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LIBRARY
ROOM 5310
OCT 16 199B
IREAiUR~U~~HTMENT
ifREASURY DEPARTMEtIT LIBRARY
Treas.
HJ
10
.A13
P4
v. 369
Department of the Treasury
PRESS RELEASES
The following numbers were not used:
2196,2209 and 2232
PUBLIC DEBT NEWS
epartDl'llt of the Treuury • Bureau of the Public Debt • WuhiD&toD., DC 20239
FOR Th1ME1)IAlE RELEASE
Jamwy~
Contact: Office ofFi.nanciDg
(202) 219-3350
1998
TREASURY'S 10-YEAR INFLAnON-INDEXED NOTES
JANUARY REFERENCE CPI NUMBERS AND DAILY INDEX RATIOS
Public Debt announced today the reference Consumer Price Index (CPI) numbers and the
daily index ratios for the mouth of January for the lO-year Treasury inflation-indexed
notes of Series A-2008. This information is based on the non-seasonally adjusted U.S. City
Average All Items Consumer Price Index for All Urban Consumers (CPI-U) published by
the Bureau of Labor Statistics of the U.S. Department of Labor.
In addition to the publication ofthc n;faQ1ce cprs (RefCPI) and ~ ratios, this
release provides the non-seasonally adjusted CPI-U for the prior tbree-month period.
This infotination is available throueh the Treasuris Office of Public Affairs automated fax
system by cal.ling 202-622-2040 and requesting document number 2137. The infotmation
is also available on the Internet at Public Debt's home page (http://www.publicdebt.treas.gov).
The information for February is expected to be released on January 13. 1998.
000
PA-299
RR-2137
Contact: Office of FinanCIng
202-21 ~-33fJlJ
TREASURY 10-YEAR INFLAnON-INDEXED NOTES
SERJES:
A-2008
CUSIP:
AUCTION DATE:
912827317
January 8, 1998
ORIGINAL ISSUE DATED DATE:
ORIGINAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
January 15, 1998
January 15. 1998
January 15. 2008
161.55484
January 1998
31
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
CPI-U (NSA) September 1997
CPI·U (NSA) October 1997
CPI-U (NSA) November 1997
161.2
161.6
161.5
Ref CPI and Index Ratios for January 1998:
Calendar day
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
!January
iJanuary
iJanuary
25
26
January
27
January
January
January
January
28
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
29
30
31
RefCPI
1998 1 161.60000
1998
161.596n
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
161.59355
,
Index Ratio
161.69032
161.58710
161.58387
161.5806S
161.5n42
161.57419
161.570;7
161.56n4
161.56452
161.56129
161.55806
161.55484
161.55161
161.54839
161.54516
161.54194
161.53871
161.53548
161.53226
161.52903
161.52581
161.52258
161.51935
161.51613
1.00000
0.99998
0.99996
0.99994
0.99992
0.99990
0.99988
0.99986
0.99984
0.99982
0.99980
,
0.99978
0.99976
161.51290
0.99974
1998
1998
161,50968
0.99972
161.50645
O.mIO
1998
161.50323"
0.99968
I
DEPARTMENT
OF
THE
TREASURY
NEWS
~/7~89~. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1I
................................
OFFICE OF PUBUC AFFAIRS. 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960
Contact: Dan Israel
(202) 622-2960
FOR IMMEDIATE RELEASE
January 5. 1997
RUBIN ANNOUNCES WORKING GROUP ON CHILD CARE
Treasury Secretary Robert E. Rubin today announced the members of Treasury's working
group on child care. At the White House Conference on Child Care on October 23, President
Clinton asked Secretary Rubin to convene a group of business and labor leaders to focus on best
practices in the private sector and pUblic-private partnerships which address child care problems
facing working parents.
"Today more than ever, businesses are coming to the realization that child care is a core
economic issue," said Secretary Rubin. "We hope our efforts will make the business community
more aware of child care options that have been employed successfully."
The members include: First Bank of Colorado CEO Doug Price; General Converters &
Assemblers President and CEO George Stinson; AFL-CIO President John Sweeney; Eli Lilly and
Co. Chairman and CEO Randy Tobias; Travelers Group CEO Sandy Weill; and Marcy
Whitebook, national co-director of the Center for the Childcare Workforce.
Other businesses, organizations and individuals interested in contributing to the
Department's work on child care should contact Treasury's Office of Business and Public
Liaison at (202) 622-1660.
The working group will report back to Secretary Rubin in the spring of 1998. A final
report will be made available to businesses interested in learning more about best practices in the
child care area.
-30RR-2l38
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
Jan 5 '98
Fax:202-219-3365
PUBLIC DEBT/WRSH DC
P.Ol
14:07
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE R;LEASE
CONTACT:
January 05, 1958
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
January 08, 1998
Term:
Issue Date:
Naturity D2.tE:
CUSIP Nurrbe:::-:
April 09, 1998
9127946KS
~~GE
OF ACCEPTED COMPETITIVE BIDS:
Investment
Discount
Rate
-----Low
High
Average
Tenders ac
Rate 1/
Price
----------
------
S.110%'
5.115%
S.2S0%-
5.115%
5.254%'
t~e
high discount rate were allotted
~~OUNTS
Accepted
Tendered
Compecitive
Noncompetitive
$
PUBLIC SUOTOTAL
Federal Rese!V8
Foreign Official Inst.
Refunded r-laturing
Amounts
TOTAL
1/
49%.
TENDERED AND ACCEPTED (in thousands)
Tender Type
Addicio~al
93.708
98.707
98.707
5.254~
$
36,138,047
1,362,224
5,703,947
1,362,224
37,500,271
7,066,::'7l
3,834,320
3,834,320
235,802
299,198
235,802
29:9,198
41,869,591
Equivalent ccuDon-issue yield.
RR-2139
http://www.pubUcdebttreas.gov
$
$
11,435,49::'
PUBLIC DEBT/WRSH DC
Fax:202-219-336S
Jan S '98
14:07
P.02
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF T~E FUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE
January 05, 1998
RESULTS OF
CONTACT:
T~EASURY'S
Office of Financing
202-219-3350
AUCTION OF 26-WEEK BILLS
Term:
182-Day Bill
Issue Date:
Maturi:y Date:
CUSIP Number:
January 08, 1998
July 09, 1998
912795AB7
R.Z\NGE OF ACCEPTED COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
Investment
Rate 1/
Price
------
----------
------
S.lIO%-
5.318~
S.130%"
5.339%
5.339%
5.l30%-
97.417
97.407
97.407
Tenders at. the high discOtIDt rate were allotted
41% .
.~CUNTS TENJERED AND ACCEPTED (in thousands)
Tendered
Tender Type
Compecicive
Noncompetitive
$
PUBLIC SUBTOTAL
Federal Reserve
Foreign Official Inst.
Refunded Maturing
Additional Amounts
TOTAL
1/
$
:6,649,112
1,193,121
Accepted
$
4,993,527
1,193,121
37,842,233
6,186,648
3,470,000
3,470,000
1,145,578
1,454,422
1,145,578
1, 454, 422
43,912,233
Equivalent coupon-issue yield.
RR-2140
http://www.publlcdebt.tr-ea.9.gov
$
12,256,648
I)
E P .\ R T l\I E 1\ T
()...
T Ii E
T ({ E .\ S lilt \"
NEWS
-
omCE OF PUBUC.AFJi'AIRS • 1500 PENNSYLVANIAAVENU'E. N.W.• WASIDNGTON, D.C. • 20!20 • (202) 622·2960
FOR IMMEDIATE RELEASE
January 6, 1998
Contact: Dan Israel
(202) 622-2960
TREASURY ANNOUNCES EFFECTIVE DATES OF SEVEN NEW TAX AGREEMENTS
The Treasury Department announced the entry into force and effective dates of seven
income tax agreements to which the U.S. Senate gave advice and consent to ratification on
October 31, 1997.
On December 28, 1997, the bilateral tax treaty between the United States and South
Africa entered into force. The treaty applies, with regard to taxes withheld at source, in respect
of amounts paid or credited on or after January 1, 1998 and, with regard to other taxes, in respect
of taxable periods beginning on or after January I, 1998. The treaty replaces a previous treaty
that was tenninatoo in 1987 pursuant to the U.S. Anti-Apartheid Act.
Instruments of ratification were exchanged in Washington on December IS, 1997 with
respect to a bilateral tax treaty between the United States and the Kingdom of Thailand. This is
the first tax treaty between the two countries, and generally will be effective, with respect to taxes
withheld at source, for amounts paid or credited on or after June 1, 1998 and, for other matters,
for taxable periods beginning on or after January 1, 1998.
The fourth protocol to the bilateral tax convention between the United States and Canada
entered into force on December 16, 1997 upon the exchange of instruments of ratification in
Washington. Article 1 of the Protocol. relating to the taxation of certain real property gains, will
have effect as of April 26, 1995. Article 2 of the Protocol, relating to the taxation of social
security benefits, generally will have effect with respect to amounts paid or credited after
December 31, 1995.
Instruments of ratification were exchanged in Washington on December 17. 1997 with
respect to a bilateral taX treaty, protocol and memorandum of understanding between the United
States and Ireland. The new treaty replaces the 1949 tax treaty between the two nations. In
general, it will have effect, with respect to taxes withheld at source, for amounts paid or credited
on or after January i, 1998 and, for other taxes, with respect to taxable years beginning on or
after January 1, 1998.
--
RR-2141
For press releases, $JJeeches, public schedules and official biographies, call our 24-hour feu: line at (202) 622-2040
On December 19, instruments of ratification were exchanged with respect to three
agreements. In Bern, instruments were exchanged with respect to a bilateral tax treaty and
protocol between the United States and Switzerland. In Washington, instruments were
exchanged with respect to bilateral tax treaties between the United States and Austria and the
United States and Turkey.
The new treaty with Switzerland replaces a 1951 treaty. It generally will have effect, with
respect to taxes withheld at source, for amounts paid or credited on or after February I, 1998. In
other cases the treaty generally will have effect with respect to taxable years beginning on or after
January 1, 1998.
The Austrian treaty replaces an existing treaty which has been in place since 1957 and will
enter into force on February 1, 1998. Provisions relating to taxes withheld at source generally
will be effective for payments made on or after April 1, 1998. Provisions relating to other taxes
generally will be effective on 1anuary 1) 1999.
The treaty with Turkey is the first between the two countries. It will have effect with
respect to taxes withheld at source, for amounts paid or credited on or after January 1, 1998, and
for other purposes, for taxable years beginning on or after January 1, 1998. This treaty completes
the U.S. network of treaties with OECD member countries.
-30-
TOTRL P.02
DEPARTMENT
OF
THE
TREASURY
NEWS
TREASURY
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960
EMBARGOED UNTIL 2:30 P.M.
January 6, 1998
CONTACT:
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills totaling
approximately $14,500 million, to be issued January 15, 1998. This offering
will result in a paydown for the Treasury of about $575 million, as the maturing
publicly held weekly bills are outstanding in the amount of $15,073 million.
In
accounts
weighted
to these
addition to the public holdings, Federal Reserve Banks for their own
hold $8,347 million of the maturing bills, which may be refunded at the
average discount rate of accepted competitive tenders. ~~ounts issued
accounts will be in addition to the offering amount.
Federal Reserve Banks hold $2,095 million as agents for foreig~ 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, as amended) 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
RR - 2142
For press releases, speeches, public schedules and official biographies, call our 24.1zour fax line at (202) 622-2040
HIGHLIGHTS OF TREASURY OFFERINGS OF WEEKLY BILLS
TO BE ISSUED JANUARY 15, 1998
January 6,
Offering Amount........................
$7,250 million
$7,250 million
Description of Offering:
Term and type of security . . . . . . . . . . . . . . . . . .
CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Auct ion date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturi ty date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Original issue date . . . . . . . . . . . . . . . . . . . . . . . .
currently outstanding . . . . . . . . . . . . . . . . . . . . . .
Minimum bid amount . . . . . . . . . . . . . . . . . . . . . . . . .
Multiples . . . . . . . . . . . . '" ....... " ., ........
91-day bill
912794 6L 3
January 12, 1998
January 15, 1998
April 16, 1998
October 16, 1997
$11,162 million
$10,000
$ 1,000
182-day bill
912795 AC 5
January 12, 1998
January 15, 1998
July 16, 1998
January 15, 1998
1998
$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.
Must be expressed as a discount rate with three decimals in
Competitive bids . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)
increments of .005%, e.g., 7.100%, 7.105%.
(2)
Net lOll,:] pOfJition [or each bjddcr llIuut be re{J()rt(~d Ir/iI(;n th(~
sum of the total bid amount, at all discount rates, and the
net long position is $1 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 . . . . . . . . . . . . . . . . . . . . . . . p5% of public offering
Maximum Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , 35% of public offering
Receipt of Tenders:
Noncompetitive tenders . . . . . . . . . . . . . . . . . . . . . Prior to 12:00 noon Eastern Standard time on auction day
Competitive tenders . . . . . . . . . . . . . . . . . . . . . . . . Prior to 1:00 p.m. Eastern Standard time on auction day
Payment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Full payment with tender or by charge to a funds account
at a Federal Reserve Bank on issue date
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
Office of Financing
202-219-3350
CONTACT:
FOR IMMEDIATE RELEASE
January 06, 1998
RESULTS OF TREASURY'S AUCTION OF 52-WEEK BILLS
364-Day Bill
January 08, 1998
January 07, 1999
912795BS9
Term:
Issue Date:
Maturity Date:
CUSIP Number:
RANGE OF ACCEPTED COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
-----5.055%
5.065%
5.065%
Ir..vestment
Rate 1/
Price
-----94.889
94.879
94.879
----------
5.330%
5.341%
5.341%
Tenders at the high discount rate were allotted
51%.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
40,656,985
1,058,116
----------------41,715,101
$
Competitive
Noncompetitive
PUBLIC SUBTOTAL
Federal Reserve
Foreign Official Inst.
Refunded Maturing
Additional Amounts
$
10,115,425
1,058,116
11,173,541
5,740,000
5,740,000
900,000
900,000
o
o
----------------$
TOTAL
1/
Accepted
Tendered
Tender Type
48,355,101
Equivalent coupon-issue yield.
RR-2143
http://www .publlcdebt.treas.gov
$
17,813,541
DEPARTMENT
OF
THE
TREASURY ("
TREASURY
NEW S
omCE OFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
January 7, 1998
Contact: Beth Weaver
(202) 622-2960
ST ATEMENT BY TREASURY SECRETARY ROBERT E. RUBIN
It is with great sadness that the Treasury Department announces the death of Customs
Senior Special Agent Manuel Zurita. Agent Zurita died last night of massive injuries suffered on
January 1, 1998, while assisting the US. Secret Service on a Presidential protection detail.
Agent Zurita, a 12-year veteran of the US. Customs Service, was one of three Customs
Special Agents seriously injured when their vessel collided with a reef in the US. Virgin Islands.
I am greatly saddened by this tragic loss. My deepest condolences go out to Agent
Zurita's wife and their four children.
This tragedy underscores the dangerous and difficult work performed by our law
enforcement bureaus every day. We owe them a debt of gratitude for keeping our country safe.
The U.S. Customs Service is currently investigating the accident.
-30RR-2144
For press releases, speeches, public schedules and official biographies, call our 24'/lOur fax line at (202) 622-2040
From: TREASURY PUBLIC AFFAIRS
20009
2-9-98
4:17pm
p. 6 of 22
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt. Washington, DC 20239
EMBARGOED FOR RELE~SE AT 3 :00 PM
January 7, 1998
Contact: Peter Hollenbach
(202) 219-3302
PUBLIC DEBT ANNOUNCES ACTIVITY FOR
SECURITIES IN THE STRIPS PROGRAM FOR DECEMBER 1997
Treas1lI"is Bureau of the Public Debt announced activity figures for the month of December 1997, of
securities within the Separate Trading of Registered Interest and Principal of Securities program
(STRIPS).
Dollar Amounts in Thousands
Principal Outstanding
(Eligible Securities)
$1,150,024,212
Held in Unstripped Form
$917,769.120
Held in Stripped Form
$232,255,092
$11,554,971
Reconstituted in December
The accompanying table gives a breakdovm of STRIPS activity by individual loan description. The
balances in this table are subject to audit and subsequent revision. These monthly figures are included
in Table VI of the Monthly Statement o/the Public Debt, entitled "Holdings of Treasury Securities in
Stripped Form. 1I
The STRIPS data along with the newMonthly Statement of the Public Debt, is available on Public
Debt's Internet homepage at: www.publicdebt.treas.gov.Awide range ofinformation about the
public debt and Treasury securities is also available on the homepage.
000
RR-2145
http://www.publlcdebureu.gov
From: TREASURY PU8LIC AFFAIRS
20009
2-9-98
4: 18pm
p. 7 of 22
TABLe VI - HOLDINGS OF TFlEA5URY seCURITIES IN 5T1~IPP=O FORM, DECEMBER:301, " ' 7
~rinc:ipal Amount Outl.tanding in Thousands
Corpus
STRIP
loan Oescrip~on
Maturity Date
CUSIP
Tresawy 8onds:
CUSIP'
9126100M7
008
0~6
Intal'O$t Rata:
11.5/8
12
10·314
DU9
DN5
11·3/4
OPO
11·'/4
OS4
DT2
10-5/8
51·7tS
9-114
7-114
OV7
OW5
0)(3
DY1
DZe
EA2
EBO
eca
ED6
l;e4
J::::!=1
EGQ
e~7
EJ3
EKO
=1.6
EMS
iN4
Epg
Ea?
55:;!
ET1
eve
E'N4
E:X2
SYTJ
9~/8
7-11:2
8-314
8-718
g.1/8
9
8·7//3
8-1/8
13-112
8-J/4
8-3/4
'1-""8
8-118
e.1,a
8
7-1/4
7-518
7·1/6
6-114
7·112
7-51B
6·7/6
S
6.:3/4
5-112
EZ7
FA1
6-5/8
F89
6-1/8
6-318
Total Treseury eond~....................... ...
912803 ASS
AD5
AG6
AJ2
912800 AA7
912803 AA1
AC7
AE3
AFO
AHS
AK9
AL7
AM5
AN3
AP8
AQ6
AR4
AS2
AlO
AU7
AVS
AW3
AX1
AY9
Al6
BAa
eee
BCG
a04
BE2
BF9
007
BHS
BJ1
eKe
BL5
BM4
Total
Out9tandlno
11/15104
05/15105
Oel1S/OS
02115106
11/15/14
02/15/15
08115/15
11/15115
02115/16
05115/16
11/15116
05/15117
08115/17
05115/1 a
11115118
0~/15/19
08115119
02/151:20
CIS/1SJ2C
08/15120
02/15121
05115121
OamS121
11/15121
08115122
11/15122
02/1512J
08115123
11115124
02115125
08/15125
02115126
06/15126
11/15125
02115127
08/15/27
11115117
!I.301,806
4,260,758
9.269.713
4,75!,916
6,005,584
12,667,799
7,149,916
6,899,659
7,268,854
18,823,551
1M64,448
18,19<1,169
14,016,858
8,708,6:39
9,032,870
19,250,7!;16
20,213,832
10,22M66
10,158,883
21,418,606
11.113,373
11,958,888
12,163,4132
32,798,394
10,~52.790
10,699,826
16,374,361
22,909,04<1
11,469,662
11,725,170
12,802,007
1~,904,916
10,893,618
11,493,177
10,456,071
10,735,756
11,184,353
<169,324,615
Portion Held in
UnstrlDDed Form
4,655,406
2,736.706
7,334,513
4.746,188
2,545,5134
11,509,679
6,480,796
5.253.459
5,581,25<1
18,717.961
18,003,728
7,809,369
7,544,aS8
2,931,039
1.732.670
Portion HelIJ In
Stripped Form
3,646,400
1.522,050
1,93~,200
9,795,271
10,580,556
11,184,353
9,728
3,460,000
1,157,920
669,120
1,646,400
685,600
105,600
860,720
10,384,800
8.472,000
5,777,600
7,300.000
14,454.600
2,587,520
4,931,600
7,103,360
18,081,120
1,020,800
7,152,640
7.:3519,360
26,155,500
1.251.200
7,777,600
5,872,000
4,539,552
B,411,760
7,764,000
1,2:37,760
405,700
855,200
157,600
650,800
155,200
0
297,666,405
171,666,210
4,76~,998
17,626,312
5,:297,266
3,065,523
5,337,485
10.092,573
4,806,248
4,764,122
6,642,894
9,101.5SO
2,922,025
12.502,361
18,369,492
3,057,902
3,941,170
11,364,247
12,499,216
10.038,618
'1,335,577
Reconsbtuted
inls Montl'i
153,1$00
383,300
:25,600
766
220,000
1, 155,040
412,460
180,800
69,600
86,<l00
1151.5120
281,120
265,600
211,;100
135.800
1.161.600
215,040
0
310,400
26B,4a0
75,200
2e:V;i60
S75,S1l0
711,:250
178.400
217.600
371,200
296,544
274,060
212,800
29(1,(140
292,400
0
0
ao,ooo
4,800
0
9,945,902
From: TREASURY PUBLIC AFFAIRS
20009
2-9-98
4:19pm
p. 8 of 22
TABLE VI .IoIOLDINGS OF TREASURY !lE~URITIES IN STRI .... eD FORM. DECSll8ER 31.1887 - c;QnCl"u~
Principal Amount Outstllnt;llng In TIlOUUnds
COfI:IU$
5TRIF='
L.oan DeSCription
MatUrity Dale
CUSI~
lotlll
Outstandino
Porl'O" Held in
Unslnpped FOnTi
Reconstituted
This Month
~rtiDn
Held in
SlrlOCied Form
Trea&ut'y Notes
CUSI~:
912927 I/INQ
wEe
WNB
WW8
XE.7
XN7
lWV7
3H3
3K6
-V=6
31=15
3F11
YN6
VlN6
ZE5
ZN5
Series: Inleract Rate:
912820 AMSl
8.118
A
AW
i
B
\).1/4
AP2
C
AQO
8-718
D
A
9·7/6
AS6
9-118
8
AT4
C
5-314
AK
C07
5-518
AL
AU1
7-718
0
5.5/8
eGO
AM
CJ4
S-6/6
AN
AVS
8-112
A
A'N7
B-7IS
S
AX5
C
e·3/4
AY3
/3-112
0
CF2
X
5·3/4
AZD
7~/4
A
8
8
882
7·7tB
C
ARe
e
cal
02115196
OS/1SISS
08/15199
l1fHilS8
02115199
O:iI1:i/99
OB/'~9
09/30/99
10131199
111'5/99
11/30199
12131/99
02l1:l/00
OM 5100
OB/15/00
111'1~IOO
A
8
:l-7/S
7·1/4
SHe
BJ5
11115/00
02115101
05/1S/01
08/15/01
11/15101
05115102
06115/02
09130102
10131102
'1fJ0102
12/31102
02115/03
08115/03
02115/04
05115104
Qas
c
7-114
BK2
O/3I1~104
R87
596
T85
US3
ve2
0
A
7-71&
0211:3IOS
05/15105
3M2
ZX3
AS:S
1392
eM
025
0
7-112
BCO
F49
A
8
7·112
6-318
808
M
5·7/8
N
P
5-314
5-3/4
5-5//3
6-1/4
CC5I
CE5
c.55
3J9
31.4
303
359
n8
L83
N81
PS9
a
A
9
se6
CH8
CK1
S~
5·3/4
001
11115/04
B
9.112
8LO
9M8
8N6
C
6-112
El~'
OMS/OS
0
A.
5-718
S'~/6
809
BR7
)(60
8
'(55
C
Z52
0
5-7/8
7
6-112
BUD
2JO
2u5
JEO
8
C
0
0·1/4
6-516
6.1/8
8W6
BX4
CA3
11/15105
02115106
05/15J06
07115106
10115106
02115107
05/15/07
08115107
we1
7-112
ess
8D
Total Treasury NOtes ...... .. . ..•....... ......
Treasury InnaUon.lnde)(ec/ Noles:
CU$I~
Sense;: Interest ~ate:
9128272M3
A
3·3/8
3-5/6
JA8
J
912820
eve
&9
01115/07
07115102
Tollllinfietion·lndexed Notes."""", , .
Gf'Ilnd Total
. .............. ...........
,
.. , .
..........
9,159,068
9,16S,3!!7
11,342,646
9,902,875
9,719,623
10.047,103
10,163,644
17,487,287
16,,823,947
10,773,5160
17,051,198
16,747,3:25
10,673,033
10,496,230
11,080,646
11,519.611:2
115,roe, 083
11.:312,602
12,398,083
12,339,15:l
24,226,102
11,714,397
23,659,0'5
12,806,814
11.737,288
12,120,580
1:Z,052,575
23,562,691
28,011.026
12,955,077
14,440,372
13,a46,467
14.373,760
13,834,754
14,739,$04
15,002,5BO
1~,209,920
15,513.587
16,015,475
22,7 40,446
22,459,675
13,103,678
13,958,186
25,636,723
6,296.028
11,254,987
7,147.446
5,840,475
6,142,023
5,450,303
6,944,0151
17,487,287
16,623,947
8,5175,560
17,051,198
18,747,:3:2$
5,290,633
5,669,030
7,207,046
7.476.482
113,036.063
8,236,802
6,96a,e5e
8,492,785
2M42,sa:z
\i,lin,S17
22,566,215
12.770,014
11,728,488
12,041,3BO
12,052,575
23,1n,:379
27,569,428
12,7e1,41i
14,306,772
12.82:3.267
14,084,150
13,634.1514
14,739,504
15,002,5ao
15.205,120
15,509,427
16,O1~,475
8,000
29,200
15,2QO
!56.000
17,600
60,600
66,400
0
0
84,800
0
2,863,040
2,910,400
4,151$,200
4,062,400
1,S77.600
3,596,600
3,219,625
0
0
3,798,400
0
0
2S,600
30,400
89,920
6,000
0
57,600
36,525
76,600
150,000
116,960
163,200
0
2,362,400
4,827,200
3,673,600
4,043,200
0
3,076,000
3,4051.225
3,846,400
:;,683,120
1,735,<480
1,292,800
36.600
B,BOO
751,200
a
0
0
0
161,624
3HI.000
0
31,200
0
0
5,040
0
0
0
0
385,312
441,eoo
1513,600
133,600
523,200
289,600
560
0
0
4,800
4,160
0
0
0
0
0
22,740,4<46
22,459,615
13,043,518
1J,937,:l86
25,615,923
60,160
20,800
20,600
647,660,$0 1
587,063,619
60,596,Ba2
1,609,069
16,071,3517
16,967,699
16,071,397
16,967,699
0
0
Q
0
33,039,095
33,0351,096
°
0
1 150024212
917769120
0
0
0
0
0
11 554.971
232,255092
Na¥. On 1111! 411'\ WQrICdlY of e8dI month Tabloo VIW\n b••••lIlble aner 3'.00 p.m OIl$1l!m!!me on 1110 eolMlMCe Oep~nh E~Q!1Q"'~ 6uttrln 6o.arlf IEaB)llIId 01\ the BU'eau af1l\e
F'\IIlIIc O.~ri \IOetIllte af "IIPJ_.puIliedeOI nu.;ov Fat ml>'e ,nlormlltion ebo'" ess, eel (202) 482-1966. The DaJ",_ In 1/'115 _DIe are Bl<bject ItI audit IOnd ,su=equ"i1I
"""",,"=
•
TOTAL P.03
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
Office of Financing
CONTACT:
FOR IMMEDIATE RELEASE
202-219-3350
January 08, 1998
RESULTS OF TREASURY'S AUCTION OF lO-YEAR INFLATION-INDEXED NOTES
Interest Rate:
Series:
CUSIP No:
9128273T7
STRIPS Minimum: $1,600,000
High Yield:
January 15, 1998
January 15, 1996
January 15. 2008
Issue Date:
Dated Date:
Maturity Date:
3 5/6%
A-200B
Pri ce :
3.730%'
99 . 13 0
All noncompetitive and successful competitive bidders were awarded
securities at the high yield. All tenders at lo~er yields were
accepted in full.
Tenders at the high yield were allotted
73%.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered
Tender Type
Competitive
Noncompe1:itive
$
PUBLIC SUBTOT.zu,
Federal Reserve
Foreign Official Inst.
TOTAL
$
Accepted
37,711
7,9 7 0 / 902
37.711
23,556,451
8,008,613
400,000
400.000
o
o
23,518,740
23,956,451
$
$
Median yield
3.699~: 50~ of the amount of accep1:ed competitive
tenders was cendered at or below that rate.
Low yield
3.580*:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
RR-2146
http://www .pubUcdebt.trerul.gov
8,408.613
NEWS
ornCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W .• WASmNGTON, D.C.. 20220. (202) 622-2960
January 8, 1998
Monthly Release of U.S. Reserve Assets
The Treasury Department today released U.S. reserve assets data for the month of
December 1997.
As indicated in this table, U.S. reserve assets amounted to $69,957 million at the end
of December 1997, up from $67,112 million in November 1997.
. >::; . . :";: : ":. ::.::.::. ::.:~.:::::.::;:.::::{:.::«</.:<:.::.>.;-:
...,.
U.S. ~~eAssets·
(in miIIionsof dollars) (
•.......
End
of
Month
Total
Reserve
Assets
Gold
Stock II
Special
Drawing
Rights
2.1 3.1
Foreign
Currencies 11
ESF
Reserve
Position
in IMF 2.1
System
l22l
i\ovember
67.112
11.050
10.120
14,104
17.267
14,571
December
69.957p
11.05Op
10,027
13,846
16,963
18,071
11 Valued at $42.2222 per fine troy ounce.
2'
Be~inning
July 1974. the IMF adopted a technique for valuing the SDR based on a
\\'eighted average of exchange rates for the currencies of selected member countries. The
L'.S. SDR holdings and reserve position in the IMF also are valued on this basis
hegmning July 1974.
J' Includes allocations of SDRs by the
1~1F
plus transactions in SDRs.
':! Includes holdings of Treasury and Federal Reserve System; beginning November 1978.
I
these are valued at current market exchange rates or, where appropriate, at such other
rates as may be agreed upon by the panies to the transactions.
p
Preliminary
For press relea.~es. speeches. public scheduit's and official biographies, call our 24-hour fax linc at (202) 622-2040
.
.
DEPARTMENT
OF
THE
TREASURY.
-
.
-
-
. .
,,',
'
_ \
-.
OFFICE OF PUBUC·AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C.. 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
January 9, 1998
Contact: Treasury Public Affairs
202-622-2960
US. Mint Public Affairs
202-874-3134
RUBIN ANNOUNCES STATE COIN DESIGN SELECTION PROCESS
Treasury Secretary Robert E. Rubin today wrote the state governors with details on the
design selection process for the 50 states commemorative quarters.
Each governor will determine the state's design-selection process, with final approval
resting with the Treasury Secretary. The coins will be issued by the US. Mint beginning next
year.
The Fifty States Commemorative Coin Program Act (Public Law 105-124) provides for
the redesign of the reverse (tails) side of the quarters with designs emblematic of each of the 50
states. The law provides for five states to be featured each year beginning in 1999, in the order in
which the states ratified the US. Constitution or were admitted into the Union.
"This is a unique opportunity for the federal and state governments to join together in
honoring each state and its contributions to the Union," Secretary Rubin said.
The design selection process will be as follows:
•
Each governor will provide the U.S. Mint with a minimum of three and a maximum offive
design concepts or themes representative of the state. The governor will decide the
process for identifYing these concepts.
•
The Mint will review the concepts for appropriateness and coinability. No head and
shoulders portrait or bust of any person, living or dead, and no living person may be
included in the design. George Washington's portrait will remain on the obverse (heads)
side of the quarters. The artists at the Mint will then develop actual candidate designs
based on the concepts sent by the state.
•
The Fine Arts Commission will be consulted on the candidate designs and the Citizens
Commemorative Coin Advisory Committee (CCCAC) will provide its review.
RR-2148
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
•
Candidate designs will then be sent to the Treasury Secretary for his review and approval.
•
The Mint will then return the Treasury Secretary's approved designs to the governor for
the state's final design selection.
•
The governor will detennine the state's final design selection process. Once chosen, the
state will return its final design to the Treasury Department for the Treasury Secretary's
approval.
The five states to have their commemorative quarters issued in 1999 are Delaware,
Pennsylvania, New Jersey, Georgia and Connecticut.
Attachments
-30-
FIFTY STATES COI\1I\1EMORA TIVE COIN PROGRAl\l
Design Selection Process
Overview
The Fifty States Commemorative Coin Program Act (Public Law 105-124), signed by President
Clinton on December 1, 1997, provides for the redesign of the reverse side of the quarter dollars
with designs emblematic of each of the 50 States. The Washington portrait will remain on the
obverse of the quarters. The program provides for five States to be featured each year for a tenyear period and that each State will be honored in the order of that State's admission to the
United States.
Procedure
Stage 1
The Mint will contact the Governor approximately 18 months prior to the
beginning of the year in which that state's quarter will be produced to begin the
State design process. The Governor will appoint an individual from the State to
serve as the Mint's liaison for this program.
Stage 2
The State will identify and provide to the Mint a minimum of 3 and a maximum
of 5 design concepts or themes emblematic of the State. The process for
identifying concepts will be one of the Governor's choosing. Concepts should be
provided to the Mint, accompanied by supporting material as appropriate - for
example, photographs or sketches of landmarks, landscapes, historical buildings,
or official depictions of State symbols. If copyrighted materials are used,
releases should be provided from the copyright holders.
Stage 3
The Mint will review concepts for appropriateness and coinabi lity. If fewer than
three concepts are submitted, the Mint will develop additional concepts so that
each state has no fewer than three concepts.
Stage 4
The Mint will produce drawings of all appropriate and coinable design concepts.
Stage 5
The Citizens Commemorative Coin Advisory Committee (CCCAC) will review
drawings and recommend candidate designs.
Stage 6
The U.S. Fine Arts Commission will review candidate designs.
Stage 7
Candidate designs will be presented to the Secretary of the Treasury for review
and approval.
Stage 8
The Mint will return approved designs to the Governor for selection of the State
design.
Stage 9
The State will select the State design through a process determined by the
Governor, within a timeframe specified by the Mint.
Stage 10
Final design will be returned to Treasury for approval by the Secretary or his
designee.
FIFTY STATES COMMEI\10RATIVE COIN PROGRAI\l
Schedule for Issue
Statehood Date
Statehood Date
1999
Delaware
Pennsylvania
New Jersey
Georgia
Connecticut
1787
1787
1787
1788
1788
2004
Michigan
Florida
Texas
Iowa
Wisconsin
1837
1845
1845
1846
1848
2000
Massachusetts
Maryland
South Carolina
New Hampshire
Virginia
1788
1788
1788
1788
1788
2005
California
Minnesota
Oregon
Kansas
West Virginia
1850
1858
1859
1861
1863
2001
New York
North Carolina
Rhode Island
Vermont
Kentucky
1788
1789
1790
1791
1792
2006
Nevada
Nebraska
Colorado
North Dakota
South Dakota
1864
1867
1876
1889
1889
2002
Tennessee
Ohio
Louisiana
Indiana
Mississippi
1796
1803
1812
1816
1817
2007
Montana
Washington
Idaho
Wyoming
Utah
1889
1889
1890
1890
1896
2003
Illinois
Alabama
Maine
Missouri
Arkansas
1818
1819
1820
1821
1836
2008
Oklahoma
New Mexico
Arizona
Alaska
Hawaii
1907
1912
1912
1959
1959
State quarters will be issued in sequence, at approximately 10 week intervals beginning in
1999.
FIFTY STATES COl\1MEMORATIVE COIN PROGRAl\l
Design Concept Parameters
Legislation
Public Law 105-124 provides for designs to be submitted in accordance with the design
selection and approval process developed by the Treasury Secretary in the sole discretion
of the Secretary. The law further requires that, "because it is important that the Nation's
coinage and currency bear dignified designs of which the citizens of the United States can
be proud, the Secretary shall not select any frivolous or inappropriate design" and "no
head and shoulders portrait or bust of any person, living or dead, and no portrait of a
living person may be included in the design."
Criteria
Designs shall maintain a dignity befitting the Nation's coinage.
Designs shall have broad appeal to the citizens of the State and avoid controversial
subjects or symbols that are likely to offend.
Suitable subject matter for design concepts include State landmarks (natural and manmade), landscapes, historically significant buildings, symbols of State resources or
industries, official State flora and fauna, State icons (eg .. Texas Lone Star, Wyoming
bronco, etc.), and outlines of the State.
State flags and State seals are not considered suitable for designs.
No inscriptions should be included in the State design concept.
Consistent with the authorizing legislation, the States are encouraged to submit concepts
that promote the diffusion of knowledge among the youth of the United States about the
State, its history and geography, and the rich diversity of our national heritage.
Priority consideration will be given to designs and concepts that are enduring
representations of the State. Coins have a commercial lifespan of at least 30 years and
are collected for generations.
Inappropriate design concepts include, but are not limited to the following: logos or
depictions of specific commercial, private, educational, civic, religious, sports, or other
organizations whose membership or ownership is not universal.
Concepts or background materials submitted to the Mint which are covered by copyright,
trademark, or other rights (such as privacy and publicity rights) must include a release
acceptable to the Mint from the rights owner that allows the concept or materials to be
used on the coin, in marketing and promotional materials, and on the Mint's website for
unlimited worldwide distribution without charge or restriction.
FIFTY STATES COl\1MEMORATIVE COIN PROGRAM
The Citizens Commemorative Coin Advisory Committee
The Citizens Commemorative Advisory Committee was established by Congress and the fU'St members
appointed by the Secretary of the Treasury in November of 1993. The committee advises Congress on
commemorative coin themes, mintage levels and years of issuance and advises the Secretary on
commemorative coin designs. It also serves as a liaison between Congress and coin collectors, and
provides Congress with a cohesive plan for future commemorative coin programs. The Committee is
composed of seven members appointed by the Secretary of the Treasury; three of whom are appointed
from the numismatic community; one of whom is appointed from the officers or employees of the Mint;
and three of whom are appointed from the general public. Further, a member of the Commission of Fine
Arts may participate in the proceedings of the Advisory Committee as a nonvoting member. Members
from the numismatic community and general public are appointed for 4-year terms by the Secretary.
The Commission of Fine Arts
The Commission of Fine Arts was established as an independent agency in 1910 by Congress to advise
the Government on matters of art and architecture that affect the appearance of the nation's capital. The
Commission is composed of seven members appointed by the President for 4-year terms. The
Commission also advises the United States Mint on the designs of coins and medals, and is responsible
generally for advising on questions of art when so requested by the President or Committees of
Congress.
PUBLIC LA W 105-124
DECEMBER 1, 1997
AN ACT
To provide for a 10-year circulating commemorative coin program to commemorate each of the 50 States,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress
assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the "50 States Commemorative Coin Program Act".
SEC. 2. FINDINGS.
The Congress flOds that( 1) it is appropriate and timely(A) to honor the unique Federal republic of 50 States that comprise the United
States; and
(B) to promote the diffusion of knowledge among the youth of the United States
about the individual States, their history and geography, and the rich diversity of
the national heritage;
(2) the circulating coinage of the United States has not been modernized during the 25
year period preceding the date of enactment of this Act;
(3) a circulating commemorative 25-cent coin program could produce earnings of
$110,000,000 from the sale of silver proof coins and sets over the 1O-year period of
issuance, and would produce indirect earnings of an estimated $2,600,000,000 to
$5,100,000,000 to the United States Treasury, money that will replace borrowing to
fund the national debt to at least that extent; and
(4) it is appropriate to launch a commemorative circulating coin program that
encourages young people and their families to collect memorable tokens of all the
States for the face value of the coins.
SEC. 3. ISSUANCE OF REDISIGNED QUARTER DOLLARS OVER 10-YEAR PERIOD
COMMEMORATING EACH OF THE 50 STATES.
Section 5112 of title 31, United States Code, is amended by inserting after subsection (k) the
following new subsection:
"( 1) REDESIGN AND ISSUANCE OF QUARTER DOLLAR IN COMMEMORA nON OF
EACH OF TIIE 50 STA TES."(I) REDESIGN BEGINNING IN 1999."(A) IN GENERAL.-Notwithstanding the fourth sentence of subsection (d)(I)
and subsection (d)(2), quarter dollar coins issued during the 10-year period beginning in
1999, shall have designs on the reverse side selected in accordance with this subsection
which are emblematic of the 1of the 50 States.
"(B) TRANSmON PROVISION.-Notwithstanding subparagraph (A), the
Secretary may continue to mint and issue quarter dollars in 1999 which bear the design in
effect before the redesign required under this subsection and an inscription of the year
'1998' as required to ensure a smooth transition into the 10-year program under this
subsection.
"(2) SINGLE STATE DESIGNS.-The design on the reverse side of each quarter dollar
coin issued during the 10-year period referred to in paragraph (1) shall be emblematic of 5 States.
"(3) ISSUANCE OF COINS COMMEMORATING 5 STATES DURING EACH OF
THE 10 YEARS."(A) IN GENERAL.-The designs for the quarter dollar coins issued during each
year of the 10-year period referred to in paragraph (1) shall be emblematic of 5 States
selected in the order in which such States ratified the ConstItution of the Untted States or
were admitted into the Union, as the case may be.
"(B) NUMBER OF EACH OF 5 COIN DESIGNS IN EACH YEAR.-Of the
quarter dollar coins issued during each year of the to-year penod referred to in
paragraph (1), the Secretary of the Treasury shall prescribe. on the basis of such factors
as the Secretary determines to be appropriate, the number of quarter dollars which shall
be issued with each of the 5 designs selected for such year.
"(4) SELEcnON OF DESIGN.U(A) IN GENERAL.-Each of the 50 designs required under this subsection for
quarter dollar shall be"(i) selected by the Secretary after consultation with"(1) the Governor of the State being commemorated, or such other State
officials or group as the State may designate for such purpose; and
"(il) the Commission afFine Arts; and
"(ii) reviewed by the Citizens Commemorative Coin Advisory Committee.
"(B) SELECfION AND APPROVAL PROCESS.-Designs for quarter dollars
may be submitted in accordance with the design selection and approval process
developed by the Secretary in the sole discretion of the Secretary.
"(C) PARTICIPATION.-The Secretary may include participation by State
officials, artists from the States, engravers of the United States Mint, and members of the
general public.
"(D) STANDARDS.-Because it is important that the Nation's coinage and
currency bear dignified designs of which the citizens of the United States can be proud,
the Secretary shall Dot select any frivolous or inappropriate design for any quarter dollar
minted under this subsection.
"(E) PROHIBmON ON CERTAIN REPRESENTATIONS.-No head and
shoulders portrait or bust of any person, living or dead, and no portrait of a living person
may be included in the design of any quarter dollar under this subsection.
"(5) TREATMENT AS NUMISMATIC ITEMS.-For purposes of sections 5134 and
5136, all coins minted under this subsection shall be considered to be numismatic items.
"(6) ISSUANCE."(A) QUALITY OF COINS.-The Secretary may mint and issue such number of
quarter dollars of each design selected under paragraph (4) in uncirculated and proof
qualities as the Secretary determines to be appropriate.
"(B) SILVER COINS.-Notwithstanding subsection (b), the Secretary may mint and
issue such number of quarter dollars of each design selected under paragraph (4) as the
Secretary determines to be appropriate, with a content of 90 percent silver and 10 percent
copper.
"(C) SOURCES OF BULLlON.-The Secretary shall obtain silver for minting coins
under subparagraph (B) from available resources, including stockpiles established under
the Strategic and Critical Materials Stock Piling Act.
"(7) APPLICATION IN EVENT OF THE ADMISSION OF ADDITIONAL STATES.If any additional State is admitted into the Union before the end of the 1O-year period
referred to in paragraph (1), the Secretary of the Treasury may issue quarter dollar coins,
in accordance with this subsection, with a design which is emblematic of such State
during any 1 year of such 10-year period, in addition to the quarter dollar coins issued
during such year in accordance with paragraph (3)(A).".
·
.
DEPARTMENT
OF
THE
TREASURY
1789
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASIDNGTON, D.C. • 20220. (202) 622-2960
EMBARGOED UNTIL 7:30PM
Remarks as Prepared for Delivery
January 9, 1998
Mark C. Medish, Deputy Assistant Secretary of the Treasury
for International Affairs
Building the New Russian State
John F. Kennedy School of Government
It is a privilege to be here to discuss Russia's economic future with a group that will do so much to
shape it.
These are momentous times. In the past year Russia has emerged as a significant player in the market
for global capital - and the opportunities, and risks, of this closer integration have been brought out
in stark relief The bad news --that Russia, along with other major emerging markets, has been hit by
contagion effects from the crises in Asia -is also the good news. Three years ago, during the Mexico
crisis, Russia was little affected by declining investor confidence in other markets --because back then,
foreign investors had very little confidence in Russia left to lose. That Russia no longer sits in
not-so-splendid isolation from turbulence elsewhere also reflects its recent dramatic progress --toward
stabilizing its economy and integrating it more closely with the global economy.
The United States' strong stake in Russian economic success is a bedrock of our evolving bilateral
partnership -a partnership that took another major step forward in the security sphere last year in the
NATO-Russia founding act. Make no mistake: America and Russia do, and will, disagree on some
issues. But these are the subject of negotiation, not confrontation. We are perhaps in greatest
harmony in our desire to see Russia achieve rapid growth as an open and competitive market
economy·--and claim its rightful position in global institutions and markets.
I would like to focus my remarks today on the progress we have seen in Russia this past year toward
that shared vision --and critical tasks that remain if Russia is finally to translate these achievements
into sustained growth. Running through all of these remarks is a central irony --that, after years of
shrinking the state, in many important respects the challenge Russia faces today is to strengthen it.
It is now clear that markets can work in Russia as surely as they do in every other country. The
question today is whether government can work effectively in Russia in support of free and fair
markets.
RR-2149
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
Let me start by discussing Russia's macroeconomic environment. Then I will touch on the financial
system, the climate for investment and Russia's integration with the global economy.
I. Locking in macroeconomic stability
1. Monetary policy successes
Effective control of macroeconomic policy is a vital job of government --vital for achieving growth
and, in this new era of global markets, vital for building and maintaining investor confidence. Here
the refonners appointed to the Russian cabinet last spring have helped make possible some notable
achievements. Russia's tight monetary policy has delivered a stable exchange rate and cut the average
inflation rate from 35 percent in 1996 to just 11 percent last year --somewhat lower than Mexico's.
This strong policy was rewarded in the first half of the year in the form of dramatic inflows of capital
and a surging stock market --and in the second half was severely tested as East Asian tunnoil began
to cross Eurasian borders. After some initial delay, the Central Bank of Russia rose to the challenge.
Its willingness to raise interest rates to defend the currency helped boost market confidence. And,
since mid-December, the money that was flowing out of Russia appears to have started to flow back
m.
The experience of the recent ruble redenomination is further testament to the new era of monetary
stability in Russia. Rather than causing the crisis of confidence that some observers expected,
introduction of the new currency has so far been a virtual non-event. The Russian authorities deserve
congratulations for devising a sensible plan to capitalize on this success in managing the country's
monetary policy, announcing it well in advance, and bolstering it with an extensive public relations
effort to ease uncertainty about the reform.
2. The fiscal hole
The resolute monetary policy of the past year, including the response to the Asian crisis, was an
important factor in yesterday's decision to reactivate Russia's program with the International
Monetary Fund, a decision the United States supported. Another major factor was the clear
indication that Russia is redoubling its fiscal reform efforts. Indeed, to be effective and meaningful,
the program depends on immediate, substantial improvements in tax administration and budget
control and accountability. As all now recognize, Russia's hard-won monetary stability will rest on
shaky ground as long as the government fails to deliver on its fiscal policy aims.
Oliver Wendell Holmes famously said that taxes are the price we pay for civilization. In that regard,
Russia is surely living on borrowed time. At 9 percent ofGDP, the level of tax revenues the federal
government was able to collect last year is at odds with the role both the government and its
electorate envision for the state --indeed, it cannot credibly sustain the operations of the most minimal
state.
2
Russia's inability to collect taxes efficiently and balance its books carries heavy costs for the entire
transition process:
1.
high public borrowing puts an excessive burden on monetary policy and stifles
domestic and foreign direct investment
2.
consistently large deficits also leave the government highly dependent on foreign
lending, thereby increasing its vulnerability to external shocks
3.
the failings of the tax system also stymie the development of small businesses, a sector
that has played a vital role in successful transitions elsewhere. Anders Aslund has
noted that Russia has only one officially registered enterprise for every 60 citizens, as
compared with one in lOin Poland and Hungary. When polled on the reasons for
this, entrepreneurs cite the tax system and general uncertainty about government as
the two leading concerns (indeed, these rank higher than crime --because crime, they
say, is usually more predictable.)
4.
more broadly, poor fiscal management undermines faith in government and the rule
of law and risks, creating a culture in which only the weak or the uninfonned pay their
bills.
Russia knows a great deal more now than it did even at the start of 1997 about the steps
needed to put its fiscal house in order. A year ago, increasing revenue collection was the
focus. But now see it is clear that improving mechanisms for tax collection is only part of the
story.
The path to more sustainable fiscal accounts lies not only in basic and wide-ranging tax
refonn but, stilI more fundamentally, in a sea-change of attitudes on the part of government
and taxpayer alike. Indeed, it is in the very nature of any market-based democracy that its
conceptions -and its practice -of good citizenship and governance should improve over time.
This has been America's experience too.
The action plan adopted by the Russian government last month represents a good start at
systemic fiscal change --but its success will depend on full and rapid implementation.
Briefly, there are six main priorities:
1.
reforming the tax laws remains perhaps the most important hurdle facing the
authorities in the coming year. Introduction of a comprehensive code this year now
appears in doubt. But it remains critical that a proposal for a strong code be
submitted to the Duma and passed as quickly as possible. I would hope that key
elements may still be implemented this year.
3
2.
eliminating offsets (swapping debts for taxes payments) is also key: offsets are a
powerful disincentive for taxpayers to meet their obligations in cash and must be
abolished. Many of Russia's tax debtors stopped making cash payments in the second
half of last year precisely because they anticipated a massive year-end offsetting
operation.
3.
adjusting penalties and interest on tax debts: the current structure of penalties for
non-compliance is overly punitive, and firms which have dug a deep tax hole for
themselves need transparent, predictable guidelines for making good on overdue
obligations.
4.
increasing complicmce by large taxpayers: cracking down on the large tax arrears of
Russia's dominant finns sends the strongest possible signal that no one is above law.
In this context the recent high-profile efforts to ensure compliance of two major tax
debtors were an important step.
5.
more realistic budgeting: Russia's budget process to date has consistently committed
the government to more spending than it is able to meet through current revenues.
The resort to stringent sequestration of funds has undermined transparency and added
to the nations's mass of overlapping public and private sector debt.
6.
increasing expenditure control: until recently, budget-funded entities funded their
programs from individual accounts maintained with a variety of Russian banks,
making it impossible for the Ministry of Finance to track spending with certainty.
Consolidation of these accounts within a functioning Treasury is now under way and
should be completed as fast as possible.
(PAUSE)
II. Strengthening the financial system
The Asian crises have amply demonstrated that, while the right mix of monetary and fiscal
policies is fundamental, governments must also ensure the safety and soundness of their
financial systems.
A1though Russia lacks the high levels of foreign debt and other weaknesses we have seen in
Thailand and some other countries, it shares with them the problem of a weak banking sector.
By any reckoning, in its first years of reform Russia has been overbanked and under regulated.
While we hear much about the Aoligarchs@ of Russia's financial system, even the largest of
the new banks are small by international standards, and a good number of the country's banks
may not be viable.
We know from experience elsewhere that building the effective supervisory and regulatory
regime and the financial infrastructure needed for a strong domestic financial system takes
4
time and detennination. As the unfolding events in Asia remind us, this is utterly
indispensable for safeguarding stability and restoring growth. I would note that Russia's
central bank has been taking several important steps:
1.
its special regulatory division for close monitoring of large banks that could pose
systemic risk was fully operational during the fall and is an important
confidence-builder.
2.
the central bank continues to make progress on shutting down weak banks, revealing
this week that it had closed 270 small and medium banks and withdrawn operating
licenses from another 3 16 last year --reducing their total number by more than 15
percent.
3.
a new bankruptcy law for banks is due to be adopted early this year, which should
ease the way for creditors to take bankrupt banks to court.
4.
the central bank has also announced and made progress implementing its schedule for
gradually tightening prudential norms for risk and liquidity, with the overall goal of
reaching most Basle standards by the end of the century.
All of these measures will help promote mergers and weed out many of the remaining small
and poorly capitalized Russian banks --and also provide for overall healthy evolution of
banking sector as a whole.
Clearly, much work remains. Effective and transparent supervision will be critical. Russia
can help itselfby following through on its commitment to introduce international accounting
standards by year-end. This will provide a better sense of the scale of the banking sector
problems. In addition, credible mechanisms are needed for the organized liquidation of
insolvent banks. Equally vital wiIl be the evolution of a modern credit culture within banks
and other financial institutions themselves. In short, Russian banks must develop the skills
to evolve from government securities traders to true financial mediators.
III. Creating the Environment for Investment and Competition
This point leads us to the vital link with the real economy.
Ifthe financial sector provides the lifeblood of a market economy, then the heart and nerves
and sinew are to be found in the structures and institutions that make investment possible and
attractive. Russia will not attain sustainable growth without a major upturn in both domestic
and foreign investment, primarily the former. And this will not occur without a wide range
of important structural and regulatory reforms in support of the macroeconomic policies and
financial sector reforms I have already mentioned. The agenda for structural change includes
refonning the pension system, completing the privatization program, rationalizing and further
5
developing regulatory systems (including in the spheres of capital markets and antitrust),
introducing pro-market land reform, defining and protecting property rights (including
shareholder rights) and strengthening the rule of law generally --all these areas continue to
be key priorities if Russia is to develop a dynamic environment to foster and attract
investment.
To take just one example, it is clear that the quality of privatization is as important as its
quantitative results. As we have seen in the response to many past privatizations, it matters,
for the building of public trust in government, not just that actions are fair and even-handed,
but that they are widely seen to be so. To put it bluntly: the public must be shown that
Proudhon and Marx were wrong --that property is not theft. They must be shown
convincingly that property will not be stolen or highjacked by Ainsiders@.
The problem is not intractable. President Yeltsin has taken the first step by firmly signaling
that corruption must not be tolerated. The lesson of other countries is that only when a
nation's leadership shows that the government will apply and enforce the law evenhandedly
--even to the rich and powerful --only then will lasting progress be made.
IV. Closer Integration with Global Institutions and Markets
Both the US and Russia agree on the importance of Russia's ongoing integration into
international economic organizations. It is immensely gratifying for the Administration to
witness the great strides that have occurred in 1997. In twelve short months we have seen:
•
Russia successfully join the Paris Club official creditors (something, incidentally, that
will greatly improve coordination of international efforts to reduce foreign debt stocks
in some of the poorest nations in Africa.)
•
the completion, early last month, of the restructuring of Russian commercial debt with
London Club creditors, which the government coolly and sensibly kept on schedule
despite the surrounding market furor.
•
the members of APEC welcome Russia's application for membership.
•
and, most prominently, the first Summit of the Eight in Denver, where the G-7
countries signaled their commitment, not only to Russian integration, but to a global
leadership role for Russia. This important new relationship will be developed further
at the Summit of the Eight in Birmingham this year.
There has also been increased Russian engagement with the DEeD, aimed at eventual
membership. It is still too soon to be talking dates, but President Yeltsin has clearly
recognized the benefits for Russia --and for its partners --that would flow from Russia's
undertaking the binding obligations on freedom of capital movements and investment and
6
other core OECD conditions.
The challenge for Russia now is to apply itself with equal vigor to its process of WTO
accession. This could produce major positive dividends for Russia. And Russia alone holds
the key to how quickly the accession talks can move.
V. The Governing Challenge: Making Less Government Do More
Russia's success in laying the foundations for democracy and a market economy these past
six years has put its destiny squarely in its own hands. The United States is committed to
doing all we can to nurture these achievements and assist Russia in advancing them.
It was Napoleon (of all people) who said that Amen are powerless to secure the future:
institutions alone fix the destinies of nations@. In my remarks today I have highlighted some
of the core institutions that we believe will be essential to building an open free market
economy in Russia --one that can deliver the rapid and broad-based growth in living standards
the Russian people deserve. President Yeltsin sounded many of the same themes in his March
State of the Union address and speech to the Duma last fall.
Effective macroeconomic management, a sturdy financial infrastructure, the rule of law,
transparent and evenhanded regulation, and open, competitive markets --all will be critical to
realizing the vision both our countries share --of Russia as a leading, prosperous member of
the global economy. But none of these things will come automatically, and none will come
without resistance. In this election-free period Russian leaders have a rare opportunity to
make good on this agenda.
It is in Russia's interest, it is in the United States' interest, and it is in the world's interest that
1998 be the year this opportunity is finally seized. Thank you.
7
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
January 9, 1998
Contact: Peter Hollenbach
(202) 219-3302
BUREAU OF TIlE PUBLIC DEBT AIDS SAVINGS BONDS OWNERS
AFFECTED BY FLOODING IN FLORIDA
The Bureau of Public Debt took action to assist victims of flooding in Florida by expediting the
replacement or payment of United States Savings Bonds for owners in the affected areas. The
emergency procedures are effective immediately for paying agents and owners in those areas of
Florida affected by the storms. These procedures will remain in effect through February 28, 1998.
Public Debt's action waives the normal six-month minimum holding period for Series EE savings
bonds presented to authorized paying agents for redemption by residents of the affected area. Most
financial institutions serve as paying agents for savings bonds.
Florida counties involved are Hernando, Hillsborough, Osceola and Polk. Should additional
counties be declared disaster areas the emergency procedures for savings bonds owners will go into
effect for those areas.
The replacement of bonds lost or destroyed will also be expedited by Public Debt. Bond owners
should complete form PD-1 048, available at most financial institutions or by writing the Richmond
Federal Reserve Bank's Savings Bond Customer Service Department, 701 East Byrd Street,
Richmond, Virginia 23219; phone (804) 697-8370. Bond owners should include as much
information as possible about the lost bonds on the form. This information should include how the
bonds were inscribed, social security number, approximate dates of issue, bond denominations and
serial numbers if available. The completed form must be certified by a notary public or an officer
of a financial institution. Completed forms should be forwarded to Public Debt's Savings Bond
Operations Office located at 200 Third St., Parkersburg, West Virginia 26106-l328. Bond owners
should write the word "Floods" on the front of their envelopes, to help expedite the processing of
claims.
000
PA-301
RR-2150
http://www.publicdebt.treas.gov
DEPARTMENT
1REASURY
OF
THE
TREASURY
NEWS
OFFICE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIllNGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
January 9, 1998
Contact: Treasury Public Affairs
(202) 622-2960
DEPUTY SECRETARY SUMMERS TO LEAD DELEGATION TO ASIA
Treasury Deputy Secretary Lawrence H. Summers will lead a U.S. delegation to Asia
beginning tomorrow.
President Clinton last night asked Summers to visit the region to take stock of the
economic situation, to hear the authorities' current plans, and to express the President's
commitment to support effective stabilization efforts.
While the itinerary is tentative, the U.S. delegation will visit countries including the
following: Singapore, Indonesia, Thailand and Malaysia.
The delegation will include representatives from the Treasury Department, the State
Department and the National Security Council.
-30-
RR-2151
Far press releases, speeches, public schedules and official biographies, call our 24-1zour fax line at (202) 622-2040
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the
Publi~
Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
Office of Financing
202-219-3350
January 12, 1998
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
January 15, 1998
April 16, 1998
Term:
Issue Dat.e:
Mat.urity Date:
CUSIP Number:
9127946L3
RANGE OF ACCEPTED COMPETITIVE BIDS:
Discount
Rate
-----Low 2/
High
Average
4.940%
4.980%
4.965%
Investment
Rate 1/
----------
Price
-----96.751
98.741
98.745
5.073%
5.114%
5.09B%
Tenders at the high discount rate were allotted
11%.
AMOUNTS TENDERED ru~ ACCEPTED (in thousands)
Tender Type
Competitive
Noncompetitive
----------------$
TOTAL
1/
27,429,904
1,433,528
$
1,433,528
-----------------
28,863,432
7,133,682
3,916,860
3,916,S60
127,511
127,511
62,489
62,489
----------------$
32,970,292
----------------$
Equivalent coupon-issue yield.
2/ $3,365,000 was accepted at rates below the competitive range.
RR-2152
5,700,154
-----------------
PUBLIC SUBTOTAL
Federal Reserve
Foreign Official Insc.
Refunded Maturing
Additional Amounts
Accepted
Tendered
11,240,542
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
January 12, 1998
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
January lS, 1998
July 16, 1998
912795AC5
Term:
Issue Dat:.e:
Maturity Dat:.e:
CUSIP NUmber:
R]>..NG2
OF ACCEPTED COMPETITIVE BIDS:
Discoun-c
Rate
-----Low 2/
High
Average
4.880%
4.920%
4.910%
Investment
Rate 1/
.---------
Price
---- --
97.533
97.513
97.518
5.073%
5.115%
5.104%
Tenders at the high discount rate were allotted
21~.
AMOUNTS TENDERED ~ ACCEPTED (in thousands)
Tender T:iPe
competitive
Noncompetitive
Tendered
-~---------------
$
TOTAL
$
-----------------
PUlSLIC SUBTOTAL
Federal Reserve
Foreign Official Inst.
Refunded Maturing
Additional Amo~~ts
22,903,547
1,409,:246
Accepted
-----------------
24,312.7.93
5,572,450
3,680,000
3,680,000
1,678,589
821,411
1,678,589
821,411
----------------$
4,163,204
1,409,246
30,492,793
----------------$
Equivalent coupon-issue yield.
2/ $6,604,000 was accepted ac rates below the competitive range.
1/
RR-2153
http://www.publicdebt.treas.gov
11,752,450
DEPARTMENT
OF
THE
TREASURY
~/78~9~. . . . . . . . . . . . . . . . . . . .. .
........................
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W•• WASIDNGTON, D.C .• 20220. (202) 622.2960
FOR IMMEDIATE RELEASE
January 13, 1998
Contact: Dan Israel
(202) 622-2960
STATEMENT OF TREASURY SECRETARY ROBERT E. RUBIN
In October 1997, the IRS initiated a series ofreports designed to identify the scope of the
problems regarding taxpayer rights violations at the IRS. The IRS released its first report in
December 1997; today, the IRS is releasing its second report.
I am deeply troubled by this report's conclusion that the inappropriate use of enforcement
statistics has put taxpayer rights in jeopardy in districts around the nation. This is an unacceptable
situation that must and will change. Commissioner Charles Rossotti and I are committed to
fundamentally changing the agency to one that respects taxpayer rights while collecting the
revenue due.
The disturbing practices shown in these reports demonstrate the importance of recent
steps taken by the IRS. These steps taken by Commissioner Rossotti include:
•
stopping the use of revenue goals in field offices and ending its practice of ranking districts
on those results;
•
requiring higher supervisory levels of decision-making for all seizures;
•
initiating monthly Problem Solving Days to make the IRS more accessible to taxpayers;
and
•
beginning to develop performance measures, including customer service and the
protection of taxpayer rights, that will promote quality and appropriate case actions.
Today, Commissioner Rossotti has announced additional measures that make clear that
such abuses will no longer be tolerated These new steps include:
•
establishing a panel, including officials from other agencies, to resolve employee
disciplinary cases arising from the report;
RR-2154
For press releases, speeches, public schedult,s and official biographies, call our 24~our fax line at (202) 622·2040
•
conducting regular reviews of each district's compliance with the Taxpayer Bill of Rights,
to ensure that employees are not evaluated based on revenue goals;
•
reviewing the need to examine activities in other IRS districts not covered by this report;
and
•
issuing a directive to all employees underscoring the importance and the absolute need to
comply with the provisions of the Taxpayer Bill of Rights.
The actions we have announced are executive actions which take an important step in the
right direction. In addition to our efforts, it is also critical that Congress pass H.R. 2676, which
will help our efforts to strengthen taxpayer rights and improve customer service.
-30-
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Pub}" D bt \11
•
Ie e
• nashmgton. DC 20239
NR IMMEDlATp. RELEASE
January 13, 1998
Contact: Office of Financing
(202) 219-3350
TREASURY'S INFLAT10N-INDEXED SECURITIES
FORUARY REFERENCE cPt NUMBERS AND DAILY INDEX RATIOS
Public Debt announced today tho reference Consumer Price Index (CPI) numbers and the
dally indeJt ratios for the month of February for the following Treasury inflation-indexed securities:
(1) ~ IO.year 3-3/8% notes due January 15, 2007, (2) the S-year 3·5/8% notes due July 15, 2002,
and (3) the 1O~year 3-518% notes due January 15, 2008. This information is based on the
non-seasonally adjusted U.S. City Averaie All Itel1l9 Conswner Price Index for All Urban
Consumers (CPI-U) published by the BweauofLabor Statistics of the U.S. Department of Labor.
In addition to the pUblication of the reference CPI' s (Rtf CPI) and index ratios) this
release provides the non-seasonally adjusted CPI-l.1 for the prior three-month period.
This information is available throu~h the Treasury's Offic.e of Public Affairs automated fax
system by caI1ini 202-622-2040 and requesting document Dumber 2155. The information
is also available on the Internet at Public Debt's horae page (http://www.publicdebt.treas.gov).
The information for March is expected to be released on FebruaIy 24, 1998;
000
A~ents
PA-303
RR-2155
http://~,,,.pu blicd~bt. tre:lS.gO\
Contact: Office of Finano;ng
202-219-3350
TREASURY 10-YEAR INFLATION-INDEXED NOTES
SERIES:
A-2007
CUSlP:
9128272M3
January 15, 1997
DATED DATE:
ORIGINAL ISSUE DATE:
ADDITIONAL ISSUE DATE:
MATURITY DATE:
Ref CPI
February 6. 1991
on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
April 15, 1997
January 15,2007
158.43548
February 1998
28
CPI-U (NSA) October 1997
161.6
161.5
CP/-U (NSA) November 1997
CPI-U (NSA) December 1991
161.3
Ref CPI and Index Ratios for February 1998:
February
February
February
February
February
Cafe ndarday'
1
2
3
4
5
RefCPI
Index Ratio
1998 161.50000
1.01934
1.01930
1.01925
1.01921
1.01916
1.01912
1.01907
1.01903
1.01898
1.01894
1.01889
1998 161.49286
1998 161.48571
7
8
9
10
11
12
1998 161.47857
1998 161.47143
1998 161.46429
1998 161.45714
1998 161.45000
1998 161.44286
1998 161.43571
1998 161.42857
1998 161.42143
1.01885
Februery
13
1998 161.41429
1.01680
February
February
February
14
15
16
17
1998 161.40714
1998 161.40000
1.01876
February
February
February
February
February
February
February
February
February
February
February
February
February
February
February
6
18
19
20
21
22
23
24
February
25
February
26
Februsry
27
_., 28
February
~.
1998 161.39286
1998 161.38571
1998 161.37857
1998 161.37143
1998 161.36429
1998' 161.35714
1998 161.35000
1998 161.34286
1998 161.33571
1998 161.32857
1998 161.32143
1998 161.31429
1998 161.30714
1.01871
1.01867
1.01862
1.01858
1.01853
1.01849
1.01844
I
.
1.01840
1.01835
1.01831
1.01826
1.01822
1.01817
1.01813
Contsct: Offloe of Flnsncfng
202-219-3350
TREASURY ~·YEAR INFLATION-INDEXED NOTES
SERIES:
J·2002
CUSIP:
9128273A8
DATED DATE:
July 15, 1997
ORIGINAL ISSUE DATE:
July 15) 1997
ADDITIONAL ISSUE DATE:
October 15,1997
MATURrry DATE:
July 15, 2002
RefCPI on DATED DATE:
160.15484
TABLE FOR MONTH OF:
February 1998
NUMBER OF DAYS IN MONTH:
28
CPI-U (NSA) October 1997
CPI-U (NSA) November 1997
CPI-U (NSA) December 1997
161.6
161.5
161.3
Ref CPI and Index RatIos for February 1996:
r:::--
February
February
February
Calendar Qay
1
2
February
3
4
5
6
7
February
February
February
Index Ratio
1998 161.50000 1.00840
1998 161.49286 1.00835
1998 161.48571 1.00831
RefCPI
1998 161.47857
1998 161.47143
1.00827
1.00822
1998 161.46429
1.00818
1.00813
1.00809
1998 161.45714
February
8
1998 161.45000
February
9
Febru~IfY
10
11
12
1998
1998
1998
1998
1998
1998
1998
February
February
February
February
February
February
February
February
13
14
15
16
17
18
19
181.44286
161.43571
161.42857
161.42143
161.41429
161.40714
161.40000
1998 161.39286
1.00n3
161.38571
1.00769
161.37857
161.37143
161.36429
161.35714
1.00764
20
February
21
February
22
23
1998 161.34280
24
25
199B 161.33571
1998 161.32857
February
26
27
1998 161.32143
1998 161.31429
.~bruarY,
28
1998 161.30714
February
I=ebruary
February
1.00800
1.00795
1.00791
1.00786
1.00782
1.00777
1998
1998
1998
1998
1998
1998
February
February
February
1.00804
161.35000
1.00760
1.00755
1.00751
1.00746
1.00742
1.00737
1.00733
1.00728
1.00724
1.00719
202-219--3350
Contact: Offlce of Flnencing
TREASURY 10-YEAR INFLATION-INDEXED NOTES
SERIES:
A-2008
custP:
DATED DATE:
912827317
January 15, 1998
ORIGINAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
January 15,1998
January 16, 2008
161.55484
February 1998
NUMBER OF DAVS IN MONTH:
28
CPI-U (NSA) October 1997
161.6
CPI-U (NSA) November 1997
CPI-U (NSA) December 1997
161.5
161.3
Ref CPI and Index Ratios for February 1998:
Ca lendarda~
February
February
February
February
February
161.50000
1998
4
5
1998
161.49286
161.48571
161.47857
161.47143
161.46429
161.45714
161.45000
161.44286
161.43571
February
February
9
February
February
February
February
February
7
a
10
11
12
13
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
0.99953
0.99948
0.99944
0.99940
0.99935
0.99931
0.99926
161.42857 0.99922
0.99917
0.99913
0.99909
18
1998 161.37857
19
1998 161.37143
1998 161.36429
1998 161.35714
0.99891
0.99886
0.99882
14
15
16
17
20
21
22
February
23
February
February
February
1998
161.42143
161.41429
161.40714
161.40000
161.39286
1998 161.38571
FGbru2UY
February
February
February
February
February
February
0.99966
0.99962
0.99957
1998
6
February
Index Rat!Q
1
2
3
February
Februa.y
February
February
RefCPI
24
25
26
27
28
0.99904
0.99900
0.99895
0.99878
1998 161.35000
0.99873
161.34286
0.99869
161.33571
0.99864
161.32857
161.32143
161.31429
0.99860
0.99856
0.99851
O.Q9847
1998
1998
1998
1998
1998
1998 161.30714
DEPARTMENT OF THE TREASURY
TREASURY,
NEWS
OFnCE Of PUBlIC AffAIRS -1500 PENNSYLVANIA AVENUE, N.W.' WASHINGTON, D.C.' 20220. (202) 622.l91iO
EMBARGOED UNTIL 2:30 P.M.
January 13, 1998
CON'I'ACT:
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills totaling
approximately $14,500 million, to be issued January 22, 1998. This offering
will result in a paydown for the Treasury of about $21,575 million, as the
maturing publicly held bills are outstanding in the arr~unt of $36,064 million
(including the eO-day cash management bills issued Novembe= 3, 1997, in the
amount of $21,139 million)
!n addition to the public holdings, Federal Reserve E2n~s for their own
accounts hold $7,451 million of the maturing bills, which may be refunded at the
weighted average discount rate of accepted competitive tende=s. Amounts issued
to these accounts will be in addition to the offering amount.
Federal Reserve Banks hold S4,03l million of thematuri~c issues as acents
for foreiGn and interna~ional mcnetarv ~uthorities. Uo to 5".000 million of
these securities mav be refunded withir- the offerino amount ,"- each of the
auctions of 13-week bills and 26-week bills at the weiohted CV~;$oe discou~t
rate of accented comoetitive tenders. ~_ciciitional amO\lnt:s mC. v be lssued in each
auction for such accounts to the extent: that the amount of ~~~ bids exceeds
p,OOO million.
Tenders for the bills will be received at Federal Rese~.e Ear~s and
Branches and at the Bureau of the Public Debt, Washington, D.C. This offering
of Treasury securities is governed by the terms and conditic~s set forth in the
Uniform Offe~ing Circular (31 CFR Part ~S6, as amended) for :hc sale and issue
by the Treasury to the public of marketcble Treasury bills, ~o:as, and bonds.
Details about each of the new
highlights.
se~urities
000
Attachment
RR-2156
are given in the attached offering
HIGHLIGHTS OP TREASURY OPFERINGS OF WREXLY BXLLS
TO BE rSSUBD JANUARY l2, 1998
January 13, 1998
Offer iog Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7.250 million
$7,250 million
DeHcrigLion of Offering:
Term and Lype at ~ecuL'ity . . . . . . . . . . . . . . . . . .
CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Auction date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Natllrity date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Odgioal issue date . . . . . . . . . . . . . . . . . . . . . . . .
currently outstanding . . . . . . . . . . . . . . . . . . . . . .
Minimum bid amount . . . . . . . . . . . . . . . . . . . . . . . . .
91-day bill
912794 6M 1
January 20, 1998
January 22, 1998
April 23, 1998
October 23, 1997
$10,692 million
$10,000
11ultlples . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000
182 -day bill
912794 4X 9
January 20, 1998
January 22, 1998
July 23, 1998
July 24, 1997
$18.830 million
$10,000
$ 1,000
The following rules apply to all securities mentioned above.
SlIbmission of Bids:
Noncompetitive bids . . . . . . . . . . . . . . . . . . . . . . . . Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids.
Competitive bids . . . . . . . . . . . . . . . . . . . . . . . . . . . (I)
MU6t be expressed as a discount rate with three decimals in
increments of .005\, e.g., 7.100\. 7.105\.
(2)
Net long position for each bidder must be t'eported \~hen the
sum of the total bid amount, at all discount rates, and the
net long position is $1 billion or greater.
(l)
Net long position must be determined as of one half-hour
prior: Lo lhe clot:ing time for receipt of competitive tcndelS
f.\.p:imuln Ilecognized Hid
-u-~t,_a
~inqlc
YieJd
~aximum Award.
Rer.eiot of Tender~:
tJoncalnpctitive tenders
competitive tender.s
payment Tel-rnS . _ .. ..
)S\ oC
public offering
35\ of public offering
Prior to 12 :00 noon Rastern Standard time on auction day
Prior to 1:00 p.m. Eastern Standard time on auction da,
. . . . . . . . . . . . Full pilyment "lith
tender or by charge to a funds account
at a Federal Reserve Dank on issue date
20009
From: TREASURY PUBLIC AFFAIRS
f)
E P .\ R T \1 E N T
0 F
TilE
2-9-98 4:25pm
T
l{
E .\ S
[1
p. 21 of 22
R Y
NEWS
orne!: OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W•• WASHINGTON, D.C.• 20220. (202) 622.2960
FOR IMMEDIATE RELEASE
January 14, 1998
Contact: Beth Weaver, Treasury (202) 622-2960
Gregory King, Justice (202) 514-2008
Royce Griffin, Arkansas AG (501) 682-2007
BRADY BACKGROUND CHECKS TO RESUME NATIONWIDE
Treasury Secretary Robert E. Rubin and Attorney General Janet Reno announced today
that once again Brady background checks on prospective handgun purchasers will be conducted
in every state in the nation.
Arkansas Attorney General Winston Bryant also announced that the State of Arkansas rejoins today the vast majority of jurisdictions across the country in voluntarily conducting
background checks, which the State had discontinued following the U.S, Supreme Court's ruling
on Brady Law. The Court ruled that state and local law enforcement officials could not be
required to conduct such checks.
"I am very pleased that Arkansas has reinstated background checks on handgun
purchasers," said Secretary Rubin. "This public safety measure is absolutely critical to saving lives
and preventing crime."
"Background checks save lives, and that's why, once again, they are being done in every
state" said Attorney General Reno. "The overwhelming majority of affected Jaw enforcement
agencies have responded to the President's request to continue doing background checks
voluntarily, "
Arkansas is one of23 states affected by the Supreme Court's decision last June that struck
down the Brady Act's requirement that state or local officials conduct background checks on
prospective handgun purchasers. It is also 1 of 7 states for which the responsibility for
background checks lies at the state rather than local level.
In July, 1997 in wake of the Court's decision, Rubin and Reno met with national law
enforcement leaders, to urge state and local police to continue to conduct background checks on
prospective handgun purchasers.
