View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

LIB R A R Y
ROOM 5030
JUN 14 1972
TREASURY DEPARTMENT

ECR RELEASE, MORNING PARERS,
Thursday, January 7, 1932.

TREASURY DEPARTMENT
f

STATEMENT BY SECRETARY MELLON

The Secretary of the Treasury gives notice that tenders are
*

invited for Treasury bills to the amount of $50,000,000, or thereabouts.
They will be 91-day bills; and will be sold on a discount basis to the
highest bidders.

Tenders will be received at the Federal Reserve Banks,

or the branches thereof, up to two o Tclock p. m . , Eastern Standard time,
on Monday, January 11, 1932.

Tenders will not be received at the

Treasury Department, Washington.
The Treasury bills will be dated January 13, 1932, and will
mature on April 13, 1932, and on the maturity date the face amount
will be payable without interest.

They will be issued in bearer form

only, and in amounts or denominations of $1,000, $10,000, $100,000,
|500,000, and $1,000,000 (matur ity value).
It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by the
Federal Reserve Banks or branches upon application therefor.
No tender for an amount less than $1,000 will be considered.
Each tender must be in multiples of $1,000.

The price offered must be

expressed on the basis of 100, with not more than three decimal places,
e. g., 99.125.

Fractions must not be used.

Tenders will be accepted without cash deposit from incorpor­
ated banks and trust companies and from responsible arid recognized
dealers in investment securities.

Tenders from others must be accom­

panied by a deposit of 10 per cent of the face amount of Treasury bills

-

2-

applied for, unless the tenders are accompanied by an express guaranty
of payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
January 11, 1932, all tenders received at the Federal Reserve Banks
or branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices will follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on January 13, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from -.ill taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowed
as a deduction, or otherwise recognized, for the" purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this
notice prescribe the terms of the Treasury bills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or branch thereof.

FOR RELEASE, MORNING PAPERS
Saturday, January 9, 1932.

TREASURY DEPARTMENT

11THE TREASURY1S FINANCIAL PROGRAM"

An Address
delivered by

HON. ARTHUR A. BALLANTINE,
Assistant Secretary of the Treasury,
before the
annual dinner
of
NEW YORK STATE RANKERS* ASSOCIATION,
Hotel Roosevelt,
New York City,
on
Friday Evening,
January 8th,

1932

The financial problem of the Government of the United States today is
to eliminate the deficit and get hack to a balanced budget.

Without taking

into account additional revenue through recommended legislation, -the deficit
is estimated at $2,123,000,000 for the current year and at $1,417,000,000
for the 1933 yea,r.

Expenditures resulting in these deficits, of course,

include expenditures for the debt retirement required by law.

The excess

of current expenditures over revenues must be met by borrowing.

.That

emergency condition cannot be allowed to continue and every citizen, wiiatever
his state or occupation, has a vits.1 interest in putting an end to it.
In a large way the condition of the Treasury today is due to effects
of the war.

As a result of the war annual expenditures for the service of

the debt and for veterans have been increased by amounts aggregating more
than twice the total amount of prewar annual expenditures of the Government
for all purposes.

Postwar industrial and commercial activities were at a

high level due in part to deficiencies in many commodities and products, and
to unusual market conditions resulting from the war.

These postwar activities

yielded very large tax receipts, and their subsidence has confronted us with
greatly diminished revenue and with emergency and relief expenditures.
are only now liquidating certain economic effects of the war.

We

Service and

sacrifice which this process involves should be accorded with the wartime
spirit of courage and unity.
The administration proposes that we get rid of the deiicit.

The

deficit for this fisca.1 yea.r cannot be wiped out by any practicable measures,
but in the coming fisca.1 year additions to the public debt can and should be
ended.

The administration proposes the adoption by Congress at this time

of measures which should for the current year lessen the deficit; in the

succeeding fiscal year, altogether eliminate "borrowing for current expendi­
tures , exclusive of statutory debt retirement, and in the second succeeding
fiscal year

"balance the budget including such retirement.

We "believe that

the attainment of these objectives is essential for the financial security of
our Government.

We believe that this program can be attained without undue

hardship for taxpayers and without prejudice to full business recovery upon
which the complete solution of the financial problem depends*

We ask general

support for the program of putting an end to borrowing for current expenditures.
The plan for getting back to a balanced budget necessitates both increas­
ing the revenues and decreasing Government expenditures.

It also involves

handling the Government debt in such a way as to protect and preserve the
public credit.
The necessity for increasing the revenues, notwithstanding the difficulties
of the times, can be firmly grasped when it is realized how sharply the revenues
have declined.

In the years 1928 and 1929 about 2/3 of the tax revenue, of the

Government was derived from income taxes on corporations and individuals.

These

income taxes combined yielded an average of about $2,250,000,000 in the fiscal
years 1928 and 1929, while for the fiscal years 1932 and 1933 receipts from
these sources are estimated at an average of only about $1,120,000,000.

Thus

the major items of Federal taxes will have been more than cut in half in the
current and the following fiscal jrears.

Furthermore, in the fiscal year 1931

customs receipts, which in recent years contributed about 17 per cent of the
Federal tax revenue, showed a decrease of nearly $210,000,000 from average
amounts collected in the two fiscal years 1928 and 1929, and miscellaneous
internal revenue, derived principally from taxes on tobacco, but also from
estates tax and the stamp taxes, showed a decline of about $45,000,000.

The

sources which I have touched upon yield all but about 15 per cent of the total
Federal receipts.

In the six months just past total tax receipts including

)
- 3 customs showed a loss of $521,000,000 from last year.

No practicable de­

crease in expenditures can make up for such drastic reductions in the Federal
revenue.
What the Treasury has proposed with regard to the revenues is that about
70$ of the decline shall be made good through increased or additional taxes.
We believe that measures should be adopted which should increase the revenue
by not less than $920,000,000 for the full fiscal year 1933.

The new measures

would yield a substantial additional amount also for the current year.

No

lesser increase will be sufficient to put an end in the 1933 year to increasing
the public debt.

The additions should be made by emergency laws operative

until July 1, 1934.
To accomplish this necessary increase in the revenue the Treasury has
proposed that we retrace our steps in tax reduction back to the general basis
of the Revenue Act of 1924.

We would give up for a time the reductions

effected by the Acts of 1926 and 1928 and carry on under the law of an earlier
Act which, notwithstanding its more ample provisions of revenue, was found
bearable and no bar to increasing prosperity.
Concretely, the Treasuryl^^^fof^oing back to the plan of the Revenue
Act of 1924, as applied to 1933 estimates, involves these increases and- additions.!

Individual income taxes, with 1924 rates and
exemptions -

$185,000,000

Corporation income taxes at 12-|$ instead of 12$
without the present $3,000 exemption -

$ 60,000,000

Supertax on estates to yield about -

$ 11 ,000,000

Miscellaneous excise taxes, about -

$514,000,000

This plan also calls for additions to the postal rates amounts sufficient to
offset by a reasonable margin, the amount of the deficit of the Post Office not
due to special services, the increased rates to yield about $150,000,000 of

|

- 4 additional revenue •

That is the general program which we think.is reasonable

I

to provide for the essential increase in the revenue.
As to the income tax, the return to the 1924 Act means that normal rates
will be fixed at 2, 4 and 6$ instead of 1^-, 3 and 5$; surtax rates at 1$ be­
ginning with incomes over $10,000 graduating up to 18$ at the $50,000 bracket,
as compared with 13$ now; to 37$ for income between $100,000 and $200,000 and
reaching 40$ on income in excess of $500,000 as compared with the present
maximum rate of 20$ on income in excess of $100,000.
Personal exemption would be fixed at $1,000 and $2,500 instead of
exemptions of $1,500 and $3,500,
$400 for each dependent.

Ho change would be made in the credit of

I

Return to the plan under which single taxpayers

with incomes of over $1,000 and married taxpayers with incomes of over $2,500
pay some tax, would bring back into the taxpaying group some 1,700,000 individ­
uals,

In the year 1930 we had less than 2,000,000 individual income taxpayers.

Even with the proposed increase there would be only some 3,600,000 individual
income taxpayers in a nation of 120,000,000 people and of this number some
300,000 would contribute about 90$ of the tax.
The increase of the income tax rate for corporations would be from 12 to
12^$,

This is a tax which in large part rests upon business and it has been

an object of the proposal to make the demand upon business relatively light.
It has not been proposed to revive the former capital stock tax as that was a
tax which had to be paid irrespective of income and which produced much con­
troversy in its application.
As regards the estate tax, a supertax which would in effect restore the
1921 rates has been recommended because of the emergency, notwithstanding the
objection to levying excessive taxes on estates.

The higher rates proposed

by the Act of 1924 were not followed, these rates having been retroactively
repealed by Congress in 1926 so that they were never actually effective.

It

is proposed that the increase be levied by an additional tax which, combined

I

„4■(

- 5 -

with the present taxj would increase the maximum rate from 20 to 2 5 tlie highest
previously in effect*
Under the Revenue Act of 1924 a substantial amount of revenue was provided
through miscellaneous taxes resting upon selected sales or transactions.

By

later Acts these were given up excerpt for the tobacco taxes, the taxes on ad­
missions, which have been greatly reduced by raising the exemption, and on
club dues and certain stamp taxes.

Because of the sharp contraction in

corporation and individual incomes, it seems essential that as under the
Revenue Act of 1924 substantial additional revenues be again provided by
miscellaneous excise taxes.

What is recommended includes an increase of 1/6

in the present rates on tobacco manufactures except cigars; an increase of 1#
in the existing stamp tax on sales or transfers of capital stock; an extension
of the present tax on admissions through the reduction of the present exemption
to 10#; a tax on mamifacturers1 sales of automobiles, trucks and accessories
at 5, 3 and 2g$s respectively; a tax of 5$ on manufacturers* sales of radio
and phonographic equipment; a tax of 2# on each check and draft; and, a tax of
5# on telephone, telegraphic, cable and radio messages in the amount of 14 to
50# and 10# for charges in the amounts in excess of 50#.

The estimated

additional revenue from all the proposed excise taxes for the fiscal year 1933
is $514,000,000.
What are the objections to the plan for increasing the revenue which we
have suggested?

There has been no serious suggestion that the plan as a whole

provides too much revenue.

There has been no suggestion of an alternative

plan for providing as much revenue.
With regard to the income tax, it has been urged on the one hand that the
rates of 1924 are too high.

The Treasury fully recognizes that under normal

conditions the rates proposed are excessive, and that lower rates would be more
productive.

But these are not normal times and increased contributions during

- 6 the emergency aught willingly to "be niade "by those still fortunate enough to have
substantial incomes,

Those "best able to respond to the need of the country

should not fail in their support,
; It has been suggested on the other hand that substantially the entire
amount of the additional revenue needed should be obtained through increasing
the income tax rates applicable to the higher brackets and that the balance be
obtained from increasing estate taxes,
suggestions are utterly inadequate.

Prom a revenue standpoint alone these
The number of reported incomes of $100,000

and over fell from about 15,000 in 1928 to about 6,200 in 1930,

We estimate

that if we should increase the surtax by 100$ we would collect only about
$200,000,000 additional taxes during the calendar year 1932 and probably the
amount would be considerably less.

Even if we should triple the surtax rate

on incomes over $100,000 which would mean a 60$ maximum rate, we would not,
even from a theoretical standpoint, collect more than an additional $120,000,000
during the calendar year 1932,

Large incomes are no longer there and

be made to produce the needed revenue.

cannot

Bear in mind that the 16,000 returns

of incomes of $100,000 and over for 1928 showed aggregate net income of
$4,450,000,000, whereas the 6,200 returns of this class for 1930 reported
aggregate net income of less than $1,560,000,000,

Reflecting the combined

effect of reduced incomes and the graduated tax rates, the aggregate tax
liability shown on these returns declined from $714,000,000 to less than
$240,000,000,

The indicated drastic shrinkage in the amounts of income and

taxes reported in the higher brackets manifestly limits the extent to which
additional taxes can be obtained from these Sources,

Moreover there is a point

beyond which even in emergency periods increase* in the tax rate would so dis­
courage enterprise as to cost far more than it returns.
It has been suggested that the income tax can be made to produce sub­
stantially more for the past year by the expedient of disallowing the deduction
of losses on security transactions.

Losses on wash or nominal transactions

- 7 are not allowable under the present law.

When it comes to the recognition

of genuine losses actually realized, it is difficult indeed to see how the
Government, in good conscience, could retroactively refuse to recognize them
when through all the past years it has collected much revenue on the gains from
corresponding transactions.

It is one thing to increase at this time the

rates of tax applicable upon income of the past year,

. during which everyone

knew of the Government1s need for more revenue, and an entirely different thing
to change, now, the rules as to how income is reckoned.

It is difficult to

see how as a practical matter the Government could expect to collect tax out
of incomes which have in fact been offset or wiped out by losses actually
sustained»
It is objected that this is not the time to call upon persons with relative­
ly small incomes to make some additional contribution to the support of the
Government.

Can it be fairly said that a married man with one dependent,

having an income of $5,000 cannot afford to pay $31.50 in taxes to the Federal
Government or.one with an income of $10,000 as much as $153.00?

This is all

that would be demanded under the individual income tax returns included in the
Treasury program.

The issue here is not between taxing the rich and not taxing

them; it is whether with large incomes, subjected to very sharp absolute increases
and still paying most of the tax, moderate incomes should be called upon for
moderate contributions.

To believe that such contributions will be opposed is

to place little faith in the character of our citizenship,

This is a time for

all citizens to join in response to the financial need of their Government.
How can it be conceived that in the present emergency the Government can
do without substantial additional taxes resting not upon incomes, which have so
largely diminished.but upon a volume of commercial transactions
stand reasonable taxes?

which can

If it was proper to have such taxes in the war and to

continue them in 1924, what conceivable objection can there be to such taxes
today when the need is greater than in 1924?

The rates suggested are not so

high, as to interfere with the flow of goods or services or to constitute a real
“burden upon those who "buy or enjoy them.

The tax of 2<p each on checks

naturally is not viewed with enthusiasm "by "bankers "but is it not an appropriate
and reasonable means of securing some substantial help to the revenue?

Banks

and the individuals who make use of their services are vitally concerned in
placing the financing of the Government on a sound "basis and should make their
emergency contribution.
It has been suggested that instead of special excise taxes resort should
be had to a general sales tax.

It is urged that such a tax would solve the

revenue problem without hardship to anyone.

The Treasury has of course con­

sidered this suggestion but has rejected it not only because a general sales
tax bears no relation to ability to pay, but also because of the enormous ad­
ministrative diiflenities of applying such a tax in this country, and the almost
inevitable pyramiding of the tax in successive sales.

Nor has the adaptation

of the Canadian manufacturers1 sad.es tax now at 4$, which has been so devised
as to largely avoid pyramiding, seemed practicable under our conditions.

It is

deemed wiser to rely on those forms of taxation iwith which we have had ex­
perience and are thoroughly familiar, and which we believe will be productive
without causing serious hardship.
In considering the revenue urogram as a whole the main point is that by
some plan the Government must secure revenue sufficient to eliminate borrowing.
A balanced budget cannot be attained without submitting to burdens of some sort
that we would rather have taken from us.

More disastrous by far than the

burden of increasing taxes would be the financial paralysis caused by a bare
Treasury.

The payment of additional taxes at this time is the payment of in­

surance against losses which would vastly outweigh the premiums.
At a time when our citizens suffering from the effects of such a depression
must be called upon to shoulder the burden of increasing taxes, the Government
should cut its expenditures to the limit.

The director of the budget working

■under the direction of the President has shown a reduction of estimated ex­
penditures for the 1933 fiscal year from the estimated expenditures for the 1932
year of some $370,000,000.

There has been some suggestion in Congress that

further reductions may he effected without impairment of the services of the
Government.

The President has enthusiastically welcomed and encouraged the

suggestion,of so increasing Government economies.
To effect large reductions in expenditures is not easy.

When it is stated

that the expenditures are now more than four times as much as "before the war,
reduction seems easy, yet analysis indicates the difficulties.

Estimated ex­

penditures for 1933 are $4,113,000,000.

service of the

Of this estimate, the

public debt is $640,000,000 for interest and $497 ,000,000 for debt reduction
required by statute, or a total of $1,4-37,000,000.

Expenditures for veterans

under existing provisions called for a total of $983,000,000.

This total in­

cludes, in addition to $226,000,000 for army and navy pensions;
medical care and hospitalization of World War Veterans;

$128,000,000 for

$356,000,000 for

military and navnl compensation for World War Veterans, and $150,000,000 for
the adjusted service certificate fund.

The expenditures for the veterans

have been on the increase.
Eor the 1933 year expenditures for the service of the debt and for veterans
combined amount to $2,120,000,000 or over 50$ of the total estimated expenditures
There is in addition $695,000,000 for the military and naval establishments.
This leaves as the subject of further reductions, expenditures for all other
purposes amounting to $1,298,000,000 which must cover the entire civil establish­
ment of the Government including nonHrilitary construction.

Possible reductions

here cannot very materially lessen the need for increased revenue, but should
rather serve as a means for hastening the complete balancing of the budget.
Analysis of the Federal budget makes one thing clear, expenditures in*-»
creasing the total must be avoided.

Eor the current year some further

emergency relief expenditures are unavoidable, but the bulk of these emergency

%peij4|tures should be of a character to be ultimately returned to the Treasily,
like the proposed expenditure for the capital stock of the Reconstruction
Finance Corporation*

Any new expenditures which will operate as an ultimate

burden upon the Treasury should certainly be offset by additions to the revenue
or by further reductions in the expenditures now contemplated*

The over­

shadowing consideration is to get back to the safe rock of a balanced budget*
Under the conditions imposed by the depression getting back to a balanced
budget will take
soundly managed*
all bankers will

time, and in that difficult

interval the publicdebt mustbe

The necessary borrowing has been accomplished thus far, but
agree that the task has not

During the period- from the beginning of

been easy.
the fiscal year 1920 to- the end

of the-fiscal year 1930 the public debt had been reduced from about
$25,485,000,000 to $16,185,000,000,. or by about $9,300,000,000*

Reduction to

the amount of -$3,460,000,000 beyond the amounts-required by sinking fund and
other statutory provisions, looking to the gradual retirement of the debt, was
accomplished by the use of Government surpluses during the eleven-year period.
These surpluses resulted partly from -exceptional items of receipts such as the
sale of war materials in the early postwar years*

This accelerated retirement

of the debt has in a sense created a reserve which w e ^ ^ ^ C l l . b a c k upon in
the lean period through again increasing the debt*
By the end of this year, however, the so-*called reserve will have been sub­
stantially exhausted, by the deficits of 1931 and 1932, when sinking fund re­
quirements, are‘iaken into, account,, and this notwithstanding ■such additions to
•the revenue .as have been recommended*

After this, year there will be no such

cushion* - ‘
When it comes to increasing the debt beyond the amount of the ac­
celerated-retirement, it is-a .mistake to. suppose that we can safely go back to
-earlier totals.-

'The debt -which we had .in" the early postwar years was supported

by a- larger volume of revenue- than is possible now, and, as you bankers know,
it was. payable in dollars- of less purchasing power* than -the dollars s f today*

For the proper management of the debt three things are essential.
First, Government issues must he sustained by prompt provision of revenues
adequate to the support of the Government and assuring the return to a fully
balanced budget.
Second, the sinking fund provisions must be maintained and respected.
Even in a time when money for debt retirement must be obtained by new loans,
sinking fund appropriations must be retained as an established part of the
Government1s financial procedure.

It could not be tolerated that the Govern­

ment with so great a debt should not make and adhere to the provisions for the
systematic retirement of that debt.
Third, the volume of issues of Government obligations must be restricted
to what the market can reasonably absorb.

It is idle to suppose that the

Government can sell indefinite amounts of its obligations.
The Administration does not propose any excessive issue of Government
securities.

The aggregate amount of additions to the public debt for the

remainder of the fiscal year involved in meeting the deficit and in setting
up the program which has been; recommended will probably not exceed one and one—
dollars.
half billion^/
This provides for about $700,000,000 for making good the deficit
for the remainder of the current year, without taking into account the
recommended increase in revenue;
construction Finance Corporation;

$500,000,000 for capital stock of the Re­
$100,000,000 for additional capital stock

of Federal Land Banks, and up to $150,000,000 for Home Loan Discount Banks*
In choosing the type of issue to be used for securing additional funds the
Treasury has broad discretion under the law and the Treasury will, of course,
use the particular type of issue best suited to the condition of the market at
the time of issue.
A large portion of the funds secured through increasing the debt will be
devoted to the acquisition of assets which should ultimately be liquidated
in cash.

The Federal Government operates on the basis of treating expenditures

-

12

-

for public construction or expenditures which leave the Government with some
asset on the same "basis as expenditures which leave no property value.

This

pri&jbiple is sound, hut at this time some satisfaction may he taken in the
thought that some considerable part of the increased Federal expenditures of
recent ^ears is represented hy permanent improvements in the planf^of the
Government or of the nation.
On the essential points of financial policy, the President declared in his
message of January 4, 1932 to Congress ’’The country must have confidence that the credit and
stability of the Federal Government will he maintained hy.
drastic economy in expenditure, hy adequate increase of
taxes, and hy restriction of issues of Federal securities.
The recent depreciation in prices of Government securities
is a serious warning which reflects the fear of further
large and unnecessary issues of such securities. Promptness
in adopting an adequate budget relief to taxpayers by
resojute economy and restriction in security issues is
essential to remove this uncertainty.”
The Administration does not propose or support excessive burdens on lenders any
more than excessive burdens upon taxpayers.

The Administration stands firm

for the protection of the public credit as the very foundation of our whole
financial structure.
The problem of restoring the national finances does not stand alone.

It

is part of the problem of accomplishing the recovery of trade and industry.
Business recovery must come principally from the operation of economic forces,
but the Administration is doing and will do all that can be done to create
conditions favorable to such recovery.

The President has sent and reiterated

to Congress proposals, with which every banker should be familiar, designed
"to check the further degeneration in prices and values, to fortify us against
continued shocks from world instability, and to unshackle the forces ox recovery.
The general program includes assistance to agriculture, industry, traae and
finance through provision of needed emergency credit*

Increased capital for

the Federal Farm Loan Banks will enlarge credit facilities for agriculture;

assisting of Home Loan Discount Banks would "revive employment By new construc­
tion and mitigate the difficulties of many of our citizens in securing renewals
of mortgages on their homes and farms,"

A powerful Reconstruction Finance

Corporation would "furnish during the period of the depression credits otherwise
unobtainable under existing circumstances in order to give confidence to
agriculture, industry, and labor *** ", and to reopen many credit channels and
reestablish the normal working of our commercial organization.

These and other

measures proposed by the President are all calculated to mobilize the financial
resources of the

Country, to insure the financial structure at key points, to

restore confidence, and to hasten the return of prosperity.
When will that return take place?

To attempt to forecast a date for the

return of prosperity is vastly less valuable than to resolve effectively here
at the outset of the Hew Year that there shall be a return.

Such a resolve

means putting full individual support behind the program for restoring of the
national finances and the protecting of both national and private credit.

Such

a resolve also means that each individual in his own sphere acts for prosperity;
that he does his share for neighborly help and his own share of business re­
construction,

It may be well to recall that what kept the children of

Israel so long out of the Promised Land was not mistakes of leadership, but
lack of faith on the part of the people.

With new faith and united effort

we shall find that we are emerging from the wilderness.

FOR RELEASE, MORNING- PAPERS,
Tuesday, January 12, 1932.

TREASURY DEPARTMENT

STATEMENT BY SECRETARY MELLON

Secretary of the Treasury Mellon announced to-day that
the tenders for $50,000,000, or thereabouts, of 91-day Treasury
Bills dated January 13, 1932, and maturing April 13, 1932, which
were offered on January 7th, were opened at the Federal Reserve
Banks on January 11th.
The total amount applied for was $169,337,000.

The

highest hid made was 99.368, equivalent to an interest rate of
about 2-l/2 per cent on an annual basis.

The lowest bid accepted

was 99,245, equivalent to an interest rate of about 3 per cent
on an annual basis.
$50,175,000,.
is 99.272.

The total amount of bids accepted was

The average price of Treasury Bills to be issued
The average rate on a bank discount basis is about

2-7/8 per cent..

TREASURY DEPARTMENT

For release upon appearance of Secret
tary of the Treasury "before the Ways
and Means Committee, which will prob*
ably he about 10 A. M, Wednesday,
January 13, 1982.

Statement relating to the need for additional taxation made by the
Secretary of the Treasury before the Ways and Means Committee on
Wednesday, January 13, 1932,

A fundamental thought which I wish to present to you is that
current receipts and expenditures of the Government should be brought
into balance for the next fiscal year beginning with the coming July,
so as to put an end at that time to any further increase in the public
debt.

This is essential not merely for maintaining unimpaired the

credit of the Government, but also for reinvigorating the entire credit
structure of the country.
The greater part of the present fiscal year has already elapsed and
it is impossible to avoid a large deficit for this yearc

To cover, for

the balance of this fiscal year, all expenditures already authorized and
appropriated for as well as those called for by the Administration's
special emergency relief program, will probably require increase in the
public debt by $1,500,000,000, less any amounts to be derived in the
current year through additional taxation.

The Administration is

determined, with your cooperation, to arrest this borrowing process on
June 30 next,

I am confident that the attainment of this objective will

have the full support of Congress,
Under existing conditions the task of bringing our budget into
balance is by no means an easy one, and involves not only self-denial but .
some measure of sacrifice.

Yet, it is possible to attain this objective

if we address ourselves resolutely to the task of drastically reducing
expenditures, refusing to take on additional obligations save those that
are absolutely necessary, and by drawing on available resources through
increased taxation.

I cannot overemphasize the importance of retrenchment.
economy there can he no balanced, budget.

Without real

We are fully justified in calling

on the people to make further sacrifice in order to supply their Government
with adequate revenue, but we are only justified in making this call if at
the same time we eliminate every unnecessary expenditure and see to it
that just as enforced rigid economy prevails in every home in the land,
so must it be observed in every operation of the Federal Government*
As pointed out in my Annual Report to the Congress, we closed the
fiscal year with a deficit of $903,000,000.

Without malting allowance

for increased revenues, through recommended legislation, we are confronted
this year with a prospective deficit of $2,123,000,000, and it is estimated
that expenditures will exceed receipts by no less than $1,417,000,000 in
the fiscal year 1933.

This situation is due on the one hand to increased

expenditures, and on the other to a precipitous decline in receipts from
taxation.
Of the increase of approximately $500,000,000 in expenditures in 1932
as compared with 1930, approximately $350,000,000 is attributable to
estimated increases in expenditures for construction activities largely
of an emergency character.

It is estimated that the Veterans Administration

will require $984,000,000, an amount which is $231,000,000 more than in 1930.
This reflects an increase of $88,000,000 required to meet loans to veterans
on adjusted service certificates exclusive of the $112,000,000 anticipated
in 1931 and one of $143,000,000 for military and naval compensation and.
services to veterans.

The postal deficit will be $103,000,000 larger.

These increases are somewhat offset by decreases in amounts required for
service of the public debt and for refunds of taxes and customs duties.
should be observed that almost half of our budgetary requirements are due
to service of our public debt and to pensions and other allowances to our
veterans

It

The following figures tell the story of what has happened to our revenue
from taxation much more completely than any words.

Customs receipts fell

from $587,000,000 in the fiscal year 1930 to $378,000,000 in 1931, and are
estimated at $410,000,000 for 1932,

Current corporate income taxes declined

from $1,118,000,000 in the fiscal year 1930 to $892,000,000 in 1931, and are
estimated at $550,000,000 for the current fiscal year.
Individual income tax
the fiscal year
the fiscal year
collections fell from $1,061,000,000 in/1930 to $730,000,000 in/1931, and are
estimated at $370,000,000 for 1932.

Miscellaneous internal revenue collec­

tions fell from $628,000,000 in 1930 to $569,000,000 in 1931, and to an es­
timated $544,000,000 in 1932.
The truth of the matter is that our revenue system rests on a compara­
tively narrow hase and that our tax receipts are susceptible to the widest
variations in accordance with variations in "business conditions.

This is

particularly true of current individual income tax collections, the instabil­
ity of which is further accentuated by the wide variations in gains and losses
derived from the sale of so-called capital assets.
If we take the returns of individuals with net incomes of $5,000 and over,
we find that the aggregate net income returned fell from $16,299,000,000 in
1928 to $10,119,000,000 in 1930, showing a decrease of $6,18^,000,000.

Of

this amount no less than $4,230,000,000, or about 68 per cent, is accounted
for by the reduction in net profits in excess of losses, resulting from the
sale of capital assets.
Moreover, while in times of depression all incomes show a tendency to
fall, this is particularly true of the larger incomes, and the decrease in
revenue resulting therefrom is accentuated by the progressive character of
our rates, which tend to bring about a relatively more rapid increase of
taxes than of incomes in times of rising prosperity and to diminish tax
collections more rapidly than incomes in times of deepening depression.

-

4-

Taxes returned, on individual incomes fell from $1,164,000,000 for the
the calender year
calendar year 1928 to $4-74,000,000 for/1930 , according to available infor­
mation.

The number of returns of those with incomes of from $5,000 to

$10,000 fell from

561,000

to

506 ,000,

while the tax paid fell from

$21,000,000 to $17,000,000, or 22 per cent.
$10,000 to $100,000, the .number fell from

Of those with incomes from

360,000

to

252 ,000,

and the tax

from $409,000,000 to $208,000,000, or 49 per cent, of those with incomes
of $100,000 and over the number fell from

1 5 ,7^0

to

6 ,15 2 ,

and the tax

from $700,000,000 to $238,000,000, or 66 per cent.
It is sometimes suggested that our additional revenue requirements
can be covered for the most part by increasing the income tax rates
applicable to the larger incomes.

The justification for such a proposal

is that in periods of emergency the doctrine of ability to pay should be
pushed to the limit.

Leaving aside the economic question involved in

drying up, even temporarily, those liquid resources which should be
available for restoring the working capital of industry and commerce and
reinforcing our credit machinery, a study of the figures leads to the con­
clusion that the necessary revenue cannot be derived from this source.
For instance, it is estimated that current collections from individual
income taxes during the calendar year

1932

will not exceed $300 ,000,000,

of v/hich a little more than half will be collected during the fiscal
year 1932.
surtaxes.

Of this estimated amount, approximately $210,000,000 is from
If we should increase surtaxes by 100 per cent we would collect

net more than $200,000,000 additional during the calendar year
probably the amount would be considerably less.

1932 ,

and

Even if we should triple

the surtax rate on incomes over $100,000, which would mean a

60

per cent

~ 5 ~
jflaxinyum rate, we would, even then from a theoretical standpoint collect
not more than an additional $120,000,000 daring the calendar year 1932.
It seems to me that while individual income tax rates, particularly
those rates applicable to the larger incomes, can and should he sharply
increased, we should at the same time recognize that the weakness in ohr
revenue system is, as I have already stated, the narrowness of the base
on which it rests and that the needed addition to our revenue cannot be
obtained without the broadening of that base.
the taxes of the present group of taxpayers.

We cannot simply increase
Many not now taxed are

very definitely in a position to make some contribution to the support
of Government.

They should be asked to do so, taking into consideration

ability to pay.

This basic concept underlies the entire program which

the Treasury Department is submitting for your consideration.

It must

form a part of any program for without it a solution is impossible and
it is justified not only by necessity but by equity and sound public policy.
In the development of our program many possible forms of taxation were
considered.

We laid aside all thought of a general sales or turnover tax,

not only because generally speaking it bears no relation to ability to pay
and is regressive in character, but because of the great administrative
difficulties involved and the almost inevitable pyramiding of the tax in
the course of successive sales.

The objections to a general sales tax

are not in this respect applicable to a tax on selective articles of the
character heretofore employed in this country and now recommended.
We have studied the limited manufacturers* or producers* sales tax,
which is being administered with a fair degree of success in Canada,
There a*tax is iiirposed at the rate of 4 per cent of the manufacturers*
sales price or the import value of all goods not exempt which are produced
or manufactured in Canada or inported into Canada.

It is distinctly not a

- 6 turnover tax.

Retailers are exempt.

Indeed the extent of the exemptions

is very great, covering thousands of specific items and classes of items*
Pyramiding is avoided hy a mechanism of licenses and certificates, the
effect of which is to collect the tax when the last licensed taxpayer
sells to an unlicensed purchaser.

The success of the tax appears to be

due not only to good administration but to very wide administractive
discretion.

The tax is passed on and therefore must add to the cost of

living.
With some 200,000 manufacturing establishments in the United States,
our much more extensive and complicated industrial mechanism, our tendency
to set out administrative procedure with almost meticulous accuracy in our
statutes, and our reluctance to grant administrative discretion or authority
to administro.tive officers to make final decisions, it is extremely doubtful
whether the Canadian sales tax would meet with the success in our country
that it has across the border.
We concluded that our immediate needs could best be met by utilizing
a known general plan with such changes as might be appropriate in the light
of altered conditions rather than embarking on new and untried ventures in
taxation.

We believe that the necessary relief to the Treasury can be

accomplished by giving -up for the time the reductions in tax effected by
the Revenue Acts of 1923 and of
the Revenue Act of

192 U.

1926

and returning to the general plan of

That was a measure calculated to produce much

larger revenue than the present Act, yet it was bearable by the country
nnd furnished no bar to increasing prosperity.
I recommend, therefore, that the Congress consider returning in
principle to the general plan of taxation existing under the Revenue
Act of 192U.

- 7 I realize, of course, that arguments can he advanced against every
increase in rate or additional tax nroposed.
looking to an increase in the nubile' revenue.

This is true of all measures
But I trust that on this

occasion the attitude of taxpayers will he different from that which,
knowing human nature, we would expect under normal circumstances.
in the midst of a grave emergency.

We are

It is essential to raise additional

revenue, not just to cover current expenditures hut to maintain unimpaired
the credit of the United States Government.

This last objective is of

paramount importance to every citizen in the land.
step in our progress toward recovery.

It is an indispensable

The losses that will he suffered

by every individual and every industry through a continuation of the
depression will exceed many times over the amounts to he contributed in
additional taxes.

It is not only the patriotic duty of all to insure the

financial stability of the Government in times such as these, hut the
sacrifice demanded - if we desire to nut the justification on a lower
plane - is amply warranted by considerations of individual selfinterest.
If every taxpayer, whether individual or corporate, will loox upon
additional burden suggested as the best investment he can make looking
to the restoration of his own economic condition, he will not only be
guided by enlightened selfinterest, but this Committee will be snared
many tedious hours in listening to arguments from those who all approve
of increased taxation in principle but are convinced that they themselves
or their industry are not in a position to bear it, even though they be
but indirectly affected.
I make the following recommendations for the provision of additional
revenue, the new measures to terminate, as nearly as may he, at the close

- 3 of the fiscal year 1934, that is, two years from next June:
Individual income tax.

The normal rates to be fixed at 2, 4 and 6

per cent; surtax rates at 1 per cent, beginning with incomes over $10,000,
graduated up to 37 per cent on incomes between $100,000 and $200,000, and
reaching 40 per cent on incomes in excess of $500,000 as compared with the
present maximum rate of 20 per cent on incomes in excess of $100,000.

Personal

exemptions to be fixed at $1,000 and $2,500 with a credit of $400 for each
dependent.

The earned income provisions of the revenue act of 1928 permitting

larger deductions in respect of earned income than were permitted by the a,ct
of 1924 should, in my opinion, be continued.
The Treasury contended at the time of the passage of the revenue act of
1924 that individual income tax rates carried in that act were higher than
it is wise or desirable to impose under normal conditions.
the position of the Treasury Department.

This is still

We are convinced that in the

long run lower rates are more productive than the higher ones.
not normal times.

But these are

There is a, real emergency resulting in the immediate need

for a substantial amount of additional revenue.

Until the emergency is

passed, we can not avoid utilization of emergency measures.

We believe that

the taxpayers will recognize the facts of the situation, and, particularly
in view of their temporary character, will cooperate with the Government to
make higher rates effective.
Tne proposed revisions would bring back into the taxpaying group some
1,700,000 individuals.

Sven so, our income tax law would still remain a tax

paid by relatively few individuals.

There would be only some 3,600,000

- 9 Federal taxpayers in a Nation of 120,000,000 people, and of this number less
than

300,000

would contribute

90

per cent of the tax.

It is estimated that such revisions will result in the collection of
additional income taxes in the amount of about $ 83 ,000,000 during the last
half of the fiscal year
year

1933 .

1932

and about $185 ,000,000 during the full fiscal

Of this additional revenue, it is estimated that about three-

fifths will be derived from incomes of $100,000 and over -and more than fourfifths from incomes of $10,000 and over.
For reasons I have often expressed, it is nqy belief that when the
emergency period is passed lower rates should be restored.
Corporation income tax.
per cent to

12 ^

The rates to be increased from the present 12

per cent.

In addition I recommend that the exemption of $3,000, at present pro­
vided for domestic corporations with net incomes of $25,000 or less, be
eliminated.
It is estimated that this proposal will result in an increase of about.
$27 ,000,000 in corporation income tax receipts during the last half of the
fiscal year

1932

and about $60,000,000 during the full fiscal year

Miscellaneous taxes.

Under the

192 U

1933 »

act a substantial amount of

revenue was provided through miscellaneous taxes.

These included the

tobacco taxes, the taxes on admissions and on club dues and certain stamp
taxes, which have been retained, and the capital stock tax, other special
taxes, the tax on manufacturers1 sales of automobiles, trucks and accessories,
and a number of minor taxes which have been repealed. In view of the marked
contraction in corporation and individual incomes, in recent years the
principal source of taxation, it seems essential that, as under the revenue

-

10

-

act of 1924, substantial additional revenues be provided by miscellaneous
taxes*

I do not recommend, however, the exact provisions of that act as to

miscellaneous taxes.
Accordingly, I recommend that additional revenue be provided from the;
following sources:

An increase of one-sixth in the present rates on tobacco

manufactures and products except cigars; an increase of 1 cent in the existing
stamp tax upon sales or transfers of capital stock; extension of the present
tax on admissions through the reduction of the present exemption to 10 cents;
a tax on manufacturers’ sales of automobiles, trucks, and accessories at 5, 3,
and 2§- per cent, respectively; a stamp tax on conveyances of realty of 50
cents for each $500 of value in excess of $100; a tax of 5 per cent on
manufacturers’ sales of radio and phonograph equipment and accessories; a
stamp tax of 2 cents on each check and draft; and a tax on telephone,
telegraph, cable, and radio messages of 5 cents for charges in the amount of
14 to 50 cents, and 10 cents for charges in amounts in excess of 50 cents.
The amount of revenue which would be realized from the miscellaneous
tax proposals would depend upon when they became actually operative.
Additional revenue on the basis of assumed collections for a period of six
months from January through June, 1932, was estimated at about $205,000,000.
The increase for the fiscal year 1933 is estimated at $514,000,000.
Estate tax.

I have frequently expressed my opposition in principle to

the levying of excessive taxes on estates of decedents,

Notwithstanding the

views which I have expressed, X believe that in the existing emergency estates
should contribute some additional revenue to the Government.

It should be

observed, however, that because of the longer period which is provided for
the payment of tax on estates, additional revenue from this source would not
be realized until the latter part of the fiscal year 1933.

11

-

-

The Congress drastically increased rates in the 192^4- act hut evidently
felt that this action was unwise, since in
retroactively.

1926

the increases wore repealed

I therefore recommend that the present rates and exemptions

he revised to correspond to those effective under the revenue act of

19 21 .

That act provided for the taxation of net estates at rates graduated from 1
per cent on the first $50,000 up to
$10,000,000.

25

per cent on amounts in excess of

Except for the high rates provided hy the revenue act of 192U,

which were never actually operative, the proposed maximum rate of

25

per

cent is the highest previously in effect.
In order to avoid the undesirable result of automatic increase in State
levies on estates in certain States in which such taxes are based on the
present Federal rates, it is proposed that the increase he effected hy means
of a supertax to he imposed in addition to present rates, with no deduction
from this supertax for State taxes paid.

Under such an arrangement amounts

of State taxes paid would continue to he allowed as credits against the
Federal tax as provided under the present law, up to SO per cent of the latter
tax, hut the entire proceeds of the proposed supertax would he retained hy the
Federal G-overnment.

Additional collections from this source are estimated

at about $11,000,000 for the last half of the fiscal year
$22,000,000 for the full calendar year

1933 *

1933

and about

The estimated amount to he

added to the Federal revenue in 1933 t>y the proposed supertax represents
approximately

50

per cent of the estimated collections (after deduction of

credits) under the present law.
Postal revenues.

In recent years the failure of postal revenues to

cover expenditures has resulted in increasing postal deficits which have
been met from the general revenues of the Federal G-overnment.

A part of this

-

12

-

deficiency may "be attributed to expenditures for special services, such as
the cost of free postal services performed for governmental departments and
agencies, the excess of the cost of air mail service over revenues, and the
cost of special rates paid to ocean mail carriers of American registry.
According to estimates by the Post Office Department the postal deficit
exclusive of such special expenditures will approximate $150 ,000,000 for the
fiscal year 1932»

It is recommended that postal rates be increased to cover

such deficiencies by a reasonable margin, that is, to provide additional
revenues in the amount of not less than $150 ,000,000 on an annual basis,
thus relieving the budget for the fiscal year
for

1933

1932

by about $75>000>000 and

and subsequent years by the full $150 ,000,000.

I am submitting herewith three tables - the first showing in greater
detail the additional revenue which it is estimated will be raised through
the adoption of these recommendations, the second illustrating the effect which
the proposed changes in individual income tax rates would have on the taxes
paid by income tax brackets as compared with existing rates if applied to the
income returned for the calendar year

1930 ;

the third showing in one case

what a married man with one dependent would pay on varying amounts of income
at the proposed rates and exemptions as compared with existing rates, and in
the other what a single man would pay.
It should be understood that these estimates for the most part were pre­
pared in October or early November on data available at that time.
require some revision in the light of additional data now available.

They may
X am

assuming that in the preparation of a revenue bill there will bo close co­
operation between this Committee and the Treasury Department and that in the
course of preparing the bill opportunity will be afforded for comparison be­
tween the estimates made by the Committee and those prepared by this
Department and for making any necessary readjustments.

TABLE 1
SUMMARY OF ESTIMATED ADDITIONAL REVENUE FROM TREASURY REVENUE PROPOSALS

(In millions of dollars)

Tax on _

Estimated additional revenuefiscal year

_____________

1912 ( 1 )

Corporation income....................
27 (2 )
Individual income ....................
S3 (2)
—
Estates (super tax)...................
Tobacco manufactures..................
29
Small cigarettes .................. ( 25)
Tobacco3 smoking & chewing, & snuff. ( Î )
6
Conveyances of realty.................
Capital stock sales or transfers.......
5
Uo
Automobiles and accessories............
Passenger automobiles.............. ( 27)
Trucks............................. ( 3)
Accessories..... .......... ....... (10)
56
Admissions.........................
Radio and phonograph (equipment
71
and accessories)................. .
Telephone and telegraph messages.......
25
Checks szlcL c L i * s •
J I
Total taxes...............
315
Increased postal revenue............. .
Total additional revenue...

79
390

a)

1951
60
1S5
11 (3)
5g
(5 1 )
(7)
15
15
121
(90 )
( 7)
(24)
135
20
55
-

35

-

770

1^0
920

(1) Estimates assume increased rates effective January 1, 1932*
(2) Increase effective for collections during last half of fiscal year only
(3) New rates, assumed effective January 1, 1932, will not affect collec­
tions until January 1, 1933*

Table 2
INDIVIDUAL INCOME TAXES ON I93 O INCOMES AT PROPOSED AND AT PRESENT RATES, EXEMPTIONS,
CREDITS, ETC.(ESTIMATED)
(in millions of dollars)

Income classes
(In thousand
dollars)

Tax
Proposed

3S .5

Under 5

5 -1 0
10 - 25
25 - 50
50 - 100
100 - 15 0
15 0 - 300
3 OO - 5OC
500 - 1 ,0 0 0
.,000 and over

29.9

6 U .7
S 3 .6
1 0 7 .9
6 s .3
9^ - 5

5 I.9
5 U .S
1 0 2 .0
6 9 6 .I

Total

Surtax

Normal Tax:
Present

1 1 .2
1 6 .6
1+9-3
7 2 .2
S 6 .7
U s. 5
6 1.9
3 3 .0
33. S
6 0 .5
!+73-7

Proposed

Present

5 1 .U

I5 .O

37.6

20.

1.7

S
U 0 .1
26 .O
lU .5
U .7
U .2
1 .6
1 .0
l.U

2 1 6 .s

1 2 9 .3

59. S
3 3 .8
I S .3

5„s

5.2

2 .0
1 .2

Proposed

Present

Tax on
Earned Income
capita.!
Credit
Proposed Present over !

