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#534  Date: January MEMORANDUM FOR:  22,  1980  The Secretary  From:  Executive Secretariat7  Subject:  Speech for 1980 Savings Bonds Kick-Off, January 23  Attached at Tab A is your speech which incorporates your edits and a few additional changes we have made.  A scenario of events is attached at Tab B. Additional material giving an update on New York City finance is being prepared and will be provided separately this afternoon.  Initiator Surname  Reviewer  Reviewer  Reviewer  Ex. Sec.  Reviewer  SE:KButton  Initials/Date  Form OS 3129 Department of Treasury   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  /i/rfgt  /  /  /  /  j  /  $ £3>Y  V MEMORANDUM FOR.  Date:' |6 JAN  igsj  SECRETARY MILLER  From-.  Subject:  Initiator  Surname  Initials J Date  Form OS 3129  Department of Treasury  https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  Johnston  Reviewer  Adams  /  Reviewer  Reviewer  Ex. Sec.  Anderson /  y-  Reviewer  /  ~r~  REMARKS OF THE HONORABLE G- WILLIAM MILLER  SECRETARY OF THE TREASURY  BEFORE THE GREATER NEW YORK CITY TAKE STOCK IN AMERICA COMMITTEE  AT THE PLAZA HOTEL, NEW YORK, NEW YORK FOR THE 1980 SAVINGS BONDS KICKOFF  GOOD AFTERNOON LADIES AND GENTLEMEN-  IT IS A PLEASURE TO BE HERE-  THIS IS MY THIRD YEAR OF  ATTENDANCE AT THESE MEETINGS, AND EACH TIME I'VE SEEN THEM FROM A DIFFERENT VIEWPOINT-  IN 1977, I WAS A BUSINESSMAN AND CHAIRMAN OF THE U-SINDUSTRIAL PAYROLL SAVINGS COMMITTEE — A POST ABLY FILLED TODAY  BY MY GOOD FRIEND, BOB KINNEY, OF GENERAL MILLS-  LAST YEAR, I WAS CHAIRMAN OF THE FEDERAL RESERVE BOARD, A  POSITION NOW HELD BY PAUL VOLCKER, WHOM MANY OF YOU KNOWAND THIS YEAR I COME BEFORE YOU AS SECRETARY OF THE  TREASURY.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  STAY TUNED FOR NEXT YEAR-  -2-  UNITED STATES SAVINGS BONDS HAVE BEEN PART OF MY LIFE FOR A  LONG TIME, AS THEY HAVE, I'M SURE, FOR MANY OF YOU-  ALMOST 39  YEARS AGO, ONE OF MY PREDECESSORS, TREASURY SECRETARY HENRY  MORGENTHAU, JR., INAUGURATED THE MODERN BOND PROGRAM WHEN HE SOLD THE FIRST SERIES E BOND TO PRESIDENT FRANKLIN D- ROOSEVELT ON MAY  1, 1941THE DAY BEFORE THAT SALE, A FINANCIAL COLUMNIST WROTE SOME  PROPHETIC WORDS WHICH DESERVE TO BE REPEATED-  THIS COLUMNIST  WROTE: "TOMORROW, IN 16,000 POST OFFICES AND THOUSANDS OF BANKS...DEFENSE SECURITIES COSTING FROM 10 CENTS TO $10,000 WILL  GO ON SALE." '  "THIS STARTS 1941'S DEFENSE LOAN CAMPAIGN.  BEFORE IT IS  COMPLETED — A YEAR OR MANY YEARS FROM NOW — BILLIONS OF DOLLARS WILL HAVE BEEN BORROWED BY THE TREASURY FROM THE LITTLE PEOPLE OF AMERICA.  