Because of the Court's ruling, the Arkansas State Police immediately discontinued
background checks on handgun buyers, However, virtually all of the law enforcement agencies in
the other 22 states that had been conducting checks prior to the Court's decision continued to do
them voluntarily,
For press releases, speeclu!s, public schedules and official biographiu, call our 24-hUUT fax line at (202) 622.2{)40
ZHHH9
From: TREASURY PUBLIC AFFAIRS
2-9-98 4:27pm
p. 22 of 22
The only other exception was Ohio, which initially responded to the Court's decision by
continuing background checks only on purchasers who consented to one. Last month, Rubin and
Reno entered into a voluntary arrangement with the Ohio Attorney General that resulted in full
reinstatement of background checks on every prospective Ohio handgun purchaser.
To facilitate the resumption of background checks in Arkansas, the Bureau of Alcohol,
Tobacco and Firearms (ATF) has designated the Arkansas Attorney General as a "ChiefLaw
Enforcement Officer" under the Brady Act. Although the Brady Act provides for a pre-purchase
waiting period of up to 5 days to allow a background to be conducted, Attorney General Bryant's
office expects that, in most cases, the check will be completed within I business day of the time
the office receives notice of the proposed gun sale. No fee will be charged for the background
check.
"I am responsible for protecting the people of Arkansas, and that's why I've requested
authority to conduct background checks" said Attorney General Bryant. "Under our procedure,
law abiding citizens should be less inconvenienced than before, so that convicted felons and other
prohibited persons are prevented from purchasing handguns.
It
In the event the background check yields information indicating that a prospective
handgun purchaser may be disqualified by law from receiving or possessing a fireanns, the
Arkansas Attorney General will notify locallaw enforcement officials and prosecutors about the
possibility that criminal conduct may be involved.
"An ATF review indicates that with Arkansas on board, nearly 100 percent of the United
States population now lives in a jurisdiction where law enforcement performs background checks
on handgun purchasers'" Rubin said.
According to Department of Justice sUlVeys, background checks of the kind provided for
in the Brady Act have prevented firearm sales to over 300,000 felons, fugitives and others
prohibited from receiving or possessing them. While in effect, background checks in Arkansas
blocked over 1,500 criminals and other prohibited persons from illegally obtaining handguns from
firearms dealers.
-30-
TOTAL P.02
·
DEPARTMENT
OF
THE
TREASURY
NEWS
~~/78~9~. . . . . . . .1I......................
................................
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C.. 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
January 14, 1998
Contact: Michelle Lynn Bonner
(202) 622-2960
TREASURY DEPARTMENT RECEIVES SMALL BUSINESS DEVELOPMENT AWARD
The Treasury Department was honored today by the National Association of Black
Procurement Professionals (NABPP) for its support of smaIl, minority and women-owned businesses.
"The Treasury Department is proud to playa leadership role in outreach to small, minority
and women-owned businesses." Secretary Rubin said. "We are committed to programs that foster
business development and increase opportunities."
The Small Business Development Award is awarded on the basis of small business prime and
subcontracting accomplishments during fiscal years 1994 through 1996. The Treasury Department
was selected because it exceeded its goals in every category of awarding procurement contracts based
on both prime and subcontracts. This award recognizes the Treasury Department for establishing
high goals for itself on awarding contracts to small, minority and women-owned businesses and
exceeding those goals. The Treasury Department works to increase capital access and participation
by small, minority and women-owned businesses in. all aspects of Treasury's programs and
procurement activities.
Founded in 1988, the NABPP is a Washington, D.C., based non-profit professional society.
The members are from federal, state, local governments and private sector businesses. NABPP's
mission is to provide training, educational and career development to procurement professionals, and
provide business development services to the small business community.
The Treasury Department has various programs to support and assist small businesses.
For more information about the Administration's work on the One America race initiative go
to www. whitehouse.gov.
-30-
RR-2158
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
·
D EPA R T 1\1 E N T
0 F
THE
T R E A'S U R Y
NEWS
ornCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIllNGTON, D.C. - 20220 - (202) 622-2960
EMBARGOED UNTIL 9AM
Remarks as prepared for delivery
January 15, 1998
Treasury Secretary Robert E. Rubin
RainbowlPush Coalition Wall Street Project Conference
It is a pleasure to speak with you today. I'd like to thank Jesse Jackson for inviting me to this
Conference, and I'd also like to recognize his leadership for over 30 years in the effort to foster
opportunity for all Americans.
On this day -- the anniversary of the birth of Dr. Martin Luther King -- we are reminded that
to best honor the memory of this great man who fought so hard for justice, we must renew our efforts
to fulfill his vision. At this conference, we gather to address an issue that goes to the heart of fulfilling
Martin Luther King's dream for this country: giving every American the opportunity to join and
succeed in the economic mainstream.
I have long held the belief that this country will fall far short of its full economic potential for
all Americans, unless we make that opportunity a reality for all of our people. That is why I firmly
believe that the issue you are addressing today is not simply a social issue or a moral issue, although
it is that as well, but an economic issue of great personal importance to each of us, no matter what
our income may be or where we may live.
Today, I'd like to begin with a look at our economy as a whole. I will discuss why I believe
that inclusion is critical to the bottom line for individual companies and for our national economy.
And then I'd like to discuss what can serve as one part of inclusion: the importance to our nation's
economy of revitalizing our country's economically distressed communities.
First, let's start with the economy, because the prerequisite for addressing issues of inclusion
and real economic opportunity for all is a strong national economy, which creates jobs and raises
standards ofliving. It seems to me that, too often those who are focused on creating a good economy
do not adequately recognize all else that is needed to enable everyone to have the opportunity to
RR-2159
Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
succeed in our economy, and conversely, those who are focused on issues of inclusion do not focus
adequately on the imperative of a good economy to meet the objective of inclusion.
When President Clinton came to office, unemployment was 7.3 percent, high budget deficits
kept interest rates high and confidence low, and job creation was slow. During the past five years,
the deficit reduction plan of 1993, and the growth that deficit reduction was key in generating,
brought down the deficit from nearly $300 billion 5 years ago to $22 billion in 1997. Overall, deficit
reduction was central to bringing interest rates down and increasing confidence, and that was central
to generating and then sustaining the economic recovery.
TQ(iay, unemployment is 4.7 percent and has been under 6 percent for the last three years. The
economy has generated over 14 million new jobs over the last five years, inflation has remained low
and real wages are rising.
There are also some hopeful signs of renewal in America's cities, areas too often fraught with
poverty and economic duress. Unemployment in the fifty largest cities is down to 6.5 percent from
9 percent in 1992. And crime is down substantially.
Having said all that, too many Americans are still not participating, or are not participating
fully, in the economic well-being that most are sharing. And too many Americans who are
participating in the mainstream economy still face barriers to fully achieving their potential.
Although government at all levels is important to addressing these issues, I believe corporate
America has a vital role to play in its own self-interest in expanding opportunity for all Americans.
Inclusion is good for the bottom line. In today's highly competitive global economy, it is
more important than ever to each company to hire and retain the best people it can get. There may
be a tendency among businesses to hire and promote the type of people they have worked with in the
past. Outreach to all, and recognizing and putting aside habits of doing what has been done before,
makes good business sense for each company, and will lead to a stronger and more competitive
economy for all of us.
The private sector, and each of us as individuals, can also help promote our country's
economic growth by getting involved in helping the residents of our inner cities realize their potential.
One approach involves tutoring inner city students or establishing internship programs at mainstream
businesses -large and small -- to help prepare the young of today to be the workers of tomorrow.
Another approach is to help small businesses or budding entrepreneurs through business
mentoring, and here there is great opportunity for all sorts of programs. For example, I recently
visited a program in Chicago, the Runners Club, which has brought together mentors from large and
small business and from academia to support African American entrepreneurs in the area who want
to build large businesses. A number of CDFIs use business mentoring, drawing on lo~al business
people to help small businesses or micro borrowers. We at Treasury have begun working on ways
2
of promoting business mentoring networks.
More generally, at Treasury headquarters in Washington, D. C., we are directly involving
ourselves in inner city economic development through an internship program we operate with local
inner city high schools, through supporting a business career academy in a local high school, and
through outreach to minority owned businesses in our procurement processes. Just yesterday,
Treasury received the Small Business Development Award from the National Association of Black
Procurement Professionals for its support of small, minority and women-owned businesses.
But of course, even if great progress is made with respect to the matters I just discussed, we
still face the challenge of bringing the residents of our inner cities and other economically distressed
areas into the economic mainstream. Many of these individuals lack the basic skills or job readiness
attributes for successful involvement in the mainstream economy, or are located far from areas of
economic activity and never get a chance to succeed. Again, this is a national economic issue of great
importance to all of us. Just think of the profound difference in terms of productivity gains, reduced
social costs, and economic growth if the residents of these areas became part of the economic
mainstream.
And that objective is achievable. There are programs that work and strategies that succeed;
the key is to identifY those programs and strategies and replicate them in sufficient scale on sustained
basis around the country.
More generally, I think of dealing with the economic issues of distressed areas, and their
residents, as involving a three part framework.
The first is strengthening public safety. In addition to the human costs, high crime rates are
a significant barrier to economic activity. The President has made this a high priority through the
Brady Bill, the assault weapons ban and his program to put police back on the streets.
Second, and more importantly, is investing in people, through education and training, from
pre-school to adults, and very importantly through improving the "job readiness" of the least
advantaged.
Third is increasing access to private sector capital, and other measures to create economic
activity in the inner cities. Despite the fact that financial markets in the United States are today the
most innovative, the broadest, and deepest in the world, we still have a severe shortage of financial
institutions and a shortage of credit to create housing and jobs in the inner city. Treasury has been
bringing its broad expertise on capital markets to bear on these problems.
We've strengthened the regulations under the Community Reinvestment Act to encourage
mainstream financial institutions to lend to creditworthy borrowers throughout their community.
Over the last five years, in part because of these changes, private sector lending in distressed areas
has increased enormously -- in 1996 alone, large commercial banks made $18 billion in community
3
development loans - funds used to produce affordable housing, finance small business, and develop
retail and cortunercial revitalization projects. In the last four years, national banks have invested four
times as much in community development as they did the in the previous thirty years.
We made permanent the low income housing tax credit, and, as the Vice President announced
just this week, the President is proposing in his budget to expand the credit by over $1.5 billion over
the next five years.
We launched two years ago the CDFI Fund to support a nationwide network of community
development financial institutions. The President's 1999 budget includes $125 million for CDFI, and
we will make it a top priority to work with Congress on the re-authorization that is required for this
most useful program to continue.
We have introduced a new tax incentive to clean up abandoned industrial properties in
economically distressed areas -- so called brownfields -- and we created new Empowerment Zones.
To conclude, the United States has had highly favorable economic conditions over the last five
years, grounded in the private sector's great improvements in competitiveness and in a broad public
economic strategy centered on deficit reduction, investment in our people through education and the
like to promote future productivity, and leadership in the issues of the international economy,
including opening markets abroad.
However, to maintain a robust economy in the years and decades ahead, we must successfully
meet many challenges. In the broadest sense, that means both the private and public sectors canying
forward their effectiveness and strategies of recent years; and specifically, that means continuing to
move forward towards the goal offuU inclusion in the economy for all Americans, and as part of that,
equipping the residents of distressed areas -- including the inner cities -- to join and succeed in the
economic mainstream.
These goals are critically important not only to the immediate beneficiaries, but to the
achievement of our country's full economic and social potential for all of us. Thank you very much.
-30-
4
D EPA R T :\1 E N T
0 F
THE
T REA SUR Y
NEWS
omCEOFPUBUCAFFAIRS .1SOOPENNSYLVANlAAVENUE, N.W.• WASHINGTON, D.C.• %0%%0. (%0%) 6%%-%960
I
FOR IMMEDIATE RELEASE
January 15, 1998
Contact: Dan Israel
(202) 622-2960
UNITED STATES SIGNS FIRST TAX TREATIES WITH BALTIC REPUBLICS
Secretary Robert E. Rubin today signed income tax conventions with Estonia, Latvia and
Lithuania. These first tax treaties between the United States and the three Baltic Republics
represent an important step in Treasury's goal of expanding the U.S. tax treaty network with
emerging economies.
re~:<e;:-::
~ C0'J,,~ :",,::-~.
B;-az.a~!tJ~;"~ \\'C~-t. ..~~.,;J
~a:
r::
.:
~ie:o<:len. \.hl:1I1S ~imdnis
anG
Litbuaniz.:l Fr,·sicicnl .l.jgl; ,.as
~: ~ . :'"::-~::,a!;~:t
The pn;}Q~-:: w:ln'rrions generally follow t~e ~')?.ttefP of the US model inCJm-: tax
:·-;::n:s. iv: .. -.r, t~, ... re are somt v2.na:ion~ Tn~:~E"
convemDD A.s '\'27.0: ::Jttr!t.: ...'":-:-a; IE.) .:.
difierences reflt'CI f'anicula; aspec!s 01 the iaw~: ::·:d !reary poLe,it's oftn::- Signatory coumnes ihe
interactions of U.S. law with the laws of the Baltic Repubhcs, and U.S. economic relations w'nh
the three nations.
The three treaties establish maximum rates of withholding at source on dividends that are
the same as those in the U.S. model. Dividends are subject to a maximum rate of tax at source of
15 percent, except that the rate is limited to five percent for dividends paid by a 10-percent or
more subsidiary in one country to its parent in the other. Unlike the U.S. model, but like a
number of U.S. treaties, interest and royalties are subject to limited tax at source. The proposed
conventions provide for a maximum 10-percent rate of tax at source on most interest payments.
Interest earned on trade credits and on government debt, including debt guaranteed by
government agencies, however, is exempt from tax at source. Royalties for the use of industrial,
commercial or scientific equipment are subject to a five-percent tax at source. All other royalties
are taxed at a maximum rate of 10 percent.
The taxation of capital gains under the proposed conventions follows the pattern of the
U.S. model. They provide that gains from real property (including aV.S. real property interest)
RR-2160
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2
are taxable in the situs state. Gains from the alienation of personal property that is part of a
permanent establishment or fixed base may be taxed in the state where the permanent
establishment or fixed base is located. All other gains are taxable exclusively in the state of
residence of the alienator.
Consistent with the U.S. model, the three agreements provide generally for the taxation by
one state of the business profits of a resident of the other only when such profits are attributable
to a permanent establishment located in that other state. The proposed conventions, however,
include an anti-abuse rule that would allow the source state to tax sales or activities carried out by
a resident of the other state as if they were performed by a permanent establishment, if it is
ascertained that such activities were structured with the intention to avoid taxation in the state
where the permanent establishment is situated.
The treatment of profits from international carriage by aircraft and ships generally follows
the U.S. model. However, income from the international rental of ships and aircraft that is not
incidental to operation of ships and aircrafts is taxed at a five-percent rate as a royalty paid for the
7'''r::.a' r:::
e"qwp'-~:'<
and
1'1::1~~
fr0r: 1';:
l_::'~
)r rente..
o!Cn;",i:r'e: t~.
:!s
:i-'~l-L,.
c:e,,_··l T[' ti:;.:-
The pr"poser .:erlven!i0'15 'W\-1th La1\~c. and =..ithuania, but nm Est,)ni3. ecr' ;r:
:;L-,~cili
Pf(,Y"'sionc ~t~i.tmg tc eX;llD' i:,: ,D:; JI eX!='tJi'"atli;" A the seabed and ~l.!b-soil "l !lest; ruie~ are
su:niar to 6. je foune In our tr~alies ;;"';.,:n ~orth Sea (, ur.t,.es
The taxation of income from the performance of yersonal ~er"l.:.:es is generallY simila:- to
that under the U.S. model, but, like some U.S. treaties with developing countries, the proposed
conventions grant a taxing ri,?ht to the host country with respect to certain categories of personal
services income that is somewhat broader tnan in the U. S. model.
The proposed conventions contain rules, similar to those in all recent U.S. treaties,
designed to restrict the benefits of the convention to persons that are not engaged in "treaty shopping." Also included are rules to prevent discriminatory taxation, as well as rules necessary for
administering the conventions, including rules for the resolution of disputes under the
conventions, and for the exchange of information.
Unique to these three conventions is an agreement that there will be a five-year period
within which the appropriate authorities of the two states will meet to discuss the application of
the convention to income derived from new technologies, such as payments received for
transmission by satellite, cable, optic fibre or similar technology. The meeting may result in a
protocol that specifically addresses the convention's application to income from new
technologies. It is understood that, until and unless an agreement is reached to the contrary, no
source country tax will be imposed on such income, unless the income is attributable to a
permanent establishment in the source country.
3
The proposed conventions are subject to ratification. Each convention will enter into
force after each state has notified the other that it has completed its ratification requirements.
Each convention will have effect, with respect to taxes withheld at the source, for amounts paid
or credited on or after the first day of January of the calendar year next following the year in
which the convention enters into force. In other cases the convention will have effect with respect
to taxable years beginning on or after the first day of January of the calendar year next following
the year in which the convention enters into force. Each convention will remain in force
indefinitely unless terminated by one of the contracting states. Either state will be able to terminate the convention at the end of any calendar year by giving written notice at least six months
before the end of that calendar year.
Copies of the new conventions are available on the Internet at www.treas.govlpress or
from the Office of Public Affairs, Treasury Department, Room 2321, Washington, D.C. 20220.
-30-
DEPARTMENT OF THE TREASURY
WASHINGTON, D.C.
SECRETARY OF THE TREASURY
January 15, 1998
The Honorable Gene Ludwig
Comptroller of the Currency
250 E Street, S.W.
Washington, D.C. 20219
Dear Gene:
I received with deep regret your letter informing me of your decision to return to private
life at the completion of your term as Comptroller of the Currency. Since its founding 125 years
ago, the Office of the Comptroller has been a strong force in this country for the maintenance of a
sound and competitive banking system, and your vision and leadership as Comptroller over the
past five years have been in the finest tradition of that Office.
In particular, your dedicated efforts to broaden access to credit and financial services for
all Americans have successfully demonstrated the important role that government can playas a
catalyst in the rehabilitation oflow- and middle-income neighborhoods. Similarly, your
commitment to seeking new ways to modernize the business of banking, while staying alert to
trends and developments that might reflect weaknesses, has played a major role in restoring our
banking system to the strength it now enjoys.
I wish you every success as you move on to your next challenge.
Sincerely,
~~
Robert E. Rubin
RR-2161
DEPARTMENT
OF
THE
TREASURY
NEWS
lREASURY
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.· WASlllNGTON, D.C .• 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
January 16, 1998
Contact: Office of Public Affairs
(202) 622-2960
ST ATEMENT OF TREASURY SPOKESMAN HOWARD M. SCHLOSS
ON THE RESIGNATION OF INSPECTOR GENERAL VALERIE LAU
Valerie Lau has submitted her resignation today, and will stay to finish the audit of
Treasury's Consolidated Financial Statements, which should be completed in March. We
appreciate Valerie's service to this Department during the last three and a half years and wish her
well in future endeavors.
-30-
RR-2162
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
DEPARTMENT
OF
TREASURY~
'<
THE
TREASURY
NEWS
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
January 20, 1997
Contact: Kelly Crawford
(202) 622-2960
STATEl\1ENT BY TREASURY SECRETARY ROBERT E RUBIN
I had a very good meeting today with Finance Minister Tarrin. The Minister underscored
Thailand's commitment to a comprehensive program of reform, including steps to strengthen and
restructure the financial sector. The United States welcomes the strong efforts of Prime Minister
Chuan and his government to address the economic situation in Thailand.
Minister Tarrin and I agreed that the focus of Thailand's efforts should remain on the need to
restore confidence through the strong implementation of the policies it has agreed to in the
context of the IMP program. I told the Minister that the United States has and will continue to
support adequate financing from the international financial institutions for the Thai reform effort.
The United States has a strong interest in seeing Thailand succeed in reestablishing financial
stability and growth.
-30-
RR-2163
Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
January 20, 1998
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
Term:
Issue Date:
Maturity Date:
CUSIP Number:
yanuary 22, 1998
April 23, 1998
9127946Ml
RANGE OF ACCEPTED COMPETITIVE BIDS:
Discount
Rate
Low
High
Average
------
Investment
Rate 1/
Price
----------
------
4.960%
4.985%
5.094%
98.746
S.lIS%-
4.980%
5.114il>
98.740
9S.741
Tenders at the high discount rate were allotted
92~.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
.~ccepted
Tendered
Competitive
Noncompetitive
$
PUBLIC SUBTOTAL
Federal Reserve
Foreign Offic'al Inst.
Refunded Maturing
Additional ~mounts
TOTAL
$
28,625,358
1,218,761
$
5,756,408
1,218,761
29,844,119
6,975,169
3,585,500
3,585,500
280,000
280,000
o
o
33,709,619
10,540,669
Equivalerrt coupon-issue yield.
RR-2164
http://www.publicd~bt.treas.gov
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public- Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
Office of Financing
202-219-3350
CONTACT:
FOR IMMEDIATE RELE.~E
Januarj 20, 1998
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182 -Day Bill
January 22, 1998
Te::m;
Issue Date:
Mc.i:urity Date:
CUSIP Number:
July 23, 1998
9127944X9
RANGE OF ACCEPTED COMPETITIVE BIDS:
Investment
Rate 1/
Discount
Rate
-----4.990%
4.995%
4.995%
Lo''''
High
Av€;!"age
T€~ders
97.477
97.475
97.475
at the high discount rate were allotted
AMOUNTS TENDERED
~~
ACCEPTED (in
$
COi:1pecicive
Koncompetitive
PUBLIC SUBTOTAL
Federal Reserve
Fcreign Official Inst.
Refunded Maturing
Additional Amounts
~housands)
Accepted
35,275,700
1,133.642
$
$
3,61'1,295
1,133,642
36,409,342
4,747,937
3,615.000
3,615,000
2,544,300
2,544,300
o
o
TOTP-.L
E~~ivalent
53%.
Tendered
T2:lder Type
1/
Price
------
---------5.191%
S.195%5.195%"
42,568,642
coupon-issue yield.
RR-2165
http~/ /www.publlcdebt.tre&.$..gov
$
10.907.237
·
D EPA R T ~1 E N T
0 F
THE T REA S V R Y
,
,
.
NEWS
TREASURY
OFFICE OP' PUBLIC AFFArRS 11500 PENNSYLVANIA AVENUE. N.W.' WASHINGTON. D.C.' 202l0' (202) 622.2960
EMBARGOED UNTIL 2:30 P.M.
January 20, 1998
CONTACT:
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction ~wo series of Treasury bills totaling
approximately $14,500 million, to be issued January 29, 1998. This offering
will result in a paydown for the Treasury of about $1,450 million, as the
maturing publicly held weekly bills are outstanding in the amount of $15,944
million.
In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $6,813 million of the maturing bills, which may be refunded at the
weighted average discount ra.te of accepted competitive tenders. Amounts issued
to these accounts will be in addition to the offering amount.
Federal Reserve Banks hold $4,444 million of the maturi~g issues as agents
for foreign and international monetarY authorities. Up to $3,000 million of
these securities may be refunded within the offering amount in each of the
auctions of 13-week bills and 26-week bills a~ ~he weigh~ed average discount
rate of accepted competitive tenders. Additional amounts may be issued in each
auction for such accounts to the exten~ that the amount of new bids exceeds
S3,000 million.
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 eFR Part 356, as amended) 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
RR-2166
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OF TREASURY OPPBRINGS OF KBBKLY BILLS
TO BE ISSUED JANUARY 39, 1998
H~GHLIGHTS
January lO, 1998
Offering Amount .........•. '"
. . . . . . . . . . . . . . . $7,250 million
D~Bcription of Offoringl
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 4U 5
January 26, 1998
January 29, 1998
April 30, 1998
May 1, 1997
$32,210 million
$10,000
$ 1,000
$7,250 million
192-day bill
912795 AD 3
January 26, 1999
January 29, 1998
July 30, 1998.
January 29, 1998
$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.
competitive bids . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)
Must be expressed as a discount rate with three decimals in
increments of .005\, e.g., 7.100\, 7.105\.
(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 $1 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 . . . . . . . . . . . . . . . . . . . • . . Prior to 12:00 noon Eastern Standard time on auction day
Competitive tenders . . . . . . . . . . . . . . . . . . . . . . . . . Prior to 1:00 p.m. Bastern Standard time on auction day
Payment Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Full payment with tender or by charge to a funds account
at a Pederal Reserve Bank on issue date
DEPARTMENT
OF
THE
TREASURY
NEWS
ornCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622.2960
FOR IMMEDIATE RELEASE
January 20, 1997
Contact: Kelly Crawford
(202) 622-1260
STATEMENT BY TREASURY SECRETARY ROBERT E. RUBIN
I had an encouraging meeting with a high-level Korean delegation today. The Korean
government, with the full support of the President-elect, has actively begun to confront many of
its critical challenges. Korea's reforms, launched with the IMF's backing, are having a real impact
in promoting the kinds of adjustments that are needed to restore confidence and stability. As the
Korean delegation acknowledged, however, there is much more to be done and no room for
complacency.
I welcome the global effort by private international banks to roll over existing claims on Korean
financial institutions for 90 days. It is important that all financial institutions with claims on
Korean financial institutions playa constructive role in this process to provide the breathing space
necessary to reach a comprehensive, longer-term refinancing agreement.
The challenge now is for these institutions to agree on a voluntary plan that would extend
significantly the maturities of foreign claims on Korean financial institutions and provide access to
new sources of private external finance.
-30RR-2167
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DEPARTMENT
OF
THE
TREASURY
NEWS
lREASURY
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASlDNGTON, D.C .• 20220 • (202) 622-2960
EMBARGOED UNTll.. DELIVERY
Text as Prepared for Delivery
January 21, 1998
Treasury Secretary Robert E. Rubin
Address on the Asian Financial Situation to Georgetown University
Washington, D.C.
Today I would like to discuss the financial crisis in Asia; why the United States must
protect its vital economic and national security interests by working to help restore
financial stability and economic growth to that troubled region; and why acting promptly
and effectively to do so protects the economic interests of every American.
To begin, I think it is important to place the recent events in Asia in the context of
the emergence of the global financial system. Over the last several years, we have entered a
new era for global financial markets and the global economy -- an era of interdependence,
complexity and opportunity. Expanding economic ties through greatly increased trade and
vastly increased capital flows has brought tremendous benefits to the American people
through greater exports, more high-paying jobs, and higher standards of living and
through lower inflation than would have been expected with the strong growth we've had.
And countries in the developing world and emerging markets have also benefited
enormously from this environment, which has allowed them to attract previously
unimaginable flows of private capital for investment. That investment has helped foster
growth and lift millions out of poverty.
Yet just as this era brings great opportunities for the United States and the rest of
the world, so does it present new risks. In recent months, these risks have been brought
home as financial instability in Asia has shaken the region and affected markets around the
world. Just a few years ago, it would have been unimaginable for the fluctuations of the
Thai baht, or the fortunes of the Korean stock market to impact U.S. markets to be printed
on the front page of newspapers every day.
In the face of this challenge, our first job is clear: to help stabilize the immediate
crisis. Yet, to make the most of the opportunities and limit the risks of the new global
RR-2168
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-
financial system and to have a viable situation for the years ahead, we must also modernize
the architecture of the international financial markets that we helped create and that has
served us so well for the last fifty years. This will be a long and complex process - which we
actually began several years ago -- involving both great intellectual effort and extensive
international coordination, yet it is imperative for the strength of our economy and the
prosperity of our citizens as we enter a new century.
The United States has enormously important economic and national security
interests at stake in promoting restoration of financial stability in Asia. When we act to
resolve the Asian crisis, we act to protect and benefit the American people.
The countries in Asia are our customers, our competitors and our security partners.
Financial instability, economic distress, and depreciating currencies all have direct effects
on the pace of our exports, the competitiveness of our companies, the growth of our
economy and, ultimately, the well-being of American workers. Thirty percent of U.S.
exports go to Asia, supporting millions of U.S. jobs, and we export more to Asia than
Europe. In states like California, Oregon and Washington, exports to Asia account for
more than half of each state's total exports.
Thus far, the effects on our economy, though real, are relatively moderate and the
most likely scenario for the next year is continued solid growth and low inflation. However,
the risks in this crisis are not just confined to the Asian countries no,w most directly
involved. Roughly forty percent of our exports have been going to emerging markets
around the globe. If the crisis were to spread more broadly to other emerging markets, then
the impact on American workers and businesses could be much greater. Simply put, we
cannot afford to stand back and gamble that the crisis will resolve itself.
The United States also has critical national security interests in seeing a restoration
of financial stability in the region. We have 100,000 troops based in Asia, 37,000 on the
Korean peninsula alone, where we have spent 45 years keeping the peace, and where North
and South Korea have only just begun negotiating a possible end to their conflict. History
has shown that economic distress and financial instability can threaten political stability
and security. A stable and prosperous Asia is more likely to be a peaceful Asia.
Action on a global scale is not easy, but the United States cannot turn its back on
this crisis in the hope that we will remain insulated from its effects and markets alone will
cure the problem. It's neither desirable nor possible to save countries from the
consequences of structural deficiencies and bad policies, but we can work to support an
international effort to help countries that help themselves, and that is very much in the
interest of the American people. By reestablishing financial stability and economic wellbeing, these countries will once again be strong markets for American goods, will have
stronger currencies that will help the competitiveness of our goods in world markets, and
will enjoy the economic conditions conducive to political and social stability. There are no
2
guarantees for success, and even with success, these countries' financial and economic
difficulty will persist for some while the reforms take hold and lead to renewed confidence
and a return to solid growth. But we must do everything sensible to help address this
crisis, because the alternative of doing nothing will lead to far deeper and far longer
financial instability and economic duress.
Before I discuss the steps the United States has taken to confront this crisis, let me
offer a few thoughts on what has happened in Asia.
While each of these countries enjoyed decades of strong growth and rising standards
of living for their people, they also had deep seated common and individual problems. At
the core, for aU of them, close links between governments, banks and corporations led to
fundamentally unsound investments by corporations funded by unsound lending by banks.
Their financial systems lacked transparency, which masked the extent of the problem. They
had inadequate financial regulation and supervision. In short, the essential underpinnings
to a modern financial system were weak or did not exist. Additionally, several economies
had large current account deficits, fixed exchange rates and inadequate monetary policies
- an unsustainable combination.
Foreign investors injected an extraordinary amount of capital into these flawed
systems without due weighting of the risks involved. From 1990 to 1997, foreign capital
inflows quadrupled in the region. Anyone who has spent substantial time enmeshed in
markets, as I have, appreciates that financial markets tend to go to extremes, including the
market for bank credit extension -- and when they reverse, they sometimes do so with great
force.
In Asia, massive amounts of capital flowed into banks, which then extended
unsound loans, including a fundamental mismatch between short term bank funding in
foreign currency and lending on long term projects of questionable merit.
No single factor that I have described would likely have produced a financial crisis.
While economies usually adjust in a relatively orderly fashion to market swings, in this case
the combination of factors proved combustible. When these crises began, foreign investors
started to withdraw capital, local companies sought to hedge hard currency exposures,
exporters stopped bringing their export earnings home, and citizens moved their savings
abroad. I think it has now become accepted that most of the pressure on these currencies
came from local sources and not foreign investors. This process brought stock prices and
land values down sharply across the region, imposed severe strains on Asian banks and
companies, and led to acute depreciations of exchange rates and greatly reduced or
negative economic growth.
The international community has been involved in a major effort to focus countries
on these underlying problems, and to assist them in addressing them. These issues have
3
been a central focus of the IMF in all its many interactions with these countries as well as
our interactions with these countries both bilaterally and multi-laterally. And as I will
explain later, the United States has been working actively to strengthen the architecture of
the international financial system to help better prevent and better manage financial crisis
that could threaten our interests. However, before a crisis occurs, we have the capacity to
advocate but Dot to force sovereign countries to take actions they do not believe to be in
their interest.
From the very beginning of this crisis, we at Treasury, in close cooperation with
Chairman Greenspan and the staff of the Federal Reserve Board, have been deeply
involved in crafting an international response involving the countries in the region, the G7, the World Bank, and the Asian Development Bank -- all working with the International
Monetary Fund. The President's national security team including Secretary Albright,
Secretary Cohen and National Security Advisor Berger, have been integrally and critically
involved in this effort.
The program we have supported has focused on four key elements: supporting
reform programs in individual nations; providing temporary financial assistance when
needed; encouraging strong action by Japan and the other major economic powers to
promote global growth; and fostering policies in other developing and emerging economies
to reduce the risk of contagion. Let me describe each of these elements.
First, and most importantly, our approach requires that these countries take the
concrete steps necessary to reform their economies. These programs, which are designed
with the IMF, address the specific causes of each nations' crisis and can be adapted as the
situation changes. The fundamental objectives of these reforms are to restore financial
stability and confidence, promote stronger and more stable exchange rates, attract new
flows of capital, and restore economic growth. These reform programs have at their core
strengthening financial systems, imp'roving transparency and supervision, eliminating the
interrelationships between banks, the government, and commercial entities, opening capital
markets, and appropriate monetary and fiscal policies. If countries don't take these steps,
no financial assistance is made available.
These are not austerity programs. These are primarily programs of structural and
financial reform. However, in financial crises like these, where confidence is critical, some
fiscal and monetary tightening is necessary to stabilize the currency and restore confidence.
It is the crisis and the ensuing loss of confidence -- not the reform programs -- that leads to
economic hardships for the population. The reform programs are the best and probably
the only viable way for these countries to limit the degree and duration of economic distress
and reestablish confidence, stability and growth.
The second element of our approach is to support these programs of reform with
4
temporary financial assistance if necessary. When a nation's financial stability is at risk,
this money provides the breathing room for a nation to establish the conditions to restore
economic confidence, attract private capital and resume growth. These programs of
financial assistance allow the external debt to be refinanced over a longer period of time.
Without this, these countries face the risk of default, either by the sovereign or systemically
in the financial sector, which could readily result in deep and prolonged distress in these
countries, possible contagion effects for emerging and developing countries around the
world, and potentially serious impacts on the industrialized countries, including our own.
The central provider of this financial assistance is the International Monetary Fund,
with additional support from the World Bank and the Asian Development Bank. In
addition, the United States has joined other industrial countries in indicating its willingness
to provide supplementary financial resources in some situations if a country fully adheres
to the reform program and further resources become necessary. Up to this point,we have
not actually dispersed any of this money, and those dispersals -- to the extent they occur -will be in the form of short term loans whose payment is guaranteed by the borrowing
government.
While the temporary financial assistance is an important part of an effective
response to these problems, let me stress, no amount of official money alone can solve these
problems and official money is not the key. Only when sound policies are pursued, will
confidence -- and capital - return.
Private financial institutions have an important role to play in solving these
problems. In the case of Korea, for example, we stated that the United States would provide
funds only in the context of international banks addressing Korea's immediate financing
needs. This linkage has helped produce a short-run rollover by bank creditors in Europe,
Japan and the United States which has helped calm Korean markets more recently. What
is important now is that the private financial institutions move forward on a voluntary
basis to negotiate with Korea a longer-term financing plan to help reestablish financial
stability. And an approach like this can be an important part of any viable response to
similar crises in the future.
The third element of our approach is to encourage the major industrial countries to
act to strengthen their own economies and take the steps necessary to promote the strong
economic and financial environment globally which can contribute to resolving the crisis in
Asia. The policies pursued by the United States over the past five years, which have
produced lower budget deficits, lower interest rates, low inflation, and strong growth have
made a major contribution to supporting growth around the globe. But we cannot play this
role alone.
In Europe, whose economies, when combined, are larger than the United States,
and where growth is starting to rebound, it is very important to undertake structural
5
reforms and other policies necessary to strengthen this recovery so that Europe, too, can be
an engine of global growth.
Japan, the second largest economy in the world, has an especially crucial role to
play. It is absolutely critical that Japan take the steps necessary to deal with the issues in
its financial system, to generate solid growth in domestic demand and to open its markets.
A weak Japan is a source of weakness for the region. A strong Japan would be a source of
strength for the region. Strong actions by Japan are vitally in the interest of Japan, the
Asian region and the global economy.
China also plays a critical role in Asia's economic stability. I want to welcome the
statements by Chinese officials made in recent weeks reconfirming their commitment to
exchange rate stability and to dealing effectively with the economic challenges that they
face.
Fourth, and finally, we have worked closely with the IMF to encourage other
emerging markets to make policy adjustments to reduce their vulnerability to contagion
from the countries now in crisis. From the APEC finance ministers meeting in April to the
meeting of global finance ministers and central bank governors in Hong Kong in
September to the meeting of Latin American finance ministers in Santiago last December,
we've worked closely to promote structural, financial, and macroeconomic policies that are
critical to stability. We have also worked closely with Russia, Eastern Europe and other
transitional economies to help reduce their risk of contagion.
At the beginning of the crisis in Asia, there was widespread concern that it might
spread throughout emerging markets around the globe. But thus far, the strong efforts to
re-establish financial stability in Asia, and reform measures in many developing countries
elsewhere have succeeded in limiting the contagion effect after the initial impact.
The IMF is the right institution to be at the center of these. support programs. This
institution, which was established at the initiative of the United States fifty years ago, has
long benefited Americans. The core mission of the IMF has always remained the same -- to
promote financial stability, trade and economic growth.
The United States has worked forcefully to help the IMF meet the new challenges of
the modern financial system, and there is simply no other institution capable of performing
its mission. With tremendous expertise and technical resources, the IMF has the ability to
shape effective reform programs. As a multinational organization, it is able to require an
economically distressed country to accept conditions that no contributing nation could
require on its own. Finally -- and critically important -- the IMF internationalizes the
burden during a global financial crisis by using its pool of capital instead of the United
States having to bear that burden alone.
6
The American people should also know this: over the past fifty years our
contribution to the IMF has not cost the taxpayer one dime. When the IMF draws on our
commitments, we receive a liquid, interest bearing offsetting claim on the IMF. There are
no budget outlays. Our contribution does not increase the deficit, or divert resources from
other spending priorities.
Support for our periodic pledge to the IMF, and support for a new emergency fund,
the New Arrangements to Borrow, which supplements the IMF's resources to deal with
crises such as this one, is critical. This funding is absolutely necessary to enable the IMF to
respond effectively if this crisis were to spread and intensify -- which we all want to avoid
event - and to deal with future crises that could similarly affect the interests of the
American people. Moreover, failure to provide funding could reduce our leverage in the
IMF, and could shake confidence in American leadership in the global economy at a time
when confidence is so important in re-establishing stability in Asia.
There is no question that the approaches to crisis prevention, and to dealing with
crisis when they occur, must advance to meet the new challenges of the international
financial system, and we have been and are working energetically toward that objective.
But we cannot afford to wait for these extremely complicated issues to be resolved to deal
with IMF funding. The United States needs an IMF that is financially equipped to help
protect U.S. interests right now. If we close the door on the IMF, we hurt ourselves.
The financial instability in Asia involves enormously complicated problems and
presents challenges the global financial system has never faced. While there are specific
dimensions in each of these programs that could be debated, I am confident that overall
these are strong well-crafted programs and the best and probably the only viable way to
help these countries re-establish stability and confidence. Moreover, these problems are
going to take time to resolve, and we must proceed energetically but with patience, and
with determination.
A number of concerns have been raised with respect to these programs. Let me try
to respond to them.
First, some have said that it's not in our interest to help countries that are seen as
our competitors, especially when falling currencies make their products cheaper. The exact
opposite is the case. Without support, it is highly likely that these countries will have much
deeper recessions and much weaker currencies, hurting U.S. exports and our
competitiveness with far greater damage to American businesses and workers. With
support, these countries have the best chance to restore growth, restore the capacity to buy
more of our goods, and restore currency values.
A second criticism has been that these programs do not require nations to take
specific steps to promote the environment, protect core labor standards and ensure human
7
rights. Let me be clear: these issues are critically important to the United States, and we
are pursuing them actively through other initiatives and in other fora. And there is no
question that financial stability, growth and prosperity provide an environment most
conducive to advancing these objectives, while instability and economic duress are
inimicable to these objectives. Moreover, designing and obtaining sustained adherence to
programs to restore financial stability is extremely difficult. To add these three objectives - however important - would vastly complicate this effort and greatly reduce its chance of
success. Also, if these objectives were added others would clearly seek to add still more
objectives, and the whole undertaking would become impossible.
Third, some have said that providing financial assistance to these countries shields
investors and countries from the consequences of bad decisions and sows the seeds of
futures crises. This problem - often called the problem of moral hazard -- has two
dimensions: the impact on the behavior of countries, and the impact of the behavior of
investors and lenders. For the countries, it should be obvious that they are not now
shielded from the effects of their bad decisions. They may receive temporary financial
assistance, but they also inevitably go through a very difficult economic period before
recovery takes hold. No country would opt to go through what Mexico went through, or
what various Asian countries are going through now.
As to investors and lenders, the problem is more complicated. Let me just say that I
would not give one nickel to help any creditor or investor. And, in fact vast numbers of
investors and creditors have taken large losses in Asia. Foreign banks and other creditors
to corporate and other borrowers throughout the region now have many troubled or bad
loans, real estate investors have almost universally sustained large asset depreciations, and
investors have suffered the consequences of stock markets that are down more than fifty
percent from their highs. Just today three major U.S. banks -- J.P. Morgan, Chase, and
Citibank -- have reported that developments in Asia have had a substantial negative
impact on their profits. The crisis in Asia has clearly taken its toll on American investors
and creditors.
To those who argue that we must ensure that all creditors take a loss, my answer is
this: The reality of the situation is much more complex. A byproduct of programs
designed to restore stability and growth may be that some creditors will be protected from
the full consequences of their actions. But any action to force investors and creditors
involuntarily to take losses, however appropriate that might seem, would risk serious
adverse consequences. It could cause banks to pull their money out of the country
involved. It could reduce that nation's ability to access new sources of private capital, and,
perhaps most tellingly, it could cause banks to pull back from other emerging markets.
Having said this, it is critically important that we work toward changing the global
financial architecture so that creditors and investors bear the consequences of their
decisions as fully as possible, while minimizing adverse consequences. But devising such
8
architectural changes is difficult and complex. We cannot wait until that work is complete
to take the steps necessary to deal with the crisis at hand that so powerfully affects our
interests.
Fourth, some say that doing nothing would be best, because markets would
ultimately solve the problem on their own. Let me say as someone who spent 26 years on
Wall Street and who has an enormous belief in markets, there are problems that markets
alone simply cannot solve. In this country, we recognized that long ago, with measures such
as the Federal Reserve System, the Securities and Exchange Commission and deposit
insurance. Laws and institution support healthy free market activity by dealing with issues
beyond the ability of unfettered markets to handle. There is simply too much risk that
markets alone will not resolve these problems of financial instability, and therefore given
our stakes in Asia we must try to help get these countries back on track.
The global economy needs architecture as modern as the markets. That is why, even
as we have tried to confront the immediate crisis in the Asian region, we have also begun
an intensive effort to improve the global financial system to both better prevent crises from
occurring and better deal with them if they do occur. President Clinton began this effort
four years ago at a G-7 meeting in Naples. At the summit that followed in Halifax in 1995,
we launched a broad international effort to strengthen safeguards in the global financial
system. Two important parts of this initiative are an international program to strengthen
disclosure and the development of core principles for supervision in emerging market
financial systems.
To build on these efforts, we have begun an intensive internal effort with the Federal
Reserve Board and others, to identify and analyze possible mechanisms for dealing with
new challenges to the international financial system. As I have said, this is a very complex
undertaking which will take time and, while there have been some suggestions which may
look attractive on their face, there are no easy answers. We also will be working with our
G-7 partners and ·others on this issue, and at President Clinton's initiative, we will convene
a meeting later this spring with finance ministers from around the world to share our views
on this subject and to begin to develop a consensus on further steps.
This initiative will focus on four objectives: improving transparency and disclosure;
strengthening the role of the international financial institutions in helping to continue to
deal with the challenges of today's global markets; developing the role of the private sector
in bearing an appropriate share of the burden in times of crisis; and strengthening the
regulation of financial institution in emerging economies.
This is a period of considerable uncertainty and challenge for the global financial
system, and for the countries most directly involved in the crisis. As I said earlier, even
under the best of circumstances, these crises take a time to abate. The process is bound to
be a difficult one for the people of these countries. But the approach I have described today
9
is the best and most likely the only viable way to succeed. While nobody can say for certain
what will happen, the countries in Asia have great underlying strengths, such as high
savings rates, firm commitments to education, and strong work ethics and, with a sustained
commitment to the necessary reforms, they are well-positioned to re-establish strong
economic growth and sound currencies going forward.
The United States has enormous economic and national security interests in a strong
and vibrant Asia. Financial instability in Asia is a threat not only to the region, but to
economies all over the world, and even ourselves. We cannot ignore these risks. We must
act to best protect and promote our interests.
As I said at the beginning, we are at the frontier of a new era. When America has
entered new eras in the past it has done so with vigor and determination. Our leadership is
critical to guiding the global economy into the 21st century, and to protecting the interests
of the American people. This is no time to turn our back. We must confront the crisis
today, and build for tomorrow. The actions we take now are critical to our economic wellbeing today, and for the future. Thank you very much.
-30-
10
DEPARTMENT
OF
THE
TREASURY
~. .~. .~178~9~. . . . . . . . . . . . . . . . . . . . . . . . . .1I
....................
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. - 20220 - (202) 622-2960
CONTACT:
EMBARGOED UNTIL 2: 30 P. M.
Janua.ry 21, 1998
TREASURY TO AuctION 2-YEAR AND 5-YEAR
TOTALING S26,000 MILLION
Office of Financing
202/219-33S0
NOT~S
The Treasury will auction SlS,OOO million of 2-year notes and $11,000
million of S-year notes to refund $29,575 million of publicly held securities
mAcuring January 31, 1998, and to pay down about $3,575 million.
In addition to the public holdings, Federal Reserve Bank. hold $1,851
million of the maturing securities for their own accounts, which may be
refunded by issuing additional amounts ot the new securities.
The maturing securities held by the public include $5,254 million held
tor foreign and international monetary
authorities. Amounts bid for these accounts by Federal Reserve Banks will
be added to the ottering.
by Federal Reaerv. Banka aa agenta
the 2-year and S-year note auctions will be conducted in the singleprice auction format. All competitive &n4 noncompetitive awards will be at
the highest yield of accepted competitive tendere.
B~th
The 2-year and S-year notes being offered today are eligible for the
STRIPS progra.m.
Tenders will be received at Federal Reaerve Banks &nd Br&nches and at
the Bureau of the Public Debt, Washington, D. C. This offering of Treaaury
securities is governed by the terms and conditions set forth in the Unitorm
Offering Circular (31 CFR Part 356, as amended) for the sale and i.aue 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
Attachrruult
RR-2169
For pun '~/.llsest
Ip.,cIa~s.
public schedul., Illl~ olfiei,,1 b;(1grllplltu.
CIlII
our 14-hortr /4JC U", til (JOJ) 621·'040
January 21, 199.
Offering Agount . . . . . . . . . . . . . . . . . . . . . . . . . $15,000 million
$11.000 wnilllon
Deacriotiog or offeriog:
Term an~ type of security .............. 2-year notes
Series •............ , ................... Y-2000
CUSIP
5-year notes
C-200]
912821 JV 2
nU1aber ........................... 912827 lU 4
Auct ion t1ate ........................ ,..
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dated date ................... " ........
Maturity date ..........................
Interest rate ..........................
January 27. 1998
February :2, 1998
January 31, 1998
January )1, lOOO
Determined based on the bighest
accepted competitive bid
Yield ........... ' " ............. ' " .... Determined at auction
Interest payment dates ................. July 31 and January 31
Minimum bid a~unt ..................... $5,000
tIIultlples .............................. $1,000
Accrued interest payable
by inventor ........................ Determined at auction
PremIum or diBcount .................... Determined at auction
January 28,
Pebruary 2,
January 31,
January 31,
1998
1998
1999
200)
based on the highest
accepted competltlve bid
Determined at auction
July 31 and January 31
Dete~ined
$1,000
S 1,000
Determtned at auction
Determined at auction
:lTRIJ!.Unfonnat ion:
JIIinimUln amount requi red ............... . Determined at auction
Corpun CUSJP number ........... . ...... . 912820 CM 7
Du ... d."lte (a) and CUSIP numbp.r Is)
'U8))
July 31. 1998
OY 9
for additl0n~1 TINTln) ....
JllnuiHY )1, 1999
OZ 6
July 31, 1999
January 31, lOOO
RIIO
RB B
Determ'ned at auction
912820 CN 5
!u'1.!UJ.
J"ly 31, 1998
January )1, 1999
July 31, 1999
January )1, 2000
July 31. 2000
OY 9
OZ 6
RIIO
9128])
January
1001
July )1, 2001
January )1, 2002
)1,
RB 8
July 31,
RC 6
January )1, 1001
2002
RD 4
RS 2
RF 9
RG 7
RH5
Ilia (ollowipg ryles .PP1Y-!~~~uYities ~ent!Qned ~O •• :
~bmisalop of aAd~1
Nonc~titive bide
. . . . . . . . . Accepted in full up to $5,000,000 at the highest accepted yield.
(1) Must be expressed as a yield with thret" decimals, e.g., 7.UH.
(2) Net long position for each bidder must be reported when the 8U~ of the total bid amount,
CO!llpetitlve bid9 . . . . . . .
(1)
at all yields, and the net long position is $2 billion or greater.
Net long position ~st be determined ss of one half·hour prior to the closing time for
receipt of competitlve tenders.
~~x~ Recoqn1aed Bid
at a Siagla Yi,ld ........ ]5' of public offering
Award ............... ]S' of public offering
Rec,ipt or TeDdt rs :
- - Noncompetitive tenders ... Pr'or to 12:00 noon Eastern Standard time on auction day
COmpetitive tenders ...... Prior to 1:00 p.m. Eastern Standard time on auction day
~_!1'I~enl!l ............... rull payment with tender or by charge to a (ul1ll'1 account at a federal Reserve Bank on issue date
~x1mum
DEPARTMENT
OF
THE
TREASURY
~178~9~. . . . . . . . . . . ._
. . . . . . . . . . . . . .
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. - 20220 - (202) 622-2960
~ ~I~
2:30
P,~,
CO!."':AC'l' I
Janu.&rI 23, 1998
O::1~ of r:'nancing
~C~/~l~-JlSO
The ~&8ury wJ.:::" auction &.p~o.x1 mat-alay $:.2,00 C lr.!.:':ion 0: S~-w.aX '!'rae.aury
Dill. to Hfund $14,778 million o! pul:llic:ly hal~ S4· ... ak :bill. m&t-ur1ni'
r@N&ri' 5, loJil. :'hili o::erillg will ruult in a p~o...... tor the Tr.UI\uy c!
aDoUt G~, 775 million. In &4<Ut1011 to tha rMturtng SA-wa~ :billa. the •• are
fli / l'7 milll.on o! m.&turing ~:icly hal~ lJ-wlu and :26·... ek billa.
In a.dd1t!.on to the pul;)11c holcllugi, radaril lelcva i&nk.l for tha1r own
hol4 $14,lS8 mil110u of the matu.r1llg b!.ll&. 'l'h4.8 a.aaouuta are
CQD.8id.and to Lol~ $6,205 :r.i::!.O:l of t~ m&t.uring 5~ -weak 111U8, whiot. may be
retund.ad at the we.1.ghtad aV64&i' cUICO\Wt rAte 0; &e3~t..r:. c:ompatit1ve eenoa.ra.
Amcur.ti 1.aued to ~Ie ACcount. \Ida be in Add!.t.ictl to the ott.ring a.re.ount.
&CCQtmtl
r.w-&l.
i.a.arve Ba.nkI ~ld e~ ,2,. million Q! the m.a.tu.r1ng
nal.
i.we.
Ai
&gent&
tC)r~ an4 intun&t1cna.l manatuy authoritiu.
mAY b. nf~d
w1tllin the offar1ng &mOUnt ~t the wt1~te4 lvar&.gl dilcount rite ot aceept.c.
cc~tit.1ve taMara. Mdit1CDAl UOunti may Qe iii"'~ for .uch a.CCOunti it the
&ggre~t. amount 0: new ~1d1 e.xQ.e~ the aggre;&te ~~ of tn.I.tur1ng billa.
ror pw:pol •• ot determining BUell add!.tion.L. a.:no~ti !oreiS" a.n~ intema-tiona:
montt&.:y &Ut.hor!.~1.a ue COIllic1lra4 to hold $~, 610 ~:':'1on of the ma.t.~!.ng
:0:
I
5'-w.u 1.aue.
Te.n~ •• tQr the )j1l1a will be reee1v.d I.t '.~&l Reaa..rve ll~& e...nc1
lr&nClhe. and &~ t.h.a Buru.u. of tM ~l1o ~tt Wu,h1ngtor., D.C. This o::ering
c! 'Z'reuu:ry •• curitioB i . governed by the t.~ a.nd ~t.1ons 5e: forth 1n the
t1n.1:orm O!tarUlg Circula: (31 C1~ Part 36' I LI amud.ed) for the aa.le and l.11\J.e
by tha 'rro&5u.tj' to tha pulJl1c o! mu''<lt~le ':rouury 1:I!-:1&, note., Uld ~.
o.t.&.ila
h1slliSht5 •
~o~t
the
rAW seC\l,;'~ty
a.re give.:. i=. the attic:.ed o::ering
000
Atta.chment
RR-2170
-
HIGELIGRTS OF TREASURY OFFERING
or
52-WEElC" BILLS
TO BE ISSUED FRBROARY 5, 1998
W'anuary 23, 19S8
Offering Amount .............. $12,000 million
Description of Offering:
Term and type of security ....
CUSIP number .................
Auction date .................
Issue date ...................
Maturity date ................
Original h- :ue date ..........
Maturing arr..:;unt ...•..........
364-day bill
912795 BT 7
January 29, 199B
February 5, 1998
February 4, 1999
Februar,t 5, 1998
$20,983 million
M1~mum ~id amount ........... $10,000
Multiples .................... $1,000
Submission of Bids:
Noncompetitive bids ••......... Accepted i~ full up to Sl,OOO,OOO at the
average discount rate of accepted
competitive bids
Competitive bids ......... (1) Must be expressed as a discount rate with
three decimals, in increments of .005t,
e.g., 7.100t, 7.105%.
(2) Net longpo.ition for each bidder must be
reported ....hen the sum of the total bid
amount, a.t all diacount ratea, and the
net long position is $1 billion or
grea.ter.
(3) Net long position must be determined as
of one h~lf-hour prior to the closing
time for receipt of competitive tenders.
Max~
Recognized Bid
at a single Yield ......... 35% of public offering
tlMimum Award ................ 35\ of public offering
Receipt of Tenders:
Noncompetitive tenders
Prior to 12: 00 noon Eastern Standard
time on auction day
Competitive tenders .......... Prior to 1:00 p.m. Eastern Standard
time on auction day
Paym§Dt
Te~[
with' tender or by charge
to a fundi account at a Federal Reserve
Bank on issue date
................ Full
paym~nt
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
jR IMMEDIATE RELEASE
CONTACT:
Office of Financing
202:"219-3350
anuary 26, 1998
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Term:
91-Day Bill
Issue Date:
Maturity Date:
CUSIP Number:
January 29, 1998
April 30, 1998
9127944U5
RANGE OF ACCEPTED COMPETITIVE BIDS:
DiscOWlt
Race
------
Low 2/
High
Average
5.030%
5.070%
5.070%
Investme..'"lt
Rate 1/
Price
---------5.164,"
------
5.205%
98.729
98.718
5.205\-
9S.718
Tenders at the high discounc rate we=e allotted
96~.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
Tendered
Competitive
Noncompetitive
25,923,617
PUl:)LIC SUBTOTAL
Federal Reservoi!
Foreign Official Inst.
Refunded Maturing
Additional Amounts
TOTAL
Accept.ed
$
1,305,099
1,305,099
27,126,716
6,877,704
3.511,815
3,517,S15
365,100
355,100
o
o
$
5,572,605
31,031,631
l/ Eauivalent coupon-issue yield.
was accepted at rates below the competitive range.
V $lO,OOO
lUt-2171
http!//www.publlcdebureu.gov
$
10,780,6l9
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
)R IMMEDIATE RELEJ:I.5E
LIluary 2 6,
Office of Financing
19 9 8
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Term:
Issue Date:
Maturi ~y Date:
CUSIP NUmber:
192-Day Bill
January 29, 1998
July 30, 1998
91279SAD3
RANGE OF ACCEPTED COMPETITIVE BIDS:
Discount
Rate
-----Low
High
Average
Investms~t
Rate 1/
97.462
97.460
97.460
5.222%
5.227%
5.227%-
5.020'&
5.025%
5.025~
Tenders at the high disccunt rate
AMOUNTS
Price
------
----------
TE~~ERED
we~e
allotted
73%.
AND ACCEPTED (in thousands)
Tender Type
Accepted
Tendered
Competitive
Noncompetitive
$
PUBLIC SUBTOT.n.L
Federal Reserve
Foreign Official Inst.
Refunded Maturing
Additional Amounts
1,239,175
3,479,549
1,239,175
32,480,605
4,718,724
3,045,000
3,O~S,OOO
2,544,600
2,544,6'00
31,241,430
$
o
o
TOT.Z\L
$
38,070,205
Equivalent coupon-issue yield.
RR-2172
http://www.publicdebt.treas.gov
$
10,306,324
DEPARTMENT
OF
THE
TREASURY
NEWS
~178~9~. . . . . . . . . . . . . . . . . . . . . . . . . .. .
............................
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
January 27, 1998
STATEMENT BY TREASURY SECRETARY ROBERT E. RUBIN ON INDONESIA
We welcome the steps taken by the Indonesian government over the last several days to put
in place the reinforced reform program agreed by the IMF on January 15, 1998.
Earlier today the government outlined important steps to strengthen and restructure the
banking system and to establish a framework for a voluntary private sector initiative to help address
the debt burden of the corporate sector.
The United States and the international community as a whole has a strong interest in seeing
Indonesia succeed in restoring financial stability.
-30-
RR-2173
-
Far press releases, speeches, public schedules and official biographies, call our 24.1zour fax line at (202) 622-2040
n
F: P 4. It T i\·T E N'-
0 'F
T
TREASURY
n 1-: T R
F. A S l! R Y
NEWS
OFFICB OF PUBLIC AFFAlB.S. 1500 PENNSYLVANIA AVENUE, N.W•• WASRINGTON, D.C._ 20120 _ (20l) 622..2960
CONTACT:
UNTIL 2:30 P.M.
Ja.nuary 27, 1998
EMB~GOED
Office
0:
Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction ~wo series of Treasury bills totaling approximately $14,500 million, to be issued February 5, 1998. This offering
will result in a paydown for the Treasury of about $1,875 million, as che
maturing publicly beld l3-week and 26-week bills are outstanding in the arnoun~
of $16,367 million. In addition to the maturing 13-week and 26-week bills,
there are $14,778 million of maturing publicly held 52-week bills. The
disposition of this latter amount was announced last week.
In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $14,158 million of the maturing bills. These accounts are considered to hold $7,953 million of the maturing 13-week and 26-week issues, which
may be refunded at the weighted average discount rate of accepted competitive
tenders. Amounts issued to these accounts will be in addition to the offering
amount.
Federal Reserve Banks hold $4,098 million of the maturing bills as agents
fo: foreign and international monetary authorities. ~h.s. may be refunded
within the offering amount at the weighted average discount rate of accepted
competitive tenders. Additional amounts may be issueo for such accoun~s if the
aqqregate amount of new bids exceeds the aggregate amount of maturing bills.
For purposes of oetermining such additional amoun~s, foreign and international
monetary authorities are considered to hold $2,488 million of the original
13-week and 26-week i33ue$.
Tender3 for the bills will be receiveo at Federal Reserve Banks and
Branches and a~ the Bureau of the Public Debt, Washington, D. C. This offering
of Treasury seeuri~ies is governed by the terms and conditions se~ forth in ~he
Onifor.rn Offering Circular (31 CFR Part 356, as amended) 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
RR-2174
For press relellses. ,p••ches. public schedules a.nd official biocraphies, CQII our 14-laour flQ: litle at (202) 622-2040
HIGHLIGHTS O~ TRBASURY OFFE~NGS OF WEEKLY BILLS
1'0 BE ISSUED FEBRUARY 5, 1998
January 21, 1998
Offering Amount ................••........•.. $7,250 million
Description of Offering:
Term and type of 8ccurity •.....•.•..•.......
CUSIP number ................................
Auction date ...................•.•....•.....
Issue date .....................•.••.........
Maturity date .............•...•.••....•.•...
Original issue date .......•.•.••••..........
Currently outstanding ....•..•.•.•...•..•••..
Minimum bid amount ........•...••.......•.•••
Multiples ......................•............
The
fol~owing
$7,250 million
91-day bill
912794 6N 9
February 2, 1998
February 5, 1998
May 7, 1998
November 6, 1991
$10,979 million
182-day bill
912195 AE 1
February 2, 1996
February 5, 1998
August 6, 1998
February 5, 1998
~10,OOO
$10,000
.$ 1,000
.$ 1,000
rules apply to all securitiea mentioned above:
Submission of Bids:
Noncompetitive bids ..............•.......... Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids.
Competitivo bids ...•........................ C1)
Must be expressed as a discount rate with three decimals in
increments·of .005%, e.g., 7.100%, 7.105\.
C2)
Net loog 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 $1 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 Recognizod Bid
~t a Single Yield ...........•............ 35% of public offering
Maximum Award ............................... 35% of public offerin'l
Rece~ of Tenders:
•
Noncompetitive tenders ......•............... Prior to 12:00 noon Eastern Standard time on auction day
Competitive tenders ....•..•...•.......•..... Prior to 1:00 p.m. Eastern Standard time on auction day
Pd~lent
Terms ............................... Full payment with tender or by charge to a funds account
at a Federal Reserve Bank on issue date
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
January 27, 1998
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 2-YEAR NOTES
Interest Rate:
Series:
CUSIP No:
STRIPS Minimum:
5 3/8%
Y-:2000
Issue Date:
Dated Date:
Maturity Date:
9128273U4
$1,600,000
High Yield:
Price:
5.440%
February 02, 1998
January 31, 1998
January 31, 2000
99.878
All noncompetitive and successful competitive bidders were awarded
securities at the high yield. All tenders at lower yields were
accepted in full.
Tenders at the high yield were allotted
51%.
Accrued interest of $ 0.29696 per $1,000 must be paid for the period
from January 31, 1998 to February 02, 1998.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered
Tender Type
Competitive
Noncompetitive
$
PUBLIC SUBTOTAL
Federal Reserve
Foreign Official Inst.
TOTAL
$
32,756,525
1,016,828
Accepted
$
33,773,353
15,004,038
1,065,730
1,380,000
1,065,730
1,380,000
36,219,083
$
Median yield
5.424%: 50% of che amounc of accepted competitive
tenders was tendered at or below that rate.
Low yield
5.380%:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
http://www.publkdebt.trea5.gov
RR-2175
13,987,210
1,016,828
17,449,768
From: TREASURY PUBLIC AFFAIRj
: 20009
n
E P .\ I~ T ;\1 E N T
0 F
TilE
1REASURY.)
3-12-9B 3:32pm
T R F .\ S l
i
p. 4 of 11
I{ Y
NEW S
#789
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C.• 20220. (202) 622.2960
EMBARGOED UNTIL lOAM. EST
Text as Prepared for Delivery
January 28, 1998
TREASURY SECRETARY ROBERT E. RUBIN'
SENATE FINANCE COMMITI'EE
Mr. Chairman. distinguished members of this Committee, it is a pleasure to speak with you
today. Soon after becoming Secretary of the Treasury, I began to see that the IRS was greatly in
need of change. JuSt as many of you in this committee have been strongly focused on IRS reform.
I became involved out of my concern that there were deep problems at the IRS, problems that
developed over years, even decades, and problems that will take years to fully solve. The phones
weren't being answered, the computers didn't work, and American taxpayers were too often
being treated improperly and too seldom getting appropriate service. As a consequence, we
started a highly intensified process of reform and change about two years ago. Though we have
begun to make progress in some areas, there is an enonnous challenge ahead including
internalizing the commitment to change and reform. We must all work together constructively to
meet this challenge.
Many have already contributed to the irreve, ~ible process of change under way at the IRS.
We at Treasury are committed to continuing to provide our full assistance and support. The VicePresidenfs National Performance Review, in conjunct;on with Treasury and the IRS. produced an
important set of recommendations on customer servJce. T:le Commission on IRS Restructuring.
co-chaired by Senator Kerrey of this Committee a..- 1 Con pressman Portman, has been an
important forum for analysis and an effective catalyst .t::':)r IRS reform. And this Committee, in its
hearings last faJI, brought to light serious anq lntoh'able "buses at the IRS -- abuses that have
now been vigorously explored in the IRS' two re' ~nt repo,-ts, and win be further explored in one
report not yet completed.
I am deeply troubled by the reports' conclu~,.,n that the inappropriate use of enforcement
statistics has put taxpayer rights in jeopardy in districts arr:und the nation. This is an unacceptable
situation and strong steps have been taken by the IRr; to ~nd this practice. We at Treasury and
Commissioner Rossotti are committed to fundament~lly Changing the agency to one that respects
RR-2176
For press releases, speeches, public schedules and oJficial biographies. call our 24-hour fax line at (202) 622-2040
~
--
From: TREASURY PUBLIC AFFAIRS
: 20009
3-12-98
3:33pm
p. 5 of 11
taxpayer rights while collecting the taxes due. And in recent months. signjficant steps have been
taken to address these problems, including stopping the use of revenue goals in field offices,
beginning to develop a new set of performance measures that address customer service and
taxpayer rights, establishing more independent reviews of each district's compliance with the
taxpayer bill of rights, and initiating monthly Problem Solving Days.
Despite the many. far-reaching problems, and fully recognizing the immensity of the
challenge. I think there is good reason to expect substantial progress in the years ahead. The IRS
is now guided by the firm hand of its new Commissioner, Charles Rossotti -- an individual quite
unlike any previous Commissioner - who brings with him 28 years of private sector management
experience in the area of information tecMology and who has already begun to bring changes at
the IRS. Our reform efforts over the past two years - in addition to producing Commissioner
Rossotti - have resulted in setting technology on a new course, increased electronic filing and
telefiling, and imprOVed telephone service. The GAO recently released a report that praised the
IRS' perfonnance during the 1997 filing season, citing "substantial improvement" in two critica1
areas: telephone accessibility and the use of alternative filing methods. And the legislation passed
with bipartisan support in the House last November promises to help bring the IRS into a new era.
Congress can continue to contribute vitally to reforming the IRS through adequate
funding. effective oversight. and, most immediately. through passing the bill passed by the House
as soon as possible.
This bill contains important measures that will help build the IRS we all want to see:
o
it provides for increased continuity and leadership at the IRS, by providing that the
Commissioner serve a fixed five-year term, and it provides a range of personnel
management reforms, although we would like to go further in improving managerial
flexibility in selecting and managing personnel;
o
it contains additional steps to strengthen taxpayer rights, including many of the President's
taxpayers' rights proposals announced last year;
o
it has important measures to expand.electronic filing, which will decrease paperwork,
llJcrease efficiency, and save money;
.
;~~ally, the bill contains new govemaflce arrangements providing for valuable input from
the private sector and effective outside oversight, while maintaining the authority and
.. ccountability with respect to the IRS within the existing structure of the federal
government, with the on-going oversight and synergies that that can provide. We would
also recommend semi-annual testimony be required of the Secretary and Deputy Secretary
of the Treasury, on the IRS, to use public accountability to see to it that future Secretaries
. ~ Deputy Secretaries take their responsibiJjties with respect to the IRS with the greatest
serious;.ess.
2
From: TREASURY PUBLIC AFFAIRj
3-12-98 3:34pm
p. 5 of 11
In short, Mr. Chainnan. this bilJ will help continue the process of change at the IRS in the
months and years ahead, including an intense focus on eliminating the abuse of taxpayers that has
been brought to light in recent months. It is clear that the IRS must focus more on taxpayer rights
and quality customer service, while at the same time collecting the revenue due. In that regard,
we must remember that those who cheat on their taxes increase the burden on all the rest of us.
Mr. Chainnan, m.S refonn is an issue of immense national importance, and one which we
take with the utmost seriousness. We can debate whether to continue with the current
progressive income tax system, or change to some other system., but we should not let that debate
affect our support for the absolutely vita1 task of serving the American taxpayer and collecting the
revenue due. OUf society depends on effective tax collection to fund 9S percent of the services of
the Federal Government, from defense to Social Security, and there are large numbers of hardworking employees at the IRS who are committed to doing the job properly - as was
demonstrated to me when I visited one regional office on the first nationwide Problem Solving
Day last November.
The new m.s will need to be the work of many hands. As we go forward we must an
work together in a constructive spirit in helping the IRS meet the many serious challenges it faces,
including each years tax collection, the fundamental transformation now underway, and dealing
with the year 2000 conversion, a subject which I know is of particular interest to members of the
Committee.
I believe that in Charles Rossotti we have a Commissioner who both symbolizes the
transfonnation under way and is exceedingly well-suited to provide transforming leadership. He
needs your constructive engagement to get the required tools - and I believe an important step
would be to adopt IRS refonn legislation that will shortly be before you. I look forward to
working with you, Mr. Chairman, the members of this Committee, the men and women of the
IRS, the National Treasury Employees' Union, and all other interested parties as we take the steps
necessary to transform the IRS into and institution that meets the needs of the American people. I
would now welcome any questions.
-3()~
TOTHL F'.
0~,
DEPARTMENT
lREASURY
OF
THE
TREASURY
NEWS
omCE OF PUBliC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASlllNGTON, D.C. - 20220 - (202) 622·2960
EMBARGOED UNTIL 10 A.M. EST
Text as Prepared for Delivery
January 28, 1998
NOMINATION OF DONALD C. LUBICK
AS TREASURY ASSISTANT SECRETARY FOR TAX POLICY
SENATE FINANCE COMMITTEE
Mr. Chairman, Senator Moynihan, Members of the Senate Finance Committee:
I am deeply honored to appear before this committee for the second time in my life as the
president's nominee to serve as Assistant Secretary of the Treasury for Tax Policy. I am grateful
to President Clinton and Secretary Rubin for this opportunity. Few persons ever are so fortunate
as to be nominated for this position - I believe I am the only one to be doubly blessed.
Actually, this is the third time for me to represent the Treasury in close dealings with the Senate
Finance Committee. From 1961 through 1964, I headed the Treasury's legal staff under Assistant
Secretary Stanley Surrey and had the chance to associate closely with Senators John Williams,
Thruston Morton, Harry Byrd, Robert Kerr, Russell Long and many others. In my tenure from
1977 through the beginning of 1981, I enjoyed a close relationship with you, Mr. Chairman,
Senator Moynihan, Senator Chafee and Senator Baucus, as well as Senators Long, Dole,
Packwood, Danforth and many other of your illustrious predecessors. The collegial atmosphere of
this Committee has always provided a unique experience for the Treasury's emissary and one that
has always provided an exhilaration that cannot be duplicated.
Regardless of differences of opinion between the administrations I have represented and Members
of the Committee, the experience of being part of the best governmental process the world has
offered has always been awesome for a small city lawyer from upstate New York.
This is a time when we shall engage in great debate on how we raise the revenue for the conduct
of our government. The decisions debated by this committee are momentous ones. We all want
to raise that revenue as fairly and simply as possible and to contribute to the efficiency of the
world's greatest economy. It is a real privilege to be here before you today and I look forward to
answering your questions.
-30RR-2177
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
DEPARTMENT
OF
THE
TREASURY
NEWS
ornCE OFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
January 28, 1998
Contact: Beth Weaver
(202) 622-2960
TREASURY ANNOUNCES NEW FLETC DIRECTOR
Treasury Secretary Robert E. Rubin announced today the appointment ofW. Ralph
Basham, a career U.S. Secret Service agent, as Director of the Federal Law Enforcement Training
Center (FLETC). Mr. Basham will begin his service on February 15, 1998.
"Throughout Ralph Basham's career, the Secret Service has benefitted enormously from
his integrity, intellect and commitment to duty," said Secretary Rubin. "I am pleased that he is
bringing these same qualities to the Federal Law Enforcement Training Center where he can
provide the leadership necessary to train our law enforcement officers."
The FLETC, located in Glynco, Georgia and Artesia, New Mexico, provides training for
nearly all the nation's federal law enforcement officers. In addition, the FLETC serves the state,
local and international law enforcement communities with training programs tailored to their
specific needs.
A graduate of Southeastern University, Basham began his 27-year tenure with the Secret
Service in 1970 as a Special Agent assigned to the Washington Field Office. He has served as the
Special Agent in Charge of the Cleveland Field Office, Special Agent in Charge of the
Washington Field Office, Special Agent in Charge of the Vice Presidential Protective Division,
Deputy Assistant Director of the Office of Training and most recently as the Assistant Director of
the Office of Administration.
Basham is married to the former Judith A O'Bryan of Owensboro, KY and has 3 children.
-30-
RR-2178
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4\
PUBLIC DEBT/WASH DC
Fax:202-219-3365
Jan 28 '98
P.Ol
14:08
PUBLIC DEBT NEWS
Department of the Treasury. Bureau of the Pub1ic Debt • Washington, DC 20239
'tREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
January 28, l.99 8
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 5-YEAA NOTES
Interest Rate:
Series:
Issue Date:
Dated Dace:
Maturity Date:
5 1/2\"
C-2003
CUSIP No;
9128273v2
STRIPS Minimum: $400,000
High Yield:
5.558%
Price:
February 02, 1998
January 31, 1998
January 31, 2003
99.74-9
All noncompetitive and successful competitive bidders were awarded
securities at the high yield. All tenders at lower yields were
accepted in full.
Tenders at the high yield were allotted
25\.
Accrued incerest of $ 0.30387 per $1,000 must be paid for· the period
from January 31, 1998 to February 02, 1999.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered
Tender Type
Competicive
Noncompetitive
$
PtmI..oIC SUBTOTAL
Federal Reserve
Foreign Official Inst.
TOTAL
Accepced
396,760
:lO,60l,1S0
396,180
22,612,281
11,ClOO,S30
785,000
78S,000
1,300,000
22,415,501
$
1,300,000
$
24,897,261
$
Median yield
5.530%: 50~ of the amount of accepted competitive
was tendered at or below that ra~e.
:~ders
Low yield
5.480\-:
5t of the amount of accepted competitive
:enders was tendered at or below tha~ rate.
RR-2179
http://www.pubUcdebLtrea.t..lOv
J.3,OSS,S30
D EPA R T 1\1 E N T
0 F
THE
IREASURY!~
\~
T REA SUR \'
NEW S
~/78~q. . . . . . . . . . . . . ._
. . . . . . . . . . . . . .
OmCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE.. N.W .• WASIDNGTON. D.C.. 20220. (202) 622·2960
EMBARGOED UNTIL 2 P.M. EST
Text as Prepared for-Delivery
January 29, 1998
TREASUR Y UNDER SECRETARY FOR DOMESTIC FINANCE
JOHN D. HAWKE, JR .
. SENATE BANKING. HOUSING. AND URBAN AFFAIRS
SUBCOM"MITTEE ON SECURITIES
I am pleased to appear before the Senate Subcommittee on Securities to discuss the
Treasury Department's views on "circuit breakers" -- the name commonly given to coordinated
trading halts in the equity and equity-derivative markets that are required when large price moves
of predetermined magnitude occur. We believe that the leadership this Subcommittee has
provided on this important issue concerning the functioning of our financial markets in time of
crisis has served to focus the attention of interested parties in a very constructive way.
The subject of circuit breakers is not free from controversy. There are sharply differing
views as to whether the triggering of a trading halt would have a beneficial effect when there is a
major decline in equity prices. At the outset, therefore. it may be useful to frame the discussion of
circuit breakers by briefly summarizing the arguments pro and con.
Those who believe that circuit breakers are appropriate make the following points:
•
They provide a pause during which market participants can assess what is
happening and during which value investors can reflect on the potential bargain
prices being offered without the distraction of a fast moving market.
•
They potentially avert the possibility of breakdowns in market infrastructure, such
as communication and computer systems. whose utilization may be at or near
capacity.
RR-21S0
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•
They may relieve payment system, collateral. and margin problems by giving
market participants time to make appropriate arrangements to meet their
obligations.
•
They substitute an orderly and defined halt to all trading for potentially disruptive
ad hoc trading halts that result in unplanned, partial market closes. Such ad hoc
halts -- due, for example. to large order imbalances -- could exacerbate pressure on
those markets that remain open.
On the other hand,-those who-believe that-circuit-breakers-are inappropriate suggest that:
•
During trading halts, pressures may build that will exacerbate market conditions
when trading is allowed to resume. In other words, the pause may serve simply to
dam up and thereby increase selling pressure rather than to bring more buyers into
the market.
•
Trading halts can create uncertainty about what is happening, especially for those
off the trading floor, since during the halt no current market price information is
available and information concerning buy, sell, and limit orders that may be sent to
the floor during the halt is not generally available.
•
Circuit breakers may exert a "magnet" effect as prices begin to approach the
trigger levels, accelerating falling prices as market participants rush to liquidate
positions before a trading halt is triggered.
•
Trading halts deny market participants access to the market at a time when they
may need it most to adjust their position-s in response to the dramatic changes in
market conditions and the general economic environment.
•
Trading halts that prevent the market from closing at the regular time may create
additional uncertainty and contribute to disruption in foreign markets.