IP
XCL•Q
3/
7.7

1 7 .U
5 6 .2
S 5.0
5 7 - 1+
s o .o
U 2.9
1+5 . 5
sU.U
K sT s

1 7 .u
5 I.I

1 2 .6
7 .1

66.9

2.S

38.6
1+8.3
2U.U
2 U .7
U 3 .2
3 1 U .6

.6

A

.10 7
.0 53
.0 2 7
UU. 2 S 7

Increases proposed over
present taxes
Under 5
5 - 10

27.3

36, U

9 .1

15 . k

i 6 cS
19.7

3 .5
U .3

I3.3

10 - 25

11

25 - 50

50 - 100
100 - 150
1 5 0 - 300

.k

2 1 .2

;
a

500 - 1,0 0 0

.6
.1

3I.7

.1
.0 2 1
.0 1 1

m0-

A

IS .5

2 1 .0

.2

__ a

20. s
U 1 .2
15 U .2

LT\

3 2 .6

2 2 2 .U

1.6

1S . S

1 .1
1 .0

., 0 0 ò and over

Total

5 .1
1 S .1

ato

19 .S

7,s
3^s

.005

19.337

3 .S
U .2

s

.3

.6

5 .5
2 .2

7 *U

•5
.3

5.7
9 .S

.o s6
.0U2
.0 2 2
2U .950

S .2
I5 .9

7.1

C O M P A R I R 0? TOTAL INDIVIDUAL INCOMS TAX PAYABLE UNDER THE PRESENT LAW (I92 S REVENUE ACT) AND UNDER PROPOSED
RATES '(192^ REVENUE ACT) BY A MARRIED INDIVIDUAL WITH ONE DEPENDENT AND BY A SINGLE INDIVIDUAL WITHOUT
DEPENDENTS•

Net income

&

0

( It is assumed that all net income not in excess of $10,000 is earned and in addition one-half of the net income in excess
It is also assumed that net income includes
of $ 10,000 until the statutory limit of $30,000 earned income is reached,
no dividends, ne capital net gains or losses and no interest on Governmen t "bonds.)
tax

Present — DJ2H
act
rates

$

— — —

1*000
2,000

3,000

H ,000

5,000
10 i000
15,000
20,000
25,000
50,000
100*000

500,000

- - — _ _ _ —
$

$

I.5O
I6 .5O
I23 .OO
335.00

585.00
835.00
2,085*00
H, 585.00
2^,535‘00

Earned income
credit
Present
1524
7
rates
act( l)

Surtax

2.00
22.00
H 2.00
20H *00
Hs 6 *oo
786.00

1,086.00
2 ,586.00
5 ,586.00
29 ,586.00

Present
rates

-----— — — —
______
_ — _
_ — —
— — M —
$
bO.OO

220.00
5 IO.OO
2,980.00
1 1 ,660.00
9 1 ,660.00

iy24
act

Increase in
Rate of tax cn
net income
amt,of tax
present
iy ci-i.rates
..act
veer centjveer cent)
.
....

Total tax
iy 24
Present
act
rates

Married individual , one dependent
- - - - - - -—
— — - —
_ — —
- - - - - — — —
—
- - —
—
$ *50
$
1 .1 3
— _ — —
5.50
$ -37
—. — —
10.50
12.38
H .12
51.00
92.25
3O .75
$
6O.OO
336.25
90.25
58-75
136.50
220.00
706.25
98.75
1 H 6.25
5 IO.OO
190.25
1,198.75
576.50
3 ,5Ho .o o
4,573-75
H9 1.25
H91.25
1 7 ,020.00
576.50
15,753.75
170 ,020.00
H9 1.25
576.50
115,753.75

$

-- -- - I .50
I6 .5O
3 I.5O
I53 .OO

455.75
869.90
1 ,405.75
5 ,549.50

—
- - - - , .03
.25
.92
'
2 .2H
3.53
H.80

—
- , .05
.Hi

9 .15

6.275*75
83:- 275-75
- - —
i
9-37

.63

- - 1 .5a
I5.37
I9 .I2

I .53
3 .0H

II9 .5O

4.35
5.62

22,029.50
199 ,029.50

15.75

23.15

11.10
22.03
39 .8I

-- -$
I5 .OO
3O.OO
H 5 .OO
6O.OO
225 .OO
5U1.25
955.00
i ,H91.25
5 ,635.00
22 ,115.00
199 ,115.00

- *.
•28

. .75

$

60.75

163.25
207 .OO,
975.75

Single individual, no dependents
$

1,000
2,000

3,000
H,000

5,000
10,000

15,000
20,000
25,000
50,000
100,000

500,000

7.50
22.50
37.50
52.50
205.00
H 55.00
705.00
955.00
2 ,205.00
H,705.00
2H,705.00

$

— - — —
$ 20.00
Ho. 00

60.00

80.00

3 OO.OO
6OO.OO
9 OO.OO
1 ,200.00
2 ,700.00
5 ,700.00
29 ,700.00

— — - —
- - - ~ - '«r¿ A l
- ---_ ~
¡g
$ 6O.OO
220.00
5 IO.OO
2 ,980.00
1 1 ,660.00
9 1 ,660.00

—
~
-

— ~ —
- - —
- - —
- - ~
$
6O.OO
220.00
5 IO.OO
3 ,5Ho .o o
1 7 ,020.00
170 ,020.00

(1) Present maximum earned income allowance <of $30,000

— — —
$ 1.8 7
5.62
9.37
I3 .I2
5I .25
88.75
128.75

176.25
521.25
521.25
521.25

— — —
$ 5 .OO
10.00

- - - $
5,63

15.00

28.13
39-38

20.00

75 .OO
118.75

165.00

218.75

16.88

153.75
H 26.25
796.25

1,288.75
4,663.75
15,SH3.75
11 5 ,343.75
retained instead of $10,000 as under the I92H act.

605.00
605.00
605.00

.56
'

.70
•75
I.5H
g.sH
3*98

5 .16

9.33

15 .8H
23.17

1.00

1.13
i ;ho

2.25
3.6 1
H .78
5<97

11,2 7
22.12

39-82

13 .12
16.87
20.62
71.25

H5c00
158-75

202.50

971.25

6 ,271.25
83 ,271.25

FOR RELEASE, MORNING PARERS,
January 18, 1932.

TREASURY DEPARTMENT

STATEMENT BY SECRETARY MELLON

The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of $50,000,000, or thereabouts.
They will be 93-day bills; and will be sold on a discount basis to the
highest bidders.

Tenders will be received at the Federal Reserve Banks,

or the branches thereof, up to two o’clock p. m . , Eastern Standard time,
on Thursday, January 21, 1932.

Tenders will not be received at the

Treasury Department, Washington.
The Treasury bills will be dated January 25, 1932, and will
mature on April 27, 1932, and on the maturity date the face amount
will be payable without interest.

They will be issued in bearer form

only, and in amounts or denominations of $1,000, $10,000, $100,000,
$500,000, and $1,000,000 (maturity value).
It is urged that tenders be made on the printed forms and
forwarded in the special envelopes v/hich will be supplied by the Federal
Reserve Banks or branches upon application therefor.
No tender for an amount less than $1,000 will be considered.
Each tender must be in multiples of $1,000.

The price offered must be

expressed on the basis of 100, with not more than three aecimal places,
e. g., 99.125.

Fractions must not be used.

Tenders will be accepted without cash deposit from incorpor­
ated banks and trust companies and from responsible and recognized
dealers in investment securities.

Tenders from others must be accom­

panied by a deposit of 10 per cent of the face amount of Treasury bills

applied for, unless the tenders are accompanied by an express guaranty
of payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
January 21, 1932, all tenders received at the Federal Reserve Banks
or branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices will follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection

thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on January 25, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowed
as a deduction, or otherwise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No, 418, as amended, and this
notice prescribe the terms of the Treasury bills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or branch thereof.

FOR RELEASE, MORNING PAPERS,
Friday, January 22, 1932.

TREASURY DEPARTMENT

STATEMENT BY SECRETARY MELLON

Secretary of the Treasury Mellon announced to-day that
the tenders for $50,000,000, or thereabouts, of 93-day Treasury
Bills dated January 25, 1932, and maturing April 27, 1932, which
were offered on January 18th, were opened at the Federal Reserve
Banks on January 21st.
The total amount applied for was $191,581,000.

The

highest hid made was 99.500, equivalent to an interest rate of
about 1.94 per cent on an annual basis.

The lowest bid accepted

was 99.332, equivalent to an interest rate of about 2.59 per cent
on an annual basis.

Only part of the amount bid for at the

latter price was accepted.
$50,937,000,
is 99.358.

The total amount of bids accepted was

The average price of Treasury Bills to be issued
The average rate on a bank discount basis is about

2.48 per cent.

FOR RELEASE, MORNING PAPERS,
Monday, January 25, 1932.

TREASURY DEPARTMENT

STATEMENT BY SECRETARY MELLON

The Treasury is today offering for subscription, at par arid
accrued interest, through the Federal Reserve Banks, $350,000,000,
or thereabouts, Treasury certificates of indebtedness in two series,
both dated and bearing interest from February 1, 1932, one series,
A-1932, being for six months, with interest at the rate of 3-1/8 per
cent, and maturing August 1, 1932, and the other series, A-1933, being
for twelve months, with interest at the rate of 3-3/4 per cent, and
maturing February 1, 1933.

The amount of each series to be issued will

be in the proportion that the total subscriptions for that series bears
to the total subscriptions received for both series.

The aggregate

amount of the two series to be issued will be $350,000,000, or thereabouts.
Applications will be received at the Federal Reserve Banks.
The Treasury will accept in payment for the new certificates of either
or both series, at maturity value, Treasury bills dated November 2, 1931,
which mature on February 1, 1932, arid subscriptions in payment of which
such Treasury bills are tendered will be given preferred allotment.
Bearer certificates will be issued in denominations of $500,
$1,000, $5,000, $10,000, and $100,000.

The certificates of Series A-1932

will have one interest coupon attached, payable August 1, 1932, and the

-

2-

certificates of Series A-1933, two interest coupons attached, pay­
able August 1, 1932, and February 1, 1933.
These certificates will be exempt, both as to principal and
interest, from all taxation, except estate and inheritance taxes.
These certificates are being issued in order to make funds
available to meet initial needs under the Presidentfs emergency
program, and will'provide for the payment of #60,000,000 of maturing
Treasury bills.
The text of the official circular follows:

-3

The Secretary of the Treasury, under the authority of the Act
approved September 24, 1917, as amended, offers for subscription, at par
and accrued interest, through the Federal Reserve Banks, $350,000,000,
or thereabouts, Treasury certificates of indebtedness, in two series,
both dated and bearing interest from February 1, 1932, the certificates
of Series A-1932 being payable on August 1, 1932, with interest at the
rate of three and one-eighth per cent per annum, payable on a semiannual
basis, and the certificates of Series A-1933 being payable on February 1,
1933, with interest at the rate of three and three-quarters per cent per
9

annum, payable semiannually.

The amount of each series to be issued will

be in the proportion that the total subscriptions for that series bears
to the total subscriptions received for both series.

The aggregate amount

of the two series to be issued will be $350,000,000, or thereabouts.
The principal and interest of the certificates will be payable
in United States gold coin of the present standard of value.
Applications will be received at the Federal Reserve Banks.
Bearer certificates will be issued in denominations of $500,
$1,000, $5,000, $10,000, and $100,000.

The certificates of Series A-1932

will have one interest coupon attached, payable on August 1, 1932, and
the certificates of Series A-1933 will have two interest coupons attached,
payable on August 1, 1932, and February 1, 1933, respectively.
The certificates of these series shall be exempt, both as to
principal and interest, from all taxation (except estate and inheritance
taxes) now or hereafter imposed by the United States, any State, or any
of the possessions of the United States, or by any local taxing authority.

-4-

The certificates of these series will be acceptable to secure
deposits of public moneys.

They will not be acceptable in payment of

taxes, and will not bear the circulation privilege.
The right is reserved to reject any subscription, in whole or in
part, and to allot less than the amount of certificates of either or both
series applied for and to close the subscriptions as to either or both
series at any time without notice,

Tne Secretary of the Treasury also

reserves the right to make allotment in full upon applications for smaller
amounts, to make reduced allotments upon, or to reject, applications for
larger amounts, and to make classified allotments and allotments upon a
graduated scale; and liis action in these respects will be final.

Allot—

ment notices will be sent out promptly upon allotment, and the basis of
the allotment will be publicly announced.
Payment at par and accrued interest for certificates allotted
must be made on or before February 1, 1932, or on later allotment.

After

allotment and upon payment Federal Reserve Banks may issue interim receipts
pending delivery of the definitive certificates.

Any qualified depositary

will be permitted to make payment by credit for certificates allotted
to it for itself and its customers up to any amount for which it shall
be aualified in excess of existing deposits, when so notified by the
Federal Reserve Bank of its district.

Treasury bills dated November 2,

1931, which mature on February 1, 1932, will be accepted at maturity value
in payment for any certificates of either or ooth series now offered which
shall be subscribed for and allotted, with an adjustment of the interest

-5-

accrued, if any, on the certificates of the series so paid for.

Sub­

scriptions for which payment is to be tendered in Treasury bills dated
November 2, 1931, and maturing on February 1, 1932, will be given preferred
allotment.
As fiscal agents of the United States, Federal He serve Banks
are authorized and requested to receive subscriptions and to make al­
lotments on the basis and up to the amounts indicated by the Secretary
of the Treasury to the Federal Reserve Banks of the respective districts.

t>y
Hon. Ogden L. Mills,
Under Secretary of the Treasury,
at the Annual Meeting of
The American Acceptance Council,
at
The Waldorf-Astoria Hotel,
Hew York City, January 25, 1932.

I appreciate the opportunity to discuss before so representative a
gathering some of those problems which are pressing for solution and which
tend to range themselves under the one main heading ”Credit and Confidence”.
The United States is passing through one of the most serious depressions
in its history.

There is not much profit in emphasizing the dark side of any

picture, but as the physician must diagnose the character and extent of the
malady before he can prescribe, so must the severity of the downward movement
in business and the consequences which it has entailed necessarily furnish
our point of departure.
Wholesale commodity prices have declined 32 per cent in the last two
years; industrial production has declined 44 per cent.

This precipitous

drop in values and in production has been accompanied not only by a sweep­
ing contraction of credit, but by
credit facilities.

a very serious disorganization of

The decline in the volume of bank credit has been the

largest ever experienced in this country.

Total loans and investments in

the banks of the United States have declined more than

billion dollars

O _

during the past two years in addition to a drop of more than S "billion
dollars in loans made to "brokers by others than banks.

Considering also the

heavy shrinkage which has occurred in the amount of money borrowed currently
to finance installment purchases of goods and in open book credit and similar
forms of commercial advances, we have experienced a credit reduction of
immense and unprecedented magnitude.
Some day it will be well worth while to examine critically the causes
which have led up to such a catastrophic contraction.
immediate task is of greater importance.

At present, tiie

Suffice it to say that while an

increase in our gold supply of about l| billion dollars over the past decade
must inevitably have produced some measure of expansion, the speculative
excesses which accompanied this expansion were bound to bring serious
retribution; moreover, our banking mechanism, in part because of the excessive
number of banks, contained elements of weakness which rendered it less able
to stand the strain of drastic liquidation.

Events have demonstrated that

the increase in number from 10,000 in 1900 to 30,000 in 1920 was a source of
weakness rather than of strength.
In any event, by the middle of 1929, from a variety of causes - of which
in my humble judgment human nature was by no means a minor one - our whole
economic setup had reached a point where a sweeping decline was as inevitable
as the downward course of the noonday sun toward the horizon.
excesses inevitably entail economic readjustments.

Economic

When the economic pendulum

swings much too high, its subseouent downward course is likely to be acceler­
ated and will continue until the readjusting forces have spent themselves.
At that point stabilization should take place and an upward movement would
be resumed were it not for the imponderable factor involved in human nature
itself.

fron the middle of 1929 to September, 1931, wholesale commodity prices
fell about 30 per cent; industrial production declined about 40 per cent;
and all bank loans and investments by about $4,500,000,000.

After such a

sweeping decline accompanied by corresponding readjustments of all kinds and
the elimination of weak spots and elements of instability in the economic
structure, it is not unreasonable to believe that the economic forces working
towards contraction and deflation had by that time fairly well spent, themselves.
And yet, what do we find?

Between September and December prices have

declined further by about 4 per cent, production 7 per cent, and loans and .
investments of weekly reporting member banks more than a billion and a half
dollars, or 7 per cent, while the deposits of these banks declined by no less
than two and a quarter billions, or 11 per cent.

I may be wrong, of course,

and both elements are always present in situations of this kind, but I have the
very distinct impression that whereas up to the last ouarter of 1931 economic
factors exercised the preponderating influence, from October up to the present
time paychological influences have played the leading part.

During the past

three months the psychology of fear has been written in large letters on
every step of the downward course.
Even after due consideration of the fact that in 1929 speculative expan­
sion reached fanciful heights; that the country was living too much on credit;
that many of the debts had to be eliminated before we could find a basis for
recovery; that iridnubtedly adjustments in particular fields remain to be made;
thn„t governmental expenditures, national, state and loqal, are altogether too
nigh; that costs in a number of industries must be further reduced, and that
adjustments of this sort must continue to be made,
the outstanding fact to-day is that deflation has proceeded much too far.
Every additional decline in credit and prices and securities brings with it

- 4 -

further "bank failures, and tank failures in their turn lead to further con­
traction in credit and prices.

The deflation has now reached a point where

it feeds upon itself, and where forces working for economic recovery are
nullified ty the psychological momentum of the downward movement.
One development to which I should like to call your attention particularly
is the movement of tank deposits in its relation to tank loans and investments.
For here it seems to me there are definite corrective steps that the tankers
might take.

Banks have teen losing deposits in part Because of currency

withdrawals and gold exports; tut in addition to this tanks have themselves teen destroying their own deposits.

To make themselves more liquid tanks all

over the country have sold securities and have called loans.

Security

holdings of reporting member tanks alone diminished ty atout $500,000,000
during the last quarter of the year.

When tanks sell securities or

call loans tank deposits are in their turn reduced.
illustration.

Take a simple

Assume a town with two tanks, Bank A and Bank B.

to increase its cash and so make itself more liquid.

A wishes

It, accordingly,

sells $10,000 worth of government securities at an attractive price to a
depositor in B.

The depositor pays for them with a check drawn on B.

A $10,000 in cash and its deposits are reduced ty $10,000.
increased $10,000, tut its deposits are not,

B pays

A Ts cash is

B, finding its deposits reduced

and its cash depleted, in its turn sells securities to a depositor in A,
thus reducing A*s deposits $10,000 and restoring $10,000 of B*s cash.

The

net result is a decrease in the deposits and the investments of toth tanks
and a reduction in the market value of their remaining assets, tut no
improvement in their cash position.

In fact, the tanks are, if anything, less

liquid than at the beginning of the operation since they have disposed of some

- 5 -

of their best assets and have weakened the market for other securities.
It is very much this kind of operation that has been going on in recent
months in the United States, with a consequent tremendous decline in the
prices of all investment securities.

The situation has been greatly ag­

gravated by this process of bank credit attrition, and yet this is a process
which to a very great extent is within the control of the banks themselves.
While there has been an enormous decline in deposits in New York City
banks, it is the banks outside of New York City that have suffered most
severely.

The pressure upon them has in turn reacted most unfavorably on

industry and commerce.

On January 13 Federal Reserve discounts for account of

member banks outside of New York City amounted to $773>000,000, or about
$^50,000,000 more than at the end of September, while discounts for account
of New York City banks showed a relatively small increase and amounted to
only $45)000,000 in January.
If only this process can be arrested and the psychology of fear dis­
pelled, there is real ground for the belief that the foundation is now
sufficiently firm to Justify our vigorously addressing ourselves to the
task of reconstruction.

There is ample evidence that economic readjustment

has proceeded far in the affairs of individuals, business and financial
institutions, and more recently of the nation and its political subdivisions.
The wholesale commodity price level has declined

about

J>2 per cent.

Wages of all kinds are on the average down approximately 10 per cent, and
so many of the smaller units in banking and business have been closed that
there has been a reduction of 2,000, or more than 10 per cent, in the number
of our banks and over 28,000, or roughly speaking 1-g- per cent, in our business

-

concerns during the last year.

6

-

The weakest spots in our banking and business

structure have been eliminated by the closing of these institutions.

Mean-

while, the 1931 records of many of the strongest business units indicate that
they have at last so adapted themselves to prevailing conditions that with
some increase in activity their operations may now be carried on at a
reasonable profit.

The nation, the states and the cities are attacking the

problem of budgetary equilibrium with increasing vigor.

There is a surprising

unanimity of opinion among industrial and banking leaders and among
economists that liquidation has proceeded beyond the point of whatever benefits
it may confer and that a healthy, progressive recovery is possible and of
course desirable.
The essence of the problem is to arrest deflation, to make available
the credit needed by American business, industry and commerce, and to encourage
its use.

We require a vigorous, cooperative program.

definite shape.

Its early operation is assured.

Such a program has taken

There must be no holding back.

We must press energetically forward all along the line toward the attainment of
these definite objectives.
The Government of the United States is prepared to do its full share.
The President laid down a program, with which you are doubtless familiar
but which, because of its importance, I desire to summarize briefly.
The Government is to begin by putting its own house in order.

Through

rigid economies and increased revenues we propose to bring the budget into
balance in the sense that there will be no further increase after July first
next in the public debt.

This is essential, not only to maintain unimpaired

the credit of the United States Government, which is of supreme importance to
&11, but so that Government financing may not interfere with the normal

operations of the security markets, and divert capital essential to the
revival of industry and trade.
In the meanwhile, to finance current expenditures for the balance of
this fiscal year and to cover the President’s emergency program, it will be
necessary for the Treasury to borrow over and above refunding operations
approximately $1,500,000,000.

This is unavoidable.

But if the Treasury,

as it proposes to do, adapts its methods of borrowing to the current condi­
tions of the market, these operations should not occasion concern, particularly
as a large part of these funds are to be applied to reinforcing the credit
structure, and some portion at least to meeting the needs of industry and
commerce.

Moreover, it is to be hoped that subscribing banks, recognizing

not only the value of the Government deposit held for a reasonable period of
time but also the opportunity thus afforded of acquiring and keeping paper
eligible for discount in case of need, will so conduct these credit opera­
tions over the course of the next foiir or five months as not to permit Govern­
ment borrowing to restrict the flow of credit into business and commercial
channels.
The Reconstruction Finance Corporation should furnish a motile reservoir
of credit available during the period of depression for credits otherwise
unobtainable and at the same time an adequate guarantee against unforeseen
contingencies.

Aside from the affirmative assistance which this corporation

should render, I visualize it as constituting a solid wall under the protec­
tion of which men and institutions can carry on their normal operations with­
out fear of sudden and devastating interruption.

I know of no instrument

better ' designed to lift that psychology of fear, which should play no part
in American economic life.
The strengthening of the Federal Land Bank System will insure to the

farmer the credit facilities to which he is entitled and maintain at the
high point which the investor has the right to demand the credit of these
institutions.
The creation of a system of Home Loan Discount Banks should serve the
constructive purpose of partially liberating resources that are at present
tied up and thus encourage new construction, and permanently improve the
facilities for financing this type of operation.
The liberalization of the discount provisions of the Federal Reserve
Act will tend to bring our policies - modified, of course, to meet American
conditions - more in line with the well-established practices of central
banks in foreign countries, while a modification of the requirements govern­
ing collateral against Federal Reserve note issues should establish a more
rational and adequate use of our gold reserves.
The development- of a program to assure early chistribut ion to depositors
in closed banks will not only mitigate the suffering inflicted on thousands
of families but tend to hove a direct effect on the general economic situation.
Finally, the Interstate Commerce Commission has recommended legislation
which will strengthen our transportation system and restore confidence in the
bonds of our railways.

Indeed the Reconstruction Finance Corporation is

intended to be particularly helpful to the railroads.

In discussing rail­

roads' this evening, I am not approaching their problem from the transporta­
tion but rather from the credit standpoint.

Railroad bonds have always

been looked upon as one of our prime investment securities.

As a rosult

the savings of the American people are invested directly and indirectly to
a greater extent in railway securities than in any other class except United
States Bonds. It is estimated that more than ~(0 per cent of all railroad bonds aid

~

9

-

notes are held by banking, insurance and other institutions.

The universal

decline in the value of railroad bonds, aside from the influence which it has
exercised on all other securities, has played a very large part in the general
threat to the country’s credit.

I know of no more important factor looking to

the restoration of confidence and the general strengthening of credit than the
safeguarding of the financial structure of this great industry.

The pool

created from increased rates for the benefit of the weaker roads, and the
anticipated agreement between the executives and the leaders of railroad
labor, should further assist in materially improving the railroad picture.
Some over~timid critics claim to have detected in this program the germ
of inflation.

They fail to distinguish the unmistakable dividing line

between inflation and the arresting of a deflationary process which has gone
to extreme lengths.

When reporting member bank credit has been deflated by

over $1 ,500 ,000,000 in three months, or at the rate of more than

25

per cent

a year, and when through fear the existing volume of credit is not used to
anything like its capacity, I do not know of any one except perhaps the
cartoonist Webster’s ’’Timid Soul" who could be seriously troubled by the
spectre of inflation.
The operations of the Reconstruction Finance Corporation have been
carefully

safeguarded.

They are designed to free rather than create credit.

Increased Treasury financing is limited in amount and time.
States,

commodity prices,

Y/holesale and retail,

corporate and other business
been and

are being subjected

budgets,
to

and

drastic

In the United

security values, wages,

now governmental budgets,
readjustments.

have

So that today

credit expansion must be looked upon as constructive and desirable rather than

10
inflationary and dangerous.

-

Furthermore, leaving aside the all-important

fact that the public temper was never more discriminating and conservative,
history shows that a dangerous inflation does not follow upon the heels of
a drastic deflation.
Here is a program that strikes at the very roots of our economic diffi­
culties.

It is intelligently conceived and should be vigorously carried out.

But governmental leadership and action alone cannot achieve complete success.
They should be supplemented by a far-sighted and liberal Federal Reserve
policy, and above all, by the affirmative qnd courageous cooperation of our
banks.

In this connection, if I may be allowed to speak with complete frank­

ness, a direct responsibility rests on the great banking institutions of the
country.

In the past in

service to the nation.

similar

emergencies they have rendered tremendous

The opportunities for leadership and service are today

even more imperatively here.

Free from the spirit of competitive individual­

ism they must establish a solid front and through a cooperative and unified
program attack a problem which they above all others are best fitted to solve.
The calamitous process of deposit and credit contraction must be arrested.
The flow of funds from all parts of the country to the financial center
should be reversed.

The full use of available credit should be encouraged.

Each bank should become a strong point radiating strength and confidence.
Resources are truly important only to the extent that they are used.

Let me

remind you of a familiar quotation from Badgehot*s great book, "Lombard Street".
"In opposition to what might be at first sight supposed, the
best way for the bank or banks who have the custody of the bank

-

11

-

reserve to deal with, a drain arising from internal discredit, is
to lend freely.

The first instinct of everyone is the contrary.

There being a large demand on a fund which you want to preserve,
the most obvious way to preserve it is to hoard it - to get in
as much as you can, and to let nothing go out which you can help.
But every banker knows that this is not the way to diminish dis­
credit.

This discredit means, fan opinion that you have not got

any money1, and to dissipate that opinion, you must, if possible,
show that you have money: you must employ it for the public
benefit in order that the public may know that you have it.
time for economy and for accumulation is before.

The

A good banker

will have accumulated, in ordinary times the reserve he is to make
use of in extraordinary times.11

After all, prior to the establishment of the Federal Reserve System,
the banks in the large financial centers were in essence the central banks
of the country and were fully conscious of their position and the responsi­
bilities which it carried.

It seems to me that it is a mistake to assume

that the coming into being of the Federal Reserve System has completely
altered their relationship to our banking system as a whole.

A large

measure of responsibility still exists, with this fundamental difference,
that with the facilities of the Federal Reserve System available they should
be able to act with greater initiative, courage and resolution than ever before.
Our problems and difficulties, serious as they are, can and will be solved,
if we unite in attacking them resolutely and courageously, confident in our­
selves and in our future.

POR IMMEDIATE RELEASE.

TREASURY DEPARTMENT

Statement fry Secretary Mellon

A persistent effort has been made to connect the granting of the
Barco Oil concession by the Government of Colombia with the granting of a
loan by American bankers to that Government and to imply that improper influence
was exercised in order to bring about the granting of the concession.

These

indirect charges, and innuendoes have recently received widespread publicity
through a speech broadcast by a United States Senator.

Inasmuch as I am a

stockholder in one of the companies interested in the concession and I have
been definitely drawn into this matter, more particularly in the radio speech,
I deem it proper to state the facts,
I had no knowledge of the granting of the Barco concession which it is
said w^s coincident with the fullfilment of a credit obligation.

I had no

knowledge at any time of any contract by bankers to grant a credit to the
Colombian Government.

I never knew that such a credit had been granted or

funfilled until the Senate hearings.

The record before the Senate Committee

indicates that the Barco concession was confirmed on June 20, 1931, and that
the $4,000,000 credit obligation was met on June 30, 1931.

I left Washington

on my way to Europe on June 5, 1931, and did not return to this country until
the end of August.

All of these transactions took place during my absence.

I had no knowledge before I left of any negotiations then pending, if they
were then pending, relating either to a bank credit or to the Barco concession.
I did not discuss this loan with the Secretary of State, any official of the
State Department, or anyone else.

The suggestion that I participated in or

in any way concerned myself, directly or indirectly, with these transactions,

- 2 ~

is entirely without foundation in fact, and the Senator was evidently mis­
informed.
It may he observed that Assistant Secretary White in his testimony before
the Senate Finance Committee, definitely established the fact that the agree­
ments by the bankers to open the credit were made in June and October, 1930,
several months before the granting of the concession.
involved in June 1931, was the fullfilmeftt
viously made.

The only question

of a definite obligation pre­

TREASURY DEPARTMENT

EOR RELEASE, MORNING PAPERS,
Thursday, January 28, 1932.

STATEMENT BY SECRETARY MELLON

Secretary Mellon to-day announced that the subscrip­
tion hooks for the current offering of six-month 3-l/8 per
cent Treasury Certificates of Indebtedness of Series A-1932,
maturing August 1, 1932, and twelve-month 3-3/4 per cent
Treasury Certificates of Indebtedness of Series A-1933,
maturing February 1, 1933, closed at the close of business
to-day, Wednesday, January 27, 1932.
Subscriptions received through the mail by Federal
Reserve Banks or the Treasury up to 10:00 A* M, , Thursday,
January 28th, will be considered as having been received
before the close of the subscription books.

TREASURY DEPARTMEET

EOR RELEASE, MORNING- PAPERS,
Friday, January 29, 1932.

STATEMENT

by

SECRETARY MELLON

Secretary Mellon to-day announced the subscription figures and the
basis of allotment for the February 1st offering of Treasury Certificates
of Indebtedness in two series, both dated and bearing interest from February
j

1, 1932, one series, A-1932, 3-1/8 per cent, maturing August 1, 1932, and
the other series, A-1933, 3-3/4 per cent, maturing February 1, 1933.

In

accordance with previous announcement, the total allotted for each series
was determined on the basis of the proportion that the total subscriptions
for that series bore to the total subscriptions received for both series.
The aggregate amount of subscriptions received for the two series was
$646,091,500, of which $395,943,500 was received for the 3-l/s per cent,
six months» certificates of Series A-1932 and $250,148,000 was received for
the 3-3/4 per cent, twelve months» certificates of Series A-1933.

On the

basis of the allotment, the details of which are set forth below, 3-l/8
I per cent certificates of Series A-1932, maturing August 1, 1932, will be
issued in the amount of approximately $228,000,000, and 3-3/4 per cent
certificates of Series A-1933, maturing February 1, 1933, will be issued
in the amount of approximately $145,000,000.
Further details as to subscriptions and allotments are as follows:
g d Z l j m _CENT TREASURY CERTIFICATES OF INDEBTEDNESS, SERIES A-1932.
For the offering of 3-1/8 per cent Treasury Certificates of Series
I

1932, maturing August 1, 1932, total subscriptions aggregate $395,943,500.

I Of these subscriptions $4,616,000 represent exchange subscriptions in payment
I for which Treasury Bills, dated November 2, 1931, maturing February 1, 1932,
I were tendered.

Such exchange subscriptions were allotted in full.

‘

Allotments on cash subscriptions for the 3-1/8 per cent certificates of
Series A-1932 were made as follows!

Subscriptions In amounts not exceed­

ing $10,000 were allotted in full.

Subscriptions in amounts over $10,000,

but not exceeding $100,000, were allotted 80 per cent, but not less than
$10,000 on any one subscription; subscriptions in amounts over $100,000,
but not exceeding $1,000,000 were allotted 65 per cent, but not less than
$80,000 on any one subscription; and subscriptions in amounts over
$1,000,000 were allotted 50 per cent, but not less than $650,000 on any
one subscription.
5^3/_4 PER C M T TREASURY CERTIFICATES OF INDEBTEDNESS, SERIES A-1933.
For the offering of 3-3/4 per cent Treasury Certificates of

Indebted­

ness of Series A-1933, maturing February 1, 1933, total subscriptions
aggregate $250,148,000.

Of these subscriptions $43,037,000 represent

exchange subscriptions in payment for which Treasury Bills dated November 2,
1931, maturing February 1, 1932, were tendered.
were allotted in full.

Such exchange subscriptions

Allotments on cash subscriptions for 3-3/4 per

cent Treasury Certificates of Series A-1933 were made as follows:.
scriptions in amounts not exceeding $10,000 were allotted in full.

Sub­
Sub­

scriptions in amounts over $10,000 but not exceeding $100,000 were allotted
80 per cent, but not less than $10,000 on any one subscription; sub­
scriptions in amounts over $100,000, but not exceeding $1,000,000 were
allotted 60 per cent, but not less than $80,000 on any one subscription;
and subscriptions in amounts over $1,000,000 were allotted 40 per cent, but
not less than $600,000 on any one subscription.

Complete details as to subscriptions and allotments will be announced
when final reports are received from the Federal Reserve Banks.

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE,
Saturday, January 30, 1932

Secretary Mellon today announced the final subscription and allotment
figures on the February 1st offering of 3-1/8 per cent Treasury Certificates
of Indebtedness of Series A-1932, maturing August 1, 1932, and 3-3/4 per cent
Treasury Certificates of Indebtedness of Series A-1933, maturing February 1,
1933.
Subscriptions and allotments were divided among the several Federal
Reserve Districts and the Treasury as follows:

3—1/8$ TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES A-1952
Total Subscrip­
tions Received

Total Sub­
scriptions
Allotted

1,000,000

$ 43,518,000
272,718,500
17,330,500
12,541,000
7,940,000
7,899,000
13,112,500
1,611,000
1,766,000
1,938,500
8,101,000
7,451,000
11,500

$ 28,319,000
145,138,500
11,350,000
8,398,000
4,995,500
5,709,000
8,531,500
1,190,500
1,456,500
1,468,500
5,934,500
5,129,500
10,000

4,616,000

$395,938,500

$227,631,000

Federal Reserve
District

Total Cash
Subscriptions
Received

Total Exchange
Subscriptions
Received

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury

$ 43,452,000
269,168,500
17,330,500
12,541,000
7,940,000
7,899,000
12,112,500
1,611,000
1,766,000
1,938,500
8,101,000
7,451,000
11,500

$

$391,322,500

$

Total

66,000
3,550,000

2 -

3—3/4$ TREASURY CERTIFICATES CF INDEBTEDNESS OF SERIES A-1933

Federal Reserve
District

Total Cash
Subscriptions
Received

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury

$ 2,820,500
151,970,500
20,020,000
8,627,500
4,174,000
4,383,500
2,299,500
1,228,000
2,420,500
1,075,500
3,571,500
4,516,000
4,000

Total

$207,111,000

Total Exchange
Subscriptions
Received

Total Subscrip­
tions Received

Total Sub­
scriptions
Allotted

25,000

$ 2,820,500
194,632,500
20,020,000
8,627,500
4,174,000
4,683,500
2,299,500
1,228,000
2,470,500
1,075,500
3,571,500
4,516,000
29,000

$ 2,065,500
108,501,000
12,050,000
5,437,000
2,793,000
3,560,000
1,641,000
1,022,000
1,225,000
800,500
2,542,000
2,706,000
29,000

$ 43,037,000

$250,148,000

$144,372,000

$ 42,662,000

300,000

50,000

TREASURY DEPARTMENT

EOR RELEASE, MORNING PAPERS,
Monday, February 1* 1932.

STATEMENT BY SECRETARY MELLON

The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of $.75,000,000, or thereabouts.
They '.Till be 93-day bills; and will be sold on a discount basis to the
highest bidders*

Tenders will be received at the Federal Reserve Banks,

or the branches thereof, up to two o'clock p. m . , Eastern Standard time,
on Thursday, February 4, 1932.

Tenders, will not bs received at the

Treasury Department, Washington.
The Treasury bills will be dated February 8, 1932, and will
mature on May 11, 1932, and on the maturity date the face amount will be
payable without interest*

They will be issued in bearer form only, and

in amounts or denominations of $1;000, $10,000, $100;000, $500,000, and
$1,000;000 (maturity value);
It is urged that tenders be made on the printed forms and for­
warded in the special envelopes which will be supplied by the Federal
Reserve Banks or branches upon application therefor;
No tender for an amount less than $1,000 will be considered.
Each tender must be in multiples of $1,000.

The price offered must be

expressed on the basis of 100, with not more than three decimal places,
e. g. ,* 9$. 125.

Fractions must not be used.

Tenders will be accepted without cash deposit from incorporated
banks and trust companies and from responsible and recognized dealersin investment securities;

Tenders from others must be accompanied by

a deposit of 10 per cent of the face amount of Treasury bills applied

-

2

-

for, unless the tenders are accompanied by an express guaranty of
payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
February 4, 1932, all tenders received at the Federal Reserve Banks
or branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices ?7ill follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay-

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on February 8, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowed
as a deduction, or otherwise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this
notice prescribe the terms of the Treasury bills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or branch thereof.

TREASURY DEPARTMENT

EOR RELEASE* MORNING- PAPERS,
Friday, February 5, 1932.

STATEMENT BY SECRETARY MELLON

Secretary of the Treasury Mellon announced to-day that
the tenders for $75,000,000, or thereabouts, of 93-day Treasury
Bills dated February 8, 1932, and maturing May 11, 1932, which
were offered on February 1st, were opened at the Federal Reserve
Banks on February 4th.
The total amount applied for was $196,873,000.

The

highest bid made was 99.450, equivalent to an interest rate of
about.2*13 per cent on an annual basis.

The lowest bid accepted

was 99.292, equivalent to an interest rate of about 2.74 per cent
on an annual basis.
$76,399,000.
is 99.314.

The total amount of bids accepted was

The average price of Treasury Bills to be issued
The average rate on a bank discount basis is about

2.65 per cent.

9

TREASURY DEPARTMENT

EOR RELEASE, MORNING PAPERS,
Monday, February 8, 1932.

STATEMENT BY SECRETARY MELLON

The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of $75,000,000, or thereabouts.
They will be 93-day bills; and will be sold on a discount basis to the
highest bidders.

Tenders will be received at the Federal Reserve Banks,

or the branches thereof, up to two o'clock p. m * , Eastern Standard time,
on Thursday, February 11, 1932.

Tenders will not be received at the

Treasury Department, Washington.
The Treasury bills will be dated February 15, 1932, and will
mature on May 18, 1932, and on the maturity date the face amount will
be payable without interest.

They will be issued in bearer form only,

and in amounts or denominations of $1,000, $10,000, $100,000, $500,000,
and $1,000,000 (maturity value).
It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by the Federal
Reserve Banks or branches upon application therefor.
No tender for an amount less than $1,000 will be considered.
Each tender must be in multiples of $1,000.

The price offered must be

expressed on the basis of 100, with not more than three decimal places,
e. g. , 99.125.

Fractions must not be used.

Tenders will be accepted without cash deposit from incorpor­
ated banks and trust companies and from responsible and recognized
dealers in investment securities.

Tenders from others must be accom­

panied by a deposit of 10 per cent of the face amount of Treasury bills

i3

applied for, unless the tenders are accompanied by an express guaranty
of payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
February 11, 1932, all tenders received at the Federal Reserve Banks
or branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices will follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on February 15, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from ?.ll taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowed
as a deduction, or otherv/ise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this
\
notice prescribe the terms of the Treasury bills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or branch thereof.

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
Friday, February 12, 1932.

STATEMENT BY SECRETARY MELLON

Secretary of the Treasury Mellon announced to-day that
the tenders for $75,000,000, or thereabouts, of 93—day Treasury
Bills dated February 15, 1932, and maturing May 18, 1932, which
were offered on February

8th,

were opened at the Federal Reserve

Banks on February 11th,
The total amount applied for was $211,872,000.
for one bid for $10,000 at the rate of about

1 .5 5

Except

per cent, the

highest bid made was 99,400, equivalent to an interest rate of
about 2.32 per cent on an annual basis.

The lowest bid accepted

was 99.267, equivalent to an interest rate of about 2.84 per cent
on an annual basis.
$75,689,000.
is 99.287.

The total amount of bids accepted was

The average price of Treasury Bills to be issued
The average rate on a bank discount basis is about

2.76 per cent.

TREASURY DEPARTMENT

EOR RELEASE, MORNING PAPERS,
Tuesday, February 16, 1932.

STATEMENT BY SECRETARY MILLS

The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of #60,000,000, or thereabouts.
They will be 91-day bills; and will be sold on a discount basis to
the highest bidders.

Tenders will be received at the Federal Reserve

Banks, or the branches thereof, up to two o ’clock p. m . , Eastern
Standard time, on Friday, February 19, 1932.

Tenders will not be

received at the Treasury Department, Washington.
The Treasury bills will be dated Febr\iary 24, 1932, and will
mature on May 25, 1932, and on the maturity date the face amount will
be payable without interest.

They will be issued in bearer form only,

arid in amounts or denominations of $ 1 ,000, # 10 ,000, $ 100 ,000, $500,000,
and $ 1 ,000,000 (maturity value).
It is urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by the
Federal Reserve Banks or branches upon application therefor.
No tender for an amount less than #1,000 7?ill be considered.
Each tender must be in multiples of #1,000.
expressed on the basis of
e. g., 99.125.

100 , with

The price offered must be

not more than three decimal places,

Fractions must not be used.

Tenders will be accepted without cash deposit from incorpor­
ated banks and trust companies and from responsible and recognized
dealers in investment securities.

Tenders from others must be accom­

panied by a deposit of 10 per cent of the face amount of Treasury bills

.is,"
-2 -

applied for, unless the tenders are accompanied by an express guaranty
of payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
February 19, 1932, all tenders received at the Federal Reserve Banks
or branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices will follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on February 24, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowed
as a deduction, or otherwise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this
notice prescribe the terms of the Treasury bills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or branch thereof.

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE,
Tuesday, February 16, 1932

Letter of
Honorable Ogden L. Mills,
Secretary of the Treasury,
to
Honorable Charles R. Crisp,
Acting Chairman, Committee on Ways and Means,
House of Representatives,
Making Recommendations for Additional Revenue,

TREASURY DEPARTMENT
Washington
February 16, 1932,

My dear Mr, Chairman:
I have your letter of February 10th requesting the Treasury
Department to make recommendations as to how the additional revenue
necessitated by the revised estimates may be obtained,

I am very

glad to comply with your request«,
The Committee on Ways and Means and the Treasury Department are
in complete accord as to the necessity of balancing the budget during
the next fiscal year so as to eliminate any further increase in our
public debt.
position.

There can be no question as to the soundness of this
It admits of no compromise.

The estimates submitted by this Department to the Congress in
December indicated that approximately $920,000,000 of additional
revenue were required to balance the budget in the fiscal year 1933,
At that time receipts were estimated at $2,696,000,000, and total
expenditures at $4,113,000,000, including statutory debt retirements,
indicating a deficit, exclusive of the latter, of $920,000,000,

Owing

to marked changes which have occurred in basic economic conditions
since the time when the original estimates were made, the revised
estimates of revenue submitted to your Committee are $321,000 ,000
less than the estimates submitted in December,

Furthermore, the

same changes in conditions have necessitated a revision of the estimates

wft f m

''

® 1

~2-

of the additional revenue that would be yielded by the taxes outlined
in the Treasury program of December, last, resulting in a reduction
of $13 ^

000„000.

According to the figures now before you the indicated deficiency
is therefore $1,2^1,000,000.

This amount must be provided for in the

main by increased taxation, but it seems to me that a part, at least,
should be covered by decreased expenditures.
While recognizing that the Budget Director has already made a
vigorous effort along this line, it seems to me that under the com­
pulsion of necessity it might

possible to reduce our total expendi­

tures to about $k,000,000,000, or by as much as $118,000,000.

This

would leave approximately $1 ,123 ,000,000 to be raised through increased
taxes.
The original recommendations of the Treasury Department, together
with the estimated yield of each new or modified tax, are summarized
in Table A, attached to this letter.

The estimated yield is

$786 ,000,000, leaving $337 ,000,000 still to be provided for.
To provide this additional amount I make the following recommenda­
tions j
1.

An additional increase of 1/2 of 1 per cent in the corpora­
tion income tax rate, which should furnish an additional
$1 7 ,000,000;

2.

Further modification in the surtax rates .applicable to in­
dividual incomes, as indicated in Table B, hereto attached,
which should yield $ 50 ,000,000;

- 3 -

3*

A tax of 1 cent per gallon on gasoline, estimated to yield
$165,000,000;

4.

A 7 per cent tax on domestic consumption of electricity and of
manufactured and natural gas, estimated to yield $94,000,000;

5,

An additional cent on capital stock sales and transfers, mak­
ing the total tax 4 cents, estimated to yield an additional
$1 1 ,000,000.

Altogether these supplementary proposals would yield about $337,000,000.
In view of the interest in some form of general sales tax which has
been evidenced in the Committee’s discussions, this department has further
considered the possibility of employing some such tax.

