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Department of the Treasury
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FEB 0 1 2006

Treas.

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10
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v.427

Department of the Treasury

PRESS RELEASES

The following Press Releases were not used:
2937 and 2999

Page 1 of 1

PRESS ROOM

September 2, 2005
JS-2696
Statement of Treasury Secretary John W. Snow on the
August Employment Report
Today's employment numbers are a note of good news in a week when the hearts
and prayers of our nation are with those suffering on the Gulf Coast.
The fact that 169,000 more people went back to work in August and the
unemployment rate fell to 4.9 percent, the lowest rate in four years, provides further
indication that our economy is continuing to expand. More than 4 million jobs have
been created since the President signed the Jobs and Growth Act in May of 2003.
Our economic strength is of critical importance at this time of national disaster, and
fortunately we are standing on sturdy economic ground at this time. Maintaining and
fortifying our economic vitality is an integral part of hurricane recovery efforts. Our
economy is the most open, flexible and adaptive in the world and I am confident
that it will prove its resiliency through these difficult times.

http://www.treas.gov/press/releases/js2696.htm

10/3/200S

Page 1 of 1

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tic

PRESS ROOM

September 2, 2005
JS-2697

w.-~

MEDIA ADVISORY
Snow to Hold Press Confemnce on the Economic Effects of Hurricane
Katrina and Treasury's Efforts to Provide Relief
U.S. Treasury Secretary John W. Snow will hold a press conference today to
address the economic effects of Hurricane Katrina and Treasury's efforts to provide
relief to its victims.
The following event is open to credentialed media with photo identification:
Friday September 2, 2005
5:30 PM Secretary John Snow to hold press conference
Economic Effects of Hurricane Katrina
and Treasury's Efforts to Provide Relief
Treasury Department
Room 4121 (Media Room)
1500 Pennsylvania Ave., NW
Washington, DC 20220
* Open Press - pre-set may begin at 4:00 PM
* Media without Treasury press credentials must contact Frances Anderson at
202-622-2960 or e-mail their name, organization, date of birth and Social
Security number to frances.anderson@do,treas.goY for clearance by 3:00 PM
on 9/2/2005

http://www.treas.gOY/press/releases/js2697.htm

10/3/2005

Page 1 of 1

PRESS ROOM

September 2, 2005
JS-2698
Treasury and IRS Expand Availability of
Housing for Hurricane Victims
WASHINGTON, DC-- The Treasury Department and the Internal Revenue Service
(IRS) today announced that they will waive low-income housing tax credit rules that
prohibit owners of low-income housing from providing housing to victims of
Hurricane Katrina who do not qualify as low-income. The action will expand the
availability of housing for disaster victims and their families.
Because of the widespread devastation to housing caused by Hurricane Katrina,
the Treasury Department and the IRS will temporarily suspend income limitation
requirements and non-transient requirements for qualified low-income housing
projects located anywhere in the United States.
"The widespread damage caused by the hurricane left many thousands of
Americans homeless," stated Treasury Secretary John W. Snow. "We hope that
providing this disaster relief will allow states to temporarily house many of the
needy whose homes were destroyed."

http://www.treas.gov/press/releases/js2698.htm

10/3/2005

Page 1 of2

PRESS ROOM

September 2, 2005
JS-2699
Snow Holds Press Conference on the Economic Effects of Hurricane Katrina
Thank you all for coming. For all Americans, our hearts and prayers are with the
people of the Gulf Coast during this difficult time. This is a time for all of us to do
whatever we can to help those affected by Hurricane Katrina.
Katrina is a disaster on many levels, but I'm confident that the residents of places
like New Orleans and Gulfport, Mississippi, and southern Alabama will recover It's
the spirit of Americans to do so. Americans are resilient. We picked ourselves up
after 9/11, we picked ourselves up after other disasters, and we have the will and
the resources and the resolve to do so again.
America is a compassionate nation. We are all doing what we can to help. Many
people are making donations to charitable organizations like the Red Cross that are
assisting in the relief efforts. I was also heartened to see businesses providing
assistance as well.
For the federal government, getting assistance to those in need is our first priority.
FEMA, under the leadership of Mike Brown, and other federal agencies have been
rushing tons of food, medicine, water and ice to the victims of this disaster.
I also commend the Congress for quickly approving the President's request for an
additional $10.5 billion in emergency funding to assist in this effort.
At the Treasury, we have been doing our part as well. We have been in regular
contact with financial market leaders, banking leaders, business leaders and federal
regulators to ensure that we do everything we can possibly do to make sure the
financial system is functioning smoothly.
Chairman Greenspan and I just met this afternoon. We discussed the current state
of the economy, and potential impacts of Katrina and her aftermath. The
devastation in the Gulf Coast region is widespread, encompassing more than
90,000 square miles. People have lost their homes, many have lost their jobs. This
is a challenging time for our country.
We are fortunate that we are dealing with this situation from a position of strength.
Today we learned that the economy created 169,000 new jobs last month and that
the unemployment rate has hit a four-year low at 4.9%. The American economy
has been steadily expanding and creating jobs for 27 straight months now.
The oil and gas supply, obviously, is of immediate concern. As the President has
said, we view this event as a temporary disruption - one that the government and
private sector, together, can address by repairing refineries and getting pipelines up
and running. Private citizens can contribute to these efforts, as the President has
asked them to do, by conserving energy in their day-to-day lives.
Secretary Bodman is approving loans of crude oil from the Strategic Petroleum
Reserve, the EPA has provided a temporary waiver that eases restrictions on
gasoline additives as well. I was also pleased that the International Energy Agency
has agreed to provide 60 million barrels of oil and gasoline over the next month, 2
million barrels per day.
At Treasury, the IRS today announced that we have waived a tax regulation that will
immediately increase the available supply of diesel fuel nationwide by allowing dyed
diesel fuel, which is ordinarily not subject to federal excise taxes because it is
intended for off-road use in farm equipment or in government vehicles such as

http://www.treas.gov/press/releases/js2699.htm

10/3/2005

Page 2 0[2
school buses, to be used on-road. This will immediately increase the usable supply
of diesel fuel nationwide, which is especially needed in Gulf Coast relief efforts. At
a time like this, ,he tax treatment of fuel is far less important than getting fuel to
those who need it, particularly those involved in the transportation of food and
medical supplies to those affected by the hurricane.
We have also extended the September tax filing and payment deadlines until
October 31 st for affected areas and have relaxed income-requirements for lowincome housing so that victims of Hurricane Katrina can take refuge in any housing
available regardless of income. Treasury is actively supporting both the Postal
Service and the Social Security Administration to ensure timely delivery of Social
Security and Supplement Security Income checks to impacted areas.
Our ability to deal with this catastrophe is enhanced by our economic strength. I am
confident that the American economy will continue to prove its incredible vigor and
resilience.

http://www.treas.gov/press/releases/js~699.htm

10/3/2005

Page 1 of2

PRESS ROOM
September 6, 2005
2005-9-6-16-24-21-20615
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets
totaled $73,381 million as of the end of that week, compared to $72,794 million as of the end of the prior week.
I. Official U.S. Reserve Assets (in US millions)

August 26, 2005

September 2, 2005

72,794

73,381

TOTAL
1. Foreign Currency Reserves 1
la. Securities

Euro

Yen

11,501

12,042

Of which, issuer headquartered in the US.

I
I

TOTAL

Euro

23,543

11,722

Yen

II
II"

11,610

I
I

5,619

TOTAL
23,332

II
II"

b. Total deposits with:
lr

f:Rntral banks and BIS

154

.190

16,344

11,389

,vvv

b.ii. Banks headquartered in the US.

b.ii. Of which, banks located abroad

b.i;;. Banks headquartered outside the US.

b.iii. Of which, banks located in the U.S.

2. IMF Reserve Position 2

II
II

13,606

13,558

3. Special Drawing Rights (SDRs) 2

8,260

8,442

4. Gold Stock 3

I
I

11,041

5. Other Reserve Assets

I
I

II. Predetermined Short-Term Drains on Foreign Currency Assets
August 26, 2005

I
11. Foreign currency loans and securities

II
I
II

Euro

II
II

Yen

II
II

TOTAL
0

II
II
II

S_eplember 2, 2005
Euro

II
II

Yen

II
II

TOTAL

I
I
I

2. Aggregate short and long positions in forwards and futures in foreign currencies vis-a-vis the U.S. dollar:
2.a. Short positions
2.b. Long positions
13. Other

II
II
II

I
I

0
0
0

II
II
II

0
0

III. Contingent Short-Term Net Drains on Foreign Currency Assets

August 26, 2005

11. Contingent liabilities in foreign currency

1.a. Collateral guarantees on debt due within 1
year

Euro

Yen

TOTAL
0

$eptember2, 2005
Euro

Yen

TOTAL
0

II
II

Ittp:llwww.trcas.gov/press/releases/20059616242120615.htm

10/3/2005

Page 2 of2
11.b. Other contingent liabilities

2. Foreign currency securities with embedded
options

3. Undrawn, unconditional credit lines

0
0

3.a. With other central banks
3.b. With banks and other financial institutions
I Headquartered in the U. S.
3.c. With banks and other financial institutions
I Headquartered outside the U.S.
4. Aggregate short and long positions of options
in foreign

ICurrencies vis-a-vis the U.S. dollar

14.a. Shalt positions
14.a.1. Bought puts
4.a.2. Written calls

4.b. Long positions

4.b.1. Bought calls
14.b.2. Written puts

Notes:

11 Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market Account
(SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect marked-to-market values, and
deposits reflect carrying values. Foreign Currency Reserves for the latest week may be subject to revision. Foreign Currency
Reserves for the prior week are final.

2J The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF and are
valued in dollar terms at the official SDRldoliar exchange rate for the reporting date. The entries for the latest week reflect any
necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month end.
31 Gold stock is valued monthly at $42.2222 per fine troy ounce.

http://www.treas.gov/press/releaseS/20059616242120615.htm

10/3/2005

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PRESS ROOM

September 6,2005
js-2700
Remarks by Secretary Snow at Meeting with Banking Regulators
Thank you for coming. We've just concluded a thorough review of actions being
taken by the banking industry to address the disaster recovery effort. I've heard
from each of the functional regulators for the banking industry and am pleased to
say that while there are challenges, the United States' financial system is
functioning well during this time of national emergency and tragedy.
The number-one priority of every agency represented here today, and I believe of
every American right now, is to aid and assist the victims of Hurricane Katrina and
help them rebuild their shattered lives.
Katrina is a disaster on every level imaginable; the immediate human needs are
heartrending. Over the long term, I'm confident that the residents of places like New
Orleans and Gulfport Mississippi and southern Alabama will recover. We picked
ourselves up after 9/11 and other catastrophic events, and we have the will and the
resources and the resolve to do so again. I am confident we will; it's the spirit of
Americans to do so.
As President Bush said this weekend, "the tasks before us are enormous, but so is
the heart of America."
We are fortunate that we are dealing with this situation from a position of economic
strength. The fact that our underlying economic fundamentals are so solid
enhances our ability to deal with this disaster.
A crucial part of getting people's lives back to normal will be ensuring they are able
to get access to banking services. There is an ongoing, comprehensive effort to
ensure that the financial system continues to work. The system possesses credit
liquidity, credit is available, and the necessary infrastructure is intact or being
restored.
Efforts are being made, across the board, to identify customer needs and to meet
those needs. Each of the regulators here today are asking the institutions they
oversee to consider all reasonable and prudent steps to assist customers' cash and
financial needs in areas affected by Hurricane Katrina.
Many financial institutions are implementing contingency plans involving a variety of
actions that will help the people of the Gulf Coast. From waiving ATM fees and
easing restrictions on cashing out-of-state and non-customer checks and waiving
overdraft fees as a result of paycheck interruption, banks and credit unions are
doing what they can to ensure that victims have the cash resources they need to
survive this difficult time, financially.
Treasury has been working closely with the insurance industry which has
thousands of claims adjusters who are ready to enter the area and begin to help
people restore their lives.
Credit institutions are taking steps such as waiving late fees for credit card and
other loan balances, easing credit card limits and credit terms for new loans and
delaying delinquency notices to the credit bureaus.
I appreciate the steps that these regulators and their constituents are taking to
make sure that hurricane victims have access to cash and credit, and to ease
worries about things like bill payments and credit status.

http://www.treas.gov/press/releasesljs2700.htm

10/3/2005

Page 2 of2
The cooperation of this group of regulators, and the institutions they govern, is
critical as the region and the country recover from this catastrophe. The ability of
the financial system to function, and to function well, is a key component of a
resilient economy.
Before I take your questions, I'd like to repeat that I am confident that the American
economy will once again prove its incredible vigor and resiliency. The dedication
and compassion of the financial industry is necessary, and it is unmistakable on this
day.
Thank you again for coming, and I'll take your questions now.

http://www.treas.gov/press/releases/js2700.htm

10/312005

Page 1 of 1

PRESS ROOM

September 7,2005
JS-2701
MEDIA ADVISORY
Secretary Snow and Commissioner Everson to Discuss
Tax Related Assistance to Hurricane Katrina Victims
U.S. Treasury Secretary John W. Snow and IRS Commissioner Mark Everson will
hold a press conference tomorrow to discuss tax related assistance to Hurricane
Katrina victims.
The following event is open to credentialed media with photo identification:
Thursday September 8, 2005
Secretary John Snow and Commissioner Mark Everson will hold press conference
to discuss tax related assistance to Hurricane Katrina victims.
Treasury Department
Room 4121 (Media Room)
1500 Pennsylvania Ave., NW
Washington, DC 20220
12:00 p.m. EDT
* Open Press - pre-set may begin at 10:30 AM
* Media without Treasury press credentials must contact Frances Anderson at
202-622-2960, 202-528-9086 or e-mail their name, organization, date of birth
and Social Security number to frances.anderson@do.treas.gov for clearance

http://www.treas.gov/press/releasesljsLJOl.htm

10/3/2005

Page 1 of 1

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PRESS ROOM

September 8, 2005
js-2703

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Statement of U.S. Treasury Deputy Secretary Robert M. Kimmitt at the APEC
Finance Ministers Meeting
Cheju, KOREA - I am pleased to be here and would like to thank Deputy Prime
Minister Han and the People of Korea for hosting the 12th annual APEC Finance
Ministers' meeting in Cheju. Asia remains the most dynamic region in the world,
and what happens here is critical for the global economy. It was particularly
important to me to meet, prior to the APEC meetings, with Deputy Prime Minister
Han, other senior Korean officials in Seoul, as well as members of the financial
community there.
These followed meetings I had with economic officials in Beijing earlier this week.
Korea is an example of the results that come from sound economic policies. Korea
has maintained and advanced its program of economic liberalization after the 1997
Asian crisis, and has been rewarded with healthy and sustained economic growth.
Korea has established an independent monetary authority, which has built a
credible inflation-targeting regime. And Korea has shown that - even for a country
heavily reliant on exports - additional exchange rate flexibility can be absorbed
without real difficulty, and flexibility is helpful in controlling inflation.
I told Deputy Prime Minister Han that I particularly appreciated his comments on
Tuesday about the importance of foreign investment in fostering growth and
employment and encouraging faster job growth. I also welcomed the intention to
pursue financial deregulation and the decision to allow foreign financial companies
to set up financial holding companies in Korea.

We in the United States share the view that an open investment regime, one that
welcomes foreign capital, is extremely important in achieving sustained growth and
employment. The United States strongly believes that the world economy works
best with free trade, the free flow of capital, and flexible exchange rates. China took
an important step in July in adopting a new exchange rate mechanism that allows
for greater exchange rate flexibility and greater reflection of market forces in
determining its exchange rate. As Secretary Snow has made clear, what is
important now is that China, and other major economies, allow their currencies to
respond to underlying market forces.

I look forward to the discussions with the APEC Finance Ministers to continue the
important dialogue on these and other important issues facing our economies and
the region.
-30-

http://www.treas.gov/press/releasesljs2703.htm

10/3/2005

Page 1 of2

PRESS ROOM

September 8, 2005
JS-2704

The Honorable John W. Snow
Prepared Remarks: Announcement of Tax Relief and IRS Actions
Relating to Hurricane Recovery Assistance
Good morning; thank you all for coming. I've asked IRS Commissioner Mark
Everson to be here today so we can fill you in on the steps that Treasury and the
IRS are taking to provide tax relief to hurricane victims, and to encourage charitable
giving during this difficult time of national disaster and recovery.
We know that the last thing people in tho devastated areas of the Gulf Coast need
to worry about right now is taxes. That's why we quickly implemented extensions of
tax deadlines, so that people in the affected areas who would otherwise have had
taxes or returns due on September 15 th don't have to worry about that deadline.
We also waived certain requirements for the low-income housing credit so that
displaced victims, regardless of financial status, could have access to that housing
during this time of great need.
In the aftermath of Katrina, it quickly became clear that the need for diesel fuel was
of great importance in rescue and relief efforts. Treasury has therefore provided
relief from penalties for highway use of dyed diesel fuel - a type of fuel that had
been limited, by its tax treatment, to certain uses and is more widely available
thanks to the lifting of these penalties. This change has made millions more gallons
of diesel fuel available.
Another important action that we have taken, along with the Department of Labor
and Pension Benefit Guarantee Corporation, is the extension of the deadline for
employers in the affected areas to make minimum funding contributions to qualified
retirement plans.
We are also pleased to be able to announce today something that we believe will
give workers and businesses an easy and effective way to contribute to the
charities that are doing so much to rescue, comfort and care for the victims of this
terrible tragedy.
This action allows employers to adopt leave-based donation programs under which
employees could forego vacation, sick or personal leave, and in turn their
employers would make cash contributions to charitable organizations involved in
relief efforts.
This is a time to help. The scale of this catastrophe is unprecedented, and the
generosity of the American people is extremely important to Katrina's victims. We
believe that this announcement will help workers and employers as they seek ways
to help their fellow Americans.
America's tradition of generosity, of helping our neighbors, is one the most
important advantages we have in terms of recovering from this disaster. We are
also fortunate that we are dealing with this situation from a position of economic
strength. The fact that our underlying economic fundamentals are so solid
enhances our ability to deal with this disaster.
Over the long term, I'm confident that the region will recover and rebuild. We picked
ourselves up after 9/11 and other catastrophic events, and we have the will and the
resources and the resolve to do so again. I am confident we will; it's the spirit of
Americans to do so

http://www.treas.gov/pressJreleases/js2704.htm

10/3/2005

Page 2 of2
I'll let Mark talk about IRS-specific efforts now, and then we'd be happy to take your
questions.

http://www.treas.gov/press/releasesljs2704.htm

10/3/2005

Page 1 of I

PRESS ROOM

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September 8, 2005
JS-2705

Treasury, IRS Announce Special Relief to Encourage
Leave·Donation Programs for Victims of Hurricane Katrina
WASHINGTON --- Department of the Tre2sury and Internal Revenue Service
officials announced today special relief intended to support leave-based donation
programs to aid victims who have suffered from the extraordinary destruction
caused by Hurricane Katrina

REPORTS
•
•

II~S News f~elease
Notice 2005-68 Treatment of Certain Amounts Paid to Section 170(c)
Organizations under Certain Employer l.eave-Based Donation Programs

http://www.treas.gov/press/releases/js2 7 05.htm

10/3/2005

INTERNAL REVENUE SERVICE

@)) News
Media Relations Office
www.irs. gOY Inewsroom

Release

Washington, D.C.

Media Contact: 202.622.4000
Public Contact: 800.829.1040

Treasury, IRS Announce Special Relief to Encourage Leave-Donation
Programs for Victims of Hurricane Katrina
IR-2005-97, Sept. 8, 2005
WASHINGTON --- Department of the Treasury and Internal Revenue Service officials
announced today special relief intended to support leave-based donation programs to aid
victims who have suffered from the extraordinary destruction caused by Hurricane Katrina.
Under these programs, employees donate their vacation, sick or personal leave in
exchange for employer cash payments made to qualified tax-exempt organizations
providing relief for the victims of Hurricane Katrina.
Under Notice 2005-68, employees can forgo leave in exchange for employer cash
payments made before January 1, 2007, to qualified tax-exempt organizations providing
relief for Hurricane Katrina victims. Employees do not have to include the donated leave in
their income. Employers will be permitted to deduct the amount of the cash payment.
-30-

Part III - Administrative, Procedural and Miscellaneous

Treatment of Certain Amounts Paid to Section 170(c) Organizations under Certain
Employer Leave-Based Donation Programs

Notice 2005-68
In view of the extreme need for charitable relief in the aftermath of Hurricane
Katrina, employers may have adopted or may be considering adopting leave-based
donation programs to aid victims of this hurricane. Under these programs employees
elect to forgo vacation, sick, or personal leave in exchange for cash payments an
employer makes to organizations described in § 170(c) of the Internal Revenue Code
(§ 170(c) organizations) for the relief of victims of Hurricane Katrina. This notice
provides guidance on the treatment of these cash payments for income and
employment tax purposes.
Notice 2001-69, 2001-2 C.B. 491, as modified and superseded by Notice 2003-1,
2003-1 C.B. 257, provided similar guidance in view of the extreme need for charitable
relief following the September 11, 2001, terrorist attacks. This guidance is provided in
view of the extraordinary damage and destruction caused by Hurricane Katrina.
The Service will not assert that cash payments an employer makes to § 170(c)
organizations in exchange for vacation, sick, or personal leave that its employees elect
to forgo constitute gross income or wages of the employees if the payments are: (1)
made to the § 170(c) organizations for the relief of victims of Hurricane Katrina; and (2)
paid to the § 170(c) organizations before January 1, 2007.
Similarly, the Service will not assert that the opportunity to make such an election
results in constructive receipt of gross income or wages for employees. Electing
employees may not claim a charitable contribution deduction under § 170 with respect
to the value of forgone leave excluded from compensation and wages.

The Service will not assert that an employer will be only permitted to deduct
these cash payments under the rules of § 170 rather than the rules of § 162. Cash
payments to which this guidance applies need not be included in Box 1, 3 (if applicable),
or 5 of the Form W-2.
For further information, please contact Sheldon A. Iskow of the Office of
Associate Chief Counsel (Income Tax and Accounting) at (202) 622-4920 (not a toll-free
call).

Page 1 of 1

PRESS ROOM

September 8,2005
JS-2706

Statement of Treasury Secretary John W. Snow on Resignation of Assistant
Secretary for Financial Markets Timothy S. Bitsberger
As the Treasury prepares to bid a fond farewell to one of its top leaders, I offer
sincere thanks and good luck on behalf of the Department to Assistant Secretary
Timothy Bitsberger.
Tim has served at the Treasury since October of 2001, first as Treasury Deputy
Assistant Secretary for Federal Finance and currently as Assistant Secretary for
Financial Markets. In each of his roles he has provided critical analysis and advice
to me and to the Under Secretary for Domestic Finance.
Tim is a national expert on policy and legislation regarding federal debt
management, state and local finance, and financial market oversight and regulation.
He has also done an outstanding job overseeing the Federal Financing Bank, and
representing Treasury on the Air Transportation Stabilization Board and the
Pension Benefit Guaranty Corporation.
His expertise and contributions have been invaluable, and he has been a highly
effective leader within the Office of Domestic Finance, as well as among the
Treasury management team. Tim's knowledge, experience and instincts will be
missed by his colleagues and staff, and I speak on behalf of the Department in
saying we wish him the very best in his future endeavors.
-30-

http://www.treas.gov/press/releases/js2706.htm

10/3/2005

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PRESS ROOM

September 9,2005
JS-2707

U.S. Treasury Urges Waiver of ATM Surcharges for Katrina Evacuees
The U.S. Department of the Treasury is requesting that depository institutions
refrain from imposing ATM surcharges on Hurricane Katrina evacuees who use the
FEMA Assistance Card to obtain cash from ATMs. The FEMA Assistance Card is a
MasterCard-branded debit card that is being issued by Treasury in order to provide
Katrina evacuees with access to FEMA benefits.
The FEMA Assistance Card may be used to make point-of-sale purchases at any
merchant that accepts MasterCard, and may also be used to withdraw funds from
an ATM through use of a Personal Identification Number (PIN). Cardholders may
already use the card without incurring a surcharge at any ATM participating in the
Allpoint network, and at any ATM owned by JP Morgan Chase, the card issuing
bank, including Bank One locations. In light of the urgent need of Katrina evacuees
for access to funds for purchasing basic needs, Treasury is urging all other
depository institutions to voluntarily waive surcharges at other ATMs where the card
can be used. Banks and ATM owners should contact their card associations,
network providers or processors for information necessary to identify these cards.
On Sept.1, 2005, The Board of Governors of the Federal Reserve System, the
Federal Deposit Insurance Corporation, the National Credit Union Administration,
the Office of the Comptroller of the Currency, and the Office of Thrift Supervision
(the agencies), and the Conference of State Bank Supervisors asked insured
depository institutions to consider all reasonable and prudent steps to help meet the
critical financial needs of their customers and communities affected by Hurricane
Katrina. The agencies stated that such actions may include waiving ATM fees for
customers and non-customers.

-30-

http://www.treas.gov/press/releasesljs1707.htm

10/3/2005

Page 1 of 2

PRESS ROOM

September 9,2005
JS-2708

The Honorable John W. Snow
Prepared Remarks: Visit to Houston
Good morning. I'm glad to be in Houston with my colleagues from the President's
economic team. We're all grateful to have this chance to get a first-hand sense of
the needs and the efforts to meet the needs of the hurricane survivors who are here
at the Astrodome. It's good to see the good work that is going on here - neighbors
helping neighbors - and it's important to see what needs to be done next.
We've seen people here receiving shelter, food and water, and medical attention.
They are survivors, but they have lost so much; it is difficult for anyone who has not
survived a catastrophic disaster to comprehend this level of loss and grief.
We share their grief as a nation. We also share their will to recover, and together
we will help them to recover.
Hurricane survivors need help putting their lives back together, and financial help is
a big part of that process. At Treasury, we're working hard to ensure that these
people who have lost so much will have easy and secure access to the money they
will need to get on the road to recovery. We know that people will have a lot of
questions about their money during this difficult time; they will need to ask a lot of
questions, and Treasury is putting financial consultants on the ground to help with
that.
I've dispatched six people from Treasury's Office of Financial Education who will be
setting up in Hall B of the Reliant Center to assist people with using their new debit
cards, or with other financial questions. These financial educators will be giving
advice and tips on how to protect oneself from fraud and how to keep their FEMAissued debit cards secure. Their top priority is providing personal counseling and
answering individual questions, and I'm awfully glad they are here to help.
It was good to see the work being done, and the help being given, at the Work
Force Tent. Finding a job is another key step on this road to recovery, and it's great
to see the Department of Labor helping people with that.
America's tradition of generosity, of helping our neighbors, is one the most
important advantages we have in terms of recovering from this disaster, so I want to
let workers and employers know that Treasury and the IRS have taken action to
allow employers to adopt leave-based donation programs under which employees
could convert vacation, sick or personal leave into cash contributions for charitable
organizations. In turn their employers would make cash contributions to charitable
organizations involved in relief efforts.
There is no doubt that we face a long and challenging road ahead as we help our
fellow Americans recovery from this terrible disaster. But good work is being done,
more help is still on the way, and I am optimistic that the generosity of the American
people will continue to lift up their fellow citizens.
Over the long term, I'm confident that the region will recover and rebuild. We picked
ourselves up after 9/11 and other catastrophic events, and we have the will and the
resources and the resolve to do so again. I am confident we will; it's the spirit of
Americans to do so.
I look forward to going on next, today, to Baton Rouge, Louisiana to check on how
people are accessing federal financial benefits and re-building their lives. Then
we're on to Mobile Alabama, where we'll be listening to state and local leaders and

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talking with them about rebuilding their communities.

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•
~-'-.'.
.;.~

w,-~

PRESS ROOM

September 9,2005
JS-2709

Statement of U.S. Treasury Deputy Secretary Robert
M. Kimmitt at the 2005 APEC Finance Ministers' Meeting
Cheju. Korea - "We have just completed a productive meeting here on the
important issues facing the APEC economies and this region. I am especially
thankful to our host, Deputy Prime Minister Han, and to the great people of Korea
for their hospitality this week. I also want to offer my deep appreciation to my APEC
colleagues for the sympathy that they have expressed for the damage caused by
Hurricane Katrina in the United States and for the offers of support by their
governments.
"During our meetings yesterday and today we had the opportunity to discuss
several issues of particular importance to the United Statos and to the APEC
region. I again emphasized the strongly held view of the U.S. that the world
economy works best with free trade, the free flow of capital, and flexible exchange
rates. Our discussions touched on each of these themes.
"We continued our ongoing dialogue on the importance of global capital flows. My
colleagues here joined me in recognizing that continued liberalization of trade and
open investment regimes that welcome foreign capital are critical to achieving
sustained economic and job growth.
"We also discussed the importance of bringing the Doha Round of multilateral trade
negotiations to a successful conclusion. One of the most important contributions
that finance ministers can make is to take a leadership role in advancing financial
services liberalization, which, along with services liberalization generally, will be a
critical part of a successful Doha Round. In our Communique we committed to
pursue a meaningful outcome in financial services in the Doha Round.
"Economic growth and the outlook in the APEC region remain strong. We also
spoke
about risks to the outlook. High oil prices are a particularly important issue, and we
discussed ways to ease the current very tight global supply. We agreed on the
importance of encouraging investment to bring forth additional supply. We also
recognized the importance of reducing subsidies that artificially encourage energy
use, often at great cost.
"The finance ministers noted in the Communique the continued threat of terror
worldwide and underscored the importance of actions to combat terrorist financing,
money laundering, and other abuses of our financial systems. The language
complements the recently adopted U.N. Security Council Resolution. 1617. which
further targets the support networks of the Taliban, al Oaida, and Usama bin
Laden. The Resolution strengthens targeted financial sanctions to cut off al Oaida's
lifeline, and sets forth a vigorous global campaign against terrorist financing.
"I want to highlight the discussion on addressing global imbalances. Our
Communique makes clear that bringing about an orderly adjustment of global
imbalances is a shared responsibility, and emphasizes the need for concrete
actions by all in a timely and effective manner. By all of us taking the actions
required to address global imbalances we can assure a continuation of sustained
and rapid growth in global output and employment
"For Europe and Japan, this means further structural reforms to promote domestic
demand-driven growth. It also requires greater exchange rate flexibility in the major
Asian economies. The Ministers welcomed the recent moves by China and
Malaysia toward greater exchange rate flexibility. As Secretary Snow has made

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clear, what is important now is that China, and other major economies, allow their
currencies to respond to underlying market forces. Finally, the United States has
noted its responsibility to raise i,ts domestic savings by cutting the budget deficIt.
This is a responsibility we take very seriously. The Bush Administration remains
committed to reducing the budget deficit's share of GOP, although Hurricane
Katrina relief and reconstruction efforts will add to the deficit in the next fiscal year.
"Asia remains the most dynamic region in the world, and what happens hore is
critical for the global economy. The creation of APEC 16 years ago was an
important development in the region that provides for meaningful communication
channels and a productive flow of ideas. I am pleased to have had tho opportunity
this week to participate in discussions on these and other important topics with my
APEC colleagues," said Kimmitt.

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PRESS ROOM
September 9, 2005
JS-2710
The Honorable John W. Snow
Prepared Remarks: Visit to Baton Rouge
Good afternoon. Mayor Holden, thank you for hosting us in your fine city that has
suffered so much since Katrina brought her devastating winds and rains.
I'm glad to be in Baton Rouge with my colleagues from the President's economic
team. We want to see what's being done to help people, and we want to know what
the next steps need to be, what help needs to come next to help rebuild people's
lives.
Today we've seen a lot of great work being done here. The employees of the
center we just visited are doing incredible work to help scores of people displaced
by Hurricane Katrina get their federal benefits - like unemployment checks or
special disaster unemployment payments. They've really been doing great work
here and I commend them for their efforts.
Katrina wreaked incredible devastation on the Gulf Coast of Louisiana. In New
Orleans, one of America's great cities is submerged. Thousands of businesses
have been destroyed and scores of homes have been lost. Hurricane Katrina is
having a terrible impact on people's lives. That's why centers such as this are so
important in helping people get their basic federal benefits
We also know that the last thing people here need to worry about right now is taxes.
That's why we quickly implemented extensions of tax deadlines, so that people in
the affected areas who would otherwise have had taxes or returns due on
September 15th don't have to worry about that deadline.
We were also pleased to be able to announce yesterday something that we believe
will give workers and businesses an easy and effective way to contribute to the
charities that are doing so much to rescue, comfort and care for the victims of this
terrible tragedy.
This action allows employers to adopt leave-based donation programs under which
employees could convert vacation, sick or personal leave into cash donations for
hurricane victims. In turn their employers would make cash contributions to
charitable organizations involved in relief efforts.
This is a time to help. The scale of this catastrophe is unprecedented, and the
generosity of the American people is extremely important to Katrina's victims. We
believe that this announcement will help workers and employers as they seek ways
to help their fellow Americans.
America's tradition of generosity, of helping our neighbors, is one the most
important advantages we have in terms of recovering from this disaster. We are
also fortunate that we are dealing with this situation from a position of economic
strength. The fact that our underlying economic fundamentals are so solid
enhances our ability to deal with this disaster.
Over the long term, I'm confident that the region will recover and rebuild. We picked
ourselves up after 9/11 and other catastrophic events, and we have the will and the
resources and the resolve to do so again. I am confident we will; it's the spirit of
Americans to do so

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6·.···
-'!.~
;...

PRESS ROOM

W-'-w

September 9, 2005
JS-2711

The Honorable John W. Snow Prepared Remarks: Visit to Mobile
Good afternoon. Governor Riley, thanks to you and your team for having us here.
I'm glad to be in Mobile with my colleagues from the President's economic team.
I'm looking forward to a good discussion about the needs of Gulf Coast
communities as they begin to rebuild in the aftermath of Hurricane Katrina.
I really appreciate the chance to hear first-hand ideas for helping communities like
Mobile recover from this devastating disaster. The President has said he wants to
seek big ideas and big solutions and we hope our conversation today will help
provide those. That's why it was so important to meet with the terrific community
and business leaders here today.
We want to encourage re-building and do whatever we can to help. I am pleased to
announce that a special effort that should help encourage the economic investment
needed to get places like Mobile back on the economic map.
We will be making a couple of key changes to the existing New Markets Tax Credit
Program (NMTC) - a competitive tax-credit-incentive program which currently
serves to attract private-sector capital investment into the nation's urban and rural
low-income areas - to encourage the financing of community development projects,
stimulate economic growth and create jobs in hurricane-ravaged areas.
Treasury will immediately implement two changes to that program's application
procedures so that its purpose is broadened to this region.
First, the deadlines for NMTC applications will be extended, on a case-by-case
basis, for organizations whose principal place of business is located in counties for
which FEMA has issued a major disaster declaration.
Second, the NMTC Program allocation application will be changed so that
additional consideration will be given to organizations that commit to target their
investment activities to affected counties.
This is a Significant first step toward encouraging businesses and investors to come
back to this area, quickly, to create commerce and jobs. More encouragement will
be needed, and Treasury will be working with Congress on how to achieve that in
the coming days and weeks. We'll be looking at short and long-term incentives for
economic development. This region will be re-built and it will be stronger than ever
- that, after all, is the American way and the American spirit.
There is no doubt that we face a long and challenging road ahead as we help our
fellow Americans recovery from this terrible disaster. But good work is being done,
more help is still on the way, and I am optimistiC that the generosity of the American
people will continue to lift up their fellow citizens.
Over the long term, I'm confident that the region will recover and rebuild. We picked
ourselves up after 9/11 and other catastrophic events, and we have the will and the
resources and the resolve to do so again. I am confident we will; it's the spirit of
Americans to do so.
-30-

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PRESS ROOM

September 9,2005
JS-2712
Snow Announces Changes to the New Markets Tax Credit Program to
Support Hurricane Katrina Recovery Efforts
U.S. Treasury Secretary John W. Snow today announced special relief for
Community Development Entities (CDE's)applying under the current round of the
New Markets Tax Credit (NMTC) program.
"I applaud the current applicants under the New Markets Tax Credit Program who
plan on focusing their business plans in areas affected by Hurricane Katrina," said
Snow. "Katrina is a disaster on every level imaginable, and tools like New Markets
Tax Credits will assist in the recovery efforts of New Orleans, Louisiana, Mobile,
Alabama and the rest of the region."
The Community Development Financial Institutions (CDFI) Fund will immediately
implement two changes to the program, in response to the recent declarations of
"major disasters" by the Federal Emergency Management Agency (FEMA):
•

The CDFI Fund will provide NMTC Program allocation application deadline
extensions, on a case-by-case basis, to organizations whose principal place
of business is located in counties where FEMA issued a 'major disaster
declaration' as of 7/15/05.

• The CDFI Fund will modify the NMTC Program allocation application so that
additional consideration will be given to organizations that commit to target
their investment activities to counties where FEMA issued a . major disaster
declaration' as of 7/15/05.
Up to $3.5 billion in tax credits is available under the current round of the NMTC
Program, which attracts private-sector capital investment into the nation's urban
and rural low-income areas. These tax credits help finance community development
projects, stimulate economic growth and create jobs.
The NMTC program, established by Congress in December of 2000, allows
individual and corporate taxpayers to receive a federal income tax credit for making
qualified equity investments in investment vehicles known as Community
Development Entities (CDEs). The credit provided to the investor totals 39 percent
of the cost of the investment and is claimed over a seven-year period. Substantially
all of the taxpayer's investment must in turn be used by the CDE to make qualified
investments in low-income communities. Successful applicants are selected only
after a competitive application and rigorous review process administered by
Treasury's CDFI Fund.
To learn more about New Markets Tax Credits, please visit the CDFI Fund's
website at www.cdfifund.gov .
-30-

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PRESS ROOM

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September 12, 2005
JS-2713

Treasury and IRS Announce Guidance Regarding the Temporary Operation of
Ships in the Domestic Trade as a Result of Hurricane Katrina
WASHINGTON, DC -- Today the Treasury Department and the IRS announced
guidance regarding the temporary operation of ships in the domestic trade as a
result of Hurricane Katrina,
Hurricane Katrina damaged many of the Gulf Coast oil refineries and has
significantly disrupted the pipeline transportation of oil and refined products from the
Gulf Coast States. The Secretary of Homeland Security has waived the Merchant
Marine Act of 1920 and related laws for the transportation of petroleum and refined
petroleum in response to Hurricane Katrina, including the transportation of
petroleum from the Strategic Petroleum Reserve undertaken in response to the
circumstances ariSing from Hurricane Katrina. By the notice issued today, Treasury
and the IRS are providing complementary guidance related to the tax treatment of
ship operators transporting petroleum and refined petroleum products pursuant to
the waiver and the treatment of the crew members of ships operating pursuant to
the waiver.

REPORTS
•

Notice 2005-65 Announcement of rules relating to the temporary opnration
of ships in the domestiC trade as a result of Hurricane Katrina

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Part III - Administrative, Procedural, and Miscellaneous

Announcement of rules relating to the temporary operation of ships in the domestic
trade as a result of Hurricane Katrina

Notice 2005-65

As a result of the devastation caused by Hurricane Katrina, the Treasury
Department and the Internal Revenue Service (IRS) understand that on September 1,
2005, the Secretary of the Department of Homeland Security waived the Merchant
Marine Act of 1920 and related laws for the transportation of petroleum and refined
petroleum products for the period until 12:01 a.m., September 19, 2005, and for the
transportation of petroleum released from the Strategic Petroleum Reserve undertaken
in response to the circumstances arising from Katrina (the waiver). As a result of these
unique circumstances, Treasury and the IRS announce the following guidance with
respect to the temporary operation of ships in the domestic trade pursuant to the
waiver.
The IRS will not challenge a position taken by a foreign corporation, who is
otherwise engaged in the international operation of ships, that the transport of
petroleum pursuant to the waiver is an activity incidental to its international operation of
ships under Treas. Reg. § 1.883-1 (g). In addition, Treasury and the IRS consider such

activities conducted pursuant to the waiver by enterprises otherwise engaged in the
operation of ships in international traffic to be ancillary activities the income from which
will qualify for exemption under the shipping article of U.S. income tax treaties.
In light of these unique circumstances, and the special consideration given to
foreign crew members reflected in section 861 (a)(3), the IRS will not challenge a
position that compensation for labor or services performed by a nonresident alien as a
regular member of a crew of a foreign vessel during the use of the vessel pursuant to
the waiver is income from sources without the United States.
For purposes of section 7701 (b)(7), the IRS will not challenge a position taken
by an individual who is temporarily present in the United States on any day as a regular
member of the crew of a foreign vessel operating in the United States pursuant to the
waiver that the individual is not present in the United States on such day unless such
individual otherwise engages in any trade or business in the United States on such day.
In addition, for purposes of the alternative tax under subchapter R of the Internal
Revenue Code, the IRS will not challenge a position that days operating in the United
States pursuant to the waiver are not included in the computation of the 30-day
limitation of section 1355(f)(4).
EFFECTIVE DATE
This notice is an emergency measure and relates to the specific circumstances
described in the waiver. Except as otherwise provided, the rules of this
notice are applicable from September 1, 2005, through September 18, 2005. With
respect to the transportation of petroleum released from the Strategic Petroleum

Reserve undertaken pursuant to the waiver, the rules of this notice are applicable from
September 1, 2005, through October 31, 2005.
DRAFTING INFORMATION
The principal author of this notice is Patricia A. Bray of the Office of Associate
Chief Counsel (International). For further information regarding this notice, contact
Patricia Bray or David Lundy at (202) 622-3880 (not a toll-free call).

Page 1 of2

PRESS ROOM
September 12, 2005
2005-9-12-16-23-45-6317
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets
totaled $73,052 million as of the end of that week, compared to $73,381 million as of the end of the prior week.
I. Official U.S. Reserve Assets (in US millions)
September 2, 2005

September 9, 2005

73,381

73,052

TOTAL
1. Foreign Currency Reserves 1
a. Securities

Euro
I

Of which, issuer headquartered in the U. S.

11,722

Yen

TOTAL

11,610

23,332

Euro

Yen

TOTAL

11,625

11,605

23,230
0

b. Total deposits with:
11,389

Ibi. Other central banks and BIS
Ibii. Banks headquartered in the U.S.

b.ii. Of which, banks located abroad

"II

5,619

11,297

17,008
0

12. IMF Reserve Position 2

16,914

II
II

13,558

3. Special Drawing Rights (SDRs) 2

4. Gold Stock 3

5. Other Reserve Assets

8,442

II
II

11,041
0

"II

Ib.iii. Of which, banks located in the U.S.

5,617

b.iii. Banks headquartered outside the U. S.

13,476
8,391

I
I

11,041

I
I

II. Predetermined Short-Term Drains on Foreign Currency Assets
SeptemlJer 2, 2005

Euro

Yen

September9,2005

TOTAL

Euro

1. Foreign currency loans and securities

Yen

I
II
2. Aggregate short and long positions in forwards and futures in foreign currencies vis-a-vis the U.S. dollar:
12.a. Short positions

12b. Long positions

13. Other

II
II

a
a

TOTAL

I
I

III. Contingent Short-Term Net Drains on Foreign Currency Assets
September 9, 2005

September 2, 2005
Euro

1. Contingent liabilities in foreign currency

Yen

II
I

1.a. Collateral guarantees on debt due within 1
year

I
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TOTAL

Euro

Yen

TOTAL
0

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Page 2 of
1er contingent liabilities

ign currency securities with embedded
awn, unconditional credit lines

th other central banks

I
I
I

I
0
0

th banks and other financial institutions
Jartered in the US

Jartered outside the US.
egate short and long positions of options

~ies

vis-a-vis the U.S. dollar

art positions
lought puts

II
II
II

th banks and other financial institutions

II
II

I
I
I

Vritten calls
'19 positions
lought calls
Vritten puts

Notes:

es holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market Account
valued at current market exchange rates. Foreign currency holdings listed as securities reflect marked-to-market values, and
reflect carrying values. Foreign Currency Reserves for the latest week may be subject to revision. Foreign Currency
s for the prior week are final.
:lms, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF and are
1 dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest week reflect any
ry adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month end.
itock is valued monthly at $42.2222 per fine troy ounce.

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PRESS ROOM

September 13, 2005
JS-2714
The Honorable John W. Snow
Prepared Remarks: McDonald's 2005 Government Relations Workshop
Washington, DC
Good morning; it's terrific to be here with all of you.
When I look around this room, I know that I'm looking at a great sample of the heart
and soul of our country. The great strength of America has never been more
evident than in our response to the devastating hurricane. All over the country
people have responded with out-stretched arms to the victims in a genuine spirit of
generosity -- and no where is the spirit of generosity more evident than in your great
company.
McDonald's owner-operators are the backbone of the McDonald's corporation and
as small-business owners you are the backbone of the American economy.
You're good neighbors in whatever community you're in because you create lots of
jobs. And in times like these, when so many lives have been devastated by a
natural disaster, you're better neighbors than ever.
I appreciate all that McDonalds - as a company and as a group of individuals - is
dOing to help the survivors of hurricane Katrina. From collecting funds through your
Ronald McDonald House Charities canisters to taking care of your owner-operators
and employees in the hurricane-ravaged area, you are reaching out and helping
with a caring spirit that embodies the spirit of America.
It's been wonderful to see the outpouring of help from companies like McDonalds,
Wal-Mart, and Home Depot, to name just a few, over the past couple of weeks.
McDonald's is supplying victims on the ground with food, water and medical help.
Wal-Mart has donated $3 million worth of essential supplies like diapers and
toothbrushes to relief centers in three states, and they are doing a terrific job at
keeping their area stores stocked with the things people need most, like generators,
water, dry ice and readily-prepared meals.
Home Depot has offered any of their employees whose job was affected by
Hurricane Katrina the opportunity to continue their employment at any Home Depot
store. They made a direct cash donation of $1.5 million to support immediate relief
and recovery efforts as well as long-term rebuilding - for example, they made a
direct donation of $500,000 to nonprofit organizations that produce and rehabilitate
affordable housing for low- to moderate-income homeowners to assist with the
repair and rebuilding efforts. They am also working with their suppliers to donate
materials, such as tarps, flashlights and bottled water, and generators to
emergency management organizations.
Across the board, companies are giving millions in cash donations to the Red Cross
and other relief groups. They're running employee donation programs and they're
matching their employees' donations. They're giving millions in product donations,
from pharmaceutical to technology products.
Johnson and Johnson has donated a quarter of a million dollars worth of products,
for example, including 2,000 personal care kits. Pfizer has donated medicines
including consumer and animal health products. Tyson Foods is providing
truckloads of pre-cooked and shelf-stable meals.

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This outpouring of help - both within the companies' families and externally, to the
broader relief efforts - reminds us that this is a country where people take care of
each other.
And although Katrina is a disaster on many levels - an event that has taken a
heartrending human toll - I am confident that the residents of places like New
Orleans and Gulfport Mississippi and southern Alabama will recover. We picked
ourselves up after 9/11 and other disasters, we have the will and the resources and
the resolve to do so again. I am confident we will again. It's the spirit of Americans
to do so.
We are committed to rebuilding the communities and as we do so we must help
people rebuild their lives with a sense of hope and opportunity. Our overriding goal
must be that everyone has an opportunity to build a better life for themselves and
their families. Nothing less is acceptable.
The business community has also proved itself to be nimble and responsive to
government action. As Treasury and other agencies announce changes in
government rules or regulations, or new programs to help hurricane survivors, the
business community has stepped up to play their part quickly and efficiently.
I know you see all of this as your responsibility, at McDonalds. You believe that
taking care of your own family is just what you do - and, oh, by the way, that family
includes your customers and everyone who works for you and their families, too.
At Treasury, we're doing our best to make sure that charitable spirit - that we see in
both individuals and companies - is encouraged. Last week, we announced an
action that allows employers to adopt leave-based donation programs under which
employees could forego vacation, sick or personal leave, and in turn their
employers would make cash contributions to charitable organizations involved in
relief efforts. We believe that this will help workers and employers as they seek
ways to help their fellow Americans.
The immediate responsibility of the government is to ensure that hurricane victims
have shelter, food, water and medical attention. And, clearly, the private sector is
playing a vital role in that effort.
Next on the list is making sure they have the money in their pockets that they need
to re-build their lives.
At Treasury, we're making sure that hurricane survivors can get access to financial
resources, starting with the checks they receive from the government, like Social
Security and unemployment pay. This is another area where cooperation and
support from private industry will help us get the job done.
I met with banking regulators last week, who are asking the institutions they
oversee to consider all reasonable and prudent steps to assist customers' cash and
financial needs in areas affected by Hurricane Katrina.
Many financial institutions are implementing contingency plans involving a variety of
actions that will help the people of the Gulf Coast. From waiving ATM fees and
easing restrictions on cashing out-of-state and non-customer checks and waiving
overdraft fees as a result of paycheck interruption, banks and credit unions are
doing what they can to ensure that victims have the cash resources they need to
survive this difficult time, financially.
Treasury has also been working closely with the insurance industry which has
thousands of claims adjusters who are ready to enter the area and begin to help
people restore their lives.
Credit institutions are taking steps such as waiving late fees for credit card and
other loan balances, easing credit card limits and credit terms for new loans and
delaying delinquency notices to the credit bureaus.
I appreciate the steps that regulators and their constituents are taking to make sure
that hurricane victims have access to cash and credit, and to ease worries about

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Page 3 of
things like bill payments and credit status.
At Treasury and the IRS, we also know that the last thing people in the devastated
areas of the Gulf Coast need to worry about right now is taxes. That's why we
quickly implemented extensions of tax deadlines, so that people in the affected
areas who would otherwise have had taxes or returns due on September 15th don't
have to worry about that deadline.
And speaking of taxes- there is a very important point that I want to emphasize:
Now is not the time to increase the tax burden on the American people.
Keeping the tax burden lighter leads to innovation, economic growth and job
creation. No one knows that better than the entrepreneurs here in this room today.
Katrina is having, and will have, an economic impact on us, and we need to focus
on maintaining a thriving economy, not burdening it with taxes that would slow it
down.
The President's economic leadership - most notably his well-timed tax cuts - really
turned our economy around over the past three years. And although there is clearly
no "good time" to be hit by a devastating natural disaster, I do believe that we were
fortunate to be standing on very solid economic ground when this terrible storm
struck.
The fact that our underlying economic fundamentals are so solid undoubtedly
enhances our ability to deal with this disaster.
Over the short term, we'll feel an economic hit from Katrina. Jobs and homes have
been lost, and that's a serious blow. The price of gas, already uncomfortably high,
has been impacted by the storm, and that hurts, too. High fuel prices act like a tax
on your business and on your family budget.
We believe that economic growth will slow in the last quarter of this year as a result
of Katrina, but are optimistic that rebuilding efforts will give GOP, jobs and our
overall economy a lift by the first quarter of next year.
I could already see the economic hope on the horizon when I visited the Gulf Coast
region last week with some of my Cabinet colleagues. We visited a Department of
Labor One-Stop center where we found out that employers - employers like youl in the area are already looking for workers. That's terrific news.
Only the private sector can come in with the ideas, innovation, capital investment
and job opportunities that the Gulf Coast needs so badly right now. And I know that
the business community isn't going to wait around for the government to re-build
Baton Rouge, New Orleans and Mobile. No. You're going to lead the effort, and in
government we'll do everything we can to encourage and support your hard work.
We are committed to helping the region re-build, to helping people re-build their
lives. And we want to do so in a way that is fiscally responsible. Will the relief and
reconstruction be costly? Of course it will - but I want to assure you that this
Administration is not, and will not stray from our course of federal deficit reduction.
With continued economic strength - which we will enjoy with the continuance of the
President's good economic policies - we'll be able to help our neighbors and
continue to reduce our deficit.
I know and appreciate that the McDonald's family is committed to providing jobs
and reopening closed restaurants in the Gulf Coast. I applaud your efforts, both
immediate and future, and deeply appreciate the partnership that we have to help
our American brothers and sisters recovery from this terrible event.
Thank you very much for having me here today; I hope you have a terrific meeting,
and I'd be happy to take your questions now.

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PRESS ROOM

September 13, 2005
JS-2715
Statement by the U.S. Treasury Regarding Requests to Postpone Pension
Payments Due on September 15
We are deeply concerned about the victims of Hurricane Katrina and have taken
numerous steps to provide relief to them in this difficult time. One of the steps
taken by the Treasury Department, the IRS, Department of Labor and the Pension
Benefit Guaranty Corporation immediately after the hurricane was to extend the
deadline for meeting minimum funding requirements under the Internal Revenue
Code and ERISA for employers and plans located in the devastated area. This
relief was granted in recognition of the administrative problems faced by employers
and their service providers in the affected areas due to lost records, and personnel
and communications problems, resulting from the devastation caused by Hurricane
Katrina. Such relief is not normally granted in other situations.
In addition to this previously announced benefit relief, we have received requests to
permit the delay of pension payments due on September 15 for certain employers
located outside the devastated area. We have concluded, however, that the best
approach is to limit the relief to those employers located within the geographical
region of the hurricane. We have reached this conclusion because we believe our
primary focus in all of our relief efforts should be to assist those directly in the path
of the hurricane's destruction. While targeted relief is appropriate in these
extraordinary circumstances, we remain equally committed to the necessary
discipline of the funding requirements to protect the interests of workers and
retirees, responsible plan sponsors, and ultimately taxpayers by targeting that relief
to those directly affected by Katrina.

####

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~-'-.'

•
.;.~

PRESS ROOM

w,-~

September 9, 2005
JS-2716

12th APEC Finance Ministers'
Meeting Joint Ministerial Statement
September 9, 2005
Jeju, Korea

I. Introduction

We, the Finance Ministers of the APEC economies, convened our twelfth annual
meeting in Jeju, Republic of Korea, on 8-9 September 2005, under the
chairmanship of Dr. Han, Duck-Soo, Korea's Deputy Prime Minister and Minister of
Finance and Economy. The meeting was also attended by the Managing Director of
the International Monetary Fund, the Managing Director of the World Bank, the
President of the Asian Development Bank, and the Executive Director of the APEC
Secretariat as well as by distinguished representatives from the private sector.
We met under the policy themes of "Free and Stable Movement of Capital" and
"Meet the Challenge of Ageing Economies." In discussing these themes, we were
pleased to note that APEC economies are moving toward freer and more stable
capital flows and acknowledged that we must all play our part by putting in place
the appropriate policies and strategies to address the importance and urgency of
the challenges that come with ageing economies in the APEC region. With the 4th
anniversary of the September 11 terrorist attack approaching and the continued
threats of terror worldwide, we reiterate the importance of actions to combat
terrorist financing, money laundering, and other abuses of our financial systems,
and in this regard, we urge FATF to make progress, as appropriate, in the
enlargement of its membership.
We expressed our sympathy for the tragic human losses from natural disasters
experienced since we last met, and stressed our commitment to work together in
dealing with their consequences.

II. Global and Regional Economic Developments
We note that global economic growth has moderated over 2005, but is still likely to
remain robust, despite high oil prices. Though growth in APEC regions is expected
to ease in 2005, we observe that member economies are experiencing faster
growth than the global economy. On the exchange rate front, we welcome the
recent moves by China and Malaysia towards a more flexible exchange rate
regime. We also reaffirmed that continued liberalization in trade and investment has
been an essential driver for the economic prosperity in the member economies. In
order to stimulate growth, and enhance the standard of living in the region, we
agreed to promote continued progress towards the Bogar Goals of free and open
trade and investment in the APEC economies. We reiterate our support for the
successful conclusion of the WTO Doha Development Agenda negotiations within
the context of a comprehensive agreement and, to that end, call for making
significant progress at the upcoming Hong Kong Ministerial Conference. We also
noted the upcoming UN Summit on MDG and look forward to cooperation on
achieving the goals for development.
We reiterate that all economies have a shared responsibility to take advantage of
the relatively strong global economic performance to address key risks and
vulnerabilities in their respective economies. To ensure orderly adjustment of global
imbalances and to help achieve more sustainable external positions and stronger
medium-term growth, we emphasize the importance of appropriate policies and the
need for concrete actions by all in a timely and effective manner. In the APEC

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Page 2 of 3
region, these include fiscal consolidation to increase national savings in the United
States; greater exchange rate flexibility for some economies as appropriate,
supported by continued financial sector reform, in emerging Asia; and further
structural reforms, including fiscal consolidation, in Japan.
We discussed the risks of sustained high energy prices to economic growth and ongoing development in the APEC economies. In this context, we noted the
importance of adequate investment in oil production and refining capacity, as well
as technology transfer for energy conservation and developing renewable energy
sources. In addition, we welcomed recent actions to reduce demand-distorting
subsidies and urged continuation of these efforts. Noting the discussions at the G-8
and ASEM meetings, we call for the Llialogue between the oil producing and
consuming countries to be strengthened through forums such as the International
Energy Forum and the G-20.
III. 12th APEC FM Process Policy Themes
On the two policy themes under discussion, we noted the greatly increased
importance of capital flows among member economies, and resolved to take
measures to address the challenge of ageing population. In particular, bearing in
mind the special characteristics of remittances as an alternative source of finance
for development, we recognized the need to help improve the efficient flow of
remittances in some member economies. We also adopted the "Jeju Declaration on
Enhancing Regional Cooperation against the Challenges of Population Ageing" to
renew our commitment to address the challenges and seize the opportunities of
population ageing.
1. Free and Stable Movement of Capital
We noted the increasing importance of capital flows in the APEC member
economies as evidenced by the size of global capital flows into and out of the
APEC economies increasing almost 8 times to 1.4 trillion US dollars in the past 20
years, compared to the 3.7 fold increase in the size of APEC's GOP during the
same period.
We acknowledged the increasing level of FDI as well as portfolio investment flows
into and out of the region. We observed that increased capital flows within the
APEC region are, in general, economically beneficial, and these flows reflect the
breadth and depth of increased economic activity among APEC economies and
between APEC and the rest of the world. As detailed in Annex C, we also noted
that worker remittances are an increasingly important component of international
financial flows, and encouraged continued efforts to improve formal remittance
services.
Recognizing the contribution of free and stable capital flows in supporting economic
growth, we emphasized the importance of open, well-supervised, and systemically
sound financial services sectors. In that context, we urge all member economies to
pursue a meaningful outcome of the financial services negotiations in the Doha
Development Round. We resolved to continue our efforts to promote capital
account liberalization, in a manner consistent with maintaining financial stability,
and to build deep, resilient and efficient capital markets including by developing
institutional investor base. We also recognized that the pace and manner of
liberalization needs to be well sequenced and tailored to the specific circumstances
of each economy.
2. Meet the Challenge of Ageing Economies
We note that some APEC economies are undergoing an unprecedented
demographic transition characterized by slowing population growth, a growing
proportion of people over 65, and a declining proportion in the population of working
age. While the dynamics of the transition vary among member economies, we
concurred that all member economies would eventually face the challenge of
population ageing.
Studies suggest that population ageing will likely bring significant fiscal pressures.
On the one hand, ageing population will bring increased demands for health care,
social security and public pension expenditures; on the other hand, tax revenue

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growth will slow as more taxpayers enter their retirement years. Research also
suggests that population ageing may have important impacts on economic growth
and on the growth of aggregate savings and investment.
In this context, we acknowledged the urgency and the Importance of domestic
economic, fiscal and financial market reforms including areas such as sustainable
pension systems, wider array of savings products and enhanced financial literacy.
We reaffirmed that international cooperation as set out in the "Jeju Declaration" is
essential to meet these objectives.
IV, Other Matters and Venue of the Next Meeting
Considering the importance of private sector input, we welcomed the active informal
dialogue with the APEC Business Advisory Council (ABAC). Also we appreciate the
contribution of the Pacific Economic Cooperation Council (PECC) Finance Forum
on ways to promote APEC economies' cooperation and enhance the financial
system, They provided both valuable insights from the private and academic
perspective and support for the work under the themes of the 12th APEC Finance
Ministers' Process.
We thanked the Korean people for their warm hospitality, and the Korean
Government and the Ministry of Finance and Economy for the well-organized
arrangement of the 12th APEC Finance Ministers' Meeting.
We agreed to meet again in HanOi, Viet Nam for the 13th APEC Finance Ministers'
Meeting on 7-8 September, 2006.

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PRESS ROOM
September 14, 2005
js-2717

Prepared Remarks of Daniel L. Glaser
Acting Assistant Secretary for Terrorist Financing and
Financial Crimes
Before the Latvian Commercial Bankers Association's
Conference:
The Fight Against Money Laundering and Financial Crimes
Riga, LATVIA - Good afternoon. It is an honor to be here today to address
Latvia's financial community about the importance of effective anti-money
laundering and counter-financing of terrorism (AMLlCFT) controls. I would like to
thank the Latvian Commercial Bankers Association for helping to bring us together.
Thanks also to Ambassador Bailey, Mark Draper and the rest of her staff for their
ongoing commitment to this issue. I am also grateful for the informative comments
and views of the speakers, panelists and other participants that we have heard from
over the past two days. It is conferences like this one that demonstrates how
effective public-private partnerships can be in enhancing understanding and
communication on both sides.
Latvia sits at the crossroads between east and west. As such, Latvia is well
positioned to be a key regional and international financial center. The United States
welcomes this role and stands ready to help Latvia achieve all of its aspirations.
But with opportunity comes responsibility. The same factors that make Latvia an
attractive center for legitimate financial transactions also make it attractive for illicit
business. Such illicit business corrupts systems and institutions, and destroys
confidence in them.
And this is not just a problem for Latvia - globalization and the computer and
telecommunications revolution means that the international financial system is only
as strong as its weakest link. Financial centers that are susceptible to abuse
provide criminals access to the international financial system as a whole. This is
why the efforts to combat money laundering and terrorist financing must be uniform
and global. Laxity in just a few jurisdictions undermines the efforts made by the
rest. Financial crimes, including terrorist financing, are global threats, which must
be addressed by common, global approaches. As members of the financial
community, not only are we charged with the responsibility to ensure the movement
of capital around the world in pursuit of investment and development, but also to
prevent that capital from supporting crime and terror.
Fortunately, the choice between strong AMLlCFT measures and a healthy, vibrant
financial center is a false one. In fact, you cannot have one without the other. In
the end, AML systems are about transparency, and transparency creates the
proper conditions for a healthy financial system, reinforcing foundations for
sustainable economic growth and development. As we work to implement strong
AMLlCFT measures, we are creating the basis for a healthy financial center that will
enjoy a strong international reputation.
However, this is not simply about such concepts as the integrity of the domestic and
international financial system. Put simply, terrorists and organized criminals are
supported by complex international financial networks that thrive in non-transparent
environments. These organizations kill innocent civilians indiscriminately, pollute
our communities with drugs, traffic in weapons of mass destruction, and undermine
the very foundations of our societies. As we have witnessed in London, Egypt, Bali,
Madrid, Russia, and four years ago in New York and Washington, DC, the stakes in
human life are unimaginably high.
It is our collective obligation to do all we can to identify, disrupt and dismantle the
financial networks that support these nefarious activities. Working together, we
have the ability to make it harder, costlier and less efficient for terrorists and

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organized criminals to move their funds through our institutions. In the end, this will
save lives and constitute a vital contribution to the international effort to combat
terrorists and other groups that prey on our society.
Prime Minister Kalvitas and the Latvian government understand these truths and
are taking steps to crack down on money laundering. I am encouraged by Latvia's
recent passage of an anti-money laundering law, which represents an important
development in Latvia's road towards crafting AMLlCFT controls in compliance with
international standards. There is much more hard work to be done in this area.
Passage of the Latvian anti-money laundering law should be followed with
comprehensive implementation measures, including vigorous application of relevant
regulations and appropriate money laundering prosecutions.
Components of a comprehensive AMLlCFT regime are well known and fairly
intuitive. They are outlined clearly by the Financial Action Task Force's (FATF) 40
+ 9 Recommendations on Money Laundering and Terrorist Financing, which have
been endorsed by over 120 countries, the IMF, World Bank and most recently, the
United Nations Security Council. They include:
•
•
•
•
•

Criminalization of money laundering and terrorist financing;
Customer identification and verification requirements;
Suspicious transaction reporting in a broad range of vulnerable financial
sectors;
Access to information by competent authorities; and
International cooperation.

Additionally, specific components are related particularly to combating terrorist
financing. These include the ability to freeze assets and block transactions, and
appropriate targeting of vulnerabilities in the charitable sector and alternative
remittance systems.
The United States - like countries throughout the world - is working to ensure that
we are implementing an effective and comprehensive regime that is compatible with
our legal, regulatory and financial systems. This effort began in earnest in 1970
with the enactment of the Bank Secrecy Act (BSA), which established the first AMLrelated regulatory requirements in the United States, and has been amended and
expanded consistently since that time, most recently by the USA PATRIOT Act.
Much of the expanded BSA is similar to regimes in many other jurisdictions. Other
aspects provide us with unique authorities, and I'll discuss briefly two of those.
Section 314 of the Patriot Act authorizes the United States Government is to share
information with and within its financial sector; that is, both vertically - between the
government and the industry - and horizontally - providing a safe harbor that
allows industry members to share with each other. The Treasury Department has
implemented this section by creating a "pointer" system for law enforcement. The
system gives the appropriate authorities, in the right circumstances, the ability to
work with the Financial Crimes Enforcement Network (FinCEN) to transmit the
names of persons of interest to the financial sector to determine whether those
institutions possess any relevant transaction or account information. If there are
any "hits," law enforcement can then follow up with a subpoena to obtain specific
information. The system has been successful, and a valuable tool for law
enforcement.
Beyond Section 314, we have worked hard to establish an embedded ethos of
information sharing between financial institutions and government authorities, and
directly between individual financial institutions. With this in mind, the Treasury
relies heavily on the Bank Secrecy Act Advisory Group (BSAAG) as a forum in
which to discuss important issues and emerging threats. The BSAAG is comprised
of high-level representatives from financial institutions, federal law enforcement
agencies, regulatory authorities, and others from the private and public sectors.
Through the BSAAG and other regulatory and educational seminars and programs,
the Treasury maintains a close relationship with U.S. financial institutions to ensure
a smooth exchange of information related to money laundering and terrorist
financing.
Section 311 of the Patriot Act authorizes the Secretary of the Treasury to designate
a foreign jurisdiction or institution as a "primary money laundering concern." Once
designated as such, the Treasury Department may take a range of regulatory

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actions to protect the U.S. financial system, including requiring U.S. financial
institutions to terminate correspondent relationships with the designated entity.
Such a measure essentially cuts the designated entity off from the U.S financial
system.
We have used this tool in several instances to date, which have affected entities
across the globe. Targeted jurisdictions and institutions have been located in
Ukraine, Nauru, Burma, Syria, the "Turkish Republic of Northern Cyprus" - and
here in Latvia. In some of these instances, the designated entities have reversed
course and implemented serious reforms, which has resulted in the U.S. lifting the
proposed rules against them.
I would also like to take this opportunity to discuss in greater detail the financial war
on terrorism. As I discussed earlier, the international community must work in
concert to disrupt and dismantle the financial networks that support terrorism. A
vital component of this effort must be the application of targeted financial sanctions.
Endorsed by the United Nations through UN Security Counsel Resolutions
(UNSCR) 1373 and 1267 - which was just recently expanded and fortified in
UNSCR 1617 - targeted financial sanctions are preventive measures quite different
from criminal or regulatory action. These endorsements are an acknowledgment
that countries need the ability to move without delay to deprive terrorists of
resources that may lead to terrorist attacks, and that those who provide financial
support to terrorists must be isolated from our financial systems immediately,
separate from any efforts to prosecute them criminally.
The United States has responded to this United Nations mandate by designating
408 entities associated with a wide range of terrorist organizations throughout the
world, including al Qaida, Hamas, Hizballah, Palestinian Islamic Jihad, ETA and the
FARC. I am sad to say, however, that this vital component of any AMLlCFT regime
- the one component which has the most explicit United Nations endorsement and
mandate through two separate UNSCRs - is probably the least understood and
most poorly implemented component worldwide. I am not talking simply about
countries that do not have the capacity to block terrorist assets. I am referring to
entire regions of the world that do not implement this United Nations requirement.
This must change.
Although most countries do have some mechanism in place to block the assets of
al Qaida-related entities specifically identified for them by the United Nations, too
many countries have taken little or no action to block the assets of other terrorist
groups as specifically required by UNSCR 1373. It is urgent for countries
throughout the world to begin to develop effective administrative mechanisms to do
just that.
But the efforts of the international community to implement targeted financial
sanctions should not be limited to the fight against terrorism. A concerted
international effort should be undertaken to identify, disrupt and dismantle the
financial networks that support the proliferation of weapons of mass destruction
(WMD), and to financially isolate those who engage in such activities. The United
States has already taken the first steps.
President Bush recently signed a WMD Proliferation Financing Executive Order that
authorizes the freezing of assets of WMD proliferators and their supporters - and
forbids U.S. persons from transacting any type of business with them. We hope
that this lays the foundation for expanded international cooperation against WMD
networks. In the case of WMD proliferation, just as it is with terrorist financing, the
international community must join forces in order to protect our society.
As we face the 4th anniversary of the September 11th attacks, it is more apparent
than ever that following dirty money and attacking its illicit sources is an essential
part of winning the financial war against terrorist financing and financial crimes. It is
also quite clear that the fight against terrorist financing and financial crimes
necessitates robust and effective AMLlCFT systems, targeted actions and
coordinated international public and private sector responses. Illicit threats are
constantly evolving, and our foes are elusive. I look forward to working with you to
meet these challenges and others that may lie ahead.

