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Treas.
HJ
10
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P4
v.378
1-'\ Department of the Treasury
PRESS RELEASES
~ RY
~ b ~1 ffJ~ .
l ~""'H')
MAY 2 ~ 2000
kUUM ~j10
us DEPT. Of THE TREASURY
The following numbers were not used:
140,183,222,232,241,253,280
The following numbers are not available:
144,190,247,254,294,313
DEPARTl\1ENT
OF
THE
TREASURY
ornCEOFPUBUCAFFAIRS -1500 PENNSYLVANlAAVENUE, N.W. - WASHINGTON. D.C. - 20220. (202) 622·2960
FOR IMMEDIATE RELEASE
Text as Prepared for Delivery
October 1, 1999
STATEMENT BY TREASURY SECRETARY LA \VRENCE H. SUl\Il\IERS O~
FI~A~ClAL SERVICES INFORl\1ATION SHARING AND ANALYSIS CENTER
Good morning. Welcome to the Treasury Depanment.
Let me start by thanking you for joining us this morning. I want to especially thank
Chairman Anhur Levitt of the Securities and Exchange Commission, Vice Chairman Roger
Ferguson of the Federal Reserve Board, Richard Clarke of the National Security Council and the
representatives of the financial services industry.
It gives me great pleasure to be here today to speak about the newly announced financial
ser,ices information sharing and analysis center (FS/ISAC) Through this center, financial
services firms will be able to better protect their computer systems from attack by sharing
information about such attacks Such information will be shared anonymously, to encourage
candor, and on a real time basis, to allow other firms to prepare immediately for similar attacks
-
\\'hen I first joined,Treasurv
some vears auo.
I can assure
. .
.YOU we were not thinkinu about
threats to the financial system emanating from \'iruses. trojan horses. logic bombs, or malicious
code.
~
But \\e arc thinking about those things no\\. and \\ith good reason
It is hard to belieye that tive .years a!!o
- almost none of us \\ere on the Internet, but today
many of us \\ ould feel that our lives had been disrupted if our Internet service provider went
down. even for a fe\" hours Anyone who has ever called customer sef\ice and been told, "Please
call back later. our computers are do\\ n" kl1o\\ s this very well It is simply not all option for
American business, and in panicular the American financial services system. to go back to serving
its customers the old fashioned way should their computers go out
Our increased reliance on computers and other technology raise a new set of security
needs. A 1998 study by the Computer Security Institute found that 64 percent of companies
LS-135
For press releases. speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622·2040
.
polled reponed information system security breaches, an increase of 16 percent over the prior
year. The estimated total financial loss from those breaches grew 36 percent compared to the
reponed losses of 1997.
As damaging as these attacks have been, the vast majority has been conducted by
disgruntled individuals. We face a future, though, where criminals, terrorists, or even nation
states may use the same tools in a more organized way for darker purposes.
Recognizing early on the potential for cyber attacks to cause damage to the nation's
military and private sector infrastructure, the President in 1996, formed the President's
Commission on Critical Infrastructure Protection; and in May 1998, he signed Presidential
Decision Directive 63. Richard Clarke of the NSC has overseen these efforts as National
Coordinator for Security Infrastructure Protection and Counter-Terrorism.
The President's directive recognizes that our nation's economy increasingly relies on the
smooth functioning of computer systems. And the increasing use of open systems such as the
Internet, both in the private sector and even the military, creates a new vulnerability.
The financial services industry is no exception. Thus, Presidential Decision Directive 63
directed the Treasury Department to work with representatives of the banking and finance sector
to enhance the security of the industry'S information systems We at Treasury have worked
closely with the information security professionals assembled here today and many others to carry
out that mandate. But we have always recognized that the financial services sector itself must
have the lead
The information sharing center that is opening today is a tribute to the determination of
the member firms represented here to !!et out in front of the Qro\', in!! information security
problem I \\ould in particular like to thank Ste\e Katz of Citigroup, who has served as our
private sector coordinator. and Stash Jarocki of Depository Trust Company, who has headed the
lask force putting together the center
-
-
-
p
The industry ISAC can play a ke~ role in bolstering the confidence orthe American public
in the security and stability of our financial system By joining together to share information
about cyber attacks and ways to deteat them. the tinancial services firms 'represented here have
taken an important step both for their own security and that of the natioo· We believe that the
participation of some of our largest tinancial services firms \vill serve as an example leading
others. And we hope that the financial services center can serve as a model for other sectors of
the economy wishing to protect themselves in this way
The support of the Securities and Exchange Commission and the Federal Reserve Board
will be critical to the success of this initiative, and I thank them for their interest. I am also
grateful that the Federal Reserve, ~n its role as payment system provider, has expressed interest in
becoming a participating member of the Financial Services ISAC
.,
In conclusion. I want to thank everyone who has contributed so much to the success of
this undertaking. and thank you all for being here today.
I would now like to tum the microphone over to Steve Katz. our private sector
coordinator, who will describe the center in greater detail.
- 30-
....
.J
D EPA R T 1\1 E N T
0 F
THE
T REA SUR Y
NEWS
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASillNGTON, D.C. - 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
October I, 1999
Contact: Steve Posner
(202) 622-2960
TREASURYSECRETARYSU~RSANNOUNCES
FINANCIAL SERVICES INFORMATION SYSTEMS SECURITY FACll..ITY
Treasury Secretary Lawrence H. Summers on Friday atinounced the opening of a banking
and financial services information security facility, the Financial Services Infonnation Sharing and
Analysis Center (FSIISAC).
The Center is a joint public/private sector initiative designed to ease the sharing of
infonnation about cyber-threats within the financial services industry. It enhances the industry's
ability to prevent, detect and respond to attacks on the industry's technological infrastructure by
providing an anonymous venue for rapid distribution of infonnation about such threats.
"New types of crime require new types of solutions," Treasury Secretary Lawrence H.
Summers said. "This kind of private sector cooperation is central to the preservation of the
financial security of Americans and the national security of the United States."
President Clinton's May 1998 Presidential Decision Directive 63 (PDD-63) directed the
Treasury Department to lead the efforts of the banking and finance industries in securing their
infonnation systems. This new facility, which is managed by a private contractor and fully funded
by participating corporations, is the product of this coordinated effort.
Currently, 12 financial services organizations have signed a letter to confinn their interest
in participating in the Center. They are: Citigroup, Bank of America, Bank of New York, DTC,
Vanguard, Merrill Lynch, Morgan Stanley, JP Morgan, Fidelity, Sun Trust, SIAC and the NY
Federal Reserve Bank.
30 -
LS--136
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
·U 5 Government Printing Otf'ce 1998 - 619-559
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
Office of Financing
202-691-3550
CONTACT:
FOR IMMEDIATE RELEASE
October 04, 1999
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
October 07, 1999
January 06, 2000
912795DB4
Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:
4.730%
Investment Rate 1/:
Price:
4.869%
98.804
All noncompetitive and successful competitive bidders were awarded
securities at the high rate. Tenders at the high discount rate were
allotted 84%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Competitive
Noncompetitive
$
24,071,045
1,271,164
$
25,342,209
PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
TOTAL
Accepted
Tendered
Tender Type
$
7,120,145
1,271,164
8,391,309 2/
115,594
115,594
25,457,803
8,506,903
3,874,320
49,406
3,874,320
49,406
29,381,529
$
12,430,629
Median rate
4.710%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
4.630%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 25,342,209 / 8,391,309 = 3.02
1/ Equivalent coupon-issue yield.
2/ Awards to TREASURY DIRECT = $973,928,000
http://www.publicdebt.treas.gov
L8-138
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
October 04, 1999
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182 -Day Bill
October 07, 1999
April 06, 2000
912795DQ1
Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:
4.870%
Investment Rate 1/:
5.076%
Price:
97.538
All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted 44%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
Competitive
Noncompetitive
Tendered
$
PUBLIC SUBTOTAL
$
22,032,944
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
TOTAL
20,858,688
1,174,256
Accepted
$
4,218,888
1,174,256
5,393,144 2/
2,111,656
2,111,656
24,144,600
7,504,800
3,530,000
903,344
3,530,000
903,344
28,577,944
$
11,938,144
Median rate
4.860%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
4.770%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 22,032,944 / 5,393,144 = 4.09
1/ Equivalent coupon-issue yield.
2/ Awards to TREASURY DIRECT = $878,521,000
http://www.publicdebt.treas.gov
L8-139
DEPARTMENT
OF
THE
TREASURY
NEWS
omCE OFPUBUCAFFAIRS e 1500PENNSYLVANlAAVENUE, N.W. e WASHINGTON, D.C.• 20220. (202) 622.2960
EMBARGOED UNTIL 12:30 PM EDT
Text as prepare4. for delivery
October 5, 1999
"TOWARD A 2lo;t CENTURY FINANCIAL REGULATORY SYSTEM"
TREASURY SECRETARY LAWRENCE H. SUMMERS
REMARKS BEFORE THE WOMEN IN HOUSING AND FINANCE
WASHINGTON, DC
Let me start by congratulating Women in Housing and Finance on reaching its 20th
anniversary. I gather that this was celebrated with quite a magnificent gala two weeks ago. I
was also pleased to see that among the outstanding women honored were Ellen Seidman and
Julie Williams from Treasury. Your organization has contributed to making accomplishments
like theirs possible.
I would like to take the opportunity today to talk about legislation that, if it is done
right, could make an important contribution to strengthening our financial system for the 21·t
century.
The American financial system is today stronger and more competitive than it has ever
been - and our financial institutions the most sophisticated and advanced in the world. The
financial system_serves like the central nervous system of the human body, ensuring that all the
other parts of the system respond appropriately. We are fortunate that ours is functioning
well
There is, however, no cause for 'complacency. And as policymakers, we must keep our
laws in sync with rapid changes occurring in the financial ~ervices industry: notably, the
emergence of new instruments and new market actors; increasing globalization; and the
growing trend toward greater consolidaqon, both within the tinancial services sector and across
borders.
As we have watched financial trends at work around the world, we have learned the
difficult balance that governments must strike in regulating their financial services system:
LS - l41
Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
•
We have learned that financial systems work best when they are competitive and where
market forces are channeled to produce greater choice and lower costs for consumers.
•
And they work least well when market participants are encouraged to maximize their
access to governmental benefits, at the expense of their business and their customers.
Our challenge is much the same as that which other nations face. We must allow
competition to work. In the context of the current legislative debate, that primarily means
allowing common ownership of banking, securities and insurance firms.
The greatest benefit of the financi,al modernization bill now in conferepce would be the
repeal of archaic restrictions in our current laws that prevent this and thereby prevent anyone
financial services firm from offering a full range of products. The walls created by these
restrictions were sustainable When the banking, securities, and insurance industries were more
static. In today's more fluid environment, those walls need to come down for financial services
firms to serve their customers efficiently.
If it can be done without compromising other critical objectives, repeal of the common
ownership restrictions of current law would be an important boost to our financial system. Our
leadership of the world's financial markets would be enhanced. And consumers would see the
benefits in the form of greater innovation and lower prices. For example, we estimate that
everyone percentage point decline in the costs of financial intermediation could save
consumers $3.5 billion per year.
That is why we want a financial modernization bill to pass. But it must be the right bill.
This will be the primary focus of my remarks today.
I. Key Aspects of the Current Financial Modernization Bills
We are at an important juncture in the life of financial modernization legislation. On
the one. hand, our experience with the House bill has taught us that by working together in a
bipartisan manner, Congressional Democrats and RepUblicans and the Administration can
produce legislation. On the other hand, the conference procedure announced last week -- with
the bill to be written by three Committee chairmen and amended only with bicameral
committee approval -- appears likely to lead to partisanship and division.
While we share the leadership's desire to see this legislation move forward, we think
that any partisan approach will not ultimately serve our shared interest in passing a bill. We
stand ready to work with all interested parties, as we have been doing with great vigor for
some time. But we must all recognize that this highly complex legislation - which many before
us have tried and failed to achieve - requires the participation of all the interested parties if it
is to survive.
2
I want a financial modernization bill that the President can sign - and I believe such a
bill can be produced only on a bipartisan basis. I remain hopeful that we can achieve such a
bill -- and achieve it this year. That said, the President has made clear that there are some
principles that he will not sacrifice in order to pass legislation.
In particular, he has stated the he wou19 veto a bill that:
•
Prohibits banking organizations from choosing the structure that is right for them.
•
Erodes the relevance of the Community Rei,nvestment Act.
•
Fails to include adequate protections for consumers.
•
Or breaks down the walls separating banking and commerce.
Let me consider each of these four principles in greater detail.
1.
Organizational Choice
We have learned over the years that drawing arbitrary lines hurts competition. We
have also learned that once those lines are drawn, it takes decades to redraw them. That is
why we believe that banks should have the flexibility to establish a subsi.diary to engage in new
financial activities. They should not be forced to divert business opportunities to an affiliate,
reduce capital by funding the new activity through dividends, and lose the earnings from their
own innovation and customer base.
At the same time, we believe that a modernized financial system should retain some
separation between banking and other financial activities. The alternative, universal banking, is
popular around the world, but I believe is the wrong choice for this country at this time. Thus,
although the House bill allows common ownership of banking, securities, and insurance firms
through subsidiaries or affiliates, both bills still require those activities to be conducted
separately within an organization, subject to functional regulation and funding limitations.
With symmetric restrictions in place, we believe that the House bill strikes an
appropriate balance between organizational choice, on the one hand, and providing adequate
protections of taxpayers on the other. And so, too do the FDIC and many independents
analysts and economists: from the American Enterprise Institute to the Brookings Institution.
This is an important issue, and one that we wi11 continue to pursue and I hope resolve.
As most of you already know. we have been asked by the Congressional leadership to discuss
this issue with the Federal Reserve Board, and those discussions are ongoing.
3
2. Effective Protection for Communities
We have made clear from the start of these debates that a bill dedicated to expanding
bank powers must also 'ensure that all communities reap the benefits: and, more specifically,
that as we create a new financial system, we preserve the relevance of the Community
Reinvestment Act (CRA).
As with any law, regulators should always be vigilant in ensuring that the law is
applied effectively and burdens are minimized to the greatest extent possible. But eRA is
working.
In 1998 alone, banks and thrifts made more than $33 billion in small business loans in
low and moderate-income areas, and more than $16 billion in other community development
loans. Home Mortgage Disclosure Act data shows that from 1993' to 1998, home loans to low
and moderate income borrowers by 64 percent, well above the rate of growth of the total
market.
As we work to modernize our financial system, we need to make sure that CRA keeps
working for our communities. That is why we have insisted that:
•
Modernization legislation include a provision that banks and thrifts have and maintain an
adequate eRA record in order to engage in newly authorized financial activities.
•
There should be no weakening of existing eRA provisions in the bill.
The Senate bilI not only fails to include a requirement with respect to newly authorized
activities, but also contains provisions that would seriously weaken the CRA. The House bill
meets this test, and preserves CRA S relevance for the future.
I
3.
Protections for Consumers
Financial privacy has gained much greater prominence as an issue since the last
Congress. Much of the benefit of tinancial modernization is synergy, and part of that synergy
is derived from the sharing of information from developing innovative products to relieving
customers of the burden of reintroducing themselves to an institution each time they do
business.
Nonetheless, revelations about tinancial service industry practices have come as a shock
to policy makers and many consumers, who thought that financial services firms preserved the
confidentiality of personal customer information. Our challenge is to protect the privacy of
consumers while preserving the benefits of competition and innovation.
4
Americans should have the opportunity to participate in the modem means of electronic
payments and receipts without subjecting themselves to behavioral profiling. Just as they
would not expect a letter carrier to read their mail or record their correspondence, they do not
expect a bank processing a check to record, store and evaluate their personal behavior.
Consumers applying for mortgage loans should not have to worry that their bank is mining
their checks to determine how many are written out to doctors or pharmacies.
Providing consumers with notice and choice on the use of their financial information
represents an important counterb'alance to the increased breadth of financial institutions
permitted under the bills. Consumer privacy safeguards should apply to sharing or sale of
information both outside and within financial organizations.
.
4.
A Bright Line Between Commerce and Banking
As I noted earlier, both bills allow common ownership of all types of financial firms,
albeit in functionally regulated units. We believe that when it comes to non-financial firms,
even greater separation is appropriate, and that common ownership should be prohibited. One
of the lessons of the Asian experience of the past few years is that financial institutions tend to
make bad decisions when it comes to lending to their corporate owners or siblings. The
synergy gains of combining financial and non-tinancial firms are not great - and the potential
downside is considerable.
Thus, I believe that the United States economy has been well served by preserving a
clear separation between those who allocate capital and the majority of those competing for it.
That is why we oppose provisions in the Senate bill that would allow banking and commerce to
be mixed together under the guise of merchant banking. And it is why we oppose a provision
in the House bill that would allow the transfer of unitary thrifts to non-financial firms. Surely,
this is an area where we' need to move cautiously, at least until we gain experience with the
effects of broader financial tirm~.
The issues I have just discussed are particularly critical to the Administration. But there
are a number of other provisions in the bill that will have an important impact on the success
of our financial regulatory system in the next millennium. For a bill to redeem the promise of
the many years that we have waited, it must reach reasonable outcomes on issues such as
Federal Home Loan Bank reform, securities regulation, and insurance sales, among other
Issues.
II. Continuing Financiall\1odernization
Passing the right legislation is important for our financial system and for the American
people. But modernization is an ongoing process, not a single event - or a journey with a
5
single destination. This legislation would not address all of the issues that are involved in
building a modem financial system. Even in the near term, many important further questions
remam:
How do we protect the system as a whole from the failure of one institution, and make sure
that all. in the puhlic and private sectors, understand that no institution is too big to fail?
•
With respect to banking, Congress and regulators have taken significant steps to red.uce
creditors'expectations that the government would protect them from loss, but neW
measures need to be studied. More broadly, the President's Working Group on Financial
Markets has now supported new requirements that public companies include in their.
financial statements their exposure to highly leveraged institutions, including banks and
hedge funds. Debates about systemic risk should also now include government-sponsored
enterprises, which are large and growing rapidly. For all types of institution, we need to
explore further ways to enhance transparency and market discipline and reduce systemic
risk.
How do we build a system q.f capital regulation that is as modern as the markets?
•
The system of capital standards upon which our supervIsory system increasingly relies
needs to be able to capture market risk, credit risk, liquidity risks, and other forms of risk
if it is to serve the purpose for which it was intended. Value-at-risk models represent an
. important step toward capturing some of these. But they lead to furth~r questions as to
how best to capture the model risk that is inherent in such techniques. With the leadership
of Bill McDonough the Basle Committee has proposed significant changes to the capital
regulations applied to banks around the world. This debate is as an important one, and I
urge you all to be part of it.
How do we l'l1.wre Ihal the
•
h(,nl~fils (!f modern ./inancial s('rvicl's
are more widely felt?
The new technologies that are revolutionizing the financial services industry have the
potential to create a so-called digital divide, but they also have the potential to make
banking more accessible for consllmers currently outside the system. In establishing the
electronic transfer accounts and implementing EFT 1999, the Treasury has taken some
first steps toward this. But we can and must think of ways to go further.
How can we ensure thaI our COI1Slfl71{'r profl'criOI1 laws keep up with the growlh (if electronic
commerce and eleclronic hanking?
•
The President took an important first step in this area when in May he announced a series
of initiatives on tinancial consumer protection. We need to pursue those initiatives. We
also need to make certain that the disclosures required by our consumer protection laws
6
have the same meaning and force when contracting on line that they do when the contract
is more traditional. And we must do more to prevent fraud and abusive practices from
spreading through electronic commerce.
How do we best respond to the greater risk to the insurance funds posed by a much more
consolidated bankinK industry?
•
Ill.
A recent FDIC study found tnat banking industry consolidation. has increased the
insolvency risk of the insurance fund by tying its health more than ev~r to that of the
largest banking organizations. Better, more market-based, supervisory tools would help
reduce this risk. And so would merging the thrifts and bank deposit insurance funds,
since this would eliminate the needless harm to public confidence that would result when
.funds were available in one, but could not be used to support the other.
Concluding
Remar~
Let me end my remarks where I began: our financial industry is stronger and more
competitive than ever. To help ensure that it remains competitive, we want a financial
modernization bill -- but we want the right bill. After so many years' of waiting, we now have
an historic opportunity for lasting and important reform. But that same long wait also gives us
a responsibility to do it right. Thank you.
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7
DEPARTl\1ENT
OF
THE
TREASURY
NEWS
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C .• 20220 • (202) 622-2960
October 6, 1999
Weekly Release of U.S. Reserve Assets
The Treasury Department today released U.S. reserve assets data for the week ending
October 1, 1999.
As this table indicates, U.S. reserve assets totaled $73,032 million as of October 1, 1999, as
compared to $73,461 million as of September 24, 1999.
u.s. Reserve Assets
(millions of US dollars)
Reserve
Foreign
3/
Drawing
R·19ht s 2/
ESF
SOMA
Position in
IMF 2/
Currencies
Week Ending
Assets
Gold
Stock II
September 24, 1999
73,461
ir,046
10,249
16,155
16,158
19,852
October 1, 1999
73,032
11,046
10,306
15,857
15,860
19,964
Reserve
1/
Special
Total
1999
Gold stock is valued monthly at $42.2222 per fine troy ounce. Values shown are as of August 31, 1999. The July 31, 1999
value was $11,048 million.
2/ SDR holdings and the reserve position in the IMF are based on IMF data and valued in dollar terms at the official SDR/ dollar
exchange rate. Consistent with current reporting practi'ces, IMF data for September 24, 1999 are final. Data for SDR holdinfs and
the reserve position in the IMF shown as of October 1, 1999 (in italics) reflect preliminary adjustments by the TreasUIY to the
September 24, 1999
I~fF
data.
3/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open .\[;uket
.1.ccount (SO~L1.). These holdings are valued at current market exchange rates or, where appropnate, at such other rates as IT..1Y be
agreed upon by the parties to the transactions.
L8-142
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
·u.s
Government PrintIng Offtce ':-~3 - 619-5:':'
NEWS
OFFlCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
Contact: Bill Buck, Treasury Department
(202) 622-2960
Helen Szablya, CDFI Fund
(202) 622-8401
FOR IMMEDIATE RELEASE
October 6, 1999
SECRETARY SUMMERS ANNOUNCES $112 MILLION IN CDFI FUND AWARDS
Treasury Secretary Lawrence Summers today announced the recipients of the
Community Development Financial Institutions Fund's (CDFI) awards. The awards, totaling
more than $112 million, are being awarded to banks, thrifts and community development
financial institutions through the CDFI's Bank Enterprise Award Program and the CDFI
Program's Core, Intermediary and Technical Assistance Components.
"The CDFI Fund is helping to rebuild communities across the country," said Secretary
Lawrence Summers of the U.S. Department of the Treasury. "By creating partnerships between
institutions and low-income communities, CDFI Fund award recipients are helping to make
financial services available to all Americans."
The CDF! Fund's mission is)o promote local growth and access to capital by directly
investing in and supporting CDFls and by expanding traditional financial institutions' lending,
investment, and services within underserved markets. Since 1996, the CDF! Fund has provided
more than $300 million to promote community and economic development and encourage private
sector investment to underserved markets.
The CDFI Program leverages Federal dollars by requiring that each CDFI provide at least
a one-to-one match with funds from non-federal sources for each dollar of assistance it receives.
In addition, CDF! award recipients are held to performance standards that help ensure that the
CDF! Fund's investment will result in a significant community impact. Under the CDFI Fund,
local organizations make the decisions about how to best meet community needs.
Please visit the Fund' s websitewWw.JI~.(l!?,gQy!~Q.fj for a complete listing of the 1999
CDFI Fund awards.
-30-
LS - 143
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
'U S Government Prlntlnq OH,ee 1998· ;;·~·5~~
DEPARTMENT
OF
THE
TREASURY
NEWS
omcr OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. -
20220 - (202) 622.2960
Embargoed until 3:30 p.m.
Text as Prepared for Delivery
October 7, 1999
Statement by
Treasury Deputy Secretary stuart E. Eizenstat on .
Conclusion of Meetings on Bolocau!t Slave and Foro,~
Labor Issues
Over the last two days, Count L< ltibsdorff and I, :: n
behalf of our ·governments, have been meeting here wit'l
the representatives of the Governments of Belarus, th~
Czech Republic, Poland, Russia, Ukrajne, and the Sta~:
of Israel, the Conference on Jewish ~aterial Claims
against Germany, and the German econcmy,as well as a
number of attorneys -representing survivors and their
heirs in lawsuits against German com~anies for acts
arising out of the Nazi-era.
The focus of our discussions has been to agree or
the establishment of a German FoundatLon that would
provide some measure of justice to fo~er forced and
slave laborers who were required to w,rk for German
industry or the Nazi regime, as well is to other victjns
of the Nazi period who suffered at th! hands of Germar
industry during this period.
All of the parties have had the chance to pres~nt
their views, to us and toone another, on the best way
to resolve these issues, which have hid such
extraordinary resonance 'in the courts, the legislatures
and among the public on both sides of the Atlantic.
We have made a great deal of pro~ress in the
two days on the establishment of mech,nisms for
resolving these issues without resort to lengthy
litigation.
las~
Today, I would like to announce SOInI! of the most
important accomplishments from our meetings this week.
I will list them briefly, and then I will make more
detailed comments:
1.We have resolved the difficult issue of eligibility.
2.We have agreed on a structure for re>olving all case~
concernina d~m~n~~ ~~ ~roperty, such a; banking.
2
3.We have essentially agreed on a mechanism for
providing the German companies with the legal peace ~ 1ey
have sought from the beginning of this process.
4. And, because of the significant p:ogress we have r.lde
on all of the substan~ive and procedlral issues
concerning the German Foundation, fo~ the first time,
German enterprises and the German qo'errunent have placed
de. Their offer :·f
six billion D-marks is much higher than the amount th:· t
that the companies and the governrnen1 had initially
considered earlier this year and replesents a basis f)T
serious discussion. Their offer COVErs each category
that we have been discussing over thE past several
months: slave laborers, forced laborErs, other cases .Jf
injury caused by German private indu~try during World
War II, cases involving damage to prcgerty, such as
banking and insurance, and the future fund for
a concrete financial
humanitarian and educational purposes. which will als(·
be available to heirs.
The other parties have not accep:ed the German
offer. Their responses have varied wi'lely among them.
The other parties should now step fO~lard with a
reasoned response. For this process ',0 be successful,
both sides need to c6ntinue to show tle flexibility th~t
has enabled us to make the progress w( have achieved t:
date.
I am encouraged by the fact that, despite the
d~fferences on money, the parties haVE agreed to
continue to meet. We plan to have our next meeting in
Germany in November.
Let me now go into some of the de:ails of our
accomplishments.
Elig~~litx
of Claimants We reso.ved the
eligibility issues, which centered on I1hether to inclucE'
"relocated" workers,. or only those who were "deported",
that is dislocated into the Gerrr.an Rei( 'n and ,whether to
include agricultural workers. This wa! accomplished in
the following ways. first, the German economy and
govern~ent have agreed ~o es:ablish a combined
foundation, which would make payments :0 both private
and public sector workers.
Second, it has been agreed
that the German f~undaticn will make lunp-surn payments,
for Category B laborers, to the Central and Eastern
3
European Reconciliation, which coule then distribute
these funds to those they believe tc be most deservilL~.
This would give them the discretion to make payments :0
private and public relocated and depJrted workers, a!
well as agriculture laborers. It wOlld be their
decision.
The German Foundation would resl!rve a portion of
funds to make payments to forced lab! ,rers outside of
these five Central and Eastern Europ(~an countries.
Banking & Other Property. Regalding banking and
other property issues, we agreed that there should be .
fixed amount allocated to banking ant other property
cases, and on the· creation of a clairr s process with all
international adjudication panel. In addition, to
address the moral aspect of the invollernent of German
Banking in the Nazi terror, it was ag:eed to establisl a
separate humanitarian fund with the flnds not used in
the claims process. Distribution of :his humanitariar
fund would be worked out with an apprl}priate
nongovernmental organization.
Other Cases.
We have also agreec to create anoth:'r
category entitled "other cases" for trose who do not fit.
into forced labor, slave labor, bankirg or other
property claims. This category could consider cases,
for example, of victims of medical ex~eriments and
others who SUffered at the hands of German industry no".
otherwise covered by th~ Foundation. 7)is new category
is very important because it would broaden the scope O~
the Foundation to cover essentially all cases against
German industry ariSing out of the NaZL period.
We have' essential .y achieved
. agreement on all the basic issues rega. -ding. legal
closure so that the German corporation: will have the
legal peace they seek in the United Stites. We now onli
need to work out some technical additicrial details.
Legal Closure.
Funds for cEEs. Rega~ding the Gelman financial
offer, ! should also note tha~ the total lump su~ has
fixed amounts for each category of cases.
Thus, the majority of funds for sl~ve labor and
forced labor would· go to residents of C~ntral and
Eastern Europe who have benefited Ijttle from past o'
existing German compensation prograrrs.
Superioritl of Ne20tiated Settl~ent. I have
always felt that the best way to res)lve these claip~ is
through a negotiated settlement rath~r than through c
lengthy series of trials. There are two reasons for
this: the age of the survivors -- no" around 80 years
necessitates an expeditious solution, since 10 percen~
of survivors pass away each year. St·cond, the number of
victims who would be covered by the Cerman foundation
would be much greater than those covered by the ·lawsu.ts
pending in United States courts. Thts, justice would be
better served if agreement can be rea ched to establisJ l a
German foundation, rather than puttin~ the aging vict:ms
at risk in unce~tain and lengthy liti~ation_
This is not an ordinary commerciil negotiation. J'
has a higher purpose. For the survivo~s, it is meant tel
bring some relief, before they pass a 1 ray, to those whc
were so cruelly exploited and have be(~n waiting so lcn~
for a measure of justice. On' the othEr side, a new
generation of German industry is will;ng to undertake
responsibility not jusz for the past actions of their
own companies, but for all companies. By doing this,
they can make a powerful case for finally bringing
closure to the economic turmoil of the Nazi era.
It is in pursuit of these higher ,urposes tha~
Count Lambsdorff and I intend to stay :he course in
these negotiations. We are gratified t le other
participants have indica ted they will j Ie with us.
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DEPARTMENT
OF
THE
TREASURY
NEWS
omcr OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. -
20220 - (202) 622·2960
EMBARGOED UNTIL 7:30 PM EDT
Text as Prepared for Delivery
October 12, 1999
"THE UNITED STATES AND CHINA AT THE DAWN OF A NEW CENTURY"
TREASURY SECRETARY LAWRENCE H. SUMMERS
REMARKS TO THE ASIA SOCIETY ANNUAL DINNER
NEW YORK, NY
Thank you. We meet at an important time for Asia as it seeks to put the recent
financial crises behind it and build the basis for strong and sustainable long-term growth into
the next millennium. The outcome will be the result of the individual and collective efforts of
every country in the region. But perhaps nothing will be more important to Asia's long-term
future and American interests in Asia than what takes place in the region's most populous
nation. In that spirit, I would like to focus my remarks today on China.
Earlier today, I was pleased to announce that the 12th meeting of China-United States
Joint Economic Committee will be held in slightly less than two weeks' time, in Beijing.
Meetings between the finance ministers of what may soon be the world's two largest
economies ought to be regular events - and increasingly, they are.
This 12th Session comes at an important moment for the Chinese people - coming as it
does in the wake of the recent fiftieth anniversary celebrations - and an important time for
China's economic transition. I expect that the discussions will focus on international economic
issues of mutual concern, macro-economic and structural questions facing China, international
law enforcement issues such as combating money laundering, and of course, the very live
question of China's entry into the World Trade Organization.
I would like today to take the opportunity to place these discussions in their broader
context.
When we convene this year's JEC it will be just over twenty years since Secretary
Blumenthal first made his historic trip to Beijing to negotiate the terms for normalizing our
trade relations to China. Since then:
LS-147
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
·u.s. Government Printing Oft.ce
1998 - 619-559
•
China's economy has grown by more than 350 percent in real terms.
•
It has risen to being 11 th largest trading nation in the world.
•
The number of Chinese with access to a television has risen one hundred-fold, to one
billion.
Ever since the rise of Assyria and Sparta, emerging economic strength and major
changes in the economic balance of power have raised the specter of war and conquest. In this
century alone we have seen two World Wars that followed closely on the emergence of major
new economic powers. And the pace of economic change in China - and indeed through much
of Asia - is literally unprecedented in history, with standards of living for billions of people
quadrupling or more in a single generation.
That this has so far been achieved without major connict, despite the pervasive rivalries
between the peoples of Asian nations, is a reflection of the progress that has been made across
the region toward openness and integration. And it speaks to the success of postwar
international institutions in helping to cement that progress. But if the next quarter century in
Asia is to be as successful as the last it will be crucial that China define its greatness in the
right way and that it fit into the global economic system.
As President Clinton has said, if we have learned anything in the last few years from
events in Russia it is that the weaknesses of great nations can pose as a big a challenge to the
United States as their strengths. Our long-term strategy must be to encourage the right kind of
success in China: to help it grow into a strong, prosperous and open society, to come together
not fall apart, and to become part of institutions that promote our deepest values and interests
and can build mutual trust.
For all its recent progress, China has enormous challenges to overcome if it is to find a
successful long-term path:
•
As Gerald Segal has noted, the home to one fifth of mankind still ranks 10~ - next to
Namibia - in the United Nations' Human Development index.
•
Each year many millions of people migrate to the cities in search of jobs, and in many
places unemployment is now well into double digits.
•
Drugs and arms trafficking - even piracy - and corruption all pose a rising threat.
In the end, the solutions to these problems will lie in the choices that China makes. But
its success will also depend on the choices we make in our regional and bilateral relations with
China. Let me say a few words about the largest economic challenges that China faces today. I
will then consider the role that regional and global efforts can make, and the core priorities for
the United States.
2
I.
Core Economic Challenges for a 21" Century China
China's remarkable progress since 1979 has been based on a simple and potent recipe:
freeing labor from the land, and allowing the multiplier to operate on a vast stock of human
resources that previously went untapped. After two decades, this has placed China, if not at the
beginning of the end of its market transition then certainly at the end of the beginning.
In a sense, China's problem now is the same as the one that Japan and other rapid
industrializers have faced. For catch-up, by definition, can only take you so far. As we are all
learning, continuous growth in a new economy demands continuous improvement in efficiency
and innovation.
There's a saying in Shanghai these days that when foreign investors say they're in
China for the long-term - it means they have been there 5 years and they're still losing money.
As the leadership recognizes, when it comes to laying the basis for this more difficult kind of
growth, China has a long way to go - and profound obstacles still to overcome.
Three complex and interrelated problems stand out.
First, financial sector refonn.
Financial markets do not just oil the wheels of economic growth. They are the wheels.
Well-functioning financial markets are the difference between getting a country's savings into
high-return investments - and tying up those precious resources in moribund state-ownedenterprises or cash hoards under mattresses. But today, far from being a spur to future
growth, China's financial sector is probably its gravest handicap.
As Nicholas Lardy has noted, the Chinese financial sector has a number of features that
were also present in the Asian economies that went on to suffer crises: notably a very rapid
build-up in domestic credit, an equally dramatic increase in the leverage of industrial
enterprises, and a rising share of non-performing loans. However, the basic nature of the
financial problem in China is very different than in those economies, relating more to the
interlocking relationship between SOEs, banks and the government and its fiscal and broader
economic consequences.
Recognizing the seriousness of the problem, the Chinese government has made financial
sector reform a high priority in recent years, and has undertaken important reforms. Promising
recent steps include the reorganization of People's Bank of China along regional lines to reduce
local political pressure on supervisors, and the creation of RTC-style asset management
companies to deal with non-performing loans at state commercial banks.
No one should imagine that breaking the dependence of loss-making SOEs and their
workers on a near-bankrupt financial sector will be easy - or that the task of building a stable,
3
well-capitalized, truly commercial financial system is c10se to being completed. But nor should
they imagine that China can achieve a stable and prosperous transition without these things.
Second, state-owned-enterprise rejon71 and reducinK state economic controls.
The success of China's reforms since 1979 has been to allow competitive forces to take
hold of a rising share of the economy. But as we learned from Hungary and other partial
reformers in the former Soviet bloc in the 19705 and 19805 - loss-making industrial SOEs and
widespread central controls are dragging burdens that a growing economy cannot carry
indefinitely.
Reform of China's loss-making SOEs was the focus of the recent Party Plenum, and the
leadership has reaffirmed its commitment to resolve the problem by the end of next year.
However, while there have been some recent achievements in the textile and coal sectors, it is
fair to say that SOE reform remains on a cautious path - and the state's control over key
sectors of economic activity looks set to be retained for some time.
To be sure, with unemployment and underemployment already a serious problem in
China, we cannot expect changes that have been resisted so long to come easily or quickly.
But if there is one lesson of recent events around the world must be that in the end,
government direction of economic activity, limited competition, and promotion and protection
of particular industries does not produce the lasting growth in living standards that China
needs. And it bears emphasis that growth is itself threatened by a situation in which the SOE
sector absorbs perhaps 85 percent of bank loans in the economy - while producing less than
one third of its output.
Third, building the intangible infrastrucrure of a market economy.
China wants to succeed in the global economy of the 21 st century. And in this new
world, even more than in the century just ending, I am convinced that the quality of
governance will be a key determinant of that kind of success. Ultimately, the long-term
challenge for China must be the same as that facing every other economy in Asia today. This is
to create an institutional environment in which investment and innovation can flourish.
That means, among other things: sound money, the rule of law, fair tax laws and
enforcement; private ownership and free land markets; intellectual and physical property
rights; independent courts that enforce laws and contracts; strong banks that safeguard peoples'
savings and channel those savings to productive investment; securities markets that deter fraud
and protect investor rights; social spending targeted to those really in need. And it means
transparency and a free market in ideas.
In its reforms of the financial sector, especially, the Chinese leadership is taking some
first difficult steps toward these things. But as the world moves from an industrial to an
information era, the degree of freedom will surely become an ever more important prerequisite
for economic success. There is no firewall between economic freedom and freedom in its
4
many other dimensions. The free flow of information is essential to free society, to free
markets and to a strong financial system.
In addition to all of these profound challenges for Chinese economic reform we should
remember that other long-term trends will be imposing their own constraints in the years to
come:
•
China's popUlation will be aging enormously. Today there are around ten workers in China
for every pensioner, in fifty years' time there will be only three.
•
And China will have to cope with the human and economic consequences of environment
degradation. China's air and water - particularly in urban areas - are now among the
polluted in the world.
At bottom, as President Clinton has said, "China's greatest challenge in the coming
years will be to maintain stability and growth at home by meeting, rather than stifling, the
growing demands of its people for openness and accountability." Seen in this light, closer
integration of China into the world economic system acquires a dual significance: as a force for
economic success in China and as a force for enhanced regional and global stability.
II.
China As Regional Anchor
The United States has supported China's efforts to playa constructive role in the
regional institutions and decisions that will help shape Asia's economic future - in its strong
and continued participation in APEC and, most recently, in its response to the recent crises.
Throughout this difficult period President Jiang and Premier Zhu have made clear that
they recognize China's own stake in a lasting restoration of growth and stability in Asia and
across the emerging market economies. And they have made clear that they understand the
contribution that China can make to that outcome:
•
Through China's involvement in the Manila Framework Group for better managing
financial crises, founded by finance ministry and central bank officials from key Asian
economies in November 1997.
•
Through its support for multilateral emergency financing packages for the Asian crisis
economies.
•
And, especially, through keeping China's own exchange rate stable at a time of crisis.
China's commitment to maintaining a stable renminbi served it well during this period and it well served the interests of the Asia-Pacific as a whole.
China's role in helping to build a more stable global financial system has now been
further recognized in its inclusion in the G20. This new permanent informal mechanism for
5
dialogue on economic and financial issues among officials from the G7 and key emerging
market economies will meet for the first time later this year. We hope and expect that China
will be an active participant.
IV.
The United States and China
There is little doubt that a constructive bilateral relationship between the United States
and China will be critical to the shape and prosperity of the 21st century global economy_
China will choose its own destiny_ But by working with China as it reforms, by expanding our
areas of cooperation and by dealing forthrightly with our differences - in all of these ways we
can advance fundamental American interests and values.
Principled and successful United States engagement with China in the years ahead will
involve a wide range of concerns that are not strictly economic: from combating global
warming and nuclear proliferation, to global aviation regulation, to expanding our people-topeople ties.
For our part the Treasury Department will be working, at the upcoming JEC and in
other fora to strengthen our cooperation on international law enforcement issues such as money
laundering, and we will also be continuing to call on China to observe the terms of the
Memorandum of Understanding and Statement of Cooperation on prison labor.
Beyond these issues, what will be most important for China's economic future will be
the approach we adopt toward the closer integration of China with the global trading system.
Many see a rising economy with millions of poor people within its borders as a threat to
American economic interests. And starting from this perspective, they worry about the
implications of such a country becoming more integrated with our own markets. This
Administration - and all of those who have supported, on a bipartisan basis, China's closer
integration with the world trading system for well over a decade - perceive it rather
differently.
Of course, it is important to ensure in our relations with China that our commercial
interests are protected. But to seek to contain China economically - to keep it poor and to
isolate it from our markets - is to see our long-term core interests precisely backwards.
The truth is that an open and prosperous China will best promote our national
commercial interests - and it will best promote our broader national economic and security
interests:
•
It will open an enormous export market to our producers and our farmers. Even the limited
opening that has already occurred has quadrupled our exports to China in the past decade,
to the point where an estimated 400,000 American jobs now depend on them.
6
•
It will support faster growth in productivity and wages in China - and thus faster real living
standards and higher demand for our products in the future.
•
And, as I have described, it will provide a catalyst for broad economic and institutional
change that could help China in the 21 st century become the open, stable and prosperous
observer of global norms that we would all like to see.
The United States' stake in a more open Chinese economy underpins our bilateral and
multilateral trade policy toward China. But look closely at the various market access and
intellectual property right agreements we have negotiated with China in recent years and you
will see that they rest on broader international standards - such as transparency, fair contract
enforcement procedures and checks on arbitrary government action.
That is why, in the long run, we believe that the best framework for our trade relations
with China would be the market-oriented and rules-based system of the World Trade
Organization. The WTO provides a tested means to reduce trade barriers on a reciprocal basis,
to prevent unfair trade practices, and to enforce commitments on open and fair trade.
For all of these reasons, the Administration remains committed to China's accession to
the WTO on strong, commercially meaningful terms. But the prospects for reaching an
agreement will depend largely on the Chinese and their willingness to address our priority
concerns, including in the area of financial services. We will not conclude these negotiations
until China's commitments are very clear, and the interests of American producers are
adequately safeguarded from sudden market shifts.
To be sure, a World Trade Organization cannot fully live up to the founders' intent
while it excludes a country that is home for one fifth of mankind. Nor can it do so by
including countries that have not firmly committed to its basic principles: commercial
reciprocity and respect for international law.
ID.
Conclusion
China has been a major power in the world for five thousand years. When George
Washington became President it produced one third of the world's output and was home to
around one sixth of the world population. As the tragedies of the past 100 years have made
clear, it is subject to convulsive and sudden change. But surely the right policy for us is a
consistent policy of giving strength to favorable trends where they are under way in China,
while at the same time as assuring that we protect our deepest interests and values.
History will judge whether both countries rose to the challenges this new era presents
and worked to lay the foundation for unprecedented regional and global security and prosperity
- or whether we let that potential go to waste. We are not guaranteed to succeed. But we will
certainly reduce the chances for success if we fail to forge a constructive path with China and
support its closer integration in the world sYstem.
7
This is what the meetings among President Clinton, President Jiang and Premier Zhu in
the past few years have been about. And it will very much be the spirit of the twelfth JEC in
Beijing on October 25 11\ Thank you.
-30-
8
NEWS
OFFICE OFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASlUNGTON, D.C. - 20220 - (202)622-2960
Weekly Release of U.S. Reserve Assets
October 12, 1999
The Treasury Department today released U.S. reserve assets data for the week ending
October 8, 1999.
As this table indicates, U.S. reserve assets totaled $73,226 million as of October 8,
1999, as compared to $73,039 million as of October 1, 1999.
1999
Total
Reserve
Week Ending
Special
Gold
Assets
Foreign
C urrenCles
. 31
Reserve
Drawing
ts 21
Position in
ESF
SOMA
IMF2I
October 1, 1999
73,039
11,046
10,284
15,857
15,860
19,993
October 8, 1999
73,226
11,046
10,250
16,000
16,003
19,927
1/
Gold stock is valued monthly at $42.2222 per fine troy ounce. Values shown are as of August 31, 1999. The July 31,
1999 value was $11,048 million.
2/ SDR holdings and the reserve position in the IMF are based on IMP data and valued in dollar terms at the official
SDRI dollar exchange rate. Consistent with current reporting practices, IMP data for October 1, 1999 are final. Data for
SDR holdings and the reserve position in the IMF shown as of October 8, 1999 (in italics) reflect preliminary adjustments
by the Treasury to the October 1, 1999 IMF data.
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.
L8-148
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'0:
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FrOl: OepartJent Of Treasury
o
EPA R T :\1 E N T
0 F
02109/00 05: 39 PM
TilE
Page 15 of 17
T REA S II R \'
NEWS
omCE OF PUBLJC AFl"AIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C. • 20220 • (202) 622-2960
Contact: John Longbrnke
(202) 622-2960
FOR IMMEDIATE RELEASE
October 12. 1999
SECRETARY SUMMERS TO LEAD U.S. DELEGATION TO CHINA
The Treasury Department announced Tuesday that Secretary Lawrence H. Summers will
lead the U.S. detegation at the China-United States Joint Economic Committee meeting on Oct.
25 in Beijing, China.
This 1211\ JEC meeting will (ocus on the economic policy and fmancial issues facing China
and the United States in the months ahead as well as enforcement issues and international trade.
The last meeting was held May 1999 in Washington, D.C.
"Our capacity to forge a constructive path with China and to support its closer integration
into the wurld economy will be fundamental to how we d~al with the strategic and economic
challenges of this new era," Secretary Summers said.
-30-
LS-149
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DEPARTMENT
OF
THE
TREASURY
NEWS
omcr OFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. -
20220 - (202) 622-2960
FOR IM:MEDIATE RELEASE
October 12, 1999
STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMMERS
ON FINANCIAL MODERNIZATION
The Administration is disappointed by the recommendations on the Financial
Modernization bill put forth by Chairmen Gramm, Leach and Bliley today. A flawed
process risks producing flawed legislation. In important respects, the Chairmen's
proposal abandons the bipartisan consensus that the House legislation achieved. On each
of the four key areas cited by the President -- business choice, the Community
Reinvestment Act, consumer protections, and banking and commerce-- the
recommendations are inadequate. If the bill were presented to the President in its current
form, the President would veto the bill.
The right financial modernization legislation can make an important contribution
to the strength of our economy. We remain willing to work cooperatively toward a bill
that meets the President's requirements.
-30-
LS-1S0
For press releases, speeches, public schedules and official biographies, call our 24~our fax line at (202) 622-2040
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
FOR IMMEDIATE RELEASE
Jctober 12, 1999
Office of Financing
202-6'91-3550
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
October 14, 1999
January 13, 2000
912795DC2
Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:
4.780%
Investment Rate 1/:
4:.918%
Price:
98.792
All noncompetitive and successful competitive bidders were awarded
;ecurities at the high rate.
Tenders at the high discount rate were
lllotted 28%.
All tenders at lower 'rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered
Tender Type
Competitive
Noncompet.itive
$
21,188,071
1,347,906
$
8,872,977 2/
150,000
150,000
22,685,97'1
9,022,977
4,761,860
4,761,860
o
o
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
$
7,525,071
1,34:7,906
22,535,977
PUBLIC SUBTOTAL
TOTAL
Accepted
27,447,837
$
13,784,837
Median rate
4.760%: 50% of the amount of accepted competitive tenders
tendered at or below that rate.
Low rate
4.670%:
5% of the amount
E accepted competitive tenders was tendered at or below that rate.
~s
id-to-Cover Ratio
I
I
=
22,535,977 /
8,872,977
=
2.54
Equivalent coupon-issue yield.
Awards to TREASURY DIRECT = $1,014,74l,OOO
L8-151
bttp=/Iwww.publlcdebureas.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
October 12, 1999
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
October 14, 1999
April 13, 2000
912795DR9
Term:
Issue Date:
Maturity Date:
CUSIP Number:
4.930%
High Rate:
Investment Rate 1/:
5.139%
Price:
97.508
All noncompetitive and successful competitive bidders were awarded
3ecurities at the high rate.
Tenders at the high discount rate were
illotted 19%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Competitive
Noncompetitive
$
20,022,760
1,157,486
$
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
$
4,037,010
1,157,486
5,194,496 2/
21,180,246
PUBLIC SUBTOTAL
TOTAL
Accepted
Tendered
Tender Type
2,811,000
2,811,000
23,991,246
8,005,496
3,960,000
3,960,000
o
o
27,951,246
$
11,965,496
Median rate
4.900%: 50% of the amount of accepted competitive tenders
as tendered at or below that rate.
Low rate
4.820%:
5% of the amount
f accepted competitive tenders was tendered at or below that rate.
id-to-cover Ratio
= 21,180,246 / 5,194,496 = 4.08
/ Equivalent coupon-issue yield.
/ Awards to TREASURY DIRECT = $841,467,000
LS-152
p:/ /www.publlcdebt.treas.gov
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANlAAVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
Text as Prepared for Delivery
October 13, 1999
"GENERATING ECONOMIC OPPORTUNITY FOR ALL AMERICANS"
TREASURY SECRETARY LAWRENCE H. SlJMl\tIERS
REMARKS TO THE ENTERPRISE FOUNDATION'S ANNUAL ENTERPRISE
NETWORK CONFERENCE
ARLINGTON, VA
Let me start by thanking Bart Harvey for that kind introduction, and for inviting me to
speak with you today. It is gratifying to see the mission that Jim and Patty Rouse started 18
years ago - to bring people up and out of poverty and into the mainstream of American life continuing to be realized through the work of the Enterprise Foundation and the dedicated
group of community leaders assembled in this audience.
I want to talk today about one of the primary missions that Secretary Rubin set for the
Treasury Department, and one that r m proud to carryon: working to develop a financial
system that benefits all Americans.
We come together at a time of remarkable prosperity in our country:
•
with unemployment and inflation at or near their lowest levels in a generation;
•
with productivity and wage growth higher than any could have expected just a few years
ago;
•
at a time when we are enjoying budget surpluses for the first time in 30 years;
•
and at a time when the federal government is paying down debt and opening up room for
investment, rather than running huge deficits and crowding out investment.
LS-153
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I)
·U.S Government Prlntong Otllce 1998 - 619-559
The progress we have made in the last six and a half years has made available nearly $2
trillion for investment in our economy.
A time of great economic strength is a time to plan for the future. It is a time to strengthen
America's role in the world and, most important, it is a time to work to include every
American in our prosperity.
Indeed, including ever American in our nation's prosperity is central to all of our
objectives: it best prepares us for a future when we will need the efforts of every American.
And it strengthens the power of our national example at a time when, more than ever before,
the world is looking toward America.
The strength of our economy comes in significant part from the strength of our financial
system. Think about it: Some Americans want to save for their retirement, or for their
children's education. Others seek attractive returns by investing in new technologies or new
infrastructure. It is the financial system that brings them together - and that has done so with
unprecedented success in recent years, forcing productivity and efficiency enhancements as
capital is reallocated out of traditional large ventures and into the companies of tomorrow.
But just as the right kind of financial system can be a powerful spur to economic growth, it
can also be a powerful spur to inclusion - the inclusion of all Americans in the prosperity that
we are seeking to create. And that is my topic today.
The First Lady has said that it takes a village to raise a child. At Treasury, we like to say
that it takes capital to build a village. For if we have learned anything in recent years about
the challenge of helping those who are least fortunate, it is this: Traditional solutions, based on
simply providing income and assuming that opportunities will appear as a result, do not bring
enduring success. But equally, a government that abandons those who are least fortunate
abdicates its economic, as well as its moral, responsibility.
That is why we are working so hard on developing new approaches based on the principle
of creating opportunity for all. And that is where the financial system comes in so critically.
Two primary financial priorities stand out. First, expanding access to capital. And
second, ensuring that all Americans have access to financial services.
I.
Expanding Access To Capital
It is essential that every part of the country, that every area, that every type of business
that could earn a fair return have an opportunity to be funded. That, to use economic jargon
for just a second, there be a strong supply and a robust effective demand for capital in the
places where many Americans have in the past been left behind. This may once just have been
an issue of morality or justice. But at time when, in addition to having people look for jobs,
we face the issue in America of jobs looking for people, it is an especially acute imperative.
2
What are we doing about it? The most important things we are doing about it are:
• keeping our economy strong;
• paying down the government's debt;
• .generating opportunities for investment;
• and creating an environment where barriers to market access are low and capital is readily
available and seeking profitable opportunities.
But we have to do more than just create the right kind of economic environment. For
many years, it has been a priority at Treasury to promote economic growth and opportunity in
emerging markets around the world because of what it can mean for the people in these
nations. What we've come to realize more recently, and what the President highlighted on his
New Markets tour in July - which I think will be one of most remembered weeks of his
Presidency - is that the most important emerging markets are those within our borders.
In my first week as Treasury Secretary, I visited Harlem, USA, a major retail and
entertainment center being developed in New York. There, I saw clearly the power of
cooperation between the public and private sectors. Prior to this project, Harlem, an area with
a population the size of Cincinnati, had not seen any retail development in 50 years. This
effort, brought together under the auspices of many projects, including the Community
Reinvestment Act, is bringing major retailers to an area that has neither shopping mall nor
even - until recently - a major supermarket.
Are there public benefits to this project or should it have been left only to the market?
Think about this: Tax collection to New York City will pay back the public investment in
Harlem, USA in just 9 months. And land values in the area have increased 5- to lO-fold.
Our most important vehicle for creating such opportunities across the country is the
Community Reinvestment Act. CRA resulted in more than $88 billion in community lending
last year. Many bankers have described how the investments they first made because of CRA
obligations have pointed the way toward new and profitable business opportunities.
We are now engaged in a debate over financial modernization. Unfortunately, some
would, at this moment of opportunity and economic success, seek to scale back CRA or erode
its relevance. The President has made very clear that at a time of such economic strength, he
would like to see the repeal of archaic rules governing our financial system, but he will not
sign into law any bill that scales back CRA.
To finance potential profit-making ventures in areas that most lenders might still overlook,
Treasury's Community Development Financial Institutions Fund provides capital for
investment opportunities in underdeveloped areas. CDFIs not only spur economic
development, they also offer conclusive evidence to private sector investors of the broader
range of opportunities available to them in disadvantaged regions. Since its first round of
3
funding in 1996, the CDFI Fund has provided over $200 million to local financial institutions.
a sum that has been leveraged many times over in the investments it has generated.
As important as it is to ensure that financing is available in our disadvantaged communities.
it is also critical that there be effective demand for funds in these areas. That is why the
President's New Markets Initiative is seeking to create opportunities to tap into the almost
$695 billion in purchasing power that a recent survey found exists in America's inner cities and
rural areas. And that is why BusinessLINC, an Administration initiative led by Vice President
Gore, is helping small businesses partner with large companies to gain advice and technical
know-how through mentoring relationships and develop potential business relationships.
II.
Improving the Availability of Financial Services
Our second priority is making access to high quality financial services universal. It was
an important national challenge half a century ago to ensure that essentially every American
had access to electricity, to running water, and to a telephone.
In the modem world, access to a basic bank account takes on a profound importance.
Here in this age of the Internet, derivatives, and embedded options, between 10 and 20 percent
of American households still do not have any type of transaction account - checking or
savings. One new survey in Chicago finds that 44 percent of recipients of the Earned Income
Tax Credit used a check cashing service to cash their EITC refund check. Moreover,
estimates suggest that the costs over a lifetime for low- and middle-income families of paying
fees for each check that they cash and for every bill that they pay could exceed $15,000.
Access to banking in society today means access to the modem economy. One recent
study found that, controlling for income, wealth, age and other factors, individuals without a
bank account are 43 percent less likely to have positive net financial assets and 13 percent less
likely to own a home.
The problem of the unbanked is widespread and, as figures suggest, is of critical
concern. As with the spread of electricity or telephone service, it is a problem best addressed
through the right kind of cooperation between the public and private sectors.
Let me tell you about some of the things that we are working on to address this issue.
The federal government recognized in 1996 that we could save money, prevent crime,
and help beneficiaries through the Electronic Funds Transfer program. EFT '99, as the
program is known, will save the government $100 million and will prevent $100 million in
cnme.
But it will not work for those who do not have a bank account. That is why Treasury is
contracting with financial institutions to offer Electronic Transfer Accounts or ETAs - low-cost
electronic accounts that would essentially allow federal benefit recipients to "direct deposit"
4
their benefits in a bank account. Participants are guaranteed a low-cost account - which in
some cases wi1l pay interest on balances - with the start-up costs subsidized by the
government. We have been pleased with banks' response to the program thus far. Since the
announcement of the program in July, over 175 insured financial institutions have indicated
their interest in offering the account.
This clearly represents progress. But it is not enough, since millions of the unbanked
are not recipients of federal checks. All of us need to bring the same kind of innovative spirit
that has brought such changes in our financial landscape to the important question of how
Americans can get their checks cashed without being subjected to interest rates that too often
can be measured in hundreds of percent.
One area that we are now exploring is helping the Postal Service provide access to
ATMs at post offices in low-income neighborhoods. Given the presence of Post Offices in
almost every community in this nation, this program holds considerable promise in increasing
access to financial services in neighborhoods that have been left behind by mainstream
financial institutions.
But basic banking services go beyond the chance to cash a check - to the accumulation
of savings. It is only through savings that people can protect themselves against the
vicissitudes of economic life.
Tens of millions of dollars are spent in this country to help the higher-income
Americans who do save. We need to extend these same opportunities to those in this country
who may not have ready access to a 40l(k). That is why, as a second way of promoting access
to financial services, the Administration continues to support funding of Individual
Development Accounts. The lower-income Americans who participate in IDA programs set up
a savings account at a mainstream financial institution, receive matching funds for their
contributions, and take part in financial education programs.
here is a third component of access to tinancial services: access to personal credit. The
opportunity for personal credit must be open to all Americans. One of our less heralded
achievements is the progress that our nation's fair lending laws have made in improving the
accessibility of lending to minorities and low-income Americans. These opportunities should
be available to all those who are willing and able to pay for them. But this opportunity will be
lost if we fail to vigorously enforce our fair lending laws. That is why we are strongly
committed to that goal.
Ill.
Concluding Rema.·ks
I have talked today about some of the steps that we at Treasury and in government are
taking to address the financial aspects of the challenges of including every American in our
nation's prosperity and empowering every community in its ability to thrive. But ultimately,
5
the lesson of America is that prosperity and strength do not trickle down. They bubble up.
That is why the work that all of you are engaged in is so very important. Thank you.
-30-
6
DEPARTMENT
OF
THE
TREASURY
NEWS
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIAAVENVE, N.W. - WASlDNGTON, D.C. - 20220 - (202) 622-2960
EMBARGOED UNTIL 3 PM EDT
Text as Prepared for Delivery
October 14, 1999
"GLOBALIZATION THAT WORKS FOR PEOPLE"
TREASURY SECRETARY LAWRENCE H. SUMMERS
REMARKS TO THE DEMOCRATIC LEADERSHIP ANNUAL CONFERENCE
WASHINGTON, D.C.
The United States is the world's largest, richest and strongest economy. If leadership in
building a truly global trading system is going to come, it is likely to have to come from our
country. And now, when our ecoQomy stands so strong, is a propitious time for action. Yet even
at this time of unprecedented economic strength, the questions of what our trade policy ought to
be - and our approach to global integration more generally - continue to be difficult and vexing
ones for our country.
I would like today to share some reflections on four aspects of this debate that I think do not
always receive the emphasis they deserve.
•
First, the political and national security case for America's open markets policy.
•
Second, the direct economic case for open markets in terms of the living standards of the
American people.
•
Third, the difficult question of how to make sure that integration works for people.
•
Fourth, the political challenge of maintaining support for global integration in our country.
I.
The Political and Strategic Case for Support for Open Markets
The crucial link between closer economic integration and our national security is this: we
are much less likely as a nation to be drawn into contlict if nations of the world are strong, and
are forging ever closer connections, than if they are financially unstable and disconnected.
In short, trade promotes prosperity and by promoting prosperity, promotes peace.
LS-lS4
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Fifty years ago, in the wake of World War II, the primary concern the world faced was
the economic reconstruction of war-ravaged Europe and Japan. A generation of visionary leaders
responded by supporting a successful strategy of rapid economic rebuilding as essential to
normalization and prosperity, and increased economic integration, so people stood more to gain
from shared peace than from divisive conflict.
Today, the challenge is to integrate the 5 billion people of the developing world hundreds of millions of who are now glimpsing the benefits that a global economy can offerinto a strong and truly global market system. And our answer to that challenge should be the
same as it has been since 1945. By supporting liberalization in these countries we invest in our
future security and we invest in the spread of our core values.
Examples such as Korea, Taiwan and Argentina illustrate that economic development
tends to bring democratization in its wake. And there is no better way to spur this process than
by integrating them into the global marketplace.
Let these countries trade in today's global economy and you provide one of the strongest
catalysts for reforms that promote our deepest interests. In a 21 st century global economy,
competition and integration will make them more market-based; more protective of personal and
commercial freedoms, more open to the free flow of information and ideas; and ultimately, less
prone to conflict with other nations;
Trade, then, is the pursuit of peace by other means. But we should never forget that it is
also the pursuit of higher living standards for Americans. To put it bluntly: even if closer
integration did not help to make America a safer nation, we would still want to support it because
it helps make us a more prosperous one.
ll.
The Economic Case for Open Markets
Let me now suggest a more academic way of thinking about the economic case for trade
that is a little different than usual. Imagine there was a country whose ports were all filled with
rocks - to be sure, a very special kind of rocks - that blocked all incoming ships but not outgoing
ones. Ask yourselves, if those rocks could be removed at no cost, would that be a good thing for
that country?
Many people would say that it would be a good thing:
•
It would provide citizens with a wider choice of consumer goods, at lower prices.
•
It would provide producers with a wider choice of inputs, and lower costs, making them
more competitive and able to hire more workers and raise their wages.
•
It would provide more competition as a spur to productivity and new ideas - and as a result,
lower inflation and lower costs of capital.
2
To be sure, the removal of those rocks would bring about change in the economy. But
looking around, we can see that every day and in every way our market economy - by bringing
about improvements in technology, communications and transportation - is bringing down
natural barriers and making communication and trade much easier.
This, too, brings enormous changes as well as benefits in its wake. Indeed, nearly all the
academic evidence in this area suggests that technological change has had a much larger impact
on workers than increased trade - and that trade liberalization has tended to raise the wages of
skilled workers rather that reduce the wages of the unskilled. Shutting ourselves off from the new
global economy would not help these people - any more than it would help them for us to turn
our back on new technologies.
The question is whether we should respond differently to man-made barriers to trade than
we do to those natural barriers that new technologies are now eroding. And should our response
be any different if other countries have bigger rocks in their harbors? Would that be a reason to
keep the rocks piled high in our own?
The success of the United States in the 1990s is a testament to the benefits that openness can
bring:
•
Exports have created millions of new jobs - jobs that on average pay 13 to 16 percent above
the average wage.
•
And our openness to imports has fueled competition and innovation and helped to sustain our
growth with almost no inflation and long-term interest rates that even now, after 8.5 years of
expansion, are around 2 percentage points lower than they were at its start.
But actually I have so far understated the case for open markets, because no one is
suggesting that the United States unilaterally lower our own trade barriers without reciprocal
steps by others. What is at issue - in the debates we have had about ratifying the Uruguay Round
of the General Agreement on Tariffs and Trade and Fast Track, or that we will have about the
new round of negotiations within the World Trade Organization - is whether we should be
involved in a broad project of removing the rocks from our harbors and from other countries'
harbors.
It bears emphasis that this is not even a symmetrical debate - since we already have by
far the lowest trade barriers in the world. Ifwe look at the trade agreements we have negotiated
in recent years, the reductions in our own trade barriers are a fraction of the reductions that other
signatories have undertaken.
To take just one example: in 1993, United States goods faced an average tariff at the
Mexican border of about 10 percent, around 2 and a half times greater than United States tariff
on Mexican goods. Thanks to NAPT A, as of July 1999, Mexico's average tariff has already
fallen to about 2 percent. Indeed, two-thirds of U.S. exports to Mexico now enter duty-free.
Overall, our exports to our NAFT A partners grew by more than two-thirds, or $93 billion, in the
five years after the agreement was signed.
3
Looking forward, the gains from future trade liberalization could only be greater, at a
time when the major Latin American and Asian economies with whom we are most likely to
negotiate new trade agreements have average tariff rates three times higher than our own.
Considering the question this way, the inescapable conclusion is that the pursuit of
further trade liberalization around the world is not merely good economics - but good
mercantilism. Of course, it is important to ensure in our bilateral and multilateral trade
negotiations that our commercial interests are protected, and that our trade laws are vigorously
enforced. But to seek to keep our harbors closed off to foreign competition is to see our longterm core interests precisely backwards.
No country has a greater commercial and broader economic stake in encouraging evercloser global economic integration. Because of the diversity of our population and the centrality
of our location, our ties to any given region in the world are stronger than its ties to any other
region. And time and again, when developing countries reduce their trade barriers they grow
faster, their wages rise - and their demand for sophisticated American products grows with them.
ID.
Making Integration Work for People
At the same time, we all haye to recognize that trade and integration will not work for
America unless it works for every American. To a degree that historians have perhaps underemphasized, the GI Bill of Rights was an integral part of the strategy behind the Marshall Planjust as our interstate highway system was partly the result of an effort to marshal our Cold War
defenses.
The lesson of that time is very clear: internationalism cannot be a goal pursued by the
elite for its own sake. We need to find ways make real and more apparent to Americans the
strong link between security and prosperity abroad - and the security and prosperity of every
American.
As the President has said, "working people will only assume the risks of a free
international market if they have the confidence that the system will work for them." As we
move to more truly global and integrated economy, and as capital becomes so much more mobile
than labor there are legitimate concerns that companies will exploit that greater mobility by
playing off competing jurisdictions against one an other. The fear is that we will find ourselves
in a race to the bottom - a bottom in which governments cannot promote fair taxes, uphold fair
labor standards, protect the environment or promote other key American values.
That is not the world we want to build. And it not the world that we are building. Just as
national regulations and standards evolved in the United States in the last century in response to
the consequences of inter-state competition - so international agreements and institutions will be
needed to provide an enduring basis for integration at the international level. As the President has
said: "a legal framework of mutual responsibility and social safety is not destructive to the
market; it is essential to its success."
4
•
That is why we are working with other countries to promote global cooperation against
corporate and legal tax havens and we are working actively in the OECD on the issue of tax
competition.
•
That is why I think that the WTO should commit to collaborating more closely with the
International Labor Organization, which has worked so hard to protect human rights and to
ban abusive child labor.
•
And that is why, among other things, at the WTO ministerial in Seattle we will be calling for
the creation of a WTO Working Group on Trade and Living Standards and a thorough review
of the environmental impact of the Seattle round.
If we are there working with developing countries, to achieve strong agreements which
open global markets to them and to us, we can simultaneously promote labor and environmental
priorities and other issues that are important to us. What is more, we can offer their workers the
most reliable route to higher wages, namely access to global markets and expertise. Without our
involvement, neither outcome can be guaranteed.
Let me just add that however these issues play out in context of our broad trade relations,
the richest nation on earth can surely afford to open its markets in a limited way to countries in
Sub-Saharan Africa and the Caribb~an whose per capita income is a fraction of our own. The
African Growth and Opportunity Act and the enhanced Caribbean Basin Initiative each represent
modest but important steps toward expanding our partnership with these countries - and
promoting the broad economic reform and accelerated growth that they desperately need. These
are not steps that a nearly nine trillion dollar economy should find it difficult to make.
IV.
The Challenge of Maintaining Support for Outward-Looking Policies in the United
States
These and the other broader arguments for open markets should not be difficult to make.
But increasingly, they are. I have tried to reflect on why that should be so: why, when the
security benefits are so compelling and the economic benefits so clear, it so difficult to make the
case for open trade and broader economic integration in America today.
Three reasons stand out.
The first is the natural human tendency to internalize the good news and externalize the
bad. How many people working hard at a badly managed firm, with out-dated technology, pin
the blame for their layoff on foreign competition? How many people, when offered a raise or
promotion in a labor-short industry following a surge of export demand, assign the credit to open
international markets, rather than considering it to be a deserved reward to their own skill?
The second reason is that the United States is a large country that has traditionally looked
inward. Historians have written at length of our oscillations between isolationism and global
engagement. In the 1920s and early 1930s we swung, disastrously, in the first direction. In the
post-war period we moved decisively toward support for integration.
5
Today the motivating force of the Communist threat has evaporated, and been replaced
by the less salient but no less real threat of foreign economic storms blowing onto our shores.
And international economic policy has become more subject to popular influences. I doubt that
anyone focus-grouped the Marshall Plan; or that it would have fared well if they had.
The third reason is that trade tends to become the lens upon which all kinds of concerns
about a changing world are projected. If Americans are to be able to support and feel
comfortable with change, we need to equip workers with the education and skills to manage the
transition process and seize the opportunities that come with it.
In the end, a globally integrated America that leaves large chunks of its people behind
will not travel far. As we move from an industrial to an information age - pregnant with
possibility but also full of new challenges for ordinary people - a progressive agenda that seeks
to widen the circle of opportunity and prepare people for a global economy is as important as it
has ever been.
V.
Conclusion
Ifwe are literal about the definitions and define the current century as ending on January
1, 2001, there is much about the 21 st century that this century will still shape. The decisions that
we and others make on crucial issues of the world trading system:
•
About whether the United States, which has aided Mrica and the Caribbean for so long, will
pursue policies that recognize that trade, not aid, it the best way to help these countries
prosper;
• Whether China, the home to one fifth of mankind, will carve its place in a open and rulebased global trading system;
• Whether we will find the momentum on key regional trade initiatives in Latin America and
Asia~
• And above all, about whether the global trading system will continue moving forward, at the
Seattle meeting and beyond.
The decisions that we and others make on these and other questions will in a very real
sense set the frontiers of global economic advancement for many years to come. The President
has called it "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." America has an enormous stake in helping to build
such a global system in the months ahead - and a great deal to lose if we take now as the time to
tum our backs.
-30-
6
OFFiCE 01- PUBLiC A}<'FAIRS e1500 PENNSYLVANIA AVENlJE, N.W. e WASHINGTON. D.C.e 20220 e (202) 622·2960
EMBARGOED UNTIL 2:30 P.M.
October 14, 1999
CONTACT:
Office of Financing
202/691-3550
TREASURY OFFERS 13-WEEK AND 26-WEEK BILLS
The Treasury will auction two series of Treasury bills totaling
approximately $17,000 million to refund $15,029 million of publicly held
securities maturing October 21, 1999, and to raise about $1,971 million of new
cash.
In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $7,416 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 maturing bills held by the public include $3,139 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.
Treasu~Direct customers requested that we reinvest their maturing holdings of approximately $806 million into the 13-week bill and $619 million into
the 26-week bill.
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 each of the new securities are given in the attached offering highlights.
000
Attachment
LS-155
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
HIGHLIGHTS OF TREASURY OFFERINGS OF BILLS
TO BE ISSUED OCTOBER 21, 1999
October 14, 1999
Offering Amount ...............•....•••.. $9,000 million
Description of Offering:
Term and type of security ..........••..•
CUSIP number ............•••...•...•..••.
Auction date ..............•.•....•.•....
Issue date ................•......•.•.•..
Maturity date .....•.......•.••.....•..•.
Original issue date .......•.•.•....••...
Currently outstanding .....••..•..•....•.
Minimum bid amount and multiples ..••..••
91-day bill
912795 DD 0
October 18, 1999
October 21, 1999
January 20, 2000
July 22, 1999
$11,650 million
$1,000
$8,000 million
182-day bill
912795 DS 7
October 18, 1999
October 21, 1999
April 20, 2000
October 21, 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
aooeptea oompetitive bia ••
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 Rate .......••... 35% of public offering
Maximum Award ....•..••.••..•••.• 35% of public offering
Receipt of Tenders:
Noncompetitive tenders •••••• Prior to 12:00 noon Eastern Daylight Saving time on auction day
Competitive tenders ..••••••• Prior to 1:00 p.m. Eastern Daylight Saving 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.
Treasu~Direct 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
omCE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C .• 20220 - (202) 622-2960
Contact: Una Gallagher, Treasury
(202) 622-063 I
Dawn Haley, BEP
(202) 874-3545
FOR IMMEDIATE RELEASE
October 15, 1999
SECRETARY SUMMERS VIEWS SERIES 1999 DOLLAR BILLS
Treasury Secretary Lawrence H. Summers and Treasurer Mary Ellen Withrow will speak
to elementary school students, view the new Series 1999 dollar bills and tour the printing
facilities at 11:45 a.m. Tuesday, October 19 at the Bureau of Engraving and Printing, 14th and C
Streets, NW.
The Series 1999 one-dollar bills will feature Secretary Summers' signature and will be in
circulation in the next few weeks. .
Fifth Grade students from Glencarlyn Elementary School in Arlington, Virginia, will tour
the facility with the Secretary and Treasurer.
Media interested in attending should call (202) 874-3545 by 6 p.m. Monday, October 18
with name and news organization for clearance into the building. All media should enter through
the 15 th Street entrance. Cameras may pre-set at 10:30 a.m.
-30-
LS-156
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
'U S Government Printing Olflce 19'38· 619-5:'1
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
october 13, 1999
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 52-WEEK BILLS
364-Day Bill
October 14, 1999
October 12, 2000
912795EG2
Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:
5.115%
Investment Rate II:
5.411%
Price:
94.828
All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted 10%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
Tendered
Competitive
Noncompetitive
$
PUBLIC SUBTOTAL
$
22,393,667
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
TOTAL
21,602,330
791,337
Accepted
$
8,134,740
791, 337
8,926,077 21
1,075,000
1,075,000
23,468,667
10,001,077
4,950,000
1,783,000
4,950,000
1,783,000
30,201,667
$
16,734,077
Median rate
5.095%: 50% of the amount of accepted competitive tenders
#as tendered at or below that rate.
Low rate
5.000%:
5% of the amount
Jf accepted competitive tenders was tendered at or below that rate.
3id-to-Cover Ratio
=
22,393,667 I 8,926,077
=
2.51
LI Equivalent coupon-issue yield.
~I
Awards to TREASURY DIRECT = $575,185,000
1S-157
http://www.publicdebt.treas.gov
DEPARTNIENT
OF
THE
TREASURY
NEWS
OFFICE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASlllNGTON, D.C. - 20220 - (202) 622-2960
Contact Steve Posner
(202) 622-2960
FOR IMMEDIATE RELEASE
October 18, 1999
TREASURY ANNOUNCES EXPANSION OF COMMUNITY
INVESTMENT PROGRAM
The Treasury Department announced on Monday that the Community Adjustment and
Investment Program (CAlP), an affiliate of the North American Development Bank (NADBank),
has launched a new grant and technical assistance program and has expanded the areas eligible for
CAlP assistance.
In an effort to better serve individual communities, the CAlP is now soliciting applications
for direct grants and technical assistance for specific projects, with up to $6 million available on a
competitive basis to fund grants in eligible areas. The deadline for submitting grant applications is
January 17, 2000. Awards will be announced this spring. Eligible applicants are SO 1(c )(3) and
501 (c)( 4) non-profit organizations, public and private institutions of higher education, state and
local political agencies and subdivisions, and Indian tribal governments.
By adopting broader and more fl~xible eligibility requirements, the CAlP has also achieved
a 62 percent increase in the number of counties qualified to apply for CAlP loans, loan
guarantees, grants and technical assistance. CAlP assistance is now available to 207 counties
located in 30 states and the Commonwealth of Puerto Rico.
The CAlP, as a domestic program affiliated with the NADBank, encourages and fosters
economic opportunities within communities that have experienced temporary job displacements
related to implementation of the North American Free Trade Agreement. To date, the program
has facilitated more than $204 million in loans and loan guarantees in 26 states, helping to create
or retain more than 6,600 jobs.
The NADBank is an international fjnancial institution jointly capitalized and governed by
the United States and Mexico to finance environmental infrastructure projects along the
U.S.lMexico border
- 30 -
LS-158
For press releases, speeches, public schedules and official biographies, call our 24-hollr fax line at (202) 622-2040
~UBLIC
~partment
DEBT NEWS
of the Treasury • Bureau of the Public Debt • Washington, DC 20239
Contact: Office of Financing
(202) 691-3550
FOR IMMEDIATE RELEASE
October 19, 1999
TREASURY'S INFLATION-INDEXED SECURITIES
NOVEMBER REFERENCE CPI NUMBERS AND DAILY INDEX RATIOS
Public Debt announced today the reference Consumer Price Index (CPI) numbers and
daily index ratios for the month of November for the following Treasury inflation-indexed
securities: (1) the 3-3/8% 10-year notes due January 15, 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, (5) the 3-7/8% IO-year notes due January 15,2009, and (6) the 3-7/8% 30year bonds due April 15, 2029. 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'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 requesting document number 159. The information is
also available on the Internet at Public Debt's website (http://www.publicdebt.treas.gov).
The information for December is expected to be released on November 17, 1999.
000
Attachment
PA-426
LS-159
http://www.publicdebt.treas.gov
TREASURY INFLATION-INDEXED SECURITIES
Ref CPI and Index Ratios for
November 1999
Security:
Description:
CUSIP Number:
Dated Date:
Original Issue Date:
Additional Issue Date:
3-7/8% 10-Year Notes
Series A-2009
9128274Y6
January 16, 1999
January 16. 1999
July 16, 1999
Bonds of April 2029
912810FH6
April 16, 1999
April 16, 1999
October 16.1999
Maturity Date:
Ref CPI on Dated Date:
January 16, 2009
164.00000
April 15, 2029
164.39333
Date
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
1
2
3
4
6
6
7
8
9
10
11
12
13
14
16
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999 .
1999
1999
CPI-U (NSA) for:
3-7/8% 30-Year Bonds
RefCPI
Index Ratio
Index Ratio
167.10000
167.12667
167.16333
167.18000
167.20667
167.23333
167.26000
167.28667
167.31333
167.34000
167.36667
167.39333
167.42000
167.44667
167.47333
167.60000
167.62667
167.66333
167.68000
167.60667
167.63333
167.66000
167.68667
167.71333
167.74000
167.76667
167.79333
167.82000
167.84667
167.87333
1.01890
1.01907
1.01923
1.01939
1.01965
1.01972
1.01988
1.02004
1.02020
1.02037
1.02063
1.02069
1.02085
1.02102
1.02118
1.02134
1.02160
1.02167
1.02183
1.02199
1.02216
1.02232
1.02248
1.02264
1.02280
1.02297
1.02313
1.02329
1.02346
1.02362
1.01646
1.01663
1.01679
1.01696
1.01711
1.01728
1.01744
1.01760
1.01776
1.01792
1.01809
1.01826
1.01841
1.01867
1.01874
1.01890
1.01906
1.01922
1.01938
1.01955
1.01971
1.01987
1.02003
1.02020
1.02036
1.02062
1.02068
1.02084
1.02101
1.02117
July 1999
166.7
August 1999
167.1
September 1999
167.9
TREASURY INFLATION-INDEXED SECURITIES
Ref CPI and Index Ratios for
November 1999
Security:
Description:
CUSIP Number:
Dated Date:
Originall88ue Date:
Additionallsaue Date:
3-3/8% 10-Year Notas
Seriel A-2007
9128272M3
January 15, 1997
February 6, 1997
April 15, 1997
3-5/8% 5-Year Notes
Seriel J-2002
9128273A8
July 16, 1997
July 15, 1997
October 15, 1997
3-5/8% 10-Year Notas
Series A-2008
9128273T1
January 15, 1998
January 15, 1998
October 15,1998
3·6/8% 30-Year Bondi
Bondi of April 2028
912810FD5
April 15, 1998
April 15, 1998
July 15, 1998
Maturity Date:
Ref CPI on Dated Date:
January 15, 2007
158.43548
July 16, 2002
160.15484
January 15, 2008
161.55484
April 15, 2028
161.74000
Date
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
Nov.
1
2
3
4
5
5
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
1999
CPI-U (NSA) for:
RefCPI
Index Ratio
Index Ratio
Index Ratio
Index Ratio
167.10000
167.12667
167.15333
167.18000
167.20667
167.23333
167.26000
167.28667
167.31333
167.34000
167.36667
167.39333
167.42000
167.44567
167.47333
157.50000
157.52667
167.55333
167.58000
167.60667
167.63333
167.66000
167.68667
167.71333
167.74000
167.76567
167.79333
167.82000
167.84667
167.87333
1.05469
1.05486
1.05502
1.05519
1.05536
1.05553
1.05670
1.06687
1.06603
1.05620
1.05637
1.06554
1.05671
1.06688
1.05704
1.05721
1.05738
1.05765
1.05772
1.05789
1.05805
1.05822
1.05839
1.05856
1.05873
1.05890
1.06906
1.05923
1.05940
1.05967
1.04337
1.04353
1.04370
1.04386
1.04403
1.04420
1.04436
1.04453
1.04470
1.04486
1.04603
1.04520
1.04536
1.04553
1.04570
1.04586
1.04603
1.04620
1.04636
1.04653
1.04670
1.04686
1.04703
1.04719
1.04736
1.04763
1.04769
1.04786
1.04803
1.04819
1.03432
1.03449
1.03466
1.03482
1.03498
1.03515
1.03531
1.03548
1.03564
1.03581
1.03597
1.03614
1.03630
1.03647
1.03663
1.03680
1.03696
1.03713
1.03729
1.03746
1.03762
1.03779
1.03796
1.03812
1.03829
1.03846
1.03862
1.03878
1.03895
1.03911
1.03314
1.03330
1.03347
1.03363
1.03380
1.03396
1.03413
1.03429
1.03446
1.03462
1.03479
1.03495
1.03512
1.03528
1.03545
1.03561
1.03578
1.03594
1.03611
1.03627
1.03644
1.03650
1.03677
1.03693
1.03710
1.03726
1.03743
1.03769
1.03776
1.03792
July 1999
166.7
August 1999
167.1
-
--
September 1999
167.9
I
I
I
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
October 18, 1999
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
October 21, 1999
January 20, 2000
912795DDO
Term:
Issue Date:
Maturity Date:
CUSIP Number:
4.990%
High Rate:
Investment Rate 1/:
Price:
5.136%
98.739
All noncompetitive and successful competitive bidders were awarded
securities at the high rate. Tenders at the high discount rate were
allotted 68%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Competitive
Noncompetitive
$
24,818,311
1,171,505
$
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
$
7,611,911
1,171,505
8,783,416 2/
25,989,816
PUBLIC SUBTOTAL
TOTAL
Accepted
Tendered
Tender Type
230,559
230,559
26,220,375
9,013,975
3,850,500
49,441
3,850,500
49,441
30,120,316
$
12,913,916
Median rate
4.990%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
4.890%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 25,989,816 / 8,783,416 = 2.96
1/ Equivalent coupon-issue yield.
2/ Awards to TREASURY DIRECT = $890,837,000
http://www.publicdebt.treas.gov
LS-160
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
October 18, 1999
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182 -Day Bill
October 21, 1999
April 20, 2000
91279SDS7
Term:
Issue Date:
Maturity Date:
CUSIP Number:
5.000%
High Rate:
Investment Rate 1/:
Price:
5.216 %
97.472
All noncompetitive and successful competitive bidders were awarded
securities at the high rate. Tenders at the high discount rate were
allotted 39%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted
Tendered
Tender Type
$
Competitive
Noncompetitive
$
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
$
4,147,000
958.914
5,105,914 2/
20,245,164
PUBLIC SUBTOTAL
TOTAL
19,286,250
958,914
2,902,041
2,902,041
23,147.205
8,007,955
3,565,000
622,959
3,565,000
622,959
27,335,164
----------------$
12,195,914
Median rate
4.990\: 50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
4.890%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio
=
20,245,164 / 5,105,914
=
3.97
1/ Equivalent coupon-issue yield.
2/ Awards to TREASURY DIRECT = $684,542,000
LS-161
http://www.publicdebt.treas.gov
NEWS
omCE OF PUBUCAFFAIRS .1500 PENNSYLVANlAAVENUE, N.W.• WASIDNGTON, D.C.. 20220. (202) 622.2960
EMBARGOED UNTIL 9:30 AM
Text as Prepared for Delivery
October 19, 1999
TREASURY TAX LEGISLATIVE COUNSEL JOSEPH MIKRUT
TESTIMONY BEFORE THE SENATE COMMITTEE ON FINANCE
SUBCOMMITTEE ON LONG-TERM GROWTH AND DEBT REDUCTION
Mr. Chairman, Ranking Member, and Members of the Subcommittee:
It is a pleasure to speak with you today about the current-law tax provisions that may
affect transactions undertaken with respect to the restructuring of the electric power industry.
The Administration supports restructuring of the electric power industry. Deregulation
and increased competition, as envisioned by the Administration's Comprehensive Electricity
Competition Plan, will encourage more efficient production and delivery of electricity resulting
in savings for consumers, a more competitive American economy, and reduced greenhouse gas
emissions. Almost all States have either adopted restructuring proposals that allow consumers to
choose among competing power suppliers or are considering such proposals. Federal action is
necessary, however, if State programs are to realize their full potential
In April, the Administration delivered the Comprehensive Electricity Competition Plan to
Congress. As Secretary Richardson noted when the Plan was delivered, the legislation it
proposes will provide the tools needed to ensure that electricity markets operate as competitively
and reliably as possible. The Administration estimates that creating a competitive electric
industry will save consumers $20 billion per year.
Deputy Secretary Glauthier of the Department of Energy and I are here this morning to
discuss the tax initiatives in the Administration's electricity restructuring proposals
Certain Internal Revenue Code provisions may hinder certain transactions that may be
undertaken pursuant to the restructuring of the electric power industry. In general, these
provisions were drafted at a time when the electric power industry was subject to rate regulation
and electric service generally was supplied by a local provider-whether the provider was a
taxable investor-owned utility or a tax-exempt government-owned facility or cooperative. To
address these situations, the Administration has proposed changes in the rules governing taxexempt financing for electric companies owned by a State or local governmental entity, a
18-162
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provision that would allow unregulated utilities to make deductible contributions to nuclear
decommissioning funds, and tax incentives for investments in distributed power and combined
heat and power facilities.
TAX-EXEMPT FINANCING
Current Law
Under current law, interest on debts incurred by State or local governments is excluded
from income if the proceeds of the borrowing are used to carry out governmental functions and
the debt is repaid with governmental funds. If a bond is nominally issued by a State or local
government, but the proceeds are used (directly or indirectly) by a private person and interest
payments are derived from the funds of such a private person, interest on the bond is taxable
unless the borrowing is for a purpose specifically permitted under the Code and certain other
conditions are met.
Facilities for electricity generation, transmission, and distribution may be financed with
tax-exempt bonds if the financed facilities are used by and debt service is paid by a State or local
governmental entity. A facility can satisfy the governmental use requirement even when the
electricity it generates or transmits is sold to private persons so long as those persons are treated
as members of the general public. The general public for this purpose may include customers,
such as large industrial users, that are charged lower rates than others, such as residential
customers, under a reasonable and customary rate schedule. Private use occurs, however, when
electricity is sold under terms, such as low-rate, take-or-pay contracts, not available to the
general public or when facilities are operated by private persons (other than under certain
permitted management contracts) or the benefits and burdens of ownership are otherwise
transferred to private persons. Such private use of a facility (including, under the change-in-use
rules, private use that begins after an initial period of governmental use) may render the interest
on bonds that financed the facility taxable.
Both the Code and Treasury regulations provide certain short term and de minimis
exceptions to these general rules. For example, in some cases, up to ten percent of the bond
proceeds of an issue may be used for certain private business uses without the entire issuance
being treated as a private activity bond In addition, temporary Treasury regulations issued in
1998 permit bonds outstanding on July 9, 1996 (the date of Federal Energy Regulatory
Commission (FERC) action to promote the creation of nondiscriminatory, open-access
transmission services) to retain their tax-exempt status when the transmission facilities financed
with those bonds are used by private persons in connection with the provision of such openaccess services. Those temporary regulations also provide that bonds outstanding on July 9,
1996, may retain their tax-exempt status notwithstanding certain private use of the generation
facility financed by the bonds. The private use must occur in connection with the sale of excess
capacity resulting from opening the issuer's power system to competition. The regulations
further require that the length of the sales contracts cannot exceed three years, that the issuer
issue no further tax-exempt bonds to finance increased generation capacity during the term of the
contract, and that any stranded costs recovered by such sales be used to redeem outstanding taxexempt bonds.
2
The temporary regulations expire in January of 200 1, about 14 months from now. We
have received useful comments from interested parties regarding these regulations and will soon
begin the process of developing permanent regulations. Regulations, however, are incapable of
fully addressing the issues raised by restructuring.
Issues Raised by Deregulation and Restructuring
The rules prescribing favorable tax treatment for bonds issued to finance public power
facilities were adopted at a time when such facilities generally were operated to serve a limited,
local geographic area. The restructuring of the electric power industry may result in situations
and transactions that were not contemplated when those rules were adopted, raising issues that
require a re-examination of such rules. Specifically, achieving a restructured electricity industry
is hampered by the following three issues that arise with respect to the tax-exempt bond rules:
First, municipal utilities may be reluctant to open up their service territories to
competition due to concerns regarding private use of their bond-financed transmission
facilities.
Second, some municipal utilities may be unable to compete effectively in a deregulated
environment because their bond-financed generation facilities are subject to private-use
limitations.
Third, because municipal utilities may finance output facilities on a tax-exempt basis,
they have a cost of capital advantage over private, for-profit providers of electricity.
The efficiency and equity of a restructured industry depend on leveling the playing field
with respect to capital costs while at the same time ensuring that government-owned facilities are
not discouraged from fully participating.
To achieve efficient, nondiscriminatory transmission, it may be necessary to turn the
operation of government-owned transmission facilities over to independent regional systems
operators or in other ways use those facilities in a manner that may violate the private use rules.
As traditional service areas of both investor-owned and government-owned systems are opened
to retail competition, the latter may find it necessary to enter into long-term contracts with
private users of electricity in order to prevent their generation facilities from becoming stranded
costs. Without relief from the change-in-use rules, government-owned systems may be
unwilling to open their service areas to competition or allow their transmission facilities to be
operated by a private party.
To maintain fair competition between government-owned and investor-owned electric
companies in a restructured industry, and to avoid unwarranted indirect federal subsidies in this
restructured environment, no new facilities for electric generation or transmission should be
financed with tax-exempt bonds. Because electric distribution facilities are inherently local and
often commingled with other public services, continued access to tax-exempt financing of such
facilities by government-owned electric systems will not distort competitive balance in the
industry. Moreover, these distribution facilities will continue to serve customers as members of
the general public. Distribution facilities owned by for-profit providers will continue to be
subject to rate regulation as natural monopolies. Continued tax-exempt financing of distribution
facilities does, however, require a bright-line standard for the distinction between transmission
and distribution facilities.
Administration Proposal
The Administration's Comprehensive Electricity Competition Plan proposes the
following changes to the tax-exempt bond rules to resolve issues under current law and assure
that restructuring of the electric power industry will deliver real savings for all Americans.
To address the change-in-use issue, pre-effective date bonds (i.e., bonds issued before the
date the proposal is enacted) used to finance transmission facilities would be permitted to retain
their tax-exempt status notwithstanding private use resulting from actions pursuant to a FERC
order requiring nondiscriminatory open access to those facilities. Under the Administration's
broader plan for encouraging industry restructuring, FERC would be given the power to require
governmental electric utilities to provide such open access.
To encourage municipal power systems to open their service areas to competition, preeffective date bonds used to finance generation or distribution facilities would be permitted to
retain their tax-exempt status notwithstanding private use resulting from the issuer's
.
implementation of retail competition or from the issuer entering into a contract for the sale of
electricity or use of its distribution property that will become effective after implementation of
retail competition.
These changes will not affect the treatment of a sale to a private entity of a facility
financed with tax-exempt bonds. Such a sale will continue to constitute a change in use
To establish fair competition in a restructured industry, interest on bonds (other than preeffective date bonds) that finance electric generation or transmission facilities would not be
exempt. Distribution facilities, defined as those operating at 69 kilovolts or less (including
functionally related and subordinate property), could continue to be financed with tax-exempt
bonds under the change-in-use rules of current law. In addition, tax-exempt bonds could be
issued to refund bonds issued before the enactment of our proposal, but advance refunding would
not be permitted.
NUCLEAR DECOMMISSIONING
Current Law
Under current law, an accrual basis taxpayer generally may not deduct an item until
economic performance has occurred with respect to that item. This economic performance
requirement defers deductions for costs incurred in decommissioning a nuclear power plant until
decommissioning occurs. A taxpayer that is liable for the decommissioning of a nuclear power
4
plant may, however, deduct contributions to a qualified nuclear decommissioning fund that will
be used to pay the decommissioning costs.
A qualified nuclear decommissioning fund is a segregated fund that accepts only
contributions for which a deduction is allowable and that is used exclusively for the payment of
decommissioning costs, taxes on fund income, payment of management costs of the fund, and
making investments. The taxpayer establishing or maintaining the fund must have a direct
ownership interest or, subject to certain restrictions, a leasehold interest in a nuclear power plant
and must be liable for decommissioning the plant. A nuclear power plant is defined for this
purpose as a nuclear plant used predominantly in the trade or business of furnishing or selling
electricity at rates that have been established or approved by a public utility commission. The
fund is prohibited from dealing with the taxpayer that established the fund. The fund is subject
to tax at a flat 20-percent rate. In general, tax is imposed on the fund's net investment income
after the deduction of management costs.
The taxpayer maintaining a qualified nuclear decommissioning fund generally must
include in income any amount distributed by the fund, other than for payment of management
costs. Thus, amounts withdrawn by the taxpayer to pay nuclear decommissioning costs are
included in income when the withdrawal occurs. At that time, however, the taxpayer will be
allowed a deduction for decommissioning costs with respect to which economic performance has
occurred.
Except to the extent provided in regulations, a taxpayer is also required to include in
gross income any amounts that are properly includible when (1) the disqualification of a
qualified fund results in a deemed distribution of its assets, (2) the taxpayer is required to
terminate a qualified fund because decommissioning of the nuclear power plant to which the
fund relates is substantially complete, or (3) the taxpayer disposes of the nuclear power plant to
which a qualified fund relates.
The regulations provide rules that apply when a taxpayer disposes of a nuclear power
plant and, in connection with the disposition, transfers its interest in a qualified fund relating to
that plant. If the transferee is eligible to maintain a qualified fund and continues to maintain the
fund after the transfer while satisfying certain other conditions, the transfer of the fund is treated
as a nontaxable transaction. The transferor does not recognize any gain or loss on the transfer
and the transfer is not treated as a distribution of fund assets with respect to which an inclusion in
gross income is required. The transferee also does not recognize any gain or loss on the transfer
and takes the transferor's basis in the fund Under the regulations, the IRS may, if necessary and
appropriate to carry out the purposes of the statutory and regulatory provisions relating to
qualified funds, apply these rules (and permit continued qualification of the fund) even in cases
in which the transferee would not otherwise be permitted to maintain a qualified fund.
The amount that may be contributed to a qualified nuclear decommissioning fund for a
taxable year is limited to the lesser of the cost of service amount or the ruling amount. The cost
of service amount is the amount of nuclear decommissioning costs included in the taxpayer's
cost of service for ratemaking purposes for the taxable year. The ruling amount is the amount
that the IRS determines to be necessary to provide for level funding of an amount equal to a
5
specified percentage of the nuclear decommissioning costs of the taxpayer. The percentage of
nuclear decommissioning costs that can be funded through a qualified fund is determined by
dividing the period during which the fund is in effect by the useful life of the nuclear power
plant. In general, the effect of this limitation is that qualified funds cannot be used to fund
nuclear decommissioning liabilities that relate to taxable years beginning before the enactment in
1984 of the provision permitting taxpayers to establish such funds. The IRS specifies a schedule
of ruling amounts in a ruling issued to the taxpayer. If circumstances change, a taxpayer may
request a revised schedule of ruling amounts. In addition, the schedule is reviewed at intervals of
no more than 10 years (5 years if, instead of a schedule prescribing a dollar amount for each
taxable year, the IRS has approved a formula or method for determining the schedule of ruling
amounts).
Taxpayers may set aside funds for nuclear decommissioning in addition to the amounts
they contribute to qualified funds . In some instances, State or Federal regulators require such
additional funding . In addition, some taxpayers maintained segregated nuclear decommissioning
funds prior to the effective date of the qualified decommissioning fund rules . In the case of
amounts irrevocably set aside for nuclear decommissioning before July 19, 1984 (the effective
date of the economic performance requirement), taxpayers may have taken the position that a
deduction was allowable at the time the funds were set aside. Alternatively, taxpayers may have
taken the position in taxable years ending before that date that such amounts, if set aside to
comply with State or Federal regulatory requirements, were not includible in gross income.
Since 1984, no deduction or exclusion from gross income has been allowable with respect to
contributions to, or segregation of amounts in, nonqualified funds and the income of a
nonqualified fund is taxed to the taxpayer at the taxpayer ' s marginal rate .
Issues Raised by Deregulation and Restructuring
The rules prescribing favorable tax treatment for qualified nuclear decommissioning
funds were adopted at a time when almost all nuclear power plants were operated by regulated
public utilities and a nuclear power plant and decommissioning fund would not be transferred
except between regulated public utilities. Deregulation and restructuring of the electric power
industry have resulted in situations and transactions that were not contemplated when those rules
were adopted. These novel circumstances have given rise to a number of questions, including
the following:
Mayan unregulated taxpayer maintain a qualified nuclear decommissioning fund? This
issue may arise when, as part of deregulation, a nuclear power plant and the related
decommissioning fund are transferred from a taxpayer subject to rate regulation to an
unregulated taxpayer. Alternatively, a taxpayer that was previously subject to rate
regulation with respect to electricity produced at a nuclear power plant may, because of
deregulation, no longer be subject to such regulation .
Does the transfer of a qualified nuclear decommissioning fund to an unregulated taxpayer
result in recognition of gain or loss by the transferor or the fund') Is such a transfer
treated as a distribution of fund assets required to be included in the gross income of the
transferor?
6
Is the transferor of a nuclear power plant entitled to a deduction for decommissioning
liabilities assumed by the transferee,)
To what extent may the purchaser of a nuclear power plant derive an immediate tax
benefit from assumption of the seller's decommissioning liabilities,)
Mayan unregulated taxpayer make deductible contributions to a qualified nuclear
decommissioning fund? This issue also arises with respect to both previously regulated
taxpayers and unregulated transferees.
Guidance under Current Law
Under current law, the IRS may permit the transfer, without disqualification, of a
qualified nuclear decommissioning fund, together with the nuclear power plant to which it
relates, to a taxpayer that is not a regulated public utility. In addition, the IRS may permit the
unregulated transferee to maintain the qualified fund after the transfer. In the cases that have
been brought to our attention, it is our view that such treatment is both necessary and appropriate
to carry out the purposes of the statutory and regulatory provisions relating to qualified funds.
Similarly, a regulated taxpayer that becomes unregulated should also be permitted, in appropriate
cases, to continue maintaining a qualified fund.
The IRS may similarly permit the transfer of a qualified nuclear decommissioning fund
from a regulated taxpayer to an unregulated taxpayer to qualify as a nontaxable transaction that
(1) does not result in recognition of gain or loss by either the transferor or the fund and (2) is not
treated as a distribution of fund assets required to be included in the gross income of the
transferor. If the transaction is nontaxable, the basis of fund assets will not change and the
transferee will take the transferor's basis in the fund. Again, in the cases that have been brought
to our attention, it is our view that such treatment is necessary and appropriate under current law.
Under current law, the seller of a nuclear power plant will be allowed a current deduction
for any amount treated as realized or otherwise recognized as income as a result of the
purchaser's assumption of the seller's decommissioning liability. The economic performance
rules would ordinarily defer the seller's deduction until decommissioning occurs. However,
regulations provide that, if a trade or business is sold and the purchaser assumes one of its
liabilities, economic performance occurs with respect to the liability when the amount of the
liability is included in the amount realized by the seller.
Under current law, a liability is not treated as incurred until economic performance
occurs with respect to the liability. Thus, the purchaser of a trade or business is not allowed a
deduction for liabilities assumed in connection with the purchase until economic performance
occurs with respect to the liabilities. The regulations clarify, in the case of nondeductible items,
that the economic performance requirement also defers the tax benefit of an increase in basis.
The regulations state, "an amount a taxpayer expends or will expend for capital improvements to
property must be incurred [i.e., economic performance must occur] before the taxpayer may take
the amount into account in computing its basis in the property" In the case of decommissioning
7
liabilities assumed in connection with the purchase of a nuclear power plant, the regulations
suggest that the liabilities may not be taken into account in determining the basis of the acquired
assets until decommissioning occurs.
Deregulation will generally eliminate traditional cost of service determinations for
ratemaking purposes. Because the amount of the deductible contribution to a qualified nuclear
decommissioning fund is limited to the amount of nuclear decommissioning costs included in the
taxpayer's cost of service for ratemaking purposes, deregulation may result in complete loss of
the deduction for contributions to the fund. In many cases, a line charge or other fee will be
imposed by a State or local government or a public utility commission to ensure that adequate
funds will be available for decommissioning. This charge or fee could be viewed as the
equivalent of an amount included in cost of service for nuclear decommissioning, but there is no
assurance that all State deregulation plans will provide for such a funding mechanism.
Administration Proposal
The favorable tax treatment of contributions to nuclear decommissioning funds
recognizes the national importance of the establishment of segregated reserve funds for paying
nuclear decommissioning costs. Although the favorable tax treatment was adopted at a time
when nuclear power plants were operated by regulated public utilities, deregulation will not
reduce the need for such funds. Accordingly, the Administration's Comprehensive Electricity
Competition Plan proposes to repeal the cost of service limitation on deductible contributions to
nuclear decommissioning funds. Under the Administration proposal, unregulated taxpayers
would be allowed a deduction for amounts contributed to a qualified nuclear decommissioning
fund. As under current law, the maximum contribution and deduction for a taxable year could
not exceed the ruling amount for that year. The new rules would apply in taxable years
beginning after December 3 1, 1999.
DrSTRffiUTED POWER AND COMBINED HEAT AND POWER PROPERTY
The Administration's Plan also includes two tax proposals intended to reduce current barriers to
the development of distributed power and combined heat and power technologies.
Distributed Power Proper(l'
Newly developed distributed-power technologies have made it possible to place
electricity generation assets in or adjacent to commercial and residential establishments, as well
as in industrial settings. The current depreciable property classification system, however, does
not adequately account for these assets, particularly when they are used to produce both
electricity or mechanical power and usable heat. Also, under current law, distributed power
assets used to produce electricity in a commercial or residential setting are likely to be
depreciated over much longer lives than are similar, or identical, assets used to produce process
energy in an industrial setting.
The Administration's Plan proposes to clarify that distributed power property has a 15year depreciation recovery period. Such property would include assets used to produce
8
electricity that is primarily used in a building owned or leased by the taxpayer. Such assets may
also be used to produce usable thermal energy. To avoid abuse, at least 40 percent of the total
energy produced would have to consist of electrical power, and no more than 50 percent of the
electricity produced could be sold to, or used by, unrelated persons.
This proposal will simplify current law by clarifying the assignment of recovery periods
to distributed power property .. It will remove taxpayer uncertainty, reduce future tax litigation,
and level the playing field for distributed power assets. It should also encourage the use and
development of more energy-efficient and less polluting electrical generation technologies.
CHP Investment Tax Credit
Combined heat and power (CHP) systems utilize thermal energy that is otherwise wasted
in producing electricity by more conventional methods. Such systems achieve a greater level of
overall energy efficiency, and thereby lessen the consumption of primary fossil fuels, lower total
energy expenditures, and reduce carbon emissions. The Administration's Plan proposes a
temporary tax credit for investments in CHP equipment. The eight-percent credit would be
available for investments in large CHP systems that have a total energy efficiency exceeding 70
percent and in smaller systems that have a total energy efficiency exceeding 60 percent. It would
be available for qualifying investments made through 2002. To prevent abuses, a qualifying
CHP system would be required to produce at least 20 percent of its total useful energy in the
form of thermal energy and at least 20 percent of its total useful energy in the form of electrical
or mechanical power.
The CHP investment tax credit is expected to accelerate planned investments and induce
additional investments in such systems. The increased demand for CHP equipment should, in
turn, reduce production costs and spur additional technological innovation in improved CHP
systems.
We urge Congress to enact the tax proposals I have outlined in my testimony. These
proposed changes are needed to encourage restructuring plans that are being developed by
individual States and to permit those plans to realize their full potential.
Mr. Chairman, this concludes my prepared testimony I will be pleased to answer any
questions you or other members of the Subcommittee may have.
- 30 -
9
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'lREASURY
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NEWS
J1:1VEN~G• • • •
omCE OF PUBUCAFFAIRS • 1500 PENNSY.LVANIA
....
l.Jl;, N.W. • WASHINGTON, D.C•• 20220 • (202) 622-2960
Weeldy Release of U.S. Reserve Assets
October 19, 1999
The Treasury Department today released U.S. reserve assets data for the week ending
October 15, 1999.
As this table indicates, U.S. reserve assets totaled $73951
million as of OCtOber 15 ,
I
1999, up from $73,058 million as of October 8, 1999.
'
..
'
,
,.".>
. ';'i.'-.: 1:0. ,.
... .,: .
Reserve
Reserve
Gold
Drawing
Currencies
31
SOMA
Position in
21
October 8, 1999
73,058
11,046
10,277
16,000
16,003
19,731
October 15, 1999
73,951
11,046
10,349
16,342
16,345
19,870
tl Gold stock is valued monthly at S42.2222 per fine troy ounce. Values shown are as of August 31,1999. The July 31,
1999 "alue was $11,048 million,
21 SDR holdings and the reserve position in the IM'F are based on IMF data and valued in dollar terms at the official
SDRI dollar exchange rate. Consistent with current reporting pr.actices, IMP data for October 8, 1999 are final. Data for
SDR holdings and the reserve position in the IMF shown as of Oaober 15, 1999 (in italics) reflect preliminary adjus tm ent3
by the Treasury to the October 8, 1999 IMF data.