There is weight to the views on each side, and there is no clear consensus. It seems
beyond dispute. however. that any attempt to engineer rules to prevent the market from reaching
its natural level is doomed to fail In any event. as the market self-regulatory organizations and
their regulators deliberate the appropriateness of changes to the current rules relating to circuit
breakers. we believe the following principles should guide those deliberations:
( I)
There should be a clearly articulated and compelling rationale set
forth as to the purposes and objectives of the circuit breakers being
proposed
2
(2)
Coordinated trading halts should only be triggered by extraordinary
market declines.
(3)
The duration of any trading halts should be brief
(4)
The rules under which trading halts are triggered should be simple and
clearly defined.
(5)
There should be a strong preference for allowing the primary cash markets
- to close-at the-normal time-and-at market-determined prices, rather than
prematurely, at prices that have triggered a trading halt.
Against the background of these principles, it may be instructive to review why the
President's Working Group on Financial Markets originally proposed coordinated trading halts, as
well as developments since their adoption
Circuit breakers were one of the reforms implemented in reaction to the stock market
decline of October 19, 1987, a day that the Dow Jones Industrial Average ("Dow") fell by a
record 22.6%. This percentage decline in the Dow exceeded by a large margin the previous
record one-day fall, the 12.8% decline on October 28, 1929.
The historic drop in October 1987 gave rise to numerous studies and to the creation of the
President's Working Group on Financial Markets, which is chaired by the Secretary of the
Treasury. The Working Group submitted a report to the President in May 1988, which
recommended, among other measures, the establishment of coordinated trading halts in the
exchange-traded equity and equity-derivative markets. The recommended trigger points for these
circuit breakers were 250 and 400 point declines in the Dow, with a first halt of one hour and a
second halt of two hours. These were subsequently adopted. At the time of the recommendation,
these trigger points represented movements in the Dow of approximately 12 and 20 percent,
respectively.
The basis for the Working Group's recommendation for coordinated trading halts was the
view that this type of automatic halt was preferable to "unplanned, ad hoc trading halts," which
would otherwise likely take place during dramatic market events and which would have the
potential to be destabilizing.
In the May 1988 report, the Working Group also recommended that these trigger points
"be reviewed at least quarterly to determine if changes in index levels necessitate changes to these
triggers in order to maintain percentages approximately equivalent to 12% and 20%." However,
it was not until January 1997 that the trigger points were increased from 250 and 400 Dow points
to the current 350 and 550 points, which at that time represented approximately 5.2% and 8.2%
declines in the Dow, respectively. At current market levels, these point declines would represent
3
moves of approximately 4.5% and 7%. The duration of the halts was also reduced in 1997 to 30
minutes and one hour, respectively.
The current focus on circuit breakers was prompted by their being triggered for the first
time on October 27, 1997, just 10 years after the 1987 market fall. On that day last October, the
350-point 30-minute circuit breaker was triggered at 2:35 pm. After the market reopened at 3:05
pm, it took just 25 minutes for the second 550-point circuit breaker to be tripped at 3 :30 pm.
which closed the market fo~ the rest of the day. The market's premature close was thus caused by
a 7.2% decline, which, while significant, was well below the 12% and 20% levels that the original
Working Group proposal had contemplated.
Many market participants and observers have expressed dissatisfaction with this first
experience with circuit breakers. While there were no major operational problems on October 27,
1997, or on subsequent trading days, many believe that the circuit breakers were triggered by
point moves that were much too small, given the level of the Dow. Also, given the rapidity with
which the market hit the second circuit breaker, many believe that the second breaker had a
"magnet" or "gravitational" effect, accelerating the decline as market participants hurried to sell
their positions before the market closed again.
The President's Working Group on Financial Markets, at the request of Chairman Gramm
and Ranking Member Dodd, is currently reviewing this recent experience with circuit breakers.
Our analysis of that day's events has not been completed. Nevertheless, the stock market's
performance on October 27 was not an event of the magnitude that the Working Group originally
envisioned as requiring an automatic cessation of trading.
The rise in the level of the stock market over the past 10 years would be reason enough to
increase significantly the point drops that trigger the circuit breaker trading halts. There is
another reason, however, for increasing the trigger levels. In 1987, the market infrastructure was
severely strained by the volume of trading that was experienced. Under these circumstances, a
trading haft might have been justified simply to allow the markets to keep pace with the flow of
the workload. Today, the stock market is far better equipped to handle large market moves
accompanied by high trading volume, due to the impressive increase in system capacity that has
occurred over the past decade.
In October 1987, the New York Stock Exchange's theoretical capacity was 440 million
shares per day, about 2.3 times the average daily volume on the NYSE in 1987. On October 19
and 20, 1987, volume on the NYSE exceeded theoretical capacity, with more than 600 million
shares changing hands on each of those two days This led to system problems and information
gaps when it was impossible for anyone not on the trading floor to know the price at which the
last trade in a particular stock was transacted.
By contrast, the NYSE's current capacity is 2.5 to 3 billion shares per day, or about five
times the average daily volume. At the peak volume in message traffic on October 28, 1997,
4
system capacity was approximately double actual usage Unlike the situation in October 1987.
there were no reporting delays.
This increased system capacity. a result of the heavy investment the NYSE has made in
technology. for which the Exchange should be commended. means that one of the reasons given
by the Working Group in 1988 for planned trading halts -- the potential for system breakdowns -is less compelling today While problems are of course still possible. the increased capacity means
that system breakdowns at the NYSE are less likely than they were a decade ago
The- New York Stock Exchange-reportedly--will censider-next week a proposal that would
reset the circuit breaker trigger points twice a year at a fixed number of points representing 10%
and 20% of the market level Under this proposal, a 10% fall in the Dow prior to 1:OOpm would
trigger a one hour halt in trading. If such a fall occurred between 1:00pm and 2:30pm. the halt
would be limited to 30 minutes. and if it occurred after 2 30pm it would shut the market for the
remainder of the day. A 20% fall would close the market for the day whenever it occurred.
The Treasury Department would view the proposed changes in the trigger points as an
improvement over the current rule. but we believe other aspects of the proposal are inconsistent
with the principles we have described. The rationale for doubling the duration of the first trading
halt. returning to the 1988 formulation. is not clear. Since we have had a recent occasion on
which a 30-minute halt was triggered by the first breaker. it is reasonable to expect that a proposal
for such an increase would be accompanied by a compelling factual case, grounded in actual
experience. justifying such a lengthening of the halt. Beyond this, we would have substantial
concerns about any rule that would result in a complete shutdown of the market. precluding a
normal closing perhaps many hours before the scheduled close. We would urge that the most
careful thought be given this proposal. including not only an analysis of the effects on market
participants, but on public confidence in the market and on the potential spillover effects on
foreign markets as well.
As our suggested principles indicate. we believe that a conventional market close, set by
the clock. is preferable to a close prematurely triggered by a price limit. A conventional close
enables mutual funds to use real market prices to calculate their net asset values, provides real
benchmarks for portfolio managers. lessens the disruptive impact on foreign markets, and does
not cause problems with respect to contracts that key off closing prices for valuing securities,
such as those under which business combinations are carried out. Such a result could be achieved
if the circuit breaker rules were written so as to permit the markets to be open for at least the hour
before the scheduled close.
The Treasury also believes that not only the circuit breaker rules but the "collar" and
"sidecar" rules need to be revised or eliminated. The collar rule, which is activated by a 50-point
move in the Dow, up or down. restricts all index arbitrage orders, whether entered into the
NYSE's computerized order system ("SuperDot") or brought manually to the specialists' posts,
to execution on a plus or zero-plus tick in down markets or on a minus or zero-minus tick in up
5
markets The sidecar rule delays for five minutes the transmission of all program trades entered
into SuperDot when the S&P 500 futures contract has declined 12 points (approximately 100
Dow points) These rules have the effect of slowing down arbitrage between the futures and cash
markets by effectively throwing sand in the gears The collar rule has become particularly
inappropriate~ given that a 50-point move in the Dow, up or down, is currently a frequent
occurrence, this rule is now activated more times than there are trading days These rules have
nothing to do with mitigating the fallout from a dramatic market situation, and they should be
reconsidered.
We appreciate- the-opportunity· this-Subcommittee-has-provided-to present our views on
this important topic
-30-
0
<D
(j)
C\J
federal financing
WASHINGTON. D.C. 20220
FEDERAL FINANCING BANK
s
N
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N
0
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N
N
</)
</)
~
CL
Charles D. Haworth, Secretary, Federal Financing Bank (FFB),
announced the following activity for the month of December 1997.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $49.1 billion on December 31,
1997, posting an increase of $1,653.3 million from the level on
November 30, 1997. This net change was the result of an increase
in holdings of agency debt of $1,755.2 million, and a decrease in
holdings of agency guaranteed loans of $101.9 million. FFB made
88 disbursements during the month of December.
In addition, FFB
repriced seven RUS-guaranteed loans, and extended the maturity of
123 RUS-guaranteed loans.
FFB also received 53 prepayments in
December.
2R-2:31
l!)
~
C\J
<D
January 29, 1998
Attached to this release are tables presenting FFB December
loan activity and FFB holdings as of December 31, 1997.
0
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en
LL
LL
Page 2 of
FEDERAL FINANCING BANK
DECEMBER 1997 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
$151,500,000.00
$500,000,000.00
$25,000,000.00
$50,000,000.00
$2,625,000,000.00
$83,300,000.00
$25,000,000.00
$50,000,000.00
$2,525,000,000.00
$42,900,000.00
$2,325,000,000.00
$75,000,000.00
$50,000,000.00
$10,800,000.00
$2,225,000,000.00
$50,000,000.00
$2,100,000,000.00
$50,000,000.00
$1,900,000,000.00
$25,000,000.00
$7,200,000.00
$25,000,000.00
$1,575,000,000.00
$47,000,000.00
$1,375,000,000.00
$25,000,000.00
$89,300,000.00
$1,150,000,000.00
$25,000,000.00
$56,000,000.00
$25,000,000.00
$1,900,000,000.00
$50,000,000.00
$70,900,000.00
$25,000,000.00
$50,000,000.00
$2,250,000,000.00
$87,000,000.00
$25,000,000.00
$50,000,000.00
$2,075,000,000.00
$1,925,000,000.00
12/2/97
2/17/98
12/2/97
12/2/97
12/2/97
12/3/97
12/3/97
12/3/97
12/3/97
12/4/97
12/4/97
12/4/97
12/4/97
12/5/97
12/5/97
12/5/97
12/8/97
12/8/97
12/9/97
12/9/97
12/10/97
12/10/97
12/10/97
12/11/97
12/11/97
12/11/97
12/12/97
12/12/97
12/12/97
12/15/97
12/15/97
12/15/97
12/15/97
12/16/97
12/16/97
12/16/97
12/16/97
12/17/97
12/17/97
12/17/97
12/17/97
12/18/97
INTERESTRATE
AGENCY DEBT
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
S/A is a Semi-annual rate.
12/1
12/1
12/1
12/1
12/1
12/2
12/2
12/2
12/2
12/3
12/3
12/3
12/3
12/4
12/4
12/4
12/5
12/5
12/8
12/8
12/9
12/9
12/9
12/10
12/10
12/10
12/11
12/11
12/11
12/12
12/12
12/12
12/12
12/15
12/15
12/15
12/15
12/16
12/16
12/16
12/16
12/17
5.520%
5.340%
5.340%
5.340%
5.340%
5.509%
5.395%
5.395%
5.395%
5.509%
5.384%
5.384%
5.384%
5.519%
5.384%
5.384%
5.394%
5.394%
5.423%
5.423%
5.520%
5.415%
5.415%
5.457%
5.395%
5.395%
5.446%
5.332%
5.332%
5.433%
5.321%
5.321%
5.321%
5.478%
5.308%
5.308%
5.308%
5.478%
5.353%
5.353%
5.353%
5.353%
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
Page 3 of 8
FEDERAL FINANCING BANK
DECEMBER 1997 ACTIVITY
DATE
BORROWER
AMOUNT
OF ADVANCE
FINAL
MATURITY
$50,000,000.00
$25,000,000.00
$1,800,000.00
$1,675,000,000.00
$50,000,000.00
$30,100,000.00
$1,425,000,000.00
$50,000,000.00
$25,000,000.00
$62,700,000.00
$1,350,000,000.00
$25,000,000.00
$1,025,000,000.00
$50,000,000.00
$900,000,000.00
$5,400,000.00
$50,000,000.00
$1,700,000,000.00
$5,300,000.00
$2,075,000,000.00
$25,000,000.00
$50,000,000.00
$77,100,000.00
$1,950,000,000.00
$25,000,000.00
$216,400,000.00
$1,700,000,000.00
$50,000,000.00
$25,000,000.00
12/18/97
12/18/97
12/19/97
12/19/97
12/19/97
12/22/97
12/22/97
12/22/97
12/22/97
12/23/97
12/23/97
12/23/97
12/24/97
12/24/97
12/26/97
12/29/97
12/29/97
12/29/97
12/30/97
12/30/97
12/30/97
12/30/97
12/31/97
12/31/97
12/31/97
1/2/98
1/2/98
1/2/98
1/2/98
5.353%
5.353%
5.488%
5.374%
5.374%
5.579%
5.363%
5.363%
5.363%
5.706%
5.454%
5.454%
5.581%
5.581%
5.581%
5.600%
5.508%
5.508%
5.696%
5.475%
5.475%
5.475%
5.696%
5.571%
5.571%
5.612%
5.571%
5.571%
5.571%
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
9/2/25
7/31/25
4/1/99
4/1/99
4/1/99
1/2/25
4/1/99
6.153%
6.153%
5.695%
5.682%
5.682%
6.073%
5.708%
S/A
S/A
S/A
S/A
S/A
S/A
S/A
INTEREST
RATE
AGENCY DEBT
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
U.S.
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
12/17
12/17
12/18
12/18
12/18
12/19
12/19
12/19
12/19
12/22
12/22
12/22
12/23
12/23
12/24
12/26
12/26
12/26
12/29
12/29
12/29
12/29
12/30
12/30
12/30
12/31
12/31
12/31
12/31
;OVERNMENT - GUARANTEED LOANS
GENERAL SERVICES ADMINISTRATION
Atlanta CDC Office Bldg.
Foley Services Contract
Chamblee Office Building
Chamblee Office Building
Chamblee Office Building
Memphis IRS Service Cent.
Chamblee Office Building
S/A is a Semi-annual rate.
12/12
12/12
12/18
12/19
12/19
12/19
12/29
I
$765.78
$157,582.64
$3,698.77
$207,950.04
$3,303,645.40
$16,201.31
$23,333.79
Page 4 of
FEDERAL FINANCING BANK
DECEMBER 1997 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST"RATE
GOVERNMENT - GUARANTEED LOANS
GSA/PADC
ICTC Building
12/19
$5,546,334.49
12/1
12/1
12/1
12/5
12/18
12/23
12/23
12/23
12/23
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
$41,082,000.00
$4,367,000.00
$289,000.00
$1,000,000.00
$4,000,000.00
$3,100,000.00
$3,456,000.00
$693,000.00
$751,000.00
$3,456,540.60
$1,258,499.64
$1,007,378.63
$5,154,543.80
$1,775,936.96
$937,324.57
$2,868,143.00
$4,147,607.01
$1,346,140.21
$1,654,302.06
$4,574,354.51
$4,427,996.85
$5,550,069.75
$4,008,897.48
$613,107.85
$35,049.72
$61,097.36
$414,640.32
$18,661. 71
$5,550,464.15
$4,962,347.60
$1,781,031.76
$5,584,374.92
$3,715,464.00
$2,912,668.92
11/2/26
6.073% S/A
3/31/98
3/31/98
12/31/29
12/31/31
12/31/29
12/31/19
12/31/24
12/31/24
12/31/24
6/30/98
6/30/98
6/30/98
6/30/98
6/30/98
3/31/98
3/31/98
3/31/98
6/30/98
6/30/98
6/30/98
6/30/98
6/30/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
5.408%
5.408%
6.122%
7.466%
5.952%
5.954%
5.977%
5.977%
5.977%
5.574%
5.574%
5.574%
5.574%
5.574%
5.446%
5.446%
5.446%
5.574%
5.574%
5.574%
5.574%
5.574%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
RURAL UTILITIES SERVICE
Basin Electric #425
Brazos Electric #437
Central Power Elec. #451
Canoochee Elec. #461
Central Iowa Power #442
Coop. Power Assoc. #450
South Texas Electric #463
South Texas Electric #463
South Texas Electric #463
*Allegheny Electric #255
*Allegheny Electric #255
*Allegheny Electric #255
*Allegheny Electric #255
*Allegheny Electric #255
*Allegheny Electric #908
*Allegheny Electric #908
*Allegheny Electric #908
*Allegheny Electric #908
*Allegheny Electric #908
*Allegheny Electric #908
*Allegheny Electric #908
*Allegheny Electric.#908
*Arkansas Elec. #920
*Arkansas Elec. #920
*Arkansas Elec. #920
*Arkansas Elec. #920
*Arkansas Elec. #920
*Arkansas Elec. #920
*Arkansas Elec. #920
*Arkansas Elec. #920
*Arkansas Elec. #920
*Arkansas Elec. #920
*Arkansas Elec. #920
*Arkansas Elec. #920
S/A is a Semi-annual rate:
Qtr. is a Quarterly rate.
* maturity extension or interest rate reset
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page 5 of 8
FEDERAL FINANCING BANK
DECEMBER 1997 ACTIVITY
30RROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
;OVERNMENT - GUARANTEED LOANS
RURAL UTILITIES SERVICE
·Arkansas Elec. #920
·Arkansa~ Elec. #920
·Arkansas Elec. #920
·Arkansas Elec. #920
·Arkansas Elec. #920
·Arkansas Elec. #920
·Arkansas Elec. #920
•Arkansas Elec. #920
·Brazos Electric #917
·Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
·Brazos Electric #917
·Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
·Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
·Brazos Electric #917
*Brazos Electric #917
·Brazos Electric #917
·Brazos Electric #917
·Brazos Electric #917
·Brazos Electric #917
·Brazos Electric #917
·Brazos Electric' #917
tBrazos Electric #917
tBrazos Electric #917
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
$4,256,102.19
$2,597,596.02
$2,832,853.79
~4,093,999.25
$5,948,306.55
$3,929,836.15
$4,368,701.91
$3,367,102.70
$3,948,947.98
$3,689,773.03
$1,331,909.24
$1,638,841.57
$403,582.75
$930,888.24
$1,215,451.62
$809,414.32
$465,369.69
$445,493.02
$870,046.42
$276,302.76
$1,038,713.65
$2,044,700.85
$334,952.76
$99,290.93
$243,095.52
$325,809.57
$609,037.67
$3,041,484.15
$1,154,405.90
$172,551.16
$58,580.22
$726,477.81
$896,524.19
$2,437,649.22
$487,267.61
$4,960,982.61
$1,140,063.12
$2,284,661.30
$22,940,483.90
Qtr. is a Quarterly rate.
t maturity extension or interest rate reset
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3131/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.483%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr .
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page 6 of !
FEDERAL FINANCING BANK
DECEMBER 1997 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
$670,728.75
$458,873.73
$2,106,059.42
$1,231,163.43
$1,599,685.13
$2,629,963.43
$2,815,087.49
$554,192.86
$17,931.90
$1,835,445.21
$945,469.10
$2,545,424.11
$808,683.47
$3,097,486.30
$4,500,000.00
$4,500,000.00
$4,463,000.00
$3,041,000.00
$1,749,011.47
$1,300,300.72
$8,557,064.61
$1,737,115.27
$411,747.96
$505,132.79
$21,879.40
$3,129,685.19
$2,911,962.12
$3,547,000.00
$1,250,000.00
$62,332,464.18
$15,428,694.74
$14,355,365.42
$5,668,404.27
$9,544,084.14
$6,883,150.03
$7,003,248.57
$5,596,981. 53
$2,914,042.76
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
1/3/17
1/3/17
1/2/18
1/2/18
1/2/18
12/31/18
12/31/18
1/2/18
1/2/18
12/31/07
12/31/07
1/2/18
1/2/18
1/2/18
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
INTEREST
RATE
GOVERNMENT - GUARANTEED LOANS
RURAL UTILITIES SERVICE
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #917
*Brazos Electric #437
*Brazos Electric #437
*Brazos Electric #437
*Brazos Electric #437
@Dairyland Power #054
@Dairyland Power #054
@Dairyland Power #054
@Dairyland Power #054
@Dairyland Power #173
@Dairyland Power #173
@Dairyland Power #173
*Georgia Trans. Corp. #446
*Georgia Trans. Corp. #446
*Johnson County Elec. #428
*Johnson county Elec. #428
*Oglethorpe Power #445
*Oglethorpe Power #445
*Oglethorpe Power #445
*Plains Elec. #918
*Plains Elec. #918
*Plains Elec. #918
*Plains Elec. #918
*Plains Elec. #918
*Plains Elec. #918
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
Qtr. is a Quarterly rate.
@ interest rate buydown
* maturity extension or interest rate reset
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.571%
5.571%
5.571%
5.571%
5.999%
5.999%
6.016%
6.016%
6.016%
6.030%
6.030%
5.893%
5.893%
5.883%
5.883%
5.893%
5.893%
5.893%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page 7 of 8
FEDERAL FINANCING BANK
DECEMBER 1997 ACTIVITY
BORROWER
DATE
AMOUNT
OF ADVANCE
FINAL
MATURITY
INTEREST
RATE
GOVERNMENT - GUARANTEED LOANS
RURAL UTILITIES SERVICE
*Plains Elec. #918
*Plains Elec. #918
*Plains Elec. #918
*South Miss. Elec. #421
*Saluda River Elec. #903
*Saluda River Elec. #903
*Saluda River Elec. #903
*Saluda River Elec. #903
*Saluda River Elec. #903
*Saluda River Elec. #903
*Saluda River Elec. #903
*Saluda River Elec. #903
*San Miguel Electric #919
*San Miguel Electric #919
*Sho-Me Power #913
*Tri-state #439
*Tri-State #440
*Uni ted Power Assoc. #911
*Uni ted Power Assoc. #911
*United Power Assoc. #911
*Uni ted Power Assoc. #911
*Uni ted Power Assoc. #911
*Uni ted Power Assoc. #911
*Uni ted Power Assoc. #911
*Uni ted Power Assoc. #911
*Uni ted Power Assoc. #911
*United Power Assoc. #911
*Uni ted Power Assoc. #911
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
12/31
$868,548.81
$1,576,456.39
$560,556.70
$8,101,010.04
$5,740,837.85
$1,537,375.25
$2,487,004.67
$7,370,949.83
$2,020,086.16
$3,753,922.07
$7,650,690.53
$1,931,428.80
$9,515,381.33
$9,991,261.69
$411,740.95
$10,428,263.25
$13,329,060.91
$872,901.21
$10,474,813.63
$3,386,787.42
$2,853,773.17
$3,387,826.38
$3,606,688.76
$3,997,607.05
$1,120,997.73
$853,147.77
$523,894.89
$1,069,819.81
Qtr. is a Quarterly rate.
* maturity extension or interes.t rate reset
3/31/98
3/31/98
3/31/98
6/30/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
1/2/18
6/30/98
6/30/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
3/31/98
5.446%
5.446%
5.446%
5.574%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.863%
5.574%
5.574%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
5.446%
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page
U ot
!l
FEDERAL FINANCING BANK
(in millions)
ErQg~
Agency Debt:
Export-Import Bank
Resolution Trust Corporation
U.S. Postal Service
sub-total·
Agency Assets:
FmHA-RDIF
FmHA-RHIF
DHHS-Health Maintenance Org.
DHHS-Medical Facilities
Rural utilities Service-CBO
Small Business Administration
sub-total·
Government-Guaranteed Loans:
DOD-Foreign Military Sales
DoEd-HBCU
DHUD-Community Dev. Block Grant
DHUD-Public Housing Notes
General Services Administration +
DOl-Virgin Islands
DON-Ship Lease Financing
Rural utilities Service
SBA-State/Local Development Cos.
DOT-Section 511
sub-total·
grand-total·
.figures may not total due to rounding
+does not include capitalized interest
December 31, 1997
Noyember 30, 1997
$
$
549.3
838.3
2,491.4
3,879.1
Net Change
FY '98 Net Change
l211/97-1ZL1~1
_~L21~12j11L~1
$
551.8
1,051.1
5..2..L...Q
2,123.9
$
-2.5
-212.7
-"14 ') . 2
-536.6
l.......2.1~,A.
_~2.l
1,755.2
-754.0
.. 2
3,675.0
13,530.0
4.4
13.0
4,598.9
.0.........0.
21,821.3
3,675.0
13,530.0
4.4
13.0
4,598.9
0,0
21,821.3
0.0
0.0
0.0
0.0
0.0
0,0
0.0
0.0
0.0
0.0
0.0
0.0
Q.Q
0.0
3,001.6
0.8
34.4
1,491.4
2,426.7
18.7
1,308.1
14,840.5
263.7
3,032.9
0.8
34.5
1,491.4
2,436.1
18.7
1,308.1
14,898.2
267.0
3,9
23,491.7
-31.3
0.0
-0.1
0.0
-9.4
0.0
0.0
-57.6
-3.3
Q.Q
-101.9
-46.7
0.2
-1 .6
-)0.0
7.0
0.0
0.0
21.7
-11.2
Q.Q
-100.6
.L....2
23,389.8
========:::
=========
$ 49,090.2
$ 47,436.8
=========
=========
$
1,653.3
$
-854.6
DEPARTMENT
TREASURY
OF
THE
TREASURY
NEWS
~~/~7~89~. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
....................................
OrnCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASmNGTON, D.C. - 20220 - (202) 622-2960
Social Security: a New Debate for a New Era
Remarks by Lawrence H. Summers
Deputy Secretary of the Treasury
National Press Club
Washington, DC
January 29, 1998
Thank you. It's good to see so many old friends and distinguished thinkers in this area. Ifit will
be lively and full debate that we will have going forward on the question of ensuring retirement
security for all Americans -- it is in no small part because of the work of the people in this room.
We meet at an auspicious time. Eor more than a generation American politics has been weighed
down by an inability to live within our means. The age of deficits have been a nagging obstacle
to good policies. It has been an excuse for letting long-term challenges go unaddressed. But
now, that weight has been lifted. Five years of sound finance and a remarkably strong economy
have shrunk the deficit -- to the point, this year, of statistical insignificance. We may be on the
brink of a new era of surplus.
Many things will change in this new era. Many things we considered impossible we may now
see achieved. Many tasks we knew we ought to accomplish will become tasks that we can -- and
must -- accomplish. And the President in the State of the Union Address has highlighted our top
priority: Social Security comes first.
In an era of surplus we have the means and the opportunity to put all these years of discussions
about Social Security reform to good use. We can prepare Social Security for the challenges
ahead and protect the security of future generations of Americans. And we can do this fairly, in a
way that serves both our economy and our values.
Let me spend my time today painting the main features of this new era we are entering; the
remarkable state of the economy, the major challenge we face as our society ages, and the
historic opportunity -- and responsibility -- this creates to protect Social Security. What the end
result should be will be a matter of considerable controversy and debate. But it will be
worthwhile noting the critical issues that will need to be discussed -- and some of the
considerations that will frame that vigorous debate.
RR-2182
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
I. A Remarkable Moment For Our Economy
This is a special time for the American economy:
•
unemployment, at 4.7%, and inflation, at 1.7 percent last year are among the lowest in a
generation. And our economy is growing at its fastest rate in a decade.
•
our rate of national savings, which had long fallen so far behind other major
industrialized nations, has doubled in five years -- from 3.4 percent in 1992 to 7.2
percent today.
•
we are investing ever larger amounts in American companies and their workers. Business
equipment investment is growing at an annual rate of 12 percent -- and at 9 percent of
GDP, accounts for a record share of our economy.
•
real wages and household incomes have at last started to catch up the ground that had
been lost since the 1970s.
•
and, lest we forget, the budget deficit is no more. President Clinton will submit to
Congress for 1999 the first balanced budget in 30 years.
As the President noted on Tuesday night, at the start of the first Clinton Administration the
deficit for 1998 was projected to be $357 billion. Today, it is expected to be around $10 billion.
As a result of the deficit reductions we have seen in this decade, more than one trillion dollars in
capital that would otherwise have been invested in the sterile asset of government paper has
instead been invested in America's future: in our productive businesses, in our workers, in our
cities and in our homes.
II. An Historic Challenge for American Society
These good economic times could not have come at a better time for our nation. For if we look
past some of those surpluses we can also see a new challenge fast approaching, in our country
and around the world -- the challenge of an aging society.
When the first Social Security Act was passed in 1935, American life expectancy was 62 years.
Today, I am told that in the cohort I and many of you are a part, a married couple of 65 year-olds
has a one half chance of seeing a survivor pass the age of 90. As the President has said, a good
many children born this year will live to see the 22nd century.
These improvements in life expectancy, and a decline in birth rates, have put us on a path of
rapid declines in the number of employed workers for every retired American. In 1960 the ratio
was 4.5 to 1. Today it is 3.3 to 1. In little more than 30 years time it will be just 2 to 1, and
falling.
2
Rising dependency is an economic challenge for the nation for which we have to save. Longer
retirement is an economic challenge for individuals for which they have to prepare. A time of
prosperity, a time when a major challenge is ahead -- is a time to save and a time to prepare.
That is what why the President has proposed that we put Social Security first in deciding how our
surpluses will be used. We must do it because it is the right way to ensure that the surpluses are
not washed away as soon as they as they appear, but used to prepare for the challenges of
tomorrow. And we must do it because it is the right way to strengthen and prepare Social
Security to meet its future obligations -- to ensure that it is there for us, and it is there for our
children.
III. Put Social Security First
It is too early for predictions or conditions. But the debate we have ahead of us will not be taking
place in a vacuum. These past years there has been an enormous amount of careful stlidy of this
issue, by thoughtful people on both sides of the Congressional aisle and every part of the
academy and broader policy community.
We have all read the report of the Social Security Advisory Council. It is fair to say that it
outlined some of the critical issues that will need to be considered in protecting and
strengthening Social Security -- issues that go beyond the use of the surplus. We will need, for
example, to decide how we should deploy Social Security's resources -- to best ensure they will
be available to protect future Americans. We will need to decide how it should reflect the
changing realities of a changing workforce.
The complexity of the issues involved in this debate is highlighted by the subtleties of the
Advisory Council's Report -- and their difficulty, perhaps, by the number of options outlined in
its fmal pages. To be sure, the work of the Council and other serious studies have presented us
with a wide spectrum of view.
But one part of the approach is plain. In an era of surpluses we have the means and the
opportunity to protect Social Security for future generations of Americans. I'm not going to
preview the numbers in the President's forthcoming budget here, but I think we can expect
surpluses in the next ten years of $1 trillion or more.
As a rough approximation -- and, clearly, these are controversial issues, and I am not making any
endorsements here -- but by way of illustration:
•
every $100 billion of those surpluses that is transferred in Treasury bonds to the Trust
Fund could delay the exhaustion of the Fund by around a year -- and reduce the actuarial
deficit by around 5 percent.
3
•
alternatively, some will suggest we invest the money in equities, which would provide an
even higher return, but would be enormously controversial and clearly bring greater risks
and uncertainties.
There is a whole range of options for strengthening the system that reserving the surpluses would
allow us to consider -- changes that could enhance the pool of Social Security funds and increase
the future rate of return for American workers.
Let me repeat, all of these examples are illustrations - not prescriptions. We owe it to
tomorrow's Americans to ensure Social Security will be there when they need it. But we owe it
to today's Americans to have a national debate about the best way to achieve this. Everyone
must have a chance to express their views and hear the views of others.
The first stage of that national dialogue began yesterday in Illinois, when the President
challenged every American to attend one of many regional fora that are being planned to debate
this issue -- or to organize and host one if there isn't one planned for a given area. The President
and Vice-President will be attending several bipartisan conferences on Social Security organized
jointly by the Concord Coalition and the Association of American Retired Persons, and will also
be hosting a conference on private retirement savings in July.
Stage Two will come this December. The President will host a bipartisan White House
Conference on Social Security bringing together the lessons and conclusions of many months'
nationwide discussion.
Finally, in Stage Three, in January 1998 the President and his team will begin bipartisan
negotiations with Congressional leaders over the reform of Social Security. We do not demand -or imagine -- broad agreement today on precisely what form this legislation should take. The only
point on which we must now all be agreed is that we tackle the issue first -- before discussing any
other use of the surpluses-to-be.
IV. The Core Reform Challenges
We will be considering a great many reform options in the months ahead. And there'll be many
questions that will be asked about these different options -- whether they ensure the solvency of
Social Security in the 21 st century and provides a benefit people can count on; whether they
preserve Social Security as a basic public trust, and help lift millions of the elderly, the disabled
and their survivors out of poverty; whether they preserve our hard-won fiscal discipline.
This di~og.ue will be addressed to the problems facing Social Security in the future -- but a large
part of It WIll be about best to preserve the enormous accomplishments it has today.
This dialogue will be about finding the best way to ensure that people's benefits are there for
4
them, and there for their children. In 1962, 69 percent of the elderly received Social Security. By
1994, the share was more than 90 percent. Today virtually every working man and woman in
America is covered by Social Security. We need to be sure they will be able to count on Social
Security as their parents and grandparents did.
This dialogue will be about finding the best way to ensure a public, cost-effective insurance for
all. The Social Security system we have today provides a fair annuity that is indexed to inflation - an asset that is difficult to obtain in the private market. And it is a living rebuke to those that
say government is inefficient. More than 99 cents are paid in benefits by Social Security for every
dollar that is paid in ·by -workers and their employers;-One-ruent-study-estimates-that during the
pay-out phase of privately-provided annuities the loss to overhead alone averages more than 8
cents on the dollar. In another, the American Council on Life Insurance found that on a per-dollar
basis, private life insurers' expenses came to 11 percent of annual income, or 16 percent of
contributions, of which nearly half went in selling costs, or agents' commissions. We will need
to ensure that the value-for-money we receive from Social Security is preserved.
This dialogue will be about finding the best way to ensure that Social Security helps those who
need it most. Today Social Security brings more than 40 percent of our elderly population out of
poverty. And it is not just there for the elderly, irtnete for every working American, in the form
of survivors and disability insurance protection. Fully one-third of all Social Security benefits
paid each year go to nonretirees. And higher real rate of returns are earned by low-wage workers
who will most depend on them.
This dialogue will be about fmding the best way to ensure that Social Security continues to
support this nations's fiscal health. By building up reserves for the years ahead, the Social
Security Trust Fund has for some time now been making an enormous contribution to our future
by increasing the pool of national saving. In choosing the way forward we will need to be
consistent with that strong record.
In short, this dialogue will not be about whether to protect these and other important
achievements of Social Security. It will be about finding how best to protect them.
A Social Security system is not worthy of the name if it reneges on its promises to future
generations or can keep them only at the cost of spiraling deficits. But nor is it Social Security if
it leaves every individuals' security in retirement entirely to the vagaries of the markets. We owe
all our sons, our daughters and our grandchildren a good return. But we also owe them the
guaranteed floor of protection that the program has been providing for all American workers and
their families since 1940.
When we pose the issue this way it becomes all the more clear why the President's words on this
subject on Tuesday night were so important. By ensuring that the surplus is reserved until Social
Security is safe, we can help ensure that the Social Security system of the 21st century continues
to protect generations of Americans -- and promote both our economy and our values. And we
5
can help ensure that it continues to promote our hard-earned fiscal discipline.
Once we have addressed Social Security reform, we can explore other possible ideas for using
the fruits of this new surplus era. What matters is that the surpluses should not be wasted -- but
used to prepare the country for the next century. At the risk of repeating myself, what matters is
that we put Social Security fust. Thank you.
6
DEPARTMENT,OF- THE.
.
TREASURY
TREA'SURY
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
January 29, 1998
Contact: Kelly Crawford
(202) 622-2960
STATEMENT BY TREASURY SECRETARY ROBERT E. RUBIN
I welcome the agreement announced last night between Korea and its major international creditors
on a proposal to refinance a significant portion of Korea's debt coming due this year,
Since December, Korea has taken a series of actions to implement its IMP-backed reform program
with the full support of the President-elect. As a result of these steps and voluntary efforts by major
international banks to roll over their short term claims on Korean financial institutions, financial
stability and confidence have begun to return to Korea. Korea must now sustain this effort as it
confronts the challenges that lie ahead in restructuring its economic system.
Yesterday's agreement represents an important step toward promoting a durable solution to Korea's
financing situation. A satisfactory conclusion of a comprehensive agreement to refinance and extend
existing claims, together with a successful effort to raise new money, will move Korea significantly
forward on the road to financial viability
-30RR-2183
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
PUBLIC DEBT/WRSH DC
Fax:202-219-3365
Jan 29 '98
14:15
P.Ol
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
January 29, 1998
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 52-WEEK BILLS
364-Day Bill
February 05 1998
February 04, 1999
Term:
Issue Date:
Maturity Date:
CUSIP Number:
1
91279SBT7
RANGE OF ACCEPTED COMPETITIVE BIDS:
Low
High
Average
Discount
Rate
Investment
Rate 1/
------
----------
4.950%
4.965%4.96S!l;-
Price
------
5.215%
5.232\
94 . .995
S.232%-
94.980
94.980
Tenders at the high discount rate were allotted
91%.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered
Tender Type
Competitive
Noncompetitive
38,561,195
PUBLIC SUBTOTAL
Federal Reserve
Foreign Official Inst.
Refunded Maturing
Addi tional Amounts
TOTAL
1/
$
Accepted
1,097,119
9,337,455
1,097,119
39,658,314
10,434,574
6,205,000
6,205,000
1/610,000
920,000
1,610,000
920,000
48,393,314
Equivalent coupon- issue yield.
RR-2184
~l/www.pubUcdebUreM..gov
$
$
19,169,574
DEPARTMENT
TREASURY
OF- THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASHINGTON, D.C .• 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
January 29, 1998
Contact: Kelly Crawford
(202)622-2960
STATEMENT BY TREASURY SECRETARY ROBERT E. RUBIN
We welcome the Export-Import Bank's announcement that it will substantially enhance its short
term insurance program in Korea and will explore ways to extend this program to other Asian
markets. It is important that this financing is available to promote US. exports and jobs in an
environment where there is a temporary shortfall in short term trade finance. We also welcome
Ex-1m Bank's efforts to work with other export credit agencies to encourage a multilateral
initiative to support the region's import financing needs. Such cooperation will be important in
broader efforts to restore investor confidence in the region while providing imports that are
necessary to return to economic growth and stability.
-30RR-2185
FQr press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
From: TREASURY PUBLIC AFFAIRS
20009
D E P .\ R T !\ I E
~
T
T II E
() F
3-12-98
3:34pm
p. 7 of 11
T R E .\ S l: I{ ,
NEWS
omCE OF PUBLIC AFFAIRS. 1500 PENNSYLVANIA AVENUE, N.W. • WASHINGTON, D.C.• 20220 • (202) 622-2960
EMBARGOED FOR 10 A.M. RELEASE
January .30,-1998
Testimony by Treasury s.ecretary Robert E. Rubin
House Banking Committee
Mr. Chairman, members of the Committee. I would like to start by discussing the
fmancial instability in Asia and the international response to it. Then I would like to discuss the
key role the IMF is playing in addressing the inunediate crisis and our efforts to modernize the architecture of the international financial markets to help prevent financial crises, or manage
them should they occur.
But first, I want to welcome the support that Chairman Leach, Congressman LaFalce,
and their cosponsors have expressed for much needed funding for the IMF.
The United States has critical economic and national security interests at stake in
promoting restoration of financial stability in Asia. When we support IMP-led reform
programs, our purpose is clear: to protect and benefit the American people.
The countries in Asia are our customers, our competitors and our security partners.
Financial instability, economic distress, and depreciating currencies all have direct effects on
the pace of our exports to the region, the competitiveness of our goods, Our agricultural
products, and our services at home and abroad, the growth of Our economy and, ultimately. the
well-being of American workers and farmers. Thirty percent of U.S. exports go to Asia,
supporting millions of U.S. jobs, and we export more to Asia than Europe. In states like
California, Oregon and Washington, exports to Asia account for more than half of each state's
total exports.
Already major U,S. companies -- such as Boeing, Motorola, and Intel -- are reporting
effects from the crisis, which impacts workers in these, as well as much smaller, companies.
However, thus far, the effects on our economy are relatively moderate and the most likely
scenario for the next year is continued solid growth and low inflation. But, if the fmancial
instability were to spread more broadly to other emerging markets then the impact on
RR-2186
1
For press relectSe$, speeches, public schedules and official biographies.
can our 24Jt.OUT fax line at (202) 622-2040
20009
From: TREASURY PUBLIC AFFAIRS
3-12-9B
3:35pm
p. 8 of 11
American workers, fanners, and businesses could be much greater because roughly forty
percent of our exports go to all emerging markets around the globe and the spread of the crisis
could lead more countries to experience currency depreciation. By doing everything sensible
to help address this crisis, we protect our workers and businesses. When fmancial stability is
reestablished, these Asian countries will once again be strong markets for American goods,
and have stronger currencies that will help the competitiveness of our goods in world markets,
and the risk of fmancial instability spreading elsewhere will have been averted.
The United States also has critical national security interests in seeing a restoration of
financial -stability-in-the·region;" whieh-&Cretary-Ct>hen'witl-address".
The approach we have supported to resolve this crisis has focused on four key
elements: supporting reform programs in individual nations; providing temporary fmancial
assistance when needed; encouraging strong action by the other major economic powers to
promote growth in their countries, particularly Japan, which, as the largest economy in Asia,
would. if on a strong economic track led by domestic demand led growth, be a larger market
for Asian goods, a source of greater bank credit and other capital flows, and a radiator of
confidence for the region; and finally fostering policies in other developing and emerging
economies to reduce the risk of contagion and prevent future crises. Today, I'd like to focus on
the fust two, both of which revolve around the IMF.
I
First, and most importantly, our approach requires that these countries take the
concrete structural steps necessary to reform their economies. These programs, which are
designed with the IMF, address the specific causes of each nations' crisis and are adapted as
the situation changes. They are not austerity programs. At their core, these reform programs
aim to strengthen fmancial systems, improve transparency and supervision, eliminate the
interrelationships between banks, the government, and commercial entities, open capital
markets, and institute appropriate monetary and fiscal policies. Let me stress, Mr. Chairman,
countries which fail to take these steps receive no financial assistance.
The second element of our approach is to support these programs of refonn with
temporary financial assistance if necessary. When a nation's financial stability is at risk, this
money provides the breathing room for a nation to establish the conditions to restore economic
confidence, attract private capital and resume growth. Without it, these countries face the risk
of default, either by the sovereign or systemically in the fInancial sector which could readily
result in deep and prolonged distress in these countries, possible contagion effects for emerging
and developing countries around the world, and potentially serious impacts on the
industrialized countries, including our own, as developing country markets for our goods
shrink and as their currencies increased depreciation undercut competitiveness of our goods in
markets around the world.
I
Mr. Chairman, fInancial assistance, while critical for a short period, is not the key.
Only when nations purse sound policies will confidence -- and private capital -- return.
2
10009
From: TREASURY PUBLIC AFFAIRS
3-12-98 3:35pm
p.
9 of 11
The central provider of this financial assistance is the International Monetary Fund,
with additional support from the World Bank and the Asian Development Bank. In addition,
the United States has joined other industrial countries in indicating its willingness to provide
supplementary fmancial resources in some situations if a country fully adheres to the reform
program and further resources become necessary. Up to this point, we have not actually
disbursed any money, and those disbursements -- to the extent they occur -- will be in the
fonn of short tenn loans whose payment is fully guaranteed by the borrowing government.
Mr. Chairman, the IMF, which has had fifty years of bipartisan support, is the right
institution'to ·be atthe-center--ef-these"support-programs.T-be·tJnited-states bas worked' ..
for-cefully to help the IMF meet the new challenges of the modern financial system. With
tremendous expertise and technical resources, the IMF has the ability to shape effective reform
programs. As a multinational organization, it is able to require an economically distressed
country to accept conditions tliat no contributing nation could require on its own. And, the
IMF 'internationalizes the burden during a global financial crisis by using its pool of capital
instead of the United States having to bear that burden alone.
The American people should also know this: over the past fifty years, our contribution
to the IMF has not cost the taxpayer one dime. There are no budget outlays. OUf contribution
does not increase the deficit, or divert resources from other spending priorities.
Today we came here to ask you to support two critical funds: an increase in our quota
subscription, and an augmented back-up facility, the New Arrangements to Borrow, to
supplement the IMP's resources, if needed, to deal with crises such as this one. This funding
is absolutely necessary to enable the IMF to respond effectively if this financial instability were
to spread and intensify -- which we all want to avoid -- and to deal with future crises that could
similarly affect the interests of the American people. Moreover, failure to provide funding
could reduce our leverage in the IMP, and could shake confidence in American leadership in
the global economy at a time when confidence and American leadership are so important in reestablishing stability in Asia.
Some have said that supporting the IMF and providing. financial assistance to these
countries shields investors and countries from the consequences of bad decisions and sows the
seeds of futures crises. With respect to the countries, it should be obvious that they are not
now shielded from the effects of their bad decisions. They may receive temporary fInancial
assistance, but their people inevitably go through a very difficult economic period before
recovery takes hold. Let me add that it is the crisis and the loss of confidence -- not the refonn
programs -- that leads to economic hardships for the population. Reform. is the solution. not
the problem. The alternative of not acting to address the root causes of the crisis would create
a serious likelihood of default by the sovereign
or systematically by the banking sector, which would then lead to far longer and far deeper
economic duress for the people of these countries.
3
20009
From: TREASURY PUBLIC AFFAIRS
3-12-98
3: 3Bpm
p. 10 of 11
As to investors and lenders, the problem is more complicated. The right principle is
that investors and creditors should bear the full consequences of their decisions. I would not
spend one nickel for the purpose of protecting investors or banks. In fact, vast numbers of
banks, investors and creditors have taken large losses in Asia. For example, three major U.S.
banks -- J.P. Morgan, Chase, and Citibank -- have reported that developments in Asia have
had a substantial negative impact on their profits. And just yesterday the largest bank in
Gennany announced it would set aside three-quarters of a billion dollars to cover potential
losses on loans to the region.
However, -it -is,-true-that--a--byproduct-of ""programs-designed-to-restore -stability"and
growth may be that some creditors will be protected from the full consequences of their
actions. But any action to force investors and creditors involuntarily to take losses, however
appropriate that might seem, would risk serious adverse consequences. It could cause banks to
pull their money out of the country involved. It could reduce that nation's ability to access
new sources of private capital, and, perhaps most troubling, it could cause banks to pull back
from other emerging markets, which could cause serious global economic disruptions,
including in our own economy.
Having said this, it is critically important that we work toward changing the global
fmancial architecrure so that creditors and investors can bear the consequences of their
decisions as fully as possible. But devising such architectural changes is difficult and complex.
We cannot wait until that work is complete to take the steps necessary to deal with the crisis at
hand that so powerfully affects our interests, or to provide funding that will equip the IMF to
deal with a substantial spread of the present financial instability -- which we are all working to
prevent -- a future crisis.
Others have said that these programs do not require nations to take specific steps to
promote the environment, protect core labor standards and ensure human rights. Let me be
clear: these issues are critically important to the United States-- because they reflect our core
values and because they are central to a successful modem economy. We will work with the
international fmancial institutions and with other countries around the globe to effectively
promote these objectives. But designing and obtaining sustained adherence to programs to
restore financial stability in countries in crisis is extremely difficult, given the wrenching
changes that must be instituted in a relatively brief period of time. To try to accomplish
additional objectives -- important as they unquestionably are -- in the same brief period of time
would complicate and delay this effort and greatly reduce its chance of success. And, if one
set of objectives were added, others would most surely seek to add still more objectives, and
the whole undertaking would become impossible. Failure, in tum, would likely prolong and
deepen economic duress in these countries, hurting their workers -- as well as our exports,
competitiveness, and, ultimately, our own workers. Moreover, failure raises the further risk
of spreading fmancial instability to other developing countries. with the additional adverse
impact on our workers which would result. In contrast, fInancial stability and growth provide
an environment most conducive to advancing human and labor rights and environmental
4
20009
From: TREASURY PUBLIC AFFAIRS
3-12-98
3: 37pm
p. 11 of 11
protection -- instability and economic duress are inimicable to these objectives.
Mr. Chairman, even as we have worked to resolve this crisis, we have begun an
intensive internal effort with the Federal Reserve Board and others, to identify and analyze
possible mechanisms for dealing with new challenges to the international financial system. All
of this follows on the work of the last four years, when we have been working with the
international fInancial institutions to improve crisis prevention and crisis response to the global
fmancial system.
This· initiative will-{octlS iJn-four -objectives:-improving 1:r3nsparency ·tmd·'disddsute;
strengthening the role of the. international fmancial institutions in helping to continue to deal
with the challenges of today's global markets; detennining the role of the private sector in
bearing an appropriate share of the burden in times of crisis; and strengthening the regulation
of fInancial institutions in emerging economies.
While nobody can say for certain what will happen in the current siruation, the
countries in Asia have great underlying strengths, such as high savings rates. firm
commitments to education, and strong work ethics and, with a sustained committnent to the
necessary reforms, they are wel1~positioned to re-establish strong economic growth and sound
currencies going forward.
Mr. Chairman, while some Members of Congress will doubtless disagree with specific
details of the programs we support, I urge members not to let these differences stand in the
way of our overall objective and support for the IMF. We must all join together and work
vigorously to respond to the financial crisis and to prevent future such situations.
Mr. Chairman, a strong IMP has been critical to dealing with the financial instability in
Asia. An IMF with the capacity to respond effectively if this crisis were to deepen and spread - which we all want to avoid -- and to dealing with future crises is critical to protecting and
promoting the interests of the American people. Thank you very much.
-30-
5
TDTRL P.05
DEPARTl\1ENT
OF
THE
TREASURY
NEWS
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIllNGTON, D.C .• 20220. (202) 622-2960
EMBARGOED UNTIL 10 A.M. EST
Text as Prepared for Delivery
January 30, 1998
TREASURY SECRETARY ROBERT E. RUBIN
HOUSE BANKING AND FINANCIAL SERVICES COMMITTEE
Mr. Chairman, members of the Committee. I would like to start by discussing the
financial instability in Asia and the international response to it. Then I would like to discuss the
key role the IMF is playing in addressing the immediate crisis and our efforts to modernize the
architecture of the international financial markets to help prevent financial crises, or manage
them should they occur.
But first, I want to welcome the support that Chairman Leach, Congressman Lafalce, and
their cosponsors have expressed for much needed funding for the IMF.
The United States has critical economic and national security interests at stake in
promoting restoration of financial stability in Asia. When we support IMF-Ied reform programs,
our purpose is clear: to protect and benefit the American people.
The countries in Asia are our customers, our competitors and our security partners.
Financial instability ,economic distress, and depreciating currencies all have direct effects on the
pace of our exports to the region, the competitiveness of our goods, our agricultural products, and
our services at home and abroad, the growth of our economy and, ultimately, the well-being of
American workers and farmers. Thirty percent of U.S. exports go to Asia, supporting millions of
U.S. jobs, and we export more to Asia than Europe. In states like California, Oregon and
Washington, exports to Asia account for more than half of each state's total exports.
Already major U.S. companies -- such as Boeing, Motorola, and Intel -- are reporting
effects from the crisis, which impacts workers in these, as well-as much smaller, companies.
However. thus far, the effects on our economy are relatively moderate and the most likely
RR-2186
For press releases; speeches, public schedules and official biographies, call our 24~our fax line at (202) 622-2040
-'
scenario for the next year is continued solid growth and low inflation. But, if the financial
instability were to spread more broadly to other emerging markets then the impact on American
workers, fanners, and businesses could be much greater because roughly forty percent of our
exports go to all emerging markets around the globe and the spread of the crisis could lead more
countries to experience currency depreciation. By doing everything sensible to help address this
crisis, we protect our workers and businesses. When financial stability is reestablished, these
Asian countries will once again be strong markets for American goods, and have stronger
currencies that will help the competitiveness of our goods in world markets, and the risk of
financial instability spreading elsewhere will have been averted.
The United States also has critical national security interests in seeing a restoration of
financial stability in the region, which Secretary Cohen will address.
The approach we have supported to resolve this crisis has focused on four key elements:
supporting reform programs in individual nations; providing temporary financial assistance when
needed; encouraging strong action by the other major economic powers to promote growth in
their countries, particularly Japan, which, as the largest economy in Asia, would, if on a strong
economic track led by domestic demand led growth, be a larger market for Asian goods, a source
of greater bank credit and other capi~al flows, and a radiator of confidence for the region; and
finally, fostering policies in other developing and emerging economies to reduce the risk of
contagion and prevent future crises. Today, r d like to focus on the first two, both of which
revolve around the IMF.
First, and most importantly, our approach requires that these countries take the concrete
structural steps necessary to reform their economies. These programs, which are designed with
the IMF, address the specific causes of each nations' crisis and are adapted as the situation
changes. They are not austerity programs. At their core, these reform programs aim to strengthen
financial systems, improve transparency and supervision, eliminate the interrelationships
between banks. the government, and commercial entities, open capital markets, and institute
appropriate monetary and fiscal policies. Let me stress, Mr. Chairman, countries which fail to
take these steps receive no financial assistance.
The second element of our approach is to support these programs of reform with
temporary financial assistance if necessary. When a nation:s financial stability is at risk, this
money provides the breathing room for a nation to establish the conditions to restore economic
confidence, attract private capital and resume growth. Without it, these countries face the risk of
default, either by the sovereign or systemically in the financial sector, which could readily result
in deep and prolonged distress in these countries, possible contagion effects for emerging and
developing countries around the world, and potentially serious impacts on the industrialized
countries, including our own, as developing country markets for our goods shrink and as their
currencies increased depreciation undercut competitiveness of our goods in markets around the
world.
2
Mr. Chairman, financial assistance, while critical for a short period, is not the key. Only
when nations purse sound policies will confidence -- and private capital -- return.
The central provider of this financial assistance is the International Monetary Fund, with
additional support from the World Bank and the Asian Development Bank. In addition, the
United States has joined other industrial countries in indicating its willingness to provide
supplementary financial resources in some situations if a country fully adheres to the reform
program and further resources become necessary. Up to this point, we have not actually
disbursed any money, and those disbursements -- to the extent they occur -- will be in the form
of short term loans whose payment is fully guaranteed by the borrowing government.
Mr. Chairman, the IMF, which has had fifty years of bipartisan support, is the right
institution to be at the center of these support programs. The United States has worked forcefully
to help the IMF meet the new challenges of the modem financial system. With tremendous
expertise and technical resources, the IMF has the ability to shape effective reform programs. As
a multinational organization, it is able to require an economically distressed country to accept
conditions that no contributing nation could require on its own. And, the IMF internationalizes
the burden during a global financial crisis by using its pool of capital instead of the United States
having to bear that burden alone.
Th~
American people should also know this: over the past fifty years, our contribution to
the IMF has not cost the taxpayer one dime. There are no budget outlays. Our contribution does
not increase the deficit, or divert resources from other spending priorities.
Today we came here to ask you to support two critical funds: an increase in our quota
subscription, and an augmented back-up facility, the New Arrangements to Borrow, to
supplement the IMF's resources, if needed, to deal with crises such as this one. This funding is
absolutely necessary to enable the IMF to respond effectively if this financial instability were to
spread and intensify -- which we all want to avoid -- and to deal with future crises that could
similarly affect the interests of the American people. Moreover, failure to provide funding could
reduce our leverage in the IMF, and could shake confidence in American leadership in the global
economy at a time when confidence and American leadership are so important in re-establishing
stability in Asia.
Some have said that supporting the IMF and providing financial assistance to these
countries shields investors and countries from the consequences of bad decisions and sows the
seeds of futures crises. With respect to the countries, it should be obvious that they are not now
shielded from the effects of their bad decisions. They may receive temporary financial assistance,
but their people inevitably go through a very difficult economic perio-d before recovery takes
hold. Let me add that it is the crisis and the loss of confidence -- not the reform programs -- that
leads to economic hardships for the population. Reform is the solution, not the problem. The
alternative of not acting to address the root causes of the crisis would create a serious likelihood
of default by the sovereign or systematically by the banking sector, which would then lead to far
3
longer and far deeper economic duress for the people of these countries.
As to investors and lenders, the problem is more complicated. The right principle is that
investors and creditors should bear the full consequences of their decisions. I would not spend
one nickel for the purpose of protecting investors or banks. In fact, vast numbers of banks,
investors and creditors have taken large losses in Asia. For example, three major U.S. banks-J.P. Morgan, Chase, and Citibank -- have reported that developments in Asia have had a
substantial negative impact on their profits. And just yesterday the largest bank in Germany
announced it would set aside three-quarters of a billion dollars to cover potential losses on loans
to the region.
However, it is true that a byproduct of programs designed to restore stability and growth
may be that some creditors will be protected from the full consequences of their actions. But any
action to force investors and creditors involuntarily to take losses, however appropriate that
might seem, would risk serious adverse consequences. It could cause banks to pull their money
out of the country involved. It could reduce that nation's ability to access new sources of private
capital, and, perhaps most troubling, it could cause banks to pull back from other emerging
markets, which could cause serious global economic disruptions, including in our own economy.
Having said this, it is critically important that we work toward changing the global
financial architecture so that creditors and investors can bear the consequences of their decisions
as fully as possible. But devising such architectural changes is difficult and complex. We cannot
wait until that work is complete to take the steps necessary to deal with the crisis at hand that so
powerfully affects our interests, or to provide funding that will equip the IMF to deal with a
substantial spread of the present financial instability -- which we are all working to prevent -- a
future crisis.
Others have said that these programs do not require nations to take specific steps to
promote the environment, protect core labor standards and ensure human rights. Let me be clear:
these issues are critically important to the United States-- because they reflect our core values
and because they are central to a successful modem economy. We will work with the
international financial institutions and with other countries around the globe to effectively
promote these objectives. But designing and obtaining sustained adherence to programs to
restore financial stability in countries in crisis is extremely. difficult, given the wrenching changes
that must be instituted in a relatively brief period of time. To try to accomplish additional
objectives -- important as they unquestionably are -- in the same brief period of time would
complicate and delay this effort and greatly reduce its chance of success. And, if one set of
objectives were added, others would most surely seek to add still more objectives, and the whole
undertaking would become impossible. Failure, in tum, would likely prolong and deepen
economic duress in these countries, hurting their workers -- as well as our exports,
competitiveness, and. ultimately. our own workers. Moreover, failure raises the further risk of
spreading financial instability to other developing countries. with the additional adverse impact·
on our workers which would result. In contrast. financial stability and growth provide an
4
environment most conducive to advancing human and labor rights and environmental protection
-- instability and economic duress are inimicable to these objectives.
Mr. Chairman, even as we have worked to resolve this crisis, we have begun an intensive
internal effort with the Federal Reserve Board and others, to identify and analyze possible
mechanisms for dealing with new challenges to the international financial system. All of this
follows on the work of the last four years, when we have been working with the international
financial institutions to improve crisis prevention and crisis response to the global financial
system.
This initiative will focus on four objectives: improving transparency and disclosure;
strengthening the role of the international financial institutions in helping to continue to deal with
the challenges of today' s global markets; determining the role of the private sector in bearing an
appropriate share of the burden in times of crisis; and strengthening the regulation of financial
institutions in emerging economies.
While nobody can say for certain what will happen in the current situation, the countries
in Asia have great underlying strengths, such as high savings rates, firm commitments to
education, and strong work ethics and, with a sustained commitment to the necessary reforms,
they are well-positioned to re-establish strong economic growth and sound currencies going
forward.
Mr. Chairman, while some Members of Congress will doubtless disagree with specific
details of the programs we support, I urge members not to let these differences stand in the way
of our overall objective and support for the IMF. We must all join together and work vigorously
to respond to the financial crisis and to prevent future such situations.
Mr. Chairman, a strong IMF has been critical to dealing with the financial instability in
Asia. An IMF with the capacity to respond effectively if this crisis were to deepen and spread -which we all want to avoid -- and to dealing with future crises is critical to protecting and
promoting the interests of the American people. Thank you very much.
-30-
From: TREASURY PUBLIC AFFAIRS
96221999
2-9-98 3:54pm
p. 1 of 8
DEPARTMENT OF THE TREASURY
Highlights of the FY 1999 Budget Request
$ Billions
Discretionary
Outside Caps
Total
FY 1998 Enacted
$11.333
$0.138
$11.471
FY 1999 Request
$12.158
$0.143
$12.301
Di'Herence
$0.825
$0.005
$0.830
Percent chango:
7.28%
3.62%
7.23%
~e
, :s
President's proposed FY 1999 budget supports Treasury's key governmental role
tax administrator, revenue colleetor, law enforcer, and financial manager.
Treasury developed this funding level in the context of its support for balancing the
Federal budget. Since discretionary spending was not proposed to grow significantly over
last year, Treasury was challenged to stretch its existing dollars and make key capital
investments for future productivity.
A key aspect of our budget is the inclusion of performance goals that are derived from our
strategic plan. This is the third year that we have included them. Our FY 1999 Budget and
Performance Plan contains perfonnance targets for each of Treasury's primary missions
which define the degree of improvement that is expected from the resources requested.
The Performance Plan section of this overall Budget-in-Brief package sets out Treasury's
strategic objectives and performance plan. It has important details that discuss further the
expected perfonnance results of the resources requested for FY 1999, as well as reports
on FY 1997 and FY 1998.
Treasury built its request of $12.158 billion and 145,673 full-time equivalent (FTE) staff
years upon three funding priorities to:
•
Ensure the quality of current operations by fully supporting the mandatory
cost increases and meeting anticipated FY 1999 workload requirements:
•
Invest in critical capital Improvements needed to realize future
efficiencies and program improvements, and address workload growth; and
Improve performance and meet new challenges by investing in program
enhancements.
RR-2187
9B221999
From: TREASURY PUBLIC AFFAIRS
2-9-98 3:54pm
p. 2 of 8
Above the $12.158 billion amount, Treasury is also requesting additional funding for the
Intemal Revenue Service (IRS) Earned Income Tax Credit (EITe) program ($143 million),
which is outside the discretionary spending caps. This amount is consistent with the
Balanced Budget Act of 1997.
f
t
partmenl-wide, Treasury managed 10 accommodate mandatory costs and critical
I':dministrative support increases within overall funding levels approved in the FY
199B appropriation act. Each year, pay raises, inflation, rent increases and other
mandatory costs must be factored into the baseline to maintain current operating levels.
No bureau can take reductions below this baseline without significantly compromising the
quality of its essential missiOns. For FY 1999, in addition to accounting for these costs, we
also funded four other baseline investments required to maintain current operating levels.
These includes: (1) the full year cost of new programs enacted in prior years; (2) essential
equipment needs; (3) on-going programs previously supported by other funding provisions;
and (4) mandatory workload increases.
In FY 1999, Treasury is requesting sufficient funding for the full year cost of programs and
staffing initiated in FY 1998 such as the White House Security program and the Federal
Law Enforcement Training Center (FLETC) Intemational Law Enforcement Academies.
The first year of these initiatives was funded at a partial year level. since it takes time to
hire staff and begin implementation.
Treasury is requesting critical equipment upgrades in its law enforcement bureaus to
replace aging vehicles and upgrade radio communication systems to accommodate the
narrowing of the radio spectrum available for law enforcement use. In addition, the
request continues the current operating level of the Youth Crime Gun Interdiction Initiative
previously funded from the Treasury Forfeiture Fund.
The budget also includes mandatory workload increases for the campaign nominee
program for the next presidential election, land border passenger processing to cover new
border crossing and statutorily mandated levels of service. and FLETC's FY 1999
projected training needs (especially for the U.S. Border Patrol). Treasury also requests
sufficient funding to support the Secretary in developing and carrying out domestic and
international financial services, law enforcement, tax, economic and management policies.
In addition, Treasury continues funding within its base level to ensure the timely
completion of the Year 2000 date change for all critical systems. Treasury has some of
the most critical systems within the Federal Government, including those that handle all
Federsl payments, collect over 95 percent of all receipts and tax revenues, secure our
Nation's money system, and protect the Nation's borders.
202 6221999
From: TREASURY PUBLIC AFFAIRS
2-9-98 3:55pm
p. 3 of 8
e
r:rowth
ure budgets are not likely to be as generous in allowing Treasury to meet workload
with increased staff and resources. For this reason, it is important that the
Department make aitical investments today that will allow Treasury to serve its customers
better and more efficiently tomorrow.
In FY 1999, IRS begins the second year of its modemization effort, according to the
blueprint and schedules set out by the IRS Chief Information Officer and approved by the
Congress and the Office of Management and Budget (OMB). The FY 1999 budget request
covers equipment and contract costs for system development and replacement by
continuing the stable funding approach established in FY 1998 using the Information
Technology Investment account. . Funding is also requested for Business Line Investments
which provide critical upgrades to current operating systems.
The U.S. Customs Service budget includes resources that will enable port personnel to
respond to the growing sophistication of evasion methods used by smuggling
organizations. Customs will be able to increase its reliance on technological advances in
a greater variety of automated targeting and non-intrusive inspedion systems, thereby
addressing the smugglers' preference for deep concealment in the growing number of
cargo entries (seagOing containers, conveyances, and rail cars).
The U.S. Secret Service will invest in technology and equipment to support the
Presidential Candidate Protection Program. FY 1999 is a preparation year for the 2000
Presidential Campaign and funds are requested for additional computer and protective
equipment.
ATF requests funding for relocation of the headquarters to a secure site. Over the long
term, this facility will reduce rental costs by consolidating several locations. It will also
reduce risks to ATF employees by placing an organization that is a potential target of
terrorism in a more secure location.
Funds are also requested to continue the dormitory, classroom, and equipment upgrades
according to the FLETC Master Plan. Tl1is is part of the ongoing effort to expand and
modernize training facilities to meet future training requirements of the Federal law
enforcement community.
Key investments are requested for repairs and renovations to the historic Treasury building
as part of a five-year plan to ensure the safety and stewardship of an important national
landmark. Treasury expects the FY 1999 requested level will be the highest annual level
required by the Department during the restoration period.
From: TREASURY PU8LIC AFFAIRS
202 6221999
2-9-98 3:55pm
p. 4 of 8
In each case. these investments have been developed in accordance with the criteria laid
out by OMB, consistent with the Clinger-Cohen Act of 1996. For specific details please
I
refer to the individual bureau highlight sections.
addition~1
Y:asury. re9uests
funding for program initiatives that accomplish the two
,
objectives of Improving perfonnance and meeting new program challenges.
These initiatives are closely linked to our capital investments by 1) implementing the
organizational changes needed to improve operations that make modernization more
meaningful; and 2) providing the staffing necessary to satisfy demands for improved
services.
~ey
In the law enforcement area. Treasury requests: 1) additional Customs personnel to
enhance the investigation and interdiction of inbound illegal narcotics and outbound
smuggled currency. in conjunction with the capital improvements in non-intrusive
inspection technology; 2) enhancements to permanent protection for the President and
protective intelligence support; and 3) expansion of the ATF Youth Crime Gun Interdiction
Initiative to increase coordinators working with State and local law enforcement officials
to reduce gun violence among youths. Each of these initiatives is designed to meet the
increased scope and complexity of the demands for our law enforcement presence.
IRS is continuing its program improvement process begun in 1997 with the
recommendations of the National Performance Review. Additional funding is requested
to address important customer service improvements including increasing and improving
the quality of telephone access, rewriting of notices and forms. expanding the taxpayer
advocate staff, and implementing the Citizen Advisory Panels. Significant improvement
has already been made in these areas and the FY 1999 budget expands on these efforts.
Funds proposed for modernizing the organization support fundamental changes in the
way IRS does business. placing the emphasis on customer service and improved
technology.
Treasury is also requesting additional resources for key initiatives that strengthen our
Nation's economy--especially in remote rural and disadvantaged urban areas. These two
efforts are: 1) the Community Development Financial Institutions Fund (CDFI) which
provides needed investment capital to distressed urban and rural communities; and 2) the
Community Adjustment and Investment Program (CAIP). a new program that provides
investment capital to areas adversely affected by the implementation of NAFTA and
related agreements.
Details on eadl of these initiatives are available in the individual bureau highlight sections
and the supplemental sections.
From: TREASURY PUBLIC AFFAIRS
202 5221999
2-9-98 3:56pm
p. 5 of 8
DEPARTMENT OF THE TREASURY
COMPARISON OF APPROPRIATIONS AND ESTIMATES FOR TREASURY BUREAUS
(DolllJrs in Thousands)
Al'f.ROlRlA.'IED..ACCO.uras
DEPARTMENTAL OFFICES:
S:II:lries:md Expenses............................................................. ........................................
VCRTF (Included in Scf:E) ....................................................................... """'"''''''''
TrClilOury Buildin!['l and Annex Repoir lind Restor:ltion...............................................
Countortcrrorism Pund .. ,...... ,............................................................................. ,.......... ,..
Private Debt Colleetion PilOl ...................................................... " ....... "........................
omce of Profession :II Responsibility.............................................................................
Trcuury Fonciture fund .................................... ,......... " ...... " ..... ,,, .... ,, ... ,.......................
FV 1997
FV 1998
F"Y 1999
Enamd
£Duted
RtQlU:It
130,348
{i8.300J
211,213
15,000
13,000
115,555
123,846
10,484
27,000
I.S00
10,000
1.250
1,654
SublO~I,
DO ...... ,...... ,................................................................................................ ,... ------,1"9'''''8,~06711.----- T27;2'89"'" ..
27,100
25,889
OFFICE OF INSPECTOR GENERALw..... _ _ _ •____ ._._._._._._ .. _._ •• _...
29.770
29,719
FINANCIAL CRIMES ENFORCEMENT NETWORK-._._ .. _._._._ ...... _..... _
23,387
23,835
VCRTF (Inclue/ed in S&:£) ... ,.... ,." ... " .................................."".................................
fl,OOOJ
{1.000J
HIDTA (non-add)................................................... ...................................................
{105J
FEDERAL LAW ENFORCEMENT TRAIN INC CENTER:
S... \ories nnd Expenses, ................... ,............................................................................... ..
56.185
65,663
VCRTF (Included in $&£) ................................................ " ....................... " ............ .
{I,OOOJ
Acquisition. Constr" Improvements and Re\;lted Expenses .......................................... ..
:!1.S84
32,548
Subtotal, FLETC .............................................................................. " ............................. '
77,769
98,211
FINANCIAL MANAGEMENT SERVlCE_._. ____ •___ ._._. __ •__ ._.. _.
1')6.518
202,490
TREASllRY.WfOE AUTOMATION ENHANCEMENT _.. _.. _._._._ ..__ ._ .. _.. _,
152,500
33,952
30,678
25,000
{I. 000]
71,923
28,360
loo;rrr
202,510
ALCOHOL, TOBACCO AND FIREARMS:
Saluies ond Expenses... "" .... ,........ " ................. ,..............................................................
VCRTF (Included in $&;£)........................................................................................
HIDTA (non-add), ............. ,................. " ......................"., ........... ,..............................
ACQuisition. Constr .• Improvement:! and Related Expenses............................................
504,989
[44.595]
508,372
[29.41IJ
554,324
{/(I,QOOJ
{1,480J
6,978
32,000
55.022
,:".96M7--------urr,,...----mm
3860324"
563,394
ATF .........,...................,......."......,.... ".......... ", ....................... ,........................ --.-. ".. -'-51'1
Subtotal,
U.S. CVSTOI"S
S~RVICE:
SIIIBri~
and Expenses .......................................................... ,........................................ ..
VCRTF (Incilldtcl in S&E)." ...... ,..... ,................. " ..... " .. " ......................................... .
1,549,585
HiDTA- (non-add) ............. ,......................... ,..............................................................
{3.987J
Opel'lltions &. Maint, Air &. Marine Interdietion Prognnm ................................. "...........
83,363
.3,000
92.758
3,000
2.406
1,682,929
BUREAU OF THE PUBLIC D£BT_ .. _ .. _ .. _ ...... _........ _.. _._._._ .... _.... _.. _.. _
169,73S
173,826
(4,400)
M3intlln:mco Fell.............................................................................................................
(4,400)
Subtotal, PUBUC DEBT ............................................................................................... ------,lr6';.,3;3",,3Sr----f69',426- .
Harbor Maintcn:mcc Fcc Collection................................................................................
. .
1,702.537
{64.471J
1,584.765
[60,648J
98.4811
3.000
c~~::.~~~~oa~~:~.I ~~~ ~.~::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::----'1~,6",~;n~-;;:~r~'-----;""<'II-.;-;';';;;;----"T"I!f7I'T~
1.804,025~
In.500
(4,400)
'---.73,100
INTERNAL REVENUE SERVICE:
Processing, Assistance, and Managemcnt. .............................. ,...................................... ..
T:lX LAw Enforeement. .................................... ,.............................................................. ..
HIDTA (non-ndd) .................................................................. ,......................... ,... ,.... .
Informotion Systems ... ,...... ,.................. ,.............. ,.......................................................... .
Information Technology Invcsanents ....................................................................... ,... ,..
1,790,328
4,091,211
(9U)
1,32.3,075
SUbtotal. IRS ................................................................................................................. .
U.S. SECRET SERVlCI£:
Salaries and Expenses .... ".""."... """,, .................... ,........................................................
VCRTF (included in StlE)........" ..........."" ........... ,"" .................... "............ ,".. "......
7,1114,flI4
SSI,288
[20.000J
HIDTA (no"-tldd).,,, ... ,.. ,, ... ,.... ,, .... ,..... ,..... ,,, .................. ,,,,,,,,, ....... " ................ ".......
{194]
AcqUisition. Constr,.lmprovements and Related Expenses ............................................ _ _ _- , 37,36.5
Subtotal, USSS .... " ..................................................................................."., ............... ".
INTERAGENCY CRIME AND DRUG ENFORCEMENT.. _..... _.....- ..... -.-.-.-..
5-8-8;"63'3
2.925,874
3,143.468
.3.162,430
3,169,539
1,272.487
32S,OOO
7.666,829
1,540,884
323,000
8.1 93,S3Y
580,681
{I 5. 731J
606,357
{1I.700J
8,799
6,445
589.480~-----:6"'12]M
73,794
JlCRTF (Included in S&£). ...................................................................................... .
COMMUNITY DEVELOPMENT FINANCIAL INST. FUND ... ,.... __ .__ ._.. _.. ~ ..
COMM{INITY ADJUSTMENT AND INVESTMENT PROGRAM. ........ -.-.-.. - .....
JOINT FINANCIAL MANACEMENT IMPROVEMENT PROGRAM._._ .. _.-._.
TOTAL, TREASVRYDISCRE'flt)'JQXRV LEVEL. __ .___ ._ ........... __ ._·_.. _.. ·.. ..
"EARNED INCOME TAX'CKEOlTCOMPL1ANCE (EIl C) (Oul8idc: Capl)_ .. _.....
fij'j'A'C,''rR'EXSURY PROGRAM LEVEL_ ..._......._.. _.. _._._.. ___ ._· __ ·__-=:::=
pC/in 7i~~I"dBd'" p,.ogram LSve7F-:..:.::......................................... ·.. ······ .... ···· ... .
HIDTA (non-add) 21. .............................. ·.. ·........ ·...·.· .. ·· ........ •.. ·........ ·.... ·.. .. " ....... ,..
50,000
80.000
11.)33,215
!,;1§7!917
11,471.%85
[/07.800)
143.000
J2,300,917
1132.172]
. ... i3s,iJiJo'"
10.711,518
16J.895)
{6.767J
75.900
{45,000J
125.000
37,000
3,000
II Annuol appropriation action for CustolTl8 Services It Small Airports will no longer bt required. FY 1998 IIppropriation netion conformed the account
to funding provisions in the Authorizing .e~18tion.
'U FY 1998 Transfer of HlDTA fullds hIlS !lOt bee" flnAli~d.
From: TREASURY PU8LIC AFFAIRS
202 6221999
2-9-98 3:57pm
p. 5 of 8
DEPARTMENT OF THE TREASURY
FISCAL fEAR COMPARISON OF
TOTALF~TlMEE(!U1VALENT(FTE)STAFFING
(DJItECT AN/) REIMBURSABLE) .
n' HI91
AetuaJ
Wuct Rdmb.
APPROPRIATED ACCOUNTS
DEPARTMENTAL OFFICES.. _._ •• _•• _... _... __.. __.. __
H.
-
..
..
OFFICE OF PROFESSIONAL RESPONSlBILITV.. _ ........ _ ..ENERGY SECURITY RESERVE .. _._ .. _._ .. _ ........ _._ .•
TREASVRY FRANCHISE FVND... _._ •. _•.• _... _ ...... _.. _...... _
.FINANCIAL CRIMES ENFORCEMENT NE1WORK.._._._.OFFICE OF INSPECTOR GENERAL_._._ .. _ .. _._._._._
FEDERAL LAW ENFORCEMENT TRAINING CENTER_
FINANCIAL MANAGEMENT SERVICE.._._._...
-..
____
M
.