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Thank you.

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PRESS ROOM

September 14, 2005
JS-2718
Treasury Calls for Large Position Reports
The Treasury is calling for Large Position Reports from those entities whose
reportable position in the 4-3/8% Treasury Notes of August 2012 equals or exceeds
$2 billion as of close of business Monday, September 12, 2005. Entities with
reportable positions in this note equal to or exceeding this $2 billion threshold must
report these positions to the Federal Reserve Bank of New York. Entities with
positions in this note below $2 billion are not required to file Large Position Reports.
Reports must be received by the Government Securities Dealer Statistical Unit of
the Federal Reserve Bank of New York before noon Eastern Time on Tuesday,
September 20, 2005, and must include the required position and administrative
information. Large Position Reports may be faxed to (212) 720-5030 or delivered to
the Bank at 33 Liberty Street. 4th floor.
Details on Call for Large Position Reports
Security Description:
4-3/8% Treasury Notes of August 2012, Series D-2012
CUSIP Number:
912828 AJ 9
CUSIP Number of STRIPS Principal Component:
912820 HF 7
Maturity Date:
August 15, 2012
Date for Which Information Must Be Reported:
September 12, 2005 as of COB
Large Position Reporting Threshold:
$2 Billion (Par Value)
Date Report Is Due:
September 20,2005, before noon Eastern time
This call for large position information is made under Treasury's large position
reporting rules (17 CFR Part 420). The notice calling for Large Position Reports is
also being published in the Federal Register. This press release and a copy of a
sample Large Position Report, which appears in Appendix B of the rules at 17 CFR
Part 420, are available at the Bureau of the Public Debt's Internet site at
www.public(j~t.lt.treas~gov.

Questions about Treasury's large position reporting rules should be directed to
Treasury's Government Securities Regulations Staff at Public Debt on (202) 5043632, Questions regarding the method of submission of Large Position Reports
should be directed to the Government Securities Dealer Statistical Unit of the
Federal Reserve Bank of New York at (212) 720-7993.
- 30 -

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PRESS ROOM

September 14, 2005
js-2719

Statement of Secretary John W. Snow on Trade Liberalization
The President today called for a successful conclusion to the Doha trade talks and
challenged nations to join the U.S. in eliminating all tariffs, subsidies and other
barriers to the free flow of goods and services as others do the same. This
challenge calls upon all nations to take strona actions that will henefit the r:1()h::l1
economy, most of all developing countries, by bringing critical opportunities for
growth and job creation to economies around the world.
Trade in services in particular can greatly benefit developing countries, providing
knowledge and infrastructure to facilitate economic growth and create jobs. In fact.
services liberalization enhances and multiolies the aains made from libemli7inn
trade In goods and agriculture. The benefits of a modem services sector spread
across an entire economy, touching every producer, transaction and consumer.
This is especially true in the case of financial services. The financial sector is the
backbone of a modern economy. An efficient, well-regulated financial sector is a
key element for achieving economic growth and stability in developing countries.
While there are many ways to strengthen financial sectors, the fastest way to boost
competition and efficiency is to introduce the best practices of world-class financial
institutions.
-30-

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PRESS ROOM

September 15, 2005
JS-2720
Treasury Designates Banco Delta Asia as
Primary Money Laundering Concern under
USA PATRIOT Act

The U.S. Department of the Treasury today designated Banco Delta Asia SARL as
a "primary money laundering concern" under Section 311 of the USA PATRIOT Act
because it represents an unacceptable risk of money laundering and other financial
crimes.
"Banco Delta Asia has been a willing pawn for the North Korean government to
engage in corrupt financial activities through Macau, a region that needs significant
improvement in its money laundering controls, said Stuart Levey, the Treasury's
Under Secretary for Terrorism and Financial Intelligence (TFI). "By invoking our
USA PATRIOT Act authorities, we are working to protect U.S. financial institutions
while warning the global community of the illicit financial threat posed by Banco
Delta Asia."
In conjunction with this finding, Treasury's Financial Crimes Enforcement Network
(FinCEN) issued a proposed rule that, if adopted as final, will prohibit U.S. financial
institutions from directly or indirectly establishing, maintaining, administering or
managing any correspondent account in the United States for or on behalf of Banco
Delta Asia.
6anj;o Delta Asic:! SARL

Banco Delta Asia is located and licensed in the Macau Special Administrative
Region, China. The bank operates eight branches in Macau, including a branch at a
casino, and is served by a representative office in Japan. In addition, Banco Delta
Asia maintains correspondent accounts in Europe. Asia, Australia, Canada, and the
United States.
Deficiencies at Banco Delta Asia noted in the finding include, but are not limited to,
the following:
•

Banco Delta Asia has provided financial services for over 20 years to
Democratic Peoples Republic of Korea (DPRK) government agencies and
front companies. It continues to develop relationships with these account
holders, which comprise a significant amount of Banco Delta Asia's
business. Evidence exists that some of these agencies and front
companies are engaged in illicit activities.
• Banco Delta Asia has tailored its services to the needs and demands of the
DPRK with little oversight or control. The bank also handles the bulk of the
DPRK's precious metal sales, and helps North Korean agents conduct
surreptitious, multi-million dollar cash deposits and withdrawals.
• Banco Delta Asia's special relationship with the DPRK has specifically
facilitated the criminal activities of North Korean government agencies and
front companies. For example, sources show that senior officials in Banco
Delta Asia are working with DPRK officials to accept large deposits of cash,
including counterfeit U.S. currency, and agreeing to place that currency into
circulation.
• One well-known North Korean front company that has been a client of
Banco Delta Asia for over a decade has conducted numerous illegal
activities, including distributing counterfeit currency and smuggling
counterfeit tobacco products. In addition, the front company has also long
been suspected of being involved in international drug trafficking.
Moreover, Banco Delta Asia facilitated several multi-million dollar wire
transfers connected with alleged criminal activity on behalf of another North

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•

Korean front company.
In addition to facilitating illicit activities of the DPRK, investigations reveal
that Banco Delta Asia has serviced a multi-million dollar account on behalf
of a known international drug trafficker.

Background on Section 311

Title III of the USA PATRIOT Act amends the anti-money laundering provisions of
the Bank Secrecy Act (BSA) to promote the prevention, detection and prosecution
of international money laundering and the financing of terrorism. Section 311
authorizes the Secretary of the Treasury - in consultation with the Departments of
Justice and State and appropriate Federal financial regulators - to find that
reasonable grounds exist for concluding that a foreign jurisdiction, institution, class
of transactions or type of account is of "primary money laundering concern" and to
require U.S. financial institutions to take certain "special measures" against those
jurisdictions, institutions, accounts or transactions.
These special measures range from enhanced recordkeeping or reporting
obligations to a requirement to terminate correspondent banking relationships with
the designated entity. The measures are meant to provide Treasury with a range of
options to bring additional pressure on institutions that pose specific money
laundering threats.
The Treasury Department has previously identified the following financial
institutions as being of "primary money laundering concern," pursuant to Section
311 :
•
•

Multibanka and VEF Bank of Latvia in April 2005;
First Merchant Bank of the "Turkish Republic of Northern Cyprus" ("TRNC")
and Infobank of Belarus in August 2004;
• Commercial Bank of Syria and its subsidiary Syrian Lebanese Commercial
Bank in May 2004; and
• Myanmar Mayflower Bank and Asia Wealth Bank in November 2003.

The Bush Administration has also taken action, pursuant to Section 311, against
the foreign jurisdictions of Burma, Nauru and the Ukraine. The finding of the
Ukraine as being of "primary money laundering concern" was lifted after Ukrainian
authorities took subsequent and aggress'lve steps to address the concerns and
risks identified in the 311 action.

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PRESS ROOM

September 15, 2005
JS-2721

MEDIA ADVISORY
Treasury Secretary Snow to Visit Atlanta to
Discuss Hurricane Katrina Relief Efforts
U.S. Treasury Secretary John W. Snow will travel to Atlanta, Georgia, tomorrow to
discuss relief efforts following Hurricane Katrina. In Atlanta, Secretary Snow will
visit the Home Depot emergency headquarters to see their emergency command
center and review how the company assists victims of the hurricane. Following his
Home Depot visit, the Secretary and IRS Commissioner Everson will tour an IRS
call center where several thousand IRS employees are helping the Federal
Emergency Management Agency answer telephone calls from Hurricane Katrina
victims seeking to register for federal relief benefits.
The following events are open to credentialed media with photo identification:

Friday S_eptember 16, 2005
Site visit to Home Depot Emergency Headquarters
Home Depot Emergency Headquarters
10:00 AM EST
2455 Paces Ferry Road
Atlanta, GA
... Media must RSVP to David Sandor (770) 3844439
Media must arrive by 9: 15 AM EST

Site visit to IRS call center with Commissioner Everson
IRS Call Center
12:00 PM EST
2385 Chamblee Tucker Road
Atlanta, GA
** Media must RSVP to Ivone Tune (770) 8159645 or (770) 455 2459
** Media must arrive by 11: 15 AM EST
·*Press Availability immediately following site visit

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PRESS ROOM

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September 15, 2005
JS-2722

Treasury and IRS to Allow Hurricane Katrina Victims to Make Withdrawals
and Loans From Retirement Plans
WASHINGTON, DC - The Treasury Department and IRS announced today that
401(k) plans and similar plans, such as those under section 403(b), will be
permitted to make loans and hardship distributions to victims of Hurricane Katrina.
"Today's action will allow those devastated by Hurricane Katrina access to muchneeded money as they work to rebuild their lives," stated Treasury Secretary John
Snow. "I also applaud action taken in the House and Senate today to provide tax
relief to Katrina victims and to allow these withdrawals to be made without penalty."
The relief is generally available now through March 31, 2006.

REPORTS
•

1RS Announcement 2005-70

http://www.treas.gov/press/releases/js2722.htm

10/3/2005

Part IV. Items of General Interest
Hurricane Katrina Relief

Announcement 2005-70

Purpose
This announcement provides relief to taxpayers who have been adversely
affected by Hurricane Katrina and have retirement assets in qualified employer plans
they would like to use to alleviate hardships caused by Katrina. In addition, this
announcement provides relief for certain verification procedures that may be required
under retirement plans with respect to loans and hardship distributions. The relief
provided under this announcement is in addition to the relief already provided by the
Service pursuant to News Release IR-2005-96 under § 7508A of the Internal Revenue
Code ("Code") for victims of Hurricane Katrina. (See the regulations under § 7508A and
Section 8 of Rev. Proc. 2005-27, 2005-20 I.R.B. 1050, for a listing of employee benefitrelated acts currently postponed until January 3,2006, because of the disaster.)

Background
The laws relating to qualified employer plans impose various limitations on the
permissibility of distributions and loans from those plans. For example, § 401 (k}(2}(B)(i)
of the Code provides that in the case of a § 401 (k) plan that is part of a profit-sharing or
stock bonus plan, elective deferrals may only be distributed in certain situations, one of
which is on account of hardship. Section 403(b)(11) provides similar rules with respect
to elective deferrals under a § 403(b} plan. Other rules do not permit in-service
distributions from certain plans, even if there is a hardship. For example, in-service
hardship distributions are generally not permitted from pension plans or from accounts
holding qualified nonelective contributions ("QNECs") described in § 401 (m}(4 )(C) or
qualified matching contributions (QMACs") described in § 401 (k)(3)(O)(ii)(I). However,
Rev. Rul. 2004-12, 2004-7 I.R.B. 478, holds that if amounts attributable to rollover
contributions are separately accounted for within a plan, such amounts may be
distributed at any time, pursuant to the employee's request. Section 72(p) imposes
certain requirements relating to plan loans. Unless those requirements are satisfied, a
loan is treated as a distribution under the plan.
In order to make a loan or distribution (including a hardship distribution), the plan
must contain language authorizing such loan or distribution. Also, except to the extent a

distribution consists of already-taxed amounts, the distribution will be includible in gross
income and generally subject to the 1O-percent additional tax under § 72(t). Similar
rules apply to a distribution from an IRA.
Plan provisions and regulations under certain Code sections establish verification
procedures before distributions or loans will be made from the plan. For example, the
regulations under § 401 (k) set forth certain criteria an employee must meet in order to
receive a hardship distribution. A plan may contain procedures designed to confirm that
the criteria have been satisfied.

Relief
A qualified employer plan will not be treated as failing to satisfy any requirement
under the Code or regulations merely because the plan makes a loan, or a hardship
distribution for a need arising from Hurricane Katrina, to an employee or former
employee whose principal residence on August 29, 2005, was located in one of the
counties or parishes in Louisiana, Mississippi or Alabama that have been or are later
designated as disaster areas eligible for Individual Assistance by the Federal
Emergency Management Agency because of the devastation caused by Hurricane
Katrina or whose place of employment was located in one of these counties or parishes
on such date or whose lineal ascendant or descendant, dependent or spouse had a
principal residence or place of employment in one of these counties or parishes on such
date. Plan administrators may rely upon representations from the employee or former
employee as to the need for and amount of a hardship distribution, unless the plan
administrator has actual knowledge to the contrary, and such distribution is treated as a
hardship distribution for all purposes under the Code and regulations. For purposes of
this announcement, a "qualified employer plan" means a plan or contract meeting the
requirements of § 401 (a), 403(a) or 403(b), and, for purposes of the hardship relief,
which could, if it contained enabling language, make hardship distributions. For
purposes of this paragraph, a "qualified employer plan" also means a plan described in
§ 457(b) maintained by an eligible employer described in § 457(e)(1 )(A), and any
hardship arising from Hurricane Katrina is treated as an "unforeseeable emergency" for
purposes of distributions from such plans. For example, a profit-sharing or stock bonus
plan that currently does not provide for hardship or other in-service distributions may
nevertheless make Katrina-related hardship distributions pursuant to this
announcement, except from ONEC or OMAC accounts or from earnings on elective
contributions. A defined benefit or money purchase plan, which generally cannot make
in-service hardship distributions, may not make hardship distributions pursuant to this
announcement, other than from a separate account, if any, within such plan containing
either employee contributions or rollover amounts.
The amount available for hardship distribution is limited to the maximum amount
that would be permitted to be available for a hardship distribution under the plan under
the Code and regulations. However, the relief provided by this announcement applies
to any hardship of the employee, not just the types enumerated in the regulations, and

no post-distribution contribution restrictions are required. For example, regulations
under § 401 (k) provide safe harbor hardship distribution standards wherein a hardship
is deemed to exist only for certain enumerated events, and after receipt of the hardship
amount, the employee is prohibited from making contributions for at least 6 months.
Plans need not follow these rules with respect to hardship distributions described in the
first two sentences in the immediately preceding paragraph.
If the plan does not provide for loans or hardship distributions, the plan must be
amended to provide for loans or such emergency distributions no later than the end of
the first plan year beginning after December 31,2005. To qualify for the relief under
this announcement, a hardship distribution must be made on account of a hardship
resulting from Hurricane Katrina and be made on or after August 29, 2005, and no later
than March 31, 2006. In the case of plan loans made pursuant to this announcement,
such loans must satisfy the requirements of § 72(p).
In addition, a retirement plan will not be treated as failing to follow procedural
requirements for plan distributions (in the case of all retirement plans, including IRAs) or
loans (in the case of retirement plans other than IRAs) imposed by the terms of the
plan, merely because such requirements are disregarded for any period beginning on or
after August 29, 2005, and continuing through March 31, 2006, with respect to
distributions to individuals described in the first paragraph under "Relief', provided the
plan administrator (or financial institution in the case of distributions from IRAs) makes a
good-faith effort under the circumstances to comply with such requirements. However,
as soon as practical, the plan administrator (or financial institution in the case of IRAs)
must make a reasonable attempt to assemble any foregone documentation. For
example, if spousal consent is required for a plan loan or distribution and the plan terms
require production of a death certificate if the employee claims his or her spouse is
deceased, the plan will not be disqualified for failure to operate in accordance with its
terms if it makes a distribution or loan to an individual described in the first paragraph
under "Relief' in the absence of a death certificate if it is reasonable to believe, under
the circumstances, that the spouse is deceased, the distribution is made no later than
March 31, 2006, and the plan administrator makes reasonable efforts to obtain the
death certificate as soon as practical. For purposes of this announcement, "retirement
plan" has the same meaning as "eligible retirement plan" under § 402(c)(8)(B).
The Department of Labor has advised Treasury and the Internal Revenue
Service that it will not treat any person as having violated the provisions of Title I of the
Employee Retirement Income Security Act solely because they complied with the
provisions of this Announcement.

Drafting Information
The principal author of this announcement is Roger Kuehnle of the Employee
Plans, Tax Exempt and Government Entities Division. For further information regarding
this announcement, please contact the Employee Plans taxpayer assistance telephone

service at (877) 829-5500 (a toll-free number) between the hours of 8:00 a.m. and 6:30
p.m. Eastern Time, Monday through Friday.

Page 1 of 3

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PRESS ROOM

September 15, 2005
js-2723

Remarks of Under Secretary of the Treasury Timothy D. Adams before the to
the U.S.-China Business Council
I'm pleased to be here. I'd like to first speak broadly about U.S economic relations
with China. After all, a prosperous and secure China that meets its international
obligations and is fully integrated and engaged in the global economy and global
economic institutions is in our, and China's, interest.
China's Importance
Let me begin by saying that the driving force behind all of the Administration's
international economic policies is the principle that rapid growth, at full potential,
around the world is the most effective way to create jobs, raise incomes, and pull
countries out of poverty. In the last 25 years, the Chinese economy has made a
remarkable transformation from a centrally planned system to an increasingly
market-oriented economy. China has posted an average annual real growth rate of
9.7 percent between 1990 and 2003. China is now the world's seventh largest
economy (based on market exchange rates), and because of both its rapid growth
and size, one with tremendous impact on global markets. Indeed, the United States
and China have been the engines of the global economy, accounting for half of
global growth in the last few years.
And as the Council membership knows, China is also the world's third largest
trading economy. China is not only a major exporter, but also a signifIcant market
for other countries' exports. U.S. exports to China alone have grown 81 percent
over the last three years. For these reasons our economic relationship is a key
lever in addressing global economic imbalances.
Addressing imbalances in the global economy is a shared responsibility among the
major economic regions of the world. Each need to take steps to help ensure that
adjustments take place in an environment of high. rather than low, growth. For the
United States, this means raiSing domestic savings, in part, by cutting the budget
deficit. But our action alone will not be sufficient to unwind global imbalances
without a major slowdown in global growth. For Europe and Japan, addressing
imbalances means further deregulation of services, goods, and labor markets to
raise domestic demand.
We think there are three key elements for East Asia and China in particular: 1)
greater exchange rate flexibility: 2) shifting from export-oriented growth to a
domestic demand-based economy: and 3) development of the financial sector
including capital markets.
Exchange Rate
The issue that has attracted the most press and public attention is exchange rate
reform. Treasury has promoted greater exchange rate flexibility because we have
always believed that it is first and foremost in China's interest. Giving monetary
authorities greater control over interest rates, and other market-based tools, while
relying less on direct administrative controls, will lead to more efficient financial
intermediation and reduce the risk of a repeat of the boom/bust cycles experienced
in the 1980s and 1990s. Given the significant structural changes that China's
economy will undergo in the years ahead, allowing markets to drive China's
exchange rate will help reduce the risk of misalignment and facilitate smooth and
efficient adjustment.
However, given the high import content of Chinese exports, we know that by itself
reforming China's exchange rate will not cure global imbalances. But, increased

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10/3/2005

Page 2 of 3
Chinese exchange rate flexibility will lead to increased exchange rate flexibility in
the rest of East Asia. And when added up, this should have a meaningful impact on
global imbalances.
In this context, the July 21 move by China to adopt a more flexible exchange rate
was welcome, and has created a mechanism that over time will create room for
considerable movement in the currency. At the time the announcement was made,
Treasury took special note of China's objective of allowing the market to fully play
its role in resource allocation as well as "to put in place and further strengthen the
managed floating exchange regime based on market supply and demand'"
It was this promise of greater exchange rate flexibility and a closer alignment with
market forces that was the critical part of China's action. The People's Bank of
China has also expanded the range of companies that can trade in the foreign
exchange market and can buy and sell foreign exchange forward contracts - actions
clearly designed to accommodate greater flexibility. What is important now is that
China allows the new exchange rate mechanism to move more closely into
alignment with underlying market forces. We at Treasury are monitoring this
process closely as we continue and intensify our engagement with the Chinese
authorities.

Domestic Demand
The second component of adjustment in China and East Asia is promoting
domestic demand-driven growth. According to the IMF, exports of emerging Asia
have grown by 10.5 percent per year on average over the past decade, reaching 18
percent annual growth during 2002-04. Exports now account for 45 percent of
emerging Asia's GOP. This export-led growth has resulted in surging current
account surpluses, and is a major source of tension among Asia's trading partners.
To sustain growth, China and East Asia need to spur the growth of domestic
demand and reduce their reliance on exports. A number of measures are available
to China to boost domestic demand. One solution is to reform and strengthen
China's pension system, healthcare system, and social safety net so that
households need to save less for unexpected events and can consume more.
Financial service liberalization and increased openness to foreign financial services
providers can provide innovative financial products that can better meet
households' saving goals. And this is where I'd like to turn to next
Financial Sector Reform
The third component is the critical issue of financial sector reform. Reform is
needed given the history of highly inefficient financial intermediation. Indeed, a
more efficient financial sector will better intermediate savings and will also help in
pursuit of the goal I just discussed, which is China's transition to consumption-led
growth and away from a heavy reliance on the export sector. Regarding financial
sector reform let me focus on three aspects.
First is liberalization of the financial sector. Opening China's financial services
sector further by allowing overseas securities firms to establish wholly-owned
subsidiaries and by expanding the scope of products securities firms can offer
would add liquidity and transparency to the capital markets, increase the flow of
capital to the most productive Chinese firms, inject management expertise,
encourage regulatory reforms, and introduce best-practices for technology, risk
management, and control systems. Improvements in corporate governance in the
financial sector will also promote the private sector role in banking.
Second is the move to risk-based lending. Last year's deregulation of lending rates
will allow banks greater scope to differentiate borrowers based on risk. But more
reforms - such as introducing rigorous credit analysis procedures, improving
accounting and financial reporting standards and adopting a strong board and
corporate management structure -- are needed to better assess risk, improve asset
quality and take advantage of higher interest rates to slow excessively aggressive
asset growth.
Third is capital market development Further development of China's equity and
bond markets would lead to more efficient allocation of capital, provide greater

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10/3/2005

Page 3 of 3
support for market oriented reforms (as agents would not be so dependent on the
government to limit risks), and improve corporate governance. Stock markets are
still too often viewed as a way to keep inefficient state enterprises afloat rather than
as a way to channel capital to the most competitive firms and sectors and a way to
transfer control to more productive owners. Deeper bond markets would reduce
corporate reliance on state-controlled lenders and more active derivatives trading
would allow firms to better manage risk.
Foreign direct investment in the financial sector specifically would strengthen risk
assessment and management in addition to providing capital. China's plan to open
the banking sector by the end of 2006 is ambitious and something that Treasury will
watch closely so that regulatory impediments do not undermine China's WTO
commitments. Particularly welcome is a recent statement from China's chief
banking supervisor that a proposal is in the works to lift caps on foreign ownership
of Chinese banks. We will continue to press China to open up more to FDI in
securities markets, because open economies are strong and resilient.
Treasury Activities
As is obvious from the items I've just discussed, we are actively engaged with our
Chinese counterparts. The economic transformation underway in China places
tremendous demands on the Chinese economic leadership. It also means that we
need to effiCiently deploy Treasury's resources to anticipate and respond to
developments. You may already know about the Technical Cooperation Program
(TCP) that Secretary Snow launched two years ago. In short, the TCP was
designed to help the Chinese authorities overcome the obstacles they see to
greater exchange rate flexibility at the technical level.
Treasury has hosted a number of exchanges between our banking and securities
regulators and their counterparts in China to discuss a variety of regulatory and
safeguard issues surrounding a shift to a more flexible exchange rate regime. For
example, we've conducted training on developing and regulating financial futures
markets in China with the aim of helping the Chinese authorities introduce currency
hedging products in an environment of greater exchange rate volatility and learn
how to supervise currency risk in banking systems. We plan to continue these
efforts and expand on the range of issues I've laid out today. Over the coming year
we expect to have numerous interactions with our Chinese counterparts in both
bilateral and multilateral fora. And we will use these opportunities to stand with our
colleagues at USTR and Commerce in pressing China to abide by its WTO
commitments, particularly protections for intellectual property.
Conclusion
Thank you again for giving me the opportunity to share with you some of Treasury's
work on China. Developing a constructive and mutually-beneficial economic
relationship with China now is vitally important since the decisions we take in the
next few years will guide the U.S.-China relationship over the next generation - and
the shape and pace of global growth for years to come.
-30-

http://www.treas.gov/press/releasesljs2723.htm

10/3/2005

PRESS ROOM

FROM THE OFFICE OF PUBLIC AFFAIRS
We recommend printing this release using the PDF file below.
To view or print the PDF content all this page, download the free AdoboC" Acrobat\.R) r?('i)(ior':'J.

September 16, 2005
JS-2724
Treasury International Capital Data for July
Treasury International Capital (TIC) data for July are released today and posted on the U.S Treasury web site (www.treas.gov/tic). The
which will report on data for August, is scheduled for October 18, 2005.
Net foreign purchases of long-term securities were $87.4 billion.
• Net foreign purchases of long-term domestic securities were $101.4 billion, $10.4 billion of which were net purchases by foreign
$91.0 billion of which were net purchases by private foreign investors .
• U.S. residents purchased a net $14.0 billion in foreign securities.
Foreigners' Transactions in Long-Term Securities with U.S. Residents
(Billions of dollars, not seasonally adjusted)
12 Months Through
2003

2004

July-04

July-05

16,263.0

Gross Purchases of Domestic Securities

13,535.4 15,288.2

14,537.1

Gross Sales of Domestic Securities

12,813.6 14,371.6

13,716.8 15,330.6

Domestic Securities Purchased, net (line 1
less line 2) Ii

Apr-05 May-05

1,396.1

1,488.3 1,

1,341.6 1,417.2 1,

721.9

916.7

820.3

932.4

54.5

71.1

587.0

681.1

599.4

768.6

43.0

57.9

Treasury
Bonds &
Notes,
net

161.7

150.9

169.3

174.3

10.8

20.8

-c

Gov't
Agency
Bonds,
net

129.9

205.6

144.2

206.5

8.3

18.1

Corporate
Bonds,
net

260.4

298.9

251.6

332.9

18.3

18.9

Equities,
net

35.0

25.6

34.3

54.9

5.6

0.2

134.9

235.6

221.0

163.7

11.5

13.2

103.8

201.1

188.5

115.0

13.9

6.8

Private, net 12

Official, net

http://www.treas.gov/press/releasesljs2724.htm

Treasury
Bonds &
Notes,
net

10/3/2005

JS-2637 -Treasury International C"Pll(U

Page 2 of 2

Vali:l lUI lVlay

Gov't
Agency
Bonds,
net

Corporate
Bonds,
net

Equities,
net

25.9

20.8

24.1

32.8

-1.7

4.6

5.4

11.5

8.0

15.4

-0.1

1.8

-0.3

2.2

0.4

0.5

-0.7

-0.1

Gross Purchases of Foreign Securities

2,764.9

3,120.6

3,063.7

3,267.7

286.5

287.7

Gross Sales of Foreign Securities

2,834.4

3,233.2

3,159.3

3,419.1

293.7

302.5

Foreign Securities Purchased, net (line 14
less line 15) /3

-69.4

-112.6

-95.6

-151.5

-7.1

-14.8

-1

Foreign Bonds
Purchased, net

19.2

-29.0

0.3

-52.4

-4.6

-10.0

-1

Foreign Equities
Purchased, net

-88.6

-83.6

-95.9

-99.1

-2.5

-4.8

-1

652.4

804.1

724.7

780.9

47.3

56.3

Net Long-Term Flows (line 3 plus line 16)

Net foreign purchases of U.S. securities (+)

Includes International and Regional
Organizations

Net U.S. acquisitions of foreign securities
(- )

REPORTS

• (PDF) Foreigners' Transactions in Long-Term Securities with U.S Residents (Billions of dollars, not seasonally adjusted)

http://www.treas.gov/pressJreleases/js2724.htm

10/3/2005

DEPARTMENT OF THE TREASURY
OFFICE OF PUBLIC AFFAIRS
Embargoed Until 9 a.m. EDT
September 16, 2005

Contact:

Brookly McLaughlin
(202) 622-1996

TREASURY INTERNATIONAL CAPITAL DATA FOR JULY
Treasury International Capital (TIC) data for July are released today and posted on the U.S.
Treasury web site (www.treas.gov/tic). The next release date, which will report on data for August,
is scheduled for October 18, 2005.
Net foreign purchases of long-term securities were $87.4 billion.
•

Net foreign purchases of long-term domestic securities were $101.4 billion, $10.4 billion of
which were net purchases by foreign official institutions and $91.0 billion of which were net
purchases by private foreign investors.

•

U.S. residents purchased a net $14.0 billion in foreign securities.

Foreigners' Transactions in Long-Term Securities with U.S. Residents
(Billions of dollars, not seasonally adjusted)
2004

12 Months Through
July-OS
Julv-04

Apr-OS

May-OS

Jun-05

Jul-OS

13,5354 15,2882
12,8136 14,3716
916,7
721.9

14,537 I 16,2630
13,7168 15,330.6
820_3
932A

1,396 I
1,341 6
54_5

1,4883
1,4172
7Ll

1,5146
1,4207
93.9

1,279 a
1,177 7
lOlA

57_9
20.8
IS I

91.0
249
321

18.~

71.0
-0.9
17.1
52 I

0.2

104

2003
I
2
3

Gross Purchases of DomestIc Secuntles
Gross Sales of DomestIC Secuntlcs
Domestic Securities Purchased, net (hne I less line 2) II

4
5
6
7
8

Private, net 12
Treasury Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, nel
EqUItieS, nel

587.0
161 7
129.9
2604
350

68Ll
1509
20S 6
2989
256

599.4
169.3
1442
251 6
343

768.6
1743
2065
549

43.0
10.8
83
18 3
56

9
10

Official, net
Treasury Bonds & Noles, nel
Gov't Agency Bonds, net
Corporale Bonds, net
EqUItIes, net

134.9
1038
259
5.4
-03

235_6
201 1
208
11.5

221.0
1885
24 I
80
04

163.7
115.0
32 8
154
05

11.5
139
-I 7
-0 I
-07

13.2
68
46
18
-0 I

23.0
167
32
26
06

lOA
36
57
I4
-03

2,764.9
2,8344
-69.4

3,120.6
3,2332
-112.6

3,063.7
3,1593
-95.6

3,267.7
3,419 I
-151.5

286.5
2937
-7.1

2877
3025
-14.8

3079
J21 0
-13.1

273.1
287 I
-I·U

19.2
-88.6

-290
-83.6

03
-95.9

-524
-99 I

-46
-25

-100
-48

-12
-11.8

-5 I
-89

652.4

804.1

724.7

780.9

47.3

56.3

80.9

87,4

11
12
13
14
15
16
17
18
19

II
12
11

Gross Purchases of ForeJ!,'I1 Secunties
Gross Sales of Foreign Securities
Foreign Securities Purchased, net (hne 14 less Ime 15) 13
ForeJgn Bonds Purchased, net
Foreign Equities Purchased, net
Net Long~ Term Flows (lme 3 plus line 16 )
Net foreign purchases of U.S. securities (+)
Includes InternatIOnal and RegIOnal Orgamzalions
Net US acqUIsitIOns offoreJgn securItieS (-)

332.~

236

Page 1 of 3

PRESS ROOM

September 16, 2005
JS-2725
The Honorable John W. Snow
Prepared Remarks: Visit to the Home Depot
Atlanta, GA
Good morning. Thank you, Bob, for hosting me at this terrific Home Depot facility.
Everyone in the Home Depot family is working so hard to help the survivors of
Hurricane Katrina, and it was a pleasure to hear about your efforts, first-hand.
It is good to be in Atlanta, and I am glad to be in the South on this National Day of
Prayer and Remembrance for our brothers and sisters who were taken from us by a
terrible act of Mother Nature, a storm so devastating that this great nation was
deeply wounded by it.
Helen Keller once said that: "The world is full of suffering; it is also full of the
overcoming of it." The overcoming of this event is going to be a mammoth task,
requiring great commitment and dedication from every party involved: government,
business and individuals.
In the government, we are committed to rebuilding the communities that were
ravaged by Katrina, and as we do so we know we must help people rebuild their
lives with a sense of hope and opportunity. Our overriding goal must be that
everyone has an opportunity to build a better life for themselves and their families.
Nothing less is acceptable.
Everyone here at Home Depot knows that America is a real do-it-yourself country.
People who come to your stores, the "weekend warriors" of home improvement. are
all working on their piece of the American Dream. That spirit of independence and
pride will be at the center of the rebuilding that will take place over the coming
months.
We are fortunate to have a really strong, vibrant economy in this country, and that is
going to be critical as we pursue rebuilding efforts. With a strong economy, we can
afford to meet any challenge.
The first priority of the government, and of corporations like Home Depot, has been
to save lives. Rescue, shelter, food and water, medical attention - all these things
came first.
The next step is giving people financial footing. Treasury is working to ensure that
victims of the hurricane can get access to financial resources, starting with the
checks they receive from the government, like Social Security and unemployment
pay.
And once hurricane survivors are on their feet, I know they will embrace being back
in charge of their own lives, making their own decisions. Katrina derailed their
independence for a short time, but they'll get it back. That's what Americans do.
I visited the Gulf Coast last Friday with two of my Cabinet economic team
colleagues - Commerce Secretary Gutierrez and Labor Secretary Chao - and was
pleased to see that hurricane survivors are already finding new jobs at Department
of Labor One-Stop Centers. This is great to see, because finding work, having a
job, is essential for every person and every family who is starting their lives over
after this tragic event.
Home Depot has always been a good neighbor in whatever community you're in
because you create lots of those essential, sometimes life-changing, Jobs. And in

http://www.treas.gov/press/releases/js2725.htm

10/3/2005

Page 2 of 3
times like these, when so many lives have been devastated by a natural disaster,
you're better neighbors than ever.
I appreciate all that the employees and leadership of Home Depot is doing to help
the survivors of Hurricane Katrina. It's been wonderful to see the outpouring of help
from companies like you, McDonald's, Wal-Mart and Johnson and Johnson, to
name just a few others, over the past couple of weeks.
You've offered employees whose job was affected by Hurricane Katrina the
opportunity to continue their employment at any Home Depot store. You made a
direct cash donation of $1.5 million to support immediate relief and recovery efforts
as well as long-term rebuilding - for example, you made a direct donation of
$500,000 to nonprofit organizations that produce and rehabilitate affordable
housing for low- to moderate-income homeowners to assist with the repair and
rebuilding efforts. You are also working with your suppliers to donate materials,
such as tarps, flashlights and bottled water, and generators to emergency
management organizations.
Across the board, companies like yours are giving millions in cash donations to the
Red Cross and other relief groups. Businesses all over the country are running
employee donation programs and matching their employees' donations. They're
giving millions in product donations, from pharmaceutical to technology products.
This outpouring of help - both within the companies' families and externally, to the
broader relief efforts - reminds us that this is a country where people take care of
each other. We help each other get back up on our feet.
Something I want to be clear about today is that increasing the tax burden on the
American people at this time won't help in that way - in fact, it would hurt recovery
efforts. Keeping the tax burden lighter leads to innovation, economic growth and job
creation.
Katrina is having, and will have, an economic impact on us, and we need to focus
on maintaining a thriving economy, not burdening it with taxes that would slow it
down.
The President's economic leadership - most notably his well-timed tax cuts - really
turned our economy around over the past three years. And although there is clearly
no "good time" to be hit by a devastating natural disaster, I do believe that we were
fortunate to be standing on very solid economic ground when this terrible storm
struck.
The fact that our underlying economic fundamentals are so solid undoubtedly
enhances our ability to deal with this disaster.
Over the short term, we'll feel an economic hit from Katrina. Jobs and homes have
been lost, and that's a serious blow. The price of gas, already uncomfortably high,
has been impacted by the storm, and that hurts, too. High fuel prices act like a tax
on business and on family budgets.
We believe that economic growth will slow in the last quarter of this year as a result
of Katrina, but are optimistic that rebuilding efforts will give GOP, jobs and our
overall economy a lift by the first quarter of next year.
Thanks to the generosity of a nation and our unique spirit of hope and
independence, I am confident that the residents of places like New Orleans and
Gulfport Mississippi and southern Alabama will recover. We picked ourselves up
after 9111 and other disasters, we have the will and the resources and the resolve
to do so again. I am confident we will again. It's the spirit of Americans to do so.
We are committed to helping the region re-build, to helping people re-build their
lives. And we want to do so in a way that is fiscally responsible. Will the relief and
reconstruction be costly? Of course it will - but I want to assure you that thiS
Administration is not, and will not stray from our course of federal deficit reduction.
With continued economic strength - which we will enjoy with the continuance of the
President's good economic policies - we'll be able to help our neighbors and

http://www.treas.gov/presS/releases/js1725.htm

10/3/2005

Page 3 of3
continue to reduce our deficit.
Thank you very much for having me here today.

http://www.treas.gov/press/releasesljs2125.htm

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PRESS ROOM

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September 16, 2005
JS-2726
The Honorable John W. Snow
Prepared Remarks: Visit to IRS Call Center
Atlanta, GA

Good afternoon. It is good to be here in Atlanta, spending some time with the
dedicated and hard-working employees of the IRS.
I appreciate being here with Commissioner Everson; I'm very proud of the work that
IRS employees, and all Treasury employees, are doing on this day.
At this facility, an IRS call center has become a disaster-relief call center. Working
with FEMA, the highly-trained government staff here are taking and directing calls,
offering help, kindness and hope to Americans whose lives have been
overwhelmed by the cruelty of a terrible storm.
I am also glad to be in the South on this national day of remembrance. We grieve
for the losses of our brothers and sisters in the Gulf Coast But we also look forward
to rebuilding the communities that were devastated. Rebuilding will be an essential
part of healing wounds that go much deeper than physical wreckage.
As we rebuild infrastructure, homes and businesses, we must also help rebuild lives
with a sense of hope and opportunity. Our overriding goal must be that everyone
has an opportunity to build a better life for themselves and their families. We look
forward to a time when victims take back control of their own lives and begin their
promising futures. Nothing less is acceptable.
We are fortunate to have a really strong, vibrant economy in this country, and that is
going to be critical as we pursue rebuilding efforts. With a strong economy, we can
afford to meet any challenge.
I was thrilled to learn that here in Atlanta, hurricane victims are already being
absorbed into the community, actually emptying the shelters that the area is
providing. This can only happen when government, employers and individuals are
all working, together, to give their fellow Americans a new start in life.
This example of an early start toward the re-establishment of independence for
victims is one of the reasons, although Katrina is a disaster on many levels, I am
confident the residents of places like New Orleans and Gulfport Mississippi and
southern Alabama will recover.
We must not forget, as Americans, that we picked ourselves up after 9/11 and other
disasters, we have the will and the resources and the resolve to do so again. I am
confident we will again. It's the spirit of Americans to do so.
An outpouring of help from individuals and businesses has not only helped
enormously, it has reminded us that this is a country where people take care of
each other.
At Treasury and the IRS, we're doing our best to make sure that charitable spirit that we see in both individuals and companies - is encouraged. last week, we
announced an action that allows employers to adopt leave-based donation
programs under which employees could forego vacation, sick or personal leave,
and in turn their employers would make cash contributions to charitable
organizations involved in relief efforts. We believe that this will help workers and
employers as they seek ways to help their fellow Americans.

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Page 2 of2
And yesterday the IRS announced that 401 (k) s and similar employer-sponsored
retirement plans can make loans and hardship distributions to victims of Hurricane
Katrina and members of their families.
This was the first time that the IRS, Treasury and Department of Labor are
providing broad-based relief to retirement plan participants affected by a major
disaster. This relief will make it possible for people to get their retirement money
more quickly, with a lot less red tape.
Treasury and the IRS also know that the last thing people in the devastated areas
of the Gulf Coast need to worry about right now is taxes. That's why we quickly
implemented extensions of tax deadlines, so that people in the affected areas who
would otherwise have had taxes or returns due on September 15 th don't have to
worry about that deadline.
The IRS also plays a special role in helping hurricane survivors re-build their
financial lives. Taxpayers can call, write or walk-in to an IRS center to receive
expedited assistance in reconstructing their financial records based on their tax
returns, for example.
Using the toll-free disaster hotline 1-866-562-5227, Hurricane Katrina victims can
obtain expedited assistance to receive disaster tax loss kits, copies of tax return
transcripts, copies of Federal Tax Returns, and guidance regarding records
reconstruction. For hurricane victims, the IRS is waiving the fees normally
associated with return and transcript requests.
To assist taxpayers that have small businesses, the IRS works in partnership with
the Small Business Administration to provide return transcripts to the SBA Office of
Disaster Assistance on an expedited basis. The information is used for income
verification and cash flow analysis for immediate lending determinations and
assistance with records reconstruction.
These are just a few examples of the help that IRS can offer during this difficult time
of recovery and rebuilding. Again, I want to thank the employees of the IRS for their
help, for being there when your fellow Americans are in their hour of greatest need.
Helen Keller once said that: "The world is full of suffering; it is also full of the
overcoming of it."
The overcoming of this event is going to be a mammoth task, requiring great
commitment and dedication from every party involved: government, business and
individuals. But we are up for the task. Together, this country will ensure that the
victims of Hurricane Katrina can look forward to very bright futures.
Thank you, again, for having me here today.

http://www.treas.gov/press/releases/js2726.htm

10/3/2005

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PRESS ROOM

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September 19, 2005
js-2727
Treasury Designates Bin Laden, Qadi Associate
The U.S. Department of the Treasury today designated Dr. Abdul Latif Saleh
pursuant to Executive Order 13224 for providing support to Usama bin Laden and
al Qaida.
"Saleh has multiple ties to al Qaida, ranging from the AI Haramain Foundation to
Yasin Qadi to Usama bin Laden," said Stuart Levey, the Treasury's Under
Secretary for Terrorism and Financial Intelligence (TFI). "This designation identifies
him as a terrorist facilitator and ensures that he will no longer be able to operate
unencumbered."
Saleh is closely associated with Usama bin Laden and was expelled from Albania
on suspicion of membership in a "radical Islamic Jihad group." Bin Laden provided
Saleh with $600,000 to encourage the establishment of extremist groups in
Albania. In addition, Saleh is closely associated with a number of nongovernmental organizations in Albania with links to the Egyptian Islamic Jihad, a
terrorist organization tied to al Qaida.
Saleh founded and organized an Albanian jihadist organization that has been
financed by the AI Haramain Foundation, a non-governmental organization linked to
al Qaida. The mission of the Albanian jihadist group has been to destabilize the
internal situation in Albania by fomenting conflict among the different religious
groups in the country. AI Haramain recruited members from this organization,
which Saleh directly assisted in vetting.
Saleh is also associated with Yasin Qadi, who was named a specially designated
global terrorist by the Treasury Department in October 2001. Qadi was known to
be an active supporter of, and fundraiser for, Saleh's jihadist group,
Saleh and Qadi had entered into several business partnerships with one another,
including a sugar importing business, a medical enterprise, and a construction
business. Saleh served as the general manager of all of Qadi's businesses in
Albania and reportedly holds ten percent of the Qadi Group's investments in
Albania.
In 1998, six individuals were arrested in Albania, two of which were tried and
executed in Egypt as perpetrators of terrorist attacks. In their testimony, the
individuals said it was Saleh who had helped them come to Albania. Saleh was
identified as "the one who had helped them in every respect, beginning with picking
them up at the airport."
The United States is taking action today pursuant to United Nations Security
Counsel Resolution 1617, which requires member states to financially isolate
individuals and entities added to the UN 1267 Committee's consolidated list of
terrorists tied to the Taliban, al Qaida and UBL.
"Resolution 1617, recently adopted by the UN Security Council, makes the
international sanctions regime against the Taliban, al Qaida, and its affiliate groups
stronger, more accessible, and more transparent," Levey continued. "Today's
action illustrates the power the global community now has to take unified, decisive
action against al Qaida's support networks."
Identifier Information
Dr. Abdul Latif Saleh

http://www.treas.gov/press/releasesljs2727.htm

10/3/2005

Page 2 of2
AKA: SALEH, Abdul LatifAA
AKA: SALEH, Abdyl Latif
AKA: SALEH, Dr. Abd ai-Latif
AKA: SALEH ABU HUSSEIN, Abdul Latif AA
AKA: SALlH, Abd ai-Latif
AKA: Abu Amir
DOB: March 5, 1957
POB: Baghdad, Iraq
Citizenship: Jordanian/Albanian
Identification Numbers: Jordanian Passport Number 0366 871
Last known residence: United Arab Emirates
Today's action prohibits any transactions between U.S. persons and Saleh and also
freezes any assets he may have within U.S. jurisdiction.
-30-

http://www.treas.gov/press/releasesljs2127.htm

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PRESS ROOM

September 19, 2005
js-2728
Financial Literacy and Education Commission to Hold Meeting On Providing
Financial Education Resources to Katrina Victims

Treasury Secretary John W, Snow will join members of the Financial Literacy and
Education Commission tomorrow to discuss ways in which Commission members
are assisting Katrina victims with financial matters,
Treasury's Office of Financial Education coordinates the efforts of the Financial
Literacy and Education Commission, which is composed of representatives from 20
federal departments, agencies and commissions, The Commission works to
improve financial literacy and education throughout the United States,
WHAT
Meeting of the Financial Literacy and Education Commission
WHO
Secretary John W, Snow and Commission Representatives
WHEN
September 20,2005
8 a,m, (EDT) - Meeting Begins
8:30 a,m, (EDT) - Secretary Snow Delivers Remarks
WHERE
American Institute of Architects
1735 New York Avenue
Washington. DC

-30-

http://www.treas.gov/press/releasesljs2728.htm

10/1!?()()'i

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September 20,2005
JS-2729
Treasury Secretary John W. Snow
Prepared Remarks to Financial Literacy & Education
Commission Meeting
Washington, DC
Good morning. Thank you all for having me here today, and thank you for the
terrific work you are doing on this Commission.
Your purpose is true, and your work is meaningful. Yours is the kind of publicprivate coordination that really makes a difference in people's lives, and you are to
be commended for that Every time your work gives a young person - or a new
American, or a baby boomer - the tools and knowledge they need to strengthen
their financial future, you have made an historic contribution to our country.
Today your group, and our nation, is faced with a considerable challenge: the
rebuilding and revitalization of the region and the lives devastated by Hurricane
Katrina.
In the government, we are committed to rebuilding the communities that were
ravaged by Katrina, and as we do so we know we must help people rebuild their
lives with a sense of hope and opportunity. Our overriding goal must be that
everyone has an opportunity to build a better life for themselves and their families.
Nothing less is acceptable.
We are fortunate to have a really strong, vibrant economy in this country, and that is
going to be critical as we pursue rebuilding efforts. With a strong economy, we can
afford to meet any challenge.
The first priority of the government has been to save lives. Rescue, shelter, food
and water, medical attention - all these things came first.
The next step is giving people financial footing. Treasury is working to ensure that
victims of the hurricane can get access to financial resources, starting with the
checks they receive from the government, like Social Security and unemployment
pay.
Of course, knowing about the resources available, how to take advantage of them,
and how to manage, financially, during this time can be very difficult That's why
Treasury's Office of Financial Education has developed a brochure - which will be
available this week - that serves as a roadmap, a financial guide to hurricane
recovery for victims of the storm.
The brochure will have toll-free phone numbers to resources that can help with the
collection of unemployment insurance, Social Security benefits and FEMA benefits.
It provides direction on managing debt, bank and credit union accounts in light of
the fact that homes, records and paperwork may have been destroyed. It also some
basic tips on budgeting. Perhaps most importantly, it outlines 10 tips for avoiding
scams - something that is of concern during a time that tends to be overwhelming
and confusing, making individuals vulnerable to things like identity theft
The brochure will be available for free by calling 1-888-MyMoney, or online at
www.mymoney.gov. We'll also make it available, of course, to financial institutions
and will even be able to distribute the brochure directly to hurricane survivors in San
Antonio later this week, as our Financial Education office will be sending a team of

http://www.treas.gov/press/releasesljs2729.htm

10/1/100':;;

Page 2 of2
financial counselors to resource and recovery centers in those areas.
As the President said in his September 15 th address to the nation, the task of
rebuilding "will require the creative skill and generosity of a united country" and our
vision of the future is not just to rebuild, but to rebuild "higher and better."
After devastating loss, hurricane survivors can look forward to a new start, and the
President's vision is that the new life will be better than the one left behind.
Government resources and financial education can help them get a foothold on that
new life.
And once hurricane survivors are on their feet, I know they will embrace being back
in charge of their own lives, making their own decisions. Katrina derailed their
independence for a short time, but they'll get it back. That's what Americans do.
Thanks to the generosity of a nation and our unique spirit of hope and
independence, I am confident that the residents of places like New Orleans and
Gulfport Mississippi and southern Alabama will recover. We picked ourselves up
after 9/11 and other disasters, we have the will and the resources and the resolve
to do so again. I am confident we will again. It's the spirit of Americans to do so.
We are committed to helping the region re-build, to helping people re-build their
lives. And we want to do so in a way that is fiscally responsible. We are a generous
people, but we are also a prudent and responsible people. And in government, we
have a solemn responsibility to spend the peoples' money well, honestly,
effectively.
Will the relief and reconstruction be costly? Of course it will - but I want to assure
you that this Administration is not, and will not stray from our course of federal
deficit reduction. With continued economic strength - which we will enjoy with the
continuance of the President's good economic policies - we'll be able to help our
neighbors and continue to reduce our deficit.
Thank you again for having me here today; have a terrific meeting.

REPORTS
•

Katrina

http://www.treas.gov/press/releasesljs2729.htm

10/3/200'i

UNEMPLOYMENT INSURANCE

FINANCIAL ASSISTANCE CASH

FEI\'1A provided one-time emergency cash assistance and
can provide rental and repair assistance, To register or
if you have any questions, call 800-621-3362 (24
hours) or 800-462-7585 (ll'Y only) or visit

Financial Tips

•

Unemployment Insurancc:

Alabama residmts, call 866-234-5382
Louisian:J resiut:llts, call 866-783-5567

http://w\\w.fcma.gov,

\\ississippi residents, call 888-844-3577

•

American Red Cross: Providing various amount~ of
financial assistance, including vOllchers, cash, and cht'cks
Call 800-975-7585

Texas reSidents, call 800-939-6631 (\londay-Friday
8 a.m. to 5 p,II1.). This numbt:r proVides information
in English and Spanish Or visit hnp:llwww.twc.

•

You may be eligible to receive a low-interest loan from the
Small Business Administration (SBA) to repair a home,
replace personal property such as furniture and clothing,
or rt'-build a busines~, InforI11Jtion IJn applying fur these
loans is :1Vailablc from FEMA and from SRA by calling
800-659-2955 or at http://\vww.sba.gov/disaster,

and Resourcesfor
Hurricane Recovery

state.tx.usJuilbnftsiclaimantinfo.html.

•

Disaster linemplovmmt Assistance for self-employed and
newly employed who are ineligible for l'nemplovment
Insurance
Alabama residents, (all 866-234-5382
louiSiana residents, call 866-783-556 7
\jississippi residents, call 866-783-5567

INSURANCE

Texas reSidents, call 800-818-7811
•

Contact your insurance company Alist of insurance
cOll1panlt's em be f(lund at:
http://w,,w.disasterinfommtion.orgl, or
For Louisiana call 800-259-5300 or
225-342-5900 (in Baton Rouge) or visit
http://ww\Y.ldi.state.la.uslwhats newt

•

Social Security Available at local Social Security offices
Fur locatiuns. call 800- 772-1213

HurricancPhone~umbcrs.pdf;

•

For Mississippi call 866-856-1982 (out of state l.
800-562-2957 (in state), or 601-359-2453
(Jackson area), Hours are '7 a,m to 7 p,m,

Vder3ns benefits and compensation callt- S Dep:lI'tment
of \'l'tcrans Affai rs 800-827-1000 (24 hours).

•

Louisiana Illlman and Social SeI'\'ices lIotItne (food
stamps, \ledicaid, other) 888-524-3578 (7 a.m. - 7
p.m.).

•

If YOll do not aln>ady receive yom Federal benefits h\ direct
deposit mll should conSider domg so. Dlft.'Ct dl'plNt
means that your benefits arc electnlllicalll' sent to 1'll1lT
b:lllk or credit umon aCCllunt. Direct depOSit 15 safer. faster
and more reliable than receiving:1 check b\' [mil To
register or for more lllf(lrmation, call 800-333-1795
(English) or
800-333-1792 (Spalllsh), 111' \'isit
http://www.godirl'ft.org (English) or
hUpll:www.dircctoasUfuenta.org (SpJlliShl

For Alabama call 800-433-3966 (in-stall') or
334-269-3550
Fllr Texas, call 800-578-4677 (lr 512-463-6169
Cvlonday-Friday 8 a,m to 5 pm) or visit hUp:11
W\YW. tdLstatc. tx. us/commishlstormslindcx.
htnd

•

OTHER FEDERAL AND STATE BENEFITS

Flood Illsurance If you don't know the insurer or
administrator, call the 'Jational Flood Insurance Program
at 800-427-466 t

DEBT

RECONSTRUCTING FINANCIAL AND TAX INFORMATION

•

Call your creditors. Many will defer your loan payments,
waive late fees, or raise your credit limit temporarily.

•

If you need help identl~'ing your creditors, get your free
credit report. Call 877 -322-8228 or visit

•

Write "Hurricane Katrill3." in red across tlle top margin
of tlle Form 4506, Request for Copy of Tax Return.

http://www.annualcrcditrcport.com

IRS can also answer other questions about tax
payments, filing, and otller issue'S.

BANK AND CREDIT UNION ACCOUNTS
•

•

For infomlalion about accessing bank accounL~, lost records,
ATM cards, direct deposits or how to reach your bank, call
the FDIC at 877-275-3342 (24 hours) or visit
http://www.fdic.go\,.
For information about credit unions, visit
http://www.ncua.go\,!Katrina/index.htm or call
800-827-6282, press 2 then for
Louisiana and Texas press 1
Abb:lma and Mississippi press 2

•

Banks and credit unions keep extensive back-up records to
ensure that customer account informatJon is accurate and
protected

•

I::bnks and credit unions generally have their computer
srstems operating so customers c;m JCCCSS their money
through debit Jnd AnI cards, even if the physical office is
dJmaged or closed.

•

:Vlost sJfe deposit boxes arc located in fireproof and
waterproof areas. If possible, contact the branch or office
where your box was located to deterilline the condition of
your box.

MANAGING A DEBIT CARD

Returns: IRS can provide free copies of your tax returns.
Call 866-562-5227 (:vlonday-Friday 7 a.m. to 10 p.m.)
or visit http://www.irs.go,,/,
T:L\

5 - Don" pay in advance for offers of housing.
6 - Avoid offers fur loans or credit earth that require payment in

advance.

7 - For home fl'j1airs, ask for references and referrals.
8 - For home repairs, get more than one estimate in writing.
Don't pay the full alllount for the work until the work is
completed and you're satished.

9 - Pest control or water purification offers may not proVide
real semees. Check these out before accepting offers, even
for "free" tests or services. Read the '"fine print" and get a
second opinion.

Credit Report: YOll can request a free credit report. Call
877 -322-8228 of\~sit
http://www.annualcrcditreport.com.

10 - If an offer sounds too good to be true, it probably is.

BUDGET
It is a good IdeJ to develop a budget for the montlls ahead. Some
things to mclude in a budget:

•

HOllsing (security deposit, monthly rent),

•

TrJnsportation (bIlS, subway or car),

•

Communications expenses (phone, fax). and

•

Work related equipment/other costs (equipment, uniform).

•

Free resources may be available for food, clothing and
furniture. Explore these options hrst

If you believe you may be a victim of ID theft, contact the fraud
departments of :my olle of tile three major credit hureaus at their
toll-free numbers to place a "fraud alert" on your cn.."Ciit file Equifax
at 1-888-766-0008, Experi:!11 at 1-888-397-3742, or
Transl l l1lon Jt 1-800-680-7289 TIllS can help prevent J
thief from openlllg new accounts or making changes to vour
existing accounts.

For more mfonllation about guarding against idenlity tlleft and
resolving problems. Visit http://www.consumer.gmJidtheft

OTHER RESOURCES
10 TIPS FOR AVOIDING SCAMS

•

Filf a v:lriety of free federal go\'crmncnt publicatiuns rtehtcd
to financial issues, viSit http://mymollcy.go\, or
888-mymoney

•

For other federal government resourceS, \'lSit
http://www.firstgm-.gOY

1 - Before you give out your personal information (Social
Security number, date of blJ'th, FBIA ease number), make
sure it is absolutelv necessary and that the person asking
for it repres('I1\s a legitimate organization (such as a
government agency or chari~')

2 - Avoid '"ofhciab" who n:quir~ payment til get FD~\ or other

•

[all be used to get CJsh from In ATM with a Personal
Identification NUlllbl'r (PI\i)

•

Can be used in many stores to purchase goods such as
groceries and clothing

3 - Always keep critical personal information and documents in

•

Keep the PI\ safe alld separate frolll the card

•

If YOll have a FE\1A debit card th:lt grts lost or stolen, you
lo~c the PI'.;, or have other questions, call 888-606-7058

4 - Don't p:ly in advance for joh listillgS, espeei:!ll)' for a 900
phone number Report job scams to thl' FTC
ht1p://www.ftc.gov. or 877 -FfC-HELP

go\'(~rnment

ben('tits \io government agency charges
applicJtioll fees for disaster relief hellefiL~

a safe place.

Compiledfrom: Cllifol7lia Sooer}' o/EI/rollcd AgmtJ.
Federal Deposit 1m/mince COIp., Federal Trade COlllm issio II ,
HOl1le Builders Associl1tioJI of/1/abmlla, Illtel7lal ReuOIue
Service, A/atiOital Credit UJlion Adm in istllltlOIl , by the
OfficI' oil-irlmlcia! Education. Septt'lllbrr 2005.

Pagelof2

PRESS ROOM

September 20,2005
JS-2730

Statement of Patrick M. O'Brien
Nominee to be Assistant Secretary for Terrorist Financing
U.S. Department of the Treasury
Before the Senate Committee on Banking, Housing and Urban Affairs
Chairman Shelby, Ranking Member Sarbanes, and members of the Committee,
good morning. Thank you for scheduling this hearing. I realize what a full schedule
you have, and I appreciate the opportunity to be with you this morning and answer
your questions.
With your permission, I would like to introduce the Committee to several members
of my family who were able to join me this morning. First, my mother and father,
Terry and Jack O'Brien, who join us from Minneapolis, MN. I am also very proud to
introduce my wonderful wife, Maureen, and our two daughters: Molly, who will be
two in December, and Margaret (Maggie), who is four months old. I am extremely
blessed to have such a wonderful family, and I will never be able to repay the love
and support they have shown me throughout my life. I would also like to thank my
sister and brothers, Katie Mason, Tom O'Brien and Dan O'Brien, who were unable
to be here today, as well as my extended family and friends who have enriched my
life beyond measure.
I am humbled to sit before you today as the President's nominee to be the Assistant
Secretary of the Treasury for Terrorist Financing. I would like to thank the PreSident
for nominating me and for the support of Secretary Snow and Under Secretary
Levey. I also greatly appreciate Senator Hatch for his support and for his
introduction this morning.
It is a great honor to be asked to serve our country. It is also a great responsibility
that I take very seriously. Should the Senate confirm me, I will give my absolute
best to be an effective Assistant Secretary and to help the Treasury Department,
our colleagues across the government, as well as our international partners, target
and disrupt illicit financial networks. build effective systems to prevent abuse of
financial institutions, and isolate and punish those who threaten our security.
I will bring to this position a variety of professional experiences that. I believe,
enable me to be an effective addition to the Department of Treasury. I am very
fortunate to have served in all three branches of government: as a law clerk in
federal district court, as a counsel on the Senate Judiciary Committee. and in a
variety of jobs at the Department of Justice. I have had significant experience
working in the interagency environment, and in particular, I have direct experience
as the Justice representative to the Terrorist Financing Policy Coordinating
Committee (PCC). I believe this background and my ability to work collaboratively
with others will help me to be a valuable rlddition to what is truly a government-wide
- and even global - effort.
I am fortunate to be nominated to join a very strong team at the Treasury
Department. If I am confirmed, I am committed to furthering the development and
strength of the Office of Terrorism and Financial Intelligence - or TFI. As the
Committee is aware, the concept behind TFI, one that I strongly support, is to
marshal Treasury's unique authorities, financial intelligence, analysis, and
international relationships to attack the financial underpinnings of national security
threats. If confirmed, I will dedicate myself to developing the Treasury's ability to
play this strategic role by providing policy development and coordination to support
TFI initiatives, and building partnerships and coalitions to extend the
implementation of sound financial practices and the impact of targeted financial
sanctions.

http://www.treas.gov/press/releases/jS2.730 htm

1 nn.

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Page 2 of2
Additionally, we must continue to develop expertise across industries and financial
disciplines, as well as regional expertise around the world, to expand policies that
address the wide variety of financial means that can be utilized by illicit financial
networks.
Indeed, partnerships must be fostered and maintained both domestically and
internationally. I am committed to building the strongest possible cooperative
relationships with our colleagues across the United States Government. These
threats cannot be addressed by anyone agency alone. If confirmed, I will build on
the strong relationships that currently exist between Treasury and its partners at
Justice, FBI, State, Defense, DHS, CIA, and the greater interagency community.
We must think and act as a single government to achieve a shared set of goals.
It is also essential that we internationalize the impact of sound financial systems
and targeted financial sanctions. This requires strong bi-Iateral and multilateral
relationships. If confirmed, I will continue Treasury's efforts, in conjunction with the
State Department and other federal agencies, to promote accepted international
standards for sound financial practices and to increase partner capacity and
cooperation through organizations like the United Nations, the Financial Action
Task Force (FATF), and the Egmont Group. The activities of illicit financial networks
do not stop at our borders, and thus we must continue to internationalize our efforts.
Thank you again for holding this hearing. I would be pleased to answer any
questions you may have.