We hold to our

original opinion that a limited group of selected excise taxes is a prefer­
able method of raising the required revenue, not only from the standpoint of
administration but also from that of basic economic considerations.
It may be stated in response to inquiries of the Committee that
should the Committee decide to substitute a general manufacturers’ sales
tax for the system of selected sales taxes, it is the opinion of the
Treasury that it would be possible to administer such a tax provided there
would he substantially no exemptions, adequate administrative authority
would be granted, and the rates would be kept at a very low point, say
per cent..

2

The yield of such a measure would depend upon its precise form.

If constructed so as to provide for a single and not a pyramided levy,
substantially without exemptions, the tax might yield about $600,000,000.
Thus should the Committee decide to introduce such a tax into a revenue
bill, it would still be necessary to employ other means for meeting about

- 4 ~
half the total amount of additional revenue required to balance the
budget in 1933.

This might be accomplished by retaining some of the

suggestions made by the Treasury and the following schedule indicates
what such a program might look like, should the Committee decide upon
a manufacturers» sales tax.
1*

Variations would be possible.

1

Corporation income tax (increase of

eer cent

in rate and elimination of exemption) ....................*$ 69,000,000
2t

Individual income.tax (revision as indicated

in Table £,, attached')
aoi,acne,a; .................. ......... ........ 184,000,000
3.

Estate tax (basis of 1921 tax) ..................

4.

1Sales or transfers of capital stock (increase

present rate of

^

to

°

4«0

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

5.

Admissions (1 / per

6.

Increased postal revenues .......................

7.

General manufacturers' sales tax

10 ^;

10 cants exemption)......

(2

22 , 000,000

110 ,000,000
150,000,000

per cent)

tentative estimate .....
....................... .............

8.

5,000,000

Seduction inexpenditures .........................

600,000,000

100 ,000,000

T,tal ...................... ......... $ 1,240,000,000
Very truly yours,

(Signed) Ogden L. Mills,
Secretary of the Treasury.

Hon. Charles R. Crisp,
Acting Chairman, Committee on
Ways and Means,
House of Representatives,

Enclosures.

STRICTLY C O U F I D E M A L
For the use of
the Ways and Means Committee
of the
House of Representatives

Table A
SUMMARY OF TREASURY1S BUDGET PROPOSALS
SUBMITTED IE DECEMBER 1931

Revised estimates of
results for fiscal
year 1933
(millions of dollars)

Revenue proposals:
Corporation income (l): increase of ■§■ of 1 per cent,
elimination of exemption....... ...........

Individual income (l): ("basis of 1924 rates
and exemptions)...... ................. ........

1 st 6
2nd 6

fiscal year
mos,
mos.

52
(26)
(26)

fiscal year
1 st 6 mos.
2nd 6 mos.

134
T53j
(81)

Estates ("basis 1921 act) (2)........ .......................
Tobacco manufactures (increase l/ 6).... ...... ..............
Conveyances of realty (basis 1924 act)............ ........
Sales or transfers of capital stock (increase of 1^, bringing
tax to 3^).................................................
Automobiles and accessories (basis 1924 act)................

5
58

10
11
100

Passenger autos, 5$..... . ..*.(73)
Trucks, 3
.......... ....,( 6)
Accessories, 2-g$. ........... .
(21)
Admissions (l^ per 10^; 10^ exemption)..... .
Radio and phonograph (equipment and accessories, 5$)
Telephone and telegraph messages (basis 1921 act)...
Checks and drafts (2<f; each)...................... ..
Postal deficit,................................

110
11
50
95
150

Total

786

(1) Increases assumed to be effective on 1931 incomes,
(2) Increase assumed to be effective March 1, 1932, will not affect collections
until March 1,. 1933.

STRICTLY CONFIDENTIAL
For the use of
the Ways and Means Committee
of the
House of Representatives
Table B
PROPOSALS SUPPLEMENTING TREASURY'S PROGRAM
SUBMITTED IN DECEMBER 1931
Estimates of results
for fiscal year 1933
(millions of dollars)
Revenue proposals:
Corporation income: additional increase of
J of 1 per cent in rate (i.e., to 13 per cent)

Individual income:
as follows:

6,000
10,000
12,000
1 M 00
100,000
200,000
300,000
500,000
Sales or
of l<p,
Gasoline
Domestic

JÜL
W
(9)

additional increase in surtaxes,

Net income

$

.fiscal yr.
1 st 6 mos.
2nd 6 mos.

- $ 10,000
12,000
1 *1,000
- 100,000
- 200,000
- 300,000
- 500,000
and over

December proposal
(192 ^ surtax rates)
......
i

0
1
1

Graduated, 2 to
37
3S
39
ko

36

Supplementary
proposal
i

1
2
51

k to

3S

39 1 ♦6 • j
ko ll92*+
k i rates
k2 + 2$
j

:al yr. 50
6 mo s.(20)

transfers of capital stock (additional increase
bringing tax to 4^).... ............ ...................
tax (l# per gal.)......... .......... ........... .
consumption of electricity and gas (7$)....... ..... ......

n

165
94

Reduction in expenditures...... .....................................

Hg

Total

^55

STRICTLY CONFIDENTIAL
For the use of
the Ways and Means Committee
of the
House of Representatives
Table C
SUMMARY OF TREASURY’S BUDGET PROPOSALS
Estimated results for
the fiscal year 1933
Supplemental
Total
Proposals
submitted
proposals
Dec .,1931
(Millions of dollars)

Revenue proposals:
Corporation income (l):
Increase of | of 1 per cent in rate,
elimination of exemption,..
..fiscal yr.
1 st 6 mos.
2nd ô mos.
Additional increase of
| of 1 per cent in rate....
..fiscal yr.
1 st 6 mos.
2nd 6 mos.
Individual income (l):
Basis of 1924 rates and
exemptions................
..fiscal yr.
1 st 6 mos.
2nd 5 mos.
Additional surtax increase..

52
(26)
(26)
39
(34)
(35)

17
Ï8 7
(9)
J

134
(53)
(81)

..fiscal yr.
1 st 6 mos.
2nd 6 mos.

Estates (basis 1921 act) (2 )...
5
Tobacco manufactures (increase 1 /6 ).........
58
Conveyances of realty (basis 1924 act)......
10
Sales or transfers of capital stock(increase lé) 11
it
it
it
it
h
it (additional 1 ^)
Automobiles & accessories (basis 1924 act)...
100
Passenger autos, 5%
(73)
Trucks, 3$
(6)
Accessories, 2j$
(21)
Admissions (1^ per 10^; 10^ exemption).......
110
Radio & phonograph (equipment &
accessories, 5$)..........................
11
Telephone & telegraph messages (basis 1921 act) 50
Checks & drafts (2<p each).......... ........
95'
Gasoline tax (1^ per gal.)...................
Domestic consumption of electricity & gas(7f0)
Postal deficit................ .............
150
Reduction in expenditures......................
Total............
786

50 ;
(20 )
(30) .

184
( 73)
(in)
5
58

10
11

\
/

22
100

110

165
94
118
455

11
50
95
165
94
150
118
1241

(1) Increases assumed to be effective on 1931 incomes*
(2) Increase assumed to be effective March 1 , 1932, will not affect collections
until March 1 , 1933.

TREASURY DEPARTMENT

EOR RELEASE, MORNING PAPERS
February 20, 1932.

Statement by Secretary Mills.

Secretary Mills to-day announced that in connection with the campaign
initiated hy the President to put idle money to work, the Treasury Department
proposes to offer on or about March 7th a special Treasury certificate*

The

certificates will probably have a maturity of a year and will be redeemable
upon 60 days 1 notice by the holders.

The interest rate will be announced at

the time of the formal offering, but in all probability will be in line with
the current yield on 60-day Government obligations, and not less than
cent.

1 -g- per

The certificates will be issued only in coupon form and in denomina­

tions of $50, $100, and $500.
The certificates will be available to purchasers through the banks*

The

banks, in turn, can, if they so desire, obtain the certificates through the
so-called nWar Loan Deposit Account" with the Federal Reserve Ranks.

Under

the well-established War Loan deposit system banks may subscribe for Govern­
ment obligations and

pay for them by means of a deposit to the credit of

the Federal Reserve Banks as fiscal agents of the United States.

Inasmuch

as payment by means of this method is in the form of credit, should funds
for the purchase of certificates be withdrawn by depositors of the subscrib­
ing bank, they will automatically be replaced by a Government deposit, which
will remain with the bank until called for by the Treasury*
Should the certificates be purchased with currency held outside of bank»
the banks receiving the subscriptions will gain the cash deposited by the sub
scriber, while they may pay for the certificates delivered to the subscriber
by means of a deposit credit for the account of the Government.

m

- 2 -

Those banks which are not at present designated to act as War Loan
depositaries may, upon complying with the Treasury regulations, obtain a
depositary designation.
The offering of these special certificates will be entirely inde­
pendent of the Treasury1 s March financing program.

77

FOR RELEASE, MORNING- PAPERS,
Saturday, February 20, 1932,

TREASURY DEPARTMENT

STATEMENT BY SECRETARY MILLS

Secretary of the Treasury Mills announced tc-day that
the tenders for $60,000,000, or thereabouts, of 91-day Treasury
Bills dated February 24, 1932, and maturing May 25, 1932, which
were offered on February 16th, were opened at the Federal Reserve
Banks on February 19th,
The total amount applied for was $196,183,000.

The

highest bid made was 99,377, equivalent to an interest rate of
about 2.46 per cent on an annual basis.

The lowest bid accepted

was 99,307, equivalent to an interest rate of about 2,74 per cent
on an annual basis.
$62,851,000.
is 99,315,
2.71 per cent

The total amount of bids accepted was

The average price of Treasury Bills to be issued
The average rate on a bank discount basis is about

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
Thursday, February 25, 1932.

STATEMENT BY SECRETARY MILLS

The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of $100,000,000, or there­
abouts.

They will be 91-day bills; and will be sold on a discount

basis to the highest bidders.

Tenders will be received at the Federal

Reserve Banks, or the branches thereof, up to two o ’clock p. m . ,
Eastern Standard time, on Monday, February 29, 1932.

Tenders will not

be received at the Treasury Department, Washington.
The Treasury bills will be dated March 2, 1932, and will mature
on June 1, 1932, and #n the maturity date the face amount will be payable
without interest.

They will be issued in bearer form only, and in

amounts or denominations of $ 1 ,000, $ 10 ,000, $ 100 ,000, $500,000, and
$ 1 ,000,000 (maturity value).
It is urged that tenders be made on the printed forms

and

for­

warded in the special envelopes which will be supplied by the Federal
Reserve Banks or branches upon application therefor.
No tender for an amount less than $1,000 will be considered.
Each tender must be in multiples of $1,000.
expressed'on the basis of
e. g. , 99.125.

100 , with

The price offered must be

not more than three decimal places,

Fractions must not be used.

Tenders will be accepted without cash deposit from incorpor­
ated banks and trust companies and from responsible and recognized
dealers in investment securities.

Tenders from others must be accom­

panied by a deposit of 10 per cent of the face amount of Treasury bills

re­

applied for, unless the tenders are accompanied by an express guaranty
of payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
February 29, 1932, all tenders received at the Federal Reserve Banks
or branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices will follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on March 2, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowed
as a deduction, or otherwise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this
notice prescribe the terms of the Treasury bills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or branch thereof.

TREASURY DEPARTMENT

EOR RELEASE, MORNING PAPERS,
Friday, February 26, 1932.

Statement by Secretary Mills

Secretary of the Treasury Mills to-day announced
that in response to an inquiry by Colonel Prank Knox,,
head of the Citizens1 Reconstruction Organization, he
has informed him that the rate of interest on the special
one-year Treasury certificates, redeemable on 60 days’
notice by the holder,, to be offered on or about March 7th,.
will be two per cent..

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE,
FEBRUARY 27, 1932.

Secretary Mills to-day sent the following letter to Chairman
Cochran, of the Committee on Expenditures in the Executive Departments.
February 27, 1932,
My dear Mr. Chairman:
I have your letter of February 26th, and have also read your remarks on
the floor of the House implying that this Department is unwilling to cooperate
with you in bringing about a more effective organization of the Executive
branch of the Government.
In your letter to me you say:
HAm I to understand from your communication that in view of the
fact that the President has made a recommendation to the Congress in
the future your Department does not wish to comment on any legislation
proposing the reorganization of the Government departments?M
May I respectfully suggest that there is nothing in my letter which justi­
fies any such assumption, and I am rather surprised that you should ask this
question, particularly in view of the fact that under date of February 26th, in
commenting on H. R.6665, providing for the creation of an Administration of
Public Works, and on H. R. 8389, providing for the consolidation and coordina­
tion of certain governmental activities affecting the Civil Service of the
United States, I informed you that in so far as those bills conformed to the
President*s recommendations (which they do in large measure) they have the ap­
proval of this Department,
It has always been the policy of the Treasury Department to cooperate to
the fullest possible extent with the Committees of the Congress, and when the
subject falls within its field, to give the Committees the benefit of our very
best judgment as well as such information as is at our disposal*
continue to be the policy of this Department.

This will

Any failure to cooperate will

not be due to any action or attitude on our part.
Hon. John J. Cochran,.
Committee on Expenditures in the
Executive Departments,
House of Representatives.

Very sincerely yours,.
(Signed) OGDEN L. MILLS
Secretary of the Treasury.

TREASURY DEPARTMENT

POR RELEAS#, MORNING PAPERS,
Tuesday, March 1, 1932*

STATEMENT BY SECRETARY MILLS

Secretary of the Treasury Mills announced to-day that
the tenders for $100,000,000, or thereabouts, of 91-day Treasury
Bills dated March 2, 1932, and maturing June 1, 1932, which were
offered on February 25th, were opened at the Federal Reserve Banks
on February 29th,
The total amount applied for was $292,984,000,

The highest

bid made was 99,450, equivalent to an interest rate of about 2,18
per cent on an annual basis.

The lowest bid accepted was 99.368,

equivalent to an interest rate of about 2.50 per cent on an annual basis.
Over $105,000,000 were bid for at the latter price, of which about
$86,000,000 were accepted.
$101,412,000,
99,369,
per cent

The total amount of bids accepted was

The average price of Treasury Bills to be issued is

The average rate on a bank discount basis is about 2,50

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
Sunday, March 6 , 1932,

Statement by Secretary Mills.

The proposals for raising additional revenue adopted by the Ways
and Means Committee should assure the attainment of the Treasury1 s main
objective.

The budget of the fiscal year 1933 can now be balanced in

the sense that there will be no further increase in the public debt
after June 30th, next.
According to our latest estimates, the indicated deficit in the
fiscal year 1933, exclusive of statutory debt retirement, amounts to
approximately $1,240,000,000.

The Committee proposes to cover the

deficit by raising approximately $1 ,120 ,000,000 of new revenue and by
reducing expenditures by $125,000,000.

Although differing in many

respects from the recommendations submitted by us, the Committee's
program has the approval of the Treasury Department and will receive
its hearty support.
I desire to emphasize, however, that even after the Committee1s
courageous and determined action in providing additional revenue, a
balanced budget is still dependent, not only on successful resistance
to all increases in expenditures, but in an actual reduction of
$125,000,000, which the Committee indicates in its opinion is possible
of attainment.

I agree with the judgment of the Committee,

- 2 ~

If the American people are to be asked to pay more than
$1 ,100 ,000,000 in additional taxes in order to balance the budget
and keep the credit of the Government unimpaired, they have the
right to expect, and will expect, the application of rigid economy
to the management of the public business.
I cannot let this occasion pass without expressing my appre»ciation of the fine spirit and of the devoted and patriotic manner
in which my former colleagues on the Ways and Means Committee have
completed the enormously difficult task assigned to them.

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
Monday, March 7, 1932.

Speech to be delivered over the radio Sunday
evening, March 6th, hy Secretary of the Treas­
ury Mills in connection with the program of
the Citizens1 Reconstruction Organization.

The Treasury Department whole-heartedly endorses the
campaign undertaken hy the Citizens* Reconstruction Organization
to put our idle dollars to work.
Through the cooperative action of the Chief Executive
and of the Congress»characterized hy a fine spirit of non-partisan­
ship, great progress has heen achieved in carrying out the Govern­
m e n t s reconstruction program.

The mobilizing of available

resources has enormously strengthened our credit structure and
counteracted the causes that have given rise to all manner of fears
and apprehensions.

By balancing the budget, the Government is

putting its own financial house in order.

But after all, the

most the Government can do is to aid in the creation of conditions
favorable to recovery.

The real task of reconstruction must be

undertaken by the people themselves.
The time has come when we can appeal to them to take
such steps to help themselves as are definitely within their power;
and in the conduct of their own affairs constantly to keep in mind
the welfare of the community and of the country.
bility rests on every individual

citizen.

A very real responsi­

-

2

-

The measure of self-help which we are discussing this evening
is simple and, if understood, obvious«

It consists in restoring

to active use the dollars that have been withdrawn from circulation«
The need for calling the existing situation to your attention
has arisen because many of our citizens

have taken the dollars

which they command and placed them on the retired list.

They have

made of them idle dollars, which are of no service to "the. community
and bring no return to their owners*

As a result, we have suffered

a vast credit contraction, which in turn has adversely affected
business and employment.
When I talk of dollars being placed on the retired list, I do
not want anyone to understand that I am referring to savings.

What

I have in mind is the withdrawal of currency from the ordinary
channels of circulation, not the deposit of funds in a savings or
checking account in a sound bank or investment in sound securities.
These are forms of using currency in a normal way.

What I am

referring to is the secreting of money in safe-deposit boxes, or
in socks, or under mattresses, or in a tin-can, where it lies idle

and

ceases to work for its owner or anybody else*

Money saved in

banking institutions or otherwise invested represents purchasing
power placed at the disposal of those engaged in business^

benefiting both the borrower and the lender,
on the other hand, is so much paper or metal.
It brings in no return.

Buried money
It is inactive.

It does not grow.

But these negative evils are not the only ones to whicji such
action gives rise.

From years of experience banks have learned

how much cash they customarily require in their tills to meet the
ordinary demands of their depositors.

Since under normal circum­

stances a bank is receiving deposits as well as cash and checks
which have been drawn upon it by its depositors, it can operate with
a relatively small amount of cash and can employ a large amount of
its resources to make loans and investments, which at the same time
earn a return for the bank and interest for the depositors, and
place funds at the disposal of borrowers who need them to finance
industrial or commercial operations.
In our credit system banks have for years done business on
just this basis and have performed a most important service in
providing for the credit needs of their communities.

When de­

positors suddenly call for unusual amounts of cash far in excess
of ordinary requirements this system receives a severe shock.
The banks must obtain additional cash and in order to do that must
borrow from their Federal reserve banks.

But debts are apt to

worry bankers as they worry individuals.

Being in debt to the

reserve banks makes them reluctant to lend to their customers and
even inclines them to call in sane of their customers1 loans or to
sell their investments.

This is the process of liquidation

- 4 and it is apt to tie cumulative once it commences.

The withdrawal

of cash from hanks for hoarding has greatly hampered the hanks of
the country in the performance of their important functions.

A

responsible hanker faced with the lurking possibility that he may
he subject to the insistent demand to provide his depositors on a
large scale with cash to he locked up in private hoards is reluctant
to extend credit freely even for ligitimate business uses.

Hoarding

has undoubtedly been a major factor in the inability of our banking
system to function fully in this emergency and has in fact been one
of the primary causes of the later phases of the business depression.
The program of financial reconstruction has done much to re­
establish confidence, and in recent weeks there has been evidence of
a return flow of currency back into the hands of banks.
occurs the process described above is reversed.

When this

The banks receive

cash for which they have no immediate need and deposit it with Re­
serve Banks.

There it is credited to the depositing bank’s account

and can be used to pay off the bank’s indebtedness, if it is in debt9
or to increase its reserves.

On the basis of these reserves, the

banks can lend several times the amount involved and serve the needs
of many customers who can then proceed with their business plans, in­
creasing employment and helping toward the return of prosperity.
Currency dollars when returned through the banks of the country to
the Federal reserve banks become reserve dollars, and reserve dollars
are high-powered dollars which in the right place can accomplish a
great deal toward increasing business activity; but these same dollars
buried in the ground can do a great deal of harm to the country’s
economic life

~ 5 ~
As a matter of enlightened self-interest, everyone who holds
these idle dollars should put them hack to work, through the placing
of deposits with souhd hanking institutions or through the purchase of
sound investments,

I cannot assume to advise as to which method

should he selected.
But the Treasury Department is making available for purchase hy
the holder of idle dollars a special obligation of the United States
Government,

He or she may turn over the currency to the Treasury

Department through the Federal Reserve Bahks and receive in return a
promise of the Government to repay the funds on 60 days1 notice, with
interest at 2 per cent.

Thus the holder of currency can substitute

for an obligation of the Government which bears no interest, an obliga­
tion of the Government which pays him 2 per cent interest.

True, he

has to wait 60 days should he desire to have the certificate redeemed,
but in the meanwhile there should be a ready market should he desire to
sell.

These obligations are being offered for the special accommoda­

tion of those who have withdrawn and are holding currency.

It is to

them that the Treasury makes this appeal,
These certificates will be dated March 15, 1932, will bear interest
from that date at the rate of 2 per cent per annum, will mature on
March 15, 1933, and will be redeemable before maturity at the optionof the holder at par, plus accrued interest, upon 60 days1 notice.
The certificates will be issued in denominations of $50, $100, and $500,
will be payable in United States gold coin of the present standard of
value, and will be exempt, both as to principal and interest, from all
taxes, except estate and inheritance taxes.

-

6

-

Any tank in your community, I am confident, will gladly accept
your sub scription, or you may forward it directly to the Federal
Reserve Bank of your District, which is the fiscal agent of the
United States Government.

The circular describing the certificate

may he obtained from your local branch of the Citizens1 Reconstruction
Organization or from the banks.
This offering should not be confused with the Treasury’s regular
March program of financing, which will be announced tomorrow morning.
The Treasury obligations offered in that connection are intended to
provide for the current needs of the Government, as distinguished from
the specific demand which the special 2 per cent certificates are in­
tended to meet.

They will bear a higher rate of interest, but will

not be subject to redemption on 60 days’ notice by the holder.
In closing, may I congratulate Colonel Knox and the Citizens’
Reconstruction Organization on the fine public service they are render­
ing,

I urge you all to give them your active support and cooperation.

They are fighting your battle and mine on one sector of a very broad
front.

We have it within our power to strengthen the whole battle­

like against the forces of depression«.

They can and will be over­

come if each and every one of us will but recognize a high sense of
responsibility to his community and his country and meet his or her
own daily problem with characteristic American resourcefulness and
courage

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
Sunday, March 6, 1932.

STATEMENT BY SECRETARY MILLS

The Secretary of the Treasury yesterday announced that the
Treasury offers for subscription, at par and accrued interest, through
the Federal Reserve Banks, United States Treasury Certificates, First
Series, dated March 15, 1932, with interest from that date at the rate
of two per cent per annum, maturing March 15, 1933, and redeemable before
maturity at the option of the holders, at par and accrued interest, on
sixty days’ notice.
Almost any banking institution will handle subscriptions for
these certificates or subscriptions may be made through the Federal
Reserve Banks.

The Secretary of the Treasury reserves the right to

close the offering without prior notice.
The certificates will be issued only in bearer form and in
denominations of $50, $100, and $500, with two interest coupons attached
payable September 15, 1932, and March 15, 1933, respectively.
The principal and interest of the certificates will be payable
in United States gold coin of the present standard of value.
These certificates vail be exempt, both as to principal and
interest, from all taxation, except estate and inheritance taxes.
The offering of these special certificates is not part of the
Treasury’s March financing program vrtiich will be separately announced, 'but
is being made in connection with the campaign to .put idle money to work,
which campaign was initiated by the President' and is now being conducted
by the Citizens^Re<»nstrmrtioir Organization under the direction of Colonel
Frank Knox.
A copy of the official circular is attached.

UNITED STATES OF AMERICA
TWO P ER CENT UNITED STATES TREASURY CERTIFICATES
FIRST SERIES
Dated and bearing interest from March 15, 1932
R E D E E M A B LE

P R IO R

TO

M A T U R IT Y , A T

T H E

Due March 15, 1933

O P T IO N

O F T H E

H O LD E R , O N

S IX T Y

D A Y S ' A D V A N C E N O T IC E

T h e S ecretary of the T reasu ry offers for subscription, a t p a r and accrued in terest, through
the F ed eral R eserve B an k s, two per cen t on e-year U nited S tates T reasu ry C ertificates, F irs t
Series, of an issue of certificates of indebtedness authorized b y Section 5 of the A ct of Congress
approved Septem ber 24, 1917, as amended.
D E S C R IP T IO N

O F

C E R T IF IC A T E S

T h e certificates of this series will be dated M a rch 15, 1932, and will b ear in terest from th a t
d ate a t the ra te of two p er cen t per annum , payable sem iannually. T he certificates will be p ay ­
able on M arch 15, 1933, and will be redeem able before m a tu rity , a t the option of the holders, a t
p ar and accrued in terest, on sixty d ay s’ advance notice by the holders. T h e principal and in terest
of the certificates will be payable in U nited S tates gold coin of the present stan d ard of value.
B earer certificates will be issued in denom inations of $50, $10 0 , and $50 0 , w ith two in terest
coupons attach ed payable Septem ber 15, 1932, and M arch 15, 1933, respectively. Provision
m ay be m ade for the interchange of certificates of different denom inations, w ithout charge by
the U nited S tates, under riiles and regulations prescribed b y the S ecretary of the T reasu ry.
T h e certificates will n o t be issued in registered form.
T h e certificates of this series shall be exem pt, both as to principal and in terest, from all
taxatio n (except estate and inheritance taxes) now or h ereafter imposed by the U nited S tates,
any S ta te , or any of the possessions of the U nited S ta te s, or by any local taxin g au th ority.
T he certificates of this series will be accepted a t p ar, during such tim e and under such
rules and regulations as shall be prescribed or approved b y the S ecretary of the T reasu ry, in
p aym en t of incom e and profits taxes payable a t the m a tu rity of the certificates. T h e certifi­
cates will be acceptable to secure deposits of public m oneys, b u t will n o t bear the circulation
privilege.
A P P L IC A T IO N

A N D

A L L O T M E N T

A pplications will be received a t the Fed eral R eserve B an k s, as fiscal agents of the U n ited
S tates. B anking institutions generally will handle applications for subscribers, but only the
F ed eral R eserve B an k s are authorized to a c t as official agencies.
T h e righ t is reserved to reject any subscription, in whole or in p a rt, and to allot less th an
the am ount of certificates applied for and to close the subscriptions a t any tim e w ithout n o tice;
the S ecretary of the T reasu ry also reserves the righ t to m ake allotm ent in full upon applications
for sm aller am ounts, to m ake reduced allotm ents upon, or to reject, applications for larger
am ounts, and to m ake classified allotm ents and allotm ents upon a grad u ated scale; and his
action in these respects will be final. A llotm ent notices will be sent o u t p rom ptly upon allot­
m ent, and the basis of allotm ent will be publicly announced.
P A Y M E N T

P ay m en t a t p ar and accrued in terest for certificates allotted m u st be m ade on or before
M arch 15, 1932, or on later allotm ent. If p aym en t is m ade after M a rch 15, 1932, it m ust
include accrued in terest from th a t d ate. A fter allotm ent and upon p aym en t F ed eral R eserve
B an k s m ay issue interim receip ts pending delivery of the definitive certificates. Any qualified
depositary will be p erm itted to m ake p aym en t by cred it for certificates allotted to it for itself
and its custom ers up to any am ount for which it shall be qualified in excess of existing deposits,
when so notified by the F ed eral R eserve B a n k of its d istrict.
1 0 46 3 1 °— 32

2
R E D E M P T IO N

B E F O R E

M A T U R IT Y

In order to secure redem ption before m a tu rity of certificates issued hereunder, a dem and
therefor in w riting, describing th e certificates b y denom ination, serial num ber and aggregate
am ount, m u st be m ade by the holder; and th e certificates, with u nm atured coupons a ttach ed ,
accom panied b y such dem and, m u st be forw arded or delivered to a F ed eral R eserve B a n k , a t
the holder's risk and expense. S ixty days after receip t of th e certificates and dem and a t a Fed eral
R eserve B an k , p aym en t, a t p ar and accrued in terest, will be m ade.
G E N E R A L

P R O V IS IO N S

As fiscal agents of the U n ited S ta te s, F ed eral R eserve B an k s are authorized and requested
to receive subscriptions and to m ake allotm ents on th e basis and up to th e am ounts indicated
by th e S ecretary of th e T reasu ry to th e F ed eral R eserve B an k s of the respective districts.

O G D E N Tj. M I E E S ,
Secretary of the Treasury.
IM P O R T A N T :
T

r e a s u

r y

D

e p a r t m

e n

t

,

Office of the Secretary,
March 5, 1932.

T h i s c i r c u l a r r e l a t e s o n l y t o t h e 2% T r e a s u r y C e r t i f i ­
c a t e s , a n d s h o u ld n o t b e c o n f u s e d w it h t h e T r e a s u r y ’s
r e g u la r M a r c h f in a n c in g , a n n o u n c e m e n t o f w h ic h w ill
b e m a d e o n o r a b o u t M a rc h 7 th .

D e p a r t m e n t C i r c u l a r N o . 4 5 6.
( P u b lic D e b t )

TO THE INVESTOR:
Almost any banking institution in the United States will handle your subscription for you, or you may
make subscription direct to the Federal Reserve Bank of your district. Your special attention is invited to
the terms of subscription, allotment, and redemption as stated above.

0 . S . GOVERNMENT PRINTIN G O P F I C I l 1 1 «

TREASURY DEPARTMENT

POR RELEASE, MORNING PAPERS,
Monday, March 7, 1933.

STATEMENT BY SECRETARY MILLS

The Treasury is today offering for subscription, at par and
accrued interest, through the Federal Reserve Banks, $900,000,000, or
thereabouts, Treasury certificates of indebtedness in two series, both
dated and bearing interest from March 15, 1932; one series, TO-1932,
being for seven months, with interest at the rate of 3-l/8 per cent, and
-$
maturing October 15, 1932, and the other series, TM-1933, being for twelve

I

months, with interest at the rate of 3-3/4 per cent, and maturing March
15, 1933.

The amount of the offering of 3-1/8 per cent seven months*

certificates is $300,000,000, or thereabouts, and the amount of the offer­
ing of 3-3/4 per cent twelve months* certificates is $600,000,000, or
thereabouts.
Applications will be received at the Federal Reserve Banks.
The Treasury will accept in payment for the new certificates of either
or both series, at par, Treasury certificates of indebtedness of Series
TM-1932, maturing March 15, 1932, and subscriptions in payment of which
such Treasury certificates of indebtedness are tendered will be given
preferred allotment.
Bearer certificates will be issued in denominations of $500,
$1,000, $5,000, $10,000, and $100,000.

The certificates of Series

TO-1932 will have one interest coupon attached, payable October 15, 1932,
and the certificates of Series TM-1933, two interest coupons attached,
payable September 15, 1932, and March 15, 1933, respectively.

-

2

-

These certificates will he exempt, both as to principal and
interest, from all taxation, except estate and inheritance taxes.
About $624,000,000 of Treasury certificates of indebtedness
and about $35,000,000 in interest payments on the public debt become
due and payable on March 15, 1932.
The text of the official circular follows:

W:

-3-

The Secretary of the Treasury, under the authority of the Act
approved September 24, 1917, as amended, offers for subscription, at par
and accrued interest, through the Federal Reserve Banks, $900,000,000,!
or thereabouts, Treasury certificates of indebtedness, in two series,
both dated and bearing interest from March 15, 1932,
The certificates of Series TO-1932 will be payable on ©ctober
15, 1932, with interest at the rate of three and one-eighth per cent per
annum, payable on an annual basis.

The amount of the offering of this

series will be $300,000,000, or thereabouts.
The certificates of Series TM-1933 will be payable on March 15,
1933, with interest at the rate of three and three-quarters per cent per
annum, payable semiannually.

The amount of the offering of this series

will be $600,000,000, or thereabouts.
The principal and interest of the certificates will be payable
in United States gold coin of the present standard of value.
Applications will be received at the Federal Reserve Banks.
Bearer certificates will be issued in denominations of $500,
$1,000, $5,000, $10,000, and $100,000.

The certificates of Series TO-1932

will have one interest coupon attached, payable on October 15, 1932, and the
certificates of Series TM-1933 will have two interest coupons attached,
payable on September 15, 1932, and March 15, 1933, respectively.
The certificates of these series shall be exempt, both as to
principal and interest, from all taxation (except estate and inheritance
taxes) now or hereafter imposed by the United States, any State, or any
of the possessions of the United States, or by any local taxing authority.

-4-

The certificates of these series will be accepted at par during
such time and under such rules and regulations as shall be prescribed or
approved by the Secretary of the Treasury, in payment of income and profits
taxes payable at the maturity of the certificates.

The certificates of

these series will be acceptable tb secure deposits of public moneys, but
will not bear the circulatibn privilege*
The right is reserved to reject any subscription, in whole or
in part* and to allot less than the amount of certificates bf either or
both series applied for and to cibse the subscriptions as to either or
both series at any time without notice} the Secretary of the Treasury aibno
reserves the right to make allotment in full upon applications for smaller
amounts* to make reduced allotments upon* or to reject} applications for
larger amounts, and to make classified allotments and allotments upon a
graduated scale; and his action in these respects will be final.

Allot­

ment notices will be sent out promptly upon allotment, and the baais of
the allotment will be publicly announced.
Payment at par and accrued interest for certificates allotted
must be made on or before March 15, 1932, or on later allotment.

After

allotment and upon payment Federal Reserve Banks may issue interim receipts
pending delivery of the definitive certificates.

Any qualified depositary

will be permitted to make payment by credit for certificates allotted to it
for itself and its customers up to any amount for which it shall be qualified
in excess of existing deposits, when so notified by the Federal Reserve
Bank of its district.

Treasury certificates of indebtedness of Series

TM-1932, maturing March 15, 1932, will be accepted at par in payment for

-5-

ahy certificates of the series now offered which shall "be subscribed
for and allotted, with an adjustment of the interest accrued, if any,
on the certificates of the series so paid for.

Subscriptions for which

payment is to be tendered in Treasury certificates of indebtedness of
Series TM-1932, maturing March 15, 1932, will be given preferred allot­
ment.
As fiscal agents of the United States, Federal Reserve Banks
are authorized and requested to receive subscriptions and to make
allotments on the basis and up to the amounts indicated by the Secretary
of the Treasury to the Federal Reserve Banks of the respective districts.

jr

:
:
3
:
:
:
j.

.
IMPORTANT:
The above offering does not
relate to the offering of one-year
two per cent United States Treasury
Certificates, First Series, covered
by Department Circular No. 456,
dated March 5, 1932«________

j r

;
:
:
:
:
:
%

FOR RELEASE, MORNING PAPERS,
Wednesday, March 9, 1932.

TREASURY DEPARTMENT

STATEMENT BY SECRETARY MILLS

Secretary Mills to-day announced that the suhscription hooks for
the current offering of seven-month 3—l/8 per cent Treasury Certificates
of Indebtedness of Series TO-1932, maturing October 15, 1932, and twelvemonth 3-3/4 per cent Treasury Certificates of Indebtedness of Series TM-1933,
maturing March 15, 1933, closed at the close of business to-day, Tuesday,
March

8,

1932.

Subscriptions received through the mail by Federal Reserve Banks or
the Treasury up to 10:00 A. M. , Wednesday, March 9th, will be considered as
having been received before the close of the subscription books.
Secretary Mills called attention to the fact that this notice of
closing relates to the 3-1/8 per cent and 3-3/4 per cent Treasury
Certificates of

Indebtedness, and does not apply to the 2 per cent Treasury
*
r ■

Certificates, first series, offered in connection with the campaign of the
Citizens* Reconstruction Organization.

The subscription books for the

2 per cent Treasury Certificates will remain open lentil further notice.

1 S S I# 'A

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
Friday, March 11, 1932,

STATEMENT BY SECRETARY MILLS

Secretary Mills to-day announced the subscription figures and the
basis of allotment for the March 15th offering of Treasury Certificates of
Indebtedness in two series, both dated and bearing interest from March 15,
1932;

one series, TO-1932, 3-l/8 per cent, maturing October 15, 1932, and

the other series, TM-1933, 3-3/4 per cent, maturing March 15, 1933,
The aggregate amount of subscriptions received for the two series
was $3,402,725,500, of which $952,619,500 was received for the 3-l/8 per
cent, 7-months certificates of Series TO-1932, and $2,450,106,000 was re­
ceived for the 3-3/4 per cent 12-months certificates of Series TM-1933.
3-1/8 PER CENT TREASURY CERTIFICATES OF SERIES TO-1932
Reports received from the Federal Reserve Banks show that for the
offering of 3-1/8 per cent Certificates of Indebtedness of Series TO-1932,
which was for $300,000,000, or thereabouts,
maturing October 15, 1932,/total subscriptions aggregate $952,619,500, Of
these subscriptions $82,593,500 represent exchange subscriptions in payment
for which Treasury Certificates of Indebtedness maturing March 15, 1932,
were tendered.

Such exchange subscriptions-were allbtted in full,

Allot-

.
I
ments on cash subscriptions for 3-1/8 per cent Certificates of Series
TO-1932 were made as follows:
$1,000 were allotted in full.

Subscriptions in amounts not exceeding
Subscriptions in amounts over $1,000, but

not exceeding $10,000 were allotted 80 per cent, but not less than $1,000
t
'1
subscriptions in amounts aver $10 ,000, but not
|
were allotted 60 per cent*, but not less than $8,000

on any one subscription;; ,
exceeding $100,000

i
■

• I., .

'

** 2

on any one subscription;

subscriptions in amounts over $100,000 but not

exceeding $1 ,000,000 ■, were allotted 40 per cent, but not less than
on any one subscription;

$60,000

subscriptions over $1 ,000,000 , but not exceeding

$10,000,000, were allotted 25 per cent, but not less than $400,000 on any
one subscription; and subscriptions in amounts over $10 ,000,000 were allotted
15 per cent, but not less than $2,500,000 on any one subscription,
3-3/4 PER CENT TREASURY CERTIFICATES OF SERIES TM-1933
Eor the offering of 3-3/4 per cent Treasury Certificates of Indebtedwhich was for $600,000,000, or thereabouts,
ness of Series TM—1933, maturing March 15, 1933,/total subscriptions aggre­
gate $2,450,106,000.

Of these subscriptions $414,089,500 represent exchange

subscriptions in payment for which Treasury Certificates of Indebtedness
maturing March 15, 1932, were tendered.
allotted in full.

Such exchange subscriptions were

Allotments on cash subscriptions for 3-3/4 per cent

Treasury Certificates of Indebtedness of Series TM—1933 were made as follows:
Subscriptions in amounts not exceeding $10,000 were allotted 50 per cent,
but not less than $500 on any one subscription;

subscriptions in amounts

over $10,000, but not exceeding $100,000, were allotted 30 per cent, but not
less than $5,000 on any one subscription;

subscriptions in amounts over

$100,000, but not exceeding $1,000,000, were allotted 15 per cent, but not
less than $30,000 on any one subscription;

subscriptions in amounts over

$1,000,000, but not exceeding $25,000,000, were allotted 10 per cent, but
not less than $150,000 on any one subscription;
over $25,000,000 were allotted

5

and subscriptions in amounts

per cent, but not less than $2,500,000 on

any one subscription.

Complete details as to subscriptions and allotments will be announced
when final reports are received from the Federal Reserve Banks.

As pre­

viously announced, the subscription books for 2 per cent Treasury Certifi­
cates, first series, offered in connection with the campaign to put idle
fund* to work, will remain onen until further notice.

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE,
Saturday, March 12, 1932

Secretary Mills today announced the final subscription and allotment
figures on the March 15th offering of 3-l/8 per cent Treasury Certificates
of Indebtedness of Series TO-1932, maturing October 15, 1932, and 3-3/4 per
cent Treasury Certificates of Indebtedness of Series TM-1933, maturing March
15, 1933.
Subscriptions and allotments were divided among the several Federal
Reserve Districts and the Treasury as follows:

3-1/8$ TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES TO-1932
Federal Reserve
District

Total Cash
Subscriptions
Received

Total Exchange
Subscriptions
Received

Total Subscrip­
tions Received

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St, Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury

$ 77,889,000
469,848,000
40,866,000
39,582,500
46,816,500
35,999,000
46,284,500
6,500,500
8,199,000
5,888,500
18,134,000
73,943,500
75,000

$

$ 80,306,000
522,188,000
42,641,000
40,004,000
46,921,60036,291,000
62,984,000
6,768,000
8,598,000
9,618,500
18,429,000
77,795,500
75,000

$ 26,693,500
168,191,500
18,275,000
15,038,500
13,682,500
18,217,000
30,226,500
3,624,500
3,734,500
6,450,000
10 ,122,000
19,192,000
45,000

$870,026,000

$ 82,593,500

$952,619,500

$333,492,500

Total

2,417,000
52,340,000
1,775,000
421,500
105,000
292,000
16,699,500
267,500
399,000
3,730,000
295,000
3,852,000

* Includes $82,593,500 exchange
subscriptions, which were
allotted in full.

Total Sub­
scriptions
Allotted

3-3/4$ TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES TM-1933

Federal Reserve
District

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
Total

Total Cash
Subscriptions
Received

Total Exchange
Subscriptions
Received

Total Subscrip­
tions Received

Total Sub­
scriptions
Allotted

$ '81,611,500
1,122,473,000
166.400.500
87.752.000
66.589.500
67.918.000
173.196.500
19.852.000
31.160.500
24.862.500
34.718.000
159,900,000
______ 82,500

$ 25,214,500
309,359,500
9.115.000
898.000
142.000
1.523.000
43,548,500
2.761.000
1.486.500
9.504.000
1.876.000
6.246.500
2.415.000

$ 106,826,000
1,431,832,500
175.515.500
88.650.000
66.731.500
69.441.000
216,745,000
22.613.000
32.647.000
34.366.500
36.594.000
166.146.500
2,497,500

$ 38,798,500
419,842,000
33.350.000
14.885.500
11.341.500
16.285.000
68.520.500
6,355,000
6.478.500
13.352.000
9.123.500
19.880.000
2.441.500

$2,036,516,500

$414,089,500

$2,450,606,000

$660,653,500

* Includes $414,089,500 exchange
subscriptions, which were
allotted in full.

FOE RELEASE, MORNING PAPERS
Sunday, March 13, 1932.

'TREASURY DEPARTMENT

Speech to he made hy Secretary of the.
Treasury Mills for tile Columbia Insti­
tute of Public Affairs, over the Colum­
bia Broadcasting’ System, at 10 P.H. on
Saturday, March 12, 1932.

I have been asked to discuss this evening the revenue
measure now pending in the House of Representatives, intended to
balance the budget of the next fiscal year in the sense that there
will be no further increase in the public debt.
do so.

I am glad to

It is essential that the American people should have a

thorough understanding of the financial problems confronting their
Government and the means proposed to solve them.
For over two months the members of the Ways and Means
Committee have studied all phases of the situation.
heard the views of the Treasury Department.

They have

They have held ex­

tensive hearings at which ample opportunity to be heard was afforded
all concerned.

They have worked diligently, pains takingly and

unselfishly and without the semblance of partisanship, actuated
solely by the purpose to do the very best they knew how for the
country*

One and all, and more particularly tne Acting Chairman,

Mr. Crisp, are entitled to our appreciation for their patriotic
efforts.

Their views and recommendations are entitled to our con­

fidence and support.
This does not mean that I agree with every part of the
proposed revenue law.

If anyone wants to be entirely satisfied

with a tax bill, he must write it himself, and even then, ■'unless

„ 9

supported byythe valor o,f ignorance, he must, under existing con­
ditions, have grave misgivings.
■■

'

The "bill differs in many respects

* <-

'

4 ■

*<j

.

■■

from the recommendations made "by the Treasury Department.

We are,.

prepared, however, to accept the coriclus5:$&$&'&fthè Goi&Sibtee, anf
,
to support 'Hke meair^^'P#ich #heiy-^.èomU;ÿ?râ*

M
It .conforms to

a-dmi-r4 p.tpatj.un are, not
Insuperable, and above all it makes possible the attainment of the
,,

one vital objective, —
*

•

a balanced budget.

-%-v

't

What do we. ïïî«aiï If t baianeed

W k ÿ is it so >*

vital to the welfare of the country?

By a balanced budget we mean

that the. Government will live wtthin.J,|ts incorse; that current re'
'■ f
ceipts will be adequate to cover cu^^apt esrp$?®$.itures, arid, that bor­
rowing will not be resorted to to pay the ordinary running expenses
of the Government.

The situation is not fundamentally different

froa that of the individual. «.,- ...If a;.

iives persistently beyond

his means and resorts to the bank to provide the funds to meet thg
m

o

n

s

of Mtnself and of-’
-'his^'f&mify, «•»-all knew that he i*

headed for disaster,
strongest.

The same is true of nation** - even the

Their credit depends on the observance of sound

financial pricg#|ple<j i>nà sm. the certainty that tb^p #411 at all f£mes
and under all circumstances meet the promises to nay they have issued
*
■ p2
in the form of government _obligations.
obligations mu*t ^

Ultimately all government

#;?^ru.taxes,. and a country which is unwilling
.

V’V-. '*

*

'

to tax itself in ^r^er to meet its current expenditures inevitably
brings i*i%$ .^u^ftiPii its

ultteietely t# tax itself to

meet thé mountain? of debt piled up'"’through lack of courage and through
»'

ft *

i?'V

■’

ft

1

.J»

Y

‘

*.V*

’ V-

, €

>\ ■*'*>

the profligate use of the public credit.

