Full text of Press Releases of the United States Department of the Treasury : Volume 374

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v. 374

Department of the Treasury

PRESS RELEASES

The following numbers were not used:

2919,2934,2967,2974,2977

DEPARTMENT

OF

THE

TREASURY

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OFFICE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960

Text as prepared for Delivery
January 4, 1999

('untact: Public Affairs
(202) 622-2960

TREASURY SECRETARY ROBERT E. RUBIN REMARKS AT THE 1999T AX FILING
SEASON KICK-OFF AT THE NATIONAL PRESS CLUB
It is a pleasure to join you today and say a fe\v v;ords about t.he 1999 tax filing season,
which begins today. As taxpayers prepare their taxes this year. I believe they will find an
improved IRS, one that is more customer friendly. better equipped to answer questions, and with
more opportunities to utilize technology when tiling.

Beginning about three years ago, the Administration began a highly intensified process of
reform at the IRS. We recognized that there \vere very substantial problems at the IRS that
would not be solved quickly, and we have devoted a great deal of time and resources to moving
forward on those problems. Since then. we have made real progress in using technology more
effectively, which was the first matter we addressed. doing more to guarantee fair treatment of
taxpayers, and improving customer sen·ice.
For example, during the 1998 filing season. the I R~ <IIlS\\ ered over:'; 7 million taxpayer
phone calls and there were 40 million fewer busy signals .. \ surge in e-tiling brought the total
number of individual returns filed electronically since the program began in 1986 to over 100
million returns. Last November. we celebrated the first alll1i \crsary of the very successful
"Problem Solving Days, when taxpayers can sit dO\\l1 and meet face to face with an IRS
representative to help resolve a particular problem. Approximately 32.000 taxpayers have taken
advantage of this innovative program Vvith even more taxpayers expected to participate in 1999.
We now have 24 hour a day/seven day a week phone scnice. and have expanded service
at over 170 sites leading up to April 15th. And this summer. the Administration worked with
Congress to pass a major bill which marks a significant step romard in reform at the IRS.
However, there is still an enormous amount to do. lhc problems at the IRS developed
over years, even decades, and it will take time to lix thcm. I here are no quick fixes or easy
solutions, but dramatic change is an absolute necessity. Ami I \\ant to tell you that we are
committed to accomplishing that goal.
RR-2875

For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

In addition to the changes \\e han: made at thL' II\~. lili~ \ car taxpayers can look forward
to a number of new tax breaks that will make it easiLT to raisc ~l child. get an education. or secure
health insurance. Taxpayers may claim a tax credit of Lip I( I S-l-I)I) Ill!' each eligible dependent
under the age of 17. There are ne\\' Hope post-secondary L'ducation and lifetime learning credits.
And self employed individuals may deduct up to -.+5 perccl1t or their health insurance premiums.
Let me close with one more thought. No one likes to pay taxes. yet one of the things that
has been lost in the debate around the IRS over the last fe\\ \ cars is the critical function that the
IRS performs. The IRS collects 95 percent of the federal gmerl1ment" 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. tll college loans. And by
enforcing the tax laws, they make the tax system fairer. Those \\ho pay their fair share shouldn't
have to bear the burden of those who avoid paying their taxes.
Let me also say a word about Charles Rossotti. lie camc to the IRS a little over a year
ago, bringing his experience as a CEO of a large public comp~lIly to bear on the problems at the
IRS. In that short time, he has really done a tremendous job in leading the IRS on the path of
reform. President Clinton, the Vice President. Commissioner Rossotti all have demonstrated a
tremendous commitment to reform at the IRS. and \\e at Treasury and the IRS are committed to
doing everything possible to continue on the reform path ~ll1d create the kind of IRS Americans
deserve and need. Thank you very much.
- ]0 -

PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239

FOR IMMEDIATE RELEASE
January 4, 1999

Contact: Office of Financing
(202) 219-3350

TREASURY'S IO-YEAR INFLATION·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 month of Jan uary for the 10-year Treasury inflation-indexed notes of Series A-2009.
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 of the reference CPI numbers (Ref CPI's) and 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 Affairs automated fax system
by calling 202-611-2040 and requesting document number 2876. The information is also available on the
Internet at Public Debt's website (http://WW\v.publicdebureas.gov).

The information for February is expected to be released on January 14, 1999.
000

Attachment

RR-2876

http://W)nv .pu blicdebt. treas.gov

TREASURY 10-YEAR INFLATION·INDEXED NOTES
DESCRIPTION:
CUSIP NUMBER:
AUCTION DATE:
DATED DATE:
ORIGINAL ISSUE DATE:
MATURITY DATE:
Ref CPI on DATED DATE:
TABLE FOR MONTH OF:
NUMBER OF DAYS IN MONTH:

Series A-2009

9128274YS
January 6, 1999
January 15, 1999
January 15, 1999
January 15, 2009
16400000
January 1999

31
163.6

CPI-U (NSA) September 1998
CPI-U (NSA) October 1998
CPI-U (NSA) November 1998

164.0
1640

Ref CPI and Index Ratios for January 1999:

Month
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January
January

Year

Ref CPI

1

1999

2
3
4

1999

164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
16400000
164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
164.00000
16400000
164.00000
16400000
164.00000
164.00000
164.00000
164.00000

Calendar Day

5

1999
1999
1999

6

1999

7

1999

8
9

1999
1999

10
11

1999

12
13
14
15

1999
1999
1999

1999
1999

1999

16
17
18
19·
20

1999
1999

21

1999

22
23
24

25

26
27

28
29
30

31

1999
1999

1999

1999
1999
1999
1999
1999
1999
1999
1999
1999

Index Ratio

1.00000
1.00000
1.00000
1.00000
1.00000
1.00000

, .00000
100000
1.00000
1.00000
1.00000
1.00000
1.00000
100000
, .00000
1.00000
i .00000

I> E .. ,.\

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T :\ lEN T

0 F

TilE

T I{ E ,.\ S II I~ Y

NEWS
omCE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. • WASIDNGTON, D.C.· 20220. (tat) 622-2960

EMBARGOED FOR 2:30 P.M. EST RELEASE
January 4, 1999

Reflections on Managing Glohallntegration
By Lawrence H Summers1
Deputy Secretary of the Treasury
Annual Meeting of the Association of Government Economists
New York City

I appreciate very much the honor that the Society of Government Economists has
bestowed upon me in asking me to address you today. Before I say anything else I want to
acknowledge that one of the great strengths of America's government is its career government
economists. Vlhile academic interlopers serving as political appointees may get a majority of the
attention, a majority of the accomplishment in areas ranging from tax policy to
telecommunications policy, from monetary policy to manpower policy, from financial policy to
forestry policy, is the result of the steady perseverance of career government economists.
Increasingly the language of public policy is the language of economics; and sophisticated
policy fonnulation depends on an understanding of economic concepts. Over the last 6 years I
have had the chance to be present when concepts ranging from "superlative price indices" to
"multiple equilibrium" to "the liquidity trap" to "dynamic hedging" to "shadow pricing" have
been discussed with the President of the United States. Where it was once the case in the United
States that the President's Council of Economic Advisers waged n lonely battle for "good"
economics, today, first rate economists staff departments ranging from Treasury to Labor to
Commerce to Justice to EPA and hold line as well as advisory positions.
As remarkable as the penetration of economics and economists into the American
government has been its penetration into even higher levels of governments around the world. A
decade ago Mexican President Zedillo was a practicing monetary economist in the Bank of
Mexico. Two recent Italian Prime Ministers Romano Prodi, and Larnbcrto Dini have
distinguished records as economic thinkers. Lest anyone think all those trained in economics
think alike, Russian Prime Minister Primakov holds a doctorate in political economy. And there
RR-2877

II am indebted to my colleagues in the US government, to many foreign counterparts, and
to many of my friends in academe for whatever I have learned about the subject of this lectw"c. I
accept responsibility for any errors, and stress that views expressed should not be attributed to
any organization with which I have been or am affiliated.
For J1reS6 releales, speeches, public scheduhs and official biographies, caU our 24-hour fa.% line at (202) 622·2040

are too many examples at the level of finance minister and central bank governor to catalog.
Just think of the Berkeley Mafia in Indonesia, the Chicago boys in Chile, and the MIT and
Harvard graduates who have played such a large role over the last decade in Mexico and
Argentina. or the historic chWlges wrought by Mahomon Singh as India's finance minster.
Any doubt I might have had about the globalization of economic thinking was shattered
when I met with Chinese Premier Zhu Rhongi in early 1997 in the same pavilion where
Chainnan Mao had received foreign visitors. After being offered a Diet Coke I was asked a
variety of searching questions about the possible use of put options in defending a currency, and
how they might be best structured.

It is perhaps good that economic thinking has globalized because the challenge of
managing international economic integration may be the preeminent new challenge facing
economic policy makers around the world, and as important as any other political challenge
facing the world's diplomats. I recognize of course that international integration has many
aspects, trade, capital flows, multinational corporations, policy spillovers, and the list could be
continued. But I think there are some common dilemmas posed by international integration in all
its fonns and it is these that I want to concentrate on this afternoon.
As I consider this topic, I shall try to emphasize the interplay of economic reasoning and
economic policy making - highlighting both those areas where the world would be a much better
place if the polity understood basic economics, and the areas where textbook economics omits
what are legitimately key parts of the policy problem. Most relevant to today's subject is that in
research one simplifies a problem to make it tractable, works on it until a satisfactory solution is
found, and abandons it, if it is too hard. Policy makers cannot abstract from awkward aspects of
reality, have timetables set by external conditions, and cannot abandon problems because they are
too hard.
Much has been said about globalization and economic integration. I want to address four
subjects today. The first is the extent of global integration that has taken place and that lies in
prospect. The second is the challenge that economic integration poses to domestic and
international policy makers around the world: Third. I want to reflect on some of the policy
implications of increased integration in one area that has been highlighted by the crises in Asia,
Russia and elsewhere •• the international capital market. Finally, I will offer some concluding
observations about the special role of the world's only economic superpower in managing global
integration.

I. Global Integration: Past, Present and Future
Some time ago, I visited Mozambique - by some measures the world's poorest country-to discuss issues relating to debt relief. Seated at a lunch with the local business community, I
inquired of the person next to me how business was. He responded "pretty good but I am
worried about the future" When I asked why, he explained that he was the monopoly Internet
provider in Mozambique but feared that competition was coming and would erode his profits.

That story captures the main forces driving global integration: technology, the growing
faith in markets, and the growing connection between poorer and richer nations.
... Spurred both by technology and the successive reduction in various kinds of barriers,
trade flows worldwide have increased several percent a year faster than global output. And
increasingly the value chain has itself been internationalized, as goods are partially assembled in
a number of different countries .
., Trade in many services has increased even more rapidly. For example, some
domestic airlines now answer reservations calls in the Caribbean to reduce labor costs.
• And depending on just what measures are used, cross border capital flows have been
rising by as much as 10 percent or more a year faster than output -- with- the number of countries
that can be said to be part of the global capital market far larger today than it was at the
beginning of the 1990s.
To be sure, as a number of authors -- such as Paul Krugman and Dani Rodrik -- have
noted, it is easy to overdo the novelty of globalization as a phenomenon. In important respects
we are, as Rodrik puts it, simply going back to the future. The dark years between 1914-1950
saw a literal dis-integration of the world economy, as governments actively sought to inhibit
integration for a host of economic and political reasons. But the pre-World War I economy was
surprisingly integrated. Trade shares for a number of countries including the United States were
not so different in 1890 and 1990. The twentieth century has not seen capital flows on the scale
of Britain's steady capital exports of7 percent ofGDP at the end of the last century. And the
passport and resulting inhibition to free labor mobility has been a 20 lh century innovation.
In fact, two considerations suggest that we may barring political or economic catastrophe
be far less advanced in the process of global integration than is often supposed. First, recent
research on intra-national trade using remarkable data on intra-provincial Canadian trade
summarized in John Helliwell (1998) suggests that differing regions of national economies are
far, far more integrated than comparably sized comparably distant regions separated by a national
border.
Helliwell finds that adjusting for scale and distance, trade between Canadian provinces was
17 times as great as between Canadian provinces and American states in 1988, falling with the
implementation of the free trade agreements to about 12 times more recently. This is not some
econometric curiosity. Trade between Ontario and Washington state is only 1112 as large as
trade between Ontario and British Colombia even though the economy of Washington state is 1/3
larger than that of Ontario! Using much less satisfactory data, he finds very substantial though
smaller border effects with the EU. In a similar vein, Helliwell's data suggest that the impact of
the US-Canada border, a border about as permeable as exists between nations on trade services,
on the flow of capital and on migration is far larger even than on the flow of goods.

It is not entirely clear how to interpret these findings. At a minimum, it should give pause
to those who proclaim a borderless world, or the end of the nation state. To some extent, it must

reflect that much economic activity depends on social networks and these are more common
where there are ties of nationality and language than where there are not. These findings
certainly point up the fact that even with the most far reaching of free trade agreements, there is
likely to a considerable gap between reality and the free trade model.
But they must also point up that there is vastly more potential international economic
integration than is usually recognized, and that if and when technology, communications,
politics, and cultural convergence reduce the national border effects international considerations
could come to loom far larger in national economic policy making than they do today.
The second consideration suggesting that we may be at only an early stage in confronting
the effects of global integration is the rise of the developing world's economies. While the
watershed events of the last year, give pause I am convinced that history will record as the most
important economic event of the late part of the 20 th century, the convergence of large parts of the
developing world towards industrial country living standards. More than 1/4 of humanity is
enjoying growth at rates where living standards quadruple within a generation is unprecedented
in economic history.
Even if convergence does not continue at quite the rate of the last decade, this means that
inevitably there will be far more production taking place in countries where relative incomes are
far lower than in the United States or other industrialized countries. Already on some purchasing
power parity measures, China is the world's second largest economy. As the relatively
homogeneous industrialized world, comes to have a smaller share of the world's population and
total output, it is inevitable that if barriers continue to fall international forces will operate
increasingly strongly on national economies.

To summarize: integration is a more salient feature of economic life than ever before. Yet
there is good reason to think that, barring catastrophe, we will see much more integration in the
future. This raises the question of how it will be and should be managed.
D. Managing Economic Integration
An audience such as this one does not need to be reminded of the benefits of open
markets, free trade and economic integration. Fundamentally, the case for free trade is the case
for the market system. The benefits come in the fonn of greater realization of the efficiencies
available from specialization, from allowing resoUrces to flow to their most productive use, from
comparative advantage, and from the spur of competition. They show up in the fonn of higher
living standards resulting from higher wages and higher returns to capital and quite likely in the
fonn of higher rates of growth.

\Vhile the case is not airtight -- consider Europe prior to World War I -- there is a strong
argument to be made that increased economic integration also brings in its wake greater political
stability and reduced potential conflict. Only half in jest. Tom Friedman notes that no two
countries with a McDonalds have ever fought a war.

There are other kinds of links between integration and stability. A sizeable fraction of
conflicts have their roots either in economic failure -- post World War I Germany, to take just
one example - or in economic success that is limited by others' protectionism, think of Japan's
rise in the 1920s and 1930s. It may be that the fact that the profound economic changes in Asia,
on top of simmering ethnic conflicts, have not so far led to violence is related in part to success
of global trade liberalization.
I belabor slightly the benefits of economic integration because the arguments I have made
differ from the ones usually used in political debate about trade. It sometimes seems in political
debates that the main arguments for open markets and free trade are the mercantilist ones. Thus
the volume of exports and the jobs they create are normally stressed, and the impression is left
that imports are a bad job-destroying thing. The truth is that in an economy in which aggregate
demand is being managed to optimize an inflation-unemployment trade- off, trade policies will
not impact on the quantity of jobs only on their industrial composition. Adding export jobs and
subtracting import jobs in most economies raises average standards of living. And imports have
important benefits including lower consumer prices, greater competitiveness for producers who
use imported inputs, and downwards pressure on inflation.
Of course, any international economics textbook records a variety of qualifications and
amplifications to the case for open international markets that I have just summarized. The most
important qualifications have to do with reciprocity-the idea that unilateral opening up reduces
leverage to get others to open up which is also in a country's interest, with pre-existing
distortions that may be exacerbated by opening up-an inadequately regulated banking system to
take an example with currency, and with various market imperfections as are implicit in infant
industry arguments. The most important amplifications have to do with rent seeking and the
overwhelming tendency for efforts to resist international integration to also inhibit the growth of
domestic market forces.
In the face of these arguments, the most important reason why the world has not made
more progress, and why progress is resisted in promoting integration, is that the losers know who
they are and organize, and winners do not know who they are and cannot and do not organize. In
part. this is because producers organize much more easily than consumers. In part it is because
of the natural human tendency to internalize good news and extemalize bad news. How many
people doing a mediocre job, at a badly managed finn, blame their layoff on foreign competition?
How many offered a raise or promotion because they were the best alternative in a labor short
region following a surge of export demand credit open markets rather than their own skill?
Clearly, public education on these points is a major task for the economically literate, one with
important stakes for our national well being.
But there is a different and growing challenge posed by global integration, one that relates
directly to the aspirations of governments. It may be that the largest and most important
difference between the globalization we have seen in recent decades and that of the last century is
that it impinges on the economic activities of government to a much greater degree than it did
then -- in large part because governments themselves are doing so much more.

Consider a number of examples:
•

Governments today tax and regulate a vastly larger share of economic activity than they
did a century ago, but find themselves increasingly constrained in pursuing these
objectives by concerns about "competitiveness" arising from international integration.

•

Governments at least since the Keynes's time in most countries have taken on an
obligation to maintain financial and macroeconomic stability, Democratic polities have
not over the last several decades been willing to tie macroeconomic policies to the mast
of a currency standard, and forego countercyclical efforts. As Barry Eichengreen has
argued, under the gold standard governments were insulated from domestic politics and
were free to take whatever steps were needed to defend their currency pegs. "Come the
twentieth century, these circumstances were transfonned."

•

Governments have accepted far more responsibility than they did a century ago for the
population's income security, and this too raises difficult questions for a more integrated
world. Dam Rodrik has raised the right and difficult question. United States laws prevent
workers from being driven out of their jobs by other American workers willing to work
12 hours a day, accept sub-minimum wages, or forego basic rights to organize. How
should they react to not being protected from foreign workers willing to do the same
things?

During his campaign for the Presidency in 1992, candidate Clinton, recognizing these
conflicts~ laid very considerable stress on the close connections between on the one hand,
domestic and international economic policy, and on the other, international economic policy and
more traditional foreign policy. The National Economic Council was a structural innovation in
the US government designed to facilitate the recognition of these linkages. What has become
clear in the last few years, is just how important these linkages are.
Integration is a good thing. But it raises tensions with other good things. Yes, greater
economic integration is in OUf national interest. But so also, in. the view of most of us, is
government involvement in stabilizing and regUlating the economy and providing some degree of
insurance to citizens. And so also, in the view of most us, is sovereignty a good thing. We want
food that is safe by standards set by our representatives, tax rates set by those who represent us,
and macroeconomic policies set with Americans' welfare in mind.
Domestically, in almost every COillltry there will be the challenge of overcoming the
special interest with the general interest. But the central task of international political economy I
would suggest in the years ahead will be reconciling as well as possible the three goals of greater
integration, proper public economic management, and national sovereignty - or what for brevity's
sake I will call the integration trilemma.
Reconciling any two of the objectives is easy if little weight is given to the third. Thus
traditional conservative economists like Milton Friedman resolve the integration trilemrna by
stressing the benefits of integration and the necessity of national sovereignty. They recognize

that in a world of capital mobility, this means that governments' capacity to tax capital, or to
regulate industry is likely to be eroded as jurisdictions are pitted against one another. And they
see this as a benefit. Similarly they welcome any erosion of the capacity to carry out
discretionary macroeconomic policy. The logic here is exactly that of American debates about
the role of Federal vs state and local government poliCies, with conservatives always favoring
more power being assigned to the states.
Modem protectionists like Pat Buchanan resolve the integration trilemma by emphasizing
sovereignty and the need for public management and are prepared to sacrifice integration.
Indeed, rather than emphasizing the traditional benefits of protection, their argument is couched
heavily in terms of integration's corrosive effect on the public sector's ability to set and enforce
regulatory standards, and on the benefits that integration conveys to mobile rich capitalists. This
strain of thought is not confined to the likes of Pat Buchanan. Paul Krugman has argued for
controls on capital outflows on the grounds that they would permit countries to pursue more
domestically congenial monetary policies in countries facing serious financial strains.
Idealists resolve the trilemma by emphasizing integration and public action and accepting
intrusions on sovereignty. Outside of the ivory tower there are few idealists in this sense on a
global scale. But at the continental level, it is precisely this approach that has animated the
European Union project over the last several decades. Monetary union is only the most recent
example of a measure which promotes integration and preserves public management by reducing
national sovereignty. An even clearer example is Brussels' large role in setting trade and all
manner of regulatory policies for the European Union.
For those who are wedded to all three horns of the trilemrna, none of these positions are
comfortable. In what kind of compromise can one take refuge? A number of features of policies
directed at promoting international integration stand out.
First, there has been a consistent desire to finesse sovereignty problems by highlighting
the national benefits of internationally congenial behavior. Thus, G-7 macroeconomic
cooperation is premised on the idea that nations pursue, and should pursue, their own interests,
but that peer pressure can often be constructive in inducing them properly to pursue their own
interests. American labor rights and intellectual property advocates both seek to argue that the
national interest of other countries coincides with American interests in protecting workers from
unfair competition and upholding intellectual property rights. Recent enthusiasm for codes of
good practice in areas like fiscal and monetary transparency reflect a similar impulse.
Second, there is a desire to pursue integration at sub-global levels. The European Union
is only the most obvious example. While traditional trade theory views sub-global integration
with some suspicion, emphasizing the distinction between trade creation and trade diversion, its
appeal to policy makers has been increasingly evident over the last decade. Part of the
motivation is political: to solidify ties between neighbors. But an important element must also be
the greater desire to pursue integration that will more fully hannonize other aspects of national
policies. Where traditional trade theories emphasize that the benefits of integration are greatest
where national economies differ most, the EU has found accession issues most difficult with

countries, such as Turkey, that are the most different from existing members.

Third, there is the greatest willingness to cede power to international institutions where
there is the greatest technical agreement on what needs to be done and where issues of values are
less paramount. Thus, for example, there is more international agreement on questions like air
safety standards and bank capital requirements than on questions like tax rules and labor
standards.
Where does this leave us? The world does not stand still. Continuing improvements in
technology, inc,reasing skill levels in developing countries, the spread of cross-border
organizations -- all of these are operating to increase global integration. This brings enonnous
benefits but inevitably it also circumscribes governments' ability to pursue public purposes.
Perhaps most significantly, just at the time that integration may be increasing the desire for
policies that insure citizens, it may also be making important income generators more mobile,
thus reducing the capacity for insurance and redistribution.
The upshot is that those who believe that increasing international integration of
economies is a good thing have to accept the concomitant obligation to press for more effective
international efforts to insure that public purposes are preserved -- and that means pursuing the
strategies above, and perhaps others, with increasing vigor. Or to put it differently, economists
want their fellow citizens to understand what they know about the benefits of free trade. They
could also do well to learn what their fellow citizens know about wanting to live in a properly
balanced economy managed by their elected representatives.

ill. The Challenge of Financial Integration
These challenges take on increased urgency in the financial arena in light of the events of
the past two years. Financial disturbances have propagated nationally and internationally with a
virulence not seen in the last 50 years. Nations thought to be managing their economies well
have seen fmancial disturbances wipe away years of economic progress and create massive
economic insecurity among their citizens. Reversals of international capital flows have played
an important role in the crises in a number of countries, and the international community has
been called on to provide financial support to a number of countries on an unprecedented scale.
Given what has happened, it is natural and appropriate that there have been calls at
highest politica11evel for the refonn of the international financial architecture. Indeed, going
back to the Naples Summit in 1994, this has been a preoccupation of President Clinton and his
administration. And since then any number of international groupings have considered various
aspects of reforming the system.
The integration trilemma arises forcefully in the financial area - with each of the more
simplistic positions outlined above fmding its advocates. First, those unconcerned with
governments' pursuit of public purpose were able to argue, in the course of the 1998 debate in
the United States over funding for the International Monetary Fund, that the IMP should be
abolished.

Citing moral hazard arguments, the IMF's critics took the position that if there were no
insurance against crises, the frequency and damage inflicted by crises would be reduced. This is
an international extension of domestic arguments against deposit insurance and last resort
lending. Perhaps these arguments are correct. But the experience of the 1930s is not
encouraging regarding the stability of unregulated fmancial systems.
Second, there are many who have sought to resolve the trilemma in this area by resisting
the integration of national capital mar~ets. Certainly, in retrospect it is clear that capital flows to
a number of emerging markets in the mid-1990s were excessive and dangerous to both borrowers
and lenders. With hindsight it is also clear that various government efforts to promote and attract
short term capital flows -- including Mexico's issuance oftesobonos, Thailand offshore banking
facility, and Russia's reliance on foreign holdings of domestic government debt -- were a kind of
excessive integration. And certainly it is now even more widely understood that liberalization of
domestic capital markets needs to be prudently measured with the pace at which adequate
regulatory capacity is developed. But it would be a tragedy if the lesson learned from recent
events was that the flow of capital from rich to poor countries was something that should be
prevented rather than encouraged.
Third, there are those who would resolve the trilemma through giving global institutions
much more power and resources. Thus, Henry Kaufman proposes a global fmancial regulator,
Jeffrey Garten a global central bank, and George Soros a global credit insurer. If they functioned
well, anyone of these institutions could possibly have important beneficial effects. But for the
moment at least, it is difficult to imagine nations ceding control over their money or their banks
to an international institution, or asking their taxpayers to support public insurance of large scale
private capital flows.
The sovereignty problems that arise from proposals that countries share conunon moneys
to avoid exchange rate problems may prove equally profound. Indeed, European economic and
monetary union may be the exception that proves the rule about the challenges of integrating
national moneys -- following as it does a half-century long process of developing integrated
political and economic institutions.
A number of countries have debated dollarization at various points with good reason.
After all, Panama is the only country in Latin America with single digit 30 year mortgage rates.
But, seignorage issues aside, using the dollar means accepting monetary policies oriented to
American conditions -- a step proud countries may be reluctant to take. When it comes to
managing money what may prove hard is reconciling our absolute need for sovereignty with
·other's need for national dignity.
The challenge for policy making in this area is to find solutions that respects all three
dimensions of the trilenuna. This is possible in a number of respects.
First, improved transparency and surveillance in international financial markets. If one
were writing a history of the American capital market I would suggest to you that the single most
important innovation shaping that capital market was the idea of generally accepted accounting

arise out of sovereign borrowing, or the forward market activities of the central bank, or private
borrowing that is subject to implicit or explicit public guarantees.
As part of this effort we should also be looking to improve private sector risk
management systems, on both the lender and the borrower side of the market: by encouraging the
adoption of international accounting and disclosure standards within fmancial institutions and at
the level of individual firms, and possibly by exploring the use of market-based incentives -- such
as requiring banks to issue marketable subordinated debt -- to strengthen risk management
practices and supplement the expertise of emerging market regulators.

Similar considerations could also be brought to bear in the ongoing review of the Basle
risk-weighted capital regime, in order to make it more accurate and to remedy biases toward
riskier kinds of lending -- for example, toward short-term interbank lending and riskier sovereign
and corporate borrowers -- if and when these are found to exist.
Fourth, and perhaps most difficult, effective crisis resolution. Two recent developments
have strengthened the IMF's capacity for responding to financial crises: the Supplementary
Reserve Facility providing that when large quantities of finance are provided to respond to
pressure from capital inflows, a premiwn will be charged; and the recent agreement that in
certain very specific circumstances the IMF could lend into arrears. We have also seen
international agreement on the principle of creating a new facility for providing contingent
finance to countries to help contain contagion.
That said, the controversies that have arisen in Asia and other troubled economies in the
wake ofIMF support programs have been vivid testament to the difficult issues of balance that
such programs bring with them. Notably, in providing support it is clear that national sovereignty
should be respected, politics should be understood, and the provision of support should not
engender a backlash against its providers. Yet these criteria have always to be balanced against
the need for credible policies that will contain the crisis, reduce the risk of future crisis, and have
the potential to increase confidence.

In Asia, the problems related to "crony capitalism" were at the heart of the crisis and that
was why structural refonns had to be a major part of the IMF's solution. On the other hand, there
was an Wlderstandable negative response on the part of many of the citizens in recipient countries
to foreign institutions' intervening in what many consider to be domestic political decisions -- for
example, about the scale and nature of domestic social safety nets. Here, as in so many areas, the
trilemma -- and the difficulties of managing it -- have perhaps been more obvious than its
solution.

IV. Concluding Remarks: The Indispensable Nation
President Clinton has recognized very clearly the challenges described above. In his
landmark address at the Council on Foreign Relations in September 1998 he spoke of the need to
work globally "to tame the cycle of boom and bust" just as we have worked to do domestically.
Recognizing the significance of international integration, he has also said that it is the "challenge

of the millennial generation ... to create a world trading system, attuned both to the pace and scope
of a new global economy and to the enduring values which give direction and meaning to our
lives."

The challenge of managing global integration is an especially important for the United
States as the world's largest, richest and strongest economy. If leadership in managing
integration is going to come, it is likely to have to come from our country. And now, at a time
when our economy is unprecedentedly strong, is a time when we should be able to do our part.
We should be able to. Yet examining the political climate for pro-integration policies in
the United States today provides serious grounds for concern. The President has not been able to
obtain negotiating authority for trade agreements. In the face of a financial crisis, IMP funding
was achieved only after a great struggle. American support for the World Bank and other
development banks has declined during the 1990s, and we are still remiss with respect to our UN
obligations.
There are a nwnber of reasons for this domestic ambivalence toward internationalist
economic policies. The Cold War "fight Communism" rationale for economic integration has
been removed. The popularization of politics has also probably played a role. I doubt that
anyone focus-grouped the Marshall Plan -- or that it would have fared well if they had. (There is
a reason it was not called the Trurnan plan.) And the power of concentrated narrow interests
relative to broad dispersed ones is also surely relevant.
But I suspect another reason is the widespread sense that international integration
interferes with governments' ability to deliver the benefits the citizenry want. That is why the
development of approaches that can reconcile integration, public purpose, and sovereignty -- by
economists and others inside and outside of government - is so profoundly important for the
future.

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
January 04, 1999

CONTACT:

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
Term:
Issue Date:
Maturity Date:
CUSIP Number:

91-Day Bill
January 07, 1999
April 08, 1999
91279SBGS

High Rate:

4.380%

Investment Rate1/:

4.490%

Price:

98.893

All noncompetitive and successful competitive bidders were awarded
securities at the high rate. All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

75%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered

Tender Type
Competitive
Noncompetitive

$

PUBLIC SUBTOTAL

24,736,561
1,306,671

Federal Reserve
Foreign Official Add-On
$

TOTAL

$

7,091,174

411,209

411,209

26,454,441

7,502,383

4,094,320
23,791

4,094,320
23,791

30,572,552

$

Median rate
4.370%-: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low rate
4.330%:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
Bid-to-Cover Ratio
1/

=

26,043,232 / 7,091,174

3.67

Equivalent coupon-issue yield.

http://www.publicdebt.treas.gov

RR-2878

5,784,503
1,306,671

26,043,232

Foreign Official Refunded
SUBTOTAL

Accepted

11,620,494

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
January 04, 1999

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
January 07, 1999
July 08, 1999
912795CF6

High Rate:

4.420%

Investment Ratel/:

4.585%

Price:

97.765

All noncompetitive and successful competitive bidders were awarded
securities at the high rate. All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

82%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered

Tender Type
Competitive
Noncompetitive

22,855,382
1,155,598

$

PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On

$

5,549,303

1,961,606

1,961,606

25,972,586

7,510,909

3,735,000
113,394

3,735,000
113,394
$

Median rate
4.410%: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low rate
4.375%:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
Bid-to-Cover Ratio
1/

=

24,010,980 / 5,549,303

=

4.33

Equivalent coupon-issue yield.

http://www.publicdebt.treas.gov

RR-2879

4,393,705
1,155,598

24,010,980

29,820,980

$

TOTAL

Accepted

11,359,303

DEPARTMENT

TREASURY

OF

THE

TREASURY

NEWS

~~/7819~. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1I

......................................

OmCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220 • (202) 622-2960

TREASURY SECURITY AUCTION RESUl,l'S
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:

FOR IMMEDIATE RELEASE
January 05, 1999

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 52-WEEK BIL:"'S
364-Day Bill
January 07, 1999
January 06, 2000
912795DB4

Term:
. Issue Date:
Maturity Date:
CUSIP Number:
4.335%

High Rate:

4.545%

Investment Ratel/:

?rice:

95.617

All noncompetitive and successful competitive bidders we~e awarded
securities at the high rate. All tenders at lower rates were accepted In full.
Tenders at the high discount rate were allotted

52%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered

Tender Type
$

competitive
Noncompet:it:ive
PUBLIC SUBTOTAL
Foreign Official Refunded

681{406

8,227,65E
85:',406

28{425,062

9,12;;,062

27{543,656

900,00C

-----------------

SUBTOTAL
Federal Reserve
Foreign Official Add-On
$

TOTAL

Accepted.

29,325,062

10,0(9,06:

';,980,008
852,60::

4,S~J,OO:

JS, 157,66:=

c:2,60:
~~

1-

~

r'~
I

::.

""':

-

~,,-~
I

'::

'::....:

Median rate
4.315%: 50% of the amount of accep:ed c~~;~::::~e
tenders was tendered at or below chac ~ate.
Low rate
4.250%:
5% of the amount of accepted cc~?e:~:~~e
tenders was tendered ac or below that rate.
Bid-to-cover Ratio

=

28/425,062 /

9{103,062

3.12

J:'qJ1iyalent coupon-issue yield.
Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

1/

DEPARTMENT

TREASURY

OF

THE

TREASURY

NEWS

~~/78~9~. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .

......................................

OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AvENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960

January 6, 1998

Weekly Release of U.S. Reserve Assets

The Treasury Department today released U.S. reserve assets data for the week
ending December 31, 1998 (given the January 1, 1999 holiday).
As indicated in this table, U.S. reserve assets totaled $81,664 million as of
December 31, 1998, up from $81,129 as of December 24, 1998.

u.s. ReserveAssets
(millions of US dollars)

1998

Reserve

Week Ending

Special

Total

Assets

Drawing

Gold
Stock

II

Rights

21

Foreign
Currencies

Reserve
31

ESF

SOMA

Position in
IMF 2/-t1

December 24, 1998

81,129

11,041

10,586

15,973

19.357

24,1 73

December 31, 1998

81,664

11,041

10,574

16,3 15

19,686

24.049

11

Gold stock is valued monthly at $42.2222 per fine troy ounce. Values shown are as of November 30.
1998. The October 31, 1998 value was $11,041 million.

21 SDR holdings and the reserve position in the IMF are based on IMF data and re\alued in dollar terms

at the official SDRIdollar exchange on the reporting date. IMF datil illT ilS of December 2-\. 1998
31

Includes holdings of tile Treasury's Exchange Stilbilization Fund (ESF) and the Federill Rc:servc:\
System Open Milrket Account (SOMA). These holdings are valued at currc:nt Ill:nket e'\Change rilte.;
or, where appropriate, at such other riltes as ll1ily be ilgreed upon by the pMties to the transilction\
BClITO\\ (C-Ull III Juh
1998, ilnd an SDR 619 millIOn 10iln to the IMF under the New Arrangements to Borrow (\;\1$) III

41 Includes SDR 361 million 10iln to the IMF under the Gener;!I Arrangements to

December 1998.

RR-2881

Far press releases, speeches, public schedules and official biographies, mil our 24-hollr 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
IMMEDIATE RELEASE
January 06, 1999

~OR

CONTACT:

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 10-YEAR INFLATION-INDEXED NOTES
Interest Rate:
Series:
:USIP No:
STRIPS Minimum:

Issue Date:
Dated Date:
Maturity Date:

3 7/8%
A-2009
9128274Y5
$1,600,000
High Yield:

Price:

3.898%

January 15, 1999
January 15, 1999
January 15, 2009

99.811

All noncompetitive and successful competitive bidders were awarded
3ecurities at the high yield. All tenders at lower yields were
~ccepted in full.
Tenders at the high yield were allotted 100%.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted

Tendered

Tender Type

24,894,123
57,029

$

Competitive
Noncompetitive
PUBLIC SUBTOTAL

8,005,979

400,000
125,000

400,000
125,000

25,476,152

$

$

Median yield
3.885%: 50% of the amount of accepted competitive
:enders was tendered at or below that rate.
Low yield
3.850%:
5% of the amount of accepted competitive
:enders was tendered at or below that rate.
~id-to-Cover

Ratio

=

24,951,152 / 8,005,979

=

7,948,950
57,029

24,951,152

Federal Reserve
Foreign Official Inst.
TOTAL

$

3.12

RR-2882
http://www.publicdebUreas.gov

8,530,979

DEPARTMENT

OF

THE

TREASURY

NEWS

TREASURY

..................1I1I1I....1I1I1I1I1I1I..~/78~9~~1I..1I1I1I1I1I1I1I1I1I1I~~~~~1I1II
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C. • 20220 • (202) 622-2960

EMBARGOED UNTIL 2:30 P.M.
January 7, 1999

CONTACT:

Office of Financing
202/219-3350

TREASURY OFFERS 13-WEEK AND 26-WEEX BILLS
The Treasury will auction two series of Treasury bills totaling
approxi=ately $15,000 million to refund $lS,331 million of publicly held
securities maturing January 14, 1999, and to pay down about $331 million.
In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $7,857 million of the maturing bills, which may be refunded at
the highest discount rate of accepted competitive tenders. Amo~ts issued to
these accounts will be in addition to the offering amount.
The maturing bills held by the public include $2,350 ~llion held by
Federal Reserve Banks as agents for foreign and international monetary
authorities, which may be refunded within the offering amount at the highest
discount rate of accepted competitive tenders. Additional amounts may be issued
for such accounts if the aggregate amount of new bids exceeds the aggregate
cunount of maturing bills.
The bill auctions will be conducted in the single-price auction format.
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 Circu1ar for the Sa1e and Issue of Marke~able Book-Entry
Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about each of the new securities are given in the attached offering
highlights.
000

Attachment

RR - 288 3
For press re/eaus. speeches. public schedules and official bio~raphw. call OUT l.t-ltollr flU: line at (202) 622-2040

HIGHLIGHTS OF TREASURY OFFERINGS OF BILLS
TO BS ISSUED JANUARY 14, lS99
January
Offering Amount •••.•.•••....••.••.•..••• $7,500 million
D,scription of Offering:
Term end type of security ..•••..•••.••.• 91-day bill
OJSIP number .•.•••......•••..•..•.•..••• 912795 BH 3
}Wction date ...••..........•......•..•.. January 11,1999
Issue date ..•....•.•...•.........••..... January 14, 1999
Maturity date ...•.................•..•.• April 15, 1999
Original issue date .•...............•••• October 15, 1998
C~rrently outstanding . . • . . . . . . . • . . . . . . . . $12,192 million
MLnimum bid amount and multiples .......• $1,000

7, 1999

$7,500 million
182-day bill
912795 CG 4
January 11, 1999
Janu8LY 14, 1999
July 15, 1999
January 14, 1999

$1,000

The following rules apply to all securities mentioned above I
Submisaion of Bids:
Noncompetitive bids .......... Accepted in full up to $1,000,000 at the highest 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. Eastern Standard time on auction day
Payment Terms: By charge to a funds account at a Federal Reserve Bank on issue date, or pa~ent
o' full par amount with tender.
TreasuryDirect customers can use the Pay Direct feature which
authorizes a oharge to their account of record at their fi~ancial institution on issue date.

PU8LIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239

EMBARGOED FOR RELEASE AT 3:00 PM
January 7, 1999

Contact: Peter Hollenbach
(202) 219-3302

PUBLIC DEBT ANNOUNCES ACTIVITY FOR
SECURITIES IN THE STRIPS PROGRAM FOR DECEMBER 1998
The Bureau of the Public Debt announced activity figures for the month of December 1998, of
securities within the Separate Trading of Registered Interest and Principal of Securities program
(STRIPS).
Dollar Amounts in Thousands
Principal Outstanding
(Eligible Securities)

$1,597,643,863

Held in Unstripped Form

$1,371,305,539

Held in Stripped Form

$226,338,324
$10,676,037

Reconsti tuted in December

The accompanying table gives a breakdown of STRIPS acti vity by individual loan description. The
balances in this table are subject to audit and subsequent revision. These monthly figures are included
in Table VI of the Monthly Statement of {he PlIhlic Debt, entitled "Holdings of Treasury Securities in
Stripped Fonn."
The STRIPS data along with the new Monthly Slatemenl oflhe Public Debt, is available on Public
Debt's Internet homepage at: www.publicdcbUreas.go\: A wide range of infom1ation about the
public debt and Treasury securities is also a\'aiJable on the homepage.

RR-2884
000

htlp:!!WWW.plibHcd.en.Ure:a.s.gov

corpus
STRIP
CUSIP

lv.m DnCtlptibn

Treasury Notes:
Senes' Interest Rate:
CUSIP
8·718
912827 XE7
A
9-118
XN7
B
8
XWl
C
5-3/4
AK
3H3
5-5/8
3K6
AL
7·7/8
YE6
0
5-5/8
AM
3P5
5-5/8
AN
3Rl
Y
5-318
3U4
A
8·112
YN6
5-1/2
Z
3Y6
5-1/2
4A7
AB
5-5/8
4C3
AC
8·7/8
YW6
B
5-1/2
4G4
AD
AE
5-318
4J8
AF
5-318
4Ml
ZE5
4Q2
4RO
4T6
ZN5
3M2
4W9
4X7
ZX3
3WO
A85
4E9
B92
025
F49
G55
3J9
3L4
3Q3
iS9
3V2
J78
3Z3
4B5
401
4H2
4K5
L83
4N9
4U3
N81
P89
Q88
R87
586
T65
U83
V82
W61
X60
Y55
Z62
2JO
2U5
3S0
3X8
4F6
4Vl

C
AG
AH
AJ
D
X
AK
AL
A
S
B
T
C
D
A
B
M
N
P
Q
C
A
D
E
F
G
H
B
J
K
A
B
C
D
A
B
C
D
A
B
C
D
B
C
D
B
C
D

912820AR8
AS6
AT4
CBl
C07
AUI
CGO
CJ4
CM7
AV9
CR6
CT2
CV7

AWl
CZ8
OBO
006

8-3/4

AX5

5-1/8
4-112
4
8·112
5-3/4
4-5/8
4-5/8
7·3/4
5-3/8
8
5-5/8
7·7/8
7·112
7·1/2
6-3/8
5-718
5-314
5-3/4
5-5/8
5-112
6-114
5-112
5-112
5-314
5-112
5·3/8
5-3/4
5-114
4·114
5-7t8
7-114
7-114
7-718
7·112
6-112
6-112
5-7t6
5-5/6
6-716
7
6-112
6-114
6-5/6
6-1/8
5-112
5-516
4-3/4

OFI
OG9
OH7
AY3
CF2
OL8
OM6

AlO
CPO
BA4
CX3
BB2
BCO
B08
BE6
CC9
CE5
CH8
CKI
CN5
BF3
C54
CU9
CW5
DA2
DCS
BGI
DE4
DJ3
BH9
BJ5
BK2
BLO
BM6
BN6
BPI
B09
BR7
BS5
BT3
BUD
BW6
BX4
CA3
C06
CYI
DKO

Principal Amount Outstanding in Thousands
TOIaI
Outstanding

02115/99
05/15/99
08115/99
09130/99
10/31199
11115/99
11130/99
12131/99
01131/00
02115/00
02129/00
03131100
04130100
05115/00
05131/00
06130/00
07/31100
08115/00
08/31100
09/30100
10131100
11115/00
11115100
11130100
12131/00
02115/01
02115/01
05115/01
05115101
08115/01
11115101
05115102
08115102
09130102
10131102
11130102
12131102
01131103
02115/03
02128103
03131/03
04130103
05/31103
06130103
08115/03
08115103
11115103
02115104
05115104
08115104
11115104
02115105
05115/05
08115/05
11115/05
02115106
05/15/06
07115/06
10115/06
02115/07
05115/07
06/15/07
02115/06
05/15/08
11115/08

Total Treasury Notes
Treasury Inflallon-lndexed Notes
Series Interest Rate
CU51P
3-5/6
J
912827 3A6
3-318
A
2M3
}O5/8
A
3T7

912620 BZ9
BV8
CL9

07115/02
01/15/07
01115/08

Total Innallon-lndexed Notes
Treasury Innatlon-Indexed Bonds
Interesl Rale
CUSIP
3-5/6
912810FD5

912603 BN2

04115/28

Total Inflation· Indexed Bonds
Grand Total. ...

Reconst~uted

Maturity Date

......

Portion Held in
Unstripped'Fonn

6.Df.023
4.755.903
5.m.694
17.269.687
16.604,747
5.868.360
16.865.598
16.647.860
17,502.026
7,558.633
17,n6.125
17,206.376
15.633.855
5,150.630
16.580.032
14,939.057
18,683.295

This Month

Portion Held in
Stnpped Form

3.385.600
5.291.200
4.390.950
217.600
219.200
4.905.600
185.600
99.200
0
3.114,400
0
0
0
5.345.600
0
0
0
4.115.200
0
0
0
4.521.600
0
0
0
3.511.200
0
4.092.000
0
3.321.600
4.678.960
2.468.800
1.630.400
35.200
61.600
200.800
0
0
654.752
44.000
0
0
0
0
452.000
0
0
217.600
68.800
999.200
0
27.640
0
0
4.800
4.160
0
0
0
60.364
33.600
24.000
0
0
0

9,719.623
10.047.103
10.163.644
17.487.287
16.823.947
10.773.960
17.051.198
16.747.060
17.502.026
10.673.033
17.776.125
17.206.376
15.633.855
10.496.230
16.580.032
14.939,057
18.683.295
11.080.646
20.028.533
19,268.508
20.524.986
11.519.682
16.036.088
20.157.545
19.477.410
11.312.802
15.367.153
12,398.083
12.873,752
12.339,185
24.226.102
11.714.397
23.859.015
12.806.814
11.737.284
12.120.580
12.052.433
13.100.640
23.562.691
13,670.354
14.172.892
12.573.248
13.132.243
13.126.779
28.011.028
19.852.263
18.625.785
12.955.077
14.440.372
13.346.467
14.373.760
13.834,754
14,739.504
15.002.580
15.209.920
15.513.567
16.015.475
22.740.446
22.459.675
13.103.678
13.958.166
25.636.803
13 583.412
27.190.961
13.487.775

6.965.446
20.028,533
19.268.508
20.524.986
6.998.082
16,036.088
20,157.545
19.4n,410
7.801,602
15.367,153
8,306,083
12,873,752
9.017,585
19.547.142
9.245.597
22.228.615
12.nl.614
11.675.684
11.919.780
12.052,433
13.100.640
22.907.939
13.626.354
14.172.892
12.573,248
13.132,243
13.126.779
27.559.028
19.852.263
18.625.785
12.737,477
14.371.572
12.347.267
14.373.760
13.806.914
14.739.504
15.002.580
15.205.120
15.509.427
16.015.475
22,740.446
22.459.675
13.043.294
13.924.586
25612.803
13.583.412
27.190.961
13.487.775

1.026.625.204

966.241.756

17.219.795
16310.130
17.064.732

17.219,795
16.310.130
17.064,732

0
0
0

50.594.658

50.594.658

0

sa

383446

17.041.946

17.041.948

0

17.041.946

17,041.948

0

1.597.043.863

1.371.305.539

226338.324 ,

219.200
97.600
29.125
0
0
56.000
0
0
0
20.400
0
0
0
33.600
0
0
0
15.200
0
0
0
42.800
0
0
0
8.000
0
152.700
0
102,400
168.240
33.600
38,400
0
0
0
0
0
34,496
0
0
0
0
0

.

0
C
C
G
71.200
182,400
C
C

:
C

0
C
C
,

.
.

l.se,:

,

1 2:"3.95'

,

'O67€O:!-

Note On the 4th workday of eaCh month Table VI 'Mil be a'iallaOle after 3 00 p m eastem time on tne Commerce Oepartmenfs EconomiC Bulletin Board (E3BI ano on !!'Ie Bureau of tl"'-4!
PubliC Debfs webSite at http IIwww pubhcdebt tteas.go\l

For more tn'otmaoon about EBB call (202) "82-1966

The balances In thiS lable 8(e subJec. 10 a""dl! anO subseQuent adluSIr--e"\ts

TABLE VI _HOLDINGS OF TREASURY SECURITIES IN STRIPPED FOR~ DECEMBER 31,1991

Loan Oescnptlon

Corpus
STRIP
CUSIP

Pnnclpal Amount Outstanding in Thousands
Matunty Date
Total
Outstandlnq

Treasury Bonds
CUSIP
912810 D',\;
OeJ8
DR5
DL:9
DNS
OPO
OS4
OT2

OVi
OW5
OX3
OYI
OZ8
EA2
EBO
EC8
E06
EE4
EFI
EG9
EH7
EJ3
EKO
EL8
EM6
EN4
EP9
E07
ES3
ETI
EV6
EW4
EX2
EYO
En
FAI
1<89
FE3
FFO

Total Treasury Bonds

Interest Rale
11-5/8
12
10-3/4
S-3/8
11-3/4
11-114
10-5/8
S-7/8
S-1I4
7-114
7-112
8-3/4
8-7/8
9-118
9
8-716
8-118
8-112
8-3/4
8-3/4
7-7/8
8-118
8-118
8
7-114
7-5/8
7-118
&-114
7-112
7-5/8
&-716
6
&-3/4
&-1/2
&-5/8
&-318
&-1/8
5-112
5-114

912803 A89
ADS
AG8
AJ2
912800 AA7
912803 AAI
AC7
AE3
AFO
AH6
AK9
AL7
AM5
AN3
AP6
A06
AR4
AS2
ATO
AU7
AV5
AINJ
AXI
AY9
AZ6
8AO
886
8C6
804
8E2
8F9
BG7
BH5
BJI
8K6
BL6
BM4
BP7
BV4

I 1115/04

05115/05
08115/05
02115/06
11115114
02115115
08115115
11115115
02115116
05115116
11/15116
05115117
06/15/17
05/15/18
11115118
02115/19
06/15119
02115120
05115/20
08115/20
02115/21
05/15/21
06115/21
11/15121
08/15122
11115/22
02115/23
08/15/23
11/15/24
02115/25
08/15/25
02115/26
08/15/26
11/15126
02115/27
08115/27
11/15/27
08/15128
11/15/28

-

Portion Held In
Unstnpped Form

8,301,806
4,260,758
9,269,713
4,755,916
6,005,584
12,667,799
7,149,916
6,699,659
7,266,854
16,823,551
18,864,448
18,194,169
14,016,658
6,706,639
9,032,670
19,250,798
20,213,832
10,226,668
10,156,883
21,416,606
11,113,373
11,956,866
12,163,482
32,798,394
10,352,790
10,699,626
18,374,361
22,909044
I I ,469,662
11,725,170
12,602,007
12,904,916
10,893,818
11,493,177
10.456,071
10,735,756
22,518,539
11,776,201
10,947,052

4,337,006
2,208,958
6,844," 3
4,747,916
2,951,984
10,630,999
6,964,156
6,141,459
7,154,054
16,561,951
17,799,166
9,085,049
10,312,656
3,364,639
2,066,070
4,665,198
19,025,032
5,602,668
2,509,923
5,100,646
10,196,573
6,415,208
8.4 14,362
11,304,244
8,595,190
2,758,826
10,990,361
18,817,396
2,400,542
2,771,570
6,653,527
12,557,716
9,114,618
8,800,377
8,422,471
10,076,156
22,100,939
11,773,801
10,947,052

503,382,054

335.427,176

Portion Held In
Stnpped Form

3,964,800
2,051,800
2.425,600
6,000
3,053,600
1,636,600
165}60
756.400
112,800
261,600
1,065,260
9,109,120
3,704,000
5,344,000
6,946,800
14,565,600
1,166,800
4,626,000
7,646,960
16,317,760
916,600
5,543,680
3,749,120
21.494, ISO
1,757,600
7,940,800
7,364,000
4,091,648
9,069,120
6,953,600
3,948.480
347,200
1,779,200
2,692,800
2,033,600
657,600
417,600
2.400
0
167,954,878

Reconstrtuted
This Month

105,600
13,000
73,600
0
49,600
144,160
33,600
393,600
154,400
24,600
110,000
924,320
1,763,200
603,200
66,000
454.400
456,560
164,400
347,200
Hll,520
163,200
309,760
344,640
506,500
274.400
100,800
163,200
30,016
153,840
251,200
119,360
52,200
319,200
36.400
208,000
0
59,200
0
0
9,369,076

Federal Register / Vol. 64, No. 5/ Friday, January 8, 1999/ Proposed Rules
DATES: The public hearing originally
scheduled for Wednesday. january 13.
1999. at 10 a.m .. is cancelled.

reasonable cost and with the same
consumer protections with respect to
the account as other account holders at
FOR FURTHER INFORMATION CONTACT:
the same institution. Treasury has
Michael L. Slaughter of the Regulations
issued a rule implementing the Act.
Unit. Assistant Chief Counsel
Treasury is also designing an electronic
(Corporate). (202) 622-7180 (not a tolltransfer account ("ETASM") for which
free number).
any individual who receives a federal
benefit. wage. salary. or retirement
SUPPLEMENTARY INFORMATION: A notice
payment shall be eligible, and that may
of proposed rulemaking and notice of
be offered by any federally-insured
public hearing that appeared in the
financial institution that enters into an
Federal Register on Friday, October 23.
ETA SM Financial Agency Agreement
1998 (63 FR 56878). announced that a
with Treasury; Treasury has asked for
public hearing was scheduled for
public comment on the proposed
Wednesday. January 13, 1999. at 10
ETA SM.
a.m .. in room 2615. Internal Revenue
Separately. certain financial
Building. 1111 Constitution Avenue.
institutions have entered into
NW .. Washington, DC. The subject of
arrangements with nondepository
the public hearing is proposed
regulations under section 6011 (e) of the payment service providers. such as
check cashers. currency dealers and
Internal Revenue Code. The request to
exchangers. and money transmitters.
speak comment period for these
whereby recipients of electronic federal
proposed regulations expired on
payments deposited into a non-ETA SM
Wednesday. December 23. 1998.
The notice of proposed rulemaking
account at the financial institution may
and notice of public hearing. instructed gain access to these payments through
those interested in testifying at the
payment service providers. These
public hearing to submit a request to
service proViders are not themselves
eligible to maintain deposit accounts or
speak and an outline of the topics to be
addressed. As of january 4. 1999. no one to receive electronic deposits directly
from the government. Treasury is
has requested to speak. Therefore. the
seeking comment on whether it should
public hearing scheduled for
propose regulations regarding these
Wednesday. january 13. 1999. is
arrangements. and if so. what the
cancelled.
content of such regulations should be.
Michael L. Slaughter.
DATES: Written comments are
Acting Chief Regulations Unit. Assistant
Chief Counsel (Corporate).
encouraged and must be received on or
[FR Doc. 99-408 Filed 1-7-99; 8:45 am]
before April 8. 1999.
BILLING CODE 483~1-U
ADDRESSES: Comments should be
mailed to the Office of the Fiscal
Assistant Secretary. U.S. Department of
DEPARTMENT OF THE TREASURY
the Treasury. Room 2112. 1500
Pennsylvania Avenue. N.W ..
Fiscal Service
Washington. D.C. 20220. Comments
received
on this ANPRM will be
31 CFR Chapter II
available for public inspection and
RIN 1505-AA74
copying at the Department of the
Treasury Library. Room 5030. 1500
Possible Regulation Regarding Access
Pennsylvania Avenue. N.W.
to Accounts at Financial Institutions
Washington. D.C. 20220. To make an
Through Payment Service Providers
appointment to inspect comments.
please call (202) 622-0990.
AGENCY: Fiscal Service. Treasury.
ACTION: Advance Notice of Proposed
FOR FURTHER INFORMATION CONTACT:
Rulemaking (ANPRM).
Roger Bezdek. Senior Advisor for Fiscal
Management. Office of the Fiscal
SUMMARY: The Debt Collection
Assistant Secretary. at (202) 622-1807;
Improvement Act of 1996 (the "Act")
or Gary Sutton. Senior Counsel. Office
reqUires that. subject to waiver. all
of the General Counsel. at (202) 622federal payments (other than tax
0480.
payments) made after January 1. 1999
SUPPLEMENTARY INFORMATION:
shall be made by electronic funds
transfer (" EFT"). It also mandates that
I. Background
the Secretary of the Treasury
Section 31001 (x) of the Act requires
("Treasury") ensure that individuals
that all federal payments I made after
required by the Act to receive their
payments electronically have an
I The Act defines "federal payments" to include
account at a financial institution. with
federal wage. salary. retirement. and benefit
access to such an account at a
payments and vendor and expense reimbursement

RR-2885

1149

January 1. 1999 be made by EFT. unless
Treasury grants a waiver. The Act
further mandates that Treasury ensure
that all individuals required by the Act
to receive their payments electronically
have an account at a financial
institution. with access to such an
account at a reasonable cost and with
the same consumer protections with
respect to the account as other account
holders at the same institution.
Treasury's final rule implementing this
mandate. 31 CFR Part 208 ("Part 208").
provides that any individual who
receives a federal benefit. wage. salary.
or retirement payment shall be eligible
to open an ETA SM. and that the ETA SM
may be offered by any federally-insured
financial institution that enters into an
ETA SM Financial Agency Agreement
with Treasury2
At this time. more than two-thirds of
federal payment recipients receive their
payments electronically. primarily by
Direct DeposiP However. there are
millions of recipients of federal
payments that do not have an account
at a financial institution and are
therefore not positioned to receive their
payments by Direct Deposit. Treasury is
designing the ETA SM primarily to afford
these recipients a safe. reliable. and
economical means of accessing their
federal electronic payments in
compliance with the requirements of the
Act. Treasury recently published a
notice and request for comment
regarding the proposed ETA SM
("ETASM Notice").4 As is more fully
described in the ETA SM Notice. the
proposed ETAsM will:
• Be an indiVidually owned account
at a federally-insured financial
institution.
• Be available to any individual who
receives a federal benefit. wage. salary,
or retirement Payment. regardless of
whether the individual already has an
account at a financial institution.
• Accept only federal electronic
payments.
payments. Payments under the Internal Revenue
Code of 1986 are excluded. 31 USc. § 33320) (3)
(Supp. 1998)
263 FR 51490 (Sept. 25, 1998) Part 208 generally
defines "financial institution" as any "insured
bank." "mutual savings bank." "savings bank." or
"savings association." as each term is defined in
section 3 of the Federal Deposit Insurance Act (12
USc. 1813). any "insured credit union" as defined
tnsection 101 of the Federal Credit Union Act (12
USc. 1752). or any agency or branch of a foreign
bank as defined in section 1(b) of the International
Banking Act. as amended (12 USc. 3101) 31 CFR
§ 208.2(k)
3 Direct Deposit is the Err payment mechanism
by which federal payments are sent through the
Automated Clearing House (ACH) system to an
account at a financial institution established by the
recipient. 31 CFR Part 210
463 FR 64820 (Nov 23. 1998)

1150

Federal Register/Vol. 64. No. 5/Friday. January 8. 1999/Proposed Rules

loans." 6 Moreover, many such
businesses may offer other nonfinancial
products and services to the same
customers (e.g .. as a convenience or
grocery store or liquor store). However,
a common element that these payment
service providers share is that they are
not subject to comprehensive federal
regulation,? and are generally subject
only to limited regulation, if any, at the
state level.
These arrangements between financial
institutions and payment service
providers typically involve the
establishment of an account in the name
of the recipient at a financial institution
into which the reCipient's payment is
deposited. followed by the transfer of
the payment to a commingled account
in the name of the payment service
provider, and in which the recipient's
interest may not be fully covered, if at
all, by federal deposit insurance. The
recipient then accesses the payment at
an outlet of the payment service
provider, where the reCipient is given
either cash or a check. Typically the
reCipient is charged an enrollment fee
and a monthly fee for the service, and,
II, Payment Service Providers
if applicable, a check cashing fee.
The vast majority of financial
Although these arrangements vary
institutions already offer Direct Deposit
considerably with respect to access to
directly to federal payment recipients.
payments, fees charged, applicability of
Moreover, it is anticipated that many
federal deposit insurance, and
financial institutions will offer ETAs SM
disclosures, customers of these services
to recipients. In addition, however, in
usually must access their payments
anticipation of the Act's EFT
through the payment service provider
requirement. a number of financial
rather than directly through the
institutions are offering or planning to
depository institution that receives the
offer Direct Deposit services that involve Direct Deposit. must withdraw the
prearranged linkages with
entire amount of the federal payment
nondepository providers of financial
rather than a portion thereof. and often
services such as check cashers, currency must pay significant fees.
dealers and exchangers. and money
The following are descriptions of
transmitters ("payment service
some arrangements between payment
providers").5 Payment service providers service providers and financial
comprise a number of diverse
institutions. either in existence or under
businesses that vary greatly in size: they development. of which Treasury is
include large. publicly held companies
aware:
that are in the business of providing
• In one arrangement. the federal
money transfers, money orders, and
payments of reCipients who enroll in the
related payment services on a
program are initially deposited into a
nationwide basis, as well as small
federally insured account of the
businesses that operate from a single
reCipient at the participating financial
location. Many of these businesses offer institution. These payments are
check cashing in conjunction with other
financial products, such as "payday
6 See' The Growth of Legal Loan Sharking: A
• Permit a minimum of four
withdrawals per month. included in the
monthly fee. at the financial
insti tution' s offices and/or proprietary
automated teller machines (" ATMs"). at
the financial institution's option.
• Be subject to a maximum fee of
$3.00 per month, and
• Provide the same consumer
protections that are available to other
account holders at the financial
institution.
Financial institutions will be
prohibited by Treasury's Financial
Agency Agreement from entering into
arrangements with nondepository
payment service providers to provide
access to ETAs SM. The ETAsM Notice
also requests comment on three other
features that are not currently part of the
proposed ETAsM, to determine whether
any or all should be added to the
ETA SM at the option of the financial
institution and at additional cost, if any,
to the account holder: payment of
interest on balances, allowing deposits
of other electronic funds, and allowing
ACH debit capability.

'Subject to limited exceptions. Part 208 requires
that electronic Federal payments must be deposited
into a financial institution account "in the name of
the recipient." The exceptions to this requirement
are limited to payments to an "authorized payment
agent." which includes a representative payee or
fiduciary under the regulations of the agency
making the payment. or to an investment account
established through a broker-dealer or investment
company registered with the Securities and
Exchange Commission. 31 CFR § 208.6. These types
of entitles are therefore not conSidered "payment
service providers" In the context of this ANPRM.

Report on the Payday Loan Industry." Consumer
Federation of America. November 1998
7 Although not directly relevant to this ANPRM.
Treasury's Financial Crimes Enforcement Network
(FinCEN), in connection with its anti-money
laundering program. has proposed regulations
under the Bank Secrecy Act ("BSA") requiring that
"money services businesses." a category that
Includes. among others, check cashers. currency
dealers and exchangers, and money transmitters.
register with FinCEN (as mandated by the BSA),
and that certain of these businesses file reports of
suspicious activities. 62 FR 27890. 27900 (May 21.
1997)
•

immediately transferred to a trust
account at the financial institution that
contains the federal payments of all
recipients who enrolled at a particular
check casher. A recipient's only means
of accessing his funds is by obtaining a
check at the check casher where the
recipient enrolled, in the full amount of
the federal payment. The recipient may
then cash the check at the check casher
or elsewhere. An enrollee may obtain a
monthly statement at the check casher
or by mail. at his option. The cost for
the program is $1.60 per federal
payment, plus a check cashing fee.
• A second arrangement establishes a
federally insured account at a financial
institution affiliated with the service
provider for each recipient enrolled in
the program. After the financial
institution receives a federal payment
and credits it to the recipient's account.
the amount is immediately transferred
to a pooled account at an unaffiliated
financial institution in the name of the
payment service provider, in which
each recipient's interest is not federally
insured. Recipients in the program may
withdraw the amount of the federal
payment (in full or in part) and check
the available balance at any office of the
payment service provider, as well as at
any ATM included in a participating
network. The charges for the program
include a $4.00 enrollment fee, a $5.50
monthly maintenance fee. and a $1.00
fee for each withdrawal or balance
inquiry.
• In a program being developed, a
recipient could enroll at any check
casher that is a member of a national
trade association. The participating
financial institution would establish a
federally insured account subject to
Regulation E 8 to receive each enrollee's
federal EFT payment. The recipient
could withdraw the amount of the
federal payment (in full or in part) from
his account at any participating check
casher through a pOint-of-sale device. or
at any ATM of the financial institution
or of any participating network. but not
at the financial institution's offices. The
fees for the program would be
determined by each check casher.
A number of concerns have been
articulated regarding financial
institutions entering into these kinds of
arrangements with payment service
providers. with respect to delivery of
federal payments. The concerns include
that these arrangements could result in
recipients being charged excessive fees
for accessing their electronic federal
payments: that by participating in such
arrangements, the recipients may lose
the benefit of certain consumer
, 12 CFR Part 205.

Federal Register / Vol. 64, No. 5/ Friday, January 8, 1999/ Proposed Rules
protections, such as federal deposit
entities to expand ATM access in these
areas.
insurance, that they would otherwise
However, some commenters have
have as an account holder at the
financial institution; and that recipients urged Treasury to go further, and also to
regulate arrangements between financial
may not be adequately informed of the
institutions and payment service
fees they may incur or the protections
providers whereby a reCipient of an
they may forego by entering into these
electronic federal payment accesses a
arrangements. Some have pointed out
non-ETAsM account at such a financial
that many payment service providers
offer other products, such as short term, institution through a payment service
provider, such as those described above.
high rate advances known as "payday
loans," to their customers, that may
Treasury did not regulate these
subject them to substantial payments,
arrangements when it adopted Part 208,
fees, or other risks. Some have argued
but noted in its adopting release that it
would monitor their development. 10
that, if the amount of the federal
In light of the concerns regarding
payment is immediately transferred out
these arrangements described above,
of the recipient's financial institution
account into a payment service provider Treasury is considering whether
rulemaking is necessary or appropriate
account, and the recipient cannot
withdraw less than the entire amount of with respect to such arrangements, and
the federal payment from the account or if so, what the content of such
maintain the account separately from
regulations should be. In considering
these questions, Treasury is endeavoring
the relationship with the service
provider, then the recipient in fact may
to ensure that federal payment
not have an "account" at a financial
recipients have access to their funds at
institution in any meaningful sense.
a reasonable cost and with the same
Others have argued that. if the recipient consumer protections as other account
cannot access his federal payment
holders at the same financial institution,
directly at the financial institution but
to increase use of EFT for federal
may do so only at an outlet of the
payments in order to reduce cost to the
payment service provider, the recipient
federal government. and to increase
may not have "access" to an account at
participation by federal payment
a financial institution. In addition, the
recipients in the country's financial
arrangements in which the payment
system.
service provider prints its own check for
III. Issues for Comment
the reCipient are contrary to the goal of
Treasury is seeking comment on the
replacing paper checks with electronic
following questions:
payments. However, others have noted
• Should Treasury regulate or
that payment service provider
prohibit arrangements between financial
arrangements provide access to funds
institutions and payment service
for reCipients residing in areas
providers in which electronic federal
underserved by banks and other
financial institutions, including low and payments are deposited into a
reCipient's non-ETAsM account at a
moderate income and rural areas.
As Treasury announced in the ETAsM financial institution but made available
Notice,9 a financial institution that
to the recipient through a payment
offers the ET ASM may not enter into
service provider?
• Do such arrangements deny the
arrangements whereby a recipient of an
reCipient either: (a) an account at a
electronic federal payment may access
financial institution, (b) access to such
an ETAsM through a payment service
account, (c) access at a reasonable cost,
provider. In addition, Treasury has
or (d) the same consumer protections
urged the federal bank regulatory
with respect to the account as other
agencies to take steps to ensure that the
institutions they regulate take
account holders at the same institution?
• Should all payment service
responsibility for full and fair disclosure
providers be subject to regulation, or
of all fees charged by the parties
only a particular subset, and if only a
involved in arrangements whereby
subset, what is the basis for such
reCipients access federal EFT payments
distinction?
deposited in non-ETAsM accounts
Commenters are asked to cite specific
through payment service providers. as
evidence supporting their position, e.g.,
well as the legal relationships involved
data showing that the fees charged
and the applicability of federal deposit
reCipients by payment service provider
insurance. Moreover, Treasury
arrangements (either generally or with
continues to explore ways to facilitate
access to federal EFT payments in areas reference to specific types of payment
service providers or specific recipients)
underserved by financial institutions;
these include working with other public are or are not reasonable; that specific
963 FR 64820.64823 (Nov. 23. 1998).

10 63

FR 51490.51498 (Sept."25. 1998).