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10/3/2005

Page 1 of2

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PRESS ROOM

September 20, 2005
JS-2731
The Honorable John W. Snow
Prepared Remarks to the National Association of
Federal Credit Unions (NAFCU)
Washington, DC
Thank you so much for having me here today,
I meet and work with financial leaders every day, and it has not escaped my notice
that credit unions tend to have great heart, That's especially important during times
like these, when financial structure and resources are so very important to our
fellow Americans, our brothers and sisters who have survived - and are surviving
the aftermath of - Hurricane Katrina,
I believe it speaks to the strength, determination and heart of the credit union
community that all 139 of the federally insured credit unions in the path of Katrina
were at least partially operational as of the close of business last Friday, Cash and
check cashing services are now available to those 681,000 Federal Credit Union
members, and that's terrific news,
For some, services for now will be at a shared branch location - an important option
that your members utilized during this difficult time, There is no doubt that
branching helped restore services quickly to customers, and I applaud your
teamwork on that effort,
I've been in touch with JoAnn Johnson at the NCUA about the need to ensure that
NCUA's regulations are appropriate for the conditions that credit unions in the area
are operating under.
I was pleased when NCUA advised credit unions they could assist consumers and
members by doing things like waiving ATM fees for members and non-members,
increasing ATM daily cash withdrawal limits, easing restrictions on cashing out-ofstate and non-customer checks, waiving overdraft fees as a result of paycheck
interruption and waiving early withdrawal penalties on time deposits
Allowances like these are so important to the victims of Katrina as they recover
from this disaster, and I know that you need to hear, from your regulators, that the
government is going to view your actions with an eye for the difficulty of the times
and the generosity of your spirit. You are helping both customers and noncustomers right now, and that is invaluable, It is appreciated,
I also appreciate that there are still some distressed institutions in the Gulf Coast
There is no doubt that full recovery and rebuilding will take a lot of time, a strong will
and a vast amount of resources,
Your institutions will be part of that rebirth, and I appreciate very much the services
that you will be giving to your customers going forward as they rebuild their lives,
As the nation - government, the private sector and charities - rebuilds
infrastructure, homes and businesses, we must also help rebuild lives with a sense
of hope and opportunity. Our overriding goal must be that everyone has an
opportunity to build a better life for themselves and their families, We look forward
to a time when victims take back control of their own lives and begin their promising
futures, Nothing less is acceptable.
As the President said in his September 15th address to the nation, the task of
rebuilding "will require the creative skill and generosity of a united country" and our

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10/3/2005

Page2of2
vision of the future is not just to rebuild, but to rebuild "higher and better."
I know that you want nothing less, and will accept nothing less, for your customers.
I believe that we are fortunate to have a really strong, vibrant economy in this
country, and that is going to be critical as we pursue rebuilding efforts. With a
strong economy, we can afford to meet any challenge
After devastating loss, hurricane survivors can look forward to a new start, and the
President's vision is that the new life will be better than the one left behind.
And once hurricane survivors are on their feet, I know they will embrace being back
in charge of their own lives, making their own decisions. Katrina derailed their
independence for a short time, but they'll get it back. That's what Americans do.
Thanks to the generosity of a nation and our unique spirit of hope and
independence, I am confident that the residents of places like New Orleans and
Gulfport Mississippi and southern Alabama will recover. We picked ourselves up
after 9/11 and other disasters, we have the will and the resources and the resolve
to do so again. I am confident we will again. It's the spirit of Americans to do so.
In the government, we are committed to helping the region re-build, to helping
people re-build their lives. And we want to do so in a way that is fiscally responsible.
We are a generous people, but we are also a prudent and responsible people. In
government, we have a solemn responsibility to spend the peoples' money well,
honestly, effectively.
Will the relief and reconstruction be costly? Of course it will - but I want to assure
you that this Administration is not, and will not stray from our course of federal
deficit reduction. With continued economic strength - which we will enjoy with the
continuance of the President's good economic policies - we'll be able to help our
neighbors and continue to reduce our deficit.
Thanks again for all the good work you do and will be doing over the coming
months. Before I take your questions, I do want to reiterate something that I hope
you already know - that that this administration understands the basic economic
principle that you get less of anything you tax, and we don't want less of what you
do. And that isn't going to change.
Thank you again for having me here today; have a terrific meeting.

http://www.treas.gov/press/releasesljs2731.htm

10/3/2005

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PRESS ROOM

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September 20, 2005
JS-2732
Treasury Releases Schedule for
September G7 Meeting
Wednesday, September 21, 2005
3:00 PM Under Secretary for International Affairs Tim Adams
Pre-G7 Press Briefing
Treasury Department
Room 4121 (Media Room)
1500 Pennsylvania Ave., NW
Washington, DC
* Open Press - pre-set may begin at 1 :30 PM
• Media without Treasury press credentials must contact Frances Anderson at
202-622-2960 or e-mail their name, organization, date of birth and Social
Security number to frances.anderson@do.treas.gov for clearance by 1:00 PM
on 9/21/2005
Thursday, September 22, 2005
9:00 AM Iraq Joint Commission on Reconstruction and Economic Development
Meeting
Treasury Department
1500 Pennsylvania Ave., NW
Washington, DC
* Pool photo at top of meeting
* Media please contact James Anderson by phone at 202-622-2960 or
e-mail atjames.anderson@do.treas.gQv by 12:30 PM on 9/21/2005
Friday,~eptember

23,2005

9:00 AM Under Secretary for International Affairs Tim Adams
Remarks on U.S. views on IMF Reform
Institute for International Economics
1750 Massachusetts Ave., NW
Washington, DC
* Open Press
12:00 PM G7 Working Lunch with Brazil, China, India, Russia and South
Africa Treasury Department
1500 Pennsylvania Ave., NW
Washington, DC
* Pool photo at top of meeting
1:30 PM G7 Meeting
Treasury Department
1500 Pennsylvania Ave., NW
Washington, DC
* Pool photo at top of meeting
3:30 PM G7 Group Photo
Treasury Department
1500 Pennsylvania Ave., NW
Washington, DC
* Open photo, pool reporter
* Photographers should arrive at the Treasury Department no later than 2:30
PM for security sweep
* Media without Treasury press credentials must contact Frances Anderson at

http://www.treas.gov/press/releasesljs2132.htm

10/3/2005

Page 2 of2
202-622-2960 or e-mail their name, organization, date of birth and Social
Security number to frances.anderson@do.treas.gov for clearance by 1 :00 PM
on 9/21/2005
6:30 PM G7 Press Conference
Office of Thrift Supervision
1700 G Street, NW
Washington, DC

.. Open Press
.. Media should arrive at OTS no later than 5:30 PM for security sweep
* Text for release; will be posted on www.treasury.gov
* Treasury, White House, IMF/WB Annual Meetings press credentials
accepted - no additional clearance is needed
*** Additions to the schedule may follow

http://www.treas.gov/press/reIeasesljsW2.htm

10/11700')

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PRESS ROOM

September 20,2005
JS--2733

Statement of Emil Henry
Nominee for Assistant Secretary of the Treasury for Financial Institutions
Financial Institutions
U,S. Department of the Treasury
before the Senate Committee on Banking, Housing,
and Urban Affairs
Chairman Shelby, Ranking Member Sarbanes and Members of the Committee,
thank you for the opportunity and privilege to appear before you today to discuss
my nomination to become the Assistant Secretary of the Treasury for Financial
Institutions.
Before my formal statement, and with your indulgence, I would very much like to
introduce members of my family here with us today. My wife Jody, was my college
sweetheart at Yale where she and I graduated together She is much smarter than I
am, she's my best friend and she's a full-time mother. With her are our two
daughters: Madeleine 13, and Parker, 12. Our third child and Parker's twin brother,
Ames, is pursuing his dream at a tennis academy in Florida.
I want to begin by expressing my thanks to President Bush for nominating me for
this important position. I am truly honored to have his confidence and, if confirmed, I
will focus daily upon earning and re-earning the trust he has placed in me. I would
also like to thank Secretary Snow, Under Secretary Randal Quarles and other fine
individuals the President has nominated to the Treasury for their support. If
confirmed, I look forward to working with them on the many important issues
currently before the Treasury Department, and many more that are certainly to
come.
My thanks also go to my friend and Congresswoman Sue Kelly for taking the time
to come here today, and for her thoughtful and kind introduction. Representative
Kelly and I share a beautiful hometown, Katonah, New York. Her constituents,
including myself, hold her in high esteem for her attention to her District and for her
measured wisdom on the House Financial Services Oversight and Investigations
Subcommittee and her leadership on terrorist financing issues.
Lastly, I would like to thank my parents for inspiring me to enter public service. My
dad was Chairman of the FCC under Presidents Kennedy and Johnson and my
mother headed the Women's Office of the SBA for the Clinton Administration. From
the time I could recognize my own name, I have believed that public service is not
only a high calling but a natural and necessary part of a productive life.
I come before you today in the long-standing tradition of one who has spent his
entire career in the private sector before being called to service. As my resume
shows, I have no formal public service experience. Yet, I do have over 20 years
experience on Wall Street and in the financial community, and much of my time has
been spent at a senior level in some of the more sophisticated and complex sectors
of the capital markets.
All of the firms I have been associated with have the highest regard of their peers
and of the financial community. At First Boston, my first job after Yale, I was
fortunate to be picked to work in the Capital Markets Division which, at the time,
was at the forefront of the advent of early derivatives such as interest rate swaps,
options and futures. At Morgan Stanley, I was a member of a team charged with
building a pre-eminent principal investment business involving management
buyouts, equity and debt financings, mergers, acquisitions and bank financings. For
the past 15 years I have been at Gleacher Partners where I am now Managing
Director and also Chairman of our core investment business and a member of our

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10/3/2005

Page 20[2
Investment Committee. Our businesses invest in a sophisticated array of alternative
investments including private mezzanine debt and private equity and hedge funds
where our investments are exposed to most of the products and securities offered
in the capital markets.
I believe my experience has given me a broad and deep understanding of the
activities of the financial institutions that participate in today's increasingly complex
and fast moving capital markets. As founder and Chairman of an investment
business, I appreciate the essential importance of safety and soundness in our
markets and institutions, I understand the value of disclosure and transparency, and
I am sensitive to the importance of balancing the costs and benefits of regulation.
If confirmed, I believe my role as Assistant Secretary would benefit from my
extensive experience and I would hope to complement the extraordinary reservoir
of talent at the Treasury, and, in my judgment, the most effective organizations are
those populated by individuals whose skills and experience complement each
other. I would also look forward to working closely with members of this Committee
and the House Financial Services Committee on crucial issues such as GSE reform
and terrorism risk insurance. I will also devote myself to the oversight of the critical
infrastructure of our nation's financial institutions. The recent disaster in the Gulf
States highlights the vital need to be prepared for natural or man-made disasters,
and if confirmed, I expect to spend a significant amount of time focusing on the
preparedness of the U.S. financial system.
Thank you again for the honor and privilege to appear before you. I would be
delighted to answering any questions you may have.

http://www.treas.gov/press/releasesljs2733.htm

10/3/2005

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September 21, 2005
JS-2934
UPDATE:
Treasury Releases Schedule for
September G7 Meeting
3:30 PM

G7 Group Photo
Treasury Department
1500 Pennsylvania Ave" NW
Washington, DC
* Open photo, pool reporter
* Photographers should arrive at the Treasury Department Hamilton entrance
(15thSt) no later than 2:00 PM for security sweep
* Media without Treasury press credentials must contact Frances Anderson at

202-622-2960 or e-mail their name, organization, date of birth and Social
Security number to frances.anderson@do.treas.gov for clearance by 1 :00 PM
on 9/21/2005

http://www.treas.gov/press/releasesljs2934.htm

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PRESS ROOM

W ' -..

September 21, 2005
2005-9-21-14-57-35-21344
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets
totaled $72,253 million as of the end of that week, compared to $73,052 million as of the end of the prior week.
I. Official U.S. Reserve Assets (in US millions)

September 9, 2005

September 16, 2005

73,052

72,253

TOTAL
1. Foreign Currency Reserves

a. Securities

Euro

Yen

11,625

11,605

TOTAL

Euro

23,230

11,409

Of which, issuer headquartered in the US.

Yen

I
I

11,428

I
II
I
I
I

5,532

I
I

TOTAL

22,837
0

b. Total deposits with:
b.i. Other central banks and BIS

11,297

5,617

16,914

b.iL Of which, banks located abroad

a
a

b.iii. Banks headquartered outside the US.

b.ii. Banks headquartered in the US.

11,103

16,635
0

a
0

b.iii. Of which, banks located in the U.S.

2. IMF Reserve Position 2

13,476

13,398

8,391

8,342

3. Special Drawing Rights (SDRs) 2
Id Stock 3

I I

Reserve Assets

,v't 1

11,041

TOTAL

I
I

II
II
II

a
a
a

II. Predetermined Short-Term Drains on Foreign Currency Assets

SeptembgrJ)-->_2.(W_5

Yen

Euro

1. Foreign currency loans and securities

I
I

TOTAL
0

I
I
I

F
I

September 16, 2JUl5

Eum

Ven

2. Aggregate short and long positions in forwards and futures in foreign currencies vis-a-vis the U.S. dollar:

2.a. Short positions

2.b Long positions

13. Other

II
II

I
I

III. Contingent Short-Term Net Drains on Foreign Currency Assets

September 16, 2005

SeptemberJ),200.5

Euro

TOTAL

Yen

1. Contingent liabilities in foreig n currency
1.a. Collateral guarantees on debt due within 1
year

http://www.treas.(1Olripreils/rele~~ew.WQ592114573521344.htm

Euro

Yen

II
II

TOTAL

II
II
10/3/2005

Page 2 of:
1.b. Other contingent liabilities

2. Foreign currency securities with embedded
options

3. Undrawn, unconditional credit lines
[3.a. With other central banks

3.b. With banks and other financial institutions
Headquartered in the U. S.
3.e. With banks and other financial institutions
Headquartered outside the U. S,

I
I

0
0

I
I
I
II
I

4, Aggregate short and long positions of options
in foreign

ICurrencies vis-a-vis the U,S, dollar

14,a, Short positions

I
II
I

14,a,1, Bought puts
14,a.2, Written calls

I
I

4,b, Long positions
4.b,1, Bought calls
4,b.2, Written puts

Notes:

11 Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market Account
(SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect marked-to-market values, and
deposits reflect carrying values. Foreign Currency Reserves for the latest week may be subject to revision, Foreign Currency
Reserves for the prior week are final.

21 The items, "2, IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF and are
valued in dollar terms at the official SDR/dollar exchange rate for the reporting date, The entries for the latest week reflect any
necessary adjustments, including revaluation, by the U,S, Treasury to IMF data for the prior month end,
31 Gold stock is valued monthly at $42.2222 per fine troy ounce,

Page 1 of2

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PRESS ROOM
September 21,2005
JS-2935

Statement of Under Secretary for International Affairs
Tim Adams Pre-G7 Press Conference
Secretary Snow looks forward to hosting G-7 Finance Ministers and Central Bank
Governors here on Friday, September 23 - and to a productive weekend of
meetings at the IMF and World Bank.
The meeting comes at a time when the United States is working intensively to meet
challenges within its own economy - namely to deal with the impact and aftermath
of Hurricane Katrina and to put the Gulf Coast on the road to recovery. We deeply
appreciate the support offered by so many countries around the world.
I expect that Secretary Snow will update his colleagues on our work in the Gulf
Coast region when they meet on Friday. He will report that recovery and
reconstruction are already underway. And he will underscore that the impact on
overall economic growth will be noticeable but short-lived.
Indeed, the U.s. economy is well positioned to deal with the shock of Hurricane
Katrina. Growth in the first half of this year was a solid 3.5 percent Forecasters
anticipate a slowdown in the immediate term as a result of Katrina, but rebuilding
activities will likely to boost growth in early 2006.
The global economy has also been growing strongly, with the outlook positive going
forward. Nonetheless, risks remain.
Energy supply disruptions that raise prices put a damper on growth. I expect
Ministers and Governors will discuss steps taken to address supply and efficiency
issues, as well as technical measures such as the improvement of data availability.
Higher oil prices are also causing problems for some emerging markets, particularly
those that control domestic prices at low levels.
The challenge of addressing global imbalances will also be a focus of discussions
on Friday. Secretary Snow will reiterate the United States' commitment to reduce
the federal budget deficit We remain on track to cut the deficit in half by FY 2009.
Even in light of increased emergency costs, we are delivering on our commitment
But I expect that Secretary Snow will underscore the need for action also in the rest
of the world to address imbalances. This means more labor and product market
reform in Europe and Japan, more financial sector and corporate reform in Asia,
and greater exchange rate flexibility. We need significantly more domestic demandled growth from other parts of the world; at this time it is hard to see growth in major
industrial countries rising much above 2 percent, perhaps not even 1 3/, percent
The global economy needs more stimulus than that And emerging markets have
developed export-dependent growth models that skew growth away from domestic
demand and depend inordinately on U.S. absorption. This is in no one's interest
The US has no current account target and will not set one. Nor will we slow growth
simply to correct external imbalances. What is needed is not less growth in the
U.S., but more engines of growth from more countries and new reforms to
appreciably boost potential growth rates.
Increasing the free flow of trade in goods and services is a vital part of promoting
global growth. The Secretary will underscore President Bush's strong message last
week about the value of free trade, the importance of a successful conclusion to the
Doha Round, and the United States' willingness to move decisively. President
Bush's challenge to all nations is unambiguous and far-reaching: the complete
elimination of all tariffs, subsidies and other barriers to the free flow of goods and
services as other nations do the same. As the President said, "this is key to

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10/3/200S

Page 2 of2
overcoming poverty in the world's poorest nations." One of our priorities in the G7 is
to create the conditions that will allow each and every nation to reach its potential,
and this must now also include greater progress in trade liberalization. In this
regard, Secretary Snow will focus in particular on financial services - given the key
contribution that an efficient, well-regulated financial sector can make to economic
growth and stability in developing countries.
This new challenge on trade follows historic accomplishments on our agenda to
assist developing countries. In addition to our significant increases in development
assistance, and the shift to grants instead of loans, this weekend we hope to see
adoption of the proposal for 100 percent debt cancellation of Heavily Indebted Poor
Countries' (HIPCs) debt obligations to IDA, AfDF, and the IMF. We insisted on 100
percent debt cancellation because it will help to foster long-term debt sustainabillty,
conclusively end the lend-and-forgive approach to development assistance and
provide additional resources for countries' efforts to reach the goals of the
Millennium Declaration (MDGs). We are calling upon all shareholders of the World
Bank, African Development Bank, and IMF to support this important initiative.
The strategic direction of the International Financial Institutions is a key item on the
agenda for Ministers and Governors. The Secretary will stress the need for ongoing
reform to make the institutions as effective as they can be. This includes
modernizing the governance structure to keep the IMF relevant for its members. We
hope to build support for our proposals in this area over the weekend.
Finally, as President Bush again emphasized before the UN last week, we must
work tirelessly to identify and disrupt the networks providing financial and materiel
support to terrorist organizations worldwide and the G7 must continue to lead this
global effort. We have a collective duty to do all we can to make the world a safer
place by targeting and disrupting terrorist networks. The United States is committed
to combating the scourge of terrorist financing and we call on our partners around
the globe to stand with us in this charge. Secretary Snow and Under Secretary
Levey will continue to press this issue in both multilateral and bilateral meetings
over the course of this weekend. Stemming the flow of terrorist financing is among
ourh~hestpriorities.

Thank you for your attention, and I look forward to your questions.

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September 21, 2005
js-2936

Statement by Treasury Secretary John Snow on Hurricane Katrina Bill
I commend Senate and House negotiators for reaching bipartisan agreement on the
Hurricane Katrina emergency tax relief bill. I am pleased that the House acted to
pass the bill this afternoon and look forward to quick Senate action, This aid comes
at exactly the right time to help victims of Hurricane Katrina as they rebuild their
lives, Hurricane Katrina was a devastating blow to our Gulf Coast and this aid
package will be an important part of the recovery effort,
We also look forward to working with the Congress in the coming weeks to enact
the President's proposals for Gulf Opportunity Zones, Worker Recovery Accounts
and the Urban Homesteading initiative to help revitalize areas affected by Hurricane
Katrina, Finally, it is important that Congress act to ensure the future health of our
national economy by making the President's tax cuts permanent A strong national
economy is crucial to rebuilding the Gulf economy,

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September 22, 2005
JS-2938

Statement of Treasury Secretary John W. Snow
Today we welcomed our friends and colleagues from the Iraqi Ministry of Finance
and Central Bank for productive discussions on the ongoing efforts to ensure
continuing reconstruction and economic development in Iraq. We hope that later
this week the next milestone would be reached with the IMF, and the IMF would,
with Iraq, be able to announce that they are moving into the negotiations phase of
the standby agreement. That would be an important next step on the path to a
standby agreement for the country. I commend Minister Allawi and Governor
Shabibi for their terrific leadership, courage, and the skill and confidence that they
bring to the monetary and fiscal economic policy issues of their country. Iraq is
fortunate to have people of their ability holding these posts at this historical time.

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1
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PRESS ROOM

September 22, 2005
JS-2939
U.S.-Iraq Macroeconomic and Financial Forum Meets
Secretary Snow and Iraqi Finance Minister Ali Allawi today co-chaired the first
meeting of the U,S,-Iraq Macroeconomic and Financial Forum, This new Forum is
part of the broader bilateral economic dialogue known as the Joint Commission on
Reconstruction and Economic Development (JCRED). They discussed key policy
and implementation issues affecting Iraq's economic reconstruction, with a focus on
the macroeconomy and the financial sector,
They were joined in the discussion by key members of the U.S, and Iraqi economic
teams, including Governor of the Central Bank of Iraq Dr, Sinan al-Shabibi, and
participants from the State Department, National Security Council, World Bank,
Federal Reserve Board, and the Federal Reserve Bank of New York,
Much of the session was devoted to Iraqi efforts to secure passage of a fullyfinanced 2006 budget and to develop a system for sound budget formulation and
execution, There was also extensive discussion of the monetary policy instruments
needed for Iraq to maintain price stability, The participants discussed ways in which
to ensure that Iraq's oil wealth is used to promote economic growth, to better
mobilize the Iraqi private sector and to revitalize the banking sector,
Secretary Snow and Minister Allawi noted substantial progress over the past year in
many areas of fiscal and monetary policy:
•
•

Iraq is well on the way to executing a fully-financed budget in 2005,
Iraq's 2006 budget will include measures to reduce meaningfully the cost of
the government's subsidy program both in 2006 and beyond,
• The Iraqi dinar remains sound and stable,
• The Central Bank of Iraq has been expanding its set of monetary policy
tools.
In addition, Secretary Snow and Minister Allawi also welcomed progress on settling
Iraq's commercial debt and signing bilateral sovereign debt agreements under the
PariS Club.

http://www.treas.gov/press/releasesljs2939.htm

10/3/2005

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PRESS ROOM

September 23, 2005
JS-2940
Remarks by Under Secretary for International Affairs
Timothy D. Adams
The IMF: Back to the Basics
Institute for International Economics Conference on
Reform of the International Monetary Fund
I would like to thank Fred Bergsten and the liE for the invitation to this conference
on IMF Reform, This conference is another reminder of how fortunate the United
States Treasury is to have outstanding think-tanks like the liE nearby to promote
debate on key international economic policy issues, Fred and the other senior
fellows have opened their doors to me and I greatly appreciate their gracious
support and indispensable wisdom,
As I flipped through the newspapers very early this morning in preparation for
today's G-7 Finance Ministers and Central Bank Governors meeting and other
meetings throughout the weekend, I was reminded why this issue - IMF reform - is
so important and so topical. The challenges we - policymakers - face are
extraordinary and we must have effective, adaptable institutions to assrst us as we
craft solutions.
So, let me start my remarks today by stating that I am a believer in the IMF - that is,
an IMF as a facilitator of international monetary cooperation, History has
repeatedly demonstrated how much the world needs such an institution - from the
maintenance of a fixed exchange rate system centered on the major industrialized
countries in the 1950s and 60s, to the resolution of the Latin American debt crisis of
the 1980s, to the economic transformation of Eastern Europe, to the emerging
market crises of the 1990s. There is a role of for the Fund,
Yet the IMF now faces fresh, tough questions about its relevance. For example, is
there any meaningful role for the IMF in the industrialized countries? With
emerging market economies implementing better domestic economic policies,
steadily repaying their IMF debts, and self-insuring through increasingly large
reserve accumulation, will the IMF simply cease to matter to this key group?
Should the IMF react by shifting more of its policy and financing focus to lowincome countries?
In a generalized response to these questions, I think that the best way to strengthen
the IMF's relevance is to refocus on the core mission envisaged by the IMF's
founders at Bretton Woods - international financial stability and balance of
payments adjustment We should measure IMF effectiveness by how well it helps
countries and the global system avert or recover from financial crises, not by the
volume of Fund lending, Managing Director De Rato's Strategic Review is a good
first step, and I urge you to pay close attention to what he has to say,
For my part, allow me to touch on five key priorities,
Quota and Representation Reform
First, it is necessary for us to address the governance structure of the 1M F, The
IMF's governance structure should ensure that every member has a voice, with
each country's vote scaled to reflect its weight in the world economy. This
shareholder structure provides for both universal representation and weighted
influence, while keeping the Fund's financial position strong so that it can meet its
systemic responsibilities and come to the aid of members when needed,
At the Spring Meetings of the IMF and World Bank, Secretary Snow stated that the
governance of the IMF should evolve along with the world economy, so that

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countries have a rightful stake in the institution. The world economy has evolved
considerably, as some countries have grown more quickly than others and Europe
has achieved monetary union and deepened integration.
The quotas for many fast-growing emerging market countries are much smaller
than the IMF's own calculations would suggest they should be. For example, Korea
is 66% underweight; Mexico about 35% underweight; and Turkey about 32%
underweight. The IMF's quota formulas also do not reflect many countries' weight
in the world economy. This is true for the United States, whose quota is 17% of the
total while U.S. GDP was roughly 29% of global GDP in 2004.
The IMF's liquidity is at a record high by any measure. There is no need to
increase its resources - either through a general or an ad hoc increase. The United
States is not seeking to increase its own quota share, and will not accept any
decline. Rather, we wish to explore ways to improve the balance.
Within that context, what can be done?
•

•

First, a voluntary rebalancing of quotas, within the existing total, from
"overweight" countries to the most "underweight" emerging markets would
be a major step forward. This will depend on countries whose quotas are
out of proportion to their global economic weight stepping forward to help
modernize the Fund.
Second, the poorest countries are among the most overweight relative to
calculated quota or share of GOP, but should be held harmless so that their
quota does not fall.
Third, in addition to rebalancing quotas, representation on the Executive
Board should better reflect the IMF's full membership. Consolidation of
European chairs would help to incfease the relative voice of emerging
market and developing country members.

These are complex issues and the United States will not be able to effect change
alone. But together, the IMF's membership can begin a process that will bring a
better balance to IMF governance and that of the international financial institutions
more broadly.

Exchange Rate Surveillance
Second, the IMF needs to be far more ambitious in its surveillance of exchange
rates.
IMF Article IV requires that the IMF exercise "firm surveillance" over the exchange
rate policies of members. After the collapse of the Bretton Woods fixed exchange
rate system, the IMF in 1977 developed surveillance guidelines that determine its
approach to what is still called the "Article IV" process. Those guidelines included
domestic policies, since domestic policies can impact a country's balance of
payments position.
Over time, however, domestic policies have come to dominate Article IV reviews,
and it is not uncommon to read an Article IV review with only a brief reference to a
member's exchange rate policy and its consistency with both domestic policies and
the intemational system. There is almost never discussion of whether an
alternative regime could be more appropriate, or how to transition to it.
Many large emerging market countries would benefit from regimes that allow
substantial exchange rate flexibility. Research, including by the IMF, has shown
that for developing countries integrating into international capital markets, the
requirements for sustaining pegged exchange rate regimes have become very
demanding.
The IMF also has standing authority to initiate "special consultations" whenever one
member's exchange rate policy is having an important impact on another member.
However, in over a quarter century, the IMF has held special consultations exactly
twice. This has placed increased pressure on bilateral mechanisms and actions to
address instances of protracted currency misalignment.

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We understand that tough exchange rate surveillance is politically difficult for the
IMF. It is also true that a country has the right to determine its own exchange rate
regime. Nevertheless, the perception that the IMF is asleep at the wheel on its
most fundamental responsibility - exchange rate surveillance - is very unhealthy for
the institution and the international monetary system.

Public Debt Sustainability
A third issue. also related to crisis prevention, is public debt sustainability in
emerging markets. High public debt keeps domestic borrowing costs high (which is
a tax on their citizens), limits scope for countercyclical fiscal policy, and eventually
could lead to explicit default or implicit default through high inflation. The banking
sector often holds domestic debt, making any restructuring particularly difficult given
the potential impact on bank capital. Domestic debt can be a problem even in
countries with large amounts of international reserves, and what starts as a
domestic debt crisis can rapidly spill over to the external accounts through capital
flight.
The IMF has been further ahead of the curve on this issue, most notably its
September 2003 World Economic Outlook which pointed to the risks of high public
debt levels in emerging markets.
But while emerging markets have made progress over the last two years amid an
exceptionally benign external environment, the average public debt ratio is still
uncomfortably high at 60%.
Accordingly, countries should seize the day before the benign conditions diSSipate.
This means greater focus on fiscal consolidation, debt structures and structural
fiscal reforms. The IMF should deepen its traditional focus on fiscal policy by
increasing efforts to help countries improve their debt structures and by stressing
structural fiscal reforms in its surveillance and programs.

Crisis Resolution
The fourth issue is crisis resolution. Crises cannot always be prevented - they will
sometimes develop in the most unexpected ways. The IMF's crisis resolution
framework is a mix of policy adjustment, official finance and private finance. On
policy adjustment, there will inevitably be a tough judgment on how much is
necessary and politically feasible. On official finance, the IMF's framework for
exceptional access should provide increased predictability for markets and aid in
the difficult differentiation between illiquidity and insolvency.
The real unresolved question is private sector involvement, and in particular
sovereign debt restructuring. It is clear to me that a market-based approach to
sovereign debt restructuring is preferable and there remains no need for a
Sovereign Debt Restructuring Mechanism. However, it is also clear that we will
have to think creatively about how to improve the market-based sovereign debt
restructuring process.
There has been considerable discussion about whether the IMF should set the
"resource envelope" for debt restructuring through the primary fiscal surplus in a
Fund program. It is helpful for a country and the IMF to reach agreement on the
primary surplus. This greatly facilitates a subsequent determination of whether the
country is making a good faith effort to resolve its defaulted debt to private creditors
- a precondition for the IMF to lend.
Outside of the IMF, a natural step would be to build on the recent progress in
collective action clauses in international bonds - a remarkable success story due in
no small measure to my predecessor. John Taylor. We can also examine the
extent to which the draft Principles of Stable Capital Flows and Fair Debt
Restructuring in Emerging Markets complements official sector efforts to clarify the
crisis resolution framework.

Low-Income Countries
Finally, partly as a result of the historic G-8 debt deal to end the lend-and-forgive

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cycle at the World Bank, African Development Bank, and IMF, much of the
discussion at this year's Annual Meetings will revolve around the role of the Fund in
Low-Income Countries. The United States believes that the IMF has a very
important function in helping low-income countries establish a sound
macroeconomic framework through surveillance, technical assistance, a new nonborrowing program for countries that desire Fund engagement but do not need IMF
finance, and IMF lending when appropriate.
However, the IMF is not a development institution, and it is clear that the IMF's
financial involvement in low-income countries has gone terribly awry. The IMF's
own work on PRGF programs shows that not only do many countries not achieve
the external adjustment targeted, but what is targeted is not enough to restore
external viability. There are also far too many follow-on programs and repeat
borrowers - so much that the IMF has established "access norms" stretching out
six programs. For example, in Guyana and Malawi, fiscal and debt sustainability
remains elusive even after HIPC debt relief and multiple IMF programs.
The issue is not whether the United States favors concessional flows to low-income
countries. We clearly do, and that is why we have substantially increased our
contributions to IDA and bilateral assistance programs. The issue is that the IMF
should remain an institution that provides short-term financi'lg in response to an
actual balance of payments need. IMF finance is concessional so low-income
countries can afford it. But it does not follow that the IMF should increase flows to
low-income countries simply because they are concessional. IMF lending, while
concessional compared to market rates, is far less concessional than IDA lending,
while an IDA grant is 100% concessional.

Conclusion
When faced with calls for reform, the typical response of any institution is that it is
already undertaking it. The IMF can legitimately say it has already begun its work.
IMF Managing Director De Rato has laid out a vision for his Strategic Review that
can incorporate these priorities.
Yet UCLA basketball coaching legend John Wooden would warn us to never
confuse activity with achievement. To achieve, the IMF needs to refocus and
deliver.
Ultimately, the IMF's relevance will be determined not by how much it broadens its
mandate but how well it carries out its existing one.

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PRESS ROOM

September 23,2005
JS-2941

Prepared Remarks of Daniel L. Glaser
Acting Assistant Secretary for Terrorist Financing and
Financial Crimes
Before the Annual Meetings Program of Seminars:
The Importance of Expanding Targeted Financial Sanctions
Programs around the Globe: Challenges and Opportunities
Good morning. It is an honor to be here today to address the IMF, World Bank and
international delegations on about the importance of expanding targeted financial
sanctions programs around the world and the most effective ways to work together
to fight the financial war against terrorism. I would like to thank our moderator
Agustin Carstens, and the organizers Barry Johnston, Jean-Franc;ois Thony, and
Latifah Osman Merican, for organizing this seminar on this crucially important topic.
I would also like to recognize my co-panelists Cesare Calari, Martin Redrado, and
Sally Scutt.
It is vital to recognize that the financial mechanisms we use to facilitate international
economic growth, deliver aid to those in need, and carry out day-to-day financial
transactions, are the same mechanisms that terrorist financiers have sought to
abuse in pursuit of their illicit activities. We must protect our financial systems from
such abuse, and exploit the financial vulnerability of terrorist organizations and their
support networks, by adopting and implementing effective anti-money laundering
and counter-financing of terrorism (AMLlCFT) controls.
As members of the financial community, not only are we charged with the
responsibility to ensure the movement of capital around the world in pursuit of
investment and development, but also to protect that capital from use and abuse by
criminals and terrorists.
Fortunately, the choice between implementing strong AMLlCFT measures and
fostering healthy, vibrant financial centers is a false one. These are not mutually
exclusive, but rather mutually reinforcing; in fact, you cannot have one without the
other. In the end, AML systems are about transparency. and transparency creates
the proper conditions for a healthy financial system, reinforcing foundations for
sustainable economic growth and development. As countries work to implement
strong AMLlCFT measures, they create the basis for a healthy financial center that
will enjoy a strong international reputation.
But even as we remember the important links between strong AMLlCFT regimes
and economic development, we must not lose sight of what lies at the heart of our
efforts to combat terrorist financing. The horrendous attacks on the London subway
system serve as a chilling reminder of the importance of identifying and disrupting
terrorist networks.
Terrorist financing is a problem that the entire world faces. The nature of today's
financial system is international, and the terrorist threat we face is global. As we
have witnessed in London, Sharm el-Sheikh, Bali, Madrid, Beslan, and four years
ago in New York and Washington, DC, terrorists do not discriminate between race,
religion or creed. The international financial system is only as strong as its weakest
link. Financial centers that are susceptible to abuse provide terrorists and criminals
access to the international financial system as a whole. Therefore efforts to combat
terrorist financing must be uniform and global. Laxity in just a few jurisdictions
undermines the efforts made by the rest. No jurisdiction can absolve itself of
responsibility.
The global nature of both the financial system and the terrorist threat requires a
global effort to effectively combat terrorist financing. This global effort must focus

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on adoption and implementation of anti-money laundering and terrorist financing
controls in compliance With international standards. While there are a large number
of important tools the international community is using to fight these groups, I want
to focus my remarks today on the importance of targeted financial sanctions.
The international community's response to the tragic attacks of 9/11 was United
Nations Security Counsel Resolution (UNSCR) 1373, which, among other
measures, calls for freezing the assets of all terrorists groups without delay. The
strength of this resolution is that it expands the pre-9/11 commitment to attack the
financing of al Qaida to attacking the financing all terrorist organizations.
It is ironic that this component of the international AMLlCFT regime, the one that
has the most explicit UN endorsement and mandate - including multiple UNSCRs _
is probably the least understood and most poorly implemented component
worldwide. These failures range not only from countries that do not have the
capacity to block terrorist assets, but also to entire regions of the world that do not
even attempt to implement this UN requirement.
Understanding the importance of this UN requirement must begin with a recognition
that terrorist organizations require significant funding. Although individual terrorist
attacks may be inexpensive, terrorist organizations require far more than explosives
to sustain themselves. They need money to train, recruit, pay operatives and their
families, travel, bribe officials, procure cover and false documents, as well as
purchase arms. If implemented effectively, targeted financial sanctions can put
terrorist organizations in a financial box, effectively depriving them of the resources
they need to conduct this range of activities.
Yet the value of our terrorist financing deSignations cannot be measured by the
amount of assets we collectively freeze. In addition to freezing terrorist related
funds, targeted financial sanctions shut down the pipeline through which terrorists
raise and move money.
If implemented effectively, these sanctions can also have a severe disruptive effect.
Constricting the flow of cash to terrorist groups can increase dissension within their
ranks, triggering hasty communications and cumbersome movements that expose
operatives, donors, facilitators and organizers to the sharp eyes of intelligence and
law enforcement.
In this respect, targeted financial sanctions represent an important means of
gaining financial intelligence. Often more important than the money found in frozen
accounts or blocked in illicit transactions is the information associated with them.
Financial investigators can exploit this information downstream to identify terrorist
cells and operatives and upstream to identify donors and supporters.
Perhaps most importantly, targeted financial sanctions are preventive. It is
impossible to overestimate the value of designation actions when viewed from this
perspective.
The effectiveness of targeted financial sanctions, as with all economic sanctions,
multiplies exponentially as more countries adopt and implement them. We must
now focus our efforts here.
The United States has responded to these and similar mandates by designating
408 individuals and entities as terrorists or terrorist supporters. These designees
were tied to a wide range of terrorist organizations throughout the world, including
al Oaida, Hamas, Hizballah, Palestinian Islamic Jihad, ETA and the FARC.
Countries should not implement targeted financial sanctions because the U.S. is
asking. Countries should implement targeted financial sanctions because it is their
obligation to do so as UN members and as responsible members of the
international community. Each country needs to ask itself the following questions:
• What action has your government taken in response to UNSCR 1373?
• What mechanisms do you have in place to identify and target terrorists and
their networks within your country?
• How many targets have you deSignated?
.
.
• What mechanisms do you have in place to communicate these designations

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to your financial community?
• How many designations have you communicated?
• What mechanisms do you have in place to ensure that your financial
institutions are complying with these obligations?
• How many terrorist related transactions and accounts have you identified?
• How many targets have you referred to international allies or the UN for
coordinated multilateral action?
Although most countries do have some mechanism in place to block the assets of
al Qaida-related entities pursuant to UNSCR 1617, too many countries have taken
little or no action to block the assets of other terrorist groups as specifically required
by UNSCR 1373. It is urgent for countries throughout the world to begin to develop
effective administrative mechanisms to provide these UN Resolutions with the bold
effect they were meant to have on terrorist support networks.
So what is the role of the international financial institutions in all of this? In March
2004, the IMF and World Bank Boards agreed to assess countries' compliance with
international AMUCFT standards as articulated by the Financial Action Task Force
(FATF) as a regular part of their assessments of financial sectors and offshore
financial centers. Their long-term commitment to this effort is vitally important, as is
the expertise that the IMF and World Bank can provide to countries as they develop
effective AMLlCFT systems. We encourage them to continue to deliver coordinated,
prioritized and efficient technical assistance.
Indeed, the efforts of the international community to implement targeted financial
sanctions should not be limited to the fight against terrorism. A concerted
international effort should be undertaken to identify, disrupt and dismantle the
financial networks that support the proliferation of weapons of mass destruction
(WMD), and to financially isolate those who engage in such activities.
The United States has recently designated several entities associated with WMD
proliferation activity under the newly established Presidential authority, Executive
Order 13382. As with our terrorist financing designations, the Order freezes any
assets the designee may have in the U.S. financial system and forbids U.S.
persons from transacting any type of business with them. We hope that this lays
the foundation for expanded international cooperation against WMD networks. In
the case of WMD proliferation, just as it is with terrorist financing, the international
community must join forces in order to protect our society.
It is our collective obligation to do all we can to identify, disrupt and dismantle the
financial networks that support terrorism and WMD proliferation. By working
together, we have the ability to make it harder, costlier and riskier for the illintentioned to move their funds through the international financial system. In the
end, our efforts can save lives and constitute a vital contribution to the international
effort to combat terrorists and other groups that prey on our society. The time for
aggressive action is now. Only together will we succeed in meeting the challenges
before us. I look forward to working with you to meet these challenges and others
that may lie ahead.
Thank you.

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PRESS ROOM

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September 23, 2005
js2942
ATSB to Explore Remarketing of Loans and Sale of Warrants
The Air Transportation Stabilization Board welcomes the confirmation of US
Airways' Plan of Reorganization by the Bankruptcy Court last week and supports its
planned exit from Chapter 11 and merger with America West Airlines. The Board
has worked with both US Airways and America West to restructure their existing
guaranteed loans to be compatible with the new business plan of the combined
companies (New US Airways).
The Board is working with a financial advisor to assess the remarketing of the two
loans to private investors without the government guarantee and to gauge the
marketability of the Board's warrant to purchase shares in New US Airways. The
ATSB is receiving the warrant in exchange for the original warrant obtained as part
of the compensation to the Government for the loan guarantee provided to America
West in 2002. In addition, the Board is exploring strategies to sell its remaining
warrants in World Airways and Frontier Airlines.

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PRESS ROOM

September 23,2005
2005-9-23-15-4-35-26612

Treasury Secretary John Snow greets South Africa's Finance Minister Trevor
Andrew Manuel

All media queries should be directed to
The Press Office at (202) 622-2960.
Only call this number if you are a member of the media.

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PRESS ROOM

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September 23, 2005
2005-9-23-15-10-35-27144

Treasury Secretary John Snow greets Palestinian Minister of Finance Salam
Fayyad

All media queries should be directed to
The Press Office at (202) 622-2960.
Only call this number if you are a member of the media.

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PRESS ROOM

September 23, 2005
JS-2943
Statement by G-7 Finance Ministers and Central Bank Governors
September 23, 2005
The global economy, as a whole, continues to expand and the outlook is positive for
further growth, supported by the containment of underlying price pressures.
However, higher energy prices, growing global imbalances, and rising protectionist
pressures have increased the risks to the outlook.
We discussed high and volatile oil prices and agreed on the key steps that need to
be taken. First, we welcome the action by members of the International Energy
Agency and by oil-producing countries to make available additional oil and oil
products to the market and we call for a sustained increase in supply by those with
spare capacity. Second, significant investment is needed in exploration, production,
energy infrastructure, and refinery capacity. Third, oil producing countries should
ensure a favorable investment climate, open markets with transparent business
practices, and stable regulatory frameworks. We stress the importance of improving
the timeliness, quality, and transparency of oil market data and increasing mediumterm energy supplies and efficiency. Fourth, we will enhance and expand our
dialogue with oil producers. Fifth, we affirm that subsidies and artificial price caps
which constrain the price of oil and oil products have an adverse effect on the
global market and should be avoided. Sixth, we are committed to fostering and
deploying technology and innovation. Seventh, we support energy conservation,
renewable and alternative sources of energy as long-term solutions, and encourage
the World Bank to promote investment in alternative energy sources and energy
efficiency in developing countries. Finally, we commit ourselves to implementing
policies and practices to improve the global energy outlook.
The challenge of addressing global imbalances over the medium term is a shared
responsibility of the international community and must be undertaken in a way that
maximizes sustained growth. The G-7 countries have a critical part to play, as do
others. Vigorous action is needed to address global imbalances and foster growth;
further fiscal consolidation in the United States; further structural reforms in Europe;
and further structural reforms, including fiscal consolidation, in Japan. The G-7 held
another outreach session today with Brazil, China, India, Russia, and South Africa.
We reaffirm our support for the Agenda for Growth initiative. We agreed to meet
again in December in the United Kingdom.
An ambitious outcome from the Doha Round by the end of 2006 is essential to
enhancing global growth and poverty reduction. We call for a multilateral rulesbased global market. We call for a strong WTO result by all members to
substantially increase market access in agriculture, industrial products, and
services, especially for developing countries; significantly reduce trade-distorting
domestic support; eliminate all forms of export subsidies in agriculture; and make
significant progress on services, including financial services, as liberalization in
financial sectors is linked to increased growth.
We reaffirm that exchange rates should reflect economic fundamentals. Excess
volatility and disorderly movements in exchange rates are undesirable for economic
growth. We continue to monitor exchange markets closely and cooperate as
appropriate. We welcome the recent decision by the Chinese authorities to pursue
greater flexibility in their exchange rate regime. We expect the development of this
more market-oriented system to improve the functioning and stability of the global
economy and the international monetary system.
We welcome the Managing Director's strategiC review of the IMF and agree that
maximizing the benefits while limiting the challenges of globalization should be a
defining principle for the activities of the IMF. The increased integration of
economies and the larger scale of private capital flows are critical to defining the

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priorities for the IMF. We stress the importance of modernizing the IMF's internal
and external governance structure to reflect developments in the world economy.
The Bank should strengthen its focus on poverty reduction through economic
growth and broader access to economic opportunities, results measurement, and
fighting corruption.
We reaffirmed our support for the G-8 proposal on debt relief for Heavily Indebted
Poor Countries, while ensuring that the financing capacity of the IFls is not reduced.
This proposal will provide additional resources for countries' efforts to reach the
goals of the Millennium Declaration, foster longer-term debt sustainability, and
improve balance of payments positions. We call upon all shareholders of the IDA,
African Development Fund, and IMF to expeditiously complete and implement this
historic and crucial initiative. We remain committed to fully financing this relief on a
fair burden share basis and stand prepared to demonstrate our Gleneagles financial
commitments consistent with our individual budgetary and parliamentary systems.
For the IMF, the G-8 will provide approximately $150 million to the Interim PRGF.
The Fund should move forward immediately to implement the shocks window in the
PRGF and the Policy Support Instrument. We invite oil producing countries to
contribute to the shocks window that would help poor countries respond to
commodity shocks, including oil prices. We endorse the Fund's estimate of the
need for a self-sustained PRGF. We are committed, on a fair burden share basis, to
cover the costs of countries that may enter the HIPC process based on their end2004 debt burdens. We will review the Enhanced HIPC Initiative in 2006, including
the application of the "sunset" clause, and the appropriateness of further action
based on the future financing capacity of the international financial institutions.
The tragic events in London in July remind us of the continued threat posed by
terrorism. As such, we renewed our commitment to fight terrorist financing through
strengthening our asset freezing systems and actions, enhan

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September 23,2005
JS-2944
Statement by Secretary John W. Snow Following the
G-7 Meeting
Washington, DC
I was pleased to host the G-7 Finance Ministers and Central Bank Governors today
here at the Treasury,
We had a very full agenda, with several extremely important issues to address,
Let me remark first on current conditions in the U.S. This is a time oxf concern for
those in the path of Hurricane Rita, and those still dealing with the aftermath of
Hurricane Katrina. Our thoughts and prayers are with all of you. I briefed my
colleagues on our work to get recovery underway on the Gulf Coast, and the
President's commitment to help restore and enhance the region, The support I
heard today from my colleagues, and that we as a country have received from
around the world, is tremendous and deeply appreCiated.
As I explained in our meetings, while there never is a good time for such
occurrences, with good fiscal and monetary policies contributing to strong and
sustainable growth rates and growing revenues, the U,S. economy was well
positioned to deal with a shock of this kind. Indeed, while forecasters anticipated a
slowdown in the immediate term as a result of Katrina, rebuilding activities are likely
to boost growth in early 2006.
Even in light of the short term costs associated with Katrina, and now Rita, let me
be very clear--the United States remains firmly committed to a path to cut the deficit
in half by fiscal year 2009. We are committed to a recovery effort that is not only
compassionate but also fiscally responsible.
More broadly, the global economy continues its expansion, with forecasts indicating
that solid growth should continue next year, While strong global performance is
encouraging, risks remain. Addressing these risks is a shared global challenge. In
this regard, I was particularly pleased to have Brazil, China, India, Russia and
South Africa join us to discuss global economic trends. While strong global
performance is encouraging, risks remain. Addressing these risks is a key priority
for the G-7.
With the United States maintaining solid growth and delivering on our commitment
to reduce the fiscal deficit, it is vital that others also act to address global
imbalances, In Europe and Japan, further labor and product market reform is
essential to increasing the potential for growth. I underscored this message to my
colleagues, We also discussed the importance of more financial sector and
corporate reform in Asia, and greater exchange rate flexibility for large economies,
Higher energy prices pose a risk for the U.S, economy, since supply disruptions
that raise prices put a damper on growth, Hurricane Katrina contributed to those
disruptions, and now roughly a quarter of U,S, refinery capacity lies in the path of
Hurricane Rita. Today, we welcomed actions being taken by G7 countries to
address supply and efficiency issues and agreed on the importance of further steps,
including measures to improve data and to create a favorable investment climate
for energy resources in producing countries,
To maintain sustainable growth - and advance the goal of reducing poverty around
the world - we simply must see more domestic demand-led growth from other parts
of the world. Rather than slowing U.s. growth to match that elsewhere, I
emphasized the need for more growth from more countries and new reforms to
boost potential growth rates appreciably,

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Echoing President Bush's strong message last week in New York, I emphasized the
value of free trade, based on clear and enforceable rules, as others do the same
Clearly, the United States is willing to move decisively. Together, Ministers and
Governors today called for an ambitious outcome from the Doha Round by the end
of 2006. We focused in particular on financial services. Significant progress in
liberalizing financial services and promoting efficient, well-regulated financial
services can make a key contribution in achieving growth and stability especially in
developing countries.
Our focus on trade is closely linked to the President's initiative four years ago to
provide 100 percent debt cancellation for the world's poorest countries, and shift
development assistance for the poorest countries to grants. When we last met in
June, we reached what I said at the time was a historic agreement to propose 100
percent cancellation of debt owed to the World Bank (IDA), African Development
Bank (AFDF), and the International Monetary Fund (IMF) by countries eligible for
HIPC.
Since June, the institutions and our governments have done a great deal of work to
follow through on this proposal and set the stage for its implementation. Today, we
called on the institutions and their shareholders to move expeditiously to support
this initiative. We reiterated our commitment to finance debt relief fully, ensuring
that the financing capacity of the international financial institutions is not reduced.
We look forward to quick action to make this historic debt cancellation deal a reality.
We also welcomed the strategic review underway in the IMF, which should aim to
keep the IMF's work focused and effective. Ministers and Governors also
emphasized the need to reform the IMF's governance structure to reflect
developments in the world economy, including the rapid growth in many large
emerging markets as well as the advent of the euro and deepening European
integration. I hope that we can see progress soon on this priority.
In the World Bank, we agreed on the need to strengthen the focus on poverty
reduction through economic growth, as well as expanding the focus on results and
continuing to fight corruption.
We all expressed our sympathy and outrage about the tragic events in London in
July. It is in this light that we continue our fight against terrorist and illicit financing
and urged the IMF and World Bank to continue their long-term commitment to work
in this area.
Finally, I took note of the encouraging statement this afternoon by IMF Managing
Director de Rato regarding progress toward a Stand-By Arrangement with Iraq.
Yesterday my staff and I had the opportunity to meet here again with my colleagues
from the Iraqi Ministry of Finance and Central Bank. I am pleased to see that
negotiations toward a Stand-By Arrangement will soon begin. This would be an
important step forward.
Thank you for your attention, and I look forward to your questions.

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PRESS ROOM

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September 23.2005
JS-2945
Letter to World Bank President from G8 Finance Ministers

L.etter to World Bank President From G8 Finance Minister

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10/3/200';

Letter to the President of the World Bank from the G8 Finance Ministers
on the G8 Debt Proposal, Washington, 23 September 2005

Dear President Wolfowitz

G8 Finance Ministers have agreed a proposal to complete the process of debt
relief for Heavily Indebted Poor Countries by providing additional development
resources which will provide significant support for countries' efforts to reach
the goals of the Millennium Declaration (MDGs). This proposal was reaffirmed
by G8 Heads of State and Government at Gleneagles.
We believe that this proposal will bring major benefits to IDA's membership;
that it will preserve and enhance the Bank's key role in supporting low-income
countries; and that it will ensure that substantial additional resources are
allocated on the basis of need, governance and the ability to use them
effectively for poverty reduction and growth.
The key element of the proposal is that debt relief will be fully financed to
ensure that the financing capacity of International Financial Institutions is not
reduced. For this reason, in IDA and the AfDF, the G8 has committed. based
on agreed burden shares, to cover the full cost to offset dollar for dollar the
forgone principal and interest repayments of the debt cancelled for the
duration of the cancelled loans. This letter reaffirms and sets out the detail of
our commitment.
We will make available immediately additional funds to cover the full cost
during the IDA '/4 period and these funds will be fully additional to the
resources already agreed during the IDA 14 replenishment. For the period
after IDA 14, we are committed to cover the full costs for the duration of the
cancelled loans and we will make contributions additional to regular
replenishments of IDA. The G8 has committed, as a whole, to the contribution
it made under IDA 13 (70.19%).
In order to create transparency and accountability, we ask that in future
replenishment rounds that the costs ot' the deDt relief initiative and the
associated donor contributions be reported separately.
We will each implement these commitments expeditiously in line with our
Indeed, since our
individual budgetary and Parliamentary procedures.

meeting in June, and the meeting of G8 Heads of State and Government at
Gleneagles, a number of us have been able to make progress:
•

The US Administration has provided clear support for a Congressional
Bill that would approve the debt relief initiative and to authorise "such
sums as may be necessary for payment" for the full duration of the
cancelled loans.

•

Japan reaffirmed its commitment to cover its share of the costs of the
proposal and to exercise its best efforts to obtain necessary Diet
approvals on the occasion of the regular replenishments to fulfil its
commitment.

•

Canada has already made an allocation to cover its share of total costs
over the next five years and is currently seeking Parliamentary
approval to disburse these funds. The Canadian Government will seek
Parliamentary approval to disburse funds over the life of the agreement
following its normal budgetary conventions.

•

Germany confirms its commitments undertaken at Gleneagles. In
particular, Germany remains committed to offset dollar for dollar, based
on agreed burden shares, the foregone principal and interest payments
of the IDA debt cancelled, subject to decisions to be taken by the new
German Government and Parliament.

•

The UK is committed to cover its share of the costs for the full duration
of the cancelled loans. It had already budgeted to pay its share of the
debt service costs of these countries until 2015, and it will make a firm
financial commitment to the cover its share of the full cost to IDA for the
next ten years through a formal Parliamentary process.

•

France is committed to cover its share of the costs for the full duration
of the cancelled loans. It will seek in 2005 Parliamentary appropriations
for commitment for the financial compensation of the lost reflows
covering the period to 2015.

•

Italy is committed to bring forward legislation that will authorise
payments of its share of the cost for the full duration of the cancelled
loans.

•

The Russian Federation confirms its commitment to cover its share of
the cost for the full duration of the cancelled loans. Necessary steps
will be taken by the Government to ensure the budget appropriations
will be made in a timely manner.

In addition, we reaffirm our commitment to the long-term role of IDA in the
international development architecture and in financing development. In doing
so we recognise that IDA will utilise a contribution baseline of the real value of
donor contributions under IDA 14 as a means of assessing additionality. We
also note that funding for IDA will continue to depend on donors' conviction of
IDA's effectiveness in delivering development assistance; IDA refJows; and
the performance, financing needs, and absorptive capacity of poor countries.
On the basis of our commitments, and the actions we have taken and will
take, we firmly believe that this initiative will strengthen the financial capacity
of IDA. We strongly believe that this initiative represents a historic opportunity
and we hope it will be seized by the whole membership at the Annual
Meetings.

Gordon Brown, Chancellor of the Exchequer, United Kingdom

John Snow, Secretary to the Treasury, United States of America

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

Ralph Goodale, Minister of Finance, Canada

Thierry Breton, Minister for the Economy, Finance and Industry, France

Caio Koch-Weser, State Secretary, Ministry of Finance, Germany

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---.~--------------------------------

Giulio Tremonti, Minister of Economy and Finance, Italy

Sadakazu Tanigaki, Minister of Finance, Japan

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Alexei Kudrin, Finance Minister, Russia

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Page 1 of 2
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PRESS ROOM

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September 24, 2005
JS-2946
Secretary John W. Snow Plenary Statement 2005 Annual Meetings
of the IMF and World Bank
Washington, DC
Chairmen, Governors, Mr. de Rato, Mr. Wolfowitz. I want to welcome all of you to
Washington.
We meet at a particularly challenging time for the United States. I want to take this
opportunity to thank all those from around the world who have responded with
solidarity and offers of support in the wake of Hurricane Katrina.
The U.S. economy is strongly positioned, even in the face of the economic impacts
of the hurricanes, to continue on a path of growth and deficit reduction. Growth in
the first half of 2005 was a solid 3.5 percent. The unemployment rate fell to 4.9
percent in August, the lowest rate in four years. Although the immediate outlook has
softened slightly, recovery efforts are likely to boost growth early next year. The
vitality, flexibility, and resilience of the U.s. economy will be tremendous assets as
we move forward.
The world economy, too, has continued to expand strongly since we met last year.
The outlook is favorable. Nonetheless, we must be mindful of the risks of higher oil
prices and persisting global imbalances. We all share responsibility for managing
these challenges.
The United States has made clear that we will reduce our fiscal deficit Although
recovery from the hurricane will expand spending in the near term, we remain on
track to cut the deficit in half by FY 2009.
But one country's efforts are not enough. Fiscal consolidation in the United States
without action elsewhere will yield slower global growth, higher unemployment, and
less progress on poverty reduction. Slower growth in the United States is clearly not
the answer, and would be in no one's best interest. As I have said, addressing
global imbalances is a shared responsibility. We w
me the actions taken by
China, and also by Malaysia, to adopt a more flexible exchange rate. This is a step
forward, but greater flexibility is still needed. And throughout East Asia efforts need
to be undertaken to spur the growth of domestic demand and reduce reliance on
exports. In addition, structural reforms in labor and product markets are essential in
Europe to boost domestic demand and growth, as are reforms to enhance
productivity growth and the flow of resources among sectors in Japan. In other
parts of Asia, financial and corporate reforms are needed to put growth on a solid
path.
A vibrant global economy is in all of our interests. Making the benefits of growth
available to each and every one of our countries depends on free trade. Tariffs,
subsidies and trade barriers are unnecessary impediments to growth, President
Bush laid out a very clear message on trade last week at the United Nations. A
successful conclusion of the Doha Round will bring benefits for every country ~ and
particularly for the developing world. Trade in services in particular can greatly
benefit developing countries, providing knowledge and infrastructure to facilitate
economic growth and create jobs. This is especially true in the case of financial
services. An efficient, well-regulated financial sector is a key element for achieving
economic growth and stability in developing countries.
The IMF and World Bank remain central to the task of promoting growth and
stability in the world economy. We want these institutions to be as effective as
possible. Together we have made progress on reform. But the United States
believes that there is more to accomplish.

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In the IMF, ongoing evolution is needed to keep the institution relevant and effective
for all its members in the modern global economy. In our view, this means an IMF
that is tightly focused on its core mission of promoting international financial stability
and balance of payments adjustment. The IMF must set high standards for strong
policies, both in its lending programs and through surveillance It must not shy away
from tough judgments - including on exchange rate regimes. The IMF also has an
important, but limited, role to play in promoting strong policies in low-income
countries whether through the new Policy Support Instrument, technical assistance,
or lendmg In cases of actual balance of payments need. For all members, a modern
governance structure is vital to preserve the IMF's centrality. It is time to begin the
process of making both quotas and representation reflect the realities of today's
world economy.
In the World Bank, we have seen improvements over the past few years as the
Bank has strengthened its focus on measurable results at the project and country
level. Now the Bank needs to adopt the results approach for the institution as a
whole, including evaluating staff on project results rather than volume. The fight
against corruption - both in recipient countries and within the institution - must
continue unabated. The Bank, too, should stay focused on its core mission reducing poverty through private-sector-Ied economic growth. The Bank needs to
identify an appropriate role in middle-income countries, whose success means they
no longer need the Bank to finance their development needs. This will involve
thinking through what the Bank can offer these countries in ways that both fill unmet
needs and preserve the Bank's focus on its core mission.
To make growth achievable and future aid more likely to bolster success, we simply
must confront unsustainable debt burdens in the poorest countries. We believe it is
essential now proceed with implementation of the proposal, endorsed by the G-8
leaders in Gleneagles, to provide full debt cancellation for Heavily Indebted Poor
Countries (HIPCs), and conclusively end the lend-and-forgive approach to
development assistance. The G-8 countries have collectively pledged to ensure that
debt cancellation will not diminish the resources of our institutions, and I personally
repeat that pledge today. I call on each of you to join this effort and make debt relief
a reality.
I look forward to advancing our shared agenda. Thank you.

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PRESS ROOM
September 24,2005
JS-2947
Statement by U.S. Secretary of the Treasury John W. Snow
International Monetary and
Financial Committee Meeting

I welcome the opportunity to meet with colleagues today to discuss world economic
prospects and the role of the IMF in today's global economy. We would like to take
this opportunity to express our great appreciation for the generous response of the
international community to Hurricane Katrina and its aftermath.
Since our last meeting, the global economy has continued its strong expansion, and
the outlook for continued solid growth remains favorable. Nonetheless, there are
risks that require attention. The disparities in industrial country growth rates are not
closing and in some cases have widened, adding to the challenge of unwinding
global imbalances. Rising energy costs also pose challenges. There is work ahead
for all of us to strengthen growth.
Despite the challenges of recovery from Hurricane Katrina, economic growth in the
United States remains solid, with core inflation pressures under control. The
significant progress made on fiscal consolidation - shaving almost a full percentage
point of GDP from the budget deficit over the past year - puts us in a position of
strength from which to absorb the impact of the hurricane, and we remain well on
track to meet our 2003 commitment to halve the fiscal deficit by 2009.
Our collective goal should be to unwind global imbalances while maintaining
financial stability and a healthy sustained pace of global growth. Exchange rate
flexibility has an important role to play in this process, and we are encouraged by
initial steps by China and Malaysia to adopt more flexible exchange rates, though
greater flexibility is still needed. Also necessary for smooth global adjustment is a
shift from export-led to domestic demand-led growth. In Europe, this means
structural reform in labor and product markets, while in Asia the focus should be on
financial and corporate sector reform. Further trade liberalization being advanced in
the Doha round -- including greater opening of financial services sectors and
reduction of trade-distorting policies - can provide impetus to growth-enhancing
reforms. Further fiscal consolidation is also important, and U.S. efforts are
proceeding apace. To ensure that global growth is sustained, growth-enhancing
reforms abroad should proceed vigorously alongside efforts to increase savings in
the United States.
Oil prices remain a significant risk to global growth. Increased investment to bring
forth additional supply and reduction of subsidies that artificially encourage energy
use are both needed to help ease tight global supply conditions.
International trade has an important role to play in improving economic
competitiveness and spurring growth. As President Bush underscored last week,
the United States places a very high priority on an ambitiOUS outcome from the
Doha Development Round, reducing barriers to trade in goods, including
agriculture, and substantial progress in liberalizing services, including financial
services. The benefits of liberalizing trade in goods are well known. World Bank
research shows that liberalization in services can multiply these gains, and that
countries with fully open financial services sectors on average grow faster than
other countries. We urge countries to use the run-up to the WTO Ministerial
meeting in December to make substantial progress in these areas.

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Strategic Directions of the IMF
It is appropriate that last year's 60 th anniversary of the Bretton Woods Institutions
has generated serious reflection on the purposes and functions of the IMF. Periodic
stock-taking is crucial to ensure that the IMF adapts effectively to address the
needs and challenges of a rapidly evolving international monetary system. Rather
than responding to global developments by expanding its mandate and making its
efforts more diffuse, we believe the IMF needs to adapt and refine its core mission
of promoting international financial stability and balance of payments adjustment.
The Fund has a unique role in identifying the macroeconomic and financial policies
that will allow each member to attain the benefits of globalization while successfully
managing the attendant risks.

Firm surveillance over exchange rates and related macroeconomic policies is the
cornerstone of the IMF's crisis prevention function, and we see a number of areas
that merit strengthening.
•

First, given that lack of exchange rate flexibility in large economies and
protracted misalignment can contribute to global imbalances and increase
external vulnerabilities in individual countries, we believe the IMF needs to
exercise Significantly greater ambition in its surveillance of exchange rates.
• Second, greater attention is needed to public debt dynamics, which are
increasingly a major source of crisis vulnerability in emerging markets,
despite high reserve accumulation. The time to reduce vulnerabilities is
now, while the external environment remains relatively benign.
• Third, the IMF has a critical role to play in understanding the interplay of
financial flows, macroeconomic policies and financial sector health. We
welcome efforts to better integrate financial expertise into surveillance and
to enhance monitoring of financial stability issues through assessment of
compliance with financial standards and codes.
• Fourth, the IMF's long-term commitment to assessing the observance of
FATF anti-money laundering and counter terrorist financing standards in its
financial sector surveillance work, and to coordinated, prioritized, and
effective technical assistance, is key to protect the integrity of the
international financial system.
• Finally, increasing the candor of surveillance is an on-going challenge which
deserves continued effort.
An effective IMF also needs a modern governance structure that legitimately
represents its members. The IMF is a shareh~lcJer institution, and its governance
needs to evolve to reflect developments in the global economy such as the growing
weight of emerging markets - particularly emerging Asia - and monetary union in
Europe. We welcome the attention that quota reform has received in the months
since we last met. This is an important start to an effort that will require a concerted,
cooperative effort.
With IMF liquidity at an historic high, a general quota increase remains
unnecessary. In our view, members need to develop a plan for a voluntary transfer
of quota shares from some of the most overweight to the most underweight large
emerging market countries, while protecting the shares of the poorest countries. EU
integration also needs to be better reflected in the governance structure.
Addressing these issues will take time and will require leadership. For our part, the
United States is not seeking additional quota, even though our quota share is quite
small relative to our weight in global GOP. Increasing the quotas of underweight
countries alone would raise the size of the IMF and result in a share reduction for all
countries, whether merited or not; this is not an appropriate path.

Debt Relief and the IMF's Role in Low-Income Countries
We look forward to implementation of the proposal, endorsed by the G-8 leaders in
Gleneagles, to provide full debt cancellation for Heavily Indebted Poor Countries
(HIPCs), and end the lend-and-forgive approach to development assistance. The
G-8 proposal will provide significant support for countries' development efforts,
promote lasting sustainability, and improve balance of payments positions. Close
monitoring and greater use of grants will be essential to preventing. a renewed
buildup of debt. It is our hope that the G-8 proposal Will lay the baSIS for a more
productive partnership between the IFls and their low-income members.

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We look forward to the adoption of a Policy Support Instrument (PSI), which will
provide a framework for IMF policy advice and technical assistance for countries
without a balance of payments financing need. A number of countries have
indicated interest. Maintaining high-quality program standards under the PSI will be
necessary to ensure the PSI becomes an effective tool not only for borrowers, but
also for donors and markets for whom it is intended to provide a credible signal.
We welcome the stronger growth performance of many low-income countries in
recent years, as economies have benefited from a combination of improved
policies, debt relief, and a relatively benign external environment. The IMF has an
important role to play in low-income countries through the full range of its activities surveillance, technical assistance, and lending when appropriate. However, studies
of prolonged use of IMF resources, and more recent analysis of PRGF program
design, have revealed that, too often, PRGFs have not aimed squarely at achieving
fiscal or external viability, and that serial PRGFs can undermine development of
domestic policy institutions and processes. We believe the PRGF ought to be more
flexible, more directly responsive to actual balance of payments needs, and aim
more directly at achieving fiscal and debt sustainability. It is also important to
maintain a distinction between the role of the IMF in promoting macroeconomic
stability and sustainability and providing exceptional balance of payment supports
and the World Bank's role for providing longer-term project and budgetary
fmancing.
We attach a high priority to working together to ensure that the IMF remains
relevant and responsive to the needs of its members. Thank you.

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PRESS ROOM

September 25, 2005
JS-2948
U.S. Treasury Secretary John W. Snow
Development Committee Statement
This committee meets at a time of tremendous opportunity for global growth and
developing countries. It is also a time of great sadness and challenge here in the
U.S. as the forces of nature have wreaked havoc on our Gulf Coast.
Natural disasters like these are painful reminds us that not one of us is immune
from the awesome forces of nature. We would like to take this opportunity to
express our sincere appreciation to those around the world who have offered
support for the victims of this terrible tragedy.
The U.S. Federal Government is committed to helping the region re-build, to
helping people re-build their lives. And we want to do so in a way that is fiscally
responsible. The relief and reconstruction will be costly, but the Bush Administration
is not, and will not stray from our course of federal deficit reduction. With continued
economic strength - which we will enjoy with the continuance of the President's
good economic policies - we'll be able to help our neighbors and continue to reduce
our deficit.
Katrina and, now, Rita, have reminded us that the international community must
continue to provide the assistance needed by others subject to natural disasters
including the victims of last December's devastating tsunami. It also reminds us that
for hundreds of millions throughout the world, the effort to find a secure dwelling
and a healthy meal remains a life-long struggle.

Rea!i9!1S forQptimisllJ.
Though the challenges are great, on the broad macroeconomic front there is good
reason to be optimistic. While oil prices remain a significant risk, the forecast for
global growth remains favorable. Economic growth among developed countries is
critical for fighting poverty in developing countries. Not only does it generate a "pull
factor" in terms of increased imports, but it also generates additional revenues for
development assistance. To put this in stark terms, if the rest of the OECD had
grown as fast as the United States over the last decade, an additional $80 billion
would have been generated for official aid (holding the 1995 ratio of official
development assistance to GNP constant).
Growth among developing countries also remains favorable. In fact, if current
growth projections hold, the worldwide poverty headcount index will fall from 28
percent in 1990 to 10 percent in 2015, far exceeding the goal set out in the 2000
Millennium Declaration. With the exception of Sub-Saharan Africa, which has been
devastated by the HIV/AIDS pandemic, indicators of social progress are improving
at unprecedented rates. For example, since 1980 developing countries have
consistently reduced the mortality rate of children under five, and record numbers of
countries have reached the point of universal primary education.
Recognizing that private sector-led growth is a necessary condition for poverty
reduction, the most recent Doing Business report issued by the World Bank
indicates that, while much more should be done, many governments continue to
take steps to remove impediments to investment. Last year, 99 countries enacted
185 reforms to improve their business climates, ranging from strengthening
property rights to reducing the cost of exporting and importing goods and services.
There are success stories on every continent, from India in Asia, to Brazil in Latin
America, to Rwanda in Africa.
Donor Response

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The donor countries have responded with large increases in development
assistance, new initiatives to fight infectious diseases, and renewed efforts to
increase the efficiency and effectiveness of foreign aid. For our part, the United
States government has launched a number of new programs, such as the
Millennium Challenge Account, the President's Emergency Plan for AIDS Relief, the
recently-announced Initiative on Malaria, and the Initiative to End Hunger in Africa.
In terms of resources, the United States has nearly doubled Official Development
Assistance (ODA) since 2000, from $10 billion to $19 billion in 2004 . Most recently ,
at the G8 Gleneagles Summit, we proposed to double aid to Sub-Saharan Africa
between 2004 and 2010.
As we stated in Monterrey in 2002, the United States will continue to increase aid to
those high performing countries that can demonstrate how our assistance will result
in greater growth and poverty reduction. At the same time, the World Bank and
other multilateral development institutions must deepen and broaden their
continuing efforts to measure the concrete results of the assistance they provide so
that resources can be applied most effectively.
But the most significant action that we can take is to maintain a healthy pace for
global growth . U.S. fiscal consolidation must continue to be met with much more
aggressive policies than to-date to stimulate domestic demand-led growth in
Europe and Japan , as well as increased exchange rate flexibility in major emerging
market countries. In the aid to gross national income ratio , more attention should be
focused on ways to increase the denominator in a sustained manner.
Africa .Ac:<tiQn Plan
While there are many reasons to be optimistic, to-date Africa has not shared the
benefits of increased growth and poverty reduction to the same degree as the rest
of the globe. Africa is the one continent which will likely not achieve any of the
MDGs. While much has been done over the years to address the rising poverty
rates in Africa, in Gleneagles, a much more aggressive course was chosen . All
leaders made substantial new commitments to support the fight against poverty,
hunger and disease in Africa . The G8 also agreed on measures to improve
coordination of additional donor assistance. The Bank's Africa Action Plan (AAP)
responds to this charge. It defines concrete, monitorable actions to ensure that the
World Bank Group and the development community focus on achieving measurable
outcomes at the country, sector, and project levels .
The MP is to be commended for its results-driven approach. We particularly
support the focus on economic growth through increased productivity as the sine
qua non for poverty reduction, and the importance placed on infrastructure
development, financial sector reform and improvements in governance . As well , the
Plan reflects consideration of the macroeconomic effects of aid . Given the large
increases in official assistance pledged for Africa , we urge the Bank to continue to
coordinate closely with the IMF on the question of absorptive capacity and the
macroeconomic effects of additional flows .

