means of providing subsidies to finance cleanup costs.
13.
Social Security Tax Status of Distributors of Bakery
Products
Administration position. Do Dot support.
Bakery drivers have
been treated as statutory employees for employment tax purposes
since 1951. We do not believe that there is sufficient reason
for changing this longstanding provision and disrupting existing
arrangements.
14.
Application of Common Paymaster Rules to certain Agency
Accounts at State Universities
Administration position. Do Dot support. We believe that the
proposal is unnecessary. Payments from more than one state
agency account would not be treated as payments from separate
legal entities for employment tax purposes. Thus, the common
paymaster rule is not necessary because wages from each agency
would be aggregated under current law for purposes of determining
the extent to which wages exceed the FICA wage base.
15.
Issuance of Certificate to the Social Security Trust Fund
CH.R. 931)
Administration Position.
development.
16.
The Administration's position is under
Exempt Non-affiliated Reliqiouslv Oriented Schools from
Coverage Under the Federal Unemployment Tax Act CFUTA)
Administration position. Do not support. We do not support this
proposal because we do not believe that there is sufficient
reason to reduce unemployment compensation coverage for this
group of employers and their employees.
In addition, an exception that is based on whether the employer has a "primary religious purpose" would increase administrative complexity in the
statute.
40
ADMINISTRATION POSITION ON
TAX ISSOES AFFECTING THE HEALTH AND SAFETY
OP INNER-CITY RESIDENTS
AND OTHER MISCELLANEOUS HEALTH-RELATED TAX ISSOES
1.
Excise Tax on Firearms
Administration Position. The Administration is examining whether
an increase in the excise tax on firearms and ammunition is
appropriate and, if so, whether the increase should apply to all
firearms in the manner of the proposed tax or only to firearms
and ammunition most commonly associated with gunshot wounds.
In
addition, we believe that medical cost containment should be
addressed as part of a comprehensive health reform plan rather
than through narrower approaches such as the Hospital Gunshot
Cost Containment Trust Fund.
2.
Excise Tax on Syringes and Intravenous Systems
Administration position. The tax, by increasing the price of
syringes and intravenous systems that do not meet new Federal
safety standards, would eliminate or substantially reduce their
use by health care providers. While the Administration agrees
with the goal of ensuring the safety of syringes and intravenous
systems, we are concerned about the administration of a relatively small tax that would be imposed' at the retail level.
Direct
statutory or regulatory restrictions on sales of syringes and
intravenous systems, with appropriate penalties, might be a more
appropriate method of assuring public safety than the proposed
tax.
3.
Treatment of HMOs and Charitable Risk Pools under
Section 502(m) of the Code
Administration Position.
(a).
HMOs
Administration position. The Administration is currently
preparing a comprehensive health care reform package.
Because of
the significance of HMOs in the health care market, the issue of
their tax treatment under section 501(m) should be addressed only
in the context of consideration of the Administration's health
care reform package.
41
(b).
Charitable Risk Pools
Administration Position. The laws of at least one state
apparently provide for the organization of charitable risk pools
that provide insurance coverage to charitable organizations that
are members of the pool. The treatment of these charitable risk
pools under current law may be uncertain.
In particular, it is
unclear whether section SOlem) precludes these organizations from
qualifying for tax exemption under section SOl(c) (3).
The Administration would not oppose a provision under which a
charitable risk pool could qualify as a section SOl(c) (3)
organization, notwithstanding section SOl(m), provided that the
charitable risk pool receives a sufficient amount of contributions from non-members that it uses to subsidize the coverage
provided to members. The Administration believes that, in the
absence of such subsidized coverage, the operations of a charitable risk pool would be virtually identical to a mutual insurance
company, and as such should be subject to tax in accordance with
the policies underlying section SOl(m).
4.
Inclusion of Organ Donor Information in Materials Sent to
Taxpayers by the Department of Treasury
Administration position. The inclusion of an organ donor card
with every refund payment needs to be carefully considered.
Currently, "stuffers" are only included with refund payments that
do not include an error statement. Error statements explain that
the taxpayer's refund is different from the amount claimed and
that the difference will be explained in a subsequent mailing.
Confusion by including additional material with the error
statement should be avoided.
When this proposal was considered in the past, it has been noted
that a number of religious groups find the concept of organ
donation offensive and may object to receiving unsolicited
materials regarding organ transplants from the government.
5.
Rules Relating to Loss Reserve Discounting by Medical
Malpractice Insurers
Administration position.
Property and casualty insurers are
allowed a deduction for their loss reserves. Section 846
requires this deduction to be discounted to take into account the
time value of money. The payment pattern of losses in each line
of business is taken into account in computing a taxpayer's
discounted loss reserves. The payment pattern of a line of
business is generally based on industry-wide data.
In certain
42
circumstances, however, a taxpayer may be able to use a payment
pattern for a line of business based on its own historical
experience.
Revenue Ruling 92-76, 1992-2 C.B. 453, allows a taxpayer to use
its own historical loss payment pattern for a line of business if
certain conditions are met.
An earlier revenue ruling had allowed certain taxpayers to elect
to use "composite discount factors"--that is, factors based on
data from several lines of business--in computing discounted loss
reserves for medical malpractice and professional liability lines
of business.
Rev. Proc. 91-21, 1991-1 C.B. 525. Revenue Ruling
91-21 does not apply to accident years after the 1991 accident
year.
The Administration would not support the use of composite
discount factors in cases outside the scope of Revenue Ruling 9121 for tax years 1992 and 1993. with respect to tax years 1994
and thereafter, medical malpractice issues might be relevant in
the context of a review and discussion of comprehensive health
care reform.
43
TREASURY NEWS
Department of the Treasurv
A
.
•
VI
Washington, D.C.
Telephone 202-622-2960
" 'j J \
j:'-
June 22,
1993
Monthly Release of u.s. Reserve Assets
The Treasury Department today released u.s. reserve assets data
for the month of May 1993.
As indicated in this table, u.s. reserve assets amounted to
76,711 million at the end of May 1993, up from 75,644 million in
April 1993.
u.s. Reserve Assets
(in millions of dollars)
End
of
Month
Total
Reserve
Assets
April
75,644
11,054
8,947
43,326
12,317
May
76,711
11,053
9,147
44,316
12,195
Gold
stock
~I
Special
Drawing
Rights 2./'J.I
Foreign
CUrrencies
~I
Reserve
position
in IMF 2.1
II
Valued at $42.2222 per fine troy ounce.
2.1
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.
~/
Includes allocations of SDRs by the IMF plus transactions in SDRs.
~I
Valued at current market exchange rates.
LB-2S2
Text as Prepared for Delivery
For Immediate Release
June 22, 1993
REMARKS OF TREASURY SECRETARY LLOYD BENTSEN
PROGRESSIVE FOUNDATION FORUM
WASHINGTON, D.C.
I want to thank the Foundation for the invitation to speak
today.
You must have been clairvoyant when you scheduled this
event -- just as we get a deficit reduction package on the floor
of the Senate. That shows you that timing is everything. Tell
my staff that. Just when the House was getting ready to vote on
the energy tax, they booked me to talk to the oil people. And
when Senate Finance was marking up a transportation tax, they had
me before the truckers. All I can say is it makes a better
salesman of you.
I would like to take a few minutes this afternoon to remind
everyone that even as we quibble over the details and minutia of
a tax package, we cannot lose sight of the bigger goal.
The object is not to raise taxes add cut spending for the
sake of doing either of those. The name of the game is getting
the deficit down and getting our economy growing again.
We have seen some encouraging news in the economic
statistics in these past few weeks.
Inflatic 3t the whol(~ale level was virtually nonexistent
in the last r~port. After l8 months of unemployment of 7 percent
or more, it finally came down slightly.
I was up near Cleveland
last Friday, and they've seen unemployment come down well over
one percentage point so far this year. Some 750,000 new jobs
have been created during our recovery, two thirds of them since
January.
Auto sales are up, and home sales are up. And interest
rates zre down to their lowest levels in 20 years.
You can get s
30-year mortgage for less than 7.5 percent.
If you've refinance:.
a 10 percent, 30-year home mortgage, you're saving a couple of
hundred dollars a month. The stock market is at an all-time
high.
LB-253
2
That's all good news.
But you cannot bet an entire economic
recovery on one month or two months of encouraging figures.
There is no guarantee yet that what we are seeing means we have
truly beaten the recession. We have got to be certain we move
beyond this modest start and lock in place policies that will
give us strong growth.
How do we do that? So far, interest rates have come down,
and the economy has responded at least in part, to our talk of
taking actions. Now it is time to actually do what we've talked
about -- pass a $500 billion deficit reduction bill. That's the
goal, and we can't lose sight of it, even though we may disagree
on how to get there.
There have been a lot of courageous actions in the past few
months here in Washington.
First, President Clinton showed leadership in laying out
very specific ways to cut government spending and very specific
ways to raise taxes and encourage investment.
It took political
courage to do that, and I don't think he's gotten enough credit
for it. No one likes having to suggest raising taxes, or cutting
back the spending on popular programs. But the fact of the
matter is, our economic problems are so great, the issue had to
be raised. The problems are so great, that the longer we delay,
the more painful and unpopular the solutions are going to be.
Second, members of the House of Representatives showed
courage. You may recall, we didn't win that vote by any
landslide. A number of very courageous House members -including some who didn't entirely agree with our approach -- did
agree that something had to be done, so they went with us on this
one.
Some went ahead and voted for the energy tax, but only if
there was some prospect that it could be changed later on.
That was a brave act, and I think that bit of courage is
overlooked in this debate.
If they hadn't backed us up, we'd be
back at square one, with a problem growing worse by the day.
Instead, we're still working on a program that will generate the
necessary $500 billion in deficit reduction.
When we got to the Senate, our preference was -- and still
is -- for a broad-based energy tax, something that was fairly
spread around and didn't have too narrow a focus.
But the Senate
leadership made it clear that the BTU tax would not pass without
major modification.
So we've been watching as things develop in
the Senate.
3
The Finance committee has taken a constructive step. If you
look at it, about 85 percent of President Clinton's program has
reached the Senate floor intact. It's about 15 percent of it
that's subject to debate and moderation.
Contrast that with the
last four budgets that were dead on arrival. Last year, in fact,
the final budget of the previous administration saw a majority of
Republicans vote against it.
We might not agree on every line of every page of what's
come out of the Finance Committee, but they've passed out a
significant deficit reduction package, and it's the Senate's turn
now.
I want to tell you that as a former chairman of the Finance
Committee, I know what it was like up there in that meeting room.
I know how difficult it was to work things out.
I know all the
concerns that have to be addressed.
I want to commend Chairman
Moynihan and the other Democrats on the committee for their work
on this.
It's one thing to bring home the bacon when you're in
Congress, and it's another thing to have to cut programs and
raise taxes.
The committee made a remarkable effort toward
meeting our goals.
What we're aiming for is something that knocks about $500
billion off the deficit, and does it as much with spending cuts
as with tax increases. We want those with the highest incomes in
our society, those who received the largest tax cuts in the 1980s
and whose income rose the most, to pay their fair share of this
tax increase.
It's only fair, especially when middle income
people for the past decade have seen their taxes go up, not down.
We want to make necessary spending cuts. We would like to see a
broad-based energy tax included in the final package.
will the final product be exactly what we set out to get in
the first place? Insofar as the specifics, probably not. But,
and here's the important part, insofar as the amount of deficit
reduction that is generated, yes.
I expect that when this bill
comes out of conference, we'll be in the basic area of the target
we set for ourselves. And that's a pretty ambitious goal to set
as the first major legislative package of a new administration.
