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TREASURY BULLETIN
JEi^AHiMl;.;

Spring Issue

June 1988
Office of the Secretary

Compiled by

Department of the Treasury
Washington, D.C.

Financial
Service

Management

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Bulletin

TREASURY BULLETIN

Office of the Secretary

Compiled by

Department of the Treasury
Washington, D.C.

Financial
Service

The Treasury Bulletin is
U.S. Government

for sale by the

Management

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Printing Office, Washington, D.C. 20402

/n this issue

Items of Special Interest:

ECONOMIC POLICY
" The Direct Revenue

Effects of Capital Gains Taxation:

Time-Series Evidence" (Page

A Reconsideration of the

TAX POLICY
•

Excerpts from "The Effect of the Tax Reform Act of 1986 on Commercial Banks"
(Page 3)
An

analysis of the overall effect of tax reform on the banking industry, which, the study concludes,

benefits from tax reform.

•

The Operation and Effect of the Domestic International
tion:

July

1981, to

June

Sales Corporation Legisla-

30, 1983 (Page 8)

An announcement of the Department of the Treasury's release of the 11th report in a series on domestic
international sales corporations, special corporations eligible for deferral of Federal income tax on part of
their export profits.

MARKET YIELDS
•

Treasury Market Bid Yields
Another
Bulletin.

Constant Maturities, 1982-87 (Page 53)

a series of historical supplements

to regularly

published statistical tables

in the

Treasury

Contents
SPRING ISSUE, JUNE 1988

TREASURY ISSUES
Page

ECONOMIC POLICY
"The Direct Revenue Effects

of Capital

Gains Taxation: A Reconsideration of

tfie

Time-Series Evidence"

TAX POLICY
Excerpts from "The Effect of the Tax Reform Act of 1986 on Commercial Banl<s"

The operation and

effect of the

domestic international sales corporation

legislation; July 1,

1981, to June 30, 1983

FINANCIAL OPERATIONS
FEDERAL FISCAL OPERATIONS
Analysis

-Budget

results for the

FFO-1. -Summary of

fiscal

second

quarter, fiscal

1988

operations

..'...•.".

Chart-Monthly receipts and outlays

15
16

FFO-2-On-budget and off-budget receipts by source
Chart— Budget receipts by source
FFO-3— On-budget and off-budget outlays by agency

17
19

FEDERAL OBLIGATIONS
FO-1 -Gross obligations incurred within and outside the Federal Government by object class
FO-2. -Gross obligations incurred outside the Federal Government by department or agency

Chart— Gross Federal

obligations; gross Federal obligations incurred outside the Federal

ACCOUNT OF THE

U.S.

UST-1 —Elements

changes

Government

22
23
25

TREASURY
in

Federal Reserve and tax and loan note account balances

FEDERAL DEBT
FD-1. -Summary of Federal debt

FD-2. -Interest-bearing public debt

FD-3. -Government account series

FD-4. -Interest-bearing securities issued by Government agencies

FD-5— Maturity distribution and average length
FD-6— Debt subject to statutory limitation

marketable interest-bearing public debt held by private investors

Chart— Average length of the marketable debt
Chart— Private holdings of Treasury marketable debt by maturity
FD-7— Treasury holdings of securities issued by Government corporations and other agencies

TREASURY FINANCING OPERATIONS

34
35

PUBLIC DEBT OPERATIONS
PDO-1 -Maturity schedule
Treasury

bills

of interest-bearing

outstanding

marketable public debt securities other than regular weekly and 52-week

Contents
Page
PDO-2.-Offerings of

bills

PDO-3.--Public offerings of marketable securities other than regular weekly Treasury

PDO-4. --Allotments by investor classes
U.S.

for public

bills

marketable securities

SAVINGS BONDS AND NOTES

SBN-1 .-Sales and redemptions by
SBN-2. -Sales and redemptions by

SBN-3

series, cumulative

period,

all

bonds and notes combined

series of savings

-Sales and redemptions by period, series E, EE, H, and

OWNERSHIP OF FEDERAL SECURITIES
OFS-1

-Distribution of Federal securities by class of investors

OFS-2. -Estimated

and type

of issues

ovi^nership of public debt securities by private investors

MARKET YIELDS
Treasury market bid yields at constant maturities,

982-87

MY-1 -Treasury market bid yields at constant maturities: bills, notes, and bonds
Chart— Yields of Treasury securities
MY-2. -Average yields of long-term Treasury, corporate, and municipal bonds by period
Chart— Average yields of long-term Treasury, corporate, and municipal bonds

55
56

FEDERAL AGENCIES' FINANCIAL REPORTS
59

FA-2. -Direct and guaranteed loans
Chart— Direct and guaranteed loans

INTERNATIONAL STATISTICS
INTERNATIONAL FINANCIAL STATISTICS
IFS-1

— US

reserve assets

IFS-2. -Selected U.S. liabilities to foreigners

IFS-3 -Nonmarketable U.S. Treasury bonds and notes issued to

official institutions

and other residents

of foreign countries

68
69

IFS-4 -Weighted average of exchange rate changes for the dollar

CAPITAL MOVEMENTS
LIABILITIES

TO FOREIGNERS REPORTED BY BANKS

CM-l-1 .-Total

liabilities

Chart— Liabilities

THE UNITED STATES
72

by type of holder

to foreigners

CM-l-2. -Total

liabilities

by type, payable

CM-l-3.-Total

liabilities

by country

CM-l-4. -Total

liabilities

by type and country

dollars

CLAIMS ON FOREIGNERS REPORTED BY BANKS

THE UNITED STATES

CM-ll-1 -Total claims by type

Chart— Claims on

foreigners

CM-ll-2 -Total claims by country
CI^-ll-3. -Total

claims on foreigners by type and country reported by banks

the United States

Contents
Page

SUPPLEMENTARY LIABILITIES AND CLAIMS DATA REPORTED BY BANKS
CM-lll-1.-Dollar claims on

THE UNITED STATES

nonbank foreigners

CM-lll-2. -Dollar liabilities to,

LIABILITIES TO,

and

dollar claims on. foreigners

81
in

countries

and areas not reported separately

AND CLAIMS ON, FOREIGNERS REPORTED BY NONBANKING BUSINESS ENTERPRISES

THE UNITED STATES
CM-IV-1, --Total

liabilities

and claims by type

CM-IV-2 -Total

liabilities

by country

CM-IV-3. -Total

liabilities

by type and country

CM-IV-4— Total claims by country
CM-IV-5.-Total claims by type and country

TRANSACTIONS IN LONG-TERM SECURITIES BY FOREIGNERS REPORTED BY BANKS AND BROKERS
THE UNITED STATES
CM-V-1 -Foreign purctiases and sales

long-term domestic secunties by type

CM-V-2 -Foreign purcfiases and sales of long-term foreign securities by type
CM-V-3.-Net foreign transactions in long-term domestic securities by typ>e and country
Chart— Net purchases of long-term domestic securities by selected countries
CM-V-4. -Foreign purchases and sales of long-term securities, by type and country, latest date
CM-V-5— Foreign purchases and sales of long-term securities, by type and country, latest year

87
IN

88
88
89
90
91

FOREIGN CURRENCY POSITIONS

SUMMARY POSITIONS
FCP-l-1 -Nonbanking firms' positions

FCP-l-2 -Weekly bank positions

CANADIAN DOLLAR POSITIONS
FCP-ll-1

FCP-ll-2

—Nonbanking firms' positions
-Weekly bank positions

95
95

GERMAN MARK POSITIONS
FCP-lll-1— Nonbanking
FCP-lll-2

firms' positions

-Weekly bank

positions

96
96

JAPANESE YEN POSITIONS
FCP-IV-1 -Nonbanking firms' positions

FCP-IV-2 -Weekly bank positions

SWISS FRANC POSITIONS
FCP-V-1 -Nonbanking

firms' positions

FCP-V-2.-Weekly bank positions

98
98

STERLING POSITIONS
FCP-VI-1

-Nonbanking

firms' positions

FCP-VI-2— Weekly bank

positions

99
99

Contents
Page
U.S.

DOLLAR POSITIONS ABROAD

FCP-VII-l.-Nonbanking

firms' foreign subsidiaries' positions

FCP-VII-2.-Weekly bank foreign

office positions

100
100

EXCHANGE STABILIZATION FUND
ESF-1. -Balance sheet

103

ESF-2.-lncome and expense

103

SPECIAL REPORTS
U.S.

CURRENCY AND COIN OUTSTANDING AND

NotB.-Detaiis of figures

Abbreviations:

may

not

add

to totals

because

CIRCULATION

of rounding.

represents Revised, p Preliminary, n.a. Not available.

109

VII

Nonquarterly Tables and Reports
For the convenience of the Treasury
in which they appear

Bulletin user, nonquarterly tables

and reports are

listed

below along

with

the issues

Issues
Winter
Federal Fiscal Operations
FFO-4. --Summary of internal revenue collections by States and other areas

Federal Agencies' Financial Reports

FA-5. -Report on cash flow

V
V
V
V

FA-6 --Report on reconciliation

FA-1 ."Report on financial position
FA-3. -Report on accounts and loans receivable due from the public
FA-4. -Report on operations

Capital l\/lovements
CM-lll-2— Dollar

and

liabilities to,

dollar claims on, foreigners

countries

and

areas not regularly reported separately

Special Reports
Consolidated Financial Statements of the United States Government

Statement

of Liabilities

and Other

Financial

Commitments

States Government
Trust

of the United

Fund Reports:

Airport

and ainway

Asbestos

trust

Black lung
Civil

trust

fund

disability trust

service retirement

and

disability

fund

Federal disability insurance trust fund
Federal hospital insurance trust fund
Federal old-age and survivors insurance trust fund

Federal supplementary medical insurance trust fund

Harbor maintenance

trust

fund

Hazardous substance superfund

Highvi/ay trust fund

Inland w/aterwaysArust fund

Leaking underground storage tank
National service

life

trust

fund

insurance fund

Nuclear waste fund
Railroad retirement account
Reforestation trust fund

Unemployment trust fund
Investments of specified

trust

accounts

Sprmg

Summer

Fall

Treasury Issues

THE DIRECT REVENUE EFFECTS OF CAPITAL GAINS TAXATION:
A

Among
as

its

the

many

important topics

influence on stock market

inflation,

Reconsideration of the Time-Series Evidence

volatility

capital gains tax law,

the issue of revenue estimation

greatest controversy

such

or the proper treatment of

revenue will be lost if capital gains tax
reduced from current levels, could provide even stronger

cited as evidence that

rates are

support

remains the subject

for the

opposite view.

IVIore definitive results

and debate. Researchers and policymakers

continue to dispute whether instituting a percentage exclusion

been

await a more

sophisticated analysis of capital gains realizations behavior, which

believe should build on the detailed cross-sectional analysis

for

long-term gains, or placing a cap on the marginal tax rate, would

increase or decrease Federal income tax revenues.

presented

the Treasury report.

Reconsideration of the 1985 Treasury Report Time-Series
Analysis
I.

Accurate revenue estimation requires an understanding of the
degree of taxpayer responsiveness to tax rate changes. On this
issue,

however, the econometric evidence has been viewed as

mixed. There have been a number of cross-sectional or panel stud-

most

ies of tax-return microdata;

of these

have estimated a

relatively

high elasticity of realizations with respect to the marginal capital

gains tax rate. Consequently, these studies imply that the Federal

revenues obtained

directly

enhanced by reducing
remainder of

this

from the taxation of capital gains could be

rates from their current high levels. (In the

paper

will

In this section, the time-series specification presented in the
1985 Treasury report is reestimated and resimulated, first using the
1954-82 sample data base, second using data revisions

original

analyze only these d/recf revenues.)

published
report

Opponents

of capital gains rate reductions,

series regressions. For example,

Report to Congress on the Capital Gains Tax Reductions of 1978,
revenue simulations of the 1978 Revenue Act and the 1981 Economic Recovery Tax Act (ERTA) using time-series parameter estimates were much less favorable than alternative simulations based
on cross-section estimation. Joseph f^inarik of the Urban Institute
has recently testified that these results are definitive proof that a
capital gains tax rate reduction would result in revenue loss ("Raising
Federal Revenues through a Reduction in the Capital Gains Tax,"
statement before the Ad Hoc Committee on the Taxation of Capital
Gains, February 2, 1988). Jane Gravelle has also used the Treasury
report and other time-series results to argue against a rate cut ("Will
Reducing Capital Gains Taxes Raise Revenue?," Tax Notes, July
27, 1987). IVIore recently, the Congressional Budget Office (CBO)
has released a report entitled How Capital Gains Tax Rates Affect
Revenues: The Historical Evidence, in which realization parameters
are estimated using time-series regressions and simulated using
microdata.
loss
1

The simulations

would be

likely to result

the

CBO

study imply that a revenue

from lowering the top marginal rate

new data. The

Reestimation with
original

1954-82 Treasury data

were not
only

OLS

statistically significant for

estimates.)

The

variable

not contend our results are definitive.

OLS and

any

of table

displays

refer to the real

and

CSTK

billions of dollars,

estima-

report

are those taken from the

the

change

components
represents the change

inflationary

net

CRGNP and
GNP change

the value of

capital gains realizations in millions of current dollars,

CIGNP

reported

(IV)

IV parameter values

our regressions,

names

Treasury report: the dependent variable

household corporate stock holdings in billions of dollars, and CTX
and CTX(-I) refer to the current and lagged changes in the capital

Column 2 presents estimates of the same specificabased on revised 1954-82 data from the National Income
and Product Accounts and the Flow of Funds accounts. (An appendix displays the revised and updated data used to analyze the Treasgains tax rate.
tion but

ury model.)

The

1
and 2 demonstrate that data revisions
GNP and corporate equity variables are
as expected, tvlore importantly, in both
regressions a percentage-point increase in the marginal tax rate is
estimated to reduce realizations by almost $1.7 billion in the first

results

little

columns

importance.

significantly

When we use

year.

effect indicated

The

positive,

revised data, the second-year offsei

CTX

by the lagged

$843

coefficient

These

($970

million vs.

to the

Treasury report's estimates of $1,705

million).

John

in this

somewhat

tax

larger

tax rate effects are also close
billion

and $814

million.

was prepared principally by Michael R. Darby
Economic Policy), Robert Gillingham, and
Greenlees (Director and Deputy Director, respectively, of the

This report

we do

column

first

set. (Coefficients originally

Since the differences between

(Assistant Secretary for

Please note that

also present

by the Treasury were obtained via instrumental variables
tion.

reductions

Rather, they demonstrate that time-series analyses, which have

to identify seri-

the basic regression specification,

ordinary least squares (OLS) coefficient estimates derived from the

all

In this paper we reconsider the time-series evidence presented
in the Treasury and CBO studies. First, we build upon the Treasury
work by using revised and more recent aggregate data, and by improving the specification of the regression model. Second, we present historical simulations based on the CBO regression model,
using the Treasury approach to revenue simulation instead of the
CBO's, which we consider to be inappropriate. Both of these analyses have the effect of transforming the implications of the time-series
research: that is, our results are much more in line with cross-section
evidence in implying a relatively low revenue-maximizing tax rate
and a more favorable revenue effect from proposed tax rate

written. Finally, since hindsight allows

Treasury tax rate variable but with several alternafunctional forms taken from the 1988 CBO study.

are of

5 percent.

then extend the regression sample through

results using the

on the other hand,

the 1985 Treasury Department

was

ous problems
tive

point to the apparently contradictory implications of published time-

later.

1985, adding 3 years of data that were not available at the time the

Office of Applied Econometrics).

2-1

Column 3

of table

through 1985, but

tells

reports

a very

on the same

specification

different story

data points added, the coefficient on lagged

extended

With three additional

CTX becomes

small and

The long-run impact of a percentage-point
change, as measured by the difference between the two
coefficients, increases from $714 million in column 2 to $1,294

statistically insignificant.

tax rate

CTX

column

billion in

As we

will

demonstrate below, this has important
1978 and 1981 tax law

implications for the estimated impacts of the

changes.

difficulty

change
CIGNP,

with the Treasury regression specification

that the

component

with no apparent intuitive meaning;

nega-

several sample years of positive inflation, and would be non-

zero outside the base year even

avoid this problem by redefining
multiplied by the

there

were no

CIGNP

percentage change

CRGNP be the residual growth
GNP change in current dollars,

variable

price

change

as lagged nominal

1954-85 sample period are shown

We
GNP

GNP deflator, and letting
CRGNP then measures real

the

which seems a more useful

present purposes. The results of

for

GNP

change is anomalous. As
component of GNP, CRGNP, is the

decomposition of

the Report, the real
constant (1972) dollars, while the inflationary component,
the remainder of the nominal change. This produces an

inflationary
tive in

this

the last

definition

modification using the

column

of table

The

improves in terms of R and D-W statistics as compared to the Treasury report specification in column 3
The inflationary change vanable is, perhaps surprisingly, now insignificant, while the tax rate effect becomes even more pronounced.
The total effect on realizations of a percentage-point rate change is
now estimated as $1 .744 billion after 2 years.
statistical

fit

of the equation

of the new coefficient estimates are demonstrated
which approximates the simulation methodology used in
table 4 12 of the Treasury report to estimate the year-by-year revenue effects of the 1978 and 1981 tax acts. The columns of the table
show simulated revenue gains or losses from the tax law changes
based on the four sets of regression coefficients reported in table 1

The impacts

table

this is entirely

regression

artifact of the

nominal and linear rather than real and
logarithmic terms. As noted above, the coefficients in the Treasury
report imply that a 1 -percentage-point change in the marginal capital
gains rate decreases realizations by $1,705 billion in the first year;
the long-run impact is $891 million. Because these effects do not
in

vary with the magnitude of realizations, the equation has the im-

an increase from 25 to 30 percent in the tax
1957 would have been sufficient to entirely eliminate realizations, since actual realizations were only about $8.1 billion. By 1985.
when realizations were $171 billion, the tax rate could have gone to
100 percent with a permanent loss in realizations of only about 42
plausible implication that
rate in

real-inflationary

defined

However,

specifications.

model's formulation

percent.