Agreement on 100% debt stock cancellation of obligations owed by countries
eligible for the HIPC Initiative to the World Bank (IDA) , African Development Bank
(AfDF), and International Monetary Fund represents both an extraordinary
opportunity, as well as an enormous challenge. For some forty years , many of the
poorest countries have been getting loans for projects to support health , education,
and other basic development needs . The result is that for many important projects
without near-term financial returns, such as building schools, these poor countries
were burdened with additional debt that needs to be repaid by future generations.
With the crushing debt burden lifted, countries can focus their efforts on generating
economiC growth by investing in infrastructure to help move goods from producers
to purchasers, and by investing in their people.
And while there are positive signs in the global economic outlook, many
governments continue to construct roadblocks to growth. While the Doing Business
report shows that many countries took steps last year to improve the business
climate, another 20 countries made it more difficult. It is particularly worrisome that
in Africa, where entrepreneurs face more obstacles than in any other region , the
reform effort has been the weakest. This year's report on governance issued by the

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World Bank Institute is also troubling , for it pOints to deterioration in a number of
countries in key areas such as regulatory quality, rule of law, and control of
corruption. Moreover, World Bank projects aimed at improving public financial
management have had very limited success and there is increasing recognition of
the fiduciary risks associated with programmatic lending and budget support
programs.
The debt relief agreement will, in part, address these concerns . Additional donor
contributions , to offset foregone debt repayments, will be allocated to all IDA-only
countries based upon the existing IDA and African Development Fund
performance-based allocation systems where governance is a significant factor. But
more must be done to fight the corrosive impacts of corruption . Though the
harmonization objectives of the Paris Declaration are well intended, we must fight
the urge to use country systems for procurement that do not meet existing World
Bank policy and documentation requirements, which have set a high international
standard that must be retained. And the Bank and the Fund should increase their
support for the Public Expenditure and Financial Accountability program, a resultsbased approach for helping countries improve their public expenditure,
procurement, and financial accountability systems. Finally, while the IFls can do
more to fight corruption, the impact will be limited without strong leadership and
support from all the developing countries. As was agreed in Monterrey, developing
countries will take responsibility for their own economic progress through good
governance and sound policies and the rule of law.

Removing.Trade Barriers
Arguably, the greatest step our governments can take to generate increased growth
and poverty reduction is through the removal of trade barriers under the Doha
Round negotiations. The United States people currently benefit from having one of
the least restrictive trade regimes in the world. According to the World Bank's own
Global Monitoring Report, the U.S. has among the lowest overall trade restrictions
for imports from low-income countries, least developed countries , and Sub-Saharan
African countries. This not only benefits U.S. consumers but also exporting
countries, the producers who provide the goods, and the individuals and families
who see their living standards increase with new and better paying jobs.
The Doha Development Agenda (DDA) places particular emphasis on integrating
developing countries into the global economy so that they may increasingly reap
the benefits of trade liberalization . As the World Bank has shown, about threequarters of the projected income gains from global trade liberalization for
developing countries are expected to come from reducing their own barriers. For
developing countries to realize these benefits, however, they too need to reduce
their own trade barriers substantially. We therefore welcome the Bank and Fund's
support for an ambitious outcome in the DDA, particularly in the core market access
areas of agriculture , non-agricultural market access (NAMA) , and services.
Liberalization in services could deliver some of the greatest gains from the Doha
round and is an essential element to the DDA. The income gains from services
trade have been estimated to be much greater than from the liberalization of goods
alone. The World Bank estimated that if developing countries were to liberalize four
key infrastructure services they could, by 2015 , generate income gains four and a
half times greater than the gains from goods liberalization alone.
Financial sector liberalization is particularly important for economic growth and
poverty reduction , yet the quality and quantity of offers made has been extremely
disappointing. Without a change in course, we are concerned that the Doha round
could generate almost no new liberalization in trade in services -- a missed
opportunity for development and poverty reduction. Therefore all countries , but
especially developing countries which stand to benefit the most, should make WTO
commitments to provide effective market access in services, including financial
services.
The United States is committed to helping developing countries participate in
negotiations, implement commitments, and broadly benefit from trade opportunities .
To this end, we have nearly doubled our bilateral assistance Since 2000 for trade
capacity building to $920 million. Overall , we agree with and .strongly. support the
premise that Aid for Trade can best be enhanced by leverag~ng eXisting
.
mechanisms like the Integrated Framework (IF) and the IMF s Trade Integration

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Page 4 of 4
Mechanism (TIM), In this regard, we support the commitment of the Bank to provide
sustained assistance as part of its current programs for trade-related capacity
building for those members that request it as part of their development strategies,
Similarly, we believe the Bank and the Fund can work closely with other donors,
including members of the WTO, to address regional or cross-country aid for trade
needs,
As President Bush stated in his recent address to the United Nations, eliminating
trade barriers is the key to overcoming poverty in the world's poorest nations, And
so he said, "the United States is ready to eliminate all tariffs , subsidies and other
barriers to free flow of goods and services as other nations do the same." While not
all may be willing to meet this challenge , we strongly urge other members of the
Development Committee and their constituencies, whether they be from highincome, middle-income, or low-income countries , to offer significant, broad trade
liberalization measures by the Hong Kong Ministerial so the growth and
development potential of the Doha Round can be realized .
Closing
The global economic expansion remains broadly on track, with its attendant
benefits to peoples around the world, However, imbalances do exist which the
international financial institutions and their shareholders, individually and
collectively, must work to address. These imbalances include a world where
hundreds of millions still live in extremely impoverished conditions. We have joined
with fellow G8 members and many other countries in adopting additional measures
this year to assist less developed nations raise living standards, particular countries
in Sub-Saharan Africa . We encourage continued efforts in this regard, and the
effective involvement of the international financial institutions. But our efforts to
succeed will continue to be limited if the recipient countries themselves do not take
the necessary actions to improve conditions for investment and sustainable growth ,
and all of us do not take immediate steps to lay the groundwork for a successful
conclusion to the Doha Round .

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PRESS ROOM

September 25, 2005
JS-2949
Statement of Secretary John W. Snow on Cancellation of HIPC debt
I was very pleased to see that the World Bank Development Committee today
strongly endorsed the proposal for 100 percent cancellation of HIPC debt. We
expect the executive boards of the IMF and World Bank to swiftly give final approval
and move on to implementing it.
President Bush set 100 percent debt cancellation as a priority objective of
America's comprehensive plan to assist poor countries. As we developed the plan
for 100 percent debt cancellation, we knew it would be a long road to reach this
goal, but it's gratifying to see our persistence and commitment payoff. We look
forward to working with the institutions, donor countries , and, most importantly, the
countries that benefit from this plan as we try to attain the ultimate goal of raising
living standards of poor people everywhere.

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PRESS ROOM

/0 vIew or pnnt tne put- content on tnlS page, Clown/oaCi the rree A(}ol)e"<) AcroIJa(("j KeaCferrf< )

September 26, 2005
JS-2950

Statement by D. Scott Parsons, Treasury Deputy
Assistant Secretary for Critical Infrastructure
Protection and Compliance Policy,
before the
U.S. House of Representatives, Committee on
Government Reform, Subcommittee on Government
Management, Finance, and Accountability
Financial Market Preparedness for Wide-Scale
Disasters or Disruptions : A Treasury Perspective
Introduction

Chairman Platts and Ranking Member Towns, thank you for inviting me here today
to testify on the financial services sector's preparedness to handle a wide scale
disruption, I am pleased to tell you that the financial sector has made tremendous
progress to ensure its resiliency to withstand both manmade and natural disasters.
President Bush has led the development and implementation of an effective
program to defend our country's critical infrastructure. The financial services sector
plays an indispensable role in the nation's economic system, providing individuals,
businesses, and the government with credit and liquidity , short and long -term
investments, risk-transfer products, various payment systems, and depository
services, It enables people to save for their education , retirement, to purchase their
homes, and to invest in their dreams. The financial services system is essential to
America's overall economic well being,

REPORTS
•

Statemen t by D. Scott Parsons

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Introduction

Chairman Platts and Ranking Member Towns, thank you for inviting me here today to testify on the
financial services sector's preparedness to handle a wide scale disruption. I am pleased to tell you that
the financial sector has made tremendous progress to ensure its resiliency to withstand both manmade
and natural disasters. President Bush has led the development and implementation of an effective
program to defend our country's critical infrastructure. The financial services sector plays an
indispensable role in the nation's economic system, providing individuals, businesses, and the
government with credit and liquidity, short and long-term investments, risk-transfer products, various
payment systems, and depository services. It enables people to save for their education, retirement, to
purchase their homes, and to invest in their dreams. The financial services system is essential to
America's overall economic well being.
I note that we have experienced a number of events in recent years that test the resilience of the sector.
The attacks of September 11,2001, the power outage of August 14 - 15,2003, and the elevation of the
threat level for the financial sector in August 2004 have all tested the preparedness and resolve of the
sector. Most recently, Hurricane Katrina caused unprecedented devastation in multiple states. Yet the
financial system has survived each of these events, and through hard work and investment, becomes
stronger and better able to contend with such disruptions.

Organizing to Protect the Critical Financial Infrastructure
President Bush has mandated that the Federal Government work closely with the private sector to
protect the nation's critical assets and infrastructure from major disruption. A unique insight that guides
the Administration's strategy is that nearly all of the financial infrastructure is owned by the private
sector. Therefore, the success of our protective efforts depends on close cooperation between the
government and the private sector.
On December 17,2003, our President issued Homeland Security Directive 7 (HSPD-7), which
establishes a national policy for Federal departments and agencies to identify and prioritize United
States infrastructure and key resources and to protect them from terrorist attacks. HSPD-7 recognized
that various Departments and agencies have specific knowledge, expertise, and experience in working
with certain sectors. Therefore, this directive provided for Sector Specific Agencies, or lead agencies,
for given sectors. The Department of the Treasury is designated as the Sector Specific Agency for the
banking and finance sector.
Under this designation, the Treasury collaborates with appropriate private sector entities to encourage
the development of information sharing and analysis mechanisms, and to support sector-coordinating
mechanisms to: (1) identify, prioritize, and coordinate the protection of critical infrastructure and key
resources; and (2) facilitate sharing of information about physical and cyber threats, vulnerabilities,
incidents, potential protective measures, and best practices.
As the lead agency for the financial services sector, the Treasury fulfills its responsibilities under HSPD7 primarily through the encouragement and support for the development and use of public-private
partnerships. I will discuss these partnerships and other related efforts that serve to coordinate relevant
parties and provide for the sharing of information.
Secretary Snow has a strong commitment to ensuring the financial system continues to serve all
Americans. He has tasked the Treasury Department's Office of Critical Infrastructure Protection and

Compliance Policy to be responsible for developing and executing policies affecting the physical and
cyber security of the United States financial system. The majority of these efforts require close
cooperation and partnership with the public and private sector. In carrying out these efforts, the
Treasury continues to:
•
•
•
•

Work with government agencies, private sector firms, national and regional organizations to
have each establish a single points of contact for critical financial infrastructure issues;
Promote strong relationships between financial institutions and the State and local
governments where their operations are located;
Inform the private and public sectors about the available resources that protect the financial
infrastructure; and
Support the availability of accurate and timely information about potential threats on a
national and regional level.

National Partnerships
Following the attacks of September 11, 2001, the Department reacted quickly to organize the financial
services sector. First, it initiated an intensive evaluation of the threats against the sector, and then
analyzed efforts to address any potential vulnerabilities. To more effectively focus efforts and resources
on these goals, the Treasury Department established a single point of contact within relevant public and
private entities - the Financial Services Sector Coordinating Council for the private sector and the
Financial and Banking Information Infrastructure Committee for the public sector group. I understand
that you will be receiving testimony later from the head of that private sector council.

Financial and Banking Information Infrastructure Committee
To coordinate Federal efforts and to ensure the sharing of vital information, and pursuant to an Order by
the President l , the Treasury Department chairs the Financial and Banking Information Infrastructure
Committee (FBIIC), and held its initial meeting on January 10,2002. The President's Working Group
on Financial Markets sponsors the FBIIC and oversees its role of coordinating the efforts of Federal
financial regulators on critical financial infrastructure issues. The FBIIC, composed of Federal and State
financial regulators, coordinates efforts to ensure the resilience of the financial system in the face of
major disruptions. The Treasury Assistant Secretary for Financial Institutions chairs the FBIIC, which
includes experienced representatives from almost 20 organizations that have regulatory authority over
different segments of the financial services sector. 2 I have had the privilege and responsibility to serve
as Acting Chair since January 2005.
The FBIIC has made significant achievements through the collaboration of its members. These
accomplishments include: analyzing the critical infrastructure assets; the analysis of the financial
services sector's dependencies on the energy, transportation, telecommunications, and information
technology sectors; and the sharing of critical information among Federal, State, and local authorities.
Furthermore, the FBIIC has published reports with the Financial Services Sector Coordinating Council.
These publications include "Lessons Learned by Consumers, Financial Sector Firms, and Government
E.O. 13231, October 16,2001
Commodities Futures Trading Commission (CFTC), Conference of State Bank Supervisors (CSBS), Farm Credit
Administration (FCA), Federal Deposit Insurance Corporation (FDIC), Federal Housing Finance Board (FHFB), Federal
Reserve Bank of New York (FRS NY), Federal Reserve Board (FRS), , National Association ofinsurance Commissioners
(NAIC), National Association of State Credit Union Supervisors (NASCUS), National Credit Union Administration
(NCUA), North American Securities Administrators Association (NASAA), Office of the Comptroller of the Currency
(OCC), Office of Federal Housing Enterprise Oversight (OFHEO), Office of Thrift Supervision (OTS), Securities and
Exchange Commission (SEC), and Securities Investor Protection Corporation (SIPe).

Agencies during the Recent Rise of Phishing Attacks" and "Impact of the Recent Power Blackout and
Hurricane Isabel on the Financial Services Sector.',3 For each publication, individuals from the FBIIC
and Financial Services Sector Coordinating Council solicited and collected written contributions from
their member organizations.
The FBIIC agencies have done much for the recovery from Hurricane Katrina, and I have been
privileged to work with so many selfless individuals in the Federal, State, local, and private sectors.
During the events surrounding Katrina, the FBIIC met frequently, often several times a day, in order to
share and exchange information to help the recovery effort by the financial sector. Although much work
remains, I'm pleased to report that every financial institution in the impacted areas is now in an
operating capacity.

Financial Services Sector Coordinating Council
The Department encouraged the creation of a corresponding entity to the FBIIC within the private
sector. This organization, the Financial Services Sector Coordinating Council (FSSCC), develops and
coordinates major policy issues for the private sector regarding the protection of the critical financial
infrastructure. The FSSCC was inaugurated on June 19, 2002 in the Cash Room of the Treasury
Building.
The FSSCC fosters and facilitates the coordination of financial services sector-wide voluntary initiatives
to improve critical infrastructure protection and homeland security. The Department designates the
chair of the FSSCC, whose membership consists of financial trade associations and organizations. 4 The
FSSCC member trade associations represent the majority of the financial services sector.
The FSSCC is vitally important to our efforts to coordinate across the financial sector. We are fortunate
that we have Don Donahue as the financial sector coordinator and chair of the FSSCC.
The members of the FBIIC and FSSCC meet together several times a year to share information and
discuss progress on various initiatives and emerging concerns. These meetings give representatives
from the public and private sector an opportunity to inform each other of their respective projects and
successes. For example, during the March 2005 meeting, members of the FBIIC and FSSCC discussed
the Department of Homeland Security's National Infrastructure Protection Plan, as well as the FBIIC
and FSSCC plans for 2005.

Regional Partnerships
One of the insights on preparedness that we recognize is that any disruption will first and foremost
require a rapid local or regional response. After establishing the national partnerships, the Treasury
Department turned its attention to the support of regional partnerships. Because the financial
community in New York City already had ties to the New York City Office of Emergency Management,
the Treasury Department turned its attention to Chicago, Illinois. Chicago's financial services industry
is among the most diverse in the United States, and encompasses futures and securities exchanges, large
and small banks, futures and securities clearinghouses, and check clearing and cash operations.
These publications are available at http://www.treas.gov/offices/domestic-finance/financial-institution/cip/.
America's Community Bankers, American Bankers Association, American Council of Life Insurers, American Insurance
Association, American Society for Industrial Security (ASIS) International, Bank Administration Institute, Bond Markct
Association, ChicagoFIRST, Chicago Mercantile Exchange, Clearing House, Consumer Bankers Association, Credit Union
National Association, Depository Trust & Clearing Corporation (DTCC), Fannie Mae, Financial Services Information
Sharing and Analysis Center (FS-ISAC), The Financial Services Roundtable/BITS, Futures Industry ASSOCiatIOn,
Independent Community Bankers of America, Investment Company Institute, Managed Funds AssoclatlOn, NASDAQ Stock
Market., National Association of Federal Credit Unions, National Association of Securities Dealers (NASD), NACHA The Electronic Payments Association, Options Clearing Corporation, Securities Industry Association (SIA), Securities
Industry Automation Corporation (SIAC), and VISA USA Inc.
3

Beginning in the summer of 2002, the Treasury Department met with and assisted financial institutions
in Chicago that had an interest in coordinating homeland security efforts for downtown businesses.
In early 2003, several Chicago financial firms came together to discuss joining forces to address their
common business continuity concerns. Their efforts produced a new kind of organization, named
ChicagoFIRST, devoted to building and maintaining relationships between the financial community and
the city, State, and Federal government, especially with law enforcement and emergency response
officials. ChicagoFIRST's unique membership consists of financial institutions with a variety of
charters and licenses, including national banks, insurance companies, securities and futures firms,
securities and futures exchanges, and clearing organizations s. ChicagoFIRST fosters relationships with
the public sector, trade associations, and other entities through periodic meetings with its "Strategic
,,6
Partners.
The Department of the Treasury has worked closely with ChicagoFIRST to improve its effectiveness as
a regional coalition. In March 2003, the Treasury Department asked the City of Chicago to provide
ChicagoFIRST a seat at the City's Joint Operations Center, which the City provided a few months later.
In August 2003, the Treasury Department, the FSSCC, and ChicagoFIRST members participated in a
seminar for the City of Chicago on the criticality of the Chicago financial community. In July 2004, the
Treasury Department sponsored in part an emergency response exercise for Chicago's financial
community and Federal, State, and local government officials. This exercise tested the assumptions and
emergency response plans of Chicago's financial community, the City of Chicago, the State of Illinois
and the Federal Government. In December 2004, the Treasury Department, in conjunction with BITS
and other parties, published a report on the ChicagoFIRST as a model for regional coalitions, entitled
Improving Business Continuity in the Financial Services Sector: A Modelfor Starting Regional
7
Coalitions.
There have been preliminary discussions on forming new coalitions in Miami/South Florida, the San
Francisco Bay Area, and Tampa Bay. We will continue to work encourage other cities and regions to
embrace this important concept. We believe that regional coalitions such as ChicagoFIRST are essential
to protecting and strengthening the financial services sector.
Outreach
With the primary support of the Federal Deposit Insurance Corporation, the FBIIC and the FSSCC have
held a series of conferences in cities across the country, entitled "Protecting the Financial Sector: A
Public and Private Partnership." The first conference was held in May 2003 in Chicago. In January
2005, the 29th and last conference in this series took place in New York City. These conferences, which
reached over 4,000 individuals in the financial services industry, highlighted the importance of publicprivate cooperation to minimize the effect of manmade and natural events on the financial sector.

5 ABN/AMRO/LaSalle Bank; Allstate; Archipelago; Bank of America; Bank One; Chicago Board of Trade; Chicago Board
Options Exchange; Chicago Federal Home Loan Bank; Chicago Mercantile Exchange; Chicago Stock Exchange; Harris
Bank; Mesirow Financial; Mizuho Securities USA Inc; Northern Trust Bank; The Options Clearing Corporation; UBS; and
William Blair & Company.

ChicagoFIRST's Strategic Partners include the City of Chicago, thc U.S. Department of the Treasury, the Department of
Homeland Security, BITS - the Financial Services Roundtable, the Securities and Exchange Commission, the Commodity
Futures Trading Commission, the Federal Deposit Insurance Corporation, the Illinois Commissioner of Banks and Real
Estate, the Federal Reserve Bank of Chicago, the Board of Govemors of the Federal Reserve System, the Office of the
Comptroller of the Currency, U.S. Secret Service, the Federal Bureau of Investigation, the Financial Services Sector
Coordinating Council, and the Futures Industry Association.
6

This report is available at http://www.treas.gov/offices/domestic-finance/financial-insti tution/cip/.

The conferences brought together public officials and experts from the private sectors who, in various
ways, protect the nation's critical financial infrastructure. These individuals included United States
Secret Service Special Agents, officials from the Departments of the Treasury and Homeland Security,
representatives of the FBIIC and FSSCC, and members of ChicagoFIRST. The speakers at the
conferences stressed the importance of joining or forming a public-private partnership to ensure the
continued operation of the region's financial services sector in the face of adverse circumstances. This
type of training, I believe, assists and has positively helped financial services professionals in recovering
from incidents like Katrina.
Financial Services Information Sharing and Analysis Center
In 1999, with the encouragement of the Department, several leading financial institutions formed the
Financial Services Information Sharing and Analysis Center (FS-ISAC) to share information about
physical and cyber threats to the financial services sector. The FS-ISAC analysts gather information
from financial services providers, commercial firms, Federal, State and local government agencies, law
enforcement and other resources for secure dissemination.
The Department of the Treasury has long supported the FS-ISAC in its efforts to disseminate important
information to the entire financial services sector. In addition to advising the FS-ISAC board,
Department officials have worked closely with the organization and publicly supported its efforts. For
example, in September 2004, the Secretary of the Treasury held a meeting with FS-ISAC members to
commend their commitment to financial services sector resilience and their involvement in the publicprivate partnership.
In 2003, the Department commissioned an independent study of the FS-ISAC to determine its value to
the financial services sector. The study found that members of the FS-ISAC benefited from its services,
but that the former structure of the FS-ISAC only served a small portion of the financial services sector.
In response to this conclusion, the Department then acquired $2 million in services from the FS-ISAC,
with the effect of thereby making the Next Generation FS-ISAC a reality. By December 2004, all five
Next Generation projects were completed: 1) a metrics dashboard to display key statistics related to
value, membership, and alert volume; 2) alert dissemination confirmation; 3) a cyber security baseline;
4) secure online chat; and 5) the ability to process commercial security feeds. The Next Generation
project has improved the FS-ISAC's ability to share threat warnings with the financial services sector.
National Communication Systems Programs
The Department of Homeland Security's National Communications System (NCS) administers a
number of telecommunication programs in which the private sector participates. These programs
include the Government Emergency Telecommunications Service (GETS), the Wireless Priority Service
(WPS), and the Telecommunications Service Priority (TSP). The GETS program allows participants to
receive priority access to the public telephone network if there is heavy traffic on the system. The WPS
grants priority service to those calling from a cellular telephone. The TSP program grants participants
priority restoration for very important telecommunications lines.
Through the sponsorship of the Department, critically important financial services sector institutions are
eligible to participate in this program. The FBIIC Federal financial regulators consider the applications
of the financial institutions and determine which are eligible for the programs. These programs have
been successfully promoted through numerous FBIIC and FSSCC initiatives.
From Preparation to Action
The Department takes its responsibility to ensure and enhance the resilience of the financial services
sector very seriously and realizes that it can only be done through cooperation between the government

and the private sector. Since September 11, 2001, the Department has pursued an aggressive agenda
working with the public and private sectors to prevent or diminish major disruptions to the financial
sector in the event of a natural or manmade disaster. The Department has worked with key institutions,
in participation with State and local officials, to ensure their business continuity plans are sound and
effective.

Conclusion
We need look only to devastation caused by Hurricane Katrina to remind us of the need to prepare for
large scale disasters. Our efforts to minimize the impact of crises, as they may occur in the future, are
grounded in the President's goals and vision for the Treasury Department- a vision that is based on a
shared commitment by the Federal government, the financial services sector, and State and local
government, to prevent incidents from occurring where possible, and a vision that emphasizes
preparation for events, so as to minimize their extent, and speed recovery. I am constantly reminded of
what President Lincoln told us all more than 140 years ago: "Leave nothing for tomorrow which can be
done today." Those words continue to guide us all as we face incidents that challenge our age, and the
21 sl century.
Thank you.
-30-

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U·~-'-.'
.;.~

PRESS ROOM

w,-~

September 27,2005
js-2951

Statement of
Under Secretary of the Treasury for International Affairs Timothy Adams
House Committee on Financial Services
Subcommittee on Domestic and International Monetary Policy, Trade and
Technology
Thank you Chairman Pryce, Vice Chairman Biggert, Ranking Member Maloney,
and members of the Subcommittee. I am very pleased to be here today to talk
about key elements of the Bush Administration's international development agenda,
including the historic G8 debt relief initiative and the recent replenishment of the
International Development Association.
Before getting into the details, I would like to put the debt relief proposal and the
IDA 14 replenishment agreement into perspective. Since the beginning of President
Bush's time in office, he has pursued an aggressive agenda on development This
agenda is comprehensive and contains key themes, such as a commitment to
increase aid, but only with a clear purpose and in countries where it could be most
effectively used to stimulate growth and reduce poverty. The agenda also
recognizes that the single most important factor to lift vast numbers of people out of
poverty is increased trade.

President's Vision for Development
The President has charted a new, exciting course for international development
His groundbreaking approach, which gained international consensus in Monterrey
in 2002 by developing and developed countries alike, focuses on results achieved,
not on resources spent It recognizes that developing countries must take primary
responsibility for their development by encouraging the sources that produce
wealth: economic freedom, political liberty, the rule of law and human rights.
Developed countries' assistance plays an important role, particularly in the fight
against hunger and disease and in reinforcing political and economic reform. The
vision affirms private sector activity as the primary engine of poverty-reducing
growth, and accordingly supports reforms and policies that promote trade and
investment, which provide the vast majority of finanCing for development
To realize this vision, President Bush has delivered concrete results. To fight the
scourge of disease, he established a $15 billion Emergency Plan for AIDS Relief in
2003 to treat 2 million sufferers of the disease, prevent 7 million new infections, and
provide care for 10 million affected individuals, including orphans. He has pledged
$1.2 billion over five years to help eliminate malaria as a major killer of children in
Africa, seeking to reach more than 175 million people in at least 15 countries and
cut mortality from the disease in half. He has launched an initiative to address
Humanitarian Emergencies in Africa and Break the Cycle of Famine. He
established the Millennium Challenge Account to deliver assistance to those
countries that are helping themselves - by investing in the health and education
needs of their people, fighting corruption, and demonstrating a commitment to
economic freedom. Finally, the President has been a champion of opening markets
abroad to ensure that American farmers, workers, and business can compete on a
level playing field. Through his work and vision, the U.S. has taken a leadership
role under the multilateral WTO Doha round negotiations, has passed numerous
bilateral and multilateral free trade agreements, and secured the passage of trade
promotion authority. An ambitious and successful Doha trade round will spread
economic gains - and the developing world stands to gain the most. Historically,
developing nations that open themselves up to trade grow at several times the rate
of other developing countries. The elimination of barriers to trade and services,
including financial services, could lift hundreds of millions of people out of poverty
over the next fifteen years.

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Debt Relief for the Poorest Countries - Time for Bold Action
Building upon this strong track record of achievements, the Administration launched
an ambitious proposal for 100 percent debt cancellation to eligible Heavily Indebted
Poor Countries (HIPCs).
For many of the poorest countries, there has been a history of repeated lend and
forgive cycles. The HIPCs alone have accounted for nearly 250 debt relief
treatments in the Paris Club over the last 25 years. This means that many
countries have been gettmg debt reschedulings, or partial debt reduction, every two
or three years. At the same time, the international financial institutions (IFls) have
been increasing their lending volumes to fill up any space created by the temporary
debt treatments. Between 1989 and 2002, debt relief to HIPCs totaled $40 billion
while new loans totaled more than twice that - $93 billion.
Shifting to grants going forward helps to break this cycle - and this Administration
has led a very successful initiative in the IFls to do this over the last few years.
However, there also needs to be a correction of history, a cleaning of the balance
sheets so that future generations can work to achieve higher economic growth and
poverty alleviation without the heavy burden of unsustainable debt.
To achieve this objective, the President publicly proposed last year a complete
write-off of all official debt to the poorest countries. We were the first country to do
so. This included as much as $60 billion in HIPC countries' debt owed to the IDA,
the AfDF and the IMF.
I want to stress that many Members of Congress, including Members sitting in this
subcomrrittee, along with NGOs, have been extremely supportive and helpful in
this campaign from the start. Thus, the U.S. has presented a very united front to
the world on this issue, and that has been critical in convincing other countries to
join us.
The Historic Agreement
In early June, President Bush and Prime Minister Blair reached agreement on a
comprehensive debt relief package, including both the U.S. proposal for 100
percent debt cancellation of debt obligations owed to the World Bank, the AfDF and
the IMF for eligible HIPC countries and a commitment to maintain the financial
strength of the IFls. This agreement represented a critical breakthrough in the fight
to cancel the debt for the poorest countries. This led to an agreement on June 11 th
by G8 Finance Ministers, endorsed by Heads of State at the Gleneagles Summit in
July, on a debt relief plan that largely reflects the one we began to discuss one year
ago. As Treasury Secretary John Snow has stated, "President Bush's commitment
to lift the crushing debt burden on the world's poorest countries has been achieved.
This is an achievement of historic proportions."

The four key elements of the G8 proposal include:
1.

100 percent IDA, AfDF, and IMF Debt Stock Relief. For International
Development Association (IDA) and African Development Fund (AfDF) debt,
100 percent stock cancellation for eligible HIPC countries will be delivered
by offsetting gross assistance flows by the amount forgiven. IMF debt relief
for eligible countries will be financed from existing IMF resources, not
through gold sales.
Additional Donor Contributions to IDA and AfDF. Donors will provide
additional contributions, based on agreed burden shares, to offset foregone
debt repayments (principal and interest) to IDA and AfDF. Additional funds
will be made available immediately to cover the IDA-14 and AfDF-10 period
and through regular replenishments for subsequent periods. For IDA-14
and AfDF-1 0, the U.S. will fulfill this commitment to the MOBs by utilizing
flexibility in the timing of planned annual payments and will not require
appropriations in addition to requests for those payments.
Focus on Strong Performance. The additional donor contributions will be
allocated to all IDA-only countries based upon the existing IDA and AfDF
performance-based allocation systems. This approach ensures equity
between HIPCs and non-HIPCs - since all countries receive additional
assistance commensurate with performance - and creates an incentive for

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countries to pursue responsible, pro-growth policies. Based upon existing
performance levels, we estimate that roughly half of the additional
contributions will be allocated to non-HIPC countries.
Utilize grant financing from IDA and AfDF to ensure that countries do
not immediately re-accumulate unsustainable external debts. IDA and
AfDF donors will develop a forward-looking debt sustainability framework
that will determine grant allocations for poor countries. This framework will
help ease HIPCs into new borrowing over time based upon their capacity to
repay.

Under the plan, 18 HIPC countries will be immediately eligible for IDA, AfDF, and
IMF debt forgiveness: Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana,
Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda,
Senegal, Tanzania, Uganda, and Zambia. The remaining HIPCs will also become
eligible as they reach their HIPC Completion Point.
The total amount forgiven for the 18 HIPC completion point countries will be $40
billion in nominal terms, of which IDA accounts for $30 billion, the AfDF $6 billion
and the IMF $4 billion. The full application of the cancellation of existing debt
repayments could amount to as much as $60 billion as countries complete the
process.
At the World Bank and IMF Annual Meetings this past weekend, shareholders
strongly endorsed this important initiative. While several technical details, such as
the dates for implementation and the cut-off for eligibility, will need to be resolved in
the coming weeks, the broad-based support will allow implementation to move
forward as envisioned.

Improving Development Effectiveness -IDA-14 Replenishment
Debt relief alone, however, will not be enough to ensure that highly indebted
countries jump start growth and meet their development objectives. We must also
ensure that the aid architecture effectively helps countries accomplish the goal of
lasting poverty reduction through sustainable economic growth. Shaping the
financial, policy, and program parameters of the MOB concessional assistance
windows is one of the most effective ways to accomplish this. The achievements of
the IDA-14 agreement resulted directly from strong U.S. leadership. This is also the
case for the recent replenishments for the African Development Fund and the Asian
Development Fund for which authorizations are currently pending before
Congress. By focusing consistently - even stubbornly - on a few basic principles
since the first days of the Bush Administration, the U.S. has advanced the reform
agenda to new frontiers on results management, grants, accountability, and
transparency. IDA is one of the most effective delivery mechanisms for assistance
to poor countries, and we are encouraged by the strides IDA and the other MOBs
have made in recent years to improve their effectiveness.
From a financial perspective, the U.S. pledged to IDA-14 a total of $2.85 billion over
three years, representing a $100 million annual increase over the IDA-13 base
level. While the U.S. share declined from 20 percent in IDA-13 to 13 percent in
IDA-14, the U.S. remains the largest cumUlative donor to IDA at 22 percent of total
contributions.
The focus on measurable results builds on the progress made in IDA-B.
Specifically, IDA-14 established a two-tiered system to monitor results: (1) country
outcomes, and (2) IDA's contribution to country outcomes. Tier one captures how
IDA is helping countries meet their development objectives on the basis of 14
country outcome indicators, such as under-5 child mortality, time required to start a
business, and access to roads, compared to only three under IDA-13. Tier two
measures institutional effectiveness to ensure that IDA country strategies are tied to
specific results, and that project monitoring and portfolio quality are maintained.
Not only wi111DA-14 focus on achieving results, but it will also deliver significantly
more assistance to countries that are well governed and enact pro-growth policies.
This means that the additional money IDA receives from the G8 debt deal will be
allocated according to IDA's performance allocation system, which has one of the
most selective systems of any donor in the world, thereby rewarding the strong
performers. The Bank's strategy for FY06-08 envisions providing the top 10
percent of country performers with nearly seven times as much assistance on a per

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Page 4 of 5
capita basis as the lowest 10 percent.
In addition to an emphasis on results, IOA-14 also marks a significant increase in
the grant share of IDA. About 31 percent of IOA-14 resources - and 45 percent of
assistance to the very poorest IDA-only countries - will be provided in the form of
grants. This represents a 60 percent increase over the IOA-13 level. An
agreement on very similar grant levels was achieved in the African Development
Fund replenishment as well, and a substantial grant window was established for the
first time in the Asian Development Fund agreement.
Recognizing that growth is the key to poverty reduction, IOA-14 also encompasses
a private-sector growth strategy. The strategy entails two broad objectives: 1)
improving the investment climate - especially with respect to micro, small, and
medium enterprises; and 2) improving access to basic infrastructure and social
services through private sector participation.
As stated in the September 23, 2005 letter from the G8 finance ministers to the
President of the World Bank, Paul Wolfowitz, "funding for IDA will continue to
depend on donors' convictions of IDA's effectiveness in delivering development
aSSistance, IDA reflows, performance, financing needs, and absorptive capacity of
poor countries."
Fighting Corruption
IOA-14 also represents great strides in improving transparency - recognizing that
transparency improves development effectiveness by fostering accountability for
results, and can aid in donor coordination and donor partiCipation. Transparency is
an essential ingredient in fighting corruption because it places accountability with
countries and institutions alike. The IOA-14 agreement helps reinforce the World
Bank's accountability by calling on the World Bank Board to: (1) disclose Board
minutes; (2) strengthen procedures for documenting public consultation processes;
(3) make interim results of projects during their execution publicly available; and (4)
require an independent audit or assessment of internal management controls and
procedures for meeting operational objectives. Following an earlier decision by the
Bank's Board, all the scores for IDA's Country Performance and Institutional
Assessments (CPIA), by which IDA's allocations are determined, will be made
publicly available in 2006.
More broadly, fighting corruption at and through the MOBs is an issue we take very
seriously. We are committed to every possible effort to help prevent, detect, and
punish corruption associated with development assistance provided by the MOBs.
Such corrupt acts are intolerable and, as custodians of taxpayer dollars intended to
stimulate economic growth and alleviate global poverty, we have the obligation to
help ensure that the MOBs take all the steps necessary to have an effective anticorruption apparatus.
Our efforts to strengthen anti-corruption efforts are focused on three levels. First, at
the institutional level, we are focused on improving the functioning of MOB internal
control processes for internal auditing, investigative mechanisms, whistleblower
protections, and corporate procurement - and increasing the disclosure and
accountability of MOB operations.
Second, at the project level, we are focused on encouraging the MOBs to conduct
analysis and design projects that help reduce opportunities for corruption,
strengthen fiduciary standards, and help ensure that MOB funds will be well spent.
Third, at the country level, we focus on enhancing the transparency and
accountability of recipient countries' governance systems and disclosure in MOB
operations and analysis, and to channel MOB resources toward countries that have
good governance in place. Treasury reports annually to the Congress on the
country specific anti-corruption programs supported by each MOB, and actions
taken by recipient countries.
Overall, the MOBs have taken important steps to combat corruption and the United
States is at the forefront of continuing efforts to broaden and deepen those
initiatives, including ensuring the full effectiveness of new anti-corruption units. The
managements of the MOBs are to be commended for the positive steps they have

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Page 5 of 5
taken in recent years to fight corruption, following the example set by the World
Bank. Clearly more needs to be done, however, and we are fully dedicated to
these efforts.
Conclusion

I want to once again thank the subcommittee for giving me this opportunlly to testify
and for its past support for the Administration's international development
programs. As I hope my testimony today demonstrates, we believe we have built a
recent record that merits your continued support. Our collective efforts have a
concrete impact on the ability of the poorest countries to generate economic growth
and reduce poverty. I look forward to continuing those efforts and will be pleased to
answer any questions you may have.
-30-

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PRESS ROOM
September 26,2005
JS-2952

lannicola Commends Jacksonvi"e Financial
Education Program
Treasury today formally recognized the FreshMinistries' Financial Education
Program, the Jacksonville Individual Development Account (IDA) Partnership, with
the John Sherman Award for Excellence in Financial Education. Deputy Assistant
Secretary Dan lannicola, Jr. presented the award at a ceremony hosted by Mayor
John Peyton at City Hall to honor the work of FreshMinistries in providing financial
education to the community of Jacksonville, Florida.
In addition to providing financial literacy, the IDA's goal is to help low-income
individuals reach financial independence. Through the IDA program, participants
put money into a special account which is matched two-to-one by FreshMinistries.
The account may be used to buy a home, pay for a college education or to start a
business.
"You can give a person just about anything. Anything, that is, except self-esteem that must be earned. For people to feel the pride of accomplishment they have to
know they put something in, before they get something out. Otherwise it is just a
gift," lannicola said. "The FreshMinsitries program helps low-income clients earn
that self-esteem by offering them a hand up instead of a hand out."
Following the ceremony, lannicola conducted a financial literacy roundtable with
financial education providers and other representatives of the Jacksonville business
community. lannicola commended the participants for their commitment to financial
literacy while participants discussed the issues they are confronting in the area of
financial education. In addition, lannicola shared best practices from other
programs across the country with the roundtable participants.
FreshMinistries is a faith-based non-profit active for the last ten years in incubating
interfaith initiatives for community restoration. FreshMinistries organized more than
20 community partners into the Jacksonville IDA Partnership which has been
expanding financial literacy training across the community and enrolling participants
into the matched savings accounts.
Using the FDIC approved Money Smarts curriculum and similar financial literacy
programs, the Jacksonville IDA Partnership has been helping lower income
residents in the area learn to better manage their money. Training has occurred at
public housing sites and other locations convenient for the participants.
FreshMinistries has also partnered with the Real Sense Prosperity Campaign to
expand the use of the earned income tax credit and provide recipients with the
opportunity for financial literacy training.
The Department of the Treasury is a leader in promoting financial education.
Treasury established the Office of Financial Education in May of 2002. The Office
works to promote access to the financial education tools that can help all Americans
make wiser choices in all areas of personal financial management, with a special
emphasis on saving, credit management, home ownership and retirement
planning. The Office also coordinates the efforts of the Financial Literacy and
Education Commission, a group chaired by the Secretary of Treasury and
composed of representatives from 20 federal departments, agencies and
commissions, which works to improve financial literacy and education for people
throughout the United States. For more information about the Office of Financial
Education visit: www.treas.gov/financialeducation.

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September 27, 2005
2005-9-27 -12-2-34-25663
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U,S. reserve assets
totaled $71,750 million as of the end of that week, compared to $72,253 million as of the end of the prior week.
I. Official U.S. Reserve Assets (in US millions)
September 16, 2005

TOTAL

September 23, 2005

72,253

1. Foreign Currency Reserves 1

Euro

Yen

11,409

a. Securities

71,750

11,428

TOTAL

"II

22,837

Of which, issuer headquartered in the US,

Euro

Yen

TOTAL

11,346

11,291
I

22,637

lb. Total deposits with:

Ib.i. Other central banks and BIS

11,103

10,982

16,475

16,635

b.iL Of which, banks located abroad

b.iii. Banks headquartered outside the US.

2. IMF Reserve Position 2

13,398

13,310

3. Special Drawing Rights (SDRs) 2

8,342

8,287

4. Gold Stock 3

11,041

b.ii. Banks headquartered in the US.

Ib.iii. Of which, banks located in the U.S.

5,532

5. Other Reserve Assets

5,493

I
I

II. Predetermined Short-Term Drains on Foreign Currency Assets
September 23, 2005

September 16, 2005
Yen

Euro
1. Foreign currency loans and securities

II
II

TOTAL

II
II

Euro

Yen

TOTAL
0

2. Aggregate short and long positions in forwards and futures in foreign currencies vis-a-vis the U.S. dollar:

12.a. Short positions

12.b. Long positions

13. Other

II
II

III. Contingent Short-Term Net Drains on Foreign Currency Assets

1. Contingent liabilities in foreign currency

I
I

September 16, 2005
Euro

II
II

1.a. Collateral guarantees on debt due within 1
year

.http://WWw.treas ..!Wv/pre~B/rcleas~.20Q.}9271223425663.htm

Yen

September23,2005

TOTAL

I
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Yen

Euro

I
II

T('\TAL

I
I

10/3/2005

Page 2 of2
11.b.

Other contingent liabilities

2. Foreign currency securities with embedded
options

@. Undrawn, unconditional credit lines
~a. With other central banks

II
II

I
I

3.b. With banks and other financial institutions
[Headquattered in the U. S.

3.c. With banks and other financial institutions

I
I

Headquattered outside the U.S.
4. Aggregate short and long positions of options
in foreign

ICurrencies vis-a-vis the U.S. dollar

I
I

I
0

4.a. Shott positions
4.a.1. Bought puts
4.a.2. Written calls

4.b. Long positions

4.b.1. Bought calls
4.b.2. Written puts

I
I

Notes:

21 The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF and are
valued in dollar terms at the official SDRldoliar exchange rate for the reporting date. The entries for the latest week reflect any
necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month end.

31 Gold stock is valued monthly at $42.2222 per fine troy ounce.

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September 28,2005
JS-2953
The Honorable John W. Snow
Prepared Remarks
Unveiling of the New $10 Note
Thank you, Tom. It's a great pleasure to be here today.
American currency - the dollar, the "greenback" _. is a terrific and enduring symbol
of our country. Like no other currency in the world, the sight of American money
means security. Our bills are symbols of our country's vast freedom and the
strength - economic and otherwise - that comes from that unique freedom.
I am proud to celebrate our currency, in its newest and most sophisticated form yet,
during a time when our country very much needs its inherent strength and
resiliency.
As we rebuild infrastructure, homes and businesses after the terrible natural
disasters in the Gulf Coast, we must also help rebuild lives with a sense of hope
and opportunity. Our overriding goal must be that everyone has an opportunity to
build a better life for themselves and their families. Nothing less is acceptable;
anything less would be un-American.
We are fortunate to have a strong, vibrant, growing economy in this country, and
that is going to be critical as we pursue rebuilding efforts. Because with a strong
economy, we can afford to meet any challenge.
The ten dollar bill is special to me because it is graced by the countenance of my
most famous and revered predecessor: the first Treasury Secretary, Alexander
Hamilton.
All Treasury Secretaries owe an awful lot to Hamilton. More than anyone else, he
put in place the economic structure that secured the future of the Union created by
the American Revolution. More than any other founding father, Alexander Hamilton
was a true visionary who saw the vast potential that lay ahead for the young and
fragile republic.
Americans primarily used coins back in Hamilton's time. But Hamilton often spoke
of the importance of steering the country to a national system of paper currency.
Several of Hamilton's observations are especially relevant to today's unveiling. It
was Hamilton who first proposed that United States money feature the pictures of
Presidents, other famous Americans and national symbols as a way to boost
patriotism.
And, in a comment that's very appropriate, Hamilton said great care and
workmanship should go into the making of our money "as a great safeguard against
counterfeits. "
Thanks to Tom Ferguson and his team at the Bureau of Engraving and Printing, the
craftsmanship that goes into our currency is unmatched anywhere in the world. So
is our commitment to safeguarding that currency.
To an extent the Founding Fathers never imagined, people around the world rely on
the strength and stability of United States currency. Thanks to the changes we've
made in currency design, thanks to aggressive law enforcement led by the U.S.
Secret Service, and thanks to an informed public, we've been able to stay ahead of

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Page 2. ot 2.
counterfeiters.
Your government is committed to keeping it that way. We expect to update currency
every seven to ten years, so that we may continue to stay ahead of counterfeiters.
The enhanced security features built into this new $10 note design - and into the
$20 and $50 note designs that preceded it in the new series - will help maintain
global confidence in our currency going forward.
I'm delighted to be here today and share with you the design for the new $10 note,
and I'm awfully proud to have my signature on that note alongside the likeness of
Alexander Hamilton as a symbol of our continuous commitment to a safer, smarter
and more secure currency.
It is now my pleasure to introduce Anna Cabral, our United States Treasurer, whose
signature can also be found on the new $10 note. Madame Treasurer ....

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September 28, 2005
JS-2954
Testimony of
Deputy Assistant Secretary of the
Treasury David Loevinger
before the House Ways and Means Committee
Chairman Thomas, Ranking Member Rangel, and other Committee members,
thank you for this opportunity to talk about developments in the Japanese economy
and the Administration's engagement with Japan on macroeconomic and financial
issues. This hearing is timely, as it is taking place at a time of growing optimism
both about the possibility of sustained domestic demand-led growth in Japan and
more rapid economic reforms following this month's elections.
My colleagues have testified on a number of sectoral trade issues. The Treasury
Department works closely with USTR, Commerce, and other agencies on these
issues through the Trade Policy Review Group. Moreover, Treasury has focused
particular attention on access to the Japanese market by U.S. financial services
providers.
In addition to these sectoral issues, Treasury pays close attention to the overall
growth of the Japanese economy. Strong, sustained, and domestic demand-led
growth in Japan - the world's second largest economy - would boost U.S. exports
and jobs and would also contribute to more balanced global growth. For the last
decade Treasury has consulted closely with Japanese authorities on ways to
achieve this.
Japan has struggled for the past decade and a half to overcome the effects of the
collapse of the late-1980s asset price "bubble." Falling property prices - with
commercial land prices down more than 80 percent in Japan's major metropolitan
areas between 1991 and 2004 - hit corporate and household balance sheets.
Banks were hit by the financial stress of their customers and by falling collateral
values when they tried to foreclose.
Firms that had built up capacity and staffing during the late-1980s boom reduced
their investment spending. They also held down hiring, cut back on overtime and
bonuses, and replaced permanent employees with part-time workers. The resulting
drop in wages slowed household consumption.
The government responded to the economic downturn with a series of fiscal
stimulus packages, mostly public works spending yielding low returns. Regulatory
forbearance allowed banks to remain technically solvent without dealing with their
growing bad loans. This led to the eventual failure of many banks, including some
systemically large institutions, and large infusions of public funds since the late
1990s.
Japan's slowness in dealing with failing banks and delinquent corporate debtors
kept it, until now, from achieving sustained domestic demand-led growth.
Evergreening loans to zombie borrowers locked resources up in non-productive
activities, and heavy debt burdens limited investment in new activities. Short-lived
economic rebounds in 1993, 1995-96, and 1999-2000 faded quickly back into
recession once the initial fiscal or export stimulus faded. The protracted economic
slowdown led to persistent deflation.
Over the past decade U.S. engagement with Japan focused on resolving banking
sector problems, overcoming deflation, and restoring sustained, domestic demandled growth. At times this discussion was acrimonious. The Bush Administration
established a quieter, more cooperative dialogue with Japan, focused on creating
the fundamentals for sustained growth rather than encouraging fiscal stimulus to

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Page 2 of3
pump up growth over the next few quarters.
Japan's struggle to emerge from the deflation, sluggish growth, and banking sector
problems may finally be coming to an end. The Koizumi Administration made clear
that restoring growth would require structural reforms such as increasing
competition in domestic markets and improving the efficiency of financial
intermediation, and could no longer rely on fiscal stimulus. The Koizumi
government also brought tougher banking regulation, which forced the banks to
raise capital and deal with their problem borrowers. Corporate restructuring has
strengthened firms' finances and reduced excess debt and capacity.
There are also growing signs that the labor market is finally strengthening: the
number of full-time employees rose recently for the first time in seven years, and
the number of part-time workers fell for the first time in a decade. While exports,
especially to China, helped fuel the early stages of Japan's current recovery,
household consumption and investment have been the key growth engines in
recent quarters. So, at least for the Japanese economy, after several false dawns,
a new day may have finally arrived.
But the Japanese economy still faces numerous headwinds. Deflation, though
diminished, still persists Many small banks and small firms still remain weak. After
years of stimuli, Japan now has the largest fiscal deficit and government debt,
relative to GOP, of any G7 country. A large fiscal retrenchment is inevitable.
Moreover, a rapidly aging population will necessitate increased public spending on
health care and pensions, while a shrinking workforce will limit the growth of income
and payroll tax receipts, making the fiscal retrenchment more difficult. By 2025,
Japan is projected to have more than half as many elderly as working-age people,
up from less than one-third today. In the United States, in contrast, that ratio is
projected to rise from about one-in-five today to about one-in-three by 2025.
Japan's long-term potential growth rate is estimated to be only about 1% percent
per year, vs. 3% -4 percent in the United States. We share Prime Minister
Koizumi's view that, given these headwinds, far-reaching structural reforms are
needed to boost productivity so that the Japanese economy can navigate the
challenges of the 21 st century and make a larger contribution to global growth.
Financial Sector Issues
The length of the post-bubble economic troubles and the high costs of cleaning up
the banking sector owe much to the financial system that Japan maintained after
the Second World War. Bank-dominated, heavily segmented and regulated, and
closed to outsiders, the Japanese financial system failed to innovate and develop
the credit analysis and risk assessment tools that financial institutions in the United
States introduced.
For the past two decades, starting with the Yen-Dollar talks in the 1980s, the
Treasury has pressed Japanese financial regulators to reform and modernize
Japan's financial system and open the sector up to foreign investment. The U.S.Japan Financial Services Agreement, negotiated in 1995, opened up a number of
sectors for U.S. financial services firms, including the management of public
pension funds. The "Big Bang" financial liberalization decontrolled prices and fees,
opened up financial markets to new entry and new products, and shifted regulation
and supervision to a modern market- and risk-based system. Regular discussions
between Treasury, Japan's Ministry of Finance, and Japan's Financial Services
Agency have continued to expand opportunities for U.S. firms - in managing the
assets of Postal Savings system and offering 401 (k) pension products, structured
asset products, investment advisory and custodial services, and many others.
Ten years ago, foreign participation in Japan's domestic financial market was
almost unthinkable. Today, market access and national-treatment are no longer
prominent issues in our financial sector dialogue. U.S. investors own two large
Japanese banks and several small ones. And the market share of U.S. and other
foreign securities firms is growing, as it is for foreign pension and mutual fund
managers. Those developments are reflected in the rapid growth of U.S. direct
financial services investment in Japan, which has grown from $6.5 billion in 1994 to
more than $38 billion last year on a historical cost basis. Income from those
investments has grown even more rapidly, from around $400 million in 1994 to
nearly $5 billion last year.

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We still have a very active engagement with Japan on financial sector issues, but
the issues have shifted from market access to market development. These have
included restrictions on short sale transactions, the ability to conduct global risk
management across financial entities, participation of global custodians in
government bond settlement, and taxation of mutual funds.
One recent example illustrates the importance of this engagement. A revision of
section 821 of Japan's proposed Corporation Law, submitted to the Diet this year,
could have required many foreign financial and non-financial firms to reincorporate
as Japanese subsidiaries, in many cases with substantial tax liability on realized
capital gains. Our financial attache in Tokyo worked closely with U.S. firms and the
Japanese Diet to craft a legislative history exempting foreign firms. We continue to
monitor this issue to determine if this will suffice or if corrective legislation is
necessary.
The most important financial sector issue now is the privatization of Japan's postal
financial institutions - Postal Savings and Postal Life. These are huge institutions,
by far the world's largest savings bank and life insurer, accounting for a third of
Japan's deposits and 40 percent of its life insurance policies. We believe Prime
Minister Koizumi's postal privatization bills can help increase the efficiency of
financial intermediation, and potentially reduce the need for such high precautionary
savings, boosting growth and imports. One key to success, as Secretary Snow and
other Treasury officials have stressed to our Japanese counterparts, will be
ensuring a level playing field so that the competitive advantages enjoyed by the
privatized postal savings and postal life insurance firms are eliminated. Another
key will be strict regulation, especially to limit risk transfers or cross-subsidization
among the privatized financial and non-financial corporations.
But postal privatization will not be enough, as Prime Minister Koizumi recognized
when he called for sweeping reforms including labor and product market
deregulation and fundamental reforms of government lending institutions. Japan
also needs continued progress in capital market and corporate governance reforms
to ensure that corporate managers are focused on shareholder value. Our own
experience shows that allowing the full range of foreign and domestic M&A activity
helps develop the market for corporate control, which can contribute to better
resource allocation, higher returns on investment, and faster growth and imports.
Exchange Rate Policy
Japan has intervened in the foreign exchange market in the past, sometimes in
large amounts. We have discussed foreign exchange market issues with Japanese
officials, and they are fully aware of our views that the world economy works best
with free trade, free flow of capital, and flexible exchange rates for large
economies. Japanese authorities have not intervened in the foreign exchange
market since March 2004. Japan has also supported the G7 position on exchange
rates, expressed in a series of G7 Communiques, calling for greater exchange rate
flexibility. And Japan has worked with us to bring about greater exchange rate
flexibility in China and in other large economies in East Asia. We will continue to
strongly express our views that major economies should have flexible exchange
rates, determined in the market with intervention kept to a minimum.
Thank you again for this opportunity to testify before you. Ensuring vigorous,
domestic demand-led growth, increased financial sector dynamism and
opportunities for U.S. firms, and flexible, market-determined exchange rates in
Japan and other large economies will continue to be priorities for the Treasury and
the Administration.

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September 28,2005
JS-2955

Treasury's Office of Financial Education Offers
Financial Counseling to Hurricane Evacuees
Treasury's Deputy Assistant Secretary for Financial Education Dan lannicola, Jr.
led a team of financial educators at the Disaster Recovery Center in Baton Rouge,
LA today, where they are providing financial education and counseling to those
affected by recent hurricanes. The team also distributed materials providing
financial tips and resources for those displaced by the storms.
Over the last few weeks, the Office of Financial Education has provided counseling
and materials at five hurricane relief sites including the Astrodome complex in
Houston, TX; the Red Cross Center at Kelly USA in San Antonio, TX; the One-Stop
Joint Assistance Center in Pensacola, FL; the DC Armory in Washington, DC; and
the Disaster Recovery Center in Baton Rouge, LA. The FDIC played a key role in
helping Treasury perform some of this outreach.
"Right now is the point in the recovery process when evacuees are trying to make
the most of their limited funds, while dealing with financial issues and avoiding
frauds and scams. Our teams have been on the ground to help our
neighbors from the Gulf Coast states get a handle on these topics while they work
to put their lives back together," said lannicola. "There is never a bad time for
financial education, but at some points in life it is especially helpful. That is the
case here."
In addition to offering one-on-one counseling, Treasury developed a brochure
entitled "Weathering the Storm: Financial Tips and Resources for Hurricane
Recovery," which describes federal, state and local financial information resources
for individuals affected by Hurricane Katrina or Hurricane Rita. The resources listed
in the brochure cover the states of Alabama, Louisiana, Mississippi and Texas. The
brochure has been distributed at various shelters and resource centers across the
country through government agencies and private sector organizations, and is also
available on the Financial Literacy and Education Commission's website,
<www.mymoneY.gov>, and the Treasury's website,
<www.trp.ssury.gov/financialeducstion>.

REPORTS
•

Hurricane Relief

http://www.treas.80v/pre5s/re]ea~es/is2955.htm

10/3/2005

UNEMPLOYMENT INSURANCE

FINANCIAL ASSISTANCE CASH
FEMA provided one-time emergency cash assistance and
can provide rental and repair assistance. To register or
if you have any questions, call 800-621-3362 (24
hours) or 800-462-7585 (ITY only) or visit
http://www.ferna.gov.

•

Financial Tips
and Resourcesfor
Hunicane Recovery

•

Alabama residents, call 866-234-5382
Louisiana resident" call 866-783-5567
:viississippi residents, call 888-844-3577

American Red Cross: Providing various 3mounl~ of
fill3l1cial aSsist3nce, lI1c1uding vouchers, (3sh, and check~
C311800-975-7585
You may be eligible to receive a low-interest loan from the
Small Business Administration (SBA) to repair a horne,
replace personal property such as furniture and clothing,
or re-build a business. Infonn:ltion on :lpplying for these
loans is :lvail3blc from FEMA and from SRA by calling
800-659-2955 or at http://www.sba.gov/disaster

Unemployment Insurance'

Texas residents, call 800-939-6631 (:vionday-Friday
to 5 p.m.). TIlis number provides information
in English and Spanish. Or visit http://,,''ww.twc.
state. tx. usluilbnftslclaimantinfo.htrnl.

8 a.11I.

•

Disaster Unemployment Assistance for self-employed and
newly employed who are ineligible for L'nemployment
Insurance:
Alabama residents, call 866-234-5382
Louisiana residents, call 866-783-5567
~1ississippi

INSURANCE
•

OTHER FEDERAL AND STATE BENEFITS
•

Soci31 Security Available at local Social Secunt\ offices
For locations. call 800-772-1213

•

For Mississippi call 866-856-1982 (out of state)'
800-562-2957 (in state), or 601-359-2453
(Jackson area). Hours are 7 :l.rn. to 7 p.m.;

Veterans benefits and compensatlon call1'S Dep1rtment
of Veterans Affairs 800-827-1000 (24 hours)

•

For Alabama call800-433-3966 (in-state) or
334-269-3550

Louisiana Human and Social Sen'ices Hotline (food
stamps, :"ledicaid, other) 888-52"t-3578 (7 a.m. - 7
p.m.).

•

If you do not already recei\'p \'Ollf Frder:!l bendit5 hr direct
dt'posit. you should consider doing so. Dirt'ct deposit
means that your benefits are electrol1lcal h' sent to rour
bank or credit union account Direct depoSll is safer, Lister
and more reluble than receil'll1g :1 cheCK bY :mil To
registt'r or for more information, call 800-333-1795
(English) or
800-333-1792 (Spal1lsh), nr mit
htt!l:/!WWw.godirect.org (English) or
httpll:www.dircctoaslicuenta.org (Sp:lIlish).

For Texas, call800-578-4677 (I)' 512-463-6169
(Monday-Frilhy 8 a.m. to 5pm) or visit http://
www.tdi.state.tx.us/commishlstorrnslindex.
htmL
•

Texas residents, ell 1800-818-7811

Contlet your insurance company. Alist of insur3nce
comp3nies can be found at
http://www.disasterinfomlation.org/, or
For Louisiana call800-259-5300 or
225-342-5900 (in Baton Rouge) or vlsit
http://www.ldi.state.la.uslwhats newt
HurricanePhoneNumbers.pdf;

residents. call 866-783-5567

Flood insurance. If you don't know the insurer or
administrator, call the National Flood Insurance Program
at 800-427-4661

DEBT

•

Call your creditors. Many will defer your loan payments,
waive late fees, or raise your credit limit temporarily.

•

RECONSTRUCTING FINANCIAL AND TAX INFORMATION

5 - Don't pay in advance for offers of hOUSing.

• Tax Returns

IRS can provide free copies of your tax returns.
Call 866-562-5227 (Monday-Friday 7 a.m. 10 10 p.m.)

6 - Avoiu offer.; for loans or credit carus that require payment in

or visit http://www.irs.gov/,

7 - For home repairs, ask for references and referrals.

If you need help identi~'ing your creditors, get your free

credit report Call 877-322-8228 or visit
http://www.annualcreditreport.com.

Write "Hurricane Katrina" in red across tllC top margin
of the Form 4506, R.equest for Copy of Tax R.eturn.
1RS can also answer other questions about tax
payments, fihng, and other issues.

BANK AND CREDIT UNION ACCOUNTS

•

For infom1ation about accessing bank accounts, lost records,
ATM cards, direct deposits or how to reach your bank, call
the FDIC at 877-275-3342 (24 hours) or visit
http://www.fdic.gm·.

•

For information about credit unions, visit
http://www.ncua.gov!Katrinalindex.htm or call
800-827-6282, press 2 then for
Louisiana and Texas press 1
Alab:una and )'Vlississippi press 2

•

Banks and credit unions keep extensive back-up records to
ensure that customer account information is accurate and
protected.

•

Banks and credit unions generally have their cumputer
systems operating so customers C:1I1 access their money
through debit and ATM cards, even if the physical office is
dam3ged or closed.

•

~10st

s3fe deposit boxes are located in fireproof and
waterproof areas. If possible, contact the branch or office
where your box was loc3ted to dctermine the condition of
your box.

MANAGING A DEBIT CARD

•

Credit Report: You can request a free credit report. Call
877-322-8228 or visit
http://www.annualcreditreport.com.

advance.

8 - For home repairs. get more than one estimate in writing.
Don't pay the full amount for the work until the work is
completed and you're satisfied.
9 - Pest control or water purification offers may not prOVide
real services. Check these out before accepting offers, even
for "free" tests or services. Read the "fine print" and get a
second opinion.

10-If an offer sounds too good to be true, it probably is.

BUDGET
It is a good idea to develop a budget for the months ahead. Some
things to include in a budget:

•
•

Transportation (bus, subway or car),

•

Communications expenses (phone, fax). and

•
•

\X'ork related eqUipment/other costs (equipment, uniform)

Housing (security deposit, monthly rellt) ,

Free resources may be available for food, clothing and
furniture. Explore these options first

If you believe you may be a victim of ID theft, contact the fraud
departments of anyone of the three major credit bureaus at their
toll-free numbers to place a "fraud alert" on your credit file: Equifax
at 1-888-766-0008, Experian at 1-888-397-3742, or
Tr:ll1sUnion at 1-800-680-7289 This clJl'help prevent a
thief from opening new accounts or making changes to your
existing accounts.
For more information about guard1l1g against identity ti1eh and
resolVing problems. visit http://www.cofl..'mmer.go\"lidtheft.

OTHER RESOURCES
10 TIPS FOR AVOIDING SCAMS

•

For a vanet)'uf frl'C federal government publications related
to financial issues, visil http://mymoncy.go\" or
888-mymoney

•

For other federal gowl1lment resources, \"lSit
http://www.firstgm·.gm·

1 - Before you give out your personal information (Social
Security number, datc of birth, FE:V1A case number), II13ke
sure it is absolutely necessary and that the person asking
for it represents a legitimate organization (such as a
government agellCY or charity).

2 - AVOid "officials" who require payment to ?,et FEvlA or other

•

Can be Llsed to get cash from an ATM with a Person31
Identification Number (Pl:'-J)

•

Can be used in many stores to purchase goods such as
grocenes and clothing.

3 - Always keep critical personal infofl113tiol1 and documents in

•

Keep the PI:\ safe ;l1ld separate from the card.

•

If you have a FE\1A debit card that gets lost or stolen, you
lose the Plr\, or haw' other questions, call 888-606-7058

4 - [Jon't pay in advance for j()b listings, especially for a 900
phone number. Report job scams to the FTC
http://www.fte.go\,, or 877-FfC-HELP

government benefits :\0 government agency charges
application fees for disaster relief benefit,
a s3fe place.

Compiled jivm: California Socie!)' o/Ellrolled Agmts.
Federal Deposit [nsurtmce CO/p., Federal Trade Commissioll,
flome Builders Assoc;atioll ojAI,zbl1l1ll1, illtt'l7Ial RelJellue
SerlJice, Natiollal Credit Vllioll Administmt/oll. by the
Office of1-inallcial Educatioll. September 2005

Page 1 of 1

PRESS ROOM

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September 29,2005
JS-2956
Treasury and IRS Propose Regulations
on Deferred Compensation
WASHINGTON, DC -- The Treasury Department and IRS today issued proposed
regulations on deferred compensation under section 409A. Section 409A governs
plans and arrangements that provide nonqualified deferred compensation to
employees, directors or other service providers. These regulations implement new
provisions established by the American Jobs Creation Act (AJCA).
The proposed regulations announced today identify which plans and arrangements
are covered under section 409A, outline operational requirements for deferral
elections and permissible timing for deferred compensation payments made under
the rules.
The rules also extend the deadline for documentary compliance with the new rules
to December 31,2006. The deadline was initially December 31,2005.
The proposed regulations provide a framework for implementing the requirements
of section 409A, taking into account the numerous comments received from the
public on Notice 2005-1, issued last December.
The effective date proposed for the regulations is January 1,2007. Taxpayers may
rely on the proposed regulations until final regulations are effective.
REPORTS
• A copy of the proposed regulations

tP://WWW.treas.8~y/press/relea~~jr;2Q56.htm

10/3/2005

[4830-01-p]
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-158080-04 ]
RIN 1545-BE79
Application of Section 409A to Nonqualified Deferred Compensation Plans
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
SUMMARY: This document contains proposed regulations regarding the
application of section 409A to nonqualified deferred compensation plans. The
regulations affect service providers receiving amounts of deferred compensation,
and the service recipients for whom the service providers provide services. This
document also provides a notice of public hearing on these proposed regulations.
DATES: Written or electronic comments must be received by January 3, 2006.
Outlines of topics to be discussed at the public hearing scheduled for January 25,
2006, must be received by January 4, 2006.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-158080-04), room
5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand-delivered Monday through
Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-15808004), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue, NW.,
Washington, DC or sent electronically, via the IRS Internet site at

www.irs.gov/regs or via the Federal eRulemaking Portal at www.regulations.gov
(IRS REG-158080-04). The public hearing will be held in the Auditorium, Internal
Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed
regulations, Stephen Tackney, at (202) 927-9639; concerning submissions of
comments, the hearing, and/or to be placed on the building access list to attend
the hearing, Richard A. Hurst at (202) 622-7116 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:

Background
Section 409A was added to the Internal Revenue Code (Code) by section
885 of the American Jobs Creation Act of 2004, Public Law 108-357 (118 Stat.
1418). Section 409A generally provides that unless certain requirements are
met, amounts deferred under a nonqualified deferred compensation plan for all
taxable years are currently includible in gross income to the extent not subject to
a substantial risk of forfeiture and not previously included in gross income.
Section 409A also includes rules applicable to certain trusts or similar
arrangements associated with nonqualified deferred compensation, where such
arrangements are located outside of the United States or are restricted to the
provision of benefits in connection with a decline in the financial health of the
sponsor.
On December 20, 2004, the IRS issued Notice 2005-1 (2005-2 I.R.B. 274
(published as modified on January 6, 2005)), setting forth initial guidance with
respect to the application of section 409A, and supplying transition guidance in

accordance with the terms of the statute. Notice 2005-1 requested comments on
all aspects of the application of Section 409A, including certain specified topics.
Numerous comments were submitted and all were considered by the Treasury
Department and the IRS in formulating these regulations. In general, these
regulations incorporate the guidance provided in Notice 2005-1 and provide
substantial additional guidance. For a discussion of the continued applicability of
Notice 2005-1, see the Effect on Other Documents section of this preamble.
Explanation of Provisions
I. Definition of Nonqualified Deferred Compensation Plan

A. In general
Section 409A applies to amounts deferred under a nonqualified deferred
compensation plan. For this purpose a nonqualified deferred compensation plan
means any plan that provides for the deferral of compensation, with specified
exceptions such as qualified retirement plans, tax-deferred annuities, simplified
employee pensions, SIMPLEs and section 501 (c)(18) trusts. In addition, section
409A does not apply to certain welfare benefit plans, including bona fide vacation
leave, sick leave, compensatory time, disability pay, and death benefit plans.
In certain instances, these regulations cross reference the regulations
under section 3121 (v)(2), which provide a special timing rule under the Federal
Insurance Contributions Act (FICA) for nonqualified deferred compensation, as
defined in section 3121 (v)(2) and the regulations thereunder. However, unless
explicitly cross-referenced in these regulations, the regulations under section
3121 (v)(2) do not apply for purposes of section 409A and under no

circumstances do these proposed regulations affect the application of section
3121 (v)(2).