There have been some changes, but the vast majority of it
complies with the administration's objectives. And while we
might structure the package differently, the process will have
drawn in more than just an administration viewpoint, and more
people will have a stake in what is finally produced.
So when we get all wrapped up in the process of who's up and
who's down, and what's alive and what's not, I think we ought to
take a little bit longer look and make sure we keep our eyes on
the goal -- significant deficit reduction -- and not get
distracted by what's going on up in the grandstands.
4
Speaking of keeping our eye on the goal of deficit
reduction, I think we ought to take a minute here and look at
what will happen if we fail to act. The consequences of not
stepping up and accepting responsibility for our economic future
would be expensive for every American.
The first thing that will happen if we can't get a
sUbstantive deficit reduction package laid down is that you're
going to see these interest rates pop right back up. Think what
that will do to the little bit of recovery we've seen so far.
Rates will go up, stocks will go down, and we could drop back
into recession.
I don't think any of us· wants to see that happen.
There's another price to pay for inaction -- growing debt
interest and growing deficits. Right now, 14 cents of every
dollar we spend in government goes to interest on the debt.
If
we do nothing, in a decade it will be 20 cents. All we get for
it is cancelled checks, and we have to pay that bill first every
month.
And let me give you a few more figures that ought to put the
price of not acting into even sharper focus.
Deficits will be about $650 billion a year in a decade from
now, in the year 2003 -- if we do not act. And by the year 2000,
if we do nothing, real hourly wages will be lower than at any
time since John F. Kennedy was president.
If we do nothing,
health care costs would consume about 20 percent of our entire
GOP. Let me put that in terms a little closer to home for all of
us. Health care costs would be $4,300 dollars for every person
in the country. For a family of four, that's over $17,000. Try
fitting that into the family budget.
That's what happens if we stick with the status quo, if we
don't take responsibility for our economic future, if we decide
to take a back seat on the international stage, if we lose sight
of our goal and what it means for America.
That all sounds rather gloomy, and I don't want anyone to
think I'm not optimistic about getting a good, solid deficit
reduction package enacted this summer.
I feel quite confident
we're going to make this happen. But I do want everyone to
understand the consequences of not acting.
5
Let me wrap things up by telling you that people ask my why
I took the job of being Treasury Secretary. You know, it seems
like it's an 8-day-a-week job sometimes.
I think I ought to
change to an hourly wage.
I might do better. Anyway, the reason
I said yes when President Clinton asked me was that I could see
that for the first time in a dozen years we had a president who
had the courage to make the necessary tough choices on our budget
and cut the deficit.
The Clinton Administration has breathed new life into the
international economic leadership role of the united states. And
we are turning our economy around and making it a force for
growth again.
I think that may be the highest service we can
perform.
Thank you.
* * *
UBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
I : '(_11,.~
FOR IMMEDIATE RELEASE
June 22, 1993
RESULTS OF
.
}
,';
,."
,
I
'
~ 1 ~) .'
{)
'
',.
CONTACT: Office of Financing
\ 'j j 3
202 - 219 - 3350
TRE*§J~.)y~JSd ~U~TION
OF 2 - YEAR NOTES
Tenders for $16,011 million of 2-year notes, Series X-1995,
to be issued June 30, 1993 and to mature June 30, 1995
were accepted today (CUSIP: 912827L34).
The interest rate on the notes will be 4 1/8%. All
competitive tenders at yields lower than 4.16% were accepted in
full.
Tenders at 4.16% were allotted 52%. All noncompetitive and
sucessful competitive bidders were allotted securities at the yield
of 4.16%, with an equivalen't price of 99.933. The median yield
was 4.14%; that is, 50% of the amount of accepted competitive bids
were tendered at or below that yield. The low yield was 4.12%;
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
24,249
40,302,893
26,061
170,140
642,031
29,591
1,772,408
39,697
20,530
60,172
15,992
865,209
321. 037
$44,290,010
Accepted
24,249
14,650,573
26,061
170,140
119,031
29,591
412,308
39,697
20,530
60,172
15,992
122,009
321. 037
$16,011,390
The $16,011 million of accepted tenders includes $858
million of noncompetitive tenders and $15,153 million of
competitive tenders from the public.
In addition, $973 million of tenders was awarded at the
high yield to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $1,152 million
of tenders was also accepted at the high yield from Federal
Reserve Banks for their own account in exchange for maturing
securities.
LB-2S4
TREASURY NEWS
Department of the Treasurv
Washington, D.C.
FOR RELEASE AT 2:30 P.M.
June 22, 1993
CONTACT:
A
.
•
VI
Telephone 202-622-2960
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $24,400 million, to be issued July 1,
1993. This offering will provide about $700 million of new cash
for the Treasury, as the maturing 13-week and 26-week bills are
outstanding in the amount of $23,697 million.
In addition to the
maturing 13-week and 26-week bills, there are $14,992 million of
maturing 52-week bills. The disposition of this latter amount
was announced last week.
Federal Reserve Banks hold $9,667 million of bills for their
own accounts in the three maturing issues. These may be refunded
at the weighted average discount rate of accepted competitive
tenders.
Federal Reserve Banks hold $3,309 million of the three
maturing issues as agents for foreign and international monetary
authorities. These may be refunded within the offering amount
at the weighted average discount rate of accepted competitive
tenders. Additional amounts may be issued for such accounts if
the aggregate amount of new bids exceeds the aggregate amount
of maturing bills.
For purposes of determining such additional
amounts, foreign and international monetary authorities are
considered to hold $2,399 million of the original 13-week and
26-week issues.
Tenders for the bills will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public
Debt, Washington, D. C. This offering of Treasury securities
is governed by the terms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356, published as a final rule on
January 5, 1993, and effective March 1, 1993) for the sale and
issue by the Treasury to the public of marketable Treasury bills,
notes, and bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
LB-255
HIGHLIGHTS OF TREASURY OFFERINGS OF WEEKLY BILLS
TO BE ISSUED JULY 1, 1993
June 22, 1993
Offering Amount . . . . .
Description of Offering:
Term and type of security
CUSIP number . . .
Auction date
. . . . . .
Issue date
. . . . . . .
Maturity date . . . . . .
Original issue date . . .
Currently outstanding .
Minimum bid amount
. . .
Mul t iples . . . . . . . .
. . . . .
. . . .
. . . . .
.
. . . . .
. . . . .
....
. . . . .
. . . . .
$12,200 million
$12,200 million
91-day bill
912794 F8 2
June 28, 1993
July 1, 1993
September 30, 1993
April 1, 1993
$11,249 million
$10,000
$ 1,000
182-day bill
912794 H2 3
June 28, 1993
July 1, 1993
December 30, 1993
July 1, 1993
$10,000
$ 1,000
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids . .
Competitive bids
. .
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10%.
(2) Net long position for each bidder must be
reported when the sum of the total bid
amount, at all discount rates, and the net
long position is $2 billion or greater.
(3) Net long position must be determined as of
one half-hour prior to the closing time for
receipt of competitive tenders.
Maximum Recognized Bid
at a Single Yield
35% of public offering
Maximum Award .
35% of public offering
Receipt of Tenders:
Noncompetitive tenders
Competitive tenders
Payment Terms .
Prior to 12:00 noon Eastern Daylight Saving time
on auction day
Prior to 1:00 p.m. Eastern Daylight Saving time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
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: 6
Author(s):
Title:
Treasury Secretary Lloyd Bentsen News Conference
Date:
1993-06-21
Journal:
Volume:
Page(s):
URL:
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
UBLIC DEBT NEWS
Department of the Treasury •
FOR IMMEDIATE RELEASE
June 23, 1993
RESULTS OF TREASURY'S AUCTION OF 5-YEAR NOTES
Tenders for $11,007 million of 5-year notes, Series P-1998,
to be issued June 30, 1993 and to mature June 30, 1998
were accepted today (CUSIP: 912827L42).
The interest rate on the notes will be 5 1/8%. All
competitive tenders at yields lower than 5.23% were accepted in
full.
Tenders at 5.23% were allotted 2%. All noncompetitive and
sucessful competitive bidders were allotted securities at the yield
of 5.23%, with an equivalent price of 99.543. The median yield
was 5.20%; that is, 50% of the amount of accepted competitive bids
were tendered at or below that yield. The low yield was 5.15%;
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
18,907
28,366,403
12,266
71,027
45,048
15,607
790,151
20,861
9,129
26,140
7,588
347,842
101,043
$29,832,012
Accepted
18,867
10,420,421
12,266
71,027
45,048
15,546
226,151
20,861
9,129
26,140
7,588
33,042
101,043
$11,007,129
The $11,007 million of accepted tenders includes $587
million of noncompetitive tenders and $10,420 million of
competitive tenders from the public.
In addition, $573 million of tenders was awarded at the
high yield to Federal Reserve Banks as agents for foreign and
international monetary authorities. An additional $1,000 million
of tenders was also accepted at the high yield from Federal
Reserve Banks for their own account in exchange for maturing
securities.
LB-256
UBLIC DEBT NEWS
FOR
June 24, 1993
RESULTS OF TREASURY'S AUCTION OF 52-WEEK BILLS
Tenders for $15,332 million of 52-week bills to be issued
July 1, 1993 and to mature June 30, 1994 were
accepted today (CUSIP: 912794L44).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.39%
3.40%
3.40%
Investment
Rate
3.53%
3.54%
3.54%
Price
96.572
96.562
96.562
Tenders at the high discount rate were allotted 95%.
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
19,365
39,537,622
7,313
21,138
20,164
14,245
1,488,194
8,108
5,335
15,732
5,497
493,006
280,893
$41,916,612
AcceQted
19,365
14,462,322
7,313
21,138
10,164
13,995
440,669
8,108
5,335
15,732
5,497
41,756
280,893
$15,332,287
Type
Competitive
Noncompetitive
Subtotal, Public
$37,307,500
519,112
$37,826,612
$10,723,175
519,112
$11,242,287
3,700,000
3,700,000
390,000
$41,916,612
390,000
$15,332,287
Federal Reserve
Foreign Official
Institutions
TOTALS
LB-257
TREASURY NEWS
Department of the Treasurv
Washington, D.C.
A
.
•
VI
Telephone 202-622-2960
Text as prepared for delivery
Adv. 6:30 p.m. EDT, for Friday AMS
STATEMENT OF LAWRENCE H. SUMMERS
UNDERSECRETARY OF THE TREASURY FOR INTERNATIONAL AFFAIRS
DEPARTMENT OF THE TREASURY
BEFORE THE KEIDANREN IN TOKYO, JAPAN
JUNE 25, 1993
I am pleased to have this opportunity to address such a distinguished audience.
America has many economic problems and it has many new economic policies. But I
am going to concentrate today, not on my country, but on yours. Because the Japanese
economy is so important to ours, we in the United States see the appropriate evolution of
our economic relationship as essential to our prosperity and to yours.
Japan's New Place in the World Economy
The companies you represent are the Japanese economic miracle. And you are what
the world thinks of when it contemplates Japan's new economic power.
We are now at a point when I suspect many of you would agree that the policies of the
past are no longer appropriate to the challenges of the present.
Japan used to argue that as a small, vulnerable island nation, poor in natural resources,
it had to export in order to import. Ambassador Kuriyama captured a corollary of this
position when he said that in Japan, free trade has traditionally meant the freedom to export
Japanese products to the rest of the world, but it will now have to mean freedom of foreign
companies to export to Japan.