One

could object that

unfair to criticize the report by apply-

ing regression coefficients to
fact

extreme data points. However, this is in
what the Treasury revenue simulations themselves do. The

functional form of the regression forces the elasticity of realizations
with respect to the tax rate to decline by almost

70 percent between
1978 and 1982, since the same absolute impact is applied to a larger
denominator of total nominal realizations. (As shown in figure 1 the
,

absolute value

parameters

the

1980 and 0.38

point

first-year

the Treasury report

falls

elasticity

from 1.15

report simulated revenue impacts by comparing

in each year to estimates of the
revenues that would have been achieved in that year under prior tax
regimes The hypothetical alternative revenues were obtained by first
using parameter values to estimate total capital gains realizations,
then using historical data by six income groups to calculate revenues
given realizations Not having access to all of the historical data, we
modified the second step, calculating aggregate simulated revenues
in a manner which is methodologically and empirically equivalent to
the Treasury's income group method.

actual capital gains tax revenues

The major

Implication of table 2

that extension of the regres-

sample through 1985 sharply increases the estimated revenue
gains from the 1978 Act. In particular, Minarik's assertion that "by
1980, the revenue gain from the 1978 law had essentially
evaporated" is only true when the incomplete sample is used. Based
on column 3 of the table, the 1978 rate cuts increased revenue significantly until 1982; in column 4 the gains are even larger and continue through 1984. Ivleanwhile, the extended sample and superior
GNP decomposition also yield much less severe revenue losses
from ERTA than do the regressions based on 1954-82 only. When
both adjustments are made, we estimate that the combined effect of
the two laws was a direct revenue increase of $4,692 billion.
sion

the

to 0.61 in

1982.) Therefore, simulations applied to 1978-82

necessarily underestimate the revenue gains from a rate cut (or
overestimate the gains from a rate increase). For the same reason,
the Treasury simulation methodology

year deterioration

induces a year-to-

artificially

the impact of the 1978 and 1981 acts.

Alternative functional forms The Treasury regression equation
can be improved through price deflation and logarithmic transformation of variables To accomplish this, in table 3 we present estimates
based on 1954-85 data, using the Treasury measures of capital

gains realizations and marginal capital gains tax rate but with four
alternative functional forms taken from table

The dependent
gains,

the

PRICE

variable

RCG

A-3

of the

logarithm

the logarithm of the

CBO

study.

the logarithm of realized capital

GNP

price deflator,

RGNP

the

and RLSTKS

the end-of-year stock of household

corporate

shareholdings minus PRICE.

The equations differ in their inclusion of the marginal tax rate
MTRTRES, as in column 1, or a transformation of that variable In
column 2 ATRTRES is the logarithm of the after-tax share -i.e., one
minus the marginal tax rate. The quadratic model in column 3 includes both MTRTRES and its square MTRTRESQ, while the
constant-elasticity form in column 4 uses the logarithm of the marginal tax rate, LMTRTRES. (The purpose of the TRES suffix is to
emphasize that the tax rate variable is the marginal tax rate for high
income taxpayers used in the Treasury report rather than the average effective marginal tax rate on all capital gains employed in the
CBO study It might be argued that the CBO tax rate is more appropriate.
simplifies

section

Use of the CBO functional forms with the Treasury tax rate
comparison with the actual CBO regressions analyzed in
tielow.)

The choice
the explanatory

of the tax rate variable

power

has essentially no impact on

of the regression; the

summary

table 3 are virtually identical. Despite the similarity

statistics in

explanatory

power, however, the four specifications do not all imply the same
relationship between the level of the marginal tax rate and the elasticity

Reconsideration of the Treasury specification. The careful
reader will have noted the other implication of table 2: the estimated
budget effects of both acts deteriorate noticeably over time. In particular, their combined effect is highly negative by 1985 under all four

1978

will

logarithm of constant-dollar gross national product,

The Treasury

implied

of realizations with respect to

graphs

this pattern for

each

changes

this level.

of the equations. Specifications

Figure 2
1

and

3 yield similar positive relationships between the marginal tax rate
and the realizations elasticity, while specification 4 estimates a constant elastidty of -0.672.

2-2

table 2 for the

Table 4 repeats the simulation analysis of

redefined specifications. Substitution of the logarithmic functional

Unfortunately,

levels.

argument

this

parameter values used

CBO

the

ignores

form yields more favorable revenue impacts for both the 1978 and

aggregate, not micro-level, regressions.

1981 acts than does the Treasury specification. In all four simula1978 act is a consistent direct revenue gainer, and even
ERTA has direct revenue-enhancing effects after 1981. For every

would respond

tions the

year

the simulation, the total revenue impact of the two laws

highly favorable despite the significant reduction

from the

II.

CBO Capital

Reconsideration of the

Gains Realizations Study

032 reduction

The

central conclusion of the

1988

CBO

study, or at least the
is

that

a reduction

the top capital gains tax rate to 15 percent would very likely lose tax

revenue relative to the tax schedule imposed under the 1986 Tax
Reform Act (TRA). By contrast, in our above analysis we found that
historical simulation of the CBO functional forms applied to the
Treasury data set yields positive estimated revenue gains from previous capital gains tax cuts. There are several possible explanations
for this apparent anomaly, and in this section we will examine each

the

CBO

uses a different measure of the effective tax rate than does the
Treasury. In particular, the Treasury variable applies only to highincome taxpayers, while the CBO's is a weighted average of estimated rates for six Adjusted Gross Income groups. This difference is
potentially important, since tax rates have not always moved in parallel for rich and poor taxpayers. The Treasury regression model also
differs from the CBO's in that the former includes short-term as well
as long-term capital gains realizations in the dependent variable.
However, it appears that these two distinctions do not change the
qualitative results of the revenue simulations.
Table 5 repeats the simulation experiment of table 4

for the four

case using the tax
and parameter estimates taken from the CBO study.
is a solid revenue gainer, and ERTA gains revebut the quadratic specification. The combined effect of

alternative regression specifications, but in this
rate variable

parameter

far

positive for

and

specifications,

all

though much smaller

table 4. Apparently, the particular choice of

realization variable

does not

Characteristics of

tions

that the

proposed

CBO

rate reductions.

A second

and 1981 acts provide no guide

that case, simulations of the

to future

revenue

inspection this explanation also appears to have

effects.

little

that

1978

Upon close

basis.

rate variable used in the CBO study fell from 22.7
1978 to 14.8 in 1982 and 13.9 in 1985. Our results above
revenue gains from this change. The CBO also estimates
that the marginal capital gains rate under TRA is 25.4 percent. This
suggests that a rate reduction to a level around 1 5 percent would
also increase direct revenue. That is, the post-1978 experience appears to offer a reasonable guide to the evaluation of proposed rate

The marginal

percent

indicate

revenue implications

explanation for the contrasting

the difference between the

CBO's

micro-level

technique and our (i.e., approximately the Treasury
aggregate method. Ordinarily, it might be assumed that
microsimulations are preferable, since they take account of the distributions of incomes, gains, and tax rates as well as their average
simulation
report's)

would not be 00321

CBO

Individual

specifications

logarithmic

do not add up

employment

that they require

of the

response

outside the range of estimation. Specifically, the

zation elasticities at higher tax rates (This
figure A-1 of the

CBO

CBO study and

phenomenon

implicit in

our figure

reali-

is illustrated

2.)

To summarize, we feel that the contrast between our favorable
revenue simulations and the CBO study's more negative conclusions
is a result of the difference between our simulation methods. While
we do not argue that the Treasury simulation approach is perfect, the

method

internally inconsistent at the theoretical level.

use

parameter values in
microsimulations; cross-sectional simulation requires an individual
response model, not an aggregate model
to

their

time-series

Interpretation of Time-Series Regressions

That our results imply revenue increases from tax reductions

may seem
an

summary comments on

surprising, given previous

series capital gains studies.

Jane Gravelle,

elasticity of realizations with

value less than one

respect to

time-

example, noted that
the tax rate "with an absofor

would indicate that small increases in tax
revenue gains." Gravelle then characterizes the
Treasury time-series results as implying an elasticity of -0.77, and a
previous CBO analysis a considerably smaller -0.25. These values
lute

rates

are

would

result in

much lower

than the typical elasticities estimated from cross-

sectional regression work.

However, Gravelle's
elasticities

rate

elasticity criterion

computed from regression

some marginal

concept

was 16.7

misleading because

coefficients usually refer to

tax rate variable, while the unitary elasticity require-

refers to the

different
final

repre-

microsimulations, however, because they imply very different

ment

reductions.

Simulation mettiod. The

simulations

power. They can be expected to have very different implications

pos-

study's unfavorable revenue simula-

proposed 15-percent cap represents a change

outside histohcal experience.

This

CBO

ranges between approximately 14 and 23 percent during the estimation period By contrast, the most important taxpayers
in their simulations will have tax rates at the 28- or 33-percent level
under TRA. As noted in the CBO study, the four functional forms in
our table 3 are indistinguishable in terms of historical explanatory

III.

tlie

the

affect the qualitative implica-

tions of the regressions.

sible explanation for the

used

rate variable

inappropriate

rate

each taxpayer, a

second, and perhaps even more serious, problem with the

simulations

CBO

than those reported

that, for

versa.

nue under

the two acts

assume

the marginal tax rate on gains results

to an
aggregate logarithmic relationship. Therefore, the CBO simulation
model cannot be correct if its regression model is correct, and vice

Again, the 1978 act
all

rate

relationships such as the

A
and realizations. As noted above,

clear,

the individual taxpayer level, the log of realizations

on the tax

cient

CBO
of tax rates

infer

a function of the level of the marginal tax rate. If this were true, however,
and one estimated a time-series regression of the logahthm of total
realizations on the marginal tax rate and other variables, the coeffi-

in turn.

Measurement

the

that

inapprophate to

the logarithm of realizations

sentative of the operational assumption
that, at

conclusion that has received the most attention,

argument

this

-percentage-point change

fact

CBO's aggregate regressions how individual taxpayers
to changes in capital gains tax rates.

To make

marginal rates.

the

simulations were taken from

average

capital gains tax rate, a considerably

both level and

percent,

compared

variability. In

1980 the average

tax

18 6 percent for the effective

used in the CBO study and 26 7 percent for the marused in the Treasury report. By 1983, the average rate had
fallen by about one-tenth, while the marginal rate measures had
fallen by roughly one-quarter. As a result, even though capital gains
realizations may be inelastic with respect to the marginal rate, the
rate variable

ginal rate

2-3

elasticity of capital

gains tax revenues can still be negative. Indicata revenue-enfiancing rate reduction. Tfiis is not

been on taxpayers with gains. The implicarevenue estimates apply only to those taxpayers. In each

sectional analyses has

ing the possibility of

tion is that

a theoretical possibility but, In fact, the empirical conclusion that
can be drawn from our regression and simulation results.

year, however,

just

There are a number

economic explanations

for these mathewe analyzed did not reduce the
marginal tax rate by the same proportion for each taxpayer. Second,
even for a given taxpayer, average and marginal tax rates did not

some taxpayers

declare net long-term losses. Any

have direct revenue-enhancing results
some reason increase their losses in response

rate reduction will

do not

for

taxpayers
lower tax

rates.

matical results. First, the tax cuts

have
rate

change

schedule

proportionately,

much more

elastic at high than low

rates This relationship implies that a proportionate reduction

mar-

ginal tax rates will increase the share of gains taxed at the highest
rates, so the

average tax rate

falls

less than proportionately.

long

as revenue gains at high rates predominate over revenue losses

lower rates, Gravelle's criterion on the realization elasticity need not

be met

for

a tax rate cut

Conclusion

because

Finally, cross-sectional

gains realizations are generally

of movements along the
evidence reveals that capital

IV.

inaease revenues

Thus, the revenue impact of a tax law change cannot be determined merely by examining regression coefficients. That is why both

Minarik's view, the revenue estimates from time-series regression
more meaningful" than the cross-sectional estimates
which "make no use of the actual experience following the recent tax
In

are "much

cuts."

also inappropriate to

CBO and Treasury regression
and cross-section regression
ables are used in each study.

compare

directly the

elasticities, or to contrast time-series
elasticities,

since different rate vari-

Summarizing the time-series

also Important to note that several factors are outside the

scope of all of the analyses discussed in this paper First, the regressions treat both GNP and the level of household equity holdings as
exogenous This ignores the effect of lower capital gains rates on
both economic growth and capital asset prices Results presented in
the Treasury report indicated that the impact of tax rates on the stock
market had an important revenue effect that should not be ignored. It
is

he argues

that

"The 1978

nue pickup." while "the 1981 capital gains tax cut was a revenue
loser from day one " In sum, "the heart of the issue is revenue. And
is no doubt."

here, there

This paper demonstrates that updating the Treasury sample to
reflect

even more recent "actual experience" reverses Minarik's conWhen we extend the original Treasury regression specifica-

clusions.

through 1985, the results imply that the 1978 act produced large
and continuing direct revenue gains Extension of the sample and
tion

correction of a flaw
It

results,

law experience thus gives no backing to claims of an ongoing reve-

reports included revenue simulations as part of their analysis of

time-series results

recent statement. Joseph Minarik of the Urban Institute

In his

takes a strong stand for using the Treasury time-series analysis as
the definitive empirical basis for rejecting capital gains preferences.

ary

GNP

the Treasury report's

measurement

of inflation-

dramatically reduce the estimated losses from the 1981

changes. Finally, substitution of cleariy superior regression specifications taken from the 1988 CBO study yields the conclusion that both

were significantly revenue-enhancing. We further find that the
CBO's own conclusion that capital gains preferences would be likely

acts

to lose

revenue

essentially an artifact of their simulation method,
a straightforward implication of their regressions.

rather than being

also reasonable to expect a further indirect revenue impact from

the positive

growth

supply-side impact of rate reductions on economic

general

ness

Second, the impact of any differential taxation of capital gains
on tax revenue from other income sources is also outside the scope
of all the analyses we consider. Taxpayers might adjust the mix of
capital gains and ordinary income when the difference between the
capital gains and ordinary income tax rates changes. Capital gains
tax rate changes would then have an indirect impact on tax revenue
from, for example, dividend income, partially offsetting the direct
impact on capital gains tax revenue.
Finally,

the standard focus of both

contrast to Minarik,

we do

not argue that our time-series

regressions provide conclusive evidence on taxpayer responsive-

time-series

and cross-

to capital

gains tax laws.

In fact,

regressions, with their large sample sizes

demographic

detail,

believe that cross-section

and

are the most reliable bases

the results presented here

do indicate

that

detailed wealth
for inferences.

when

the

and

What

sample

extended to fully reflect the experience of the 1980s, Minarik's own
line of argument leads to a conclusion opposite to his: namely, that
the time-senes data, like the cross-section data, provide consider-

able evidence supporting the likelihood of direct revenue gains from
reductions

In capital

gains tax rates.

2-4

TABLE

2-5

TABLE

2-6

2-7

FIGURE

Treasury Elasticity Estimates by Year

2-8

APPENDIX
TREASURY MODEL DATA

EXCERPTS FROM "THE EFFECT OF THE TAX REFORM ACT OF 1986 ON
COMMERCIAL BANKS"
by Thomas

Neubig and Martin A. Sullivan

INTRODUCTION
Before
fiad

Commercial banks are generally subject

tax reform, several studies concluded that commercial

banks seemed likely
candidates for tax reform, and subsequently they have been cited as
one of the industries most adversely affected by the Tax Reform Act
of 1986. Revenue estimates indicate that commercial banks will pay
an additional $4 billion in taxes over the next 5 years. Like most
estimates quoted during tax reform, this figure only includes the
banks

low effective

tax

rates.