B. Section 457 plans
Section 409A does not apply to eligible

deferr~d

compensation plans

under section 457(b). However, section 409A applies to nonqualified deferred
compensation plans to which section 457(f) applies, separately and in addition to
the requirements applicable to such plans under section 457(f). Section 409A(c)
provides that nothing in section 409A prevents the inclusion of amounts in gross
income under any other provision of the Code. Section 409A(c) further provides
that any amount included in gross income under section 409A will not be
required to be included in gross income under any other Code provision later
than the time provided in section 409A. Accordingly, if in a taxable year an
amount subject to section 409A (but not required to be included in income under
section 409A) is required to be included in gross income under section 457(f),
that amount must be included in gross income under section 457(f) for that
taxable year. Correspondingly, if in a taxable year an amount that would
otherwise be required to be included in gross income under section 457(f) has
been included previously in gross income under section 409A, that amount will
not be required to be included in gross income under section 457(f) for that
taxable year.
These proposed regulations are intended solely as guidance with respect
to the application of section 409A to such arrangements, and should not be relied
upon with respect to the application of section 457(f). Thus, state and local

government and tax exempt entities may not rely upon the definition of a deferral
of compensation under §1A09A-1 (b) of these proposed regulations in applying
section 457(f}. For example, for purposes of section 457(f}, a deferral of
compensation includes a stock option and an arrangement in which an employee
or independent contractor of a state or local government or tax-exempt entity
earns the right to future payments for services, even if those amounts are paid
immediately upon vesting and would qualify for the exclusion from the definition
of deferred compensation under § 1 A09A-1 (b)(5) of these proposed regulations.
However, until further guidance is issued, state and local government and tax
exempt entities may rely on the definitions of bona fide vacation leave, sick
leave, compensatory time, disability pay, and death benefit plans for purposes of
section 457(f) as applicable for purposes of applying section 409A and §1A09A1(a}(4) of these proposed regulations to nonqualified deferred compensation
plans under section 457(f}.
C. Arrangements with independent contractors
Consistent with Notice 2005-1, Q&A-8, these regulations exclude from
coverage under section 409A certain arrangements between service providers
and service recipients. Under these regulations, amounts deferred in a taxable
year with respect to a service provider using an accrual method of accounting for
that year are not subject to section 409A. In addition, section 409A generally
does not apply to amounts deferred pursuant to an arrangement between a
service recipient and an unrelated independent contractor (other than a director
of a corporation), if during the independent contractor's taxable year in which the

amount is deferred, the independent contractor is providing significant services to
each of two or more service recipients that are unrelated, both to each other and
to the independent contractor. In response to comments, these regulations
clarify that the determination is made based upon the independent contractor's
taxable year in which the amount is deferred.
Commentators also requested clarification of the circumstances in which
services to each service recipient will be deemed to be significant, as required for
the exclusion. Determining whether services provided to a service recipient are
significant generally will involve an examination of all relevant facts and
circumstances. However, two clarifications have been provided. First, the
analysis applies separately to each trade or business in which the service
provider is engaged. For example, a taxpayer providing computer programming
services for one service recipient will not meet the exception if, as a separate
trade or business, the taxpayer paints houses for another unrelated service
recipient. To provide certainty to many independent contractors engaged in an
active trade or business with multiple service recipients, a safe harbor has been
provided under which an independent contractor with multiple unrelated service
recipients, to whom the independent contractor also is not related, will be treated
as providing significant services to more than one of those service recipients, if
not more than 70 percent of the total revenue generated by the trade or business
in the particular taxable year is derived from any particular service recipient (or
group of related service recipients).

Page 1 of 1

I-'HLSS HOOM

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September 30, 2005
js-2957
Preliminary Annual Report On U.S. Holdings Of Foreign Securities
Preliminary data from an annual survey of U.S. portfolio holdings of foreign
securities at year-end 2004 are released today and posted on the U.S. Treasury
web site at (httpllwwwtreasgov/tlc/fplshtml). Final survey results, which will
include additional detail as well as revisions to the data, will be reported by
December 30, 2005.
The survey was undertaken jointly by the US Treasury, the Federal Reserve Bank
of New York, and the Board of Governors of the Federal Reserve System.
A complementary survey measuring foreign holdings of U.S. securities also is
conducted annually. Data from the most recent such survey, which reports on
securities held on June 30, 2005, are currently being processed. Preliminary
results are expected to be reported by April 28, 2006.
Overall Preliminary Results
The survey measured U.S. holdings at year-end 2004 of approximately $3.8 trillion,
with $2.6 trillion held in foreign equities, $1.0 trillion in foreign long-term debt
securities (original term-to-maturity in excess of one year), and $233 billion held in
foreign short-term debt securities. The previous such survey, conducted as of yearend 2003, measured U,S holdings of approximately $3.2 trillion, with $2.1 trillion
held in foreign equities, $874 billion in foreign long-term debt securities, and $199
billion held in foreign short-term debt securities.
REPORTS
•

Preliminary Annual Report On U,S. Holdings Of Foreign Securities

P://WWw.treas.gov/pless/relC(l~es/j5

11/7

noo"

.r!

DEPARTMENT OF THE TREASURY
OFFICE OF PUBLIC AFFAIRS
Embargoed Until 4 p.m. EDT
September 30, 2005

CONTACT:

Brookly McLaughlin
(202) 622-1996

PRELIMINARY ANNUAL REPORT ON U.S. HOLDINGS OF FOREIGN SECURITIES
Preliminary data from an annual survey of U.S. portfolio holdings of foreign securities at yearend 2004 are released today and posted on the U.S. Treasury web site at
(http://www.treas.gov/tic/fpis.html). Final survey results, which will include additional detail as
well as revisions to the data, will be reported by December 30, 2005.
The survey was undertaken jointly by the U.S. Treasury, the Federal Reserve Bank of New York,
and the Board of Governors of the Federal Reserve System.
A complementary survey measuring foreign holdings of U.S. securities also is conducted
annually. Data from the most recent such survey, which reports on securities held on June 30,
2005, are currently being processed. Preliminary results are expected to be reported by April 28,
2006.
Overall Preliminary Results
The survey measured U.S. holdings at year-end 2004 of approximately $3.8 trillion, with $2.6
trillion held in foreign equities, $1.0 trillion in foreign long-term debt securities (original termto-maturity in excess of one year), and $233 billion held in foreign short-term debt securities.
The previous such survey, conducted as of year-end 2003, measured U.S. holdings of
approximately $3.2 trillion, with $2.1 trillion held in foreign equities, $874 billion in foreign
long-term debt securities, and $199 billion held in foreign short-term debt securities.

Table 1. U.S. holdings of foreign securities, by type of security, as of survey dates)
(Billions of dollars, except as noted)
Type of Security

Dec. 31, 2003

Dec. 31, 2004

Long-term Securities
Equity
long-term debt
Short-term debt securities

2,954
2,079
874
199

3,553
2,560
993
233

Total

3,152

3,787

u.s. Portfolio Investment by Country
Table 2. U.S. holdings of foreign securities, by country and type of security, for the
countries attracting the most U.S. investment, as of December 31,2004
(Billions of dollars)

2
3
4
5
6
7
8
9
10
11
12
13

14
15
16
17
18
19
20
21
22
23
24
25

United Kingdom
Japan
Canada
France
Netherlands
Gennany
Cayman Islands
Bermuda
Switzerland
Australia
Italy
Korea, Republic of (South)
Spain
Mexico
Brazil
Sweden
Ireland
Finland
Luxembourg
Hong Kong
Taiwan
Israel
Norway
Netherlands Antilles
Singapore
Rest of world
Total value of investment

Debt securities:
Long-term
Short-term

Total

Equities

738
384
345
217
202
201
196
164
142
103
74
69
66
63
62
55
39
38
37
35
34
30
30
29
354

456
330
180
165
136
124
70
154
138
57
57
67
63
38
43
38
32
34
8
35
35
19
18
29
24
211

171
36
152
42
55
68
114
10
2
40
17
7
5
29
20
15
14
4
27
2
15
10
2
5
131

3,787

2,560

993

233

110
17
12
10
11
10
12
2
6
3

*
*
*
10
9
4

*
*
*
2

*
*

I The stock of foreign securities for December 31, 2004 reported in this survey may not, for a number or reasons,
correspond to the stock of foreign securities on December 31,2003, plus cumulative flows reported in Treasury's
transactions reporting system. The final report on U.S. holdings of foreign securities as of end-year 2004 will
contain an analysis of the relation between the stock and flow data.

Greater than zero but less than $500 million.

Page 1 of 1

PRESS ROOM

October 3, 2005
JS-2958
ATSB Announces Sale of US Airways Warrant
The Air Transportation Stabilization Board today announced that it reached an
agreement with US Airways for the repurchase of the Board's warrant in the newly
merged company for $115.8 million. Net proceeds from the sale will go to the
Treasury Department general fund.

tp:IIWWw.treas ~ov/prcss/relea5e6/j829'58.htrn

10/3112005

Page 1 of 1

PRESS ROOM

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October 3, 2005
JS-2959
United States and Sweden Sign Protocol to Income Tax Treaty
WASHINGTON, DC - Today the Treasury Department announced that Assistant
Secretary of State for Economic and Business Affairs E. Anthony Wayne and
Swedish Ambassador Gunnar Lund signed a new Protocol to amend the existing
bilateral income tax treaty, concluded in 1994, between the two countries. The
Protocol was signed Friday afternoon.
The agreement significantly reduces tax-related barriers to trade and investment
flows between the United States and Sweden. It also modernizes the treaty to take
account of changes in the laws and policies of both countries since the current
treaty was signed. The Protocol brings the tax treaty relationship with Sweden into
closer conformity with U.S. treaty policy.
The most important aspect of the Protocol deals with the taxation of cross-border
dividend payments. The Protocol is one of a few recent U.S. tax agreements to
provide an elimination of the withholding tax on dividends arising from certain direct
investments.
The Protocol also strengthens the treaty's provisions preventing so-called treaty
shopping, which is the inappropriate use of a tax treaty by third-country residents.

REPORTS
•
•
•

US Note
Protocol
Swedish Note

tp:IIWWw.treasgoy/press/releasei.ij!;:.)<}59.htm

10/31/2005

September 30, 2005

Excellency:
I have the honor to refer to the Protocol Amending the Convention
between the Government of the United States of America and the Government
of Sweden for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income, which was signed today, and to
confirm, on behalf of the Government of the United States of America, the
following understandings reached between our two Governments.

l. With reference to clause ii) of subparagraph e) of paragraph 2 of Article 17

(Limitation on Benefits) of the Convention

It is understood that in applying clause ii) of subparagraph e) of paragraph 2 of

Article 17 (Limitation on Benefits) in the case of Sweden the amount of a
person's deductible payments and gross income for the taxable year shall be

His Excellency
Gunnar Lund,
Ambassador of Sweden.

-2-

reduced by the amount of group contributions paid to a Swedish resident or
Swedish permanent establishment.

2. With reference to paragraph 6 of Article 17 (Limitation on Benefits) of the
Convention

It is understood that in applying paragraph 6 of Article 17 (Limitation on

Benefits), the legal requirements for the facilitation of the free flow of capital
and persons within the European Union, together with the differing internal
income tax systems, tax incentive regimes, and existing tax treaty policies
among member states of the European Union, will be considered. Under that
paragraph, the competent authority is instructed to consider as its guideline
whether the establishment, acquisition or maintenance of a company or the
conduct of its operations has or had as one of its principal purposes the obtaining
of benefits under this Convention. The competent authority may, therefore,
determine, under a given set of facts, that a change in circumstances that would
cause a company to cease to qualify for treaty benefits under paragraphs 2 and 3
of Article 17 need not necessarily result in a denial of benefits. Such changed
circumstances may include a change in the state of residence of a major
shareholder of a company, the sale of part of the stock of a Swedish company to
a person resident in another member state of the European Union, or an
expansion of a company's activities in other member states of the European
Union, all under ordinary business conditions. The competent authority will
consider these changed circumstances (in addition to other relevant factors

-3-

normally considered under paragraph 6 of Article 17) in determining whether
such a company will remain qualified for treaty benefits with respect to income
received from United States sources. If these changed circumstances are not
attributable to tax avoidance motives, this also will be considered by the
competent authority to be a factor weighing in favor of continued qualification
under paragraph 6 of Article 17.

3. With reference to Article 26 (Exchange ofInformation) of the Convention

It is understood that the powers of each Contracting State's competent authorities

to obtain information include powers to obtain information held by financial
institutions, nominees, or persons acting in an agency or fiduciary capacity (not
including information that would reveal confidential communications between a
client and an attorney, solicitor or other legal representative, where the client
seeks legal advice), and information relating to the ownership of legal persons,
and that each Contracting State's competent authority is able to exchange such
information in accordance with the Article.
If this is in accordance with your understanding, I would appreciate an
acknowledgment from you to that effect.
Accept, Excellency, the renewed assurances of my highest consideration.

For the Secretary of State:

PROTOCOL
AMENDING THE CONVENTION BETWEEN
THE GOVERNMENT OF THE UNITED STATES OF AMERICA
AND THE GOVERNMENT OF SWEDEN
FOR THE AVOIDANCE OF DOUBLE TAXATION AND
THE PREVENTION OF FISCAL EVASION
WITH RESPECT TO TAXES ON INCOME

The Government of the United States of America and the Government of Sweden,
desiring to amend the Convention between the Government of the United States of
America and the Government of Sweden for the A voidance of Double Taxation and the
Prevention of Fiscal Evasion with Respect to Taxes on Income, signed at Stockholm on
September I, 1994 (hereinafter referred to as "the Convention"),

Have agreed as follows:

2
ARTICLE I
Article 1 (Personal Scope) of the Convention is amended by:
a)

omitting the last sentence of paragraph 4 and substitutIng the following sentence:
"Notwithstanding the other provisions of this Convention, a former citIZen or

long-term resident of the United States may, for the period often years following the loss
ofsueh status, be taxed in accordance with the laws of the United States."; and
b)

adding a new paragraph as follows:

"6.

In the case of an item of income, profit or gain derived by or through a person that

is fiscally transparent under the laws of either Contracting State, such item shall be
considered to be derived by a resident of a State to the extent that the item

treated for

the purposes of the taxation law of such State as the income, profit, or gain of a resident."

ARTICLE"
Article 2 (Taxes Covered) of the Convention is amended by omitting
subparagraph b) of paragraph I and substituting the following:
"b)

in Sweden:
i)

the national income tax;

ii)

the withholding tax on dividends;

iii)

the income tax on non-residents;

iv)

the income tax on non-resident artistes and athletes;

for the purpose of paragraph 3 of this Article, the national capital

tax;
vi)

the excise tax imposed on insurance premiums paid to foreign

insurers; and
vii)

the municipal income tax."

ARTICLE JII
Article 4 (Residence) of the Convention is amended by omitting paragraph I and
substituting the following:
"1.

For the purposes of this Convention, the term "resident of a Contracting

State" means any person who, under the laws of that State, is liable to tax therein by

3
reason of his domicile, residence, place of management, place of incorporation, or any
other criterion of a similar nature, and also includes that State and any political
subdivision or local authority thereof. This term, however, does not include any person
who is liable to tax in that State in respect only of income from sources in that State or of
profits attributable to a permanent establishment in that State.
b)

A United States citizen or an alien lawfully admitted for permanent

residence in the United States is a resident of the United States, but only if such person
has a substantial presence, permanent home, or habitual abode in the United States. If
such person is also a resident of Sweden under this paragraph, such person will also be
treated as a United States resident under this paragraph and such person's status shall be
determined under paragraph 2.
c)

The term "resident of a Contracting State" includes a legal person

organized under the laws of that Contracting State and that is generally exempt from tax
in that State and is established and maintained in that State either:
i)

exclusively for religious, charitable, scientific, artistic, cultural, or

educational purposes; or

ii)

to provide pensions or other similar retirement benefits
pursuant to a plan."

ARTICLE IV

1. Article 10 (Dividends) of the Convention shall be omitted and the
following shall be substituted:
"ARTICLE 10
Dividends
1. Dividends paid by a company that is a resident of a Contracting State to a
resident of the other Contracting State may be taxed in that other State.
2. However, such dividends may also be taxed in the Contracting State of which the
company paying the dividends is a resident, and according to the laws of that State,

but if the beneficial owner of the dividends is a resident of the other

Contracting State, the tax so charged shall not exceed:
a)

5 percent of the gross amount of the dividends if the beneficial owner is a

company that owns shares representing at least 10 percent of the voting power in
the company paying the dividends;
b)

15 percent of the gross amount of thc dividends in all other cases.

This paragraph shall not affect the taxation of the company in respect of the profits out of
which the dividends are paid.
3.

Notwithstanding the provisions of paragraph 2, such dividends shall not be taxed

in the Contracting State of which the company paying the dividends is a resident if the
beneficial owner is:
a)

a company that is a resident of the other Contracting State that has

owned, directly or indirectly through one or more residents of either
Contracting State, shares representing 80 percent or more of the voting power
in the company paying the dividends for a 12-month period ending on the
date on which entitlement to the dividends is determined, and:
i)

satisfies the conditions of clause i) or ii) of subparagraph c) of

paragraph 2 of Article 17 (Limitation on Benefits);
ii)

satisfies the conditions of clauses i) and ii) of subparagraph e)

of paragraph 2 of Article 17, provided that the company satisfies the
conditions described in paragraph 4 of that Article with respect to the
dividends;
iii)

is entitled to benefits with respect to the dividends under

paragraph 3 of Article 17; or
iv)

has received a determination pursuant to paragraph 6 of

Article 17 with respect to this paragraph; or
b)

a pension fund that is a resident of the other Contracting State,

provided that:
i)

such dividends are not derived from the carrying on of a

trade or business by the pension fund or through an associated
enterprise; and
ii)

such pension fund does not sell or make a contract to sell the

5
holding from which such dividend is derived within two months of the
date such pension fund acquired such holding.
For the purposes of determining whether a company is entitled to benefits
with respect to the dividends under paragraph 3 of Article 17, within the
meaning of clause iii) of subparagraph a) of this paragraph, the determination
of whether a person owning shares, directly or indirectly, in the company
claiming the benefits of this Convention is an equivalent beneficiary shall be
made by treating such person as holding the same voting power in the
company paying the dividends as the company claiming the benefits holds in
such company.
4.

Subparagraph a) of paragraph 2 and subparagraph a) of paragraph 3 shall

not apply in the case of dividends paid by a U.S. Regulated Investment Company
(RIC) or a Real Estate Investment Trust (REIT). In the case of dividends paid by a
RI C, subparagraph b) of paragraph 2 and subparagraph b) of paragraph 3 shall
apply. In the case of dividends paid by a REIT, subparagraph b) of paragraph 2 and
subparagraph b) of paragraph 3 shall apply only if:
i) the beneficial owner of the dividends is an individual or pension fund,
in either case holding an interest of not more than 10 percent in the REIT;
ii) the dividends are paid with respect to a class of shares that is publicly
traded and the beneficial owner of the dividends is a person holding an
interest of not more than 5 percent of any class of the REIT's shares; or
iii) the beneficial owner of the dividends is a person holding an interest of
not more than 10 percent in the REIT and the REIT is diversi fied.
b)

For purposes of this paragraph, a REIT shall be "diversified" if the value

of no single interest in real property exceeds 10 percent of its total interests in real
property. For the purposes of this provision, foreclosure property shall not be
considered an interest in real property. Where a REIT holds an interest in a
partnership, it shall be treated as owning directly a proportion of
the partnership's interests in real property corresponding to its interest in the
partnership.

6
5.

The term "dividends" as used in this Article means income from shares or other

rights, not being debt-claims, participating in profits, as well as income from other
corporate rights that is subjected to the same taxation treatment as income from shares by
the laws of the State of which the company making the distribution is a resident, and
income from arrangements, including debt obligations, carrying the right to participate in
profits to the extent so characterized under the laws of the Contracting State in which the
income arises as well as, in the case of the United States, contingent interest ofa type that
would not qualify as portfolio interest.
6.

The provisions of paragraphs 2 and 3 shall not apply if the beneficial owner

of the dividends, being a resident of a Contracting State, carries on business in the
other Contracting State, of which the company paying the dividends is a resident,
through a permanent establishment situated therein, or performs in that other State
independent personal services from a fixed base situated therein, and the dividends
are attributable to such permanent establishment or fixed base. In such case, the
provisions of Article 7 (Business Profits) or Article 14 (Independent Personal
Services), as the case may be, shall apply.
7.

A Contracting State may not impose any tax on dividends paid by a company

which is not a resident of that State, except insofar as:
a)

the dividends are paid to a resident of that State; or

the dividends are attributable to a permanent establishment or a fixed base

situated in that State.
8.

A religious, scientific, literary, educational, or charItable organization that is

resident in Sweden and that has received substantially all of its support from persons
other than citizens or residents of the United States shall be exempt in the United States
from the United States excise taxes imposed with respect to private foundations.
9.

A company that is a resident of a Contracting State and that has a permanent

establishment in the other Contracting State, or that is subject to tax in that other
Contracting State on items of income that may be taxed in that other State under Article 6
(Income from Real Property) or under paragraph I of Article \3 (Gains), may be subject
in that other Contracting State to a tax in addition to the tax allowable under the other
provisions of this Convention. Such tax, however, may:

7
a)

in the case of the United States be imposed only on:
i)

the portion of the business profits of the company attributable to

the permanent establishment, and
ii)

the portion of the income referred to in the preceding sentence

that is subject to tax under Article 6 or paragraph I of Article 13,
that represents the "dividend equivalent amount" of those profits and
income; the term "dividend equivalent amount" shall, for the purposes of
this subparagraph, have the meaning that it has under the law of the United
States as it may be amended from time to time without changing the
general principle thereof; and
b)

in the case of Sweden be imposed only on that portion of the income

described in subparagraph a) that is comparable to the amount that would be
distributed as a dividend by a locally incorporated subsidiary.
10.

The tax referred to in subparagraphs a) and b) of paragraph 9 shall not be imposed

at a rate exceeding the rate specified in paragraph 2 a). In any case, it shall not be
imposed on a company that:
a)

satisfies the conditions of clause i) or ii) of subparagraph c) of

paragraph 2 of Article 17;
b)

satisfies the conditions of clauses i) and ii) of subparagraph e) of

paragraph 2 of Article 17, provided that the company satisfies the conditions
described in paragraph 4 of that Article with respect to an item of income,
profit, or gain described in paragraph 9;
c)

is entitled under paragraph 3 of Article 17 to benefits with respect to

an item of income, profit, or gain described in paragraph 9; or
d)

has received a determination pursuant to paragraph 6 of Article 17

with respect to this paragraph.
11.

The term "pension fund" as used in this Article means any person that:
a)

is organized under the laws of a Contracting State;

is established and maintained in that Contracting State primarily to

administer or provide pensions or other similar remuneration, including social
security payments; and

8
c)

is exempt from tax in that Contracting State with respect to the activities

described in subparagraph b).
2.

Paragraph 5 of Article 24 (Non-Discrimination) shall be omitted and the following

paragraph shall be substituted:
"5.

Nothing in this Article shall be construed as preventing imposition of a tax

described in paragraph 9 of Article 10 (Dividends)."

ARTICLE V
Article 17 (Limitation on Benefits) of the Convention shall be omitted and
the following Article substituted:
"ARTICLE 17
Limitation on Benefits
I.

A resident of a Contracting State shall be entitled to benefits otherwise accorded

to residents of a Contracting State by this Convention only to the extent provided in this
Article.
2.

A resident of a Contracting State shall be entitled to all the benefits of this

Convention if the resident is:
a)

an individual;

a Contracting State or any political subdivision or local authority thereof;

a company, if:
i)

its principal class of shares (and any disproportionate class of

shares) is regularly traded on one or more recognized stock exchanges,
and either:
A)

its principal class of shares is primarily traded on a

recognized stock exchange located in the Contracting State of
which the company is a resident (or, in the case of a
company resident in Sweden, on a recognized stock exchange
located within the European Union or in any other European
Economic Area state or in Switzerland or, in the case of a company
resident in the United States, on a recognized stock exchange

9
located in another state that is a party to the North American Free
Trade Agreement); or
B)

the company's primary place of management and control

is in the Contracting State of which it is a resident; or
ii)

at least 50 percent of the aggregate voting power and value of the

shares (and at least 50 percent of any disproportionate class of shares) in
the company are owned directly or indirectly by five or fewer companies
entitled to benefits under clause i) of this subparagraph, provided that, in
the case of indirect ownership, each intermediate owner is a resident of
either Contracting State;
d)

a person described in subparagraph c) of paragraph I of Article 4

(Residence), provided that, in the case ofa person described in clause ii) of that
subparagraph, either:
i)

more than 50 percent of the person's beneficiaries, members or

participants are individuals resident in either Contracting State; or
ii)

the organization sponsoring such person is entitled to the

benefits of this Convention pursuant to this Article; or
e)

a person other than an individual, if:
i)

on at least half the days of the taxable year at least 50 percent of

each class of shares or other beneficial interests in the person is owned,
directly or indirectly, by residents of the Contracting State of which that
person is a resident that are entitled to the benefits of this Convention
under subparagraph a), subparagraph b), clause i) of subparagraph c), or
subparagraph d) of this paragraph; and
ii)

less than 50 percent of the person's gross income for the taxable

year, as determined in the person's State of residence, is paid or accrued,
directly or indirectly, to persons who are not residents of either
Contracting State entitled to the benefits of this Convention under
subparagraph a), subparagraph b), clause i) of subparagraph c), or
subparagraph d) of this paragraph in the form of payments that are
deductible for purposes of the taxes covered by this Convention in the

10
person's State of residence (but not including arm's length payments in the
ordinary course of business for services or tangible property and payments
in respect of financial obligations to a bank that is not related to the
payor).
3.

A company that is a resident of a Contracting State shall also be entitled to the

benefits of the Convention if:
a)

at least 95 percent of the aggregate voting power and value of its shares

(and at least 50 percent of any disproportionate class of shares) is owned, directly
or indirectly, by seven or fewer persons that are equivalent beneficiaries; and
b)

less than 50 percent of the company's gross income, as determined in the

company's State of residence, for the taxable year is paid or accrued, directly or
indirectly, to persons who are not equivalent beneficiaries, in the form of
payments (but not including arm's length payments in the ordinary course of
business for services or tangible property and payments in respect of financial
obligations to a bank that is not related to the payor), that are deductible for the
purposes of the taxes covered by this Convention in the company's State of
residence.
4.

A resident of a Contracting State will be entitled to benefits of the

Convention with respect to an item of income derived from the other Contracting
State, regardless of whether the resident is entitled to benefits under paragraph 2
or 3, if the resident is engaged in the active conduct of a trade or business in the
first-mentioned State (other than the business of making or managing investments
for the resident's own account, unless these activities are banking, insurance, or
securities activities carried on by a bank, insurance company or registered
securities dealer), and the income derived from the other Contracting State is
derived in connection with, or is incidental to, that trade or business.
b)

If a resident of a Contracting State or any of its associated enterprises

carries on a trade or business activity in the other Contracting State which gives
rise to an item of income, subparagraph a) of this paragraph shall apply to such
item only if the trade or business activity in the first-mentioned State is substantial
in relation to the trade or business activity in the other State. Whether a trade or

11
business activity is substantial for purposes of this paragraph will be determined
based on all the facts and circumstances.
c)

In determining whether a person is "engaged in the active conduct of a

trade or business" in a Contracting State under subparagraph a) of this paragraph,
activities conducted by persons connected to such person shall be deemed to be
conducted by such person. A person shall be connected to another if one
possesses at least 50 percent of the beneficial interest in the other (or, in the case
ofa company, at least 50 percent of the aggregate voting power and at least 50
percent of the aggregate value of the shares in the company or of the beneficial
equity interest in the company) or another person possesses, directly or indirectly,
at least 50 percent of the beneficial interest (or, in the case of a company, at least
50 percent of the aggregate voting power and at least 50 percent of the aggregate
value of the shares in the company or of the beneficial equity interest in the
company) in each person. In any case, a person shall be considered to be
connected to another if, based on all the relevant facts and circumstances, one has
control of the other or both are under the control of the same person or persons.
5.

Notwithstanding the preceding provisions of this Article, where an enterprise of

Sweden derives insurance premiums, interest, or royalties from the United States, and,
pursuant to a tax convention between Sweden and a third state, the income consisting of
such premiums, interest, or royalties is exempt from taxation in Sweden because it is
attributable to a permanent establishment which that enterprise has in that third state, the
tax benefits that would otherwise apply under the other provisions of the Convention will
not apply to such income if the tax that is actually paid with respect to such income in the
third state is less than 60 percent of the tax that would have been payable in Sweden if the
income were earned in Sweden by the enterprise and were not attributable to the
permanent establishment in the third state. Any interest or royalties to which the
provisions of this paragraph apply may be taxed in the United States at a rate that shall
not exceed 15 percent of the gross amount thereof. Any insurance premiums to which the
provisions of this paragraph apply will be subject to tax under the provisions of the
domestic law of the United States, notwithstanding any other provision of the
Convention. The provisions of this paragraph shall not apply if:

12
a)

in the case of interest, as defined in Article II (Interest), the income from

the United States is derived in connection with, or is incidental to, the active
conduct of a trade or business carried on by the permanent establishment in the
third state (other than the business of making, managing, or simply holding
investments for the enterprise's own account, unless these activities are banking,
or securities activities carried on by a bank, or registered securities dealer); or
b)

in the case of royalties, as defined in Article 12 (Royalties), the royalties

are received as compensation for the use of, or the right to use, intangible property
produced or developed by the permanent establishment itself.
6.

A resident of a Contracting State that is not entitled to benefits pursuant to the

preceding paragraphs of this Article shall, nevertheless, be granted benefits of the
Convention if the competent authority of the other Contracting State determines that the
establishment, acquisition, or maintenance of such person and the conduct of its
operations did not have as one of its principal purposes the obtaining of benefits under
the Convention. The competent authority of the other Contracting State shall consult
with the competent authority of the first-mentioned State before denying the benefits of
the Convention under this paragraph.
7.

For the purposes of this Article:
a)

the term "principal class of shares" means the ordinary or common shares

of the company, provided that such class of shares represents the majority of the
voting power and value of the company. If no single class of ordinary or common
shares represents the maj ority of the aggregate voting power and value of the
company, the "principal class of shares" are those classes that in the aggregate
represent a majority of the aggregate voting power and value of the company;
b)

the term "disproportionate class of shares" means any class of shares of a

company resident in a Contracting State that entitles the shareholder to
disproportionately higher partiCipation, through dividends, redemption payments,
or otherwise, in the earnings generated in the other Contracting State by particular
assets or activities of the company when compared to its participation in overall
assets or activities of such company;
c)

the term "shares" shall include depository receipts thereof;

13
d)

the term "recognized stock exchange" means:
i)

the NASDAQ System owned by the National Association of

Securities Dealers, Inc. and any stock exchange registered with the U.S.
Securities and Exchange Commission as a national securities exchange
under the U.S. Securities Exchange Act of 1934;
ii)

the Stockholm Stock Exchange (Stockholmsborsen), the Nordic

Growth Market, and any other stock exchange subject to regulation by the
Swedish Financial Supervisory Authority;
iii)

the Irish Stock Exchange and the stock exchanges of Amsterdam,

Brussels, Copenhagen, Frankfurt, Hamburg, Helsinki, London, Madrid,
Milan, Oslo, Paris, Reykjavik, Riga, Tallinn, Toronto, Vienna, Vilnius and
Zurich; and
iv)

any other stock exchanges agreed upon by the competent

authorities of the Contracting States;
e)

a class of shares is considered to be regularly traded on one or more

recognized stock exchanges in a taxable year if the aggregate number of shares of
that class traded on such stock exchange or exchanges during the preceding
taxable year is at least 6 percent of the average number of shares outstanding in
that class during that preceding taxable year;
f)

a company's primary place of management and control will be in the

Contracting State of which it is a resident only if executive officers and senior
management employees exercise day-to-day responsibility for more of the
strategic, financial, and operational policy decision making for the company
(including its direct and indirect subsidiaries) in that State than in any other state,
and the staffs conduct more of the day-to-day activities necessary for preparing
and making those decisions in that State than in any other state;
g)

the term "equivalent beneficiary" means a resident of a member state of

the European Union or of any other European Economic Area state or of a party
to the North American Free Trade Agreement. or of Switzerland, but only if that
resident:

14
i)

would be entitled to all the benefits of a comprehensive

tax convention between any member state of the European Union
or any other European Economic Area state or any party to the
North American Free Trade Agreement, or Switzerland, and the
State from which the benefits of this Convention are claimed under
provisions analogous to subparagraph a), subparagraph b), clause i)
of subparagraph c) or subparagraph d) of paragraph 2, provided
that if such convention does not contain a comprehensive
limitation on benefits provision, the resident would be entitled to
the benefits of this Convention by reason of subparagraph a),
subparagraph b), clause i) of subparagraph c), or subparagraph d)
of paragraph 2 if such person were a

~sident

of one of the

Contracting States under Article 4 (Residence); and
B)

with respect to insurance premiums and to income referred

to in Article 10 (Dividends), 11 (Interest), or 12 (Royalties), would
be entitled under such convention to a rate of tax with respect to
the item of income for which benefits are being claimed under this
Convention that is at least as low as the rate applicable under this
Convention; or
ii)

is a resident of a Contracting State that is entitled to the benefits of

this Convention by reason of subparagraph a), subparagraph b), clause i)
of subparagraph c), or subparagraph d) of paragraph 2;
h)

with respect to dividends, interest, or royalties arising in Sweden

and beneficially owned by a company that is a resident of the United States, a
company that is a resident of a member state of the European Union will be
treated as satisfying the requirements of subparagraph g) i) B) for purposes of
determining whether such United States resident is entitled to benefits under this
paragraph if a payment of dividends, interest, or royalties arising in Sweden and
paid directly to such resident of a member state of the European Union would
have been exempt from tax pursuant to any directive of the European Union,
notwithstanding that the tax convention between Sweden and that other member

15
state ofthe European Union would provide for a higher rate of tax with respect to
such payment than the rate of tax applicable to such United States company under
Article 10, 11, or 12."

ARTICLE VI
Article 20 (Government Service) shall be amended by adding the following new
paragraph:
"4.

Notwithstanding paragraph 2, Sweden shall not tax a pension, paid by the U.S.

Government to Swedish citizens and residents (and those beneficiaries entitled to
survivors benefits), if the relevant individual was hired prior to 1978 by the U.S.
Government to work for the United States embassy in Stockholm or the United States
consulate general in Gothenburg and was covered under the United States Civil Service
Retirement pension plan."

ARTICLE VII
Article 23 (Relief from Double Taxation) of the Convention shall be amended by:
a)

adding the words "or former citizen or former long-term resident" after the words

"United States citizen" both in the chapeau to paragraph 3 and at the very end of
subparagraph a) of paragraph 3; and
b)

adding the words "or former citizenship or former long-term residency" after the

word "citizenship" in clause (i) of subparagraph a) of paragraph 4.

ARTICLE VIII
1.

This Protocol shall be subject to ratification in accordance with the applicable

procedures of each Contracting State. Each Contracting State shall notify the other
through the diplomatic channel, accompanied by an instrument of ratification, when it has
completed the required procedures.
2.

This Protocol shall enter into force on the 30th day after the later of the

notifications, accompanied by an instrument of ratification, referred to in paragraph 1,
and its provisions shall have effect:
a)

in the case of the United States:

16
i)

in respect of taxes withheld at source, for amounts paid or

credited on or after the first day of the second month next
following the datc on which the Protocol enters IOta force;
ii)

in respcct of othcr taxes, for taxablc years beginning on or

after the first day of January next following the date on which the
Protocol enters into force;
b)

in the case of Sweden:
i)

in respect of the taxes on income covered by Article VI, for

income derived on or after January I, 1996;
ii)

in respect of 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 Protocol enters into force;
iii)

in respect of other taxes, for taxable years beginning on

or after the first day of January next following the date on which
the Protocol enters into force.
3.

This Protocol shall remain in effect as long as the Convention remains in force.

IN WITNESS WHEREOF the undersigned, duly authorized thereto by their respective
Governments, have signed this Protocol.

DONE in duplicate at Washington on the

day of September, 2005, in the English

language.

FOR THE GOVERMENT OF THE
UNITED STATES OF AMERICA

FOR THE GOVERNMENT OF
SWEDEN

Her Excellency
Condoleezza Rice,
Secretary of State of the
United States of America.

Excellency:

I have the honor to acknowledge the receipt of your note of September 30, 2005 which reads
as follows:
I have the honor to refer to the Protocol Amending the Convention between the Government
of the United States of America and the Government of Sweden for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, which was
signed today, and to confirm, on behalf of the Government of the United States of America,
the following understandings reached between our two Governments.
1. With reference to clause ii) of subparagraph e) of paragraph 2 of Article 17 (Limitation on
Benefits) of the Convention

It is understood that in applying clause ii) of subparagraph e) of paragraph 2 of Article 17
(Limitation on Benefits) in the case of Sweden the amount of a person's deductible payments
and gross income for the taxable year shall be reduced by the amount of group contributions
paid to a Swedish resident or Swedish permanent establishment.
2. With reference to paragraph 6 of Article 17 (Limitation on Benefits) of the Convention
It is understood that in applying paragraph 6 of Article 17 (Limitation on Benefits), the legal
requirements for the facilitation of the free flow of capital and persons within the European
Union, together with the differing internal income tax systems, tax incentive regimes, and
existing tax treaty policies among member states of the European Union, will be considered.
Under that paragraph, the competent authority is instructed to consider as its guideline
whether the establishment, acquisition or maintenance of a company or the conduct of its
operations has or had as one of its principal purposes the obtaining of benefits under this
Convention. The competent authority may, therefore, determine, under a given set of facts,
that a change in circumstances that would cause a company to cease to qualify for treaty
benefits under paragraphs 2 and 3 of Article 17 need not necessarily result in a denial of
benefits. Such changed circumstances may include a change in the state of residence of a
major shareholder of a company, the sale of part of the stock of a Swedish company to a
person resident in another member state of the European Union, or an expansion of a
company's activities in other member states of the European Union, all under ordinary
business conditions. The competent authority will consider these changed circumstances (in
addition to other relevant factors normally considered under paragraph 6 of Article 17) in
determining whether such a company will remain qualified for treaty benefits with respect to
income received from United States sources. If these changed circumstances are not
attributable to tax avoidance motives, this also will be considered by the competent authority
to be a factor weighing in favor of continued qualification under paragraph 6 of Article 17.

3. With reference to Article 26 (Exchange of Inforn1ation) of the Convention
It is understood that the powers of each Contracting State's competent authorities to obtain
information include powers to obtain inforn1ation held by financial institutions, nominees, or
persons acting in an agency or fiduciary capacity (not including information that would reveal
confidential communications between a client and an attorney, solicitor or other legal
representative, where the client seeks legal advice), and inforn1ation relating to the ownership
of legal persons, and that each Contracting State's competent authority is able to exchange
such information in accordance with the Article.
If this is in accordance with your understanding, I would appreciate an acknowledgment from
you to that effect.
Accept, Excellency, the renewed assurances of my highest consideration."
I have the honor to confirm, on behalf of the Government of Sweden, that the references to
clause ii) of subparagraph e) of paragraph 2 of Article 17, paragraph 6 of Article 17 and
Article 26, as specified by you, is in accordance with our understanding.
Accept, Excellency, the renewed assurances of my highest consideration.
Dated at Washintgon, D.C., September 2005

[Gunnar Lund]

Pagelof2

PRESS ROOM

October 3,2005
JS-2960
Treasury Designates Seven AI Qaida Associates
The U.S. Department of the Treasury designated seven Egyptian individuals
pursuant to Executive Order 13224 for acting for and on behalf of Egyptian Islamic
Jihad (EIJ), a terrorist group that merged with al Qaida in 2001.
"This action targets the financing mechanisms used by those rogue actors
supporting al Qaida," said Robert Werner, Director of the Treasury's Office of
Foreign Assets Control (OFAC). "Designations are central to identifying and
disrupting the support networks fueling al Qaida's agenda."
The activities of these individuals included training and providing material support to
al Qaida, as well as conspiring to commit terrorist acts. One of the individuals,
Madhat Mursi AI-Sayyid Umar, was an explosives and chemical substances
specialist for al Qaida. Another designee, Abdullah Muhammad Rajab Abd AIRahman, was responsible for coordinating al Qaida's work with other terrorist
organizations.
These individuals are wanted by Egyptian authorities for their involvement in
terrorist cases and membership in a terrorist organization.
The United States is taking this action pursuant to United Nations Security Counsel
Resolution 1617, which requires member states to financially isolate individuals and
entities added to the UN 1267 Committee's consolidated list of terrorists tied to the
Taliban, al Qaida and UBL.
Identifying Information
AL-SIBA'I, Hani Muhammad Yusuf
AKA: YUSUF, Hani al-Sayid AI-Sibai
DOB: 1 March 1961
POB: Qaylubiyah, Egypt
Nationality: Egyptian
UMAR, Madhat Mursi AI-Sayyid
DOB: 19 October 1953
POB: Alexandria, Egypt
Nationality: Egyptian
HUSAYN ALAYWAH, AI-Sayyid Ahmad Fathi
DOB: 30 July 1964
POB: Suez, Egypt
Nationality: Egyptian
AHMAD, Zaki Izzat Zaki
DOB: 21 April 1960
POB: Sharqiyah, Egypt
Nationality: Egyptian
ABO AL-RAHMAN, Abdullah Muhammad Rajab
AKA: ABU AL-KHAYR, Ahmad Hasan
DOB: 3 November 1957
POB: Kafr al-Shaykh, Egypt
Nationality: Egyptian
AL-ISLAMBULI, Muhammad Ahmad Shawqi
DOB: 21 January 1952
POB: Minya, Egypt

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Nationality: Egyptian

MUSTAFA BAKRI, Ali Sa'd Muhammad
AKA: AL-MASRI, Abd AI-Aziz
DOB: 18 April 1966
Nationality: Egyptian
This action prohibits any transactions between U.S. persons and the designees and
also freezes any assets they may have within U.S. jurisdiction.

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PHlSS HOOM

October 3, 2005
JS-2961
Treasury Secretary Snow Appoints
David Loevinger as Financial Attache in China
Treasury Secretary John W. Snow today announced that he is appointing David
Loevinger as the Department's Financial Attache in China. Loevinger will be
responsible for direct engagement with China on a broad array on economic issues
including banking, capital markets, financial regulation, monetary policy, and
exchange rate policy.
"David's deployment comes at a critical juncture in the United State's economic
dialogue with China," said Secretary Snow. "I'm pleased we will have him on the
ground to lead our extensive communications with Chinese economic authorities at
all levels and maintain the close and continual communications on the many
economic issues that face both of our countries and the global economy."
Loevinger is currently the Deputy Assistant Secretary for Africa, the Middle East
and Asia reporting to the Assistant and Under Secretary for International Affairs.
Loevinger advises senior Treasury officials on activities of the International
Monetary Fund, World Bank, and regional development banks in these regions. He
has led efforts to encourage Asian economies to adopt flexible exchange rates in
fora such as the Asia-Pacific Economic Cooperation (APEC) and in improving the
effectiveness of U.S. financial assistance provided to Turkey, Israel, Egypt, and
Pakistan. His earlier positions at Treasury (he first joined in 1991 as a staff
economist) included Director of the Office of East Asian Nations, Special Assistant
to the Under Secretary, Economist on the Mexico Crisis Task Force, and Assistant
Attache in Paris.
In 1995-1999, Loevinger worked at the IMF, first in the U.S. Executive Director's
office and then as an economist in the Caribbean Division.
Loevinger received a BA from Dartmouth College in 1984. In 1988, he completed
a Master's in Public Policy from the Kennedy School and then spent three years
working for the Office of the U.S. Trade Representative, the Senate Banking
Committee, and the U.S. Commerce Department.

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PRESS ROOM

October 3,2005
JS-2962
Treasury Secretary Snow to Travel
to Japan and China
Visit Will Include Meetings of G-20 and the
U.S.-China Joint Economic Commission
Treasury Secretary John W. Snow will visit Tokyo and three cities in China next
week on the way to meetings of the Group of 20 finance ministers and central bank
governors in Beijing.
The Secretary will be in Tokyo October 10-11 for meetings with economic officials.
Secretary Snow is expected to meet with Japanese Finance Minister Tanigaki to
discuss economic developments in the region -- in particular, the recent return to
economic growth in Japan.
From Tokyo, Secretary Snow will travel to Shanghai, China's predominant trade
and finance center. On October 11-13 he will meet with financial sector leaders
based in Asia, and other representatives of the business community, including a
visit to the Shanghai Stock Exchange. He will also visit a new office of operations
for China's foreign exchange trading system.
On October 13, Secretary Snow will travel to Chengdu, located in Sichuan province
in western China. There the delegation will have the opportunity to observe the
progress of economic reform in China outside of the major coastal centers. The visit
will include a visit to a flight school that trains commercial pilots, a credit institution,
visits to Chengdu's business district, and other meetings.
Secretary Snow will join other finance ministers and central bank governors in
Grand Epoch City, located outside of Beijing, on October 14. The G-20 meetings
will conclude on Sunday, October 16.
Following the G-20 meetings, Secretary Snow will lead the U.S. delegation at the
U.S.-China Joint Economic Commission (JEC). Joining Snow for the JEC will be
Federal Reserve Chairman Alan Greenspan, Chairman of the Securities and
Exchange Commission Chris Cox, and Chairman of the Commodity Futures
Trading Commission Reuben Jeffery III.
The Treasury delegation will include Tim Adams, Under Secretary for International
Affairs, and David Loevinger, recently appointed as the Treasury Department's
permanent financial attache in Beijing.

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PRESS ROOM

October 4, 2005
2005-10-4-13-55-12-7669
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets
totaled $71,428 million as of the end of that week, compared to $71,750 million as of the end of the prior week.

I. Official U.S. Reserve Assets (in US millions)

September 23, 2005

TOTAL
11. Foreign

71,750

Currency Reserves 1

Euro

71,428

Yen

11,291

a. Securities

Of which, issuer headquartered in the US.

September 30, 2005

11,346

"II

I
"I

TOTAL

Euro

Yen

TOTAL

22,637

11,257

11,232

I
I

22,489

I
I

16,408

b. Total deposits with:
Ib.i. Other central banks and BIS

10,982

5,493

16,475

b.ii. Banks headquartered in the US.

b.ii. Of which, banks located abroad

Ib.iii. Banks headquartered outside the US.

10,969

b.iii. Of which, banks located in the U.S.

2. IMF Reserve Position 2

5,439

I
I
I
I

8,287

4. Gold Stock 3

11,041

5. Other Reserve Assets

II
II

I
I

0
0

13,310

3. Special Drawing Rights (SDRs) 2

I
I

13,245

I
I

8,245
11,041
0

II. Predetermined Short-Term Drains on Foreign Currency Assets
$jlptember 23, 2005

I
Euro

_1. Foreign currency loans and securities

I
I

TOTAL
0

II
I
I

September 30, 2005
Euro

TOTAL

Yen

2. Aggregate short and long positions in forwards and futures in foreign currencies vis-a-vis the U.S. dollar:
2.a. Short positions
2.b. Long positions

3. Other

I
I

I
I
I

I
I

0
0

I
I
I

p:IIWWw treas gov/pless/relC(l~es/j5
III. Contingenl

;:HlUIl-1 t:IIII 1'It:l UI ClIII:> VII

[
1. Contingent liabilities in foreign currency

rvlt"l:I"

vu.rency Assets
September 30, 2005

September 23, 2005

I
I

Euro

1.a. Collateral guarantees on debt due within 1
year

Yen

TOTAL
0

Euro

II
II

Yen

II
II

TOTAL
0

I
I

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11.b. Other contingent liabilities

2. Foreign currency securities with embedded
options
3. Undrawn, unconditional credit lines

[3.a. With other central banks

I
0

3.b. With banks and other financial institutions

3.e. With banks and other financial institutions _

I
I
I

Headquartered in the U. S.

Headquartered outside the U. S.
4. Aggregate short and long positions of options
in foreign

Currencies vis-a-vis the U.S. dollar

4.a. Short positions
4.a.1. Bought puts
[4.a.2. Written calls

14.b. Long positions

I
I

4.b.1. Bought calls
14.b.2. Written puts

Notes:

31 Gold stock is valued monthly at $42.2222 per fine troy ounce.

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PRESS ROOM

October 5,2005
JS-2963
Treasurer to Discuss Strengthening Social Security and
Financial Education in San Antonio, TX
U.S. Treasurer Anna Escobedo Cabral will travel to San Antonio, TX on Friday to
discuss President Bush's efforts to strengthen and preserve Social Security and
increase financial education in America.
The following events are open to the media:
WHAT
Hispanic Women's Network of Texas 19th Annual Conference,
Keynote Speaker
WHERE
Omni Hotel
9821 Colonnade Boulevard
San Antonio, TX
WHEN
Friday, October 7,2:00 p.m. COT

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PRESS ROOM

October 6, 2005
JS-2964

Testimony of the Honorable John W. Snow
Before the Committee on Finance
U.S. Senate
Chairman Grassley, Ranking Member Baucus and Members of the Committee,
thank you for the work you have done and are doing to help the people of the Gulf
Coast region survive and recover. And thank you for inviting me to appear before
this committee to explore the ways that Congress and the Administration can assist
in the long-term rebuilding of the Gulf Coast region.
As a nation, we continue to grieve over the losses experienced by our fellow
Americans who made the Gulf Coast region their home. There was a heartrending
loss of life and extensive loss of possessions and property. For many survivors,
there is nothing left.
The devastation of Katrina and the repeated misery brought by Rita left a scar on
this nation. But America is a strong nation and Americans are profoundly resilient.
And many are already rebuilding their communities or are anxiously waiting to start.
We intend to help them.
People in the region must rebuild their infrastructure, their homes and their
businesses. The overriding goal must be that everyone has an opportunity to build
a better life for themselves and their families. We look forward to a time when
victims can make their own future. Nothing less is acceptable.
It is critically important - and the President has made this clear - that as we help
the region, we do so in a fiscally responsible way. The President called upon
Congress this week to pay for as much of hurricane relief as possible by cutting
spending. And we will work with you to identify offsets that will free up money for
the reconstruction efforts.

Economic Background
We have a strong, vibrant economy, and that is going to be critical as we pursue
rebuilding efforts. While there is clearly no "good time" to be hit by a devastating
natural disaster, we were fortunate to be standing on very solid economic ground,
with robust underlying fundamentals, when these terrible storms struck. Our
economic strength undoubtedly enhances our ability to deal with this disaster.
With a strong economy, we can better afford to meet any challenge. I know that this
committee is keenly aware of that fact, and I appreciate your work to make our
economy the strongest and most adaptive in the world. The work that Congress did
to pass economy-invigorating tax cuts in 2001, 2002 and 2003 is one of the reasons
we are standing on solid economic ground today.
While the President's tax cuts were designed for the good of the American people
in terms of economic growth and job creation, we are reminded today that a strong
economy can also serve as a type of shelter against storms - natural or economic
that are beyond our control.
Over the short term, our economy will feel the impact of Katrina and Rita, as jobs,
property, and businesses have been lost, and gas prices have edged higher. High
fuel prices are a burden on businesses and family budgets.
These terrible storms likely took away from economic wealth in the third quarter, but
I am optimistic that rebuilding efforts will restore lost GOP by the first quarter of next

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year.
We can encourage this rebound even further by preserving the tax cuts that gave
our economy the opportunity to grow and put us on the solid footing we enjoy today
Let me be clear on this point: now is not the time to increase the tax burden on the
American people. Lower tax burdens encourage innovation, economic growth and
job creation - all the things we need to help hurricane-ravaged communities
recover and rebuild.

Treasury and IRS Action in the Wake of the Hurricanes
As the topic of this hearing recognizes, well-tailored fiscal policy is an effective tool
during times of disaster recovery. In the wake of both Katrina and Rita, the Treasury
Department and the IRS took immediate action to provide tax relief to hurricane
victims, and also to encourage the charitable giving that is so important to both
short and long-term recovery efforts.
We appreciate that the last thing people in the devastated areas needed to worry
about, in the days following these terrible storms, is taxes. So we granted tax filing
and payment relief to all affected taxpayers. We also waived certain requirements
for developers to receive the low-income housing tax credit so that displaced
victims, regardless of financial status, could have access to that housing during this
time of great need.
In the aftermath of Katrina, it quickly became clear that diesel fuel was needed for
rescue and relief efforts. Treasury has therefore provided relief from penalties for
highway use of dyed diesel fuel - a type of fuel that had been limited to certain uses
for tax purposes - in order to increase availability of diesel fuel.
We've also announced that we'll be providing additional help for business
development by giving a priority to applicants from the Gulf region for New Markets
Tax Credits. This step will help encourage businesses and investors to come back
to the region quickly to create commerce and jobs.
The IRS also assigned thousands of employees to augment the FEMA hurricane
victim registration effort and established its own dedicated toll-free disaster number
and a special section of their internet web site. So far IRS employees have
answered well over 760,000 registration calls for FEMA. They have answered more
than 30,000 calls on the special IRS toll-free line for affected taxpayers, and they
have filled orders for nearly 180,000 Disaster Relief Kits.
Commissioner Everson and the terrific employees of the IRS have done an
outstanding job. I applaud their dedication and thank them for their excellent service
to the American people.
At Treasury, we are also making sure that hurricane survivors have access to the
financial resources they need, starting with the checks they receive from the
government, like Social Security, unemployment payments, and direct disaster
assistance. This is an area where cooperation and support from private industry is
also helping us get the job done.
We also worked closely with banking regulators, who have asked the institutions
they oversee to consider all reasonable and prudent steps to assist their customers'
cash and financial needs in areas affected by Katrina and Rita.

Rebuilding: Higher, Better, Responsibly
As the President said in his September 15th address to the nation, the task of
rebuifding "will require the creative skill and generosity of a united country" and our
vision of the future is not just to rebuild, but to rebuild "higher and better."
The Administration is committed to helping the region re-build - and we should do
so in a manner that is fiscally responsible.
The relief and reconstruction efforts will be costly and are likely to have a short-term

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impact on the deficit. But these will be one-time costs. And they can be met while
also meeting the President's commitment to halve the deficit by 2009.
I appreciated the story that the President told, in his September 15th speech, about
a man in New Orleans who had lost his home. When asked by a reporter if he
would relocate, the man said, "No, I will rebuild - but I'll build higher."
Every party involved in the rebuilding and revitalization of the region - from
individuals to businesses to government - must embrace the attitude of that man,
an individual who has lost so much but will prevail because he lives by a code of
common sense and responsibility as well as all-American optimism.
To spend taxpayer dollars on anything that does not "build higher," that does not
provide essential relief or generate real progress, or that can be washed away by
the next storm, would be irresponsible.
While it is impossible, at this point, to assign a dollar figure to the federal rebuilding
efforts, we are committed to principled, disciplined spending that is commensurate
with the needs of the region.
We must approach this task with a number of clear goals and be mindful of avoiding
moral hazard.
First, we must minimize the exposure of individuals to harm from future disasters.
Clearly, the physical disaster protection needs of the region must be met.
Second, redevelopment plans must minimize the future exposure of all taxpayers,
in recognition of the fact that the federal government is effectively often the insurer
of last resort in large-scale disasters. In other words, we should not set a precedent
that the taxpayer is the first-dollar insurer in all disasters.
Finally, redevelopment must tap the resources of the private sector and all of the
efficiency and innovation that it brings.

Federal Action to Date
As you well know, over $60 billion has been appropriated to the FEMA Disaster
Relief Fund by Congress for the Katrina emergency response. As of last week,
$19.1 billion of the Disaster Relief Fund has been allocated for programs consistent
with the Stafford Act and past practice, namely human services (mostly housing
assistance), infrastructure, mitigation, operations and administration.
You have also passed tax relief to assist the victims and encourage rebuilding, and
I applaud you for these actions. The people of the region are appreciative to the
members of this Committee for acting quickly and decisively, and in a bipartisan
manner. We look forward to working with you and hope the same spirit and
cooperation will produce a second tax bill in the coming weeks.

The President's Proposals
The President has proposed a number of initiatives to spur rebuilding - and a better
life - in the Gulf Coast. We look forward to working with the members of this
Committee to bring these proposals to fruition, and I'd like to outline their basic
purpose for you today.
A Gulf Opportunity Zone, or GO Zone, would help local economies devastated by
Hurricane Katrina by providing tax relief and loans for businesses and
entrepreneurs who invest in the region and create jobs. Small businesses in the GO
Zone would be able to double their business expensing from $100,000 to $200,000
for investments in new equipment, take advantage of a 50 percent bonus
depreciation, and receive tax relief for the building of new structures.
The GO Zone would also make available more funding for loans and loan
guarantees for small businesses, including minority-owned enterprises, to get them
up and running again.

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The Gulf Coast hurricanes were specific and devastating events. But there is an
American truism that will apply to the recovery of the area just as it has applied to
the incredible growth and success of our country since its inception:
entrepreneurship will create jobs and opportunity and help break the cycle of
poverty. GO Zones are designed to facilitate that power of entrepreneurship and
small business to the Gulf Coast.
The President has also proposed worker recovery accounts to help those who need
extra help finding a job - a key to independence and a better life.
Finally, the President has proposed an urban homesteading initiative to provide a
new beginning, in the form of a new home, for lower-income hurricane evacuees.
Homeownership is one of the great strengths of any community, and it must be a
central part of our vision for the revival of this region.

The Federal Role: Getting the Right Balance
The size and the scope of hurricane damage is unprecedented in our history. On an
individual level, losses came in the form of homes, jobs and loved ones.
Economically, lost income and infrastructure damage have national significance.
That said, it is essential that the Federal government play an appropriate role, but it
should avoid taking steps that are excessive. We must tailor our response
appropriately.
No one can say with certainty how much it will take to rebuild the region. The
Federal government is still assessing the cost of lost infrastructure, for example.
State and local governments are still grappling with the most immediate needs; they
and community leaders will need time to plan.
How can we draw the lines? Much of that has yet to be determined. We must first
be sure we understand the nature of the losses, some of which will be covered by
insurance and reserves.
The Administration is seeking a backstop for local and municipal governments, to
the extent traditional forms of support such as their own tax base, borrowing
capacity, and state aid prove insufficient to provide essential services. We will work
with the Congress to make sure this aid is effective.
For instance, some have proposed guarantees or other backstops of local and
municipal bond issuance. In this area, I want to be very clear: while relief is needed,
federal assumption or guarantees of localities' debt is highly undesirable and
something Treasury would oppose. A federal bailout in the form of Treasury
guaranteeing municipal securities could result in a risk premium on Treasury
issuance going forward.
Providing a guarantee - a government-sponsored protection of investors - would
be an intrusion in the private markets, disrupting the assessment of risk, which is
essential to the proper function of markets. More importantly, such a guarantee
would do little to put actual money in the hands of those who need it most - the
individual victims. We cannot support that.

The Task Ahead
The task ahead is not simple, but America is no stranger to struggle, nor to
solutions. We picked ourselves up after 9/11 and other disasters, and we have the
will and the resources and the resolve to do so again. It is the spirit of Americans to
pick themselves up, to rebuild and to be stronger than ever before.
Let me close by laying out a course of action that I believe will translate to the
fiscally responsible rebuilding that I believe we are all committed to:
•
•

Build infrastructure that mitigates the future exposure to storm damage.
Avoid moral hazard by taking steps to promote and encourage prudent
future planning including the appropriate role of insurance.

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• Avoid damaging the national economy and our financial system.
Thank you, we look forward to working with you, and I look forward to taking your
questions.

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PRESS ROOM

October 6, 2005
JS-2965
Statement of Jennifer L. Dorn
Nominee for United States Alternate Executive Director
of
The International Bank for Reconstruction and
Development
Before the Committee on Foreign Relations
Chairman Lugar, Senator Biden, and distinguished Members of the Committee,
thank you for the opportunity to appear before you today. I am grateful to President
Bush for my nomination to serve as the United States Alternate Executive Director
of the International Bank for Reconstruction and Development. If confirmed, it will
be an honor to serve under Secretary Snow and work with the Treasury
Department to help ensure that America's investments in the World Bank stimulate
growth and reduce poverty in developing countries throughout the world.
This is a critical time in the history of the World Bank. The international community
is facing profound challenges in fighting acute poverty, disease and strife. At the
same time, President Bush has made unprecedented commitments to development
and democracy throughout the world; the U.S. Congress, with the leadership of this
Committee, has provided historic levels of support; and Mr. Wolfowitz brings strong
leadership to an institution with an increasingly complex and vital mission.
It has been my privilege to enjoy a life-long career in public service. I have held
leadership positions in a wide range of not-for-profit and government organizations,
from the Federal Transit Administration to the American Red Cross; from the
National Health Museum to the U.S. Department of Labor. I have been honored to
work for and with people, like Senator Dole, who are dedicated to making a
difference in the lives of people in need.
In its many ambitious and important projects, the World Bank strives to promote
economic growth, while living up to the highest standards of financial stewardship;
to improve the quality of life of millions of people in need, while protecting the
environment. This mission is both inspiring and extraordinarily difficult.
Notwithstanding my passion for the mission of the World Bank, I recognize that
wanting to "do good" is not enough; results are the true measure of success and
measurement of results is critical to insure that taxpayer investment - domestic or
international - produce the intended effect. At the Federal Transit Administration,
for example, I put into place a system of executive performance accountabilities tied
to the effectiveness of a $7 billion annual investment in public transportation.
Among the important results we identified, none was more meaningful than living up
to the President's charge to "bring back New York" after the horrific events of
September 11. Our urgent mission was to expeditiously deliver and ensure good
stewardship of $4.5 billion appropriated by Congress to restore and rebuild the
transportation infrastructure destroyed in Lower Manhattan. Like the other transit
projects already underway in Lower Manhattan, this project will help drive economic
growth; it will be delivered on time and within budget; and it will be completed with
careful attention to complex environmental challenges and the importance of
honoring the memory of the victims of September 11.
To ensure rigorous financial discipline, we developed and utilized a risk assessment
and management tool that is now an essential component of FT A's evaluation of
major capital projects. To minimize negative environmental impacts while
expediting these critical projects, we pioneered an effective partnership among
Federal, State and local stakeholders that recognized the potential impacts of the
multiple construction projects that would be underway simultaneously in Lower

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Manhattan. And to help protect the sanctity of the World Trade Center site, we
reached out to the victims' families and the affected community as project plans
were developed. And I am proud to say, just weeks ago Transportation Secretary
Mineta broke ground for the new transit station that will serve millions of
passengers at the World Trade Center site.
The challenges we faced in rebuilding New York City were not unique. We knew,
as the World Bank knows, that we would find better solutions by building strong
partnerships.
As for my International experience, when I was senior vice president of the
American Red Cross, I oversaw its international disaster relief and assistance to
victims of war. Among other responsibilities, I served as the American Red Cross
lead representative to the Federation, composed of Red Cross and Red Crescent
societies from 154 countries, and served on its Executive Committee. In addition, I
was personally asked and agreed to serve on an international commission to
resolve differences between the International Committee of the Red Cross (ICRC)
and the Federation of Red Cross and Red Crescent Societies (Federation), to
ensure that humanitarian relief efforts could proceed effectively during conflict
situations.
During my tenure at the Red Cross, the world faced devastation of unimaginable
proportions in Africa, the former Soviet republics, and Armenia. I was awed by the
generosity and good will of the American people as they supported Red Cross relief
efforts. Today, we are dealing with back-to-back natural disasters in our own
country with great confidence that those affected will be able to rebuild their lives.
Our confidence in America's resilience is rooted in our commitment to the principles
that have been articulated by President Bush as the foundation for effective
international aid, as well. As the President has reminded us, "Where there is
freedom and the rule of law, every dollar of aid, trade, charitable giving, and foreign
and local investment can rapidly improve people's lives."
In America, we have established the fundamental building blocks that you, Mr.
Chairman, have recognized as critical to the effectiveness of the investments that
American taxpayers make through the World Bank. Fighting corruption and
increasing transparency are key priorities of the U.S. government at the World
Bank. Your leadership in this arena has made a vital contribution to the efforts of
the World Bank and other multilateral banks to improve living conditions around the
world. And it has inspired the World Bank to establish some of the highest
standards of ethics and stewardship in its own operations. Nonetheless, our work
must be expanded because corruption, where it exists, is complex and deeply
rooted.
If confirmed, I will dedicate the full measure of my leadership experience to
ensuring that the high expectations established by the President and this
Committee are achieved. Like President Bush, I believe that "Economic aid that
expects little will achieve little. Economic aid that expects much can help to change
the world."
Thank you very much, Mr. Chairman.

,;IIWWw.treas.gov/prcss/reletlSe5/js2965 htm

10/3112005

federal financing
WASHINGTON, D.C. 20220

bankNEWS

FEDERAL FINANCING BANK

SETEMBER 2005

Brian D. Jackson, Chief Financial Officer, Federal Financing
Bank (FFB) announced the following activity for the month of
August 2005.
FFB holdings of obligations issued, sold or guaranteed by
other Federal agencies totaled $27.6 billion on August 31, 2005,
posting an increase of $126.6 million from the level on July 31,
2005. This net change was the result of an increase in net
holdings of government-guaranteed loans of $126.6 million.
The
FFB ~ade 47 disbursements and received 8 prepayments during the
month of August.
Attached to this release are tables presenting FFB August
loan activity and FFB holdings as of August 31, 2005.