ALCOHOL, TOBACCO" FIREARMS__ ..... ____ _
ENCRAVING
A~D
PRINTING_ _ _ ._. ____ ._._
'... _ . _ .. _ ... _ . _ . _ . _ _ •_ _ _ ._._. __
924
368
-iDiiI
Dim:!
1.292
1
.-
417
.-
ReqlJl:lt
IA1al
1.414
.-
~
1.030
-
RaDlb,
,,-
Iota!
426
1.456
-
-
105
118
118
13
-
-
13
13
-
13
280
292
6
298
292
6
298
164
181
4
185
181
4
185
84
_.
5
997
Enlded
&1mb.
----
105
84
275
FY 1999
FY 1998
-
I
-
.--
164
-
460
24
484
526
40
566
553
40
593
2.033
33
2.066
2.060
97
2.1S1
2.006
134
2.140
3,818
107
3,925
3,934
138
4,072
4,038
115
4,153
-
l,739
2,739
2.739
2,739
2,714
2.714
2,073
2,073
2,280
2,280
2).77
2).77
2,247
16,655
50
16,705
2,630
2,630
19,285
SO
16,766 2.855
50
···-r6;766···
19JrS
2.905
-
19.621
50
19.671
-
-
.-
.-
Customs Services at Small Airportli............................................ .. ....
Subtotal, CUSTOMS ...................................................................
SIlIDrie& and Expenses .................•....................•.................••..............
16.722
30
16,152
2).41
18,969
30
18,999
.-
1,680
7
1,681
I ,80S
17
1,822
1,805
17
1.822
Proccasing, Assistance and Management. .................................... .....
Tax Law Enforcement. ............................................... ,................. .....
31,280
62,918
7505
101,703
524
440
40
31,804
63.358
7S45
102.707
45,195
46,073
7329
98.597
603
391
45,798
46,464
7374
99.636
46,206
46.130
7493
99,829
613
403
46
1,072
46,829
46,S33
7539
100.901
4.683
5.000
5.000
5.042
5,042
-
-
5
u.s. MINT _
llS CUSTOMS SERVICE:
0 • •'
BUREAU OF THE PUBLIC DUT.. _ .. _._. __ •__ .. _._._
-
INTERNAL REVENUE SERVICE:
Information Systems ..................................................................... .....
U.s. Sl!:CRET SERVlCE._._~_. __ ._.. ____ .__
..
..SUBTOTAL, TREASURY PROGAAM LEVEL.. _._._...._. _..
JOINT FIN. MANAGEMENT IMPROVEMENT PROGM. __
OTHER ACCOUNTS
COMPT. OJ: THE CURRENCy......................................................
OFFICE OF THRlFT SUPBRVISION .......................................... ..
COMMUNITY DEVELOPMENT FIN. INSTITIITIONS FUND.. .....
...
....
EARNED INCOME TAX CREDIT (Outside caps)....................... .....
SUBTOTAL, OTHER ACCOUNTS-.•_.... .
. ............ _
""
.
TOTAL, TREASURY PROGRAM LEVEL.......... _ ....._ _._..
VCRrF (Included Abo\le)..... .......................................................... .. ....
4.683
-
131.493
.-14
14
1.004
-
.-
.,691 141,1'"
2.948
1.335
--
2.948
1,335
14
4;iir'""4l~
-
_.
-
130110
MP
--
2.975
1,300
35
-
139 ti22
1S
1315tiO
---
2.975
1,300
35
35
1954 _~lIJl.4
1954
-- ---f,§'fJ-4-:t1S--,!f64
132.50' JM'4 145)~
75
_.
45
1,039
l.Z19
-
5
2.975
1,275
2,975
1,275
..uSO
2184
6.469
9818 141.388
-
3S
13b099 13A78J~5.816 ~~77f) 104 078 14'857
28
28
214
214
-
TOT!=1L P.06
DEPARTMENT
OF
THE
TREASU_RY
NEWS
~2i178~9~. . . . . . . . . . . . . . . . . . . . . . . .. . .
..........................
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIAAVENVE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
Contact: Paul Elliott
(202) 622-2016
EMBARGOED UNTIL 3:00PM
February 2, 1998
TREASURY ANNOUNCES MARKET BORROWING ESTIMATES
The Treasury Department announced on Monday that its net market borrowing for the
January - March 1998 quarter is estimated to be $10 billion with a cash balance of $20 billion on
March 31. The Treasury also announced that its net market borrowing for the April - June 1998
quarter is estimated to be a pay down in the range of $75 billion to $80 billion with a cash balance
of $35 billion on June 30, 1998.
In the quarterly announcement of its borrowing needs on October 27, 1997, the Treasury
estimated net market borrowing for the January - March quarter to be in the range of $15 billion
to $20 billion with a cash balance of $20 billion on March 31. Our current lower estimate largely
reflects higher receipts.
Actual net market borrowing in the October - December 1997 quarter was $17.0 billion,
with an end-of-quarter cash balance of $31.9 billion. On October 27, the Treasury estimated ne
market borrowing for the October - December quarter to be $20 billion with a cash balance of $35
billion on December 31. The reduction of $3 billion in net market borrowing lowered the end-ofquarter cash balance by about $3 billion, compared with the October estimate.
The regular quarterly press conference will be held at 9:00AM on Wednesday,
February 4, 1998.
--30-RR--2188
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
February 2,1998
Contact: Pete Hollenbach
202-219-3302
MORE GOOD NEWS FOR TREASURY DIRECT CUSTOMERS
The Bureau of the Public Debt announced today that its Treasury Direct toll free telephone
service has been expanded. Customers can now order a statement of account, check their
account balance or order a duplicate interest income statement (IRS 1099- [NT) by calling: 1-800943-6864. The new "Direct to You" telephone service further simplifies the popular Treasury
Direct system, saving customers both time and money.
Treasury Direct customers can access these new services between 8:00 a.m. and 8:00 p.m.
Eastern Time, Monday through Friday; the service hours parallel when the system is available to
provide this information. Last year more than 51,100 requests for account balances, statements
of accounts, and d,uplicate 1099 forms were received from customers.
"These new services bring us closer to our goal of making it possible for Treasury Direct
customers to handle their investments electronically," said Van Zeck, Acting Commissioner of
the Public Debt.
This same toll free number can still be used by Treasury Direct customers to reinvest maturing
securities 24 hours a day, 365 days a year. The Reinvest Direct by telephone was one of three
new "Direct to You" services introduced in September 1997. The other two were: Pay Direct
which allows customers to pay for their securities by authorizing Treasury to debit their bank
account on the day the security is issued; and Sell Direct which allows investors to sell their
Treasury securities through the Chicago Federal Reserve Bank \vhich performs the service as
Treasury's agent.
Treasury Direct, a system that became operational in 1986, allows Treasury to continue its longstanding policy of selling securities directly to the public. More than 825,000 customers hold
$84 billion worth of securities in Treasury Direct. All principal and interest payments are made
electronically. Treasury Direct investors are served by servicing sites located at Federal Reserve
Banks and branches throughout the country as well as at Public Debt's Capital Area Servicing
Center in Washington, D.C.
Visit Public Debt's web site at: www.publicdebt.treas.gov, to learn more about Treasury Direct
and the "Direct to You" features, as well as the securities offered. to do\vnload forms. and to
check on Treasury auction results.
000
PA-304
RR-2189
http://www.publicdebt.treas.gov
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE
February 02, 1998
CONTACT:
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
February OS, 1998
May 07, 1998
9127946N9
Term:
Issue Date:
Maturity Date:
CUSIP Number:
RANGE OF ACCEPTED COMP£TITIVE BIDS:
Discount
Rate
------
Low
High
Average
5.08051>
5.10551>
5.10051>
Investme:1t
Rate 1/
---------5.21751>
5.24251>
5.23851>
Price
------
98.716
98.710
98.711
Tenders at the high discount rate were allotted
AMOUNTS TENDERED AND
ACC~PTED
(in thousands)
Accepted
Tendered
Tender Type
$
Competitive
Noncompetitive
PUBLIC SUBTOTAL
Federal Reserve
Foreign Official Inst.
Refunded Maturing
Additional Amounts
$
TOTAL
1/
9651>.
28,761,091
1,504,797
$
5,576,491
1,504,797
30,265,888
7,081,288
4,203,010
4,203,010
184,422
45,578
184,422
45,578
34,698,898
Equivalent coupon-issue yield.
RR-2190
http://www.publicdebt.treas.gov
$
11,514,298
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE
February 02, 1998
CONTACT:
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Term:
Issue Date:
Maturity Date:
CUSIP Number:
182-Day Bill
February OS, 1998
August 06, 1998
912795AEI
RANGE OF
Low
High
Average
ACCEP~ED
COMPETITIVE BIDS:
Discount
Rate
Investment
Rate 1/
Price
------
----------
------
5.275%5.296%5.296%-
5.070%5.090%5.090%-
97.437
97.427
97.427
Tenders at the high discount rate were allotted
47%'.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
$
Competitive
Noncompetitive
30,775,632
1,356,469
$
3,970,219
1,356,469
PUBLIC SUBTOTAL
32,132,101
5,326,688
Federal Reserve
Foreign Official Inst.
Refunded Maturing
Additional Amounts
3,750,000
3,750,000
1,928,083
477,717
1,928,083
477,717
$
TOTAL
1/
Accepted
Tendered
Tender Type
38,287,901
Equivalent coupon-issue yield.
RR-2191
http://www.publicdebt.treas.gov
$
11,482,488
DEPARTMENT
'IREASURY
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622·2960
EMBARGOED UNTIL 10 A.M. EST
Text as Prepared for Delivery
February 3, 1998
TREASURY SECRETARY ROBERT E. RUBIN
SENATE BUDGET COMMITTEE
Mr. Chainnan, members of this committee, it is a pleasure to speak with you today about
the President's FY 1999 budget. This is an historic moment: The President is proposing a
balanced budget for the upcoming fiscal year, the first since 1969. The budget is rooted in fiscal
discipline, yet invests in areas critical to future productivity, and promotes and protects our
interests in the global economy. Perhaps most importantly, this budget provides a clear answer to
the question of how to use the projected budget surpluses. The President proposes that surpluses
be reserved pending reform of the Social Security system.
This budget carries forward the President's successful economic strategy. As the
President said last week during the State of the Union, from the beginning of this Administration
we have "pursued a new strategy for prosperity: fiscal discipline to cut interest rates and spur
growth; investments in education and skills, in science and technology and transportation to
prepare our people for the new economy; new markets for American products and workers."
Before I discuss the specifics of this budget, I think it is important to review the progress
we have made in getting our fiscal house in order.
When President Clinton entered office in 1993, federal debt had quadrupled from 1980 to
1992 and the 1992 deficit was $290 billion, an all time high. These huge deficits kept interest rates
high, diminished confidence, lowered investment and stifled growth. Budgets were based on
economic assumptions that were far too optimistic. When these assumptions failed to materialize,
the result was higher deficits than forecast, and cynicism about the budget process.
In 1993, President Clinton fought for, and Congress approved, a powerful deficit
reduction plan that was based on conservative economic assumptions and which brought the
RR-2192
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
deficit down by $500 billion over five years. The deficit reduction increased confidence, helped
bring interest rates down, and that, in tum, helped generate and sustain the economic recovery,
which, in tum, reduced the deficit further. The result was a healthy, mutually reinforcing
interaction of deficit reduction policy and consequent economic growth, that brought the deficit
down to $22.3 billion in 1997, and sets the stage for going to balance.
Today, unemployment is 4.7 percent; it has been under 6 percent for the last three years.
Over the last five years, the economy has generated over 14 million new jobs, inflation and
interest rates are low and real wages are rising, although too many Americans are still not
participating fully in the economic well-being that most are sharing. Last year's bipartisan deficit
reduction package has further improved our fiscal picture, even while increasing investments and
cutting taxes for the middle class.
Moreover, for a median income family offour, the federal income and payroll tax burden
will be lower in 1998 than at any time in the last 20 years. And for a family of four earning half the
median income, in part because of the expansion of the Earned Income Tax Credit for 15 million
families, the federal income and payroll tax burden is lower than at any time in the last 30 years.
Families' tax burden will fall further next year when the child credit enacted last year is fully
phased in.
Mr. Chairman, the efforts over the past five years have paid off: the current projection
anticipates surpluses well into the next century, although long-term budget forecasts inherently
involve a great deal of uncertainty. How we use these surpluses is a critically important issue in
the years ahead, and a key focus of the President's budget.
The overarching point of the President's economic strategy going forward and his 1999
budget is clear: Under no circumstances can we take any steps that will undo the fiscal discipline
we have worked so hard to achieve. We propose targeted tax cuts that are fully paid for, in the
context of a balanced budget, to benefit working families. We believe there should be no tax cuts
that are not fully paid for. The last few years clearly demonstrate the economic benefits of fiscal
discipline and the global financial markets that have emerged in recent years greatly heightens its
importance. The global capital markets impose swift and strict penalties on countries with
unsound policies as we have seen in recent months in Asia, and confers great benefits on countries
with sound policies.
The surpluses present an enormous opportunity, one that so many have worked hard to
achieve, and one that we must not squander. We believe the surpluses should be reserved until
Social Security is placed on a sound financial footing for the 21 st century.
After 2010, the huge baby boom generation will begin retiring. This will place increasing
pressure on the Social Security system. And that is why the President believes very firmly that
nothing should be done with the surpluses until Social Security reform is addressed.
2
I would stress, however, that the President's commitment to preserving the surpluses does
not preclude undertaking other initiatives -- including cutting taxes and increasing spending -- so
long as those initiatives are fully paid for. Indeed, our budget includes investments in areas critical
to increasing future productivity, moderate targeted tax cuts, Medicare and retirement initiatives,
and critically important measures to protect and promote America's economic and national
security interests in the global economy. Today I would like to focus on just a few significant
measures that reflect those priorities.
First, to enhance productivity, and maintain our country's competitive position in the
years ahead, the Administration proposes increased funding for education, such as tax credits for
school construction and new spending for recruiting and training more teachers. The budget also
proposes the new Research Fund for America for medical and science research.
Our budget also includes an important set of child care proposals, including tax credits to
help parents afford child care and to encourage businesses to create and expand its availability,
and new spending for child-care subsidies for children from poor families. Helping parents with
child care is not only good for parents, it is also good for the economy, because it helps all to
participate in the workforce to the full extent of their abilities and wishes.
In addition, the budget includes measures to promote growth in our inner cities and other
economically distressed areas, by increasing the low-income housing tax credit and through
increased funding for community development banks. This is a national economic issue: Our
economy will never achieve its full potential until we equip the residents of these areas to enter
the economic mainstream.
Second, the budget promotes retirement security and health care through permitting all
individuals to buy into Medicare when aged 62-64, and the unemployed after age 55. The costs of
these medical proposals are entirely paid for by the beneficiaries, plus by specific proposals to
eliminate waste, fraud and abuse in the Medicare program, all in accordance with rates set by the
professional actuaries every year at the Health Care Financing Administration. Our budget also
includes new tax credits that will increase the availability of private pensions to those who do not
have access to them now.
Third, our budget includes measures to help protect the environment: tax incentives to
encourage energy conservation, which are critical as we address the threat of global climate
change; and spending and other incentives to clean up environmentally contaminated sites.
Fourth, and finally, the budget has critically important measures to protect and promote
the interests of American workers, farmers and businesses in the global economy. Working
through international financial institutions such as the World Bank, the International Monetary
Fund and the multilateral development banks helps promote fiscal stability and growth in
developing countries, which promotes jobs and increases standards of living here at home.
3
The IMF is playing an especially critical role as it leads an international effort to resolve
the current financial crisis in Asia. The countries in Asia are our customers, our competitors and
our security partners. The United States has both critical economic and national security interests
at stake in promoting the related goals of economic growth and stronger currencies in Asia.
To enable the IMF to respond effectively if this crisis were to spread and intensify -- which
we all want to avoid -- and to deal with future crises that could similarly affect the interests of the
American people, we recently transmitted a supplemental FY 1998 budget request for an increase
in our IMF quota subscription, and a commitment for an augmented back-up facility to the IMF,
the New Arrangements to Borrow. When the IMF draws on either of these commitments, we
receive a liquid, interest bearing offsetting claim on the IMF of equal value. Our contribution does
not result in a budget outlay and so does not increase the deficit, or displace spending on other
domestic programs. And last year, this Committee provided in the bipartisan Balanced Budget Act
specific provisions for discretionary cap adjustments for these programs.
Before concluding, let me say once more: the budget does not exceed the discretionary
caps, under the structure of the current Budget Enforcement Act; and all of the initiatives in the
President's budget are fully paid for, in full accordance with that act. The measures to pay for the
initiatives include spending cuts, tax loophole closers, revenue from tobacco legislation designed
to curb the use of tobacco among young people, extension of Superfund taxes and excise taxes on
fuels, and a new Federal aviation user fee to replace existing aviation excise taxes.
Mr. Chairman, we have finally put our nation's fiscal house in order. That is an enormous
achievement, but by no means can we rest on our laurels. We face significant challenges in
fostering a strong economy and maintaining fiscal responsibility in the years and decades ahead,
particularly with the coming retirement of the baby boom. As the old saying goes, you fix your
roof when the sun is shining.
Mr. Chairman, the President's budget carries forward the President's economic strategy
that has been so central to the strong economic conditions of the past five years. This budget
preserves the surpluses until we strengthen Social Security, invests in areas that are critical to the
future of this country, provides for programs that protect and promote our critical economic and
national security interests in the global economy, and, of absolutely critical importance, it keeps us
on the path of fiscal discipline that is so crucial to our economic well-being. I look forward to
working with all of you in the days and weeks ahead to approve this budget. Thank you very
much.
-30-
DEPARTMENT
OF
THE
TREASURY
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.· WASHINGTON, D.C .• 20220. (202) 622-2960
FOR RELEASE FOLLOWING EMBARGO TIME
Text as Prepared for Delivery
February 3, 1998
REMARKS TO THE TREASURY BORROWING ADVISORY COMMITTEE
OF THE PUBLIC SECURITIES ASSOCIATION
BY DIRECTOR OF THE OFFICE OF FINANCIAL ANALYSIS
JOHN H. AUTEN
When you were here three months ago, the economy was growing strongly and
inflation was low. The cloud on the horizon was the emerging financial problems in Southeast
Asia. Now, three months later, the Asian situation shows signs of stabilizing and the U. S.
economic situation has if anything improved even further. Growth moved above 4 percent in
the fourth quarter and inflation stayed near 1-112 percent.
Most recent measures of domestic economic performance have been extremely positive.
Perhaps the only exceptions worth noting are some features of the last quarterly reading on the
employment cost index and a dip in the Conference Board index of consumer confidence in
Jan uary, offset by stronger readings recently from other such surveys. The general picture is
one of a strong domestic expansion supported by vigorous job growth and sharply rising
incomes. The unemployment rate stayed below 5 percent in the second half of last year, but
cost pressures are still well contained with some key measures of inflation showing the lowest
readings in more than three decades. This combination of strong growth and low inflation
after more than six years of cyclical expansion is remarkable, indeed.
Important features of the current situation were summarized last week in two key data
releases: the employment cost index for the three months ending in December and the advance
estimate of Gross Domestic Product for the fourth quarter of last year.
RR-2193
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2
The employment cost index covering wages and salaries plus fringe benefits of civilian
workers rose by 3.3 percent during the twelve months of 1997, up from increases of
2.9 percent during 1996 and 2.7 percent during 1995. The 1997 increase and the results for
the latest three months were somewhat above market expectation.
The latest results were boosted statistically by higher commissions in the financial
industry associated mainly with the recent surge in mortgage refinancing activity. This was
the only industry to experience a bigger wage and salary increase in the fourth quarter than in
the third. Developments in this area seem unlikely to be much of an inflationary force going
forward.
Attention is often directed to the potential cost-increasing impact of rising levels of
employment rather than to the tangible income-enhancing effects. Converted to real terms, the
private wage and salary component of the employment cost index rose by more than 2 percent
during 1997 -- the largest such twelve-month increase in nearly fifteen years.
There is little indication, however, that the employment cost index is revealing any
significant increase in inflationary pressure. Rising real wages reflect lower rates of inflation
and above-average gains in productivity last year. While full productivity data are not yet
available for the fourth quarter, approximate estimates can be made. Productivity growth
apparently tapered down from a very rapid pace in the third quarter, but ran well above trend
for the year as a whole. This held down growth in unit labor costs despite the rising levels of
compensation that are an inevitable, and highly desirable, feature of a prosperous economy.
The other key statistical report last week was the advance estimate of fourth-quarter
GDP. Growth rose to a 4.3 percent annual rate in the fourth quarter, up from 3.1 percent in
the third q-uarter, bringing the increase during the four quarters of 1997 to 3.9 percent.
Inflation remained at relatively low levels with the GDP chain-weight price index rising at a
1.5 percent annual rate in the fourth quarter and 1.8 percent during the four quarters of the
year. Strong growth and low inflation were the dominant features of the report.
In addition, there were some special features of the fourth-quarter results which require
comment.
•
Given the Asian difficulties, some early signs of deterioration in the net export
component of the GDP accounts might have been expected. That still lies in the future
since net exports improved on a seasonally adjusted basis, adding about 1 percentage
point to real growth in the fourth quarter. This repeats once again a pattern that has
been common in recent years, apparently related to difficulties of seasonal adjustment.
On the basis of past experience, some worsening of the net export position early this
year would be expected for purely statistical reasons alone.
3
•
It should be noted that there was some moderation in the pace of domestic final demand
in the fourth quarter, masked by the increase in net exports and by an increase in the
rate of inventory investment. Consumer expenditures grew more slowly than in the
third quarter, with most of the growth coming from spending on services rather than
commodities. In addition, business fixed investment spending actually fell back a little
in the fourth quarter, following double-digit rates of increase in the two previous
quarters. As a result, final demand slowed down somewhat from the third-quarter pace.
The economy closed the year on a strong note, but does not seem to have accelerated
much, if at all, from the pace earlier in the year, despite the 4.3 percent growth number
for the fourth quarter.
It is an unfortunate fact that even our most recent statistical readings are backwardlooking. Yet, in domestic economic terms, the dominant question currently is the impact of
Asian developments. Financial market signals flashed rapidly down the electronic highway, as
many of you know from firsthand experience. Effects on what we are prone to term real
activity are still relatively moderate and not always even clearly discernible in the flow of
statistical information. And, with interest rates moving to lower levels, some of the early
effects on real activity appear to have been positive, rather than negative.
At this stage, reliance has to be placed on econometric estimation of the probable Asian
impact on the U. s. economy. There is no shortage of such estimates although their direct
comparability is occasionally questionable with some focussing on primary impact effects and
others allowing for subsequent repercussions. All told, a lot of private-sector forecasts point
to a negative impact on U. S. growth of perhaps 1/2 percentage point this year.
These estimates are valuable. They help to separate fact from fancy and shift the
discussion into a quantitative framework. They have one serious shortcoming. Even if we
accepted a specific estimate and regarded it as accurate out to several decimal points, what
would we subtract it from? An Asian impact could fall heavily on the U. S. economy in one
set of economic circumstances and hardly be noticed in another. Given a continuation of the
stabilizing policies already put in place internationally and the strength of the U. S. economy
domestically, U. S. economic growth seems likely to slow from its recent pace but not to fall
much below its trend rate of growth in potential.
This may be a case where strength in numbers provides some support. The Blue Chip
consensus estimate of growth by some 50 economists at major banks, corporations and
academic research organizations for the four quarters of 1998 has been remarkably stable near
2-1/4 percent since late last summer. Presumably this reflects their collective allowance for a
negative impact from Asian adjustments offset by continued signs over the period of greaterthan-expected strength in the U. S. economy.
That is a summary of recent economic developments and the near-term outlook.
--30--
DEPARTMENT
TREASURY
OF
THE
TREASURY
NEWS
~/7~. . . . . . . . . . . .. .
. . . . . . . . . . . . . .
OmCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. _ 20220 _ (202) 622-2960
EMBARGOED UNTIL 2: 30 P.M.
February 3, 1998
CONTACT:
Office of Financing
202/219-3350
TREASURY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills totaling
$14,500 million, to be issued February 12, 1998. This offering
will result in a paydown for the Treasury of about $1,925 million, as the
maturing publicly held weekly bills are outstanding in the amount of $16,420
million.
approx~tely
In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $7,324 million of the maturing billS, which may be refunded at
the weighted average discount rate of accepted competitive tenders. Amounts
issued to these accounts will be in addition to the offering amount.
Federal Reserve Banks hold $2,939 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, as amended) 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
RR-2194
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
HIGHLIGHTS OF TREASURY OFPERINGS OF WEERLY BILLS
TO BE ISSUED FEBRUARY 12, 1998
February 3, 1998
Offering Amount .................... .
$7,250 million
Description of Offering:
Term and type of security .......... .
91-day bill
CUSIP nwnber ....................... .
912794 6P 4
Auction date ...... .
......... February 9, 1998
Issue date ......................... . ......... February 12, 1998
Maturity date ...................... . ......... May 14, 1998
original issue date ................ .
November 13, 1997
currently outstanding .............. .
$10,883 million
Minimum bid amount ................. .
$10,000
MUltiples .......................... .
$ 1,000
$7,250 million
182-day bill
912795 Al!' 8
February 9, 1998
February 12, 1998
August 13, 1998
February 12, 1998
$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 three decimals in
increments of .005%, e.g., 7.100%, 7.105%.
(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 $1 billion or greater.
(3)
Net long position must be determdned 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 ............. . ......... Prior to 12:00 noon Eastern Standard time on auction day
Competitive tenders ................ . ... ...... Prior to 1:00 p.m. Eastern Standard time on auction day
payment Terms ...............................
Full payment with tender or by charge to a funds account
at a Federal Reserve Bank on issue date
To: PUBLIC AFFAIRS CALLER
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From: TREASURY PUBLIC AFFAIRS
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3-12-98 12:38pm
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T R E ,\ S I; It \'
NEWS
'IREASURY
omCE OF PUBUCAFFAIRS -1500 PENNSYLVANlAAVENUE, N.W. - WASHINGTON. D.C •• 20220. (202) 622-2960
STATEMENT OF
DEPUTY SECRETARY OF THE TREASURY
LAWRENCE H. SUMMERS
before the
COMMITTEE ON FINANCE,
UNITED STATES SENATE,
February 4,1998
Mr Chainnan. I am pleased to have this opportunity to discuss recent developments in Asian
financial markets and the closely related issue of ensuring adequate funding for the International
Monetary Fund -- both of which I mow have been of considemble interest to this committee and
other members of Congress.
Today I would like to discuss the instability in Asia and the risks that a more prolonged crisis
would pose to the United States; the Administration's strategy for restoring stability; and the
critical need to support the IMF so we can respond effectively, not just to these crises, but to
other possible crises down the road.
I. The Risks. Posed by the Instability in Mia
As the President said in his State of the Union Address, the Asian economies are our customers,
our competitors and our allies. The financial tunnoil in the region will have an impact on the
growth of the American economy, and the well-being of American workers, businesses and
farmers. Our job is to ensure that impact is as small as possible.
Nearly one third of our exports go to Asia •• more than we send to Europe. Already major
Fortune 500 companies such as Microsoft, General Motors and Boeing have warned of reduced
export demand because of the instability in Asia, reduced demand that we can expect to mean
fewer new jobs for American workers.
Our economy is in strong shape to withstand these and other short-tenn effects of the crises as
they have developed thus far. But the potential costs will be much larger if these economies
prove unable to restore stability and the crises spread to emerging markets in other regions -.
For press releases, speeches, public schedules and offititJl biograPhies, call our 24-11mufeu liJU! at (202) 622-2040
To: PUBLIC AFFAIRS CALLER
From: TREASURY PUBLIC AFFAIRS
3-12-98 12:39pm
p. 2 of 11
markets which now account for more than 40 percent of our exports. Prolonged instability in
Asian and other markets:
•
could threaten American exports and the jobs that depend on them, leading to a cycle of
costly devaluations and impeding open trade;
•
could affect our own financial markets, and with it everything from investment in ~ools
and equipment for workers to mortgages for new homes;
•
and could raise serious concerns for national security, given the proven potential for
financial crises to trigger broader conflicts. Under Secretary Eizenstat will be addressing
this issue in greater detail.
In short, the risks of failing to respond to these crises - the risks for our economy. the stability of
our financial markets and our broader national security -- far exceed the risks of action. We can,
and we must work with the International Community to help restore confidence and growth as
soon as possible -- so that these nations can continue to be strong markets and stable allies for the
United States.
II. The United States' Approach
Our approach to these events rests on four principles:
•
first, that the major responsibility for resolving these crises rests with the countries
themselves and the actions they are prepared to take.
•
second, that the international conununity should provide temporary, conditioned financial
support for countries as a bridge to recovery;
•
third, that in the wake of these crises the major industrialized nations, particularly Japan,
and the economies of the reiion must promote growth in their own economies to support
the return of market confidence and growth;
•
fourth, that we must act with a view, not merely to the present crises but to the kind of
international financial system we want to build for the future, by fostering policies around
the world to reduce the risk of contagion and prevent further crises.
Let me say a little about each of these, with a special focus on the first two, which rely heavily on
the IMF.
1. National Policy
A strong domestic response is the absolute prerequisite for restoring stability. The reform
2
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programs we have supported in TMiland, Indonesia and Korea commit these countries to
concrete actions to restore stability and lay a surer foundation for long-term growth.
While each program is tailored to address the specific causes of that country's crisis, the focus
throughout has been on maklng the economy more market-oriented and better able to allocate
capital and to allow market forces to operate. Important, long overdue, chan~es need to be made
in the structure of these economies - changes which have been welcomed, in many cases by
officials in the countries themselves. The major reform areas include
•
measures to strengthen the domestic fmancial system, through financial sector
restructuring, improved transparency and supervision, elimination of the interrelationships between government and business, and opening of domestic capital markets.
•
structural refonns to break up commodity monopolies and open protected sectors to
foreign competition.
•
restoration of appropriate monetary and fiscal policies. and agreement on stahle and
transparent rules for policy makers for the lonier term
Bearing in mind the strong interest of this committee in the trade aspects of these programs, let
me say a little more on this subject.
Indonesia's stabilization package commits the government to eliminating a range of officiallysanctioned import and export monopolies, removing export taxes on resource products,
reforming the government procurement process, and accelerating the pace of privatization.
Tariffs on food imports have been cut to a maximum of 5 percent, effectively immediately.
Similarly, the Thai program includes a greater emphasis on privatization, measures to reduce
subsidies to state enterprises, and loosening of the limitations on foreign ownership and
exchange controls.
For its part the Korean government has pledged, among other things, to eliminate a string of
unfair subsidies to Korean exporters, ease up on import licensing and cumbersome customs
procedures, end government-directed noneconomic lending and substantially ease restrictions on
foreign ownership of Korean companies.
Mr Chairman, it is worth taking a step back to consider what these changes represent. The close
and preferential relationship between the chaebo/s, the banks and the govenunent has been one
of the salient characteristics of the Korean economy for years. It is at the root of our persistent
trade problems with the country -- resulting in poor market access, Wleconornic investment and
excessive concentration and excess capacity in key industries. At the same time, these practices
have been very difficult to address using traditional trade policy tools_ The reforms in the IMF
program will go far toward breaking up thls preferential relationship once and for all.
3
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2. International Assistance
When -- and only when -- countries are conunitted to pursuing these strong policies, the
international conunWlity, led by the United States, has a strong interest in helping them help
themselves. By providing temporary financial assistance, we can give these economies vital
breathing room while those vital reforms are undertaken.
Without this support, even those countries that are committed to reform might face default -either at a government level or the private corporate level -- which could have devastating effects
on their own economies and significantly raise the risks of contagion in other markets.
The IMP has been and must continue to be the central provider of such assistance, supported by
additional help from the World Bank and the regional development banks. It should be noted that
in responding to the recent crises in Asia the IMF has been the vehicle for a major multilateral
effort to restore stability -- refleCtlni an unprecedented degree of international burden-sharing. In
sharp contrast to the situation in Mexico, the International Financiallnstitutions have been
responsible for the bulk of the assistance provided -- meaning very limited direct financial
exposure for the United States.
We have joined other industrial countries in indicating a willingness to provide additional
temporary assistance in some situations if a country is continuing with reforms and unexpected
developments call for supplementary resources. To date, none of this "second line of defense"
funding has been disbW'Sed, and any disbursements that do occur would be highly short-term in
nature and guaranteed.
3. Action by the industrialized economies and by the countries of the region
Strong domestic policies in the countries worst affected will be the key to restoring stability in
those economies. But in an era of interconnected markets, other countries have a part to play in
supporting a rapid return to growth - and the continued expansion of trade. Given the high levels
of regional trade and competition, the largest economies in the Asia- Pacific region have a special
respon:§ibility to pur~ue sound policies aimed at promoting their shared interest in monetary
stability and solid growth.
With a balanced budget, the United States government is doing its part, by no longer soaking up
$200 billion a year that could be invested in the global economy. Continued strong refonns in
China will also be increasingly vital. When we talked recently with Zhu Rhongji, the Chinese
Vice Premier, in Beijing we were happy to hear him reaffirm China's commitment to a stable
exchange rate, and to dealing effectively with the economic challenges it faces. In the coming
weeks and months, though, it will be Japan's tum to step up to the plate -- by acting decisively to
stimulate growth and by coming to grips with the problems in its own domestic financial sector.
The industrialized nations can also respond more directly to the crises by helping to support trade
flows in the region. There is a severe danger that the domestic recession in these economies will
4
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be prolonied by Ii shortage of shorHenn trade finance. Weighed down by debt, the financial
system in some cases has simply ceased to function -- making it all but impossible for businesses
to obtain credit to import vital goods and materials.
Our own Export-Import bank has led the world in offering substantially enhanced short-tenn
export insurance in Korea and is exploring ways to extend this program to other Asian markets.
Providing this support is truly a win-win proposition for the United States: it gives immediate
protection to American exports and jobs, while at the same time speeding the long-term recovery
of these important markets. Ex-1m is now working to enlist other export credit agencies in a
multilateral initiative to support the region's import financing needs.
4. Long-term reform agenda
Mr. Chainnan, recent events in Asia leave in their wake an important long-term agenda for the
international community. This will not be the last ftnancial crisis. But we need to work to reduce
the risks of such events and manage them more effectively when they do occur -- we need, in
Secretary Rubin's words, an international financial architecture as "modern as the markets".
President Clinton began this effort four years ago at a G-7 meeting in Naples. At the summit that
followed in Halifax in 1995, we launched a broad international effort to strengthen safeguards in
the global fmancial system. Two important parts of this initiative are an international program to
strengthen disclosure and the development of core principles in supervision in emergina market
financial systems.
To modernize our tools for dealing with crises, the United States has also taken a leading role in
devising new approaches to the provision of external finance. Indeed, one outgrowth of this
process, the Emergency Financing Mechanism of the IMF. has been a core element of the
financial support programs in Asia.
At President Clinton's initiative, the United States will convene a meeting later this sprina of
finance ministers from around the world to continue these efforts and start developing a
consensus on policies to deal with new challenges to the international financial system.
The crucial imperatives ofthls agenda include:
•
promoting measures to make global markets function more efficiently, for example
through increased surveillance and enhanced national supervision and regulation;
•
increasing transparency and disclosure, for example of all encumbrances on foreign
reserves;
•
strengthening prudential standards, both globally and in individual economies
•
improving domestic policy management, exploring ways to manage policy to help avoid
5
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crises and deal with crises that occur;
•
strengthenin2 the role of the international financial institutions in financial crises, to
ensure that the international conununity can respond quickly and appropriately to
problems and act to prevent their recurrence;
•
ensuring appropriate burden-sharing by the private sector in the resolution of crises.
These issues are as complex as they are important. Given the high stakes involved, we carutot
risk pushing through major reforms before the consequences have been thoroughly examined-nor can we afford to leave the IMP ill-prepared to respond to this and future possible crises until
these questions are resolved. However, it is important to note the important progress that we
have made in recent months -~ even in the midst of crisis -- toward some of those long-tenn
reform goals:
•
•
to promote transparency, as a condition for disbursements of financial support in
Thailand, Indonesia and Korea, we strongly, and successfully, urged that governments
publish the "Letter of Intent" outlining the reform measures agreed with the IMF.
with the United States again taking the lead to ensure that the means of support match the
situation, the most recent programs have also rested on the concept of supplemental
reserve ftnancing at a premium interest rate -- where the aim is to provide the necessary
emergency finance and to maximize the private sector's incentive to raise foods for itself.
•
by involving the foreign creditor banks in the resolution of the Korean crisis, we have
supported an important innovation in the international community's approach to crises of
this kind and helped catalyze a major private sector effort on behalf of restoring stability.
•
in addition to pressing for the major fmanciaI sector strengthening included in the IMF
support programs, we have reached agreement with Asian governments on the
development of regional surveillance mechanisms to promote Asian financial stability
and increase fmancial market transparency at a regional level.
To repeat, Mr Chairman, these and other steps must be seen as part of a rolling reform agenda -in a. sense, one that will never be completed. As long as the global economy changes, we will
need to ensure that the international financial architecture changes with it.
Ill. Support for the IMF
Let me turn now to the immediate need to ensure adequate funding for the IMP at this critical
time. On Monday the President asked, as a supplementary request, for Congress to a.pprove
supporting the IMF in two important ways: first, through an increase in our quota subscription,
6
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and second, by contributing to an augmented emergency facility, the New Arrangements to
Borrow, to supplement the IMF's resources to deal with these kinds of crises.
Mr. Chainnan, we have responded to these crises because they raise important risks for our core
economic and national security interests, risks that will increase the longer the instability
continues -- and the further it spreads. We must support the IMF as we work through these
crises, and ensure it is ready to respond to future crises, because it is, quite simply, the cheapest,
most effective way for us to promote those core American interests.
Fifty years of bipartisan support for the IMF has not cost the American taxpayer one cent,
because it has not had a major default, and because its lending is backed by very substantial gold
reserves. The IMP presently has $65 billion in loans outstanding -- and fully $40 billion in
reserves. It operates much like an international credit wllon. We and other countries provide a
line of credit, and when the IMF draws on our commitments, we receive a liquid, interest bearing
offsettini claim on the IMF. That is why there are no direct budget costs. That is why our
contribution does not increase the deficit, or impact other spending priorities.
By imposing conditions, the IMF supports the right policies. By injecting shorHerm finance it
prevents further devaluations •• and supports the return of long-term growth. It promotes changes
that are in our long-tenn interest: such as making these economies more open to foreign trade
and reducing domestic subsidies. And it provides us maximum leverage: each dollar we .
contribute levers more than five from the rest of the world. Even with these new funds the IMF's
resources would still represent well under 1 percent of global GOP -- little more than half what
they were 20 years ago.
The IMP needs to be better governed. It needs to be more transparent in its operations and
accoWltable for its decisions if it is to command the confidence of taxpayers and investors.
These are aspects of the IMP that are quite appropriately the subject of Congressional
examination .. And let me be clear: these are aspects we plan to change.
A number of concerns have been raised about our continued. support of the IMF. Let me take a
little time to address some of these.
Excessive austerity?
There have been legitimate concerns that IMF stabilization programs in Asia have been
excessively contractionary and focused too little on the need to restore growth and provide for
rising individual incomes and opportunities in these countries.
The primary focus of these programs is structural -- on the promotion of policies that will
promote growth by allowing markets to operate and market forces to operate. The
macroeconomic aspects of the programs are designed to balance the imperative to prevent further
declines in markets and a free-falling currency, on the one hand, and the imperative of avoidin~
7
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further knocks to domestic demand, on the other. There is no guarantee that this difficult balance
will be struck correctly. And as we go forward the United States will watching closely to ensure
the right balance is being struck as conditions change and confidence is improved. But be clear:
these programs are designed with one objective and one objective alone -- achieving the fastest
possible restoration of growth.
Where a crisis has occurred and adjustments have to be made, it is crucial for US all to recognize
that these changes have to be carried out effectively •• and equally critical that they be designed
to promote an equitable return to growth. In fact, all of the recent programs have been designed
to ensure that the necessary adjustments do not come at the expense of the poor:
•
in the Indonesian and Thai programs, spending on health, education and social programs
have been expressly protected from any fiscal consoHdation, and where possible, efforts
to target spending on the poorest segments of society have been intensified. In Korea, the
program commits the government to strengthening the labor insurance system, and the
promotion of active labor market policies to lessen the shock to employment due to the
crisis;
•
in designing programs to supplement the IMF program, both the World Bank and the
Asian Development Bank have been acutely aware of the need to focus on the impact of
policy on the most vulnerable, both in the new lending provided to these countries and
through the restructuring of existing lending programs to promote urban and rural
employment and basic health services. New World Bank lending to Thailand and
Indonesia. for example, foresees upwards of $600 million in new loans for improving the
social safety net in each of these countries.
Finally, and more broadly, we should remember that these programs center around the ur~nt
need to restore confidence in financial markets •• because that is the critical first step to a
recovery in growth and investment In that sense they are aimed squarely at promoting the longtenn interests of workers in these countries.
Insufficient concern/or core labor standards?
A closely related concern about these programs has been that they fail explicitly to incorporate
requirements to improve labor standards in these countries.
Establishing core labor standards and ensuring human rights are vital to successful development - and they have been and will continue to be a critical priority at Treasury. In recent years we
have made important progress in pressing these issues within the World Bank and other
International Financial Institutions and we are committed to progressing further. To cite just two
recent examples:
•
we have secured a major World Bank effort to fight against forced and exploitative child
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labor, and successfully urged the World Bank to pUblish major policy paper on the
subject and to strengthen its partnerships with the International Labor Organization and
other labor organizations;
•
and we have persuaded the IMF to institute a policy dialogue with the ILO and to
undertake a pilot program of in-country consultations on labor market issues and worker
rights.
In Indonesia, the United States Executive Director in the World Bank has specifically raised the
issue of worker rights in Board Reviews of the Country Assistance Strategy for Indonesia, urging
that the World Bank consider and better integrate core labor issues into its Indonesian programs
and operations.
Our Executive Director to the IMP has also raised the question of Indonesian labor market
practices in the context of the most recent financial package. And just last week, the United
States Trade Representative raised worker right issues with officials in Indonesia, outlining an
action plan for progress and setting benchmarks on freedom of association and the right to
organize.
In Korea, with the strong encouragement of the IMF during their official negotiations -- and in
addition to the commitments to strengthen labor insurance programs mentioned earlier -- the
government has created a tripartite business-labor-govenunent conunittee to negotiate the terms
for the restructuring of Korea's chaebol-based industrial sector. This is a ground breaking
achievement that puts labor directly at the table in designing the future shape of the Korean
economy.
And yet, as Secretary Rubin has said, it is important to recognize that in these types of emergency
situations, it is simply not feasible -- and almost certainly unwise -- to attempt to address these
hugely complex issues at the same time as achieving all the steps needed to restore financial
instability. To be effecHve, these programs have to focus on the immediate sources of the
problem. They cannot be used as a vehicle to address the full range of other issues that are of
particular concern to us, however appealing that possibility might be -- much less those of the
180 odd other IMF members.
Fueling moral hazard?
In the wake of these programs. an important concem has arisen that; by providing financial
assistance to these economies, the IMF -- and with it the United States -- may have encouraged
irresponsible behavior by governments and investors in the future (the problem of "moral
hazard").
Where governments are concerned, all of the economies who have had to seek IMF assistance
in recent months face months of severe economic distress and implementation of difficult
reforms to restore confidence. Clearly, the overall costs of the crises will far outweigh the
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fleeting benefit of emergency support.
In the case of investors, the situation is less clear-cut. Creditor banks and other institutions can
and have taken significant losses in the wake of these crises; and in Korea, especially, creditors
have shared a iood part of the burden for restoring stability. One Federal Reserve estimate
suggests that investors could face losses of $700 billion following the decline in equity markets
in these economies. Already, three major U.S. banks -J.P. Morgan, Chase, and eitibank -- have
reported that developments in Asia have had a substantial negative impact on their profits. And a
story this week in the Financial Times cited a market forecast, which mayor may not prove to be
accurate, that European banks alone could face losses of $20 billion on their lending to Asia
because of the crises.
However, it is true that in some situations providing support for countries can have the
inevitable, and undesirable side--effect of shielding investors and banks from the full
consequences of their actions- The trouble is that the alternative, of forcin~ these creditors to take
losses, would raise even graver risks for long-term stability. not merely in these economies but
around the world. Banks might withdraw from these economies -- and, perhaps, a great many
other markets, undemlining the continued flow of investment funds to emerging economies and,
quite possibly. the stability of our own financial markets.
We can and must work to promote investor responsibility in this new global economy: but' we
must do this in a way that supports rather than threatens the long-tenn financial stability in which
American workers and businesses have such an enormous stake. In the meantime, we cannot
afford to leave the IMF poorly positioned to respond to another wave of instability in Asia •• or a
different crisis down the road.
Imposing harsh outside remedies?
Finally, there has been widespread unease that, in designing these programs, the IMF -- led by the
United States -- has imposed sweeping reforms without regard for the views and concerns of the
governments that must implement them.
Few, if any, of the negotiations leading to the recent reform programs have resembled this
description. In fact, the broad outlines of the program _. and a large chunk of the specific refonn
measures _. have almost always originated with officials in the cOWlmes themselves, many of
whom have welcomed the opportunity to undertake long-sought reforms. Kim Dae Jung, the
incoming Korean President published a book in 1996 making a compelling case for ending
government-directed lending to industry, for promoting non-inflationary monetary policies, for
keeping budgets under control, for reforming the chaebol, and for opening up these economies'
financial systems -- all reforms which the IMF program will now help him to undertake.
Mr Chainnan. there will always be room for disagreement about which policies are the right
ones. And the United States will always have a stake in pressing for programs that reflect our
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core values: the importance of transparency, fighting corruption, promoting the environment and
protecting core labor standards. But we will only have an effective voice in the IMF to ensure
that it promotes the right policies -- and the IMF will only be able to help protect the financial
stability we have a stake in -- if we do our part to ensure it remains adequately funded.
IV. Concluding Remar~
Mr. Chairman, these are serious crises that we have seen in Asia. Even if stability is now
restored, the effects of the crises to date on the United States will be real. If the instability were t(
spread or intensify. the potential risks to Americanjobs, American financial markets and our
national security could be grave indeed.
We are in a strong position to withstand the effects of these crises: our economic performance is
the best in a generation and unrivaled among the major industrialized economies. The
uncertainties in the situation are great: there can be no guarantee that our efforts to restore
stability and minimize the effects on our economy will succeed. But·- given the risks involvedwe have a responsibility to do all we can to protect America's core economic and security
interests, by responding to these crises and working to restore stability with the most effective
mechanisms available to U5.
To fail, at such a time, to fund the IMF adequately would be to take real risks. It would risk our
not bein~ able to respond with adequate financial support in the event that this crisis spreads.
And it could risk a further shock to the confidence of international investors at a time of
considerable market fragility. These are not risks we should take. They are not risks that the
American taxpayer would want us to take -- especially when we can invest in the protection of
the IMF at zero net cost to the budget
I look forward to working with you, Mr. Chainnan, with other members of this committee and
'With others in Congress as we work to ensure that the IMF continues to promote our core
interests in the months and years to come. Thank you.
11
TOTAL P.l1
DEPARTMENT
OF
THE
TREASURY
FOR RELEASE FOLLOWING EMBARGO
February 4, 1998
REMARKS BY ROGER L. ANDERSON
DEPUTY ASSISTANT SECRETARY FOR FEDERAL FINANCE
FEBRUARY 1998 TREASURY QUARTERLY REFUNDING
PRESS CONFERENCE
Good morning. I will begin with today's refunding announcement and the terms of the
regular Treasury February quarterly refunding. I will also discuss Treasury market borrowing
requirements for the balance of the current calendar quarter and our estimated cash needs for
the April - June 1998 quarter. I will then discuss certain other debt management issues.
1.
We are offering $35.0 billion of notes and bonds to refund $26.0 billion of
privately held notes maturing on February 15 and to raise approximately $9.0 billion of cash.
The three securities are:
First, a 3-year note in the amount of $13.0 billion, maturing on February 15, 2ool.
This note is scheduled to be auctioned on a yield basis at 1:00 p.m. Eastern time on
Tuesday, February 10.
Second, a lO-year note in the amount of $12.0 billion. This note is scheduled to be
auctioned on a yield basis at 1:00 p. m. Eastern time on Wednesday, February 11.
Third, a 29-3/4 year bond in the amount of $10.0 billion, a reopening of the 6-1/8%
bond maturing on November 15, 2027. This bond is scheduled to be auctioned on a
yield basis at 1:00 p.m. Eastern time on Thursday, February 12.
RR-2197
For press releases, speeches, public schedules and official biographies. call our 24-hour fax line at (202) 622-2040
2
The total of these issues is the same as the total amount offered in the November 1997
quarterly refunding.
2.
As announced on Monday, February 2, we estimate a net market borrowing
need of $10 billion for the January - March quarter. The estimate assumes a $20 billion cash
balance at the end of March. Including the securities announced in this refunding, we have
paid down $24.3 billion of cash from sales of marketable securities. See the attachment for
details.
3.
The Treasury will need to borrow $34.3 billion in marketable securities during
the rest of the January - March quarter. This can be accomplished with the regular sales of
13-, 26-, and 52-week bills in February and March and 2- and 5-year notes in February and
March and with cash management bills that will be issued later in February and in early March
to mature after the April 15 tax date. Further short-term cash management bills may be
r.eeded to cover any remaining low point in the cash balance in March. The tentative auction
calendars for February, March, and April are included in the chart package that was
distributed today.
4.
We estimate that the Treasury will pay down between $75 billion and $80
billion in marketable securities during the April - June quarter, assuming a $35 billion cash
balance on June 30.
5.
Last month, we held our fifth auction of inflation-indexed securities: a new 10year indexed note. We were pleased with this auction, and we continue to be pleased with the
development of the inflation-indexed market. The development of the inflation-indexed
market is a long-term process, and we have made a long-term commitment to its continuing
development. The next step in that process is expanding the indexed market to include 30-year
indexed bonds. As has been recommended by the Treasury Borrowing Advisory Committee,
we are planning to sell a 30-year indexed bond in April 1998.
6.
Inflation-indexed securities have been strippable since the Treasury began
selling them last year, but interest STRIPS from different inflation-indexed issues are not yet
interchangeable for reconstitution purposes. As a promised improvement to the lIS, we
published a proposed amendment to the uniform offering circular for Treasury securities in the
Federal Register on December 8, 1997. The proposal would permit interchangeability (aka
fungibility) of the interest components of stripped inflation-indexed securities that have the
same payment dates. The comment period for the proposal closes on February 6, and we
expect a final amendment to be published soon thereafter.
7.
In the January 29 Federal Register, we published a change in the Uniform
Offering Circular for Treasury securities that tightened the restrictions on noncompetitive
bidding in Treasury auctions, effective immediately. Under the amendment, a noncompetitive
bidder may not hold, at any time, a position for its own account in when-issued trading or in
3
futures or forward contracts in the security being auctioned or enter into any agreement to
purchase or sell or otherwise dispose of securities between the date of the offering
announcement and the time of the official announcement by the Treasury of the auction
results. This is a change in timing only. Before the change, the prohibition had lasted from
the time of the offering announcement until the deadline for competitive tenders. We have
simply extended the end of the prohibition from the competitive tender deadline until the
announcement of the auction results. This change was directed at limiting the noncompetitive
bidding option to small, less sophisticated bidders.
The May quarterly refunding
8.
Wednesday, May 6, 1998.
pr~ss
conference is scheduled to be held on
--30--
4
ATIACHMENT
CASH RAISED
Including the securities announced in this refunding, we have paid down $24.3 billion
of cash from sales of marketable securities.
This has been accomplished as follows:
raised $8.4 billion from the lO-year inflation-indexed notes issued January 15;
paid down $9.1 billion in the 7-year notes that matured January 15;
paid down $1. 6 billion in the 2-year notes that were issued February 2;
raised $0.7 billion in the 5-year notes that were issued February 2;
paid down $5.9 billion in the regular weekly bills including those announced yesterday;
paid down $4.6 billion in the 52-week bills which were issued January 8 and will be
issued tomorrow, February 5;
paid down $21.1 billion of cash management bills that matured on January 22; and
raised $9.0 billion with the notes and bonds we are announcing today.
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3-16-98 4:27pm
p. 1 of 59
20009
REPORT TO THE SECRETARY OF mE TREASURY
FROM THE
TREASURY ADVISORY COMMIlTEE
OF THE
BOND MARKET ASSOCIA nON
February 4, 1998
Dear Mr. Secretary.
Since the Committee's last meeting on October 29, 1997, the pace of economic activity has continued to be
relatIvely brisk. However, the situation Ul Asia and the accompanying appreciation in the doUar are WIdely
expected to nave a negative effect on US. trade performance leading to some moderation in economic growth
during 1998. On the inflation front, the news continues to be qUIte favorable. While job growth has accelerated of
late and labor market conditions appear to be extremely tight, wage pressures have been slow to bu.iJd and the rate
of increase in both consumer and producer prices has been trending lower.
The Asian crisis and credit quality concerns prompted strong demand for the US doUar and Treasuries which drove
yields as much as 50 basis points lower in early December Recently, the stabilizaticn in Asia has reversed this
trend somewhat with yields now 25-35 basis points lower and the yteld curve somewhat flatter than at the time of
the Committee's last meeting. While the Federal Reserve is widely expected to leave policy unchanged in the near
term, forward rate structures are priced for a modest easing over the next several months.
Within this context, to refund $25.9 billion of privately -held notes maturing OIl February. IS, 1998 and to raise $91
billion ofneY{ cash, the CornnUttee recommends that the Treasury 3uctioo 535.0 billion of the foUowing securities:
•
$13.0 billion 3-year notes due February 15,2001;
•
512.0 billion 10-year notes due February 15. 2008;
•
$ W.O billion 29 3/4-year bonds due November 15.2027.
The Committee recommends, by an 18-1 majority, a reopening of the 6 118% bond of November 15,2027. The
Committee felt that a reopening would E!Il.hance the beDchmark status of the bond by creating a larger, more liqUId
issue. This could be especially useful with a six month interval before the next expected band offering. There has
also been increased investor activity in the bond sector, and some accompanying increase in fmancmg market
pressures. All members felt that the size ofrhe long bond offermg should remam at 510 billion in this refundmg.
In its refunding recorruneodatioo. a sizable majority of 13 Committee members felt thiJl the Treasury should
reinforce the benchmark status of the IO-year note by offering 512 billioo. This majonty believed that the 2 and 3
year maturity areas offer the best alternatives for future reduct10ns in coupoo SlZeS, and recommeods a S 13 billion
3-year security in this refunding. Three members felt that the most recent auctioo sizes ofS14 billion 3-years and
$11 billlOl1 10-years would be preferable, believing ttw stability would be desirable in the near term., with the
uncertaJDty over potential future surpluses and financing requirements. Finally, 3 members supported a smaller
refunding offering of $34 billion, with a reduction in the 3-year offermg to 513 billion.
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20009
3-15-98 4:27pm
p. 2 of 59
2
WIth the aim of achieving a cash balance of $20 billIon on March 31, the Committee unarurnously recommends
that, for the remamder of the quarter, the Treasury meet Its borrowmg requirement in the followmg manner
5~year
•
Two
notes totaling S 11.0 billion each;
•
Two 2~year notes totaling $15 0 billion each, WIth these four auctions paying down a net S9.1 billIoo of
cash;
•
A I ~year bill totaling $12.0 billion, to pay down $3 7 bIllion of cash;
•
WeekJy issuance of 3- and 6-month bills through the remainder of the quarter, to pay down $72 billion of
cash; and
•
Two cash management bills totaling $47 btllioo.
Including the $9.1 billion raised in the mid-quarter refunding, as well as anticipated foreign add-«ls of $5.0 billion,
the proposed financing schedule will raise a net amount of $41 billioo. This amount. when added to the $3 1 billion
paydmm for issues that have already been auctioned (or announced) in the quarter, will accompllsh the tcul net
market borrowing requirement of $10 billion.
For the April • June 1998 quarter, the Treasury estimates a oet pay down of$75 - 80 billioo, wrth a cash balance of
$35 billion at the end of June. To accomplish this requirement, the Committee recommends the provisional
financing schedule attached in Table 1.
At the Treasury's reqtJest, the Committee discussed the alternatives fur changes in Treasury market financing, if
there is further improvement in the Federal budget In tlus regard, the Committee recogruzed the uncertainty
regarding both the size and duratioo ofpoteDtiaJ budget surpluses. That uncertainty, which arises bodl from future
economic developments as well as future fiscal policy decisions, needs to be taken into conSideration by the
Treasury in evaluatmg techniques for modifymg existing debt management ammgernmts in the face of unproved
fiscal performance
One such technique wouJd be to introduce arrangements for the repurchase of outstanding Treasury obligations In
the view of most members of the Committee, this debt management technique would be most usefuJ to the Treasury
In circumstances where Wlcertainty regarding the duration of a fiscal surplus make it. premature to consider changes
in the number or frequency of regular coupoo ofi"ermgs, and where there was only limited scope fur further
reduction in existing issue sizes, without putting at nsk the attractlve liquidity fuarures of benchmark issues. In
such circumstances, the Treasury could target the repurchase of eXIsting off-the-run issues, with the chOIces as to
particular issues or sectors reflecting thell prevailing market supply--demand ccmditiOllS.
The Committee further discussed whether any such repurchase initIative should be linuted to formal "reverse
auctJoo" style debt exchanges or also include the ability to employ discreticnary sec:oodary market purchases, most
likely using the Federal Reserve Bank as the Treasury's fiscaJ agmt. A minority of the members of the C orruruttee
felt that any such initiati~ should be limited to funnal auctIoo styte debt exchanges, SO as to ensure a bigh degree
of transparency and reguJarity A majority af the Committee felt that the Treasury need not limit itself to formal
debt exchange offerings, since there could be advantages to be gained by smaller, more targeted secaodary market
From: TREASURY PUBLIC AFFAIRS
3-15-98 4:28pm
p. 3 of 59
3
repurchases. with execution at competitive secondary market prices. AU members of the Conunittee recogruzed that
there were government accounting poLi,y issues that needed to be addressed.
The Committee then discussed the question of the scope for further reduction in sizes of existing Treasury coupon
offenngs. Recogruzmg ~e Size of reductions made to date, the Committee felt there was little, if any, room for
further cutbacks II1 the Size of 10 and 30·year offerings. Indeed., many members of the Committee would favor
modest increases in the size of these benchmark offenngs, especiaUy the lO-year note. In the Committee's VIew,
there is still some scope for reduction In issue sizes of the 2~year, 3~year and, to a lesser extent, 5-year note
ofi'ermgs, before raising concerns about the liquidity of those benchmark offerings.
In the short tenn, limited further issue size reductions in the 2 and 3-year notes, together with flexible utilization of
a debt repurchase arrangement, should provide sufficient tools to respond to further improvemem.s in the budget
picture. Size reductions would be more feasible if there were greater use of re-openings of existing issues, as
market circumstances permit.
Lalger tenn, it may be necessary to re-evaluate the number and frequency of regular coupon offerings, wrth a view
to preserving the liquidity features of large benchmark issues. Indeed, with the prospect of a large Eurodenominated government bald market in the years ahead, maintaining large liquid Treasury benchmark issues .was
felt to be an even more important policy consideration for the US. Treasury. With this in mind, and to the extent
Treasury coupon cycle changes were to be needed, the Committee felt they would best be made in the 2 or 3~year
sectors of the curve, with some members inclined toward less frequent offerings of 2-year octes and odlers partial to
elimination of the 3-year note. In either case, the objective would be to focus Treasury issuance on large, liquid
offerings of benchmark securities.
Finally, in forming its recommendatioo on the auctioo schedule for a 30-year inflation-indexed bond, it was the
VIew of the Committee that enhancing paroclpatico in thIs market should receive greater weight than other factors,
including the short-term management of the Treasury's cash position. All members of the Committee agreed that
the next offering of an inflatiOll-indexed security should be a 30-year bond. This will provide the Treasury with
important market feedback 011 the nature and level of inwstor interest in loog-tenn inflatioo prct:ectioo. That
feedback will be useful to the Treasury in shaping its plans for future inflation-indexed security issuance.
A majority of 13 members believed tbatmaiotaiDing a regular January, April, July, October cycle for int1at\on~
mdexed securities proVlded the best platform for investor focus OIl these instruments as a distinct asset class This
majority recommends that the Treasury announce a 30-year inflatico-indexed bond of S8 billico on Apnl 1 for
auction on April 8. The other six members believed that investor interest was more likely to be mcreased If the
instrument was auctiOlled as pan of the May refunding, believing that this time of generally mcreased IDvestor
focus on Treasury securities was more likely to increase investor interest in the new security.
Respec:tfuUy submitted,
I
Stepbeo G. Thieke
Chairman
20009
From: TREASURY PUBLIC AFFAIRS
3-16-98 4:29pm
4
Estimated Trea:Jury Market Borrowing
(Billions of Dollarsl
April-June. 1998
Amount
MaturioE
Amount
Offered
194.3
188.5
-5.8
May 28
13.8
14.9
15.0
-2.9
June 25
14.1
12.0
12.0
12.0
12.0
670
2D.O
Total BiUs
319.1
256.5
Treasun: Coul!ons
Apr Inflauon-indexed security
S.O •
8.0
20.5
11 7
15.0
11.0
1.0
-45
0.6
-0.1
May 3-year note
May 1O-year note
Refunding Subtotal
25.6
13.0
12.0
25.0
0.5
0.3
0.8
0.2
15.0
110
LO
-44
0.6
0.0
Treasury Bills
Regular WeekJy Bil1s
52-week bills
ApnJ2
Apn130
Cash Management BiUs
Apr 2-year note
Apr 5-year note
Foreign
Add-ODS
Casb
Raised
-1.8
---
-30
-2.1
-47.0
0.0
-62.6
00
May 2-year note
20.4
May 5-year note
11.6
Jun 2-year note
Jun 5-year note
20.8
11.1
1.0
0.6
4.8
11.0
Total Coupons
129.6
111.0
5.6
-13.0
Total Borrowing
448.7
367.5
5.6
-75.6
• Maturing 7-year note
15.0
05
p. 4 of 59
20009
From: TREASURY PU8LIC AFFAIRS
3-15-98 4:29pm
p. 5 of 59
MlNUTES OF THE l'dEETING OF THE
TREASURY BORROWING ADVISORY COMMITTEE
OF THE BOND MARKET ASSOCIATION
February 3, 1998
The Committee convened at 9:30 a.m. at the Treasury Department for the portion of the
meeting that was open to the public. All members were present. The &:deraJ Re~ster
announcement of the meeting and a list of Committee members are attached.
Deputy Assistant Secretary for Federal Finance Roger Anderson welcomed the Committee
and the public to the meeting. John Auten, Director, Office of Financial Analysis, summarized the
current state of the U.S. economy (statement attached). Jill Ouseley, Director, Office of Market
Finance, presented the chart show, which had been released to the public on February 2, updating
Treasury borrowing estimates and providing statistical infonnation on recent Treasury borrowing
and market interest rates.
The public meeting ended at 9:55 a.m.
The Committee reconvened in closed session at the Madison Hotel at 10:30 a.m. All
members were present. Deputy Assistant Secretary Anderson gave the Committee its Charge,
which is also attached.
The Committee began by considering the attached proforma financing plan for the
January-March quarter that had been prepared in advance by one of the members, using the
market borrowing estimates that were released by the Treasury on February 2 (attached). The
Committee decided, prior to making a refunding recorrunendation and recommendations for the
remainder of the quarter, however, to discuss the portion of the Charge pertaining to alternatives
for changes in Treasury market financing.
The discussion of alternatives revolved around two conceptual issues: (1) that the
Treasury repurchase older, higher coupon Treasury securities, either through exchanges or
reverse auctions in the market through the Federal Reserve Bank of New York; and (2) that the
Treasury change the issuance of new marketable securities. The two were not considered
mutually exclusive.
Repurchase proiUatD. The Committee discussed the purposes for which the Treasury
might use a repurchase program and how a repurchase program might be implemented. The
consensus of the members was that a repurchase program could be useful to the Treasury as a
short-tenn alternative to altering the sizes or frequencies of new offerings, if accounting issues can
be resolved. Most of the Conunittee members favored a repurchase program that the Treasury
would use at its discretion instead of a program in which the Treasury would conduct repurchases
on a regular schedule.
-2199
From: TREASURY PUBLIC AFFAIRS
20009
3-16-98 4:30pm
p. 5 of 59
2
ChangjDi IreasuQ' issuance. The Committee consensus was that changes in the current
new security issuance cycles would be necessary in the event of further improvenents in the
Federal budget and corresponding reductions in Treasury financing requirements. The
Committee discussed shrinking the sizes of the issues that the Treasury currently sells or changing
cycles, for example, dropping a cycle or reducing the frequency of offerings of particular coupon
securities. The consensus was that the'1 O-year notes, 30-year bonds, and bills are about as small
as they can be without impairing market liquidity. Regarding the remaining new issue cycles, the
-Committee favored retaining a monthly 5-year note and was about evenly split between: (a)
maintaining quarterly 3-year notes and reducing the 2-year note frequency to 8 per year from the
current 12; or (b) eliminating 3-year notes and maintaining monthly new issues of 2-year notes.
Befundini
The Committee discussed the size of the 3D-year bond and whether to reopen the 6-118%
bond of November 15,2027. They voted unanimously to recommend that the Treasury issue $10
billion of bonds and by 18-1 in favor of reopening the 6-1/8% Treasury bond of November 15,
2027. The Committee then turned to the sizes of the 3- and 10-year notes. They voted as
follows: 1J for a package consisting of $ 13 billion 3 -year notes and $12 billion 1O-year notes~ 3
for $14 billion 3 -year notes and $11 billion lO-year notes; and 3 for $13 billion 3-year notes and
$11 billion of 10-year notes.
Marketable fiDaocjn~ for the JanualY-Marcb Quarter
The Committee consensus was to adopt the financing plan suggested in the profonna,
adjusted to incorporate their February refunding recommendation.
Marketable fioancin~ for the April-June Quarter
For the April-June quarter, given the Treasury's forecasted funding needs, the Committee
by consensus recommended keeping the sizes of coupon and bill offerings the same as the
proforma. adjusted to correspond with their February refunding recommendation. The
Committee was unanimous in recommending that the Treasury issue a 3D-year indexed bond.
They discussed the timing of the first issue of a 30-yearinflation-indexed bond and voted 13 to 6
to reconunend that the Treasury seU the indexed bond in a separate financing operation in April,
rather than including it in the May refunding.
The meeting adjourned at 12:30 p.m.
From: TREASURY PUBLIC AFFAIRS
3-16-98 4:31pm
p. 7 of 59
20009
3
The Committee reconvened at the Treasury at 5 :00 p.m. All members were present. The
Chairman presented the Committee report (copy attached) to Assistant Secretary Gensler and
Deputy Assistant Secretary Anderson. In reply to questions from Treasury officials, individual
Committee briefly remarked on the economic situation and increased use of Treasury reopenings
to enhance the liquidity of Treasury securities.
The meeting adjourned at 5:30 p.m.
. Ouseley. Director
ffice of Market Finance
February 3, 1998
Attachments
CertifiedbY~'
Stephen Thieke, Chairman
Treasury Borrowing Advisory Committee
of The Bond Market Association
February 4. 1998
FrDm:
:0009
TREA~URY
PUBLIC AFFAIR:
3-~6-j8
4:31pm
p. S d
Federal Register I Val. 63, No. 11 / Friday January 16, 1998 I Notices
DEPARTMENT OF TRANSPORTAnON
Surlace, Transportation Board
WItnesses cont8.1ning detailed evideqcB
ShOllld file comments. Persons
inl?rested only in se+!k.ing public use or
traIl usc conditions should elsa file
commen~. Persons opposing the
proposed abandonment or
Boston and Maine Corporationdiscontinuance that do wish to
Abandonment and Springfield
participate actively and fully in the
Terminal Railway Corripanyprocess should file a protest.
Discontinuance at Servlce-4n Hartford
In addition, a commenting pariy or
protestant may provide:
and New Haven Counties, CT
{i) An offer of financial assistance
On December 29,1997, the Boston
pursuant to 49 U.s.C. 10904 (due 12'0
and Maine Corporation (B&M) and
days aher the application is filed or 10
Springfield Terminal Railway Company days after the application is granted by
(ST) (referred to collectively as
the.~oard. whichever occurs sooner);
applicants) filed with the Surface
(11) Recommended provisions for
Transportation Board (Board).
p~t,~on of the interests of employees;
Wasbington, DC 20423, an application
(Ill) A request for a pubuc use
for pennission for B&M to abandon and
condition under 49 U.s.c. 10905' and
ST to disconUnue service on a line of
(iv) A'statement pertaining to -'
railroad known as the Canal Branch
prospective use of the right-oC-way for
extending from milepost 14.50 in
interim trail use and rail banhng uD.
Cheshire, CT, to milepost 24.00 in
16 U.S,C. 1247{d) IDld 19 CFR 1152
Parties seeling inIormation
Southington, CT, a distance of'
concerning the filing of protests auld
approximately 9.50 miles, in Hartford
refer \0 49 CFR 1152.25.
and New Haven Counties, cr, The line
Written comments and pn its,
traverses U.S, Postal Service ZIP Godes
including all ref.juests for E Lic use and
05410,06467,06479. and 06489.
Applicants have indicated that,thtH13 are tntil use conditions. mus/ ldicate the
proceeding designation
B Nos. AB-32
no agency stations located on the line.
(Sub-No, 83) and AS- !i (Sub-No. 23)
The line does not contain federally
and should be'filed th the Secretary
granted rights-of-way. Any
Surface Transport
Board.
documentation in B&M's possesslon
Washington. DC' ,423, no -later than
will be made available promptlrlo
Febrn8..1'j' 12.
,. lnrerested persons
those requesting il The applicants'
may file a W' [t;:[l comment or protest
entire case for abandonment andwith the B
d tcr become a party to this
discolltinuance was filed with the
proceedi. A copy oT each written
application.
•
camm' or protest mall OO'Serwd
The line of railroad has appeared on
upon .e applicants repres~mtative
B&M's system diagram map or has been
Jar .. Nadolny, General Counsel Law
included in its narrative in category 1
r Utment, 'Boston and Maine
since February 28, 1997,
)rporation,1ron Horse Park, N.
The interest of railroad employees
t;illerica. MA 01862. The original and
will be protected by Oregon Short Line
10 copies of all1::ommenls or protests
R. Co.-AbandonrnE!nt~hen, 360
sball be filed with the Board with a
I.c.e. 91 (1979).
Any interested person may file w
certificate of service, Except as
the Board written comments conr ling otherwise set forth in par11152, every
ilie proposed abandonment and
document filed with the Board must be
discontinuance or protests (in ,ding
served 00 all parties to the proclWding.
49 CFR 1104.12(8).
the protestant's entire oppo' )n casB),
The line sought to be abandoned and
by February .12, 1998. All: -erested
discontinued will he aviUlable fOf
persons should be aw~ at following
subsidy or s.ale for C!lntinued rail use, if
any abandorunent of JC ,~erviC8 and
the Board decides to permit the
salvage of the Ijne. tl
me may be
abandorunent and discootinUl1l1ce. in
suitable for other p ,lie use, including
accordance with applicable laws and
interim trail use.
,y request for a
regulations (49 U.S.C. 10904 and 49 CFR
pubUc use conr on under 49 V.S.c.
1152,27). No subsidy arrangement
1090S (49 CFJ 152.28 of the Board's
approved WIder 49 U.s.c. 10904 shall
rules) and B,
request for a trail use
remain in effect for more than 1 year
condition ~der 16 U,S.C.1247(d) (49
unless otherwise mutually agreed by the
CFR 11~ ~9 of the Board's rules) must
parties (49 U.S.c. l0904(f)(4)(B)).
be file ,y February 12. 1998, Persons
Applicants will promptly provide upon
who IiY oppose the abandonment or
request to each interested party an
dis .1tinuance but who do not wisb to
estimate of the subsidy and minimum
P lcipate fully in the process by
purchase price required to keep the line
'pearing at any oral hearings or by
ill operation. The carriers'
submitting verified statements of
(STB Doc~et No. AB-32 (Sub-No. S3)J and
(STB Doc~et No. AB-355 (Sub-No.. 23)]
on
S3
2719
representative to whom inquiries ay
be made concerning sale or sub y
terms is set forth above.
Persons seeking furtbcr ill
mati on
concerning abandonment
)Cedures
may CODtacttbe Board 0 ~fer to the full
abandonment or disco' nuance
regulations at 49 efT' art 1152.
9uestions concern' ., environmental
Issues may be dir led to the Board's
Section of £ny;' runental Analysis
(SEA).
An eIlma
nental assessment (tA) (or
environm' al i.mpact statement (EIS), if
necassar prepared by SEA will be
served pan all parties of record and
UpOI uy agellcies or other persons who
cal ,ented during its preparation. Any
r ~r persons who would Wee to obtain
:opy of the EA (or EIS) may contact
-::lEA. EAs in abandonmentproceediogs
normally will be made available wit.hin
33 days of the filing of the application.
The deadline for submission of
eOlIUDents on the EA will generally be
within 30 days of its service. The
comments received will be addressed in
the Board's decision_ A supplementa[
EA or FlS may be issued where
appropriate.
lJeoded: ]anl,lBI'J lZ, 1998.
By tbe..8oard. David M.. KonscluUk,
~,Ofiice of Proceedings.
V'emDD..A. Williams.
secretury.
[FR Il!;Jc.. Q8-U19 Piled 1-1:r-98; 8:4.5 aml
DEPARTMENT OF THE TREASURY
Departmental Offices; Debt
Management AdviSOry Committee;
Meeting
Notice is hereby given, pursuant to 5
U.S.C. App. ~ 10(a](2}. that a meeting
will be held at the u.s. Treasury
Department, 15 tb and Pennsylvarua
Avenue. N.W., Washington, D.C., on
February 3. 1998, of the follOwing debt
management advisory committ~:
The Bond Market AssociatioD
Treasury Bonuwing Advisory Cornm.ittee
The agenda for the meeting provides
for a technical background briefing by
Treasury staff. followed by a charge by
the Secretary of the Treasury or his
designate that the committee discuss
particular issues, and a worlting session.
following the working session, the
committee will present a written report
of its recommendations,
The background briefing by Treasury
staff will be beld at 9:30 a,m. Eastern
time and will he open to the public. The
remaining sessions and the committee's
reporting session will be closed to the
2720
Federal Regt.Sler J Vol. 63, No, 11 I Friday. January 16, 1998 I Notices
public, pursuant to 5 U.S.c. App.
§ lO(d). __
.
This notice shall constJtute my
determination, pursuant to the authority
placed in heads of departments by 5
U.S.c. App. § lOrd) ancl vested in me by
Treasury DepartmlJ.D.t Order No. 10~-Q5,
that the closed portions of the meeting
are concerned with i.J;l.formation that is
exempt from disclosure under 5 U.S.c.
§ 552b(c)(9)(A). The public interest
requires that such meetings be closed to
the public because the Treasury
Department requires f~ and full
advice &om representatives of the
financial community prior to making its
final decision on major financing
operntions.. Hi stori cal 1y, this ad vice bas
been offered by debt management
advisory committees established by ~e
several major segments of the finanCIal
community When so utilized. such a
committee is recognized to be an
advisory committee under 5 U.S.c. App.
§3
Although the Treasury s final
annOlwcamen! of financing plans may
not reflect the recommendations
provided in reports of the advisory
committee;premature disclosure altha
committee's deliberntions and reports
would be likely to lead to slgnific::a.nt
1in.anc.a1 specula tion in ilia secun tJ e 8
markeL Thus. these meetIngs £Bll within
the EDCBmption caveredbfS V.S.c.
§'552b{c){9l!AJ
The Office of the AAsistmrt Secretary
£or "Financial Mal:kBts is responsible fur
IBQlD.taining-l"9COrds -or debt
management advisory committee
meetmgs end for providing..a.n.nuat
reports satting forth a ~or
committee acti vtties and such Other
matters aslDBY be mfurmativ8 to the
public consistent with the policy of 5
UB.e.. § 552b.
Gary Geosler
Assista nt Ser:relDry (Financial Marbts)
IFR Doc. B~736 Filed 1--15-98; lk45 tiIIlJ
SI1..lMQ COOE 4Il~
opportunity to comment on proposed
and/or continuing information
collections, as required by the
Paperwork Reduction Act of 1995.
Public Law 104-13 (44 U.s.c.
3506(c)(2)(A)). Currently. tbcIRS is
soliciting comments concerning Form
8800, Application for Additional
Extension of Time To File U,S. Return
for a Partnership, RBvfiC. or for Certam
Trusts.
OATES: Written comments should be
received on or before March 17, 1998 to
be assured of consideration.
ADDRESSES: Direct aU written cvmments
to Garrick R Shear,1nternal Ravenue
Service. room 5571, 1111 Constitution
Avenue NW., Washington, OC 20224.
FOR FURTHER INFORMATION comACT:
Requests for additional inlormation or
copies Df the form and instructio~
should be directed to Martha R BnnsOD,
(202) 622-3869, Internal Revenue
Service, room 5571.1111 Constitution
Avenue NW., Washington, OC 20224.