Tfius,

to the same tax rules
other corporations. For instance, the corporate rate structure,

all

the alternative

minimum

tax,

depreciation rules apply to

were changed

rules

and the investment

tax credit

and

corporations. Several bank-specific tax

all

tax reform: the

bad debt reserve deduction,

the deduction for interest incurred to carry or purchase tax-exempt

bonds, the cash method of accounting, and the net operating loss
In addition, the book income preference of the
alternative corporate minimum tax will affect many commercial
carryover rules.

effects of bank-specific provisions.

This paper analyzes the overall effect of tax reform on the
banking industry and shows that the banking Industry benefits from

We estimate that as a result of tax reform commercial
banks will pay more Federal income tax. However, their before-tax
income will rise by more than the increase in taxes, with the net
result of an increase in after-tax income. Pre-tax earnings rise
because of portfolio shifting from tax-exempt bonds to taxable

banks because book income includes
holdings of tax-exempt bonds.

from their large

interest

tax reform

investments. This combined with the reduction

A. Bank-Specific Provisions

the corporate tax

46 percent to 34 percent more than offsets the loss
bank-specific tax advantages.
rate from

section

In this

both under prior law

look at each of these bank-specific provisions
and under the Tax Reform Act of 1986.

Bad Debt Reserve Deductions

of
a. Prior

paper, a banking model with individual bank data from
1977 to 1984 simulates the effects of tax reform on the banking

Law

In this

industry. Aggregate tax
revenue cannot be calculated from
aggregated data. A disaggregate model of individual banks is
necessary because a model using only aggregate data cannot
calculate the effects of the minimum tax, tax-exempt bond holdings,
and the amount of the tax bad debt reserves on individual banks.

Under prior law, banks could deduct loan losses using one of
three methods: the specific chargeoff method, the experience
reserve method, and the percentage of eligible loan reserve method.
The specific chargeoff method permits deductions when the loans
are considered either wholly or partially worthless.
principal

recovery

The model extrapolates the 14,400 banks' income statements
and balance sheets through 1991 and calculates Federal tax liability
and after-tax income before and after tax reform. The model allows
the separate estimation of the effects of each of the major tax reform
provisions affecting banks, including recapture of existing bad debt
reserves and the adjustment to new levels of tax-exempt bond
b.

holdings.

The paper has

five additional

sections.

The second

section

explains the tax reform provisions most directly affecting commercial

banks. The third and fourth sections describe the model and data

used

for the simulations.

results

The

fifth

section presents the simulation

the effects of tax reform as well as

some

of
is

such a loan

then included

later recovered,

the

part or

all

amount

of the
of

the

the bank's taxable income.

Tax Reform

The Tax Reform Act repealed both reserve methods for bad
for "large" banks. Banks with more than $500 million

debt deductions
in

assets (or that are part of a consolidated group with more than

$500

million in assets)

"Small" banks

may

still

must now use the specific chargeoff method.
use the experience reserve method and, until

sensitivity

changes to the key parameters. The final section includes
a discussion of some limitations of the simulations and some future
analysis of

lines of research.

TAX REFORM PROVISIONS AFFECTING COMMERCIAL
BANKS

its scheduled expiration
method.

1988, the percentage of eligible loan

The bad debt reserve deduction was repealed for nonfinancial
as well as large banks. The reserve method generally

institutions

II.

accelerated deductions so they are received prior to the year

TAX POLICY
which the loss would be determined under the "all events test." Thus,
bad debt losses were allowed more generous tax treatment than
other expected future losses, such as product liability claims.
Acceleration of future loss deductions is the equivalent of the
Government making interest-free loans to banks of the amount equal
to the current tax rate

purchase or carrying of tax-exempt obligations.
If
10 percent of a

attributable to the

The disallowance applied on a pro rata basis.
bank's assets are tax-exempt bonds acquired

after 1982, then 2
percent (10 percent times 20 percent) of interest deductions are
disallowed.

times the amount of the existing tax reserve.
of "large"

The Tax Reform Act increases the disallowance percentage to
100 percent for tax-exempt bonds acquired after August 6, 1986.

banks, the act requires the recapture of their existing bad debt
reserves into taxable income. In general, the recapture of existing tax

Exceptions are provided for public-purpose tax-exempt bonds issued
by State and local government entities that expect to issue less than

bad debt reserves recognizes that banks have already deducted
amounts added to reserves. If future chargeoffs are allowed as

$10

change

addition to the

bad debt deductions

deductions rather than as nondeductible charges

to the reserve,

then

banks would be allowed double deductions for those losses. The
end of 1986 generally must be
brought back into taxable income over 4 years: 10 percent in 1987,
20 percent in 1988, 30 percent in 1989, and 40 percent in 1990. The
4-year recapture rule is thus more generous than requiring future
losses to be charged to the reserve, which would have recaptured
the reserve for most banks in 2 or 3 years.
existing reserve outstanding at the

million of such bonds during the year. Bank purchases of these
and bonds related to 20 specific projects listed in the
Conference Report of the Tax Reform Act, are subject only to the
20-percent disallowance rule Previously purchased tax-exempt
bonds continue to have prior law treatment

issues,

Special Rules for Net Operating Losses of Financial

Institutions

Before the Tax Reform Act, financial institutions were allowed
to carry

Two

allowed to the recapture rule. First,
"financially troubled" banks, which have nonperforming loans in
excess of 75 percent of equity capital, can suspend the recapture of
exceptions

their existing

reserve

are

until

they no longer meet

this

definition

Second, a bank may elect to include more than
in 1987 (or the first year of
recapture) This may be advantageous to a bank with expiring net
operating losses or subject to tax credit limitations The remainder of
the reserve must then be included in taxable income: 2/9th in the
second year, 3/9th in the third year, and 4/9th in the fourth year.
financially troubled.

10 percent

its

reserve balance

rule

was adopted

of the existing tax

bad debt reserves

will

have a

major effect on "large" banks' tax liability during the recapture period.
Approximately 90 percent of the expected tax revenue from repeal of
the bad debt reserve method during fiscal years 1987 through 1991
is due to the recapture provision. However, it should be noted that
most deductions for increases in the bad debt reserve were taken at

46 percent, while the recaptured reserves are
34-percent rate

This

the equivalent of

percentage

carryback period

deducted

to offset the effect of the

phasing-down

eligible

increased the

likelihood

NOLs

that

could

the current year rather than carried forward into future

years.

Tax reform requires
carryback and

financial institutions

15-year

have the same

as all other
However, a special transition rule is allowed for
commercial banks with NOLs attributable to deductions for losses on
bad debts. Such NOLs occurring before 1994 can continue to be
carried back 10 years.
carryforward

rules

corporations.

General Tax Reform Provisions Affecting Commercial Banks

Tax reform reduces the top corporate tax rate from 46 percent
34 percent. The new rate schedules are shown in table 10 1

be taxed at only a
the banks borrowing $1

Disallowance of Interest on Debt Used

the succeeding 5 taxable years. This special

1969

Nonfinancial corporations

from the U.S. Government at a zero Interest rate and then only
paying back 74 cents (34/46) upon recapture.
2.

loan bad debt reserve method
were only allowed to carry NOLs back 3
years and fonward 7 years (15 years after the 1981 Act). The longer
the

3-year

The recapture

net operating losses (NOLs) back to the prior 10 taxable

years and forward

Corporate Rate Reduction

Purchase or Carry

Tax-Exempt Obligations

2 Alternative Corporate

Minimum Tax

Before 1983, commercial banks deducted all interest paid on
deposits and other borrowings irrespective of the amount of
tax-exempt bonds held. Unlike corporations, banks have the ability to

Under prior law, corporations were potentially subject to an
add-on minimum tax. Corporations had to pay 15 percent of certain
preference items in excess of the greater of their regular tax liability

a bank could earn after-tax profits by
borrowing $100 at 10 percent (5.4 percent after-tax at a 46-percent

tax arbitrage. For example,

tax rate)

On a
$0.40
tax

and investing

a tax-exempt bond yielding only 6 percent.
in a loss of $4, yet earns
enabled banks to reduce their Federal
zero by holding a small fraction of their assets in
in

pre-tax basis, this transaction results
after-tax. This rule also

liability

nearly to

$10,000,

addition

bank-specific preference item

regular

their

was

tax

liability.

only

reserve method deduction over the experience reserve
method deduction. By the 1980s most banks were not subject to the

eligible loan

add-on corporate

tax-exempt bonds.

tax.

The Tax Reform Act repealed

the add-on

minimum

substituted a broad-based 20-percent alternative corporate

For tax-exempt bonds acquired after 1982, pre-1986 law
disallowed deductions for 20 percent of the interest on debt

The

the excess of the percentage of

tax

and

minimum

The bad debt reserve preference item was retained as the
excess over the experience method reserve deduction, but will be
tax.

TAX POLICY

Table 10.1 "Corporate Tax Rate

1988 and
beyond

Taxable income

$25,000 or less
$25.000-$50.000
$50,000-$75.000
$75,000-$ 100,000
$100.000-$335.000
$335.000-$!. 000.000
$1,000,000$ 1.405.000

16.5

27.5

Over $1,405,000

banks

tfie percentage of
However, a number of
preference items were added. The act's most important preference
item affecting banks is tfie inclusion of 50 percent of tfie excess of
pre-tax book income over alternative minimum taxable income.
"Business untaxed reported profits" are thus effectively taxed at a
10-percent tax rate Tax-exempt interest income is the major
difference between banks' book income and taxable income. No
grandfathering of income from existing assets was provided, so
banks' income from existing holdings of tax-exempt bonds will be
subject to this tax. To the extent that book bad debt deductions
exceed tax bad debt deductions, some of the tax-exempt income will
continue to be fully sheltered from tax.

meaningless

for

eligible loan

reserve metfiod after 1987.

Two

after ttie

elements

other

important to banks.

the

only

First,

expiration of

minimum

may be
tax

regular tax

Minimum
however,
3.

liability

extent

resulting

are

attributable

not allowed as a carryfon/vard credit.

interest

changes

to the foreign

limitations for financial services

income subject

to high withholding

income

taxes were included

prevent the "averaging" of domestic and foreign tax rates across

different

over $1.1

sources of income. Even with significant transition rules,
billion in additional tax revenues in fiscal years 1987-91

are estimated from

all

the

banks'

deductions arise from

investment tax

their leasing activity.

the after-tax cost of leasing activity

IV.

will

total assets.

be borne by the lessees.

SIMULATION RESULTS

The banking model was used to simulate the changes in banks'
liability and after-tax income from 1987 through 1991 due
to the revisions most affecting banks. The overall effect of tax reform
is an increase of $5.3 billion over the 5-year period in the Federal
income tax liability of commercial banks. Nevertheless, banks are
net "winners" from tax reform. Despite their paying more Federal
taxes, after-tax Income increases by over $6.1 billion over 5 years
due to rate reduction and higher pre-tax incomes from altered
Federal tax

investment portfolios.

The model examines five major changes in the tax law and their
The two general corporate tax changes are varied from
column to column in table 10.4: (a) the new rate structure and (b) the
new alternative minimum tax. Three banking-specific changes and
combinations thereof are varied from row to row: (1 ) the repeal of the
bad debt reserve method for large banks, (2) the recapture of
existing
(3) the

income

for large

banks, and

disallowance of deductibility of interest

to carry

tax-exempt

bad debt reserves

into taxable

securities.

A. General Corporate Provisions

corporations due to the separate limitation on

The primary

interest subject to high withholding taxes.

benefit of tax reform to

banks

rate reduction.

reduction of the top corporate rate from 46 to 34 percent by
4. Limitations

on the Use

After tax reform,

of the

Cash Method

use of the cash method

accounting

change

accounting methods must be Included

not

taxable income over a 4-year period.

Investment Tax Credit and Depreciation Rules/Leasing

Tax reform repealed the investment tax credit and lengthened
These changes will affect depreciation deductions

depreciation lives.
for

banks'

new

physical assets (bank buildings, computers,

etc.),

The
itself

would reduce commercial bank taxes by $5.8 billion over the first 5
years of tax reform. Besides this direct benefit to banks, rate

Accounting

allowed for taxpayers with average annual gross receipts of $5
million or more. Additional income recognized in the first year from
the required

large

and depreciation
Some of the changes in

credits

interactions.

Foreign Tax Credits

Separate

amount

items.

deferral

from tax-exempt interest income,

The Tax Reform Act made a number

tax

allowed as a carryfonward credit against
the

liability

tax credit rules.

and

minimum

carried over to other taxable years. Second,

liability

tax

and
Amounts

of foreign tax credits

net operating losses are usable against the

disallowed

minimum

alternative

90 percent

these account for a very small fraction of banks'

but

lessens the impact of tax reform base-broadening
measures, because each additional dollar of taxable income yields
34 instead of 46 cents in revenue. In the following sections, the
benefits of rate reduction are weighed against the base-broadening
provisions which raise bank tax liabilities.
reduction

The effects of the alternative minimum tax (AfvIT) can be
observed by comparing the first and third columns and the second
and fourth columns in table 10.4. With no base broadening, the AMT
increases tax liabilities by $1 .6 billion under the pre-tax reform rate
structure and $1.9 billion with lower rates during 1987 through 1991.

TAX POLICY
minimum tax for banks is largely a function of the
between book and taxable income because banks do not
have a large amount of preference income. Recapture and repeal of
the bad debt reserve method increase taxable income do not
significantly reduce the alternative minimum tax. However, the large
The

alternative

difference

amount

of portfolio switching to taxable securities,

taxable income by more than

which increases

increases book income, reduces

much of the potential impact of the alternative minimum tax on
banks. Once banks shift their portfolios toward more taxable
securities few banks will have minimum tax liability. This is
consistent with our earlier assertion that banks maximize after-tax
income by holding enough taxable securities so that regular tax
liability

equals minimum tax

B. Provisions Specific to

liability.

Banking

By comparing rows (0) and (1) in table 10.4 it can be seen that
repeal of the bad debt reserve method for large banks increases
taxes by less than $0 1 billion under the new rate structure. The
effect is small since the banks will continue to deduct net chargeoffs
which have been about 95 percent of tax bad debt deductions.
Excess bad debt deductions have been reduced due to the
phasedown and future expiration of the percentage of eligible loans
method and the base year grandfathering rule which put many banks
on the equivalent of the specific chargeoff method.

The revenue impact of the recapture of large banks' existing tax
bad debt reserves can be calculated by comparing rows (0) and (2)
of table 10.4. Under lower rates, recapture increase banks' tax
liability increases by $1 .8 billion over the 5-year period. An important
distinction to make between the repeal of bad debt reserve methods
and recapture is that the former is a permanent change while most of
the revenue impact of recapture takes place during the 1987-90
period.

The

effects of

commercial banks'

shifting

from tax-exempt to

due to the disallowance of interest for carrying
tax-exempt securities can be calculated by comparing rows (0) and
taxable securities
(3) in table 10.4,

portfolio shifting

after-tax

The $5 5
right

Tax Reform over Time and on Small and Large

billion in

additional tax revenue

corner of table 10.4

shown

the lower

not evenly spread over the 1987-91

The last panel of table 10.5 shows that tax reform lowers the
banking industry's tax liabilities by $0.4 billion in 1987. Taxes
increase after 1987 as banks Increase their purchases of taxable
Investments; by 1991 banks have an additional $12.6 billion of
taxable income due to portfolio shifting. Taxes also tend to rise from

period.

1987 to 1990 as the percentage recapture of existing bad debt
reserves Increases. Thus, relative to prior law, taxes rise from 1987
through 1990. drop in 1991 with the decline in recapture, and then
their rise as banks continue to substitute taxables for
maturing tax -exempts. The effect of tax reform on after-tax Income is
relatively stable until 1991 when it jumps from $1.2 billion to $2.3

resume

billion

1990

due

primarily to the reduction of recapture from $3.2 billion

$0.5

billion in

1991.

Just over one-quarter of the banking system's assets in 1986
were held by banks with less than $500 million In assets.
Comparison of the first two panels of table 10 5 Indicates that $3 2
billion of the total increase of $6.2 billion In after-tax income flows to
small

banks.

This

larger

than

proportionate

Increase

not

unexpected since small banks are not affected by recapture or
Nevertheless,
method.
repeal
of
the
bad debt reserve
disproportionate revenue Is also derived from small banks:
collectively, small banks pay $2.4 billion In extra taxes while large
banks only pay $3 1 billion more than under prior law over the 5-year
period. This is due to small banks' relatively large holdings of
tax-exempt securities; these banks earned just under one-half of
tax-exempt interest income in 1984. In sum, small banks are bigger
winners than large banks.

billion.

more taxes yet will still be
The switch to taxables is Induced primarily by two factors:
rate reduction and the disallowance of interest expense. However,
although both these changes have the same behavioral effect, they
have opposite impacts on the banks' bottom line. A switch to
taxables will increase banks' taxable income and thus tax liability,
but because taxable investments have higher yields than tax-exempt
is

The Effects
Banks

Under new rates and the alternative minimum tax,
increases bank taxes by $6.7 billion. Nevertheless,

income increases by $4.8

How

and Increase their taxes, banks could experience an Increase in
after-tax income assuming the implicit tax rate remains constant at
33 percent on tax-exempt bonds acquired In the future, as can be
seen In the second and fourth columns In row (3) of table 10.4.

possible that banks pay

better off?