31 Includes holdings of the Tre~ury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA). These holdin(!;s are valued at current market uch~nge rates or, where ;tppropriate, at such ocher rates as
may be agreed upon by the parties to the transactions.
L8-163
n- jn-As
releases, $/leeches, public schedules and oJIicial biographies, call our 24-hour fax l.Uu: at (202) 622-2040
TOTAL P.01
D EPA R T MEN
,'j'
U~'
THE
T'R E .,A SUR Y
NEWS
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIAAVENUE~ N.W.• WASlllNGTON~ D.C.• 20220 • (202) 622·2960
Contact: Steve Posner
(202) 622-2960
FOR IMMEDIATE RELEASE
October 19, 1999
TREASURY SHUTS DOWN ABUSE OF CHARITABLE REMAINDER TRUSTS
The Treasury Department and the Internal Revenue Service issued proposed
regulations effective Tuesday aimed at shutting down an abusive tax-avoidance scheme
involving charitable remainder trusts. Under this scheme, individuals attempt to use
charitable remainder trusts to convert highly-appreciated assets, such as stock, into cash
for personal use, without ever paying tax on the gain,
"Shutting down schemes like this helps us create and build on a culture of
compliance,," Treasury Secretary Lawrence H. Summers said. "When we eliminate
abusive tax schemes and shelters, our aim is not merely to protect revenues, but also to
protect those who willingly pay their fair share. "
The proposed regulations, issued under specific regulatory authority granted by
Congress in 1996 to prevent abuses of the tax rules regarding trusts, ensure that
individuals are taxed appropriately w.hen they receive a distribution from a charitable
remainder trust.
-30LS-164
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
OfFiCE 01' PUBLIC ""'Alas .1500 PENNSYLVANIA AVENtJ~. N.W•• 'WASBINGTON. D.C•• ZOZlO.(lOZ) 622.2"o
IMBARGOBD 'ONTIL 2: 3 0 P. K.
CONXACT:
OctOber 21, 1999
Office of .inancing
202/691-3550
1'ltBAStlItY OnDS 13-WBBlt AND 26-w.ax BILLS
The Treasuxy will auction two series of Treasury l:>ills totaling
app~oximat.lr $18,000 ~11ioD to re!uud $15,.53 .tlli~ of publtcly held
securities matur~g October 28, 1999, and to raiae about $2,5" million o~
Dew
cash.
~ addition to the public holdings, F.deral .eaerYe Banka for ~ir own
aoocnmta hold $7,353 million of the matur1ng bills, which may be rafuncSe4 .~
the highest discount rate of accepted competitive teDders. Amounts issued to
these accounts will be in addition to the offeriDg amount.
.
~h. maturiD; billa held by the pUblic tnclude 13,707 million held
!'ecler.l ....erY. Bank. •• .gents for foz-eil! and iDte:clational. moneta::y
authorities. pP to .3,000 million of these se~ities may be refunded ~thin
the offering amount in each of the auctions of 13-waek bi11s and 26-week
~ills at the hish•• t discount rate of accepted campe~ieive tenders.
AdditiODal amount. may ~. i.sued in each auctioD for such accounts to the extent
tbat the amount of Dew bids exceeds $3,000 million.
!?r
~reas~Direct
customers requested that we re~vest ~eir maturing holdings of app:t'OXimately $919 mi11ion in1:0 the 13-week bill allCl $733 zzp.11:ion into
the 26 -week bill.
'l"bis offering of Treasury securities is governed by the texms and conditioDS set forth ~ ~e ODifor.m Offering Circular for the Sale and Issue of
Harketable Book-Entry Treasury Bills, Notes, and Bonds (31 cn Part 356, as
am81Jded) •
D.~ail.
&bout eaah of the new securities are given in the attached offer-
ing highlights.
000
'-ttac!mumt
L8-165
For p'us
'.'.111." sp••ela.s, public seladul,s ,viti oJJicill/ 6;01'II,II;,s, -ella ollr 24-hou,'lIZ liu ,,'1 (20~) 622-2040
IIXCDIL:E~.
o.
-.raBA8U8Y
o .....axlllU. o • •:ELL.
TO .B %SBUBD OCZOBBJl 28. 1'"
October 21, 1999
$10,000 .i11ion
$8,000 million
91-day bil~
912795 DB 8
OctOber 25, 1999
OCtober 28, 1999
Matarity date •••••••••••••••••••••••••• January 27,2000
Original i •• ue date ••••.••••••••••••••• JUly 29,1999
CUZrently outstanding •••••••••••••••••• '11,548 million
l8a-day bill
912795 DT 5
October 25, 1999
October 28, 1999
April 27, 2000
April 29, 1999
$15,018 million
MtDu.w. bid amount and multiple •••••••• 81,000
$1,000
Offering Amount ••••••••••••••••••••••••
DellGription of Offering =
Tama and type of security ••••••••••••••
CUlIP n.-ber •••••••••••••••••••••••••••
Auction date •••••••••••.•••••••••••••••
Ia._ date •••••••••••••••••••••••••••••
following rule. apply to all 8ecuritie. mentioned above,
.ulais.iOD of Bids I
.onc~titlv. bids ••••••••• Accepted in full up to $1,000,000 at the highest discount rate of
aooepted competitive bids.
Ca.p_t~tive bids •••••••••••• (1) MUst be expressed as a discount rate with three decimals in
increments of .005\, e.g., 7.100%, 7.105%.
(2) ~et 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 gr•• ter.
(3) Ret long position must be determined as of one half-hour prior
to the closing time for receipt of competitive tenders.
Mazbawm Recognised Bid
at a .!DAl. Rate •••••••••••• 35' of public offering
Maximo. a.ar4 •••••••••••••••••• 35' of public offering
aeceipt of Tenders:
.onc~tltive tender ••••••• Prior to 12100 naan Bastern Daylight Baving time on auction day
Competitive tenders ••••••••• Prior to 1:00 p.D. Eastern Daylight Saving time on auction day
PaJ!!Dt ~: By charge to a funds aacount at a Wederal Reserve Bank on issue date, or payment
of full par amount with tender. rreasury.D1reat Gustomers can use the Pay Direct feature which
autloris •• a oharge to their account of record at their financial institution on issue date.
~e
J)
E P .\ R T :\1 E N T
0 F
TilE
TREASURY
T
f{
E A S LJ
I{
Y
NEWS
O,,'t'IC£ OF PUBLIC At'I"'\IKS e1500 PENNSYLVANIA AVENUE. N,W.• WASHINGTON, D.C .• 20220 .,202) 6l2.~96(1
*
EMBARQOE!) 'UN'l':IL .2 30 P. H.
COlqTACT:
octobazo 20, 1999
TREASURY
~
AUCTXOR $15,000 MXLL%ON OP
Office of FinMu:i.~g
2021691-3550
2-~
NOTES
Th. Tre••ury will auctioD $15,000 million of 2-year not •• ~o refund
~26,294 ~llion of publicly ~.ld ••euriti. . . .turing October 31, 1999,
~ to pay dOWA about $11,29. milli~.
XD additioD to t~. public holdiD§8, Pederal Re •• rve Banks ~olQ $2,682
u.l1ioD of the maturiug .ec1,U:'1ti•• for e.hair OWD aeeounc8. which may b.
~efUD4ed by 1 • .,uiDU' an addit!ioDa,l CIOUDt of the n.w .ecurity.
Th. mat\U.":LnSJ ••cUZ"iti.. held by the public !~cllld. $3,158 .ld.l1.iQJ1 h.l.a
Federal Re ••rve Bank. •• ageftta for for.igB aD4 iDbe~tio~l moDet~
utb.o~itde..
AmoUAt;. bi4 for the •• accounts ~ ,.ed.:I:'a1 fte.erv-. Banks wil.l
• a44.4 to the offering.
~
~•• ur,yDt~ae cus~~r.
olding. of
app~ox~t!.ly
$583
:l:'equ•• te4 ~hat . . ~.iDV..t their maturiAg'
~lliOD iata the 2-yeazo note.
The avctioA w~ll be eObQuct.d iA the .iDgl.-p~ice .uct~on £or.mat.
11 compotitive aha nODcomp.tt~ive award. will h. at the high.at yield of
,cepte4 compet~tive tenders.
The note. heiD§
o££.~.a
Tb1. offering of
.~iOD.
Tr••• ~ •• c~iti.. i . gov.~ed b,y the terms and co~
set forth in the
~k.table
to4ay are eligihle for the STRZPS grogram.
Book-Entr,y
UDifo~
~ea.ury
O!!.riAg' Circular fa~ the Sale ~ X••u.
8illa, Notea, aud Bonds (31 CFR Part 356,
1Im8Z1.4ed) •
Detai1. about the
ghl:Lgh~ •.
taelDent
~..
.ecuritr are g!ven
i~
Che actached
o£f.~ing
O~ TREASUkY OPPEaXRG ~O THE .ODL~e
~-YBAR NOTES TO B2 ZSSUED NOVBHBER 1, 1999
RXQHLXQRTS
OF
u~~u~er
20, 1999
Offeriu9 AmDunt······· ••••••••••••••••••.• $15,OOO million
De.C~iRCio~
T.~
and
of
~ype
Off.~iB9:
of securitY ••••••••••••••••• 2.year note.
Ser1aa ... - . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AE-2001
cus~p numher •..••. •• •••• + • • • • • • • • • • • • • • • • • 912827 SR 9
Auction date······· ••••••••.•.•.•••.•..•.• October 27, 1999
to
.....
Isaue da~.······+ •••.................. _... Novamb.r 1, 1999
Dated da~.······· •. + • • • • • • • • • • • • • • • • • • • • • • Oa~ob.~ 3t, 1999
Maturity dat ••••••••••. - •••.•• -- ••.••.•.•• Oo~ober 31, 2001
Int.~•• e rate •••••.••••• - ••.•••••••••••••• Deter.mi~.d ba •• d on the highest
ACQepte4 Qompetitiv. ~1d
yield ••••••• a.a··· .••....•...•...••.•.•••• DeCe~Dod a~ auction
Interest payment a.c.a ••••••.•.••.••.••••• ~~11 30 and October 31
Minimum ~id ~c &ad mn1tipl.a •••••••••• $1.000
Accrued i~tara.~ payable b.Y iDve$to~ •••••• »eter.miDed at auction
Premiua 0: ~i.count ••••••••••••••••••••••• Det.rmiD.d at a~ction
STR~PS
ZDfo~tton;
Kinimwa
~UAt ~.~1red
Cor.pua CUSXP
Due da~e (s)
n~er
••••.••.•••••••••.. Det.r.min.d at Auction
•••••••••••••.•.••.•.• 912820 ED 5
and CUSI:P number (a)
for additional TXMT(s) •..•..•.•..•.••... Not applicable
Submi.~ion of B~da~
Noncompetitive b~dg!
ACcepted ~ £ull up to $5,000,000 at the bi~hest
llccepted yie1d.
Competitive bidg:
(1) Mu~t be exp~••••d as a y!.1d with three 4.~~18. e.g., 7.123%.
(2) Nee long pogi~1~D for each g£4aer must b. reported when th_ sum
of ~h. tota1 bL4 amount, at ~ll yields, and the net long position
i . $2 billioD O~ w~eater.
(3) Nat lODg posi~~oD ~.t b. 4et.~i~ed as of one half-hour prior co
ehe c108in§ bime for :eceipt of competitive t.nder~.
Max~ a.co~ized
Kax~
B14 at a Single Ti~ld ....•• 35% of public offering
Award •••••••••••••••.••••••••••••••••• 35% of public offering
a_e_1ft of
~.n4.rs:
Noncompetitive t.Dders:
prior to 12:00 noon Eastern D~ylight Saving
time on auet10n day.
Competitive ~.DaerB:
Prier to 1:00 p+m. Eastern Daylight Saving
ttme on auce10n day.
P~nt ~er.m.:
By charge to • fund a aocount at a r.4eral Re •• ~. Bank on
issue aate, or p*y.ment o£ £~ll par amo~t with e.Qae~.
~r~46~D~.ect
CU.t~r8 can uaA the Pay Direct feature which autho~~zes a cbA~9. to their
acco~t of reco~a at thei~ financial lnstitut!QA QD issue dAte.
TOTAL P.02
0
<D
C1J
(\J
federal financing
WASHINGTON. D.C. 20220
FEDERAL FINANCING BANK
S
September 30, 1999
Kerry Lanham, Secretary, Federal Financing Bank (FFB),
announced the following activity for the month of August 1999.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $39.3 billion on August 31, 1999,
posting a decrease of $560.0 million from the level on
July 31, 1999. This net change was the result of a decrease in
holdings of agency debt of $366.6 million, in holdings of agency
assets of $175.0 million, and in holdings of agency guaranteed
loans of $18.4 million.
FFB made 47 disbursements during the
month of August. FFB also received 12 prepayments in August.
Attached to this release are tables presenting FFB August
loan activity and FFB holdings as of August 31, 1999.
LS-167
N
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<D
N
0
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Page 2
FEDERAL FINANCING BANK
AUGUST 1999 ACTIVITY
Borrower
F~nal
Interest
Rate
Date
Amount
of Advance
8/02
8/06
8/09
8/09
8/10
8/10
8/11
8/12
8/13
8/13
8/16
8/20
8/20
8/23
8/23
8/24
8/24
8/25
8/25
8/26
8/26
8/27
8/30
$218,400,000.00
$225,400,000.00
$250,000,000.00
$287,400,000.00
$150,000,000.00
$249,100,000.00
$325,800,000.00
$203,000,000.00
$100,000,000.00
$311,400,000.00
$96,800,000.00
$100,000,000.00
$358,600,000.00
$325,000,000.00
$484,900,000.00
$325,000,000.00
$326,400,000.00
$200,000,000.00
$250,300,000.00
$75,000,000.00
$299,500,000.00
$254,900,000.00
$108,400,000.00
8/03/99
8/09/99
8/10/99
8/10/99
8/11/99
8/11/99
8/12/99
8/13/99
8/16/99
8/16/99
8/17/99
8/23/99
8/23/99
8/24/99
8/24/99
8/25/99
8/25/99
8/26/99
8/26/99
8/27/99
8/27/99
8/30/99
8/31/99
4.971%
4.917%
4.866%
5.086%
4.917%
5.076%
5.034%
4.919%
5.034%
4.855%
4.961%
4.888%
4.958%
4.877%
5.139%
4.958%
5.118%
5.139%
5.055%
5.118%
5.055%
5.105%
5.138%
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
8/02
8/11
8/12
8/20
8/24
8/24
8/31
$15,308.00
$23,166.00
$21,957.44
$568,173.02
$35,338.43
$26,232.57
$595,996.00
11/02/26
7/31/25
1/02/25
11/02/26
7/31/25
7/31/25
10/01/26
6.351%
6.532%
6.484%
6.348%
6.346%
6.346%
6.405%
S/A
S/A
S/A
S/A
S/A
S/A
S/A
8/19
$135,726.80
9/01/26
6.329% S/A
8/02
8/05
8/05
$5,600,000.00
$719,000.00
$2,211,000.00
1/03/33
12/31/31
1/03/34
6.256% Qtr.
6.277% Qtr.
6.141% Qtr.
Maturity
ENCY DEBT
.s.
POSTAL SERVICE
• S. postal Service
• S. Postal Service
• S. postal Service
.s.
• S.
.s.
.s.
• S.
• S.
· S.
· S.
· S.
• S.
· S.
.s.
.s.
,s.
,s.
,So
,S.
S.
S.
S.
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
'ERNMENT-GUARANTEED LOANS
:NERAL SERVICES ADMINISTRATION
'TC Building
ley Square Office Bldg
mphis IRS Service Cent
TC Building
ley Services Contract
ley Services Contract
amblee Office Building
PARTMENT OF EDUCATION
Va. State College
RAL UTILITIES SERVICE
N. Tennessee EMC #510
~stal
~hline
Electric #460
Elec. #538
Page 3
FEDERAL FINANCING BANK
AUGUST 1999 ACTIVITY
Borrower
.ootenal. Elec. #531
licking Valley Elec. #522
gralite Elec. #543
elaware County Elec. #470
enard Elec. #518
awkeye Tri-County Elec. #509
ackson Energy #527
outh Texas Electric #505
umter Elec. #485
itizens Elec. #529
arshalls Energy Co. #458
)Ccelsior Elec. #468
kefenoke Rural Elec. #486
S/A is a Semiannual rate.
Qtr. is a Quarterly rate.
Date
8/05
8/06
8/13
8/13
8/16
8/17
8/19
8/19
8/23
8/25
8/26
8/27
8/31
Amount
of Advance
$2,000,000.00
$1,633,000.00
$1,438,000.00
$852,000.00
$1,000,000.00
$678,000.00
$2,000,000.00
$845,000.00
$500,000.00
$1,961,000.00
$325,000.00
$700,000.00
$2,377,000.00
Final
Maturity
Interest
Rate
10/02/00
1/03/00
1/03/34
1/02/29
10/02/00
1/03/33
10/02/00
12/31/24
10/02/06
1/03/00
1/02/18
12/31/31
10/02/06
5.292%
4.993%
6.239%
6.422%
5.356%
6.287%
5.334%
6.295%
6.161%
5.143%
6.728%
5.971%
6.222%
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page 4
FEDERAL FINANCING BANK HOLDINGS
(in millions of dollars)
Monthly
Net Change
8/1/99- 8/31/99
Fiscal Year
Net Change
10/1/98- 8/31/99
August 31. 1999
July 31, 1999
Subtotal *
$2 250.0
$2,250.0
$2 616.6
$2,616.6
-$366.6
-$366.6
-$3 446.1
-$3,446.1
Agency Assets:
FmHA-RDIF
FmHA-RHIF
DHHS-HMO
DHHS-Medical Facilities
Rural Utilities Service-CBO
Subtotal *
$3,410.0
$7,270.0
$1. 7
$3.2
$4 598.9
$15,283.8
$3,410.0
$7,445.0
$1. 7
$3.2
$4 598.9
$15,458.8
$0.0
-$175.0
$0.0
$0.0
$0.0
-$175.0
-$265.0
-$2,230.0
-$1.4
-$4.0
$0.0
-$2,500.4
Government-Guaranteed Lending:
DOD-Foreign Military Sales
DoEd-HBCU+
DHUD-Community Dev. Block Grant
DHUD-Public Housing Notes
General Services Administration+
DOl-Virgin Islands
DON-Ship Lease Financing
Rural Utilities Service
SBA-State/Local Development Cos.
DOT-Section 511
Subtotal *
$2,628.6
$11.0
$14.0
$1.419.9
$2,408.4
$16.1
$1. 138. 7
$13,969.0
$197.5
$3.7
$21. 807.0
-$33.7
$0.1
-$0.8
$0.0
-$6.3
$0.0
$0.0
$24.8
-$2.6
$0.0
-$18.4
-$200.4
$6.5
-$16.5
-$71. 5
-$64.8
-$1.3
-$86.2
-$197.4
-$35.8
-$0.1
-$667.7
Grand total*
$39,340.8
$2,662.3
$10.9
$14.7
$1,419.9
$2,414.7
$16.1
$1. 138.7
$13,944.2
$200.2
$3.7
$21,825.4
$39,900.8
-$560.0
-$6,614.2
Program
Agency Debt:
U.S. Postal Service
1
* figures may not total due to rounding
+ nope:; not
;nrll1n~
,.~n;t-,,"l;.,o""
;"+,.. ... ,..~+
1
1
1
1
I> 1-: P ..\ R T '\ I F N T
0 F
TilE
n \.
T I{ E '\ S ()
NEWS
ameli: O~~UCAFF~ -1500 P~~V.ANIAAVENlJ£, N.W.• WASHINGTON, D.C. -
~0220.
(202) 622-~960
CONT ACT: PUBLIC AFFAIRS
(202) 622-2960
FOR IMMEDlATE RELEASE
October 22, 1999
STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMMERS
ON THE FOREIGN OPERATIONS LEGISLATION
In the coming days the United States Congress will be making some important decisions
about the investments tbat we make in supporting our national interests overseas. It is
important that the American people understand what is at stal{e in some of these
decisions.
In 1991~ President Bush requested funding for a $1.8 billion U.S. contribution to
the International Financial Institutions. For 2000, President Clinton has requested
$1.4 billion - and yet Congress has cut that request to just $895 million- That is
less than half the level of spending in 1991 - and more tban 35 percent below the
President's request. And it is not enough to get the job done.
The same bill would also fatally undermine a global effort to reduce tht: debt of the
poorest countries. In the turrent bill, appropriations for this effort would be just
$33 million - compared to tbe President's request for $970 million over 4 yearsThe President's International Affairs request for tb~se and other international priorities
is not large by historical standards - and it is barely one percent of the total federal
budget. Because it is fully funded, it does oot subtract from our capacity to meet critical
domestic priorities - and it does not mean spending any of tbe Social Security surplus.
The request was carefully crafted to include only high return investments in America's
core interests and its global leadership - investments that for more than 50 years have
enjoyed strong bipartisan support:
_
Every dollar we contribute to the multiJatend development banks leverages more
than $45 in official lending to countries where morc than three.. quarters of the
world's people live.
LHS-168
-.'
For press relecues, q,eer./ws, public sthedules tmd official biographies, call our Z4-hour ftrt line 41 (302) 622·2{.J40
.
-
-
..
-
_
As the President bas Doted, th~ U.S. hns less than 5 percent orthe )'VoJ"ld's
population - and more thon 20 percent of its income. To maintain our sfandard of
living. we need otller countries to develop and become larger markets for our goods
and services. These programs are focused on exactly that - on building market
economies in the developing world that are open to our goods and our idell~. Quite
simply, they are the most effective tools we have for investing in the markets for
tomorrow.
By supporting these programs we help to sustain American global economic
leadership - and to promote changes overseas that renect core American values
free markets, strong property rights llnd open borders.
~
like
Writing off debts owed by countries that will never be able to repay them is sound
financial accounting. It is also a moral imperative at a time when u m:w generation
of African leaders is trying to throw otIthe legacies of the Cold War and open up
their etonomies.
That is what the Heavily Indebted Poor Country initiative is about. It will not write
off the debts of countries that are not working to reform. It will help build future
markets in countries that are committed to helping themselves.
The Foreign Operations legislation passed by Congress would prevent core investments
in tbis country's future, which is why the President vetoed it. Its potential bud~et saving
would be minimal, but the long-term costs for American leadership, American markets
and American values would be incomparably higher.
~30-
TOTAL P.02
J)
E P .\ 1< T :\ I I': N T
0 l'
TilE
T
I~
F . \ S l; I( Y
NEWS
omCE OF PUBUC AFFAlRS -1500 PENNSYLVANIAA'VENI.JE,
N.W
•• WASHINGTON.
D.C•• 20220. (202) 62~2S60
•
...
vs
_.
Contact: Bill Buck
(202) 622.. 2960
FOR IMMEDIATE RELEASE
October 22, 1999
STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMMERS
This legislation, if successfully completed, would at the end of the 20111 century replace
archaic financial restrictions with a legal foundation for a 21 et century financial system. It
would benefit consumers by providing them with more choice~ lower prices through
competition, new privacy protections, and continued investment in their communities. It
would benefit the economy by promoting financial innovation, lower capital costs and greater
international competitiveness.
-30LS .. 169
For press releas~~ speeches, public schedula and official biogru.phies, call OI4r 24.hour fax line at (202) 622~2040
TOTAL P.01
•
I
I)
E P 1\
l{
T i\ lEN T
'IREASURY
0 F
TilE
T R F :\ S (1 R \'
NEWS
OFnCE OF PUBLlC.AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W•• WASHJNCTON, D.C•• 2022() • (tot) 622-2960
FOR IMMEDIATE RELEASE
Text as Prepared for Delivery
October 28~ 1999
UNDER SECRETARY OF THE TREASURY FOR DOMESTIC FINANCE
GARY GENSLER
REMARKS TO THE BOND MARKET ASSOCIATION
1999 ANNUAL LEGAL AND COMPLIANCE CONFERENCE
NEWYORK,NY
I am very pleased to be here today. This is a historic moment for the U.S. financial
system. Legislation that will repeal the arcane Depression era Glass-Steagall Act is likely to
be voted on by both Houses of Congress in the coming week. For decades, prior Congresses
and Administrations have worked to repeal the laws that have separated the banking,
securities, and insurance industrics. Finally, we are on the brink of success with the newly
renamed Gramm-Leach-Bliley Act. Beyond the efforts of these three Chairmen of the
Conference Committee, I'd like to recognize the significant leadership and accomplishments of
Senator Sarbanes and Representatives LaFalce and DingeU.
As a result of these efforts, we believe that the agreements that have been reached on a
bipartisan basis will result in a final bill that is good for the economy and the financial system
and good for consumers and communities. While repealing Glass-Steagall is important, the
Administration insisted that the bill benefit consumers and communities as well as the financial
industry. That's why we were willing to walk away from the bill. even at the eleventh hour, if
it did not meet that standard. We believe the final bill will meet that standard. If the language
of the bill and the report remain consistent with the agreements that have been reached, the
Administration will support enactment of this legislation.
When the Glass-Steagall Act was passed, the financial and economic landscape of our
country differed greatly from tOday. In 1933, banks dominated the financial industry and the
economy to an extent that we find difficult to imagine today. Banks had no choice but to hold
the mortgages and loans they originated and consumers had little choice as to where to place
thelr savings. In addition, banks served only their local markets.
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Today, there is broad consumer choice. Banks compete for deposits with money
market funds and savings products offered by securities firms, asset managers, and insurers.
Securitization has changed the way banks manaie their assets -- mortgages and other loans are
readily put in tradeable form and sold. An $80 trillion dollar derivatives market has
revolutionized the way financial firms manage their ri~ks and the products they offer. And
today, the markets for financial products are not just national, but truly global in reach.
Spurred by competition, innovation, and technology, our fmancial industry and our economy
have been reshaped over the decades since 1933.
To a significant extent, our financial services industry has already modernized itself,
even without the final repeal of the Glass-Steagall Act. The industry is preeminent globally.
This has been facilitated, in part, by the erosion through judicial and regulatory actions of the
walls erected in 1933. Subject to certain limits, banking institutions have been able to offer
brokerage services and to engage in securities underwriting through so-called ASection 20"
firms.
Benefits of the Bill
The greatest benefit of the bill will be to permit financial services firms to offer
banking, securities. and insurance products all within one organization. At its core, the bill
pulls down barriers to competition. Allowing financial services fums to offer this wider array
of products will give these finns the flexibility to respond to their customers' needs. Financial
institutions will be able to expand the banking, securities, and insurance products they offer
without artificial structural limitations.
Common ownership of diverse financial services firms will enable these firms to
compete using the best that each discipline has to offer, Asset and risk management
teChniques, funding techniques, technological innovation, product development, and
approaches to serving customers and communities are just some of the areas in which
significant gains can be made through new business combinations. Particularly in an era of
rapidly changing technology, firms will be able to take advantage of greater operating
efficiencies.
I believe that this le~slation
will result in a diversity of approaches to financial
services. Just as with any other industry, some companies will be successful at serving their
customers by remaining specialized and focusing on particular markets or areas. Others will
be successful by offering a broad range of products or by serving many markets. There will
not be just one single approach that will be successful. This legislation will ensure that the
choi.ces firms make are dictated by the markets and by customers -- not by artificial barriers
erected by the government decades ago.
Consumers and Communities
2
AS important as these benefits of financial modernization are, the President insisted that
a financial modernization bill must include adequate protections for consumers and must
preserve the relevance of the Community Reinvestment Act. As a result of the provisions
included on CRA, investor protection, and privacy, we believe the [mal bill achieves these
objectives.
Over the many years of major financial modernization proposals, no major bill ever
addressed the issue of consumer privacy. The President took an important step when on May
4 he laid out his principJes on protection of individual privacy. The Senate bill, which had
already passed, included no privacy provisions. The House then acted by a vote of 427-1 to
add privacy to their bill. The final bill goes further, providing significant privacy protections.
For the first time, financial institutions will be required to adopt privacy policies and to
disclose these policies to their customers. Financial Institutions will be required tD give their
clIstomers notice annually on how their personal information is being shared, even amongst
affiliates. Consumers will have the right to prevent personal financial information from being
shared with third parties, subject to limited exceptions that will permit institutions to continue
to operate efficiently. The financial regulatory agencies will have the authority to write and
enforce rules to implement these privacy protections. Importantly, this bill will preserve the
rights of States to provide even stronger privacy protections. While we believe more can and
should be done to give consumers choice before their information is shared with affiliates, the
fInal bill takes an important first step.
We believe that communities also will benefit from the bill. For the ftrst timet a
bank's performance under the Community Reinvestment Act will be considered when it
expands outside of traditional banking activities. A banking organization will not be able to
commence a new activity, directly or indirectly, or to merge with or acquire a company
engaged in such activities, unless every insured bank within the organization is seIVing its
communities, as measured by a satisfactory eRA rating.
Under the bill, eRA will continue to apply to all banks without exception t and existing
procedures for public comment are preserved. Small banks will have an incentive to achieve
better eRA ratings to reduce the frequency of examinations. The final bill includes disclosure
provisions related to certain agreements entered into by banks related to eRA. These
provisions were improved substantially from the Senate bill and from the initial proposals of
the Chairmen of the Conference Committee. It is important that these requirements be
implemented in a reasonable manner to ensure that they do not chill the work of those who do
so much in our underserved communities. We will work hard in the regulatory process to
ensure this result. Community-based organizations are essential to effective implementation of
CRA, and to combined growth and opportunity in our communities.
I believe that, taken together. these provisions will ensure that CRA continues to work
for all communities.
3
Organizational Structure
The bill contains important limitations on the fmancial services firms of the future. We
believe that a modem financial system should retain some separation between banking and
other financial activities. The alternative, universal banking, is popular around the world, but
we believe is the wrong choice for this country at this time. Thus, although the bill allows
common ownership of banking, securities, and insurance firms, it still requires those activities
to be conducted separately within an organization. subject to functional regulation and funding
limits.
At the same time, the bill allows for organizational choice, enabling a financial
institution to structure itself and its activities in a manner that best suits its needs, as well as
promoting safety and soundness. The provisions of the final bill will preserve an important
role for the executive branch with regard to banking policy and the evolution of the financial
system of the future.
We believe that when it comes to non-financial fi.rms, even greater separation is
appropriate, and that common ownership should be prohibited. One of the lessons of the
Asian experience of the past few years is that financial institutions tend to make bad decisions
when it comes to lending to corporate owners or siblings. The synergy gains of combining
financial and non-financial firms are not great and the potential downside is considerable.
Thus, I believe that the United States economy has been well served by preserving a clear
separation between those who allocate capital and the majority of those com~ting for it.
Importantly 7 the bill would prohibit the transfer of unitary thrifts to non-financial firms.
In addition, it sets some important limitations on merchant banking activities in banking
institutions. Surely, this is an area where we need to move cautiously, at least until we gain
experience with the effects of broader financial finns.
Commodity Exchange Act
As Congress passes this historic legislation this week, we are also embarking on
another effort to revise a significant piece of legislation that is in need of updating -- the
Commodity Exchange Act.
The President's Working Group on Financial Markets will shortly be reporting on our
joint views on over-the-counter derivatives. We will also report on proposed revisions to the
Commodity Exchange Act in connection with the upcoming reauthorization of the Commodity
Futures Trading Commission. The process represents a unique opportunity to move forward
to modernize the legal and regulatory framework for the derivatives markets. There are a
number of important principles I would like to mention in that regard.
4
First, it is critical that we provide legal certainty for OTe derivatives. Legitimate
transactions have come under a legal cloud as a result of expansive interpretations of the CEA
over the years. Such uncertainty can create systemic risk and must be resolved. Second, we
must consider the potential for properly desi,ned~ centralized clearing of OTC contracts. This
could significantly reduce systemic risk in these markets and contribute to the stability of our
fmancial markets. Third, we must allow for innovation and the emergence of more efficient
trading mechanisms in order to ensure that the U.S. remains preeminent in these markets.
Fourth, the Working Group also must address other extremely important areas, particularly
concerning the Treasury Amendment, which excludes from the CEA transactions in
govemment securities or foreign currency. Lastly, we need to ensure that loopholes do not
exist that allow bucket shops and other fraudulent operators to prey on retail customers.
The members of the Working Group are working diligently to achieve a consensus on
recommendations that can be sent forward to the Congress. The Working Group has focused
on finding resolutions that will ensure the integrity of markets while fostering innovation and
competition. These two goals, ensuring market integrity and fostering innovation, need not be
competing or incompatible objectives. Innovation and competition are critical to ensuring the
integrity of our markets over the long term.
Let me conclude by saying that we have a historic opportunity to prepare for the 21 st
Century by updating archaic laws from the early 20th Century. It will strengthen our financial
sector and promote our economy.
Thank you.
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Text as Prepared for Delivery
October 25, 1999
TREASURY SECRETARY LAWRENCE H. SUMMERS
REMARKS FOR OPENING PLENARY
CHINA - U.S. JOINT ECONOMIC COMMITTEE TWELFTH SESSION
BEIJING, CHINA
Thank you Mr. Minister. On behalf of our delegation, let me say how pleased we are to
be back in Beijing for this 1tit session of our Joint Economic Committee. On the sidelines of the
World BankIIMF Annual Meetings in Washington, Finance Minister Xiang and I spoke about
organizing this next session of the JEe. I am delighted to be here less than one month later.
Little did I expect that this trip would take me all the way to Lanzhou, a city on the path
of the old silk road, located in what is now one of the poorest provinces in China. This visit gave
me fresh insight into the challenges and opportunities that China faces in extending the benefits of
market-led reform to the interior provinces. I would like to thank Premier Zhu and Minister
Xiang for making that trip possible.
These JEC sessions are only one of the many opportunities we have to meet each year, but
they play an important role in helping us to understand each others' economies and economic
policies, and to exchange views on a wide range of issues of critical concern to both our
countries. They have become well-established fixtures on our respective calendars - and I hope
they will remain so.
A great deal has happened in the 17 months since our last JEe, including some happy
events in our bilateral relations, but also some difficult and painful ones. I am pleased to say the
relationship between our Treasury and your Finance Ministry has remained productive throughout
this time.
Let me say a little about five key issues on our agenda today:
•
•
•
Important recent developments in the global economy
Domestic macroeconomic conditions in the United States and China
Chinese financial sector and state-owned-enterprise reforms
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•
•
External economic issues and integration
And key issues regarding cooperation in international law enforcement
Developments in the global economy
The most significant global economic events during this period have been the move
toward recovery in the East Asian crisis economies - and the financial crises in Russia and Brazil.
These developments have given fresh impetus to international efforts to build a stronger and more
stable global financial architecture - efforts in which China has played a very active role.
In its participation in regional fora such as APEC and the Manila Framework grouping,
and in broader meetings of the G-22 and G-33, China has made a welcome contribution to
building the stronger regional and global economy in which it has such a growing stake. Its
participation will be further cemented by China's membership in the G-20. This permanent
informal mechanism for high level discussion of economic and financial issues among the G7 and
key emerging market economies will meet for the first time in December.
Macroeconomic conditions in the United States and China
Turning to our respective domestic economic environments, our two economies appear to
have weathered recent storms in regional and global financial markets quite well. But while the
United States economy has performed extremely well during the 1990s, we recognize that this has
come in large part from making difficult decisions - especially with respect to taming our federal
budget. We recognize that we cannot afford to take these good times for granted.
.
During the same period China has also continued to grow and to work to implement
difficult macro-economic and structural reforms. We will be interested in hearing how you view
the prospects for the Chinese economy going forward, the role of fiscal and monetary policies in
that outlook, and your views on how best to address the formidable challenge of deflation.
Financial sector and state-owned enterprise reforms
The questions of how best to address deep-seated financial sector problems - and prevent
them being repeated - is scarcely unique to China. Countless other economies have faced some of
the same challenges in recent decades. The United States learned a number of costly lessons in the
course of the 1980s savings and loan crisis - lessons that we have since been working to apply in
the 1990s. Most recently, Congress appears to have reached agreement on major legislation to
revamp our financial system and its regulation with the goal of improving its ability to allocate
capital efficiently, within an appropriate framework of regulation and supervision.
I know that you recognize that resolving the problems in your financial sector will be
2
\.
critical to the success of China's economy in the years ahead. At last year's JEC, you told us
about your plans to increase the independence of the Peoples' Bank of China and to grant greater
autonomy and market..orientation to the four state-owned banks. We will be very interested in
learning about the progress made since then, and how you plan to proceed from here. We would
like to explore the possibility of intensifying our dialogue on the crucial issues in capital market
development, including securities markets.
We also spoke last year about your intention to address the problems of state-ownedenterprises, and allow market forces to operate more broadly in your economy. Since then we
have seen your important refonn achievements in the coal and textile industries, but we would be
interested in an update on the steps being taken throughout the enterprise sector to meet your
goals. We are also interested in hearing about your efforts to untangle and separate the complex
web of services that state-owned enterprises provide, such as housing, health care, and education.
External policies and integration
We also wish to exchange views about trade prospects and economic openness, and how
our joint trade agenda can be moved forward. In our view, the openness of our own economy
has been an important key to America's prosperity over the long tenn. It has brought us the
benefits of goods, capital, services, and ideas from abroad. It has also brought periods of
tremendous challenge to our producers, forcing them to reassess their business practices and
strategies. And it has brought us foreign savings when our own savings have faBen short of our
investment demands.
In the past two decades China has clearly become a major trading partner for the United
States, and has benefited greatly from access to the United States and global markets. We will be
interested in learning more about your thoughts on our respective external situations, including
steps that can be taken to address the imbalance in our bilateral trade. More broadly, we will be
interested in discussing the ways that greater opening of the Chinese economy and financial sector
could help support and accelerate other aspects of China's economic progress - notably SOE and
financial sector refonn.
Enforcement issues
International crime poses great difficulties in all of the world's economies, and it is
essential that all countries work together to fight it. I hope that we can agree that both sides
should observe fully the tenns of the Memorandum of Understanding and Statement of
Cooperation on prison labor. We welcome the conclusion of the Customs Mutual Assistance
Agreement, and hope that we will be able to strengthen cooperation in other areas, including
combating international organized crime, narcotics trafficking, counterfeiting, and money
laundering.
3
\.
This is a very full agenda for a one-day meeting. I would like to end at this point, so that
we can move forward to the dialogue on specific issues. I hope, as in the past, that the
discussions will be conducted in a spirit of openness, friendliness, and a desire to learn and
exchange views. Disagreements are inevitable in a relationship of this size and complexity as that
between our two nations. But I think our relationship is strong enough that we can address such
issues frankly, to better improve our mutual understanding and move us forward.
Before I return the podium to Minister Xiang, I'd like to introduce the key members of the
U.S. delegation who will be participating in the discussions today: Federal Reserve Governor
Meyer will co-chair this morning's working group; and Assistant Secretary of the Treasury for
International Affairs Truman will co-chair this afternoon's session. Thank you very much. I look
forward to a fruitful meeting.
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Text As Prepared for Delivery
October 25, 1999
JOINT STATEMENT
12TH SESSION OFTHE CHINA-U.S. JOINT ECONOMIC
COMMITTEE
BEIJING October 25, 1999
At the invitation of Finance Minister Xiang Huaicheng, Secretary Summers visited
h
China. Minister Xiang and Secretary Summers co-chaired the 1t session of the ChinaUnited States Joint Economic Committee (lEC). During the meeting, both sides held
extensive discussions on a broad range of economic issues. The two ministers noted that
mutual understanding and the bilateral relationship in the economic, fiscal and financial
fields had been enhanced through dialogue on a regular basis in the lEC. They stressed
their common desire to continue deepening cooperative relations between the two
countries in general, and collaboration in international economic and financial affairs in
particular.
The 12th session of the JEC addressed both domestic and international economic issues.
•
On domestic economic issues, both sides discussed the progress and challenges
they face in sustaining economic growth. The United States pointed to prudent
fiscal and monetary policies on its side, and particularly to a federal budget
surplus expected in fiscal year 2000, for the third consecutive year. China
emphasized that it will continue its pro-active fiscal policy and appropriate
monetary policy stance so as to maintain the balance of payments and therefore
maintain the stability of the RMB exchange rate, thereby further boosting
domestic demand.
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•
Meanwhile, China stressed its current efforts on further deepening the reforms of
state-owned enterprises and the financial sector, and establishing a sound social
security system so as to maintain the growth momentum of the national economy.
The United States expressed support for these objectives. The United States and
China have agreed to establish a more intensive process of dialogue on financial
and capital market development issues, including the roles of foreign financial
services providers in each of our countries, under the JEC mechanism. This
process will be co-chaired by our Finance Deputies and Central Bank Deputies
and will include securities market regulators and banking supervisory officials.
This process is described further in the attachment.
•
The two sides exchanged views on economic issues of mutual interests, such as
domestic economic policies and goals. The two sides discussed the issues related
to macroeconomic conditions, including the importance of sound macroeconomic
fundamentals and strong financial systems. They also discussed the external
position of both countries, including trade balances, investment flows, foreign
exchange reserves, debt, and exchange rate policy.
•
On international economic and financial issues, the two sides reviewed the
current global economic situation, and touched upon the issues of financial crisis
prevention and management. The two sides welcomed the creation of the new
informal mechanism for dialogue among systemically important countries and the
inclusion of key emerging market economies in this group. They looked forward
to the opportunity, at the first meeting in December, to exchange views with their
counterparts on important issues facing the world economy, including further
steps to strengthen the international financial architecture.
•
The two sides discussed the roles of the two countries in the regional and global
financial system in the context of the Asian financial crisis. They also reviewed
the external positions of both countries. In addition they discussed China's
accession to the WTO.
•
The two sides discussed money laundering and bilateral law' enforcement
agreements, including enforcement that applies to exports and imports of goods
made by prison labor. They discussed what they could do to strengthen cooperation in this area and observe existing agreements so as to enforce them.
They expressed satisfaction with the signing of a Customs Mutual Assistance
Agreement since the last lEC meeting. They reiterated their belief that this
Agreement will strengthen bilateral efforts to suppress international organized
crime, narcotics trafficking, smuggling activity and violations of intellectual
property rights. Both sides expressed satisfaction with progress made on the
Shanghai Model Port Project under the auspices of APEC and hoped to achieve
further concrete progress in the areas of technical assistance and professional
training.
2
Minister Xiang particularly drew attention to the following developments since the last
JEC meeting:
•
He stressed the importance of the constructive meeting between President Jiang
and President Clinton in Auckland, New Zealand. Such a result will advance
bilateral relations. He was of the view that the regular dialogue of the financial
ministers would help to promote the cooperative goals set forward by the two
presidents. He believed that maintaining high level bilateral contacts would
deepen mutual understanding and further promote the bilateral relationship
between the two countries.
•
He pointed out that China had deepened reforms to move toward a market-based
economy. China gave priority to restructuring state owned enterprises and the
financial sector, and establishing a sound social security system.
•
He noted that despite the Asian crisis, China had managed to keep a favorable
external position.
Secretary Summers also remarked on a number of specific issues:
•
He discussed recent developments in the U.S. economy, in particular noting that
he expects the momentum of expansion to continue with strong growth and low
inflation, subject to the normal ups and downs.
•
He expressed his pleasure that China will participate actively in the new informal
mechanism for dialogue among systemically important countries.
•
He reiterated the hope that relations between the U.S. Treasury and the Chinese
Ministry of Finance would continue to develop. He noted that there had been a
significant expansion of contacts between officials of the two organizations, and
expressed his hope that such cooperation could be further expanded.
Both sides recognized the potential problems related to the Y2K issue and have been
cooperating to deal with them. They pledged to continue their cooperation with a view
toward addressing any problems that may arise with the tum of the millennium. '
The two sides agreed that the next meeting of the lEC would take place in Washington,
D.C. in 2000.
The Chinese delegation to the JEC consisted of representatives of the Ministry of
Finance, Ministry of Foreign Affairs, State Development and Planning Commission,
State Economic and Trade Commission, Ministry of Foreign Trade and Economic
Cooperation, the Ministry of Justice, the People's Bank of China, State Administration of
axation, General Administration of Customs, China Securities Regulatory Commission,
and State Administration of Foreign Exchange.
3
The U.S. delegation included representatives from the Department of the Treasury. the
Federal Reserve Board, the Department of State, the Office of the U.S. Trade
Representative, the Office of the Comptroller of the Currency, the National Security
Council, the National Economic Council, the U.S. Customs Service, and the u.S.
Embassy in Beijing.
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Attachment to JEC Statement
The United States and China have agreed to establish a more intensive process of
dialogue on fmancial and capital market development issues, including the roles of
financial services providers in each of our countries. This process will be co-chaired by
our Finance Deputies and Central Bank Deputies and will include our national securities
market regulators and banking supervisory officials as well as other experts, as
appropriate.
Issues under discussion will include:
•
•
•
•
Financial sector development, including regulatory and infrastructure issues;
Capital markets development, including deepening the securities market;
Policy challenges of capital markets integration; and
Approaches to promoting product diversification and appropriate risk management
procedures.
This process will foster cooperation in an area critical to China's development and future
growth, contributing to increasing confidence while promoting dynamism in China's
financial markets. The development of market and regulatory infrastructure will help
contribute to efficient use of domestic savings and prudent interactions with global
capital markets.
The first meeting will be held in early 2000. The Deputies will report back to the
Ministers at the next JEC to be held later next year.
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Text as Prepared for Delivery
October 25, 1999
"China's Role in the 21 st Century Global Economy"
Secretary of the Treasury Lawrence H. Summers
Remarks at Qinghua University School of Economics and Management
Beijing, China
Thank you, Vice-Dean Chen, for that kind introduction and Professor He for hosting my
visit today. Let me say first how delighted I am, as a graduate of MIT, to come to the MIT of
China. A very distinguished Qinghua graduate - Premier Zhu or perhaps here I should say Dean
Zhu - probably put it the other way round when he visited MIT earlier this year. But either way,
it is good to hear that the great minds of Beijing and Cambridge have been working together to
educate leaders at your school of management for a market-driven future.
China's transition to an open market economy is unique. But China is not alone. The
transformation that has been taking place here during the last two decades of this century has
echoes around the world. Powerful forces are creating a new global economy for the 21 st
century: one that holds enormous opportunities for improving the lives of the world's people, but
that also poses new challenges and risks.
Today I would like to reflect on these global trends, and their implications for China. I
do so as someone who is a specialist in economics, not politics - as someone who recognizes that
the long-term interests of both of our countries are well served through China's economic
development.
I.
Three Driving Forces Behind the New Global Economy
Many elements are building this new global economy. But three key trends are at its
center.
First, revolutions in technology
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A recent cartoon in an American magazine depicted a small boy telling his friend that
what he wanted to be when he grew up had not yet been invented. That captures some of the
spirit of this new era. Modem advances in information technology, transportation, and
communications are taking us to a post-industrial age, with profound implications for economies
and societies.
In this new era:
•
Brains matter more than brawn - how much you know matters more than how much you can
lift.
•
Innovation matters more than mass production - a product's value is measured not in pounds
or kilos, but by the weight of ideas that went into making it.
•
And information matters most of all - how easily it can travel through the economy and how
well it is used.
Second, the spread of market forces
These technological changes, in tum, have helped to propel the second major
development: the erosion of government economic controls and the spread of market forces.
It cannot be an accident that Soviet-style communism, planning ministries throughout the
developing world, and large corporations run by command and control all ran into brick walls in
the same decade and had to be restructured. Economic success means striking the right balance
between, on the one hand, the central coordination of activity, and on the other, the motivation of
individual talent and ideas. Shunning either of these entirely is never right. But new technologies
have helped shift the balance between the two.
Increasingly, the balance of economic advantage has tilted firmly in favor of systems in
which economic power and opportunities are more decentralized - and the skills and ideas of the
individual are given greater weight. At the level of individual businesses and national
economies, flexibility is winning out over rigid controls. And the capacity to respond to change
is winning out over the capacity to dictate it.
. Third, global integration
These two trends come together in the third and perhaps most spectacular aspect of the
new global economy: one in which goods, capital, and information flow freely across the globe
to the places where they will be most effective in spurring growth. Creating an environment
where there is competition for capital is today a key to economic success - more than was ever
the case in the past.
When history books are written 200 years from now about the last two decades of the
20th century, I am convinced that the end of the Cold War will be the second story. The first
story will be about the appearance of emerging markets - about economies where more than
2
three billion people live moving toward the market and seeing rapid growth in incomes. For the
first time in human history, living standards for huge populations have quadrupled or more in a
single generation.
This record of growth in emerging markets is an achievement, I would argue, whose
importance in economic history can best be compared to the Industrial Revolution. For business,
this means commercial opportunity on a huge scale. For governments it means managing in a
single decade economic changes that might once have taken half a century. For the world's
people - it is driving improvements in health, literacy, and nutrition that were unthinkable even
two decades ago.
These lessons - the importance of technology, the centrality of market forces, the need
for global integration, and the focus on flexibility in response to change - will be crucial
components of economic success in the 21 st century. Our own success in the United States in
recent years has been predicated on just these factors: a culture that encourages entrepreneurship
and technology; an economic environment that lets the market dictate outcomes; continuing
market reforms that allow capital to find its most efficient use; and dramatic changes in our fiscal
balance that have led to budget surpluses and reallocated trillions of dollars for private
investment that otherwise would have been invested in the sterile asset of government paper.
These lessons are also applicable to China's economy as it prepares to enter the next century.
II.
Implications for the Chinese Economy
What China has achieved in 20 years of economic reform is truly remarkable:
•
In 1978 Deng Xiaoping dreamed of doubling and redoubling China's GDP by 2000 - China
passed that milestone earlier this decade, and has since exceeded it.
•
China has risen to become the 11 th largest trading nation in the world.
•
Most important, 200 million fewer people in China now live in poverty - and every year,
more than 450,000 fewer Chinese children die before reaching their fifth birthday than was
the case 20 years ago.
These gains have come from a potent recipe: freeing labor from the land; tapping China's
vas.t stock of human resources; and welcoming foreign capital, management, and technology into
Chma. These policies have helped China quickly make up some of the economic ground it had
lost relative to other economies earlier in this century. But catch-up, by definition, can only take
an economy so far - and increasingly China seems to be coming up against diminishing returns.
National problems demand national solutions that respect national customs and practices: to
overcome the enormous obstacles in its path, China needs to continue building a market
economy that will work for China. But it also needs to build one that will succeed in today's
global economy. And the laws of economics, like the laws of physics, cannot be repealed.
3
In that sense, China's core economic challenges are the same ones that every economy faces
at the dawn of a new millennium: the need to build policies and institutions for a post-industrial
age; the need to allow market forces to operate more freely; and the need to unleash the benefits
of integration with the global economy for business and people.
1. Planting the Seeds of a New Chinese Economy
As President Jiang, Premier Zhu and others have recognized, the challenge for the next
stage of China's transition is to find policies and institutions that will finally realize the full
creative potential of the Chinese people, and will support innovation and investment over the
long term - and over all of China:
•
That means building the right intangible infrastructure for a modem market economy:
including the rule of law, fair tax laws and enforcement; high levels of transparency; private
ownership and free land markets; intellectual and physical property rights; independent
courts that enforce laws and contracts; securities markets that deter fraud and protect investor
rights; and social spending targeted to those really in need.
•
That means support for institutions that can help bridge the gap between good ideas, on the
one hand, and good products and services, on the other - the kind of gap that Qinghua' s
School of Economics and Management is working to fill.
•
And most of all, perhaps, it means recognizing the enormous value of not merely an open
market for products and services - but an open market in ideas.
Just as in the mass-based economy of the 20th century an effective system of transport was
critical to a country's growth, as we enter the 21 st century the free flow of ideas has become a
prerequisite for economic success.
2. Letting Market Forces Operate
The second major challenge is to free this new economy from the weight of inefficient
state-owned enterprises and a financial sector that expends vast amounts of resources supporting
them.
What this will require, in China no less than in other transition economies, will be a
fundamental change in the incentives facing managers of these enterprises. In the end, businesses
will succeed when they face hard budget constraints on their activities - not the costly prop of
continued state support.
Recognizing the seriousness of the problem, the Chinese government has made financial
sector reform a high priority in recent years, and begun that challenging process. Promising
recent steps include the reorganization of the People's Bank of China along regional lines to
reduce local political pressure on supervisors, and the creation of asset management companies
to deal with non-performing loans at state commercial banks.
4
3. Opening the way to a globally integrated economy
There has been considerable debate in recent months about whether the Chinese reform
process is strong enough to withstand the effects of further opening China to the rigors of foreign
competition. In light of global experiences in the 1990s, the more relevant question may be
whether Chinese reforms can truly succeed without it.
One of the most impressive qualities of the leaders who have shaped China's economic
reform process has been their recognition that a market transition can be powerfully supported by
- indeed, will not be fully achieved without - opening China to the global economy, and all the
capital, competition and new ideas that it can offer. In my meeting with Premier Zhu yesterday
in Lanzhou, we engaged in a valuable and candid dialogue on the importance that each of our
nations attach to China's accession to the World Trade Organization. While both sides have real
and legitimate concerns that must be addressed in any negotiation over China's membership, we
ultimately believe that the best framework for our trade relations with China would be the
market-oriented and rules-based system of the WTO.
WTO accession would constitute an integral piece of China's effort to build on the
economic progress it has made and promote openness and reform. This step would further
integrate China into the dynamic world economy, contribute to a more stable and efficient
business environment, and spur productivity gains as competition directs capital to its b~st
available use.
The potential gains for America of an enhanced trading relationship with the world's
most populous nation are also enormous - not only because it would provide sounder and surer
access by U.S. manufacturers and service providers to China's markets, but also because by
contributing to China's prosperity through the WTO, it would at the same time enhance the
prosperity of the entire global economy.
In that context, if the United States and China can reach a satisfactory WTO accession
agreement, the Administration will work hard with Congress to attain permanent normal trading
relations for China.
Ultimately, a World Trade Organization cannot fully live up to the founders' intent if it
does not include a country that is home to one-fifth of mankind. But it can do so only by setting
standards that ensure that nations joining the WTO have firmly committed to its basic principles:
commercial reciprocity and respect for international law.
III.
Concluding Remarks
The economic principles for national success that I have described today are as difficult to
implement as they are easy to state. In any country, there is a paradox in this moment: just as a
new global economy creates more opportunity than ever before, it also brings more uncertainty.
The challenge of crafting economic policy in these circumstances is one of balance:
5
•
A balance between moving toward necessary objectives and maintaining stability along the
way;
•
A balance between responding to international global realities and upholding domestic
traditions;
•
And a balance between the virtues of competition as a motivator and driver of success and
the importance of cohesion and cooperation as a source of strength for our societies.
Successfully striking these balances is a challenge for every country.
There is little doubt that continuing the important working relationship between the United
States and China - a relationship that must be firmly grounded in mutual respect - will be critical
to the shape and prosperity of the 21 st century global economy. And yet, we should never forget
that the ties that bind two economies together reach well beyond official meetings, like the one
that has brought me to China today. The growing connectedness of our two countries also shines
through on a business-to-business level - and the rising number of exchanges that take place
person-to-person.
You have felt that growing connectedness firsthand in your collaboration with MIT. But you
are not the only ones:
•
An estimated 400,000 American jobs now depend on the business their companies do in
China - in the past decade alone, our exports have quadrupled. And foreign direct investment
has left American firms with $6.3 billion invested directly in China's economic success.
•
Today, more than 100,000 Chinese students and scholars have had the opportunity to study in
the United States. Thousands of American teachers and students have had the chance to come
to China - and across China, Americans are also working with local governments,
universities and citizens' groups on projects such as teaching poor rural women to read and
hooking up schools to the Internet.
How China will define its greatness in the decades to come is a question only China can
answer. But by working with China as it reforms and by expanding our areas of cooperation we
know that we can advance shared Chinese and American interests and values. Thank you.
-30-
6
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
Office of Financing
202-69:1..-3550
CONTACT:
IMMEDIATE RELEASE
ober 25, 1999
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
October 28, 1999
January 27, 2000
912795DE8
Term:
Issue Date:
Maturity Date:
CUSIP Number:
4.995%
High Rate:
Investment Rate 1/:
5.145%
Price:
98.737
All noncompetitive and successful competitive bidders were awarded
lrities at the high rate.
Tenders. at the high discount rate were
)tted 65%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered
Tender Type
Competitive
Noncompetitive
$
25,033,869
1,338,116
$
26,371,985
PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
$
7,723,869
1,338,116
9,061,985 2/
942,400
942,400
27,314,385
10,004,385
4,272,815
4:,272,815
o
o
Federal Reserve
Foreign Official Add-On
TOTAL
Accepted
31,587,200
$
14,277,200
ledian rate
4.980%: 50% of the amount of accepted competitive tenders
.endered at or below that rate.
Low rate
4.950%:
5% of the amount
:cepted competitive tenders was tendered at or below that rate.
o-Cover Ratio
=
26,371,985 / 9,061,985
= 2.91
uivalent coupon-issue yield.
ards to TREASURY DIRECT = $1, 017', 653, 000
L8-173
'www.pubUcdebt.treas.go1
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:
IMMEDIATE RELEASE
.ober 25, 1999
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
October 28, 1999
April 27, 2000
912795DT5
Term:
Issue Date:
Maturity Date:
CUSIP Number:
5.115%
High Rate:
Investment Rate 1/:
Price:
5.338%
97.414
All noncompetitive and successful competitive bidders were awarded
lrities at the high rate.
Tenders at the high discount rate were
Jtted 61%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
Tendered
Compet:itive
Noncompetitive
$
Accepted
21,281,020
1,068,690
$
22,349,710
PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
$
5,363,769 2/
2,641,200
2,641,200
24,990,910
8,004,969
3,080,000
3,080,000
o
o
Federal Reserve
Foreigr. Official Add-On
TOTJ:..L
4,295,079
1,068,690
28,070,910
$
11,084,969
1edian rate
5.110%: 50% of the amount of accepted competitive tenders
:endered at or below that rate.
Low rate
5.060%:
5% of the amount
:cepted competitive tenders was tendered at or below that rate.
:o-Cover Ratio
= 22,349,710 / 5,363,769
=
4.17
~ivalent coupon-issue yield.
Tards to TREASURY DIRECT
= $807,445,000
httD:llwww.publlcdebt.treas.gov
D EPA R T 1\1 E N T
0 F
THE
T REA SUR Y
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. - 20220 - (202) 622·2960
EMBARGOED UNTIL 1:00 PM
Text as Prepared for Delivery
October 26, 1999
Remarks by Deputy Secretary of the Treasury Stuart Eizenstat
Annual Conference of the Tax Executives Institute
Philadelphia, PA October 26,1999
I am very happy to be here at your annual conference. There has always been a
strong tie between TEl and Treasury. You give us important feedback on policies and
procedures, and you have been especially helpful to us in the ongoing reorganization of
IRS.
This conference is just one of an array of educational programs in every area of
tax practice and policy your Institute organizes, both in Washington and in the states. It
is the responsibility of your members to look at tax issues from the standpoint of your
companies, their stockholders and their customers. It is our job to represent the national
interest as we see it and as Congress has directed us. In many cases, our goals are
consistent and we appreciate our partnership in these matters. The creative dialogue
between us has been going on for a long time, and I hope it will continue.
I want first to touch on some issues of special importance to you. As you know,
earlier this month the World Trade Organization issued a final decision holding that our
foreign sales corporation regime constituted an impermissible export subsidy that violates
two WTO agreements. The decision requires the withdrawal of the FSC tax exemption
as of October 1, 2000. I share your disappointment with this decision. From the time we
learned that the European Community might bring a case against the U.S. over our FSC
rules, the Administration has committed substantial resources and done everything
possible to defend these rules. Our strategy and legal positions have been developed with
the involvement and advice of interested members of Congress and the private sector.
We will continue to commit the resources necessary to evaluate the opinion and assess
the prospect of an appeal and other available options. Our goal is a level playing field for
United States companies. I appreciate and welcome any assistance that TEl can offer us
in evaluating our options.
LS-17S
press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622.2040
(i
2
Let me also just briefly discuss subpart F, which deals with the taxation of the
income of U.S.-majority controlled foreign corporations. This part of the tax code
provides that certain income of such corporations will be taxed currently as part of the
income of the corporations' U.S. shareholders. As many of you know, Treasury has been
working on a study of this area to determine whether subpart F is still fulfilling its
original purposes, whether those purposes are still valid, and whether any
recommendations for change should be made. This report should be released soon.
The taxation of foreign income is an important issue in an era of globalization.
Our system has to strike the right balance. We should not impose inappropriate burdens
on U.S. businesses when they invest abroad. But we should not unduly favor investment
abroad, which may mean that domestic businesses and individuals will bear a greater tax
burden. Once our study is published we hope that you, and others, will discuss with us
ways to improve subpart F.
I should also mention that we are currently looking at the tax issues raised by new
technologies and by new paradigms of conducting business, including of course the
Internet and electronic commerce. These new technologies increase the distance across
which a transaction can be easily and speedily conducted and have decreased the distance
between producers and their ultimate customers, by reducing the need for intermediaries.
The stakes in approaching these new issues are high. Forrester Research projects that on~
line retail sales in the US should reach a staggering $185 billion by 2004. Although
Forrester estimates that would be only seven percent of total retail sales in the US, state
and local governments perceive this growth in electronic sales as a threat to their sales tax
revenue base. At the same time, electronic commerce is spurring growth in the US and
so the economic cost could be high if it were subject to discriminatory taxation here or
abroad.
It is for these reasons that we supported the Internet Tax Freedom Act and its
three-year moratorium on the imposition of discriminatory new taxes on the Internet.
The Administration, for the same reasons, worked with our international trading partners
to secure the temporary moratorium on the imposition of tariffs on telecommunications
transmissions and seeks a permanent moratorium on tariffs on electronic transmissions
for as long as possible.
Through our ongoing participation in the Federal Advisory Commission on
Electronic Commerce and the Organization for Economic Cooperation and Development
(OECD), we will continue to work toward ensuring that commerce conducted by these
new means is not subject to discriminatory taxation and that any solutions adopted take
account of the global nature and other special characteristics of this new commerce. Our
view, endorsed by the OECD, is that any taxation of the Internet or electronic commerce
be neutral, non-discriminatory, simple, certain, fair and flexible.
From the time the Sixteenth Amendment became part of the Constitution, eightysix years ago, our national tax policy has reflected the nation's social goals and economic
strategies. The first Revenue Act, passed in 1914, established the principle of progressive
3
taxation-although the maximum individual rate was only seven per cent. The Revenue
Act of 1932 was based on the assumption that a tax increase would stimulate the
economy. In more recent decades, this goal was sought through tax cuts. Over the years.
we have seen the tax laws used to encourage and discourage all manner of social and
economic activities. Indeed, some of the fundamental issues we have faced as a nationeducation and poverty, housing and health care, economic isolation or international
involvement-have all presented themselves in the form of changes in the Code.
The Administration has set out four criteria by which we evaluate all tax policy
proposals:
•
•
•
•
Are they fiscally responsible?
Do they promote fairness, especially for working families?
Do they promote economic prosperity and growth, and
Do they make it simpler for ordinary taxpayers to comply with the law?
Our commitment to the first criterion of fiscal responsibility should be very clear.
Reducing the Federal budget deficit has been a centerpiece of this Administration's
economic policy. We made difficult, and sometimes unpopular, choices in 1993 and
1997, and those choices--together with strong economic growth--have turned the unified
budget deficit into a budget surplus. In 1992, the deficit was $290 billion and projected
to rise; in 1998, the surplus was $69 billion, and tomorrow we will announce the surplus
for the fiscal year just ended, which we project to exceed $115 billion.
Building on this remarkable achievement, the President has now set a higher
standard: to balance the government's books excluding the surpluses generated by the
Social Security system. In the Mid-Session Review of the Budget in June, the
Administration presented a framework that dedicated the projected on-budget surpluses
to four priorities: saving Social Security, reforming and modernizing Medicare,
maintaining prudent levels of discretionary spending, and providing a large tax cut for
retirement savings. Even after meeting these priorities, the framework left a balanced onbudget.
Today the President will submit legislation to Congress to implement this plan,
and he has emphasized his desire to work with Congress to pass this legislation. The
proposal would protect the Social Security surpluses, make transfers to Social Security
equal to the interest savings from debt reduction achieved by locking away the Social
Security surpluses, and reserve one-third of the on-budget surplus over the next 10 years
for Medicare. The bill would also extend the discretionary caps and pay-as-you-go
budget enforcement rules.
The President's budget framework would pay off the federal debt by 2015,
helping to spur economic growth and keep interest rates down. It would extend the
solvency of both Social Security and Medicare. And it would provide the crucial
government services on which the American people depend-without the budget
gimmicks and the potentially damaging across-the-board spending cuts being proposed.
4
The across-the-board cut now being discussed sounds like a fairly small change.
But it would reduce the number of military personnel in the current fiscal year by 39,000:
the number of women, infants and children who receive food assistance from the WIC
program by 100,000; and the number of children in the Reading Excellence program by
14,000. Moreover, if one rejected all budget gimmicks, such as labeling the 2000 Census
an "emergency," the across-the-board cut needed to balance the on-budget in their plan
would be over 6 times as large.
Thus, as the budget process continues this fall, the Administration will continue to
focus on these issues:
•
•
•
the importance of protecting the Social Security surplus and extending the
solvency of Social Security;
the importance of devoting part of the projected on-budget surpluses to
Medicare reform rather than an unaffordable tax cut;
and the importance of an honest and disciplined approach to federal
budgeting.
The second test, fairness or equity, has long been recognized as an important tax
policy goal. The purpose of a tax system is to raise revenue in a fair and equitable way.
It is vital to any tax system, but particularly to a voluntary one like ours, that revenu~ be
raised in a fair way; that it be perceived as being administered in that way and that the
tax base be protected from avoidance and evasion. In that connection, I want to
commend Commissioner Rossotti and the IRS for all they are doing to comply with the
directives of Congress in the IRS Restructuring and Reform Act of 1998, in making the
Service more responsive to the needs of the taxpayer.
It is not difficult to determine which of the proposals currently under discussion meet
the test of fairness. The Earned Income Tax Credit certainly does. It entered the Code
during the Ford Administration, but was greatly strengthened by the 1993 Act. The EITC
reduces the burden of Federal taxes for 20 million low and moderate-income working
families. In 1998, it lifted 4;3 million persons above the poverty line. The proposal made
recently to delay EITC payments next year fails the fairness test. In order to help avoid a
fiscal 2000 deficit it would impose an unfair tax increase on up to 20 million working
families who expect to receive the full amount of the credit when they file next winter
and spring. No other group of taxpayers is being asked to delay receipt of their tax
refund.
The proposed long-term care credit in the President's budget meets the test of
fairness. It is available to people who must payout a large portion of their income
because they are incapacitated and also to people who are primary caregivers for
someone in their families, and who forgo the opportunity for other income in order to
care for them. Two million taxpayers-most of whom are elderly-would benefit from this
proposal. An above-the-line deduction for individually purchased health insurance fails
the test.
5
Larger benefits would accrue to high-income taxpayers most able to afford insurance. A
disproportionate number of low-income workers have no health insurance, and would
gain nothing from this proposal.
Any proposed increases in tax incentives for retirement savings must also meet the
test of basic fairness. Our tax preference for pensions is designed to encourage
retirement benefits for moderate and lower-income families, who need them most to
supplement their Social Security benefits. Proposals to raise the maximum dollar limits
for pension contributions, whether by employer or employee, fail that test. These
initiatives -- and related proposals to weaken anti-discrimination and top-heavy
safeguards that protect lower- and middle-income Americans -- represent a regressive,
"trickle down" approach that could actually lead to reduced retirement benefits for
millions. The fair alternatives are incentives-- based, for example, on the President's
universal savings accounts proposal -- that are targeted to the segment of our work force
that needs it most.
Third is prosperity and economic growth. No tax initiative has done more in recent
years to promote these goals than the R&E tax credit. It underpins the technology sector,
which has been responsible for creation of the majority of the new jobs in our economy in
recent years. It needs to be extended. Measures to encourage retirement savings, such as
our proposed new USA accounts, would increase savings, making more funds available
for private investment, and spurring growth.
Our prosperity is also enhanced to the extent that investment decisions are based on
business considerations, not tax considerations. In that connection, as Secretary
Summers told you last March, curbing corporate shelters is a high priority at Treasury
and within the Administration. The recent proliferation of shelters undermines the
integrity of, and poses a significant threat to, our self-assessment tax system. We are
pleased with the recent court decisions in the Compaq and Winn-Dixie cases. They
confirm a central judgment we made in preparing our corporate tax shelter proposalsthat a strong, coherent economic substance doctrine is critical in addressing these
transactions. Litigation, however, is an inefficient and expensive tool to deal with this
problem. Significant resources are being expended to address and combat these
transactions. Our budget proposals -- by codifying the economic substance doctrine,
requiring advance disclosure of these transactions, and increasing penalties on both
participants and promoters -- properly ensure that taxpayers do not ignore the need for
meaningful economic substance in analyzing potential transactions before engaging in
them. Our Corporate Tax Shelter White Paper took up many of the concerns that had
previously been raised regarding our proposals. We look forward to working with TEl
on this important problem and would welcome the opportunity to speak with any of you
regarding remaining concerns you may have.
Simplicity is our fourth tax policy goal. Clear and simple tax rules foster respect for
our tax system. They facilitate voluntary compliance and improve the ability of the IRS
to administer the Code. The more c9mplex a rule, the less likely it is to be applied and
enforced. The Administration's budget this year advanced simplification by proposing
6
to extend for two years a provision effective in 1998 which allows personal credits to
offset the tentative Alternative Minimum Tax. This will save about 960,000 taxpayers
from having their personal credits reduced, and millions more taxpayers having to
undertake complex calculations to determine if they come under AMT. The increased
exemption of up to $500,000 in capital gains on home sales, written into law in 1997,
ensured that 99 percent of homeowners will not have to pay capital gains on the sale of
their home.
Other provisions of the 1997 Act ensured that over 95 per cent of corporations will
not have to worry about the alternative minimum tax; and that children claimed as
dependents on their parent's return need not file a tax return simply because they have a
modest amount of unearned income. This will relieve over one million children from the
burden of filing. And as part of the ongoing effort to restructure the IRS, we have made
significant progress in increasing the use of electronic filing, which simplifies tax
preparation and filing for taxpayers, reduces errors and the need for subsequent follow-up
by the Service, and reduces IRS processing costs. This year, 25 per cent of all returns
were filed electronically, an increase of nearly 5 million over last year.
I appreciate the opportunity to state our principles of tax policy and some of the
measures we propose to carry them out. They are part of the agenda for negotiation and
resolution in Washington both this fall and next year. They will also, I am sure, be the
subjects of debate and discussion at the many meetings this organization will hold in the
future. I am glad to have had this chance to talk to you about them today and we will
continue to seek your help and support as much as possible in the months ahead.
-30-
DEPART!VIENT
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS. 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C. • 20220 • (202) 622·2960
Weekly Release of U.S. Reserve Assets
October 26, 1999
The Treasury Department today released U.S. reserve assets data for the week ending
October 22, 1999.
As this table indicates, U.S. reserve assets totaled $73,930 million as of October 22,
1999, up from $73,795 million as of October 15, 1999.
1999
Total
Reserve
WeekEnding
Gold
Specia~
Foreign
Reserve
Drawing
Currencies 31
Position in
IMF21
Assets
October 15, 1999
73,795
11,046
10,290
16,342
16,345
19,772
October 22, 1999
73,930
11,046
10,339
16,338
16,341
19,865
Gold stock is valued monthly at $42.2222 per flne troy ounce. Values shown are as of August 31, 1999. The July 31,
'9 value was $11,048 million.
SDR holdings and the reserve position in the IMP are based on IMP data and valued in dollar terms at the official
Rldollar exchange rate. Consistent with current reporting practices, IMP data for October 15, 1999 are final. Data for
R. holdings and the reserve position in the IMP shown as of October22, 1999 (in italics) reflect preliminary adjustments
:he Treasury to the October 15, 1999 IMP data.
Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
ount (SOMA). These holdings are valued at current market exchange rates or, where appropriate, at such other rates as
, be agreed upon by the parties to the transactions.
r
press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
Q
D EPA R T ~I E N T
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THE
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ornCE OFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
EMBARGOED UNTIL 3 :00 PM EDT
Text as Prepared for Delivery
October 27, 1999
TREASURY INTERNATIONAL TAX COUNSEL PHILIP R. WEST
TESTIMONY BEFORE THE SENATE COMMITTEE ON FOREIGN RELATIONS
Mr. Chairman and members of the Committee, I am pleased today to recommend, on
behalf ofthe Administration, favorable action on eight bilateral tax treaties and protocols that the
President has transmitted to the Senate and that are the subject of this hearing. These agreements
would provide significant benefits to the United States, as well as to our treaty partners. Treasury
appreciates the Committee's interest in these agreements as demonstrated by the scheduling of
this hearing, and requests that the Committee and the Senate take prompt and favorable action on
aU of these agreements:
The treaties and protocols before the Committee today represent a cross~section of the
United States tax treaty program. There are new agreements with three of our oldest treaty
partners -~ new income tax treaties with Denmark and Italy and a protocol to our estate tax treaty
with Germany -~ and five agreements -- with Estonia, Latvia, Lithuania, Slovenia and Venezuela - expand our treaty network in Latin America, Eastern Europe, and the former Yugoslavia.
An active treaty program is important to the overall international economic policy of the
United States, and tax treaties have a substantial positive impact on the after-tax profitability of
United States businesses that enter a treaty partner's marketplace. This is an obvious incentive to
expand our treaty network to new treaty partners. However, it also requires us to update our
existing treaties. When President Clinton took oflice, many important U. S. tax treaties were
nearly half a century old. Since the beginning of 1993, we have replaced our tax treaties with
Sweden, which dated from 1939, with the Netherlands, which dated from 1948, with Ireland,
which dated from 1949, and with Switzerland, which dated from 1951. The Denmark treaty,
which you are considering today, will replace the oldest of our income tax treaties still in force,
which was signed in 1948.
For these reasons, negotiating new treaties and updating existing treaties take up a large
amount of my staff's time. We believe, however, that the investment of our resources is
1S-177,
tJress releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
worthwhile because of the benefits a modern treaty network brings both to taxpayers and to the
government I'd like to speak now about these benefits.
Benefits to Taxpayers
An income tax treaty removes impediments to international trade and investment by
reducing the threat of "double taxation" that can occur when both countries impose tax on the
same income. Four different aspects of this general goal illustrate the point. First, an income tax
treaty generally increases the extent to which exporters can engage in trading activity in the other
country without triggering tax. Second, when taxpayers do engage in a sufficient amount of
activity for tax to be imposed, the treaty establishes rules that assign to one country or the other
the primary right of taxation with respect to an item of income, that help ensure the allowance of
appropriate deductions and that reduce withholding tax on payments of income to the treaty
beneficiary. Third, the treaty provides a dispute resolution mechanism to prevent double taxation
that sometimes can arise in spite of the treaty. Finally, the treaty helps to create stability of tax
rules that the private sector needs if its member are to be confident in their projections of an
investment's return.
Although the domestic tax legislation of the United States and other countries in many
ways is intended to further the same general objectives as our treaty program, a treaty goes
beyond what domestic legislation can achieve. Legislation cannot easily take into account
differences among other countries' rules for the taxation of particular classes of income and how
those rules interact with United States law. Legislation also cannot reflect variations in the United
States' bilateral relations with our treaty partners. A treaty, on the other hand, can make useful
distinctions, and alter in an appropriate manner the domestic statutory law of both countries as it
applies to income flowing between the treaty partners. Examples in the treaties before you
include reductions in statutory withholding tax rates and the creditability of the Italian tax known
as the IRAP.
One of the principal ways in which double taxation is eliminated is by assigning primary
taxing jurisdiction in particular factual settings to one treaty partner or the other. In the absence
of a treaty, a United States company operating a branch or division or providing services in
another country might be subject to income tax in both countries on the income generated by such
operations. The resulting double taxation can impose an oppressive financial burden on the
operation and might well make it economically non-viable
For example, lesser developed countries frequently assert much broader taxing jurisdiction
than the United States does. In the absence of a treaty, they might well tax a foreign corporation
on income from business activities even if the activities conducted in the other country are
relatively negligible or, in some cases, if the payor of the income is a resident of the developing
country without regard to whether any activities take place within its territory In many cases, the
country will not allow the foreign corporation to deduct business expenses relating to such
income Finally, the foreign corporation may not be able to plan its activities in such a way as to
2
avoid the tax because the rules that establish the taxation threshold under the countl)"s domestic
laws may not be clear. If the economic activities that give rise to the income take place in the
United States, we would view the income as being from U.S. sources. In cases where a foreign
corporation taxes income that we view as U.S.-source, the effect of the U.S. tax rules may be to
deny a foreign tax credit in whole or in part (depending on the U.S. corporation's overall foreign
tax credit situation).
Tax treaties help to resolve these situations by establishing the minimum level of economic
activity that a resident of one countl)' must engage in within the other before the latter countl)'
may tax the resulting business profits. The tax treaty lays out ground rules providing that one
country or the other, but not both, will have primary taxing jurisdiction over branch operations
and individuals performing services in the other country. In general terms, the treaty provides that
if the branch operations have sufficient substance and continuity and, accordingly, sufficient
economic penetration, the country where the activities occur will have primary (but not exclusive)
jurisdiction to tax. In other cases, where the operations are relatively minor, the home countl)'
retains the sole jurisdiction to tax.
Under these treaty rules, United States manufacturers may test a market by establishing a
foreign presence through which products are sold without subjecting themselves to foreign tax,
including compliance, rules. Generally, if the market proves promising, the company will establish
a more substantial operation which would become subject to tax in the other country. Similarly,
United States residents generally may live and work abroad for short periods without becoming
subject to the other country's taxing jurisdiction; if they stay longer, however, they would become
subject to tax on the income derived in the other country or, ultimately, might even become
subject to taxation as residents. These rules, the permanent establishment and business profits
rules and analogous provisions for individuals, not only eliminate in many cases the difficult task
of allocating income and tax between countries but also serve to encourage desirable trade
activities by eliminating or reducing what can often be complex tax compliance requirements.
High withholding taxes at source can be an impediment to international economic activity
Under United States domestic law, all payments to non-United States persons of dividends and
royalties as well as certain payments of interest are subject to withholding tax equal to 30 percent
of the gross amount paid. Inasmuch as this tax is imposed on a gross rather than net amount, it
imposes a high cost on investors receiving such payments. Indeed, in many cases the cost of such
.taxes can be prohibitive as a 30 percent tax on gross income often can exceed 100 percent of the
net income. Most of our trading partners impose similar levels of withholding tax on these types
of income. Tax treaties alleviate this burden by reducing the levels of withholding tax that the
treaty partners may impose on these types of income In general, United States policy is to reduce
the rate of withholding taxation on interest and royalties to zero Dividends normally are subject
to tax at one of two rates, 15 percent on portfolio investors and 5 percent on direct corporate
investors. The extent to which we realize our policy of reducing withholding rates depends on a
number of factors. Although generalizations often are difficult to make in the context of complex
negotiations, it is fair to say that we are more successful in reducing these rates with countries
that are relatively developed and where there are substantial reciprocal income flows We also
achieve lesser but still significant reductions with countries where the flows tend to be
disproportionately in favor of the United States.
The benefits of tax treaties are not limited to business profits earned by companies.
Treaties remove tax impediments to desirable scientific, educational, cultural and athletic
interchanges, facilitating our ability to benefit from the skills and talents of foreigners including
world-renowned rock stars, symphony orchestras, astrophysicists and Olympic athletes. In fact,
treaty benefits are not limited to profit-making enterprises but extend to pension plans, Social
Security benefits, charitable organizations, researchers and alimony and child support recipients.
The rules provided in the treaty frequently do not explicitly address every future
development. This may be because the international community has not yet reached a consensus
on the appropriate standard for taxation. For example, the international community may take
some time to reach a consensus on the appropriate taxation standard with respect to the area of
communications technology. This is an area in which international cooperation is vitally
important. To address these issues, our proposed treaties with Estonia, Latvia and Lithuania.
require the parties to consult within five years after the treaties enter into force concerning the
taxation of income from new technologies. This period was chosen because of the possibility that
an international standard might emerge within that time that both Contracting States would want
to consider adopting In fact, the Organization for Economic Cooperation and Development
("OECD"), recognized as the leading international forum to consider developments such as these,
is considering these issues today Until resolution is reached, the treaties with the Baltic countries
provide that income of a resident of one country from transmission by satellite, cable, optic fiber
and similar technologies will not be taxable in the other country unless the resident has a
permanent establishment in the other country We rejected an approach that would have taxed
this income like a royalty, subject to withholding
Even with constant monitoring, there will be cases in which double taxation occurs in spite
of the treaty. In such cases, the treaty provides mechanisms enabling the tax authorities of the
two governments -- known as the "competent authorities" in tax treaty parlance -- to consult and
reach an agreement under which the taxpayer's income is allocated between the two taxing
jurisdictions on a consistent basis, thereby preventing the double taxation The U.S. competent
authority under our tax treaties is the Secretary of the Treasury Currently, that function is
delegated to the Assistant Commissioner (International) of the Internal Revenue Servic·e.
One of the most common situations in \vhich this type of agreement may be necessary is in
the area of"transfer pricing." If a multinational manipulates the prices charged in transactions
between its affiliates in different countries, the income reported for tax purposes in one country
may be artificially depressed, and the tax administration of that country will collect less tax from
the enterprise than it should In theory, the multinational would plan its transactions to ensure
that its income is reported in the jurisdiction with the lowest effective tax rate. It is this possibility
that makes transfer pricing one of the most important international tax issues
If this potential tax avoidance (and the potential for double taxation) is to be avoided, it is
necessary to have a benchmark by which to evaluate the prices charged. The benchmark adopted
by the United States and all our major trading partners is the arm's-length standard. Under the
arm's-length standard, the price charged should be the same as it would have been had the parties
to the transaction been unrelated to one another -- in other words, the same as if they had
bargained at "arm's-length." This requires an analysis of the functions performed, resources
employed and risks assumed by each party, to make sure each party is adequately compensated
for those functions, resources and risks in light of the contractual terms and other relevant
economic circumstances of the transaction. If taxpayers and tax administrators can find similar
transactions that took place between unrelated parties, they begin the inquiry by analyzing those
transactions to see whether the functions, resources and risks of each party are comparable to
those in the related party transaction.
In more and more cases, it is difficult or impossible to find a uniquely comparable
transaction. This may be because the transactions between related parties are highly specialized
or involve unique intangibles, or, as in the case of certain kinds of global securities trading, the
functions are so highly integrated that there is a single profit center and no transactions are ever
booked between the separate entities. In those cases, it will not be possible to apply "traditional
transactional methods." Instead, taxpayers and tax administrators will have to perform the
functional analysis required by the arm's-length approach, but will use transactional profits
methods, such as the comparable profits method or the profit-split method, in order to
compensate the entities for the functions performed, resources employed and risks assumed. The
Internal Revenue Service developed transactional profits methods in the 1980's because it saw
that it would not always be possible to use traditional transactional methods. These methods,
including the use of multi-factor formulas in appropriate cases, were found by the OECD to be an
acceptable application of the arm's length standard, at least as a method of last resort, in the
Transfer Pricing Guidelines issued in 1995 and its report on Global Trading of Financial
Instruments in 1998. We have seen, and expect to continue to see, increasing acceptance of these
profits-based approaches in the coming years, speeded by the increase in globally-integrated
businesses that will become possible as a result of improvements in telecommunications
technology.
Perhaps because of globalization, there has also been an increased focus in recent years on
the taxation of branches (known as "permanent establishments"). Treaties use the same arm's
length standard to determine the profits attributable to a permanent establishment. Many of the
legal developments that have occurred in the context of the taxation of separate legal entities,
however, have not yet been extrapolated to the branch situation. Because the commentaries to
the relevant parts of the OECD model tax treaty have not yet been revised to reflect current
thinking regarding profit splits, taxpayers have taken inconsistent approaches in the context of
permanent establishments. One recent court case suggests that it is not possible to use profitsbased methods in determining the business profits attributable to a permanent establishment, and
that the tax administrator is required to respect the income shown on the books of the branch,
except in "exceptional circumstances," a much higher standard than applies when adjusting the
5
income of separate legal entities A more recent case would allow the administrators to adjust the
branch books to reflect an arm's length result, but does not provide any guidance on how that is
to be accomplished.
We believe that an international consensus eventually will develop around the proposition
that any of the methods that are acceptable for transfer pricing between related entities will also
be acceptable in the context of allocating income between branches of a single entity The United
States has already adopted this approach in the context of global dealing of financial instruments,
both in advance pricing agreements and by regulation, as has the OEeD in its report on Global
Trading in Financial Instruments. It has done so by sanctioning the use of multi-factor formulas
to allocate income from global trading activity under one common trading model -- the
"functionally fully-integrated" model.
Prevention of Tax Avoidance and Evasion
The foregoing aspects of our tax treaties involve benefits to taxpayers. While providing
these benefits certainly is a major purpose of any tax treaty, it is not the only purpose. The
second major objective of our income tax treaty program is to prevent tax avoidance and evasion
and to ensure that treaty benefits flow only to the intended recipients Tax treaties achieve this
objective in several ways. They provide for exchange of information between the tax authorities.
They contain provisions designed to ensure that treaty benefits are limited to hOlla fide residents
of the other treaty country and not to "treaty shoppers." And two of the treaties before you
reflect one version of an anti-abuse rule that set limits on aggressive tax avoidance transactions
using treaties.
Under the tax treaties, the competent authorities are authorized to exchange information,
including confidential taxpayer information, as may be necessary for the proper administration of
the countries' tax laws. This aspect of our tax treaty program is one of the most important
features of a tax treaty from the standpoint of the United States The information that is
exchanged may be used for a variety of purposes For instance, the information may be used to
identify unreported income or to investigate a transfer pricing case In recent years information
exchange has become a priority for the United States in its tax treaty program. If a country has
bank secrecy rules that prevent or seriously inhibit the exchange of information under the tax
treaty, we will not conclude a treaty with it. In fact, we generally do not even negotiate with such
countries Information exchange is one of the handful of issues that we discuss with the other
country before beginning formal negotiations because it is one of a very few issues that we
consider non-negotiable This has, of course, prevented us from entering into treaties with some
countries with which we have significant economic ties, but we believe that it is the right policy.
Recent technological developments which facilitate internationaL and anonymous,
communications and commercial and financial activities can also encourage illegal activities.
Over the past several years we have experienced a marked and important sea change as many of
the industrialized nations have recognized the increasing importance of tax information exchange;
6
the absence thereof serves to encourage not only tax avoidance and evasion, but also criminal tax
fraud, money laundering, illegal drug trafficking, and other criminal activity. Treasury is proud of
the role it has played in moving these issues forward not only in our bilateral treaty negotiations
but also in other fora such as the OECD.
A second aspect of U.S. tax treaty policy to deal with avoidance and evasion is to include
in all treaties comprehensive provisions designed to prevent "treaty shopping. " This abuse of the
treaty can take a number of forms, but it generally involves a resident of a third state that has
either no treaty with the United States or a relatively unfavorable one establishing an entity in a
treaty partner that has a relatively favorable treaty with the United States. This entity is used to
hold title to the person's United States investments, which could range from portfolio stock
investments to major direct investments or other treaty-favored assets in the United States. By
placing the investment in the treaty partner, the third-country person is able to withdraw the
returns from the United States investment subject to the favorable rates provided in the tax treaty,
rather than the higher rates that would be imposed if the person had invested directly into the
Uriited States. Of course, the tax imposed by the treaty partner on the intermediate entity must be
relatively low, or the structure will not produce tax savings that justify the added transaction
costs.
This Committee and the Congress have expressed strong concerns about treaty shopping,
and the Treasury Department shares those concerns. Our treaty program is designed to give
benefits to residents and, if applicable, nationals of our treaty partner. Treaty shopping represents
an abusive attempt to siphon benefits to others. Moreover, iftreaty shopping is allowed to occur,
then there is less incentive for the third country with which the United States has no treaty to
negotiate a treaty with the United States. The third country can maintain inappropriate barriers to
United States investment and trade, and yet its companies can obtain the benefits oflower U.S.
tax by organizing their United States transactions so that they flow through a country with a
favorable United States tax treaty.
For these reasons, the United States has taken a leading role in developing anti-treatyshopping provisions and encouraging other countries to adopt the provisions in their treaties. The
Department of the Treasury has included in all its recent tax treaties comprehensive "limitation on
benefits" provisions that limit the benefits of the treaty to hOIlG fide residents of the treaty partner.
These provisions are not uniform, as each country has its own characteristics that make it more or
less inviting to treaty shopping in particular ways. Consequently, each provision must to some
extent be tailored to fit the facts and circumstances of the treaty partners' internal laws and
practices. Moreover, the provisions need to strike a balance that avoids interfering with
legitimate and desirable economic activity
As we have pursued our goal of updating our existing treaties to eliminate treaty-shopping
abuses, however, we have seen an increasing number of other types of transactions that seek to
use treaties to achieve inappropriate results. Therefore, we have decided to include in our treaties
relatively modest anti-abuse rules in addition to the limitation on benefits provision. In the treaties
7
before you. these rules are found only in the treaties with Italy and Slovenia. because the others
were substantially negotiated before this change in our policy.
As described above, anti-treaty shopping rules are now firmly entrenched in our treaty
policy, in part as a result of concerns raised by the Committee. The anti-abuse rules before you
are complementary to these anti-treaty shopping rules. Anti-treaty shopping rules take the broad
approach of denying all treaty benefits to persons who are not bona fide residents of the treaty
country. Anti-abuse rules such as those before you are more targeted in the sense that they are
not blanket exclusions from all treaty benefits; they deny specific treaty benefits in abuse cases.
These rules have been included in our treaties because of several concurrent developments
in international tax law. First, although the overwhelming majority of taxpayers who avail
themselves of treaty benefits are entitled to those benefits and are not engaged in abusive
transactions, aggressive abuse of treaties has increased As evidence of this trend one need only
observe that Congress has twice in recent years taken the unusual step of legislating against treaty
abuse. Most recently, Congress enacted section 894( c) to deny benefits to certain taxpayers that
are not excluded from our treaties under limitation on benefits provisions. Congress also enacted
section 7701(1), providing the Treasury with a broad grant of regulatory authority to curb treaty
abuse. This authority has been exercised to adopt a standard very similar to that under
consideration by you today, under which taxpayers have been operating for some years now,
apparently without significant difficulty. (The commentary to Article I of the DECO model tax
treaty and the DEeD Report on Harmful Tax competition make clear that countries can impose
their domestic anti-abuse rules to claims for treaty benefits.)
A second development contributed to the decision to include these rules in our treaties.
We observed that Italy had just concluded a treaty containing a broader but more subjective antiabuse rule. We then observed that virtually all of the other countries with which we were
negotiating at the time either had treaty anti-abuse precedents generally consistent with the rule
you have before you (the United Kingdom, Chile and Korea) or, in the case of Canada, had
already included in its treaty with the United States an explicit recognition of the right to apply a
similar anti-abuse rule that was in force under its domestic law In addition other countries such
as Ireland and Mexico had agreed to a similar provision with each other and other countries such
as Israel were consistently seeking even broader provisions The rule has been included in more
than 50 treaties, representing approximately -W different countries (including 10 DECO
members). In fact. concerns about the adequacy of current treaty rules to prevent abuses have
stimulated work in the DECO on this subject As one of the more common approaches to
achieving such an objective, rules such as those before you today are obviously part of that work.
The increase in treaty abuse has unfortunate results for both Treasury and our taxpayers:
it requires Treasury to divert resources to fighting abuse that it mioht
otherwise devote to
0
improving our treaty network. The emergence internationally of anti-abuse rules such as those
before you provides a win-win solution They help address the abuse problem. while at the same
time freeing up Treasury resources to provide greater benefits for U. S taxpayers. As such, the
~
~
8
question became not whether an anti-abuse rule was appropriate, but which anti-abuse rule was
appropriate. Treasury rejected a narrower anti-abuse rule because of its ineffectiveness. Treasury
also rejected a broader more subjective anti-abuse rule for several reasons. First, it provided a
less certain standard against which a taxpayer could meaningfully evaluate its transaction.
Second, since the narrower rule before you appears in a significant number of treaties around the
world, and promises to appear in more, it is more consistent with international norms and will
likely be the subject of more interpretive law than the other standards.
As such, the proposed rule should provide greater certainty over time than some of the
alternatives. Nevertheless, we are aware of concerns that the proposed anti-abuse rules will
provide uncertainty for taxpayers. The test incorporated in the rule does require taxpayers and
their advisors to make some judgements. This standard creates no more uncertainty, however,
than other U.S. tax doctrines that may also apply to the transaction under consideration, such as
the business purpose and step transaction doctrines. And, as the commentary to the OECD model
treaty makes clear, even if our treaties are silent regarding abuse, other countries may apply their
own internal anti-abuse doctrines to U.S. taxpayers' claims for treaty benefits, whether we have
explicitly agreed to those standards or not.
Our treaties are intended to last decades before re-negotiation. Therefore, relying on
treaty amendments to eliminate abuses that arise in the future will invariably prove inadequate.
Moreover, relying on amendments to domestic law will invite charges that the treaty is being
overridden, as were made when section 894(c) was enacted. For these reasons, the treaties
should contain their own mechanisms to combat abuse, such as the provisions in the treaties
before you today. In this regard, it is important to keep in mind that our tax treaties contain only
benefits for taxpayers, and no provisions that increase tax burdens As such, it is appropriate to
impose reasonable limits on those benefits to curb abusive transactions that may be developed in
the future.
Treaty Program and Negotiation Priorities
Given all of these benefits to taxpayers and the government, an obvious question is why
we do not have a tax treaty with every country The answer is slightly different for each potential
treaty partner, but there are some general themes In establishing priorities, we keep in mind the
two principal objectives of tax treaties -- to prevent both double taxation and tax avoidance and
.evasion.
The United States has a network of 50 bilateral income tax treaties, the first of which was
negotiated in 1939. Although that number is somewhat lower than the number of treaties that
some other countries have, it is important to note that the network includes all 28 of our fellow
members of the OECD and covers the vast majority of trade and investment by U.S. companies
abroad. For the past decade, the Treasury Department has given priority to renegotiating older
treaties to ensure that they reflect current United States treaty policy, particularly with respect to
anti-abuse provisions and information exchange.
9
As demonstrated by the mix of treaties being considered today, the progress we have
made at updating old conventions has given us the opportunity to focus on expanding our treaty
network. In this, our primary concern is to conclude treaties or protocols that are likely to
provide the greatest benefits to United States taxpayers, such as when economic relations are
hindered by substantial tax obstacles. We meet regularly with members of the U.S. business
community regarding their priorities and the practical problems they face with respect to
particular countries. We are proud of our efforts in the treaty area, and believe that our record of
accomplishment here is as strong as that of any other administration in recent memory.
Even when business identifies problems that could be resolved by treaty, however, a treaty
may not be appropriate for a variety of reasons. Despite the protections of the limitation on
benefits provisions and anti-abuse rules, there may be countries with which we choose not to have
a tax treaty because of the possibility of abuse. Other countries may not present us with sufficient
tax problems that are best resolved by treaty. For example, we generally do not conclude tax
treaties with jurisdictions that do not impose significant income taxes, because there is little
danger of double taxation of income in such a case. In such cases, particularly with Caribbean
Basin countries, we have offered to enter into an agreement limited to the exchange of tax
information, which furthers the goal of reducing tax avoidance and evasion without creating other
opportunities for abuse
However, the situation can become more complex when a country adopts a special regime
for certain parts of the economy while the rest of its residents are subject to substantial taxation.
It might be considered inappropriate to grant treaty benefits to companies taking advantage of
such regimes, while a treaty relationship might be useful and appropriate in order to avoid double
taxation in the case of the residents who are subject to substantial taxation Accordingly, in some
cases we have devised treaties that carve out from the benefits of the treaties certain residents and
activities. The anti-treaty shopping provisions in our treaty network prevent investors from
enjoying the benefits of a tax-haven regime or preferential tax regime in their home country and,
at the same time, the benefits of a treaty between the United States and another country. The
recent OECD report on Harmful Tax Competition recommends that member countries adopt
similar policies, and not enter into tax treaties with tax havens. The report also directed the group
within the Committee on Fiscal Affairs that is responsible for the OECD Model treaty to consider
various additions to the Model that are intended to prevent abuse of tax treaties.
Prospective treaty partners also have to indicate that they understand their obligations
under the treaty, including with respect to information exchange, and demonstrate that they are
able to comply with those obligations Sometimes they are unable to do so In other cases we
may feel that a treaty is inappropriate because a treaty partner may be unwilling to deal with the
tax problems that have been identified bv business Lesser developed and newly emerging
economies, where capital and trade tlov,s are often disproportionate or virtually one-way, may not
be willing to reduce withholding taxes to a level that will eliminate double taxation because they
feel that they cannot give up scarce tax revenues None of the new treaties that we have asked
10
you to consider today are in that class. All are with countries that showed a willingness to reduce
or eliminate withholding taxes or other impediments to investment.
Most of the emerging economies with which we have had successful treaty discussions -including those whose treaties we present today -- have been active participants in the training and
outreach programs run by the Treasury Department, the Internal Revenue Service and the OECD.
These programs are a wise investment as they help to ensure that all parties understand the
international norms that are represented by these agreements. We have every reason to believe
that these programs will continue to increase the number of countries -- particularly in Eastern
Europe and Latin America -- that are ready to enter into mutually advantageous treaties with us.
In many cases, the existence of a treaty that lowers taxation of trade and investment will help to
establish economic ties that will contribute to the country's stability and independence, as well as
improve its political relationships with the United States.
The primary constraint on the size of our treaty network, however, may be the complexity
of the negotiations themselves. The various functions performed by tax treaties, and particularly
the goal of meshing two different tax systems, makes the process of negotiation quite timeconsummg.
A nation's tax policy, as reflected in its domestic tax legislation as well as its tax treaty
positions, reflects the sovereign choices made by that country in the exercise of one of its most
important governmental functions, that of funding the government. Numerous features of the
treaty partner's unique tax legislation and its interaction with United States legislation must be
considered in negotiating an appropriate treaty. Examples include whether the country eliminates
double taxation through an exemption or a credit system, whether the country has bank secrecy
legislation that needs to be modified by treaty, the treatment of partnerships and other transparent
entities, and how the country taxes contributions to pension funds, the funds themselves and
distributions from the funds. A negotiated treaty needs to take into account all of these and many
other aspects of the treaty partner's tax system in order to arrive at an acceptable treaty from the
perspective of the United States. Accordingly, a simple side-by-side comparison of two actual
treaties, or of a proposed treaty against a model treaty, will not enable meaningful conclusions to
be drawn as to whether a proposed treaty reflects an appropriate balancing of interests. In many
cases the differences are of little substantive importance, reflecting language problems, cultural
obstacles or other impediments to the use of particular U. S or OECD language.
In addition to keeping in mind that each treaty must be adapted to the individual facts and
circumstances of each treaty partner, it also is important to remember that each treaty is the result
of a negotiated bargain between two countries that often have conflicting objectives. Each
country has certain issues that it considers non-negotiable The United States, which insists on
effective anti-abuse and exchange-of-information provisions, and which must accommodate its
uniquely complex internal laws, probably has more non-negotiable issues than most countries.
For example, each of the full treaties before the Committee today allows the United States to
impose our branch profits tax and branch-level interest tax at the rates applicable to direct
11
dividends and interest, respectively, paid to related parties. All of them also reflect our new
policy with respect to dividend distributions from real estate investment trusts, except for the
treaties with Estonia, Latvia and Lithuania, which were fully negotiated before the change in
policy. They also include the "saving clause", which permits the United States to tax its citizens
and residents as if the treaty had not come into effect, and allow the United States to apply its
rules dealing with former citizens and long-term residents and with investments in U. S. real
property interests.
Obtaining the agreement of our treaty partners on these issues sometimes requires other
concessions on our part. Similarly, other countries sometimes must make concessions to obtain
our agreement on issues that are critical to them Eventually, the process of give-and-take
produces a document that is the best treaty that is possible with that other country. In many
cases, the process ends there, as the Administration decides that the treaty does not further the
interests of the United States enough to justify the necessary compromises. These treaties never
make it to this Committee. Accordingly, each treaty that we present here represents not only the
best deal that we believe we can achieve with the particular country at this time, but also
constitutes an agreement that we believe is in the best interests of the United States. The
technical explanations which accompany our treaty, the discussions with the staffs of this
Committee and its members, and the staffs of the tax-writing Committees, and most importantly,
hearings such as this, will provide the Senate with the assurance that a particular treaty is, overall,
in the best interests of the United States
Discussion of Treaties and Protocols
Each of the treaties before you today reflects the basic principles of current United States
treaty policy. The provisions in each treaty borrow heavily from recent treaties approved by the
Senate and the U.S model and are generally consistent with the 1992 OECD Model Income Tax
Convention, as subsequently amended. The United States was and continues to be an active
participant in the development of the OECD Model. and we are generally able to use most of its
provisions as a basis for negotiations
The U S model was published in September 1996 A model treaty is a useful device if
used properlv- and kept current In the course orthe ne!!'otiation
of these
treaties we discovered
,
that certain provisions of our model treaty could be improved upon, and we did so in these
agreements. Many of these improvements have become part of the document that we use to
begin negotiations and we expect that they will be reflected in a new version of the U. S. model
that will be published in the future
There are no major inconsistencies between the US and OECD models, but rather the
US model elaborates on issues in which the United States may have a greater interest or which
result from particular aspects of United States law and policy For example, our limitation of
benefits provisions are generally not found in typical tax treaties of other OECD countries. We
have also found it useful to expand on treaty coverage and treatment of pass-through entities such
12
as our limited liability companies. Despite the importance we attach to the OECD model and our
continuing efforts with our colleagues to improve it and keep it current, most countries cannot
accede to all of the provisions of that model, nor do we expect that all of our prospective treaty
partners will agree with all of the provisions of our model. The primary benefit of the U.S. Model
is that it enables all interested parties, including this Committee and the Congress and its staffs,
the American business community, and our prospective treaty partners, to know and understand
our treaty positions. We do not anticipate that the United States will ever sign a tax convention
identical to the model; there are too many variables.
Nevertheless, there are some basic provisions that are found in all of the treaties. These
include provisions designed to improve the administration both of the treaty and of the underlying
tax systems, including rules concerning exchange of information, mutual administrative assistance,
dispute resolution and nondiscrimination. Each treaty permits the General Accounting Office and
the tax-writing committees of Congress to obtain access to certain tax information exchanged
under treaty for use in their oversight of the administration of United States tax laws and treaties.
Each treaty also contains a now-standard provision ensuring that tax discrimination disputes
between the two nations generally will be resolved within the ambit of the tax treaty, and not
under any other dispute resolution mechanisms, including the World Trade Organization (WTO).
Finally, some treaties will have special provisions not found in other agreements These
provisions account for unique or unusual aspects of the treaty partner's internal laws or
circumstances. For example, many well-known Danish multinational companies are owned in part
by "taxable non-stock corporations". If the treaty had not included special rules for taxable nonstock corporations, the multinationals might not have qualified for full treaty benefits, even
though they clearly are not treaty-shopping. These rules had to be tailored to the Danish law and
the specific manner in which the taxable non-stock corporations operate, without violating any of
the basic principles underlying our limitation on benefits provisions. The flexibility we bring to
the table should be regarded as a strength rather than a weakness of the tax treaty program, since
it is these differences in the treaties which enable us to reach agreement and thereby reduce
taxation at source, prevent double taxation and increase tax cooperation.
I would like to discuss the importance and purposes of each agreement that you have been
asked to consider. We have submitted Technical Explanations of each agreement that contain
detailed discussions of each treaty and protocol. These Technical Explanations serve as an official
guide to each agreement. We have furnished our treaty partners with a copy of the relevant
technical explanation and offered them the opportunity to submit their comments and suggestions.
The Baltic Treaties -- Estonia, Latvia and Lithuania
I would now like to turn to the three treaties colloquially known as the "Baltic Treaties."
Since gaining independence from the Soviet Union at the beginning of this decade, the three Baltic
States - Estonia, Latvia and Lithuania - have actively pursued reforms aimed at economic
stabilization and market strengthening. These reforms have placed Estonia in the first wave of
13
Central and East European applicants to the European Union, while Latvia and Lithuania are
currently under consideration by the EU for promotion to this first wave. Economic performance
in all three countries over the past several years has been among the best in the region.
Entering into these treaties is an important element in our current tax treaty program and
is a high priority with the US business community Without the current treaty, US. businesses
are at a competitive disadvantage in the Baltics, since many of their competitors are from
countries that have concluded a tax treaty with them. Under the proposed Conventions, the
Baltic States taxation of U.S. operations would decrease on direct investment dividends,
copyright royalties (including software), royalties on the right to use equipment, and interest paid
on loans guaranteed by the U.S. Export-Import Bank. In addition, the proposed Convention
would provide U.S. business a greater degree of certainty, protection against discriminatory tax
practices and the ability to resolve potential double taxation cases and other disputes.
Although these Conventions were largely negotiated at joint sessions, these are, of course,
three separate treaties with three separate, sovereign nations. I will, therefore, deal with each of
the three separately. In general, however, it should be noted that none of the three deviates
substantially from any of our more recent treaties.
Estonia
Let me first deal with Estonia. The treaty does differ from other recent U.S. treaties in a
number of respects. I will now highlight some of these differences as well as other important
provisions of the treaty
First, in respect of the taxation of investment income The withholding rates under the
treaty are in some respects higher than those in the U S Model and in many recent U. S. treaties
with DECD countries. The rates are the same as in many Estonian treaties. Under the treaty
dividends are subject to taxation at source in the same manner as under the U. S Model. Direct
investment dividends are subject to withholding tax at source at a maximum 5 percent rate, and
portfolio dividends are taxable at a maximum 15 percent rate The treaty requires a 10 percent
ownership threshold for application of the 5 percent tax rate.
The treaty provides for a maximum 10 percent rate of tax at source on most interest
payments Interest earned on trade credits, and on government debt, including debt guaranteed by
government agencies (eg., the US Export-Import Bank) is exempt from tax at source.
Royalties for the use of industrial, commercial or scientific equipment are subject to a 5
percent tax at source All other royalties (including payments for the use of software, other than
off-the-shelf software) are taxed at a maximum rate of 10 percent.
In relation to the taxation of business income. consistent with the U.S and DECD Models,
the treaty provides generally for the taxation by one State of the business profits of a resident of
14
the other only when such profits are attributable to a permanent establishment located in that
other State. The treaty, however, includes an anti-abuse rule that would allow the source state to
tax sales or activities performed by the enterprise outside the United States as if they were
petformed by a permanent establishment if it is ascertained that such activities were structured
with the intention to avoid taxation in the State where the permanent establishment is situated.