TENS OF MILLIONS WILL OWN GOVERNMENT BONDS FOR THE  FIRST TIME..." THE COLUMNIST WENT ON TO SAY, AND THIS IN 1941 - "NO MATTER WHAT YOUR INCOME OR FINANCIAL STATE, THERE ARE DEFENSE BONDS  SUITABLE FOR YOUR PURCHASE-•-EVERYONE IS COVERED.•-FROM THE SCHOOL BOY WHO CAN AFFORD A 10 CENT WEEKLY CONTRIBUTION TO THE  WEALTHY INDIVIDUAL...(BUT) THE WEALTHY INDIVIDUALS OF THE NATION ARE OF SECONDARY IMPORTANCE-  COUNTS..."   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  IT'S THE LITTLE FELLOW THAT  -3-  AND THE 1941 COLUMN ENDED WITH THESE WORDS: s "THERE IS NO PARALLEL ANYWHERE IN ALL HISTORY FOR THE  MAGNITUDE OF THE BORROWING DRIVE THAT STARTS TOMORROW IN THIS NATION." I'M DELIGHTED TO KNOW OF AT LEAST ONE COLUMNIST WHOSE PREDICTIONS HAVE COME TRUE.  SINCE THOSE WORDS WERE WRITTEN, OUR COUNTRY HAS GONE THROUGH WARS AND PEACE, PROSPERITY, RECESSION, INFLATION.  THEY WERE WAR BONDS WHEN WE NEEDED A RALLYING POINT FOR OUR  DIVERSE PEOPLES. THEY WERE PEACE BONDS FOR RETURNING G-I-'S, AND MONEY FOR THEM TO START NEW BUSINESSES OR FAMILIESBONDS HAVE IMPROVED LIFE FOR MILLIONS OF AMERICANS BY  SENDING THEM TO SCHOOL, HELPING THEM TO BUY NEW HOMES, GO ON VACATIONS, OR RETIRE WITH MORE DIGNITY AND SECURITY-  UNITED STATES SAVINGS BONDS HAVE BEEN A TRADITION, AN INVESTMENT IN THE COUNTRY, AND AN EXCELLENT WAY TO SAVE-  TODAY,  THEY CONTINUE TO BE ALL OF THESE THINGS AS WELL AS A TIME-TESTED WAY TO RAISE FUNDS FOR ONGOING NATIONAL NEEDS.   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -H-  THE TERMS AND CONDITIONS OF SAVINGS BONDS HAVE CHANGED OVER  THE YEARS-  THIS MONTH, WE ARE INTRODUCING THE NEW SERIES EE  BONDS, WHICH WILL MATURE IN 11 YEARS, WITH 7 PERCENT INTEREST WHEN HELD TO MATURITY-  SERIES EE BONDS ARE SOLD IN DENOMINATIONS  RANGING FROM $50, FACE VALUE, UP TO $10,000-  AND THEY CAN BE  BOUGHT FOR ONE-HALF OF THEIR FACE VALUE, WHICH IS A CHANGE FROM THE 75 PERCENT PURCHASE PRICE OF PREVIOUS SERIES E BONDS. THE 1980 SERIES EE BONDS RETAIN MANY OF THE LONGTIME BENEFITS OF EARLIER SAVINGS BONDS.  THESE INCLUDE THEIR ABSOLUTE  SAFETY AND THE TAX DEFERRAL FEATURES-  BUT THE REAL SECRET OF ANY  GOOD SAVINGS PLAN — THE REAL SUCCESS OF THESE BONDS — IS THE PAYROLL SAVINGS METHOD, WHICH MAKES IT EASY FOR A PERSON TO START, AND EASY TO MAINTAIN, A SYSTEMATIC WAY TO SAVE-  THERE ARE MANY WAYS TO INVEST MONEY YOU NOW OWN, BUT NOT AS  MANY WAYS TO SAVE THE MONEY YOU RECEIVE NEXT WEEK-  THIS IS A  MAJOR REASON WHY ALMOST 10 MILLION AMERICANS USE PAYROLL SAVINGS  PLANSSAVINGS BONDS ARE AN IMPORTANT MEANS OF ENCOURAGING SAVINGS  BY THE MANY AMERICANS WHO CAN AFFORD TO PUT ASIDE ONLY SMALL AMOUNTS AT ANY ONE TIME-  AND IT IS CLEAR THAT WE MUST NOT ONLY  MAINTAIN BUT INTENSIFY OUR EFFORTS TO ENCOURAGE SAVINGS AT ALL  LEVELS-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  '  -5A DECADE AGO, SAVINGS WERE ABOUT 7-4 PERCENT OF DISPOSABLE INCOME-  TODAY THEY HAVE DROPPED TO ABOUT 4 PERCENT.  