SUPPLEMENTARY IHFORMATION:
Title; Application far Additional
Extension of Time To File U.S. Return.
for B Partnership, .REM1C, or for Certain
Trusts.
OMB Number: 154.5-105i
Form Numhe~B800
Abstract; Form 88OO.is used by
partnershlps, REMlCs,llIlli oy CUIUw.
trusts to request an llddirional exteD ~n
of time {up to 3 monlhsl tv file For.
1065, Fonu 1041,~.Form 1066. ~ rom.
8800 COn.t.wlS data needed by tl
R5 to
determine whether.or not 8 W 1m
qualifies for such an extensiOl
Current Actlons; There an J changes
being made tq the form at. tl time.
Type of RfNiew: ExteD.SJ. of a
currently approved coUe(; on..
Affected Public: Busir ,IS or other forprofit organizations an ElTIDS.
Estimated Number Respondents:
20,000
Estimoted Time ~ Respondent: 13
min.
Estimated Totq
DEPARTMENT OF THE TREASU
Internal Revenue Service
Proposed Collection; Co"
Request for Form B800
lent
AGENCY: Internal Re
ue Service [ffiSJ.
Treasury.
ACTION: Notice
'0 request for
comments.
SUMMARY' ne Department of the
Treasu ,as part of its continuing effort
to :n: C9 paperwork. and respondent
bl en, inVltes the gener-al publI.e and
lUer Federal agencies to take this
lIutuaJ Burden
Hours: 4,210
The follow ~aragrapb applies to aU
of the collect
s of information covered
by this notic
An agent nay not conduct or
sponsor, a
a person is Dot requ.tn::d to
respond
a collection of info~ation
unless I collection of information
displa ~ valid OMB control number
Book r records relating to a collection
of it rmation must be retained as I~ng
as
ir contents may become matenal
ir .e administration of any internal
reven..;~ la ..... GeneraUy, tax returns ~d
tax return information are confidential.
as required by 26 U.s.c. 6103.
Request for Comments
Comments submitted in respOIl to
this notice will be summarized
[;or
included in the request for OM;
approval. All co=ents will
ome-a
matter of public record. Co.rrJ mts are
invited on: (8) Whether the flection of
information is necessary f~ rhe proper
performance of the functi s of the
agency. including wbet1
the
information shall have actical utility;
(b) the accuraey of tho Jeney's estimate
oft.he burden of the
lection of
information; (e) wa to enhance the
quality, utility, aD ~Jarity of the
information to hi IQUected; (d) ways to
minimize the b· len of the collection of
information 0' ~pondents, including
through the .
of automated coUection
techniques ..Jther forms of informa..tion
tochnolOJil cu:l. (e) estimates of capital
or start-ur" osts and costs of operation,
mninteo, n.."e,and purchase of services
to prov a information.
ApJ;
ed: J;muary a. 1998.
Can' ~ R. Shear,
m.e
II
ports Clearonce Officer
Joe. 98-1079 Filed 1-1~8; 8:45 am]
.-.a CODE
4130-414J
DEPARTMENT OF lliE TREASURY
JntsmaJ Revenue Service
Proposed CoUectlon, Comment
Request for Fonns 8038, ~ ana
B038-GC
AGENCY; In tema l.Revan ue :service (IRS]
Treasury
ACTION: Notice
and request for
comments.
SUWAARy;.!fbe Department of the
Treasury, as part 0 fits continuing effort
to reduce paperwork and respondent
burden, jnvites the general public and
other Federal agencies to take thlEi
opportunity to comment on proposed
£iIldJOl' oontinuing information
collections, as required by the
Paperwork Reduction Act of 1995,
Public Law 104-13 [44 U.S.c.
3506(c)(2J(Aj).
Currently, the IRS is soliciting
comments concerning Forms 8038,
Information Return for TIiX-Exempt
Private Activity Bond Issues, B083-G,
Information Return for Tax-Exempt
Governmental Obligations. and 8038GC, Information Return for SmaU Tax·
Exempt Governmental Bond Issues.
Leases, and lmtall.ment Sales.
DATES: Written comments should be
received on or before March 17, 1998 to
be 8.SS'UIed of consideration.
From: TREASURY PUBLIC AFFAIRS
20009
3-1B-gB 4:34pm
Treasury Borrowing Advisory Committee
ortbe
Public Securities Association
Chairman
Stephen Thieke
Chairman, Market Risk Committee
JP Morgan & Company, Inc.
60 WaIl Street, 20th Floor
New York, NY 10260
VICE CHAIRMAN
Kenneth M. deRegt
Managing Director
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Daniel S. Ahearn
President
Capital Markets Strategies Co.
50 Congress Street, Ste. 816
Boston, MA 02109
Gedale B. Horowitz
Senior Managing Director
Salomon Brothers, Inc.
7 World Trade Center, 39th Fl.
New York, NY 10048
James R. Capra
Rye, NY 10580
Timothy W. Jay
Managing Director
Lehman Government Securities, Inc.
3 World Financial Center
New York, NY 10285-0900
Stephen C. Francis
London Office:
Vice Chairman
1 Broadgate, 3rd Floor
London EC2M 7HA England
President
Capra Asset Management, Inc.
555 Theodore Fremd Avenue Ste. C-204
Fischer, Francis, Trees & Watts, Inc.
200 Park Avenue
New York, NY 10166
Lisa W. Hess
Managing Director
Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Thomas L. Kalaris
President
BZW Securities Inc.
222 Broadway
New York, NY 10038
p. 10 of
20009
From: TREASURY PUBLIC AFFAIRS
3-15-98 4:34pm
2
Barbara Kenworthy
Management Director
of Mutual Funds - Taxable
prudential Insurance
McCarter Highway
2 Gateway Center, 7th Floor
Newark, NJ 07102-5029
Richard D. Lodge
President
Bane One Funds Management Company
150 E. Gay Street, 24th Floor
P.O. Box 432710138
Columbus, OR 43271-0138
Wayne D. Lyski
Chairman & Chief Investment Officer
Alliance Fixed Income Investors
Alliance Capital Management Corporation
1345 Avenue of the Americas
New York, NY 10105
Robert D. McKnew
Executive Vice President
Bank of America
1455 Market Street, 5th Floor
San Francisco, CA 94103
Michael P. Mortara
Partner, Co-head
Fixed Income Division
Goldman-Sachs & Co.
85 Broad Street, 26th Floor
New York, NY 10004
Daniel T. Napoli
Senior Vice President
Merrill Lynch & Company
250 Vesey Street, North Tower
World Financial Ctr, 8th Floor
New York, NY 10281
William H. Pike
Managing Director
Chase Securities Inc.
270 Park Avenue
New York, NY 10017
Joseph Rosenberg
President
Lawton General Corporation
667 Madison A venue
New York, NY 10021-8087
Morgan B. Stark
Principal
Rarnius Capital Group
757 Third A venue, 27th Floor
New York, NY 10017
Craig M. Wardlaw
Executive Vice President
National Bank Corporation
National Bank Corporate Center
Mail Code NCI 007-0606
Charlotte, NC 28255-0001
p. 11 of 59
20009
From: TREASURY PUBLIC AFFAIRS
DEPARTMENT
OF
THE
3-16-9B 4:37pm
p. 18 of 59
TREASURY
NEWS
omCE OF PURtlC AFFAIRS -1500 PENNSYLVANIA AVENUE. N.W. • WASHINGTON, D.C. - 20220 - (202) 622-2960
FOR RELEASE !;IHEN ]\UTHORI ZED AT PRESS CONFERENCE
February 4
I
1998
CONTJ..CT:
TREASURY FEBRUARY QUJ.RTERLY
Office of Financing
202/219-3350
FINJ.~CING
The Treasury will auction $13,000 million of 3-year notes, $12,000
million of 10-year notes, and $10,000 million of 29-3/4-year 6-1/8% bonds
to refund $25,961 million of publicly held securities maturing February IS,
1998. and to raise about $9,050 million of new cash.
In addition to the public holdings, Federal Reserve Banks hold $4.278
million of the maturing securities for their own accounts, which may be
refunced by issuing additional amounts of the new securities.
The maturing securities held by the public include $2,091 million held
by Federal Rese~ve Banks as agents for foreign and international monetary
a·J.thorities. JI.mounts bid for these accounts by F'ederal Reserve Bc.nks will
be added to the offering.
The 3-yea~ and IO-year notes and the 29-3/4-year bond being offered
today are eligible for the STRIPS program.
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 i8 governed by the terms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356, as amended) for the sale and issue by
the Treasury to the public of marketable Treasury bills, notes, and bonds.
Details about the notes and bond are given in the attached offering
higl:lights.
000
Attachment
tR-2200
Far press releases, speeches, public schedules and official biographies, call our 24~our fax line at (202) 622-2040
.-...
=
lIIGIILIGHTS OJ!' TREASURY OFFERINGS TO THE PUBLIC
FEBRUARY
~99a
"'"
=
<.D
QUARTERLY FINANCING
February 4, 199B
OUering Amount . . . . . . . . . . . . . . . . . $13,000 million
$12,000 million
$10,000 million
]-year notes
S-2001
912B27 ]W 0
February 10, 1998
February 17, 1998
February 15, 1998
February 15, 2001
Determined based on the average
of accepted competitive bids
yield . . . . . . . . . . . . . . . . . . . . . . . . . . . Determined at auction
Interest payment dates . . . . . . . . . . August 15 and February 15
10-year notes
B-2008
912827 3X 8
February 11, 1998
February 17, 199B
February IS, 1998
February 15, 2008
Determined based on the average
of accepted competitive bids
Determined at auction
August 15 and February 15
29-3/4-year bonds (reopening)
Bonds of November 2027
912810 FB 9
February 12, 1998
February 17, 1998
November 15, 1997
November 15, 2027
6-1/8%
MInImum bid amount . . . . . . . . . . . . . . $5,000
r~ultiples . . . . . . . . . . . . . . . . . . . . . . . $1,000
Accrued interest payable
by investor . . . . . . . . . . . . . . . . . Determined at auction
$1,000
$1,000
$1,000
$1, 000
Determined at auction
$15.90470 per $1,000 (from
November 15, 1997, to
February 17, 199B)
Description of Offering:
Te~m and type of security . . . . . . .
series . . . . . . . . . . . . . . . . . . . . . . . . . .
CUSIP number
Auction date . . . . . . . . . . . . . . . . . . . .
Issue date . . . . . . . . . . . . . . . . . . . . . .
Dated date . . . . . . . . . . . . . . . . . . . . . .
Maturity date . . . . . . . . . . . . . . . . . . .
Illterest rate . . . . . . . . . . . . . . . . . . .
Determined at auction
May 15 and November 15
..,
-r,
o
3
-!
:;u
rn
:I>
U)
C
:;u
-<
Premium or discount . . . . . . . . . . . . . Determined at auction
Determined at auction
Determined at auction
'U
C
CD
r-
STRIPS fnformation:
Minimum amount required . . . . . . . . . Determined at auction
COl'PUS CUSIP [lUmber: . . . . . . . . . . . . . 912820 CP 0
Due date(s) and CUSIP number(s)
Not applicable
for additional TINT(s)
I-t
Determined at auction
912620 CQ S
":I>
$1,600,000
912803 8M 4
"T'1
..,
:I>
I-t
:;u
Not applicable
",0
Not applicable
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids ......... Accepted in full up to $5,000,000 at the average yield of accepted competitive bids.
Competitive bids . . . . . . . . . . . . (1) Must be expressed as a yield with three decimals, e.g., 7.123t.
(2) Net long position tor 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
at a Single yield ........ 35% of public offering
Haximum Award . . . . . . . . . . . . . . . 35% of public offering
Receipt of Tenders:
Noncompetitive tenders ...... Prior to 12:00 noon Eastern Standard time on auction day
Competitive tenders ......... Prior to 1:00 p.m. Eastern Standard time on auction day
Payment Terms . . . . . . . . . . . . . . . Full payment with tender or by charge to a funds account at a Federal Reserve Bank on issue date
UJ
.....I
0'1
I
<.D
CD
...
UJ
CD
u
3
'D
.....
<.D
o
-.
lJ1
<.D
D EPA R T 1\1 E ~ T
0 F
THE
'IREASURy;(14
T REA S V R Y
NEW S
omCE OF Pl'BUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W .• WASHINGTON, D.C.. 20220. (202) 622-2960
Text as Prepared for Delivery
February 5, 1998
Remarks by Donald Lubick
Acting Assistant Secretary for Tax Policy
US Department of the Treasury
Conference of State Legislators
Washington, DC
It is a great pleasure to be here today to talk with our state partners in government about the
important subjects of this year's budget and the prospects for tax reform.
This morning, I would like to begin with a brief overview of the current economic environment.
Second, I would like to discuss some of the tax initiatives the President announced as part of the
Administration's budget, and how they fit into the Administration's plan to continue building an
economy for the twenty-first century. Finally, I will enumerate principles we will use to evaluate
tax reform ideas.
The U.S. Economy
By almost any measure, we have a strong economy, one, as Secretary Rubin says, that is the best
we have seen in a generation.
•
•
•
•
•
•
Last week, figures revealed 43% growth in the 4th quarter making growth for the year
3.9%. That's the strongest growth we have experienced in over a decade.
We are currently 81 months into a strong expansion.
If the expansion continues through the fall as many forecasters expect, it will be the
longest peacetime expansion in history.
Unemployment at 4.7% is only a notch above its 25 year low last month.
Business investment is surging at a 9 7% annual pace
All this is occurring against a backdrop of the lowest inflation since John F. Kennedy was
president.
To be sure, economic conditions are better in some areas of the country than others.
Nevertheless, on balance the economy is performing exceptionally well. We are enjoying
RR-2201
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something that has not been seen in a generation, a sustained, low-inflation, investment and export
led recovery.
A Sound Fiscal Policy
Undoubtedly, sound government fiscal policies have contributed to the strong performance of our
economy. In fiscal 1992, we had a budget deficit of $290 billion. This year the deficit is
projected to be $10 billion and heading lower. As a percent ofOOP, we have cut the deficit from
4.7% in FY 1992 to 0.3% in FY 1997. And next year, our budget will take that deficit to zero
On Monday, President Clinton submitted a budget with surpluses for the foreseeable future This
represents a historic turnaround in the Nation's fiscal policy.
How Did We Manage to Do It?
In part, this success reflects the courage shown by members of Congress in 1993 in voting for
deficit reduction. In part it represents the good faith and wisdom of those members of Congress
who voted for the balanced budget agreement last year It certainly reflects our strong economy
which has increased tax receipts.
At the same time, however, it also reflects the fact that the government is today leaner and more
efficient.
Cutting the Deficit the Right Way
Eliminating the deficit has been an important part of our strategy, but equally important has been
eliminating it the right way. Over the last five years, President Clinton has fought to protect
Social Security and Medicare while making the investments we need to make in our people and
our future to pave the way for continued growth.
This strategy of pursuing a sound fiscal policy while still making critical investments has worked
exceptionally well. As Secretary Rubin said on Monday, it is vitally important that we stay this
successful course.
The Budget
At the same time, however, as the President said in his State of the Union, now when things are
good is not a time to rest. It is a time to build. And this year's budget builds on our
accomplishments while taking on those challenges that remain.
As you know, one of the major questions confronting Congress and the White House has been
what to do with the projected surpluses. There are a number of alternatives that have been
floated, but the President has sent a clear message--protect Social Security.
2
The Administration's 1999 budget puts Social Security first. The President has proposed that we
should not spend a single dime of any of our budget surpluses until we have first addressed Social
Security reform and placed it on a sound path. This is in contrast to some who have suggested
that now is the appropriate time for more major tax cuts. The Administration believes that this
would be premature.
Investing in the Future
The second key feature of this budget is that it invests in our future. Of particular concern to me,
of course, are the tax: initiatives contained in the budget to provide child-care assistance to
working families, to promote energy efficiency and improve the environment, to promote
education, to encourage retirement savings, and to increase the availability oflow-income
housing. The budget also extends certain expiring provisions, and contains provisions to simplify
the tax laws and enhance taxpayers' rights. Importantly, every item on this list is fully paid for by
measures that, among other things, reduce unwarranted corporate tax subsidies, close tax
loopholes, and improve tax compliance.
Let me cover some of these specific items.
Child care: As part of the Administration'S comprehensive initiative to address the child care
needs of low- and moderate-income families, the budget proposes a $5.1 billion expansion of the
child and dependent care tax credit. This would grant three million taxpayers an average annual
tax cut of$330. In addition, $500 million is proposed for a new employer credit for providing
employee child care.
Climate change initiatives: In combination with other proposed initiatives to improve the
environment and combat global warming, the budget includes $3.6 billion for nine tax incentives
Among them are credits for purchasers of highly fuel efficient vehicles, a credit to individuals and
businesses for rooftop solar equipment, and a credit for certain energy-efficient building
equipment (such as natural gas water heaters and advanced central air conditioners).
Education initiatives: This Administration has the abiding goal of improving America's
educational system and ensuring that all Americans have access to it. We believe that sustaining
our current economy requires constant improvement in the education of our people. Last year's
tax bill focused on higher education With this budget, we propose to make a major contribution
to the improvement of our elementary and secondary schools.
To this end, the budget proposes $5 billion for two public school bond initiatives. Under these
initiatives, the Federal Government would pay the interest costs on State and local government
bonds by granting a tax credit in lieu of interest accrued.
3
•
First, approximately $19.4 billion in School Modernization bonds would be authorized to
pay school construction costs (allocated half to the 100 school districts with the largest
populations of poor children and half to the States).
•
Second, an additional $2.4 billion in Qualified Zone Academy bonds would be authorized.
These bonds, which were established last year and originally proposed by Rep. Rangel,
provide funding for schools in poorer areas that have established a partnership with
business to improve the schools.
This initiative has received a great deal of attention from Congress already, and we hope that it
will become law in the near future.
Other initiatives
In addition, this Budget continues the Administration's commitment to help improve local
communities with innovative tax initiatives.
For example, this budget would increase the low-income housing credit for the first time since
1986. As I am sure you are aware, the current limit on a State's annual allocation of first-year
low-income housing tax credits is $125 per capita. The budget proposes to increase this amount
to $1.75 per capita, at an estimated cost of $1 .6 billion.
The budget would also bolster several other important initiatives. The budget would make
permanent a temporary provision that encourages the cleanup of so-called brownfields. It would
extend the work opportunity tax credit through May 1, 2000. And it would also provide a
corresponding one-year extension of the new welfare-to-work tax credit.
Expand pension coverage
The Administration continues to be concerned that all Americans share in the benefits of our
booming economy, and believes that incentives to save for retirement should help them do so.
Thus, the budget contains $900 million in new incentives for retirement savings.
Taken together these provisions will help us create the foundation, as the President said, for the
next American Century.
Other Tax Restructuring Proposals
I have discussed our major tax policy irutiatives Let me tum now to some of the proposals for
more radical tax restructure that have been advanced in various quarters.
We in the Administration examine every serious tax reform idea that is proposed. We believe that
any acceptable idea for tax reform must as a threshold satisfy four vital principles.
4
•
•
•
•
First, changes in the tax code should not increase or cause a deficit-they should provide all
the revenues we need to meet our governmental obligations-nor should they lead to
deficits at the state and local level
Second, tax law changes should be fair to working families--they should not shift the
burden of taxes from affluent taxpayers to the middle class and poor.
Third, restructure of the tax laws should contribute to economic growth.
Finally, restructuring the tax code should not increase its complexity, either to comply
with or to administer, at the state or federal level.
Missing from the debate over these proposals has been the effects they would have on the states.
Their effect upon state and local financing has been virtually absent from the discussion. Nor have
the state and local governments been consulted as a party to framing proposals, so that their needs
can be taken into account.
Let me examine several ideas which have gained particular attention of late, the flat tax, a national
sales tax and the sunset of most current taxes.
The Flat Tax
The flat tax, at first glance, may appear to possess an attractive simplicity, that of a single rate and
the elimination of all deductions. Less discussed is that it also eliminates from taxation
unconsumed capital income-dividends, interest, capital gains. True, if fixed at an appropriate rate,
it would not have to increase the deficit. But since consumption is a narrower base than income,
the rate applied to a consumption base would have to be higher than one applied to income. With
moderate exemptions for low income persons, the rate would have to be raised for middle income
taxpayers to make up for the drastic reductions in rates on high incomes and the elimination from
the tax base of capital income that is largely received by affluent taxpayers. It is difficult to argue
that a flat tax would be fair or that it would contribute significantly to savings or growth.
The notion that a flat tax would achieve complete simplicity by eliminating deductions is also
questionable. First of all many items now excluded from income would have to be valued and
taxed-health insurance provided by employers and other fringe benefits for example. And in fact
any discussion of a flat tax rapidly begins to include exceptions by way of deductions-such as
home mortgage interest and gifts to charity-and the single rate necessarily rises, contributing both
to complexity and shift of tax burden to the middle class. As Deputy Secretary Summers often
says, by the time you figure in all these exceptions, you would need an electron microscope to
read the postcard that it is claimed would suffice for a tax return.
In addition, the flat tax rate that proponents argue would cover the government's expenses is
invariably too low. Many proponents of the flat tax have calculated the low rate using a highly
controversial method of revenue scoring that takes into account completely speculative
projections of the effect on our economy of the flat tax.
5
The historical evidence is conclusive; when taxes were cut in the 1980s, the effects hoped for by
proponents did not materialize. Instead, deficits soared. Now, when the budget is finally
balanced, is not the time to jeopardize the progress we have made.
There is another problem with the flat tax. Proponents have generally not involved the states in
the analysis. Most states, as you know, use the federal income tax as a foundation for the
calculation of their own income taxes, and rely heavily on federal rules, such as information
reporting rules, to administer their taxes. Moving to a flat tax, or any other type of tax regime,
for that matter, would require states to make a Hobson's choice--either make a radical change
from the current system to a new and untested regime that may have substantial revenue
implications, or try to sustain a separate and independent income tax system without the
administrative tools provided by the current federal system. From what we understand from those
who have studied this issue, state governments could face serious difficulties if they were forced
into this position.
A National Sales Tax
The national sales tax also poses a number of problems when compared to our four criteria
First, unless the sales tax rate was set quite high, it would imperil our fiscal soundness. Again,
now when the budget is balanced is not the time to experiment with ideas that would threaten the
progress we have made. A national sales tax of 30-40% such as those advocated by some would
crowd out state sales taxes--jeopardizing the financial footing of our state partners in government
It would shift the point of collection of our tax. revenues to retail seller-the weakest point of our
administration.
A national sales tax would also be highly regressive and therefore unfair to working families.
There have been some proposals to remedy this flaw, but we have seen none that come close to a
satisfactory solution.
Finally, a national sales tax. would impose major administrative burdens We are currently set up
to process the income tax.. Changing over to a national sales tax. would require the federal
government to reinvent tax administration Many of the proposals would make states responsible
for collecting these taxes without explaining how they would do so and without having consulted
with the states on this challenge.
And once again, these proposals do not address how states should impose and collect their
income taxes if the federal income tax is eliminated. A national sales tax. could even exacerbate
this problem by crowding out state sales tax revenues--thus making the other state tax bases even
more important to their financial stability.
6
Sunsetting the Tax Code
Finally, let me briefly examine the idea of sunsetting the tax code, an idea that has a large number
of Congressional sponsors who intend to bring this proposal to a vote. The legislative proposal
would repeal all taxes under the Internal Revenue Code, except those relating Social Security and
Railroad Retirement, as of December 31,2000. Congress would be then mandated to come up
with a new unspecified system of taxes in the ensuing six months.
Can anything be more designed to produce chaos in our economy for the next three years? Is it
responsible to repeal what is now producing enough revenue to balance the budget without any
notion on what business and individuals can base decision making? What if there is a gridlock
during the first six months of 200 I? Who would buy state and local bonds if in three years the tax
exclusion accepted as a trade for lower interest rates proves to be ephemeral? What will happen
to the housing market without certainty as to the status of financing? What are the states to do
with their tax systems in the interim or even during the first six months of 200 1 while waiting to
see what, ifanything, emerges? Would business continue to invest without the certainty of
depreciation to recover the cost of investment against taxation? Would the bond market support
Treasury notes in the face of pennanent annual deficits of over $1 trillion-the amount of taxes
sunsetted and not being collected during the first part of 200 1?
The stability of our economy is built upon relatively settled expectations of tax treatment and on
having a dependable, predictable source of revenues to fund our government. Proposals for
sunsetting the tax code, with no replacement, therefore cannot be treated as serious on their face,
but rather attempts to push some other agenda.
We are concerned however, that the attraction of the political statement made by a vote to sunset
the tax code may be too compelling for some to resist. We hope that good judgment and fiscal
responsibility will win out in the end
Conclusion
In conclusion, this economy is strong. And having succeeded in the difficult task of balancing the
budget, now is not the time to endanger the hard won progress we have made. Instead, we
should stay the course of promoting fiscal soundness while protecting Social Security and
Medicare and making the critical investments we need to prepare for the future.
As we go forward, we in the Administration look forward to working clo~ely with you our state
partners to build the foundations, as the President said, for the next Amencan century.
7
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt. Washington, DC 20239
EMBARGOED FOR RELEASE AT 3 :00 PM
February 5, 1998
Contact: Peter Hollenbach
(202) 219-3302
PUBLIC DEBT ANNOUNCES ACTIVITY FOR
SECURITIES IN THE STRIPS PROGRAM FOR JANUARY 1998
Treasury's Bureau of the Public Debt announced activity figures for the month of January 1998, of
securities within the Separate Trading of Registered Interest and Principal of Securities program
(STRIPS).
Dollar Amounts in Thousands
$1,158,416,989
Princi pal Outstanding
(Eligible Securities)
Held in Unstripped Form
$926,257,314
Held in Stripped Fonn
$232,159.675
$12,480.296
Reconstituted in January
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 o/the Public Debt, entitled "Holdings of Treasury Securities in
Stri pped Fonn. "
The STRIPS data along with the new Monthly Statement a/the Public Debt. is available on Public
Debt's Internet homepage at: www.publicdebt.treas.gov.Awide range of information about the
public debt and Treasury securities is also available on the homepage.
000
RR-2202
PA-305
http://www.publicdebt.treas.gov
TABLE VI - HOLDINGS OF ,TREASURY SECURITIES IN STRIPPEO FORM, JANUARY 31, lS!la
Loan
Treasury Bends'
CUSJP
9128100M7
OOB
DR6
DU9
DNS
OPO
DS4
Dn
DV7
DW5
DXJ
DYI
DZa
EA2
E30
Eca
EJ6
E::4
E=1
EG9
E'-47
EJ:l
Eo{O
E:...B
E\16
EN4
E?9
E07
ES3
El1
EV6
EW4
Corpus
STRIP
CUSIP
Desc~p!lOn
Interest Rate
11-518
12
10-3/4
9-3/8
11-314
11·114
10-518
9·718
9-1/4
7·114
7·112
8-3/4
8·7/8
9·1/8
9
8-718
8·1/8
8·112
8·3/4
8·3/4
7.7/8
8·1/8
e·1/8
8
7·1/4
7·5/8
7·1/8
6·1/4
7-1/2
7·Sie
6-7/8
EYO
6
6-3/4
6·112
EZ7
6·5/8
Fa9
6-318
6·1/8
EX2
FAI
Total Treasury Sonds .........................
9,2e03 AB9
ADS
AGe
AJ2
912eOO AA7
S~2e03 AA1
AC7
AE3
AFO
AH6
AK9
AL7
AM:
AN3
APa
A06
AR4
AS2
ATO
AU7
AV5
AW3
AXI
AY9
AZ6
SAO
BS8
BC6
Boa
BE2
9F9
807
BH5
BJ1
BK8
916
SM4
PnnClpal Amour.! Cutstandlng In TMusa~C;
Matunty Date
Re~onstltuteo
Total
OulstandlnO
11/15104
05/15/05
08115105
02115106
11115114
02/15115
08115115
11/15/15
02115/16
05/15116
11/15/16
05/15/,7
08115/17
05115/18
11/15/18
02l15J19
08115/19
02115120
05115120
08115120
02115/21
05115/21
08115121
11115121
08115122
11115122
0:2115123
08115/23
11/15124
02115125
08/15125
02115126
08/15126
11/15/26
02115127
08/15J27
11115127
B,301,B06
4,260,n8
9,269,713
4,755,916
6,005584
12,667,799
7,149,916
6,899,659
7,266,854
18,823,551
I
Portion Held In
Unstncoed Form
I
POr1lon l'ie~d In
Stncce-:: Form
thiS Month
18,194,169
14,016,S:8
8.108,639
9,032,870
19,25079a
20,213,832
10,228,868
10,156,883
21,418,606
11,113373
11,9588e8
12,163,482
32,798,39 4
10,352,790
10,6S9,626
18,374,361
22,909,0«
11,469,662
11,725,170
12,602,007
12,904,916
10,893,818
11,493,177
10,456,071
10,735,755
11,184,353
4,716,206
2,744,208
7,236,113
4,746,le8
2,377,584
1;,415,959
6,535,516
5,41C,259
6701,254
18,669,951
18,010,368
8,052,249
7,664,858
3060,639
1,813,870
5,4()S,99S
17,597,832
:,218,868
3,410,883
5.394,446
10,106,973
4,861,928
5,039,322
7,007,594
8.803,990
2,811,626
11,924,761
18,30S,I4()
2,729,982
3,8S9,170
11,461,847
12,459,916
9,973,018
11,194,377
9162,471
10,433,356
11.064,353
3,:85.600
1,516550
2,033,600
9,728
3628,000
1,251,840
614,4()0
1,489,600
:65,600
153,600
854,080
10 141,920
63:2,000
:;.6~8 000
7,21 e 000
13844,600
2,616000
: 010,000
67"8,000
1602 4 ,160
1,00€,400
7,OSS,960
7,12 4 ,160
25 7~O 800
1,5 4 8.800
7,8e8,000
6,449,600
4,603,904
8,739,680
7,856,000
1,140,160
445000
920,800
298800
1,273600
3024()0
120000
145,600
166,560
618,240
1,249,350
171,200
60,BOO
430,400
369,6S6
592,800
1,083,200
634,560
161,400
87,200
0
46,400
0
0
469,324,615
297,413,073
1i1,911,542
10,116,986
18,B64,4~8
li4,400
10,500
0
0
a
718,oeo
54,720
156.800
323,200
57,600
25,040
405,440
236,800
208,000
123,000
820,800
147,840
65,200
548,320
203,8~O
TABLE VI. HOLDINGS OF TREASURY SECURITIES IN STRIPPE) FORM, JANUARY 31, 1998 - Continued
Corpus
STRIP
CUSIP
Loan Ces.:~ptlon
Treasury Notes
Se"es
CUSIP
A
912827 VW9
E
WE3
C
WN8
D
'NW8
A
XE7
XN7
C
XVV7
AK
3H3
Al
3K6
C
YES
A ,',1
3P5
Poe:.
3R1
A
YN6
'(W6
E
e
ZE5
ZN5
3M2
C
D
X
ZX3
A
A85
892
C
025
F49
G55
3J9
314
303
3S9
J78
l83
N81
F89
C88
R87
586
T85
U83
V82
W81
xeo
Y55
Z62
2JO
2U5
3ED
=
C
A
E
M
N
Interesl Rate
8·1/8
9
9·1/4
8·7/8
8·718
9·1/8
8
5·3/4
5·5/8
7·7/8
5·5/8
5·5/8
8·1/2
8·718
8.3/ 4
8·1/2
5·3/4
7·3/4
8
7·7/8
7·1/2
7·1/2
6·3/8
5·7/8
5·314
~
5·3/4
5·518
6·1/4
5·3/4
5·718
7·1/4
7·1/4
C
;.
2
A
=
C
D
7-718
A
7·1/2
6·112
6·112
5·7/8
5·518
6·7/8
7
6·1/2
6·1/4
6·518
6·1/8
E
C
C
A
C
C
cC
TOlal Treasury Nc;es
912820 AM9
AN7
AP2
AQO
AR8
ASS
AT4
CBI
C07
AU1
CGO
CJ4
AV9
AW7
AX5
AY3
CF2
AlO
BA4
BB2
BCO
808
8E5
eC9
CE5
CH6
CK1
8F3
8G1
8HS
8JS
BK2
BlO
8M8
BN6
8P1
80S
8R7
855
BT3
SUO
BW6
8X4
CA3
Pnr,C:;lal Amount Outstanclng ,n Tncusancs
Maturity Date
Total
OutstanClnG
02/15198
05/15/98
08115198
11/15/98
02/15/99
05/15/99
08/15/99
09130/99
10131/99
11/15199
11130/99
12/31/99
D2/15/00
0:/15/00
08/15/00
11115/00
11115/00
02115/01
0:/15/01
08115/01
11115/01
05/15/02
08/15/02
09130/02
10131/02
9,15901:8
9,165.387
11 ,342.6~6
9,902,875
9,719,623
10047,103
10,163,644
17,487,287
16,823947
10773,960
17,051,198
16,747,020
10,673,033
10ASa 230
11,OSO,646
11,519,682
16,036,083
11,312,802
12,398083
12,3391S5
24,225102
11,714,397
23,8:9,015
12,eCE 814
11,737,284
11130/02
12131/02
02/15/03
08115/03
02/15/04
05115/04
08115/04
11/15/04
02115/05
05/15/05
08/15/05
11/15i05
02/15/06
05/15i06
07/15/06
10115/06
02115/07
05/15/07
OS/15/07
12,120.580
12,052368
23,562,691
28,011,028
12,955,077
912820 eV8
8Z9
CL9
NOlO On 1M 4111 "","'cav
:~ •• co mcntt1 racle VI ""II be avarJaOle aner 3 00 ,
Pr..OIIl: OeCf$ website at ~--= /;JNNJ
m
7,O1834~
8,330633
5,66 4 230
7,116,326
7,488882
16,036,083
8,258,402
9,142. aS8
8,868,785
20,063322
9,541,517
22,587,015
12,770014
11,661,224
I
S[rlooeG Form
Reconstituted
This Month
12. 400
0
43,200
271,400
550,400
38,560
15,2 40
84,800
0
0
186,400
0
424,928
431,200
193,600
16,aOO
523,200
289,600
560
0
13,103,678
13,955,186
25,636,803
647,660,085
557411,552
60,248133
2,363,310
16,0630 4 5
16,063045
16.958.558
8,410,286
41,432289
0
0
0
0
a
0
16,9~8,g5a
8.410,286
41,432.289
1.158.41E 989 I
9252=7314
cad (202) 482 1geS The
4
0
0
48,000
42.400
32,000
499,200
0
0
0
0
0
0
0
0
0
0
a
4,800
4,160
0
0
0
60,160
20,800
20.800
I
232 lS9 675 I
eas:em ~m. on flo Commerce Deoa~em's Ec:nomlc 9uleln Board (E3B) and on ltle Bureau of:-e
p\.JeI~c::e~l.lTeas ~O" For more m1crTT1aucn about E:8
277,1;:0
10600
28,000
65,6CO
104,OCO
67,2CO
81,150
0
0
16,000
0
0
64,000
1,600
9440
11,934,180
12052.388
23,137,763
27,579,828
12,761,477
14,423,572
12,823,267
14,084,160
13,834,194
14,739,504
15,002,5.50
15,205,120
15,509427
16,015,475
22740,446
22,459,675
13,043518
13,937,386
25,616003
22,4~9,675
I
Grand Total
Ponlan He!d In
2,630080
2905,800
4,169,600
4027,200
1,579,200
3529,600
3,145,300
0
0
3814,400
0
0
2,342,4CO
4,832,000
3,964,320
4,030,800
0
3,054,400
3.255.625
3,47C,400
4,162,72Q
1,772,480
1,272,000
36,800
76,000
17,487,297
16,823947
6,959560
17,051,198
16,747,020
14,~0,372
01/15/07
07115/02
01115/08
I
6,528923
6.259.587
7,173,046
5,875,675
8,140,423
6,517=03
13,346.467
14,373,760
13,834,754
14,739,504
15,002,580
15,209,920
15,513,587
16,015.475
22,740446
.......
Treasury Inftatlon·lr,::xed Notes
Se,.-es Imeres! Rate
CUS;P
3·3/8
A
9128272M3
3·5/8
3A8
J
3·5/8
A
3T7
. .....
Totallnnation·lncex!!: e:.o!es ...
I
Ponlon He'd In
UnstmlOe1 Fcr~
a
0
0
0
0
12480255
~alances In !tIIS \acle are suoJect to audJ1 and sl.Oese~ue!"'lt aCJus~e"lS
DEPARTMENT
OF
THE
'IREASURY \ ':~" . .~.)
TREASURY
NEW S
omCE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C. - 20220 - (202) 622·2960
Monthly Release of U. S. Reserve Assets
February 6, 1998
The Treasury Department today released U.S. reserve assets data for the month of
January 1998.
As indicated in this table, U.S. reserve assets amounted to $70,004 million at the end
of January 1998, up from $69,954 million in December 1997.
End
of
Month
Total
Reserve
Assets
Gold
Stock II
Foreign
Currencies 1,1
Special
Drawing
Rights
21 3.1
ESF
System
Reserve
Position
in IMF 21
l221
December
69,954r
1l,047r
10,027
13,846
16,963
18,071
70,004p
1l,047p
9,998
13,975
16,945
18,039
1998
January
II Valued at $42.2222 per fine troy ounce.
Z,I Beginning July 1974, the IMF adopted a technique for valuing the SDR based on a
weighted average of exchange rates for the currencies of selected member countries. The
U.S. SDR holdings and reserve position in the IMF also are valued on this basis
beginning July 1974.
3,1 Includes allocations of SDRs by the IMF plus transactions in SDRs.
41 Includes holdings of Treasury and Federal Reserve System; beginning November 1978,
these are valued at current market exchange rates or, where appropriate, at such other
rates as may be agreed upon by the parties to the transactions.
p
Preliminary
Revised
RR-2203
r
DEPARTMENT
lREASURY
OF
THE
TREASURY
NEWS
OFFlCE OFPUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. _ 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
February 9, 1998
Contact: Dan Israel
(202) 622-2960
TREASURY ANNOUNCES INNOCENT SPOUSE INITIATIVES
As part of a year-long review of tax liability issues affecting innocent spouses, the
Treasury Department today announced a comprehensive set of initiatives to address these issues.
"It is imperative that we protect taxpayers whose spouses violate the tax laws without
their knowledge and Treasury and the IRS are taking steps to achieve this goal," said Secretary
Robert E. Rubin. "Many in Congress have been focused on addressing this issue, and we are
committed to working with them to find a solution."
The announcement comes as a result of increased Administration efforts to expand and
protect taxpayer rights. The Treasury plan will affect taxpayer contacts with the IRS at all stages,
from initial filings through a new ultimate remedy in the Tax Court. Furthermore, the IRS has
strengthened the authority of the Taxpayer Advocate to intervene in such cases.
"Taxpayers who feel they have nowhere to tum should be aware that they can seek
assistance from the IRS' Taxpayer Advocate," said Secretary Rubin.
The new initiatives include both administrative actions that Treasury and the IRS are
implementing, and legislative proposals which the Administration hopes to work with Congress to
enact. The administrative steps include:
•
Expediting the issuance of a new form to assist taxpayers in preparing claims for relief
under the innocent spouse provisions_ These forms will be processed in one central
location to ensure the technical expertise of the IRS examiner and consistent treatment for
taxpayers_
•
Reviewing current training materials to ensure that they stress the responsibility of
employees to identify situations where the innocent spouse provisions might apply even if
the taxpayer does not know about the provisions When appropriate, the IRS will provide
these taxpayers with the new form and assist them in preparing it.
RR-2204
For press releases, speeches, public schedules and official biographies, call our 24-hollr fax line at (202) 622-2040
•
Making telephone assistors, specially trained in the innocent spouse provisions, available
to answer questions from taxpayers received through IRS' toll free telephone system.
•
Developing special training courses on the innocent spouse provisions to be given to IRS
collection and examination personnel in both basic training as well as annual continuing
professional education training
•
Alerting couples who file joint income tax returns of the legal consequences of joint filing
in the instructions in their tax packages and revising other publications to make innocent
spouses more aware of the relief provisions available to them.
•
Reaching out at both the national and local levels to community organizations that serve
abused or battered spouses to identifY those who might qualifY for relief under the
innocent spouse provisions.
The legislative initiatives, which were proposed by President Clinton last October and
included in last week's budget, include:
•
Automatically suspending collection efforts against one spouse when the other is
contesting a proposed joint assessment in Tax Court.
•
Making innocent spouse relief easier to obtain by changing statutory standards to help
additional taxpayers, including those with smaller tax bills who are presently ineligible for
relief in many cases.
•
Giving more taxpayers who are denied innocent spouse relief by the IRS an opportunity to
appeal the IRS decision to Tax Court and automatically suspending collection while the
Tax Court considers the appeal
Treasury also will release a technical report, required by Congress in the Taxpayer Bill of
Rights 2, which examines proposals to change the current system as well as defects in current law.
-30-
PUBLIC DEBT NEWS
Department of the Tnasury • Bureau of tbe Public Debt • Washington,
DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEE! - WASHINGTON DC
FOR IMMEDIATE RELEASE
CONTACT:
February 09, 1998
Office of Financing
202-2l9-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Term:
Issu.e Date:
~l-Day Sill
February l2, 1998
Maturity Date:
May 14, 1998
CUSIF Number:
9127946P4
RANGE OF ACCEPTED COMPETITIVE E!DS:
Discount
Investment
Rate
Rate
-----Low
High
Average
5.070%
5.1qO%
1/
Price
----------
------
5.209%
98.'718
98.711
5.238%
5.234%
S.09S\'
98.712
Tenders at the high discount rate were allotted
32%.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepr::ec.
Tendered
Tender Type
Competitive
Noncompetitive
$
PtmLIC SUBTOTAL
Federal Reserve
Foreign Official Iost.
Refunded Maturing
Addi tional ~.mounts
$
TOTAL
42,077,080
1,377,695
$
5,822,926
1,377,695
43,454,775
7,200,621
3,809,455
3,809,485
103,344
1,656
103,344
1,656
47,369,260
l/ Equivalent coupon-issue yield.
RR-2205
http://WWW·llublh:dl.ht.tr~:ls.gov
$
11, llS, 106
From: TREASURY PUBLIC AFFAIRS
20009
3-16-98 4:39pm
p. 20 of 59
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of tbe Public Debt· Washington, DC 20239
!REASURY SECURITY AUCTION RESULTS
SOREAU OF THE PUBLIC DEBT ~ WASHINGTON DC
FOR IMMEDIATE R.£LEJl.5E
CONTACT:
February 09. 1998
Office of Financing
202-219-3350
RESULTS OF nEASURY'S AUCTION OF 25 -WEEK BILLS
Term:
Issue Date:
Macurity DatE:
Ct1SIP Number:
162-Day Bill
February 12, 1998
August 13, 1998
912795AF8
RANGE OF ACCEPTED COMPETITIVE BIDS;
Discount:
Rate
-- ----
Investment
Rate 1/
------
...
Price
---
------
LOIll
5.040%
5.244%
High
S.07S~
5.282%
97.434
Average
5.075%
5.2B2%'
97.434
Ten~ers
9'7.452
at the high discount rate were allotted
AMOUNTS TENDERED AND ACCEPTEO (in
45~.
~hc~sands)
Tendered
Tender Type
Competitive
$
Ncncompe~it.ive
32,734,108
l/261,806
Acce9ted
s
3,169,849
1,261,606
PUBLIC SmTOTAL
33,9.95,.916
.l:,"'31,657
FederCi.l Reserve
Foreign Officia.l Inst.
Refunded Maturing
Additional Amounts
.3,5l5,000
3.515,000
2,832,556
43,744
2,832,556'
43,744
40,3S7,216
J.O,S22.9S7
$
TOTAL
1/ Equivalenc coupon-issue yield.
RR-2206
h Up :/l\'fWW.J> ublil:(tL-b t.rrr :'I!".::u\,
DEPARTMENT
OF
THE
TREASURY
I
1789
omCE OFPUBUCAITAIRS -1500 PENNSYLVAN1AAVENUE. N.W. - WASHINGTON, D.C.• 20220. (202) 622·2960
EMBARGOED UNTIL 9:30 A.M. EST
Text as Prepared for Delivery
February II, 1998
TREASURY SECRETARY ROBERT E. RUBIN
HOUSE APPROPRIATIONS FOREIGN OPERATIONS, EXPORT FINANCING
AND RELATED PROGRAMS SUBCO:MMITTEE
Mr. Chairman, it is a pleasure to testify today about the Administration's FY 1999 budget
request for funding for the international financial institutions (IFls) -- the World Bank, the
International Monetary Fund and the regional development banks.
We live in an era marked by a global economy and global financial markets, which has
brought tremendous benefits to American workers, farmers and businesses through greater
exports, more high-paying jobs, higher standards of living and lower inflation. Countries in the
developing world and emerging markets have attracted previously unimaginable flows of private
capital for investment, which has heJped foster growth and lift millions out of poverty and has
helped tum the developing countries into markets that have been absorbing over 40 percent of our
exports.
Yet just as this era brings great opportunities for the United States and the rest of the
world, so does it present new risks -- as we have clearly seen in recent months with respect to the
financial crisis in Asia. To make the most of the opportunities, and manage the risks, we must
participate in -- and lead in -- the international institutions that help shape the global economy.
Accounting for less than one tenth of one percent of federal outlays, these programs provide an
enormous return for American taxpayers. They help build free markets and free trade, promote
growth and reform, promote sustainable development -- and assist in responding to financial
crises such as the current one in Asia. All of which importantly protects and promotes U.S.
economic and national security interests.
Mr. Chairman, let me say that I very much appreciate the hard work of this Committee in
furthering effective U.S. leadership in the IFls. I am pleased that we have worked in partnership
-
For press releases, speeches, public schedules and official biographies, call our 24.IJour fax line at (202) 622-2040
vvith this Committee to set priorities for the future. Last year we cleared our arrears to the \Vorld
Bank's International Development Association and set a course to clear our remaining arrears to
other IFIs. Because we have negotiated a 40 percent reduction in future U.S. obligations to the
multilateral development banks, our annual commitment will be less than $1.2 billion, after we
complete the arrears reduction process. On the basis of this annual U.S. investment, we will
maintain our great influence in the multilateral development banks and in the decisions on the
terms of tens of billions of dollars they lend annually.
At the same time, we have worked forcefully with these institutions to refonn their
operations, reduce overhead, become more open, do more to prevent corruption, promote the
private sector, and become more sensitive to environmental concerns and labor standards and
human rights. The World Bank is undergoing a major reorganization. Asian and European Bank
budgets have been frozen for several years and the African Bank has cut staff sharply under a
radical restructuring. The banks are now providing us vvith better value for the money than at any
time in their history, even while we are reducing our contribution to them.
However, U.S. arrears to the I\1DBs are still well over $600 million and we are $75
million short of meeting our pledge to the IMF's Enhanced Structural Adjustment Facility. Our
FY99 budget request includes $509 million toward these commitments. OUf highest priority, as
always, is the current contribution, but the arrears, too, are critically important.
Today, I'd like to touch briefly on a few items that bear special explanation.
First is funding for the Global Environment Facility (GEF). The GEF is a unique
instrument to help developing countries deal vvith environmental problems that have cross-border
effects, such as protecting the oceans or the ozone layer Our $300 million request for the GEF,
of which nearly $200 million is for arrears, is an investment in our own future health and
prosperity.
Second, we are requesting $155 million for the Mrican Development Fund, more than half
of which would cove: arrears: The African Bank, which includes the Fund, has made top-tobo~om reforms, and IS a key lOstrument for a deeper American partnership with an emerging
Africa.
!
.
T~rd, we are .requesting $~ .million for t~e echnical Assistance Program at Treasury,
which assists developIng and transltlOnal countnes In their efforts to establish market economies
In a ~arge budget .this. is. a very small amount of m~ne~, yet the expertise that Treasury and other'
offiCIals can pr~Vlde IS Invaluable for these countnes In creating the basic elements of a market
ec~nomy, and In so~e cases ~- as t~e recent crisis in Asia -- it is important to deploy technical
aSSIstance more rapidly than IS pOSSIble through Current funding mechanisms outside Treasury.
Fourth, we strongly support funding for the World Bank's International Development
Association. As you know, the Bank has taken major steps to improve project quality and
2
maximize the development impact of its operations. To continue our leadership with respect to
that refonn, and for the Bank's ongoing activities, we need to continue to provide our fair share
of the funding.
Mr. Chainnan, the events of the past year validate the focus oftbis Committee on the
important issues surrounding the IFIs, as financial instability in Asia has shaken the region and
affected markets around the world and the IFIs have taken the lead in responding to the crisis. Let
me say a word now about the effort to restore financial stability and growth to the troubled
countries in Asia.
Financial instability, economic distress, and depreciating currencies a11 have direct effects
on the pace of our exports to the region, the competitiveness of our goods and services in world
markets, the growth of our economy and, ultimately, the well-being of American workers, farmers
and businesses. Already major U.S. companies - such as Boeing, Motorola, and Intel-- are
reporting effects from the crisis, which impacts workers in these, as well as many smaller,
companies. Roughly forty percent of our exports go to developing countries around the globe. If
the crisis were to spread more broadly to other emerging markets, then the impact on our
economy could be much greater. 'By helping to reestablish financial stability, we help these
countries become strong markets once again for American goods, and have stronger currencies
that will help the competitiveness of our products in world markets.
The program we have supported to resolve this crisis involving the IFIs has focused first
on supporting refonn programs in individual nations to address the specific causes of each crisis.
At their core, these programs aim to strengthen financial systems, improve transparency and
supervision, eliminate the interrelationships between banks, the government,.and commercial
entities, open capital markets, institute appropriate monetary and fiscal policies, and liberalize
trade through measures such as tariff reductions and eliminating unfair export subsidies.
Second, ifnecessary, we support these programs of reform with temporary financial
assistance to provide the breathing room for a nation to restore economic confidence, attract
private capital and resume growth.
The IMF, World Bank, and the Asian Development Bank have all played key roles in the
effort to resolve this crisis. The World Bank and ADB, both of which played a strong role in the
development of Asia, have reacted quickly and effectively to the recent financial crisis in Asia and
have directed many of their loans to the social sector to mitigate the effects of the crisis on the
population. Our budget requests $13.2 million for the Asian Development Bank and $250 million
for the Asian Development Fund, of which $150 million is for arrears, to help support their
critical efforts. The Export-Import Bank and OPIC have also been very actively involved in the
efforts in Asia.
As the central provider of financial assistance, the IMF has been key to the effort to
resolve this crisis. To enable the IMF to respond effectively if this crisis were to spread and
3
intensify -- which we all want to avoid -- and to deal with future crises that could similarly affect
the interests of the American people, we are requesting funding for our Th1F quota subscription,
and a commitment for an augmented back-up facility to the Th1F, the New Arrangements to
Borrow When the IMF draws on either of these commitments, we receive a liquid, interest
bearing offsetting claim on the IMF of equal value. Our contribution does not result in a budget
outlay and so does not increase the deficit, or displace spending on other domestic programs.
Over the last fifty years, since the IMP's founding, our funding has not cost the American
taxpayer a single dime.
Some have said that providing financial assistance to these countries shields investors from
the consequences of bad decisions and sows the seeds of futures crises. Investors and creditors
should bear the full consequences of their decisions and in fact, vast numbers have taken large
losses in Asia, including U.S. banks. Deutsche Bank, the largest German bank, announced
recently it would set aside a $777 million dollar reserve for possible losses for loans in Asia.
However, a byproduct of programs designed to restore stability and growth may be that some
creditors will be protected from the full consequences of their actions. But forcing investors and
creditors involuntarily to take losses, however appropriate that might seem, could cause banks to
pull their money out of the country involved, and, perhaps from other emerging markets, which
could cause serious global economic disruptions.
Having said this, it is critically important that we continue to work toward changing the
global financial architecture -- and we are now engaged, in conjunction with the Federal Reserve
Board, in an active examination of these extremely complicated issues -- so that creditors and
investors can bear the consequences of their decisions as fully as possible, as well as to improve
prevention and various other matters. However, we should not wait until that work is complete to
take the steps necessary to deal with the crisis at hand.
Another concern that has been raised is that these programs do not require nations to take
specific steps to promote the environment, protect core labor standards and ensure human rights.
We are committed to addressing these issues in other fora and to working with the international
financial institutions to promote them on a regular basis. But there are a lot of practical limits on
the feasibility of addressing them in the context of a program to restore financial stability in a
country. Moreover, restoring financial stability, growth and prosperity provides the best
environment to advance these objectives and benefit the workers of these countries as well as our
own workers.
Mr. Chairman, let me conclude by reiterating how important these institutions are to our
own ~~onomic well~being. T.h~y help promote growth and economic reform in developing and
transitIOnal econonues, prOVIding new markets for U. S. goods and services. And as w h
h"
e ave seen
.
In .recent mont s In Asia, t.hey provide e~penise and resources to respond to global financial
cnses when they occur. In. short, supportmg the IFls is very much in the interest of American
workers, fanners, and busmesses. Thank you very much.
-30-
4
DEPARTMENT
OF
THE
TREASURY
NEWS
-~::a_
OmCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASlllNGTON, D.C. _ 20220 _ (202) 622.2960
EMBARGOED UNTIL 2 P.M. EST
Text as Prepared for Delivery
February 12, 1998
TREASURY SECRETARY ROBERT E. RUBIN
SENATE FOREIGN RELATIONS COMMITTEE
Mr. Chainnan, members of the Committee, it is a pleasure to appear before this
Committee, which focuses on the broad range of the nation's foreign policy concerns. We live in
a new era of the global economy and global financial markets -- an era that creates enonnous
opportunities for American fanners, workers and businesses, but which also carries new risks.
Strong and effective U.S. leadership on the issues of the global economy is essential if we are to
realize the opportunities, and manage the risks; and whether or not we provide that leadership
will profoundly affect our national economic and security interests in the years ahead. These
issues of the global economy will be of enormous importance to this Committee in the years and
decades ahead.
Against this background -- the imperative of U.S. leadership in the global economy
because of our economic and national security interests -- today I would like to discuss the crisis
in Asia; its potential impact on the United States; the international response to the crisis
including the critical role of the International Monetary Fund; and our efforts to modernize the
architecture of the international financial markets to better help prevent financial crises, or better
manage them should they occur.
Let me start by placing the events in Asia in the context of the emergence of the global
economy. I worked on Wall Street for 26 years before joining the Administration, and I saw how
businesses over time became increasingly international in their operations, how economies
around the globe became more and more interdependent. and how capital began flowing in
previously unimaginable amounts to developing countries. These flows of capital helped provide
investment in developing countries, which, in tum. fostered strong sustained economic growth,
helping to lift millions out of poverty and creating new markets for U.S. goods and services.
Forty percent of our exports are now purchased in developing countries. All of this has brought
RR-2208
-
Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
tremendous opportunities to the American people: greater exports, more high-paying jobs, higher
standards of living and 10wer inf1ation. And our leadership in the World Bank, the IMF and the
regional development banks has played a key role in this process that has contributed so much to
our economic well being.
But with the opportunities have come risks. In recent months, these risks have been
brought home as financial instability in Asia has shaken the region and affected economies
around the world, including our own.
Financial instability, economic distress, and depreciating currencies all have direct effects
on the pace of our exports to the region, the competitiveness of our goods and services in world
markets, the growth of our economy and, ultimately, the well-being of American workers. Thirty
percent of U.S. exports go to Asia, supporting millions of U.S. jobs, and we now export more to
Asia than Europe. In states like California, Oregon and Washington, exports to Asia account for
more than ha1f of each state's total exports. Already major U.S. companies -- such as Boeing,
Motorola, and Intel -- are reporting effects from the crisis, which impacts workers in these, as
well as many smaller, companies.
If the crisis were to spread more broadly to other emerging markets throughout the globe
-- which we are all working hard to avoid -- then American workers and businesses could be far
more severely affected. By working to reestablish financial stability we help the countries in
crisis become strong markets once again for American goods, with stronger currencies that will
help the competitiveness of our goods in world market. When we support IMF-led reform
programs, we help to protect and promote the interests of the American people.
The United States also has critical national security interests in seeing a restoration of
financial stability in the region. We have 100,000 troops based in Asia, 37,000 on the Korean
peninsula alone. A stable and prosperous Asia is more likely to be a peaceful Asia -- as was the
case over the last decade when Asia was experiencing dynamic growth. And more generally, with
respect to the broader concerns of this Committee, economic stability promotes political and
social stability and economic instability threatens political and social stability.
Mr. Chairman, the United States has helped lead an international response to resolve this
crisis. This response has focused on four key elements: enacting reform programs in individual
nations; providing temporary financial assistance when needed; working with other major
economic powers to promote growth in their countries; and finally, fostering policies in other
developing and emerging economies to reduce the risk this crisis will spread and to prevent
future crises. Let me say a few words about each of these.
First, these programs focus on economic reforms to address the specific causes of each
nations' crisis and lay the basis for recovery by strengthening financial systems, improving
transparency and supervision, eliminating the interrelationships between banks, the government,
and commercial entities, opening capital markets, and instituting appropriate monetary and fiscal
2
policies. These are not austerity programs, they focus largely on structural reforms.
Second, if necessary, we support these programs of reform with temporary financial
assistance to provide breathing room for a nation to restore economic confidence, attract private
capital and resume growth.
Mr. Chairman, let me stress that financial assistance, while critical for a short period, is
not the key. Reform is the key. Only when nations purse sound policies will confidence -- and
private capital -- return.
Design of the reform programs and the provision of assistance is centered around the
IMF . Today we ask you to support two critical requests: a commitment for our IMF quota
subscription, and an augmented back-up facility, the New Arrangements to Borrow, to
supplement the IMF's resources, if needed, to deal with crises such as this one. These IMF
resources need to be put in place as quickly as possible to enable the international system to
respond to a worsening and spreading of this crisis, or to deal with future crises, either of which
could dramatically affect the interests of the American people. The likelihood of such
developments may be small, but let me emphasize, the consequences could be immense. We
cannot afford to take that risk. Moreover, failure to provide these resources could shake
confidence in American leadership in the global economy just at a time when confidence and
American leadership are so important in re-establishing stability in Asia.
Our contribution to the IMF does not result in a budget outlay. When the IMF draws on
our commitments, we receive a liquid, interest bearing offsetting claim on the IMF of equal
value. Our contribution does not increase the deficit, or divert resources from other spending
priorities and our contributions over fifty years have not cost the taxpayers a single dime.
The third element of our approach is to encourage the major industrial countries to act to
strengthen their own economies, which can contribute to resolving the crisis in Asia. Japan, the
second largest economy in the world, has an especially crucial role to play. If Japan were on a
strong economic track led by domestic demand led growth, it would be a larger market for Asian
goods, a source of greater bank credit and other capital flows, and a radiator of confidence for the
region.
Fourth, and finally, we have worked closely with the IMF to help other emerging markets
in Asia, Latin America, Russia and other transitional economies to make policy adjustments to
reduce their vulnerability to contagion from the countries now in crisis.
Thus far, strong U.S. leadership and the rapid efforts of the international community to
re-establish financial stability in Asia, as well as reform measures in many developing countries
elsewhere, have succeeded in limiting the contagion effect of the crisis.
Looking forward, while nobody can say for certain what will happen in the current
3
situation, the countries in Asia have great underlying strengths, such as high savings rates, firm
commitments to education, and strong work ethics. With a sustained commitment to the
necessary reforms, they are well-positioned over time to re-establish strong economic growth and
sound currencies -- although there are certainly enormous challenges ahead to restore economic
well-being.
Let me take a moment to address a couple of concerns that have been raised with respect
to these programs.
Some have said that providing financial assistance to investors shields them from the
consequences of bad decisions and sows the seeds of futures crises. In fact, vast numbers of
creditors and investors, have taken large losses in Asia -- for example Deutsche Bank, the largest
German bank, announced last week a $777 million dollar reserve for possible loan losses in Asia.
And investors and creditors should bear the full consequences of their decisions. However, a
byproduct of programs designed to restore stability and gro\vth may be that some creditors will
be protected from the full consequences of their actions. But any action to torce investors and
creditors involuntarily to take losses, however appropriate that might seem, could cause banks to
pull their money out of the country involved, and, perhaps from other emerging markets, which,
in turn, could cause serious global economic disruptions.
Having said this, it is critically important that we work toward changing the global
financial architecture so that creditors and investors bear the consequences of their decisions as
fully as possible, an effort that we have already begun in conjunction with the Federal Reserve
Board. But devising such architectural changes is difficult and complex. We cannot wait until
that work is complete to take the steps necessary now to put in place the capacity to protect
ourselves against the crisis.
Others have said that these programs do not require nations to take specific steps to
protect the environment, promote core labor standards and ensure human rights. We are
committed to addressing these enormously important values, both as social and moral issues, and
as essential underpinnings for a successful global economy. But there are a lot of practical limits
on the feasibility of addressing them in the context of a program to restore financial stability
under crisis conditions. Moreover, restoring financial stablJity, growth and prosperity provides
the best circumstances to advance these objectives and benefit the workers of these countries as
well as our own workers.
Others say that doing nothing would be best, because markets would ultimately solve the
problem on their own. Let me say as someone who has an enormous belief in markets, that there
is simply too much risk that markets alone will not resolve these problems of financial instability,
and given the enormity of our stakes in Asia we must act.
Mr. Chairman, as I said earlier, we live in an era of global financial markets and a global
economy which presents both opportunities and risks for American workers, farmers and
4
businessmen. Making the most of those opportunities, while minimizing the risks. will be a
central issue for this Committee. and the nation, in the years ahead. U.S. leadership in these
matters will be indispensable for fostering growth and stability around the world -- and protecting
and promoting the interests of the American people. Thank you very much.
-30-
DEPARTMENT OF TH~ TREASURY
WASHINGTON. D.C.
February 9, 1998
The Honorable William V. Ro~ Jr.
Chairman
Committee on Finance
United States Senate
Washingto~ D.C. 20510.6200
Dear Mr. Chairman:
We \\/Tite to express our stroog opposition to S. 1133, which we understand your Committee may
soon consider. Last summer, when the Senate passed a similar proposal, the President stated that
be would veto the legislation that contained it. S. 1133 mises concerns similar to those raised by
last year's Senate bill and by H.R. 2646, which the House passed last fall. As we staled in
October 1997, we would recommend that the President veto S. 1] 33.
Every Americall child deserves a high quality elementary and secondary education. We believe
that targeting our limited Federal resources to build stronger public schools will help ensure that
aU of our children receive the education they need to be productive citizens. Public schools serve
approximately 90 percent of students in grades K-12 and currently face record-breaking
enrollments. By focusing resources on public schools, we can Jeverage community investment to
help parents, teachers. and administrators meet the important educational challenges they face in
serving the vast majority of our children: meeting high standards for learning and discipline;
fixing school buildings; and providing a safe. drug-free environment for children. In contrast, S.
1133 diverts needed attention and resources from our public schools.
The bill disproportionately benefits the most affluent families and provides linJe benefit to lower
and middle-income families. Additionally, given the expansion of tax-preferred savings vehicles
in last year's bi11~ we do not believe that further increasing the contribution limits for taxpreferred savings opponunities will generate much additional savings and would, instead, reward
families, particularly those with significant means, for wha'L they would otherwise do.
We are also concerned that the bill would create significant compliance problems. The
legislation allows tax-free withdrawals from Education lRAs for, among other things,
supplementary expenses required for .the child's enrollment or attendance at a public. private, or
religious school, but provides no guidance in identifying what these expenses are. Distinguishing
between an appropriately taX-free withdrawal and one that should be subject to tax penalty would
lead to Significant additional tax complexities for families.
RR-2210
We therefore strongly w-ge the Committee not to approve this legislation.
Sincerely,
~.'-.R~
Robert E. Rubin
Secretary of the Treasury
\
~.:-"
Richard W. Riley
Seaetalj' of Education
OFFICE
or PUBLIC AFFAliU -1500
P£NNSYL'r'A~IA
AVENUE, N.W._ WASHINGTON, D.C ••
EMBARGOED UNTIL 2:30 P.M.
February :0, 1998
CONTACT:
TREASORY'S
~~EKLY
lOnG. (10l) 611.1960
Office of Financing
202/219-3350
BILL OFFER1NG
The Treasury will auction tyO series of Treasury bills totaling
approximately $14,500 millionl to be lssued February 19, 1998. This ottering
will ~esult in a paydown for ~he Treasury ot abouc $875 million, as che maturing
publicly held weeKly bills are outstanding in the amount of S15,365 million.
In addition-to the public holdings, Federal Reserve Banks for their own
accounts hold $7,220 million of the maturing bills, which may be refunded at the
weighted average discount race of accepted competitive tenders. Amounts issued
to these accounts ~ill be in addition to the offering ~ount.
Federal Reserve Banks hold $2,259 million as agents for foreign and
international moneta.y authorities, which may be refunded within the offerinq
amount at the weighted average d~scount rate of accepted competitive tenders.
Additional amounts may be is~ued for such accounts if the aggregate amount of
new bids exceeds the aggregate amounL ot maturing bills.
Tenders for the bills will be received at Federal Reserve Banks and
a~ ~e Bureau or the Public Debt, Washing~on, D.C.
This offering
Branches and
of Treasury seeuri~ies is governed by the terms and condi~ion3 3@t forth in the
Uniform Offerinq Circular (31 CFR Part 356, as amended) for the sale and issue
by the Treasury to the public at marketable Treasury bills, notes, and bonds.
~etai13
about each of the new
~ecuritie~
highlights.
000
Attachment
RR-2211
-
are given in the attached ottering
HI GHLIGH'l'B OF TREASURY OFl"ERINGB OIr WiEKLY BI LLB
TO BE ISSUED FEBRUARY 19 1
1998
ful.llu<.Iry 10 1
OffQring Amount . . . . . . . . . . . .
OaBc~ipLion of O(fQcing:
Te rm and type of secur i t y . . . . . . . . . . . . . . . .
CUSIP number ............................ .
AuctJon date .....
Issue di..lte . . . . . . . . , .... "
....... .
MatuIi ty date . . . . . . . . . . . . . . . .
Ociylnal issue ddlc.
. ..... .
Currently outstanding . . . . . . . . . . . . . . . . . . . .
MinimlJm bid amount . . . . . . . . . . . . . . . . . . . . . . .
Mu 1 t j pl es. .
. . . . . . . . . . . . . . . . . . .. . .... .
The following
x~le9
S\lbm i :.J!i i on
U I d."l :
0
f
$7,250 mi 11 ion
~7,2)O
million
91-cWy bill
H2-day bi 11
912794 6Q 2
912794 4Y 7
Fobruary 17,
1998
fehruar y 19, 1998
. . . Ma y 2 I, 1 99 B
NOVember 20, 1997
.$10,844 lIil1 ion
$10,000
S 1,000
1998
february 17, 1990
f()bruary 19, 1998
Augu.3t 20, 1998
August 21, ] 997
SIB,763 million
S10,000
S 1,000
apply to all 6GCUcltiea mentioned sbove:
Noncompetrli've-blds.
Cclm t w t l t l V C Li.b.
. Accepted in fuJI up to Si,O()O,(lOO ,It tllf~ dVt~r,j()I'
discount r.ate ()f dC'l,l'lltC'd C(,m!'llt it ivu L!,j:.!.
(I)
Mu.:;t be e~fJrt;;:Jed cI:J oJ di :Il"),II,l I ,d I: ~/l t II l til lit.' dOLi",,') oJ In
inc r c me n t.9 0 t . 0 () ~ "
c 9 , 7. 1 00", 7 1 0 ~ \
(2)
Net long position for each llidder /(\\J~t be [ul'lIIted wilen llic
slim of the total bid amount, at all di:Jcount rates, and l he
net long po:'llion is $1 billion or (]realer.
Net long position mll!.it be determined as of one halt-houl.
prior to the closing time (or receipt of competitive ten ler~.
(J)
H~co9111 zed 8 i d
~a-slngle-¥feld:.- -- -
Haximt1m
~
Maximum Award.
35~
ot public offering
35% of public
offcrin~
Recei[:~_~f -.:!'~~d~rs:
Noncompetitive tender~ ...... .
compet i ti ve tenders ......... .
Payment Tenus.
Prio~
to 12:00 noon Eastcln Standard time on auction day
[a~tern Standard time on auction day
Prior to 1:00 p.m.
Full payment wi th tellder or by charge to a fund.9 account
at a Federal ~egerve Bank on js~uc date
O.'FleE OF PUBLIC AEFA1RS· UOO PENNSYLVANIA AVEN1J~, N.W•• WASHINGTON, D.C.e lOnG.
CONTACT:
E:MBARGOED UNTIL 2: 20 F. 11.
February lD, 1998
(:lIn 612.296.
Office of Financing
202/219-3350
?R.EASiJRY TO J,.\Jcr:;:ON CASH MANAGEMENT BILLS
The Treasury will auction approximately $22,000 million of 6s-day Treasury
cash managemenc bills to be issued February 17, 1998.
Competitive and noncompecitive tenders will be received at all Federal
Reserve Banks and Branches. Tenders will not be accepted for bills to be
maint.ained on t:he book-entry records of the Department of thliil Treasury
(TREASu""RY DlREC"I'). Tenders will ~ be received at the Bureau of Ule PuDliC
Debt,
Na6hing~on,
D.C.
Addicio~l amount.s of the bill. may be issued to Federal Reserve Banks as
agents for foreign and internacional monetary authorities at the average price
of accepted competitive tenders.
This o!r~ring of Trea&ury aecuritiee is governed by the terms and
conditions ge~ forth in ~he Gniform Offering Circular (3~ CFR Pare 356, a&
amended) tor t.he sale and iSiiua by the Treasury to the p1.ll;)lic of markecable
4reasury bills, notes, and bonds.
Note that competitive bids in cash ID4n4sement bill auctions roue; be
exPressed as a di=C9unt ra;e with ~wo decimals. e.g .. 7.l0t.
Details about the new security are given in the attached offering
highlights.
000
At tac1:ment
RR-2212
HIC;li:J;c;E7S CP :;tEASlMY CF~NG
OF 65 - DA i" CASH MANAGEMENT 13 ILL
February
.
"-0 un t . . . . . . . . . . . . . . . . .~ -~ 2,
of ~~@r~tlg
n.w
COO
~O,
1998
mil:ion.
D@scription of Offering:
':'enn a.r.d type of securi::.y
SS-day Cash Management Bill
cusr? r.~~er . . . . . . . . . . . . . . . . . 9:2794 6M 1
Auction date . . . . . . . . . . . . . . . " Febr.lary ::'2, i998
~68ue date . . . . . . . . . . . . . . . . . . . ?ebr~ry 17, 1998
Maturi:y date . . . . . . . . . . . . . . . . Apr~l 23, 1998
Orig~.al iS9~e date ........ -. October 23, 1997
~=ently outstanding ........ $21,560 million
t'".!llur..um bid amount ....... _ ... S:'O, 000
Multiples . . . . . . . . . . . . . . . . . . . . $1.000
Minimum to hold amount ....... S10,000
Mult.iples to. hold . . . . . . . . . . . SI, 000
Supmission of Bids:
~onc~ticive
Accepted in full up to
bids
$~,OOO,DOO
at the
average discount rate of accepted
competitive bids
Compe tit i ve bids . . . . . . . . . (1 ) Mu&C be expressed 46 a di5counC rate with
(2 )
(3)
two decimals, e.g., 7.10%.
Net long position tor each bidder must be
reported when. the sum of the total bid
amount, at all discount rates, and the
nee long posit.ion is $1 billion or
great.er.
Net lang position muse be determined as
of. one b.alf -hour prior to the closing
time for rece~pt of competitive tender •.
Maxjmum
Recognizag Big
ac & Single yield .........
Max.imum
Al@.rd . . . . . . . .
Receipt 0;
3S~
of public of!ering
35t of public offering
Ten~rQ:
~oncompeti~ive
tenders
Prior to
~~me
Co~ecitive taLders ""
"""
?a~ant Te~ ........ " " " "
on
l~:OO
auct~on
a.m.
Eas~ern
Standard
day
Prior to 11:30 a.m. Eascern scandara
time on auction day
Full payment. with tender or by charge to
a fu..nds account at a Federal R.eserve Bank
on issue date
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
February 10, 1998
Contact: Peter Hollenbach
(202) 219-3302
BUREAU OF THE PUBLIC DEBT AIDS SAVINGS BONDS OWNERS
AFFECTED BY FLOODING IN CALIFORNIA
The Bureau of Public Debt took action to assist victims of flooding in California by expediting
the replacement or payment of United States Savings Bonds for owners in the affected areas. The
emergency procedures are effective immediately for paying agents and owners in those areas of
California affected by the storms. These procedures will remain in effect through March 31,
1998.
Public Debt's action waives the normal six-month minimum holding period for Series EE savings
bonds presented to authorized paying agents for redemption by residents of the affected area.
Most financial institutions serve as paying agents for savings bonds.
California counties involved are: Alameda, Butte, Calaveras, Colusa, Contra Costa, Glenn,
Humboldt, Lake, Marin, Mendocino, Merced, Monterey, Napa, San Benito, San Francisco, San
Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Sonoma, Sutter,
Tehama, Ventura, Yolo and Yuba. Should additional counties be declared disaster areas the
emergency procedures for savings bonds owners will go into effect for those areas.
The replacement of bonds lost or destroyed will also be expedited by Public Debt. Bond owners
should complete form PD-1048, available at most financial institutions or by writing the Kansas
City Federal Reserve Bank's Savings Bond Customer Service Department, 925 Grand Avenue,
Kansas City, Missouri 64198; phone (816) 881-2000. Bond owners should include as much
information as possible about the lost bonds on the form. This information should include how
the bonds were inscribed, social security number, approximate dates of issue, bond
denominations and serial numbers if available. The completed form must be certified by a
notary public or an officer of a financial institution. Completed forms should be forwarded to
Public Debt's Savings Bond Operations Office located at 200 Third St.,. Parkersburg, West
Virginia 26106-1328. Bond owners should write the word "Floods" on the front of their
envelopes, to heIp expedite the processing of claims.
~
RR-2213
000
PA-306
http://www .publicdebt.treas.gov
PUBLIC DEBT/WASH DC
Fax:202-219-3365
Feb 10 '98
14:11
P.Ol
-
PUBLIC DEBT NEWS
~ Department of the Treasury • Bureau of the Public
Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE
CONTACT:
February 10, 1998
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 3-YEAR NOTES
Interest Rate:
Series:
Issue Date:
Dated Date:
5 3/8%
$-2001
CUSIP No:
9128273WO
STRIPS Minimum: $1,600,000
Maturity Date:
February 17, 1998
February 15, 1998
February 15, 2001
RANGE OF ACCEPTED COMPETITIVE BIDS:
Yield
Price
Low
5.404~
High
Average
5.420%
99.920
99.876
5.414%
99.893
Tenders at the high yield were allotted
87%.
Accrued interest of $ 0.29696 per $1,000 must be paid for the period
from February 15, 1998 to February 17, 1998.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
Competitive
Noncompetitive
Accepted
Tendered
803,719
___ 12,219,450
803,'19
PUBLI C SUBTOTAL
32,986,719
13,023,169
Federal Reserve
Foreign Official Inst.
1,532,560
780,000
1,532,560
780,000
TOTAL
$
$
32,183,000
35,299,279
RR-2214
http://Www.publicdcbt.tre:ts.gQV
S
$
DEPARTMENT
OF
THE
TREASURY
OFFICE OF PUBUCAFFAIRS -1500 PENNSYLVANlAAVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
Contact: Michelle Smith
(202) 622-2960
February 11, 1998
SUMMERS TO SPEAK ON ASIAN FINANCIAL SITUATION
Treasury Deputy Secretary Lawrence H. Summers will discuss the Asian financial
situation at noon Thursday, February 12 at the Economic Strategy Institute, 1401 H Street
N.W., Suite 750.
Interested media should contact ESI Vice President for Public Relations Greg Stanko at
(202) 326-8554 or Michelle Smith at the Treasury Department at (202) 622-2960.
-30-
RR-2215
For press releases, speech es,
'
h dules and official biographies, call our 24-hour fax line at (202) 622-2040
e
'JJ'
PublIC sc
20809
From: TREASURY PUBLIC AFFAIRS
3-16-98 4:40pm
p. 21 of 53
PUBLIC DEBT NEWS
Deputment of the Treasury ~ Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTlON RESULTS
BUREAU OF THE PU6LIC DEBT ~ WASHINGTON DC
F~R.
CON'l"'1I.CT:
IMMEDIA'l'i: RELEASJ;:
1~9B
February III
Office of Finane1ng
202-:21.9-3350
RESULTS OF
TR2ASU~Y'S ~UCTION
Interest Rar:e: S 1/1~
B-200e
Series:
912e273X8
COSIP No:
STRIPS Minimum: $400,000
OF 10-VEAR NOTES
Issue pate:
Dated Date:
Febru~ 17. 1998
February 15, ~~98
Mar:.urity Date:
February 15, 20D8
RANGE OF ACCEPTED COMPETITIV£ arDS:
Yield
Price
Low
5.550%
SS.620
High
S.S6~%
Average
5.55S~
99.514
99.559
T~ders
at the high yield were allotted
86%.