The treaty, consistent with current U.S. treaty policy, provides for exclusive residencecountry taxation of profits from international carriage by aircraft and ships. This reciprocal
exemption also extends to income from the rental of aircraft, ships and containers if the rental
activity is incidental to the operation of aircraft and ships by the lessor in international traffic.
However, income from the international rental of ships and aircraft that is non-incidental to
operation of ships and aircraft:s is taxed at a 5 percent rate as a royalty paid for the rental of
equipment
Income from the use or rental of containers that is non-incidental to the operation of ships
or aircraft in international traffic is treated as other income. Therefore, non-incidental leasing of
containers by U.S. businesses is taxable only in the United States.
With regard to the taxation of personal services income, the taxation of income from the
performance of personal services under the treaty is generally similar to that under the U.S.
Model, but, like some U.S. treaties with developing countries, it grants a taxing right to the host
country with respect to certain categories of personal services income that is somewhat broader
than in the OECD or U.S. Model.
The limitation on benefits provisions are similar to those found in the U.S. Model and in
all recent U.S. treaties.
The exchange of information provisions generally follow the U.S. Model and make clear
that Estonia is obligated to provide U.S. tax officials such information as is necessary to carry out
the provisions of the treaty.
The treaty provides a U S foreign tax credit for the Estonian income taxes covered by the
Treaty, and a Estonian foreign tax credit for the U S income taxes covered by the treaty.
The treaty will enter into force after each State has notified the other that it has completed
its ratification requirements. It will have effect, with respect to taxes withheld at the source, for
amounts paid or credited on or after the first day of January of the calendar year next following
the year in which the treaty enters into force. In other cases the treaty will have effect with
respect to taxable years beginning on or after the first day of January of the calendar year next
following the year in which the treaty enters into force The treaty will remain in force indefinitely
unless terminated by one of the Contracting States Either State will be able to terminate the
treaty at the end of any calendar year by giving written notice at least six months before the end of
that calendar year.
15
Unique to the treaty and the treaties with Latvia and Lithuania is an agreement that there
will be a five-year period within which the appropriate authorities of the two States will meet to
discuss the application of the treaty to income derived from new technologies (such as payments
received for transmission by satellite, cable, optic fibre or similar technology). The meeting may
result in a protocol that specifically addresses the treaty's application to income from new
technologies
Next 1 will turn to Latvia. This treaty also differs in some respects from other recent U.S.
tax treaties. I will again highlight some of these differences as well as other important provisions
of the treaty.
In respect of the taxation of investment income, the withholding rates under the treaty are,
again, in some respects higher than those in the U. S. Model and in many recent U. S. treaties with
DECD countries. The proposed rates are the same as in many Latvian treaties.
Under the treaty dividends are subject to taxation at source in the same manner as under
the U.S. Model. Direct investment dividends are subject to withholding tax at source at a
maximum 5 percent rate, and portfolio dividends are taxable at a maximum 15 percent rate. The
treaty requires a 10 percent ownership threshold for application of the 5 percent tax rate.
The treaty provides for a maximum 10 percent rate of tax at source on most interest
payments. Interest earned on trade credits, and on government debt, including debt guaranteed by
government agencies (e.g., the U.S Export-Import Bank) is exempt from tax at source.
Royalties for the use of industrial, commercial or scientific equipment are subject to a 5
percent tax at source All other royalties (including payments for the use of software, other than
off-the-shelf software) are taxed at a maximum rate of 10 percent
In relation to the taxation of business income. consistent with the U Sand DECD Models,
the treaty provides generally for the taxation by one State of the business profits of a resident of
the other only when such profits are attributable to a permanent establishment located in that
other State The treaty, however, includes an anti-abuse rule that would allow the source state to
tax sales or activities performed by the enterprise outside the United States as if they were
performed by a permanent establishment if it is ascertained that such activities were structured
with the intention to avoid taxation in the State where the permanent establishment is situated.
The treaty, consistent with current US treaty policy, provides for exclusive residencecountry taxation of profits from international carriage by aircraft and ships This reciprocal
exemption also extends to income from the rental of aircraft, ships and containers if the rental
activity is incidental to the operation of aircraft and ships by the lessor in international traffic.
However, income from the international rental of ships and aircraft that is non-incidental to
6
operation of ships and aircrafts is taxed at a 5 percent rate as a royalty paid for the rental of
equipment.
Income from the use or rental of containers that is non-incidental to the operation of ships
or aircraft in international traffic is treated as other income. Therefore, non-incidental leasing of
containers by U.S. businesses is taxable only in the United States.
With regard to the taxation of offshore activities, the treaty contains a reciprocal
agreement, found in several U.S. treaties, particularly those with our North Sea partners, that the
income from the exploration or exploitation of the seabed and sub-soil is taxable by the source
State if the activities are carried on for more than 30 days in any twelve month period. Wages,
salaries and similar remuneration paid to those whose employment is derived from such activities
can be taxed in the state where the offshore activities occur if such activities exceed the 30 day
threshold. However, that same remuneration can be taxed only in the non-source State if the
period of activity does not exceed 30 days and the employer is not a resident of the source State.
If the wages, salaries or other remuneration are derived from the transportation of supplies or
from other activities (such as tugboats) auxilial)' to the exploration and exploitation then that
remuneration can be taxed only in the count I)' of which the employer is resident.
The taxation of income from the performance of personal services under the treaty is
generally similar to that under the U.S. Model, but, like some U.S. treaties with developing
countries, it grants a taxing right to the host countl)' with respect to certain categories of personal
services income that is somewhat broader than in the OECD or U.S. Model.
The limitation on benefits rules of the treaty are similar to those found in the US. Model
and in all recent U. S. treaties.
The exchange of information provisions generally follow the U. S. Model and make clear
that Latvia is obligated to provide U S. tax officials such information as is necessal)' to carl)' out
the provisions of the treaty.
The treaty provides a US. foreign tax credit for the Latvian income taxes covered by the
treaty, and a Latvian foreign tax credit for the U.S. income taxes covered by the treaty.
The treaty will enter into force after each State has notified the other that it has completed
its ratification requirements. It will have effect, with respect to taxes withheld at the source, for
amounts paid or credited on or after the first day of Janual)' of the calendar year next following
the year in which the treaty enters into force. In other cases the treaty will have effect with
respect to taxable years beginning on or after the tirst day of Janual)' of the calendar year next
following the year in which the treaty enters into force.
17
The treaty will remain in force indefinitely unless terminated by one of the Contracting
States. Either State will be able to terminate the treaty at the end of any calendar year by giving
written notice at least six months before the end of that calendar year.
Unique to the treaty and the treaties with Estonia and Lithuania is an agreement that there
will be a five-year period within which the appropriate authorities of the two States will meet to
discuss the application of the treaty to income derived from new technologies (such as payments
received for transmission by satellite, cable, optic fibre or similar technology). The meeting may
result in a protocol that specifically addresses the treaty's application to income from new
technologies.
Lithuania
Finally, let me turn to Lithuania As with the other two Baltic treaties, this treaty differs in
some respects from other recent US. tax treaties. I will again highlight some of these differences
as well as other important provisions of the treaty.
Once again, the withholding rates under the treaty are, in some respects higher than those
in the U.S. Model and in many recent U.S. treaties with OECD countries. The proposed rates are
the same as in many Lithuanian treaties.
Under the treaty, dividends are subject to taxation at source in the same manner as under
the U.S Model. Direct investment dividends are subject to withholding tax at source at a
maximum 5 percent rate, and portfolio dividends are taxable at a maximum 15 percent rate. The
treaty requires a 10 percent ownership threshold for application of the 5 percent tax rate.
The treaty provides for a maximum 10 percent rate of tax at source on most interest
payments. Interest earned on trade credits, and on government debt, including debt guaranteed by
government agencies (eg., the U S Export-Import Bank) is exempt from tax at source.
Royalties for the use of industrial. commercial or scientific equipment are subject to a 5
percent tax at source All other royalties (including payments for the use of software, other than
off-the-shelf software) are taxed at a maximum rate of 10 percent.
Consistent with the US and OECD Models, the treaty provides generally for the taxation
by one State of the business profits of a resident of the other only when such profits are
attributable to a permanent establishment located in that other State. The treaty, however,
includes an anti-abuse rule that would allow the source state to tax sales or activities performed
by the enterprise outside the United States as if they were performed by a permanent
establishment if it is ascertained that such activities were structured with the intention to avoid
taxation in the State where the permanent establishment is situated
18
The treaty, consistent with current U.S. treaty policy, provides for exclusive residencecountry taxation of profits from international carriage by aircraft and ships. This reciprocal
exemption also extends to income from the rental of aircraft, ships and containers if the rental
activity is incidental to the operation of aircraft and ships by the lessor in international traffic.
However, income from the international rental of ships and aircraft that are non-incidental to
operation of ships and aircrafts is taxed at a 5 percent rate as a royalty paid for the rental of
equipment.
Income from the use or rental of containers that is non-incidental to the operation of ships
or aircraft in international traffic is treated as other income. Therefore, non-incidental leasing of
containers by U.S. businesses is taxable only in the United States.
The treaty contains a reciprocal agreement, found in several U.S. treaties, particularly
those with our North Sea partners, that the income from the exploration or exploitation of the
seabed and sub-soil is taxable by the source State if the activities are carried on for more than 30
days in any twelve month period. Wages, salaries and similar remuneration paid to those whose
employment is derived from such activities can be taxed in the state where the offshore activities
occur if such activities exceed the 30 day threshold. However, that same remuneration can be
taxed only in the non-source State if the period of activity does not exceed 30 days and the
employer is not a resident of the source State. If the wages, salaries or other remuneration are
derived from the transportation of supplies or from other activities (such as tugboats) auxiliary to
the exploration and exploitation then that remuneration can be taxed only in the country of which
the employer is resident.
The taxation of income from the performance of personal services under the treaty is
generally similar to that under the U.S Model, but, like some U.S. treaties with developing
countries, it grants a taxing right to the host country with respect to certain categories of personal
services income that is somewhat broader than in the OECD or U. S. Model.
The limitation on benefits rules of the treaty are similar to those found in the U.S. Model
and in all recent U.S. treaties.
The information exchange provisions generally follow the U.S. Model and make clear that
Lithuania is obligated to provide U.S. tax officials such information as is necessary to carry out
the provisions of the treaty.
The treaty provides a U.S foreign tax credit for the Lithuanian income taxes covered by
the treaty, and a Lithuanian foreign tax credit for the U. S. income taxes covered by the treaty.
The treaty will enter into force after each State has notified the other that it has completed
its ratification requirements. It will have effect, with respect to taxes withheld at the source, for
amounts paid or credited on or after the first day of January of the calendar year next following
the year in which the treaty enters into force In other cases the treaty will have effect with
19
respect to taxable years beginning on or after the first day of January of the calendar year next
following the year in which the treaty enters into force.
The treaty will remain in force indefinitely unless terminated by one of the Contracting
States. Either State will be able to terminate the treaty at the end of any calendar year by giving
written notice at least six months before the end of that calendar year.
Unique to this treaty and the treaties with Estonia and Latvia is an agreement that there
will be a five-year period within which the appropriate authorities of the two States will meet to
discuss the application of the treaty to income derived from new technologies (such as payments
received for transmission by satellite, cable, optic fibre or similar technology). The meeting may
result in a protocol that specifically addresses the treaty's application to income from new
technologies.
This concludes my remarks on the three Baltic treaties.
Venezuela
Next, I would like to tell you about the proposed treaty with Venezuela. This treaty is of
special importance because it represents a crucial step towards achieving our goal of expanding
our tax treaty network in Latin America. Ifratified, this agreement would be the United States'
only tax treaty in force with a South American nation.
The proposed treaty with Venezuela generally follows the pattern of the 1996 U.S. Model,
while incorporating some provisions found in recent U.S. treaties with other developing countries
and in the OECD Model. The treaty's rules on the taxation of investment income are an example.
Although the withholding rates under the proposed treaty are generally higher than those in the
U.S. Model, the rates are comparable to those found in other US tax treaties with developing
countries and those in other tax treaties of Venezuela Also, the withholding rates reflect
Venezuela's territorial system of taxation and the policy objective of establishing an adequate
single level of tax on cross-border investment income
Under the proposed treaty, as in the U S ModeL direct investment dividends are taxable
at source at a 5 percent rate, and portfolio dividends are taxable at source at a 15 percent rate
The proposed treaty requires a 10 percent ownership threshold for application of the 5 percent
direct investment tax rate. Also similar to the U.S. Model, dividends paid to a Contracting State
or a governmental entity constituted and operated exclusively to administer or provide pension
benefits, are exempt from withholding in the source State.
The proposed treaty provides for a 10 percent rate of tax at source on most interest
payments. Interest that is received by a financial institution (including an insurance company) is
subject to a lower 4.95 percent rate of tax Interest earned on government debt, including debt
guaranteed by government agencies (e.g, the U S. Export-Import Bank, the Federal Reserve
20
Banks and the Overseas Private Investment Corporation) is exempt from tax at source. These
provisions are, in effect, a melding of the U.S. and OECD Models.
Royalties for the right to use copyrights, patents or trademarks are subject to a 10 percent
tax at source. Royalties for the right to use industrial, commercial or scientific equipment are
subject to a lower 5 percent rate of tax at source. Under the proposed treaty, fees for the
provision of technical services and fees for technical assistance are considered business profits or
personal services income, and are taxed as such, rather than as royalty payments. These latter
important provisions thereby mitigate double taxation and generally limit any taxation to net
rather than gross income, and then only to when a permanent establishment is created.
The taxation of capital gains under the proposed treaty follows the format of the U. S.
Model. Gains and income derived from the sale of real property and from real property interests
may be taxed by the State in which the property is located. Likewise, gains or income from the
sale of personal property, if attributable to a fixed base or permanent establishment situated in a
Contracting State, may be taxed in that State. All other gains, including gains from the sale of
ships, aircraft and containers, and gains from the sale of stock in a corporation, are taxable only in
the State of residence of the seller.
Regarding the taxation of business income, as with the U.S. and OECD Models, the
proposed treaty provides generally for the taxation by one State of the business profits of a
resident of the other only when such profits are attributable to a permanent establishment located
in that other State. Under the proposed treaty, the taxation of income from the operation of ships
and aircraft in international traffic and from the use, maintenance or rental of containers used in
international traffic is fully consistent with the U S Model
The taxation of income from the performance of persona! services under the proposed
treaty is similar to that under some U. S treaties with developing countries, but grants a taxing
right to the host country with respect to such income that is broader than in the OECD or U.S.
Model.
The limitation on benefits provisions of the proposed treaty are similar to those found in
the U. S. Model and in all recent U. S treaties, with minor modifications necessary because of
Venezuela's territorial tax system.
The information exchange provisions generally follow the U.S Model and make clear that
Venezuela is obligated to provide U.S. tax ot1lcials such information as is necessary to carry out
the provisions of the treaty.
The proposed treaty provides a U. S. foreign tax credit for Venezuelan income taxes
subject to the limitations imposed by US. internal law on the granting of foreign tax credits.
Similarly, Venezuela shall, under the proposed Convention, provide relief against double taxation
21
to Venezuelan taxpayers who are also subject to U.S. income tax, subject to the limitations
imposed by Venezuelan law.
The proposed treaty will enter into force when each Contracting State has notified the
other that the domestic requirements needed for entry into force have been completed. It will
have effect, with respect to taxes withheld at source, for amounts paid or credited on or after
January 1 of the year following the date on which the treaty enters into force. In other cases the
treaty will have effect with respect to taxable periods beginning on or after January 1 of the year
following the date on which the treaty enters into force.
I know that the Committee has been alerted to a pending change in Venezuela's income
tax law, through which Venezuela will begin taxing all of the income received by its residents,
rather than only that income that was determined, under broad "sourcing" rules, to be connected
to Venezuela The possibility that Venezuela would adopt this "worldwide" system was present
throughout our treaty negotiations, and we planned for it in drafting the treaty. And while more
time with the new law may provide us with more opportunity to analyze its provisions, we believe
that the analysis we have performed is adequate to allow us to determine that the treaty is at least
as appropriate under the new lawas it would have been under the old law, and likely more so.
We believe that the treaty works appropriately, in large part because this change from "territorial"
to "worldwide" taxation brings Venezuela's domestic laws into closer conformity with
international norms. The increased possibilities for double taxation that are the natural result of
this change make the treaty that much more important than it was when Venezuela had a
territorial system. And the vestiges of Venezuela's territorial system are also addressed by special
provisions in the treaty included to deal with that system. On balance, we believe we can
recommend that the Committee approve the treaty despite this change in Venezuela's law.
Slovenia
The United States does not currently have an income tax treaty with Slovenia. Slovenia
will be the first country in the area of the former Yugoslavia with which we will have concluded a
tax treaty. It is the most economically advanced country in the former Yugoslavia and is in the
first wave of applicants to the European Union from Central and Eastern Europe We expect that
the conclusion of the tax treaty will be an important element in expanding trade and investment
between the United States and Slovenia
The proposed income tax treaty vvith the Republic of Slovenia generally follows the
pattern of the U.S. Model, while incorporating some provisions found in the OECD Model. The
proposed treaty establishes maximum rates of source country tax on cross-border payments of
dividends, interest, and royalties The vvithholding rates on investment income in the proposed
treaty are generally consistent with those found in U S treaties with OECD member countries.
Dividends may be subject to tax at source at a maximum rate of 15 percent, except when
paid to a corporation in the other country that owns at least 25 percent of the paying corporation,
in which case the maximum rate is 5 percent.
The maximum rate of withholding tax at source on interest under the proposed treaty is 5
percent. However, interest received, guaranteed, or insured by the Government of either
Contracting State or the central bank of either Contracting State and interest with respect to a
deferred payment for personal property or services is exempt from withholding at source.
Royalties are generally subject to tax at source at a rate not to exceed 5 percent.
The taxation of capital gains under the proposed treaty follows the format of the U. S.
Model. Gains and income derived from the sale of real property and from real property interests
may be taxed in the State in which the property is located. Likewise, gains or income from the
sale of personal property, if attributable to a fixed base or permanent establishment situated in a
Contracting State, may be taxed in that State. All other gains, including gains from the sale of
ships, aircraft and containers, and stock in a corporation, are taxable only in the State of residence
of the seller.
As with the U.S. and OECD Models, the proposed treaty provides generally for the
taxation by one State of the business profits of a resident of the other only when such profits are
attributable to a permanent establishment located in that other State. Under the proposed treaty,
the taxation of income from the operation of ships and aircraft in international traffic and from the
use, maintenance or rental of containers used in international traffic is fully consistent with the
US. ModeL
The taxation of income from the performance of personal services under the proposed
treaty generally follows standard U.S treaty policy. The taxation of income from dependent
personal services or of income derived by corporate directors, by athletes, or by entertainers is
essentially the same as in other recent U. S. treaties The dollar threshold for the taxation of
athletes and entertainers is slightly lower than in the U S Model to reflect the lower average
income level in Slovenia.
The treaty provides for host-country exemption for students for up to five years with
respect to certain types of income. These exempted categories of income include support
payments from abroad, grants and awards, and up to $5,000 of annual income from personal
services in the host state. Business trainees temporarily present in the host State are exempted
from tax for up to 12 months with respect to income from personal services not exceeding
$8,000. Visiting professors and researchers at recognized educational or research institutions are
exempt from host-country taxation for a period not exceeding two years from the date of first
arrival.
The proposed treaty contains comprehensive rules in its "Limitation on Benefits" article,
designed to deny "treaty-shoppers" the benefits of the treaty. In addition, the treaty contains new
provisions aimed at preventing abuse with respect to specific transactions. Under these
provisions, a person otherwise entitled to treaty benefits will be denied those benefits if the main
purpose, or one of the main purposes, of the creation or assignment of the rights giving rise to the
income was to take advantage of the treaty These provisions apply with respect to the Articles
regarding Dividends, Interest, Royalties, and Other Income. It is expected that the United States
will incorporate these new anti-abuse provisions into its Model.
The information exchange provisions generally follow the U. S. Model and make clear that
each State is obligated to provide tax officials of the other State such information as is necessary
to carry out the provisions of the treaty. Slovenia has confirmed to us that it has no bank secrecy
or other rules that would prevent such exchange from taking place.
The proposed treaty provides a U.S. foreign tax credit for Slovenian income taxes subject
to the limitations imposed by U.S. internal law on the granting of foreign tax credits. Similarly,
Slovenia shall, under the proposed treaty, provide relief against double taxation to Slovenian
taxpayers who are also subject to U.S. income tax, subject to the limitations imposed by
Slovenian law.
Also included in the proposed treaty are rules necessary for administering the treaty,
including rules for the resolution of disputes under the treaty.
The proposed treaty will enter into force upon the exchange of instruments of ratification.
It will have effect with respect to taxes withheld at source for payments made or credited on or
after the first day of the third month next following the date the treaty enters into force, and with
respect to other taxes, for taxable years beginning on or after the first day of January next
following the date of entry into force
Denmark
I'd like to turn now to the proposed treaty and protocol with Denmark. This proposed
treaty would replace the existing convention, our oldest income tax treaty, which was signed in
1948. The new treaty generally follows the pattern of the OECD Model and of recent U. S.
treaties with other developed countries
First, with regard to the taxation of investment income, the withholding tax rates under the
proposed treaty are the same as those in the l' S l\.10del Direct investment dividends are
subject to withholding tax at source at a maximum 5 percent rate and portfolio dividends are
taxable at a maximum 15 percent rate The proposed treaty requires a 10 percent ownership
threshold for application of the 5 percent tax rate. This ownership threshold is reduced from the
95 percent threshold required under the existing treaty. As under the existing treaty, interest and
royalty payments are generally exempt from tax in the source country under the proposed treaty.
24
These limitations on taxation by the source country do not apply if the beneficial owner of the
income is a resident of a Contracting State that carries on business in the other Contracting State
in which the income arises and, in the case of business profits, the income is attributable to a
permanent establishment or, in the case of independent personal services, to a fixed base in that
other State.
The taxation of capital gains under the proposed treaty generally follows the format of the
U. S. Model. Gains from the sale of real property and from real property interests may be taxed
by the country in which the property is located. Likewise, gains from the sale of personal
property forming part of a fixed base or permanent establishment situated in a contracting State
may be taxed in that State. All other gains, including gains from the alienation of ships, boats,
aircraft and containers used in international traffic and gains from the sale of corporate stock are
taxable only in the seller's residence State. As a variation from the rules under the current treaty
and the U. S. Model, gains of an enterprise of one Contracting State from the deemed alienation of
an installation, drilling rig or ship used in the other State for the exploration or exploitation of oil
and gas resources may be taxed in that other State in accordance with its law, but only to the
extent of any depreciation taken in that other State. In order to minimize possible double taxation
that could otherwise arise, the treaty allows adjustments to the timing of the taxation of capital
gams.
As with the existing treaty, recent U.S. treaties and the OECD Model, the proposed treaty
provides generally for the taxation by one State of the business profits of a resident of the other
only when such profits are attributable to a permanent establishment located in that other State.
In addition, the proposed treaty preserves the U.S. right to impose its branch tax on U.S.
branches of Danish corporations. This tax is not imposed under the existing treaty.
Consistent with the U. S. ModeL the proposed treaty permits only the country of residence
to tax profits from the international operation of ships or aircraft and income from the use,
maintenance or rental of containers used in international tramc. This reciprocal exemption
extends to income from the rental on a full basis of ships and aircraft and, if the ships or aircraft
are operated in international traffic by the lessee or the income is incidental to income from the
operation of ships or aircraft in international tramc, to income from the rental on a bareboat basis
of ships and aircraft. The exemption under the proposed treaty is broader in scope than under the
existing treaty.
The proposed treaty clarifies the treatment of the profits of the Scandinavian Airlines
System (SAS) by treating it as a consortium that is eligible for the exemption from taxation in the
source State to the extent of the participation of the Danish member of SAS, SAS Danmark A/S.
The taxation of income from the performance of personal services under the proposed
treaty generally follows U.S. standard treaty policy. The rules for the taxation of pension income
vary from the rules found in the existing treaty and the U. S. Model by providing for taxation only
2S
in the source State, subject to an exception for persons currently receiving pensions, who will
continue to be taxed only in the country of residence.
The limitation on benefits provisions of the proposed treaty are similar to those found in
the U.S. Model and recent U.S. treaties, with modifications to take account of certain types of
entities found only in Denmark.
The proposed treaty provides a foreign tax credit for certain taxes imposed under the
Danish Hydrocarbon Tax Act, subject to the same type oflimitation that is found in other tax
treaties with countries on the North Sea.
Also included in the proposed treaty are the rules necessary for administering the treaty,
including rules for the resolution of disputes under the treaty and the exchange of information
The exchange of information provisions of the proposed treaty generally follow the U. S. Model.
Our experience on exchange of information with Denmark is positive As under the existing
treaty, the proposed treaty contains a provision for assistance in the collection of taxes.
The proposed treaty will enter into force when the Governments notify each other that
their requirements for entry into force have been met It will have effect, with respect to taxes
withheld at source, for amounts paid or credited on or after the first day of the second month next
following the date on which the treaty enters into force~ with respect to other taxes, the treaty will
take effect for taxable periods beginning on or after the first day of January next following the
date on which the treaty enters into force. Where the existing treaty would have provided greater
relief from tax than the proposed treaty, the existing treaty will continue to have affect for an
additional year at the election of any person that was entitled to benefits under the current treaty.
The proposed treaty will remain in force indefinitely unless terminated by one of the Contracting
States by giving prior notice through diplomatic channels.
The proposed new treaty and protocol with Italy would replace the existing treaty, which
was signed in 1984 The proposed treaty generally follows the pattern of the OECD Model and
other recent United States treaties with developed countries The proposed treaty is of great
importance to the U.S. business community because it addresses a new Italian regional tax on
productive activities and generally lowers the vvithholding rates imposed by each country on
passive investment income
26
The proposed treaty addresses the replacement of the Italian local income tax by the new
Italian regional tax on productive activities (IRAP). Because IRAP is calculated without an
allowance for labor costs and, for certain taxpayers, without an allowance for interest costs, it
raises the issue of potential double taxation. By providing a U.S. tax credit for a portion ofIRAP
the proposed treaty resolves this issue. A formula is provided in the proposed treaty for
calculating the creditable portion. Only the creditable portion of IRAP is considered to be a
covered tax under the proposed treaty.
The proposed treaty establishes maximum rates of source country tax on cross-border
payments of dividends, interest, and royalties that are generally lower than those in the existing
treaty.
Under the proposed treaty, dividends may be subject to tax at source at a maximum rate of
15 percent, except when paid to a corporation in the other country that owns at least 25 percent
of the paying corporation, in which case the maximum rate is 5 percent. Under the existing treaty,
the 5 percent rate is available only if the receiving corporation owns more than 50 percent of the
stock or capital of the paying corporation, while a 10 percent rate applies if the receiving
corporation owns between 10 and 50 percent of the paying corporation, and a 15 percent
maximum rate applies in all other cases. While the maximum rate applicable to those corporate
taxpayers owning at least 10 percent and less than 25 percent of the paying corporation will
increase from 10 percent to 15 percent under the proposed treaty, the maximum rate for those
owning between 25 percent and 50 percent of the paying corporation, including the significant
group of taxpayers who own exactly 50 percent, will decrease from 10 percent to 5 percent.
The proposed treaty lowers the maximum rate of withholding tax at source on interest to
10 percent from the 15 percent rate in the existing treaty. As in the existing treaty, the proposed
treaty provides an exemption from withholding at source for interest received, guaranteed, or
insured by the Government of either Contracting State (although, in order for interest received by
a qualified governmental entity to be eligible for this exemption, the qualified governmental entity
must hold less than 25 percent of the capital of the person paying the interest) The proposed
treaty also exempts from withholding at source interest with respect to credit sales between
enterprises and credit sales of industriaL commercial, or scientific equipment.
The proposed treaty lowers the maximum rates of withholding tax at source for royalty
payments compared to the rates in the existing treaty. Under the proposed treaty, royalties for
literary copyrights are exempt from tax at source The maximum rate for royalties for the use of
computer software or for the rental of industrial, commerciaL or scientific equipment is 5 percent,
and the maximum rate for all other royalties is 8 percent. I n contrast, under the existing treaty the
maximum rate for royalties for literary copyrights is 5 percent, the maximum rate for royalties for
the rental of tangible personal property is 7 percent, the maximum rate for royalties for motion
pictures and films is 8 percent, and the maximum rate for all other royalties is 10 percent. Thus,
although the proposed treaty does not reflect the U S Model position of exemption at source for
27
software and rentals of tangible personal property, the proposed treaty reduces the rates of
withholding as compared to the existing treaty.
The taxation of capital gains under the proposed treaty follows the format of the existing
treaty. Gains and income derived from the sale of real property and from real property interests
may be taxed in the State in which the property is located. Likewise, gains or income from the
sale of personal property, if attributable to a fixed base or permanent establishment situated in a
Contracting State, may be taxed in that State. As in the existing treaty, but unlike the U.S.
Model, non-incidental gains from the alienation of ships and aircraft rented on a bareboat basis
and attributable to a permanent establishment situated in a Contracting State may be taxed in that
State. All other gains, including gains from the alienation of containers, gains from the alienation
of ships and aircraft rented on a full basis, incidental gains from the alienation of ships and aircraft
rented on a bareboat basis, and gains from the sale of stock in a corporation, are taxable only in
the State of residence of the seller.
As with the U. S. and OECD Models, the proposed treaty provides generally for the
taxation by one State of the business profits of a resident of the other only when such profits are
attributable to a permanent establishment located in that other State.
As under the U. S Model. all income from the use, maintenance or rental of containers
used in international traffic is exempt from source-country taxation under the proposed treaty.
Also, the proposed treaty provides for exclusive residence-country taxation of profits from the
international operation of ships or aircraft, including the rental of ships and aircraft on a full basis
and, when the rental is incidental to the operation of ships or aircraft by the lessor, rentals of ships
and aircraft on a bareboat basis. Like the existing treaty, but unlike the U.S. Model, income from
the rental of ships and aircraft on a bareboat basis that is not incidental to the operation of ships or
aircraft by the lessor and that is attributable to a permanent establishment situated in a Contracting
State may be taxed in that State.
Unlike the existing treaty, the taxation of income from the performance of personal
services under the proposed treaty generally follows standard U S treaty policy Consistent with
the U. S. Model, the proposed treaty eliminates a provision of the existing treaty that allows the
source State to tax an individual performing independent personal services if that individual has
been present in that State for more than 183 days during the year, even if that person does not
have a fixed base regularly available to him
The limitation on benefits provisions of the proposed treaty are similar to those found in
the U.S. Model and in all recent U.S treaties, and are more comprehensive than those found in
the existing treaty
In addition, the treaty contains new provisions aimed at preventing abuse with respect to
specific transactions Under these provisions, a person otherwise entitled to treaty benefits will be
denied those benefits if the main purpose, or one of the main purposes, of the creation or
28
assignment of the rights giving rise to the income was to take advantage of the treaty. These
provisions apply with respect to the Articles regarding Dividends, Interest, Royalties, and Other
Income. It is expected that the United States will incorporate these new anti-abuse provisions
into its Model.
The information exchange provisions are similar to those in the existing treaty and make
clear that each State is obligated to provide tax officials of the other State such information as is
necessary to carry out the provisions of the treaty. Italy has confirmed to us that it has no bank
secrecy or other rules that would prevent such exchange from taking place.
Finally, the proposed treaty includes modernized rules necessary for administering the
treaty, including rules for the resolution of disputes under the treaty. These provisions now
conform to the OECD Model, which should improve the functioning of the mutual agreement
process. They include the use of arbitration to resolve disputes that may arise between the
Contracting States. However, the arbitration process may be implemented under the treaty only
after the two Contracting State have agreed to do so through an exchange of diplomatic notes.
Once implemented, a particular case may be assigned to an arbitration panel only with the consent
of all the parties to the case.
The proposed treaty will enter into force upon the exchange of instruments of ratification.
It will have effect with respect to taxes withheld at source for payments made or credited on or
after the first day of the second month next following the date the treaty enters into force, and
with respect to other taxes, for taxable years beginning on or after the first day of January next
following the date of entry into force. In the event that a person would have been entitled to
greater relief under the existing treaty, that person may elect to continue to apply the existing
treaty for a twelve-month period from the date on which the proposed treaty would otherwise
have effect The proposed treaty will remain in force indefinitely unless terminated by one of the
Contracting States. Either State may terminate the proposed treaty at any time after 5 years from
the date on which the proposed treaty enters into force by giving at least six months prior notice
through diplomatic channels.
Estate Tax Protocol with Germany
The proposed protocol amends the estate, inheritance and gift tax treaty between the
United States and Germany, which was signed in 1980 and entered into force in 1986. In 1988,
the United States amended its estate tax law in a way that increased estate taxes in the case of
deceased U.S. citizens who were married to non-citizens
Although the U.S. rejected claims by estate tax treaty partners that the 1988 change
violated treaty nondiscrimination clauses, we indicated our willingness to amend our estate tax
treaties with certain treaty partners to provide relief to surviving noncitizen spouses in appropriate
cases. In particular, the proposed protocol eases the impact of the 1988 provisions upon certain
estates oflimited value. The United States, in a 1995 protocol to the U.S.-Canada income tax
29
treaty, provided similar relief to certain estates oflimited value involving Canadians. The United
States' willingness to enter into the proposed protocol was a significant factor in Germany's
ratification of the current U.S.-Germany income tax treaty, which was signed in 1989.
The proposed protocol also provides a pro rata unified credit to the estate of a German
domiciliary for purposes of computing the U.S. estate tax. Under this provision, a German
domiciliary is allowed a credit against U. S estate tax ranging from the amount ordinarily allowed
to the estate of a nonresident under the Code ($13,000) to the amount of credit allowed to the
estate ofa U.S. citizen under the Code ($202,050 in 1998), based on the extent to which the
assets of the estate are situated in the United States Congress anticipated the negotiation of such
pro rata unified credits in Internal Revenue Code section 21 02( c)(3 )(A), and a similar credit was
included in the 1995 u.S.-Canada income tax protocol.
The proposed protocol also makes other changes to the Convention to reflect more
closely current U.S. treaty policy. For example, the proposed protocol extends the period of time
during which a citizen of one country can be domiciled in the other country without becoming
subject to the primary taxing jurisdiction of the other country. Such a provision is increasingly
important to peripatetic business executives. The proposed protocol also extends the United
States' ability to tax former citizens and long-term residents to conform with 1996 legislative
changes to the Internal Revenue Code.
Agreements dealing with Taxation of Dividends frol11 REITS
In 1997, the Senate approved three treaties, with Austria, Ireland and Switzerland, subject
to the understanding that the Treasury Department would use its best efforts to negotiate
agreements that would modifY those treaties' treatment of dividends paid by Real Estate
Investment Trusts The agreements with Austria and Switzerland are in an advanced stage of
negotiation, but have not yet been completed However, the agreement with Ireland was signed
on September 24, 1999 Although it is not yet pending before the Committee, we hope that, if the
President transmits it to the Senate in time, the Committee will consider it at the same time as the
rest of the treaties as the agreement does nothing other thall respond to the Senate's 1997
understanding
Treaties under Negotiation
We continue to maintain an active calendar of tax treaty negotiations. We are in active
negotiations with Canada, Korea, the United Kingdom and Chile We expect to announce the
start of negotiations with several other countries soon In accordance with the treaty program
priorities noted earlier, we continue to seek appropriate opportunities for tax treaty discussions
and negotiations with several countries in Latin America and in the developing world generally.
30
Conclusion
Let me conclude by again thanking the Committee for its continuing interest in the tax
treaty program, and for devoting the time of Members and staff to undertake a meaningful review
of the agreements that are pending before you. We appreciate your efforts this year and in past
years to bring the treaties before this Committee and then to the full Senate for its advice and
consent to ratification. We also appreciate the assistance and cooperation of the staffs of this
Committee and of the Joint Committee on Taxation in the tax treaty process. With your and their
help, we have, since the beginning of 1993, brought into force 22 new treaties and protocols, not
counting the eight agreements presently being considered.
We urge the Committee to take prompt and favorable action on all of the Conventions and
Protocols before you today. Such action will send an important message to our trading partners
and our business community. It will demonstrate our desire to expand the United States treaty
network with income tax treaties formulated to enhance the worldwide competitiveness of United
States companies. It will strengthen and expand our economic relations with countries that have
seen significant economic and political changes in recent years It will make clear our intention to
deal bilaterally in a forceful and realistic way with treaty abuse Finally, it will enable us to
improve the administration of our tax laws both domestically and internationally.
I will be glad to answer any questions you might have.
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31
D EPA R T ~I E N T
0 F
THE
T REA SUR Y
NEWS
1REASURY
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C. - 20220 - (202) 622-2960
Contact: Public Affairs
(202) 622-2960
For Immediate Release
October 29, 1999
SENIOR TREASURY OFFICIAL TO SPEAK TO CHARLOTTE STUDENTS
Treasury Under Secretary for Enforcement Jim Johnson will speak to students and faculty
at Garinger High School in Charlotte, North Carolina on .Monday, November 1 at 1 p.m ..
about the Clinton Administration' s current efforts to prevent youth and school violence.
Garinger High School is located at 1100 Eastway Drive in Charlotte.
- 30 -
#LS-178
For press releases, speeches, public schedules and official biographies, call our 244tour fax line at (202) 622-2040
DEPARTl\'lENT
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASHINGTON, D.C.• 20220 • (202) 622-2960
EMBARGOED UNTIL 10:00 A.M. EDT
Text as Prepared for Delivery
October 28, 1999
"Economic Engagement: The Risks of MaJign Neglect"
Remarks by Lawrence H. Summers,
Secretary of the Treasury
Brookings Institution,
Washington, DC
October 28, 1999
I would like to talk today about the crucial issue of how the United States engages with
the rest of the global economy at the dawn ofa new century.
Let me focus my remarks on four issues:
•
First, the national security and economic case for support for open markets around the world.
•
Second the case for supporting global economic development more directly, including
through our support for the international financial institutions (IFls).
•
Third, the generalized decline in support for global engagement in the United States, and the
implications for both the quantity and the quality of our global leadership.
•
Fourth, some of the reasons for this generalized decline - and how these need to be
addressed.
Let me begin. however, with a few words about the broader context.
I.
A Special Time for the United States
It is, in many ways, a critical moment in our nation's history. America is the world' s
largest economy and strongest nation with no single, dominant competitor. At the same time,
Americans are growing wary of global entanglements. Market ideas are in ascendancy; there is
high regard for business and the rights of capital; but while successful investors are heroes. those
at the bottom of the ladder still feel insecure. Internationally, the breakdown of empires and the
absence of large power balances have made the world ripe for ethnic and nationalist conflicts.
LS-179
1
For press releases, speeches, public schedules and official biographies, call our 24~our fax line at (202) 622-2040
I suppose I could be describing the latter part of the 1990s. I am actually describing the
late 1920s. That was a time of high optimism, a time when continued peace and stability was
widely foreseen; yet over the next 15 years the world system would spiral out of controL first
economically and then politically. The period of depression and World War that followed are
perhaps the darkest two decades of this century and, arguably, among the darkest of this
millennium.
History does not repeat itself. Any historical analogy between the world of today and the
world of the 1920s is surely imperfect. But it does remind us that there have been other times in
our history when the United States' reluctance to engage fully with other nations and to help
manage changes in the balance of global economic power has had major consequences.
A generation of post-war leaders was determined that we would not make that mistake
again. They helped to shape a global vision of an America committed to create an ever-widening
circle of ever more prosperous, ever more international economies. This is a vision that has been
at the center of US foreign and economic policy - during Republican and Democrat
Administrations alike - for the bulk of our postwar history. And it is a vision that has served our
country extraordinarily well.
In many ways, the United States in the final decade of the 20 th century is the most
successful economy that there has ever been. And yet, at another critical time in our history, the
fundamental choice for this country - to be a force for the right kind of global integration - is
under threat in a way that it has not been in 50 years.
•
That threat does not spring from a single party or agenda - although partisanship and the
particular interest have played their role.
•
That threat does not clothe itself in the language of protection or nationalistic retreat although these surely have their proponents.
•
And it does not come in a single battle that will be won or lost - although some of the
decisions that we make in the coming days will be very important to the long-term result
The risk we face at this special time is more diffuse than any of these - but no less
dangerous. It is the risk of what one might call the malign neglect of our global standing: the risk
that little by little, in countless different ways for countless different reasons, we will wear away
at our capacity to lead the world in a direction that will support our deepest long-term national
interests and values - and in a manner that can inspire ever-increasing global support.
II.
The National Security and Economic Case for Strong Support for Open Markets
There are two sets of reasons why the United States needs to continue to be a vigorous
proponent of open markets policies.
First. it is an investment in our future security
2
The crucial link between closer economic integration and our national security is this: we
are much less likely as a nation to be drawn into conflict if nations of the world are strong,
confident, and forging ever-closer connections than if they are financially unstable and
disconnected. In short, trade promotes prosperity, and by promoting prosperity, promotes peace.
Fifty years ago, the challenge the world faced was the economic reconstruction of warravaged Europe and Japan - and ensuring that the mistakes of the inter-war years would not be
repeated. Today we face a very different challenge: the challenge of integrating the five billion
people of the developing world into the global economy that is being born out of the embers of
the Cold War. But the right course for the United States is the same as it was in 1945.
There may never have been so radical a change in the balance of global economic power
as there has been in the emerging markets of the world, particular in Asia, in the past 25 years.
The fact that it has taken place without major conflict is in no small part a tribute to increased
integration of the world's economies and support for cooperative institutions to cement that
integration.
By supporting liberalization in these countries, we invest in our future security and we
invest in the spread of our core values. Examples such as Korea, Taiwan and Argentina illustrate
that economic development and openness bring democratization in its wake, and there is no
better way to spur this process than by integrating these economies into the global marketplace
Second, as an investment in our future prosperity
But even if there were no strategic or broader national security case for open markets and
interchange between nations, I believe that there would be a compelling economic case for
integration, rooted in our standard of living. Perhaps you will pardon me the slightly academic
approach of making this point through an analogy.
Imagine a country all of whose harbors were filled with rocks so that ships and goods could
not come in, though some could go out. And imagine that it was proposed to remove the rocks
from the harbors. Many people would say that this would be a good thing to do:
•
It would provide citizens with a wider choice of consumer goods, at lower prices.
•
It would provide producers with a wider choice of inputs, and lower costs, making them
more competitive and able to hire more workers and raise their wages.
•
It would provide more competition as a spur to productivity and new ideas - and as a result.
lower inflation and lower costs of capital.
To be sure, the removal of those rocks would bring about change in the economy. But every
day and in every way our market economy - by bringing about improvements in technology.
communications and transportation - is bringing down natural barriers and making
communication and trade that much easier. The question is whether we should respond
differently to man-made barriers to trade.
3
It bears emphasis that this is not even a symmetrical argument - because we start out more
open, so liberalization agreements with other countries always tends to reduce their trade barriers
more than it reduces ours. To take just one example, the tariff reductions achieved in NAFT A
with Mexico were five times as large in Mexico as in the US.
In other words, an open markets approach is not just good economic policy; it's good even
from a mercantilist standpoint as well. And it is especially good policy for the United States
because of our strategic position, because of the diversity of our population, and because of the
size and strength of our economy. We stand at the hub of a world trading system. And the bigger
that world trading system is, the more open it is, the more we will benefit from our position at its
hub.
Whatever our broader trade policy might dictate, it cannot be right that the richest
country in the world, the richest country that there has ever been, is unable to provide
preferential access to its markets to a countries in Africa where 500 million people live, nearly
half on incomes of less than one dollar a day. That is why the African Growth and Opportunity
Act - which has had strong supporters on both sides of the Congressional aisle - is such a crucial
piece oflegislation. We hoped it would pass last year. It needs to pass this year.
What is true in Africa is also true much closer to home, in the Caribbean. NAFT A was a
very important step, but it had the consequence of hurting some of our other neighbors who did
not benefit from the preferences that were provided to Mexican goods. The right trade
preferences for the Caribbean - as reflected in the strengthened version of the Caribbean Basin
Initiative now before Congress - will help make their economies much stronger and our
economy safer.
III.
The Case for Sustained Support for the International Financial Institutions
We always - and rightly - tend to respond to and focus on the problems that one can
locate on a map, in places such as Kossovo or East Timor. What we may focus on too little are
the things that can help prevent such problems occurring in the future. That is why our support
for global development institutions, our support for open markets; and our support for strong
policy are so important.
Ten years ago, when the Berlin Wall came tumbling down the United States defense
budget was $107 billion higher in real terms than it is today. Reasonable people can debate how
much of this ought to be invested in forward defense of our core interests through support for the
IFls and other foreign operations. But it would be hard to make the case that the right answer is
to spend a good deal less on these things than we did before.
The Foreign Operations bill that the President vetoed last week appropriated only $12.7
billion for these kinds of investments. That is nearly $7 billion, or 35 percent less than the $19.4
billion average that was spent under President Reagan and President Bush. To take just one
crucial piece of this: in 1991, President Bush requested a $1.8 billion contribution to the IFls. For
4
2000, President Clinton requested just $1.4 billion. But Congress cut that request to just $895
million - or less than half the level of spending in 1991.
The President's International Affairs request for these and other international priorities is
not large by historical standards - and it is barely one percent of the total federal budget. It
represents high return investments in America's core interests and its global leadership investments that for more than 50 years have enjoyed strong bipartisan support.
Every dollar we contribute to the multilateral development banks leverages more than
$45 in official lending, to countries where more than three-quarters of the world's people live.
Quite simply, they are the most effective tools we have for investing in the markets of tomorrow.
These programs help to promote changes that reflect core American values: such as freer
markets, greater transparency and public participation strengthened property rights and open
borders. And they are at the cutting edge of global efforts to combat major new threats such as
AIDS, which is already devastating Africa and now threatens to erase twenty years of economic
development in Asia.
•
Not so long ago, the United States annual commitment to the IFls came to $1.9 billion.
Today that has been cut to $1.2 billion. Yet the Congressional bill would prevent us from
meeting even this reduced obligation.
•
Not so long ago, United States arrears to these institutions that we were so central to creating
were $1.5 billion. Today that debt has been reduced to $335 million. The Congressional bill
would reverse that progress, and our arrears next year would rise to more than $665 million.
The same bill would also fatally undermine a global effort to reduce the debt of the poorest
countries. Yet writing off debts owed by countries that will never be able to repay them is sound
financial accounting. It is also a moral imperative at a time when a new generation of African
leaders is trying to throw off the legacies of the Cold War and open up their economies. That is
what the Heavily Indebted Poor Country initiative is about. It will not write off the debts of
countries that are not working to reform. It will help build future markets in countries that are
committed to helping themselves.
At a time when the wars that the world faces are more likely to be born of ethnic divisions
and poor governance within countries than ideological power struggles between them - and
when conflicts in Africa have killed more people in the 1990s than in every other region
combined - investing a tiny fraction of our budget in programs that can help these countries
build a better future is not an investment that a nine trillion dollar economy should find it
difficult to make.
IV.
The Broader Costs of Reduced Support for Engagement
I have spoken of the aspects of our global engagement that Treasury is most involved with.
But of course the generalized domestic distrust of global involvement shows up in other ways:
5
•
In visible rejections of multilateral policies and institutions: including the widespread
opposition we have seen to the World Trade Organization; the sixty-plus times that the US
has imposed unilateral economic sanctions since 1993; and the failure to pay our dues to the
United Nations which may soon cause us to lose our seat in the General Assembly.
•
And, no less clearly, we see it in the rising demands that we make on other countries as
conditions for United States support. Each of these, considered individually, may be wise but cumulatively, they risk the erosion over time of broader global support.
It is a striking irony of this time that the economy that has gained most from rising global
integration and cooperation seems to need ever-greater assurance that these things are in its
interest - and will invest an ever-decreasing amount in their support. And that irony, we can be
sure, is not lost on other nations. In all of these ways, the United States' reduced faith in the
benefits of global engagement threatens to reduce the world's faith in us, and so to undermine
our global authority.
Of course, in our support for global institutions and agreements we inust always ensure that
core American interests and values are protected. But the stock of global goodwill is not infinite.
When we choose to deplete it in a given instance - the consequences for the next time we need
that goodwill must always be taken into account.
If we want to have an opportunity to shape the right kind of global economy - one that
supports our interests and values and where there are common rules that enable it to work for all
- We have to be part of the process. And we have to be seen to be participating constructively
and in good faith.
V.
The Roots of Malign Neglect
I have tried to reflect on why, when the security benefits are so compelling and the
economic benefits so clear, it so difficult to make the case for open trade and broader economic
integration in America today. Three reasons stand out:
The first is the natural human tendency to internalize the good news and externalize the
bad. How many people working hard at a badly managed firm, with out-dated technology, pin
the blame for their layoff on foreign competition? How many people, when offered a raise or
promotion in a labor-short industry following a surge of export demand, assign the credit to open
international markets, rather than considering it to be a deserved reward to their own skill?
It is the nature of the trading process that when there are costs, those costs are apparent
and attributed to trade, even when the main cause is something else - and when there are
benefits, the link with trade is seldom if ever made. That makes the case for integration that
much more difficult to make.
The second reason why we have a hard time making a compelling case for global
integration is that the compelling geopolitical rationale that the Cold War provided is no more.
Historians have written at length about the oscillations of the United States between isolationism
6
and global engagement. It greatly simplifies, but perhaps does not distort, that work to say that
our global engagement has typically been in response to a dire threat.
Today's threats - of rising disorder and impoverishment overseas - do not have the
emergency character that the threats of an earlier time have had. Yet we saw in the inter-war
years what could happen when the United States shunned cooperation and turned inward, at a
time of great national strength That is the danger we must work to avoid today, just as those
visionary leaders did after 1945.
The third reason is that trade - and integration more generally - tend to become the lens
through which all kinds of concerns about a changing world are projected. Whether the root
concern is new technology, or deregulation - all of the economic insecurities that this new
economy can produce tend to come together when the subject is trade.
That is why it is so essential that we work to equip workers with the education and skills
to manage the transition process and to seize the opportunities that come with it. If we compare
our time to that postwar period of remarkable American internationalism, the absence of a single,
major threat is one major difference. A different kind of poli~ical process is another. I doubt
anyone ever focus-grouped the Marshall Plan - and I am not sure how well it would have done if
they had. But that postwar period was also a time when opportunity and protection was being
given to the American middle clCl$s.
To a degree that historians have perhaps under-emphasized, the GI Bill of Rights was an
integral part of the strategy behind the Marshall Plan - just as our interstate highway system was
partly the result of an effort to marshal our Cold War defenses. President Clinton had a clear
understanding of these issues at the start of this Administration when he decided to establish the
National Economic Council - a body that stands for the recognition that our domestic and our
international economic policies will always be intertwined.
For all of these reasons, the case for vigorous United States engagement with the world
and support for open markets is surely more difficult to make today than it was forty or fifty
years ago. But the risks for our future capacity to lead the world - and to bequeath a safe and
prosperous global economy to our children and their children - are every bit as great as they
were then. Thank you.
7
D EPA R T [\1 E N T
() F
THE
T REA SUR Y
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
October 27,1999
Treasury Contact: Michelle Smith
(202) 622-2920
OMB Contact: Linda Ricci
(202) 395-7254
JOINT STATEMENT OF
LAWRENCE H. SUMMERS,
SECRETARY OF THE TREASURY
AND
JACOB J. LEW,
DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET,
ON
BUDGET RESULTS FOR FISCAL YEAR 1999
SUMMARY
The Administration is today releasing the September Monthly Treasury Statement ofReceipts
and Outlays ofthe United States Government. The statement shows the actual financial totals
for the fiscal year that ended September 30, 1999, as follows:
•
a surplus of $122. 7 billion;
•
total outlays of $1,704.5 billion;
•
total receipts of$I,827.3 billion; and
•
an $88.3 billion reduction in the debt held by the public.
(MORE)
LS - 180
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
·U.S. Government Printing Office' t998 - 619-55!
Table 1. TOTAL OUTLAYS, RECEIPTS AND SURPLUSIDEFICIT (-)
(in billions of dollars)
1998 Actual . . . . . . . . . . . . . . .
Outlays
1,652.2
Receipts
1,721.5
1999:
February Budget Estimate
Mid-Session Review Estimate .
Actual ................. .
1,727.1
1,727.5
1,704.5
1,806.3
1,826.3
1,827.3
SurpluslDeficit (-)
Unified On-budget Off-budget
69.2
-29.9
99.2
79.3
98.8
122.7
-41.7
-24.8
-1.0
121.0
123.6
123.7
NOTE: Detail may not add to totals or changes due to rounding.
SURPLUS
The FY 1999 unified surplus was $122.7 billion, or 1.4 percent ofGDP. The surplus, almost
twice the size of last year's, is the largest ever in nominal terms and the largest as a
percentage of GDP since 1951. This is the first time there have been two consecutive years
of surpluses since 1956-57. Excluding Social Security and the Postal Service, there was a
small on-budget deficit of $1.0 billion, the smallest on-budget deficit since 1969.
This is the seventh consecutive year of improvement in the Federal budget since the deficit
peaked at $290.4 billion, or 4.7 percent ofGDP, in FY 1992. This is the longest series of
improvements in budget outcomes in the history of the United States. Since 1992, thanks to
strong economic growth and Federal Government downsizing and spending control, outlays
have grown at an average annual rate of only 3.0 percent per year, less than half the average
of7.3 percent per year over the preceding 12 years, while receipts have advanced at a rate
of7.6 percent per year, faster than the 6.4 percent average from 1980 through 1992. As a
result of this progress in eliminating the deficit, the debt held by the public has declined by
$51.2 billion in FY 1998 and by $88.3 billion in FY 1999, and has come down to $3,633.3
billion at the end of FY 1999. As a share of the economy, the debt held by the public has
declined for six consecutive fiscal years to 41. 1 percent, and is now below its 1990 share of
42.4 percent. This string of six consecutive years of declining debt as a share ofGDP is the
longest since the period ending in 1967 --more than 30 years ago.
The change from the Mid-Session Review (MSR) surplus estimate reflects:
•
a $23.0 billion decrease in outlays; and
•
a $0.9 billion increase in receipts .
2
OUTLAYS
Total outlays were $1,704.5 billion, $23.0 billion lower than the MSR estimate, continuing
the spending restraint that has occurred since the beginning ofthis Administration. The major
outlay changes since the MSR are described below. Table 2 displays actual outlays as well
as estimates from the February Budget and the MSR by agency and major program.
Department of Defense - Military. Actual outlays for the Department of Defense - Military
were $261.4 billion, $7.2 billion below the MSR estimate. The difference was due in large
part to slower-than-anticipated spending from FY 1999 emergency supplementals. In the case
of the FY 1999 Omnibus Consolidated and Emergency Supplemental Appropriations Act,
some contingent emergency funds were released much later in the fiscal year than anticipated,
resulting in some outlays occurring in FY 2000 rather than FY 1999. In regard to the Kosovo
supplemental, the slowdown resulted from the conclusion ofthe Kosovo air campaign in June.
Expenditures for military personnel pay and benefits also were lower than estimated because
of shortfalls in meeting personnel recruitment and retention goals. This accounted for over
one-third of DoD's total outlay shortfall.
Department of Health and Human Services. Actual outlays for the Department ofHealth and
Human Services were $359.7 billion, $11.6 billion lower than the MSR estimate. Medicare
outlays were $9.2 billion below the MSR estimate. About two-thirds of the lower Medicare
outlays were due to a decrease in Hospital Insurance spending caused by lower -than-expected
inpatient hospital admissions, home health agency visits, skilled nursing facility expenditures,
and managed care enrollment. The rest of the lower Medicare outlays resulted from a
decrease in Supplementary Medical Insurance spending due to lower-than-expected home
health visits, managed care enrollment, and outpatient expenditures. The Department of
Health and Human Services' and the Health Care Financing Administration's efforts to root
out fraud, waste, and abuse in the Medicare program may also have contributed to the
decline in Medicare spending. Outlays for Medicaid, the Children's Health Insurance Fund,
discretionary health programs, and the Administration for Children and Families were also
below the MSR estimate.
Department of Treasury. Actual outlays for the Department of the Treasury were $387.3
billion, $1.2 billion below the MSR estimate. Interest on the public debt was $1.1 billion
below the MSR estimate. RougWy half ofthe difference, $0.6 billion, was from lower interest
payments on debt held by the public that were caused, in part, by a substantially higher
surplus. The other half of the difference, $0.5 billion, resulted from lower interest payments
to trust funds. These reduced interest payments were offset, however, by lower interest
payments received by trust funds. These reductions are shown elsewhere in the budget as
lower undistributed offsetting receipts; therefore, together these two changes do not affect
total outlays of the Federal Government.
For the first time since 1961, outlays for interest on the public debt were lower than the
previous year. More specifically, outlays for interest on the public debt in FY 1999 were
$353.5 billion, or $10.3 billion below the 1998 total of$363.8 billion.
This reduction is the largest in percentage terms since 1936 and is the largest ever in dollar
terms. The lower interest costs resulted primarily from the budget surpluses in FY 1998 and
FY 1999--which caused a decline of$139.5 billion in the debt held by the public--and the
replacement of older debt with new debt at lower interest rates.
Undistributed offsetting receipts. Offsetting receipts are deducted from gross outlays in
calculating net outlays; therefore, changes in these figures inversely affect outlays, but change
the surplus in the same direction. Actual offsetting receipts totaled $159.1 billion, a decrease
of$1.7 billion from the MSR estimate. The difference was largely due to $1.3 billion of
interest on Outer Continental Shelf funds held in escrow because of a long-standing dispute
between the State of Alaska and the Federal Government over the rights to certain offshore
lands. The MSR assumed that the interest on the funds would be released to the Federal
Government in FY 1999. This did not occur because mapping of the disputed lands is not yet
completed.
RECEIPTS
Actual FY 1999 receipts were $1,827.3 biHion, $0.9 billion higher than the MSR estimate.
Lower-than-expected collections of individual income taxes were more than offset by
higher-than-expected collections of corporation income taxes and social insurance and
retirement receipts. Table 3 displays actual receipts and estimates from the Budget and
MSR by source.
Individual income taxes were $879.5 billion, $7.2 billion lower than the MSR estimate. Most
of the difference is attributable to unanticipated prior year accounting adjustments between
individual income tax receipts and the receipts of the Medicare and Social Security trust
funds. These adjustments reduced individual income taxes by $3.7 billion and increased
receipts to the Social Security and Medicare trust funds by the same amount. In addition,
higher-than-estimated withheld taxes of$1.9 billion were more than offset by $4.9 billion of
lower-than-estimated payments of non-withheld taxes and higher-than-estimated refunds of
$0.7 billion, reducing receipts by an additional $3.7 billion relative to the MSR.
Congressional inaction on legislative proposals included in the MSR accounts for the
remaining difference of $0.2 billion.
Corporation income taxes were $184.7 billion, $5.2 billion higher than the MSR estimate.
Lower-than-anticipated refunds account for most of the increase in this source of receipts.
Social insurance and retirement receipts were $611.8 billion, $3.8 billion higher than the MSR
estimate. Unanticipated prior year adjustments between individual income taxes and the
receipts of the Medicare and Social Security trust funds account for most of the net increase
in this source of receipts.
4
Table 2.--1999 BUDGET OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)
1999
1998
---.~-
Estimate
---_.
- - --
---
Change, 19!:j9 ActlJal fro_m:
Budget
Mid-Session
~ctua'
B_udget
Mid-.Session
Actual
2,600
3,463
2,850
3,913
2,853
3,912
2,621
3,793
10,143
278
18,204
40
18,391
307
19,223
285
1,019
245
832
(22)
Outlays by Major Agency
(229)
(120)
(232)
(119)
Legislative Branch ......................................................................
The Judiciary ..............................................................................
Agriculture:
Farm Service Agency:
Commodity Credit Corporation .......................................... ,.
Other ....................................................................................
Risk Management Agency (Federal Crop Insurance
Corporation) ...........................................................................
Foreign Agricultural Service ....................................................
Food and Nutrition Service:
Food stamps .......................................................................
Other ....................................................................................
Forest Service .........................................................................
Other........................................................................................
Subtotal, Agriculture ...........................................................
1,274
591
1,372
1,403
1,443
1,429
1,731
951
359
(452)
288
(478)
20,141
12,833
3,399
5.289
53,950
21,204
13,416
3,440
4.333
63,412
19,846
13,281
3,445
4,536
62,678
19,051
13,210
3,423
5.011
62,885
(2,153)
(206)
(17)
678
(527)
(795)
(71)
(22)
475
207
Commerce ..................................................................................
Oefense-Military ..........................................................................
4,047
256,124
4,767
263.556
4,796
268,570
5,036
261,379
269
(2,177)
240
(7,191)
10,720
11,928
8,850
31,498
10,458
14,100
9,802
34,360
11,061
13,461
9,801
34,323
10,907
12,794
9.820
33,521
449
(1,306)
18
(839)
(154)
(667)
19
(802)
11,181
3,263
14,444
11.824
3]20
15,544
11.824
3.720
15,544
12,188
364
3.891
t1'1
16,079
535
213,569
101,234
5
23,680
226,282
108,534
1,437
26,112
221,197
108,592
987
26.112
212,019
108,043
565
25,547
(14,263)
(491 )
(872)
(565)
(9,178)
(549)
(422)
(565)
15,456
17,134
15,848
18,042
(20.Z23)
375,532
16,971
18,042
16,918
17,574
(20.96:4)
359,700
1,070
(468)
(241)
(15,832)
(53)
(468)
(323)
(11,560)
Education:
Office of Elementary and Secondary Education .......................
Office of Postsecondary Education ..........................................
Other .........................................................................................
Subtotal, Education ................................................................
Energy:
Atomic energy defense activities ..............................................
Other.........................................................................................
Subtotal, Energy .....................................................................
Health and Human Services:
Medicare (gross outlays) .........................................................
Medicaid ..................................................................................
Children's health insurance fund .............................................
Public Health Service ..............................................................
Temporary assistance for needy families and family support
payments to States ..........................................................
Other Administration for Children and Families .......................
Other. .......................................................................................
Subtotal, Health and Human Services ................................
(20~!i06)
350,571
(20.6~1)
371,260
364
17J
535
Table 2.--1999 BUDGET OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)
1999
...
Estimate
Budget
Mid-Session
Actual
4,621
25,604
30,224
4,964
27,360
32,324
4,735
28,253
32,988
4,804
27,932
32,736
(160)
572
412
69
(321 )
(252)
1998
Actual
Change, 1999 Actual from:
Budget
Mid-Session
Outlays by Major Agency
Housing and Urban Development
Community development grants ............................................ .
Subtotal, Housing and Urban Development... ................... .
Interior ....................................................................................... .
Justice ....................................................................................... .
Labor:
Training and employment services ......................................... .
Unemployment trust fund ...................................................... ..
Pension Benefit Guaranty Corporation ................................... .
Other ........................................................................................
Subtotal, Labor .................................................................. .
7,232
16,169
8,426
16,458
8,580
18,648
7,773
18,318
(653)
1,860
(807)
(330)
4,644
23,408
(1,218)
3,169
30,002
5,152
26,405
(843)
4,209
34,923
5,152
24,769
(843)
3,807
32,885
4,675
24,870
(665)
3,579
32,459
(477)
(1,535)
178
(630)
(2,464)
(477)
101
178
(228)
(426)
State ...........................................................................................
5,373
6,791
7,034
6,464
(327)
(570)
20,350
4,297
9,242
39,467
23,455
4,002
9,398
5,OJ8
41,873
23,454
4,002
9,428
5,029
41,913
23,047
4,259
9,507
5,005
41,819
(408)
257
109
(13)
(54)
(407)
257
79
(24)
(94)
(1,236)
363,824
(1,254)
353,429
(1,254)
354,651
(1,385)
353,511
(131 )
82
(131 )
(1,140)
23,239
9,914
26,273
11,319
(32.91)
385,976
25,884
12,115
(2,9_46)
388,450
25,632
11,442
(1,921 )
387,280
(641 )
123
1.8IO
1,304
(252)
(673)
1,025
(1,170)
Transportation:
Federal Highway Administration ............................................. .
Federal Transit Administration ................................................ .
Federal Aviation Administration .............................................. .
Other ....................................................................................... .
Subtotal, Transportation .................................................... .
Treasury:
Exchange Stabilization Fund .................................................. .
Interest on the public debt... .................................................. ..
IRS:
Earned income tax credit.. .................................................. .
Other ................................................................................... .
Other ........................................................................................
Subtotal, Treasury ............................................................ ..
5,5I9
(5~641)
390,094
Table 2.--1999 BUDGET OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)
1999
Estimate
Mid·Session
Budget
.-.
1998
Actual
Actual
Change, 19~9 Ac;tual from:.
Budget
Mid-Session
Outlays by Major Agency
Department of Veterans Affairs:
Veterans Health Administration .............................................. .
Other ........................................................................................
Subtotal, Department of Veterans Affairs ......................... ..
Corps of Engineers ................................................................... ..
Other defense civil programs ..................................................... .
Environmental Protection Agency ............................................. .
Executive Office of the President... ........................................... .
Federal Emergency Management Agency ............................... ..
General Services Administration ............................................... .
International Assistance Programs:
International Security Assistance:
Foreign Military Financing ................................................... .
Economic Support Fund ...................................................... .
Other .....................................................................................
Agency for International Development.. ................................. .
Multilateral assistance ............................................................ .
Military sales programs ........................................................... .
International monetary programs ............................................ .
Other........................................................................................
Subtotal, International Assistance Programs .................... ..
National Aeronautics and Space Administration ...................... ..
National Science Foundation ..................................................... .
Office of Personnel Management... ........................................... .
Small Business Administration .................................................. .
Social Security Administration:
Old age and survivors insurance (off·budget) ....................... ..
Disability insurance (off·budget) ............................................. .
Supplemental security income program ................................ ..
Other:
On·budget. ............................................................................
Off-budget. ............................................................................
Subtotal, Social Security Administration ............................ .
Other independent agencies:
Major deposit insurance agencies:
Federal Deposit Insurance Corporation:
Bank insurance fund ........................................................... .
Savings association insurance fund .................................. ..
17,615
24,160
41,776
3,833
31,216
6,288
236
2,101
1,095
18,154
25,320
43,474
4,209
32,311
6,667
374
2,668
328
43,913
4,209
32.311
6,666
387
3,120
361
18,250
24,918
43,169
4,186
32,008
6,752
416
4,040
(46)
96
(402)
(305)
(23)
(303)
85
42
1,372
(374)
96
(841 )
(744)
(23)
(303)
86
29
920
(407)
18,154
25,I59
3,118
2,461
(630)
2,435
1,850
(163)
(151 )
59
8,980
3,841
2,201
(438)
2,691
1,725
(36)
22
124
10,130
3,837
2,275
(234)
2,740
1,768
(36)
22
125
10,497
3.357
2,349
(310)
2,346
1,857
533
(146)
Z3
10,059
(484)
148
128
(345)
132
569
(168)
(51)
(71 )
(480)
74
(76)
(394)
89
569
(168)
(52)
(438)
14,206
3,188
46,307
(78)
14,043
3,259
48,266
(866)
14,043
3,259
48,268
(814)
13,664
3,285
47.515
58
(379)
26
(751 )
924
(379)
26
(753)
872
329,769
49,459
29.747
339,910
52,704
30,685
338,765
51,919
30,685
337.916
52,142
30,673
(1,994)
(562)
(12)
(849)
223
(12)
8,388
10,437
(U,2a8)
422,438
10,475
01.3_3.5)
420,509
9,905
(10,8.45)
419,790
(532)
453
(2,648)
(570)
490
(719)
(763)
(402)
(1,196)
(402)
(751 )
(397)
(!UBO)
408,202
(1,219)
(448)
12
445
5
5
Table 2.-1999 BUDGET OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)
1998
Actual
1999
Estimate
Budget
Mid-Session
Actual
Change, 1999 Actual from:
Budget
Mid-Session
Outlays by Major Agency
FSLlC resolution fund (including RTC) ............................... .
Other .
Subtotal, Federal Deposit Insurance Corporation ................ .
National Credit Union Administration .................................... .
Subtotal, major deposit insurance agencies ...................... .
District of Columbia ................................................................ .
Export-Import Bank ................................................................. .
Federal Communications Commission:
Universal service fund ........................................................ ..
Spectrum auction subsidies ................................................. .
Other. ................................................................................... .
Subtotal, Federal Communications Commission .................... .
Postal Service:
On-budget. ........................................................................... .
Off-budget. ........................................................................... .
Subtotal, Postal Service .................................................... ..
Railroad Retirement Board ..................................................... .
Securities and Exchange Commission ................................... .
Tennessee Valley Authority ................................................... ..
Other (net) .............................................................................. .
Subtotal, other independent agencies .............................. ..
Allowances ................................................................................ .
Undistributed offsetting receipts:
Employer share, employee retirement (on-budget) ............... ..
Employer share, employee retirement (off-budget) ............... ..
Interest received by on-budget trust funds ............................. .
Interest received by off-budget trust funds ............................. .
Rents and royalties on the Outer Continental Shelf lands ...... .
Sale of major assets ............................................................... .
Spectrum auction receipts ...................................................... .
Outer Continental shelf receipts escrow interest and other .... .
Subtotal, undistributed offsetting receipts ......................... ..
Total, Outlays .............................................................................
On-budget. ..............................................................................
Off-budget. ..............................................................................
Deficit (-) I Surplus (+) ............................................................... .
On-budget. ...............................................................................
Off-budget ................................................................................
NOTE: Detail may not add to totals or changes due to rounding.
(2,484)
29
(4,122)
(212)
(4,334)
768
(208)
(3,658)
35
(4,788)
(247)
(5,035)
(2,480)
(257)
(3,839)
35
(5,402)
(247)
(5,649)
(2,293)
(442)
(3,583)
28
(4,702)
(261)
(4,963)
(2,690)
(168)
75
(7)
86
(14)
72
(210)
89
256
(7)
700
(14)
686
(397)
274
1,769
4,810
0
6,579
3,770
4,748
(6)
3,764
(6)
4,742
3,293
1,369
(32)
4,630
(477)
1,369
(26)
866
(1,455)
1,369
(26)
(112)
86
217
303
4,837
(231 )
(784)
3,723
10,653
29
964
993
5,014
(43)
(418)
4,803
6,341
3,118
29
964
993
4,707
(212)
(218)
4,854
6,482
632
29
1,021
1,050
4,830
(255)
2
4.429
6,865
57
57
(184)
(212)
420
(374)
524
(3,118)
57
57
123
(43)
220
(425)
383
(632)
(27,819)
(7,052)
(67,210)
(46,630)
(4,522)
(5,158)
(2,642)
(28,103)
(7,355)
(67,233)
(51,869)
(3,123)
(28,112)
(7,386)
(66,996)
(52,108)
(3,442)
(28,209)
(7,385)
(66,563)
(52,071 )
(3,098)
(106)
(30)
670
(202)
25
(97)
1
433
37
344
(1,447)
(1,447)
(3->
(1.~64)
Ct.~84)
(161,036)
(160,394)
(160,775)
(1,753)
(1)
(159,080)
(306)
'1,263
1,314
(306)
1,283
1,695
(22,526)
(20,248)
(2,278)
(22,957)
(22,916)
(41 )
43,477
40,766
2,711
23,902
23,808
94
1,652,224
1,335,622
316,602
69,242
(29,956)
99,198
1,727,071
1,404,015
323,056
1,727,502
1,406,683
320,819
1,704,545
1,383,767
320,778
79,263
(41,717)
120,980
98,838
(24,759)
123,597
122,740
(951 )
123,691
Table 3.-1999 BUDGET RECEIPTS BY SOURCE
(fiscal years; In millions of dollars)
1999
1998
Change, 1999 Actual from:
Estimate
~
~
Mig-S~~~iQIl
~
~
MLd-Sessio~
828,587
188,677
868,945
182,210
886,657
179,494
879,480
184,680
10,535
2,470
(7,177)
5,186
136,411
444,426
580,880
26,480
4,707
3,844
Receipts by Source
Individual income taxes .................................................................
Corporation income taxes .............................................................
Social insurance and retirement receipts:
Employment and general retirement:
On-budget...............................................................................
Off-budget ...............................................................................
Subtotal, Employment and general retirement.. ...................
Unemployment insurance ..........................................................
Other retirement contributions ...................................................
Subtotal, Social insurance and retirement receipts ............
Excise taxes ..................................................................................
Estate and gift taxes ......................................................................
Customs duties.............................................................................
Miscellaneous receipts ..................................................................
Total, Receipts ....................................................................
On-budget. .......................................................................
Off-budget ........................................................................
NOTE: Detail may not add to totals or changes due to rounding.
124,215
131,704
~:l5,6QQ
~44,Q~§
540,015
27,484
575,740
28,765
132,567
44404:16
576,983
26,719
~
571,835
~
608,824
~
608,021
YZ2
ill
15.3
611,832
3,008
3,811
57,669
24,076
18,297
68,075
25,932
17,654
70,655
28,441
17,994
70,399
27,782
18,336
2,324
1,850
682
JU25
~
1,806,334
1,362,298
444,036
~
1,826,340
1,381,924
444,416
'J.WJ..
8.3
1,827,285
1,382,817
444,468
20,951
20,519
432
1,721,465
1,305,666
415,800
m
5,140
(2,285)
52
3,897
(239)
(256)
(659)
342
QQ.1l
945
893
52
Table 3.-1999 BUDGET RECEIPTS BY SOURCE
(fiscal years; in millions of dollars)
1998
AtlY.S!I
1999
Estimate
Mid-Session
~
~
Change, 1999 Actual from:
~ Mid-Session
Receipts by Source
Individual income taxes ........... .
Corporation income taxes ..................................... .
Social insurance and retirement receipts:
Employment and general retirement:
On-budget. .......................................... .
Off-budget. ... .
Subtotal, Employment and general retirement... ................. .
Unemployment insurance ......... .
Other retirement contributions ................ .
Subtotal, Social insurance and retirement receipts ........... .
Excise taxes ................................... .
Estate and gift taxes ........................................... .
Customs duties ...................................................... .
Misce"aneous receipts ................................................................. .
Total, Receipts................................................................... .
On-budget. ...................................................................... .
Off-budget. ....................................... .
NOTE: Detail may not add to totals or changes due to rounding.
(7,177)
5,186
828,587
188,677
868,945
182,210
886,657
179,494
879,480
184,680
10,535
2,470
124,215
415 eQQ
540,015
27,484
4335
571,835
131,704
444 Q36
575,740
28,765
132,567
444416
576,983
26,719
136,411
444466
580,880
26,480
4,707
432
5,140
(2,285)
~
U19
YI2.
ill
ill
608,824
608,021
611,832
3,008
3,811
57,669
24,076
18,297
68,075
25,932
17,654
70,655
28,441
17,994
70,399
27,782
18,336
2,324
1,850
682
3.U2.5
~
1,806,334
1,362,298
444,036
35.ill
'JAIll
S3
1,826,340
1,381,924
444,416
1,827,285
1,382,817
444,468
20,951
20,519
432
1,721,465
1,305,666
415,800
3,844
~
3,897
(239)
(256)
(659)
342
Q.QjJ
945
893
52
Final Monthly Treasury Statement
of Receipts and Outlays
of the United States Government
For Fiscal Year 1999 Through September 30, 1999, and Other Periods
Highlight
This issue includes the final budget results and details the
surplus of $122.7 billion for Fiscal Year 1999.
RECEIPTS, OUTLAYS, AND SURPLUS/DEFICIT
THROUGH SEPTEMBER 1999
B
I
L
L
I
0
N
S
2000
1800
1600
1400
1200
1000
800
600
400
200
Contents
Summary, page 2
Receipts, page 6
Outlays, page 7
Means of financing, page 20
Receipts/outlays by month, page 28
Federal trust funds/securities, page 30
Receipts by source/outlays by
function, page 30
Explanatory notes, page 31
0
-200
Compiled and Published by
Department of the Treasury
Financial Management Service
Introduction
of receipts are treated as deductions from gross receipts; revolving and IIlInIgt.
ment fund receipts, reimbursements and refunds of monies previously expended ..
treated as deductions from gross outlays; and interest on the public debt (pWt
issues) is recognized on the accrual basis. Major information sources ilc:bIe
accounting data reported by Federal entities, disbursing officers, and Federal
Reserve banks.
The Monthly Treasury Statement of Receipts and Outlays of the United States
Government (MTS) IS prepared by the Financial Management Service, Department of
the Treasury, and after approval by the Fiscal Assistant Secretary of the Treasury, is
normally released on the 15th worllday of the month following the reporting month.
The publication IS based on data provided by Federal entities, disbursing officers,
and Federal Reserve banks
Triad of Publications
The MTS is part of a triad of Treasury financial reports. The Daily TI8ISIIy
Statement is published each worlling day of the Federal Government. It provides
data on the cash and debt operations of the Treasury based upon reporting of the
Treasury account balances by Federal Reserve banks. The MTS is a r8pOI1 of
Government receipts and outlays, based on agency reporting. The U.S. Government
Annual Report is the official publication of the detailed receipts and outlays 01 the
Government. It is published annually in accordance with legislative mandates given
to the Secretary of the Treasury.
Audience
The MTS IS published to meet the needs of: Those responsible for or interested
In the cash poSition of the Treasury; Those who are responsible for or interested in
the Government's budget results; and individuals and businesses whose operations
depend upon or are related to the Government's financial operations.
Disclosure Statement
ThiS statement summarizes the financial activities of the Federal Government
and off-budget Federal entities conducted in accordance with the Budget of the U.S.
Government, Ie, receipts and outlays of funds, the surplus or deficit, and the means
of finanCing the deficit or disposing of the surplus. Information is presented on a
modified cash basis: receipts are accounted for on the basiS of collections; refunds
Data Sources and Information
The Explanatory Notes section of this publication provides information c0ncerning the flow of data into the MTS and sources of information relevant to the MTS.
Table 1. Summary of Receipts, Outlays, and the Deficit/Surplus of the U.S. Government, Fiscal Years 1998 and 1999,
by Month
[$ millions]
Period
FY 1998
October
November
December
January
February
March
April
May
June
July
August
September
Year-to-Date ___ ....... , , , , ..... _...... .
FY 1999
October
November
December
January
February
March
April
May
June
July
August
September
Year-to-Date ......................... ..
Receipts
Outlays
Deficit/Surplus (-)
114,898
103,481
167,998
162,610
97,952
117,930
261,002
95,278
187,858
119,723
111,741
180,995
150,866
120,830
154,359
137,231
139,701
131,743
136,400
134,057
136,752
143,807
122,907
143,569
35,968
17,349
-13,639
-25,379
41,750
13,813
-124,603
38,779
-51,106
24,084
11,166
-37,425
'1,721,465
'1,652,224
'-69,242
119,974
113,978
178,646
2171,728
299,502
2130,416
2266,229
298,663
2199,507
2121,923
2126,324
200,396
152,413
130,915
183,803
2101,223
2141,847
2152,825
2152,770
2122,631
2145,939
2147,086
2.3129,127
143,966
32,440
16,937
5,156
-70,505
42,345
22,409
-113,459
23,969
-53,568
25,164
2,803
-56,430
1,827,285
1,704,545
122,740
'The recetpt. ou~ay and defiCIt figures dlHer from the FY 2000 Budget, released by the Office
of Management and Budget on February 1. 1999 by -$4 million due mainly to revisions in the data
fOlloWing the release of the Final September Monthly Treasury Statement.
'Outlays have been Increased and refunds of taxes decreased by $5 million $88 million $124
million. $87 million. $76 million. $28 million. $18 million. and $10 million, respectvely, for J~uary
1999 through August 1999 to reflect additional reporting for payments where child care creIIfI
exeteed the liablity for tax.
'Outlays have been increased by $289 million in August 1999 to reflect an adjustment by 1/11
Small BUSiness Administration.
Note: Details may not add to totals due to rounding.
2
Table 2. Summary of Budget and Off-Budget Results and Financing of the U.S. Government, September 1999 and
Other Periods
[$ millions]
Current
Fiscal
Year to Date
This
Month
Classification
Budget
Estimates
Full Fiscal
Year'
Prior
Fiscal Year
to Date
(1998)
Budget
Estimates
Next Fiscal
Year (2000)'
Total on-budget and off-budget results:
Total receipts ...........................................
200,396
1,827,285
1,826,340
1,721,465
1,914,223
On-budget receipts ...................................
Off-budget receipts ..................................
161,304
39,093
1,382,817
444,468
1,381,924
444,416
1,305,666
415,800
1,444,820
469,403
Total outlays ............................................
143,966
1,704,545
1,727,502
1,652,224
1,771,743
...................................
...................................
108,846
35,120
1,383,767
320,778
1,406,683
320,819
1,335,622
316,602
1,439,730
332,013
........................
+56,430
+122,740
+98,838
+69,242
+142,480
................
................
+52,458
+3,973
-951
+123,691
-24,759
+123,597
-29,956
+99,198
+5,090
+137,390
.............
-56,430
-122,740
-98,838
-69,242
-142,480
of financing:
Borrowing from the public ...........................
Reduction of operating cash, increase (-) .........
By other means ......................................
-47,718
-20,069
11,356
-88,323
-17,580
-16,837
-66,831
-6,122
-25,885
-51,211
4,743
-22,774
-121,944
On-budget outlays
Off-budget outlays
Total surplus (+) or deficit (-)
On-budget surplus (+) or deficit (-)
Off-budget surplus (+) or deficit (-)
rolal on-budget and off-budget financing
~eans
'These figures are based on the Mid-Session Review of the FY 2000 Budget, released by the
of Management and Budget on June 28, 1999.
... No Transactions.
Note: Details may not add to totals due to rounding.
)ffice
'igure 1. Monthly Receipts, Outlays, and Budget Deficit/Surplus of the U.S. Government, Fiscal Years 1998 and 1999
$ billions
Receipts
Deficit (-)/Surplus
100+,--r---.-----r----.-.---.-~-.-_,_--,-r_-r-__r--,r_.__--,---r-r-_r_--,-r-:--r-:-i
Oct.
FY
98
Dec.
Feb.
Apr.
Jun.
Aug.
FY
99
3
-20,536
Figure 2. Monthly Receipts 01 the U.S. Government, by Source, Fiscal Years 1998 and 1999
$ billions
3
Total Receipts
250
200
1
1
Dec.
Apr.
Feb.
Jun.
Aug.
Oct.
Dec.
Feb.
Apr.
Jun.
Aug.Sept.
FY
FY
99
98
Figure 3. Monthly Outlays 01 the U.S. Government, by Function, Fiscal Years 1998 and 1999
$ billions
180
Oct.
Total Outlays
Dec.
Feb.
Jun.
Aug.
Oct.
FY
FY
98
99
4
Dec.
Feb.
Apr.
Jun.
AugSept.
Table 3. Summary of Receipts and Outlays of the U.S. Government, September 1999 and Other Periods
[$ millions]
Classification
This Month
Current
Fiscal
Year to Date
Comparable
Prior Period
Budget
Estimates
Full Fiscal Year'
Budget Receipts
Individual income taxes ......................................... .
Corporation income taxes ....................................... .
Social insurance and retirement receipts:
Employment and general retirement (off-budget) ............ .
Employment and general retirement (on-budget) ............. .
Unemployment insurance ..................................... .
Other retirement ............................................... .
Excise taxes ..................................................... .
Estate and gift taxes ........................................... .
Customs duties .................................................. .
Miscellaneous receipts ........................................... .
89,250
40,235
2879,480
184,680
828,587
188,677
886,657
179,494
39,093
15,701
332
356
7,167
2,294
1,727
4,242
444,468
136,411
26,480
4,472
70,399
27,782
18,336
34,777
415,800
124,215
27,484
4,335
57,669
24,076
18,297
32,325
444,416
132,567
26,719
4,319
70,655
28,441
17,994
35,078
Total Receipts ................................................ .
200,396
1,827,285
1,721,465
1,826,340
(On-budget) ................................................. .
161,304
1,382,817
1,305,666
1,381,924
(Off-budget) ................................................ .
39,093
444,468
415,800
444,416
201
317
4,399
460
22,951
3,492
1,551
31,187
4,776
805
1,661
2,656
497
4,519
2,621
3,793
62,885
5,036
261,379
33,521
16,079
3359,700
32,736
7,773
18,318
32,459
6,464
41,819
2,600
3,463
53,950
4,047
256,124
31,498
14,444
350,571
30,224
7,232
16,169
30,002
5,373
39,467
2,853
3,912
62,678
4,796
268,570
34,323
15,544
371,260
32,988
8,580
18,648
32,885
7,034
41,913
363,824
26,270
41,776
3,833
31,216
6,288
236
2,101
1,095
8,980
14,206
3,188
46,307
354,651
33,799
43,913
4,209
32,311
6,666
387
3,120
361
10,497
14,043
3,259
48,268
-814
420,509
6,482
632
Budget Outlays
Legislative Branch ............................................... .
Judicial Branch .................................................. .
Department of Agriculture ...................................... ..
Department of Commerce ...................................... .
Department of Defense-Military ............................... .
Department of Education ...................................... ..
Department of Energy .......................................... ..
Department of Health and Human Services ................... .
Department of Housing and Urban Development .............. .
Department of the Interior ...................................... .
Department of Justice ........................................... .
Department of Labor ............................................ .
Department of State ............................................ .
Department of Transportation .................................. ..
Department of the Treasury:
Interest on the Public Debt ................................. ..
Other .......................................................... .
Department of Veterans Affairs ................................ ..
Corps of Engineers ............................................. .
Other Defense Civil Programs .................................. .
Environmental Protection Agency .............................. ..
Executive Office of the President .............................. .
Federal Emergency Management Agency ...................... .
General Services Administration ............................... ..
International Assistance Program .............................. ..
National Aeronautics and Space Administration ................ .
National Science Foundation .................................... .
Office of Personnel Management .............................. ..
Small Business Administration .................................. .
Social Security Administration .................................. ..
Other independent agencies .................................... .
Allowances ...................................................... ..
Undistributed offsetting receipts:
Interest ........................................................ .
Other ......................................................... ..
19,785
-2,106
3,633
490
2,662
609
21
151
-69
760
1,261
299
4,363
249
35,019
5,582
353,511
2.333,769
43,169
4,186
32,008
6,752
416
4,040
-46
10,059
13,664
3,285
47,515
458
-78
419,790
6,865
408,202
10,653
-1,052
-7,164
-118,634
-40,446
-113,839
-47,197
-120,388
-40,387
Total outlays .................................................. .
143,966
1,704,545
1,652,224
1,727,502
(On-budget) ................................................. .
108,846
1,383,767
1,335,622
1,406,683
(Off-budget) ............................................... ..
35,120
320,778
316,602
320,819
Surplus (+) or deficit (-) ................................... .
+56,430
+122,740
+69,242
+98,838
(On-budget) ................................................. .
+52,458
-951
-29,956
-24,759
(Off-budget) ................................................ .
+3,973
+123,691
+99,198
+123,597
'These figures are based on the Mid-Session Review of the FY 2000 Budget. released by the
:>tfice of Management and Budget on June 28, 1999.
million in September 1998 to reflect an adjustment by the Department of Health and Human
Services.
"Outlays have been increased by $289 million in August 1999 to reflect an adjustment by the
Small Business Administration.
... No Transactions.
Note: Details may not add to totals due to rounding.
2()utlays have been increased and refunds of taxes decreased by $435 million for January
1999 through August 1999 to reflect additional reporting for payments where child care credits
~xceed the liability for tax.
'Outlays for the Department of Health and Human Services have been increased by $2 million
IIld outlays for the Department of the Treasury - Other have subsequently been decreased by $2
5
Table 4. Receipts of the U.S. Government, September 1999 and Other Periods
[$ millions]
Current Fiscal Year to Date
This Month
Gross
Receipts
Classification
Individual income taxes:
W,thheld
Pres1den!1a1 Elect10n Campaign Fund
Other
Total-Individual income taxes
.........................
Corporation income taxes ....................................
Social insurance and retirement receipts:
Employment and general retirement:
Federal old-age and survivors ins. trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes
Deposits by States
Total-FOASI trust fund
Federal disability ,nsurance trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes
Deposits by States
Total-FDI trust fund
Federal hospital insurance trust fund:
Federal Insurance Contributions Act taxes
Self-Employment Contributions Act taxes
Receipts from Railroad Retirement Board
Deposits by States
Total-FHI trust fund
Railroad retirement:
Rail industry pension fund
Railroad Social Security equivalent benefit
I Receipts
.
Refunds
(Deduct)
Gross
Receipts
I (Deduct)
Refunds 1
.
Receipts
Gross
Receipts
to DIIt-
Refunds
(Deduct)
RICIIpIa
646.472
63
281.527
693.940
61
308,185
'49.244
1
'43.077
Prior Fiscal Year
3,072
89,250 1,002,186
2122,706
879,480
928,063
99,476
621,517
42,571
2,336
40,235
216,325
31,645
184,680
213,270
24,593
181.an
'31,502
'3,528
1,301
30.201
3,528
364.423
20.437
1,301
363,122
20.437
1,778
r 0)
340,188
20,379
-5
338,410
20,379
-5
35,029
1,301
33,728
384.860
1,301
383.559
360.562
1,778
358,784
'5,008
'562
206
4,803
562
57,891
3,224
206
57,685
3.224
293
(0 0)
54,076
3,233
-1
53,783
3,233
-1
5,364
61,115
206
60,910
57.309
293
57,016
13,887
1.475
123,360
8,520
388
123,360
8.520
388
(0 0)
110.455
9,029
381
-2
110,455
9,029
381
-2
132,268
119.863
119,863
92,322
5,570
206
'13,887
'1,475
(0 0)
(0 0)
r 0)
15,362
15,362
132,268
180
160
179
160
2,633
1,517
4
3
2,629
1,514
2.599
1,782
16
12
2,583
1,no
540,015
56,302
1,508
54,794
582,394
1,514
580,880
542.114
2,098
Unemployment insurance:
Deposits by States
Federal Unemployment Tax Act taxes
Railroad unemployment taxes
296
39
3
296
36
19,894
6,650
111
175
19,894
6,475
111
21,047
6.479
68
111
(0 0)
6,369
68
Total-Unemployment insurance
335
3
332
26,655
175
26.480
27,595
111
27,484
348
8
348
8
4,399
73
4,399
73
4,261
74
4,261
74
356
356
4.472
4.472
4.335
4,335
Total-Employment and general retirement:
Other retirement:
Federal employees retirement - employee share
Non-federal employees retirement
Total-Other retirement
Total-Social insurance and retirement
receipts .............................................
(00)
21,047
56,993
1,511
55,481
613,522
1,690
611,832
574,044
2,209
571.835
1,475
1,162
4,702
48
-234
6
448
1,710
1,156
4,254
48
20,760
10,395
40,325
596
524
4
1,148
20,236
10.391
39,177
596
23,008
8,154
27.433
636
714
43
805
22,294
8,111
.....................................
7,387
220
7,167
72,076
1,676
70,399
59,231
1,562
57,ee8
Estate and gift taxes .........................................
2,348
54
2,294
28,386
603
27,782
24,631
555
24,076
...............................................
1,788
61
1,727
19,486
1,150
18,336
19,689
1,392
18,2t7
Miscellaneous Receipts:
DepoSits of eamlngs by Federal Reserve Banks
Universal service fund
................
All other
............................... ..............
2,789
366
1,096
9
2,789
366
1,087
25,917
3,752
5,848
740
25,917
3,752
5,108
24.540
2,759
5,073
46
24,540
2,759
5,027
4,251
9
4,242
35,516
740
34,777
32,371
46
32,325
207,659
7,262
200,396 1,987,496
160,211 1,827,285 1,851,299
129,834 ,,72'~
167,059
5,756
161,304 1,541,521
158,704 1,382,817 1,433,429
127,763 1,305'"
40,599
1,507
Excise taxes:
Miscellaneous excise taxes
Airport and airway trust fund
Highway trust fund
Black lung disability trust fund
Total-Excise taxes
Customs duties
Total Total Total Total -
........................
Receipts ........................................
On-budget ......................................
Off-budget ......................................
Miscellaneous receipts
'Outlays have been Increased and refunds of taxes decreased by $435 million for January
1999 Ihrough August 1999 to reflect add.tJonai reporting for payments where child care credits
exceed the habollty lor tax
'In accordance WIth the Soaal Secunty Act as amended. ··Indivldual Income taxes. Withheld"
have been decreased and Federal Insurance Conrnbutlon Act Taxes "correspondingly Increased
by $.I 010 mllioon to correct estimates lor the quarter ending September 30. 1998. "Individual
Income taxes Withheld have also been Increased and ·Federal Insurance Contribution Act
39,093
445,975
1,507
444,468
417,871
2,071
26,628
636
-=
415,Il10
-
Taxes" correspondingly decreased by $42 million to correct estimates for calendar year 199U"
pnor. "Individual income taxes, Other" have been decreased and "Self-Employment eontrb*"
Act Taxes" correspondingly increased by $132 million to correct estimates for calendaryell'1996
and pnor.
... No Transactions.
(. 'J Less than $500.000.
Note: Details may not add to totals due to rounding.
6
Table 5. Outlays of the U.S. Government, September 1999 and Other Periods
[$ millions)
This Month
Classification
Gross lAPPlicable
Outlays Receipts
I
Outlays
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross /APPlicable/
Outlays
Outlays Receipts
Gross /APPlicable/ 0 tl
u ays
Outlays Receipts
Legislative Branch:
45
68
....................................................... .
House of Representatives .................................. .
Joint items .................................................. .
Congressional Budget Office ............................... .
Architect of the Capitol ..................................... .
Ubrary of Congress ......................................... .
Govemment Printing Office ................................. .
General Accounting Office .................................. .
United States Tax Court ................................... .
Other Legislative Branch agencies ......................... .
Proprietary receipts from the public ........................ .
Intrabudgetary transactions ................................. .
-3
Total-Legislative Branch ............................... .
201
..
45
68
(' ')
( )
35
-5
29
16
34
-5
29
485
796
105
24
190
567
95
360
3
2
3
33
2
20
3
-3
-28
201
2,646
3
3
33
33
30
30
Other ....................................................... ..
311
6
311
6
3,808
218
3,479
196
3,479
196
Proprietary receipts from the public ........................ .
tntrabudgetary transactions ................................ ..
-3
3.808
218
-14
-252
Total-Judicial Branch .................................. .
317
3,793
3,474
~~
8
2
17
8
2
-3
(* *)
2
2
9
3
10
26
483
794
105
24
180
565
95
360
33
20
-10
-28
454
784
90
23
166
641
108
345
32
10
-33
2,621
2,620
2
1
8
4
3
452
783
90
23
157
637
108
345
32
10
-3
-33
20
2,600
Judicial Branch:
Supreme Court of the United States ...................... .
Courts of Appeals. District Courts. and other judicial
services .................................................... .
..
)
(
..-3
(
)
14
-252
11
-230
-11
-230
317
3,807
79
79
847
847
782
782
40
37
40
37
429
407
41
612
604
1,017
429
407
430
413
61
526
597
668
3
430
413
61
526
597
665
1.677
243
1,566
535
243
1,031
768
19,223
-596
112
19,508
714
18,875
672
92
20,352
657
295
679
596
320
580
(* *)
14
11
3,463
Department of Agriculture:
Agricultural Research Service .............................. ..
Cooperative State Research. Education. and Extension
Service:
Research and education activities ...................... ..
Extension activities ...................................... ..
Other ...................................................... .
Animal and Plant Health Inspection Service ............... .
Food Safety and Inspection Service ...................... ..
Agricultural Marketing Service ............................. ..
Risk Management Agency:
Administrative and operating expenses .................. .
Federal crop insurance corporation fund ................ .
2
2
71
71
47
86
47
86
8
8
308
2
306
Farm Service Agency:
Salaries and expenses .................................. ..
Commodity Credit Corporation ........................... .
Agricultural credit insurance fund ........................ .
Other ..................................................... ..
96
1,464
10
1,064
40
96
401
-30
Total-Farm Service Agency .......................... .
1,577
1,104
473
Natural Resources Conservation Service:
Conservation operations .................................. .
Other ..................................................... ..
Rural Development ......................................... ..
Rural Housing Service:
Rural housing insurance fund ............................ .
Rental assistance program ............................... .
Other ...................................................... .
Rural Utilities Service:
Rural electrification and telecommunications fund ....... .
Rural Development insurance fund ..................... ..
Other ..................................................... ..
Foreign Agricultural Service ... .. .......................... ..
Food and Nutrition Service:
Food stamp program ..................................... .
Child nutrition programs .................................. .
Women, infants and children programs .................. .
Other ...................................................... .
Total-Food and Nutrition Service
Forest Service:
National forest system .................................. ..
Wildland fire management ................................ .
Forest service permanent appropriations ................ .
Other ..................................................... ..
Total-Forest Service .................................. .
Other ....................................................... .
Proprietary receipts from the public ....................... ..
Intrabudgetary transactions ................................. .
Total-Department of Agriculture ...................... .
6
6
53
34
53
2,172
-300
555
146
2,091
533
126
2,274
-183
533
126
2,327
627
72
951
2,788
541
320
-461
2,953
598
232
334
-247
951
3,287
629
80
591
19,051
8,878
3,942
390
32,261
19,051
8,878
3,942
390
32,261
20,141
8,565
3,902
366
32,975
20,141
8,565
3,902
366
32,975
1.251
824
366
981
3,423
1,251
824
366
981
3,423
1,467
577
334
1,022
3,399
1,467
577
334
1,022
639
464
38
392
28
72
5
48
-44
197
11
1,740
429
233
23
2,425
86
177
50
119
432
295
679
-4
34
-77
-4
659
77
6,230
1,831
4,399
81,253
4
7
9,931
714
10,143
-527
92
10,421
1,872
555
146
68
38
10,916
8,732
1,199
-51
46
86
177
50
119
432
9,856
1,060
657
177
1,740
429
233
23
2,425
768
29,079
464
112
30,424
54
622
53
34
53
126
46
68
197
54
2,299
41
612
604
1,016
86
42
617
967
-967
-5
-5
18,369
62,885
71,479
-5
596
320
580
31
-152
591
3,399
969
604
-969
-5
17,529
53,950
35
Table 5.
Outlays of the U.S. Government, September 1999 and Other Periods-Continued
[$ millions]
Current Fiscal Year to Date
This Month
Classification
Department
EconomIC
Bureau of
Promotion
Gross !APPlicable! Outlays
Outlays
Receipts
01 Commerce:
Development Administration
the Census
of Industry and Commerce
40
108
34
ScIence and Technology
National Oceanic and Atmospheric Administration
National Institute of Standards and Technology
Other
Total-SCience and Technology
Other
Propnetary receipts from the public .
Intrabudgetary transactions
Total-Department 01 Commerce
Department 01 Delense-Military:
Military Personnel:
Department of the Army
Department of the Navy
Department of the Air Force .
Total-Military Personnel
Operation and Maintenance:
Department of the Army
Department of the Navy
Department of the Air Force .
Defense agencies
.............
. . . . . . . . . . ..
Total-Operation and Maintenance
Procurement:
Department of the Army
Department of the Navy
Department of the Air Force .
Defense agencies
...........
..............
Total-Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research, Development, Test, and Evaluation:
Department of the Army
................
Department of the Navy
...........
Department of the Air Force
Defense agencies
..................
Total-Research, Development, Test, and Evaluation
Military Construction:
Department of the Army
...........
Department of the Navy ..........................
Department of the Air Force .
Defense agencies
. . . . . . . . . .. . . . . .
Total-Military Construction .............
Famdy Housing:
Department of the Army ...................
Department of the Navy
Department of the Air Force
...........
Defense agencies ..............................
RevolVing and Management Funds:
Department of the Army . . . . . . . . . . . . . . .
Department of the Navy
Defense agencies:
Working capital fund
.................
Other
..........................
Trust funds:
Department of the Army
...............
Department of the Navy
Department of the Air Force
Defense agencies
............. ...............
Proprietary recetpts from the public:
Department of the Army
Department of the Navy
. . . . . . . . . . . . . .. . .
Department of the Air Force .
Defense agenCIes
lAPPli~ble
I Outla ys
Receipts
40
108
34
387
1,131
374
11
2,413
660
35
25
Gross
Applicable
Outlays ! Receipts!! Outllp-
376
1,131
374
393
542
364
8
2,126
668
43
17
25
2,388
660
10
31
12
38S
542
364
220
52
3
10
2
210
52
1
275
12
263
3,107
49
3,058
2,837
49
2,788
15
(0 0)
0)
4
13
110
-13
106
4
135
(0 0)
(0 0)
102
-135
(")
5,036
4,242
195
4,047
2,108
668
15
113
(0 0)
(0 0)
(0 0)
460
5,112
2,110
2,130
1,658
2,110
2,130
1,658
26,038
24,341
19,124
26,038
24,341
19,124
25,809
24,116
19,051
25,809
24,116
19,051
5,898
5,898
69,503
69,503
68,976
68,976
2,757
2,968
2,545
2,625
2,757
2,968
2,545
2,625
23,711
24,630
25,451
22,628
23,711
24,630
25,451
22,628
22,498
25,002
24,168
21,805
22,498
25,002
24,166
21,805
10,895
10,895
96,420
96,420
93,473
93,473
901
1,569
1,199
359
901
1,569
1,199
359
8,632
18,351
18,385
3,457
8,632
18,351
18,385
3,457
8,243
18,228
18,052
3,684
8,243
18,228
18,052
3,684
4,028
4,028
48,824
48,824
48,207
48,207
507
723
1,119
1,015
507
723
1,119
1,015
5,027
8,052
14,171
10,112
5,027
8,052
14,171
10,112
4,881
7,837
14,499
10,204
4,881
7,837
14,499
10,204
3,365
3,365
37,362
37,362
37,421
37,421
36
67
101
355
36
67
101
355
1,017
722
965
2,815
1,017
722
965
2,815
914
785
1,063
3,286
914
785
1,063
3,286
559
559
5,519
5,519
6,046
6,046
130
138
121
12
130
138
121
12
1,255
1,330
1,029
123
1,255
1,330
1,029
79
1,288
1,429
1,054
162
1,286
1,429
1,054
-8
197
-8
197
-47
1,154
-47
1,154
-116
1,514
-301
-101
66
-287
66
-288
-753
-314
(00)
(0 0)
1
4
18
1
8
30
17
256
8
30
1
256
3
27
12
262
r 0)
.......................
r 0)
Gross
Outlays
Prior Fiscal Year to 01"
473
-301
-101
r
13
(0 0)
4
731
348
-61
254
8
(* 0)
18
-731
-348
61
-254
76
44
17
199
-71
249
580
-199
71
-249
-580
63
99
-116
1,514
-753
3
(* 0)
11
123
1,340
410
442
-317
3
27
1
262
-123
-1,340
-410
-442
Table 5. Outlays of the U.S. Government, September 1999 and Other Periods-Continued
[$ millions]
This Month
Classification
Gross !APPlicable
Receipts
Outlays
J
Department of Defense-Military:-Continued
Intrabudgetary transactions:
Department of the Army ..................................
Department of the Navy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..
Department of the Air Force ..............................
Defense agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . .
Offsetting governmental receipts:
Department of the Army ..................................
-107
-531
-30
-60
.............
24,228
Department of Education:
Office of Elementary and Secondary Education:
Education reform ................................
Education for the disadvantaged ..........................
Impact aid ..................................................
School improvement programs ............................
Other · . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total-Office of Elementary and Secondary
Education ...............................................
Total-Department of Defense-Military
Outlays
-107
-531
-30
-60
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross _!APPlicable/
Outlays
Receipts
Outlays
Gross fPPlic.ablel Outlays
Receipts
Outlays
-43
2
-117
(' ')
(")
1,276
22,951
262,403
95
463
23
168
4
95
463
23
168
4
752
-43
2
-117
-55
-2
-111
-55
-2
-111
5
-5
1,024
261,379
258,523
887
7,554
1,081
1,326
59
887
7,554
1,081
1,326
59
746
7,818
735
1,366
55
746
7,818
735
1,366
55
752
10,907
10,907
10,720
10,720
6
-6
2,399
256,124
Office of Bilingual Education and Minority Languages
Affairs · . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office of Special Education and Rehabilitative Services:
Special education ..........................................
Rehabilitation services and disability research ............
Special institutions for persons with disabilities ..........
Office of Vocational and Adult Education ..................
21
21
311
311
207
207
341
207
9
129
341
207
9
129
4,444
2,713
135
1,364
4,444
2,713
135
1,364
3,658
2,482
133
1,451
3,658
2,482
133
1,451
Office of Postsecondary Education:
College housing and academic facilities loans ...........
Student financial assistance ...............................
Higher education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Howard UniverSity . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . .
Federal direct student loan program ......................
Federal family education loans ............................
-1
1,142
96
15
-619
1,241
-1
1,142
96
15
-619
1,241
3
9,125
855
220
-93
2,729
45
-42
9,125
855
220
-93
2,729
-2
7,934
785
206
876
2,225
96
-98
7,934
785
206
876
2,225
. .. . . . . ... . ..
1,873
1,873
12,838
45
12,794
12,025
96
11,928
Office of Educational Research and Improvement .........
Departmental Management ..................................
Proprietary receipts from the public .........................
55
108
479
440
66
479
440
-66
514
404
4
55
108
-4
4
3,492
33,631
110
33,521
31,594
Total-Office of Postsecondary Education
Total-Department of Education
........................
3,497
514
404
96
31,498
)epartment of Energy:
AtomiC Energy Defense Activities:
Weapons activities ..................................
Defense environmental restoration and waste
management ..............................................
Defense facilities closure projects ........................
Other defense activities ...................................
Other .......................................................
493
493
4,604
4,604
3,953
3,953
307
65
189
3
307
65
189
3
4,341
1,014
2,037
192
4,341
1,014
2,037
192
4,444
863
1,691
230
4,444
863
1,691
230
Energy Programs:
Science ................... .................................
Energy supply ..............................................
Energy conservation .......................................
Other · . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . .
214
69
73
5
214
69
73
4
2,449
939
586
1,650
30
2,449
939
586
1,620
2,239
1,241
621
1,750
11
2,239
1,241
621
1,739
Total-Energy Programs ................................
360
359
5,624
30
5,594
5,851
11
5,840
Power Marketing Administration .............................
Departmental Administration .................................
Proprietary receipts from the publiC .........................
Intrabudgetary transactions ..................................
Offsetting governmental receipts ............................
452
-53
2,101
138
2,077
1,910
25
24
138
-1,296
-543
-25
1,982
141
25
256
-53
-1
-43
-25
10
72
141
-1,590
-1.190
-10
Total-Department of Energy •••••••.••...•...••••.•••.•.