1151

consumer protections. such as federal
deposit insurance or Regulation E
coverage, are given or denied to such
persons; or the extent to which the
reCipient mayor may not have either an
account at a financial institution, or
access to such account. under such
arrangements.
Treasury is also seeking comment
with regard to the nature of any
regulation that may be appropriate for
payment service provider arrangements.
As noted above, a range of suggestions
have been made as options for Treasury
to consider; these generally fall into two
broad categories. Under one category.
Treasury would generally prohibit
arrangements between financial
institutions and payment service
providers whereby electronic federal
payments received at such institution
are accessed by the recipient through a
payment service provider. For example,
some have urged that Treasury could
require all financial institutions that
receive federal Direct Deposit payments
for account holders to become Treasury
Financial Agents and prohibit these
kinds of arrangements with payment
service providers in their Financial
Agency Agreements. Alternatively. it
has been suggested that. under certain
circumstances, Treasury could adopt
regulations that would prohibit
financial institutions that receive Direct
Deposit from entering into these kinds
of arrangements with payment service
providers.
Under the second broad category
noted above. Treasury could promulgate
rules to delineate further the
requirements relating to financial
institution accounts required by the Act
for receipt of federal electronic
payments. Treasury might approach this
by establishing minimum requirements
for the receipt of electronic federal
payments by defining in a regulation
terms such as "account," "access,"
"reasonable cost," and" consumer
protection," in the context of the Act.
For example, Treasury might determine
that, for purposes of the Act, an
"account" must have certain core
attributes, which could include the
ability of the account holder, at the
account holder's option, to maintain the
account and to retain a federal payment
in the account, notwithstanding any
arrangement with any third party, and
to withdraw less than the entire amount
of a federal payment made to the
account. Similarly, Treasury might
determine that. in order to have
"access" to an account. for purposes of
the Act, a reCipient must be able to
access the account at an office or ATM
of the financial institution,
notwithstanding any access that may

1152

Federal Register/Vol. 64, No. S/Friday, January 8, 1999/Proposed Rules

exist through a payment service
federal payment reCipients access
provider. In addition, it is suggested that federally insured depository
institutions, reducing government costs,
Treasury could use its rulemaking
authority to determine a "reasonable
and improving the payment system?
cost" for a financial institution account,
It has been determined that this
considering a variety of factors and
ANPRM does not constitute a
circumstances. Finally, Treasury could
"significant regulatory action" for
determine that. to satisfy the "consumer purposes of E.O. 12866. Treasury
protection" requirement of the Act. a
specifically requests comments on the
financial institution must at least
costs and benefits of the regulatory
provide its recipients with federal
approaches discussed in this document,
deposit insurance (in the cases where
and the economic impact such
the institution is federally insured) and
approaches may have on small
the benefits of Regulation E.
businesses.
Other options have also been
Comments received in response to
suggested; these include the imposition
this ANPRM will be reviewed and
by Treasury of enhanced disclosure
considered by Treasury in preparation
obligations by financial institutions
for pOSSible further action in connection
regarding the products being offered, II
with the issues discussed herein.
and the enactment of additional state or
This ANPRM is issued under the
federal legislation regulating some or all authority of 31 U.s.C. 321 and 3332.
payment service providers.
Dated: January 4,1999.
Alternatively, some have suggested that,
Donald V. Hammond,
rather than focusing on the attributes of
Fiscal Assistant Secretary.
the financial institution account,
[FR Doc. 99-354 Filed 1-7-99: 8:45 am]
regulations should be directed at
ensuring that the aggregate fees that may BILUNG CODE 4810-25-P
be charged recipients of federal EFT
payments are "reasonable."
DEPARTMENT OF THE TREASURY
Treasury invites comments on all the
above options and suggestions as to how
Customs Service
Treasury might implement them, as well
as suggestions as to any other type of
31 CFR Part 1
measure that the commenters believe
would be appropriate for these
Privacy Act of 1974; Implementation
arrangements, including any factual and
AGENCY: Customs Service, Department
legal bases therefor. Treasury also
requests that any comments address the of the Treasury.
ACTION: Proposed rule.
following issues: Should a suggested
regulation be directed at all payment
SUMMARY: In accordance with the
service providers, or limited to a
particular subset, and if limited, what is Privacy Act of 1974, as amended.
Customs has determined to exempt a
the basis for making such a distinction?
system of records, the Seized Asset and
What effect would any such regulation
Case Tracking System (SEACATS)
have on the Direct Deposit program
Treasury/ Customs .213 from certain
generally? How could such regulation
be limited so as not to disrupt the many provisions of the Privacy Act. The
types of standard account arrangements. exemptions are intended to increase the
such as preauthorized debits, that are in value of the system of records for law
enforcement purposes, to comply with
wide use and do not give rise to the
possible abuses that are the focus of this legal prohibitions against the disclosure
of certain kinds of information, and to
ANPRM? Would the prohibition or
protect the privacy of individuals
regulation of payment service provider
arrangements limit or expand the ability identified in the system of records.
DATES: Comments must be received no
of federal payment reCipients to access
later than February 8, 1999.
their funds, if such measure would
Significantly impede or preclude the
ADDRESSES: Comments (preferably in
functioning of such arrangement? How
triplicate) may be submitted to the U.S.
would such regulation further
Customs Service, Office of Regulations
Treasury's objectives, including helping and Rulings, Disclosure Law Branch.
1300 Pennsylvania Ave. NW.,
II As noted above. Treasury has already urged the
Washington, DC 20229. Comments will
federal bank regulators to endeavor to ensure that
be available for inspection and copying
the banks they regulate take responsibility for full
at the Disclosure Law Branch, 1300
and fair disclosure of all fees charged by all the
Pennsylvania Ave., NW., Washington,
parties involved in these kinds of arrangements. the
legal relationships involved. and the applicability
DC.

of federal deposit Insurance. Some have suggested
that Treasury could amplify this request by
adopting a regulation requiring such disclosure.

FOR FURTHER INFORMATION CONTACT:

Ellen Mulvenna, Office of Information

and Technology, U.S. Customs Service,
(202) 927-0800.
SUPPLEMENTARY INFORMATION: This
computerized database will permit the
retrieval of information as part of a
redesigned work process improving the
way the Office of Information and
Technology uses technology to
maximize efficiency. The purpose of the
newly proposed system of records is to
provide Customs and the Treasury
Executive Office of Asset Forfeiture
with a comprehensive system for
tracking seized and forfeited property,
penalties and liqUidated damages from
case initiation to final resolution. The
system includes investigative reports
relating to seizures and other law
enforcement matters. Authority for the
system is provided by 5 U.s.c. 301; and
Treasury Department Order No. 165,
Revised, as amended. Pursuant to the
Privacy Act of 1974, as amended, 5
U.S.C. 552a, the Department of the
Treasury is publishing separately in the
Federal Register a notice of a system of
records entitled Treasury/Customs .213
Seized Assets and Case Tracking System
(SEACA TS). This system of records will
assist Customs in the proper
performance of its functions under the
statutes and Treasury Department Order
No. 165 cited above.
Under 5 U.S.c. 552aO)(2), the head of
an agency may promulgate rules to
exempt a system of records from certain
provisions of 5 U .S.C. 552a if the system
of records is maintained by an agency or
component thereof which performs as
its principal function any activity
pertaining to the enforcement of
criminal laws, including police efforts
to prevent, control. or reduce crime or
to apprehend criminals, and the
activities of prosecutors, courts,
correctional. probation, pardon, or
parole authorities, and which consists
of: (a) Information compiled for the
purpose of identifying individual
criminal offenders and alleged offenders
and consisting only of identifying data
and notations of arrests, the nature and
disposition of criminal charges,
sentenCing, confinement, release and
parole and probation status; (b)
information compiled for the purpose of
a criminal investigation, including
reports of informants and investigators.
and associated with an identifiable
individual; or (e) reports identifiable to
an individual compiled at any stage of
the process of enforcement of the
criminal laws from arrest or indictment
through release from supervision. In
addition, under 5 U.s.C. 552a(k)(2), the
head of an agency may promulgate rules
to exempt a system of records from
certain provisions of 5 U.s.C. 552a if the

TREASURY

NEWS

OFFICE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960

FOR IMMEDIATE RELEASE
January 19, 1999

Contact: Maria Ibafi.ez
(202) 622-2960

TREASURY, COMMERCE AND U.S. TRADE REPRESENTATIVE NAME
DELEGATES TO THE E-COMMERCE ADVISORY COMMISSION
Treasury Secretary Robert E. Rubin announced Tuesday that Joseph H. Guttentag, Deputy
Assistant Secretary for International Tax Affairs, will serve as his delegate to the Advisory
Commission on Electronic Commerce, established last October under the Internet Tax Freedom
Act.
In making his selection, Secretary Rubin stated that Guttentag has a substantial
background in both tax and electronic commerce issues and \vould make a significant
contribution to the Commission's work.
Under the legislation the Secretary of Commerce and the U.S. Trade Representative, or
their respective delegates, will also be members of the Commission. U.S. Commerce Secretary
Daley has appointed Andrew Pincus, Department of Commerce General Counsel, as his delegate.
Pincus has had responsibility for a number of electronic commerce-related issues at the
Commerce Department, including last year's successful effort to enact legislation implementing
the World Intellectual Property Organization treaties that update copyright law for the digital age
and issues related to the legal standards governing validity of electronic contracts and the
authentication of parties to electronic transactions.
Ambassador Barshefsky, the U.S. Trade Representative. has appointed Robert Novick,
Counselor to the United States Trade Representative. as her delegate.
The Commission will conduct a thorough study of Federal. State. local and international
taxation and tariff treatment of transactions using the Internet and Internet access and other
comparable intrastate, interstate or international sales activities. The Commission is directed to
report its findings to Congress, including any legislOltive recoillmendations. by May 2000. In
addition to establishing the Commission, the Internet Ta:\ Freedolll Act imposed a three-year
moratorium on new taxes on Internet access and Illultiple or discriminatory taxes on electronic
commerce.
-30RR-2886

For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

DEPARTMENT

TREASURY

OF

THE

TREASURY

NEWS

~~178~9~. . . . . . . . . . . . . . . .. .

..................

OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960

TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:

FOR IMMEDIATE RELEASE
January 11, 1999

Office of Financi~g
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
January 14, 1999
April 15, 1999
912795BH3

Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:

4.390%

4.502%

Investment Rate1/:

Price:

98.890

All noncompetitive and successful competitive bidders were awarded
securities at the high rate. All tenders at lower rates were accepted in ful:.
Tenders'at the high discount rate were allotted

26%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)

Competitive
Noncompetitive

$

24,477,578
1,434,383

$

25,911,961

PUBLIC SUBTOTAL

5,891,2';D
1,434,323
7,325,6=3

193,301

Foreign Official Refunded

26,105,262

SUBTOTAL

7,518,<::2';

3,971,860
15,699

Federal Reserve
Foreign Official Add-On
TOTAL

Accepted

Tendered

Tender Type

$

30,092,821

Median rate
4.380%: 50% of the amount of accepted compe:~:lv~
tenders was tendered at or below that rate.
Low rate
4.340%:
5% of the amount of accepted competiti','e
tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 25,911,961 / 7,325,623
1/

3.54

Equivalent coupon-issue yield.

RR-2887
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622·2040

DEPARTMENT

OF

THE

TREASURY

NEWS

TREASURY

~~/78~9~. . . . . . . . . . . . . . . . . . . .. .

......................

OrnCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960

TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE
January 11, 1999

CONTACT:

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:

182-Day Bill
January 14, 1999
July 15, 1999
912795CG4
4.405%

Investment Rate1/:

4.568%

Price:

97.773

All noncompetitive and successful competitive bidders were awarded
securities at the high rate. All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

28%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
Competitive
Noncompetitive

Tendered
$

PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
TOTAL

Accepted

21,130,371
1,361,556

5,32:",332

2,181,399

2,181,::99

24,673,326

7,5C::,231

3,885,000
176,901
$

-:

;J::':-

-

~I

-

~,v_~,.~~

28,735,227

Low rate
4.350%:
5% of the amount of accepted
tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 22,491,927 / 5,321,832

3,960,276
1,36:,556

22,491,927

Median rate
4.390%: 50% of the amount of accepted
tenders was tendered at or below that rate.

1/

$

compe~::lv~

c()mp(~t:'~:':e

4.23

Equivalent coupon-issue yield.

Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

RR-2888

federal financing bankNEWS
WASHINGTON. DC. 20220

December 31,1998

FEDERAL FINANCING BANK

Paula Farrell, Acting Secretary, Federal Financing Bank
(FFB) , announced the following activity for the month of November
1998.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $44.8 billion on November 30,
1998, posting a decrease of $128.6 million from the level on
October 31, 1998. This net change was the result of a decrease
in holdings of agency debt of $39.3 million and in holdings of
agency guaranteed loans of $89.3 million.
FFB made 82
disbursements during the month of November.
FFB also received 11
prepayments in November.
Attached to this release are tables presenting FFB November
loan activity and FFB holdings as of November 30, 1998.

RR-2889

Page 2 of 5
FEDERAL FINANCING BANK
NOVEMBER 1998 ACTIVITY

DATE

10RROWER

AMOUNT
OF ADVANCE

FINAL
MATURITY

$86,400,000.00
$1,750,000,000.00
$150,000,000.00
$50,000,000.00
$119,600,000.00
$1,500,000,000.00
$150,000,000.00
$153,600,000.00
$1,225,000,000.00
$150,000,000.00
$50,000,000.00
$110,900,000.00
$1,050,000,000.00
$150,000,000.00
$50,000,000.00
$261,400,000.00
$1,000,000,000.00
$150,000,000.00
$50,000,000.00
$103,200,000.00
$800,000,000.00
$150,000,000.00
$50,000,000.00
$85,900,000.00
$600,000,000.00
$150,000,000.00
$50,000,000.00
$93,900,000.00
$550,000,000.00
$75,000,000.00
$159,600,000.00
$1,150,000,000.00
$150,000,000.00
$50,000,000.00

11/3/98
11/3/98
11/3/98
11/3/98
11/4/98
11/4/98
11/4/98
11/5/98
11/5/98
11/5/98
11/5/98
11/6/98
11/6/98
11/6/98
11/6/98
11/9/98
11/9/98
11/9/98
11/9/98
11/10/98
11/10/98
11/10/98
11/10/98
11/12/98
11/12/98
11/12/98
11/12/98
11/13/98
11/13/98
11/13/98
11/16/98
11/16/98
11/16/98
11/16/98

INTEREST
RATE

.GENCY DEBT
U.S. POSTAL SERVICE
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
1. s. Postal
J. S. Postal

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.
J.S.
J. S.
J.S.
J. S.
J. S.
J. S.
J. S.
]. S.
1. S.
1. S.

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

;/A is a Semi-annual rate.

11/2
11/2
11/2
11/2
11/3
11/3
11/3
11/4
11/4
11/4
11/4
11/5
11/5
11/5
11/5
11/6
11/6
11/6
11/6
11/9
11/9
11/9
11/9
11/10
11/10
11/10
11/10
11/12
11/12
11/12
11/13
11/13
11/13
11/13

4.667%
4.458%
4.458%
4.458%
4.626%
4.667%
4.667%
4.688%
4.626%
4.626%
4.626%
4.708%
4.688%
4.688%
4.688%
4.758%
4.708%
4.708%
4.708%
4.709%
4.758%
4.758%
4.758%
4.667%
4.709%
4.709%
4.709%
4.605%
4.667%
4.667%
4.593%
4.605%
4.605%
4.605%

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 5
FEDERAL FINANCING BANK
NOVEMBER 1998 ACTIVITY

DATE

iORROWER

AMOUNT
OF ADVANCE

FINAL
MATURITY

$127,300,000.00
$1,775,000,000.00
$600,000,000.00
$86,100,000.00
$1,950,000,000.00
$150,000,000.00
$50,000,000.00
$56,000,000.00
$2,025,000,000.00
$135,600,000.00
$1,650,000,000.00
$100,000,000.00
$50,000,000.00
$124,900,000.00
$1,525,000,000.00
$100,000,000.00
$50,000,000.00
$208,000,000.00
$1,300,000,000.00
$100,000,000.00
$50,000,000.00
$196,900,000.00
$1,075,000,000.00
$100,000,000.00
$50,000,000.00
$166,100,000.00
$930,000,000.00
$100,000,000.00
$50,000,000.00
$109,900,000.00
$1,790,000,000.00
$100,000,000.00
$50,000,000.00
$108,000,000.00

11/17/98
11/17/98
11/17/98
11/18/98
11/18/98
11/18/98
11/18/98
11/19/98
11/19/98
11/20/98
11/20/98
11/20/98
11/20/98
11/23/98
11/23/98
11/23/98
11/23/98
11/24/98
11/24/98
11/24/98
11/24/98
11/25/98
11/25/98
11/25/98
11/25/98
11/27/98
11/27/98
11/27/98
11/27/98
11/30/98
11/30/98
11/30/98
11/30/98
12/1/98

INTEREST
RATE

.GENCY DEBT
U.S. POSTAL SERVICE
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.
fA

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

is a Semi-annual rate.

11/16
11/16
11/16
11/17
11/17
11/17
11/17
11/18
11/18
11/19
11/19
11/19
11/19
11/20
11/20
11/20
11/20
11/23
11/23
11/23
11/23
11/24
11/24
11/24
11/24
11/25
11/25
11/25
11/25
11/27
11/27
11/27
11/27
11/30

4.647%
4.593%
4.593%
4.543%
4.647%
4.647%
4.647%
4.564%
4.543%
4.584%
4.564%
4.564%
4.564%
4.582%
4.584%
4.584%
4.584%
4.719%
4.582%
4.582%
4.582%
4.750%
4.719%
4.719%
4.719%
4.698%
4.750%
4.750%
4.750%
4.675%
4.698%
4.698%
4.698%
4.699%

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 4 of 5
FEDERAL FINANCING BANK
NOVEMBER 1998 ACTIVITY

30RROWER

DATE

AMOUNT
OF ADVANCE

FINAL
MATURITY

INTEREST
RATE

\GENCY DEBT
U.S. POSTAL SERVICE
U.S. Postal Service
U.S. Postal Service
U.S. Postal Service

$2,140,000,000.00
$100,000,000.00
$50,000,000.00

12/1/98
12/1/98
12/1/98

4.675% S/A
4.675% S/A
4.675% S/A

11/20
11/20
11/23
11/24
11/27
11/27

$65,988.84
$192,200.45
$958,240.73
$8,023.00
$114,085.15
$730,790.19

4/1/99
4/1/99
11/2/26
7/31/25
4/1/99
1/2/25

4.643%
4.643%
5.375%
5.411%
4.727%
5.378%

S/A
S/A
S/A
S/A
S/A
S/A

11/13
11/17
11/27
11/30
11/30

$500,000.00
$1,660,000.00
$505,000.00
$5,600,000.00
$5,600,000.00

1/2/29
12/31/14
1/2/18
12/31/19
12/31/19

5.346%
5.064%
6.761%
5.238%
5.238%

Qtr .
Qtr.
Qtr.
Qtr.
Qtr.

11/30
11/30
11/30

OVERNMENT - GUARANTEED LOANS
GENERAL SERVICES ADMINISTRATION
Chamblee Office Building
:hamblee Office Building
reTC Building
Poley Square Office Bldg.
~hamblee Oft ice Building
1emphis IRS Service Cent.
~URAL

UTILITIES SERVICE

County Elec. #47
•labama Electric #393
~rshalls Energy Co. #458
:oop. Power Assoc. #450
:oop. Power Assoc. #450

~laware

/A is a Semi-annual rate:

Qtr. is a Quarterly rate.

Page 5 of 5
FEDERAL FINANCING BANK HOLDINGS
(in millions)

Program

Net Change

Fiscal Year
Net Change

11/1-11/30/98

10/1/98-11/30/98

November 30, 1998

October 31, 1998

$4,648.0

$4,687.3

($39.3)

($1,048U

$4,648.0

$4,687.3

($39.3)

($1,048.1

Agency Assets:
FmHA-RDIF
FmHA-RHIF
DHHS-HMO
DHHS-Medical Facilities
Rural Utilities Service-CBO

$3,675.0
$9,500.0
$3.1
$7.2
$4,598.9

$3,675.0
$9,500.0
$3.1
$7.2
$4,598.9

$0.0
$0.0
$0.0
$0.0
$0.0

$0.0
$0.0
$0.0
$0.0
$0.0

sub-total *

$17,784.2

$17,784.2

$0.0

$0.0

$2,813.4
$5.2
$15.5
$1,420.0
$2,465.0
$17.5
$1,224.9
$14,199.5
$226.7
$3.8

$2,826.4
$5.2
$15.5
$1,491.4
$2,474.9
$17.5
$1,224.9
$14,191.2
$230.0
$3.8

($12.9)
$0.0
$0.0
($71.4)
($9.9)
$0.0
$0.0
$8.3
($3.3)
$0.0
($89.3)

Agency Debt:
USPS
sub-total*

Government-Guaranteed Lending:
DOD-FMS
DoEd-HBCU
DHUD-Community Dev. Block Grant
DHUD-PubIic Housing Notes
General Services Administration+
001-Virgin Islands
DON-Ship Lease Financing
Rural Utilities Service
SBA-StatelLocal Development Cos.
DOT -Section 511
sub-total*
grand total *
* figurcs may not total due to rounding

+ does not include capitalized interest

$22,391.5

$22,480.8

---------------

---------------

$44,823.7

$44,952.3

========

($128.6)

($15.6
$0.6
($14.9
($71.4
($8.1
$0.0
$0.0
$33.0
($6.7
$0.0
($83.2
---------------

($1,131.3

PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239

FOR IMMEDLATE RELEASE

Contact: Office of Financing
(202) 219-3350

January 14, 1999

TREASURY'S INFLATION-INDEXED SECIJRITIES
FEBRUARY REFERENCE CPI l\1JMBERS AND DAILY INDEX RATIOS
Public Debt announced today the reference Consumer Price Index (CPI) numbers and daily
index ratios for the month of February for the following Treasury inflation-indexed securities:
(1) the 3-3/8% IO-year notes due January 15,2007, (2) the 3-5/8% 5-year notes due July 15,2002,
(3) the 3-5/8% IO-year notes due January 15,2008, (4) the 3-5/8% 3D-year bonds due April 15,
2028, and (5) the 3-7/8% IO-year notes due January 15, 2009. TIlls infonnation is based on the nonseasonally 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 CPl's (Ref Cpr) and 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 Affairs automated fax
system by calling 202-622-2040 and requesting document number 2890. The infonnation is
also available on the Internet at Public Debt's website (http://'-VWW.publicdebt.treas.gov).
The infonnation for March is expected

La

be released on February 19, 1999.

000

Attachment
PA-391

RR-2890

bttp:llwww.publicdebUreas.gov

TREASURY INFLAnOH-INDEXED SECURInES

RII' CP. and Inde. Ratlol
february 1899

'0'

StCwllV:
Description:
CUSIP Numbllr:
DallldD... :
OrIginall1i8uII Olle:
Addilloniltuue Date:

3-3/8% l~Y.a, Nol..
Serlel A·ZOOT
91 28272M3
January 15.1997
February 8. 1991
April IS. 1997

3-6/8% 5-Vea, Noles
Serl.. J.2002
8128273AI
JulV 15. 199T
JulV 15. 1997
October 16. 11197

3·518·k

I~V.ar Nolee
Series A-Zoo8
11128273T1
Janulry 15. 1998
January 15. 1998
Oclober 15.1998

3-518% 3~Y.. r Bondi
80nda April 2028
IU2810FD5
April 15. 1998
AprU 15. 1998
July IS, 1998

Malurltv Dale:
R.f CPt on Dated Dlle:

January 16.2007
168.4354&

JulV 16. 2002
160.16484

Januery 15. 2008
161.55484

Apr1J 15, 2028
181.14000

Dale
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
F.b.
Feb.
Feb.
feb.
feb.
Feb.
Feb.
Feb.
Feb.

Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.

Feb.
Feb.
Feb.
Feb.
Feb.

1
2
3
4
6
8
7

,
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
28
21
28

1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1899
1999
1999
1999

Cpt·U (NSA) for:

nefePI

Index Ratio

'64.00000
163.09643
163.99286
163.98929
183.118511
163.98214
163.97857
163.97500
163.91143
163.96786
163.98429
183.96011
163.95714
183.96357
163.95000
163.94643
163.94286
163.93929
163.93671
163.93214
163.92857
163.92600
163.92143
163.81786
163.111429
163.91071
163.90714
163.90357

1.035.2
1.03510
1.03508
1.03506
1.03503
1.03501
1.03499
1.03496
1.03494
1.03492
1.03490
1.03481
1.03485
1.03483
1.03481
1.03418
1.03476
1.03474
1.034n
1.03469
1.03461
1.03465
1.03463
1.03480
1.03458
1.03458
1.03454
1.03451

October 1998

164.0

Indllx RaUo

Index Ratio

Index Ratio

1.01614
1.01511
1.01509
1.01501
1.01505
1.01502
1.0'500
1.01498
1.01496
1.01494
1.01491
1.01489
1.01487
1.01485
1.01483
1.01480
1.01418
1.01418
1.01414
1.01472
1.01469
1.01467
1.01466
1.01463
1.01460
1.01468
1.01456
1.01454

1.01391
'.01395
1.01393
'.01391
1.01388
1.01386
1.013U
1.01382
1.01380
1.01317
1.01376
1.01373
1.01311
1.01369
1.01366
1.01364
1.01362
1.01360
1.01368
1.01355
1.01353
1.01351
1.01349
1.01347
1.01344
1.01342
1.01340
1.01338

." : 1.0240.
I
1.02399
1.02396
1.02394
1.02392
1.02390
1.0238'
1.02385
1.02383
1.02381
1.02319
1.02318
1.02374
1.02312
1.02370
1.02361
1.02366
1.02363
1.02361
1.02359
1.02358
1.02354
1.02352
1.02350
1.02347
1.02345
1.02343
1.02341

November 1998

0'

164.0

December 19118

I

I
I
I

163.9

TREASURY INFLATlON-INDEXED SECURITIES
Ref cPt and Indell Ratios for
FebrullY 1899

SgeurllV:

3-718% lo-Ye.r Notes

Description:
CUSIP Number:
Dated Da'.:
Ortglnal 188U. Date:
AddIUonllle.u. Date:

Seri.s A·2009
9128274Y6
J.n .... ry 15, 1999
J.n .... ry 16. 1999

...tuIIIV Dale:
Re' CPI on Oiled Dale:

January 15, 2009
164.00000

Date
Feb.
Feb.
Fib.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
Feb.
feb.
Feb.
Feb.
Feb.
Feb.
Feb.

Feb.
Feb.
Feb.
Feb.
Feb.
Feb.

1
2
3
4
S

a
7
8
9

10
11
12
13
14
16
16
11
18
19
20
21
22
23
24
25
26
27
28

Indell Ralio

RerCP/
1999
1999
1999
1999
1999
1999
1999
1999
t999
1999
1999
1999
1999
1899
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1899
1999
1999

CPI-U (NSA) for:

164.00000
163.09643
163.99286
163.989211
163.98571
163.98214
183.97857
163.97500
163.97143
163.96186
163.96429
183.96011
163.96114
163.95367
163.95000
163.94643
163.94286
163.93929
163.93571
163.93214
163.92857
163.92500
163.92143
163.111788
163.91429
163.91011
163.90714
163.90357

OCtober 1998

1.00000
0.99998
.0.99996
0.99993
0.99991
0.99989
0.99981
0.99985
0.99983
0.99980
0.99978
0.899711
0.99974
0.99912
0.99970
0.99967
0.99966
0.99963
0.99861
0.99959
0.99956
0.99954
0.99952
0.99950
0.999411
0.99946
0.99943
0.99941

--

I

I

November 1998

164.0
-

,

--

164.0

December 1888

163.9

DEPARTl\-1ENT

OF

THE

1REASURY

TREASURY

NEWS

ornCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C.· 20220. (202) 622·2960

January 12. 1999

Weekly Release of U.S. Reserve Assets
The Treasury Department today released U.S. reserve assets data for the week
ending January 8, 1999.
As indicated in this table, U.S. reserve assets totaled $81,716 million as of
January 8, 1999, down from $81,755 as of December 31, 1998.

U.S. Reserve Assets
(millions of US dollars)

199811999

Reserve
Week 'Ending

Special

Total
Assets

Gold
Stock

II

Foreign

Reserve
31

Drawing
R Ig ht S 21

ESF

SOMA

Position in
IMF 21-'1

Currencies

December 31, 1998

81,755

11,041

10,603

16,315

19,686

24.111

January 8, 1999

81,716

11,041

10.603

16.360

19,601

2./.111

11

Gold stock is valued monthly at $422222 per fine troy ounce. Values shown are as of November 30.
1998. The October 31. 1998 value was $11,041 million.

2/ SDR holdings and the reserve position in the IMF are based on IMF data and revalued in dollar terms
at the official SDRldollar exchange on the reporting date. IMF data are as of December 31. 1998. and
are shown as preliminary figures (in italics) for January 8.1999.
3/ Includes holdings of the Treasury's Exchange StabilizatIOn Fund (ESF) and the Federal Reserve's
System Open Market Account (SOMA) These holdings are valued at current market exchange rates
or. where appropriate. at such other rates as may he agreed upon by the parties to the transactions
4/ Includes SDR 361 million loan to the IMF under the General Arrangements to Borrow (GAB) in July
1998. and an SDR 619 million loan to the IMF under the New Arrangements to Borrow (NAB) in
December 1998.

RR-2891

DEPARTMENT

OF

THE

TREASURY

~~178~9~. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..

....................................

OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C .• 20220 • (202) 622·2960

FOR IMMEDIATE RELEASE
January 12, 1999

Contact: Dan Israel
(202) 622-2960

TREASURY SECRETARY ROBERT E. RUBIN STATEMENT
ON NEW FUNDS FOR POOREST COUNTRIES

We welcome the World Bank Executive Board's approval of a new multilateral financing
package to replenish the Bank's International Development Association (IDA), which provides
concessional development finance for the world's poorest countries The new funding will enable
IDA to provide additional concessionallending of $20.5 billion through June 30, 2002, including
up to $3 billion per year for sub-Saharan Africa.
Especially significant are commitments designed to improve transparency and boost IDA's
effectiveness in reducing poverty and promoting sustainable economic development. In
particular, the IDA agreement calls for: stronger linkage between new lending and borrower
performance, including explicit consideration of good governance and efforts to combat
corruption; fuller consultation with the public in developing Bank programs and publication of key
planning documents; and adoption of an appropriate inspection function for the Bank's private
sector operations.
Together, the new IDA financing and policy reforms represent a solid and cost-effective
vehicle for U. S support for poverty reduction and economic growth world-wide.
-30RR-2892

For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

DEPARTMENT

OF

THE

TREASURY

OFFICE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622·2960

EMBARGOED FOR RELEASE AT 8:30 A.M. EST
January 13, 1999

Issues for the Financial Services Industry in 1999
Remarks by Lawrence H. Summers
Property-Casualty Insurers Industry Forum
New York, NY
Thank you. I am delighted to meet with this key part of the financial services sector at the
beginning of what we hope will be a less tumultuous year in the industry. I would like to reflect
first today on the American economic situation. Let me then offer some thoughts on a key policy
question under discussion in Washington of particular relevance to your industry: the question of
federal involvement in the provision of disaster reinsurance ..
I. The American Economy

It has been a difficult few months for the global economy and for the financial services industry
in particular. But while important parts of our economy have been hurt by crises overseas and
hurricanes at home -- the basic momentum of the recovery has not. In fact, as the President
reported last week, last month took us into the longest peacetime expansion on record.
Consider:
•

unemployment is at a 30 year low, and a higher share of lunericans are in work than at
any time in our history.

•

inflation -- instead of rising -- is tamer than in a generation.

•

real wages are finally making up the ground that had been lost, with the fastest growth in
average hourly earnings last year in more than two decades.

•

and the budget deficit is no more. When President Clinton took office the Congressional
Budget Office was projecting a federal deficit in 1999 of $404 billion. Today, we expect a
surplus of at least $75 billion -- the highest dollar surplus in our history.
RR-2893

Far press releases, speeches, public schedules and official biographies, call our 24~our fax line at (202) 622-2040

Why this success? Two reasons stand out.
First, the competitive drive, creativity and flexibility of American companies. It cannot be an
accident that communism, planning ministries throughout the developing world and large
corporations run by command and control all ran into a brick wall in the same decade and had to
be restructured. New technologies in all areas of industry have forced profound changes in the
way economic and financial life is organized -- changes for which we are fortunate that our
economy is superbly well adapted.
The twin forces of information technology and modem competitive finance are moving us
toward a post-industrial age. And if you think about what this new global economy means -whether it is AIG in insurance, McDonald's in fast-food, Walmart in retailing, Microsoft in
software, Harvard University in education, CNN in television news -- the leading enterprises are
American.
The second major reason was a prudent, pro-gro\Vth economic strategy.
First, we have pursued sound macroeconomic policies: policies that recognized that Fed-bashing
was a fool's game, it does not change short-term interest rates because the Fed does not respond,
but it does increase long-term interest rates because the bond market does. And policies that
recognized that the economy had to be freed of the burden of the federal deficit. Thanks to 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.
Second, we have worked to make critical investments in our future and to make government a
positive force in our society and our economy. This ranges from the creation in 1994 of the Early
Head Start program for disadvantaged children under 3 and last year's Hope Scholarship
program -- to President Clinton's proposal to invest $100 million to develop a next generation
Internet.
Third, we have worked to promote an open global economy, with 240 new trade agreements
lowering barriers to American goods since 1993, including the ratification ofNAFT A and the
completion of the Uruguay round of the GATT and ground breaking international trade
liberalization agreements within the World Trade Organization in the critical sectors of
telecommunications and financial services.
We pressed for a strong agreement in the World Trade Organization negotiations in financial
services that ended in 1997. And we got one: covering 95 percent of the global financial services
market in revenue terms, and far outmatching the previous agreement reached in 1995. With the
1997 agreement, 102 WTO members have made market-opening commitments encompassing
nearly $18 trillion in global securities assets. and more than S2 trillion in worldwide insurance
premIUms.
2

In insurance alone, American companies now have more than $200 billion in foreign premiums.
Across all insurance sectors, 52 countries have guaranteed broad market access tenns. And
another 14 countries have committed to open critical subsectors of their insurance markets of
particular interest to American industry. Indeed, in insurance alone, we were able to get countries
to commit to allowing cross-border provision of services -- so that American insurers will be able
to sell their services to far-off clients without ever leaving their home base.
As we go forward we will be hoping to build on such market-opening successes in these and
other sectors. There will be a new round of comprehensive service sector negotiations within the
WTO starting next year, and you can count on us pursuing opportunities for American insurers in
that context.
I am confident that the dynamic duo of competitive industry and prudent policy leave America
well-placed to face future shocks and that the momentum of the recovery can be sustained, albeit
perhaps at a slower pace than has been true most recently. But a healthy partnership between
private entrepreneurship and public purpose is like a marriage -- it takes work. Times change,
and when times change so must be the relationship.
The challenge for policy makers to keep up with change -!. and manage the consequences -- has
arisen with particular force of late in the financial sphere, both at the domestic and the
international level. The example closest to the hearts of many in this room is whether there is
now a role for the federal government in the provision of disaster reinsurance.

II. A Federal Role in Disaster Reinsurance
It seems clear that the appropriateness of a federal role in natural disaster reinsurance will be
discussed in this Congress as it was in the previous one. We in the Administration have taken an
active role in these discussions. The greater frequency and severity of natural disasters since
Hurricane Hugo in 1989 has put the issue high on the public agenda -- and rightly so.
Disasters are a grave concern for all. Under the leadership of Federal Emergency Management
Agency Director Witt, the Administration is presently engaged in a broad range of mitigation
initiatives. As Director Witt has said, "the fact is we have the opportunity to cut losses, the
know-how to reduce risk and the responsibility to save lives. But it means we must change the
way we think and plan and budget. It means that instead of responding to disasters we must
prevent them -- instead of waiting to react we prepare now for the next flood, hurricane, fire or
earthquake. "
These considerations motivate the Project Impact initiative, which will build disaster resistant
communities, saving lives and protecting families and communities against disaster losses.
Pre-disaster mitigation is very important, perhaps even more important than what I will talk
about here. Insurance cannot undo the human costs of disasters. Yet it can provide the
foundation for a sound recovery in financial tenns, and we want to ensure the insurance

3

foundation is as sound as possible.

1. Recent Developments In the Market
The characteristics of natural disasters -- low frequency of occurrence, high losses when they
occur, and a considerable degree of uncertainty associated with loss estimates -- make them
especially challenging for insurers. As a result, it is perhaps not sUrprising that, even in "normal"
times, prices in the market for disaster risk can be high relative to estimates of expected losses.
For example, insurance premiums at the highest layers of risk can typically run in the
neighborhood of 3-5 times expected loss.
In the wake of large events, prices typically spike higher still -- and remain high -- pending the
replenishment of capital in the reinsurance industry, and the consequent restoration of
underwriting capacity.
Ultimately, we believe that the most efficient means for underwriting these risks may involve the
capital market as an important complement to the traditional reinsurance industry. Indeed, in
1997, just over $1 billion of catastrophic natural disaster risk was securitized in American
markets, and issuance continued at roughly the same rate in the first half of last year, the latest
period for which we have data. These are significant developments, given that this market
simply did not exist even a few years ago.
The exciting thing about the so-called "cat bond" market is its tremendous capacity for absorbing
losses. Consider: in today's global capital market, $50 billion can be won or lost in a day
without so much as a raised eyebrow. The same amount lost in the reinsurance sector would wipe
out about a fifth of industry's capital.
But, as most here will probably testify, the market for securitized catastrophic risk is in its early
days yet. This marke·t still only represents, at most, a few percent of the domestic catastrophic
insurance market as a whole. So important gaps and problems remain a feature oftoday's
markets. Notably: reinsurance and cat market prices are still high, purchases of high-level
protection are limited, and purchases of high-level protection are still limited.
On balance, we believe that these considerations constitute a strong case for prudent
participation of the federal government in the market for disaster reinsurance, in a way that
reduces both the private costs of these events and the costs to society as a whole.

2. Principles to Guide Legislation
We believe that federal involvement in this market should be guided by the same two principles
that have guided so much of the Administration's policy these past 6 years:
first, the government should share risk, not subsidize it.
4

•

second, government policies should support the private market, not supplant it.

In essence, the first principle says that the program should impose no net cost on the taxpayer
-- that the federal government cannot be the bill-payer of last resort. We think there are some
constructive things the government can do to better serve the interests of the homeowner and
the insurer. But we also believe that any such actions must be judged in light of the fact that
there will be two parties to every transaction in which the government might engage, with
taxpayers being the other. Any actions the government takes must be consistent with the
kind of hardheaded prudence that has been critical in getting our fiscal house in order.
The second principle suggests a number of constraints on any legislation: first, federal
involvement should ~e partial, leaving room for the private market, even in the short run. It
should also be limited, applying only to the kind of low-probability risks that private markets
currently have difficulty handling. And above all, the government's involvement should be
considered strictly transitional, phasing out as private markets develop. We can improve on
today's market outcome -- but we must not do so at the cost of stifling the incentive for the
market to come up with even better solutions on its own.
The crafters of HR219 -- the bill that was passed out of the House Banking Committee last
year -- shared many of the same goals and the bill seems to us to be a very constructive
starting point for further legislative discussions of this issue. It comes a long way toward
meeting our principles. But as you know, we still believe it could be improved in a number of
ways, all of which would make it function even better as reinsurance protection.

It is difficult to know where the debate will go. But we hope there is a constructive way
forward that meets our principles and passes on the maximum benefits to American
homeowners. We look forward to working with Congress and with you all on this important
issue. Thank you.

5

DEP'ARTMENT

OF

THE

'IREASURY (U~~

TREASU-RY

NEW S

178<)

OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASlflNGTON, D.C. - 20220 - (202) 622-2960

FOR IMMEDIATE RELEASE
January 13, 1999

Contact: Dan Israel
(202) 622-2960

TREASURY SECRETARY ROBERT E. RUBIN STATEMENT ON BRAZIL

Brazil acted this morning to enhance the flexibility of its exchange rate system and
reaffirmed its commitment to implement the program of fiscal adjustment and other reforms
agreed with the IMF last year
We are in close touch with the Brazilian authorities, the IMF, the G7, and the financial
authorities of key emerging markets, and will continue to watch developments in world markets
closely. It is important that Brazil carry forward the implementation of a strong, credible
economIC program.
-30RR-2894

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DEPARTMENT

,

OF

THE

.

TREASURY

NEWS

'IREASURY

OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W•• WASfDNGTON, D.C.• 20220. (202) 622-2960

Remarks as Prepared for Delivery
January 14, 1999

Contact: Office of Public Affairs
(202) 622-2960

STATEMENT OF JAMES E. JOHNSON
UNDER SECRETARY FOR ENFORCEMENT
BEFORE THE COMMISSION ON THE ADVANCEMENT
OF FEDERAL LAW ENFORCEMENT
Chairman Webster and Members of the Commission, it is a pleasure for me to be here
today. With me are representatives from the Treasury law enforcement bureaus, Mr. John
Magaw, Director of the Bureau of Alcohol, Tobacco and Firearms (ATF); Mr. William Baity,
Acting Director of the Financial Crimes Enforcement Network (FinCEN); Mr. Ted Brown,
Assistant Commissioner of the IRS, Criminal Investigations Division. After my remarks, Director
Magaw will explain ATF' s initiatives in greater detail and then Acting Director Baity and
Assistant Commissioner Brown will do the same.
As Under Secretary for Enforcement, I am responsible for overseeing the work of the
Bureau of Alcohol, Tobacco and Firearms; the U.S Customs Service; the Federal Law
Enforcement Training Center; the Financial Crimes Enforcement Network; the Secret Service; the
Office of Foreign Assets Control; and the Executive Office of Asset Forfeiture. The Office of the
Under Secretary also works to ensure coordination between the IRS Criminal Investigation
Division and the other Treasury Enforcement Bureaus.
As we approach the 21 st Century, the missions of these law enforcement agencies grow
increasingly more complex each year, both in terms of scope and resources Within the past few
years, we have witnessed greater threats from advances in technology, the growth of international
financial markets, the expansion of international commerce, the continued rise of drug smuggling
and trafficking in dangerous weapons, and the emergence of organized criminal networks around
the world.
Treasury Enforcement performs a critical role by aggressively meeting these threats and
serving the nation's law enforcement priorities Treasury Enforcement employs over 29,000
people, with a budget of just over $3.5 billion The Special Agent Force at Treasury, including
IRS-Cr, contains four of the eight largest Federal law enforcement agencies
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-

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The agents, inspectors, and regulators reporting to the Under Secretary for Enforcement protect
our borders from drug traffickers; combat money laundering and other financial crime in order to
protect our currency and payment systems; fight violent crime; protect our leaders; provide highquality training; regulate the alcohol, tobacco and firearms industries; and, through the collection
of excise taxes and trade duties, contribute nearly $35 billion for the U.S. Treasury.
With respect to terrorism in particular, Treasury will continue working to prevent terrorist
acts from taking place, provide expertise in connection with bombing and arson incidents, enforce
sanctions against those sponsoring terrorism, protect U.S. and other officials, and maintain the
integrity of our border. Our anti-terrorism activities have grown significantly in recent years.
For example, a Presidential Decision Directive assigns the Secret Service a lead role in connection
with handling the terrorist threat at events having national security significance. The details of
this responsibility are classified. In addition, the Bureau of Alcohol, Tobacco and Firearms'
forensic and investigative expertise has been critical to the investigations of bombings, incidents of
arson, and other attacks, including the World Trade Center and Oklahoma City bombings.
Moreover, the Office of Foreign Assets Control's prominence has grown as we have sought to
shut off the finances and fundraising schemes of terrorists and their sponsors.
As noted, whether employed in traditional anti-crime pursuits or as part of our nation's
anti-terrorist program, the work of the Treasury bureaus and offices is overseen by the Office of
the Under Secretary for Enforcement. This office has created mechanisms in order to better
ensure that our bureaus are performing their missions as safely, professionally, and well as
possible. In addition, we provide policy oversight and guidance for all the Treasury Enforcement
components, and work to ensure coordination and prevent duplication of effort within law
enforcement through various mechanisms, such as the Treasury Enforcement Council and regular
meetings with the Bureau heads and the Bureau Liaisons.
As to policy oversight, activities that the Office of Enforcement has taken to enhance its
missions over the past year include:
(1) working with Customs, Justice, ONDCP, and others to ensure close cooperation on
anti-narcotics matters, including the recently announced Border Coordination Initiative by
which Customs and the Immigration and Naturalization Service are strengthening countersmuggling efforts at the Southwest border;
(2) making further use of the specially designated narcotics trafficking program under the
International Emergency Economic Powers Act, pursuant to which we identify, expose,
isolate and incapacitate the businesses and agents of the Colombian cartels and deny them
access to the U.S. financial system and to the benefits of trade and transactions involving
United States businesses and individuals;
(3) solidifying our nation's anti-money laundering efforts through activities such as the
geographic targeting orders, suspicious activity reports (SARs), the anti-money laundering

2

conferences hosted jointly with the Department of Justice, and the development of the
first-ever national anti-money laundering strategy;
(4) coordinating all enforcement-related strategic planning for Treasury as it fulfilled its
responsibilities under the Government Perfonnance and Results Act (GPRA);
(5) playing a lead role within the Administration on the National Church Arson Task
Force;
(6) expanding fireanns trafficking strategies, such as the Youth Crime Gun Interdiction
Initiative, which will be extended to an additional 10 cities;
(7) establishing the International Law Enforcement Academy (ILEA) South in conjunction
with the Departments of State, Justice, and others;
(8) working with Customs on the enhancement of its automated trade data collection, use,
and processing capabilities; and
(9) reviewing alcohol policy issues in order to pursue the goal of reducing consumption by
minors.
To further strengthen policy coordination within the Department, the Office of
Enforcement recently has established a Financial Crime Steering and Working Group. In
addition, the Office of Enforcement promotes coordination with the Justice Department and other
agencies, through representation of the Bureaus and the Department at interagency meetings
involving Justice, the National Security Council, the Office of National Drug Control Policy, and
the Department of State. Such coordination mechanisms include the Attorney General's White
Collar Crime Council, the Attorney General's Southern Frontiers Meeting, and the NSC process
on the International Crime Control Strategy and Weapons of Mass Destruction.
As to operational oversight, the Office of Enforcement reviews major tactical operations
undertaken by our Bureaus. Where necessary, we coordinate these operations with the
Department of Justice and other law enforcement agencies. For instance, the Office of
Enforcement has developed standard operational policies for all of the Treasury law enforcement
Bureaus, such as the Policy on the Use of Force, the Guidelines for Sensitive Undercover
Operations, and the General Guidelines on the Use of Cooperating Individuals and Confidential
Informants, that are consistent with those of other Federal agencies.
To further enhance day to day operational oversight, we have established the Office of
Professional Responsibility (OPR) within the Office of Enforcement. OPR provides direct
oversight for each of the Bureaus on specific issues such as internal affairs as well as detailed
advice on cross-cutting issues, like training and inspection. When fully staffed, OPR will have a
Senior Oversight Advisor for each one of the Bureaus who will be responsible for direct oversight

3

of that particular Bureau. In addition, OPR will have advisors who deal exclusively with crosscutting issues, such as internal affairs, inspection, training, and EEO issues.
The ultimate measure of the Office of Enforcement's work is the success of our bureaus
and offices in meeting the goals of the Department's strategic plan. You have already heard from
Customs Commissioner Kelly and FLETC Director Basham with respect to the goals for which
their bureaus have primary responsibility. In just a few moments, you will hear from our other
bureaus and with your permission, I would now like to tum this presentation over to Director
Magaw who can tell you about ATF's efforts to reduce violent crime. Then Acting Director Baity
ofFinCEN and Assistant Commissioner Brown of the IRS Criminal Investigation Division will
speak about their bureaus' work to combat financial crimes and money laundering.
After this, we would be happy to answer any questions you or the Members of the
Commission may have. Thank you.
-30-

4

-

DE}' ART -'1 E

~

T

0 F

T II

TREASURY

l~

l' REA S l! R-Y

NEWS

OFFICE OF PUBLIC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. e WASHINCTON, D.C.e 20%20 - (20:1) 621.2J66

EM8ARCOlU) mrr:tL 2: 30 Ii'. H.

CO!Jll'AC'1':

January 14, 1999

office of

P1DaDC~

202/219-3350

TREASURY Ol"l"ERS 13 .. W1!:l!:lt

Am)

26-WEl!:lt BILLS

The Treasury will auction two series of ~reasury bills totali~
$15,000 ~llion to refund $40,314 million of publicly held
securities maturing January 21, 1999, and to pay down about $25,314 million.
The amount of maturing publicly held securities incluQes the 79-day cash
ma.nagemant bills issued November 3, 1998, in the IUnO\U1t of $25,000 million.
~proximAtelY

In addition to the public boldiAgs, Federal Reserve BaDks for their own
accounts hold $7,061 million of the maturing bills, which may be refunded at
the highest discount rate of accepted competitive tenders. Amounts issued to
these accounts ~ll be in addition to the offering amount.
The maturing bills held by the public include $3,195 million held b.Y
Federal Reserve Banks as agel:l.ts for foreign aDd international monetary authorities, which may be refunded within ebe offering &moUDt at the highest discoUDt
rate of accepted competitive tenders. MditioDA1 amounts may be issued for such
accounts if the aggregate amount of new bids exceeds the aggregate amount of
maturing bills.
The bill auctions will be conducted in the single-price auction format.
Tenders for the bills will be received at Pederal Reserve Banks ana
Branches and at the Bureau of the Public Debt, Washington, D.C. This offering
of Treasury securities is governed by the ter.ms and conditions set forth in
the ~for.m o!!er~g Cireu1ar for the Sale and Issue of Marke~&ble Book-Entry
Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about each of the new securities are given in the attached offering
highlights.
000

RR-2896

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HIGHLIGHTS OF TREASURY orPERIMGS or BILLS
TO BE :ISSUED JANUARY 21, 1999

January 1&, It99
Offering Amount ••••••••••••••••••••••.•• $7,SOO million
De.cription of Offerings
T.r. and type of s8cur1ty •••••.••••••••• 91-d.y bill
COSX&, nwMer •••••••••••••••••••••••••••• 912795 BJ 9

Auction date •••••••••••••••••••••••••••• January 19, 1999
:X •• u. date .•••••.•••••••••••.•.•.•.••••• J.nuary 21, 1999
Maturity dat •••••••..•••. '0' ••••••••••••• ~ril 22, It99
~tginal i.au. dot •.••••.•••••••••••.••• Ootober 22, 1998
Curr.ntly out.t.nding ••••••••••••••••••• $11,711 million
Minimum bid amount and multipl •••••••••• $1,OOO

$7,500 million
182-day bill
912795 HZ 3

J.nuary 19, lt99
J.nuary 21, 1999
July 22, 1999
July 23, 1998
$15,76t millIon
$1,000

The following rules apply to all .ecuritle. mentioned above:

Submi •• ioD of Bidas
Noncompetitive bids ••••••••• Accept.d in full up to $1,000,000 at the higheat di.count rate of
accepted competitive bid8.
comp.titive bid •••••••••••.• (1) Must be expressed a. a di8count rate with three a.cimal. in
increment. 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 rate., and the net long
position i8 $1 billion or greater.
(3) Net long position must b. deter.minea aa of one half-hour prior
to the cl08ing time for reoeipt of competitive tendera.
Maximum Recognized Bid
at a Bingle Yield •••••••.•.• 35% of public offering
MaHLmwm Aw.rd ••••••••••.•.••••.• 35% of public offering
Rec.ipt of Tenders.
Noncompetitiv. tenders ••••.• Prior to ll,OO noon Eastern Standard t~e on auotion day
co~.titive tender •..•..••.• Prior to 1.00 p.m. Eastern Standard time on auction day
P.~nt TeDma:
By charge to a funds, account at a Federal Reserve Bank on issue date, or p~ent
of full par amount with tender.
TreasuryDireat customers can u •• the Pay Direot fe.ture which
.uthorize. a charge to their account of record at their financial institution on i •• ue date.

DEPARTMENT

'IREASURY

OF

THE

TREASURY

NEWS

OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960

EMBARGOED UNTIL 7:30PM EST
Remarks as prepared for delivery
January 14, 1999

"RUSSIA AND THE UNITED STATES: THE ECONOMIC AGENDA"
REMARKS BY DEPUTY TREASURY SECRETARY LAWRENCE H. SUMMERS
US-RUSSIAN INVESTMENT SYMPOSIUM
CAMBRIDGE, MA

Thank you. A great deal has happened in Russia since your last conference. Now more than ever.
perhaps, it will pay to retain a sense of perspective. A year ago, few might have predicted the
events oflast summer. But the problems leading to the crisis were well known and cause for
concern -- in Washington as they were in Moscow. We need to remember this in considering
which policy approaches have been discredited by August 17 -- and which have not.
Let me spend my time today talking about the roots of the Russian collapse and the implications
of the crisis, both for Russian policy makers and for the international community.

I. Lessons of the Crisis
Few serious observers ever said that the path to a market democracy in Russia would be easy.
But in retrospect it is fair to say that the enormity of the task was underappreciated -- even by
those with experience of transition elsewhere.
•

First, as Richard Pipes reminds us. the West -- and most of Central and Eastern Europe -has a tradition of private property dating back to the Middle Ages. In Russia this was
weakly rooted even before Communism and consummately destroyed after.

•

Second, the USSR was a more hea\·ily mi litarizcd economy than any CEE country or
even China, with a higher share taken up hy hca\)' industry under tight central control.
This added a deeper conceptual prohlem to reform. Realizing new opportunities to add
value is one thing: ending subsidized yalue destruction. on a national scale. quite another.

RR-2897

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•

Third, there has perhaps been the ironic handicap of Russia's natural wealth. As in so
many similarly placed countries, these riches may have been a curse in disguise. As was
true before 1991, they have diverted activity into seeking rents rather than creating value - and, with hindsight, they have helped to defer a day of economic reckoning.

For all of these reasons, Russian reformers have struggled more than anyone might have
anticipated with the creation of the intangible infrastructure of modem market economy -- at the
core of which are private property rights, enforceable contracts and the rule of law. Marti
Weitzman once said that the difference between communism and capitalism is that in
communism, the buyers bribe the sellers -- and in capitalism, the sellers bribe the buyers. It is not
clear today which category Russia falls into. But it is clear that it does not work.
August 17 was not inevitable. Had the Asian crisis not reduced confidence among emerging
market investors, had the oil price not fallen so dramatically -- the crisis of 1998 might not have
taken place. Even in July, significant progress was being made, and this progress underpinned
the decision to offer additional international support. It was a calculated gamble -- and it was, in
my view, a gamble worth taking. Yet we were under no illusions. As Herb Stein says, "if
something cannot go on forever, it will stop."

II. The Two Opposing Forces in Russian Reform
Recent events will cast a shadow over the Russian landscape for a long time to come. Looking at
Russia today, it is easy to see only gloom. But the crisis must not blind us to the enormous
positive changes that eight years of reform have brought:
•

Russia has a democracy -- imperfect, perhaps, but not now seriously threatened -- and
a free press in which Moscovsky Komsomolets can print biting political cartoons on
its front page and Izvestia amuses its readers nominating an "oligarch of the year."

•

Russia is now open; people know what happens in the markets and systems beyond
their borders have access to the ideas and products that the world has to offer.

•

Russia has dramatically downsized its military and is no longer channeling one fifth
of its national resources into maintaining it. In 1997 Russian military spending was
only 117 of its Soviet era peak in 1988 and 2/5 of its level in 1992.

•

And the Russian economy is no longer a creature of command and control, with
around 70 percent of all economic activity now generated by the private sector.

In all of these achievements Russia's reformers can feel justly proud. However, each has
come with a larger failure:

2

•

the ballot box and a free press have replaced one-party rule, but other elements of a
civil society have not taken root -- the rule of law, independent judiciaries, or the
broad-based political parties that make for a true democratic politics.

•

Russia's borders are open to the rest of the world. But the economic side of
integration has been distorted by the lack of lasting economic stability and credible
institutions. The result is an openness that has encouraged too little long-term foreign
investment to come in -- and too much domestic wealth to fly out.

•

the economy is no longer in a state of constant mobilization, but too much of the
rusting military-industrial complex has lived on as economic deadweight, draining
the nation's financial and human resources amid a web of barter and unpaid bills.

•

and while much of the economy is privately owned, the state has not changed its role
accordingly. Total Russian employment is thought to have fallen by about 10% from
1992 to 1997. In civilian government it rose by 50-70 percent. A bloated bureaucracy
and unwieldy tax system have pushed more and more activity into barter and
"virtuality," and they have driven a widening gap between what the state wishes to
spend and the revenue it can collect.

In a sense, Russia's transition has always been a struggle between the two forces in Russia's
transformation. The first supports grassroots entrepreneurship and a healthy market
democracy. While the second seeks to favor the top-down solutions that have failed in the
past. The macroeconomic problems that ended in the collapse of August -- the dwindling tax
revenues, the rising domestic debt and declining reserves -- all of these were only bypro ducts
of this deeper structural dynamic, a dynamic that is still being played out.
Indeed, one might argue that the economic costs of this struggle were the less important ones
-- at a time when more Russians are dying each year of tuberculosis than even contract it in
the United States, and only 54 percent of 16-year-old males can be expected to survive to 60.
This, compared to 83 percent in the US today and 56 percent in western Russia a hundred
years ago.
III. The Way Forward
Where does Russia go from here? Three core lessons suggest themselves.
First, building a successful market economy in Russia is not about ideology. It's about what
works. Put it another way: as Deng might have said, it doesn't matter what color the cat is,
but it does have to be able to catch mice. Yes, a market economy in Russia must be one that
can work/or Russia. But the laws of gravity work the same way on either side of the Urals -and so do the laws of arithmetic.

3

Second, and related, reform has to begin with transforming the role of the state. In everything
from budgetary policy, to regulation and upholding rule of law, to the relationship between
center and periphery, the state's role needs to be fundamentally different and it needs finally
to gamer public trust.
Third, progress will come from the bottom-up. In many ways, the Soviet system was a topdown system that got dismantled the same way. This points to the same structural dynamic I
discussed earlier. The challenge is to free the forces of bottom-up growth from the tyranny of
top-down decay. The irony is that this will take a stronger state -- but, again, one with a very
different role.
The prospects for such growth may be less bleak than they seem. The failures of recent years
will continue to take a heavy economic and human toll. But the scale of the devaluation, the
spare capacity in the economy, and Russia's vast, underutilized human capital -- all imply
great scope for import-substitution and catch-up growth. We perhaps can see some of this
potential already being grasped in the Russian goods now arriving in Russian shops.
The challenge is to free this potential from the dead hand of macroeconomic collapse and
ineffective state institutions. That means, among other things:
I. Stabilization
The Russian authorities have no easy stabilization choices. It is always tempting -- in such
situations -- to believe that more heterodox routes are possible and desirable. Unable to
borrow domestically or abroad, there is now huge and understandable pressure on the
authorities to print money. But Russia's failure to grow these past years did not come from a
shortage of roubles. And it did it not come from a lack of optimism in the drafting of budgets.
The budget for this year proposed by Prime Minister Primakov aims for stringency. But for
the government to be credible it needs to set budgets that will stick. With the exchange rate
already well below -- and inflation already well ahead -- of the level assumed in the budget,
"virtual revenue" is not enough. What is needed are genuine and realistic cuts in the deficit.
The prescriptions for achieving this are not new but they will work. They include: extracting
more revenue from the energy sector, reductions and reallocation of spending out of
agricultural and industrial subsidies and into health and social spending. There should also be
immediate action to extend the reach of the tax system to the barter economy: such as tax
collection on an accrual basis, and finally and permanently eliminating the use of tax offsets.

2. Tax Reform
Nothing has been more important to the course of Russian reform than its tax system -- and
nothing has been harder to change. To encourage growth and support fiscal stability, Russia

4

needs a tax system that supports the government and legitimizes enterprise. That means
reform that raises revenues, and can increase simplicity and predictability. But, hardest of alL
it also means reform that can command the political support to be put into action.
To be sure, it is easier to suggest how the tax system should be reformed than how it might
be agreed. At this stage it may well be that what is politically possible in the way of
increasing federal revenues will still fall short of what it now wants to spend. This points
strongly toward a new allocation of spending and revenues between the center and regions.
The budget now before the Duma does contain some helpful steps. But, when one thinks
about the kind of measures that are proven to raise revenues, and one considers the budget -it is not encouraging that several key tax changes it proposes -- particularly the changes to
V AT -- look firmly to be headed in the wrong direction.

3. Bank Restructuring and Financial Sector Regulation
With so much of the private financial system under water -- the crisis has ironically given
Russia a golden opportunity to start afresh in building a system that can do the job that the
Russian economy desperately needs it do. Namely, turning domestic savings into investment
capital for viable small and medium-sized businesses.
No one should doubt the potential. The European Bank for Reconstruction and
Development's Russia Small Business Fund has now lent around $250 million to Russian
small and micro businesses. Its repayment rates -- at more than 95 percent -- are higher than
for most banks in the United States. More broadly, giving a greater welcome to foreign banks
-- with all their capital, expertise and confidence -- could make an important contribution.
Of course, the history of bank clean-ups shows that governments cannot ever truly start
afresh. In this regard the development of a solid bank restructuring plan is a major step
forward. But it needs to be implemented in a fair and transparent way -- within a legal
framework that makes current owners responsible for their losses before scarce public money
is used. To date there is little sign of this taking place.

The Goal: A Positive Climate for Investment
If there is a broader end goal of all these efforts -- it is to create finally in Russia an
environment in which business and investment can flourish and the country's vast human and
physical potential can be realized.
That means: sound money, the rule of law, fair tax laws and enforcement; private ownership
and free land markets; independent courts that enforce laws and contracts; strong banks that
safeguard peoples' savings and channel those savings to productive private investment;

5

securities markets that deter fraud and protect legitimate investor rights; social spending
targeted to those really in need, and it means the prevention of hidden, anti-competitive ties
between government and business interests. In many of these areas foreign investors may
have an important role to play -- both in the setting of high examples and in the demand that
certain core standards are met.
Let me add here that Prime Minister Primakov deserves credit for succeeding where previous
governments had failed, by passing production sharing agreement legislation. This is a
crucial step forward for the energy sector and for future foreign investment within it. But
clearly, it is one of many such steps that are needed, economy-wide -- and one that will
depend a great deal on its implementation.

IV. The Role of the International Community and the United States
Talk of "who lost Russia" misses the point. Russia was never ours to lose, and it is certainly
not ours to re-win. What has always been true -- what remains true today -- is that the United
States and the international community have an enormous economic and strategic stake in a
stable and prosperous new Russia. We will continue to act in any way appropriate to further
that goal. Our support is conditioned only by our realism -- and by our prudence.
Three imperatives for the international community stand out:
First, resuming engagement with the IMF. We continue to believe that Russia has a great
deal to gain from close contact with the IMF -- both in terms of the technical and financial
resources it can offer and the broader credibility it can bestow. Yet we will not be striving
for a program on any terms. The IMF focus on deficit cutting as a core element of Russia's
economic program -- and, especially, constructive efforts to raise tax revenues -- is not just
reflexive orthodoxy. It is the right policy for Russia. It is neither feasible nor desirable for
Russia to incur major new debts to finance large deficits.
Second, it must be frankly admitted that Russia will not, under any realistic scenario, be in a
position to service all of its foreign debt in 1999. The international community should be
prepared to work with Russia on realistic solutions, but it has to be in the context of a strong
economic program supported by the IMF and Russian respect for the principle of
comparability of treatment of creditors.
Finally, we must and we will seek wherever possible to lend weight to the positive
transforming forces in Russia today and to weaken the forces of corruption and distrust. So
many aspects of corruption grows out of regulatory and legal failings -- failings that
successive IMF and World Bank programs have sought to correct. We hope and expect that
this structural side of official support for Russia will play an even larger role in the future.

6

On a bilateral level, legal reform and the battle against corruption have long been a central
focus of Vice President Gore's work with the Russian Prime Minister and President Clinton's
dialogue with President Yeltsin. For our part Treasury have worked closely with Russian law
enforcement for the past 2-3 years to help curb money laundering and this coming year we
are looking to beef up these efforts and extend them to other kinds of financial crime.

V. Concluding Remarks
Russia's transition comes at a time of global transition -- the transition to a post-industrial
economy. It cannot be an accident that communism, planning ministries throughout the
developing world and large corporations run by command and control all ran into a brick wall
in the same decade and had to be restructured. Across America and across the world, new
technologies and closer economic integration have forced profound changes in the way
economic and financial life is organized. It is a striking reflection on this move to a postindustrial society that Microsoft today has a greater market capitalization than the entire
American steel, auto and aerospace sectors combined.
It is certainly true that in this new global economy, the market punishment for bad policies
comes more quickly and takes a harsher form. But the reverse is also true: that good policies
are rewarded that much more quickly. That is the positive lesson for Russia that can be
gleaned from experiences in Mexico and elsewhere.

It is not a time for predictions and certainly -- it is not a time for excessive optimism. Russia
faces difficult decisions in the months ahead and upcoming legislative and presidential
elections will probably not make them any easier. But they will give the Russian people the
opportunity to address one of Russia's fundamental problems -- the lack of a consensus on
Russia's true way forward.
To repeat, the United States stands ready to support Russians on the path to a stable and
prosperous market democracy. But the choice is for Russia and Russia alone to make. Thank
you.

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7

DEPARTMENT

OF

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lREASURY i'~w

TREASU-RY

NEW S

omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C .• 20220. (202) 622-2960

FOR IMMEDIATE RELEASE
Remarks as prepared for delivery
January 15, 1999

TREASURY SECRETARY ROBERT E. RUBIN
REMARKS BEFORE THE WALL STREET PROJECT CONFERENCE
NEW YORK, NEW YORK

I appreciate the opportunity to speak with you today. I would like to thank Reverend
Jackson for this invitation and applaud him for his leadership on the issue of fostering
opportunity in America's economically distressed areas. I know Reverend Jackson has been
enormously focused on this project. Since I spoke at the first Wall Street project last year, he
has held meetings around the country with experts in finance, investors, bankers, and
community leaders to find practical ways to attract more capital to low income communities.
We meet at a time of tremendous strength in the U.S. economy. December marked the
93rd month of the current expansion, making it the longest peacetime expansion in history.
Inflation is low. The unemployment rate is the lowest in a generation and more Americans are
working than ever before with 131 million Americans working in December. The economy
has created more than 17 million net new jobs since January 1993.
And incomes are rising -- at all income levels. Economic expansion has not always
helped those at the low end of the pay scale. Low-wage workers were left behind in the
expansion of the 1980; in fact, their income actually fell during the decade and a half before
President Clinton took office, and income inequality grew. But during the current expansion
that trend may have started to reverse. Families in all income groups have seen gains in
income since 1993 and families in the bottom fifth of the income scale have experienced the
largest increases in income in recent years.
Moreover, this strong economy has greatly benefitted America's cities. Unemployment
in the fifty largest cities is down to 5.1 percent from 8.4 percent in 1992. And crime is down
substantiall y.

RR-2898
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But, while these developments are important, the reality remains that there is an
enormous amount to do to promote growth and opportunity in America's urban and rural
economically distressed areas, places fraught with poverty and economic duress. I have long
held the belief -- and more importantly, President Clinton deeply believes -- that this country
will fall far short of its full economic potential for all Americans, unless our least well off
have a real opportunity to join the economic mainstream. Providing this opportunity is not
simply a social issue or a moral issue, but an economic issue of great personal importance to
each of us, no matter what our income may be or where we may reside. Just think of the
difference it would make in terms of higher productivity and reduced social costs if we can
bring the residents of these areas into the economic mainstream.
From the beginning of his Administration, President Clinton has made promoting
growth in distressed areas a high priority. One of the most important steps we can taKe for our
inner cities and other distressed areas is to continue to pursue the economic strategy of fiscal
discipline, opening markets and investing in people that has proved so successful for our
economy as a whole. The foundation for a successful strategy of promoting growth in
distressed areas is strong economic growth, which in turn creates a tighter labor market, as we
have now, and thereby increases the availability of jobs and tends to increase incomes at all
levels. Too often, those who believe in the importance of fostering opportunity in distressed
areas under emphasize the importance of a strong national economy in that pursuit, while those
who do focus on a strong economy too often neglect all else that is require for fostering
growth in distressed areas.
Beyond economic growth, this Administration has focused on three key areas -- three
areas that are mutually reinforcing -- to promote opportunity and growth in the inner cities and
other distressed areas: first, investing in people through education and training so they will
have the tools to succeed in the modern economy; second, improving public safety, by putting
100,000 new police on the streets, enacting tougher gun laws and other measures, in part
because safe communities are an obvious prerequisite to attracting business; and third -- an
area we are intensely focused on at Treasury -- expanding access to capital. Let me now focus
on that third area for few moments.

a

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 credit to create housing and jobs in our inner cities and distressed rural
communities. Treasury has been bringing its broad expertise in capital markets to address
these problems.
As a reflection of the importance we place on these issues, we have established, for the
first time in the history of the Treasury Department, an office specializing in these issues, as
well as on tax incentives for development in distressed areas, the Office of Community
Development Policy.

2

Through that office - which has accomplished a lot in its relatively brief life - we are
focusing on three fundamental challenges going forward.
First, we must protect the Community Reinvestment Act, which expands access to
capital from mainstream financial institutions. We have greatly improved CRA by
streamlining its regulations so that they focus on performance, not paperwork. CRA has been
an enormous success. Over the last six years, according to non-profit community groups,
banks and thrifts have made commitments to provide over $1 trillion in capital to low income
communities. Home Mortgage Disclosure Act data shows that since 1993, home loans to
African-Americans have increased by 58 percent, to Hispanics by 62 percent, to Asians by 29
percent and to low and moderate income borrowers by 38 percent, all well above the overall
market. CRA is working. We believe strongly that it is important to maintain CRA and we
are opposed to any efforts to weaken CRA.
Second, we must strengthen the Community Development Financial Institutions Fund,
or CDFI Fund. We will ask Congress this year for $125 million for the CDFI Fund in the
new budget to give this critical program the necessary resources to continue its success. Over
the last several years we have implemented President Clinton's vision of a CDFI fund, which
gives funding to small, community development organizations. Through their local kflowledge
and expertise, CDFls are expanding the reach of the private sector marketplace, helping to
demonstrate how to make effective loans and investments in low income communities, and
drawing in mainstream institutions in partnership. We are also encouraging more banks to get
involved through Bank Enterprise Awards, which are awarded to mainstream financial
institutions that are active in distressed areas.
At the same time, under the Vice President's leadership, we have started BusinessLinc
to connect local businesses with larger businesses, because access to capital is most effective
when married to access to business expertise and technical assistance. Those of you in the
business community can be of enormous assistance to smaller firms, particularly firms in the
inner cities, that may be cut off from mainstream business networks. At the same time,
experience suggests that these BusinessLinc strategies are good for the larger firms' bottom
line as well. The Administration is seeking $3 million in SBA's budget to move this initiative
forward and would like to work with you to expand BusinessLinc strategies across the country.

Third, we mus,t build on our efforts to encourage economic growth in low income
communities through tax incentives for business investment. Over the last several years, we
have enacted a number of incentives, from the so-called brownfields tax incentive to spur the
clean up and redevelopment of thousands of abandoned, environmentally contaminated sites in
under-served communities to two rounds of Empowerment Zones. We made the low income
housing tax credit permanent, and we are now proposing to expand it by 40 percent.

3

Building on these efforts, the President announced today a proposal for a new tax
incentive to spur the private sector to make equity investments to help grow businesses in our
nation's cities and rural communities. This New Markets Tax Credit could help foster $6
billion in new equity investment in low-income communities over the next five years. A
community development investment fund, if selected, would be able to offer potential
investors a 6 percent tax credit for five years, cutting the investors' cost of capital by 25
percent.
To provide flexibility and attract a range of investors, the tax incentive would be
available for investments in a broad array of community development investment vehicles,
from CDFls and rural venture capital funds, to Community Development Corporations that set
up partnerships to attract new retailers in low income communities. You heard this morning
that SBA is creating two new programs: New Market Entrepreneur Funds and America's
Private Investment Companies to invest in businesses in these communities. Investors in these
funds will also be able to obtain the tax credit.
I remember from my time on Wall Street that there really had been no practical means,
even for professional investors, to invest in inner cities even if they wished to do so.
Hopefully, the creation of CDFI and other vehicles, and this new tax credit, will interact to
make investment opportunity more readily available and to provide incentive for such
investment. And that is not only good for the inner cities and rural areas, it is a good for
investors and for the country. In the past few years, in Los Angeles, Boston, Chicago, and the
Bronx, I have seen firsthand the positive effects these community development institutions can
have in economically rejuvenating distressed neighborhoods.
This past year has been a year of significant crisis in the global economy, a crisis that
has affected hundreds of millions of people around the globe, in nearly every country,
including our own. While we must be and have been intensely focused on this crisis, because
our own economic well being is integrally related to the well being of the global economy, we
must also remain focused on being strong at home, and making sure the residents of our
distressed areas have a real opportunity to enter the economic mainstream.
The current strength of the U.S. economy provides an enormous opportunity to make
progress in promoting growth in our nation's communities. The President's announcements
today build on successful programs such as CRA, the CDFI Fund and a host of tax initiatives
in a strong effort to make real progress in bringing all Americans into the economic
mainstream. And we at Treasury look forward to continuing to work with you on a bipartisan
basis on these critical issues as we move ahead. Thank you very much.