VI.

SUMMARY AND CONCLUSION
Base-broadening provisions specific

costs used to carry tax-exempt securities -are

bonds, banks' extra tax burden is offset by higher pre-tax yields. This
explains why tax increases are greater than reductions in after-tax

when assessing

income. However, with rate reduction after-tax yields on taxables

that the

may exceed tax-exempt

yields

and the

portfolio switching

would

banks-namely,

the

repeal of the bad debt reserve method, the recapture of existing bad
debt reserves Into taxable income, and the disallowance of interest

commonly

highlighted

the effects of the tax reform on banks. However,

model using individual bank data shows
added tax liability due to these provisions, along with the
alternative minimum tax, Is offset largely by rate reduction.
empirical analysis with a

Increase after-tax income.

The

causes banks to switch to taxable
Investments, increases tax liability, and reduces after-tax Income
(first and third columns In row (3) in table 10.4). This occurs tsecause
interest disallowance

after-tax returns from taxable investments at a 46-percent rate are

lower than tax-exempt yields. Rate reduction increases after-tax
returns from taxable securities so that

when banks

switch to taxables

Although banks on the whole pay more taxes over the 1987-91
Income Increases because

period, the banking Industry's after-tax

additional interest

Income

will

be earned when banks

shift

their

Taxable securities earn higher yields
than tax-exempt securities, and, tiecause of tax reform, they are
taxed at lower rates.
portfolios to taxable securities.

TAX POLICY
Table 10.4-Effect of Tax Reform Provisions on Banks' Federal Tax Liability and After-Tax Income Between 1987 and 1991,
Total 5-Year

Changes*
Wnhoui alternative
minimum tax

(0)

Changes only

regular lax rate and/or

With alternative

minimum

tax

TAX POLICY

THE OPERATION AND EFFECT OF THE DOMESTIC INTERNATIONAL
SALES CORPORATION LEGISLATION: JULY 1, 1981, TO JUNE 30, 1983
The

11th report

the Department of the Treasury's series of reports on the operation and effect of the

domestic international sales corporation (DISC) legislation was released by the Office of Tax Policy on February
29, 1988. DISCS are a special class of corporations which are eligible for deferral of the Federal income tax on a
portion of their export profits. The report covers the 10th and 11th full years of DISC operations and presents a
variety of statistical estimates bases on tax returns filed for accounting periods ending between July 1, 1981, and
June 30, 1983. The first year of this period is referred to as "DISC year 1982" and the second year as "DISC year
1983"; accordingly, the report

DISCS increased the value
$2.8

may be

referred to as "The 1982-83

of U.S. exports

over the 2-year period by $1

DISC Report." The report estimates that
1 to $16 billion at a revenue cost of about

billion.

Under current law,
on exports by paying an annual interest
tax exemption on exports by routing such exports through
charge.
foreign sales corporations (FSCs) which receive substantial tax exemptions when acting as export sales corpora-

The DISC provisions were

substantially modified by the Deficit Reduction Act of 1984.

may use "interest-charge DISCs" to
Other exporters may obtain partial corporate

small exporters

defer tax

liability

tions for their U.S. owners.

Copies are available from the Superintendent of Documents, U.S. Government Printing Office,
Washington, DC 20402, as stock number 048-000-00399-1, price $3. Washington-area GPO bookstores are
located at 710 North Capitol Street NW. (275-2091), at 1510 H Street NW. (653-5075), and in the Commerce
Department, 14th and Pennsylvania Avenue South NW. (377-3527).

Financial Operations

FEDERAL FISCAL OPERATIONS
INTRODUCTION
Background

collecfions.

14 of the Budget and Accounting Procedures Act of
1950 (31 use. 3513a) requires the Secretary of the Treasury to
prepare reports on the financial operations of the U.S. Government.

Section

Rece/pfs.-Receipts reported

The first three Federal fiscal operations (FFO) tables are
published quarterly and cover 5 years of data, estimates for 2 years,
detail for 13 months, and fiscal year-to-date data. The tables are
designed to provide a summary of data relafing to Federal fiscal
operations reported by Federal entities and disbursing officers, and
daily reports from the Federal Reserve banks. These reports detail
accounting transactions affecting receipts and outlays of the Federal
Government and off-budget Federal entities, and their related effect
on the assets and liabilifies of the U.S. Government. Data used in the
preparafion of tables FFO-1, FFO-2, and FFO-3 is derived from the
Ivlonthly Treasury Statement of Receipts and Outlays of the United
States Government.

Budget autliority usually takes the form of "appropriations"
which permit obligations to be incurred and payments to be made.
I^ost appropriations for current operations are made available for
obligation only during a specified fiscal year (annual appropriafions).

the tables are classified into the

following major categories: (1) budget receipts and (2) offsetting
collecfions. Budget receipts are collecfions from the public that result

from the exercise of the Government's sovereign or governmental
powers, excluding receipts offset against oufiays. These collections,
also called governmental receipts, consist mainly of tax receipts
(including social insurance taxes), receipts from court fines, certain
licenses, and deposits of earnings by the Federal Reserve System.
Refunds of receipts are treated as deducfions from gross receipts.
Offsetting collections are from other

Government accounts or

the public that are of a business-type or market-oriented nature.
They are classified into two major categories: (1) offsetting
collections
offsetting

credited to appropriations or fund accounts, and (2)
(ie., amounts deposited in receipt accounts).

receipts

Collecfions credited to appropriation or fund accounts normally can
be used without appropriation acfion by Congress. These occur in
two instances: (1) when authorized by law, amounts collected for
materials or services are treated as reimbursements to appropriafions and (2) in the three types of revolving funds (public enterprise,

Some

and trust); collecfions are netted
spending, and oufiays are reported as the net amount.

Budget authority can be made available by Congress for
and disbursement during a fiscal year from a succeeding
appropriations (advance funding). For many education
programs. Congress provides forward funding-budget authority

being appropriated. They are subdivided into two categories: (1)
proprietary receipts -these collections are from the public and they
are offset against oufiays by agency and by function, and (2)
intragovernmental funds-these are payments into receipt accounts
from governmental appropriation or fund accounts. They finance
operafions within and between Government agencies and are
credited with collections from other Government accounts. The

are for a specified longer period (multiple-year appropriafions).
Others, including most of those for construction, some for research,
and many for trust funds, are made available for obligation unfil the
amount appropriated has been expended or until the objectives have
been attained (no-year appropriafions).

obligafions
year's

made available for obligafion in one fiscal year for the financing of
ongoing grant programs during the succeeding fiscal year. When
advantageous to the Federal Government, an appropriation is
provided by Congress that will become available 1 year or more
beyond the fiscal year for which the appropriafion act is passed
(advance appropriafions). Included as advance appropriafions are
appropriafions related to mulfiyear budget requests.
authority is made available by Congress for a
any part not obligated during that period
and cannot be used later. Congressional acfions that extend
the availability of unobligated amounts that have expired or would
otherwise expire are known as reappropriations. The amounts

When budget

specific period of time,

expires

involved are counted as new budget authority
legislation in which the reappropriafion acfion
of

when

the

amounts were

the fiscal year of the

included, regardless
or when they

originally appropriated

would otherwise lapse.
Out/ays -Obligafions generally are liquidated by the issuance of
checks or the disbursement of cash; such payments are called
outlays. In lieu of issuing checks, obligafions also may be liquidated
(and outlays recorded) by the accrual of interest on public Issues of
Treasury debt securifies (including an increase in the redemption
value of bonds outstanding); or by the issuance of bonds, debentures, notes, monetary credits, or electronic payments. Refunds of

as reductions of collecfions, rather
payments for earned-income tax credits in
excess of tax liabilities are treated as outlays rather than as a
reduction in receipts. Oufiays during a fiscal year may be for
payment of obligafions incurred in prior years or in the same year.
Outlays, therefore, flow in part from unexpended balances of prior
year budget authority and in part from budget authority provided for
collecfions generally are treated

than as outlays. However,

in which the money is spent. Total outlays include both
budget and off-budget outlays and are stated net of offsetting

the year

intragovernmental,

Offsetting receipts in receipt accounts cannot be

against

used without

may be intrabudgetary when the payment and receipt
both occur within the budget or from receipts from off-budget Federal
enfifies in those cases where payment is made by a Federal entity
whose budget authority and oufiays are excluded from the budget
transactions

totals.

three
subdivided
into
transactions
are
Intrabudgetary
categories: (1) interfund transactions, where the payments are from
one fund group (either Federal funds or trust funds) to a receipt
account in the other fund group; (2) Federal intrafund transactions,

where the payments and receipts both occur within the Federal fund
group; and (3) trust intrafund transactions, where the payments and
receipts both occur within the trust fund group.
Offsetting receipts are generally deducted from budget authority
function, by subfunction, or by agency. There are four
types of receipts, however, that are deducted from budget totals as
undistributed offsetting receipts. They are: (1) agencies' payments

and outiays by

payments by off-budget Federal entities) as employers
employees retirement funds, (2) interest received by trust funds,
(3) rents and royalties on the Outer Continental Shelf lands, and (4)
other interest (i.e., interest collected on Outer Continental Shelf
(including
into

money

deposit funds

when such money

transferred into the

budget).

Off-budget Federal entities— The Federal Government has used
the unified budget concept as the foundation for its budgetary
analysis and presentation since 1969, This concept calls for the
all of the Government's fiscal transactions with the
however, various laws have been enacted
which
several
Federal entifies have been removed from the
under
budget or created outside the budget. Other laws have moved

budget to include

public. Starting in 1971,

certain off-budget Federal enfities onto the budget.
law, the off-budget Federal enfities consist of the

Under current

two social security

FEDERAL FISCAL OPERATIONS
trust funds,

Federal old-age and survivors insurance and Federal

and net miscellaneous receipts by source.

disability insurance.

The otf-budget Federal

entities

controlled, but their transactions are

are

federally

owned and

excluded from the budget

Table FFO-3.--On-budget and Off-budget Outlays by Agency

totals

When an entity is off-budget, its receipts,
and surplus or deficit are not included in budget receipts,
budget outlays, or the budget deficit; its budget authority is not
included in the totals of budget authority for the budget; and its

Congress

under provisions of law.
outlays,

receipts, outlays, and surplus or deficit ordinarily are not subject to
the targets set by the congressional budget resolution.

Budget and Emergency Deficit
1985 (commonly known as the Gramm-Rudman-

Nevertheless, the Balanced
Control Act of

Hollings Act) included the off-budget surplus or deficit in calculating
the deficit targets under that act and in calculating the excess deficit

purposes of that act. Partly because of this reason, attention has
focused on the total receipts, outlays, and deficit of the Federal
Government instead of the on-budget amounts alone.
for

TableFF0-1.--Summary of Fiscal Operations
This

table

summarizes the amount

outlays, total surplus or deficit, transactions

monetary

assets,

of
in

and transactions and

receipts,

total

Federal securities and
Treasury
in

balances

[generally]

[usually]

provides

budget

authority

the form of appropriations, then

which

Federal agencies

Government funds to make outlays. The amounts in this
represent a breakdown of on-budget and off-budget outlays by

obligate the
table

agency.

Table FFO-4."Summary of Internal Revenue Collections by
States and Olfier Areas
This annual table provides data on internal revenue collections
and other areas and by type of tax. The amounts
reported are for collections made in a fiscal year beginning in
classified by States

October and ending the following September.
Fiscal year collections span several tax liability years because
they consist of prepayments (e.g., estimated tax payments and taxes
withheld by employers for individual income and social security
taxes), of payments made with tax returns, and of subsequent
payments made after tax returns are due or are filed (e.g., payments
with delinquent returns or on delinquent accounts).

operating cash.
It is also important to note that these data do not necessarily
Federal tax burden of individual States. The amounts are
reported based on the primary filing address furnished by each

reflect the

Table FFO-2.--On-budget and Off-budget Receipts by Source
Budget receipts are taxes and other collections from the public
from the exercise of the Government's sovereign or
governmental powers. The amounts in this table represent income
that result

taxes, social insurance taxes, net contributions for other insurance

and

retirement, excise taxes, estate

and

gift

taxes,

customs

duties,

taxpayer or reporting entity. For multistate corporations, this address
may reflect only the State where such a corporation reported its
taxes from a principal office rather than other States where income
was earned or where individual income and social security taxes
were withheld. In addition, an individual may reside in one State and

work

another State.

FEDERAL FISCAL OPERATIONS
Budget Results

for the

Second Quarter,

Fiscal 1988

Summary
The Federal deficit for the second quarter of fiscal 1988
narrowed to $37 billion from $58.5 billion in the comparable
months of fiscal 1987. For the first half of fiscal 1988, the
deficit totaled $118.9 billion, or $4.3 billion less than in the
prior fiscal year. That narrowing reflected an increase in
receipts of 7.4 percent and a rise in outlays by a moderate

to be disbursed in December. Reflecting this shift,
reported outlays for the second quarter of fiscal 1988 totaled

January

$244.2 billion, off 3.2 percent from the year earlier period
and off sharply from $284.7 billion in the first quarter of fiscal
first 6 months of fiscal 1988, outlays totaled
compared with $507 billion in fiscal 1987.

1988. For the

$530.9

billion

4.8 percent.

Spending totals for the first and second quarters of the
fiscal year were distorted by a large shift in the timing of
check disbursements which artificially raised outlays in the
first quarter and lowered them in the second. This shift in
timing was due to the long New Year's holiday weekend this
year, which caused both the January social security benefit
checks and the military paychecks normally paid out in early

Most functional categories of outlays posted increases in
first half of fiscal 1988 compared with the same period a
year earlier. Spending on national defense was up by 5-1/2

the

percent, while interest outlays rose by 9-1/2 percent.

were

JarHjary-March

Tour on-budget and oH-budget resulU:
Tola! receipts

On-budget receipts
OH-budget recepts
Total outlays

On-budget outlays
OH-budget outlays
Total surplus

()

or deficit ()

On-budget surplus

{*) or deficit

(-)

Off-budget surplus

(+) or deficit

(-)

ktearw of financing:
Borrowing from the public
Reduction

operating cash, inaease

(-).

Other means
Total on-budget

and off-budget financing

In-

posted by most other major functional
categories. Outlays for energy, international affairs, and agriculture declined from a year earlier.

creases

FEDERAL FISCAL OPERATIONS
October-December 1987 quarter were $0.04
above the year earlier level as the reduction in the
average State unemployment tax rate was slightly more than
balanced by an increase in taxable wages.

tions for the
billion

Contributions for other insurance and retirement.Other retirement contributions for the first quarter of fiscal
1988 decreased by $0.01 billion from the like period in fiscal
1987. A decline of $0.02 billion in Federal employees' retirement contributions was offset by an increase of $0,005 billion
in

Excise taxes. --Excise tax collections for the Octoberquarter were $1.1 billion above the year

December 1987

Two major

Customs duties.~Customs
$3.9

billion for

crease of $0.5

other retirement contributions.

earlier level.

Estate and gift taxes.-Estate and gift tax receipts were
$1.77 billion for the first quarter of fiscal 1988. This represents a reduction of 3.5 percent from $1.83 billion in the
same quarter in the preceding year and 4.3 percent from
$1.85 billion in the previous quarter. Most of this slowdown
could be attributed to the employees stock ownership plan
deduction enacted in 1986.

factors contributed to the increase.

These were a large settlement of windfall profits taxes for
prior years and the reimposition of the Superfund taxes
which are used to clean up hazardous waste sites.

FIrtl-Ouartef Rscal 1988 Net

Individual

Unemployment insurance
Contributions tor other insurance

Excise taxes
Estate and

Customs

gift

taxes

duties

Miscellaneous receipts

Total budget receipts

and retirement

billion

Miscellaneous receipts.-Net miscellaneous receipts for
first quarter of fiscal 1988 increased by $0.8 billion over
the same quarter in fiscal 1987. Deposits of Federal Reserve
earnings increased by $0.79 billion, while net other miscellaneous receipts increased by $0.04 billion.