1,774
224
1,551
19,507
3,428
16,079
3,521
14,444
197
-43
9
1,296
-543
1,590
-1,190
17,965
Table 5.
Outlays of the U.S. Government, September 1999 and Other Periods-Continued
[$ millions]
Classification
Department of Health and Human Services:
PublIC Health Service
Food and Drug Administration
Health Resources and Services Administration
In<lIan Health Services
Centers lor Disease Control and Prevention
National Institutes of Health .
Substance Abuse and Mental Health Services
Administration
Agency for Health Care Policy and Research .
This Month
Current Fiscal Year to Date
Gross IAPPlicablel Outlays
Outlays
Receipts
Gross IApplicable \ Outla s
Outlays
Receipts
y
86
376
120
191
1,253
(0 OJ
1
195
-1
2
86
375
120
191
1,253
955
3,885
2,198
2,430
13,815
195
-1
2,214
79
2,219
25,577
4
26
30
Prior Fiscal Year to
Gross IAPpilcabie/
Outlays
Receipts
951
3,860
2,198
2,430
13,815
842
3,492
2,146
2,410
12,501
2,214
79
2,236
77
25,547
23,703
4
19
DIte
-
0uIIeya
838
3,473
2,146
2,410
12,501
2,236
n
Total-Public Health Service .
2,220
Health Care Financing Administration:
Grants to States for Medicaid
Payments to health care trust funds
State children'S health insurance fund
10,099
6,356
55
10,099
6,356
55
108,043
69,589
565
108,043
69,589
565
101,234
65,184
5
101,234
65,184
10,874
136
10,874
136
129,463
1,297
129,463
1,297
135,487
1,203
135,487
1,203
11,010
11,010
130,759
130,759
136,690
136,690
69
69
742
742
608
608
6,685
158
6,685
158
79,008
1,510
79,008
1,510
74,837
1,435
74,837
1,435
6,843
6,843
80,518
80,518
76,272
76,272
-32
-32
-34
-34
-42
-42
34,401
34,401
390,181
390,181
379,950
379,950
1,183
1,183
14,161
14,161
13,284
13,284
580
76
45
194
580
76
45
194
2,756
1,176
332
2,254
2,756
1,176
332
2,254
2,171
1,132
326
2,028
2,171
1,132
2,028
96
119
475
96
119
475
1,032
1,993
5,703
1,032
1,993
5,703
1,095
'2,437
'5,331
1,095
2,437
5,331
301
47
301
47
828,587
3,114
4,707
378
4,707
378
4,451
334
4,451
34,491
34,491
32,590
32,590
879
682
879
682
-22,483
'829
'505
829
Federal hospital insurance trust fund:
............
Benefit payments
Administrative expenses
Total-FHI trust fund
Health care fraud and abuse control
Federal supplementary medical insurance trust fund:
...........
Benefit payments
............
Administrative expenses .
Total-FSMI trust fund
Other
Total-Health Care Financing Administration,
Administration for Children and Families:
Temporary assistance for needy families "'" ...........
Payments to States for child support enforcement and
family support programs
....................
Low income home energy assistance ..............
Refugee and entrant assistance ...
. ...............
Child care entitlement to States
........................
Payments to States for the child care and development
block grant
................. .................
Social services block grant
............
Children and families services programs ..........
Payments to States for foster care and adoption
assistance
. ....................
Other
................
Total-Administration lor Children and Families
Administration on Aging
Other
. . ............... . . . .................
Proprietary receipts from the public ........... ...........
Intrabudgetary transactions:
Payments for health insurance for the aged:
Federal supplementary medical insurance trust fund ..
Payments lor tax and other credits:
Federal hOSpital insurance trust fund ..............
Total-Department of Health and Human Services
3,114
69
69
34
34
2,293
-2,293
22,483
23
23,61)
5
326
334
505
21,799
-21,799
-5,074
-5,074
-62,185
-62,185
-59,919
-59,919
-1,283
-1,283
-7,413
-7,413
-5,264
-5,264
31,187
382,213
359,700
372,393
33,482
2,295
10
22,513
21,822
350,511
-
Table 5. Outlays of the U.S. Government, September 1999 and Other Periods-Continued
[$ millions]
Classification
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross 'IAPPlicabl4 Outlays
Outlays Receipts
Gross IAPPlicabl4
Outlays Receipts
Outlays
Gross IAPPlicablel 0 tl
Outlays Receipts
u ays
Department of Housing and Urban Development:
Housing Programs:
Public enterprise funds .............. .
Credit accounts:
Federal housing administration fund ...
Housing for the elderly or handicapped fund ......... .
Other ........ ................... .. ............ ..
Rent supplement payments .............................. .
Homeownership assistance ............................... .
Rental housing assistance ................................ .
Low-rent public housing ................................ .
Public housing grants ............................... .
College housing grants ....................... .
Lower income housing assistance ............... .
Section 8 contract renewals ............... ..
Other ................... .
Total-Housing Programs
35
44
-9
53
82
-30
98
123
-25
14,031
7,464
75
6,567
-75
35,169
492
( )
56
45
609
606
29,528
881
5,641
-389
16,432
726
690
-362
(' ')
54
74
618
617
-39
17
9,140
r 'J
8
8
15
6,637
2
2
235
15
6,637
(")
2,398
17,122
364
( )
54
74
618
617
-39
17
9,140
2,398
1,736
1,736
7,583
7,053
46,088
30,492
15,597
29,802
17,280
12,522
..
2
215
182
32
230
188
42
242
38
511
2,876
283
11,692
2,876
283
11,692
3,116
281
10,815
4
4
11
41
20
11
41
20
1
1
1
1
258
258
235
14,636
..
r ')
56
45
609
606
r ')
..
Public and Indian Housing Programs:
Low-rent public housing-loans and other expenses
Payments for operation of low-income housing
projects ................ . ......................... .
Community Partnerships Against Crime ........... .
Other ......................................... .
242
38
511
Total-Public and Indian Housing Programs .. '
794
(' *)
793
15,065
182
14,883
14,443
Govemment National Mortgage Association:
Management and liquidating functions fund ............. .
Guarantees of mortgage-backed securities .............. .
3
17
-14
167
494
-326
Total-Government National Mortgage Association
3
17
-14
167
494
387
104
4,804
1,347
196
Community Planning and Development:
Community development grants ............ .. ........... .
Home investment partnerships program ................. .
Other ...................................................... .
3
)
3,116
281
10,815
188
14,255
( )
788
845
-57
-326
788
845
-57
91
4,804
1,347
105
4,621
1,286
265
90
4,621
1,286
176
91
6,256
6,172
90
6,082
414
4,228
16
510
60
-4,228
-16
..
387
104
14
6
8
499
6,347
54
54
8
8
510
60
Total-Community Planning and Development ........ .
505
Management and Administration ........................... .
Other ....................................................... ..
Proprietary receipts from the public ............... .
Offsetting governmental receipts .......................... ..
Total-Department of Housing and Urban
Development ............................................ .
(
16,000
6
3,618
-3,618
11,224
4,776
68,238
35,502
32,736
34
255
57
602
712
602
16
602
696
602
(* ')
414
55
55
3,030
16
-3,030
-16
51,673
21,449
30,224
592
663
688
15
592
648
688
2.257
Department of the Interior:
Land and Minerals Management:
Bureau of Land Management:
Management of lands and resources ............. .
Other ............................................ ..
Minerals Management Service ........................... .
Office of Surface Mining Reclamation and
Enforcement ............................ .
Total-Land and Minerals Management
Water and Science:
Bureau of Reclamation:
Water and related resources
Other ............................. ..
United States Geological Survey ............... .
Other ....................... ..
Total-Water and Science .......... .
Fish and Wildlife and Parks:
United States Fish and Wildlife Service
National Park Service .............................. .
Total-FiSh and Wildlife and Parks
34
256
57
329
29
29
356
356
329
376
375
2.272
16
2,256
2,272
15
59
56
69
601
423
801
295
601
128
801
586
390
736
179
6
37
37
42
190
1,861
1,566
1,755
135
115
135
1,308
1,620
1,308
1,620
1,302
1,726
1,302
1,726
250
250
2,928
2,928
3,028
3,028
59
105
69
48
6
238
48
115
11
295
179
586
211
736
42
1,576
and Other Periods-Continued
Table 5. Outlays of the U.S. Government, September 1999
[$ millions]
Classification
Department of the Interior.-Continued
This Month
Current Fiscal Veer to Dete
Gross IApPlicablel Outleys
Receipts
Outleys
Gross IApplicablel
Outleys Recaipts
Outleys
........................... .
-254
7,773
9,563
595
595
288
288
62
147
246
171
390
286
1.069
2.177
3.040
1.203
3.775
3,404
201
1.069
2.177
3.040
1.203
3.775
3.204
1,021
1,923
2,949
1,099
3,593
2,858
1,021
1,923
2,949
1,099
3,593
2,682
260
82
103
90
2,266
1,161
819
338
-59
1,477
968
978
318
-51
1,270
2,266
1,161
819
338
-59
-1,270
1,470
18,318
17,420
805
10,302
-22
-22
62
147
246
171
390
302
1,120
Other
308
476
185
-262
Totsl-Department of the Interior ..................... ..
General Administration
Legal Activities and United States Marshals:
United States Attorneys
.............. .
Other
............................. .
Federal Bureau of Investigation ............................ .
Drug Enforcement Administration ........................... .
Immigration and Naturalization Service ..................... .
Federal Prison System ..
. ............................. .
Office of Justice Programs:
Violent crime reduction programs ........................ .
Community oriented policing services .................... .
Other
............................... .
331
408
855
-2.160
-262
331
408
906
10
255
314
16
260
82
103
90
Intrabudgetary transactions ................................. .
Offsetting governmental receipts ........................... .
-7
Total-Department of Justice .......................... .
1,824
aua.,.
1.793
98
62
15
-255
-56
98
62
25
Gross IAppilcabiel
Outleys Receipts
DIfI
1.850
1.857
-56
Department of Justice:
r .)
127
127
Bureau of Indian Affairs
Departmental Offices:
Insular affairs
.......... .
Office of Special Trustee for American Indians
Other
Proprietary receipts from the public ...
. ......... .
Intrabudgetary transactions
............. .
Prior Fiscal VHr to
-7
7
51
2.160
2,529
12
1.781
308
20
2.105
476
165
-2.105
-254
2,331
176
7,232
1,4n
1.075
968
976
316
-51
-1,075
1,251
18,181
147
-147
163
1,661
19,788
447
39
40
27
447
39
40
27
4,675
267
441
326
4,675
267
441
326
4,644
16
448
283
4,644
16
448
283
7
7
45
45
219
219
23
23
21,180
3,361
140
186
19,933
3,085
204
183
3
19,933
3,065
Department of Labor:
Employment and Training Administration:
Training and employment services ....................... .
Welfare to work jobs ................. . .................. .
Community service employment for older Americans ... .
Federal unemployment benefits and allowances ........ .
State unemployment insurance and employment service
.............................. .
operations
Advances to the unemployment trust fund and other
funds ................................................... .
Unemployment trust fund:
Federal-State unemployment insurance:
State unemployment benefits ........................ .
State administrative expenses ......................... .
Federal administrative expenses ....................... .
Veterans employment and training .................... .
Other.
Total-Unemployment trust fund
Other
Total-Employment and Training Administration ...... .
Pension Benefit Guaranty Corporation ...
Employment Standards Administration:
Salaries and expenses
............... ..
Special benefits .............. ..
Black lung disability trust fund
Other
Occupational Safety and Health Administration .... :: .....
Bureau of Labor Statistics
Other
Proprietary receipts from the publiC ................ .
Intrabudgetary transactions ..................... .
Total-Department of Labor
.............................
1,509
298
11
16
(")
(")
4
21,180
3,361
140
186
4
1,834
1,834
24,870
24,870
23,408
23,408
7
7
91
91
89
69
2,402
2,402
30,738
30,738
29,106
29,1~
-23
1,231
-665
1,064
33
-420
554
17
30
29
56
1
-23
307
150
1,000
149
349
326
523
307
150
1,000
149
349
326
523
307
56
993
148
339
320
472
2,656
34,362
100
1,509
298
11
16
123
33
-420
554
17
30
29
56
-1
-23
2,778
122
12
1,897
6
-410
1,903
-6
204
183
3
2,281
'¥fI
56
993
148
nI
320
3
-410
-517
32,459
32,287
-1,218
2,285
472
-3
-517
Table 5. Outlays of the U.S. Government, September 1999 and Other Periods-Continued
[$ millions)
Classification
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross IAPPlicablel Outlays
Outlays Receipts
Gross lAPPlicabl1 0 tla s
Outlays Receipts
u y
Gross IAPPlic.ablel Outlays
Outlays Receipts
Department of State:
Administration 01 Foreign Affairs:
Diplomatic and consular programs ....................... .
Intemational Information Programs ....................... .
Security and maintenance of United States missions ... .
Payment to Foreign Service retirement and disability
fund ...................................................... .
Foreign Service retirement and disability fund .......... .
Other ...................................................... .
267
55
76
267
55
76
2.137
469
615
2.137
469
615
1.768
443
235
1,768
443
235
39
45
-166
39
45
-166
216
538
188
216
538
188
214
517
225
214
517
225
315
315
4.163
4.163
3,403
3,403
Intemational Organizations and Conferences .............. .
Migration and refugee assistance .......................... .
127
47
Other ........................................................ .
55
127
47
55
1.183
732
657
1.183
732
657
997
722
521
997
722
521
Proprietary receipts from the publiC ........................ .
Intrabudgetary transactions ................................. .
-47
-47
-269
Total-Department of State ............................. .
497
(* *)
497
6,466
265
36
59
39
2
265
36
59
38
400
2
Total-Administration of Foreign Affairs
(>0)
r *)
2
2
-2
-269
-268
2
6,464
5,374
2,812
392
669
296
7
2.812
392
669
289
398
4.170
7
128
128
Airport and airway trust fund:
Grants-in-aid for airports ............................... .
Facilities and equipment ............................... .
Research, engineering. and development ............. .
Trust fund share of FAA operations .................. .
187
274
16
343
Total-Airport and airway trust fund ............... .
819
Other ..................... ' ............................... ..
(* *)
-2
-268
2
5,373
2,657
353
647
269
6
2.657
353
647
263
4.163
3,925
6
3,919
1,455
1,455
3.352
3,352
187
274
16
343
1.565
2.195
4,122
1.565
2,195
174
4,122
1,511
2,226
203
1,929
1,511
2,226
203
1.929
819
8.056
8,056
5.868
5.868
2
-2
-1
4
-4
25
4
21
947
2
945
9,510
4
9.507
9,245
4
9,242
2.687
41
24
25
2.687
16
24
22.742
152
194
40
22.742
112
194
19,967
129
263
9
19.967
120
263
39
331
331
304
(* *)
I)epartment of Transportation:
Coast Guard:
Operating expenses .... ,...... .. ........................ .
Acquisition. construction. and improvements ............ .
Retired pay .............................................. ..
Other ...................................................... .
Total-Coast Guard ............................. .
Federal Aviation Administration:
Operations ........................ .
Total-Federal Aviation Administration
Federal Highway Administration:
Highway trust fund:
Federal-aid highways ....................................
Other .....................................................
Other programs ............................................
Total-Federal Highway Administration.................
National Highway Traffic Safety Administration ........
Federal Railroad Administration:
Capital Grants to the National Railroad Passenger
Corporation ............................................. ..
Other ...................................................... .
174
-----------------------------------------------------2.752
25
2.727
23.088
40
23.047
20.359
9
20.350
39
r *)
304
37
(* *)
37
244
195
7
244
189
479
613
7
479
606
37
(* ')
37
439
7
432
1.092
7
1,086
293
115
293
115
52
52
-106
1.524
4.252
-1,411
-106
1.524
4.252
-1,411
-181
1.873
2.260
345
-181
1.873
2.260
345
Total-Federal Transit Administration ................. .
460
460
4.259
4.259
4.297
4.297
Maritime Administration .................................... ..
43
-28
42
-30
-86
-6
448
229
597
255
116
123
216
-120
-24
-116
633
41,819
Total-Federal Railroad Administration
Federal Transit Administration:
Formula grants ............................................ .
Discretionary grants .. ' ................. ' ...... ' ......... ..
Trust fund share of expenses ........................... .
Other ...................................................... .
Other ....................................................... ..
2
1
86
Proprietary receipts from the public ....................... ..
Intrabudgetary transactions ................................ ..
Offsetting governmental receipts ..... , ..................... .
-6
Total-Department of Transportation ............•......
4,643
7
-7
125
4,519
13
325
13
120
-24
42,452
398
13
23
112
-23
-36
-112
572
39,467
-36
40,039
199
242
and Other Periods-Continued
Table 5. Outlays of the U.S. Government, September 1999
[$ millions]
Classification
Department of the Treasury:
Departmental Offices
Exchange stabilizatIOn fund
Other
Current Fiscal Year to Date
Gross jAPPlic.able j Outlays
Outlays
Receipts
Gross jAPPIiC8ble j 0 tl
Outlays
Receipts
u ays
Total-Financial Management Service
Federal FinanCing Bank
Bureau of Alcohol, Tobacco, and Firearms:
Salaries and expenses
Internal revenue collections for Puerto Rico ..
United States Customs Service
Bureau of Engraving and Printing
United States Mint
Bureau of the Public Debt
Internal Revenue Service:
Processing, assistance, and management
Tax law enforcement
Information systems
Payment where earned income credit exceeds liability
for tax
Payment where child credit exceeds liability for tax
Refunding internal revenue collections, interest
Other
Total-Internal Revenue Service .
United States Secret Service
Comptroller of the Currency
Office of Thrift Supervison
Interest on the public debt:
Public issues (accrual basis)
Special issues (cash basis) .
Total-Interest on the public debt
Other
Propnetary receipts from the public
Intra budgetary transactions
Offsetting governmental receipts
3,270
122
40
207
2.328
3,617
1,827
182
192
2,328
3,435
678
71
192
2.328
3.435
678
71
3,441
3,441
8,162
8,162
6,705
6,705
-109
-109
1,130
1,130
3,071
3,071
52
19
167
-18
616
13
52
19
167
-18
352
13
553
235
2,230
-40
1,923
305
553
235
2,230
-40
20
305
467
230
2,028
45
941
270
467
230
2,028
519
256
311
519
256
311
3,203
3,115
1,816
3,203
3,115
1,816
2,690
3,146
1,363
2,690
3,146
1,363
123
11
97
21
25,632
2446
2,724
144
23,239
6
25,632
446
2,724
139
23,239
(0 0)
123
11
97
21
2,599
126
10
2,599
116
1,338
(0 0)
1,337
37,080
6
37,074
33,163
10
33,153
60
31
12
60
30
11
732
405
149
401
141
732
4
8
639
357
139
389
143
639
-32
-3
18,286
1,499
18,286
1,499
228,382
125,129
228,382
125,129
241,567
122,256
241,567
122,256
19,785
19,785
353,511
353,511
363,824
363,824
184
1,208
184
-9,864
-5,114
-1,208
124
82
12
-5,989
-1,559
-82
24,081
6,403
17,678
401,607
14,327
387,280
1,387
48
23
1,387
26
17,846
666
262
680
-175
-13
1,777
80
1,549
1,072
523
21,148
1,445
117
1
11
23
1,201
12
138
69
2,500
27,157
39
522
961
9
3,270
122
40
263
-1,559
Veterans Benefits Administration:
Public enterprise funds:
Guaranty and indemnity fund
Loan guaranty revolving fund
Other
Compensation. pensions. and burial benefits
Readjustment benefits
...................................
Insurance funds:
National service life
....................
United States Government Life
Veterans special life
.............................
Other
Total-Veterans Benefits Administration
Total-Department of Veterans Affairs
680
-71
44
1,777
80
39
(00)
.................
104
57
117
1
14
23
2,664
Construction
Departmental Administration
Propnetary receipts from the publiC:
National Service life
Other
Intrabudgetary transactIOns
OutlaY'
207
2,328
3,617
1,827
182
9
5.989
Department of Veterans Affairs:
Veterans Health Administration:
Medical care
..................................
Other
Gross jAPPIIClblej
Outlays
Receipts
-371
538
-581
743
67
12
.....................
Prior Fiscal Ye.r to Date
-1,385
743
72
82
139
82
FinanCial Management Service:
Salanes and expenses
Payment to the Resolution Funding Corporation
Net Interest paid to loan guarantee financing accounts
Claims. ludgements, and relief acts
Other
Total-Department of the Treasury
This Month
3
164
r
0)
15
303
804
1,903
3,633
47,144
45
1,037
-96
270
402,673
12,579
390,094
17,846
404
17,271
572
227
17,271
344
1,549
-371
-4
21,148
1,445
1,150
1,609
556
20,289
1,310
1,201
12
-37
69
1,210
12
161
100
2,145
25,012
26,399
(0 0)
521
961
523
893
1,443
527
176
204
1,363
-9
S38
1,240
-5,114
(0 0)
-1.236
124
-8,895
-9,498
-1,240
9,864
-15
-303
864
'8,895
-9,498
-204
-1,363
-9
-37
43,169
45,620
71
1,648
570
179
2,467
..
(
)
1,079
-39
-13
20,289
1,310
1,210
12
-18
100
23,932
-523
893
217
933
-217
3,845
41,771
-933
-1/
~
4,138
505
3,975
~
14
Table 5. Outlays of the U.S. Government, September 1999 and Other Periods-Continued
[$ millions]
This Month
Classification
Gross jAPPlicable
Outlays Receipts
I
Outlays
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross IAPPlicableJ 0 II
Outlays Receipts
u ays
Gross /APPlic8ble/ 0 II
Outlays Receipts
u ays
Corps of Engineers:
218
191
55
49
24
Construction. general ....................................... .
Operation and maintenance. general ....................... .
Flood control ................................................ .
HarbOr maintenance trust fund ............................. .
1.233
1,661
495
281
905
45
218
191
55
49
24
-45
45
490
4,576
Other ........................................................ .
2.675
8
14
2,675
8
14
15,250
31,889
178
150
Proprietary receipts from the public ........................ .
Intrabudgetary transactions ................................. .
-33
-33
-15,447
Total-Other Defense Civil Programs .................. .
2,664
2,662
32,019
38
162
254
168
37
38
162
254
168
37
-48
607
1,873
2,745
1,577
623
Other ........................................................ .
Proprietary receipts from the public ........................ .
Total-Corps of Engineers
535
1,177
1,328
433
497
705
390
1,233
1,661
495
281
905
-390
390
4,186
4,140
15,250
31,889
178
150
-11
-15,447
15,119
31,142
152
132
-15,316
32,008
31,229
528
1,857
2,597
1,431
472
10
607
1,873
2,745
1,577
604
-320
-325
-10
348
6,752
6,636
46
56
307
1,177
1,328
433
497
705
-307
307
3,833
Other Defense Civil Programs:
Military Retirement:
Payment to military retirement fund ..................... .
Military retirement fund ................................... .
Educational Benefits ........................................ .
-1
11
11
12
12
15,119
31,142
152
132
-12
-15,316
31,216
Environmental Protection Agency:
Science and technology .................................... .
Environmental programs and management ................. .
State and tribal assistance grants ......................... .
Hazardous substance superfund ........................... .
Other ........................................................ .
(' .)
48
Proprietary receipts from the public ........................ .
Intrabudgetary transactions ................................. .
Offsetting govemmental receipts ........................... .
Total-Environmental Protection Agency .............. .
18
320
-325
-1
658
49
609
7,100
5
5
19
320
-250
528
1,857
2,597
1,431
453
-320
-250
9
-9
348
6,288
Executive Office of the President:
Compensation of the President and the White House
Office ....................................................... .
Office of Management and Budget ........................ .
Unanticipated needs ........................................ .
5
5
Other ........................................................ .
11
(. *)
11
51
59
153
153
(**)
51
59
153
153
134
(**)
134
21
(* *)
21
416
(* *)
416
236
(* *)
236
25
253
-72
26
82
-57
253
-72
26
609
3,746
104
277
687
-77
3,746
104
277
359
1,998
253
273
775
-416
1,998
253
273
(**)
(00)
9
-9
8
-8
696
4,040
2,884
783
2,101
1,039
-11
129
24
-216
13
181
-24
63
1,039
-11
129
-63
Total-Executive Office of the President
46
56
Federal Emergency Management Agency:
Public enterprise funds ..................................... .
Disaster relief ............................................... .
Emergency management planning and aSSistance ......... .
Other ........................................................ .
Proprietary receipts from the public ........................ .
Offsetting governmental receipts ........................... .
Total-Federal Emergency Management Agency
-1
81
151
4,736
-216
13
181
8
33
-109
15
-8
-61
8
-69
-22
24
-46
1,157
63
1,095
29
341
239
45
42
-13
341
239
45
308
3,357
2,349
353
470
358
3,118
2,461
250
521
5
-5
502
-162
3,357
2,349
353
-502
717
-163
3,118
2,461
250
-717
47
607
6,367
971
5,395
6,188
1,238
4,950
232
General Services Administration:
Real Property Activities ..................................... .
Supply and Technology Activities .......................... .
General Activities ............................................ .
Proprietary receipts from the public ........................ .
Total-General Services Administration
33
-109
15
Intemational Assistance Program:
Intemational Security Assistance:
Foreign military loan program ............................ .
Foreign military financing program ....................... .
Economic support fund ................................... .
Other ...................................................... .
Proprietary receipts from the public ..................... .
Total-International Security Assistance ..... .
653
Multilateral ASSistance:
Contribution to the International Development
ASSOCiation ............................................... .
Intemational organizations and programs ................ .
Other ...................................................... .
34
81
34
81
994
338
524
994
338
524
1,029
300
535
14
1,029
300
522
Total-Multilateral Assistance .......................... .
115
115
1,857
1,857
1,864
14
1,850
5
Table S.
Outlays of the U.S. Government, September 1999 ~~d Other Periods-Continued
[$ mllhons]
Classification
International Assistance Program:-Continued
InternatJOl'lal Development Assistance:
Agency for International Development:
Economic assistance loans
Sustainable development assistance program
Assistance for the new independent States of the
Former SoViet Union
Operating expenses
Payment to the Foreign Service retirement and
disability fund .
Other
Propnetary receipts from the public
Intrabudgetary transactions
Total-Agency for International Development
Overseas Private Investment Corporation
............
Peace Corps
Other
Total-International Development Assistance
Prior Fiscal Vear to DIll
Gross IAPPliC8bI4 Outlays
Outlays
Receipts
Gross IAPPIiC8bl;j Outla
ys
Outlays
Receipts
Gross IAppllca"i
Outlays
Receipts 0uIIIyt
-1
71
66
205
r 0)
19
-1
National Aeronautics and Space Administration:
Human space flight
Science, aeronautics, and technology
Mission support
Other
Total-National Aeronautics and Space
Administration ............................................
...........
....................
Office of Personnel Management:
Government payment for annuitants, employees health
and life insurance benefits
................
Payment to civil service retirement and disability fund ....
Civil service retirement and disability fund ..................
Employees life insurance fund
Employees and retired employees health benefits fund
Other
...............
Intrabudgetary transactions:
Civil service retirement and disability fund:
General fund contributions
Other
Total-Office of Personnel Management """"""'"
1,354
-1,215
1,354
44
50
652
484
652
484
626
493
626
493
108
45
1,476
44
1,230
(0 0)
(0 0)
-2
-3
2,346
3,744
1,309
2,435
..
-241
239
73
106
218
65
330
)
-224
1,504
2,418
4,133
1,639
-146
-151
12,159
-2
-11,624
1
14,010
14
10,059
26,058
185
1
r 0)
45
1,584
-2
85
284
3,530
23
22
9
22
1
22
9
79
239
73
320
106
..
(
316
3,921
-256
-146
..
12,159
6
1,154
)
)
-1,075
766
1,075
368
423
..
(
766
1,183
1,176
...............
(0 0)
-67
71
44
50
1,154
1
Total-International Assistance Program
Total-National Science Foundation
Current Fiscal Vear to Date
-256
International Monetary Programs
Military Sales Programs:
Foreign military sales trust fund
Other
Proprietary receipts from the public
Other
National Science Foundation:
Research and related activities
Education and human resources
Other
This Month
(
)
-1,176
1
(
8
11,624
14,107
r 0)
1,214
94
44
1,136
-1
-3
(00)
218
65
2,494
-151
14,010
53
14,135
-39
-14,135
I"
17,079
8,110
760
24,166
529
515
203
14
529
515
203
14
5,417
5,785
2,395
66
5,417
5,785
2,395
66
5,551
6,015
2,483
157
5,551
6,015
2,483
157
1,261
1,261
13,664
13,664
14,206
14,201
115
144
39
115
144
39
2,393
571
321
2,393
571
321
2,248
576
364
2,248
576
364
299
299
3,285
3,285
3,188
3,111
397
21,401
3,805
134
1,644
9
397
21,401
3,805
-26
180
9
4,479
21,401
43,932
1,613
18,483
91
4,479
21,401
43,932
-1,384
424
91
4,099
21,357
43,058
1,635
17,176
55
4,099
21,357
-21,401
-2
-21,401
-26
-21,401
-26
-21,357
-28
4,363
68,572
47,515
65,996
2,089
1,329
160
1,464
-21,401
-2
5,987
1,624
16
2,998
18,059
21,057
43,056
2,979
16,710
-1,344
466
55
-21,357
-28
19,689
48$1
Table 5. Outlays of the U.S. Government, September 1999 and Other Periods-Continued
[$ millions]
Classification
This Month
Current Fiscal Year to Date
Gross IAPPlicablel
Outlays
Outlays Receipts
Gross !APPlicable! 0 tl
Outlays Receipts
u ays
Prior Fiscal Year to Date
Gross
Outlays
!APPlic~blel
Receipts
Outlays
Small Business Administration:
Public enterprise funds:
Business loan fund ......... . ............................ .
Disaster loan fund ........................................ .
Other ...................................................... .
Other ........................................................ .
130
465
1
-219
110
17
1
r *)
20
448
(**)
-219
440
713
16
273
(* *)
3705
Proprietary receipts from the public ........................ .
Total-Small Business Administration
446
225
9
376
128
249
1,442
18
47
2,761
2
18
47
2,761
2
27,907
202
1,384
-5
488
7
273
-705
781
421
16
225
(**)
369
169
2
225
843
-843
1,521
-78
412
252
14
58
1,443
10,826
554
30,673
4
10,826
554
30,673
4
9,141
592
29,747
17
9,141
592
29,747
17
27,907
202
332,383
1,851
3,681
332,383
1,851
3,681
324,274
1,832
3,662
324,274
1,832
3,662
28,109
28,109
337,916
337,916
329,769
329,769
4,353
91
4,353
91
50,488
1,520
135
50,488
1,520
135
47,739
1,564
157
(**)
(**)
r *)
47,739
1,564
157
52,142
52,142
49,459
Social Security Administration:
Payments to social security trust funds ................... .
Special benefits for disabled coal miners .................. .
Supplemental security income program .................... .
Office of the Inspector General ............................ .
Federal old-age and survivors insurance trust fund (offbudget):
Benefit payments ......................................... .
Administrative expenses .................................. .
Payment to railroad retirement account ................. .
Total-FOASI trust fund ............................... .
Federal disability insurance trust fund (off-budget):
Benefit payments ......................................... .
Administrative expenses .................................. .
Payment to railroad retirement account ................. .
Other ...................................................... .
Total-FDI trust fund .................................. .
Proprietary receipts from the public:
On-budget ................................................. .
Off-budget ................................................ .
Intrabudgetary transactions:
Off-budget4 ................................................ .
Total-Social Security Administration
4,445
4,445
369
-26
-18
-369
26
1,479
21
-18
-10,824
-1,479
-21
(*
49,459
1,362
20
-10,824
-9,140
*J
-1,362
-20
-9,140
35,362
343
35,019
421,290
1,500
419,790
409,584
1,382
408,202
14
26
41
31
(**)
13
26
41
31
144
406
609
281
3
141
406
609
281
191
403
591
250
3
188
403
591
250
-5
-5
7
15
41
128
152
452
66
15
48
3,357
62
152
-2,905
146
471
201
21
83
1
69
21
14
258
885
3
1,053
255
-168
246
530
323
1,410
-168
3,293
1,369
-10
323
1,410
-158
-5
26
3,293
1,369
-32
1,769
4,810
32
32
(**)
459
3
149
30
310
-28
1,768
155
2,518
552
-751
-397
1,243
81
2,462
529
-1,219
-448
17
426
78
-409
-76
3,613
284
-3,364
-218
28
358
141
29
2,527
456
8
249
66
28
-2,169
-314
29
683
-195
2,266
6,968
-4,702
1,852
5,974
-4,122
25
25
-6
-6
308
298
226
230
1
491
308
298
225
-261
150
285
210
252
1
464
150
285
210
-212
Other independent agencies:
Appalachian Regional Commission ......................... .
Broadcasting board of governors .......................... .
Corporation for National and Community Service ......... .
Corporation for Public Broadcasting ....................... .
District of Columbia:
Courts ..................................................... .
Corrections ................................................ .
General and special payments ........................... .
Financing .................................................. .
Equal Employment Opportunity Commission ............... .
Export-Import Bank of the United States .................. .
Federal Communications Commission:
Universal service fund .................................... .
Spectrum auction subsidies .............................. .
Other ...................................................... .
Federal Deposit Insurance Corporation:
Bank insurance fund ..................................... .
Savings association insurance fund ...................... .
FSLIC resolution fund:
Resolution Trust Corporation closeout ................ .
Other .................................................... .
Office of Inspector General .............................. .
Total-Federal Deposit Insurance Corporation ........ .
Federal drug control programs ............................. .
Legal Services Corporation ................................. .
National Archives and Records Administration ............. .
National Credit Union Administration ....................... .
2
8
489
18
8
("*J
-60
17
18
68
50
1
738
146
471
201
-50
244
-208
1,769
4,810
and Other Periods-Continued
Table 5. Outlays of the U.S. Government, September 1999
[$ millions]
Current Fiscal Year to Date
This Month
Classification
Gross
Outlays
Gross !APPlicable! Outlays
Outlays
Receipts
Other independent agencies:-Continued
Naltonal Endowment for the Arts
Nataonal Endowment for the HumanitieS
Institute of Museum and library Services
Naltonal Labor Relations Board
Nuclear Regulatory Commission
Panama Canal CommisSion
Postal Service
Public enterpnse funds (off-budget)
Payment to the Postal Service fund
Railroad Retirement Board:
Federal Windfall subsidy
Federal payments to the railroad retirement accounts
Railroad unemployment Insurance trust fund:
Benefit payments
Administrative expenses
Rail Industry pension fund:
Benefit payments
Advances from FOASDI fund
OASDI certifications
Administrative expenses
Interest on refunds of taxes
Other
Supplemental annuity pension fund:
Benefit payments
Interest on refund of taxes
Railroad Social Security equivalent benefit account:
Benefit payments
Interest on refund of taxes
Other
Intra budgetary transactIOns:
Payments from other funds to the railroad retirement
trust funds
Other
9
9
15
15
40
62
8.762
53
55
9
9
15
15
-13
8
104
113
163
182
479
684
5,476
3.286
64,085
29
16
188
493
16
(* *)
r *)
6
6
220
-93
93
7
220
-93
93
7
(* *)
(* *j
1
1
!APPli~ble
I Outlay s
Receipts
442
758
63.064
Gross !APPllcabiel
Outlays
Receipts
104
113
163
182
37
-74
97
110
153
177
492
688
1,021
29
60.971
86
188
493
201
254
68
68
Prior Fiscal Year to
DIll
-
0utIe,.
-
97
110
153
In
455
739
60.754
38
-SO
217
86
201
254
59
59
r *)
r *j
r *j
(")
2.902
-1,118
1,118
88
1
5
2.902
-1,118
1,118
88
1
5
2.905
-1.124
1.124
87
3
5
2,905
-1,124
1,124
87
3
5
r *j
r *j
75
79
79
(* *)
(* *j
(* *j
(")
444
444
5,317
1
5,317
1
5,316
2
5,316
2
6
6
r *)
(* *j
75
(* *j
r *j
-3,816
-492
-3,816
-492
-3,819
-254
-3,819
-254
r *j
(")
700
700
4,830
4,830
4,837
4,837
..............
Securities and Exchange Commission
Smithsonian Institution
Tennessee Valley Authority
United States Enrichment Corporation Fund ................
.................
Other
-231
46
780
-255
486
8,785
1
1,222
8,783
-4
332
-255
486
2
5
890
-231
488
9,004
1,108
999
9,788
1,154
563
-231
486
-784
96
787
-1
35
-231
46
-7
1
60
....................
12,677
7,095
5,582
92,207
85,343
6,865
91,369
80,716
10,853
(* *j
r *)
3
-3
Total-Railroad Retirement Board
Total-Other independent agencies
(* *j
Undistributed offsetting receipts:
Other Interest
Employer share. employee retirement:
Department of Health and Human Services:
Federal hospital insurance trust fund:
Federal employer contributions
Postal Service employer contributions
Payments for military service credits
Department of State:
Foreign Service retirement and disability fund
Other Defense CiVil Programs:
MIlitary retirement fund
Office of Personnel Management:
CIVil service retirement and disability fund
Social Secunty Admlnl~tratlOn (off-budget):
Federal old-age and survivors insurance trust fund:
Federal employer contributions
Payments for military service credits ...............
Federal disability Insurance trust fund:
Federal employer contributions
Payments for military service credits
Other
Total-Employer share. employee retirement
-1
-46
436
-166
-51
-166
-51
-1,894
-611
-71
-1,894
-611
-71
-1,825
-607
-67
-1,825
-607
-67
-13
-13
-121
-121
-109
-109
-881
-881
-10,417
-10,417
-10,421
-10,421
-4,328
-4,328
-15,095
-15,095
-14,791
-14,791
-549
-549
-6,146
-228
-6,146
-228
-5,843
-243
-5,843
-975
-36
-1
-927
-39
-1
-flI
-35,594
-34,872
-34,872
-87
-87
(00)
(0 0)
-975
-36
-1
6.076
-6,076
-35,594
18
-243
-39
-1
-
Table 5. Outlays of the U.S. Government, September 1999 and Other Periods-Continued
[$ millions}
Classification
Undistributed offsetting receipts:-Continued
Interest received by trust funds:
Judicial Branch:
Judicial survivors annuity fund ......................... .
Department of Health and Human Services:
Federal hospital insurance trust fund ................. .
Federal supplementary medical insurance trust fund .,
Department of Labor:
Unemployment trust fund .............................. .
Department of State:
Foreign Service retirement and disability fund ........ .
United States Information Agency ..................... .
Department of Transportation:
Oil spill liability trust fund .............................. .
Airport and airway trust fund .......................... .
Highway trust fund ..................................... .
Department of Veterans Affairs:
National service life insurance fund ................... .
United States government life insurance fund ........ .
Corps of Engineers ....................................... .
Other Defense Civil Programs:
Military retirement fund ................................ .
Educational benefits fund .............................. .
Armed Forces Retirement Home ...................... .
Environmental Protection Agency ........................ .
National Aeronautics and Space Administration ......... .
Office of Personnel Management:
Civil service retirement and disability fund ............ .
Social Security Administration (off-budget):
Federal old-age and survivors insurance trust fund .. .
Federal disability insurance trust fund ................. .
Independent agencies:
Railroad Retirement Board ............................ ..
Other .................................................... .
Other ...................................................... .
Total-Interest received by trust funds ............... .
This Month
Current Fiscal Year to Date
Prior Fiscal Year to Date
Gross IAPPlicable! Outlays
Outlays
Receipts
Gross !APPlicable!
Outlays Receipts
Outlays
Gross !APPlicable! 0 tl s
Outlays Receipts
u ay
(* ')
(")
-25
-25
-11
-11
-16
-109
-16
-109
-9,287
-2,925
-9,287
-2,925
-9,154
-2,606
-9,154
-2,606
-13
-13
-4,795
-4,795
-4,304
-4,304
(")
(")
(")
(")
-710
-1
-710
-1
-695
-1
-695
-1
-41
-16
-41
-16
-48
-698
-48
-698
-68
-543
-2,004
-68
-543
-2,004
-936
-6
-68
-977
-6
-44
-977
-6
-44
-2
-2
(")
(")
-24
-24
-936
-6
-68
-385
-51
3
-385
-1
-1
-51
3
-12,560
-40
-6
-52
2
-12,560
-40
-6
-52
2
-12,358
-40
-8
-67
-1
-12,358
-40
-8
-67
-1
-28
-28
-33,579
-33,579
-31,766
-31,766
-80
-12
-80
-12
-46,847
-5,223
-46,847
-5,223
-42,197
-4,432
-42,197
-4,432
-35
-35
-2
-238
-313
-71
-444
-313
-71
-444
-2,017
-30
-508
-2,017
-30
-508
-1,052 -118,634
-118,634
-113,839
-113,839
-1
-1
-2
-238
-1,052
Rents and royalties on the outer continental shelf lands ..
Sale of major assets ...................................... ..
Spectrum auction proceeds ................................ ..
311
-311
3,098
-3,098
777
-777
1 ,753
-1,753
4,522
5,158
2,642
-4,522
-5,158
-2,642
Total-Undistributed offsetting receipts ............... .
-7,127
1,088
-8,215 -154,228
4,852 -159,080 -148,711
12,326
-161,036
Total outlays ................................................ .
180,257
36,291
143,966 1,940,158
235,612 1,704,545 1,876,355
224,131
1,652,224
Total on-budget .................... , ..................... .
139,687
30,841
108,846 1,556,295
172,527 1,383,767 1,498,978
163,356
1,335,622
Total off-budget .................... , ..................... .
40,569
5,450
60,774
316,602
35,120
383,863
63,085
320,778
377,376
Total surplus (+) or deficit ............................... .
+56,430
+122,740
+69,242
Total on-budget .......................................... .
+52,458
-951
-29,956
Total off-budget .......................................... .
+3,973
+123,691
+99,198
MEMORANDUM
Receipts offset against outlays
Proprietary receipts .................................................... ..
Intrabudgetary transactions ............................................. .
Governmental receipts .................................................. .
Total receipts offset against outlays ............................... .
[$ millions]
Current
Fiscal Year
to Date
Comparable Period
Prior Fiscal Year
65,397
283,371
4,853
353,621
69,605
276,479
5,574
351,657
'Outlays have been increased by $289 million in August 1999 to reflect an adjustment by the
Small Business Administration.
'Includes FICA and SECA tax credits, non-contributory military service credits, special benefits
for the aged. and credit for unnegotiated OASI benefit checks.
.. No Transactions.
Less than $500,000.
Note: Details may not add to totals due to rounding.
'Outlays for "Social services block grant" have decreased by $4 million, outlays for "Children
lnd families services programs" have increased by $2 million. outlays for Administration on Aging"
lave increased by $1 million, outlays for "Other" have increased by $1 million and "Proprietary
'eceipts from the pub~c" for the Department of the Treasury have increased by $2 million in
>eptember 1998 to reflect an adjustment by the Department of Health and Human Services.
2()utIays have been increased and refunds of taxes decreased by $435 million for January
1999 through August 1999 to reflect additional reporting for payments where child care credits
IXceed the liability for tax.
r ')
19
. the Deficit or Disposition of Surplus by the U.S. Government, September 1999 and Other Perioda
Table 6. Means 0 f Fmancm
9
[5 millions]
Net Transactions
(-) denotes net reduction of either
liability or asset accounts
Assets and Liabilities
Directly Related to
Budget Off-budget Activity
Account Balance,
Current Fiscal Year
Beginning of
Fiscal Year to Date
This Month
This Year
Uability accounts:
Borrowing from the public:
.
T .
PubliC debt secuntles, ISSUed under general Financing author! les.
ObllgallOns of the United States. issued by:
United States Treasury
Federal Financing Bank
Total. public debt securities
Deduct:
Federal securities held as investments of govemment accounts
(see Schedule D)
.............................................
Less discount on federal securities held as investments of
govemment accounts
Net federal securities held as investments of government
............
accounts
This Year
1
This Month
130.078
113.047
5.511.193
15.000
5.657.386
15.000
-16.115
130.078
113.047
5,526,193
5.672,386
5.641.271
15,000
5,656,271
-16
534
-200
1.648
648
864
2,202
79,051
2,018
80,165
80,698
-16.665
128,230
112,831
5,449,345
5.594,241
5,5n.575
283
-449
-3,814
'29,359
28,627
28,910
-16,383
127,782
109,017
5,478,704
5.622,868
5.606,486
31.747
2221,927
163.915
21,767,778
1.957,959
1,989,705
5,822
3,687
10,687
16,098
16,510
Agency securilles, ISSUed under special financing authorities (see
Schedule B. for other Agency borrowing, see Schedule C) .....
Total federal securities
Prior Year
CIoM 01
ThI,1IICInIII
-16.115
Plus premium on public debt securities
Less discount on public debt secuntles
Total public debt securities net of Premium and
discount
I
-
411
2,002
31,335
216.105
160.228
1,757,090
1.941,860
1,973,196
-47,718
-88.323
-51,211
3.721,613
3,681,008
3,633,290
............ ...........
Accrued interest payable to the public
............
Allocations of special drawing rights
Deposit funds ............... . .....................................
Miscellaneous liability accounts (includes checks outstanding etc.)
8.729
-346
-719
4,054
-2,845
80
188
498
-635
30
-824
-15
45,448
6,719
4,280
3,923
33,874
7,145
5,188
366
42,603
6.799
4,469
...............................................
-36,000
-90,402
-52,655
3,781,983
3,727,582
3,891,581
Asset accounts (deduct)
Cash and monetary assets:
U.S. Treasury operating cash: 3
Federal Reserve account .............. .......................
Tax and loan note accounts
.................. ..............
1,082
18.986
1,689
15,891
-2,740
-2,003
4,952
33,926
5,559
30,831
6,641
49,817
...........
20.069
17,580
-4.743
38,878
36,389
56,458
...........
-512
1,000
178
2.000
108
10,106
-9.200
10,796
-8,200
10,284
-7.200
488
2.178
108
906
2,596
3,084
663
-166
4
14,763
412
-15.750
-36
162
7,204
6
31,762
4.615
-14,884
-85
46.525
4,364
-30,467
-126
46,525
5,027
Total borrowing from the public
Total liability accounts
Balance
.................
Special drawing rights:
Total holdings..... . ...............................
SDR certificates issued to Federal Reserve Banks
Balance
.............
Reserve position on the U.S. quota in the IMF:
U.S. subSCription to International Monetary Fund:
Direct quota payments
...............
Maintenance of value adjustments
. . . . . . . . . . . . . . . . . ...........
Letter of credit issued to IMF
...............
Dollar deposits with the IMF
Receivable/Payable (-) for interim maintenance of value
adjustments
Total cash and monetary assets
........................
-30,633
-121
-406
-562
-262
-253
-409
-815
94
-1.173
7.110
21,155
19,887
19,982
-1.513
-495
887
495
3.375
495
26,153
28.552
27,040
Balance
Loans to International Monetary Fund . . . . . . . . . . . . . . . . . . . . .
Other cash and monetary assets
4,420
19.139
18.977
6.344
87.586
87,425
106,563
.............
..............
-5,500
5,280
2,012
-5,240
'18,124
1,486
-457
11,472
-203
-14,362
65.289
-83
-14,102
78,133
-610
19,603
83,413
1,403
Total asset accounts .............................. , ..................
20,930
33,347
17,157
138,430
150,846
171,~
....................................
-56,931
-123,749
-69,811
+3,643,554
+3,576,736
+3,519,1OS
500
1.009
569
508
1,009
-56,430
-122,740
-69,242
+3,577,244
+3,520~
Net ACtiVity, Guaranteed Loan Financing
Net ACtiVity, Direct Loan Financing
Miscellaneous asset accounts
Excess of liabilities (+) or assets (-)
TransactIOnS not applied to current year's surplus or deficit (see
Schedule A for Details)
Total budget and off-budget federal entities
(financing of deficit (+) or disposition of
surplus (-)) ................................................................
'Inclu<les a pnor penod adlustment to record secun\!es preViously redeemed
~ncludes an open'ng Dalance adlustment of -$1.763 million and an adjustment for year to date
act,,,,ty of S24 m,lloon to reflect the reclaSSlflcatoon of secunt'es held by government accounts to
QepoSIt funclS
+3,643,554
=-
=-
Centers, the Bureau of the Public Debt and various electronic systems. DepositS are refteCl8dreceived and withdrawals are reflected as processed.
..
'Includes an adjustment for -$289 million in August 1999 for the Small Business ~
tion.
No Transactions.
(- ') Less than $500,000.
Note Details may not add to totals due to rounding.
~~ap sources of Inf()r'T\ah()('\ used to determine Treasury s operating cash Income Indude
Feoe<al Reser.-e BankS the Treasury Regoonal FInance Centers the Internal Revenue Service
20
Table 6. Schedule A-Analysis of Change in Excess of Liabilities of the U.S. Government, September 1999 and
Other Periods
[$ millions]
Fiscal Year to Date
This Month
Classification
This Year
...
I
Prior Year
Excess of liabilities beginning of penod:
3,576,460
Based on composition of unified budget in preceding period
3,642,770
3,713,893
Adjustments during current fiscal year for changes in composition
of unified budget:
Revisions by federal agencies to the prior budget results ..... .
276
783
-528
--------------~------~Excess of liabilities beginning of period (current basis) ............... .
3,576,736
3,643,554
3,713,365
========~~==~~=
Budget surplus (-) or deficit:
Based on composition of unified budget in prior fiscal year ....... .
Changes in composition of unified budget .......................... ..
Total surplus (-) or deficit (Table 2) .................................. ..
Total-on-budget (Table 2)
-56,430
-122,740
-69,242
-----------------------------56,430
-122,740
-69,242
======================
-52,458
951
29,956
-3,973
-123,691
-99,198
Transactions not applied to current year's surplus or deficit:
Seigniorage ............................................................ .
-500
................................................. .
(' ')
-1,018
-9
-562
-7
Total-oft-budget (Table 2)
~oo~~~
Net gain (-)/Loss for International Monetary Fund
Loan valuation adjustments ....................................... ..
19
-----------------------------
Total-transactions not applied to current year's surplus or
deficit ............................................................... .
-500
-1,009
-569
======================
3,519,805
3,519,805
3,643,554
Excess of liabilities close of period .................................. .
Table 6. Schedule B-Securities Issued by Federal Agencies Under Special Financing Authorities, September 1999 and
Other Periods
[$ millions]
Net Transactions
(-) denotes net reduction of
liability accounts
Account Balances
Current Fiscal Year
Classification
Fiscal Year to Date
This Month
I
This Year
Beginning of
Prior Year
I
This Year
Close of
This month
This Month
.,
Agency secunties, ISSUed under special financing authorities:
Obligations of the United States, issued by:
Export-Import Bank of the United States .............................. ..
Federal Deposit Insurance Corporation:
FSLlC resolution fund ................................................. .
Obligations guaranteed by the United States, issued by:
Department of Housing and Urban Development:
Federal Housing Administration ....................................... .
Department of the Interior:
Bureau of Land Management ........................................ ..
Obligations not guaranteed by the United States, issued by:
Legislative Branch:
Architect of the Capitol .............................................. ..
Independent agencies:
Farm Credit System Financial Assistance Corporation ............... .
National Archives and Records Administration ....................... .
Postal Service ......................................................... .
Tennessee Valley Authority ........................................... .
Total, agency securities •.••.•.•....•.•.•..................•.•...•.
..
)
r *)
r *)
-32
63
63
63
-59
105
174
109
114
7
-2
177
183
184
277
-5
-83
-308
-5
-3,181
-701
1,261
281
717
26,685
1,261
276
634
26,101
1,261
276
634
26,378
283
-449
-3,814
29,359
28,627
28,910
(
5
(' 'j Less than $500,000.
Note: Details may not add to totals due to rounding.
'Includes a prior period adjustment to record securities previously redeemded.
'" No Transactions.
21
Table 6. Schedule C (Memorandum)-Federal Agency Borrowing Financed Through the Issue of Public Debt Secu~
September 1999 and Other Periods
[$ millions]
Account Balances
Current Fiscal Year
Transactions
Classification
Fiscal Year to Date
Beginning of
I Prior Year
Borrowing from the Treasury:
Department of Agnculture:
Farm Service Agency:
Commodity Credit Corporation
Agncultural credit insurance fund
Natural Resources Conservation Service
Rural HOUSing Service:
Rural community facility loans fund
Rural hOUSing insurance
Self-help housing land development fund
Rural BUSiness - Cooperative Service:
Rural business and industry loans
Rural development loan fund
...............
Rural economic development loan fund
Rural Utilities Service:
Rural water and waste disposal fund
Rural communication development fund
Rural electrification and telecommunications fund
Rural telephone bank
Distance learning and telemedicine program
...........
Rural development insurance fund
.............
Foreign Agricultural Service
Department of Commerce:
National Oceanic and Atmospheric Administration:
.....................
Fisheries finance
Fishing vessel obligations
.............. .. .....
Department of Education:
Federal direct student loan program ....................
Federal family education loan program . . . . . . . . . . . . . . . . . . . . .
College housing and academic facilities loans ............. .............
Department of Energy:
Bonneville Power Administration fund
Department of Housing and Urban Development:
Housing Programs:
Federal Housing Administration
....... ... .......
Housing for the elderly and handicapped
...........
Public and Indian housing:
low-rent public housing ...........
. ...........
Department of Interior:
Bureau of Reclamation loan fund
Helium fund
Bureau of Indian Affairs
....... . . ......... ... . . ....
Department of Justice:
Federal Prison Industries. Incorporated ...........................
Department of State:
Repatriation loans
............................................
Department of Transportation:
Minonty business resource center fund
Federal Aviation Administration:
Aircraft purchase loan guarantee program
Federal Railroad Administration:
Alameda corridor project
Railroad rehabilitation and improvement loan fund
Other
Department of Treasury:
Community development finanCial institutions fund ...........
Federal Financing Bank revolving fund
...................
Department of Veterans Affairs:
Veterans housing benefit program fund ...........................
loan guaranty revolving fund
Direct loan revolving fund
Native Amencan veteran hOUSing fund
VocatIOnal rehabihtation loan fund
................
Corps of EngIneers'
WashIngton aqueduct
EnVIronmental Protection Agency:
Abatement. contrOl, and compliance loan program
Federal Emergency Management Agency
NatIOnal Insurance development fund
D,saster assIstance loan fund
825
-723
12.020
668
92
605
This month
9.794
324
17.543
2.390
4
28.738
3.781
4
29.563
3.058
409
723
611
7.197
810
8.217
704
7.802
(' ')
-106
-415
I This Month
This Year
Clolt 01
This Month
This Year
-
(' ')
17
18
11
26
128
49
48
145
62
151
(' ')
22
23
13
-246
387
1.541
-376
-2
-1
353
-79
1
-75
119
250
-45
2.530
25
9.232
432
-1.375
-28
1.076
642
3.163
25
9.962
355
2
1.001
803
2.917
25
9.585
353
1
1.001
761
(' ')
6
-42
48
62
-1
87
(' ')
(' ')
30
8
55
10
143
10
142
10
-4.509
-117
-29
16.972
-117
-27
12.384
-237
-68
35.097
117
396
56.579
117
399
52.070
80
16
r ')
2.499
2.435
2.515
1.417
1.417
-665
2.941
-881
6.579
5.293
6.579
4.628
7.996
4.628
-25
370
25
3
16
15
-2
-2
-1
65
252
28
79
252
28
82
252
26
20
20
20
r ')
(' ')
(' ')
r ')
r ')
(',
-9
4
-5
9
22
14
..
)
(',
248
248
366
..
)
(' *)
(',
..
(
119
119
)
128
..
(
)
..
(
(
..
(
)
)
(
3.775
4
-5.921
1
-909
5
34.036
9
24.340
9
28.115
-1.237
764
107
-2.028
1.759
3.761
2.523
-9
-2
1
-8
(* *)
15
1
25
3
16
)
10
13
13
22
23
38
38
38
525
50
544
73
(* *)
-15
22
..
(
19
9
-395
-13
~
59
Table 6. Schedule C (Memorandum)-Federal Agency Borrowing Financed Through the Issue of Public Debt Securities
'
September 1999 and Other Periods-Continued
[$ millions)
Account Balances
Current Fiscal Year
Transactions
Classification
Fiscal Year to Date
Beginning of
This Month
r
This Year
Borrowing from the Treasury:-Conttnued
General Services Administration:
Land aquisition and development fund ................................ .
International Assistance Program:
Intemational Security Assistance:
Foreign military loan program ........................................ .
Military debt reduction ............................................... .
Agency for Intemational Development:
Intemational debt reduction .......................................... .
Housing and other credit guaranty programs ....................... .
Microenterprise and small enterprise development .................. .
Overseas Private Investment Corporation .............................. .
Small Business Administration:
Business loan fund ..................................................... .
Disaster loan fund ...................................................... .
Independent agencies:
District of Columbia ..................................................... .
Export·lmport Bank of the United States ............................ ..
Federal Communications Commission:
Spectrum auction loan fund .... .
Presidio trust fund ...................................................... .
Railroad Retirement Board:
Rail industry pension fund ........................................... .
Social Security equivalent benefit account .......................... .
Smithsonian Institution:
John F. Kennedy Center parking facilities .......................... .
Tennessee Valley Authority ............................................. .
Total agency borrowing from the Treasury
financed through public debt securities issued
Prior Year
This Year
I
Close of
This month
This Month
-85
(* *)
(* *)
(* *)
1,542
6
1,782
7
1,508
7
234
72
3
76
148
48
2
63
-274
-1
-34
(* *)
134
3
-86
-24
-1
-13
-86
-24
-38
(* *)
(* *)
-6
-17
234
72
2
68
6
122
22
244
8
145
399
9,160
416
9,283
421
9,404
-195
2,647
-223
815
3,956
6,798
6,603
-619
-619
20
-2,563
4,558
4,558
20
3,939
20
252
-145
-45
2,128
2,865
2,128
2,468
2,128
2,720
20
150
20
150
20
150
-2,473
28,878
20,854
154,155
185,506
183,033
-145
-2,375
-4,030
9,500
7,270
7,125
-84
-282
-265
-652
18,766
3,675
18,569
3,410
18,485
3,410
-86
-83
1,624
-399
1,624
-486
1,624
-486
6
4
5
11
11
-4
-6
7
3
3
-1
-1
3
2
2
-72
-17
-70
-6
1,491
30
1,420
14
1,420
13
-1
-1
17
16
16
(* *)
(* *)
(* *)
4
4
4
-3
-68
-33
87
1,760
713
1,696
713
1,692
713
-18
-218
-219
2,829
2,629
2,611
-4
-40
-41
233
198
194
-1,375
3,733
5,696
2,250
6,279
-3,990
45,955
39,341
43,116
IIorrowing from the Federal Financing Bank:
Department of Agriculture:
Rural Housing Service:
Rural housing insurance fund .................................. .
Rural Utilities Service:
Rural electrification and telecommunications fund ................... .
Rural development insurance fund ................................... .
Department of Defense:
Department of Navy ................................................... ..
Defense agencies ....................................................... .
Department of Education:
Historically Black college and university capital
financing fund ......................................................... ..
Department of Health and Human Services:
Medical facilities guarantee and loan fund ............................ ..
Health maintenance organization loan and
loan guarantee fund ................................................... .
Department of Housing and Urban Development:
Low rent housing - loans and other expenses ...................... .
Community development grants ........................................ .
Department of Interior:
ASSistance to territories ................................................ .
Department of Transportation:
RBllroad rehabilitation and improvement loan fund .................... .
General Services Administration:
Federal buildings fund .................................................. .
Pennsylvania avenue activities .......................................... .
International Assistance Program:
Foreign military financing program ..................................... .
Small Business Administration:
BUSiness loan fund .................................................... ..
Independent agencies:
Export.lmport Bank of the United States ............................ ..
FSLlC resolution fund:
Resolution Trust Corporation closeout .............................. .
Postal Service ........................................................... .
4,029
583
Total borrowing from the Federal Financing Bank .•.•.........•.•.
3,775
-2,839
(* *)
(* *)
-1,295
... No Transactions.
Note: This table includes lending by the Federal Financing Bank accomplished by the purchase
,I agency financial assets, by the acquisition of agency debt securities. and by direct loans on
eIlalf of an agency. The Federal Financing Bank borrows from Treasury and issues its own
ecurities and in tum may loan these funds to agencies in lieu of agencies borrowing directly
lrough Treasury or issuing their own securities.
(* ') Less than $500,000.
Note: Details may not add to totals due to rounding.
23
Table 6. Schedule D-Investments of Federal Government Accounts in Federal Securities, September 1999 and
Other Periods
[$ millions]
Securities Held as Investmenta
Current Fiscal Year
Net Purchases or Sales (-)
Classification
I Prior Year
This Year
Federal funds:
Department of Agnculture
Department of Commerce
Department of Defense-Military:
Defense cooperation account
Department of Energy
Department of Housing and Urban Development:
Housing Programs:
Federal Housing Administration fund
Government National Mortgage Association:
Guarantees of mortgage-backed securities
Other
Department of the Interior
Department of Labor
Department of Transportation
Department of the Treasury ..... .
Department of Veterans Affairs:
Canteen service revolving fund
Veterans reopened insurance fund ......................... .
Servicemen's group life insurance fund
Independent agencies:
Export-Import Bank of the United States
Federal Deposit Insurance Corporation:
Bank insurance fund
........... .
Savings association insurance fund
FSlIC resolution fund
National Credit Union Administration
Postal Service
.......... .
Other
Other
Total public debt securities
Total Federal funds
Beginning of
Fiscal Year to Date
This Month
This Year
5
-7
14
16
Cloae 01
I This Month
14
ThIIIllCllllll
4
4
3
-5
140
4,399
5,320
1
12,449
16,708
16,848
-2,749
597
875
14,350
17,696
14,947
14
3
332
37
1151
68
5,449
168
12,295
5,781
514
142
16,389
5,767
202
2,438
9,349
102
16,632
15,676
37
513
5
37
509
5
..
(
8
26
1
-956
)
600
-40
-713
..
)
(
115
940
-3
-1
28,775
8
1
18
11
1
205
2,~
9,375
103
..
(
..
)
38
516
4
-369
489
-426
528
1,386
1,017
-291
53
75
-68
642
274
914
542
27,445
9,602
2,087
3,906
1,000
2,713
4,203
28,650
10,091
2,229
4,227
167
2,861
4,627
28,359
10,144
2,304
4,159
-1
253
-191
421
3423
1,116
337
281
211
140
621
351
-3,197
8,425
10,453
112.090
123,712
120,515
-3,197
8,425
10,453
112,090
123,712
120,515
..
33
6
37
33
-4
-6
(
)
217
-5
809
3,135
4,626
Trust funds:
....
Legislative BranCh:
Library of Congress
United States Tax Court
Other
Judicial Branch:
Judicial retirement funds
.................. ..
Department of Agriculture ........................... ..
Department of Defense-Military:
Voluntary separation incentive fund .......... .
Other
(
(
)
)
9
1
1
28
6
36
-3
-15
45
-6
46
-1
398
6
446
15
-33
16
-4
11
-2
873
64
922
59
(" .)
24
..5
(
)
(
)
7
37
889
60
Table 6. Schedule D-Investments of Federal Government Accounts in Federal Securities, September 1999 and
Other Periods-Continued
[$ millions)
Securities Held as Investments
Current Fiscal Year
Net Purchases or Sales (-)
Classification
Fiscal Year to Date
This Month
I
This Year
Beginning of
Prior Year
This Year
Close of
This month
1
This Month
'Trust Funds-Continued
Department of Health and Human Services:
Federal hospital insurance trust fund .................................. .
Federal supplementary medical insurance trust fund .................. .
Other ................ · .... ·· .. · ....... ··· ..... · .......................... .
Department of the Interior ............................................... ..
Department of Justice .................................................... .
Department of Labor:
Unemployment trust fund .............................................. ..
Other .................................................................... .
Department of State:
Foreign Service retirement and disability fund ......................... .
Other .................................................................... .
Department of Transportation:
Airport and airway trust fund ......................................... ..
Highway trust fund .................................................... ..
Other ................................................................... ..
Department of Treasury .................................................. .
Department of Veterans Affairs:
General post fund, national homes ................................... ..
National service life insurance ......................................... ..
United States government life insurance fund ......................... .
Veterans special life insurance fund ................................... .
Corps of Engineers ....................................................... .
Other Defense Civil Programs:
Military retirement fund ................................................. .
Other .................................................................... .
Environmental Protection Agency ......................................... .
Federal Emergency Management Agency ............................... ..
National Aeronautics and Space Administration ......................... .
Office of Personnel Management:
Civil service retirement and disability fund:
Public debt securities ................................................. .
Agency securities .................................................... ..
Employees life insurance fund ........................................ ..
Employees and retired employees health benefits fund ............... .
Social Security Administration:
Federal Old-age and survivors insurance trust fund ................... .
Federal disability insurance trust fund ................................. .
Independent agencies:
Harry S. Truman Memorial Scholarship trust fund .................... .
Japan-United States Friendship Commission .......................... .
Railroad Retirement Board ............................................ ..
Other .................................................................... .
11,813
-5,774
44
20
-82
35,517
-12,973
148
-10
-72
1,629
5,037
28
-25
94
118,250
39,502
1,298
397
94
141,955
32,303
1,402
367
104
153,767
26,528
1,446
387
22
-1,425
6,716
-9
2
8,718
-12
70,641
55
78,782
66
77,358
57
10,131
10
581
572
9,550
10,121
-3
-3
-6
3
3
102
1,750
62
-28
3,864
10,157
74
1
2,189
-4,415
28
36
8,550
17,926
2,138
309
12,312
26,333
2,151
339
12,414
28,083
2,212
311
5
6
-55
8
-14
-6
-6
37
355
18
141
45
12,008
86
1,628
1,621
46
12,055
81
1,677
1,964
51
11,954
80
1,666
1,976
-3
17
142,585
744
5,931
2
17
141,274
776
6,052
-4
7,821
52
-448
-1
1
133,843
693
6,529
(* *)
7,431
83
-477
2
22,358
26
-178
33,883
-3,283
1,379
-430
32,353
-3,181
1,338
-522
446,757
3,917
19,377
6,265
458,282
634
20,729
6,013
480,640
634
20,755
5,835
6,369
1,036
108,944
15,670
85,837
13,434
653,282
76,996
755,857
91,630
762,226
92,666
-1
1
26
2,535
3,345
(* *)
(* *)
55
2,572
121
16
21,811
620
58
42
24,149
3,998
57
42
24,345
3,964
-101
-1
-12
12
-1,311
32
121
(* *)
197
-34
(* *)
2
13
Total public debt securities .......................................... .
Total agency securities ............................................... .
34,944
216,786
-3,283
156,643
-3,181
1,651,771
3,917
1,833,613
634
1,868,557
634
Total trust funds •.....•.•...•.••..••••••.•.•••.•..•••••••••.•••.•
34,944
213,503
153,462
1,655,688
1,834,247
1,869,191
irand total."., ... , .. , .. ,., ... , ........................................... ..
31,747
221,927
163,915
1,767,778
1,957,959
1,989,705
'Includes an opening balance adjustment of -$1,755 million and an adjustment for year to date
:tivity of $26 million to reflect the reclassification of securities held by government accounts to
!pOSit funds.
~ncludes an adjustment of -$7 million to reflect the reclassification of securities held by
,vemment accounts to deposit funds.
31ncludes an adjustment of -$2 million to reflect the reclassification of securities held by
goverment accounts to deposit funds.
. No Transactions.
(' *) Less than $500,000.
Note: Investments are in public debt securities unless otherwise noted.
Note: Details may not add to totals due to rounding.
25
Table 6.
Schedule E-Net Activity, Guaranteed and Direct Loan Financing, September 1999 and Other Periods
[$ millions]
Net Transactions
(-) denotes net reduction of
asset accounts
~
Classification
Beginning of
Fiscal Year to Date
This Month
I
This Year
Guaranteed Loan Financing Activity:
Department of Agnculture
Farm Service Agency:
Commodity Credit Corporation export fund
Agncultural credit insurance fund
Rural HOUSing Service:
Rural community facility loans
Rural hOUSing Insurance fund
Rural Buslness~Cooperative Service:
Rural bUSiness and industry loans
Rural UtllllleS Service:
Rural water and waste disposal fund
Department of Commerce:
National Oceanic and Atmospheric Administration:
Fishing vessel obligations
Department of Defense-Military
Department of Education:
Office of Postsecondary Education:
Federal family education loans
Department of Health and Human Services:
Health Resources and Services Administration:
Health center loans
Health education assistance loans
Department of Housing and Urban Development:
PubliC and Indian Housing Programs:
Indian housing loans
Community Planning and Development:
Community development loans
Housing Programs:
FHA~Mutual mortgage insurance loans
FHA~General and special risk fund
Government National Mortgage Association:
Guarantees of mortgaged~backed securities
Department of the Interior:
Bureau of Indian Affairs
Department of Transportation:
............
Mantlme Administration
Department of Veterans Affairs:
Veterans Benefits Administration:
Veterans housing benefit program fund . . . . . . . . . . . . . . . . . . . .
........................
loan guaranty revolving fund
International Assistance Program:
Agency for International Development:
. . . . . . . . . . ..
Ukraine export credit insurance fund
loan guarantees to Israel .......................
. ..........
Urban and environmental credit guaranteed loans
Microenterprise and small enterprise development
Overseas Private Investment Corporation ...............
Small Business Administration:
BUSiness loan fund
Independent agencies:
Export~lmport Bank of the United States ....................
Net Activity, Guaranteed Loan Financing
Account Balances
Current Fiscal Year
..........................
This Year
Prior Year
I
Clolt of
This mantII
This Month
24
-7
15
-19
-339
-88
-499
-256
-508
-268
-484
-275
(0 0)
-10
4
-130
-1
-9
-3
-80
1
-199
1
-210
-6
-57
-13
-30
-81
-87
(OO)
(OO)
(OO)
-24
-24
-24
(OO)
(OO)
-1
-1
11
-3
8
-3
7
-4
-.4
-1.605
-1,980
-26
-7,983
-8,358
-9,962
(OO)
(OO)
-24
-37
-1
-11
-1
-262
-1
-275
-299
(OO)
-2
-3
-4
-6
~
-2
-9
-5
-7
-14
-16
-2,457
-645
-1,589
-274
2,166
-231
5,069
-90
5,937
281
3,480
276
-84
-269
-424
-784
-508
-2
-10
-1
-19
-27
-29
73
56
-62
-246
-263
-190
-653
-928
-467
-3,618
-1
-3,893
-1
-4,546
-2
-35
-15
-2
-118
-12
-1
-93
-28
-515
-49
-3
-275
-28
-515
-53
-2
-357
-30
-550
-68
-2
-13
-2
-35
-18
1
-94
-109
387
104
-1,209
-713
-822
-289
-436
-984
-3,810
-3,957
-4,245
-5,500
-5,240
-457
-14,362
-14,102
-1',101
164
643
254
2,053
2,532
2,896
2
-4
-2
-2
143
590
101
703
316
7,017
414
7,105
7/111
(OO)
(OO)
(H)
23
28
16
20
19
103
38
123
131
(OO)
Direct Loan Financing Activity:
Department of Agnculture
Farm Service Agency:
Agncultural credit insurance fund ......................................
Natural Resources Conservation Service:
Agncultural resource conservation demonstration program
Rural HOUSing Service:
Rural community faCility loans fund
.............
Rural hOUSing Insurance fund
Self~help hOUSing land development fund
............
Rural Buslness~Cooperatlve Service:
Rural bUSiness and Industry loan fund
Rural development loan fund
(OO)
45
502
4
8
26
-1
-384
-1
-369
-
e
43
Table 6. Schedule E-Net Activity, Guaranteed and Direct Loan Financing, September 1999 and Other Periods-Continued
[$ millions]
Net Transactions
(-) denotes net reduction of
asset accounts
Account Balances
Current Fiscal Year
Classification
Fiscal Year to Date
This Month
Beginning of
I Prior Year
This Year
..
This Year
I This Month
Close of
This month
Direct Loan Financing Actlvlty.-Contlnued
Department of Agriculture:-Continued
Rural economic development loan fund .............................. .
Rural Utilities Service:
Rural water and waste disposal loans .............................. ..
Rural electrification and telecommunications fund .................... .
Rural telephone bank .................................................. .
Distance leaming and telemedicine program ......................... .
Rural development insurance fund .................................... .
Foreign Agricultural Service:
P.L. 480 direct loan fund ............................................. .
Intemational debt reduction ........................................... .
P.L. 480, title 1, Food for progress credits ......................... ..
Department of Commerce:
National Oceanic and Atmospheric Administration:
Fisheries finance ....................................................... .
Department of Education:
Office of Postsecondary Education:
Federal direct student loan program ................................. ..
College housing and academic facilities loans ....................... .
Historically Black college and university capital financing fund
Department of Housing and Urban Development:
Housing Programs:
FHA-Mutual mortgage insurance loans .............................. ..
FHA-General and special risk fund .................................. ..
Department of the Interior:
Bureau of Reclamation ................................................. ..
Bureau of Indian Affairs ................................................. .
Department of State:
Administration of Foreign Affairs:
Repatriation loans ...................................................... .
Department of Transportation:
Office of the Secretary:
Minority business resource center ................................... ..
Federal Highway Administration:
High priority corridors loan fund ...................................... .
Federal Railroad Administration:
Alameda corridor project .............................................. .
Railroad rehabilitation and improvement loan fund ................... .
Amtrak corridor improvement loans ................................... .
Department of the Treasury:
Departmental Offices:
Community development financial institutions fund ................... .
Financial Management Service ........................................... .
Department of Veterans Affairs:
Veterans Benefits Administration:
Veterans housing benefit program fund .............................. .
Loan guaranty fund ................................................... .
Direct loan fund ....................................................... .
Native American veteran housing fund .............................. ..
Vocational rehabilitation loan fund ................................... ..
Environmental Protection Agency:
Abatement, control, and compliance loan program ..................... .
Federal Emergency Management Agency:
Disaster assistance loan fund .......................................... ..
ntemational Assistance Program:
Intemational Security Assistance:
Foreign military loan program ........................................ ..
Military debt reduction ................................................. .
Agency for International Development:
Intemational debt reduction ........................................... .
Microenterprise and small enterprise development ................... .
Overseas Private Investment Corporation ............................... .
,mall Business Administration:
Business loan fund ..................................................... ..
Disaster loan fu nd ....................................................... .
ndependent agencies:
District of Columbia ..................................................... ..
Export-Import Bank of the United States ............................... .
Federal Communications Commission:
Spectrum auction loan fund ........................................... .
Net Activity, Direct Loan Financing •.•..•.•.••.•.•.•.•....•.•.•.....•.
3
14
7
39
51
54
191
251
13
461
781
39
1
473
848
24
1,479
4,621
167
1,748
5,151
192
1,065
1,065
1,940
5,402
205
1
1,065
(' *)
(**)
30
-2
12
47
-9
-3
33
2
-3
369
43
183
386
37
168
417
34
180
7
98
26
26
117
124
4,450
14,056
4
6
10,894
1
4
32,796
15
5
42,402
18
11
46,852
18
11
-2
-1
-1
-4
(* *)
(* *)
(* *)
-1
3
(**)
6
1
(* *)
20
-2
64
24
74
23
79
24
(**)
(* *)
(* *)
-2
-2
-2
(**)
2
(* *)
5
6
7
248
2
-1
248
2
-1
366
2
-1
(* *)
(**)
(* *)
16
-1
3
119
119
128
(**)
(* *)
(* *)
(* *)
3
4
6
7
(* *)
(* *)
(**)
326
555
651
555
1,004
555
(* *)
(* ')
(**)
15
1
16
1
353
678
-336
1
1
1
(**)
(**)
(' *)
15
1
2
-2
-2
36
32
34
3
18
-16
39
55
58
210
2
56
(* *)
95
3
1,373
6
1,219
5
1,429
7
126
1
42
117
3
39
92
2
39
-26
-1
-34
(**)
-3
-60
-1
-28
-1
-337
-5
-232
-8
195
90
4,214
85
4,319
84
3,982
202
1,679
-223
905
3,308
4,784
4,986
-929
-1,092
-2,608
4,502
4.339
3,410
5,280
18,124
11,472
65,289
78,133
83,413
(**)
expenses and subsidy payments are reported on a cash basis and included within each program's
budgetary totals in Table 5.
... No Transactions.
C 'j Less than $500.000.
Note: Details may not add to totals due to rounding.
Note: Federal credit programs provide benefits to the public in the form of direct loans and loan
arantees. This table reflects cash transactions and balances of the nonbudgetary financing fund
:aunts that result from the disbursement of loans. collection of fees, repayment of principle. sale
COllateral. interest. and subsidy received from the credit program accounts at net present value
accordance with the Credit Reform Act of 1990. Unreimbursed costs such as administrative
27
~~nth, Fiscal Year 1999
Table 7. Receipts and Outlays of the U.S. Government by
[$ millions]
Receipts:
IndiVIdual Income taxes
CorporatlOl1 Income taxes
SOCIal Insurance and retirement receipts:
Employment and general retirement
Unemployment Insurance
Other retirement
ExCise taxes
Estate and gift taxes
Cus tom s dutieS
Miscellaneous receipts
Total-Receipts this year
Nov.
Oct.
Classification
...........
Dec.
Jan.
March
Feb.
April
30,661
3.948
93,020
39.264
59,992
3.405
60.719
3.697
89.250
40.235
879.480
184.680
39.690
1,142
405
9,630
2.089
1,776
3.228
42,940
2.655
331
6,021
2,132
1.380
3,738
47,869
315
417
5.446
2.239
1,472
2,527
53,725
867
337
4,806
2.206
1,286
3.509
43,735
2,594
353
3,892
1.600
1.403
1.868
48,592
269
355
5.880
2,172
1.546
2.457
60.186
4.547
428
5.579
5.138
1.350
2.383
45.617
7.731
350
4.978
1.942
1.256
2.181
54.380
370
393
5,880
1.857
1.599
2.742
44.392
1.573
403
5.723
1.938
1.725
2,771
44.960
4.085
344
5.397
2.175
1.814
3.131
54.794
332
356
7.167
2.294
1.727
4.242
580,880
26.480
4.472
70,399
27,782
18.336
540,015
27,.
34,7n
32.325
119,974 113,978 178,646 171,728
99,502 130,416 266,229
29,910
32,142
41,801
34,356
37,867
Department of Education .
Department of Energy .
Department 01 Health and Human
ServICeS:
Public Health Service
Health Care FinanCing Administration:
Grants to States for Medicaid
Federal hOSpital Ins. trust fund
Federal supp. med. ins. trust
fund
Othet
AdministratIOn for Children and
Families
Other
Department of HOUSing and Urban
Development
Department of the Intenor
Department of Jusbce
Department of Labor:
Unemployment trust fund
Other
Department of State
Department of Transportation
Highway trust fund
Other
Department of the Treasury:
Intetest on the public debt
Other
Department of Veletans Aff8lrs
CompensatlOl1 and penSionS
NatJona) SetVlCe life
United States Government ufe
Othet
F.Y.
50,591 164,919
18.553 21.699
(Off-budget) ... , ... " .. ,., ... , ..... ,
Total Military
PIIIIIIe
PwIocI
PrIor
42,880
1,176
92,548 219,490
Department of Defense:
Military
Military Personnel .
Operation and Maintenance
Procurement
Research, Development, Test, and
Evaluation
Military Construction .
Family Housing
RevolVing and Management
funds
Other
Sept.
99,863
5,130
65,146
Outlays
Legislative Branch
Judicial Branch
Department of Agnculture:
Commodity Credit Corporation and
Foreign Agncultural Service
Other
Department of Commerce .
Aug.
75,988
42,374
81,836 143,338 129,927
(Off hudgel)
July
51,341
3,440
90,064
rVlal-Recelpl, prtvr rear
June
-
eo..
60,255
1,758
(On-budget) .................... ,' ..
(On hudge/)
May
Fiscal
VHr
To
Date
35,309
/14,898 103.481 167,998 162,610
87,082
73,689 135,341 123,368
46,739
97,952 /17,930 261,002
98,663 199,507 121,923 126,324 200,396 1,827,285
62,723 156,929
87,959
91,554 161,304 1,382,817
42,578
33,964
34,170
35,940
39,093
444,488
828.517
18"'77
U15
57.
24.G71
111.297
......
1111 ••
...".
95,278 187,858 119,723 11l,741 180.995
...... W/,44j
65,051
80,647 216,988
61,791 144,970
87,819
79,134 149,785
... , "
/,30j,d66
32,606
31,210
......
m,8Of)
27,816
29,792
32,657
39,243
32,900
37,283
44,014
33,488
42,888
31,903
326
370
202
250
243
292
199
353
189
308
188
310
196
374
203
309
263
293
199
307
212
311
201
317
2,621
3,793
2,600
3,483
2,966
3,686
397
5,541
3,102
507
2,967
3,502
524
3,805
3,332
320
736
3,228
382
401
4,573
362
464
3,554
389
239
3,211
380
2,234
3,786
506
72
3,531
379
151
3,404
430
598
3,801
460
20,174
42,711
5,036
10,734
43,216
4,047
8,168
7,011
3,320
3,259
6,871
3,388
7,946
8,046
5,144
3,003
7,946
3,678
5,871
6,356
3,649
5,477
8,505
4,822
8,148
8,432
3,656
3,266
7,988
3,678
5,899
8,197
4,842
8,750
8,264
4,198
3,816
7,909
4,422
5,898
10,895
4,028
69,503
96,420
48,824
68,976
93,473
3,632
384
218
2,500
464
300
3,471
522
306
3,278
342
287
2,613
442
304
4,003
434
350
2,838
448
335
2,661
515
287
3,12 1
525
274
3,018
412
320
2,861
472
308
3,365
559
401
37,362
5,519
3,692
37,421
6,046
3,889
730
720
30
-172
350
-29
-353
81
-122
769
468
171
317
-125
-404
171
93
-143
-145
-24
134
-262
-213
-1,982
884
-826
24,183
16,640
25,756
18,262
19,883
24,230
24,049
18,162
22,808
24,793
19,661
22,951
261,379
321
-2,186
256,124
2,758
1,439
2,442
1,281
3,080
1,705
3,132
922
3,130
1,240
4,258
1,169
2,194
1,224
2,538
1,315
2,101
1,581
1,973
1,335
2,422
1,317
3,492
1,551
33,521
16,079
31,486
14,444
2,019
1,883
2,700
1,769
2,117
2,256
2,015
2,032
2,279
2,089
2,168
2,219
25,547
23,611
9,960
12,195
7,853
9,435
8,554
12,351
8,859
8,573
8,561
10,109
9,027
12,106
9,648
13,441
8,138
8,755
9,363
11,237
9,014
12,098
8,964
9,450
10,099
11,010
108,043
130,759
101,234
136,111
8,426
5,100
4,415
5,090
8,862
9,344
4,385
3,093
6,276
5,267
7,232
6,207
7,788
7,340
5,230
5,141
7,233
6,523
8,300
5,372
5,527
5,426
6,843
6,394
80,518
70,296
76,1/2
65,7.s
2,507
3,191
-6,641 -12,299
2,912
-3,309
3,018
-6,910
3,588
-8,057
2,717
-8,724
2,843
-6,937
2,820
-8,268
2,727
-6,900
2,773
-6,862
3,114
-8,492
34,491
-89,954
-85,~
2,281
-6,556
48,207
32~
2,930
684
1,285
2,049
599
1,555
3,359
1,006
1,471
2,793
457
1,472
1,937
826
1,322
2,344
600
1,506
1,969
481
1,946
2,855
510
1,306
2,616
500
1,823
2,290
668
1,333
2,816
638
1,638
4,776
805
1,661
32,736
7,m
18,318
1l.224
1,658
751
504
1,601
627
808
2,141
375
816
2,463
555
374
2,389
261
485
2,771
447
499
2,223
833
583
1,852
767
1,874
883
612
2,003
766
477
1,834
822
497
24,870
7,589
6,464
23"
6_
434
2,060
500
373
2,110
1,633
1,917
1,743
1,932
1,747
1,367
1,372
1,175
1,309
1,499
1,389
1,519
1,501
1,775
1,437
2,235
1,894
2,115
1,590
2,506
1,534
2,702
1,816
22,854
18,965
'mJII
20,655
2,126
25,440
61
69,882
2,556
19,828
1,201
19,870
11,216
21,278
8,199
20,337
4,259
25,383
1,771
70,054
3,012
19,223
1,780
21,776
-305
19,785
-2,106
353,511
33,769
363,821
26,270
3,296
100
70
1
1,654
3.335
79
1
1.730
113
81
1
1,629
1,789
75
1
1,697
1,819
101
1
1,754
3,412
93
2
1,976
141
84
1
1,660
1,783
74
3,403
86
1
1,652
180
77
1
1,646
1,777
101
1
1,754
21,148
997
12
21,012
'm.21
II
12
77
1
2,089
28
..
(
)
1,771
7:tJ
16,1.
5,373
19,1)
~
Table 7. Receipts and Outlays of the U.S. Government by Month, Fiscal Year 1999-Continued
[$ millions]
Classification
Oct.
Nov.
Dec.
Jan.
Feb.
March
April
May
June
July
Aug.
Sept.
Fiscal
Year
To
Date
Comparable
Period
Prior
F.Y.
Outlays-Continued
.........
.........
Environmental protection .......... .....
CorpS of Engineers ...........
Other Defense Civil Programs
ExecutiVe Office of the President .......
Federal Emergency Management
Agency .................................
General Services Administration .........
International Assistance Program:
International Security Assistance .....
Mulblateral Assistance ................
International Development
Assistance ...........................
Other ..................................
National Aeronautics and Space
I Administration ..........................
t-lational Science Foundation ............
.Offioe of Personnel Management .......
"Small Business Administration ..........
::Social Security Administration:
Federal oId-age and survivors ins.
trust fund (off-budget) ...............
Federal disaMty ins. trust fund (offbudget) ...............................
Other ..................................
idependent agencies:
Fed. Deposit Ins. Corp:
Bank insurance fund ...............
Savings association insurance
fund ...............................
FSUC resolution fund:
ATC doseout ....................
Other .............................
Office of Inspector General ........
Postal Service:
Public enterprise funds (offbudget) ............................
Payment to the Postal Service
fund ....... , ........ , ..............
Tennessee Valley Authority ...........
Other independent agencies ..........
Indistributed offsetting receipts:
Employer share, employee
retirement ............................
Interest received by trust funds ......
Rents and royalties on outer
continental shelf lands ...............
Sale of major assets .................
Other ..................................
298
2,636
486
13
484
2,632
515
46
501
2,654
639
105
262
2,678
447
18
312
2,682
516
74
347
2,693
593
20
235
2,707
573
40
257
2,666
537
21
285
2,666
666
19
364
2,664
563
20
352
2,668
608
20
490
2,662
609
21
4,186
32,008
6,752
416
3,833
31,216
6,288
236
381
29
665
424
782
-414
434
-31
238
-62
343
165
184
66
194
-26
328
104
130
-65
211
-167
151
-69
4,040
-46
2,101
1,095
235
349
3,145
3
258
6
133
267
19
138
79
42
305
554
109
35
377
69
160
248
-32
32
607
115
5,395
1,857
4,950
1,850
280
-969
95
914
326
-276
108
260
297
522
47
400
233
29
221
62
222
60
153
-564
118
229
316
-277
2,418
389
2,494
-314
1,085
249
3,890
16
1,114
249
3,912
39
1,452
240
4,061
34
988
278
3,732
156
889
247
3,694
-828
1,178
253
4,104
49
1,111
249
3,814
34
1,140
261
3,963
12
1,281
328
4,047
114
1,051
294
4,079
21
1,113
339
3,856
160
1,261
299
4,363
249
13,664
3,285
47,515
58
14,206
3,188
46,307
-78
27,460
27,438
53,764
1,880
27,815
27,952
27,944
27,966
31,787
27,936
27,864
28,109
337,916
329,769
4,179
4,710
4,132
159
7,776
4,776
765
181
4,278
2,446
4,341
2,488
4,373
4,803
4,325
71
4,505
2,550
4,498
4,812
4,526
269
4,445
2,466
52,142
29,732
49,459
28,974
-123
-161
-163
218
-194
-89
-49
-263
-71
110
-276
310
-751
-1,219
-2
-74
-30
16
-45
-64
-38
-41
-71
75
-95
-28
-397
-448
-296
21
-1,005
-9
-319
-7
-210
-21
-69
-9
-177
-12
......
-268
-10
-187
-17
......
-256
-45
(")
(")
......
-133
-11
7
. .....
. .....
. ...
-35
-23
13
-409
-76
8
-3,364
-218
28
-2,169
-314
29
933
8
-1,429
-269
-219
-969
446
-140
15
-115
-527
3,286
1,021
217
......
......
......
......
. .....
......
......
. .....
......
. .....
89
1,588
42
1,329
-28
1,233
-221
1,246
29
1,154
-18
1,091
29
14
-1,738
......
73
1,611
121
-2,258
-29
1,428
-65
1,335
-7
2,496
29
2
10,515
86
-784
15,256
-2,347 -2,746
-5,390 -50,164
-2,544
-55
-2,522
-1,110
-2,583
-825
-2,827
-606
-2,606 -2,711
-5,438 -51,177
-3,151
-31
-2,620
-1,381
-2,861
-1,404
...
,"
-6,076 -35,594 -34,872
-1,052 -118,634 -113,839
-217
-481
-316
14
-178
-379
-149
-33
-567
-6
-475
-311
......
......
......
.....
. .....
-3,098
......
......
......
......
-414
(. 0)
......
......
......
(. 0)
. .....
-281
......
......
-56
......
-777
-1,754
(")
r 0)
-226
otals this year:
-4,522
-5,158
-2,645
-32,440 -16,937
-5,156 +70,505 -42,345 -22,409 ft113,459 -23,969 +53,568 -25,164
-2,803 +56,430 +122,740
......
......
......
......
(On-budget) ........................ -33,688 -18,139
-5,921 +27,542 -45,509 -29,662 +96,016 -28,712 +20,788 -29,693
-6,430 +52,458
-951
......
+3,973 +123,691
......
Total outlays
.........................
152,413 130,915 183,803 101,223 141,847 152,825 152,770 122,631 145,939 147,086 129,127 143,966 1,704,545
(On-budget) ........................
123,752
(Off-budget) ........................
28,661
Total-surplus (+) or deficit (-)
.....
(Off-budget) ........................
Total borrowing from the public
....
Total·outlays prior year ...... .......
(On·budget) ..................
(Off-budget) ...............
30,940
34,544
-1,162
31,192
30,614
29,296
91,435 136,141 117,652
97,983 108,846 1,383,767
31,197
31,143
9,798
29,434
+1,249
+1,202
+765 +42,963
+3,164
+7,253 +17,443
+4,744 +32,779
+4,530
15,309
22,313
-5,383 -31,250
1,692
37,073 -85,211
-547 -22,264
1,193
+3,627
35,120
26,470 -47,718
150,866 120,830 154,359 137,231 139.701 131.743 136,400 134,057 136,752 143,807 ]22,907 143,569
123,866
.....
99,975 149,258 102,385 110,656 122,211 123,474
27,000
91,326 146,648 108,844 109,393 101,967 108,570 102,382 /25,603 115,713
29,504
7,7/1
28.388
30,308
29,775
27,830
31,675
11.149
28,094
316,602
-36,784 -17,637 -11,307 +14.524 -44.342 -21.320 \+108.4]9 -40,591 +]9.367 -27.894 -]3.420 +41,029
+2,592
'" No transactions.
t' 'J Less than $500,000.
Note: Details may not add to totals due to rounding.
29
+7,508 +]6,184
+],8]2 +31.739
+3,809
/,652,224
34,814
30.353
(On·budget) ....... ... ..... ....
+287 +24,946 +]0,855
-51,211
...
...... J,335,622
-35,968 -/7,349 +13,639 +25,379 -41.750 -13,813 +/24.603 -38,779 +51,106 -24.084 - 11, /66 +37.425
+816
-88,323
92,555 108,755
Total-surplus (+) or deficit (-) prior
year ................. ..
(Off-budget) ... ............. .......
320,778
+2,254
-3,604
. .....
+69,242
-29,956
'"
+99, /98
Table 8. Trust Fund Impact on Budget Results and Investment Holdings as of September 30, 1999
[$ millions]
Securities held as Investmenta Current Fiscal Year
Fiscal Year to Date
This Month
Classification
Beginning of
Receipts
Outlays
Receipts
Excess
Outlays
Excess
This Year
Trust receipts. outlays. and Investments held:
Airport and airway .
Black lung disability
Federal disability Insurance
Federal employees life and health
Federal employees retirement
Federal hospital Insurance
Federal old-age and survivors Insurance
Federal supplementary medical insurance
Hazardous substance superfund
Hl9hways
Military advances
MIlitary retirement
Railroad retirement
Unemployment
Veterans life insurance
All other trust .
26,166
16,996
34,337
6,892
234
4,254
1,176
1,265
374
366
18
534
820
554
4,445
154
3,853
11,079
28,109
6,843
168
2,853
1,154
2,675
678
1,841
129
1,015
352
-506
1,031
-154
22,313
5,917
6,229
49
66
1,402
22
-1,409
-304
-1,474
-111
-481
Total trust fund receipts and outlays and
investments held from Table 6-0 """""
............
Less Interfund transactions
99.306
38,208
66.368
38,208
32.939
Trust fund receipts and outlays on the basiS
of Tables 4 & 5
61,099
28,160
32,939
Total Federal fund receipts and outlays "", ...
Less: Interfund transactions ..
139.840
542
116,348
542
23.492
Federal fund receipts and outlays on the
basis of Table 4 & 5
139,298
115,806
23,492
Net budget receipts & outlays """"""""'"
200.396
143,966
56.430
1,171
48
5,475
75,714
153,015
446,977
85,278
876
39,179
11,624
38,227
8,763
31,681
1,152
7,400
8,056
1,000
52,142
-961
44,497
131,501
337,916
80,518
1,577
28,897
12,159
31,889
8,390
24,938
1,176
8,305
3,034
-401
15,650
961
31,216
21,514
109,062
4,760
-700
10,281
-535
6,338
374
6,743
-24
-904
979.367
315,486
772.000
315,486
207.367
663,881
456,513
207,367
1.164.486
1,082
1,249,113
1,082
-84.627
1,163,405
1,248,032
-84,627
1.827.285
1,704.545
122,740
11,090
598
67,792
Note. Interfund receipts and outlays are transactions between Federal funds and trust funds
such as Federal payments and contribullons, and Interest and profits on investments in Federal
secuntles They have no net eHect on overall budget receipts and outlays Since the receipts side of
I
This Month
CIoH 01
This MonII
8,550
12,312
12.414
76,996
25,641
460,629
118,250
653,282
39,502
5,296
17,926
91,630
26,742
469,489
141,955
755,857
32,303
4,552
26,333
92••
133,843
21,811
70,641
13,722
9,601
142,585
24,149
78,782
13,813
13,748
141.274
24.345
1.655,688
1,834,247
1,au.ll1
......
26,590
491.855
153.767
762,226
26.5211
4.583
28.083
......
n.•
13••
13.793
such transactions is oHset against bugdet outlays. In this table, Interfund receipts are shown a ..
adjustment to anrive at total receipts and outlays of trust funds respectively.
Table 9. Summary of Receipts by Source, and Outlays by Function of the U.S. Government, September 1999
and Other Periods
[$ millions]
Classification
This Month
Fiscal Year
To Date
Comparable Period
Prior Fiscal Year
89,250
40,235
879,480
184,680
828,587
188,677
54,794
332
356
7,167
2,294
1,727
4,242
580,880
26,480
4,472
70,399
27,782
18,336
34,777
540,015
27,484
4,335
57,669
24,076
18,297
32,325
200,396
1,827,285
1,721,485
24,279
1,371
1,773
375
2,249
1,196
7,361
4,260
1,330
5,437
13,031
16,100
16,897
32,581
3,615
2,306
1,712
15,259
-7,164
276,792
15,264
19,397
981
22,303
24,359
2,966
38,856
12,791
57,438
140,803
190,448
237,180
390,043
43,210
25,837
16,058
230,265
-40,445
268,456
13,103
18,219
1,270
22,396
12,206
1,014
40,332
9,720
54,883
131,100
192,822
233,302
379,225
41,781
22,832
13,398
243,359
-47,194
143,966
1,704,545
1,652,224
NET RECEIPTS
Individual income taxes
Corporation income taxes .. '"
....... .
SOCial insurance and retirement receipts:
Employment and general retirement
Unemployment insurance
Other retirement ................ .
Excise taxes
Estate and gift taxes
Customs duties
Miscellaneous receipts ....................................... ,",
Total ............................................... .
NET OUTLAYS
National defense,
""""""'" """""""
International affairs""""""""",.,
General science, space, and technology " """"""
Energy " " " ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ' ,,",," " " " ' " ' ' ' ' ' ' ' ' ' '
Natural resources and environment ,
, , , , , , , , , , ... ,
Agriculture
""""""
Commerce and housing credit, .... ,"""", .... ,""'"
Transportation ...... " .. """",., .... ,""""'"
Community and regional development ', .... ,"","
Education, training, employment and social services """""'"
Health
MedlCSre
Income security
SOCIal secunty
Veterans benefits and services
Administration of justice
General government
Net Interest
Undlstnbuted offsettl~g recelpi~
Total,., ... , ..... ", .. "" ....... . ............................
No transactl()(1s
Note DetaIls may not add to totals due to roundIng
30
'Explanatory Notes
• Flow of Data Into Monthly Treasury Statement
The Monthly Treasury Statement (MTS) is assembled from data in the
entral accounting system. The major sources of data include monthly
Iccounting reports by Federal entities and disbursing officers, and daily
eports from the Federal Reserve banks. These reports detail accounting
ransactions affecting receipts and outlays of the Federal Government
IrId off-budget Federal entities, and their related effect on the assets and
iabilities of the U.S. Government. Information is presented in the MTS on
I modified cash basis.
Outlays are stated net of offsetting collections (including receipts of
revolving and management funds) and of refundS. Interest on the public
debt (public issues) is recognized on the accrual basis. Federal credit
programs subject to the Federal Credit Reform Act of 1990 use the cash
basis of accounting and are divided into two components. The portion of
the credit activities that involve a cost to the Government (mainly
subsidies) is included within the budget program accounts. The remaining
portion of the credit activities are in non-budget financing accounts.
Outlays of off-budget Federal entities are excluded by law from budget
totals. However, they are shown separately and combined with the onbudget outlays to display total Federal outlays.
!. Notes on Receipts
Receipts included in the report are classified into the following major
ategories: (1) budget receipts and (2) offsetting collections (also called
iflPIicable receipts). Budget receipts are collections from the public that
esult from the exercise of the Government's sovereign or governmental
lOwers, excluding receipts offset against outlays. These collections. also
ailed govemmental receipts, consist mainly of tax receipts (including
octal insurance taxes), receipts from court fines, certain licenses, and
'leposits of eamings by the Federal Reserve System. Refunds of receipts
fe treated as deductions from gross receipts.
Offsetting collections are from other Govemment accounts or the
ublic that are of a business-type or market-oriented nature. They are
lassified into two major categories: (1) offsetting collections credited to
ppropriations or fund accounts, and (2) offsetting receipts (Le., amounts
eposited in receipt accounts). Collections credited to appropriation or
Jnd accounts normally can be used without appropriation action by
:ongress. These occur in two instances: (1) when authorized by law.
mounts collected for materials or services are treated as reimburselents to appropriations and (2) in the three types of revolving funds
)ublic enterprise, intragovernmental, and trust}; collections are netted
gainst spending, and outlays are reported as the net amount.
Offsetting receipts in receipt accounts cannot be used without being
:>propriated. They are subdivided into two categories: (1) proprietary
!Ceipts-these collections are from the public and they are offset against
Jtlays by agency and by function, and (2) intragovemmental fundslese are payments into receipt accounts from Governmental appropria>n or funds accounts. They finance operations within and between
ovemment agencies and are credited with collections from other
.ovemment accounts. The transactions may be intrabudgetary when the
Iyment and receipt both occur within the budget or from receipts from
.f-budget Federal entities in those cases where payment is made by a
lderal entity whose budget authority and outlays are excluded from the
/dget totals.
Intrabudgetary transactions are subdivided into three categories:
~ interfund transactions, where the payments are from one fund group
Ither Federal funds or trust funds) to a receipt account in the other fund
')up; (2) Federal intra fund transactions, where the payments and
:eipts both occur within the Federal fund group; and (3) trust intrafund
I'lSactions, where the payments and receipts both occur within the trust
ld group.
Offsetting receipts are generally deducted from budget authority and
tlays by function, by subfunction, or by agency. There are four types of
~ipts, however, that are deducted from budget totals as undistributed
?-setting receipts. They are: (1) agencies' payments (including payments
. off-budget Federal entities) as employers into employees retirement
Ids, (2) interest received by trust funds, (3) rents and royalties on the
Iter Continental Shelf lands, and (4) other interest (Le., interest collected
Outer Continental Shelf money in deposit funds when such money is
nsferred into the budget).
4. ProceSSing
The data on payments and collections are reported by account symbol
into the central accounting system. In turn, the data are extracted from
this system for use in the preparation of the MTS.
There are two major checks which are conducted to assure the
consistency of the data reported:
1. Verification of payment data. The monthly payment activity reported by
Federal entities on their Statements of Transactions is compared to the
payment activity of Federal entities as reported by disbursing officers.
2. Verification of collection data. Reported collections appearing on
Statements of Transactions are compared to deposits as reported by
Federal Reserve banks.
5. Other Sources of Information About Federal Government
Financial Activities
• A Glossary of Terms Used in the Federal Budget Process, January
1993 (Available from the U.S. General Accounting Office, P.O. Box 6015,
Gaithersburg, Md. 20877). This glossary provides a basic reference
document of standardized definitions of terms used by the Federal
Government in the budgetmaking process.
• Daily Treasury Statement (Available from GPO, Washington, D.C.
20402, on a subscription basis only and on the Internet at
http://www.fms.treas.gov/). The Daily Treasury Statement is published
each working day of the Federal Government and provides data on the
cash and debt operations of the Treasury .
• Monthly Statement of the Public Debt of the United States
(Available from GPO, Washington, D.C. 20402 on a subscription basis
only and on the Internet at http://www.publicdebttreas.gov/opd/opd.htm).
This publication provides detailed information concerning the public debt.
• Treasury Bulletin (Available from GPO, Washington, D.C. 20402, by
on
the
Internet
at
subscription
or
single
copy
and
http://www.fms.treas.govl). Quarterly. Contains a mix of narrative, tables,
and charts on Treasury issues, Federal financial operations, international
statistics, and special reports.
• Budget of the United States Government, Fiscal Year 19 _
(Available from GPO, Washington, D.C. 20402 and on the Internet at
http://access.gpo.govl).This publication is a single volume which provides
budget information and contains:
-Budget of the United States Government, FY 19 _
-Appendix, The Budget of the United States Government, FY 19_
-Analytical Perspectives
-Historical Tables
-Citizens Guide to the Federal Budget
Notes on Outlays
Outlays are generally accounted for on the basis of checks issued,
ctronic funds transferred, or cash payments made. Certain outlays do
t require issuance of cash or checks. An example is charges made
ainst appropriations for that part of employees' salaries withheld for
~es or savings bond allotments - these are counted as payments to
! employee and credits for whatever purpose the money was withheld.
• United States Government Annual Report and Appendix (Available
from Financial Management Service, U.S. Department of the Treasury,
Washington, D.C. 20227). This annual report represents budgetary
results at the summary level. The appendix presents the individual receipt
and appropriation accounts at the detail level.
31
Scheduled Release
The release date for the October 1999 Statement
will be 2:00 pm EST November 22, 1999.
For sale by the Superintendent of Documents, U.S. Government Printing
Office, Washington, D.C. 20402 (202) 512-1800. The subscription price is
$38.00 per year (domestic), $47.00 per year (foreign).
No single copies are sold.
The Monthly Treasury Statement is now available on the Department of Commerce's Economic Bulletin Board.
For information call (202) 482-1986.
Intemet service subscribers can access the current issue of the Monthly Treasury Statement through the
Financial Management Service's home page:
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Text as prepared for Delivery
October 27,1999
TREASURY DEPUTY SECRETARY STUART E. EIZENSTAT
TESTIMONY BEFORE THE SENATE COMMITTEE ON JUDICIARY
Mr. Chairman, Ranking Member Leahy and Members of the Committee:
Good morning. I am here to discuss the Administration's position on proposals to further
amend the Foreign Sovereign Immunities Act ("FSIA").
Let me begin by expressing the Administration's and my own personal sympathy to victims of
international terrorism -- an evil that this Administration has taken world leadership in combating. It is
the responsibility of the United States Government to do everything possible to protect American lives
from international terrorism. People like the Flatows and the families of the Brothers to the Rescue
deserve government support in their demand to be compensated for their grievous losses. The
Administration is dedicated to working with the Congress to achieve this goal by setting up a
commission which would recommend proposals to the President and to the Congress to help families
of the victims of international terrorism receive compensation. But this must be done in a way that is
consistent with our national interest, not done in a piecemeal fashion, and does not touch blocked
assets or diplomatic property to achieve this end. The commission would also review all other
aspects of the problems presented by acts of international terrorism.
International terrorism is an all too common evil in today's world, affecting the lives of too
many Americans. In my capacity as the President's Special Representative for Cuban Democracy, I
met in Miami with the families of the "Brothers to the Rescue" members who were shot down by
Cuba. It was an unforgettable experience and one that personalized for me the brutality of the Castro
regime. I have also met on several occasions with Mr. Flatow, who lost his daughter Alisa in a bomb
attack in Gaza. I was touched by the depth of suffering, as well as impressed by the strength and
determination of the families to seek justice for their loved ones. We understand the frustrations that
have led the sponsors of this legislation to introduce it. These plaintiffs have suffered grievously at the
hands of terrorists and should be compensated by those responsible.
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However, it should come as no surprise that the states involved here -- states that we have
publicly branded as sponsors of terrorism -- do not view the United States as a cordial environment to
conduct financial transactions. As part of our efforts to combat terrorism, we impose a wide range of
economic sanctions against state sponsors of terrorism in order to deprive them of the resources to
fund acts of terrorism and to affect their conduct. Because of these measures, terrorism-list states
engage in minimal economic activity in the United States. In many cases, the only assets that states
which sponsor terrorism have in the United States are either blocked or diplomatic property. Such
property is not legally available for attachment and execution of judgments, for very good reasons
involving the security and interests of the entire nation, which I will describe in detail.