ACCORDING  TO ONE STUDY, PERSONAL SAVINGS IN 1977 AND 1978, OUTSIDE OF u PENSION FUNDS, TOTALED LESS THAN ONE PERCENT OF PERSONAL AFTER-TAX INCOME.  AND OTHER STUDIES INDICATE THAT ONE OUT OF  FOUR AMERICANS HAVE NO SAVINGS AT ALL-  WE NEED TO ENCOURAGE MORE, RATHER THAN LESS, SAVINGS, AND WE NEED TO DO IT ON A LONG-TERM BASIS-  WITHOUT THE $80 BILLION  OUTSTANDING IN SAVINGS BONDS, THE NATIONAL SAVINGS PICTURE WOULD BE EVEN MORE GRIM-  AND I AM NOT AT ALL CONVINCED THAT, WITHOUT  THE OPTION OF BUYING SAVINGS BONDS, MANY OF THESE PEOPLE WOULD  CONVERT TO OTHER FORMS OF SAVINGS, OR THAT MANY FINANCIAL INSTITUTIONS WOULD SEEK THEIR PAYROLL FUNDS-  BUT I HAVE BEEN ASKED — AND YOU MAY BE TOO — WHY WE CANNOT  COUPLE THE CLEAR ENCOURAGEMENT TO SAVINGS PROVIDED BY THE PAYROLL SAVINGS PROGRAM WITH HIGHER INTEREST RATES - EVEN INTEREST RATES  LIKE THOSE ON INVESTMENT CERTIFICATESPART OF THE ANSWER IS THAT SAVINGS BONDS ARE JUST A DIFFERENT BREED OF CAT.  AS AN INSTRUMENT FOR THE ACCUMULATION OF  THE SMALL SAVINGS OF MILLIONS OF AMERICANS, SAVINGS BONDS INVOLVE ADMINISTRATIVE COSTS THAT WOULD BE EXPECTED TO RESULT IN LOWER  INTEREST RATES THAN THOSE PAID ON LARGE DENOMINATION INVESTMENT  CERTIFICATES OF COMPARABLE MATURITY-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -6BEYOND THAT, SAVINGS BOND INTEREST RATES MUST BE RELATED TO  THE RATES OFFERED ON THE OTHER OPTIONS AVAILABLE TO SMALL SAVERS. ONE OF THESE, OF COURSE, IS PASSBOOK SAVINGS AT BANKS AND SSL'S, 4 NOW PAYING A MAXIMUM OF 5-5 PERCENT- WITH SAVINGS BONDS AT 7  PERCENT, WHEN HELD TO MATURITY, THE DIFFERENTIAL BETWEEN SAVINGS BONDS AND SSL PASSBOOK RATES IS CURRENTLY THE HIGHEST IN HISTORY-  BUT THE OPTIONS AVAILABLE TO SMALL SAVERS ARE CHANGING AND SHOULD CHANGE-  RETURNS TO SMALL SAVERS HAVE LONG BEEN RESTRICTED  BY FEDERAL LAW AND REGULATIONS THAT HAVE PREVENTED SMALL SAVERS FROM OBTAINING MARKET RATES ON THEIR SAVINGS-  THAT IS WHY  PRESIDENT CARTER — CONSISTENT WITH HIS EFFORTS TO REMOVE  UNWARRANTED FEDERAL REGULATIONS AND EXPAND THE SCOPE FOR MARKET FORCES -- HAS RECOMMENDED TO CONGRESS THAT THE DEPOSIT RATE CEILING BE PHASED OUT OVER AN ORDERLY TRANSITION PERIOD-  A CHANGE OF THIS MAGNITUDE CANNOT OCCUR OVERNIGHT-  CLEARLY  IT MUST  PROCEED IN STAGES TO ALLOW THE NECESSARY ADJUSTMENTS IN THE OPERATIONS OF THE NATION'S THRIFT INSTITUTIONS-  BUT EQUALLY  CLEARLY SUCH A CHANGE MUST OCCUR, AND AS IT DOES, IT WILL INEVITABLY AFFECT THE CONTEXT IN WHICH THE SAVINGS BOND PROGRAM  OPERATES. THERE IS AN OLD CHINESE PROVERB, "MAY YOU LIVE IN