In today's world, Japan has a major stake in the health of the world economy, and the
world economy has major stake in Japan's economic performance.
The Promise of Past Commitments
Increasing awareness in Japan of the opportunities and responsibilities that come with
economic power led in the 1980's to a series of commitments to change.
In 1985, Japan embraced in the Maekawa report a new economic vision, one that was
subsequently renewed in the call to make Japan a "life style superpower." That vision was
based on open markets, domestic-demand led growth, and giving consumers a greater share
of the economic pie.
LB-258
Japan has repeatedly recognized in the context of both the G-7 dialogue and in
bilateral discussions that its current account surplus must come down. And there have been
negotiations, too numerous to count, directed at reducing trade barriers that reduce the flow
of imports into Japan.
Unfortunately, the promise of these commitments has not yet been fully redeemed.
Japan today is a larger, rather than a fundamentally altered, version of its former self.
Consumption in Japan has fallen as a share of national income as the tax take
has increased.
The external surplus is on track to exceed its past peaks. The OECD expects
it to rise to $150 billion in 1994, or roughly 3.3 percent of GNP.
And the market share of manufactured imports in Japan is virtually
unchanged since 1985, and is now only half what it is in the United States and
half what it is for the European Community as a whole.
The New Framework with Japan
The United States has a tremendous stake in Japan's carrying through on its
commitments to reduce imbalances and increase imports. That's why we are working so
hard on a new framework for our economic dialogue with Japan.
Our approach has three distinct differences from the past.
First, by anchoring the economic dialogue in a semiannual meeting of the
heads of state, we've injected a new element of political commitment to a part
of the agenda that for too long in the past was subordinate to other
considerations in the relationship.
Second, because of the failures of past approaches, we will focus on results,
about which I will say more later.
And third, we have a comprehensive and integrated approach which addresses
the two enduring economic problems Japan present for the United States and
the rest of the world -- an imbalance problem and a penetration problem.
-2-
The Economic Problem with Japan
First, Japan continues to run substantial external surpluses, which at their present
magnitude of between three and four percent of GNP are a significant drag on world growth.
In the mid-1980's the U.S. trade deficit was the major imbalance in the world economy, and
our deficit was spread across most of the regions of the world. Now, Japan's surplus is the
major asymmetry in the world economy. And, its imbalance has evolved from a surplus
largely concentrated with the United States to a surplus spread roughly evenly across Asia,
Europe, and North America.
Second, Japan has retained a peculiar resistance to foreign goods, services, and investment
that cannot be explained away by benign factors like geography, its modest endowment of
natural resources, and the much vaunted competitiveness of many Japanese products. The
low level of import penetration has persisted despite successive efforts to open Japan's
market.
The low level of import penetration and the chronic external surplus are different but
closely related problems. Macroeconomic policies directed at reducing imbalances and
micro economic policies directed at increasing import penetration are like two blades of a
scissor. You need both to cut toward your objective. Fiscal policies directed at increasing
domestic demand and consumption, for example, are likely to mean easier penetration by
foreign producers. And trade liberalization and structural reform should enhance the impact
of macroeconomic policy by increasing the responsiveness of imports to changes in demand
and prices.
The details of the framework have now been reported widely. Rather than elaborating
on those reports, I would like to talk about the conceptual basis for our approach and dispel
some mischaracterizations of our positions.
The Macroeconomic Challenge
Japan's current account surpluses have fluctuated substantially over the past several years
-- from roughly four percent of GNP in 1987 to less than 1.5 percent in 1991. The surplus
is now expected to approach four percent of GNP again in 1994. These fluctuations reflect
macroeconomic forces -- a high level of savings in the household and government sectors,
more of which have been absorbed when growth accelerates than when it slows.
Excessive current account surpluses are always a global problem because they invite
pressures for protection. In today's demand-short global economic environment, with
America and Europe consolidating their fiscal positions, and the world suffering sub-par
growth, Japan's growing external surpluses are a particular problem.
-3-
What the world needs from Japan now is a sustained period of domestic demand-led
growth, a period when the demand for goods in Japan exceeds the domestic supply, so that
Japan is a net provider of jobs rather than a net drain on jobs in the rest of the world.
The extra demand that would be created by a return of the Japanese current account
surplus to its historically average level of one and a half percent of GNP would be enough
to create more than $60 billion dollars in additional exports from the rest of the world, which
translates into an extra one to two million jobs.
A reduction in the surplus of this magnitude is a prudent and a realistic objective for the
Japanese Government. Indeed, a more ambitious objective of reducing the surplus from its
1990 level of 1.2 percent of GNP was embraced by the Japanese Government in 1991.
Macroeconomic Concerns
There are several concerns raised in objection to this prescription of domestic demand
led expansion.
First, some question whether Japan has room for fiscal expansion. But Japan still has by
far the largest fiscal cushion in the G-7. Even after two stimulus packages Japan still has a
structural general government surplus and the net stock of outstanding publicly hold debt is
still remarkably small in comparison with the rest of the G-7.
Another familiar concern is that continued fiscal restraint is necessary to finance the
retirement of a rapidly aging population. My response to this is that public investment -- in
highways and hospitals -- is a better way to prepare for the challenge of an aging society than
the prodigious accumulation of low-yielding financial assets. And it is hard to see how it
helps Japan's future to risk prolonging the current recession.
A third response is that it is far more important for Japan to "recycle" rather than to
reduce its surplus. The world needs Japanese demand much more than it needs Japanese
savings. The barrier to increased growth in the industrialized countries and developing world
is low demand, not an inadequate supply of capital.
Finally, some observers argue that relying on macroeconomic stimulus to reduce the
external surplus risks a repeat of the asset price bubble. I think this is the wrong lesson.
Consumption-led growth fueled by fiscal policy measures will not lead to asset price bubbles.
The bubble economy of the late 1980's was not caused by too much growth in domestic
demand. It was caused by excessive liquidity and savings, which were the consequence of an
inappropriate policy mix combining excessively tight fiscal policy with loose monetary policy.
-4-
Credibility is like capital. Accumulating credibility for fiscal rectitude isn't particularly
valuable unless you are occasionally prepared to spend some of it. If there was ever a time
in Japan, that time is now.
The Trade Policy Challenge
Japan's selective engagement with the global economy -- expressed in the low level of
import penetration and the low level of intra-industry trade -- has persisted in the face of
successive commitments to liberalize access to foreign goods and large fluctuations in the
external surplus.
We can probably all now agree that Japanese snow is not all that different from the snow
that falls in other countries that produce skis. But despite the liberalization that we all
acknowledge has occurred:
the market share of manufactured imports in Japan is still less than half of that
in the rest of the G-7;
Japan still has an extraordinarily low level of intra-industry trade, which mean
that in contrast to the common pattern of commercial exchange in the
industrialized countries, Japan does not import much of the manufactured
goods it exports; and
the level of foreign direct investment in the Japanese economy is a small
fraction of that in the United States and Europe, which matters because trade
follows investment.
Some people misinterpret these statlstlcs as evidence that Japan is simply more
competitive than its competitors. That may be tempting, but it is not compelling. In a broad
range of high-tech manufactured goods, U.S. manufacturers outmatch Japanese producers in
third markets, but can not get a foot in the door in Japan. If efficiency and productivity were
the answer, then Japan would not have so few industries with a high, balanced level of exports
and imports.
America's goal in the ongoing negotiations on a new economic framework is to open
Japanese markets for the benefit of producers from all countries. Our approach is consistent
with the GATT -- we are seeking reductions in Japanese trade barriers solely on an MFN
basis.
Equally important, success in meeting our objectives is essential to the long-term future
of the multilateral trading system. This is true because when Japanese trade practices keep
foreign products out, it is difficult to forestall protectionism and it is difficult to mobilize
support for reducing trade barriers in other countries.
-5-
We will focus on results, not because we want to cut special deals for U.S. producers
unable to make it on their own, but to ensure that market outcomes are allowed to prevail.
The ultimate test of any trade agreement is the changes it brings about. It's difficult to see
any other way to monitor progress than by looking at benchmarks.
Quantitative benchmarks are no great innovation. They pervade all types of trade
agreements. Consider agreements in agriculture that liberalize quotas, or commitments to
reduce government subsidies to the steel industry, or agreements to open a class of
procurement to competitive bidding, or commitments to grant a specific number of licenses
to now entrants in the financial industry.
Contrary to some suggestions, we are not proposing hair trigger retaliation based on single
market share targets for uncompetitive U.S. producers. But we do see a critical role for
quantitative benchmarks.
Where traditional rules-based trade negotiations have been exhausted and the
anticipated response in sales by competitive foreign producers has failed to
materialize, indicators can playa useful role.
Where government monopolies or regulators are at issue, then quantitative
benchmarks can deliver results and it cannot be argued they are subverting the
market.
And in some sectors where there are real chicken and egg problems, where
producers don't invest in cracking new markets because they think they won't
be able to sell and where they can't sell because they don't invest, a temporary,
selective boost can be self-ratifying in raising sales and justifying the investment.
We are not seeking to manage trade. We are seeking to unmanage it.
It is unmanaging trade, not managing trade, to monitor the share of the
Japanese pension market in which foreign investment advisors have an
opportunity to participate.
It is unmanaging trade, not managing trade, to monitor purchases by the
government's telecommunications monopoly of foreign telecommunications
equipment relative to what happens in other markets.
And it is unmanaging trade, not managing trade, to explicitly compare public
institutions' purchases of foreign supercomputers with benchmarks set by other
purchasers.
-6-
The charges of managed trade are ironic from a Government which has long embraced
industrial targeting, which has allocated market shares among a limited number of companies
in selected markets, which pushes an active role for public policy in shaping private sector
decisions in its dialogue with developing countries, and which continues to use indicative
targets in its own medium-term economic plans.
Conclusion
The U.S.-Japan economic partnership over the last 45 years has been as productive as any
economic alliance in the history of the world. Both countries must do their part to ensure
equal success in the future. The United States looks forward to a continuing and productive
dialogue.
-30-
Japanese Consumption as a Share of GNP
62%
I
62%
61% 1-- .....................................................................................................................-t 61%
600/0 1--......................... r ...:.. ........ ,......... '" ..... ,....... ,.. ,........... ,................................ -t 60%
59% 1--............". .............. ,.......,,"-= ................... :................. , ........................... '" .. , . -t 59%
58% J--.................................................................
~
.......................... '; ................. --t
•
58%
57% J-- .....................................................................................~ ........................ --I 57%
560/0 J-- .....................................................................................................................--I 56%
55% ' ,
550/0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992
I
Data is on fiscal year basis.
I
Japan's Current Account Balances 1980-94
(Ratio to GNP)
5
z~
~4
5
~ .............................................. ::..; ... _u
... .:.:.; ............................................................... -4 4
~
3
~······································2;8···
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2
~·····························1;8···
2
1
r····················0:7··
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0.4
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~-
........................................................................................................................... -4 -1
(1.1)
-2
-2
~
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~
~
~
~
~
~
~
~
~
,\-()'B ,\-()'U ,\-()'U ,\-()'U ,\-()'U ,\-()'U ,\-()'U ,\-()'U ,\-()'U ,\-()'U ,\-()-' ,\-()-' ,\-()-' ,\-()()"'j '\-()()~
1993-4 are OECD forecasts as of June 1993.
Manufactured Imports as Ratio of GNP/GOP
8%
8%
7%
6%
. ....
........ .
~
. . ._ . . . . . . .
5%
I" 11111
•
4%
""
.
111111""" 11111111 """"
...........
I
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....
7%
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. ..
' , , 111111111111
...............