Oepartmen~ 01 the Trea3Ur/
LIbrary

NOV I 5 2005

JS-2966

C1l

C\J

N
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Page 2
FEDERAL FINANCING BANK
AUGUST 2005 ACTIVITY

Borrower

Date

Amount
of Advance

8/01
8/01
8/01
8/09
8/11
8/11
8/12
8/22
8/24

$6,087,444.17
$89,055,864.27
$10,024,555.47
$3,993,387.97
$174,770.00
$67,672.38
$4,901.74
$5,480.50
$4,274,968.76

2/01/35
2/01/35
2/01/35
8/01/35
7/31/25
2/01/35
7/31/25
7/31/25
8/01/35

4.581%
4.581%
4.581%
4.720%
4.639%
4.697%
4.565%
4.439%
4.511%

8/04

$230,783.86

1/02/32

4.488% S/A

8/01
8/01
8/01
8/01
8/01
8/01
8/05
8/08
8/09
8/09
8/10
8/12
8/12
8/12
8/15
8/15
8/16
8/17
8/18
8/19
8/19
8/22
8/22
8/22
8/23

$5,000,000.00
$5,000,000.00
$1,250,000.00
$5,000,000.00
$5,000,000.00
$283,480.00
$851,000.00
$1,544,000.00
$1,760,000.00
$600,000.00
$19,571,000.00
$21,000.00
$1,000,000.00
$800,000.00
$2,993,277.58
$17,000.00
$865,000.00
$180,000.00
$4,016,554.87
$3,675,000.00
$493,000.00
$1,400,000.00
$1,329,000.00
$2,000,000.00
$9,634,000.00

7/02/35
7/02/35
7/02/35
7/02/35
7/02/35
12/31/29
12/31/37
12/31/36
12/31/36
12/31/20
1/03/34
12/31/37
12/31/35
12/31/08
12/31/15
12/31/37
1/03/22
1/02/35
12/31/15
12/31/30
12/31/35
1/03/40
12/31/37
12/31/37
1/03/39

Final
Maturity

Interest
Rate

GOVERNMENT - GUARANTEED LOANS
GENERAL SERVICES ADMINISTRATION
San Francisco OB
San Francisco Bldg Lease
San Francisco OB
San Francisco Bldg Lease
Foley Square Office Bldg.
San Francisco OB
Foley Services Contract
Foley Services Contract
San Francisco Bldg Lease

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

DEPARTMENT OF EDUCATION
Tuskegee Uni v .
RllmL UTILITIES SERVICE
Brazos Electric #2086
Brazos Electric #2086
Brazos Electric #2086
Brazos Electric #2086
Brazos Electric #2086
Missoula Elec. #688
Rock County Electric #2029
Scenic Rivers Energy #2013
San Miguel Power #824
Scott County Telephone #2175
Basin Electric #2210
Fox Islands Elec. Coop. #2106
Grundy Elec. Coop. #744
Orange County Elec. #2179
Farm Mut Tele Coop IA #2220
fux Islands Elec. Coop. #2106
Blackduck Telephone Co. #2215
Grundy County Elec. #689
Farm Mut Tele Coop IA #2220
East Kentucky Power #753
McLennan County Elec. #784
Bailey County Elec. #2219
Lighthouse Elec. #2090
S. Indiana Rural Elec. #2059
Kamo Electric #2162

4.426%
4.426%
4.426%
4.426%
4.426%
4.425%
4.485%
4.546%
4.567%
4.423%
4.552%
4.487%
4.487%
4.121%
4.143%
4.403%
4.290%
4.386%
4.178%
4.360%
4.345%
4.371%
4.370%
4.370%
4.374%

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 3
FEDERAL FINANCING BANK
AUGUST 2005 ACTIVITY

Borrower
-SM-Me Power #2160
Farmer's Rural Elec. #2046
South Miss. Elec. #2109
St. Croix Electric Coop. #801
central Virginia Elec. #2126
East Kentucky Power #2171
Farmers Elec Coop Corp #877
Range Telephone #2231
Tri-State #808
Tri -State #2052
Tri-State #2172
East Kentucky Power #2171

sf A is a Semiannual rate.
Qtr. is a Quarterly rate.

Date

Amount
of Advance

Final
Maturity

Interest
Rate

8/24
8/25
8/25
8/25
8/26
8/26
8/26
8/26
8/26
8/26
8/26
8/30

$1,400,000.00
$3,000,000.00
$2,316,000.00
$650,000.00
$1,000,000.00
$30,000,000.00
$1,000,000.00
$5,839,164.47
$169,000.00
$8,464,000.00
$1,258,000.00
$30,000,000.00

12/31/37
12/31/37
1/03/34
12/31/35
1/03/39
1/03/39
1/02/35
12/31/14
12/31/31
1/03/34
12/31/35
1/03/39

4.361%
4.353%
4.353%
4.354%
4.343%
4.343%
4.343%
4.071%
4.336%
4.342%
4.343%
4.345%

Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.
Qtr.

Page 4

FEDERAL FINANCING BANK HOLDINGS

(in millions of dollars)

Program

August 31. 2005

Agency Debt:
U.S. Postal Service

Jul y 31. 2005

Monthly
Net Change
8/1/05 - 8/31/05

Fiscal Year
Net Change
10/1/04- 8/31/05

Subtotal*

$0.0
$0.0

-$1,800.0
-$1.800.0

Agency Assets:
FmHA-RDIF
FmHA-RHIF
Rural Utilities Service-CBO
Subtotal *

$0.0
$230.0
$4,270.2
$4.500.2

$0.0
$0.0
$0.0
$0.0

-$200.0
-$450.0
$0.0
-$650.0

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*

$1. 255.3
$125.8
$0.2
$971.9
$2.145.9
$5.5
$375.7
$18.197.8
$40.8
$2.7
$23.121. 7

$1. 289.0
$125.6
$0.2
$971.9
$2.143.9
$5.5
$375.7
$18.038.4
$42.1
$2.7
$22.995.1

-$209.6
$7.8
-$0.2
-$82.9
$4.6
-$2.1
-$122.9
$1. 236.7
-$15.7
-$0.1
$815.6

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

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

-$33.7
$0.2
$0.0
$0.0
$2.0
$0.0
$0.0
$159.4
-$1. 3
$0.0
$126.6

$27.622.0

$27.495.3

$126.6

-$1. 634.4

Grand total*
* figures may not total due to rounding
+ does not include capitalized interest

Page 1 of2

PRESS ROOM

October 7, 2005
JS-2967

Treasury Releases Schedule for Secretary Snow's Visit to Japan and China
Treasury Secretary John W. Snow will visit Tokyo and three cities in China next
week on the way to meetings of the Group of 20 finance ministers and central ban,
governors in Beijing.
Secretary Snow will be in Tokyo October 10-11 for meetings with economic
officials. Secretary Snow is expected to meet with Japanese Finance Minister
Tanigaki to discuss economic developments in the region -- in particular, the recen
return to economic growth in Japan.
The following events are open to credentialed media with photo identification:

9:30 AM
Press Conference
U.S. Embassy, Floor 1
10-5 Akaska 1-Chome Minato-Ku
Tokyo,Japan

11:45 AM
Site Visit to Shanghai Stock Exchange
528 South Pudong Road
Shanghai, China
*Media availability to follow visit
Thur~day,

Octoper 13,-~W05- Chengdu, Chjl1a

9:00 AM
Tour of Mulan Market
Mulan Town
Xindu District
Chengdu Municipality
Chengdu, China
9:30 AM
Site Visit to Chengdu Rural Credit Union
Mulan Town
Xindu District
Chengdu Municipality
Chengdu, China
*Media availability to follow visit
10:30 AM
Meet with Cessna Officials at Civil Aviation Flight University of China Guanghan
Sichuan, China
11:10 AM
Tour of Civil Aviation Flight University of China
Guangham
Sichwan, China

P://WWw.treas.gov/pless/relC(l~es/j52967 htm

10/3112005

Page 2 of2
12:30 PM
Formal Greeting Ceremony
Jin Jang Hotel
80 Erduan (2nd Section)
Ren Min Nan Lu-People's South Rd.
Chengdu, China
Sunday, October 16, 2005- Beijing, China
12:30 PM
Post G-20 Press Conference
Zheng'An Palace Hotel
Beijing, China
2:30 PM
U.S.- China Joint Economic Commission
Opening Plenary Remarks
West Multifunction Hall, 3rd Floor
Zheng'An Palace Hotel
Beijing, China
* Open for photo at top of meeting
Monday, October 17, 2Q05- Beijing, China
4:30 PM
U.S.-China Joint Economic Commission
Closing Session
Four Season Hall, 1st Floor, Bldg 6
Diaoyutai Guest House
Beijing. China
* Open for photo at top of meeting

9:00 AM
Securities Industry Association
Remarks
Grand Hyatt Hotel
1 East Chang An Avenue
Beijing, China

P://WWw.treas.gov/p{ess/relca~es/j52967 htm

10/31/2005

Page 1 of 1

PRESS ROOM

October 7, 2005
JS-2968

Statement by Treasury Secretary John Snow on
September Jobs Report
Today's job numbers show that the U.S. economy has great underlying strength.
Despite the devastation wrought by Hurricane Katrina, payrolls declined only
35,000, a much lower figure than expected and also less than the combined upward
revisions of 77 ,000 jobs in the previous two months. We would not be seeing this
kind of performance in the face of such a great challenge unless the fundamentals
of our economy were exceptionally strong.
The President's economic plan has placed the economy on a path of growth and
put us in a stronger position from which to deal with the effects of Hurricanes
Katrina and Rita. We must keep the economy on the right path by keeping taxes
low and helping individuals and businesses rebuild by implementing the President's
reconstruction proposals including Gulf Opportunity Zones, Worker Recovery
Accounts and the Urban Homesteading Initiative.

P://WWw.treas.gov/pless/relC(l~es/j52968 htm

10/3112005

Page 1 of 2

PRESS ROOM

October 11, 2005
js-2969

Statement by Treasury Secretary John Snow
Embassy of the United States
Tokyo, Japan
Good morning . I'd like to thank Ambassador Schieffer for his exceptional advice
and counsel and for the first-rate assistance of his staff here at Embassy Tokyo .
I also want to thank my good friend and colleague , Minister Tanigaki , for making
time to meet with me during this very busy time . As always, we had an excellent
and engaging discussion about economic developments in Japan, the region and in
the global economy. I always look forward to our visits . We are in frequent contact
and have worked closely together on important issues in meetings of the G7
finance ministers and central bank governors where Minister Tanigaki is recognized
as a forceful and effective leader. Japan is fortunate to have Minister Tanigaki
leading its economic policy .
During our dinner last night, we discussed the earthquake which hit Pakistan this
weekend , and the tragic loss of life there , including the loss of a Japanese aid
worker and his son. I took the opportunity to express my sympathy to the Minister
for Japan's loss. America's thoughts and prayers are with all of the vi ctims of this
disaster. President Bush is committed to assisting in recovery efforts in that nation .
I have visited Japan many times, especially in my previous career in business , so I
have long had a special interest in relations between our two nations. It is my view
that the relationship between Japan and the United has never been stronger than
today . We are inextricably linked by trade and financial exchanges, by our shared
democratic values, by mutual security responsibilities, and by the vitality of our
growing cultural ties.
As the two largest national economies in the world today, it is vitally important that
we have such a strong, cooperative relationship, and it is equally important for our
citizens and for the global economy , that we generate strong economic growth.
The U.S. economy, in spite of the devastating hurricanes which hit the Gulf Coast
region last month, and high energy prices, continues to demonstrate strong
economic growth. Although we will see slightly slower economic growth during this
quarter as a result of the storms, I expect robust economic growth to return during
the first quarter of 2006 and beyond . It is a testament to the fle xibility and resiliency
of the U.S. economy that it can withstand the forces of economic shocks. Our abil ity
to do so is a direct result of our commitment to good economic policy, resulting in
strong growth, a corresponding increase in tax receipts , and a sharply reduced
fiscal deficit this year.
I am very pleased to see that the Japanese economy is also responding to sound
policy and demonstrating economic strength. The reform program of Prime Mini ster
Koizumi and Minister Tanigaki is clearly showing results . The improvement in the
banking sector with the resolution of non-performing loans, the reduction in
unemployment, and the improving health of the corporate sector, for example, are
evidence of a strengthening economy. These results -- and the statement of
popular support evident from the recent elections -- should serve as a guide to
other nations. Implementing econom ic reforms is never easy in any country, but the
fruits of reform are only available to those willing to take risks and implement sound
policy. Japan will continue to succeed if it stays on this path .
I was also able to renew my acquaintances with business leaders in Japan including my good friend Dr. Toyoda. I have developed extensive relationships with
Japanese business leaders throughout my career, so it was good to hear their

P://WWw.treas.g()v/pless/relca~es/j52969 .htm

10/3112005

Page 2 of2
candid assessments of the Japanese economy.
The United States welcomes a vibrant, rejuvenated Japanese economy A growing,
prosperous Japan is in our mutual interest. By sustaining and strengthening our
economic relationship, together America and Japan will continue to contribute to
global growth and security.
Thank you.
-30-

P://WWw.treas.gov/pless/relC(l~es/j52969 htm

10/3112005

Page 1 of2

PRESS ROOM

October 11 , 2005
2005-10-11-11-57 -57 -16568

u.s. International

Reserve Position

The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets
totaled $71,521 million as of the end of that week, compared to $71,428 million as of the end of the prior week.
I. Official U.S. Reserve Assets (in US millions)
September 30, 2005

I
11. Foreign

TOTAL

October 7, 2005

71,428

Currency Reserves 1

Euro
11,257

la. Securities

Yen

11,232

IOf which, issuer headquartered in the US.

71,521
II

TOTAL

Euro

22,489

11,311

16,408

I
I
I
I
I

Yen

11,180

I
/I

TOTAL
22,491

b. Total deposits with:
Ib.i. Other central banks and BIS

Ib.ii. Banks headquartered in the US.

10,969

I
I

5,439

b.ii. Of which, banks located abroad

b.iii. Banks headquartered outside the US.

11,025

5,414

16,439
0

I
I

b.iii. Of which, banks located in the U.S.

2. IMF Reserve Position 2

13,245

8,245

11,041

3. Special Drawing Rights (SDRs) 2
4. Gold Stock 3
5. Other Reserve Assets

0
0
13,282
8,268
11,041
0

II. Predetermined Short-Term Drains on Foreign Currency Assets

September 30, 2005
Euro

Yen

TOTAL

1. Foreign currency loans and securities

October 7, 2005

Yen

Euro

I
I

TOTAL

2. Aggregate short and long positions in forwards and futures in foreign currencies vis-a-vis the U.S. dollar:

[2.a. Short positions

2.b. Long positions

3. Other

I
I
I

I
I

/I
/I

III. Contingent Short-Term Net Drains on Foreign Currency Assets

[
1. Contingent liabilities in foreign currency

October 7, 2005

September 30, 2005

Euro

1.a. Collateral guarantees on debt due within 1
year

P://WWw.treas.gov/pless/relca~es/j520C5101111575716568.htm

Yen

TOTAL

II
II

Euro

Yen

TOTAL

II
II
10/31/2005

Page2of2
11.b. Other contingent liabilities

2. Foreign currency securities with embedded
options

3. Undrawn, unconditional credit lines

II
0

~a. With other central banks
3.b. With banks and other financial institutions

~eadquartered in the U. S.
3.e. With banks and other financial institutions
Headquartered outside the U.S.

4. Aggregate short and long positions of options
in foreign

Currencies vis-a-vis the U.S. dollar

I
I

4.a. Short positions

[4.a.1. Bought puts
14.a.2. Written calls
14b. Long positions

I
I

14.b.1. Bought calls
14.b.2. Written puts

Notes:
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market Account
(SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect marked-to-market values, and
deposits reflect carrying values. Foreign Currency Reserves for the latest week may be subject to revision. Foreign Currency
Reserves for the prior week are final.

21 The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF and are
valued in dollar terms at the official SDR/doliar exchange rate for the reporting date. The entries for the latest week reflect any
necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month end.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce.

P://WWw.treas.gov/pless/relC(l~es/j520051O!111575716568.htm

10/3112005

Page 1 of 1

PRESS ROOM

10 view or pnnt the put- content on thiS page, download the tree Ado/)e® Acro/)alf.!3! Headef(fJ).

October 11, 2005
JS-2970
Treasury Officials to Join Unveiling of FloridaFIRST in Miami
Treasury Under Secretary for Domestic Finance Randal Quarles and Deputy
Assistant Secretary for Critical Infrastructure Protection and Compliance Policy
Scott Parsons will be in Miami, Florida on Thursday to join in the unveiling of the
FloridaFIRST Regional Coalition.
FloridaFIRST is a regional coalition formed by a group of financial institutions based
in Miami with the goal of enhancing the resilience of the financial sector in South
Florida to handle threats from terrorism and natural disasters. FloridaFIRST is a
collective effort to protect the homeland through public and private partnerships.
This regional coalition will help officials at all levels of government coordinate with
the financial sector in South Florida to share information, promote policies and
programs that increase preparedness and to speed the recovery of financial
institutions should there be an incident of disruption.
FloridaFIRST is the second regional coalition established in the U.S.
ChicagoFIRST was created in 2003 and served as a model for private sector
coalitions dedicated to working to protect financial institutions. (For more
information on ChicagoFIRST:
http://www. treasury .gQv/press!reloasosireports/chicagofi rst_ hand boo k. pdf)
The following event is open to the media:

WHO
Under Secretary for Domestic Finance Randal Quarles
Deputy Assistant Secretary for Critical Infrastructure Protection and Compliance
Policy Scott Parsons
WHAT
Press Conference on the Unveiling of the FloridaFIRST Regional Coalition
WHERE
Hyatt Regency Coral Gables
50 Alhambra Circle
Coral Gables, FL
WHEN
Thursday, October 13,2:00 p.m. EDT

P://WWw.treas.gov/pless/relC(l~es/j52970.htm

10/3112005

Page 1 of 1

PRESS ROOM

October 14,2005
JS-2971

Treasury Names David Nason Deputy Assistant Secretary
The Treasury Department today announced the appointment of David G. Nason as
Deputy Assistant Secretary for Financial Institutions Policy.
Nason comes from the Securities & Exchange Commission where he served as
counsel to Commissioner Paul S. Atkins. In this capacity, he served as a primary
adviser for capital raising and corporate governance issues, Gramm-Leach-Bliley
compliance, and hedge fund and mutual fund initiatives. Prior to joining the SEC,
Nason was an attorney at Covington & Burling in Washington, D.C., where he
focused on securities offerings, mergers and acquisitions, and federal tax planning.
Nason previously served as law clerk to the Honorable Marvin J. Garbis of the U.S.
District Court for District of Maryland.
A native of Providence, Rhode Island, Nason received a B.S. in Finance from The
American University, and a J.D., summa cum laude, from The Washington College
of Law at The American University. He is married and has two young daughters.

P://WWw.treas.gov/pless/relC(l~es/j52971.lJtm

10/3112005

Page 1 of 1

PRESS ROOM

October 14, 2005
JS-2972
Treasury Names Kevin MacMillan Deputy Assistant Secretary
The Treasury Department today announced the appointment of Kevin MacMillan as
Legislative Affairs Deputy Assistant Secretary for Banking and Finance.
MacMillan recently served as senior counsel to the House Financial Services
Committee. In this capacity he drafted legislation for members of the Committee,
organized legislative and investigative hearings, and performed policy analysis and
interpretation on issues including government sponsored enterprises, banking,
payment systems, and international trade and monetary policy.
A native of Pittsburgh, Pennsylvania, MacMillan received a B.A. from Gettysburg
College, a J.D. from Tulane University School of Law, and an L.L.M. degree in
securities and banking regulation from the Georgetown University Law Center.

P://WWw.treas.gov/pless/relC(l~es/j52972.htm

10/3112005

Page 1 of 5

PRESS ROOM

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October 14, 2005
js-2973

Joint Statement Of John W. Snow, Secretary Of The Treasury, And Joshua B.
Bolten, Director Of The Office Of Management And Budget, On Budget
Results For Fiscal Year 2005
SUMMARY
The Administration today is releasing the September 2005 Monthly Treasury
Statement of Receipts and Outlays of the United States Government. The
statement shows the actual budget totals for the fiscal year that ended September
30, 2005, as follows:
•

A deficit of $319 billion;

•

total receipts of $2,154 billion; and

•

total outlays of $2,473 billion.

"The year-end budget report highlights the positive results of the President's
economic leadership. Lower taxes and pro-growth economic policies have created
millions of jobs and a growing economy that has swelled tax revenues over the last
year. While deficits are never welcome, the fact that we finished FY 2005 with a
much lower-than-expected deficit is encouraging news.
While the effects of Hurricanes Katrina and Rita will be felt in the short term, we
remain on a path to meet the President's goal of cutting the deficit in half by 2009.
It's important that we ensure continued economic growth by keeping the President's
economic policies in place and making the tax cuts permanent."
- Secretary John W. Snow
"The President's pro-growth policies have succeeded in sustaining an economic
expansion that has created 4.2 million jobs since May 2003 and produced a 14.6
percent increase in tax receipts this year.
As we help the people of the Gulf Coast region recover and rebuild from Hurricane
Katrina, it is more important than ever that we continue the pro-growth economic
policies that have contributed to a strong expansion and a surge in revenues. We
must also redouble our efforts to reduce unnecessary spending elsewhere in the
budget to help offset recovery costs and keep us on track to meet the President's
goal of cutting the deficit in half by 2009."
- Director Joshua B. Bolten

Table 1. TOTAL RECEIPTS, OUTLAYS AND SURPLUS/DEFICIT (-)
(in billions of dollars)
Receipts

Ol!tI(3y~ SurpLus/Deficit (-)

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2004 ActuaL...................................

1 ,880

2,293

-413

2,053

2,479

-427

FY 2005 Estimates:
FY 2006 Budget.............
FY 2006 Mid-Session Review..

2,140

Actual ......................................... 2,154

2,472
2,473

-333
-319

The FY 2005 unified deficit was $319 billion, or an estimated 2.6 percent of the
Gross Domestic Product (GOP). As a percent of GOP, the 2005 deficit was lower
than the deficits of 16 of the last 25 years. The deficit for FY 2005 was $14 billion,
or 4.2 percent, lower than projected in the Mid-Session Review (MSR). Receipts
were higher by $15 billion and outlays were higher by $1 billion. The deficit was
$108 billion, or 25.3 percent, lower than projected less than a year ago in the FY
2006 Budget. Receipts were higher by $101 billion and outlays were lower by $6
billion.
Receipts in 2005 were 14.6 percent higher than in 2004, the highest increase in
receipts in over 20 years. Outlays grew by 7.9 percent above the previous year.
The 7.9 percent increase in total outlays was driven by growth in five major
agencies - the Departments of Agriculture, Defense - Military, Education,
Homeland Security, and Veterans Affairs - net interest, and Medicare. Altogether,
these outlays grew by 12.6 percent, and accounted for $137 billion of the $180
billion increase in outlays over 2004. The total growth in outlays is somewhat
reduced by slower growth rates in a number of other agencies and programs.
RECEIPTS
Total receipts for FY 2005 were $2,154 billion, $15 billion higher than the MSR
estimate of $2,140 billion. Almost $13 billion of this increase was attributable to
higher-than-estimated collections of corporation income taxes. The remaining
increase was attributable to higher-than-expected collections of social insurance
and retirement receipts, excise taxes, estate and gift taxes, and miscellaneous
receipts, which were partially offset by lower-than-estimated collections of individual
income taxes and customs duties. Table 2 displays actual receipts and estimates
from the Budget and the MSR by source.
IQdl\lidualjm:omJ~jClxes were $927 billion, $2 billion lower than the MSR estimate.
This decrease relative to MSR was attributable to lower-than-estimated withheld tax
payments and reallocations of withheld tax payments from individual income taxes
to the Social Security and Medicare Trust Funds, which more than offset higherthan-estimated non-withheld tax payments and lower-than-estimated refunds. The
reallocations, which are accounting adjustments based on more recent data, did not
change the overall level of receipts, only the allocation of collections between
individual income taxes and the social insurance trust funds (see the discussion of
social insurance and retirement receipts below).

C;orposation income taxe~ were $278 billion, nearly $13 billion greater than the MSR
estimate. This increase was the combined effect of higher-than-expected payments
and lower-than-estimated refunds.
Social ins_ur9ncELandrEilirement receipts were $795 billion, $2 billion higher than the
MSR estimate. This increase was primarily attributable to the reallocation of
withheld tax receipts from individual income taxes to the Social Security and
Medicare Trust Funds. The adjustment offsets the adjustment to individual income
taxes described above; there is no impact on total receipts.
Othersources of receipts, which totaled $154 billion, exceeded the MSR estimate
by a net $2 billion. Excise taxes and estate and gift taxes each exceeded the
corresponding MSR estimate by $1 billion. Miscellaneous receipts, which exceeded
the MSR estimate by $2 billion, were offset by lower-than-expected customs duties
of $2 billion. These changes in miscellaneous receipts and customs duties were in
large part due to Congressional inaction on the Administration's proposal to repeal
the Byrd Amendment, which would not have changed the overall level of receipts,

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Page 3 of 5
only the allocation of collections between customs duties and miscellaneous
receipts.
OUTLAYS
Total outlays were $2,473 billion, $1 billion above the MSR estimate. The majority
of agency outlays were down from the MSR, although a number of agencies had
outlays above the MSR estimates. The largest increases occurred in the
Departments of Defense and Homeland Security and the largest decrease occurred
in the Department of Agriculture. Table 3 displays actual outlays by agency and
major program as well as estimates from the Budget and the MSR. The largest
changes in outlays were in the following areas:
•

OE3R-<irt_ment Qf. HomelgndSecurity - Outlays for the Department of
Homeland Security were $39 billion in FY 2005, $5 billion above the MSR
estimate. This difference is mainly attributable to the $6 billion increase in
outlays in Emergency Preparedness and Response (EP&R) Directorate,
primarily due to Hurricane Katrina and the four major Florida hurricanes in
2004. Outlays for the EP&R Disaster Relief Fund and the National Flood
Insurance Fund were greater than estimated for individual and public
assistance and for insurance claims as a result of these hurricanes.

•

Department of Agriculture - Actual net outlays for the Department of
Agriculture were $85 billion, a decrease of $4 billion from the MSR estimate.
Combined, outlays for the Farm Service Agency (FSA) and the Natural
Resources Conservation Service (NRCS) (which include a $1.4 billion cash
transfer from the Commodity Credit Corporation (CCG) to the NRCS to
cover remaining Farm Bill program expenditures from prior year obligations)
were $2 billion below MSR. This decrease is primarily due to lower CCC
payments for 2004 disaster programs and lower payments for commodity
programs due to higher-than-expected prices for last year's corn and
soybeans crop. In addition, FSA outlays were lower due to prepayment of
commodity marketing loans by Russia, lower-than-expected guaranteed
export loan obligations, and a timing shift in Tobacco Trust payments. Net
outlays were also lower than estimated for Child Nutrition and Food Stamp
programs, crop insurance payments, fire suppression activities, and rural
development credit subsidies. Net outlays for the Rural Utilities Service
were $0.6 billion above the MSR mainly due to decreased collections from
pre-Credit Reform loans.

•

Department of Defense - Mili!C!1}' - In FY 2005, outlays for the Department
of Defense - Military were $474 billion, an increase of $4 billion from the
MSR estimate. This difference can be attributed to higher-than-anticipated
fuel prices as well as increased operational activity resulting from the Global
War on Terror.

•

Departmentpf Health ancl tiuman ServiceJ) - Net outlays for the
Department of Health and Human Services were $581 billion in FY 2005, $2
billion lower than MSR. Medicare outlays were $6 billion higher than the
MSR estimate. A change in accounting for recoveries of overpayments in
2005 results in $2.5 billion of this increase. Previously these recoveries had
been deducted from Medicare's reported outlays, now these recoveries are
recorded as offsetting receipts and are not deducted from Medicare's gross
outlays. Part A increases primarily result from higher-than-expected
spending in both inpatient hospital and skilled nursing facilities. Part B
increases are primarily due to faster-than-expected spending in physician
fee schedule, other carrier, and outpatient hospital services, caused mainly
by greater utilization of health services. Collections of proprietary receipts
from the public, primarily associated with Medicare, were $3 billion higher
than previously estimated. Medicaid outlays were $5 billion lower than MSR
estimates, largely as a result of cost-saving measures implemented by

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States.

•

~)(ecl,ltiv_e Office of the President - As a result of a more rapid expenditure
from the Iraq Relief and Reconstruction Fund, FY 2005 outlays for the
Executive Office of the President were $8 billion, $2 billion higher than MSR
Large infrastructure projects progressed more quickly than previously
expected, accelerating outlays for these projects. In addition, outlays for
security and democracy programs were higher than previously estimated.

•

Office of PI3Isol1nj:lLMan_Qgernem - Office of Personnel Management
outlays were $60 billion in FY 2005, over $1 billion below MSR. Actual
outlays for the Civil Service Retirement and Disability Fund were about $0.8
billion lower than estimated in the MSR, due largely to a lower-thananticipated increase in the retired employee population. In addition, actual
net outlays were about $0.4 billion less for the Employees and Retired
Employees Health Benefits Fund due to lower health care costs than
estimated in the MSR.

•

Railroad Retirement Board - In FY 2005, net outlays for the Railroad
Retirement Board were $2 billion, more than $1 billion lower than estimated
at MSR. The National Railroad Retirement Investment Trust's earnings on
non-Federal securities, which offset the agency's outlays, were over $1
billion higher than the MSR estimates.

•

Department of Transportation - The Department of Transportation outlays
were $57 billion in FY 2005, $1 billion below the MSR estimate. Outlays
were $1 billion below the MSR for the Federal Highway Administration due
to the delayed enactment of surface transportation legislation that prevented
the obligation of some funding for the Federal-aid Highway Program.

•

Department of Justice - In FY 2005, Department of Justice outlays were
$23 billion, $1 billion higher than MSR. The largest difference, $1 billion,
occurred in the Office of Justice Programs. State and local agencies are
submitting requests for reimbursement more quickly than in previous years.
In addition, spending for Bureau of Prisons construction and agency-wide
information technology occurred faster than anticipated.

•

Department of Veterans Affairs - FY 2005 outlays for the Department of
Veterans Affairs were $70 billion, $1 billion higher than MSR. The bulk of
this difference is the result of an FY 2005 supplemental of $1.5 billion
passed in early August to address the shortfall in funding for medical care.

•

Department of Treasury - The Department of Treasury had FY 2005 actual
outlays of $409 billion, $1 billion higher than the MSR estimate. Interest on
the public debt paid to the public was $2 billion above the MSR estimate.
Changes in interest paid to trust funds and government accounts were
largely offsetting. Higher interest paid to the public was partly offset by lower
outlays for interest on Internal Revenue Service refunds ($1 billion).

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Page50f5
The September 2005 Monthly Treasury Statement of Receipts and Outlays of the
United States Government containing these results can be found on the Financial
Management Service website at: www.fms.treas.gov.

REPORTS
•

Joint Statement On Budget Results For Fiscal Year 2005

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10/3112005

FOR RELEASE AT 2 :30 P.M.
October 14, 2005

Treasury Contact: Taylor Griffin
(202) 622-2920
OMB Contact: Scott Milburn
(202) 395-7254

JOINT STATEMENT OF
JOHN W. SNOW,
SECRETARY OF THE TREASURY,
AND
JOSHUA B. BOLTEN,
DIRECTOR OF THE OFFICE OF MANAGEMENT AND BUDGET,
ON
BUDGET RESULTS FOR FISCAL YEAR 2005

SUMMARY
The Administration today is releasing the September 2005 Monthly Treasury Statement
of Receipts and Outlays of the United States Government I . The statement shows the
actual budget totals for the fiscal year that ended September 30, 2005, as follows:
•

A deficit of $319 billion;

•

total receipts of $2, 154 billion; and

•

total outlays of $2,473 billion.

(MORE)

I The September 2005 Monthly Treasury Statement of Receipts and Outlays of the United States Government
containing these results can be found on the Financial Management Service website at: www.fms.treas.gov.

"The year-end budget report highlights the positive results of the President's economic
leadership. Lower taxes and pro-growth economic policies have created millions of jobs and
a growing economy that has swelled tax revenues over the last year. While deficits are
~ever welc~me, the fact that we finished FY2005 with a much lower-tharrexpected deficit
IS encouragmg news.
While the effects of Hurricanes Katrina and Rita will be felt in the short tenn, we remain on
a path to meet the President's goal of cutting the deficit in half by 2009. It's important that
we ensure continued economic growth by keeping the President's economic policies in
place and making the tax cuts pennanent."
- Secretary John W. Snow
"The President's pro-growth policies have succeeded in sustaining an economic expansion
that has created 4.2 million jobs since May 2003 and produced a 14.6 percent increase in
tax receipts this year.
As we help the people of the Gulf Coast region recover and rebuild from Hurricane Katrina,
it is more important than ever that we continue the pro-growth economic policies that have
contributed to a strong expansion and a surge in revenues. We must also redouble our
efforts to reduce unnecessary spending elsewhere in the budget to help offset recovery costs
and keep us on track to meet the President's goal of cutting the deficit in half by 2009."
- Director Joshua B. Bolten

Table 1. TOTAL RECEIPTS, OUTLAYS AND SURPLUS/DEFICIT (-)
(in billions of dollars)
Receipts
1,880

2004 Actual....... ... ....... ...... ..... ..... ...
FY 2005 Estimates:
FY 2006 Budget......... ... ........ .... 2,053
FY 2006 Mid-Session Review ... 2,140
ActuaL........................................ 2,154

Outlays
2,293

Surplus/Deficit (-)
-413

2,479
2,472
2,473

-427
-333
-319

The FY 2005 unified deficit was $319 billion, or an estimated 2.6 percent of the Gross
Domestic Product (GOP). As a percent of GOP, the 2005 deficit was lower than the
deficits ofl6 of the last 25 years. The deficit for FY 2005 was $14 billion, or 4.2 percent,
lower than projected in the Mid-Session Review (MSR). Receipts were higher by $15
billion and outlays were higher by $1 billion. The deficit was $108 billion, or 25.3
percent, lower than projected less than a year ago in the FY 2006 Budget. Receipts were
higher by $101 billion and outlays were lower by $6 billion.

Receipts in 2005 were 14.6 percent higher than in 2004, the highest increase in receipts in
over 20 years. Outlays grew by 7.9 percent above the previous year. The 7.9 percent
increase in total outla ys was driven by growth in five major agencies - the Departments
of Agriculture, Defense - Military, Education, Homeland Security, and Veterans Affairsnet interest, and Medicare. Altogether, these outlays grew by 12.6 percent, and accounted
for $137 billion of the $180 billion increase in outlays over 2004. The total growth in
outlays is somewhat reduced by slower growth rates in a number of other agen;ies and
programs.

RECEIPTS
Total receipts for FY 2005 were $2,154 billion, $15 billion higher than the MSR estimate
of$2,140 billion. Almost $13 billion of this increase was attributable to higher-thanestimated collections of corporation income taxes. The remaining increase was
attributable to higher-than-expected collections of social insurance and retirement
receipts, excise taxes, estate and gift taxes, and miscellaneous receipts, which were
partially offset by lower-than-estimated collections of individual income taxes and
customs duties. Table 2 displays actual receipts and estimates from the Budget and the
MSR by source.
Individual income taxes were $927 billion, $2 billion lower than the MSR estimate. This
decrease relative to MSR was attributable to lower-than-estimated withheld tax payments
and reallocations of withheld tax payments from individual income taxes to the Social
Security and Medicare Trust Funds, which more than offset higher-than-estimated nonwithheld tax payments and lower-than-estimated refunds. The reallocations, which are
accounting adjustments based on more recent data, did not change the overall level of
receipts, only the allocation of collections between individual income taxes and the social
insurance trust funds (see the discussion of social insurance and retirement receipts
below).
,Corporation income taxes were $278 billion, nearly $13 billion greater than the MSR
estimate. This increase was the combined effect of higher- than-expected payments and
lower-than-estimated refunds.
Social insurance and retirement receipts were $795 billion, $2 billion higher than the
MSR estimate. This increase was primarily attributable to the reallocation of withheld tax
receipts from individual income taxes to the Social Security and Medicare Trust Funds.
The adjustment offsets the adjustment to individual income taxes described above; there
is no impact on total receipts.
Other sources of receipts, which totaled $154 billion, exceeded the MSR estimate by a
net $2 billion. Excise taxes and estate and gift taxes each exceeded the correspond ing
MSR estimate by $1 billion. Miscellaneous receipts, which exceeded the MSR estimate
by $2 billion, were offset by lower-than-expected customs duties of $2 billion. These

changes in miscellaneous receipts and customs duties were in large part due to
Congressional inaction on the Administration's proposal to repeal the Byrd Amendment,
which would not have changed the overall level of receipts, only the allocation of
collections between customs duties and miscellaneous receipts.

OUTLAYS
Total outlays were $2,473 billion, $1 billion above the MSR estimate. The majority of
agency outlays were down from the MSR, although a number of agencies had outlays
above the MSR estimates. The largest increases occurred in the Departments of Defense
and Homeland Security and the largest decrease occurred in the Department of
Agriculture. Table 3 displays actual outlays by agency and major program as well as
estimates from the Budget and the MSR. The largest changes in outlays were in the
following areas:
•

Department of Homeland Security - Outlays for the Department of Homeland
Security were $39 billion in FY 2005, $5 billion above the MSR estimate. This
difference is mainly attributable to the $6 billion increase in outlays in Emergency
Preparedness and Response (EP&R) Directorate, primarily due to Hurricane
Katrina and the four major Florida hurricane s in 2004. Outlays for the EP&R
Disaster Relief Fund and the National Flood Insuran::e Fund were greater than
estimated for individual and public assis tance and for insurance claims as a result
of these hurricanes.

•

Department of Agriculture - Actual net outlays for the Department of Agriculture
were $85 billion, a decrease of $4 billion from the MSR estimate. Combined,
outlays for the Farm Service Agency (FSA) and the Natural Resources
Conservation Service (NRCS) (which include a $1.4 billion cash transfer from the
Commodity Credit Corporation (CCC) to the NRCS to cover remaining Farm Bill
program expenditures from prior year obligations) were $2 billion below MSR.
This decrease is primarily due to lower CCC payments for 2004 disaster programs
and lower payments for commodity programs due to higher-than-expected prices
for last year's com and soybeans crop. In addition, FSA outlays were lower due to
prepayment of commodity marketing loans by Russia, lower-than-expected
guaranteed export loan obligations, and a timing shift in Tobacco Trust payments.
Net outlays were also lower than estimated for Child Nutrition and Food Stamp
programs, crop insurance payments, fire suppression activities, and rural
development credit subsidies. Net outlays for the Rural Utilities Service were $0.6
billion above the MSR mainly due to decreased collections from pre-Credit
Reform loans.

•

Department of Defense - Military - In FY 2005, outlays for the Department of
Defense - Military were $474 billion, an increase of $4 billion from the MSR
estimate. This difference can be attributed to higher-than-anticipated fuel prices as
well as increased operational activity resulting from the Global War on Terror.

•

Department of Health and Human Services - Net outlays for the Department of
Health and Human Services were $581 billion in FY 2005, $2 billion 10 wer than
MSR. Medicare outlays were $6 billion higher than the MSR estimate. A change
in accounting for recoveries of overpayments in 2005 results in $2.5 billion of this
increase. Previously these recoveries had been deducted from Medicare's reported
outlays, now these recoveries are recorded as offsetting receipts and are not
deducted from Medicare's gross outlays. Part A increases primarily result from
higher-than-expected spending in both inpatient hospital and skilled nursing
facilities. Part B increases are primarily due to faster-than-expected spending in
physician fee schedule, other carrier, and outpatient hospital services, caused
mainly by greater utilization of health services. Collections of proprietary receipts
from the public, primarily associated with Medicare, were $3 billion higher than
previously estimated. Medicaid outlays were $5 billion lower than MSR
estimates, largely as a result of cost-saving measures implemented by States.

•

Executive Office of the President - As a result of a more rapid expenditure from
the Iraq Relief and Reconstruction Fund, FY 2005 outlays for the Executive
Office of the President were $8 billion, $2 billion higher than MSR. Large
infrastructure projects progressed more quickly than previously expected,
accelerating outlays for these projects. In addition, outlays for security and
democracy programs were higher than previously estimated.

•

Office of Personnel Management - Office of Personnel Management outlays were
$60 billion in FY 2005, over $1 billion below MSR. Actua 1 outlays for the Civil
Service Retirement and Disability Fund were about $0.8 billion lower than
estimated in the MSR, due largely to a lower-than-anticipated increase in the
retired employee popUlation. In addition, actual net outlays were about $0.4
billion less for the Employees and Retired Employees Health Benefits Fund due
to lower health care costs than estimated in the MSR.

•

Railroad Retirement Board - In FY 2005, net outlays for the Railroad Retirement
Board were $2 billion, more than $1 billion lower than estimated at MSR. The
National Railroad Retirement Investment Trust's earnings on non-Federal
securities, which offset the agency's outlays, were over $1 billion higher than tre
MSR estimates.

•

Department of Transportation - The Department of Transportation outlays were
$57 billion in FY 2005, $1 billion below the MSR estimate. Outlays were $1
billion below the MSR for the Federal Highway Administration due to the
delayed enactIrent of surface transportation legislation that prevented the
obligation of some funding for the Federal-aid Highway Program.

•

Department of Justice - In FY 2005, Department of Justice outlays were $23
billion, $1 billion higher than MSR. The largest difference, $1 billion, occurred in
the Office of Justice Programs. State and local agencies are submitting requests
for reimbursement more quickly than in previous years. In addition, spending for

Bureau of Prisons construction and agency-wide infonnation technology occurred
faster than anticipated.
•

Department of Veterans Affairs - FY 2005 outlays for the Department of
Veterans Affairs were $70 billion, $1 billion higher than MSR. The bulk of this
difference is the result of an FY 2005 supplemental of $1.5 billion passed in early
August to address the shortfall in funding for medical care.

•

Department of Treasury - The Department of Treasury had FY 2005 actual
outlays of $409 billion, $1 billion higher than the MSR estimate. Interest on the
public debt paid to the public was $2 billion above the MSR estimate. Changes in
interest paid to trust funds and government accounts were largely offsetting.
Higher interest paid to the public was partly offset by lower outlays for interest on
Internal Revenue Service refunds ($1 billion).

Table 2.·-2005 BUDGET RECEIPTS BY SOURCE
(fiscal years; in millions of dollars)

2004
Actual

2005
Estimate
Budget Mid-Session

Actual

Change, 2005 Actual from:
Budget 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 ..... .
Miscellaneous receipts ..
Total, Receipts.
On-budget..
Off-budget. ...

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

NOTE: Detail may not add to totals or changes due to rounding.

808,958
189,370

893,704
226,526

929,130
265,761

927,222
278,281

33,518
51,755

-1,908
12,520

154,615
534,744
689,359
39,453
4,596
733,408

165,273
561,363
726,636
42,476
4,619
773,731

169,973
575,694
745,667
43,183
4,619
793,469

170,187
577,475
747,663
42,999
4,459
795,121

4,914
16,112
21,027
523
-160
21,390

214
1,781
1,996
-184
-160
1,652

69,855
24,831
21,083
32,279

74,013
23,754
24,674
36,443

71,748
23,842
25,130
30,576

73,093
24,764
23,378
32,445

-920
1,010
-1,296
-3,998

1,345
922
-1,752
1,869

1,879,783
1,345,039
534,744

2,052,845
1,491,482
561,363

2,139,656
1,563,962
575,694

2,154,305
1,576,830
577,475

101,460
85,348
16,112

14,649
12,868
1,781

Table 3.--2005 BUDGET OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)

2004
Actual

2005
Estimate
Budget Mid-Session

Actual

Change, 2005 Actual from:
Budget Mid-Session

Oullays by Major Agency
Legislative Branch ................................................................................ .
The Judiciary ............................................................................ .
Agriculture:
Farm Service Agency:
Commodity Credit Corporation ........................................ .
Food and Nutrition Service:
Food
Agriculture Marketing Service ....
Natural Resources Conservation Service ..
Rural Housing Service ......................... .
Risk Management Agency ............... .
Rural Utilities Service ......................... .
Forest
Offsetting receipts
Subtotal, Agriculture ..

Defense-Military:
Military Personnel..
. .................. .
Operations and Maintenance ... .
Procurement..
. ............. .
Research, Development, Test, and Evaluation ..
Military Construction ..
Revolving and management funds ..
Subtotal, Defense-Military ............. .
Education:
Office of Elementary and Secondary Education
Office of Special Education and Rehabilitative Services ..
Office of Postsecondary Education ..
Office of Federal Student Aid ..
Subtotal,
Energy:
Atomic energy defense activities ..
Subtotal,

3,880
5,396

4,083
5,741

4,176
5,741

3,989
5,562

-94
-179

-187
-179

10,569
778

24,049
1,099

19,530
2,171

20,172
1,075

-3,877
-24

642
-1,096

28,621
16,369
1,089
2,382
508
3,269
-2,169
5,635
-2,638
7,354
71,768

34,211
17,584
1,367
2,924
-84
3,366
-1,052
5,580
-1,481
7,349
94,912

32,791
17,619
1,367
2,984
286
3,369
-2,108
5,599
-1,581
7,515
89,542

32,613
17,216
912
1,091
389
2,950
-1,537
5,036
-2,214
7,426
85,129

-1,598
-368
-455
-1,833
473
-416
-485
-544
-733
77
-9,783

-178
-403
-455
-1,893
103
-419
571
-563
-633
-89
-4,413

5,849

6,278

6,288

6,165

-113

-123

113,576
174,049
76,217
60,756
6,310
2,341
3,863
437,111

109,975
174,464
80,238
65,563
6,550
2,605
4.673
444,068

126,525
181,171
82,970
65,724
6,575
3,240
4,673
470,878

127,463
188,120
82,294
65,691
5,330
2,877
2,661
474,436

17,488
13,656
2,056
128
-1,220
272
-2,012
30,368

938
6,949
-676
-33
-1,245
-363
-2.012
3,558

21,180
12,817
2,247
22,877
3,695
62,817

23,241
13,747
2,408
26,212
5,345
70,953

23,241
13,747
2,408
27,486
5,345
72,227

22,916
14,089
2,254
29,020
4,665
72,944

-325
342
-154
2,808
-680
1,991

-325
342
-154
1,534
-680
717

16,083
3,891
19,974

17,293
4,885
22,178

17,063
4,885
21,948

17,161
4,474
21,635

-132
-411
-543

98
-411
-313

Table 3.--2005 BUDGET OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)

2004
Actual
Health and Human Services:
Medicare (gross outlays) ..................................................................
Medicaid ........................................................................................
State children's health insurance fund ...............................................
Public Health Service ........................................................................
Temporary assistance for needy families and payments to States for
child support enforcement and family support programs.
Other Administration for Children and Families
Proprietary receipts ...........
......................
Other ..........................
.................................
Subtotal, Health and Human Services .........
Homeland Security:
Border and Transportation Security ...
..............
Coast Guard
Emergency Preparedness and Response ....
Departmental Management
Science and Technology ..
Other ..
Subtotal, Homeland Security ...........
Housing and Urban Development:
Public and Indian Housing Programs ..
Federal Housing Administration ...
Other housing programs .....
Community Planning and Development. ..
Government National Mortgage Association

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

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

Subtotal, Housing and Urban Development....

Justice:
Office of Justice Programs ..
September 11th victims compensation ..
Federal Bureau of Investigations ..
Federal Prison System ....
General administration ..

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

Subtotal, Justice ....
Labor:
Training and employment services ...
. . . . . ..
Unemployment trust fund ...
Pension Benefit Guaranty Corporation ..

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

2005
Estimate
Budget Mid-Session

Actual

Change, 2005 Actual from:
Budget Mid-Session

301,505
176,231
4,607
44,419

333,442
188,497
5,343
46,176

333,457
186,382
5,321
46,148

339,430
181,720
5,129
46,035

5,988
-6,777
-214
-141

5,973
-4,662
-192
-113

21,540
24,466
-33,344
3.784
543,206

22,033
25,026
-39,215
4,470
585,772

22,033
25,026
-39,345
4.616
583,638

21,340
25,091
-42,096
4.844
581,492

-693
65
-2,881
374
-4,280

-693
65
-2,751
228
-2,146

12,871
6,843
4,331
2,430
432
-184
26,724

14,146
7,292
6,902
3,865
1,169
-115
33,259

14,466
7,395
7,560
3,735
1,169
-313
34,012

13,931
7,317
13,679
4,079
835
-534
39,307

-215
25
6,777
214
-334
-419
6,048

-535
-78
6,119
344
-334
-221
5,295

30,523
5,183
859
8,590
-310
180
45,024

31,339
1,232
1,142
8,682
-215
434
42,614

31,464
2,079
1,142
8,410
-215
595
43,475

31,311
1,980
871
8,356
-379
375
42,514

-28
748
-271
-326
-164
-59
-100

-153
-99
-271
-54
-164
-220
-961

8,938

9,433

9,448

9,093

-340

-355

4,710
6,309
4,927
4,751
1,458
6,799
28,953

3,086
25
5,544
4,532
1,267
6,717
21,171

3,323
25
5,599
4,532
1,424
6,698
21,601

4,206
12
5,111
4,844
1,772
6,794
22.740

1,120
-13
-433
312
505
77
1,569

883
-13
-488
312
348
96
1,139

5,606
46,321
-247

5,237
39,286
-543

5,311
36,533
-40

5,324
37,059
94

87
-2,227
637

13
526
134

Table 3.--2005 BUDGET OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)

Employment Standards Administration ....................
Subtotal, Labor. ........................................................
State:
Administration of Foreign Affairs ..
.............
International organizations and conferences ....
Other .........
................................
Subtotal, State
....................
Transportation:
Federal Highway Administration .......................................
Federal Transit Administration
..............................
Federal Aviation Administration ..
Subtotal, Transportation ..
Treasury:
Exchange Stabilization Fund ..
Interest on the public debt ..
IRS
Earned income tax credit..
Child tax credit..
Refunding collections, interest ..

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

Financial Management Service:
Temporary State Fiscal Relief Fund
Payment to Resolution Funding Corporation ...
Other ..
.......................
Federal Financing Bank ..
Offsetting receipts.
......................
.........................
Subtotal, Treasury ..
Department of Veterans Affairs ..
Corps of Engineers ..
Other defense civil programs ....
................
Environmental Protection Agency ..
Executive Office of the President:
Iraqi relief and reconstruction fund ..
Other ..
Subtotal, Executive Office of the President ..
General Services Administration ..
International Assistance Programs:

2004
Actual
2,486
2,542
56,708

2005
Estimate
Budget Mid-Session
3,450
3,448
2,604
2,542
50,034
47,794

Actual
2,895
2,574
47,946

7,204
1,870
1,868
10,942

7,462
2,064
2,408
11,934

7,833
2,595
2,714
13,142

7,602
2,689
2,547
12,838

140
625
139
904

-231
94
-167
-304

30,666
8,011
12,835
3.029
54,541

32,950
8,420
13,559
3,286
58,215

32,950
8,420
13,559
3.287
58,216

31,877
8,359
13,839
2,859
56,934

-1,073
-61
280
-427
-1,281

-1,073
-61
280
-428
-1,282

-604
321,566

-473
347,890

-473
349,916

-542
352,350

-69
4,460

-69
2,434

33,134
8,857
5,118
10,285

33,790
13,516
6,023
10,586

34,527
14,749
7,420
10,587

34,559
14,624
6,112
10,115

769
1,108
89
-471

32
-125
-1,308
-472

5,000
2,187
5,481
-1,043
-16,444
1.722
375,258
59,556
4,842
41,732
8,335

0
2,187
6,114
-1,026
-17,601
1,966
402,972
68,046
4,891
43,460
7,862

0
2,134
6,456
-1,026
-17,749
1,956
408,497
68,882
4,891
44,090
7,862

0
2,130
6,857
-816
-18,083
1,807
409.114
69,995
4.767
43,484
7.918

0
-57
743
210
-482
-159
6,142
1,949
-124
24
56

0
-4
401
210
-334
-149
617
1,113
-124
-606
56

3,006
303
3,309
-404

5,361
404
5,765
459

7,338
387
7,725
53

1.977

1,977

Change, 2005 Actual from:
Budgel Mid-Session
-555
-553
-30
32
-2,088
152

:11
1,960
-406

Table 3.--2005 BUDGET OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)

International Security Assistance:
Foreign Military Financing ....
Economic Support Fund .....

........ , ....................................
............. " ..............

Agency for International Development. ............................................
Multilateral assistance ......................................
Military sales programs ........................
International monetary programs ..................
Subtotal, International Assistance Programs .....................
National Aeronautics and Space Administration.
National Science Foundation ..........................
Office of Personnel Management:
Civil Ser\lice Retirement and Disability Fund ..
Employees and Retired Employees Health Benefits Funds ..
Other
Subtotal, Office of Personnel Management ..
Small Business Administration .............
Social Security Administration:
Old age and sUr\livors insurance (off·budget) ..
....
......
Disability insurance (off·budget) ......
Supplemental security income program .....
Other:
On·budget
Off·budget..
Subtotal, Social Security Administration.
Other independent agencies
Corporation for Nalional and Community Ser\lice.
District of Columbia ..
Export·lmport Bank
Federal Communications Commission:
Universal ser\lice fund.
............... ,.
Spectrum auction subsidies ....
Universal ser\lice fund income and other. ..
Subtotal, Federal Communications Commission ..............
Federal Deposit Insurance Corporation:
Bank insurance fund ...
Savings association insurance fund
FSLlC resolution fund (including RTC) ..
Other FDiC ....
Subtotal, Federal Deposit Insurance Corporation .....
Federal drug control programs ..
'"

2004
Actual

2005
Estimate
Budget Mid-Session

Actual

5,302
2,854
255
4,327
2,586
-1,239
-647
300
13,738

4,899
3,523
381
3,688
1,913
0
0
350
14,754

5,022
2,692
591
3,740
2,265
0
0
129
14,439

4,883
2,723
336
4,068
2,395
431
54
-104
14,787

-16
-800
-45
380
482
431
54
-454
33

-139
31
-255
328
130
431
54
-233
348

15,186
5,118

15,719
5,641

15,611
5,432

-108
-209

52,277
-1,721
5,976
56,533
4,077

55,612
-1,323
6,675
60,964
3,036

55,612
-1,327
6,723
61,008
2,641

54,790
-1,750
6,470
59,510
2,503

-822
-427
-205
-1,454
-533

-822
-423
-253
-1,498
-138

417,078
78,550
36,411

435,312
84,439
41,869

436,945
85,396
41,622

436,892
86,468
40,940

1,580
2,029
-929

-53
1,072
-682

12,595
-14,428
530,206

13,881
-16,453
559,048

14,011
-16,591
561,383

13,604
-16,580
561,324

-277
-127
2,276

-407

765
805
-1,902

923
658
-376

793
659
-814

-130
1
-438

12,790
641
-9,583
3,848

7,558
1,279
-248
8.589

7,127
1,279
-1,071
7,335

7,264
1,263
-978
7,549

-294
-16
-730
-1,040

137
-16
93
214

-1,006
-411
-163
26
-1,554
429

354
-67
-103
30
214
478

-91
-299
-103
3D
-463
478

-651
-465
214
28
-874
409

-1,005
-398
317

-560
-166
317

Change, 2005 Actual from:
Budget Mid-Session

11
-59

-1,088
-69

-411
-69

Table 3.--2005 BUDGET OUTLAYS BY AGENCY
(fiscal years; in millions of dollars)

National Credit Union Administration ................................................ .
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):
Military retirement and health ..
Other..
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 ..
Spectrum auction
Subtotal, undistributed offsetting receipts ...
Total,
On-budget..
Off-budget. ....
Deficit (-) I Surplus (+)

NOTE: Detail may not add to totals or changes due to rounding.

2005
Estimate
Budget Mid-Session
-437
-437

Actual
-339

568
-2,783
-2,215
3,556
-942
-210
7,296
15,603

568
-1,791
-1,223
2,123
-799
-205
6,902
14,182

568
-1,010
-442
4,079
-942
-210
7,137
19,671
34,899

-22,210
-19,889
-11,331
-67,759
-86,227
-5,105
0
Q
-212,522

-27,389
-20,690
-10,911
-71,457
-91,995
-5,886
-100
Q
-228,428

-27,389
-20,692
-10,941
-69,722
-91,906
-5,946
-100
Q
-226,696

-27,045
-20,930
-10,941
-69,153
-91,837
-6,144
-160
Q
-226,210

2,218

486

2,292,628
1,913,116
379,512

2,479,404
2,080,022
399,382

2,472,310
2,072,190
400,120

2,472,920
2,070,710
402,211

-6,484
-9,312
2,829

610
-1,480
2,091

-412,845
-568,077
155,233

-426,559
-588,540
161,981

-332,654
-508,228
175,574

-318,615
-493,880
175,264

107,944
94,660
13,283

14,039
14,348
-310

2004
Actual
-351
60
-4,130
-4,070
2,792
-685
-413
6,169
5,833

Change, 2005 Actual from:
Budget Mid-Session
98
98
0
-781
-781
-1,956
143
5
-235
-5,489
-34,899

0
992
992
-1,433
143
5
-394
-1,421
0

344
-240
-30
2,304
158
-258
-60

344
-238
0
569
69
-198
-60

Page 1 of 1

PRESS ROOM

October 17, 2005
JS-2974
Excerpts of Deputy Assistant Secretary for Financial Education Dan
lannicola's Remarks to Virginia Financial Literacy Summit
Today, U.S. Treasury Deputy Assistant Secretary for Financial Education Dan
lannicola traveled to Richmond, VA, to participate in the first-ever Virginia Financial
Literacy Summit. The following is an excerpt of lannicola's remarks:
"This summit brings together leaders from business, education, government and
the non-profit world to improve financial education in Virginia. By raising the level of
financial literacy we can produce better students, employees, consumers and
investors. The leaders here today realize that, when it comes to financial
education, their organizations have much to give, but even more to gain."

P://WWw.treas.gov/pless/relC(l~es/j52974.htm

10/31/2005

Page 1 of2

PRESS ROOM

October 17, 2005
2005-10-17-15-48-46-27251
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets
totaled $71,245 million as of the end of that week, compared to $71,521 million as of the end of the prior week.
I. Official U.S. Reserve Assets (in US millions)
October 7, 2005

October 14, 2005

71,521

71,245

TOTAL
1. Foreign Currency Reserves

Euro

11,311

a. Securities

Yen

11,180

Of which, issuer headquartered in the US.

TOTAL

II
I

22,491
0

Euro

Yen

II
II

11,264

11,156

II
II

TOTAL

I
I

22,420

I
I

I
I
II
I

16,395

b. Total deposits with:

11,025

Other central banks and BIS

5,414

b.ii. Banks headquartered in the US.

b.iii. Banks headquartered outside the US.

b.iii. Of which, banks located in the U.S.
Reserve Position 2

pecial Drawing Rights (SDRs) 2

114. Gold Stock

5,404

b.ii. Of which, banks located abroad

10,991

16,439

0
0

13,282

13,183

8,206

~'~41

11,041

8,268

5. Other Reserve Assets

II. Predetermined Short-Term Drains on Foreign Currency Assets
October J,~Q()!5
I

Yen

Euro

TOTAL
0

1. Foreign currency loans and securities

I
I
I

October 14, 2005
Euro

II
II

Yen

I
I

TOTAL

I
II
I

I
I
I

2. Aggregate short and long positions in forwards and futures in foreign currencies vis-a-vis the U.S. dollar:
2.a. Short positions
2.b. Long positions

I
I

3. Other

0
0

II
II
II

II
I
I

I
I

III. Contingent Short-Term Net Drains on Foreign Currency Assets

[

Octob~r

Euro

Yen

TOTAL

1. Contingent liabilities in foreign currency
1.a. Collateral guarantees on debt due within 1
year

7, 2005

P://WWw.treas.gov/pless/relC(l~es/j52005101715484627251.htm

October 14, 2005
Euro

II
II

I
II

Yen

II
I

I
I

TOTAL

I
I
I

I
I
10/3112005

Page 2 of2
l1.b. Other contingent liabilities
2. Foreign currency securities with embedded
options

3. Undrawn, unconditional credit lines
~.a. With other central banks
3.b. With banks and other financial institutions

II"

"I
I
I

With banks and other financial institutions
Headquartered outside the U. S
4. Aggregate short and long positions of options
in foreign

Currencies vis-a.-vis the U.S. dollar

14.a. Short positions
~ Written calls
4.b. Long positions
4.b.1. Bought calls

II"

Headquartered in the U.S.

4.a.1. Bought puts

"I
I
I

"
"II
I
I

II"

~I"
0

I
"I

II"

I
I

"II
!

I
I

14.b.2. Written puts

"II

I
I
I
I

I
I

2/ The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF and are
valued in dollar terms at the official SDRldollar exchange rate for the reporting date. The entries for the latest week reflect any
necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month end.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce.

P://WWw.treas.gov/pless/relC(l~es/j52005101715484627251.htm

10/31/2005

Page 1 of 1

PHLSS HOOM

October 17, 2005
JS-2974

Excerpts of Deputy Assistant Secretary for Financial Education Dan
lannicola's Remarks to Virginia Financial Literacy Summit
Today, U.S Treasury Deputy Assistant Secretary for Financial Education Dan
lannicola traveled to Richmond, VA, to participate in the first-ever Virginia Financial
Literacy Summit. The following is an excerpt of lannicola's remarks:
"This summit brings together leaders from business, education, government and
the non-profit world to improve financial education in Virginia. By raising the level of
financial literacy we can produce better students, employees, consumers and
investors. The leaders here today realize that, when it comes to financial
education, their organizations have much to give, but even more to gain."

P://WWw.treas.gov/pless/relC(l~es/j52974.htm

11/712005

Page 1 of 5

PRESS ROOM

October 18,2005
JS-2975
Remarks by Secretary Snow to the Securities Industry Association
Good morning and thank you for having me here today. As you know I've just
spent the last week traveling through China and in meetings here in Beijing with
economic officials from the Group of Twenty leading economies and with my
counterparts in China's economic leadership. I'd like to thank my good friend,
Ambassador Sandy Randt and his excellent staff here in Beijing, and also in
Shanghai and Chengdu. We always receive first-class treatment when we visit,
and it is greatly appreciated. I would also like to thank our Chinese hosts,
especially Minister Jin at the Ministry of Finance.
Finally, I would very much like to thank Marc Lackritz and the Security Industry
Association for inviting me to speak at your meeting today. The themes of financial
services modernization and capital market development are ones I have focused on
during this visit to China, so the timing of this meeting is perfect.
Traveling through China one cannot but be impressed with the rapid rate of
economic growth that this nation has been able to achieve. China's drive toward a
fully market-oriented economy is showing results even in some of the further
reaches of the country. We have long held that allowing the private sector to thrive
is the best way to raise living standards. Perhaps nowhere in history has that
notion been proven more dramatically than here in China where in the span of a
handful of years, hundreds of millions of people have seen their living standards
rise above the poverty line as Chinese authorities have been unleashing restraints
on private initiative so that the Chinese people can meet their great potential.
Before arriving in Beijing I visited Shanghai, the financial capital of China on the
coast, the city of Chengdu, located in the western province of Sichuan, and a small
town, Mulan, about an hour outside of Chengdu in Sichuan.
In Shanghai I had the opportunity to meet with businesspeople who have
established firms here and leaders of financial institutions. I had excellent
discussions with officials from China's Foreign Exchange Trading System and at
the Shanghai Stock Exchange.
In Chengdu, we were able to get a sense of the penetration of economic reforms in
China. I suspect that if one had visited Chengdu ten years ago, it would have taken
a leap of faith to predict seeing five-star hotels, western brands like Cadillac and
Nike, and Starbucks .... well, OK, maybe Starbucks!
But it's clear that the economic reforms are quickly transforming the landscape of
this great nation. The town of Mulan, a small rural village in Sichuan, has not yet
seen the full power of the market economy in its daily life, but I think that is only a
matter of time. The people of Mulan are clearly anxious for the good things that
greater growth and prosperity make possible.
Certainly it is Mulan, and thousands of towns like it, that occupy the thoughts of
China's economic leaders today. They recognize that China's great challenge is to
make the country's economic growth more balanced and sustainable. The failure to
do so will have wide-ranging implications for the Chinese people - and also, in this
interconnected world, for the global economy as well.
Most of the attention involving the U.S. economic relationship with China has
focused on the narrow issue of exchange rates. China's foreign exchange regime
certainly is important, and it's an issue that we have devoted a great deal of
attention to with our Chinese counterparts. Our views on this by now are well
known: China and the global economy will both benefit from greater currency

P://WWw.treas.gov/pless/relC(l~es/j5297j htm

10/3112005

Page 2 0[5
flexibility. Greater currency flexibility would increase - not decrease -- stability in
output prices and will assist in the adjustment of imbalances in Asia and the global
economy. But China's foreign exchange regime is just one of many economic and
financial issues that would contribute to this goal. As I have said, greater currency
flexibility is a necessary element of reform, but insufficient alone to bring global
trade and financial flows into appropriate alignment.
This morning, I would like to spend some time discussing how greater access to
financial services and robust capital markets can help China achieve the balanced,
sustained growth it desires and why this is important for the global economy.