Accrue~ interest of S
0.3039' per $1,000 must be paid for
from February 15, lS98 to February 171 199B.
AMOUNTS TENt)SRE;:! AND ACCEPTED
c:ompetit;i.va
Noncompetitive
PUBLIC SUETOl"AL
Federal Reserve
Fcreign Official Inst.
TOTAL
$
period
(in thousands)
Ac~epted
Tendered
Ten.der 'type
~he
29,S7S,l.20
$
J.1,'i45,960
258 1 756
2S8,7SQ"
---------------~.
:19,836,876
12,004,715
1 / 420,000
1,420,000
150,000
lSO,OOO
3ld06/676
$
RR.-2216
http://www.pnblicdtlbUrcns.(!o,·
TOTAL P. (H
From: TREASURY PUBLIC AFFAIRS
20009
I)
E .'" A Il T l\1 E N T
() F
THE
1REASURY
3-15-98 4:40pm
p. 22 of 59
T I~ E A S II R \'
NEWS
omCEOFPUBUCAFFAIRS -1500 PENNSYLVANlAAVENUE, N.W.· WASHINGTON, D.C•• 20220. (202) 622-2960
"Emerging From Crisis: the Beginnings of a New Asia"
Remarks by Lawrence H. Summers,
Deputy Secretary of the Treasury
Economic Strategy Institute
Washington, DC
February II, 1998
Thank you for giving me this opportunity to discuss the seismic changes under way in Asia and
what they will mean for the United States.
It is now a little more than seven months since the troubles in Asia first hit the newsstands, with
the July 2nd devaluation of the thai currency. Since that first day the United States has been
intensely focused on finding the right way to restore stability to the region: the right way for
American workers and businesses, the right way for Asia, and the right way for the global
economy. These economies have a long way to go before stability and long·term growth are
restored for good. But in many of them. we can at least say that the core elements of a resolution
are starting to fall into place.
I will spend a little time today describing the United States' stake in a successful end to these
crises. But my main focus will be on Asia - and the opportunity that these crises afford to put
Asian finance on a firmer long-tenn footing.
I. Our Stake in Restoring Stability
In an interconnected world, a threat to the growth and stability of Asia is a threat to our own: to
American workers' wages, their savings and their security.
Nearly one third of our exports go to Asia: more than we send to Europe. California, Oregon
and other Western states are even more exposed, with more than half of their exports going to
Asia. Already, major Fortune 500 companies such as Three M, Boeing and Motorola have felt
the impact of the crises in Asia in reduceq export orders that wiU translate inro fewer new highpaying jobs, and smaller pay checks for American workers.
It says something about this new global economy that USA Today now reports every morning on
RR-2217
Forpress 7'f!leases, speeches, public schedules flnci official biographies, call our 24-hourfcu line at (202) 622.2040
From: TREASURY PUBLIC AFFAIRS
3-16-98
4:41pm
p. 23 of 59
the day's events in Asian markets. Americans have roughJy 2.5 trillion dollars in portfolio
invesunents overseas. Most important of all, the fate of our investments in markets at home is
increasingly linked to events in markets elsewhere. Federal Reserve figures reported yesterday
suggest that Americans now have nearly 30 percent of their assets invested in the stock market more than they have invested in their homes. and more than at any time since records began.
Prolonged instability in Asian and other markets stands to have a direct impact on those assets -and a direct impact on everything from investment in tools and equipment for workers to
mortgages for new homes.
Finally! we have a core national security stake in resolving these crises because a prolonged
financial crisis threatens the stability ofa strategically vital region with a bloody past. We have
] 00,000 troops based in Asia. 37,000 on the Korean peninsula alone, and history shows well
enough the scope for financial instability to trigger broader conflicts.
In short. as Secretary Rubin has said, we have acted to help restore stability in Asia for a clear
purpose: to protect and benefit the American people.
TI. Systemic Roots of the Crisis
While there are enonnous differences between these economies and it is easy to over-generalize,
I think it is fair to say that there have been a number of common features of the economic and
financial approach pursed by many Asian cOWltries in what has historically been a tremendously
positive period. It is an approach, in many respects t that tracks the postwar economic success of
Japan.
This "Asian" approach to finance was built on the fundamentals .- on high savings. high levels of
education and hard work. But it was also an approach that favored centralized coordination of
activity over decentralized market incentives. Governments targeted particular industries,
promoted selected exports, and protected domestic industry. There was a reliance on debt rather
than equity. reIationship.driven finance not capital markets, and informal rather than fonnal
enforcement mechanisms.
While this model has had important and profoWld successes .. • and while the perfonnance of
Asia has been truly spectacular •• it is a difficult question of interpretation how much is due to
the strong universal fundamentals of high savings and education and how much due to particular
practices distinct to Asia Even before the onset of the recent financial problems a reassessment
was under way from a number of quarters:
•
Japan's disappointing economic performance had led to plans for a "Big Bang"
liberalization of the Japanese financial sector and repeated calls for deregulation of goods
and services.
•
prominent Korean observer Kim Dae Jung -- who is now, of course, the President-Elect -2
From: TREASURY PUBLIC AFFAIRS
28009
3-15-98 4:41pm
p. 24 of 59
had published books and articles calling for wholesale refonn of the Korean economic
system: for an end to government-directed lending to industry, for the promotion of noninflationary macroeconomic policies! for refonning the chaebol, and for opening up the
financial system.
•
respected academic studies of Asia's growth record .. by economists such as Paul
Krugman, Alwyn Young, and others --- began to suggest that the miraculous growth of
Asia might owe rather little to sustained growth in productivity and a great deal more to
rapid accumulation of labor and capital.
•
concerns about the distinct features of these markets began to be raised more forcefully
by their trading partners. In Korea, for example, the close and preferential relationship
between the chae.bols! the banks and the govennnent - and resulting poor market access
and excess capacity - has been a mounting source of friction with the United States.
These longer term issues were conflated, in recent years, with a set of shorter tenn problems of
macroeconomic management: the maintenance of mutually inconsistent monetary policy and
exchange rate regimes; excess inflows of private capital channeled into unproductive
investments; substantially reduced competitiveness; significant failures of debt management that
led to unsustainable quantities of short-tenn debt. All of these elements -- short- and long-telTIl - came together to produce these crises, and were then reinforced by lack of market confidence so
as to set up a situation with many of the features of a bank run.
It is important to recognize that this is a distinct kind of crisis. It has a conunon element with
almost all financial crises: money borrowed in excess and used badly. But it is also profoWldly
different because it does not have its roots in improvidence: excessive budget deficits, excess
rates of inflation or insufficient rates of saving.
The recognition that reform and renewal is essential to shaping effective economic policy -- both
in countries with major IMF reform programs and in other important economies of the region.
Relative to nearly all of the crises we have seen in recent years, the problems that must be fixed
are much more microeconomic than macroeconomic, and involve the private sector more and the
public sector Jess.
ill. The Cballenge of Reform
The critical cballenge of reform programs in all these economies is to create an environment that
is conducive to private investment. This means:
•
not just restructuring the financial system, but laying the ground for a new one -- one in
which lenders can trust in transparent and independent financial supervision and
regulation and effective bankruptcy laws, work-out procedures and other formal means of
enforcement
3
From: TREASURY PUBLIC AFFAIRS
20009
•
3-16-98
4:42pm
p. 2S of S9
not just corporate debt work-outs, but system-wide changes with improved financial and
corporate accounting standards and better disclosure to put corporate governance on a
solid footing and assure shareholders their interests will be protected
•
not just an end to govemment-directed lending, but wholesale market opening and
deregulation to increase the power of market incentives and reduce the scope for official
rent· seeking and corruption •• to build a system, in short, which rewards hard work not
hard graft, and settles disputes in the courts not the palace.
The I:MF programs in Thailand, Korea and Indonesia conunit these governments to taking
dramatic steps toward this kind of systemic reform. To state just one example: by June the
Indonesian government is pledged to abolish a dozen officially sanctioned monopolies that have
dominated a whole swathes of the economy for decades .. including every pad of paper sold in
country, every piece of timber, and every sack offlour.
These changes are important with respect to both Asia's shorter and longer tenn imperatives:
they will increase confidence and attract private capital in the short ron. And they address the
longer tenn problem of allocating capital on a more market-oriented basis. They are also
important for the International Community because a more market·oriented Asja wi1l be a better
trading partner, better able to grow and finance our imports and less likely to distort markets with
excess capacity, excess concentration of industry and selective protection.
III. The Regional Underpinnings for Growth
An important aspect of this crisis is its regional dimension. Disturbances are transmitted from
country to country and market to market in several ways. That makes each link of the chain
important. Al] of the economies of the Asia- Pacific need to respond to the crises by pursuing
sound policies aimed at promoting their shared interest in sound finance and so1id growth.
The two dominant economies of Asia. China and Japan, have a special role to play in
contributing to a resolution of the current crisis.
When we talked recently with Zhu Rhongji, the Chinese Vice Premiert in Beijing we were happy
to hear him reaffinn Chinais commitment to a stable exchange rate, and to implementing long~
needed reforms in Chinais own, debt-laden state financial system, He clearly recognizes the
importance to regional fmancial stability of exchange rate stability in China.
Japan has played an important role in helping catalyze the international response to the Asian
crisis, and has a made a substantial financial commitment to the countries in crisis. But as Anwar
Ibrahim, the Deputy Prime Minister of Malaysia. recognized earlier this week, the most important
contribution Japan could make to the restoration of stability and growth in Asia is to take the
steps necessary to strengthen domestic demand, deregulate its economy and open it up to imports,
4
From: TREASURY PUBLIC AFFAIRS
3-15-98 4:43pm
p. 25 of 59
and resolve its fmancial problems.
The Prime Minister took important steps late last year to cut taxes and increase expenditures. But
these were modest steps. Even by the Japanese government's estimates. they still leave Japanese
fiscal policy contractionary for FY1998. And as a result, confidence in the outlook for the
Japanese economy has deteriorated since these steps were announced.
Over the last several weeks there have been encoW'aging signals from some ruling party
politicians and some officials that additional fiscal measures may be forthcoming soon. This has
been well received by the financial markets, but virtual policy is not enough. Substantial, early
additional fiscal action is critically important, not just for Jap~ but for the region as a whole.
Japan has outlined some proposals to help shore up its banking system. The most important and
constructive of these is the proposal to put more public money behind the government's
guarantee of deposits in the banking system. Many of the other proposals are still not well
defined. How they are defined and implemented will be important, for most of the established
experience in confronting these problems suggests that the ultimate success of the strategy will
depend on the degree to which the approach focusses on a number of critical goals:
•
on providing clear and transparent rules for the use of public money
•
on instilling confidence among depositors, not protecting managers
•
on strengthening viable banks, not propping up weak ones
•
and, finally, on attaching clear conditions on the receipt of money, so shareholders bear
their fair share of the burden.
IV. The Reforms Ahead: Not a Bail-out But a Beginning
I have tried to make clear the stake the United States has in a successful outcome in Asia. And I
have tried to make clear the approach we are supporting. A central part of political debate
involves support for the IMF, which has played a large role in financing these programs.
In considering the merits of support for the IMF it is useful to recall what would happen 'on these
occasions if there were no IMF: there would be no conditioned reform; there would be no
internationally recognized source of apolitical advice; there would be further devaluations and
greater reductions in these countries' capacity to purchase our goods; there would be more
pressure on the United States to act unilaterally with taxpayer resources.
We might have a different debate ifIMF imposed a real cost on American taxpayers, but the
crucial thing to recognize is that it does not. Appropriations for the IMF are scored as a zero net
cost to the budget. It is difficult to know what the impact of the Asian financial crisis will be on
the United States economy, but if it is one half of one percent ofGDP, as many observers
5
From: TREASURY PUBLIC AFFAIRS
20009
3-15-98 4:43pm
p. 27 of 59
suggest, this would translate directly into higher budget deficits over the next two years.
By contrast, through fifty years of bipartisan support for the IMF has not cost the American
taxpayer one cent, because it has not had a major default, and because its lending is backed by
very substantial gold reserves. The IMF presently has $65 billion in loans outstanding - and
fully $40 billion in reserves. It operates much like an international credit union. We and other
countries provide a line of credit, and when the IMF draws on our commitments, we receive a
liqui~ interest bearing offsetting claim on the IMP. That is why there are no direct budget costs.
That is wby our contribution does not increase the deficit, or impact other spending priorities.
There are legitimate questions that are debated within the IMF about how these programs shou1d
best be handled. In the inunediate response to the crises, some difficult trade--offs have to be
made. In particular:
•
the macroeconomic aspec~ of these programs need to be designed to balance the
imperative to prevent further declines in markets and a free-faI1ing currency, on the one
hand, and the imperative of avoiding further knocks to domestic demand, on the other.
•
equally, in seeking to bolster the financial system, international and domestic policy-~
makers must weigh the long-tenn need to ensure investors take responsibility for their
actions against the short-term necessity to prevent confidence declining further.
The IMF will not get these trade-offs right on every occasion -- and nor will the officials in the
countries themselves. But one thing is clear: the IMP and the governments impJementing these
programs are agreed on the overarching goal: the restoration oflasting and sustainable growth.
We have worked vigorously to bring about change at the IMF: by creating mechanisms for it to
lend at premium rates in short-term crises to improve borrower incentives; by increasing IMF
transparency and accountability through wider publication oflMF documents and more frequent
publication of the Letters of Intent for programs; by successfully insisting that the IMF focus on
the need to prevent the burden of adjustment falling heavily on the poor.
There will be a need for more of these kinds of changes. But not to fund the IMF now would be
a little like canceling your life insurance policy when you have already gotten sick. It is simply
not a risk that we should take. Nor is it a risk Americans would want us to take -- especially
when we can invest in the protection by the IMF at zero cost to our budget.
Let me be clear on one final point. Our involvement in this crises is not about charity or comity
with other nations: it is about a hard-headed assessment of United States interests. Being
involved in supporting reform - and stabilizing financial markets -- in Asia is as good an
investment in the future of our economy and living standards and security of American workers
as we are likely to find. Thank you.
-306
TOTAL P.06
From: TREASURY PUBLIC AFFAIRS
20009
3-15-98 4:44pm
p. ZB of 59
PUBLIC DEBT NEWS
-Vepartme.llt of tbe TnaiSary-:~Bnreau of the }'ublic Debt • Wasbington, DC l0239
'.t'REASURY SECURIT"t AUCTION 1U:SULTS
BUREAU OF THB
~OR
PUB~IC
DEBT - WASHINGTON DC
CONTACT:
IMMfilJ;A"I'E RSLEASE
Offiee of
Pebruary 12 I 1998
RESULTS
O~
TREASl'JRY'S AUCTION' OF 6S-DAY' BILLS
'I'erm:
6S-Day Bill
Issue :oa1;e;
February 17,
Mat;urity Dace:
April 23. 1998
CUSIP NUmber:
9127946Ml
RANG~
OF
DiSCQu.nt
Rate
_. S.26 t
-~---
Low
High
19~B
ACCE~TED ~OM~ETITlVE BIC$~
J:nve5 ement
Rate 1/
Price
........ _-- ....
5.40
5.30 t
5.29 t
Avera.ge
Finanein~
202-219-3~$O
5.4:3
5.41
-----99.047
"t
"
99.043
99.045
'I'snders at: the high diecount rate we.re allotted
2%.
AMOoms TENDEREtl AND ACCEPTED (in thousand.s)
Tender 'I'ype
......
- _---_
...
Cornpe~i t:ive
$
64,eoo,000
o
Non,=ompctitive
Federal Reserve
Foreign Off':Lcial
I:ru;t.
22.16e.500
o
22,188,500
o
o
200,000
200,000
-------------~--55,000,000
$
l'O'I'AL
c~pon-issue
s
S4.BOO,OOO
POBLIC SUBTOTAL
Equivalent
Accepted
Tendered
...
s
yield.
-2218
http://www.publicdebt.treas.gov
TOTRL P .1Z11
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
February 12, 1998
Contact: Peter Hollenbach
(202) 219-3302
BUREAU OF THE PUBLIC DEBT AIDS SAVINGS BONDS OWNERS
AFFECTED BY FLOODING IN TENNESSEE
The Bureau of Public Debt took action to assist victims of flooding in Tennessee by expediting
the replacement or payment of United States Savings Bonds for owners in the affected areas. The
emergency procedures are effective immediately for paying agents and owners in those areas of
Tennessee affected by the storms. These procedures will remain in effect through March 31,
1998.
Public Debt'S action waives the normal six-month minimum holding period for Series EE savings
bonds presented to authorized paying agents for redemption by residents of the affected area.
Most financial institutions serve as paying agents for savings bonds.
Tennessee counties involved are Carter and Unicoi. Should additional counties be declared
disaster areas the emergency procedures for savings bonds owners will go into effect for those
areas.
The replacement of bonds lost or destroyed will also be expedited by Public Debt. Bond owners
should complete form PD-1048, available as a download from Public Debt's website at:
www. publicdebureas. gov, at most financial institutions, or by writing the Richmond Federal
Reserve Bank's Savings Bond Customer Service Department, 701 East Byrd Street, Richmond,
Virginia 23219; phone (804) 697-8000. Bond owners should include as much information as
possible about the lost bonds on the form. This information should include how the bonds were
inscribed, social security number, approximate dates of issue, bond denominations and serial
numbers if available. The completed form must be certified by a notary public or an officer of a
financial institution. Completed forms should be forwarded to Public Debt's Savings Bond
Operations Office located at 200 Third St., Parkersburg, West Virginia 26106-1328. Bond
owners should write the word "Floods" on the front of their envelopes, to help expedite the
processing of claims.
RR-2219
000
http://www.publicdebt.treas.gov
PUBLIC DEBT/WRSH DC
Fax:202-219-3365
Feb 12 '98
14:32
P.Ol
-
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
Office of Financing
February 12, 1998
202-219-3350
RESULTS OF TREASURY'S AOCTION OF 29-3/4 YEAR BONDS
This issue is a reopening of a bond originally issued November 17,1997.
Interest Rate:
Series:
6 1/8%
CUSIP No:
912810FB9
Issue Date:
February 17, 1998
Dated Date:
November 1S, 1997
November 1S, 2027
Maturity Date:
STRIPS Minimum: $1,600,000
RANGE
OF ACCEPTED COMPETITIVE BIDS:
Yield
Price
Low
High
5.300%
104.558
5.S30~
.~verage
5.822%
104.122
104.239
Tenders at the high yield were allotted
92%.
Accrued interest of $ 15.90470 per $1,000 must be paid for the period
from November 15, 1997 to February 17, 1998.
k~OUNTS
TENDERED AND ACCEPTED (in thousands)
Tender 'Type
Competitive
Tendered
$
Noncompet:itive
PUBLIC SUBTOT.AL
Federal
Reserve
21,064,750
$
$
9,863,550
143,126
143,126
21,207,876
10,006,676
1,325,000
1,325,000
o
o
Foreign Official Inst.
TOTAL
Accepted
22,532,876
RR-2220
http://www.pubIicdcbt.tr~~s.g()V
$
11,331,676
DEPARTMENT
OF
THE
TREASURY
NEWS
1REASURY
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASIDNGTON, D.C.· 20220 • (202) 622-2960
Contact: Public Affairs
(202) 622-2960
FOR IMMEDIATE RELEASE
February 12, 1998
MEDIA ADVISORY
Treasury Secretary Robert E. Rubin will brief reporters on the upcoming "Group of Seven"
economic conference. The G-7 will be held in London, England, on February 21.
DATE:
Thursday, February 19, 1998
TIME:
11:00 am
PLACE:
Secretary's Large Conference Room, Room 3327
Main Treasury, 1500 Pennsylvania Avenue, NW
LOGISTICS:
Members of the media should arrive at the 15th Street entrance of the
Treasury Department. Journalists without White House, Congressional, or
Treasury media credentials should contact 202-622-2960 for access.
-30-
RR-2221
Forpress releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
February 12, 1998
Contact: Peter Hollenbach
(202) 219-3302
BUREAU OF THE PUBLIC DEBT AIDS SAVINGS BONDS OWNERS
AFFECTED BY FLOODING IN VIRGINIA
The Bureau of Public Debt took action to assist victims of flooding in Virginia by expediting the
replacement or payment of United States Savings Bonds for owners in the affected areas. The
emergency procedures are effective immediately for paying agents and owners in those areas of
Virginia affected by the storms. These procedures will remain in effect through March 31,
1998.
Public Debt's action waives the normal six-month minimum holding period for Series EE savings
bonds presented to authorized paying agents for redemption by residents of the affected area.
Most financial institutions serve as paying agents for savings bonds.
Virginia counties involved are: Alleghany, Augusta, Bath, Bland, Botetourt, Buchanan, Craig,
Dickenson, Giles, Highland, Montgomery, Pulaski, Roanoke, Rockbridge, Russell, Tazewell,
Smyth, Wise and Wythe. Should additional counties be declared disaster areas the emergency
procedures for savings bonds owners will go into effect for those areas.
The replacement of bonds lost or destroyed will also be expedited by Public Debt. Bond owners
should complete form PD-I048, available as a download from Public Debt's website at:
www.publicdebLtreas.gov, at most financial institutions, or by writing the Richmond Federal
Reserve Bank's Savings Bond Customer Service Department, 701 East Byrd Street, Richmond,
Virginia 23219; phone (804) 697-8000. Bond owners should include as much information as
possible about the lost bonds on the form. This information should include how the bonds were
inscribed, social security number, approximate dates of issue, bond denominations and serial
numbers if available. The completed form must be certified by a notary public or an officer of a
financial institution. Completed forms should be forwarded to Public Debt's Savings Bond
Operations Office located at 200 Third St., Parkersburg, West Virginia 26106-1328. Bond
owners should write the word "Floods" on the front of their envelopes, to help expedite the
processing of claims.
RR-2222
000
http://www.pubUcdebt.treas.gov
-
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
February 12, 1998
Contact: Peter Hollenbach
(202) 219-3302
BUREAU OF THE PUBLIC DEBT AIDS SAVINGS BONDS OWNERS
AFFECTED BY FLOODING IN NORTH CAROLINA
The Bureau of Public Debt took action to assist victims of flooding in North Carolina by
expediting the replacement or payment of United States Savings Bonds for owners in the affected
areas. The emergency procedures are effective immediately for paying agents and owners in
those areas of North Carolina affected by the storms. These procedures will remain in effect
through March 31, 1998.
Public Debt's action waives the normal six-month minimum holding period for Series EE savings
bonds presented to authorized paying agents for redemption by residents of the affected area.
Most financial institutions serve as paying agents for savings bonds.
North Carolina counties involved are Mitchell and Avery. Should additional counties be
declared disaster areas the emergency procedures for savings bonds owners will go into effect for
those areas.
The replacement of bonds lost or destroyed will also be expedited by Public Debt. Bond owners
should complete form PD-I048, available as a download from Public Debt's website at:
www.publicdebureas.gov, at most financial institutions, or by writing the Richmond Federal
Reserve Bank's Savings Bond Customer Service Department, 701 East Byrd Street, Richmond,
Virginia 23219; phone (804) 697-8000. Bond owners should include as much information as
possible about the lost bonds on the form. This information should include how the bonds were
inscribed, social security number, approximate dates of issue, bond denominations and serial
numbers if available. The completed form must be certified by a notary public or an officer of a
financial institution. Completed forms should be forwarded to Public Debt's Savings Bond
Operations Office located at 200 Third St., Parkersburg, West Virginia 26106-1328. Bond
owners should write the word "Floods" on the front of their envelopes, to help expedite the
processing of claims.
RR-2223
000
http://www.publicdebt.treas.gov
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
February 12, 1998
Contact: Peter Hollenbach
(202) 219-3302
BUREAU OF THE PUBLIC DEBT AIDS SAVINGS BONDS OWNERS
AFFECTED BY FLOODING IN WEST VIRGINIA
The Bureau of Public Debt took action to assist V)ctmlS of flooding in West Virginia by
expediting the replacement or payment of United States Savings Bonds for owners in the affected
areas. The emergency procedures are effective immediately for paying agents and owners in
those areas of West Virginia affected by the storms. These procedures will remain in effect
through March 31, 1998.
Public Debt's action waives the normal six-month minimum holding period for Series EE savings
bonds presented to authorized paying agents for redemption by residents of the affected area.
Most financial instimtions serve as paying agents for savings bonds.
West Virginia counties involved are: Boone, Fayette, Greenbrier. McDowell, Mercer, Monroe,
Nicholas, Pocohontas, Raleigh, Summers, Webster and Wyoming. Should additional counties be
declared disaster areas the emergency procedures for savings bonds owners will go into effect for
those areas.
The replacement of bonds lost or destroyed will also be expedited by Public Debt. Bond owners
should complete form PD-1048, available as a download from Public Debt's website at:
www.publicdebt.treas.gov, at most financial institutions, or by writing the Richmond Federal
Reserve Bank's Savings Bond Customer Service Department, 701 East Byrd Street, Richmond,
Virginia 23219; phone (804) 697-8000. Bond owners should include as much information as
possible about the lost bonds on the form. This information should include how the bonds were
inscribed, social security number, approximate dates of issue, bond denominations and serial
numbers if available. The completed form must be certified by a notary public or an officer of a
financial institution. Completed forms should be forwarded to Public Debt s Savings Bond
Operations Office located at 200 Third St., Parkersburg, West Virginia 26106-1328. Bond
owners should write the word "Floods" on the front of their envelopes, to help expedite the
processing of claims.
I
RR-2224
000
http://www.publicdebt.treas.gov
DEPARTMENT
OF
THE
TREASURY
NEWS
omCE OF PUBliC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C .• 20220 _ (202) 622.2960
FOR Th1MEDIATE RELEASE
February 13, 1998
Contact: Dan Israel
(202) 622-2960
DONALD C. LUBICK CONFIRMED AS TREASURY ASSISTANT
SECRET AR Y FOR TAX POLICY
The U.S. Senate voted yesterday to confinn Donald C. Lubick as the Assistant Secretary
of the Treasury for Tax Policy. Lubick brings to the position an extensive background in federal
tax policy, having held the same position during the Carter Administration.
Lubick had served as acting Assistant Secretary for Tax Policy since June 1996. From
1994 to 1996, he was the Department's director of the Tax Advisory Program for the Central and
Eastern European countries and the fonner Soviet Union. Since 1992, as a member of a panel of
experts on the Fiscal Affairs Department of the International Monetary Fund and a senior fellow
with the Harvard Law School's International Tax Program, Lubick has participated in tax reform
missions to Russia, Czechoslovakia and the Dominican Republic, among other countries.
Until 1994, Lubick was a partner with the law finn of Hodgson, Russ, Andrews, Woods &
Goodyear, where he had been since 1981, as well as from 1950 to 1961 and 1964 to 1977. In
both interims, Lubick served at the Treasury. He was Assistant Secretary for Tax Policy from
1978 to 1981. Prior to his 1978 appointment, he served as Deputy Assistant Secretary and
Acting Assistant Secretary for Tax Policy. From 1961 to 1964, he was the Department's Tax
Legislative Counsel.
A graduate of Harvard University Law School and the University of Buffalo, Lubick is a
member of the American Law Institute and a past member of the Advisory Group to the
Commissioner of Internal Revenue. He fonnerly chaired the American Bar Association's
Committee on Domestic Relations Tax Problems.
Lubick and his wife, Susan, have three children, Jonathan, Caroline and Lisa.
-30RR-2225
F()]' press releases, speeches, public schedules and official biographies, call our 24.1zour fax line at (202) 622-2040
DEPARTMENT
OF
THE
TREASURY
1789
OffiCE OF PUBliC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C.• 20220. (202) 622-2960
EMBARGOED UNTIL 10:15 A.M. EST
"The Role of Multilateral Institutions in Preserving International Financial Stability"
Remarks by Lawrence H. Summers
Deputy Secretary to the Treasury
Bretton Woods Committee Annual Meeting,
Washington, DC,
February 13, 1998
Thank you for giving me the opportunity to discuss these questions in such distinguished
company. Given the particular salience of the issue, I hope you will forgive me for focusing my
remarks on the role of the International Monetary Fund.
Since the early years of the first Clinton Administration the United States has been working to
build with other nations a global economic system ready for the 21 st century -- a system in which
trade, capital and know-how can flow freely to where they can best create wealth; a system in
which all can participate; a system that will rest critically, on strong and stable finance.
The shape of this new system -- and the rules and institutions guiding it -- are not yet fixed. In a
sense. they never will be. As long as the global economy changes, we will need to ensure that the
international financial architecture changes with it. But one thing is absolutely certain: the IMF
has and will continue to have a core role as the world's first and best line of defense against
financial crises.
I would like to talk about why the IMF is an indispensable safeguard of international financial
stability; the progress we have made in adapting the IMF to the demands of a changing world;
and the long-tenn refonn challenges for the IMF and the International Community going
forward.
I. The Core Role of the IMF
When housewives in Sao Paulo are tuning in to the Asian business news every morning to get a
sense of their next credit card bill -- we know we are living in a new time. In this new era events
in markets far away can and will affect the United States. And so will the way we and the
International Community as a whole respond to those events.
RR-2226
For press releases, speeches, public schedules and official biographies, call our 24-hoUT fax line at (202) 622-2040
It is because of the United States' enormous stake in the stability of this new world that we have
worked to respond to the crises in Asia and ensure growth and confidence is restored as soon as
possible. That is why we have strongly supported the provision of temporary, conditioned
outside assistance to countries committed to strong domestic reforms. And it is why we have
been detennined to look beyond these crises: to the kind of international financial system we
would like to build for the future.
We have supported the IMF playing the central role in all these efforts -- quite simply, because it
is the cheapest, most effective way for us to promote our core interest in preserving stability.
There is -- and will always be -- room for improvement of the IMF. I will say a little in a few
moments about the important progress the United States has made in pressing for change at the
IMF, and the changes that will be needed in the future. But in light of recent events there is
simply no room for doubting that the IMF is indispensable.
If there was no IMF in these circumstances:
•
there would be no multilateral vehicle for conditioned refonn, reform which has achieved
more trade liberalization in Asia in the past few months than many years of trade
negotiations in the region
•
there would be no internationally recognized source of apolitical advice~
•
there would be further devaluations and greater reductions in these countries' capacity to
purchase foreign goods
•
there would be more pressure on countries -- particularly the United States -- to act
unilaterally with taxpayer resources without global leverage
Countries cannot be helped by the IMF if they are not willing to help themselves, with major
domestic refonns to tackle the problem and prevent it recurring. But without the IMF, even
those countries that are committed to reform might face default -- either at a government level or
through the failure of the financial system as a whole -- which could have devastating effects on
their own economies and significantly raise the risks of contagion in other markets.
In this decade alone, the IMF has brought Russia back from the brink of hyperinflation. It has
brought Estonia and Poland from a state of near-economic collapse to the fastest growth rates in
Europe. It has underwritten ten years of radical reform in Uganda that have reduced inflation
from more than 250 percent to single figures and seen real growth of 6.5 percent a year. It has
helped Argentina to break free of a century-long tradition of stop-go economics and vulnerability
to outside shocks. And these are the cases the world knows about. It is of the nature of the
institution that its major successes will be the crises that no-one knows about -- the crises that did
not take place.
2
It has rightly been said, in this context. that if the IMF did not exist we would have to invent it.
But of course, we do not need to imagine such a possibility -- we can simply turn to history.
There was no IMF in 1931 when the failure of one Austrian bank threatened to have knock-on
effects elsewhere. With no lender of last resort facility to quell the panic, creditors and
institutions were left to resolve the problem among themselves. And the failure of a single major
institution became a European, and global, financial catastrophe. That is why it was necessary to
invent the IMF in 1944 -- and it is why it is vital to preserve its capacity to act today.
II. Making the IMF More Effective
In the past five years the United States has used its leadership role to achieve major
improvements at the IMF. These have focused on three core areas:
First, we have worked to adapt the IMF's policies and practices to meet the needs of a more
integrated and market-driven global economy -- to ensure that IMF will no longer stand for "It's
Mostly Fiscal":
•
by pressing for the creation of the new Emergency Financing Mechanism, to provide for
more rapid agreement to extraordinary financing requests in return for more intense
regular scrutiny.
•
by pressing the IMF to take the lead in international efforts to promote greater disclosure
of economic and financial data and improved banking supervision in emerging markets.
More than 40 countries have already subscribed to the IMF's Special Data Dissemination
Standard created in April 1996. And the IMF was closely involved in the development, by
the Basel Committee, of Core Principles for supervision of emerging market financial
systems that were formally approved by the G7 countries at last year's Denver Swnmit.
•
most recently, by driving the creation of a new Supplementary Reserve Financing facility
to let the lMF lend at premium rates in short-term liquidity crises and improve borrower
incentives -- a mechanism that grew out of recent developments in Asia and has played a
major role in the IMF's assistance to the region.
Second, we have worked to ensure that the IMF is keenly focused on its primary goal of
promoting growth and prosperity;
•
by paying closer attention to the needs of the poor in designing adj ustment programs,
encouraging governments to cut unproductive expenditures such as military spending and
shift more resources to primary education, health care and essential capital investment.
Since 1990 military spending has declined from 5.5 percent to 2.2 percent of GDP in
program countries, and has declined as a share of government spending while social
spending has increased.
3
•
by playing its part in a new United States-supported multilateral debt initiative (HIPe) to
enable the international community for the first time to include IFI debt in the cooperative
effort to relieve countries of unsustainable debt burdens which impede integration and
thwart refonn.
•
by instituting a policy dialogue with the ILO and undertaking a pilot program of incountry consultations on labor market issues and worker rights. These efforts took
another step forward in Korea, where Michel Camdessus has met with Korean labor
leaders and the IMF strongly encouraged the government in its official negotiations to
involve labor unions directly in plans for restructuring the chaebol.
Third, we have made important steps toward raising IMF transparency and accountability:
•
through much wider publication of IMF internal data, including the new Public
Infonnation Notices and Recent Economic Development papers on member countries
•
with the institution, for the first time, of external evaluations of key IMF policies. the first
of which is expected to be published this spring.
•
through the publication of Letters of Intent outlining the details of IMF agreements with
countries -- including those for all three of the most recent IMF programs in Asia.
In short, with the United States behind it, the IMF has been taking on new roles -- and adapting
its old roles to new circumstances. Much has been achieved. And much remains to be achieved not merely to improve the IMF's effectiveness and responsiveness but to modernize the entire
global financial architecture of which it is a part.
III. The Long-Term Reform Agenda: Making Institutions out of Instances
These past months in Asia, like the Mexican experience before it, have yielded important new
lessons -- and new tools and mechanisms for the International Community to respond to these
kinds of crises. But individual cases do not make institutions. The challenge is to build a fully
functioning set of rules and institutions for safeguarding international financial stability that is -as Secretary Rubin likes to say -- as modem as the markets.
As you know, President Clinton began this ambitious agenda four years ago at a 0-7 meeting in
Naples. At the summit that followed in Halifax in 1995, we launched a broad international effort
to strengthen safeguards in the global financial system. These efforts have already brought
concrete results -- the Basel Principles and the new IMF data dissemination standards being just
two examples. But the Asian crises have underscored that plenty more needs to be done. At
President Clinton's initiative, the United States will convene a meeting later this spring of
finance ministers from around the world to continue these efforts and start deVeloping a
consensus on policies to deal with the new challenges we face.
4
The crucial imperatives of this agenda include:
•
promoting measures to make global markets function more efficiently, for example
through increased surveillance and enhanced national supervision and regulation. The
important contagion effects we have seen in Asia and other emerging markets well
illustrate the importance of this kind of ongoing prevention;
•
increasing transparency and disclosure, for example by strengthening the SDOS to
include net reserves, short-tenn debt accumulation and data on the financial sector.
•
strengthening financial systems, both globally and at the level of individual countries,
through improved prudential standards and the promotion of effective financial
infrastructure;.
•
improving domestic policy management, exploring ways to manage policy to help avoid
crises and respond early to problems;
•
strengthening the role of the international financial institutions in financial crises to
ensure that the international community can respond quickly and appropriately to
problems and act to prevent their recurrence;
•
and ensuring appropriate burden-sharing by the private sector in the resolution of crises.
This is an ambitious agenda -- as ambitious as it is important. There will be many difficult
questions and trade-offs to overcome in seeking to ensure that the international financial system
is equipped to prevent crises, and equipped to deal with crises that will stilL inevitably, occur.
Let me make a special mention of the final issue on the list -- the question of investor
responsibility -- since it has recently aroused such debate here in Washington
There is no doubt that this is a major issue we will need to address. By involving the foreign
creditor banks in the resolution of the Korean crisis, we have supported an important innovation
in the international community's approach to crises of this kind and helped catalyze a major
private sector effort on behalf of restoring stability.
It will be important, going forward, to explore whether their are lessons to be drawn from this
experience that might provide for more widely applicable mechanisms for appropriate burdensharing. For world capital markets to function properly, investors must make investments based
on national economies and their components, and not the likelihood of international rescues.
IV. The Challenge Today: Investing in the IMF
In building an international financial architecture for a new century we must work to create the
best possible safeguards against crisis -- and we have also to accept that crises will inevitably
5
take place. That is why the United States needs urgently to follow through on its commitment to
support the increase in IMF quotas that was agreed last year, and contribute to a new emergency
facility, the New Arrangements to Borrow, to supplement the IMF's resources in these types of
situations.
We can and must work to promote investor responsibility in this new global economy. But we
must do this in a way that supports rather than threatens the long-term financial stability in which
American workers and businesses have such an enormous stake. Not to support the IMF at this
critical time would be a little like canceling one's life insurance when one has already gotten
sick. This is simply not a risk we should take. And it is not a risk the American taxpayer would
want us to take -- when we can invest in the protection of the IMF at zero cost to our budget.
At this critical time we have a responsibility to do all we can to protect America's core economic
and security interests. That means protecting the IMF's capacity to respond, not just to today's
challenges, but to the challenging new century to come.
-30-
6
D EPA R T 1\1 E N T
0 F
THE
T REA SUR Y
NEWS
omCE OFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C•• 20220. (202) 622-2960
EMBARGOED FOR RELEASE
February 17, 1998
1:30 p.m. EST
Contact: Public Affairs
(202) 622-2960
STATEMENT BY SECRETARY ROBERT E. RUBIN
It is a pleasure to join all of you this afternoon and to welcome you to Washington as
representatives of countries from around the world, for what I believe are very important
discussions on some of the most important issues facing us in today's global economy. As you
know, President Clinton pledged at the APEC meeting in Vancouver last November that the
United States would organize a gathering of finance ministers and central bank governors to
discuss ways to better deal with challenges in the international financial system in the years and
decades ahead and make that system as modem as the markets.
We live in an era marked by the global economy and global financial markets -- an era
that presents enonnous opportunities for workers, farmers and businesses around the globe. But
with the opportunities come risks, as demonstrated by the events in Asia over the last several
months.
It is enonnously important to the economic well-being of all of our nations that we work
together to strengthen the architecture of the international financial system so that we can make
the most of the opportunities and minimize the risks.
As we all know, this is a task that presents many challenges and is a very complex
process, yet it is critical that we move forward, and in doing so, learn from each others'
perspectives and experiences.
Our discussions will be wide-ranging. Among the topics that I expect will be an initial
focus are:
promoting efficient functioning of global markets;
steps to increase disclosure and transparency;
strengthening financial systems, both globally and in individual economies;
national policy management to help avoid crisis and deal with crises that occur;
RR-2227
-
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
the role of the international community in financial crises;
appropriate burden-sharing by the private sector, especially with respect to the socalled moral hazard problem, so that investors and creditors bear the full
consequences of their decisions.
Things can be done in some of these areas in a shorter period of time, although even those
may be complex. Others are much more complicated and will undoubtedly take a substantial
amount of time to think through, build consensus around and then implement. We here in the
United States have been focused on these issues for some time now. This meeting provides an
opportunity to share perspectives, and in combination with the work of a range of other fora,
helps set the stage for advancing this effort at the upcoming meeting of finance ministers and
central bank governors. By working together and by taking into account the range of views and
experiences of countries around the world, the international community can move towards
consensus on how to strengthen our global system so that all can benefit. Thank you very much,
and good luck with your discussions.
-30-
-
PUBLIC DEBT NEWS
-Departm.ent of the Treasury • Bureau of the Public Debt· Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE
February 17, 1998
CONTACT:
202-219-3350
RESULTS OF TREASURY'S
Term:
Office of Financing
AUCT~ON
OF 13-WEEK BILLS
91-Day Bill
February 19, 1998
May 21, 1998
9127946Q2
Issue Date:
Maturity Date:
CUSIP Number:
RANGE OF ACCEPTRD COMPETITIVE BIDS:
Discount
Rate
-.- ..... -
Investmen~
Rate 1/
Price
---- ... -----
------
Low
5.050%
S.18B%
98.723
High
S.080%"
5.075%
5.217%
98.716
98.717
Average
5.213%'
Tenders at the high discount rate were allotted
AMOUNTS TENDERED
~u
B%".
ACCEPTED (in thousands)
Tender Type
Tendered
Competir.ive
Noncompetitive
$
PUBLIC SUBTOTAL
Federal Reserve
42,817,782
1,360,471
Accepted
$
5,857,193
1,360,471
44,178,253
7,217,664
3,4B4,564
3,484,564
170,7'77
24,223
170,'777
Foreign Official Inst.
Refunded Maturing
Additional Amounts
TOTAL
1/
$
47,857,817
Equivalent coupon-issue yield.
RR-2228
http://www _publicdebt.trc;ts.gov
24,223
s
10,897,226
PUBLIC DEBT NEWS
-Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
February 17, 1998
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
Term:
Issue Date:
Maturity
February 19, 1998
August 20, 1999
Da~e:
CUSIP Number:
9127944Y7
RANGE OF ACCEPTED COMPETITIVE EIDS:
DiscOWl~
Rate
------
Low
Investment
Rate 1/
----------
97.444
S.261t
5.275%
5.275%
5.055%
High
Average
price
------
5.070%
5.070%
97.437
97.437
Tenders at the high discount rate were allotted
67~.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted
Tendered
Tender Type
$
Competitive
Noncompet.itive
34,035,274
1,171,327
$
-----------------
FUBLIC SUBTOTAL
Federal Reserve
Foreign Official Inst.
Refunded Maturing
Additional Amounts
35,206,601
5,213,922
3,735,000
3,735,000
2,088,l73
294,527
2,068,173
294,827
------------p---$
TOTAL
4,042,595
1,171,327
41,324,601
11 Equivalent coupon-issue yield.
RR-2229
bttp;I/\Y"Yw.publicdcbt.trca~.gov
$
11,331,922
ornc! or pvaLIC .urAl.... 11" rKJIOfIVLVANIA AVKN'OE. N.W. e WUKINGTON, D.C.e lUll- (Jll) Ql,.2Kt
•
~EO
aNTIL 2:30
February 17, 1998
~.M.
CONTACT:
Ottice of financing
202/219-3350
TREASORY'S WEEKLY BILL OFFERING
The Treasury will auction two series of Treasury bills totaling
approximately S14,500 ~llioo, to be issued February 26, 1998. Th~ottcrini
will result in a paydown for the Treasury ot &bout $1,350 million, ~s the
maturinq publicly held bills are outstanding in the amount of S15,851 million.
In addition
~o
the public holdinqs, Federal Reserve Banka tor their own
accounts hold $6,793 million of the .ut.u.rinq bills, "":uch may be reillndeci at the
wliqhted averaqe discount rate of accepted competitive tenders. Amounts issued
to the •• accounts will be in add1~ion ~o che ot!erinq amount.
Pederal
~e.erve
Sank. hold
account.
renders for the bill. will be received at Federal Reserve Banks and
8ranches and a~ the Buxe&u ot the Public Deb~, Wasninqton, D.C. This off.ria;
ot Treasury secUIities ia governed by the terms ~d cond1tion~ set forth in 'the
Onito~ O!fexinq Circular (31 eFR Part 356, as amended) for the sale ana issue
by the Treasury to the public of mark.~&ble !re•• ury billa, notes, ana bo~.
Oetails About each o! the new securitles are 91ven in eh. att&cbeQ
hiqhlighta.
000
Attachmen.t
RR-2230
-
ott.~inq
HlwtLlOOl'S oS' TRKABUR't Oi'rKJUNOS 0' tOW<LY BILLS
20 81 ISSUED rlBRUAA! 26, 1998
.·eocuary 11,
ottu-inSl Aaount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,250 lOi 11 ion
S1,
2~O
1998
.11110n
De.aription of Ortering:
Term and type of security ................... 91-day bill
182-ddY bill
912195 AG 6
CUSIP nulwer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9127!U 4V 3
Auction date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issue date ..................................
Hatur i ty ddte . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Original 1s.9ue date . . . . . . . . . . . . . . . . . . . . . . . . .
Currently outstanding .......................
HinillUIII bi d amount . . . . . . . . . . . . . . . . . . . . . . . . . .
Hul tiple3 ...................................
rhe Collowing rul •• spplx to all
February 23, 1998
February 26, 1998
M..,y 28, 1998
May 29, 1991
$32,160 11I111ion
$10,000
S 1,000
February 23, 1998
February 26, 1998
August 27, 1998
February 26, 1999
SlD,aoo
S 1. 000
.ecuritiQ. aentloned ahov.:
Submi33ion of Bids;
NoncorapetltIvc bieh . . . . . . . . . . . . . . . . . . . . . . . . . Accttptttd 10 full up Lo $1,000,000 til tlltl dVtHdy~
discount rate of accepted cOrllpetilive bid:;;.
Competitive bid8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)
Hust be expressed as a dJ.3count
Incre~ent~
(2)
13)
rdt6
of .OOS', e.g., 7.}00\,
.... Jth
U'lce dUL!adiJ
Net long po:dtion for each bidder must be reported whtw l he
S~ ot the total bid amount, at all d13count rates, and the
net long position i~ $1 billion or 9~eBter.
Net long po.!,ition Must be determined as o( one hal f-hoUl
prior to the closing time for receipt of
co~petitivo
MSKimum Recognized Bid
at a Single yield ................. ....... 35' at public of te .. ing
Maxi~um
Award ............................... 35' at public oftering
Receipt of Tenders:
NonCOMpetitive tenders ...................... Prior to 12:00 noon Ea~teln Standard tl~e on auction day
Competitive tenders ......................... Prior to 1:00 p .•. Eastern Standard time on auction day
Pa~ent
feras .......
0
•••••••••••••••••••••••
In
110~'.
Full paynent ~ith tender or by charge to a funds account
at a Federal Reserve Bank on issue date
tenders.
DEPARTMENT
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. _ 20220 _ (202) 622-2960
EMBARGOED UNTIL 10 A.M. EST
Text as Prepared for Delivery
February 25, 1998
TREASURY UNDER SECRETARY RAYMOND W. KELLY
HOUSE APPROPRIA TIONS SUBCOMMITTEE ON TREASURY,
POSTAL SERVICE AND GENERAL GOVERNMENT
Chairman Kolbe, Congressman Hoyer, Members of the Committee, it is a pleasure for me
to be here before you today to highlight the FY 1999 budget request for Treasury's law
enforcement bureaus and offices. With me today are the heads of the Treasury law enforcement
bureaus, several of whom are new additions to the Treasury team since the last appropriations
hearing: Lewis Merletti, Director of the U.S. Secret Service (USSS), who was appointed by
Secretary Rubin on June 6, 1997; Samuel Banks, Acting Commissioner of the U.S. Customs
Service (USCS); and Ralph Basham, Director of the Federal Law Enforcement Training Center
(FLETC), our newest Director. We are pleased to have these new Directors joining today with
John Magaw, Director of the Bureau of Alcohol, Tobacco and Firearms (ATF) and William Baity,
Deputy Director of the Financial Crimes Enforcement Network (FinCEN).
Each year, Treasury's mission grows in complexity, scope and importance. Treasury
Enforcement performs a critical role in serving the nation's law enforcement priorities. Treasury
bureaus protect our leaders, safeguard our financial institutions from money launderers and fraud,
and collect taxes. Treasury agents and inspectors protect our borders from drug traffickers and
every day our agents fight to protect our streets from the threat of bombs, arson and gun violence.
To ensure excellence in achieving these missions, and in keeping with the spirit of the
National Performance Review and the Government Performance and Results Act, Treasury
engaged in a thorough strategic management process. The Treasury Strategic Plan, which was
submitted to Congress last fall, is the capstone of this planning and analysis process. The
purpose of this plan, and of our other efforts, is to improve the results which we deliver to the
American people.
Treasury's strategic plan provides an overview for the Department as a whole. In
addition, each of Treasury's bureaus developed its own strategic plan for its operations in
support of the overall plan. Collectively, these strategic plans describe what the Department
RR-2231
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
intends to accomplish over the next five years and how we will accomplish it. Our bureaus' and
offices' FY 1999 budget submissions provide a program level description of the annual resources
and actions needed to achieve these goals. The FY 1999 President's budget seeks $3.2 billion for
26,580 direct FTE Treasury Enforcement personnel. strategic investments, and other operational
costs. This does not include the Internal Revenue Service Criminal Investigation (IRS/CID).
IRS/CID, however, plays an integral role in Treasury law enforcement efforts with their FY 1999
$373 million request for 4,103 law enforcement personnel. We believe the Treasury law
enforcement budget request strikes an appropriate balance permitting Treasury to contribute
substantiaUy towards balancing the federal budget while supporting new and more effective
approaches to law enforcement. I would like to note that Treasury enforcement's $3.2 billion
request will allow us to combat crime while making a $33 billion revenue deposit to the U.S.
Treasury. By all counts, this is a tremendous return on investment. The budget submissions also
set specific annual performance goals for each of our programs and report on our achievements
against prior year goals.
Treasury's Office of Enforcement has developed a five-part mission statement which
describes the purposes of our broad law enforcement functions. We are committed to ensuring
that this strategic plan is a living document. We will use it to guide our operations, and will
continue to update and revise it periodically to make certain it remains relevant. Our plan was
developed with the active involvement of officials throughout Treasury, and we have sought input
from many of our stakeholders in Congress, elsewhere in the government, and in the private
sector. We continue to welcome input from all of our stakeholders.
The following describes the goals of our strategic plan, in a format designed to highlight
our bureaus' specific expertise, activities and budget requests, as well as our cross-cutting
expertise on financial crimes matters. Thereafter, I will discuss the important role that is played
by the Office of Enforcement in enabling our bureaus to meet their goals and fulfill their missions.
Goal: Reduce the Trafficking, Smuggling and Use of Illicit Drugs
Treasury brings essential counter-narcotics and money laundering expertise to the
implementation of all aspects of the President's comprehensive anti-drug strategy. OUf antismuggling efforts at the border and our substantial air support to interdict illegal narcotics at the
source places Treasury in a leading role in the fight against illicit drugs. For example, this antinarcotics role is pursued through anti-money lau ndering measures, reduction of narcotics-related
violent crime, and demand reduction programs.
u.s. Customs Service
The Customs Service has the primary role for the Treasury Department and one of the
primary roles fOf the U. S. in interdicting drugs and other contraband at the border, and ensuring
that all goods and persons entering and exiting the United States do so in accordance with the
law. The Customs Service discovers or seizes, on average, more than half of the narcotics seized
by all Federal authorities in the United States each year.
2
Customs has tremendous responsibilities. We need to recount some of what Customs
must confront in order to put the drug interdiction challenge into perspective: Last year, Customs
processed over 442 million people, 118 million vehicles, 320,000 rail cars. and $854 billion worth
of merchandise. Customs performed the initial checks, processes, and enforcement functions for
over 40 Federal agencies and applied hundreds oflaws and regulations. It performed these tasks
by servicing more than 300 ports of entry sprawled across 7,000 miles ofland border. It also
provided air support to the U.S. Government's source control efforts in South and Central
America. Customs pursued all of these enforcement missions while collecting approximately $23
billion in revenue for the United States in the form of duties, taxes, and fees.
Customs constantly strives to improve its ability to stem the flow of drugs while dealing
with the increasing volumes of cargo and passengers into and out of the United States. Indeed,
the number one operational priority for the Customs Service is preventing the smuggling of
narcotics into the United States. It pursues this mission through interdiction, intelligence and
investigative capabilities that disrupt and dismantle smuggling organizations. Although Customs
seized nearly one million pounds of illegal drugs in FY 1997, through programs such as Operation
Hard Line at the Southwest border and Operation Gateway in the Caribbean, the quantity of
cocaine seized last year dropped 12 percent. To counter this decline, Customs recently embarked
upon a program to utilize innovative approaches and will focus on the most high-risk ports of
entry.
Customs will continue to develop the capabilities to meet the ongoing smuggling threats,
on our southwest land borders, in the Caribbean, and at all borders and ports of entry across the
country. Customs actively participates in multi-agency criminal investigations, and will continue
to strengthen its partnerships with the private sector, cooperative foreign governments and other
Federal agencies in order to continue its active role to counter narcotics smuggling.
Customs' budget proposal for FY 1999 includes increases for drug smuggling and money
laundering enforcement, integrity awareness, non-intrusive inspection technology and automation,
all of which will help us achieve our goal of reducing the trafficking, smuggling and use of illicit
drugs.
In addition to Customs many and varied contributions to the drug fight, we also are proud
of such efforts as ATF' s campaign against armed narcotics traffickers through its Achilles
Program, the work of all of our bureaus on HIDT A and ICDE task forces, the use of our financial
crimes expertise to attack the financial underpinnings of the drug trade, and valuable prevention
such as ATF's GREAT program.
Goal: Combat Financial Crimes and Money Laundering
One of the most important missions of the Treasury law enforcement bureaus is the
investigation of financial crimes and money laundering. Treasury's unique structure permits us to
use both our regulatory and investigatory expertise to follow the money trail and thus undermine
3
criminal enterprises. We intend to strengthen the capability of our bureaus to fight money
laundering and will continue our international efforts to promote stronger anti-money laundering
laws abroad. As advances in technology and the removal of barriers allow money to move with
increasing speed among nations, an effective, long term anti-money laundering strategy will
require other nations to adopt strong anti-money laundering measures in the legal, regulatory, and
law enforcement areas. We will also seek to improve our regulatory functions to protect financial
systems from illicit assets.
Additionally, we are developing anti-counterfeiting strategies that employ all appropriate
technological and investigatory methods to combat designers and traffickers in counterfeit
currency and instruments. Working with the State Department, we are expanding our overseas
presence to more effectively combat the burgeoning international criminal threat to our financial
systems. We are also enhancing our leadership role by continuing to develop partnerships with
the financial community and others in the private and public sectors.
Treasury is working in a number of ways to engage both the public and private sectors in a
common effort to deny money launderers access to legitimate avenues of finance and commerce.
We are continuing to emphasize the importance of interagency cooperation to pool resources and
share experiences and information. The Committee is aware of the successes achieved by the El
Dorado Interagency Task Force and FinCEN which were responsible for implementing the
Geographical Targeting Orders (GTOs) directed towards Colombian and Dominican Republic
drug-related money laundering operations.
Treasury held two conferences over the last year, along with representatives from the
Department of Justice, which brought together the experts from both our Departments-prosecutors, regulators, and law enforcement agents, all sharing their insights into the problem.
Additional conferences are planned both at the national and regional level in order to further shut
down the avenues available to money launderers.
The Customs Service, Secret Service, the Financial Crimes Enforcement Network, and the
Internal Revenue Service Criminal Investigation Division all playa vital role in accomplishing our
money laundering and financial crimes goals. The Office of Enforcement will seek to enhance the
individual and collective work of these bureaus through completion of a Departmental financial
crimes review, which is currently being undertaken jointly with the Treasury bureaus and offices.
The following are some of our bureaus' individual efforts in the current fight against
money laundering and financial crimes.
Customs Service
In addition to its substantial efforts to counter illicit drugs, Customs also plays a vitally
important role in combating money laundering. During FY 1997, Customs' money laundering
investigations resulted in 1,054 arrests and 905 criminal indictments. Its investigative strategy is
4
focused on disrupting two key business functions that are necessary for sophisticated international
money laundering operations to function: laundering profits and investing the proceeds of their
criminal activity. Customs' money laundering coordination center will become operational in
1998 and will coordinate Customs' nationwide undercover money laundering operations and
follow-up investigations.
Secret Service
The Secret Service is the nation's lead agency in investigating counterfeiting, forgery, and
access device fraud. As the nation's counterfeiting expert, the Secret Service has investigated
fictitious financial instruments, counterfeit currency and credit card schemes both domestically
and internationally. United States currency is counterfeited around the globe. Indeed,
approximately 70 percent of all counterfeit currency detected domestically is of foreign origin.
Therefore, it is only prudent that the Secret Service devotes a large portion of its investigative
resources to battling international counterfeiting issues.
The Secret Service has learned through experience that the best method to manage this
problem is to address counterfeit issues at their source, with the permanent stationing of Secret
Service agents in foreign posts. In addition, the Secret Service leverages its resources by enlisting
international law enforcement agencies to identifY counterfeit currency and suppress
counterfeiting plates. These efforts, primarily carried out through counterfeit detection seminars,
have promoted a cooperative international law enforcement effort to detect, suppress
and prosecute counterfeit violations.
Moreover, to prevent financial fraud schemes, the Secret Service has developed and
implemented longstanding and effective partnerships with private industry to better understand
various financial systems and combat significant losses. Assisting the industry and their financial
systems with" systemic fixes," aggressive analysis, and proactive security enhancement measures
has increased the overall security of these financial systems. Proactive joint initiatives with the
industry, such as public awareness campaigns, media programs, speeches, seminars, and security
training are having a positive impact. These partnerships have reduced the ability of criminal
organizations to target financial institutions.
FinCEN
While Customs, Secret Service and IRS-CID are the financial crime investigators, FinCEN
serves as Treasury's principal support arm for such investigative efforts. As its name states,
FinCEN is a network, a link between the law enforcement, financial, and regulatory communities.
It brings together government agencies and the private sector, in this country and around the
world. It works to maximize information-sharing among these communities thereby furthering
efforts to prevent and detect money laundering activities. The intelligence derived from the GTOs
and other efforts has also contributed to the work of an interagency coordinating group (lCG)
which is located at FinCEN. The group includes the Internal Revenue Service, the Customs
5
Service, the Drug Enforcement Administration, the Federal Bureau of Investigation, and the U. S.
Postal Service. The ICG has been building on knowledge which its members, especially the
Criminal Investigation Division of the IRS and the Customs Service, have developed about a
highly complex money laundering system used by the Colombian Cartel, known as the Black
Market Peso Exchange.
The initiatives in FinCEN's budget request will strengthen the quality of the support that it
provides to law enforcement.
IRS-CID
Although IRS-CID is not a part of this appropriations hearing, I want to say a few words
about its important contribution to Treasury's law enforcement efforts. Fighting financial crime is
a job well suited for the special agents ofIRS-CID. They are known for their ability to "follow
the money trail" and stop the criminal when no one else can. IRS-eID agents are financial
experts in combating money laundering and tax evasion. Their expertise is sought in
investigations of all types of financial crimes, including health care fraud, pension fraud, insurance
fraud, bankruptcy fraud, telemarketing fraud, gaming, narcotics, and public corruption.
Today, IRS-CID is combating the increased use of computers for committing financial
crimes with its latest weapon ... a new type of special agent known as the Computer Investigative
Specialist (CIS). Through IRS-CID's national Computer Investigative Specialist Program, the
CIS continuously receives training in cutting edge investigation automation and evidence seizure
and data recovery methods. Combining its unique financial expertise with advanced computer
skills permits IRS-CID to optimize its ability to investigate and solve computer based and
computer related financial crimes IRS-CID is taking the lead in providing this specialized
computer investigative training to agents from the other Treasury bureaus.
Goal: Fight Violent Crime
Treasury is working to fight violent crime by arresting the most violent armed offenders,
denying criminals and juveniles access to firearms, reducing the risk of violent crime in our
communities, safeguarding the public from arson and explosive incidents and strengthening our
capability to fight terrorist threats to the United States. To enhance our efforts to reduce and
prevent violent crime with firearms, Treasury has fully supported the Administration's and
Congress' efforts to prevent criminals, gang offenders, and juveniles from illegally obtaining
firearms. These efforts have been built on three foundations: implementation of the first phase of
the Brady law, to stop felons and other prohibited persons from buying handguns from licensed
dealers; reform of the firearms dealer licensing systems to ensure a high level of commercial
integrity and compliance with local laws; and a tough, focused illegal firearms trafficking program
aimed at stopping trafficking to criminals, gang offenders, and juveniles. Additionally, we are
working to maintain appropriate firearms importation and international illegal firearms trafficking
policies and to share crime gun tracing and anti-smuggling expertise with the international
6
community in order to combat the illegal firearms trafficking.
To safeguard the public from arson and explosives incidents, we will maintain the highest
standards of investigative expertise and state-of-the-art technology to most effectively respond to
those incidents. Our studies on the use of tracer elements in explosives materials will continue
and we will enhance the national repository for arson and explosives information to assist in the
investigation of explosives incidents. We will endeavor to prevent criminal misuse of explosives
in crimes of arson through enforcement, regulation, and community outreach and investigate
thefts and illegal diversion of explosives.
The Bureau of A1cohol, Tobacco, and Firearms (ATF) plays the leading role for Treasury,
indeed the entire Federal government, in the fight against armed violent crime. ATF is responsible
for enforcement of the Federal firearms laws as well as for regulation of the firearms and
explosives industries. It investigates some of the most destructive, dangerous, and controversial
crimes in the United States, including bombings of abortion and family planning clinics, church
arson, firearms crimes and illegal trafficking, and firearms and explosives violations.
In an effort to reduce armed violent crime, ATF focuses its investigative efforts on armed
violent criminals, career criminals, armed narcotics traffickers, violent gang offenders, and
domestic and international firearms traffickers that supply the illegal firearms market. It strives to
deny criminals, gang offenders and juveniles access to firearms, safeguard the public from
bombings and arson, and imprison violent criminals.
Through its Violent Crime Coordinators (VCCs), ATF is focusing its investigations on
armed recidivist and violent career criminals. The VCCs will continue to assist in removing the
armed criminals that pose the greatest threat to society by identifying and investigating the most
violent offenders, analyzing the best route to prosecution and working closely with the United
States Attorneys' Offices to maximize the effectiveness of our investigative efforts.
Through its Youth Crime Gun Interdiction Initiative (YCGII), which began as a small
pilot effort in 1996, ATF is working to further reduce the illegal trafficking of firearms to gang
offenders and juveniles. Due to the positive reception of the program in the 17 pilot cities and to
ATF's first comprehensive trace analysis report designed for agents and police departments, the
President confirmed his support by announcing that 10 additional cities would be included in
FY 1998. We are grateful for the support you have already provided to this program, which is
designed to supplement and strengthen ATF's illegal firearms trafficking program. Through
YCGII, ATF is developing new methods of identifying the illegal sources of firearms being
supplied to gang offenders, juveniles, and criminals and to prosecute the traffickers responsible for
providing these guns. ATF will work with the nation's police departments to provide
comprehensive crime gun tracing, illegal market analysis, investigative information and training to
the 27 cities To break the chain of illegal supply of crime guns to violent gang offenders and
7
juveniles, we will hire more than 160 agents to collaborate with U. S. Attorneys and police
departments in investigating and arresting the illegal firearms traffickers.
ATF is also renowned for its expertise in the areas of arson and explosives. Through its
certified fire investigators, National and International Response Teams, accelerant and explosives
detection canine program, its accredited laboratory, its arson and explosives repository, and
numerous other programs, ATF maintains its role as the leader and innovator in these areas. Its
expert work on the National Church Arson Task Force has helped produce a 33 percent clearance
rate for the arsons under investigation, a rate that is more than twice the average rate for arson
crimes in general. ATF assists State and local authorities with arson investigations falling under
Federal jurisdiction and having a significant impact on their community, particularly when the
nature or extent of the problem extends beyond the available resources or expertise of the locale
involved. ATF also provides training to other Federal, State, and local enforcement agencies in
the detection and investigation of arson, particularly arson-for-profit, and post-blast bombing
investigation
As Director Magaw will explain in greater detail, the additional funds requested in ATF's
budget for the VCCs and YCGII will permit it to better fulfill the goal of countering violent crime.
Goal: Protect Our Nations Leaders and Visiting World Leaders
Treasury is striving to manage the ever changing nature of threats by developing,
acquiring and deploying necessary countermeasures. One aspect of this proactive approach is
developing a formal risk assessment-based decision making process to enhance protective
capabilities. Toward this end, we will identify emerging technologies that pose a threat to those
we are entrusted with protecting and develop defenses against them. We will also exploit
technology that can be used to lower risk to protectees and ensure their safety. To help fulfill the
vital protective mission and to provide the safest possible environment for all protectees, we will
continue to develop partnerships between the law enforcement agencies inside and outside
Treasury.
Secret Service
As you know, the United States Secret Service has the critical responsibility of protecting
the President, Vice President, and other specially designated protectees. It accomplishes this
protective and investigative mission effectively in an increasingly hostile society. During the past
fiscal year, the Service successfully managed protective security for several major events, as well
as the implementation of numerous, ongoing security enhancements at the White House complex
and the Vice President's residence. -The Secret Service's White House Emergency Plan was
revised to include enhanced procedures in the event of a crisis situation at the White House
complex. The Service also continued its efforts to combat the increasing threats from
chemicallbiological weapons. To respond to this threat, the Service has formulated a
chemicallbiological detection and protective program which combines multiple systems: fixed
8
detectors, collective protection systems, and portable detection equipment for deployment at
critical protective sites. Additionally, the Service's ultimate goal is to provide immediate
chemicallbiological detection, mitigation and decontamination support for all Presidential
movements.
During FY 1999, the Service begins the build-up for the Presidential campaign of the
Year 2000. As it begins planning for the Presidential campaign and the inauguration of January
2001, the Secret Service's budget request will further advance its ability to maintain the highest
level of physical protection possible for its protectees through the effective use of human
resources, protective intelligence, risk assessment and technology.
Goal: Provide High Quality Training for Law Enforcement Personnel
Assuring the excellence of training of Federallaw enforcement is of vital importance to the
future effectiveness of our law enforcement efforts. As the training agent for the majority of all
Federal law enforcement agencies, we currently have 70 Federal agencies participating in
training programs at the FLETC. We are committed to enhancing basic and in-service training
programs to meet the changing needs and increasing demands of Federal law enforcement as we
combat increasingly sophisticated, technologically advanced and globally linked crime. Our
objective is to develop and operate state-of-the-art facilities and systems responsive to interagency
training needs.
To meet the goal of quality training within a limited budget, to meet current training needs
and to prepare for the future, we will maintain and improve FLETC's physical plant by
implementing the master plan to guide the expansion of facilities to meet projected training needs.
We will also develop alternative training delivery systems, such as distance learning capabilities,
thereby effecting long term cost savings. Additionally, we will expand the use of advanced
technology in training and support, especially in the areas of computer-based training and
simulation, to provide not only state-of-the-art training but long-term budget savings as well. We
will also provide international training in support of the International Law Enforcement Academy
(fLEA) in Budapest and the ILEA being developed for Latin America (ILEA South).
FLETC
One of the reasons that Treasury law enforcement is so successful is the quality of training
that its agents and inspectors receive at the Federal Law Enforcement Training Center (FLETC).
Since its establishment by a memorandum of understanding in 1970, FLETC has built a reputation
for providing high quality, cost effective law enforcement training. As you know, there are many
advantages to consolidated training for Federal law enforcement personnel, not the least of which
is an enormous cost savings to the Government. Seventy agencies in 200 different training
programs now train at FLETC. Additionally, FLETC has been involved in providing law
enforcement training overseas for over 20 years and has trained more than 5,000 foreign law
enforcement officials from more than 102 different countries. We expect this growth to continue
as more agencies recognize the many benefits of consolidated training.
9
Over the last two years, the FLETC has seen an unprecedented increase in its workload.
Current projections indicate continued workload growth through FY 1999 and beyond. During
FY 1997, the FLETC provided training to 23,329 students representing 109,116 student-weeks of
training, the largest workload in the history of the Center. In FY 1998 the workload is expected
to grow to 32,404 students. The majority of this growth is attributable to recent Congressional
and Administration initiatives to control immigration along our Nation's borders and to provide a
safe workplace for Federal employees.
To permit FLETC to train the law enforcement agents in the skills needed for the future, it
has continued to implement its master plan for facilities. This plan was first introduced in 1989
and when fully implemented will permit FLETC to achieve its goal of further developing,
operating, and maintaining state-of-the-art facilities and systems responsive to interagency training
needs. Indeed, a major portion of FLETC' s budget request is the continued implementation of
the facilities master plan for new construction at FLETC's two centers in Glynco and Artesia.
This funding will ensure that less efficient temporary facilities, now relied upon to meet workload
requirements, are phased out as soon as possible. Since early 1996, FLETC has been operating at
full capacity and we expect that this workload will continue through FY 1999. To accommodate
this increasing demand, FLETC has been utilizing temporary buildings and contracted or licensed
facilities. In addition, some Border Patrol training is occurring at a temporary facility in
Charleston, South Carolina. As FLETC's capacity increases, the need for a temporary site at
Charleston can be phased out.
In addition to its domestic training responsibilities, the FLETC is also being called upon to
playa larger and more important role in support of the Administration's and Congress' foreign
policy initiatives involving the training of foreign law enforcement officials. We estimate that
there will be a 36 percent increase in FLETC's FY 1998 international training workload as
compared with FY 1997. A key provision in the FLETC's FY 1999 budget request and central to
FLETC's ability to meet these increased training needs is the ILEA South initiative.
At the San Jose Summit on May 8, 1997, President Clinton announced that an
international law enforcement training academy would be created in Latin America (i.e., ILEA
South) before the end of 1997. Patterned after ILEA Budapest, the goals ofILEA South are to
expand relationships with and among foreign law enforcement officials from Latin America and
the Caribbean, support democracy by stressing the rule of law in international and domestic police
operations, foster international cooperation and raise the professionalism of law enforcement
judicial officials.
The Department of State selected the Department of the Treasury as the lead agency to
establish ILEA South. In turn, the Department is relying on the FLETC to provide operational
management oversight and administrative support to guide program development for ILEASouth. The first ILEA South training program was recently conducted in Panama City, Panama,
during November and December 1997. Thirty-two students from eight Central American
countries attended the program The program was extremely well received and was considered
by all those involved to be a great success.
10
Moreover, to prevent financial fraud schemes, the Secret Service has developed and
implemented longstanding and effective partnerships with private industry to better understand
various financial systems and combat significant losses. Assisting the industry and their financial
systems with "systemic fixes," aggressive analysis, and proactive security enhancement measures
has increased the overall security of these financial systems. Proactive joint initiatives with the
industry, such as public awareness campaigns, media programs, speeches, seminars, and security
training are having a positive impact. These partnerships have reduced the ability of criminal
organizations to target financial institutions.
Office of Enforcement
We recognize that the work of our law enforcement bureaus can only be enhanced
through the oversight and support provided at the Departmental level. In this regard, I am
pleased to report that the Office of Enforcement has worked diligently over the past year to fulfill
these responsibilities, and has a plan in place for maximizing such efforts over the next year.
This Committee's support in the creation of an Office of Professional Responsibility (OPR) will
help us meet these goals. Since receiving funds in last year's appropriations, we have developed a
precise staffing and hiring plan for the OPR positions to provide direct oversight on such
important matters as internal affairs, training, and inspection issues. The process included
extensive outreach to expand the pool of qualified applicants, as well as thorough reviews of
applications and several rounds of interviews for select candidates, including interviews with our
bureau heads. While the process continues, we have selected a number of impressive members of
the OPR team. They are on board, and we are confident that they will help our bureaus perform
their missions as safely, professionally, and well as possible. On one issue in particular -- integrity
-- Treasury and its bureaus share the Committee's strong commitment, and have made it a priority
for OPR,
The Office of Enforcement also has taken other measures to enhance its support and
oversight missions. Among other activities, we worked closely with Customs, ONDCP, and
others to ensure close cooperation on anti-narcotics matters; solidified the Department's vital
role on anti-money laundering issues through such activities as the geographic targeting orders
and the anti-money laundering conferences hosted jointly with the Justice Department;
coordinated all enforcement-related strategic planning activities for Treasury as it fulfilled its
GPRA responsibilities; maintained a lead role within the Administration on the National Church
Arson Task Force, as well as international money laundering and financial crime issues; performed
a complete management assessment at FLETC by working with an outside consultant, expanded
the Youth Crime Gun Interdiction Initiative to 10 additional cities; and established ILEA South in
conjunction with the State Department and others.
11
Conclusion
In summary, the Treasury Department is proud of the contributions that its law
enforcement bureaus have made and continue to make to this nation. Treasury and its bureaus
have defined goals and objectives to ensure our excellence in protecting our borders, fighting
violent crime, defeating financial crimes and training our law enforcement agents for the
challenges of countering increasingly sophisticated criminals. This budget request will enable
Treasury's law enforcement bureaus to meet the current challenges and to begin preparations for
the challenges of the 21st century. I am confident you will find this to be a responsible budget, as
it considers the growing demands of the law enforcement in a constrained budget environment.
With your permission Mr. Chairman, I would like to ask the Directors of the Treasury law
enforcement bureaus to describe in more detail those strategies and goals we see as playing a key
role in the coming fiscal year, as well as our recent accomplishments. After which we would be
pleased to answer any questions you or Members of this Committee may have. Thank You.
-30-
»
E P ,\ J~ T ]\., E ~ T
() F
THE
NEWS
TREASURY
OFFICE
T REA S li R Y
or PUBLIC AFFA.IRS -1500 PENNSYLVANlA AVENUE. N.W.-WASHINGTON. D.C •• lOUO. (10l) c5l1.~9'O
EMBARGOED UNTIL 2:30 P.M.
Febtuary 18, 1998
CONTACT:
Office of Finaneing
202/219-3350
TREASORY TO AUCTION 2-YEAR AND 5-YEAR NOTES
TOTALING $26,000 MILLION
The Treasury will auction SlS,OOO million of 2-year notes and $11,000
million of 5-year notes to refund $28,278 million of publicly held securities
maturing February 28, 1998, and to pay down aboue $2,275 million.
In addition to the public holdings, Federal Reserve Banks hold $2,592
million of the maturing seeurities for their own accounts, which may be
refunded by issuing additional amounts of the new securities.
The maturing securities held by the public include $4,453 million held
by Federal Reserve Banks as agents for foreign and international monetary
authorities.
Amounts bid for these accounts by
Fede~al
Reserve Banks will
be added to the offering.
Both the 2-year and 5-year note auctions will be conducted in the ~ingle
price auction format. All competitive and noncompetitive awards will be at
the highest yield of accepted competitive tenders.
The
2-yea~
and 5-year notes being offered today are eligible for the
STRIPS program.
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 ~he ~er.ms and conditions set forth in the Uniform
Offering Circular (31 CFR Part 356, as amended) 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
RR-2233
Po,. p,en ,.dellses. speeches. public schedule, lind offici4l bl()~,"pltlts. caU 011' 24-Itou,
fllX
Illte at (202) 622.2040
2-YKAR AND 5-YEAR NorES TO a. 18SUBD NARCH 2, 1998
February 18, 1998
Offering Amount ••••..•......•..........• S15,000 mllion
Do,crlption ot
Offerin~:
Term and type of 58curlty ...........•..• 2-year note5
Saciea .........•.............•..........
CUSIP number ...•................•.••...•
Auction date ..•..•...••.•••••••.....•..•
1",ue date ..........•....•.•..•.•...•..•
Dated date •...•.....•..•.•••.•..••.....•
Maturity date .......•.....•.....•.......
Intere&t rate .•..•..•....••••...••.••.••
Z-2000
912821 3Y 6
February 2., 1998
March 2, 1998
February 28, 1998
February 29, 2000
Dete~ined ba3ed on the hlghe3t
accepted competitive bid
Yield ..............•••••..•.••.••••.•... Dete[1llined at auction
Interest payment date3 .•............••.• The la3t calendar day of
August and Februarv through
February 29, 2000
Hinl ..WI bid amount ................•.•..• S5,000
Multiples .....•...•.•....•......•......• ~l/OOO
Accrued interest payable
by investor ........................• Detcrnalned at auction
Pre.-ium or discount .•..........•....•.•• Determined at auction
STRIPS
5-year note3
0-2003
912821 n J
February 25, 1998
March 2, 1999
February 28, 1999
February 2B, 200l
Determined based on the highest
accepted competitIve bid
Det6~ined at auction
The last calendar day of
AU9u~t and February through
February 28, 200)
$1,000
$1,000
Deteumined at auction
Determined at auction
Info~tion:
Hini~um a~ount
requirod .............. '" Detenmlncd at auction
Corpu3 CUSIP number ..................... 912820 CR 6
Due date(s) and CUSIP number(s)
9128))
-(or additional TINT(s) ............... l\uqU.9t 31, J999
RJ 1
RK 8
February 28, 1999
ItL 6
1\ugust 3], 19~9
RM 4
Fobruary 29, 2000
The
S11,OOO nrl1110n
~ollowin~
Determined at auction
912820 CS 4
91283)
--RJf
August 31, 1990
February 28, 1999
RK 8
August 31, 1999
RL 6
~'obrua ry 29, 2000
RM 4
August 31, 2000
Rtf 2
91283]
f'ebruary 28, 2001
August J1, 2001
Februilry 28, 2002
August 31, 2002
Fobruary 28, 2003
RP?