As much as we join the sponsors of this bill in desiring to have victims of international
terrorism compensated, it would be unwise in the extreme to ignore these reasons and forgo the
interests of all our citizens for this purpose.
The legislation before the Committee today, though born of good intentions, is fundamentally
flawed. The legislation would have five principal effects, all of which would be seriously damaging to
important U.S. interests.
First, blocking assets of terrorist states is one of the most significant economic sanctions tools
available to the President. This legislation would undermine the President's ability to combat
international terrorism and other threats to national security by permitting the attachment of blocked
property, thereby depriving the U.S. of a source of leverage, such as was used to gain the release of
our citizens held hostage in Iran.
Second, it could cause the U.S. to violate our obligations to protect diplomatic property of
other nations, and would put our own diplomatic property around the world at risk.
Third, it would benefit one small group of Americans over a far larger group of Americans.
Those with judgments in court since the FSIA amendments of 1996 would benefit over others, many
of whom have \vaited decades to be compensated by Cuba and Iran for both the loss of property and
the loss of the lives of their loved ones. and would leave no assets for their claims and others that may
follow.
Fourth. it would breach the long-standing principle that the United States Government has
sovereign immunity from garnishment. thereby preventing the U.S. Government from making good
on its debts and potentially causing the U. S. taxpayer to incur substantial financial liability .
Fifth. it would direct courts to ignore the separate legal status of states and their agencies and
instrumentalities, overturning Supreme Court precedent and basic principles of corporate and
international law by making state-owned corporations liable for the debts of the state.
As The Washimnon Post observed in a recent editorial, "Victims of terrorism certainly should
be compensated. but a mechanism that permits individual recovery to take precedence over significant
~oreign polie): interests is flawed." The proposed legislation would indeed seriously compromise
Important natIOnal security. foreign policy, and other clear national interests, and discriminate among
2
and between past and future U.S. claimants. For the reasons which I will explain in detail during the
course of my remarks, the Administration strongly opposes the proposed legislation.
Attachment of Blocked and Diplomatic Property
I want to begin by explaining the Administration's grave concerns with the provisions of the
legislation that seek to nullify the President's waiver of last year's Foreign Sovereign Immunities Act
amendments and thereby permit attachment of blocked and diplomatic property.
Let us be entirely clear: attachment of blocked or diplomatic property would compromise our
national security and would seriously prejudice a number of important national interests. These
interests include:
_
_
_
our interest in the effective functioning and preservation of our asset blocking programs to
combat threats to our national security and to the safety of American citizens abroad;
our legal obligation to protect the diplomatic property of foreign states, regardless of the
status of our relations with those states, and our clear national interest in upholding the
international legal regime that protects U.S. diplomatic property and personnel abroad;
and
our interest in avoiding laws that would create gross inequities in the amounts of
compensation received by similarly situated U.S. nationals with claims against foreign
governments.
I will address each of these concerns in tum.
Elimination of the Effectiveness of Our Blocking Programs
The ability to block assets represents one of the primary tools available to the United States to
deter aggression and discourage or end hostile actions against U.S. citizens abroad. Our efforts to
combat threats to our national security posed by terrorism-list countries such as Iraq, Libya, Cuba, and
Sudan rely upon our ability to block the assets of those countries.
Blocking assets permits the United States to deprive such countries of resources that they
could use to harm our interests, and to disrupt their ability to carry out international financial
transactions. By placing the assets of such countries in the sole control of the President, blocking
programs permit the President at any time to withhold substantial benefits from countries whose
conduct we abhor, and to offer a potential incentive to such countries to reform their conduct. Our
blocking programs thus provide the United States with a unique and flexible form of leverage over
countries that engage in threatening conduct.
The Congress has recognized the need for the PreSIdent to be able to regulate the assets of
foreign states to meet threats to the U.S. national security, foreign policy and economy. In both the
International Emergency Economic Powers Act and the Trading with the Enemy Act, the Congress has
provided the President with statutory authority for regulating foreign assets. On the basis of this
authority and foreign policy powers under the Constitution, Presidents have blocked property and
interests in property of foreign states and foreign nationals that today amounts to over $3.4 billion.
The Supreme Court has also recognized the importance of the President's blocking authority.
stating that such blocking orders "permit the President to maintain the foreign assets at his disposal for
use in negotiating the resolution of a declared national emergency. The frozen assets serve as a
'bargaining chip' to be used by the President when dealing with a hostile country," Dames & Moore v.
Regan. 453 U.S. 654,673 (1981).
The leverage provided by blocked assets has proved central to our ability to protect important
U.S. national security and foreign policy interests. The most striking example is the Iran Hostage Crisis
from 1979-1981. The critical bargaining chip the United States had to bring to the table in an effort to
resolve the crisis was the almost $10 billion in Iranian Government assets that the President had
blocked shortly after the taking of our embassy. This was a decision in which I was involved as
President Carter's Chief Domestic Adviser. Because the return of the blocked assets was one of Iran's
principal conditions for the release of the hostages, we would not have been able to secure the safe
release of the hostages and to settle thousands of claims of U.S. nationals if those blocked assets had
not been available. This settlement with Iran also resulted in the eventual payment of $7.5 billion in
claims to or for the benefit of U.S. nationals against Iran.
In the case of Vietnam, the leverage provided by approximately $350 million in blocked assets,
combined with Vietnam's inability to gain access to U.S. technology and trade, played an important
role in persuading Vietnam's leadership to address important U.S. concerns in the normalization
process. These concerns included full accounting of POWs and MIAs from the Vietnam War,
accepting responsibility for over $200 million in U.S. claims which had been adjudicated by the Foreign
Claims Settlement Commission. and moderating Vietnamese actions in Cambodia.
In addition. blocked assets have helped us to secure equitable settlements of claims of U.S.
nationals against such countries as Romania. Bulgaria and Cambodia in the context of normalization of
relations. These results could not have been achieved without effective blocking programs.
However. our blocking programs simply cannot function, and cannot serve to protect these
important interests. if blocked assets are subject to attachment and execution by private parties, as the
proposed legislation would permit. The ability to use blocked assets as leverage against foreign states
that threaten U.S. interests is essentially eliminated if the President is unable to preserve and control
the disposition of such assets. Private rights of execution against blocked assets would permanently
rob the President of the leverage blocking provides by depleting the pool of blocked assets.
In the Cuban and Iranian contexts. for example, the value of the judgments won by the
Brothers to the Rescue families exceeds the total known value of the blocked assets of the
Government of Cuba in the United States. and the value of the judgment won by the Flatow family or
the former Beirut Hostages exceeds the total known value of the blocked assets of the Government
of Iran in the United States. Attachment of blocked assets to satisfy private judgments in these and
similar cases would leave no remaining assets of terrorism-list governments in the President's control,
4
denying the President an important source of leverage and seriously weakening his hand in dealing
with threats to our national security.
In addition, the prospect of future attachments by private parties would place a perpetual
cloud over the President's ongoing control over blocked assets. This would further undermine the
President's ability to use such assets as leverage in negotiations, even where attachments had not yet
occurred.
Put simply, permitting attachment of blocked assets would eliminate the use of our blocking
programs as a key tool for combating threats against our national security.
Our Obligation and Interest in Protecting Diplomatic Property
The proposed legislation also could cause the United States to violate our obligations under
international law to protect diplomatic property, and would undermine the legal protections for
diplomatic property on which we rely every day to protect the safety of our diplomatic property and
personnel abroad. Even though the current version of the legislation before the Committee provides
protection for a slightly broader range of diplomatic property than previous versions. it is still
fundamentally flawed in its failure to permit the President to protect properties, including consular
properties, some diplomatic bank accounts, and diplomatic residences, which international law
obligates us to protect.
The United States' legal obligation to prevent the attachment of diplomatic property could not
be clearer. Protection of diplomatic property is required by the Vienna Convention on Diplomatic
Relations, to which the United States and all of the states against which suits presently may be brought
under the 1996 amendments to the FSIA are parties. Under Article 45 of the Vienna Convention on
Diplomatic Relations we are obligated to protect the premises of diplomatic missions. together with
their real and personal property and archives, of countries with which we have severed diplomatic
relations or are in armed conflict. This would include diplomatic residences owned by the foreign
state.
Likewise, under Article 27 of the Vienna Convention on Consular Relations, the same
protection is required for consular premises, property, and archives. 'Attachment of any of the types
of property covered by the Vienna Conventions on Diplomatic and Consular Relations could place the
United States in violation of our obligations under international law. The proposed legislation would
only permit the President to ensure the protection of a narrow portion of the property covered by
the Vienna Conventions, and would thereby place the United States in violation of our legal
obligations.
In addition, the proposed legislation as drafted could cause us to breach our obligations to
ensure the inviolability of missions to the United Nations, pursuant to the UN Headquarters
Agreement and the General Convention on Privileges and Immunities.
Nor could our national interest in the protection of diplomatic property be clearer or more
important. The United States owns over 3000 buildings and other structures abroad that it uses as
embassies. consulates. missions to international organizations, and residences for our diplomats. The
total value of this property is between $12 and $15 billion.
Because we have more diplomatic property and personnel abroad than any other country. we
are more at risk than any other country if the protections for diplomatic and consular property are
eroded. If we flout our obligations to protect the diplomatic and consular property of other countries.
then we can expect other countries to target our diplomatic property when they disagree strongly
with our policies or actions. Defending our national interests abroad often makes the United States
unpopular with some foreign governments. We should not give those states who wish the United
States ill an easy means to strike at us by declaring diplomatic property fair game.
In the specific case of Iran, attachment of Iran's diplomatic and consular properties could also
result in substantial U.S. taxpayer liability. Iran's diplomatic and consular properties in the United
States are the subject of a claim brought by Iran against the United States before the Iran-U.S. Claims
Tribunal. I will say more about the Tribunal later in my remarks. For the moment, let me simply note
that. although we are contesting this claim vigorously, the Tribunal could find that the United States
should have transferred Iran's diplomatic and consular property to it in 1981. If it does so and the
properties are not available because they have been liquidated to pay private judgments, the U.S.
taxpayer would have to bear the cost of compensating Iran for the value of the properties. Such an
award against the United States would be enforceable in the courts of any country, under the laws of
that country.
Equitv Among Claimants
The proposed legislation would also frustrate equity among U.S. nationals with claims against
terrorism-list states. It would create a winner-take-all race to the courthouse. arbitrarily permitting
recovery for the first. or first few. claimants from limited available assets, leaving other similarly situated
claimants with no recovery at all. In fact. it would take away assets potentially available to them.
As I noted earlier. the value of the judgments held by the families of the Brothers to the
Rescue victims exceeds the total value of blocked assets of the Government of Cuba in the United
States. Similarly. even if the plaintiffs in the Flatow case were to succeed in attaching all of Iran's
diplomatic and consular properties in the United States, these properties would be insufficient to
satisfy even one tenth of the damages awarded in that judgment. In each case, execution on their
judgments would exhaust all of the blocked assets of these governments in the United States.
However. the Alejandre and Flatow cases do not represent the only claims of U.S. nationals
against Cuba and Iran. No other claimants would benefit at all from the proposed legislation; indeed
this legislation would seriously prejudice their interests.
In the case of Cuba. the U.S. Foreign Claims Settlement Commission has certified 5,911
claims of U.S. nationals against the Government of Cuba, totaling approximately $6 billion with
interest. dating back to the early 1960s. These include the wrongful death claims of family members
of t-:-oq individuals whom the Cuban Government executed after summary trial for alleged crimes
agamst the Cuban state. Other claims relate to the Castro Government's seizure of homes and
6
businesses from U.S. nationals. These claimants have waited over 35 years without yet receiving
compensation for their losses. This bill will not help them at all.
The same situation applies with respect to Iran. In addition to the Flatow case, the plaintiffs in
the Beirut Hostage case -- David Jacobsen, Joseph Cicippio, Frank Reed, and their families collectively have won judgments against Iran totaling $65 million arising from the three men being held
hostage in Lebanon. Similar suits against Iran, including one brought by Terry Anderson for damages
related to his captivity, are currently pending in the Federal District courts.
Moreover, given the nature of these regimes, it remains possible that in spite of our substantial
efforts to combat terrorism, foreign terrorist states will commit future acts in violation of the rights of
U.S. nationals, which may give rise to claims against them. If such incidents occur, these claimants will
also have an interest in being compensated.
Against this background, in which outstanding claims far exceed available funds, the proposed
legislation would permit the first claimants to reach the courthouse to deplete all the available assets of
terrorism-list governments, leaving nothing for other similarly situated claimants. Satisfaction of the
judgments in the Brothers to the Rescue and Flatow cases would come at the expense of all other
claimants against Cuba and Iran, both past and future. This would be fundamentally unfair.
Equitable resolution of all outstanding claims of terrorism-list states must be accomplished
systematically in order to ensure fairness to all parties, not in the piecemeal fashion envisioned by the
proposed legislation.
In sum, permitting the attachment of blocked and diplomatic properties in individual cases, as
the proposed legislation would do, would
_
_
_
_
undermine our ability to combat threats to our national security,
violate our obligations under international law,
place our diplomatic properties and personnel abroad at risk, and
lead to arbitrary inequities in the treatment of similarly situated U.S. nationals with claims
against foreign governments.
Breaching the Sovereign Immunity of the United States
Let me tum next to the provision of the proposed legislation which would permit garnishment
of debts of the United States. This provision would breach the long-established principle that the
United States Government has sovereign immunity from garnishment actions. This provision is of
particular concern because it would result in the U.S. taxpayer being liable for millions, and perhaps
hundreds of millions, of dollars by prejudicing the position of the United States with respect to claims
pending before the Iran-U.S. Claims Tribunal in The Hague.
Let me say a few words about the Iran-U.S. Claims Tribunal. The Iran-U.S. Claims Tribunal is
an arbitration court located at The Hague in the Netherlands. It was established as part of the
agreement betweenIran and the United States that freed the U.S. hostages in Iran and resolved
outstanding claims that were then pending between the United States and Iran. Pursuant to this
agreement and awards of the Tribunal, Iran has paid $7.5 billion in compensation to or for the benefit
of U.S. nationals. The Tribunal also has jurisdiction over certain claims between the two
governments.
The proposed legislation would prevent the United States from meeting its obligations to pay
money to Iran in satisfaction of awards the Tribunal renders against the United States. Instead. the
proposed legislation would permit private parties to garnish the funds of the United States
Government in order to collect such payments before they reach Iran. Even without this change in
the law, there have been efforts in the Flatow case to garnish the payment of a $6 million Tribunal
award in Iran's favor.
It is important to understand that allowing private litigants to garnish amounts we owe Iran
under Tribunal awards would not discharge our liability to Iran to pay such money. For example, if
the efforts in the Flatow case succeed, the Flatow family will receive $6 million, but the United States
will still owe Iran $6 million under the unpaid award. And because the awards of the Iran-U.S. Claims
Tribunal are enforceable in the courts of any country, Iran can enforce awards against non-immune
U.S. property in other countries if we do not pay them voluntarily.
Permitting garnislunent of the payment of such awards would thus result in the U.S. taxpayer
paying twice: once when a private claimant garnishes the payment, and a second time when Iran
enforces the still unsatisfied award against us abroad. Because the judgments against Iran received by
these plaintiffs total in the hundreds of millions of dollars, permitting garnishment of debts owed by the
United States to Iran as a means of satisfYing these judgments could cost the U.S. taxpayer hundreds
of millions of dollars.
You should also know that we face other claims by Iran at the Tribunal totaling billions of
dollars. We are vigorously contesting these claims. If we are unable to pay awards against us, our
position before the Tribunal in these other claims will clearly be undermined.
Eliminating Legal Separateness of Agencies and Instrumentalities
Let me now turn to the provision of the proposed legislation that would change the way the
FSIA defines a foreign state's agencies and instrumentalities for terrorism-list countries where there is a
terrorism-related judgment against it. This provision would overturn the Congress's·own considered
judgment when it passed the FSIA in 1976. as well as existing Supreme Court case law and basic
principles of corporate and international law. In addition. it would prejudice the interests of U.S.
citizens and corporations who invest abroad.
This provision would make corporations that are majority-owned or controlled by a
terrorism-list foreign government liable for all of the individual debts of that government. The
Congress recognized the danger of this position when it passed the FSIA in 1976. The Conference
Report to that bill observed that "If U.S. law did not respect the separate juridical identities of different
agencies or instrumentalities, it might encourage foreign jurisdictions to disregard the juridical divisions
between different U.S. corporations or between a U.S. corporation and its independent subsidiary."
8
U.S. citizens and corporations have far more money invested abroad than those of any other
country, and thus have more to lose if investment protections such as those provided by the
presumption of separate status is eroded. If we saddle the investors of other countries with the debts
of foreign governments with which they are co-investors, as the proposed legislation would do, then
we can expect U.S. investors to pay a considerably higher price when other governments follow our
example.
This hearing has afforded a welcome opportunity to discuss a very important subject involving
the fight against terrorism, compensation for victims, and critical national security interests.
Unfortunately, however, the concerns raised here today indicate that the 1996 amendment waiving
sovereign immunity and creating a judicial cause of action for damages arising from acts terrorism has
not met its purposes of providing compensation to victims and deterring terrorism. In fact, if blocked
assets were exhausted to compensate the families, which would be the result of this bill, the leverage
to affect the conduct of the terrorist-list states would be lost along with the blocked assets. I hasten to
add that we are not happy that these suits have not led to recovery for families who have brought
cases under the 1996 amendment. A system that has to date left no recovery option other than one
that conflicts with U.S. national security interests is not an acceptable system.
We are anxious to work with the Congress to address this difficult problem. Together, we
hope to formulate short and longer-term approaches that will address the concerns -- of
compensation for terrorist acts and the U,S. national interests and international obligations that we all
share -- in a much more satisfactory way. Most important, we believe that for a workable and
effective longer-term solution we need a careful and deliberative review of the issues, informed by our
experience since the 1996 amendment. We suggest that the Administration and Congress commit to
a joint commission to review all aspects of the problem, and to recommend to the President and the
Congress proposals to find ways to help these families receive compensation, in a way consistent with
our overall national interests and international obligations.
This commission's task would differ from previous commissions such as that established under
the 1996 Antiterrorism and Effective Death Penalty Act. The "Commission on the Advancement of
Federal Law Enforcement" has 10 specific areas of inquiry in its broad law enforcement charter, with
capability to investigate and deter terrorism being only one of them.
We believe that the new commission should be one of stature and with the right expertise to
confront all the hard issues we have discussed today -- including the lack of effective remedies in these
cases because of sanctions against terrorism-list countries under U.S. law, which are absolutely
necessary to maintain. I would like to pursue this idea in more depth with you and your staffs.
A fundamental principle for this joint commission -- by definition -- would be the need to
inventory outstanding claims and develop an effective and fair mechanism for compensation of victims
of terrorism. We believe it should be encouraged to think ,broadly, including consideration of avenues
other than the judicial one created by the 1996 amendment.
Just as important, the commission should be guided by the principle of preservation of blocking
programs and protecting diplomatic property, for the important reasons we have addressed here
today. In this light, we would suggest that the commission should present alternatives to statutes that
9
would make blocked assets available for attachment, such as last year's amendments to the FSIA and
the recent bill presented for consideration by this committee. Just as critical U.S. interests served by
blocking must be preserved, so should the commission consider the likelihood that, under the current
scheme, foreign countries will take reciprocal actions against U.S. property abroad - both diplomatic
and private.
Once again, we are committed to working together with you to find legislative and nonlegislative means for addressing these issues. As one critical part of this effort, we look forward to
beginning work on a commission so it can be constituted soon and be charged with making its
recommendations within 12 months thereafter.
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Text as Prepared for Delivery
October 27, 1999
Address by Stuart Eizenstat, Deputy Secretary of the Treasury
Annual Meeting of the Brazil-U.S. Business Council
Washington D.C. October 27, 1999
I am pleased to be with you here today. Your Council plays an important role in
promoting Brazilian-U.S. trade and investment. It fosters useful dialogue and greater
understanding between our two business sectors and it makes considered policy
recommendations to both governments.
I want to speak to you today about Brazil. but I would like to put it in the context
of the larger world economic picture. We live in an age of globalization-the
unprecedented. rapid flow of private capital. ideas. technology. goods and services
around the world. \\lith the coming of computers and the Information Age. the pace of
globalization is so fast. and its reach so wide. that at some point early in the next century
almost every person on earth will have the ability to communicate any kind of data to
almost any other person. instantly and cheaply.
The approach to globalization issues taken by the Administration of President
Clinton is based on the belief that market-based economic systems provide the best
environment for creating jobs. generating economic activity. and raising living standards.
both in our own country and around the world. Perhaps the greatest benefits of
globalization over the next generation will come from making possible the safe and
sustainable flow of goods. capital and ideas bet\\'een the developed world and the
developing one. The labor force in the United States and Western Europe is agi.ng. All of
the world's population gro\\1h is going to occur in the developing world. That is where
the expanding markets and the manpower will be. and that is where attention must be
gIven now.
To spread the benefits of globalization to all people requires a coordinated effort
among the leading industrial nations. by international institutions. and above all by the
developing nations themselves. It is vital that they nurture the kind of institutions. and
follow the kind of macroeconomic policies that can attract international capital by being
safe. attractive places for investment. The policies include enforceable land and contract
rights; labor market reform that encourages job creation and entrepreneurship; and
policies of privatization that open up opportunities and reduce business costs. The
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institutions that should be nurtured include banking and financial systems that promote
productive investment: judicial systems that make foreign investment safer and more
predictable~ and open accounting and procurement policies which provide a level playing
field for all types of investment foreign and domestic.
The challenge of. globalization has special resonance in Brazil. Brazil is one of the
leading emerging market economies in the world. It is more than just the economic leader
of Latin America. It is much of Latin America with 52 per cent of its land area and 55
per cent of its people. Its Gross Domestic Product of close to $750 billion last year was
about 50 per cent of the entire continent. Although foreign trade is a small share of
Brazil's economy, the size of that economy means that its neighbors benefit from
Brazilian growth. One-third of the exports of Argentina, for example, go to Brazil. Brazil
is also central to Mercosur, which has been a major force for regional integration and
trade liberalization. With only a few exceptions trade between Brazil and Argentina is
now free and rose to nearly $15 billion in 1998.
Brazil is important to the United States. It is our eleventh most important trading
partner. Total trade between our two countries was over $23 billion last year, an increase
of 68% from five years ago. In that connection, the Administration strongly supports the
creation of a Free Trade Association of the Americas. and is working hard in the ongoing
negotiations to make concrete progress toward that end.
It used to be said that when the U.s. sneezed. Europe caught a cold. By the same
token. events in Brazil are likely to have significance across all of the world's emerging
markets. We saw that in events a year ago in the aftermath of the Russian financial
collapse and in the period leading up to this year's devaluation. Even those countries that
had few direct economic links to Russia and Brazil were affected because capital flows to
emerging markets worldwide dried up and lending spreads-the difference between what
emerging market borrowers pay and what the U.S. government pays -- widened sharply.
The economic prognosis for Brazil today is far better than what was generally
predicted last January. when the government floated the exchange rate after experiencing
massive losses in its foreign exchange reserves. Perhaps the severity of the postdevaluation crises in Asian countries conditioned expectations for the worse. Its large
foreign and domestic net debt. nearly 43 percent of GOP at the end of 1998 - one-third
of which was linked to the exchange rate - created the fear that a sudden rise in interest
payments would drain the fiscal accounts. Fairly recent memories of hyperinflationwhen the CPI rose over 2.000 per cent a year~ontributed to fears that devaluation
would lead to disaster. But as your Council pointed out to the Congress. Brazil is not
Asia. Its economy is more diverse. its banking sector stronger. its culture not as
vulnerable to "crony capitalism." To the credit of the Cardoso government. there has
been no depreciation-inflation spiraL no fiscal difficulties in servicing the debt and no
wide scale corporate or financial sector bankruptcies. Consumer price inflation has been
about 6% year to date through September. and according to the most recent surveys,
expected to be 8% for the year. Short-term interest rates have fallen from 45% in March
2
to 19% toda\". The central bank is taking steps to see that interest rates to the pri\"ate
sector come' dov.'l1 as well. A recent Reuter' s survey produced the opinion that the
exchange rate is expected to close this year in the l.90 to l.95 to the dollar range. While
this is a significant depreciation in both nominal and real terms compared to last January.
it is far from the collapse feared by many last winter.
Real GOP is expected to decline only marginally this year. far less than the 3-4
per cent contraction that was estimated at the time of devaluation. Latin America in
general has had negative growth this year. and - ironically - the decline in Brazil's GOP
is not as great as several other countries that did not have currency crises.
The impressive resilience of the Brazilian economy. nine and a half months after
moving to a floating exchange rate. is attributable in large part to the response of the
Brazilian authorities. Our former Treasury Secretary. Bob Rubin. used to say there is no
substitute for credible policy and credible policymakers. The combination of significant
fiscal measures. deep privatization. firm monetary policy and strong leadership at the
central bank has been critical for these past months.
The challenge ahead is for Brazil to consolidate the return to stability and restore
a healthy rate of economic growth. To do this. it needs to move ahead with deeper fiscal
and structural measures to ensure a permanent basis for fiscal sustainability. Perhaps the
most important step it can take is to press ahead with fiscal reform. Unlike the crisis in a
number of Asian countries. Brazil's crisis was more a reflection of public rather than
private sector imbalances. Its large fiscal deficits have been a major source of concern to
world investors. with foreign investors asking during last year's crisis whether the nation
could sustain its public sector debt. In 1998. in the runup to the crisis. Brazil's budgetary
balance excluding interest payments was roughly zero. But the growing burden from the
high interest needed to defend the real generated. in that year. an overall deficit that
exceeded 8 per cent of GOP.
The move to a floating exchange rate has not reduced the need for fiscal and
structural reform. although the sharp fall in interest rates has provided some needed
room. Brazil has also taken firm measures that allowed it to achieve a primary surplus excluding interest costs - likely to be well over 3% of GOP this year.
But most of the needed tiscal response has come in the form of temporary
measures. such as the CPMF financial transactions tax. and higher COFINS tax rate. The
challenge ahead is to make progress on longer-term measures. particularlv social securitv
reform and the Fiscal Responsibility Act. which limits how much different levels ;f
government in the country can borrO\\". The imbalances in the social security system have
reached nearly 5 per cent of GOP this year and are growing. Social sec uri tv reform is a
very big part of achieving fiscal reform.
..
.
Brazil has a strong interest in maintaining an open climate for foreign direct
investment. It attracted a remarkable total of $30 billion over the last 12 months. fully
financing the current account deficit. Foreign direct investment is vital to the nation. It
3
builds factories, introduces new technology, and supports local employment. Much of its
progress in this regard has come about because of the government has unleashed the
power and efficiency of the private sector and of foreign investment. The important
telecommunications, electricity and petroleum sectors have been opened up to private
ownership. To continue this success, the authorities need to maintain a friendly
environment by ensuring stable and predictable property rights.
Brazil also needs to assure that the benefits of growth are shared by all its people.
Like other countries in the region, Brazil has a high degree of income inequality. The
Real Plan slashed inflation from over 2000% to just 2% in just 4 years. and made an
important contribution to improving the well being of the poor. Brazil has an interest in
continuing the fight against income inequality and poverty, and has taken important
measures recently to improve its social safety net.
Looking forward, I see many reasons for optimism. Brazil is a large and diverse
economy that is rich in natural resources and human capital. The Real Plan' s success in
bringing stability from 1994 to January 1999 is by no means lost. If Brazil stays on the
path of reform; we in the u.s. have high expectations. As a prospering economy, a
staunch friend of the United States, and the leader of Latin America, it can be a full
partner and a major beneficiary of the new economy of the coming century.
Thank you.
4
D I', P :\ I{ T 1\ lEN "I
() F
TilE
T I~ E :\ S II H. Y
NEWS
ontCE OF PUBlJC AFFAJR5 • 1500 PENNSYLVAN'lA. AVENUE, N.W•• WASHJNCTON, D.C•• 20220 • (202) 622,.2960
FOR IMMEDIATE RELEASE
Text as Prepared for Delivery
October 28~ 1999
UNDER SECRETARY OF THE TREASURY FOR DOMESTIC FINANCE
GARY GENSLER
REMARKS TO THE BOND MARKET ASSOCIATION
1999 ANNUAL LEGAL AND COMPLIANCE CONFERENCE
NEW YORK, NY
I am very pleased to be here today. This is a historic moment for the U. S. financial
system. Legislation that will repeal the arcane Depression era Glass-Steagall Act is likely to
be voted on by both Houses of Congress in the coming week. For decades, prior Congresses
and Administrations have worked to repeal the laws that have separated the banking,
securities, and insurance industries. Finally, we are on the brink of success with the newly
renamed Gramm-Leach-Bliley Act. Beyond the efforts of these three Chairmen of the
Conference Committee~ I'd like to recognize the Significant leadership and accomplishments of
Senator Sarbanes and Representatives LaFalce and Dingell.
As a result of these efforts, we believe that the agreements that have been reached on a
bipartisan basis will result in a final bill that is good for the economy and the financial system
and good for consumers and communities. While repealing Glass-Steagall is important, the
Administration insisted that the bill benefit consumers and communities as well as the financial
industry. That's why we were willing to walk away from the bill. even at the eleventh hour, if
it did not meet that standard. We believe the final bill will meet that standard. If the language
of the bill and the report remain consistent with the agreements that have been reached, the
Administration will support enactment of this legislation.
When the Glass-Steai!a11 Act was passed, the financial and economic landscape of our
country differed greatly from tOday. In 1933, banks dominated the financial industry and the
economy to an extent that we ftnd difficult to imagine today. Banks had no choice but to hold
the mortgages and loans they originated and consumers had little choice as to where to place
their savings. In addition, banks served only their local markets.
LS-l84
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speech", public: $c:hedules and official biographies,
call our 24-hour!ti:Jt.line at (202) 622-2040
·U.S. Govemrnqn, F'ri,.,li"'g Olllee: 199B"
6'9-~59
Today, there is broad consumer choice. Banks compete for deposits with money
market funds and savings products offered by securities firms, asset managers, and insurers.
Securitization has changed the way banks mana&e their assets -- mortgages and other loans are
readily put in tradeable form and sold. An $80 trillion dollar derivatives market has
revolutionized the way financial firms manage their risks and the products they offer. And
today, the markets for financial products are not just national, but truly global in reach.
Spurred by competition, innovation, and technology, our fmancial industry and our economy
have been reshaped over the decades since 1933.
To a significant extent, our financial services industry has already modernized itself,
even without the final repeal of the Glass-Steagall Act. The industry is preeminent globally.
This has been facilitated, in part, by the erosion through judicial and regulatory actions of the
walls erected in 1933. Subject to certain limits, banking institutions have been able to offer
brokerage services and to en~a,e in securities underwriting through so-called ASection 20"
firms.
Benefits of the Bill
The greatest benefit of the bill will be to permit financial services firms to offer
banking, securities, and insurance products all within one organization. At its core, the bill
pulls down barriers to competition. Allowing financial sel'Vices ftrms to offer this wider array
of products will give these finns the flexibility to respond to their customers' needs. Financial
institutions will be able to expand the banking, securities, and insurance products they offer
without artificial structural limitations.
Common ownership of diverse financial services firms will enable these firms to
compete using the best that each discipline has to offer. Asset and risk management
teChniques, funding techniques, technological innovation, product development, and
approaches to serving customers and communities are just some of the areas in which
significant gains can be made through new business combinations. Particularly in an era of
rapidly changing technology, firms will be able to take advantage of greater operating
efficiencies.
I believe that this legJslation will result in a diversity of approaches to financial
services. Just as with any other industry, some companies will be successful at serving their
customers by remaining specialized and focusing on particular markets or areas. Others will
be successful by offering a broad range of products or by serving many markets. There will
not be just one single approach that will be successful. This legislation will ensure that the
choices firms make are dictated by the markets and by customers -- not by artificial barriers
erected by the government decades ago.
Consumers and Communities
2
As important as these benefits of financial modernization are, the President insisted that
a financial modemization bill must include adequate protections for consumers and must
preserve the relevance of the Community Reinvestment Act. As a result of the provisions
included on CRA, investor protection, and privacy, we believe the final bill achieves these
objectives.
Over the many years of major financial modernization proposals, no major bill ever
addressed the issue of consumer privacy. The President took an important step when on May
4 he laid out his principles on protection of individual privacy. The Senate bill, which had
already passed, included no privacy provisions. The House then acted by a vote of 427-1 to
add privacy to their bill. The final bill goes further, providing significant privacy protections.
For the frrst time, financial institutions will be required to adopt privacy policies and to
disclose these policies to their customers. Financial Institutions will be required to give their
cLlstomers notice annually on how their personal information is being shared, even amongst
affiliates. Consumers will have the right to prevent personal fmancial information from being
shared with third parties, subject to limited exceptions that will permit institutions to continue
to operate efficiently. The financial regulatory agencies will have the authority to write and
enforce rules to implement these privacy protections. Importantly, this bill will preserve the
rights o.f States to provide even stronger privacy protections. While we believe more can and
should be done to give consumers choice before their information is shared with affiliates, the
final bill takes an important first step.
We believe that communities also will benefit from the bill. For the fust time. a
bank's performance under the Community Reinvestment Act will be considered when it
expands outside of traditional banking activities. A banking organization will not be able to
commence a new activity, directly or indirectly, or to merge with or acquire a company
engaged in such activities, unless every insured bank within the organization is serving its
communities, as measured by a satisfactory eRA rating.
Under the bill, eRA will continue to apply to all banks without exception, and existing
procedures for public comment are preserved. Small banks will have an incentive to achieve
better CRA ratings to reduce the frequency of examinations. The final bill includes disclosure
provisions related to certain agreements entered into by banks related to CRA. These
provisions were improved substantially from the Senate bill and from the initial proposals of
the Chairmen of the Conference Committee. It is important that these requirements be
implemented in a reasonable manner to ensure that they do not chill the work of those who do
so much in our underserved communities. We will work hard in the regulatory process to
ensure this result. Community-based organizations are essential to effective implementation of
CRA, and to combined growth and opportunity in our communities.
I believe that, taken together, these provisions will ensure that CRA continues to work
for all communities.
3
Organizational Structure
The bill contains important limitations on the fmancial seIVices firms of the future. We
believe that a modem financial system should retain some separation between banking and
other financial activities. The alternative, universal banking. is popular around the world, but
we believe is the wrong choice for this country at this time. Thus, although the bill allows
common ownership of banking, securities, and insurance firms, it still requires those activities
to be conducted separately within an organization. subject to functional regulation and funding
limits.
At the same time, the bill allows for organizational choice, enabling a financial
institution to structure itself and its activities in a manner that best suits its needs, as well as
promoting safety and soundness. The provisions of the final bill will preserve an important
role for the executive branch with regard to banking policy and the evolution of the financial
system of the future.
We believe that when it comes to non-financial firms, even greater separation is
appropriate, and that common ownership should be prohibited. One of the lessons of the
Asian experience of the past few years is that financial institutions tend to make bad decisions
when it comes to lending to corporate owners or siblings. The synergy gains of combining
financial and non-financial firms are not great and the potential downside is considerable.
Thus, I believe that the United States economy has been well served by preserving a clear
separation between those who allocate capital and the majority of those competing for it.
Importantly. the bill would prohibit the transfer of unitary thrifts to non-financial firms.
In addition, it sets some important limitations on merchant banking activities in banking
institutions. Surely, this is an area where we need to move cautiously, at least until we gain
experience with the effects of broader financial finns.
Commodity Exchange Act
As Congress passes this historic legislation this week, we are also embarking on
another effort to revise a significant piece of legislation that is in need of updating -- the
Commodity Exchange Act.
The President's Working Group on Financial Markets will shortly be reporting on our
joint views on over-the-counter derivatives. We will also report on proposed revisions to the
Commodity Exchange Act in connection with the upcoming reauthorization of the Commodity
Futures Trading Commission. The process represents a unique opportunity to move forward
to modernize the legal and regulatory framework for the derivatives markets. There are a
number of important principles I would like to mention in that regard.
4
First, i[ is critical that we provide legal certainty for OTe derivatives. Legitimate
transactions have come under a legal cloud as a result of expansive interpretations of the CEA
over the years. Such uncertainty can create systemic risk and must be resolved. Second, we
must consider the potential for properly desiened, centralized clearing of OTe contracts. This
could significantly reduce systemic risk in these markets and contribute to the stability of our
fmancial markets. Third~ we must allow for innovation and the emergence of more efficient
trading mechanisms in order to ensure that the U.S. remains preeminent in these markets.
Fourth, the Working Group also must address other extremely important areas, particularly
concerning the Treasury Amendment, which excludes from the CEA transactions in
government securities or foreign currency. Lastly, we need to ensure that loopholes do not
exist that allow bucket shops and other fraudulent operators to prey on retail customers.
The members of the Working Group are working diligently to achieve a consensus on
recommendations that can be sent forward to the Congress. The Working Group has focused
on finding resolutions that will ensure the integrity of markets while fostering innovation and
competition, These two goals, ensuring market integrity and fostering innovation, need not be
competing or incompatible objectives. Innovation and competition are critical to ensuring the
integrity of our markets over the long term.
Let me conclude by saying that we have a historic opportunity to prepare for the 21 st
Century by updating archaic laws from the early 20th Century. It will strengthen our financial
sector and promote our economy.
Thank you.
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· DEPARTl\1ENT
'IREASURY
OF
THE
TREASURY
NEWS
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
For Immediate Release
October 28, 1999
Contact: Public Affairs
(202) 622-2960
STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMMERS
For the past six years as Director of the Bureau of Alcohol, Tobacco and Firearms, John
Magaw has spearheaded significant and successful changes for one of the premier law
enforcement agencies in the Federal government. Director Magaw's distinguished and versatile
law enforcement career of 39 years has proven him to be a stellar leader of great integrity.
Since being named ATF Director in 1993 by former Treasury Secretary Bentsen, Magaw
has shaped ATF into a more diversified and efficient organization better suited to confront the
challenges of law enforcement including several high-profile investigations such as the
bombings of the Murrah Federal Building in Oklahoma, the World Trade Center and the 1996
U.S. Olympics.
Director Magaw's early emphasis on ATF's strategic plan, which became a model for
other federal agencies to follow, brought focus to ATF's enforcement efforts. Under Director
Magaw's leadership, ATF has received four "Unqualified Audit Opinions" - the highest possible
rating for overall performance given by the Treasury Inspector General. He also increased
A TF' s efforts in training, science and technology, and implemented a restructuring effort that
integrated regulatory and law enforcement areas.
In addition to the ATF, Director Magaw also served for the U.S. Secret Service as a
Special Agent and numerous executive level positions including head of all protective operations
for former President George Bush and later as Director of the Secret Service. Director ~1agav..'
leaves behind a tremendous record of service to the Treasury Department and a lasting imprint
on Treasury enforcement.
I thank Director Magaw for the esteemed leadership that he has provided to Treasury and
wish him well on his retirement from ATF.
- 30 LS-185
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
Department of the Treasury
Bureau of Alcohol, Tobacco and Firearms
ATF[M~
I.
24 Hour Telephone: (202) 927.. 8500
Yashlngton, DC 20226
FOR IMMEDIATE RELEASE
FY 00-2
CONTACT: Jeff Roehm
Telephone: (202) 927-8500
Date: Octobor 28, 1999
DIRECTOR MAGAW ENDS TENURE AT ATF
Director John W. Magaw
will be retiring from his post
as head of the U.S. Bureau of Alcohol, Tobacco and Firearms
(ATF) , effective
''''J "'1',.
December 31, 1999.
His letter of
resignation was submitted to the Secretary of the Treasury
today.
Director Magaw's law enforcement career began 39 years
ago, when he became a trooper with the Ohio State Patrol.
In 1967, he became a Special Agent with the U.S. Secret
Service, rising through numerous executive-level positions
-- including head of all protective operations for former
President George Bush -- to Director of the Secret Service,
a position he held until October 1993 when he was
reassigned to be ATF's director at the request of thenSecretary of the Treasury Lloyd Bensten.
During his tenure at ATF, Director Magaw initiated
numerous organizational and policy changes that made ATF a
more diversified and efficient law enforcement agency.
Under Director Magaw's leadership, ATF participated in
several high-profile investigations, including the Oklahoma
City Bombing, the crash of TWA Flight BOO, the bombing at
the 1996 Olympics, and the National Church Arson Task
Force.
At the same time, ATF's role in implementing the
Brady Law, the Youth Crime Gun Interdiction Initiative, and
the work of its National Tracing Center, along with several
other programs targeting firearms violations, such as the
Integrated Violence Reduction Strategy, have had a direct
impact on reducing gun crimes in the United States.
Director Magaw implemented a restructuring of all of
ATF that integrated regulatory and law enforcement
elements. The restructuring eliminated duplicate reporting
structures and fostered closer working relationships.
The
National Revenue Center in Cincinnati, Ohio, was also
established under his leadership, resulting in the
consolidation of five ATF technical offices.
Director Magaw took the lead in implementing a
comprehensive strategic plan as required by the 1993
Government Performance and Results Act (GPRA).
Today, the
ATF Strategic Plan is being used as a model in both the
2
public and private sectors.
In its 1998 "Report on
Managing for Results," the General Accounting Office (GAO)
cites ATF as one of the few agencies which has successfully
made the critical linkage between performance plans and the
agency's budget.
In fact, this past spring, under Director
Magaw's leadership, ATF received its fourth
"Unqualified
Audit Opinion" - the highest possible rating given by the
Treasury Inspector General, which contracted with the
private accounting firm of PricewaterhouseCoopers to do the
audits for GPRA compliance.
Increased emphasis on training, science and technology
were among the top priorities on Director Magaw's agenda.
Under his direction, ATF adopted the seat management
approach to computer equipment acquisition.
Instead of
purchasing computer equipment, ATF now negotiates threeyear rental agreements.
In addition to being more
efficient and economical, this approach provides ATF with
better and more frequent access to state-of-the-art
computer hardware and software.
Another pioneer program implemented at ATF under
Director Magaw's tenure is a two-year initiative by the
Department of the Treasury designed to retain current
employees and attract new ones with mission-critical skills
3
in the area of science, technology or analysis.
Employees
who qualify may receive additional salary.
During Magaw's tenure, the ATF K-9 facility in Front
Royal, Virginia, was built and the National Tracing Center
in Martinsburg, West Virginia, will be moving soon into a
larger facility nearby that will have expanded
capabilities.
Plans also are underway to construct two
other facilities, including a new headquarters building in
Washington, D.C., and the National Lab and Fire Research
Center in Greenbelt, Maryland.
Director Magaw is a graduate of Otterbein College in
Westerville, Ohio, and serves on the Board of Trustees.
He
is also a member of the International Association of Chiefs
of Police and serves on the Association's Executive
Committee as well as its Advisory Committee for
International Policy.
He also serves as the Chairperson
for the National Law Enforcement Explorers Committee of the
Boy Scouts of America.
He is the recipient of numerous other awards and
commendations, including Presidential Rank Meritorious
Award in 1991 and 1998, and the Presidential Rank
Distinguished Award in 1995.
###
4
D EPA R T 1\1 E N T
0 F
THE
T REA SUR Y
NEWS
omCE OF PUBliC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
EMBARGOED UNTIL 10 A.M.
Prepared for Delivery
October 29, 1999
STATEMENT OF WILLENE A. JOHNSON
NOMINEE FOR U.S. EXECUTIVE DIRECTOR OF THE
AFRICAN DEVELOPMENT BANK
BEFORE THE SENATE FOREIGN RELATIONS COMMITTEE
Mr. Chairman, Mr. Ranking Member, and Members of the Committee, I am
honored to appear before this Committee as the nominee for the position of United
States Executive Director for the African Development Bank Group.
My interest in African economic development began thirty years ago when I
served as director of Volunteer Teachers for Africa, a student-run program of Harvard
University. My work as a volunteer, teaching dressmaking in rural Kenya, provided
me with first-hand experience of the development challenge in Africa.
When I returned to the United States, I became involved in education, first as a
teacher of African and African-American culture and then as an active parent. As my
interest in Africa deepened, I received a master's degree in African history and later
went on to receive a doctorate in economics from Columbia University where my
research and dissertation again focused on Africa.
Since 1982, I have enjoyed a career as an economist and central banker at the
Federal Reserve Bank of New York. I have worked in various departments at the
Federal Reserve Bank, including economic research, foreign exchange, international
financial markets, international affairs, and the office of equal employment opportunity.
My early research focused on country risk and capital flows to Latin American
countries, but I have also worked on European markets and the role of central banks in
transition economies. I have lectured on finance and economics in Latin America,
Africa, and throughout the United States.
LS-186
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'U S Governmenl Pflnllng OffIce 1998· 619·55
During the past five years, I have devoted considerable energy to studying,
writing, and speaking about Africa. My recent work has dual responsibilities as both
the equal employment opportunity officer and as the officer responsible for the Federal
Reserve Bank of New York's relationships with African central banks. This work has
included developing leadership programs for central bankers both here and abroad. In
several State Department sponsored speaking tours in Africa, I have stressed the
importance of capacity building and governance as critical underpinnings of economic
and financial reform.
During remarks to the World Bank's Development Committee in September,
Secretary Summers outlined four pre-requisites for sustainable growth and poverty
reduction:
1.
2.
3.
4.
Sound and transparent economic management;
A policy framework that integrates poverty reduction with growth objectives;
Priority attention to human development; and
Good governance, including institutions incorporating transparency, accountability,
the rule of law, and the participation of civil society.
This strategic vision of sustainable development is one that I share, and I am
prepared to implement this strategy with all the skills that I have. The United States
has worked diligently to promote the restructuring of the African Development Bank,
thereby making the organization better able to provide the institutional support for the
implementation of this strategy in the African context. Moreover, the AIDB has stated
its intention to playa constructive role in countering corruption in its borrowing
countries. In September, the AIDB Board adopted a policy to make governance
reforms an essential element in African Development Bank operations throughout the
region. Given these ongoing internal reforms and support for regional reform efforts,
the AIDB is now better placed to play an active role in eradicating poverty in Africa
and to serve as an institution through which the United States can make a significant
contribution.
If given the opportunity to serve as the U.S. Executive Director, I would draw
on my experiences as a banker, including work supporting the audit committee for the
Board of the Federal Reserve Bank of New York, to encourage prudential management
and continuing reforms in internal governance at the AIDB. I would also draw on my
training as an economist to implement strategies for sustainable growth and poverty
alleviation.
Thank you for your attention. I look forward to answering any questions that
you might have.
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2
DEPART~'iENT
OF
THE
TREASURY
NEWS
omCE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. - 20220 - (202) 622-2960
Contact: Steve Posner
(202) 622-2960
FOR IMMEDIATE RELEASE
October 29, 1999
PRESIDENT CLINTON DESIGNATES JONATHAN TALISMAN
TREASURY ACTING ASSISTANT SECRETARY FOR TAX POLICY
. President Clinton on Thursday designated Jonathan Talisman as Acting Assistant Secretary for
Tax Policy at the Department of the Treasury
As Acting Assistant Secretary for Tax Policy, Talisman will assist the Treasury Secretary in
developing and implementing tax policies and programs~ provide the otIJcial estimates of all
Government receipts for the President's budget, fiscal policy decisions, and Treasury cash
management decisions; establish policy criteria reflected in regulations and rulings published in
conjunction with the Internal Revenue Service and used in implementing and administering the
Internal Revenue Code; negotiate tax treaties for the United States and represent the United States in
meetings and work of multilateral organizations dealing with tax policy matters~ and provide
economic and legal policy analysis for domestic and international tax policy decisions
Talisman has served since December 1998 as Deputy Assistant Secretary for Tax Policy In
that position, he had supervisory responsibility for all domestic tax issues before the Treasury
Department, including legislative proposals and regulatory guidance He was actively involved in
representing and advancing the Administration's position during consideration of various tax bills,
including the Taxpayer Relief Act of 1997, the IRS Restructuring and Reform Act of 1998, and the
Taxpayer Refund and Relief Act of 1999. Talisman joined the Treasury Department in February 1997
as Tax Legislative Counsel.
Prior to joining the Treasury Department. Talisman served as f\.1inority Chief Tax Counsel for
the Senate Finance Committee under Senator Daniel Pat rid \lo~mihan, \vhere he was responsible for
developing tax proposals and analyzing all ta'\-related legislation for the Democratic members of the
Finance Committee. Prior to his service at the Finance Committee, he was Legislation Counsel of the
Joint Committee on Taxation Before joining the federal government, Talisman practiced law in
Washington, D.C., with the law firm of Akin, Gump, Strauss, Hauer & Feld.
Talisman has a B.S. in accounting from the Mcintire School of Commerce at the University of
Virginia and a J.D. from the University of Virginia School of Law, where he served as Executive
Editor of the Virginia Tax Review He lives in Bethesda, MD with his wife Alisa and children Nick,
Max, and.Lita.
L8-187
- 30 -
,
Far press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
DEPARTMENT
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960
USTR Contact: Amy Stilwell
(202) 395-3230
Treasury Contact: Steve Posner
(202) 622-2960
FOR IMlv1EDIATE RELEASE
October 29, 1999
CLINTON-GORE ADMINISTRATION COMMENDS
HOUSE PASSAGE OF E-COMMERCE RESOLUTION
The Clinton-Gore Administration welcomes the House resolution (H Con. Res. 190)
supporting the Administration's ongoing etTorts to obtain a permanent moratorium on the
imposition of tariffs on electronic transmissions. This resolution, adopted on October 26, by a
vote of 423-1, endorses a long-standing Administration position with respect to electronic
transmissions. The Administration successfully achieved in May 1998 an agreement among the
132 WTO countries to establish a temporary moratorium on the imposition of customs duties on
electronic transmissions. We are actively seeking an extension of the moratorium at this
December's WTO Ministerial Conference, with a view to making the moratorium permanent and
binding at the earliest possible date.
The Administration also applauds the goal of the HOllse resolution regarding taxation,
which is to keep the Internet and electronic commerce fj'ee tl'om special, multiple or
discriminatory taxes. The resolution supports the Administration's position that the Internet and
electronic commerce should not be subject to any non-neutral or discriminatory taxation In
addition, the Administration has long been on record as strongly opposing any special Internet
taxes, and has successfully opposed imposition of one such tax, an international "'bit tax" based on
information volume.
The Administration commends and appreciates the leadership of Senator Ron Wyden and
Representative Christopher Cox in bringing this matter to the attention of Congress and the
American people. The Administration looks forward to \\or\'\ing with Congress to ensure that the
technologies that facilitate the global marketplace are \.\ept t,'ee of special, multiple or
discriminatory taxes, and other discriminatory measures, which vvould impede the use of these
important commercial, educational and social tools.
-30L8-188
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line cit (202) 622-2040
'U S Governmenl PflnTtng Office 1998· 619,559
DEPARTMENT
OF
THE
TREASURY
NEWS
TREASURY
OHICE 0.' PUBLIC An'AIRS e1500 PENNSYLVANIA AVENUE, N.W. e WASHINGTON. DX .• 20220. (202) 622·2960
CONTACT:
EMBARGOED UNTIL 2:30 P.M.
october 28, 1999
Office of Financing
202/691-3550
TREASURY OFFERS 13-WEEK AND 26-WEEK BILLS
The Treasury will auction two series of Treasury bills totaling
approximately $18,000 million to refund $15.,671 million of publicly held
securities maturing November 4, 1999, and to raise about $2,329 million of new
cash.
In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $8,343 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 in addition to the offering amount.
The maturing bills held by the public include $2,546 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.
Treasu~Direct customers requested that we reinvest their maturing holdings of approximately $1,012 million into the 13-week bill and $843 million
into the 26-week bill.
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 each of the new securities are given in the attached offering highlights.
000
~ttacbment
LS-189
For press releases, speeches, public schedules and official biographies, call our 24·hour fax line at (202) 622-2040
HZGHLZGHTS OF TREASURY OFFERZNGS OF BZLLS
TO BE XSSUED NOVEMBER 4, 1999
October 28, 1999
Offering Amount ••••••••.•....••••••••..• $10,000 million
$8,000 million
Description of Offering:
Term and type of security •••••••••••••••
CUSIP number ••••••••••••••••••••••••••••
Auction date ••••••••••••••••••••••••••••
Issue date •••••••••••••••••••••••.•••••••
Maturity date •••••••••••••••••••••••••••
Original issue date •••••••••••••••••••••
Currently outstanding •••••••••••••••••••
Minimum bid amount and multiples ••••••••
182-day bill
912795 DU 2
November 1, 1999
November 4, 1999
May 4, 2000
November 4, 1999
91-day bill
912795 DF 5
November 1, 1999
November 4, 1999
February 3, 2000
February 4, 1999
$27,885 million
$1,000
$1,000
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids
Accepted in full up to $1,000,000 at the 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 Rate •••..•••.••• 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.
DEPARTI\lENT
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASIDNGTON, D.C.• 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
OCTOBER 31, 1999
STATEMENT BY TREASURY DEPUTY SECRETARY STUART EIZENSTAT
AMMAN, JORDAN
Today, during meetings with King Abdullah, Prime Minister Rawabdneh,
Deputy Prime Minister Khalaf, Finance Minister Marto and Central Bank Governor
Fariz, we discussed Jordan's ongoing economic reform efforts and Jordan's bid to join
the World Trade Organization. Prior to these meetings, I also met with members of the
Jordanian-American Business Association to hear their concerns about the bilateral
economic relationship.
The meeting with King Abdullah focused on the King's efforts to invigorate
Jordan's economic reform agenda and ways in which we could improve our bilateral
trade relationship
I praised King Abdullah for his leadership of Jordan on a wide array of fronts.
In particular, I lauded the Government of Jordan for adhering to its 1999 budget deficit
targets, even in the face of unanticipated difficulties brought on by the drought, and
urged them to stay the course. I pointed to the U.S. experience, that fiscal discipline
pays off. It makes possible a "virtuous cycle" where interest rates can be reduced,
which spurs private investment and further economic growth.
Jordan's accession to the World Trade Organization is now at a very advanced
stage. I am impressed with Jordan's commitment to accelerate reforms and pass
relevant legislation for WTO accession. I commend the Government of Jordan for its
recent improvement in its WTO accession offer, particularly in financial services.
Moreover, the Trade and Investment Framework Agreement (TIFA), signed in May
1999, was an important step in promoting our bilateral trade relationship.
I congratulated the Government of Jordan on the United States Trade
Representative's decision to designate three new Qualifying Industrial Zones, AI-Kerek
LS-191
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I
Industrial Estate, Ad-Dulayl Park and AI-Tajamouat Industrial City. These three, along
with two existing QIZ's (AI-Hasan near Irbid and the Jordan Gateway Project Sheikh
Hussein bridge), will help attract investment, create jobs and in some cases aid in the
transfer of technology.
I also commended the Government of Jordan for its recent progress on structural
reforms, particularly progress on the long-awaited privatization of Jordan
Telecommunications Corporation, reorganization of the Aqaba Railway Corporation
and plans for restructuring and privatizing Royal Jordanian Airlines.
o
Finally, we are pleased to support Jordan's structural reform efforts by placing a
Resident Debt Advisor with the Ministry of Finance. This Advisor will help Jordan
create the most efficient market possible for its domestic government securities by
advising on primary issuance of government debt and secondary market structure.
-30-
PUBLIC DEBT NEWS
Department of tbe Treasury • Bureau of tbe Public Debt • Washington, DC 20239
FOR IMMEDIATE RELEASE
November I, 1999
Contact: Peter Hollenbach
(202)691-3502
I BONDS TO EARN 6.98 % WHEN BOUGHT FROM NOVEMBER 1999 THROUGH APRIL 2000
I BOND EARNINGS RATE - 6.98%
The earnings rate for I Bonds is a combination of a fixed rate, which will apply for the life of the bond. and the inflation rate.
The 6.98 percent earnings rate for I Bonds bought from November 1999 through April 2000 will apply for the first six
months after their issue. The earnings rate combines the 3.40 percent fixed rate of return with the 3.52 percent annualized
rate of inflation as measured by the Consumer Price Index for all Urban Consumers(CPI-U). The CPI-U increased from
165.0 to 167.9 from March to September 1999. a six-month increase of 1. 76 percent.
r reasury' s inflation- indexed I Bonds are designed to offer all Americans a way to save that protects the purchasing power of
their investment by assuring them a real rate of return over and above inflation. I Bonds have features that make them
lttractiveto many investors. They are sold at face value in denominationsof$50, $75. $100. $200. $500. $1.000. $5.000.
md $10.000 and earn interest for as long as 30 years. I Bond earnings are added every month and interest is compounded
;emiannually. They are State and local income tax exempt. and Federal income tax on I Bond earnings can be deferred until
he bonds are cashed or they stop earning interest after 30 ~ cars. In\estors cashing I Bonds before five years are subject to a
I-month earnings penalty.
I
BO~D
FIXED RATE 3.40%
;eries I. inflation-indexed savings bonds purchased from !\ovember 1999 through April 2000 \\il\ earn a 3.4 percent
ixed rate of return over and above inflation. Tht: 3 A percent fixed rate applies for the 30-year life of I Bonds purchased
uring this six-month period.
EARNI~GS
RATES FOR ALL I BONDS
amings rates and actual ~ ields for I Bond:-. art: shlmn In tht: I Bond Earnings Report on the back of this release.
'lORE
I~FOR'IA TIO~
et the latest information about I Bonds and "t:rlt:" FE bonds at PubliC Dt:bt"s savings bond \vebsitt: at
w..... savinl:shond.\.f,:"'· Do\\nload the ne\\ Sa\lng~ Bond WILardr~'. \t:rslon2.02 a fret.: easy to use program that lets
)u keep track of all ~our sa\ lOgs bonds. caicui3tt: thc \ alut: of ~ our rortfnlll1. and more. The latest Un/lcd Slatcs
mngs Bmul, 'S()iL'\ Eammg\ Report. containing ralc and ~ It:ld InformatIOn for Series E. EE and I bonds along with
Ivings ~ote~. is abo a\ ailabk at the \\ebsltc pr h~ mali Scnd a rostcard asking for tht.: "Earnings Report" to the
Jreau of the Public Debt. 200 Third Street. Parkcrshurg. W\· 26106-1328.
oOt)
www.publicdebt.treas.go\'
VALUES AND YIELDS FOR $100 SERIES I BONDS
November 1999 Thru October 2000
The table shows semiannual values for $100 Series I bonds·. Values for other denominations are proportional
to the values shown. For example, the value of a $50 bond is one-half the amount shown and the value of a $500
bond IS five times the amount shown. The Current Earnings column shows the annual yield that the bonds will eam
dUring the penod indicated. The Earnings From Issue is the bond's yield from its issue date to the date shown or date
adjusted as shown in the footnotes.
Eamin ~s to Date when held 5 years .Eamin! Period
Redemption Value End
Current
Start
Earnings
End
Start
Start
Series I Bond
End
Value
Value
Eamings From Issue
DateIssue Dates
Date Value
Value
100.00
103.48
6.96%
11/1/1999
51112000
6.96%
1111999 - 4/2000
100.00
101.72
11/111999
102.52
106.04
6.87%
5/1999 - 10/1999
511/2000
5.95%
101.24
104.28
11/1/1999
105.12
11/1998 - 411999
51112000
6.85%
108.72
5.65%
103.80
106.92
9/1998 - 10/1998
3/1/2000
111.44
9/1/2000
107.68
6.98%
5.49%
106.32
109.56
Monthly Increases In value, applicable to some bonds, are not shown In the table .
•• Each "Start Date" and "End Date" is for the first date of the range in the "Issue Dates" column.
Add one month for each later issue month. For example, a bond issued in 1/2000
would be worth $100.00 on 111/2000 and $101.72 on 7/1/2000 .
••• A bond Issued on or after May 1, 1997 is assessed a three-month interest penalty if
redeemed less than five years after its issue date. "Redemption Value" shows bond values
after penalty. "Earnings to date when held 5 years" shows the amount upon which future
earnings will compound.
.
PUBLIC DEBT NEWS
. [)epartment of the Treasury • Bureau of the Public Debt • Washington, DC 20239
Contact: Peter Hollenbach
(202) 691-3502
FOR IMMEDIATE RELEASE
November 1, 1999
BUREAU OF THE PUBLIC DEBT ANNOUNCES SERIES EE SAVINGS BOND RATE
FOR NOVEMBER 1999 THROUGH APRIL 2000
The Bureau ofthe Public Debt announced today the rate for Series EE savings bonds issued on or after May 1, 1997.
SERIES EE SAVINGS BOND RATE - 5.19%
The 5.19 percent Series EE savings bond rate is in effect for bonds issued on or after May 1, 1997, that enter sem iannual
earnings periods from November 1999 through April 2000. The rate is 90 percent of the average 5-year Treasury securities
yields for the preceding six months. A new interest rate is announced effective each May I and November 1. A 3-month
interest penalty is applied to these bonds if redeemed before five years. The Series EE bonds on sale now increase in value
mQnthly. The bond's interest rate is compounded semiannually.
SERIES EE BONDS ISSUED BEFORE MAY 1997
The 4.35 percent Short-Tenn Series EE savings bond rate is in effect for bonds issued from May 1995 through April 1997
for bonds that enter semiannual earnings periods from November 1999 through April 2000. See the table on the back of this
release for earnings on Series EE bonds issued from January 1980.
MATURED SERIES E SA VINGS BONDS AND SAVINGS NOTES
~eries E savings bonds and Savings Notes continue to reach final maturity and stop earning interest. Bonds issued from
vtay 1941 through October 1959 along with those issued from December 1965 through October 1969, have stopped earning
nterest. Savings Notes. issued from May 1967 through October 1969. have stopped earning interest. Bonds and Notes with
ssue dates shown here will reach final maturity in the next six months.
Bonds lNotes Stop Earning Interest
November 1999 through April 2000
November 1999 through April 2000
BondlNote Issue Dates
November 1959 through April 1960
November 1969 through April 1970
MORE INFORMATION
'he latest United States Sal'ing\' Bonds/A'oles Earnings Reporl and other useful information about savings bonds is available
t Public Debt's Internet website at www.sm·ingshonds.gov. Download the new Savings Bond Wizard TM version 2.02 an
asy to use program that lets you keep track of all your savings bonds. calculate the value of your portfolio, and more. The
lble on the back of this release shows actual yields for Series EE bonds. The Earnings Report, which contains rate and
ield in[p.rmation for Series E&EE bonds and Savings Notes, is also available by mail from Public Debt. Send a postcard
sking for "Earnings Report" to Bureau of the Public Debt. 200 Third Street, Parkersburg. WV 26106-1328.
3-193
000
www.publicdebt.treas.gov
VALUES AND YIELDS FOR $100 SERIES EE BONDS
November 1999 Thru October 2000
The table shows semiannual values for $100 Series EE bonds·. Values for other denominations are proportional
to the values shown. For example, the value of a $50 bond is one-half the amount shown and the value of a $500
bond is five times the amount shown. The Current Eamings column shows the annual yield that the bonds will earn
dunng the period indicated The Earnings From Issue is the bond's yield from its issue date to the date shown or date
adjusted as shown in the footnotes.
Earnin~
Series EE Bond
Issue Dates
11/1999 - 412000
5/1999 - 10/1999
1111998 - 4/1999
5/1998 - 10/1998
1111997 - 4/1998
5/1997 - 10/1997
Start
Date 11/111999
11/1/1999
11/1/1999
11/1/1999
11/1/1999
11/1/1999
Period
End
Date51112000
51112000
51112000
51112000
51112000
51112000
Redemption Value ...
Earnin s to Date when held 5 ~ears ...
End
Start
Earnings
Current
End
Start
Value
Value
Earnings From Issue
Value
Value
50.00
50.64
5.12%
5.12%
51.28
SO.OO
50.52
5172
4.74%
5.17%
52.40
51.08
4.74%
51.72
52.96
5.20%
53.64
52.28
53.00
4.79%
54.24
5.23%
54.96
53.56
54.48
4.96%
55.80
5.23%
56.52
55.08
56.04
57.36
5.08%
5.23%
58.12
56.64
Earnings
from
Current
End
Start
Series EE Bond
Issue
Earnings
Value
Date ..
Issue Dates
4.37%
4.36%
58.16
11/1/1999
11/1996 - 411997
4.35%
4.40%
59.40
111111999
5/1996 - 10/1996
4.41%
4.30%
60.84
11/1/1999
11/1995 - 411996
4.48%
4.32%
62.40
11/1/1999
511995 - 10/1995
5.15%
4.96%
66.12
1111/1999
11/1994 - 411995
5.10%
4.85%
67.64
511994 - 1011994
1111/1999
5.04%
4.86%
69.12
11/1/1999
11/1993 - 411994
5.02%
4.86%
70.76
5/1993 - 10/1993
11/1/1999
5.03%
4.97%
72.56
3/1993 - 4/1993
3/1/2000
6.00%
77.92
6.03%
1111992 - 211993
1111'1999
6.00%
80.24
5.95%
5/1992 - 10/1992
111111999
6.08%
6.01%
82.68
11/1991 - 4/1992
111111999
511991 - 10/1991
85.16
6.00%
6.01%
11/111999
11/1990 - 411991
11/111999
87.68
5.92%
6.00%
5/1990 - 1011990
11/1/1999
90.32
6.02%
6.00%
11/1989 - 4/1990
1111/1999
6.02%
93.04
6.00%
5/1989 - 1011989
11/111999
95.84
6.02%
6.00%
1111988 - 4/1989
11/111999
98.68
5.93%
600%
511988 - 1011988
11/1/1999
101.64
6.00%
6.00%
11/1987 - 411988
1111/1999
103.68
4.01%
5.92%
511987 - 10/1987
111111999
105.76
4.01%
5.85%
11/1986 - 411987
11/111999
107.92
4.08%
5.78%
511986 - 10/1986
11/111999
122.40
4.00%
6.50%
11/1985 - 4/1986
111111999
124.84
3.99%
6.41%
5/1985 - 10/1985
11/1/1999
127.32
3.97%
6.33%
1111984 - 4/1985
11/111999
129.88
4.02%
6.25%
5/1984 - 10/1984
11/111999
135.12
5.10%
6.31%
11/1983 - 4/1984
11/1/1999
141.40
481%
6.40%
511983 - 10/1983
111111999
147.64
4.83%
6.47%
3/1983 - 4/1983
3/112000
155.80
4.95%
660%
11/1982 - 211983
11/1/1999
162.72
597%
686%
5/1982 - 1011982
1111/1999
18264
600%
7.33%
11/1981 - 411982
11/1/1999
18632
403%
7.24%
5/1981 - 10/1981
11/1/1999
19004
3.99%
7.15%
11/1980 - 411981
1111/1999
20248
4.03%
730%
5/1980 - 10/1980
1111/1999
220.92
601%
7.57%
111980 - 4/1980
1/1/2000
22532
6.00%
7.48%
- Monthly
I to some bonds, are not shown In the table
••
Each" Increases" In value. app ilea be
Add
Start Date and "End Date" IS for the first date of the range In the "Issue Dates" column
one month tor each later Issue month For e)(ample. a bond Issued In 1/1986
~~uld be worth S122.40 on 1/1/2000 and S124.84 on 711/2000
1 1997 IS assessed a three-month Interest penalty if
red A bond
d IIssued on or after Ma y,
Earnin! Period
Start
End
Value
Date56.92
51112000
58.12
5/112000
59.56
51112000
61.08
5/112000
64.52
51112000
66.04
5/112000
67.48
5/112000
69.08
51112000
70.80
9/112000
75.64
51112000
77.92
51112000
80.24
5/112000
82.68
5/112000
51112000
8516
87.68
5/112000
90.32
5/112000
51112000
93.04
5/112000
95.84
5/112000
98.68
51112000
101.64
5/112000
103.68
51112000
10576
511/2000
120.00
51112000
12240
51112000
12484
5.'112000
12732
51112000
131 76
51112000
13808
511/2000
14416
9/112000
15204
51112000
15800
5/112000
177 32
51112000
18264
51112000
18632
5/1/2000
19848
5/112000
21448
7/1/2000
21876
afte~;~al;s:~an five years after ItS Issue date "Redemption Value" shows bond values
earnings WIIlCO:;:~;; to date when held 5 years" shows the amount upon which future
DEPARTl\tlENT
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
EMBARGOED UNTIL 3:00PM
November 1, 1999
Contact: Bill Buck
(202) 622-2960
TREASURY ANNOUNCES MARKET BORROWING ESTIMATES
The Treasury Department announced on Monday that net market borrowing for the
October - December 1999 quarter is estimated to be $51 billion with a cash balance of
$70 billion on December 31, 1999. The Treasury Department also announced that net
market borrowing for the January - March 2000 quarter will be a paydown of $12
billion with a cash balance of $20 billion on March 31.
In the quarterly announcement of its borrowing needs on August 2, 1999, the Treasury
Department estimated net market borrowing for the October - December quarter to be
$65 billion with a cash balance of $80 billion on December 31, 1999. Current
estimates reflect a higher opening cash balance, lower net issues of State and Local
Series securities than previously estimated, and a lower target balance on December 31.
Actual net market borrowing for the July - September 1999 quarter was a paydown of
$15.9 billion with a cash balance of $56.5 billion on September 30. On August 2, the
Treasury Department announced its current estimate of net market borrowing to be a
paydown of $11 billion with a cash balance of $45 billion on September 30. The
increase in the paydown was the result of lower outlays than estimated.
The Quarterly Refunding Press Conference will be held at 9:00AM on Wednesday,
November 3, 1999.
-30LS - 194
Far press releases, speeches, public schedules and official biographies, call our 24.Jzour fax line at (202) 622-2040
"
,
DEPARTl\'IENT
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASIDNGTON, D.C.• 20220 • (202) 622-2960
FOR IMMEDIATE RELEASE
November 1, 1999
Contact: Bill Buck
(202) 622-2960
SECRETARY SUMMERS TO LAUNCH INTERNET SAVINGS BOND SITE
Treasury Secretary Lawrence H. Summers will witness the first on-line purchase of an
U.S. Savings Bond as he unveils the new Savings Bond Internet site at 10:30 a.m., Tuesday,
November 2, in the Treasury's Diplomatic Reception Room (Room 3327).
The site, The Savings Bond Connection, will allow people to conveniently purchase U.S.
Savings Bonds 24 hours a day, 7 days a week, from home with a credit card. This is part of the
Clinton's Administration's ongoing commitment to make it easier for Americans to save and
invest.
Reporters without Treasury, White House, State Department, Congressional, Justice or
Defense credentials should call (202) 622-2960 with their name, date of birth, social security
number and news organization to be cleared in to enter the building. All reporters should enter
the Treasury Department from the 15 th Street entrance at 1500 Pennsylvania Avenue.
-30-
LS - 195
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANlAAVENUE, N.W. - WASHINGTON, D.C. - 20220 - (2Q2) 622-2960
FOR IM1vlEDIATE RELEASE
November 1, 1999
Office of Public Affairs
(202) 622-2960
MEDIA ADVISORY
(pHOTO-OP)
TREASURY TO UNVEIL REDESIGNED $5 AND $10 CURRENCY NOTES
Treasury Secretary Lawrence H. Summers, Treasurer Mary Ellen Withrow and Secret
Service Director Brian 1. Stafford will unveil the redesigned $5 and $10 notes on Tuesday,
November 16 in continuance of the Government's efforts to deter counterfeiting of U.S. currency
in circulation. The unveiling ceremony will be held at 10 a.m. in Treasury's Diplomatic
Reception Room (Room 3311).
In addition, three retail employees will be honored for having successfully detected
counterfeit notes at work using the new security features. They will each receive a certificate for
"Exceptional Public Service" signed by Secretary Summers.
Officials from the Treasury Department, Federal Reserve, United States Secret Service
and the Bureau of Engraving and Printing will be available to answer questions regarding the
new notes.
Reporters without Treasury, White House, State, Congressional or Defense credentials
should call (202) 622-2960 with name, date of birth, social security number and news
organization for clearance. Clearance information may also be faxed to (202) 622-1999.
-30-
LS-196
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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
CONTACT:
FOR IMMEDIATE RELEASE
November 01, 1999
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
November 04, 1999
February 03, 2000
912795DF5
Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:
4.995%
Investment Rate 1/:
5.145%
Price:
98.737
All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
allotted 47%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
Accepted
Tendered
Competitive
Noncompetitive
$
26,272,771
1,405,279
27,678,050
PUBLIC SUBTOTAL
SUBTOTAL
9,659,050 2/
348,563
28,026,613
10,007,613
4,383,010
181,437
4,383,010
181,437
Federal Reserve
Foreign Official Add-On
$
8,253,771
1,405,279
348,563
Foreign Official Refunded
TOTAL
$
32,591,060
$
14,572,060
Median rate
4.985%: 50% of the amount of accepted competitive tenders
tendered at or below that rate.
Low rate
4.900%:
5% of the amount
)f accepted competitive tenders was tendered at or below that rate.
~as
3id-to-Cover Ratio
=
27,678,050 / 9,659,050
=
2.87
./ Equivalent coupon-issue yield.
!/ Awards to TREASURY DIRECT = $1,101,535,000
http://www.publicdebt.treas.gov
L8-197
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
November 01, 1999
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182 -Day Bill
November 04, 1999
May 04, 2000
912795DU2
Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:
5.090%
Investment Rate 1/:
5.311%
Price:
97.427
All noncompetitive and successful competitive bidders were awarded
3ecurities at the high rate.
Tenders at the high discount rate were
illotted 71%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
Tendered
Competitive
Noncompetitive
$
$
24,419,506
PUBLIC SUBTOTAL
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
TOTAL
23,248,350
1,171,156
Accepted
$
4,761,157
1,171,156
5,932,313 2/
2,087,237
2,087,237
26,506,743
8,019,550
3,960,000
1,086,763
3,960,000
1,086,763
31,553,506
$
13,066,313
Median rate
5.080%: 50% of the amount of accepted competitive tenders
as tendered at or below that rate.
Low rate
5.000%:
5% of 'the amount
f accepted competitive tenders was tendered at or below that rate.
id-to-Cover Ratio
= 24,419,506 / 5,932,313 = 4.12
/ Equivalent coupon-issue yield.
/ Awards to TREASURY DIRECT = $902,279,000
http://www.publicdebt.treas.gov
LS-198
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NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
Text as Prepared for Delivery
November 2, 1999
DIRECTOR OF THE OFFICE OF MACROECONOMIC ANALYSIS JOHN H. AUTEN
REMARKS TO THE TREASURY BORROWING ADVISORY COMMITTEE
OF THE BOND MARKET ASSOCIATION
When you were here three months ago, real growth had fallen below 2 percent
annual rate in the second quarter. It was unclear at the time whether this was a temporary
development, or an early signal of a downshift to a slower pace of growth going forward.
Last week's advance Gross Domestic Product report settled that issue, at least for the third
quru1er, with real growth rebounding close to 5 percent. It sti111eaves unanswered the
question of whether growth is likely to continue at such an elevated pace, or whether it
will begin to move down toward the economy's longer-term growth potential.
The other major domestic economic development in the past three months had
been the apparent intensification of concern over the threat of rising inflation. While the
broad inflation measures in the Gross Domestic Product accounts were surprisingly well
behaved in the third qual1er, there have been some relatively high inflation readings
recently from the monthly producer and consumer price indexes. The key question here
was the extent to which the bulge in these indexes could safely be attributed to special
factors, or whether it might be a signal of a more general increase of inflationary
pressures. Recent data releases seem to have reduced. although perhaps not entirely
removed, those concems.
Turning first to the issue of economic growth, last week's Gross Domestic Product
results also included a comprehensive benchmark revision of the national income and
product accounts, a regular OCCUITence every 4 to 5 years which in this case changes
results from 1959 through the second qum1er of 1999. There has been insufficient time to
examine the full implications of these revisions to the national accounts with the close
attention that they deserve. The changes will undoubtedly prove to be important in
LS-199
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2
appraising longer-tenn historical developments, and certainly they represent a
commendable effort by the Commerce Department's Bureau of Economic Analysis to
improve and modernize its accounts in order to keep pace with the ever-changing U.S.
economy. But it seems questionable whether such data revisions have much immediate
practical significance for us' today in tracking the short-tenn behavior of the economy.
On the revised basis, real growth jumped from 1.9 percent annual rate in the
second quarter to 4.8 percent in the third. But, domestic fmal demand only edged up
from a 4.7 percent annual rate increase in the second quarter to 4.9 percent in the third.
Consumer spending actually slowed a little from 5.1 percent in the second quarter to 4.3
percent in the third quarter. These are hardly significant changes and do not suggest any
clear slowdown in consumer spending. But they do highlight the fact that higher growth
in the third quarter was mainly accounted for by a turnaround in inventory investment. In
the second quarter, inventory investment had dropped sharply, leaving inventory levels
very low in relation to sales, and the third quarter seems to have been a period of
voluntary inventory buildup -- one of replenishment. Aside from the inventory swing, the
second and third quarters were fairly similar periods of strong fmal demand.
There are a few scattered signs currently that the economy may be shifting toward
a more moderate pace of growth, but nothing that could yet be regarded as decisive.
Consumer confidence seems to be slipping from its peak levels, although still remaining
high. Largely anecdotal reports suggest that retail sales may have cooled a little.
Residential construction is hobbled by shortages of construction labor and home sales
have softened. Special explanations can be found for most of these possibly transient
signs of weakness and the economy seems to be rolling along currently at generally
undiminished speed.
The fOUJ1h quarter is regarded by many forecasters as likely to feature even more
inventory buildup, as many businesses and perhaps even some consumers begin to
practice a "just in case" inventory policy in advance of the Y2K transition into the new
millennium. That may introduce some modification of the quarterly path. For example,
the Blue Chip consensus forecast in early October from about fifty economists at major
businesses, financial institutions and academic research organizations, was carrying a 3.8
percent real growth estimate for the fourth quarter and 2.0 percent for the first quarter of
next year as precautionary inventory building ran its course. For the four quarters of next
year, real growth was expected to average 2.6 percent, probably not far from many
current estimates of the economy's trend rate of growth potential.
3
Inflation, or perhaps one should say its comparative absence, remains the major
puzzle in the current situation.
•
Broad measures of inflation in the national accounts remained well behaved in the
third quarter. The GDP chain weight price index (which captures only prices for
goods and services produced in the U.S.) rose at a 1.0 percent annual rate, down
from 1.3 percent in the second quarter. The price index for gross domestic
purchases (which reflects only prices paid by U.S. residents) moved up by 1.6
percent at an annual rate in the third quarter following a 1.9 percent rise in the
second. An upturn in the price of imported oil is primarily responsible for the
higher -- but still low -- rates of inflation on this basis.
•
The employment cost index (ECI) continues to defy the conventional expectation
of an accelerating pattern in a period of such tight labor markets. During the three
months ended September, the index rose by 0.8 percent. Growth over the twelve
months ended September comes to only 3.1 percent -- a slowdown of 0.6
percentage point from 3.7 percent during the comparable year-ago period. The
slowdown has been centered in wages and salaries, which grew by 3.3 percent
during the latest twelve months compared to 4.0 percent a year earlier. Growth of
benefit costs accelerated nan-owly from 2.6 percent to 2.7 percent.
•
In sharp, and at the time somewhat disturbing, contrast, producer and consumer
price indexes for September rose rather abruptly. The 1.1 percent increase in
producer prices was a nine-year high. Excluding aben-ant jumps in cigarette and
passenger car prices, the core PPI index would, however, have risen only 0.1
percent. Even without this deconstruction approach, the core PPI is up this year at
only a 0.6 percent annual rate. The CPI core index was up 0.3 percent in
September but roughly two-thirds of that increase was due to higher prices for
cigarettes and apparel, believed to be temporary.
The economy continues to roll along with few clear signs of difficulty ahead and a
remarkably quiescent inflation situation. That is a summary of recent economic
developments and the near tenn economic outlook.
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EMBARGO TIME WILL BE SET
November 3, 1999
UNDER SECRETARY OF THE TREASURY FOR DOMESTIC FINANCE
GARY GENSLER
REMARKS AT THE NOVEMBER 1999 TREASURY QUARTERLY REFUNDING
Good morning. I am pleased to be with you today to discuss the government's refunding
needs for the current quarter. As we announced last Wednesday, Fiscal Year 1999 resulted in the
largest budget surplus in our nation's history. The FY 1999 surplus of $123 billion caps seven
consecutive years of improvement in our budget results since the deficit peaked at $290 billion in
FY 1992. In addition to two record-breaking budget surpluses in a row, we also have again
achieved the largest ever pay-down ofpublic1y held debt. In FY 1999, we reduced debt held by
the public by $88 billion, following on a paydown of $51 billion in FY 1998. The result has
been that our publicly held debt is taking up an ever smaller share of our nation's debt markets.
Moreover, interest payments on our publicly held debt, which had been projected in 1993 to
grow to S321 billion for FY 1999, have been held to S235 billion for the year. The Clinton
Administration's policy of fiscal discipline has been critical to achieving this success.
Debt Buy-backs
In August, we announced proposed rules that would allow us to buy back Treasury
securities prior to maturity. We received constructive input on the proposed rule during the
comment period. which is no\\' closed. This week, we had the opportunity to discuss the
proposal and comments with Treasury's Borrowing Advisory Committee. The Committee has
provided valuable comments as to how Treasury could best conduct any buy-back operations.
\Ve plan to move forward on the rule and expect to have a final rule in place by January. While
Treasury has not yet determined whether it will, in fact, conduct debt buy-backs, adoption of a
final rule will make buy-backs an actual debt management tool for Treasury.
Reopenings
Today, I would like to announce another important initiative that will improve our debt
management capabilities. Today the Treasury is issuing a temporary rule that will allow
Treasury to reopen its benchmark securities within one year of issuance without creating
concerns under the original issue discount (OlD) rules. This rule will permit Treasury to reopen
its benchmark securities on a more regular basis. The increased flexibility to conduct such
reopenings will promote greater liquidity and efficiency in the markets for Treasury securities.
LS - 200
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Until now, Treasury has been constrained in its ability to reopen its benchmark securities
issuances by the OlD rules. Under the existing rules, Treasury generally can reopen an issue
only if the price of the issue has not fallen by more than a de minimus amount. This de minimus
standard was of particular concern for issues with shorter maturities. In addition, the existing
rule constrained Treasury in that the de minimus price change is measured as of the date of the
auction, rather than as of the announcement date. The rule change we are announcing today will
eliminate the uncertainty under the OlD rule arising from potential price movements between
announcement and auction dates.
This rule change will provide us with greater flexibility in reopening issues of Treasury
securities. In particular, this will allow us to promote liquidity in our benchmark securities issues.
Together with the ability to conduct debt buy-backs, this will give the Treasury two additional
tools to manage the nation's debt in an era of budget surpluses.
The temporary rule will be published Friday in the Federal Register and will be effective
immediately. At the same time, Treasury is publishing a request for comment on a similar rule
for issuers other than the Treasury.
Terms of the November Refunding
I will now tum to the terms of the quarterly refunding. We are offering $25 billion of
notes to refund S29.3 billion of privately held notes maturing on November 15, paying down
approximately 54.3 billion.
The securities are:
1) A 5-year note in the amount of SIS billion, maturing on November 15,2004; and
2) A reopening of the 6% note of August 15,2009, in the amount of$10 billion.
These notes are scheduled to be auctioned on a yield basis at 1:00 p.m. Eastern time on
Tuesday, November 9 and Wednesday, November 10, respectively.
As announced on Monday, November 1, we estimate that net market borrowing for the
October-December quarter will be $51 billion. This estimate assumes a $70 billion cash balance
on December 31. The Treasury also announced that net market borrowing for the January-March
quarter will be a paydown of approximately Sl2 billion with a cash balance of$20 billion on
March 31.
As we announced in August, we are planning for a larger than usual year end cash
balance as part of our planning related to the Year 2000. We have reduced our targeted balances
from the S80 billion announced last quarter to S70 billion as a result of the additional information
now available as to the timing of our year end receipts and outlays. As we announced in August,
we continue to stand ready to meet our obligations under the borrowing facility established for
the National Credit Union Administration. We do not anticipate any problems, but we continue
to be prepared to deal with any needs that may arise. All major Treasury financial systems,
including those used to collect taxes, disburse payments, and auction marketable securities are
Y2K ready. The Federal Reserve has also indicated that its systems supporting Treasury
programs are Y2K ready.
The additional funding in the fourth quarter will be done primarily through cash
management bills. We expect to issue two cash management bills this quarter, one in midNovember and another in early December. Both will mature in mid-January.
The next quarterly refunding press conference will be held on February 2,2000.
-30-
NET MARKET BORROWING
October-December 1999
(Billions of dollars)
TOTAL
50.7
DONE *
-23.0
BILLS
Regular weekly bills
52- week bill
Total
COUPONS
7- year note
2- year notes
5- year notes - end of month
30- year inflation-indexed bond
November refunding
13.3
0.1
13.4
-10.3
0.7
-31.9
7.4
-2.3
-36.4
TO BE DONE
* Issued or announced through November 3, 1999.
73.7
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omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622·2960
FOR IMMEDIATE RELEASE
November 2, 1999
Contact: Bill Buck
(202) 622-2920
SAVINGS BONDS NOW A VAILABLE FOR ON-LINE PURCHASE
Treasury Secretary Lawrence H. Summers today unveiled the Savings Bond Connection,
an on-line location for purchasing U.S. Savings Bonds over the Internet 24 hours a day, 7 days a
week.
"'Americans have relied on Savings Bonds for decades as an important tool in their efforts
to save for their future," Secretary Summers said. "'By bringing Savings Bonds as close as your
home computer, this program makes it more convenient for millions of Americans to add to their
.
savmgs.
,~
Designed for the convenient purchases of savings bonds, the website offers secure on-line
purchases of Series EE and new Series I (inflation-indexed) bonds with either a MasterCard or
Visa. It takes about five minutes to buy a bond at www.savingsbonds.gov. After entering
ownership information for the bond, a credit card number and e-mail contact information, buyers
get a confirmation of purchase. Bonds are delivered, by mail, in about one week. In the case of
last minute gift purchases, a gift certificate can be downloaded.
Most purchasers will use the Secure Sockets Layer (SSL), the current encryption standard
for Internet commerce. Secure Electronic Transaction (SET) technology is also available for
those customers doing business with banks who issue SET certificates.
The Savings Bond Connection on the Bureau of the Public Debt's website was developed
in a joint effort with MasterCard International. Mellon Financial Corporation, IBM Corporation
and the Treasury Department's Financial Management Service.
Purchasers must have Internet browsers equivalent to Netscape 3.0 or better or Microsoft
Internet Explorer 4.0 or higher.
The new Series I inflation-indexed savings bonds along with Series EE bonds are
available in the most popular denominations: $50, $75, $1.00, $200 and $500 ($1,000 for Series
EE bonds). There is a $500 issue price limit forindividual orders.
-30LS-201
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OFFICE OF PUBLIC AFFAIRS e1500 PENNSYLVANIA AVENUE, N.W. e WASHINGTON, D.C.e 20220 e (202) 622·2960
'OR RELEASE WHEN AuTHoRIZED AT PRESS CONFERENCE
'ovember 3, 1999
CONTACT: Office of Financing
202/691-3550
TREASURY NOVEMBER QUARTERLY FINANCING
The Treasury will auction $15,000 million of 5-year notes and $10,000
illion of 9-3/4-year 6% notes to refund $29,319 million of publicly held
ecurities maturing November 15, 1999, and to pay down about $4,319 million.
In addition to the public holdings, Federal Reserve Banks hold $4,325
illion of the maturing securities for their own accounts, which may be
efunded by issuing additional amounts of the new securities.
The maturing securities held by the public include $4,042 million held
r Federal Reserve Banks as agents for foreign and international monetary
lthorities. Amounts bid for these accounts by Federal Reserve Banks will
3 added to the offering.
TreasuryDirect customers requested that we reinvest their maturing
)ldings of approximately $164 million into the 5-year note and $9 million
lto the 9-3/4-year note.
Both of the auctions being announced today will be conducted in the
.ngle-price auction format.
All competitive and noncompetitive awards
.11 be at the highest yield of accepted competitive tenders.
The notes being offered today are eligible for the STRIPS program.
This offering of Treasury securities is governed by the terms and con,tions set forth in the Uniform Offering Circular for the Sale and Issue of
,rketable Book-Entry Treasury Bills, Notes, and Bonds (31 CFR Part 356, as
tended) .
Details about the notes are given in the attached offering highlights.
000
tachment
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.. _'"'u .... _'n& ......."':
... A
.... ~.::>UA,I;
VJi'".I!".l!iX.1..N\:i::;
"J.'U "I"HE
PUBLIC
NOVEMBER 1999 QUARTERLY FINANCING
November 3, 1999
Offering Amount •.•.•.......... " ......... $15,000 million
$10,000 million
Description of Offering:
Term and type of security . . . . . . . . . . . . . . . .
Series ...•..••...•.•...........•........•
CUSIP nUltlber . . . • . . . . . . . . . . . . . . . . . . . . . . . . .
Auction date . • . . • . . . . . . . . . . . . . . . . . . . . . . . .
Issue date .•.•.....•.....................
Dated date ......••...•...•...............
Maturity date ..•.....•..••...............
Interest rate ....•.•.•...................
9-3/4-year notes (reopening)
C-2009
912827 5N 8
November 10, 1999
November 15, 1999
August 15, 1999
August 15, 2009
5-year notes
H-2004
912827 5S 7
November 9, 1999
November IS, 1999
November IS, 1999
November IS, 2004
Determined based on the highest
accepted competitive bid
Yield .......•.....•..•.•................. Determined at auction
Interest payment dates ...•..........••... May 15 and November 15
Minimum bid amount and multiples ......... $1,000
Accrued interest payable by investor
None
Premium or discount ..•.•.......•......... Determined at auction
STRIPS Information:
Minimum amount required . . . . . . . . . . . . . . . . . . Determined at auction
Corpus CUSIP number . . . . . . . . . . . . . . . . . . . . . . 912820 EE 3
Due date(s) and CUSIP nUltlber(s)
for additional TINT(s) . . . . . . . . . . . . . . . . Not applicable
6%
Determined at auction
February 15 and August 15
$1,000
$15.00000 per $1,000 (from
August 15 to November 15, 1999)
Determined at auction
$100,000
912820 EA 1
Not applicable
The following rules apply to all securities mentioned above:
Submission of Bids:
Noncompetitive bids ...... Accepted in full up to $5,000,000 at the 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
ornCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
Weekly Release of u.s. Reserve Assets
November 3, 1999
The Treasury Department today released U.S. reserve assets data for the week ending
October 29, 1999.
As this table indicates, U.S. reserve assets totaled $73,209 million as of October 29, 1999,
down from $73,775 million as of October 15,1999.
1999
Total
Reserve
Special
Gold
Drawing
Foreign
Currencies
Reserve
31
Position in
2!
WeekEnding
October 22, 1999
73,775
11,046
10,290
16,338
16,341
19,759
October 29, 1999
73,209
11,046
10,232
16,187
16,190
19,554
1/ Gold stock is valued monthly at $42.2222 per fine troy ounce. Values shown are as of August 31,1999. The July 31, 1999
value was $11,048 million.
2/ SDR holdings and the reserve position in the IMF are based on IMF data and valued in dollar terms at the official SDR/ dollar
exchange rate. Consistent with current reporting practices, IMF data for October 22, 1999 are final. Data for SDR holdings and
the reserve position in the IMF shown as of October 29, 1999 (m italics) reflect preliminary adjustments by the Treasury to the
October 22, 1999 IMP data.
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.
LS-203
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DEPARTMENT
OF
THE
TREASURY
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omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
November 3, 1999
Contact: Bill Buck
(202) 622-2960
TREASURY'S WEEKLY BILL ANNOUNCEMENT HOLIDAY SCHEDULE
Since the Veterans' Day holiday falls on Thursday this year, Treasury will release
its weekly bill announcement on Wednesday, November 10 at 2:30 p.m., instead of
Thursday, November 11.
-30LS-204
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FOR IMMEDIATE RELEASE
November 4, 1999
STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMMERS
We applaud last night's approval by the House Banking Committee of priority legislation to
provide debt relief to millions of people in the world's poorest countries. The Committee's
bipartisan action is an important step forward toward making the historic international initiative
for Highly Indebted Poor Countries a reality in the Jubilee year. In the days ahead, we look
forward to continuing this urgent work with the Congress in the final budget discussions now
underway.
-30-
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·u.s
Government Prlnhng Oltoc€ 199~ - 61s.-55'
DEPARTl\IENT
OF
THE
TREASURY
NEWS
OffiCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIflNGTON, D.C.. 20220. (202) 622-2960
Contact: John Longbrake
(202) 622-2960
FOR IMMEDIATE RELEASE
November 4, 1999
TREASURY RELEASES U.S. FISCAL TRANSPARENCY QUESTIONNAIRE AND
SELF-EVALUATION REPORT
The Treasury Department on Thursday made available on its web site the United
States' response to the IMF's Questionnaire on Fiscal Transparency and Self-Evaluation Report
on Fiscal Transparency, at (www.treas.gov/press/releases).
The IMF questionnaire was developed to help countries assess how their fiscal
management systems compare with the requirements of the code. The self-evaluation report
was designed to highlight the strengths and weaknesses of these systems. Treasury is releasing
the United States' response in an effort to promote widespread implementation of the IMF's
Code of Good Practices on Fiscal Transparency - Declaration on Principles. Treasury also
anticipates the transparency standards will become an integral part of the IMF' s "Article IV"
surveillance process.
The IMF' s increased focus on promoting fiscal transparency is a response to an
emerging consensus that fiscal transparency is a critical part of good governance. Greater
transparency is expected to help markets better adjust to economic developments, minimize
contagion and reduce volatility. The IMF's Code of Good Practices on Fiscal Transparency
Declaration on Principles was approved by the Executive Board and endorsed by the Interim
Committee in 1998 (publicly available on the IMF web site).
-30-
LS - 206
For press releases, speeches, public schedules and official biographies, call our 24~our fax line at (202) 622-2040
lUBLIC DEBT NEWS
:!partment of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR RELEASE AT 3:00 PM
November4, 1999
Contact: Peter Hollenbach
(202) 691-3502
PUBLIC DEBT ANNOUNCES ACTIVITY FOR
SECURITIES IN THE STRIPS PROGRAM FOR OCTOBER 1999
The Bureau of the Public Debt announced activity figures for the month of October 1999, of securities
within the Separate Trading of Registered Interest and Principal of Securities program (STRIPS).
Dollar Amounts in Thousands
Principal Outstanding
(Eligible Securities)
$1,864,704,634
Held in Unstripped Form
$1,647,368,864
$217,335,770
Held in Stripped Form
$9,156,829
Reconstituted in October
The accompanying table gives a breakdown of STRIPS activity by individual loan description. The
balances in this table are subject to audit and subsequent revision. These monthly figures are included
in Table V of the Monthly Statement of the Public Debt, entitled "Holdings of Treasury Securities in
Stripped Form."
The Strips Table along with the new Monthly Statement of the Public Debt is available on Public
Debt's Internet homepage at: www.publicdebt.treas.gov.Awide range of information about Public
Debt and Treasury Securities is also available on the homepage.
000
LS-207
TABLE IV. STATEMENT OF GUARANTEED DEBT OF U.S. AGENCIES, OCTOBER 31, 1999
{CompIled from latest reports receIved by Treasuryl
TABLE V • HOLDINGS OF TREASURY SECURITIES IN STRIPPED FORM, OCTOBER 31, 1999
Principal Amount Outstanding
Corpus
Loan Description
STRIP
CUSIP
In
~
Thousands
Maturrty Date
Total
Outstanding
Portion Held In
Un stripped Fonn
Ponlon Held In
Stripped Form
Reconstrtuted
ThIs Month
!I
!
Treasury Bonds
CUSIP
9128100M7
D08
OR6
DU9
ON5
OPO
DS4
OT2
DVl
OW5
OX3
OYl
OZ8
EA2
EBO
EC8
ED6
EE4
EFl
EG9
EH7
EJ3
EKO
EL8
EM6
EN4
EP9
E07
ES3
ETl
EV6
EW4
EX2
EYO
Ell
FAl
FB9
FE3
FFO
FG8
FJ2
Interest Rate'
11·5/8
12
10-3/4
9-3/8
11-3/4
11-1/4
10-5/8
9-7/8
9-1/4
7-1/4
7·112
8-3/4
8-7/8
9-1/8
9
8-7/8
8-1/8
8-112
8-3/4
8-3/4
7-7/8
8-118
8-1/8
8
7-114
7-5/8
7-1/8
6·1/4
7-112
7-5/8
6-7/8
6
6-3/4
6-1/2
6-5/8
6-3/8
6-1/8
5-112
5·1/4
5-114
6-1/8
r
912803 AB9
ADS
AG8
AJ2
912800 M7
912803 M1
AC7
AE3
AFO
AH6
AK9
AL7
AM5
AN3
AP8
AQ6
AR4
AS2
ATO
AU7
AV5
AW3
AXl
AY9
AZ6
BAO
BB8
8C6
B04
8E2
8F9
BG7
BH5
BJl
BK8
8L6
BM4
8P7
BV4
8W2
eG6
11/15/04
05/15/05
08115/05
02115/06
11/15/14
02115/15
08115/15
11115/15
02115/16
05115/16
11/15/16
05115/17
08115/17
05/15/18
11/15/18
02115/19
08115/19
02115/20
05115/20
08115/20
02115/21
05/15/21
08115/21
11115/21
08/15/22
11115/22
02115/23
08115/23
11/15/24
02115/25
08115/25
02115/26
08/15/26
11/15/26
02115/27
08/15/27
11115/27
08/15/28
11115/28
02115/29
08/15/29
Total Treasury Bonds ..
Treasury Inflation-Indexed Notes:
CUSIP:
Series: Interest Rate:
3-5/8
9128273A8
J
3-3/8
2M3
A
3-5/8
3T7
A
3-718
4Y5
A
912820 BZ9
BV8
CL9
ON4
07115/02
01115/07
01115/08
01/15/09
Total Inflation-Indexed Notes ..
Treasury InflatIon-Indexed Bonds:
CUSIP:
Interest Rate:
912810FDS
3·518
3-718
FH6
Totallnnation·lndexed Bonds,
912803 BN2
CF8
04115/28
04115/29
0
172<:;0
12500
0
218400
206.400
49280
108.800
64.aOO
118400
35.760
634.240
185600
9600
213.000
1.798.400
125.120
219,600
147840
686.720
0
725-<:.0
200.960
949,575
347,200
265.600
148.800
107,232
168.160
134. 4 00
34.:60
133,400
8.301,806
4.260.758
9,269,713
4.755.916
6,005,584
12.667.799
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
11.350,341
11,178,580
4.421.806
1.834.758
5.593.713
4,747,980
2.432.784
9.936,599
6.274,396
3.647.059
6.500.454
18.653.151
17.823.168
10,064,889
10,116,058
2,891,039
2,374,670
9.633,198
19,293,512
8.012.468
3.150.723
6,732,846
9.991,773
6,748,648
8,857,562
13.767,044
8,956,790
3.499,626
11,414,361
18.439,508
3.681,982
2.651,570
7,637.527
11.823.016
7.280.218
8,235,577
5.856,071
9,903,756
18.587,339
11,680.201
10.706.252
11,350,341
11,178,580
525,910.975
356.383.013
17.545,211
16.618,514
17.387,177
16,201.680
17,545,211
16.618.514
17,387.177
16,201.680
0
0
0
0
0
0
0
0
67.752,582
67.752.582
0
0
17.364,166
14,962,578
17.364,166
14.962.578
0
0
32.326,744
32.326.744
0
3.880.000
2.426,000
3,676,000
7.936
3.572.800
2,731.200
875,520
3.252.800
766.400
170.400
1,041,280
8,129,280
3.900,800
5,817.600
6,658,200
9,617.600
920,320
2,216.400
7.008.160
14685,760
1.121,600
5.210,240
3,305,920
19,031,350
1,396.000
7,200,000
!
,
:
I
'
i
'
:
i
:
'
:
'
:
:
!
:
'
I
I
6,960,000 I
4,469.536 '
7.787.680 !
9,073,600
4.964,480
1.081.900
3,613.600
3,257,600
4.600.000 i
832,000 :
3,931,200 !
96.000 I
240.800 :
0'
i
O.
64.000
240.4..-"0
233.600
16.000
118.400
0
0
0
0
I
I
165.527,962 :
8086<:87
a
J
",
"
TABLE V· HOLDINGS OF TREASURY SECURITIES IN STRIPPED FORM. OCTOBER 31.1999 - Continued
Loan Description
Treasury Notes:
Series: Interest Rate.
CUSIP:
7·7/8
0
912827 YE6
5-518
3P5
AM
5-5/8
3Rl
AN
5-3/8
3U4
Y
8·112
YN6
A
5-112
3Y6
Z
4A7
A8
5-112
5-518
4C3
AC
YW6
8·718
8
4G4
5-112
AD
5-3/8
4J8
AE
5-3/8
4Ml
AF
8·3/4
ZE5
C
5-1/8
402
AG
4-112
4RO
AH
4
4T6
AJ
ZN5
8·1/2
0
5-3/4
3M2
X
4W9
4-5/8
AK
4X7
4-5/8
AL
422
4-112
U
7·3/4
A
ZX3
3WO
5-3/8
S
5
5C2
V
4-7/8
500
W
5E8
X
5
A85
8
8
5-518
4E9
T
5Hl
5-1/4
Y
5-3/4
5J7
Z
5L2
5-112
A8
892
7·718
C
5P3
AC
5-1/2
501
5-5/8
AD
7·1/2
025
0
F49
A
7·112
G55
6-3/8
6
3J9
5-7/8
M
3L4
5-3/4
N
5-3/4
303
P
5-5/8
3S9
0
5-112
3V2
C
J78
6-1/4
A
3Z3
5-112
0
465
5-112
E
4Dl
5-3/4
F
4H2
5-112
G
4K5
5-3/8
H
L83
5·3/4
8
4N9
5-114
J
4U3
4-1/4
K
N81
5·7/8
A
5A6
4-3/4
E
P89
7·114
8
5F5
5·114
F
088
7·1/4
C
5MO
6
G
R87
7·7/8
0
S86
A
7·112
T85
6·1/2
8
U83
6-1/2
C
V82
5-7/8
0
W81
A
5-5/8
X80
6-7/8
8
Y55
7
C
6·112
Z62
0
2JO
6·1/4
8
2U5
6-518
C
3EO
6-1/8
0
3X8
5·1/2
8
4F6
5·5/8
C
4Vl
4-3/4
D
5-112
5G3
8
5N8
6
C
Principal Amount Outstanding in Thousands
Corpus
STRIP
CUSIP
Maturity Date
Total
Outstanding
AUI
CGO
CJ4
CM7
AV9
CR6
CT2
CV7
AWl
11115/99
11130/99
12131/99
01/31/00
02115/00
02129/00
03/31/00
04130100
05/15100
05/31/00
06/30100
07/31/00
cza
080
006
AX5
OFI
OG9
OH7
AY3
CF2
OL8
OM6
OP9
AlO
CPO
DRS
OS3
0T1
8A4
CX3
OW4
OX2
OYO
862
E89
EC7
8CO
808
8E6
CC9
CE5
CH8
CKI
CN5
8F3
CS4
CU9
CW5
DA2
OC8
8Gl
OE4
OJ3
8H9
007
8J5
OU8
8K2
OZ7
810
6MB
8N6
BPI
609
SR7
BS5
BTJ
BUO
BW6
BX4
CA3
08115/00
08/31/00
09130/00
10/31/00
11115100
11/15/00
11/30100
12131/00
01/31/01
02115101
02115/01
02128/01
03131/01
04/30/01
05/15/01
05115/01
05/31/01
06130101
07/31/01
08/15/01
08/31/01
09/30/01
11/15/01
05115/02
08/15/02
09/30/02
10131/02
11/30/02
12131/02
01131103
02115/03
02128/03
03/31/03
04/30103
05/31/03
06/30/03
08115/03
08/15/03
11/15103
02115/04
02115104
05/15/04
05115/04
08115104
08/15/04
11115/04
02115/05
05115105
08/15/05
11/15/05
02115/06
05/15/06
07/15/06
10/15/06
02115/07
05/15/07
08/15/07
02115/08
05115/08
11/15/08
05115/09
08/15/09
C08
CYl
OKO
DV6
EAl
Total Treasury Notes.
Grand Total. ...
,
.......
Portion Held in
Unstnpped Form
Reconstrtuted
This Month
Portion Held In
Slnpped Form
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
20,157,568
19.474,772
19,777,278
11,312,802
15,367,153
19,586,630
21,605,352
21,033,523
12,398,083
12,873,752
19,885,985
19,001,309
20,541,316
12,339,185
20,118,595
18.797,767
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
17,823,228
14,440,372
18,925,383
13,346,467
18,089,806
14,373.760
13,834,754
14,739,504
15,002,580
15,209,920
15,513,587
16,015,475
22,740,446
22,459,675
13,103,678
13,958,186
25,636,803
13,583,412
27,190,961
25,083,125
14,794,790
14,757.014
5,941,960
16,865,598
16,646,260
17,502,026
6,885,033
17,774,125
17,203,576
15.630,655
4,769,830
16,326,432
14,671,857
18,680,095
6,651,686
20,023,733
19,268,508
20,496,986
6,624,882
16,036,088
20,157,568
19,474,772
19,777,278
7,926,402
15,367,153
19,586,630
21,605,352
21,033,523
8,494,883
12,873,752
19,885,985
19,001,309
20,541,318
9,203,185
20,118,595
18.797,787
19,715,782
6,717,357
22.033,415
12,771,614
11.675,684
11.919,780
12,052.433
13,100.640
22,729,411
13,626,354
14,172,892
12,573,248
13,132,243
13.126,779
27,414,228
19,852,263
18.524,185
12,694,277
17,823,228
14,284,372
18,925,383
12,355,267
18,089,806
14,373,760
13,806,994
14,739,504
15,002,580
15,203.520
15,513,267
15,942,195
22,740.446
22.459,675
13,034,430
13.919.786
25,609,603
13,583.012
27,190,961
25,082,325
14.791,990
14,757,014
4,832,000
185,600
100,800
0
3.788,000
2,000
2,800
3,200
5,726,400
253,600
267,200
3,200
4,428,960
4,800
0
28,000
4,894,800
0
0
0
0
3,386,400
0
0
0
0
3,903,200
0
0
0
0
3,136,000
0
0
4,510,320
2,997,040
1,825,600
35,200
61,600
200,800
0
0
833,280
44,000
1,238,714,333
1,190,906,525
47807,808
1.864,704.634
1,647,368,864
217335,770
246,400
0
0
0
20,800
0
0
0
65,600
0
0
0
800
0
0
0
4,800
0
0
0
0
1,600
0
0
0
0
0
0
0
596,800
0
101,600
260,800
0
156,000
0
991,200
0
0
27,760
0
0
6,400
320
73,280
0
0
69.248
38.400
27,200
400
0
800
2.800
0
!