Budget Receipts, by Source

32.43

income taxes

Errpioyment taxes and contributions

receipts net of refunds were
quarter of fiscal 1988. This is an inover the same quarter a year earlier.

first

the

[In billions ol dollars]

Corporation income taxes

the

FEDERAL FISCAL OPERATIONS
Table FFO-1 .--Summary of Fiscal Operations
[In

millions of dollafs. Source: Monthly Traasury

Slalemenl

Receipts and Outlays of Ihe Untied Stales Governmentl

Total on-budget and off-budget results
Total

On-budgel

cm-budget

Total

On-budgel

receipts

outlays

Off-budget
outlays

Total

On-budget

Off -budget

surplus

delldt

deficit

deleft

()

(-)

()

Borrowing from the
public-Federai
securities

Public

debt
securiiies

1983

FEDERAL FISCAL OPERATIONS

MONTHLY RECEIPTS AND OUTLAYS
FISCAL YEARS 1987 AND 1988
Source: Monthly Treasury Statement of Receipts and Outlays
of the United States

0'86 N

Government

FISCAL YEARS 1987 AND 1988

FEDERAL FISCAL OPERATIONS
Table FF0-2.--0n-budget and Off-budget Receipts by Source
[In

millions of dollars. Source: Monthly Treasury

Slatemenl

Recetils and Outlays ot ihe United Slates Government]

Income taxes
Corporation

Employment taxes and contrbutions
Old-age. disability, and
hospital insurance

266.046
281.805
302.554
314.803
322.463

1983
1984
1985
1986
1987

325,968
345.491

1988(Est.)

1989

(Est.)

1987 -Ma;
Apr

27.608
26.943
24.823
25,525
31.596
25.008
24.569
30.122
24.888
34.020
24.979
28.046
33.296

May
June
July

Aug
Sept
Oct

Nov
Dec
1988 -Jan

Feb
Mar
Fiscal

1988

to date

175.350

83.585

FEDERAL FISCAL OPERATIONS
Table FF0-2.--0n-budget and Off-budget Receipts by Source-Continued
[In

millions ot dollars]

Highway

Net

Gross

Refunds

Net

social

Insurance
taxes and
contri-

butions

208.994
239,376
265.163
283,901
303,319

1983
1984
1985
1986
1987
1988
1989

(Est.).
(Est.).

1987- Mar
Apr

Nov.

Dec.

23,361

Jan

28,162
28,500
25.676

July..

Aug.
Sept.

1988

Feb..
Mar..
Fiscal

1988

to date

2,856
2,743
3.066

23.689
33,646
30,218
24,853
23,346
25,712
25.403
22,177
23,756

Oct

2,601

May.
June

2,165

267
247
260
311

280
280
208
283
281

230
252
265

2,165

Gross

Refunds

Gross

trust

fund

Refunds

FEDERAL FISCAL OPERATIONS

BUDGET RECEIPTS BY SOURCE THROUGH SECOND
QUARTER OF FISCAL YEARS 1987 AND 1988
Source: Monthly Treasury Statement of Receipts and Outlays
of the United States Government

f-n

1987
1988

I
Individual

Income

Corp. Income

I
Social Insurance

isa

Customs Duties

Misc. Receipts

I
Excise

Estate and Gift

TAXES AND OTHER RECEIPTS

FEDERAL FISCAL OPERATIONS
Table FF0-3.--0n-buclget and Off-budget Outlays by Agency
[In millions ol dollars.

Source: Monthly Treasury Slalemenl

1988
1989

1,437
1,579
1,610
1,665
1,812

Receipts and Outlays ol Ihs United Slates Government]

Executive

Funds ap-

Agricul-

Commerce

judi-

OHice

Depart-

of the

propriated
to the
President

ture De-

ciary

partment

ment

President

1983
1984
1985
1986
1987

The

.080
12,050
11,377
10,626
1 1

52,404
42,015
55,523
58,666
49,593

(Est.)
(Est.)

1987- Mar
Apr

May
June
July

Aug

720
810
862
877
828
348

Sept
Oct

1,091
'1,253

Nov
Dec

'l82
'322

1988- Jan

1.051

Feb
Mar

687

Fiscal

1988 to date.

4,629
4,754
2,935
1,818

4,193
3,325

733
7,645
5,194
3,806
4.428

643
4.358
26,074

Defense Department

Department

204,430
2,140
2,0S4
2,156

Education

Energy
Department

FEDERAL FISCAL OPERATIONS
Table FF0-3.--0n-budget and Off-budget Outlays by Agency-Continued
[In

Fiscal
year or

General

National

Oflice of

Services
Adminis-

Aero-

Personnel

nautics

tration

and

month

1983
1984
1985
1986

1988
1389

Other
indepen-

Management

tration

agencies

dent

Undistributed offsetting receipts

Employer

Interest

Renis and

share,

recerved

royalties

Space

employee

Adminis-

retire-

irusi

Iration

ment

funds

-23,484
-25.263
-27,217
-28,528

-17.102
•20,354
-26.189
-27.873
-35.015

206

6.853
7,055

218

7.251

286

7,403
7,591

1987.

millions of dollars]

Small
Business
Adminis-

21.278
22,590
23.727
23,955
26,966

24.827
25,593
26,333
26,536
26,952

10.963

1.149
2,382
2.049
2.457
3,380
1,133
2.178
3,639

2.675
1.226
1.472

11,661

9,783
11,422
12,586

-X,726

on the Outer
Continental
Shelf lands

-10.491
-6,694
-5,542
-4,716
-4,021

(Est.)
(Est.)

1987 -Mar
Apr

226

2,221

-270

May

203

2,333
2.386
2,346
2.406
2.316
2.407
2,400
2.193
2.324
2.554
2.392
2.510

June
July

Aug
Sept
Oct

Nov
Dec

'-566
'284
'322

1988- Jan

-428

Feb
Mar

645
698
936
772
843
622
606
807

893
3,771
1,210

2,158
2,555

'1,321

'2,469
'282

1,924

-2,466
-2,477
-2,621

-2,545
-2,536
-2,522
-3,882
-2,589
-2,551

-2,536
-2.655
•2.400
-2.607

-282
-1.702
-19.554

-235
-2,116
-16,654

-524
-295
-242
-224

661,219

FEDERAL OBLIGATIONS

"Obligations" are the basis on which the use of funds is
in the Federal Government. They are recorded at the point
at which the Government makes a firm commitment to acquire goods
services
and are the first of the four key events-order, delivery,
or
payment, and consumption-which characterize the acquisition and
use of resources. In general, they consist of orders placed, contracts

order, but the order itself usually

causes immediate pressure on the

economy.

controlled

private

awarded, services received, and similar transactions requiring the
disbursement of money.

Obligations are classified according to a uniform set of
categories based upon the nature of the transaction without regard to
ultimate purpose. All payments for salaries and wages, for
its
example, are reported as personnel compensation, whether the
personal services are used in current operations or in the construction of capital items.

Government transactions

is a strategic
Government's operations on the
national economy, since it frequently represents for business firms
the Government commitment which stimulates business investment,
including inventory purchases and employment of labor. Disbursements may not occur for months after the Government places Its

The

point

obligational stage of

gauging the impact

of the

Federal agencies often do business with one another; in doing
agency records obligations, and the "performing"
agency records reimbursements. In table FO-1, obligations incurred
within the Government are distinguished from those incurred outside
the Government. Table FO-2 shows only those incurred outside.
so, the "buying"

Table FO-1 .--Gross Obligations Incurred Within and Outside the Federal Government
by Object Class, as of Dec. 31, 1987
[In

millions of dollars. Source:

Standard Form 225, Report on Obllgalions. Irom agencies|

Gross obligations incurred
Object class

Personal services and benefits:
Personnel compensation
Personnel benefits
Benefits for former personnel

Contractual services and supplies:
Travel and transportation of persons
Transportation of things
Rent, communications, and utilities
Printing and reproduction
Ottier services
Supplies and materials

210
367

1,3BS
2,099
4,521

1,390

290
12.068
6.370

Acquisition of capital assets:
18.579
4.238
12.984

5,415
3,374
2.980

Equipment
Lands and structures
Investments and loans

Grants and fixed charges:
Grants, subsidies, and contributions
Insurance claims and indemnities
Interest and dividends
.

X,23S

12,232

96,776
52,668

13.622

42.467
96.856
66.290

236

Refunds
Other:

Unvoucfiered
Undistributed U.S. obligations

Gross obligations incurred

^
For Federal budget presentation a concept of "net obligations Incurred" Is generally used.
This concept eliminates transactions within the Government and revenue and reimbursements from the public which by statute may be used by Government agencies without
appropriation action by the Congress. Summary figures on this basis follow. (Data are on
the basis of Reports on Obligations presentation and therefore may differ somewhat from
the Budget of the U.S. Government.)

Gross obligations Incurred (as above)
Deduct:

Advances, reimbursements, other income,
Offsetting receipts

Net obllgalions incurred

etc.

FEDERAL OBLIGATIONS
Table FO-2.»Gross Obligations Incurred Outside the Federal Government by
Department or Agency, as of Dec. 31, 1987
[In

millions ol doHars.

Source: Standard Form 225. Report on Obllgallons. Irom agencies]

Personal services and benetlts

Contractual services and supplies

FEDERAL OBLIGATIONS
Table FO-2.--Gross Obligations Incurred Outside the Federal Government by
Department or Agency, as of Dec. 31, 1987--Continued
[In millions of dollars]

Grants and fixed charges
Acquisition of
capital assefs

Equip-

ment

Lands
and

Invest-

struc-

ments
and

tures

loans

Grants.

—
25

FEDERAL OBLIGATIONS

GROSS FEDERAL OBLIGATIONS
AS OF DEC.

Personal Services

1987

31,

Benefits

Outside Government

^ Within Government

Contractual Services

& Supplies

Acquisition of Capital Assets

Grants & Fixed Charges

XXXXXXX»$$$$$$$$$<

»^igKg»Ii'»»Ii

$«$$$^>$$$$^XXXXXXXXXXXXXXX^^^

—

150

100
$ Billions

GROSS FEDERAL OBLIGATIONS INCURRED
OUTSIDE THE FEDERAL GOVERNMENT
Asof Dec.

31, 1987
;ontractual Services

& Supplies

Acquisition of Capital Asseti

ersonal Services

Grants & Fixed Charge;

Benefits

200

ACCOUNT OF THE

U.S.

TREASURY

SOURCE AND AVAILABILITY OF THE BALANCE IN THE ACCOUNT OF THE
The operating cash of the Treasury is maintained in Treasury's
accounts with the Federal Reserve banl<s and branches and in tax
and loan accounts. Major information sources include the Daily
Balance Wire received from the Federal Reserve banks and
branches, and electronic transfers through the Treasury Financial
Communications System. As the balances in the accounts at the
Federal Reserve banks become depleted, they are restored by
calling in (withdrawing) funds from thousands of financial institutions
throughout the country authorized to maintain tax and loan accounts.

Law

95-147, the Treasury implemented
a portion of its operating cash
and loan accounts.
Under the Treasury tax and loan investment program, depositary
financial institutions select the manner in which they will participate
in the program. Depositaries that wish to retain funds deposited in

Under

authority of Public

a program on Nov.
in

1978,

U.S.

TREASURY

Deposits to tax and loan accounts occur in the normal course of
business under a uniform procedure applicable to all financial

whereby customers of financial institutions deposit with
payments and funds for the purchase of Government
securities. In most cases the transaction involves merely the transfer
of funds from a customer's account to the tax and loan account in the
institutions

them

tax

same

financial institution.

occasion,

the extent authorized by

the Treasury, financial institutions are permitted to deposit

in these
accounts proceeds from subscriptions to public debt securities
entered for their own account as well as for the accounts of their
customers.

to invest

obligations of depositaries maintaining tax

and loan accounts in interest-bearing obligations participate
under the r>Jote Option; depositaries that wish to remit the funds to
the Treasury's account at Federal Reserve banks participate under
the Remittance Option.
their tax

Table UST-1 .--Elements of Changes
[In

The tax and loan system permits the Treasury to collect funds
through financial institutions and to leave the funds in Note Option
depositaries and in the financial communities in which they arise until
such time as the Treasury needs the funds for its operations. In this

way

the Treasury is able to neutralize the effect of its fluctuating
operations on Note Option financial institution reserves and the

economy.

Federal Reserve and Tax and Loan Note Account Balances

millions of dollars. Source: Financial

Management

Service]

.
.

ACCOUNT OF THE
Table UST-1 .--Elements of Changes

U.S.

TREASURY

Federal Reserve and Tax and Loan Note Account Balances-Con.

[In

millions ol dollars]

During period

Tax and

Low

High

loan note

accounts

Federal

Tax and

Federal

Tax and

Federal

Reserve

loan note

Reserve

loan note

Resen/e

accounts

1983
1984
1985
1986
1987
1987- Mar.
Apr..
.

May

June.
July

Aug

Sept.
Oct..

Nov
Dec

1988- Jan.
Feb.

Mar..

16.557
8.514
4.174
7,514
9.120

20.500
21,913

3.576
29.688
6.383
13.774
5.365
3.763
9,120
8.898
3.594
5.313
10.276
2.472
2.403

5,394
26,056
26,723
26,298
14.052
18.872
27,316
29,416
17,556
17,056
29,648
26,450
20,510

16,557
16,778
19,877
19,087
29,688

12,886
23.870
27,316

Government account

series,

securit^s

and taxes.

Represents checks paid, wire transfer payments, drawdowns on

make payment

letters

credit,

etc.

the form of a deposit credit for the

purchase price of U.S. Government securities purchased by them for their own account, or
for the account of their customers who enter subscriptions through them, when this method
of payment is permitted under the terms of the circulars inviting subscriptions to the issues.
* Includes U.S. savings bonds, savings notes, retirement plan and tax and loss bonds.
U.S. savings notes first offered for sale as of May 1, 1967, and were discontinued after

1,518

3,754

3.760
4.638
4.162
4,546
6,584

1,887

5,394
4,950
26.171
13,893
14,052
11.745
10.841
17,342
17,656
7,408
6,971
19,807
12,131

3,161
7.164
16,028
8.776
5,140
3,409
10,585
8,828
3,755
4,209
5,774
3.710
2,894

878
1,429

21,334
26,056
27,174
26,640
26,763
23.307
28.553
29,416
29.416
28.233
29.907
28.573
26.062

14.324
3,898
9,036
10,937
6,338
3,747

redemptions of securities other than Government account series,
^ Special depositaries are permitted to

1,686

22,259
22,398
25,139
28,553

4.276
29,688
23,043
17,749
10,005
5,455
25,657

Less ;han $500,000.
Represents transfers from tax and loan note accounts, proceeds from sales

other than

20,601

accounts

2,806
6,383
1,518
3,297
2,330
2,329
2,108

10,781
11,605

12,427
15,715
26,738
20,943
22,379
17,847
20,702
26,346
22,637
18,160
20,382
23,956
19,845

11.649
12,208
18,485

June 30, 1970. Retirement plan bonds first offered for sale as of Jan. 1,1963; tax and kiss
bonds first issued in March 1968.
Taxes eligible for credit consist of those deposited by taxpayers in the tax and kjan
depositaries, as follows: Withheld income taxes beginning March 1946; taxes on employers
and employees under the Federal Insurance Contributions Act beginning January 1950, and
under the Railroad Retirement Tax Act beginning July 1951; a number of excise taxes
beginning July 1953; estimated corporatron income taxes beginning April 1967; all
corporation income taxes due on or after Mar. 15, 1968; and FUTA taxes beginning April
1970.

FEDERAL DEBT
INTRODUCTION

Treasury securities (i.e., public debt securities) comprise most of
Federal debt, with securities issued by other Federal agencies
accounting for the remainder. In addition to the data on the Federal
debt presented in the tables in this section of the quarterly Treasury
Bulletin, the Treasury publishes detailed data on the public debt
outstanding in the l^onthly Statement of the Public Debt of the
United States and on agency securities and the investments of Federal Government accounts in Federal securities in the (Monthly
Treasury Statement of Receipts and Outlays of the United States
tine

Government.

agency borrowing from the Treasury, which is presented in the
Monthly Treasury Statement of Receipts and Outlays of the United

eral

States Government.

The Government-sponsored

securities are presented in the

memorandum

entities,

whose

section of table FD-4,

are not agencies of the Federal Government, nor are their securities
presented in table FD-4 guaranteed by the Federal Government.

Table FD-5.~Maturlly Distribution and Average Length of
Marketable Interest-Bearing Public Debt Held by Private
Investors

Table FD-1 .--Summary of Federal Debt

The Federal debt outstanding is summarized as to holdings of
public debt and agency securities by the public, which includes the
Federal Reserve, and by Federal agencies, largely the social security and other Federal retirement trust funds. Greater detail on holdings of Federal securities by particular classes of investors is presented in the ownership tables, OFS-1 and OFS-2, of the Treasury
Bulletin.

Table FD-2.-lnterest-Bearing Public Debt
Interest-bearing
marketable and nonmarketable Treasury
as to type of security. The difference between interest-bearing and total public debt securities reflects outstanding matured Treasury securities on which interest has ceased
to accrue. The Federal Financing Bank (FFB) is under the supervisecurities are presented

sion of the Treasury,

and FFB

securities

shown

in this

Table FD-3.~Government Account Series
Nonmarketable Treasury securities held by U.S. Government
accounts are summarized as to issues to particular funds within the
Government. I^any of the funds invest in par-value special series
nonmarketables at statutorily determined interest rates, while others
whose statutes do not prescribe an interest rate formula invest in
market-based special Treasury securities whose terms mirror the
terms of marketable Treasury securities.