EXCITING  TIMES-"  THIS WILL BE AN EXCITING AND CHALLENGING YEAR FOR  VOLUNTEERS IN THE SAVINGS BONDS PROGRAM-  THERE IS NO SUBSTITUTE  FOR YOUR PERSONAL LEADERSHIP, AND I URGE YOU TO GET INVOLVED-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  -7YOU MAY RECALL THE STORY OF TWO SHOE SALESMEN WHO WENT ON A  BUSINESS TRIP TO A SOUTH PACIFIC ISLAND-  SHORTLY AFTER ARRIVING,  ONE MAN CABLED BACK "RETURNING IMMEDIATELY- NONE OF THE  INHABITANTS WEARS SHOES-"  INDEFINITELY.  THE OTHER MAN CABLED BACK "STAYING  PROSPECTS ARE TREMENDOUS-  NONE OF THE INHABITANTS  WEARS SHOES-"  BRING YOUR OWN DOUBLE E'S OF ENERGY AND ENTHUSIASM — AND PERSONAL LEADERSHIP - TO THE SAVINGS BONDS EFFORT AND YOU WILL SEE RESULTS.  LET ME TICK OFF AGAIN SOME OF THE ADVANTAGES OFFERED BY SAVINGS BONDS:   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  (1) THE CONVENIENCE OF PAYROLL DEDUCTIONS FOR SAVINGS SMALL  AMOUNTS; (2) AN INTEREST RATE AT LEAST COMPETITIVE WITH OTHER SAVINGS  ALTERNATIVES FOR SMALL, PERIODIC SAVERS;  (3) ABSOLUTE SAFETY AS AN OBLIGATION OF THE U-S- GOVERNMENT;  (A) LIQUIDITY THAT ALLOWS BONDS TO BE CONVERTED INTO CASH IF NEEDED WITHOUT MARKET RISKS TO PRINCIPAL THAT WOULD EXIST ON MARKETABLE SECURITIES;  (5) THE OPTION FOR TAX DEFERRAL OF INTEREST THAT, WITH  COMPOUNDING, GREATLY INCREASES AFTER-TAX YIELDS FOR MANY AMERICANS.  -8-  ANY PROGRAM THAT CAN HELP 15 MILLION PEOPLE YEARLY TO SAVE  - 9-1/2 MILLION ON PAYROLL SAVINGS —  ANY PROGRAM THAT CAN CAPTURE THE IMAGINATION AND EFFORTS OF LEADERS LIKE YOURSELVES -  ANY PROGRAM THAT UNITES AMERICANS IN THIS NEW "PULLING TOGETHER" DECADE OF THE 1980'S —  IS A PROGRAM WITH WHICH I AM HAPPY TO BE ASSOCIATED-  THE  CHALLENGES THIS YEAR FOR YOU WILL BE TO INSURE A SMOOTH TRANSI­ TION TO THE NEW BONDS ON PAYROLL SAVINGS PROGRAMS, AND TO HELP THE PROGRAM AND ITS PARTICIPANTS TO GROW AND PROSPER.  AS WE MEET  THESE CHALLENGES, WE WILL GROW OURSELVES-  ' AND NOW, LET ME ENLARGE THE CANVAS AND BRIEFLY DISCUSS THE GENERAL ECONOMIC PICTURE-   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis  0000  X•  TREASURY SECRETARY G. WILLIAM MILLER JANUARY 23, 1980  11:00  11:30  PRESS CONFERENCE, BAROQUE FOYER, PLAZA HOTEL  11:30  12:15  RECEPTION, BAROQUE ROOM  12:20 12:30  LUNCHEON  1:10  MAYOR EDWARD I. KOCH - REMARKS  1:15  MR. JAMES D. ROBINSON - REMARKS (R. ROBINSON IS CHAIRMAN OF THE BOARD S CEO AMERICA EXPRESS COMPANY, AND NEW YORK STATE VOLUNTEER CHAIRMAN FOR SAVINGS BONDS,)  1:20  SECRETARY MILLER - ADDRESS  1:45  MR. EDWARD F. G IBBONS - CLOSING REMARKS (MR. GIBBONS IS 'IIAIRMAN AND CEO, F.W. WOOLWOR CO. .... YORK CI GEOGRA  1:55  END OF MEETING   https://fraser.stlouisfed.org Federal Reserve Bank of St. Louis