0
96,850
0
0
0
0
0
0
0
4,400
6,000
198,400
0
0
0
0
0
125,792
0
0
0
0
0
8,800
0
100,000
0
0
176,800
0
8.000
0
0
0
0
0
0
0
0
0
0
0
4.800
0
0
0
0
0
0
1069,842
I
9 156,829
NEWS
TREASURY
OFFICE OF PUBLIC AFFAIRS -1500 P1-.:NNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C •• 20220. (Z02.) 62Z-2960
CON'l'ACT:
EMBARGOED UNTIL 2: 30 P. M.
November 4, 1999
Office of Financing
202/691-3550
TREASURY OFFERS 13-WBEK, 26-WEBK, AND 52-WEEK BJ:LLS
The Treasury wi1l auction three series of Treasury bills totaling
approximately $28 1 000 million to refund $26,680 million of publicly held
securities maturing November 12, 1999, and to raise about $1,320 million of
new cash.
.
In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $12,724 million of the maturing bills, which may be refunded at
the highest discount rate of accepted competitive tenders. ~ounts issued
to these accounts will be in addition to the offering amount.'
The maturing bills held by the public inolude $4,752 million held by
Federal Reserve Banks as agents for foreign and international monetary
authorities, which may be refunded within the offering ~ount 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 purposes of deter.mining such additional amounts, foreign and international monetary authorities are considered
to hold $3,868 million of the origina~ 13- and 26-week issues and $884 million
of the original 52-week issue.
Note that for the Sa-week bil~ auction the noncompetitive closi~ time
will be 11!OO aam. and the cOmpetitive clOSing t~e will be 11:30 a.m. Eastern
Standard t~e. The noncompetitive and competitive closing ttmAs for the 13and 26-week bills will be the normal l2:00 noon'and 1:00 p.m. ~ascern Standard
time, respectively.
TreasuryDirect customers requested that we reinvest their maturing
holdings of approximately $977 million into the 13-week bill, $746 million
into the 26-week bill, and $441 million into the 52-week hill.
This offering of Treasury securities is governed by the terms and con~
ditions set 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) .
Detai1s about each of the new securities are given in the attached
offering
highl~ghts.
oov
Attacbment
For press releases, speeches, public schedules and official MograRhies~ call our 24-hour fax line ar (202) 622-2040
S-208
HIGHLIGH~S
OF TREASURY OFPBRINGS OF BILLS
TO DB ISSUED NOVBM»BR 12, 1999
November 4, 1999
Offering Amount ....................
Description of Offering:
Term and type of security .....•....
CUSIP nwmer •....•................•
Auotion date ..••.......•.....
Issue date ••.•.•.......••.......•..
Maturity date .•••..•....••...•..•••
O~iginal issue date ••...•.......••.
CUrrently outstanding ..........•.•.
Mini~um bid amount· and multiples ..•
0
•••••
$10 ,000 million
$8,000 million
$10,000 million
90-day bill
lSl-day bill
912795 DV 0
November 8, 1999
November 12, 1999
May 11, 2000
November 12, 1999
363 .. day bill
912795 DR 0
November 9, 1999
November 12, 1999
November 9, 2000
Nov~er 12, 1999
$1,000
$1,000
912795 DG 3
November 8, 1999
November 12, 1999
February ~O, 2000
August 12, 1999
$12,301 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 d~Bcount rate of accepted
competitive bids.
Competitive bids ...•.•... (1) Must be expressed as a discount ~ate with three decimals in increments
of .005%, e.g' l 7.100%, 7.105%.
(2) Net long posit~on for each bidder must be reported when the sum of the
total hid amount, at all d~scount rates, and the net long pos~tion .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 Smgle Rate ....•.... 35% of public offering
Maximum
A~rd ...............
35% of public offering
Receipt of Tenders:
13~ and 26-week bills:
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
52-week. bill:
Noncompetitive tenders ..•. Prior to 11:00 a.m. Bastern Standard time on auction day
Competitive tenders ....... Prior to 11130 a.m. Eastern Standard time on auction day
payment Terms .. , ..•......... By charge to a funds account at a Pederal Reserve Bank on issue date, or
payment of full par amount with tender. TreasuryD1rect customers oan use the
Pay Direct feature wh~oh autnorizes a charge to their acoount of reoord at
their financial institution on issue date.
DEPARTMENT
1REASURY
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TREASURY
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FOR IMMEDIATE RELEASE
November 4, 1999
STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMMERS
I am pleased by today's overwhelming Senate vote in favor of modernizing our financial
services laws and look forward to House action on this historic piece of legislation.
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omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W•• W.ASlDNGTON, D.C•• 20220 - (202) 622-2960
•
'L
FOR IMl\lliDIATE RELEASE
Thursday, November 4, 1999
Contact: Bill Buck
(202) 622-2960
STA TEMENT BY TREASURY SECfRETARY LAWRENCE B. SUMMERS
Today Congress voted to update the rules that have governed financial services since the Great
Depression and replace them with a system for the 21 $l century.
This historic legislation will better enable American companies to compete in the new economy.
It will stimulate competition, increase choice and reduce costs for consumers, communities and
businesses. It will promote diversification and stability in our financial system. It will provide
important new privacy protections for consumers beyond existing law. And it also establishes an
important principle: no bank can take advantage ofthe new opportunities of this law without
demonstrating it is serving communities. including low and moderate income communities.
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EMBARGOED UNTIL 10:00 A.M. EST
Text as prepared for Delivery
November 5, 1999
TREASURY DEPUTY ASSISTANT SECRETARY GREGORY A. BAER
SENATE COMMITTEE ON BANKING, HOUSING AND URBAN AFFAIRS
Mr. Chairman, Senator Sarbanes, and Members of the Committee:
I am honored to appear before you today as the President's nominee to serve as Assistant
Secretary of the Treasury for Financial Institutions.
I am very pleased to have my wife Shirley and my son Jackson here with me today. My younger
sons, Matthew and Thomas (who was born last week) are waiting at home. and my father Arthur
is rooting me on from his home in Charlotte Without their considerable support, I would have
been unable to take advantage of this opportunity or weather the last few months of financial
services legislation
I am a graduate of the University of North Carolina at Chapel Hill and Harvard Law School.
After two years of litigation practice at the tirm of Williams & Connolly, I spent seven years in the
General Counsel's office at the Federal Reserve Board. rising to the rank of managing senior
counsel. At the Board. I performed a wide variety of special projects for the General Counsel.
Board, and the Federal Open Market Committee. The focus of the work included legislation
affecting the Board, regulatory responsibility for securities activities, inter-affiliate funding
limitations. insider lending and other areas, and general troubleshooting.
For the past two years. it has been my privilege to serve at the Treasury Department as Deputy
Assistant Secretary for Financial Institutions Policy In that position, my primary responsibility
has been the financial modernization bill that the Senate passed with a strong, bipartisan vote
yesterday. I have also coordinated Treasury efforts in developing the President's May 1999
financial privacy and consumer protection initiative. supervised Treasury's Office of Govemment
Sponsored Enterprise Policy. and coordinated Treasury's response to the Presidential Decision
Directive on critical infrastructure protection -- working to protect our financial services system
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For press releases, speeches, public schedules and official biographies, call our 24~our fax line at (202) 622-2040
'U S Government P"ntlng Olflc~ 1998· 619·559
If confirmed as Assistant Secretary, I hope to continue the close working relationship with this
Committee that has been forged through our work on the financial services bill and other issues.
In closing, I would like to thank the President for nominating me for this position, and Secretary
Summers and former Secretary Rubin for the confidence that they have placed in me. I am
excited at the opportunity to continue my public service at the Treasury Department, a place
where the extraordinary talents of my coworkers is a continuing source of inspiration and pride.
I now look forward to answering your questions.
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Text as Prepared for Delivery
November 5, 1999
SECRETARY OF THE TREASURY LAWRENCE H. SUMMERS
TESTIMONY BEFORE THE SENATE COMMITTEE ON FOREIGN RELATIONS
Mr. Chairman, Ranking Member Biden, and Members of this Committee, I am pleased
to have this opportunity to discuss recent developments in the global economy and the ongoing
reform of the global financial architecture, especially the International Monetary Fund - which
I know to have been of considerable interest to this committee and other members of Congress.
Let me focus my remarks on four issues:
•
First, the current outlook for the global economy, including the crisis economies in which
the IMF has recently been actively involved.
•
Second, core lessons for national policy makers and the international community from the
experiences of the past few years.
•
Third, recent reforms of the IMF and the broader international financial architecture with
particular reference to the areas that were emphasized in last year's IMF legislation.
•
Fourth, further architectural reform issues that the United States will be pursuing going
forward.
I.
The Global Economic Outlook and Prospects for the Emerging Market Economies
Looking around, I think that most would agree that the global economic outlook has
improved significantly since I spoke to the Subcommittee on International Economic Policy and
Export and Trade Promotion last winter, and certainly since last year when Congress was
grappling with the issues of IMF funding and reform.
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Forceful domestic policy steps in Korea, Thailand and Brazil - combined with the
substantial financial support that was mobilized by the official community - have brought
important progress in setting these countries on the path to recovery. Market confidence in
these and other emerging market economies is on the mend.
•
In Korea, net foreign reserves have risen to more than $65 billion - compared to less than
$5 billion at the end of 1997, when the country was looking squarely at the possibility of
default. Overnight interest rates, which rose to 35 percent during the crisis, have been in
the low single digits since early 1999. And private forecasters expect the economy to grow
this year by more than 8 percent.
•
In Thailand, net reserves are now hovering close to $30 billion, compared to around $1
billion in the thick of the crisis. Overnight interest rates are below 1 percent. And private
forecasters predict growth of 3 or 4 percent in 1999.
•
In Brazil, interest rates are today less than half their level in February, output is roughly
where it was before the crisis and inflation this year is expected to remain in single digits.
This progress has contributed to a general improvement in global economic conditions.
The United States economy continues to show strong, non-inflationary growth. There are
signs of modest improvement in Europe and indications that the economic decline in Japan has
been arrested.
But the global economy is not out of the woods yet. While the balance of risks for the
global economy may have tilted somewhat in the right direction, it would be a mistake to see
this trend as inexorable. Economic conditions in a number of countries and regions are still
fragile. Near-term action on a number of fronts will be necessary to achieve a sustained and
more balanced global recovery.
Notably:
In Japan: while important policy steps have been taken, it is far from clear that a sustained
recovery is on the horizon. Until recovery is firmly established, Japan needs to continue with
steps to promote domestic demand-led growth, including supportive monetary policies and
continued fiscal stimulus until there is a self-sustaining recovery in domestic private demand.
In addition, work needs to continue on the banking sector, notably the permanent disposal of
bad assets.
In Europe: while the weakness of late 1998 and early 1999 appears to have come to an end,
domestic demand still lags behind. If Europe is to play its part in supporting global growth,
the policy emphasis should be on structural reforms to boost domestic investment and demand
- in addition to supportive macro-economic policies.
2
In Latin America: while growth is expected to resume across much of Latin America next year,
at a time of unsettled international financial markets countries will need to keep their focus on
disciplined macro-economic policies and deepening economic reforms, including the
strengthening of financial sectors.
In Emerging Asia: while important progress has been made in many of the crisis economies,
the risk of reform fatigue and complacency are serious ones. Along with maintaining
appropriate macro-economic policies, the Asian emerging market economies must push ahead
with structural reforms, especially in the corporate and fmancial sectors, if they are to lay a
durable foundation for market-led growth.
In Russia: the government has continued to face enormous economic and political challenges in
the wake of the economic and financial collapse of August 1998. The capacity of the
international community to help bring about positive change going forward will depend
ultimately on the will and capacity of Russian authorities and the Russian people to carry
"forward critical structural and other reforms, including measures to strengthen their fmancial
system and finally creating a genuine rule oflaw. In this context it is especially important that
Russia intensify efforts to combat corruption and money laundering and safeguard against the
inappropriate use of official resources. I will say a little more about this issue in few minutes.
n.
Core Lessons of the Emerging Market Crises
The programs that the international community supported in Asia and elsewhere were
defined by pragmatism about the nature of the challenge each country faced and were centered
on strong macro-economic and structural measures to restore confidence. Where this approach
has been implemented decisively by national authorities, stability and confidence have by and
large returned-and governments have been able to relax monetary and fiscal conditions
relatively quickly to support faster growth.
At the same time, battlefield medicine is always imperfect. Certainly there is room to
debate whether, in every given instance, the precise policies that the IMF and the international
community supported in response to these crises were always the right ones.
With the benefit of hindsight I think we can draw five broad lessons from the
experience of the past few years:
First, countries shape their own destinies. By far the greatest responsibility for causing, and
responding effectively, to crises lies with countries themselves. The fact that most countries
with IMF programs in place have severe economic problems does not imply that the IMF is
responsible for those problems - any more than the fact that most people in a hospital are
severely ill would be evidence of medical malpractice.
Second, there is no substitute for strong nmional policies. Where the domestic commitment to
strong policies is present, we have learned that conditioned international support can play an
important role in countering the bank run psychology that has taken hold in the recent crises.
3
But any amount of external support will just flow straight back out of the country if that
domestic commitment is lacking.
Third, adopting afixed exchange rate system without renouncing domestic monetary policy
discretion is a recipe for trouble. These crises have brought home once and for all that a
fixed, but not firmly institutionalized exchange rate regime holds enormous risks for emerging
market economies in a world where fast-flowing capital and insufficiently developed domestic
financial systems coincide.
Fourth, weak financial systems and opaque relationships between government and the private
sector greatly enhance the risks of crises in a more globalized world. Lack of transparency,
too much lending on the basis of too many implicit public guarantees - the risks of these and
other micro-economic distortions that are associated with the phrase "crony capitalism" were
all brought home in a much more dramatic way in the financial crises in Thailand, Indonesia
arid elsewhere. While these things had not prevented unprecedented growth gains in some of
these countries in previous decades - they surely did contribute to the severity of the collapse
when trouble came. That is why priorities such as increased transparency, effective
bankruptcy and insolvency regimes and combating corruption have continued continue to be
such a high priority for the United States in its approach to architectural reform.
Fifth, private seClOr coordination can play a valuable role in the restoration of confidence.
When investors start to withdraw large quantities of capital from a country whose underlying
prospects are strong, the system as a whole has a stake in supporting policies that successfully
turn those investors around. We have seen, notably in Korea in December of 1997, and Brazil
in February of 1999, that voluntary private sector involvement in recognition of its mutual
interest in avoiding withdrawals can form part of a successful solution.
III.
The Reform of the IMF and the Broader International Financial Architecture
Financial crises of the scale and severity we have seen in recent years pose a major
threat to the construction of a strong, truly global financial system - a threat to which the
international community has rightly and vigorously responded in what has come to be called
the reform of the global financial architecture.
This has produced some important achievements, of which perhaps the most significant
over the long term will be the rejection of the idea that it could be the work of the major
industrial nations alone. We have seen this reflected in the creation of the 020. This
grouping, which will meet for the first time next month, will be a permanent informal
mechanism for dialogue on key economic and financial issues among industrial and emerging
market economies who among them will account for more than 80 percent of global ODP.
A fundamental change in the basic quality of economic and financial policies in the
emerging market economies has been - and must continue to be - at the core of our efforts to
build on these achievements and reduce the risk of these kinds of crises in the future. Going
4
forward, we must continue to raise the bar on what is expected of countries in these areas, and
to strengthen the incentives for countries to meet them.
And yet, while major improvements in national policies are clearly necessary for a
stronger global financial system - they are not sufficient. A major element of architectural
reform must also be more effective policies and incentives at the international level.
In recent years the Administration has pushed forward with this effort in three major
respects, each of them supported by last year's IMF legislation:
•
We have changed the terms of the exceptional financial support that the international
community provides, to make it more market-based and reduce moral hazard, with the
creation of the IMF's Supplementary Reserve Facility and most recently its Contingent
Credit Line.
•
We have catalyzed a major global effort to reduce national vulnerabilities to crises, with
concrete steps to help countries develop stronger national financial systems and improVed
international surveillance, including increased incentives to pursue sound policies before
trouble crisis strikes - including the additional incentives embodied in the terms of the
CCL.
•
And we have found new ways to involve the private sector in the resolution of crises most notably in the case of Korea and of Brazil.
A more effective IMF will be central to all of these tasks and has rightly been a major
focus of energy and interest in this Committee and elsewhere in Congress. Since the start of
this Administration - and particularly in the wake of recent crises - the United States has
worked to bring about a dramatic change in the orientation of the IMF.
Let me highlight five areas in particular that were emphasized in last's year legislation:
Increased rransparenLY
We have helped to bring about a sea of change in transparency and accountability - a sea of
change that is perhaps most visible in the IMF's new policies on the public release of official
documents.
•
In large part as a result of Administration and Congressional urging, Public Information
Notices, which summarize the key Board discussions about a country's policies, have been
released in respect of 81 percent of the IMF's Article IV consultations with member
countries to date in 1999. And 45 countries have now agreed to participate in the pilot
project to publish the annual staff reports prepared for those consultations.
5
•
Since June, 28 of 33 countries have agreed to publish the full set of their program
documents considered by the IMF Board - including Letters of Intent - which detail the
policy commitments that they have undertaken as a condition for IMF support.
•
Many key policy documents are also now posted on the IMF web site; this includes
publication in a timely manner of the key papers being debated by the Board on debt relief
and the reform of the Enhanced Structural Adjustment Facility. The web site also now
carries detailed information about the IMF's financial resources and liquidity position and
the Annual Report.
Stronger promotion of public investments in growth and social stability
We have urged the IMF, in cooperation with the World Bank, to press more actively to
channel scarce public funds away from unproductive purposes such as showcase projects and
excessive military spending - and toward policies that support growth and poverty reduction.
But ensuring adequate funding for high-yield investments in human resources needs to be a
higher priority. To make progress in this area, there will need to be greater transparency in
and accountability for government spending, including military spending.
In large part as a result of pressure by the United States, the IMF has also recognized
the importance of establishing or strengthening social safety nets in order to reduce the social
costs of rapid structural adjustments. For example, the United States Executive Director has
pressed for the IMF to pay greater attention to these issues in specific cases such as South
Korea and Thailand, where we have called for improved unemployment insurance schemes and
programs to retrain displaced workers.
Strong supportfor market opening and trade liberalization
Trade liberalization is often a key component of IMF arrangements. In the course of its
recent negotiations the IMF has sought continued compliance with existing trade obligations
and further commitments to market opening measures as part of a strategy for spurring growth.
For example:
•
As part of its IMF program, Indonesia has abolished import monopolies for soybeans and
wheat; agreed to phase out all non-tariff barriers affecting imports; dissolved all cartels for
plywood, cement and paper; removed restrictions on foreign investment in the wholesale
and resale trades; and allowed foreign banks to buy domestic ones.
•
Zambia's 1999 program with the IMF commits the government to reducing the weighted
average tariff on foreign goods to 10 percent, and to cutting the maximum tariff from 25
percent to 20 percent by 2001. In July, the import ban on wheat flour was eliminated.
More energeric promotion of core labor standards
6
The United States is the most vigorous proponent of core labor standards in the IMF.
Despite reluctance by many member countries to address this issue, some progress has been
made. During this past year, as a result of U.S. efforts, labor issues were addressed in a
number of important IMF programs. For example:
•
In Brazil, we have stressed to the IMF and the Brazilian government that budget austerity
measures not impact on those agencies responsible for enforcing labor laws, and that social
programs for the poor and disadvantaged be spared from cuts as much as possible.
Recently, the Brazilian government has submitted to Congress a labor reform package that
provides for increased flexibility while reducing restrictions on the creation of new unions
and promoting direct bargaining between unions and employers at the firm level.
•
Under strong urging from the United States and the IMF, Indonesia introduced and
approved legislation last year ratifying the ILO' s .Convention 87 on freedom of association
- considered one of the most important ILO core conventions.
The United States is engaging other international organizations on this issue. We have
vigorously promoted improved cooperation between the IMF and the ILO. As a result, in
April, the ILO participated, for the first time ever, as an observer at a meeting of the IMF's
Interim Committee - now the International Financial and Monetary Committee. It now has
permanent observer status in that committee.
An enhanced focus on environmental protection
We have has consistently voiced in the IMF our belief that economic development is
inextricably linked to environmental conditions - and that macro-economic stability is a
minimum and necessary condition for preserving the environment. Operationally, the IMF
relies on the expertise of the World Bank for analysis of environmental issues in individual
countries. However, due in part to our urging, IMF staff has been increasingly diligent in
ensuring that macroeconomic frameworks are supportive of sound environmental policies, with
the goal of promoting sustainable development.
For example, in Brazil, the IMF emphasized the importance of protecting to the
greatest extent possible environmental and other priority expenditures from needed fiscal cuts.
When evidence emerged that key pilot programs for environmental protection could suffer
deep cuts, the United States government and the IFls, led by the World Bank, raised concerns
with the Brazilian government, and the funds were restored.
Mr. Chairman, these and other reforms that the United States has supported at the IMF
are listed in greater detail in the Report on the implementation of last year's legislation that
was submitted to Congress on October 1. As this Report makes clear, we have made progress
in the effort to develop a 21'1 century IMF. But we have no doubt that further change is
needed.
7
We said many times last year that a well-funded IMF was indispensable to a stable
global fmancial system. But as we also said at that time - that does not mean we can be
satisfied with the IMF as it is.
IV.
Key Reform Priorities Going Forward
The reform of the global financial architecture is an organic and many-sided process
that will never entirely be completed. But recent events have highlighted important areas for
reform - and major issues that the United States and the international community will need to
address going forward.
Let me highlight five crucial priorities for future architectural reforms:
Promoting good governance and reducing corruption
In line with continued pressure from the United States, governance issues have played
an increasingly important role in the decisions of the IMF and multilateral development banks.
This has been brought out most clearly in the approach that the international community has
recently taken toward Russia in the wake of the economic and fmancial collapse in the summer
of 1998.
The IMF program in July 1999 was very different from all of Russia's prior IMF
programs. The first disbursement under the new IMF program - as well as any subsequent
disbursements - was predicated on the imposition of new safeguards to protect the use of that
money. The funds were provided in the form of Special Drawing Rights, paid into an account
at the IMF and can be used only to repay Russian obligations to the Fund. In addition,
approval of the program required Russia to complete a satisfactory independent investigation of
the Russian central bank's investment in Fimaco and of the July 1998 IMF disbursement.
Our continued support for IMF or World Bank engagement with Russia is predicated on
Russia's compliance with crucial conditions to ensure financial integrity and to safeguard any
assistance provided. Specifically, the most recent review of Russia's program is requiring the
investigation of other offshore central bank subsidiaries, in addition to other steps to improve
internal controls and initiate quarterly audits of the central bank's reserve management
practices.
In light of our experience in Russia, the United States and others in the G7 have now
called for authoritative and systematic reviews by the IMF and the World Bank to find ways to
strengthen safeguards on the use of their funds in all of their lending activities. We believe
that this review should include: more systematic use of external audits of the central banks that
are the recipients of official funds; new IMF program requirements to enhance countries'
internal safeguards against misappropriation; and steps to strengthen the IMF's capacity to
deter and penalize misuse of its funds, including in "post-program" cases where all
disbursements have been made.
8
Promoting appropriate private sector involvement
The United States has actively promoted, as part of the strengthening of the
international financial architecture, an appropriate role for the private sector in forestalling and
resolving financial crises. To be sure, there are no easy answers to the question of what is the
best mix of domestic policies, external official support and appropriate private sector
involvement, if any, needed to restore confidence in the future crises that may arise.
Every crisis is unique, and we need to maintain the flexibility to respond accordingly.
But the G7 Communique of last June established, for the first time, a useful broad framework
for our efforts in future cases.
The G-7 framework promotes appropriate involvement of private sector lenders in crisis
resolution and aims at a system in which countries are encouraged to address debt problems in
a market-based, orderly way. It recognizes the need to balance competing considerations on a
case-by-case basis, in a way that preserves the fundamental principle that creditors should bear
the consequences of the risks they assume, while not undermining the equally essential
principle that debtors should honor their obligations in full and on time. At the same time, we
all understand that th.is is an enormously complex and important issue that will need to be the
focus of continuing attention.
Reducing VulnerabiliTies
(0
Crises in Emerging Market Economies
As I have said, many of the economies worst affected by crises have made enormous
progress in the past year. But as global confidence begins to return and memories of the crises
begin to ebb, it becomes even more important for us press forward the frontier to ensure that
countries are less vulnerable to the kind of bank run dynamic we saw take hold in Asia and
elsewhere.
Among other things, increased safety will require:
•
Safer exchan)!.e rale regimes. The IMF and the official sector as a whole needs to help
countries avoid the trap of an exchange rate regime that may appear to offer stability but
that - if not solidly backed by credible institutional arrangements and consistent domestic
policies - may encourage large risks to build up unnoticed. Over time, it should
increasingly be the norm that countries involved with the world capital market avoid the
"middle ground" of pegged exchange rates with discretionary monetary policies. And
where countries choose the middle ground, and their own policies are not sufficient to stem
an attack on a particular exchange rate level, the international community should have a
compelling rationale before it provides exceptional support for the country to defend it.
•
More prudenr managemenr of narional balance sheets. A number of groups have looked at
guidelines for improved risk management at a national level and simple balance sheet rules
for countries to follow to reduce their vulnerability to sudden withdrawals of capital in the
9
future. The next steps must be to develop more sophisticated systems for evaluating an
economy's vulnerability to different types of shock, and to establish stronger incentives for
countries to put these in place. In response to our call, the IMF and the World Bank will
shortly develop best practice guidelines in this area as part of a more global effort.
Effective Strategies to Promote Growth and Poverty Reduction in the Poorest Countries
With the partial recovery in global confidence we also have an opportunity to intensify
the International Financial Institutions' search for more effective ways to support enduring
growth in the very poorest countries. In the end the only ones who can build a better future
for these countries are their own governments and citizens. But when many are laboring under
the debts that they owe to the international community, we owe them a fresh start in the way
we seek to help.
This global imperative is at the root of the new approach to the provision of
concessional finance to the poorest countries that is reflected in the new Poverty Reduction and
Growth Facility (PRGF), which the United States has promoted in the context of the Heavily
Indebted Poor Country initiative (HIPC). The PRGF will be part of a collaborative approach
with the World Bank based on poverty reduction strategies initiated by the countries
themselves. By putting poverty reduction and high quality growth front and center, this new
approach aims to support more effectively countries' efforts to put their economies on sound
and sustainable footing and achieve their development goals.
Together with the enhanced debt relief under HIPC that was agreed by the G7 leaders
in Cologne, this new joint IMF-Bank process for providing conditioned assistance to the
poorest economies marks a major step forward - one with enormous potential for kick-starting
reform and growth in sub-Saharan Africa and other markets of tomorrow.
Enhance the overall effectiveness of the International Financial Institutions
Finally. as we consider the international finandal architecture we have and the one we
would like to have, we must always consider not merely the individual parts of that system
such as the IMF, but the sum of those parts. Concretely. in light of recent experiences we must
continue to focus on how the IMF, the World Bank and other IFIs all work together, so that
each is playing to its strengths - and complementing the activities of the others rather than
complicating them.
To be sure. the question of the appropriate role for each of these institutions has been
endlessly debated and does not yield many easy answers. But the new PRGF - and the more
inclusive approach to the provision of assistance that it represents - marks one important
landmark in the search for a better solution. Further progress in enhancing collaboration
between the IMF and the World Bank on the financial sector issues that have been so central to
recent crises would mark another.
10
Already, at the urging of the United States, the staffs of these institutions have taken
steps to work more closely with one another on these questions. And they are now moving
forward with a new Joint Financial Sector Assessment Program (FSAP) that will involve indepth assessments to identify financial system strengths and vulnerabilities in individual
countries.
At the same time, in this area - as is true more generally - both the IMF and the World
Bank will need to devote greater effort going forward to giving true meaning to the word
"joint", and to better deploying their respective resources in the way they prevent and respond
to crises and in their design and delivery of programs and technical assistance.
V.
Concluding Remarks
Mr. Chairman, as I said earlier, the reform of the IMF and the global financial
architecture more generally is a process, not a journey with a fmal destination. However,
taken together, it is fair to say that the events of the past few years - and the changes they have
helped to set in train - mark an important new stage in the system's evolution.
What will be crucial going forward will be pushing forward in the areas I have
highlighted, and pressing for the safer policies and institutions at a national level upon which
this new system will ultimately depend. In a world of sovereign nations our goal cannot to be
to prevent governments from ever making mistakes. What our goal must be, as we move
forward from the events of the past few years, 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 taken place in the past year, including many that were
specified in the legislation last fall, we have made some important progress. But we know that
we have a great deal more to do. I look forward to working with you, Mr. Chairman, with
others in this Committee and with others in Congress as we work to progress further in the
months to come. Thank you. I would now welcome any questions.
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T REA SUR Y
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANlAAVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622·2960
FOR PLANNING PURPOSES ONLY
November 5, 1999
Contact: Bill Buck
(202) 622-2960
MEDIA ADVISORY
TREASURY DEPARTMENT LAUNCHES ATM PILOT PROGRAM IN BALTIMORE
Treasury Under Secretary for Domestic Finance Gary Gensler will join U.S. Senator Paul
Sarbanes, Post Master General William 1. Henderson, and Key Corporation Chairman and CEO
Robert W. Gillespie to launch a pilot program which places Automated Teller Machines (ATMs)
in Post Offices in communities underserved by financial institutions. The event will take place at
the Post Office at Lexington Market Center, 130 North Greene Street, Baltimore, MD at 10:00
a.m., Monday, November 8.
-30LS-213
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622·2040
D E P ..\ R T 1\1 E N T
0 F
THE
T REA S lJ R Y
NEWS
ornCE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASlDNGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
November 5,1999
Contact: Lydia Sennons
(202) 622-2960
MEDIA ADVISORY
Treasury Deputy Secretary Stuart E. Eizenstat and Count Otto GrafLambsdorff, Special
Representative for the German Foundation Initiative, will hold a j oint press conference on the
Holocaust forced and slave labor negotiation meetings today at 3:30 p.m. in the Cash Room of
the Main Treasury Building, 1500 Pennsylvania Avenue, N.W.
Media without Treasury, White House, State Department, Defense Department or
Congressional press credentials planning to attend should contact TreasuryJs Office of Public
Affairs at (202) 622-2960, with the following information: name, social security number or date
of birth. Foreign press should include foreign passport numbers. This information may also be
faxed to (202) 622-1999. The Cash Room will be available for pre-set at 2:30 p.m.
- 30-
LS -214
~ press
releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
~
QFFlCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. - 20220 - (202) 622-2960
Text as Prepared for Delivery
November 5, 1999
STATEMENT BY TREASURY DEPUTY SECRETARY STUART EISENSTAT
ON FORCED AND SLAVE LABOR NEGOTIATIONS
Count Otto Lambsdorff and I have had a very useful meeting. We are getting down to
the final phase of these long and difficult negotiations, and he was kind enough to come here
and tell me what he and his colleagues have been doing in Germany to help bring them to a
successful conclusion.
May I say first that we would not have been able to get this far without the active
engagement of the German government, and especially of Chancellor Schroeder. I want to
express my appreciation to him for all he has done and all he is doing.
Our progress continues. We have now reached agreement on the issue of lawsuits
against German companies brought in U.S. courts that we all believe should satisfy the
legitimate concerns of German companies seeking legal closure in American courts in return for
contributing to the German Foundation Initiative. Because my Government believes that the
Foundation Initiative provides the fairest and most expeditious way of compensating elderly
survivors, we also believe that action at the federal, state or local level which are inconsistent
with legal closure would be harmful to the process we are trying to create.
The one barrier to success in these negotiations is the question of the amount of money
which will be made available to accomplish the work of the Foundation Initiative. I have
repeatedly urged all participants to be flexible in this regard. I am pleased to report that the
plaintiffs' attorneys and the German Government are demonstrating that flexibility.
As a group, plaintiffs' attorneys have substantially reduced their original demand. I have
reason to believe they are willing to show continued flexibility.
The German offer currently consists of OM 4 billion from German industry and OM :2
billion from the government. The government despite its considerable current budget
difficulties, has indicated to me through Count Lambsdorffthat is considering a higher total
German offer that would be accomplished through an increase in the government's share of the
contribution.
LS-21S
For press releases, speeches, public schedules and official biograPhie~, call our 24-hour fax line at (202) 622-2040
All of this represents significant movement toward agreement on the last remaining
issue. It is now incumbent upon the German companies to follow the lead of their government
and show their own flexibility.
Our next round of negotiations is scheduled for Bonn November 16 and 17. We
discussed today the type of negotiating structure that will best facilitate significant progress at
this session. Our goal remains to agree on a suitable figure and to conclude these negotiations as
soon as possible.
-30-
DEPART~IENT
lREASURY
OF
THE
TREASURY
r,) NEW S
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C .• 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
Text as Prepared for Delivery
November 8, 1999
UNDER SECRETARY OF THE TREASURY FOR DOMESTIC FINANCE
GARY GENSLER
REMARKS AT ATM PILOT PROJECT ANNOUNCEMENT
BALTIMORE, MD
Good morning I want to thank Senator Sarbanes for the leadership he has provided on
expanding access to capital and financial services in all of our communities. I also would like to
thank Postmaster General Henderson for his role in making this pilot program possible. We look
forward to working with KeyCorp to make the Postal ATM pilot project a success. I am
personally very honored to be participating in this event -- Baltimore is my hometown.
Our country is enjoying unprecedented economic prosperity. One of the most important
challenges that we face is finding ways to enable all Americans to share in this prosperity.
Providing people with access to financial services is critical to bringing them into the economic
mainstream. It is increasingly difficult to participate fully in our modern economy without access
to a bank account and high quality banking services Today, having a bank account can be as
essential as having a telephone or reliable transportation It is a critical step to enabling families
and individuals to save money. to establish a credit record. and to plan for the future.
Unfortunately. the ease of access to financial services has been reduced significantly in
many communities When my parents and grandparents shopped at Lexington Market, there were
two banks down the block. Where are the Eutaw Savings Bank and Maryland National Bank
branches today') Times have changed Banks that once served this community are gone.
Today, we are taking a step to restore a part of the banking services this community once
had. We want every American to enjoy the same convenience and access that our parents and
grandparents enjoyed The Postal ATM pilot project is part of Treasury's efforts to find new and
creative ways to help individuals and families in low and moderate income areas. They need to
have access to their money in a safe. convenient. and affordable manner. We believe the Postal
ATM pilot project has the potential to make the tlnancial system more accessible in communities
LS-216
For press releases. speeches. public schedules and official biographies. call our 24.Jzour fax line at (202) 622-2040
where traditional banking services are limited.
The Postal ATM pilot project is just one of our initiatives. Treasury also has launched a
program to work with financial institutions to offer low-cost, no-frills accounts. The accounts,
called ETAs, will be available to recipients of federal payments. These accounts will be yet
another way of bringing individuals who do not now have bank accounts into the financial
mainstream. By allowing people to receive federal benefits electronically, they will no longer have
to worry about losing their checks or having them stolen.
Providing safe and convenient access to banking services to neighborhoods such as this
one, will help to ensure that the financial system is working for all Americans.
Thank you.
-30LS-216
2
DEPARTMENT
TREASURY
OF
THE
TREASURY
NEWS
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASHINGTON, D.C .• 20220. (202) 622-2960
FOR IMlYfEDIATE RELEASE
November 8, 1999
Contact: Bill Buck
(202) 622-2960
TREASURY DEPARTMENT LAUNCHES PILOT ATM PROGRAM IN BALTIMORE
Treasury Under Secretary for Domestic Finance Gary Gensler unveiled on Monday an
innovative pilot program in Baltimore which places automated teller machines (ATMs) in post
offices to increase access to financial services in the communities in need.
"Providing safe and convenient access to banking services in traditionally underserved
communities will help to ensure that the financial system is working for all Americans," said
Under Secretary Gensler. "This ATM will help to ensure that families in this neighborhood can
have bank accounts that are truly accessible."
Under Secretary Gensler was joined at the event by Senator Paul Sarbanes (D-MD), Post
Master General William 1. Henderson, and Key Corporation Chairman and CEO Robert W.
Gillespie. They unveiled an ATM at the post office at Lexington Market Center, 130 North
Greene Street in Baltimore.
This program is part of the Treasury Department's ongoing effort to improve access to
financial services and to move individuals into the financial mainstream. Treasury is partnering
with the U.S. Postal Service in this one-year pilot program to provide access to money through
commercial automated teller machines in local post offices.
Customers may use ATM, debit or credit cards issued by most financial institutions in the
Baltimore-area. Additionally, the pilot ATMs will provide access to Maryland Electronic
Benefit Transfer (EBT) services, state cash benefits otherwise known as the Maryland
Independence Card. There will be no fee charged to use the ATM.
KeyBank, N.A., of Cleveland, Ohio, will own, operate and maintain the ATMs.
In addition to the Lexington Market Center post office, Baltimore has two other pilot
locations: the Druid Station post office at 1826 Pennsylvania Avenue and the South Station post
office at 146 West Ostend Street. Three pilot locations have also been established in rural areas
outside Tallahassee, Florida.
-30LS-217
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
'U S Government Printing 011oe. 1998· 619'0--
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
FOR IMMEDIATE RELEASE
November 08, 1999
Office of Financing
202-691-3550
CONTACT:
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
90-Day Bill
November 12, 1999
February 10, 2000
912795DG3
Term:
Issue Date:
Maturity Date:
CUSIP Number:
High Rate:
5.030%
Investment Rate 1/:
5.177%
Price:
98.743
All noncompetitive and successful competitive bidders were awarded
securities at the high rate. Tenders at the high discount rate were
allotted 18%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tender Type
Competitive
Noncompetitive
Tendered
$
PUBLIC SUBTOTAL
24,386,398
1,386,248
$
SUBTOTAL
215,000
215,000
25,987,646
10,014,146
4,549,485
4,549,485
o
o
Federal Reserve
Foreign Official Add-On
$
8,412,898
1,386,248
9,799,146 2/
25,772,646
Foreign Official Refunded
TOTAL
Accepted
30,537,131
$
14,563,631
Median rate
5.005%: 50% of the amount of accepted competitive tenders
was tendered at or below that rate.
Low rate
4.950%:
5% of the amount
of accepted competitive tenders was tendered at or below that rate.
Bid-to-Cover Ratio = 25,772,646 / 9,799,146 = 2.63
1/ Equivalent coupon-issue yield.
2/ Awards to TREASURY DIRECT = $1,072,226,000
L8-218
http://www.publicdebt.treas.gov
OFFICE OF PVBLIC .U·FAIRS elSOO PENNSYLVANIA AVENUE. N.W•• WA.SH1NGTON. D.C •• 10llO -(101) 612.29'0
co~tact:
IMBARGOED UNTIL 2 c 30 P. X.
November 8, 1.999
Office of Financ~
202/691-3550
TRBASORY TO AUCTION CASH MANAGEMENT BILLS
The Treasury will auction appraximate1.y $16,000 ~11ion of 66-day
Treasury cash management bills to be issued November 1.5, 1999.
Competitive and noneompetitive tenders for bills to be issued in
Automated Debt Bntr,y Systam (TRADBS) will be received
through the Federal Reserve syseem. Tenders will not be accepted for bills
to be maintained on the book-entxy records of the Department of the Treasury
(I'rea.suryD1.recc). 'l'enclers will not be received at the Bureau of the Public
the
TreaS~/Reserve
Debt, Washington, D.C.
-
.
Additional ~ts of the bill. may ~e 1ssuad to Federal Reaerve Banks
as agants for foreign and international monetary autborities at the highest
discount rata of accepted competitive tenders.
The auction being aDDoWlced today will ~e eonducted. in the sillgle-price
All competitive and noncompetitive awards will ba at the
highest di.count rate of accepted competitive tend.ra,
auction format.
Thi. offeri.DS' of
'l':'.&.\l~ ••cwd.ti.••
L.
g~:n.d. ~y
the term8 and
con-
diti.OZls set forth ~ the uni.£o:. Offer~g Ci.:-cular for the Sale &Dd. :IaBU. of
Marketable Book-BD~ Treasury Bill., Hote., ana Bonds (31 cpa Part 356, .a
amended) •
NOTE: Competitive bids in cash management bill auctions must be
expressed as a di~coun t rate wi th ~ decimals Ie. 9 ., 7.1.0%.
Details about the new security are given in the attached offering
highlights.
000
L8-220
HIGHLIGHTS or TRBASURY OPPBRING
OF 66-DAY CASH XAHAGDBNT BILL
November 8, 1999
offering Amount •••••••••.••.••••••• ,$16,000 million
Description of Offering:
Term and type of security
66-day Cash Management Bill
..........
COSIP nllDlber •••••••••••••••••••••••
912795 DD 0
date •••...•.•••••••••••••••
Issue date ......................... .
Ma t'U.%"i ty da te ......••••••••••..••••
Original issue date •.••••••••••••••
Aue~ion
November 10. 1999
November 15. 1999
January 20, 2000
July Zl, 1999
currently outstanding •••••••••••••• 524,577 million
Sl,OOO
Kinimum bid amount and mul tipl ••
Submission of Bids:
Noncompetitive bid& •••••••• Accepted in full up to $1,000,000 ~t
the highest accepted discount r~t&.
Competitive bids .•••..• (1) Must be expressed as a discount :t:ate with
two decimals, e.g., 7.10%.
(2) Net long poaitiou. for each bidder must
be r.ported when the sum of the total bid
amount, at all discount rate&, and the
n.t long position is $1 billion or
greater.
(3)
Net long p08ition mu.t be dat:e:mined .a
of on. half-hour prior to the closing
ttma for r.ceipt o! comp.:itive tenders.
Haximum Recognised. Bid
at a Single Yi.ld. ••••••••• 35' of public offering
Maxtmum Award •••..••••...•••• 35\ of public offering
Receipt of Tenders:
Noncompetitive tenders
..... Prior
to 11:00 a.m. Eastern Standard
ttme on auction day
Competitive tenders .•••.••• Prior to 11:30 a.m. Eastern Standard
time on auction day
Par=ent ~.r.m. •.•••••••••••••• By charge to • funds account at a F.d.ral
It.••• z:v. Bank on i.aue elate, or pa;tmtmt of
full par amount with tender.
NEWS
~8~9. . . . . . . . . . . . . .. .
................
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASHINGTON, D.C .• 20220. (202) 622-2960
EMBARGOED UNTIL 1000 AM EDT
Text as Prepared for Delivery
November 9, 1999
TREASURY SECRETARY LAWRENCE H. SUMMERS TESTIMONY
BEFORE THE HOUSE CO!\I!\IITTEE ON \VA YS AND MEANS
Mr Chairman. Mr Ranking:\ 1ember. !\\embers of the Committee, I appreciate the
opportunity to appear before you today to discuss the President's plan for presening
Social Security, which I know to be of great interest to this Committee and others in
Congress.
During the last six years, the United States has made enormous progress to\vard
putting this country's budget on a sustainable long-term path The core principle
underlying the Social Security legislation recentl~ put fOlward by the President is that we
should work to preserve and e\tend that progress -- and ensure that its benefits are
devoted as much as possible to meeting this countn'::, long-term priorities
In this context, I would liJ,;e to address three tupi(s
•
First. the dramatic fiscal progress that has been achieved in the 1990s and the benefits
for the American people that h:l\ e resulted,
•
Second. the President' s plan fur 1l1;\llllainlng thh prugress and ensuring that the
savings it brings \\ill not be dl".,lp;ltl'd. :l1ld
•
Third, the broader signitic<llh_'l' l>l till'
fiscal priorities going tom arc!
I.
Recent Fiscal Accomplishmcllts
1)1
e'oilklll ., plclll
;\l1d
our further economic and
It is fair to say that fiscal responsibility has been the centerpiece of this
Administration's economic polic\' hom its \en beginning In conjunction with strong
economic growth, difficult and somet il11cs unpopular choices that we made in 1993 and
1997 have helped to turn years unitied budget deticib into a surplus
or
LS-221
lor press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
In 1992, the unified deficit was $290 billion and projected to rise, in 1998, 'We
achieved a surplus of $69 billion, and in the fiscal year just completed, the surplus
increased to $123 billion. During the past two years, we paid down $140 billion of debt
held by the public, the largest decrease on record. As a result, the debt that was held by
the public at the end of fiscal year 1999 was $1.7 trillion less than was projected when
President Clinton took office
The result for the American economy is that we have moved from a vicious circle
of rising debt and lagging economic performance to a virtuous cycle of fiscal discipline and
continued strong economic growth. An additional $1.7 trillion that would have been
absorbed by government borrowing has instead been invested in America's future -- in its
businesses, workers, and communities.
With the resources that this progress has made available, business investment has
surged, with purchases of equipment and soft\\are gro'Wing at double-digit rates for six
years in a row A rising capital stock. in turn, has contributed to a rise in workers'
productivity. productivity in the nonfarm business sector has accelerated to a ~ I percent
annual average rate since the end of 1995 from the I ~ percent that prevailed from the
1970s through the early 1990s
And higher producti\'ity, in turn, has helped produce higher real \\ ages and higher
standards of living For the first time in a generation, \\ e are seeing real v,ages rise Most
encouraging, real wage increases seem no\\ to be reaching a broader spectrum of
Americans, with low- and moderate-income \\ orkers benefiting in addition to workers
further up the economic ladder.
When the Federal government reduces its dra\\ on the pool of savings, interest
rates fall. This decline not only lo\\ers the cost of capital to businesses, it makes it easier
and cheaper for people to borrow money to purchase houses, to buy cars and to send
children to college For example, a family with a home mortgage ofSIOO,OOO might
expect to save about S~OOO in mortgage costs edch \eal .-\s housing has become more
affordable during the past si" ~ears. an addltiunal ~ -; mililun tilillilies have become
homeowners, and the homeo\\ nership rate ha~ rlsell 10 ;J record high
A smaller debt also mean:-. lu\\er 111lere"t cu,,(:-. tllr the Federal government Net
interest payments since 19c)~ htl\\.:' he\.:'11 ~I \..·UlllL1Lttl\l' Sll)1 hilli(.11l iLmer than projected in
1993, which amounts to rl)L1ghh S2 ;()U p\.:'I ·\lll\.:'rk~1I1 Lllllih
In all of these ways, our strategy 01' ti"Cdi re:,punslbillt\ IS producing tangible
benefits for American workers, hOllleo\\ ner". and t,l\pa\ers
A similar improvement has taken place 111 the stance of the government budget
excluding Social Security From a record high of S3-l0 billion in 1992, the non-Social
Security deficit, jU5t like the unified budget, has impro\'ed in every year of the
Administration. Building on the achievement of a balanced unified budget, the President,
in his June budget review, highlighted the importance of setting a higher fiscal objective
balancing the government's books without using the surpluses generated by the Social
Security system.
Balancing the on-budget account would mean that the bonds accumulating in the
trust fund would be matched very nearly dollar-for-dollar by a reduction in debt held by
the public. Put differently, accumulations in the Trust Fund will truly represent
accumulations of a national asset -- an increased capacity to meet our obligations to
tomorrow's retirees.
This is the responsible way to prepare for the retirement of the baby boom
generation' increasing the productive capacity of the economy and thus making
tomorrow's workers more productive and better able to meet the benefits obligations that
are promised under current la\v The increment to national saving from following this
approach would be dramatic under current projections the debt held by the public would
be completely paid off by 2015
II.
The Right Principles for Preser-ving Social Seclir-it),
This discussion brings us to the crucial question If we achieve this degree of fiscal
success, how should we use the interest savings that resul() Should we use them for a tax
cut, for additional spending, or for Social Security'> The responsible answer to this
question needs to take into account two important facts about the future
First, the retirement of the baby boomers in coming decades stands to put great
stress on Social Security, which is the cornerstone of our retirement system Social
Security benefits are the largest source of income for two-thirds of Americans over age 65
and the only source of income for J 8 percent of them
The system has enjoyed dramatic success in reducing pcwert:-..' among retirees,
helping to lower the elderly poverty rate from 35 2 percent in 1959 to around 105 percent
in 1998 -- although po\'erty among certain group:" slIch as elderly widows, remains high
Without Social Security, nearlv halfoftl)da\'s eldL'lh \\ould be in poverty We should
not forget that it is also a major famil, protectiun plan nearh une third of Social Security
beneficiaries is under the age of62 and recei\lI1g either disabilit:-., benetits or survivors'
benefits
The aging of our population will challenge all of these accomplishments In fact,
the Social Security trust fund is predicted to be e\hausted by 2034
Second, in making our budget plans we need to remember that the savings that
would result from continuing on the current path of fiscal discipline would be very large
indeed. Ifwe follow the President's budget tl'amev,ork, the amount that the Federal
..,
J
government spends on interest payments, relative to the interest payments that would
prevail if the government balanced the unified budget, would be $107 billion lower in 20 II
and more than $200 billion lower per year by 2016. We believe that we should earmark
those savings to meet the commitments to future retirees that are implicit in our existing
Social Security system.
Let me now describe the four main principles underlying the President's approach
The firsl prlllciple is that we should respect the integrity of the Social Security
Trust Fund. By ensuring that all of the Social Security surpluses are used to pay down
debt, rather than finance other government activities, the President's approach enhances
the Trust Fund's ability to contribute to the government's and the nation's capacity to
meet its promises.
The legislation that we transmitted to Congress embodies this principle in specific
rules. The legislation extends the discretionary spending caps and pay-as-you-go rules
that have been very helpful in achieving fiscal discipline over the past decade. It also goes
one step further, by creating a new point-of-order to protect the Social Security surplus.
The second principle is that the interest savings from the debt reduction coming
from Social Security surpluses should be channeled into the Social Security Trust Fund
These transfers are the central link between our overall budget framework and Social
Security reform. Essentially, we devote the savings we have earned from reducing one
liability -- the federal debt held by the public -- to meeting another government liability,
namely promised Social Security benefits
According to the Social Security actuaries, the transfers we propose would extend
the solvency of the Social Security system to 2050, compared with 2034 under current
law. This approach of earmarking the interest sa\'ings from debt reduction can be
distinguished from the lockbox proposals thai ha\'e been disclissed in Congress this year
These do not extend the sokenc y' of Social SecurilY b\ e\en one da\' -- since they do not
direct those sa\'ings to Social Security and thereb~ help \0 pre\enl them from being used
for other purposes
In considering these issues it is . .vorth thinking about the steps that a private
company would take to address a financial shortfall in its defined-benefit pension plan
Clearly, the firm would look at ways to modernize and update the pension plan. But if it
were enjoying extraordinary profits, and expected to continue to do so, then its first step
would be to devote some of those profits to meeting the shortfall in its pension plan
In much the same way, we believe there needs \0 be broad-based and bipartisan
reform of Social Security But we also belie\'e that ollr 'tirst step should be to use the
opportunity presented by budget surpluses to strengthen the program's finances today
The third principle is that we should make provision for devoting the increased
resources to Medicare that are likely to be necessary in the context of any responsible
approach to assuring its future. Medicare has been a great American social policy success
-- but there is now widespread agreement that the program requires basic changes if it is
to continue that success in a new century In fact, the Medicare trust fund is now
projected to be exhausted by 2015, nearly two decades before the projected insolvency of
the Social Security Trust Fund.
The reform of Medicare poses a wide range of ditlicult issues. The President has
put forward a plan containing his proposals for modernizing Medicare and realizing the
quality and cost advantages that increased competition within the system would offer A
number of other constructive reform proposals have emanated from Congress. But
whichever route this country ultimately takes, most independent observers agree that even
with reform, Medicare will require increased funding to extend substantially its solvency
without damaging benefit cuts or tax increases That is why we believe that we should
combine reform with steps to assure the availability of increased resources for the
Medicare system in the future
The legislation that the President just submitted to Congress would reserve onethird of the projected surpluses from any use except for reform that extends the solvency
of the Medicare program. To repeat, the President wants to work with Congress to
achieve comprehensive Medicare reform, but we know that reaching an agreement on this
complicated issue \vill not be a simple process In the meantime, we should preserve the
resources that will be needed to strengthen and modernize i\ledicare as outlined in the
legislation that the President just submitted to Congress
The/ol/rlil princIple is that this nation's budget plans should be based on realistic
discretionary spending plans The discretionar~ caps have been very helpful in achieving
fiscal discipline over the past decade The President's plan e'aends them But it would
use some of the surplus, as pan of a plan that extends Social Security solvency, to provide
realistic levels of appropriations for the fultillment of go\'ernment's core functions
This is a necessary and prudent response to the unrealistic spending levels
envisioned, for example, in the current Congressional Budget resolution, which by 2009
would reduce nondefense discretionary spending by approaching 50 percent, assuming
that defense v,'ere funded at the level requested by the President
It is important, in considering the President's spending proposals, to remember
that this is 1/01 a debate about making gO\ernlllent bigger It is about ensuring that
government has the resources to fulfill its core functions The executive branch non-postal
federal civilian workforce has declined b\' about 10 percent since 1993 - representing
more than 357,000 positions Non-defense discretionary spending today is at its lowest
level in 35 years And for a family offour \,ith median income, the burden of Federal
income and payroll taxes is the lowest it has been in 20 years
The President's plan would increase defense spending slightly in real terms, in
order to ensure military readiness and an effective national defense However, the plan
would reduce inflation-adjusted nondefense spending, leaving it more than 10 percent
below its current real level by 2009.
Overall, the growth of discretionary spending proposed in the President's plan
would remain slightly below inflation as currently forecast. We believe that such cuts are
feasible, if the spending is targeted at our critical needs Deeper cuts, in our view, are not
feasible if core government functions -- the services that every American taxpayer expects
-- are to be maintained.
Some have said that any modest increase in discretionary spending is fiscally
irresponsible. I would suggest that the opposite is true The irresponsible course would
be to build the nation's budget plans on the foundation of spending plans that we can
safely predict will not be achieved
As we have seen in this year's budget debate, unrealistic discretionary caps will be
exceeded -- through emergencies that expand the term "emergency" well beyond its
accepted meaning, or through other budgetary gimmicks If we base large tax cuts today
on the promise of unspecified deep cuts in future spending, we may create a situation in
which the spending that ultimately occurs will lead to additional and unneeded government
borrowing The result would be to erode the enormous fiscal progress that this country
has made -- and the enormous economic benefits that have come with that progress
III.
Broader Significance of the President's Plan and Challenges for the Future
Respecting the integrity orthe Social Security trust fund, channeling the interest
savings from debt reduction to the Social Security trust fund, making proper allowance for
Medicare; and budgetary realism -- if we could agree to respect these four principles going
forward it would make a major contribution to AmeriC<I' s economic and fiscal future
It \."ould be an important step for our eCUI1Ullli( future because it would continue
the paydown of our publicl~'-held nation:tl deb!. \\ ith ~l prujected elimination of that debt
by 2015. We would establish the principle of uSll1g the Social Securit~ surplus to pay
down debt rather than financing other gO\'ernment acti\ities And \\e would free up
substantial new resources for business investment and housing. further reducing interest
rates and the cost of capital, and boosting productivity and American living standards
Respecting those four principles would be an important step for our tiscal future
because we would realistically provide funding to help us meet the existing obligations of
the Federal government that are not yet funded \Ve would extend the solvency of Social
Security by earmarking for the Social Security Trust Funds the sa\.ings gained from using
Social Security surpluses to pay do\\n the debt held b\ the public
6
Thus, the principles embodied in the President's budget and Social Security plan
can provide a crucial foundation for our long-term economic and fiscal future But they
are just that - a foundation, not a completed edifice Going forward we would need to
build on this foundation, because even after passing this plan, important national
challenges would remain.
Notably:
IV.
•
We would still need to increase personal retirement savings, especially for the
73 million American workers who do not participate in employer-sponsored
pension plans In 1994, less than half of all individuals aged 65 and over
received any private pension benefits
•
We would also still need to make further reforms of both Social Security and
Medicare As I have mentioned, the President hopes that his comprehensive
Medicare reform proposal could help to provide a basis for bipartisan
discussions of this critical issue in the near future
Concluding Remarks
Mr Chairman, as I have discllssed, I belie\e that ollr strong economy and
dramatically improving fiscal condition offer LIS an historic opportunity to address some of
the core long-term challenges confronting our nation Certainly, we may have very
different views about how to respond to these challenges. but I hope we can all agree that
this opportunity should not be wasted
I look forward to working with you, Mr Chairman, f\1r Ranking Member, and
others in this committee and with others in Congress as we work to progress further on
these critical issues in the months to come Thank vou I \\ auld now welcome any
questions
-3 u-
7
DEPARTMENT
OF
THE
TREASURY
omCEOFPUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. -WASHINGTON, D.C. - 20220 - (202) 622.2960
EMBARGOED UNTIL 10:00 A.M. EST
November 9. 1999
Wrinen Statement for the Record
TREASURY DEPUTY SECRETARY STUART E. EIZENSTAT
PERMANENT SUBCOMMITEE ON INVESTIGATIONS
SENATE COMMITTEE ON GOVERNMENTAL AFFAIRS
I. Introduction
Madam Chairman. Ranking Member Levin. Members of the Subcomminee. I welcome this
opportunity to submit this statement on money laundering and corruption issues. Your hearing
on money laundering and private banking represents the culmination of a great deal of work by
you and your staff over the past year. As I understand it. you will be hearing from a range of
witnesses over the course of this hearing. concerning a number of specific matters alleging the
abuse of private banking relationships by apparently corrupt foreign officials seeking to <.:om:eal
their ill-gotten gains. Thus you have focused your efforts on the intersection of high-le\'t~1
government corruption and money laundering. Both of these issues present crucial law
enforcement and regulatory challenges. and both raise significant foreign policy and national
security implications.
Let me say at the outset that safeguarding the integrity of American and international financial
institutions is an absolute priority for this Administration. Accordingly. as described belov.. the
Treasury Department is engaged at many levels in the tight against wrruption and mone:
laundering. This engagement is retlected by our ongoing r~glliatory and enforcement initiatives
to prevent. detect. and prosecute money laund~ring: our promotion of reforms in international
financial institutions' lending programs: and our \\ork \\1th our G-7 colleagues and others to
reform the global financial architecture.
In addition to these ongoing efforts. I am CO-dlJinng \\ith Dt:puty Attorney General Eri<.: Holder
an interagency task force to implement tht: \ational \lont:: Laundering Strategy recently
announced by Secretary of the Treasury Summers and Attorney General Reno. As we move to
implement the Strategy. we are looking to IeJrn nt:\\ lessons. and to devise new policies to
respond to changing circumstances. A.<.:cordingl:. th~ Trt:asur: Department has supported your
investigative efforts o\'er the past year. and \\e are \ ~r: much looking forward to the public
discussion of the results of those efforts in this hearing.
LS-223
~ press releases. speeches. public schedules and official biographies, roll our 24.Jtou~ fax line at (202) 622.2040
My statement covers two topics: corruption. money laundering. and private banking: and
the Administration's new National Money Laundering Strategy. As described below. we believe
that private banking relationships are important. and we recognize that high net worth individuals
have special banking needs. But we also recognize that private banking is particularly
vulnerable to abuse by money launderers. A number of specific action items called for by the
National Money Laundering Strategy - including. for example. a 90 day review of guidance to
enhance bank scrutiny of potentially high risk accounts and the enhanced use of information
processing technologies to uncover patterns of unlawful transactions from the data already
collected -- address the subjects you are exploring in this hearing. I assure you that. as we move
forward on those and other items. we will pay particular attention to addressing the
vulnerabilities posed by the private banking business.
II. Corruption, Money Laundering, and Private Banking
First. I want to reiterate the reasons that this Administration has placed a high priority on
fighting both corruption and money laundering. These issues are important domestically and
internationally. and they are closely related to one another. Both public corruption and money
laundering taint financial institutions and erode public trust in their integrity. In their extremes.
public corruption and money laundering can undermine democratic institutions. and
representative governments. Money laundering may be thought of as a corrupting influence on
financial institutions and governments. In this age of rapidly advancing technology and
globalization. public corruption and money laundering can affect trade flows and ultimately
undermine financial stability. For this reason. both are ultimately matters of national security for
the United States.
Public Corruption. These points were illustrated in hearings held by the House Banking
and Financial Services Committee in September concerning allegations of crime and corruption
in Russia and the alleged infiltration of Western financial institutions. Recent press accounts
alleging public corruption by Russian officials dramatically illustrate these points.
Unfortunately. the type of allegations addressed in the House hearings are not isolated to anyone
country. Large-scale corruption by high-ranking government officials has undermined the
economic and social stability of a number of countries around the world. Systematic. unchecked
depletion of assets by top government leaders diverts scarce resources from many of the world' s
poorest countries. and has crippled some of the most promising economies in the developing
world. such as the former Zaire and Nigeria.
One of the principal obstacles we face in combating public corruption is the historical.
acceptance in the international business community of corrupt behavior by government officials.
We tend to forget - since the United States enacted the Foreign Corrupt Practices Act over
twenty years ago (which I helped draft for the Carter Administration) - that an international
consensus about the dangers of public corruption is only just now forming. In some countries.
for example. pending their full implementation of the OECD Anti-Bribery Convention. it is still
possible for corporations to deduct foreign bribes on their tax returns. Although we generally
understand what we mean by the term "public corruption:' our understanding is by no means
universally accepted. Thanks to the work of non-governmental organizations such as
Transparency International. corruption issues have become more a subject of public discussion.
2
We have made significant progress in recent years. For example. it has now been nearly
two years since the members of the Organization for Economic Cooperation and Development
(OECD) concluded the OECD Anti-Bribery Convention. and the Vice President hosted a
ground-breaking Anti-Corruption conference in February 1999. Since then. we have pressed.
and will continue to press, for the complete ratification and implementation of the OECD
Convention by all signatories. We hosted a U.S. - Africa Ministerial Conference with over 40
African nations, at which combating corruption was a central item on the agenda. I have worked
with the Global Coalition for Africa, in which some dozen African countries have adopted
comprehensive anti-corruption principles. In addition, the United States is working with its G-7
partners and others to coordinate anti-corruption efforts and assistance and to complete a WTO
agreement on transparency in government procurement. We also are exploring the best ways to
identify. block. and seize illicit funds gained through public corruption as well as other criminal
acts.
There has been considerable progress over the past year or so within the international
financial institutions. The International Monetary Fund (lMF) has developed a code of fiscal
transparency, and has consistently supported open and transparent markets. price decontroL and
trade liberalization. each of which will reduce the opportunity for bribery and corruption. In
specific programs with Thailand. Korea. and Indonesia. the IMF has insisted on full audits and
has even suspended funding in response to substantial accusations of corruption. Both the IMF
and the World Bank suspended assistance to Kenya because of pervasive corruption.
The World Bank is paying increased attention to the problems of corruption in its
member countries. The Bank has developed programs to combat corruption problems in
individual countries. initiatives to enhance transparency and accountability in public finances.
and approaches to strengthen public institutions and the rule of law with regard to investment
and property. The Bank has also developed new methodologies and techniques for analysis of
the nature and extent of corruption in specific countries. These issues were the focus of attention
at the international meetings of the IMF and World Bank in Washington in September.
Monev Laundering. In many respects. our efforts to fight money laundering have
progressed much further. Money laundering has been a separately punishable federal crime in
the United States only since 1986. and our enforcement agencies vigorously investigate and
prosecute violations. We also have had in place since the early 1970s - through the Bank
Secrecy Act and its implementing regulations - a relatively well developed regulatory structure.
This structure ensures that records are maintained and reports are tiled that can be of use to
investigators pursuing money laundering. tax e\'asion. and other financial crimes. Our regulatory
regime is generally consistent with structures in place in many other countries around the world,
thanks primarily to the efforts of the Financial Action Task Force (FATF) and other international
bodies to push implementation of the FA TF 40 Recommendations. Treasury' s Financial Crimes
Enforcement Network (FinCEN) has capably led the Treasury's efforts to coordinate and
implement these efforts. But much work remains to be done.
In September. the Treasury and the Justice Departments released the first comprehensive
National Money Laundering Strategy. The Strategy sets forth a broad-based domestic and
international program to combat money laundering. As discussed more fully below. several of
..,
-'
the action items are directed against the type of criminal activity that the Subcommittee has been
investigating over the past year. The Strategy - as well as the testimony you will receive from
officials representing the Office of the Comptroller of the Currency and the Board of Governors
of the Federal Reserve System - demonstrates that we have been working on these issues for
some time. The Strategy also demonstrates that we are taking concrete steps to address them.
Private Banking. The regulation and oversight of private banking - that is. the provision
of financial services to high net worth individuals - bring together the issues of corruption and
money laundering. The private banking business has long been recognized as having the
potential to be particularly vulnerable to abuse by money launderers. GAO reports from June
and October 1998 explored a range of issues relating to regulatory oversight of offshore private
banking activities arising out of the allegations that Raul Salinas used Citibank' s private banking
services as a conduit to launder funds. As described below. issues raised by the private banking
business will figure prominently in our implementation of a number of the priority action items
called for in our National Money Laundering Strategy.
The bank supervisory agencies have already taken a number of steps. which I am sure
you will hear about in some detail from other witnesses. The Treasury' s Office of the
Comptroller of the Currency (OCC). for example. has created a special group in its headquarters
to focus on money laundering controls. and has moved to revise its bank examination
procedures. The OCC has also instituted novel procedures - using the artificial intelligence
capabilities of FinCEN and other internal lead-generating methods - to proactively identify
institutions that pose particular money laundering risks. Over the past year. the OCC has
conducted over ten targeted examinations of such institutions. using specially trained examiners.
The OCC also responds to external notification - from law enforcement or other sources - with
its specialized money laundering examination teams. Finally. the OCC has begun a general
review of its examination procedures.
One theme that underlies these efforts - and the efforts of other bank regulators. notably
the Federal Reserve Board -- is the need for banks involved in private banking to put in place
appropriate policies and procedures in order to meet their obligations to investigate and report. if
necessary. suspicious private banking activity. As \ve continue to work on this issue. we must
strike the correct balance between protective regulations and the promotion of competitive
commercial activity. and between customers' legitimate right to financial privacy and the need
for government to be able to pierce the veil of secrecy to pursue criminals.
For all of these reasons. we welcome these hearings. and applaud the work that you and
your staff have done to uncover particular problems and to frame them in a way that will help us
move together toward appropriate solutions.
III. The National Money Laundering Strategy
In September. the Treasury and Justice Departments issued a National Money Laundering
Strategy. marking a new stage in the government's coordinated effort to follow the money. The
Strategy's ambitious agenda is built around four basic goals: (I) strengthening domestic law
4
enforcement: (2) enhancing steps taken by financial institutions to prevent and detect money
laundering; (3) partnering with state and local authorities: and (4) bolstering our efforts to have
strong money laundering standards adopted - and adhered to - worldwide. Several actions set
forth in the Strategy are particularly relevant to the subject of this hearing: many of these are
proceeding on self-imposed deadlines to ensure that significant progress is made in short order.
First. we have convened a working group of federal bank regulators and law enforcement
officials to determine what guidance would be appropriate to enhance bank scrutiny of certain
transactions or patterns of transactions in potentially high-risk accounts. This working group is
to complete its review within 90 days of the publication of the Strategy. and we intend to report
on its findings in the second annual strategy report. which is due to the Congress on February 1.
2000. Financial industry officials are looking to us for guidance about how to comply with the
duty of financial institutions and their employees to avoid becoming entangled in money
laundering schemes. and we want to provide that guidance. Naturally. we want to balance
concerns of efficiency and privacy with those of effective law enforcement.
Second. this review will be complemented by a determination by the working group as to
what guidance would be appropriate to enhance the scrutiny of correspondent bank accounts in
the United States maintained by certain offshore and other financial institutions that pose money
laundering risks. This review. which also is due to complete its review within 90 days of the
strategy's publication. will focus on steps needed to ensure that U.S. financial institutions obtain
information about the identity of customers of certain correspondent banks. The working group
will also pay attention to issues raised by the use of payable through accounts. As more effective
mechanisms are devised to meet these goals. U.S. banks should be better able to detect deception
by corrupt foreign officials.
Third. the federal bank supervisory agencies. in cooperation with the Department of the
Treasury. will conduct a more general review of existing bank examination procedures relating
to the prevention and detection of money laundering at financial organizations. to be completed
in 180 days of the National Money Laundering Strategy' s publication. The objectives of this
review will be to determine whether current examination procedures are adequate to evaluate
bank anti-money laundering measures and compliance with existing laws and regulations. and
whether additional support from law enforcement of1icials can assist bank examiners in
examining institutions for money laundering risks. I will ensure that this review takes full
account of the results of the Subcommittee' s investigation as discussed in this hearing.
The Strategy also calls for a series of steps to improve the government' s performance in
making use of information reported under the Bank Secrecy Act and in sharing with financial
institutions the analysis of such information. In some cases. such sharing may involve issuance
of guidance about emerging issues or strategies used by money launderers. In other cases.
subject to the appropriate legal restrictions. morc specific warnings may be generated. Once
again. I will ask FinCEN and the law enforcement and regulatory communities to pay close
attention to the results of the Subcommittee's investigation. and to apply the lessons learned
from that investigation on a continuing basis.
5
Further, the Strategy calls for action on two important items pointedly directed at the
fight against money laundering by corrupt foreign officials. The Department of Justice is leading
the Administration's effort to enact legislation to enhance our ability to pursue criminal sanctions
- including the seizure and forfeiture of assets - against corrupt foreign officials. Bribery of
public officials and witnesses was included as a "specified unlawful activity" (or predicate) when
the money laundering statute was first passed in 1986. But the statute limits our ability to bring
money laundering charges, or to confiscate assets on behalf of foreign governments. in cases
involving predicate crimes that violate foreign. but not U.S., law. The Money Laundering Act of
1999. which the Administration plans to submit to the Congress today. will include a provision
enlarging the list of foreign crimes for which money laundering prosecutions can be brought in
the U.S. when the proceeds of the crime are laundered in the U.S. This list of crimes will include
"bribery of a public officiaL ur the misappropriation, the/i, or embezzlement ofpuhlicfunds by
or for the benefit of a public official." If passed, this legislation will give us an important new
tool to assist emerging democratic governments as they attempt to recover state assets
misappropriated by corrupt officials of current or preceding regimes.
Finally. the Strategy notes that the United States will advocate that other nations include
bribery as a serious offense for the purpose of their own anti-money laundering legislation. As
you well know. the proceeds of large-scale public corruption - in the form of bribes or
embezzlement - must. like any other ill-gotten gains. be laundered if they are to be secured and
enjoyed by corrupt officials. And we have made significant progress in the international
community toward universal enactment of so-called "serious crimes" money laundering
legislation. An OECD working group has reported that it considers bribery as a serious offense
for the purposes of money laundering legislation and has asked the FA TF to review the issue
with its membership. Last month. at their meeting in Moscow. the G-8 Justice and Interior
Ministers agreed on the importance of extending predicate offenses of money laundering to
bribery or corruption committed in violation of both domestic and foreign law.
Of course. the Money Laundering Strategy report calls for a host of other actions to
improve our ability to combat money laundering. The Strategy recognizes the long-term
commitment needed for the fight. but I want to assure you that we have mobilized our resources
on a number of priority items in the short term.
IV. Conclusion
In closing. I want to thank you and the Subcommittee staff again for your hard work over
the past year in exploring the vulnerability of private banking to abuse. You have performed an
extremely important service in highlighting the important. but still not widely understood
relationship between public corruption and money laundering. The Treasury Department is
committed on an ongoing basis to devising and implementing effective measures to protect the
U.S. financial system from abuse by corrupt public officials and international organized crime.
We look forward to working closely with you and your staff in the future.
-30-
6
DEPARTMENT
TREASURY
OF
THE
TREASURY
NEWS
omCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
EMBARGOED UNTIL 10 A.M.
November 9, 1999
Contact: Bill Buck
(202) 622-2960
PRESIDENT'S WORKING GROUP ON FINANCIAL MARKETS
RELEASES OVER-THE-COUNTER DERIVATIVES REPORT
The President's Working Group on Financial Markets on Tuesday unanimously
recommended changes to the Commodities Exchange Act that are designed to create legal
certainty in the over-the-counter derivatives markets and reduce systemic risk.
"Our new financial system has to be based on old virtues," Treasury Secretary Summers,
Chairman of the Working Group, said. "As we worked to clarify the legal framework for OTC
derivatives, we were guided by time-tested principles of competition, efficiency and
transparency. If enacted, these changes will strengthen the financial system by improving a
segment of the market which helps American businesses to hedge and manage risk more
effectively and reduces borrowing costs for both individuals and corporations."
As members of the President's Working Group on Financial Markets, the Treasury
Secretary and the Chairmen of the Securities and Exchange Commission, the Commodities
Futures Trading Commission and the Board of Governors of the Federal Reserve System, studied
the existing regulatory framework, recent innovations, and the potential for future developments
in the over-the-counter derivatives markets.
•
•
Among the report's recommendations are:
Creating an exclusion from the CEA for swaps agreements that are bilateral agreements
between eligible parties on a principal-to-principal basis. (The exclusion does not extend to
agreements involving non-financial commodities with finite supplies).
-- This recommendation provides greater legal certainty and removes doubts about
enforceability, making the U.S. a more attractive derivatives market.
Creating an exclusion from the CEA for electronic trading systems that limit participation to
sophisticated parties trading for their own accounts. (Again, the exclusion does not apply to
systems used to trade contracts that involve non-financial commodities with a finite supply.)
--This recommendation promotes innovation, competition, efficiency, liquidity and
transparency and encourages the development of electronic trading systems.
LS-224
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
•
Removing legal impediments to the development of clearing systems for OTC derivatives,
while requiring that such systems be subject to appropriate regulation.
__ This recommendation reduces systemic risk by encouraging appropriately regulated
clearing for OTC derivatives.
•
Clarifying the Treasury Amendment to enable the CFTC to address the problems associated
with foreign currency "bucket shops" while excluding all other transactions in Treasury
Amendment products from the CEA, unless they are conducted on an organized futures
exchange.
--This recommendation helps to create legal certainty and protects retail customers from
unfair practices.
•
Clarifying the exempt status of hybrid instruments that reference securities and modifying the
CFTC's "exclusive jurisdiction" clause to prevent limitations on the authority of the SEC and
the bank regulatory agencies with regard to hybrid instruments.
--These recommendations, while technical in nature, enhance legal certainty by clarifying
that hybrid instruments that reference securities can be exempted from the CEA and they
resolve potential jurisdictional disputes between regulators by limiting the exclusive
jurisdiction clause.
Additionally, the Working Group recommends that Congress clarify the CFTC's
authority to provide appropriate regulatory relief for exchange-traded derivatives when the
CFTC deems such relief to be consistent with the public interest. The report also suggests
approaches to other related issues including single stock futures, enhanced reporting authority for
unregulated affiliates of broker-dealers, and close-out netting provisions in bankruptcy and bank
insolvency law.
-30-
DEPARTMENT
OF
THE
TREASURY
NEWS
TREASURY
OFFlCE OF PUBliC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C. - 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
November 9, 1999
STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMMERS
Michel Camdessus has served the members of the International Monetary Fund with great
distinction during his time as the longest serving Managing Director. With brave and skillful
leadership, he steered the IMF through challenges from the 1980s debt crisis to the
transformation of former communist economies and the Asian financial crisis. Throughout
these times, Mr. Camdessus has reinforced the strengths of the institution and steadfastly
protected the interests of its members and the international monetary and financial system as a
whole. Most recently, we in the United States have deeply appreciated his leadership in
championing the HIPC initiative and working tirelessly to secure its financing.
An international institution charged with these vital responsibilities requires a leader of great
experience, judgment, and talent. Michel Camdessus proved to be such a leader.
The Treasury Department will miss his many contributions to the international community, and
we wish him well in his future endeavors.
-30-
LS-225
Forpress releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
'U S Governmenl PrJnl,ng Olf'ce 1998 - 619-559
DEPARTMENT
OF
THE
TREASURY
TREASURY
NEWS
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE? N.W.• WASIllNGTON, D.C .• 20220. (202) 622-2960
Weekly Release of U.S. Reserve Assets
November 10, 1999
The Treasury Department today released U.S. reserve assets data for the week emhng
November 5, 1999.
A.s tlus table indicates, U.S. reserve assets totaled $72,644 million as of NOHmber 5, 1909,
as compared with $73,228 million as of October 29, 1999.
u.s. Reserve Assets
(millions of US dollars)
1999
Total
Special
Reserve
Foreign
Currencies
31
Assets
Gold
Stock II
Drawing
R"Ig hts 21
ESF
SOMA
Position in
IMF 21
October 29, 1999
73,228
11,047
10,232
16,187
16,190
19,571
November 5, 1999
72,644
11,047
10,204
15,936
15,939
19,517
Reserve
Week Ending
1/ Gold stock is valued monthly at $42.2222 per fine troy ounce. Values shown are as of August 31, 1999. The August 31, 1999
value was $11,046 million.
2/ SDR holdings and the reserve position in the IMF are based on ItviF data and valued ill dollar terms at the official SDR/ dollar
exchange rate. Consistent with current reporting practices, IMF data for October 29, 1999 are finaL Data for SDR holdings and
the reserve position in the IMF shown as of November 5, 1999 (in italics) reflect preliminary adjustments by the Treasury to the
October 29, 1999 IMF data.
3/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open .'-hrket
Account (SOMA). These holdings are valued at current market exchange rates or, where appropnate, at such other rates as may be
agreed upon by the parties to the transactions.
LS-226
Far press releases, speeches, public schedules and official biographies, call our 24-hollr fax line at (202) 622-2040
·U S Government Pnnt1ng Qtflce 1:'98 - -=19-51::
DEPARTMENT
TREASURY
OF
THE
TREASURY
NEWS
1I.....................................:ti,78~9~..............................II.......
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C.. 20220. (202) 622-2960.
For Immediate Release
November 9, 1999
Contact: Public Affairs
(202) 622-2960
STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMMERS
We have been following closely the hearings on money laundering and corruption being
held today in the Senate's Permanent Subcommittee on Investigations. These hearings -addressing the vulnerability of private banking to abuse by money launderers -- underscore the
importance of this Administration's commitment to the fight against money laundering. That
commitment was embodied most recently in the first-ever National Money Laundering Strategy
that Attorney General Reno and I announced in late September. The Administration is actively
working to implement the Strategy's objectives.
The issues raised in today's hearings are at the core of our National Strategy. Indeed, as
Deputy Secretary Eizenstat makes clear in testimony submitted to the Subcommittee today, our
National Strategy establishes a senior working group to determine. before the end of this year,
what kind of enhanced bank scrutiny is needed for high-risk accounts - precisely the kind of
issue raised by today's hearings.
In addition, the Administration tomorrow will follow through on a separate action item
outlined in our Strategy by submitting legislation - the Money Laundering Act of 1999 - to
bolster our domestic and international enforcement powers.
- 30 LS-227
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
'U S Government Pflntmg Ott'ce 1998 - ~19-55=
DEPARTMENT
TREASURY
OF
THE
TREASURY
NEWS
OFFICE OF PUBUC AFFAIRS. 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220· (202) 622-2960
For Immediate Release
November 9, 1999
Contact: Public Affairs
(202) 622-2960
TREASURY AND JUSTICE ANNOUNCE MONEY LAUNDERING LEGISLATION
Treasury Deputy Secretary Stuart Eizenstat and Assistant Attorney General Eric Holder
will announce the Money Laundering Legislation of 1999 at a press roundtable on Wednesday,
November 10 at 10 a.m. in Main Treasury's Diplomatic Reception Room 3315 at 1500
Pennsylvania Avenue, N.W.
Media without Treasury, White House, State, Defense 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
also be faxed to (202) 622-1999.
- 30 LS-228
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
'U S Government Printing Office , 1')8 - 6' 9·5:':;'
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
)R IMMEDIATE RELEASE
lvember 09, 1999
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 5-YEAR NOTES
terest Rate:
ries:
SIP No:
RIPS Minimum:
5 7/8%
H-2004
9128275S7
$1,600,000
Issue Date:
Dated Date:
Maturity Date:
High Yield:
5.888%
Price:
November IS, 1999
November IS, 1999
November IS, 2004
99.944
All noncompetitive and successful competitive bidders were awarded
:urities at the high yield.
Tenders at the high yield were
lotted 90%. All tenders at lower yields were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted
Tendered
Tender Type
Competitive
Noncompetitive
$
27,257,700
512,560
$
27,770,260
PUBLIC SUBTOTAL
15,000,760 1/
2,189,968
1,200,000
2,189,968
1,200,000
Federal Reserve
Foreign Official Inst.
TOTAL
$
31,160,228
14,488,200
512,560
$
18,390,728
Median yield
5.870%:
50% of the amount of accepted competitive tenders
tendered at or below that rate. Low yield
5.810%:
5% of the amount
accepted competitive tenders was tendered at or below that rate.
-to-Cover Ratio = 27,770,260 / 15,000,760 = 1.85
Awards to TREASURY DIRECT
=
$332,539,000
·229
http://www.publlcdebl.treas.gov
DEPARTMENT
TREASURY
OF
THE
TREASURY
NEWS
OFFICE OF ~UBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIllNGTON, D.C. _ 20220 _ (202) 622-2960
EMBARGOED UNTIL 10 A.M. EST
November 16, 1999
Contact: Una Gallagher
(202) 622-2960
TREASURY UNVEILS NEW $10 AND $5 BILLS
Redesigned notes are latest in series to add anti-counterfeiting features
Treasury Secretary Lawrence H. Summers, Treasurer Mary Ellen Withrow and Secret Service
Director Brian L. Stafford on Tuesday unveiled the redesigned $10 and $5 notes that include new and
modified security features to deter counterfeiting of U.S. currency.
Incorporating security features similar to those added to the new $1 OOs, $50s and $20s, the new
notes have been designed to stay a step ahead of advances in reprographic technology.
"The public is our first line of defense against counterfeiting," Secretary Summers said. "If
everyone checks the money that passes through their hands, it will put counterfeiters out of business.
And that is the goal of redesigning our currency."
In addition to unveiling the new notes, the Treasury recognized three retail-store employees with
"Exceptional Public Service" awards for having intercepted counterfeit notes at work. Because of their
knowledge of the new features, their detection of the bogus notes resulted in the arrest of a total of seven
individuals and the seizure of nearly $90,000 in counterfeit notes by the United States Secret Service.
They received their awards during the unveiling ceremony in the Diplomatic Reception Room at the
Treasury Department.
The retail employees honored by Secretary Summers are: Zera Frazier-Bey, 17, of Kansas City,
MO, who detected counterfeit currency while working at a McDonalds drive-thru window; Burnetta
Travis, 41, of Gulfport, MS, who detected counterfeit currency while working at a Wal-Mart cash
register; and Kim Welsh, 26, of Fairfax, VA, who detected counterfeit currency while working as an
assistant manager at a Sam Goody's store.
The new series 1999 notes will be issued toward the middle of 2000. The Series 1996 $100 note
was issued in March 1996, the redesigned $50 note in October 1997 and the $20 note in September
1998. No decision has been made whether to redesign the $1 note.
LS-230
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'us
Government Pront,ng Ofloce 1998 - € 19-5';-;
The new $10 and $5 will replace the older notes gradually. There will be no recall and no
devaluation of any U.S. currency. The United States always honors its currency at full face value, no
matter how old. More than $500 billion worth of U.S. currency is in circulation around the globe.
Through a comprehensive public education effort, Treasury, the Fedenil Reserve, the Secret
Service and the Bureau of Printing and Engraving expect to provide millions of bank tellers, retailers
and other cash handlers with printed informational materials and will offer training videos and CDRoms. Because the $10 and $5 notes are widely used in many types of vending and other machines that
disperse currency, additional emphasis will be placed on working with manufacturers and distributors of
these devices to ensure a smooth transition when the new notes are issued. In addition, special seminars
will be conducted for cash handlers to learn how they can and should discourage counterfeiting by
closely examining all the notes they handle.
Like the other redesigned notes, the new $10 and $5 notes will include a large dark numeral on a
light background on the back of the note that will make it easier for people with low vision to identify
the denomination. Other features include: a larger slightly off-center portrait; a watermark depicting the
same historical figure as the engraved portrait; fine-line printing in the background of the portrait and the
picture on the back; and, on the $10 note a color-shifting ink that alternates between green and black
when viewed at different angles.
Both notes contain a polymer thread embedded in the paper uniquely positioned for easy
authentication. With the $10 note, the thread is to the right of the portrait and will glow white under
ultraviolet light. In the $5 bill, the thread is to the left of the portrait and will glow blue when held under
an ultraviolet light. In addition, the thread on the $10 note reads "USA TEN" and a flag can also be seen
from both sides when held up to a light source. The number" 10" appears in the star field of the flag.
The $5 note contains the words "USA FIVE" and a flag can be seen from both sides of the note
when held up to a bright light. The number" 5" appears in the star field of the flag.
Enlarged replicas of both currency notes depicting the face and back will be available for
photographs throughout the day. For additional information on the new currency visit the Treasury web
site at www.moneyfactory.com.
-30-
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
Office of Financing
202-691-3550
CONTACT:
FOR IMMEDIATE RELEASE
~ovember 09, 1999
RESULTS OF TREASURY'S AUCTION OF 52-WEEK BILLS
363-Day Bill
November 12, 1999
November 09, 2000
912795EHO
Term:
Issue Date:
Maturity Date:
CUSIP Number:
5.170%
High Rate:
Investment Rate 1/:
Price:
5.471%
94.787
All noncompetitive and successful competitive bidders were awarded
3ecurities at the high rate. Tenders at the high discount rate were
~llotted
45%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted
Tendered
Tender Type
Competitive
Noncompetitive
$
$
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
$
8,394,800
725,625
9,120,425 2/
28,724,675
PUBLIC SUBTOTAL
TOTAL
27,999,050
725,625
884,000
884,000
29,608,675
10,004,425
4,540,000
904,000
4,540,000
904,000
35,052,675
$
15,448,425
Median rate
5.160%: 50% of the amount of accepted competitive tenders
tendered at or below that rate.
Low rate
5.080%:
5% of the amount
)f accepted competitive tenders was tendered at or below that rate.
~s
lid-to-Cover Ratio
=
28,724,675 / 9,120,425 = 3.15
./ Equivalent coupon-issue yield.
~/ Awards to TREASURY DIRECT = $548,500,000
L8-231
http://www.publicdebt.treas.gov
D EPA R T 1\1 E N T
() F
THE
T REA SUR Y
~~/78~9~. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1I
..................................
OffiCE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622·2960
EMBARGOED UNTIL 11 :00 A.M, EST
Text as Prepared for Delivery
November 10, 1999
TREASURY ACTING ASSISTANT SECRETARY FOR TAX POLICY JONATHAN
TALISMAN TESTIMONY BEFORE HOUSE COMMITTEE ON \VAYS AND MEANS
Mr, Chairman, Mr. Rangel, and distinguished r-..1embers of the Committee
Thank you for giving me the opportunity to discuss t he problem of corporate tax shelters
with you today, The Committee on Ways and Means has reacted quickly with legislation as
specific corporate tax shelters come to light As you mentioned, Mr. Chairman, the Committee in
recent years has acted to close down about SSO billion in tax shelters Unfortunately, based on all
the indications we see, there is an increasing number of avoidance transactions being undertaken,
despite your willingness to enact legislation to stup parti(ular schemes as they are uncovered
Consequently, we are here before you toda~ ill SUpPLlrt of kgislation to deter corporate tax shelter
activity on a more comprehensive, before-tile-fact basis
The Treasury Department. in addition to many others, including the American Bar
Association, the New York State Bar Association and the statT of the Joint Committee on
Taxation, has expressed concerns about the proliferation of corporate tax shelters These
concerns range from the short-term revellue loss to the tax system, to the potentially more
troubling long-term efTects on our \'olunta~ income tax system In its FY :WOO Budget, released
in February of this year, the Administration madc se\cral proposals to inhibit the growth of
corporate tax shelters
In July of this year, the Treasurv IkpllrtlllCllt issucd its White Paper. ll1e I Jroh!el11 (d
Corporate Tax Shellas: lJl.\CIIS\/(JIl, .iIlU(I',\I.\ ulld Il'gl.\!u/I\'l' J>ruj)(J\u/\ This report discussed
more fully the reasoning underlying the Budget pwpusals relating to corporate tax shelters,
provided a description and analysis of the CUlllments on the Budget proposals, and provided
refinements to those proposals
Since the issuance of our White Paper. there ha\'e b'een some important developments
regarding corporate tax shelters. including the IS:'U<lnce of the statr of the Joint Committee on
Taxation's study of present-la\A. penalt\ and IntcrL':'! pru\isiul1s, as \\ ell as some important court
1S-233
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·U S Government PrlnllngOfhce 1998 - 619-559
decisions. With these developments in mind, I would like to emphasize the following points in my
testimony today.
First, corporate tax shelters continue to be a substantial and ongoing problem. While
Congress, the Treasury Department and the Internal Revenue Service take action to stop
particular transactions as they are uncovered, many abusive transactions remain undiscovered and
numerous new transactions are created all the time.
Second, the current ad hoc and piecemeal approach to addressing corporate tax shelters is
inadequate. The current system is costly and inefficient. Admittedly, recent court decisions l
denying the purported tax benefits of certain shelter transactions are important. However, these
decisions are after-the-fact actions against shelters - they do not prevent the design, marketing,
and implementation of new and different shelters. Furthermore, even though Congress has
enacted certain legislative changes curbing certain types of shelters, these statutory prohibitions
can sometimes be avoided by making certain adjustments to a transaction to avoid the impact of
the revised statutory provisions. A global legislative solution is needed to prevent abusive, taxengineered transactions before they occur The Treasury Department believes this global solution
should include four parts increased disclosure, changes to the substantial understatement penalty,
codificat.ion of the economic substance doctrine and sanctions on other parties to the transaction
Third, while increased disclosure and changes to the penalty regime are necessary to
uncover transactions and change the cost benefit analysis of entering into corporate tax shelters,
these remedies are not enough Accordingh, the Treasury Department continues to believe that it
is necessary to codify the economic substance doctrine, thus requiring taxpayers to perform a
careful analysis of the pre-tax etTects of a potential transaction before they enter into it The
Treasury Department's proposed substanti\'e prO\'ision is intended to be a coherent standard
derived from the economic substance doctrine as enunciated in a body of case law to the
exclusion of less developed, inconsistent decisions Codification of the doctrine, while not
creating a new doctrine, would create a consistent standard so that taxpayers may not choose
between the conflicting decisions to support their position Coditication would isolate the
doctrine from the facts of the case~ S,) that ta\pa\ers could not simply distinguish the cases based
on the facts
Fourth, there are substantial Sllllil,l1itll'~ l1l't\\l'l'n the Treasury Department's proposals and
other proposals to curb corporate ta\ shl'ltl'r~ hll nample, the statT of the Joint Committee on
Taxation agrees that there should he inCrL'd~l'd dl,>ciu . . ure b} pal1icipants, increased penalties on
understatements attributable to undiscllhl'd 1Ial1-..'lctI0I1S al1d tidltenin~ of the reasonable cause
exception, and sanctions on other p.lrtll''' III Ihl' transaction A-s discu;sed more fully in the White
I
S
~~t.:.t.:g.
('
,
""I/'U1/((}III/IIIIl'I'('''IJ' \
Iowa 199'1).1I"1//1I-/)I\N.\/(}I'l's./II(
1999-359 (I 'll)<) )
I
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Paper, the American Bar Association and the New York State Bar Association proposals contain
several elements similar to those in the Administration's proposal. Finally, H.R. 2255, introduced
by Mr. Doggett, also contains an approach similar to the Administration's proposal, including the
codification of the economic substance doctrine. We commend Mr. Doggett for his leadership.
Fifth, the proposed legislation would be inadequate without effective enforcement The
Internal Revenue Service is undergoing a substantial restructuring. This restructuring will
concentrate IRS resources relating to corporate tax shelters, enabling it to identity, focus on, and
coordinate its efforts against corporate tax shelters in a more efficient manner, while instituting
and maintaining appropriate taxpayer safeguards The enactment of corporate tax shelter
legislation, combined with the efforts of the restructured IRS, will deter abusive transactions
before they occur and uncover and stop these transactions to the extent they continue to occur.
The balance of my testimony will elaborate on these points.
Reasons for concern
First, corporate tax shelters are designed to, and do, substantially reduce the corporate tax
base. Moreover, corporate tax shelters breed disrespect for the tax system - both by the parties
who participate in the tax shelter market and by others who perceive unfairness A view that welladvised corporations avoid their legal tax liabilities by engaging in tax-engineered transactions
may cause a "race to the bottom" The l\e\\ York State Bar Association recently noted this
"corrosive effect" of tax shelters "The constant promotion of these frequently artificial
transactions breeds significant disrespect for the tax s~'stem, encouraging responsible corporate
taxpayers to expect this type of acti\'ity to be the norm, and to follow the lead of other taxpayers
who have engaged in tax advantaged transactions" If unabated, this will have long-term
consequences to our voluntary tax system far more important than the revenue losses we currently
are experiencing in the corporate tax base
Finally, significant resources - both in the private sector and the government - are
currently being wasted on this uneconomic acti\it~ :' Pri\ate sector resources used to create,
implement and defend complex sheltering transactIons are better used in productive activities
Corporations distort their business deciSIons to take ad\'antage of tax shelter opportunities
Similarly, the Congress (particularly the ta\-\\Titing committees and their stafTs), the Treasury
Department, and the IRS must expend significant resources to address and combat these
transactions.
2 As Peter
Cllhh.
tl)nller lkput\ Chleflll
"1~ln "I
11k' .1"lllll"llllllllk'c' "ii
I ~1\~llllll1 rell11tll "1~lled "YUlll;ll1'l
undereslimate hm\ ma!1\ of Amenc;I'" ~rc;llc"l 111111,1, 11:,!1i1 II(}\\ ~II C bCIII:,! dc\ uk'J III \\ hat CCOl1lll11hh \\ uulJ ,III sal IS
totally
useless econOJl1IC aeI!\ 11\ "
....
.'
Corporate tax shelters and the corporate tax base
Some have argued that the growth of corporate income tax receipts demonstrates that
corporate tax shelters cannot be a problem. Of course, the size of the problem is not indicated by
the amo1l111 of corporate tax receipts, which vary over time for a number of reasons, but by the
difference between actual tax payments and those that would be remitted absent corporate tax
shelters That difference is impossible to measure directly, but the increasing difference between
the income taxpayers report on their corporate tax forms (taxable income) and the income they
report to shareholders (book income) appears to be consistent with the increasing use of
corporate tax shelters.
One feature of many tax shelters is that they reduce taxable income and taxes without
reducing book income. Corporate taxpayers report their book income on Schedule M-1 of Form
1120. Such data show that the difference between book income and taxable income for large
corporations (average assets greater than $1 billion) increased between 1991 and 1996. 3 Current
income reported on corporate tax returns (total receipts less total deductions) represented a much
Figure 1.
Book and Tax Corporate Income
450
Firms with Mean Assets Over $1 Billion
1
I
400 •
350 .
Book Income
300 .
:50 .
200 •
150 •
Ta. Income (dashed)
100 .
50 •
0 .....
' - - - -_ __
1991
199:
1993
1994
1995
1996
Vear
Book Income = Alter·lax book Income from Schedule M·' • Federaltaxes ·tax exempt Interest
Tax tncome = Total Receipts· Total Deduct,ons
Corporations excluding S corporations RICs REITs and Foreign Corporations
Source Internal Revenue Service Statistics of Income
.' All estInlatt:~ ilrt: ha~t:J UIl <I baian(e,i !,.Illel \,,:-: I I «Iq" Ilatl' lib \\ Itll mt:aIl a~~ct SIZC In c'\ccss of $1 bIllIon, III 1992
dol.lars. o\cr ~hc \ eah I'N I tl1r,'u!,!h I 'J'l(, L ,lq'''I;t[( td\ J.lLI <II e "II" a\aIiahlc through 1l)l)6 We dlJ not uSe data
bel ore 1991 lur thIS cnmpansllll becau~c Je!,I((ldtl(IIllL'LI II,'IlI"(hc,iulc M-I :IIC nut;l\ aIlablc hdixe 1<:191 In
addltlon. the Jct:llkJ book. data Irom hdufC 1')') I ",-'Clll 1I1(llhl . . !Clll \\ Itll the pust-ll)l)() data. pt:rhaps because of an
accountlIlg mcthlxl chan!,!e
smaller share of book income (calculated as book income after tax, plus Federal taxes, less taxexempt income) in 1996 than in the early 1990s. (See Figure 1.) Thus, even though corporate
income reported on tax returns has increased markedly in the 1990s, book income has increased
even faster. It is unclear how much of the divergence between tax and book income reflects tax
shelter activity, but the data are clearly consistent with other evidence that the problem is
significant.
Book and tax measures of income can diverge for many reasons that are unrelated to tax
shelters. For example, increases in the rate of new investment can cause book and taxable income
to diverge because tax depreciation is accelerated compared with book depreciation. But
depreciation does not seem to be a significant factor. Figure 2 shows that the difference due to
depreciation has declined over the last several years while the difference between book and tax
income continues to climb. Hence, removing the depreciation discrepancy would actually make
the proportional gap between the two income measures larger in recent years.4
Fig u re 2.
The Difference Between Book and Tax Corporate Income
140
Firms with Assets Over $1 Billion
120
•
I
100
~
10
=
1:
I
eo J
I
<0
20
... ... ... ...
.
- ............
... ... ... ...
elces, 0' Tal 0".'
Boolil CepreClallon
1991
1992
, 994
1993
, 995
1998
Year
BOOk Income = After·tax book Income from SChedule M 1 · Federal taxes· tax exempt Interest
Tax Income = Total Receipts· Tota' Deductions
Corporations excluOIng S corporations RICs RE ITs anO Foreign Corporations
Source Internal Revenue Service Statistics of Income
Need for legislation
To date, most attacks on corporate tax shelters ha\'e targeted specific transactions and
have occurred on an ad hoc, after-the-fact basis - through legislative proposals, administrative
4 Other factors contribute to the gar het\\ ccn b(lok anJ ta\ mcasurcs of Incomc. lI1cluJIng I ) the dltTerentwl llnpact of
the business cycle on the two measures. :2) 111crcasc-, 111 I(>rclgn hascd llKomc that an; rdkckJ 111 book but not tax
income and 3) differences 111 accountmg trcatmcnt jl)r stuck optluns and thclr lI1crcascJ Importance as a component of
executive and employee compensation
5
guidance, and litigation. In the past few years alone, Congress, the Treasury Department and the
IRS have taken a number of actions to address specific corporate tax shelters. These include:
1.
Two provisions enacted in 1996 and 1997 to prevent the abuse for tax purposes of
corporate-owned life insurance (COLI)5 Collectively, these two provisions were
estimated by the Joint Committee on Taxation to raise over $18 billion over 10 years As
the then Chief of Staff of the Joint Committee on Taxation stated: "When you have a
corporation wiring out a billion dollars of premium in the morning and then borrowing it
back by wire in the afternoon and instantly creating with each year another $35 million of
perpetual tax savings, that's a problem. _. I think we were looking at a potential for a
substantial erosion of the corporate tax base if something hadn't been done. ,,6
2.
Legislation enacted late last year to eliminate the ability of banks and other financial
intermediaries to avoid corporate-level tax through the use of "liquidating REITs. ,,7 The
Treasury Department's Office of Tax Analysis (OT A) estimated that eliminating this one
tax shelter product alone would save the tax system approximately $34 billion over the
next ten years
3.
The recent IRS ruling 8 addressing so-called lease-in, lease-out transactions, or "LILO"
schemes. Like COLI, these transactions, through circular property flows and cash flows,
offered participants millions of dollars in tax benefits with no real economic substance or
risk. Based on the transactions we have been able to identify to date, OT A estimates that
eliminating this tax shelter saved S 10 :; billion over ten .years
~
4
Legislation signed into law on June ::::\ 1999, aimed at section 357(c) basis creation
abuses'l In these transactions, taxpayers exploited the concept of "subject to" a liability
and claimed increases in the bases of assets that resulted in bases far in excess of the
assets' values
5
Proposed regulations addressing fast-pa~ preferred stock transactions These financing
transactions purportedly allLm ed taxpa\ers to deduct both principal and interest It was
lll
,
- Puh L ~') I(I-i-I'!1. ~
5[11
[I'J')("
I'ul' I \:,. 111:'.~.j ~ I[J:-;.j [I'i'!-J
6 Kenneth Kle~.1 LlTbCnpt llrf'cJ~Tdl H;II !\"".":I,III'\I1' 1-"llllh Imli;IIj(ll1al Blcnnlal Conference
Process, n:rnnk',lll1 q-I <I\, \:,'IC' 1,,,1.11 21-~:-; 1.1,111 ~ I 1'1'1- I
8
Re\,. Rul 99-14, 19')-i-I-i IR B 3
9
Pub L No IU6-36, § 3001 (1999)
i"prop Reg § I 7701(1)-)
6
Oil
the Til\, Legislative
reported that one investment bank created nearly $8 billion of investments in a few
months.
6.
Notice 98-5 11 dealing with foreign tax credit abuses.
7.
The Government's victories in several important corporate tax shelter cases - ACM
l2
Partnership v. Commissioner and ASA lnvesterings Partnership v. Commissioner, 13 and
those cases mentioned in footnote one of this testimony.
Addressing corporate tax shelters on a transaction-by-transaction, ad hoc basis, however,
has substantial defects. First, because it is not possible to identify and address all (or even most)
current and future sheltering transactions, this type of transaction-by-transaction approach is
inadequate. There will always be transactions that are unidentified or not addressed by the
legislation. As Treasury Secretary Lawrence H. Summers said: "One is reminded of painting the
Brooklyn Bridge: no sooner is one section painted over, than another appears needing work.
Taxpayers with an appetite for corporate tax shelters will simply move from those transactions
that are specifically prohibited by the new legislation to other transactions the treatment of which
is less clear." 14
Second, addressing tax shelters on a piecemeal basis complicates the tax law. In the past
few years alone, Congress has passed numerous provisions to prevent specific tax shelter abuses.
The layering of provision upon provision may lead one to believe that there is a rule for every
situation and thus what is not specifically proscribed is, by negative inference, allowed, In time
these specific rules themselves are used in unintended \vays to create corporate tax shelters 15
Third, a legislative strategy that deals with tax shelter transactions on a piecemeal basis
calls into question the viability of current rules and standards, particularly the common law tax
doctrines such as sham transaction, business purpose, economic substance and substance-overform, Finally, reliance on a transaction-by-transaction legislative approach to corporate tax
shelters may embolden some promoters and participants to rush shelter products to market on the
assumption that any Governmental reaction would be applied only on a prospective basis,
11
1998-3 I RB -l<J
12 73T.CM lCCH)2IX~)(I<)<)7).all\llI1l'art 1I:\',llI1l'al1.I:'"7I' ,,12,1 (3JLII I'NX),I.:\!rt d\!I1I\!J,119Slt 1251
(1999)
13 76 I.CM (CCH) 325 (1998)
14
Lawrence H, Summers. "A Bett\!r Ta,\ S\!r\'ll.:\! and a Iktkr Ta,\ S\stcm," la\ [\\!Cutl\'CS InstIlut\!, March 22, 1999
15 So far this year, we han:: shut dO\\11 so-called "chutzpah tlush" \\hlch' \\\!r\! slIllIlar to a structur\! shut dO\\'I1 by
Congress in 1997 and we are nO\\ heanng ahout ",,(111 ufUI,()" tr~II1Sal.:tl()nS and p\!llllutatlons ofth\! section 357(c)
product
7
We believe that a more comprehensive approach to corporate tax shelters is needed. In
developing such an approach in the President's FY 2000 Budget and the Treasury Department's
White Paper, we examined characteristics of known corporate tax shelters.
Common characteristics
Because corporate tax shelters take many different forms and utilize many different
structures, they are difficult to define with a single formulation. A number of common
characteristics, however, can be identified that are useful in crafting an approach to solving the
corporate tax shelter problem
Lack of economic substance -Professor Michael Graetz recently defined a tax shelter as "a deal
done by very smart people that, absent tax considerations, would be very stupid." 16 This definition
highlights one of the most important characteristics common to most corporate tax shelters - the
lack of any significant economic substance or risk to the participating parties. Through hedges,
circular cash flows, defeasements and the like. the participant in a shelter is insulated from any
significant economic risk
Inconsistent financial accounting and tax treatments - There is a current trend among public
companies to treat corporate in-house tax departments as profit centers that strive to keep the
corporation's effective tax rate (i e , the ratio of corporate tax liability to book income) low and in
line with that of competitors Accordingly. in many recent corporate tax shelters involving public
companies, the financial accounting treatment of the shelter item has been inconsistent with the
claimed Federal income tax treatment
Tax-indifferent parties - \1anv recent shelters have relied on the use of "tax-indifferent" parties
- such as foreign or tax-exempt entIties - \\ho participate in the transaction in exchange for a
fee to absorb taxable income or otherwise deflect tax liability from the taxable party.
Marketing activity - Promoters often design tax shelters so that they can be replicated multiple
times for use by different participants. rather than to address the tax planning issues of a single
taxpayer. This allows the shelter "product" to be marketed and sold to many different corporate
participants, thereby maximizing the promoter's return from its shelter idea
Secrecy - Similar to marketing. maintaining secrec~' of a tax shelter transaction helps to
maximize the promoter's return from its shelter idea - it prevents expropriation by others and it
protects the eflicacy of the idea by pre\l~l1tll1g or delaying discovery of the idea by the Treasury
Department and the IRS In the past. m<ll1\ promoters have required prospective participants to
8
sign a non-disclosure agreement that provides for large payments for any disclosure of the
"proprietary" advice.
Contingent or refundable fees and rescission or insurance arrangements - Corporate tax shelters
often involve contingent or refundable fees in order to reduce the cost and risk of the shelter to
the participants. In a contingent fee arrangement, the promoter's fee depends on the level of tax
savings realized by the corporate participant. Some corporate tax shelters also involve insurance
or rescission arrangements. Like contingent or refundable fees, insurance or rescission
arrangements reduce the cost and risk of the shelter to the participants.
High transaction costs - Corporate tax shelters carry unusually high transaction costs. For
example, the transaction costs in the ASA fnvestermgs Partnership case ($24,783,800) were
approximately 26.5 percent of the purported tax savings (approximately $93,500,000).
Administration proposals
In its FY 2000 Budget, the Administration made several proposals designed to inhibit the
growth of corporate tax shelters These proposals build upon the common characteristics of
corporate tax shelters described above and focus on the following areas.