Table FD-4.~lnterest-Bearing Securities Issued by Government

Agencies
Federal agency borrowing has been declining in recent years,
because the Federal Financing Bank has been providing
financing to other Federal agencies. This table does not cover Fedpart

Table FD-6.~Debt Subject to Statutory Limitation

table are held

by a U.S. Government account.

The average maturity of the privately held marketable Treasury
debt has increased gradually since it hit a trough of 2 years, 5
months, in December 1975. In Inarch 1971, the Congress enacted a
limited exception to the 4-1/4-percent interest rate ceiling on Treasury bonds that permitted the Treasury to offer securities maturing in
more than 7 years at current market rates of interest for the first time
since 1965. The exception to the 4-1/4-percent interest rate ceiling
has been expanded since 1971 to authorize the Treasury to continue
to issue long-term securities The volume of privately held Treasury
marketable securities by maturity class reflects the remaining period
to maturity of Treasury bills, notes, and bonds, and the average
length comprises an average of remaining periods to maturity,
weighted by the amount of each security held by private investors
excludes the Government accounts and Federal Reserve
(i.e.,
banks).

The statutory debt ceiling is compared with the outstanding debt
subject to limit. The other debt category includes certain Federal
debt that the Congress has designated by statute to be subject to the
debt ceiling. The changes in non-interest-bearing debt shown in the
last column reflect maturities of Treasury secunties on nonbusiness
days, such as weekends and holidays. In that event. Treasury
securities are redeemed on the first business day following a nonbusiness day.

Table FD-7.-Treasury Holdings of Securities Issued by Government Corporations and Other Agencies
Certain Federal agencies are authorized by statute to borrow
from the Treasury, largely to finance direct loan programs. In addition, agencies such as the Bonneville Power Administration are
authorized to borrow from the Treasury to finance capital projects
The Treasury finances such loans to the Federal agencies with issues of public debt securities.

FEDERAL DEBT
Table FD-1. --Summary of Federal Debt
[In

millions ol dollare. Source: Monlhly Treasury

SlatemenI

Recelpis and Oullays of the Uniled Stales Governmenl]

Amount outstanding
Endol
fiscal

year

month

Government accounts
Public
debt

Public

securi-

debt
securi-

held by:

The

public

Public

30
FEDERAL DEBT
Table
[In millions of dollars.

Airport and
airway
trust fund

Employe
life
insuran
fund

FD— 3. - Government Account

Series

Source: Monthly Statement of the Public Debt of the United States]

Exchange
Stabilizati
Fund

Federal
Deposit
Insurance
Corporatioi

era

31
FEDERAL DEBT
Table FD-4.

Interest-Bearing Securities Issued by Government Agencies

[In mtlllons of dollars.
Source: Monthly Treasury Statement of Recetpts and Outlays
of the United States Governirient and Financial Management Service]

Housing and Urban
Development Department
Family housing
and homemners
assistance

Federal
Housing
Administratlon

Government
National
Mortgage
Association

Other Independent agencle

Export-Import

Postal

Bank of the

Service

United States

Tennessee
Valley
Authority

1983
1984
1985
1986
1987

4,675
4,481
4,366
4,217
4,009

2,165
2.165
2,165
2,165
1,965

1.725
1,725
1,725
1,625
1,380

19e7-Mar.
Apr..
May..
June.
July.
Aug..
Sept.
Oct..
Nov..

3,994
3,800
3,801
3,801
3.806
4,108
4,009
3,893
3,880
3,518
8,069
7,823
5,643

2.165
1,965
1,965
1,965
1.965
1,965
1,965
1,965
1,965
1,615
1.615
1,165
1,165

1,380

Dec.
1988-Jan.

1,380

FEDERAL DEBT
Table FD-5.--Maturity Distribution and Average Length of IVIarl<etable
Interest- Bearing Public Debt Held by Private Investors
[In

End

fiscal

year

month

millions ot dollars. Source: Otiice ol

1987 -Mar
Apr

May
June
July

Aug
Sept
Oct

Nov
Dec
1988- Jan

Feb
Mar

Analysis

Ihe Ottice ol the Secretary]

Maturity classes

outstanding
privately

held

1983
1984
1985
1986
1987

GovemmenI Finance and Market

Amount

10-20
years

Within
1

year

862,631
1,017,488
1.185.675
1.354.275
1.445,366

379,579
437.941
472.661
506.903
483,582

294,955
332.808
402,766
467,348
526,746

99,174
130,417
159,383
189,995
209,160

40.826
49,664
62,853
70,664
72,862

48.097
66,658
88,012
119,365
153.016

1,420,644
1.401.609
1.415.262
1.428.020
1.424.781
1,459,793
1.445.366
1.457.652
1.478.550
1.483.625
1.483.135
1.610.778
1.522.745

496,642
489.343
487,944
482.919
476.623
495,018
483.582
500.525
603.235
502.918

506,646
496.631
508.008
618.547
520.691
528,692
526,746
523.169
530.327
528.258
622,336
542.026
542.609

208.331
207.786
201.683
209,422
210,380
209,710
209,160
209.135
214.818
222.786
224,032
218.633
226.733

73.544
73.158
73.196
72.903
72.859
73.036
72.862
72.776
74.051
73.876
73.947
73.944
74.015

135.481
134.691
144.431
144.229
144,228
153,338
153,016
152.047
166.119
165.789
166.269
166.025
165,025

606.561
511.150
614.363

4yrs

FEDERAL DEBT

35
FEDERAL DEBT
Table FD-7.

Treasury Holdings of Securities Issued by Government Corporations and Other Agencies

[in millions of dollars.

Source: Monthly Treasury Statement of Receipts and Outlays of the United States Government]

Agriculture Department
Total

1983
1984
1985
1986
1987

198,639
211,833
230.954
210 ,468
211,875

1987-Har
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
1988-Ja n
Feb
Mar

206,386
209,667
210,640
211,482
205,138
208,048
211.875
197,043
200,411
196,599
198 ,908

189,714
192,131

Commodity
Credit
Corporatio

21,407

Education
Department

Energy
Department

Housing and Urban Development Department
Federal
Housing
Administ

Governmen
National
Mortgage

TREASURY FINANCING OPERATIONS, JANUARY-MARCH

1988

JANUARY
the auction process, $1,152 million was awarded to Federal
Reserve banks as agents for foreign and international

Auction of 2-Year Notes
would
On January 20 the Treasury announced that
auction $8,750 million of 2-year notes to refund $9,782
million of notes maturing January 31, 1988, and to paydown
about $1,025 million. The notes offered were Treasury Notes
of Series W-1990, dated February 1, 1988, due January 31,
1990, with interest payable on July 31 and January 31 until
it

maturity.

interest rate of 7-3/8 percent

was

52-Week

Bills

set after the

determination as to which tenders were accepted on a yield
auction basis.

Tenders for the notes were received until 1 p.m. EST,
January 27, and totaled $29,649 million, of which $8,766
million was accepted at yields ranging from 7.39 percent,
price 99.973, up to 7.41 percent, price 99.936. Tenders at
the high yield were allotted 69 percent. Noncompetitive
tenders were accepted in full at the average yield, 7.40
price
99.954. These totaled $1,117 million.
percent,
Competitive tenders accepted from private investors totaled
$7,649 million.
In

monetary authorities. An additional $749 million was
accepted from Government accounts and Federal Reserve
banks for their own account.

addition to the $8,766 million of tenders accepted

On January 8 tenders were invited for approximately
$9,250 million of 364-day Treasury bills to be dated January
21, 1988, and to mature January 19, 1989. As the 52-week
bills maturing on January 21 were outstanding in the amount
of $9,875 million, this issue resulted in a paydown of about
$625 million. Tenders were opened on January 14. They
totaled $22,756 million, of which $9,253 million was
accepted, including $647 million of noncompetitive tenders
from the public and $229 million of the bills issued to Federal
Reserve banks for themselves and as agents for foreign and
international monetary authorities. An additional $151 million
was issued to Federal Reserve banks as agents for foreign
and international monetary authorities for new cash. The
average bank discount rate was 6.67 percent.

FEBRUARY
February Quarterly Financing

On January 27

announced

would
auction $9,250 million of 3-year notes of Series R-1991,
$9,000 million of 10-year notes of Series A-1998, and $8,750
the Treasury

that

million of 29-1/4-year 8-3/4 percent bonds of 2017 to refund
$12,122 million of Treasury securities maturing February 15
and to raise about $14,875 million of new cash.

The notes of Series R-1991 were dated February 16,
1988, due February 15, 1991, with interest payable on
August 15 and February 15 until maturity. An interest rate of
7-3/8 percent was set after the determination as to which
tenders were accepted on a yield auction basis.
Tenders

notes were received until 1 p.m. EST,
and totaled $22,437 million, of which $9,253
million was accepted at yields ranging from 7.40 percent,
price 99.934, up to 7.43 percent, price 99.855. Tenders at
the high yield were allotted 92 percent. Noncompetitive
tenders were accepted in full at the average yield, 7.42
percent,
price
99.881.
These totaled $639 million.
Competitive tenders accepted from private investors totaled
$8,614 million.

February

for the

addition to the $9,253 million of tenders accepted in
auction process, $1,098 million was accepted from

the

Reserve banks as agents for foreign and
monetary authorities, and $1,182 million was
accepted from Government accounts and Federal Reserve
banks for their own account.
Federal

international

The notes of Series A-1998 were dated February 15,
1988, issued February 16, 1988, due February 15, 1998,
August 15 and February 15 until
maturity. An interest rate of 8-1/8 percent was set after the
determination as to which tenders were accepted on a yield
auction basis. Accrued interest of $0.22321 per $1,000,
covering the period from February 15 to February 16, 1988,
with interest payable on

was payable
Tenders

for

each accepted tender.

notes were received
and totaled $18,321 million,

for the

until

p.m. EST,

of which $9,002
from 8.17 percent,
price 99.696, up to 8.23 percent, price 99.293. Tenders at
the high yield were allotted 82 percent. Noncompetitive
tenders were accepted in full at the average yield, 8.21

February

was accepted

million

at yields ranging

price
99.427.
These totaled $344 million.
Competitive tenders accepted from private investors totaled
$8,658 million.

percent,

addition to the $9,002 million of tenders accepted

auction process, $150 million was accepted from
Government accounts and Federal Reserve banks for their

the

own

account.

The notes of Series A-1998 may be held in STRIPS
The minimum par amount required is $320,000.

form.

The 8-3/4 percent bonds of 2017 were an additional
issue of bonds dated May 15, 1987, due May 15, 2017, with
interest

Accrued

payable on
interest of

May 15 and November
$22.35577

per

15 until maturity.
$1,000, covering the

TREASURY FINANCING OPERATIONS, JANUARY-MARCH
November

period from

payable

15, 1987, to

February 16, 1988, was

$7,895
In

Tenders
million

bonds were received
and totaled $17,333 million,

for the

was accepted

at yields

until

p.m. EST,

which $8,764

ranging from 8.48 percent,

up to 8.53 percent, price 102.309. Tenders at
yield were allotted 81 percent. Noncompetitive
were
accepted
in full at the average yield, 8.51
tenders
percent,
price
102.528. These totaled $327 million.
Competitive tenders accepted from private investors totaled
$8,437 million.
price 102.858,

high

the

addition to the $8,764 million of tenders accepted

$75 million was accepted from
Government accounts and Federal Reserve banks for their
the

auction

own

account.

addition to the $8,780 million of tenders accepted

$1,210 million was accepted from
Federal Reserve banks as agents for foreign and
international monetary authorities, and $712 million was
accepted from Government accounts and Federal Reserve
banks for their own account.

the

auction

process,

The notes of Series K-1993, were dated March 3, 1988,
due May 15, 1993, with interest payable on November 15
and May 15 until maturity. An interest rate of 7-5/8 percent
was set after the determination as to which tenders were
accepted on a yield auction basis.

process,

The bonds of 2017 may be held in STRIPS
minimum par amount required is $160,000.

form.

The

Auction of 2-Year and 5-Year 2-Month Notes

million.

each accepted tender.

for

February

1988

February 17 the Treasury announced that

would

auction $8,750 million of 2-year notes of Series X-1990 and
$7,250 million of 5-year 2-month notes of Series K-1993 to
refund $9,928 million of publicly held 2-year notes maturing
February 29, 1988, and to raise about $6,075 million of new

Tenders for the notes were received until 1 p.m. EST,
February 25, and totaled $22,067 million, of which $7,252
million was accepted at a yield of 7.64 percent, price 99.881,
up to 7.66 percent, price 99.797. Tenders at the high yield
were allotted 78 percent. Noncompetitive tenders were
accepted in full at the average yield, 7.65 percent, price
99.839. These totaled $305 million. Competitive tenders
accepted from private investors totaled $6,947 million.
In addition to the $7,252 million of tenders accepted in
the auction process, $830 million was awarded to Federal

Reserve banks as agents
monetary authorities.

for

foreign

and

international

cash.

52-Week

The notes of Series X-1990 were dated February 29,
due February 28, 1990, with interest payable on
August 31 and February 28 until maturity. An interest rate of
7-1/8 percent was set after the determination as to which
tenders were accepted on a yield auction basis.

February 5 tenders were invited for approximately
364-day Treasury bills to be dated February
18, 1988, and to mature February 16, 1989. The issue was
to refund $9,733 million of maturing 52-week bills and to
paydown about $475 million. Tenders were opened on
February 11. They totaled $33,260 million, of which $9,288
million
including
million
was
accepted,
$569
of
noncompetitive tenders from the public and $3,400 million of
the bills issued to Federal Reserve banks for themselves and
as agents for foreign and international monetary authorities.
An additional $580 million was issued to Federal Reserve
banks as agents for foreign and international monetary
authorities for new cash. The average bank discount rate

1988,

Tenders for the notes were received until 1 p.m. EST,
February 24, and totaled $27,723 million, of which $8,780
million was accepted at yields ranging from 7.15 percent,
price 99.954, up to 7.17 percent, price 99.918. Tenders at
the high yield were allotted 21 percent. Noncompetitive
tenders were accepted in full at the average yield, 7.16
price
99.936.
These totaled $885 million.
Competitive tenders accepted from private investors totaled

percent,

Bills

$9,250

million of

was 6.18

percent.

MARCH
Auction of

2- Year

On March

and 4-Year Notes

16 the Treasury announced that

accepted on a yield auction basis.
it

would

auction $8,500 million of 2-year notes of Series Y-1990 and
$6,500 million of 4-year notes of Series M-1992 to refund

$15,626

million of

Treasury notes maturing March 31 and to

paydown about $625

million.

The notes of Series Y-1990 were dated March 31, 1988,
due March 31, 1990, with interest payable on September 30
and March 31 until maturity. An interest rate of 7-3/8 percent
was set after the determination as to which tenders were

Tenders for the notes were received
March 23, and totaled $25,075 million,

1
p.m. EST,
which $8,526
million was accepted at yields ranging from 7.38 percent,
price 99.991, up to 7.40 percent, price 99.954. Tenders at
the high yield were allotted 64 percent. Noncompetitive
tenders were accepted in full at the average yield, 7.39

until

price
These totaled $940 million.
99.973.
Competitive tenders accepted from private investors totaled
$7,586 million.

percent,

TREASURY FINANCING OPERATIONS, JANUARY-MARCH
niillion of tenders accepted in
$1,155 million was accepted from
Federal Reserve banks as agents for foreign and
international monetary authorities, and $1,589 million was
accepted from Government accounts and Federal Reserve
banks for their own account.
In

tlie

addition to the $8,526

auction

process,

The notes of Series M-1992 were dated March 31, 1988,
due March 31, 1992, with interest payable on September 30
and March 31 until maturity. An interest rate of 7-7/8 percent
was set after the determination as to which tenders were
accepted on a yield auction basis.

364-day Treasury bills to be dated March
and to mature March 16, 1989. The issue was to
million
of maturing 52-week bills and to
refund $9,550
paydown about $550 million. Tenders were opened on
March 10. They totaled $30,389 million, of which $9,030
accepted,
including
million
million
was
$579
of
noncompetitive tenders from the public and $3,079 million of
the bills issued to Federal Reserve banks for themselves and
as agents for foreign and international monetary authorities.
An additional $151 million was issued to Federal Reserve
banks as agents for foreign and international monetary
authorities for new cash. The average bank discount rate
$9,000

million of

17, 1988,

was 6.30
Tenders for the notes were received until 1 p.m. EST,
March 24 and totaled $17,182 million, of which $6,505
million was accepted at yields ranging from 7.89 percent,
price 99.949, up to 7.92 percent, price 99.848. Tenders at
the high yield were allotted 50 percent. Noncompetitive
tenders were accepted in full at the average yield, 7.90
99.916.
These totaled $443 million.
price
percent,
Competitive tenders accepted from private investors totaled
$6,062 million.
In

addition to the $6,505 million of tenders accepted

$1,105 million was accepted from
Federal Reserve banks as agents for foreign and
international monetary authorities, and $500 million was
accepted from Government accounts and Federal Reserve
banks for their own account.

the

auction

52-Week

1988

percent.