'I,
...........~
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......
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......
6%
~; .
................................... .
ttrrf\"· . ... . . . ... .. .
5%
'
.....
...
......,.. ..........................................
......... ~.....
,
.
3%
""
... . .....
..
".
........ _...................... ............
...
2%
R
t .............................
J-..................... .....................................
.....
. ............ .
;.............
4%
..... ·············,··.".110·······
...............
"............
",
......................••
.....
I
I
3%
I
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992
Japan
.1 I I I I.
EC-4: Imports from outside EC only. Total
manufactured Imports by EC-4 would be higher.
U.S.
EC-4
1111111111111
~/o
Consumption of LDC Manufactures by
Industrial Countries, 1988
5
c
ao 4
4.1
E
::s
(I)
c
8
3
II
i2
'0
C
I
1
o~
u.s.
....aurect •• percent of ........ consunlplori.
So\rce: "GlobIII Economic Prospects Mel ...
DeveloDlna Countrtes", Wortd a.... 1992.
EC
JAPAN
G-7: Manufactured Imports (1992)
(Ratio of GNP/GDP)
200/0
20%
18.6%
15%
.................................................................................................................)
10%
................................................................................................................. ) 100/0
........ 4.-6 9k ......................................... "--1
5%
15%
5%
4%
0%
0%
Canada
U.K.
U.s.
Germany
France
Italy
Japan
G-7: Foreign Direct Investment
(End of 1990)
25 %
1-- ...........24.2°/0................................................................................................................ --1 25 %
Vj))
>')'
--1 200/0
20 %
I--··········~A········································· ......................................................................
15%
1-- .......... ~j ..............................................................................................................., 15%
12.5%
10 %
. 'd ................ ..
..................... . . . .8.9%
8.1%
. ........................... .
. ....
10%
~
5%
5%
0.3% 0.6%
0
00/0
%
u.s.
Japan
II
Germany
France
Italy
Ratio of FOI to GOP ~ Share of total world FOI
Source: Department of Commerce
Japan, France and Italy figures exclude
reinvested earnings
U.K.
For Immediate Release
June 25, 1993
CONTACf: Jack DeVore
(202-622-2920)
STATEMENT OF TREASURY SECRETARY LLOYD BENTSEN
I want to congratulate the Senate for passing a significant deficit reduction
measure that addresses the broad goals we are seeking in an economic package. By
bringing down the deficit, we lower interest rates and create the climate our economy
needs to resume growing again. It helps us create jobs and a better way of life.
Now that we see encouraging economic signs and long term interest rates are at
20-year lows, it is imperative that we keep on this path. If we fail, we will see an
immediate upspike in long term interest rates. That's usually followed by a drop in the
stock market. What I don't want to see is a drop back into recession.
I expect that the conference committee will work quickly to get the package to the
President. The differences between the House and Senate bills are not as great as some
would have us believe. The bottom line is virtually the same in both versions: the deficit
will be cut by the $500 billion proposed by President Clinton.
-30-
LB-259
federal financing
WASHINGTON, D.C.
20220
bankNEWS
June 28,
1993
FEDERAL FINANCING BANK
Charles D. Haworth, Secretary, Federal Financing Bank (FFB),
announced the following activity for the month of May 1993.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $137.2 billion on May 31, 1993,
posting a decrease of $3,592.1 million from the level on
April 30, 1993. This net change was the result of decreases in
holdings of agency debt of $1,992.7 million, in holdings of
agency assets of $1,250.1 million, and in holdings of agencyguaranteed loans of $349.3 million. FFB made 18 disbursements
and received 27 prepayments in May.
Attached to this release are tables presenting FFB May loan
activity and FFB holdings as of May 31, 1993.
LB-260
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SJ
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Page 2 ot 3
FBDBRAL FINANCING BANK
MAY 1993 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
INTEREST
MATURITY
RATE
(semiannual)
INTEREST
RATE
(not semiannual)
GOVERNMENT - GUARANTEED LOANS
GENERAL SERVICES ADMINISTRATION
Chamblee ott ice Building
Foley Square Courthouse
ICTC Building
Memphis IRS Service Center
Oakland Ottice Building
5/12
5/14
5/18
5/25
5/26
$ 3,763,250.00 05/12/23
8,291,656.00
6,184,523.41
178,318.65
3,307,568.00
12/11/95
11/15/93
01/03/95
01/31/94
6.547%
4.316%
3.335%
4.110%
3.505%
3,093,275.89
1,301,325.82
2,834,352.31
7,025,467.47
1,082,895.73
3,307,949.39
2,141,044.43
1,652,063.67
3,764,162.00
250,000.00
600,000.00
601,000.00
590,000.00
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
12/31/14
12/31/26
12/31/14
12/31/25
6.172%
6.172%
6.172%
6.172%
6.172%
6.172%
6.172%
6.172%
6.217%
6.262%
6.460%
6.453%
6.845%
RURAL ELECTRIFICATION ADMINISTRATION
@Arizona Electric ,103
@Arizona Electric '103
@Arizona Electric '103
@Arizona Electric '103
@Arizona Electric ,103
@Arizona Electric '103
@Arizona Electric '103
@Arizona Electric '103
@Arizona Electric '103
Guam Telephone Auth. '371
Jackson Electric '381
Guam Telephone Auth. '371
w. Michigan Electric '355
@ interest rate buydown
5/4
5/4
5/4
5/4
5/4
5/4
5/4
5/4
5/4
5/4
5/5
5/24
5/25
6.125%
6.125%
6.125%
6.125%
6.125%
6.125%
6.125%
6.125%
6.169%
6.214%
6.409%
6.402%
6.787%
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
qtr.
Page 3 of 3
FEDERAL FINANCING BANK
(in millions)
Program
ency Debt:
port-Import Bank
lederal Deposit Insurance Corporation
lesolution Trust corporation
iennessee Valley Authority
Postal Service
sub-total *
May 31. 1993
$ 6,742.6
3,500.0
30,777.9
6,575.0
10.439.9
58,035.4
April 30. 1993
$
6,742.6
3,500.0
32,670.6
6,675.0
10.439.9
60,028.1
Net Change
FY '93 Net Change
5/1/93-5/31/93
10/1/92-5/31/9~
0.0
0.0
-1,892.7
-100.0
.Q....Q
-1,992.7
-949.9
-6,660.0
-15,758.0
-600.0
-23,431. 3
-2,600.0
-19.2
-4.4
0.0
$
$
~3~.~
,gency Assets:
armers Home Administration
HHS-Health Maintenance org.
DHHS-Medical Facilities
Rural Electrification Admin.-CBO
Small Business Administration
sub-total *
40,379.0
36.0
59.9
4,598.9
3.2
45,077.1
41,629.0
36.0
59.9
4,598.9
3.3
46,327.2
-1,250.0
0.0
0.0
0.0
-Oll
-Q.~
-1,250.1
-2,624.4
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 +
DOl-Guam Power Authority
DOl-virgin Islands
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 *
4,194.2
4,790.0
52.8
139.9
1,801.0
1,362.5
0.0
23.1
1,528.3
17,969.8
105.7
596.6
1,344.2
17.6
177.0
34,102.6
4,209.2
4,790.0
52.8
142.4
1,801.0
1,347.8
0.0
23.1
1,528.3
18,008.0
106.0
601.7
1,646.7
18.0
177.0
34,451.9
-15.0
0.0
0.0
-2.5
0.0
14.7
0.0
0.0
0.0
-38.2
-0.3
-5.0
-302.5
-0.4
0.0
-349.3
-150.1
-30.0
-72.2
-34.5
-52.3
585.6
-27.0
-0.6
-47.9
-173.2
-37.8
-37.1
-1,072.6
-1.5
grand-total*
*figures may not total due to rounding
+does not include capitalized interest
O.Q
-1,151. 0
~~===~
-=~~
=~=z::~
-======-=c::::.:
$137,215.1
$140,807.2
$-3,592.1
$-27,206.8
o
UHLIG DEB:~E"YS
Washl~lSton;
eRartment of the Treasury •
FOR IMMEDIATE RELEASE
June 28, 1993
Bureau of the Public De : -.
DG'20239
11f~'\
'{I)j
; ", '\!
,J L ;'i
....... '_
.....
. \.
J
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RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $12,343 million of 13-week bi~ls to be issued
July I, 1993 and to mature September 30, 1993 were '
accepted today (CUSIP: 912794F82).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.03%
3.05%
3.05%
Investment
Rate
3.10%
3.12%
3.12%
Price
99.234
99.229
99.229
Tenders at the high discount rate were allotted 21%.
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
Type
Competitive
Noncompetitive
subtotal, Public
Federal Reserve
Foreign Official
Institutions
TOTALS
Received
26,448
41,691,904
8,725
40,541
530,719
19,557
1,515,538
12,'080
6,439
20,670
12,154
863,125
753,640
$45,501,540
Accepted
26,448
11,075,604
8,725
40,541
135,719
17,187
153,258
12,080
6,439
20,670
12,154
80,545
753,640
$12,343,010
$40,307,261
1,259,963
$41,567,224
$7,148,731
1.259,963
$8,408,694
2,967,235
2,967,235
967,081
$45,501,540
967,081
$12,343,010
An additional $250,519 thousand of bills will be
issued to foreign official institutions for new cash.
LB-261
~~
CONTACT: Office of Financing
202-219-3350
UBLIC D~~T NEWS
DCJ:)anll1cnt of thc Treasurv •
FOR TMMEDIATE RELEASE
June 28, 1993
Bureau of th~ 'PJblic Debt • Washing:!on DC 20239
C.i
" F
ju~~ J~;
.
I..; ,-' ,j -J L
0J
Tenders for $12,330 million of,26-week bi~ls to be issued
July I, 1993 and to mature December 30, 1993 were
accepted today (CUSIP: 912794H23).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Discount
Rate
3.13%
3.15%
3.14%
Investment
Rate
3.22%
3.24%
3.23%
Price
98.418
98.408
98.413
$2,930,000 was accepted at lower yields.
Tenders at the high discount rate were allotted 1%.
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
19,458
43,892,247
6,943
27,113
22,566
12,656
1,758,582
9,319
8,168
21,221
10,635
673,873
520,128
$46,982,909
Accepted
19,458
11,506,880
6,943
27,113
22,566
11,666
123,962
9,319
8,168
21,221
10,635
42,173
520,128
$12,330,232
Type
Competitive
Noncompetitive
Subtotal, Public
$41,217,686
864,329
$42,082,015
$6,565,009
864,329
$7,429,338
3,000,000
3,000,000
1,900,894
$46,982,909
1,900,894
$12,330,232
Federal Reserve
Foreign Official
Institutions
TOTALS
An additional $492,606 thousand of bills will be
issued to foreign official institutions for new cash.
LB-262
lJLrc
CONTACT: OfYice of Financing
,
'1
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Low
High
Average
~'"
v~
I,. \
FOR RELEASE AT 2:30 P.M.
June 29, 1993
J.;
CONTACT:
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $24,400 million, to be issued July 8,
1993. This offering will provide about $500 million of new cash
for the Treasury, as the maturing bills are outstanding in :he
amount of $23,890 million.
Federal Reserve Banks hold $5,642 million of the maturi~g
bills for their own accounts, which may be refunded within the
offering amount at the weighted ave~age discount rate of accepted
competitive tenders.
Federal Reserve Banks hold $:,915 million as agents fo~
foreign and international monetary authorities, which may be
refunded within the offering amount at the weighted average
discount rate of accepted competitive tenders.