I am not talking, -&f

course, of lack of balance in the budget of a single year, or of
budgets unbalanced in moderate amounts

These may be unavoidable*

But when the United States Government closed the fiscal year 1931
with a deficit of over $900,000,000; when it will close the fiscal
year 1932 with a deficit of as much as two billion and a half of
dollars, and when the prospective deficit of the fiscal year 1933
amounts to more than $1,700,000,000, the time has come beyond all
question to put our financial house in order.

Unless we do, the

soundness of our credit must inevitably be questioned, for why should
lenders voluntarily advance their funds to a. Government that would fail
to meet so serious a situation with courage and determination, and
would be willing to follow for an indefinite period a policy of living
beyond its means.
This is not an academic discussion.
*f immediate and enormous practical importance.

The problem is one
It is my very firm

belief that the later phases of the long business depression from
which we are suffering are due chiefly to a credit crisis, exemplified
by liquidation which far exceeds what one would expect in the way of
nectssary readjustment following a period of wild expansion and
speculation,

The decline in the volume of bank credit has been the

largest ever experienced in this country,

credit structure.

It has been accompanied by

We have made great progress along these

>

-¡4 -

lines through the creation of the Reconstruction Finance Corporation,
which has heen performing admirable service for the last four weeks;
through the passage of the so-called Glass-Steagall Banking Bill,
and through the other remedial measures with which you are unques­
tionably familiar*

But the keystone of the arch is a balanced

budget and the unimpaired credit of the United States Government*
As I have had occasion to say before, our private credit
structure is inextricably bound to the credit of the United States
Government*

Our currency rests predominantly upon the credit of

the United States*

Impair that credit and every dollar you handle

will be tainted with suspicion.

The foundation of our commercial

credit system, the Federal Reserve Banks, and all other banks which
depend upon themj is tied into and dependent upon the credit of the
United States Government.

Impair that credit today, and the day

after thousands of development projects, —

they are still going on, -

will stop; thousands of business men dependent upon credit renewals
will get refusals from their bankers; thousands of mortgages that
would otherwise be renewed or extended, will be foreclosed*

Mer­

chants who would buy on credit, will cancel orders; factories that
would manufacture on part capacity at least will close down*

Im­

pair the credit of the United States Government and all that we have
sought to accomplish in the course of the last few months is, to a
large extent, nullified*

The renewed courage and confidence that

have replaced the fear and uncertainty which prevailed almost univer­
sally, will once more grow weak and hesitant*
Our economic troubles and all of the hardships which they

- 5 -

entail are not to "be swept away toy the magic formula, or outside help.
have got to do the job ourselves.'

We

The way to toegin is to make those first

common sense steps which we all recognize to toe essential, no matter what
initial hardships they may entail.

You cannot climto a hill without effort.

You cannot throw off the tourden of depression without feeling some weight.
The country’s representatives in Congress are facing a most exacting duty.
Let the Mnited voice of a determined and courageous people assure them full
cooperation and support in the carrying out of this essential task.

As other

great nations have tightened their "belts and tackled even more difficult
financial and economic problems than we are called upon to face, so must the
patriotism and resourcefulness of the American people toe equal to this
emergency.
The reason for the critical fiscal situation is simple enough.

There

has toeen a colossal falling off in the revenue of the Government, due to a
general curtailment of the National income and accentuated toy the character
of our tax system.

We place our chief reliance on income taxes applied in so

far as individuals are concerned at progressive rates and with very liberal
exemptions.

Practically all of this tax is paid toy some 350,000 people.

Their income has, to a very large extent, melted away from a variety of
causes, such as decreased profits, reduced dividends and large losses.
Incidentall3^, the drying up of the larger incomes necessarily increases the
difficulties involved in finding the additional revenue required.
The total receipts of the Government in 1930 aggregated $4,178,000,000.
It is estimated that receipts will amount to $2,242,000,000 this year, and to
$2,375,000,000 next year.

Or, in other words, our total revenues

have just about been cut in half.

Current collections of individual

income tax have dropped from $1,051,000,000 in 1930 to but an estimate^
$275,000,000 in 1933, while the corporation income tax has dropped
from $1,118,000,000 in 1930 to an estimated $382,000,000 in 1933.
Customs receipts show a, reduction of nearly $160,000,000, while mis­
cellaneous internal revenue receipts have been more stable, having
fallen off from $628,000,000 in 1930 to an estimated $550,000,000 in
1933.
The problem created by this drastic curtailment of revenue
mast be met in two ways, - first, by a program of rigid economy, and,
secondly, by drawing further on available resources.

When it is

realized that we are spending on various forms of relief to our
veterans and their families a billion dollars this year, and that
tne interest on the public debt and the sinking fund account for
over a oillion dollars, so that these two items alone approximately
exhaust our total available receipts, it is evident that the budget
cannot be balanced through economies alone.-

The figures submitted

in tne annual budget message contemplate a reduction in expenditures
for 1933 of $370,000,000.

' The Ways and Means Committee recommends

a further reduction of $150,000,000, making a total savings of approxi­
mately half a billion dollars.
very substantial achievement.

If realized, this constitutes a
Such a figure,- however, is impossible

of attainment, unless tne Congress abstains from all'legislation that
will increase expenditures, and unless in the carrying out of this
essential urogram of retrenchment, the representatives of the people
have the full support of the people themselves and are protected

from the insistent pressure exerted "by organized groups furthering
pet projects.
But a saving of half a billion dollars still leaves us
very far from our goal.

It is still necessary to provide approx­

imately $1,100,000,000 in additional revenue.

The Treasury De­

partment recommended a broadening of the income tax base, an increase
in the normal tax, the doubling of the surtax rates applicable to
the higher brackets, an increase in the estate tax to a maximum of
25 per cent, and a series of excise taxes applied to selected articles,
the competitive position of which would not be affected by the appli­
cation of the tax.

The Ways and Means Committee, in the main,

follows the Treasury recommendations regarding income taxes, making
the new rates applicable, however, to 1932, rather than 1931 income.
They recommend an increase in estate tax rates to a maximum of 40 per
cent, which, in my judgment, is too high, and which in a number of cases
may even prove confiscatory, unless estates are granted a longer period
in which to pay the tax than is now permitted.

For the protection

of the estate and income taxes from evasion they have provided a gift
tax, with rates running up to 30 per cent.

In order to stop the

practice which has evidently grown up of wiping out other income by
means of losses on security transactions, which in actual practice
are frequently nothing more than paper losses, the Ways and Means
Committee recommends limiting the losses which may be taken on the sale
of securities to deductions from gains realized by the sale of securities,
thus preventing the wiping out of income derived from such items as
salaries, business profits, dividends and interest,

This may work

- 8 -

an injustice in some cases, "but it seems to be necessary in order •
to.put *'i- stop to a growing abuse*

This, and- other administrative

changes should correct abuses and prevent evasion.

These changes,

it is estimated, will increase revenue by $100 ,000,000,
In lieu of a series of special excise taxes, the Ways and
Keanb Committee recommends the imposition'of a general manufacturers*
sales, tax, modeled on the Canadian Law, imposed at a rate of 2\ per
cent, and with liberal exemptions covering agricultural products,
fertilizer, seeds and feeds for livestock and poultry, fresh, dried
and salted meat, fish, poultry, butte-r, cheese, milk, eggs, bread,
flour, sugar, salt,’ tea and coffee, or,‘in other words, essential food
products, *

«

>

The tax is imposed on imported as well as domestic articles,
.*
*

though exported articles are exempt,
(
#

,

C
‘
ufacturer on his wholesale selling price.

It is to be paid by the man—
0

Pyramiding is avoided

through a system of licenses by means of which the tax can only apply
on the sale of the finished product by the final manufacturer,

|

may add that long expenience in Canada has demonstrated that such
a system doe/, prevoat pyramiding.

The tax has been successfully

imposed in Canada end Australia, at a rate in Canada of 4 per cent,
and in Australia of

6

per cent.

Administration presents a very

real difficulty, but the administrative provisions as drafted are
such that, with the discretion granted the .Bureau ox Internal Revenue,
most of the doubts wiri'-h the Treasury at one time entertained have
been removed.

If Canada and Australia can success dlly administer

l

such e tax: if Suronear. countries can administer with mors or less
t

9
success still more conrolicated sales taxes, there is no reason why
vre cannot undertake the task, particularly as the Committee seems
to have profited "by the experience of other countries and to have
avoided many of the mistakes made by them.
The time at my disposal necessarily limits me to a very
sketchy outline.

Perhaps the quickest way to present the picture

to you is to give you the amounts that it is estimated will be raised
during the fiscal year 1933 by the different taxes, old and new,
which will be imposed should the Committee’s program be adopted*
Customs duties will yield $430,000,000; income taxes,
$1 ,100 ,000,000; estate and gift taxes, $80,000,000; manufacturers’
and excise taxes, $595,000,000; miscellaneous internal revenue taxes,
$738,000,000; or a total of tax revenue of $2,543,000,000*

It will

be observed that of this amount, direct taxes contribute approximately
$1,180,000,000 and indirect taxes $1,760,000,000.

Generally speak-,

ing, direct taxes cannot be passed on; indirect taxes may be.

I

must admit that I should feel happier if the percentage of direct tax
were higher than 40 per cent of the total tax revenue.

But we are

confronted not with a theory, but with hard, inescapable facts.
The yield from direct taxes is not greater, not because the Committee
has been lenient in fixing the rates, —

quite the contrary, since they

propose to tax higher incomes at 46 per cent and the larger estates
at 40 per cent, but because the base to which income tax rates appljr
has temporarily been so narrowed by the degression that adequate
revenue cannot be derived from these sources no matter what rates are
applied.

For example, it is estimated that at the present rates

the current individual income tax will yield $275,000,^00 in tue fiscal
year 1933.

Pven with the rates in the higher brackets doubled» only

approximately $110,000,000 more is derived.

To the extent that

incomes arc. still available, this bill reaches'them at high progressive
rates, but if the budget is to be balanced we have to look elsewhere
for additional revenue.
I happen to be one who :Ta 'the past has not favored a saxes
tax.

I prefer a tax system consinting of a progressive taA on

individual incomes with a broad base, a corporation income tax,
an estate tax, customs duties, and a 'selective group of excise taxed»
But in a National emergency of this character who can refuse -to ac­
cept a bill which,'while placing the fullest'possible burden upon
those best able to pay, demands some element of sacrifice from all.
Viewed as a whole, the bill reported by the Ways and Moans Committee
faithfully observes the doctrine of ability to pay.

It can only

fairly be challenged by those who contend that irrespective of their
ability to make some small contribution certain' groups of our citizens
should not be asked to make any contribution whatever to the support
of the National Government even in times of emergency.
of us really being frightened by a word?

Aren* t some

A soles tax sounds formid­

able as involving possibly a burden to the-«onsumer.

But 'when 'all is

said and done, a contribution of $600,000,000 imp osed on all of

12 0 ,000,000

people, cannot under any conceivable circumstances mean any

great individual burden to any one of them.

2^

per cent rate is to Ike applied —

The base to which this

and that is a low rate, and a low

rate will cure most $£ the defects of even & v$ry bad tax —

is so im­

mense, aggregating, af it deei ir^ye th&n 26 billion dollars, that I do not

11

“believe it will have any discernible effect, or that anyone will
really feel it.
May I repeat:

In a great national emergency the Ways and

Means Committee has drafted a revenue measure which makes possible
the attainment of the main objective, — • a balanced budget, which is
based definitely on the principle that those best able to should
contribute in accordance with their ability to do so, and which calls
upon all American citizens to make some contribution to the support
of the national credit.

That there will be some disagreement as

to some parts of the bill, was to be expected.

But as to the neces­

sity for so comprehensive a measure, and as to the broad principles
upon which it is based, there can be no disagreement*
There is no more important issue before the country.

The

foundation upon which the structure of restored prosperity must rest
is the unimpaired credit of the National Government.
increased taxation.
proper one.

The cost is

But the word ’’cost” in a sense is not the

No better investment can be made today by any American

than a contribution to the strengthening of this foundation*
Any weakening of that must inevitably threaten the economic welfare
and security which we have rightly considered as an essential feature
of the American heritage.

Our difficulties are great.

The path

is not easy, but I am confident that American courage and resourceful­
ness will be equal to the task and that our hard common sense will
lead us along the right road, even if it is not the easiest one.

TREASURY DEPARTMENT

FOR RELEASE, MORNING PARERS
Thursday, March 24, 1932.

STATEMENT BY SECRETARY MILLS

The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of $100,000,000, or there­
abouts.

They will be 91-day bills; and will be sold on a discount basis

to the highest bidders.

Tenders will be received at the Federal Reserve

Banks, or the branches thereof, up to two o'clock p. m . , Eastern
Standard time, on Monday, March 28, 1932.

Tenders will not be received

at the Treasury Department, Washington.
The Treasury bills will be dated March 30, 1932, and will mature
on June 29, 1932, and on the maturity date the face amount will be pay­
able without interest.

They will be issued in bearer form only, and

in amounts or denominations of $1,000, $10,000, $100,000, $500,000, and
$ 1 ,000,000 (maturity value).
It is urged that tenders be made on the printed forms and for­
warded in the special envelopes which will be supplied by the Federal
Reserve Banks or branches upon application therefor.
No tender for an amount less that $1,000 will be considered.
Each tender must be in multiples of $1,000.
expressed on the basis of
e. g., 99.125.

100 , with

The price offered must be

not more than three decimal places,

Fractions must not be used.

Tenders will be accepted without cash deposit from incorpor­
ated banks and trust companies and from responsible and recognized
dealers in investment securities.

Tenders from others must be accom­

panied by a deposit of 10 per cent of the face amount of Treasury bills

-

2-

applied for, unless the tenders are accompanied by an express guaranty
of payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
March 28, 1932, all tenders received at the Federal Reserve Banks or
branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices will follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on March 30, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowed
as a deduction, or otherwise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this
notice prescribe the terms of the Treasury bills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or branch thereof.

FOR IMMEDIATE RELEASE,
Saturday, April 2, 1932

TREASURY DEPARTMENT

Statement by Secretary of the Treasury Mills,

The "bill which passed the House of Representatives will
raise a very large amount of revenue.

What, however, is more im­

portant is that the House in passing it has recognized and affirmed
the necessity of balancing the budget.
for sound financial principles.

This is a great victory

There can be no turning back.

The differences as to estimates of revenue are minor in
character.
too low.

The Speaker seems to think the Treasury estimates are
I hope he is right.

Only time will tell.

All I can

say is that the estimates represent our very best judgment.
The bill contains serious defects and discriminations.
I trust that these will be corrected in the Senate and that the
changes will ultimately be concurred in by the House.
The Treasury estimates that the bill, during the fiscal
year 1932-33, will raise approximately $1,030,000,000 of n:ew reve­
nue, including increased postal charges, as against an estimated
$1,241,000,000 needed to balance the budget, exclusive of the sink­
ing fund requirements.

It is apparent, therefore, that there is a

gap of something over $200,000,000 which remains to be bridged.
This, the Ways and Means Committee and the House evidently plan
to bring about by means of reduced expenditures.

There never was

- 2 -

any difference between the Ways and Means Committee and the Treasury
Department as to the imperative need of reducing the cost of government,
but in my lottor. to Chairman Crisp I pointed out »the extreme danger
of attempting to balance the budget except on the basis of either
ascertained facts or of prospects sufficiently substantial as to justify
a confident expectation of their realization».

Unfortunately, neither

the Ways and Means Committee nor the House had before them in preparing
their estimates of needed revenue a concrete program for definite
reduction in expenditures.

They were obliged to rely on more or less

vague estimates.
It is now clear that if we are to have a balanced budget, the
preparation and realization of such a concrete program is imperatively
necessary.
This means that there must be substantial modifications of
existing l&w affecting the duties and obligations of the departments
and independent establishments of the Government.
drastic cuts already made in the

1933

In view of the

budget as presented to the

Congress, amounting to $370,000,000, there is but little further
room for large economies through administrative changes alone.
To accomplish a real reduction in cost, there must be an elimination
of duplication of effort through consolidation, the curtailment of
unnecessary functions, and the suspension of certain activities

- 3 -

during the period of emergency*. .. To attain this goal will require
not only legislation, "but close cooperation between the legislative
and the executive branches of the Government in carrying out such a
program.
There is no saving in mere temporary postponement of an appro­
priation* .In the discussion of savings much emphasis has been placed
on the reduction in the estimates of appropriations made by the
Committee on Appropriations of the House.

The claim has been made

that they represent an actual saving of as much as $113,000,000*. .
As a matter of fact, only $27,000,000 of reductions can fairly
be said to represent actual savings* . The balance, in all human
probability, merely represents deferred appropriations*.

For

instance, the largest single item of reduction is one of $50,000,000
for the Adjusted Service Certificate Fund... The Committee reduced
an estimate of $150,000,000 to $100,000,000— to use its own language—
’’upon the assurance of General Hines that an appropriation of
$100 ,000,000 will take care of the obligations until the next session
of Congress, when a deficiency appropriation can be made if needed”.
In other words, the $50,000,000 of supposed savings is to be appro­
priated next December, — in the middle of the very fiscal year for
which we are budgeting, and will have to be paid for out of taxes
collected during that fiscal year*..

- 4 -

This illustrates one of the causes of confusion.

'When the

Treasury Department talks of a balanced budget, it means a balanced
budget —

not one balanced on paper.

When it talks of reduced

expenditures, it means an actual reduction in the cost of Government
not a postponement of an appropriation for a few months.
There can be no question as to the willingness of the
Treasury Department and other departments of the Government to
cooperate with the Congress in the development on a non-partisan
basis of a real program looking to genuine reductions in the cost of
Government.

As a matter of fact, the departments and independent

establishments have already submitted suggestions to the appropriate
committees for effecting substantial reductions.

TREASURY DEPARTMENT

FOR RELEASE, WEDNESDAY,
APRIL 6 , 1932.
(Upon the appearance of the
Secretary before the Committee)

Statement by Secretary of the Treasury Mills
before the Finance Committee of the Senate
with reference to H.R. 10236, the Revenue Bill
for 1932.

The revenue for the fiscal year 1932-33 under existing laws, it is
estimated, will amount to $2,375,000,000.

Expenditures, likewise under

existing laws are estimated at $4,113,000,000.
amounts to $1,738,000,000.

Thus the prospective deficit

If we exclude sinking fund requirements, the

amount needed to balance the budget in the sense that current expenditures
will be covered by adequate receipts, and that there will be no increase
in the public debt, is $1,241,000,000.

This must be obtained through de­

creased expenditures and increased taxes.
The Treasury's position is that the budget rnus’t be balanced in
the sense above described.

There is no need of my presenting to this

Committee the compelling and unanswerable arguments in favor of a balanced
budget.

It is essential to preserve unimpaired the credit of the United

States government.

Bring that credit into question and our present dif­

ficulties great as they are become ' infinitely greater.

New dangers and

evils will appear and recovery will be indefinitely prolonged.
has declared its determination to balance the budget.

The House

I am confident the

Treasury Department will have the support and cooperation of the Senate in
maintaining the finances of our Government on a sound basis.
The House proposes to balance the budget by raising, according
to our estimates, $1 ,030 ,000,000 in additional revenue and by reducing

- 2 expenditures by $200,000,000 in addition to those reductions already
provided for in the annual budget submitted to the Congress in December.
The Treasury Department urges the necessity of reducing expenditures.

When

asked to assume an enormously heavy tax burden the people are entitled to
have the cost of Government reduced to a minimum and every expenditure not
essential to the proper functioning of Government eliminated.

I need not

point out to this Committee that to accomplish any such reduction as
$200,000,000 in expenditures will require amendments to existing law re­
lieving the departments and independent establishments of obligations now
existing.

This is one of the essential tasks which confronts the executive

and legislative branches of the Government.
dispensable element in our program.

It is a fundamental and in­

The more you examine the difficulties

of raising adequate revenue, the more you will appreciate the compelling
necessity of addressing yourselves as well to the task of reducing the
cost of Government.
The causes which have led
are well known to you.

up to our present critical situation

Our expenses in the fiscal year 1933» including sink­

ing fund requirements, are estimated at $*+,1 1 3 ,000,000, as compared with
$3 ,99^">000,000 in

1930 ;

whereas under existing law our revenues in the next

fiscal year are estimated as $2,375*000,000, as compared with $^-,175,000,000 in
1930*

It is apparent that our budgetary problem arises from a collapse in our

revenue collections due to the business depression acting directly on a tax
system particularly sensitive to business fluctuations.
It is no easy task to raise a billion dollars in additional taxes,
or an amount which exceeds half the revenue provided for under existing

statutes.

If we except the estate tax, broadly speaking, there are only

three ways in which money can be raised by the Government through taxations
First, by a tax on income; secondly, by a tax on outgo; or, third, by a
combination of the two.

The income tax is in many respects an ideal tax.

Advantages of this tax arc as follows:

It is direct and unconcealed so

that each nan knows what Government is costing him.

It can be nade to

yield a very large revenue even in slack tines if applied on a broad base.
It only reaches those who have ability to pay and through a progressive
rate compels those best able to contribute to pay relatively most.
Disadvantages are:

As a practical matter it is very difficult

to impose on all citizens having tax-paying ability.
felt, and being felt it is unpopular.
impose it on fewer and fewer taxpayers.

Being direct it is

Consequently, the tendency is to
This enormously limits its useful­

ness as a money raiser and weakens its fundamental fairness.

It involves

trouble to the taxpayer and administrative difficulties to the Government.
It is neither easy, unnoticed nor painless.

Therefore, in practice we

limit its application and even in ordinary times look elsewhere for ad­
ditional revenue.
Under the income tax system developed in this country high
exemptions relieve people of small and moderate means from contributing
to the support of the Federal Government in the form of income taxation.
Because of the great volume of tax-exempt securities, which, as long as
ten years ago, the Treasury urged Congress to do away with through a
Constitutional amendment, the application of the income tax to the large
income derived from inherited or accumulated wealth is necessarily limited.
The result is that our income tax of necessity rests essentially on the
active American business man and on the successful professional classes

-4In tines of active business when their capital is fruitfully
employed and i^rofits are large the Government collects from them con­
siderable revenue.

When industry and commerce go flat, capital ceases

to work, and profits disappear, their income likewise vanishes and so
do our taxes.

That is why the income tax as applied to individuals has

failed us in this emergency.
melted away.

The large profits and the big incomes have

Taxes on incomes of $100,000 and over fell off by

66

per

cent from 1928 to 1930, and have fallen off to a great extent since then.
Men talk of doubling or tripling the rates on the very large incomes.
Those that remain would probably seek isles of safety.
the point.
problem.

But that isn’t

Raising the rates on the larger incomes does not solve our
They are no longer there.

There is no nourishment in the

hole in a doughnut.
What I wish to bring home to you very definitely is that jg
we turn to the income tax as a means of furnishing in large measure the
additional revenue required, we cannot think of the problem in terms
of simply raising the rates on those who already pay income taxes.

To

raise greatly increased revenue through income taxation we must be pre­
pared to lower the exemptions to as low a point probably as England does,
and to impose a substantial normal tax on all taxpayers, even in the
lower brackets.

While recommending some broadening of the base, the

Treasury Department has not advocated such a course.

In spite of its

theoretical advantages there are very cogent arguments against it.
Eor a long period of years we have relied on a limited rather than a
general income tax.

We have become accustomed to high exemptions and

-

5-

very low rates on the smaller taxable incomes,

That is our fixed con-

caption of an income tax, and it is very difficult as a practical
matter to change fixed conceptions of this character.

Moreover, it

must not be forgotten that the real bur don of taxation in this country
is due for the most part to local and state taxes, and they are borne,
generally speaking, by people of small and moderate means.
There is a very real justification, therefore, for hesitation
when it comes to the adoption of a Federal income tax which would re,ally
reach the lower incomes.

But, having reached that conclusion, the

next conclusion becomes inevitable, and that is that we must lock to
other forms of taxation in order to fill the greater portion of the gap
in our revenues.

To impose the full weight of the additional taxes

on the present income tax-paying class would make their burden almost
unbearable and would s'n penalize the capital actually employed in
business as to seriously affect the genera! economy of the Nation.
In its study of the problem the Treasury early realized that
it was necessary to look elsewhere than to the income tax for the
necessary revenue.

We recommended, to be sure, a broadening of the

income tax base by a reduction of the exemptions and an increase in the
surtax rates to the level of the

192 U

the rate$in the upper brackets,

as a means not only of obtaining

Act, which meant a doubling of

such revenue as these measures would yield, moderate though the amounts
are, but because we recognized that if ever there wero a time when the
doctrine of ability to pay should apply, it is now.

In searching for

additional sources of revenue, we canvassed the entire field.
We considered a general sales or turnover tax, and rejected it because
of administrative difficulties and because we considered it unsound in principle.

- 6 We considered the manufacturers1 sales tax as -.©xempli'fiGd by* the
Canadian law*

And I want to make a Very sharp distinction ‘between a manu­

facturers’ sales tax and a general sales* or turnover^ tax*

They are some­

thing totally different, from the administrative standpoint, from the stand­
point of pyramiding, and from the standpoint in many cases of incidence* In
the recent debates which took place in the House, a general sales tax was
frequently confused with the manufacturers’ sales tax reported by the Ways
and Means Committee, and on more than one occasion the Treasury’s opposition
to a general sales tax was quoted in opposition to the Canadian manufacturers’
tax system.

This was unwarranted.

We gave very serious consideration indeed to the Canadian manufacturers’
sales tax.

Dr. Adams and Mr. Alvord made a special trip to Canada at

our request to report as to the workings of this tax.

We did not recommend

it because we concluded that there exist in this country administrative
difficulties that might be hard to overcome, and because on the whole we
felt it was safer to travel along known roads rather than to venture into
untried paths.
We decided to recommend instead a series of selective excise
taxes, applied to subjects which, generally speaking, had a broad base;
Which would yield in each case a very considerable revenue;
administrative difficulties;

were not open to evasion;

affect the competitive position of the subjects taxed.

involve no

and would not
The articles

or services selected were, therefore,picked for very definite reasons.
They may be summarized as follows:

ease in administration; large

revenue yield; lack of effect on the competitive position of the in­
dustry; and the fact that-the purchase of the article or service would»
generally speaking,indicate tax-paying ability.

- 7 The Treasury program, which I am submitting herewith in detailed
form in Schedule A, comprised, generally speaking, a progressive income
tax at increased rates;

a progressive estate tax at increased rates;

a series of selective excise taxes, following in the main the lines of
the 1921 and

192 U

Acts; and increased rates on post,age adequate to put

the Post Office Department on a self-sustaining basis.
The Ways and Means Committee reported a bill in which the income
tax rates were increased substantially along the lines of the Treasury
recommendations; the estate tax rates were sharply increased over the
recommendations of the Treasury; a
speaking, in lieu of the series

of

gift tax was
excise

taxes

included; generally
recommended by the

Treasury, while some were retained, a £&j&faccurers» sales tax, based
on the Canadian model though more comprehensive in character and at a
lower rate, was substituted:

An increase in postal rates was not recom­

mended.
The details of tne Ways and Means Committee bill and the revenue
yield under each head appear in Schedule B, hereto attached.
The Treasury stated that while the recommendations of the Committee
did not conform to those originally made, nevertheless the bill was ac­
ceptable.
The bill now before you lowers tne income tax exemptions from $3 ,5OO
to $2,500 for married couples, and from $1,500 to $1,000 for individuals;
it increases the normal income tax rates to

and

7f0;

does away

with the exemption of dividends from the normal tax; and sharply increases
surtaxes, particularly those applicable to the upper brackets; it pro­
vides for much higher estate tax rates than have ever existed in this
country, even in war time, and supplements them with a gift tax at

•

-

correspondingly higher rates;

8

-

it raises the corporation income tax rate

from 12$ to 13-|$, and for corporations filing consolidated returns to 15$;
it provides for a very great number of manufacturers* excise taxes, which,
generally speaking, seem to he directed at what might he described as
luxuries, though I am a little at a loss to know why soap and tooth-paste
should he included in this category;

it imposes two new tariff duties; and

provides increased postal charges calculated to yield approximately
$165,000,000.
The detailed schedules are presented in Table C, hereto attached.
The great merit of this hill is that it raises $1,030,000,000
of new revenue, and that, from the standpoint of the Treasury, is a
most vital consideration.

It is, however, susceptible to improvement

in a number of important respects.

I should like to mention the more

important features which we think subject to criticism and submit as a
part of this report a more detailed analysis of the principal sections
of the bill*
I believe that the corporation income tax rate is too high; that
there is no justification for compelling corporations to pay for the
privilege of filing income tax returns in accordance with their usual
method of doing business and keeping their books;

that the concealed

double taxation involved in discontinuing the exemption of dividends
from normal tax is unsound, resulting as it does in discrimination
against the corporate form of doing business, with particular hardship
to the smaller corporation as compared with a partnership;

that com­

pletely doing away with the net loss provision is hard to justify in
times like these;
isting conditions;

that the stock transfer tax is excessive under ex­
and that the estate tax rates are too high.

-

9 -

It must not "be forgotten that the hill already provides for a
sharp increase in normal and surtax rates;

that losses on the sale of

so-called capital assets are to he limited to any gains which happen
to he derived from the sale of capital assets in the same year;

that

the Treasury Department and the Ways and Means Committee were ready to
limit the net loss carry-over provision to one year, and that very
heavy taxes indeed were proposed in the Ways and Means Committee Bill
on the issuance and transfer of securities*
The cumulative effect of all these provisions is very great.

They

tend to converge the full weight of each of them upon capital actively
employed in business, and to discourage the normal flow of capital into
industry and commerce at a time when business men are hesitant and in­
dustry stagnant.

Their combined restrictive effect magnified by the

deadening influence of the depression will in my judgment tend to retard
business recovery.
What we want to accomplish above all else at the present time is
to break down the vicious circle of deflation of credit, industrial
stagnation, falling prices and loss of purchasing power.
to work, capital must go to work.
offered.

To put men

Credit must be sought and freely

But capital must see some chance of profit to compensate

for the risk.

Business men will not borrow and banks will not lend

unless the enterprise offers some fair prospect of return.
Yet the particular provisions to which I refer, and which
were written into the bill at the very last minute, certainly without
any great amount of consideration, have a definitely inhibiting effect.
On the one hand,, at a period when losses are only too real and too
common they would deny to business the right it now enjoys to carry

-

10 -

over the losses from this, a very had year, to next year, which it is
hoped will he a better one; and on the other hand, the tax on any pos­
sible profits is very greatly increased.

To illustrate:

Take the

case of a corporation that sustains a loss of $200,000 this year and
makes a profit of say $100,000 next year.
24-month period show a loss of $100,000.

Its operations over a
Yet under this bill it will

be taxed at higher rates on the $100,000 which is earned, and at still
higher rates on what it distributes, while no recognition whatsoever
is to be given to the $ 200,000 lost.
The corporation income tax is to be increased in some cases
to 13| per cent, and in others to 15 per cent, and on ton of this
distributed profits are to bear an additional tax of 7 per cent,
making in the one case a tax of 20$ per cent, and in the other
per cent, as compared with 12 per cent today.

22

This is apart from

the fact that the stockholder in any event is to pay increased surtaxes.
For the purpose of illustration, consider the case of the
railroads.

Their bonds are largely held by the great insurance com­

panies, savings banks and other fiduciary institutions, or, in other
words, the savings of the American people are invested in them to a
very great extent.

These bonds are much depreciated in value.

A

diminished earning power is of course largely responsible, though
fixed charges are for the most part being earned.

Bat the serious

part of tne situation is that the equities back of these bonds are
gradually being eaten away.

With the heavy taxes proposed on

future possible railroad earnings and on railroad dividends, coupled
with the inhibition on carrying over losses from one year to another,
the restoration of equity values essential to the restoration of the

-

11

-

high standing of the underlying securities and of the ability of the
railroads to obtain necessary capital, becomes piero''difficult ,
In this connection it should not be forgotten that railroads
ordinarily spend annually anywhere from $600,000,000 to $800,000,000
for capital improvements, giving employment directly to thousands of
men and indirectly to many thousands of others through the orders they
place*

These funds must be obtained from investors through the '

security markets,
I do not want the Committee to understand that my criticism
is directed to the bill as a whole.

There are, however, certain

important features with which the Treasury does not agree, and which
I trust your Committee will either eliminate or modify,
I wish now to turn to the analysis of some of the more im­
portant provisions of the bill, a. discussion of which I hope may prove
helpful to this Committee,
Corporation Income Tax:— The Bill increases the rate of corpo­
ration income tax from 12$ to 13-J$.
increase may be too great.

As I have said, I think that this

In dealing with the rats of the corporation

income tax, it is to

be borne in mind that the income which we refer to

as the income of the

corporation is in reality the income of a group of

individual stockholders.

The tax imposed upon the corporation may fall

unfairly, upon the individual stockholders.

It cannot be- apportioned or

levied with reference to the individual status of the different stock­
holders.

When the corporation rate is increased, the increase affects

equally stockholders

of small

does not rest fairly on these

means and stockholders of large means, and
different classes of stockholders.

It is

also to be borne in mind that when it comes to a relatively high rate

-

12

-

for incomes of corporations, the relation of the income of the corporation
to the capital involved, in the enterprise is a very important factor.

An

increase in the corporation rate may he entirely hearable hy a corporation
which is fortunate enough to he earning a high rate of return on its capi­
tal.

In the case of a corporation, however, which is earning a low rate

of return upon its capital, the increase in the flat rate of the corporation
income tax may hear with great hardship.

The increase

in the rate of the

flat corporation income tax should he kept within hounds.

I felt some douht

as to the soundness of recommending, as we did, that the

corporation income

tax rate he increased from 12$ to 13$.
Consolidated Returns of Corporations:— Certain income tax pro­
visions relate to the treatment under the tax law of business enterprises
conducted through the medium of corporations.

I refer first to the wholly

novel treatment in this Bill of consolidated returns of corporations.

The

Bill provides that consolidated returns may he made hy corporations having
subsidiaries, hut that for the right to make such return the corporations
shall pay a price in the form of

1 -|$

more of their net incomes than would

he required as tax, in the case of a corporation filing a separate return,
I can conceive of no sound argument for putting a price upon the right to
file a particular kind of income tax return.
The provision for consolidated returns should he retained as part
of the law, like other parts of the law which recognize sound business
practices and are designed to permit recognition of such practices in the
computation of taxable income.

T«hen the Revenue Act of 1928 was enacted,

it was determined to confine the use of consolidated returns to cases iir
which affiliation rests upon 95$ ownership of the voting stock hy another
corporation.

It has been the practice of most corporations operating with

subsidiary corporations to file consolidated returns of income and of

- 13 -

operations §f the grf^p, and #ad 0r this provision thé income and operation
of the group are reported for ta# purposes in the santé mânnêr in which they
are reported and d$&!$ wi$h in t}ie CQr^or§tipn!s reporfg for j$pddaol.ders
of hanks, and for oth©? purposes.

Dealing with

pftupis of corpora­

tions in this way, with the gl iminatipn of the effect of purely inter—company
transactions, causes $hp tjot tc?
a whole.

ê ÿrug.agj incsmg of the group as

This provision eliminates thq necessity of going into questions

of Inter-company accounting, and eliminates artificial effects upon income
which might he harmful to the revenue resulting from considering the opora^tions of single subsidiaries, without regard to what may ho offsetting or
modifying operations of other subsidiaries.
The provision in the Bill following the carefully considered pro­
visions of the present revenue act, treats affiliated corporations on a
basis which accords with business practice, which appears to be sound and
practicable in the light of many years of experience of the Treasury with
such returns, and any departure from the use of that basis in the law would
a
be a backward step.
The novel idea of putting/price upon the use of sound
accounting methods by affiliated corporations, should be eliminated from
the Bill.
The statement of this Committee on the subject of consolidated
returns in reporting the Revenue Bill of 1928, was in part as follows:

"Your committee has considered the mat^r very carefplly and is convinced
that the elimination of the consolidated returns provision will not produce
any increase in revenue, will not impose any greater taxes on corporations
and will in all probability permit of tax avoidance to such an extent as to
decrease revenues.

- 14 -

Changed Treatment of Dividends:«--»A new feature of great importance
embodied in this Bill

*

is the giving up of the exemption of dividends

on corporate stock from normal tax.

Under all of the revenue acts since

1913, dividends received by individuals have been exempt from normal tax.
The reason for this treatment of dividends was, of course, the idea that
the actual receipt by the individual stockholder of a portion of the income
of the corporation, which had

already been

subjected to the basic income

tax, should not create a new liability to the same basic normal tax.

You

will recall that under the first income tax, the rate of normal tax upon
individuals was
was also 1$.

1 $,

and the rate of tax upon the net income of corporations

It was believed that when the income of the corporation had

been subjected to the

1 fo

tax, it should not again be subjected to the same

tax when received by the individual stockholder.

It was concluded that

unless dividends received by individual stockholders were made exempt
from normal tax, there would be a duplication of tax in the case of income
realized by individuals through the medium of corporations.
This treatment of dividends in the manner to prevent what was
regarded as a duplication of normal tax and a discrimination against the
use of the corporate form, was continued, as I have said, under all the
succeeding revenue acts.

The exemption of corporate dividends of normal

tax may be said to be one of the basic ideas or principles which has
hitherto been followed in the structure of our income tax.
he no doubt that the financing

There can

of business enterprises has been

based to some extent upon the expectation of the continuance of
this treatment of corporations* dividends under the law.

Exemption

of dividends from normal tax has played an important part in the

securing of equity money for "business enterprises«

It has "been a

consideration of particular importance in connection with the
financing through the sale ci preferred stock«,

The exemption of

dividends from normal tax gives the preferred stock some compensating
attraction as compared with the bond, which, while ranking ahead of
the preferred ¿stock, does not have this exemption«
It ‘Till , of course, be

in mind that the. interest paid

on the bon d const:brutes a deuicc ion by the corpora/:ion .

computing its

net income aid he:¿ice ji*b no'«- bc-0 i) su''1cctsd to the corporation income
*bci/X.

J-*el 0 0

ip! w e the earnings from whit

px oferred and ^ther dividends are

paid,,
The changed vu oatment of dividends louna in the House Bill would
rest with 'articular hardship

to.small

corporations *

7 'r

is obvious

that in the case of enterprises controlled by a few individuals,
carried on in a corporate form, the change would mean that the. income
from the business having been subjected to the corporation income tax
. increased rave. vrould.

.w non

.e normal tax: while- if

«m e

o:1rtributel as dividends.- be subjected
«. us*ness

were ca:cried vn under the

orship form ofie income would ¡m subject to '
the normal fax only«
tion of dividen d s * from .
normal. case does not :
fulxy oqrialite die-*
criminacion which has been involved over since the corporation, income
tat: rate was made to exceed the norma/, tax rat a.,

faking away that

exemption, however« materially increases discrimination against the
corporate form.,

¿one effort was made in the Bill to relieve against

- 16 this effect in the case of small corporations by providing that
dividends should.be exempt where received from a corporation the gross
income of which in the previous year did not exceed $25,000.

This

provision is obviously not inclusive and would be difficult of
satisfactory application.
Notwithstanding the large amount of revenue which this change
would yield, I think that it is a sounder course to adhere to the treatment
of dividends which has been followed in all the revenue acts up to the
present time, and not to embark now upon a novel treatment of that •
subject.

Business recovery depends in a very material degree upon

the securing of capital for new enterprises and more capital for
existing enterprises.

The most needed funds are those which should

be brought in through investments in stock.

The securing of such funds

will be rendered more difficult by the proposed change and the dis­
crimination against the using of corporations for the conduct of business
would be ¡sharply increased.
Net Losses:- Another change embodied in the Bill, which is likely to
have adverse effect upon the conduct of business enterprises, is the
change which denies to any business the right to carry over as a deduction
for a succeeding year a net loss which may be the result of the operations
in a particular year.

Under our lav/ the computation of taxable income

is, in general, required to Tbe gado upon the basis of annual accounting
periods.

For many years, however, it has been recognized that in the

case of business enterprises continuously carried on, the requirement
that each year should be treated as a unit without reference to what

-

17

-

happened in other years, works a hardship.

If no recognition whatever were

to he permitted of losses for particular years in businesses continually
carried on, the result, of course, is that business enterprises will
actually be required to pay tax on more income than they have had, because
the income over a series of years represents the combined effect of gains
and losses for these years.
In reporting the Bill, the Ways and Means Committee recommended that
the net loss deduction be confined to a deduction for the year immediately
succeeding the year of the loss, cutting off the right to a deduction for
a secono. succeeding year.
provides that until

1935

The Bill, as it passed the House, however
there shall be no deduction of a loss for a prior

year. I be.h evi- -..hat the net loss provisions of the recent revenue acts
rested upon sound principle; I believe that it was justifiable, in vie?; of
the existing emergency, to qu.alify the application of that principle to the
extent of limiting the right to carry over the loss to a succeeding year.
But the total elimination of recognition of the effect of losses for
particular years upon the income account and of the hardship which results
from always having to pay tax on profit for a good year, without any right
to offset profits by losses of a bad year, is unsound.
Limitation on the Deduction of Losses:—

Another provision which

should, in my opinion, be .amended, is the section limiting the right to
deduct losses on transactions in securities to the offsetting of gains
as provided in Section 23*
from similar transactions in the some taxable ye ixj In recent years income
from business profits, from salaries, and from other sources, has in many
cases been offset by losses on security transactions.

It is the effect

- IS of such losses in diminishing the tax upon forms of income, such as
I have mentioned, which, to a considerable extent, is responsible for

Ik
the diminished yield of the income tax in these years.

Undoubtedly, a

very serious case can be made for continuing the right to io deduct sucn
losses.

In many cases, however, the losses thus deducted may be said to

be paper or fictitious losses.

In place of the securities in which the

losses were taken, other securities were purchased without substantial
change in income.

The Treasury was disposed to agree that it was

not unreasonable under present conditions to deny to taxpayers the privi­
lege of offsetting forms of ordinary income through security losses.
I think, however, that banks should be excepted.

Banks, as a

part of their regular business, purchase securities for investment
purposes, which become an important element in their necessary secondary
reserve.

Speculation is not involved, nor is the question of protecting

the revenues from improper deductions.

It is my opinion that, particular­

ly in the case of banks, a tax upon the gains and a denial of the losses
is not necessary and can not be justified.

I also recommend that the

provision not apply to bonds, which are normally purchased and held
for investment purposes and which are not susceptible of manipulation so
as to creat fictitious losses.
Estate Tax:—

The recommendation of the Treasury with regard to

additional estate tax was that it should be such as to increase the
rates to the level of the 1921 Act.

This would have increased

the maximum rate from twenty per cent to twenty-five per cent.
It was proposed that this tax be so framed as to constitute an additional
tax to which credits for the payment of State inheritance or estate taxes
permitted the amount of eighty per cent as against the present estate tax

- 19 -

should ngt apply«

In the House hill the recommended "basis

for the treatment of additional estate tax is preserved hut
the rates are drastically increased.

The schedule begins

with amounts in excess of $50,000 instead of $100,000 as at
present; is graded sharply upward with narrow brackets and
reaches a maximum rate of forty-five per cent.

The effect of

the steeper gradation of a tax will he seen when it is observed
that under the present law the maximum rate on an estate of
$500,000 is five per cent while in the new law it would be
thirteen per cent.

The maximum rate is eighty per cent higher

than the highest rate employed during the war, and the gradation
upward is very much more rapid than under the war-time schedule.
So far as the production of additional revenue in
the inmediate emergency is concerned, the estate tax is not
an available source for the reason that new rates apply only
to estates coming into existence after the passage of the Act
and the tax is not due until one year after the date of the
death, and the time for payment may be long extended.

In the

bill it is recognized that the higher rates necessitate the
allowance of a much longer period for payment, and it is provided
that in the case of tax shown to be due by the return the period
may be extended up to eight years, while in the case of
deficiencies the period may be extended to four years.

In the

case of any extension interest must be paid at the rate of six
per cent.

The total amount of additional revenue from the estate

tax during the year 1933 is estimated at $20,000,000*

-

20

-

The additional estate tax is thus not in substance a part
of the emergency revorsCLe program«

The problem of fixing the rates is

essentially one of long time legislative policy.

Taking a long time

view of the matter the probable effect of much higher rates on the
whole national economy must be taken into account.

It is obvious that

in very many cases executors or administrators will find great difficulty
in making payment of such high estate taxes for the reason that they
will not have available sufficient assets which can be readily turned
into cash.

It is by no means certain that this problem can be

satisfactorily solved by allowance of longer periods of time for payment.
The necessity of paying such high taxes will in many instances operate so as
to bring about the sacrifice of capital values and the disruption of
businesses.
There is an immediate adverse effect upon business recovery
through the imposition of drastic estate tax rates. Unquestionably’
'there
will be strong pressure on constructive business men whose activities
normally result in the building up of new or enlarged business enterprises
(
to refrain from employing their capital ielsuch enterprises and to put it
instead in forms in which it can be readily liquidated.

When account is

taken of this effect it is not clear that the imposition of very high
estate tax rates will not tend to decrease the revenue from various
sources and to check business developments which might help in the field
of employment and in many other ways.

From a broad economic standpoint

I think you should consider the danger of impairing the working capital
of the nation by this form of capital levy imposed at very high rates.

-

21-

It is my understanding that there exists in England a considerable body of
opinion on the part of relatively disinterested observers that the high
estate and income tax

rates there in force have been a serious adverse

economic factor.
The rates in the case of the gift tax are logically made
dependent upon the rates of the estate tax.

They are so constructed

as to provide a differential of twenty-five per cent in favor of the
gift tax —

that is the gift tax upon the disposition of a given amount

of property is twenty-five per cent less than the total estale taxes would be
upon the same property.