4

DEPARTMENT

OF

THE

TREASURY
.

lREASURY

.

NEWS

~/78~9~. . . . . . . . . . . . . . . . . . . . . .. .

........................

OFFICE 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
January 20, 1999

STATEMENT OF TIMOTHY F. GEITHNER
NOMINEE FOR UNDER SECRETARY OF THE TREASURY
(INTERNATIONAL AFFAIRS)
SENATE FINANCE COMMITTEE

Mr. Chairman, Senator Moynihan, and Members of the Committee, I am honored to
appear before you today as you consider my nomination to be Under Secretary for
International Affairs. I am pleased to have my family with me today: my wife, Carole; my
daughter, Elise; my son, Benjamin; and my father, Peter.
I am honored to have been nominated by President Clinton for this position, and to
have been given this opportunity to continue to work with Secretary Rubin and Deputy
Secretary Summers, and the distinguished career civil servants in International Affairs at the
Treasury.
l-am also plea~ed to appear before you today with Ted Truman, who brings great talent
and experience to the Treasury. We have worked very closely together, particularly over the
past six years, and he has helped build a strong, cooperative relationship between Treasury and
the Federal Reserve on international financial issues that has served this country well.
I have had the privilege to work at the Treasury for just over a decade, these past
months as Assistant Secretary, and before that as a civil servant in a variety of positions under
previous administrations.
Our job at the Treasury is to defend and promote American interests in the international
economic and financial system. At this particular point in time, our interests lie primarily in
the following areas: in working to restore financial stability and growth to a world still in the
midst of crisis; in promoting free and fair trade; in advancing market-oriented, open economic
policies, together with the institutions and policy tools that can enable countries to enjoy the
RR-2899
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

benefits and manage the risks that come from economic integration; and in developing ways to
strengthen the architecture of the international financial system so that we can better prevent
and better manage future financial crisis.
As we work to meet these challenges, I am committed to continuing to work closely
with this Committee and the Congress.
Thank you, Mr. Chairman. I would be pleased to answer any questions.

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2

DEPARTMENT

OF

THE

TREASURY

NEWS

~/78~9~. . . . . . . . . . . . . . . . . . . . . . . . . . . .1I

..............................

OffiCE 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
January 20, 1999

STATEMENT OF GARY GENSLER
NOMINEE FOR UNDER SECRETARY OF THE TREASURY (DOMESTIC FINANCE)
SENATE FINANCE COMMITTEE

Mr. Chairman, Senator Moynihan, and members of the Committee:
I am honored to appear before you today as the President's nominee to be Under
Secretary of the Treasury for Domestic Finance.
I am very pleased to have my family here with me today: my wife, Francesca; my
three daughters, Anna, Lee and Isabel; my parents, Sam and Jane Gensler; and my t~in
brother Robert. I want to thank them for all of their support.
I hope that my educational and professional background has prepared me for the
position to which I have been nominated. I grew up in Baltimore, Maryland and received a
first rate education in the public schools of my home state. I then attended the Wharton
School, of the University of Pennsylvania, where I studied finance and accounting. I earned
both a Bachelor of Science in Economics, and an MBA from Wharton. I then spent 18 years
at the investment banking firm of Goldman, Sachs & Co., first as an employee and later as a
partner. For most of those years, I was a senior professional in the firm's Mergers and
Acquisitions Department. I then gained both trading and international experience as the head
of Goldman Sachs' debt and currency trading efforts in Japan.
I began serving as the Treasury's Assistant Secretary for Financial Markets in
September, 1997. Among my duties, I have supervised the offices that concentrate on federal
finance policy and federal credit policy. I have also worked with other members of the
President's Working Group on Financial Markets to monitor and study the functioning of the
capital markets. In addition, I have worked on matters of government financial policy.
During the past year, I have had the privilege of working with many talented individuals. In
particular, I would like to extend my compliments to the career staff at Treasury, who have
impressed me with their dedication and professionalism.
RR-2900
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At this time, the Treasury Department is deeply involved in addressing some of the
most critical issues facing our nation. If confirmed as Under Secretary, I hope to be able to
make a contribution in addressing these challenges. One of my top priorities will be to assist
the Secretary in his efforts to strengthen and stabilize our global capital markets. In addition, I
look forward to continuing the Department's important work on policy areas related to
financial institutions, fiscal affairs, financial markets and community development. In
particular, I would like to emphasize my commitment to building upon the Department's
efforts to promote growth and opportunity in America's economically distressed areas.
I wish to thank the President and Secretary Rubin for the confidence that they have
placed in me. Public service is a great honor for me. I pledge to the Committee that; if
confirmed, I will devote my full energies to serving the Department and the public interest.
I now look forward to answering your questions and, if confirmed, working with this
Committee, its Members, and your staff.
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DEPART}\;IENT

OF

THE

TREASURY

NEWS
omCE 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 20, 1999

STATEMENT OF EDWIN M. TRUMAN
NOMINEE FOR ASSISTANT SECRETARY OF THE TREASURY
(INTERNATIONAL AFFAIRS)
SENATE FINANCE COMMITTEE

Mr. Chairman; Senator Moynihan, Members of the Committee, I am honored to appear
before you today as you consider my nomination to be Assistant Secretary of the Treasury for
International Affairs. I am pleased to be here with my wife Tracy (a physical therapist) and our
daughter Christine (in her third year at Columbia University's College of Physicians and
Surgeons); unfortunately our son David (a lawyer in the St. Louis County Prosecutor's office)
could not be with us.
I am honored by President Clinton's nomination and by the opportunity to join Secretary
Rubin's international team at Treasury. On the occasion of Tim Geithner's swearing in as
Assistant Secretary, I was quoted accurately as having said that Secretary Rubin had the best
Treasury team that I had worked with in my 26 years in Washington. My hope is that, if
confirmed, I will not lower the average.
I am an economist by training, taught five years at Yale University, and spent the past 26
years in the Division of International Finance at the Board of Governors of the Federal Reserve
System, the most recent 21 years as its head. During my conversations last summer with Secretary
Rubin and Deputy Secretary Summers about the possibility of joining the talented Treasury team
in dealing with the difficult challenges of the global economy, I was reluctant and flattered B
reluctant to leave the friendly confines of the Federal Reserve and flattered by the thought that I
might be able to contribute significantly on a broader scale.
I am confident that we can successfully meet the immediate challenge of restoring stability
and growth to the global economy in the wake of the Asian financial crisis and, thereby, benefit
the U.S. economy. However, in our focus on these shorter-run issues, we also must not lose sight
of the need to make steady and concrete progress in strengthening the functioning of the
RR-2901
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

international financial system in order to help reduce the incidence and severity of future crises.
I embrace the opportunity to work with my many dedicated new colleagues at the U.S.
Treasury on these matters. I also look forward to working with this Committee, the Congress,
others in the Executive Branch, and representatives of other countries as we together seek
effective, pragmatic and cooperative approaches.
Thank you, Mr. Chairman. I am happy to respond to questions.
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2

DEPARTMENT

'IREASURY

OF

THE

TREASURY

NEWS

omCE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASlflNGTON, D.C. - 20220 - (202) 622·2960

EMBARGOED UNTIL lOAM. EST
Text as Prepared for Delivery
January 20, 1999

STATEMENT OF DAVID C. WILLIAMS
NOMINEE FOR INSPECTOR GENERAL OF THE TREASURY
(TAX ADMINISTRATION)
SENATE FINANCE COMMITTEE

Mr. Chairman, Senator Moynihan, and members of the Committee, I would like to
express my appreciation for this opportunity to sit before you again to be considered for the
position of Treasury Inspector General for Tax Administration. I would like to begin by
saying it has been a great honor to serve this Committee as the Inspector General for the
Department of the Treasury and the Social Security Administration, and I look forward to
continuing this relationship as I am considered for the Inspector General for Tax
Administration.
I would like to briefly discuss my background as well as my recent work at the
Department of the Treasury, specifically regarding my participation on the transition task force
for the establishment of an Office of Inspector General for Tax Administration.
My government service began in the US Army, where I was a special agent with
military intelligence in the American Infantry Division in Vietnam. After my service in the
Army, I obtained two.graduate degrees at the University of Illinois. Upon completion of my
graduate studies in 1975, I joined the United States Secret Service as a Special Agent.· In
1979, I went to work for the Labor Department's Office of Inspector General in the Office of
Labor Racketeering where I investigated Organized Crime in the Teamsters union and other
organized crime controlled labor unions. During this time, I served in Chicago and was the
Special Agent in Charge in Cleveland and New York City. I was also asked to serve on
President Reagan's Commission on Organized Crime. Following this assignment, I became
the Field Director for the Office of Labor Racketeering until 1986.

RR-2902
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I then became the first Director of the Office of Special Investigations for the General
Accounting Office. As Director, I was responsible for conducting and supervising
investigations for various Congressional committees. In 1989, I had the pleasure of b~ing
nominated by President Bush to become the first Inspector General for the Nuclear Regulatory
Commission. And in 1996, I was nominated by President Clinton to become the first
Inspector General for the Social Security Administration.
As you know, in 1998, I was again nominated by President Clinton to be the Inspector
General for the Department of the Treasury. Although my tenure as Treasury Inspector
General has been quite brief, I feel that this organization has made significant improvements
over the last several months. I believe these improvements are consistent with changes that
this Committee identified as being essential. The organizational structure has been simplified
and strengthened to allow for a more efficient and effective operation. We have attempted to
improve communications with our stakeholders by creating a Public and Congressional Affairs
group. In addition, we have added resources to our Investigations Division to strengthen
oversight of Treasury's Law Enforcement Bureaus and to expand our presence along the
southwest border and Miami areas. I have been pleased with the quality of journeymen
investigators and the many new managers that we have been able to recruit into the office.
More recently, I have been an active member of the Treasury Task Force responsible
for establishing and implementing the Office of the Treasury Inspector General for Tax
Administration. The Task Force was formed immediately after the IRS Restructuring-and
Reform Act of 1998 was signed into law. We immediately began to tackle the enormous task
of creating a new government organization. Issues addressed by the Task Force included:
budget, human resource management, information technology, Treasury Orders and
Directives, policies and procedures, administrative support, and more. The Office of the
Treasury Inspector General for Tax Administration became operational on January 18, 1999,
exactly as scheduled.
I would also like to recognize that this Committee was responsible for the creation of
the Inspector General for Tax Administration, and, if confirmed, it would be my personal goal
to ensure that the organization becomes all that your Committee envisioned. I will dedicate
myself to working with the Committee to see that this goal is realized. I have great
appreciation for the legislation which created the Treasury Inspector General for Tax
Administration. The provisions for law enforcement authority, direct referrals to the
Depart~ent of Justice, and public disclosure will make the organization effective and
responsIve.
This concludes my statement and I would be pleased to answer any questions that you
have. Thank you.
.
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PUBLIC DEBT N--EWS
Department of the Treasury • Bureau of the Public Debt. Washington, DC 20239
FOR IMMEDIATE RELEASE
Contact: Peter Hollenbach
January 26, 1999
(202) 219-3302

BUREAU OF THE PUBLIC DEBT AIDS SAVINGS BONDS OWNERS
AFFECTED BY TORNADOES IN ARKANSAS

The Bureau of Public Debt took action to assist victims of tornadoes in Arkansas 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
Arkansas affected by the tornadoes. These procedures will remain in effect through February 28,
1999.
Public Debt's action waives the normal six-month minimum holding period for Series EE and
Series I savings bonds presented to authorized paying agents for redemption by residents of me
affected area. Most financial institutions serve as paying agents for savings bonds.
The hardest hit counties in Arkansas were Clay, Independence, Saline, St. Francis and White.
Other affected counties include Clark, Craighead, Faulkner, Greene, Hot Spring, Jefferson,
Lawrence, Lonoke, Miller, Monroe, Phillips and Prairie. Should ad~itional counties be declared
disaster areas me 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 at most financial institutions or by writing the Kansas
City Federal Reserve Bank's Savings Bond Customer Service Department, 925 Grand Boulevard,
Kansas Cicy, Missouri 64198; phone (816) 881-2000. 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 instirution. 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 "TORNADOES" on the front of their
envelopes, to help expedite the processing of claims.

RR-2903
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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
January 19, 1999

CONTACT:

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
January 21, 1999
April 22, 1999
912795BJ9

Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:

4.280%

Investment Ratel/:

4.387%

Price:

98.918

All noncompetitive and successful competitive bidders were awarded
securities at the high rate. All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

69%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered

Tender Type
competitive
Noncompetitive

$

PUBLIC SUBTOTAL

22,109,334
1,186,614

Federal Reserve
Foreign Official Add-On
$

TOTAL

$

7,285,575

220,000

220,000

23,515,948

7,505,575

3,750,500

3,750,500

o

o

27,266,448

$

Median rate
4.250%: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low rate
4.200%:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
Bid-to-Cover Ratio
1/

=

23,295,948 / 7,285,575

3.20

Equivalent coupon-issue yield.

http://www.publicdebt.treas.gov

RR-2904

6,098,961
1,186,614

23,295,948

Foreign Official Refunded
SUBTOTAL

Accepted

11,256,075

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
January 19, 1999

CONTACT:

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
January 21, 1999
July 22, 1999
912795BZ3

Term:
Issue Date:
Maturity Date:
CUSIP Number:
4.310%

High Rate:

Investment Rate1/:

4.467%

Price:

97.821

All noncompetitive and successful competitive bidders were awarded
securities at the high rate. All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

82%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered

Tender Type
Competitive
Noncompetitive

$

PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
$

TOTAL

Accepted

22,038,453
1,134,863

$

23,173,316

4,603,516

2,900,000

2,900,000

26,073,316

7,503,516

3,310,000

3,310,000

o

o

29,383,316

$

Median rate
4.300%: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low rate
4.275%:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
Bid-to-Cover Ratio
1/

=

23,173,316 / 4,603,516

5.03

Equivalent coupon-issue yield.

http://www.pubJicdebt.treas.gov

RR-2905

3,468,653
1,134,863

10,813,516

DEPARTMENT

OF

THE

TREASURY

NEWS
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960

January 20, 1999

Weekly Release of U.S. Reserve Assets
The Treasury Department today released U.S. reserve assets data for the week
ending January 15, 1999.
As indicated in this table, U.S. reserve assets totaled $81,562 million as of
January 15, 1999, down from $81,867 as of January 8, 1999.

U.S. Reserve Assets
(millions of US dollars)

1999

Total
Reserve

Week Ending

1/

Assets

Special
Gold
Stock

Drawing
II

Foreign
Currencies

Reserve
3/

R19ht s 21

ESF

SOMA

Position in
IMF 2/-41

January 8, 1999

81,867

11 ,041

10,646

16,360

19,601

24,219

January 15, 1999

81,562

11,041

10,646

16,157

19,499

24,219

Gold stock is valued monthly at $42.2222 per fine troy ounce. Values shown are as of November 30,
1998. The October 31, 1998 value was $11,041 million.

2/ SDR holdings and the reserve position in the IMF are based on IMF data and revalued in dollar terms
at the official SDRIdollar exchange on the reporting date. IMF data are as of January 8. 1999, and
are shown as preliminary figures (in italics) for January IS, 1999.
3/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's
System Open Market Account (SOMA). These holdings 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.
4/ Includes SDR 361 million loan to the IMF under the General Arrangements to Borro\\ (GAB) in July
1998, and an SDR 619 million loan to the IMF Linder the Ne\\ Arrangements to Borroll (NAB) In
December 1998.

RR-2906

J)

E 1· ART ~ I E :'\ T

0 F

T H t:

T REA SUR Y

,"

NEWS

TREASURY

OFFICE OF PVBLIC AFFAIRS el100 PENNSYLVANIA AVENUE, N.W. e WA5HJ"CTON, I).C.e %0110. (%02) 6%2·2'"

mmAllGOBD
.:FCuary'

mrrn.

CON"!AC'l':

2: 30 P.X.

20, 1.999

Offiee of !'iD&Z1cing
202/219-3350

TR.EAStntY '1'0 ACCTION $151000 JaLLIOl!l OF 2-YEAR NOTES

The T.rea~ wil~ auction $15 000 million of 2-year Doee. eo refgnd
$29 1 604 milliou of publicly held securities maturiDg January 31., 1999, and
to pay down about $16,606 million.
1

In addition to the public holdin~., Pederal aeserve Banks hold $2,765
million of the maturiza,g securieies for their owu account., which may be
refunded by issuing aD additional aJIO'Wlt of the new seCNZity.
~e maturing securities held ~ th~ public iDCluQe $6,782 million held
Vederal Reserve B~ as agents for foreigu aDd international monetary
authorities. Amounts ~i4 for these accounes by Federal Reserve Banks will
1:H. acld.ecl to the offering.
~

The auctiou will be conducted in the single-price auction ~ormat. ~1
competitive and noncompetitive a~ds will be at the higbest yield of accepted
competitive tenders.

The DoteS being offered today are eligible for the

STRIPS program.

Tenders will be received at Federal Reserve Banks and Branches and at
the Bu%eau of the Public Debt, Wasbington, D. C. This offerius of Treasury
securities is governed. by the te%m8 and conditions set forth iD the 'On.ifo%1ll
Offering Circula:- for the Sale and Issue of Marketable ~ook-Entry '1'reasury
Bills i Notes, and Scuds (31 CFR P~t 356, as amended).

Details about the new security are given ift the attached offering

bigAlights.

000

A.tta.chment
RR-2907
For press releases, $puches, public schedules and official biographies, call OUT 24-hour fax

-

li1lt

at (202) 622.2040

JC:G!lIUGB'rS OF ~ OPPBlUNC ~ '1'BE ptJBI,XC OF
2-YEAR lIIOTE8 ~ BB ISsm:D FEBm:rAltY 1, 1999

January ZO, 1999
.
o ff er1D.9:

~t............................

,

$15 000 million

n..cription of O££eriDg:
Ter.m and type of a.~ty ••••••••••••••••• 2-ye~ not.s

8.ri •••••••••••••••••••••••••••••••••••••• ~-2001
ct1S%P number •••••••••••••••••••••••••••••• 91.2827 4Z 2
Auction dat••••••••••••••••••••••••••••••• January 27, 1999
Issue 4a~e •••••••••••••••••••••••••••••••• Pabruarr 1, 1999
Dated date •••••••••••••••••••••••••••••••• January 31, 1999
Maturity elate ••••••••••••••••••••••••••••• January 31, 2001
Intereat rate ••••••••••••••••••••••••••••• Deter.mined based on the higheat
aee.~te4 campe~itiV8

hid

yiela ••••.•••••.••••••••••.•.••.••....•.•• Det.r.miD.a at auction
Interest payment datea •••••••••••••••••••• JU1y 31 and JaDuary 31
~imum

bid amount aDd mu1tipl.B •••••••••• $1,OOO
Accrued intereat payable b,y inv•• tor •••••• Det.r.aLned at auction
Pr~ua or 4i80ount .• ___ •••••.••. __ ...... _Det.~D.d at auction
S'l'RIPS Information:
Min;mnn amount required ••••••••••••••••••• Det.r.min.d at auction
Corpus CUSIP DUmber ••••••••••••••.••••••. 912820 DP 9
Dae date(a) and COSXP number(s)
for additional TXRT(a) •••••••••••••••••• Bot applicable

SulDiBSion of Bids:
Noncompetitive bids:
Accepted in full up to $5,000,000 at the highest
accepted yield.
Competitive bids:
(1) MUst be expressed as a yield with three decimals, e.g., 7.123%.
(2) Met long position for each bidder must be reported when the Bum
of the tot~l bid amount, at all yields, and the net long position
is $2 billiou or great.r.
(3) Ret long position must be determined as of one half-hour prior to
the closing time for receipt of competitive tenders.
Maz~ RecogniZed Bid at a Single yield ••..•• 35% of public offering

MaXimum Award •••••••••••••••••••.•••.•.••••••• 35% of public offering
Receipt of Tendera:
Noncompetitive tenders: Prior to 12:00 noon Eastern Standard time on
auction day.
Competitive tendera: Prior to
auction day'.
Payment Terms: By charge to a funds account at a Federal Reserve aa.nk on
issue date, or payment of full par UIOuot with tender.
Trea BuzyDire ct
customers can use the Pay Direct feature which authorizes a charge to their
account of record at their financial institution on issue date.

PUBLIC DEBT N'EWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
Contact: Peter Hollenbach
January 21, 1999
(202) 219-3302

BUREAU OF THE PUBLIC DEBT AIDS SAVINGS BONDS OWNERS
AFFECTED BY TORNADOES IN TENNESSEE

The Bureau of Public Debt took action to assist victims of tornadoes 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 tornadoes. These procedures will remain in effect through February
28, 1999.
Public Debt's action waives the normal six-month minimum holding period for Series EE and
Series I 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 Carroll, Crockett, Decatur, Dickson, Hardeman, Haywood,
Henderson, Lauderdale, Madison, Maury Montgomery and Perry. Should additional counties be
declared disaster areas the emergency procedures for savings bonds o.wners 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 Boulevard,
Kansas City, Missouri 64198; phone (816) 881-2000. This form can also be downloaded from
Public Debt's 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 "TORNADOES" on the front of their
envelopes, to help expedite the processing of claims.

000

RR-2908

hitp://www.publkrl.ebU:r<:::as.go'V

D E P ..\ l~ T ;\1 E ~ T

0 F

T 11 E

T R E ..\ S t) R Y

NEWS

TREASURY

OFFICE OF PUBLIC AFFAIRS e1500 PENNSYLVANIA AVENUE. N.W•• WASHINGTON. D.C.e 10llO e (20%) 611·2"0

CONTACT:

EMBARGOED UNTIL 2:30 P.M.
January 21, 1999

Office of Pinancing
202/219-3350

TRXAStJRY OFFERS 13-WEEE AND 26-WBEX BILLS
The Treasury will auction two series of Treasury bills totaling
approximately $15,000 milliou to refund $15,814 million of publicly held
securities maturing January 28, 1999, and to pay down about $814 million.
In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $7,343 million of the maturing bills, which may be refunded at
the highest discount rate of accepted competitive tenders. Amounts issued to
these accounts will be ~ addition to the offering amount.
The maturing bills held by the public include $3,662 million held by
Federal Reserve Banks 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 at
the highest discount rate of accepted competitive tenders. Additional amounts
may be issued in each auction for such accounts to the extent that the amount of
new bids exceeds $3,000 million.
The bill auctions will be conducted in the single-price auction format.
Tenders for the billa will be received at Pederal Reserve Banks and
Branches and at the Bureau of the Public Debt, Washington, D.C. This offering
of Treasury securities is governed by ehe eerma and conditions set forth ~~
the Uniform Offering Circular for the Sale and Issue of Marketable Book-Entry
Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
Details about each of the new securities are given in the attached offering
highlights.
000

Attachment

RR-2909
For prus releases. speechu. public Jchedules Qlrd official biographies. clllI our 24-ltou, flU 11IIt! II' (202) 622-2040

HIGHLIGHTS OF TREASURY OFFERINGS OF BILLS
TO BS ISSUED JANUARY 28, 1999
January 21, 1999
Offering Amount .....••...•.•..•.•.•..••• $7,500 million
pascription of Offerings
Term and type of security •.•...•.•...••• 91-day bill
CUBIP number •••......•.•......•.•.•.•..• 912795 BW 0
Auction date ............................ January 25, 1999
I'Bue date •....•.....••..•.•..••.•••...• January 28, 1999
Maturity date ••.•......•........••..•••• April 29, 1999
Original issue date •.•...•........•...•• April 30, 1998
CUrrently outstanding •...•.....•..•...•• $26,630 million
Mlnimu. bid amount and multiples ..•..••. $l,OOO

$7,500 million
182-day bill
!H2795 Cft 2
January 25, 1999
January 28, 1999
July 29, 1999
January 28, 1999
$1,000

The following rules apply to all @ecuritlee mentioned above:

Submi@sion of Bid,:
Noncompetitive bids ..•.•..•.• Accepted in full up to $1,000,000 at the highest discount rate of
accepted competitive bids.
Competitive bids ..••.•..•.... (1) Must be expressed as a discount rate with three decimals in
increments ot .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 dete~ined as ot one half-hour prior
to the closing time for receipt of competitive tenders.

Maximum Recognized Bid
at a Single yield ••••..••.••. 35\ of public offering
M!_imua Award .•.•.•••••••.••••.• 35\ of public offering
Receipt of Tenders.
Noncompetitive tenders .•••••• Prior to 12:00 noon Bastern Standard time on auction day
competitive tenders •••.••..•. Prior to 1.00 p.m. Eastern Standard time on auction day
Payment Terms: By charge to a funds account at a rederal Reserve Bank on issue date, or payment
of full par amount with tender. TreasuryDlrect customers can use the Pay Direct feature whioh
authorises a oharge to their account of reoord at their financial institution on issue date.

From: TREASURY PUBLIC AFFAIRS

20009
I)

E P \ R T \. E N T

0

F

TilE

3-24-99 4:43pm

p. 5 of 35

T R E \ S l.f It \'

NEWS
omCE OFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W•• WASIDNGTON, D.C •• 20220 - (202) 622-2960

FOR IM:MEDIATE RELEASE
January 22, 1999

Contact: Dan Israel
(202) 622-2960

TREASURY RELEASES ANNUAL FOREIGN EXCHANGE RATE REPORT

The Treasury Department today released the tenth Annual Report to Congress on
International Economic and Exchange Rate Policy, which reviews developments in the major
economies and exchange markets and assesses the foreign exchange systems of a number of our
major trading partners. The report is provided under the Omnibus Trade and Competitiveness
Act of 1988.
This report covers the period from November 1, 1996, through October 31, 1998, a time
marked by the Asian financial crisis and the subsequent turmoil in international financial markets.
The financial crisis resulted in economic contractions or declining growth rates across emerging
markets. This, combined with continuing Japanese weakness, had a significant negative impact on
U.S. exports, which resulted in a growing U.S. current account deficit. Despite the financial crisis
and its impact on U.S. trade, however, the U.S. economy performed strongly over the two years
covered by this report.
For most of that time, the strength of the U.S. economy and a growing aversion to risk
caused an appreciation ofthe dollar. Between November 1996 and August 1998, the dollar
appreciated by 16.9% in real trade-weighted effective terms. In September 1998, however, a
growing concern about losses stemming from the global financial turmoil led to a retreat of the
dollar against most major currencies. In September and October 1998, the dollar depreciated
5.4% in real trade-weighted terms.
On June 17, 1998, the U. s. monetary authorities intervened in foreign exchange markets,
purchasing a total of $833 million worth of Japanese yen. This was the only intervention by U. S.
monetary authorities during the period of this report.
The report presents an updated assessment of whether countries have manipulated
exchange rates between their currencies and the dollar to prevent balance of payments adjustment
or gain an unfair competitive advantage in international trade (as defined in the Omnibus Trade
RR-29 10

For press releases, speeches, public schedules and l!Ificial biographies, call our 24~our fax line at (202) 622-2040

20009

From: TREASURY PUBLIC AFFAIRS

3-24-99

4:43pm

p. B of 35

and Competitiveness Act), and concludes that none of our major trading partners is manipulating
its exchange rate under the tenns of the Act.
The report states that Treasury will continue to monitor closely the exchange rate policies
of these countries.
-30-

TOTAL F'.02

D EPA R T MEN T

TREASURY

O.F

THE

T R E";'A·.S· U R Y

NEWS

OFFICE OF PUBUCAFFAIRS. 1500 PENNSYLVANIA AVENUE, N.W.• WASIllNGTON, D.C.. 20220. (202) 622-2960

FOR IMMEDIATE RELEASE
January 25, 1999

C 0I1t(1Ct: Maria Ibanez

(202) 622-2960

UNITED STATES AND VENEZUELA SIGN NEW INCOME TAX CONVENTION
The Treasury Department announced Monday that U.S. Ambassador John F. Maisto and
Venezuelan Minister of Foreign Affairs Miguel Angel Burelli Rivas signed a new income tax
Convention and Protocol with Venezuela in Caracas. This tax convention, if ratified, will be the
first between the United States and Venezuela and represents an important step in Treasury' s
goal of expanding the U.S. tax treaty network with emerging economies, particularly in Latin
America.
The proposed convention with Venezuela generally follows the pattern of the 1996 U.S.
Model Tax Convention, while incorporating some provisions found in recent U.S. treaties with
other developing countries and in the OECD (Organization for Economic Cooperation and
Development) Model. There are, as with all bilateral tax conventions, some variations from
these norms. In the proposed convention, these differences ret1ect particular aspects of
Venezuelan law and treaty policy, the interaction of U.S. and Venezuelan law, and U.S.Venezuelan economic relations.
The proposed convention is subject to ratification and will enter into force when each
contracting state has notified the other that the domestic requirements needed for entry into force
have been completed. The proposed convention will have etfect. with respect to taxes withheld
at source, on amounts paid or credited on or after January I of the year following the date on
which the convention enters into force. In other cases the convention will have effect with
respect to taxable periods beginning on or after January I of the year following the date on \\'hich
the convention enters into force.
-30-

RR-29 11

Far 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 REA SUR Y

17SQ

OmCEOFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20%20 - (202)622-2960

EMBARGOED UNTIL 9:30 A.M. EST
Text as Prepared for Delivery
January 26, 1999

TREASURY SECRETARY ROBERT E. RUBIN
TESTIMONY BEFORE THE SENATE FINANCE COMMITTEE
ON GLOBAL ECONOMIC AND TRADE INITIATIVES

Mr. Chairman, members of this Committee, I appreciate the opportunity to speak with you

this morning about the Administration's trade policy and our strategy to open markets and expand
trade. While Secretary Daley and Ambassador Barshefsky will speak in greater detail about our
trade agenda, I want to make a few broader points about the importance of trade to our economy
because the decisions we make on trade over the next few years will be some of the most
important we will make as a nation with respect to our future prosperity
We meet at a time of tremendous strength in the US economy. Today, unemployment is
4.4 percent and it has been under 6 percent for the last four years The economy has generated
nearly 18 million new jobs over the last six ~'ears, and inflation has remained low. And wages are
rising - across all income levels
A number of factors have contributed to this strong economy including, very centrally, the
private sector regaining its competJli\e ed~l: o\er the last decade, and the President's broad based
economic strategy of fiscal discipline, ill\ estlll~ III people, and opening markets. And that last
point - expanding trade, to which this Administration has been firmly committed and for which
this Committee has been the keeper of the flame - has c1carly' played a major role.
Jobs related to exports pay on average higher wages than other jobs, Opening markets
and expanding exports are therefore of great importance to our nation's prosperity and our ability
to create high wage jobs Less widely recognized is that imports, too, contribute greatly to our
economic well being Americans, as consumers, benefit from the lower prices and wider choice
which imports provide, American produccrs slfnilarl), benefit from lower costs and wider choice
for inputs, making them more competitJ\c, \vhich results in more jobs and higher wages,
productivity is enhanced through greater competition, and for all these reasons, inflation and thus
market interest rates are therefore lower
RR-2912
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

It is interesting to compare our economic performance of the last six years with the
economic performance of other industrialized nations that are less open. Study after study has
shown that more open economies enjoy stronger growth. and that is certainly evident here. We
have low unemployment, rising wages across the board - and we have the most open markets
among the major economies. Europe and Japan are far less open than the United States, and the
major economies of continental Europe have had persistent unemployment of 10 to 12 percent or
greater, and Japan, now in recession for over a year, has been virtually stagnant for roughly eight
years.
Moreover, trade is not a zero sum game All nations benefit from a vibrant trading
system.
Mr. Chairman, as you well know, for the last year and a half the global economy has
experienced a financial crisis severely affecting countries around the world. While our economy
has performed very well despite the crisis, there are certain sectors that have been substantially
affected - most notably, steel, because of increased imports, and agriculture and aircraft, because
of decreased world demand. The risks of that crisis continue, despite some positive developments
in recent months, as do the risks to us from that crisis. To protect the economic prosperity of our
country, and to restore the well being of affected sectors, we have been and continue to be
enormously focused on the effort to restore stability and growth to troubled parts of the world.
In this regard, we have been working bilaterally as well as with the IMF, the World Bank, the
MDBs, and others to meet these important objectives

Let me emphasize two points integrally related to a\l of these comments. First, trade
should be not only open but fair, and this Administration is committed to fully enforcing our trade
laws to deal with unlawful practices Second. the President has worked to equip Americans with
the tools they need to succeed in the global economy, with a strong emphasis on education,
training, health care, and technological research and development. A strong international policy
has to go hand in hand with a strong domestic policy And we must be particularly focused on
helping those who are adversely affected by the dynamic change - due principally to technology
but also to trade - that so benefits the American people overall and is critical to American success
in the global economy
What we must not do is pull away fmm the global economy, which is so important to our
economic well-being The rest of the \\orld loo~ to the l'llitcd States for leadership. For the
United States to reduce access to our markets. C\'en on what might appear to be a limited basis,
could well be very damaging to us It \\ould hun our economy directly through higher costs to
consumers and producers and higher inflation and quite possibly higher interest rates; and under
today's conditions there would in addition be two special risks to our economic well-being.
First, reduced access here could undermine the prospects of recovery and growth abroad
in a world that is still working itself through the global crisis that began a year and a half ago, a

.,

recovery so important to our economic well being. Japan and Europe must also increase the
world's access to their markets, for their sake, and for the sake of the rest of the world.
Second, and most troubling, if the United States, with its very healthy economy, is seen as
moving toward restricting markets, that could well reinforce the newly vibrant voices of
protectionism in many countries around the world whose economies are struggling or less vibrant
then ours, and that is enormously against our economic interest.

Mr. Chairman, the U.S. economy is the strongest it has been in a generation. To sustain
that strength we must continue to maintain open markets at home, and press for open markets
abroad. This Committee has long been a major force in pursuing those objectives, and I and all of
us in the Administration look forward to working with you to meet these great challenges,
including building a consensus for trade negotiating authority that also reflects appropriate
provisions with respect to labor and the environment, issues to which the WTO and the ILO have
a great deal to contribute. Our success in meeting these challenges is critical to the prosperity and
standard of living of our nation, as well as the global economy, for the years and decades ahead.
Thank you very much.
-30-

3

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
OR IMMEDIATE RELEASE
anuary 25, 1999

CONTACT:

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
January 28, 1999
April 29, 1999
912795BWO

Term:
Issue Date:
Maturity Date:
CUSIP Number:
4.305%

High Rate:

Investment Rate1/:

4.412%

Price:

98.912

All noncompetitive and successful competitive bidders were awarded
at the high rate. All tenders at lower rates were accepted in full.

~curities

Tenders at the high discount rate were allotted

82%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered

Tender Type
Competitive
Noncompetitive

Accepted

20,397,921
1,243,065

$

PUBLIC SUBTOTAL

Federal Reserve
Foreign Official Add-on

7,393,107

110,000

110,000

21,750,986

7,503,107

3,777,815

3,777,815

o

°

TOTAL

25,528,801

$

$

Median rate
4.290%: 50% of the amount of accepted competitive
lders was tendered at or below that rate.
Low rate
4.250%:
5% of the amount of accepted competitive
lders was tendered at or below that rate.
l-to-Cover Ratio

=

21,640,986 / 7,393,107

=

2.93

Equivalent coupon-issue yield.

-2913

6,150,042
1,243,065

21,640,986

Foreign Official Refunded
SUBTOTAL

$

http://www.publicdebt.treas.gov

11,280,922

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:

'OR IMMEDIATE RELEASE

Office of Financing
202-219-3350

anuary 25, 1999

RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
January 28, 1999
July 29, 1999
912795CH2

Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:

4.280%

Investment Rate1/:

4.436%

Price:

97.836

All noncompetitive and successful competitive bidders were awarded
!curities at the high rate. All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

29%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted

Tendered

Tender Type
Competitive
Noncompetitive

$

PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On

$

TOTAL

18,333,455
1,205,638

$

19,539,093

4,956,043

2,553,000

2,553,000

22,092,093

7,509,043

3,565,000

3,565,000

o

o

25,657,093

$

Median rate
4.270%: 50% of the amount of accepted competitive
ders was tendered at or below that rate.
Low rate
4.240%:
5% of the amount of accepted competitive
ders was tendered at or below that rate.
-to-Cover Ratio: 19,539,093 / 4,956,043 = 3.94
Equivalent coupon-issue yield.

http://www.publicdebt.treas.gov
RR-2914

3,750,405
1,205,638

11,074,043

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T lot E A SUR \'

NEWS

'IREASURY

omCE OF PUBUC AFFAIRS .1500 PENNSVLVANlA AVENllE, N.W.• WASHINGTON, D.C•• 20220 • (202) 622·2960

January 26, 1999

Weekly Release of U.S. Reserve Assets

The Treasury Department today released U.S. reserve assets data for the week
ending January 22, 1999.

As indicated in this table, U.S. reserve assets totaled $81,618 million as of
January 22,1999, down from $81,714 as of January 15, 1999.
U.S.' Reserve As.sets
(millions of US dollars)

1999

Reserve

Reserve

Foreign
Currencies

31

Assets

Gold
Stock II

Drawing
R'Ig htS "].1

ESF

SOMA

Position in
IMF 2141

January 15, 1999

81,714

11,046

10,597

16,157

19,499

24.414

January 22, 1999

81,618

11.046

10,597

16,098

19,463

24,41.:1

Week Eliding

II

Special

Total

Gold stock is valued monthly ilt $42.2122 per fine troy ounce. Values shown are as of December 31.
1998. The November 30. 1998 value was $11.041 million.

21 SDR holdings and the reserve position in the IMF arc based on IMF data and revalued in dollar terms

at the official SDRldollar exchange on the reporting date. IMF data are as of January 15. 1999. and
are shown as preliminary figures (in italics) for January 22. 1999.
31 Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Re~crve's

System Open Markel Account (SOMA). These holdings are valued ill current market exchange rates
or, where appropriate, at such other rates as may be agreed upon by the parties 10 the transactions.
4/ Includes SDR 361 million loan to the IMF under the General Arrangements to Borrow (GAB) in July
1998. and all SDR 619 million IOll'l 10 the 1M F under the New Arrilngements to Borrow (N A B) in
December 1998.

RR-2915

-

Fur press releases, speeches~ public schedules and official biographies, call ov.r 24-hour fax line at (202) 622-2040

-

TOTRL P.01

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20099

n

F P .\ R T i\I F 1\ T

0 F

THE

3-24-99 4:44pm

T I{ E \ S I i

p. B of 3S

I{ \'

omCE OF PUBlJC AFFAIRS -1500 PENNSYLVANlAAVENUE, N.W.• WASlDNGTON, D.C •• 20220 - (202) 622.2960

EMBARGOED UNTIL 10 A.M.
Text as prepared for Delivery
January 27,1998

LAWRENCE H. SUMMERS, DEPUTY SECRETARY OF THE TREASURY
SENATE FOREIGN RELATIONS SUBCOMMITTEE ON INTERNATIONAL
ECONOMIC POLICY AND EXPORTITRADE PROMOTION

Mr Chainnan. I am pleased to have this opportunity to discuss reform of the International
Monetary Fund, which I know to have been of considerable interest to this committee and other
members of Congress.
Today I would like to discuss where we are in carrying forward the important refonns to the IMF
contained in the legislation passed last fall. I will then reflect a little on the broader challenges we
-- and the international community as a whole -- must face going forward in response to recent
financial crises in emerging markets. First, however, let me just say a few words about the
events of the past year and a half and the IMF's role in those events.
The IMF bas appropriately been at the forefront of global attention during this period, as the core
vehicle for international response to what has been called the most serious global financial crisis
in fifty years. The financial disruptions that began in Thailand in the swnmer of 1997 have
caused immense damage in the cOW1tries affected -- including large chunks of Asia, Russia and
Brazil -- and major destabilizing shifts in trade flows and asset prices around the world.
Economists and other pollcy makers will rightly be debating the causes of these crises for a long
time to come_ And as the IMP moves forward from these experiences it will be important for it to
reflect on its ovm actions and consider how best to improve its approacbes going forward. If
there is one message running through my entire testimony today it isThis onc, that the global
economy has changed greatly in recent years, and the IMF has to change with it.

RR-2916

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--. Forpress releases, speeches, puhlic schedules and official biographies, call our 24-hour fax line at (202) 622·2040

•

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But, Mr Chairman, I have no doubt that without an IMP with the capacity to respond to these
crises, the costs of these crises would have been even higher -- and the impact on our own
economy and markets much more severe. While important domestic industries have been
adversely affected by these events, the basic momentum of the recovery remains strong. And a
significant part of the credit for this must go to the actions taken by the international community
last fall to support growth and stability --- of which one of the most important was the passage of
IMF funding legislation by Congress last October.

Let me now tum to the important refonns of the IMF that were mandated as part of that
legislation and the progress we have made in implementing those reforms.

J. An Evolving IMF
Mr Chainnan, when Congress passed the IMF authorization and appropriations legislation of
1998 it affirmed a commitment to a much refonned, much more effective IMF. Let me say this
is a commitment that the Administration Wholeheartedly shares and we are extremely focused on
working to achieve.
A:i Secretary Rubin, Chaim1an Greenspan and I all underlined last year in testifying before this
committee and others in Congress -- to say that the IMP is indispensable is not to say we should
be entirely happy with the IMP we have today_ Events in Asia and other emerging markets from
mid-1997 onwards have underscored a need to instigate change in critical areas, all highlighted in
last year's legislation:
•

first, the IMF needs to be more transparent and open in its agreements with countries.
beyond.

•

second, the IMF needs to be more accountable to its members for its use of public
resources and allow for external evaluation of its procedures and the results they bring.
third, the IMF needs to work harder in designing the terms of financial support to make it
more market-based and more "exceptional Ol to its recipients, so as to discourage countries
from imprudent lending and borrowing at the international community's expense.

•

fourth, and related, the IMF needs to work with others in the international community to
ensure greater private sector burden sharing in the event of crises.

fifth, the IMF in designing its programs needs to take better account of the broader
structural and institutional environment within which they are to be implemented -- with
a greater focus on refonns to reduce trade barriers and unproductive expenditures,
promote core labor standards and mitigate the social costs of economic adjustment.s.

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Mr Chairman; as we said at the time, one of the best reasons for the United States to play its role
in ensuring adequate financing for the IMF last year was to maximize our capacity to bring about
these and other key changes in the way the IMF and the international monetary system operates.
And we were gla.d to see these shared objectives reflected in last fall's legislation.
Since the legislation was passed we have begun to build an international consensus on these
changes. In direct compliance with the legislation~ Secretary Rubin and Chairman Greenspan
certified to Congress very soon after passage of the bill that the major IMF shareholders had
fonnally endorsed certain core objectives, as expressed in a joint memorandum of the G7
Executive Directors of the IMF, released to the public on October 30 (see attachment),
It is early days yet. No one should doubt that we are only part way down the long road toward
reforming the IMF. For our part we fully recognize that there is great deal for us to do. But I can
tell you today that the United States has made real progress in furthering some key American
values.

Today let me review the main changes under way in five areas highlighted in last year's
legislation and then report on how we plan to continue this progress going forward.

}, Increased Transparency
The legislation recognized ~- correctly -- that an institution wielding as much influence in the
global economy as the IMF, and that is underwritten by the world's taxpayers, cannot and must
not operate entirely behind closed doors. Thanks to recent United States-initiated refonns, the
IMF has moved significantly toward openness and transparency.
The major IMF shareholders have collectively endorsed -- for the first time -- the proposition
that, as a general principle, the IMF should adopt a presumption in favor of releasing a broad
array of infonnation on its policies, programs and objectives.
The concrete changes already achieved include:
•

much broader publication of "Press Information Notices"outlining the Executive Board's
assessment following the IMF staffs regular ("Article IV") consultations with national
authorities. Just two years ago this was exceptional. Today, with 90 countries having
published PINs, it is becoming the rule.

•

as a condition for IMP support programs, there is now a de facto policy of the borrower's
publishing the so-called "Letters ofIntent" and "Policy Framework Papers" that detail the
terms and conditions of those programs, We see this shift affirmed in the publication of
"LOIs" and "PFPs" following major recent IMP programs in Brazil, Russia and East
Asia.

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publication of much more comprehensive infonnation on the Fund's financial position,
including a liquidity table and summary of countries' accounts with the Fund and all
outstanding loans.

Let me add that all of this information is now available on the IMP's website, which has been
greatly expanded and improved (selected examples attached).
Going forward we will seek to codify those practices that remain de facto and will press for
further steps to increase the transparency of the IMP and its operations, including timely release
on the Internet of written summaries of Board discussions of the economic policies of member
countries and IMF support programs, and improved public access to IMF archives.

2. Greater Accountability
The IMF legislation highlighted that the IMF can and must be held more accountable to its
members -- and the public at large .~ for its policies and programs and for its use of international
financial resources. And here, too, there have recently been some important progress as a result
of our efforts.
Concrete steps to increase accountability include:
•

public release of internal staff evaluations of past IMF programs, including, most
recently, the publication of a comprehensive review of the Fund's recent programs in
Asia and a sllmmary of the Board's discussion of its conclusions.
greater external evaluation of Fund programs -- the first of which, assessing use of the
Fund's Enhanced Structural Adjustment Facility, was published last year, External
reviews of the Fund's surveillance of its members' economies and of its research
activities are now in progress.

•

comprehensive reporting to Congress on a wide range of Fund-related issues. including a
regular report by the Secretary of the Treasury to the appropriate corrunittees on IMF
arrangements supported by commitments from the Exchange Stabilization Fund; progress
in promoting policies for which the United States' use of its influence in the IMP is
mandated; and identification ofIMP arrangements under which financing is provided at
substantially higher interest rates and shorter maturities than standard tenus provide.

Of course, as we go forward, we can and we must go further to enhance public and congressional
scrutiny of the Fund's programs and use ofIMF financing.

3. More Market-Based Loans
The IMF funding legislation shared the Administration's desire to ensure that exceptional

4

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amounts of IMF assistance should be just that -- a very temporary substitute for private finance in
cases of exceptional need.
In the fall of 1997 the United States led an important innovation in this area with the creation of a
new IMF facility -- the Supplemental Reserve Facility. This marked a fimdamental change in the
terms and conditions of IMF lending, with money provided only on shorter term basis, at
premhun rates of interest, to provide countries with maximum incentive to seek alternative,
private sources of finance and repay loans as quickly as possible.
Following this innovation, a growing proportion of outstanding IMF credit is being provided
with interest rates that are at least 3 percentage points above short-term market interest rates in
the major industrial economies, with a maturity of 2.5 years- or less. In 1998, about $18 billion of
IMP financing was provided on such terms -- or more than 40 percent of all IMP lending.
Looking ahead, I can confirm today that any use of the new contingent credit line for combating
financial market contagion -- whose creation was endorsed by the 07 last fall -- will also carry
premium interest rates and shorter maturities.

4. Private Sector Burden-Sharing
Mr Chairman, our efforts to toughen the terms of IMF exceptional financial assistance and make
it more market-based can be seen as part of a broader strategy for combating "moral hazard" -something I know to have been a very real concern to members of this committee and to others
on Congress.

We must always be mindful of the danger that the provision of intemational financial support to
countries will encourage imprudent borrowing and lending, either by governments and by the
private sector. This is an extremely complex and difficult issue to work tlrrough but let me say
that it has been and continues to be a major focus within the Administration and in multilateral
fora.

In a few moments I will discuss how this concern feeds into broader issues relating to the refonn
the international financial architecture and our ongoing efforts to reduce the risk of future crises.
Here let me just mention some of the recent developments in IMF programs and policies that will
reduce the scope for moral hazard in lending programs and encourage greater private sector
burden sharing in the event of crises, both at the domestic and the international level:

Fjrst, the IMF is increasing its attention to the development and maintenance of effective
domestic bankruptcy laws and procedures a core component of policy programs so as encourage
private sector resolution of debt problems before crisis strikes. In accordance with the IMF
legislation, we are working to build support for the broader incorporation into IMF programs of
the provision of a legal basis for non-discriminatory treatment in insolvency proceedings between
domestic and foreign creditors and for debtors and other concerned persons. For example, in
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Indonesia, the FWld has been actively involved in developing a national bankruptcy law and
procedures to advance the process of bankruptcy, including training judges and creating a system
for private sector ad hoc judges.
Second, to facilitate greater private sector burden-sharing at an international level, United States
pressure has helped to extend the IMF's long-standing policy on lending to governments that are
in arrears on external debt so that such "lending into arrears" can take place -- in very special
circumstances and on a case-by-case basis ,- when the arrears include debt to private lenders.
Such a policy could be a useful signal to private creditors that encourages them to share the
burden of economic adjustment. This policy was translated into action for the first time in the
treatment of certain kinds of Ukrainian private foreign debt in the lead-up to last summer's
Ukrainian lending program.
Third, following the ground-breaking voluntary involvement of private bank creditors in the
December 1997 Korea program, the United States has sought to encourage recipient countries to
reach voluntary agreements with major international private creditors and to support the
objectives of the program. This has occurred most recently in Brazil, where the government met
with major creditors to discuss the program and underline its importance.

5. Improved Policies
Mr. Chairman, the IMP legislation set out a number of important objectives for program design
and required that the 07 endorse certain core elements. We were able to obtain such an
endorsement as part of the 07 Executive Directors' October 30 memorandum.
Among other things, this statement means that the dominant shareholders of the IMF have for the
first time explicitly endorsed the principle that conditions on the use ofIMF resources should
include requirements to liberalize trade and eliminate directed lending and other unfair or
market-distorting subSidies.
As you know, the legislation covered a very wide range of issues that ought to playa larger part
in the design and implementation of IMF lending programs. In addition to trade liberalization
and eliminating directed lending, these include raising the transparency of govemment budgets in
general and military budgets in particular, promoting core labor standards, strengthening social
safety nets and the promotion of good governance.

Some of these ideas or approaches are not yet Widely accepted within the IMF and will require
much more internal lobbying by the United States as we go forward. But I am able to report that
in a number of key instances in recent months we have been able to make a difference in areas of
particular importance to the United States.

6

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For example:
•

as a condition for the Korean stand-by arrangement with the FWld the Korean authorities
committed themselves to end directed lending and subsidies and eliminate the various
special tax and incentive schemes for selected industries. During the most recent quarterly
review of the program, IMP staff provided -- at the insistence of the US Executive
Director. Karin Lissakers -- a note certifying that the Korean government had fulfilled
this and other commitments. Staffwill continue to monitor Korea's adherence to this
commitment as part of the normal review process.

•

at the same quarterly review of Korea's program the United States Executive Director
was also instrumental in securing agreement [Tom the Koreans to fully bind the
commitments on liberalization of financial services that they made to enter the
Organization for Economic Cooperation and Development under the auspices of the
World Trade Orgaoization -~ as a prior condition for approving the quarterly
disbursement ofIMF tlll1ds.

•

in the case of Brazil; the United States chair stressed to the Brazilian authorities and to
the IMF Board and management that Brazil needed to meet international trade obligations
and more informally, confimled that there were no intentions to raise tariffs as part of the
government's fiscal adjustment program. At our urging, the text of Brazil's agreement
with the IMF also included a pledge to continue its policy of trade liberalization and
integration.
we have won the agreement of the major G7 shareholders to ask the IMF Executive
Board to consider timely and systematic publication of the results ofIMF surveillance of
the degree to which each of its member countries meets internationally recognized codes
and standards of transparency and disclosure in the form of a regular "transparency
report".
last June, following combined pressure by the IMF and the United States, Indonesia
ratified ILO Convention 87 on Freedom of Association. It has also signaled its intention
to ratify other key Conventions On the abolition of forced labor, employment
discrimination and child labor this year.

•

in addition) earlier this month, the United States abstained from supporting an IMF loan
to Pakistan, and the United States Executive Director made a formal statement to the
Board highlighting Pakistan's very poor record on child labor as an important element in
the United States' decision to withhold support.

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These are significant steps. We have raised and will contin.ue to raise the issues and concerns
highlighted in the legislation repeatedly vvith the Fund's staff on country after COlU1try -_ both in
informal contacts and in the deliberations of the IMF Board. But we still need to work to achieve
change on a broader front. As we continue to work to advance Oll[ agenda, we should bear in
mind that the IMF consists of 182 members and that the IMF operates best when it operates on
the basis of consensus.
On many of the mandated issues, there are diverse views among the Fund's key members as to
whether these fall within the Fund's core responsibilities. This means that the United States
needs to work across many fi·onts to build support:
through regular, more timely input on IMF policies from Treasury and other United States
government agencies, including the Labor Department, USTR and the State Department.
•

through earlier, more vigorous "working of the system" by the office of the United States
Executive Director, Karin Lissakers, with US input provided to IMF staff well before
program or surveillance document comes to the Executive Board for discussion. This
helps improve the prospects that our views will be taken jnto consideration early in the
process.

•

through pressing the IMF to strengthen its collaboration with other organizations such as
the World Bank, the MDBs, the WTO and the ILO.

•

and by working hard to build consensus with our colleagues in the major industrial
countries, as exemplified by the October 30 G-7 Executive Directors statement.

II. Broader Issues Relating to the IMF's Global Role

Mr Chainnan, I think we all recognize that there are broader concerns coming out of recent
events going well beyond those expressed in the recent legislation. The crises in Asia and
elsewhere were predicted by no one and they have pointed up a great many very difficult issues
tOT the international community -- problems for which no one today has lasting or comprehensive
solutions.
As Chainnan Greenspan has stressed in his recent appearances before this Chamber and thc
House, these crises corne in against the backdrop of a international financial system that is today
profoundly different from ten, even five years ago. Almost every feature of the market -- be it
the suppliers of services, the nature of the products traded, the tec]mology under lying those trades
or their geographical reach -- is barely recognizable relative to the recent past.
These changes have brought enormous benefits to consumers and producers here in the United
States and around the world -- from the narrowing of the gap between American mortgage rates
and Treasuries to the provision of new finance to build schools and bridges in the developing
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world. But the same innovations and reforms that open up new opportunities also open up new
risks to financial stability and new kinds of financial crises of a scale and ferocity quite unlike
any the world has ever seen.
The world has changed. And it is fair to say that governments ill the developing and developed
world, international financial institutions, and even many of the private sector actors in these
markets, have not kept of with the pace of these changes or properly mastered the implications.
This is the challenge we all face today as we reflect on recent experiences and work to adapt the
system to reduce the risk of similar crises being repeated.
I wish it were possible to say here today that we can build an international financial system in

which no crises will come -- or, when they come, in which their effects will always be perfectly
contained. This no one can promise.
However, it is appropriate and necessary that the IMF and the international community focus on
the issues highlighted by recent events and evolve new ways to approach them forward. No doubt
it will take time fOT the world to build consensus on the core elements of an international
financial architecture better-attuned to modem market realities. But the past year and a half have
brought some important places to start.
Better attuning IMF prescriptions to the needs of emerging market e,'onomies:
In retrospect it is clear that in too many cases the immense new flows of private capital available
to emerging economles in recent years far out-paced these economies' structural and institutional
capacity to absorb it productively. This points to a broader lesson -- that in the new global
economy sound macroeconomic policies are important, but they are far from sufficient.
The upshot is that it will be increasingly critical for the IMF to consider its advice and
prescriptions for countries against a broader canvas: to consider not just the level of public
spending but its quality and the distortions it creates, and not j list the level of tax. rate but the
overall structure of the tax system and the institutions that enforce it. It matters whether there is
an effective rule of law that allows property rights to be enforced and contractual disputes to be
resolved. And, something that must be a particular focus for the international community going
forward, whether there is strong and transparent domestic financial infrastructure.
These core ingredients of a stable market economy took many decades to develop here in the
United States and will not be developed overnight in any country. Yet in the light of recent events,
the IMF and other parts of the international commlUlity will clearly need to focus on giving
countries stronger incentives for countries to undertake sllch refonns, be it through new kinds forms
of international financial surveillance, or through the leverage provided by market access to major
financial centers.
The IMF can and must playa critical role in encouraging and giving technical support to many of
these changes in its regular dialogue with countries and in the design of lending programs. But it

9

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will also be critical for it to collaborate -- perhaps more closely than has been true in the past -- with
the, World Bank and o.t~er sources of intemati?nal financial regulatory and supervisory expertise.
ThiS has been an exphclt focus of recent G7 discussions and will no doubt continue to be so in the
future.

Matching IMF macroeconomic policies to the realilies of global capital markets

As I have noted, several of the crises of the past eighteen months or so have differed in important
respects from the more kind of crises -- involving as they have not the standard kind of trade
aCcoWlt problem but problems in the capital account. And it may be that the kinds of policies
necessary to bring about adjustments in traditional balance of payments crises are different to
those required in these newer cases.
There have always been a variety of circumstances leading countries into crises -- whether it be
unsustainable public borrowing, as in Russia, or more private sector excesses, as was the case in
the Asian crisis countries. What is novel in the recent crises has been the capacity for very large
and rapid outflows of global capital to greatly exacerbate the crisis in an atmosphere of panic. In
these circumstances the IMF faces a mOre difficult challenge in designing the appropriate
conditions for programs than in the case of the more standard balance of payments of the past.
This brings clear implications for the IMP and its design of programs, as we saw, for example, in
the IMF's support for considerable fiscal expansion in the wake of the financial crises in
Thailand, Indonesia and Korea. And it will certainly be important explore further ways to adapt
the IMF's approaches to modem realities. But we must take care not to throw the good advice out
with the bad. Modem kinds of crisis can still be caused by old-fashioned problems of
government excess. If these are at the root of a crisis, then it is these problems that a solution
will need to address,

Realistic exchange rate regimes in a world offreeflowing capital
Recent experience will no doubt also provide fresh impetus to longstanding debates about the
merits of different kinds of exchange rate regimes. Even economists that can agree almost every
aspect of economic theory and practice are often divided on this issue. Some are with Milton
Friedman in treating exchange rates as a price -- and a price that should be flexible for the same
reasons that others are, For others, money and its exchange is a promise -- one that should be
fixed and that should not be broken or devalued.
The choice between these two poses enormous difficulties. But we can aU agree that where it is a
promise, the promise should be maintalned, and that treating it as a promise, then breaking it, is
probably the worst of all options. There is no Single answer, but in light of recent experience
what it perhaps becoming increasingly clear -- and will probably be increasingly reflected in the
advice that the international community offers -- is that in a world of freely flowing capital there
is shrinking scope for countries to occupy the middle ground of fixed but adjustable pegs.

10

As we go forward from the events of the past eighteen months, I expect that cOW1tnes will be
increasingly wary about committing themselves to fixed exchange rates, whatever the
temptations these may offer in the short run, unless they are also prepared to dedicate policy
wholeheartedly to their support and establish extra-ordinary domestic safeguards to keep them in

place.
Modern tools for crisis response
In this new global economy the international community needs mechanisms for responding to
crises that are a match for the scale and complexity of the system as a whole. In this context
several have argued that the system now needs a much larger capacity to offer emergency
financial assistance, which could function more like a domestic lender of last resort in lending
much more freely into crises at penalty rates.
There are critical limits to the analogy with domestic lenders of last resort. Notably, in the United
States and other developed economies an entire regulatory and supervisory system has developed
around this capacity to guard against the moral hazard inherent to the promise of such support. It
is difficult to believe that any similar system wouJd be feasible or desirable at an international
level in the foreseeable future.
On the other hand, there is clearly a dimension of these crises that resembles a domestic bank run
-- where the fear that even basically sound institutions might fail becomes a self-fulfilling
prophecy, It is in response to this aspect of modern crises that we helped to create the
Supplementary Reserve Facility to provide for exceptional amount of very short-tenn lending at
premium rates.
A similar motivation wlderpinned our support for the development of a new Contingent Reserve
Facility to provide support for countries facing market contagion. But in using and further
perfecting these new tools, important balances will need to be struck -- between dousing panic,
on the one hand, and stoking excess market exuberance on the other.
Involving the priVaTe Sector in managing adjustments
The inherent limitations on the volume of official assistance relative to the scale of modem
markets, coupled with the moral hazard that such assistance can create, provide the two strongest
arguments for the international community to devise more effective ways to involve the private
sector more directly in the resolution of crises.
As I mentioned earlier, this is a challenge that we have been and will remain extremely focused
following the involvement of private sector creditors in the Korean program, and the new
agreement to allow for the IMF to lend into arrears. But here, too, difficult issues will need to be
overcome. Notably, the international community cannot afford to foster an impression that we
are prepared to license opportunistic default, nor must we put in place mechanisms that will
11

induce crises because creditors will flee at the first sign of trouble or take steps which generate
substantial contagion.
Both of these dangers highlight the potential disadvantages of the proposal heard in some
quarters, that the international conununity should adopt some fonn of explicit international
bankruptcy regime for sovereign debtors. This proposal would also run into severe problems of
national sovereignty. However, there are a nwnber of other tools available that may well be
fruitful to explore on a more flexible, case-by-case basis. For example:
*

a decision not to provide official finance for cOllntries except in the context of
constructive engagement with private creditors to ensure adequate financing for the
program;

•

and an insistence that where official debt is to be rescheduled there be strict comparability
of treatment with commercial creditors.

As we are learning, there are enormous problems involved in reaching these kinds of solutions in
a world where there is such a broad diversity of creditors, and the share of commercial bank
lending in the total is $0 much smaller than it was in the past. But we have been and remain
vigorously committed to exploring new approaches in cooperation with the international
financial institutions and others in the international community.

III. Concluding Remarks

Mr Chainnan. These are critically important issues and it matters how and when we decide to
address them. But we must always remember that more important than any steps that the
international community takes collectively will be the actions of individual governments.
Recent events have reaffinned an age-old lesson: that while the external environment is
important and international support can make a difference, countries shape their own economic
destiny. The international community can offer vital support to committed efforts in the countries
concerns to undertake refonn and adjustment -- but it cannot substitute for them. As we saw in
Russia, and as we saw in the first months of the crisis in Indonesia, where governments are not
themselves committed and able to follow through on their commitments the IMF cannot force
these changes and IMF adjustment programs will not succeed.
In a world of sovereign nations our goal cannot to be to prevent governments from making
mistakes. What our goal must be, as we move forward from the events of the past eighteen
months, is to provide the best possible system for encouraging sound policies -- and for
minimizing the broader costs to the international system as a whole when crises strike.
With the major reforms that have occurred in the past year and, especially, as a result of the
legislation l~st fall, we made some important steps to improve the system and more changes are
12

From: TREASURY PUBLIC AFFAIRS
l:

3-24-99 4:52pm

p. 20 of 35

20009

in the process of being implemented. But none of us can doubt that we are far, far from the
finishing line. I look forward to working with you, Mr Chairman, with others in this committee
and others in Congress as we work to progress further in the months to come. Thank you. J would
now welcome any questions.

13

From: TREASURY PUBLIC AFFAIRS

3-24-99 4:52pm

p. 21 of 35

",""'ho

t9} Office Memorandum
~",iii'"

To:

The Managing Director
Members oftbc Executive Bom!

From:

Ms. Lissakers (U.S.) and Messrs. Beroes (Canada). Esdar (Germany), Grilli
(Italy). Milleron (France). Pickfurd (U.K.)) and Yoshimura (Japm)

October 30. 1998

Subject: Work Program on Strengthening the Architecture of the lutemationaJ
Monetary System

The leaders of our countries and our Finance Ministers and Central Bank Governors
have issued statements to4.a.y on the world economy and refon:a.s to the intemaIicmal financial
sys1em. A5 rcpresentativ~:s of 01..0: countries in the IMF, we would like to take this
opportUnity to propo-se SOme priority refonns for consideration as we develop the work
program of the Executive Board to address these issues. Working in close cooperation with
other members of the Executive Board, we will support and act to implement the following
refoans to improve the effectiveness of the L.V!F, including transparency and ac:countability of
the institution and its lending policies.
Srandyd,
The importance of standards and codes of good practice in improving the
functioning; of markets and promoting tra.D.Sparency and good governance in the public sector
is widely recognized. The IMF plays a leadillg role in developing standards on data
dissclllination and [Donetaiy. financial and fiseal policies. We look foIVflU'd to decisions by
year end on strengthening the Special Data Dissemination Standard (SDDS)~ particularlY the
publication of timely. accurate and comprebensive infonnation on official foreign exchange
rese.tVes, including forward positions. We should also complete wotk on the proposed code
on monetary and financial policy by the spring 1999 meetings. Finally, the Executive Board

should consider the pUblication, in a timely and systematic way, the results cfrMF
surveillance of the degree to which each of its member countries meets internationally
recognized codes and standards of trmspaxcncy and disclosure in the form of a transparency
report.

There is gro'Wing awareness that public instinnions~ including the IMF and other
JFIs, need to enhance their accountability through greater transparency about their opentions,
objectives and dc(;isiop.-m:Udng processes. We believe that, as a. general prinCiple, the IMP

should a~pt a presum?ti.on in favor of the release of. information, except where release might
comprormse confideonahty. The Fund should establish, annOWlce and periodically revi~w an
agreed d~tion of the areas in which confidentiality should apply and the criteria for
applying it in order to facilitate the release of infurmation.
The Interim Committee has endorsed increased IMF transparenc.y, including wider
use of Public Information Notices (Pll'ls), broader publication of Letters 'ofIntent (LOl) and .
Policy Framewotk Papers (PFPs), and more public information an and evaluations of the
Fund's operations and policies. The discussions·in the Executive Board suggest that concrete
actiotlS are both desirable and feasible which could build on the substantial progress achieved
in recent years to make the Fund a more open institution. To this end, Fund policies should
provide that:full written summaries on a broader range of Executive Board meetings are
made available to the public by issuing PINs following a discussion of: an lMF program or
program review in which. there is a LOI, Memorandum ofUnderstandjngQdOU) or PFP;
changes in genc::ral Fund policy; and Article IV consultatiOllS. Fund policies should also
make provision for the timely release of toIs, MOUs, or PFPs following Board consickn.tion.
The concerns which have been Iais~d in previous discussions about the po~tial
effects of a wider publication policy could be addressed by providing flexibility in the timing
of PINs and relevant document release, possibly involving delays of up to three months
following the Board discussion, and by deleting market sensitive, national security or
--Froprie~~nformation.
.
The!MF should also develop a foonal mechanism for systematic evaluation,
involving external input, of the etnctiveness of its operations, programs, policies and
procedures.
Ierms snd Ctuaditians

OD

IMF Loans

The pursuit of sound monetary, fiscal and excbmge rate policies is an essential

prerequisite for crisis p~"~tion and resolution. However, recent e."CpCricnce demonstrates
that structural reforms and a solid institutional frameworlc are also needed to make markets

more flexible and open to competition; to eliminate systemic gavemment subsidies and
regulations which distort the allocation of resources; and to proVide a well~functio~
financial inftastruc:turc.
The J1v1F plays an impoItlnt role in this effort both. through its cousultations and .
surveillance activities as well as its financial support. . The recent review of Fund programs
indicated, inter alia, that greater emphasis needs to be given to reducing trade ~~ and
unproductive ~-penditures. Moreover. one of the key lessons from the C'UlTent cnSlS IS the
importance ofhaviJlg robust insolvency arrangements as a meattS of achieving an orderly and
equitable resolution o( debt ~q~lems. Therefore, the policies on the use ofIMF reSOUIces

should include requirements that the borrower, in accomance with a schedule for actioD)
adopt policies to:
o

liberalize restIic;tioDS 0.0 trade in goods and seIVices. consistent with the
terms of all international trade agreements of which the borrower is a
signatory;

o

elimjnate the systemic practice or policy of govemment-directed lending
on non..commercial terms or provision of market-distorting subsidies to
favored industries, enterprises, parties or institutions; and,

o

provide a legal basis for non-<liscriminatory treatment in insolvency
proceedings between domestic and foreign creditors and for debtors and
other concemed persons.

All memb~s, inchiding our countries, should be encouraged to adopt such pOlicie's.
Achieving' greater involvement of the private sector is also of critical importance
both in preventing and resolving fin.alJ.cial crises. We recognize that the issues involved in
this area are complex but believe it will be essential to develop effective mechanisms to
involve the private sector in crisis managernen~ with an appropriate financiD.g role. In this
connection, the ,Executive Board should consider how to, under carefully designed conditions
ana-on a cas~by-case basis. extend.the Fund's po!!cy on lencting into arrears.

The tenns on which the IMP e:>..'tends financing can also help to reduce moral
hazard, provide an incentive for early IMJ=' repayment and encourage a return to private
market financing. Therefore, Fund policies to provide loans from general resources to
countries experiencing balance ofpaymc:nts difficulties due to a large short-term financing
need resulting from a suddc::n and disruptive loss of market confidence should provide for the
imposition of a surcharge of at least 300 basis points as an adjustment for risk and shorter
maturities of 1-2 ~ years.
Cop,clUlIiiGIl

We look forward to werking closely with you to strmgthen. the Fund's capacity to
deal with the cballeoges facing'tbe world economy.

HOIIM ,

$.an:h, Map I Index I wtun'. N.w

International Monetary Fund
About I News' .ubllcilti".... I fund RM••

~xplanaton:

Note

Toral resources
Non-usabll! resourcel!

I D.ta Standards

IMF's Financial Resources and Liquidity
Position, 1996 - Present
(In billions of SDRs unless otherwise indicated; end-of-period)

Usable resources

1/25/99 6:25 PM

Net uncommitted

usable resources
Balances available
under the GABINAB
Liquid liabilities

Liquidity ratio

1996
1. Total resources

Members' currencies
Gold
holdings
SDR holdings
Other assets
Available under GABINAB
activation

3.6

n. Less: Non-usable re~ources
III. Egual~: Usable rggurces

Less: Amounts committed
under arrangements
Less: Minimum working balances
IV. Net uncommitted usable

resources
(resources available to meet use
of reserve positions and new
commitnJenU)*
[Allowance for use of reserve
positions]
V. Balances available under the
GAB/NAB
VI. Liquid liabilities

Reserve tranche positions
Outstanding borrowing
(GABINAB)
VII. Liquidity ratio (in percent)
(lV. divided by VI.)

DecemBer December 1998
1997
SDRs US$

149.0

149.2

143.4

165.1

144.7

1494

36

;.6
0.6

1.7
0.3

0.3

232
210

5

0.7
0.3

I
0

ILl

16

87.9

98.5

11 1.5

157

61.1.

50.7

53.6

75

9.7
l1.9

18.0

10.0

24.5
9.6

34
14

39.5

22.7

19.5

27

[9.5.11.4][11.8-14.1][15.2-18.2)[21.26]
18.5

18.5

18.6

26

38.0
38.0

47. I
47.1

60.6
56.3

79

4.3

6

32.2

32.2

103.9

48.2

Memorandum item: US$ per SDR 1.43796
Note: Derails may nor add due to roundmg.