(1) increasing disclosure of corporate tax shelter activities,
(2) increasing and modifYing the penalty relating to the substantial understatement of
income tax,
(3) codifYing the economic substance doctrine, and
(4) providing consequences to all the parties to the transaction (e.g., promoters, advisors,
and tax-indifferent, accommodating parties)
Increasing disclosure
Greater disclosure of corporate tax shelters would aid the IRS in identifYing corporate tax
shelters and would therefore lead to better enforcement by the IRS Afso, greater disclosure likely
would discourage corporations from entering into questionable transactions The probability of
discovery by the IRS should enter into a corporation's cost/benefit analysis of whether to enter
into a corporate tax shelter
In order to be effective, disclosure must be both timely and sufficient In order to facilitate
examination of a particular taxpayer's return with respect to a questionable transaction, the
transaction should be prominently disclosed on the return Moreover, because corporate tax
returns may not be examined for a number of years after they are filed, an "early warning" system
should be required to alert the IRS to tax shelter "products" that may be promoted to, or entered
9
into by, a number of taxpayers Disclosure should be limited to the factual and legal essence of the
transaction to avoid being overly burdensome to taxpayers.
Disclosure would be required if a transaction has certain of the objective characteristics
identified above that are common in many corporate tax shelters. The Treasury Department
believes that two forms of disclosure are necessary. Disclosure would be made on a short form
separately filed with the National Office of the IRS. Promoters would be required to file the form
within 30 days of offering the tax shelter to a corporation. Corporations entering into
transactions requiring disclosure would file the form by the due date of the tax return for the
taxable year for which the transaction is entered into (unless the corporation had actual
knowledge that the promoter had filed with respect to the transaction) and would include the form
in all tax returns to which the transaction applies. The form would require the taxpayer to provide
a description of the characteristics that apply to the transaction and information similar to the
information in the ABA disclosure proposal The form should be signed by a corporate officer
who has, or should have, knowledge of the factual underpinnings of the transaction for which
disclosure is required Such officer should be made personally liable for misstatements on the
form, with appropriate penalties for fraud or gross negligence and the officer would be accorded
appropriate due process rights.
Substantial understatement penalty
In order to serve as an adequate deterrent, the risk of penalty for corporations that
participate in corporate tax shelters must be real The penalty also must be sufficient to affect the
costlbenefit analysis that a corporation considers when entering into a tax shelter transaction.
The Treasul)' Department belie\·es that the substantial understatement penalty imposed on
understatements of tax attributable to corporate tax shelters should be greater than the penalty
generally imposed on other understatements This viev,1 is shared by the staff of the Joint
Committee on Taxation, the ABA, the NYSBA and others Thus, to discourage the use of
shelters, the Treasury Department would double the current-law substantial understatement
penalty rate to 40 percent for corporate ta\. shelters To encourage disclosure, the penalty rate
would be reduced to 20 percent if the taxpayer tiles the appropriate disclosures
In the original Budget proposal. the Administration provided that the rate could not be
further reduced belo\\ 20 percent or eliminated by a showing of reasonable cause (i e, the penalty
would be subject to a strict liability standard) Although one may rhetorically question whether
there ever is any reasonable cause for entering into a corporate tax shelter transaction, many
commentators have criticized the proposed elimination of the reasonable cause exception for
co?,orate tax shelter~ .These commentat~~s cited the potentially vague definitions of c?rporate
tax shelter and tax a\oldance transactIon. the allowance of a reasonable cause exceptIon for
17
These cnticisms \\ crt: addressed b\ tilt: lrt:~I~lll\ Ikjl~lrtl11t:llt h\ 11lllJlt\mg tilt: dt:!il1ltlOll of thest: tt:nns
10
other penalties, and basic fairness for opposing a "strict liability" penalty. The Treasury
Department still believes that the penalty structure set forth in the Administration's FY 2000
Budget is appropriate. However, in light of the comments received, the Treasury Department
believes that consideration should be given to reducing or eliminating the substantial
understatement penalty where the taxpayer properly discloses the transaction and the taxpayer has
a reasonable belief that it has a strong chance of sustaining its tax position. In addition, because
many commentators believe that taxpayers are either ignoring or circumventing the requirements
of Reg. § 1.6664-4 as to what constitutes reasonable cause, these requirements would be codified
to heighten visibility and strengthened to the extent necessary.
Under the Treasury Department's modified approach, a strengthened reasonable cause
standard could be used to reduce or eliminate the substantial understatement penalty if the
taxpayer also properly disclosed the transaction in question, even if the transaction ultimately is
deemed to be a corporate tax shelter. This limited exception would encourage disclosure and
would alleviate some taxpayer concerns with respect to the definition of corporate tax shelter.
Finally, as discussed below, fears that the IRS may abuse the potential availability of
increased substantial understatement penalties would be addressed by establishing procedures that
would enhance issue escalation and facilitate consistent and centralized resolution of such matters.
Codify the economic substance doctrine
As evidenced by the comments from the ABA, AICPA, NYSBA, and others, corporate
tax shelters are proliferating under the existing legal regime This proliferation results, in part,
because discontinuities in objective statutory or regulatory rules can lead to inappropriate results
that have been exploited through corporate tax shelters Current statutory anti-abuse provisions
are limited to particular situations and are thus inapplicable to most current corporate tax shelters.
Further, application of existing judicial doctrines has been inconsistent over time, which
encourages the most aggressive taxpayers to pick and choose among the most favorable court
opinions.
The current piecemeal approach to addressing corporate tax shelters has proven
untenable, as (1) policymakers do not have the knowledge, expertise and time to continually
address these transactions, (2) adding more mechanical rules to the Code adds to complexity,
unintended results, and potential fodder for ne\\ shelters, (3) the approach may reward taxpayers
and promoters who rush to complete transactions before the anticipated prospective effective date
of any reactive legislation, and (4) the approach results in further misuse and neglect of common
law tax doctrines Thus, the Treasury Department believes that a codification of the economic
substance doctrine is necessary in order to curb the growth of corporate tax shelters. While
increased disclosure and changes to the penalty regime are necessary to escalate issues and change
the costlbenefit analysis of entering into corporate tax shelters, these remedies are not enough if
taxpayers continue to believe that they will prevail on the underlying substantive issue
11
The centerpiece of the substantive law proposal is the codification of the economic
l8
substance doctrine first found in seminal case law such as Gregory v. Helvering and most
9
recently utilized in ACM Partnershi/ and the cases in footnote one. The economic substance
doctrine requires a comparison of the expected pre-tax profits and expected tax benefits. This test
is incorporated in the first part of the Administration's proposed definition of "tax avoidance
transaction." Under that test, a tax avoidance transaction would be defined as any transaction in
which the reasonably expected pre-tax profit (determined on a present value basis, after taking
into account foreign taxes as expenses and transaction costs) of the transaction is insignificant
relative to the reasonably expected net tax benefits (i.e., tax benefits in excess of the tax liability
arising from the transaction, determined on a present value basis) of such transaction. In addition,
the economic substance doctrine would apply to financing transactions (that do not lend
themselves to a pre-tax profit comparison) by comparing the tax benefits claimed by the issuing
corporation to the economic profits derived by the person providing the financing.
A tax benefit would be defined to include a reduction, exclusion, avoidance or deferral of
tax, or an increase in a refund However, the definition of tax benefit subject to disallowance
would not include those benefits that are clearly contemplated by the applicable Code provision
(taking into account the Congressional purpose for such provision and the interaction of the
provision with other provisions of the Code) Thus, tax benefits that would normally meet the
definition, such as the low-income housing credit and deductions generated by standard leveraged
leases, would not be subject to disallowance
The above definition of a tax-avoidance transaction is a modification of the
Administration's original FY :WOO Budget proposal The moditications address commentators'
concerns about the potential vagueness of the original proposal. Concerns that the IRS might
abuse the authority indicated in the original Budget proposal are addressed by a more concrete
definition of tax avoidance transaction In addition, the tax attribute disallowance rule would
apply by operation of law, rather than being subject to the discretion of the Secretary.
A similar approach to that discussed above can be found in H R 2255, the "Abusive Tax
Shelter Shutdown Act of 1999." introduced by ~kssrs Doggett, Stark, Hinchey and Tierney on
June 17, 1999
The Treasury Depanment continues to beliew that it is necessary to codify the economic
substance doctnne, thus requiring taxpayers to perform a careful analysis of the pre-tax effects of
a potential transaction before they enter Into it The Treasury Department's proposed substantive
provIsion IS Intended to be a coherent standard demed frol11 the economic substance doctrine as
18
293 LJ S 4(,5 ( 19:;5)
19
AC\/ Partners/lip \
COllI/II.
73 T C M rCC! 1121 X'J. all\t
demed, 119 S Cl 1251 (1999)
12
I))
pan. re\ 'J
In
pan. 157 F 3J 231 (3J CII' 1998), cert
enunciated in a body of case law to the exclusion of less developed, inconsistent decisions.
Codification of the doctrine, while not creating a new doctrine, would create a consistent standard
so that taxpayers may not choose between the conflicting decisions to support their position
Codification would isolate the doctrine from the facts of the cases so that taxpayers could not
simply distinguish the cases based on the facts.
Consequences to other parties
Proposals to deter the use of corporate tax shelters should provide sanctions or remedies
on other parties that participate in, and benefit from, a corporate tax shelter. These remedies or
sanctions would reduce or eliminate the economic incentives for parties that facilitate sheltering
transactions, thus discouraging those transactions. As the ABA stated in its recent testimony: "All
essential parties to a tax-driven transaction should have an incentive to make certain that the
transaction is within the law." With respect to corporate tax shelters, the "other parties" generally
are promoters, advisors, and tax-indifferent parties that lend their tax-exempt status to the shelter
transaction to absorb or deflect otherwise taxable income
When Congress was concerned with the proliferation of individual tax shelters in the early
1980s, it enacted several penalty and disclosure provisions that applied to advisors and promoters.
These provisions were tailored to the types of "cookie-cutter" tax shelter products then being
developed. Similar provisions could be enacted that are tailored to corporate tax shelters
Alternatively, with respect to promoters and advisors of corporate tax shelters, the
Treasury Department proposed to affect directly their economic incentives by levying an excise
tax of25 percent upon the fees derived by such persons from the corporate tax shelter
transaction. Only persons who perform services in furtherance of the corporate tax shelter would
be subject to the proposal, and appropriate due process procedures for such parties with respect
to an assessment would be provided
A tax-indifferent party often has a special tax status conferred upon it by operation of
statute or treaty To the extent such persoll is using this status in an inappropriate or unforeseen
manner, the system should not condone such use Imposing a tax on the income allocated to taxindifferent parties could deter the inappropriate rental of their special tax status, limiting their
participation in corporate tax shelters, and thus reducing other taxpayers' use of shelters that
utilize this technique
The Treasury Department proposes to require tax-indifferent parties to include in income
(either as unrelated business taxable income or efTectively connected income) income earned in a
corporate tax shelter transaction To the extent such parties are outside the U. S tax jurisdiction,
such liability would be joint and severable with the U S corporate participant The proposal
would apply only to tax-indifferent parties that are trading on their special tax status and such
parties would have appropriate due process rights
13
JeT Report
The staff of the Joint Committee on Taxation (JCT), in its study and report on penalty and
interest provisions of the Code, also analyzes corporate tax shelters. The JCT staff concluded
that there "is evidence that the use of corporate tax shelters has grown significantly in recent
years" and "that present law does not sufficiently deter corporations from entering into
arrangements with a significant purpose of avoiding or evading Federal income tax." In this
regard, the staff made certain legislative recommendations.
The proposals made by the JCT staff are quite similar to those made by the
Administration. The JCT staff proposal would require increased disclosure, increase the
substantial understatement penalty on undisclosed transactions and tighten the reasonable cause
standard, and provide sanctions on other parties to shelter transactions. The major difference
between the two sets of recommendations is that the JCT would not codify the economic
substance doctrine. However, the JCT proposal does incorporate a version of the economic
substance doctrine similar to that of the Administration's proposals in identifying corporate tax
shelters.
Compaq and other recent decisions
Since we last testified before this Committee on the problem of corporate tax shelters, the
IRS has won some significant tax shelter cases, including Compaq, IES Illdustries, WIIlIl-Dlxle,
and Saha Partners/1Ip The courts in these cases applied an economic substance analysis in
denying tax benefits that purportedly met the black letter of the applicable Code provisions
These cases are helpful as part of an overall approach to address corporate tax shelters.
First, the cases stand for the proposition that both the economic substance doctrine and the role of
penalties are important components in the fight against corporate tax shelters. Some may argue
that these cases demonstrate that the IRS currently has all the tools it needs to combat corporate
tax shelters and that further legislation is unnecessary Such an assertion ignores the realities of
the litigation process and is premised on a misunderstanding of the intent of the Administration's
legislative proposals
Reliance on judicial deCISions. \\ 11Iel1 ta'pa\ers may attempt to distinguish, is not the most
efficient means of addresslI1g corporate ta, shelters Litigation is expensive and time-consuming,
both for the government and ta'payers. and frequently· does not provide a coherent set of rules to
be applied to subsequent transactions Ta, Court Judge Laro, speaking on his own behalf before
the Tax Executives Institute last month, :., acknowledged that the courts have provided little
guidance on the amount of economic substance or business purpose sufficient for a transaction to
be respected He stated that such concepts "may require further development in the case law,"
20
BY.l
Dor/I·
Tor Report
«
kt 2:-; 1')')1)) (,-2
14
but highlighted the difficulty with such an approach when he said that judges "decide cases one at
a time ... and don't make tax policy.
It
The Treasury Department strongly believes that the economic substance doctrine upon
which these recent cases have been decided should be codified. The doctrine has been a part of
the fabric of our tax system since the seminal case of Gregory v. He/vering, but has, until recently,
been eroded by some admittedly confusing and conflicting case law that has led to a lack of
respect for the doctrine on the part of some taxpayers and tax practitioners. The economic
substance doctrine is the most objective, most understandable, and most easily applied of all the
judicially created doctrines. We believe that it is appropriate for the Congress to elevate this
standard by codifying it, rather than waiting and hoping that the case law evolves in a more
coherent and understandable manner.
The Administration's corporate tax shelter proposals, including enactment of the economic
substance doctrine, attempt to change the outcome of the cost-benefit analysis undertaken by
taxpayers in deciding whether or not to engage in a questionable transaction. Taxpayers should
be encouraged to apply these principles before the fact, rather than playing the audit lottery The
Administration's proposals provide a level playing tleld between overly aggressive taxpayers and
compliant taxpayers and between overly aggressive taxpayers and their advisors and the
government by ensuring that all parties are playing by the same objective rules, encouraging
timely disclosure of potentially questionable transactions, and providing appropriate sanctions to
parties that "cross the line"
IRS administrative actions
The IRS currently is undergoing a substantial restructuring The IRS will be reorganized
into divisions based on types of taxpayers Because the Treasury proposals generally apply to
large corporate transactions, the IRS personnel focusing on corporate shelters probably will be
located in the IRS's new Large and Mid-Size Business Division, which will be fully operational in
2000.
The restructuring of the IRS \"ill enhance its ability to deal with corporate tax shelters
Centralization of IRS resources focusing on corporate tax shelters will facilitate training and
coordination among IRS agents. IRS litigators. their supervisors and c'hief Counsel The IRS
also is considering methods to centralize and coordinate the formulation of strategy regarding
corporate shelters generally and particular shelter transactions
Further, to prevent interference \\ith legitimate business transactions, the IRS is
considering whether to require examining agents to refer corporate tax shelter issues to a
centralized office for consideration Such a referral process might be silllilar to that used with
respect to the partnership anti-abuse regulations The IRS is also considering whether to establish
of a procedure whereby a taxpayer could obtain an expedited ruling from the IRS as to whether a
contemplated transaction constitutes a corporate tax shelter
15
The Treasury Department will work closely with the IRS to create appropriate systems
and procedures to centralize review and analysis, to ensure fair, consistent, and expeditious
consideration of corporate tax shelter issues.
Conclusion
Mr. Chairman, the proliferation of corporate tax shelters presents an unacceptable and
growing level of tax avoidance behavior by wasting economic resources, reducing tax receipts,
and threatening the integrity of the tax system. This morning we have laid out the rationale for
our suggested approach for combating this problem, and discussed why we believe that existing
law does not provide sufficient tools to combat this behavior. We look forward to working with
you and the members of the Committee to address this important problem, as we have in the past
to curb specific abuses
-30-
16
DEPARTMENT OF THE TREASURY
DEPARTMENT OF JUSTICE
For Immediate Release
Contacts: Maria Ibanez, Treasury
(202) 622-2960
Gretchen Michael, Justice
(202) 514-2007
November 10, 1999
ADMINISTRATION SUBMITS MONEY LAUNDERING ACT OF 1999
The Administration on Wednesday is submitting to Congress the Money Laundering Act
of 1999, designed to bolster our domestic and international enforcement powers in the fight
against money laundering.
The legislation was called for in the National Money Laundering Strategy jointly
announced in September by Treasury Secretary La\\Tence H. Summers and Attorney General
Janet Reno.
"Money laundering poses a serious thr~at to any country's economic integrity and
security," said Deputy Attorney Gcn~ral Eric lIold~r. "Th~ ~'loncy Laundering Act of 1999 will
make it increasingly difficult for those \\'ho attempt to launder money through financial
institutions to derive profits from their illegal acts,"
Deputy Treasury Secretary Stuart Eizenstat addcd. "the legislation is an important
element of our National Money Laundering Strategy. We are committed to ensuring that this
Strategy does not remain mere words on paper. but is translat~d. quickly. into concrete actions
that fundamentally change the way we addr~ss money laundering,"
In the months ahead T reaSUfY and Justice wi II pursue a \,ariety of initiatives to translate
the Strategy into practical action. The nc\\ kgislation would. among other things:
•
Expand the list of foreign crim~s that S~f\e as a basis for money laundering prosecution - to
include fraud. official bribery. misappropriation
punl ic funds. arms trafficking and crimes
of violence.
•
Make bulk cash smuggling - smuggling of morc than $1 (l.OOO out of the United States -- a
crime and provide for confiscation of the smuggled currency,
•
Make it a crime for a currency courier to transport more than $10.000 in currency in
interstate commerce, knowing that it is unlawfully dcri\'ed,
or
LS-234
•
Enact a "long-arm" statute allowing federal courts to exercise jurisdiction over foreign banks
and other entities that violate the federal money laundering laws by conducting transactions
in the United States.
•
Require persons who purchase drug dollars on the Colombian black market to prove that they
had no reason to know that the dollars were derived from unlawful activity.
•
Give federal prosecutors greater access to foreign business records that may be used to trace
the money sold on the Black Market Peso Exchange system. by which drug proceeds from
U.S. cities are ultimately converted into goods smuggled into Colombia.
-30 -
1
D EPA R T 1\ I E I"' TO.'
THE
T REA SUR Y
ornCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W. • WASHINGTON, D.C.• 20220 • (202) 622·2960
EMBARGOED UNTIL 12:15 P.M. EST
Remarks as Prepared for Delivery
November 10, 1999
"THE CASE FOR AMERICAN SUPPORT FOR OPEN MARKETS"
REMARKS BY TREASURY SECRETARY LAWRENCE H. SUMMERS
BEFORE THE U.S. CHAMBER OF COMMERCE, BOARD OF DIRECTORS
WASHINGTON, DC
I would like to talk today about what may be the most important issue affecting the
lives of our children in the next half-century: the approach that the United States takes toward
the global economy in general. and toward the world trading system in particular.
We meet at a time of remarkable economic strength for our country, when our
economic power is at a high point and when the power of our example has never been greater.
At such a time it becomes especially important to make the right international economic policy
choices. And yet. as we consider the difficult debates we have been having about these issues
in recent months and years, it is fair to say the fundamental choice for the United States to be
a force for the right kind of global integration is under challenge in a way that it has not been
since World War II.
In the earliest days of President Clinton's Administration he said that" America must
compete. not retreat. - Today's National Dialogue on Jobs and Trade is about the importance
of staying on the course that has served us so well in the past as we approach the World Trade
Organization ministerial that begins in Seattle at the end of the month. That is why President
Clinton and Secretary Daley are nght now at a factory In York, Pennsylvania today talking
with Harley Davidson workers about America's stake in global integration. That is why nearly
250 companies around the nation are hosting events to discuss with their employees the
importance of trade. And of course. that is what brings me here today.
I would like to make four POInts in my remarks:
•
First. there is an overwhelming political and national security case for an American open
markets policy.
LS-235
For press releast's. spt't'Ches. public schedules and official biographies, call our 24~our fax line at (202) 622-2040
•
Second, there is a compelling direct economic case, in terms of the standards of living of
the American people, for an open market policy.
•
Third, the right kind of open market policy - the kind that the Administration will be
urging at Seattle - is a policy that can work very directly for the American people.
•
Fourth, there is a compelling political challenge, in the kind of economy we have today, to
maintain political support for American leadership in global integration.
I.
The Political and Strategic Case for Support for Open Markets
The crucial link between closer economic integration and our national security is this:
we are much less likely as a nation to be drawn into conflict if nations of the world are strong,
confident, and forging ever-closer connections than if they are financially unstable and
disconnected. In short, trade promotes prosperity, and by promoting prosperity, promotes
peace.
Fifty years ago, in the wake of the Second World War, the challenge the world faced
was the economic reconstruction of war - ravaged Europe and Japan, and ensuring that the
tragic errors of the first half of the century were not repeated, not least the cycle of
protectionism of the 1930s and the failure to respond to major changes in the global economic
balance of power.
A generation of visionary leaders - in the United States and in Europe - responded by
supporting a successful strategy of rapid economic rebuilding as essential to normalization and
prosperity and increased economic integration. So people stood more to gain from shared
peace than from divisive conflict.
Today's challenge is to integrate the five billion people of the developing world,
hundreds of millions of whom are now glimpsing the benefits that a global economy can offer,
into a strong and truly global market system. And our answer to that challenge should be the
same as it has been since 19~5.
I would dare to suggest that there has never been so radical a change in the balance of
global economic strength as there has been in the emerging market economies and in Asia in
particular over the past 25 years. The fact that this has taken place without major conflict is in
no small part a tribute to the integration of nallons and peoples through trade and the global
institutions that have helped to cement that Integration.
By supporting liberalization In these countries, we invest in our future security and we
invest in the spread of our core values. Examples such as Korea, Taiwan and Argentina
illustrate that economic development and openness bring democratization in its wake, and
there's no better way to spur this process than by integrating them into the global marketplace.
2
ll.
The Economic Case for Open Markets
But even if there were no security case, no political case, no foreign policy case for
open markets and interchange between nations, I believe there would be a compelling
economic case, rooted in our standard of living. Perhaps you will pardon me a slightly
academic approach of making this point through an analogy - not an original one, I might add.
Imagine a country all of whose harbors were fl1led with rocks so that ships and goods
could not come in, though some could go out. And imagine that it was proposed to remove
the rocks from the harbors. Would that be a good thing for that country?
Many people would say that it would be a good thing:
•
It would provide citizens with a wider choice of consumer goods, at lower prices.
•
It would provide producers with a wider choice of inputs, and lower costs, making them
more competitive and able to hire more workers and raise their wages.
•
It would provide more competition as a spur to productivity and new ideas - and as a
result. lower inflation and lower costs of capital.
To be sure. the n:moval of those rocks would bring about change in the economy. But
looking around, we can see that every day and in every way our market economy - by
bringing about improvements in technology, communications and transportation - is bringing
down natural barriers and making communication and trade much easier. And this, too, brings
enormous and sometime difficult changes as well as great benefits in its wake.
The question is whether we should respond differently to man-made barriers to trade than
we do to those natural barriers that new technologies are now eroding - and whether our
response should be any different if other countries have bigger rocks in their harbors than we
do.
Our economic success in the 1990s is a testament to the benefits that openness can bring:
•
Exports have created millions of new jobs - jobs that on average pay 13 to 16 percent
above the average wage.
•
And our openness to imports has fueled competition and innovation and helped to sustain
our growth with almost no inflation and long-term interest rates that even now, after 8.5
years of expansion. are around 2 percentage points lower than they were at its start.
3
Let me be clear. No one is suggesting that the United States unilaterally lower our trade
barriers on a broad scale without reciprocal steps by others. What is at issue - in the debates
we have had about ratifying the Uruguay Round or passing Fast Track, or the debates we will
have about the wro meeting in Seattle - is whether we should be involved in a broad project
of removing the rocks from our harbors and from other countries' harbors.
It bears emphasis that this is not even a symmetrical debate - since we already have by
far the lowest trade barriers in the world. If we look at the trade agreements we have
negotiated in recent years, the reductions in our own trade barriers are a fraction of the
reductions that other signatories have undertaken. To take just one example, the tariff
reductions achieved in NAFfA with Mexico were five times as large in Mexico as in the US.
Estimates suggest that that factor would be in the range of three or more for further trade
agreements with Latin America and Asia.
To put it yet another way, an open markets approach is not just good economic policy;
it's good even from a mercantilist standpoint. And it is especially good policy for the United
States because of our strategic position, because of the diversity of our population, and because
of the size and strength of our economy.
We have closer relations with Europe than any other region has with Europe, closer
relations with Latin America than any other region has with Latin America, closer relations
with Asia than any other region has with Asia. We stand at the hub of a world trading system.
And the bigger that system is, the more open it is - the more we will benefit from our position
at its hub.
Whatever our broader trade policy might dictate, it cannot be right that the richest
country in the world is unable to provide preferential access to its markets to countries in
Africa where 500 million people live. nearly half on incomes of less than one dollar a day.
That is why we so pleased that the African Growth and Opportunity Act has now passed in
both houses of Congress with strong bipartisan support.
Closer to home. the trade preferences contained in the strengthened Caribbean Basin
Initiative - which has also now passed In both the House and the Senate - will help make these
economies much stronger and our own t:conomy safer. What we very much hope now is that
remaining differences between the Senate and the House on both the African and the
Caribbean measures can be resolved. and legislatIOn that the President can sign reaches him as
SCKln as possible.
III.
The :"ieed to Make A Global
Ecoflom~'
Work for People
So I believe there is a compelling economic case and a compelling foreign policy and
security case for American support for economic openness. But trade cannot be taken in
isolation.
4
Let me be clear. No one is suggesting that the United States unilaterally lower our trade
barriers on a broad scale without reciprocal steps by others. What is at issue - in the debates
we have had about ratifying the Uruguay Round or passing Fast Track, or the debates we will
have about the WTO meeting in Seattle - is whether we should be involved in a broad project
of removing the rocks from our harbors and from other countries' harbors.
It bears emphasis that this is not even a symmetrical debate - since we already have by
far the lowest trade barriers in the world. If we look at the trade agreements we have
negotiated in recent years, the reductions in our own trade barriers are a fraction of the
reductions that other signatories have undertaken. To take just one example, the tariff
reductions achieved in NAFfA with Mexico were five times as large in Mexico as in the US.
Estimates suggest that that factor would be in the range of three or more for further trade
agreements with Latin America and Asia.
To put it yet another way, an open markets approach is not just good economic policy;
it's good even from a mercantilist standpoint. And it is especially good policy for the United
States because of our strategic position, because of the diversity of our population, and because
of the size and strength of our economy.
We have closer relations with Europe than any other region has with Europe, closer
relations with Latin America than any other region has with Latin America. closer relations
with Asia than any other region has with Asia. We stand at the hub of a world trading system.
And the bigger that system is. the more open it is - the more we will benefit from our position
at its hub.
Whatever our broader trade policy might dictate, it cannot be right that the richest
country in the world is unable to provide preferential access to its markets to countries in
Africa where 500 million people live. nearly half on incomes of less than one dollar a day.
That is why we so pleased that the African Growth and Opportunity Act has now passed in
both houses of Congress with strong bipartisan support.
Closer to home. the trade preferences contained in the strengthened Caribbean Basin
Initiative - which has also now passed In both the House and the Senate - will help make these
economies much stronger and our own economy safer. What we very much hope now is that
remaining differences between the Senate and the House on both the African and the
Caribbean measures can be resolved. and legislation that the President can sign reaches him as
soon as possible.
III.
The
~eed
to Make A Global Econom) Work for People
So I believe there is a compelling economic case and a compelling foreign policy and
security case for American support for economic openness. But trade cannot be taken in
isolation.
4
If you think about the history of our country in the late 1800s and the early 1900s, I
think most historians would agree that you saw a coming together of the national economy,
driven by improvements in transportation and communications. Political leaders in both
parties came to recognize that a greater degree of interconnection between states necessitated a
greater need for common rule-setting at the national level - because otherwise we would risk a
race to the bottom, a bottom in which state governments could not promote fair taxes, uphold
fair labor standards, regulate product safety, protect the environment, or promote other key
values.
Global integration poses the same kind of challenge for the world's policy makers
today. At a time when the world is coming together and man-made and natural barriers to
trade are coming down - it becomes vital to prevent a race to bottom. We must not and will
not build a global economy in which capital races from jurisdiction to jurisdiction, playing off
its greater mobility to the detriment of workers and consumers.
As the President has said: "'a legal framework of mutual responsibility and social safety
is not destructive to the market; it is essential to its success." To be sustainable - our approach
to integration needs to be a balanced approach, which paces the opening of markets to the
development of tools to respond to these concerns and to support our deepest values. And that
is the approach we will be taking to Seattle.
We want this round to be about greatly expanding the frontiers of global trade and reducing
barriers to American goods and services. But we also want this round to be:
•
A round about jobs and development - that creates a WTO Working Group on Trade and
Labor and gives the International Labor Organization observer status at the WTO.
•
A round about ensuring that global integration and environmental protection go and hand in
hand, with a thorough review of the environmental impact of the round and pressure for
"win-win" measures such as abolishing fishery subsidies that have encouraged overfishing.
•
A round that furthers our democratic values - by making the WTO itself more open and
accessible. for example. by opening its dispute resolution procedures to the public.
If we are there at the table. working With developing countries to achieve strong
agreements that open global markets to them and to us. we can simultaneously promote labor
and environmental priorities and other issues that are important to us. What is more, we can
offer their workers the most reliable route to higher wages; namely, access to global markets
and expertise. Without our leadership - neither outcome can be guaranteed.
IV.
Reasons for Domestic Distrust of Open Markets
5
I have tried to reflect on why - as compelling as these national strategic, political and
economic arguments for integration seem to be - the debate about trade in our country is such
a divisive one, and the case for open markets seems less than compelling to so many
Americans.
There are probably three main reasons.
The first is a natural tendency that we all have to internalize good news and externalize
bad news. Think about how many people working at a not so successful company with outdated technology who lose their job blame it on international trade; Now ask yourself how
many people you have ever met who said, "You know, I was doing an OK job for my
company, but labor was short and there was a surge of export demand, and so I got a
promotion ...
Let me note that we tend to see the same dynamic operating higher up the corporate
ladder. Think how often it is that CEOs talk about the bad things that are happening to their
industry because of trade. Now think about how often they cause a splash talking about the
revenue growth that has come from more open markets overseas or lower cost inputs from
abroad. It is the nature of the trading process that when there are costs, those costs are
apparent and attributed to trade, often much more than is actually the case.
It is equally true that the benefits of trade are rarely perceived as such. How many
people, returning from their Christmas shopping this year, will be remarking on the fact that
they can buy twice as many toys for their kids than they used to, because of our increased
trade links with very poor countries who can make these things more cheaply? How many
people think about the fact that their children have not had to fight a major war in this
generation. and say "'that is why it is so important for us to give strong support for a new
global trade round at Seattle?"
The second reason why we have had a hard time making a compelling case for trade is
that the compelling geopolitical rationale that the Cold War provided is no more. Historians
have written at length about the oscillations of the United States between isolationism and
global engagement. It over-simplifies but does not distort that work to say that our global
engagement has typically been in response to a dire threat.
The threats of the current time - of rising disorder and increasing impoverishment
overseas - do not have the emergency character that the threats of an earlier time have had.
And yet we have seen in the aftermath of the 1920s, a time that was also a time of great
American confidence and economic strength. we saw then what could happen when America
was reluctant to engage fully with other nations and respond to new global economic
challenges. That is the danger we must work to avoid today.
The third reason why it has been so hard to build a strong consensus around open
markets so far is that trade - and integration more generally - tend to become the lens through
6
which all kinds of concerns about a changing world are projected. Whether the root concern is
new technology, or deregulation, all of the economic insecurities that this new economy can
produce tend to come together when the subject is trade. And that is why it is so essential that
we work to equip workers with the education and skills to manage the transition process and to
seize the opportunities that come with it.
It is instructive to compare today to that period after the Second World War, of
remarkable American internationalism. The lack of a communist threat is one important
difference. A different kind of political process is another. I doubt anyone ever focus-grouped
the Marshall Plan - and I am not sure how well it would have done if they have. But also it
was a period when opportunity and protection was being given to the American middle class.
I suspect the G.!. Bill of Rights was a much larger component, not just of America's domestic
economic strategy, but of America's international economic strategy, than many think of
today.
As the President has said: "working people will only assume the risks of a free
international market if they have the confidence that the system will work for them. " That is a
large part of what his New Markets agenda is about. It is a large part of what empowerment
zones - that have already done so much to support renewal and re-investment in our inner
cities - were about. And of course it is very much at the core of the specific trade-related
initiatives that we have supported, such as the Community Adjustment and Investment
Program to support new jobs and regeneration in areas where increased trade has hurt jobs and
communities.
V.
Concluding Remarks
The President has called it "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." Whether we succeed will
partly depend on the energy that we in government invest in ensuring that people feel they have
a stake in the outcome. But it will also depend a great deal on the approach of the kind of
people represented here - on whether the people in leadership roles in America's companies
invest themselves in the kind of balanced approach to global integration that I have described
today. Than k you
-30-
7
1)
EPA R T !\l £ :\J T
0 F
THE
TREASURY
OFFICI:: OF PUBLlC At·FAIRS -1500 PI::1'iNSYLVANIA
T R E ;'- S tj It Y
NEWS
AV~NUE,
N.W. e WASHINGTON. D.C.e 20210. (201) 621·1960
CONTACT:
EMBARGOED tJNTXL 2: 30 P. H.
November 10, 1999
'I"RBASmtY OFFERS 13-WSEK
»m
Office of FiDancing
202/691-3550
26-WSEK BILLS
The Treasury will auction two series of Treasury bills totaling
approximately $17,000 mdllion to refund $16,096 million of publicly held
securities maturing November 18, 1999, and to raise about $904 million of new
cash.
In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $8,027 million of the maturing bills, which ~ 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 $2,592 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.
Treasur.v.Direct customers requested that we reinvest their maturing holdings of approximatelY $962 million in~o the 13-week bill and $777 million into
~he
26-weak bill.
This offering of Treasury securities is governed by the terms and conditions set forth in the Onifor.m Offering Circular for the Sale and Xssue of
Marketable Book-Entry Treasury Bills, Notes, and Bonds (3l CFR Part 356, as
amended) .
Details about each of chs new securities are given in the
ing highlights.
L8-236
a~t~ched
offer-
000
Fo, press releases. speeches. public schedules and offidal biographies, call our 24·hoUl' far line at (202) 622-2040
HXGHLXGHTS OF TREASURY
OFFBR~NGS
TO BE J:SSUED IfOVEMBBR 18,
OF BXLLS
1999
November 10, 1999
Offering Amount •••••••••••••••.•.••••••• $9,000 mill ion
Desoription of Offering'
TeeD and type of s.curity ••••••••••••••• 91-day bill
CVSIP nUllber •••••••••••••••••••••••••••• 912795 DH 1
Auction 4at•••••••..••••••••••••.•••.••• November 15, 1999
I.lJue dat ••••••••••.•••••••••••••••••••• Nov8lllber 18, 1999
Maturity dat•••••••••••••••••••••••••••• F.bruary 17, 2000
Orlginal i.su. dat •••••••••••••••••••••• August 19, 1999
CUrrently out.t.nding ••••••.•.••.•.•.... $12,342 million
Minimum bid amount .nd multiples .••••••. $1,000
$8,000 million
182-d.y bill
912795 DW 8
November 15, 19~9
November 18, 1999
May 18, 2000
November 18, 1999
$1,000
The following rules apply to .11 securities mentioned above:
Submission of Bids I
Noncompetitive bids ••....... Accepted in full up to $1,000,000 at the highest discount rate of
accepted competitive bids.
C~etltive bids •••••••••••• (1) Must be expressed a8 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 .11 discount rates, and the Det long
position is $1 billion or greater.
(3) Net long positioD must be determined as of one half-hour prior
to the closing time for receipt of competitive tenders.
Maximum Recognized Bid
at a Single Rate •••••••••••• 35% of public offering
Maximum Award ••••••.•••••••••.•• 35% of public offering
Receipt of Tenderaf
Nonoompetitive tenders •••••• Prior to 12:00 noon Eaatern Standard time on auction day
Co~etitiv. tenders ••••••••• Prior to 1:00 p.m. Eastern standard time on auction day
P~ent ~e~s:
By charge to • funds account at a Federal Reserve B.nk on issue date, or payment
of full par amount with tender. Treasur,yDirect customers can use the Pay Direct feature which
authorize. a charge to th.ir account of record at their financial institution on issue date.
0
~
ederol financing
WASHINGTON. D.C
20220
bankNEWS
FEDERAL FINANCING BANK
October 30, 1999
Kerry Lanham, Secretary, Federal Financing Bank (FFB),
announced the following activity for the month of September 1999.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $43.1 billion on September 30,
1999, posting an increase of $3,774.8 million from the level on
August 31, 1999. This net change was the result of an increase
in holdings of agency debt of $4,029.1 million, and a decrease in
holdings of agency assets of $145.0 million and in holdings of
agency guaranteed loans of $109.3 million. FFB made 49
disbursements during the month of September. On behalf of RUSguaranteed borrowers, FFB extended the maturity of 80 loans. FFB
also received 101 prepayments in September.
During the fiscal year 1999, FFB holdings of obligations
issued, sold or guaranteed by other Federal agencies posted a net
decrease of $2,839.3 million from the level on September 30,
1998. This net change was the result of an increase in holdings
of agency debt of $583.0 million, and a decrease in holdings of
agency assets of $2,645.4 million and in holdings of
agency-guaranteed loans of $776.9 million.
Attached to this release are tables presenting FFB September
loan activity and FFB holdings as of September 30, 1999.
LS-237
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Page 2
FEDERAL FINANCING BANK
SEPTEMBER 1999 ACTIVITY
Fl.nal
Maturity
Interest
Rate
9/03
$172,900,000.00
9/07
$200,000,000.00
9/07
$247,800,000.00
9/08
$126,000,000.00
9/09
$17,100,000.00
9/10
$237,500,000.00
9/15
$78,200,000.00
$525,000,000.00
9/17
9/17
$264,400,000.00
9/20
$900,000,000.00
9/20
$244,400,000.00
$700,000,000.00
9/21
$214,900,000.00
9/21
$550,000,000.00
9/22
$249,800,000.00
9/22
$325,000,000.00
9/23
$328,800,000.00
9/23
$300,000,000.00
9/24
$231,800,000.00
9/24
$150,000,000.00
9/27
$245,000,000.00
9/27
$111,000,000.00
9/28
$750,000,000.00
9/30
$500,000,000.00
9/30
9/30 $2,500,000,000.00
$279,100,000.00
9/30
9/07/99
9/08/99
9/08/99
9/09/99
9/10/99
9/13/99
9/16/99
9/20/99
9/20/99
9/21/99
9/21/99
9/22/99
9/22/99
9/23/99
9/23/99
9/24/99
9/24/99
9/27/99
9/27/99
9/28/99
9/28/99
9/29/99
1/03/00
3/30/00
10/01/99
10/01/99
5.041%
5.043%
4.971%
4.950%
4.939%
4.875%
4.878%
4.878%
4.792%
4.825%
4.940%
4.792%
4.919%
4.940%
4.950%
4.919%
4.950%
4.950%
4.906%
4.950%
4.992%
4.971%
4.977%
5.084%
4.971%
5.002%
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
9/01
9/01
9/01
9/02
9/23
9/24
9/27
9/27
9/28
$1,407.01
$3,847.42
$13,001.29
$33,700.00
$62,316.13
$85.00
$331,928.26
$352,362.00
$21,590.00
10/01/26
10/01/26
1/02/25
7/31/25
1/30/02
10/01/26
10/01/26
11/02/26
7/31/25
6.418%
6.418%
6.435%
6.443%
5.856%
6.351%
6.266%
6.265%
6.346%
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
9/07
9/07
$5,000,000.00
$1,893,000.00
1/03/34
1/03/00
Date
Borrower
Amount
of Advance
;ENCY DEBT
J.S. POSTAL SERVICE
J. S.
J. S.
J. S.
]. S.
]. S.
]. S.
]. S.
]. S.
J. S.
J. S.
J. S.
J. S.
J. S.
J. S.
r. S.
r. S.
r. S.
I. S.
r.
s.
'. S.
'. S.
'. S.
.5.
.5.
.5.
. S.
Postal
Postal
Postal
Postal
postal
Postal
postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
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
VERNMENT-GUARANTEED LOANS
ENERAL SERVICES ADMINISTRATION
hamblee Office Building
hamblee Office Building
emphis IRS Service Cent.
oley Square Office Bldg.
tlanta CDC Lab
hamblee Office Building
hamblee Office Building
eTC Building
oley Square Office Bldg.
~L
UTILITIES SERVICE
ynches River Elec. #545
jlin Rural Elec. #528
6.099% Qtr.
5.110% Qtr.
Page 3
FEDERAL FINANCING BANK
SEPTEMBER 1999 ACTIVITY
Borrower
rcteod Coop. Power #554
,aurens Elec. #553
:osebud Elec. #555
'.osebud Elec. #555
an Isabel Elec. #552
arrison County #532
arrison county #532
ocorro Elec. #541
ocorro Elec. #541
ocorro Elec. #541
eminole Electric #416
llegheny Electric #255
llegheny Electric #255
llegheny Electric #908
llegheny Electric #908
llegheny Electric #908
llegheny Electric #908
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
razos Electric #917
Date
Amount
of Advance
Fl.nal
Maturity
Interest
Rate
9/13
9/15
9/15
9/16
9/16
9/22
9/23
9/27
9/27
9/28
9/29
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
$500,000.00
$6,000,000.00
$895,000.00
$895,000.00
$6,316,000.00
$1,000,000.00
$1,000,000.00
$893,000.00
$893,000.00
$893,000.00
$24,000,000.00
$3,366,552.99
$4,809,961. 67
$872,371. 33
$2,669,390.92
$3,904,223.97
$2,461,640.87
$3,454,828.26
$1,534,489.01
$379,900.40
$876,263.39
$1,144,128.48
$761,917.60
$438,061. 63
$818,991. 79
$982,396.17
$316,792.13
$229,915.24
$392,422.39
$229,992.46
$164,783.19
$143,558.79
$78,651.88
$118,850.30
$38,253.17
$1,258,507.96
$292,972.01
$252,621. 32
$949,972.60
$2,845,558.87
$1,704,128.06
$1,021,283.33
$616,626.01
$953,015.11
$517,755.22
$1,493,947.04
$1,800,014.90
$437,489.96
$1,173,790.53
$1,525,138.91
1/03/34
1/03/34
1/02/29
1/02/29
9/30/09
1/03/34
1/03/00
1/03/33
12/31/29
12/31/29
6/30/09
3/31/00
3/31/00
1/03/00
1/03/00
1/03/00
3/31/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
6.111%
6.189%
6.259%
6.257%
5.899%
6.287%
4.959%
6.018%
6.053%
6.122%
5.970%
5.074%
5.074%
4.832%
4.832%
4.832%
5.074%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page 4
FEDERAL FINANCING BANK
SEPTEMBER 1999 ACTIVITY
Borrower
,razos Electrlc #917
,razos Electric #917
,raz~s Electr ic #437
razos Electric #437
:oop. Power Assoc. #130
'oop. Power Assoc. #130
oop. Power Assoc. #240
eorgia Trans. Corp. #446
ew Horizon Elec. #473
ew Horizon Elec. #473
ew Horizon Elec. #473
ew Horizon Elec. #473
ew Horizon Elec. #473
ew Horizon Elec. #473
ew Horizon Elec. #473
orthwest Iowa Power #907
glethor~e Power #445
aluda Rlver Elec. #472
an Miguel Electric #919
an Miguel ~lectric #919
an Miguel Power #492
teele-Waseca Coop. #550
nited Power Assoc. #911
nited Power Assoc. #911
nited Power Assoc. #911
nited Power Assoc. #911
nited Power Assoc. #911
nited Power Assoc. #911
nited Power Assoc. #911
nited Power Assoc. #911
nited Power Assoc. #911
nited Power Assoc. #911
~ited Power Assoc. #911
,ited Power Assoc. #911
,ited Power Assoc. #911
1ited Power Assoc. #911
1ited Power Assoc. #911
1i ted Power Assoc. #911
1ited Power Assoc. #911
1ited Power Assoc. #911
1i ted Power Assoc. #911
1i ted Power Assoc. #911
Date
Amount
of Advance
Flnal
Maturity
Interest
Rate
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
9/30
$2,507,405.67
$2,683,902.85
$1,431,895.39
$324,794.26
$9,128,872.96
$2,871,617.92
$5,104,118.07
$12,011,626.35
$5,291,784.19
$1,417,120.21
$2,292,469.17
$6,794,387.19
$3,460,286.71
$7,052,247.80
$1,780,350.87
$6,481,435.72
$15,419,484.32
$1,311,831.65
$8,957,015.40
$9,404,970.95
$3,066,000.00
$3,695,000.00
$821,679.07
$593,753.00
$9,860,147.89
$3,188,049.53
$2,686,312.76
$3,189,027.53
$3,395,047.00
$3,763,026.07
$1,434,194.97
$3,542,572.77
$1,055,217.19
$803,084.75
$604,925.73
$1,038,597.13
$1,015,859.99
$59,612.87
$458,778.86
$709,910.03
$484,255.39
$1,011,815.78
1/03/00
1/03/00
1/03/00
1/03/00
10/01/01
10/01/01
10/01/01
3/31/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
10/02/00
1/03/00
1/03/00
1/03/00
1/03/00
9/30/04
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
1/03/00
4.832%
4.832%
4.957%
4.957%
5.745%
5.745%
5.748%
4.950%
4.957%
4.957%
4.957%
4.957%
4.957%
4.957%
4.957%
5.232%
4.832%
4.957%
4.832%
4.832%
5.938%
4.803%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
4.832%
S/A is a semiannual rate.
Qtr. is a Quarterly rate.
maturity extension or interest rate reset
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page 5
FEDERAL FINANCING BANK HOLDINGS
(in millions of dollars)
Program
September 30. 1999
Agency Debt:
U.S. Postal Service
August 31. 1999
Monthly
Net Change
9/1/99- 9/30/99
Fiscal Year
Net Change
10/1/98- 9/30/99
Subtotal*
$6.279.1
$6.279.1
$2.250.0
$2.250.0
$4.029.1
$4.029.1
$583.0
$583.0
Agency Assets:
FmHA-RDIF
FmHA-RHIF
DHHS-HMO
DHHS-Medical Facilities
Rural Utilities Service-CBO
Subtotal *
$3.410.0
$7.125.0
$1. 7
$3.2
$4.598.9
$15.138.8
$3,410.0
$7.270.0
$1.7
$3.2
$4,598.9
$15.283.8
$0.0
·$145.0
$0.0
$0.0
$0.0
-$145.0
-$265.0
-$2.375.0
-$1.4
-$4.0
$0.0
-$2.645.4
Government-Guaranteed Lending:
DOD-Foreign Military Sales
DoEd-HBCU+
DHUD-Community Dev. Block Grant
DHUD-Public Housing Notes
General Services Administration+
DOl-Virgin Islands
DON-Ship Lease Financing
Rural Utilities Service
SBA-State/Local Development Cos.
DOT-Section 511
Subtotal *
$2.610.9
$11.0
$13.6
$1.419.9
$2.404.9
$16.1
$1.138.7
$13.885.0
$193.9
$3.7
$21.697.7
$2.628.6
$11.0
$14.0
$1.419.9
$2.408.4
$16.1
$1.138.7
$13.969.0
$197.5
$3.7
$21.807.0
-$17.7
$0.0
-$0.3
$0.0
-$3.4
$0.0
$0.0
-$84.1
-$3.7
$0.0
-$109.3
-$218.1
$6.4
-$16.8
-$71. 5
-$68.2
-$1. 3
Grand total*
$43.115.6
$39.340.8
$3,774.8
-$2.839.3
*
+
figures may not total due to rounding
does not include capitalized interest
~$86.2
-$281. 5
-$39.5
-$0.1
-$776.9
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
R IMMEDIATE RELEASE
vember 10, 1999
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 66-DAY BILLS
66-Day Bill
November 15, 1999
January 20, 2000
912795DDO
Term:
Issue Date:
Maturity Date:
CUSIP Number:
5.17 %
High Rate:
Investment Rate 1/:
5.31 %
Price:
99.052
All noncompetitive and successful competitive bidders were awarded
:urities at the high rate.
Tenders at the high discount rate were
otted 73%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered
Tender Type
Accepted
Competi':.::.ve
Noncompeti::ive
$
35,931,750
3,685
$
16,038,700
3,685
TOTAL
$
35,935,435
$
16,042,385
Median rate
5.16 %: 50% of the amount of accepted competitive tenders
tendered at or below that rate.
Low rate
5.07 %:
5% of the amount
~ccep1:ed competitive tenders was tendered at or below that rate.
-to-Cover Ratio
~quivalent
= 35,935,435 / 16,042,385 = 2.24
coupon-issue yield.
238
/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
IR IMMEDIATE RELEASE
,vembe r 10, 199 9
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 9-3/4-YEAR NOTES
This issue is a reopening of a note originally issued August 15, 1999.
terest Rate:
ries:
SIP No:
RIPS Minimum:
6%
C-2009
9128275N8
$100,000
Issue Date:
Dated Date:
Maturity Date:
High Yield:
6.007%
Price:
November 15, 1999
August 15, 1999
August 15, 2009
99.927
All noncompetitive and successful competitive bidders were awarded
:urities at the high yield.
Tenders at the high yield were
Lotted
8%. All tenders at lower yields were accepted in full.
Accrued interes~ of $ 15.00000 per $1,000 must be paid for the period
Jrn August IS, 1999 to November 15, 1999.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted
Tendered
Tender Type
Competitive
Noncompetitive
$
24,775,530
83,683
$
10,004,913 1/
24,859,213
PUBLIC SUBTOTAL
2,135,000
500,000
2,135,000
500,000
Federal Reserve
Foreign Official Inst.
TOTAL
$
27,494,213
9,921,230
83,683
$
12,639,913
Median yield
5.990%:
50% of the amount of accepted competitive tenders
tendered at or below that rate.
Low yield
5.910%:
5% of the amount
accepted competitive tenders was tendered at or below that rate.
!-to-cover Ratio = 24,859,213 / 10,004,913 = 2.48
Awards to TREASURY DIRECT
=
$48,342,000
LS-239
http://www .pubUcdebt.treas.gov
D EPA R T 1\1 E N T
0 F
THE
T REA SUR Y
~~/78~9~. . . . . . . . . . . . . . . . . . . . . .1I.....
............................
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASlDNGTON, D.C. _ 20220 _ (202) 622-2960
FOR IMMEDIATE RELEASE
November 12, 1999
Contacts: Steve Posner
Maria Ibanez
(202) 622-2960
TREASURY SECRETARY TO VISIT SOUTHWEST BORDER REGION
Treasury Secretary La~Tence H. Summers \vill visit the Southwest Border Region Tucson, Arizona and El Paso, Texas - on Monday, November 15.
In Tucson, Secretary Summers \>"'ill address the first Community Forum of the President's
Interagency Task Force on the Economic Development of the Southwest Border at 9 a.m. MST
at the University of Arizona, University Science and Technology Park, The Presentation
Room (Room 1350),900 S. Rita Road. Pn:ss should plan to arri\(: hy 8:30 a.m. MST to set up.
In El Paso, Secretary Summers will tour the Bridge of the Americas to review the
progress of the Border Coordination Initiative (BCI) and state-of-the-art technology used by U.S.
Customs. a bureau of the Treasury Department. to help deter drug smuggling and other border
violations. The media is invited to join the Secretary at I ;.~5 p.m. (MST) at the Bridge of the
Americas for a walking tour follov.ed hy a press (1\·ailabilit). Press should plan to arrive by 1:20
p.m. (MST) to set up under the secondary inspection canop) .
- 30 LS-240
!'or press releases, speeches, public schedules and official biographies, call our 24~our fax line at (202) 622-2040
'U S Government Ponllng OffIce 1998· 619·559
DEPARTMENT
OF
THE
TREASURY
17gq
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASlllNGTON, D.C.. 20220. (202) 622.2960
FOR IM:MEDIATE RELEASE
Text as prepared for delivery by teleconference
November 15, 1999
TREASURY SECRETARY LAWRENCE H. SUMMERS
REMARKS TO SOUTHWEST BORDER FORUM:
"SUPPORTING EMERGING MARKETS ON THE SOUTHWEST BORDER"
Thank you, Representative Kolbe, for that introduction As Chairman of the Treasury-Postal
Subcommittee on appropriations, you have been a key partner for Treasury and a leader on that
committee - in bringing much-needed attention to enforcement concerns and especially
Customs, and in working to ensure that this crucial part of Treasury's mission is adequately
funded. And you have been critical to ensuring that the IRS has the funding it needs to carry
through major reform and restructuring.
Let me also offer my thanks to Representative Pastor, who is a leader in his district, just up the
road from here, and an important partner to the Administration back in Washingtonparticularly on issues affecting the border; to Deputy Assistant Secretary Lynda de la Vina, who
has helped to organize this event; to our gracious hosts, University of Arizona Senior Vice
President and Provost Paul Sypherd; and, most of all, to the community leaders, businesspeople,
and representatives of non-governmental organizations who are here today for this important
dialogue on the challenges we face in this part of the country.
I am delighted to be helping to kick off the first of four border forums to be held by the
President and Vice-President's Task Force on the Economic Development of the Southwest
Border. Not so long ago, it would have been surprising for a Treasury Secretary to be asked to
chair such a Task Force. Today, after nearly 7 years of Treasury efforts to bring capital and
private enterprise to every region in America, it seems the most natural thing in the world.
Let me address three topics
•
First, the outlook for the United States economy as whole.
•
Second, broadening our economic success to include more of the people of the border region.
•
Third, the challenge of strengthening protection of the border and its communities.
L8-242
_For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622·2040
I.
A Remarkable Time for the National Economy
We meet at a time of remarkable prosperity in our country, a time when the things that should be
up are up - and the things that should be down are down.
•
At a little more than 4 percent, the unemployment rate is lower than it has been in 30 years and female unemployment is the lowest in 46 years. Yet inflation remains at low rates.
•
Our economy has created nearly 20 million new jobs since the beginning of 1993.
Productivity"is growing faster than any could have expected even a few years ago. And for
the first time in a generation, real wages in almost ever income group are rising.
•
Business investment has surged, with purchases of equipment and software growing at
double-digit rates for six years in a row. Indeed, real investment as a share of GNP is today
higher than it has been at any time since World War II.
•
Welfare rolls and national crime rates are the lowest in 30 years. And 5 million Americans
have been lifted out of poverty since this Administration began.
These new developments reflect an economy that is in many ways new and also a new national
economic strategy - a strategy based on harnessing the power of markets and establishing a
framework in which markets can operate.
New technologies have forced profound changes in the way economic life is organized - changes
for which our economy has turned out to be superbly well equipped.
•
Our traditions of flexibility and market competition have helped build a venture capital sector
in which entrepreneurs may raise their first $100 mill ion before buying their first suits.
•
And they have helped to create a post-industrial economy where Americans are leaders in
almost every area from fast food to accounting, from management consulting to retailing,
from higher education to mass entertainment.
At the same time, a new economy could not emerge except on a foundation of old virtue. Our
economic success has been made possible by President Clinton and Vice President Gore's
determination to forge a new national consensus in support of sound macro economic policies especially when it comes to the management of our nation's budget.
In 1992, the Federal deficit was $290 billion and projected to rise In the fiscal year just
completed, we recorded a surplus of $123 billion, the first time we have achieved two budget
surpluses, in a row since 1957. As a result of this move from deficit to surplus, $1. 7 trillion that
was predicted to be consumed by government borrowing when President Clinton took office has
instead been invested in our future - in America's businesses, its workers and its communities.
2
Americans can rightly feel proud of the unrivaled success of their economy as the end of the
century draws near. But we know that to continue that success we need to make it deeper and we
need to make it reach more of our people.
Widening the circle of economic opportunity to include all of our poorest regions and cities is
what the President's New Market tours have been about - the most recent of which ended earlier
this month in Chicago with a joint statement of priorities by the President and Speaker Hastert.
And that is what the Southwest Border Task Force is about. We spend a lot of time at Treasury
thinking about emerging markets - but there are no more important emerging markets than the
ones here at home.
Let me spend the rest of my time today on the two greatest challenges that the border region
faces: generating economic opportunities and strengthening enforcement.
n.
Broadening American Prosperity to reach all of the Southwest Border
One does not need to spend long in Tucson or Phoenix to see that many in Arizona have been
part of the longest peacetime expansion in American history. At the same time, we also know
that too many have been left out.
It cannot be right that at a time of such remarkable national economic opportunity:
•
About one third of the countries in the Southwest border have an unemployment rate of more
than 10 percent, and in some counties as many as one in four of the workforce is out of work.
•
Nearly half a million people living on the border live in colollias without running water,
sewers, electricity or paved roads. This translates into a 6 times higher rate of tuberculosis
among border residents than the national average - and a 5 times higher incidence of
Hepatitis A. Yet an estimated 3 million residents of the area are uninsured.
Today we are delivering to the Vice President an interim report of the Task Force highlighting
these and other problems and what we are doing to address them. This will be disseminated on
the Treasury website, in its new pages for Southwest Border Task Force information. And in
April, the Task Force's first Annual Report will outline key policy options for promoting
sustainable development in the border region that must guide the Task Force going forward
As today's Report makes clear, generating growth and opportunities is a complex and manysided effort. But any consideration of America's recent economic performance would highlight
two key ingredients for economic success in the new global economy:
•
The first is successful integration with that economy - giving businesses and workers the
capacity to seize the opportunities and manage the risks.
•
The second is an effective financial system - ensuring ready access to capital to anybody
with a good idea and the capacity to make it work.
3
Let me briefly discuss each of these with reference to the particular difficulties they pose to this
region - and the Administration's efforts to address them
1. Managing Economic Integration and the Role of the NAD Bank
President Clinton and Vice President Gore have supported a more open and economically
integrated global economy because it helps generate increased opportunities and rising living
standards here at home - and because it helps to build a more stable and prosperous world. But
we all recognize that trade cannot be taken in isolation.
As the President has said: "working people will only assume the risks of a free international
market if they have the confidence that the system will work for them." At a time when the
world is coming together and barriers to trade are coming down - it becomes vital to prevent a
race to the bottom That is why our approach to integration needs to be a balanced approach, one
that marries the opening of markets to the development of tools to respond to broader social and
environmental concerns and support our deepest values.
In this context, two Administration initiatives here in the border region deserve special mention.
The first is the North American Development Bank and its sister organization, the Border
Environment Cooperation Commission, which we worked to establish at the time ofNAFT A
with regional leaders and our partners in Mexico. Both of these institutions have made good
progress in fulfilling their mandate. Notably the NADBank has now authorized almost $155
million in loans and grants - representing a total investment in environmental infrastructure
along the border of over $550 million.
But we all recognize that the border's environmental infrastructure needs are far from being met.
That is why we are working to bring the NADBank's energy and commitment to bear on some of
the other environmental health problems facing the region: for example, to include improving the
accessibility to water and sewage services in homes that currently lack them. We look forward to
dialogue on changing its mandate, where necessary, to make this possible
The second initiative is the Community Adjustment Investment Program, which we worked with
Congress to create to help to address directly the short-term employment impact of expanding
trade. To date, the CAIP has provided financing through direct loans and the subsidy of loan
guarantee fees from other government programs, leading to a total of 160 loans in the region
amounting to nearly $50 million - loans which have helped to create or retain around 1500 jobs.
Last year Congress appropriated $10 million dollars to enhance the CAlP and we are now
collecting applications from communities and organizations that wish to ~ccess these funds. To
that end, I
pl~ased to note that eligibility for CAlP programs has been expanded: to cover 40
border countIes lIlstead of four, and to include a direct grant and technical assistance program.
an:
4
2. Ensuring Broad Access to Capilal
Every part of the country and every type of business with the capacity to earn a fair return ought
to have an opportunity to receive capital it needs. The first lady is right it does take a village to
raise a child. And it takes capital to build a successful village.
The Community Development Financial Institutions Fund - created early in this Administration
with the strong personal backing of the President - aims to provide capital for worthwhile
investments in areas that the private capital tends to leave behind. Since 1996 it has provided
more than $14 million for new lending and investment in under-served markets along the border
One example of the CDFI Fund's work right here in Tucson is the PPEP Microbusiness and
Housing Development Corporation. Since 1986, PPEP has provided a wide range of financing
and training services to its rural southern Arizona target market. Support provided to the PPEP
in the past three years from the CDFI Fund has helped it to expand and develop new loan
products across the border region - including a mortgage loan pool that will be capitalized by a
$1 million investment from the CDFI Fund.
Let me tell you one person's story: that of Daniel Renteria, who is here in the audience today
Daniel started a small auto-mechanic business in 1987, after ten years as a mechanic at a gas
station in Nogales, Arizona. At that time he applied for a $1000 loan to buy an air compressor
from PPEP Micro in Tucson. That began a virtuous circle of growth, increased need for capital,
and more PPEP loans that enabled further growth. The most recent $50,000 loan granted last
year will help Daniel expand his business from six bays to ten - and will cement his membership
of the local Chamber of Commerce.
Daniel is an example for others to follow - and an example of the way that the right kind of
public policy can help to unlock private sector potential We must work to ensure there are many
more stories like these in the future
ill.
Protecting the Border and the Communities Who Live Beside It
There is no greater obstacle to growth than the absence of a fully functioning rule of law. And
nowhere is the rule of law more important than at our border, where we must help to encourage
lawful, productive commerce while preventing smuggling of the most destructive substances.
To be sure, none of us at Treasury can afford to take for granted the contribution that Customs
makes to our economy in facilitating free and legal trade across our borders. That is one reason
why we have been working so hard, with the leadership of Commissioner Kelly and the support
of Representative Kolbe, to make sure that the Customs Service is as strong as it can possibly be.
The challenges facing our US Customs Service and other law enforcement agencies on the
Southwest Border may be greater today than they ever been. Let me highlight just two of these
challenges, and the way that enhanced interagency coordination is helping us to combat them.
5
Drugs
The Southwest border remains the principal entry point for smuggling drugs, and firearms into
the United States. And every day, drugs are destroying hundreds of young lives in border
communities indeed, I gather that the Dallas Morning News has recently been reporting on
rising number of teenage drug smugglers in this region.
As those articles attest, the war on drugs has not yet been won. But if we are winning more
battles than we were five years ago - many of those are being won on the border.
Let me take one recent example Operation Impunity. This involved Customs, the Drug
Enforcement Agency and the Federal Bureau of Investigation working together in a two-year
investigation resulting in the seizure of 13 tons of cocaine, 2.5 tons of marijuana, and $19 million
in currency and the arrest of93 individuals linked to the Amado Carillo Fuentes drug trafficking
organization headquartered in Juarez, Mexico. This will substantially hinder the ability of this
organization to move cocaine and other drugs into, and around, the United States in the future.
Enhanced coordination is also at the core of the success of the Border Coordination Initiative,
(BCI), a year-old partnership between Customs Service and the INS and agencies operating at
and between border ports of entry - including the Departments of Transportation, Justice,
Agriculture, and Interior. This initiative is already having an effect: in fiscal year 1999, seizures
of cocaine, marijuana and heroin were all up by 23 to 33 percent.
Money laundering
Money laundering is another growing threat But in September, Attorney General Reno and I
announced the first National Money Laundering Strategy, a comprehensive set of concrete
actions we will take to address the problem. And just last week we sent to the Congress the
Money Laundering Act of 1999.
If passed, that legislation will for the first time make it a crime to launder money derived from
a of more than $10 "000 a crime
foreign official corruption It will also make bulk cash smuaalin
:::>:::>
:::>
give US. courts "long-arm" power over foreign banks that violate U.s. laws when conducting
transactions in the United States and give law enforcement new tools to go after the largest
known money laundering system, the Black Market Peso Exchange
This bill, is only the first concrete consequence of the National Money Laundering Strategy. In
the commg months I expect to announce further far-reaching initiatives.
m.
Concluding Remarks
I ~ave spo~en about ,challenges we face and our approach to meeting them. But the real value of
t~IS gather,mg t~day IS the contribution that each of you in the audience can make in the
~I~logues m ,which you will be engaged today, through your input Because it is you who are
hvmg, workmg, and raising families along the border.
That is what this event is all about - to hear from you about what is working, what is not
working, and how we can work together to help ensure that this region shares in the nation' s
prosperity. As the Chair of the Southwest Border Task Force I am determined to see that the
action plan is carried out quickly and effectively We want a border region with its own distinct
and valuable culture and heritage, but also one that shares more of the economic characteristics
of other parts of the nation. Thank you
7
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
JR IMMEDIATE RELEASE
)vember 15, 1999
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
November 18, 1999
February 17, 2000
912795DH1
Term:
Issue Date:
Maturity Date:
CUSIP Number:
5.115%
High Rate:
Investment Rate 1/:
5.269%-
Price:
98.707
All noncompetitive and successful competitive bidders were awarded
at the high rate.
Tenders at the high discount rate were
.lotted 70%-.
All tenders at lower rates were accepted in full.
~curities
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Competitive
Noncompetitive
$
23,396,662
1,336,796
SUBTOTAL
8,743,020 2/
259,240
24,992,698
9,002,260
4,226,564
15,760
4,226,564
15,760
Federal Reserve
Foreign Official Add-On
$
7,406,224
1,336,796
259,240
Foreign Official Refunded
lS
$
24,733,458
PUBLIC SUBTOTAL
TOTAL
Accepted
Tendered
Tender Type
29,235,022
$
13,244,584
Median rate
5.100%-: 50%- of the amount of accepted competitive tenders
tendered at or below that rate.
Low rate
5.030%-:
5%- of the amount
accepted competitive tenders was tendered at or below that rate .
. d-to-cover Ratio ~ 24,733,458 / 8,743,020 ~ 2.83
Equivalent coupon-issue yield.
Awards to TREASURY DIRECT = $1,057,483,000
http://www.publlcdebttreas.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
)R IMMEDIATE RELEASE
CONTACT:
Office of Financing
202-691-3550
)vember 15, 1999
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
November 18, 1999
May 18, 2000
912795DW8
Term:
Issue Date:
Maturity Date:
CUSIP Number:
5.215%"
High Rate:
Investment Rate 1/:
5.444%
Price:
97.364
All noncompetitive and successful competitive bidders were awarded
,curities at the high rate.
Tenders at the high discount rate were
lotted 91%".
All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered
Tender Type
Competitive
Noncompetitive
$
$
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
$
4,565,769
1,112,366
5,678,135 2/
25,845,495
PUBLIC SUBTOTAL
TOTAL
24,733,129
1,112,366
Accepted
2,333,160
2,333,160
28,178,655
8,011,295
3,800,000
141,840
3,800,000
141,840
32,120,495
$
11,953,135
Median rate
5.215%: 50%" of the amount of accepted competitive tenders
tendered at or below that rate.
Low rate
5.130%:
5% of the amount
accepted competitive tenders was tendered at or below that rate.
i-to-Cover Ratio
=
25,845,495 / 5,678,135
=
4.55
Equivalent coupon-issue yield.
Awards to TREASURY DIRECT = $849,737,000
LS-244
http://www.publlcdebureas.gov
,
DEPARTMENT
OF
THE
TREA·S:URY
NEWS
TREASURY
OFflCE OF PUBUCAFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASIDNGTON, D.C., 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
November 16, 1999
STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMl\1ERS
Last night's agreement on debt relief is important for half a billion people in the world's poorest
countries. Debt relief emphasizing economic growth and poverty reduction is good, sound and
conservative financial practice. Additional resources will now be available for critical needs
like poverty reduction, education and health care. With President Clinton's leadership at
Cologne, the world committed itself to debt relief for the world's poorest in this Millenium year.
This agreement moves toward making that commitment a reality.
The important work of debt reduction is not complete. We welcome Congress' commitment to
move forward early next year to release the remaining resources necessary to bring this global
effort to fruition.
-30-
LS - 245
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~
'lJ S Governmenl P""'dlrv:; Oll!t:r: .---
_ ..
DEPARTl\1ENT
OF
THE
TREASURY
TREASURY
NEWS
omCE OF PUBliC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960
Weeldy Release of U.S. Reserve Assets
November 16, 1999
The Treasury Department today released U.S. reserve assets data for the week ending
November 12, 1999.
As this table indicates, U.S. reserve assets totaled $72,27 5 million as of November 12, 1999,
as compared with $72,367 million as of November 5, 1999.
u.s. Reserve Assets
(millions of US dollars)
1999
Total
Special
Reserve
Foreign
Currencies
31
Assets
Gold
Stock II
Drawing
R'Ig ht S 21
ESF
SOMA
Position in
IMF 21
November 5, 1999
72,367
11,047
10,429
15,936
15,939
19,016
November 12, 1999
72,275
11,047
10,375
15,966
15,969
18,918
Reserve
Week Ending
1/ Gold stock is valued monthly at $42.2222 per fIne troy ounce. Values shown are as of September 30, 1999. The August 31,
1999 value was $11,046 million.
2/ SDR holdings and the reserve position in the IMF are based on IMF data and valued in dollar terms at the offIcial SDR/ dollar
exchange rate. Consistent with current reporting practices, IMF data for November 5, 1999 are fInal. Data for SDR holdings and
the reserve position in the rlviF shown as of November 12, 1999 (in italics) reflect preliminary adjustments by- the Treasury to the
November 5, 1999 IMF data.
3/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open i'farket
Account (SOMA). These holdings are valued at current market exchange rates or, where appropnate, at such other rates as rna\' be
agreed upon by the parties to the transactions.
18-246
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'U S Governmenl Pronl,ng Off'CE 1998· 619'::9
DEPARTMENT
OF
THE
TREASURY
NEWS
TREASURY
..............1I................1I....~/~78~9~. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASIDNGTON, D.C. • 20220 • (202) 622-2960
FOR IMMEDIATE RELEASE
November 16, 1999
STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMMERS AND
COUNCIL OF ECONOMIC ADVISERS CHAIRMAN MARTIN N. BAILY
The Administration respects the independence of the Federal Reserve in making
decisions about our nation's monetary policy We share the Federal Reserve's goals of
maintaining healthy economic grO\vth while preserving low inflation
Supported by sound economic policies, including budget discipline, the economy
continues to grow, with strong investments and higher productivity, creating good jobs and
improved living standards for all Americans We are committed to sustaining this economic
success into the future
-30-
LS-248
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'U S Government Prontlng Office 1998 - 619-559
DEPARTMENT
OF
THE
TREASURY
NEWS
..............
....................~~~~~~~~~;/~78~9~~
1I...................
OFFICE OF PUBUC AFFAIRS. 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220 • (202) 622-2960
Text as Prepared for Delivery
November 17, 1999
STATEMENT BY TREASURY DEPUTY SECRETARY STUART E. EIZENSTAT ON THE
GERMAN FOUNDAnON INITIATIVE FORCED AND SLAVE LABOR NEGOTIATIONS
IN BONN, GERMANY
First, I would like to say that this has been a difficult but our most productive session.
We are pleased that the plaintiffs' attorneys have reviewed the legal closure documents agreed to
by the U.S. Government and the German side, and have accepted them. An effective mechanism
for legal closure has now been accepted by all parties. This is an important achievement. We
have also nearly completed work on an Executive Agreement between the United States and
Germany that firmly commits both sides to this process. Pursuant to that agreement, the U.s.
Government would undertake the extraordinary commitment of filing statements of interest in
current and future suits against German companies arising from their activities during the Nazi
era and World War II. As an additional step, the U.S. Government is willing to take appropriate
measures to deal with state and local sanctions, or other efforts, that might interfere with this
process. The German companies have insisted that legal closure was fundamental to the
establishment of the Foundation.
Here I would like to note that, in the United States, we have had the highest levels of
government and three government departments -- State, Justice and Treasury -- engaged in this
process for more than a year. The German companies have insisted that legal closure was
fundamental to the establishment of the Foundation. We have now provided the German side
with what they have requested: an effective mechanism to achieve legal closure. Our legal
efforts represent a step that is unprecedented in U.S. history.
In addition to these extraordinary efforts, President Clinton has written twice to
Chancellor Schroeder. The President's most recent letter, dated November 13, urged continued
flexibility on the German side.
Second, the Germans proposed a range of between six and 10 billion D-Marks and the
plaintiffs' attorneys proposed a range between 10 and 15 billion D-Marks, proposals which
actually touched each other for the first time. As you know, in early October, the German side
offered six billion D-Marks. The German government is now prepared to increase its share by
an additional one billion D-Marks. This increase would be on top of the current German offer of
six billion and contingent on the private sector's willingness to increase its offer as well, which
they have now done.
l:'
biographies, call our 24-hour fax [me at (202) 622-2040
ror
press releases, sPeech es, publl·c schedules and oFficial
'JJ'
~
The plaintiffs' attorneys have responded positively by indicating that there has been very
significant progress, that this represents a serious offer by the German side, and they pledged to
work together to bridge the gap.
I want to applaud the additional flexibility shown by all sides in these discussions. I
particularly want to express my appreciation for the leadership of Chancellor Schroeder in
making this proposal under difficult budgetary constraints.
Given these two new proposals a negotiated settlement now seems attainable.
Contingent on an appropriate allocation formula, several Central and Eastern European
countries have assured me they could accept a settlement. Furthermore, it is our understanding
that the Government of Israel and the Conference of Jewish Material Claims Against Germany
are of the view that the German proposal could lead to dignified payments being made to Jewish
slave laborers.
Count Lambsdorff and I will be meeting next week in Washington to discuss the future
course of these negotiations. We are now so close that it is critical for all sides to make the last
steps necessary to reach agreement. I want to urge all participants to reflect on how far we have
come and what the consequences would be if we do not succeed. In this interval, I ask all parties
to refrain from actions or statements that could threaten the process.
Third, regarding payments to other workers who were forced to participate in the Nazi
war effort, such as agricultural workers, the German initiative will permit the Reconciliation
Foundations to make such payments to them, ifthey wish to do so.
Fourth, while these developments in the last two days represent considerable progress,
and the two sides have narrowed their differences, there still remains a gap that must be bridged.
I call on both sides to find ways to bridge this gap.
For the vast majority of victims, the German Foundation Initiative represents the only
mechanism by which they may have any hope of recovering. Settlement of individual lawsuits
would not benefit the vast majority of victims. The lawsuits can only cover those victims who
were employed by the 16 German corporations that are subject to U.S. jurisdiction-that is,
those companies with business activities in the United States. By definition, these are a limited
number of individuals. Thus, should the German Foundation not be established, as many as a
million former forced laborers would be unable to receive any benefit. Those left out would
include former laborers of SS companies, former laborers of public sector corporations, former
laborers of defunct companies, and others. In addition, should the German Foundation not be
established, the victims would also lose the benefit of the German government contribution.
•
These talks must not fail for the sake of U.S.-German economic and political relations .
•
The talks also must not fail because success will buy the legal peace that German companies
deserve to do business in the United States.
•
Finally, and most importantly, these talks must not fail for the sake of the victims in Poland,
the Czech Republic, Ukraine, Belarus, and Russia, as well as the Jewish victims. These slave
and forced laborers deserve a small measure of justice in the few years remaining in their
lives.
It is important that the German people recognize that the vast majority of the potential
beneficiaries of the German Foundation are citizens of Central and East Europe who has, thus
far, benefited little from German compensation programs. It is therefore critical that these
negotiations continue.
It is also important not to lost sight of the significance of the generosity shown by the
original 16 companies which supported the German Foundation Initiative: that is, to be willing
to make payments not only to their own workers but also to all those who were forced to work
for any private German company existing at the time.
Finally, it is also important to realize that litigation contains many risks for both sides
and, even if successful, would mean considerable delay. The majority of victims, whose average
age is 80, are unlikely to live long enough to be able to benefit from litigation. The German
Foundation, on the other had, could be making payments in a matter of months. Thus, the
proposed German Foundation Initiative is the best way to provide some measure of justice so
these elderly victims, who have already waited too long and should not be made to wait any
longer.
As I have previously state, Chancellor Schroeder and the German people should be
commended for this historic initiative. The success of the Foundation would make it possible for
th
Germany to enter the new millennium with a final moral gesture for the 20 Century to those
hundreds of thousand of people who stand to benefit from the German Foundation.
-30-
'DEPARTMENT
TREASURY
OF
THE
TREASURY
NEWS
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON, D.C .• 20220. (202) 622-2960
For Immediate Release
November 18, 1999
Contact: Maria Ibanez
(202) 622-2960
STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMMERS
I welcome today's gathering of the Financial Action Task Force (FA TF). which includes
representatives from Africa, Asia/Pacific, the Caribbean, Central and Eastern Europe and South
America. We congratulate F ATF on its leadership in expanding anti-money laundering efforts
worldwide. The U.S. will increasingly rely on the F ATF and its work to raise international
standards as we implement our National Money Laundering Strategy. We will only have
maximized our efforts in fighting financial crime and money laundering when there are no
jurisdictions where illegal profits of crime can be hidden,
Money laundering uses the financial system to conceal profits of crime. It is global in
reach and provides the funds for criminals and their organizations to continue their illegal
activity. We are firmly committed to working with our international partners to strengthen law
enforcement activity to disrupt the flow of illicit proceeds, and support FA TF' s efforts to
encourage all jurisdictions to develop strong anti-money laundering programs.
- 30 LS-250
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'U S Government Pnnl,ng Offoce 1998· 619·5~3
D EPA R T 1\1 E N T
0 F
THE
lREASURY
T REA SUR Y
NEWS
OFFICE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C .• 20220 - (202) 622-2960
FOR IMMEDIATE RELEASE
Text as Prepared for Delivery
November 18, 1999
"LATIN AMERICAN FINANCE AT TIlE END OF TIlE 90s"
TREASURY ASSISTANT SECRETARY FOR INTERNATIONAL AFFAIRS
EDWIN M. TRUMAN
REMARKS AT THE FLORIDA INTERNATIONAL BANKERS ASSOCIATION
33 RD ANNUAL ASSEMBLY
MIAMI, FL
It has been said that to know where your going, it helps to know where you've
been. As we close out 1999, Latin America can look back with some satisfaction on the
past decade. Protectionist and populist policies that were coming under attack at the
beginning of the decade have largely been replaced by policies that allow markets to
flourish. As a result, Latin America's GDP has grown 3.8 percent per year during the
Nineties, well above the annual growth rate of 2.2 percent in the Eighties.
Nevertheless, as the new millennium approaches, dealing effectively with global
financial flows poses an ongoing challenge to continued growth and stability in Latin
America. We all know that the first line of defense is sound macroeconomic policies.
In addition, valuable lessons about financial policies can be drawn from both Latin
America's own recent experiences and the experiences of other emerging market
countries. I hope my remarks will contribute to this process.
Latin America is important to the United States
The market-friendly policies adopted by Latin American countries over the past
decade have deepened U.S. economic ties with the region. From 1991 to 1998, total
U.S. trade (exports plus imports) with Latin America has increased 128 percent,
substantially more than the 75 percent increase in U.S. trade with the rest of the world.
U.S. investment has accompanied the increase in trade flows. The United States
accounted for 47 percent of foreign direct investment, on average, in Latin America in
1997 and 1998.
LS - 251
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As U. S. economic ties with Latin America have deepened, so has the level of
cooperation and consultation among policy makers. Perhaps most reflective of that
trend is the Summit of the Americas process, launched here in Miami five years ago by
the heads of state of this hemisphere's democratic nations. As President Clinton said at
that time, "history has given the people of the Americas a dazzling opportunity to build
a community of nations committed to the values of liberty and the promise of
prosperity. "
To help further that promise of prosperity, Western Hemisphere finance
ministry officials, for example, meet regularly under the auspices of the Committee on
Hemispheric Financial Issues or CHFI, as it is commonly known. Through CHFI, the
region's finance ministers seek to foster the strengthening and integration of capital
markets to support the growing economic ties within the region. The next meeting will
be in February in Cancun.
The last two years have been difficult
Despite deeper economic integration in the Western Hemisphere and generally
prudent macroeconomic policies, Latin American economies remain susceptible to
external shocks. Global financial turmoil, falling commodity prices, and unusually bad
weather over the last two years have combined to take a heavy toll on regional GDP
growth.
Following the Asian crisis that began in mid-1997, net private capital flows to
Latin America fell from about $120 billion in 1997 to around $80 billion in 1998.
Issuance of bonds in external markets also declined significantly from $85 billion in the
eighteen months preceding July 1997 to $65 billion over the following eighteen months.
Those developments put pressure on exchange rates and foreign exchange reserves.
Many countries responded by raising domestic interest rates. Local short-term
interest rates (90-days or less) in major Latin American countries increased from an
average of 17.5 percent in July 1997 to 32 percent in October 1998. The average
remained above 24 percent through April of this year. As the adverse effects of higher
domestic interest rates and reserve losses mounted, several countries, including Brazil,
Ecuador, Chile, and Colombia, re-evaluated their exchange rate regimes and chose to
float their currencies.
Weak commodity prices exacerbated the effects of reduced capital inflows and
higher domestic interest rates. Commodity prices fell 16 percent from December 1997
to December 1998, by one measure (Commodity Research Bureau). The large drop hurt
Latin America's terms-of-trade - prices of exports relative to prices of imports - which
the IMF calculates fell 24 percent in 1998. More importantly for the region's oil
exporters, the price of oil plunged 58 percent in the 24 months to December 1998.
2
Venezuela, where oil exports account for 15 to 20 percent of GDP, was particularly
hard hit.
Non-oil commodity exporters have also suffered. The 44 percent decline in
copper prices since June 1995 has constrained the growth of Chile's GDP, where
copper exports comprise 40 percent of Chile's total exports. Although commodity
prices have rebounded on average in 1999, led by a 77 percent jump in the price of oil,
agricultural prices continue to languish, declining 12 percent this year, after falling 20
percent in 1998, as measured by the commonly used Goldman Sachs' Index. That
weakness has continued to dampen growth for agriculture exporters such as Argentina,
Brazil, and Colombia.
Finally, an unusually bad draw in weather, coupled with negative commodity
price shocks, has played havoc with several countries' economies and exports,
including the Peru, Ecuador, and Central American economies.
Largely as a result of those shocks, the economies of Argentina, Brazil, Chile,
Colombia, Ecuador, and Venezuela are in recession. In some countries, such as
Ecuador, deep-seated domestic economic and financial problems also played an
important role in causing the recession. For the region, Consensus Forecasts expects
GDP to contract 0.5 percent in 1999, after growing only 2.1 percent in 1998. That
compares to regional growth of 5.1 percent in 1997. One notable exception is Mexico,
where GDP is projected to expand 3 percent or more this year, after growing almost 5
percent in 1998. Mexico has benefited from its close economic ties to the United
States. However, Mexico's commitment since 1995 to sound macroeconomic policies
in a difficult external environment has been essential to its recent relative economic
success; its flexible exchange rate regime also has provided an important shock
absorber.
Prospects are brighter
For the most part, the policy response of other Latin American governments to
negative external shocks has been similar to Mexico's (though with some exceptions).
The vast majority of countries responded to external economic and financial pressures
with renewed commitments to prudent fiscal and monetary policies, deeper financial
sector reforms, and no significant reversals of trade liberalization. Such responses,
during a time of economic pressure, underline the robustness of the reform consensus.
One encouraging result of prudent macroeconomic policies is that inflation remains
subdued in the region. In 1999, the inflation rate for the region is expected to be in the
single digits for the third year in a row.
Responsible economic policies and a more stable external environment provide a
solid platform for the resumption of growth next year. The average spread on external
Latin American sovereign debt, as measured by J.P. Morgan's Latin EMBI, has fallen
from its recent high of over 900 basis points in August to under 700 today. Further, as
3
I noted earlier, commodity prices, with the exception of some agriculture prices, have
generally rebounded. Short-term interest rates on average in major economies in the
region, at less than 17 percent, are now half as high as one year ago. The increased
prevalence of flexible ~xchange rates provides more scope for continued declines in
interest rates looking forward. Thus, next year looks more promising for economic
growth in Latin America. The Consensus Forecast currently is for 3.2 percent GDP
growth in 2000.
Global fmancial markets
The key issue for Latin American and other emerging market economies going
forward is financial management in an environment of large potential shocks in global
capital flows. Capital will always have ebbs and flows, to some extent independent of
policies in individual countries. Each ebb and flow produces its own challenges. The
main precaution Latin American countries can take to protect themselves is to keep
policies strong.
Financial systems
The importance of sound financial systems in reducing a country's vulnerability
to financial shocks is indisputable. Latin American countries were ahead of the curve
when they committed at their 1997 CHFI meeting to implement the Basel Core
Principles. This commitment was symbolic of the increased attention to such issues in
the wake of the Tequila crisis of 1995. The relative strength of banks in Latin America
is probably one reason the region survived the financial turmoil of the past two years
with less damage than occurred in Asia.
However, Latin American financial systems are small, which impedes growth.
To encourage investment in domestic fmancial institutions, governments must maintain
macroeconomic stability and nurture legal environments that protect property rights.
At the same time, authorities need to establish robust regulatory and supervisory
frameworks to ensure the soundness of fmancial systems. Changes are not going to
occur overnight; they require continued work to implement and sustain. Nevertheless,
they are critical to enhance the ability of Latin America to withstand potential financial
market volatility.
Exchange rates
Other measures to reduce vulnerability are also required. To sustain confidence
in the future, Latin America will need exchange rate regimes that can command the
trust of domestic citizens and of foreign investors, accommodate regional and global
integration, and remain resilient over time. There is a growing consensus that countries
involved in the world capital market will need to avoid the "middle ground" of pegged
exchange rates combined with discretionary monetary policies. It has become clear that
fixed - but not firmly institutionalized - exchange rate regimes hold enormous risks for
4
emerging market economies in a world where fast-flowing capital and insufficiently
developed domestic financial systems coincide. At the same time, adoption of floating
exchange rate regimes should not be used as a device to avoid implementing prudent
macroeconomic po~icies.
The most extreme institutional monetary arrangement available to a country, of
course, is the abandonment of its own currency. In this context, dollarization has been
discussed as an alternative to floating and to the middle ground of adjustable pegs. The
decision to make another country's currency one's own is hugely consequential for any
country, and it is one that has to be considered carefully. On the one hand, dollarization
offers the attractive promise of enhancing stability in the dollarizing country by
importing the credibility and discipline of another country's policies in support of its
own policies, and, thereby, also advancing its integration with the world economy. On
the other hand, the country also must be prepared to embrace that discipline and to
accept the potentially significant consequences of doing without the capacity
independently to adjust its exchange rate or the direction of domestic interest rates.
U.S. authorities are open to dollarization by other countries. However, we have
made clear that it would be inappropriate to adjust our own bank supervisory
responsibilities to cover institutions in countries that adopt the dollar, to provide
expanded access to the Federal Reserve's discount window, or to adjust the procedures
or orientation of U.S. monetary policy in light of another country's decision to dollarize
its monetary system. Any country contemplating dollarization will have to weigh
carefully these considerations as well as many others.
More generally, countries must take care to avoid the trap of pegged exchange
rate regimes that may appear to offer stability, but may in reality encourage large risks
to be build up unnoticed. It is noteworthy, in this connection, that this year four Latin
American countries have adopted flexible exchange rate regimes. But a great deal of
the hard work remains to be done both to implement and stick to prudent
macroeconomic policies, regardless of a country's exchange rate regime if a country is
to capitalize upon the progress that has been made in liberalizing its economy and
financial system.
National balance sheets
The risks associated with exchange rate fluctuations are only one factor that
contributes to an economy's vulnerability to what Secretary Summers has called
modern capital account crises. Governments need to think more broadly about their
economies' exposure to all types of financial risk, and focus upon the prudent
management of their national balance sheets. Sound management of the national
balance sheet is a concept that is broader than the sovereign's own balance sheet and
extends to assets and liabilities in both domestic and foreign currency. Sound balance
sheet management is essential to help limit the risk that temporarily tight conditions in
capital markets will trigger a deep contraction in domestic output.
5
In light of recent experience, it seems clear that weaknesses in the sovereign's
own balance sheet need not be the central source of an economy's financial
vulnerability. Risk exposures of banks, finance companies and individual firms, in
various combinations, can set the stage for a generalized, reinforcing rush for the exit.
It is also clear that private sector leverage and risk exposure can augment pressure on
sovereign balance sheets both prior to and during a crisis.
Thus, borrowing and lending decisions that are individually prudent may
nonetheless aggregate into vulnerabilities for a country. An individual corporate
treasurer, for example, may decide that it is smart to borrow unhedged in foreign
currency, or to remain exposed to commodity price declines. However, if all firms in
the economy make the same bet, the resulting economy-wide unhedged exposure can
contribute to the type of destabilizing dynamics we have seen recently in many
countries, where a scramble for foreign currency makes a thin market thinner, and very
one-sided.
The interesting question is how to reduce the risk that the conditions that can
lead this type of dynamic get-established in the first place. The policy challenges are a
bit more complicated than those required for prudential management of the sovereign's
liabilities alone, since the risks lie in the consolidated balance sheet of the nation
overall. To reduce those risks, one has to think about how to influence the behavior of
a diverse mix of private actors.
In determining the appropriate policy measures, there is room for creative
thought; we do not have all the answers. We can say with some confidence that a
sensible approach will require an integrated assessment of the refmancing and currency
risks contained on the national balance sheet, as well as other significant sources of risk
exposures. Many of these risks can currently be hedged in the capital markets, and
even more will be as demands to spread more and more categories of risk lead to the
creation of new hedging instruments. Other creative approaches can be explored.
Commodity- price-based fiscal stabilization funds, such as Chile's CODELCO, for
example, are the type of different approach that other commodity-dependent nations
could usefully explore.
Reducing the aggregate risk in the national balance sheet also involves enhanced
efforts to strengthen financial sectors. Such efforts include limiting the scope of the
financial safety net, improving the prudential regulation and supervision of banks, and
developing local capital markets in order to provide alternatives to bank fmance. It is
also important to avoid the distortions favoring what appear to be "cheap" financing
terms on short-term foreign currency obligations that all to often contribute to future
financial crises.
Finally, we must not forget the importance of managing the sovereign balance
sheet itself. The Asian crises did not originate in sovereign balance sheets, but
6
arguably the crises in Mexico five years ago, Russia last summer, and Brazil last fall
did, largely due to excessive concentration on short-term borrowing. In the Brazilian
case, it was the sovereign's balance sheet in domestic currency that was most relevant,
but the point about potential vulnerability remains.
Conclusion
In conclusion, I leave you with three thoughts. First, Latin America on balance
has made enormous progress over the Nineties to the benefit of its citizens and the
United States. After weathering the storms of the past two years, it is well positioned
to continue to move forward. Second, Latin America, along with many other
countries, faces the challenges, as well as the opportunities, of global capital markets
and potentially volatile financial flows. Third, to deal effectively with global financial
markets in the new millennium, countries will have to maintain sound macroeconomic
policies, of course, but they will also have to address vulnerabilities arising from
financial systems that are not robust, exchange rate regimes that are not appropriate,
and national balance sheets that are embedded with excessive systemic risks. To meet
those challenges successfully, the public and private sectors throughout the Americas
will have to continue to work together.
-30-
7
· OFFICE OF PUBLIC A}'FAIRS .1500 PENNSYLVANIA An:N m:. N. W.• WASHINGTON. D.C.- 20220. (201) 622.2960
EMBARGOED UNTIL 2:30 P.M.
November 18, 1999
CONTACT:
Office of Financing
202/691-3550
!'REAS'ORY OFFERS 13-WEEK AND 26-WEBI'i: BILLS
The ~reasur.v wi11 au~~i~ ~wo ~o~ioa gf TreasQ~ bills ~o~al~~g
approxima~e1y $17,000 million to refund $15,223 million of publicly held
securities maturing November 26, 1999, and to raise abou~ $1,777 million
of
new cash.
In addition to the »ublia holdings. Federal Reaerve BaDia for thair 0Wft
accounts hold $7,788 million of ehe maturing bills, which may be refunded at
ehe 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 iDclude $3,681 million held
ana iftt8~Dtional moneta;Y
to $3,000 million of these securitie. may be refun4e4 wi~ift
by Federal Reserge Banks as ageDts for fore~i2
authorities.
OP
the offering amount in ea~h of ehe 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 ~he cmount of new bids excee4s $3,000 million.
~re&~Direct cus~omers requested that we reinvest their ~turing holdings of approximate1y $908 million into the 13-week bill and $694 million Lnto
the 26-week bill.
This offering of Treasury securities is governed by the terms and conditions set forth in the Onifor.m Off9ring 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 offer-
ing highlights.
000
Attachment
L8-252
For press releases, speeches, public schedules and official hiQgraphie.<:, call our 24-hour fax line at (202) 622·2040
HZQHLZQRTS OF ~REASUay OFFER7NGS or
~ BE ISS OED ROVEMBBR 26, 1999
B~LLS
November 18, 1999
Offering Amount ••••••••••••••••••••••••• $9,OOO million
$8,000 million
Description of Offerings
Ter.m and type of security ••••••.•• ~ ••••• 90-day bill
CUSIP nwnher •••••••••••••••••••••••••••• 912795 DJ 7
Auction date •••••••••••••••••••••••••••• November 22, 1999
I:ssue date •••••••••••••••••••••••••••••• NaveJnber 26, 1999
Maturity date ••••••••••••••••••••••••••• Februa~ 24,2000
Original issue date ••••••••••••••••••••• August 26, 1999
currently outstanding ••••••••••••••••••• $11,387 million
Minimum bid amount and multiples •.•••••• $1,000
181-day bill
912795 DX 6
November 22, 1999
November 26, 1999
May 25, 2000
May 27, 1999
$15,297 million
$1,000
The following rules apply to all securities meDtioned abovez
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 long p08ition must he deter.mined as of one half-hour prior
to the closing time for receipt of competitive tenders.
Maximum Recognized Bid
at a Single Rate ••.••••••••• 35% of public offering
M&ximum Award ..••.•.•..•.••••••• 35% of public offering
Receipt of Tenders:
Noncompetitive tenders •••••• Prior to 12.00 noon Eastern Standard tfma 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.
Treasur,yDlrect 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
TREASURY
NEWS
OFFICE OF PUOUC AFFAIRS .1500 PENNSVLVANIA AVENUE, N.W .• WASHINGTON. D.C .• 20220. (l02l 622.2960
FOR IMMEDIATE RELEASE
November 17, 1999
CONTACT:
Office of Financing
202/691-3550
THANKSGIVING HOLIDAY SCHEDULE FOR
TREASURY'S WEEKLY BILL ANNOUNCEMENT
Since the regular
anno~ncement
day for weekly bills falls on
Thanksgiving Day next week, Treasury will release its announcement on
Tuesday, November 23, 1999, at 2:30 p.m.
This is consistent with the
Bond Market Association's recommendations for a full market closing
on Thanksgiving Day and an early closing on Wednesday, November 24.
000
L8-255
For press releases, speeches, public schedules and o/ficial biographies, call our 24-lrour fax Litle at (202) 612-2040
DEPARTMENT
OF
THE
TREASURY
Text as Prepared for Delivery
November 19, 1999
REMARKS OF DEPUTY SECRETARY STUART E. EIZENSTAT
BEFORE THE TREASURY ADVISORY COMMITTEE ON INTERNATIONAL
CHILD LABOR ENFORCEMENT
I am pleased to be able to join you this morning. I want to thank all of you for the
assistance you are giving us in this important area. Some of you have devoted your professional
lives to the cause of human rights and worker rights. You are an inspiration. All of you bring a
perspective that we at Treasury want to hear.
There are a few people I want to thank, even though they are not here. One is Senator
Tom Harkin, who has taken the lead on this issue in the Congress along with Congressman
Bernie Sanders, who was instrumental in obtaining the appropriation that will allow us to deploy
more enforcement agents overseas. We look to this Committee for recommendations on how
these funds can be used most productively. And I want to acknowledge the great efforts of my
good friend Alexis Herman, the Secretary of Labor, whose Department has wide responsibilities
throughout the area of child labor, who has been a strong presence in this field.
According to the ILO, an estimated 250 million children. some as young as five years
old, are forced to work, some under conditions of great hazard. Through the efforts of many
human rights, religious, and labor organizations, and the Clinton-Gore Administration, the issue
has made its way onto the moral agenda. Many nations are addressing it, including our own, and
often involving the private sector in a constructive way. The MOU covering the garment
industry in Bangladesh is an example of such an initiative.
The President, by stressing the problem of child labor in both his 1998 and 1999 State of
the Union address, has made this a major Administration priority. Under the fiscal 1998
appropriations, and President Clinton' s Child Labor Action Plan. Treasury is assigned the overall
task of keeping the products of forced or indentured child labor out of the country. We take this
responsibility very seriously at both main Treasury and at the Customs Bureau. We shall rely of
course on the expertise and the vast experience the Customs Service has in enforcing trade laws.
Commissioner Kelly and Assistant Secretary Bresee are giving this issue a high priority in their
enforcement work. The fact that Lis Bresee and Sam Banks are here shows how much we want
to reach out to all the affected constituencies for your ideas and your support.
LS-256
For press releases, speeches, public schedules and official biographies, call our 24.1zour fax line at (202) 622-2040
'U
s. Government P"ntlng Ql1lce
, 998· 6' 9.559
In selecting the members of the Committee. \\c tried tn achicye balance and diversity of
background and viewpoint. All opinions are welcome hcn:. But. \\e also wanted people .
committed to deal with this issue as an important national priority. You are all agreed on the
importance of eliminating the abuses of child labor. If not. you would not be here. That you may
have principled differences over means or strategy is no indication of lack of commitment on the
issue. It is, indeed, important to your mission. As we have seen in the budget negotiations on
Capitol Hill, as we saw this week in China. differences can otten he reconciled through man's
best friend, the compromise.
I am pleased that you have established a Subcommittee on Business Outreach. This is
very important. We have a limited amount of funds for enforcement activities although we feel
we have enough to meet current needs. They must be shared among competing priorities such as
drug enforcement, enforcement of economic sanctions. and protection of intellectual property
rights. We need to be able to leverage our own efforts with those of all concerned citizens.
including corporate citizens. If we can make a determined Im\ enforcement showing. companies
and individuals will be persuaded to adopt voluntary methods. such as best practices and codes
of conduct, in order to avoid statutory violations.
You meet at a time when the Senate, by a large bipartisan majority. has just ratified the
International Labor Organization Convention to abolish the worst forms of child labor. It is not
easy to get international agreements through the Senate and this shows the importance child
labor has on our national political agendas. The signatories to this Convention are required to
take immediate and effective measures to eliminate the worst forms of child labor. These
include slavery, and practices that amount to slavery. such as the sale and trafficking of children,
bonding of children by their parents and forced labor. and other forms of work which. by the way
it must be done, are likely to harm the health. safety, or morals of children.
I realize that in some countries, child labor is deeply imbedded in traditional cultural and
family patterns. But the nations where it is most prevalent are precisely the nations that can
least afford, in the long run, to sustain it. This issue is not ahout sovereignty. It is about the
future of the world's children. It is about whether a country \\ill stay back or will advance into
the new economy that is changing the patterns of all nations. Child labor is not just cruel and
immoral.
It is also bad economics. It is bad development strategy. In the next century, which we
shall enter just seven weeks from now, competitiveness and prosperity will not belong to
nations that have small children knotting rugs and breaking bricks. They will come to those
that can, with help from private investment and the many multilateral development institutions,
develop an educated and skilled work force that can operate at the cutting edge of technology
and that have the skill--economic, politicaL and cuItural--to adjust to the global economic
environment. The only way developing countries can move into the global economic
mainstream is by developing, not exploiting. their human capital-and that means education and
training from the youngest years through college and beyond. Child labor deprives a generation
of the skills needed to thrive in the technological era in which we live. It consigns such countries
to a wider and wider gap with countries like those in Southeast Asia. which invested in the young
people.
We are elevating core labor standards. including the exploitation of child labor. in our
trade agenda as we seek to create a Working Group on Trade and Labor within the WTO and to
create greater ILO/WTO linkages. The European Union has suggested on ILO/WTO Forum.
although outside the WTO. Those are the larger stakes involwd in what you are helping us to
do. I know that many of you have innovative strategies to accomplish this. I hope you will all
join actively in the work of this committee. offering your ideas. discussing and debating the
issues among yourselves, and coming up with what I know \\ill he good advice.
- 30 -
DEPARTMENT OF THE TREASURY
DEPARTMENT OF JUSTICE
For Immediate Release
November 23, 1999
Contact: Maria Ibanez, Treasury
(202) 622-2960
Grctchen MichaeL Justice
(202) 517-2007
STATEMENT BY TREASURY SECRETARY LAWRENCE H. SUMMERS
AND ATTORNEY GENERAL JANET RENO
In the past six years, many in the House and Senatc ha\c supported the Administration's
efforts to put gun criminals behind bars as well as prc\'cnt thcm rrom getting guns in the first
place. Measures, such as the Brady Law, the Assault Weapons Ban, and expanded crime gun
tracing and coordinated federal and state prosecutions or gun crimes have contributed
significantly to our nation's decrease in violent crime.
Despite broad support and evidence that measures such as the Brady Law help reduce
crime, the House-Senate conference committee could not complete their work to produce a
Juvenile Justice Bill containing important gun safety pro\·isions. As the final Congressional
session of the 20th century concludes. the passage of meaningrul legislation to reduce gun
violence was frustrated.
Gun violence will continue to threaten our communities and parents will continue to fear
for their children's safety until the will of the American people is carried out by enacting
common sense gun legislation in the next Congressional session. We look forward to working
with the Congress to pass gun safety amendments that will make our communities safer as the
new century begins.
- 30 LS-2S7
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
rember 22, 1999
CONTACT:
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
90-Day Bill
November 26, 1999
February 24, 2000
912795DJ7
Term:
Issue Date:
Maturity Date:
CUSIP Number:
5.10s%-
High Rate:
Investment Rate 1/:
5.256%-
Price:
98.724
All noncompetitive and successful competitive bidders were awarded
:urities at the high rate.
Tenders at the high discount rate were
.otted 98%-.
All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered
Tender Type
competitive
Noncompetitive
$
22,672,359
1,334,802
$
611,000
611,000
24,618,161
9,001,776
4,153,180
4,153,180
o
o
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
$
7,055,974
1,334,802
8,390,776 2/
24,007,161
PUBLIC SUBTOTAL
TOTAL
Accepted
28,771,341
$
13,154,956
Median rate
5.090%-: 50%- of the amount of accepted competitive tenders
tendered at or below that rate.
Low rate
5.010%-:
5%- of the amount
accepted competitive tenders was tendered at or below that rate.
-to-Cover Ratio = 24,007,161 / 8,390,776 = 2.86
Equivalent coupon-issue yield.
Awards to TREASURY DIRECT = $1,026,571,000
hU:p://www.publlcdebt.treas.gov
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
{ IMMEDIATE RELEASE
rember 22, 1999
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
181-Day Bill
November 26, 1999
May 25, 2000
912795DX6
Term:
Issue Date:
Maturity Date:
CUSIP Number:
5.235%
High Rate:
Investment Rate 1/:
Price:
5.466%
97.368
All noncompetitive and successful competitive bidders were awarded
lrities at the high rate.
Tenders at the high discount rate were
Jtted 84%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Accepted
Tendered
Tender Type
$
Competitive
Noncompetitive
$
Foreign Official Refunded
SUBTOTAL
Federal Reserve
Foreign Official Add-On
4,345,118
1,074,916
5,420,034 2/
19,661,234
PUBLIC SUBTOTAL
2,585,000
2,585,000
22,246,234
8,005,034
3,635,000
3,635,000
o
o
$
TOTAL
18,586,318
1,074,916
25,881,234
$
11,640,034
Median rate
5.230%: 50% of the amount of accepted competitive tenders
tendered at or below that rate. Low rate
5.130%:
5% of the amount
~ccepted competitive tenders was tendered at or below that rate.
·to-Cover Ratio
=
19,661,234 / 5,420,034
lquivalent coupon-issue yield.
~ards to TREASURY DIRECT = $775,383,000
259
=
3.63
DEPART~1ENT
OF
THE
TREASURY
NEWS
TREASURY
OffiCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 20220 - (202) 622-2960
November 23, 1999
Weekly Release of U.S. Reserve Assets
The Treasury Department today released U.S. reserve assets data for the week ending
November 19, 1999.
As this table indicates, U.S. reserve assets totaled $72,068 million as of November 19,
1999, down from $72,339 million as of November 12, 1999.
u.s. Reserve Assets
(millions of US dollars)
1999
Total
Special
Reserve
Gold
WeekEnding
Assets
November 12, 1999
November 19,1999
··Foreign
Reserve
3/
Stock 11
Drawing
Rights 2/
ESF
SOMA
Position in
IMF 2/
72,339
11,047
10,385
15,966
15,969
18,972
72,068
11,047
10,336
15,900
15,903
18,882
Currencies
1/ Gold stock is valued monthly at $42.2222 per fine troy ounce. Values shown are as of September 30,1999. The
August 31,1999 value was $11,046 million.
2/ SDR holdings and the reserve position in the IMP are based on IMP data and valued in dollar terms at the official
SDRIdollar exchange rate. Consistent with current reporting practices, IMP data for November 12, 1999 are final. Data
. for SDR holdings and the reserve position in the IMP shown as of November 19, 1999 (in italics) reflect preliminary
adjustments by the Treasury to the November 12, 1999 IMP data.
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.
LS-260
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OFFICE
or PUBLIC ,u· ..·AIRS -1500 P~NNSYLVANII\ ,\\iJo:N1J~. III.W. _ WASHlNGTON. D.C .• l0211). (201) 6Z1.2960
IMBARGOED UNTIL 2: 30 P .H.
November 23, 1999
Contact: Office of P~c~g
l02/691-lS50
TR.EASORY TO AUCTION CASK HANAGBMBNT BILLS
The Treasury will auction approximately $28,000 million of 43-day
Treasury cash managem~t bills to be issued December 1, 1"9.