Additional
amounts may be issued for such accounts if the aggregate amount
of new bids exceeds the aggregate amount of maturing bills.
Tenders for the bills will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public
Debt, Washington, D. C.
This offering of Treasury securities
is governed by the terms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356;· published as a final rule on
January 5, 1993, and effective March 1, 1993) for the sale and
issue by the Treasury to the public of marketable Treasury bills,
notes, and bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
LB-263
HIGHLIGHTS OF TREASURY OFFERINGS OF WEEKLY BILLS
TO BE ISSUED JULY 8, 1993
June 29, 1993
Offering Amount .
$12,200 million
$12,200 million
91-day bill
912794 F9 0
July 6, 1993
July 8, 1993
October 7, 1993
April 8, 1993
$11,345 million
$10,000
$ 1,000
182-day bill
912794 H3 1
July 6, 1993
July 8, 1993
January 6, 1994
July 8, 1993
Description of Offering:
Term and type of security
CUSIP number
Auction date
Issue date
Maturity date
Original issue date
Currently outstanding
Minimum bid amount
Multiples .
$10,000
$ 1,000
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids
Competitive bids
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10%.
(2) Net long position for each bidder must be
reported when the sum of the total bid
amount, at all discount rates, and the net
long position is $2 billion or greater.
(3) Net long position must be determined as of
one half-hour prior to the closing time for
receipt of competitive tenders.
Maximum Recognized Bid
at a Single Yield
35% of public offering
Maximum Award .
35% of public offering
Receipt of Tenders:
Noncompetitive tenders
Competitive tenders
Payment Terms .
Prior to 12:00 noon Eastern Daylight Saving time
on auction day
Prior to 1:00 p.m. Eastern Daylight Saving time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
Text as Prepared for Delivery
For Immediate Release
June 30, 1993
REMARKS OF TREASURY SECRETARY LLOYD BENTSEN
CONSUMERS FOR WORLD TRADE AWARDS DINNER
Thank you very much for this honor. It's times like this that I know these 8-day
weeks we've been putting in are worth it. It means a great deal to me for an
organization of this stature to say I've accomplished something good for our country.
It's also a special honor to be recognized at the same time you recognize the
contributions of President Salinas. He deserves great credit for the courageous steps he
has taken. Ambassador Montano, would you pass on my congratulations to President
Salinas?
Let me turn the tables just a little here for a moment, and thank you, all of you,
for the efforts you have been making on behalf of greater, freer trade throughout the
world. Sometimes it is not easy convincing others that opening their doors can benefit
everyone -- consumers and businesses. The help you provide makes the job a little
easier, and we in the administration thank you.
The hour is late, so I'll try to keep my remarks brief. I want to talk for a few
minutes about our trade policy and what we're doing on some important trade issues.
Let's step back for a moment and look at recent trade history. We've had an
explosion in international trade. Since 1959, exports have more than doubled as a share
of our Gross Domestic Product.
Since the end of World War Two, we basically accepted trade barriers abroad as
the price of recovery for Europe and Japan. Now, the rest of the world is getting as
prosperous as us, some of them more so. So the time has come to change things.
Our trade policy of export activism is based on a simple premise: world markets
should be as open as ours.
LB-264
2
To put this in perspective, let's look at openness for a moment. When you match
things up against GOP, Japan has penetrated our markets nearly twice as much as it's
gotten into the European Community markets. By the same standard, Europe has nearly
twice the percentage of our market as it does in Japan's market. Something's out of line
here, and I'll tell you what it is. Our markets are open, and other markets aren't.
Even in the areas where we provide some protection from foreign competition,
we're still far and away more open than our major competitors. We bring in more
apparel products per capita than the EC, Japan, or Canada. Foreign automakers have
24 percent of our market, but just 12 percent in the EC, and 4 percent in Japan. The
OECO says our agricultural subsidies are substantially lower than those in Europe and
Japan. Again, something's out of line here.
It's this imbalance in openness that's the basis for our activist approach to exports.
The fact that our markets have been so open for so long means that other industrialized
nations, particularly those with chronic external surpluses, must do much more to open
their markets. We're not looking for anything we haven't already done ourselves.
Let me give you a look at what we're doing to put this policy in place.
First, on NAFfA: I'm sure many of you have heard about the judge's ruling today
that we have to have an environmental impact statement before we go ahead with
NAFfA. I want to say that we strongly disagree with that ruling. We're going to appeal.
We're concerned about it. It could result in an inordinate delay of NAFfA, and we
don't want to see that. Furthermore, it interferes with the president's ability to conduct
foreign policy.
We are seeking the effective side agreements -- on the environment and on labor
issues -- that will strengthen the agreement. I will say that I'm encouraged to see that
the Canadian Senate acted last week on NAFfA. I hope we'll soon be able to do the
same.
NAFfA is a vitally important agreement. It means economic growth, more jobs
and bigger paychecks. In short, it means prosperity.
There are those who seem to have a bit of a hearing problem with NAFfA.
When I listen, what I hear is the whoosh of goods rolling south, not jobs. The jobs are
in the United States, making goods for export.
Five years ago we ran a trade deficit with Mexico. Today, after President Salinas
has brought down trade barriers, we are running a substantial surplus, in the order of $5
billion dollars. Our exports to Mexico are up by $25 billion a year in the past five years.
3
That's a sure sign to me that freer trade brings growth and prosperity.
And I think the overwhelming majority of sectors in our economy will benefit
from NAFfA. It is an agreement that is good for consumers, and it is good for business.
Secondly, we've been talking with Japan about a new framework for our economic
relationship.
Those talks haven't gone as well as we would have hoped, but the government
there is in transition, which makes it a little more difficult to nail things down now.
That doesn't change our goals one bit. We're still looking for Japan to get its
current account surplus down to something more consistent with historical levels. And
we're talking with them about market access.
If you look at this from the perspective of consumers, I think it's time that Japan
gave as much attention to its consumers as it does to its producers.
Japan is a modern nation. It's per capita GDP is among the highest in the world.
It's higher than ours. Japan has higher hourly manufacturing wages.
But look at the standard of living. I saw some figures the other day from a joint
U.S.-Japan study on prices. It said the Japanese pay nearly 50 percent more than we do
for food. A box of cereal is nearly 80 percent more than in the United States. They
have to pay 74 percent more for a pair of blue jeans. The study said the Japanese pay
40 percent more for a laser printer, and it's made in Japan. The list goes on and on.
Let me tell you, those prices aren't exactly consumer friendly.
It's clear there are barriers to open and free trade there. If Japan were to have a
more pro-consumer approach -- those Japanese consumers would have more money to
spend on improving their living standards.
The point is that consumers everywhere will benefit when market access is
greater, when protected markets are opened for competition.
The time has come for us to attack these problems. What's at stake here is world
growth, and the jobs that will come with it. The United States cannot by itself pull the
entire global economy along. If, for instance, that Japanese current account surplus gets
down to where it ought to be, there could be between one and two million more jobs,
another $60 billion in exports for the world economy.
4
The third item that will resolve some of these problems with openness in markets,
and push the global economy along, is a successful completion of the Uruguay Round of
GAIT talks. The president has made it quite clear that we want this wrapped up
quickly, and successfully.
Now, everyone has different definitions of what success is. So let me tell you
what mine is as far as the GAIT is concerned.
I think we can say we've been successful if we lower the tariff and non-tariff
barriers for our exports. We want to see the mutuai elimination of tariffs in the major
sectors, such as pharmaceuticals, electronics, manufactured equipment and others. We
want our service suppliers, such as banks and insurance companies, to have greater
access to foreign markets.
If we can get this round finished, it's going to mean a lot for Americans. More
precisely, it will mean growth and jobs.
We think that our output will go up by $1 trillion over the next decade, and that
world output can go up by $5 trillion. That means another $17,000 for the average
family of four. It means there can be another 1.4 million U.S. jobs because of additional
trade related to the GAIT round.
Before I close I want to say that I will be going with President Clinton to the
Tokyo Economic Summit next week. We are going in with a strong position, the
strongest in years, because of the economic housekeeping we've done here at home. Our
leadership has already restored vitality to an almost moribund G-7 process. And our
credibility should help encourage our G-7 partners to take additional cooperative steps
to stimulate their economies and create jobs and growth.
One of the messages I have been putting out lately is that we, the United States,
cannot singlehandedly bring along the rest of the world economy.
It must be a cooperative effort. That is why we are working so hard to get
markets opened, and to have coordinated and cooperative domestic economic policies.
We've got to keep this process going strong.
The summit will be an opportunity for all of us, the President, me, Secretary
Christopher, to cover a number of other issues with our counterparts, such as democracy
and market reforms in Russia. We are leading the effort to assist the Russians, and I'm
pleased that the IMF is voting to release that $1.5 billion loan today.
5
I think that what you're going to see in this summit is an event that is short on
ceremony and long on substance. There will be plenty of time for the leaders to talk
frankly with one another, get to know each other better, and work together. It will allow
them to focus on the most important issues at the moment, which are restoring global
growth, opening up markets, and assisting Russia's reform process. We don't have to
walk out and make some grand pronouncement to have made progress on those issues.
We understand that not everyone will have the authority to commit to change at
this summit. Our Japanese hosts, for example, will elect a new Diet 10 days afterward.
What that means is that we will have to demonstrate an even greater commitment to
leadership to carry through on the efforts we are making to get the global economy
.
.
movmg agam.
I'd like to close by telling you that I had decided to retire from the Senate when
my term expired. That was until President Clinton asked me to serve as Treasury
Secretary. I saw a President with the political courage to do what hadn't been done in
this town in 12 years, and that is take charge of our economy and change our economic
future. Part of that is his strong commitment to opening markets and making more
goods available to more people. I am convinced that the actions we are pursuing on the
trade front will accomplish that.
Again, thank you for this award. It is a great honor.
***
Thank you.
FOR IMMEDIATE RELEASE
June 30, 1993
CONTACT: Scott Dykema
(202) 622-2960
STATEMENT BY SECRETARY BENTSEN
I'm pleased by today's decision by the International Monetary Fund Executive
Board to disburse a $1.5 billion loan to Russia. This is a strong endorsement of the
Russian government's reform program and vote of confidence for President Yeltsin's
success in securing a market-based democracy for the Russian people.
The IMF loan is particularly important because the major industrial nations are
making good on the commitment they made in April to send quickly money to support
Russia's efforts to cut its budget deficit and control money printing. The $1.5 billion is a
first installment to be followed by additional support as Russia continues making
progress in privatizing and stabilizing its economy.
-30-
LB-265
A
.
•
VI
TREASURY NEWS
Department of the Treasurv
Washington, D.C.
Telephone 202-622-2960
Text As Prepared for Delivery
For Immediate Release
July 1, 1993
REMARKS OF TREASURY SECRETARY LLOYD BENTSEN
WHITE HOUSE PRESS BRIEFING
Let me make a few comments and then take questions.
First, annual economic summits don't usually bring surprises. If there's a surprise,
something's wrong. But heading into this economic summit there's a surprise -- and it's a
pleasant one: Economics is actually at the.!QP of the agenda. And it's pocketbook
economics -- jobs, growth, and trade.
President Clinton's actions are earning us the same economic respect this year as
we've had in the military and diplomatic arenas in years past. Here we have a President
who took care of business at home first -- cut our deficit (something every country has
wanted us to do). Long-term interest rates are lower than they've ever been at a
summit. And our economy, even with modest growth, is growing faster than anybody
else's.