1.34925

85

1.40803

*The Fund does not fonnally apponion its available net uncommitted resources (and
resources remaining under the OABINAB) berween the amounts that might be
needed to meet encastunent or members' reserve positions and resources to meet new
commitments. However, the fIrSt claim on the Fund's resources is [0 meet requests to
liquidate members' positions in the Fund--hence the importance of the liquidity ratio
(Le., the ratio of net Wlcommitted usable resources to liquid liabilities), It is difficult
to project members' propensity to use their reserve positions (reserve tranche
positions and outstanding lending under the GABINAB) at any particular time.
though the likelihood that all the Fund's liquid liabilities would be encashed during a
short period of time is re\l1tively small. However, it is incumbent on the Fund to be in
II position to meet any request for an encashment of reserve positions. For that
purpose, the FWld needs to maintain an amoWlt of usable resources that bears a
reasonable relation to its liquid liabilities. While this ratio is neither a fIXed nor
minimum ratio, historically it has not fallen below 25-30 percent of liquid liabilities
for any length oftime, thereby maintaining the Fund'$ capacity to meet members'
requests. Application of this nmge to the Fund's outstanding liquid liabilities is
iJlustrated above.

The IMF's Financial Resources and Liquidity Position;
Explanatory Note

the aec'ompanying table swnmarizes the IMF's financial resource and
liquidity position expressed in SDRs, the IMP's unit of account. The
following items are included:

lfl5199 6:25 PM

I. Total resources
The largest component of the IMF's resoW'ces is its holdings of
mex:nbers' currencies (currently SDR l49.4 billion). Under the
Arttcles of Agreement) the IMF's gold is valued at SDR 35 per
ounce and thus gold holdings amount to SDR 3.6 billion. (At
the market price on December 31, 1998--US$287.45 a fine
oWlce--the holdings would be valued at SDR 21.1 billion about
US$30 billion.) The ~~'s holdings of gold are not readily
usable because a deCISIOn to sell gold requites a majority of 85
percent of the total voting power in the Executive Board.
.
Holdings of SDRs currently amount to SDR 0.7 billion' "other
as~et~" (SDR 0.3 .billion) reflects sundry. assets (such .d
bUlldmg and receIVables) net ·of sundry payables. In addition to
the IMF's own resources, SDR 11.1 billion remain currently
usable under the activations of the General Arrangements to
Borrow (GAB) agreed on july 20, 1998 and the New
Arrangements to Borrow (NAB) agreed on December 2, 1998.

II. Non-usable resources
Resources that are considered non·usable to finance the IMF's
ongoing operations and transactions are (i) its holdings of gold,
(iO the currencies of members that are using IMF resources and
are therefore, by definition, in a weak balance of payments or
reserve position, (iii) the currencies of other members with
relatively weak external positions, and (iv) the "other assets"
noted above. The use ofIMF credit by a member increases the
IMF's non-usable resources and reduces its usable resources by
equivalent amounts.

III. Usable resources
These consist of (i) holdings of the currencies of members
considered by the Executive Board to have a sufficiently strong
balance of payments and resetve position for their currencies to
be used in transactions, (U) holdings of SDRs, and (iii) any
unused amounts under credit lines already activated (such as
under the GABINAB). Amounts committed under
arrangements, which reflect uildrawn balances committed under
operative stand-by and extended arrangements, other than
pre<:autionary arrangements, are deducted from the total of
usable resources, as are one-half of the amoWlts committed
under precautionary arrangements. Minimwn working balances
required for the IMF to be able to make payments that must be
made in specified currencies are also deducted. The Executive
Board has decided that such balances be set at 10 percent of the
quotas of members deemed sufficiently strong for their
currencies to be used.
IV. Net uncommitted usable resources (resources a\failable to
meet reserve tranche purchases and new commitments)
Currently usable resources minus resources already committed
under existing arrangements and working balances as described
above. This amount represents the resources available to meet
reqllests for use of reserve positions in the IMF and new
'requests for use of IMF resources (see footnote to table).

v.

Balances available under the General Arrangements to
1/25/996:25 PM

Borrow (GAB) and the New Arrangements to Borrow
(NAB)
The IMF since October 1962 has entered into General
Arrangements to Borrow (GAB) from the major industrial
countries. Under the GAB, which has 11 adherents, and the
Associated Agreement with Saudi Arabia, the IMF can borrow
a total of up to SDR 18.5 billion when supplementary resources
?I'e nee~ed to forestall or cope with an impairment of the
mternatlOnal monetary system. The GAB were activated in July
1998 for an amount of SDR 6.3 billion (of which SDR 1.4
billion has been drawn). In November 1998 the New
.
Arrangements to Borrow (NAB) entered into effect. The NAB,
which has 25 participants, does not replace the GAB. The
maximum amount of resources available to the IMP under the
NAB and GAB combined is SDR 34 billion. The NAB is to be
the first and principal recourse in the event of a need to provide
supplementary resources to the Fund. The NAB were activated
in December 1998 for an amount ofSDR 9.1 billion (of which
SDR 2.9 billion has been drawn). As a result of the recent
activations of the GAB and the NAB totaling 15.4 billion, the
amo\mt of additional resources that could be available under the
GABINAB is currently SDR 18.6 (=34.0-15.4) billion.

VI. LiqUid liabilities
The IMF's liquid liabilities consist of (i) reserve tranche
positions of members, which a member acquires when the IMF
uses the member's currency in its operations and through
reserve assets paid by the member in connection with quota
payments, and (ii) the amount of outstanding borrowing by the
IMF, e.g., under the GABINAB. Both reserve tranche positions
and outstanding lending under the GABINAB (together called
reserve positions of members in the IMP) are part of members'
international reserves. The Fund cannot challenge a request by
a member to draw on its reserve position in the IMF when
developments in its balance of payments or its reserve position
make this necessary and the IMF must be in a position to meet
such requests. At present, reserve tranche positions amount to
SDR 56.3 billion, and outstanding borrowing, under the
GABINAB. amounts to SDR 4.3 billion (out of tota) authorized
calls of SDR 15.4 billion). The vast bulk of liquid liabilities
reflects credit extended by the Fund, amoWlting to SDR 60.5
billion on December 31, 1998.

VII. Liquidity ratio. .

.

..

..

The liquidity ratIO 1S a measure of the IMP's hqmdlty pOSItIon,
represented by the ratio of its net unconunitted usable resources
to its liquid liabilities.

1(25/996:25 PM

International Monetary Fund
About

About Letters of

Intent
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t News I PubJleatlo". 1....ltd lIMa.. I gatA

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Policy Memorandum. JanUW)' II, 1999 W!J

[

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Letter oflntent December 18, 1998 I!!!!l
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Policy Framework Paper 1997-2000

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Letter of Intent and Memorandum of Economic and FinanG,iru
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INN;

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Technical Memorandum of Understanding, December 8, 1998 I!!!tJ
Letter of Intent and Memorandwn of Economic Policies, November
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Letter of Intent. September 9, 1998

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Policy Framework Paper 1998-2000
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Policy Framework Paper 1998/99-2000/01

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Policy Framework Paper 1998-2000

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Letter of Intent, October 22. 1998

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PolicY' Fl~.mework Paper 1998/99-2000101

The Gambia
1f25/99 6:4 7 PM

From: TREASURY PUBLIC AFFAIRS

3-24-99

4:57pm

p. 29 of 35

Policy Framework Paper, 1998-2000

Georgia
Letter of Intent, July 9, 1998
Policy Framework Paper 1998-2000
Policy Framework Paper 1997-1999

Ghana
Letter of Intent. November 12, 1998 IIINl
Economic and Financial Policy Framework Paper, 1928 2000

Guinea
Economic and Financial Policy Framework Paper, 1998
Letter ofIntent, March 20, 1998
Haiti
Letter ofIntent, November 19, 1998
Honduras
Letter ofIntent. November 13, 1998

Indonesia
Letter ofIntent and Supplementary Memorandum of Economic and
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Letter ofIntent and Supplementary Memorandum of Economic and
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Letter of Intent and Supplementary Memorandum of Economic and
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Memorandum of Economic and Financial Policies, June 24, 1998
Memorandum of Economic and Financial Policies, April 10, 1998
Memorandum of Economic and Financial Policies. January 15, 1998

Korea
Letter ofIntent, November 13, 1998
Letter ofIntent. July 24, 1998
Letter of Intent, May 2, 1998
Letter of Intent, February 7, 1998
Letter ofIntent, December 24, 1997
Summary of the Economic Program, December 5, 1997
Letter ofIntent. December 3, 1997

Kyrgyz Republic
Policy Framework Paper 1998-2000

Former Yugoslav Republic of Macedonia
'Policy 'f'~amework Paper 1998-2000
Malawi

1125/99 6:47 PM

Policy Framework Paper, 1998/99-1000/01 INEW

Mali
Policy Framework Paper. 1998-2001

Mozambique
Policy Framework Paper, 1998-2000
Niger
Policy Framework Paper, 1998-2001

Peru
Letter ofIntent, May 5, 1998

Philippines
Memorwdum of Economic and Financial Policies. March II, 1998

Russian Federation
Memorandum on Economic and Financial Stabilization Policies Supplement. July 20, 1998
Memorandum on Economic and Financial Stabilization Policies, July
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Rwanda
Letter of Intent, June 4, 1998
Policy Framework Paper for 1998/99-200010 I

St. Kitts and Nevis
Letter Qf Intent, December 10, 1998 ~

Senegal
Policy Framework Paper 1998-2000

Tajikistan
Policv Framework Paper, 1998-2001

I!!!!!l

Thailand
Letter oflntent. December 1. 1998 U!!!J
Letter of Intent, August 25, 1998
Letter ofIntent. May 26, 1998
~ettet afIntent, February 24, 1998
Letter of Intent. November 25, 1997

Turkey
Memorandum of Economic Policies. June 26, 1998

Uganda
Policy Framework. Paper 1998/99-2000/2001 . October 28, 1998
'Lettet"or~Intent, October 28, 1998
Policy Framework Paper 1997/98-1999/2000

1/25 /99 6:49 PM

0:

20009

From: TREASURY PUBLIC AFFAIRS

3-24-99 4:5Bpm

p. 31 of 35

Ukraine
Letter ofIntent, September 4, 1998
Memorandum ofEconom\c Policies, August 11,1998

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TOTHL F'.25

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, 1999

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 2-YEAR NOTES
Interest Rate:
Series:
CUSIP No:
STRIPS Minimum:

Issue Date:
Dated Date:
Maturity Date:

4 1/2%
U-2001
9128274Z2
$400,000
High Yield:

4.575%

Price:

February 01, 1999
January 31, 1999
January 31, 2001

99.858

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

42%.

Accrued interest of $ 0.12431 per $1,000 must be paid for the period
:rom January 31, 1999 to February aI, 1999.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted

Tendered

Tender Type
$

Competi ti ve
Noncompetitive
PUBLI C SUBTOTAL
Federal Reserve
Foreign Official Inst.
TOTAL

$

30,652,550
1,219,174

$

31,871,724

15,007,324

2,765,000
2,000,000

2,765,000
2,000,000

36,636,724

$

Median yield
4.540%: 50% of the amount of accepted competitive
~nders was tendered at or below that rate.
Low yield

4.450%:

5% of the amount of accepted competitive

!nders was tendered at or below that rate.

:D-TO-COVER RATIO = 31,871,724 I 15,007,324 = 2.12

RR-2917

13,788,150
1,219,174

bttp:llwww.publicdebt.treas.gov

19,772,324

D EPA R T MEN
T
-

0 F T. ,H E' T REA . S.U
RY
,
,

NEWS

TREASURY

OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASlllNGTON, D.C.• 20220. (202) 622·2960

Contact: Maria Ibanez
(202) 622-2960

FOR IMMEDIATE RELEASE
January 29, 1999

MEDIA ADVISORY
Treasury Department officials will discuss the General Explanations of the
Administration's Revenue Proposals (the Green Book) at a back!!round press briefing on
Monday, February 1 at 1:00 p.m. in Room 3327, the large conference room, of the Main
Treasury Building, 1500 Pennsylvania Avenue, N.W.
The Green Book will be available at Treasury" s courier entrance by 11 a.m. Monday,
February 1. The background briefing by Treasury officials will not be available for broadcast
purposes.
Media without Treasury, White House, State, Defense or Congressional press credentials
planning to attend should contact Treasury's Office of Public Atfairs at (202) 622-2960, with the
following information: name, social security number and date of birth. This information may
also be faxed to (202) 622-1999.
- 30 -

RR-2918

-

'or press releases, speeches, public schedules and official biographies, call our 24..!zour fax line at (202) 622·2040
---------~----~--------------------------------------------------------

OFFICE OF PllBLIe AFFAIRS -IS00 PEJI;Nl'\·LVANJA AVENUE, N.W•• WASHINGTON, D.C.- 2.12 •• (202) 622·19"

EDAROOED mrl'IL 2: 30 P •••

COlnAC'l':

January 28, 1999

Office of J'iulImc:l.lIg
202/219-3350

The Trea~ will auction three series of Treasur,y bills totaling
approximately $l5,000 million to refund $28,540 million of publicly held
securities maturing February 4, 1999, and to pay down about $3,560 million.

In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $14,018 million of the maturing bill.s, which may be refunded at
the highest discount rate of accepted competitive tenders. Amounts issued to
these accounts will be in addition to the offeriDg amount.

The maturing bills held by the public inc:lude $3,705 million he1Cl by
Federal Reserve Be"k. . . .g~t. for foreign aDd ~ternatioD&l monetary authorities, which mAY be refUDded within the offeriDs amount at the highest di.ccn:mt
rate'of accepted competitive tenders. Additional amounts may be issued for such
acc<ounts if the aggregate amount of new bids exceeds the aggregate amount of
maturing bills. For purposes of determining such additional. amounts, foreign
and interuational monetary authorities are considered to bold $1,175 =dllion of
the original 13- and 26-week issues, and $2,530 million of the original 52~ek
issue.
The bill auctions will be conducted in the single-price auction

fo~t.

Tenders for the bills will be received at Federal Reserve B~ and
Branches and at the Bureau of the Public Debt, Washington, D.C. 'rhis offering
of Treasury seeur1e1es 1. goverued D,y the t.:ma aDd condieion8 86~ forth in the
Unifor.m Offering Circular for the Sale and Issue of Marketable Book-Entry
Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).

Deta.ils about. each of the new securities are given in the a.ttached offering highlights.
000

For press reuases, speeches, public schedules and official biographies, call our 24·Jsour ja.x lint at (202) 622·2040

or ~RE&suaT OFFERINGS or B%LLB
TO BS %SSUED rEBRVARY 4, 1999

HIGHLIOH~B

January 28, 1'99
~ount

•••••••••••••••••••• $7,500 million
D•• e: '\ption of Off.r1nill
Tar.. and type of •• eurity •••••••••• 91-day bill
COSI. numb.r ••••••••••••••••••••••• 912795 BK 6
Auot1on dat •••••••••••••••••••••••• r.bru.ry 1, 1999
X••u. dat .............................bru.ry 4, 1999
Maturity d.t ••••••••••••••••••••••• May 6~ 1999
Original ieaua d.t ••••••••••••••••• Nov.mh.r 5, 1998
Curr.ntly out.t.nding •••••••••••••• $12,255 million
Hini_um bid amount and multipl ••••• $l,OOO
Off.ring

$7,500 .i11ion

$10,000 million

1el-day bill
February 1, 1999
"ebruary 4, 1999
August 5, 1999
F.bruary 4, 1999

36'-day hill
912795 Dr 5
Pebruar,y 2, 1999
Febru.ry 4, 1999
February J, 2000
February 4, 1999

$1,000

$1,000

912795 CJ 8

following rule. apply to all seouritie. mentioned .bove,
Submi •• ion of Bids.
Nonoomp.titiv. bid ••••••• Acc.pt.d 1n full up to $1,000,000 at the highest discount rate of accepted

~.

competitive bids.
Competitive bids ••••••••• (1) Must be eKPreBsed a. a discount rate with three decim~ls in increments
of .005%, •• g., 7.100%, 7.105%.
(2) N.t long position for each bidder must be reported when the sum of the
tot.l bid ·~ount, at .11 disoount 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
olosing time for receipt of oompetitive tend.ra.
Maximw. Reoognized Bid
at a Single yield •••••••• 35% of publio offering
M.ximum Award ••••••••••••••• 35% of publio offering
R.c.ipt of Tendera,
Noncompetitive tenders ••• Prior to l~IOO noon Eastern Standard time on auction day
Comp.titive t.n4.rs •••••• Prior to 1100 p.m. Eastern Standard time on auction day

Paym.nt T.rms •..••.••••••..• By charge to a funds account at a Federal Reserve Bank on issue date, or
payment of full par Amount with tender.
TraaBu~Direct customers can use the
Pay Direct feature which authorizes a charge to their account of record at
their financial institution on iS8ue date.

DEPARTMENT

OF

THE

TREASURY

~~178~9~. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1I

..................................

OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANlA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622·2960

EMBARGOED UNTIL 3:00PM
February 1, 1999

CONTACT: John Longbrake
(202) 622-2960

TREASURY ANNOUNCES MARKET BORROWING ESTIMATES

The Treasury Department announced on Monday that net market borrowing for the January
- March 1999 quarter is estimated to be a pay down of $5 billion with a cash balance of $20
billion on March 31. The Treasury also announced that net market borrowing for the April - June
1999 quarter is estimated to be a pay down in the range of $105 billion to $110 billion with a cash
balance of $40 billion on June 30.
In the quarterly announcement of its borrowing needs on October 26, 1998, 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. The improvement in net market
borrowing is the result of higher receipts and lower outlays.
Actual net market borrowing for the October - December 1998 quarter was $24 bill ion
with an end-of-quarter cash balance of $17.5 billion. On October 26, the Treasury estimated net
market borrowing for the October - December quarter to be $30 billion with a cash balance of $15
billion on December 31. The decrease in net market borrowing was the result of higher receipts,
lower outlays and higher net issuances of nonmarketable securities.
The regular quarterly Press Conference will be 9 am Wednesday, February 3, 1999.
-30-

RR-2921

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
FOR IMMEDIATE RELEASE
February 01, 1999

CONTACT:

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
February 04, 1999
May 06, 1999
912795BK6

Term:
Issue Date:
Maturi ty Date:
CUSIP Number:
High Rate:

4.400%

Investment Rate1/:

4.510%

Price:

98.888

All noncompetitive and successful competitive bidders were awarded
;ecurities at the high rate. All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

66%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type

Tendered

Competitive
Noncompetitive

$

PUBLIC SUBTOTAL

21,889,528
1,422,724

Federal Reserve
Foreign Official Add-On

TOTAL

$

$

7,444,251

58,845

58,845

23,371,097

7,503,096

4,588,010
71,155

4,58B,010
71,155

28,030,262

$

Median rate
4.380%: 50% of the amount of accepted competitive
was tendered at or below that rate.

lnders

Low rate
4.340%:
5% of the amount of accepted competitive
was tendered at or below that rate.

Mers

d-to-cover Ratio = 23,312,252 / 7,444,251 = 3.13
E~ivalent

RR-2922

6,021,527
1,422,724

23,312,252

Foreign Official Refunded
SUBTOTAL

Accepted

coupon-issue yield.
http://www.publicdebt.treas.gov

12,162,261

-

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 01, 1999

CONTACT:

•

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
February 04, 1999
August OS, 1999
912795CJ8

Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:

4.390%'

Investment Rate1/:

4.551%

Price:

97.781

All noncompetitive and successful competitive bidders were awarded
at the high rate. All tenders at lower rates were accepted in full.

;e~ities

Tenders at the high discount rate were allotted

88%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted

Tendered

Tender Type
Competitive
Noncompetitive

$

PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
TOTAL

$

19,790,119
1,288,957

$

21,079,076

6,462,076

1,041,055

1,041,055

22,120,131

7,503,131

4,040,000
1,258,945

4,040,000
1,258,945

27,419,076

$

Median rate
4.380%: 50% of the amount of accepted competitive
~nders was tendered at or below that rate.
Low rate
4.345%:
5% of the amount of accepted competitive
!nders was tendered at or below that rate.
ld-to-cover Ratio = 21,079,076 / 6,462,076 = 3.26
Equivalent coupon-issue yield.
http://www.pubJicdebUreas.gov
RR-2923

5,173,119
1,288,957

12,802,076

DEPARTMENT

OF

THE

TREASURY

omCE OFPUBIJCAFFAIRS -1500 PENNSYLVANlAAVENUE, N.W. - WASlflNGTON, D.C. - 20220 - (202) 622.2960

FOR IMMEDIATE RELEASE
Text as Prepared for Delivery
February 2, 1998

DIRECTOR OF THE OFFICE OF MACROECONOMIC ANALYSIS
JOHN H. AUTEN
REMARKS TO THE TREASURY BORROWING ADVISORY COMMITTEE
OF THE PUBLIC SECURITIES ASSOCIATION

When you were here three months ago, the economy was growing at more than a
3 percent annual rate with inflation as measured in the national income accounts near 1
percent. On the basis of domestic considerations alone, there was little fault to find with
economic performance. But events in financial markets here and abroad had moved rapidly
and at times unpredictably. Credit-quality spreads had widened sharply and credit availability
was interrupted temporarily in some markets. At the time, that financial turmoil inevitably
introduced an element of uncertainty into the economic outlook.
Now, three months later, we meet with the domestic economy growing even more strongly
than before, inflation remaining low and domestic financial markets functioning smoothly. Some
of the original financial problems still remain and new ones always seem to be emerging
internationally, but the immediate threat to the current economic expansion clearly has subsided.
Indeed, the economy picked up speed late last year.
Last week the Commerce Department reported another "growth surprise", this time for
Gross Domestic Product in the fourth quarter. Positive surprises have been the rule rather than
the exception in recent years with economic growth regularly exceeding consensus expectation.
That surely was the case in the fourth quarter with growth estimated at a 5.6 percent annual
rate, compared to the 2-112 percent average growth rate projected at the beginning of the quarter
by the Blue Chip consensus of 50 economists at major financial institutions, business corporations
and academic research organizations. The big fourth quarter raised real growth for the four
quarters of 1998 to 4.1 percent. This was the third successive year of real growth around 4
percent in what has now become the longest U.S. peacetime economic expansion.
RR-2924

--

Fm-press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622·2040

The composition of fourth quarter real growth was remarkably well balanced. Inventories
grew a little more slowly than in the third quarter and inventory-sales ratios remained at low and
what seem to be healthy levels. Business capital spending picked up again to a double-digit pace,
after a third-quarter pause which some took as an early sign of weakness in that area. Consumer
spending continued a strong pace of advance in the fourth quarter, residential construction pushed
to higher levels and consumer confidence remained strong.
It is- not likely that 5 percent real growth will continue. There were special factors
boosting real growth late last year which are unlikely to repeat and which may in some cases
reverse. There was a rebound from effects of the General Motors strike. Construction activity
benefitted during the fourth quarter from unusually mild weather, as well as from the generally
favorable economic and financial environment. Net exports exerted an essentially neutral
influence in the fourth quarter as opposed to large negatives earlier in the year. Similar
fourth-quarter improvement in the past has been associated with difficulties of seasonal
adjustment. Based on that experience, some reversal of the fourth-quarter improvement might
well be expected in the trade area. In light of these considerations, a slower pace of real growth
in the current quarter seems likely to develop for statistical reasons alone, although without
necessarily implying much significant change in the underlying pace of activity.

The other major recent reading on economic performance, also released last week, was the
employment cost index. This is the most comprehensive measure of the costs to employers of
employee wages, salaries and benefits. Total compensation costs rose at a seasonally-adjusted 0.7
percent in the final three months of the year and by 3.4 percent over the last 12 months. Both
results suggested considerably less cost pressure than markets were expecting. Two features of
the employment cost report deserve special mention.
Despite some deceleration in nominal compensation growth to around 3-112 percent, gains
in real compensation have been substantial. Inflation-adjusted private wages and salaries, as
measured by the employment cost index, grew by 2-1/4 percent during 1998 following a 2.0
percent increase during 1997. An enabling factor has been consumer price inflation of only about
1-112 percent per year, partly due to falling import prices.
Reduced cost pressures coupled with sizable real wage gains also reflect more rapid growth
of productivity. Through the first three quarters of this year, nonfarm productivity grew at a 2
percent annual rate but may have grown at a much more rapid rate in the fourth quarter for which
the initial estimate of productivity will not be available until next week.
It would have been difficult to have imagined a much more favorable set of economic
statistics than has appeared recently. In addition to strong economic growth and low inflation late
last year, there are more recent economic readings which suggest that considerable forward
momentum is carrying over into this year.

2

Initial claims for unemployment insurance had been running a little higher than expected
earlier this year (about 350,000 after seasonal adjustment). This began to raise some doubts as
to the pace of current activity. Downward-revised data released last week paint a different and
more encouraging picture. Initial claims have been lowered to a level (near 300,000) that is more
consistent with strong growth and tight labor markets.
Doubts as to the continued strength of consumer spending and business capital outlays have
caused many economists to write down this year's growth prospects. Early but still inconclusive
signs this year have been more favorable. The DR Redbook survey of retailers shows
broad-based strength in sales through the first three weeks of January, the December report on
durable goods orders points to strong business equipment spending this quarter and the latest
report of the National Association of Purchasing Management suggests the possibility of some
firming in manufacturing activity.
Despite this run of favorable economic statistics, it is necessary to recall that only three
months ago the outlook appeared much less certain. There are still risks inherent in the current
economic and financial environment both here and abroad. Domestically, the economy and its
financial markets are always subject to ups and downs. But, the economy looks strong currently
with its combination of solid growth and low inflation and seems to be poised for further gains.
That is a summary of recent economic developments and the near term economic outlook.
-30-

3

D EPA R T MEN T

O'F

THE

T REA SUR Y

OffiCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W .• WASIDNGTON, D.C .• 20220. (202) 622-2960

EMBARGOED UNTIL 10 AM
Text as Prepared For Delivery
February 2, 1999

TREASURY SECRETARY ROBERT E. RUBIN
TESTIMONY BEFORE THE SENATE FINANCE COMMITTEE

Mr. Chairman, members of this Committee, I appreciate the opportunity to discuss
with you the President's FY 2000 Budget, the first budget of the 21"1 century.
As a result of the fiscal policy of the last six years, the economy it helped produce, and
the ongoing interaction between the two, the nation has moved from an era of large annual
budget deficits to an era of budget surpluses for many years into the future. And this gives us
an historic opportunity to meet challenges that will affect our economic and social well-being
for decades to come, including the economic and fiscal pressures created by the retirement of
the baby boom generation. And meeting those challenges is exactly what the President's
budget does. The core of this budget is fiscal discipline, and thereby increased national
savings, in order to promote economic growth and retirement security in the years ahead.
Before I discuss how this budget will meet these challenges, let me review what has
taken place in the last six years. In 1992, the deficit reached a record of $290 billion, the
Federal debt had quadrupled during the preceding twelve years and both the deficit and debt
were projected to rise substantially. The President responded with a three-pronged economic
strategy of fiscal discipline, equipping people for the future and open markets at home and
abroad. This strategy contributed greatly to moving us from deficits to surpluses, and to what
many consider to be the best economic conditions in recent memory -- the longest peacetime
economic expansion in our history, a very high rate of job creation, the lowest unemployment
in decades, and real increases in income across all income strata. It seems to me that focusing
on the economic conditions of recent years, and on the strategy that contributed so much to
them, provides very useful guidance as we face policy issues going forward.

RR-2925

-

-

For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

Let me also stress that tax burdens on working families are at record lows for recent
decades. For a family of four with a median income, the federal income and payroll tax
burden is at its lowest level in 21 years, in part because of the child tax credit enacted in the
1997 balanced budget plan. For a family of four with half the median income, the income and
payroll tax burden is at its lowest level in 31 years, in part because of the 1993 expansion of
the Earned Income Tax Credit for fifteen million families as well as the 1997 enactment of the
child tax credit. And for a family of four with double the median income, the federal income
tax burden is at its lowest level since 1973. While overall tax revenues have risen as a
percentage of GDP, that is primarily because affluent individuals have had large increases in
incomes, in part from bonuses based on high stock prices and increased realizations of capital
gains, and in part because of increased corporate earnings.
Against that backdrop, the President's new budget proposes that in order to generate
jobs, raise standards of living and promote retirement security most effectively, we must save
the great preponderance of projected budget surpluses, not consume them for tax cuts and
spending programs. Specifically, the budget proposes that 62 percent of the surpluses be
allocated for Social Security, and 15 percent of the surpluses be allocated for Medicare. These
resources will then be used predominantly to pay down publicly held debt of the federal
government, and in part to purchase equities, both of which will in effect preserve and invest
rather than consume and eliminate the increase in national savings that comes from the surplus.
In addition, national savings is increased by allocating 12 percent of the surpluses for creating
new Universal Savings Accounts. Finally, the budget insists that none of the surpluses be used
at all until we have put Social Security on sound financial footing for the long-term.
Let me focus on debt reduction for a moment. When President Clinton was elected,
publicly held debt equaled 50 percent of GDP. Under the President's plan, 80 percent of the
surpluses allocated to Social Security and all of the surpluses allocated to Medicare will reduce
debt held by the public. As a result, by 2014, publicly held debt will decline to about 7
percent of GDP. This reduction in debt will have three effects. First, the government will not
have to refinance federal debt and thereby will consume less of national savings, thus making
capital more readily available to the private sector. That, in tum, will reduce interest rates and
increase confidence in the economy, increasing economic growth, job creation and standards
of living. Second, debt service costs will decline dramatically. When the President came into
office debt service costs of the federal government in 2014 were projected to constitute 27
percent of the federal budget. Under the President's proposal, and because of the progress we
have made to date, we estimate the debt service costs will be 2 percent of the federal budget in
2014. Third, the decrease in debt means the federal government will have a greatly improved
capacity to access external capital should the need arise.
In addition to reducing publicly held debt, the President's budget strengthens Social
Security and Medicare. With regard to Social Security, the President has proposed two
measures that -- taken together -- will extend the life of the Trust Fund to 2055. The first
measure is the purchase of Treasury "special" non-marketable securities, which are in effect a
-2-

first claim against the general revenues of the federal government to meet the already existing
Social Security commitments. The second proposal is, that of the 62 percent of the surpluses
that will be transferred to the Social Security Trust Fund, about one fifth would be invested in
private-sector equities.
I have had concerns about investment in equities by the Trust Fund. Let me make two
observations about this particular proposal. First, it would result in roughly 15 percent of the
Trust Fund being invested in equities. Given that equities do have risks, that seems to me to
be a prudent balance between receiving the potentially greater return from equities and keeping
the investment small enough so that the Trust Fund is not exposed to danger. Second, we are
proposing to have two levels of protection to make sure that there is no political influence in
the investment process. Money managers would be from the private sector and there would be
no investment function performed by government officials. A mechanism would be devised in
concert with Congress to provide apolitical oversight and apolitical selection of these
managers.
In addition, the President is also proposing that a bipartisan process be created to
recommend the "tough choices" necessary to extend the life of the Trust Fund beyond 2055 -to 2075. However, within the framework of these "tough choices," the President is committed
to reducing the high rate of poverty for elderly widows -- and to eliminating the earnings test
for working seniors.
With regard to Medicare, we extend the life of the Trust Fund to 2020 by purchasing
Treasury "special" non-marketable securities, as under current law. In addition, the President
proposes that a bipartisan process be used to enact reforms, but only after the Medicare
Commission submits its report in March, and that coverage of the cost of prescription drugs
should be part of any package recommended by this bipartisan process.
Now let me focus on our proposal for the new Universal Savings Accounts. These
accounts would receive 12 percent of the surplus, be separate from Social Security, and would
provide incentives for workers to save for retirement. The government would provide a
refundable tax credit of an equal amount for each account and also a match for each addition
dollar voluntarily saved, with larger matches going to low income workers. The exact details
of the program would be worked out by the Administration and Congress.
Finally, the remaining eleven percent of the surpluses would not be saved, but would
be allocated for defense spending to protect our national security and for critical domestic
discretionary investment priorities. This eleven percent supplements other discretionary
expenditures in the budget that are within the limits imposed by the discretionary spending
caps.
Let me now highlight some of the key investments and priorities in the discretionary
and mandatory sides of the President's budget. Leaving aside measures in the budget that are

-3-

paid for out of the surplus after Social Security has been addressed, all new tax cuts and
mandatory spending are fully paid for and the budget complies with the discretionary caps.
In his State of the Union Address, the President made clear that our key investments
for the future and our critical priorities were concerned with providing important programs and
tax credits for education, working families, communities, and fostering a strong economy and
a strong America in the world. Within these broad areas, I would like to focus on just a few
specific initiatives.
First, for education, the budget proposes to help states and school districts build and
renovate schools through $3.75 billion of tax credits over five years. The budget also
proposes to extend and expand the tax deduction for employer-provided educational assistance.
Second, for working families, the budget proposes a long-term care initiative that
includes a new $1,000 tax credit to help compensate families for the cost of caring for an
ailing relative. The budget also includes a new $700 tax credit to assist workers with
disabilities. And the budget helps with child care costs in three ways: through greater tax
relief for working families and for those parents who stay at home, through subsidies to help
families pay for child care, and through dramatic increases in funding for after-school
programs.
Third, for communities, the budget provides for a "New Markets Investments
Initiative" that could spur $15 billion in new capital investment in businesses in underserved
inner cities and rural areas through tax credits and loan guarantees. It also includes an increase
in the low-income housing tax credit. Finally, the budget calls for a new 21 st century policing
initiative that would help communities add between 30,000 and 50,000 more law enforcement
officers, give law enforcement officials access to the latest crime-fighting technologies, make
the Brady law permanent, and permanently ban violent juveniles from buying guns.
Fourth, to help foster a strong economy, the budget proposes to facilitate "Y2K"
amelioration activities through the Council on Year 2000 conversion and extend the Research
and Experimentation tax credit.
Finally, the budget asks for resources to strengthen America's leadership in the world.
The Congress contributed to global financial stability last year by providing the full amount of
resources for the International Monetary Fund. I would like to strongly encourage the
Congress to approve the request in this budget to meet all of our financial obligations to the
United Nations. We are also asking for resources to promote trade with Africa.
Before I close, let me mention one other important element of this year's budget. Our
budget contains several proposals aimed at curbing corporate tax shelters. Tax shelters not
only erode the corporate tax base, they also breed disrespect for the tax system both by people'
who participate in the corporate tax shelter market and by others who perceive corporate tax
-4-

shelter users as paying less than their fair share of tax. Our budget proposals address these
issues by increasing disincentives for entering into abusive transactions and by attacking
specific corporate tax shelter transactions of which we are aware. The Treasury Department
will continue to study additional remedies for the corporate tax shelter problem and to wbrk
with the members of Congress and their staffs to address this issue.
Mr. Chairman, restoring fiscal discipline to our country has contributed enormously to
the strong economic conditions of the last six years. Because of what has been accomplished,
we now have a unique opportunity to further our economic and social well-being for the years
and decades ahead. The President has proposed that the surpluses be used predominantly to
increase national savings and improve the fiscal condition of the federal government, while at
the same time, strengthening Social Security and Medicare. The effect of all this should be to
increase jobs, raise standards of living and improve the economic security of future retirees
and workers. I look forward to working with the members of this Committee as we face these
critical challenges. Thank you very much.
-30-

-5-

D EPA R T MEN T

O· F

THE

T REA SUR Y

OFFICE OF PUBliC 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 3, 1999

TREASURY SECRETARY ROBERT E. RUBIN
TESTIMONY BEFORE THE SENATE BUDGET COMMITTEE

Mr. Chairman, members of this Committee, I appreciate the opportunity to discuss with
you the President's FY 2000 Budget, the first budget of the 21 st century.
As a result of the fiscal policy of the last six years, the economy it helped produce, and the
ongoing interaction between the two, the nation has moved from an era of large annual budget
deficits to an era of budget surpluses for many years into the future. And this gives us an historic
opportunity to meet challenges that will affect our economic and social well-being for decades to
come, including the economic and fiscal pressures created by the retirement of the baby boom
generation. And meeting those challenges is exactly what the President's budget does. The core
of this budget is fiscal discipline, and thereby increased national savings, in order to promote
economic growth and retirement security in the years ahead.
Before I discuss how this budget will meet these challenges, let me review what has taken
place in the last six years. In 1992, the deficit reached a record of $290 billion, the Federal debt
had quadrupled during the preceding twelve years and both the deficit and debt were projected
to rise substantially. The President responded with a three-pronged economic strategy offiscal
discipline, equipping people for the future and open markets at home and abroad. This strategy
contributed greatly to moving us from deficits to surpluses, and to what many consider to be the
best economic conditions in recent memory -- the longest peacetime economic expansion in our
history, a very high rate of job creation, the lowest unemployment in decades, and real increases in
income across all income strata. It seems to me that focusing on the economic conditions of
recent years, and on the strategy that contributed so much to them, provides very useful guidance
as we face policy issues going forward.

RR-2926

--

Forpress releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
-

Let me also stress that tax burdens on working families are at record lows for recent
decades. For a family of four with a median income, the federal income and payroll tax burden is
at its lowest level in 21 years, in part because of the child tax credit enacted in the 1997 balanced
budget plan. For a family of four with half the median income, the income and payroll tax burden
is at its lowest level in 31 years, in part because of the 1993 expansion of the Earned Income Tax
Credit for fifteen million families as well as the 1997 enactment of the child tax credit. And for a
family of four with double the median income, the federal income tax burden is at its lowest level
since 1973. While overall tax revenues have risen as a percentage of GOP, that is primarily
because affiuent individuals have had large increases in incomes, in part from bonuses based on
high stock prices and increased realizations of capital gains, and in part because of increased
corporate earnings.
Against that backdrop, the President's new budget proposes that in order to generate jobs,
raise standards of living and promote retirement security most effectively, we must save the great
preponderance of projected budget surpluses, not consume them for tax cuts and spending
programs. Specifically, the budget proposes that 62 percent of the surpluses be allocated for
Social Security, and 15 percent of the surpluses be allocated for Medicare. These resources will
then be used predominantly to pay down publicly held debt of the federal government, and in part
to purchase equities, both of which will in effect preserve and invest rather than consume and
eliminate the increase in national savings that comes from the surplus. In addition, national
savings is increased by allocating 12 percent of the surpluses for creating new Universal Savings
Accounts. Finally, the budget insists that none of the surpluses be used at all until we have put
Social Security on sound financial footing for the long-term.
Let me focus on debt reduction for a moment. When President Clinton was elected,
publicly held debt equaled 50 percent of GOP. Under the President's plan, 80 percent of the
surpluses allocated to Social Security and all of the surpluses allocated to Medicare will reduce
debt held by the public. As a result, by 2014, publicly held debt will decline to about 7 percent of
GDP. This reduction in debt will have three effects. First, the government will not have to
refinance federal debt and thereby will consume less of national savings, thus making capital more
readily available to the private sector. That, in tum, will reduce interest rates and increase
confidence in the economy, increasing economic growth, job creation and standards of living.
Second, debt service costs will decline dramatically. When the President came into office debt
service costs of the federal government in 2014 were projected to constitute 27 percent of the
federal budget. Under the President's proposal, and because of the progress we have made to
date, we estimate the debt service costs will be 2 percent of the federal budget in 2014. Third, the
decrease in debt means the federal government will have a greatly improved capacity to access
external capital should the need arise.
In addition to reducing publicly held debt, the President's budget strengthens Social
Security and Medicare. With regard to Social Security, the President has proposed two measures
that -- taken together -- will extend the life of the Trust Fund to 2055. The first measure is the
purchase of Treasury "special" non-marketable securities, which are in effect a first claim against

2

the general revenues of the federal government to meet the already existing Social Security
commitments. The second proposal is, that of the 62 percent of the surpluses that will be
transferred to the Social Security Trust Fund, about one fifth would be invested in private-sector
equities.
I have had concerns about investment in equities by the Trust Fund. Let me make two
observations about this particular proposal. First, it would result in roughly 15 percent of the
Trust Fund being invested in equities. Given that equities do have risks, that seems to me to be a
prudent balance between receiving the potentially greater return from equities and keeping the
investment small enough so that the Trust Fund is not exposed to danger. Second, we are
proposing to have two levels of protection to make sure that there is no political influence in the
investment process. Money managers would be from the private sector and there would be no
investment function performed by government officials. A mechanism would be devised in concert
with Congress to provide apolitical oversight and apolitical selection of these managers.
In addition, the President is also proposing that a bipartisan process be created to
recommend the "tough choices" necessary to extend the life of the Trust Fund beyond 2055 -- to
2075. However, within the framework of these "tough choices," the President is committed to
reducing the high rate of poverty for elderly widows -- and to eliminating the earnings test for
working seniors.
With regard to Medicare, we extend the life of the Trust Fund to 2020 by purchasing
Treasury "special" non-marketable securities, as under current law. In addition, the President
proposes that a bipartisan process be used to enact reforms, but only after the Medicare
Commission submits its report in March, and that coverage of the cost of prescription drugs
should be part of any package recommended by this bipartisan process.
Now let me focus on our proposal for the new Universal Savings Accounts. These
accounts would receive 12 percent of the surplus, be separate from Social Security, and would
provide incentives for workers to save for retirement. The government would provide a
refundable tax credit of an equal amount for each account and also a match for each additional
dollar voluntarily saved, with larger matches going to low income workers. The exact details of
the program would be worked out by the Administration and Congress.
Finally, the remaining eleven percent of the surpluses would not be saved, but would be
allocated for defense spending to protect our national security and for critical domestic
discretionary investment priorities. This eleven percent supplements other discretionary
expenditures in the budget that are within the limits imposed by the discretionary spending caps.
Let me now highlight some of the key investments and priorities in the discretionary and
mandatory sides of the President's budget. Leaving aside measures in the budget that are paid for
out of the surplus after Social Security has been addressed, all new tax cuts and mandatory
spending are fully paid for and the budget complies with the discretionary caps.

3

In his State of the Union Address, the President made clear that our key investments for
the future and our critical priorities were concerned with providing important programs and tax
credits for education, working families, communities, and fostering a strong economy and a
strong America in the world. Within these broad areas, I would like to focus on just a few
specific initiatives.
First, for education, the budget proposes to help states and school districts build and
renovate schools through $3.75 billion of tax credits over five years. The budget also proposes to
extend and expand the tax deduction for employer-provided educational assistance.
Second, for working families, the budget proposes a long-term care initiative that includes
a new $1,000 tax credit to help compensate families for the cost of caring for an ailing relative.
The budget also includes a new $1000 tax credit to assist workers with disabilities. And the
budget helps with child care costs in three ways: through greater tax relief for working families
and for those parents who stay at home, through subsidies to help families pay for child care, and
through dramatic increases in funding for after-school programs.
Third, for communities, the budget provides for a "New Markets Investments Initiative"
that could spur $15 billion in new capital investment in businesses in underserved inner cities and
rural areas through tax credits and loan guarantees. It also includes an increase in the low-income
housing tax credit. Finally, the budget calls for a new 21 st century policing initiative that would
help communities add between 30,000 and 50,000 more law enforcement officers, give law
enforcement officials access to the latest crime-fighting technologies, make the Brady law
permanent, and permanently ban violent juveniles from buying guns.
Fourth, to help foster a strong economy, the budget proposes to facilitate "Y2K"
amelioration activities through the Council on Year 2000 conversion and extend the Research
and Experimentation tax credit.
Finally, the budget asks for resources to strengthen America's leadership in the world.
The Congress contributed to global financial stability last year by providing the full amount of
resources for the International Monetary Fund. I would like to strongly encourage the Congress
to approve the request in this budget to meet all of our financial obligations to the United Nations.
We are also asking for resources to promote trade with Africa.
Before I close, let me mention one other important element of this year's budget. Our
budget contains several proposals aimed at curbing corporate tax shelters. Tax shelters not only
erode the corporate tax base, they also breed disrespect for the tax system both by people who
participate in the corporate tax shelter market and by others who perceive corporate tax shelter
users as paying less than their fair share of tax. Our budget proposals address these issues by
increasing disincentives for entering into abusive transactions and by attacking specific corporate
tax shelter transactions of which we are aware. The Treasury Department will continue to study
additional remedies for the corporate tax shelter problem and to work with the members of

4

Congress and their staffs to address this issue.
Mr. Chairman, restoring fiscal discipline to our country has contributed enormously to the
strong economic conditions of the last six years. Because of what has been accomplished, we
now have a unique opportunity to further our economic and social well-being for the years and
decades ahead. The President has proposed that the surpluses be used predominantly to increase
national savings and improve the fiscal condition of the federal government, while at the same
time, strengthening Social Security and Medicare. The effect of all this should be to increase jobs,
raise standards of living and improve the economic security of future retirees and workers. I look
forward to working with the members of this Committee as we face these critical challenges.
Thank you very much.
-30-

5

DEPARTMENT

OF

THE

1REASURY !.~~

TREASURY

NEW S

1789

OmCE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622.2960

EMBARGOED UNTIL 10 A.M. EST
Text as Prepared for Delivery
February 4, 1999

TREASURY SECRETARY ROBERT E. RUBIN
TESTIMONY BEFORE THE HOUSE WAYS AND MEANS COMMITTEE

Mr. Chairman, members of this Committee, I appreciate the opportunity to discuss with
you the President's FY 2000 Budget, the first budget of the 2 pI century.

As a result of the fiscal policy of the last six years, the economy it helped produce, and the
ongoing interaction between the two, the nation has moved from an era of large annual budget
deficits to an era of budget surpluses for many years into the future. And this gives us an historic
opportunity to meet challenges that will affect our economic and social well-being for decades to
come, including the economic and fiscal pressures created by the retirement of the baby boom
generation. And meeting those challenges is exactly what the President's budget does. The core
ofthis budget is fiscal discipline, and thereby increased national savings, in order to promote
economic growth and retirement security in the years ahead.
Before I discuss how this budget will meet these challenges, let me review what has taken
place in the last six years. In 1992, the deficit reached a record of $290 billion, the Federal debt
had quadrupled during the preceding twelve years and both the deficit and debt were projected
to rise substantially. The President responded with a three-pronged economic strategy of fiscal
discipline, equipping people for the future and open markets at home and abroad. This strategy
contributed greatly to moving us from deficits to surpluses, and to what many consider to be the
best economic conditions in recent memory -- the longest peacetime economic expansion in our
history, a very high rate of job creation, the lowest unemployment in decades, and real increases in
income across all income strata. It seems to me that focusing on the economic conditions of
recent years, and on the strategy that contributed so much to them, provides very useful guidance
as we face policy issues going forward.

RR-2927

-

Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

Let me also stress that tax burdens on working families are at record lows for recent
decades. For a family of four with a median income, the federal income and payroll tax burden is
at its lowest level in 21 years, in part because of the child tax credit enacted in the 1997 balanced
budget plan. For a family of four with half the median income, the income and payroll tax burden
is at its lowest level in 3 1 years, in part because of the 1993 expansion of the Earned Income Tax
Credit for fifteen million families as well as the 1997 enactment of the child tax credit. And for a
family of four with double the median income, the federal income tax burden is at its lowest level
since 1973. While overall tax revenues have risen as a percentage of GDP, that is primarily
because affluent individuals have had large increases in incomes, in part from bonuses based on
high stock prices and increased realizations of capital gains, and in part because of increased
corporate earnings.
Against that backdrop, the President's new budget proposes that in order to generate jobs,
raise standards of living and promote retirement security most effectively, we must save the great
preponderance of projected budget surpluses, not consume them for tax cuts and spending
programs. Specifically, the budget proposes that 62 percent of the surpluses be allocated for
Social Security, and 15 percent of the surpluses be allocated for Medicare. These resources will
then be used predominantly to pay down publicly held debt of the federal government, and in part
to purchase equities, both of which will in effect preserve and invest rather than consume and
eliminate the increase in national savings that comes from the surplus. In addition, national
savings is increased by allocating 12 percent of the surpluses for creating new Universal Savings
Accounts. Finally, the budget insists that none of the surpluses be used at all until we have put
Social Security on sound financial footing for the long-term.
Let me focus on debt reduction for a moment. When President Clinton was elected,
publicly held debt equaled 50 percent of GOP. Under the President's plan, 80 percent of the
surpluses allocated to Social Security and all of the surpluses allocated to Medicare will reduce
debt held by the public. As a result, by 20 I 4, publicly held debt will decline to about 7 percent of
GDP. This reduction in debt will have three effects. First, the government will not have to
refinance federal debt and thereby will consume less of national savings, thus making capital more
readily available to the private sector. That, in tum, will reduce interest rates and increase
confidence in the economy, increasing economic growth, job creation and standards of living.
Second, debt service costs will decline dramatically. When the President came into office debt
service costs of the federal government in 20 I 4 were projected to constitute 27 percent of the
federal budget. Under the President's proposal, and because of the progress we have made to
date, we estimate the debt service costs will be 2 percent of the federal budget in 2014. Third, the
decrease in debt means the federal government will have a greatly improved capacity to access
external capital should the need arise.
In addition to reducing publicly held debt, the President's budget strengthens Social
Security and Medicare. With regard to Social Security, the President has proposed two measures
that -- taken together -- will extend the life of the Trust Fund to 2055. The first measure is the
purchase of Treasury "special" non-marketable securities, which are in effect a first claim against

2

the general revenues of the federal government to meet the already existing Social Security
commitments. The second proposal is, that of the 62 percent of the surpluses that will be
transferred to the Social Security Trust Fund, about one fifth would be invested in private-sector
equities.
I have had concerns about investment in equities by the Trust Fund. Let me make two
observations about this particular proposal. First, it would result in roughly 15 percent of the
Trust Fund being invested in equities. Given that equities do have risks, that seems to me to be a
prudent balance between receiving the potentially greater return from equities and keeping the
investment small enough so that the Trust Fund is not exposed to danger. Second, we are
proposing to have two levels of protection to make sure that there is no political influence in the
investment process. Money managers would be from the private sector and there would be no
investment function performed by government officials. A mechanism would be devised in concert
with Congress to provide apolitical oversight and apolitical selection of these managers.
In addition, the President is also proposing that a bipartisan process be created to
recommend the "tough choices" necessary to extend the life of the Trust Fund beyond 2055 -- to
2075. However, within the framework of these "tough choices," the President is committed to
reducing the high rate of poverty for elderly widows -- and to eliminating the earnings test for
working seniors.
With regard to Medicare, we extend the life of the Trust Fund to 2020 by purchasing
Treasury "special" non-marketable securities, as under current law. In addition, the President
proposes that a bipartisan process be used to enact reforms, but only after the Medicare
Commission submits its report in March, and that coverage of the cost of prescription drugs
should be part of any package recommended by this bipartisan process.
Now let me focus on our proposal for the new Universal Savings Accounts. These
accounts would receive 12 percent of the surplus, be separate from Social Security, and would
provide incentives for workers to save for retirement. The government would provide a
refundable tax credit of an equal amount for each account and also a match for each additional
dollar voluntarily saved, with larger matches going to low income workers. The exact details of
the program would be worked out by the Administration and Congress.
Finally, the remaining eleven percent of the surpluses would not be saved, but would be
allocated for defense spending to protect our national security and for critical domestic
discretionary investment priorities. This eleven percent supplements other discretionary
expenditures in the budget that are within the limits imposed by the discretionary spending caps.
Let me now highlight some of the key investments and priorities in the discretionary and
mandatory sides of the President's budget. Leaving aside measures in the budget that are paid for
out of the surplus after Social Security has been addressed, all new tax cuts and mandatory
spending are fully paid for and the budget complies with the discretionary caps.

3

In his State of the Union Address, the President made clear that our key investments for
the future and our critical priorities were concerned with providing important programs and tax
credits for education, working families, communities, and fostering a strong economy and a
strong America in the world. Within these broad areas, I would like to focus on just a few
specific initiatives.
First, for education, the budget proposes to help states and school districts build and
renovate schools through $3.75 billion of tax credits over five years. The budget also proposes to
extend and expand the tax deduction for employer-provided educational assistance.
Second, for working families, the budget proposes a long-tenn care initiative that includes
a new $1,000 tax credit to help compensate families for the cost of caring for an ailing relative.
The budget also includes a new $1000 tax credit to assist workers with disabilities. And the
budget helps with child care costs in three ways: through greater tax relief for working families
and for those parents who stay at home, through subsidies to help families pay for child care, and
through dramatic increases in funding for after-school programs.
Third, for communities, the budget provides for a "New Markets Investments Initiative"
that could spur $15 billion in new capital investment in businesses in underserved inner cities and
rural areas through tax credits and loan guarantees. It also includes an increase in the low-income
housing tax credit. Finally, the budget calls for a new 21 st century policing initiative that would
help communities add between 30,000 and 50,000 more law enforcement officers, give law
enforcement officials access to the latest crime-fighting technologies, make the Brady law
pennanent, and pennanently ban violent juveniles from buying guns.
Fourth, to help foster a strong economy, the budget proposes to facilitate "Y2K"
amelioration activities through the Council on Year 2000 conversion and extend the Research
and Experimentation tax credit.
Finally, the budget asks for resources to strengthen America's leadership in the world.
The Congress contributed to global financial stability last year by providing the full amount of
resources for the International Monetary Fund. I would like to strongly encourage the Congress
to approve the request in this budget to meet all of our financial obligations to the United Nations.
We are also asking for resources to promote trade with Africa.
Before I close, let me mention one other important element of this year's budget. Our
budget contains several proposals aimed at curbing corporate tax shelters. Tax shelters not only
erode the corporate tax base, they also breed disrespect for the tax system both by people who
participate in the corporate tax shelter market and by others who perceive corporate tax shelter
users as paying less than their fair share of tax. Our budget proposals address these issues by
increasing disincentives for entering into abusive transactions and by attacking specific corporate
tax shelter transactions of which we are aware. The Treasury Department will continue to study
additional remedies for the corporate tax shelter problem and to work with the members of

4

Congress and their staffs to address this issue.
Mr. Chainnan, restoring fiscal discipline to our country has contributed enonnously to the
strong economic conditions of the last six years. Because of what has been accomplished, we
now have a unique opportunity to further our economic and social well-being for the years and
decades ahead. The President has proposed that the surpluses be used predominantly to increase
national savings and improve the fiscal condition of the federal government, while at th~ same
time, strengthening Social Security and Medicare. The effect of all this should be to increase jobs,
raise standards of living and improve the economic security of future retirees and workers. I look
forward to working with the members of this Committee as we face these critical challenges.
Thank you very much.
-30-

5

DEPARTMENT

lREASURY

OF

THE

TREASURY

NEWS

~8~9. . . . . . . . . . . . . ._

. . . . . . . . . . . . . .

OmCE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622·2960

WeekI V Release of U.S. Reserve Assets

February 2, 1999

The Treasury Department today released U.S. reserve assets data for the week
ending January 29, 1999.
As indicated in this table, U.S. reserve assets totaled $81,029 million as of
January 29, 1999, down from $81,555 million as of January 22, 1999.
U.S. Reserve Assets
(millions of US dollars)

1999

Total
Reserve

Week Ending

II

Assets

Special
Gold
Stock

Drawing
11

Rights

21

Foreign
Currencies

Reserve
3/

ESF

SOMA

Position in
IMF 214/

January 22,1999

81,555

11,046

10,575

16,098

19,463

24,373

January 29, 1999

81,029

11,046

10,575

15,873

19,162

24,373

Gold stock is valued monthly at $42.2222 per fine troy ounce. Values shown are as of December 31,
1998. The November 30, 1998 value was $11,041 million

2/ SDR holdings and the reserve pOSItion In the IMF are based on IMF data and re\:lIued In dollar terms
at the official SDRJdollar exchange on the reporting date. IMF data are as of January 22. 1999, and
are shown as preliminary figures (in italics) for January 29,1999.
3/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's
System Open Market Account (SOMA). These holdings are \alued at current marKet exchange rate~
Or. where appropflate, at such other rates as may be agreed upon by the parties to [ile tran,Jctlons
41 Includes SDR 361 million loan to the IMF under the General .-\IT~\ngemellts to Borrow (G ..l.B) In Jul\'

1998, and an SDR 619 million loan to the IMF under the Ne\\ .-\rrangelllcim to

BOITl)\\

1\-\8)

III

December 1998

RR-2928

~---------------------------------------------------------------

For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-20-+0
~-~--------~--~----------~--~------------------------------

-

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 02, 1999

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 52-WEEK BILLS
364-Day Bill
February 04, 1999
February 03, 2000
912795DF5

Term:
Issue Date:
Maturi ty Date:
CUSIP Number:
4.370%

High Rate:

Investment Rate1/:

4.584%

Price:

95.581

All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

90%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted

Tendered

Tender Type
Competitive
Noncompetitive

$

PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On

25,300,865
1,061,003

$

26,361,868

8,528,745

1,482,700

1,482,700

27,844,568

10,011,445

5,390,000

5,390,000

o

o

TOTAL

$

33,234,568

$

Median rate
4.360%: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low rate

4.290%:

5% of the amount of accepted competitive

~n~rs was tendered at or below that rate.

Bid-to-cover Ratio

=

26,361,868 / 8,528,745

3.09

1/ Equivalent coupon- issue yield.
RR-2929

7,467,742
1,061,003

http://www.publicdebt.treas.gov

15,401,445

DEPARTMENT

TREASURY

OF

THE

TREASURY

NEWS

OffiCE OFPURUCAFFAlRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. - 20220 - (202) 622-2960

EMBARGO TIME WILL BE SET
February 3, 1999

REMARKS BY GARY GENSLER
ASSIST ANT SECRETARY FOR FINANCIAL MARKETS
FEBRUARY 1999 TREASURY QUARTERLY REFUNDING

Good morning. I am pleased to be with you today to announce the February quarterly
refunding. I will also take this opportunity to discuss some changes to the Treasury borrowing
program, and to provide a status report on our continuing efforts to encourage saving and to
broaden access to Treasury securities.
In 1992, the deficit stood at a record $290 billion, and the Congressional Budget Office
was projecting that it would climb to $357 billion in 1998. Instead, last year we had the first
budget surplus in a generation. Continuing this fiscal discipline, we are expecting a surplus of $79
billion for this fiscal year. If the President's programs are adopted, over the next 15 years, we will
achieve the lowest level ofpublic1y-held debt as a percentage ofGDP since World War I. These forecasts
are consistent with those of the Congressional Budget Office and private sector economists. Such
fiscal and economic success continues to present a happy challenge -- the significant paydown of
the public debt.

Changes in Treasury Market Borrowing
Our nation's improving fiscal conditions have already prompted us to make several
adjustments to the Treasury market borrowing program. Over the past three years, we have
reduced the issue sizes of various offerings, and we have adjusted issuance cycles and the
instruments that we offer. For example, we announced in May 1998 that the Treasury would
discontinue new issues of 3 -year notes, and would reduce the frequency of 5-year notes.
Now, in view of the forecasts for continuing budget surpluses, we are instituting some
further adjustments to the Treasury market borrowing program. In addition, I would like to
discuss some other adjustments that are under consideration. These changes will reduce our
borrowing in the context of promoting the three primary goals of Treasury's debt management:
assuring sound cash management, achieving the lowest cost financing for the taxpayers, and

RR-2930

-

For-press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

promoting efficient capital markets. In particular, they will allow us to distribute the adjustments
to our borrowing across the sectors and maturities of our securities.
First, the quarterly refunding will be an offering of $35 billion of notes and bonds, as
compared to the last refunding of $38 billion. This reduction in borrowing will be accomplished
by decreasing the size of the 5-year and the 10-year notes.
Second, the Treasury plans a modest reduction in the offering size of our 10- and 30-year
inflation-indexed securities. The exact size of the next index auction will be announced on March
31. This reduction is consistent with the adjustments that we have been making in other sectors,
as well as with our continued commitment to the indexed securities market. We believe that it
will enhance the market for Treasury inflation-indexed securities.
Third, the Treasury is considering reducing the frequency of new issues of nominal 30year Treasury bonds, and nominal issues of 2-year notes. Such reductions in the frequency of
issuance would allow the Treasury to maintain its presence in these maturity areas, while
providing sufficiently large issues to promote liquidity.

Terms of the February Refunding
I will turn now to the terms of the quarterly refunding. We are offering $35 billion of
notes and bonds to refund $27 billion of privately held notes maturing on February 15, and to
raise approximately $8 billion of cash.
The securities are:
•
A S-year note in the amount of$IS.0 billion, maturing on February 15, 2004.
•
A reopening, in the amount of$10.0 billion, of the 4-3/4% Treasury note maturing
on November 15,2008.
•
A 30-year bond in the amount of$10.0 billion, maturing on February 15,2029.
These securities are scheduled to be auctioned on a yield basis at 1:00 p.m. Eastern time
on the following dates: the 5-year note on Tuesday, February 9; the lO-year note on Wednesday,
February 10; and the 30-year bond on Thursday, February 11. In the event the price of the
43/4% note is below $98.00 per $100 face amount at 9:00 a.m. Eastern time on February 10, the
Treasury will announce a new 10-year note maturing on February 15, 2009. The auction would
still be held on February 10, at 1:00 p.m.
As announced on Monday, February 1, we estimate that the Treasury will net redeem $5
billion of marketable securities during the January-March quarter. This estimate assumes a $20
billion cash balance at the end of March. Including the securities we are announcing today, we
will have net redeemed $59 billion of marketable securities. (See the attachment for details.) The
$54 billion that remains to be raised will be accomplished through regular issuance of Treasury
bills and 2-year notes, as well as the issuance of cash management bills. We plan to issue two
longer dated cash management bills in mid-February and early March, maturing after the April tax

2

payment date, as well as one short-dated cash management bill to bridge the cash low point in
early April.
Looking forward to the April-June quarter, we estimate that the Treasury will pay down
between $105 and $110 billion of marketable securities, and end the quarter with a $40 billion
cash balance.

Reduced Securities and Funds Transfer Fees
I would like to conclude with a few additional remarks.
First, as of Monday, February 1, we reduced fees for the transfer of Treasury securities in
the commercial book-entry system. This was achievable due to efficiencies created by the Bureau
of Public Debt's new National Book Entry System. The Federal Reserve funds transfer fee has
been lowered as well. We estimate that the new fee structure will cut the market's costs by 24
percent this year.

Better Service for Small Investors
Second, I am happy to report that our inflation-indexed Series I savings bonds have been
selling well since we began offering them in September 1998. As of January 31, we had sold
$168 million in Series I bonds. In addition, I am pleased to report that our program for selling
marketable bills, notes and bonds over the Internet and over the telephone has been successful.
This Buy-Direct program, which we launched last fall, has accounted for about 27,000 security
sales, worth $916 million, or 39 percent of all sales through Treasury DIRECT.
Thank you for your attention. The next quarterly refunding will be announced on May 5,
1999.

Attachment

3

ATTACHMENT
CASH RAISED
Including the securities that we are announcing today, we have paid down $59.0 billion in
sales of marketable securities.

This was accomplished as follows:
•
raised $8.5 billion from the 10-year inflation-indexed note issued January 15;
•
paid down $10.6 billion in the 7- year note maturing January 15;
•
paid down $0.5 billion in the 2- year notes issued January 3 1;
•
will pay down a total of $ 34 billion in the 5- year notes maturing January 31,
February 28, and March 3 1;
•
raised $0.3 billion in the regular weekly bills including those to be issued tomorrow;
•
paid down $5.8 billion in the 52-week bills issued January 7 and February 4;
•
paid down $25 billion in cash management bills which matured January 21; and
•
will raise $8 billion with the notes and bonds announced today.

-30-

4

DEPARTMENT

OF

TREASURY!

~

THE

TREASURY

NEWS

OffiCE OFPURUCAFFAlRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. - 20220 - (202) 622-2960

February 3, 1999

CONTACT: John Longbrake
(202) 622-2960

CLARIFICATION ON THE REOPENING OF 9 3/4 YEAR NOTES
In the event the price of the 43/4% notes announced on February 3,1999 is below
$98.00 per $100 face amount at 9:00 a.m. Eastern time on February 10, the Treasury will
announce a new 10-year note maturing on February 15, 2009. The auction would still be
held on February 10, at 1 :00 p.m. Eastern time.

RR-2931

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 4, 1999

CONTACT:

Office of Financing
202/219-3350

TREASURY ISSUES TEMPORARY CUSIP NUMBER FOR
WHEN-ISSUED TRADING IN THE 9-3/4-YEAR NOTE
Treasury is facilitating when-issued trading in the 9-3/4year Treasury Note announced on February 3, 1999, by issuing
a temporary CUSIP Number 9128275B4 to be used for when-issued
trading in the to-be-issued note.

This CUSIP number should also

be used on tenders submitted by auction participants.
other details previously announced remain the same.
000

RR-2932

http://www.publicdebt.treas.gov

All of the

DEPARTMENT

TREASURY

OF

THE

TREASURY

{II; NEW

S

OFFICE OF PUBLIC AFFAIRS e1500 PENNSYLVANIA AVENUE. N.W. e WASHJ:-.IGTON. D.C.e 20220 e (2112) 622.2960

FOR RELEASE WHEN AUTHORIZED AT PRESS CONFERENCE
February 3, 1999

CONTACT:

Office of Financing
202/219-3350

TREASURY FEBRUARY QUARTERLY FINANCING
The Treasury will auction $15,000 million of 5-year notes, $10,000 million
of 9-3/4-year 4-3/4% notes, and $10,000 million of 30-year bonds to refund $27,024
million of publicly held securities maturing February 15, 1999, and to raise about
$7,976 million of new cash.
In addition to the public holdings, Federal Reserve Banks hold $4,693 million
of the maturing securities for their own accounts, which may be refunded by issuing
additional amounts of the new securities.
The maturing securities held by the public include $4,753 million held
by Federal Reserve Banks as agents for foreign and international monetary authori-

ties. Amounts bid for these accounts by Federal Reserve Banks will be added to
the offering.
All of the auctions being announced today will be conducted in the singleprice auction format.
All competitive and noncompetitive awards will be at the
highest yield of accepted competitive tenders.
All of the securities 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 the terms and conditions set forth in the Uniform Offering Circular
for the Sale and Issue of Marketable Book-Entry Treasury Bills, Notes, and Bonds
(31 CFR Part 356, as amended).
Details about the notes and bond are given in the attached offering highlights.
000

Attachment

RR-2933

For press releases, speeches, public schedules alld official biographies, call our 24-llOlIr fax line at (202) 622-2040

HIGHLIGHTS OF TREASURY OFFERINGS TO THE PUBLIC
FEBRUARY 1999 QUARTERLY FINANCING

February 3, 1999
Offering Amount . . . . . . . . . . . . . . . . . . . $15,000 million

$10,000 million

$10,000 million

Description of Offering:
Term and type of security .........
Series . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CUSIP number . . . . . . . . . . . . . . . . . . . . . .
Auction date . . . . . . . . . . . . . . . . . . . . . .
Issue date . . . . . . . . . . . . . . . . . . . . . . . .
Dated date . . . . . . . . . . . . . . . . . . . . . . . .
Maturity date . . . . . . . . . . . . . . . . . . . . .
Interest rate . . . . . . . . . . . . . . . . . . . . .

9-3/4-year notes (reopening)
D-2008
912827 4V 1
February 10, 1999
February 16, 1999
November IS, 1998
November IS, 2008
4-3/4%

3D-year bonds
Bonds of February 2029
912810 FG 8
February II, 1999
February 16, 1999
February IS, 1999
February 15, 2029
Determined based on the highest
accepted competitive bid
Determined at auction
August 15 and February 15
$1,000

5-year notes
E-2004
912827 SA 6
February 9, 1999
February 16, 1999
February IS, 1999
February IS, 2004
Determined based on the highest
accepted competitive bid
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Determined at auction
Interest payment dates . . . . . . . . . . . . August 15 and February 15
Minimum bid amount and multiples
$1,000
Accrued interest payable
by investor . . . . . . . . . . . . . . . . . . . . . Determined at auction

Premium or discount . . . . . . . . . . . . . . . Determined at auction
STRIPS Information:
Minimum amount required .... '" .... Determined at auction
Corpus CUSIP number . . . . . . . . . . . . . . . 912820 DQ 7
Due date(s) and CUSIP number(sl
for additional TINT(s) ......... Not applicable

Determined at auction
May 15 and November 15
$1,000
$12.20304 per $1,000 (from
November IS, 1998, to
February 16, 1999)
Determined at auction

Determined at auction

$800,000
912820 DK 0

Determined at auction
912803 BW 2

Not applicable

February IS, 2029--912833 XN 5

Determined at auction

The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids ........ Accepted in full up to $5,000,000 at the highest accepted yield.
Competitive bids . . . . . . . . . . . (1) Must be expressed as a yield with three decimals, e.g., 7.123\.
(2) Net long position for each bidder must be reported when the sum of the total bid amount,
at all yields, and the net long position is $2 billion or greater.
(3) Net long position must be determined as of one half-hour prior to the closing time
for receipt of competitive tenders.
Maximum Recognized Bid
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 . . . . . . . . . . . . . . . . By charge to a funds account at a Federal Reserve Bank on issue date, or payment of full par amount
with tender. TreasuryDirect customers can use the Pay Direct feature which authorizes a charge to
their account of record at their financial institution on issue date.

D EPA R T MEN T

O'F

THE

T REA SUR Y

~178~9~. . . . . . . . . . . . . . . .. .

....................

-

OffiCE OF PUBUC AFFAIRS. 1500 PENNSYLVANIA AVENUE, N.W .• WASHINGTON, D.C.. 20220. (202) 622-2960

EMBARGO TIME WILL BE SET
February 3, 1999

REMARKS BY GARY GENSLER
ASSISTANT SECRETARY FOR FINANCIAL MARKETS
FEBRUARY 1999 TREASURY QUARTERLY REFUNDING

Good morning. I am pleased to be with you today to announce the February quarterly
refunding. I will also take this opportunity to discuss some changes to the Treasury borrowing
program, and to provide a status report on our continuing efforts to encourage saving and to
broaden access to Treasury securities.
In 1992, the deficit stood at a record $290 billion, and the Congressional Budget Office
was projecting that it would climb to $357 billion in 1998. Instead, last year we had the first
budget surplus in a generation. Continuing this fiscal discipline, we are expecting a surplus of $79
billion for this fiscal year. If the President's programs are adopted, over the next 15 years, we will
achieve the lowest level of publicly-held debt as a percentage of GOP since World War I. These forecasts
are consistent with those of the Congressional Budget Office and private sector economists. Such
fiscal and economic success continues to present a happy challenge -- the significant paydown of
the public debt.
Changes in Treasury Market Borrowing
Our nation's improving fiscal conditions have already prompted us to make several
adjustments to the Treasury market borrowing program. Over the past three years, we have
reduced the issue sizes of various offerings, and we have adjusted issuance cycles and the
instruments that we offer. For example, we announced in May 1998 that the Treasury would
discontinue new issues of 3-year notes, and would reduce the frequency of 5-year notes.
Now, in view of the forecasts for continuing budget surpluses, we are instituting some
further adjustments to the Treasury market borrowing program. In addition, I would like to
discuss some other adjustments that are under consideration. These changes will reduce our
borrowing in the context of promoting the three primary goals of Treasury's debt management:
assuring sound cash management, achieving the lowest cost financing for the taxpayers, and

RR-2930

----------------------------------------------------------------------------------------------------------------------------~ press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
@

promoting efficient capital markets. In particular, they will allow us to distribute the adjustments
to our borrowing across the sectors and maturities of our securities.
First, the quarterly refunding will be an offering of $3 S billion of notes and bonds, as
compared to the last refunding of $38 billion. This reduction in borrowing will be accomplished
by decreasing the size of the S-year and the 10-year notes.
Second, the Treasury plans a modest reduction in the offering size of our 10- and 30-year
inflation-indexed securities. The exact size of the next index auction will be announced on March
31. This reduction is consistent with the adjustments that we have been making in other sectors,
as well as with our continued commitment to the indexed securities market. We believe that it
will enhance the market for Treasury inflation-indexed securities.
Third, the Treasury is considering reducing the frequency of new issues of nominal 30year Treasury bonds, and nominal issues of 2-year notes. Such reductions in the frequency of
issuance would allow the Treasury to maintain its presence in these maturity areas, while
providing sufficiently large issues to promote liquidity.