China's leaders have committed to pursue financial market reforms as part of their
transformation to a market-driven economy. Chairman Greenspan and I discussed
these issues in great depth with our Chinese counterparts this week in our annual
Joint Economic Committee meetings. It was significant that, in addition to the Fed
and Treasury, Chairman Chris Cox of the SEC and Rueben Jeffrey, Chairman of
the CFTC, and other U.S. agencies also participated in these meetings. China's
most senior economic leaders also participated. In addition today, senior technical
level U.S. regulators and supervisors for the first time will be having a full day of
discussions with their counterparts. I think that this level of senior official
engagement underscores the importance we place on the need for the
establishment of a modern, world-class financial system in China and the breadth of
our economic and financial relationship.
One goal on which both nations agree is the need for China to transform from a
primarily export-driven economy to one that is more balanced and led by domestic
demand with a far greater role for the consumer. Recent Chinese economic growth
has depended on continued sharp increases in investment and net exports. This
pattern of growth has contributed to regional and sectoral imbalances in the
Chinese economy and does not provide a basis for sustained long-term growth.
When viewed in the context of external imbalances, China and the United States
are mirror images. China's extremely high savings rate - approaching 50% -contributes to global imbalances, just as does the United States' very low national
savings rate of about 13.4%. In the United States we are looking for ways to
increase national saving by encouraging greater household savings and reducing
our fiscal deficits. The challenge for the Chinese is to lower the propensity to save
and to encourage greater domestic consumption.
Such a shift towards domestic demand-led growth -- with more efficient investment
and more rapid growth in household consumption - would raise the welfare of the
Chinese population, help address regional and income imbalances, and provide the
foundation for sustained future growth.
For China, the development of financial services and capital markets will be vital to
this transformation. What is noteworthy today is that the development of these
sectors need not be delayed, waiting for "homegrown" solutions.
We live in a world today where the acquisition of knowledge, skills, and capital can
be immediate, and this should have positive implications for all emerging market
countries -- especially here in China.
I was reminded of this fact as I traveled through China and had the opportunity to
use some of the excellent hotels available to visitors to Shanghai, Chengdu, and
here in Beijing. These world-class hotels are not indigenous to China; they're not
"homegrown". In fact, they are imports from other nations - some Western, some
Asian. They are expertly run by managers from around the world. The
beneficiaries of these hotels, in addition to the visiting tourists, businessmen and
government officials who receive the excellent service, are the Chinese
themselves. Rather than waiting the years that might be required for a domestic
hotel industry to develop, along with the necessary expertise in administration,
logistics and staff management, marketing, client knowledge, taste differentiation, it
can be acquired - as it has been here in China - essentially overnight. Moreover,
the technological and managerial know-how foreign firms bring is absorbed in the
domestic economy as Chinese managers who learn best practices go on to run

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their own hotels.
The same rapid acquisition and transfer of knowledge and skills is available today
in economics and finance.
Throughout the world, the "overnight" acquisition of knowledge has already had a
dramatic impact, for example, in the field of monetary policy with respect to the
understanding of the nature of inflation and the proper application of monetary
instruments to combat it. There is near universal understanding among central
bankers today that inflation is a monetary phenomenon and that price stability
should be a central goal. And so what we have witnessed in recent years is a
dramatic reduction in inflation and inflation expectations and the near-absence of
cases of hyperinflation, despite the recent sharp rise in energy prices. The
conquering of inflation should be viewed as one of greatest contributions in the
economic life of people everywhere.
Nowhere was this knowledge indigenous. Rather, it was achieved as the result of
very painful trial-and-error, in the United States and elsewhere, and significant
development of theory and economic analysis. A great deal of credit for
understanding inflation goes to people like Milton Friedman, and certainly to
Chairman Greenspan and his predecessor, Paul Volcker. The contribution of John
Taylor, my former Under Secretary for International Affairs at the Treasury
Department, should also be noted for his now-famous "Taylor Rule" -- a rulesbased method of inflation targeting used by countless central banks. So it's not
necessary for central banks to go through the upheaval of dealing with an inflation
crisis to know that they can use market instruments like short-term interest rates to
either inject or reduce liquidity in the money supply. Moreover, many countries,
including emerging markets, have found that operationally independent central
banks with clear objectives can anchor inflationary expectations with flexible
exchange rates.
Likewise, this same rapid acquisition and application of knowledge and skills is
available to develop robust financial services and capital markets in emerging
market economies. The pace of change in financial products around the globe is
breathtaking. Things like asset backed securities, securitization, credit and
currency derivatives, options, sophisticated hedging devices, and on and on.
These financial instruments allow economic assets to transfer risk to those best
able to assess and manage them.
By reducing the uncertainty associated with economic undertakings, these
instruments facilitate economic activity - trade in its many forms, investing in the
variety of ways it occurs, China can quickly take advantage of these important
advances and thereby "leapfrog" in the development of its financial sector.
Undoubtedly, there is a threshold level of proficiency needed on the part of
government in order to develop these sectors. Governments must provide clear
and transparent regulation and supervision, ensure that the rule of law is enforced,
protect private property rights, and ensure that investment decisions are free from
political interference. I'm pleased to see China devoting so much effort to putting
these key building blocks in place. Governments should also be cautious about
attempting to distinguish between good and bad financial instruments or investors.
The same tools used to hedge risk can be used to speculate. Risk-takers provide
important liquidity to markets.
Achieving these standards go hand-in-hand with broader economic development,
and sometimes are not easy to achieve. Certainly, even more mature economies
still have challenges in these areas. For example, in the United States and Europe
we continue to develop and work to implement new rules in areas like corporate
governance, accounting standards, oversight of financial markets and banking
supervision.
But if these conditions meet this threshold, the delivery of financial services to
consumers can be acquired very quickly, and with immediate benefits.
China can quickly move forward with further liberalization of its financial services
sector by allowing foreign securities firms to establish or acquire wholly-owned
subsidiaries, and by expanding the scope of products securities firms can offer,

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such as trading in A-shares derivatives. This would add liquidity and transparency
to the China's capital markets, increase the flow of capital to the most productive
Chinese firms, inject management expertise, encourage regulatory reforms, and
introduce best-practices for technology, risk management, and control systems. In
addition, foreign investment would improve and encourage corporate governance,
and increase the efficiency of financial intermediation.
Liberalization must also be accompanied by a shift to risk-based lending. Last year
China deregulated lending rates in order to give banks greater scope to differentiate
borrowers based on risk. But more reforms - such as introducing rigorous credit
analysis procedures, improving accounting and financial reporting standards and
adopting a strong board and corporate management structure -- are needed to
better assess risk, improve asset quality and take advantage of higher interest rates
to slow excessively aggressive asset growth.
Capital market development is particularly necessary in China to achieve balanced
growth which translates into real prosperity. For economies to reach their
maximum growth potential, capital must be allowed to find those opportunities
where it can generate the maximum return. In a global economy, finding those
places is a complex process. A small investor in the United States or a pensioner
in France - even relatively large businesses and governments around the world lack the expertise or time to find those places for their savings. This is where the
role of financial services and capital markets enters - allowing the "invisible hand"
to play its role in organizing economic activity in ways that best advance societies'
material well-being.
Financial services and capital markets exist in order to marry the accumulated
resources of billions of savers and investors around the world with the myriad of
investment opportunities available. This system involves everything from the small
Chinese rural credit cooperative I visited in Sichuan province last week, to the large
and sophisticated bond and equity traders in New York, London, Tokyo, Hong
Kong, and elsewhere. The saver in Tokyo cannot be expected to know that the
best investment - the one that provides the security and expected return desired at
that precise moment in time -- happens to be an equity offering in Kuala Lumpur.
For this you need intermediation, and you need markets.
As I have said, this system has the immediate and obvious benefit of providing
maximum return on investment - but only when allowed to operate efficiently, and
not impeded by national rules that limit flows of capital, inefficient tax or regulatory
structures, corruption or lack of transparency, lack of property rights, or misaligned
prices signals due to interference with foreign exchange or interest rates.
This system has the added benefit of creating the flexibility necessary to adjust to
constantly changing economic conditions - benefits that accrue to the saver or
investor, financial services firms, and national economies, and the global economic
system. It also has the great advantage of facilitating a continuous series of benign
adjustments which help to avoid disruptions and crises and to minimize their
consequences.
In the United States, our bond and equity markets are vital to both investors and
firms. U.S. investors - from large companies to small savers - use the bond and
equity markets to meet their goals, which can range from making a strategic
acquisition to saving for individual retirement. Our firms also benefit from having
the ability to tap outside capital - either equity or debt - to fund their growth.
More developed capital markets are also good for financial stability, as firms have
more ways to raise funds rather than simply through the banking system.
Development of bond and equity markets help corporations source funds when
banks experience problems, preventing destabilizing cash crunches. For example,
the savings and loan crisis in the United States would have been far more serious,
with a deeper impact on our economy, if firms had not had ways to raise funds
outside the banking system. Beyond the United States, in Asia and elsewhere we
have seen where the excessive reliance on bank financing has contributed to
financial crisis. Here in China, it's important to keep in mind that the overwhelming
volume of domestic firm financing comes from the banking system. China is at the
point where capital markets are increasingly necessary to meet the needs of its
people and firms, where such markets could playa helpful role in disciplining
economic agents and reducing the cost of capital.

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Fully developed capital markets can help China's economy shift from savings to
consumption without sacrificing growth, thus improving living standards for the
Chinese people. Capital markets can produce higher returns on investment for
corporations and more efficient utilization of resources for the country. This would
enable China to maintain economic growth with lower savings and higher
consumption rates. Not only would this improve living standards, but it would also
work to reduce China's external imbalances.

Fortunately, the reforms I have outlined today are generally supported by China's
economic leadership. They understand that development of a real market economy
requires progress across a broad horizon of sectors and issues. They agree that
increased domestic consumption, the development of modern financial services
and capital markets, market interest rates and flexible exchange rates, are all in
China's interests and in the interests of the global economy. I also believe that
well-developed financial system is essential to buttress the Chinese economy in the
face of the inevitable disruptions in the global economy. Where we find our
differences. they are largely on the questions of the sequence and pace of reforms,
not the direction.
Our economic relationship with China is far-reaching and complex. I am
encouraged that we are reaching a level of maturity in our relationship
characterized by the understanding that we are not involved in a zero-sum game,
but rather a "positive" sum game. Both nations stand to gain from our increased
interaction.

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JS.2976 - Treaswy International Capital Data for August

Page 1 of2

PRESS ROOM

FROM THE OFFICE OF PUBLIC AFFAIRS
We recommend printing this release using the PDF file below.
To view or print the PDF content on this page. download the free Adobo@ Acrobat@ F?eacier@.

October 18, 2005
JS·2976

Treasury International Capital Data for August
Treasury International Capital (TIC) data far August are released today and posted on the U.S. Treasury web site (www.treasgovLtic).
which will report on data for September, is scheduled for November 16, 2005.
Net foreign purchases of long-term securities were $91.3 billion.
• Net foreign purchases of long-term domestic securities were $87.9 billion, $4.4 billion of which were net purchases by foreign of
$83.5 billion of which were net purchases by private foreign investors.
• U.S. residents sold a net $3.5 billion in foreign issued securities.

Foreigners' Transactions in Long-Term Securities with U.S. Residents
(Billions of dollars, not seasonally adjusted)

Foreigners' Transactions in Long-Term Securities with U.S. Residents
(Billions of dollars, not seasonally adiusted)
12 Months Through
2003

2004

Aug-

All&-

13526.0
12806.1

15178.9
14262.5

14416.2
13596.1

16471.0
15510.6

1500.8
1431.1

1530.0
1435.1

3 Domestic Securities Purchased, net (line 1 less line

719.9

916.4

820.1

960.3

69.7

94.8

4
5
6

PrivjJte, net 12
Treasury Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, net
Equities, net

585.0
159.7
129.9
260.3
35.0

680.8
150.9
205.6
298.0
26.2

576.8
146.0
151.3
258.4
21.2

811.5
201.2
208.5
341.6
60.2

56.5
20.8
18.1
17.1
0.6

71.9
-0.9
17.1
51.9
3.8

Official, net
Treasury Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, net
Equities, net

134.9
103.8
25.9
5.4
-0.3

235.6
201.1
20.8
11.5
2.2

243.3
208.5
25.9
8.6
0.3

148.9
102.7
29.0
16.5
0.7

13.2
6.8
4.6
1.8
-0.1

23.0
16.7
3.2
2.6
0.6

2761.8
2818.4

3123.1
3276.0

3096.9
3204.2

3348.0
3512.7

287.7
302.5

307.9
321.0

16 Foreign Securities Purchased, net (line 14 less line

-56.5

-152.8

-107.3

-164.8

-14.8

-13.1

17
18

32.0
-88.6

-67.9
-85.0

-24.8
-82.5

-51.7
-113.0

-10.0
-4.8

-1.2
-11.8

1 Gross Purchases of Domestic Securities
2 Gross Sales of Domestic Securities

7
8
9
10
11

12
13

14 Gross Purchases of Foreign Securities
15 Gross Sales of Foreign Securities

Foreign Bonds Purchased, net
Foreign Equities Purchased, net

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May-05

Jun·

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Page 2 of2

JS.2976 - Treaswy International Capital Data for August
663.3

19
II
12
13

763.6

54.9

81.8

Net foreign purchases of U.S. securities (+)
Includes International and Regional Organizations
Net U.S. acquisitions of foreign securities (-)

REPORTS
• (PDF) Foreigners' Transactions in Long-Term Securities with U.S. Residents (Billions of dollars, not seasonally adiusted)

2976 htm

10/3112005

"I"

DEPARTMENT OF THE TREASURY
OFFICE OF PUBLIC AFFAIRS
October 18, 2005
EMBARGOED UNTIL 9:00 AM

Contact: Taylor Griffin
202-622-2014

TREASURY INTERNATIONAL CAPITAL DATA FOR AUGUST

Treasury International Capital (TIC) data for August are released today and posted on the U.S.
Treasury web site (www.treas.gov/tic). The next release date, which will report on data for
September, is scheduled for November 16,2005.
Net foreign purchases of long-term securities were $91.3 billion.
•

Net foreign purchases of long-term domestic securities were $87.9 billion, $4.4 billion of
which were net purchases by foreign official institutions and $83.5 billion of which were net
purchases by private foreign investors.

•

U.S. residents sold a net $3.5 billion in foreign issued securities.

Foreigners' Transactions in Long-Term Securities with U.S. Residents
(Billions of dollars, not seasonally adjusted)

1 Gross Purchases of Domestic Securities
2 Gross Sales of Domestic Securities
3 Domestic Securities Purchased, net (line 1 less line 2) /I

12 Months Through
Aug-04 ~ug-OS

May-OS

Jun-OS

Jul-OS

2003

2004

Aug-OS

13526.0
12806.1
719.9

IS1789
14262.5
916.4

14416.2
13596.1
820.1

1647l.0
15510.6
960.3

1500.8
1431.1
69.7

IS30.0
143S.1
94.8

1278.9
1177.7
101.3

1414.2
13263
87.9

4
5
6
7
8

Private, net 12
Treaswy Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, net
Equities, net

585.0
159.7
129.9
260.3
35.0

680.8
150.9
205.6
298.0
26.2

576.8
146.0
IS13
2S8.4
212

811.5
201.2
208.5
341.6
60.2

56.5
20.8
18.1
17.1
0.6

71.9
-0.9
17.1
51.9
3.8

90.9
24.9
32.1
23.S
104

83.5
24.9
16.9
381
3.6

9
10
11
12

Official, net
Treaswy Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, net
Equities, net

134.9
1038
25.9
5.4
-0.3

235.6
201.1
20.8
11.5
2.2

243.3
208.S
25.9
8.6
0.3

148,9
1027
29.0
16.5
0.7

13.2
6.8
4.6
1.8
-0.1

23.0
16.7
3.2
2.6
0.6

10.4
3.6
5.7
1.4
-0.3

4.4
3.2
-1.2
2.1
0.3

2761.8
2818.4
-56.5

3123.1
3276.0
-152.8

3096.9
3204.2
-107.3

3348.0
3512.7
-164.8

2877
302.5
-14.8

307.9
321.0
-13.1

273.3
287.1
-13.8

3114
3080
3.5

32.0
-88.6

-67.9
-85.0

-24.8
-82.5

-51.7
-113.0

-10.0
-4.8

-1.2
-11.8

-5.1
-8.7

17.0
-13.S

663,3

763.6

712.8

795.6

54.9

81.8

87.5

91.3

13
14
15
16
17
18
19
11
12
13

Gross Purchases of Foreign Securities
Gross Sales of Foreign Securities
Foreign Securities Purchased, net (line 14 less line 15) 13
Foreign Bonds Purchased, net
Foreign Equities Purchased, net
Net LOI!g-Term FlowsJline 3 Qlus line 16)
Net foreign purchases of US. securities (+)
Includes International and Regional Organizations
Net U.S. acquisitions of foreign securities (-)

Page 1 of2

PRESS ROOM

October 18, 2005
JS-2977
Statement of Clay Lowery
Nominee to be Deputy Under Secretary for
International Affairs
U.S. Department of the Treasury
Before the Senate Committee on Finance
Chairman Grassley, Ranking Member Baucus, and members of the Committee on
Finance, I am honored to appear before you today as President Bush's nominee to
serve as Deputy Under Secretary of the Treasury for International Affairs. Please
allow me to express my gratitude to the President and Secretary Snow for the
confidence and trust they have shown in me, and I would like to thank you for your
consideration of my nomination.
I am pleased to be here with my family - my wife, Diana, and my father, Richard.
Together, along with my deceased mother, Gail, my brother, and some very close
friends, lowe a debt of gratitude for providing me the foundation and the passion to
pursue a career in public service. I want to particularly thank my wife for supporting
me in a career that, at times, can feel somewhat like a long flight abroad: little
communication when in the field, and interminable hours at the office.
As a career civil servant at the Treasury for the past decade, it has been my
privilege to serve in the Administrations of President Clinton and President Bush in
a number of positions promoting the national interest in international development,
economics, and finance. As a desk officer, economist, negotiator, diplomat and
manager, I have been deeply involved in such issues as responding to the
emerging-market crises of the 1990s, developing the initiative to provide debt relief
to the world's poorest countries, and creating the Millennium Challenge Corporation
(MCC).
For the past year and a half - on loan from the Treasury - I have served as a Vice
President at the MCC and a member of its Investment Committee. In this capacity,
I have been a leader in building and managing a "start-up" government corporation
to implement President Bush's pioneering initiative to revamp the model for foreign
assistance: reducing poverty by investing in sustainable economic growth in poor
countries that rule justly, invest in their people, and encourage economic freedom.
Prior to MCC, I held a variety of positions at the Treasury, most recently Deputy
Assistant Secretary for Debt and Development Finance. In this position, I led a
team consisting of four offices with responsibilities for debt workouts, trade finance,
development policy and cross-cutting financial market analysis. I also worked at
the National Security Council as Director of International Finance - a job that
allowed me to bring together the complementary imperatives of protecting national
security and advancing economic prosperity.
In many of these capacities, I have worked closely with Congress and, if confirmed,
I plan to continue such collaboration on a full range of issues.
Mr. Chairman, this range of issues starts with a juxtaposition. In many respects, the
global financial picture couldn't be stronger with global growth -led by the U.S.
economy - at 30-year highs, inflation around the world relatively benign, and
foreign investment on an upswing in emerging-market economies. This positive
news, however, is accompanied by worrisome global financial imbalances, potential
complacency in financial circles, and large swaths of poverty in the developing
world. To me, I think the challenge for the United States is to help the American
people seek the great opportunities offered by such an environment while
promoting the essential benefits of increased productivity, open markets, and free
trade.

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If confirmed, I look forward to working with the Administration, the Congress, and
the Treasury team in addressing these challenges and opportunities, focusing on
such key priorities as promoting economic growth worldwide, preventing financial
crises, and opening up foreign markets to U.S. goods and services - particularly
through negotiations to conclude a strong Doha Development Round. If confirmed,
I also look forward to leading a dedicated Treasury team by continuing to make
President Bush's vision of providing more effective development assistance to the
poorest people a reality.
Mr. Chairman, Senator Baucus, Members of the Committee, I am grateful for this
opportunity to appear before you today. I would be pleased to answer any
questions you may have.

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PRESS ROOM

October 18, 2005
JS-2978
Treasury Officials to Join Bankers in Schools Across the Nation
to Promote the Wise Use of Credit
Treasury is teaming up with the American Bankers Association Education
Foundation on Thursday for the third annual Get Smart About Credit Day. Treasury
officials will join bankers across the nation to visit high schools, universities and
youth groups to teach students how to budget, use credit cards and build a positive
payment history.
Media interest should contact Melissa Jones with ABA for press registration at (202)
663-5442.
The following events are open to the press:
Emil Henry, Jr., Assistant Secretary for Financial Institutions
Eleanor Roosevelt High School
7601 Hanover Parkway
Greenbelt, MD
8:15 a.m. EDT
Harold Damelin, Inspector General
T.C. Williams H.S.
3330 King Street
Alexandria, VA
8:30 a.m. EDT
D. Scott Parsons, Deputy Assistant Secretary for Critical Infrastructure
Protection
Myers Park High School
2400 Colony Rd
Charlotte, NC
9:00 a.m. EDT
Dan lannicola, Jr., Deputy Assistant Secretary for Financial Education
University of Rhode Island
Quinn Hall, RM 211
Kingston, RI
9:30 a.m. EDT
West Warwick High School
Webster Knight Drive
West Warwick, RI
12:45 p.m. EDT
James Carroll, Jr., Deputy General Counsel
T.C. Williams H.S.
3330 King Street
Alexandria, VA
9:40 a.m. EDT
Anna Escobedo Cabral, United States Treasurer
Manhattan Center for Math and Science
280 Pleasant Ave
New York, NY
10:00 a.m. EDT

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Troy Stang, Community Development Financial Institutions
Cleveland High School
5950 Delridge Way, SW
Seattle, WA
11 :00 a.m. PDT
Kimberly Reed, Senior Advisor to the Secretary
Boys and Girls Clubs Thornberry Unit
3831 E. 43rd Street
Kansas City, MO
4:15 p.m. CDT

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October 19, 2005
JS-2979
ATSB Announces Sale of US Airways and America West Loans
The Air Transportation Stabilization Board (ATSB) today announced that the ATSBguaranteed loans issued to US Airways and America West have been sold to
private investors without the government guarantee. This remarketing eliminates
the risk to the government that had been associated with these loans.
The original US Airways loan was issued on March 31,2003 in the amount of $1
billion, of which $900 million was guaranteed by the ATSB. At the time of US
Airways' exit from bankruptcy, the loan had been paid down, without loss, to $582.9
million, of which $524.6 million was guaranteed. The loan was remarketed at par.
The original America West loan was issued on January 18, 2002 in the amount of
$429 million, of which $379.6 million was guaranteed by the ATSB. At the time of
the remarketing, the outstanding balance on the loan was $249.6 million, of which
$227.7 million was guaranteed. The loan was remarketed at par plus 1 percent.
Of the six loans guaranteed by the Board, four have been paid off in full or
remarketed without the government guarantee.

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October 19, 2005
js-2980

Henry Sworn In As Assistant Secretary For Financial Institutions
The Treasury Department today announced that Emil W. Henry, Jr. was sworn in as
Assistant Secretary of the Treasury for Financial Institutions on October 13, 2005.
As Assistant Secretary, Mr. Henry serves as an advisor to the Secretary of
Treasury, Deputy Secretary and Undersecretary of Domestic Finance on matters
regarding financial institutions legislation and regulation, legislation affecting federal
agencies that regulate or insure financial institutions, securities markets legislation
and regulation, and the promotion of consumer access and protection in financial
services.
Mr. Henry also oversees the Office of Critical Infrastructure Protection and
Compliance, Office of Financial Education, the Community Development Financial
Institutions Fund and the Office of Sallie Mae Oversight.
Mr. Henry brings more than 20 years experience on Wall Street and in the financial
community to the position. Before joining the Treasury, he most recently served as
a senior partner of Gleacher Partners, a worldwide investment banking and
investment management firm where he was Managing Director, Chairman of Asset
Management, and Chairman of Gleacher Fund Advisors. During his tenure with
Gleacher, he had oversight responsibility for the firm's core investment activities
which include private equity and mezzanine debt investing and several pooled
investment vehicles in the form of hedge funds. Mr. Henry has extensive
experience in management buyouts, mergers and acquisitions, equity and debt
financing, and a wide array of sophisticated investment vehicles. Prior to his
position at Gleacher Partners, Mr. Henry was a member of Morgan Stanley's
merchant banking arm responsible for the firm's principal investments.
Mr. Henry graduated cum laude in Economics from Yale University in 1983 and
received his MBA from Harvard Business School in 1987. Mr. Henry is married with
three children and maintains residence in Washington, D.C. and Katonah, NY.

###

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October 20,2005
JS-2981
Deputy Secretary Robert M. Kimmitt
U.S. Department of the Treasury
Testimony before the
United States Senate
Committee on Banking, Housing, and Urban Affairs
October 20, 2005

Chairman Shelby, Ranking Member Sarbanes and distinguished members of the
Senate Committee on Banking, Housing and Urban Affairs, I appreciate the
opportunity to appear before you today to discuss the Committee on Foreign
Investment in the United States (CFIUS), and how CFIUS conducts national
security reviews of foreign acquisitions of companies as required under the ExonFlorio amendment. I am here speaking on behalf of the Administration, the
Treasury Department, and the Committee on Foreign Investment in the United
States (CFIUS).
Natio_nal Security

I wholeheartedly agree with your recent comments that national security cannot
take a second place to purely economic considerations. Throughout my years of
government service, starting with combat duty in Vietnam 35 years ago and
including over eight years with the National Security Council staff, I have built a
career premised on the belief that protecting and advancing the national security is
a government official's highest priority. Let me assure you that my colleagues and
I fully appreciate the national security concerns voiced by the members of this
Committee and Congress.
This is a demanding time for our nation as we seek to provide for the security of our
country. Indeed, no responsibility of government is more important than protecting
the national security, which is also a prerequisite for advancing economic
prosperity. In our view, these missions - protecting national security and advancing
economic prosperity - are inherently linked.
Safeguarding our national security depends on protecting defense-related
information, maintaining our technological edge, protecting the defense industrial
base, and securing our critical infrastructures, such as the U.S. telecommunications
network and related communications systems. We believe that the Exon-Florio
amendment is sufficiently flexible to provide CFIUS and the President the
necessary tools to protect these national security assets. CFIUS brings together
twelve agencies with diverse expertise and equities to ensure that transactions are
considered from a variety of perspectives so that all national security issues are
identified and considered in the review of a foreign acquisition. To provide just a
few examples, CFIUS assesses whether the foreign investment under review
might threaten the national security by harming the nation's communications
systems, fostering cyber-crime, or violating the privacy of users of the United States
communications systems, and seeks to ensure the protection of sensitive United
States information and technology relating to national defense and critical
infrastructure.
Member agencies bring particular expertise essential to the assessment of the
potential national security implications of specific foreign investments in the United
States. This expertise includes knowledge of the level of technological
sophistication of the transaction participants, the market position of alternate
suppliers, the financial and product service track record, and the future outlook for
transaction participants. This expertise gives CFIUS the broad perspective needed
for a comprehensive assessment of the national defense, competitive performance,
trade and investment policy and commercial issues involved in each transaction. It
also enables CFIUS to ensure that the national security is safeguarded in a manner

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consistent with longstanding United States policy regarding foreign investment in
the United States. In addition, since certain member agencies administer U.S.
export control programs for both dual use and military/defense items, CFIUS is able
to evaluate the compliance record of the foreign acquirer and can offer guidance to
ensure that any relevant export control issues are taken into account when the
foreign acquisition is completed.

Economic Prosperity
In my view, the concept of national security includes both traditional foreign policy
and defense criteria and economic considerations. Indeed, I believe there is an
inherent link between our national security and a strong U.S. economy that
facilitates free and fair trade, market-based exchange rates, and the free flow of
capital across borders. We are mindful of the positive benefits of foreign
investment to our country and therefore seek to maintain the traditional U.S. open
investment policy.
Indeed, we cannot protect the national security without a strong economy, and
foreign investment strengthens the U.S. economy. Foreign companies bring in new
technology, managerial expertise, and capital. Foreign companies buy some U.S.
companies that would otherwise go out of business or move overseas. Foreign
investment enables the United States to import new ways of doing business that
revive our industries and increase productivity. Foreign investment in the United
States keeps jobs and technology in the United States.
A strong world economy enhances our national security by advancing prosperity
and economic freedom in the rest of the world. Economic growth supported by free
trade and free markets creates new jobs and higher incomes, spurs economic and
legal reform, promotes democratic political systems, and helps lift large numbers of
people out of poverty.
The international economy performs best when large economies embrace free
trade, the free flow of capital, and flexible currencies. Obstacles in any of these
areas prevent smooth adjustments to changes in international conditions. At best,
such obstacles result in less than maximum growth; at worst, they create distortions
and increase risks.
In the recent past, the United States has placed considerable emphasis on
promoting global free trade and investment, multilaterally through its support for the
resumption of negotiations in the Doha Round and regionally and bilaterally through
the negotiation of Free Trade Agreements, including most recently CAFTA, and
bilateral investment treaties. In addition, the United States has urged countries,
including China, to adopt more flexible currency policies. However, we also need to
promote policies that encourage the global free flow of capital. Too many countries
maintain barriers that keep needed foreign portfolio and direct investment out while
preventing domestic capital from seeking better returns in overseas financial
markets.
If the United States maintains its openness to foreign direct investment, we have
the credibility internationally to promote similar investment regimes in other
countries. Open investment regimes based on the free flow of capital are crucial to
the U.S. economy both because of the benefits provided domestically, including job
creation, and because of the reciprocal opportunities such policies in other
countries provide for U.S. firms seeking to invest abroad.
INVESTMENT POLICY

U.S. policy towards foreign investment in the United States provides the context in
which Exon-Florio is implemented. U.S. investment policy welcomes foreign direct
investment and provides national treatment -- treating foreign companies like we
would treat U.S. companies. In return, the United States seeks to promote
reciprocity in similarly open investment regimes in other nations around the world.
When capital is free to flow in response to market demand, it is channeled into its
most efficient use. When the United States makes the best use of capital, as
determined by the market, we achieve greater productivity and enhanced
international competitiveness. This has direct benefits for our economy, and

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indirect but clear benefits for our national security.
To illustrate the benefits of foreign direct investment, last year foreign investors
invested over $115 billion in U.S. companies in the United States. Further,
according to data from the Department of Commerce's Bureau of Economic
Analysis, in 2003 foreign firms operating in the United States:
•
•
•
•
•

Employed 5.3 million Americans, 4.7% of employment in non-bank private
industries;
Had payrolls of $318 billion, an average of $60,527 per employee, 31 %
higher than the average of all companies;
Accounted for 5.8% of U.S. gross domestic product originating in private
industries compared to 4.3% a decade ago (an increase of more than 30%);
Accounted for over 20% of all U.S. exports; and
Spent $30 billion on research and development.

I have discussed foreign direct investment, but portfolio investment is another key
engine of economic growth. The free flow of capital is one reason for the strong
performance of the U.S. economy, and it is gratifying to see that countries around
the world increasingly recognize the benefits to be gained from liberalized capital
accounts. Openness to capital inflows creates avenues for foreign investors to
contribute to economic development. At the same time, it decreases the cost of
capital to local entrepreneurs, especially in the small- to medium-sized enterprise
sector.
EXQII-Flprio
Our open investment policy has always recognized the need to protect the national
security, a need that is internationally recognized as a defensible exception to an
open investment regime. The United States has numerous laws and regulations
that provide this critical protection.
CFIUS was established in 1975 by Executive Order of the President with the
Secretary of the Treasury as its chair. Its main responsibility was "monitoring the
impact of foreign investment in the United States and coordinating the
implementation of United States policy on such investment." It analyzed foreign
investment trends and developments in the United States and provided guidance to
the President on significant transactions. However, it had no authority to take
action with regard to specific foreign investments.
The Omnibus Trade and Competitiveness Act of 1988 added section 721 to the
Defense Production Act of 1950 to provide authority to the President to suspend or
prohibit any foreign acquisition, merger, or takeover of a U.S. company that the
President determines threatens to impair the national security of the United States.
Section 721 is widely known as the Exon-Florio amendment, after its original
congressional co-sponsors.
Specifically, the Exon-Florio amendment authorizes the President, or his designee,
to investigate foreign acquisitions of U.S. companies to determine their effects on
the national security. It also authorizes the President to take such action as he
deems appropriate to prohibit or suspend such an acquisition if he finds that:
(1) There is credible evidence that leads him to believe that the foreign investor
might take action that threatens to impair the national security; and
(2) Existing laws, other than the International Emergency Economic Powers Act
(IEEPA) and the Exon-Florio amendment itself, do not in his judgment provide
adequate and appropriate authority to protect the national security.
The President may direct the Attorney General to seek appropriate judicial relief to
enforce Exon-Florio, including divestment. The President's findings are not subject
to judicial review.
Following the enactment of the Exon-Florio amendment, the President delegated to
CFIUS the responsibility to receive notices from companies engaged in transactions
that are subject to Exon-Florio, to conduct reviews to identify the effects of such

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transactions on the national security, and, if necessary, to undertake investigations.
However, the President retained the authority to suspend or prohibit a transaction.
The Secretary of the Treasury is the Chair of CFIUS, and the Treasury's Office of
International Investment serves as the Staff Chair of CFIUS. Treasury receives
notices of transactions, serves as the contact point for the private sector,
establishes a calendar for review of each transaction, and coordinates the
interagency process. The other CFIUS member agencies are the Departments of
State, Defense, Justice, and Commerce, OMB, CEA, USTR, OSTP, the NSC, the
NEC and the newest member, the Department of Homeland Security.
The CFIUS process is governed by Treasury regulations that were first issued in
1991
(31 CFR part 800). Under these regulations, parties to a proposed or completed
acquisition, merger, or takeover of a U.S. company by a foreign entity may file a
voluntary written notice with CFIUS through Treasury. Alternatively, a CFIUS
member agency may on its own submit notice of a transaction. The CFIUS process
starts upon receipt by Treasury of a complete, written notice. Treasury determines
whether a filing is in fact complete, thereby triggering the start of the 30-day clock,
and CFIUS may reject notices that do not comply with the notice requirements
under the regulations. Treasury sends the notice to all CFIUS member agencies
and to other agencies that might have an interest in a particular transaction, for
example, the Departments of Energy and Transportation, or the Nuclear Regulatory
Commission. CFIUS then begins a thorough review of the notified transaction to
determine its effect on national security. In some cases, this review prompts CFIUS
to undertake an "investigation," which must begin no later than 30 days after receipt
of a notice. The Amendment requires CFIUS to complete any investigation and
provide a recommendation to the President within 45 days of the investigation's
inception. The President in turn has up to 15 days to make a decision, for a total of
up to 90 days for the entire process.
CFIUS lmplfJmE!nt(3tion
Exon-Florio notices are voluntary. Many acquisitions by foreign investors do not
implicate the national security, and parties to those transactions choose not to
notify. However, companies know that failure to notify leaves their transaction
subject to Presidential action indefinitely, and there is no statute of limitations.
Companies also know that any CFIUS member may notify a transaction to the
Committee.
During the initial 30-day review, each CFIUS member agency conducts its own
internal analysis of the national security implications of the notified transaction. As
part of the review, agencies with particular areas of competence, such as export
controls, protection of classified information or critical infrastructure, examine
whether existing laws other than International Emergency Economic Powers Act
(IEEPA) are adequate and appropriate to protect the national security with respect
to the transaction. The U. S. Intelligence Community provides input to CFIUS
reviews. For instance, the Intelligence Community Acquisition Risk Center (CARC)
now under the office of the Director of National Intelligence may be called on by
CFIUS to provide intelligence support to CFIUS' review process, including threat
assessments on the foreign acquirer. Further, the Department of Energy and the
Department of Transportation have actively participated in the consideration of
transactions that impact the industries under their respective jurisdictions. CFIUS
agencies, through the Treasury Staff Chair, can seek clarifications of and
supplements to the information provided in the notice by submitting additional
questions to the parties to the transaction. In some cases, the parties are asked to
meet with CFIUS agency staff.
If within the initial 30-day period CFIUS determines that there are no national
security concerns, or any national security concerns have been mitigated, thereby
obviating an investigation, Treasury, on behalf of CFIUS, writes to the parties
notifying them of that determination. This concludes consideration of the
acquisition for Exon-Florio purposes. However, when the Committee believes that
unresolved national security issues remain at the end of the 30-day period, CFIUS
conducts an investigation that ends with a report and recommendation to the
President.

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Depending on the facts of a particular case, CFIUS agencies that have identified
specific risks that a transaction could pose to the national security may, separately
or through CFIUS auspices, develop appropriate mitigation mechanisms to address
those risks when existing laws and regulations alone are not adequate or
appropriate to protect the national security. Agreements implementing mitigation
measures vary in scope and purpose, and are negotiated on a case by case basis
to address the particular concerns raised by an individual transaction. Publicly
available examples of the general types of agreements that have been negotiated
include: Special Security Agreements, which provide security protection for
classified or other sensitive contracts; Board Resolutions, which, for instance,
require a U.S. company to certify that the foreign investor will not have access to
particular information or influence over particular contracts; Proxy Agreements,
which isolate the foreign acquirer from any control or influence over the U.S.
company; and Network Security Agreements (NSAs), which are used in
telecommunications cases and are imposed in the context of the Federal
Communications Commission's (FCC) licensing process.
These examples in no way represent an exhaustive list of the kinds of agreements
or mitigation measures that have been negotiated by CFIUS agencies. Moreover,
because the facts of and issues raised by each transaction are unique, additional or
varied mitigation measures will undoubtedly be required to resolve agencies'
national security concerns in future transactions. In such cases, once an
agreement to implement the mitigation measures is executed by the parties to the
agreement and all CFIUS members are satisfied that the national security issues
have been adequately addressed. CFIUS concludes its review. When mitigation
measures are agreed to during an investigation, companies may request a
withdrawal and re-file. CFIUS then concludes its review.
As noted, publicly available NSAs provide some insights into the kinds of concerns
that arise in the telecommunications sector. Also, in recent years, CFIUS has taken
a close look at transactions involving technologies for either military/defense or dual
use applications. For foreign acquisitions in this sector, CFIUS has analyzed the
acquiring and acquired firms' records on compliance with U.S. export controls and
the potential for unauthorized diversion of these technologies. In addition, in the
post-9/11 environment, factors in the review have expanded to include terrorismrelated issues. Finally, while CFIUS was always mindful of the potential national
security impact of foreign acquisitions of U.S. companies in critical infrastructure,
especially in the telecommunications sector, the addition of Homeland Security to
the Committee's membership has led to an even closer focus on infrastructure
vulnerabilities as they relate to foreign acquisitions under review.
When CFIUS completes a full 45-day investigation, it must provide a report to the
President stating its recommendation. If CFIUS is unable to reach a unanimous
recommendation after the investigation period, the Secretary of the Treasury, as
Chairman, must submit a CFIUS report to the President setting forth the differing
views and presenting the issues for decision. The President then has 15 days to
announce his decision on the case and inform Congress of his determination.
The Exon-Florio amendment requires that information furnished to any CFIUS
agency by the parties to a transaction shall be held confidential and not made
public, except in the case of an administrative or judicial action or proceeding. This
confidentiality provision does not apply to Congress. Treasury, as chair of CFIUS,
upon request of congressional committees or subcommittees with jurisdiction over
Exon-Florio matters, has arranged congressional briefings on transactions for which
CFIUS has completed a review. These briefings are conducted in closed sessions
and, when appropriate, at a classified level. CFIUS members with equities in the
transaction under discussion have also been invited to participate in these
briefings.
Since the enactment of Exon-Florio in 1988, CFIUS has reviewed over 1,570
foreign acquisitions of companies for potential national security concerns. In most
of these reviews, CFIUS agencies have either identified no specific risks to national
security or risks have been addressed during the review period. However, 25
cases in total have gone to investigation, twelve of which reached the President's
desk for decision. In eleven of those, the President took no action, leaving the
parties to the proposed acquisitions free to proceed. In one case, the President
ordered the foreign acquirer to divest all its interest in the U.S. company. In another
case that did not go to the President, the foreign acquirer undertook a voluntary
divestiture. Of the 25 investigations, six were undertaken since 2001 with one

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going to the President for decision. However, these statistics do not reflect the
instances where CFIUS agencies implemented mitigation measures that obviated
an investigation or where, in response to dialogue with CFIUS agencies, parties to
a transaction either voluntarily restructured the transaction to address national
security concerns or withdrew from the transaction altogether.
An important aspect of the Exon-Florio process is the requirement that
governmental action be concluded within specified time limits. Those limits -- for
instance, the initial 3D-day review period -- necessitate that the government act
efficiently to assess all factors relating to the case. At the same time, the short time
frame does not significantly hold up transactions, which should be driven by the
market and can be time-sensitive.

Improving CFIUS
Two weeks ago, this Committee heard from the GAO regarding its recent report,
"Defense Trade: Enhancements to the Implementation of Exon-Florio Could
Strengthen the Law's Effectiveness." I appreciate the time and resources that the
GAO dedicated to this report, and, although I do not agree with all of the assertions
in the report, I do recognize a need to review current CFIUS policies and operating
procedures, especially those mentioned in the GAO recommendations. The new
senior CFIUS team represented at this hearing is involved in an effort to improve
the CFIUS process, drawing on comments from members of Congress, the
recommendations of the GAO, and the recommendations I have received from the
member agencies of CFIUS.
•

•

•
•

First, I believe that CFIUS requires high-level attention from Treasury and
the other members. You have my commitment that I will work hard to bring
that high level of attention going forward. The departmental representation
at today's hearing is an important indication of our common commitment in
this regard.
Second, when meeting at the Deputies level, I will chair CFIUS while the
Under Secretary of Treasury for International Affairs or his designee will
represent the Treasury Department during consideration of a particular
transaction. I think that this change will enable me to manage the process
to ensure that all viewpoints are identified and given the same equal, careful
consideration.
Third, we are looking carefully at ways to allow more time to assemble the
information needed to develop agency positions during the CFIUS process.
Lastly, I support the idea of enhancing the transparency of the CFIUS
process through more effective communication with Congress, while
recognizing our shared responsibility to avoid the disclosure of proprietary
information that could undermine a transaction or be used for competitive
purposes. I am open to suggestions on ways to improve the transparency
of the process, such as more regular reports to Congress and congressional
briefings.

Conclusion
We are in a time of both challenge and opportunity for our national security
interests. Through an improved CFIUS process, we will continue to protect our
national security in the context of an open investment policy that recognizes the
critical link between national security and economic prosperity.
Thank you for the opportunity to appear before you today.

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October 20,2005
JS-2982

U. S. Treasury Officials Join Bankers in Schools Across the
Nation to Promote Financial Education
The U.S. Treasury partnered with the American Bankers Association Education
Foundation today for the third annual Get Smart About Credit Day. Nine Treasury
officials teamed up with bankers across the nation and visited nearly 900 students
in high schools, universities and continuing education classes to teach students
how to budget, use credit cards and build a positive payment history.
"Today in classrooms across the country bankers and Treasury officials are
teaching our young people that they have the power to determine their financial
futures," said Treasury's Deputy Assistant Secretary for Financial Education Dan
lannicola, Jr. "By learning to use credit of all types wisely, young people can avoid
things like garnishments and bankruptcy, and can make possible things like a car, a
home and a college education. The choice is entirely theirs, and today we're here
to help them make the right one."
The ABA Education Foundation, a non-profit subsidiary of the American Bankers
Association, is committed to developing and providing education programs that lead
to financial literacy. The foundation has supported the banking industry's efforts to
teach personal finance skills in schools and communities across the country. It
provides programs that are specifically and uniquely created for young children,
teenagers and adults to provide them with the skills they need to budget, save, and
manage credit.
The Department of the Treasury is a leader in promoting financial education.
Treasury established the Office of Financial Education in May of 2002. The Office
works to promote access to the financial education tools that can help all Americans
make wiser choices in all areas of personal financial management, with a special
emphasis on saving, credit management, home ownership and retirement planning.
The Office also coordinates the efforts of the Financial Literacy and Education
Commission, a group chaired by the Secretary of Treasury and composed of
representatives from 20 federal departments, agencies and commissions, which
works to improve financial literacy and education for people throughout the United
States. For more information about the Office of Financial Education visit:
YL'N'!' .1m~s .govjfina_nc.iC:lleduc~tiQn.

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October 21 , 2005
JS-2983
Excerpts of lannicola's Remarks to the JumpStart
Coalition for
Personal Financial Literacy
U.S. Treasury Deputy Assistant Secretary for Financial Education Dan lannicola
participated in the JumpStart Coalition for Personal Financial Literacy event today
in Washington, DC. The following is an excerpt of lannicola's remarks:
"For years the JumpStart Coalition has been a pioneer in helping America's young
people improve their financial literacy. Through state coalitions across the country,
JumpStart levers the power of partnerships to do collectively what no one
organization could do alone. On behalf of the Department of Treasury I commend
you for your efforts and encourage you to continue your important work."

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October 21,2005
JS-2984

Treasury Targets North Korean Entities for Supporting WMD Proliferation
The U.S. Department of the Treasury today designated eight North Korean entities
pursuant to Executive Order 13382, an authority aimed at freezing the assets of
proliferators of weapons of mass destruction (WMD) and their delivery vehicles.
Today's action prohibits all transactions between the designated entities and any
U.S. person and freezes any assets the entities may have under U.S. jurisdiction.
"Proliferators of WMD often rely on front companies to mask their illicit activities and
cover their tracks," said Stuart Levey, the Treasury"s Under Secretary for Terrorism
and Financial Intelligence (TFI). "Today's action turns a spotlight on eight firms
involved in WMD proliferation out of North Korea. We will continue to expose and
designate these dangerous actors."
Today's action builds on President Bush's issuance of E.O. 13382 on June 29,
2005. The Order carried with it an annex that designated eight entities - operating
in North Korea, Iran, and Syria - for their support of WMD proliferation. The
President at that time also authorized the Secretaries of Treasury and State to
designate additional entities and individuals proliferating WMD and the missiles that
carry them.
Korea Mining Development Corporation (KOMID), which was designated in the
annex of E.O. 13382, is the parent company of two of the Pyongyang-based entities
designated today, Hesong Trading Corporation and Tosong Technology Trading
Corporation. These direct associations meet the criteria for designation because
the entities are owned or controlled by, or act or purport to act for or on behalf of
KOMID.
Korea Ryonbong General Corporation, also named in the annex, is the parent
company of the remaining six Pyongyang-based entities designated today. These
entities include Korea Complex Equipment Import Corporation, Korea International
Chemical Joint Venture Company, Korea Kwangsong Trading Corporation, Korea
Pugang Trading Corporation, Korea Ryongwang Trading Corporation, and Korea
Ryonha Machinery Joint Venture Corporation.
As subsidiaries of KOMID and Korea Ryonbong General Corporation, many of
these entities have engaged in proliferation-related transactions.

Identifying Informatton
HESONG TRADING CORPORATION
Pyongyang, North Korea
KOREA COMPLEX EQUIPMENT IMPORT CORPORATION
Rakwon-dong, Pothonggang District, Pyongyang, North Korea
KOREA INTERNATIONAL CHEMICAL JOINT VENTURE COMPANY
AKA: CHOSON INTERNATIONAL CHEMICALS JOINT OPERATION COMPANY
AKA: CHOSUN INTERNATIONAL CHEMICALS JOINT OPERATION COMPANY
AKA: INTERNATIONAL CHEMICAL JOINT VENTURE CORPORATION
Hamhung, South Hamgyong Province, North Korea
Man gyongdae-kuyok, Pyongyang, North Korea
Mangyungdae-gu, Pyongyang, North Korea
KOREA KWANGSONG TRADING CORPORATION
Rakwon-dong, Pothonggang District, Pyongyang, North Korea

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KOREA PUGANG TRADING CORPORATION
Rakwon-dong, Pothonggang District, Pyongyang, North Korea
KOREA RYONGWANG TRADING CORPORATION
AKA: KOREA RYENGWANG TRADING CORPORATION
Rakwon-dong, Pothonggang District, Pyongyang, North Korea
KOREA RYONHA MACHINERY JOINT VENTURE CORPORATION
AKA: CHOSUN YUNHA MACHINERY JOINT OPERATION COMPANY
AKA: KOREA RYENHA MACHINERY JIV CORPORATION
AKA: RYONHA MACHINERY JOINT VENTURE CORPORATION
Central District, Pyongyang, North Korea
Mangungdae-gu, Pyongyang, North Korea
Mangyongdae District, Pyongyang, North Korea
TOSONG TECHNOLOGY TRADING CORPORATION
Pyongyang, North Korea
Recognizing the need for additional tools to combat the proliferation of WMD,
President Bush signed Executive Order 13382 authorizing the imposition of strong
financial sanctions against not only WMD proliferators, but also entities and
individuals providing support or services to proliferators.
The designations announced today are part of the ongoing interagency effort by the
United States Government to combat WMD trafficking by blocking the property of
entities and individuals that engage in proliferation activities and their support
networks.

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October 21,2005
JS-2985

TREASURY AND IRS ISSUE PROPOSED REGULATIONS ON DOMESTIC
PRODUCTION ACTIVITIES DEDUCTION
Today, the Treasury Department and IRS issued proposed regulations under Code
section 199 on the recently enacted deduction relating to domestic production
activities. The proposed regulations expand on the initial guidance, Notice 200514, that was issued in January 2005.
The section 199 deduction relating to domestic production activities was enacted in
October 2004 as part of the American Jobs Creation Act. The provision generally
allows companies to deduct three percent of income from domestic production
activities for 2005 and, by 2010, nine percent of such income. The activities eligible
for the deduction include not only the manufacture of personal property such as
clothing, goods, and food, but also software development, film and music
production, the production of electricity, natural gas, or water, and construction,
engineering and architectural services.
The proposed regulations include many of the rules contained in the initial guidance
issued in January. In addition, in response to over eighty public comment letters
received, the proposed regulations provide many more comprehensive rules,
definitions, and examples to assist taxpayers implement this new provision.
The regulations are proposed to be effective for taxable years beginning after
December 31,2004, and taxable years of pass-thru entities beginning after
December 31, 2004. Until the proposed regulations are finalized, taxpayers are
generally permitted to rely on the Notice as well as the proposed regulations.

REPORTS
•

Proposed regulations under section 199

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[4830-01-p]
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[REG-105847-05]
RIN 1545-BE33
Income Attributable to Domestic Production Activities
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and notice of public hearing.
SUMMARY: This document contains proposed regulations concerning the deduction for
income attributable to domestic production activities under section 199. Section 199 was
enacted as part of the American Jobs Creation Act of 2004, Public Law 108-357 (118
Stat. 1418) (the Act). The regulations will affect taxpayers engaged in certain domestic
production activities. This document also provides a notice of a public hearing on these
proposed regulations.
DATES: Written or electronic comments must be received by [INSERT DATE THAT IS

60 DAYS AFTER PUBLICATION OF THIS DOCUMENT IN THE FEDERAL
REGISTER]. Outlines of topics to be discussed at the public hearing scheduled for
Wednesday, January 11,2006, must be received by December 21,2005.
ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-1 05847-05), room 5203,
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044.

- 2Submissions may be hand delivered Monday through Friday between the hours of 8 a.m.
and 4 p.m. to: CC:PA:LPD:PR (REG-105847-05), Courier's Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW., Washington, DC, or sent electronically, via the
IRS Internet site at www.irs.gov/regs or via the Federal eRulemaking Portal at
www.regulations.gov(IRSand REG-105847-05). The public hearing will be held in the IRS
Auditorium, Internal Revenue Building, 1111 Constitution Avenue, NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Concerning §§ 1.199-1, 1.199-3, 1.199-6,
and 1 .199-8, Paul Handleman or Lauren Ross Taylor, (202) 622-3040; concerning § 1 .1992, Alfred Kelley, (202) 622-6040; concerning §1.199-4(c) and (d), Richard Chewning, (202)
622-3850; concerning all other provisions of § 1.199-4, Scott Rabinowitz, (202) 622-4970;
concerning §1.199-5, Martin Schaffer, (202) 622-3080; concerning §1.199-7, Ken Cohen,
(202) 622-7790; concerning submission of comments, the hearing, and/or to be placed on
the building access list to attend the hearing, LaNita Van Dyke, (202) 622-7180 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act
The collections of information contained in this notice of proposed rulemaking have
been submitted to the Office of Management and Budget for review in accordance with the
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)). Comments on the collections of
information should be sent to the Office of Management and Budget, Attn: Desk Officer
for the Department of the Treasury, Office of Information and

-3Regulatory Affairs, Washington, DC 20503, with copies to the Internal Revenue Service,
Attn: IRS Reports Clearance Officer, SE:W:CARMP:T:T:SP, Washington, DC 20224.
Comments on the collection of information should be received by [INSERT DATE 60

DAYS AFTER PUBLICATION OF THIS DOCUMENT IN THE FEDERAL REGISTER].
Comments are specifically requested concerning:
Whether the proposed collection of information is necessary for the proper
performance of the functions of the IRS, including whether the information will have practical
utility;
The accuracy of the estimated burden associated with the proposed collection of
information (see below);
How the quality, utility, and clarity of the information to be collected may be
enhanced;
How the burden of complying with the proposed collections of information may be
minimized, including through the application of automated collection techniques or other
forms of information technology; and
Estimates of capital or start-up costs and costs of operation, maintenance, and
purchase of service to provide information.
The collection of information in these proposed regulations is in § 1 .199-6(b)
involving patrons of agricultural and horticultural cooperatives. This information is required
so that patrons of agricultural and horticultural cooperatives may claim the section 199

-4 deduction. The collections of information is mandatory. The likely respondents are
business or other for-profit institutions.
Estimated total annual reporting burden: 9,000 hours.
Estimated average annual burden hours per respondent: 3 hours.
Estimated number of respondents: 3,000.
Estimated annual frequency of responses: annually.
An agency may not conduct or sponsor, and a person is not required to respond to,
a collection of information unless itdisplays a valid control number assigned by the Office
of Management and Budget.
Books or records relating to a collection of information must be retained as long as
their contents may become material in the administration of any internal revenue law.
Generally, tax returns and tax return information are confidential, as required by 26 U.S.C.
6103.

Background
This document contains proposed regulations relating to the deduction for income
attributable to domestic production activities under section 199 of the Internal Revenue
Code (Code). Section 199 was added to the Code by section 102 of the Act. On January
19,2005, the IRS and Treasury Department issued Notice 2005-14 (2005-71.R.B. 498)
providing interim guidance on section 199 and inviting comments on issues arising under
section 199. Written and electronic comments responding to Notice 2005-14 were
received. The IRS and Treasury Department have reviewed and considered all the

- 5comments in the process of preparing these proposed regulations. This preamble to the
proposed regulations describes many of the more Significant comments received by the
IRS and Treasury Department. Because of the large volume of comments received,
however, the IRS and Treasury Department are not able to address all of the comments in
this preamble.
General Overview
Section 199(a)(1) allows a deduction equal to 9 percent (3 percent in the case of
taxable years beginning in 2005 or 2006, and 6 percent in the case of taxable years
beginning in 2007, 2008, or 2009) of the lesser of: (a) the qualified production activities
income (OPAl) of the taxpayer for the taxable year; or (b) taxable income (determined
without regard to section 199) for the taxable year (or, in the case of an individual, adjusted
gross income (AGI}).
Section 199(b)( 1} limits the deduction for a taxable year to 50 percent of the W-2
wages paid by the taxpayer during the calendar year that ends in such taxable year. For
this purpose, section 199(b )(2) defines the term W-2 wages to mean the sum of the
aggregate amounts the taxpay.er is required under section 6051 (a)(3) and (8) to include on
the Forms W-2, "Wage and Tax Statement," of the taxpayer's employees during the
calendar year ending during the taxpayer's taxable year. Section 199(b)(3) provides that
the Secretary shall prescribe rules for the application of section 199(b) in the case of an
acquisition or disposition of a major portion of either a trade or business or a separate unit
of a trade or business during the taxable year.

- 6Qualified Production Activities Income
Under section 199(c)( 1), OPAl is the excess of domestic production gross receipts
(DPGR) over the sum of: (a) the cost of goods sold (CGS) allocable to such receipts; (b)
other deductions, expenses, or losses directly allocable to such receipts; and (c) a ratable
portion of deductions, expenses, and losses not directly allocable to such receipts or
another class of income.
Section 199(c)(2) provides that the Secretary shall prescribe rules for the proper
allocation of items of income, deduction, expense, and loss for purposes of determining
QPAI.
Section 199(c)(3) provides special rules for determining costs in computing OPAl.
Under these special rules, any item or service imported into the United States without an
arm's length transfer price shall be treated as acquired by purchase, and its cost shall be
treated as not less than its value immediately after it enters the United States. A similar
rule applies in determining the adjusted basis of leased or rented property when the lease
or rental gives rise to DPGR. If the property has been exported by the taxpayer for further
manufacture, the increase in cost or adjusted basis must not exceed the difference
between the value of the property when exported and its value when imported back into the
United States after further manufacture.
Section 199(c)(4 )(A) defines DPGR to mean the taxpayer's gross receipts that are
derived from: (i) any lease, rental, license, sale, exchange, or other disposition of (I)
qualifying production property (OPP) that was manufactured, produced, grown, or extracted

-7(MPGE) by the taxpayer in whole or in significant part within the United States; (II) any
qualified film produced by the taxpayer; or (III) electricity, natural gas, or potable water
(collectively, utilities) produced by the taxpayer in the United States; (ii) construction
performed in the United States; or (iii) engineering or architectural services performed in
the United States for construction projects in the United States. Section 199(c)( 4 )(8)
excepts from DPGR gross receipts of the taxpayer that are derived from: (i) the sale of
food and beverages prepared by the taxpayer at a retail establishment; and (ii) the
transmission or distribution of electricity, natural gas, or potable water.
Section 199(c)(5) defines app to mean: (A) tangible personal property; (8) any
computer software; and (C) any property described in section 168(f)(4) (certain sound
recordings).
Section 199(c)(6) defines a qualified film to mean any property described in
section 168(f)(3) if not less than 50 percent of the total compensation relating to production
of the property is compensation for services performed in the United States by actors,
production personnel, directors, and producers. The term does not include property with
respect to which records are required to be maintained under 18 U.S.C. 2257 (generally,
films, videotapes, or other matter that depict actual sexually explicit conduct and are
produced in whole or in part with materials that have been mailed or shipped in interstate
or foreign commerce, or are shipped or transported or are intended for shipment or
transportation in interstate or foreign commerce).
Section 199(c)(7) provides that DPGR does not include any gross receipts of the

- 8taxpayer derived from property leased, licensed, or rented by the taxpayer for use by any
related person. A person is treated as related to another person if both persons are
treated as a single employer under either section 52(a) or (b) (without regard to
section 1563(b)), or section 414(m) or (0).
Pass-thru Entities
Section 199(d)(1) provides that, in the case of an S corporation, partnership, estate
or trust, or other pass-thru entity, section 199 generally is applied at the shareholder,
partner, or similar level, except as otherwise provided in rules applicable to patrons of
cooperatives. Section 199(d)(1) further provides that the Secretary shall prescribe rules for
the application of section 199, including rules relating to: (a) restrictions on the allocation of
the deduction to taxpayers at the partner or similar level; and (b) additional reporting
requirements.
The general rule is that section 199 is applied at the shareholder, partner, or similar
level. However, section 199(d)(1 )(8) limits the amount of W-2 wages from a pass-thru
entity that may be used by each shareholder, partner, or similar person to compute the
section 199 deduction. Specifically, section 199(d)(1 )(8) provides that such person is
treated as having been allocated W-2 wages from such entity in an amount equal to the
lesser of (i) such person's allocable share of such wages (without regard to this rule) from
such entity as determined under regulations prescribed by the Secretary; or (ii) 2 times 9
percent (3 percent in the case of taxable years beginning in 2005 or 2006, and 6 percent in
the case of taxable years beginning in 2007, 2008, or 2009) of the OPAl of that entity

- 9allocated to such person for the taxable year.
Individuals
In the case of an individual, section 199(d)(2) provides that the deduction is equal to
the applicable percentage of the lesser of the taxpayer's: (a) OPAl for the taxable year; or
(b) AGI for the taxable year determined after applying sections 86, 135, 137, 219, 221,
222, and 469, and without regard to section 199.
Patrons of Certain Cooperatives
Section 199(d)(3) provides special rules under which a taxpayer receiving certain
patronage dividends or certain qualified per-unit retain allocations from a cooperative (to
which subchapter T applies) engaged in the MPGE, in whole or in significant part, or in the
marketing of any agricultural or horticultural product is allowed a section 199 deduction with
respect to the amount of the patronage dividends or qualified per-unit retain allocations that
are: (a) allocable to the portion of the cooperative's OPAl that would be deductible by the
cooperative; and (b) designated as such by the cooperative in a written notice mailed to its
patrons during the payment period described in section 1382. Such an amount, however,
does not reduce the taxable income of the cooperative under section 1382.
In determining the portion of the cooperative's OPAl that would be deductible by the
cooperative, the cooperative's taxable income is computed without taking into account any
deduction allowable under section 1382(b) or (c) (relating to patronage dividends, per-unit
retain allocations, and non patronage distributions) and, in the case of a cooperative
engaged in marketing agricultural and horticultural products, the cooperative is treated as

- 10having MPGE, in whole or in significant part, any agricultural and horticultural products
marketed by the cooperative that its patrons have MPGE.
Expanded Affiliated Groups
Section 199(d)(4 )(A) provides that all members of an expanded affiliated group
(EAG) are treated as a single corporation for purposes of section 199. Taking into
account the provisions of the Congressional Letter (as described below),
section 199(d)(4)(B) provides that an EAG is an affiliated group as defined in
section 1504(a), determined by substituting "more than 50 percent" for "at least 80
percent" each place it appears and without regard to section 1504(b)(2) and (4).
Section 199(d)(4)(C) provides that, except as provided in regulations, the
section 199 deduction is allocated among the members of the EAG in proportion to each
member's respective amount (if any) of OPAl.
Trade or Business Requirement
Section 199(d)(5) provides that section 199 is applied by taking into account only
items that are attributable to the actual conduct of a trade or business.
Alternative Minimum Tax
Section 199(d)(6) provides rules to coordinate the deduction allowed under
section 199 with the alternative minimum tax (AMT) imposed by section 55. Taking into
account the provisions of the Congressional Letter (as described below), section 199(d)(6)
provides that for purposes of determining alternative minimum taxable income (AMTI)
under section 55, the section 199 deduction shall be determined without regard to any

- 11 adjustments under sections 56 through 59, except that in the case of a corporation
(including a corporation subject to tax under section 511), the taxable income limitation is
the corporation's AMTI.
Authority to Prescribe Regulations
Section 199(d)(7) authorizes the Secretary to prescribe such regulations as are
necessary to carry out the purposes of section 199.
Congressional Letter
On July 21, 2005, the Chairman and Ranking Member of the Senate Finance
Committee and the Chairman of the House Ways and Means Committee introduced the
Tax Technical Corrections Act of 2005, H.R. 3376 and S. 1447, 109th Congo (2005). In a
letter on the same date to the Treasury Department (the Congressional Letter), they
provided clarification for several issues so that 'appropriate regulatory guidance may be
issued reflecting their intention. These proposed regulations reflect the intent expressed in
the Congressional Letter with respect to section 199,

Summary of Comments
Qualified Production Activities Income
One commentator requested that the proposed regulations clarify the treatment of
advance payments, and the costs related to those payments, for purposes of computing
QPAI. Section 4.03(3) of Notice 2005-14 provides that, in the case of advance payments
(for goods, services, and use of property) that are recognized under the taxpayer's method
of accounting in a taxable year earlier than that in which the property or services are

-12delivered, performed, and provided, the taxpayer must accurately identify, based on a
reasonable method, whether the receipts (and the corresponding expenses) qualify as
DPGR. If a taxpayer recognizes an advance payment in Year 1, and the CGS in Year 2,
the commentator asks whether CGS must be applied to reduce DPGR in Year 2, even
though the DPGR and CGS are recognized in different taxable years.
The proposed regulations clarify that, in the example the commentator cites
involving advance payments, as well as other circumstances (such as taxpayers that use
the cash receipts and disbursements method) where gross receipts and corresponding
expenses are recognized in different taxable years, taxpayers must take the receipts and
expenses into account for purposes of section 199 in the taxable year such items are
recognized under their methods of accounting for Federal income tax purposes. The IRS
and Treasury Department believe it would be unduly burdensome and complicated to
create a separate set of timing rules for purposes of section 199. Thus, gross receipts and
costs are taken into account for purposes of computing OPAl in the taxable year they are
recognized for Federal income tax purposes under the taxpayer's methods of accounting
even if the related gross receipts or costs, as applicable, are taken into account in different

taxable years. If the gross receipts are recognized in an intercompany transaction within
the meaning of §1.1502-13, see also §1.199-7(d).
A commentator requested clarification of how the advance payment rules would
apply in the following scenario. In Year 1, a taxpayer sells for $100 a one-year software
maintenance agreement that provides for software updates (that the taxpayer would MPGE

Page 1 of 1

PRESS ROOM

October 21,2005
js2986
Treasury Names Three To Tax Policy Office
WASHINGTON, DC - The Treasury Department today announced three new
appointments in the Office of Tax Policy. Michael J. Desmond was named Tax
Legislative Counsel, Harry J. "Hal" Hicks III was named International Tax Counsel
and Robert H. Dilworth was named Senior Advisor.
As Tax Legislative Counsel in the Treasury Department's Office of Tax Policy,
Michael Desmond will be responsible for a broad range of issues relating to the
domestic federal tax law. Desmond assumed this role in an acting capacity June
20.
Prior to joining the Office of Tax Policy, Desmond was a partner at McKee Nelson
LLP in Washington, D.C., where his practice focused on large case tax litigation
and tax controversy matters. Before joining McKee Nelson, Desmond was a trial
attorney with the Tax Division of the U.S. Department of Justice, and served as a
law clerk to the Honorable Ronald S.W. Lew in the U.S. District Court in Los
Angeles.
Desmond is an Adjunct Professor of Law at Georgetown University Law Center. He
received a BA degree in Political Science and History from the University of
California at Santa Barbara and his J.D. from the Columbus School of Law at the
Catholic University of America.
As International Tax Counsel, Hal Hicks will be responsible for all matters relating to
international taxation issues and will coordinate Treasury's role in the negotiation of
international tax treaties.
Hicks currently serves as the Associate Chief Counsel (International) in the Office
of Chief Counsel at the IRS. Prior to joining the IRS, Hicks was a partner in the
international law firm of Mayer, Brown, Rowe & Maw. Prior to that he was a partner
and Deputy National Director of International Tax Services at Ernst & Young.
Hicks received an LL.M. in taxation from New York University, a J.D. from the
University of Virginia School of Law, and a BA from the College of William &
Mary. Hicks is a member of the Advisory Board at the GWIIRS institute on
International Tax. He has been an Adjunct Professor at Georgetown University
Law Center since 1992 (teaching corporate and international tax classes).
As Senior Advisor to the Assistant Secretary for Tax Policy, Robert Dilworth will
advise on a broad range of tax policy issues. Previously, Dilworth served in the
PricewaterhouseCoopers LLP Washington National Tax Services office. During his
tenure at PricewaterhouseCoopers, Dilworth served as leader or co-leader of the
firm's national Global Structuring group (International Tax Services, Mergers and
Acquisitions and Transfer Pricing), the Finance and Treasury group, and the firm's
International Tax Services group in the national office.
Prior to joining PricewaterhouseCoopers in July 1999, Dilworth was a partner in
Baker & McKenzie, in its Chicago, Taipei, San Francisco and, most recently, its
Washington, D.C. offices.
Dilworth received his AB. degree from Harvard College and his J.D. from Harvard
Law School.

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PRESS ROOM

October 17, 2005
JS-2987
JOINT STATEMENT
17TH SESSION OF THE CHINA-U.S. JOINT ECONOMIC COMMITTEE
Beijing, China, October 16-17, 2005
At the invitation of Chinese Finance Minister Jin Renqing, U.S. Treasury Secretary
John W. Snow led an official delegation to China to co-chair the 17th Session of the
China-U.S. Joint Economic Committee (JEC) on October 16-17, 2005. People's
Bank of China Governor Zhou Xiaochuan, China Banking Regulatory Commission
Chairman Liu Mingkang , China Securities Regulatory Commission Chairman Shang
Fulin, NDRC Vice Chairman Zhu Zhixin , Ministry of Finance Vice Minister Li Yong ,
Ministry of Commerce Vice Minister Ma Xiuhong , People's Bank of China Deputy
Governor Hu Xiaolian, China Insurance Regulatory Commission Vice Chairman Li
Kemu, State Administration of Foreign Exchanges Deputy Chief Wei Benhua, U.S.
Federal Reserve Chairman Alan Greenspan , U.S. Securities and Exchange
Commission Chairman Christopher Cox, U.S. Commodities Futures Trading
Commission Chairman Reuben Jeffery , U.s . Treasury Under Secretary Timothy D.
Adams, and U.S. Ambassador Clark T. Randt, Jr. also participated in the meeting.
Both sides noted the important role the JEC has played in strengthening bilateral
economic and financial cooperation, maintaining domestic and global economic
stability and prosperity, and promoting bilateral relationship development in general.
Macroeconomic Issues: Addressing Global Economic Imbalances
The two sides discussed the situation and outlook in their respective economies , as
well as the challenges facing the global economy. Global economic performance
remains sound , notwithstanding the impact of rising oil prices. Inflation and
inflationary pressure are relatively contained . The Chinese side explained that the
China's economic developments remained stable and rapid . The U.S. side noted
that economic conditions in the U.S. remain solid. However, both sides noted
potential risks associated with high oil prices, tightening of financial market
conditions, widened global current account imbalances and rising protectionism.
Global Imbalances
In discussing the situation and outlook for the global economy, the two sides noted
that economic growth had not taken place evenly across the world , and that it was
necessary to address current account imbalances that have arisen in order to
sustain global growth. They acknowledged that they have a shared responsibility,
along with other major economies, to implement the policies necessary to reduce
these imbalances. The U.S. side affirmed its commitment to reduce its fiscal deficit
in order to increase domestic savings. Though Federal outlays for the hurricane
relief and recovery efforts are likely to raise the budget deficit in the short term, the
deficit outlook over the medium to long range is for steady declines due to tight
controls on discretionary spending and continued strong economic growth . The
Chinese side reiterated its commitment to undertake policies that would lead to
sustained , rapid and more balanced growth of its domestic economy. In this
context, the Chinese side affirmed their intention to make efforts on narrowing the
gap between savings and investment, particularly by encouraging consumption.
They also affirmed their intention to enhance the flexibility and strengthen the role
of market forces in their managed floating exchange rate regime . Both sides agreed
that exchange rate policy is a sovereign decision , but can have a global impact.
Both sides reaffirmed that excess volatility and disorderly movements in exchange
rates are undesirable for economic growth.

China's Financial Sector Modernization.

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The Chinese side stressed the importance of financial sector reforms in promoting
economic growth. Chinese participants described measures being taken to
strengthen the banking system and to develop its domestic capital markets,
including restructuring of state-owned commercial banks and securities companies,
resolving the problem of non-tradable shares in the stock market, strengthening
financial market supervision, and further liberalization of financial services. The
Chinese side reaffirmed China's commitment to further advance reform in the
financial sector by opening up the financing sector to competition, strengthening
prudential supervision and risk management, improving corporate governance and
continued progress in corporatization and listing state-owned enterprises. The two
sides discussed the benefits of financial sector development on increasing
consumption and helping to reduce external imbalances. The two sides agreed to
enhance the cooperation in financing sector reform and supervision.

u.s.