So far as the gift tax is applied as a source

of additional, revenue there is question as to whether the provision of a
greater differential would not operate to increase the revenue.
Manufac-turers1 Excise Taxes:—

The manufacturers1 excise taxes pro­

vided for under Title IV of the Act include a considerable list, but a num­
ber of them of a very minor character so fair as expected revenue is con­
cerned.

These contrast with the relatively few taxes of much larger

expected yield embodied in the Treasury proposals and with the manufacturers'
excise tax as appearing in the bill reported by the Ways and Means Committee.
Those taxes which are in effect protective tariff duties present
problems usually dealt with under a Tariff Act.

Whether they should be

included, in a revenue bill is a matter of policy for the Congress to do—
termino.

-

22

-

Each, of the special sales taxes is deserving of "being studied
with reference to its scope and its effect on the competitive position of
the article.
A question also arising with reference to the special group
of manufacturers* taxes is as to whether a tax is imposed in any case
with reference to an industry perhaps less well situated to hear the
tax burden than other industries which are not taxed.
Sales taxes applying to great numbers of small establishments
with no exemptions are, of course, very much more difficult and costly
to administer and more subject to evasion than the broader taxes.
Tax on Transfers of Stock:—

The provision for additional

tax on transfers of capital stock and similar interests, introduces a
new principle of basing the tax, not upon the number or par value of
the shares, or certificates, but upon the selling price of the shares
in case there is a selling-price.

It is provided that the transfer

tax imposed shall not in any case be less than one-fourth of
of the selling price.

1

per cent

The additional taxes to be imposed must be con­

sidered in the light of the recent doubling of the transfer tax imposed
by the State of New York.
As to whether the proposed tax is so high as to seriously in­
terfere with the volume of security transactions in normal times the
Treasury Department has not the information upon which to base an opinion.
In view, however, of the present conditions existing in' the security markets,
it is a doubtful wisdom to attempt an experiment of this kind.

Indeed

those men competent to know advise us that such a tax will seriously cur­
tail legitimate and necessary activitiy on the security markets.
The provision appearing as Section 723 (b), intended to effect
the application of the stock transfer tax to transfers occurring outside

the United States, calls for close study i

Obviously, there is doubt as

to the legal power to give the tax extra territorial effect and doubt as
to whether the provisions of this section are capable of administration,
or of just application.
From the administrative standpoint, there is some objection to
basing a stamp tax liability upon a consideration of selling price or
value instead of upon the simpler consideration of number or par value of
shares which permit the tax to be most readily and definitely determined.
ZS2 5S the Transfer of Bonds:— The Bill includes a tax upon the
transfer of bonds, which is to be 2<k on each

$200

but not less than 1/8 of 1$ of the selling price.

or a fraction thereof,
(Section J2U.)

ITo tax

on transfers of bonds was included in the war revenue acts, or in any
subsequent act.

The reason for this sprang, undoubtedly, from the

fact

that bonds are, in general, negotiable instruments in bearer form, which
can be transferred from hand to hand by more delivery without the use of
any instruments of transfer.

In view of this freedom of transfer, the

imposition of the tax upon a transfer is peculiarly difficult to enforce.
It seems impossible to avoid widespread evasion of such tax.

The larger

proportion of transfers of bonds does not occur through established exchange
The introduction of the determination of the tax by the selling
price has the objection of making the tax less easy to determine automati­
cally and does not seem to be suitable for a stamp tax.
In conclusion may I reemphasize the vital importance of balancing
the budget and the need of very greatly increasing our revenues, after
making allowance for possible economies.

So far as changes v/hich I have

recommended would decrease the revenue, I call attention to alternatives in
the Treasury proposals summarized in Schedule A.

I need hardly add

'■

that during the consideration of this' bill the personnel of the Treasury
will at all times be at the service of the Committee.

A

SUMMARY OF TREASURY»S BUDGET PROPOSALS
Submitted to Committee on Ways and
Means
Estimated results for
the fiscal year 1933
Revenue proposals:

(Millions of dollars)

Corporation income (l):
Increase of 1 per cent in rate, elimination
of exemption ...............
fiscal year.
1 st 6 months
2nd 5 months
Individual income (l):
Exemptions $2,500 and $1,000;
Normal rates, 2, 4 and 6$;
Surtax rates, $6000-10,000, 1$
10,000-12,000, 2i
thereafter, 1924 rates ulus 2f
fiscal year.
1st 6 months
2nd S months
Estates (basis 1921 act), nominal estimate (2 ).
Tobacco manufactures,except cigars (Increase 1 / 6 )
Conveyances of realty (basis 1924 act) .......
Sales or transfers of capital stock (increase L )
Automobiles & accessories (basis 1924 act)
Passenger autos, 5$
Trucks, 3$
Accessories, 2-M
Admissions (l# per 10#; 10# exemption) ......
Radio & phonograph (equipment & accessories, 5^)
Telephone & telegrauh messages (basis 1921 act )
Checks & drafts {3#'each) .T...............?!!.
Gasoline tax (l# per gal.) ........ ..!.!!.!!..
Domestic consumption of electricity &*^as'
Postal deficit ................
Reduction in expenditures.....
Total ...........
HI

p e a s e s assumed to be effective on 1931 incomes.
increase assumed to be effective March
affecting collections until March 1 1933.

69
(34)
(35)

184
( 73)

(111)
5
58
10

22
100
( 73)

( 6)

( 21)
110

11
50
95
165
94
150
118
1241

1,

1932, not

Budget Program of the Committee on Ways and Means as
Submitted to the House of Representatives.

Estimated Additional
Revenue for fiscal year 1933
H.R. 10236:
Manufacturers1 excise tax at 3 | * ...............

$

Income tax:
Individual ............................... ,
Corporation^.....................................
Administrative changes ..........................
Estate and gift taxes (nominal) .................
Admissions tax at 10* on admissions of
’
25 cents and over .............................
Stock transfers and sales, increase
from^present rate of 2 cents to 4 cents, and
application of tax of 4 cents to loans of stocks
Lubricating oil, 4 cents per gallon ..................
Malt syrup 35^, wort
'5 cents, per gallon, and
grape concentrates, 40 per cent ad valorem ....
Telegraph, telephone and radio messages, 5 cents
on messages costing 31 - 49 cents, and 10 cents
on messages costing 50 cents or more ........ .
Gasoline, gas oil, fuel oil, and crude oil
imports, 1 cent per g a l l o n ..... ..............
Total additional

revenue

595 ,000,000.
112,000,000.
21,000,000.
100 ,000,000.
35 OOO 000 (1)
'
W
9q OOO 000.

28,000,000.
25,000,000.
50,000,000.

35,000,000.

5 ,000,000.
$1,096,000,000.

Reduction in expenditures (including postal deficit
$25 million) ...................

150,000,000.

xotal additional revenue and reduction in ex—
pendi ture ^............
Amount required to balance the budget (2 ) ..........

$1,246,000,000.
1,241,000,000.

Excess over requirements ...........................

$

/is

5,000,000.

originally submitted, increase assumed to be effective March 1,1932.

{¿) Exclusive of statutory debt retirements.

I if #

c

H.R. 10236 as Amended in the House
Estimated Yield, Fiscal Year
1933
Treasury
revised
estimates
(Millions of dollars)
Title I — . Income tax:
1
Individual income tax —
H.R. 10236, as introduced ...... .......................
Amendment increasing highest normal rate to 7$ ......... .
Additional surtax "brackets, beginning $ 5,000 ....... .....
Dividends subject to normal t a x ...... ...................
Total ................. ..............................
Corporation income tax —
H.R. 10236, as introduced............ .................,.
Reduction in exemption from $2,000 to $i,000 ...........
Further increase in rate, 13$ to 1 3 § $ ...................
Additional increase in rate from 13-J$ to 15$ for
consolidated returns ........... .......................
Total ......... ......................................
Other income tax changes, largely administrative:—
H.R. 10236 (administrative_changes.in.bill_as introduced).
Repeal of net loss provisions ........................
Dividends (Section 115-b) ........i)
!
#
[!
Dividends (Section 115 d) .....
!.*!!*!!
Revision of depletion allowance ..................... 1
Dividends, tax on foreign corporations and nonresident aliens
Total ..... *.......................................
Title II
Title III

—

112

3
7

89

211.0

21

6
8.4

8.0
43.4

100

7
6

2

3
119.0

Additional estate.tax (H.R. 10236,.as.amended) ...

20.0(1)

Gift tax (H.R. 10235, as amended) ....... ........

5.0(2)

Title IV — Manufacturers’ excise tax:
Lubricating oils' (4^ per gallon)
..... ..
Brewer's wort& malt, 5$. & [35^ per gallon), grape
concentrates (40^) ............ ........................
Imported gasoline, fuel oil, etc. (li per gallon) ........
Imported coal ($2 per ton) .... ................
Toilet preparations (10$ manufacturers! sales) ...........
Furs (10$ manufacturers' sales) .................
Jewelry (10$ manufacturers' sales) ..... ....... .........
Passenger automobiles (3$ manufacturers' sale§) ..........
Trucks (2$ manufacturers' sales) ................. .
Accessories (1$ manufacturers' sales) .... ............. !

35
46
5
20

15
15
44
4
8

.5

1“
- 2 ~
Title IV — Manufacturers1 excise tax: (continued) Yachts, motor "boats, etc* (above $15 value, 10$) ..........
Radio and phonograph equipment and accessories
(5$ manufacturers’ sales) ......... ...................
Mechanical refrigerators (5$ manufacturers’ sales)
Sporting goods and cameras (10$ manufacturers’ sales).........
Firearms and shells (10$ manufacturers’ sales) •••••••••.••..••
Matches (4 cents per 1,000) .... .............. ...............
..... .
Candy (5$ manufacturers’ sales)
Chewing gum (5$ manufacturers * sales) .....................
Soft drinks (basis 1921 act) .................................
T o t a l ...... ............................................
Miscellaneous taxes:
Telephone, telegraph messages, etc., except news­
papers (5{Zi on messages costing 31# to 49# and 10#
on messages costing 50# or more) .....................
Part II — Admissions (l# for each 10# over 45#) ..................
Part III-«~Stamp taxes Issues of bonds and capital stock, etc. (10# per $100) ...... .
Transfer of stocks, etc. (4# per $100 par value or 4# per share
no par, but not less than ^ of 1$, 4 cents to apply to
lo ans of stock) ............................ ................
Transfer of bonds, etc. (2# on each $100 par value but not
less than l/8 of 1$) ...... ....................
Conveyances (50# on $100 - $500, 50# per $500 in excess) ••••••
Sales of produce for future delivery (5# per $100) ...........
Part IV — Oil transported by pipe line (8$ of charge) ....... .
Part V — Leases of safety deposit boxes (10$ of rental) .......
Total ............................. .....................

*5
11
6
6*5
2,5
11
12
3
10
255.0

Title V —
Part I —

33
40
8

70
25
10
6
20
1
213.0

Total additional taxes ......................................•••••••

866.4

Title VIII - Increased postage rates and other postal provisions
(estimate of the Committee on Ways and Means) ••••...... .........

165,5(3)

T o t a l ............................... ..............................

1,031.9

Required to balance budget (excluding debt retirement) .........

1,241.0

Surplus (■+•), Deficit (-) .... ............ ........................

- 209.1

(1) Assuming collections beginning May 1, 1931,
(2) A ssuming tax effective beginning July 1, 1932.
(3) Includes estimated effect on budget of H.R.10236 and of other bills recently
passed by the House.

D
Internal revenue receipts under the present law, actual fiscal
year 1931 and estimated fiscal years 1932 and 1933
(in millions of dollars)

1931
(Actual)

Income taxes:
Current corporation ...,...............
Current individual —
Normal tax less earned income credit *
S u r t a x .................... .........
12^- per cent tax on gains less 12-^ eer
cent tax credit on losses from sale of
capital assets held more than two years.
Total current individual ..........
Back taxes ..
..........................
Total income taxes ...........
Miscellaneous internal revenue:
Estate tax ............................. T..
Alcoholic spirits, etc. ...................
Tobacco t a x e s ..... ......... .
Admissions and dues ................... .
Stamp taxes, including playing cards .......
Oleomargarine, urocess butter, etc. ........
Miscellaneous, including narcotic taxes, delinquent taxes under repealed laws, etc...
Tota.1 miscellaneous internal revenue ................... ...... ..

Total internal revenue .....................

1933
1932
(Estimated, Feb.9,1932)

892

517

382

124
447

82
234

67
208

159
730
233
1,860

23
339

—

220
1,076

275
210
867

48
10
444
14
47
3

55
10
41014
34
2

45
10
434
15
43
2

2

1

1

568

526

550

2,423

1,602

1,417

TREASURY DEPARTMENT

FOR RELEASE, MORNING- PAPERS,
Thursday, April 7, 1933.

STATEMENT BY SECRETARY MILLS

The Secretary of the Treasury gives notice that tenders are
invited for Treasury hills to the amount of $75,000,000, or thereabouts.
They will he 91-day hills; and will he sold on a discount basis to the
highest bidders.

Tenders will he received at the Federal Reserve Banks,

or the branches thereof, up to two o’clock p.m., Eastern Standard time,
on Monday, April 11, 1932»

Tenders will not he received at the

Treasury Department, Washington,
The Treasury hills will he dated April 13, 1932, and will
mature on July 13, 1932, and on the maturity date the face amount will
he payable without interest.

They will he issued in hearer form only,

and in amounts or denominations of $1,000, $10,000, $100,000, $500,000,
and $1,000,000 (maturity value).
It is urged that tenders he made on the printed forms and
forwarded in the special envelopes which will he supplied by the Federal
Reserve Banks or branches upon application therefor.
No tender for an amount less than $1,000 will he considered.
Each tender must he in multiples of $1,000.

The price offered must he

expressed on the bawis of 100, with not more than three decimal places,
e. g., 99.125.

Fractions must not he used.

Tenders will he accepted without cash deposit from incorpor­
ated hanks and trust companies and from responsible and recognized
dealers in investment securities.

Tenders from others must he accom­

panied by a deposit of 10 per cent of the face amount of Treasury hills

-

2-

applied for, unless the tenders are accompanied by an express guaranty
of payment hy an incorporated "bank or trust company.
Immediately after the closing hour for receipt of tenders on
April 11, 1932, all tenders received at the Federal Reserve Banks or
branches thereof up to the closing hour will be opened and public an­
nouncement of the acceptable prices will follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on April 13, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowed
as a deduction, or otherwise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this
notice prescribe the terms of the Treasury bills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or branch thereof.

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
Tuesday, April 12, 1932.

STATEMENT BY SECRETARY MILLS

Secretary of the Treasury Mills today announced that
subscription hooks for the offering of two per cent United States
Treasury Certificates, First Series, dated March 15, 1932, maturing
March 15, 1933, will close at the close of business Wednesday,
April 13, 1932.
These special two per cent Treasury Certificates were
offered on March 5, 1932, in connection with the campaign to put
idle funds to work conducted throughout the country by the Citizens
Reconstruction Organization.

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS
Tuesday, April 12, 1932*

STATEMENT BY SECRETARY MILLS.

Secretary of the Treasury Mills announced to-day that the
tenders for $75,000,000, or thereabouts, of 91-day Treasury Bills
dated April 13, 1932, and maturing July 13, 1932, which were offered
on April 7th, were opened at the Federal Reserve Banks on April 11th.
The total amount applied for was $399,374,000.

The highest bid

made was 99.736, equivalent to an interest rate of about 1.04 per cent
on an annual basis.

The lowest bid accepted was 99.700, equivalent

to an interest rate of about 1.19 per cent on an annual basis.
total amount of bids accepted was $76,200,000.
of Treasury Bills to be issued is 99.735.
bank discoimt basis is about 1.05 per cent.

The

The average price

The average rate on a

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE,
April 13, 1932*

Wednesday,

letter of the Secretary of the Treasury to the Chairman of
the Committee on Finance of the Senates
»April 12, 1932,

% dear Senator Smoots
I understand from my telephone conversation with you that the
Senate Finance Committee at a meeting this morning instructed you
to request the Treasury Department to submit a program of revenue
legislation adequate to balance the budget*
I wish respectfully to call to your attention that after many
weeks of careful study and mature consideration, the Secretary of
the Treasury submitted to the Ways and Means Committee a well-balanced
program intended to provide the necessary revenue in the existing
emergency* Later, when on the basis of additional information the
Treasury estimates of revenue were revised, I submitted to the Ways
and Means Committee some suggestions supplementing the original
Treasury program*
Subsequently, the Ways and Means Committee reported out a bill
constructed on somewhat different lines from the Treasury Program,
but nevertheless constituting a well-balanced and sound revenue
measure. I then stated that while the Ways and Means Committee bill
did not conform to the original proposals submitted by this Department,
it was acceptable to the Treasury*
On Wednesday last I appeared before the Finance Committee
expressed in detail the views of this Department regarding the revenue

- 2 -

bill which, passed the House of ^Representatives and is now "before your
Committee for consideration* In the exhibits attached to my formal
statement submitted to the finance Committee I set forth a summary
of the treasury recommendations, the Ways and Means Committee pro­
posals, and the House provisions.
It seems to me, therefore, that the freasuryU position has been
folly presented*
If the Committee desires us to recommend a complete plan as an
entire substitute for the House bill, I must refer you to the program
submitted to the Ways and Means Committee or to the Ways and Means
Committee bill, which I declared to be acceptable to this Department*
Either of these plans is preferable to the measure now before you.
If, however, the Senate Finance Committee decides to deal with the
problem by taking the House bill as the basis of the revenue measure
which it will recommend to the Senate, - and I am not to be understood
as opposed to such a course, - then I shall, of course, be only too
glad to cooperate with the Committee in any way I can in attempting
to perfect this measure, and shall hold iryself in readiness to appear
before you at any time you may call upon me*
Sincerely yours,
(Signed) OGM S L. MILLS
Secretary of the freasury.11
Hon. Heed Smoot,
Chairman, Committee on Finance,
United States Senate.

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE,
Wednesday, April 13, 1932.

Letter of the Secretary of the Treasury to the Chairman of
the Committee on Finance of the Senate:
"April 12, 1932.

My dear Senator Smoot:
I understand from my telephone conversation with you. that the
Senate Finance Committee at a meeting this morning instructed you
to request the Treasury Department to submit a program of revenue
legislation adequate to balance the budget.
I wish respectfully to call to your attention that after many
weeks of careful study and mature consideration, the Secretary of
the Treasury submitted to the Ways and Means Committee a well-balanced
program intended to provide the necessary revenue in the existing
emergency.

Later, when on the basis of additional information the

Treasury estimates of revenue were revised, I submitted to the Ways
and Means Committee some suggestions supplementing the original
Treasury program.
Subsequently, the Ways and Means Committee reported out a bill
constructed on somewhat different lines from the Treasury program,
but nevertheless constituting a well-balanced and sound revenue
measure.

I then stated that while the Ways and Means Committee bill

did not conform to the original proposals submitted by this Department
it was acceptable to the Treasury.
On Wednesday last I appeared before the Finance Committee and
expressed in detail the views of this Department regarding the revenue
bill which passed the House of Representatives and is now before your

- 2 -

Committee for consideration.

In the exhibits attached to my formal

statement submitted to the Finance Committee I set forth a summary
of the Treasury recommendations, the Ways and Means Committee pro­
posals , and the House provisions.
It seems to me, therefore, that the Treasury's position has been
fully presented.
If the Committee desires us to recommend a complete plan as an
entire substitute for the House bill, I must refer you to the program
submitted to the Ways and Means Committee or to the Ways and Means
Committee bill, which I declared to be acceptable to this Department.
Either of these plans is preferable to the measure now before you.
If, however, the Senate Finance Committee decides to deal with the
problem by taking the House bill as the basis of the revenue measure
which it will recommend to the Senate, - and I am not to be understood
as opposed to such a course, — then I shall, of course, be only too
glad to cooperate with the Committee in any way I can in attempting
to perfect this measure* and shall hold myself in readinesu to appear
before you at any time you may call upon me.

Sincerely yours,
(Signed)
OGDEN L. MILLS
Secretary of the Treasury."
Hon. Heed Smoot,
Chairman, Committee on Finance,
United States Senate.

TREASURY DEPART? TENT

FOR RELEASE, MORNING PAPERS,
Thursday, April 14, 1932.

STATEMENT BY SECRETARY MILLS

The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of $75,000,000, or thereabouts.
They will be 91-day bills; and will be sold on a discount basis to the
highest bidders.

Tenders will be received at the- Federal Reserve Banks,

or the branches thereof, up to two o'clock p. m * , Eastern Standard time,
on Monday, April 18$, 1932.

Tenders will not be received at the Treasury

Department, Washington.
The Treasury bills will be dated April 20, 1932, and will
mature on July 20, 1932, and on the maturity date the face amount will
be payable without interest.

They will be issued in bearer form only,

and in amounts or denominations of $1,000, $10,000, $100,000, $500,000,
and $1,000,000 (maturity value).
It is urged that tenders be made on the printed forms and for­
warded in the special envelopes which will be supplied by the Federal
Reserv« Banks or branches upon application therefor.
No tender for an amount less than $1,000 will be considered.
Each tender must be in multiples of $1,000.

The price offered must be

expressed on the basis of 100, with not more than three decimal places,
e. g. , 99.125.

Fractions must not be used.

Tenders will be accepted without cash deposit from incorpor­
ated banks and trust companies and from responsible and recognized
dealers in investment securities.

Tenders from others must be accom­

panied by a deposit of 10 per cent of the face amount of Treasury bills

applied for, unless the tenders are accompanied by an express guaranty
of payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
April 18, 1932, all tenders received at the Federal Reserve Banks or
branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices will follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less then the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on April 20, 1932.
The Treasury bills will be exempt, as to principal end interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowed
as a deduction, or otherwise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as ?¡mended, and this
notice prescribe the terms of the Treasury bills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or branch thereof.

FOR IMMEDIATE RELEASE,
THURSDAY, APRIL 14, 1932.

TREASURY DEPARTMENT

Statement of the Secretary of the Treasury
"before the Finance Committee of the Senate,
April 14, 1932.

I am here at the request of the Committee, due apparently
to some misunderstanding as to the scope of the information to he
furnished "by me in response to inquiries made hy some members of
the Committee, and as to the attitude of my department.
There can he no doubt as to the position of the Treasury
Department*

I stand ready to cooperate with this Committee as

heartily as I did with the Ways and Means Committee of the House
with a view to drafting the best revenue measure possible to meet
the present emergency,

I believe that the way to proceed is to

lay aside all partisanship, to sit around this table with one
single thought in mind,

the Rational interest, and with an

unequivocal willingness to share the responsibility, and I may add,
whatever degree of unpopularity may come from the imposition of
additional taxes in times such as these.
That has been our position from the first.

When the

Congress met, we could have contented ourselves with calling atten­
tion to the great and growing deficit and simply urged the Congress
to impose such additional revenue as would balance the budget, and

- 2 thus have avoided the difficult and responsible task of submitting
a detailed program of additional taxation.

But we felt that it

was our duty to share in the exacting task confronting the Con­
gress, and we submitted, therefore, a detailed tax program adequate
to raise the revenue necessary to balance the budget in the sense
in which it has been discussed.
When the Ways and Means Committee told us that they did
not propose to take our program, but to prepare one of their own,
I told the Chairman that our time, information and judgment were
at his disposal in the-working out of the Committee program.
All were freely given over a period of several weeks.
I told the Chairman of the Ways and Means Committee that
if their program when completed was in our judgment sound, even',
though it differed from what we had recommended, I would support
the program and that the Treasury would assume its share of the
responsibility involved in imposing the proposed taxes.
This I did at once as soon as the Ways and Means Committee
report was presented to the House of Representatives.
I mention this record because the question has been raised
as to our willingness to cooperate.

I say to you that I stand

ready now and until you complete your consideration of the revenue
bill to work with you as sincerely, as whole-heartedly and as
cooperatively as I did with the Ways and Means Committee.
far as I am concerned, there will be no partisanship and no
shirking of responsibility.

As

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE,
Monday, April 18, 1932,

Letter of the Secretary of the Treasury to the Chairman
of the Committee on Finance, United States Senate,
April 18, 1932.

My dear Mr. Chairman:
In accordance with the request made to me, I am submitting
a summary of the Treasury* s revenue proposals brought up to date.
As I stated to the Finance Committee, -the Treasury Department has
no new program.

It adheres to the program originally submitted

in the Report of the Secretary of the Treasury, supplemented
by our additional suggestions made to the Ways and Means Committee
and by the administrative changes written in cooperation with the
Ways and Means Committee, and now modified to take advantage of
prospective economies larger than originally anticipated.
The program follows in the main the principles of the 1924
Act.

As the Secretary of the Treasury stated in his Annual Report

submitted to the Congress in December, which set forth our revenue
program in detail:
”1 advise that the Congress consider returning
in principle to the general plan of taxation ex­
isting under the revenue act of 1924.
The
country knows the burdens to be expected under
such a law.
It paid taxes under that law and,
notwithstanding the higher rates and broader
scope of that act, found that these taxes did
not constitute an unbearable burden nor prevent
increased prosperity.
Instead of embarking
on new and untried ventures in taxation, it is
wiser to utilize a known general plan with such
changes as may be appropriate in the light of
altered conditions”.

-

2

-

As I pointed out to your Committee, in bringing the plan
submitted to the Ways and Means Committee up to date, it seems
necessary to make certain modifications to meet altered condi­
tions.

Thus, the Treasury Department originally recommended

that the 1924 income tax rates be made applicable to 1931 income.
Owing to our failure to secure the approval of the Congress, and
the time having passed when this suggestion can be made effective,
it is necessary to withdraw it, occasioning a loss in revenue
for the fiscal year 1933.

The loss is offset by the increased

revenues which it is estimated will be made available by the
tightening of the law through administrative changes provided
for by the joint study and action of the Ways and Means Committee
and the Treasury Department.
At the time the urogram was submitted to the Ways and Means
Committee there was not sufficient information relating to possible
economies to justify in my judgment budgeting on the basis of an
estimated reduction in cost of government in excess of $ 120 ,000,000,
I am now confident that at least $200 ,000,000 may be expected as
a result of the reduced cost of government.

This additional

saving, coupled T?ith a uroposod tax on malt syrup and wort, worked
out in conjunction with the Ways and Means Committee, enables me
to eliminate entirely the suggested tax on gas and electricity
domestically consumed, and to reduce the suggested gasoline tax
to be paid at the refinery from
gallon.

1^

a gallon to

3/4

of a cent a

As I stated to your Committee, we now include in our program
a gift tax as a safeguard to the integrity of the income and estate
taxes, though it cannot he looked upon as a strictly revenue pro­
ducing measure.
There are two minor changes in the estimates: the one affecting
the yield of the estate tax and occasioned hy the delay in enactment
of the legislation; and the other affecting postal receipts, due to
a revised estimate of the Post Office Department,
I am attaching hereto a table summarizing the Treasury* s
proposals brought up to date.
Senator Harrison made a request of me which, if I -understand it
correctly, contemplates taking the bill as it passed the House
of Representatives and while endeavoring to preserve as many of its
provisions as possible, eliminating the most objectionable ones, more
particularly the taxes which I indicated would impede economic re­
covery and resumption of employment, and substituting therefor other
revenue proposals adequate to offset the resulting loss in revenue,
I have tried to carry out Senator Harrison*s directions.
of that effort is the summary attached hereto.

The result

This is not my

program and X am not submitting it as representing the Treasury1s
views as to the proper revenue measure or as my recommendations to
the Committee,

To rewrite the bill to conform to the Treasury*s

views would make the summary essentially the same as the summary of
the Treasury budget proposals brought up to date, which is attached
to this letter.

As far as the substitute revenue proposals are

(r

- 4

concerned, there are, of course others which the Committee
should consider if it decides to follow Senator Harrison’s
plan#
May I add that I am ready to cooperate in any way possible#

Sincerely yours,

(Signed)
OCDEU L. MILLS
Secretary of the Treasury.

Hon. Reed Smoot,
Chairman, Committee on Finance,
United States Senate.

SUMMARY OF TREASURY BUDGET PROPOSALS BROUGHT UP TO DATE.
EMERGENCY PROGRAM TO TERMIMATE IN 1934.
Estimates of a.dditional Revenue for
the fiscal year 1933.
___________________________________________________________ (Millions of dollars)
Income taxes:
Corporation —
Increase in rate from 13 to 13 per cent and elimina­
tion of present exemption of $3,000; effective be­
ginning with incomes for calendar year 1932..... ...
35
Individual —
Exemptions $2,500 and $1,000;
Normal rates, 2, 4 and 6 uer cent;
Surtax rates, $6,000 - $10,000, 1$
1 0 ,0 0 0 - 1 2 , 0 0 0 , 2$
Thereafter, 1924 rates, plus 2$ (maximum rate, 42$)
Effective beginning with incomes for calendar
year 1932................ .................... ..
Ill
Limitation on deduction of security losses and other
changes, largely administrative..... ............
100
Estate tax (basis 1921 act, specific exemption $50,000,
maximum rate of 25$)............. ■........ ...... .
3 (l)
Gift tax (rates and exemption as provided for estates
in revenue act of 1921)......... .....................
3 (2)
Miscellaneous taxes:
*
Tobacco manufactures, except cigars (increase nresent
rates by 1 / 6 )..«.... ...........................
58
Conveyances of realty (basis 1924 act and included
in H. R. 10236)... ............ ...................
10
Sales or transfers of cawital stock (increase rate
to 4/).............. I .............. ..............
22
Automobiles and accessories:
Passenger automobiles, 5$.........
73
Trucks,
3$..........................
6
Accessories,
2-|$.....
21
Admissions (1 # per 10 # .on admissions in excess of 10 #)
110
Radio and phonograph equipment and accessories, manu­
facturers’ sales, 5$ (included in H.R. 10236)......
11
Telephone and telegraph messages (basis 1921 act, i.e.,
5# on messages costing 15# to 50#, 10# on messages
costing over 50#)..................................
50
Checks and drafts (2# each).’..........................
95
Gasoline tax at 3/4 of 1# per gallon— pa.id at refinery..
124
Malt syrup and brewers wort (35 # axl 5# per gallon),
grape concentrates (40$)........
46
Postal deficit - Revised estimates of Post Office Dept...
155
Total ............................
1,033
Required to balance the budget (3)......................
1,241
Deficiency to be met by reduced expenditures............
208
(1) Assuming collections beginning May 1, 1933; previous estimate assumed
earlier effective date.
(2) Assuming tax effective beginning July 1, 1932.
(3) Exclusive of statutory debt retirement.

SUMMARY PREPARED IN RESPONSE TO REQUEST OP SENATOR HARRISON.
— T-rwM-Mir

' w

t m j - - i- t c r f C K r r i S tCr SLT» T -&&■!» » s u fm a

a

.

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

Estimates of addi­
tional revenue for
the fiscal year 1933«

— — _ ...... ... - w

__ ___ _____ _____ _____(Millions of dollars)

Income tax:
Individual income tax (H.R, 10236 as passed "by
the House# except dividends not subject to
normal tax) ...................
122
Corporation income tax:
Increase in rate from 12 to 13 per cent,
elimination of exemption.....................
35
Limitation on deduction of security losses and
other changes, largely administrative.........
109
Additional estate tax (basis of 1921 Act)............
3 (l)
Oift tax (rates and exemption as provided for
estates in revenue act of 1921)..............
3(2)
Manufacturers1 excise taxes:
Lubricating oils (4# per gallon)........... .
35
Brewers wort and malt, 5# and 35# per gallon,
grape concentrates (40$).......................
46
Imported gasoline, fuel oil, etc. (l<zi per gallon)
5
(3)
Imported coal ($2 per ton)......... ............
#5
(3)
Toilet preparations (10$ manufacturers1 sales).«
20
Purs (10$ manufacturers1 sales)................
15
Jewelry (10$ manufacturers1 sales).............
15
Passenger automobiles (5$ manufacturers* sales).
73
Trucks (3$ manufacturers1 sales)...............
6
Accessories (2-g$ manufacturers* sales)..........
21
Yachts, motor boats, etc. (above $15 value, 10$)
.5
Radio and phonograph equipment and accessories
(5$ manufacturers* sales)...................
11
Mechanical refrigerators (5$ manufacturers* sales)
6
Sporting goods and cameras (10$ manufacturers*
^sales).......................................
6.5
Firearms and shells (10$ manufacturers* sales)..
2.5
Matches (4# per 1,000).........................
11
Candy (5$ manufacturers* sales)................
12
Chewing gum (5$ manufacturers* sales)..........
3
Soft drinks (basis of 1921 act).......... .
10___
Total................................ ....... ., .299
Miscellaneous taxes:
Telephone, telegraph messages, etc., except news­
papers (5# on messages costing 31# to 49# and
10# on messages costing 50# or more)....... .
33
Admissions (l# for each 10# on admissions over

*0 #)................... ... ........

110

-2Stamp taxesi
Issues of bonds and capital stock, etc.,
(10 $. per $100 )
....................... .......
Transfer of stocks, etc. (4$ per $100 par
value, or 4$ per share no par, 4 cents to
apply to loans of stock).......... ............
Conveyances (50<f on $100 - $500, 50$ per $500
in excess)........ .............. .
Sales of produce for future delivery
(5$ per $100 )........... .......................
Oil transported by pipe line ( 8# of charge)..........
Leases'of safety deposit boxes (10# of rental)....,....
Checks and drafts ( 2$ each)................ ..........
Total...... ......................................

8
28

10
6
20
1

95

33.1

Total additional taxes....... .

882

Title VIII - Increased postage rates and other postal
provisions ( revised .estimate of the Post Office
D e p a r t m e n t ........ ............... ......

155

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

1,037

Required to balance budget (excluding debt retirement).....

1 ,241

Surplus

(1)
(2)
(3)
(4)

(+), Deficit (~)..................................

_

204

Assuming collections beginning May 1, 1933.
Assuming tax effective beginning July 1, 1932.
The Treasury expresses no opinion as regards these items.
Includes estimated effect on budget of H.E. 10236 and of other bills
recently passed by the House.

(4 )

TREASURY DEPARTMENT

EOR RELEASE, MORNING PAPERS,
Tuesday, April 19, 1932*

STATEMENT BY SECRETARY MILLS

Secretary of the Treasury Mills announced to-day that the
tenders for $75,000,000, or thereabouts, of 91-day Treasury Bills
dated April 20, 1932, and maturing July 20, 1932, which were of­
fered on April 14th, were opened at the Eederal Reserve Banks on
April 18th.
The total amount applied for was $289,740,000.

The highest

hid made was 99.876, equivalent to an interest rate of about 0,49
per cent on an annual basis.

The lowest bid accepted was 99,826,

equivalent to an interest rate of about 0.69 per cent on an annual
basis.
accepted.

Only part of the amount bid for at the latter price was
The total amount of bids accepted was $75,600,000,

The average price of Treasury Bills to be issued is 99.843.
average rate on a bank discount basis is about 0.62 per cent.

The

EOR IMMEDIATE RELEASE,
Wednesday, April 20, 1932,

TREASURY DEPARTMENT

The following correspondence was made public to-day
"by Secretary Mills:

"Philadelphia, Pa.,
April 11, 1932.

Secretary of the Treasury Mills.
Dear Sir:
Thinking that perhaps I could do my share to help my Govern­
ment the same as I did during the World War, when I gave every
dollar I had to help pay the cost, I wish to make this offer to
you.
I am getting an old man - my soldier hoy was killed in battle the only boy I had.
I receive insurance of $57,50. I have saved
from that about Two Thousand Dollars, which you can have the use of
(without interest), and my Government can pay it back to me again
when things get better.
Will you please answer and let me know if it is needed?
though it is not much, I will send it to you at once.

(Signed)

Al­

CHARLES P. THOMPSON.u

TREASURY DEPARTMENT
Office of the Secretary

« April 20 , 1932.
Mr. Charles P. Thompson,
Philadelphia,
Pennsylvania.
Ify dear Mr. Thompson:

I acknowledge receipt of your kind letter of April 4, 1932,
in which you offer to lend to the Government, without interest
and for an indefinite period, the sum of $2,000 which you have
saved from monthly War Risk insurance payments of $57.50 received
by you as the beneficiary of an only son who was killed in the
World War,

There is no law which will permit the Secretary of the
Treasury to borrow funds in the manner which you suggest, and,
therefore, I am unable to accept your generous offer.
I find difficulty in expressing in adequate terms the
Governments deep appreciation of the splendid spirit of patri­
otism which has prompted your proposal.
You have already made
a supreme sacrifice in giving to your country the life of an
only son, and this additional evidence of your patriotism is a
magnificent example of that kind of public spirit in the citizen
that enables a nation to overcome all difficulties and makes it
great nation.
Very sincerely yours,

(Signed)
OGDEH L. MILLS
Secretary of the Treasury.”

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS
Thursday, April 21, 1932.

Letter of the Secretary of the Treasury to the
Chairman of the Sub-Committee in Charge of the
Treasury Department Appropriation Bill for 1933.

"April 20, 1932.

Hon. Tasker L. Oddie,
Chairman of the Sub-Committee in Charge
of the Treasury Department Appropriation Bill,
United States Senate.
My dear Mr. Chairman:
I understand that I am to appear before your SubCommittee on Friday, next, in connection with the provisions of
the Resolution adopted by the Senate on April 18th, directing
a flat reduction in the amount of appropriations for the Treasury
Department as at present contained in the Appropriation Bill,
exclusive of the provisions for building and construction.
It occurs to me that the Sub-Committee may desire to
have the views of this Department for consideration and study
prior to my appearance, and that it may be advantageous, if you
deem it desirable, to insert this letter in the Congressional
Record.
I appreciate the opportunity afforded me to be heard,
not only as the head of the Treasury Department, but as repre­
senting a great body of faithful and efficient public servants
who have a vital interest in a sound solution of this problem*

-

2

-

The flat 10 Per cent cut would effect a saving of
approximately $14,000,000.

I am prepared to indicate how

savings in excess of this amount can he effected without im­
pairment of the efficiency of the Department and without neces­
sitating the dismissal of thousands of necessary employees.
I am informed that the Senate has not considered as
yet the effecting of the

10

per cent reduction hy the use of

a five-day week for per diem employees and of a month’s fur­
lough without pay for employees on an annual basis, as suggested
hy the President.
I recommend, therefore, that such a provision he writl
ten into this Appropriation Bill, whether or not the Senate
adopts the flat cut method.
a sound measure of economy.

The furlough plan is of itself
If the flat cut method is to

prevail, the furlough is essential to mitigate the hardships
incident to this program.

Legislation is clearly necessary

if the furlough without pay is to apply for I have grave doubts
as to whether, without Congressional sanction, the Executive
could legally and properly effect what would he a modification
of the salaries provided for hy the Congress in the Classifica­
tion Act.
I recommend further that an amendment he adopted

- 3 -

providing that not to exceed 15 per cent of any one appropriation
may, with the approval of the Director of the Budget, "be trans­
ferred to any other appropriation or appropriations under the
same Department,
I recommend that in view of the pending Revenue Bill
the Internal Revenue Bureau he in any event excluded from the

10

per cent cut provision, though it should he included in any

furlough provision,
I recommend that for the year 1933 the contracts cov­
ering certain building projects he not let, as indicated in my
letter of March 29th,
No one is more vitally concerned in reducing the cost
of government than the head of the Treasury Department, respon­
sible for conducting the fiscal affairs of the Nation in a time
of great difficulty when our every effort must he directed to­
wards balancing the budget and maintaining the public credit.
Economy is essential.

But it should be constructive economy

achieved through the elimination of waste, the curtailment of
unnecessary activities, the postponement of projects not now
essential to the public welfare, and the promotion of greater
efficiency.

An arbitrary cut applying uniformly and without

discretion to every bureau and activity alike irrespective of
its importance and irrespective of its efficiency or ability
to bear the cut is not businesslike, and as
may not even be econony.

I shall show,

a

- 4 ~

Our total auor opr iat ions aggregate $146,311,988, exclu­
sive of the public building item,
is for

porsonal service^ .

Qf this amount, $112,306,402
representing nearly 77 per cent

of the total, and $34,005,586 is for supplies, equipment and mis­
cellaneous expenses, representing about 23 per cent of the total.
Of this last mentioned amount, more than $11,000,000 is for con­
struction, equipment and operation of public buildings; over
$7,000,000 for maintenance and operation and repairs of Coast
Guard vessels and stations; and auproximately $5,500,000 is
for rent, travel, etc.

Over $1,000,000 of the $34,000,000

represents uensions to retired Coast Guard officers and men.
It is apparent that there is no economy in curtailing the ade­
quate maintenance of public buildings and uublic vessels, and
the amount to be squeezed out of the $34,000,000, short of
inefficiency and neglect, is small.

The bulk of this reduc­

tion, then, must be met by a reduction in uersonnel, unless
you adopt a five-day week and some such furlough plan as that
suggested by the President.

Provision for the furlough plan

should be written into this bill.

The alternative is a shocking one*

- 5 -

As nearly as we can estimate, without the furlough the

10

per cent cut in the appropriations for personal service would

mean the dismissal of upwards of

6,000

employees - nearly 80$ of

whom are stationed outside of Washington«
I am not talking about place-holders.

I am not talk­

ing about political appointees, for practically all of the em­
ployees of the Treasury Department are appointed from Civil
Service lists.

I am talking of 6,000 men and women whose

services are needed; who have, generally speaking, decided to
devote their lives to the public service, and who would in times
when it is impossible to find another job, be turned out on to
the street by the Government of the United States*
The President, in conjunction with the Economy Commit­
tee of the

House, has worked out a National economy program,

which, as it stands today without such further study as you
gentlemen may care to give it, promises a saving in excess of
that which it is proposed for all Departments by the method of
a flat cut without impairment of government efficiency and with­
out the intolerable hardship which dismissal would inflict on
thousands of American families.
A flat cut applied to every bureau of the Treasury
Department, without a furlough provision and without granting
any discretion to the Executive as to where the savings can best
be made, will not save money, but will cost more than the amount
saved.

It surely cannot have been overlooked that the pri­

mary duty of the Treasury Department is the collection of the
public revenues.

The Commissioner of Internal Revenue informs me

~ 6 -

that a ten per cent flat reduction for his Bureau would have to
he effected largely by the reduction of his field force.

To

give somewhat extreme, but nevertheless pertinent illustrations,
the Commissioner advises that if this reduction were effected by
reducing the number of deputy collectors throughout the country,
it would mean dispensing with some 1,300 deputy collectors.

The

average amount of additional tax recommended by each of these
employees for the past fiscal year was $40,812.

Assuming that

the full amount of the tax recommended could be collected, on
the face of it the reduction in the force of deputy collectors
might result in a los& of over $50,000,000.

The Commissioner

of Internal Revenue further informs me that if a ten per cent
reduction in the appropriation for his Bureau is to be effected
through reducing the force of internal revenue agents, an even
greater loss of revenue might result.

The average salary and

expenses of revenue agents as of March 31, 1932, was $3,716.
The average amount of additional tax recommended by each revenue
agent for the past fiscal year was $105,000.

Assuming that

only 50 per cent of this tax was assessed and collected, in order
to save $3,716 in salary and expenses we would sacrifice $52,500
in taxes.

Assuming that 906 of these productive officers were

dismissed, the amount of additional taxes recommended on the
basis of the past fiscal year might

be

reduced by $95,000,000.

- 7 -

On July 1st, 1932, the Treasury Department, in all
probability, is to undertake the collection of over a billion
dollars of additional taxes; - some of them new taxes, others
at rates high enough to invite evasion.

We cannot en­

force the new law and collect these taxes without increasing
our force.

Yet if this Resolution is carried out without

modification, we are to attempt this new and difficult task
with a reduced and demoralized force.
In my letter of March 29th to Senator Jones I pointed
out that if an arbitrary reduction were to be made in the amount
of the Treasury appropriations, a business-like and effective
way of making the saving would be to suspend the letting of
contracts for a number of post office buildings throughout the
country,

At that time the five-day week and furlough plan

had not been worked out.

The Senate Resolution specifically

excludes any savings along this line.

It is pertinent to

observe that if towns and cities throughout the country have
gotten along with their existing post office facilities up to
the present time, they surely can during these trying days
wait a year or two longer for a new building of a monumental
character.

What is sacred about a new post office in times

like these?
I know that it is urged that the.building of $14,000,000
worth of post offices will give employment.

It will give some

employment, but surely this employment should not be secured

8
through throwing out of employment more than six thousand men and
women*

These dismissals will have to he made in spite of the

valuable services performed in the past; in spite of reasonable
expectation of continuance in service because of fidelity and
efficiency, and in spite of the difficulty, if not the impossibility
of finding other employment enabling those who have served the
Government to continue to live and to take care of their families.
You can save these people from misery, maintain the
efficiency of this Department, protect the collection of the
revenues, and still effect the savings which you have in mind by
following the Presidents program and the lines indicated in my
letter of March 29th, foregoing for a year or two the construction
of some post offices.
Sincerely yours,

(Signed)
O G D M L. MILLS,
Secretary of the Treasury."

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
Thursday, April SI, 1932.

STATEMENT BY SECRETARY MILLS

The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of $50,000,000, or thereabouts.
They will be 91-day bills; and will be sold on a discount basis to the
highest bidders.

Tenders will be received at the Federal Reserve Banks,

•r the branches thereof, up to two o!clock p. m . , Eastern Standard time,
on Monday, April 25, 1932.

Tenders will not be received at the Treasury

Department, Washington.
The Treasury bills will be dated April 27, 1932, and will
mature on July 27, 1932, and on the maturity date the face amount will
be payable without interest.