Cash Management

Bills

On March 22

tenders were invited for approximately
bills to be issued March 30, 1988,
representing an additional amount of bills dated October 22,
1987, maturing April 21, 1988. The issue was to raise new
cash. Tenders were opened on March 25. They totaled
$38,809 million, of which $4,055 million was accepted. The
average bank discount rate was 6.20 percent.

$4,000

million of

22-day

process,

Bills

On March

4 tenders were

invited

for

approximately

On March
$9,000

28, tenders

million of

17-day

were

bills

invited for approximately

be issued

April 4,

1988,

amount of bills dated October 22,
1987, maturing April 21, 1988. The issue was to raise new
cash. Tenders were opened on March 30. They totaled
$50,261 million, of which $9,022 million was accepted. The
average bank discount rate was 6.35 percent.
representing an additional

PUBLIC DEBT OPERATIONS
INTRODUCTION

Background
The Second

52-week bill is a reopening of the existing 52-week
low, and average yields on accepted tenders and the
Liberty

Bond Act

(31

U.SC. 3101,

et seq.) pro-

vides the Secretary of the Treasury with broad authority to borrow
and to determine the terms and conditions of issue, conversion,
maturity,

payment, and interest rate on Treasury

the "Public Debt Operations" section, which have

Data
been published

securities.

in
in

in some form since its inception in 1939, pertain only to marketable Treasury securities, currently bills, notes, and
bonds. Treasury bills are discount securities that mature in 1 year or
less, while Treasury notes and bonds have semiannual interest payments. New issues of Treasury notes mature in 2 to 10 years, and
bonds mature in over 10 years from the issue date. Each marketable
Treasury security is listed in the Monthly Statement of the Public
Debt of the United States.

the Treasury Bulletin

Table PDO-1. -Maturity Schedule of Interest-Bearing Marketable
Public Debt Securities Other than Regular Weekly and 52-Week
Treasury Bills
All

unmatured Treasury notes and bonds are

order, beginning with the earliest maturity.

listed in maturity

separate breakout

bill.

The

high,

dollar value of

bids is presented, along with the dollar value of awards on a
competitive and a noncompetitive basis. The Treasury accepts noncompetitive tenders of up to $1 million in each auction of Treasury
securities in order to assure that individuals and smaller institutions
are able to participate in offerings of new marketable Treasury
total

securities. Noncompetitive bids are awarded at the average
accepted competitive bids.

yield

Table PDO-3.-Publlc Offerings of Marketable Securities Other
than Regular Weekly Treasury Bills

The results of auctions of marketable Treasury securities, other
than weekly bills, are listed in the chronological order of the auction
dates over approximately the most recent 2 years. This table includes notes and bonds presented in table PDO-1 52-week bills in
table PDO-2, and data for cash management bills. Treasury offers
cash management bills from time to time to bridge temporary or
seasonal declines in the cash balance. Cash management bill
maturities generally coincide with the maturities of regular issues of
Treasury bills.
,

provided for the combined holdings of the Government accounts and
Federal Reserve banks, so that the "All other investors" category
includes

all

Table PDO-4.-Allotments by Investor
Marketable Securities, Parts A and B

private holdings.

Table PDO-2.-Offerlngs of

Bills

results of

for

Public

Data on allotments of marketable Treasury securities by invesare presented in chronological order of the auction date for
approximately the most recent 2 years. These data have appeared in
the Treasury Bulletin since 1 956. Tenders in each Treasury auction
of marketable securities other than weekly auctions of 13- and 26week bills are tallied by the Federal Reserve banks into investor
classes described in the footnotes to the table.
tor class

weekly auctions of 13- and 26-week bills and
auctions of 52-week bills every fourth week are presented in table
PDO-2. Treasury bills mature each Thursday, tvlew issues of 13week bills are reopenings of 26-week bills. The 26-week bill issued
every fourth week to mature on the same Thursday as an existing

The

Classes

PUBLIC DEBT OPERATIONS
Table PDO-1 .--Maturity Schedule of Interest-Bearing Marketable Public Debt Securities Other than
Regular Weekly and 52-Week Treasury Bills Outstanding, Mar. 31, 1988
[In

millions of dollars. Source:

Monthly Statement

the Public Debl of |he United Slates, and Office of

Amount

Oats

of malurflies

Government Finance and Market Analysis

ihe Office ol the Secretary]
Amount ot matuntie

PUBLIC DEBT OPERATIONS
Table PDO-1 .--Maturity Schedule of Interest-Bearing Marketable Public Debt Securities Other than
Regular Weekly and 52-Week Treasury Bills Outstanding, Mar. 31, 1988-Continued
[In

Annount

millions ol dollarsi

o! maturities

Amount

Qt maturities

Held by

Govl

Date

U.S.

o( final

accounts and
Federal Reserve banks

maturity

Nov. 15

All

Date

U.S.

other
Investors

ollinal

accounts and
Federal Reserve banks

maturity

Gov1

All

other
investors

42
PUBLIC DEBT OPERATIONS
Table PDO-2,
rce:

Amount of

bids
tendered

Regular weekly:
(13-iieek and 26-«eek)
1987-Dec.

1988-Mar.
June
Mar.

June
17

Mar.

June
June

1988-Jan.

June
Apr.
July
Apr.

July
21

Apr.

July

Feb.

Apr.

July
May

18
25

Mar.

10
17

24
31

Aug.
May
Aug.
May
Aug.
May
Aug.
June
Sept.
June
Sept.
June
Sept.
June
Sept.
June
Sept.

52-iieek:

1987-Har.
Apr.
Hay
June
July
Aug.
Sept.
Oct.

19
16
14
11
9
6
3
1

1988-Jan.

29
27
24
21

Feb.
Har.

18
17

Nov.
Dec.

1988-Har.
Apr.
Hay
June
July
Aug.
Sept.
Sept.
Oct.
Nov.
Dec.

1989-Jan.
Feb.
Har.

Cash Hanagenent:
1988-Mar.

19e8-Apr.

Offerings of Bills
PubHc Debt

Amounts of bids

Issue

Number of
days to
maturity

Monthly Statement of the

$21,726.5

of the Un ited States and allotments]

epted

Amount
maturing on
Issue date

Total
unmature
Issues
standlno

43
PUBLIC DEBT OPERATIONS
Table PDO-2.
On total bids accepted

Offerings of Bills-Continued

44
PUBLIC DEBT OPERATIONS
Table PDO-3.

Public Offerings of Marketable Securities Other than Regular Weekly Treasury Bills
Source: Bureau of the Public Debt]
[Dollar amounts in roillions.

(years,
days) 2/

3/13/86

45
PUBLIC DEBT OPERATIONS
Table PDO-3.

Public Offerings of Marketable Securities Other than Regular Weekly Treasury Bills-Continued
[Oollar amounts in millions]

Auction

46
PUBLIC DEBT OPERATIONS
Table

PDO-4. - Allotments

by Investor Classes for Public Marketable Securities
Part A

Other than

Bills

[In millions of dollars]
Allotinents by investor classes

Issues

Total

Description of securities

47
PUBLIC DEBT OPERATIONS
Table

PDO-4. -

Allotments by Investor Classes
Part B

Bills

for Public

Marketable Securities-Con.

Other than Regular Weekly Series
[Dollar amounts In millions]

Total amount
Issued

3/20/86
4/17/86
5/15/86
6/12/86
7/10/86
8/07/86
9/04/86
10/02/86
10/30/86
11/28/86
12/26/86

3/19/8
4/16/8
5/14/8
0/11/8
7/09/8
8/06/8
9/03/8
10/01/8
10/29/8
11/27/8
12/24/8

1/22/87
2/19/87
3/19/87
4/16/87
5/14/87
6/11/87
7/09/87
8/06/87
9/03/87
10/01/87
10/29/87
11/27/87
12/24/87

1/21/88
2/16/88
3/17/88
4/14/88
5/12/88
6/09/88
7/07/88
8/04/88
9/01/88
9/29/88
10/27/88
11/25/88
12/22/88

6.61

Includes trust funds and accounts that comp

the unified budget concept.
21 Exclusive of banks and Insurance conpanles.
7/ Included with all other Investors are certain Gove

Allotments by Investor classes
U.S. Gov't

Commer

accounts
and Federal
Reserve
banks 1/

clal

banks

48
U.S.

SAVINGS BONDS AND NOTES

Series EE bonds, on sale since Jan. 1, 1980, are the only
savings bonds currently sold. Series HH bonds are issued in
exchange for series E and EE savings bonds and savings notes.
Series A-D were sold from Mar. 1, 1935, through Apr. 30, 1941.
Series E w^as on sale from May 1, 1941, through Dec. 31, 1979
(through June 1980 to payroll savers only). Series F and G were sold
from May 1, 1941, through Apr. 30, 1952. Series H was sold from

June 1, 1952, through Dec. 31, 1979. Series HH bonds were sold for
cash from Jan. 1, 1980, through Oct. 31, 1982. Series J and K were

sold from

May

1952, through Apr 30, 1957.

U.S. savings notes were on sale May 1, 1967, through June 30,
1970. The notes were eligible for purchase by individuals with the
simultaneous purchase of series E savings bonds. The principal
terms and conditions for purchase and redemption and information
on investment yields of savings notes appear in the Treasury
Bulletins of March 1967 and June 1968; and the Annual Report of
the Secretary of the Treasury for fiscal year 1974.

Table SBN-1. --Sales and Redemptions by Series, Cumulative through Mar. 31, 1988
[In

millions of dollars.

Source: Monthly Stalemenl of the Public Debt

ol Ihe

United Stales; Market Analysis Section. Unlled Stales Savings Bonds Division]

Amount outstanding
Sales plus
accrued

Interest-

Matured

discount

bearing debt

non-interest-

bearing debt

Savings bonds:
3,949

Series A-D^

SeriesE, EE, H,
Series F and
Series J and

Savings notes

Total

G
K

andHH.

49
U.S.

SAVINGS BONDS AND NOTES

Table SBN-3.--Sales and Redemptions by Period, Series E, EE, H, and
[In millions of dollars.

Sourcs: Monihly Slalemeni

o( the Publk:

Debl

ol Ihe

United Slates; Market Analysis Section. United Slates Savings Bonds Dlvlsionl

Redemptions

Exchange ot
ol
E bonds for

acaued

Sales

H and HH bonds

discount

price

Sales plus

Amount outstanding
Interest-

Matured

bearing debt

non-inierest-

bearing debt

Serie*

E and EE

Rsc»l years:
1941-85
1986
1987

223,106
8.301
10.317

312.257
13.937
16.446

233.003
4.723
4.587

183.265
2.719
2.717

49,739
2.005

183.889
2.778
2.998

60.160

9.364

1.954
1.794

789
584

1.870

69.114
77.317
88.423

1,199
1,224

70.122
81,936
90,335

1.444
1.437
1.539

946

Calendar years:
1941-85
1986
1987

1987

224.470
11.888
7.022

90.510
5.720
6.853

314.980
17.607
13.875

234.048
4.732
4.793

July

703
706
602
543
517

524
513
570

1.212
1.197
1.126
1.055
1.087

Aug

461

521

410
377
350
382
426
404

Sept
Oct

474
486
543
630
645
658
706

497
550
708
919

Mar
Apr

May
June

Nov
Dec
1988

Jan

Feb
Mar

1.015

829
606

982

84.302

971
1.036
1.251

1.550
1.660
1.487
1.312

Series

1.301

85.800
86.422
87.067
87.597
88.137
88.736
89.589
90.335
91.577
92.559

1.285
1.269
1.253

93.331

H and HH

Fiscal yeara:

1952-85
1986
1987

13.620

14.633

-1

409
339

-38

8,165
8,510
8.867

Calendar years:
1952-85
1986
1987

1987 -Mar
Apr

May
June
July

1988

13.608
21

40
21
-33
-1

-16
21

Aug

-5

Sept
Oct

-1

Nov
Dec

Jan

-57

Feb
Mar

-9

-6

Note.-Serles E and EE include U.S. savings notes (Freedom Shares) on sale from
1. 1967. through June 30, 1970, to E bond buyers.

May

1.329

85.061

3,938
S.969
J,012

1,241

1.224
1.224
1.216
1.539
1.407
1.394
1.357

OWNERSHIP OF FEDERAL SECURITIES
INTRODUCTION

Federal securities presented in these tables comprise public
debt securities issued by the Treasury and debt issued by other
Federal agencies under special financing authorities. See the Federal debt (FD) series of tables for a more complete description of the
Federal debt.

Table OFS-1 .--Distribution of Federal Securities by Class of
Investors and Type of Issues
Holdings of Treasury marketable and nonmarketable securities
and of debt issued by other Federal agencies are presented for Government accounts, the Federal Reserve banks, and private investors. Government account holdings largely reflect investment by the
social security and Federal retirement trust funds. The Federal Reserve banks acquire Treasury securities in the market as a means of
executing monetary policy.

Table OFS-2.~Estlmated Ownership of Public Debt Securities
by Private Investors
Privately held Treasury securities are those held by investors
other than the Government accounts and Federal Reserve banks.
Treasury obtains information on private holdings from a variety of
sources, such as data gathered by the Federal financial institution
regulatory agencies. State and local holdings and foreign holdings
include special issues of nonmarketable securities to municipal enti-

and foreign official accounts, as well as municipal and foreign
and private holdings of marketable Treasury securities. Data
on foreign holdings of marketable Treasury securities are presented
in the capital movements tables in the Treasury Bulletin. See the
ties

official

footnotes for descriptions of the investor categories.

OWNERSHIP OF FEDERAL SECURITIES
Table OFS-1.

Distribution of Federal Securities by Class of Investors and Type of Issues
[In

imiHons of dollars.

Source: Financial Management Service]

Held by U.S. Government

1983
1984
1985
1986
1987

.381 .886
,576 ,748
,827 .470
,129 ,522
2 .354 .286

1.375.751
1,559,570
1.821,010
2.122,684

239.023
263,084
316.545
382 .859
457.167

2,250.717
2.271 .945
2,291.319

407.453
419.604
426 .023
438.146
438.948
443.120
457.167
464.303
465.459
477.650
488.847
492.246
490.840

1
1
1

1987-H«r
Apr
May
JufW
July
Aug
Sept
Oct

Feb

2 .479 .681

2,244,023
2,265,559
2,274,341
2.306.705
2.304,494
2,341,659
2,347,750
2,372,089
2,407.080
2.428.935
2.435.134
2,469.235

H«r

2 .493 ,195

2 ,484 .908

2 .313 .097

2.310.784
2 .348.300
2 ,354,286
2 ,388 ,693

NOV
Dec

2,413.452

1988-Jari

2.456.341

2 .435 .233

Interest-bearing public debt

17.170
16.964
16.964
17.564
17.484
17.386
17.481
17,250
28,346
17,378
17,298
17,458
17.412

981.305
1.141.468
1.334.763
1.549.074
1.678.642

862.690
1.016.544
1.184.343
1.352.734
1.446.558

118.615
124.925
150,420
196.340
232.083

1.459
12.696
2.093
2.619
2.527

4.366
4.217
4.009

1987-Mar
Apr
Hay
June
July
Aug
Sept
Oct
Nov
Dec
1988-Jan
Feb
Har

1.640.161
1.627,072
1.641.014
1.656.253
1.657.376
1,691.301
1.678.642
1.690.172
1.722.661
1.728.734
1.727.876
1.760.098
1.776.572

1.422.137
1.403.309
1.416.329
1.429.126
1.425.973
1,461.083
1.446.558
1.457.737
1.468.717
1.484.760
1.483.601
1.511.833
1.523.762

218.024
223.763
224 .685
227.128
231.403
230.218
232.083
232.435
253.944
243.974
244,275
248.265
252.810

2,701
2,585
13,177
2,590
2,483
2.533
2.527
12.711
2.491
2.780
13.137
2.623
2.643

3.994
3.800
3.801
3.801
3.806
4.108
4.009
3.893
3.680
3.518
8.069
7.823
5.643

OFS-2 -

390.283
402 .640

196,409
218,883
207,304
212,306
208,170
207,238
211.941
217.614
218.960
222.551
218.411
216.891
217.496

Held by
U.S. Government
accounts and
Federal Reserve
banks

1983
1984
1985
1986
1987

Table

155.423
155.018
169.702
190.751
211.941

409.059
420,582
421.464
425.734
439.686
447.053
437.113
460.272
471.549
474.788
473,428

Matured
public
debt
and debt

;