Terms of the February Refunding
I will turn now to the terms of the quarterly refunding. We are offering $35 billion of
notes and bonds to refund $27 billion of privately held notes maturing on February 15, and to
raise approximately $8 billion of cash.
The securities are:
•
A S-year note in the amount of $IS.0 billion, maturing on February IS, 2004.
•
A reopening, in the amount of$10.0 billion, of the 4-3/4% Treasury note maturing
on November 15, 2008.
•
A 30-year bond in the amount of$10.0 billion, maturing on February 15,2029.
These securities are scheduled to be auctioned on a yield basis at 1:00 p.m. Eastern time
on the following dates: the 5-year note on Tuesday, February 9; the lO-year note on Wednesday,
February 10; and the 30-year bond on Thursday, February 11. In the event the price of the
43/4% note is below $98.00 per $100 face amount at 9:00 a.m. Eastern time on February 10, the
Treasury will announce a new lO-year note maturing on February IS, 2009. The auction would
still be held on February 10, at 1:00 p.m
As announced on Monday, February 1, we estimate that the Treasury will net redeem $5
billion of marketable securities during the January-March quarter. This estimate assumes a $20
billion cash balance at the end of March. Including the securities we are announcing today, we
will have net redeemed $59 billion of marketable securities. (See the attachment for details.) The
$54 billion that remains to be raised will be accomplished through regular issuance of Treasury
bills and 2-year notes, as well as the issuance of cash management bills. We plan to issue two
longer dated cash management bills in mid-February and early March, maturing after the April tax

2

payment date, as weIl as one short-dated cash management bill to bridge the cash low point in
early April.
Looking forward to the April-June quarter, we estimate that the Treasury will pay down
between $105 and $110 billion of marketable securities, and end the quarter with a $40 billion
cash balance.

Reduced Securities and Funds Transfer Fees
I would like to conclude with a few additional remarks.
First, as of Monday, February 1, we reduced fees for the transfer of Treasury securities in
the commercial book-entry system. This was achievable due to efficiencies created by the Bureau
of Public Debt's new National Book Entry System. The Federal Reserve funds transfer fee has
been lowered as well. We estimate that the new fee structure will cut the market's costs by 24
percent this year.

Better Service for Small Investors
Second, I am happy to report that our inflation-indexed Series I savings bonds have been
selling well since we began offering them in September 1998. As of January 31, we had sold
$168 million in Series I bonds. In addition, I am pleased to report that our program for selling
marketable bills, notes and bonds over the Internet and over the telephone has been successful.
This Buy-Direct program, which we launched last fall, has accounted for about 27,000 security
sales, worth $916 million, or 39 percent of all sales through Treasury DIRECT.
Thank you for your attention. The next quarterly refunding will be announced on May 5,
1999.

Attachment

3

ATTACHMENT
CASH RAISED
Including the securities that we are announcing today, we have paid down $59.0 billion in
sales of marketable securities.

This was accomplished as follows:
•
raised $8.5 billion from the lO-year inflation-indexed note issued January 15;
paid down $10.6 billion in the 7- year note maturing January IS;
•
•
paid down $0.5 billion in the 2- year notes issued January 31;
•
will pay down a total of $ 34 billion in the 5- year notes maturing January 31,
February 28, and March 31;
•
raised $0.3 billion in the regular weekly bills including those to be issued tomorrow;
•
paid down $5.8 billion in the 52-week bills issued January 7 and February 4;
•
paid down $25 billion in cash management bills which matured January 21; and
•
will raise $8 billion with the notes and bonds announced today.

-30-

4

I

D EPA R T 1\1 E N T

0 F

THE

T REA SUR Y

omCE OF PUBUC AFFAIRS -1500 PENNSYLVANlAAVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960

February 3, 1999

CONTACT: John Longbrake
(202)622-2960

CLARIFICATION ON THE REOPENING OF 9 3/4 YEAR NOTES
In the event the price of the 43/4% notes announced on February 3, 1999 is below
$98.00 per $100 face amount at 9:00 a.m. Eastern time on February 10, the Treasury will
announce a new 10-year note maturing on February 15, 2009. The auction would still be
held on February 10, at 1:00 p.m. Eastern time.

RR-2931

-------------------------------.------------------------------~-For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622·2{}10

--------------~-----------------------------------------------------------

MINUTES OF THE MEETING OF THE
TREASURY BORROWING ADVISORY COMMITTEE
OF THE BOND MARKET ASSOCIATION
February 2, 1999
The Committee convened at 9:00 a.m. at the Treasury Department for the portion of the
meeting that was open to the pUblic. All members were present. The Federal Register
announcement of the meeting and a list of Committee members are attached.
Assistant Secretary for Financial Markets Gary Gensler welcomed the Committee and the
public to the meeting. John Auten, Director, Office of Macroeconomic Analysis, summarized
the current state of the U.S. economy (statement attached). Paul Malvey, Associate Director,
Office of Market Finance presented the chart show, which had been released to the public on
February 1, updating Treasury borrowing estimates and historical debt and interest rate statistics.
The public meeting ended at 9:35 a.m.
The Committee reconvened in closed session at the Madison Hotel at 10:25 a.m. All
members were present. Assistant Secretary Gensler gave the Committee its Charge, which is
also attached.
The Committee began by reviewing a long-term proforma financing schedule for the
period ending in FY 2005 and a list of suggested debt management objectives, both of which
were prepared by Committee members and are attached to this report. The discussion revolved
around a several-pronged approach to distributing downward adjustments in Treasury borrowing
taking continuing budget surpluses into consideration. While implementation was not viewed as
imminent, this approach would reduce the frequency, but not the size of 2-yea( notes and 30year bonds, initiate buy-backs of outstanding Treasury securities to manage the debt maturity
structure flexibly and enhance market liquidity, and trim the size of new issues of inflationindexed notes and bonds.
The Committee then turned to a discussion of the February refunding and the financing
for the remainder of the January-March quarter. A proforma financing plan (also attached) for
the quarter was distributed by a member to facilitate discussion. The Committee decided
unanimously to recommend a new 5-year note in the amount of$16 billion. A majority of the
Committee (15-3) voted to recommend reopening the outstanding 4-3/4% Treasury note of
11115/08. The Committee was evenly divided regarding reopening the 5-1/4% Treasury bond of
11115/28. Those who favored reopening the bond recommend an amount of $8 billion and
reopening the 1O-year note in an amount of $12 billion. Those who favored a new 30-year bond

2

recommend issuing $10 billion of bonds maturing on February 15,2029 and reopening the 43/4% note in an amount of $1 0 billion.
In the course of the discussion on whether to reopening, one committee member raised an
issue regarding the application of the 35 percent rule in such cases. Currently, anyone bidder in
an auction is allowed to take down up to 35 percent, including the bidder's net long position in
the security going into the auction. In the case of a reopening, the holdings of the outstanding
issue are also included in a bidder's net long position, while the 35 percent limit is only based on
the size of the reopened auction. The recommendation of the member is to include only the net
long position in the WI market for the reopened security for purposes of the 35 percent rule.
By consensus, the Committee decided to recommend that the Treasury follow the
January-March and April-June financing plans in the proformas, except with adjustments to the
auction sizes in the to reflect the Committee's recommendations regarding the February
refunding. The proformas did not include the social security trust funds investments in private
securities in the February-June period.
The meeting adjourned at 12:20 p.m.
The Committee reconvened at the Madison Hotel at 6: 15 p.m. All members were
present. The Chairman presented the Committee report to Fiscal Assistant Secretary Hammond.
There we no questions.
The meeting adjourned at 6:30 p.m.

,;1/
.,.

\

0

~lt-(

Ji K. Ouseley, Director
101 ffice of Market Finance
February 2, 1999

Certified by:
Step en Thieke, Chairman
Treasury Borrowing Advisory Committee
of The Bond Market Association
February 3, 1999

/ 1/
(J

~ation.

Federal Register/Vol. 64. No. lO/Friday. January 15. 1999/ Notices

the authority to
IOCO~S n will automatically expire.
,b3t1 °d decisions and notices are
Bff,le on our website at

~\'~~:W.STB.DOT.GOV."

999

\{'I ,. ••

pecid ed : January 11. 1
.
the soard. David M. Konschnik.
~Ior. Office of Proceedings.
SeCretary

.. ...
~

99-983 Filed 1-14-99; 8:45

Lois K. HoUand.

Lois K. HoUand.

BlLUNG CODE

New Executive Office
Building. Washington. DC 20503.

10202.

.

Departmenrol Reports Management Officer.
IFR Doc. 99-926 Filed 1-14-99; 8:"5 ami
_,~

Departmental Reports. Managemen' .Jfficer.

[FR Doc. 99-925 Filed 1-14-99; 8' 5 amI

veJ1l 0D A. WillilUD5.
IFR I)oC.

OMB Reviewer: Alexander T. Hunt
(202) 395-7860. Office of Managemen'
and Budget. Room 10202. New
Executive Office Building. Washinp In.
DC 20503.