They will be issued in, bearer form only,

and in amounts or denominations of $ 1 ,000, $ 10 ,000, $ 100 ,000, $500,000,
and $ 1 ,000,000 (maturity value).
It is urged that tenders be made on the printed forms and for­
warded in the special envelopes which will be supplied by the Federal
Reserve Banks or branches upon application therefor.
No tender for an amount less than $1,000 will be considered.
Each tender must be in multiples of $1,000.
expressed on the basis of
e. g., 99.125.

100 , with

The price offered must be

not more than three decimal .places,

Fractions must not be used.

Tenders will be accepted without cash deposit from incorpor­
ated banks and trust companies and from responsible and recognized
dealers in investment securities.

Tenders from others must be accom­

panied by a deposit of 10 per cent of the face amount of Treasury bills

-2-

applied for, unless the tenders are accompanied by an express guaranty
of payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
April 25, 1932, all tenders received at the Federal Reserve Banks or
branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices will follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on April 27, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allcwed
as a deduction, or otherwise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this
notice prescribe the terms of the Treasury bills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or branch thereof.

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
Saturday, April 23, 1932,

ADDRESS TO BE DELIVERED
BY HONORABLE OGDEN L, MILLS,
SECRETARY OF THE TREASURY,
BEFORE THE DAUGHTERS OF THE AMERICAN REVOLUTION,
AT CONSTITUTION HALL, WASHINGTON, D. C.,
ON FRIDAY EVENING, APRIL 22, 1932.

These are serious times, and the problems that confront us are
difficult and complex*

If wise solutions are to he attained, and if

those charged with the responsibilities of Government are to have that
measure of popular support without which progress is impossible and the
soundest of plans are doomed to failure, it is essential that there
should be a general understanding of the fundamental factors involved,
of the obstacles to be overcome, and of the proposed remedies.
In the comparatively brief time allotted to me, I cannot hope to
give you anything like a broad survey of the situation, and of the ef­
forts and forces that have been brought into play to counteract the
depressing factors that tend to intensify and prolong the conditions
from which our Country is suffering to-day.

I want, therefore, to di­

rect your attention this evening to one phase of our national program
with which the Treasury Department is particularly concerned, and which
I think most people would agree is an essential element in our progress
toward recovery.
In the course of the last few months, you have heard much about
the need of balancing the budget*

Considered solely from the standpoint

of financing the Government, the nature of the problem is not difficult to
grasp, since all of us in our daily lives acquire a painful familiarity with
the necessity of maintaining our business and domestic budgets in balance*
Budget balancing, then, is an all too familiar problem.

We all recognize

that individuals have to balance their budgets, and that business concerns
must balance their budgets, or eventually quit.

There is no mysterious

way through which the Government is exemnt from this necessity.

Time,

the Government can for a while live beyond its means and borrow, as can
individuals and business concerns, up to r certain point.

The only d i f ­

ference is that because the credit of the Government is infinitely greater
and stronger than that of any individual or of any business enterprise it
can borrow on a larger scale and for a longer period of time.

But in the

end there is the same day of reckoning, when not only the borrowing process
must come to an end, but current expenditures and the cost of accumu­
lated borrowing must be met either by decreased expenditures or by increased
income, which, in the case of the Government, means increased taxes.
or later all borrowings must be met by taxation.

Sooner

Borrowing does not avoid

taxation; at best it wostpones it with cost.
In order to borrow, the Government has to find willing lenders.
Generally speaking, those having funds are only too glad to lend to a strong
Government such as the United States' Government, whose credit is unassailable,
because they are confident that at all times and under all conditions the
United States Government will be preuared to meet its obligations.

But let

the idea, once get abroad that the Government has abandoned sound financial pol­
icy, that it is making nrofligate and unwarranted use of its credit, that it has
embarked on a course of continued and excessive borrowing, lenders will become

hesitant, the cost of "borrowing will grow very rapidly, and eventually
an impairment of the public credit "becomes inevitable»
This is obvious enough.

It is just plain common sense.

We have no difficulty in recognizing these principles in the case of
any one of our counties or towns or municipalities, or even of foreign
countries; but somehow or other we think that the United States Govern­
ment is so big and so strong that the ordinary rules do not apply.
do.

They

We have but to turn back to the so-called "Gay Nineties"— and, in­

cidentally, as I read financial history, they were anything but gay—
which is but yesterday in the life of a nation, to see how an unwise and
improvident public financial policy can bring a great Government to the
verge of disaster.
When I emphasize the danger of an unbalanced budget, I am not
talking, of course, of lack of balance in the budget of a single year, or
of budgets unbalanced in moderate amounts.

This may be inevitable.

But

when the United States Government closed the fiscal year 1931 with a
deficit of over $900,000,000; when it will close the fiscal year 1932
with a deficit of more than $2,500,000,000, and when the prospective
deficit of the fiscal year 1933 amounts to more than $1,700,000,000,
the time has come beyond all question for definite and adequate pro­
vision for restoration of a balanced budget.

Unless we do, the sound­

ness of our credit must inevitably be questioned, for why should lenders
voluntarily advance their funds to any Government that fails to meet so
serious a situation with courage and determination, and shows a willing­
ness for an indefinite period to go on living beyond its means on such a
scale as the figures cited indicate?
If an accumulation of deficits be permitted to continue, lenders

- 4 will know that one issue of securities will of necessity be followed by
another and still others, and that the more the Treasury issues, the
higher the interest rate it will have to nay.

There will, therefore,

be a growing reluctance to buy Government securities, because of the in­
evitable depreciation resulting from the indefinite continuance of addi­
tional borrowing.

The Treasury would begin, let us say, by a sale of

securities at 3 per cent; five or six months later the first issue would
be followed by another, and a higher rate of interest would be paid, and
so with each successive issue, not only would the burden of the interest
cnarge upon the Federal budget increase, but the effect of increasing
rates of interest would be to depreciate the value of outstanding Gov­
ernment securities and further depress other security prices.

This is

a picture of the commencement of the disintegration of the public credit,
the destruction of confidence, and the utter prostration of business.
It is apparent, therefore, that in the larger aspect of the
problem there is involved in this ouestion of a balanced budget something
of much greater importance 'than the necessity of financing the needs of
the Federal Government.
The Country has been passing through the most severe period of
depression in its history.

The facts of this period have been borne in upon

us all much too forcefully to require an extended discussion of them.

It is

emough to point out that in the course of the past two and a half years the
volume of industrial production lias been almost halved, incomes have been se­
verely reduced, and in this Country of vast resources and wealth we have again
witnessed the spectacle of men and women, capable of earning livelihood, unable

- 5 to find employment.

The attention of the entire Country is absorbed in the

problem of setting the wheels of industry again in full motion and of re­
storing employment to the unemployed.
The period has been characterized by drastic liquidation throughout
the entire economic structure.

Behind this liquidation, particularly in its

latter phases, the influence of shaken confidence has accentuated and pro­
longed the decline and has threatened at times to undermine our credit structure,
that element in our national economy which is the bloodstream of industry and
commerce, and the restoration of which to health and vigor is so essential to
recovery.
Whatever its causes may have been, a period of speculative excess
such as we witnessed on an unparalleled scale was bound to bring serious retri­
bution.

In such a period all manner of maladjustments necessarily developed,

not only at home but abroad.

During the depression which ensues, readjustments

take place, as a result of which many points of weakness and elements of in­
stability are eliminated.

The patient throws off the poisons and overcomes the

disease gradually, but they leave him weak and nervous and convalescence is slow.
I have already referred to the drastic decline in industrial produc­
tion.

Accompanying this decline, prices of commodities and of securities, in

fact values in general, have fallen sharply, and we have witnessed a credit
liquidation on an unprecedented scale, and in the train of this liquidation a
great number of bank failures.

Dear and uncertainty have gripped the ITation'i

This psychology of fear has not only accentuated the already severe liquidation,
but nullified the constructive forces which might otherwise have been expected
to become operative.

6

-

-

Impelled by the exaggerated fear of impending disaster and with con­
fidence in our

monetary and credit structure severely shaken, individuals

began to pursue the destructive practice of withdrawing currency from banks
for purposes of hoarding.

By the beginning of the year it is estimated that

more tfcan a billion and a quarter dollars of money had gone into hiding,
Paced with this situation and with the fear of sudden and unnecessary demands
of their depositors, the banks of the Country were forced into a vicious
circle of cumulative liquidation

The banking system of the Country was un­

able to perform its normal credit functions«,

In fact, the Country*s credit

mechanism, which is of such vital importance, particularly in a period of
depression and at the the inception of recovery, was well nigh paralyzed.
Certainly I need not discuss here the vital importance of credit to the
industry and commerce of the Nation.

The bulk of our business transactions

is accomplished through the operation of credit.

Business as we know it

cannot be conducted without credit, and credit cannot function without con­
fidence,

It is for this reason that the Government *s reconstruction program

has centered on such constructive undertakings as will provide the basis for
reestablishment of confidence.
We have devoted our thoughts and our energies to the creation of con­
ditions which would make recovery possible, recovery in the sense that the
purchasing power of the farmer may be restored through the receipt of adequate
prices for his products, and that the unemployed in the industrial centers may
find relief through the resumption of industrial and commercial activity.

The

only way that I know to bring adequate relief to the people of the United States
is to set in motion forces that will make economic recovery possible. The first
and essential condition was and is to arrest the fearful deflation of prices,

7
the contraction of credit, the failure of "banks, the hoarding of currency,
the paralyzing fear that dries un the sources of credit and stifles the
creative impulse of enterprise.

I haven*t the time to describe— not even

to enumerate— the measures that have been taken, but no one will Question
that great progress has been achieved in arresting the urocess of disintegra­
tion, even if no definite signs of an upturn are as yet evident.

But, given

the vast liquidation and readjustments which have taken place in the
course of the last two years and a half, the essential soundness of fundamental
conditions, the enormous reserve strength of our economic system, it seems to
me that the real problem to-day is the restoration of confidence.
In the very forefront of the program is the Government's undertaking
to put its own financial house in order.

At a time when it was found necessary

to underpin and strengthen our whole commercial and financial credit structure
by putting back of it the credit of the national Government, how can there be
any doubt as to the necessity for maintaining unimpaired the credit of the na­
tional Government itself?

It should stand in times of panic and fear a pillar

of unquestioned strength, the visible embodiment of the nation's confidence in
itself.

Our whole credit structure depends to a very great extent upon the

credit of the national Government, upon the confidence of the people that the
Government will meet its financial obligations promptly and punctiliously on
every occasion, and in every emergency.

Our currency rests predominantly upon

the credit of the United States; the foundation of our commercial credit system,
the Federal Reserve Banks, and all other banks which depend upon them,is inextricably tied into and dependent upon the credit of the United States Government.

- 8 -

If the Governments credit can ever "be brought into question, such a blow
will have been dealt to confidence and hope that this depression, with all
that it spells in terms of human misery and suffering, must be indefinitely
prolonged.
Do you wonder that we who happen to find ourselves in these trying
times in positions of responsibility, and to whom the people are Entitled,
therefore, to look for leadership and direction, have insisted and will
continue to insist, that, cost what it may, the credit of this Nation shall
continue supreme and unchallenged?
Specifically, the Treasury* s program calls for the immediate accom­
plishment of substantial reduction in expenditures and immediate provision
of additional revenue, adequate together to balance the budget for the
fiscal year 1933 in the sense that there will be no further increase in
the public debt in that year, and to assure a fully balanced budget, in*»
eluding provision for the sinking fund, in the fiscal year 1934.

Certainly

it is not asking too much, after two years of deficits of the magnitude of
those for the fiscal years of 1931 and 1932 to ask that the budget be thus
brought into balance over the course of the next two fiscal years.
There are, as you well know, enormous difficulties in bringing about
the adoption of such a program.
principle.

Everyone is for a balanced budget in

Everyone in principle believes in economy in government and

expresses a willingness to submit to the additional taxation necessary
to raise adequate revenue.

But when an attempt is made to apply these

principles, very serious resistance develops on the part of many groups,
both as to their application to the reduction of the cost of government

-

and to increased taxes.

9 ~

So strong, indeed, is this opposition,

and so rapidly can it he mobilized, that it is not too much to say
that if each part of either the economy or the revenue program is
considered separately and independently of the programs as a whole,
it is faced with serious danger of defeat.

Moreover, if to the

opposition of special groups there he added all of the difficulties
incident to partisan consideration of these questions, particularly
at a time when a National election is pending, the obstacles in the
way of the development and the carrying through of the truly National
program called for by the times become vary great indeed.
I am not as seriously concerned to-day about the revenue end of
this program as I was some time ago*

I believe we will succeed in

obtaining a reasonably sound and adequate tax measure*

But I hold, as

I have held from the beginning, that the best way to insure this result
is for the Treasury P,Apartment and the members of the Committees in
charge of the drafting and preparation of the Revenue Bill to sit
around the table in a spirit of complete non-partisanship and willing
cooperation with a view to producing the best possible bill that can
be written under most difficult and trying conditions ready to share
jointly the responsibility and whatever measure of unpopularity may
come with the imposition of new tax burdens.

This is the Treasury's

position, and I am confident that this method of procedure will ulti­
mately prevail*

3Tor

my part, I would only insist on the observance

of two broad principles:

First, that recognition should be given

10

-

to the doctrine of ability to pay; and secondly, that the taxes
should he so devised as to imoose a minimum of impediment to economic
recovery.
What is true of the Revenue Bill is even more true of reducing
the cost of government.

At present there is a vast degree of con­

fusion, due in large measure to a division of responsibility and of
jurisdiction.

What we need is a well considered and constructive

plan to eliminate waste, to curtail unnecessary activities, to post­
pone projects not now essential to the uuhlic welfare and to promote
greater efficiency.

To do away with the present chaotic situation

and to insure the attainment of prompt and definite results, it is
essential that the various nroposals looking to economy should he
combined and coordinated into a unified, consistent, and effective
program of National economy.

No greater service can he rendered

to the country at this time than to have the leaders of both parties
join in a common effort to bring about this result.
Let me say in conclusion, however, that the responsibility does
not rest alone on the public servants.
ficult and trying task.

At best, theirs is a dif­

They need to have their hands upheld.

They are certain to be subjected to the merciless and unremitting
attacks of certain groups whose interests are affected, even though
viewed in larger aspects those very groups benefit from every
measure calculated to further the interests of the country as a whole.
Your Representatives, your Senators and your public officials are
answerable to the people for the wisdom and efficacy of the policies
which they adopt and for the administration of these policies.

-

11

-

On the other hand, the people must realize that when their representa­
tives are engaged in a battle against depression, and, in the face of
great obstacles, are attempting to solve in a constructive way the
problems of the country, they cannot carry this vital task to a
successful conclusion without the full and unequivocal support of the
Nation.

TREASURY DEPARTMENT

EOR RELEASE, WHEN DELIVERED AT
2:00 P.M., MONDAY, APRIL 25,1932

ADDRESS TO BE DELIVERED BY HON. OGDEN L. MILLS,
SECRETARY OP THE TREASURY,
BEFORE THE ASSOCIATED PRESS, AT ITS ANNUAL LUNCHEON,
AT THE WALDORF-ASTORIA HOTEL,
NEW YORK CITY,
APRIL 25, 1932.

We are confronted with a most extraordinary and "baffling
paradox.
We know that, judged "by any economic standards, past or
present, the United States is a remarkably rich country, richer
than anything ever dreamed of by any nation in the world.

We have

vast natural resources, splendid factories, the most complete and
up-to-date mechanical equipment, and the finest trained workmen on
earth.

It is no longer a case of potential wealth— it is actual and

real; and the volume of wealth that is still being produced, even at
the depth of the depression, must seem enormous to other nations.
And yet, there isn*t the slightest doubt that, likewise judged
by any economic standard, we have been and are still going through
the most severe depression ever experienced in this country.

We have

to go back over a hundred years to find anything to approach it, and
in those days the accumulations of capital were relatively small, the
great bulk of the population living on farms was self-sustaining, and
such financial crises as wdre known back of the 1830 *s must in the
very nature of things have been relatively less severe.

-

2

-

The times call for serious and honest thinking, and for
cool and objective judgment and decision on the part of those to
whom we must look for leadership in the world of business and in the
field of government.

It has long since been evident that the de­

pression could not be left to cure itself.

There never was a time

when there was greater need for principles and wisdom in men, and
character and courage in nations.
There is, of course, a great temptation to delve into the
causes which have brought about existing conditions.

The future

value of such studies will be great, but the immediate task is to
determine what forces are at present exercising depressing and dis­
integrating influences, and how best we can counteract them.
Whatever the original and the primary causes of this de­
pression, in its later phases the clear and outstanding fact is that
financial elements thrust themselves violently into the picture a
year ago, and have since dominated it.
Recognizing that past errors and growing maladjustments
had probably long since laid the train, nevertheless, just as in the
case of the tragic murder at Sarajevo eighteen years ago, the insol­
vency of the Credit-Anstalt last May set in motion a chain of events
which in the rapidity of their sequence and the violence of their
cumulative effects were unparalleled.

The dramatic disclosure of

the weakness of this great banking institution in Central Europe
and the impending failure of Austrian credit at once undermined the
credit structure of its great neighbor, Germany.

Whether the

- 3 -

attempt to save Germany through the one-year suspension of payments
on account of governmental obligations would have succeeded had it
not been for the delay, it is impossible to say.

But the fact is

that a complete collapse occurred of the normal functioning of the
financial machinery in Germany, and the machine had to be taken over
largely by the Government.

By that time, confidence throughout the

world had been thoroughly well shaken.

As if directed by some evil

genius, the forces of disintegration next attacked the world’s finan­
cial citadel, the stronghold that throughout the centuries had stood
unassailable, the accepted symbol of financial security.

Within a

few weeks London was compelled to capitulate, Great Britain went off
the gold standard, and the world stood aghast.

Then the wave of

destruction rolled forward once more, seeking to tear down and
engulf tne credit of the United States and the American dollar.
That battle was won, but the cost was heavy, and as we have learned
from real war, even victory can be followed by misfortunes second
only to those resulting from defeat.

When the battle was over, -

not so very long ago, for while the main shock of attack came in
September and October, we have been beating off attacks ever since, the gold resources of the United States were over $700,000,000 lower,
hundreds of banks had failed, the banks were heavily in debt to
the Federal Reserve System, and currency was being hoarded on an
immense scale.

-4■A21 of these factors constituted a tremendous drag upon the
country’s economy, under the effects of which the production and dis­
tribution of goods and prices of commodities and securities plunged
to new low depths*

But for this series of events, recovery from our

depression might well have begun many months ago.
It is not an unreasonable assumption that after the sweeping
decline and liquidation which had taken place, the economic forces
working towards contraction and deflation had fairly well spent
themselves*

There is ample evidence that economic readjustment has

proceeded far in the positions of individuals, business and finan­
cial institutions, and more recently of the nation and its political
sub-divisions*

The weakest spots in our banking and business structure

have been eliminated.

The 1931 records of many of the strongest

business activities indicate that they have at least so adapted
themselves to prevailing conditions that with some increase in
activity their operations may now be carried on at a reasonable
profit.

The Nation, the States, and the cities are attacking

the problem of budgetary equilibrium with increased vigor.
But whatever forces were working toward recovery were more than
offset by the paralyzing fear which gripped our people, the loss of
confidence, and the terrible contraction of credit which forcedbusi­
ness and prices to new low levels.
Between September, 1931, and March, 1932, prices have declined

- 5 -

by about 7 per cent; production by 9 per cent, whereas loans and
investments of weekly reporting member banks were about $2,750,000,000
lower, or 12 per cent, and their deposits $3,300,000,000 lower, or
16 per cent.
A vicious circle had been set up.
bank that failed frightened depositors.

Banks were failing. “Every
They withdrew deposits.

The withdrawal of deposits frightened the banks.
sought to make themselves liquid —

The banks in turn

that is, they sold investments,

called loans, and stopped making new loans.

As this movement proceeded

the prices of bonds fell progressively to lower levels, weakening the
position of all banks holding them as a secondary reserve, and
carrying a threat to other great fiduciary institutions.

All of this,

as we have seen, meant an enormous contraction of credit, which had
inevitably to be accompanied by a fall in prices and a restriction
of commercial and industrial activity.
If this analysis be correct, the twin weapons which must
be forged to repel and turn back the forces of destruction are
a reinvigorated credit structure and a restoration of national
confidence.

The wave of fear and the tide of deflation has to be

turned back.

The country is just beginning to realize the steps

that have been taken one by one as part of a coordinated and con­
sistent campaign to assure ultimate victory In the battle against
depression.

The only way that I know to bring adequate relief to

the people of the United States is to set in motion forces that will
make economic recovery possible.

-

6

-

The first step was the organization of the National
Credit Association through which in effect the banks of the coun­
try voluntarily organized so as to mobilize their resources for mu­
tual assistance.

It performed a great service at a time when no

other agencies of that character were in existence.

It saved many

banks from failure; in fact, the number of bank failures dropped from
522 in October to 175 in November.

The men who organized and gave

their time so freely to the work of this Association performed a real
public service and are entitled to our gratitude.
We next saw the creation of the Railroad Credit Corporation»
intended to assist the weaker railroads in meeting their fixed obliga­
tions and the enactment of a law increasing the capital of the Federal
Land Banks, with a view to strengthening the credit position of these
great agricultural credit institutions and to permit the continuance
of a liberal policy towards agricultural borrowers.
Then came the creation of the Reconstruction Finance Corpo­
ration.

By January the process of deterioration had again been

accelerated.

There were 342 bank suspensions that month.

With

the continued contraction of loans and investments of the banks at an
increasing rate and the decline in prices of the securities which form
in large measure the reserves of the great fiduciary institutions of
the country, the uncertain status of railroad credit, and the growing
sense of fear, almost amounting to panic, it became more and more evident
that the whole credit structure of the Nation was gradually being imperiled
What the Government did in creating the Reconstruction
Finance Corporation was to put the credit of the Government itself
back of the National credit structure.

The Corporation was empow*-

ered to make loans to certain institutions selected because they were
affected with the public interest and because they were either essen­
tially National in character, or formed essential cogs in the credit

- 7-

machinery of the country
Take the hanks for purposes of illustration:

Why did the Fed­

eral Government lend its credit to the support of the hanks of the
country?

Hot because the Government is interested in the officers or

stockholders of these hanks, hut because they are the instrumentalities
through which the business and commercial fabric obtains the necessary
credit upon which it lives, and because they hold the deposits and
savings of millions of our countrymen, to whom a bank failure brings
disaster and misery.
When the Reconstruction Finance Corporation saves a bank
in some comparatively small community, —

and they are the banks it

has been saving, for the record shows that 86.4$ of the banks that
have borrowed up to date are located in towns of 25,000 or less, and
only 5.3$ of the money loaned has been loaned to banks located in
cities of a million and over, —

it preserves the savings laid aside

by the family for a rainy day from being tied up indefinitely in a sus­
pended bank.

It makes available to the merchant and manufacturer

of that town the current deposits and the credit facilities which he
needs to keep his small business going.
From the standpoint of direct benefit to the individual I do
not know of any single measure calculated to reach and protect more
people, particularly those needing protection and assistance than is
afforded by this provision for the support and safeguarding of the banks
of the country.

From the broader aspect these loans serve the all-

important purpose of maintaining confidence and of preventing the
disintergration of the credit machinery of the country.
Again, consider the case of the railroads.

Some gentlemen

-

8-

apparently visualize the railroads of the United States as the private
property of a limited number of stockholders,

Now, I have the great­

est sympathy for the stockholder, considering the prices at which
equities are selling to-day.

Bat what are the railroads?

the backbone of the transportation system of the country.
the largest employers of labor.

They are one

of raw and fabricated materials of all kinds.

They are
They are

of the largest purchasers
Their underlying se­

curities to the extent of many billions of dollars are held by the
great fiduciary institutions, such as insurance companies and savings
banks* which means that indirectly there is.invested in them the sav­
ings of the American people.

To-day there are something like 68

million insurance policies outstanding.
In the face of these facts can any one question the National
necessity of maintaining the credit of the railroads,
interest of our commerce and industry,

not only in the

but forthe sake of the thousands

of men that they employ and the millions of individuals whose savings
are invested in that most sacred form of family investment, the life in­
surance policy?

When a railroad goes into receivership, men are dis­

charged, capital improvements are suspended, purchases fall off, the
value of its underlying securities is severely depreciated, and its
service to the public is curtailed.

These are the fundamental reasons

why railroads were included in reconstruction legislation intended to
strengthen and protect our National economy.
And so on down through the list of those institutions which are
authorized to borrow from the Reconstruction Finance Corporation:

IS;1
- 9 -

mortgage companies, "building and loan associations, joint stock land
banks, agricultural credit corporations, etc., all affected with a
public interest, all furnishing the medium through which not only the
National credit structure may be reinvigorated, but the individual
citizen protected.
This great work is going forward.
fruit.

It has already borne

There were 342 bank suspensions in January with deposits of

$219,000,000; while 19 banks with deposits of about $11,000,000 reopened.
In March only 45 banks suspended, with deposits of about $16,000,000,
and 28 reopened, with deposits of about $15,500,000, almost an offset
in deposits.
As a result of the sharp decline in bank failures and unques­
tionably in part because of the vigorous campaign conducted by Colonel
Knox and his Anti-Hoarding Organization, currency has begun to come
back from hiding.

After making adjustment for seasonal movements,

from February 6th to April 12th, the return flow of currency amounted
to some $250,000,000.
This movement and other available evidence indicate clearly
that there is a definite, if gradual, return of confidence, and
I cannot repeat too often, credit and confidence are the key to the
solution of our problems.
But if it was necessary to put the credit of the National Gov­
ernment back of the private credit structure of the country, it fol­
lows as a necessary corollary that it is even more vitally essential to
preserve unimpaired the credit of the National Government.

Directly

and indirectly, our private credit structure and our monetary system are

-

10

ipextricably tied to the credit of the National Government.

No greater

blow could he dealt to National confidence and to the National credit *..■
than the failure of the Federal Government in times like these to
follow a sound financial policy and to balance its budget.
This means, for the Government, drastic economies; for the people,
an additional burden of taxation.

What is the alternative?

Continued

borrowing at constantly increasing interest rates, progressive deprecia­
tion in the value of all outstanding Government securities, loss of
confidence and in the end uncontrolled inflation and a sad day of
reckoning.
Next in order, the Glass-Stegall Bill is deserving of mention.
The purpose of this Law is two-fold:

During the period of emergency,

to make the credit facilities of the Federal Reserve System available
to member banks, whose eligible caper has been exhausted, by permitting
them to borrow on sound assets.

This is another measure which affords

relief to the banks and puts them in a stronger position to meet any
demands that may be made on them.

It relieves the member banks of the

necessity of selling investments and calling loans to make themselves
more liquid, and tends to make the banks more willing to lend freely.
The second and more important feature of the Glass-Stegall Law is
that which frees the large sucoly of gold held by the Federal Reserve
System in excess of the 40 oer cent gold reserve against notes re­
quired by law, but tied up as collateral cover for Federal Reserve
notes issued.

This change in the law without reducing the legal

reserves of the Federal Reserve Banks released something like one

-

11

■billion dollars of gold, a tremendous protection against any such
raid on the dollar as we witnessed in September and October, and at
the same time puts the Federal Reserve Banks in a position to make
credit much more freely available to the country.
This leads us to the latest feature of the program of financial
reconstruction.

It must not be forgotten that the events which have

taken place have greatly curtailed those funds which constitute re­
serves and therefore form the basis for credit expansion.

We have

lost since Seotember apuroximately $640,000,000 in gold, and in
addition currency still hoarded must be well in excess of $1,000,000,000.
The Federal Reserve urogram of buying Governments, which has been in
progress now for some weeks, would thus be fully justified on the
grounds of replacing exported gold and hoarded currency.
But I believe that there is more to be said in favor of such a
policy.

With the collapse of our banking system definitely halted and

with our commercial and industrial organization still in a state of
extreme strain, what would appear to be required now is the stimulus
of credit expansion, supported by a liberal policy of the Federal
Reserve System, such as it is pursuing at present, and regulated in
its development by that System.

With a gradual restoration of con­

fidence at home, with greater stability abroad, with a new banking
law increasing the amount of disposable gold, the situation is
auspicious for carrying through an easy money policy as long as it
remains under control, and does not develop into uncontrolled infla­
tion.

The means of control lie in our official banking organization,

-

12

-

and the machinery of that organization -provides a method of solving
such difficulties and dangers as may arise.

Controlled credit

expansion is only possible through the operation of that system.
I emphasize this to bring out the contrast between controlled expan­
sion of this kind and -pure inflation, such as is involved in proposals
now before the Congress for printing fiat currency, or such as would
result ultimately from a series of unbalanced budgets.
I realize how inadequate and sketchy is the outline which I have
given you.

But I have tried to demonstrate in a general way that, in

its latter phases at least, the continuing depression can in large
measure be explained by fear, loss of confidence, and a steady con­
traction of credit resulting in a suspension of the normal function­
ing of the credit machinery which in the modern economic state is
an indispensable factor in maintaining industrial and commercial
activity.

I have tried to point out that credit and confidence are

the magicians that must solve our paradox for us.

I have briefly

enumerated the steps that have been taken to arrest the process of
deterioration and to enlist credit and confidence in the battle
against depression.

I have pointed out that progress has been

achievedf But it takes time to arrest and reverse these great move­
ments, and while it seems almost cruel to urge -patience after an
already protracted period of waiting, yet I cannot help but feel
that we should give the forces which have been set in motion an
opportunity to exert themselves before yielding to doubt as to whether
we are on the right path.

H

i

I

j

- 13 -

Let us keep faith.

In spite of the trials through which this

generation has lived, we possess a great heritage, which long after
these events have passed into history we must transmit unimpaired
to future generations.

I have seen nothing, even in the darkest

hours of doubt, to impair ray faith in the promise of American life.

S

TREASURY DEPARTMENT

EOR IMMEDIATE RELEASE,
Monday, April 25, 1932

STATEMENT BY ACTING SECRETARY BA1LANTINE

Acting Secretary Ballantine to-day announced that the
Treasury has accepted the design submitted by Mr« John Flanagan ,
of New York City for the new quarter-dollar authorized by the
Act of March 4, 1931.

The new coin, which will be issued in

commemoration of the Bicentennial Anniversary of the birth of
George Washington, bears the portrait of Washington.
The models have been forwarded to the Mint at Philadelphia,
and it is expected that the coins will be ready for distribution to
banks, through the twelve Federal Reserve Banks, in about four weeks.

TREASURY DEPARTMENT

FOR RELEASE, MORNING- PAPERS
Tuesday, April 26, 1932.

STATEMENT BY ACTING SECRETARY BALLANTINE

Acting Secretary of the Treasury Ballantine announced to-day
that the tenders for $50,000,000, or thereabouts, of 91—day
Treasury Bills dated April 27, 1932, and maturing July 27, 1932,
which were offered on April 21st, were opened at the Federal Re­
serve Banks on April 25th*
The total amount applied for was $241,451,000#

The highest

hid made was 99.853, equivalent to an interest rate of about 0.58
per cent on an annual basis.

The lowest bid accepted was 99.836,

equivalent to an interest rate of about 0.65 per cent on an annual
basis.
accepted.

Only part of the amount bid for at the latter price was
The total amount of bids accepted was $51,550,000.

The average price of Treasury Bills to be issued is 99.841.
average rate on a bank discount basis is about 0.63 per cent.

The

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
Tuesday, April 26, 1932.

STATEMENT BY ACTING SECRETARY BALLANTINE

Acting Secretary Ballantine to-day announced that the
subscription books for the current offering of one-year 2 per
cent Treasury Certificates of Indebtedness of series B-1933,
maturing May 2, 1933, and two-year 3 per cent Treasury notes
of series A-1934, maturing May 2, 1934, closed at the close
of business to-day, Monday, April 25, 1932.
Subscriptions placed in the mail before 12:00 o ’clock
midnight, April 25, 1932, will be considered as having been
entered before the close of the subscription books.

TREASURY DEPARTMENT

For release upon appearance of the
Secretary of the Treasury "before the
Committee on Ways and Means,which prob­
ably will be about 10;00 a.m., Standard
Time« Wednesday, Anril 27, 1932.

Statement by Secretary of the Treasury Mills before
the Committee on Ways and Means of the House of
Representatives with reference to H.R. 7726, to
provide for the immediate payment, in Treasury notes,
of the face value of Adjusted Service Certificates»
The measure now before you is designed to pay an obligation
not due, in money that is not honest.
tificates do not mature until 1945.

The adjusted service cer­
To pay them at their face

value today, less the amount that has been borrowed on them would,
in effect, almost double the payment provided for by the Adjusted
Service Compensation Act, and would involve an immediate cost to
the Government of about $2,400,000,000.

In other words the Gov­

ernment is to pay almost twice the amount it undertook to pay.
The United States Government has made generous provision for
the dependents of those who gave their lives to their country, for
the care of the wounded, disabled and sick veteran, and for his de­
pendents.

We are spending annually about a billion dollars, or

about one-fourth of our total expenditures, for the benefit of our
veterans.

I have the deepest sympathy for the veteran out of work,

as I have for all who cannot find employment.

But there is no evi­

dence to indicate that the veterans as a class are suffering more than
any other group of individuals in the country.

Moreover, anything

that is harmful to the country is harmful to the veteran.

He, to­

gether with every other citizen must be profoundly injured by any
measure which destroys and defeats all that we have sought to accomplish,
in so far as it lies within the power of the Government, to^create
conditions favorable to a recovery in employment and in industry.

-

2

-

The Government is confronted with an enormous deficit4
preserve unimpaired the public credit
important to the country

—

—

To

and I know of nothing more

the entire people in a period of unprede-**

dented depression are being asked to take on a colossal burden of
additional taxation.
Under these circumstances, nothing will persuade me that the
men who fifteen years ago stood ready to give their lives to their
country in the crisis of war, are today,' in a crisis which in so far
as human misery and suffering in this country are concerned far ex­
ceeds anything experienced during the war years, really seeking this
huge grant of two billion four hundred million dollars, the effect of
which will be to impair public and private credit, to destroy con­
fidence and to prolong the depression.
In saying this, I am not speaking just as Secretary of the
Treasury, but as one who helped to call together and to organize that
convention of the A.E.E. that gave birth to the American Legion; who
participated in the organization of the Legion in my own State; who
served as a State Commander; and who presided over the first conven­
tion in the State of Hew York.
If these obligations were due today, then no matter what the
cost, the United ^tates Government on behalf of the people of the
United States

would honor them.

If these obligations are due, they

ought to be paid in honest dollars.

If they are not due and their

payment is inimicable to the public credit and the public welfare,
it cannot be sanctified by the use of dishonest dollars.

-

3-

The financial position of the Government is not such as to per­
mit the Treasury to meet this demand.
deficit.

We are faced with an enormous

The Congress is finding it difficult enough to "bring the

"budget into "balance through decreased expenditures and increased
taxes.

This Committee knows that.

can he raised hy taxation.

No additional $2,U00,000,000

Taking into consideration all of the

elements of the existing situation, no such sum can he borrowed ex­
cept at excessive cost, with serious embarrassment to the Government
in meeting its unavoidable obligations and with damage to the public
credit.
The passage of this bill would, in my judgment, deal such a severe
blow to public confidence as to make the consequences almost incalcu­
lable.

Let us not forget the critical days through which we are living.

In order to bolster up our entire private credit structure, upon which
the business and commercial life of this nation depend, we have been
obliged to put back of it the credit of the United States Government.
Let us not forget that in September and October, and again in December
and January, banks in every section of this country were failing by
the score, bringing disaster to individuals and to industry alike;
that over a billion and a quarter dollars of currency was being hoarded;
and that we have witnessed a contraction of credit accompanied by a
reduction in prices and a restriction of business activity unparalleled
in the economic history of this country.
What does all this mean?

It means that fear has gripped the

American people to such an extent as to destroy their confidence and
paralyze their normal-activities and enterprise.
ually overcoming that fear.

We have been grad­

In the last few weeks the foundations

-H -

have teen solidified, the ground under our feet has "become firmer,
tanks have stopped failing, and currency is coming out of hoards.
The day must come when credit will expand, prices will rise and
business and employment will turn upward.
To select this particular moment to destroy our hopes of a
balanced budget and to deal a smashing blow to national confidence,
is to me simply incomprehensible.
The proponents of this measure fully recognize that the cost
cannot be borne by legitimate means.

They seek, therefore, to

avoid the conseauences of their action by resorting to a device which
far from averting the dangers which I have described, multiplies them
many times.

They would discharge what they state to be a solemn

obligation of the United States Government, not by raising the funds
through taxation, not by drawing on the public credit, not by payment
of an honest dollar, but by setting the printing presses to work
printing dishonest dollars.
This device is the direct descendant of the practices of dishonest
and unscrupulous princes and sovereigns, who robbed and defrauded their
subjects by debasing their currency.
It has been resorted to time and again, and I know of no instance
where it has failed to bring retribution and disaster.
There is no reason that I can conceive of to justify the Gov­
ernment of the United States resorting to the printing press to
meet its obligations.

This is a question that transcends in

importance the payment at face value today of adjusted service

certificates, or of their non-payment.

It involves the courage,

the character, and the financial integrity of the United States.
I can imagine a poor, bankrupt people, at the end of their
resources and as a last act of desperation, resorting to the
debasement ©6 their currency.

But for a great, powerful nation,

probably the strongest nation economically not only in the world
today, but that has ever existed in the world, that even in a
period of deep depression has not begun to call upon its ultimate
reserves and resources, deliberately to adopt this insidious
and essentially dishonest device, would to my mind be worse
than an act of financial bankruptcy.

It would constitute moral

bankruptcy.
Let us not be deluded by the idea that this scheme can be
carried through without cost.

On the contrary, the initial cost

would be indefinitely multiplied in its ultimate effects and
must be borne by everyone.
If there is one lesson in economic history on which all are agreed,
it is the extreme- difficulty rf stopping an inflationary process of this
kind short of such complete debacle as reduces the currency to worth­
less paper.

Post-war"inflation reduced the franc from 19^ to

post-war inflation reduced the mark from

to zero.

In the case

-6-

of Germany particularly, it brought the economic life of the
country to a state of complete prostration and economic ruin tc
practically all classes of her population.

And yet, both in

the case of France and of Germany, they were driven to this
course by forces which were, or seemed at the time, so irre­
sistible as to make it impossible to stand up against them.
In our case it is proposed, after five successive tax
reductions at a time when our taxes are applied at the lowest
rates they have been since the war, before we even make an
effort to draw on our available national resources, before we
even resort not to the,war-time tax levies, but to the rates
that prevailed in I92 U, under which we lived and prospered,
it is proposed, I say, to re‘sort to the printing press«
Let us have no illusion on one point at least.

If it is

legitimate and proper and wise to pay the adjusted service certif­
icates by printing currency, then it is legitimate and proper and
wise to meet the real obligations of the Government by the same
process.

Why bother with a revenue bill?

Why compel the

Treasury on quarter-days to sell certificates, notes and bonds
to the public?

All we have to do, according to the gentlemen who

-

7

~

urge the passage of this measure, is to "buy the paper and the ink
and tell the engravers and printers to go to it*.

Under these ideal

conditions you can, of course, make some savings.

You do not need

a Secretary of the Treasury or a large staff in the Treasury Depart­
ment.

All you need is a first-class production manager.

Ultimate­

ly, of course, you will need quite a sales force to keep your
currency in circulation.

Gentlemen may laugh, hut in the course

of the last decade, in several countries that I could mention, hales
of currency have been peddled on the streets.
I know it will be said that we can- arrest the movement
long before it goes to such lengths.

Bat what reason is there to

believe that any government that is sufficiently mad and improvident
to embark on such a course would have the character to stop, partic­
ularly as all experience shows that once such a movement is started
the forces that urge it forward grow constantly greater and more remorselessly persistent.
It is represented, of course, that during the beginning of an
inflationary process, even the crude inflationary process by way of
the printing press, certain classes in the community do benefit.
But their benefits are fleeting at bast, and it cannot be emphasized
too strongly that for large classes of the community, savers, bond­
holders, insurance policy holders, salaried persons, all recipients
of fixed incomes, and to a very large extent wage-earners, since

8 wages rise more nslovly^than''prices, are not even initially
benefited.

In the end all classes are heavy losers, and the

farmer, Af-our experience counts for anything, among the heaviest
of all.
In so far as the Treasury is concerned, inflation of this
character is fatal to its budgets.

The experinece of all nations

is that inflation, once begun, perpetuates the deficit and operates
to augment it.

The recurrent deficits of the Trench and German

governments while inflation was in full swing are cases in point.
The real value (gold value or purchasing power) of government
receipts diminishes so rapidly during the tax period that they
become inevitably unequal to the procurement of the goods and
services necessary for the government to function.

On the other ,

hand, the established sources of taxation tend gradually to dry
up and new bases must be found, which are necessarily less satis­
factory and productive and always, difficult to reach.

Thus during

a period of inflation both of these circumstances - rapidly rising
expenditures and decreased revenue -• tend to produce continuing
deficits, and, hence, to perpetuate the inflation.
In so far as our present situation is concerned, there is no
currency shortage.

It is true there has been credit contraction

on a large scale, but there exist ample reserves on which to base
a credit expansion adequate to meet all of our actual and potential

, .*>

q
j
needs.

The problem is to put credit to work.

The Government can­

not bring this about by forcing out fiat currency.

It can assist

very greatly by putting its own house in order and taking such
measures that in the eyes of the whole world Federal credit will
stand as a pillar of unassailable strength.
How can private credit expand as long as the public credit

remains in doubt?

It is the very essence

This is fundamental.

of the problem with which we are wrestling.
No one is more anxious than I an not only to arrest this ex­
cessive credit contraction, but to set in notion forces that will
lead to credit expansion, but these results can best be obtained
by having the Government in its own sphere pursue a wise, honest
and sound policy, and leave it to the great credit agencies of the
country, not only the private, but the seni-public institutions,
to meet this problem, the solution of which is essential to the
recovery of the nation.
.Tlie vgy to it all is confidence.
dry up credit and paralyse enterprise.

Destroy confidence and you
Ko measure was ever

drafted better calculated to destroy confidence than the one now
before you.

Enact it into law and you will stifle all hope of

an early economic recovery and write the most lamentable chapter
in American, financial history.

FOR RELEASE, MORNING PAPERS,
Thursday, April 28, 1932*

TREASURY DEPARTMENT

STATEMENT BY SECRETARY MILLS

Secretary Mills today announced the subscription figures and the
basis of allotment for the May 2nd offering of one-year Treasury Certificates
of Indebtedness, Series B-1933, 2 per cent, maturing May 2, 1933, and of
two-year Treasury Notes of Series A-1934, 3 per cent, maturing May 2, 1934,
2

PER CENT TREASURY CERTIFICATES OF INDEBTEDNESS, SERIES B-1933
Reports received from the Federal Reserve Banks show that for the

offering of 2 per cent Certificates of Indebtedness, Series B-1933, matur­
ing May 2, 1933, which was for $225,000,000, or thereabouts, total sub­
scriptions aggregate $1,699,868,000,

Allotments on subscriptions for this

/

series of certificates were made as follows:

Subscriptions in amounts not

exceeding $10,000 were allotted 50 per cent, but not less than $500 on any
one subscription;

subscriptions in amounts over $10,000, but not exceeding

$100,000 were allotted 40 per cent, but not less than $5,000 on any one
subscription;

subscriptions in amounts over $100,000 but not exceeding

$1,000,000, were allotted 20 per cent, but not less than $40,000 on any
one subscription;

subscriptions over $1,000,000, but not exceeding

$5,000,000 were allotted 10 per cent, but not less than $200,000 on any
one subscription; and subscriptions in amounts over $5,000,000 were allotted
7 per cent, but not less than $500,000 on any one subscription.
3

PER CENT TREASURY NOTES OF SERIES A-1934

For the offering of 3 per cent Treasury Notes of Series A-1934,
maturing May 2, 1934, which was for $225,000,000, or thereabouts, total
subscriptions aggregate $2,496,428,700*this series of notes were made as follows:

Allotments on subscriptions for
Subscriptions in amounts not

~ 2 -

exceeding $10,000 were allotted 50 per cent, tut not less than $100 on
any one subscription;

subscriptions in amounts over $10,000, tut not

exceeding $100,000 were allotted 25 per cent, tut not less than $5,000
on any one subscription;

subscriptions in amounts over $100,000, tut

not exceeding $1,000,000 were allotted 15 per cent, tut not less than
$25,000 on any one subscription;

subscriptions in amounts over $1,000,000,

tut not exceeding $5,000,000 were allotted 7 per cent, tut not less than
$150,000 on any one subscription;

and subscriptions in amounts over

$5,000,000 were allotted 4 per cent, tut not less than $350,000 on any
one subscription.

Complete details as to subscriptions and allotments will be
announced when final reports are received from the Federal Reserve Banks,

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS
SATURDAY, APRIL 30, 1932.

Paper read "by Secretary of the Treasury Mills
before the Association of the Bar of the City
of New York, on April 29th, 1932.

Financial Relations of the Federal
and State Governments.

I.

Taxation in this country has become a matter of dominant
national importance.

The aggregate tax burden is so great as to

constitute an economic factor of such prime importance as to affect
directly or indirectly,almost every sphere of public and private
activity.
In 1930, according to a study just completed by the
National Industrial Conference Board, the taxes collected by the
Federal, state, and local governments reached the staggering sum of
$10,266,000,000, amounting to 14.4$, or one-seventh, of the estimated
national income of seventy-one billions for that year.
in total tax collections between 1923 and 1930 was 42$.