RO 5
RR J
itS 1
RT 9
rulo. apply to all aoouritie. mentionod above:
Subm1 •• ion ot Bid.:
Nonc~potitivo bld~
......... Accepted in full up to ~5,OOO,OOO at the highest accepted yield.
Competitive bids ............ (1) MU3t be expressed as a yield with throe decimals, o.g., 7.123\.
(2) Net long position for each bidder must be reported whon the sum or the total bid amount,
at all yields, and the net loog position is ~2 billion or greater.
(3) Net long position must be determined d3 of one half-hour prior to the closing time for
receipt of competitive tender~.
HadDall'l. Reoognlnt1 Bid
at • 81n~la yi.ld ........ )S\ of public offering
N&xUaum Award ••.•••••.••.••• 35\ of public offering
Reoeipt
ot
Tender.:
Nonco~petitive
tender, ... Prior to 12:00 noon Eastern Standard timo on auction day
Competitive tenders ...... Prior to 1:00 p.m. Eastern Standard time on auction day
PDy.ent Term •.........•....• Full payment with tend6r or by charge to a funds account at
~
foderal Reservo Bank on lsBue date
DEPART~IENT
OF
THE
TREASURY
NEWS
~/7~. . . . . . . . . . . .. .
..............
--
OmCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASlllNGTON, D.C.• 20220. (202) 622.2960
EMBARGOED UNTIL 11 :30 AM
Text as Prepared for Delivery
February 19, 1998
STATEMENT BY TREASURY SECRETARY ROBERT E. RUBIN
ON THE UPCOMING G-7 MEETING
This weekend I will be meeting in London with other finance ministers in the G-7. Today, I'd
like to give a brief overview of our agenda.
This meeting occurs at a critical time in the global economy In recent months financial
instability in Asia has shaken the region and affected economies around the world, including our own,
and the economic and national security interests of the United States have been brought sharply into
focus. By helping these countries where disruptions have occurred reestablish financial stability, we
help them to become once again strong markets for American goods, have stronger currencies that
will help the competitiveness of our goods in world markets, and reduce the risk that financial in
stability will spread to other developing countries --the recipients of over forty percent of our exports
In addition, we help to protect our national security interests in a stable and peaceful Asia.
As we respond to the situation in Asia, it is important to remember that the international
financial markets and global economy offer tremendous benefits to American workers, farmers and
businesses through greater exports, more high-paying jobs, higher standards of living, and lower
inflation. But with the opportunities have come risks. Making the most of those opportunities, while
managing the risks, are high priorities of this Administration --and a key focus of the G-7.
The situation in Asia will dominate the meetings this weekend, first in our discussions of steps
the G-7 can take to improve the prospects of resolving the situation; and more generally as the
backdrop for our ongoing efforts to improve the international financial architecture to prevent future
crises or manage them if they occur. Let me discuss each of these for a moment.
First, we will review the overall state of the world economy, the impact of the disruption, and
the challenges we face in promoting global growth Although the key to recovery lies with the Asian
nations, strong growth in the G-7 is also necessary for a successful resolution.
RR-2234
Far press releases, speeches, public schedules and official biographies, roll our 24-hour fax line at (202) 622-2040
In this context, Japan, the second largest economy in the world, has an especially crucial role.
If Japan were on a strong economic track led by domestic demand led growth, it would be a larger
market for Asian goods, a source of greater bank credit and other capital flows, and a wellspring of
confidence for the region. I look forward to my first meeting with Minister Matsunaga.
Second, we will discuss the progress the Asian economies have made in following through
on their commitments to reform their economies. Let me emphasize that the reform programs are the
key to restoring financial stability. Only when sound policies are pursued, will confidence, capital and
growth return to these nations.
Third, we will discuss our proposal for the Trade Finance Initiative, a multilateral effort to
provide necessary short term trade credits to struggling Asian economies. This initiative can make
a strong contribution to the return of economic growth in the region.
Finally, I will discuss our Administration's efforts to receive the funding necessary to enable
the IMF to respond effectively if the current crisis were to spread --which we all want to avoid --and
to future crises. Here in the United States, it is critically important that the Congress approve the
Administration's request for the U.S. contribution to the IMF and for the New Arrangement to
Borrow. And let me once again stress that when the lMF draws on our commitments, we receive a
liquid, interest bearing offsetting claim on the IMF of equal value. In fifty years, the IMF has never
cost taxpayers one dime.
Even as we address today's financial instability in Asia, the G-7 will also focus on efforts to
reform the international financial architecture to better prevent crises and manage them when they
occur. We here in the United States have been focused on this issue for some time now --Deputy
Secretary Summers held a meeting on the topic this week --and it will be a major focus of our
discussions this weekend.
Our effort will center on six elements: promoting more efficient global markets; increasing
disclosure and transparency; strengthening financial systems, both globally and in individual
economies; improving domestic policy management; rethinking the role of th~ international
community in financial crises; and encouraging appropriate burden-sharing by the private sector,
especially with respect to the so-called moral hazard problem, so that investors and creditors bear the
full consequences of their decisions.
None of these challenges is simple. They have taken decades to develop and none will be
solved overnight. But at our meeting this weekend, we will take another step to help set the stage for
advancing this effort at the G-7 Summit in May.
To conclude, let me say that by acting to restore financial stability in Asia, and by
strengthening the international financial architecture to deal with new risks in financial markets and
the world economy we help strengthen our own economy now, and improve our prospects for growth
in the future. I'd be happy to answer your questions.
2
-
PUBLIC DEBT NEWS
-Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
February 19, 1998
Contact: Peter Hollenbach
(202) 219-3302
BUREAU OF THE PUBLIC DEBT AIDS SAVINGS BONDS OWNERS
AFFECTED BY TORNADOES IN FLORIDA
The Bureau of Public Debt took action to assist victims of tornadoes in Florida by expediting the
replacement or payment of United States Savings Bonds for owners in the affected areas. The
emergency procedures are effective immediately for paying agents and owners in those areas of
Florida affected by the storms. These procedures will remain in effect through March 31, 1998.
Public Debt's action waives the normal six-month minimum holding period for Series EE savings
bonds presented to authorized paying agents for redemption by residents of the affected area.
Most financial institutions serve as paying agents for savings bonds.
Florida counties involved are Broward, Dade and Monroe. Should additional counties be
declared disaster areas the emergency procedures for savings bonds owners will go into effect for
those areas.
The replacement of bonds lost or destroyed will also be expedited by Public Debt. Bond owners
should complete form PD-1 048, available at most financial institutions or by writing the
Richmond Federal Reserve Bank's Savings Bond Customer Service Department, 701 East Byrd
Street, Richmond, Virginia 23219; phone (804) 697-8370. This form can also be downloaded
from Public Debt website at: www.publicdebureas.gov. Bond owners should include as much
information as possible about the lost bonds on the form. This information should include how
the bonds were inscribed, social security number, approximate dates of issue, bond
denominations and serial numbers if available. The completed form must be certified by a
notary public or an officer of a financial institution. Completed forms should be forwarded to
Public Debt's Savings Bond Operations Office located at 200 Third St., Parkersburg, West
Virginia 26106-1328. Bond owners should write the word "Storms" on the front of their
envelopes, to help expedite the processing of claims.
RR-2235
PA-311
000
http://www.publicdebt.treas.gov
n
F. PAR T \, F. N T
0 F
T II E
T REA S lj R Y .
41
NEWS
TREASURY
OFFICE OF PUBLIC AFFAIRS '1500 PENNSYLVANIA AVENUE. N.W.• WASHINGTON. D.C •• 20110. (101) 6%1.2960
EMBARGOED UNTIL 2:30 P.M.
CONTACT:
February 20, 1998
Office of Financing
202/219-3350
TREASURY'S 52-WEEK BILL OFFERING
The Treasury will auction approxima~ely $12,000 million of 52-week Treasury
bills to refund $14,996 million of publicly held 52-week bills maturing
March 5, 1998. This offering will result in a paydown for the Treasury of about
$3,000 million.
In addition to the maturing 52-week bills, there are ~15,932
million of maturing publicly held 13-week and 26-week bills.
In addition to the public holdings, federal Reserve Banks for their own
accounts hold $13,665 million of the maturing bills. These accoun~s are
considered to hold $5,845 million of the maturing 52-week issue, which may be
refunded at the weighted average discount rate of accepted competitive tenders.
Amounts issued to these accounts will be in addition to the offering amount.
Federal Reserve Banks hold $4,621 million of the 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 51,527 million of the maturing
52-week issue.
Tenders for the bills w~ll 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 O!l'ering Circular (31 erR part. 356, as amended) for the sale and issue
by the Treasury to the public of marketable Treasury bills, notes, and bonds.
Details about the new
highligh1:s.
RR-2236
secu~ity
are glven in the attached offering
000
A~~achment
For press releases, speeches, public Ichedules alld official biographies, ctlll our 24-hour ftU lilli! at (202) 622-2040
HIGHLIGHTS OF TREASURY OFFERING OF S~-WEEK BILLS
TO BE ISSUED MARCH 5, 1998
february 20,
Offer~ng
1998
Amount . . . . . . . . . . . . ,. $12,000 million
Description of Offering:
Term and type of securi~y
CUSIP number . . . . . . . . . . . . . . . . .
Auc~ion date . . . . . . . . . . . . . . . . .
Issue dat.e . . . . . . . . . . . . . . . . . . .
Maturity date . . . . . . . . . . . . . . . .
Original issue date ......... .
Maturing amount . . . . . . . . . . . . . .
Minimum bid amount . . . . . . . . . . .
Mul ~iples .................. ..
~9sion
364-day bill
912795 BU 4
February 26, 1998
March 5, 1998
March 4, 1999
March 5, 1998
$20,841 million
S10,000
$1,000
of Bid9:
Accep~ed
Noncompetitive bids
Competi t i ve bids . . . . . . . . .
(l)
(2)
(3)
in full up to Sl,OOO,OOO at the
average discoun~ ra~e of accepted
competitive bids
Must be expressed as a discount rate with
three decimals, in increments of .005%,
e.g., 7.100%, 7.105%.
Net lor.g po~i~ion for each bidder must be
repor~ed when the sum ot the total bid
amount, at all discount rates, and the
net long posit~on is Sl billion or
greater.
~et 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
....................
Receipt of Tenders:
Noncompetitive tenders
35~
of public offering
P~ior ~o 12:00 noon Eastern Standard
t~me
on auction day
Cornpet~tive tenders . . . . . . . . . . Pr~or to 1:00 p.m. Eastern Standard
t~me on auction day
Payment Terms . . . . . . . . . . . . . . . . Full payment with tende= or by charge
to a funds account at a Federal Reserve
Bank on issue date
DEPARTMENT
lREASURY
OF
THE
TREASURY
NEWS
OffiCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASHINGTON, D.C .• 20220 • (202) 622-2960
Remarks as prepared for delivery
February 23, 1997
THE TREASURY'S STUDY OF CREDIT UNIONS
Remarks of Richard S. Carnell
Assistant Secretary of the Treasury
for Financial Institutions
Credit Union National Association
Governmental Affairs Conference
Washington, D.C.
I.
Introduction
I appreciate the opportunity to speak to you this morning about the Treasury's study of
credit unions.
I'd like to begin by thanking Dan Mica for inviting me and for all the cooperation we
received from CUN A in the course of the study.
I also want to express our appreciation for the input we received from credit unions
across the country, including quite a few of you here today.
You as credit unions have a great story to tell. A story about people working together.
A story about mutual self-help. And a story about satisfied members.
On December 22, 1997, the American Banker published its annual customer satisfaction
survey. This survey found that credit unions continue to rank highest of all financial
institutions, with 73 percent of credit union members saying they are "very satisfied" with their
credit union. The American Banker called credit unions "the perennial service quality
champs."
RR-2237
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
2
As we did our study, I was reminded of how unions come in all shapes and sizes. The
credit unions we visited exemplify that diversity. For example, we visited a $2 million credit
union run by one person. We visited a credit union that operates out of an inner-city church
basement -- and has a 50-year history of working with immigrant populations. We also visited
large, sophisticated credit unions that offer their services over the World Wide Web. Despite
the differences among these credit unions, each had a strong focus on serving its members.
Credit unions also have a great story to tell about their financial soundness. The credit
union system today is financially solid.
Credit unions have significantly increased their net worth over the past five years. As a
group, you now have net worth exceeding 11 percent of total assets. This is prudent and farsighted. A strong base of net worth puts you in a strong position to lend to your members,
generate returns for your members, and serve your members through good times and bad.
But times have been good. Increased net worth, growing loan portfolios, and a
prosperous national economy have meant few credit union failures. The National Credit
Union Share Insurance Fund has suffered few losses in recent years and has paid dividends on
your 1 percent deposit in each of the past three years. The Fund has had to assess insurance
premiums only once since 1985, when the 1 percent deposit system took effect. That fact
highlights the Fund's resilience and the strong performance of credit unions even during the
regional recessions of the 1980s and the national recession of the early 1990s.
One additional general observation: by emphasizing service to members over pursuit
of the bottom line, credit unions add something special to our financial services system.
That's also a great story.
* * *
We at the Treasury worked on our study of credit unions for over a year. We met
with, and listened carefully to, hundreds of people. And last December we published a report
setting forth our findings and recommendations. The report is 125 pages long; I can't cover it
all in the time we have here. I do want to note that copies of the full report, or our 13-page
summary, are available from CUNA. They're also available at the Treasury's web site on the
Internet.
I'm going to turn now to four selected topics from the report. First, the National
Credit Union Administration's safety and soundness regulations. Second, whether the NCUA
should continue to administer the Share Insurance Fund. Third, whether credit unions' 1
percent deposit in the Share Insurance Fund should continue to be treated as an asset on credit
unions' books. And fourth, credit unions' access to emergency liquidity.
3
II.
The NeUA's Safety and Soundness Regulations
I'll start with the NCUA's safety and soundness regulations. We reviewed all of those
regulations. We also compared them with the safety and soundness regulations that apply to
other federally insured depository institutions. We found some differences between the two
sets of rules. When we did, we asked whether the differences made good sense. Throughout
this process, we kept in mind that credit unions are not-for-profit cooperatives -- which gives
them a distinctive character. We kept in mind that credit unions come in all shapes and sizes.
And we kept in mind that many credit unions are smaller and have simpler portfolios than
many banks and thrifts.
But we did find points on which we believe action by Congress or the NCUA is
appropriate. I want to talk about three of them this morning. The first involves the process by
which the NCU A makes major safety and soundness policies and lets credit unions know about
them. You might call it rulemaking for short. I'll come back to it in a moment. The second
involves net worth requirements. And the third involves prompt corrective action.
Let's first look at the way that the NCUA makes major safety and soundness policies
and then lets credit unions know about those policies. We found that the NCUA had a greater
tendency than the other federal financial regulatory agencies to put fundamental safety and
soundness policies not in regulations but in guidelines, manuals, policy statements, or standard
by-laws. For example, if you wanted to find the limit on loans to one borrower, you had to
look in the standard by-laws. Informality can be good. But it's also important to know what
the real rules really are. Some seemingly informal policies can get treated like rules: if the
examiners find you violating them, they'll criticize you. If that's what's going on, the rule
should be written down in a place you can find it.
We recommend that the NCUA make important safety and soundness rules readily
accessible to credit unions. We also recommend that if the NCUA means for a rule to have
the force of law, it should give people a chance to comment before it adopts the rule.
This approach would benefit credit unions in at least three ways. It would provide
clarity -- so that credit union managers and directors know what is expected of them. It would
promote consistency. And it would make for better rules. Rules are almost always better
when they're made through an open process with plenty of input from the people who will
have to comply with them.
The second area where we recommend action involves net worth requirements. Net
worth forms the buffer that protects credit unions and the Share Insurance Fund from losses.
As I noted earlier, credit unions as a group are very well capitalized -- with 11 percent net
worth to total assets. We at the Treasury believe that now is the right time to formalize a
requirement that credit unions have at least 6 percent net worth to total assets in order to be in
good standing. 96 percent of credit unions have more than 6 percent net worth, and those
4
credit unions hold 98 percent of total credit union assets. We would also propose that credit
unions set aside, as retained earnings, a small percentage of gross income if they have less than
7 percent net worth. 93 percent of credit unions have more than 7 percent net worth, and
those credit unions hold 93 percent of total credit union assets.
The third area we point to involves prompt corrective action. Prompt corrective action
is a net-worth-based approach to safety and soundness supervision. It seeks to resolve net
worth deficiencies before they grow into large problems. You can think of it as a structured
decision-making process aimed at ensuring timely regulatory action. Prompt corrective action
has applied to all other federally insured depository institutions since 1992, and the results
have been good.
We recommend that Congress establish a system of prompt corrective action for credit
unions -- specifically tailored to credit unions as not-for-profit, member-owned cooperatives.
We have in mind a system that would take effect 18 months after enactment.
Such a system of prompt corrective action would benefit credit unions and the credit
union system. It would reinforce the commitment of credit unions and the NCUA to resolve
net worth deficiencies promptly, before they become more serious. It would promote fair,
consistent treatment of similarly situated credit unions. It should reduce the number and cost
of future credit union failures. In so doing, it should conserve the resources of the Share
Insurance Fund, make the Fund even more resilient, and make more money available for
lending to credit union members. And it would respect and complement the cooperative
character of credit unions.
These changes -- involving little cost or burden today -- would pay good dividends to
credit unions and their members for many years to come.
III.
National Credit Union Share Insurance Fund
My second and third topics involve the National Credit Union Share Insurance Fund.
A.
Who Should Administer the Share Insurance Fund
Congress required us to report on whether some entity other than the NCUA should
administer the Fund. There is some potential for the NCUA's mission as a charterer or
supervisor to conflict with its responsibilities for administering the Fund. But we believe that
separating the Fund from the NCUA would not be the best response. We believe that the
system of prompt corrective action that I've just described would mitigate any potential
conflict between promoting credit unions and protecting the Fund. We accordingly
recommend that the NeUA continue to administer the Fund.
5
B.
The 1 Percent Deposit
Congress also required us to report on whether credit unions should continue to be
permitted to count their I percent deposit in the Share Insurance Fund as an asset on their own
books. Now bankers, the Bush Administration, and the General Accounting Office have
expressed concern that this involves double-counting of capital because it treats the same
dollars as reserves of the Fund and as assets of credit unions. Capital can't be in two places at
once, they say. So they advocate requiring credit unions to write off the 1 percent deposit.
But saying that there's double-counting doesn't mean that the 1 percent deposit should
be written off. The basic goal is to provide adequate protection for the Share Insurance Fund
and the taxpayers who stand behind it. Three reforms that I outlined earlier are particularly
relevant here: a 6 percent net worth standard; a requirement that credit unions with less than 7
percent net worth set aside some of their income as retained earnings; and a system of prompt
corrective action. We believe that these measures, coupled with existing safeguards, will
ensure adequate protection of the Fund. By contrast, requiring a writeoff the 1 percent deposit
wouldn't be nearly as constructive. Accordingly, we recommend against requiring a writeoff.
C.
A Technical Reform
I'd also like to mention a technical recommendation involving the Share Insurance
Fund. The NCUA calculates the Fund's reserve ratio by dividing the current month's reserves
by the insured shares at the end of the preceding calendar year. This means that it calculates
each year-end reserve ratio using a denominator that's a year old. That just doesn't make
sense. We recommend calculating the reserve ratio by dividing the current reserves by the
current insured shares, and using the most recent data available for each.
IV.
Credit Unions' Access to Emergency Liquidity
I want to turn now to the fourth topic from the study: credit unions' access to
emergency liquidity. This topic came to our attention as we reviewed corporate credit unions.
Corporates provide their member credit unions with a safe place to invest unloaned funds.
And one way they can invest those funds is by lending them to other credit unions. The
corporate system does a fine job of reallocating excess liquidity.
But what would happen if we had a systemic crisis, whether in the financial system
generally or in the credit union system specifically. What if, in the midst of that crisis, there
were no excess liquidity? Let me emphasize that our financial system is in excellent shape
right now, and that even in the future such a crisis would be extremely unlikely. But public
officials are paid to worry about things like that -- and to make sure that such a challenge
could be handled if it did arise.
6
Corporate credit unions are not set up to handle such a systemic crisis. Accordingly,
Congress created the Central Liquidity Facility to serve as a governmental lender of last resort
for the credit union system.
But we at the Treasury are concerned that the CLF couldn't handle such a crisis. Let
me explain why.
First, the CLF has little capital of its own. Congress intended that credit unions invest
directly in the ClF, but few credit unions actually joined. So during the 1980s the ClF
implemented the redeposit program, which allows credit unions to join the CLF through their
corporates. But the redeposit program is just a series of accounting entries; it gives the CLF
no real capital.
Second, Congressional appropriations Acts have allowed the CLF to lend no more than
$600 million to credit unions. Considering that credit unions hold $300 billion in deposits, the
CLF would need billions upon billions of dollars in lending authority to be assured of having
the resources to carry out its original purpose.
Even as the eLF faces these constraints, credit unions have access to a governmental
lender of last resort with unlimited borrowing authority: the Federal Reserve System. Credit
unions that offer share draft accounts can borrow from the Federal Reserve discount window.
Against this background, our report recommends that Congress discontinue the CLF.
We also recommend that credit unions, particularly larger credit unions, apply to their Federal
Reserve bank for discount window access. Our basic idea is that -- if worse came to worse,
and a systemic crisis did arise -- the Fed could take care of large credit unions' liquidity needs
and the corporates could take care of smaller credit unions.
Since our report came out, some have told us that the CLF has been a great success -and that discontinuing it now would be like closing the fire station because we haven't had any
fires recently. I believe that comparison is mistaken. The following illustration will help
explain why.
In my home town of Gainesville, Florida, stood a historic church. If you looked up at
the ceiling, you'd see a conspicuous row of smoke detectors. And you'd think, "They aren't
pretty, but at least they'll give good warning of any fire."
But when an arsonist torched that church seven years ago, the smoke detectors made no
difference at all. They didn't work. If anything, they had given a false sense of security.
We have similar concerns about the CLF. As a means for dealing with a systemic
emergency, it won't work because it can't do the job. And yet it creates a false sense of
security.
7
Some argue that the CLF is worth keeping for two reasons. First, that it acts as an
early-warning system, alerting the NeUA that a credit union is in trouble. And second, that
the Federal Reserve would not want to lend to credit unions, especially small credit unions.
Let's look at these argu men ts more closely, starting with the earl y-warning argument.
When a corporate credit union is unwilling to make a loan to one of its member credit unions,
that's a signal to the NCUA that the credit union may have problems. Often, the NCUA will
give the corporate a guarantee from the Share Insurance Fund. Then the corporate makes the
loan, and the NCUA checks up on the credit union later on.
But note: the signal to the NCUA has nothing to do with the CLF. The CLF isn't
advancing any money. It isn't taking on any credit risk. Nothing appears on its balance sheet.
The transaction really involves the Share Insurance Fund and the corporate credit
union. The Fund takes on the credit risk, the corporate provides the liquidity, and the NCUA
receives the signal. Without the CLF, the system could still work just as it does today.
Nothing that we have proposed would limit the NCUA's current authority to use the Share
Insurance Fund to guarantee such loans.
Now let's consider the Federal Reserve as an alternative to the CLF. When Congress
created the CLF, credit unions had no access to the Fed and corporate credit unions were still
in the early stages of development. But two years later, in 1980, Congress permitted credit
unions to borrow from the Fed's discount window. Since then the Fed may have been
reluctant to lend to credit unions because it uses a "credit elsewhere" test for the discount
window -- that is, if you can borrow somewhere else, you should. The Fed has reasoned that
because the CLF exists to serve as an emergency lender for credit unions, it reduces or
eliminates the need for the Fed to perform that function. Of course, without the CLF, the Fed
would stand ready to lend to credit unions in the same way, and on the same terms, as it does
for banks and thrifts.
I'd also note that the CLF operates under a statute modeled on that governing the Fed's
discount window. The CLF exists to provide emergency liquidity to solvent but illiquid credit
unions, and should make advances only on good collateral. Congress did not intend for the
eLF to fund troubled credit unions, and it acted in 1991 to sharply curtail the Fed's lending to
troubled banks and thrifts.
Thus we recommend that larger credit unions take the modest steps needed to line up
access to the Fed discount window. This simply involves filing some paperwork with your
local Federal Reserve bank. You don't have to pre-pledge collateral. Then, if a systemic
crisis ever occurred that involved widespread demand for liquidity, large credit unions could
turn to the Fed, leaving corporate credit unions free to provide liquidity to small credit unions.
It is just this type of emergency that the eLF can't handle.
8
So we remain concerned that the CLF is a bit like that fire-protection system that didn't
work. It isn't like a real firehouse. It's more like a miniature firehouse. Your members
deserve more reliable access to emergency liquidity than the CLF can provide.
V.
Field of Membership
Before concluding my remarks, let me say a few words about a different subject that I
know is on your minds: field of membership. After the Supreme Court rules in the AT&T
case, we'll review the Court's decision and consider its implications. We'll discuss them with
interested parties, including CUNA, and with Members of Congress. We'll then consider
what steps may be appropriate in light of the Court's ruling.
VI.
Conclusion
As you gather here this week to "Choose Your Future," keep in mind the importance of
ensuring the long-run safety and soundness of credit unions. We at the Treasury recognize the
value, and the special role, of the credit union system. We want you to build on your many
achievements, and have a safe, sound, and prosperous future.
Thank you for this opportunity to speak to you today.
-30-
,
DEPARTMENT
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASInNGTON, D.C .• 20220. (202) 622·2960
FOR IMMEDIATE RELEASE
February 23, 1998
Contact: Hamilton Dix
(202) 622-2960
RUBfN TO PRESENT BLACK PATRIOTS COMMEMORATIVE COINS
Treasury Secretary Robert E. Rubin will present three Black Patriots commemorative
coins in a ceremony at 8:30 a.m. Wednesday, February 25, at the National Archives Theater,
Pennsylvania Avenue at 7th Street, N.W., Washington, D.C.
Black Patriots Foundation President Wayne Smith, Co-Chair of the Foundation's
Leadership Conunittee and actor Ossie Davis and Michael 1. Walker, 8th grade student from
Washington, D.C.'s Robert H. Terrell Junior High School, will receive the silver one dollar coins
commemorating Black Revolutionary War Patriots.
The coins also commemorate the 275th anniversary of the birth of the first black
Revolutionary War patriot, Crispus Attucks, who was the first American colonist killed by
British troops during the Revolutionary period. The U.S. Mint is authorized by Public Law 104329 to produce up to 500,000 one dollar silver coins. A portion of the proceeds from the sale of
the coins are authorized to be used to support the construction of the B lack Patriots Memorial on
the National Mall in Washington, D.C.
Media should use the Pennsylvania Avenue entrance between 7th and 9th Streets, N. W.
-30-
RR-2238
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622·2040
PUELIC DEET/WRSH DC
Fax:202-219-3355
Feb 23 '98
14:19
P.Ol
-
PUBLIC DEBT NEWS
-Department of the Treasury • Bureau of the Public Debt· Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEAS£
CONTACT:
February 23, 1998
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
Term:
Issue Date:
Maturity Date:
CUSIP Number:
February 26, 1998
May 28, 1998
9127944V3
RANGE OF ACCEPTED COMPETITIVE BIDS:
Investment
Rate 1/
Discount
Rate
Low
High
Average
------
5.250~
5.110\
5.145%
5.140%
Tenders at the high
Price
----------
------
98.708
98.699
98.701
5.287%
5.279\"
discoun~
rate were allotted
AMOUNTS TENDERED AND ACCEPTED
2%'.
(in thousands)
Tendered
Tender Type
Competitive
Noncompetitive
$
PUBLI C SUBTOTAL
Federal Reserve
Foreign Official Inst.
Refunded Maturing
Additional Amounts
37,709,714
1,329,005
$
5,563,086
1,329,005
39,039,719
6,892,091
3,478,180
3,479,180
396,700
a
$
TOTAL
42,913,599
1/ Equivalent coupon-issue yield.
RR-2239
Accepted
h ttP:lfwww.pubIicdebt.tre:ls.go v
$
10,766,971
PUBLIC DEBT/WASH DC
-
Fax:202-219-3365
Feb 23 '98
14:19
P.02
PUBLIC DEBT NEWS
.... Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEET - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
February 23, 1998
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
February 26, 1998
August 27, 1998
912795AG6
Term:
Issue Date;
Maturity Date:
CUSIP Number:
RANGE OF ACCEPTED COMPETrTIVE BIDS:
Discount:
Rate
-----LOW
Righ
Average
Investment
Rate 1/
Price
----------
------
5.010%
5.040%
S.212t
5.244%
97.467
97.452
5.035%
5.237%
97.455
Tenders at the high discour.t rate were allocted
69%.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
Tendered
Competitive
Noncompetitive
$
PUBLIC SUBTOTAL
Federal Reserve
24,805,483
Accepted
$
3,ll6,683
1,139,492
1,139,492
25,944,975
4,256,175
3,3l5,000
3,315,000
3,000,000
3,000,000
272 / 600
Foreign Official Inst.
Refunded Maturing
Additional .~ounts
272 / 600
TOTAL
$
32,532,575
1/ Equivalent coupon- issue yield.
RR-2240
h ttl) :/fwww.[lubli('(kbt trc~ls.gav
$
10,843,775
From: TREASURY PUBLIC AFFAIRS
() E I' ,'\ I~ T r\1 E N T
0 F
TilE
3-16-98 4:44pm
p. 29 Df 59
T REA S II R \"
NEWS
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February 23, 1998
"Americ8D Farmers; Tbeir Stake in Asia~ Their Stake in the IMF"
Remarks By Lawrence H. Summers
Deputy Secretary of the Treasury,
Department of Agriculture
Washington, DC
Thank you. 1 am glad to have this opportunity to discuss recent developments in Asia and the
United States response to those events.
There is little need to remind this audience that Asia matters. There is little need to remind you
that resolving the financial crises in the region is about protecting core American interests -protecting American wages, American savings and American security. No one can be certain
what the precise impact of these events will be. But one thing is clear: American farmers and
ranchers will be among the first to feel the effects. And they will be among the first to suffer
from a failure to restore financial stability as soon as possible.
I'd like to discuss three topics this evening:
•
the crises in Asia and risks they pose to the United States·. the agricultural sector, in
particular;
•
the United States response to these crises and key role of the International Monetary
F\Wd;
•
the urgent need to offer continued support for the IMF in the context of these efforts.
I. The Crises in Asia and tbe Risks to American Agriculture
These crises come at a special time for the United States .... a time of rapid, sustained growth, a
time oflow inflation, a time of historic increases in employment. We have a responsibility to do
aU we can to protect this strong perfonnance. In an interconnected world. that means protecting
our growing stake in a stable and prosperous global economy.
Our exporters, with agriculture,
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as always, at the forefront, have played a major role in our recent
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economic success. Financial instability, economic distress, and depreciating currencies all have
direct effects on these highly integrated sectors: on the pace of our exports, the competitiveness
of our companies, the growth or our economy and the well-being of our workers:
•
in the past four years, nearly one-third of our economic growth has been due to exports -exports which now support more than 11 million jobs, and pay, on average, 15 percent
more than jobs in non-trade-related sectors. And some 4S percent of the recent growth in
our exports has been in Asia.
•
Asia is the largest market for agricultural exports, and has been growing at the second
fastest rate. Fully 45 percent -- $28 billion -- of United States farm exports go to the
region~ The South-East Asian economies and Korea, the countries worst affected by the
crises to date, account for 12 percent of all American agricultural exports.
As early as last December USDA was estimating that the crises in Asia would cut United States
exports by $500 million this year. Without the multilateral assistance package assembled by the
IMF, USDA now believes the crises might have reduced United States exports worldwide by 3 to
6 percent over the next two years relative to what would have been. For this fiscal year, the loss
in exports would have been $2 billion, with sales in Southeast Asia and Korea alone falling $1.25
billion.
None of these, very imprecise estimates take account of the further knock-on effects if the crises
were further prolonged, or spread to emerging markets in other regions -- leading to a cycle of
costly devaluations and impeding open trade.
And, of course, it would not only be trade that was affected. A long drawn-out crisis:
•
could also affect our fmancial markets, and with it everything from invesnnent in tools
and equipment for workers to mortgages for new homes;
•
it could raise serious concerns for national security, given th~ proven potential for
financial crises to trigger broader conflicts. We have 100,000 troops in Asi~ 37,000 on
the Korean peninsula alone, where North and South Korea have only just begun
negotiating a possible end to their conflict.
To repeat, any forecast of the impact of these crises -- like the situation in Asia -- is highly
uncertain. A great deal will depend on the success of United States-led efforts to restore stability
and growth in the region and to limit the impact on our economy.
II. The United States Response
We have taken direct action through USDA's Commodity Credit Corporation to lessen the
effects of the crises on US farmers and ranchers by making available $2.1 billion in export credit
guarantees to Korea and other Asian countries. GSM is working. American exporters have
already sold over $362 million worth of beef, cattle hides and skins t cotton, pork, soybean meal,
and wheat since the package was announced in early January,
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A similar effort is underway ta support our capital goods exports. Last Friday, in London, Ex-Im
Bank organized a multilateral export credit agency (ECA) initiative to keep trade finance flowing
to Asian countries undertaking refonn programs. In conjunction with the pursuit of policies that
maintain creditworthiness, Ex-Im Bank announced that it is prepared to provide short-tenn trade
insurance of up to $1 billion each to Indonesia, Korea and Thailand -- a major increase from Ex1m Bank's pre-crisis level of $62 million.
Providing this support is truly a win-win proposition for the United States: it gives immediate
protection to American exports and jobs, while at the same time speeding the long-term recovery
of these important markets.
In the midst of the crises, all of these efforts will help to keep trade flOwing and markets open.
But there is a limit to what they can achieve while the frres of financial instability are still
burning. The overriding imperative must be to restore stability and growth so that these cOWltries
will once again be strong markets far American goods) and will enjoy the economic conditions
conducive to political and social stability, To support that objective we have:
•
given strong United States support to tough IMF -led refonn programs in Thailand,
Indonesia and Korea ta restore market confidence and lay a surer fOWldation for growth;
•
where these reforms are to be carried out, supported the provision of temporary,
conditione~ international assistance, centered around the IMP, to give countries the
financial breathing space to put their economies back on track;
•
encouraged strong action by other economies in the region -- especially Japan and China
-- to promote their collective interest in long-tenn financial stability and growth;
•
stepped-up US-led efforts to strengthen the international financial system to safeguard
against these kinds of crises and respond to them effectively when they do take place.
Let me say a little about the content of the reform programs we have supported in Asia and the
implications for United States trade.
While each program is tailored to address the specific causes of that country's crisis, the focus
throughout has been on making the economy more market-oriented and better able to allocate
capital and to allow market forces to operate. Important, long overdue changes will need to
occur in the structure of these economies -- changes which have been welcomed, in many cases
by officials in the countries themselves.
The upshot is that these programs wil1 serve a dual purpose for United States exporters and
fanners. Not only will they help stabilize the situation in the short-tenn and support our existing
markets in Asia; they will also help open up many new markets and opportunities for United
States companies and United States farmers. Specifically:
•
Indonesia's stabilization package commits the government to eliminating a range of
officially-sanctioned import and export monopolies, removing export taxes on resource
products, reforming the government procurement process, and accelerating the pace of
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privatization. Tariffs on food imports have been cut to a maximwn of 5 percent, effective
immediately.
•
and in Korea., the govenunent will streamline its cumbersome import clearance
procedures on products such as com grits, soyflakes, and peanuts; it will eliminate traderelated subsidies, reducing high price supports for rice and beef and reducing the number
of agricultural products subject to tariff rate quotas and noneconomic directed lending to
industry will come to an end.
In some ways the IMF has done more in these past few months to liberalize these economies and
open their markets to United States goods and services than has been achieved in rounds of trade
negotiations in the region. And it has done so in a way that serves our critical, short and longer
term interest the restoration of confidence and growth in this vital part of our world.
m
Ill. The Need to Support the IMF
Everyone here understands the critical role for short-tenn international support at times of
financial crises - .support that can put a flOor to a plununeting exchange rate, a declining
economy, and a shrinking capacity to buy imports.
The international community will not help countries who are not committed to helping
themselves. But without short-term outside support, even those countries that are pledged to the
riiht refonn policies might face default -- either at a government level or by the financial system
as a whole -- which could have devastating effects on their own economies and significantly raise
the risks of contagion in other markets.
This is not just an hypothesis. The world has had ample experience with international fmancial
problems that do not meet with a cooperative response. A recent Washington Post column talked
about what was for 50 years called America's Great Depression: the events that began in the
1870s, which hit our farmers worst of all. And of course) an even clearer example of what
happened when the United States was not prepared to lead with respect to international fmancial
problems was prOvided by events in Europe in the early 1930s, when devaluation -. competitive
devaluation -- deflation, contraction, and widespread depression laid the ground for what was as
great a conflict as human history has seen.
The United States has an immense interest in helping stop these vicious chain-reactions in their
tracks. And in the IMP we have the most effective way for us to provide that he1p. That is why
the United States needs Urgently to follow through on its commitment to support the increase in
IMF quotas that was agreed last year, and contribute to an important new emergency facility, the
New Arrangements to Borrow, to supplement the IMF's resources in these types if situations.
Fifty years of bipartisan support for the IMF has not cost the American taxpayer one cent,
because it bas not had a major default, and because its lending is backed by very substantial gold
reserves. The IMF presently has $65 billion in loans outstanding -- and $40 billion in reserves.
It operates much like an international credit union. We and other countries provide a line of
credit, and when the IMF draws on our commitments, we receive a liquid, interest bearing
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offsetting claim on the I1v1F. That is why there are no direct budget costs. That is why our
contribution does not increase the deficit. or impact other spending priorities.
The United States has been an active proponent of changes at the IMF to make it more effective
in support of US interests. I~ the last three years we have worked to:
•
adapt the IMF to a world that is much more dominated by capital accounts than any we've
had before, and to one in which greater transparency of international financial and
economic d.a.ta is a critical bulwark against instability
•
ensure the IMF is keenly focused on its primary goal of promoting growth and prosperity
for all in its member countries. By paying closer attention to the needs of the poor in
designing adjustment programs and encouraging governments to cut unproductive
expenditures, such as military spending
•
bring the same values that the IMF stresses to its clients - of transparency and
accountability -- to the IMF itself, with much wider publication of IMP internal data., and
greater use of external evaluations.
These are a few examples of where progress is under way. There are other, larger questions that
we will have to face in the months ahead as we learn and'distill the lessons from the Asian crisis.
If we are to keep up with the dramatic pace of change in this new global economy, we can and
must update and improve the II.VIF, just as we must work to improve the entire international
financial architecture of which the IMP is a part. But we must do this in a way that supports
rather than undermines the long-tenn international financial stability in which American workers,
American farmers, and American companies have such an enormous stake.
Not to support the IMF at this critical time would be a little like canceling one's life insurance
when one has already gotten sick. 1bis is simply not a risk we should take. And it is Dot a risk the
American taxpayer would want us to take -- when we can invest in the protection of the IMF at
zero cost to our budget.
At this critical time we have a responsibility to do all we can to protect America's core economic
and security interest in an open and prosperous Asia. And that means protecting the IMP's
capacity to respond~ not just to todais challenges, but to the challenging new centwy to corne.
Thank you.
TOTAL P.lj5
DEPARTl\1ENT
OF
THE
TREASURY
NEWS
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960
EMBARGOED UNTIL 1 P.M. EST
T ext as Prepared for Delivery
February 24, 1998
TREASURY UNDER SECRET ARY DAVID A. LIPTON
HOUSE WAYS AND MEANS SUBCOMMITTEE ON TRADE
Mr Chairman, I am pleased to have this opportunity to discuss recent developments in
Asian financial markets and the effects on our economy.
Today I would like to focus my testimony on the Administration's strategy for restoring
stability in Asia. I would also like to speak about the critical need to support the IMF so we can
maintain our capacity to respond to financial crises around the world.
I. The Risks Posed by the Instability in Asia
As the President said in his State of the Union Address, the Asian economies are our
customers, our competitors and our allies. The financial turmoil in the region is affecting growth in
our economy, and thus is affecting the well-being of American workers, businesses and farmers.
Our aim is to restore stability for these key markets as soon as possible.
Nearly one third of our exports go to Asia -- more than we sell to Europe. Already many
smail businesses and some major Fortune 500 companies are seeing reduced export demand in the
wake of the instability in Asia. Reduced demand translates into fewer new jobs for American
workers.
Our economy is in strong shape today, so we can expect to withstand likely short-term
effects of the crisis as it has unfolded thus far. But the costs could be much larger if Asian
economies prove unable to restore stability and if the crisis were to spread to emerging markets in
other regions. Prolonged instability in Asian and other markets could:
•
lead to a cycle of competitive depreciation and trade barriers;
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•
threaten American exports and the jobs that depend on them;
•
affect our own financial markets, imperiling those who rely on them for investment finance,
personal incomes and mortgages for new homes; and
•
raise national security concerns, if the financial crisis were to lead to broader conflicts.
Under Secretary Eizenstat addresses this risk in some detail in his testimony fortoday's
hearing.
In short, the risk of failing to respond to this crisis -- the risk for our economy, the stability
of our financial markets and our broader national security -- far exceeds the risk of action. We can,
and we must, work with the international community to help restore confidence and growth as
soon as possible -- so that these nations can continue to be strong markets and stable allies for the
United States.
II. The United States' Approach
As Ambassador Barshefsky mentioned earlier, the U. S. economy is strong and our ability
to weather the Asian crisis is better at this time than virtually any other time. However, we are
highly integrated into the global economy and rely upon these markets for a significant share of our
exports. Therefore, it is in our interest to strengthen the markets in Asia. Our approach rests on
four principles:
•
first, the major responsibility for overcoming crisis rests with the countries themselves and
the actions they are prepared to take,
•
second, the international community should be prepared to provide temporary, conditioned
financial support for countries to provide breathing space for carrying out reforms;
•
third, the major industrialized nations, particularly Japan, must promote balanced growth in
their own economies to support the return of market confidence and to help accommodate
transitional trade imbalances in crisis-affected countries; and
•
fourth, the architecture of the international financial system must be modernized to make us
better able to prevent and manage crises.
Let me give you a more detailed explanation of these principles, focussing on the first two,
which involve the Th1F.
A strong domestic response in the countries facing crisis is the absolute prerequisite for
restoring stability. The reform programs we have supported in Thailand, Indonesia and Korea
commit these countries to concrete actions to restore stability and lay a surer foundation for longterm growth.
2
While each program is tailored to address the specific causes of that country's crisis, the
focus throughout has been on making economies more market-oriented and better able to allocate
capital and to allow market forces to operate. Important, long overdue changes need to be made
in the structure of these economies -- changes which have been welcomed, in many cases, by
officials in the countries themselves. The major reform areas include:
•
restoration of appropriate monetary and fiscal policies, and agreement on stable and
transparent rules for policy makers for the longer term.
•
measures to strengthen the domestic financial system, (through financial sector
restructuring, improved transparency, and supervision), elimination of inter-relationships
between government and business that lead to inefficiencies and corruption, and opening of
domestic capital markets.
•
structural refonns to break up commodity monopolies and open protected sectors to
foreign competition.
Bearing in mind the strong interest of this committee in the trade aspects of these
programs, let me say a little more on that subject.
Indonesia's stabilization package commits the government to eliminating a range of
officially-sanctioned import and export monopolies, removing export taxes on resource products,
reforming the government procurement process, and accelerating the pace of privatization. Tariffs
on food imports have been cut to a maximum of 5 percent, effect.ive immediately.
Similarly, the Thai program includes a greater emphasis on privatization, measures to
reduce subsidies to state enterprises, and loosening of the limitations on foreign ownership and
exchange controls.
As part of its IMF program, the Korean government has pledged, among other things, to
eliminate subsidies to Korean exporters, ease up on import licensing and cumbersome customs
procedures, end government-directed non-economic lending and substantially ease restrictions on
foreign ownership of Korean companies.
Mr Chairman, it is worth taking a step back to consider what these changes represent. The
close relationship between the government, the banks and the chaehol conglomerates has been one
of the salient characteristics of the Korean economy for years That relationship has been at the
root of our persistent trade problems with the country, because it resulted in poor market access,
uneconomic investment, excessive concentration, and excess capacity in key industries. Tackling
these practices has been very difficult using traditional trade policy tools. That is because these
practices could not be changed without altering fundamentally the relationship between the
government and business. Now, President-elect Kim Dae Jung has embraced to an IMF program
3
that aims not only to overcome Korea's financial crisis, but to break up this preferential
relationship once and for all.
More broadly, the design of reform programs and the provision of assistance is centered
around the IMF. That is why we ask you to support two critical requests: an increase in our IMF
quota subscription, and U.S. participation in an augmented back-up facility, the New
Arrangements to Borrow, to supplement the IMF's resources. These additional resources need to
be put in place as quickly as possible to enable the international community to be in a position to
respond to any worsening of this crisis, or to deal with any future crisis that might arise. The
likelihood of such developments may be small, but the consequences for America would be large.
We cannot afford that risk. Moreover, failure to provide these resources could shake confidence in
American leadership in the global economy just at a time when confidence and American
leadership are so important in re-establishing stability in Asia.
The IMF has been and must continue to be the institution we rely upon to support
countries with severe balance of payments problems. Its conditional finance, bolstered by
additional support from the World Bank and the regional development banks, is key to our
approach to crisis management. Moreover, our reliance on the IMF and other international
financial institutions has ensured international burden-sharing. In contrast to the Mexican support
program three years ago where the United States took the lead, the international financial
institutions have been responsible for the bulk of the financing provided.
The industrialized nations are also directly responding to the crisis by helping to support
trade flows in the region. At present domestic recession in the affected Asian economies is being
exacerbated by a shortage of short-term trade finance. Weighed down by debt, some financial
systems virtually ceased to function -- makmg It all but Impossible for businesses to obtain credit
to Import vital goods and materials.
Our own Export-Import Bank is leading a global effort to provide needed trade finance.
Providing this support is truly a win-win propositIon for the UnIted States: it gives immediate
protection to American exports and Jobs, while at the same time speeding the long-term recovery
of these important markets. Ex-1m has offered enhanced short-term export insurance in Korea and
recently announced $3 billion in addItIOnal loans and loan guarantees for sale of American
products to Korea, Thailand and IndoneSIa. Other export credit agencies have also joined in the
multilateral initiative to support the regIOn's Import finanCing needs
[II. Long-Term Agenda
Mr. Chainnan, recent events in Asia leave in their wake an important long-term agenda for
the international community. We need to work to reduce the risk of financial crisis and learn to
manage them more effectively when they do occur. We need, in Secretary Rubin's words, an
international financial architecture as "modern as the markets it serves"
4
President Clinton began this effort four years ago at the G-7 Summit in Naples. The next
year in Halifax, we launched a broad international effort to strengthen safeguards in the global
financial system. Two important parts of this initiative were an international program to
strengthen disclosure and the development of core principles for supervision of emerging market
financial systems.
The United States continues to take a lead role in modernizing our tools for dealing with
the crisis. One outgrowth of the Halifax process, the Emergency Financing Mechanism of the
IMF, has enabled the institution to respond quickly to problems in a number of Asian countries.
More recently, the IMF membership agreed to establish a new set of financing parameters,
through the Supplemental Reserve Facility, which provide for shorter maturities and premium
interest rates on exceptional programs -- this facility is being utilized for much of the program for
Korea.
At President Clinton's initiative, the United States will convene a meeting later this spring
of Finance Ministers and Central Bank Governors from 22 countries to continue these efforts and
start developing a consensus on policies to deal with new challenges to the international financial
system. A week ago, Deputy Secretary Summers held a productive, preparatory meeting with his
counterparts from these countries. And just last weekend, the G-7 Finance Ministers discussed
the subject of modernizing financial architecture in their meeting in London.
In shaping that agenda, we aim:
•
to promote measures to make global markets function more efficient, for example through
enhanced surveillance and enhanced national supervision and regulation;
•
to increase transparency and disclosure, including for a broader range of central bank and
commercial bank data;
•
to strengthen financial systems in emerging markets and globally, for example, through
strengthened banking supervision and wider adoption of Bas Ie Core Principles;
•
to improve domestic policy management in emerging market countries;
•
to strengthen the role of the international financial institutions in preventing and
responding to financial crises; and
•
to ensure that the private sector plays an essential role in the resolution of crises.
These issues are as complex as they are important. Some will take time to work through
and then to reach consensus with others in the international community. Given the high stakes
involved, we cannot risk pushing through major reforms before the consequences have been
5
thoroughly examined. Nor can we afford to leave the IMF ill-prepared to respond until these
issues are resolved.
We are already making progress -- even in the midst of crisis -- on some items in this
agenda:
•
to strengthen crisis prevention in the future, we have reached agreement with Asian
governments on the development of a regional surveillance mechanism to promote Asian
financial stability and increase financial market transparency.
•
to promote transparency, as a condition for disbursements of financial support in Thailand,
Indonesia and Korea, we strongly, and successfully, urged that governments publish their
"Letter ofIntent" outlining the reform measures agreed with the IMF.
•
to reduce moral hazard, we created a new IMF lending facility (mentioned earlier) under
which much of the IMF financing is provided at shorter maturities and a premium interest,
increasing the incentive for borrowing countries to restore their creditworthiness quickly
and regain access to private capital markets.
•
to enlist the private sector to playa greater role in crisis resolution, we catalyzed a major
private sector effort to extend credit maturities for Korean commercial banks.
To repeat, Mr Chairman, these and other steps must be seen as part of a rolling but
accelerated reform agenda to which we are fully committed as an urgent priority.
IV. Support for IMF
Mr. Chairman as I stated earlier, we need to ensure adequate. funding for the IMF at this
critical time. The President asked, as a supplementary request, for Congress to support the IMF in
two important ways: first, through an increase in our quota subscription, and second, by
contributing to an augmented emergency facility, the New Arrangements to Borrow.
Mr. Chairman, we have responded to these crises because they raise important risks for
our core economic and national security interests, risks that will increase the longer the instability
continues -- and the further it spreads. We must support the lMF as we work through this crisis,
and ensure it is ready to respond to any future crises, because it is, quite simply, the cheapest,
most effective way for us to promote those core American interests.
Without the IMF, at times of crisis. there would be greater pressure on the United States
to act unilaterally with taxpayer resources to protect our interests without the global leverage the
IMF provides.
6
Today, as much as when it was established with U.S. leadership more than 50 years ago,
the IMF acts to promote out economic values and interests. The IMF helped Poland recover
from the collapse of communism and become one of the fastest growing economies of Europe and
brought Russia back from the brink if hyperinflation. In Argentina, the IMF supported
Argentina's economic transfonnation from a country characterized by anemic growth and
hyperinflation to one that enjoys strong growth (8% in 1997), near zero inflation, declining fiscal
deficits, and a more private-sector oriented economy. And in Uganda, it has helped promote ten
years of successful economic reforms which have generated average annual growth rates, in real
terms, of over six percent a year:
By imposing conditions, the IMF supports the right policies. By injecting short-term
finance it prevents further currency depreciation -- and supports the return oflong-term growth. It
promotes changes that are in our long-term interest: such as making these economies more open
to foreign trade and reducing domestic subsidies. And it provides us maximum leverage: each
dollar we contribute levers four to five from the rest of the world. Even with these new funds, the
IMF's resources would still represent well under half a percent of global output, less than half of
what they were 15 years ago (1983). In relation to private capital flows going to developing
countries they are one-twentieth as large as they were 15 years ago.
I thought that itmay be helpful for me to say a few words about the financing structure of
the Th1F. In some ways, the IMF operates like a credit union. We extend a credit line -- for most
of our quota subscription and for our proposed NAB commitment -- which the IMF can draw on.
Any drawing by the IMF gives us a claim -- not unlike a deposit -- in the lMF, which is of equal
value, pays interest, is supported by over $30 billion in gold, and which ~e can withdraw
essentially on demand if necessary. For these reasons, U.s. participation in the Th1F is treated as
an exchange of financial assets. us. transfers to the IMF are not scored as budget outlays, and
do not come at the expense of domestic programs.
A number of concerns have been raised about our continued support of the IMF. Let me
take a little time to address two of these.
Some have expressed the concern that IMF stabilization programs in Asia have been
excessively contractionary and focused too little on the need to restore growth and provide for
rising individual incomes and opportunities in these countries.
The hardships that have come with the "slowdown" in growth in Asia stem mainly from
domestic policy mismanagement and the ensuing loss of market confidence, not from the
involvement of the IMF. The IMF has offered finance and, in Korea, Thailand and the
Phillippines, has triggered a restoration of confidence that is already lessening the burden of
adjustment. The primary focus of these programs is structural -- on the promotion of policies that
will promote growth by allowing markets to operate and market forces to operate.
7
Macroeconomic programs must always weigh what is needed to stop a free-falling
currency, and what can be done to maintain production. As we go forward the United States will
watching closely to ensure the right balance is being struck as conditions change and confidence is
improved. But be clear: these programs are designed with the objective of quickly restoring
stability, which is the surest route to a restoration of growth.
Another concern is that the international financial institutions work to ensure that the
impact of adjustment on the poor is cushioned. This is being addresses in several respects:
•
in the Indonesian and Thai programs, spending on health, education and social programs
have been expressly protected from any fiscal consolidation, and where possible, efforts to
target spending on the poorest segments of society have been intensified.
•
In Korea, the program commits the government to strengthening the labor insurance
system, and the promotion of active labor market policies to lessen the shock to
employment due to the crisis;
•
in designing programs to supplement the IMF program, both the World Bank and the
Asian Development Bank have been acutely aware of the need to focus on the impact of
policy on the most vulnerable, both in the new lending provided to these countries and
through the restructuring of existing lending programs to promote urban and rural
employment and basic health services, New World Bank lending to Thailand and
Indonesia, for example, foresees upwards of $600 million in new loans for improving the
social safety net in each of these countries.
IV. Concluding Remarks
Mr. Chairman, the globalization of financial markets has been a breathtaking development.
Huge amounts of capital flow quickly among closely integrated financial systems. Technological
change has made possible flows of information and finance on a vast scale. Globalization has
thrust the private sector into a predominant role in financing development around the world.
Private capital has financed great advances in productivity and has raised living standards, and
created new markets for U.S. goods. Globalization has created great new opportunities for
America.
At the same time, globalization brings new risks The Asian crisis will likely be viewed as
the first crisis of the new global economy. To date, the impact of the crisis on our country is
moderate, and manageable. We are in a strong position to withstand the effects of this crisis: our
economic performance is the best in a generation and unrivaled among the major industrialized
economies. But, if instability were to spread or intensify, the potential risks to American jobs,
American financial markets and our national security could be much greater. Given the risks
involved, we have a responsibility to protect America's core economic and security interests, by
working to restore stability with the most effective mechanisms available to us.
8
To fail to fund the IMF adequately and promptly would risk our not being able to respond
with adequate financial support in the event that this crisis were to spread. And it could risk a
further shock to the confidence of international investors at a time of considerable market
fragility. These are not risks we should take.
Mr. Chainnan global markets of the twenty first century present both opportunities and
risks for the American people. Making the most of those opportunities, while minimizing the
risks, will be a central issue for this Committee, and the nation, in the years ahead. U.S. leadership
in these matters will be indispensable for fostering growth and stability around the world -- and
protecting and promoting the interests of the American people. Thank you very much.
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9
D EPA R T 1\1 E N T
0 F
THE
T REA SUR Y
ornCE OF PUBUC AFTAIRS • ISOO PENNSYLVANIA AVENUE, N.W.• WASHINGTON. D.C. •
.
zono. (202) 622·2960
EMBARGOED UNTIL 9:30 A.M. EST
Text as Prepared for Delivery
February 24, 1998
TREASURY ASSISTANT SECRETARY TIMOTHY F. GEITHNER
JOINT ECONOMIC CO!vfMITTEE
Mr. Chairman, thank you for giving me the opportunity today to discuss the International
Monetary Fund, its role in the world economy and financial system, and why we believe it is
important to act now to strengthen its financial resources.
New Risks in the Global Financial System
This hearing today takes place in the context of two developments of great importance to
the United States and to this debate over funding for the International Monetary Fund (lMF).
The first is the emergence of a global financial market that has brought significant benefits
to the world economy, but also new risks. National financial systems are now more closely
integrated than ever before. Capital now flows across markets on an extraordinarily large scale.
And technological innovations in telecommunications and finance make it possible for finance to
flow much more quickly in response to events
These developments have made it possible for private capital to finance an extraordinary
improvement in living standards across many countries But they also have increased the scale,
force, and speed with which financial crises can occur
These risks are illustrated clearly in the financial crisis in Asia. and this is the second
development which makes these hearings on the IMF so important The crisis that began this
summer in Thailand and then spread throughout Southeast Asia and to Korea presents serious
potential risks to American interests
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Our economic interests are at stake because large and sustained depreciations in the
currencies of our trading partners and deep recessions in their economies will reduce the
competitiveness of American companies, reduce demand for American exports, reduce the
earnings of American firms, and reduce the value of pension funds across the country, all of
which, of course, will affect American families and American workers.
Even if the crisis is contained to its current dimensions. the impact on the U.S. economy
could be significant. While it is too early to offer a precise assessment of the overall impact of the
Asian crisis, preliminary assessments by the OEeD and a number of private forecasts have
estimated that the impact on the U.S. economy may be around halfa percentage point (0.5%) of
U.S. GDP. If the crisis is not contained, the impact could be significantly greater.
Our security interests are at stake because economic instability, when it is acute and
sustained, can threaten political stability. This risk is real, not just in those places where we now
have American troops on the ground. It can be significant in any country where the basic
institutions of the state are untested in crisis or where there does not exist an established panern
for stable governmental successions.
u.s. Policy
In response to these developments and in an effort to limit the risks they present, we have
led a major international response to help reestablish financial stability in Asia and to help
strengthen the architecture of the international financial system. The International Monetary Fund
is at the center of these efforts, and it will remain critical to any effective U.S. response to protect
our interests in this crisis, as well as future international financial crises.
Our strategy to protect U.S. interests in the immediate crisis has the following major
elements:
•
First, we have worked to encourage the countries in crisis to put in place strong programs
of reform, and supported these programs with temporary financial assistance from the
international financial institutions
Second, we have encouraged countries in the region and uutside the region to take
preemptive policy actions to reduce their vulnerability to contagion from the crisis.
Third, we have worked to encourage Japan and the other major industrial countries to
pursue policies to strengthen groVlth and open their markets, and thereby contribute to
recovery in Asia.
And. finally, we have taken steps. led by the U.S Eximbank. to protect U.S. exports to
the region, by mobilizing trade finance for the countries in crisis.
2
Restoring Financial Stability in Asia
The centerpiece of our approach has been to support strong programs of reform, backed
by temporruy, highly conditioned financial assistance, led by the IMF, as a bridge to recovery.
Policy and Reform
These programs of economic reform are designed to address the specific causes of the
crisis in each country and to create the conditions necessary for stronger and more stable
exchange rates and for a quick return to rising living standards.
To accomplish this, the programs focus on the types of reforms necessary to restore
confidence, so that the people of these countries are willing to keep their savings in the currency
of the country concerned and so that new flows of private capital will be available to finance
recovery.
Although the specifics have necessarily varied across countries, the principal elements of
each program include:
Measures to strengthen the financial systems by closing weaker institutions, reinforcing
stronger ones, and improving the supervisory system.
•
Structural reforms to make the economy more market-oriented, better able to allocate
capital efficiently, and less vulnerable to corruption.
•
The liberalization of restrictions on trade and investment.
•
Improved transparency and disclosure in the financial accounts of the government and
central bank, and in the balance sheets of private banks and corporations.
•
Measures to reduce the impact on the poorest segments of society by protecting health
and other social expenditures from budget cuts
A supportive framework of monetary policies to help stabilize the exchange rate and
contain the inflationary effects of depreciation, and fiscal policies to promote the necessary
reduction in external deficits and to finance the costs of financial sector restructuring.
These programs are essentially programs of growth-oriented structural reforms They are
not austerity programs. Despite popular perception, the degree of fiscal and monetary tightening
in these programs in Asia has been modest by comparison with the stabilization programs the IMF
has employed in different circumstances
3
It may be unavoidable that the reform programs and their architects get associated with
and blamed for the economic distress that comes with financial crisis. But it is the crisis -- not the
programs -- that induces the distress. And it is the programs that help cushion the decline in
growth and living standards and help create the conditions necessary for recovery. Countries that
have tried a different path of delayed adjustment and less comprehensive reform have normally
found that by doing so they simply lengthened the crisis and delayed recovery.
The other common element in these programs is that they can be adjusted in response to
changing circumstances. When growth slows more sharply than expected, for example, the IMF
can move, as it has in each of the cases in Asia, to modify the fiscal targets in the programs so as
not to impose excessive contraction on weakened economies. And when problems in the banking
system become more acute than originally estimated, the Th1F can act, as it has in Thailand and
Indonesia., to strengthen the programs in response.
Temporary Financial Assistance
In support of these programs of reform, we have mobilized temporary financial support,
led by the IMF and other international financial institutions, to rebuild reserves and help provide
confidence.
The U.S. has also joined with other countries in being prepared to provide contingent
supplemental resources that could be made available to augment these programs. We have a
moderate share of these supplemental lines, and have not yet disbursed any funds.
This financial assistance by the international community is an essential part of the solution
to these crises and a necessary complement to the programs of reform. It is necessary to provide
confidence, to induce stronger reform programs, to provide some breathing space for the reforms
to take hold, to supplement the countries' official reserves, and to help ensure that these
governments can meet their international obligations and can stand behind their financial systems.
There is no amount of official money available in the world that could substitute for or
compensate for a lack of commitment to reform in these countries But even the most virtuous,
most credible, most committed government could not successfully confront problems of this scale
without temporary financial assistance. It's useful to recall that the United States drew a
substantial amount of our reserve deposits from the IMF in 1978 -- largely financed through the
General Arrangements to Borrow (GAB) -- when we faced a major decline in the value of the
dollar.
The Th1F reform programs are structured carefully to help ensure it works, to help limit
the moral hazard risks that are inherent in any provision of official finance, and to maximize
burden sharing. Several of these features are wonh highlighting:
4
•
Disbursements are tied to strict compliance with very detailed, concrete, time-specified
policy commitments. They are tranched or phased to help induce both early up-front
actions and sustained follow-through. The money does not flow unless and until the
policy commitments are carried out.
•
The assistance is in the form of temporary loans, not grants, at market-related interest
rates. In fact, after the establishment of a new IMF facility at our initiative in December,
much of the assistance for Korea is being made available for short maturities at a
substantial premium to minimize use and to maximize the incentive to repay early.
•
The assistance comes with strict limitations on the use of the money, with restrictions on
support to private corporations, and with limits and conditions on liquidity suppon to
banks.
•
The assistance is led by the international financial institutions -- the IMF, the World Bank,
and the Asian Development Bank -- which ensure that conditionality is maintained and
that we leverage substantial contributions from the international community for any U. S.
participation (direct or indirect).
Not providing this assistance, however appealing that might seem as an option, would risk
more acute instability, with a greater and more protracted loss of economic output, deeper, more
sustained depreciations in the currencies of our trading partners, and greater contagion, with all
the attendant risks to the United States.
The Critical Role of the International Monetary Fund
The IMF is absolutely central to this effon. If it did not exist, we would have to invent it.
We have a huge stake in making sure it has sufficient resources to respond to any intensification
or spread of the current crisis and for any future crises
Without the IMF, there would be no multilateral mechanism for providing apolitical advice
to shape strong reform programs
\Vithout the IMF, at times of crisis. there would be greater depreciations in the currencies
of our trading panners and sharper adverse Impacts on the US and world economies.
•
Without the lMF, at times of crisis. there would be greater pressure on the United States
to act unilaterally with taxpayer resources to protect our interests without the global
leverage the IMF provides
Today, as much as when it was established with U.S leadership more than 50 years ago,
the IMF acts as a forward defense of American interests It has played a critical role in supporting
reform and growth in the transition economies. bringing Russia back from the brink of
5
hyperinflation, and Poland from near collapse to one of the fastest growing economies of Europe.
In Uganda it has helped underwrite ten years of remarkably successful economic reforms which
have generated average annual growth rates, in real terms, of over six percent a year. And in
Argentina, the IMF has supported -- including during the 1995 "tequila crisis" - Argentina's deep
economic transformation from a country characterized by anemic growth and hyperflation to one
that enjoys strong growth (8% in 1997), near zero inflation, declining fiscal deficits, and a more
private-sector oriented economy.
The IMF has been successful in so many cases because it promotes the core American
economic values of sound money, respect for market forces, and free trade.
I thought that it may be helpful for me to say a few words about the financing structure of
the IMF. In some ways, the IMF operates like a credit union. We extend a credit line -- for most
of our quota subscription and for our GAB or NAB commitment -- which the IMF can draw on.
Any drawing by the IMF gives us a ~ort of deposit in the IMF, which is of equal value, pays
interest, is supported by over $30 billion in gold, and which we can withdraw essentially on
demand if necessary. For these reasons, U.S. participation in the IMF is treated as an exchange of
financial assets. U.S. transfers to the IMF are not scored as budget outlays, and do not come at
the expense of domestic programs.
Chainnan Greenspan and Secretary Rubin have testified several times over the past few
months about the risks in the current crisis and the importance of action by the Congress to
strengthen the IMF's resources.
As you know, the President's request has two components:
The first component is to authorize our participation in a facility to provide expanded
emergency resources to the IMF called the New Arrangements to Borrow. Proposed after
the Mexican financial crisis and modeled on the General Arrangements to Borrow (GAB)
established by the G-1 0 more than three decades ago. these arrangements would make
available an additional $23 billion from some 25 countries to supplement the lMF's normal
lending resources in the event of a serious threat to the stability of the international
financial system. The GAB was last increased in J983 in response to a request from
President Reagan, and also in conjunction with a normal quota increase. In the ensuing 15
years, the growth in the world economy. trade. and. most importantly, global capital flows
have left these arrangements too small to deal effectively with the challenges of today' s
capital markets -- for instance, I MF resources as a percentage of private capital flows to
developing countries are now one~twentieth as large as they were 15 years ago.
The second component is to authorize our participation in a normal periodic increase in
IMF quotas, which are the normal lending resources of the institution. These resources
have been increased on average every seven years in an attempt to keep up with the
growth of the world economy and the global financial system. This latest proposal, which
6
would increase the overall quotas of the lMF by about 45 percent and provide roughly
$65 billion in additional loanable resources, was negotiated last year, in consultation with
the relevant committees in the Congress.
The IMF's recent stabilization programs for Asian countries have depleted its resources to
levels approaching historical lows. Although the lMF has $45 billion in uncommitted resources,
only $10-15 billion are now available for lending, because the IMF needs to reserve the remainder
in cash balances to accommodate possible unconditional withdrawals by members. This is neither
a sufficient cushion of resources to enable the IMF to perform its basic mission nor is it sufficient
to ensure the IMF could respond effectively if the Asian crisis deepens or spreads to other
markets. We believe it is extremely important that the Congress move quickly to approve both
the NAB and quota requests, so that the IMF has sufficient resources to help protect U.S.
interests in the event of unforeseeable but potentially very damaging financial emergencies over
the near term.
Strengthening the Architecture of the International Financial System
At the same time that we have worked to confront the immediate crisis in Asia, we have
worked to build consensus on reforms to help strengthen the architecture of the international
financial system. We have a strong interest in trying to identify changes to the system that could
help reduce the risk of, and make the system more resilient in the event of, future financial crises
of this magnitude.
President Clinton began this effort four years ago at the G-7 Summit in Naples. At the
Summit that followed in Halifax in 1995, we launched a major international effort to help make
the international financial architecture. in Secretary Rubin's words, "as modem as the markets."
This initiative produced an international program to strengthen transparency and
disclosure, the development of core principles for banking supervision in emerging markets. the
establishment of an "Emergency Financing Mechanism" to accelerate the 1MF's capacity to
respond in crisis, and an expanded emergency facility for the IMF, the New Arrangements to
Borrow.
Building on these steps, we have supponed a number of additional reforms over the past
few months. The most significant of these are the following
We launched a new effort to strengthen transparency and disclosure standards to help
reinforce market discipline, by improving the quality of information available to the
markets on the liabilities of central banks, the balance sheets of the banking system, and
the external debt of the government and private institutions
We have won support for a number of steps to improve transparency in the operations of
the IMF, including the release of Letters of Intent with respect to each of the three large
7
Asian programs and summaries of the IMF annual reviews of countries, and new effons to
use independent, external evaluators to gauge the effectiveness of IMF programs in a
number of areas.
•
We have changed the policies and operations of the IMF and the World Bank to make it
possible for them, when necessary, to mobilize the types oflarge-scale, front-loaded, and
more innovative programs of temporary financial assistance more appropriate to the
challenges of to day's capital markets. Most imponant among these changes is the
establishment of a new facility in the Th1F, the Supplemental Reserve Facility, which will
result in much of the resources provided in exceptional circumstances being' extended at
shorter maturities and at a substantial premium over the IMF's normal lending rates.
We established a new forum for mutual surveillance an9 cooperation in Asia, to help deal
with risks that might precipitate future crises.
•
And we have encouraged greater panicipation by private financial institutions in the
resolution of these crises, with a global effort by the major banks to refinance their shontenn claims on Korean financial institutions.
We are now in the process of a more comprehensive review of changes to the international
financial system that will help ensure we have effective institutions to manage the risks that
accompany all the benefits of the global capital markets, and help deal with a world in which we
are all more directly affected by the failures and successes of other economies and other
governments. But we do not yet have solid and convincing means to induce sovereign states to
take actions that would prevent a crisis, or to induce investors to make judgements about risk and
return that overcome the more powerful forces of fear and self interest that drive markets.
These challenges will be the subject of a meeting of finance ministers and central bank
governors from key countries around the world that we will convene later this year as a first step
to try to build a global consensus on reforms to the architecture of the international financial
system. We held a preparatory meeting of senior officials from the finance ministries and central
banks of 22 countries in Washington last week. And the G-7 Finance Ministers and Central Bank
Governors last weekend endorsed a framework of new initiatives in several areas
This will be a complicated and difficult process, with lots of interesting, compelling
solutions to be explored. The temptation will be to try to stop the clock somehow and suspend
the reality of the global financial market while we try to figure out the best way forward, but that
is not a tenable approach given the risks we now face
Conclusion
The United States is central to this effon to contain and resolve the Asian crisis and to
strengthen the architecture of the international financial system
8
Our role is critical because the Th1F cannot strengthen its financial position without us. If
we do not act, the NAB wil1 not come into force, and the quota increase will not go into effect.
Our role is important because no other nation has the capacity to lead the global effort necessary
to deal with a crisis of this magnitude. And our role is fundamental because our perceived
willingness and capacity to support an effective international response is critical to confidence at
what is a rather delicate moment for the global financial system.
We cannot guarantee that, by acting, we can tum things around and successfully limit any
fallout for the U.S. economy and our strategic interests Most of the solutions to these problems
have to come from the countries themselves. But we have a responsibility to do what we can to
protect our interests in this crisis. And strengthening the IMF is essential if we are to have the
tools necessary to protect those interests.
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DEPART~lENT
OF
THE
TREASURY
NEWS
OFFICE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASlHNGTON, D.C. - 20220 - (202) 622-2960
EMBARGOED UNTIL 2 P.M. EST
Text as Prepared for Delivery
February 24, 1998
TREASURY DEPUTY SECRETARY LAWRENCE H. SUMMERS
SENATE BUDGET COMMITTEE TASK FORCE ON SOCIAL SECURITY
Mr. Chairman, my colleagues and I appreciate the opportunity to be with you here today
to discuss the most successful government program in American history.
We meet at an auspicious time. For more than a generation, American politics has been
weighed down by an inability to live within our means. Budgetary deficits have been a nagging
obstacle to good policies. They have been an excuse for letting long-term challenges go
unaddressed. But now, that weight has been lifted. Five years of sound finance and a remarkably
strong economy have shrunk the deficit - to the point, this year, of statistical insignificance.
We may be on the brink of a new era of surplus.
Many things will change in this new era. Many things we considered impossible in the
old era of deficits will now be achievable. Many tasks we knew we ought to accomplish will
become tasks that we can - and must - accomplish. And as you know, at the top of the
Administration's agenda is to Save Social Security First.
Let me spend my time today painting the main features of this new era we are entering:
The remarkable state of the economy, and the historic challenge and responsibility to increase
national savings and to protect Social Security as our society ages. What the end result for Social
Security should be will be a matter of considerable controversy and debate. But it will be
worthwhile noting the critical issues that will need to be addressed - and some of the
considerations that will frame that vigorous debate.
I. Preparing the Nation for the Demographic Challenge Ahead
To begin, let us consider the remarkable state of the nation's economy:
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•
unemployment, at 4.7 percent, and inflation, at 1.7 percent last year, are among the lowest
in a generation. And last year our economy posted its fastest growth in a decade.
•
we are investing more in American companies and their workers. Business equipment
investment is increasing 11 percent per year, and - at 9 percent of GOP - accounts for
a record share of our economy's output.
•
real wages and household incomes have at last started to catch up the ground that had
been lost since the 1970s. Indeed, real median family income is up more than $2,000
since 1993.
•
and, as Director Raines has reminded us, the budget deficit is no more. President Clinton
has submitted the first balanced budget in 30 years. The magnitude of this
accomplishment would be difficult to overstate. Consider that, as of five years ago, the
Office of Management and Budget projected that the deficit for 1998 would come to
$388 billion. Today, it is expected to be negligible. As a result of the deficit reductions
we have seen this decade, more than $1 trillion in capital that would otherwise have been
invested in the sterile asset of government paper has instead been invested in America's
future: in our productive businesses, in our workers, in our cities, and in our homes.
These good economic times could not have come at a better time for our nation. Because
a central fact confronting everyone who would think seriously about the future of our economy is
the coming aging of our society. In 1940, soon after the first Social Security Act was passed, the
average American aged 65 could expect to live another 12.5 years. Today, the comparable figure
is 17.5 years. And as the President has said, a good many children born this year will live to see
the 22nd century.
These improvements in life expectancy, and a decline in birth rates, have put us on a path
of rapid declines in the number of American workers for every beneficiary. In 1960 the ratio was
5.1 to 1. Today it is 3.3 to 1. In a little more than 30 years' time it will be just 2 to 1, and falling.
These prospective demographic developments pose twin challenges. For individuals,
increasing life expectancy implies that greater attention must be paid to laying the foundation for
a financially secure retirement. For the economy as a whole, the burden imposed by the increase
in the number of beneficiaries per worker, together with the increasing burden likely to be
imposed by the health care system, implies that even greater effort must be exerted toward
improving the productivity of the American workforce.
The key to answering both challenges - at both the individual and national levels - will
be to increase saving. Obviously, saving is the means by which individuals make provision for
later consumption. So for individuals, the message is simple: If you are going to live longer, on
average, you must save more in order to enjoy the same standard of living during your retirement.
For the economy as a whole, increased saving facilitates greater investment. In tum, an increase
2
in investment results in a more productive workforce and an economy with greater overall
productive capacity. Increasing the productive capacity of the economy is the key to easing the
burden on future generations of providing for tomorrow's retirees.
One piece of good news is that national saving has increased in recent years - from 3.1
percent of gross domestic product in 1992 to 6.5 percent in 1997. This is an important step in the
right direction. However, it is worth noting that this improvement is entirely accounted for by
increased government saving through the reduction in the federal deficit. In contrast, private
saving has actually declined relative to the size of the economy, even though important pieces of
legislation have been enacted during the Clinton Administration to expand and strengthen private
pensions and individual savings in the future, and this year's budget includes several additional
proposals.
We need to save more, and if history and the efforts of other countries provide any guide,
we can save more. For example, in the 1950s and 1960s our national saving rate averaged 11
percent. And today, of the 26 largest industrialized countries, the United States presently ranks
19th in terms of national saving rates.
How do we increase national savings? There are two methods available: the government
can save more - or dissave less - and the private sector can save more.
The budgetary surpluses now visible on the horizon could playa critical role in helping
the country prepare for the challenge of aging, by providing a significant down payment on the
higher savings the nation needs to equip tomorrow's workers. For example, the projected
surpluses could add up to half a percentage point per year to the national saving rate even over
the next few years, when the surpluses still have not reached their projected peak.
But the surpluses could also do more than simply increase national savings; they could
also be used in a variety of ways to strengthen Social Security's solvency for the 21 st century.
For example, as a rough approximation - and, clearly, these are controversial issues, and I am
not making any endorsements here - but by way of illustration:
•
every $100 billion of those surpluses that is transferred in Treasury bonds to the Trust
Fund could delay the exhaustion of the Fund by around a year - and reduce the actuarial
deficit by around 5 percent.
•
alternatively, some will suggest we invest the money in equities, which would provide an
even higher return, but would be enormously controversial and clearly bring greater risks
and uncertainties.
Although there will no doubt be many disagreements as we move forward through this
process, I am sure that there will be unanimous sentiment in favor of ensuring that Social
Security works as well for future generations as it has for past generations.