When we go to the table we'll have three major economic issues:
First. growing the world economy. Slow growth in other countries means we
have shrinking markets to sell to and that's not good for creating jobs. So to promote
our growth, by promoting growth elsewhere, we want to keep seeing lower interest rates
in Europe (like the cut in Germany), and we want to see Japan keep stimulating its
economy.
Second, expanding trade. We want to wrap up the Uruguay Round of the GAIT
agreement quickly, so all countries have to contribute. It could add 1.4 million jobs in
the U.S. over the next decade. And Japan must open its market. Our discussions with
them (which are separate from the summit) will continue after their election.
Third, Russia. Nothing is more important for global security. In Tokyo, we'll
push to keep the flow of aid coming. I was in Moscow last month, I saw a lot of
progress, and we have to make sure Russia continues to stabilize its economy.
Let me end with this. If at this summit we can agree to cooperate and reduce
tensions on issues like trade, it will lead to jobs here and abroad. And that's well worth
our efforts.
LB-266
UBLICDEBT NEWS
Dcpanml'nt of the Treasurv •
FOR IMMEDIATE RELEASE
July 6, 1993
}~\..
~"\
I.~'\
r\~ .~
~~¥
Bureau of the PupliflDebt • Washington, DC 20239
~
'\ \' ,. d J J VCONTACT: Office of Financing
\
.,J
,,'
202-219-3350
-,
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Tenders for $12,230 million of 13-week bills to be issued
July 8, 1993 and to mature October 7, 1993 were
accepted today (CUSIP: 912794F90).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
2.95%
3.02%
3.01%
Investment
Rate
3.01%
3.08%
3.08%
Price
99.254
99.237
99.239
Tenders at the high discount rate were allotted 68%.
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
25,141
29,419,353
9,291
26,927
31,875
26,377
1,456,217
8,933
5,080
21,557
13,305
608,911
875,415
$32,528,382
Accepted
25,141
10,787,033
9,291
26,927
30,915
26,377
342,217
8,933
5,080
21,557
13,305
58,271
875,415
$12,230,462
Type
Competitive
Noncompetitive
Subtotal, Public
$27,769,131
1,364,975
$29,134,106
$7,471,211
1,364,975
$8,836,186
2,792,330
2,792,330
601, 946
$32,528,382
601,946
$12,230,462
Federal Reserve
Foreign Official
Institutions
TOTALS
An additional $360,254 thousand of bills will be
issued to foreign official institutions for new cash.
LB-267
UBLIC DEBT NEWS
Department of the Treasury -
FOR IMMEDIATE RELEASE
July 6, 1993
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Tenders for $12,242 million of 26-week bills to be issued
July 8, 1993 and to mature January 6, 1994 were
accepted today (CUSIP: 912794H31).
RANGE OF ACCEPTED
COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
3.07%
3.10%
3.10%
Investment
Rate
3.16%
3.19%
3.19%
Price
98.448
98.433
98.433
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
.
28,171
36,929,561
6,397
20,995
31,199
20,516
1,494,967
9,336
10,294
18,396
11,249
513,150
648,668
$39,742,899
Accepted
28,171
11,101,052
6,397
20,995
30,029
20,126
252,617
9,336
10,294
18,396
11,249
84,630
648,668
$12,241,960
Type
Competitive
Noncompetitive
Subtotal, Public
$34,658,424
1,051,821
$35,710,245
$7,157,485
1,051,821
$8,209,306
2,850,000
2,850,000
1, 182,654
$39,742,899
1, 182,654
$12,241,960
Federal Reserve
Foreign Official
Institutions
TOTALS
An additional $708,046 thousand of bills will be
issued to foreign official institutions for new cash.
LB-268
CONTACT:
FOR RELEASE AT 2:30 P.M.
July 6, 1993
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills
totaling approximately $24,400 million, to be issued July 15,
1993.
This offering will provide about $1,225 million of new
cash for the Treasury, as the maturing bills are outstanding in
the amount of $23,172 million.
Federal Reserve Banks hold $5,479 million of the maturing
bills for their own accounts, which may be refunded within the
offering amount at the weighted average discount rate of accepted
competitive tenders.
Federal Reserve Banks hold $1,672 million as agents for
foreign and international monetary authorities, which may be
refunded within the offering amount at the weighted average
discount rate of accepted competitive tenders. Additional
amounts may be issued for such accounts if the aggregate amount
of new bids exceeds the aggregate amount of maturing bills.
Tenders for the bills will be received at Federal
Reserve Banks and Branches and at the Bureau of the Public
Debt, Washington, D. C.
This offering of Treasury securities
is governed by the terms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356, published as a final rule on
January 5, 1993, and effective March 1, 1993) for the sale and
issue by the Treasury to the public of marketable Treasury bills,
notes, and bonds.
Details about each of the new securities are given in the
attached offering highlights.
000
Attachment
LB-269
HIGHLIGHTS OF TREASURY OFFERINGS OF WEEKLY BILLS
TO BE ISSUED JULY 15, 1993
July 6, 1993
Offering Amount .
$12,200 million
$12,200 million
Description of Offering:
Term and type of security
CUSIP number
Auction date
Issue date
Maturity date .
Original issue date .
Currently outstanding
Minimum bid amount
Multiples .
91-day bill
912794 G2 4
July 12, 1993
July 15, 1993
October 14, 1993
April 15, 1993
$11,066 million
$10,000
$ 1,000
182-day bill
912794 H4 9
July 12, 1993
July 15, 1993
January 13, 1994
January 14, 1993
$14,809 million
$10,000
$ 1,000
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids
Competitive bids
Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids
(1) Must be expressed as a discount rate with
two decimals, e.g., 7.10%.
(2) Net long position for each bidder must be
reported when the sum of the total bid
amount, at all discount rates, and the net
long position is $2 billion or greater.
(3) Net long position must be determined as of
one half-hour prior to the closing time for
receipt of competitive tenders.
Maximum Recognized Bid
at a Single Yield
35% of public offering
Maximum Award .
35% of public offering
Receipt of Tenders:
Noncompetitive tenders
Competitive tenders
Payment Terms .
Prior to 12:00 noon Eastern Daylight Saving time
on auction day
Prior to 1:00 p.m. Eastern Daylight Saving time
on auction day
Full payment with tender or by charge to a funds
account at a Federal Reserve Bank on issue date
FOR IMMEDIATE RELEASE
July 7, 1993
STATEMENT BY TREASURY SECRETARY LLOYD BENTSEN
Last Thursday at the White House, I said agreement to complete the Uruguay
Round by December was one of our key objectives out of this summit, and today we not
only met, but surpassed, that objective.
Promises to complete the Uruguay Round are standard fare at summits. For
three years that's what we've seen. What distinguishes this summit is that we've moved
beyond the promises to the pay-off -- a breakthrough in these negotiations that is much
more than an agreement to agree. The prospects of meeting the December deadline are
brighter than ever before.
President Clinton and Ambassador Kantor deserve a lot of credit on this one.
They recognize the urgent need to complete the Uruguay Round. Over the next decade
it could create 1.4 million jobs in America and that's something we can all applaud.
President Clinton has succeeded in making this economic summit a jobs summit. That's
what this summit is all about -- creating jobs.
The market-access agreement is a good one. Not only is it the largest single tariff
reduction ever negotiated, it will result in increased market access for industrial goods -goods that now represent over $75 billion in U.S. exports.
It certainly made my meeting with my G-7 counterparts a pleasant experience
today. The mood was very collegial. And if I can sum up a couple of hours of
conversation in one word, the word is jobs.
America has created 770,000 jobs since January -- and that's pretty robust growth
compared to what we are seeing now in other countries. Their employment is going
down, not up. And much of that unemployment, especially in Europe, is long-term, not
short-term like we have in the U.S., where most find a job eventually. We talked about
what we can do to increase worldwide employment -- and that means worldwide growth.
We don't want competition between countries for jobs. We want cooperation, like
we've had militarily and diplomatically, so everybody comes out of this ahead. Their
message to us was something we've heard before: cut our budget deficit. I said that's the
President's top priority when he returns to Washington. Budget cutting has lowered
long-term interest rates to 20-year lows, which has been our way of stimulating the
economy.
LB-270
2
My message to them is something they've heard before and have acted on before.
For Europe, they need to cut interest rates. Since I met in February with them, they
have. But the rates are still high, given the depth of the recession there. And we told
Japan that they need to keep stimulating domestic demand. Japan has made a start but
they need to do much more.
Let me end with this: If we can increase the demand for products by 2 percent
among our trading partners, it means 700,000 new jobs in the U.S., 750,000 new jobs in
Europe, 500,000 new jobs in Japan, and 120,000 new jobs in Canada. We'd all be
winners. And that's what we're here to discuss, and, in the case of the market-access
agreement, not only talk about but act on.
-30-
DEPARTMENT OF THE TREASURY
WASHINGTON
PRESS
BRI~FING
BY TREASURY SECRETARY LLOYD BENTSEN
JUly 7, 1993
10;10 AM Tokyo Time
SECRETARY:
mente
Good morning.
I
hav~
no prepared state-
Why don't yoU JUBt open up with whatever questions you
have in mind.
0;
What do you think the prospects are of
concluding the framework agreement with the Japanese before the
end of the week?
SECRETARY:
I rton't
thlnk It is a difficult task.
resolve tnat we have not been
think it's going to be ea&y.
I
We have some major points yet to
~ble
to, but thA
negotlat1on~
are
continuing.
0:
Who carries on the negotiations?
8ECRETARY:
We have a
numb~r
of them.
Obviously
Larry Summ9rs from Treasury is involved in that, Roger Altman,
Deputy Secretary, iR involved in Lhat.
As I understand 1t, at the
0:
et~rt
the U.S.
proposed that the Japanese, as part of this to reduce the current
account surplus to 1 1/2 percent to 2 percent of GOP over seven
years as well
8S
increase its manufacturing import by a third, 1s
the U.S. continuing to atick by tne essential proposals, or i&
th@re some wiggle room?
SECRl!;'r ARY :
trying to
rQgolv~
I think what they are trying to do is
how long It takes to achieve our objectivQs.
1
I
think that's the major
1aau~
still lnvolved and policy we think
ought to De quantif1able and it ia impoTtant how
th~l
1e accom-
plished.
What Ooes the United State8 think abOut
Q:
tne Japanese suggestion that thQ United States
shoul~
refrain
from any traOe sanctions?
Well, what we are talking abOut Qo1ng is
SECRETARY:
That'S tne low,
laws that we have in the United States.
pras~nt
stay1ng with the
an~
if you're talking about something like 301
that'g part of our laws that
~re
in
eff~ct
ana we have to honor
those.
t~lxB
The fact that theee
Q:
Qoes lt indicate
th~t
the
JapanQS~
are going on,
have accepted the principla of
numerical target?
SECRET"RY:
unde£5tand
th~t
I think what it says
i~
that tne Japanese
we cannot Rustain the kind of surplus that they
have in trade with Gl17 billion with nat10ns around the world,
particularly the United States
evi~enoed
.~n~
Europe.
The EurOpeans have
their eoncarn aDOut that, as we have.
Wh~t
you're
~aying
is it that continues I think you'll
see a return to protectionism, and I think that's bad for the
world.
I thinK that's a serious
miatak~.
I get amused at this
charge of "managed traOe" aimed at the United States by Japan.
~hen
I lOOK at a situation here where we have 40 percent of the
(super) computer market when we're talking about the private sector,
2
private sales, out when you're talking about public procurement
sounds like managed trade to me.
we have lese than 1 PQrcent that
The papers tOday have reported that a
Q;
poll taken
the
~y
Japanes~
the Tokyo
bl~
Japan tor its economic problems.