The increase
Part of

this increase may be explained, of course, by the growth in population,
but even on a per capita basis the increase during that seven-year
period was 28.5$; and converting the per capita tax payments into
dollars of the same purchasing power, the increase was nearly 50$
(49.8$).
Take, for instance, our largest tax, the property tax.
According to the study which I have mentioned, property taxes in

-

2

-

1929 accounted for more than 76$ of the total state and local taxes,
and over 50$ of the total taxes collected "by all jurisdictions. Some
at
idea of the menacing pace/which the "burden of this tax has "been advancing may he gathered from the following statement by the Committee
on Taxation of the President’s Conference on Home Building and Home
Ownership:
"Tax Rates Upon Real Estate. The burden imposed
by the property tax upon real estate is nearly everywhere
heavy and in many communities destructive. In 1910 the
average rate of the general property taxes imposed by
cities having more than 30,000 inhabitants was 18.9 mills
on the assessed valuation. This average rate rose to
20.2 mills in 1918, and to 27 mills in 1928.
In addition,
state taxes (averaging 2 mills) were collected in the
majority, county taxes (averaging 5.9 mills) in a large
number, and special taxes (averaging 1.2 mills) in a very
small number of these cities.
While no weighted general
average covering state, county, city and special levies
can be accurately computed, it is highly probable that
this general average exceeds 30 mills for the year 1931.
Approximately half of the taxpayers are above the average,
i.e., pay more than 30 mills at the present time.
It is
among those taxpayers that the hardship is greatest.
In
general, property is still assessed at less than full value.
But in millions of cases today the assessed value equals or
exceeds the actual market value.
Such properties are paying
to the state and local governments an annual average rate
which frequently exceeds 3 per cent upon their full capital
value.
"A useful measure of the burden of the property tax is
found in the proportion of rental income (before taxes) taken
by the tax.
The results of studies of urban property taxes
in nine states are thus summarized by Whitney Coombs in his
Taxes on Farm Property (page 32): Arkansas (1923-25),17.1 per
cent; Colorado (1926), 27.1 per cent; Indiana (1922-23), 30.6
per cent; Iowa (1927), 31.3 per cent; North Carolina (1927),
29.5; Pennsylvania (1924-25), 20.9 per cent; South Dakota
(1922-26), 29.9 per cent; Virginia (1926), 16.0 per cent;
Washington (1924-26), 31.7 per cent."
Speaking of financial conditions in the states and cities,
this Committee concluded that "the present situation is characterized
by excessive public spending, excessive reliance by local governments
on the property tax, and by excessive concentration of the property
tax on real estate

u

This last factor —

the excessive concentration

- 3 of the property tax on real estate —
major social evil.

is itself responsible for a

It "discourages and materially restricts home

ownership” , while it creates a tax load which bears with crushing
weight upon the debt-ridden farm owners,
I quote from an address before the 1931 Conference of
National Tax Association by Dr, Eric Englund, Assistant Chief of
the Bureau of Agricultural Economics:
"Studies in several states from 1922 to 1927
showed that real estate taxes took an average of
about one-third of the net rent of farms.
Judging
by the trends of farm prices and of farm taxes since
that period, the ratio of taxes to net rent in the
past year, no doubt, was much higher, taxes probably
absorbing the whole rent in the case of a substantial
portion of the farms — especially in regions of
higher tax levies."
Of course the people are in large measure themselves to
blame.

They have not only tolerated, but given encouragement to

an ever-expanding cost of government.

The spenders were the ones

elected to office; and bond issues voted with cheerful alacrity.
It is true that President Coolidge succeeded in dramatizing economy,
but

I remember in our State when Governor Miller, under the urging

of the electorate, resumed the practice of law, it was openly said
that economy in government would not be a successful issue in New
York State in many a year.

And it hasn!t been.

Not only are

our taxes too high, but if we view our Federal, state and local taxes
as a whole, we do not find anything that faintly resembles a logical and
coordinated plan, but rather a number of unrelated systems, frequently
overlapping and existing in a state of confusion that gives rise to
all manner of maladjustments, duplications and irregularities.

- 4 II.
There is a growing conviction, which I share, that the time
has cea,sed when the federal and state governments may safely chart
separate and unrelated courses over the troubled financial waters which
they must now all traverse.

The time for drifting has nassed.

The

time for considerate and conscious coordination has arrived.
The federal Constitution segregates in rudimentary and
imperfect fashion a few of the sources of federal and state taxation.
In practical effect it prevents the federal government from imposing
property and poll taxes, and denies the states, without the consent
of the Congress at least, power to levy taxes upon imports and exports
or to burden interstate commerce by direct taxation.

But here,

practically, separation of sources stops and joint use begins.

Both

state and federal governments may, at one and the same time, tax in­
comes, sales, production, consumption, privileges and the transfer or
inheritance of property.
While this concurrent power over taxation has been enjoyed
by both the state and the federal governments since the birth of the
nation (except with respect to the income tax, which was not con­
clusively brought within the federal powers until the adoption of
the Sixteenth Amendment), it created no serious difficulties until
recent years.

During most of our history, the main sources of

revenue used respectively by the states and by the federal govern­
ment were distinct and separate.

In the period between the War of

1812 and the Civil War, the federal government derived its revenue
almost wholly from duties on imuorts; while the states relied
almost entirely upon the oroperty tax.

Luring the Civil War and

the period immediately following that.conflict, the federal govern­
ment was comoelled to utilize additiona.1 sources of revenue, such

-5as income, inheritance, sales and miscellaneous excise taxes.

But

by 1883 these additional taxes, except for the taxes upon tobacco and
liquor, had been discarded; and until the end of the first decade of
this century, customs and tobacco and liquor taxes furnished practically
all the tax revenue received by the federal government.

Meanwhile the

state and local governments continued to rely primarily on the prop­
erty tax, although they made increasing use of corporation taxes, licenses,
and death duties.

Until about 1910, however, each department of govern—

ment gave free steerage-way to the other.

Conflicts of jurisdiction

arose and gave rise to important interpretations of our constitutional
law.

But neither department of government exercised its taxing

powers so as seriously to embarrass the other.
Since 1910 the picture has materially changed.

Pressure

for additional revenue has forced the states and the federal government
to bear heavily upon the same sources of revenue.

The federal gov­

ernment adopted a full-fledged income tax in 1913, an estate tax

in

1916; and it seems plain that, as a consequence of the World War and
cnanged economic conditions, it must continue to occupy, though not
necessarily to the exclusion of the states, this field of taxes upon
wealth and income
ploited.

a field which the states had never thoroughly ex­

On the other hand, the states during the same period

substantially increased their revenues from the inheritance tax and re­
vived the income tax.

Beginning with Wisconsin, in 1911, state after

state adopted an income tax, though at very moderate rates, until today
there are twenty-two with this form of taxation.

The states have also

invaded the field of consumption taxes, formerly-used almost exclusively

b
by the federal government.

Today every state imposes a gasoline tax, and

thirteen"'- make use of taxes on tobacco or cigarettes, and state taxes
uoon amusements and semi-luxuries are spreading.
This simultaneous and overlapping use of the same tax sources
by tne state and the federal governments has come gradually, almost
stealthily, without the guidance of any broad policy or plan of national
finance.

It subjects us to a haphazard scheme rather than an ordered

system of taxation, which lacks uniformity and coordination, involves
government and taxpayer alike in serious difficulties, and is growing
steadily worse.
Ill
There is nothing inherently wrong in the use by both the
federal government and the states of the same source of revenue.
But wnen it is done without agreement or understanding between the
competing jurisdictions and without the restraint of a superior power,
it may easily result in a combined burden heavy enough to cripple the
source.

The danger is especially great in the case of "popular" taxes,

such as the income and inheritance taxes, popular because they are so
levied as to reach comparatively few people.

There is a growing

disposition to rely more and more heavily upon these taxes, and since
this tendency characterizes both the state and the federal governments,
the result may be serious, not only to those subject to the tax but
to the governments and the national economy as well, because of the
decreased yield that inevitably follows excessive taxation.
This danger is by no means imaginary.

For example, Wisconsin

recently doubled its personal Income tax rates on 1931 income, bringing
the tax to more than 15 per cent on income in excess of $12,000.

If

Wisconsin should find it necessary or desirable to continue this emergency

- 7 tax for another year, as is not altogether improbable, and the federal
rates adopted by the House are enacted into law, the combined state and
federal tax on residents of Wisconsin, with respect to income earned
this year, would range from 17 per cent to 22 per cent on income in
excess of $12,000, up to 62 per cent on income in excess of $100,000,
Similarly, if the income tax rates of the House bill (H.R. 10236) are
adopted and Wisconsin continues its corporation income tax rate beyond
1931, income derived by corporations from property located and business
transacted in Wisconsin, will pay a combined rate of more than 20 per
cent.
Or, take the gasoline tax which is now imposed by every state
in the Union,

The rates range from two to seven cents per gallon, and

are steadily being increased.

In some places the tax is in excess of

the market price of gasoline at the refinery.

In its pressing need for

money, the federal government may legitimately feel that it is entitled
to use this source to a moderate extent, especially in view of the fact
that the federal government grants the states substantial monetary aid
in their roadbuilding programs —
line tax was primarily introduced.

the very purpose for which the gaso­
Yet, because of the pre-emption or

prior use of this tax by the states, and the high rates in force in
some states, the federal government must pause and consider before
adding a federal tax, though Federal entry into this field might help
the states in the administration of the tax, which is tending in some
places to break down because of the bootlegging of gasoline.
Or, consider the tobacco taxes.

The federal government has

imposed these taxes since the Civil War, and the rates are high.
The state governments claim that they are entitled to use consumption
taxes on ’’articles of widespread use but not of first necessity”.

-

8

-

Moreover, in states like North Carolina, in v/hich large amounts of
tobacco are grown and. in which great tobacco factories are located,
there is a natural feeling that since tobacco represents one of their
major industries they should be entitled to a substantial revenue from
this source*

But the federal tax stands in the way.

Even so, thirteen

states levy taxes on tobacco or cigarettes in addition to the federal
taxes,
A striking illustration of the danger of joint use of the same
source is found in the stamp taxes on stock transfers.

In its present

mood public opinion is not sympathetic either towards the stock broker
or the stock market, particularly in those districts
stock exchange and comparatively few stock brokers.

which contain no
Spurred by revenue

necessities, the State of New York recently doubled its stock transfer
tax at a time when the Eederal Government was moved by a similar impulse.
The result is a proposal or bill from the

House of Representatives which

imposes a minimum tax of 4 cents on each share of stock transferred and
a maximum tax of one—fourth of 1 per cent of the selling price, while the
exemption upon stock loans for short selling has been repealed, thus
subjecting short sales to double the ordinary rates*

This proposal if

enacted into law may be enough, with the New York tax, to restrict
activity in the chief security market.
Joint taxation of this character entails another evil which should,
if possible, be eliminate^.

This is the waste involved in the dupli­

cation of administration, and the correlative annoyance to taxpayers
arising from the necessity of complying with two or more sets of re­
quirements with respect to the same kind'of t'ax*

The amount

of money which such duplication involves probably runs into large
figures

-

9IV

Interstate Commerce Complications
Another major problem affecting the financial relations of the
State and Federal Governments arises from those constitutional pro­
visions which have been interpreted to inhibit the States from hinder­
ing interstate trade or commerce by direct taxation.

The uncertainty

of the constitutional law involved and the changing subtleties of the
decisions which interpret that law deprive the States —
too much to say —

it is hardly

of the free and natural use of those taxes most

suited to corporations engaged in interstate commerce,

A recent and

learned commentator, E, F. Albertsworth, Professor of Law at north­
western University, says that the States are ’’hemmed in and hamstrung”
by. the decisions declaring taxes or licenses to be direct restraints
or burdens upon interstate trade.
After many years of serious thought, some of our most qualified
students of taxation have reached the conclusion —
tate

to share —

which. I Still hesi­

that state taxation on business should be based upon

or measured by gross receipts or gross income rather than net income.
Such a tax is comparatively easy to administer; it yields a substantial
revenue which is not subject to as wide fluctuations as is the net in­
come tax; and it is .possibly the best available measure of the benefit
which business receives from government and for which business should
legitimately be asked to pay.

But with business partaking to such a

large extent of the character of interstate commerce, the usefulness
of a gross receipts tax is materially circumscribed by the inability
of the state to tax directly the receipts from such commerce,

Hot

only is the possible yield of such a tax greatly reduced, but there is
unjustifiable discrimination in favor of those taxpayers engaged to a
considerable extent in interstate commerce and against those who are

-

10

~ -

primarily engaged in "business within the confines of a particular
state.

The difficulties which the states have had in the taxation

of public utilities doing an interstate business —

particularly the

railroads and telephone companies — - are well known.
The same obstacle stands in the way of effective use of sales
taxes, except those sales taxes which are most difficult to administer,
that is, retail sales taxes.

And even with respect to retail sales taxes,

the interstate commerce restriction has, indirectly, an adverse affect.
In the first place there is the uncertainty as to when and
under what conditions such sales taxes represent a direct burden upon
interstate commerce.

Our law books are replete with decisions dealing

with this question, but it arises again and again.
Supreme Court was called

Only recently the

upon to decide the question as to whether

gasoline used in busses or airplanes carrying passengers in interstate
traffic could be taxed by the state in which the gasoline was purchased.
Secondly, the inability of states to tax interstate commerce
leaves such sales taxes vulnerable to easy violation.
tax.

Take the gasoline

There has developed a gasoline bootlegging racket of quite sizable

proportions which, according to one competent authority, is depriving
the states of $100,000,000 of revenue yearly.

Much of this evasion is

directly attributable to the purchase of gasoline in a state with a low
rate of tax and its sale in a state with a high tax.

The states cannot

adequately check the purchases and sales of the retail service station.
Their control must depend largely upon supervision and check upon the
refineries, the large distributors, and the shipments by the recognized
carriers.

But supervision falls down when the carrier is a bootlegger

with a fleet of tank wagons, who can bring gasoline into the state with­
out interference under the protection of the interstate commerce clause.

-

11-

The same situation is found in connection with state tobacco taxes,
A study recently made of the administration of state taxes on cigarettes
shows that whereas in 1930 the per capita consumption of cigarettes in
the entire country averaged 975, the five states which in that year
levied a tax solely on cigarettes collected, on the average, taxes on only
431 cigarettes per capita.

While we may not assume that the average

actual consumption in these five states was the same as the average
for the country, yet the figures would indicate that many a cigarette
was smoked in these states on which the state tax had not been paid.
In addition to violation of the law, the restrictive
effect of the interstate commerce clause upon state sales taxes
produces a considerable amount of inequity,

Sp.ch taxes, of course,

find their way usually into the price at which the taxed article
is sold to the ultimate consumer.

Retailers in the taxing state who

are located at or near* the border of a state which does not tax that
article, or which taxes it at a lower rate, are likely to find themselves
in the unenviable position of having to absorb the tax themselves or of
seeing their customers cross the line into the neighboring state in order
to purchase the article at a lower price.

It is not uncommon, for instance,

to find service-stations near state lines selling gasoline at the same price
as that which obtains in the next state, in which the tax is lower.

Simi­

larly, the competition which the merchant in the taxing state must meet from
the mail-order houses which can sell free of tax, since such sales are inter­
state commerce, is a serious evil.

-

12

~

Governor Gardner speaking before the North Carolina General
Assembly said about a year ago:
uAny tax that we add to sales within the state helps
to turn the scale against business in North Carolina
and in favor of business outside of North Carolina,
I can not favor any system of taxation that imposes
this additional burden on the retail merchants of
North Carolina, and that penalizes business within
and encourages business without the state.”

U.S,

Daily, March 26, 1931, at 205,

V
Other Constitutional limitations on State Taxation
Because they are rather closely related to the problems already
discussed, and because their solution may go hand in hand with the
solution of the conflicts in state and federal taxation, mention may
be made of certain active problems arising from constitutional limitation
upon state taxing powers, although these problems are not involved in the
relationship between the state and federal taxing powers.

These problems

are (l) the taxation of the obligations and instrumentalities of other
jurisdictions, and (2) the allocation to a particular state, for
purposes of taxation, of the appropriate share of a subject of
taxation which cannot be wholly assigned to one state.

Both of

these problems have particular reference to state income taxes.

-13-

These are extremely difficult questions, and the specific forms in which
they arise require that they he submitted again and again to the courts
for determination*

We can never he sure, in many cases, about the

validity of certain provisions of state income tax laws until their
effect is determined by the courts of last resort.

And even then we

cannot he certain, as will he readily understood by those who have been
interested in the recent decisions of the Supreme Court as to the power
of a state to include income from bonds and instrumentalities of the
federal government in a franchise or excise tax measured by net income.
In May, 1929, the Supreme Court rendered its decision in Macallen Co.
v. Mass. (279 U.S. 620) holding that under the Massachusetts corporation
excise tax, interest from federal bonds could not be included in the
measure of the tax.

Because of the stress laid by the decision on the

necessity of considering the true substance and operation of state tax
laws rather than their form or name, .¿:u& the finding that the Massachusetts
law ”in substance and effect imposes a tax upon federal bonds and secur­
ities,” the decision was believed by many of our best lawyers and tax
experts to be a substantial modification, if not a reversal, of a long
line of prior decisions which drew a distinction between direct taxes
on income or capital stock and excise taxes measured by income or capital
stock —

a distinction with little economic or practical difference.

But in less than two years, in January, 1931, came the decision in
Educational Films Corp. v. Ward (282 U.S. 379) holding that royalties de­
rived from federal copyrights might be included in the measure of the
New York corporation franchise tax.

The decision reaffirmed the dis­

tinction which was thought to have been discarded in the Macallen case.

14 And on the 11th of this month, came the decision in Pacific
Co. v. Johnson, holding that the inclusion of interest from federal
"bonds in the measure of the California corporation franchise tax, was
permissible.

The decision reached was contrary to that made in the

Macallen case, yet it would be most difficult to find any substantial
distinction in the facts presented in the two cases.

Though the court

does not admit it in so many words, it is plain that in less than three
years after its promulgation, the Macallen decision has been definitely
overruled.

As stated in the minority opinion, f,We think there is no

escape from the conclusion that if the Miller and Macallen cases were
followed the legislation here under review would be condemned.

To

base a distinction of these cases from the pending case upon differences
so lacking in substance as to be in effect no differences at all, simply
adds to the confusion already too great in this field of taxation.11
Similar confusion exists with respect to the power of the
federal government to tax the income derived from state instrumentalities,
as is amply shown by such conflicting cases as Gillespie v. Oklahoma
(257 U.S." J501), Group No. 1 Oil Corp. V. Bass (233 U.S. 279), and
Burnet v.‘Coronado Oil and Gas Co., decided less than three weeks ago.
A more important problem —

perhaps the most important

problem involved in the use of an income tax by the states —

is

the question of allocating or apportioning the net income of corpora­
tions engaged in interstate business to the particular states in
which they operate.

Hearly every conceivable formula for apportion­

ing such income- is to be found in our state laws.

Some states allocate

solely on the basis of one factor, such as tangible property, or gross
sales; others allocate on the basis of a combination of factors,

- 15
wiuli varying methods of combination.

Under such, different measuring

sticks, it is not difficult to see how a corporation may well be taxed
on more than its entire net income.

To state a simplified case, a corpora­

tion which did all its manufacturing in Connecticut, but sold all its
product in South Carolina, would theoretically be taxed on its entire net
income by each of these states, since Connecticut*s allocation formula is
based solely on property, while South Carolina»s is based solely on sales.
It is true that cases as bad as this seldom, if ever, arise; but there can
be no doubt that serious inequity arises from lack of uniformity in these
allocation formulas.
The problem of apportionment, moreover, which has caused much trouble
to the courts, and to the taxpayers, has been so difficult that the courts
are inclined to sustain any method of apportionment prescribed by the
statute, provided it is not deliberately unfair or discriminatory.

On

the other hand, the Supreme Court has recently (in Hans Rees Sons v.
North Carolina, 283 U.S.123) invalidated a tax levied by North Carolina,
under an apportionment formula based on property, where the taxpayer »»proved**
that it earned within that state less income than the amount reached by use
of tne formula.

But the court's decision will probably be of little help,

as the average corporation doing interstate business would find it most
difxicult to furnish such convincing proof as that supplied by the taxpayer
in the North Carolina case.
solve this problem.

We cannot and should not rely on the courts to

While the courts may continue to render sound and help­

ful decisions in isolated cases, inequitable treatment, disputes, dis­
gruntled feelings, and waste of time and money will continue until the
problem is deliberately met with a cooperative effort to solve it.

Certain­

ly it is not too much to ask that the states shall join in a determined
effort to avoid multiple taxation upon the income of corporations doing
interstate business.

-

16

-

Such,then, is the pass to which we have come as a result
of the short-sighted drifting course we have pursued and our failure
to view in a comprehensive way the effects of the relationships between
the federal and state governments and between the states in matters of
taxation*

Our present system of taxation, if we can be said to have a

system, is permeated by inequity, uncertainty, and administrative dif­
ficulties; the cost of collecting taxes is much too great, as is also
the cost to the taxpayer in determining his tax liability and in
furnishing the tax collector with the information required for the
same purpose*
dispute.

We have too much tax competition, too much litigation and

State tax systems have been prevented from developing along

logical and effective lines, and the tax burden has fallen with unequal
and crushing weight upon real property*

We are sorely in need of simpli­

fication and uniformity? we need a much greater degree of cooperation and
coordination in the framing of fiscal policies.
How can we achieve a better ordered, coordinated scheme of state
and federal taxes?

Wot by hasty action, but by beginning at once to give

the subject the sustained study and discussion without which no satisfactory
answer can ever be reached*

One solution that has been advanced is a

thoroughgoing separation of the revenue sources of federal and state
revenues.

Much of our difficulty would be solved if we could assign

certain forms ..of taxes to the federal, government alone, and others to
the states alone*

Overlapping would be eliminated, cost of Administra­

tion would be reduced, and each jurisdiction would be free to exploit its
revenue sources without the necessity of keeping an eye open to what the
other is doing*

Something could undoubtedly be done along this line, but

it is doubtful that this remedy would be sufficient*

It seems impractica—

ble to assign to either the states or the federal government alone such

-

17-

import ant types of taxes as the income tax and the estate tax.

Under

any logical plan of separation the federal government would he assigned
those taxes which it can administer more effectively than the states ——
yet the states have particular need for these taxes.

To take them

away completely from the states would only result in a still heavier
burden on real estate.

Furthermore any complete plan of separation

would probably prove too inflexible in the long run and might become
a source of friction between the states and the federal government.
Recognizing these difficulties, some observers advocate an
extension of the principle now used in the federal estate tax —
the allowance of a limited credit against the federal tax for a
similar tax levied by the states.

Perhaps, if such a credit were

made conditional upon the state tax being administered under certain
uniform provisions (excepting rates, of course), a large degree of
simplification would be achieved.

For example a uniform method of

allocation and apportionment of income arising from interstate busi­
ness might be secured.
But here again there are serious objections.

Such a credit

would practically force the states to adopt the taxes involved and
to adopt such rates as would take up the full credit —

as the ex­

perience with the federal estate tax credit has amply demonstrated,
I am opposed to such a solution as tending further to undermine the
sovereignty of the states, to concentrate authority in Washington,
and to lessen the supervision and control which the taxpayer should
exercise over the taxing power.

-

18-

A third remedy which hag been suggested is the enactment hy
Congress of a law permitting the states to tax directly interstate
commerce under prescribed conditions and in accordance with specified
methods —

somewhat along the lines of the federal act governing the

taxation of national hanks hy the states.
in favor of such a proposal.

There is ranch to he said

It would solve the difficulties arising

from the restrictions upon the state in the taxation of interstate
business, which I have already discussed, and would foster natural
and effective methods of state taxation of business and state taxes
upon sales or consumption.

But such a law : might ho unconctitutihnal,

although a strong case may he made out for its validity, if properly
drawn.

There is a good chance that the court would uphold a law

designed to promote equitable taxation, which would permit and compel
the equal taxation of inter-state and intra-state business, and which
would relieve the courts of constant wrestling with the nice problem
of determining whether a tax operates to put a direct burden on
interstate commerce or only an indirect and incidental burden.
Others have stressed the urgent need of uniform state
legislation with respect to some forms of taxation, particularly the
income tax.

If such uniformity could be secured, undoubtedly many

difficulties could be erased,

But the attempt to bring the states

together and effect a compromise of their conflicting interests would
obviously be a formidable task, though it might be accomplished if the
taxpayers affected —

chiefly corporations doing an interstate business *

would array themselves solidly behind such a movement.
Considering the obvious objections and limitations to the
various plans for eliminating or reducing the evils which beset us in
this field, the only safe conclusion is that there exists an urgent need

-19 -

for systematic, unbiased, and comprehensive study of these problems,
before we can hone to secure the coordination in our state and federal
systems of taxation which we so sorely need»

Such a study should, be

made by some commission on which the federal and state governments
shall be adequately represented by men of ability and breadth of view.
Half of the members of this commission could be appointed by the
President and half by the Governors' Conference.

I have no doubt

that the funds necessary to defray the small expenses oi the commission
for research and investigation could be secured without great difficulty,
even in these times of financial stringency and enforced economy, for
the possible benefits to be gained, would far outweigh the cost.

Though

the task is a formidable one, the longer we delay tackling it, the more
difficult it will become.

In view of the immense popular interest which

now undoubtedly exists, this would seem to be an auspicious moment to
make a start.

TREASURY DEPARTMENT

EOR IMMEDIATE RELEASE, .
Saturday, April 30, 1932

Acting Secretary Ballantine today announced the final sub­
scription and allotment figures on the May 2nd offering of 2 per
cent Treasury Certificates of Indebtedness of Series B-1933, matur­
ing May 2, 1933, and 3 per cent Treasury Notes of Series A-1934,
maturing May 2, 1934,
Subscriptions and allotments were divided among the several
Federal Reserve Districts and the Treasury as follows;

2j TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES B-1933
Federal Reserve
District
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St-* Louis
Minneapolis
Kansas City
Dallas
San Francisco
Total

Total Subscrip­
tions Received
$

123,731,000
976,844,500
136,700,000.
64,919,500
39,218,000
63,165,000
104,328,500
23,346,000
15,015,500
12,505,000
20,342,500
119,782,500

$1,699,868,000

Total Subscrip­
tions Allotted
$

21,755,500
106,844,500
25,960,000
12,206,500
7,528,000
20,228,000
16,564,000
4,178,500
2,364,000
1,941,500
5,920,500
13,706,000
$239,197,000

L

- 2 ~

Zi TREASURY NOTES OF SERIES A-1934

Federal Reserve
District

Total Subscript
tions Received,

Total Subscriptions Allotted

Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St, Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury

$ 138,846,700
1,355,426,000
232,500,000
85,203,500
73,210,500
80,271,000
205,422,300
26,326,000
17,365,100
19,050,400
24,359,700
238,942,500
5,000

$ 18,423,800
105,342,800
27,870,000
11,225,800
12,041,000
17,322,200
19,518,400
4,132,100
2,095,700
3,107,000
5,659.100
17,494,200
2,500

$2,496,928,700

$244,234,600

Total

I

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
Thursday, May 5, 1932.

STATEMENT BY SECRETARY MILLS

The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of $75,000,000, or there­
abouts.

They will be 91-day bills; and will be sold on a discount

basis to the highest bidders.

Tenders will be received at the Federal

Reserve Banks, or the branches thereof, up to two o'clock p* m . ,
Eastern Standard time, on Monday, May 9, 1932.

Tenders will not be

received at the Treasury Department, 7/ashington.
The Treasury bills will be dated May 11, 1932, and will mature
on August 10, 1932, and on the maturity date the face amount will be
payable v/ithout interest.

They will be issued in bearer form only,

and in amounts or denominations of $1,000, $10,000, $100,000, $500,000,
and $1,000,000 (maturity value).
It. is urged that tenders be made on the printed forms and for­
warded in the special envelopes which will be supplied by the Federal
Reserve Banks or branches upon application therefor.
No tender for an amount less than $1,000 will be considered.
Each tender must be in multiples of $1,000.

The price offered must be

expressed on the basis of 150, with not more than three decimal places,
e. g., 99.125.

Fractions must not be used.

Tenders will be accepted without cash deposit from incorpor­
ated banks and trust companies and from responsible and recognized dealers
in investment securities.

Tenders from others must be accompanied by

a deposit of 10 per cent of the face amount of Treasury bills applied

-

2-

for, unless the tenders are accompanied by an express guaranty of
payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
May 9, 1952, all tenders received at the Federal Reserve Bonks or
branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices will follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made
at the Federal Reserve Banks in cash or other immediately available
funds on May 11, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowe
as a deduction, or otherwise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this
notice prescribe the terms of the Treasury bills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or branch thereof.

■HR
§1I
11vfepr ^

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE,
Friday, May 6, 1932.

Statement by Secretary of the Treasury Mills.

The action taken "by the Senate Finance Committee this
morning in reporting out hy a large majority, on a strictly non­
partisan basis, a revenue bill which will produce in excess of
$1,000,000,000 is another definite step in the progress towards
restoring the Government finances to a sound condition.

With

the economies which I am confident will be effected prior to the
adjournment of the Congress, this measure should assure a balanced
budget in the sense that there will be no additional borrowings
during the fiscal year 1933.
The program is composite in character.

In it are many

items taken from the original Treasury program and many already
advanced by the Senate Finance Committee.

In a sense it is a

compromise plan intended to harmonize divergent views.

This

necessarily implied concessions on the part of all concerned, but
these are more than justified if as a result there be attained
promptly a program upon which we can all unite irrespective of
party and without doing violence to soirad principles of taxation.
The bill is, of course, not perfect, but most of the ob­
jectionable features, such as the double taxation involved in the ap­
plication of the normal tax to dividends; the denial of any carryover
of net losses; the penalty rates applicable to the filing of consolidated

-

2

-

returns; and the drastic provisions relating to losses on
security transactions have either been eliminated or modified*
In appearing before the Senate Finance Committee and
urging unity of action, the Treasury’s position that tariff
items are matters of policy as to which the Treasury has not
been called upon to express an opinion was maintained, and my
views relating to estate tax rates, heretofore expressed, were
reiterated.
In so far as the Treasury Department is concerned, we
are prepared to accept and support this program as a temporary
measure intended to provide the necessary revenue during a
period of national emergency.
I hope that the bill will receive prompt consideration and
the approval of both the Senate and the House and will become
law within the next two weeks, thus terminating the uncertainty
which has had such a disturbing influence on the public mind.

TREASURY DEPARTMENT

FOR RELEASE* .MORNING PAPERS,
Tuesday, May 10, 1932.

STATEMENT BY SECRETARY MILLS

Secretary of the Treasury Mills announced to-day that the
tenders for $75,000,000, or thereabouts, of 91-day Treasury Bills
dated May 11, 1932, and maturing August 10, 1932, which were of­
fered on May 5th, were opened at the Federal Reserve Banks on
May 9th.
The total amount applied for was $351,661,000.;

The

highest bid made was 99.880, equivalent to an interest rate of
about 0.47 per cent on an annual basis*

The lowest bid accepted

was 99*817,. equivalent to an interest rate of about 0.72 per cent
on an annual basis.

Only part of the amount bid for at the latter

price was accepted.

The total amount of bids accepted was $76,744,000.,

The average price of Treasury Bills to be issued is 99.829»
average rate on a bank discount basis is about 0.68 per cent.

The

#t

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS
Thursday, May 12, 1932.

STATE; TINT BY SECRETARY MILLS

The Secretary of the Treasury gives notice that tenders are
invited Ton Treasury bills to the amount of $75,000,000, or there­
abouts.

They will be 91-day bills; and will be sold on a discount

basis to the highest bidders.

Tenders will be received at the Federal

Reserve Banks, or the branches thereof, up to tw o o ’clock p. m . ,
Eastern Standard time, on Monday, May 16, 1932.

Tenders will not be •

received at the Treasury Department, Washington*
The Treasury bills will be dated May 18, 1932, and will mature
on August 17, 1932, and on the maturity date the face amount will be
payable without interest.

They will be issued in bearer form only,

and in amounts or denominations of $1,000, $10,000, $100,000, $500,000,
and $1,000,000 (mntur ity value).
It is urged that tenders be made on the printed forms and for­
warded in the special envelopes which will be supplied by the Federal
Reserve Banks or branches upon application therefor.
No tender for an amount less than $1,000 will be considered.
Each tender must be in multiples of $1,000.

The price offered must be

expressed on the basis of 100, with not more than three decimal places,
e. g., 99.125.

Fractions must not be used.

Tenders will be accepted without cash deposit from incorpor­
ated banks and trust companies and from responsible and recognized
dealers in investment securities.

Tenders from others must be accom­

panied by a deposit of 10 per cent of the face amount of Treasury bills

U *f

applied for, unless the tenders are accompanied by an express guaranty
of payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
May 16,1932-, all tenders received at the Federal Reserve Banks or
branches thereof up to the closing hour Trill be opened and public
announcement of the acceptable prices Trill follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders-, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on May 18, 1932*
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowed
as a deduction, or otherwise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this notice
prescribe the terms of the Treasury bills and govern the conditions of
their issue.

Copies of the circular may be obtained from any Federal

Reserve Bank or branch thereof.

FOR RELEASE, MORNING PAPERS,
Tuesday, May 17, 1932,

TREASURY DEPARTMENT

STATEMENT BY SECRETARY MILLS,

Secretary of the Treasury Mills announced to-day that the
tenders for $75,000,000, or thereabouts, of 91-day Treasury Bills,
dated May 18, 1932, and maturing August 17, 1932, which were offered
on May 12th, were opened at the Federal Reserve Banks on May 16th,
The total amount applied for was $395,069,000,

The highest

bid made was 99,900, equivalent to an interest rate of about
0,40 per cent on an annual basis.

The lowest bid accepted was

99,892, equivalent to an interest rate of about 0,43 per cent on
an annual basis.
price was accepted.
$75,000,000.
is 99,893.

Only part of the amonnt bid for at the latter
The total amount of bids accepted was

The average price of Treasury Bills to be issued
The average rate on a bank discount basis is about

0,43 per cent.

TREASURY DEPARTMENT

FOR IMMEDIATE RELEASE,
TUESDAY, MAY 17, 1932.

Statement by Secretary Mills.
Secretary of the Treasury Mills tonight sent the follow­
ing telegram to Mrs. E. C. Billard, widow of Rear Admiral Billard,
Commandant of the Coast Guard, who died in Washington late this
afternoon:
’’Dear Mrs. Billard:
I learned with great grief this after­
noon of the passing away of Admiral Billard*
In the course of the years during which we
have been associated in the public service,
I formed not only the highest respect for his
character and abilities, but a very real
affection for him as a man. His going leaves
me with a deep sense of personal loss*
The Government has lost a most devoted,
able and trusted public servant.
I speak
for all of his associates in the Treasury
Department, as well as myself, in extending
to you our deepest sympathies and in letting
you know how thoroughly we share your grief.
Sincerely yours,
Ogden L. Mills,
Secretary of the Treasury.”

Rear Admiral E. C. Billard, Commandant of the Coast Guard,
entered the Coast Guard service in 1894, has served continuously since
that time, and attained the highest rank in the service*

He served

with distinction in both the Spanish-American and World Wars, and
throughout his career his service was of the highest character.
Since 1924 he has been Commandant of the Coast Guard, dur­
ing its period of greatest expansion and development of its highest
efficiency*

He was not only a seaman in every sense of the word,

but an executive of very real ability*

Through his death the country

loses a public servant of the highest type.*

EOR RELEASE, MORNING PAPERS,
THURSDAY, MAY 19, 1932.

TREASURY DEPARTMENT

STATEMENT BY SECRETARY MILLS

The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of £60,000,000, or there­
abouts.

They will be 91-day bills; and will be sold on a discount

basis to the highest bidders.

Tenders will be received at the

Federal Reserve Banl.s, or the branches thereof, up to two o ’clock
p. m. , Eastern Standard time, cn Monday, May 23, 1932.

Tenders will

not be received at the Treasury Department, Washington.
The Treasury bills will be dated May 25, 1932, and will mature
on August 24, 1932, and on the maturity date the face amount will be
payable without interest.

They will be issued in bearer form only,

and in amounts or denominations of £1,000, £10,000, £100,000, £500,000,
and £1,000,000 (matur ity v alue).
It is urged that tenders be made on the printed forms and for­
warded in the special envelopes which will be supplied by the Federal
Reserve Banks or branches upon application therefor.
No tender fbr an amount less than vl,000 will be considered.
Each tender must be in multiples of £1,000.

The price offered must be

expressed on the basis of 100, with not more than three decimal places,
e. g., 99.125.

Fractions must not be used.

Tenders will be accepted without cash deposit from incorpor­
ated banks and trust companies and from responsible and recognized
dealers in investment securities.

Tenders from ethers must be accom­

panied by a deposit of 10 per cent of the f ce amount of Treasury bills

-

2-

npplied for, unless the tenders are accompanied by an express guaranty
of payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
May 23, 1932, all tenders received at the Federal Reserve Banks or
branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices will follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on May 25, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowed
as a deduction, or otherv/ise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, alid this
notice prescribe the terms of the Treasury bills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or bronch thereof.

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
TUESDAY, MAY 24, 1932.

STATEMENT BY SECRETARY MILLS
Secretary of the Treasury Mills announced to-day that the tenders
for $60,000,000, or thereabouts, of 91-day Treasury Bills, dated
May 25, 1932, and maturing August 24, 1932, which were offered on
May 19th, were opened at the Federal Reserve Banks on May 23rd.
The total amount applied for was $334,818,000.

The highest bid

made was 99.945, equivalent to an interest rate of about 0.22 per
cent on an annual basis.

The lowest bid accepted was 99.927, equivalent

to an interest rate of aboxit 0.29 per cent on an annual basis.
total amount of bids accepted was $60,050,000,
Treasury Bills to be issued is 99.927.
discount basis is about 0.29 per cent.

The

The average price of

The average rate on a bank

TREASURY DEPARTMENT

EOR RELEASE, MORNING PAPERS,
We^nescl ay, May 25, 1932.

STATEMENT BY SECRETLY MILLS

The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of $100,000,000, or there­
abouts.

They will be 91-day bills; and will be sold on a discount

basis to the highest bidders.

Tenders will be received at the

Federal Reserve Banks, or the branches thereof, up to t?/o o'clock
p. m* , Eastern Standard time, on Friday, May 27, 1932.

Tenders will

not be received at the Treasury Department, Washington.
The Treasury bills will be dated June 1, 1932, and will mature
on August 31, 1932, and on the maturity date the face amount will be
payable without interest.

They will be issued in bearer form only,

and in amounts or denominations of $1,000, $10,000, $100,000, $500,000,
and $1,000,000 (maturity value).
It is urged that tenders be made on the printed forms and for­
warded in the special envelopes which will be supplied by the Federal
Reserve Banks or branches upon application therefor.
No tender for an amount less than $1,000 will be considered.
Each tender must be in multiples of $1,000.

The price offered must be

expressed on the basis of 100, with not more than three decimal places,
e. g., 99.125.

Fractions must not be used.

Tenders will be accepted without cash deposit from incorpor­
ated banks and trust companies and from responsible and recognized
dealers in investment securities.

Tenders from others must be accom­

panied by a deposit of 10 per cent of the face amount of Treasury bills

applied for, unless the tenders are accompanied by an express guaranty
of payment by an incorporated, bank or trust company.
Immediately after the closing hour for receipt of tenders on
May 27, 1932, all tenders received at the Federal Reserve Banks or
branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices will follow as soon as possible
thereafter, probably *n the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay­

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on June 1, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowe
as a deduction, or otherwise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this
notice prescribe the terns of the Treasury hills and govern the con­
ditions of their issue.

Copies of the circular may be obtained from

any Federal Reserve Bank or branch thereof.

TREASURY DEPARTMENT

FOR RELEASE, MORNING- PAPERS
Friday, May 27, 1932.

Statement by Secretary of the Treasury Mills.

Upon my return to Washington my attention has been called
to a statement issued by former Governor Smith urging a vast
public works program, National,State, and local, to be financed
from the Federal Treasury.
Governor Smith has shown such a breadth of view and courage in
his recent public statements and brings such valuable support by
his outspoken declaration in favor of the rest of the President's
program, that I dislike to find myself in disagreement with him on
this point.

But this phase of the program upon which we differ is so

vitally important that I feel obliged to call attention to it in the
hope that if he will but study the problem anew with the intelligent
detachment of which he is capable and the nonpartisan spirit which
he has shown, Governor Smith may be willing to reconsider his position.
As I view it, the public works program which he suggests,
financed from the Federal Treasury, would destroy what the President,
supported by the Congressional leaders of both Parties, has insisted
on as the one indispensable foundation for recovery, a balanced
budget and an unimpaired National credit.

- 2 -

To be sure, in a "brief sentence Governor Smith states he
favors a balanced budget, but he then goes on at length to
elaborate a plan which would involve an unbalanced budget on a
large scale.
What do we means by a balanced governmental budget?
what we mean by a balanced household budget:
shall not exceed receipts.

Exactly

that expenditures

If after balancing the budget through

reduced expenditures and increased taxes, the Congress then
authorizes large expenditures for public works of an unproductive
character, the budget becomes unbalanced by just that amount; and
since no revenue is available to meet the expenditures the Govern­
ment is conpelled to borrow.
From a budgetary standpoint it makes no difference for what
purpose the additional funds are expended, whether for increasing
the size of the army, or doubling the number of Government employees,
or increasing their salaries, or for public works.

The effect on

the budget is the same, irrespective of their character.
Capitalizing these expenditures is simply a high-sounding
method of eliminating them from the current budget through the
creation of an extraordinary budget, a device tried by foreign
countries and which inevitably brought their finances to the brink
of disaster.

With the sinking fund provisions applicable to the

existing debt inoperative for the fiscal years 1931, 1932, and 1933,
there can be no conceivable justification for capitalizing these
expenditures, leaving aside all the other basic objections to the
abandonment of the policy consistently followed by the Federal
Government

~ 3 ~
Governor Smith professes to he unable to distinguish between
a so-called productive and an unproductive loan, the funds to he
obtained in the first case

by the sale of Reconstruction Finance

securities and in the second by the sale of Treasury obligations*
The difference is fundamental, yet simple.
must be obtained from the public#

In both cases the funds

But in the case of productive

loans Federal credit is only indirectly invoked in the first instance,
and first and last the loan does not constitute a charge.
public funds.

0$

the

For the loan is not made from the Treasury’s

general fund and the obligations issued are not paid for at ma­
turity from taxes, but from the earnings of the enterprise.

Any

loss suffered would be a charge against the resources of the
Reconstruction Finance Corporation, and perhaps ultimately against
its capital.

But this capital has already been fully paid in

and is included in this year’s budget*
It is clear, then, that this kind of a loan should not be
charged against next year’s or future budgets.
In the second case, involving unproductive loans made by
the Treasury, the initial loan is paid out of the general fund as
the result of a current appropriation.

The funds are obtained

from the sale of Treasury obligations, the interest on which and
the redemption of which must be secured from taxes.

They are a direct

charge on the Treasury, and under our well-established system of
budgeting must be reflected in the 1933 budget.

Governor Smith seeks to overcome the objection to unbalancing
the budget, which he recognizes, by talking vaguely of a beer tax
and a general manufacturer’s sales tax to cover the cost of public
works*

The first proposal has twice been decisively beaten in

both the Senate and the House.

As to the manufacturer1s sales

tax, no one has suggested superimposing it on the selective sales
or excise taxes proposed in the pending revenue bill, and it would
be unfair to do so*

The manufacturer’s sales tax has been pro­

posed as a substitute for these taxes, and as such would not furnish
the additional revenue for public works.

These are inescapable

facts.
Public works, then, mean public borrowing, an unbalanced budget,
and a shock to public confidence, for the country has relied on the
definite assurance of the Administration and of the Congressional
leaders that the budget would be balanced.
The only wise and sound course to pursue is to balance the budget
and put an end to borrowing.
objective for six months.

We have been striving to reach this
Are we to throw up our hands now?

No

matter how earnest, sincere and moving the plea, the Treasury Department
can not surrender on this fundamental principle.
The greatest field for the revival of enployment is in private
industry, and it is that employment that must be revived*
Governor Smith says business cannot get under way on its own
initiative.

I believe he is wrong.

Business can and will get

under way.

After talking with, many business men and canvassing

the situation, I am confident that the biggest barrier today to a
return of confidence and to a gradual recovery is the fear of an
unbalanced budget and of the Federal Government's continuing on
the course of borrowing that has lead nations and individuals to
disaster.
At best, a public works program can put comparatively few of
these unemployed to work during the course of the next twelve months.
The pending $132,000,000 road bill would furnish work to but
35,000 men directly.

We spend $30,000,000 on flood control on

the Lower Mississippi and give work to 8,000 men»

The President,

after a caneful survey of the situation, has estimated that only
$100,000,000 additional can usefully be spent by the Federal Govern­
ment during the next twelve months over and above the $575,000,000
provided for in the budget for public v;orks.
The one way to give real relief to the .American people is to
restore confidence and get business going.

Give business a

chance.

Let Congress balance the budget and pass a sound relief

measure.

Then with confidence restored, the effective stimula­

tion to productive works, private and public, that can be ’
affected
through loans by the Reconstruction Finance Corporation in addition
to the work it is now doing, the open-market policy of the Federal
Reserve System, and the cooperative measures to be taken by business
men themselves as developed by the Young Committee in New York, the
Avery Committee in Chicago, and other similar committees now being

formed, may well "break the vicious circle of contraction and start
the upward movement.
The destructive effect of an unsound financial program, shak­
ing as it would the confidence of the country, would far outweigh
any "benefits to "be derived from unproductive public construction!
for it would retard "business recovery and on balance increase
rather than decrease unemployment.