3
If the surpluses are dissipated before Social Security reform is addressed, however, they
will not achieve either critical objective - increasing national savings or strengthening Social
Security - and the country will be that much less well prepared for the future. Future
generations are depending on us to make the right choice. And in the State of the Union Message
President Clinton made our choice clear: in deciding how the surpluses will be used we must
save Social Security first.
II. Reforming Social Security
To use the budget surpluses to increase national savings and strengthen Social Security,
we will be considering a great many reform options in the months ahead. To evaluate these
options, there are a number of basic questions that will need to be addressed:
•
How to find the best way to ensure Social Security's financial health, so that people's
benefits are there for them, and there for their children. We need to be sure they will be
able to count on Social Security as a public trust as their parents and grandparents did.
•
How to find the best way to ensure public, cost-effective insurance for all. More than 99
cents are paid in benefits by Social Security for every dollar that is paid in by workers and
their employers. One recent study estimates that during the pay-out phase of privatelyprovided annuities, the loss to overhead alone averages more than 8 cents on the dollar. In
another study, the American Council on Life Insurance found that on a per-dollar basis,
private life insurers' expenses came to 11 percent of annual income, or 16 percent of
contributions, of which nearly half went for selling costs or agents' commissions.
•
How to find the best way to ensure that Social Security continues to provide the greatest
retirement benefits to those who need them the most. Currently, higher real rate of returns
are earned by lower-wage workers. Today, the elderly poverty rate stands at 10.8 percent.
Without Social Security benefits, it would be about 50 percent.
•
How to ensure that Social Security provides an adequate rate of return for workers on
their contributions. Social Security must provide benefits during retirement that are
commensurate with the payroll taxes they paid as workers.
•
How to ensure that Social Security continues to provide security for every working
American in the form of survivors and disability insurance protection. Fully one-third of
all Social Security benefits paid each year go to nonretirees.
In answering these questions, it also will be important to keep in mind that the Social
Security system is not advance funded. To a significant extent, the benefits of current retirees are
paid for with payroll contributions of current workers. If we were to move to an advance funded
system, in which contributions of current workers were fully saved in order to be available for
them to use when they reached retirement age, then we would have to figure out some new way
4
to pay for the Social Security benefits paid to current retirees. This "transition problem" must be
considered when evaluating any proposals for comprehensive Social Security reform.
Viewed in the framework of these questions, there are many options that have already
been proposed by those outside the Administration for reforming Social Security. These options
lead to many issues that will be debated, including:
1.
Should we transfer unified budget surpluses to the Social Security Trust Fund?
2.
Should we invest some of the Social Security Trust Fund's assets in private-sector
securities?
3.
Should we create a system of individual investment accounts, and fund them either by
redirecting some ofthe payroll tax, by using some of the budget surpluses, or through
some other funding mechanism?
Needless to say, each of these issues - and the myriad others like them - has many
complexities. Each of them must be viewed through the prism of the questions I described a few
moments ago. That will be the challenge of the national discussion that the President has set in
motion for this year.
III. Concluding Remarks
Mr. Chairman, the debate we will have about the reform of Social Security will not be
about whether to protect its historic achievements. It will be about finding how best to protect
them.
By ensuring that the surplus is reserved until Social Security is safe, we can help ensure
that the Social Security system of the 21 st century continues to protect generations of Americans
- and promote both our economy and our values. And we can help ensure that it continues to
promote our hard-earned fiscal discipline.
Once we have addressed Social Security reform, we can explore other possible ideas for
using the fruits of this new surplus era. What matters is that the surpluses should not be wasted
- but used to prepare the country for the next century. I look forward to working with you, Mr.
Chairman, with other members of this committee and with others in Congress as we work to take
on this critical challenge.
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DEPARTMENT
OF
THE
TREASURY
NEWS
OFFICE OFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
EMBARGOED UNTIL 2 P.M. EST
Text as Prepared for Delivery
February 24, 1998
TREASURY ASSISTANT SECRETARY FOR TAX POLICY DONALD C. LUBICK
OVERSIGHT SUBCOMMITTEE
HOUSE COMMITTEE ON WAYS AND MEANS
Chainnan 10hnson and Members of the Subcommittee:
I am pleased to appear before you today in response to your request to discuss the
Department of the Treasury's recently-released Report to the Congress on Joint Liability and
Innocent Spouse Issues ("Report"). As we indicated in the Report and in the President's budget
proposals, we share with many in Congress the concern that the existing statutory framework on
these issues sometimes works imperfectly for taxpayers, particularly those who are divorced or
separated from a fonner spouse. I welcome the opportunity to discuss these provisions and
various possible solutions with you today.
As Secretary Rubin has stated, "it is imperative that we protect taxpayers whose spouses
violate the tax laws without their knowledge." Treasury and the Internal Revenue Service ("IRS")
are taking steps to achieve this goal, and we are also committed to working with Congress to find
a solution.
Let me first remind the Subcommittee of the genesis of our Report and explain the
procedure we followed. In the years following the enactment of the first Omnibus Taxpayer Bill
of Rights in 1988 and leading up to the enactment of the Taxpayer Bill of Rights 2 ("TBOR 2") in
1996, Congress heard complaints from many taxpayers and their representatives about the tax
rules applicable to married taxpayers who file joint returns, particularly those who later divorce or
separate. Concern has focused especially on the Internal Revenue Code's standard of "joint and
several liability" for joint filers and the so-called "innocent spouse" provisions that provide relief
from joint and several liability in certain situations. Rather than abruptly changing these rules,
however, Congress in TBOR 2 prudently directed Treasury and the IRS, as well as the General
Accounting Office, to conduct studies of these issues, and in particular to analyze four specific
items:
RR-2245
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(1)
(2)
(3)
(4)
The effects of changing the liability for tax on a joint return from being joint and
several to being "proportionate" to the tax attributable to each spouse;
The effects of providing that, if a divorce decree allocates liability for tax on a joint
return, the IRS may collect such liability only in accordance with the decree;
Whether the innocent spouse provisions of the Internal Revenue Code provide
meaningful relief in all cases where such relief is appropriate; and
The effect of providing that community income, which (in accordance with the
rules contained in I.R.C. § 879(a» may currently be treated as the income of one
spouse, is exempt from a levy for failure to pay any tax by the other spouse for a
taxable year ending before their marriage.
The legislative history accompanying TSOR 2 further directed us to examine the effects of
legislatively reversing a 1930 Supreme Court case, Poe v. Seaborn, for income tax purposes in
community property states, and finally to consider "the tax policy implications, the equity
implications, and operational changes which would face the IRS" if any of these rules were
changed by statute.
As part of the Administration's own initiatives to enhance taxpayer's rights, Treasury and
the IRS had begun studying these issues even before TSOR 2 was finally enacted. In 1996, we
requested public input on the topics identified by Congress, and we received a great number of
thoughtful comments and reform proposals. These generated extensive discussions, both
internally among members of our working group and publicly with interested tax practitioner
groups, such as the American Bar Association ("ABA") and the American Institute of Certified
Public Accountants ("AICPA").
As you know, Madam Chairman, the Report of our study was delivered to Congress
nearly a full year late. I sincerely apologize for that tardiness, but I want to assure you and the
other members of the Subcommittee that the delay was caused substantially by our desire to
analyze all of these issues thoroughly and in as complete and even-handed a manner as we could.
We hope you will agree with us that eventually we did evaluate all of the proposals fully, fairly,
and in considerable depth, and that ultimately what we provided in our Report meets the
Congress's request for an inquiry into these problems.
Let me tum now to the results of our study. As you can see, the organization of our
Report varies slightly from the enumeration of questions in the TBOR 2 statute and legislative
history. There are several reasons for this. First, our research convinced us that it is important to
consider the narrow topics Congress asked us to analyze within a much broader context. Joint
return filing, joint and several liability, the interplay of the Federal income tax law with State
common law or community property law, and the innocent spouse relief provisions have evolved
over many decades. Reviewing this history convinced us that the current rules on these issues are
the end result of a series of considered tax policy decisions by Congress. They are also integrally
related to a number of more fundamental tax considerations, such as the existence of different
filing statuses for individual income taxpayers and the many factors that go into determining the
amount of tax, including marginal rates, phase-outs, other deduction and credit limitations, and so
forth. Finally, the IRS has in many respects structured its administration of the income tax system
around the current joint filing and liability rules, and significant changes to those rules would have
major effects on return processing, account servicing, examination and collection, and dispute
resolution. It is important to recall that the IRS receives over 51 million returns from married
taxpayers each year, and that according to the General Accounting Office the universe of potential
innocent spouse cases may be as few as 35,000 annually.!' In short, reform proposals cannot and
should not be considered in isolation.
Our study also persuaded us that the current system has many basic features that are
worth preserving. These include, in particular, the joint filing option for married couples, the
principle of joint and several liability for the tax due in most joint filing situations, and the
allowance for equitable relief, currently in the form of the innocent spouse provisions, as the
exception rather than the rule. Let me discuss each of these for a moment.
First, there are sound policy reasons for permitting married couples to file joint income tax
returns and thereby treating them as a single economic unit for tax purposes. This permits
spouses to offset each other's income and losses with great ease and simplicity, provides that
couples in similar economic situations pay the same amount of tax, and permits married taxpayers
in common law property jurisdictions the same income-splitting effect that is available to
taxpayers by operation of law in community property jurisdictions. There are also practical
reasons for joint filing, in particular to simplify filing obligations for the roughly 49 million married
couples who do file jointly, and to reduce by up to half the resources that the IRS must devote to
handling the annual income tax returns of married individuals.
Second, the basic principle that taxpayers who file joint income tax returns are jointly and
severally liable for the correct amount of tax due for the period covered by the return is
appropriate in the vast majority of cases. By signing and filing a joint return, each spouse
voluntarily undertakes the responsibility for the correct total joint liability, just as other taxpayers
undertake responsibility for their correct tax liability upon the filing of a return. Taxpayers who
wish to avoid the rule of joint and several liability, and in effect to obtain proportional liability,
already may elect to file separate returns using married filing separate status, although we
recognize that there are frequently drawbacks to doing so. Undeniably, however, taxpayers
should be made more fully aware of their filing status options and the legal consequences of each
filing status.
We acknowledge that joint and several liability can lead to inequitable results in some
factual situations, for instance where one spouse withholds information or intentionally deceives
the other. The innocent spouse provisions are intended to rectify such situations, and they do so
in many cases but, we realize, may also work imperfectly in some other cases. Eventually we
concluded, however, that some of the reform proposals, such as shifting to a mandatory separate
return system or a proportionate liability system at the "front-end" (return filing) stage of the tax
process, would have significant drawbacks affecting millions of taxpayers, in an effort to address
these relatively infrequent situations. Such a dramatic change would impose large compliance and
General Accounting Office, Information on the Joint and Several liability Standard, No.
GAO/GGD-97-34 (March, 1997) at 4.
11
paperwork burdens on taxpayers and the IRS, yet they would provide very little compensating
benefits to the overall.operation of the tax system. In certain egregious situations, moreover, they
would still require some kind of equitable relief provisions, like the current innocent spouse rules.
More limited "back-end" proposals, which would apply only in the event of a controversy
over the amount or collection of a tax liability, do have some distinct advantages when compared
to current law, but they also suffer from potentially serious defects of their own. We discuss two
of these proposals -- the ABA's proportionate liability recommendation and the AICPA's
allocated liability concept -- at some length in our Report, because they were the two proposals
that were presented to us in the most complete and thorough form. On the positive side, backend reform proposals would as a general rule not be nearly as disruptive to the processing of
income tax returns as front-end approaches, and they would potentially limit the ultimate tax
exposure of a spouse for whom the current standard of joint and several liability for the full joint
tax amount may be perceived as unfair. Each proposal also bears distinct disadvantages,
however. There are many technical or "mechanical" problems with each proposal, which could
create significant difficulties in tax administration and collection for taxpayers and the IRS. In
addition, many of the problems that individuals experience with the current innocent spouse
provisions relate to the individuals' inability to prove that they qualifY for the relief, and these
proposals, in which taxpayers would bear the burden of demonstrating the proper treatment of a
challenged item, would not resolve such difficulties. Moreover, some kinds of equitable relief
(like the current innocent spouse rules) still would be needed in certain situations in which the
liability-limiting rules would leave results that may still be considered unfair. Thus, while these
approaches possibly would reduce the number of cases in which innocent spouse relief is needed,
they would not eliminate it entirely.
Some other reform proposals that we considered would depart fairly dramatically from
appropriate and well-established tax policy and have serious defects that become readily apparent
upon close review. These include, for instance, the proposals to reverse Poe v. Seaborn or to
.limit the amount of community property that is subject to collection for federal tax debts. Both
proposals would create significant anomalies between community property and common law
jurisdictions, depart from traditional deference to State law regarding what constitutes property or
rights to property, and unilaterally impair collection of Federal taxes vis-a-vis other creditors who
would continue to follow and be bound by State property law.
We concluded in our study that the best option for reform in this area is to devise
strategies that will preserve the many advantages of the current system and yet will modifY the
system to afford innocent spouse relief in more cases where such relief is appropriate. Our plan
will affect taxpayer contacts with the IRS at all stages of the process, from initial filings through a
new ultimate remedy in the Tax Court.
Treasury and the IRS have already undertaken several administrative actions to improve
the operation of the innocent spouse provisions, and we are considering other changes in the
regulations, forms, and publications concerning joint and several liability and innocent spouse
issues. These include:
•
Expediting the issuance of a new form to assist taxpayers in preparing claims for relief
under the innocent spouse provisions. These forms will be processed in one central
location to ensure the technical expertise of the IRS examiner and consistent treatment for
all taxpayers.
•
Reviewing current training materials to ensure that they stress the responsibility of
employees to identify situations where the innocent spouse provisions might apply even if
the taxpayer does not know about the process. When appropriate, the IRS will provide
these taxpayer with the new form and assist them in preparing it.
•
Making telephone assistors, specially trained in the innocent spouse provisions, available
to answer questions from taxpayers received through IRS's toll free telephone system.
•
Developing special training courses on the innocent spouse provisions to be given to IRS
collection and examination personnel in both basic training as well as annual continuing
professional education and training.
•
Alerting couples who file joint income tax returns of the legal consequences of joint filing
in the instructions in their tax packages and revising other publications to make innocent
spouses more aware of the relief provisions available to them.
•
Reaching out at both the national and local levels to community organizations that serve
abused or battered spouses to identify those who might qualify for relief under the
innocent spouse provisions.
We have also recommended to Congress certain statutory changes to both the innocent
spouse rules themselves and the procedures in which they may be invoked. In particular, we
recommend legislation that would:
•
totally eliminate dollar thresholds that bar innocent spouse relief in some meritorious
cases;
•
liberalize the treatment of erroneous items of deduction and credit to treat them the same
way as income items in applying the innocent spouse rules;
•
extend the relief provisions applicable to taxpayers in community property states to make
them comparable to those applicable in non-community property states;
•
significantly expand taxpayers' procedural opportunities to claim substantive relief under
the innocent spouse provisions, by making access to Tax Court routinely available; and
•
prohibit collection of a joint liability from one spouse when the other spouse is contesting
the amount of liability in the Tax Court.
The new procedures we are recommending will prevent many of the cases of abuse by collection
officers that have so disturbed you and us. We do not, however, recommend elimination of the
joint and several liability standard or the current "knowledge" standard in the innocent spouse
rules, because we believe that they are critical to maintaining the legal significance of an income
tax return and, ultimately, to the successful operation of our voluntary self-assessment system.
Eliminating them would greatly complicate the administration of this system without benefiting
the vast majority of taxpayers who are never involved in a potential innocent spouse situation.
Our Report discusses our conclusions in some depth, and as you know the President's FY
1999 budget proposal incorporated our legislative recommendations. Several of our proposed
changes have been incorporated in the IRS restructuring bill (H.R. 2676) passed by the House of
Representatives last fall. We hope to add our other new proposals to H.R. 2676 as that
legislation is considered in the Senate this year. Treasury and the IRS look forward to working
with the tax-writing committees of Congress to enact these important reforms.
This concludes my prepared remarks. I would be happy to answer your questions at this
time.
-30-
-PUBLIC DEBT NEWS
- Department of the Treasury • Bureau of the Public Debt • Wa.hiD£toD, DC 20239
FOR IMMEDIATE RBI ,EASE
FebIUaIY 24. 1998
Contact: Office of FinaDcing
(202) 219-3350
TREASURY'S lNFLAT10N~INDEXED SECURITIES
MARCH REFERENCE ell NUMBERS AND DAILY lNDEXRAnOS
Public Debt announced today the reference Consumer Price Index (CPI) numbers and the
daily index ratios for the month of March for the following Treaswy inflation-indexed securities;
(1) the lO-year 3-3/8% notes due January 15, 2007, (2) the S-year 3-5/8% notes due July 15, 200~
and (3) the lo-year 3-5/8% notes due JanuaIy 15, 2008. This infonnation is based on the
non-seasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban
Consumers (CPI-U) published by the Bureau of Labor Statistics of the U.S. Department of Labor.
In addition to the publication of the reference cpr s (Ref CPI) acd index ratios, this
release provides the non-seasonally adjusted CPI-U for the prior three-month period.
This information is available through the Treasury's Office of Public AfWIs automated fax
system by calling 202-622-2040 and requesting document number 2246. The infonnation
is also available on the Internet at Public Debt's web site (http://www.publicdebt.treas.gov).
The information for April is expected to be released on March 19, 1998.
000
Attachments
PA-313
RR-2246
bUp:/Iwww.publicdebt.treaa.:ov
202-219-3350
Contact Office of Financing
TREASURY 10-YEAR INFLATION-INDEXED NOTES
A-2007
9128272M3
January 15, 1997
SERIES:
CUSIP:
DATED DATE:
ORIGINAL ISSUE DATE:
ADDITIONAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
February 6, 1997
Apri115,1997
January 15. 2007
158.43548
March 1998
31
161.5
161.3
161.6
CPI-U (NSA) November 1991
CPI-U (NSA) December 1997
CPI-U (NSA) January 1998
Ref CPI and Index Ratios for March 1998:
Month
March
March
March
March
March
March
March
March
March
March
March
March
March
Year
RefCPI
1
199B
2
1998
1998
1998
1998
1998
1998
161.30000
161.30968
161.31935
161.32903
161.33871
161.34839
161.35806
161.36774
161.3n42
161.38710
161.3SSn
161.40645
161.41613
161.42581
161.43548
161.44516
161.45484
161.46452
161.47419
161.48387
161.49356
161.50323
161.51290
161.52258
161.53226
161.54194
161.55161
161.56129
161.57097
161.58065
161.59032
Calendar Day
3
4
5
6
7
8
9
10
11
12
1998
1998
1998
1998
1998
1998
1998
March
13
14
March
15
1998
16
17
18
19
1998
1998
1998
1998
1998
1998
1998
1998
1998
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
20
21
22
23
24
25
26
27
28
29
30
31
1998
1998
1998
1998
1998
1998
1998
Index Ratio
1.01808
1.01814
1.01820
1.01826
1.01832
1.01839
1.01845
1.01851
1.01857
1.01863
1.01869
1.01875
1.01881
1.01887
1.01894
1.01900
1.01906
1.01912
1.01918
1.01924
1.01930
1.01936
1.01942
1.01948
1.01955
1.01Q61
1.01967
1.01973
1.01979
1.01985
1.01991
Contact Office of Financing
202-219-3350
TREASURY 10-YEAR INFlATION-INDEXED NOTES
SERIES:
A-2008
CUS1P:
9128273T7
DATEDOATE:
January 15. 1998
January 15.1998
January 15, z008
ORIGINAL ISSUE DATE:
MATURITY DATE:
RefeP1 on DATED DATE:
161.55484
TABLE FOR MONTH OF:
March 1998
NUMBER OF DAYS IN MONTH;
31
CPI-U (NSA) November 1997
CPI-U (NSA) December 1997
161.5
161.3
161.6
CPI.. U (NSA) January 1998
Ref CPI and Index Ratios for March 1998:
Month
March
March
March
March
Maren
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
Calendar Day
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
March
25
March
March
March
March
March
March
26
27
28
29
30
31
Year
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998
1998'
1998
1998
1998
1998
1998.
1998
1998
1998
1998
1e98
1998
1998
1998
1998
1Q9S
1998
1998
1998
RefCPI
Index Ratio
161.30000
161.30968
161.31935
161.32903
161.33871
101.34839
161.35806
161.36n4
161.37742
161.38710
161.396Tl
161.40645
161.41613
161.42581
161.43548
161.44518
161.45484
161.46452
161.47419
161.48387
161.49355
161.50323
0.99842
1~1.5129a
161.52258
161.53226
161,54194
161.55161
161.56129
161.57097
161.58065
161.59032
0.99848
0.99854
0.99860
0.99866
0.99872
0.99878
0.99884
0.99890
0.99896
'0.99902
0.99908
0.99914
0.99920
0.99926
0.99932
0.99938
0.99944
0.99950
0.99956
0.99962
0.99968
0.99974
0.99980
0.99986
0.99992
0.99998
1.00004
1.00010
1.00016
1.00022
202-219-3350
Contact: Office of Financing
TREASURY 5-YEAR INFLATION-INDEXED NOTES
SERJES:
CUSIP:
DATED DATE:
ORIGrNAlISSUE DATE
ADDITIONAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATEO DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:
J-2002
9128273A8
July 15, 1997
July is, 1997
October15,1997
July 15, 2002
160.15484
March 1998
31
161.5
161.3
161.6
CPI·U (NSA) November 1997
CPI-U (NSA) December 1997
CPI-U (NSA) January 1998
Ref CPI and Index Ratios for March 1998:
Month
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
March
Calendar Day
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Yeal
RefCPI
1996 161.30000
1998 161.30968
199B 161.31935
1998 161.32903
1998 161.33871
1998 161.34839
1998 161.35806
1998 151.36774
1998 161.37742
1998 161.38710
1998 161.39677
1998 161.40645
1998 161.41613
1998 161.42581
1998 161.43548
Index Ratio
1.00715
1.00721
1.00727
1.00733
1.00739
1.00745
1.00751
1.00757
1.00763
1.00769
1.0077S
1.00781
1.00788
1.00794
1.00800
16
1998
161.44516
17
1.00806
1998 161.45484
1998 4161.46452
1998 161.47419
1998 161.48387
1998 151.49355
1998 161.50323
1998 161.51290
1998 161.52258
1998 161.53226
1998 161.54194
1.00812
1.00818
1.00824
1.00830
1.00836
1.00842
1.00848
1.00854
1.00860
1.00866
1.00872
18
19
20
21
22
23
24
25
26
27
28
29
1998
161.55161
1998
161.56129
161.57097
1998
30
1998
31
1998
161.58065
161.59032
1.00878
1.00884
1.00890
1.00896
DEPARTl\1ENT
OF
THE
TREASURY
NEWS
FOR IMMEDIATE RELEASE
Remarks as Prepared for Delivery
February 24, 1998
Secretary Robert E. Rubin
National Treasury Employees Union Legislative Conference
It is a pleasure to speak with you today. As the union representing tens of thousands of Treasury
employees, in the wide range of the Bureaus at Treasury, including the Bureau of Public Debt,
ATF, Customs, the IRS, FMS, and BEP, the NTEU, is a forceful voice and valuable partner in
all of the critical challenges we face at Treasury. In that respect, let me say that I have gotten to
know Bob Tobias and his thoughtfulness and judgement are of enormous value as we all try to
work together on the issues we face at Treasury.
We at Treasury are committed to working with the NTEU to meet the challenges of
creating more efficient, customer friendly service. And the best means to reach that goal is to
create a healthy work environment that supports Treasury employees, because that, in tum,
means they will do the best job for the American people. Treasury partnerships have continually
won awards from the President's National Partnership Council for jointly developing and
implementing a variety of innovative programs to more effectively promote the missions of the
agency including outreach to our customers.
Now more than ever, Treasury needs to maintain a strong partnership with the NTEU. We
need to continue to work to increase efficiency, improve customer service, and enforce the law -and front line Treasury employees are the key to success. Today 1 would like to discuss those
challenges specifically at Customs and the IRS, and then say a few words about the importance
of the work of Treasury employees, and public service in general.
At Customs, we face the challenge of meeting the dual missions of managing the
increasing flows of trade into the United States, while, at the same time, performing the law
enforcement function of preventing the import of illegal products, particularly the interdiction of
drugs. In this effort, and in partnership with the NTEU, Customs has taken some important steps
over the last few years, such as the changes in the Miami Customs office, the use of x-ray
RR-2247
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technology on the Southwest border, and most recently, Operation Brass Ring. Its innovative
approach, created with enthusiastic front line involvement, to increase drug seizures through
intensive inspection procedures could become a template for the future. We look forward to
working with you on these issues in the coming weeks, months and years.
George Weiss did a terrific job as Commissioner of Customs, and Sam Banks has done a
terrific job as acting Commissioner. We all look forward to working with Ray Kelly pending his
nomination and confinnation by the Senate. I've worked with him for over a year now and I
know that, with Banks and Kelley, you will have a very capable team at Customs in facing these
challenges.
At the IRS, we face the challenge of continuing to create an IRS that is customer friendly
and efficient, while collecting the taxes due. As you all know, over the last three years we have
been engaged in a highly intensive process of change and refonn that has led to improved
technology, and increased electronic filing, and improved telephone service.
However, the great bulk of our challenges lie ahead. Just as these problems took a long
time to develop, it is going to take a great deal of time and effort by all of us to build the kind of
IRS that taxpayers deserve. There are no quick fixes or easy solutions, but dramatic change is an
absolute necessity. And I want to tell you that we are committed to working with you to
accomplish that goal. And just as the NTEU has been a critical partner throughout our past
efforts to improve the IRS, it will be a critical partner going forward.
I visited the Baltimore office on the first nationwide Problem Solving Day last
November. This reinforced my belief that the vast majority ofIRS employees are dedicated
public servants, committed to helping taxpayers comply with the law. We are ready to work with
you to make sure that we create the kind of environment where the sorts of abuses we saw last
year in the congressional hearings do not recur and if they do recur are dealt with quickly and
effectively.
We at Treasury can contribute in the areas where we have expertise and through the
budget process to make sure the IRS has the funding it needs to accomplish its mission. By
creating an environment that supports IRS employees, we will also create an environment that
will best serve the American people. And as we go forward. we must work to internalize a
culture of customer service.
After many months of debate, in the last few weeks of 1997, the Administration and
Congress worked together to fashion a bill to reform the IRS that we think is a very good balance
of many competing considerations that contributes significantly to the kind of IRS we all want to
have. This bill will provide proactive. ongoing involvement by the Treasury to help the IRS meet
its challenges, and an outside board that includes unions and the private sector to provide another
set of perspectives and expertise.
2
Perhaps most importantly, and symbolizing our commitment to change, we brought on
board a new type of Commissioner, Charles Rosotti, who had long experience in private business
and expertise with computer systems.
One of the things that has been lost in the debate around the IRS over the last few years is
the critical function the IRS performs. The IRS collects 95 percent of the federal government' s
revenue -- revenue that funds essential activities of government that contribute enormously to the
well-being of the American people, from the nation's defense, to social security, or college loans.
And by enforcing the tax laws, they make the tax system fairer, because those who cheat on their
taxes increase the burden on all the rest of us.
The debate over what is the appropriate role of government has been central to our nation
since its founding and I think that is a good and healthy debate. However, in recent years. far too
many people, while engaging in that debate, have also denigrated the public servants who
perform the nation's business. And that, in my view, is not only wrong, it is counterproductive
because it makes it more difficult for public servants to preform their vitally important jobs.
Those who serve in government, at the IRS and every agency. deserve the respect of their
fellow citizens -- and with that respect, they will better serve the American people. And my belief
in supporting public servants has only been reinforced since I entered the Clinton Administration
five years ago. Throughout my experience in government, which includes two years at the
National Economic Council, and three years at Treasury, I have been continually impressed by
the intelligence, professionalism and dedication of the people with whom I've had the
opportunity to work.
Let me conclude on personal note. A Secretary of any Department faces a lot of
challenges, including a multitude of policy issues. and has to make judgements about priorities.
When I was first nominated to be Treasury Secretary I had dinner with a former Treasury official
who had served with two administrations and who advised me that my highest priority should be
to focus on maintaining and building on the excellence of this institution, which has served the
American people so well. He was absolutely right. The key asset of any great institution is its
people -- and the best guidance in terms of building an institution comes from its front line
employees. And it is in that spirit that I continue to look forward to working with all of you in the
future as we face our challenges. Thank you very much for your hard work. dedication and
partnership.
-30-
3
J)
EPA R T 1\1 E N T
0 F
T H F.
T REA SUR Y
NEWS
TREASURY
OFFICE OF POBLeC AFFAIR.S -1500 PENNSYLVANIA AVENUE, N. W. e WASHINGTON, D.c.e 10110 e (lIZ) 112·U60
•
CONTACT:
UNTIL 2:30 P.M.
February 24, 1998
~GOED
otfiee of Financing
202/219-3350
TREASURY t S WEEKLY BILL OFFERING
~he Treasury will auction two series of Treasury bills eotaling approximately $14,SOO million, to be issued MaJ:'ch S, 1998. This offering will result
in a paydown for the Treasury of al:Iout $1,4:25 million. as the maturing pul:>licly
held lJ-week and 26-week ~ills are outstanding in the amount of $15,932 million.
In addition to the maturing 13-week and 26-week bills, ehere are $14:,996 ~llion
of maturing publicly held 52-week bills. The disposition of chis latter amount
was announced lase week.
In addition to the public holdings, Federal Reserve Sanks for their own
accounts hold $13,665 million of ~e maturing bills. These accounts are con·
sidered to hold $7,820 million of the maeuring ~J-week and 26-week issues, which
may be refunded at the weighted average discount raee of accepted competitive
tenders. Amounes issuea ~o these acc~un~s will be ~ addi~ion eo the offertng
amount.
Feoeral Reserve Banks hold $4,596 million of the maeuring bills as agents
for foreign and internac10nal monetary authorities. These may be refunded
within the offering amount. at ~he weighted average discount rate of accepted
competitive tenders. Addi~ional amoun~s may be issued for suCh accounts if the
aggregat.e amount ot l4ew bid.s exceeds the aggregate amount of maturing bil1.s.
For purposes of determining such additional amounts, foreign and international
monetary aut.horit.ies are considered to hold $3,069 million of ehe original
13-week and 2o-week issues.
Tenders for the bills will be received a~ Federa~ Reserve Danks and
Branches and at the Bureau of the Public Debt, Washington, D. C. This offering
of 'I'reaiiury se~i ~ies is governed by the terms and condi t.ions set fonh in ~he
Uniform Offering Circular (31 CFR Part 356, as ~ended) for the sale and issue
by t.be Treasury to the public of marketable Treasury bills, notes, and bonds.
Details about each
ot the new securities are given in the attached otfering
highlighes.
RR-224P,
Ar.tacbment
000
For p,ess relelUes. speeches. public schtdldes lind Dfficilll bJOg'flpl';~J. call ou, 24-J.DU' /a."'C lin~ flr (102) 622.21UO
UXGHLXGHTS OF TBBASURY O••SRINCS OF WEEKLY BXLLS
TO 8B ISSUED MARCH 5, 1998
February 24, 1998
Offering Amount .••.••.•.•.•...•.••.•....•••. $7,250 lII.il1ion
Rescription of Off,ringt
Term and type of security .........•......•.. 91-day bill
CUSIP number •...•......•.•......•.•.......•• 912194 fiR 0
Auction date .......•..•..•.•.•••••.........• March 2, 1998
Issue date ..•.....••.....•.•.••....••...•... March 5, 1998
Maturity date •.....••.•..•...••...•......•.. June 4,1998
Original issue date ••••......•.•.....•.•.••. December 4, 1997
Currently outstanding .•.•......•....••....•• $10,91' Million
Minimum. bid amount •...........••.•....•.•... $10,000
Multiples .....•..•.•.•••••.•........... ' •.... $ 1,000
~he
$7,250 million
182-day bill
912795 All 4
March 2, 1998
March 5, 1998
September 3, 1998
March 5, 1998
$10,000
$ 1,000
following rule. applY to all .ecuritle@ mentioned abovel
~ubmission
Qf Bids:
Noncompetitive bids ...•.•.•...•...........•. Accepted in full up to $1,000,000 at the average
discount rate of accepted competitive bids.
Competitive bIds .............•.•............ (1)
Must be expressed as a discount rate with three decimals in
increments of .005', e.g., 7.100t, 7.105t.
(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 $~ billion or greater.
(3)
Net long pOSition must be determined as of one half-bour
prior to the closing time for receipt of competitive tenders.
Maximum Recogni~ed Dig
It a Single yield .••..••••••••........•.. 35' of public offering
~axi.um
Award., .......•...•..........•...... 35' of public offering
Receipt of Tenders:
tenders •.•..........••...•..• Prior to lalOO noon Eastern standard time on auction day
Competitive tenders .••..•••..•.....••....•.. Prior to 1:00 p.m. Eastern Standard time on auction day
Nonco~titive
Payment
terms ............................... Full payaent with tender or by charge to a funds account
at a Federal Reserve Bank on iS8ue date
n
EPA R T i\l E 1\ T
0 F
THE
T R "E A SUR Y
NEWS
TREASURY'
OFF1CE OF PtJBLIC AJ'lAIR.S -1500 PENNS\'LVANlA. AVENtlE, N.W•• WASHINGTON, D.C.- 20l18. (202) U%-1960
•
~GOBD
'ONTI.L 2:30 1».H.
rebru.ary 24., 1998
CON'l'AC'r;
Office of PiDaDoiDg
202/219-3350
7he Treasury will auceicn .ppro~~ely $23,000 m1l1ioD of 44-day Trea8ury
casb. mana.gement bills to be issued March 3, 1998.
Competitive and ~oncompetitive tenders will be received at all Federal
Reserve Eanks and. 2ranchea. TeDders will aot be accepted. for bills to be
maintained on the book-entry records of the Department of ~a Treasury
(n.3AStl'aY DIR2C'l'). TeDders will not be received at the Bureau of the Public
D~t, Washingt.C!D, D.C.
Additional amounts of tbe bills may be i.sued to Pederal ~e8erve Banks as
agents for foreign ~d international monetary authorities at the average p~ice
of accepted competitive tenders.
'l'hili offering of 'l'reasury sec:uritie& is governed. by the terms and
co~ditions s.~ forth in the Uniform Offering Circular (3~ erR par~ 356, as
amended) for the sale and issue by the Treasury to the public of marketable
Treasury bills, notes, and bonds.
Note that gompetitive bids in cash management bill auctions must be
expressed AS a discount rate with two dec:imals. e.g .• 7.10%.
Details about the new security are given in the attached offering
highJ.1ght.s •
000
Attachment
RR-2249
For press "Ieosts. speeches. pubJi~ sduldliles and fJlfu:ial
bJo:,apl'I~I,
call OUI U·Il01l1 lax IIn~ at (lOl) 622-2040
BIGm..IGlITS OP "l'lU:.AS'tJRY OPniR:mc;
OF 44-DAY ~ MANAGEMENT SILL
O~fgring Amount ••••••••••••••
$23,000 mil110n
Description of Offer~g:
Term. and type of security
44-day Cash KaDagement Bj,ll
C'OSIP nUlllber ••••••••••••••••• 91.2794 6Ia 3
A.uc tiou 4a te ••.••.•••••••• •..
·X.aue date •.••••••••••••••••.
Maturity date ..•••.••••••••••
Original issue date ••••••••••
CUrr~tly outstanding ••••••.•
Kini.mum bid amount •••••••••••
Multiple •••..••.••.•.••..••.•
Min:imUm to hold amount •••••••
Multiples to hold •••••••••••
SUbmission of Sids:
Noncompetitive bids
Competi tive
bid~
..............
••••••••• (l)
(2)
(3)
February 2', l.998
March 3, 1998
April 16, 1998
October 1.6, 1997
$22,441 million
$10,000
$1,000
$10,000
$1,000
Accepted in full up to $1,000,000 a~ the
average discount rate of accepted
cOQPetitive bids
Must be expressed as a discount rate with
two dec~l., e.g., 7.10t.
Net long position for each bidder must b.
reported whtm the sum of the total bid
amount, at all diacouct rat •• , and the
net long position is $1 billion or
greater.
Net loug position must be determined as
of one half-hour prior to the closing
tima for receipt of competitive tenaera.
Max~
Recognized Bid
at a Single Yield •••.••••• 35% of public offering
Maximum Award •••.•••••••••••• 35' of pumlic offeriug
Receipt of Tenders:
Noucompetitive tenders ..••••. Prior to 11:00 a.m. Eastern Standard
t~e on auction day
Competitive tenders .•.•.••••• Prior to 11:30 a.m. Xastern Standard
time on auction day
Payment Te~ ..•...••..•.••.• Full paymeut with eender or by charse to
a fund. account at a Fed8r&1 ~.a.rv. Bank
on issue date
Fax:202-219-3365
PUBLIC DEBT/WRSH DC
-
Feb 24 '98
14:05
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
February 24, lSS8
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 2-YEAR NOTES
Interest Ra~~:
Series:
COSIP No:
STRIPS Minirr.'.lm:
Issue Date:
Dated Date:
Maturity Date:
5 1/2%
Z-2000
9128273Y6
March 02, 1998
February 28, 1998
February 29, 2000
$400,000
High Yield:
Price:
5.537\
99.930
All noncompe~itive and successful competitive bidders were awarded
securities at the high yield. All tenders at lower yields were
accepted in full.
Te~ders
at the high yield were allotted
37~.
Accrued in~e~est of $ 0.29891 per $1,000 must be paid for the period
from Februa!":: 25, 1998 to March 02, 1996.
AMO~~S
TENDERED AND ACCEPTED (in thousands)
$
Competi:i ve
Noncom~;~i~ive
PUBL:C SUBTOTAL
Federal R:serve
Foreigr. Of!icial Inst.
$
TOT.~
Median y:eld
tenders was
32,636,000
908,Ol9
$
15,001,269
l,497,320
1,235,000
1,497,320
1,235,000
36,276,339
$
5.520%": 50% of the amount of accepted competitive
at or below that rate.
S. 4S0t-:
:e~dared ~t
14,093,250
906,Ol9
33,544,019
~~~d~red
Lot,; yiel':
tenders was
.l\ccepted
Tendered
Tender ':ype
S%- of the amount of accepted competitive
or below that rate.
RR-2250
http://www . pub lied ch t. trC:lS .gOY
17,733,569
D EPA R T 1\1 E N T
0 F
THE
T REA SUR Y
NEWS
EMBARGOED UNTIL 10 A.M. EST
Text as Prepared for Delivery
February 25, 1998
TREASURY SECRETARY ROBERT E. RUBIN
HOUSE APPROPRIATIONS SUBCOMMITTEE ON TREASURY,
POSTAL SERVICE AND GENERAL GOVERNMENT
Mr. Chairman, Congressman Hoyer, members of this Committee, it is a pleasure to speak
with you today about the Administration's FY 1999 budget request for Treasury's law
enforcement functions. Let me preface my remarks by noting that we in the Treasury Department
deeply appreciate the support this Committee has given Treasury, both generally and in the law
enforcement area. I am joined today by Under Secretary Kelly and the heads of Treasury's law
enforcement Bureaus. We've had some very good people leave us, but as with any strong
organization, we have also had very good people come along to take their place. In that regard, I
am here today with Lew MerIetti, who took over as head of the Secret Service last year, and
Ralph Basham, the new Director of the Federal Law Enforcement Training Center (FLETC).
And let me add that George Weise did a terrific job as Customs Commissioner and Sam Banks as
acting Commissioner. And I look forward to having Ray Kelly, once nominated and confirmed,
take the helm at Customs.
As the members of this Committee know well, Treasury has wide-ranging law
enforcement responsibilities, from protecting the President and other public figures, to preventing
the flow of drugs into the country, enforcing federal firearms laws, investigating violent crimes
such as the bombing in Atlanta at the Olympics, enforcing the tax laws, investigating financial
crimes, counterfeiting, and money laundering. Treasury is unique in law enforcement in that, in
almost all of these areas, there is a mutually reinforcing interrelationship between regulation,
revenue collection and law enforcement. The men and women who serve the public in these law
enforcement capacities -- and who often place their lives in danger by doing so -- do an
extraordinary job.
To strengthen these critical efforts, the President's FY 1999 budget for Treasury law
enforcement bureaus totals $3.204 billion, an increase of $172 million or 5.7 percent above last
year. We need this increase to meet certain mandatory cost increases, to enhance initiatives in
RR-2251
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
combating narcotics trafficking, reduce illegal firearms trafficking to young people, improve
Presidential protection and White House security, investigate financial crimes, and train law
enforcement officers. The heads of each of the law enforcement agencies can provide more detail
on these budget requests. but I just wanted to take a moment to highlight a few items.
First, we need additional resources to help the Customs Service with the critical mission of
drug interdiction. In cooperation with the Office of National Drug Control Policy, the U.S.
Customs Service has formulated a 5-year technology plan which is designed to deploy an array of
technologies that enables Customs to effectively fulfill both of its missions: preventing the entry of
illegal products, particularly drugs, and processing the large flows of trade that playa central role
in our economy. Funding for implementation of the first phase of this plan has been requested for
FY 1999.
Second, a major priority at Treasury is combating money laundering. Our anti-money
laundering efforts provide a vantage point for getting at the leadership of organized crime and
drug lords by going after their Achilles Heel -- the profits from their illegal activities. In addition,
since money laundering poses a real economic danger by affecting markets and undermining
financial systems, especially in developing countries, our promotion of stronger measures
internationally will strengthen those systems
Money laundering is a very sophisticated business that is international and utilizes state of
the art technology. To be effective, our efforts need to be international and to use state of the art
technology. FINCEN is applying state of the art technology to tracing flows of money that are
exceedingly complex. Its budget includes an expansion of the Gateway program to coordinate
federal, state and local efforts. We need the resources to stay on the cutting edge in this effort
through more innovative technologies and techniques and through better international
cooperation, especially since money laundering is increasingly difficult to detect and enforce
because of constantly evolving technologies and the fluidity and globalization of capital markets.
Third, we are asking for resources to suppon an effort that the Department and ATF have
led over the past two years to prevent violent firearms crime by our nation's youth. The Youth
Crime Gun Interdiction Initiative is a collaborative law enforcement effort between ATF. local
police depanments. and prosecutors. Its goal is to develop and share better information about
how juveniles and gang offenders are illegally obtaining firearms, and thereby reduce the illegal
supply of firearms to youth by investigating, arresting. prosecuting, and incarcerating illegal gun
traffickers. A preliminary analysis indicates this program shows significant promise. With these
resources. ATF will be able to expand its initiative to the 27 cities to be covered this year and
potentially to more cities next year. It will also permit the ATF to field new agents in each of the
27 participating cities to work with police departments in arresting the illegal traffickers supplying
firearms to juveniles. gang offenders, and other violent criminals in those jurisdictions.
Fourth, in FY 1999. the Secret Service must begin to build its capacity to protect
candidates and nominees for the Presidential election in the year 2000. Increased funds have been
2
requested to meet this mandatory workload increase, in addition to ongoing White House security
and other protection initiatives.
Finally, we are asking for additional resources to support the Federal Law Enforcement
Training Center in its critical work. Over the last two years FLETC has seen an unprecedented
increase in its workload and current projections indicate that this increase will continue for the
foreseeable future. We need to continue construction ofFLETC's sites at both Glynco, Georgia
and Artesia, New Mexico in order to meet this need.
Mr. Chairman, let me conclude by saying that when I came to Trea.sury I had a lot of
experience in the financial issues of Treasury, but I had very little experience in the law
enforcement areas. In the time I've been here I've developed a deep appreciation of the
importance of Treasury's law enforcement functions, and I have gotten to know the people who
head the law enforcement bureaus as well as some people in the bureaus. I think the members of
this Committee can feel very good about the leadership at these bureaus and the capabilities,
esprit and commitment of the brave men and women who are serving in the wide range oflaw
enforcement activities at Treasury. I look forward to working with you in the days and weeks
ahead as we support and advance their critical efforts. Thank you very much.
-30-
NEWS
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANlAAVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622·2960
EMBARGOED UNTIL I P.M. EST
Text as Prepared for Delivery
February 25, 1998
TREASURY DEPUTY SECRETARY LAWRENCE H. SUMMERS
HOUSE WAYS AND MEANS COMMITTEE
Mr. Chainnan and members of this committee, it is a pleasure to speak with you today
about the President's FY 1999 budget. This is an historic moment: The President is proposing a
balanced budget for the upcoming fiscal year, the first since 1969. The budget is rooted in fiscal
discipline, yet invests in areas critical to future productivity and the American people. Perhaps
most importantly, this budget provides a clear answer to the question of how to use the projected
budget surpluses. The President proposes that surpluses be reserved pending refonn of the Social
Security system.
This budget carries forward the President's successful economic strategy. As the
President said last month during the State of the Union, from the beginning of this
Administration we have "pursued a new strategy for prosperity: fiscal discipline to cut interest
rates and spur growth; investments in education and skills, in science and technology and
transportation to prepare our people for the new economy; new markets for American products
and workers."
Before I discuss the specifics of this budget, I think it is important to review the progress
we have made in getting our fiscal house in order.
When President Clinton entered office in 1993, the federal debt had quadrupled from
1980 to 1992 and the 1992 deficit was $290 billion, an all time high. These huge deficits kept
interest rates high, diminished confidence, lowered investment and stifled growth. Budgets were
based on economic assumptions that were far too optimistic. When these assumptions failed to
materialize, the result was higher deficits than forecast, and cynicism about the budget process.
In 1993, President Clinton fought for, and Congress approved, a powerful deficit
reduction plan that was based on conservative economic assumptions and which brought the
RR-2252
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622·2040
deficit down by $500 billion over five years. The deficit reduction increased confidence, helped
bring interest rates down. and that. in tum, helped generate and sustain the economic recovery,
which. in tum. reduced the deficit further. The result was a healthy, mutually reinforcing
interaction of deficit reduction policy and consequent economic growth. that brought the deficit
dO\\-l1 to $22.3 billion in 1997, and sets the stage for going to balance.
Today, unemployment is 4.7 percent; it has been under 6 percent for the last three years.
Over the last five years. the economy has generated over 14 million new jobs, inflation and
interest rates are low and real wages are rising, although too many Americans are still not
participating fully in the economic well-being that most are sharing. Last year's bipartisan deficit
reduction package has further improved our fiscal picture, even while increasing investments
and cutting taxes for the middle class.
Moreover, for a median income family of four, the federal income and payroll tax burden
will be lower in 1998 than at any time in the last 20 years. And for a family of four earning half
the median income. in part because of the expansion of the Earned Income Tax Credit for 15
million families. the federal income and payroll tax burden is lower than at any time in the last
30 years. Families' tax burden will fall further next year when the child credit enacted last year is
fully phased in.
Mr. Chairman, the efforts over the past five years have paid off: the current projection
anticipates surpluses well into the next century, although long-term budget forecasts inherently
involve a great deal of uncertainty. How we use these surpluses is a critically important issue in
the years ahead. and a key focus of the President's budget.
The overarching point of the President's economic strategy going forward and his 1999
budget is clear: under no circumstances can we take any steps that will undo the fiscal discipline
we have worked so hard to achieve. The last few years clearly demonstrate the economic
benefits of a strong fiscal position and the global financial markets that have emerged in recent
years greatly heighten its importance. The global capital markets impose swift and strict penalties
on countries with unsound policies as we have seen in recent months in Asia and confer great
benefits on countries with sound policies.
The surpluses present an enormous opportunity, one that so many have worked hard to
achieve, and one that we must not squander. Because this nation has a major challenge ahead: the
challenge of moving from a younger society to an older one.
A time of surplUS. a time when a major change is coming, is not a time to spend. It is a
time to save. And the best way to save for our future is to save Social Security. That is why we
believe the surpluses should be reserved until Social Security is placed on a sound financial
footing for the 21 st century.
This is the right policy for our nation. It is the right policy from the standpoint of the
economy, which needs to save more in order to invest and grow fast enough to shoulder the
2
burdens of the next century. It is the right policy from the standpoint of our long-term fiscal
health, which will otherwise be placed under growing strain by the costs associated with aging.
And it is the right policy from the standpoint of individuals, who need to make plans to ensure
their long-term security in retirement, and a substantial proportion of whom will inevitably rely
on Social Security. That is why the President believes very firmly that nothing should be done
with the surpluses until Social Security reform is addressed.
Of course, as we go forward there will be a need for new measures to equip our nation for
the challenges ahead and to compete successfully in this new global economy. The President's
commitment to preserving the surpluses does not preclude undertaking these kinds of initiatives - including cutting taxes and increasing spending. But what is critical is that all those initiatives
are paid for in full.
We propose moderate targeted tax cuts that are fully paid for and propose new spending
in areas that are critical to increasing future productivity and to protecting and promoting
America's global economic and national security interests. Today I would like to focus on just a
few significant measures that reflect those priorities.
First, to enhance productivity and maintain our country's competitive position in the
years ahead, the Administration proposes:
•
increased funding for education, including an additional $5 billion to support school
construction and modernization projects, subsidies to recruit and train more teachers.
•
far-reaching measures to make child care more affordable including a $5.1 billion
expansion of the child and dependent care tax credit that will grant 3 million taxpayers an
average annual tax cut of $330; a new employer credit to promote employee child care
and expand its availability; and new spending for child-care subsidies for children from
poor families. Helping parents with child care is not only good for families, it is also
good for the economy, because it helps all to participate in the workforce to the full
extent of their abilities and wishes,
•
measures to promote growth in our inner cities and other economically distressed areas,
by increasing the low-income housing tax credit and increasing funding for community
development banks. This is a national economic issue: Our economy will never achieve
its full potential until we equip the people of these areas to enter the economic
mainstream.
Second, our budget proposes major new steps to protect the environment, with $3.6
billion in nine tax incentives to promote energy efficiency and improve the environment. These
include: tax credits of up to $4,000 for purchasers of highly fuel-efficient vehicles and up to
$2,000 for buying rooftop solar equipment; new credits for buying energy-efficient homes and
certain energy-efficient building equipment; and a range of new incentives to clean up
environmentally contaminated sites.
3
Mr Chairman. a beneficial byproduct of our policy to reduce youth smoking by increasing
the prices of tobacco products is that we will raise revenues for the government. Our budget
proposes to share these revenues among three sources. First. we will return to the states roughly
the amount of revenues that they would have received under the original tobacco settlement. A
large part of this money will be unrestricted; states can use it for whatever purposes they choose.
The rest of the money will go to states for state-administered programs to provide child care
subsidies. reduce class size. and expand coverage of children by public health insurance.
Second. we are providing funding for a dramatic expansion of health-related research in America
through our Research Fund. Finally, we divide the remaining dollars into other uses including
cessation programs, farm support programs. etc.
Of the $23 billion in revenue-raising measures we propose, $11.1 billion have been
proposed in prior budgets. These items include the repeal of the sales source rule ($6.6 billion);
the repeal of the lower-of-cost-or market inventory method ($1.6 billion); repeal of the
percentage depletion for non-fuel minerals mined on Federal lands ($500 million); and the
reinstatement of the oil spill excise tax ($1.2 billion). The budget also raises approximately
$11.9 billion from new measures to eliminate unintended subsidies and other revenue-raising
provisions. These include several new insurance provisions, which raise approximately $4.6
billion in revenue; three provisions restricting unintended consequences of the current real estate
investment trust (REIT) rules, which raise approximately $135 million; and eliminating several
unwarranted subsidies relating to estate and gift taxes, including a proposal to stop non-business
valuation discounts, which raises approximately $1 billion.
Mr. Chairman. these revenue-raising proposals will no doubt be the s1.lbject of debate.
What is crucial is that any new expenditure or reductions in tax burdens be paid for. Let me
repeat: all of the initiatives in the President's budget are fully paid for. This budget is in full
accordance with the Budget Enforcement Act. It does not exceed the discretionary caps.
We have finally put our nation's fiscal house in order. That is an enormous achievement
we must protect. And it is an enormous opportunity we must seize. We face significant
challenges in fostering a strong economy and maintaining fiscal responsibility in the years and
decades ahead, particularly with the coming retirement of the baby boom. So, as the old saying
goes, you fix your roof when the sun is shining.
Mr. Chairman, the President's budget carries forward the President's economic strategy
that has been so central to the strong economic conditions of the past five years. This budget
preserves the surpluses until we strengthen Social Security, invests in areas that are critical to the
future of this country, provides for programs that protect and promote our critical economic and
national security interests in the global economy, and. of absolutely critical importance, it keeps
us on the path of fiscal discipline that is so crucial to our economic well-being. I look forward to
working with all of you in the days and weeks ahead to approve this budget. Thank you very
much.
-30-
DEPARTl\1ENT
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASlllNGTON, D.C.• 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
Remarks as Prepared for Delivery
February 25, 1998
Secretary Robert E. Rubin
Black Patriot Commemorative Coin Ceremony
It is a pleasure to speak with you today. I'd like to thank Representatives Nancy Johnson,
lC. Watts, Donald Payne, and Charlie Rangel for attending today and for their efforts to pass the
legislation to produce this coin. I'd also like to thank Mary Ellen Withrow for her leadership as
Treasurer, Philip Diehl, Director of the Mint, for his leadership on this project, and the Black
Patriots Foundation for their input.
This seems to me a most suitable place to celebrate the release of a coin that honors the
contributions of African Americans in the Revolutionary War: the National Archives, the building
that houses the Declaration ofIndependence, the Constitution and so many of the vital documents
of our history. For the release of this coin honors those African Americans who fought -- and died
-- for the freedom that those documents embody, and one African American in particular, Crispus
Attucks.
Crispus Attucks, an escaped slave, was the first person killed at the Boston Massacre on
March 5, 1770. Certainly one of the great paradoxes of American history is that the first American
to die for the cause offreedom in our Revolution was an escaped slave. It took more than ninety
years before slavery finally ended in this country, but the first steps for freedom had begun.
Later, more than 5,000 African Americans served in the Revolutionary War against the
British, an essential fact in the history of the founding of this country that is too little known. I
hope that by producing these coins, we will broaden recognition of the role of African Americans
in the American Revolution. more broadly, by recognizing the role that all of our people play in
our history, we gain a richer and fuller understanding of the American experience and we
appreciate the contributions of all segments of our society to the American experience.
RR-2253
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
I will now present the coins to Wayne Smith, the President of the Black Patriots
Foundation, Ossie Davis, the distinguished actor, and co-Chainnan of the Black Patriots
Leadership Committee, and Michael Walker, an eight grade student at Terrell Junior High School.
For those who can't see them clearly, on the front side of these coins there is an image of Crisp us
Attucks, on the reverse, which you can't see, there is an African American family of the
Revolutionary War era, armed, and yearning for freedom. The first two framed boxes contain the
coins along with stamps honoring four African Americans, Frederick Douglass, Harriet Tubman,
Benjamin Bennecker, and Salem Poor, a Revolutionary War patriot who distinguished himself at
Bunker Hill. The box for Michael consists of a coin and a collage of highlights about Crispus
Attucks and the Revolutionary War. Thank you very much.
-30-
2
-
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
February 24, 1998
Contact: Peter Hollenbach
(202) 219-3302
BUREAU OF THE PUBLIC DEBT AIDS SAVINGS BONDS OWNERS
AFFECTED BY TORNADOES IN FLORIDA
The Bureau of Public Debt took action to assist victims of tornadoes in Florida by expediting the
replacement or payment of United States Savings Bonds for owners in the affected areas. The
emergency procedures are effective immediately for paying agents and owners in those areas of
Florida affected by the storms. These procedures will remain in effect through April 30, 1998.
Public Debt's action waives the normal six-month minimum holding period for Series EE savings
bonds presented to authorized paying agents for redemption by residents of the affected area.
Most financial institutions serve as paying agents for savings bonds.
Florida counties involved are Brevard, Orange, Osceola, Seminole and V olusia. Should
additional counties be declared disaster areas the emergency procedures for savings bonds
owners will go into effect for those areas.
The replacement of bonds lost or destroyed will also be expedited by Public Debt. Bond owners
should complete form PD-1048, available at most financial institutions or by writing the
Richmond Federal Reserve Bank's Savings Bond Customer Service Department, 701 East Byrd
Street, Richmond, Virginia 23219; phone (804) 697-8370. This form can also be downloaded
from Public Debt's website at: www.publicdebt.treas.gov. Bond owners should include as much
information as possible about the lost bonds on the form. This information should include how
the bonds were inscribed, social security number, approximate dates of issue, bond
denominations and serial numbers if available. The completed form must be certified by a
notary public or an officer of a financial institution. Completed forms should be forwarded to
Public Debt's Savings Bond Operations Office located at 200 Third St., Parkersburg, West
Virginia 26106-1328. Bond owners should write the word "Storms" on the front of their
envelopes, to help expedite the processing of claims.
RR-2254
000
http://www .publicdebt.treas.gov
DEPARTMENT
fIREASURY
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIllNGTON, D.C .• 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
February 25, 1998
Contact: Jim Tourtellotte
(202) 622-2960
PUBLICATION QUALITY PHOTOS AVAILABLE OF
BLACK PATRIOT COMMEMORATIVE COIN CEREMONY
Treasury Secretary Robert E. Rubin presented for the first time three Black Patriots
commemorative coins in a ceremony at the National Archives Theater in Washington, D.C.
Publication-quality digital photographs are available from this event on the World Wide Web. The
site is www. ustreas.govlpressl.
Black Patriots Foundation President Wayne Smith, Co-Chair of the Foundation's Leadership
Committee and Michael 1. Walker an 8th grade student from Washington, D.C. 's Robert H. Terrell
Junior High School, received the silver one dollar coins commemorating Black Revolutionary War
Patriots.
The coins also commemorate the 275th anniversary of the birth of the first black
Revolutionary War patriot, Crispus Attucks, who was the first American colonist killed by British
troops during the Revolutionary period. The U.S. Mint is authorized by Public Law 104-329 to
produce up to 500,000 one dollar silver coins. A portion of the proceeds from the sale of the coins
are authorized to be used to support the construction of the Black Patriots Memorial on the National
Mall in Washington, D.C.
Photographs of Treasury events are posted daily including bilateral meeting, public events,
officials and speeches. The website also contains a photo archive of pictures that are more than one
week old.
All images are high resolution 300dpi jpeg -- suitable for magazines, newspapers, wire
services, or television. These photographs are a public resource and can be used without cost.
-30-
RR-2255
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
FEB-25-98
-
PUBLIC DEBT/GSRS
16:43
W~D
P.Ol
FAX NO. 2022193639
PUBLIC DEBT NEWS
- Department of the Treasury • Bureau
of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
eUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE
Feb~ua ry 2 5
R~LEASE
CONTACT:
I
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 5-YEAR NOTES
Interest Rate:
Se~ies :
5 1/2%-
CUSl'P No:
D-2003
91.2827323
STRIPS Minimum:
$~OO,OOO
Eigh Yield:
Issue Date:
Dated Date:
March 02, 1~98
February 2E, 19Se
Maturity Date:
February 2e, 2003
Price:
5.605%
99.547
~_1l
noncc....:;::::itive a.nd successful competitive bidders we:=-e awarde:=:
at t~s high yield. All tenders at lower yields were:
accepted in f~ll.
securi~ies
hiqh yield were allotted
T~nder5
a:
Accrued
i~:~~~st
from Februar""
t~!
~:,
0.29891 per $1,000 must be paid for the: pe=:oci
1998.
of $
J.998 to March 02,
~~OUN~S
TENDERED AND ACCEPTED (in thousands)
~:.. ~:.:
$
Noncomps::'::'ve
PUBLiC S:;tiT01'}·..L
Federal
Accepted
Tendered
Te:1der Ty;:
CC:r"lpet i
31%.
:\5~=:rve
Foreign C:ficial Inst.
$
TO'lAL
29,637,700
309,643
10,690,400
309,643
29,947,343
11. 000, 043
1,095,000
1,561,000
1,SG1,OOO
32,603,343
l,09!',nC)o
$
N.adian yie:':'
5.580%: 50~ of che amount of accepted competitive
was te:-.c.ered at or belnw that race.
ter.ci.e2:~
5%' of the a.mount of accepted camr,'lr.;icive
a: or below that rate.
5.550%-:
t~nciers
was
RR-2256
te~~ered
hI tp://www.publict!chl.rrC::1s.go v
13,656,043
D EPA R T l\tl E N T
0 F
THE
T REA SUR Y
NEWS
omCE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIllNGTON, D.C. _ 20220 _ (202) 622-2960
EMBARGOED UNTIL 8:00 P.M. EST
Remarks as Prepared for Delivery
February 25, 1998
u.s. DEPUTY TREASURY SECRETARY LAWRENCE H. SUMMERS
REMARKS BEFORE THE FOREIGN POLICY ASSOCIATION
Thank you. Let me just say how glad I am to receive this award and to be here to discuss
the United States role in shaping global financial markets at this critical time.
If ever we needed a reminder of the critical importance of the IMF in helping the United
States seize the opportunities afforded by the emergence of a global financial market, and manage
the risks, we have received it these past few months in Asia. With these events -- and the United
States response to them -- now in the forefront of people's minds, I would like to focus my remarks
today on this subject.
Let me speak briefly about why the IMF is an indispensable safeguard of the stability of the
international financial system, the progress we have made in adapting the IMF to the demands of a
changing world; and the long-term reform challenges for the IMF and the international community
going forward.
I. The IMF's Contribution
There are those who suggest that the world would somehow be better without the lMF.
Think of where we would be in this crisis if there was no collective capacity for international
financial response:
-
there would be no multilateral vehicle to produce conditioned reform, none of the
conditionality, which has achieved more trade liberalization in Asia in the past few months
than many years of trade negotiations in the region.
-
there would be more, not less, austerity and economic pain in the region as the supply of
finance available to troubled countries would be diminished -- diminished once by the
absence of the policies the IMF is supporting, diminished twice by the absence of the
direct finance that it has been successful in providing
RR-2257
1
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
•
there would be far greater pressure on the United States and other countries to provide
direct support from our own taxpayers' resources.
•
there would be no internationally recognized source of apolitical advice and judgment on
the response to this crisis
•
there would be no internationally recognized authority providing support to the vast
majority of the countries in the world that have not been plagued by crisis, on the kinds of
steps that they need to take to ensure that they continue to avoid such problems.
Countries cannot be helped by the IMF if they are not willing to help themselves. But
without the llvIF, even those countries that are committed to reform might face default, either at a
government level or through the failure of the financial system as a whole, which could have a
devastating effect on their own economies and significantly raise the risks of contagion in other
markets.
This is not just hypothesis. The world has had ample experience with international
financial problems that are not addressed collectively, that do not call forth a cooperative response.
A recent column in the Washington Post talked about what was for 50 years called America's Great
Depression: the events that began in the 1870s. And of course, an even clearer example of what
happened when the United States was not prepared to lead with respect to international financial
problems was provided by events in Europe in the early 1930s, when devaluation -- competitive
devaluation, deflation, contraction, and depression -- laid the groundwork for what was as great a
conflict as human history has yet seen.
There is, I would suggest to you, an enormously strong case for, and it is very much in
America's national interest to have, a capacity to respond to these kinds of crises. And that is a
critical part of what the IMF does. But think about what else the IMF has done in the last decade.
It was the primary national security challenge of the post-Cold War period to support
economic reform and the maintenance of order in the former Soviet Union, particularly in Russia.
In early 1993, hyperinflation in Russia was widely predicted. Hunger in the major cities was
frequently forecast. Secession of major parts of Russia and civil war were on some people's radar
screen, and the lack of confidence in Russia's currency was seen as at the center of all of those
concerns. The international community, beginning with President Clinton's meeting with President
Yeltsin in Vancouver in 1993, made a strong response. And the IMF, the financial innovation of
the IMF, was at the center of that response.
Today a new wind is blowing through Africa, as economic growth rates have nearly
doubled in the last four years. And if you look at where that growth is coming from, those
increases in growth are all coming in countries that have embraced programs of economic reform,
of openness, of liberalization, and have done so with IMF support.
The llvIF has also played a crucial role in the 1990s in helping Argentina to break free of a
century-long tradition of stop-go economics and vulnerability to outside shocks. After 30 years
2
when Argentina was adding a zero to the value of its currency every three years, it has seen several
years now of nearly zero inflation.
And these crises are the crises the world knows about. Equally important are the successes
of surveillance that are not talked about: the occasions on which a country was facing very serious
problems, and a quiet message was sent, a trip was taken, a warning was given,
an opposition leader was notified, a friendly country was involved, a policy correction was made,
and a crisis that would have taken place was averted. That1s perhaps even the more important role,
even if it is, by its nature, the less widely heralded role.
I would suggest to you that the IMF is absolutely essential to a successful new economic
world as we enter the 21st century. And success of the IMF is dependent on the strong support of
its largest shareholder, the United States of America. That is an issue on which we will be
crucially tested during this year, as we make a national decision on whether to ratify the quota
increase that has been approved by the IMF and the expansion of the new arrangements to borrow.
Let me be very clear: given the case that I have just made, I would suggest to you that even
if a substantial cost to our taxpayers was involved, it would be in America's national interest to
support the IMP. But the reality is that there is no ~- repeat no -- cost to American taxpayers
whatsoever.
The IMP functions very much like a credit union. You do not spend money when you
make a deposit in a credit union; you simply exchange assets. And the IMF is a very safe credit
union, because most other credit unions do not have gold backing for nearly two-thirds of their
outstanding loans. It is a credit union, we should also remember, with which we have transacted
in both directions, borrowing as recently as 1978. And it is a credit union that going forward will
be operated on an even more economic basic, following the recent decision, in the case of certain
large programs, to charge premium interest rates to cover any risks that are involved and to
encourage countries to move back to the market as rapidly as possible. In short, the IMF would be
a tremendous bargain for the United States at even a far larger price than it costs.
II. Reform of the IMP
It is one thing to say that we absolutely need an IMF. It is another thing to say that we are
completely satisfied with the IMF that we have.
Recent events do point up the continuing need for evolution and change at the IMF. We in
the United States have been working to support that kind of change in a number of areas over the
last three years, including policies to adapt to a world that is much more dominated by capital
accounts than any we have had before; a new emergency financing mechanism; for the first time,
IMP transparency policies oriented toward promoting transparency through the world, through the
special data dissemination standard; and much closer involvement by the IMF in monitoring
supervisory practices in the financial sector.
As we remarked several years ago, it is time that IMF stop standing, as some suggest, for
3
"Itls mostly fiscal," and expand its activities to work to support strong and effective regulation of
financial systems around the world. That is not a task it can carry out alone. It is a task in which
the Bank of International Settlements, in which the Basle group and the World Bank have a crucial
role. But surely there is a major role as well for IMF surveillance.
Second, we have worked to ensure the IMF is keenly focused on its primary goal of
promoting growth and prosperity in all its member countries. By paying closer attention to the
needs of the poor in designing adjustment programs and encouraging governments to cut
unproductive expenditures, such as military spending, and by encouraging the allocation of more
resources to primary education, health care and essential capital investment, the IMF has made,
and can continue to make, a very important contribution.
Going forward, it is not just the quantity of budget deficit reduction that matters~ it is the
quality of budget deficit reduction that matters as well. And I take some satisfaction from the fact
that since 1990, military spending in program countries has declined from 5.5 percent of GNP to
2.2 percent of GNP.
The IMF has played a crucial role in supporting, with very strong American support, the
multilateral debt initiative for highly-indebted poorer countries to remove debt overhangs that in
Uganda alone has taken $300 million that otherwise would have gone to support debt service and
put that into clean water and better schools.
And as part of that continuing effort to ensure that all benefit, we have strongly supported
the ongoing, but only recently ongoing, policy dialogue between the IMF and the International
Labor Organization on undertaking a pilot program of in-country consultations on labor market
issues and worker rights. These efforts took another step forward in Korea, where Michel
Camdessus met with Korean labor leaders and the IMF strongly encouraged the government to
involve labor unions directly in its plans for restructuring the chaebol.
Third, welve made progress in bringing about some of the same values that the IMF
stresses to its clients -- the values of transparency and accountability -- at the IMF itself As
Michel Camdessus has recognized, this is progress that needs to continue. We need much wider
publication ofIMF internal data. We need much more scope, as we have seen recently, for
external evaluations of key IMF policies, the first of which is expected to be published this spring.
And we need to build on the very important precedent set in the three most recent Asian programs
by the publication of letters of intent detailing IMF agreements wherever possible.
Ill. The Long-Term Challenge: Building the Right International Architecture
There are other, larger questions that we will have to face in the months ahead as we learn
and distill the lessons from the Asian crisis. They include stronger and enhanced efforts at
improving the regulation of capital flows and financial institutions globally. They include learning
the lessons of the recent experience on crucial questions, such as how you respond to this new
kind of crisis that is a crisis of confidence and a crisis of capital withdrawal, rather than a crisis of
excess demand and overheating.
4
This past weekend in London the G-7 Finance Ministers and Central Bank Governors
made clear their commitment to continuing the major international effort a safeguard the global
financial system against crises which began, at President Clinton's initiative, some years ago at a
G-7 meeting in Naples and later developed at the Halifax Summit. That initiative has already
brought concrete results -- the Basel Principles and the new IMF data dissemination standards
being just two examples. But the Asian crises have underscored that plenty more needs to be done.
As we recognized in London, there are five crucial imperatives in this agenda:
•
first, promoting measures to make global markets function more efficiently, for example
through increased surveillance and enhanced national supervision and regulation. The
important contagion effects we have seen in Asia and other emerging markets well
illustrate the importance of this kind of ongoing prevention;
•
second, increasing transparency and disclosure, for example by strengthening the SDDS to
include net reserves, short-term debt accumulation and data on the financial sector;
•
third, strengthening financial systems, both globally and at the level of individual
countries, through improved prudential standards and the promotion of effective financial
infrastructure;.
•
fourth, strengthening the role of the international financial institutions in financial crises to
ensure that the international community can respond quickly and appropriately to problems
and act to prevent their recurrence;
•
fifth, ensuring appropriate burden-sharing by the private sector in the resolution of crises.
Let there be no doubt, as Secretary Rubin has said, that it is not our objective or our desire
in responding to any of these situations to provide one nickel for the benefit of bailing out private
creditors who have made bad loans, or to prevent them from accepting the pain associated with
restructuring, renegotiating or stretching out those loans. But support for nations, support for
economic growth, support for stability, inevitably will have a by-product on occasion of benefiting
private creditors. And it is in that way that there have been benefits to private creditors in these
support programs.
Given the tremendous and very fast growing quantities of money that are involved we will
have to find institutions that will enable us to work through these crises with less external finance
and more creditor stretch-out. But we will have to do so in a way that is safe and in a way that is
stable and in a way that does not promote contagion. That is an awesomely difficult analytical
challenge. It involves bankruptcy laws at the micro level with respect to particular countries. It
involves the way we regulate international capital flows to banks. And it involves national
economic practices in time of crisis.
I don't think any of us have the answers, but I think all of us are committed to asking the
questions and moving vigorously forward.
5
IV. Concluding Remarks
I have tried to make two basic points here today. There are fires burning. The IMF is the
fire department that is helping the international community respond to this crisis. It is essential
that we continue to support it. At the same time, we need to look, going forward, very hard at how
that fire department operates and make sure that as this crisis, as this phase is brought to a close,
whenever that happens, we have the best possible apparatus in place to prevent it from happening
again, and to respond to any problems that may arise.
In 1944 Franklin D. Roosevelt acted on a recognition that United States involvement
would be critical to facing the immediate challenges of rebuilding a new international economy on
the ashes of the old. And he recognized the enormous benefits that would flow from that
engagement for the United States. Our commitment at that time as been rewarded many, many
times over in the years since. Today, at the dawn of another new and challenging era, we have to
learn from that legacy and build on it. And that means supporting the IMF to be up to the
challenges today and the challenges to come. Thank you very much.
-30-
6
DEPARTMENT
OF
THE
TREASURY
1789
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N .W.• WASIDNGTON, D.C .• 20220 • (202) 622-2960
FOR IMMEDIATE RELEASE
February 26, 1998
Contact: Dan Israel
(202) 622-2960
FIRST CITIZEN ADVOCACY PANEL LOOKING FOR MEMBERS
Treasury Secretary Robert E. Rubin and Internal Revenue Service Commissioner Charles
0_ Rossotti today announced the formation of Citizen Advocacy Panels, designed to provide
independent monitoring of the quality of IRS customer service and to make recommendations to
improve that service. The first citizen panel, based in the IRS's South Florida district, is
beginning its search for taxpayers to serve as volunteer members.
The panels are being established nationwide, with the first four rolling out this year. In
addition to the first panel in Ft. Lauderdale, citizen panels will be established in Brooklyn,
Milwaukee, and Seattle.
Panel members will be identified through an independent, structured application process,
aimed at a balanced membership and representation of a cross-section of the taxpaying public
within the district in which the panel resides. The Secretary of the Treasury will make final
selections from identified candidates.
"The citizen advocacy panels are a significant step in our effort to reform the IRS," said
Secretary Rubin. "These independent panels, together with a stronger Taxpayer Advocate at the
IRS, will make it easier for taxpayers to get problems addressed quickly and effectively and will
help the IRS to identify ways in which customer service can be improved to prevent additional
problems. "
President Clinton announced last October the concept of the new, locally-based citizen
panels whose mission is to:
•
provide citizen input into enhancing IRS customer service by identifying problems and
making recommendations for improvement of IRS systems and procedures;
•
elevate identified problems to the appropriate IRS official, and monitor the progress to
effect change; and
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
•
refer individual taxpayers to the appropriate IRS office for assistance in resolving their
problems.
Commissioner Rossotti said he looks forward to receiving the input the citizen panels will
provide. "This type of cooperative panel is a win-win for everyone," said Rossotti. "Not only can
the IRS benefit from the fresh perspective of our service as seen through our customers' eyes, but
this kind of grassroots involvement also gives the public an opportunity to participate in
government decision-making."
Last month, Rossotti unveiled a new concept of modernized operations for the IRS to
deliver significantly improved service, based on looking at IRS operations from the taxpayers'
perspective. "We have to start looking at everything we do from the outside in -- the citizens'
panels fit in perfectly with that concept," Rossotti said.
Each panel will consist of seven members serving two-year tenns. The only government
representative will be the IRS district's Taxpayer Advocate. No fonner IRS employees will be
allowed to serve on the panels, and only one panel member may be a professional tax
practitioner. Panel members will not be paid, but will be reimbursed for their travel expenses.
Members of the first four citizen panels are being solicited by Booz-Allen & Hamilton.
-30-
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt· Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE
CONTACT:
RELEASE
Office of Financing
February 26, 1998
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 44-DAY BILLS
44-Day Bill
March 03, 1998
April 16 I 1998
Sl127946L3
Term:
Issue Dace:
Maturit:y Date:
CUSIP Number:
RANGE OF ACCEPTED COMPETITIVE BIDS:
Discount
Rate
-----Low
High
Average
5.36 %
5.37 %
5.37 %
Investment
Rate 1/
Price
---------5.47 %
5.48 %5.48 %
9$1.345
99.344
99.344
Tenders at the high discount rate were allotted
35~.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
$
Competitive
95,805,000
PUBLIC SUBTOT.ll.L
Federal Reserve
Foreign Official Inst.
$
TOTAL
$
23.276,375
o
o
95,805,000
23,276.375
Noncompetitive
1/
Accepted
Tendered
Tender Type
o
o
IOO,Deo
100,000
95,905,000
Equivalent: coupon-issue yield.
RR-2259
http://\VWW .pub lied cht. tre:ls.gov
$
23,376,375
PUELIC DEET/WRSH DC
-
Fax:202-2l9-3365
Feb 26 '98
13:55
P.Ol
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt· Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE
February 26, 1998
CONTACT:
Office of Financing
202-219-3350
RESULTS OF TREASURY'S AUCTION OF 52-WEEK BILLS
Term:
Issue Date:
Maturit.y Date:
CUSIP Number:
364-Day Bill
March 05, 1998
March 04, 1999
91279SBU4
RANGE OF ACCEPTED COMPETITIVE BIDS:
Discounc
Invest.ment
Rate 1/
Rate
------
Low
5.120%
High
Average
S.12S%
5.125%
price
------
---------5.402%
5.407%
5.407%
94.823
94.818
94.818
Tenders at the high discount rate were allotted
AMOUNTS TENDERED
ru~
73%.
ACCEPTED (in thousands)
Tender Ty-pe
Tendered
Competitive
Noncompetitive
$
Accepted
44,694,300
1,052,488
----------------$
9,610,550
1,052,488
45,746,788
10,663,038
Federal Reserve
5,845,000
5,845,000
Foreign Official Inst_
Refunded Maturing
Additional Amounts
1,440,000
1,440,000
PUBLIC SUBTOTAL
o
o
----------------'TOTAL
1/
$
53,031,788
Equivalent coupon· issue yield_
RR-2260
http://\yYVW .p 11 b licrl~bt. treas_go v
$
17,948,038
8660 9407 1RUI
08/05/98
MAB
I;~
1 1 11~l il0087964
il~M~ I~il[lnil l l
@FedFRASER