I think what YOU see is a ehared concern
SECRETARY:
the economic problem we are QQQ1ng in tne rest of the world
Yon're lOOklng at the $117 billion dollarA or trade sur-
today.
pluses that drag on the rest ot
get
th~
world's economy.
If we can
of that and get it more in balance that would create
~id
johS.
SystAm snows that most of
surveyed reel that the American people and the
American government
~bout
aro~dcasting
You're looking at 20 mill10n people unemployed in
EuropQ today, and tnat means that if we can open up tnese markets
And we can get more halance in our trade and that you are 90 1 no
to create jobs,
~nd
the jobs that are involved 1n the export
bUSiness normally get about 17 percQnt more in the way of compensation than other jObS, which are very important johs.
0:
GO, •••
SECRETARY:
You never nave unanimity amongst the G7
countries, but I think there is a general snared concarn about
that kind ot a trade su!plu&.
I think that is a common belief on
the part of all of them that want to see aome opening up of these
markets.
Do any of them Rhare the U.S.
0:
favor of these
~argets
today?
3
~iew
in
SECRETARY:
When we're talking about sectorG where we
gQ@ part1cularly a closed market. I th1nk there is a general
shnr1ng of th3t bellef.
We're
t~lking
about for all other
nations, not just the UniteO States.
0:
Do thp-y want to quantify the results?
Q~CRETARY:
I don't ge@ how you
you're making pro;ress
01
~etermine
whether
not unless you have some kind of a
quantiflablo result tryin; to further define this part ot the
problem.
0:
SECRETARY:
very strongly 1s for
One of the things that we nave encouraged
th~m
to stimulate their economy.
In the
February Meeling in London of tne Finance Ministers, whIch
w~nt
vIrtually unnoticed, fortunately, we had a very informal meeting
there.
hi~h
We
diQcusse~
at length the problema of F.urope 1nsofar as
interest rates and what that wati doing to them.
We dis-
cussed With the Japanese the fact that they had a contractlonary
budget and tnat we wace hopeful and concerned and wanted them to
do more stimulation of their economy.
They
pae.e~
They re5pondeO to that.
two supplement.ary buOgets where they worA gOing to
have a negative GNP, they havQ a very
GNP, QomAthing around 1 percent.
mo~e8t
increase in their
That certainly 18 not enough to
creote jobs.
What we are urging vQry strongly is for them to
the stimulation of their economy on into 1994
80 th~t
more consumer aemanO in Jopan an6 that would create
4
con~1nue
we can gQt
mo~e
exports
for the rest ot us around the
worl~,
not just the United
St~tes
but for the entire world in thaL kind of macroeconomic approach.
Have yoU persuaded Mr. Hayashi to make
Q:
any sort ot commitment in that regard when you met with him?
SF.CRETARY:
that regard.
I
did not have any commltment from him in
I didn't get a commitment from him in that regard
in London, but he and the administration here certainly
to tha concerns that we cited in London. and that
that degree.
turther opening up of their markets.
ric~.
helpful to
we would hope that it would continue the stimula-
tlon of the economy hQre. and we would like to
on
w~s
resPOn~ed
ge~
some things in
As we look at the situation
where they were not accopted at all. when I look at the
prices for the consumers here, I think if we can see an opening
up of these markQts that it will create jobs around the world
anO. in turn, will materially benefit the consumers in this
country.
When 1 look al something like the price of a pair of
Levis in this country be1nQ 74 percent higher than they are in
the United States, when I look at a pound of sirloin begf that
SQ11s for S4.11 a pound in Washington anO it sells for
$25.47 a pound here, when! look at thQ fact that the factory
wage in Japan 1& higher than it 1s in the United States and lhe
per capita income now is past that ot the United States, and yet
I look at tne standard of living in Japan
living iQ
90
wher~
the cost of
high that they don't have the beneflt of that
5
increase in
w~ge
here, that we
thin~
it would bA a matelial
benefit to tnem for their con8umers and also to attack
lems of
un~mployment
~he
prob-
in the rest of the world.
0:
Th~
Prime Minister said
y~sterd~y
that
Japan is a market economy and governments can't do anything in
such Bn economy to control the surplus ...
SRCR~TARY;
se~n
I strongly dIsagree with that when 1 have
the oooperative efforts at MITl and tne Japanese
in promoting thc sale,
~nQ
particularly the @xports, when I've
eGen the kind of situation I just cited on the
where
governm@n~
90vernm~nt
procurement says that
~ney
comput~r
business
purchase less than 1
pelcent of their computers from outside their country and, yet,
in the
showing
pI'! vate
~hat
sector
w~
we are competitive.
0:
Japanese have
have about 40 percent of the ml!lrket,
I
think that Message is wrong.
When I said & While ago whether tne
acc~pted
the concept of
th~
numer1cal targets, you
reSpOnded something to tne effect that they
can't sustain that kind of
bock to the question.
8
underS~and
that they
surplus, but I would like to come
In the1r undarstanoing that they can't
8ustain that kind of a surplus are they saying, well, let's find
some other way to solve
~h1S,
or are they accept1ng the principle
of numerical targets?
SECRETARY;
I don't know how you measure it w1tnout
having something quant1fiable.
The qUQstion is terminology and
how you arrive at sometn1nQ that they can agree to
6
an~ ~e,
in
turn, and it will not be easy.
defining yet what the
I think they do.
Qxactltu~e,
I
que~t1on
is
suppos~.
A rQlated trade matter.
0;
The
Given Judge
Richie's decisIon on NAFTA, how docs the adm1n;~tratlon plan to
try publicly sell now ...
SECRETARY:
case, obviously.
Th@ first we are going to apP0al the
The other one. when you've nad a deficit in
trade witn the country, as the United States has had with Mexico
just five years ago, anO YOU hove seen the explosion in trade
with them,
~nd
es
you have sep-n thIS move to a
surplus, lhat tells you that the expAnsion
or
important to the United States und that that
billion dollar
trad~
i~
is terribly
a jOb creator.
I've heard one ot the tnem say that "you hoar that great sucKing
sound II and that'g the jOhA are gOlnq south.
really Is, is products going south
an~
I think what it
creating jobs in the
United States, and I think that's important for Doth the Uniled
States and M@xiCO. and we now see that Mexico has subplanted
Japcn as our No. 2 purchaser of manufaclured products so that. in
turn,
is
important.
I was Oorn and reared on that MeK1can bord@r And have
been involved in Mexico all my lite, ana this is u dramatic
change in the attitude on th@ part ot MeXICo ana Salinas, who is
thQ tormer President, who hus been able to hring their tariffs
down to an average of some 11 percent.
7
But those ar9 not
~oun~.
successor to SalinaS who is not as rQform
m1n~ed
they can go back
UP to 50 percent.
That is the 80rt ot thing we are trying to get rid of.
purcha8~
If you'rQ looking ot the
of automobiles and automobile
parts, they will not buy from us until we have bought, say,
thns~
$20,000 worth of
parts and automobiles from thenl, and then
they buy $10,000 from us.
Tnat's discriminatory.
Are you maKing these arguments
Q:
positive in a
v~ry
campaign to sell Congress to the public'
S£CR&TARV=
Let me tell you.
arguments for soma time, and
somethlng 44 Limes before
1
I've oeen making those
find in Washington you have to eay
flnal1y says:
~omeone
By the way, Qid
you hear what he soid?
0:
A~suming
you go home at the end of the
week without a framQwor.k aqreemellt, what do you want people in
t~~
public
~e~tor
... waste of time?
Not a waste of time.
SEC~ETARY;
1 think that som@-
times these things take a while, and if you lOOk bock at the
previous Summit meetings a lot of times they
w@r~
ballyhooed and
graat expectotions and people went away quite disappointed.
We
should not hOld wome impossible 8tanaard for this Summit meeting.
We have made that pOint from the vary beginninq, but we
sure how much of it we can accomplish.
8tOP the aay we
h~ad
back to WaShinglon.
pUr8UQ these objectives.
8
~re
not
But that doesn't mean we
We will continue to
It YOU look at the past Summ1ts,
Q:
la~t
the
three Summits placed ...
SECRETARY;
I just said that.
0=
••• Are they going to come up with a
market access agreem@nt this year ...
I certainly hope that we can coma up with
SECRETARY:
a marKet access agreement.
I think it's awfully important.
The
CongrQss, Bome ot the members that put us on notice that 1f it
isn't done this time that they are not going to renew (fast
authority), and
that'~
som@thlng else to consider.
w@'re successful thi8 time or not
with, for example,
wh~l
jt
18
tra~k
But whether
not easy, particularly
we have heard from the ¥rench, lhat gives
us concorn.
YOIl and the President hnvc both stressed
0:
the importance to Japanese
con~umer~
at elIminating trade
barriQrs 80 their cost of goods and services woulQ gO down.
How
concerned are you that these kinds of atatementa to the Japanese
public might be seen here a8 improper interferenoe, sort of a
r@gentment factor, thyt you're t@111ng them whal they should be
doing in thelr
own best nationyl interQst?
SECRETARV:
The Japanese have been tel1inq us what we
should be doing and they made a very titrong case, and
PQ8n countries did, about
order
b~fore
what to do.
~hy
th~
Euro-
don't you get your own house in
you start lecturing
U8.
SO they were telling us
Why don't YOU do something about your dQt1clts?
9
I must tell you in the meeting in Lonaon 1n February,
ther@for@ you
ha~
m~rathon,
that we
President
h~d
a G7 organization that had becom@ almost a
ha~
an
en~hus1asL1c
response to what thi@
the courage to do 1n taking on this budget and
making some very unpopular recommendations about cutting back on
popular proqrams about raising
t~xe6
insofar as those that are
Th~t
best off from an QcOnomlC standpOint.
courage.
If it did not it would
have
takes politicAl
been done a long time ago.
but those countries responded to it and we were very pleased, and
the comments they made to me in that finance ministers meet1ng
were mosat encouraglnq, and when we responded by then
lower interest rates for Europe ana, 1n turn,
sugg~stinq
stimul~ting
the
Japanese economy, there was a responSive accord to that one.
0:
In the President's ap@ech today, at one
point hQ talked 8Dout considering an
A8i~
Pacific Trad@ Ar@8.
Would the U.S. be willing to enter some [ree trade
~111anca
with
some of these other Asian nations?
SECRETARY;
Well, I think it's much too early to be
able to d@ftn@ tnat one, but what it does mean 18 that we intena
to be a major player jn ASla-pac1t1c, Clud I was particularly
pleased that the President recommendeQ, ana told me frankly, to
get together with the Financo Ministers of the 15 countries.
want to be a part or that, part of thQt economic action.
'fhis 1s
an exploding, growing @conomic area, Clod we must be involvQ6
it must not be just the Jaran~s@, wno is the mojor financ1~l
10
We
an~
power.
Wp- want to be a part of th~t and we want to have im-
proved and continuing ~lalOgue, for example, with the ChinesQ in
that regard.
0:
You are an expert on the pol1cies of
trade in WaShington, but given the narrow margins that the
president haG
ha~
with the tax package, given the vision in the
Congress on NAFTA, do you think that the U.S, can make
SlonS, enough conceeaions, on th@ market access
t~lks
conce~
to get this
dQsl dona, given that you are going to have to step on the toe&
of such powQrful
an~
important industries as textil@s And
apparels?
SECRETARY:
Roun~
You're not talking about the Uruguay
rather than just NAFTA.