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
Saturday, May 28, 1932.

STATEMENT 3Y SECRETARY MILLS

Secretary of the Treasury Mills announced to-day that the
tenders for $100,000,000, or thereabouts, of 91-day Treasury
Bills, dated June 1, 1932, and maturing August 31, 1932, which
were offered on May 25th, were opened at the Federal Reserve
Banks on May 27th.
The total amount applied for was $296,503,000.

The highest

hid made was 99.975, equivalent to an interest rate of about 0*10
per cent on an annual basis.

The lowest bid accepted was 99,915,

equivalent to an interest rate of about 0.34 per cent on an annual
basis.

Only part of the amount bid for at the latter price was

accepted.

The total amount of bids accepted was $100,022,000.

The average price of Treasury Bills to be issued is 99,819«
average rate on a bank discount basis is about 0.32 per cent.

The

FOR IMEDIATE RELEASE
Tuesday, May 31, 1932

TREASURY DEPARTMENT

Statement by Secretary of the Treasury
Mills before the Senate Finance Committee,

Events during the last two months, and more particularly the last
few weeks necessitate taking into account a changed situation as affect­
ing the estimates of old and new revenue made by the Treasury Department
in February,

The estimates were predicated on a prompt enactment of a

revenue bill furnishing a basis for, first, a stabilization of economic
conditions, and then a gradual rise.

Instead, there has been a marked

contraction of economic activity and a further fall in commodity and
security

prices, so that not only has the date of recovery been post­

poned, but recovery starts from a lower level.

This is bound to have

an adverse effect oh prospective revenues.
The Treasury recommended in February $1,125,000,000 in new taxes.
That is the amount needed today.
The bill now before the Senate, even with the Finance Committee
items still to be voted on will bring in but $840,000,000, as compared
with the $965,000,000 estimated under the old figures.

Thus there

is a shortage of revenue between the amount originally estimated by the
Treasury as necessary and the yield of the bill as it now stands of
$285,000,000.

The difference is due to a reduction by the Congress

in new taxes amounting to $160,000,000 —

of which about $100,000,000

was agreed to by the Treasury in its eagerness for prompt action —
and $125,000,000 is accounted for by changed conditions.

In other words, assuming that the expenditure figures are reduced
"below those submitted in the Budget Message by not less than $350,000,000,
$285,000,000 of additional revenue is needed today to balance the budget.
In order to bridge this gap, I unqualifiedly recommend turning to the
manufacturers1 excise tax along the lines of Senator Walsh’s pending
amendment« . While the Treasury Department has hitherto refrained from
recommending this tax, I had occasion to give it close study during its
consideration by the Ways and Means Committee and I unhesitatingly endorse
it today as the most effective means of balancing the budget and giving
assurance of yielding the needed revenue.
I further recommend the adoption of the so-called Connally Income
Tax Amendment, which means a return to the 1922 income tax rates, which
I have

hitherto opposed, but the necessity of balancing the budget is

so great that objections which up to the present time justified opposition
to a particular tax can in this emergency no longer be considered valid.
If the Senate is unwilling to follow what I deem to be the wise
course, I suggest as a possible alternate program:

(l) the Connally

Amendment, yielding approximately $70,000,000; (2) a gasoline tax of
one cent, yielding approximately $150,000,000; and, (3) restoration of
the exemption on admissions to 10 cents, which will yield $55,000,000
more than is now provided for; or a total of $275,000,000.

FOB. IMMEDIATE RELEASE
TREASURY DEPARTMENT

Thursday, Juno 2, 1932.

Statement "by Secretary of the Treasury* Mills
before the Committee on Banking and Currency
of the Senate.

S. 4755, the so-called Wagner Bill, as I read it, seeks to
accomplish four objects*
(1)

To make grants or loans to the States aggregating $300,000,000

to furnish relief and work relief to the needy;
(2)

To authorize the Reconstruction Finance Corporation to make

loans in the aggregate amount of $1,460,000,000 (a) to political sub­
divisions and Sta.tes and quasi-public corporations to finance projects
self-liquidating in character; (b) to private limited dividend cor­
porations to finance projiects self-liquidating in character; and (c)
to private corporations to carry out certain specified projects; like­
wise self-liquidating in character;
(3)

To authorize the Reconstruction Finance Corporation to advance

$40,000,000 to the Secretary of Agriculture for the purpose of financing
sales of agricultural products in the markets of foreign countries;
(4)

To provide for the construction of authorized public works

through the creation of an emergency construction fund of $500,000,000
to be financed through a special bond issue.
I approve of the above-mentioned first three objects sought to be
accomplished, subject to certain important suggestions as to structure and
protective provisions.

-

2-

The fourth proposal, however, is open to very serious objection.
To reduce to the simplest terms the very complex provisions, what is
actually contemplated is the creation of a special or extraordinary
budget in the amount of $500,000,000, to be covered by a special bond
issue, the spending of approximately $300,000,000 additional for pub­
lic. works, and under certain conditions permitting the capitalization
of approximately $200,000,000 of public work items otherwise included
in our ordinary budget for the fiscal year 1933.
Assuming that the Congress adopts a revenue measure which will
produce $1,125,000,000 of new revenue, and reduces expenditures below
the budget figures by approximately $350,000,000, we should balance
our budget for the fiscal year 1933 exclusive of provision for the
sinking fund.

If, however, this particular provision should become

law, it will automatically unbalance that budget by $300,000,000.
The device of creating an extraordinary budget does not conceal
this result; it accentuates it.

And in the minds of all those who

have knowledge of the unfortunate experiences of other countries with
the doubtful expediant of an extraordinary budget it raises fears—
and fears which are justified— out of all proportion to the amount in­
volved in this particular case.

The reason for this is plain enough.

For if ?/e are justified in unbalancing our budget by $300,000,000
through the creation of an extraordinary budget, why not by $500,000,000,
and if by $500,000,000, why not one billion dollars?

Once we concede

away the principle of a balanced budget, all our defenses are down.
With the sinking fund provisions applicable to the existing debt inoper­
ative for the fiscal years 1931, 1932 and 1933, there can be no conceiv­
able justification for capitalizing these expenditures, leaving aside

I;?if
- 3 all the other basic objections to the abandonment of the policy con­
sistently followed by the Federal Government.
At noon to-day the Senate, in completing the budget balancing
task, will presume the enormously difficult task of trying to reduce
the cost of government by means of an emergency econoiry program approx­
imating $238,000,000.

Yet this very morning this Committee is con­

templating undoing all of the work of the Special Economy Committee and
adding over $300,000,000 to our actual expenditures for the fiscal
year 1933.
Broviding for a special issue of bonds does not eliminate the
deficit.

It recognizes its existence*

For how otherwise does a

government meet a deficit save by borrowing?

From the standpoint of

the public finances and of cost it would be infinitely preferable,
instead of limiting us to the issuance of special bonds, frankly to
acknowledge the creation of this deficit and then permit the Treasury
to borrow the $300,000,000 as part of its current financing program
through the issuance of the most suitable securities.
There is another inconsistency to which your attention should
perhaps be directed.

The day before yesterday the Senate passed a

tax bill with surtax rates so high as to invite the purchase of taxexempt securities.

To—day, with gracious generosity it is proposed

to make them available in the form of 25-year tax-exempt bonds.
This, however is but an incidental objection.

The fundamental

objection to 1his section is that it unbalances the budget; that it
resorts to the unsound device of an extraordinary budget; that it
breaks down a sound financial policy pursued since the beginning of

- 4 -

the Government i and opens a, breach which I am fearful will he only too
promptly widened.
And for what purpose?
creating employment*

IPor the humane and righteous purpose of

But does it actually accomplish that purpose

in a way commensurate with the sacrifice of sound financial principles
and with the expenditure of public funds involved?

Let us consider

the three main items of public works for which these funds are to be
expended:
The Bill provides approximately $136,000,000 for roads and trails.
I have not the detailed figures covering the $16,000,000 for the
construction of forest highways and trails, hut X am submitting with
this statement a table showing the allotment of $120,000,000 of road
funds by States, the allotment per capita, and the total labor that
would be employed directly.
The expenditure of $120,000,000 for road-building purposes would
give employment directly to but 33,193 men.

The maximum number of

men who would receive employment in any one State is 2,130 in Texas,
1,683 in New York, 1,461 in Pennsylvania, 1,410 in Illinois, and 1,051
in Michigan; and so on down to 216 in Connecticut and 167 in Delaware.
Paragraphs 3 and 4 of Section 4 provide $45,500,000 for river and
harbor and flood control projects.
The expenditure of this $45,500,000 would give employment to only
18,150 men.
I am submitting herewith a table showing the expenditure and per
capita expenditure per State, as well as the number of men to be
employed in each State.

-

5-

The third major item is $100,000,000 for public building projects,
none of which have been specifically authorized to date.

Of this amount,

taking into consideration the time required for acquiring the sites,
preparing the plans and letting the contracts, it is estimated that
$ 2U,500,000 could be expended during the fiscal year

1933 »

of which

$1 1 ,500,000 would be for land, and $1 3 ,000,000 for construction.
It is estimated that the $13,000,000 for construction will
provide direct employment for

2,600

men.

To summarize, appropriations aggregating $265,000,000 will result
in the direct employment of 53,9^3 men during the next fiscal year.
These figures prove beyond question that this method of attack
is wholly ineffective in solving the unemployment problem.

This

factor alone is sufficient to warrant the Committee in eliminating
the provision.
It becomes all the more necessary when you consider that an
unbalanced budget and the abandonment of sound financial practices
will cause a further shock to public, confidence, tend to retard
business recovery, and so not only prevent re-employment on a large
scale, but very possibly add to the number of those already unemployed.
There is much greater hope, not only of relief to employment, but of
actually stimulating a business revival, through the loans provided for
under Section 2 (a) for so-called projects of a self-liquidating character,
though on the one hand the list of projects could be advantageously added
to, and on the other the protective features need strengthening.

I 'should

like at the appropriate time to discuss the details of this provision with
the Committee.

-

6-

Turning, now, to the provision for loaning $300,000,000 to the
States for relief purposes, I approve heartily of the principle that
the Federal Government should create something in the nature of an
emergency fund that can be loaned to a State that has exhausted its
own resources and actually needs funds for the relief of destitution.
The Section as drafted, apportioning $300*000,000 among the several
States in proportion to their population and not in accordance either
with their needs or their ability to meet those needs, is not only a
direct invitatioh to all other States to apply for Federal funds, but
creates such a rigid process of distribution as to insure the grant of
Federal funds to States that do not need them at all and in an amount
unrelated to their needs or resources.
The only imitation is the certification by the Governor as to the
necessity for such funds.

This does not seen to he adequate.

Certain

definite tests should he specifically provided in the law adequate to
demonstrate that the State needs the funds and has exhausted its own
available resources before it shall be permitted to turn to the federal
Government for relief.

Whether the State has complied with these re­

quirements should be determined by duly authorized agents of the federal
Government,

I know of no conceivable reason why great, rich States like

New York and Pennsylvania should receive a grant from the federal Treasury
or be invited to accept one.

They are well able to take care of their

own.
The bill should be so drafted as to provide for an emergency fund
for the States that need it; not for a gratuitous distribution to all
States on a per capita basis irrespective of need or resources.

~ 7 I shall he glad, if the Committee so desires, to make suggestions
as to possible amendments to this Section.
In conclusion I find myself in agreement with much in this measure,
subject to amendments along the lines I have suggested,

I am, however,

very definitely opposed to the public works proposal as ineffective and
inconsistent with sound financial principles.

State.

Allotment.

Population.

Alabama ...........
Arizona ...........
Arkansas........
California........
Colorado..........
Connecticut ..... ..
Delaware......
Florida ...........
Georgia ...........
Idaho .............
Illinois.........
Indiana ...........
Iowa.........
Kansas ............
Kentucky ..........
Louisiana ....
Maine ........
Maryland ..........
Massachusetts .....
Michigan ..........
Minnesota ..........
Mississippi ........
Missouri ...........
Montana .........
Nebraska ...........
Nevada ............
New Hampshire .....
New Jersey ........
New Mexico .........
New York ..........
North Carolina ....
North Dakota ......
Ohio ..............
Oklahoma ..........
Oregon ............
Pennsylvania ......
Rhode Island ......
South Carolina... .
South Dakota ......
Tennessee ..........
Texas ...... .......
Utah ..............
Vermont..........
Virginia ..........
Washington ........
West Virginia .....
Wisconsin ..........
Wyoming ...........
Hawaii ......... .*..

$2,550,053
1 ,762,636
2,691,1+31
1+,669,7H
2,255,281
779*324
600,000
1,629*204
3*120,191
1,508,485
5,077,245
3*060,266
3*173*^93
3*276,334
2,259*648
1,740,196
1,070,600
1,015,296
1,712,774
3*763*179
3*373*560
2,l60,628
3»76l,Ol4
2,525,108
2,557*683
1,578,025
600,000
1,659*121
1,962,340
6,057,965
2,890,203
1,940,325
4,501,069
2,893*101
1,996,128
5*261,052
600,000
1,666,492
2,002,076
2, 609,757
7*668,024
1,387,190
600,000
2,256,196
1 ,905,627
1,316,720
2,992,438
1,54o ,S11
600.000

2,646,248
435*833
1,854,482
5*672,009
1,035,01+3
1,604,711
t23$*3^
1,466,625
2,902,443
445,837
7,607,684
3*225,600
2,467,900
1,679,946
2,623,668
2,094,496
797,423
1,629,321
4,253*646
4,842,280
2,566,445
2,007,979
3,620,961
536,332
1*376,900
90,961
465,293
4,028,027
427,216
12,619,503
3*170,287
682,448
6,639,637
2,391*777
952,691
9,640,802
687,497
1,732,567
690,755
2,608,759
5 *^21,272
502,562
359,611
2,421,851
1,561,96{
1,729,205
2,930,282
224,597

Total

120,000,000

Allotment
Per Capita.
$

.96
4.04

1 .1 3
.82
2.18
.49

2.52

1.11
1.08
3.38
.67
.95
I .29

Labor
Employed708

490
58I
1,297

626
216

167

1+53
867
419
1,410

850
882

1 .7 4

910

.86
.23

623
483
297
310

I .34

.60
.40
.78

1.3 1
1.08
.1,04

4 .7 1
1.85

1 7 .3^
1.29
.41
•+.59
.48
.91
2.84
.68
1.21
2.10
.55
.87

.96
2.90

1.00

1.3 2
2.76
1.6 7
.93

1.2 2

476
1,0 51

937

600
1,045
701
710
43s
167
46l

545
1,683
S03
539

1,250

804

554
l,46l
167

463
^56
725

2,130
3S5
167
627
529

.76

366

6.86

831
428

1.0 2

33*193

Wagner Bill.
Estimated distribution of appropriation of $45,500,000 for river and
harbor and flood control works.

State

Alabama. . . . . . . .
Arkansas . . . . . . ,
California . . . . ,.
Connecticut. . . . ,,
Florida. . . . . . . ,
Georgia. .......... ,
Illinois . . . . . . ,
Iowa . . . . . . . . ,
Kansas . . ........ ,
Kentucky . . . . . . ,
Lousiana . . . . . .
Maryland ..........
Massachusetts. . . ,,
Michigan . . . . . . ,
Minnesota. , . . . .,
Missouri . . . . . . .
Mississippi. . . . ,.
Nebraska . . . . . . ,
New Jersey . . . . ,
New York . . . . . ,.
O h i o .............. ,
Oregon . . ........
Pennsylvania . . . .,
South Carolina . . ,,
Tennessee. . . . . ,.
Texas. .......... ,,
Virginia . . . . . ,
West Virginia. . . .
Wisconsin.......... .

Expenditure

.
.
.
.
.
.
.
.
.
.
.

.
.
.
.
.
.
.
.
.
.
.

. $ 206,000
. 3,000,000
. 1,539,000
.
364,500
. 1,134,300
.
216,000
. 2,550,300
.
525,000
. 1,925,000
. 1,000,000
. 7,000,000

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

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

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

585,500
3,500,000
450,000
7,775,000
4,000,000
75,000
745,000
2,462,700
350,000
210,000
1,704,300
66,400
1,000,000
228,000
850,000
1,000,000
480,000

Total • • • ., . . . 45,500,000

Per capita

$

.08
1.62
.25
.22
.77
.07
.33
.21
1.02
.38
3.32
.34
.14
.72
.17
2.15
2.00
.06
.18
.20
.05
.21
.18
.04
.38
.04
.35
.58
.16

Employment, men
per year
80
1,200
615
145
455
45
1,020
210
770
400
2,800
225
235
1,400
180
3,110
1,600
30
300
985
140
80
680
25
400
90
340
400
190
18,150

FOR IMMEDIATE RELEASE,
Thursday, Juno'.2, 19 J2*

TREASURE DEPARTMENT

Statement by the Secretary of the Treasuiy
before the Ways and Means Committee in connection with H, R* 12155»______________ ..
H, R. 12353 nay be divided into three main parts:

Part 1 would

authorize the appropriation of a sun of $100,000,000 to be disbursed by
the President for the relief of persons residing in the United States,
which he nay disburse either as gifts or loans of money in any way he
sees fit.

Part 2 would broaden the powers of the Reconstruction Finance

Corporation and extend its borrowing authority by $1,000,000,000 so as to
authorize it to make a loan to any individual or corporation, public or
private, for almost any purpose*

Part

3

would authorize tne appropriation

of $1,100,000,000 for public works such as rivers and harbors, flood
control, post office construction and road building*

This constitutes a

total of $2,200,000,000*
It is difficult to finds words adequate to characterize this pro­
posal from the standpoint of the public finances*

After a great effort

to bring our budget into balance by drastic economies and by imposing on
the people of the United States the most severe taxation ever imposed in
peace time for the all important purpose of preserving unimpaired the
credit of the United States Government and thus laying a foundation for
economic recovery, this bill would undo all our efforts, unbalance the
budget on a huge scale, impair the credit of the United States Government,
destroy the confidence of the people in their government and indefinitely
postpone all hope of early recovery.
Where do you expect to get these funds?

There are only two ways

in which the Government obtains fundsj first, by taxationj second, by

-

borrowing.
revenue.

2

-

The new tax bill has gone to the extreme in raising new
The bill, therefore, doesn!t contemplate raising these

billions by taxation, but by borrowing.

But borrowing contemplates

a willing lender and where are you to find lenders willing to advance
their funds to a government with a large public debt, with a budget
unbalanced on such scale as is contemplated in this bill and for
the purposes contemplated in this bill,
I say to you as Secretary of the Treasury that I can not
undertake to float Government bonds directly and Reconstruction bonds
indirectly for these purposes save at such interest rates as will ser­
iously impair the value of all outstanding Government securities and,
indeed, of every outstanding bond.
Let me briefly consider some of the purposes for which it is
proposed to expend funds borrowed at high interest rates and ultimately
to be repaid by an overburdened tax payer,

I understand that the Secre­

tary of War has dealt with some phases of the public works program and I
shall confine myself to the public building section, which falls within
the jurisdiction of my department.
There are 51 pages of solid print enumerating the cities, vil­
lages and hamlets in which it is proposed to erect public buildings.
Leaving aside the fact that this bill destroys the self-denying principle
adopted by the Congress in the matter of public buildings, which places
their original selection in the hands of two Cabinet officers, every mem­
ber of Congress, every man who has ever served in Congress, every man
and woman of voting age knows the purpose for which these projects were

mentioned in the hill, item by item,
I have asked the Office of the Supervising Architect to give me
an estimate of the actual number of men that will receive employment,
directly and indirectly, on public building projects during the fiscal
year 1933 if this bill is adopted, in addition to the projects already
provided for during that year.

In estimating the maximum expenditures

during the fiscal year 1933, under the alternate plans, no allowance has
been made for inevitable delays which will originate through incomplete
reports from site agents, protests from communities regarding site
selected, protests from Members of Congress respecting type of building
proposed, time required for readvertising where low bid exceeds amount
available, time required to handle protests of unsuccessful bidders who
may appeal to the Comptroller General and other conditions beyond the
control of the Department, such as strikes, excessive time for private
architects to draw plans, etc,$ *fh© total number of men who will receive
employment, directly and indirectly, is 30,448, from a total authorized
amount of $283,409,000.
Only one— quarter of this sum can actually be expended during the
fiscal year 1933, but here's the point, gentlemen, after the fiscal
year has passed, after this amount has been spent, after the unemployment
emergency may be gone, I hope, the remaining 75$ ct this huge amount
will remain authorized and appropriated for and a lot of it under
contract,

Now do you understand why impartial critics call this a

"pork barrel" rather than an unemployment relief bill?

To give relief

to 30,448 men during the next 12 months, the tax payers of the United
States are to be asked to squander a large part of $283,409,000 over a
course of years.

- 4 -

The number of new projects involved approximates 2,600 a number
of which were already under contemplation.

The bulk of them are repre­

sented by post offices in small communities.

In many of these places

post office facilities are rented for $200 or $300 a year,

For these

rented quarters secured at low cost, it is proposed to substitute type
buildings costing from $50,000 to $70,000, with all of the subsequent
cost involved in maintenance and upkeep.

The Post Office Department

estimates that for a present annual cost of less than $3,000,000 covering
the existing Post Office facilities in these communities, there will be
substituted annual fixed charges of $15,000,000 covering interest, opera­
tion and maintenance.
If the communities themselves should be called upon to erect
these buildings at their own expense, the tax payers would never consent to
do so, but would rise in protest.

When the tax payers of the United States

come to realize that what is proposed in this bill is to undertake for the
United States as a whole what they would not dream of permitting in their
respective communities, I venture the prophecy you will hear from them in
no uncertain voice.
Turning now to that phase of the bill which deals with the Recon­
struction Corporation, I haven*t had the opportunity to consult my colleagues
on the board and I can not, therefore, undertake to speak for them,

I

think the President of the Corporation and the Chairman of the Board should
be heard from.

But as I read the bill, the Corporation would be authorized

to do a general banking business throughout the United States in competition
with all of our commercial banks.

It might even go further and carry on a

chattel mortgage business on a fairly large scale.

I don*t say that it would,

but I do

say that the language is so "broad as to authorize the

Reconstruction Finance Corporation to lend to any individual for almost
any purpose on almost any security that the Corporation deems adequate*
This is altogether too great a power to entrust to any group of men.
I do not "believe that you will find any public official willing to as~?
sume such responsibilities*

No such burden could be satisfactorily ad­

ministered and, furthermore, it is hardly conceivable that the security
afforded by personal loans of this sort could be such as to protect the
Government in the repayment of the loans, and to make it true, as in the
case of the loans by the Reconstruction Finance Corporation originally
authorized, that its loans would not constitute an ultimate burden to the
Government,
It is utterly impracticable for the Reconstruction Finance Corporation
to go into the personal loan business.
Finally, as to section 1, it introduces definitely the principle
of direct relief to the individual by the Federal Government, whether
it be called a dole or by any other name.

This is a complete and radical

departure from the well-established principles and practices followed by
our Nation ever since its birth.

It is an abandonment of the principle

of local responsibility and the entering upon a road the end of which no
man can foresee.

When we consider the immense population of this country,

its vast extent, and how distant the Federal Government inevitably is from
the average citizen, we realize how difficult it is for the citizen to
exercise any supervision over the expenditure of public funds, and we are
shocked at the possibilities of waste, favoritism, maladministration and
political pressures which the introduction of the Federal Government into
the field of private charity may entail.

TREASURY DEPARTMENT

FOR RELEASE, MORNING PAPERS,
MONDAY, JUNE 6, 1932.

STATEMENT 3Y SECRETARY MILLS

The Treasury is today offering for subscription at par and
accrued interest, through the Federal Reserve Banks, $400,000,000, or
thereabouts, 3 per cent three-year Treasury notes of Series A-1935,
and $350,000,000, or thereabouts, l-l/2 per cent one-year certificates
of indebtedness of Series TJ-1933.
The Treasury notes will be dated June 15, 1932, and will bear
interest from that date at the rate of 3 per cent per annum, payable
semiannually.

They will mature June 15, 1935, and will not be subject

to call for redemption prior to that date.
The certificates of indebtedness will be dated June 15, 1932,
and will bear interest from that date at the rate of l-l/2 per cent per
annum, payable semiannually.

They will mature June 15, 1933.

The principal and interest of the Treasury notes and Treasury
certificates of indebtedness will be payable in United States gold coin
of the present standard of value.
The Treasury notes and Treasury certificates of indebtedness
will be exempt, both as to principal and interest, from all taxation
(except estate or inheritance taxes) now or hereafter imposed by the
United States, any State, or any of the possessions of the United States,
or by any local taxing authority.

-

2-

Applications will "be received at the Federal Reserve Bank$,
The Treasury will accept in payment for the new Treasury notes and
certificates of indebtedness, at par, Treasury certificates of indebt­
edness of Series TJ-1932, maturing June 15, 1932, and subscriptions
in payment of which such Treasury certificates of indebtedness are
tendered will be given preferred allotment.
The Treasury notes will be issued in bearer form only, in
denominations of $100, $500, $1,000, $5,000, $10,000, and $100,000,
with interest coupons attached payable semiannually on December 15
and June 15 in «ach year.

The certificates of indebtedness will be

issued in bearer form only, in denominations of $500, $1,000, $5,000,
$10,000, and $100,000, with two interest coupons attached, payable on
December 15, 1932, and June 15, 1933*
About $324,578,500 of Treasury certificates of indebtedness
and about $100,000,000 in interest payments on the public debt become
due and payable on June 15, 1932.
The texts of the official circulars follow:

-3TREASURY NOTES, SERIES A-1935

The Secretary of the Treasury offers for subscription, at par
and accrued interest, through the Federal Reserve Banks, $400,000,000, or
thereabouts, three per cent Treasury notes of Series A-1935, of an issue
of gold notes of the United States authorized by the Act of Congress
approved September 24, 1917, as amended.
\

DESCRIPTION OF N0T#S
The notes will be dated June 15, 1932, and will bear interest
from that date at the rate of three per cent per annum, payable semi­
annually on December 15 and June 15 in each year.

They will mature

June 15, 1935, and will not be subject to call for redemption prior to
maturity.
The principal and interest of the notes will be payable in
United States gold coin of the present standard of value.
Bearer notes with interest coupons attached will be issued in
denominations of $100, $500, $1,000, $5,000, $10,000, and $100,000.

The

notes will not be issued in registered form.
The notes «hall be exempt, both as to principal and interest,
from all taxation (except estate or inheritance taxes) now or hereafter
imposed by the United States, any State, or any of the possessions of
the United States, or by any local taxing authority.
5?he notes will be accepted at par, during such time and under
such rules and regulations as shall be prescribed or approved by the
Secretary of the Treasury, in payment of income and profits taxes pay­
able at the maturity of the notes.

-4-

The notos will bo acceptable to secure deposits of public
moneys, but will not bear the circulation privilege.
APPLICATION AND ALLOTMENT
Applications will be received at the Federal Reserve Banks.
Subscriptions for which payment is to be tendered in Treasury
certificates of indebtedness of Series TJ-1932, maturing June 15, 1932,
will be given preferred allotment.
The Secretary of the Treasury reserves the right to reject
any subscription, in whole or in part, and to allot less than the amount
of notes applied for and to close the subscriptions at any time without
notice; the Secretary of the Treasury also reserves the right to make
allotment in full upon applications for smaller amounts, to make reduced
allotments upon, or to reject, applications for larger amounts, and to
make classified allotments and allotments upon a graduated scale; and
his action in these respects shall be final.

Allotment notices will

be sent out promptly upon allotment, and the basis of the allotment will
be publicly announced.
PAYMENT
Payment at par and accrued interest for notes allotted must
be made on or before June 15, 1932, or on later allotment.

Any qualified

depositary will be permitted to make payment by credit for notes allotted
to it for itself and its customers up to any amount for which it shall
be qualified in excess of existing deposits, when so notified by the
Federal Reserve Bank of its district.

Treasury certificates of

-5-

indebtedness of Series TJ-1932, maturing June 15, 1932, will be accepted
at par in payment for any notes of the series now offered which shall
be subscribed for and allotted, with an adjustment of the interest ac­
crued, if any, on the notes of the series so paid for,
GENERAL PROVISIONS
As fiscal agents of the United States, Federal Reserve Banks
are authorized and requested to receive subscriptions and to make allot­
ments on the basis and up to the amounts indicated by the Secretary of
the Treasury to the Federal Reserve Banks of the respective districts.
After allotment and upon payment Federal Reserve Banks may issue interim
receipts pending delivery of the definitive notes,

CERTIFICATES OF INDEBTEDNESS, SERIFS 1J-I933

The Secretary of the Treasury, under the authority of the Act
approved September 24, 1917, as amended, offers for subscription, at par
and accrued interest, through the Federal Reserve Banks, $350,000,000, or
thereabouts, Treasury certificates of indebtedness of Series TJ-1933.
DESCRIPTION OF CERTIFICATES
The certificates of this series will be dated June 15, 1932,
and will bear interest from that date at the rate of one and one—half per
cent per annum, payable semiannually.

They will be payable on June 15,

1933.
The principal and interest of the certificates will be payable
in United States gold coin of the present standard of value.

-6-

Bearer certificates will bo issued in denominations of $500,
$1,000, $5,000, $10,000, and $100,000,

The certificates will have two

interest coupons attached, payable on December 15, 1932, and June 15, 1933.
The certificates of this series shall be exempt, both as to
principal and interest, from all taxation (except estate and inheritance
taxes) now or hereafter imposed by the United States, any State, or any
of the possessions of the United States, or by any local taxing authority*
The certificates of this series will be accepted at par, during
such time and under such rules and regulations as shall be prescribed
or approved by the Secretary of the Treasury, in payment of income and
profits taxes payable at the maturity of the certificates.
The certificates of this series will be acceptable to secure
deposits of public moneys, but will not bear the circulation privilege.
.APPLICATION AND ALLOTMENT
Applications will be received at the Federal Reserve Banks.
Subscriptions for which payment is to be tendered in Treasury
certificates of indebtedness of Series TJ-1932, maturing June 15, 1932,
will be given preferred allotment.
The Secretary of the Treasury reserves the right to reject
any subscription, in whole or in part, and to allot less than the amount
of certificates applied for and to close tho subscriptions at any time
without notice; the Secretary of the Treasury also reserves the right
to make allotment in full upon applications for smaller amounts, to make
reduced allotments upon, or to reject, applications for larger amounts,
and to make classified allotments and allotments upon a graduated scale;

-7-

and his action in those respects shall be final*

Allotment notices

will be sent out promptly upon allotment, and the basis of the allotment
will be publicly announced*
PAYMENT
Payment at par and accrued interest for certificates allotted
must be made on or before June 15, 1932, or on later allotment*

Any

qualified depositary will be permitted to make payment by credit for
certificates allotted to it for itself and its customers up to any amount
for which it shall be qualified in excess of existing deposits, when so
notified by the Federal Reserve Bank of its district*

Treasury certi­

ficates of indebtedness of Series TJ-1932, maturing June 15, 1932, will
be accepted at par in payment for any certificates of the series now
offered which shall be subscribed for and allotted, with an adjustment
of the interest accrued, if any, on the certificates of the series so
paid for*
GENERAL PROVISIONS
As fiscal agents of the United States, Federal Reserve Banks
are authorized and requested to receive subscriptions and to make allot­
ments on the basis and up to the amounts indicated by the Secretary of
the Treasury to the Federal Reserve Banks of the respective districts*
After allotment and upon payment Federal Reserve Banks may issue interim
receipts pending delivery of the definitive certificates*

TREASURY DEPART MEET

FOR RELEA.SE, MORNING- PAPERS,
Uednesday, June 8, 1932.

STATEMENT BY SECRETARY MILLS

Secretary Mills today announced that the subscription
hooks for the current offering of one-year 1-1/2 per cent
Treasury Certificates of Indebtedness of Series TJ-1933,
maturing June 15, 1933, and three-year 3 per cent Treasury
Notes of Series A—1935, maturing June 15, 1935, closed at
the close of business today, Tuesday, June 7, 1932.
Subscriptions received through the mail by Federal
Reserve Banks or the Treasury up to 10:00 A. M. , "Wednesday,
June 8th, will be considered as having been received before
the close of the subscription books.

TREASURY DEPARTMENT

FOR RELEASE, MORNING- PAPERS
Friday, June 10, 1932.
STATEMENT BY SECRETARY MILLS

Secretary Mills to-day announced the subscription figures and the
basis of allotment for the June 15th offering of one-year Treasury
Certificates of Indebtedness, Series TJ-1933, 1-1/2 per cent, maturing
June 15, 1933, and of three-year Treasury Notes of Series A-1935, 3 per
cent, maturing June 15, 1935.
1-1/2 PER CENT, TREASURY CERTIFICATES OF INIMBTEDNESS. SERIES TJ-1933
Reports received from the Federal Reserve Banks show that for the
offering of 1-1/2 per cent Certificates of Indebtedness, Series TJ-1933,
maturing June 15, 1933, which was for $350,000,000, or thereabouts, total
subscriptions aggregate $1,653,799,000.

Of these subscriptions $113,116,500

represent exchange subscriptions in payment for which Treasury Certificates
of Indebtedness, maturing June 15, 1932, were tendered.
scriptions were allotted in full.

Such exchange sub—

Allotments on cash subscriptions for

1—l/2 per cent Certificates #f Series TJ—1933 were made as follows:

Sub—

scriptions in amounts not exceeding $10,000 were allotted 50 per cent, but
not less than $500 on any one subscription; subscriptions in amounts over
$10,000, but not exceeding $100,000, were allotted 40 per cent, but not
less than $5,000 on any one subscription; subscriptions in amounts over
$100,000, but not exceeding $1,000,000, were allotted 20 per cent, but not
less than $40,000 on any one subscription; and subscriptions in amounts
over $1,000,000 were allotted 10 per cent, but not less than $200,000 on
any one subscription

- 2 *
3 PER CENT TREASURY NOTES OF SERIES A-I935
For the offering of 3 per cent Treasury Notes of Series A-1935
maturing June 15, 1935, which was for $400,000,000, or thereabouts,
total subscriptions aggregate $1,143,548,400.

Of these subscriptions

$134,744,300 represent exchange subscriptions

in payment for which

Treasury certificates, maturing June 15, 1932, were tendered in payment.
Such exchange subscriptions were allotted in full.

Allotments on cash

subscriptions for the 3 per cent Treasury Notes of Series A-1935 were
made as follows:

Subscriptions in amounts not exceeding $10,000 were

allotted 80 per cent, but not less than $100 on any one subscription;
subscriptions in amounts over $10,000, but not exceeding $100,000, were
allotted 50 per cent, but not less than $8,000 on any one subscription;
subscriptions in amounts over $100,000, but not exceeding $1,000,000,
were allotted 30 per cent, but not less than $50,000 on any one sub­
scription; subscriptions in amounts over $1,000,000, but not exceed­
ing $25,000,000, were allotted 20 per cent, but not less than $300,000
on any one subscription; and subscriptions in amounts over $25,000,000
were allotted 15 per cent, but not less than $5,000,000 on any one
subscription.

Further details as to subscriptions and allotments will be
announced when final reports are received from the Federal Reserve
Banks.

FOR IMMEDIATE RELEASE,
Wednesday, June 15, 1932

TREASURY DEPARTMENT

Acting Secretary Ballantine today announced the final subscription
and allotment figures on the June 15th offering of 1-1 ¡2 per cent Treasury
Certificates of Indebtedness of Series TJ-1933, maturing June 15, 1933, and
3 per cent Treasury Notes of Series A-1935, maturing June 15, 1935.
Subscriptions and allotments were divided among the several Federal
Reserve Districts and the Treasury as follows:
1-1/2$ TREASURY CERTIFICATES OF INDEBTEDNESS OF SERIES TJ-1933
Federal Reserve
District

Total Cash
Subscriptions
Received

Boston
Now York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury

$

Total

67,141 ,000
805,881 ,000
114,989 ,500
78,231 ,000
51,661 ,000
63,961 ,000
137,529 ,000
13,617 ,000
11,339 ,500
17,192 ,500
46,129 ,000
132 ,'981,000
30 ,000

$1,540,682 ,500

Total Exchange
Subscriptions
Received

Total Subscrip­
tions Received

$

$

6,620,500
64,100,000
1,780,000
714,500
467,000
425,000
23,308,500
4,506,000
1,062,000
3,236,500
42,500
6,822,500
46,500

$113,131,500

73,761,500
869,981,000
116,769,500
78,945,500
52,128,000
64,386,000
160,837,500
18,123,000
12,401,500
20,429,000
46,171,500
139,803,500
76,500

$1,653,814,000

* Includes $113,131,500 exchange
subscript ions, which were
allotted in full.

Total Sub­
scriptions
Allotted
$ 20,992,500
178,239,500
24,800,000
17,024,000
14,149,000
19,144,000
45,125,500
7,504,000
2,775,000
6,725,500
12,891,000
24,428,000
58,500
$373,856,500;

TREASURY NOTES OF SERIES A-1935
Federal Reserve
District
_______________

Total cash
Subscriptions
Received_____

Total Exchange
Subscriptions
Received______

Total Subscrip­
tions Received

Boston
New Yoyk
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury

$

43,840,400
473,767,900
73.816.500
71,120,900
22, 770,400
23. 780,200
105,665,400
18.637.500
13?552,000
26’376,000
27,189,300
108,276,100
________11.500

$

$

$1,008,804,100

$134,759,300

4,159,500
3.080.000

47, 387, 400
557, 412,,200
74, 514, 500
n * 365,,900
22,822, 400
24, 297,,200
130, 976, 900
25, 022,500
16, 385, 000
30, 663,. 000
27 j189, 300
mL â
L |435, 600
...
3. 091, 500
$1,143, 563,

o
o

Total

3,547,000
83,644,300
698.000
245.000
52,000
517.000
25,311,500
6.385.000
2,833,0p0
4.287.000

Total Sub­
scriptions
Allotted
$ 20,974,300
201,167,500
21,500,000
20,821,300
9,251,600
10,577,400
57.440.300
13,791,900
6,59 8, 800
11.991.600
11.928.300
27.470.600
3.089.200
$416,602,800 *

* Includes $134,759,300 exchange
subscriptions, which ivere
allotted in full.

TREASURY DEPARTMENT

FOB RELEASE, MORNING PAPERS,
TUESDAY, JUNE 21, 1932.

Statement by Secretary of the Treasury Mills.

I am informed that in the course of his discussion of the
Prohibition Plank adopted by the Republican Convention Senator Borah
stated that for the last six years I had been in favor of the repeal
of the Eighteenth Amendment.

Since the Senator has referred to my

position, I feel called upon to make a brief statement of my personal
views.

The Senator has evidently misunderstood my position.

While'

I have not been an advocate of the Eighteenth Amendment, I have not
believed that mere repeal is the solution.

On the contrary, I have

become more and more convinced that the true remedy is to be found
m

modifying the Eighteenth Amendment so as to prevent a return of the

conditions which existed prior to the Eighteenth Amendment, and at the
same time stamp out the undeniable evils that exist today.
As I stated to the Convention, there are two extreme points
of View., On the one hand there are those who would retain the
Eighteenth Amendment and the Volstead Law unamended.
understand it, is the position of Senator Borah;

This, as I

At the other extreme,

are those who would repeal the Eighteenth Amendment without sub­
stituting anything therefor.

This, as I understand it, is the position

of Dr. Nicholas Murray Butler.
I do not believe that the American people should be limited
to the choice of either retaining the existing system or of returning

-

2

-

to all of the evils of the liquor traffic.

I do not believe

that the American people should be limited in their choice to
the speakeasy or the saloon,
American statesmanship should be equal to the task of
developing a new system which will preserve us from the evils
which existed under unlimited state control, and at the same
time free us from the grievous difficulties which have arisen
under an inflexible prohibitory provision embodied in the
federal Constitution,

The plank adopted by the Republican

National Convention lays down the broad principles upon which
such a solution can be based.
In the first place, it provides correction for the
two main weaknesses of the present system;

that is, its

inflexibility and its departure from one of the fundamental
principles of American form of government, namely, the right
of local initiative and determination carrying with it a
very definite sense of local responsibility.

In the second

place, it would provide protection for those states electing
to remain dry.

And third, it would retain in the federal

Government power adequate to prevent the return of the
saloon and its attendant evils in those states whose citizens
determine to permit the manufacture and sale of intoxicating
beverages*
It is said that the plank is indefinite.
contrary.

Qp.ite the

Its important provisions are set out in clear and

unambiguous language.

What are they?

~ 3 First:

Submission by the Congress to the people through

State conventions duly elected by the people of a new amendment
modifying the Eighteenth Amendment.
Second:

The proposed amendment to allow States to deal

with the problem as their citizens may determine subject to the
specified powers reserved in the Federal Government.
Third:

Reservation in the Federal Government of the

power to protect those States where prohibition may exist and
safeguard our citizens everywhere from the return of the saloon
and at t endant abus es.
The broad principles here laid down may be summarized
in one sentence,— Returning to the States initiative, determination
and responsibility, and retention in the Federal Government of
sufficient power to attain two specifically named objectives.
Some gentlemen apparantly would have had us go further
and submit a proposed Constitutional amendment and even a statute
carrying out its provisions.

But the national Convention was

adopting a party platform, or declaration of principles.

The

convention was neither a constitutional convention nor a legis~
lative body.

It was not charged with any such duty.

It is just

as unreasonable to demand that this proposal be written into the
platform in the form of an amendment or bill as it would be to
claim that when a Republican Platform declares in favor of the
correction of certain abuses in our banking practices it should
present the exact language of the statutes whereby those abuses
are to be corrected.

- 4 -

When the time comes,formulating the new amendment
may give rise to differences of opinion as to how best to
apply these principles.

But I am sure that the Congress

can write a Constitutional amendment which will restore de­
termination and a sense of responsibility to the States and
retain in the Congress power to enact legislation making
available Federal authority for the protection of the dry
States and preventing the return of the saloon.

I
'1

FOR RELEASE, MORNING PAPERS,
Thursday, June 23, 1932.

TREASURY DEPARTMENT

STATEMENT BY SECRETARY MILLS

The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of $100,000,000, or thereabouts,
They will be 91-day bills; and will be sold on a discount basis to the
highest bidders.

Tenders will be received at the Federal Reserve Banks,

or the branches thereof, up to two o’clock p. m. , Eastern Standard time,
on Monday, June 27, 1932.

Tenders will not bo received at the Treasury

Department, Washington.
The Treasury bills will be dated June 29, 1932, and will mature
on September 28, 1932, and on the maturity date the face amount will be
payable without interest.

They will be issued in bearer form only, and

in amounts or denominations of $1,000, $10,000, $100,000, $500,000, and
$1,000,000 (matur ity value).
It is urged that tenders be made on the printed forms and for­
warded in the special envelopes which will be supplied by the Federal
Reserve Banks or branches upon application therefor.
No tender for an amount less than $1,000 will be considered.
Each tender must be in multiples of $1,000.

The price offered must be

expressed on the basis of 100, with not more than three decimal places,
e. g., 99.125.

Fractions must not be used.

Tenders will be accepted without cash deposit from incorporated
banks and trust companies ancl from responsible and recognized dealers
in investment securities.

Tenders from others must be accompanied by

a deposit of 10 per cent of the face amount of Treasury bills applied

-

2-

for, unless the tenders are accompanied by on express guaranty of
payment by an incorporated bank or trust company.
Immediately after the closing hour for receipt of tenders on
June 27, 1932, all tenders received at the Federal Reserve Banks or
branches thereof up to the closing hour will be opened and public
announcement of the acceptable prices will follow as soon as possible
thereafter, probably on the following morning.

The Secretary of the

Treasury expressly reserves the right to reject any or all tenders or
parts of tenders, and to allot less than the amount applied for, and
his action in any such respect shall be final.

Those submitting

tenders will be advised of the acceptance or rejection thereof.

Pay»

ment at the price offered for Treasury bills allotted must be made at
the Federal Reserve Banks in cash or other immediately available funds
on June 29, 1932.
The Treasury bills will be exempt, as to principal and interest,
and any gain from the sale or other disposition thereof will also be
exempt, from all taxation, except estate and inheritance taxes.

No loss

from the sale or other disposition of the Treasury bills shall be allowed
as a deduction, or otherwise recognized, for the purposes of any tax now
or hereafter imposed by the United States or any of its possessions.
Treasury Department Circular No. 418, as amended, and this notice
prescribe the terns of the Treasury bills and govern the conditions of
their issue.

Copies of the circular may be obtained from any Federal

Reserve Bank or branch thereof.

FOR RELEASE, MORNING PAPERS,
Tuesday, June 28, 1932,

TREASURY DEPARTMENT

STATEMENT BY SECRETARY MILLS

Secretary of the Treasury Mills announced to-day that the tenders
for $100,000,000, or thereabouts, of 91-day Treasury Bills, dated June
29, 1932, and maturing September 28, 1932, which were offered on June
23rd, were opened at the Federal Reserve Banks on June 27th,
The total amount applied for was $292,881,000,

Except for three

bids aggregating $149,000 at prices averaging 99,965, the highest bid
made was 99,939, equivalent to an interest rate of about 0.24 per cent
on an annual basis.

The lowest bid accepted was 99.886, equivalent

to an interest rate of about 0,45 per cent on an annual basis.
total amount of bids accepted was $100,466,000,
Treasury Bills to be issued is 99,897.
discount basis is about 0.41 per cent.

The

The average price of

The average rate on a bank


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102