Financial Sector Issues.

The U.S. side pointed out that US financial sector remained resilient. U.S. banks
are well capitalized, and non-performing loan ratios remain low. The U.S. side also
discussed trends in the U.S. housing and mortgage markets, recent modifications to
plan for implementing the new Basel capital framework, and policy issues
associated with foreign banks establishing a presence in the U.S. market. There
were also discussions of U.S. efforts to restore investor confidence in the wake of
recent corporate scandals, including implementation of the Sarbanes-Oxley Act.
The Act strengthened regulation in such areas as corporate governance,
disclosure, and accountability of top executives and other gatekeepers.

Cooperation in International Affairs
Both sides welcomed the strategic review and the reform agenda of the Bretton
Woods Institutions. They agreed that governance of the IMF should evolve along
with the world economy so that countries' position better reflect their global weights
and all members are more effectively represented.
The two sides discussed U.S. voting policies on MOB loans to China. China
expressed its view that the United States should support the full range of Chinese
MOB projects. The Chinese side expressed its intention to join the Inter-American
Development Bank (IADB). The U.S. side welcomed China's willingness to make a
greater contribution to the cause of poverty reduction in Latin America and the
world at large. The U.S. side supported China's endeavor to join the IADB. Bilateral
consultations on this matter will continue.
China and the United States reiterated the importance of actions to identify and
combat terrorist financing and money laundering, and agreed to take necessary
steps to prevent abuse of financial systems within their jurisdictions. China affirmed
its willingness to join the anti-money laundering and anti-terrorist financing regional
bodies, and to take the necessary steps to obtain full membership in the Financial
Action Task Force (FATF). The United States supports China's involvement in antimoney laundering and anti-terrorist financing activities, and its efforts to obtain full
membership in the FA TF, by taking necessary steps to comply with FATF
international standards.
The two sides reiterated their support for the successful conclusion of the WTO
Doha Development Round negotiations. Both sides agreed to make effort to
promote meaningful and balanced outcomes in key areas, including agricultural and
financial services negotiations, and called for progress at the upcoming Hong Kong
Ministerial Conference.
The Chinese delegation to the JEC consisted of representatives from the Ministry of
Finance (MOF), People's Bank of China (PBOC), Ministry of Foreign Affairs (MFA),
National Development and Reform Commission (NDRC), Ministry of Commerce
(MOFCOM), China Banking Regulatory Commission (CBRC), China Securities
Regulatory Commission (CSRC), China Insurance Regulatory Commission (CIRC)
and State Administration of Foreign Exchanges (SAFE).
The U.S. delegation included representatives from the Treasury, Federal Reserve
Board, Securities and Exchange Commission (SEC), Commodity Futures Trading
Commission (CFTC), Federal Deposit Insurance Corporation (FDIC), National

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Association of Insurance Commissioners (NAIC), Council of Economic Advisers
(CEA), and the U.S. Embassy in Beijing.

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PRE.SS ROOM

October 24, 2005
JS-2988
Statement by Secretary John Snow on Nomination of
Ben Bernanke as Federal Reserve Board Chairman
Dr. Ben Bernanke will bring a wealth of experience in economic and monetary
policy to the Federal Reserve chairmanship . He will be a worthy successor to Alan
Greenspan. Ben's background as a distinguished economics professor
and researcher, as chairman of the the Economics Department at
Princeton University, as member of the Federal Reserve Board of Governors and,
most recently, as an economic policy advisor to the President make him an ideal
nominee for this critical position .
I've had the pleasure of working closely with Dr. Bernanke in his capacity as
Chairman of the President's Council of Economic Advisors, and I am continually
impressed with both his economic acumen and his intellectual integrity.
Alan Greenspan , in his 18-year tenure as Chairman, has expertly helped to guide
the Federal Reserve Board and our economy through challenges with prescience
and remarkable insight. The American people have reaped the benefit of his wise
leadership in the form of a strong growing economy and low inflation. Chairman
Greenspan leaves an outstanding legacy. In Ben Bernanke the President has
chosen the right person to carry on the strong, independent leadership of the Fed.

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PRESS ROOM

October 26,2005
2005-10-26-12-7 -56-884
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S. reserve assets
totaled $70,529 million as of the end of that week, compared to $71,245 million as of the end of the prior week.

I. Official U.S. Reserve Assets (in US millions)
October 14, 2005

[I
TOTALj

I
11. Foreign

Currency Reserves 1

a. Securities

71,245
Euro

11,264

Yen
11,156

Of which, issuer headquartered in the US.

October 21, 2005

TOTAL

Euro

I
I

22,420

11,163

16,395

70,529

Yen

II
II

10,972

II
II
II

TOTAL

22,135

I
I

otal deposits with:
b.i. Other central banks and BIS

Ib.ii. Banks headquartered in the US.

b.ii. Of which, banks located abroad
b.iii. Banks headquartered outside the US.

10,991

5,404

2. IMF Reserve Position 2
2

4. Gold Stock 3

15. Other Reserve Assets

11,041

"II

15,926

8,206

I
I

5,315

13,183

3. Special Drawing Rights (SDRs)

b.iii. Of which, banks located in the U.S.

10,611

I
I

0
13,207
8,221

"II

II
II
II

11,041

II
II

I
I
I
I
I

II. Predetermined Short-Term Drains on Foreign Currency Assets

[

October L4, 2005

TOTAL

Yen

Euro

1. Foreign currency loans and securities

I
I

October 21, 2005
Euro

I
I

TOTAL

Yen

2. Aggregate short and long positions in forwards and futures in foreign currencies vis-a-vis the U.S. dollar:
2.8. Short positions

2.b. Long positions

3. Other

II
II
II

0
0
0

I
I
I

III. Contingent Short-Term Net Drains on Foreign Currency Assets

[
1. Contingent liabilities in foreign currency
1.a. Collateral guarantees on debt due within 1
year

OctQber 14, 2005
Euro

Yen

TOTAL

II
II

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Euro

II
II

II
1\

October 21, 2005

Yen

TOTAL

II
10/3112005

Page 2 of2

l1.b. Other contingent liabilities
2. Foreign currency securities with embedded
options

[I Undrawn, unconditional credit lines
[a. With other central banks

I
I

0
0

3.b. With banks and other financial institutions
Headquartered in the U. S.

3.c. With banks and other financial institutions
Headquartered outside the U. S.
4. Aggregate short and long positions of options
in foreign

@urrencies vis-a-vis the U.S. dollar

~.a. Short positions
@.a.1. Bought puts

@.a.2. Written calls

[4.b. Long positions
4.b.1. Bought calls

4.b.2. Written puts

Notes:
11 Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market Account
(SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect marked-to-market values, and
deposits reflect carrying values. Foreign Currency Reserves for the latest week may be subject to revision. Foreign Currency
Reserves for the prior week are final.

21 The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF and are
valued in dollar terms at the official SDR/doliar exchange rate for the reporting date. The entries for the latest week reflect any
necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month end.
31 Gold stock is valued monthly at $42.2222 per fine troy ounce.

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PRess ROOM

October 26, 2005
JS-2989
The Honorable John W. Snow
Prepared Remarks to the Center for National Policy
Washington, DC
America has the most flexible, resilient and dynamic economy in the world. I want to
talk to you today about the President's positive economic reform agenda, designed
to ensure that America continues its premier economic position in the years ahead.
I appreciate the work you are doing at the Center for National Policy to encourage
innovative thinking and ensure that the best ideas rise to the top of the national
debate. What you do helps to ensure that those ideas become the basis for the
policies that then benefit the citizens of this great country -- and that's an important
contribution.
Today the U.S. economy is the envy of the world. We have been through an
absolutely remarkable quarter century of growth and prosperity with rising
standards of living for our citizens and, importantly, interrupted by only two brief and
shallow recessions. This has occurred despite the fact that the US economy has
been subject over that period to a whole series of jolts and shocks:
• the S&L crisis in the late 1980's and disruptions in the banking industry in
the early 1990's;
• the 1987 equity market meltdown -- which saw some 20 percent of the value
of the NYSE disappear in a single day;
• the emerging market financial crises of the late 1990's;
• the bursting ofthe high tech bubble in 2000;
• corporate scandals;
• the terrorist attacks of September 11.
Despite all of this, the American economy has rolled along and absorbed the blows
and moved to higher levels of output and per capital income without a financial
crisis. Our economy has become remarkably flexible, adaptive and responsive with
internal shock absorbers that allow us to take external blows, adjust and keep
moving forward.
The question is: How has this come about? What made this possible? Chairman
Greenspan, Ben Bernanke and others point to the remarkable resiliency and
flexibility of the American economy, but how did our economy become so flexible
and resilient? The American economy wasn't always so flexible and adaptive.
The answer lies in actions taken decades ago to move large parts of the American
economy out from under government controls and to put in place a policy
framework that made sure that new and emerging industries -- growth industries -responded to the marketplace, not government. It is important that government
continuously review the obstacles that get in the way of. the economy's
performance, things that make the economy rigid, inflexible and incapable of
changing and adapting.
Thirty years ago I was privileged to serve in another Republican administration
under another far-sighted President who recognized the need for continuous
reform. That President, Gerald Ford, ushered in the modern era of deregulation and
I found myself at the Department of Transportation making the case for removing
regulation from various modes of transportation - railroads, motor carriers, barge
lines, passenger airlines, air freight and so on. What we started under President
Ford came to fruition under President Carter to the great credit of both men.

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major sectors of the American economy - communication, electricity and financial
services to name three key areas. Spurred on by this new deregulated
environment, the American economy responded in an extraordinary way. Nowhere
was this more evident than in the financial markets, where today we see a vast
array of new products facilitating the whole disintermediation process, moving
capital much more efficiently from savers to investors, and providing a whole array
of instruments to hedge risk. The developments in financial service markets are
extraordinary. Securitization in its many forms, the many developments in the home
mortgage market, the development of hedge funds, derivative and hedge devices,
credit swaps and credit derivatives, are just a few examples.
Today, we are reaping real benefits from the deregulation reforms. Consumers
have far lower prices and far greater choices. Likewise, 30 years from now, our
children and grandchildren stand to enjoy a higher standard of living, if we can
capitalize on the President's leadership and advance his bold and forward-looking
economic reform agenda.
Today I'd like to tie together four broad areas of economic reforms that will set U.S.
workers and businesses on a path to compete and win in a fiercely competitive
global economy.
First, we are fighting for lower, simpler taxes because we appreciate that lower
taxes spur the engine of innovation and entrepreneurship that drives our economy
and creates jobs, and ultimately leads to higher government revenues. But low
taxes must go hand in hand with fiscal discipline, because excessive government
spending creates a burden on the economy, and robs Americans of the opportunity
to use their own money as they best see fit. Furthermore, the burden of taxation
that is too high and too complicated reduces our ability to compete.
Second, we are working to improve health and retirement security for American
workers and retirees, because our citizens should have the opportunity for peace of
mind through all phases of life.
Third, we seek to maintain a vibrant and strong financial sector, because it is the
very underpinning of a strong and growing economy. Our financial markets are the
gold standard for safety and soundness, and the deepest and most liquid in the
world. We must ensure that America remains the best place in the world for people
to put their money.
And, finally, we embrace trade and open markets because they will produce rising
living standards for us and a more secure world.
I'd like to give a little more detail on each of these key reforms, beginning with fiscal
discipline and taxes.
ElscalQiscjpline amLlowI~x~s
Low taxes and a strong government balance sheet are not mutually exclusive. The
two go hand in hand.
When the executive and legislative branches look at the impact of the federal
budget on the economy we should be guided by the President's message that tax
dollars must be spent wisely, or not at all.
This is a difficult job, as there are clearly legitimate needs, particularly in the wake
of recent devastating natural disasters, and the need to protect the homeland. But
there can be no doubt that there are limits in terms of the impact of government
budgets on the strength of our economy. Deficits, while unders~andable in current
circumstances, are nonetheless unwelcome and should be aVOided. ExceSSive
deficit spending can lead to higher interest rates, and slower growth.
Fiscal responsibility gives us a competitive edge, and that is very much on the
minds of Administration leaders as we look at our budgets to tightly control
spending. That is why we are encouraging efforts in Congress as we speak to cut
excessive spending. Those efforts are to be applauded.

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The respect for taxpayers dollars, let me add, must be exercised both on the
spending end and the collection end. President Bush pushed Congress to give
Americans tax cuts when our economy was struggling, and the economic results
have been outstanding - strong GOP growth and job creation. Our citizens, and
therefore our economy, responded in a fundamental way to a lighter tax burden.
And the result of their efforts has increased the revenues flowing to the federal
government. Lower tax rates lead to economic growth, which produces more
government revenues. That is why it would be exactly the wrong time, as some
have proposed, to raise taxes. The American people and the economy would likely
respond in kind, with GOP and job losses. I don't mean to belabor the basic
principles of economics, but rather to emphasize the Administration's commitment
to and appreciation of those principles, and the irrefutable results.
The collection of revenues not only means the amount, but also the method of
collection, for its level of complexity actually acts like an additional tax, taking
billions of dollars out of the economy. American taxpayers and businesses in fact
spend an estimated $130 billion dollars in lost time and money trying to comply with
our increasingly unwieldy tax code. That's $130 billion in resources that could be
used to create jobs, invest in new business, or spur consumer spending. The $130
billion burden our tax code places on the American people is a drag on economic
growth and our international competitiveness as well as simply being an
unnecessary weight for Americans to bear
Next Tuesday, the President's Panel on Tax Reform will release its report,
containing both an analysis of the current tax code and two suggested structures for
a new code that is simpler, fairer and encourages economic growth. I look forward
to receiving that report, evaluating the options it presents, and later making a
recommendation to the President on fundamental tax reform.
Spending control, combined with lower tax rates, and a simpler, more pro-growth
tax code are a potent reform recipe for jobs, growth, and higher incomes for future
generations of Americans.
Taxation and spending, and their relationship to the health of our economy, also lie
at the heart of another set of reforms that the Administration is dedicated to: greater
security for the health and retirement needs of Americans.

As America's society ages, the President has rightly been in the forefront of reform
to increase the health and retirement security for America's workers and retirees.
You know the math--you've heard me and the President talk about before. As the
baby boomers enter retirement, the combination of rising cost of health care costs,
and the declining number of workers to retirees, both stand to swamp not only the
federal budget, but also sap our national income. Well-intentioned policies of the
past are already raising the cost and reducing the availability of health insurance,
and if private pension reform is not enacted - and it must be done right - pension
systems that workers have grown to rely on will leave millions at risk. And we must
save Social Security, so that our children and grandchildren have the foundation of
a secure retirement that so many now enjoy.
Some significant reform of health care policy has already been achieved - namely
the advent of Health Savings Accounts and legal reform that will help tame the
rising cost of health care - but there is much more to be done. The Administration
wants to continue to empower consumers to make their own choices, inserting
competitiveness into the health care marketplace that is sorely lacking today.
Individuals and small groups - like the employees of small businesses - have been
ill served by the current system and reforms must address their needs first. This
would include allowing small businesses and civic and community organizations to
band together to negotiate lower-priced health insurance for their employees
through Association Health Plans (AHPs) and providing a tax credit for contributions
to the HSAs of small business employees.
When discussing small business and health care, it is important to note that
addressing their needs go far beyond a noble effort to help the "little guy." Because
small business is actually the engine of our incredible economy. To them we owe
the majority of new job creation and American innovation. When small business
loses its competitive edge, America loses its edge.

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A small business that enjoys success will grow, and it will increasingly offer greater
benefits to its employees ... like pension plans. This is a positive occurrence, but in
recent years the flaws in the pension system, and the federal government structure
that protects workers, have been revealed. Reform in this area must be thoughtful
and deliberate, but not put off for another day. President Bush has proposed a
comprehensive pension reform to ensure that companies' promises to their workers
will not be broken in the future. Central to the proposed reform is better, more
market-sensitive accounting, which will ensure that corporations actually put aside
the funds needed to make good on their pension promises. Other key measures
involve an increase in premiums paid to the Pension Benefit Guaranty Corporation
(to strengthen the PBGC's finances and to reflect market insurance rates), new
transparency requirements (so that workers will know if their employers are making
good on their obligations), and restrictions on the ability of firms with underfunded
plans to make new promises to workers. These commonsense measures for
defined benefit pensions will help to strengthen an important pillar of our retirement
system, company-based pensions.
Another critical pillar of our retirement system is also in serious need of reform. As
all of you well know, Social Security is on a financially unsustainable path.
Reforming the system will address some critical long-term economic issues. It will
help address the looming unfunded obligations which threaten the fiscal outlook.
Another key to reform is stopping the practice of the government writing itself IOUs,
while spending dollars intended for Social Security on unrelated programs. This has
to stop.
That's why the President wants to let younger workers put their Social Security
dollars in personal accounts - the ultimate "lock box" for their hard-earned
retirement dollars.
We also need to make the program solvent. Progressive benefit growth, which
would bring the program about 70 percent of the way to solvency, is another
important element of the President's proposed changes. It would mean that the
lowest income seniors would have the fastest-growing benefits while benefits for
those who are more well off grow more slowly, with protection from inflation.
Americans rightly expect rising incomes in their working years, and a safe and
secure retirement. Health, pension and Social Security reform are all essential
reforms to address that concern. Without addressing their problems and embracing
fiscally responsible solutions, each of these future risks carries the potential to
deeply wound our economy and our ability to compete.

The very foundation of a strong and growing economy is a vibrant and healthy
financial system--one that efficiently allocates savings to the highest and best
investment opportunities. This "disintermediation" process lies at the heart of
economic growth. A healthy market must also have plenty of "shock absorbers" like
futures markets, derivatives, and hedge funds, to build deep, liquid capital markets
that spread risk and therefore will help to cushion the blows of economic shocks.
While my general belief, and a guiding principle for this Administration, is that our
economy does its competitive best when government leaves it alone, there is also
of course a need to look for and punish those who are abusing the system and/or
outright committing fraud. Such behavior is a direct assault on our way of
organizing economic activity. Fraud is totally antithetical to our system, which
simply cannot function unless strong anti-fraud rules are enforced.
Revelations of widespread misconduct that rocked the investment world in the
spring of 2002 led to the need for fairly immediate reforms on that front. The .
scandals threatened to destroy this nation's confidence in corporate leadership and
in those entrusted to safeguard our system of corporate capitalism, so considering
the context in which it came about, Sarbanes-Oxley actually was in most respects
quite a measured response. Despite its celebrated status as the most far-reaching
capital market legislation since the creation of the SEC in the thirties, the fact IS It.
essentially reaffirms established norms and codes of corporate governance, albeit
with criminal penalties. I know the President was proud to sign thiS essential reform
legislation.

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More often than not, reaffirming those norms and codes - versus over-policing or
burdening capital markets - is going to be the course of action that will protect, not
harm, our economy.
Our national system of housing finance is a critical portion of our financial markets,
so I want to speak briefly about reforms that we believe are necessary in that area
as well.
Our housing finance system needs to remain strong and healthy so that it can
continue to make mortgage credit available and provide financing opportunities for
new homeowners. The Administration has therefore proposed reforms that are
intended to ensure greater regulatory oversight, enhanced market discipline, and
appropriate capital requirements for Government Sponsored Enterprises (GSEs).
As we consider these reforms, we are guided by two core objectives the need for a
sound and resilient financial system and increased opportunities for home
ownership, especially for less advantaged Americans.
In light of the recent events at the GSEs, the need for meaningful reform has
become even more clear. As we originally outlined in detail in 2003, the regulator
for the GSEs should have powers comparable in scope and force to those of other
world-class financial supervisors and fully sufficient to carry out the agency's
mandate. The regulator must have clear general regulatory, supervisory, and
enforcement powers with respect to the GSEs. These powers must include the
authority to set both minimum capital standards and risk-based capital standards;
the power to assess the entities for independent funding outside of the
appropriations process; and the ability to place a failed GSE in receivership.
In order to protect against the systemic risk posed by the housing GSEs' mortgage
investment business, the Administration also recommends that limitations be placed
on the size of the housing GSEs' retained mortgage investment portfolios. After the
appropriate phase-in period, given the overall advances in securitization, the large
amount of data available on mortgages, and the increased sophistication of
mortgage investors, we believe that our capital markets will readily adjust without
any loss in mortgage availability.
Our primary goals in developing our GSE reform proposal are to promote the
strength and resilience of our housing finance markets, lessen the potential for
systemic risk, and continue our progress in meeting the mortgage credit needs of all
our Nation's homebuyers. To accomplish those purposes, the fundamental
elements of reform that the Administration has proposed are essential.
The IroJJ()rtl!os::g of Trade a_nd Open McHkets
So far I've primarily addressed what we can do at home to help us compete abroad.
But what about our active engagement with global markets, with our trading
partners and those with whom we hope to trade? Simply put, we do not operate as
an isolated country, and we must always resist inclinations to do so. History tells us
that economic isolationism would be a recipe for failure. An open economy that
embraces trade and open markets will be a successful one, period.
When discussing the benefits of international trade, I am reminded of a speech that
Tony Blair gave where he said that "The pace of change can either overwhelm us,
or make our lives better and our country stronger. What we can't do is pretend it is
not happening."
He went on to chide those who say that we ought to stop and debate this
phenomenon. He said, "You might as well debate whether autumn should follow
summer" and then pointed out that the emerging growing economies are not
debating it. They are seizing it and all of its possibilities and opportunities.
China, India, Brazil and our close neighbor, Mexico are among the countries that
are doing so, which is why they are the countries on my schedule of international
travel this year. In Brazil and China I have witnessed this year the great power of
good economic reforms for the people of those countries .as well as for the citizens
of the nations with whom they trade. I look forward to Similar VISitS to India and
Mexico before the year is over.

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I'm proud to say that this Administration has embraced, and continues to pursue,
free trade agreements. The President put the purpose of free trade well on the day
he signed CAFTA: "[T]o keep our economy growing and creating jobs, we need to
open markets for American products overseas. All of us understand that
strengthening our economic ties with our democratic neighbors is vital to America's
economic and national security interests. And all of us understand that by
strengthening ties with democracies in our hemisphere, we are advancing the
stability that comes from freedom."
A vibrant global economy is, indeed, in all of our interests. And making the benefits
of growth available to each and every one of our countries depends on free trade.
Tariffs, subsidies and trade barriers are unnecessary impediments to growth.
President Bush laid out a very clear message on trade in September at the United
Nations: A successful conclusion of the Doha Round will bring benefits for every
country - and particularly for the developing world. Trade in services in particular
can greatly benefit developing countries, providing knowledge and infrastructure to
facilitate economic growth and create jobs. This is especially true in the case of
financial services. An efficient, well-regulated financial sector is a key element for
achieving economic growth and stability in developing countries, and we are deeply
involved in advancing that agenda at the Treasury, in partnership with my
counterparts in the G7 and G20 nations.
Bold and ForwarQ LQokingReforms
Time doesn't allow me to address other key areas of reform that President Bush is
advancing including education, immigration and energy policy. In all of these areas
the President has shown strong leadership for reform.
In the tradition of Presidents Theodore Roosevelt and Ronald Reagan, President
Bush has advanced a bold and far-reaching reform agenda for America.
By tying together this bold and forward looking economic reform agenda, all aimed
at a dynamic, resilient and competitive American economy, I hope to have
underscored the basic fact that President Bush understands that responsible
government can't stand still. It must move forward and address the obstacles and
risks to rising growth and prosperity.
Certainly this does not mean that it has to grow, or that we can spend our way
through every problem. Just the opposite, in fact. Government needs to adjust, shift
or simply get out of the way in most cases. And that type of reform is the most
challenging of all. But we embrace it and we will not grow weary of pursuing it.
Thank you for having me here today.

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PRESS ROOM

October 26, 2005
js-2990

Statement by Deputy Secretary Kimmitt at Treasury's Iftaar
U.S. Treasury Department, Washington, DC
"Assalamualaikum and warm Ramadan greetings. I am honored to host you tonight
at the Treasury Department for this special meal, and to join you in recognition of
the holy month of Ramadan.
"I sincerely appreciate the chance to meet and have a meal together, and the
chance to talk with you about the good that comes from this month of prayer and
togetherness. Secretary Snow and I stand in admiration of your faith, and of the
significance of the fasting and personal sacrifice of Ramadan. This is a time to give
thanks for God's blessings through works of charity, which is of the highest
purpose.
"I know it deeply saddens all of us to realize that there are some who commit
atrocities in the name of this great faith, and that Muslim charities have been
abused in the process. At Treasury, we are proud to work closely with you to blunt
the effects of those who would use the Muslim faith for ill purposes. Tonight,
however, is a time for celebrating your faith, and I am grateful to have had this
chance to gather in fellowship and honor the many good deeds and generosity of
the Muslim people. Ramadan Mubarak."

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PRESS ROOM

October 27, 2005
JS-2991
Treasurer to Discuss Strengthening Social Security
and Financial Education in Norcross, Georgia
U.S. Treasurer Anna Escobedo Cabral will travel to Norcross, Georgia on Saturday
to discuss President Bush's efforts to strengthen and preserve Social Security and
increase financial education in America.
The following event is open to the media:
WHAT
Smart Teens Investing in Their Future
Latino Youth Conference
Keynote Speaker
WHERE
Norcross High School
5300 Spalding Drive
Norcross, GA
WHEN
Saturday, October 29,2005
9:00 a.m. EDT

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PRESS ROOM

October 28, 2005
JS-2992

Statement by Treasury Secretary John W. Snow
On Third Quarter GDP
"I was pleased by today's strong GOP number, which indicates that the American
economy is continuing to perform very well. In a quarter where the economy also
had to absorb the shock of massive natural disasters, a 3.8% rate of growth is truly
outstanding.
"For ten straight quarters, the American economy has grown at a healthy rate of 3.3
percent or more. There can be no doubt that the American economy is an adaptive
and resilient marvel, and one that has benefited greatly from good fiscal policies."
"The strong and steady GOP growth we've been experiencing is the result of lower
tax rates, sound monetary policy set by the Federal Reserve, and the economy's
underlying fundamentals. This growth bodes well for everything from job creation to
Treasury receipts. There is little wonder why the American economy is the envy of
the world."
###

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PRESS ROOM

October 28, 2005
js-2993
Media Advisory: Treasury Secretary Snow to Visit Detroit
U.S. Treasury Secretary John W. Snow will travel to Detroit, Michigan Monday
October 31,2005 to discuss the state of the U.S. economy and economic reforms
including tax policy and trade issues. In Detroit, Secretary Snow will attend a
luncheon hosted by members of the Detroit Economic Club.
The following events are open to credentialed media with photo identification:
Monday October 31, 2005
Luncheon hosted by members of the Detroit Economic Club
Cobo Center
1 Washington Blvd
Detroit, MI 48226
12:00 PM EST
** Media must RSVP to Rashanda Gray (313) 963-8547 by 8:00 AM EST Monday,

October 31, 2005
** Media must arrive by 12:00 PM EST

**Press Availability immediately following luncheon

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PRESS ROOM

October 28, 2005
js-2994

Media Advisory: Treasury Secretary Snow to Receive Final Report From The
President's Advisory Panel on Federal Tax Reform
Today the Treasury Department announced that Senators Connie Mack and John
Breaux, Chairman and Vice-Chairman of the President's Advisory Panel on Federal
Tax Reform, accompanied by other members of the Panel, will deliver the Panel's
recommendations to reform the U.S. tax code to Treasury Secretary John Snow on
Tuesday, November 1, 2005 at 10:00 a.m. in the Treasury Department Diplomatic
Reception Room. A briefing by Senators Mack and Breaux will follow.
The Tax Reform Panel was established by President Bush on January 7, 2005.
President Bush has charged the bipartisan panel with recommending reforms to the
tax code that will make the U.S. tax system simpler, fairer and more growth
oriented.
The following events are open to credentialed media with photo identification:
Tl,I~scLay l-lovember

1, 2005

President's Advisory Panel on Federal Tax Reform Delivers Recommendations to
Secretary John W. Snow
Diplomatic Reception Room (Room 3311)
The Treasury Department
1500 Pennsylvania Ave., NW
Washington, DC 20220
10:00 AM EST
*** Media must R.S.V.P. by 4:00 PM EST October 31 to Frances Anderson at
(202) 622-2439 or fral1~~s.anderson@do.treas.gov with full name, OOB, Social
Security number, organization name and country of birth if not U.S.

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PRESS ROOM

October 28, 2005
js-2995
Remarks by U.S. Treasurer Cabral in Visit to Reopening of Gulfport,
Mississippi Schools

Thanks so much for your hospitality and for hosting me today . I am so pleased to
be visiting this wonderful state.
I feel. b~th ~ouched and honored to be here with all of you today, visiting Gulfport,
MIssIssIPPI schools. I bnng you warm greetings from President Bush and Secretary
Snow as you return to class this month , and our best wishes to all - students,
teachers, administrators and parents alike.
I would also like to especially thank Dr. Hank Bounds , Mississippi State
Superintendent of Education, his wonderful staff, the school principals and teachers
of Gulfport for their graciousness in taking valuable time to host me today.
I want to let you know that our nation and our government stand behind you in this
challenging time. It is a source of great pride to note how our fellow Americans
devastated by this natural disaster have demonstrated grace under fire, and how
they have continued to valiantly face the long-term challenges that will be without a
doubt overcome. But overcoming these challenges will be a mammoth task
requiring great commitment and dedication from every party involved : government,
businesses and individuals .
Superintendent Bounds tells me that he is in awe at the great outpouring of support
for Mississippi schools both from the American people , as well as from the nonprofit
and private sectors. So I want to say to all those who have given : thanks again for
providing aid and assistance to these schools and students who so desperately
need it. And thank you to all who have committed to helping not just in the shortterm, but also in the long-term.
Fortunately , our country and this state are together facing these challenges headon, with complete determination and optimism. It is also very fortunate that we do
so having a really strong and vibrant economy. This is critical as we pursue
rebuilding efforts for Mississippi schools and across your state. As my boss
Secretary Snow says, "With a strong economy, we can afford to meet any
challenge ."
I want to assure you that President Bush will continue to work to keep government
on the side of economic growth and job creation so America's businesses and
workers can compete and prosper - so that the folks in the most affected areas by
the Hurricanes can get back on their feet and so their local communities can once
again flourish . Even in the face of challenges, such as the devastation caused by
the natural disasters of Hurricanes Katrina and Rita, President Bush has acted to
maintain pro-growth economic policies.
However, this President recognizes that there is still more work to be done. The
futu re holds tremendous opportun ity for the American people, and this
Administration is working very hard to ensure that all those pursuing the American
Dream have the opportunity to attain it.
How will the President continue to work to achieve these goals? First and foremost ,
his Administration will continue to work toward keeping taxes low and also work to
restrain unnecessary federal spending. The President has called upon Congress to
make tax relief permanent to continue to ensure that more money is left in the
pockets of the American people . To continue reducing the deficit, the President has
submitted a disciplined budget that proposed an actual cut in spending on nonsecurity discretionary programs and will keep the government on track to cut the

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deficit in half by 2009. As we help the people of the Gulf Coast rebuild the
President will work with Congress to further reduce unnecessary spending and cut
programs that are not working, so as to provide for emergency relief in a fiscally
responsible way.
As many of you know, this Administration has tended to recommend broad reforms.
From education to health care, homeland security to corporate responsibility, Social
Security to tax reform, the Bush Administration has actively sought reform across
the spectrum of government. We've done so because we appreciate that
government often must adapt itself to allow for individual creativity spur market
growth.
We also understand the .burden that can be left to future generations of taxpayers
and policy makers alike If we allow government to become an outdated mechanism
that creates a drag on our economy.
At Treasury, much of the reform policy that we focus on is aimed at maintaining an
American economy that stands apart as the most flexible, adaptive and resilient in
the world. This reform policy can be synthesized in four main or areas.
These four broad areas of reform that I will mention next, if achieved, will keep us
ahead of the curve when it comes to our ability to compete in the global
marketplace. First, to reiterate, we emphasize lower, simpler taxes and fiscal
discipline because we respect the taxpayers' money. We appreciate that spending
growth, and therefore government and tax growth, hampers individuals and
businesses from using their money to create wealth. Furthermore, the burden of
taxation that is too high and too complicated reduces our ability as a country to
compete in a global marketplace.
Second, we are working with Congress to improve the social safety nets of health
care and retirement security. Only thoughtful changes will help us help our
neighbors, while at the same time avoid hampering the security of future
generations.
Allow me to elaborate on the topic of improving retirement security. President Bush
has proposed a comprehensive plan for pension reform to ensure that companies
keep the promises they make to their workers.
Better and more market-sensitive accounting is crucial to this reform, which will
ensure that corporations actually put aside the funds needed to make good on their
pension promises.
Other key measures involve an increase in premiums paid to the Pension Benefit
Guaranty Corporation (to strengthen the PBGe's finances and to reflect market
insurance rates), new transparency requirements (so that workers will know if their
employers are making good on their obligations), and restrictions on the ability of
firms with underfunded plans to make new promises to workers. These
commonsense measures for defined benefit pensions will help to strengthen an
important pillar of our retirement system, company-based pensions.
Another critical pillar of our retirement system is also in serious need of reform.
Social Security is currently on a financially unsustainable path. Reforming the
system is necessary, and doing so will address some critical long-term economic
issues. I hope to see reform of the system that stops the practice of the government
writing itself IOUs while spending taxpayer dollars on unrelated programs.
That's why the President wants to give younger workers the choice to put their
Social Security dollars in personal accounts - the ultimate "lock box" for their hardearned retirement dollars.
President Bush also wants a permanent solution to this problem. So we also need
to make the program solvent. Progressive benefit growth, which would bring the
program about 70 percent of the way to solvency: is another i~portant element of
the President's proposed changes. In this scenariO, the lowest Income sel1lors
would have the fastest-growing benefits while benefits for those who are better off
grow more slowly, with protection from inflation.

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Much like a business that hopes to be successful, the government that regulates a
free-market economy must look not only at the challenges of the day, but the
challenges of the future. Health, pension and Social Security reform all fall into that
category. Without addressing their problems and embracing fiscally responsible
solutions, each of these future risks carries the potential to critically stagnate our
economy and our ability to compete.
Third, we additionally seek regulatory reforms to maintain a vibrant financial sector
because strong enforcement must function without creating a burden for good
actors.
And fourth, we also encourage both the Congress and the international community
to embrace free trade and open markets because we believe it holds great hope not
just for our businesses and workers, but for all the citizens of the world.
These reforms together are critical to both revitalizing the areas hardest hit by
Hurricanes Katrina and Rita; and they are essential to the continued economic
growth and prosperity of our country as a whole.
We owe it to ourselves today, and we owe it to our future generations to keeping
moving toward achieving these goals - even as we work to rebuild the communities
recently devastated by natural disasters. Achieving them will be a key to keeping
our country on the road to increased economic prosperity. If we stay on this course,
our children will surely benefit from it.
I sincerely appreciate your invitation to Mississippi. Thank you once again. I am so
grateful for your time and for the opportunity to visit with you today. All the folks in
MissisSippi and in your school districts are all doing an amazing job, and doing that
job beautifully.
-30-

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PRESS ROOM

October 28, 2005
js-2996
Indexed Amounts for Health Savings Accounts
The Treasury Department and IRS today issued new guidance on the maximum
contribution levels for Health Savings Accounts (HSAs) and out-of-pocket spending
limits for high deductible Health Plans (HDHPs) that must be used in conjunction
with HSAs. These amounts have been indexed for cost-at-living adjustments for
2006 and are included in Revenue Procedure 200r-70, which announces changes
in several indexed amounts for purposes of the federal income tax.
The new levels are as follows:
New Annual Contribution Levels for HSAs:
•

•
•
•

For 2006, the maximum annual HSA contribution for an eligible individual
with self-only coverage is $2,700. (Note: for any individual, the maximum
contribution is the lesser of the indexed amount or the deductible of the
HDHP.)
For family coverage the maximum HSA contribution is $5,450.
Catch up contribution for individual who are 55 or older is increased by
statute to $700 for 2006.
Both the HSA contribution and catch up contribution apply pro rate based on
the number of months of the year a taxpayer is an eligible individual.

New Amounts for Out-of-Pocket Spending on HSA-Compatible HDHPs:
•

The maximum annual out-of-pocket amounts for HDHP self-coverage
increase to $5,250 and the maximum annual out-of-pocket amount for
HDHP family coverage is twice that, $10,500.

Minimum Deductible Amounts for HSA-Compatible HDHPs:
•

For 2006, the minimum deductible for HDHPs increases to $1,050 for selfonly coverage and $2,100 for family coverage.

Note that a fiscal year HDHP that satisfies the requirements for an HSA-compatible
HDHP on the first day of its fiscal year may apply that deductible for the entire fiscal
year.

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PRESS ROOM

October 31, 2005
JS-2997
The Honorable John W. Snow
Prepared Remarks to: the Detroit Economic Club
Good afternoon. I really appreciate you having me here today. In 2003, I gave my
first speech as Treasury Secretary to the Detroit Economic Club, and it's a real
pleasure to be back here today. Since I was here last, we have seen the economy
on a remarkable path of growth. Last week's encouraging advance GOP report for
the third qu~rter was a reminder of the power of the inherent strength and flexibility
of the American economy to help us deal with economic challenges. In a quarter
where the economy had to absorb the shock of massive natural disasters we still
grew at a healthy rate of 3.8 percent.
'
Fundamental to our economic strength has been the pro-growth policies the
President has championed. Lower tax rates for all taxpayers put money back in ti")e
hands of consumers. An increase in expensing for capital investment gave a boost
to small businesses. It's important to continue this growth that we make the tax
cuts permanent.
It is also important that we exercise fiscal discipline. The increased spending
required for hurricane recovery efforts make this all the more important. We are
currently on the path to cut the federal deficit in half by 2009, and while economic
growth has helped the growth of Treasury receipts quite a bit, spending restraint is
the necessary other-half to the deficit-cutting process.
Wise monetary policy from the Federal Reserve has also played a great role in
keeping our economy strong. Under Alan Greenspan's leadership, the Federal
Reserve has played a Significant role in plotting a safe course for the economy
through some very difficult economic times. Through the stock market downturn of
the late-1980s to the currency crises of the 1990s and two recessions, Chairman
Greenspan's deft hand at the helm of the Federal Reserve has been a key element
of our economic success.
I was pleased by the President's choice of Ben Bernanke to be his nominee as the
next Fed Chairman. I have enjoyed having the opportunity to work with Ben these
past few months as he's served as Chairman of the President's Council of
Economic Advisors. His intellectual rigor and his deep understanding of the field of
economics have greatly impressed me. Ben's background as a respected
researcher and chairman of the Economics Department at Princeton University, as
a member of the Federal Reserve Board of Governors and, most recently, as an
economic policy advisor to the President, make him an excellent choice for this
critical position. Greenspan is not an easy act to follow, but Ben, I believe, will truly
prove a worthy successor.
A low inflationary environment has been the key to global growth and prosperity
over the last few years. It is widely understood today that inflation is a monetary
phenomenon. It will fall to the Fed and other leading central banks of the world to
continue to put in place the appropriate monetary policy to assure continued noninflationary growth.
Another key to continued economic growth is the flexibility of our economy. One of
the great virtues of a flexible economy is the continuous .automatlc adjustment
process. A flexible market economy is constantly adjusting to aVOid large problems
that require sharp corrections. In this way th~ automatic. market adJustn:ent
processes are like a tea kettle which, upon hitting the boiling pOint, con~tnues to let
off pressure. Under a system of tight regulation and government dlrectl?n of the
economy, the rules and regulations can get far out of touch With underlYing
economic realities.

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In these cases, the underlying pressures will continue to build but without the
automatic correction process takin~ place and without the regulators having a good
feel for the fact that things are getting out of balance. They will eventually see that
they a~e out.of balance, but by then the required correction will be large and
potentially highly d.lsruptlve .. In other words, de-regulation by allowing markets to
operate, reduces rrsks of major disruptions and thus promotes stability. Imbalances
are addressed automatically, so that In most cases no one is even aware that
problems have been avoided - it is the tea kettle that did not blow up.
The importance of economic flexibility was readily apparent in the aftermath of the
recent hurricanes. Despite very real shocks to the economy, GOP grew in the third
quarter at a strong 3.8% pace. Harsh reality means we will face disruptive events
from time to time. The best thing we can do is make sure that the U.S. economy
and the global economy are able to absorb such shocks.
We have done that pretty well in the U.S. economy by adopting a far-reaching set of
poliCies over the past three decades that have made the American economy much
more flexible and much more resilient. A priority for national policy makers must be
to resist policy proposals that would introduce rigidity into the economy and instead
to press on every front for policies to make the economy even more flexible.
Our tax system is one area where we have a real opportunity to increase economic
flexibility. The unwieldy nature of the American tax code is legendary. As I'm sure
you know, the President's Panel on Tax Reform will be presenting a comprehensive
report to me tomorrow that details both the problems with the current code and
suggested replacement structures for it. I'm looking forward to receiving their
report.
At Treasury, we'll be taking the Panel's report into consideration as we prepare to
then give our reform recommendations to the President.
There are challenges to our economy. High energy prices are something that we
are all thinking about. The underlying strong fundamentals of our economy have
certainly helped us to adjust to the rise in prices, but all the same, current energy
prices are creating real headwinds for the economy. They act like a tax on
consumers, reducing their real purchasing power. They also have an adverse
psychological effect on consumers, making them more apprehensive and less
positive about the economic outlook. They also have adverse effects on the cost
structures, operating income and cash flow of energy-intensive businesses.
While high energy prices are leading to a supply-side driven slowdown in the
recovery, they have not derailed the recovery. The world economy continues to
grow at a strong clip, even in the face of the headwinds created by high energy
prices.
Unwelcome as they are, high energy prices lead to behavior changes by both
suppliers of energy and consumers of energy, which set in motion a set of forces to
moderate the high prices over time. These are natural responses to higher prices.
High energy prices are a good incentive to develop both traditional and nontraditional new energy sources. In addition, they provide a strong incentive for
energy buyers to conserve and we see that happening already.
The energy bill that President Bush pushed for so hard and so long is fi~ally law. It
will help over time and sends a good signal to the markets that our polItical
processes work. In the long run, this legislation will encourage c?nservatlon,
increased production, and give incentives for developing alternative sources of
energy.
But we also need to promote greater access to our abundant energy sources. We
need to allow exploration in ANWR. It can be done in an e~vironmentally sensitive
way. We need to facilitate expansion of our refinery capacity In the U.S. which has
become a real bottleneck for us.
We also need to encourage nuclear energy investment. We need to speed up the
regulatory process and create more certainty in it. These are the ideas the
Administration is working on today under the leadership of Energy Secretary Sam
Bodman.

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Another area of particular concern to businesses, and especially businesses in the
Detroit area, are rising health care costs. The Administration is exploring ways to
address this problem. It can be argued that the future fiscal condition of the federal
government will be driven by rising health care costs. In the private sector,
employers can be reluctant to hire new employees because of steeply rising health
costs.
One necessary reform to deal with this problem is to address frivolous lawsuits that
clog up our courts and raise health care costs for everyone. The courts exist to
give citizens recourse, but every dollar spent fighting a frivolous lawsuit is a dollar
that is not going to care for a patient or to reduce costs. It is important that we turn
the courts back into venues for legitimate claims and restrict the opportunity for junk
lawsuits to tie up valuable time and resources.
We've also created Health Savings Accounts (HSA) to bring affordable health care
within reach of more Americans. Like super-charged IRAs for health care, HSAs
are tax free savings accounts that can be used in conjunction with a high deductible
health care plan to significantly reduce health care costs. HSAs put consumers in
charge of their own health-care choices. If you have not already, I hope all of you
consider offering an HSA option to your employees.
I talked earlier about removing government impediments to economic growth, and I
want to point out that the importance of this applies to other nations as well. In other
words, in a global economy the U.S. cannot continue to be the sole source of
growth, nor can we continue to grow if we are isolated from the enormous number
of potential customers that exist outside our borders. We look to other countries to
improve their economies and to remove barriers to trade. Trade is a two-way
street. While we believe in open trade, we believe in trade with rules that everyone
must follow.
I just recently returned from a trip to China where we had productive discussions
about trade liberalization - in particular, greater access for financial services. I
believe financial services liberalization would help China achieve balanced growth,
which is critical not just for China, but for the global economy.
China's foreign exchange regime certainly is also extremely important. Our views
on this issue by now are well known: China and the global economy will both
benefit from greater currency flexibility. We will continue to press China to continue
to make progress on reforming their foreign exchange regime.
But we can't forget that constant reform of our own economy is our highest priority if
we want to remain the most dynamic economy in the world. For our economy to
continue to grow, we must keep it flexible, we must keep taxes low, and we must
work with our trading partners to eliminate barriers to trade.
Thank you so much for having me here. I'd be glad to take your questions.

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f->HlSS HOOM

October 31 , 2005
JS-2998

Testimony of Robert Werner, Director
Office of Foreign Assets Control
U.S. Department of the Treasury
Before The Permanent Subcommittee on Investigations
Committee on Homeland Security and Governmental
Affairs
Chairman Coleman, Ranking Member Levin and other distinguished members of
the Subcommittee, I appreciate the opportunity to discuss the responsibilities of the
Office of Foreign Assets Control, or OFAC, as these pertain to the United Nations
"Oil-for-Food" program and the Iraqi sanctions.
My testimony today will center on the Committee's interest in OFAC's role regarding
the administration, compliance and oversight of U.S. persons authorized to
participate in the "Oil-for-Food" program as well as those who obtained licenses to
engage in transactions related to travel to, and within, Iraq.
Before turning to a discussion of these responsibilities and processes, however, I
would like to provide you with a general overview of OFAC's mission and
jurisdictional authorities.

Mission and Jurisdiction
Since becoming Director of OFAC in October of 2004, I have learned first hand that
it is an exceptional agency of experienced, knowledgeable professionals dedicated
to carrying out the complex mission of administering and enforcing economic
sanctions programs based on U.S. foreign policy and national security goals with a
workforce of 140 authorized full-time staff.
OFAC currently administers 30 economic sanctions programs against foreign
governments, entities and individuals. Though eight of these programs have been
terminated, they still require residual administrative and enforcement activities.
OFAC's authority to impose controls on transactions and to freeze foreign assets is
derived from the President's constitutional and statutory wartime, and national
emergency powers. In performing its mission, OFAC relies principally on
delegations of authority made pursuant to the President's broad powers under the
Trading with the Enemy Act ("TWEA"), International Emergency Economic Powers
Act ("IEEPA"), and the United Nations Participation Act ("UNPA") to prohibit or
regulate commercial or financial transactions involving specific foreign countries,
entities, or individuals. In administering and enforcing economic sanctions
programs, OFAC maintains a close working relationship with other federal
departments and agencies to ensure that these programs are implemented properly
and enforced effectively. OFAC works directly with the Department of State
("State"); the Department of Commerce ("Commerce"); the Department of Justice,
the Federal Bureau of Investigation (FBI), the Department of Homeland Security's
U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs
Enforcement (ICE); bank regulatory agencies; and other law enforcement agencies
to fulfill our mission.
I would also note, Mr. Chairman, that all of the programs we administer require that
we work closely with the broad range of industries potentially affected by these
programs. We are expanding and improving our communication with our diverse

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constituencies ranging from the financial and services sectors to manufacturing and
agnculturalllldustnes. The cooperation we receive from U.S. corporations in
complYlllg with sanctions IS generally exceptional

UN/Iraq Sanctions Overview and Implementation
Following the Iraq invasion of Kuwait on August 2, 1990, the UN Security Council
Issued UNSCResolutlon 661 on August 6, 1990, imposing sweeping economic
sanctions agalllst Iraq and providing protective measures with respect to Kuwait.
Resolution 661 also established a committee consisting of all members of the UN
Secunty Council to monitor and supervise implementation of the sanctions (the
"661 Committee"). Following the invasion of Kuwait, the President also issued
Executive Order 12722, on August 2, 1990, which froze the assets of the
Government of Iraq in the United States or under the control of U.S persons and
Imposed a comprehensive trade embargo against Iraq. Followlllg the adoption of
UNSC Resolution 661, the President issued Executive Order 12724 on August 9,
1990, broadenlllg the sanctions previously imposed. These sanctions were
implemented by OFAC through the Iraqi Sanctions Regulations, 31 C.F.R. Part 575
(the "Regulations").
Section 575.205 of the Regulations prohibited any goods, technology or services
from being exported from the U.S. to Iraq, except for donated articles intended to
relieve human suffering that were authorized by OFAC on a case-by-case basis.
Under sections 575.520 and 575.521 of the Regulations, U.S. persons could apply
to OFAC for authorization to export to Iraq donated food and donated supplies
intended strictly for medical purposes.
Except as otherwise authorized, section 575.207 of the Regulations prohibited U.S.
persons from engaging in transactions relating to travel to Iraq by any U.S. citizen
or permanent resident alien, or to activities by any U.S. citizen or permanent
reSident alien within Iraq. This prohibition included payments by U.S. persons for
their own travel or living expenses while in Iraq. The Regulations did not prohibit
travel transactions related to travel to Iraq or to activities within Iraq that were: (1)
necessary to effect the departure of a U.S. citizen or permanent resident alien from
Kuwait or Iraq; (2) relating to travel and activities for the conduct of the official
business of the United States Government or the United Nations; or (3) by persons
regularly employed in journalistic activity by recognized newsgathering
organizations.
OFAC referred travel applications to the Department of State for foreign policy
guidance in appropriate cases, such as when an applicant claimed a compelling
humanitarian consideration (e.g., a critical illness of an immediate family member in
Iraq), or where CIrcumstances indicated that a national interest was at stake. In
these instances, licensing determinations were made on a case-by-case basis in
consultation with the Department of State. In addition, U.S. persons planning to
travel to Iraq under a U.S. passport were required by the Department of State to
have their passports validated for travel to Iraq by the Office of Passport Services.
In April of 1995, the Security Council adopted UNSC Resolution 986 (Oil-for-Food)
as a temporary measure to provide for the humanitarian needs of the Iraqi people.
In May of 1996, the Government of Iraq signed a Memorandum of Understanding
setting out detailed arrangements for the implementation of Resolution 986. Under
Oil-for-Food, the Government of Iraq was permitted to sell and to export from Iraq
petroleum and petroleum products as well as purchase and illlport humanitarian
materials and supplies to meet the essential needs of the CIVilian population In Iraq.
The proceeds from sales of Iraqi-origin petroleum and petroleum products were to
be deposited into a special escrow account at the New York branch of Banque
Nationale de Pans ("BNP New York") where they would be used to fund purchases
made by the Government of Iraq.
The Secretary-General established a panel of independent experts in the
international oil trade to oversee oil-purchase contracts and ensure that they
complied with requirements provided for in Resolution 986. The panel was .
responsible for assessing the pricing mechanisms for petroleum purchases In order
to determine whether they reflected fair market value. The panel was also

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responsible for providmg analysis and recommendations to the 661 Committee.
With respect to purchases of humanitarian materials and supplies, the Government
of Iraq was required to prepare a categorized list of humanitarian goods and
supplies It Intended to purchase and import pursuant to Resolution 986 and submit
it to the Secretary-General. The Secretary-General would then forward the
distribution list to the 661 Committee. Individual contracts for purchases of
humanitarian goods and supplies were submitted to the 661 Committee through the
relevant UN mission of the exporting state. Committee members could disapprove
any contract. Payment from the Iraq escrow account at BNP New York would only
be approved for items included in the distribution list, unless the 661 Committee
decided otherwise on a case-by-case basis. Experts in the UN Secretariat were to
examine each contract, especially regarding quality and quantity of the goods and
supplies m order to determine whether a fair price and value were reflected in the
document.
Effective December 10, 1996, OFAC amended the Regulations to provide
statements of licensing policy with respect to Oil-for-Food, which appeared in the
December 11, 1996, edition of the Federal Register. Section 575.522 of the
Regulations authorized U.S. persons to enter mto executory contracts with the
Government of Iraq for the purchase of Iraqi-Origin petroleum and petroleum
products, and to trade in oilfield parts and equipment and civilian goods, including
medicines, health supplies and foodstuffs. U.S. persons were also authorized to
enter into executory contracts with third parties outside OFAC's jurisdiction that
were incidental to permissible executory contracts with the Government of Iraq.
U.S. persons were not authorized to engage in transactions related to travel to, or
within, Iraq for the purpose of negotiating and signing executory contracts.
However, U.S. persons could enlist and pay the expenses of non-U.S. nationals to
travel to Iraq on their behalf for the purpose of negotiating and signing executory
contracts.
OFAC required U.S. persons, who had entered into executory contracts with the
Government of Iraq for the sale of humanitarian materials and supplies or oilfield
parts and equipment, to submit an application to OFAC for a case-by-case review
and approval prior to performance of each contract. OFAC referred each application
to the Department of State and if appropriate the Commerce Department for
guidance on whether to authorize performance of the contract. State was then
responsible for submitting the contract to the UN 661 Committee for review
concerning whether to authorize release of funds from the Iraq account at BNP New
York to pay for the goods upon their delivery to Iraq. OFAC issued a license
determination after it received from State a copy of the 661 Committee approval of
payment and a separate memorandum from State recommending that a specific
license be issued to the applicant.
OFAC issued approximately 1050 specific licenses to U.S. persons for various
aspects of the Oil-for-Food program, primarily under three provisions of the
Regulations. Sales to the Government of Iraq of Oilfield parts and equipment and
humanitarian aid were subject to licensing under, respectively, sections 575.524
and 575.525 of the Regulations. Three U.S. companies were authorized under
section 575.524 to sell oilfield parts and equipment directly to the Government of
Iraq, and 23 U.S. companies were authorized under section 575.525 to make direct
sales to the GOI of humanitarian aid. A total of 48 licenses were issued to these 26
U.S. companies authorizing performance of sales contracts entered into with the
Government of Iraq.
Section 575.523 of the Regulations authorized the performance of contracts
approved by the UN 661 Committee for the purchase of Iraqi.-origin petroleum or
petroleum products directly from the GOI. Nine U.S. companies were each Issued a
license under this section.
Most U.S. persons licensed by OFAC under this program were authorized to
engage in trade transactions with third country entities who were contractors or
subcontractors with the Government of Iraq. In other words, these remammg
.
approximately 1000 specific licenses either authorized U.S persons to engage m
transactions with third parties related to sales to the GOI, or else authOrized non-

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u.s. persons to engage in transactions involving U.S.-origin goods or components
being supplied to the Government of Iraq. For example, under 575.523 OFAC
issued thirteen specific licenses to seven US. persons for activities tha't facilitated
the purchase of Iraqi oil by third parties
Finally, the general license In section 575526 of the Regulations authorized U.S.
persons to impoli into the United States, and otherwise deal In, Iraqi-ongin
petroleum and petroleum products provided that the goods in question had been
approved for purchase and export from Iraq by the 661 Committee
Outreach
Because of the complexity of the Oil-for-Food program. OFAC engaged in an
outreach program to assist licensees in understanding their obligations. OFAC
provided guidance about the Program's requirements in hundreds of sanctions
workshops. It also published information on Iraqi sanctions in numerous plainlanguage brochures, including Iraq. What You Need to Know About US. Sanctions,
and Foreign Assets Control Regulatons for the Financial Community, ... for
Exporters and Importers, ... for the Insurance Industry. and ". for the Securities
Industry. Further, it referenced the program in articles published in industry
magazines for bankers, for shippers, and for the international trade community.
In addition to engaging in this general guidance, in January of 1997, OFAC issued a
memorandum to the attention of the US. Customs Service recommending that
Customs require importers of Iraqi petroleum or petroleum products to provide a
copy of the 661 Committee approval for which the petroleum or petroleum products
in question comprised all or a part of the original purchase. In addition, OFAC
suggested that Customs might wish to request from the importer a brief statement
describing the type and amount of the imported Iraqi products and affirming that, to
the best of the importer's knowledge and belief, the Imported Iraqi petroleum or
petroleum products comprised all or a portion of the purchase covered in the
accompanying UN document. In a memorandum to OFAC dated March 6, 1997,
Customs confirmed that it had issued instructions to Customs field offices pursuant
to the guidance contained in OFAC's memorandum.
In December of 2000, OFAC also published explicit information about authorized
and unauthorized payments under the Oil-for-Food program. This document,
entitled "Guidance on Payments for Iraqi Origin Petroleum," was prepared in
response to media reports that the Government of Iraq had attempted to force its oil
customers to violate UN Security Counsel Resolutions by demanding that they pay
premiums in the form of surcharges, port fees or other payments into an Iraqi
controlled account. The guidance specifically stated that no transfer of funds or
other financial or economic resources to or for the benefit of Iraq or a person in Iraq
could be made except for transfers to the 986 Escrow Account. The document
mirrored a December 15, 2000, communication from the 661 Committee with the
following explicit points:
1.) The Sanctions Committee did not approve a surcharge of any kind on Iraqi Oil.
2.} Payments for purchasing Iraqi crude oil could not be made to a non-UN account.
3.) Therefore, buyers of Iraqi oil should not pay any kind of surcharge to Iraq.
Designation Authority
Under the Iraq sanctions program, OFAC had the authority to specially designate-that is, to identify publicly and to block assets of any person, whether an individual
or a business, that was directly or indirectly owned or controlled by the Government
of Iraq, or that purported to act for or on behalf of that government. As an essential
element of the Iraq sanctions, OFAC began an initiative to Identify front companies
and agents used to acquire technology, equipment, and resources for Iraq or to
otherwise act for or on behalf of the Government of Iraq. Iraq Specially Designated
Nationals (SON) included Iraqi governmental bodies, representatives, agents,

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intermediaries or fronts, and could be either overt or covert entities of the
government. The designations not only exposed these persons and blocked their
assets but also cut them off from participation in the U.S financial and economic
systems .. Ultimately, OFAC named approximately 300 separate entities or
individuals as Iraq SONs.
Enforcement
OF AC also worked closely with federal law enforcement agencies to enforce
sanctions against Iraq. For example, CBP has responsibility to interdict goods
destined to or from OFAC-sanctioned countries or groups. CBP inspectors contact
OFAC's Enforcement Division when suspect goods are detained to determine if
OFAC has issued licenses for these goods. OFAC's outreach training to CBP
inspectors at the Federal Law Enforcement Training Center and at CBP Ports of
Entry throughout the country IIlcluded information about sanctions against Iraq.
Moreover, OFAC has completed over 300 investigations and audits against U.S.
financial institutions, corporations and individuals involving violations of the Iraq
sanctions program. The violations investigated ranged from unauthorized attempts
to export goods to Iraq by U.S. companies to the operation of brokerage accounts
for Specially Designated Nationals of Iraq by brokerage firms. In addition, audits of
banking transactions conducted by OF AC have revealed other cases involving
funds transfers destined for Iraq transmitted by US banks. OFAC's action against
violators included the issuance of warning letters, the imposition of civil monetary
penalties and, where no violation was found, no further agency action depending on
the nature, circumstances and scope of the violation.
Finally, criminal investigations of OFAC sanctions' programs are conducted by ICE,
the Commerce Department's Office of Export Enforcement ("OEE"), and the FBI.
OFAC plays a coordinating and advisory role in such cases, and works closely with
agents and Assistant U.S. Attorneys. OFAC often provides an expert witness at
trial. Criminal charges of IEEPA violations have been brought in at least 13 cases
since August 1990, for unlicensed transactions with Iraq. These cases have
involved illegal exports, money remittances and dealings in Iraqi oil.
OFAC is also working with agents in a number of on-going criminal investigations,
including investigations by the Department of Justice of potential violations of the
Oil-for-Food program. In one case, dealing with the purchase of Iraqi oil in excess
of the amount authorized by the U.N. under Oil-for-Food, OFAC ordered a U.S.
company to place in excess of several million dollars into a blocked account at a
U.S. financial institution. In another case, OFAC provided information from an Olifor-Food license file to a US. Attorney's Office.
Conclusion
I thank the Committee for the opportunity to discuss OFAC's role in implementing
economic sanctions against Iraq, including its role In the Oil-for-Food program. I
look forward to taking your questions.

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Page 1 of 1

PRESS ROOM

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October 31, 2005
JS-3000

Treasury Announces Market Financing Estimates
The Treasury Department announced tOday that it expects net borrowing of
marketable debt to total $96 billion in the October - December 2005 quarter. The
estimated cash balance on December 31 is $25 billion. On August 1, Treasury
announced estimated net market borrowing of $97 billion this quarter and a
December 31 cash balance of $25 billion. Adjusting for a beginning-of-quarter cash
balance that was $6 billion higher-than-estimated in August, the current borrowing
estimate is $5 billion higher than previously announced. The increase in anticipated
borrowing is primarily the result of higher outlays partially offset by higher receipts.
Treasury also announced that it expects net borrowing of marketable debt to total
$171 billion in the January - March 2006 quarter. The estimated cash balance on
March 31 is $15 billion.
Treasury borrowed $52 billion in net marketable debt in the July - September 2005
quarter. The cash balance on September 30 was $36 billion. On August 1,
Treasury announced estimated net market borrowing of $59 billion and an end-ofquarter cash balance of $30 billion. Adjusting for the higher-than-estimated cash
balance at quarter-end. the net market borrowing need was $12 billion lower than
announced in August. The improvement was primarily the result of higher receipts
Additional financing details relating to Treasury's Quarterly Refunding will be
released at 9:00 A.M. on Wednesday, November 2. The following link provides
access to Treasury documents related to this Quarterly Refunding.
(http://www .trea s. gov/offices/domestic-finance/debt -management/q uarterlyrefunding/)
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REPORTS
•

Market Financing Estimates

P://WWw.treas.g()v/pless/relC21~es/j53000.htrn

11/7/2005

TREASURY ANNOUNCES MARKET FINANCING ESTIMATES

Today, the Treasury Department announced net borrowing of marketable
debt for the October-December 2005 and January-March 2006 quarters.

Quarter

Estimated
Borrowing
($ billion)

Estimated
End-of-Quarter
Cash Balance
($ billion)

Oct-Dec 2005
Jan-Mar 2006

$96
$171

$25
$15

Since 1997, the average absolute forecast error in net borrowing of
marketable debt for the current quarter is $10 billion and the average
absolute forecast error for the end-of-quarter cash balance is $9 billion.
Similarly, the average absolute forecast error for the following quarter is $32
billion and the average absolute forecast error for the end-of-quarter cash
balance is $11 billion.
The following tables reconcile the variation between forecasted and actual
net borrowing of marketable debt in the July-September 2005 quarter.

Quarter

Estimated
Borrowing
($ billions)

Actual
Borrowing
($ billions)

Estimated
End-of-Quarter
Cash Balance
($ billions)

Actual
End-of-Quarter
Cash Balance
($ billions)

Jul-Sep 2005

$59

$52

$30

$36

CateJ;:ories
Receipts
Outlays
Other
Larger End-of-Quarter
Cash Balance

Chg from
AUJ;: Estimate

$14
($3)
$2
($6)

Additional financing details relating to Treasury's Quarterly Refunding will
be released at 9:00 A.M. on Wednesday, November 2. The following link
provides access to Treasury documents related to this Quarterly Refunding.
(http://www .treas. gOY / offices/ domestic-finance/ debt -management/ quarterly -refunding/)

Page lof2

PHLSS HOOM

October 31 , 2005
JS-3001
Assistant Secretary of the Office of Economic Policy
Mark J. Warshawsky
Statement for the Treasury Borrowing Advisory Committee
of the Bond Market Association

In the three months since the Advisory Committee's last meeting, the economic
scene has been dominated by the serious hardship suffered by so many Americans
as a result of HUrricanes Katrina and Rita. But the quarter's initial, solid
momentum, combined with the national economy's overall resilience, provided a
foundation of strength. Despite the hurricanes, the U.S economy continued to
grow strongly: real GOP, our most complete measure of activity, grew at a 3.8
percent annual rate in the third quarter as reported in the advance estimate just last
Friday, accelerating from the second quarter's 3.3 percent pace. Strength was
evident in consumption, selected categories of investment, and residential
construction.
Consumer spending continued to anchor the economy Personal consumption
expenditures advanced by a strong 3.9 percent, buoyed early in the quarter by
sales of motor vehicles as consumers responded to employee discount incentive
programs.
Business capital spending provided more support to growth. Investment in
equipment and software increased at an 8.9 percent rate in the third quarter, in line
with the 9.5 percent pace of the first half of the year. Business investment In
structures continued its recent uneven pattern, dipping 1.4 percent in the third
quarter. Nonetheless, we expect to see some rebound in private nonresidential
construction expenditures as post-hurricane rebuilding proceeds.
Although remaining at a high level, growth in real residential investment slowed in
the third quarter to a 4.8 percent annual rate. Much of the slowdown was due to
reduced brokers' commissions as growth in home sales flattened out at a high level.
Inventory investment, which had subtracted 2.1 percentage points from growth in
the second quarter, reduced growth by an additional 0.6 percentage point in the
third quarter. The private inventory-sales ratio has been cut sharply in the last two
quarters, suggesting that businesses may well need to rebuild stocks, and that
inventory investment could make a positive contribution to growth over the next few
quarters.
The foreign trade deficit narrowed a bit, making a small positive contribution to real
GOP growth for the second straight quarter, after six quarters of posing a drag.
Both exports and imports were affected by disruptions to port facilities. Complete
data for the quarter are not available, yet preliminary figures show exports slowed -likely owing to hurricane disruptions -- growing by 0.8 percent in the third quarter
after eight straight quarters of robust, and sometimes double-digit, growth. Total
imports were flat in the third quarter, after falling by 0.3 percent in the second
quarter.
Hurricane-related disruptions boosted energy prices and caused the overall inflation
rate to jump. The price of West Texas Intermediate crude shot up near the $70 a
barrel mark in early September, and gasoline prices briefly exceeded $3 a gallon.
The broadest measure of inflation, the GOP price index, rose by 3.1 percent at an
annual rate in the third quarter, and consumer prices in September were 4.7
percent above the year-earlier level. Outside of the energy sector, however, the

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11/7/2005

Page 2 of2

inflation picture remains remarkably tame. The core PCE price index, which
excludes energy and also food, rose Just 1.3 percent in the third quarter, well below
the 2 percent average rate over the preceding two years. Clearly, recent
inflationary pressures have been centered in energy, which underscores the
importance of the Administration's efforts to encourage the expansion of domestic
energy supplies and a more efficient use of energy.
Although underlying employment conditions outside of the affected areas remain
healthy, the impact of Hurricane Katrina on employment was significant. We know
from regional employment data that Louisiana and Mississippi suffered large onemonth job losses of 251 ,000 and 60,000, respectively. The city of New Orleans
alone lost 237,000 jobs -- a drop of almost 40 percent. The national unemployment
rate rose 0.2 percentage points to 5.1 percent in September, and payroll
employment fell by 35,000 -- the first decline in 28 months. Every effort IS being
made to rectify the consequences of these job losses through a variety of
Administration programs and proposals targeted toward unemployed hurricane
survivors. Programs already In place Include the "Pathways to Employment"
Initiative, the HUrricane Recovery Job Connection, Disaster Unemployment
Assistance, and the National Emergency Grant employment program. In addition,
the President's Gulf Opportunity Zone proposal would provide immediate jobcreating incentives to area businesses.
Overall, we're optimistic that future real growth will remain solid with continued
gains in payroll Jobs. Crude oil prices have receded by roughly $10 a barrel from
their late August peak, and gasoline prices have declined by about 15 percent since
then, suggesting the potential for more favorable headline inflation going forward.
We agree with private sector estimates suggesting growth above 3 percent in the
fourth quarter, accelerating to about 3.5 percent in the first half of 2006 -- abovetrend growth as post-hurricane reconstruction proceeds.
As we move from focusing on disaster response to recovery, we will be faced with
an array of decisions and choices. The desire to rebuild immediately must be
tempered with the need to rebuild wisely. In this regard, it is important that we
recognize that all federal choices -- whether explicit or implicit -- will have an impact
on future redevelopment. Further, we must ensure that redevelopment plans
minimize the future exposure of all taxpayers, in recognition of the fact that the
federal government is effectively often the insurer of last resort in large-scale
disasters. Fulfilling this task involves accounting for potential future costs in current
government decision-making and ensuring that the appropriate incentives are in
place for the private sector to do so as well.
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