2703

BlLUNG CODE ~~

amI

....GCOOE.'l~

DEPARTMENT OF THE T .EASURY

"

~~~~================~ Submission for OMB

r Jvlew;

Comment Request

DEPARTMENT OF THE TREASURY
January 8.1999.

SUbmission for OMB review; comment
request

The Department ,f the Treasury has
submitted the foP ,wing public
information colJ .::tion requirement(s) to
january 5. 1999.
OMB for reviel and clearance under the
The Department of Treasury has
Paperwork RE' .uction Act of 1995.
submitted the following public
Public Law • )4-13. Copies of the
itlformation collection requirement(s) to submissiop ;) may be obtained by
OMB for review and clearance under the calling thr freasury Bureau Clearance
paperwork Reduction Act of 1995.
Officer Ii .ed. Comments regarding this
public Law 104-13. Copies of the
inform? .on collection should be
submission(s) may be obtained by
addrer ed to the OMB reviewer listed
calling the Treasury Bureau Clearance
and t the Treasury Department
Officer listed. Comments regarding this
Clef ance Officer. Department of the
information collection should be
TI" JSury. Room 2110. 1425 New York
addressed to the OMB reviewer listed
,. enue. NW .. Washington. DC 20220.
and to the Treasury Department
ATES: Written comments should be
Clearance Officer. Department of the
received
on or before February 16. 1999.
Treasury. Room 2110. 1425 New York
to be assured of consideration.
Avenue. NW .. Washington. DC 20220.
Internal Revenue Service (IRS)
DATES: Written comments should be
received on or before February 16. 19' J
OMB Number: 1545-0633.
to be assured of consideration.
Notice Number: IRS Notices 437.
U.S. Customs Service (CUS)
OMB Number: 1515-0100.

Form Number: None.
Type of Review: Reinstatemr 1t.
Title: Customs Regulations 'ertaining
to Customhouse Brokers.
Description: The collecti n contained
in Part 111 of the Custom Regulations
(19 CFR 111) governs th' licensing and
conduct of Customs brr .ers in the
performance of Custo' .s business on
behalf of others.
Respondents: BUf .ness or other forprofit. Individuals Jr households. Notfor-profit institut' Jns. Federal
Government.
Estimated N mber of Respondents/
Recordkeepe r : 3.000.
Estimated 3urden Hours Per
Responder /Recordkeeper: 1 hour.
Freque! :y of Response: On occasion.
Estimr .ed Total Reporting!
Record' eeping Burden: 1.500 hours.
Cler 'Once Officer: J. Edgar Nichols
(202) <127-1426. U.S. Customs Service.
Prj, .ing and Records Management
Br nch. Ronald Reagan Building. 1300
F ,nnsylvania Avenue. N.W., Room
,.2.C. Washington. DC 20229.

437 A. 438 and 466.
Type of Review: Revision.
Title: Notice of Intention to Disclose.
Description: Notice is required by 26
USC 6110(0. A reply is necessary if the
recipient disagrees with the Service's
proposed deletions. The Service uses
the reply to consider the propriety of
making additional deletions to the
public inspection version of written
determinations or related background
file documents.
Respondents: Individuals or
households. Business and other forprofit. Not-for-profit institutions. Farms.
Local or Tribal Government.
Estimated Number of Respondents:
5.250.
Estimated Burden Hours Per
Respondent: 30 minutes.
Estimated Total Reporting Burden:
2.625 hours.
Clearance Officer: Garrick Shear.
Internal Revenue Service. Room 5571.
1111 Constitution Avenue. NW,
Washington. DC 20224.
OMB Reviewer: Alexander T. Hunt.
(202) 395-7860. Office of
Management and Budget. Room

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. 15th and Pennsylvania
Avenue. NW .. Washington. DC. on
February 2. 1999. of the following debt
management advisory committee:
The Bond Market Association

Treasury Borrowing Advisory Committee
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 working session.
Following the working session. the
committee will present a written report
of its recommendations.
The background briefing by Treasury
staff will be held at 9:00 a.m. Eastern
time and will be open to the public. The
remaining sessions and the committee's
reporting session will be closed to the
public. pursuant to 5 U.S.C. App.
§ 10(d).
This notice shall constitute my
determination. pursuant to the authority
placed in heads of departments by 5
U.S.C. App. § 10(d) and vested in me by
Treasury Department Order No. 101-05.
that the closed portions of the meeting
are concerned with information 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 frank and full
advice from representatives of the
financial community prior to making its
final decision on major financing
operations. Historically. this advice has
been offered by debt management
adViSOry committees established by the
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
announcement of financing plans may
not reflect the recommendations
provided in reports of the advisory
committee. premature disclosure of the
committee's deliberations and reports

2104

Federal Register/Vol. 64. No. lO/Friday. January 15. 1999/Notices

would be likely to lead to significant
financial speculation in the securities
market. Thus. these meetings fall within
the exemption covered by 5 U.S.c.
§ 552b(c)(9)(A).
The Office of the Assistant Secretary
for Financial Markets is responsible for
maintaining records of debt
management advisory committee
meetings and for providing annual
reports setting forth a summary of
committee activities and such other
matters as may be informative to the
public consistent with the policy of 5
U.S.C. § 552b.
Dated: January 11. 1999.
Gary Gensler.

Assistant Secretary (Financial Markets).
IFR Doc. 99-970 Filed 1-14-99; 8:45 amI
BILLING COOE 481~

DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and
Firearms
Proposed Collection; Comment
Request
ACTION: Notice and request for
comments.
SUMMARY: The Department of the
Treasury. as part of its continuing effort
to reduce paperwork and respondent
burden. invites the general public and
other Federal agendes to take this
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. the Bureau of
Alcohol. Tobacco and Firearms within
the Department of the Treasury is
soliciting comments concerning the
Environmental In forma ti on and
Supplementallnformation on Wate'
Quality Considerations.
DATES: Written comments shou' . be
received on or before March l' • 1999 to
be assured of consideration
ADDRESSES: Direct all wri' .m comments
to Linda Barnes. Bureal' Jf Alcohol.
Tobacco and Firearmf 050
Massachusetts Aver .e. NW.,
Washington. OC 2' a6. (202) 927-8930.

FOR FURTHER INF .RMATION CONTACT:

Requests for 8 Jitional information or
copies of thr ,orm(s) and instructions
should be .iJ'ected to David Brokaw.
Regulati .1S Division. Bureau of
Alcoh r . Tobacco and Firearms. 650
Mas' .chusetts Avenue. NW ..
Wr rungton. OC 20226. (202) 927-8230.
, JPPLEMENTARYINFORMATION:

Title: Environmentallnformation and
Supplementallnformation on Water
Quality Considerations.
OMB Number: 1512-0100.
Form Number: AIT F 1740.1 and ATF
F 1740.2.
Abstract: The environmental forms
are necessary in order to comply with
the provisions of the National
Environmental Policy Act. 42 V.S.c.
4332 (ATF F 1740.1) and the Clean
Water Act. 33 U.S.c. 1341(a) (AIT F
1740.2). Information regarding solid and
liquid waste. air pollution. noise. etc. as
collected on AIT 1740.1 is evaluated to
determine if a formal environmental
impact statement or an environmental
permit is necessary for a proposed
operation. The environmental type
information is collected from
manufacturers. namely distilled spirits
plants. wineries. breweries. and tobacco
products factories. ATF F 1740.2 is also
submitted by manufacturers but only
those who discharge a solid or liquir'
effiuent into navigable waters.
Applicants are required to descr' .e any
biological. chemical. thermal. r other
characteristic of the discharp' as well as
any methods or equipment .sed to
monitor the condition of' .e discharge.
Based upon this data. ,.' f makes a
determination as to w' dther a
certification or waiv i by the applicable
State water qualit' .1gency is required.
Should a manufr ,curer be required to
submit both fo' ,}S (AIT F 1740.1 and
1740.2) he IV f incorporate by reference
any redunc ..at information especially
regardinp ,olid and waste. The record
retentic period for this information
coller .on is 15 years after
disc .ltinuance of business for distilled
sr' Its plants having production
, .:ilities. All others. 4 years after
jiscontinuance of business.
Current Actions: There are no changes
to this information collection and it is
being submitted for extension purposes
only.
Type of Review: Extension.
AJ1ected Public: Business or other forprofit.
Estimated Number of Respondents:
8.000.

Estimated Time Per Respondent: 30
minutes.
Estimated Total Annual Burden
Hours: 4.400.
Request for Comments
Comments submitted in response to
this notice will be summarized and/or
included in the request for OMB
approval. All comments will become a
matter of public record. Comments are
invited on: (a) Whether the collection of
information is necessary for the proper
performance of the functions of the

~
agency. including whether the
information shall have pracucal v ...ity:
(h) the accuracy of the agency's ,lUnate
of the burden of the collectiol' ,(
information; (c) ways to enb .lce the
quality. utility. and clarity .i the
information to be collecf ..I; (d) ways to
minimize the burden ,,' .be collection of
information on resp" Jents. including
through the use of, .tomated collection
techniques or olb . forms of information
technology; anc' .e) estimates of capital
or start-up co' .; and costs of operation.
maintenanC' . and purchase of services
to providE' ..aformation.
Dated: muary 10. 1999.
Wuu. , T. Earle.
Ass: .ant Director (Management) CFO.

W . Doc.

99-944

.. LL.IIIO COOE

Filed 1-14-99: 8:45 amI

4I1~1~

DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and
Flreanns
Proposed Collection; Comment
Request
ACT1OH: Notice and request for
comments.
SUMMARY: The Department of the
Treasury. as part of its continuing effort
to reduce paperwork and respondent
burden. invites the general public and
other Federal agencies to take this
opportunity to comment on proposed
and/or continuing information
collections. as required by the
Paperwork Reduction Act of 1995.
Public Law 104-13 (44 V.S.c.
3506(c)(2)(A)). Currently. the Bureau of
Alcohol. Tobacco and Firearms within
the Department of the Treasury is
soliciting comments concerning the
Application for Enrollment to Practice
Before the Bureau of Alcohol. Tobacco
and Firearms.

Written comments should be
received on or before March 16. 1999 to
be assured of consideration.

DATES:

Direct all written comments
to Linda Barnes. Bureau of Alcohol.
Tobacco and Firearms. 650
Massachusetts Avenue. NW .•
Washington. OC 20226. (202) 927-8930.
ADDRESSES:

FOR FURTHER INFORMATIOH CONTACT:

Requests for additional information or
copies of the fonn(s) and instructions
should be directed to Rosa M. Jeter.
Market Compliance Branch. 650
Massachusetts Avenue. NW..
Washington. OC 20226. (202) 927-8123.

Treasury Borrowing Advisory Committee
of the
The Bond Market Association

Chairman

Stephen G. Thieke
Chairman, Risk Management Committee
J.P. Morgan & Co. Incorporated
60 Wall 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

Lisa W. Hess
Managing Director
Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022

James R. Capra
President
Capra Asset Management, Inc.
555 Theodore Fremd Avenue, Ste. C-204
Rye, NY 10580

Gedale B. Horowitz
Senior Managing Director
Salomon Smith Barney
388 Greenwich Street, 39th Fl.
New York, NY 10013-2396

Stephen C. Francis
Vice Chairman
Fischer, Francis, Trees & Watts, Inc.
200 Park Avenue
New York, NY 10 166

Timothy W. Jay
Managing Director
Lehman Government Securities, Inc.
1 Broadgate, 3rd Floor
London EC2M 7HA England

2

Thomas L. Kalaris
President
Barclays Capital Inc.
222 Broadway
New York, NY 10038

William D. Shaw, Jr.
President
Aubrey G. Lanston & Co., Inc.
One Chase Manhattan Plaza, 53rd Fl.
New York, NY 10005

Barbara Kenworthy
Managing Director
of Mutual Funds - Taxable
Prudential Insurance
McCarter Highway
2 Gateway Center, 7th Floor
Newark, NJ 07102-5029

Morgan B. Stark
Principal
Ramius Capital Group
757 Third Avenue, 27th Floor
New York, NY 10017

Wayne D. Lyski
Chairman & Chief Investment Officer
Alliance Fixed Income Investors
Alliance Capital Management Corporation
1345 Avenue of the Americas
New York, NY 10105

Craig M. Wardlaw
Executive Vice President
Bank of America
Mail Code NCI 007-0606
Charlotte, NC 28255-0001

Michael P. Mortara
Partner, Co-head
Fixed Income Division
Goldman-Sachs & Co.
85 Broad Street, 26th Floor
New York, NY 10004

Charles D. White
Senior Vice President
Wells Fargo
Norwest Center
Sixth and Marquett
Minneapolis, MN 55479-0163

William H. Pike
Managing Director
Chase Securities Inc.
270 Park Avenue
New York, NY 10017

Joseph Rosenberg
President
Lawton General Corporation
667 Madison Avenue
New York, NY 10021-8087

NEWS
-

OffiCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE. N.W.• WASlDNGTON, D.C.. 20220. (202) 622·2960

FOR IMMEDIATE RELEASE
Text as Prepared for Delivery
February 2, 1998

DIRECTOR OF THE OmCE OF MACROECONOMIC ANALYSIS
JOHN H. AUTEN
REMARKS TO THE TREASURY BORROWING ADVISORY COMMITTEE
OF THE PUBLIC SECURITIES ASSOCIATION

When you were here three months ago, the economy was growing at more than a
3 percent annual rate with inflation as measured in the national income accounts near 1
percent. On the basis of domestic considerations alone, there was little fault to find with
economic performance. But events in financial markets here and abroad had moved rapidly
and at times unpredictably. Credit-quality spreads had widened sharply and credit availability
was interrupted temporarily in some markets. At the time, that financial turmoil inevitably
introduced an element of uncertainty into the economic outlook.
Now. three months later, we meet with the domestic economy growing even more strongly
than before, inflation remaining low and domestic financial markets functioning smoothly. Some
of the original financial problems still remain and new ones always seem to be emerging
internationally. but the immediate threat to the current economic expansion clearly has subsided.
Indeed, the economy picked up speed late last year.
Last week the Commerce Department reported another "growth surprise", this time for
Gross Domestic Product in the fourth quarter. Positive surprises have been the rule rather than
the exception in recent years with economic growth regularly exceeding consensus expectation.
That surely was the case in the fourth quarter with growth estimated at a 5.6 percent annual
rate, compared to the 2-112 percent average growth rate projected at the beginning of the quarter
by the Blue Chip consensus of 50 economists at major financial institutions, business corporations
and academic research organizations. The big fourth quarter raised real growth for the four
quarters of 1998 to 4.1 percent. This was the third successive year of real growth around 4
percent in what has now become the longest U. S. peaceti me economic expansion.
RR-2924

-

-

Far press releases, speeches, public schedules and official biographies, call our 24.1zour fax line at (202) 622-2040

The composition of fourth quarter real growth was remarkably well balanced. Inventories
grew a little more slowly than in the third quarter and inventory-sales ratios remained at low and
what seem to be healthy levels. Business capital spending picked up again to a double-digit pace,
after a third-quarter pause which some took as an early sign of weakness in that area. Consumer
spending continued a strong pace of advance in the fourth quarter, residential construction pushed
to higher levels and consumer confidence remained strong.
It is not likely that 5 percent real growth will continue. There were special factors
boosting real growth late last year which are unlikely to repeat and which may in some cases
reverse. There was a rebound from effects of the General Motors strike. Construction activity
benefitted during the fourth quarter from unusually mild weather, as well as from the generally
favorable economic and financial environment. Net exports exerted an essentially neutral
influence in the fourth quarter as opposed to large negatives earlier in the year. Similar
fourth-quarter improvement in the past has been associated with difficulties of seasonal
adjustment. Based on that experience, some reversal of the fourth-quarter improvement might
well be expected in the trade area. In light of these considerations, a slower pace of real growth
in the current quarter seems likely to develop for statistical reasons alone, although without
necessarily implying much significant change in the underlying pace of activity.

The other major recent reading on economic performance, also released last week, was the
employment cost index. This is the most comprehensive measure of the costs to employers of
employee wages, salaries and benefits. Total compensation costs rose at a seasonally-adjusted 0.7
percent in the final three months of the year and by 3.4 percent over the last 12 months. Both
results suggested considerably less cost pressure than markets were expecting. Two features of
the employment cost report deserve special mention.
Despite some deceleration in nominal compensation growth to around 3-1/2 percent, gains
in real compensation have been substantial. Inflation-adjusted private wages and salaries, as
measured by the employment cost index, grew by 2-114 percent during 1998 following a 2.0
percent increase during 1997. An enabling factor has been consumer price inflation of only about
1-112 percent per year, partly due to falling import prices.
Reduced cost pressures coupled with sizable real wage gains also reflect more rapid growth
of productivity. Through the first three quarters of this year, nonfarm productivity grew at a 2
percent annual rate but may have grown at a much more rapid rate in the fourth quarter for which
the initial estimate of productivity will not be available until next week.
It would have been difficult to have imagined a much more favorable set of economic

statistics than has appeared recently. In addition to strong economic growth and low inflation late
last year, there are more recent economic readings which suggest that considerable forward
momentum is carrying over into this year.

2

Initial claims for unemployment insurance had been running a little higher than expected
earlier this year (about 350,000 after seasonal adjustment). This began to raise some doubts as
to the pace of current activity. Downward-revised data released last week paint a different and
more encouraging picture. Initial claims have been lowered to a level (near 300,(00) that is more
consistent with strong growth and tight labor markets.
Doubts as to the continued strength of consumer spending and business capital outlays have
caused many economists to write down this year's growth prospects. Early but still inconclusive
signs this year have been more favorable. The DR Redbook survey of retailers shows
broad-based strength in sales through the first three weeks of January, the December report on
durable goods orders points to strong business equipment spending this quarter and the latest
report of the National Association of Purchasing Management suggests the possibility of some
firming in manufacturing activity.
Despite this run of favorable economic statistics, it is necessary to recalHhat only three
months ago the outlook appeared much less certain. There are still risks inherent in the current
economic and financial environment both here and abroad. Domestically, the economy and its
financial markets are always subject to ups and downs. But, the economy looks strong currently
with its combination of solid growth and low inflation and seems to be poised for further gains.
That is a summary of recent economic developments and the near term economic outlook.
-30-

3

February 2, 1999
COMMITTEE CHARGE

The Treasury would like the Committee's advice on the following:
General Topics

Current forecasts predict growing budget surpluses. If the President's proposals are
adopted, the debt held by the public in 2014 is projected to be the lowest since World
War I as a percent ofGDP. What are the possible implications of this for Treasury debt
management over the longer term? What are the implications for Treasury debt
management over the next two years?
Given that the realization of long run-forecasts such as these is dependent upon future
economic, budget and political behavior, what are the implications for Treasury debt
management over the next two years?
Any other general topics related to the Treasury debt management program.
Treasurv financin2

The composition of a financing to refund approximately $27.0 billion of privately held
notes maturing on February 15 and to raise approximately $8 to $10 billion of cash in Sand 1O-year notes and 30-year bonds. Does the Committee recommend any reopenings?
Ifwe were to reduce the size of this refunding, how would you recommend doing so?
The composition of Treasury marketable financing for the reminder of the January-March
quarter, including cash management bills to mature in April.
The composition of Treasury marketable financing for the April-June quarter.

Debt management objectives in an environment of extended fiscal surplus

I.

Seek the

]0\\

est long run e:\pected Interest cost consistent with low rIsk (uncenalnty) relative

to that expectatIon:

\laIntaIn tkxlbIllty to respond to changes ansIng from fiscal policy actIOns and uncenaIn
economic developments:

3.

PreserYe. to the e\.tent practlcal. the I1quldIty of the key matunty segments of the Treasury
bIll and coupon markets:

·t

Provide tr;.msparency and predlctabll1ty In order to lImit the direct and Indirect costs of
disruptive shifts In Treasury financIng plans.

II Additional Considerations

•

LJse market based. rather than go\emment budget SCOrIng. methods to e\"aluate the costs of
VarIOUS deot rellrement tl'ChnIqUl'S

•

Scale annu;.ll spccIal1zcd Instrument ISsuance (tIpS) relatlYe to the expected sIze of annual
oenchmark coupon IS"U:.lnCl'. rather th:m the share of outstandIng debt.

u.s. TREASURY FINANCING SCHEDULE FOR 1ST QUARTER 1999
BILUONS OF DOLLARS

ISSUE

CAlE

AUCTION
DATE

3&6 MONTH BILLS

12, 30
01/07
01'14
01/21
01.28
02104
02111
02.18
02.'25
03,04
03111
03118

01/04
01/11
01119
01/25
02101
02108
02. 16
02122
03101
03108
03'15
03122

ANNOUNCEMENT

SETTLEMENT

OFFERED

MATURING

DATE

AMOUNT

AMOUNT

NEW
MOt'-lE'y

01/07
01114
01/21
01/28
02104
02111
02118
02.25
03104
03111
03118
03'25

1501
1502
1501
1501
1507
1500
1500
1500
1500
1500
1500
1500

153
153
153
158
147
159
158
153
157
157
155
155

-024
-027
-027
-077
036
-085
-082
-025
-068
-071
-051
-052

18567

-555

12.8
130
121

-283
-297
-210

3001

3790

-789

A
A
A

A
A

18012

FORE

G~

~D-ONS

01
02
00
00
13

l-YEAR BILLS
12.'30
0"28
02,25

01,05
02,'02
03102

1001 A
1000 A
1000

01/07
02;04
03104

09

CASH MANAGEMENT BILLS
79-Day Bill

10/29

11;02

11103

000

2301

-2301

02.09

02111

02115

2000

000

2000

02,'23

02.25

03101

3500

000

3500

Matures 1 '21 '99
58-0ay Bill
Malures 4;15,99
49-Day Bdl
Matures 4.19'99

CHANGE

COUPONS

lNSllE
Inflation-Indexed Security

12. 30

01106

01, 15

801 A

101

-21

000

2-Year Note

0120

01127

013 ~

1501

296

-146

200

5-Year Note
la-Year Note
30-Year BOnd

02103
02103
02103

02109
02110
02111

02,'15
02.'15
02;15

270

110

2-Year Note

02117

02124

02.'28

1500

184
110

-34
-110

2-Year Note

03117

03124

03;]1

1500

184
109

-34
-109

9101

1254

-344

NET CASH RAiSeD THIS QUARTER
FOREIGN ADD-ONS I MISC_ PURCHASES
TOTAL NEW MONEY RAISED THIS QUARTER
Matu"ng 7-Year Note
A : AnnounCed

3800

1600
1200
1000

'"

Treasury
anl'\Ounced 01
borrOWing

neea 01 -$5
on 2/1/99

till

-1588
1085
-503

109

Assumes abOut
$11 bllol
lorelgf'l add'ons
tor trle Quaner

U.S. TREASURY FINANCING SCHEDULE FOR 2ND QUARTER 1999 (PRELIMINARY)
BILLIONS OF DOLLARS

ISSUE

ANNOUNCEMENT
DATE

AUCTION

SETTLEMENT

OFFERED

MATURING

NEW

DAlE

DATE

AMOUNT

AMQUNJ

MONEY

03125
04101
04108
04,15

03129
04/05
04112
04119
04126
05,03
05/10
05,,7

04101
04108
04115
04122
04129
05/06
05/13
OS/20
OS/27
06/03
06110
()6, 17
06124

1500
1500
1400
1400
1400
1400
1400
1400
1400
1400
1400
1400
1400

158
155
156
155
155
159
155
IS 5
IS 5
IS 5
162
IS 8
150

·1 50
·1 51
·220
·184
·104

17000

18792

·1S 96

1000
1000
1000
1000

112
101
100
102

·123
·011
-003
-016

3000

31 37

3&6 MONTH BILLS

04:22
04:29
05106
05,13
0520
05,27
06103
06110
06117

OS/24
05/31
06107
06;14
06121

FORE'GN
AD::J·CNS

-077

·053
·161
·151
·1 55
·1 88
·151
.151

1·YEAR BILLS
03,25
04122
05,20
06/17

03/30
04127
05/25
06122

04101
04129
05:27
06124

-

·1 53

CASH MANAGEMENT BILLS
58·Day Bdl

02.'10

02/12

02/16

000

2000

·2000

02/23

02/25

03101

000

3500

·3500

03.29

03,'31

04/01

2500

2500

000

0525

05,27

06,01

2500

2500

000

Matures 4115,99
49·0ay Bill
Matures 4. I 9. 99
21 ·Day Btil
Matures 4.22.99
14 Day B,iI
Matures ;; 15.99

CHANGE
IN SIZE

COUPONS
Intlatoon.lnClexeCl Secu"ty

()4,07

()4,14

()4,' I 5

800

91

·11

2'Year Note

()4,'21

04128

()4,30

1500

181
111

·31
·111

5'Year Note
to·Year Note

05/05
05/05

05/11
05/12

0515
05,15

286

·06

2· Y'ear Note

05119

05126

05/31

1600

176
115

·16
·115

2'Year Note

()6,16

06123

()6,30

IS 00

170
114

·20
·114

8200

1244

·424

NET CASH RAISED THIS QUARTER
FOREIGN ADD~NS I MISC. PURCHASES
TOTAL NEW MONEY RAISED THIS QUARTER
MatUring 7·Year Note
A = AnnounceO

2800

1600
1200

rfe.uury
announced Q2
borrOWing need

-5105 10·
S1 10 011. on
01

201,99

·11792

...2.1..££.....
·10692

110

Assumes S' , bil
IOl8+Qn adO-ons
tOf Ihe QuarlE1r

TREASURY BORROWING ADVISORY COMMITTEE
OF THE
BOND MARKET ASSOCIATION
February 3, 1999
Dear Mr Secretary
Since the Committee's last meeting on October 28, 1998, the US economy has performed
strongly. The Commerce Department recently reported that GDP expanded at an impressive
5.6% pace in the fourth quarter of 1998 The growth rate for the year as a whole was about 4% - matching the performance seen in 1997. To this point, consumer-led demand strength, gains in
construction activity and continued forward momentum in business capital spending have more
than offset any headwinds in the trade sector arising from a slowdown in the global economy.
On the inflation front, the news remains very favorable Despite extremely tight labor markets,
wage pressures actually show signs of some moderation. The Labor Department recently
indicated that the employment cost index advanced at just a 0.7% pace in the fourth quarter with the year/year rate ticking down to 3.3%. Moreover, quotes for energy items and other
industrial commodities remain quite soft. Finally, outside of recent spikes in tobacco prices, CPI
and PPI readings have continued to be benign
The Treasury yield curve is considerably flatter than at the time of the Committee's last meeting
While the yield on 2-year notes has risen about 50 basis points during this interval, there has
been little change in yields at the long end of the curve. The back-up in short term rates reflects
a diminished expectation of near term easing by the Federal Reserve, in the wake of the
cumulative 75 basis points ofrate cuts that occurred between September 29 and November 17.
While an intensification of the Brazilian crisis reignited some flight-to-quality buying of US
Treasuries in mid-January, in general these flows have slackened while domestic financial
market conditions have improved significantly in recent months.
At the Treasury's request, the Committee discussed the longer term implications for Treasury
debt management of current Administration and CBO forecasts of extended, growing budget
surpluses. The discussion was in the context of explicit recognition of the inherent uncertainty of
the key assumptions which underlie those forecasts-not only as they relate to economic
developments, but also future fiscal policy actions, as well as the increased importance of
financial asset market performance as a source of tax revenue growth. Those sources of
uncertainty strongly suggest the importance of preserving flexibility to adapt debt management
practices, in the event of significant changes in the fiscal outlook.
As a starting point for its discussion, the Committee considered, and generally reaffirmed, its
views on the appropriate debt management objectives in an environment of extended fiscal
surpluses. Specifically, those objectives should be (1) to seek the lowest long-run expected
interest cost consistent with low risk relative to that expectation; (2) to maintain flexibility to
respond to changes arising from fiscal policy actions and uncertain economic developments; (3)
to preserve, to the extent practical, the liquidity of key segments of the Treasury bill and coupon

-2markets~

and (4) to provide transparency and predictability, so as to limit the direct and indirect
costs of disruptive shifts in Treasury financing plans.
In the context of these general objectives, the Committee discussed at some length the various
debt management tools available to the Treasury and their relative advantages and disadvantages
in meeting these objectives. These tools include modifications to the frequency of regular bill
and coupon offerings; changes in the size of such offerings; issuance of specialized forms of
Treasury securities, and secondary market debt repurchase mechanisms Thus far, the Treasury
has focused its actions on reducing the number and frequency of benchmark coupon offerings,
while seeking to maintain relatively large benchmark issues. Looking ahead. and if the proposed
surpluses were to materialize in the size forecasted, it is likely that the Treasury would wish to
make use of all available tools, in order to distribute the impact of its debt retirement activity in a
way which preserves as much of the cost efficiency and liquidity of the Treasury securities
market as is practical.
As regards the frequency and size of regular coupon offerings, to the extent further changes in
the issuance cycle might be needed in the years ahead, the Committee reaffirmed its view, as set
out in its report of August 4, 1998, that a reduction in the frequency of 2-year note offerings, as
well as a reduction of one 30-year bond offering, were preferable to significant reductions in the
size of the benchmark quarterly refunding issues. There was also some discussion of the tradeoff between preserving liquidity in the benchmark coupon offerings relative to the impact of
reduced issuance on liquidity of the Treasury bill market. While Committee members generally
stressed the importance of the liquidity of coupon issues, this should not be at the expense of
foregoing access to the bill market, where restrictions on certain investor holdings make
Treasury bills especially attractive
In tenns of primary market activity, the Committee also discussed two additional possible
changes in debt management practices which might enhance the Treasury's ability to meet its
objectives First, the Committee discussed the possibility of shifting some portion oflonger term
issuance into callable structures, such as a 30-year, non-call 5-year structure. Given the
uncertainty surrounding the size of the longer term surpluses, as well as the potential financing
needs once social security surpluses are depleted, it could well be that the extra costs to the
Treasury of call features in its long term debt is a reasonable price to pay for the flexibility it
would provide The Committee felt further evaluation of this type of tool would be in order.
Second, the Committee again discussed the relative size of the annual issuance of inflationindexed securities. As noted in its last report, the Committee views the current size of these
offerings as disproportionately large relative to the size of regular financing activity in the
nominal coupon markets. As part of a longer term strategy of overall debt reduction, the
Committee felt that the Treasury should consider reducing the size of these offerings There was
also a suggestion, generally endorsed by the Committee, that the Treasury evaluate a change to a
continuously offered format for TIPS offerings, instead of the existing approach oflarge
quarterly auctions. It was felt that the current auction sizes and method is resulting in the
Treasury absorbing a significant risk premium for this specialized debt instrument.

-3In a forecasted environment of sizable shrinkage in the size of outstanding Treasury debt, the
Committee reconsidered the possible use of secondary market debt buyback mechanisms These
mechanisms were viewed as especially useful to the Treasury in terms of managing the impact of
debt reduction on various maturity sectors of the market, in terms of balancing the possible
impact of less frequent 2-year note offerings on the average maturity of the outstanding debt and
in terms of preserving flexibility to adapt to the impact of a less favorable economic environment
or different fiscal policy outcomes. The Committee again took note of the current budget
accounting requirements which would expense any premium paid to retire current debt in the
year of repurchase while lowering future year interest expenses. While the Committee suggested
that consideration be given to seeking changes in these requirements to better align accounting
with the real economics, the Committee felt that the Treasury should evaluate the use of this tool
primarily on the basis of the underlying market economics, as well as the advantages it would
provide in terms of greater debt management flexibility
In summary, the Committee would stress three points when considering how to adapt debt
management practices to an environment of projected sizable, sustained fiscal surpluses First,
there is a high degree of uncertainty inherent in all long term fiscal forecasts, so care should be
taken not to impair currently valuable financing tools. Second, the scale of projected debt
retirement, should it materialize, will have profound effects on the structure and liquidity of the
Treasury debt markets. As such, it is in the Treasury's interest to make use of the full range of
tools available to it, in order to manage carefully the impact of these changes. Third, once the
Treasury has made decisions on any changes it may wish to make in terms of the frequency,
timing or structure of its offerings, it is in both the Treasury and the market's interest to
announce those changes in advance, so as to limit any disruptive impact.
Against this backdrop of longer-term considerations, the Committee addressed the composition
of the Treasury's February refunding
The Committee unanimously recommended a total refunding size of$36 billion, to refund
approximately $27 billion of privately held notes and bonds maturing on February 15, and to
raise approximately $9 billion of new cash
The Committee's discussion regarding the composition of the refunding focused on the 30 year
bond, specifically, the benefit to the Treasury of a lower interest cost associated with a new bond
offering, contrasted with the presumed long-run benefit associated with the increased liquidity
afforded by a reopening of the existing bond Members were evenly divided on this issue, with 9
members favoring a new bond offering, while 9 members preferred a reopening of the existing
bond. This preference was the key determinant of the composition recommendation, as the
members who preferred a new bond favored a $10 billion size for the offering, while those who
favored a reopening felt that the size should be $8 billion
The preferred size of the 10-year offering recommendation was $12 billion for those nine
members who proposed an $8 billion re-opening of the long bond, while the other nine members
preferred a $10 billion lO-year offering A majority of 15 members of the Committee favored a
reopening of the existing) O-year note, based on the potential benefits of increased liquidity in
this key sector and the likelihood that there would be little, if any, premium for the Treasury if it

-4-

were to issue a new security Should the Treasury decide to proceed with a reopening, it should
clarify for the market that this would be contingent on meeting original issue discount
regulations
The Committee unanimously supported a $16 billion size for the 5-year note offering
In response to the Treasury's request, members also considered how they would potentially
reduce the size of the refunding further. The 9 members who favored an $8 billion reopening of
the current bond would support, in those circumstances, a smaller reopened ten year note
offering of$10 billion. Of the 9 members who supported a new bond offering of$10 billion, a
majority of 7 members would reduce the five year note offering from the proposed size of $16
billion. The minority view was that a cut in the size of a new bond offering below $10 billion
was preferable to a reduction in the size of the five year note offerings.
In the context of the discussion concerning reopenings, one member raised a concern regarding
the application of Treasury regulations on the auction process for a reopened security Currently,
holdings in an outstanding issue are considered against the bidding restriction of 3 5% for a new
security auction. As the size of new Treasury offerings shrink, while the size of dealer firms
grow with industry consolidation, there is increased likelihood that this rule, as currently applied,
will limit potential participation in the when issued market and the auctions for reopened
securities. Recognizing that the intent of the rule was to promote distribution of new issued
securities, it was felt by the Committee that only positions in the when-issued security should be
relevant as it relates to the auction restriction, thus allowing an entity to purchase up to 35%
(including WI holdings) of a reopened security, regardless of holdings in the outstanding issue
The Committee suggested that the Treasury reconsider this aspect of the rule.
In regard to the composition of Treasury marketable financing for the remainder of the current
quarter, the Committee recommends that the Treasury meet its borrowing requirement in the
following manner
•
•
•
•

Two 2-year notes of $150 billion each,
Two I-year bills of$IOO billion each,
Weekly issuance of $150 billion of 3- and 6-month bills through the remainder of the
quarter, and
Two cash management bills -- $20 0 billion to be issued February 16 to mature April
15,1999, and $35.0 billion to be issued March 1 to mature April 19, 1999

For the second quarter of 1999, the Treasury estimates a net market paydown in the range of
$105-110 billion. To accomplish this requirement, the Committee recommends the provisional
financing schedule in the attached table
Respectfully submitted,

~.,

~
.

~~/
I
r"--r

\.)

~ -.Y\\,~

~,~
r-........;

Stephen G. Thieke

u.s. TREASURY FINANCING SCHEDULE FOR t'iD QUARTER 1999 (PRELIMINARY)
BILLIONS OF DoLLARS
A"""OC~CEME!'.'

lsSrE

DATE

Ace-no"
DATE

SETILE..\iE.:-',
DATE

OF'FE.RE.D

MAn"Rr\(j

A\lOl"'-.,'

A\IOl"'-.,'

NEW
Mo,,'n

rORElG"

ADo-O>.;s

!

03125
04/01
04/08
04/J5
04122
04/29
05/06
05/13
05/20
05/27
06/03
061]0
061]7

3&6 MONTI-I BILLS

03/29
04/05
04112
04119
04126
05/03
05/10
05/17
OS/24
05/31
06/07
06fl4
06/21

04101
04108
04115
04/22
04129
05/06
05113
05/20
05/27
06/03
06/lO
06117
06/24

.l,J 77

15.00
15.00
14.00
14.00
14.00
14.00
14.00
14.00
14.00
14.00
14.00
14.00
14.00

15.8
155
IS b
15.5
15.5
15.9
15.5
15.5
15.5
15.5
16.2
15.8
15.0

170.00

187.92

lO.OOO

lO.OO

112
10.1
10.0
lO.2

-0.03
-0.16

30.00

31.37

-1.53

-0.53
-1.61
-I 51
-1.55
-1.88
-1.5 I
-1.51
-1.50
-1.551
-2.20
-1.84
-104

i

I,

-18.%

I'YEAR Bn.LS
03/25
04/22
OS/20
061]7

CASH MA.~AGnlE."iT BILLS
[
[ 58-Dav Bill
02/10
MAn"REs 4fl 5/99
[ 49-Dav Bill
02/23
MAn"REs4119/99
03/29
21-Dav Blil
MAn"REs 4122/99
[14-Dav BIll
05/25
MAnREs 6/1 5/99

I

03/30
04/27
OS/25
06/22

04/01
04/29
OS/27
06124

lO.OO
1000

-1.23
-D. II

02113

02fl6

0.00

20.00

·20. ()()

I

02/25

03/01

000

35.00

-35.00

I

03/31

04101

25.00

25.00

00.00

I

05/27

06/01

2500

25.00

0000

COUPONS
ll\nAnO~-L'nDCED

SECl"RITY

04/07

04/14

04/'5

8.00

9.'·

-\.1

2-YEARNoTE

04/21

04/28

04/30

15.00

18.1
11.1

-3.1
-III

S-YEARNoTE
10-YEAR-NoTE

05/05
05105

05111
05112

05/15
U5115

lO.OO

28.6

-2.6

2-YEARNoTE

05119

95/26

05/31

15.00

17.6
11.5

-2.6
-11.5

2-YEARNoTE

06IJ6

06/23

06/30

15.00

17.0
11.4

-2.0
-11.4

124.4

-45.4

16 00
26.00

-

82.00

1\'ETCASH RAISED THIS Ql'ARTER
FORElID; ADD-OKS ']-.USC. Pl"RCHASES
TOTAL XEW MO"'EY RAISED THIS Ql'AR TER
• MATl'R£';G 7-YEAR :-;OTE
A = A,'~OL~CED

-- - - -- - ---- -=------------------=----==-==

TREAslJ"RY

-120.92

A.'"NOL'NCED 01
BORRO\VING

-.-lLQQ
-109.92

AsSUMES$11
BILLlvN FUkEON
ADD-ONS FOR THE

Ql;ARTER

11.0

PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt. Washington, DC 20239

EMBARGOED FOR RELEASE AT 3:00 PM
February 4. 1999

Contact: Peter Hollenbach
(202) 219-3302

PUBLIC DEBT ANNOUNCES ACTIVITY FOR
SECURITIES IN THE STRIPS PROGR.\M FOR JANUARY 1999

.

The Bureau of the Public Debt announced activitv
. fig:ures for the month of Januarv 1999. of securities
within the Separate Trading of Registered Interest and Principal of Securities program (STRlPS).
~

Dollar Amounts in Thousands
Principal Outstanding
(Eligible Securities)

$1.606,178.831

Held in Unstripped Fonn

$1.384,914,302
$221.264,529

Held in Stripped Fonn

$13.550,644

Reconstituted in January

The accompanying table gives a breakdown of STRlPS acti\'ity by individual loan description. The
balances in this table are subject to audit and subsequent re\'ision. These monthly figures are included
in Table VI of the ft,fanthly Statement afthe Public Debt, entitled "Holdings of Treasury Securities in
Stripped Form."
The STRlPS data along: with the new Manthlv
. Sratemel1( afthe Public Debt, is available on Public
Debt's Internet homepage at: www.publicdebt.treas.gov A \vide range of information about the
~

public debt and Treasury securities is also available on the homepage.

000

F

RR-2935

bUp:/ /www.puhlicdent.treas.go y

TABLE V - HOLDINGS OF TREASURY SECURITIES IN STRIPPED FORM, JANUARY 31,1999 -- Continued

Loan Description

Treasury notes
Series
CUSIP
A
912827 XE7
XN7
B
XW7
C
3H3
AK
3K6
Al
YE6
D
3P5
AM
3Rl
AN
3U4
Y
YN6
A
3Y6
Z
4A7
AB
4C3
AC
YW6
B
4G4
AD
4J8
AE
4Ml
AF
ZE5
C
402
AG
4RO
AH
4T6
AJ
ZN5
0
3M2
X
4W9
AK
4X7
Al
ZX3
A
3WO
S
A85
B
4E9
T
B92
C
025
0
F49
A
G55
B
3J9
M
314
N
P
303
3S9
0
3V2
C
J78
A
3Z3
0
4B5
E
401
F
4H2
G
4K5
H
l83
B
4N9
J
4U3
K
N81
A
P89
B
088
C
R87
0
A
S86
T85
B
U83
C
V82
0
W81
A
X80
B
Y55
C
Z62
0
2JO
B
2U5
C
3EO
0
3X8
B
4F6
C
4Vl
0

Interest Rate
8-718
9-118
8
5-3/4
5-5/8
7-7/8
5-5/8
5-5/8
5-3/8
8-1/2
5-1/2
5-1/2
5-5/8
8-7/8
5-1/2
5-3/8
5-3/8
8-3/4
5-1/8
4-1/2
4
8-112
5-3/4
4-5/8
4-5/8
7-3/4
5-3/8
8
5-5/8
7-7/8
7-1/2
7-1/2
6-3/8
5-7/8
5-3/4
5-3/4
5-5/8
5-1/2
6-1/4
5-1/2
5-112
5-3/4
5-1/2
5-3/8
5-314
5-1/4
4-1/4
5-7/8
7-1/4
7-1/4
7-7/8
7-1/2
6-1/2
6-1/2
5-7/8
5-5/8
6-7/8
7
6-1/2
6-1/4
6-5/8
6-1/8
5-1/2
5-5/8
4-3,4

Corpus
STRIP
CUSIP

912820 AR8
AS6
AT4
CBl
CD7
AUI
CGO
CJ4
CM7
AV9
CR6
CT2
CV7
AW7
CZ8
DBO
006
AX5
OFI
OG9
OH7
AY3
CF2
Ol8
OM6
P>Z.O
CPO
BA4
CX3
BB2
BCD
B08
BE6
CC9
CE5
CH8
CKI
CN5
BF3
CS4
CU9
CW5
DA2
OC8
BGI
OE4
OJ3
BH9
BJ5
BK2
BlO
BM8
BN6
BPI
B09
BR7
BS5
BT3
BUD
BW6
BX4
CA3
C08
CYI
OKO

Prlnc,pal Amount Outstanding In Thousands

II

Maturity Date
Total
Outstanding

02115199
05/15/99
08/15/99
09130/99
10/31199
11115/99
11130/99
12131199
01131/00
02/15/00
02129/00
03/31/00
04/30100
05115/00
05/31/00
06/30/00
07/31/00
08115/00
08/31/00
09/30/00
10/31/00
11/15/00
11/15/00
11130100
12/31/00
02115/01
02115/01
05/15/01
05/15/01
08115/01
11115/01
05115/02
08/15/02
09/30102
10131/02
11/30102
12131/02
01/31/03
02/15/03
02128/03
03/31/03
04/30103
05/31/03
06/30103
08115/03
08/15/03
11/15/03
02/15/04
05115/04
08115/04
11115/04
02115/05
05/15/05
08/15/05
11115/05
02115/06
05/15/06
07115/06
10/15/06
02115/07
05/15/07
08115/07
02/15/08
05115/08
11/15/08

Total Treasury Notes
Grand Total

I

I

PortIOn Held In
UnstriDDed Fomn

9,719623
10047103
10,163,644
17,487287
16,823947
10,773,960
17,051,198
16,747,060
17,502,026
10673033
17.776,125
17,206,376
15,633855
10,496230
16,580032
14,939,057
18,683,295
11,080646
20,028533
19,268508
20,524986
11,519682
16,036088
20,157,568
19,474,772
11,312,802
15,367153
12,398,083
12,873752
12,339,185
24.226 102
11,714397
23.859015
12,806814
11,737284
12,120580
12.052433
13,100640
23,562,691
13,670354
14,172,892
12,573248
13,132243
13,126779
28,011 028
19,852263
18,625 785
12,955077
14.440372
13,346467
14,373760
13834754
14,739504
15002580
15,209920
15513587
16.015475
22,740446
22,459675
13,103678
13,958,186
25,636803
13,583412
27,190961
13487775

6279,623
4,749503
5829894
17,269,687
16604,747
5,794,760
16,865,598
16,647,860
17,502,026
7,546,633
17,776,125
17,206,376
15633,855
5,091,430
16,580,032
14,939057
18,683,295
6,952,166
20,028,533
19,268,508
20,524,986
6,988,082
16,036,088
20,157,568
19474,772
7,850,402
15367,153
8,329,383
12,873,752
9039,985
19607,542
9,225,517
22,233,415
12,771,614
11,675,684
11,919,780
12,052,433
13,100,640
22,904,867
13,626,354
14,172,892
12 573,248
13,132.243
13126,779
27.487828
19852,263
18625785
12739077
14369,972
12424067
14373,760
13806,914
14,739504
15002580
15205,120
15,509.427
16015.475
22740446
22459,675
13043,294
13924.586
25609,603
13583,412
27,190,961
13487,775

1,026622 589

968206411

1 606 178 831 I

1 384914302

Portion Held ,n
Stripped Fomn

3,440000
5,297,600
4,333750
217,600
219,200
4,979,200
185,600
99,200
0
3,126,400
0
0
0
5,404,800
0
0
0
4,128,480
0
0
0
4,531,600
0
0
i
0,
3,462,400 '
0
4,068,700
0
3,299,200
4.618.560 I
2,488.880
1.625,600
35.200
61,600
200,800
0
0
657,824
44 000
0
0
0
0
523,200
0
0
216,000
70.400
922,400
0
27,840
0
0
4,800
4,160
0
0
0
60,384
33,600
27,200
0
0
0
58,416,178
221,264 529 I

Reconstituted
This Month

40,000
0
90,775
0
0
6,400
0
0
0
42,000
0
0
0
22,400
0
0
0
10,400
0
0
0
0
0
0
0
82,400
0
82,300
0
32.000
219,200
9.600
4.800
0
0
0
0
0
77.728
0
0
0
0
0
16,800
0
0
33.600
48.800
76,800
0
0
0
0
0
0
0
0
0
0
1.600
1,600
0
0
0
899,203
13.550644

,
workday Of eac"'1 nionth Tac'e V Will oe allatlac,e after 3 00 p m eastern time on tr,e CO'1"'\ merce Eoonomlc
Bulletin Board (EBB) and the Bureau of the PubliC
Debt s webs.:e a: nnD Ilw",w DwbllCde~1 treas gO\l For more Information about EBB ca'i (202) 482·1966 The balances In thiS table are Subject to audit and subsequent adjustments
Note 01"'11"'e

-l~"'1

TABLE V - HOLDINGS OF TREASURY SECURITIES IN STRIPPED FORM, JANUARY 31,1999

Corpus
Loan Description

Treasury Bonds
GUSIP
912810 DM7
D08
DR6
DU9
DN5
DPO
DS4
DT2
DV7
DW5
DX3
DYl
DZ8
EA2
EBO
EG8
ED6
EE4
EFl
EG9
EH7
EJ3
EKO
EL8
EM6
EN4
EP9
E07
ES3
ETI
EV6
EW4
EX2
EYO
EZ7
FAl
FB9
FE3
FFO

Interest Rate
11-5/8
12
10-314
9-3/8
11-3/4
11-1/4
10-5/8
9-7/8
9-1/4
7-1/4
7-1/2
8-3/4
8-7/8
9-118
9
8-7/8
8-118
8-112
8-3/4
8-3/4
7-7/8
8-1/8
8-118
8
7-1/4
7-5/8
7-1/8
6-1/4
7-1/2
7-5/8
6-7/8
6
6-3/4
6-112
6-5/8
6-3/8
6-1/8
5-112
5-1/4

STRIP
CUSIP

912803 AB9
AD5
AG8
AJ2
912800AA7
912803AAl
AC7
AE3
AFO
AH6
AK9
AL7
AM5
AN3
AP8
A06
AR4
AS2
ATO
AU7
AV5
AW3
AX1
AY9
AZ6
BAO
BB8
BC6
BD4
BE2
BF9
BG7
BH5
BJI
BK8
BL6
BM4
BP7
BV4

Principal Amount Outstanding In Thousands
Maturity Date
Total
Outstanding

11/15/04
05/15/05
08/15/05
02/15/06
11/15/14
02115/15
08115/15
11115/15
02/15/16
05115/16
11115/16
05115/17
08115117
05/15/18
11/15/18
02115/19
08115/19
02115/20
05115/20
08115/20
02115/21
05115/21
08/15/21
11115/21
08115/22
11115/22
02115/23
08/15/23
11115/24
02115/25
08/15/25
02/15126
08115/26
11115/26
02115/27
08/15/27
11/15/27
08/15/28
11/15128

Total Treasury Bonds
Treasury Infiatlon-Indexed Notes.
CUSIP
Series' Interest Rate
9128273A8
3-5/8
J
2M3
3-318
A
3T7
A
3-5/8
4Y5
A
3-7/8

9128208Z9
BVa
CL9
DN4

07/15/02
01/15/07
01115/08
01/15/09

Totallnfiation-Indexed Notes ..
Treasury Infiatlon-Indexed Bonds:
CUSIP
Interest Rate
912810 FD5
3-5/8
Totallnfiation-Indexed Bonds

912803 BN2

04/15/28

Portion Held In
Unstrlpped Form

Reconstituted
This Month

Portion Held In
StflPped Form

8,301,806
4,260,758
9,269,713
4,755,916
6,005,584
12667,799
7.149,916
6.899,859
7,266.854
18.823.551
18.864,448
18,194,169
14.016.858
8.708,639
9.032,870
19,250,798
20.213.832
10.228.868
10,158,883
21,418.606
11.113,373
11.958,888
12,163,482
32.798,394
10.352,790
10.699,626
18,374.361
22.909,044
11,469,662
11,725,170
12.602.007
12,904.916
10.893.818
11,493.177
10,456,071
10.735,756
22,518,539
11.776,201
10,947.052

4,161,006
2,167,458
6,524.913
4,747,916
2,861.584
10,869,559
6,997.276
5.055,059
7,154.854
18,596,351
17,943,968
9.103.289
10.818,458
3,411.039
2.558,070
5,917.998
19,163,912
5.829,268
2.880,643
5,769.806
10,222.173
6.520.488
9,389.402
12.012.719
8.710.390
2.824,426
11,038,361
18,800.148
2,419.822
2.766.770
8.970,647
12,569,316
9.490,618
8,779.577
8,489.671
10,074.956
22.201,739
11.773,801
10,946,252

4.140.800
2093.300
2.744.800
8,000
3.144,000
1.798.240
152.640
1,844.800
112.000
227,200
920.480
9.090.880
3.198.400
5.297.600
6474.800
13332.800
1049920
4399.600
7.278.240
15648800
891.200
5438.400
2.774.080
20785.675
1.542.400
7.875.200
7.336.000
4.108.896
9.049.840
8.958.400
3631.360
335,600
1,403.200
2.713,600
1.966,400
660.800
316800
2400
800

24.000
22.250
32.800
0
30.400
61.440
49.920
182400
355.200
187.200
477,680
970.560
929.600
132.800
547.000
1,342.400
376,960
231.200
378.720
1.020.000
259.200
291,520
1.244.160
948.575
148.000
96.000
124.800
263,296
177.920
25.600
370.240
11.600
593.600
147.600
388.800
4,800
203.200
0
0

503,382.054

340,533.103

162848.351

12,651.441

17.221,141
16,311,391
17.066.077
8,532,287

17.221.141
16,311.391
17.066,077
8.532.287

0
0
0
0

0
0
0
0

59,130,896

59.130.896

0

0

17.043.292

17.043.292

0

0

17,043,292

17.043.292

0

0

HIGHLIGHTS OF 7RBASURY OFFERINGS OP BILLS
TO BE ISSUED PEBRUARY 11, 1999
February 4, 1999
Qf!ering AInount ••••••••••.••••.••••••.•• $7,500 million
Description of Offering:
Term and type of security ••••••••••••..• 91-day bill
CI1SIP number •..••••••..••••••••.•••••.•• 912795 BL 4
A\&c tioR date •.••••••••.•.•••••••••••••.• February 8, 1 9 99
I.lue date ••••••.•••••••.••••••••••••..• February 11, 1999
Maturity date •..••••••.••••••••••.•••••• May 13,· 1999
Original issue date •..••.•••••••••••.••• November 12, 1998
Currently outstanding •••••.••••••.•••••• $11,825 million
Minimum bid amount and multiples ..•••••• $1,000

$7,500 ml11ion

182-day bill
912795 CK 5
February 8, 1999

February 11, 1999
August 12, 1999
February 11, 1999
$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 highest 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\, 7.10St.
(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.
Recognized Bid
at a Single yield .••.•.••...• 35\ of public offering

~axi.um

Maximum Award •..•......•..•.•••• 35\ of public

o~fering

Receipt of Tenders:
Noncompetitive tenders .•...•. Prior to 12s00 noon Eastern Standard time on auction day
Competitive tenders .•..••..•. Prior to 1:00 p.m. Eastern Standard time on auction day
rayment Termsl By charge to a funds account at a Federal Reserve Bank on issue date, or payment
of full par amount with tender. TreasuryD1rect customers can use the Pay Direct feature which
authorizes a charge to their account of record at their financial institution on issue date.

D EPA R T 'I E :\" T

0 F

THE

TREASURY

T R F. A S {; R Y

NEWS

OFFICE OF PUBLIC A.'SAIKS -!SOO PENNSYLVANIA AVENUE, N.W•• WASHINGTON, D.C.e 10110 _ (10%) 611.1960

~GOED

aNTIL 2:30 P.M.

CONTACT:

February 4, 1999

Office of PinanciDg
202/219-3350

TREASURY OFFERS 13-WBEX AND 26-WEEK BILLS
The Treasury will auction two series of Treasury bills totaling
approximately $15,000 million eo refund $15,888 million of publicly held
securities maturing Pebrua.ry 11, 1999, and to pay down. about $888 million.
In addition to the public holdings, Federal Reserve Banks for their own
accouncs hold $7,534 ~llion of ehe macuring bills, which may be refunded at
the highest discount rate of accepced competitive tenders. Amounts issued to
these accounts will be in addition to the offering amount.
Tbe maturing bills held by the public include $3,063 million held
by Federal Reserve B~ks as agents for foreign and international monetary
authorities, which may be refunded within the offering amount at the highese
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 Pederal Reserve Banks and
Branches .~d at the Bureau of tbe Public Debt, Washi~gton, D.C. This offering
of Treasury securities is governed by the terms and conditions set forth in
the Uniform Offeri~g Circular for the Sale and Issue of Marketable Book-B~try
Treasury Bills, Noces, and Bonds (31 CFR Part 356, as amended).
Details about .each of the new securities are given in the attached offering
highlights.
000

RR-2936

P'

--

'

For press releases, speeches, public schedules fllJd o/flc;fll biog,,,phies. call (J'" 24-ho", fax line

fit (202) 622.2040

Also today, two statements were approved for wine labels. The two statements are:
•

"The proud people who made this wine encourage you to consult your family
doctor about the health effects of wine consumption."

•

"To learn the health effects of wine consumption, send for the Federal
Government's Dietary Guidelines for Americans, Center for Nutrition Policy and
Promotion, USDA, 1120 20th Street, NW, Washington, DC 20036 or visit its
WEB site : http://www.usda .gov/fcs/cnpp .htm

Alcohol beverage labels are approved by ATF to make sure they do not contain statements
or representations that are likely to mislead consumers about the product. ATF worked with
industry to modify their proposed statements to meet these criteria.
"Under existing law, ATF can only deny labeling statements if they are false or
misleading," said Treasury General Counsel Ed Knight. He said ATF determined that the labeling
statements approved today met the factual standards as not being false or misleading because
these statements do not make any health claim, but simply direct consumers to sources for
information about the health effect of alcohol consumption .
In an effort to determine consumers ' perceptions of the two statements, A TF relied on a
survey of current wine drinkers conducted by the Substance Abuse and Mental Health Service
Administration ' s Center for Substance Abuse Prevention, an office within the U .S. Department of
Health and Human Services. The findings indicate that for most of those who participated in the
study, drinking patterns would not be influenced by the message on the label.
-30-

DEPARTlVIENT

1REASURY

OF

THE

TREASURY

NEWS

omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASIllNGTON, D.C .• 20220. (202) 622-2960

FOR IMMEDIATE RELEASE
February 5, 1999

Contact: Office of Public Affairs
(202) 622-2960

TREASURY ANNOUNCES ACTIONS CONCERNING
LABELING OF ALCOHOLIC BEVERAGES
The Treasury Department and its Bureau of Alcohol Tobacco and Firearms announced
Friday three specific actions concerning the labeling of alcoholic beverages. The three were:

•

Treasury and ATF are launching an effort to develop legislation to strengthen its
authority over alcohol labels as a way of deterring alcohol beverage marketing
directed to underage persons and to prevent alcohol abuse. In doing so, it will
consult closely with HHS, industry and health groups.

•

ATF is publishing in the Federal Register a notice of proposed rulemaking
prohibiting alcohol beverage containers that mislead consumers about the alcohol
character of the product particularly those that appear to be marketed to underage
persons.

•

A TF approved two new statements for wine labels that had been requested by
wine producers, but only after modifications.

"Treasury is continuing its efforts to combat underage drinking and will work to
strengthen our authority to ensure that products are neither targeted at nor provided to minors,"
said Treasury Under Secretary for Enforcement James E. Johnson.
With regard to the legislation, Treasury will consider a number of options, including
whether to require the Government Warning Statement on alcohol beverage products be rotated
among different messages, and whether to require all alcohol advertisements to carry a
Government Warning Statement Treasury will also look at other legislative proposals to
strengthen its authority over alcohol marketing practices targeted at underage consumers or that
encourage alcohol abuse.
ATF is immediately seeking comment on a rule to stop the misleading packaging of
alcohol products, especially those that would be attractive to children. Examples of this would be
products that resemble frozen flavored ice products, gelatin products and non-alcoholic fruit
sodas and drinks.

-

-

RR-2937
FQr press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

ATF's review of314 criminal investigations, involving more than 54,000 fireanns, reveals
a wide variety of violations occurring at gun shows. Additionally, it showed that substantial
numbers of firearms associated with gun shows have been used in drug crimes, violent crimes and
have been passed illegally to juveniles.
The variety of weapons available at gun shows ranges from new and used handguns to
semiautomatic assault rifles to machine guns. In addition, vendors offer large capacity gun
magazines and machine gun parts for sale.
The Gun Shows report stemmed from the President's concerns that violent criminals and
illegal firearms traffickers could use gun shows to purchase weapons without background checks
and that crime guns bought at gun shows could not be traced by law enforcement. During the 60day review, Treasury and Justice officials analyzed existing federal and state laws and sought
input from ATF field offices, U.S. Attorney's offices, law enforcement organizations, trade
associations and a wide range of other groups. The input received from these sources reflected
diverse views, ranging from a preference for the status quo to a prohibition on all sales offirearms
at gun shows by anyone other than a federal firearms licensee.
The recommendations to the President add reasonable restrictions and conditions on
firearms transfers at gun shows, ensure that there are adequate resources to enforce the law and
educate sellers at gun shows of the legal consequences of illegal transfer of firearms. The report's
recommendations would:
•

Define gun shows to include flea markets and other events where 50 or more firearms are
sold by two or more individuals.

•

Require gun show promoters to register, notify ATF of all gun shows and maintain a list
of vendors at the show.

•

Require that all firearms transactions at gun shows be completed through an FFL. The
FFL would conduct a Brady check on the purchaser and maintain a record of the
transaction, allowing firearms recovered from crime scenes to be traced.

•
•
•

Provide additional resources for regulatory enforcement, investigation and prosecution to
combat the illegal trade of firearms at gun shows.
Establish a program for gun owners, educating them on how to sell or otherwise dispose
of their firearms without making them available to violent criminals, unauthorized juveniles
or other prohibited persons.
Provide for a review of the statutory definition of what constitutes being "engaged in the
business" of selling firearms

The Gun Sho:,s Report is available t~rough the Treasury Office of Public Affairs at (202)
622-2960 or the JustIce Office of Publtc AffaIrs at (202) 616-2777 or via the Internet at
\vw\v.atftreasgov by 10:30 a.n1. EST Saturday, February 6.
-30-

DEPARTMENT OF THE TREASURY

mepartment of justice
EMBARGOED UNTIL 10:30 AM EST
February 6, 1999

Contact:
Treasury Public Affairs (202) 622-2960
Justice Public Affairs (202) 616-2777

PRESIDENT CLINTON ACCEPTS GUN SHOW RECOMMENDATIONS
President Clinton today accepted the recommendations from a joint Treasury-Justice study
on gun shows that would require background checks for all sales of guns at these shows. The
President said in his radio address today he would support legislation adopting the
recommendations.
"America cannot allow its gun shows to become illegal arms bazaars, where lawbreakers
shop side-by-side with the law-abiding," said President Clinton. "That is why I strongly support
the recommendations of Secretary Rubin and Attorney General Reno. We must close the gun
show loophole: no background check, no gun, no exceptions."
The report, "Gun Shows: Brady Checks and Crime Gun Traces," directed by the President
in November and conducted by Treasury, Justice and the Bureau of Alcohol, Tobacco and
Firearms, is a comprehensive review of firearms transfers at gun shows.
'The report is clear evidence for the need to require background checks and to enable
crime gun tracing on all firearms sold at gun shows," said Treasury Secretary Robert E. Rubin.
"This is another step by this Administration to crack down on the supply of illegal firearms to
criminals, juveniles and gun traffickers."
The Brady Handgun Violence Protection Act, which requires federally licensed firearms
dealers (FFLs) to verify that prospective purchasers are not felons or other prohibited persons,
has prevented more than 250,000 illegal sales since 1994. Under current law, firearms can be
bought and sold by unlicensed sellers without background checks or any records maintained on
those purchases at the more than 4,000 gun shows that take place annually. At many gun shows,
unlicensed sellers make up one-quarter or more of all firearms sellers.
"We have a wonderful opportunity to close the gun show loophole by building on the
success of the Brady Act," said Attorney General Janet Reno. "In our larger quest to confront the
culture of violence in this country we should make sure that every gun purchase at a gun show is
subject to a background check. If we do so, felons and other prohibited purchasers will think
twice about trying to buy guns at gun shows."
RR-2938

J)

E P .\ H. T !\ I E ~ T

() F

1REASURY

TilE

T J{ E .\ S l i U \'

NEWS

OFFICE OF PUBUC AFFAIRS -UOO PENNSYLVANlAAV17MTRO' N W • WASIJn,'GTON DC 20"'''0
0''''''''''''' "
n..l.n
, . .•
u.

(20~)

622.2960

FOR IMMEDIATE RELEASE
Remarks as Prepared for Delivery
February 10, 1999

STA TEMENT OF TREASURY SECRETARY ROBERT E. RUBIN
I am pleased to be here today for the introduction of Representative John Lafalce's bill, which
represents a very significant and constructive development in the effort to enact financial services
modernization legislation.

Treasury has long believed in the benefits of financial modernization legislation but we have
also been clear that the job needs to be done right. The Lafalce Bill goes a long way toward that
goal
First, the Lafalce Bil1 takes the fundamental actions necessary to modernize our financial
system by repealing the anti-affiliation provisions of the Glass-Steagall Act and the Bank Holding
Company Act, thereby allowing commercial banks, investment banks, and insurance companies to
affiliate.
Second, the LaFalce Bill preserves the full relevance of the Community Reinvestment Act for
the 21st Century. The Administration believes that the any bank seeking to conduct new financial
activities should be required to achieve and maintain a satisfactory eRA record, as the Lafalce biH
does.

Third, the LaFalce Bill contains important consumer protection provisions designed to ensure
that customers of financial conglomerates clearly understand what they are buying.
Finally, the LaFalce Bill preserves the choice of banks to operate through subsidiaries or
affiliates or both, preserving the subsidiary option. The subsidiary and the affiliate are precisely
identical with respect to safety and soundness and the spread of the subsidy, except for in one respect
where the subsidiary is better for safety and soundness. It is for this reason why the current FDIC
Chair and three fonner FDIC Chainnen have endorsed the subsidiary approach. And there is an
important public policy purpose served by so permitting this choice of structure, including greater
safety.

RR-2939
1

---~------------------------------------------------------~-----------------------!or
presti releases1 speeches, public schedule& and official biographies, call our 24-hour fax line at (202) 622-2040

•

[0:

20009

From: TREASURY PUBLIC AFFAIRS

3-24-99 4:59pm

p. 34 of 35

No bill is perfect. and we do have serious concerns about the potential for affiliation between
commercial finns and depository institutions. But I believe this bill represents the best chance I have
seen in two years to build the bipartisan coalition that will be necessary to pass and sign into law
financial modernization Jegislation_
Other than this concern, we fully support the Lafalce bill and hope and expect to work with
Rep. LaFalce to reach consensus on financial modernization. My staff and I stand ready to provide
whatever assistance Rep. LaFalce would like. Thank you very much.
-30-

2

TIJTRL 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 DEBT - WASHINGTON DC

FOR IMMEDIATE RELEASE
February 08, 1999

CONTACT:

Office of Financing
202-219-3350

RESULTS

OF TREASURY'S AUCTION OF 13 -WEEK BILLS

Term:
Issue Date;

91-Day Bill
February 11, 1999
May 13, 1999

Maturity Dace:
CUSIP Number:

91279SBL4

High Rate:

4.420%

J~atel/:

Investment

4.531%

Price:

98.883

All noncompetitive and successful compecitive bidders were awarded
securities at the high rate. All tenders at lower rates were accepted in full.
Tenders at the high discount rate wer2 allotted
AMOUNTS TENDERED

.~

48~.

ACCEPTED (in thousands)

Tendered

Tender Type
Competitive
Nonccmpeticive

$

PUBLIC SUBTOTAL

23,004,754
1.386.186

Federal Reserve
Fo~eign Official Add-On

s

TOTAL

s

6,946,440

560,039

560,039

24,950,979

7,506,479

3,844,485
94,961

3,844,485

28,890,125

94.961
$

Median rate
4.400~: 50%- of the amount of accepted competi.:.ive
tenders was tendered a t: or below that rate.
Low rate
4.370~:
S~ of the amounc ot accepted competitive
tenders was tendered at or below that rate.
Bid-to-cover Ratio

=

24,390,940 /

6,946,440

3.51

1/ Equivalent coupon- issue yield.
RR-2940

5,560,254
1,386,186

24,390,940

Foreign Official Refunded
SUBTOTAL

Accepted

htlp:/lwww.publicdebLtreas.gov

11,445,925

-

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
IMMEDIATE RELEASE
~bruary 08,
1999

FOR

CONTACT:

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
February 11, 1999
August 12, 1999
912795CK5

Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:

4.420%

Investment Rate1/:

4.585%

Price:

97.765

All noncompetitive and successful competitive bidders were awarded
securities at the high rate. All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

46%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered

Tender Type
Competitive
Noncompetitive

$

PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
$

TOTAL

20,417,374
1,200,312

Accepted
$

21,617,686

5,039,903

2,473,761

2,473,761

24,091,447

7,513,664

3,690,000
419,639

3,690,000
419,639

28,201,086

$

Median rate
4.410%: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low rate
4.370%:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
Bid-to-cover Ratio = 21,617,686 / 5,039,903

4.29

1/ Equivalent coupon-issue yield.

http://www .pu blicdebt. treas.gov

RR-2941

3,839,591
1,200,312

11,623,303

NEWS

TREASURY

OffiCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W .• WASHINGTON, D.C. • 20220. (202) 622-2960

Weekly Release of U.S. Reserve Assets

February 9, 1999

The Treasury Department today released U.S. reserve assets data for the week ending
February 5, 1999.
As indicated in this table, U.S. reserve assets totaled $80,236 million as of February 5,
1999, down from $80,675 million as of January 29,1999.

u.s. Reserve Assets
(millions of US dollars)

1999

Total

Special

Resen'e

Week Ending

1/

Assets

Gold
Stock

\1

Foreign
C urrencles
.

Reserve
31

Drawing
R Ig ht S 21

ESF

SOMA

Position in
IMF 2/41

January 29, 1999

80,675

11,046

10,465

15,873

19,162

24,129

February 5, 1999

80,236

11,046

9,632

12,414

19,242

27,902

Gold stock is valued monthly at $42.2222 per fine troy ounce. Values shown are as of December 31, 1998. The

November 30,1998 value was $11,041 million.
2/ SDR holdings and the reserve position in the IMF are based on IMF data and revalued in dollar terms at the official
SDR/dollar exchange rate. Consistent with current reporting practices, IMF data for January 29, 1999 are final. Data for
SDR holdings and the reserve position in the IMF shown as of February 5, 1999 (in italics) reflect preliminary adjustments
by the Treasury to the January 29, 1999 IMF data in light of (a) the United States' p,1yment of its quota increase in the ilifF
and (b) U.S. sales of SDR to other IMF member countnes. (See supplemental note below.)
3/ Includes holdings of the Treasury's Exd1,lnge St,lbIllzation Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA). These holdings ,He v,llued at current market exchange rates or, where ,lppropriate, at sllch Olher rates J.S
may be agreed upon by the parties to the transactions.
4/ Includes SDR 361 million loan to the IMF under the General Arrangements to Borrow (GAB) 111 Juh· 1998, .1l1d an
SDR 619 million loan to the IMF under the New ArL111gements to Borrow (NAB) III December 1998.

Supplemental Note:
The declme m ESF forclgn exchange rcseruCl rejlects the Un !ted Stales' pll),7IlCnt 011 Fc!im,l/I' 3, 1')99 (I/Ihe re50·;'(' :1'5e:.~') rl I'm '.
the Increase m the us. qliOta zn the IMF III ,ucord:lJ1ce With procedures agreed!ry Ihe 1M! IIICIII/)(,15hIP, 25 perCCII! (I!',,:t! S37
bi/han eqUivalent) of the quota Increasc 1£',15 lIi111Sjcrred to the fMF 111 the foml ofresen'c ,/5,ct5 .. spCU[zC:l/1y, cums ill'/d :',y ti,c·
ESF. The remammg 75 percent was made avazlahle 1!l the forll! of all muease lIZ the /eller ojcredzt IssHed to the fAir !r, i/JC
Treasury's general account. The declme 1Il Sf)R ho!dzngs (approxmlatcly $864 lIZzi/lOll e(jlilva/cllt), reflew olllrz?,iJl 5.d,., ()fSUR

by the United States
RR-2942

lO

other IMF members.

HIGHLIGHTS OF TREASURY OFFERING
OF 65-DAY CASH MANAGEMENT BILL

February 9,

1999

Offering Amount . . . . . . . . . . . . . . . . . . . . . . . . . $8,000 million
Description of Offering:
Term and type of security . . . . . . . . . . . . . . .
CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Auction date . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturi ty date . . . . . . . . . . . . . . . . . . . . . . . . . . .
Original issue date . . . . . . . . . . . . . . . . . . . . .
Currently outstanding . . . . . . . . . . . . . . . . . . .
Minimum bid amount and multiples . . . . . . . .

65-day Cash Management Bill
912795 BJ 9
February 11, 1999
February 16, 1999
April 22, 1999
october 22, 1998
$22,979 million
$1,000

Submission of Bids:
Noncompetitive bids . . . . . . . . . . . . Accepted in full up to $1,000,000 at
the highest accepted discount rate.
Competitive bids . . . . . . . . . . (1) Must be expressed as a discount rate with
two decimals, e.g., 7.10%.
(2) Net long position for each bidder must
be reported when the sum of the total bid
amount, at all discount rates, and the net
long position is $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 11:00 a.m. Eastern Standard time on
auction day
Competitive tenders . . . . . . . . . . . . Prior to 11:30 a.m. Eastern Standard time on
auction day
Payment Terms . . . . . . . . . . . . . . . . . . . . By charge to a funds account at a Federal
Reserve Bank on issue date, or payment of
full par amount with tender.

OFFICE OF PUBLIC AFFAIRS. 1500 PENNSYLVANIA AVENUE, N.W .• WASHINGTON, D.C.. 20220. (202) 622.2960

EMBARGOED UNTIL 2:30 P.M.
February 9, 1999

Contact:

Office of Financing
202/219-3350

TREASURY TO AUCTION CASH MANAGEMENT BILLS
The Treasury will auction approximately $8,000 million of 65-day Treasury
cash management bills to be issued February 16, 1999.
Competitive and noncompetitive tenders will be received at all Federal Reserve
Banks and Branches. Tenders will not be accepted for bills to be maintained on the
book-entry records of the Department of the Treasury (TreasuryDirect).
Tenders will
not be received at the Bureau of the Public Debt, Washington, D.C.
Additional amounts of the bills may be issued to Federal Reserve Banks as
agents for foreign and international monetary authorities at the highest discount
rate of accepted competitive tenders.
The auction being announced today will be conducted in the single-price auction
format. All competitive and noncompetitive awards will be at the highest discount
rate of accepted competitive tenders.
This offering of Treasury securities is governed by the terms and conditions
set forth in the Uniform Offering Circular for the Sale and Issue of Marketable BookEntry Treasury Bills, Notes, and Bonds (31 CFR Part 356, as amended).
NOTE:
Competitive bids in cash management bill auctions must be expressed as
a discount rate with two decimals, e.g., 7.10%.
Details about the new security are given in the attached offering highlights.
000

Attachment

RR-2943

For press releases, speeches, public schedules llnd official biographies, call ollr 24-1I01ir fax line at (202) 622-2&4&

PUBLIC DEBT NEWS

- Department of the Tr~asury :Bureau of the Public Debt • Washington, DC 20239

TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE

rebruary 09,

CONTACT:

1999

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 5-YEAR NOTES

Series:

4 3/4%
E-2004

CUSIP No:
STRIPS Minimum:

9128275A6
$800,000

Interest Rate:

Issue Date:
Dated Date:
Maturity Date:

High Yield:

4.767\

February 16, 1999
February 15, 1999
February 15, 2004

99.925

Price:

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

from

14%.

Accrued interest of $
0.13122 per $1,000 must be paid for the period
February 1S, ~999 to February 16, 1999.
AMOUNTS TENDERED AND ACCEPTED (in

~hou6ands)

Accepted

Tendered

Tender Type

$

competitive
Noncompetitive

27,053,000
377,575

$

----------------27,430,575

PUBLIC SUBTOTAL

15,00:2,575
2,012,740

2,Ol2,740
800,000

Federal Reserve
Foreign Official Inst.

TOTAL

$

30,243,315

14,625,000
377,575

BOO,OOO
$

17,815,315

Median yield
4.745%: SOt of the amount of accepted competitive
tenders waS tendered at or below that rate.
Low yield

4.700%:

5% of the amount of accepted competitive

tenders was t.endered at or below that rate.
Bid~to-Cover Ratio ""

27,430,575 /

J.S, 002,575

1. B3

RR-2944
http://www.publicdebt.treas·eOl'

TOTAL P.Ol

-

PUBLIC DEBT NE\VS

-Departm eDt of the Treasury • Bureau of the Public Debt • WashiDgtOD, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
FOR IMMEDIATE RELEASE
~bruary 10, 1999

CONTACT:

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 9-3/4-YEAR NOTES
Interest Rate:
Series:
CUSIP No:
STRIPS Minimum:

4 3/4%
D-2008
9128274V1
$800,000
High Yield:

Issue Date:
Dated Date:
Maturity Date:

4.913%

Price:

February 16, 1999
November 15, 1998
November 15, 2008

98.735

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

11%.

This offering was announced on February 04, 1999, as a new 9-3/4-YEAR NOTES
of Series D-2008(CUSIP No. 9128275B4). The interest rate determined in
this auction matches that of an outstanding issue with the same maturity and
interest payment dates. ACCORDINGLY, THE SECURITY AUCTIONED TODAY WILL BE
CONSIDERED AN ADDITIONAL ISSUE OF THE 10-YEAR NOTES OF SERIES D-2008
~LY DESCRIBED ABOVE.
Accrued interest of $ 12.20304 per $1,000 must be paid for the period
November 15, 1998 to February 16, 1999.

from

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered

Tender Type
Competitive
Noncompetitive

$

PUBLIC SUBTOTAL
Federal Reserve
Foreign Official Inst.
TOTAL

$

20,391,100
62,414

Accepted
9,940,520
62,414

$

20,453,514

10,002,934

1,340,000
250,000

1,340,000
250,000

22,043,514

$

11,592,934

Median yield
4.884%: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low yield
4.830%:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
20,453,514 / 10,002,934 = 2.04 THIS 9-3/4-YEAR
BID-TO-COVER RATIO
4-3/4%- NOTE (CUSIP 912827 4V 1) MATURING 11/15/08 IS THE SAME SECURITY
TREASURY ANNOUNCED AS A REOPENING IN ITS 2/3/99 QUARTERLY FINANCING
ANNOUNCEMENT.
RR-2945

HIGHLIGHTS OF TREASURY OFFERINGS OF BILLS
TO BB ISSUED FEBRUARY 18, 1999

February 11, 1999
Offering Amount •.•••..•.•...•••........• $7,500 Ilillion

Description of Offering:
Term and type of security ••...•...•.•... 91-day bill
CUSIP number •....•.•.....•...••.•••.•... 912795 BM 2
AUction date . . . . . . • • . . . . . . . . . . • . . . . . . . . • February 16, 1999
Issue date •...........•..•..••...•..•..• February 18, 1999
Maturity date •..•.........•.•........... May 20, 1999
Original issue date •.••.•...•••.•.•..... November 19, 1999
CUrrently outstanding .•••...•.•••....... $11,880 million
Minimum bid amount and multiples •....... $l,OOO

$7,500 million
182-day bill
912795 CA 7
Pebruary 16, 1999
Pebruary 18, 1999
August 19, 1999
August 20, 1998
$15,756 million
$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 highest 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 10ng 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: By charge to a funds account at a Federal Reserve Bank on issue date, or payment
of full par amount with tender. TreasuryDirect customers can use the Pay Direct feature which
auth~rizes a charge to their account of record at their financial institution on issue date.

f)

F F .\ R T \ I f, :\ T

() F

T fl E

TREASURY

T R

j.: '\

S C 1-< Y

NEWS

OFFICE OF PUBLIC AFFAIRS elS00 'ENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C.e 20210. (20%) 6%2.2960

EMBARGOED UNTIL 2: 30 P.M.

CONTACT:

Pebruary 11, 1999

Office of Financing
202/219-3350

TREASURY OFFERS i3-WEER AND 26-WEBK BILLS
The Treasury will auction ewo series of Treasury bills toealing
approximately $15,000 million to refund $15,863 million of publicly held
securities maturing February 1.8, 1999, and to pay clown about $863 million.
In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $7,622 million of the maturing bills, Which may be refunded at
the highest discount rate of accepted competitive tenders. Amounts issued to
these accounts will be in addition to the offering amount.
The maeuring bills held by the public include $2.512 million held by
Federal Reserve Banks as agents for foreign and international monetary authorities. which may be refunded within the offering amount at the highest 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.

Tendera for the bills will be received at Federal Reserve Banke and
Branches and at the Bureau of the Public Debt, Washington, D.C. This offering
of Treasury securities is governed by the ter.ms and conditions set forth in
the uniform Offering Circular for ehe Sale and Issue of Marketable Book-Entry
Treasury Bills, Notes, and Bonds (31 CPR Part 356, as amended).
Details about each of the new securities are given in the attached offering highlights.
000

Attachment
RR-2946

-

For press releases, speeches~ public schedules and official biog,.aphiu. call OU7 24-hou7 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
FOR IMMEDIATE RELEASE
February II, 1999

CONTACT:

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 65-DAY BILLS
65-Day Bill
February 16, 1999
April 22, 1999
912795BJ9

Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:

4.48 %-

Investment Rate1/:

4.58 %

Price:

99.191

All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

47%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted

Tendered

Tender Type
Competitive
Noncompetitive

$

29,945,000

$

29,945,000

$

8,027,500

$

8,027,500

°

°

TOTAL

Median rate
4.46 %: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low rate
4.38 %:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
Bid-to-Cover Ratio

1/

=

29,945,000

I

8,027,500

3.73

Equivalent coupon-issue yield.

RR-2947

http://www.publicdebUreas.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
CONTACT:

FOR IMMEDIATE RELEASE
February 11, 1999

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 30-YEAR BONDS
Issue Date:
Dated Date:
Maturity Date:

Interest Rate:
5 1/4%"
Series:
CUSIP No:
912810FG8
STRIPS Minimum: $800,000
High Yield:

Price:

5.298%

February 16, 1999
February 15, 1999
February 15, 2029

99.282

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

32%".

Accrued interest of $ 0.14503 per $1,000 must be paid for the period
from February 15, 1999 to February 16, 1999.
AMOUNTS TENDERED AND ACCEPTED (in thousands)

-----------------

$

Competitive
Noncompetitive

Federal Reserve

20,443,001
61,043

-----------------

$

-----------------

20,504,044

10,009,444
1,340,000

1,340,000
-------------

$

----

21,844,044

-----------------

$

Median yield
5.279%: 50% of the amount of accepted compet~~ive
tenders was tendered at or below that rate.
5 220 0
5~0 of the amount of accepted competitive
.~:
tenders was tendered at or below that rate.

. Id
Low Yle

Bid-to-Cover Ratio

RR-2948

9,948,401
61,043

-----------------

PUBLIC SUBTOTAL

TOTAL

Accepted

Tendered

Tender Type

= 20,504,044 / 10,009,444

2.05

http://www .pu blicdebt. treas.gov

11,349,444

lREASURY

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 12, 1999

TREASURY SECRETARY ROBERT E. RUBIN
TESTIMONY BEFORE THE HOUSE COMMITTEE ON BANKING
AND FINANCIAL SERVICES

Mr. Chairman, Members of this Committee, I appreciate the opportunity to discuss the
Administration's views on financial modernization, including HR 10, and HR 665, introduced this
week by Mr. LaFalce.
Mr. Chairman, as we approach financial modernization legislation, the Administration's
overall objective has always been to do what best serves the interests of consumers, businesses
and communities, while protecting the safety and soundness of our tinancial system We will
support legislation that achieves those aims
Let me begin by noting that the U S financial system is stronger and more competitive
than ever. Abroad, the United States is dominant in investment banking and highly competitive in
other segments of financial services U S commercial banks are more competitive today than at
any time I can remember. The problem our financial services firms face abroad is more one of
access, than lack of competitiveness
Financial modernization is occurring already in the marketplace through innovation and
technological advances With the lessening of regulatory barriers, tinancial services firms are
offering customers a wide range of financial products Banks and securities firms have been
merging; banks are selling insurance products; and insurance companies are otTering products that
serve many of the same purposes as banking products -- all of which increases competition and
thus benefits consumers
Financial modernization will continue in the absence of legislation, but it can, with good
legislation, occur in a more orderly fashion Treasury has long believed in the benefits of such
legislation, but we have also been clear that if this is going to be done, it needs to be done right
RR-2949

---:---------------------------------------------------------------------------------For press releases, speeches, public schedules and official biographies, call our 24~Ollr fax line at (202) 622-2040
-------------------------------------------------------------------------------------

Let me also say that while we favor financial modernization legislation, it does seem to me that
when you look at the developments around the world over the last couple of years, and when you
look at the size of mergers here in the United States over the 'same period, there are legitimate
concerns about financial modernization with respect to economic concentration and systemic risk
Let me turn now to the bills before this committee. Both bills, HR 10 and HR 665, take
the fundamental actions necessary to modernize our financial system by repealing the GlassSteagall Act's prohibitions on banks affiliating with securities firms and repealing the Bank
Holding Company Act prohibitions on insurance underwriting. Beyond that, however, there are
significant differences between the two bills.
Today, I would like to focus on the Administration's concerns about HR 10. As you
know, the Administration would have vetoed HR 10 had it passed in the last Congress, and we
continue to oppose HR lOin its current form. We have three basic objections to this bill -- its
prohibition of the use of subsidiaries by banks, its weakening of the effects of the Community
Reinvestment Act (CRA), and its expansion without reform of the Federal Home Loan Bank
System.
First, the bill would prohibit financial services firms that include banks from conducting
new financial activities through bank subsidiaries -- and force them to conduct those activities
exclusively through bank holding company affiliates. Subsidiaries and affiliates are absolutely
identical with respect to the ability of a bank to transfer any subsidy that may exist in the bank.
And subsidiaries and affiliates are absolutely identical with respect to safety and soundness except in one respect, which I will discuss in a moment, in which subsidiaries are actually superior
with regards to banks' safety and soundness The LaFalce bill, which allows banks to conduct
merchant banking and securities activities through a subsidiary, contains the following rigorous
safeguards that produce this result
Every dollar a bank invests in a subsidiary would be deducted from the bank's
regulatory capital, just as is the case with every dollar a bank pays as a dividend to
its parent holding company for investment in an affiliate. A bank would have to be
well-managed and well-capitalized before and after such investment is deducted
from its capital and on an ongoing basis
A bank could not invest any more in a subsidiary than it could pay as a dividend to
its parent holding company for investment in an affiliate.
•

The rules governing loans from a bank to a subsidiary would be exactly the same
as they are for a loan from a bank to an affiliate.

Thus, there are no public policy reasons to deny the choice of a subsidiary; however, there
are four important policy reasons to allow that choice
2

First, financial services firms should, like other companies, have the choice of structuring
themselves in the way that makes the most business sense and this, in tum, should lead to better
service and lower costs for their customers.
Second, the relationship between a subsidiary and its parent bank provides a safety and
soundness advantage. Firms that choose to operate new financial activities through subsidiaries
are, in effect, keeping those assets available to the bank rather than transferring them outside the
bank's reach. If the bank ever needed to replenish its capital, the bank's interest in the subsidiary
could be sold solely at the behest of the bank. If the bank were ever to fail, the FDIC could sell
the bank's interest in the subsidiary in order to protect the bank's depositors and the deposit
insurance fund. For this reason, the FDIC, a neutral observer with a paramount interest in this
issue, its current chairman and three former chairmen -- two Democrats and two Republicans -have stated that the subsidiary option is actually preferable from the standpoint of safety and
soundness and protecting deposit insurance funds. I would also like to observe that currently,
under the Federal Reserve's jurisdiction, foreign banks underwrite and deal in securities through
subsidiaries in the United States, and US. banks conduct securities and merchant banking
activities abroad through so-called Edge Act subsidiaries
Third, to the extent that firms choose to operate through subsidiaries, the consolidated
assets of the bank will be larger than if these activities are conducted through affiliates, and that,
in tum, is favorable with respect to the Community Reinvestment Act.
Fourth, one of an elected Administration's critical responsibilities is the formation of
economic policy, and an important component of that policy is banking policy. In order for the
elected Administration to have an effective role in banking policy, it must have a strong
connection with the banking system. That connection is currently provided by the Office of the
Comptroller of the Currency, which regulates national banks. We believe if subsidiaries of
national banks cannot be used to engage in new activities, then gradually banks will gravitate
away from the national banking system, and this critical connection will be lost.
We also believe it is very important that the Federal Reserve Board maintain its strong
connection with the banking system. We believe that allowing banks the choice of conducting
non-bank financial activities, either through an operating subsidiary or an affiliate, serves the
purpose of having both the elected Administration and the Federal Reserve strongly involved in
banking policy
With respect to the subsidiary option, we support three additional steps.
First, we proposed last year -- and the LaFalce bill includes -- joint Federal ReserveTreasury rulemaking to define new financial activities. We believe that this arrangement would
promote consistency and would eliminate the potential for unhealthy competition or laxity in
defining new activities

3

Second, we favor functional regulation. We support provisions like those in the LaFalce
bill, making clear that securities and insurance regulators have the same jurisdiction over
subsidiaries as over affiliates.
Third, we have no objection to requiring the largest banks to retain a bank holding
company, thereby assuring the Federal Reserve a central supervisory role regardless of whether
the bank operates with affiliates or subsidiaries.
Our second major objection to HR lOis its effect on the Community Reinvestment Act.
CRA encourages a bank to serve creditworthy borrowers throughout communities in
which it operates. Since 1993, a greatly invigorated CRA has been a key tool in the effort to
expand access to capital in economically distressed areas and to make loans to rebuild low and
moderate income communities. In fact, since 1993, the number of home mortgage loans extended
to African Americans increased by 58 percent, to Hispanics by 62 percent, and to low- and
moderate-income borrowers by 38 percent, figures all well above the overall market increase.
We believe that any bank seeking to conduct new financial activities should be required to
achieve and maintain a satisfactory CRA record. The LaFalce bill includes that requirement,
which we support Although HR 10 requires a bank to have a satisfactory CRA record when it
commences new financial activity, it does not require that the bank maintain a satisfactory record.
If we wish to preserve the relevance of CRA at a time when the relative importance of bank
mergers may decline and the establishment of non-bank financial activities will become
increasingly important, the authority to engage in newly authorized activities should be connected
to a satisfactory CRA performance
Our third major objection to HR 10 relates to the Federal Home Loan Bank System. The
FHLB System is currently the largest issuer of debt in the world Last year, it issued
approximately $22 trillion in debt, and it currently has $350 billion in debt outstanding. Yet the
System uses little of its government-subsidized debt to further the System's home ownership
purpose. We recognize the desire of many Members to see the System lend more to community
banks. Indeed, we believe that the System should focus on such lending, not on using taxpayer
funds for arbitrage activities and overnight lending which currently constitute so much of its
activities. Changing this important System perhaps should be done separately. But if it is to be
addressed in this legislation, we believe changes in the FHLB System should occur only in the
context of comprehensive reform.
Let me mention briefly two other areas of HR 10 where we have concerns. First, we
believe that current law on bank insurance sales is pro-competition and pro-consumer and is
preferable to HR 10's provisions, especially with respect to establishing safe harbors and
restricting deference Second, although creating wholesale financial institutions may be an
appropriate step, we believe that developments in financial markets over the last year raise serious
concerns. We need to consider carefully the consequences of giving them certain of the same
benefits of the federal safety net for banks -- the payment system and the discount window, albeit
not deposit insurance - while subjecting them to diminished banking regulation.
4

Before concluding, I would like to say a few words about HR 665, the Lafalce bill. As I
announced on Wednesday, we support the LaFalce bill. The Lafalce Bill allows firms the
subsidiary option, preserves CRA, avoids anticompetitive restrictions on bank insurance sales, and
omits other provisions ofHR 10 that in our opinion do not advance the cause of modernization.
However, we support this bill with the caveat that we have serious concerns about the affiliation
between commercial firms and depository institutions which this bill would permit.
Mr. Chairman, let me reiterate: our nation's financial institutions are strong and highly
competitive, both here and abroad. In our view, financial modernization legislation can produce
significant benefits, but the job must be done right. We in the Administration look forward to
working with you and others in Congress to construct good financial modernization legislation
that serves the interests of consumers, businesses and communities, while protecting the safety
and soundness of our financial system. Thank you very much.

-30-

5

DEPARTMENT

OF

THE

TREASURY

NEWS

TREASURY

omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C.. 20220. (202) 622-2960

February 16, 1999

Weekly Release of U.S. Reserve Assets
The Treasury Department today released U.S. reserve assets data for the week ending
February 12, 1999.
As indicated in this table, U.S. reserve assets totaled $78,394 million as of February 12,
1999, down from $78,765 million as of February 5, 1999.
U.S. Reserve Assets
(millions of US dollars)

1999

Total

Special

Reserve

Week Ending

11

Assets

Drawing

Gold

Stock

II

Foreign
Currencies

Reserve
3/

R'Ig ht S 21

ESF

SOMA

Position in
IMF 2/.t1

February 5. 1999

78,765

I1J)46

9,852

12,414

19,242

26.21 I

February 12, 1999

78,394

1 J J)46

9,787

12.3 14

19,178

26. 068

Gold stock is valued monthly at $42.2222 per fine troy ounce. Values shown are as of December 31, 1998. The

November 30, 1998 value was $11,041 million.
2/ SDR holdings and the reserve position in the IMF are based on IMF data and rev,llued 111 dollar terms at the official
SDR/ dollar exchange rate. Consistent with curreI1l reporting practices, IMF data for Febru,llT 5, 1999 are fin,l1. D.na for
SDR holdings and the reserve position in the IMF shown as of February 12, 1999 (in italics) reflect preliminary
adjustments by the Treasury to the February 5,1999 IMF d,na in light of U.S. sales of SDR to other IMF member
countries.

(See supplemental note below.)

3/ Includes holdings of the Treasury's Exclun?,e St.lbiliz,nion Fund (ESF) and the Feder,ll Reserve's Sntem Open \hrket
Account (SOMA). These holdings are v,llued ,n current nurket exchange rates or, where ,1pproprute, ,n such other Lnes as
may be agreed upon by the parties to the tr,1I1S,lCllOl1S.
4/ Includes SDR 361 million lo,m to the IMF llndl'l the CeneLll l\rr,mgements to jj()Il()\\' (~"\B) in.llllv 1998, <lI1el ,m
SDR 619 million loan to the IMF under the New .'\rr<1l1?,e1l1ents t() Rorro\y (NAB) in Uelcmhl'l )998

S.upplemental Note:

For the week ended February 12, 1999, thc ch ..mgc Iii "DR. /:Jo/dw,I',5 rdazi..'c to thc pnor 1~cck rejicer' the Scl/C ujSDR to ,mothcr
IMF member. For the week ended Februar), 5, I Y9Y, I he/m,1! SDT? cllle! re5erVe p05ztlOn/i,l',IIrC5 sho:;'1/ v/!muc dl/jcr j)'OJl!
preVIOusly published estimates. The differcnccs rej7nl !/lorc reccntly en"I1/ablc dctads Oil, rC5p(,cli~C!\', SDR II/tcrcst rccczccd/rom
the 1MF and dollar mflows to the IMF from oliJn 1.\11 II/embers. In ,~cilcral, all Ilv!F IISC ojdu/I,ns reslI/ts l)) ,l/l IIlCYC,ISC li1 ;hc
U.S. reserve position, and an IMF recclpt ofdollars resli/ts m a decrc{HC.

RR-2950

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 16, 1999

CONTACT:

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF I3-WEEK BILLS
9I-Day Bill
February 18, 1999
May 20, 1999
912795BM2

Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:

4.440%

Investment Ratel/:

4.551%

Price:

98.878

All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

47%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted

Tendered

Tender Type
Competitive
Noncompetitive

$

PUBLIC SUBTOTAL

22,794,679
1,339,308

Federal Reserve
Foreign Official Add-On

7,078,484

430,100

430,100

24,564,087

7,508,584

4,111,564

4,111, 564
29, 900

29,900

$

TOTAL

28,705,551

s

Median rate
4.430%: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
5% of the amount of accepted competitive
4.330%:
Low rate
tenders was tendered at or below that rate.
Bid-to-cover Ratio
1/

= 24,133,987 /

7,078,484

3.41

Equivalent coupon- issue yield.

RR-2951

5,739,176
1,339,308

24,133,987

Foreign Official Refunded
SUBTOTAL

$

http://www.publicdebt.treas.gov

11,650,048

PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Deht •

Wa~hington,

DC 20239

TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:

FOR IMMEDIATE RELEASE
February 16, 1999

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 18, 1999
August 19, 1999
912795CA7

High Rate:

4.637%

Investment Rate1/:

Price:

97.740

All noncompetitive and successful competitive bidders were awarded
securities at the high rate. All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

52%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted

Tendered

Tender Type
$

Competitive
Noncompetitive
PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On

$

TOTAL

19,953,852
1,217,878

$

21,171,730

5,464,945

2,038,900

2,038,900

23,210,630

7,503,845

3,510,000
141,100

3,510,000
141,100

26,861,730

$

Median rate
4.460%: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low rate
4.340%:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 21,171,730 / 5,464,915
1/

3.87

Equivalent coupon-issue yield.

http://www.publicdebt.treas.gov
RR-2952

4,247,067
1,217,878

11,154,945

DEPARTMENT

OF

THE

TREASURY

NEWS

~~178~9~. . . . . . . . . . . . . . . . . . . .. .

......................

OffiCE 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 16, 1999

MEDIA ADVISORY

Treasury Secretary Robert E. Rubin will have a press conference in the Cash Room at the
Treasury Department on Wednesday, February 17, at 1100 am., to discuss the US. agenda for
Saturday's G-7 finance ministers and central bank governors meeting in Bonn, Germany.
Media without Treasury, White House, Defense, State or Congressional press credentials
planning to attend should contact Treasury's Office of Public Affairs at (202) 622-2960 with the
following information name, social security number and date of birth This information may be
faxed to (202) 622-1999. The Cash Room will be open for pre-set at 1000 am.
-30-

RR-2953

For press releases, speeches, public schedules and official biographies, call our 24--hour fax line at (202) 622·2040

lREASURY

NEWS

~8~9. . . . . . . . . . . . . ._

. . . . . . . . . . . . . .

OffiCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C.. 20220. (202) 622-2960

EMBARGOED FOR RELEASE AFTER PRESS CONFERENCE
Text as Prepared for Delivery
February 17. 1999

TREASURY SECRETARY ROBERT E. RUBIN
PRE G-7 PRESS CONFERENCE

This weekend. I will trawl to Bonn. Germany to meet with the Finance Ministers and
Central Bank Governors of the G-7. We will focus on two basic challenges: promoting grov-.1h
in the global economy. and continuing the effort to reform the international financial architecture
for the 21 st century.
We face a number of challenges in promoting grov.1h and recovery in the global
economy. With respect to the industrialized nations. while the most likely scenario for the
United States remains solid gro\\1h and 10\\ inflation. suhject to the usual ups and downs and the
risks of the global economy. we continue to belien? that the balance of risks in the glohal
economy has shifted_ and that highlights the importance of sound. gro\\1h-oriented policies in all
of the G-7 countries. I am sure we will he discussing hO\\ Japan and Europe plan to move
forward on gro\\1h in their economies. This is critical to the prospects for recowry in the
emerging economies.
It is also important hecause tht: intanational system cannot sustain indefinitely the large
current account imhalances created hy the disparities in gro\\1h and openness hetween the U.S.
and its major trading partners.

We will also review the major challenges bcing tht: t:mt:rging market economics and how
we can work to restore stahility and gro\\th. i->1any crisis and non-crisis countries have made real
progress in reform. and that has had positi\e effects - as in Korea and Thailand and in many noncrisis countries. Much \\ork. ho\\e\er. remains ahead in all countries. We will discuss Brazil's

RR-2954

-

-

Far press releases. speeches, public schedules and official biographies. call our 24-hour fax line at (202) 622-2040

progress toward putting in place the strong economic program necessary to restore confidence.
contain inflation and address its fiscal problems. We will also discuss Russia.
The second major focus for this weekend will be the global financial architecture. Our
approach is based on sustaining and reinforcing a market-based system for the global economy
that will be less susceptible to major instability and that will better deal with major instability
when it occurs.
Many of these issues are extremely complex. but an enormous amount of work has been
done and progress is being made in many areas. Development of final measures, including
analysis and international consensus, will phase in over time - in some cases quite extensive time
given the complexities of dealing with this new global economy. At this meeting I expect we
will be in a position to highlight progress we have made in two important areas.
First. we expect to reach agreement on improvements to the IMF's Special Data
Dissemination Standard that will significantly strengthen countries' reporting of their reserves
and related liabilities, key data for market assessment of a country's financial position. Had
these kinds of requirements been in place before the current crisis began in 1997. the flows of
capital might well have slowed at a much earlier stage, substantially reducing the severity of the
cnSlS.

Second. Bundesbank President Tietmeyer has been working on a proposal to establish a
Financial Stability Forum to improve policy coordination among national financial authorities.
the international financial institutions and international regulatory bodies. We look forward to
discussions this weekend on an approach we can all endorse.
For the United States. an important goal of this meeting is to continue to advance the
discussion in a broad range of other areas where the thinking and in some cases practice have
continued to develop in the months leading up to the Cologne Summit in June. This is all in
accordance with the full framework set forth in the October 30 statements of the Leaders and of
the Finance Ministers and Central Bank Governors. [n that context, to continue the international
inclusiveness in the architecture work that began with the Special Meeting of Finance Ministers
and Central Bank Governors from a number of countries a year ago. we expect to reach
agreement in Bonn to conduct two key meetings over the next few months for a broad range of
industrial and emerging economies. Germany would host the first meeting in mid-March, and we
would host the second in the U.S. in April.
Let me conclude by emphasizing how important the G-7 process is in dealing with current
economic challenges and issues and to these efforts to strengthen the international financial
system. We look f~rward to working with OLlr German colleagues as host of this meeting and
this year's summit and with the other G-7 countries. both on the immediate issues and in on the
architecture.
-30-

HIGHLIGHTS OF TREASURY OFFERING TO THE PUBLIC OF
2-YEAR NOTES TO BE ISSUED MAR9 H 1, 1999
February 17, 1999
Offering Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,000 million
Description of Offering:
Term and type of security • . . . . . . . . . . . . . . . .
Series . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CUSIP number . . . . . . . . . . . . . . . . . . . . . . . . . . ·.·.
Auction date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issue date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ·.
Dated date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maturity date . . . . . . . . . • . . . . . . • . . . . . . . . . . ·.
Interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest payment dates . . . . . . . . . . . . . . . . . . . .
Minimum bid amount and multiples ..........
Accrued interest payable by investor ......
Premium or discount . . . . . . . . . . . . . . . . . . . . . . .

2-year notes
V-2001
912827 5C 2
February 24, 1999
March I, 1999
February 28, 1999
February 28, 2001
Determined based on the highest
accepted competitive bid
Determined at auction
The last calendar day of August and
February through February 28, 2001
$1,000
Determined at auction
Determined at auction

STRIPS Information:
Minimum amount required . . . . . . . . . . . . . . . . . . . Determined at auction
Corpus CUSIP number . . . . . . . . . . . . . . . . . . . . . . 912820 DR 5
Due date(s) and CUSIP number(s)
for additional TINT(s) . . . . . . . . . . . . . . . . . . Not applicable
Submission of Bids:
Noncompetitive bids:
Accepted in full up to $5,000,000 at the highest
accepted yield.
Competitive bids:
(1) Must be expressed as a yield with three decimals, e.g., 7.123%.
(2) Net long position for each bidder must be reported when the sum
of the total bid amount, at all yields, and the net long position
is $2 billion or greater.
(3) Net long position must be determined as of one half-hour prior to
the closing time for receipt of competitive tenders.