0:
of NAFTA
m~ke
Yes,
I'm asking you whether the P011t1cs
it difficult tor the U.S. to make the kind of cnn-
cessions necessary to get a market access agreement given that
text11@s ana appalsls are going to have to ...
SECRETARY:
I aon't think so.
compatible objectives.
I think they are
What we're talking about is access and
opening up markets, and I think those for the Uruguay Round arQ
compatible wlth what we're trying to do with NAFTA.
In NAFTA we
go boyond what tne Uruguay Round is talking about, out so does
the European Communi ty.
their
~U&tOm8
~ongst
They (Ud away wi th thei r borders
their nations
an~
we're talking about
doing some of the eame to Mexico and to Canada.
11
an~
It will not be
easy.
I must aay labor teels very strongly
th~t
the job' are
going to go south, and thay are A1ncere about that.
their concern is
Been in
th~
miepl~ced
balanCe ot
tra~e
some of them. they say:
capita b46is they
case.
what yuu
~ill
h~ve
in that one.
that
h~s
I think that
With the results we've
developed, they tell me,
Well, Mexico ie so poor that on a pp-r
not be 3ble to bUy our products.
Not the
in Mexico, thQY buy more per capita thon
~o
the more affluent Europe4ns from UB.
0:
1
ha~
a question about the framewor.k
talks. The Japanese GovQrnment has already started to ... Minister
HayaShi and MITI Minister Mr. Mor1 made a promise
suggesting that it was not managed trade, they
In other
wor~s,
y~sterday
~p-re
that they could not hold to these
not
ple~ges.
gui~eljnes.
They also suggested that they were hlstoric rather than forward
lOoklnQ.
In other words, you wouldn't be shooting foe 20 per-
cent, you would just look ot the last six months ana see it there
have been improvements, that soet of thing.
Anyway, my point is they seem to be suggesting that
tnere is give on both
Gi~ea,
and yesterday Chr1stopher and Cergen
told us that there had been significant give on the Japanese
side.
lim
asking how much are we giving or are we willing to let
up on on idea of a plQdge Which they can be held to ...
SECRETARY:
both SIdes.
Let me gay I
th1n~
there has been give on
I think that the fact that our negotiators on the
27th and 28th (ot June) felt thet they werenlt v@ry seriouSly
negotiated with and went nome, ! think that made a
12
surpris~
tn
the Japanese.
Then the Prime Minister wrote a personal letter
~n~
to President ClInton, which I saw,
in it made some sugqes-
tiona that looked like tnere was more room for negotiation, and
that is why we
h~ve
returned to tne taDle.
have no assurance that we will be
It is not easy.
succ~ssrul
I
in that regard, but
we will continue to pursue it to try to get further. ano 1n the
way of definition
I
am not in a p08ition to
0:
Is
th~re
ot progres8 beyond the letters
~o
that.
anything you can
betwe~n
a~y
is a
~ign
Mr. Clinton and Prime
Minist@r MiyaZawa ... tenor of negotiationsa'?
SECRETARY:
The tenor 18 we have made saom@ modest
but we are not there yet.
pr09~e8S,
finalize what has been
necessary.
to the pOlnt that we think is
Thank you very much.
0:
a~18tence
~ccompl1shed
We have not been able to
It the Mlyazawa government goes out of
will thisa agreement, it there i8 one,
h~ve
any
QuraD1l1ty?
S}:;CRETARY:
~bout
the
Japan~RQ
I think it doell.
The interesting thing
anO the 8trength of the bureaucracy ana the
permanent employees, one of tne tning8 that you
h~vc
eeen in
spite or changing prime minlslters iF! a substantial continuity in
policy trom one Qovernment to the other, so t think it a
ment wae made by Mlyazawa on behalf of the JapanQse
that that would be pretty well carried out.
(END Of BRIEFING)
13
~ornmit
g~v@rnment,
Thank you.
PUBLIC DEBT NEWS
Depar tment of the Treas ury •
Burea u of the Public Debt • Wash ington . DC 20239
FOR RELE ASE AT 3:00 PM
July 7. 1993
Conta ct: Peter Holle nbach
(202) 219-3302
PUBLIC DEBT ANNO UNCE S ACT M1Y FOR
SECURITIES IN THE STRIPS PROGRAM FOR JUNE 1993
Treas ury's Burea u of the Public Debt annou nced activity figure
s for the month of June 1993.
of securi ties within the Separ ate Tradi ng of RegIs tered Intere
st and Princi pal of Secur ities
progr am (STRI PS), are as follows:
Dolla r Amou nts in Thous ands
Princi pal Outst andin g
(Eligi ble Secur ities)
S700.254.594
Held in Unstr ipped Form
S510.863.173
Held in Stripp ed Form
S189.391.421
Recon stitute d in June
S19.037.160
The accom panyi ng table gives a break down of STRIP S activity
by indivi dual loan descri ption.
The balan ces in this table are subjec t to audit and subse quent revisio
n. These month ly figures
are includ ed in Table VI of the Month lv Statem ent of the Public
Debt, entitle d "Hold ings of
Treas ury Secur ities in Stripp ed Form. "
Inform ation about "Hold ings of Treas ury Secur ities in Stripp ed
Form" is now availa ble on the
Depa rtmen t of Comm erce's Econo mic Bullet in Board (EBB
). The EBB. which can be
access ed using perso nal comp uters. is an inexpe nsive servic e provid
ed by the Depa rtmen t of
Comm erce. For more inform ation conce rning this servic e call
202-482-1986.
000
PA-12S
215
TABLE VI--HOL.DNaI OF TREASURY SECURITIES IN STRIPPED FORM. JUNE 30, 1113
(In thousand.)
To,.
$.4.860 15-4 I
S1 798,400 II,
'12,800
" 14'11. Nole ",995
6933,861
5,267.781 I
I ,6fi6.ceo II
23,040
" 1 4'11. Nole 8-1995
7 127086
4 130,126 [
2.996,960 I
'012'11. Note C 1995
7955.901 I
5.167,901 I
2 768.!XX) II
67,200
" 58'11. Nol. C
1~
1111~
S6 558.554
I
.().
I
9 12"\, Note ().1995
3 78' Nole A 1996
7316550
I
3.892,150 I
3426,400 II
42,400
2/1!>'96
8416964
1
7556,1&4 I
8EO.1nl11
236,800
511!>'96
2O,()I5,643 I
19304843 I
7~,1nl1[
49,600
1111!>'96
20.258 810 I
17928,410
I
2 3:Il400 II
92,1nl
5115197
9921,237
I
8690037 I
II
.().
9362636
1
,
I
4'11. Nol. ().1996
8 I,2'\, Nol. "'997
8115197
85.8' Nol. 81997
a 7 8%
Note C 1997
, 1 8% Nol. A 1998
~
I 11115197
i
, 4"" Nol. C 1998
, 7 B~, Nol. 0·1998
I
8207.636 I
9808,329 I
7419,529 I
23881nl
11200
!I
.().
200,960
2/151ge
9159068
I
8421.788 I
737.280 11
51151ge
9 165,387 I
6.891,967 I
227340011
55.200
8115198
11342646 '
9928.246 I
141440011
29.600
211520011
{).
II
25,600
211040011
38400
11115198
9902,875
7 787675
2/15.99
9719523
897727.3
, ' 8'. Nol. 81999
5115.99
'0047103
7936.703 !
NOI. C 1999
8115.99
'0163 644 '
? 789944
1
,'3700 II
11600
11115.99
'0773960
I
9468.360 I
, 30560011
'4400
i 2.'15100
10673033 I
'0034.633 '
638,400 II
115.200
; 5115100
'0496.230
7846630 '
254960011
136,!XX)
; 8115100
"080646
97176061
1
, ; 8"" Nol.
•
,I
1231.200
1 155.200 I
0
. 9',
NOI.
A·I999
01999
I
!
!
1
'~24OO
363040 II
°
i 11115100
11519682:
9896082
I
1623600 I:
58,!XX)
1
2/15101
11312.802 '
10~402
!
II
{).
i
5115101
12398083 :
11409.258 I
96882511
227 !XX)
i 8115101
12,339185 I
12139,165
2OO,!XX) II
i 11115101
O·
· , 2"" Nole 02001
24226.102
23878902
34720011
12.000
· , 2'"
; I
2"" Nole 0 20CIJ
· } 4% Nole
A 2001
· 'B' NOle C 2001
316.400
: :"15102
" 714397
11 460 797
I
25.3600 II
0·
o J 8"" NOle 8
2002
:, 8115102
23859015
23822.215 :
36800 Ii
o
o 1 4""
2003
I 2/15103
23562681
23,560 665
8301806
5772206
,
~ 8~,
NOI.
A 2002
NOle A
80nd 2004
llt15104
:', Bona 2005
14
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Bona X'e5
4260758
J 401 508 I
9269713
3742513
· '8', Bona X' 5
755276
J
016 384 ,
, 987200 II
1
2. 15:15
'2667799:
4274039 I
,39J 760 II
1 337 120
8115:15
: 149916
3169436
1
J 380480 II
, 459.200
11 '15115
6899 859
2098259 '
480160011
792 !XX)
2. 15:16
, 266 854
5594 054
, 67280011
1390 400
'w2OO:,
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- J ~~o Bona 2':?::
356000
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100 !XX)
359250 II
755 916
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, 8", Bona 2':'8
o
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6005584
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11 15:14
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1
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'8823551
'8060351
'8 B64 448
'7912768
640 Ii
1
900.000
10000
1
5. 15;17
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a 15;17
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5 15118
3708 639
2191639
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9032.870
998 870
3 ()34 !XX)
I
)
5154 169
786.880
3683200
1
SOO 800
424000
2 15.19
'9250 798
3679598
a 15.19
2Q213632
'4446792
'1580
2. 15.20
'~
374 068
, 'X)J!XX)
228 B68
J
'557120011
515:20
'0158 B83
2 134 723
i J24 160
i> 15.20
21418606 ,
35.38606
" 880 000 I
2. 15.21
'1113373
3828573
:, 15,21
'1958888
J
328 488
44800
429 920
, 533.280
, 284 800 ,
217 600
'EJO 400
294 720
a 1521
',163482
'818522
, :>44 960
567360
'11521
32796 394
': '45 ()4.4
"65J 350
2437000
27
TABLE VI-HOlDINGS OF n.USURY SECURmES IN Sn.IPPED FORM. JUNE 30. 1993-COntinued
(In thousand.)
S!nopeo Form
:013.1
~
,
~~.,
Bono 2022
8/'5122
10 J52.79O
9111'90
• S 8.... Bono 2022
" /'5122
'0699 626
'0203.626
• , 8"1. Bono 2023
;C' 15I23
1837436'
'8 369.56'
' 00 2504 5904 I
~ lfect",e Mav 1
' .01e On
1987
secL.l'lt.es r.eId ., str'lOP8'<l lann
me 41" W()OI.oav 01
JOOU'
eacn menm Tat:Ite VI 'Mtl be
~econSlltuled
r"'IS Manln l
O ~~",
MaIlnV Dale
510863.173 I
>8 OO.J
' ~9 39'4 21
'
. !1}37 ' 60
were 911908 lor reconstJtunon to !nett l,I1Str'1OOeCS torm
a~
att8f
J 00 om eastern
EBB 's ,2021 482· 1986 The DaJanCeS ,n ' .... ta04e ... e SUOteCl
10
fwne on me Commerce Oeoartmenl S EconolTuc Bu.lletln Boara (E BB)
aUCll1 at1<l SUOS8QU9l'lt aOlustments
D-.e
r ~ne
numDef tor mOfe rn !o rmallon
@FedFRASER