Competitive and noncompetitive tenders for bills to be issued in
the Treasury/Reserve Automated Debt Entry System (TRADES) will be received
through the Federal Reserve Sys~em. Tenders will not be accepted for bills
to be maintained on the book~entry recocds of the n;par~t of the Treasury
(TreasuzyDirec:t:). Tenders will not be received at the Bureau of the public
Debt, Washington, D.C.
Additional amouDt. of CAe bLll. may ~e t ••ued to r.da~.l ae.arva Bank.
as a9~t. tor foreign and international monetary authorities at the highest
diacount rate of accepted competitive tenders.
The aucC£oD being announced today will be cOD~ucted in the .ingle-price
auceioD forma~. All e~eeitiye and noncompetitive awards ~ll be a~ eAe
highest 41scount rate of accepted competitive teDders.
This offeriDg of Treasury securitios is governed by the ter.ms and conditions set forth in the Uniform Offering Circular for the Sale and Issue of
Marketable Book-Entry Treasury Bills, Notes, and. Bonds (31. e!'R Part 356, as
amended.) •
!2!!: Competitive bids in cash management bill auctions must be
expressed as a discount rate with ~ decimals, e.g., 7.10%.
Detail. about the new 8ecurity are giveD in the attached offering
highlights.
Treasu%y ~ll assess its need to issue an additional casb management
bill in mid-December in order ~o reach the announced year-end target cash
balaAce of $70 bi~lion.
000
18-261
'ttacQmEmt
-
F.r P'"I "1,,,,.,, I",ell.,. ,.blte lelr,dlll,s 11114 tJjJlc#al bi,,'II,ltia, ellU 1111' J~-htJlI' flU 11"'111 (202) 62J.2/UO
HIGHLIGHTS OP TUAStJRY OPPBlUNG
OP' 43 -DAY CASH DltAGJDIBNT BILL
No~ember
23, 1999
Offering Amount •.••••.•.•..•••••... $28,000 million
Descripeion of Offering:
Term and type of security ••••.••... 43-day cash Management Bill
CtJSIP nUJllber •••••••••••.•••••••...• 912795 DC 2
Auction daee .••.••••••••...•••.• - .. November lO, 1.999
Issue d.a.t.e .......................... .. December 1, 1.999
Maturity date .......................... . January 13, 2000
Original issue date ••••.•.•.•...... July 1.5. 1999
currently outstanding ••....•••.•... $26,329 milli.on
$1,000
Hin~ bid amount and mult1ples
Submission of Bids:
Noncompetitive bids ••...••• Accepted in fu1l up to $1,000,000 at
the higheat accept~ diacount rate.
Competitive bids ••••••. (1) Must be expressed as a discount rate with
two decimal., e.g., 7.10%.
(2) Net long posi.eion for each bidder must
be reported wh~ the ~ of ch. total b14
amount, at all 41acOUDt rates, and the
net long poaitlon i . $1 billion or
greater.
(3) Net long positi.on mu.t·be d.te~ed as
of one half-hour p~io~ to the clOSing
time fo~ receipt o~'compec~tive tenders.
Maximum Recowaiz.d Bid
at a Single Rate •.•••..••• 35% of public offering
Maximum
A~rd
...•••.•••••.•.. 35% of public offering
Receipt of TeDders:
Noncompetitive tenders •••.• Pr10r eo 12,00 noon Bastern
Co~etj.eive
St~4.~d ~~
on &uct1on day
tender••••••••• Prior to 1:00 p.m. Bastern Standard ttme
on auc ticm day
PaY!!nt Term. •••••••••••••••• By charge to a !UD4. account at • Pederal
Reserve Bank on i.sue date, or P~y.maDt of
full par u.olmC witl:a. teDCler.
OFFJCE OF PUBLIC AFFAIRS eliOO PENNSYLVANIA A\' ENUE. N.W•• WASHUIGTON. D.C.e 10220. (202) 62%-2"0
CO)1'l'ACT;
EMBARGOED 'O'N'rl:L 2: 30 P.H.
November 23, 1999
Office of Financing
202/69l-35SQ
TREASURY OFFb.S 13 -WED: AND 26-WBBK BILIaS
The Treasury will auction two series of Treasury bills totaling
approxtmately $17,000 million to ~efund $15,247 million of publicly held
securities maturing December 2, 199', and to raise about $1,753 million of new
cash.
In addition to the public holdings, Federal Reserve Banks for their own
accounts hold $7,890 million of the maturing ~ills. which may be refunded at
the highest d~scount ~ata of accepted co~etitive tenders. Amounts issued to
these accounts will be ~ addition to the offering amount.
The maturing bills held by the public !Delude $2,703 million held by
Reserve Banks as agents for foreign .aDd international monetary
authorities, which may be refunded within tbe offer~g amount at the highest
diacount rate of ace_peed oomp.~~eive t.n4.~.. A44itional amount. may be
issued for suob accounts if the aggregate amount of new bids ·axceeds the
aggrega.te amount of maturing bills.
~ederal
Treas~ireet customers requested
approx~t.~y $923 ~llion ~to
ings of
tbe 2'-v••k
that we reinvest their maturing holdchs 13-waek bill and $768 ~11ion ~to
.11~.
This offering of Treasury securities is gover.nad by the ter.ms and conditions set forth in the Unifo~ Offering Circular fo~ the Sale and Xssue of
Harketable Book-Entry Treasury Bills, Notes, and Bonds (31 CPR Part 356. a.s
aJnended).
Details abou~ each of the new securities are given in the atta.ched offering highli.gbts.
000
Attacbmellt
18-262
-
For press releezses, speeches, public schedules anti offtc;allrio/P'llphies, C/lU Dur 24-hOUT lox line at (202) 622-20~0
HrGHLIGHTB OF TRBASURY
orrSRXNOS or
TO BB XSSOBD DBCBNBBR
a,
BILLB
1999
November 23 1 1999
Of£ering Amount ••••..••.•.•..•.•...••.. $9,000
~llion
$8,000 million
DeBcript~on
of Offering: .
Te~ and type of security ••..••••.•••..
CUBI' n.-ber . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Auction date •.•••••.•.•••••...•..••••.•
Issue date .....•••..••••..•.....••••••.
Maturity date ••••••••••••..••••••••••••
Original issue date ••••••••••••.•••••••
Curr en t1y outstanding •••••••.••••••••••
Mini.um b~d amount and multiple••••••••
The
fo11~ng
91-day bill
912795 DK 4
November 29, 1999
December 2, 1999
March 2, 2000
Karch 4,1999
$27,403 million
912795 DY 4
November 29, 1999
December 2, 1999
June 1, 2000
December 2, 1999
$1,000
$1,000
182-day bill
rules apply to all securities mentioned abovel
Sub_i •• ion of Bids •
• onc~etiti~ hids ••••••••• Acoepted in full up to $1,000 1 000 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 ••oognized Bid
at a Single Rate •••..•••••••
35~
of public offering
Maximum Award ••••.•.••.••.•.•.. 35' of public offering
Receipt of Tenders.
Noncompetitive tenders ••.... Prior to 12100 noon Bastern Standard time on auction day
Competitive tenders •.•.•••.. Prior to 1:00 p .•• Bastern Standard time on auction day
Payment 7erma: By charge to a funds account at a Pederal R~Berve Bank on issue date, or payment
of full par . .ount with tender. TreasuryD1rect customers can use the Pay Direct feature which
authorizes a charge to their account of record at their finanaial institution on issue data.
DEPARTMENT
OF
THE
lREASURYilJ
TREASURY
NEW S
OFFICE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W .• WASlflNGTON, D.C .• 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
November 29, 1999
SECRETARY SUMMERS TO VISIT
Contact: John Longbrake
(202) 622-2960
soum AMERICA
Treasury Secretary Lawrence H. Summers will visit Argentina, Bolivia and Brazil
during a four-day trip to South America, December 1 - 4.
The Secretary's tour will begin in Buenos Aires, Argentina, followed by stops in Santa
Cruz, Bolivia, and Sao Paulo, Brazil, before culminating in Rio de Janeiro where the Secretary
is scheduled to address the Inter-American Development Bank's (IDB) 40th Anniversary
Conference. During the visit, Secretary Summers will meet with government officials in each
of the three countries.
In addition to addressing the IDB, Secretary Summers will speak before the American
Chamber of Commerce in both Buenos Aires and Sao Paulo.
Thursday, December 2
Treasury Secretary Lawrence H. Summers
Argentina-American Chamber of Commerce
Remarks
8 a.m. (local time)
Marriott Park Hotel, Salon Fiestes
Buenos Aires, Argentina
Treasury Secretary Lawrence H. Summers
Debt Reduction Agreement Signing
6 p.m. (local time)
Hotel Los Tajibos, Salon Convencionales
Santa Cruz, Bolivia
LS - 263
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622·2040
'U S Governmenl Ponl.ng 01l.ce 1998 - 619-559
Friday. December 3
Treasury Secretary Lawrence H. Summers
Brazil-American Chamber of Commerce
Remarks
3:30 p.m. (local time)
Gran Melia Hotel
Sao Paulo, Brazil
Saturday December 4
. Secretary Lawrence H. Summers
Inter-American Development Bank 40th Anniversary Conference
10 a.m. (local time)
Remarks
Quitandinha
Petropolis, Brazil
-30-
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
)R IMMEDIATE RELEASE
)Vember 29,
1999
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 13-WEEK BILLS
91-Day Bill
December 02, 1999
March 02, 2000
912795DK4
Term:
Issue Date:
Maturity Date:
CUSIP Number:
5.200%
High Rate:
Investment Rate 1/:
Price:
5.355%
98.686
All noncompetitive and successful competitive bidders were awarded
Tenders at the high discount rate were
lotted 10%. All tenders at lower rates were accepted in full.
~curities at the high rate.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Competitive
Noncompetitive
$
25,150,458
1,283,048
7,520,558
1,283,048
204,303
Foreign Official Refunded
26,637,809
SUBTOTAL
TOTAL
$
26,433,506
PUBLIC SUBTOTAL
Federal Reserve
Foreign Official Add-On
Accepted
Tendered
Tender Type
4,019,955
40,697
4,019,955
40,697
-----------------
$
30,698,461
$
13,068,561
Median rate
5.180%: 50% of the amount of accepted competitive tenders
tendered at or below that rate. Low rate
5.090%:
5% of the amount
: accepted competitive tenders was tendered at or below that rate.
lS
d-to-Cover Ratio = 26,433,506 / 8,803,606 = 3.00
Equivalent coupon-issue yield.
Awards to TREASURY DIRECT = $1,002,838,000
-264
http://www.publlcdebt.treas.gov
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
TREASURY SECURITY AUCTION RESULTS
BUREAU OF THE PUBLIC DEBT - WASHINGTON DC
CONTACT:
OR IMMEDIATE RELEASE
ovember 29, 1999
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 26-WEEK BILLS
182-Day Bill
December 02, 1999
June 01, 2000
912795DY4
Term:
Issue Date:
Maturity Date:
CUSIP Number:
5.330%
High Rate:
Investment Rate 1/:
5.570%
Price:
97.305
All noncompetitive and successful competitive bidders were awarded
Tenders at the high discount rate were
.lotted 63%.
All tenders at lower rates were accepted in full.
~curities at the high rate.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
competitive
Noncompetitive
PUBLIC SUBTOTAL
Foreign Official Refunded
24,518,607
1,061,926
----------------25,580,533
$
TOTAL
$
4,455,815
1,061,926
5,517,741 2/
2,483,897
2,483,897
-----------------
SUBTOTAL
Federal Reserve
Foreign Official Add-On
Accepted
Tendered
Tender Type
28,064,430
8,001,638
3,870,000
496,103
3,870,000
496,103
-----------------
$
32,430,533
$
12,367,741
Median rate
5.325%: 50% of the amount of accepted competitive tenders
is tendered at or below that rate.
Low rate
5.240%:
5% of the amount
E accepted competitive tenders was tendered at or below that rate.
ld-to-Cover Ratio = 25,580,533 / 5,517,741 = 4.64
i
i
Equivalent coupon-issue yield.
Awards to TREASURY DIRECT = $825,687, 000
LS-265
httn://www.publicdebt.treas.gov
Department of the Treasury
Bureau of Alcohol, Tobacco and Firearms
ATF~~©
For Immediate Release
Contact: Jeffrey R. Roehm (202) 927-8500
Date: November 29, 1999
ATF ANNOUNCES ONLINE TECHNOLOGY TO STOP GUN TRAFFICKERS
Partnering with State and Local Law Enforcement to Reduce Violent Crime
Washington - Treasury Secretary Lawrence H. Summers joined John W. Magaw, Director of the Bureau of
Alcohol, Tobacco and Firearms (ATF) today to launch Online LEAD, a new technology designed to aid
law enforcement in its fight against illegal firearms traffickers. "Online LEAD" is the newest crimefighting tool in ATF's "electronic crime fighting arsenal".
.
"Online LEAD takes our fight against gun trafficker~ into cyberspace," said Secretary Summers. "It gives
federal, state, and local law enforcement officials throughout the country a new tool to help identify and
arrest gun traffickers."
Online LEAD was created in February to enhance the ATF's information system that provides investigative
leads to identify illegal frrearms trafficking. The system will send up "red flags" on potential illegal
frrearms traffickers throughout the country.
Director Magaw commented, "With Online LEAD, ATF field offices nationwide will be able to assist our
State and local law enforcement partners with real time access to Firearms Tracing System (FTS) data."
The FTS currently contains over 1 million crime gun traces and is updated continuously. This greatly
enhances the field investigator's ability to quickly identify illegal frrearms trafficking and interdict the
supply of guns to the illegal market.
A TF and local law enforcement personnel have successfully used Online LEAD in a variety of locations.
Firearms trafficking task forces in cities such as New York, Memphis, Atlanta, Baltimore and Washington,
D.C. have been able to link the purchaser of a crime gun to crime guns recovered in other locations thus
identifying potential illegal frrearms traffickers.
To illustrate the importance of Online LEAD, Metropolitan Nashville Police Chief Emmett H. Turner cited
a recent case where information obtained through Project LEAD identified the persons responsible for
illegally trafficking a frrearm used in the May 1996 murder of Officer Francis Scurry of his department.
That firearm was one of approximately 400 frrearms illegally trafficked by two people who were
subsequently arrested and convicted for violations of the Federal firearms laws.
Online LEAD is available to all State and local law enforcement agencies at ATF field offices throughout
the country.
www.atf.treas.gov
L5-266
Department of the Treasury
Bureau of Alcohol, Tobacco and Firearms
•
Online Lead is the investigative software used by ATF special agents, inspectors, and
ATF Firearms Trafficking Task Force police officers throughout the U.S. This
software can be used to access-and sort firearms trace information in such a way that
investigators can identify trends and patterns that can indicate the illegal trafficking of
firearms.
•
There are over 1 million traced firearms entries in the ATF National Tracing Center
database.
•
Online LEAD now updates crime gun trace data every 24 hours-data that special
agents, inspectors, and State and local officers can use to identify illegal firearms
trafficking. A firearm trace completed today is available for use in an
investigation tomorrow.
•
Online LEAD evolved from Project LEAD which later developed into E-LEAD, and
was ATF' s first effort at providing investigators access to crime gun trace data. This
system utilized information that was stored on discs, and required that the information
be shipped to ATF field offices, which proved to be slow, delaying valuable
information from reaching field personnel in a timely manner. Online LEAD was
released in February 1999 for field-testing, and is now available to all ATF personnel
and State and local Task Force officers nationwide via ATF online computer
technology.
•
Online LEAD is operational in all 331 ATF field and area offices in the United States,
Virgin Islands, Puerto Rico, and Guam.
•
State and local police agencies can also have access to Online LEAD data thi-ough
task force participation and other ATF partnerships. Online LEAD's remote
accessibility allows A TF special agents and inspectors to take the Online LEAD data
to the field whenever and wherever it might be needed.
•
As more agencies begin comprehensive crime gun tracing, investigators will be able
to identify additional multi-jurisdictional patterns of illegal firearms trafficking.
•
For fiscal year 1999, there were 209,127 crime gun traces submitted to the National
Tracing Center.
•
Online LEAD will continue to evolve to meet the needs of the law enforcement
community as they combat the illegal trafficking of firearms in their community.
•
Online Lead is another example of ATF' s mission to reduce violent crime, and assist
state and local law enforcement in their efforts to reduce violent crime.
11/30/99
Stuan E. Eizenstat
Deputy Secretary
U.S. Depanmeot of the Treasury
Keynote Address
U.S. Alliaoce for Trade Expansion
WTO Ministerial
Sea~e, VVasbington
November 29,1999
1 am. very happy to be here, with so many people I know so well who believe in open
marketS and who have come to Seanle to help move our trade agenda forward. Today we
acknowledge the imponance of me role of the private sector and ofNGOs in the dialogue on
trade. The U.S. has been at the forefront of pusbing for more openness, tranSparency, and
accountability.
The United States is pleased to be able to host this week's Ministerial, in this beautiful
city, whose economy was built upon trade and shipping. which looks westWard to some of our
most important markets, and which has gained fame around the world as a symbol of American
technology in the new global economy.
I am happy to see Mack MeLany, who has served President Clinton in so many
capacities, and is a keen supponer of our imponant e.conomic relations with latin America. I am
delighted also to be here with my old friend Jerry Jasinowski. We worked together in President
Caner's campaign and Administration. I have always enjoyed working with him, and I have
watched with admiration as Jerry has emerged as a strong and responsible voice for the
manufacturing sector.
In Seanle ibis week. we shall be preparing for a new trade round in a new century. Trade
is no longer an esoteric international economic issue involving only an elite few - as was the
case when I was in the ·Carter White House and the Tokyo Round implementing legislation
passed with only a handful of diss~ting vote:i. Today, trade touches the lives of us all, business,
workers, farmers, and consumers alike. But trade has unfairly become a whipping boy for all of
those threatened by the rapid change that technology and a globalized economy are bringing
about. Our goal in Seanle is to launch a broad-based, ambitious and robust new trade round for a
new millennium which pursues the built-in agenda for the Uruguay Round, including agriculture
and services, which includes new issues like e-commerce, and o~d issues like market access for
non-agricultural products - and that can be: completed in a three-year period.
But President Clinton wants this to be a different Round. one that addresses concerns in
developed and de1leloping countries that will provide a human face to trade by stressing
observance of core labor standards and environmental sensitivity, that will make: the WTO more
accountable and open. that focuses on jobs and development, broadly shared prosperity and
improving the quality of life and work around the world. It ~hould lead those who feel on the
L8-267
2
outSide. both within the U.S. and in the developing nations, to join a shared consensus on the
importance of increased trade and op~ markets.
If we can gain approval of a constrUC'tive agenda for negotiation, and if the negotiations
succeed over the next three years, people of every nation will be able to participate in the benefitS
of open markets. Your Alliance has brought together hundreds of organizations. including some
of the most influential in the private seCtor. Many have been strong supponers of trade for
decades, from the Kennedy Round to the Uruguay Round and NAFTA. We need you even more
today. We need YOW' help to persuade Americans at the grass roots level that If they want to keep
good economic times going; if they want rising wages in the U.S. and around the world; if they
want to create greater environmental sensitivity in developing countries, open marketS under
global trade agreements is the way to make it happen. There are five things we musr do. First,
we must do a better job of educating the public about the benefits of trade in general. Second, we
must demystify the WTO by explaining the importanCe oftheWTO and of rules-based trade to
the world economy. Thirc1, we must layout The new elements of our national trade agenda,
especially those that relate to labor, the environment, and internet conunerce. Fourth, we must
give developing IUtions, particularly the least developed, a sense~f equity in the multilateral
trading system. And fifth, we must improve market access for industrial and agricultural
products.
Ironically, more trade will actually foster the goals of those demollStI'ating here this week.
Trade i~ one of me best anIidot~s to poverty and one of the most crucial ingredients to sustainable
devdopme:nt. It creatc:s new middle classes, for example in East Asia and Latin America, with
rising wages and enhanced environmental interest, and a commitment to political openness and
democracy. It is not a coincidence that new democracies of the •80's and "90's from South Korea,
Taiwan, and Thailand to Argentina and most ofLann America have develop~d as trade and
openness to the world created newly empowered middle classes with a democratic
consciousness. An open, fair trading system for agriculture is among the world's strongest
Ckfense:; against hunger. By reducing or eliminating expoll subsidies and trade-distorting
domestic supportS in agricultural and fisheries we protect the environment by removing
incentives for OVc!I'-use of land and over-fishing. Competition leads to more efficient use of
scarce resources. At the same time, it is impollant that we hear each other"s messages.
Mainstream NGOs are right that the WTO should be more transparent, and should give increased
attention to the environment and workers rights.
1 would like: to say a few words about each of the five challenges I mentioned abov~.
Explaining the Worldwide Benefits of Trade
If! have a single theme, it is that we should nor be defensive here at Seattle. American
business has no reason to be defensive about promoting free trade and open markets, and
spreading the technology boom. Together with fiscal discipline that has led to the first budget
surpluses in three decades, they have created unprecedented prosperity. moderate inflation, rising
3
wages, increased job growth (nineteen and a half million new jobs since 1993) and low
unemployment. To tum away from this successful combination of policies - including increased
trade -- would be to threaten the pillars upon which our unprecedented prosperity has been
erected. And those who would be hun first would be our workers and the disadvantaged who
have fully begun to enjoy the fruits of expanding opporrunity. We must not put them at risk.
Nor must - or will- the U.S. government be defensive about erecting and strengthening a rulesbased trade system. This is a powerful instrument in assuring that counnies win abide by their
commitments. The U.S. brings and wins more trade cases th3n any other counuy in the worldfor the b~t:fit of our consumers, workers and businesses.
It is absolutely fallacious to argue that our workers cannot compete with lower wage
workers abroad. By vinue of their skills and productivity, they do so successfully every day.
Low wages are a sign oflow skills and low productivitY. The remarkable productivity and
capabihty of our workers has spawned an unprecedented growth in our exports. And the imports
we accept allow wages in poorer countries to improve.
No nation benefits more from increased trade than we do .. We are the largest exponer of
agricultural goods and manufactured goods in the world. Wages in U.S. expon-related industries
are 12.5 to 18 percent high.erthan elsewhere in the economy. Even the wages of unskilled
workers in expon-related industries are around 7 percent higher than unskilled workers in the rest
of the economy. Trade now represents close to ODe quaner of our economy and has contributed
to one-third of our economic growth since 1993. Trade has created millions of jobs that pay
above average wages. It generates the competition.. innovation and productivity that have helped
sustain growth with low inflation. And since 96 p~cent of the world's population does not live
in th~ U.S., trade is the key to the global growth and prosperity upon which America's own
growth and prosperity will ultimately depend.
Other nations benefit equally. Eight trade rounds In the last fifty years have resulted In
overall tariff reductions of over 90 percent. In Western Europe, tariffs have been reduced to zero
internally and the percentage of per capita income attributable to trade has doubled. One
. measure of the success of me Common Market and the European Union in improving living
standards is the number of nations applying to join the EU today. As for the developing
countries, their share of world trade has risen from one-quarter to one-third since the Uruguay
Round began. In Asia, hWlCired of millions of people have been lifted from poverty by
investments that would not have been made had nations kept trade barriers high.
Trade between nations promotes peace between mtions. Between 1870 and 194:5, France
and Germany fought each other in three wars, with devastating results. Today, their economies
are intenwined so closely it is inconceivable they would go to war again. The nations of me
Middle East trade: far more outside their region than they do with one another. Only seven
percent of all of their trade is within this region. If they could develop greater trading
opponunines, they too might find it easier to stay at peace.
4
Reduction of trade barriers was also a major factor in the vicroI)' of th~ free market
system over the Commurusr system, which helped to end the Cold War. The fonner Soviet
Union did linle to encourage open trade among its satellites. Western Europe fonned the
Common Market. When the people of Eastern Europe saw the growing disparity between their
standard of living and that of free market nations, achieved in large part by reducing traditional
trade batriers, they had a powerful incentive to break free from totalitarian rule.
Every country wishes to expon more of its products around the globe. But that means
countries must also be receptive to fairly traded impons. There can be no one· way street for
trade. ImportS also SeNe multiple benefits in and of themselves. In the modem economy. trade
and technology are synergistic. hlstant communications and rapid rransponation make it possible
for flowers grown in the Andes and fish caught in the waters off Norway to appear fresh on
American tables within hours. Impons allow our consumers greater choice, at lower prices. They
help make our companies remain competitive and provide cheaper inputs for the products we
produce and export. including higlHech products. Equally important. importS allow foreigners to
eam the dollars they need to buy our food and fiber, our airplanes and software, adding good
paying jobs to the economy of Washington State and every other srare in the country.
Demystifying the WTO
The WTO is a new organization. Few Americans know what it does or how it works.
The WTO is not the advance guard of world govenunent or a cabal between multinational
corporations and govenunents to exploit workers and despoil the environment. The truth is
much more mundane, but critically important. The WTO is a body of rules, written rhrough
negotiations between sovereign governments. which are not binding on any nation until they
have been rarified by the nation'S sovereign processes. The rules and procedures simply assure
that nations conduct their economic interactions fairly and in compliance with the obligations
they have undenaken. Its procedures are replete with opp.orrunities for hearings, appellate
review, and settlement. Without the WTO, there might well be a free-for-all down to the least
common denominator: The WTO does not undermine sovereignty. Nations are allowed to take
actions to preserve their environment and the health of their people. Nations can take protective
action when other nations refuse to adhere [0 the rules after having full opporruniry to be heard. 1
belie,:,e that when people know the rea1 WTO instead of the phantom, they will regard its work in
a bener light.
But it is important for the WTO to be demystified. This means that it should adopt the
transparency and openness refonns Pre~ident Clinton has suggested, which will pennit NGOs
and other interested parties to participate in WIO processes.
Labor, the Environment, E-CQmmerce and Biotechnology
Because the WTO is new, there are some imponant constitutencies with whom it has not
fully connected. One is labor. For forry years. the U.S. has worked to raise inremationallabor
5
standards at the same time as we were establishing an open trading syttm. We have promoted
open markets, core labor standrds. strong safety nets and high standards of workplace ~alth and
safety. We believe that open trade and rising living standards and working conditions reinforce
each other.
We should recognize, however, that many workers and their rc!prese1ltatives do nor think
the WTO is interested in the concerns they have about free trade. It is important that the WIO
strengthen its credibility and legitimacy among labor and irs representatives. During the first .
ministerial in Singapore, all members of the WTO renewed their comminnent observing
internationally recognized core labor stadards, and supported closer collaboration between the
WTO and the ao. At Seanle, we want to build on this concensus. Our goverument will press
for a Working Group on International Trade and Labor in the WTO to consider key issues such
as the effect of increased trade and invesnnent on employment, social protections and abusive
child labor. We will also work to improve cooperation beweeen the WTO and the ILD.
It is critical that you in industry help make the case by supponing imponam aspects of
our labor agenda - such as a trade and labor working group - and: that you find other ways to
reach out through your associations to labor. environmental and other NGOs to find common
ground.
We also want the WTO to show a greater sensitiviIy to the environmental community.
On November 16, President Clinton and Vice President Gore outlined a strategy to ensure that
efforts to expand trade are consistent with high levels of environmental protection and serve the
broader goal of sustainable development. The President issued an Executive Order to require
environmental reviews of proposed trade: agreem~ts; he:: released a Declaration of Environmental
Trade Policy, which ebb orates the principles to guide U.S. negotiators at the WTD; and he
enunciated a strategy to promote developing country 'environmental practices through tedmical
assistance.
OLit government wants the WIO panels which adjudicate trade disputes to operate with
greater transparency. They should allow environmental groups as well as other interested parties
an opponunity to present their views so that all will feel they have had a fair sa)'. We promote
good environmental practices by reducing subsidies in areas like agriculture and fisheries.
subsidies that abuse the land and exhaust fish stocks. No one stands to benefit more than the
environmental community from the removal of anificial subsidies.
.
.
We also will press for a permanent worldwide moratorium on CUStoms duties on
electronic commc:rce transactions as an element of a continuing WID work program to keep the
electronic marketplace fo the future free of inappropriate international trade barriers. We want a
concrete deliverable now-a continued moratorium on e-commerce tariffs. We also seek
forbearance from unnecessary regulation ofE-commerce, applicability ofWTO rul~s to Ecommerce! and clarification of the relationship of the Internet to existing GATS comminnenlS.
6
We also seek a WTD working party for agricultural productS of new technologies to
develop and elaboraIe -WTD disciplines for approval processes for these agricultural products.
Developillg CouDtries
It is crucial that we launch a Round which enables the least developed countries to reap
the full benefit of the multilateral trading system. We have a multi-pronged approach to assist
developing nations. First, we have taken the lead on bilateral debt reduction and in developing
the enhanced HIPC iIUtiative which will expand debt relief to additional heavily-indebted poor
countries.
Second, we support enhanced market access for products from the least developed
counuies through existing preference programs. Our GSP program and our new proposals
embodied in pending Africa and CBI legislation would be a step in achieving this result. We
hOp~ othc:=r WTO members, including some developing countries, will accord least developed
counnies similar treatment.
Third. while we are not prepared to reopen the Uruguay Round negotiations or support a
wholesale extension of transition periods, we do recognize that a number of developing countries
have had difficulty implemt!%lting all of their objectives from the Uruguay Round.
Founh, we support greater efforts to assist developing countries in capacity building to
meet their trade objectives, comply with their trade obligations, and to be bener integrated into
the world economy.
We are prepared to do these steps both from a perspective of fairness and equiry to the
world's poorest nations but also because these ar~ countries with th~ greatest growth potential to
become customers of U.S. products in a new millennilllIl.
Market Access
The'U.S. is ready to haVe! a comprehensive market acCe!ss negotiation on agricultural and
non-agriculrural products provided that acce!lerared tariff liberalization negotiations are part of
the package. ATL can be achieved now and implemented provisionally pending compl~tion of
the broader market access negotiations. The principles for the negotiations must ensure effective
market openings and the mandate must be equally ambitious for agriculrural and non-agricultural
products. World agricultural tariffs average 50 percent - five times higher than U.S. rates - and
rt:duce opportunities for farmers in the! U.S. and around the world.
These are some of the issues on which we need your help this week. Weare also going to
need your help in promoting the open markets agenda next year. This includes NTR status for
China, so that nation can become a member of the WTO, under the terms of the agreement
7
brilliantly negotiated by Charlene Barshefsl..-y along with Gene Sperling. It also means the
African Trade Initiative and the Caribbean Trade Initiative. You must.be in the vanguard in
explaining their benefits and more broadly the benefits of trade to Congress and the Amc?rican
people.
We look forward to working with the Alliance and its constituent organizations, as we
have done so often and so productively in the past We have won many victoric!s together over
the past few years. We shall continUe! to do so, because history shows we are on the right side. I
have spent a considerable part of my career in public life working shoulder-lo-shoulder with
many of you in. this room and fighnng alongside those who believe that trade is good for America
and the world. We have a great deal of which to be proud. But the fight is just beginning. I look
forward to this week, and to everything that we together will do in the furore.
Thank you very much.
•••••
DEPARTMENT
OF
THE
TREASURY
NEWS
OFFlCE OF PUBUC AFFAIRS • 1500 PENNSYLVANlAAVENUE, N.W.• WASmNGTON, D.C .• 20220. (202) 622-2960
Weekly Release of U.S. Reserve Assets
November 30, 1999
The Treasury Department today released U.S. reserve assets data for the week ending
November 26,1999.
As this table indicates, U.S. reserve assets totaled $71,906 million as of November 26,1999,
down from $72,128 million as of November 19, 1999.
U.S~;.ReserVe Assets
:(t'riillloriSM~US dollars)
1999
Total
Reserve
Special
Week Ending
Assets
Gold
Stock 11
November 19, 1999
72,128
11,047
November 26, 1999
71,906
11,049
Drawing
Foreign
C urrenCles
. 31
Reserve
ESF
SOMA
Position in
IMF 21
10,361
15,900
15,903
18,916
10,126
16,121
16,123
18,487
Rights
21
1/ Gold stock is valued monthly at $42.2222 per fine troy ounce. Values shown are as of October 31, 1999. The September 31),
1999 value was $11,047 million.
2/ SDR holdings and the reserve position in the HviF are based on IMF data and valued in dollar terms at the official SDR/ dollar
exchange rate. Consistent with current reporting practices, IMF data for November 19, 1999 are final. Data for SDR holdings and
the reserve position in the IMF shown as of November 26, 1999 (in italics) reflect preliminary adjustments by the Treasury to the
November 19, 1999 IMF data.
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 ma\· be
agreed upon by the parties to the transactions.
L8-268
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-204 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
November 30, 1999
Office of Financing
202-691-3550
RESULTS OF TREASURY'S AUCTION OF 43-DAY BILLS
43 -Day Bill
December 01, 1999
January 13, 2000
912795DC2
Term:
Issue Date:
Maturity Date:
CUSIP Number:
5.30 %
High Rate:
Investment Rate 1/:
5.42 %
Price:
99.367
All noncompetitive and successful competitive bidders were awarded
securities at the high rate.
Tenders at the high discount rate were
~llotted 33%. All tenders at lower rates were accepted in full.
AMOUNTS TENDERED AND ACCEPTED (in thousands)
Tendered
----------------70,933,000
$
1,000
----------------70,934,000
$
Tender Type
Competitive
Noncompetitive
TOTAL
Accepted
$
28,004,500
1,000
$
28,005,500
5.28 %: 50% of the amount of accepted competitive tenders
Low rate
5.23 %:
5% of the amount
)f accepted competitive tenders was tendered at or below that rate.
Median rate
,as tendered at or below that rate.
lid-to-Cover Ratio
=
70,934,000 / 28,005,500
=
2.53
./ Equivalent coupon-issue yield.
LS-269
http://www.publicdebt.treas.gov
D EPA R T i\l E ~ T
0 F
l' H E
TREASURY
T REA SUR Y
NEWS
Ot'FICE OF PUBLIC A.FFAIRS. tSOO PENNSYLVANIA A.VENUE. N. W.• WA.SHINGTON. D.C.e 20120. (202) 612.2960
EHBARGOED 1:Jlft:tL 2: 30 P .11.
DeceBbex 2, 1999
CONTACT:
Office of
Financ~
202/691-3550
TREAStrRY OFFERS 13-WEEK, 26-WEEK,· AND 52-WEEK B:ILLS
The Treasur,y will auction three series of Treasur,y bi11s totaling
approxtmately $27,000 million to refund $25,255 million of publicly held
securities maturing December 9, 1999, and to r~ise about $1,745 million of
new cash.
In addition to the publ.ic hol.dings, Federal. Reserve Banks for their own
hold $12,987 million of the maturing bills, whieh may be xefunded at
the hi~he8t discount rate of accepted competitive tenders. Amo~Dts issued
to tbese acco~t8 will be in addition to the offering amount.
&CCo~t8
The maturing bills beld by the public include $4,469 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 ~ounts may be
issued for such accounts if the aggregate amount of new bids exceeds the
aggregate amount of maturing bil1s. For purposes of deter.mining such additional amounts, foreign and internationa1 monetary authorities are considered
to hold $3,735 million of the original 13- and 26-week issues and $734 million
of the original 52-week issue.
Treasur,yDirec~ customers requested that we reinvest their maturing
holdings of approximately $899 mil 1- ion in~o the13-week bill, $109 mil.lion
into the 26-week bill, and $472 million into the 52-week bill.
This offering of Treasury securities is governed by the terms and eoD.ditions set £orth 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) •
netails about each of the new securities
offering highlights.
L8-270
000
a~e
given in the attached
HXGHL~GHTS
OF TREASURY OFFBRXNGS OF BXLLS
TO BE
~SSUED
DBCEMBER 9,
~999
'\
December 2, 1999
Of fering Amount •••••••••••••••••.•• .$9,000 million
Description of Offering:
T.~ and type of .eourity •.••••..•• 91-day bill
CUSIP nwnber •••••••.••••••••••••••• 912795 Dr,
~
Auctiondate •••••••••••••••••••.••• December 6, 1999
l:lIsue da.te .•••••••.••.•••.•••.•..•• December g, 1999
Maturi tr date ••••••••••••••••••.••• March g, 2000
original issue date •••.••.•••••.••• Septamber 9, 1999
CUrrently outstanding ••••••••••.•.• $11,873 million
Minimum bid amount and multiples •.• $1,000
millio~
$8,000 million
$10,000
182-doy bill
912795 DZ 1
Decamber 6, 1999
Decamber 9, 1999
June 8, 2000
December 9, 1999
364-day bill
912795 EJ 6
December 7, 1999
December 9, 1999
Dec~er 7, 2000
Decamher 9, 1999
$1,000
$1,000
The following rules apply to all securiti&8 mentioned above:
SubrnissLon of Bids:
Noncompetitive bids ••••.• Accepted in full up to $1,000,000 at the highest discount rate of accepted
competitive bids.
Competitive bi~B ....••••• (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 billi6n o~ ~reater.~
(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 Rate ..••.••.. 35% of public offering
Maximum Award •..•.•..••...•. 35% of publio offering
Receipt of Tenders:
Nonc~etitive tenders ••. Prior to l~:OO noon Eastern Standard tiMe on auction day
Competitive tenders •••..• Prior to 1;00 p.m. Eastern Standard time on auction day
p~ent
Ter.ms .•.••......•.•• By charge to a funds account at a Federal Re.erve Bank on issue date, or
payment of full par ~ount with tender.
Tre4Bu~Direct customers can use the
Pay Direct feature which authorizes a charge to their account of record at
their financial institution on issue date.
sderal financing
WASHINGTON. D.C
20220
bankNEWS
FEDERAL FINANCING BANK
October 31, 199 Q
Kerry Lanham, Secretary, Federal Financing Bank (FFB),
announced the following activity for the month of October 1999.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $42.5 billion on October 31, 1999,
posting a decrease of $649.9 million from the level on
September 30, 1999. This net change was the result of a decrease
in holdings of agency debt of $675.3 million, in holdings of
agency assets of $90.0 million, and an increase in holdings of
agency guaranteed loans of $115.4 million. FFB made 64
disbursements during the month of October. FFB also received 19
prepayments in October.
Attached to this release are tables presenting FFB October
loan activity and FFB holdings as of October 31, 1999.
18-271
0
<.D
00
0
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N
N
N
~
<.D
N
0
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~
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Page 2
FEDERAL FINANCING BANK
OCTOBER 1999 ACTIVITY
Date
Borrower
Amount
of Advance
F~nal
Maturity
Interest
Rate
10/04/99
10/04/99
10/05/99
10/05/99
10/06/99
10/06/99
10/07/99
10/07/99
10/08/99
10/08/99
10/12/99
10/12/99
10/13/99
10/13/99
10/14/99
10/14/99
10/15/99
10/15/99
10/18/99
10/18/99
10/19/99
10/19/99
10/20/99
10/20/99
10/21/99
10/21/99
10/22/99
10/22/99
10/25/99
10/25/99
10/26/99
10/26/99
10/27/99
10/27/99
10/28/99
10/28/99
10/29/99
10/29/99
11/01/99
11/01/99
4.950%
5.000%
5.002%
4.992%
5.000%
4.982%
4.992%
4.940%
4.982%
4.960%
4.940%
4.937%
4.960%
5.055%
4.937%
5.107%
5.055%
5.148%
5.107%
5.166%
5.148%
5.273%
5.166%
5.273%
5.273%
5.273%
5.273%
5.262%
5.273%
5.187%
5.262%
5.263%
5.187%
5.273%
5.263%
5.263%
5.273%
5.231%
5.263%
5.239%
:ENCY DEBT
r. S. POSTAL SERVICE
r. 5.
r. 5.
r. 5.
r. 5.
r. S.
r _
s.
'.5.
'.5.
'.5.
'.5.
.5.
. S.
.5.
.S.
.5.
5.
5.
5.
5.
5.
5.
.5.
.5.
.S.
.S.
•S.
.5.
.5.
.5.
.s.
,So
,S.
S.
S.
5.
S.
S.
S.
S.
S.
postal
postal
postal
postal
postal
postal
postal
Postal
Postal
postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Postal
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
Service
10/01
10/01
10/04
10/04
10/05
10/05
10/06
10/06
10/07
10/07
10/08
10/08
10/12
10/12
10/13
10/13
10/14
10/14
10/15
10/15
10/18
10/18
10/19
10/19
10/20
10/20
10/21
10/21
10/22
10/22
10/25
10/25
10/26
10/26
10/27
10/27
10/28
10/28
10/29
10/29
$2,450,000,000.00
$220,000,000.00
$2,700,000,000.00
$246,300,000.00
$2,525,000,000.00
$55,500,000.00
$2,300,000,000.00
$90,000,000.00
$2,000,000,000.00
$223,600,000.00
$2,100,000,000.00
$253,400,000.00
$1,875,000,000.00
$116,200,000.00
$1,400,000,000.00
$308,000,000.00
$1,275,000,000.00
$211,700,000.00
$2,050,000,000.00
$298,600,000.00
$2,295,000,000.00
$34,000,000.00
$2,125,000,000.00
$290,200,000.00
$2,000,000,000.00
$348,700,000.00
$1,800,000,000.00
$420,500,000.00
$1,790,000,000.00
$262,900,000.00
$1,650,000,000.00
$232,600,000.00
$1,400,000,000.00
$205,300,000.00
$1,175,000,000.00
$259,600,000.00
$875,000,000.00
$363,700,000.00
$1,700,000,000.00
$403,800,000.00
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
S/A
Page 3
FEDERAL FINANCING BANK
OCTOBER 1999 ACTIVITY
Date
Borrower
~ERNMENT-GUARANTEED
Amount
of Advance
F1.nal
Maturity
Interest
Rate
LOANS
ENERAL SERVICES ADMINISTRATION
eTC
Building
10/26
$106,278.00
11/02/26
6.688% S/A
10/05
10/05
$8,100,000.00
$1,695,750.00
1/02/30
1/02/15
6.253% S/A
6.065% S/A
10/01
10/01
10/07
10/08
10/13
10/15
10/18
10/18
10/18
10/18
10/19
10/19
10/20
10/20
10/20
10/21
10/22
10/22
10/22
10/25
10/27
$774,000.00
$360,000.00
$1,900,000.00
$500,000.00
$24,000,000.00
$500,000.00
$2,104,000.00
$802,000.00
$3,000,000.00
$1,000,000.00
$314,000.00
$3,000,000.00
$53,000.00
$48,044,000.00
$714,000.00
$2,200,000.00
$500,000.00
$1,062,546.00
$500,000.00
$500,000.00
$23,970,000.00
1/03/33
1/02/18
1/03/33
1/02/01
6/30/08
1/03/33
12/31/12
1/03/33
1/02/01
1/03/33
1/02/24
1/02/01
12/31/14
12/31/25
1/03/23
12/31/31
12/31/08
1/03/34
1/03/34
12/31/09
6/30/10
EPARTMENT OF EDUCATION
incoln University
incoln University
~
UTILITIES SERVICE
Ilrke-David Elec. #494
irshalls Energy Co. #458
Jutheastern Indiana #496
Jdington-Clark Elec. #551
~minole Electric #416
~d River Valley #484
Pittsburgh Tele. #449
rth star Elec. #495
en Electric #525
i-state E.M.C. #503
ibama Electric #431
~n Electric #525
.abama Electric #393
.abama Electric #507
.abama Electric #508
Ihnson County Elec. #482
.rroll Elec. #488
'and Elec. Coop. #546
Indiana Rural Elec. #548
lmew-Wayne Elec. #455
minole Electric #416
S/A is a semiannual rate.
Qtr. is a Quarterly rate.
6.251%
6.706%
6.378%
5.431%
6.208%
6.511%
6.201%
6.451%
5.615%
6.451%
6.571%
5.597%
6.360%
6.616%
6.616%
6.542%
6.299%
6.419%
6.419%
6.288%
6.337%
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr .
Qtr.
Qtr .
Qtr.
Qtr .
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Page 4
FEDERAL FINANCING BANK HOLDINGS
(in millions of dollars)
Program
Agency Debt:
U.S. Postal Service
October 31. 1999
September 30. 1999
Monthly
Net Change
Fiscal Year
Net Change
10/1/99-10/31/99
10/1/99-10/31/99
Subtotal *
$5.603.8
$5.603.8
$6.279.1
$6.279.1
-$675.3
-$675.3
-$675.3
-$675.3
Agency Assets:
FmHA-RDIF
FmHA-RHIF
DHHS-HMO
DHHS-Medical Facilities
Rural Utilities Service-CBO
Subtotal *
$3.410.0
$7.035.0
$1. 7
$3.2
$4,598.9
$15.048.8
$3.410.0
$7.125.0
$1. 7
$3.2
$4.598.9
$15.138.8
$0.0
-$90.0
$0.0
$0.0
$0.0
-$90.0
$0.0
-$90.0
$0.0
$0.0
$0.0
-$90.0
Government-Guaranteed Lending:
DOD-Foreign Military Sales
DoEd-HBCU+
DHUD-Community Dev. Block Grant
DHUD-Public Housing Notes
General Services Administration+
DOl-Virgin Islands
DON-Ship Lease Financing
Rural Utilities Service
SBA-State/Local Development Cos.
DOT-Section 511
Subtotal *
$2.608.3
$20.8
$12.9
$1.419.9
$2.405.0
$16.1
$1.138.7
$13.997.8
$190.0
$3.7
$21.813.1
$2.610.9
$11.0
$13.6
$1.419.9
$2.404.9
$16.1
$1.138.7
$13.885.0
$193.9
$3.7
$21.697.7
-$2.7
$9.8
-$0.7
$0.0
$0.1
$0.0
$0.0
$112.8
-$3.9
$0.0
$115.4
-$2.7
$9.8
-$0.7
$0.0
$0.1
$0.0
$0.0
$112.8
·$3.9
$0.0
$115.4
Grand total*
$42.465.7
-$649.9
-$649.9
* figures may not total due to rounding
+ does not include capitalized interest
=
$43.115.6
DEPARTMENT
OF
THE
TREASURY
1789
ornCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON. D.C. - %0%20 - (202) 6%2·2960
FOR IMMEDIATE RELEASE
Text as prepared for delivery
December 3. 1999
"BRAZIL, LATIN AMERICA AND THE UNITED STATES
AT THE TURN OF THE CENTURY"
TREASURY SECRETARY LAWRENCE H. SUMMERS
REMARKS TO THE AMERICAN CHAMBER OF COMMERCE
SAO PAULO, BRAZIL
Thank you. I'm glad to be here at such a crucial moment for our two countries
and for the global economy.
If the trials of the past year have reaffIrmed anything it is the strength of the ties
that bind the United States and Brazil - and bind Brazil and all of our hemisphere to the
broader global economy. In days gone by. many in Latin America used to refer to the
Colossus of the North. Today, we in Washington know that if there is a Colossus of the
South it is Brazil.
Brazil's transformation in this last decade of the 20th century has been unique.
But its core elements have echoes around the world. Powerful forces are creating a
new global economy for the 21 51 century: one with enormous opportunities for
improving the lives of the world's people, but that also brings new challenges and risks.
When economic historians look back at this period, they will identify three
developments driving·the creation of this new world:
•
The global move away from centralized, state-led development - toward a greater
reliance on markets and the power of private enterprise.
•
Revolutions in communications and information technologies that are bringing
people and economies together in ways that were unimaginable even a few years
ago.
And the dawn of an age of emerging markets, with countries where more than three
billion live reversing decades of stagnation and seeing rapid growth in incomes.
LS - 272
•
m- press releases, speeches, public schedules and official biographies,. call our 24-hour fax line at (202) 622-2040
; Governmenl p,.".ng OffICe 1998· 619-559
All of us - in the United States, in Brazil and around the world - will be tested
by these developments and the enormous changes that they set in train. The kind of
standards of living and security that our people are able to enjoy in the future will
depend in large part on how we meet that test.
Against this backdrop, I would like to reflect today on three topics:
•
First, some of the lessons of the fInancial crisis that the world and Brazil have come
through in the past few years.
•
Second, the broader prerequisites for an effective national economic strategy in this
new global marketplace.
•
And third, I would like to reflect briefly on our common stake in building a strong
and stable global fInancial system and in meeting the broader challenges that
globalization presents.
I.
Lessons of the Crisis
The past few years have been a difficult period whose causes and implications
economists and others will be debating for years to come. Some of the mechanisms of
these fInancial crises were 2pI century. But in many ways, the root cause was as old as
fInance itself: too much money borrowed, on the basis of too little capacity to repay.
And the right response to crisis, once it struck, was equally timeless - depending above
all on a government's capacity to act decisively to restore conftdence and growth.
Our support for the exceptional international fInancial package that was
mobilized for Brazil last year - and especially, our own $5 billion bilateral contribution
to that package - was a reflection of the enormous stake that we have in Brazil's
success. It was equally a reflection of our conftdence that President Cardoso and his
team would do what was necessary to put the economy back on track.
The fact that Brazil is already starting to repay some of that fInancing - indeed,
announced yesterday that it will repay the full $3.2 billion in bilateral fInancing that is
coming due later this month - only re-affirms that our conftdence was not misplaced.
Indeed, looking around the world today, while there are certainly important
caveats and risks, we can say that the crisis economies whose governments were able to
respond decisively and with international official support have been well rewarded.
Consider:
2
•
In Korea, net foreign reserves have risen to more than $65 billion. And private
forecasters expect the economy to grow this year by more than 8 percent.
•
In Thailand, net reserves are now hovering close to $30 billion. Overnight interest
rates are below 1 percent. And private sector forecasts predict growth of 3 or 4
percent this year.
Here in Brazil, inflation over the last ten months has not risen back to high
levels, as many feared following the devaluation of the real. And the recession is
proving much shorter and shallower than many expected. Private forecasters expect that
the economy may even show modest growth in 1999, compared with the decline of 4
percent that was expected only 6 months ago. The forecast next year is for solid
growth.
Almost all of Latin America has been affected by these crises, with a recession
that has left few untouched. But after a decade of reforms, none of its major economies
has changed course. Growth in the region should resume next year, with private sector
forecasts of upwards of 3 percent growth in the largest economies. And Latin American
sovereign bond spreads have been steadily narrowing for several months.
TI.
Core Ingredients for National Economic Success
Brazil's contribution to the transformed global picture is one on which I will be
congratulating President Cardoso and his team during my stay. But we all know that
there is an important difference between getting out of the intensive care unit, and
leading a full and healthy life. The challenge for Brazil and others in the region - for all
their recent achievements - is to combine fmancial stability with strong inclusive
growth.
What does this require in a new global economy? Let me highlight three core
ingredients that have been the central emphasis of the Clinton administration and - I
believe-very important to the economic turn-around that Americans have enjoyed in
the 1990s.
1. A Solid Fiscal Foundation
This new economy is growing newer by the day. But new techniques and
fmancial instruments cannot substitute for old-fashioned fiscal virtues. As we have
learned in the United States in the 1980s and 1990s, ultimately, sustained macroeconomic stability and growth in any country depends on government over time
matching its perception of what the state needs to do to the capacity to mobilize the
resources necessary to achieve that.
3
Until these two are matched, problems will inevitably arise - whether in the
form of inflation, excessive real interest rates, or an excessive dependence on foreign
capital that periodically raises questions about the long-term capacity to repay. And
enduring growth and stability will likewise remain in doubt.
The critical importance of a solid fiscal foundation for growth was a major topic
of discussion when I met with the incoming economic team in Argentina earlier this
week. It will be important for the success of every country in this region and, as the
authorities recognize, it will be crucially important for Brazil.
We know from our own experience how difficult it can be to bring a
government's aspirations and its resources back together when they have long been
misaligned. Achieving it here in Brazil will depend on the Administration's
commitment to build on the improvements that we have seen in the past year to achieve
lasting pension system reform and building a more sustainable fiscal relationship
between different tiers of government. But success will equally depend on the
commitment of those with whom they the Administration will need to work - both
inside and outside the public sector and in every level of government.
2. Establishing a Frameworkfor Markets to Operate
If changing expectations and capacities in the public sector is the first ingredient
of economic success in this new economy - then changing them in the private sector
must be the second. The right macro-economic policies can lift a large burden from the
economy. But without efforts to support the market system as it evolves, we will none
of us be able to realize our full economic potential.
The new paradigm of public policy in our time is one based on supporting not
supplanting the market, and on establishing institutions that can make the private sector
an attractive and profitable place to be - and thus the engine of economic growth.
What does that require? Here in Brazil you talk about reducing the "Brazil cost" but
the agenda that is captured in that term is not specific to Brazil:
•
Completing the successful transfer of public industries into private hands. Brazil has
recently made remarkable headway in privatizing telecommunications, power, and
state banks. But all recognize that there is further to go. I will highlight in my
discussions with officials that the program needs to press forward in the next year
despite the delays that hampered the government in this area in 1999.
•
Building a strong and efficient domestic financial sector that can channel financial
resources to all that will use them well - both through continued reform of public
sector fmancial institutions and by helping the private fmancial sector to develop its
capacity to provide long-term fmance to business and consumers.
4
•
And, crucially, building the intangible infrastructure for markets: including strong
and consistent norms of transparency and integrity in both the public and private
sector; respect for contracts and effective means of enforcing them; continued
efforts to root out corruption; and a strong and enduring rule of law.
2. Investing in People
Macro-economic virtue, the right market institutions - in the competition for
economic opportunity in a more global economy these will be crucial assets for any
country. But in a world in which capital, and business can move, the most distinctive
asset of any country will increasingly be its people - and the quality of investments in
people will be an increasingly important determinant of national economic success.
That is why President Clinton, since the very start of his Administration, has
always placed such emphasis on investments in people. And that is why President
Cardoso has been so right to make education and social inclusion such an important part
of his mission in government.
President Clinton has spoken often about the need to broaden the circle of
economic opportunity to include all of our citizens. That must be a moral imperative for
both of our nations today. But it is equally an economic imperative at a time when the
same forces that are bringing the world's economies together are also making our
internal domestic economies more interconnected. Increasingly, in such an
environment, an economy's strength overall will be limited by the strength of its
weakest parts.
In approaching these issues, two lessons of recent global experience bear
emphasis:
•
We have learned - or been reminded - that without major public efforts, too little
will happen to reduce poverty; too few children will learn to read; and basic health
care will not be provided.
•
At the same time, we have learned equally that public bureaucracies evaluated only
on the basis of inputs and run for the convenience of its administrators can absorb
large amounts of public money without producing tangible benefits for people.
As President Clinton, President Cardoso and others discussed in Florence last
month, in all our countries the answer to this dilemma must lie in bringing to all of our
core public sector services the same emphasis on innovation, quality service and the
customer that the best of our private sector now achieves.
5
I am told that the Sao Paulo American Chamber of Commerce has recognized its
own stake in - and potential contribution - to this effort, in its work helping to develop
effective low-cost ways to improve the quality of Brazilian education. Equally, public
sector innovations such as the expanding program of government grants to help keep
children in school and to eliminate child labor have given us a glimpse of what a
concerted application of these lessons in Brazil might achieve.
The recent study indicating that close to one half of university students were
now the children of parents who did not fInish the fIrst year of secondary school must
be good news to all who care about the democratization of economic opportunity in
Brazil and the national economic opportunities that that would bring. But here, too,
there can be little room for complacency, when more than 730,000 children between
the ages of 7 and 14 are estimated to be working on the land or in workshops instead of
learning to read and write in school.
ID.
Shared Challenges: Strengthening the Global Financial System and
Managing Global Integration
If successful competition in a world market is the national economic challenge of a
millennium generation - then successful international cooperation must be its global
one. Let me highlight two key areas where strong collaboration between our two
nations and globally will be especially important: building a strong and stable
international fInancial architecture and managing regional and global economic
integration.
1. Building a Strong Global Financial Architecture
With the storms clouds more distant and confidence on the mend - we must not
become complacent about building a stronger global fInancial system for the future. As
the United States has long stressed, reforming our international fInancial institutions to
make them better equipped to respond to modem risks will be a critically important
piece of that endeavor. Another will be a greater capacity for industrial and emerging
market economies to work together.
We welcome, in this context, the fIrst meeting in Berlin this month of the G20,
the new permanent informal mechanism for dialogue on key economic and fInancial
issues among industrial and emerging markets. Brazil's participation in that grouping
will be important. For, if what is different about these crises is the degree to which they
trace back to the capital account and the sudden outflow of foreign capital, then recent
experience in Brazil has pointed up a number of ways for countries to help stop these
dynamics taking hold.
Notably:
6
•
By building a stronger national balance sheet. Countries need to be working to build
debt structures that help to cushion unexpected shocks, not worsen a crisis of
confidence. That means investing in an adequate level of reserves; paying more for
the protection afforded by longer term debt; and paying more to avoid the currency
risk implicit in foreign currency borrowing.
•
And by adopting more sustainable exchange rate regimes. Coming out of these
crises, it should become increasingly the norm that countries involved with the
world capital market avoid the risky "middle ground" of pegged exchange rates
with discretionary monetary policies. In this region especially, an increasing
number of countries are in fact moving toward "comer" regimes: be they fIrmly
institutionalized fixed rate regimes or a pure float.
2. Managing Global Integration
At the same time, we have been reminded in recent days that globalization is
and must be much more than a narrow economic challenge. As President Clinton has
emphasized, global economic integration simply will not work if it means local
disintegration - and if our people do not believe that integration works for them.
That is why, as we look to promote global trade and all the opportunities that it
affords, we need to recognize globally - as we did within our own economy when interstate commerce took off in the second half of the 19th century - that in a world of
deeper interconnections between economies there will be a greater need to consider
together the issues that we have in common.
In short, at a time when the world is coming together and man-made and natural
barriers to trade are coming down - it becomes vital to prevent a race to bottom, a
bottom in which governments cannot promote fair taxes, uphold fair labor standards,
regulate product safety, protect the environment, or promote other key values.
The challenge is one of synthesis. We must not begin a new century by
impeding the most benign economic trend of this century - the rise of economic
integration. In this region and globally, we must work to ensure that trade liberalization
proceeds. But nor can we afford to ignore these broader concerns if we are to build the
kind of global economy that we all want to see. The two giants of this hemisphere have
an enormous stake in working to ensure that this kind of synthesis is achieved. Thank
you.
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D EPA R T J\'I E N T
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EMBARGOED UNTIL 1:45 PM EDT
Text a~ Prepared for Delivery
December 3, 1999
TREASURY UNDER SECRETARY GARY GENSLER REMARKS TO
THE CONFERENCE ON FISCAL POLICY IN AN ERA OF SURPLUSES
AT THE FEDERAL RESERVE BANK OF NEW YORK
Good afternoon. I want to thank Peter Fischer for inviting me to speak here today I am
particularly pleased to talk about debt management in this new era of budget surpluses.
The fiscal year 1999 unified surplus was $123 billion, almost twice the size of the previous
year's $69 billion. These surpluses capped seven consecutive years of improvements in the
Federal budget since the deficit peaked at $290 billion in FY 1992. This represents the longest
series of improvements in budget outcomes in the history of the United States.
This progress has had a significant effect on Treasury financing. In 1993, federal debt held
by the public was projected to rise to $5.4 trillion by 1999. Fortunately, the stock of publicly held
debt outstanding now stands at only $36 trillion,' more than $l. 7 trillion lower than it otherwise
would have been.
As a result, Treasury debt is taking up an ever smaller share of the economy and the
capital markets Treasury debt held by the public has fallen from 50 percent of GOP in 1994 to
less than 40 percent today This string of six consecutive years of declining debt as a share of
GDP is the longest since the period ending in 1967 - more than 30 years ago. The decline in
o~tstanding debt is expected to continue, dropping to 26 percent of GOP within 5 years
The change is even more marked in relation to the capital markets. Treasury's share of
gross new issuance in the market has dropped from 38 percent in 1995 to 16 percent through the
third quarter of 1999. Since the start of the Clinton Administration, Treasury's share of
outstanding debt in U.S. markets has fallen from more than 33 percent six years ago to less than
25 percent today.
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Reducing Treasury debt held by the public greatly benefits the economy and all Americans
It also brings with it new challenges for Treasury debt managers in achieving our three main
goals: (1) to ensure that adequate cash balances are available at all times; (2) to achieve the lowest
cost financing for taxpayers; and (3) to promote efficient capital markets. In pursuing these goals,
we have sought to promote market liquidity and finance across the yield curve.
Debt Management Responses to Declining Debt
To date, Treasury has managed the declining debt by refunding our regularly maturing
debt with smaller amounts of new debt. To accomplish this, we have used the financing tools of
modifying issue sizes, offering schedules, and the types of securities offered
First, while maintaining the frequency of Treasury bill auctions, we reduced their average
size. In 1996, the average size of our weekly bill auctions was close to $20 billion. By 1998, the
average size of weekly bill offerings had dropped 28 percent to just over $14 billion This year
the size has increased modestly to an average of just over $15 billion.
Next, we reduced the number of regular coupon issuances by one-third, from 39 to 26 a
year. We accomplished this by discontinuing the 3 year, moving the 5 year to quarterly offerings,
and discontinuing the November 30 year bond offering. This has allowed us to continue to issue
large, liquid benchmark securities. While average auction size has declined modestly, by 6 percent
since 1996, we have been able to maintain it at just under $14 billion for 1999.
We continue to consider whether further revisions to our auction schedule would be
appropriate. Particularly, we continue to consider the frequency of issuance of I-year bills and 2year notes. Reducing the frequency of these auctions would give us some additional leeway in
maintaining the size of our benchmark issues.
Debt Management Challenges
While we have been able to meet our debt management goals through these adjustments,
we face additional challenges going forward
First, debt held by the public is forecasted to shrink further, by $720 billion over the next
five years and by over $2 trillion in ten years
Second, the effect of seven years of fiscal discipline is already showing up in our maturing
debt. There will be a great deal less maturing debt to be redeemed in the very near future. This
fiscal year, $476 billion of coupon debt will mature, down from a peak of $510 billion in 1998.
Over the next 18 months , the last of the .old 7 year and 3 year notes will mature. Thus, by 2002,
2
debt maturing will decline significantly. Depending upon the decisions we make this fiscal year
about issuance of2 year notes, debt maturing in 2002 is likely to be less than $400 billion·
Third, we face the challenge of how to continue to issue sufficient longer-term debt
without an unacceptable lengthening of our maturity structure. For instance, if we maintain the
current level oflong term financing (10 year and 30 year debt), the average maturity is forecasted
to lengthen from about 5 3/4 years currently to 8 years by the end of 2004 Over the long term,
this would impose additional cost on the taxpayers to finance our debt.
To meet these challenges, new tools will be needed. By the end of the year, we will have
in place two new debt management tools. This will provide us with important new means of
managing the government's debt and responding to our improved fiscal condition
First, we have issued a rule that will make it much easier for Treasury to reopen its
benchmark securities. The new rule allows Treasury to reopen its benchmark securities within
one year of issuance without creating concerns under the original issue discount (OlD) rules.
Under the previous rules, Treasury generally could reopen an issue only if the price of the issue
had not fallen by more than a de minimus amount. This significantly constrained our ability to
reopen benchmark securities The new rules will enable us to reopen issues more easily This
important new debt management tool will improve our ability to maintain the size and liquidity of
our benchmark securities.
Second, we are putting in place a new rule that will permit us to conduct debt buy-backs.
This new rule will permit us to buy-back Treasury debt in advance of its maturity date. Buying
back outstanding debt in advance of maturity will enable us to maintain larger, more liquid,
auction sizes for our benchmark securities Debt buy-backs also will give us the ability to manage
the maturity structure of our debt by selectively targeting the maturities to be repurchased. This
will provide us with additional flexibility to continue issuing our long-end maturities without
unduly lengthening the maturity structure of our debt Finally, debt buy-backs could be used as a
cash management tool, absorbing excess cash in periods such as late April when tax revenues
greatly exceed immediate spending needs
Looking Ahead
Treasury securities currently play an important role in the global capital markets. They are
actively used for hedging purposes They provide a risk-free pricing benchmark across the yield
curve. The Federal Reserve uses transactions in Treasury securities to affect the supply of
reserves in the banking system
As the Treasury market declines in size, other markets are likely to take on these roles.
We believe that the financial markets should be able to make a smooth adjustment to these
changes. Investors and hedgers will switch to trading other securities and derivatives.
This transition is already taking place Market participants today use Eurodollar futures
more actively than Treasury bills to hedge in the short end of the market. In addition, the role of
Treasury securities as a pricing benchmark in the investment grade bond market is changing.
While high grade corporates are still priced relative to Treasuries, growing weight is being given
to the value of other high grade corporates. We are already seeing underwriters pricing new
issues relative to the value of similar recently issued securities in addition to Treasury yields.
Most importantly, the benefits of reducing our nation's debt far surpass the issues that
arise for the capital markets from this reduction. As less savings flow into government bonds,
more will flow into investment in businesses and housing. There will be less pressure on interest
rates, reducing the borrowing costs for businesses and families alike. While debt reductions
present challenges to the financial markets and to Treasury's ability to manage the remaining debt,
I think we can all agree the enormous benefits for our economy make these challenges worth
meeting.
Thank you. I will be happy to take your questions
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ornCE OF PUBUC AFFAIRS -1500 PENNSYLVANIA AVENUE, N.W. - WASHINGTON, D.C. - 2OUO - (20%) 6%2-2960
"Argentina and the United States Greet a New Century"
Remarks by Lawrence H. Summers
Secretary of the Treasury
American Chamber of Commerce
Buenos Aires, Argentina
December 2,1999
Thank you. I am pleased to be able to meet with members of the Buenos Aires business
community here today, and to share some of my impressions of my visit to Argentina.
I met yesterday with President Menem, Vice-Minister Guidotti and Central Bank Governor Pou;
and with President-elect De La Rua, Finance Minister-designate Machinea, Foreign Ministerdesignate Rodriguez and other key officials. At these meetings we touched on four main topics:
• The remarkable accomplishments of the past decade of reforms in Argentina.
•
How close the United States and Argentina have become during this period.
•
The challenges that Argentina faces going forward.
•
Our shared interest in a strong and more open global economy in the years to come.
Let me say a few words on each of these before opening it up for your questions.
I.
A Remarkable Record
Particularly in my conversations with President Menem and his team, I reflected on the
remarkable turnaround that has been achieved in the past ten years in Argentina:
•
The economy has put four decades of slow growth and stagnation behind it, with average
growth of 6 percent or more in the 1990s and a near doubling of per capita GDP.
•
For the first time in living memory, the people of Argentina have been able to rely on stable
prices and, behind them, a stable exchange rate. Inflation was 2,300 percent in 1990. Today it
is below zero.
•
And democracy - still perceived to be fragile in many quarters when the decade began - is
now so strong and well-grounded here in Argentina that it has become a commonplace.
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We see the fruit of these achievements in the growth in the private business sector through the
decade, and no less in Argentina's capacity to withstand enormously challenging times in
regional and global financial markets: first, in the Tequila Shock of 1994-5, and most recently in
the emerging market financial crises of the past two and a half years.
II.
A Special Relationship
This visit was equally an opportunity to underscore how close the United States and Argentina
have become during this period. Our bilateral relationship dates back to before there was even a
country called Argentina - when the United States sent its first envoy to Buenos Aires in the first
decade of the 19th century. But it is fair to say that a decade of change in Argentina has also
greatly strengthened the ties that bind our two nations together.
•
The United States' trade with many countries has grown in the past decade, but with few has
it grown perhaps eight-fold, as it has with Argentina.
•
American companies' foreign direct investment in Argentina has also increased substantially,
reflecting the new opportunities created by macro-economic and structural reforms.
•
And our security relationship has grown ever closer. Argentina is one of very few nonNATO countries that the United States formally claims as an ally, with whom we have
worked together in recent years on key global challenges such as peacekeeping and
addressing global warming.
III.
Challenges Ahead
Times of transition, in a democracy, are always ·special times. I remember well the excitement
surrounding President Clinton's election in November 1992. In democracies that are working
well, as the United States' does and Argentina's does, they are both times for. the reaffirmation of
enduring principles and times offering windows of opportunity to achieve important things.
That is certainly true in Argentina right now. Realizing the opportunities that this special
moment affords is the challenge that the newly elected leadership will face in the decisions and
judgments that it will make in the weeks ahead. But it is also the challenge facing those who will
need work with them to make change happen.
to
In discussing with President-elect De La Rua and his team the Argentine recession and the
problems that accompany it I was certainly reminded of the challenges that President Clinton
faced as a.n incoming Administration in 1992. Notably: the need to confront fiscal problems; the
high level of real interest rates; and the environment' of economic slowdown.
The President's strategy in 1992 was to be rapid, decisive and strong in confronting these
problems and to take a vicious cycle of high public borrowing, leading to high real interest rates,
to slow growth and yet higher public borrowing - and turn it into a virtuous circle from lower
borrowing to lower interest rates and faster growth.
That strategy played a key part in making the United States economic performance in the 1990s
as good as it has been. I was encouraged by the sense of commitment on the part of President-
2
elect De La Rua and his economic team to taking the same kind of decisive fiscal action to get
the economy moving again here in Argentina.
We also had an opportunity to discuss the critical structural challenges facing Argentina particularly at a time of close to 15 percent unemployment. And here, too, I was impressed by
their commitment to reforms to help markets to operate and to produce more and better jobs.
And I welcomed their emphasis on deregulation and reducing disincentives to hire workers as
key means to that end.
If there is one lesson from global fmancial history it is that countries shape their own destinies.
The choices that governments make, the speed with which they make them, and the clarity with
which they execute them tend to be the single most important factors detennining national
success in a global economy.
The international investor community, as well as businesses here in Argentina like you, will be
watching Argentina closely in the coming weeks and months - especially closely for signs of a
reversal in the momentum of reforms. This heightened focus is certainly a constraint. But it also
provides a rare chance to profit from exceeding expectations. Time and again, in recent years,
we have seen the very different outcome that awaits the government that steps out, ahead of the
market - relative to the one that Jags behind.
IV.
Common Interests
Finally, we reflected upon our shared interest in strong global growth in the coming few yearsand the role that increased regional and global trade liberalization could play in bringing about
that kind of strength. We noted in particular, in this context, the importance to both of our·
countries of reducing existing barriers to agricultural products in the next global trade round.
I am sorry not to be staying longer. But I am glad to have had the opportunity to come here for
what was a very satisfying set'of meetings - providing as they did a welcome opportunity both to
reaffinn old ties and to forge new ones, with an Administration that is taking office at a critical
time.
To be sure, the world is still a dangerous place. But Argentina has in its favor the improving
atmosphere in world capital markets, rising commodity prices and the appearance of recovery in
most other countries in Latin America. What matters now is that the Argentina government and
people now seize the opportunity for this country's refonns to come of age. Thank you .
.3
DEPARTMENT
OF
THE
TREASURY
TREASURY
NEWS
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EMBARGOED UNTIL 10 A.M. LOCAL TIME
Text as Prepared for Delivery
December 4, 1999
"THE IDB AT THE DAWN OF A NEW CENTURY"
TREASURY SECRRETARY LAWRENCE H. SUMMERS
REMARKS AT THE INTER-AMERICAN DEVEOLOPMENT BANK
40 th ANNIVERSARY CONFERENCE
PETRO POLIS, BRAZIL
Let me express the warm congratulations of the United States as you celebrate
forty years promoting social and economic development in our hemisphere.
When Brazilian President Juscelino Kubitschek helped to found this institution in
1959 we knew that a central role of the world's first regional development bank would be
helping countries and regions to build the capital they needed for development and
growth. That remains true today, only now we know that there are at least three kinds of
capital that are vital for lasting and inclusive growth.
First, countries need basic financial capital and a stable financial system through
which to allocate that capital. When financial stability is in question - as it has been in
many countries in the region at various times in recent years - the IDB has played a key
role in helping countries respond to these financial emergencies and in this it has served
the region well.
With the storm clouds now more distant and confidence returning, all of us need
to remember the importance of building a stronger and more stable global and regional
financial infrastructure for the future. As it matures and, more importantly, as the private
capital market for emerging markets matures - especially, perhaps, in Latin America the lOB will need to continue to think about its distinctive role in these efforts. It needs to
consider carefully how it can best help countries prevent and respond to crises going
forward, and how its comparative advantage will be exploited to maximum effect.
Second, we have learned and re-Iearned the importance of human capital for
development, which surely is accentuated as regional and global economic integration
proceeds. In a world where capital, businesses, information and ideas are more and more
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free to move, a country's most distinctive resource will be its people. And the quality of
the investments that it makes in its people will be an increasingly important determinant
of a nation's long term economic success.
The IDB for some time has been increasing its focus on human development and
poverty reduction. But we can none of us have the kind of hopes we would like to have
for this Continent in the early decades of a new century as long as roughly one-third of
Latin America's people live in poverty, one-quarter do not have access to safe water, and
one-fifth do not have access to sanitation. I am glad to note that the historic agreement to
make available sufficient resources for the Fund for Special Operations is a mark of all of
our commitment to continuing to strengthen the IDB' s capacity to help the countries of
this region reduce poverty and broaden economic opportunities in the years to come.
Third, we have come to realize the importance of what has come to be called
social capital: the institutions, networks and understandings that go to make the kind of
healthy civil society that is crucial for growth. In many ways it means, not just
government by the people but government for the people.
That kind of social capital is hard to define precisely and even harder to create.
But here at the IDB, we are learning some of the best places to start developing this kind
of capital - such as increased transparency, more determined efforts to combat corruption
and new mechanisms to devolve power and pave the way for deeper popular
participation. To be sure, a very important part of this agenda will equally be increasing
the transparency and accountability of the IDB itself, along with other international
financial institutions.
I have just visited Bolivia, where the IDB and others are joining together within the
framework of the Highly Indebted Poor Countries initiative, which the membership of the
IDB recently endorsed to respond to all three problems.
•
This initiative reflects the financial imperative that debts that will never be repaid
should be relieved.
•
It reflects the human imperative that the highest return use for the benefits of debt
relief will be investing in human capital - in measurable improvements in key social
indicators such as infant mortality, primary enrollments and rates of immunization.
•
And finally, it reflects the social imperative that if those investments in people are to
work as effectively as possible, they must also provide for greater participation by the
people who will be most affected.
For all these reasons, the United States is doing and will continue to do its part to
support the HIPC initiative. And have no doubt that we will continue to work with our
Congress and the donor community to ensure that the initiative is fully funded.
In these ways and many more, the lOB has made a great contribution to the Americas
in its forty years. But as impressive as its accomplishments have been, I know that
President Iglesias would agree with me that its best days lie in the future. I look forward
to good economic news for the region and new accomplishments for the region when we
st
meet again for the IDB's 41 Annual Meeting, to be held in New Orleans. Thank you.
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~\
'IREASURY )~l
T REA SUR Y
NEW S
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASHINGTON. D.C.• 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
T ext as Prepared for Delivery
December 6, 1999
. "THE EVOLUTION OF THE INTERNATIONAL FINANCIAL SYSTEM"
TREASURY ASSISTANT SECRETARY FOR INTERNATIONAL AFFAIRS
EDWIN M. TRUMAN
REMARKS AT THE INSTITUTE FOR INTERNATIONAL MONETARY AFFAIRS
EIGHTH SYMPOSIDM
TOKYO, JAPAN
My remarks are organized in two parts. First, I offer some general comments on several aspects
of currency arrang~ments. I follow with some observations on three features of the international
financial system in the 21 sl century: the currency system, capital flows, and responsibilities of
authorities in the major economies.
Currency Arrangements
A A Common Global Currency
Many believe that a common global currency is the most attractive monetary arrangement
from a global perspective; some wistfully identify such a regime with the 19th century gold
standard. Under such a regime, foreign-currency transaction costs would be eliminated, foreign
exchange crises would be a thing of the past, and a single money and capital market would
allocate efficiently a global pool of savings to achieve maximum expected returns. To obtain the
full promised potential from such a regime, wages and prices would have to be flexible, labor and
capital would have to be mobile, and the scope for governmental intervention in the economy
would have to be extensively circumscribed so that automatic mechanisms could be unleashed to
adjust to changes in national economic and financial circumstances, for example, wages and prices
(and, thus, real wages and relative prices) potentially would need to be free to decline and rise.
In the absence of those conditions, changes in global economic and financial circumstances
- in particular, shocks with differential impacts on national economies - would be likely to lead to
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governmental intervention, at a minimum, to short-circuit the global system's automaticAdjustment mechanisms. For example, governments would be tempted either to cushion the
downward adjustment of wages and prices or to cushion the impact on employment and output of
insufficient flexibility in wages and prices. Moreover, if the common currency were to be issued
by a global monetary authority, it would be necessary to reach agreement on the objectives and
political accountability of that authority. Finally, unless the monetary regime were accompanied
by an approach to the global financial system with no public safety net, multi-national agreement
would also be required on the supervision and regulation of that system. At the national level, the
scope to provide lender-of-Iast-resort support to the financial sector would be very limited.
Although I can imagine convergence toward such a monetary regime at some point in the 21 5t
century, I doubt it is a realistic possibility in the next few decades.
B. International Currencies?
th
For most of the 20 century, at least one national currency has played a role in the
international financial system as a major international currency, first sterling and more recently the
dollar. I define an "international currency" as one that serves as an international unit of account,
means of payment, and store of value for both the private and the public sectors. Moreover, a
national currency that is used in international transactions or investment activities involving
economic agents in two countries when the currency involved is issued by one of the countries has
a very different role compared with a national currency that is used in international transactions
and investment activities among agents in two countries when the currency involved is issued by
neither of the countries. By the first test, there are many international currencies today,
particularly in the financial area where non-residents borrow in and, to an even greater extent,
invest in assets denominated in local currencies. By the second test, there is only a handful of
international currencies, actual and potential. In today's world, the choice of an international
currency in the broadest sense is one made by the market and not via governmental edict, and an
international currency's role as a store of value for the public sectors (its reserve role) is of limited
importance. l
The benefits to today's global financial system of the availability of an international
currency are similar to those associated with a regime with a single global currency; they derive
2
from reduced costs, increased efficiency, and enhanced liquidity in international transactions.
I For example, today less than 20 percent of foreign portfolio claims on the United States take the
fonn of clain;ts by official institutions.
2 The distinction between a regime with common global currency and a regime with single
international currency is analogous to the distinction between a world with a common language used by
everyone in all communications and a world with many languages but only one language that is used in all
"international" communications. In the absence of an "international" language, communication suffers
because one or both parties would have to learn multiple foreign languages in order to communicate, and
accurate communication suffers as a result. Multilingual communication, involving more than two languages,
is even more handicapped.
2
These benefits accrue primarily to the system as a whole as long as economic agents are free to
use, or not to use, the international currency in their transactions. The costs to the system are
minimal because national monetary authorities are not constrained by the monetary policy
decisions of the country issuing the currency, are free to use their own policies to adjust to
changing economic and financial circumstances, and are not required to hold their foreign
exchange reserves in anyone international currency. Financial institutions chartered in the
country issuing the international currency may over time derive some benefit from their access to
a lender of last resort that is perceived to have the ability to influence the creation of international
credit, but this is hardly a benefit that can be recorded in a country's national income and product
accounts. At the same time, the national monetary authorities in the issuing country may feel
constrained in their decisions because of their reduced capacity to monitor and control the growth
of credit denominated in their currency.3
It is fashionable to observe that the international financial system is headed toward a
tri-polar world with three international currencies playing roughly equal roles. This may well be
the case, but I would argue that there is no added efficiency for the system as a whole from
multiple international currencies. Moreover, although some argue that more than one major
international currency would provide a healthy element of competition, others argue that potential
volatility would increase.
C. The Future of National Currencies?
For a country whose currency is not an international currency, the question is whether
there is a net benefit to its independent status. The potential benefit derives from two features of
the regime: the use of exchange rate adjustments to alter relative prices, and the scope for
independent macroeconomic policy - primarily, but not exclusively, monetary policy. A country
may choose to preserve its policy options by adopting a regime with some form of adjustable peg,
but it cannot expect on a continuing basis to be able to exercise much independence in its
monetary policy. If a country is to exercise significant independence in monetary or other
macroeconomic policies on a continuing basis, it must have a substantial degree of exchange rate
flexibility. However. even under floating exchange rates, the exercise of that independence is
constrained by global economic and financial conditions, as the authorities ofa number of major
countries learned during the 1970s.
A relevant question is whether during the 25 years of floating exchange rates among the
major currencies. and the growing integration of international money' and capital markets over the
period, the scope to exercise independent monetary policies has declined. Abstracting from
changes in domestic and international economic and financial environment, i.e., from business
I do not include seigniorage on the use of paper currency as a benefit deriving from a currency's
international role because in today's world, and as a rather recent development, such international seigniorage
primarily derives not from the use of another country's currency in international (transnational) transactions
but principally from its use in its domestic (internal) transactions.
3
3.
cycles and the volatility of inflation, differentials among short-term real interest rates are a crude
proxy for the de facto scope for independent monetary policies. This thought led me to look at
4
some evidence What I found was that under fixed exchange rates in the 1960s, differentials in
real short-term interest rates between Germany and the United Kingdom and the United States
5
were 100-200 basis points. In the 1970s, differentials (including for Japan) often exceeded 300
basis points and, and at times exceeded 450 basis points. In the 1980s, observed differentials
declined somewhat, but they increased again in the 1990s, at times exceeding 300 basis points.
The evidence from these crude proxies suggests that, with floating exchange .rates, the scope to
exercise an independent monetary policy is larger than under fixed rates and remains substantial,
at least for countries whose macroeconomic policies are fundamentally credible, including not
only the G3 economies - Japan, Euroland, and the United States - but also, based on the u.K.
evidence that was assembled, for countries such as Canada and Switzerland.
What about other countries and their currencies? We appear to be witnessing a trend
away from the "middle ground" of pegged exchange rate regimes combined with discretionary
6
monetary policies. This is an appropriate and pragmatic trend, and the international financial
community, in our view, should be reluctant to provide extraordinary financing to support middleground regimes when they are not supported by strong institutional arrangements and are
potentially vulnerable. At the same time, adoption of a floating exchange rate regime does not
automatically bestow on a country meaningful policy independence; that requires the
establishment of a sustained record of policy and performance.
At the other extreme, a country may abandon its currency and adopt another country's
currency as its own, for example, via dollarization. A country may choose to take such a step,
having rejected the middle ground of an exchange rate peg, because its macroeconomic policies
are insufficiently credible to take advantage of the scope for discretionary policy offered by
floating. However, unlike the choice of monetary union, which involves sovereign decisions by all
the parties, the choice of dollarization, or the equivalent adoption of another country's currency,
fundamentally should be for the authorities of the dollarizing country to make because the
decision has large potential economic, financial and political consequences.
4 Proxies were constructed using nominal short-term (generally three-month) interest rates for Japan,
Germany, the United Kingdom, and the United States deflated by the 12-month lagging CPI inflation rate.
The absolute values of differentials with the U.S. short-term real interest rate were smoothed over rolling
five-year periods. My former colleagues in the Division of International Finance at the Board of Governors
of the Federal Reserve System generously constructed the proxies.
5
Comparable interest-rate .data were not readily available for Japan during this period.
6 We have seen a trend toward floating exchange rate regimes, first in Asia'in 1997 and this year in
Latin America, where four countries have followed Mexico's 1995 example and abandoned regimes involving
various types of exchange rate pegs - Brazil, Chile, Colombia and Ecuador. Malaysia is a counter example,
having adopted a peg in September 1998.
4
The United States, in principle, is open to a choice by another country to dollarize.
However, we have said that it would be inappropriate to adjust the procedures and orientation of
u. S. monetary policy in light of a country's choice to adopt the dollar, to increase the
responsibilities of our bank supervisors to cover institutions in that country, or to provide
expanded access to the Federal Reserve's discount window to its financial institutions. We have
also indicated our interest in discussing such a choice with the authorities because, depending on
the economic size of the country, its decision and the quality of its advance preparations
potentially could impact adversely the United States as well as the global financial system.
Three Observations about the International Financial System in the 2111 Century
I conclude with some observations on three features of the international financial system in the
21 sl century: the currency system, capital flows, and the responsibilities of authorities in the major
econoll1les.
A. The Currency System
Given the diverse development of exchange rate regimes over the past thirty years, I am
reluctant to forecast the shape of the global currency system five, ten, twenty or fifty years from
now. The safest judgment is that the currency system will continue to evolve along with the
evolution of the international financial system. It is no accident, and in my view remains wise,
that Article IV of the IMF Articles of Agreement calls upon "members to assure orderly exchange
rate arrangements and to promote a stable system of exchange rates"· not a stable exchange rate
system. In a rapidly changing international financial system, the search for comprehensive
approaches to global exchange rate systems· is likely to be unrewarding.
When it comes to exchange rate regimes, there are no panaceas. It is easy to demonstrate
that there is no single regime that is best for any national economy under all economic and
financial circumstances; the disturbances with which regimes must cope change over time.
National authorities have to make choices about which regime on balance will best serve their
economies; because changes in regimes are not costless. Eclecticism also is not a realistic option.
Similarly no global currency system promises to serve best the interests of the global financial
system under all conditions. Hence, the ongoing debate about currency regimes.
In my view, it would be undesirable if the global financial system were to evolve in the
direction of large currency blocs. In the jargon of the economists, there are today few natural
optimal currency areas aside from cases where their economic integration is an overarching
objective, such as Euroland. Viable currency blocs are likely to leave out a large number of
economies participating in the global economy. Moreover, the analogy to trade blocs is weak.
The economic case for a trade bloc rests on the observation that ex ante trade barriers are high~
the establishment of the trade bloc serves on balance to reduce trade distortions, creating more
trade than is diverted. Currency blocs, on the other hand, run the risk of increasing distortions
through the erection of barriers to the free flows of finance where few exist today, at least among
the major currencies and financial markets.
5
B. Capital Flows
When it comes to global capital flows, I do not believe that the global currency system is
the major source of potential crises. Consider a regime with a common global currency. Under
such a regime, as with national monetary systems, capital flows would not be immune from
irrational exuberance or despondence, and crises would continue to be possible.
Whatever one's philosophy, at a pragmatic level, responding to potential problems'
associated with international capital flows by the imposition of controls on those flows is likely
over time to prove to be inefficient (and, therefore, costly), ineffective, or both, unless the national
financial market itself is tightly controlled or highly underdeveloped. Moreover, experience has
shown that as countries develop and grow, controls are relaxed and financial systems are opened
up. Thus, a better response to the potential problems associated with international capital flows
lies in the promotion of sound .macroeconomic policies, flexible markets, robust financial systems
supported by appropriate regulations and supervision, transparency about regimes and
institutions, and adherence to agreed global standards.
C. Responsibilities of Authorities in the Major Economies
In order to provide support for the appropriate evolution of the international financial
system in the 21 st century, the authorities in the major economies should implement sound
macroeconomic and structural policies, demonstrate their respect for market forces, and endeavor
to follow a policy of inclusion when it comes to establishing the rules and principles that will
guide and govern the financial system. All this may sound like very little, but it is remarkable how
taxing it is to accomplish these tasks effectively and successfully.
-30-
6
DEPARTMENT
OF
THE
TREASURY
omCE OF PUBUC AFFAIRS • 1500 PENNSYLVANIA AVENUE, N.W.• WASlllNGTON, D.C .• 20220. (202) 622-2960
FOR IMMEDIATE RELEASE
Text as Prepared for Delivery
December 6, 1999
DEPUTY TREASURY SECRETARY STUART EIZENSTAT
REMARKS TO THE FOURTH FARM JOURNAL FORUM
WASHINGTON, D.C.
I am happy to be with you today. The Farm Journal is respected throughout the
agricultural community, not only for its content, but for its sponsorship of meetings like
this, where people with a critical interest in agriculture, from farmers to agricultural
economists, have a chance to hear from one another I look forward to hearing from some
of you after my presentation.
I have had a long association with the agricultural community Ag policy was part
of my portfolio on'the White House staff Since the President of the United States was
himself a farmer, I was not able to add any first hand experience, but I became expert in
just about every aspect of farm policy. When I was in Brussels, I participated in the
major efforts we made to open up the EU market to U S products, including some of the
first GMO products like Ready Roundup Soybeans. I also saw the important role our
Embassies abroad play, at the local level, to help with market opportunities. Later, at
Commerce and the State Department. I had the opportunity to work with many of your
industries and companies to foster this Administration's open market policies. I know
that the Ag community has been the backbone of support for all our efforts to improve
trade among nations. In connection with my topic for today, I particularly remember the
strong support the agricultural community gave, at the time of the Asian financial crisis,
to our successful effort to enlarge the U.S. contribution to the International Monetary
Fund, so it could help restore some measure of financial stability; and also to our effort to
increase export credit guarantees to Asian countries This has begun to pay real
dividends
The food and fiber industries are key to our position in the global economy. They
employ over 2 '12 million people Since 1994, food exports have contributed over $300
billion to our balance of payments, on average, accounting for 6'12% of our exports. It is
extremely important, to us at Treasury and throughout the government, that you maintain
and expand your markets overseas
LS-271
For press releases, speeches, public schedules and official biographies, call our 24-hour fax line at (202) 622-2040
'U S Government Pflnt,ng Oft,ee t998 - 6t9-559
It has been a rocky road for agriculture over the last three years Overall
commodity prices have declined by about 20% since 1997, and agricultural prices have
declined further than that. In the past several months, prices appear to have hit bottom
and started to recover, with livestock prices leading the way. Nevertheless, they are still
at depressed levels, and it will take resumption of growth in both Asia and Latin America
for prices and exports to recover fully The Administration has tried to help with direct
assistance. In 1998, we provided $16 billion and this year it has been $22 5 billion, the
highest yearly figure in history The Freedom to Farm bill cut a hole in the safety net,
giving insufficient cushion for farmers in years when the ag economy goes south. We
need a well thought out, well balanced farm bill and we in the Administration will work
hard with the Congress to get it.
And this year it used to be that farmers were at the mercy of only four things the
weather, the insects, the railroads and the banks. That was hard enough. Now they have
to worry about financial crises half way around the world: how it will affect their
markets, how it will affect their prices, what can be done to bring them under control.
The world economy was severely impacted by the crisis that began in Asia two
years ago. That in turn severely affected your exports. In the five countries that bore the
brunt of the crisis-Thailand, Indonesia, Korea, Malaysia and the Philippines, GDP
plummeted from an average of 4. 5% positive growth in 1997 to an average of 7.7%
negative in 1998. In Indonesia the turnaround was even worse from 46% growth to
13.2% shrinkage, with dire human and political consequences which have still not played
out. Net flows of private capital-which help finance those countries' imports and
therefore sustain the agricultural economy-were even more dramatic. In 1997, investors
poured over $62 billion into these countries Last year, they took over $45 billion out.
And all of this came at a time when Japan, the world's second largest market, was
suffering from disinflation and weak demand itself
While the US economy overall has remained strong, the fallout from the
financial crisis resulted in our overall export numbers being flat The Ag sector, being
partic~larly vulnerable, experienced a much larger fall Overall commodity prices have
declined by 20% since 1997 as a result of weak global demand, and agricultural prices
have dropped further. Annual agricultural exports have declined by over $10 billion since
their peak in 1996. Prices seem to be bottoming out this year; notably livestock prices,
are showing improvement. As global demand picks up, we expect both shipments and
prices for· agricultural commodities to increase.
In the countries most strongly affected by the Asian crisis, the consensus forecast
for GDP growth this year is 8.6% in Korea, between 29% and 4.5 % for Thail~nd, 0.1%
for Malaysia, the Philippines, and Indonesia The IMF forecast for the developJl1g
countries in Asia is a 5.4% increase Last year Japan's economy contracted by 2.8%.
There are some positive signs of growth in Japan but prospects fo~ a sustain~d upturn
remain somewhat uncer1ain Third qUaI1er figures show an annua!Jzed drop Jl1 GOP of
3.8%.
2
It has been a rocky road for agriculture over the last three years. Overall
commodity prices have declined by about 20% since 1997, and agricultural prices have
declined further than that In the past several months, prices appear to have hit bottom
and started to recover, with livestock prices leading the way. Nevertheless, they are still
at depressed levels, and it will take resumption of growth in both Asia and Latin America
for prices and exports to recover fully The Administration has tried to help with direct
assistance. In 1998, we provided $16 billion and this year it has been $22 5 billion, the
highest yearly figure in history. The Freedom to Farm bill cut a hole in the safety net,
giving insufficient cushion for farmers in years when the ag economy goes south. We
need a well thought out, well balanced farm bill and we in the Administration will work
hard with the Congress to get it
And this year it used to be that farmers were at the mercy of only four things: the
weather, the insects, the railroads and the banks. That was hard enough. Now they have
to worry about financial crises halfway around the world: how it will affect their
markets, how it will affect their prices, what can be done to bring them under control.
The world economy was severely impacted by the crisis that began in Asia two
years ago That in turn severely affected your exports In the five countries that bore the
brunt of the crisis-Thailand, Indonesia, Korea, Malaysia and the Philippines, GOP
plummeted from an average of 4. 5% positive growth in 1997 to an average of 7. 7%
negative in 1998. In Indonesia the turnaround was even worse from 4.6% growth to
13.2% shrinkage, with dire human and political consequences which have still not played
out Net flows of private capital-which help finance those countries' imports and
therefore sustain the agricultural economy-were even more dramatic. In 1997, investors
poured over $62 billion into these countries. Last year, they took over $45 billion out
And all of this came at a time when] apan, the world's second largest market, was
suffering from disinflation and weak demand itself
While the US economy overall has remained strong, the fallout from the
financial crisis resulted in our overall expol1 numbers being flat The Ag sector, being
particularly vulnerable, experienced a much larger fall Overall commodity prices have
declined by 20% since 1997 as a result of weak global demand, and agricultural prices
have dropped further. Annual agricultural exports have declined by over $10 billion since
their peak in 1996. Prices seem to be bottoming out this year; notably livestock prices,
are showing improvement As global demand picks up, we expect both shipments and
prices for agricultural commodities to increase.
In the countries most strongly atfected by the Asian crisis, the consensus forecast
for GDP growth this year is 8.6% in Korea, between 2 9% and 4 5 % for Thail~nd, 0.1%
for Malaysia, the Philippines, and Indonesia The IMF forecast for the developll1g
countries in Asia is a 5.4% increase. Last year Japan's economy contracted by 2.8%
There are some positive signs of grovvth in Japan but prospects fo~ a sustain~d upturn
remain somewhat uncertain Third quarter figures show an annualIzed drop 111 GOP of
3.8%.
2
Hopes for recovery are also reflected in rising intra-Asian trade Exports from the
other Asian nations to the crisis countries were up 5% in the first quarter of this year
compared to a 20% decline in 1998. Stocks have rebounded strongly in these nations, and
currencies have also strengthened in many cases. However, the recoveries are not yet
broad based, due to weak domestic consumption and investment, and the risk the
economies may backslide remains
I know you are also interested in the outlook in Latin America The fallout from
the Asian financial turmoil, combined with weak commodity prices and exiremely bad
weather, has made things difficult for Latin countries. Economists expect the economy of
the region as a whole to contract slightly this year. Real GOP in six of the countriesArgentina, Brazil, Chile, Columbia, Ecuador and Venezuela--willlikely be flat or decline
this year. Agricultural commodity prices fell 12% this year after a 20% decline last year.
However, the Latin governments generally have responded to external economic and
financial pressures with renewed commitment to prudent fiscal and monetary policies and
deeper financial sector reforms, and they have not retreated into protectionism As a
result inflation has remained low in most countries and short term interest rates are
typically well below their level a year ago Thus, next year looks more promising for
economic growth in Latin America as a whole The consensus forecast is for a healthy
3.2 % growth and the I!v1F forecast is 39 % This means there should be a rebound in
agriculture prices, along with those of other commodities
As we deal with the consequences of the events of the past, we should consider
what can be done to prevent financial crises in the future I think the experience of the
past two years provides important guidelines as to how best to do this
At the heart of all the recent crises were exchange rate regimes that ultimately
proved unsustainable and inconsistent with the macroeconomic policies the countries
were following. Fixed exchange rates also led to the additional danger that firms and
financial institutions would underestimate the risks associated with short-term borrowing
of foreign currencies, thus contributing to the excessive accumulation of un hedged shortterm debt
The countries most vulnerable were those that lacked the intangible infrastructure
of modern financial systems. To a significant degree, bank lending was based upon
closed company to company relationships instead of market analysis. In Korea,
Indonesia, Thailand and even Japan, there was over-lending and over-investment i~ real
estate and other sectors, which were risky and proved ultimately to be unsustainable
These activities were financed for too long by investors and creditors from industrial
countries who, while reaching' for greater yield, failed to pay sufficient attention to risk.
Once things started to go sour, once confidence was lost,. investors w~o h~d .
previously extended credit to developing countries over-reacted 111. th.e Oppos.lte dIreCtion,
and began to pull out of developing countries indiscriminately ThIS IS. why, !Il o~r
judgment, it was critical in several cases for the international commun.tty to step !Il and
provide the financing needed to stem the tide and catalyze the restora~lOn of confidence.
,
.'
From August 1997 to December 1998 the international community committed $]90
billion to Thailand, Korea, Indonesia and Brazil, of which $63 billion was disbursed The
recipient countries agreed to important conditions concerning trade liberalization.
Pursuant to its loan program with the IMF, Indonesia has abolished import monopolies
for soybeans and wheat, agreed to phase out all quantitative import restrictions and other
non-tariff barriers. South Korea has reduced the number of items subject to adjustment
tariffs and eliminated trade-related subsidies. Brazil made a commitment, in the context
of its IMF program, not to impose trade restrictions for balance of payments reasons, or
any other restrictions that would be inconsistent with its WTO obligations And
Argentina has undertaken to end the surcharge to its Mercosur external tariff by the end
of this year. In these ways, the international financial organizations are working with us
to break down trade barriers.
The Asian crisis and its aftermath resulted in a broad, soul-searching effort to
strengthen the international financial architecture. The purpose is to prevent as much as
possible a repetition of events which did such damage to your industry and to others
around the world.
On exchange rates, the International Monetary Fund, to which nations look for
assistance when their policies cause problems, will be watching much more closely, and
clearly indicating to governments when their domestic policies are inconsistent with their
chosen exchange rate regime We are encouraging the IMF also to provide stronger
guidance to nations on how to exit from exchange rate anchors put into place in response
to the hyper-inflation that had affiicted some developing markets The major shareholders
of the IMF have made clear their view that the international community should not
provide significant official financing for a country intervening heavily to support a
particular exchange rate level, except where that level is judged sustainable and certain
conditions have been met, such as where the exchange rate policy is backed by a strong
and credible commitment with supporting arrangements, and by consistent domestic
policies
To help prevent capital account crises, governments need to think long and hard
about the strength of their own balance sheets A number of international groups have
looked at guidelines for improved risk management at a national level and some simple
balance sheet rules for {;ountries Examples include rules of thumb for minimum levels
of foreign reserves and a suggested three-year minimum averag.e maturit~ ?fpu~li~ ~~bt.
Sound debt management is one of the criteria the IMF will use 111 determll1l11g elIgIbIlIty
for its new Contingent Credit Line, the IMF's first line of defense against financial
contagion.
Once the immediate crises have passed, emerging market nations will still have to
make deep-seated structural reforms to lay: the basis for long-:erm, sU,stai~able growth
For the people of these nations to make the sacritices such retorms often II1volve, they
must have some confidence that a social safety net exists to help them weather the
transition. Social programs should be aimed at helping people acq~ire the s~ills to change
occupations and make other adjustments They should· include baSIC educatIon and health
care, access to credit for small and medium sized enterprise and retirement systems to
encourage productivity and labor mobility These investments should be maintained, or at
least not disproportionately reduced, during economic downturns. That is why the US
pressed, in the fall of 1998, for the World Bank to triple its social program lending to
crisis economies, and why we have supported major efforts by all international financial
institutions for these purposes.
There will be no single, dramatic moment of reform. But over time, the steps we
have already taken and those we are now implementing constitute a very powerful
program of reform-one that will have an increasing effect on the way the global
financial system functions This will redound to the advantage of our farm community as
Asia and Latin America recover from their financial crises
It used to be a long way from the boardrooms of international finance to the
farmland of America, but it is no longer They are connected today in many ways. Both
are part of the global economy. Both need each other to accomplish their goals. Both can
be damaged by problems in distant lands. Our job in government is to help create
conditions that will operate for the safety and the benefit of both. It has been our privilege
to work with many of you in the past, and I hope that relationship will continue into the
future.
Thank you.
-30-
• 'i
PUBLIC DEBT NEWS
Department of the Treasury • Bureau of the Public Debt • Washington, DC 20239
FOR RELEASE AT 3:00 PM
December 6. 1999
Contact: Peter Hollenbach
(202) 691-3502
PUBLIC DEBT ANNOUNCES ACTIVITY FOR
SECURITIES IN THE STRIPS PROGRAM FOR NOVEMBER 1999.
The Bureau of the Public Debt announced activity figures for the month of November 1999. of
securities within the Separate Trading of Registered Interest and Principal of Securities program
(STRIPS).
Dollar Amounts in Thousands
Principal Outstanding
(Eligible Securities)
$1,887.595.439
Held in UnstrippedFonn
$ 1,676,776.486
Held in Stripped Fonn
$210.818,953
Reconstituted in No\ember
$12302.747
The accompanying table gives a breakdown of STRIPS activity by individual loan description. The
balances in this table are subject to audit and subsequent revision. These monthly figures are included
in Table'\, of the i'.Ionthly Statement of the Public' Debt. entitled "Holdings of Treasury Securities in
Stripped Fonn."
The Strips Table along with the new Monthly Statement of the Public Debt is available on Public
Debt's Internet homepage at: www.publicdebt.treas.gov.Awide range of infonnation about Public
Debt and Treasury Securities is also available on the homepage.
000
1S-278
TABLE V - HOLDINGS OF TREASURY SECURITIES ItJ STRIPPED FORM, NOVEMBER 30, 1999
Corpus
STRIP
CUSIP
loan Description
Treasury Banas:
GUSIP
912810 DM7
D08
DR6
DU9
ON5
OPO
DS4
DT2
OV7
DW5
DX3
DY1
DZ8
EA2
EgO
Fa9
FE3
FFO
FG8
FJ2
Interest Rate'
11-5'8
12
10-3/4
9-3/8
11-3/4
11-1/4
10-5/8
9-7/8
9-114
7-114
7-112
8-3/4
8-7/8
9-1/8
9
8-718
8-1/8
8-1/2
8-3/4
8-3:4
7-7/8
8-118
8-1/8
8
7-1/4
7-518
7-118
6-1/4
7-1/2
7-5,8
6-7/8
6
6-3/4
6-1/2
6-5/8
6-3/8
6-1/8
5-112
5-1/4
5-1/4
6-118
TOlal Treasury Bonds ._
..........
EG8
EJ6
E:4
E=l
EG9
E-F
EJ3
E'<O
E~8
E.\o15
E~4
E"9
E07
ES3
En
EV6
EW4
EX2
EYO
EZ7
FAl
912803 AB9
ADS
AG8
AJ2
912800 AA7
912803 AAl
AC7
AE3
AFO
AH6
AK9
Al7
AM5
AN3
AP8
AQ6
AR4
AS2
ATO
AU7
AV5
AW3
AXl
AY9
Al6
BAO
BB8
BC6
BD4
BE2
BF9
BG7
BH5
BJ1
BK8
Bl6
BM4
BP7
BV4
BW2
CG6
Treasury Inflatlon-Indexea Notes'
CUSIP.
Senes Interest Ra!e.
3-5,8
9!28273A8
J
3-3/8
2M3
A
3-5.8
A
3T7
3-7,8
4Y5
A
TotallnflallOn-lndexed Notes ....
..... ..
Treasury Inflation-Indexed Bonds
Interest Rate
CUSIP:
3-5,8
912810 FDS
3-718
Fri6
Total Inflation-Indexed Bonds ...
912820 BZ9
BV8
GL9
DN4
Principal Amount Ci.:standlng In ThOusands
Matunty Date
TOlal
Outstandlnq
11/15 104
05/15/05
08/15/05
02115/06
11/15/14
02115/15
08/15/15
11115/15
02115/16
05115/16
11/15/16
05115/17
08115/17
05115/18
11/15/18
02115/19
08115/19
02115/20
05115/20
08/15/20
02115/21
05115/21
08115/21
11/15/21
08115/22
11/15/22
02115/23
08115/23
11115/24
02115/25
08115/25
02115/26
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11115/26
02115/27
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11/15/27
08/15/28
11/15/28
02115/29
08/15/29
07/15/02
01115/07
01/15/08
01/15/09
Por:,~n
Helo In
Unstr:c~~d Form
Reconstlluted
ThiS Monm
P:::>rtron HelO:: In
SirlDoe1 For'"
8,301,806
4.260,758
9,269,713
4,755.916
6.005,584
12.667,799
7.149.916
6,899,859
7,266.854
18,823,551
18.864,448
18.194,169
14,016,85a
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
11.350,341
11,178.580
4.348.206
1,854,208
5.694,513
4,747.980
2.455.984
9.601,079
5.347,356
3,199.059
6,500.454
18.708,351
17,738,928
10,295,929
10,226.458
3,023,839
2.598,470
10,513.198
19,293.192
8,195.268
3.136.483
7.286.606
10.074,973
6.820.008
8.943,642
15,136,044
8.979,190
3.685,226
11,198,361
18,471.380
3,554,302
2.761,970
7,751.447
11,877.516
7,336,218
8,241,977
5,864,071
9.863,756
18,166.539
11,675,001
10.706,252
11,350,341
11,178.580
3.953.600
2.406,550
3.575.200
7,936
3,549,600
3.066.720
1,802.560
3,700.800
766,400
115.200
1,125.520
7,898.240
3,790.400
5,684,800
6.434,400
8,737,600
920.640
2.033,600
7.022,400
14.132.000
1,038.400
5.138.880
3.219.840
17,662.350
1,373,600
7,014,400
7,176,000
4,437,664
7,915.360
8,963.200
4,850,560
1,027,400
3.557,600
3:25i,200
4,592.000
872.000
4,352,000
101,200
240.800
0
0
92.800
45.200
110.400
0
107,200
502.880
103.040
24.000
0
139,200
30.800
826·.560
398.400
182.400
387,000
1,270,400
187,200
364,000
173.440
984.800
100,800
171.840
618.240
2,081,075
140,000
219,200
163,200
170,016
67,680
315.200
279,040
136.500
165.600
214,400
232,000
48.000
60,800
0
0
0
0
525.910.975
358.402,355
167,508.620
11,113,311
17,627.784
16,696.673
17.469.050
16.278.012
17.627.784
16.696.673
! 7,469.050
16.278.012
0
0
0
0
0
0
0
0
68,071 ,5! 9
63.071.519
0
0
17,445.855
15,032.946
17.445,855
15.032.946
0
0
0
0
32,478.80 1
32.478.801
0
0
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912803 BN2
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04/15/28
04/15/29
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