Maximum Recognized Bid 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: By charge to a funds account at a Federal Reserve Bank on
issue date, or payment of full par amount with tender.
TreasuryDirect
customers can use the Pay Direct feature which authorizes a charge to their
account of record at their financial institution on issue date.

DEPARTMENT

OF

THE

TREASURY

NEWS

TREASURY

OFFICE OF Pl'BLlC AFFAIRS I 1500 PEl"NSYLVANIA AVENl'E, l".W. I WASHINGTON, D.C.I 20220. (202) 622.2960

EMBARGOED UNTIL 2:30 P.M.
February 17, 1999

CONTACT:

Office of Financing
202/219-3350

TREASURY TO AUCTION $15,000 MILLION OF 2-YEAR NOTES
The Treasury will auction $15,000 million of 2-year notes to refund
$29,259 million of publicly held securities maturing February 28, 1999, and
to pay down about $14,259 million.
In addition to the public holdings, Federal Reserve Banks hold $2,571
million of the maturing securities for their own accounts, which may be
refunded by issuing an additional amount of the new security.
The maturing securities held by the public include $4,811 million held
by Federal Reserve Banks as agents for foreign and international monetary
authorities. Amounts bid for these accounts by Federal Reserve Banks will
be added to the offering.
The auction will be conducted in the single-price auction format.
All
competitive and noncompetitive awards will be at the highest yield of accepted
competi ti ve tenders.
The notes being offered today are eligible for the STRIPS program.
Tenders will be received at Federal Reserve Banks
the Bureau of the Public Debt, Washington, D. C. This
securities is governed by the terms and conditions set
Offering Circular for the Sale and Issue of Marketable
Bills, Notes, and Bonds (31 CFR Part 356, as amended).

and Branches and at
offering of Treasury
forth in the Uniform
Book-Entry Treasury

Details about the new security are given in the attached offering
highlights.

RR-2955
Attachment

000

------------------------------------------------------------~------------~~--~-----For press releases, speeches, public schedules and official biographies, call our 24-"0Ilr fax Iille at (202) 622-2040

----------------------------------------------------------------------------------------

DEPARTl\1ENT

OF

THE

TREASURY

NEWS

TREASURY

OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W .• WASIllNGTON, D.C .• 20220. (202) 622-2960

FOR IMMEDIATE RELEASE
February 18, 1999

Contact: Public Affairs
(202) 622-2960

MEDIA ADVISORY
The Treasury Department will convene two simultaneous panel sessions on Thursday,
February 25, at 3:30 p.m., as part of Vice President AI Gore's conference on official corruption,
"A Global Forum on Fighting Corruption: Safeguarding Integrity Among Justice and Security
Officials," February 24 - 26, 1999.
A panel discussion on procurement officials will take place in the Cash Room and a panel
discussion on financial regulators will take place in the Diplomatic Reception Room at the
Treasury Department.
DATE:

Thursday, February 25, 1999

TIME:

3:30 p.m.

PLACE:

Cash Room -- Pallel on Procurement Officials
Diplomatic Reception Room -- Pallel on Financial Regulators
Main Treasury
1500 Pennsylvania Avenue, NW

LOGISTICS:

Media without Treasury, White House, Defense, State or Congressional
press credentials planning to attend should contact Treasury's Office of
Public Affairs at (202) 622-2960 with the following information: name,
social security number, and date of birth. This information may be faxed to
(202) 622-1999 Each room will be open for pre-set at 230 p m.

-30-

RR-2956

-

~or press releases, speeches, public schedules and official biographies, call Ollr 24-1lOllr fax line at

(202) 622-2040

TREASURY INFLATION-INDEXED SECURITIES
R.. CPI Ind . . . . ReI'ol 'or .
Marcil

I

'.'111 Nohl

t.,

I--W% 6-VIUNol'l
Sette, J·200z

~'" ,t-VI,r NOI"

Sill,. MOOt

3-611,. »y.., 80nd.
10_ aI April 2012.

II2I272M1

~121213A1

Ol1alnlllll. . Dale:
ActdHlonallllul D,":

Jenuary IS, ltt'
Febr\lUV I, 1187
April II, 1187

July Ii, 1897
JuJr 1', 18117
Oclober IS, lin

IIUW3T7
January 16, 18111
Januaty I., 1MB

Aprl'",
...
AprVIS,18N

O~ober IS, ' " '

Jllir II. . . .

.. atu.ltr Dati:

Jlnuary 15, 2007

Jul~

Jlllua" I', lO01

A" CPI on DIIN DIlle:

1& • .,.Q, ••

Apr1l115.ZOU
181,7....

8lCurlly:
DNcrlpllon:

8.,1" A·2007

CUIIP Number:
Oll",~:

s-M'l6.

Dat.
March
Marcil
Marc.
Mllc.
Mlrcll
MI.c;h
"arch
March
Mlrcll
MlrcII
Mlrell
Mllell
MI.ell
Mlfch
Mlrch
Mlrcll
Mlreh
Mlfcla
Mil cia
M•• cll
M.rell
March
"'Irch
Mlrell
Mucll

Much
.... cia
""cll
Mllcll
MIlch
MInlh

A" CPI

Ind •• Allio

1te'

113,Il0000

1m
111M

1113,tl2I1D
lIU2 ...

IM441
1.oJ.!!'

113.831171
161.'&111

10

111M
1811.
111111
IIl1i
ltell
11181
I lite

11

19M

12
13

111111
lelle
111111
11118
11111
111"
11 lie

1i4.02IOJ
114.041M
1'-4.05484
104.01774
IllUMes
16UaG45

I
2

a

•
,
I
I

••

14
15
16

17

"

1113.11m2

I DUGan
1I4.016U

20
21

11188
'tell
111811

114.111135
114.13221
114.1451'
184.161Ot
164,17"7

U

n ..

1&4.'~7

14
H
It
'11

111"
IIiN

114.111177
'5 •• 201111'
184,'12261
184.2.1541
11420113.
11428128
184.'11411
114.21710

ZI
28

so
31

18118
I til 8
1"11
1NII
, . . 11

CP'·U (NSA) tor :

I.onu

'1 •. l0Ut

110.

net

1.03482
1.03490
'.03'"
1.03&01
I.oJSI.

lA .... U
IN.fflU

11

12

I.N4I1
UCM73

Novemb,r lilt.
--_.

---

Index RIUo

.... R.tlo

lome

1.01452
1.01400
101461
10147.
11)'484
'.014112
1.o'6()O
1.0110.
1.01611
10ln4
1.01611
1.015)11
1.01541
IOU65

1.01336

1.02347
1.02355
'.02353

l.oa3n
1.02378
1.02317

lom5
1D24OJ
1 02.,1

1.0341.

I.03a~

I~I

1.00571
1.00nll

10:146.
1.02417
1.024711
1.02483
1.12482

1.03611

'.0350.
1.03111
1,00620
1.0082.
1.0063.
l.OG•• 1I

l'U6484

Ind•• R.tlo

101»30
1.0»38
1.03S47
1.03&6$

1.0'»17

1.02427
1.O~36

102443

1.01351
1.01'67
1.01375
1.G13W
un.1
U13911
Ul407
10 .....
ImU3
Ul1'li

UI41.
UI .. 7
U ... "
1.01463
U,471
1.D1471

1.01n.
1.01617
1.011111
1.AI1103

, . ' .. 7
1.....118
UM03
loOn ..

1 OUI I
1.01'18

U~O

U36"
UIJIIH

,.OUU

10'''7

1.03en
1036"
1.03683

1.00S64
102612
1.02610

101111

o.c.mboll I lite

Ut3~

UI3I1

""~
101111

1.02.501
, 02611
1.02624
1.02&32
1.02140
U2S4e

1.oaln

' ... 0

15, 2002
'60.164&4

tlIIIC1fD5

1,OIU7
1.01138
1.01643
1.01161

1.01,,'
,..,1117
"I~

I QII6.

"'''43
l.ousl
Ulnll
t.DIM7
'.01115

I olen
UIUI

ItU

JIIIUUJ Inll
- - -

16403

-

PUBLIC DEBT NE\VS
DepartmeDt of the Treasury • Bureau of the Public Debt • WashiDgtOD, DC 20239

FOR WMEDlATE RELEASE
February 19, 1999
.

Contact: Office of Fmancing
(202) 219-3350

.

TREASURY'S JNFL..rtION.INDEXED SECUlUTIES
MARCH REFERENCE CPI NUMBERS AND DAILY INDEX RATIOS
Public Debt announced today the reference Consumer Price lodex (CPI) numbers and daily
index ratios for the month of March for the following Treasury inflation-indexed securities:
(1) the 3-3/8% IO-year notes due January IS, 2007, (2) the 3-5/8% 5-year notes due July 15,2002,
(3) the 3-5/8% 10-year notes due January 15,2008, (4) the 3-5/8% 30-year bonds due April 15.
2028, and (5) the 3-7/8% 10-year notes due January 15,2009. This information is based on the nonseasonally adjusted U.S. City Average All Items Consumer Price Index for All Urban Consumers (CPI-V)
published by the Bureau of Labor Statistics of the U.S. Depamnent of Labor.

In addition to the publication of the reference cpr s (Ref CPI) and 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 Affairs automated fax
system by calling 202-622-2040 and re~ting document number 2957. The information is
also available on the Internet at Public De~t's website (http://www.publicdebt.treas.gov ).
The information for April is expected to be released on March 18. 1999.

000
Attachment

T

RR-2957

http://www.publicdebt-treas.gov

TREASURY "FLA1ION·tNDEXEO SECURIl1E8

Aef CPI end Ind•• nl'loa fo,
March 199$

to-v.., Not..

&.cvrttr.

'·1/~

DlltltpUon:

SwJe.A~

CUSIP Numbe.:

81 28214Y1
January 1" taa,

Oat.dD.,.:
Orlglnll'"ue Da\le:
~ddldon.""ue

January IS, ' " '

Dew:

J.nu.ry 15, 200'

M.turlly Dall;
CP' on Da',d Date:

R.,

Dete

"'ercn

1

Mlreh
M.rct.
MlI'ch
M"e"
....'eh
.... 'ch

I
I

"'eroll
Mardi
Mud.
Mire"
Merch
.... 'cl1
MIlICh
""tch

MI"h
Mlldl
Mucll
M.rch
Mlft:h
Mlreh
"Ireh
MlroII
Mlrdl
Mllell
MlfCb

MarCil
M.ft:II
Ulft:h
Mlreh
M.rch

4
I

...

,,.,,,

1M'
lilt.
"lIg
11""

• ,"'
• 'HI
7

t
10

"

12
13

,.

15
II

n

"

11

20

11
22

23
14
U
It
rT

21
2.

ao

"

18 •. 00000

A"CP'

,,"'0000
'03.1'2110
leUU81

IOU0171
1&lle,.,
l~ee4$2

0."".
'.00002
1.00010
'.000"
'.000211
1000l'
l.OCl041
1.00048
1.000&7
1.000G6
'.oD078

18.05484
184.1)1714
tSU60GO
114.083511

UI"I
,.9a
1181

,...
,'"
,.,.
UN

'811'

ttaa

...

""
,
'"'

,Nt
IBM

CPH.! (MSA) for :

0.118810
0.8197'

o....ea.

1m
1891

111911

o.tll'~

113.18032
1eUo:n3

'84..0'11'
1U 02eoJ

tllll8

O.tUst
0 ... 841
lIMINe

1&3.ffiU

lett
1111'
!tile
11111

,",

'nete. nillo

184.041 ...

''''.11801
'.'0841

,.ooon

164.11321
lG4.1451'
184.lIeOI
1114.170117

1.000111
1.00ON
1.00'04
'.00112
'.00120
1.00121
100tsl
'.00144
1.00161
1.001"
toOte7

1'U~'7

114. 18m
184.20"'
" •. 22261
"4231141
114.2413.

184.2.61211
164..27411

1.00 no

,6Ul7I0

NoVtmber , ...

I

114.0

D.cemller 1_

taU

"-*"Y 1...

leu
------

HIGHLIGHTS OF TREASURY OFFERINGS OP BILLS
TO BB ISSUED rSBROAR~ 25, 1999

February 18, 1999
Offering Amount •••••...•••..•.•.•...••.• $7,500 million

DesQription of Offeringl
and type of security .......••..•..• 91-day bill
CUSIP number •.•....•......•.•••.•••.•... 912795 BX 8
Auction date •..••....•....•••..•••....•. February 22, 1999
Iasue date ••..•••••....••.•••.•.•...•.•. February 2S I 1999
Maturity date •••••.....••••••.•.••..•••. May 27, 1999
Original issue date ........•.••.•....... May 28, 1998
Currently outstanding ..•..•.•.•.•••.•... $27,158 million
Minimum bid amount and multiples ••...... $1,000

Te~

$7,500 million

182-day bill
912795 CL 3

February 22, 1999
Pebruary 25, 1999
August 26, 1999
February 25, 1999
$1,000

The following rules apply to all securities mentioned above:
Sybmission of Bids:
Noncompetitive bids ..•.••.... Accepted in full up to $1,000,000 at the highest 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 Bum
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
It a Single yield ............ 35\ of public offering
Haximum Award ••.•..••...•....•.. 35\ of public offering
Receipt of Tenders:
Noncompetitive tenders ......• Prior to 12:00 noon Eastern Stan~ard ti~e on auction day
competitive tenders ....•...•. Prior to 1:00 p .•. Eastern standard time on auction day

By charge to a funds account at a Federal Reserve Bank on issue date, or payment
TreasuryDlrect customers can use the Pay Direct feature which
authorizes a charge to their account of record at their financial institution on issue date.

Payment Termsl

ot full par amount with tender.

orne.£ OF PUBLIC At-rAJRS e1S00 Pt:NNSYLVANIA AVENUE, N.W•• WASHINGTON. D.C •• 10210. (201) 622·2960

s

EMBARGOBD UNTrL 2: 30 P. M.
February 18, 1999

CONTACT:

Office of Financing
202/219-3350

TREASURY OFFERS I3-WEEK AND 26-WEBK BILLS
The Treasury will auction two series of'Treasury bills totaling
$15,000 million to'refund $15,285 million of publicly held
securities maturing Pebruary 25, 1999, and to pay down about $285 million.

approx~tely

In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $7,688 million of the matur~g bills, which may be refunded at
the highest discount rate of accepted competitive tenders. Amounts issued to
these accounts will be in addition to the offering amount.

The maturing bills held by the public include $3,019 million held by

Federal Reserve Banks a& agents for foreign and ineernatioDal monetary authorities, which may be refunded within the offering amount at the highest discount
rate of accepted competitive tenderg. Additional amounts may be issued for
such accounts if the aggregate amount of new bids exc •• ds 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 see forth in
the Oniform Offering Circular for the Sale and Issue of Marketable Book-Entry
Treasury Bills, Notes, and BOOQS (31 CPR part 356, as amended).
Details about each of the new securities are given in the attached offering highlights.
000

RR-2958
?

For P'I~S '~/~as~s, sp~uhes, public schedules and official biographies, call ou, 24-hour fax line III (202) 622-2040

o

EPA R T 1'1 E N T

0 F

THE

T REA S II R '"

NEWS
omCE OF PUBliC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C•• 20220. (202) 622-2960

FOR IMMEDlA TE RELEASE
February 17, 1999

Contact: John Longbrake
(202) 622-2960

TREASURY STATEMENT ON DRAFT FINANCIAL SERVICES LEGISLATION

Yesterday Senator Gramm released for comment draft legislative provisions and
proposals. In our view, the draft package, if enacted, would weaken the Community
Reinvestment Act, which encourages banks and thrifts to serve creditworthy borrowers
throughout their communities. eRA is working well. We believe strongly that it is important
to maintain eRA, and we continue to oppose efforts to weaken eRA.
The draft bill released yesterday would diminish banking regulators' current ability to
review a financial institution's eRA performance when assessing mergers or acquisitions. In
addition, financial institutions would not be required to achieve or maintain an adequate eRA
rating in order to conduct new financial activities. Further, we have concerns about a proposal
to make certain activities criminal.
Although the draft bill recognizes that giving fmancial institutions a choice of structure
between affiliates and subsidiaries is appropriate and consistent with safety and soundness, it
limits that choice to community banks. Financial modernization must provide all banks access
to the advantages that the subsidiary structure offers for safety and soundness as well as
efficiency.
The draft package also includes a proposal that would dramatically expand the mixture
of banking and commerce. At a time when recent events in financial markets give reason for
caution about mixing banking and commerce, these provisions would head in the wrong
direction.
Finally, the draft package includes a proposal that would expand the Federal Home
Loan Bank System without addressing the need for comprehensive reform of the system.
These and other draft provisions and proposals raise serious concerns and are
unacceptable in their current form. We look forward to continuing our work with Congress on
a financial modernization bill that serves the interests of consumers, businesses and
communities, while protecting the safety and soundness of our financial system.
-30
Fur press releases, speeches, public schedules and official biographies,

can

OUT

24-hour fax line at (202) 622-2040

DEPARTMENT

OF

THE

TREASURY

NEWS
OFFICE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON. D.C. - 20220 - (202) 622-2960

FOR HvfMEDIATE RELEASE
February 19, 1999

Contact: Dan Israel
(202) 622-2960

TREASURY MOVES TO COMPLY WITH SDDS

The Treasury Department announced today two additions to its statistical reporting,
motivated by the HvlF's Special Data Dissemination Standard (SODS) First, monthly data on the
gross foreign claims and liabilities of the banking sector are published on the Internet at
www.ustreasgov/tic. Data are available on a global basis and for specific regions The quarterly
Treasury Bulletin also includes data on gross foreign claims and liabilities (Table CM 1-4 for
liabilities and Table CM II-3 for claims) A notice that monthly data are available on the Internet
will be included in future editions of the TreaslllY Bulletill. Second, a maturity breakdown of
total outstanding central government debt will be published in future releases of the Monthly
Statement of Public Debt. Currently, a maturity breakdown is published only for marketable
securities.
Data as of January 31, 1999 are as follows.

Maturit~·

Breakdown of Total

Outstandin~

Debt

($ millIons)

Short-Term Debt

Treasur; Bills

662,725

Nonmarketable

259,066
921,791

Total Short- Teml Debt

(Cont)

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---------------------------------------------------------------------------------For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
----------------------------------------------------------------------------------

Maturity Breakdown of Total Outstanding Debt
($ millions)

Long-Term Debt II
Marketable
Treasury Notes

1,976,869

Treasury Bonds

653,209

Tota! Marketable

2,630,078

Nonmarketable

2,016,194

Total Long-Terrn Debt

4,646,272

Grand Total Outstanding Debt 12

5,568,063

11 Maturity of over one year.
21 Tota! is for public debt securities. Does not mclude agency securities, which cannot be broken dov,n
by maturity. However, these represent less than I % of total outstanding debt of the federal government.

The SDDS was established in 1996 to provide guidance on the dissemination of economic
and financial data for countries that have, or that might seek, access to international capital
markets. The United States is a subscriber to the SDDS.
-30-

DEPARTMENT

OF

THE

TREASURY

NEWS

TREASURY

OFFICE OF PUBUC AFFAIRS. 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960

FOR IMMEDIATE RELEASE
February 19, 1999

Contact: Office of Public Affairs
(202) 622-2960
MEDIA ADVISORY

Treasury Under Secretary for Enforcement James E. Johnson will announce the latest
results of the Youth Crime Gun Interdiction Initiative on Sunday, February 21 at 1:30 p.m. in
Room 3327 of the Treasury Department.
Media without Treasury, White House, Defense, State or Congressional press credentials
planning to attend should contact Treasury's Office of Public Affairs at (202) 622-2960 with the
following information: name, social security number and date of birth. This information may be
faxed to (202) 622-1999. The room will be open to pre-set at 12:30 p.m.
-30-

RR-2961

Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

DEPARTMENT

OF

J'UE

TREASURY

NEWS

~178~9~. . . . . . . . . . . . . . . . . . . . . . . . . . . .. .

..............................

OmCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C .• 20220. (202) 622-2960

FOR IMMEDIATE RELEASE
February 21, 1999

Contact: Office of Public Affairs
(202) 622-2960

TREASURY RELEASES LATEST CRIME GUN TRACES
The Treasury Department announced Sunday the latest results of President Clinton's
Youth Crime Gun Interdiction Initiative (YCGII), a program which has traced over 76,000 guns
used in crime in 27 cities and has led to the investigation and arrest of hundreds of illegal firearms
traffickers supplying juveniles and criminals. And President Clinton announced his intention to
expand the YCGII program to ten additional cities and has included $11. 2 million to fund the
expansion in the Administration's budget request.
YCGII, a collaborative program among Treasury's Bureau of Alcohol, Tobacco and
Firearms (ATF), state and local law enforcement and prosecutors, was initiated by President
Clinton in a July 8, 1996, directive to Secretary Robert E. Rubin and Attorney General Janet
Reno to establish a program to identify and reduce the illegal supply of firearms to juveniles.
YCGII was developed in response to the tripling of the juvenile firearms homicide rate from
1985-1994. While youth violence is declining nationally, it is still historically high.
"With more police on the streets and tougher gun laws on the books, crime has dropped to
its lowest level in a generation," said President Clinton. "But, we must do more. Today's report
shows that tracing crime guns to their source and putting gun traffickers out of business for good
will make our streets even safer."
The report confirms that over 25 percent of guns recovered by law enforcement in the 27
cities are moving rapidly from retail sale to point of recovery by law enforcement. ATF
investigative experience shows that such fast "time to crime" guns are likely to have been
trafficked.
"The Brady Law has been successful in stopping felons from buying handguns at the point
of retail purchase," said Secretary Rubin. "This program is successfully focusing attention on
illegal gun markets operating through the back door."
A complementary report sent to Congress last week, "YCGII Performance Report,"
summarizes findings from 648 illegal firearms trafficking investigations nationwide involving
juveniles and youth and nearly 27,000 firearms. ATF investigations confirm that new, used and
stolen firearms are being trafficked.
___~RR~-~2~96~2~_____________________________________________________________________~____~___

---

For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

-

ATF investigations show that there are many illegal trafficking sources. They include
straw purchasing rings, individual straw purchasers, trafficking in stolen fireanns, trafficking by
licensed federally licensed fireanns dealers and unregulated private sellers at gun shows and
elsewhere.
"Through this program, we have been able to provide law enforcement with new tools to
identifY, investigate and incarcerate the criminal behind the criminal -- the illegal gun trafficker,"
said Under Secretary for Enforcement James E. Johnson.
Other findings of the Youth Crime Gun Interdiction Initiative report and the Perfonnance
Report include:
•

Among possessors of guns used in crime, over 11 percent were juveniles (ages 17 and
under) and over 32 percent were between ages 18-24.

•

Semiautomatic pistols clearly predominate among guns recovered in crimes in each city
and constitute 52 percent of all trace requests.

•

Over one third of the traffickers involved in the illegal trafficking investigations had prior
felony convictions.

•

In eight of the 27 cities, an average of 11.4 percent of traced handguns had obliterated
serial numbers, showing awareness of ATF's firearms trafficking enforcement program.

The 27 cities included in the YCGn report are Atlanta, Baltimore, Birmingham, Boston,
Bridgeport (CT), Chicago, Cincinnati, Cleveland, Detroit, Gary, Houston, Inglewood (CA),
Jersey City, Los Angeles, Memphis, Miami, Milwaukee, Minneapolis, New York, Philadelphia,
Richmond, Salinas (CA), San Antonio, St. Louis, Seattle, Tucson and Washington, D.C.
The new cities announced by the President are Charlotte, Dallas, Denver/Aurora,
Louisville, New Orleans, Oakland, Omaha, Phoenix, Portland and Tampa. The Administration's
total Fiscal Year 2000 budget request for the Youth Crime Gun Interdiction Initiative is $45.2
million for additional A TF agents and tracing resources.
The report on the Youth Crime Gun Interdiction Initiative and accompanying Performance
Report are available through Treasury's Office of Public Affairs (202) 622-2960 or via the
Internet at www.atftreas.gov after 1:30 p.m. EST Sunday, February 20.
-30-

DEPARTMENT

OF

THE

TREASURY

..

1REASURY fg)
•

NEW S

17SQ

OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C.. 20220. (202) 622-2960

FOR IMMEDIATE RELEASE
Remarks as Prepared for Delivery
February 22, 1999

"STRENGTHENING THE CREDIT UNION SYSTEM: A HALFTIME REPORT"
ASSISTANT SECRETARY OF THE TREASURY (FINANCIAL INSTITUTIONS)
RICHARD S. CARNELL
REMARKS BEFORE THE CREDIT UNION NATIONAL ASSOCIATION
GOVERNMENTAL AFFAIRS CONFERENCE
WASHINGTON, D.C.

I appreciate the opportunity to speak to you this morning about issues involving credit
umons.
Much has happened over the past year. When I spoke to last year's Government Affairs
Conference, the Treasury's study of credit unions had been public for only a couple of months And
the legislative battle for H.R. 115) had barely begun
Since then, you won that battle. Congress passed H.R. 1151 and the President signed it into
law That legislation enacted much more flexible field-of-membership rules than the Supreme Court
had allowed in the AT&T case
The legislation also included the most significant
safety-and-soundness reforms since the establishment of the National Credit Union Share Insurance
Fund in 1970 Those reforms have laid a solid foundation for making the credit union system and the
Share Insurance Fund even safer. sounder. and more resilient than before.
Now I would note that if a nearsighted Rip Van Winkle had attended this conference last year,
fallen asleep. and then awakened this morning, he might wonder for just a moment how much
progress had been made. Here we are a year later, and you still face Congressional hearings on field
of membership. a field of membership lawsuit by the American Bankers Association, and even a
Treasury study of credit unions.
Of course. if Rip thought the world had stood still during his slumbers. he'd be quite mistaken.
The enactment of H R. 1151 represents a basic change in the landscape. Yet some of the previous
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---------------------------------------------------------------------------------

issues continue, even ifin a new context and a different form. In that sense, my remarks today may
have the flavor of a halftime report. I want to reflect on what has been accomplished and on some
of the work that lies ahead.
But first let my express my appreciation for the opportunities that we at the Treasury have
had to work with CUNA on a range of issues over the past several years. I believe that CUNA and
the Treasury have maintained an open, constructive dialogue, even in the face of some difficult issues.
This has been particularly important since the fall of 1996, when the Treasury began its
Congressionally mandated study of credit unions. I appreciate the exceptionally able work of Dan
Mica and his staff We look forward to continuing that dialogue in the months ahead.

The Achievements of H.R. tl5t
Any review of the past year must begin with the achievements of H. R. 1151, which the
President signed into law on August 7, 1998.
I want to focus in particular on the
safety-and-soundness provisions of that legislation. Those provisions include prompt corrective
action, the 6 percent net worth standard, risk-based net worth standards for complex credit unions,
and various measures to further strengthen the Share Insurance Fund.
These historic reforms reflect the credit union tradition of getting ahead of problems and
taking prudent precautions. They emphasize recognizing safety-and-soundness problems early and
correcting then while they're still small. Experience in this country and around the world has
repeatedly shown that facing up to financial difficulties and dealing with them head-on ultimately
means less uncertainty, less pain, and a speedier recovery.
Let me elaborate on a few of the more important safety-and-soundness reforms.
The new law formalizes a requirement that, to be in good standing, credit unions have at least
6 percent net worth to total assets Virtually all credit unions already satisfY this requirement today.
Indeed, credit unions as a group have II percent net worth to assets.
The new law also requires that credit unions set aside, as retained earnings, a small percentage
of income if they have less than 7 percent net worth Well over 90 percent of credit unions already
meet the 7 percent target.
Working hand-in-hand with these net worth requirements is a system of prompt corrective
action. This system should reduce the number and cost offuture credit union failures. That, in turn,
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.

Implementing Prompt Corrective Action

2

Now that prompt corrective action is the law, the NCVA must implement it. Specifically, the
NCVA must develop a system of prompt corrective action that is "comparable" to the prompt
corrective action statute applicable to FDIC-insured banks and thrifts. And the Senate Banking
Committee's report on H.R. 1151 makes clear what "com'parable" means. "Comparable" means
"parallel in substance (though not necessarily identical in detail) and equivalent in rigor"
The basic idea is for the NCVA to start with the system of prompt corrective action applicable
to banks and thrifts. The NCVA must then take account of credit unions' character as not-for-profit
cooperatives that (1) do not issue capital stock, (2) must rely on retained earnings to build net worth,
and (3) have boards of directors that consist primarily of volunteers. Specifically, the NCVA must
omit provisions that do not logically apply to credit unions. A prime example would be the
requirement that an undercapitalized bank increase its net worth by issuing capital stock. (Credit
unions don't have capital stock in that sense.) By the same token, the principle of "parallel in
substance ... and equivalent in rigor" requires the NCVA to include the provisions of the bank and
thrift system that do make sense for credit unions.
Risk-Based Net Worth Requirement

The new law requires the NCVA to develop a risk-based net worth requirement for complex
credit unions. According to the Senate committee report,
"The NCVA must design the risk-based net worth requirement to take account of any material risks
against which the 6 percent net worth ratio required for an insured credit union to be adequately
capitalized may not provide adequate protection. Thus the NCUA should, for example, consider
whether the 6 percent requirement provides adequate protection against interest-rate risk and other
market risks, credit risk, and the risks posed by contingent liabilities, as well as other relevant risks"
The risk-based requirement involves the NCUA blazing a trail through uncharted territory.
We believe that the process would greatly benefit from broad input and careful discussion and debate.
We therefore encourage the NCUA to continue seeking comments from a broad spectrum of
interested and knowledgeable parties
Indeed, we would suggest that the NCUA consider reaching out even further One way of
doing so would be for the NCUA to host a conference on how to design the risk-based net worth
requirement for complex credit unions. Such a conference could have two key points offocus. First,
how to identify credit unions with abnormally high risk-profiles. And second, how to impose an
additional net worth requirement appropriate for those higher-than-normal risks.
In addition to the NCUA and its staff, the conference could include credit unions and their
trade aSSOCIatIOns It could include state credit union supervisors. And it could include
risk-management experts from the academic world, from private consulting firms, and from other
financial regulatory agencies

3

The goal would be to develop ideas that can make the NCUA's decision making and the final
risk-based requirement as sound and well-informed as possible. Whatever ideas surfaced at such a
conference would be available for the NCUA to evaluate, use, or disregard, as it judged best.
I have shared this idea informally with some of you and with others in the credit union system.
1 offer it here one more time, mindful that the time available for such a process is growing short. A
conference would be a way of bringing together a spectrum of viewpoints and expertise to wrestle
with the basic problems of developing a risk-based requirement for complex credit unions.
Treasury's Current Credit Union Studies
Let me now tum to the Treasury's current credit union studies. Congress evidently liked our
December 1997 report so much that it required us to conduct three more studies. Such was our
reward, and some might see it as further evidence that no good deed goes unpunished.
First, Congress required us to evaluate the differences between the regulation of credit unions
and the regulation of banks and thrifts.
Some of you may recall that we have already done that. Indeed, our 1997 report devoted one
chapter and a lengthy appendix to just such a comparison. This time around, we will cover not just
safety and soundness regulations but all important rules under which depository institutions operate
And we will pay particular attention to how the NCUA is implementing H. R. 1151 IS safety and
soundness provisions, including prompt corrective action.
Second, Congress required us to study credit unions' exemption from the federal income tax
and the potential effects of changing that exemption. Congress also invited us to provide
recommendations regarding the taxation of small banks (or other recommendations to preserve the
viability of small banks) Unlike the comparability of bank, thrift, and credit unions regulations, the
tax issue was not part of our previous study.
Third, Congress required us to study credit unions' member business lending. You may recall
how last year's Congressional debate shed more heat than light on that subject, and reflected broad
disagreement about what these loans are and who they are made to. Our goal is to turn up the light
and contribute to a better understanding of credit unions' business lending.
Indeed, Congress has asked us to do just that Congress directed us to report on member
business loans by the size of the loan, and by the type and size of the businesses that receive such
loans. Difficult as answering that question will be, Congress has also asked us to study the extent to
which member business loans help meet the financial service needs of low- and moderate-income
individuals within credit unions' fields of membership.

4

As you know, credit union call reports do not have this kind of information nor does the
NCUA otherwise collect it. Thus the only way for us to fulfill our obligation to Con~ress is to ask
you for your assistance.
Working with and through the NCUA, we expect to survey credit unions about their member
business lending. Only with thoughtful, complete responses can we gather the information that
Congress has requested. I would like to ask those credit unions that receive our survey to take the
time to respond carefully.
Let me put this request in context. During last year's Congressional debate over member
business lending, credit unions tried to tell a story about the importance of this aspect of their
business. Think about the time spent in responding to this survey as a means of helping tell your story
about member business lending.
We currently expect to issue a single report later this year that will respond to all three of the
study requirements. As with our 1997 report, we are taking our Congressional mandate seriously.
We will give careful consideration to each of the issues we have been asked to address. And we will
remain open for input from CUNA and others as we move forward.
Let me turn now to a more immediate and difficult issue.
The C.F. and Y2K Liquidity

Those of you that heard me speak at this conference last year may recall that I spoke at some
length about the Central Liquidity Facility. As the 1997 Treasury report concluded, and as I
reiterated here last year, we find that the C.F. provides a false sense of security and is not up to the
job of being an emergency lender of last resort
This may be the conclusion from our report that credit union folks have been the most
reluctant to accept. Yet I have heard nothing over the past year to suggest some flaw in our analysis.
Now that a full year has passed since then, we find ourselves back in discussions about the
C.F. This time, the discussion centers on Y2K-related concerns. Careful liquidity preparation for
Y2K is prudent and necessary. Consideration of where liquidity will come from in a highly unlikely,
yet conceivable, liquidity crisis is also prudent and necessary.
Some of you know that we at the Treasury have been actively engaged on this issue for
several months. You also may know that Secretary Rubin sent a letter to Congress in January stating
that we saw no need for legislative action involving the C.F.
I want to assure you that we are continuing to work with the Federal Reserve, the NCUA,
CUNA, and others to ensure that appropriate contingency plans are in place. I would also like to ask
that you continue to give serious thought to the concerns that the Treasury has raised regarding the
C.F., and to consider long-run options for meeting credit unions' liquidity needs.

5

Conclusion

In conclusion, let me reiterate my appreciation for the candor and goodwill that have marked
the relationship between CUNA and the Treasury over the past few years. While we may not have
always agreed, I believe that we have had a highly constructive working relationship. We at the
Treasury look forward to continuing that relationship in the months and years ahead.
-30-

6

Communique of G-7 Finance Ministers and Central Bank Governors
February 20, 1999
Petersberg, Bonn

We, the Finance Ministers and Central Bank Governors of the G7- countries and Wim
Duisenberg, President of the European Central Bank met today with Michel
Camdessus, Managing Director of the International Monetary Fund, to review recent
developments in the world economy. Ministers and Governors also discussed
international financial architecture issues.

Developments in the World Economy

2.

We discussed developments in our own economies and in the rest of the world. Since
our last statement of October 30 there have been some encouraging developments
such as the economic and financial stabilisation in Asia, calmer financial markets in
industrialised countries, interest rate cuts in the U.S. and Europe and most recently in
Japan, progress made to implement policies to strengthen the financial system and
stimulate the economy in Japan, and the successful introduction of the euro. But
financial market conditions have worsened in some regions and the outlook for global
economic growth is somewhat less favourable. The impact of financial crises is now felt
beyond the regions where the crises occurred. Against this background, it is of the
utmost importance to strengthen in all countries the foundations for sustainable growth
of output and employment, social stability and the macroeconomic conditions for
financial market stability.

G-7 Economies

3.

We remain committed to a domestically based growth strategy that would contribute to
achieving more balanced growth among our countries, reducing external imbalances
and supporting recovery in emerging market economies. The outlook for price stability
in our countries as a whole remains favourable.

4.

In view of the challenges facing each of our economies we reaffirm the importance of
intensified cooperation among us:

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-2•

In the United States and Canada economic growth is expected to slow gradually,
but the overall economic outlook remains favourable. In these countries, policy
should be directed at maintaining necessary conditions for sustainable growth.

•

In the United Kingdom growth is expected to be lower than last year but to recover
thereafter. With a less inflationary outlook, interest rates have been reduced
sharply and economic policies will continue to help create the conditions for
sustainable growth.

•

In the euro area growth expectations for 1999 have been lowered. The magnitude
of the slowdown may differ among these countries. They agree on the importance
of pursuing an appropriate mix of macroeconomic policies and structural measures
aimed at promoting strong and sustainable domestic led growth and fostering
employment.

• In Japan short-term prospects remain uncertain. The Japanese authorities have
adopted important steps to strengthen the financial system and macropolicies to
reinforce growth led by domestic demand and need to push ahead with the
implementation of their policies directed to those ends.

We welcome the successful introduction of the euro in eleven member states of the
European Union. The euro has been well received in the international financial and
foreign exchange markets. The introduction of the euro helped avoid spill overs of
turbulences to financial markets in Europe. Economic and monetary policies of the euro
area will have significant implications for the stability of the global financial and monetary
system.

The international monetary system and exchange rates

5. In view of the increasing integration of the world economy and financial system we have
a special responsibility with regard to improving the conditions for a proper functioning of
the international financial and monetary system and, in particular, enhancing sound
fundamentals necessary for exchange rate stability. To this end, we will maintain strong
cooperation to promote stability of the international monetary system and to promote
exchange rates among major currencies that are in line with fundamentals.

-36. We discussed developments in our exchange and financial markets since our last
meeting. We reaffirmed our view on the importance of pursuing policies to help avoid
excess volatility and significant misalignments of exchange rates of major currencies. We
will continue to monitor developments in exchange markets and cooperate as
appropriate.

Open Markets

7. We confirm our strong commitment to open, fair, competitive and dynamic international
trade. The rules-based international trading system has shown its potential to create the
necessary demand and underpin sustainable growth and stability in the global economy.
We look forward to the launch of a new round of trade negotiations in the US in
November with a balanced agenda of interest to all WTO member countries. We support
a World Trade Organisation, and trade agreements, which are responsive to the
challenges of global markets and the concerns of citizens throughout the world.

Emerging Market Countries

8. We discussed financial and economic developments in emerging markets. We welcome
the progress in restoring financial stability and strengthening the foundations for
economic growth in many Asian countries. In other regions, notably Latin America,
outlook for growth has deteriorated since last year while the external financing
environment has become more difficult. It is crucial for the countries in the region to
pursue appropriate poliCies, including institutional, structural, macroeconomic and
exchange rate policies, and, where necessary, to reinforce existing economic programs
as the best way to respond to financial markets pressure.

Russia

9.

We met with representatives of the Russian Federation to discuss recent developments
in Russia. The economic situation in Russia continues to give cause to concern. In the
absence of a concerted policy response to ongoing financial and macroeconomic
instability, the country is increasingly faced with the serious risk of accelerating inflation,
further exchange rate weakening, and continued economic contraction. A viable budget
for 1999, significant improvement in government revenues and sufficient progress in
institutional and structural reforms are necessary for an agreement with the IMF and for

-4economic recovery. We expressed once again our concern regarding the accumulation
of arrears on debts due by Russia. Russia's debt would only be considered by Paris
Club creditors in the context of an agreement on an economic program supported by
the IMF. Ministers and Governors of the G7 also str~ssed the importance they attach to
Russia's treating its obligations to all creditors comparably.

Brazil

10. Concerns about the implementation of the Brazilian reform program led to renewed
pressures on the exchange rate of the Real and eventually to an abandonment of the
exchange rate peg. We welcomed the commitment of the Brazilian authorities to a
strengthened economic program designed to prevent an initial rise in prices associated
with the sharp depreciation of the Real from leading to a general inflationary spiral and to
pursue a strong program of fiscal adjustment. Under present circumstances it is of
utmost importance to restore confidence. Thus, we urge the Brazilian authorities to
continue with their reform efforts while paying due attention to social needs. We reaffirm
our commitment to support a strong IMF program and recall the importance of a strong
involvement of the private sector creditors in restoring financial stability in Brazil.

Koln Debt Initiative

11. We had an exchange of views about the situation of the poorest highly indebted
countries and reiterated our continuing view that maximum progress should be made in
the next year. We agree that the fundamental review and the development of the HIPC
Debt Initiative provide the appropriate framework to address the debt problems of
these countries. We stressed the importance of improving the HIPC Debt Initiative and
discussed proposals from a number of G 7 partners for achieving this, for example, by
reviewing the duration and the criteria for debt reduction. We will discuss these issues
with a view to reaching agreement by the time of the Kbln summit. We stressed the
importance of fair burden sharing among creditors and of ensuring that sufficient
resources are available to finance the share of the multilateral creditors, using existing
resources insofar as possible and agreed to work to this end.

-5Strengthening the international financial and monetary system

12. We reviewed progress of the ongoing work on strengthening and increasing the
transparency
of the international financial architecture. Since our statement of
,
October 30 there has been important progress in the following areas:

-

The IMF quota increase and the New Arrangements to Borrow have become
effective. Together this provides the IMF with additional resources of SDR 66 billion
to be used to safeguard the stability of the international monetary system.

- To strengthen the IMF's Special Data Dissemination Standard (SDDS),we agreed
on a comprehensive format for full information on reserves and urge action by the
IMF's Executive Board to adopt this standard in advance of the April Interim
Committee Meeting. We ask the IMF to further strengthen the SDDS by including
more complete information on external debt and the international investment position
of a country.

-

We support the progress made by the IMF, working in close cooperation with the
BIS, central banks and other relevant authorities, in developing a code of best
practices for monetary and financial policy transparency, the completion by the IASC
of its core set of internationally agreed standards and the progress the OECD has
made on its prinCiples of corporate governance.

-

We welcomed the substantial progress in developing an enhanced IMF facility
providing a contingent short-term line of credit, accompanied by appropriate private
sector involvement. We will work at the IMF to ensure that this facility is introduce~
as soon as possible.

-

We agree that the international financial institutions must playa prominent role in
facilitating cooperation among all countries, especially in the area of macroeconomic
and monetary issues that are at the centre of the IMF's mandate as stated in
Article 1 of its Articles of Agreement. To this end, we all agree to consider ways to
improve the IMF programs and procedures in crisis prevention and resolution, and
appropriate institutional reforms, including of the Interim and Development
Committees.

-613. We discussed the effects of economic adjustment on the most vulnerable groups in
society, and reaffirmed the importance we attach to the work on general principles of
good practice in social policy being taken forward in consultation with other
organisations. We will work together t~ ensure that these principles can brought into
operational use as quickly as possible, to be used in the design of adjustment programs
by the World Bank, the IMF and their member countries.

14.We discussed and endorsed the recommendations by the Basle Committee on Banking
Supervision on how to mitigate risks involved in dealing with Highly-Leveraged
Institutions (HLls) including hedge funds. We also noted that IOSCO and other relevant
bodies were also working on HLI issues and looked forward to receiving their reports
shortly. We agreed with the Basle Committee that adequate risk management by
financial institutions is particularly important when they deal with HLis. We are committed
to continuing to consider, in a broad context, implications arising from the operation~ of
HLis and of offshore centres on the framework of financial supervision, including whether
additional reporting and disclosure by HLis themselves is warranted or feasible.

Financial Stability Forum

15. We are grateful to Hans Tietmeyer for his report on international cooperation and
coordination in the area of financial market supervision and surveillance. We welcome
his proposal that the G-7 should take the initiative in convening a Financial Stability
Forum to ensure that national and international authorities and relevant international
supervisory bodies and expert groupings can more effectively foster and coordinate
their respective responsibilities to promote international financial stability. improve the
functioning of the markets and reduce systemic risk.

While the Forum will initially be the initiative of the G 7 countries, we envisage that over
time additional national authorities would be included in the process. The issues to be
addressed affect all countries. including both industrial and emerging market
economies, and the G 7 regards this initiative as a step toward broader participation.

- We agreed that the Forum will meet regularly to assess issues and vulnerabilities
affecting the global financial system and identify and oversee the actions needed to
address them, including encouraging. where necessary. the development or

-7strengthening of international best practices and standards and defining priorities for
addressing and implementing them.

We agreed that the Forum will be comprised of representatives of national
authorities responsible for financial stability, the relevant international financial
institutions and organisations as well as the relevant international supervisory bodies
and expert groupings. The Forum will be supported by a small secretariat located in
Sasle. Its first chairman will be Mr Andrew Crockett, General Manager of the SIS, for
a term of three years. We ask our Deputies to make the necessary preparations so
that the first meeting of the Forum could be held in Spring 1999.

Next steps

16. We will continue to work to ensure implementation of all the reforms which we agreed in
our Declaration of October 30 1998. A plan for implementation presented to the G 7
Heads in December 1998 is attached as an annex. Our work between now and the K61n
summit will focus on the scope for strengthened prudential regulation and supervision in
industrial countries and further strengthening financial systems in emerging market
economies: exchange rate regimes in emerging market economies, crises response and
greater participation by the private sector in crisis containment and resolution; proposals
for strengthening the IMF and the Interim and Development Committees; and minimising
the human cost of financial crisis.

17. We will intensify the discussion of these issues among ourselves but also with other

industrialised and emerging market economies. A first seminar involving a representative
group of industrialised and emerging countries will take place on March 11 in Germany
This seminar will be devoted to exchange rate regimes, private sector involvement in
crisis resolution and to proposals for strengthening the IMF and the World Bank. A
second seminar will take place in the United States in April to discuss issues of
prudential oversight in industrial countries, strengthening financial systems in emerging
market countries, and minimiSing the human cost of crisis and encouraging the adoption
of policies that better protect the most vulnerable in society.

We welcome the initiative of Carlo Ciampi to hold a special preparatory meeting at the
deputies level for the next Interim Committee of April to help advance reforms of the
international monetary system.

2

As far as emerging market countries are concerned, we welcomed the progress in
restoring financial stability and strengthening the basis for growth in many Asian countries. We
welcomed the commitment of the Brazilian authorities to a strengthened economic program and
urged them to continue their reform efforts.
Our second major focus, reform of the international financial architecture, took up a good
part of our discussions. This is an extremely complex issue which will take a very long time to
resolve in all its facets. Our approach has been to press forward with concrete steps in line with
the framework set out at the end of October by G- 7 Leaders. Already an enormous amount of
work has been done and I am pleased that we were able to make further progress during today's
meeting.
The communique lays out a number of areas of progress. Let me point to four:
We agreed on a significant strengthening of disclosure through the IMF's Statistical Data
Dissemination Standard (SDDS) to give a full picture of countries' foreign exchange
reserves -- essential for alerting investors and policy-makers alike as soon as a country's
international position begins to deteriorate.
We welcomed the progress being made on developing an enhanced IMF facility aimed at
reducing the risk of contagion by providing a contingent line of credit to countries affected
by financial contagion. We agreed to work at the IMF to bring this facility on-line as soon
as possible.
We agreed to move forward with President Tietmeyer's proposal on convening a Financial
Stability Forum, although some of the details still need to be worked out by our G-7
Deputies. We want to use this Forum to improve the cooperation between national and
international authorities and relevant international bodies to promote international financial
stability.
Fourth, one of the most critical elements for the new architecture will be steps to protect
the vulnerable in society and spread the benefits of globalization broadly within our
societies and around the world. With this in mind, my G-7 colleagues and I stressed the
importance of work on principles of good practice in social policy and agreed to press for
these to be brought into operational use as quickly as possible.
Our discussion also highlighted the importance of exploring ways to strengthen the HIPC
debt initiative. We hope to reach agreement by the Cologne summit in June on ways to do so.
Finally, we met with our Russian colleagues and stressed the importance of a concerted
policy response to avert the risks of accelerating inflation and continued economic decline.
-30-

DEPARTl\1ENT

OF

THE

TREASURY

omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASmNGTON, D.C .• 20220 • (202) 622-2960

TEXT AS PREPARED FOR DELIVERY
FOR RELEASE AT 5 P.M. (LOCAL TIME)
February 20, 1999
POST-G-7 PRESS STATEMENT
by
TREASURY SECRETARY ROBERT E. RUBIN
BONN, GERMANY

Let me start by thanking Oskar Lafontaine and Hans Tietmeyer for hosting today's
extremely interesting meeting of G-7 Finance Ministers and Governors.
I would like just to say a few words about the meeting, and then I will be happy to
respond to questions.
First, I would like to say how very valuable I believe it is for us to get together and really
talk through the common issues and challenges facing us in today's global economy. This has
been especially true during the past eighteen months or so, as we have addressed the issues arising
out of the financial crisis in some emerging market economies.
We focused on two main topics in today's meeting: first, the outlook for growth in our
own economies, and in the world economy more generally, and second, the key issue of global
financial architecture.
On the first, we all agreed on the importance of strengthening the foundations for
sustainable growth. As far as the United States is concerned, the overall outlook for us remains
favorable, with solid growth expected again this year. But it is crucially important that Japan and
Europe also move forward with domestic demand-led growth in their economies, to achieve more
balanced growth among our countries, reduce the large external imbalances and support recovery
in emerging market economies.
As always, we discussed exchange rates. Let me read for you the language that
summarizes our discussion: "We reaffirmed our view on the importance of pursuing policies to
help avoid excess volatility and significant misalignments of exchange rates of major currencies
We will continue to monitor developments in exchange markets and cooperate as appropriate"
RR-2965

For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2rHO

Communique of G-7 Finance Ministers and Central Bank Governors
February 20, 1999
Petersberg, Bonn

1.

We, the Finance Ministers and Central Bank Governors of the G7- countries and Wim
Duisenberg, President of the European Central Bank met today with Michel
Camdessus, Managing Director of the International Monetary Fund, to review recent
developments in the world economy. Ministers and Governors also discussed
international financial architecture issues.

Developments in the World Economy

2.

We discussed developments in our own economies and in the rest of the world. Since
our last statement of October 30 there have been some encouraging developments
such as the economic and financial stabilisation in Asia, calmer financial markets in
industrialised countries, interest rate cuts in the U.S. and Europe and most recently in
Japan, progress made to implement policies to strengthen the financial system and
stimulate the economy in Japan, and the successful introduction of the euro. But
financial market conditions have worsened in some regions and the outlook for global
economic growth is somewhat less favourable. The impact of financial crises is now felt
beyond the regions where the crises occurred. Against this background, it is of the
utmost importance to strengthen in all countries the foundations for sustainable growth
of output and employment, social stability and the macroeconomic conditions for
financial market stability.

G-7 Economies

3.

We remain committed to a domestically based growth strategy that would contribute to
achieving more balanced growth among our countries, reducing external imbalances
and supporting recovery in emerging market economies. The outlook for price stability
in our countries as a whole remains favourable.

4.

In view of the challenges facing each of our economies we reaffirm the importance of
intensified cooperation among us:

RR-2966

-2• In the United States and Canada economic growth is expected to slow gradually,
but the overall economic outlook remains favourable. In these countries, policy
should be directed at maintaining necessary conditions for sustainable growth.

• In the United Kingdom growth is expected to be lower than last year but to recover
thereafter. With a less inflationary outlook, interest rates have been reduced
sharply and economic policies will continue to help create the conditions for
sustainable growth.

•

In the euro area growth expectations for 1999 have been lowered. The magnitude
of the slowdown may differ among these countries. They agree on the importance
of pursuing an appropriate mix of macroeconomic policies and structural measures
aimed at promoting strong and sustainable domestic led growth and fostering
employment.

• In Japan short-term prospects remain uncertain. The Japanese authorities have
adopted important steps to strengthen the financial system and macropolicies to
reinforce growth led by domestic demand and need to push ahead with the
implementation of their policies directed to those ends.

We welcome the successful introduction of the euro in eleven member states of the
European Union. The euro has been well received in the international financial and
foreign exchange markets. The introduction of the euro helped avoid spill overs of
turbulences to financial markets in Europe. Economic and monetary policies of the euro
area will have significant implications for the stability of the global financial and monetary
system.

The international monetary system and exchange rates

5. In view of the increasing integration of the world economy and financial system we have
a special responsibility with regard to improving the conditions for a proper functioning of
the international financial and monetary system and, in particular, enhancing sound
fundamentals necessary for exchange rate stability. To this end, we will maintain strong
cooperation to promote stability of the international monetary system and to promote
exchange rates among major currencies that are in line with fundamentals.

-36. We discussed developments in our exchange and financial markets since our last
meeting. We reaffirmed our view on the importance of pursuing policies to help avoid
excess volatility and significant misalignments of exchange rates of major currencies. We
will continue to monitor developments in exchange markets and cooperate as
appropriate.

Open Markets

7. We confirm our strong commitment to open, fair, competitive and dynamic international
trade. The rules-based international trading system has shown its potential to create the
necessary demand and underpin sustainable growth and stability in the global economy.
We look forward to the launch of a new round of trade negotiations in the US in
November with a balanced agenda of interest to all WTO member countries. We support
a World Trade Organisation, and trade agreements, which are responsive to the
challenges of global markets and the concerns of citizens throughout the world.

Emerging Market Countries

8. We discussed financial and economic developments in emerging markets. We welcome
the progress in restoring financial stability and strengthening the foundations for
economic growth in many Asian countries. In other regions, notably Latin America,
outlook for growth has deteriorated since last year while the external financing
environment has become more difficult. It is crucial for the countries in the region to
pursue appropriate policies, including institutional, structural, macroeconomic and
exchange rate policies, and, where necessary, to reinforce existing economic programs,
as the best way to respond to financial markets pressure.

Russia

9.

We met with representatives of the Russian Federation to discuss recent developments
in Russia. The economic situation in Russia continues to give cause to concern. In the
absence of a concerted policy response to ongoing financial and macroeconomic
instability, the country is increasingly faced with the serious risk of accelerating inflation,
further exchange rate weakening, and continued economic contraction. A viable budget
for 1999, significant improvement in government revenues and sufficient progress in
institutional and structural reforms are necessary for an agreement with the IMF and for

-4economic recovery. 'fVe expressed once again our concem regarding the accumulation
of arrears on debts due by Russia. Russia's debt would only be considered by Paris
Club creditors in the context of an agreement on an economic program supported by
the IMF. Ministers and Governors of the G7 also stressed the importance they attach to
Russia's treating its obligations to all creditors comparably.

Brazil

10. Concems about the implementation of the Brazilian reform program led to renewed
pressures on the exchange rate of the Real and eventually to an abandonment of the
exchange rate peg. We welcomed the commitment of the Brazilian authorities to a
strengthened economic program designed to prevent an initial rise in prices associated
with the sharp depreciation of the Real from leading to a general inflationary spiral and to
pursue a strong program of fiscal adjustment. Under present circumstances it is of
utmost importance to restore confidence. Thus, we urge the Brazilian authorities to
continue with their reform efforts while paying due attention to social needs. We reaffirm
our commitment to support a strong IMF program and recall the importance of a strong
involvement of the private sector creditors in restoring financial stability in Brazil.

Koln Debt Initiative

11. We had an exchange of views about the situation of the poorest highly indebted
countries and reiterated our continuing view that maximum progress should be made in
the next year. We agree that the fundamental review and the development of the HIPC
Debt Initiative provide the appropriate framework to address the debt problems of
these countries. We stressed the importance of improving the HIPC Debt Initiative and
discussed proposals from a number of G 7 partners for achieving this, for example, by
reviewing the duration and the criteria for debt reduction. We will discuss these issues
with a view to reaching agreement by the time of the Kbln summit. We stressed the
importance of fair burden sharing among creditors and of ensuring that sufficient
resources are available to finance the share of the multilateral creditors, using existing
resources insofar as possible and agreed to work to this end.

-5-

Strengthening the international financial and monetary system

12. We reviewed progress of the ongoing work on strengthening and increasing the
transparency
of the international financial architecture. Since our statement of
,
October 30 there has been important progress in the following areas:

-

The IMF quota increase and the New Arrangements to Sorrow have become
effective. Together this provides the IMF with additional resources of SDR 66 billion
to be used to safeguard the stability of the international monetary system.

-

To strengthen the IMF's Special Data Dissemination Standard (SODS), we agreed
on a comprehensive format for full information on reserves and urge action by the
IMF's Executive Soard to adopt this standard in advance of the April Interim
Committee Meeting. We ask the IMF to further strengthen the SODS by including
more complete information on external debt and the international investment position
of a country.

-

We support the progress made by the IMF, working in close cooperation with the
SIS, central banks and other relevant authorities, in developing a code of best
practices for monetary and financial policy transparency, the completion by the IASC
of its core set of internationally agreed standards and the progress the OECD has
made on its prinCiples of corporate governance.

-

We welcomed the substantial progress in developing an enhanced IMF facility
providing a contingent short-term line of credit, accompanied by appropriate private
sector involvement. We will work at the IMF to ensure that this facility is introduced
as soon as possible.

-

We agree that the international financial institutions must playa prominent role in
facilitating cooperation among all countries, especially in the area of macroeconomic
and monetary issues that are at the centre of the IMF's mandate as stated in
Article 1 of its Articles of Agreement. To this end, we all agree to consider ways to
improve the IMF programs and procedures in crisis prevention and resolution, and
appropriate institutional reforms, including of the Interim and Development
Committees,

-6-

13. We discussed the effects of economic adjustment on the most vulnerable groups in
society, and reaffirmed the importance we attach to the work on general principles of
good practice in social policy being taken forward in consultation with other
organisations. We will work together to ensure that th~se principles can brought into
operational use as quickly as possible, to be used in the design of adjustment programs
by the World Bank, the IMF and their member countries.

14.We discussed and endorsed the recommendations by the Basle Committee on Banking
Supervision on how to mitigate risks involved in dealing with Highly-Leveraged
Institutions (HLls) including hedge funds. We also noted that IOSCO and other relevant
bodies were also working on HLI issues and looked forward to receiving their reports
shortly. We agreed with the Basle Committee that adequate risk management by
financial institutions is particularly important when they deal with HLis. We are committed
to continuing to consider, in a broad context, implications arising from the

operation~

of

HLis and of offshore centres on the framework of financial supervision, including whether
additional reporting and disclosure by HLis themselves is warranted or feasible.

Financial Stability Forum

15. We are grateful to Hans Tietmeyer for his report on international cooperation and
coordination in the area of financial market supervision and surveillance. We welcome
his proposal that the G-7 should take the initiative in convening a Financial Stability
Forum to ensure that national and international authorities and relevant international
supervisory bodies and expert groupings can more effectively foster and coordinate
their respective responsibilities to promote international financial stability, improve the
functioning of the markets and reduce systemic risk.

While the Forum will initially be the initiative of the G 7 countries, we envisage that over
time additional national authorities would be included in the process. The issues to be
addressed affect all countries, including both industrial and emerging market
economies, and the G 7 regards this initiative as a step toward broader participation.

We agreed that the Forum will meet regularly to assess issues and vulnerabilities
affecting the global financial system and identify and oversee the actions needed to
address them, including encouraging, where necessary, the development or

-7strengthening of international best practices and standards and defining priorities for
addressing and implementing them.

We agreed that the Forum will be comprised of representatives of national
authorities responsible for financial stability, the relevant international financial
institutions and organisations as well as the relevant international supervisory bodies
and expert groupings. The Forum will be supported by a small secretariat located in
Basle. Its first chairman will be Mr Andrew Crockett, General Manager of the BIS, for
a term of three years. We ask our Deputies to make the necessary preparations so
that the first meeting of the Forum could be held in Spring 1999.

Next steps

16. We will continue to work to ensure implementation of all the reforms which we agreed in
our Declaration of October 30 1998. A plan for implementation presented to the G 7
Heads in December 1998 is attached as an annex. Our work between now and the Koln
summit will focus on the scope for strengthened prudential regulation and supervision in
industrial countries and further strengthening financial systems in emerging market
economies; exchange rate regimes in emerging market economies, crises response and
greater participation by the private sector in crisis containment and resolution; proposals
for strengthening the IMF and the Interim and Development Committees; and minimising
the human cost of financial crisis.

17. We will intensify the discussion of these issues among ourselves but also with other
industrialised and emerging market economies. A first seminar involving a representative
group of industrialised and emerging countries will take place on March 11 in Germany.
This seminar will be devoted to exchange rate regimes, private sector involvement in
criSis resolution and to proposals for strengthening the IMF and the World Bank. A
second seminar will take place in the United States in April to discuss issues of
prudential oversight in industrial countries, strengthening financial systems in emerging
market countries, and minimising the human cost of crisis and encouraging the adoption
of policies that better protect the most vulnerable in society.

We welcome the initiative of Carlo Ciampi to hold a special preparatory meeting at the
deputies level for the next Interim Committee of April to help advance reforms of the
international monetary system.

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 22, 1999

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
February 25, 1999
May 27, 1999
912795BX8

Term:
Issue Date:
Maturi ty Date:
CUSIP Number:
4.530%

High Rate:

4.646%

Investment Ratel/:

Price:

98.855

All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

6%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted

Tendered

Tender Type
$

Competitive
Noncompetitive
PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On

$

TOTAL

23,253,008
1,281,735

$

1,281,735

24,534,743

6,839,403

674,128

674,128

25,208,871

7,513,531

3,883,180
29,072

3,883,180
29,072

29,121,123

$

Median rate
4.520%: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low rate
4.420%:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
Bid-to-Cover Ratio
1/

=

24,534,743 / 6,839,403

3.59

Equivalent coupon-issue yield.

http://www.publicdebt.treas.gov

RR-2968

5,557,668

11,425,783

-

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 22, 1999

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
February 25, 1999
August 26, 1999
912795CL3

Term:
Issue Date:
Maturity Date:
CUSIP Number:
4.430%

High Rate:

4.595%

Investment Ratel/:

Price:

97.760

All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted

32%.

AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted

Tendered

Tender Type
$

Competitive
Noncompetitive
PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On

$

TOTAL

20,858,658
1,141,417

$

22,000,075

5,270,331

2,237,872

2,237,872

24,237,947

7,508,203

3,805,000
97,028

3,805,000
97,028

28,139,975

$

Median rate
4.420%: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low rate
4.320%:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
Bid-to-Cover Ratio

=

22,000,075 / 5,270,331

4.17

if Equivalent coupon-issue yield.

RR-2969

4,128,914
1,141,417

http://www.publicdebt.treas.go v

11,410,231

DEPARTMENT

OF

THE

TREASURY

OffiCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622.2960

FOR IMMEDIATE RELEASE
Text as Prepared for Delivery
February 23, 1999

Statement of James E. Johnson
Treasury Under Secretary (Enforcement)
Subcommittee on Treasury. Postal Service and General Government
Thank you Mr. Chairman, Congressman Hoyer, and members of the Subcommittee. It is a
pleasure for me to be here today to support the FY 2000 budget for Treasury's law enforcement
bureaus and offices.
With me are the heads of each Treasury law enforcement bureau: John W. Magaw,
Director of the Bureau of Alcohol. Tobacco and Firearms (ATF); Bruce 1. Bowen, Acting
Director of the United States Secret Service (USSS); Raymond W. Kelly, Commissioner of the
United States Customs Service (USCS). and W. Ralph Basham, Director of the Federal Law
Enforcement Training Center (FLETC) William F Baity, Acting Director of the Financial Crimes
Enforcement Network (FinCEN). will not be appearing before the Subcommittee today; I ask the
Chairman's consent that his written statement be entered into the official record of these
proceedings Since this is my first appearance before the Subcommittee as Under Secretary, I
also request that my biography be entered into the record as well
I welcome this opportunity to share with you my thoughts on Treasury Enforcement's
mission today and into the 21 century. and on how President Clinton's FY 2000 budget request
supports us in achieving this miSSIOn
$I

Each year. as the world becomes a more complex place, Treasury's law enforcement
mission grows in complexity. scope and importance Secretary Rubin has repeatedly noted that
our bureaus must continue to meet these challenges as they perform their critical role in advancing
America's law enforcement priorities. which include. but are not limited to, protecting our
leaders. protecting our borders from drug traffickers and our streets from the threat of bombs,
arson, and gun violence, safeguarding our tinancial institutions from money launderers and fraud,
and collecting revenue.
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
continues to engage in a comprehensive strategic management process to enhance and improve

-

RR-2970

------------------------------------------------------------------------------------For press releases, speeches, public schedules and official bio~aphies, call our 24-hour fax line at (202) 622-2040
'

the results we deliver to the American people. Overall, the bureaus' perfonnances against
established strategic plans were excellent. And while not every goal was met our results were
very significant.
With the objective in mind of continuing to perfonn our mission at the highest level of
excellence, the President's FY 2000 budget seeks a Treasury Enforcement program level of$3.5
billion and 27,422 direct FTE, excluding the Internal Revenue Service Criminal Investigation
Division (IRS/CID). IRs/crn, however, does perfonn an integral role in Treasury law
enforcement efforts with its FY 2000 $384.3 million and 4,049 FTE request. We believe these
budget requests take a pragmatic approach to two goals. On one hand, it permits Treasury to
contribute substantially towards balancing the federal budget. On the other, it supports effective
approaches to law enforcement Also, it is important to note that the requested Treasury program
level allows us to combat crime while depositing more than $34 billion in revenues and collections
into the U. S. Treasury. This is a tremendous return on investment.
My remarks today will focus on two things: the role of the Office of Enforcement and the
goals of our five-part strategic plan that was developed by the bureaus working with the Office of
Enforcement. This fonnat highlights our bureaus' specific areas of expertise, activities and budget
requests, as well as our cross-cutting expertise on financial crimes matters. During my testimony,
I will highlight several key initiatives that Treasury is undertaking in the law enforcement context.
Office of Enforcement

We recognize that the role of our enforcement bureaus is enhanced through the support,
oversight and policy guidance provided at the Departmental level. In dus 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.
Support
Over the past year, we have worked to support each of our bureaus individual goals as
well as for the advancement of issues of significance to all of the enforcement bureaus We have
often done this by bringing together working groups including bureau personnel, to work on
challenging issues Many of these efforts are led by bureau personnel either dedicated to the
project or detailed to the Office of Enforcement to work on such matters
For example, working groups consisting of personnel from the Office of Enforcement, the
Office of Management and the enforcement bureaus developed a fleet management policy that
balances the needs of law enforcement with the Subcommittee's concern for assurance that
vehicles are being used in confonnitv with sound management principles. A combined team of
Enforcement and Management staff recently reported to the Subcommittee on the results of those
efforts. Similarly, a working group was formed to develop an implementation plan for the
demonstration pay project We expect to transmit the plan to the Subcommittee shortly. It is our
hope that the use of personnel interventions identified by this working group will enable us to
improve our capacity to recruit. develop, and retain high-caliber employees Finally, the Office of

2

Enforcement, Office of Management, and enforcement bureau representatives have jointly
undertaken a major effort to respond to the Congressional request that we analyze the
implications of the imminent agent retirements.

Oversight
Over the last year we have worked with our bureaus to identify issues before they become
problems, and work on problems before they become crises. This Subcoinmittee's support of the
Office of Professional Responsibility (OPR) is helping us to meet this goal. Since receiving funds
in the FY 1998 appropriations bill, we have made considerable progress in staffing this unit, which
assists in the provision of oversight on such important issues as internal affairs, training and
inspection. Among other things, OPR has carried on work begun by fonner Under Secretary .
Kelly, by continuing to make integrity a priority. Indeed, last week. fulfilling a Congressional
request, the Office of Enforcement issued an OPR report on Customs' Office oflntemal Affairs.
This study represents a thorough and comprehensive analysis and reflects the important oversight
role this Subcommittee envisioned for OPR.
Additionally, during the past year, OPR has worked with A TF to improve enforcement of
the firearms laws and operations at the National Tracing Center, analyzed EEO and diversity
issues at the Treasury bureaus, and participated in the Implementation Committee overseeing
renewal of the FLETC. OPR also conducted an assessment of training at the Customs Service.
Its findings and recommendations fully support Commissioner Kelly's decision to establish an
Office of Training at the Assistant Commissioner level.
Policy Guidance
A third major function of the Office of Enforcement is to provide leadership in the
formulation and coordination of policy for Treasury Enforcement. In this regard, in the past year,
we convened the Financial Crimes Policy Steering Committee which consists of representatives
from all of the Treasury Bureaus and offices. at the Assistant Director level, who are tasked with
helping to formulate policy in the area of Treasury's financial crimes jurisdiction. Among other
things, I have tasked this group with the development of a strategic response to what we believe
to be an insidious money laundering system. the Black Market Peso Exchange, which is a process
by which Colombian Narcotraffickers convert their ill-gotten dollars into ostensibly clean pesos
On a broader level, this group is the pnmary vehicle by which the Office of Enforcement is leading
the development of a nationwide strategy against money laundering.
As a former prosecutor, I understand that the effectiveness of our bureaus is constrained
by the legal and administrative infrastructure under which they operate. We are working to
ensure that those rules function to make our bureaus work as effectively as possible. For
example, the impact of successful investigation may be undercut by Sentencing Guidelines that do
not adequately reflect the severity of the cnme The Office of Enforcement and General Counsel
within Treasury have been working with our bureaus to formulate and recommend to the
Sentencing Commission certain changes in the Guidelines

3

The Office of Enforcement also has taken other steps to enhance its support and oversight
missions. Among other activities, we continue to work closely with Customs, ONDCP, and
others to ensure close cooperation on anti-narcotics matters; we have maintained a lead role
within the Administration on the National Church Arson Task Force; and in conjunction with ATF
and the Department of Justice, we have responded to the President's directive to analyze the
problem of the gun show loophole, and remain at the forefront on firearms issues.
On the trade and regulatory side, the Office of Enforcement has taken the lead in
initiatives to streamline and modernize the regulatory and trade law enforcement operations of the
enforcement bureaus. In recent years, Treasury has been a major force behind changes to the way
the alcoholic beverage industry and the firearms industry are regulated by ATF, re-organization of
the Customs Service to provide better service to the public, re-invention of Customs' business
processes for both import and export transactions, and Customs' enforcement of intellectual
property laws.
More globally, the Office of Enforcement represents the United States in an initiative by
the G7 governments to develop standard electronic documentation for trade among the G7
countries. This initiative will greatly simplify the experience of exporting for small u.s
companies, and it will reduce the expense of international transactions for all U. S. businesses.
Providing key support, sensible oversight, and sound policy guidance are the principles
that govern the work of the Office of Enforcement I trust they will become clear as we discuss
in greater detail the implementation of Treasury Enforcement's strategic plan
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 Customs plays
a leading role in the fight against illicit drugs through our anti-smuggling efforts at the border and
our substantial air support to interdict illegal narcotics at the source Treasury's anti-narcotics
role is also pursued through anti-money laundering activities, efforts to reduce narcotics-related
violent crime, and demand reduction programs The following examples highlight in greater detail
the roles our individual bureaus play in Treasury's efforts to achieve the goal of reducing
trafficking. smuggling. and use of illiCit drugs
The Customs Service has the pnmarv role for the Treasury Department -- and one of the
primary roles for the United States -- In Interdicting drugs and other contraband at the border, and
in ensuring that all goods and persons entering and eXiting the United States do so in accordance
with the law. The Customs Service dlsc(wers or seizes more illegal drugs than all federal
authorities in the United States combined each year
Customs has tremendous responsibililies As you know, Customs must deal with
significant challenges in its efforts to execute Its drug interdiction mission For example. the
Customs Service processed o . . er 460 million people. over 139 million land. air and sea carners,
and $955 billion wonh of Imported merchandise Customs performed the initial checks.

4

processes, and enforcement functions for over 40 federal agencies and applied hundreds of laws
and regulations. It performed these tasks by servicing more than 300 ports of entry sprawled
across 7,000 miles ofland border, and 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 $22 billion in revenue for the United States in the fonn 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. Customs seized
1.116.000 pounds of illegal drugs in FY 1998. exceeding its target of953,OOO pounds. Customs'
increase in seizures resulted, in large measure. from Operation Brass Ring, a six month effort to
increase the amount of narcotics seized
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 also remains an active participant in multi-agency criminal investigations. and
continues 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' FY 2000 budget proposal includes increases for integrity awareness and training
initiatives. and non-intrusive inspection technology and automation. all of which will help us
achieve our goal of maintaining the best possible workforce while reducing the trafficking and
smuggling of illicit drugs in an effective and efficient manner.
We also are proud of such efforts as ATF's campaign against armed narcotics traffickers,
through its Achilles Program. and Youth Crime Gun Interdiction Initiative. 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 efforts such as ATF's GREAT
program
Goal: Combat Financial Crimes and !\loney Laundering

One of the Treasury Department's most important missions is the fight against money
laundering and financial crimes Treasury's unique structure permits us to use both our regulatory
and investigative expertise to follow the money trail and thus undermine criminal enterprises.
Since our last appearance before you, there have been several developments in this area. For
example, as mentioned earlier, the Treasury Department, In conjunction with federal, state. local
and private sector entities, is now in the final stages of developing a national money laundering
strategy as directed by the Money Laundering and Financial Crimes Strategy Act of 1998. The
Office of Enforcement has taken the lead role in thIS effort We have reached out to other
agencies as we have worked to develop the strategy, and we look forward to continuing work on
its further refinement and. ultimately, its implementation Indeed. we believe that the strategy will
make an important contribution to the battle against money laundering.
5

We have continued to press forward with international efforts against money laundering.
Last May, President Clinton announced the Administration's International Crime Control Strategy
(ICCS), which includes as one of its goals countering international financial crime. Treasury's
Office of Enforcement and its law enforcement bureaus played an active role in the development
of the ICCS and continue to play important roles in its implementation. As advances in
technology and the removal of other 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. This,
too, is a component part of the ICCS and an area in which FinCEN, in particular, is actively
involved.
Also, we have continued to strengthen the capability of our bureaus to fight money
laundering in a coordinated fashion Treasury Enforcement's Financial Crimes Steering
Committee, established in 1998, brings together the full spectrum of Treasury agencies that playa
role in efforts to combat financial crime This group currently oversees an interagency working
group that is developing an action plan to combat an insidious form of drug money laundering the Colombian Black Market Peso Exchange.
In furtherance of our goal of protecting the integrity of our nation's financial systems, we
are also focused on continuing to develop 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 the
Secret Service's overseas presence to combat more effectively 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.
Recognizing the importance of our combined efforts to combat this problem, in 1998, Secretary
Rubin asked Attorney General Reno and the Justice Department to coordinate with Treasury in
working with the Sentencing Commission to review and enhance the guideline ranges for
imprisonment in counterfeiting cases
Some of our bureaus' individual efforts in the fight against money laundering and financial
crimes include
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 1998, Customs' money laundering
investigations resulted in 1,035 arrests and 928 criminal indictments. Its investigative strategy is
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 In this context, I note the significance of Operation Casablanca, the largest drug
money laundering investigation in U S history, which to date has resulted in the arrests of 168
individuals While I will defer to Commissioner Kelly to discuss the public details of this ongoing
investigation, I note that this case represents a fine example of the important work that Customs is
doing to eliminate the scourge of money laundering
6

Secret Seryice
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. Because United States currency is counterfeited around the globe -approximately 70 percent of all counterfeit currency detected domestically is offoreign origin -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 at 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
In addition to its work with the private sector, the Secret Service plays an active role in
law enforcement task forces aimed at identifying and targeting fraud schemes intended to
victimize individuals. banks. credit card issuers. or other financial institutions.
FinCEN
While Customs. Secret Service and IRS-CID are the financial crime investigators, the
Financial Crimes Enforcement Network serves as Treasury's principal support arm for such
investigative efforts As its name states. FIOCEN 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. to maximize information-sharing among
these communities. and thereby further efforts to prevent and detect money laundering activities.
FinCEN's FY 2000 budget request focuses on those programs that are at the core of its
support to law enforcement the Gateway system. direct case support to law enforcement;
sophisticated research and analysis support to the regulatory and law enforcement communities;
expanding the use of technology tools such as datamines to Bank Secrecy Act databases:
expansion of secure communications. finanCial intelligence unit development. and a study to gauge
the magnitude of money laundering Your support for FinCEN' s FY 2000 budget request --

which reflects a commitment to essential programs rather than an expansion into new initiatives -will strengthen the quality of the support that it provides to law enforcement.

IRs-cm
Although IRs-cm 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 of IRS-CID. They are known for their ability to "follow
the money trail" and stop the criminal when no one else can. IRS-Cm 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. IRS-CID
continues to play an invaluable role in Treasury Enforcement's efforts to combat the range of
financial crimes facing us. and we look forward to our continued partnership with them.
Goal: Fight Violent Crime

One of the goals of the Clinton Administration has been to reduce violent crime in our
nation's streets. Treasury is working to fight violent crime by arresting the most violent anned
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. During FY 1998. ATF received over
180.000 gun trace requests from federal. state, local and intemationallaw enforcement agencies
It also expanded its Youth Crime Gun Interdiction Initiative (YCGII) from 17 to 27 cities.
focusing on the sources of firearms recovered from juvenile and youthful offenders.
To safeguard the public from arson and explosives incidents. ATF maintains the highest
standards of investigative expertise and state-of-the-art technology to respond most effectively to
those incidents We 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
On the international front. we continue to work to maintain appropriate firearms
importation and international illegal firearms trafficking policies and to share crime gun tracing
and anti-smuggling expertise with the InternatIonal community in order to combat illegal firearms
trafficking

As will be clear from Director Magaw' s testimony. ATF plays the leading role for
Treasury -- indeed for 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 arsons. illegal firearms trafficking. and other firearms and explosives violations.

8

In an effort to reduce violent crime, ATF focuses its investigative efforts on violent
criminals, career criminals, armed narcotics traffickers, violent gang offenders, and domestic and
international firearms traffickers that supply the illegaJ firearms market. It strives to deny
criminals, gang members and juveniles access to firearms, sa!eguard 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 identitying 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 YCGII, which was launched by President Clinton, ATF continues its efforts to
further reduce the illegal trafficking of firearms to gang offenders and juveniles. As we reported
to you last year, 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 10
additional cities were added to the program 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, and ask you to support expansion of the program for an additional
10 cities (total of 37) in FY 2000
In addition, as recently announced, the Administration is working to deny prohibited
persons access to firearms, including those sold at gun shows. The President's FY 2000 budget
includes additional resources for enhanced overall firearms law enforcement.
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 34 percent clearance
rate for the arsons under investigation, a rate that is more than twice the average rate for arson
crimes in general In late 1998, the Attorney General established the National Task Force on
Violence Against Health Care PrOViders Thl~ Jomt effort is required to effectively address the
recent increase of violence against women's health care clinics and their providers nationwide.
ATF. having the largest contingency on the Task Force, contributes its expertise in arson,
explosives and firearms and brings 16 years of Investigating abortion clinic bombings and arson
incidents It is also an active participant In the Southeast Bombing Task Force, which is
investigating, among other things, the 1QC)6 bombing at Olympic Park in Atlanta.
ATF assists state and local authontles 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, particularlv arson-for-profit, and post-blast bombing investigation.
To ensure that its vital work continues in as safe and secure an environment as possible,
9

the President's budget supports the proposed new ATF headquarters building. We ask you to
support this request. Overall, the President's FY 2000 budget request will enable ATF to
continue its critical work in the battle against violent crime.

Counterterrorism
One essential aspect of our anti-violent crime efforts is Treasury's contribution to our
nation's antiterrorism fight. Treasury enforcement bureaus have the legal authority and the
essential expertise to perform missions that are critical to the success of the counterterrorism
effort Treasury's counterterrorist activities are not new, but derive from authority that Treasury
has exercised for decades and from expertise developed in the course of Treasury's longstanding
performance of its missions.
Treasury enforcement bureaus provide immediate and effective response to terrorist
attacks, guard against the smuggling of weapons of mass destruction, enforce laws directed at the
most common instruments of terror, protect potential terrorist targets, and enforce economic
sanctions against countries and groups that promote terrorism. Treasury bureaus are equipped
not only to respond to specific threats and attacks, but also to conduct the proactive operations
within their areas of expertise that help defeat terrorist plans.
Treasury's central role in the counterterrorism effort is performed by ATF, Customs, the
Secret Service, the Office of Foreign Assets Control (OFAC), the FinCEN and the FLETC As
set forth above, ATF investigates bombing and arson cases Customs, as the lead agency
responsible for enforcement of anti-smuggling laws, is charged with preventing the illegal import
or export of nuclear, hazardous, or otherwise illegal materials OF AC enforces sanctions laws,
including those directed at governments that sponsor terrorism The Secret Service is responsible
for protecting the President, the Vice President. foreign dignitaries, and other designated
protectees.
In addition, Treasury's unrivaled expenrse on financial crime investigations provides an
invaluable mechanism for sanctiomng those who commit terrorist acts. The IRS/CID, the Secret
Service and FinCEN figure prominentlv In the discovery and analysis of financial information
about terrorists and their orgamzatlons The I RS IS also the sole agency responsible for
investigating income tax violations. comnl()nlv committed by groups that advocate violence
against the U S Government
Coordination among agencies IS cruCial to the fight against terrorism, and law enforcement
agencies throughout the federal government have always recognized and relied upon the essential
work of Treasury's law enforcement bureaus As eVidenced by the response to the World Trade
Center bombing, Oklahoma City bombing. and Unabomber investigation, Treasury closely
coordinates with Justice and other federal. state. and local law enforcement. This coordination
continues into the policy making arena. where T reasurv works closely with Justice on the
Attorney General's Core Agency Group against terrorism. and participates actively in the NSC's
coordination groups on Weapons of Mass Destrucllon and counterterrorism
Goal: Protect Our Nations uadt'rs and Visiting World Leaders
10

As I noted at the outset of my testimony, as the world becomes an increasingly more
complex and dangerous place, Treasury's law enforcement mission grows in complexity as well.
Treasury is striving to manage the ever-changing nature of threats by developing, acquiring and
deploying necessary countermeasures. The Secret Service, as described below, continues to carry
out its critical responsibility of protecting the President, the Vice President and other specially
designated protectees against any potential threat.
Secret Seryice

The Secret Service must accomplish its protective and investigative missions in an
increasingly dangerous society--and it has done so quite effectively. During FY 1998, the Service
successfully managed protective security for its protectees as well as for several major events.
Importantly, last year, the President signed Presidential Decision Directive 62, which names the
Secret Service as the lead agency for security design, planning and implementation at designated
national special security events.
The Service has also continued its efforts to combat the increasing threat from weapons of
mass destruction, and is working to develop measures to ensure the safety of the President and
other protectees against the threat of such weapons. In FY 2000, the Secret Service looks
forward to training additional chemicallbiological teams to support its protective responsibilities
Also during FY 2000, the Service will continue its preparations for the 2000 Presidential
campaign and has budgeted $35,247,000 to come from the Department's Asset Forfeiture Fund
to cover the costs of providing protection for the candidates and nominees involved in the
campaign and the two national party conventions 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 trainmg of federal law 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 71 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 traming while keeping 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, the Office of Enforcement is

11

working with FLETC to 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-theart training but long-term budget savings as well. We will also continue to provide international
training in support of the International Law Enforcement Academies.

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 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. Currently, 71 agencies participate in more than 200 different training programs 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. Through the National Center for State and Local Law
Enforcement Training, FLETC also has been an excellent resource for providing over 50 highly
specialized advanced training programs to State and local law enforcement officers within the
United States These programs include training related to hate-bias crime issues, computer and
financial fraud and rural drug enforcement matters
Over the last several years, the FLETC has seen an unprecedented increase in its
workload. Current projections indicate continued workload growth for several more years.
During FY 1998, FLETC graduated 25,762 students representing 120,399 student-weeks of
training, the largest workload in the history of the Center In FY ) 999 the workload is expected
to grow to 35,315 students As Director Basham notes in his testimony, the majority of this
increase is attributable to recent Congressional and Administration initiatives to control
immigration along our nation's borders Other contributing factors include counter-terrorism
activity and security enhancements at federal facilities and new federal prisons coming on line.
To permit FLETC to train !he 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 ) 989
and when fully implemented. will permit FLETC to achieve its goal of further developing,
operating. and maintaining state-of-the-an facilities and systems responsive to interagency training
needs In addition to relying on temporarv training facilities to accommodate the increased
workload, the Center has also implemented a dual-shift schedule at Glynco in order to
accommodate the training being requested In FY 1999
In addition to its domestic training responsibilities. the FLETC is also being called upon to
playa larger and more imponant role In support of the Administration's and Congress' foreign
policy initiatives involving the training of foreign law enforcement officials Indeed, as Director
Basham reports. foreign training requests have grown substantially in recent years, with student
weeks of training increasing by almost 200 percent since 1994

12

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. The FY 2000 President's budget
request will enable Treasury's law enforcement bureaus to meet the current chaJlenges 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
I would like to express my appreciation for aJl the support the Subcommittee has provided
us. 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 Subcommittee may have
Thank you.

-30-

)3

..----________

NEWS

~8~q~------------

OmCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W .• WASHINGTON, D.C .• 20220. (202) 622.2960

February 23, 1999

Weekly Release of U.S. Reserve Assets
The Treasury Department today released U.S. reser:e assets data for the week ending
February 19, 1999.
;\s indicated in this table, U.S. reserve assets totaled S7 6, 162 million as of February 19 1999
down from $77,831 million as of February 12,1999.
.
'
,

u.s. Reserve Assets
(millions of US dollars)

1999

Total

Special

ESF

SOMA

9,755

12,314

19,178

25,538

9,553

11,734

18,586

25,244

Drawing

Assets

February 12, 1999

77,831

11,046

February 19, 1999

76,162

11,046

Week E1ldillg

Reserve
Position in
IMF 2141

Gold
Stock 11

Reserve

Foreign
Currencies

•

Rights

21

31

1/ Gold stock is nlued monthl\' at $42.2222 per fine troy ounce. Values shown are as of December 31, 1998. The ~o\'ember 30,
1998 \'alue was S11,041 million.
2/ SDR holdings and the resen'e position in the II\IF are based on II\[F data and re\'alued ill dollar terms at the offiCIal
SDR/ dollar exchange rate. Consistent with current reporting practices, II\[F data for February 12, 1999 are final. Data for SDR
holdings and the resen'e position in the II\[F shown as of Februan' 19, 1999 (in italics) renect preliminary adjustments by the
Treasurv to the February 12, 1999 Ii\IF data in light of U.S. sales of SDR to other II\[F member countries. (See supplemental note
below.)
3/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Resen·e's System Open :\Iarket
:\ccount (SOI\L-\). These holdings are \'alued at current market exchange rates or, where appropriate, at such other rates as rna\' be
agreed upon by the parties to the transactions,

~/ Includes SDR 361 million loan to the IMF under the General "-\rrangements

to Borrow (GAB) in July 1998, and an SDR 619

million loan to the II\IF under the ~ew Arrangements to Borrow (NAB) in December 1998.

Supplemental Note:

For the u'eek ended Febmary 19, ! 999. the change in S DR holdings relatit'e to the pnor lJ'eek rejlects the sale of SD R to anotber IAIF member.

RR-2911

HIGHLIGHTS OF TREASURY OFFERING
OF 52-DAY CASH MANAGKlImNT BILL

February 23, 1999
Offering Amount .•....•.•••••••••••••••.. $42,000 millio11
Description of offering:
Term and type of security .•.....•••.•..•
COSIP nmnber • . . . • • . • . . . . . . . . . . . . . . . . . . . .
Auction daee .•••.•.•••..•••..•.•.••.••••
:Issue daee ..••••••••.•.••••.•.••••••.•••
Maturity date ••.••••.•••••..........••••
original issue date •..............••.•.•
CUrrently outstanding .••.••.•.••••••••••
Min~ bid amount and multiples •.•.•.••

52-day Cash Manageme11t Bi11
912795 BJ 9
February 25, 1999

March 1,1999
April 22,1999
October 22, 1998
$31,007 million
$1,000

Submission of Bids:
Noncompetitive bids . • . . . . . . . . . . Aecepted in full up to $1.000,000 at
the highest accepted discount rate.
Competitive bids . . • . . . . . . . (1) MUst be expressed as a discount rate with
two deCimals, e.g., 7.10\.
(2) Ret 10119 positio11 for each bidder must
be reported when the sum of the total bid
amount, at all di.count rate., and the net
10119 position is $1 billio11 or greater.
(3) Net long posieion must be dete~ned 218 of
one half-hour prior eo ehe closing t~ for
receipt of competitive eenders.
MaX~

Recognized Bid
at a ..$1n91e yield .•••.•...•... 35\ of public offeri.ng

Maximum Award •.•..•.•••.•......•. 35\ of public offering
RQCQipt of TQndgra:
Noncompeeitive tend.r •.•.....•. Prior to 12:00 110011 Eastern Standard

t~

on

auctiOll d.-.y

Competitive tenders . . . . . . . . . . . . Prior to 1:00 p.m. Eastern Standard timM on
auctio11 day
Payment Terms . . . . . . . . . . • . . . . . . . . . By charge to a funds account at a F@deral
. . . . rve Bank on issue date, or paym~t of
full par &mOunt with tender.

DEI' A l{ T

~'J

E NT

0 F

THE

TREASURY

T It E A S ['

n

Y

NEWS

OFFICE OF PUBLIC AFFAIRS _IS00 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C.- 20220. (202) 612-2960

l!3mAR.GOBD UNTiL 2: 3 0 P. M.

Contact:

February 23, 1999

Office of

F~nanc~g

202/219~33S0

TREASURY TO AUCTION CASH MANAGEMRN'l' BILLS

The Treasury w~ll auc~on approximacely $42,000 million of 52-day Treasury
cash management b~lls to be issued March I, 1999.
Competitive and noncompeeitive tenders will be received at all Federal Reserve
Banks and Branches. Tenders will E2! be accepted for bills to be mainta~ed on the
book-entry records of the Department of the Treasury (TreasuryDirsce).
Tenders ~11
not be received at the Bureau of the Public Debt, Washington, D.C.
Additional amounts of the bills may be issued to pederal Re8erve Banks as
agents for foreign and international monetary authoritiee at the highest discount
rate of accepted competitive tenders.
The auction being announced today viII be conducted in the single-price auction
format.
Al.l competitive and noncompetitive awards will be at the highest d.i.scount
rate of Accepted competitive tenders.
This offar£ng of TreaBury securitieB i8 governed by the terms and conditions
8et forth :i.n the Uniform OffAr£ng Circular for che Sale and issue of Marketable BookEntry Treasury Bills, Notes, and Bond1:l (31 CPR Part lS6, as amended).
~:
Competitive bids in cash management bill auctions must: be expressed as
a discount rate with ~ dec~ls, e.g., 7.10%.
Deta~ls

about the new

8ecuri~

are given in the attached offering highlights_
000

Attachment

RR-2972

DEPARTl\'lENT

OF

THE

TREASURY

•

1789

OmCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUF., N.W. • WASmNGTON, D.C.• 20220. (202) 622-2960

EMBARGOED UNTIL 10:00 A.M. EST
Text as Prepared for Delivery
February 24, 1999

TREASURY SECRETARY ROBERT E. RUBIN
TESTIMONY BEFORE THE SENATE BANKING COMMITTEE

Mr. Chairman, Members of this Committee, I appreciate the opportunity to discuss the
Administration's views on financial modernization, including the draft bill circulated by the
Chairman last week.
Mr. Chairman, as we approach financial modernization legislation, the Administration's
overall objective has always been to do what best serves the interests of consumers, businesses
and communities, while protecting the safety and soundness of our financial system. We will
support legislation that achieves those aims.
Let me begin by noting that the U.S. financial system is stronger and more competitive
than ever. Abroad, the United States is dominant in investment banlcing and highly competitive in
other segments of financial services. U.S. commercial banks are more competitive today than at
any time I can remember. The problem our financial services firms face abroad is more one of
lack of access, than one of lack of competitiveness.
Financial modernization is occurring already in the marketplace through innovation and
technological advances. With the lessening of regulatory barriers, financial services firms are
offering customers a wide range of financial products. Banks and securities firms have been
merging~ banks are selling insurance products; and insurance companies are offering products that
serve many of the same purposes as banlcing products -- all of which increases competition and
thus benefits consumers.

RR-2973

-

-

For press releases, speeches, public schedules and official biographies, call our 24.Jzour fax line at (202) 622-2040

Financial modernization will continue in the absence of legislation, but it can, with good
legislation, occur in a more orderly fashion. Treasury has long believed in the benefits of such
legislation, but we have also been clear that if this is going to be done, it needs to be done right.
Let me also say that while we favor financial modernization legislation, it does seem to me
that when you look at the developments around the world over the last couple of years, and when
you look at the size of mergers here in the United States over the same period, there are
legitimate concerns about financial modernization with respect to economic concentration and
systemic risk.
Let me tum now to the draft bill. The bill, rightly in our view, takes the fundamental
actions necessary to modernize our financial system by repealing the Glass-Steagall Act's
prohibitions on banks affiliating with securities firms and repealing the Bank Holding Company
Act prohibitions on insurance underwriting. The bill also continues to allow bank insurance sales
unencumbered by anti-competitive restrictions. I believe we could construct a bipartisan
consensus on these provisions.
That said, the draft bill and its appendix of "undecided issues" contain significant
provisions that are unacceptable to the Administration, and we would oppose the bill in its current
form. We have five basic objections to the draft bill and its appendix -- its prohibition on the use
of subsidiaries by larger banks; its weakening of the effects of the Community Reinvestment Act
(CRA); its extensive mixing of banking and commerce; its provisions with respect to the Federal
Home Loan Bank System; and what we view as inadequate consumer protections.
First, the bill would prohibit financial services firms that include large banks from
conducting new financial activities through bank subsidiaries -- and force them to conduct those
activities exclusively through bank holding company affiliates. Although the bill does permit
smaller banks -- those with under $1 billion in assets -- to engage in new financial activities
through subsidiaries, it prohibits all other banks from doing so. This provision is unacceptable to
the Administration.
With the safeguards we have proposed, subsidiaries and affiliates are absolutely identical
with respect to the ability of a bank to transfer any subsidy that may exist in the bank. And, again
with the safeguards we have proposed, subsidiaries and affiliates are absolutely identical with
respect to safety and soundness -- except in one respect, which I will discuss in a moment, in
which subsidiaries are actually superior with regards to banks' safety and soundness. The
safeguards we have proposed (which the draft bill includes in part) are as follows:
•

Every dollar a bank invests in a subsidiary would be deducted from the bank's
regulatory capital, just as is the case with every dollar a bank pays as a dividend to
its parent holding company for investment in an affiliate. A bank would have to be

2

well-managed and well-capitalized before and after such investment is deducted
from its capital and on an ongoing basis.

•

A bank could not invest any more in a subsidiary than it could pay as a dividend to·
its parent holding company for investment in an affiliate.

•

The rules governing loans from a bank to a subsidiary would be exactly the same
as they are for a loan from a bank to an affiliate.

I would add that these restrictions on funding the subsidiary make this proposal
fundamentally different from the European model of universal banks.
I would also observe that the draft bill permits subsidiaries of small banks to engage in the
activities we have proposed.
Thus, there are no public policy reasons to deny the choice of a subsidiary; however, there
are three important policy reasons to allow that choice.
First, financial services firms should, like other companies, have the choice of structuring
themselves in the way that makes the most business sense and this, in tum, should lead to better
service and lower costs for their customers.
Second, the relationship between a subsidiary and its parent bank provides a safety and
soundness advantage. Firms that choose to operate new financial activities through subsidiaries
are, in effect, keeping those assets available to the bank rather than transferring them outside the
bank's reach. If the bank ever needed to replenish its capital, the bank's interest in the subsidiary
could be sold, solely at the behest of the bank. If the bank were ever to fail, the FDIC could sell
the bank's interest in the subsidiary in order to protect the bank's depositors and the deposit
insurance fund. Forthis reason, the FDIC, a neutral observer with a paramount interest in safety
and soundness and protecting the deposit insurance fund, its current chairman and three former
chairmen -- two Democrats and two Republicans -- have stated that the subsidiary option is
actually preferable from the standpoint of safety and soundness and protecting deposit insurance
funds.
I would also like to observe that currently, under the Federal Reserve's jurisdiction,
foreign banks underwrite and deal in securities through subsidiaries in the United States, and U. S.
banks conduct securities and merchant banking activities abroad through so-called Edge Act
subsidiaries. Foreign bank subsidiaries hold over $450 billion in assets, and Edge Act subsidiaries
hold about $250 billion in assets. Thus, there is a proven history of subsidiaries conducting these
activities.

3

Third, one of an elected Administration's critical responsibilities is the fonnation of
economic policy, and an important component of that policy is banking policy. In order for the
elected Administration to have an effective role in banking policy, it must have a strong
connection with the banking system. That connection is currently provided by the Office of the
Comptroller of the Currency, which regulates national banks. We believe that if the larger
national banks were prohibited from engaging in new activities through subsidiaries, then
gradually such banks would gravitate away from the national banking system, and this critical
connection will be lost.
We also believe it is very important that the Federal Reserve Board maintains its strong
connection with the banking system. We believe that allowing banks the choice of conducting
non-bank financial activities, either through an operating subsidiary or an affiliate, serves the
purpose of having both the elected Administration and the Federal Reserve strongly involved in
banking policy.
With respect to the subsidiary option, we support three additional steps.
First, we proposed last year joint Federal Reserve-Treasury rulemaklng to define new
financial activities. We believe that this arrangement would promote consistency and would
eliminate the potential for unhealthy competition or laxity in defining new activities. The draft bill
establishes a process whereby the Treasury could petition the Federal Reserve to act, and veto its
decisions. This arrangement is less likely to produce consensus than true joint rulemaking.
Second, we favor functional regulation. We support provisions making clear that
securities and insurance regulators have the same jurisdiction over subsidiaries as over affiliates.
Third, we have no objection to requiring the largest banks to retain a bank holding
company, thereby assuring the Federal Reserve a central supervisory role regardless of whether
the bank operates with affiliates or subsidiaries.
Our second major objection to the draft bill is its effect on the Community Reinvestment
Act.
CRA encourages a bank to serve creditworthy borrowers throughout communities in
which it operates. Since 1993, a greatly invigorated CRA has been a key tool in the effort to
rebuild low and moderate income communities. In fact, since 1993, the number of home
mortgage loans extended to African Americans increased by 58 percent, to Hispanics by 62
percent, and to low- and moderate-income borrowers by 38 percent, figures all well above the
overalI market increase. We believe strongly that it is important to maintain CRA, and we are
opposed to any efforts to weaken CRA.

4

The draft legislation includes a so-called "safe harbor" provision specifying that a
satisfactory eRA rating in a bank's most recent examination conclusively establishes a bank's
eRA performance, unless a public comment is filed that provides substantial verifiable information
to the contrary.

•

The proposal would effectively bar banking regulators from reviewing a financial
institution's eRA performance when assessing applications, such as for mergers or
acquisitions -- absent public comment. eRA reviews during applications are
important, because eRA ratings can become "stale," circumstances can change
rapidly after an examination, examiners may miss evidence with respect to a
particular market, or applications may involve new markets not covered by an
earlier examination.

•

We believe that the facts and analysis with respect to eRA performance are most
effectively brought forth when the interested consumer and community groups
participate actively. However, these groups do not have the resources to do so
routinely, and they participate primarily when the bank applies to carry out a major
transaction. This is how these groups can have the greatest impact.

•

In addition, the provision imposes the burden of proof in the context of
applications on the community-based organization to come forward with
"substantial verifiable information," despite the fact that the financial institution,
and their regulators, are in a better position to have the relevant information
necessary to determine the veracity of the complaint.

Of equal concern, is a so-called "anti-extortion" amendment contained in the "undecided"
portion of the draft bill. We are, of course, opposed to extortion, and extortion is illegal under
state and Federal law. I have been informally advised by the Department of Justice -- and I
would imagine that they would be willing to share their views on this with you as well -- that this
proposed addition to Federal law, with its broad and vague terms, would extend substantially
beyond existing law and could criminalize normal, legitimate, arms-length transactions and
productive cooperation between banks and community groups. In addition, because of the
resulting uncertainty, it could chill precisely the activity that eRA is intended to encourage. For
example, banks make grants to community-based organizations to conduct home ownership
counseling, which increases the bank's ability to make safe and sound loans to low-income
borrowers. Under this legislation, such activity could be discouraged because the participants
would be uncertain about whether that activity is illegal.
Finally, we believe that any bank seeking to conduct new financial activities should be
required to achieve and maintain a satisfactory eRA record. The draft bill fails to include this
requirement. If we wish to preserve the relevance of eRA at a time when the relative importance
of bank mergers may decline and the establishment of non-bank financial activities will become

5

increasingly important, the authority to engage in newly authorized activities must be connected
to a satisfactory CRA performance. Achieving and maintaining an adequate CRA record furthers
the long standing public purpose of banks: to serve the convenience and needs of their
communities.
Our third objection to the draft bill concerns affiliations between depository institutions
and non-financial firms. The "undecided" portion of the bill authorizes a "basket" of nonfinancial activities that can grow to 25 percent of the revenues of the organization, and would
authorize new "unitary bank holding companies." The main text of the bill would continue
current law as to the powers of the unitary thrift holding companies, thus allowing commercial
companies to continue acquiring thrifts. In these ways, the draft bill would allow a dramatically
expanded mixture of banking and commerce -- far more than any bill that Congress has
considered over the past seven years. We would have serious concerns about these mixtures of
depository institution activity and commerce under any circumstances, and these concerns are
heightened as we reflect on the financial crisis that has affected so many countries around the
world over the past two years.
Our fourth objection concerns provisions with respect to the Federal Home Loan Bank
System that are also in the "undecided" section. We recognize the desire of many Members to see
the System lend more to community banks. Indeed, we believe that the System should focus on
such lending, not on using taxpayer funds for arbitrage activities and overnight lending which
currently constitute so much of its activities. Changing this important System perhaps should be
done separately. But if it is to be addressed in this legislation, we believe changes in the FI-ll.-B
System should occur only in the context of comprehensive reform.
Our final objection concerns the relative absence of provisions designed to inform and
protect consumers of the new financial products authorized under the bill. If Congress is to
authorize large, complex organizations to offer a wide range of financial products, then
consumers should be guaranteed appropriate disclosures and other protections.
Mr. Chairman, let me reiterate: our nation's financial institutions are strong and highly
competitive, both here and abroad. In our view. financial modernization legislation can produce
significant benefits, but the job must be done right. We in the Administration look forward to
working with you and others in Congress to construct good financial modernization legislation
that serves the interests of consumers. businesses and communities, while protecting the safety
and soundness of our financial system. Thank you very much.

-30-

6

The backdrop for my remarks is the development of the global economy over the last
few decades. Liberalized trade and financial flows have contributed to increased investment,
output and efficiency, all of which has benefitted millions of people around the globe. A
central lesson of this period - and it is a lesson that holds true despite the financial crisis of
the last year and a half - is that, in order to succeed in the global economy, nations must be
able to attract private capital to foster growth. There are many dimensions to an environment
conducive to attracting private capital -- sound macroeconomic policies, a strong financial
system, openness to trade and investment, and an educated work force to name a few. And
among these dimensions I would include here is good governance, in particular, effectively
combating corruption.
Corruption disrupts normal business and public policy decision-making by benefitting
the few at the expense of the majority. It distorts the allocation of financial and human
resources to inefficient uses often inconsistent with a nation's social, political and economic
objectives and needs. It discourages small business, entrepreneurs, and consumers who simply
cannot afford the costs of bribery. It discourages foreign investment. And it damages the
respect for law and public and financial institutions, undermines the credibility and
effectiveness of both elected and appointed government officials, and creates an environment
conducive to crime in the private sector, including organized crime.
The economic dimension of corruption has been demonstrated over the last year and a
half, as the world has experienced a financial crisis. In some countries, corruption increased
vulnerability to crisis. In others. corruption was a significant impediment to implementing the
necessary response and a major obstacle to restoring the confidence that is so critical to
countries' recovery and stability.
In some countries. corruption is so pervasive it can be a threshold economic issue that
undermines a country's ability to succeed in the global economy.
Of course, no region or nation -- developed or developing -- can claim purity in this
area. Corruption exists everywhere. But corruption is especially troubling in developing
countries. By diverting the scarce resources that are needed so badly for critical priorities such
as health, education and housing. and more generally. the impact on a less developed economy
can be so much greater.
Against that backdrop, it seems to me there are at least five elements critical to
effectively combating corruption.
First. nations must have good. clear laws and regulations that can be easily and reliably
enforced. This. in tum. requires courts that are adequately funded and independent of political
pressure. as well as honest. well-trained and adequately compensated regulators, judges,
prosecutors and law enforcement officers. All of this is a very tall order, especially in poor
countries that can not afford proper training or adequate compensation, and this puts an even
greater onus on the international community to help.
2

DEPARTMENT

OF

THE

TREASURY

~/78~9~. . . . . . . . . . . . . . . . . ..

....................

OmCE OF PUBUC AFFAIRS -1500 PENNSYLVANlAAVENUE., N.W. - WASIDNGTON, D.C. - 20220 - (202) 622·2960

FOR IMMEDIATE RELEASE
Text as Prepared for Delivery
February 24, 1999

STATEMENT OF TREASURY SECRETARY ROBERT E. RUBIN
A GLOBAL FORUM ON FIGHTING CORRUPTION: SAFEGUARDING INTEGRITY
AMONG JUSTICE AND SECURITY OFFICIALS
It is a pleasure to sf)f'..ik with you today. I believe it is enormously important that so
many of you have traveled long distances to be here in Washington for this conference,
convened by the Vice President, on the importance of combating corruption.

The fact that so many world leaders, representing some 80 countries, and nearly as
many multilateral and non-governmental organizations, have gathered here to discuss the
importance of combating corruption demonstrates exactly that, the importance of this issue.
can remember not so long ago when discussing corruption in any conference like this would
have been unthinkable, taboo. On a personal note, I was in Kenya a few months ago and gave
a speech on corruption. And I thought it was remarkable, regarding both the level of interest
and the wide ranging discussion we held afterwards, which included comments by students,
government officials, and representatives from non-governmental organizations about the
impact of corruption on their society. As a result of the leadership of the Vice President, and
the work of others in this Administration. of organizations like the World Bank, the IMF, the
OECD, and groups such as Transparency International. there is an increased international
awareness of the corrosive effect of corruption and real focus on strategies to combat it.
Corruption is very much a social and political issue. An accountable, responsive and
honest government is central to a government's legitimacy and, ultimately, to political and
social stability. As evidence of this. there are many instances of governments that have lost
public support in part because of corruption.
Today I wish to focus on how corruption is also very much an economic issue. Then I
will discuss how sovereign nations -- in both the developing and industrial world and through
the international institutions -- can address this issue.
RR-2975

---------------------------------------------------------------------------------For press releases. speeches. public schedules and official biographies. call our 24-hour fax line at (202) 622·2040
----~-----------------------------------------------------------------------------

In addition, industrial nations can help by providing technical assistance to ·developing
nations who are building the sorts of institutions I mentioned that are critical to combating
corruption. Treasury has cr~ted a specific program to work in this area - with Treasury's
help, for example, the government of Bulgaria has developed a national strategy to combat
corruption, passing a financial disclosure law and developing an internal corruption
investigative unit within the Ministry of Interior among other activities ..
Separately, the international financial institutions -- including the International
Monetary Fund, World Bank, and the Regional Development Banks -- have been active in
combating corruption and should take further steps. The IMF has developed a code of fiscal
transparency which calls for governments to accurately track and disclose expenditures and
thereby helps hold them accountable for their spending decisions. However, we believe the
IMF should include more explicit consideration of weakness in governance in all Fund
programs and provide assistance conditioned on efforts to confront corruption.
The Multilateral Development Banks are in a unique position to fight corruption. With
annual disbursements of about $50 billion per year, the MOBs can have real impact through
the conditions they place on loans and with the standards they set for themselves. Recently, the
World Bank and the African Development Bank agreed to put in place systems linking new
lending to performance on key governance and corruption criteria. The World Bank is
providing direct assistance for anti-corruption programs in many countries and has
strengthened its own international anti-corruption systems.
But the IFIs still need to do more to help countries help themselves combat corruption.
The IMF needs to raise the bar still farther on transparency in member countries. The MDBs
need to establish clearer and more uniform procurement rules and documents of the highest
standard. All of us need to work with the MDBs and IMF to focus their efforts more on
providing appropriate incentives and technical and financial assistance to help countries
develop anti-corruption laws and anti-corruption efforts.
Finally, and maybe most fundamentally. the international community is gaining a
consensus that it is important for the IFls to target development assistance to those countries
that can use it the best. In making Judgements about assistance, corruption is -- and must be __
an increasingly important factor for the lFls. Similarly. it is very important for the IFIs to cut
off assistance when corruption undermInes the viability and effectiveness of their reform
programs. Scarce development resources should not be wasted in countries that are not
prepared to confront and combat corruption seriously, but rather should be channeled to
countries that will use the assistance most effectively.
Let me conclude by saying again that it is extremely important you came to Washington
to discuss this critical issue and that the Vice President and so many other world leaders have
exercised their strong leadership on thIS issue. As I said earlier, conferences like this one
demonstrate that with intensified international focus. corruption is becoming a mainstream
issue. In fact. just by shining a light on corruption. and its corrosive effects on a society and
4

Second is to eliminate unnecessary controls on the economy and reduce state
involvement in the economy. Reducing both the scope and the administrative discretion of
government reduce the potential for corruption. For example, the fewer licenses that need to
be granted and the fewer approvals that need to be obtained, the fewer opportunities there are
for bribes to be demanded and paid.
Third is to create a well-supervised, soundly regulated, and competitive financial
system that operates on a commercial basis and is not subject to credit decisions based on
personal or political connections.
Fourth is to increase the transparency and accountability of government operations and
decision-making. Shining light on the activities of government by publishing information
about its operations and decision making and by including public participation in those
decisions, is a powerful deterrent to corruption. Let me also add that a free and vibrant press
can make an enormous contribution here.
Fifth and finally is to create a sound civil service system with strict conflict of interest
rules, appropriate sanctions for malfeasance, and adequate compensation for employees. As I
have already mentioned, this last point may be particularly difficult for developing countries,
which may lack the resources to pay its civil servants adequate salaries. In some countries, it
may be desirable to reduce the size of the bureaucracy to enable the country to pay higher
wages.
A key part of strengthening the civil service system is creating strong, independent
anti-corruption investigative units with real authority and power. As I said earlier, no nation is
immune to corruption. In the United States we have placed a strong emphasis in our
government on creating units within the government, such as Inspectors General, to prevent
and combat corruption.
While much of the responsibility for putting in place these five elements to combat
corruption lies with developing nations. there is much the industrial world can do.
To begin, developed countries must deal directly with their own involvement in
developing country corruption. Corruption is a two way street and for every bribe taker, there
is a bribe giver. In 1977, the United States passed the Foreign Corrupt Practices Act, which
outlaws bribery by our businesses and Investors in other countries. For the last several years,
we have been urging the GECD countries to do more to discourage bribery. The GECD
Bribery Convention, which was signed in December 1997, and went into effect just a few days
ago, was a critical step in recogniZing the responsibility of industrial countries to discourage
the giving of bribes. While most of the GECD have ended the tax deductibility of bribes,
there are still several GECD countries that have not. and they should do so forthwith. We
urge vigorous monitoring of the implementation of the Convention, and would like to see more
work in the GECD Export Credit PartiCIpants Group to encourage increased efforts by official
export credit agencies to eliminate bnbery.
3

an economy, I believe we make progress in demonstrating how behavior that was once
tolerated, is now unacceptable and that those people who engage in it are subject to
condemnation. As a byproduct of that process, we may thus deter that behavior from
happening in the first place. But this is just a first step, albeit an important one. All of us
must continue to work together -- developed and developing nation, large and small, and the
international financial institutions - to combat corruption. And by doing so, I believe we will
lay the groundwork for stronger economies around the world, and benefit all of us. Thank
you very much.
, -30-

5

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, 1999

Office of Financing
202-2l9-3350

RESULTS OF TREASURY'S AUCTION OF 2-YEAR NOTES
Interest Rate:
Series:
CUSIP No:
STRIPS Minimum:

Issue Date:
Dated Date:
Maturity Date:

5%
V-2001
9128275C2
$40,000
High Yield:

Price:

5.009%

March 01, 1999
February 28, 1999
February 28, 2001

99.983

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

54%.

Accrued interest of $ 0.13587 per $1,000 must be paid for the period
from February 28, 1999 to March 01, 1999.
AMOUNTS TENDERED AND ACCEPTED (in thousands)

Competitive
Noncompetitive

$

PUBLIC SUBTOTAL
Federal Reserve
Foreign Official Inst.
TOTAL

Accepted

Tendered

Tender Type

$

26,226,880
1,163,618

$

27,390,498

15,004,998

2,571,000
2,000,000

2,571,000
2,000,000

31, 961, 498

$

Median yield
4.988%: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low yield
4.929%:
5% of the amount of accepted competitive
tenders was tendered at or below that rate.
Bid-to-Cover Ratio ~ 27,390,498 / 15,004,998

1.83

http://www.publicdebt.treas.gov
RR-2976

13,841,380
1,163,618

19,575,998

DEPARTlVlENT

TREASURY

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OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASillNGTON, D.C .• 20220. (202) 622-2960

FOR IMMEDIATE RELEASE
Remarks as Prepared for Delivery
February 25, 1999

"POLICY CHALLENGES FOR ASIA IN 1999"
DEPUTY TREASURY SECRETARY LAWRENCE SUMMERS
REMARKS BEFORE THE AMERICAN CHAMBER OF COMMERCE
SEOUL, KOREA

Thank you. It's good to be back in Seoul. The last time I was here -- a little over a year
ago -- the light at the end of the tunnel seemed a very long way away. If someone had predicted
the developments we have seen in Korea these past 12 months -- the authority which the
government has shown in implementing reform; the speed at which foreign reserves have been
rebuilt; the signs of output bottoming out in the second half of the year and the return of foreign
investors -- it is fair to say that the prediction would have been treated with a good degree of
scepticism.
Looking across the region, the impact of the crises of the past eighteen months is still very
much apparent. And markets continue to seem worried by the risks and uncertainties facing Japan,
China and others. But, to paraphrase Winston Churchill, if we are perhaps not at the beginning of
the end of the crisis, here in Korea we may well be at the end of the beginning. Automobile traffic,
at any rate, seems to be back to pre-crisis levels.
However, there is an important difference between recovering from a heart attack -- and
changing your lifestyle to be sure you never have another one. Whether and how that kind of
permanent regime change is going to take place is still perhaps more of an open question.
Let me reflect today on the roots of the recent crisis; the policy response to it; and the key
challenges ahead, not merely for governments in the crisis economies but for the United States
and the international community. I will concentrate on Korea, because I think that in many
respects the problems that led to Korea's crisis, and the way the government has sought to
resolve them, carry important lessons for better understanding and resolving crises in other
countries.
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I. Roots of the Crisis
When a car crashes on the open road, one can usually point to many contributing causes. If the
driver had been driving less recklessly -- or wearing a seat-belt -- it might not have happened. If the
road had been better designed, and the markings clearer -- it might not have happened. If other drivers
had been more attentive, or the weather less treacherous -- it might not have happened. One could
point to a similar range contributors in thinking about the crisis here in Korea.
On the one hand, by the time of the crisis there had for some time been widespread concern
about Korea's short-term macroeconomic course and the risks it presented: the rising inconsistency
between monetary policy and the exchange rate regime; the substantial declines in industrial
competitiveness; the speculative bubble channeling large amounts of private capital into unproductive
investment; and the mounting, ill-monitored, stocks of short-term private debt.
On the other hand, these problems could be traced to deeper doubts about the underlying
structure of the economy and rules by which it operated. Korea's development since the 1960s had
been spectacular. To be sure, one needs to be doing quite a lot right to achieve more than three decades
of 8 percent growth. But through the 1990s a number of commentators -- most prominent among them
Kim Dae Jung himself -- had been warning that time was running out.
Beneath the surface, they argued, was a growing structural crisis in the economy, a crisis that
could be traced directly to core parts of the government's long-time recipe for growth: notably the
wide scale government coordination of productive activity; the implicit and explicit subsidization
of particular industries; the heavy dependence on export-led growth and targeted protection; and
the cultivation of nontransparent, relationship-based bank finance.
And yet -- to appeal to the economist's third 'hand' -- it seems clear that the outside
environment played its part in these problems com busting in quite the way they did:
•

had private institutions been less exuberant in their investments in Korea (and other Asian
emerging markets) from the mid-1990s onwards, the macro- and microeconomic imbalances in
the economy might not have been able to mount so high -- or for so long.

•

equally, if the external economic climate had not deteriorated as sharply as it did during 1997
_ led by the rapid decline in the performance of Japan -- it is fair to say that the crisis might not
have erupted at the time that did, or with the same kind of severity.

In the event, all of these elements came together and were then compounded by a crisis of
confidence and large-scale run for the exits. The upshot was a situation with many of the features of a
bank run, in which the fear that even fundamentally sound institutions might fail, can become a selffulfilling prophesy.

This then was a different kind of crisis -- calling for a different kind of response. It had a
common ele~ent ~th almost all financial crises: money borrowed in excess and used badly. But it was
also profoundly different because, relative to most of the crises we have seen in the past -- the problems

2

that had to be fixed were much more microeconomic than macroeconomic, and involved the private
sector more and the public sector less.
When I met the (then) President-elect shortly before his inauguration last year he handed me his
book, "The Mass Participatory Economy". He had written it several years before but its solutions were
the right ones for the short run and the long run problems that the country faced: transparent, noninflationary macroeconomic policies; large-scale liberalization and deregulation of the economy;
improved governance and an end to government-directed lending to industry; reforming the Chaebol;
and opening up the domestic financial system.

II. The Response to the Crisis and Where We Are Today
The program of economic and structural adjustment that the Korean government has worked to
implement since the end of 1997 reflected this diagnosis. We saw it in the relatively greater emphasis
on regaining investor confidence. And we saw it in the commitment to wide-ranging structural reform.
Policy makers faced an enormous challenge designing such a program in the thick of crisis.
Inevitably, especially with 20/20 hindsight, one can question the way in which they settled some of
the details. But comparing Korea's situation today with that of a little over a year ago, it seems
difficult to question that the broad approach was the right one. Consider:
•
in December 1997, the won was at 1800 per dollar. Today it is below 1200. The
stock market index is now significantly up from its crisis lows. Net foreign reserves -- at
one time below $4 billion -- are upwards of $50 billion. And Korean bonds are once again
to be considered investment grade.
•
renewed stability and investor confidence, in turn has provided room to loosen
policy. Short-term interest rates have now come done to below pre-crisis levels, and fiscal
policy has eased substantially.
•
and most important, all of this is filtering through to growth -- with manufacturing
production now near its level in December 1997, and private forecasters now predicting
upwards of 2-3 percent real growth in 1999.
At the same time, the government has started to make progress on the critical tasks of
restructuring the bank and corporate sectors -- tasks which the past year has taught need to be
addressed together. The vicious cycle is by now all too familiar:
•
weak banks balk at making new loans, or undertaking new risks, and charge higher
rates to corporate borrowers when they do lend. They are also more reluctant to take part
in much-needed corporate workouts that would involve write-downs of capital they do
not have. The upshot is to prolong the problem of corporate insolvency.

3

•
insolvent corporations, in turn, continue to consume precious national savings that
could be employed more productively by viable firms -- and may well end up running up
further losses for the banks, and further need for banking sector recapitalizations.
As this audience knows well, breaking the cycle is an immense undertaking. And it is fair
to say that efforts to address these problems got off to a slow start here. But the government has
lately made some important progress.
The first stage of its financial sector program has been completed. Nearly fifty non-viable
institutions have been closed and all but two commercial banks have been recapitalized. Only
yesterday, one of the largest international banks announced it was buying a major Korean bank
and declared that it did plan to exercise its option to buyout the government's share. At the same
time, President Kim and the independent Financial Supervisory Commission (FSC) are making
determined efforts to accelerate the pace of corporate restructuring -- notably with their new
accord with the Top Five chaebol last December.
III. Challenges for 1999

The problems that Korea faced in 1998 were in many ways problems of too little
confidence. Lack of confidence show up in bank runs; it shows up in runs on the foreign reserves,
it shows up in lack of demand, it shows up in the drying up of foreign investment. All of these
clearly have self-fulfilling prophesy aspects, which is why they needed to be addressed as quickly
and decisively as possible.
But the government's very success in addressing these problems and restoring economic
stability means that to some extent the problems that it faces this year will be more ones of
complacency. And complacency, for its part, has a habit of becoming a self-denying prophesy:
•

it can put a brake on necessary restructuring;

•
it can reduce the pressure for unity that was such a hallmark of the Korean
response;

•

it can deter moves to increase labor flexibility;

•
and it can create macroeconomic problems of its own such as managing sharp
increases in capital inflows.
If what Korea had to fear in 1998 was fear itself -- it might be that what it has to fear in
1999 will be the lack of fear itself. Ambitious goals have been set. The challenge will be to
persevere in achieving them when the storm clouds appear to be moving on.

4

The December agreement commits the Big Five chaebol to cutting the number of their
affiliates in half and dramatically reducing their debt-equity ratios by the year 2000. But in the
end, restructuring that is shallow and gimmicky will deliver a recovery to match. As President
Kim said in this context yesterday, "when you make a promise, you ought to keep that promise."
Companies need to show they are making genuine reductions in excess capacity and changes in
the way they operate. That means providing the means for effective monitoring; and it means the
creation of transparent, market-based procedures that apply to all.
The government's own commitments to restructuring and renouncing past practices await
the same test. President Kim has pledged to end directed lending and hidden subsidies. He has
pledged to build and defend a more transparent system of corporate governance. He has pledged
to push banks into insolvency that cannot meet their obligations. In the coming months he will
need to show that he still means it.
In this context the United States has welcomed President Kim's commitment to openness
and to doing away with directed lending, hidden subsidies and other unfair practices that have
been such a stumbling block in global trade arena in past years. But as you know, suspicion in this
area will often be as damaging as hard proof. In the steel and semi-conductor sectors, especially,
it will be vital to put to rest any doubts that subsidies are continuing behind closed doors.
Maintaining a feeling of national unity -- the feeling that was so palpable last December
when housewives were bringing their wedding rings to the banks -- is the country's best insurance
against complacency. And an important way to support that kind of unity will be moving rapidly
to create an effective system for protecting dislocated workers, support retraining and provide for
basic social services. To be sure, culture and history matter. It us up to Korea to work out the
kind of social safety net that is right for its people and its way of life. But it will be important to
ensure that effective protections exist.
The fact that employment and real wages are likely to lag well behind the recovery in
output will put enormous pressure on trade unions to return to business as usual. In its early
support for tripartite dialogue the government rightly recognized the need to include labor and its
representatives in the restructuring process. But that inclusion has to be based on a reasonable
bargain.
Despite last year's agreements, a company's right to layoff workers still seems to carry
with it a legal obligation to be near death. In the months ahead, the unions need to recognize that
Korea will not continue to move rapidly out of crisis while the major segment of its workforce is
standing still.
Going forward, rising capital inflows as investor confidence recovers, will present
macroeconomic policy challenges of its own -- albeit ones that are much easter to address than .
soaring capital outflows. But in all these challenges it will be important for Koreans to keep their
eyes on the long-term prize.

5

·
. For decades Korea was ?ne the world's greatest development success stories. The key
mgredtents of that success remam today. And as painful as the past year has been -- and as painful
as the next year may be for many people -- it is at least possible to see Korea emerging stronger as
a result. In a global economy fueled increasingly by technology and human capital, Korea is a
country, after all, with unquestioned technological capacities and a share of high school graduates
going on to college that is second only to the United States'.

IV. The Role of the United States and the International Community
Let me conclude today by reflecting briefly on the role of the United States and the
international community with respect to Korea and with respect to the problems facing the global
economy.
While national policy is always of paramount importance, there is no question that the
Korean experience demonstrates the potential difference that conditioned provision of finance
and the confidence it can engender -- can make. Had Korea been forced into a moratorium or
general default at the end of 1997, as looked quite likely for a time, it is very unlikely that
industrial production would be at anything like the pre-crisis levels today. And the turbulence in
other markets around the world could have been even more severe.
Just as Korea has its part to play in supporting a global recovery in 1999, so has the rest of
the international community. Let me highlight just three aspects.

Policies to secure strong growth in the industrial countries
The United States has played its part in supporting global growth over the past five years
with policies that have achieved a balanced budget, lower interest rates, low inflation and
strong growth. These have made and will continue to make a major contribution to supporting
global growth and financial confidence. But we cannot carry the burden of global adjustment to
the Asian crisis on our own.
Japan and Europe both have critical roles to play in achieving broad-based growth in the
major industrial economies and helping curb the development of destabilizing global imbalances.
With the Japanese economic situation still very troubling, it is as important as it has ever been for
the government to take effective steps to achieve its goal of strong domestic demand-led growth.
For their part the European economies need to pursue effective macroeconomic policies and
structural measures to ensure solid growth in domestic demand.

Working With the International Financial Institutions to Support Key Remaining Priorities
As the crisis economies start to enter a new phase of the crisis the international
community'S response has also evolved to respond to key priorities. Notably:

6

•
through the Asian Growth and Recovery Program, part of a multilateral initiative
to .assist ~~ian restruc~uring efforts that was launched by President Clinton and Japanese
Pnme Mlntster Obuchl at APEC. The AGRP aims to help governments to tackle this
critical barrier to recovery by supporting the implementation of strengthened policy
frameworks for restructuring and by helping to catalyze, through use of official credit
enhancements, where appropriate, new private funds to finance the fiscal costs of
recapitalizing banks.
•
through stepped-up support of social safety net programs in the economies worst
hit by crisis. Following President's call last autumn, the World Bank has trebled its social
lending programs to these economies and the ADB' s social lending has doubled.

Helping to Prevent Future Crises
Finally we need to work together -- industrial economies and developing ones -- to find
better ways to prevent crises and deal more effectively contain them when they occur. Among the
priorities here will be:
•
increased transparency and disclosure. If one were writing a history of the American
capital market I would suggest to you that the single most important innovation shaping that
capital market was the idea of generally accepted accounting principles. We need that
internationally, and we need it at the level of individual companies and financial institutions.
•
and designing effective systems of crisis response. That means every country
having an effective regime for corporate insolvency. And as we saw in Korea, these can
often involve an important role for voluntary participation of private sector creditors.
Without in any way minimizing the scale or the enormity of challenges ahead in this
country, I think that what has been accomplished here in Korea in the past year points up the key
elements of an effective crisis response: the importance of appropriate macroeconomic policies; of
transparency, and of structural reforms to let market forces operate. But if there is one lesson
above all others in the Korean experience it is the critical importance of political leadership.
Looking around the world today I cannot think of another first presidential anniversary I am
happier to celebrate. Thank you.
-30-

7

,

DEPARTMENT

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OFFICE OF PUBLlCAFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C .• 20220. (202) 622-2960

EMBARGOED UNTIL 11 :30 AM. EST
Text as Prepared for Delivery
February 25, 1999

COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND DIRECTOR
ELLEN W. LAZAR
TESTIMONY BEFORE THE HOUSE SUBCOMMITTEE ON VA, HUD, AND
INDEPENDENT AGENCIES

Chairman Walsh, Congressman Mollohan and distinguished Members of the
Subcommittee, it is a pleasure to be before you today to represent the Community
Development Financial Institutions (CDFI) Fund. I am Ellen Lazar, the Director of the Fund.
Before I begin my testimony, I would like to introduce you to two other key members of the
Fund who are with me today: Paul Gentille, Deputy Director for Management/Chief Financial
Officer of the Fund, and Maurice Jones, Deputy Director for Policy and Programs at the
Fund.

STRONG AND EFFECTIVE MANAGEMENT
When I testified before this Subcommittee this time last year, I described key steps that
the Community Development Financial Institutions Fund (the CDFI Fund or the Fund) would
take to develop and implement necessary improvements to the Fund's financial and program
management, reporting systems, internal controls, operating procedures, and awards
monitoring. I am very pleased to report to the Subcommittee that over the past twelve months
we have made great progress in these areas.
In the Fund's financial audit for Fiscal Years 1995 through 1997, our independent
auditors, KPMG Peat Marwick, LLP (KPMG), provided an unqualified opinion, affirming
that our financial statements fairly presented the financial position of the Fund as of September
30, 1997, 1996, and 1995. KPMG also confirmed our identification of material weaknesses
that we needed to correct.
RR-2979

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KPMG r~cently .completed the Fund's fiscal year 1998 audit, and I am pleased to report
that we have agam received an unqualified opinion. In addition, KPMG verified that we have
successfully corrected all material weaknesses identified in last year's audit. They have
reported no new material weaknesses for this year's audit.
We are in compliance with the Federal Managers' Financial Integrity Act (FMFIA).
Our system of internal management, accounting and administrative control has been
strengthened and is operating effectively. Our enhanced policies and procedures ensure that
our programs achieve their intended results; our resources continue to be used in a manner that
is consistent with our mission; and our programs and resources are protected from waste,
fraud, and mismanagement.

As evidenced by our auditor's report, the Fund has taken critical steps to strengthen
and build its infrastructure and hire staff. During FY 1998, a Deputy Director for
Management/Chief Financial Officer, Awards Manager and Financial Manager were hired -critical positions for ensuring proper internal controls and accountability. In addition, a
Deputy Director for Policy and Programs was appointed and program managers for each
program were hired. The Fund's legal department was substantially increased and additional
staff have been hired to help carry out the Fund's many programs. Our enhanced internal
procedures and staff capacity has helped us to deliver more effectively our award dollars to the
institutions selected to receive awards. For example, with respect to our Core Component
CDFI Program, all of our 1996 awardees have received disbursements and 86 percent of our
1997 awardees has received disbursements. We are currently disbursing the 1998 awards,
which were announced in late September of last year. We anticipate disbursing funds to all
1998 awardees by August of this year. Our 1999 awards have not been determined yet.
As I discussed with the Subcommittee last year, the Fund is committed to managing for
results. We have undertaken a rigorous review of the Fund's five-year strategic plan, goals,
and performance measures. I am happy to report that we have completed this process and
have forwarded to you a draft of our revised strategic plan for your consultation and
consideration.

STRENGTHENING COMMUNITIES: PROVIDING ACCESS TO CAPITAL
Overview
The Fund's mission is to promote access to capital and local economic growth by
directly investing in and supporting community development financial institutions (CDFls) and
expanding banks' and thrifts' lending, investment, and services within underserved markets.
Currently, the CDFI Fund pursues its mission primarily through five initiatives: the
CDFI Program, which includes the Core, Technical Assistance and Intermediary Components;
the Bank Enterprise Award (BEA) Program; the Presidential Awards for Excellence in
Microenterprise Development; the Native American Lending Study and Action Plan; and our
2

Policy and Research Programs. The CDFI Fund also administers a Certification Program for
community development financial institutions.

CDFI Program and Certification
The CDFI Program has three funding components: Core, Intermediary and Technical
Assistance. These three components promote the CDPI Fund's goal, articulated in its strategic
plan, of strengthening the expertise and the financial and organizational capacity of CDFIs to
address the needs of the communities that they serve. CDFIs include community development
banks, community development credit unions, non-profit loan funds, micro-enterprise loan
funds, and community development venture capital funds.
The Core Component builds the financial capacity of COFIs by providing equity
investments, grants, loans or deposits to enhance the capital base -the underlying financial
strength - of these organizations so that they can better address the unmet community
development needs of their target markets. In addition, under the Core Component, the Fund
provides technical assistance grants in conjunction with loans and investments in order to
maximize the community development impact of the Fund's awards.
The Fund selects awardees that clearly demonstrate private sector market discipline and
the capacity to positively impact underserved communities. The Core Component leverage
encourages additional private and public sector investments into these same organizations
through its one-to-one non-federal match requirement.
The Intennediary Component allows the Fund to invest in additional CDFIs indirectly,
through intermediary organizations that support COFIs. These intermediary entities, which
are also COFIs, generally provide intensive financial and technical assistance to small and
growing CDFIs, thereby strengthening the industry'S financial and institutional capacity.
Since inception, under the Core and Intermediary Components, the Fund has made 123
awards totaling $122 million.
The Technical Assistance (TA) Component of the COFI Program is the Fund's newest
funding program. Introduced in 1998, this component builds the capacity of startup, young
and small institutions. The TA Component allows the Fund to direct relatively small amounts
of funds to COFIs that demonstrate significant potential for generating community
development impact but whose institutional capacity needs to be strengthened before they can
fully realize this potential.
In the first TA Component round held in 1998, the Fund awarded $3 million to 70
institutions.
In 1998 , the Fund awarded a total $47 million to 112 institutions through
its CDFI
.
Program. In 1998 as in all previous years, demand for COFI Program fundmg far exceeded

3

the funding we announced as available. Under the Core Component we announced the
availability of approximately $40 million. We received requests for more than $175 million.
For 1999, w~th the help of the $95 million appropriated to the Fund for FY 99, we
anticipate that we wlll make $62 million in awards to 130 institutions under the CDFI
Program. In October, the Fund published the FY 99 Notice of Funds Availability (NOFA) for
both the Core and Intermediary Components, announcing a total of $57.5 million available,
$50 million for the Core Component and $7.5 million for the Intermediary Component. We
received 153 Core applications requesting a total of $184 million. We anticipate making
approximately 55 Core awards. We received eight Intermediary applications requesting a total
of $16 million. We anticipate making five Intermediary awards. In January, we published the
FY 99 NOF A for the Technical Assistance Component. With the $5 million available for TA
awards, we anticipate making 75 awards.
To date, institutions in 43 states plus Puerto Rico and the District of Columbia have
received CDFI Program awards. To encourage applications from a diverse pool of applicants,
the Fund is conducting a record number of informational workshops. Among the nineteen
Core and Intermediary workshops conducted in 1998, five were located in States that have not
had previous Core or Intermediary Awardees. In March, the Fund will hold eighteen
informational workshops on the Technical Assistance Component around the country, again
selecting several regions in which there are no current awardees.
To further our goal of building the institutional capacity of the CDFI field, we provide
debriefings to applicants that were not selected for an award. To date in fiscal year 1999, the
Fund is responding to 92 requests for debriefings. Applicants are given valuable feedback
about strengths and weaknesses of their applications as observed by those community
development professionals involved in reviewing their requests for funding. Many of these
applicants use the information gathered from the debriefing to build the strength of their
operations and to improve their performance.
In addition to our CDFI funding programs, the Fund administers a CDFI Certification
Program. CDFI certification increases the credibility of community lending organizations in
the eyes of potential funders and investors. An organization that is certified is better able to
attract private sector investments from local banks, corporations, foundations, and individuals.
To date , we have certified a total of 280 organizations in 45 states, plus the District of
Columbia and Puerto Rico. New applications arrive each month. Currently, applications are
pending for the Virgin Islands, plus two of the five states that do not currently have any
certified CDFIs.
Bank Enterprise A ward Program
The Bank Enterprise Award (BEA) Program is the Fund's primary tool for pursuing its
strategic plan goal of expanding banks' and thrifts' com~unity develop~e~t l~ndi.ng and
investment activity. By providing incentives to these. mamstream finanCIal 1O.s~ltutlOns, the
Fund encourages them to increase their investments 10 underserved commumtles. These
4

financial instit~t~on~ do this in t~o ,:ays: by providing loans, investments and services directly
to the commumtIes m need; and mdirectly, by investing in local COFIs or other community
development programs, that then provide financial and development services to the
communities.
The leveraging involved in this program is impressive. To date, 124 banks and thrifts
in 30 states have received $58 million in BEA funding. This $58 million actually translates
into investments in underserved communities of $576 million, ten times the amount of the
COFI Fund's investment. The awardees have invested $334 million in direct loans,
investments and services to the community, and $242 million into CDFI's.
For example, in 1998, the Fund awarded Chase Manhattan Bank of New York, New
York $2,215,548 for its support of 26 certified COFIs. In exchange for this award, Chase
provided equity investments of $475,500 and lines of credit of $31,367,250 to CDFIs
nationwide. Chase's $31.2 million loan to Community Preservation Corporation (CPC), a
non-profit mortgage lender specializing in financing low and moderate income housing and
commercial real estate properties, will assist CPC in serving its target market which includes
parts of Syracuse, New York and the Bronx.
The Fund dramatically increased our BEA awards in 1998 when we made 79 awards
totaling $28 million. In 1996, we made 36 awards totaling $13.1 million; in 1997 we made 54
awards totaling $16.5 million. The three-year total for the 169 BEA awards is $57.6 million.
For the FY 99 funding round, we conducted twelve informational workshops around the
country and received 139 applications. The Fund anticipates selecting approximately 80 of
these institutions to receive awards totaling $25 million.

Presidential Awards for Excellence in Microenterprise Development
The Presidential Awards for Excellence in Microenterprise Development is a nonmonetary program administered by the Fund that recognizes and seeks to bring attention to
organizations that have demonstrated excellence in promoting micro-entrepreneurship. By
recognizing outstanding microenterprise organizations, the Presidential Awards seek to
promote sound lending practices and bring wider public attention to the important role and
successes of microenterprise development especially in enhancing economic opportunities
among women, low income people and minorities who have historically lacked access to
traditional sources of credit. This program is one of the ways that the Fund is promoting
performance best practices in the industry.
In February of this year, the President presented awards to six organizations for their
work in the microenterprise industry.

Native American Lending Study and Action Plan
Our Native American Lending Study and Action Plan is intended to stimulate private
investment on Indian Reservations and other land held in trust by the United States. The first

5

step in accomplishing this goal is identifying the barriers to private financing in these areas. In
1998, we launched an action plan that will examine lending and investment practices on Native
American lands, identify lending and investment barriers and their impacts, and make
recommendations for removing them. As part of that plan, we will be holding workshops in
13 cities across the country this year. The workshops will involve the Native American
community, financial institutions, state agencies and community development organizations.
With the assistance of the participants in these workshops, we anticipate that the study will be
completed in fiscal year 2000.

Policy and Research
The Fund is perhaps the largest single source of capital available to the CDFI industry
nationwide. It has access to data from hundreds of community development financial
institutions nationwide. This includes information about the institutions as well as their target
markets. In addition to baseline data derived from the process of certifying or funding
applicants, the Fund collects longitudinal data on all of its awardees over at least a five-year
period. Our policy and research goals include: measuring and reporting on the performance
and outcomes of the Fund and its awardees and seeking to advance the CDFI industry as a
whole through involvement in industry-wide research and development efforts.
In 1998, we moved forward on the first of these, measuring and reporting on the
performance and outcomes of Fund awardees. As you know, the Fund invests in CDFls to
promote their long-term viability and ability to serve distressed communities. Today, I am
pleased to be able to report some preliminary findings of our efforts thus far with respect to
the accomplishments of our awardees.

PERFORMANCE AND IMPACT
Surveys
Using surveys, the Fund collected performance and outcome data on 25 of our 31 firstround CDFI Core Component awardees. These awardees were chosen in 1996. We began our
evaluation on only first round awardees because they have had at least a year to absorb the
Fund's investments and put them to work. Our sample of 25 first round awardees includes
five credit unions, eleven loan funds, two community development banks, three venture capital
funds, two microenterprise programs, and two multifaceted CDFls. Together, they received
$29 million in CDFI awards. What has our $29 million helped these institutions to
accomplish?
Our preliminary findings demonstrate that these awardees have accomplished
significant community development impact over the past three years. For example, they have
made $198 million in community development loans and investments. These loans and
investments have helped to: create or expand 841 microenterprises and 864 businesses; create
or retain 10,348 jobs; develop 8,279 units of affordable housing, 72 childcare centers serving

6

5,511 children, 12 h~lth care facili~ies serving 9,223 clients and 106 additional community,
cultural, human servIces and educational facilities.
.. Further, these awardees have provided business training, credit counseling, homebuyer
trammg and other development services to 6,870 individuals.
Based on our sample, 71 % of the clients of the average 1996 awardee are low income
individuals. Sixty-three percent are minority individuals. Fifty-one percent are women.
Forty-eight percent live in the inner city. Forty-one percent live in rural communities. Ten
percent live in suburban areas.
Since receiving their Fund awards, the 1996 awardees in our sample have strengthened
their capacities to deliver products and services to their target communities. Their total assets
have increased by 127%, growing from $429 million in the aggregate before they received
their awards to $972 million in the aggregate in 1998.

Case Studies
In addition to the outcomes surveys, the Fund is conducting in-depth case studies of a
sample of awardees. The case studies include on site evaluations by the Fund to examine the
CDFI's activities within the local economic development context. To date, we have completed
three case studies. We anticipate completing several more in the coming year. The three case
studies that have been completed thus far have been in Boston, Massachusetts, San Antonio,
Texas and Santa Cruz, California. Our initial research suggests how CDFIs are positively
affecting their communities.
In Boston, many of the city's poorer neighborhoods did not benefit from the
"Massachusetts Miracle" of the 1980s; their conditions actually worsened during that period.
Yet these same neighborhoods have experienced notable improvements in the past 10 years,
thanks in no small part to the work of CDFIs such as the Boston Community Loan Fund and
the Local Initiatives Support Corporation, two CDFI Fund awardees. These CDFIs have been
critical behind-the-scenes actors. They have provided badly needed financial and technical
support to two of the city's most effective community development corporations (CDCs),
enabling the groups to develop the scale necessary to carry out affordable housing and
commercial projects that have revitalized long-declining communities such as East Boston and
Egleston Square. Since the mid-1980s, the CDFIs have provided over $7.5 million to the
CDCs, which in turn have: built or rehabbed over 800 units of affordable housing; managed
an additional 900 apartments and commercial properties; and operated after-school and other
programs for 150 neighborhood youths. The CDFIs have also played a crucial intermediary
role, working with bankers, city officials, and corporate and foundation leaders to encourage
additional targeted investment in these neighborhoods. A number of bankers view the CDFIs
as important partners in their community development work, crediting the CDFIs with
effectively serving organizations and individuals that the banks cannot afford to serve.
All around San Antonio, public and private sector institutions recognize the important
work of ACCION Texas, a CDFI Fund Awardee. From the city's Economic Development
7

Office to local Chambers of Commerce to banks ranging in size from local independent banks
to Chase Manhat~~m~ ACCION is viewed as the source of financial services for a previously
neglected - yet sIgnificant - segment of the population: the low- and moderate-income micro
entrepreneurs who live and work in some of the city's poorest neighborhoods. ACCION is
seen as the organization that can get loan capital into the hands of this underserved population
- and just as important -- get it back. ACCION's 400 clients include plumbers , electricians ,
seamstresses, independent taxi drivers, and street vendors. They are primarily Hispanic.
Without ACCION, they would not have access to credit for their businesses. The stories are
by now familiar: these micro entrepreneurs do not have sufficient collateral; they don't have
good business records; or they don't need enough money to make them attractive to a bank.
With ACCION, they are able to get the financial and technical assistance they need to grow
their businesses and to make them more prosperous through better business management.
ACCION's success in San Antonio has led it to begin opening offices around the state, in the
Rio Grande Valley, Houston, Dallas, Austin, and Fort Worth.
In Santa Cruz county in California, the third largest community credit union in the
nation, the Santa Cruz Community Credit Union (SCCCU), offers a wide range of financial
products and services designed to meet the financial needs of a predominantly rural low
income population. The need is perhaps greatest in Watsonville, where the unemployment rate
is 15.8 percent - more than three times the national average. This area has been hard hit by
recent plant closings resulting from import competition from Mexico. Adding to the
unemployment rate are the once-migrant agricultural workers who are settling in the area in
increasing numbers, even though agricultural work remains seasonal. The employment and
income figures highlighted the importance of focusing on the Watsonville population. With
the help of its CDFI Fund award, the Santa Cruz Community Credit Union opened a branch in
Watsonville so that it could ensure credit and banking access for all citizens, especially the
Latino population which had historically distrusted traditional banking enterprises due to
discrimination and neglect.

THE YEAR AHEAD: FY 2000
The President's FY 2000 budget requests $125 million in appropriations for the Fund.
This request is $30 million above FY 1999 funding levels. The Fund proposes to use $15
million of the increase to enhance its core programs; thus, $110 million will be used to
administer the CDFI, BEA, Training, Policy and Research and Secondary Market Programs
and the Native American Lending Study and Action Plan. The remaining $15 million will be
used to launch a new initiative, the Program for Investment in Microentrepreneurs (PRIME).
In FY 2000 and beyond, the COFI Program will continue to focus on building the
capacity of the CDFI industry to facilitate acc~ss to c~pital i~ underse~ed an~ low-income
markets. I believe the Fund will be able to buIld on ItS prevIOUS years expenence and
findings from its first outcomes surveys to inform our practice in identifying organizations that
can maximize impact in needy communities. We will also seek to enhance the performance
and impact of the industry through our Technical Assistance Program. Through the BEA
8

Program, the Fund will continue its efforts to facilitate community reinvestment by providing
incentives for banks and thrifts to reach new markets through partnerships with CDFls and by
targeting lending, investment and services in the most distressed neighborhoods. Finally, the
Fund will seek to enhance the effectiveness and impact of CDFls, banks, thrifts and others
engaged in community development finance through its Training Program.
In FY 2000, the Fund will complete its Native American Lending Study. We plan to
make recommendations to the President and Congress on needed statutory and regulatory
amendments to existing Federal programs and other needed policy changes to improve access
to capital for Native Americans.
Based on a feasibility study to be conducted in FY 99, in FY 2000, the Fund plans to
launch a secondary market program for loans made by CDFIs and examine the potential role
of the Fund in creating and sustaining these efforts.
I believe one of the most exciting proposals in the President's budget is the creation of
the Program for Investment in Microentrepreneurs (PRIME). The $15 million PRIME Act was
recently introduced by House Banking Committee Chairman James Leach, Ranking Member
John Lafalce and Congressmen Bruce Vento and Bobby Rush. Senators Kennedy and
Domenici have also introduced it in the Senate among others. This program will allow the
Fund to meet a growing need that we currently cannot address. This is the need to strengthen
organizations that are providing critical training and technical assistance to the most vulnerable
population of entrepreneurs: low-income and disadvantaged microentrepreneurs. One of the
clearest lessons that has emerged from the first decade of microenterprise development in the
United States is that provision of training and technical assistance is a necessary ingredient for
building successful entrepreneurs. In the highly developed U.S. economy, starting and running
a successful business requires a solid understanding of business regulations, tax issues, record
keeping, ar.d marketing. Many of the thousands of people who have started microenterprises
to make ends meet do not have these skills.
Many of the organizations that provide training and technical assistance to
microentrepreneurs are not currently eligible for Fund assistance because they do not meet our
financing entity test under the CDFI Program. PRIME will allow the Fund to reach these
organizations. The PRIME Act first, provides training and technical assistance to low income
and disadvantaged microentrepreneurs; second, builds the capacity of microenterprise
organizations so that they can better serve their low-income clients; and third, supports best
practices research and development. I believe that PRIME complements the Fund's existing
programs and will be a key tool for creating opportunity for low-income people.

CONCLUSION
. Mr. Ch.airm~n,. Membe.rs of the Comm!ttee, thank y?u for giving me the opportunity to
proVIde you with thIS mformation on the Fund s current actIvities and its plans for the future.
I look forward to working with you over the course of this year's appropriations process. I
would be happy to respond to any questions you may have.
-30-

9

HIGHLIGHTS OF TREASURY OFFERINGS OP BILLS
TO DK ISSUED MARCH 4, 1999
February 25, 1999
Offering Aaoynt •••••••••••••••..•.• $7,500 million
Pe.criptioA of Offerings
Term and type of .ecurlty ••••••.•.• 91-day bill
CUSIP nUllb.r •••••.•.••••..•••••.••. 912795 BN 0
Auction date ••.••••••••••••••...••• March 1, 1999
l •• u. d.te •••.••••••..•••••••••.•.• March 4, 1999
Maturity date ••••.•.•.•••••••••.•.• June 3, 1999
Original i.sue date ...•••••••••.•.• Dec.mber 3, 1998
CUrrently out.tanding •••••••••••••• $11,862 ml11ion
Minimum bid amount and mUltiples .•• $1,000

$7,500 million

$10,000 million

182-day bill
912795 CM 1
March 1, 1999
March 4, 1999
September 2, 1999
March 4, 1999

364-day bill
912795 DK 4
March 2, 1999
March 4, 1999
March 2, 2000
March 4, 1999

$1,000

$1,000

Tbe following rule. apply to all securities mentioged above:
Submission of Bide:
Noncompetitive bids .....• Accepted in full up to $1,000,000 at the highest discount rat. ot accepted
competitive bids.
Competitive bids .•.•.... (1) Must be expressed a. a discount rata with three deci.ala in incr.menta
of .005%, e.g., 7.100\, 7.105\.
(2) Net long position for each bidder must be reported when the .um of the
total bid amount, at all discount rat •• , and th. n.t long pOlition 1.
$! billion or greater.
(3) Net long position must be determined aa of one half-bour prior to the
closing time for receipt of competitive tender ••

Maxipum Recognized Bid
at a Single Yield •.•...• 35% of public offering
Maximua Award •.•..•••.••... 35\ of public offering
Receipt of Tenders:
NoncoMpetitive tenders .• Prior to 12:00 noon Kastern Standard time on auction day
Competitive tenders •.•.• Prior to 1100 p.m. Bastern Standard time on auction day
Payment

re~8

•••••••••••..•. By charge to a funds account at a Federal Reserve Bank on issue date, or
payment of full par amount with tender. TreasuryDlrect customers can use the
Pay Direct feature which authorizes a charge to their account of record at
their financial institution on issue date.

n

EPA

I{

T :\ 1 E :" T

0 F

THE

TREASURY
OFFICE

T R E .\ S li R Y

NEWS

or P1}BLIC AFFAIRS e1500 PENNSYLVANIA AVENVE, ~. W. e WASHINGTON. D.C.e 10llO. (101) 612.2960

EMBARGOED UN'I'IL 2: 30 P. M.

CONTACT:

February 25, 1.999

Office of li'inancillg
202/219-3350

TREASlJ'RY OFFERS 13 -WEEK, 26-WBEK, AND 52-WEEK BILLS

The Treasury will auction three series of Treasury bills totaling
approximately $25,000 million to refund $27,548 million of publicly held
securities maturing March 4, 1999, and to pay down about $2,548 million.
In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $1.3,215 million of the maturing bills, which may be refunded at
the highest discount rate of aceepted competitive tenders. Amounts issued to
these accounts will be in addition to the offering amount.
The maturing bills held by the public include $4,514 million beld by
Pederal Reserve Banks as agents for foreign and international monetary authorities, which may, be refunded within the offering amount at the highest 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 purpo.es of determining such additional amounts, foreign
and international monetary authoritiea are considered to hold $3,074 million of
the original ~3- and 26-week issues, and $1,440 million of the original 52-week
issue.
Tenders for the bill. will be received at Federal Reserve Banks and
Branches and at the Bureau of the Public Debt, Washington, D.C. This off.r~g
of Treasury securities i. governed by the terms and conditions set forth in the
uniform Offering Circular for the Sale and Issue of Marketable Book-Entry
Treasury Bills, Notes, and Bonda (31 CPR Part 356, as amended).
Details about each of the new 8ecurities are given in the attached offering highlights.
000

RR-2980
Attachment
For prus releases, spuches, pI/bile sc/tedl/lu

IIltd

official bio"aphies, cllIl Oil' 14.ho"r ftvt: lilt~ at (202) 622-2fUO

HIGHLIGHTS OF TRBAS~Y OFFSRING
OF 12-DAY CASH HAHAGEMENT BILL

7ebruary 2S, 1999
Offering AmoUDt ••••..•.•..•.•••.•••••••• $19,000
D.scription of Offering:
T.~ aDd type of .ecurity •..•.•..••..•••
COSIP number •••••••..•••..•..•....•.•.•.
Auction elate •••••••••••••••••••••••.•••.
Issue date ••..•••.•.••..••••.•..•.••••..
Maturity date ••.••••••••••.•••••.•.•.•..
Original issue dat ••••.••.••....•...•••.
~ bid amount and mu1tiplea •...••••

~llioD

14-c!ay cash Management Bill
912795 at 7
March 2, 1999
March 3, 1999
Karch 1S, 1999
March 3, 1999
$1,000

of Bida:
Noncompetitive bids ••••.••••... Accept.d in full up to $1,000,000 at
the higheat accept.d discount rate.
Competitive bids •••••••.•. (1) Must be expressed as a discount rate with
two d.cimals, •. g., 7.10%.
(2) Net 10Dg position for each bidder ~.t
be reported when the sum of the total bie!
amount, at all discount rates, aDd the net
loag poait1oa 1. '1 ~il1ioD oc ~eae.r.
(3) He~ 10Dg position mu.t be dete~ed aa of
one half-hour prior to the closing t~e for
receipt of competitive tenders.

S~8aion

Max~

Recognized Bid
at a Single yield .•........... 35% of public off.ring

Receipt of Tenders!
Noncompetitive tenders •••.•.... Prior to 11:00 a.m. Bastaru Standard time on
auction day
Competitive teDd.r •......•.•.•. Prior to 11:30 a.a. Ea.e.rn Standard t~ CD
auction day
payment Terms •••••••.••.•.•...... By charge to a funds account at a ~ederal
••• erve Bank on i.sue date, or payment of
full par amount with tender.

DEI' ,\ R T \j E l\ T

0 F

THE

TREASURY

T R L ,\ SLit Y

NEWS

OFFICE OF PUBLIC AFFAIRS -1500 PEJiliNSYLVAJiliIA AVENUE, N. W•• WASHINGTON, D.C.- 20220 - (101) 6l1.2960

BHBAllGOJa)

mrrn.

2: 30 P .K.

Ccntace:

February 25, 1999

Office of Financing
202/219-3350

TilZAStrRY 'IO AUCTION CASH MANAGEQNT BiLLS

The Treasury will auction approximately $19,000 million of 12-day
cash managemene bills to be issued Marcb 3, 1999.

'I~easury

ccmpeeieive and AOncompetitive tenders will be received at all Peda~al Reserve
Banks and Branches. Tenders will ~ be accep~ed for bills to be maintained on ehe
book-antry records of the Department of the Treasury (Tr.a.~irect). Tenders will
DOt ba received at the Bureau of the PUblic Debt, Washingeon, D.C.
Addieional amounes of the bills may be issued eo Federal Reserve Banks as
agents for foreign ~d ineernational monetary authorities at the highest discount
rate of accepted compee1tive tenders.
'Ihe auceion being anAOUnced today will be conducted in the sin91e-p~ice &uctia.n
formae.
All competitive and noncompetitive awards will be at ~e highese di.count
rat. of accepted eampetieive tenders.
This offering of Treasury securities is governed by the terms and ccnditiona
sat forth in the OUiform Offering Circular fer ebe Sale and Issue of Marketabla BookRDtry Treasury Bi1~a, Notes, and Bond. (31 CFR Pare 356, as amend.d).
NOTE:

Competitive bids in cash management bill auctious must be expressed as

a discoune raee with .!:!!2 dec1Juls, e.g., 7.10\.
Details abouc the new .ecuriey ara given

~

the attaChed offering

~ghlighes.

000

Attachment

RR-298

-

FO'I""SS "d'IISI!$, spei!drn. pllblic ulreduli!_f. turd official biographies. crill DItIT Z4-ho1tlT fax line III (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
February 25, 1999

Office of Financing
202-219-3350

RESULTS OF TREASURY'S AUCTION OF 52-DAY BILLS
52-Day Bill
March 01, 1999
April 22, 1999
912795BJ9

Term:
Issue Date:
Maturity Date:
CUSIP Number:
4.74 %

High Rate:

Investment Rate1/:

4.85 %

Price:

99.315

All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
All tenders at lower rates were accepted in full.
Tenders at the high discount rate were allotted 100%.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted

Tendered

Tender Type
Competitive
Noncompetitive

$

77,424,800
625

$

41,999,800
625

TOTAL

$

77,425,425

$

42,000,425

Median rate
4.72 %: 50% of the amount of accepted competitive
tenders was tendered at or below that rate.
Low rate
4.63 %:
5% of the amount of accepted competitive
. tenders was tendered at or below that rate.
Bid-to-Cover Ratio

=

77,425,425 / 42,000,425

1.84

1/ Equivalent coupon-issue yield.

http://www.publicdebt.treas.gov

RR-2982

DEPARTMENT

TREASURY

OF

THE

TREASURY

NEWS

OffiCE OFPURUCAFFAlRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. - 20220 - (202) 622-2960

FOR IMMEDIATE RELEASE
Remarks as Prepared for Delivery
February 26, 1999

"JAPAN AND THE GLOBAL ECONOMY"
DEPUTY TREASURY SECRETARY LAWRENCE H. SUMMERS
NATIONAL PRESS CLUB
TOKYO, JAPAN

Just a few months ago we faced what some called the most serious global financial crisis in
50 years. Today I would like to discuss where we are in working through that crisis -- both in
terms of sustaining global demand and in terms of building an international financial system that
can prevent and better contain future crises.

I. The Global Economic Situation
This has been quite a remarkable period in the global economy. Six months ago, in the
wake of the Russian financial crisis, signs of significant strain in United States and global financial
markets, and evident concerns about global growth -- the G7 warned that the balance of risks in
the global economy had shifted, and emphasized their commitment to promote sustainable global
growth. As Secretary Rubin and I discussed with our G7 colleagues in Bonn last weekend, since
then there has been some important progress made. But very large challenges remain. Two stand
out.
First, there is too little growth in the global economy. The risks around the world are still
very much tilted toward lack of growth, spare capacity, and slowdown -- rather than toward
economic overheating. Concerns are about excess supply not excess demand. And in many places
worries about rising prices have given way to concern about falling prices.
Growth in Europe has weakened, and is expected to average at best 2 percent this year.
While prospects for Japan also look worse than they did a few months ago, with most forecasters
now expecting another year of negative growth in 1999, and IMF and private forecasts projecting
a decline in prices.
Second, there is too little balance in growth. Growth in the United States has been very
strong, but __ at 4 percent -- very likely above long run trend sustainable rates and is giving rise to
very substantial imbalances. Private sector forecasts are suggesting that the United States current

RR- 2983
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040

account deficit rose by more than $80 billion, to $235 billion in 1998, while Japan and Europe are
expect.ed to ~ave had current account surpluses of $95-115 billion. United States imports from
e~~rgIng ~sla: for exampl~, rose by close to $12 billion last year, as compared with a nearly $20
bllhon dechne In Japanese Imports from these countries.
.
.The Unite~ States accou.nted for more than two-thirds of growth last year in the major
mdustnal economies and one thud of global growth. On current forecasts it will account for a
similar share this year. With growth in the world increasingly dependent on the United States, and
growth in the United States increasingly dependent on the American consumer, it is crucial -- both
because of the slowdown directly and because of the consequences of imbalanced growth -- that
we see a strengthening of global growth as an imperative for policy. And appropriate domestic
policies aimed at promoting sound and sustainable growth at home can also help lay the
foundation for more stability in exchange markets.
In the face of these challenges we in the United States will do everything we can to keep
our economy growing strongly. But we cannot assume that the global economy will be able to fly
permanently on a single engine.
The European economies -- have to do their part and continue to remain focused on the
goal of strong domestically generated growth in demand. As the G7 reaffirmed last week,
appropriate macroeconomic policies, and structural measures to boost the flexibility and
dynamism of the European economy, will both have an important contribution to make in
supporting growth and promoting employment and investment.
F or their part, key emerging market economies in crisis need to respond effectively to
restore confidence and support the maintenance of an adequate flow of capital to prevent the need
for further costly adjustments in emerging markets. I came here from Korea, which a little more
than a year ago seemed very close to a general market default. With decisive leadership,
appropriate macroeconomic policies and credible, transparent structural reforms the government
has since made impressive strides toward stabilizing the economy and laying the basis for future
growth. Brazil and Russia, especially, need urgently to put in place the same core ingredients in
their economies if confidence and growth is to be restored.
And no country, other than the United States, is more important to an effective global
growth strategy than Japan: the second largest economy in the world and by far the major
economic power in Asia. Even today, Japan accounts for two-thirds of the Asian economy. A
global economy cannot be fully successful without a successful Japan.

U. The Challenge of Growth in Japan
All in Bonn, I think, recognized that an important evolution has taken place in Japan's
approach to the crisis. Moves to implement more ambi~ious plans for strengthening t~e financial
sector have been particularly welcome. In that context It has nonetheless b~en troubhng that -- as
the G7 identified -- if anything, the uncertainties facing the economy have Increased and growth
forecasts have been revised further downward.
2

I~ is now very widely ~ecognized that the overarching challenge of policy in Japan today is
the creation of strong domestic demand-led growth. The tools that can be enlisted to meet that
challenge are three-fold:

1. Fiscal and Monetary Policy
On the macroeconomic front, Japan is now implementing two large supplemental stimulus
budgets, and will soon pass a more expansionary initial FY99 bUdget. These fiscal measures,
effectively implemented, should provide some cushion for domestic demand in this period of weak
private sector confidence and negative private sector growth. In monetary policy, the Bank of
Japan has also recently taken steps to stimulate growth.
As the G7 agreed last week, the outlook for price stability in our countries as a whole
remains favorable. The goal of price stability, of course, also means avoiding deflation. The
government will need to ensure that the promised fiscal stimulus is fully implemented and
sustained over the next few years. Its boost to the economy should also be accommodated by
monetary policy. And going forward it will be important to think creatively about the best use of
all the tools of fiscal and monetary policy to create an expectation of confidence and renewed
growth.

2. Financial Stabilization
As the emerging market economies are learning -- and as many of the industrial countries
have learned in recent years -- it is crucial to the efficacy of any other policies to promote growth
to remove the bottleneck that is presented by an economy that is mired in debt. When Japan
announced its Financial Stabilization Plan in July, there were four critical priorities for addressing
decisively the problems in the Japanese financial sector. First, strengthening the major banks;
second, resolving insolvent institutions; third, disposing of nonperforming assets; and fourth,
improving disclosure and supervision.
Visitors to Japan have recently been encouraging to see the implementation of that plan
start to achieve progress on all four fronts:

•

15 of the 17 top Japanese banks are to receive approximately Y7.S trillion in public capital
out of the Y25 trillion in available funds.

•

although they are still operating, two major insolvent banks have been put under
government control, while a number of smaller institutions have failed and been dissolved.

•

legislation has been passed to ease auction rules and securitization o~ ~ad .Ioans. There are
plans to securitize bad debts held by the government and some secuntIzatIon has begun.

•

and to strengthen supervision and disclosure, the FSA has completed a round of
inspections which raised the amount of disclosed loans ?y nearly 1~ percent and has
imposed new provisioning targets on major banks applymg for pubhc funds.
3

All of ~his ma~ks welcome progress. But, as the G7 affirmed, it will be vital to continue to
press ahead with the Implementation of the Financial Stabilization Program in those areas where
the greatest problems remain. Critically:

•

b~":"s are still undercapitalized. With loss estimates ranging from Y 15-25 trillion, it will be
cnt~cal to ensure further r.ecapitalization next year. Banks also need to add more equity
capital through new offenng to the public and private sector.

•

and a mountain of bad assets stilI stands in the way of cleansing bank balance sheets once
and for all. We see it as very important that the authorities start to actually sell off
government holdings of bad assets -- in part based on our own experience in Savings and
Loans crisis, when we did this too late. And that they move to pass the proposed
legi.slation to ease settlement of competing claims and provide incentives for lenders to
forgive debts or give up their relevant recourse rights. As the government has recognized,
they also need to further step up the regulatory pressure on banks to recognize and write
off such assets.

3. Structural Reform and Market Opening
As Prime Minister Obuchi has recognized, a third part of laying the foundation for
restored domestic growth in Japan will be deregulating and liberalizing the Japanese economy.
Prime Minister Hashimoto's "Big Bang" financial reform plan is a far-reaching and
inspired initiative, covering many of the impoI1ant areas of financial deregulation, experience in
the United States and elsewhere suggests that this is only the start. Indeed, if anything, the
available evidence suggests that the potential returns to such measures in Japan are even higher.
The Japanese EPA has estimated that deregulation in just 8 industrial sectors could raise Japanese
growth rate by nearly 1 percent a year over the next five years.
We have thus been glad to note the revived interest in deregulation here in Japan in recent
months. The work of the Prime Minister's Economic Strategy Council has identified the
importance of structural economic reform, and we hope that many of the ideas contained in the
report can be adopted and implemented as rapidly as possible. And, in light of Japan's large
current account deficit, steps to open markets and ensure free and fair competition are a critical
priority.
These three things -- supportive macroeconomic policy, financial sector restructuring and
structural reform and market opening -- will be mutually reinforcing in their support for
domestically driven growth in Japan. And in all likelihood the benefits of the whole will be greater
than the sum of the parts.
While a strong case can be made that excessive capital inflows may have contributed
importantly to the recent problems in emerging markets, it seems clear that the problem for the
next years will be increasing confidence in these countries. This is my last stop on a 5 nation trip
4

through Asi~. At each ~top it wa.s clear that national authorities saw what happened in Japan and
other countnes as crucial for their economies, and stressed the importance of close cooperation
for shared growth and currency stability in Asia. One thing is certain; trade is better than aid.
That is why strong growth and open markets in the industrial countries are now so important.

III. The Global Structural Reform Challenge
But even as we work our way through the current financial crisis it is essential to think
about ways of resolving future crises. In some cases reforms will take years -- and in others it
might not yet be appropriate to put in place necessary changes. But it will be important to
consider carefully what the experience of the past year has taught.
If you study any auto accident it is always the case that it could have been better avoided in
a number of different ways. If the driver had been driving less recklessly -- or wearing a seat-belt -it might not have happened. If the road had been better designed, and the markings clearer -- it
might not have happened. If other drivers had been more attentive, or the weather less treacherous
it might not have happened.
So, too, is it a mistake to look for one single cause in considering the roots of the recent
crises. If capital had been used better, the crisis would not have happened. If the macro and micro
conditions determining how capital is used had been better, the crisis would not have happened. If
problems had been better understood by investors -- and the authorities had acted earlier to address
them -- it would not have happened.
In the event, alI of these elements came together and were then compounded by a crisis of
confidence and large-scale run for the exits. The upshot was a situation which had many of the
elements of a bank run, when people are spending more time thinking about other people than
about the fundamentals.

This, then, was a different kind of crisis -- calling for a different kind of response. It had a
common element with almost alI financial crises: money borrowed in excess and used badly. But
it was also profoundly different because, relative to most of the crises we have seen in the past -the problems that had to be fixed were much more microeconomic than macroeconomic, and
involved the private sector more and the public sector less.
This diagnosis has informed the response to the crises in Asia and elsewhere in the past
year and must also inform the international community's efforts to prevent and better contain
crises in the future. Let me highlight three areas:

1. An Intangible Infrastructure jor a Global Capital Market
The G7 last week reiterated its commitment to increasing transparency and disclosure in
the global financial systems as a core form of insurance against future c~ises. And here I think one
example highlights better than any other the kind of change we are seekmg.

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If you ask W?y th~ Ameri~an financial system succeeds, at least my reading of the history
w~ul~ be t~at there IS no mno~atlOn more important than that of generally accepted accounting
pnnclples:.lt ~e~n~ that every mvestor gets to see information presented on a comparable basis;
that there IS dlsclphne on company managements in the way they report and monitor their
activities; that there are whole groups of people all seeking to refine the way in which we measure
and understand how companies' prospects are being described and presented.
GAAP are not a single institution. They are not a single magic bullet. They are an
ongoing process that really is what makes our capital market work and work as stably as it does.
And very much the same kind of thing is necessary globally.
Important steps have already been taken to enhance the transparency of global markets
and progress in this critical effort was continued last weekend as the G7 agreed to strengthen the
IMF's Special Data Dissemination Standard to include much fuller information on central bank
reserves, and asked the IMF to strengthen the SDDS further in future, with more complete data
on countries' external debt and international investment position.
Steps to encourage and promote improved banking regulation and supervision in emerging
market economies will also be critical. That means pressing for greater opening of domestic
financial market to foreign providers of financial services -- and the experience and greater
diversification that they afford. And, as the G7 has recognized, it will mean our following up on
the agreement of the Basel Principles, with effective surveillance of national authorities' progress
toward implementing these principles and building more effective systems.
In this context let me highlight the GTs decision to take the initiative in convening a
Financial Stability Forum to ensure that national and international authorities and relevant
international bodies and expert groups can better foster and coordinate their respective
responsibilities to promote international financial stability.

2. Avoiding Excessive and Potentially Destabilizing Capital Flows
The root cause of crises is not so much the weakness of financial systems as it is the
inflow of capital that is excessive relative to the maturity of the system in which it must be
absorbed. This points up a number oflessons for safe global practice.
We need to work to ensure that countries to pace the opening of the capital account to the
development of the domestic financial system. We ha~e see~ -- once ~gain -- in recent m~nths in
Asia the danger of opening up the capital account when mcentIves are distorted and domesnc
regulation and supervision is inadequate.
The corollary to this is a need for improved surveillance to ?ighligh~ ~nd discourage
.
excessive reaching for capital inflows by countries that may not be In a. pOSItIOn to safely absorb It.
W e saw thi s 1·n Mexico , with the increasing resort to issuing dollar-denommated
.
d tesobonos
. before
. . the
th
crisis' we saw it in Thailand, with the Bangkok Offshore Banking FaCIlity; an we saw It RUSSIa, In e
gove~ment's efforts to court foreign investors to invest in domestic GKOs.
6

On the other hand, every ill-judged credit has both a lender and a borrower. In this context
the G71ast we.e~ endorse~ the. recommendations of the Basle Committee on Banking Supervision on
how ~est to mlttgate the nsks mvolved in dealing with highly-leveraged institutions. As we go forward
there IS broad agreement on the need to consider the supervisory and other implications arising out of
the operations of such institutions and of offshore centers.

3. More Effective Crisis Response
Countries shape their own destiny. No amount of external support will succeed where the
domestic commitment to reform is lacking. But -- as the Korean example so clearly demonstrates
-- where the domestic will is present, conditioned provision of finance can make an important
difference. And recent events have pointed up a number of key issues for developing the most
effective systems for this kind of response.
One is developing the capacity to respond in a strong way to bank-run-type situations. In
the fall of 1997 the United States and Japan worked together to produce innovation in this area
with the creation of a new IMF facility -- the Supplemental Reserve Facility. This progress has
since been continued with the IMF's development of a new contingent short term credit line
which, like the SRF, will carry premium interest rates and shorter maturities to maximize
countries' incentive to seek alternative, private sources of finance.
Another will be finding ways to work more effectively with the private sector so that it is
doing its share in responding to crises and mitigating their effects. This means a great many
things. But in a sense, it adds up to a system that can safely fail. Countries need bankruptcy laws.
And they need effective judicial institutions to enforce them. That is part of being part of a global
capital market. And when severe difficulties arise -- as we saw in Korea -- it may often involve
an important role for voluntary participation of private sector creditors.
Finally, we will need to improve the capacity of the IMF and other international financial
institutions to address the very difficult challenges and conflicts that responding effectively to
crises can present. Notably, the need for credible policies to contain the crisis and increase
confidence will need always to be considered alongside the sometimes competing need to respect
national sovereignty and prevent a domestic backlash against external providers.

IV. Concluding Remarks
The United States and Japan are the world's largest economies. Ours is the most
important economic partnership in the world. Together we have an enormous stake in seeing the
global economy prosper. That means creating and sustaining prosperity in our own economies.
And it means cooperating to build the right kind of international financial system for the 21 st
century. This is a momentous challenge but working together, I am sure it is challenge that we can
meet. Thank you.

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