233.136
258,090
310,411
362.015
439.686

1.196
1.179
1.171
1.165
1.104

3.479
3.302
3.195
3.052
2.905

1,169
1.166
1.116
1.116
1.104
1.104
1.104
1.092
1.092
905
885

2.825
2,634
2,685
2,685
2,702
3,004
2,905
2.801
2.788
2.613
7.184
7.175
4.993

Estimated Ownership of Public Debt Securities by Private Investors

Individuals 3/

1980-June
Dec

558.2
616.4

1981-Junc
Dec

651.2
694.5

1982-Har
June
Sept
Dec

733.3
740.9
791.2
846.4

116.1
116.1
117.8
131.4

1963-«ar
June
Sept
Oec

906.6
948.6
962.7
1.022.6

153.2
171.6
176.3
188.8

753.4
777.0
806.4
833.8

1984-Mar
June
Sept
Dec

1.073.0
1.102.2
1.154.1
1.212.5

189.8
182.3
183.0
183.4

883.2
919.g
971.1
1.029.1

19S5-Mar
June
Sept
Dec

1.254.1
1.292.0
1.338.2
1.417.2

195.0
196.3
196.9
192.2

1.059.1
1,095.7
1.141.3
1.225.0

145.1
148.7
151.4
154.8

75.4
76.7
78.2
79.8

94.2
100.3
105.3
115.4

26.7
24.8
22.7
25.1

198e-nar
June
Sept
Oec

1.473.1
1.502.7
1.553.3
1.602.0

195.1
197.2
r214.3
r238.3

1.278.0
1.305.5

157.8
159.5
158.0
162.8

81.4
83.8

118.5
120.4
126.4
135.4

1987-Mar
June
Sept
Dec

1.641.4
1.657.7
1.682.6
1.745.2

r237.2
r238.4
r251.3
r253.3

rl.404.2
rl.419.3
rl.431.3
rl. 492.1

145.3
140.0
143.0

1.778.2

P260.7

1.517.5

1988-Mar
'Ings bonds,

series A-F

21.5
112.5
114.1
115.6
116.5

rl. 339.0

rl.373.7

116.7
121.3
129.0
133.4

67.5
67.4
67.6

69.7
70.6
71.5

25.7

32.1
35.8
38.6

45.0
46.7
48.0
48.2

44.1

47.9
51.6
58.4
61.9

49.6
54.0
58.5
65.3

17.6
21.6
24.5

99.0
103.3
109.0
115.0

27.2
32.6
35.9
39.7

123.0
127.4
137.0
149.0

156.2
160.1

166.3

r235.9
r253.1
r263.8
r257.3

155.0
162.9
170.0
173.0

166.3
171.6
175.5
192.9

r293.8
r310.l
r343.0
r354.7

50.8
54.9
59.0
59.0

177.0
190.3
203.0
224.0

186.4

200.7
209.8
212.5

r378.9
r376 .0
r390.1
r434 .2

29.9
22.8
24.9
r26.0

59.6
61.2
65.7
68.8

229.0
235.5
245.0
260.0

r217.9
r237.1
r253.4
251.6

r465.3
r469 .0
r465.6
r467.1

rlS.S
20.6
rl5.2
rl4.3

r73.5
r79.7
r81.8
p84.6

44.8
28.3
22.1
22.8

72.2
72.9
73.7
74.5

included at current

87.1
92.3

19.4
14.9
13.6
25.9

5/ Exclusive of bani
6/ Includes State ai

136.1

137.2
140.6
149.5

160.

r260.3
r268 .6
r267 .0
287.3

insurance compami
pension funds,

des domestically chartered banks. U.S. branches and agencie
gn banks. New York Investment cofipanles majority owned by
gn banks, and Edge Act corporations owned by domestically

7/ Consists of the
~ accounts in the
December 1978 to

des partnerships and personal trust accounts.
des U.S. savings notes.
Sales began Hay 1. 1967. and were
ntlnued June 30. 1970.

8/ Includes savings
Institutions, rajtual saving
dealers and brokers, certal
Government-sponsored agencli

jnent of foreign bal
I

States.

Estimate'

accounts, and

MARKET YIELDS
INTRODUCTION

The tables and charts in this section present yields on Treasury
marketable securities and compare long-term Treasury market yields
with yields on long-term corporate and municipal securities.

a consistent data

on Treasury bills, which are discount
coupon equivalent yields of bank discount rales at
which Treasury bills trade in the market. The Board of Governors of
the Federal Reserve System also publishes the Treasury constant
series. Yields

securities, are the

maturity data series in

Table MY-1.--Treasury Market Bid Yields
Bills, Notes, and Bonds

presented in the chart that accompanies table MY-1, is based on current market bid quotations on the
most actively traded Treasury' securities as of 3:30 p.m. each business day. The Treasury obtains quotations from the Federal Reserve
Bank of New York, which composites quotations provided by five
primary dealers. This yield curve reflects yields based on semiannual
interest payments and is read at constant maturity points to develop

The Treasury

yield curve,

its

weekly H,15 press release.

Constant Maturities:
Table MY-2.~Average Yields of Long-Term Treasury, Corporate,
and Municipal Bonds

The long-term Treasury
MY-1

rate

the 30-year constant maturity

The corporate and municipal bond
series are developed by the Treasury, using reoffering yields on new
long-term securities rated Aa by Moody's Investors Service. See the
rate presented in table

footnotes for further explanation.

MARKET YIELDS
Treasury Market Bid Yields
[Source: Ottlce ol

End

iaa2
June
Dec.

1983
June

Dec

19S4
June

Dec

198S
June

Dec

month

13.37
8.19

9.14
9.32

10.30
8.12

7.04
7.28

IMS
June

Dec

1987
June

Dec

6.13
6.83

6.91

6.86

14.13
8.45

Constant Maturities, 1982-87

GovernmenI Finance and Market Analysis

Ihe Ofllce ot Ihe Secrelary)

MARKET YIELDS
Table MY-1.--Treasut7 Market Bid Yields
[Source: Oftice of

1-yr.

Monthly average

Constant Maturities:

Governmenl Finance and Market Analysis
2-yr.

3-yr.

Bills,

Ihe Otiice of Ihe Secretary]
5-yr.

Notes, and Bonds*

55
MARKET YIELDS

MARKET YIELDS
Table MY-2,"Average Yields of Long-Term Treasury, Corporate, and Municipal Bonds
[Source:^ Office ot

Governmern Finance and Market Analysis

the Oftice ol the Secfelary]

New Aa

Treasury

New Aa

Treasury

New Aa

30-yr.

corporate

municipal

30-yr.

corporate

municipal

30-yr.

corporate

municipal

bonds

Treasury

MARKET YIELDS

AVERAGE YIELDS OF LONG-TERM TREASURY,
CORPORATE, AND MUNICIPAL BONDS
Monthly Averages

Trsasury^ 3q-Yr.

Bonds

Aa Municipal Bonds_
Aa Corporate Bonds

|iii i |iMiiii

iiimii

iiiiii|iiiiii

i|iiniiimT'''''''''T'' '''

"""1" '"

''''
l

CALENDAR YEARS

'I"

""I"""
88

FEDERAL AGENCIES' FINANCIAL REPORTS
INTRODUCTION
1950

Section 114 of the Budget and Accounting Procedures Act ot
(31 use. 3513a) requires the Secretary of the Treasury to

prepare reports on the financial operations of the US. Government
and provides that each executive agency must furnish the Secretary
of the Treasury such reports and information relating to the agency's
financial condition and operations as the Secretary may require. The
provisions do not apply to the legislative and judicial branches of the
Federal Government; however, these entities are encouraged to
submit the prescribed reports so the Secretary of the Treasury can
prepare comprehensive reports on

all

the financial activities of the

U.S. Government.

The Treasury
for the

submission

dance with

Manual (I TFM 2-4100) sets the criteria
annual and quarterly financial reports in accor-

Financial
of

the Reporting Entities Listing (Bulletin No. 87-07). Re-

ports are provided tor six fund types: Revolving funds, trust revolving
all other trust funds, all other activity

funds, 15 major trust funds,

combined, and consolidated reports of an organizational

unit.

The

be accounted for on the accrual basis. The Report on Operations can be
submitted on a cash basis under certain circumstances (see TFM
2-4180.20) Reports are to be prepared from a budgeting and accounting system which contains an integrated data base that is part
of the agency's integrated financial management system as required
by the Office of Management and Budget (0MB) Circular No. A-1 27.
financial transactions supporting the required reports are to

conducted in the territories or overseas, and any monetary
assets or properly received, spent, or otherwise accounted for by the
reporting entity. Amounts are reported to the dollar.
tions

Requirements provide that Federal agencies submit to Treasury
reports supplemented by three supporting reports
which are consolidated and published annually in the winter issue of
Treasury
Bulletin.
These reports are: Report on Financial Posithe
tion (SF 220), Report on Operations (SF 221), Report on Cash Flow
(SF 222), and Report on Reconciliation (SF 223). The three supporting reports are: Direct and Guaranteed Loans Reported by Agency
and Program Due from the Public (SF 220-8), Report on Accounts
and Loans Receivable Due from the Public (SF 220-9), and Additional Financial Information (SF 220-1). The report on Direct and
Guaranteed Loans is submitted to Treasury quarterly, and annually
for publication in the Treasury Bulletin. The Report on Accounts and
Loans Receivable Due from the Public is submitted quarterly on a
selected basis, and by all entities annually. Information captured in
the SF 220.8 is shown in the following table:
four financial

The required
equities relating to

reports should include
all

programs and

all

assets,

activities

liabilities,

under control

and

of the

reporting entity, except for the assets of disbursing officers, which
are reported by the Treasury. Reports should include transfer appropriation accounts from other agencies, foreign currencies, opera-

Table FA-2.--Direct and Guaranteed Loans
and guaranteed loans to the
Program to support credit activities.

This report reflects the direct loans
public through the Federal Credit

Actual control of credit program levels remains with authorizing legislation and appropriations acts. The report on Direct and Guaranteed

Loans also provides the Federal Reserve Board information to
monitor the flow of funds. An accompanying chart depicts direct
loans and guaranteed loans for the first quarter of fiscal 1 988.

FEDERAL AGENCIES' FINANCIAL REPORTS

—

Table FA-2.
[In

thousands

Direct

of dollars.

and Guaranteed Loans, Dec.

Source: SF 220-8, compiled by Financial

1987

Service]

Guarantees or insurance

Direct loans or credit

Agency and program

31,

Management

Amount

(Maximum

Amount

outstanding

autfiorlty

outstanding

_ Wholly owned Government enterprises
U.S. dollar loans

Funds appropriated

to ttie President

1,111,223
2,472,675
140,000
290,132
90,106
2,700,339
15,741,707
50,096

Guaranty reserve fund
Foreign military sales credit
Military sales credit to Israel

Emergency

security assistance to Israel

Housing and other credit guaranty programs
Alliance for Progress loan fund
Ottier programs
Overseas Private Investment Corporation ...

Funds appropriated

Total

Department

to the

22,596,281

President

of Agriculture:

Commodity loans
governments and private trade
Export credit sales program
Storage facility and equipment loans
Loans

to foreign

entities

Guaranteed foreign loans
Rescheduled claims on guaranteed loans
Rural electrification and telephone revolving fund
Rural Telephone Bank
Rural communication development fund
Agricultural credit insurance loans

Rural development insurance loans
Rural housing insurance loans
Other Farmers Home Administration loans
Total

Department

of Agriculture

of Commerce:
Economic Development loans

Department

Trade Administration loans
Coastal energy impact fund
International

Federal ship financing fund
Other loans
Total

Department

Commerce

14,851,423
11,219,301
777,948
65,178
2,356,961
34,665,916
1,468,885
19,054
26,619,606
6,445,221
26,704,523
38,223

125,232,245

547,790
7,184
88,389
28,188
10,178

681,730

1,435,861
6,031,071

350,000
682,663
90,106
2,700,339
15,741,707
69,799

1,353,214

706,301
2,059,515

FEDERAL AGENCIES' FINANCIAL REPORTS
Table FA-2.

—

Direct

and Guaranteed Loans, Dec.

31,

Amount

Maximum

Amount

Maximum

outstanding

authority

outstanding

authority

— Wholly owned Government enterprises
U.S. dollar loans

Department of Defense
Ryukyu Islands, construction
Total

Department

power systems

Defense

Department of Education:
College housing loans
Higher education
Other loans
Total

1,172,063

facilities

loan and insurance fund

Department

of Energy:
Bonneville Power Administration loans

Other loans
Total

Department

of Health

Energy

and Human Services

Health professions graduate student loan fund
Ivledical facilities guarantee and loan fund

Student loan program
Other Healtti Resources and Services Administration loans
Nurse training fund
Health maintenance organization loan fund
Total

Department

of Health

and Human Services

Department of Housing and Urban Development
Federal Housing Administration fund
Housing for the elderly or handicapped
Low-rent public housing program
Other housing loans
IVIanagemeni and liquidating functions
Guarantees of mortgage-backed securities
.

Rehabilitation loan fund

Urban renewal programs
Other loans

210,138
5,821,881

Department of Education

—Con.
Guarantees or insurance

Direct loans or credit

Agency and program

1987

FEDERAL AGENCIES' FINANCIAL REPORTS
Table FA-2.

—

Direct

and Guaranteed Loans, Dec.

31, 1987

Guarantees or insurance

Direct loans or credit

Agency and program

Amount

IVIaximum

Amount

outstanding

autfiority

outstanding

_ Wholly owned Government enterprises
U.S. dollar loans

Department of the Intenor:
Reclamation protects

533,176
109,706

Indian affairs revolving fund for loans
Indian loan guaranty

Guam Power

15.610

and insurance fund

Autfiority

Virgin Islands construction

Department

Total

of ttie Interior

Department of Labor:
Pension Benefit Guaranty Corporation
Department

Total

Labor

Department
Emergencies in diplomatic and consular service
Loans to ttie United Nations
of Stale:

Department

Total

Department

of State

of Transportation:

Federal Aviation Administration:
Purcliase of aircraft
Federal Higfiway Administration:
Fligfit-of-way revolving fund

50,826

Higfiway trust funds
Federal Railroad Administration loans
Urban IVIass Transportation loans
N/lantime Administration:

Federal

sfiip

Department

financing fund

Department

Total

of Transportation

of tfie Treasury:

Federal Financing Bank
to foreign

Loans

Total

governments

Department

of tfie

Treasury

Environmental Protection Agency

Loans
Total Environmental Protection

Agency

General Services Administration
Federal buildings fund
Ottier

funds

Total General Services Administration

Small Business Administration
Business loans
Disaster loan fund
Otfier loans

Total Small Business Administration

—Con.

FEDERAL AGENCIES' FINANCIAL REPORTS
Table FA-2.

—

Direct

and Guaranteed Loans, Dec.

31,

Amount

Maximum

Amount

IVIaximum

outstanding

authority

outstanding

autlnority

— Wholly owned Government enterprises
U.S. dollar loans

Veterans Administration
Loan guaranty revolving fund

1,263,356

Direct loan revolving fund
Service-disabled veterans insurance fund
Veterans reopened insurance lund

Vocational retiabilitation revolving fund
Education loan fund

Other

trust

funds

National service

Veterans special

life
life

Compensation and

insurance fund
insurance fund

benefits

Other loans
Total Veterans Administration

Other independent agencies:

Loans

C Government

Export-Import Bank of the United Stales
Federal Savings and Loan Insurance Corporation
National Credit Union Administration

Tennessee Valley Authority
Total Other
Total Part

independent agencies

—Con.
Guarantees or insurance

Direct loans or credit

Agency and program

1987

FEDERAL AGENCIES' FINANCIAL REPORTS

DIRECT AND GUARANTEED LOANS, DEC.

31,

1987

Wholly owned Government Enterprises--U.S. Dollar Loans

ducation

Direct

Loans

Agriculture"

Agriculture

Guaranteed Loans

International Statistics

67
INTERNATIONAL FINANCIAL STATISTICS

"/"'!? stu"

The tables in this "<:j;°" .?",''"l9"^
°'^„" '"(I'^a
^ ^
00 U.S. reserve assets and
"",/"J
and international
payments
related to the U.S. balance of

notes^fslueJ'^to'of ??c?al
countries,
foreign
a

position.
of the United States,
Table IFS-1 shows the reserve assets
drawing r ghts held in the
including Its gold stock, special
the '"»«""{»""
e u! o'rawin^ Account in
"^Jt^rvepo^ireserve posi
currencies, and
holdings of convertible foreign
Fund.
"ion in the International Monetary
liabilities to
T^hl» IF^-2 brinqs together statistics on
and selected liabilities to all
foreion l?f cLl "ns?? tuti ins
in the U.S. balance of payments
other foreigners, which are used

Table IFS-4

financial

(

nsti""ons

between the U.S. dolla
other countries.

Table IFS-1.

U.S. Reserve Assets

[In Billions of dollars]

Special

End of calendar
year or month

Treasury

2/
Total _

Hsetri/
asbcv*
±j

\\-\\\

\\f.\

u.om

11:u.om

l^^l;::::::::::::::::::::::::::

J:..

"^^V-V-V-V.

4SU0

U.06,

U.OS,

July
A-S;
Sept

35944

11,068

11.068
11.075
11.085
11.082
11.078
11.068

2".
"0»

::::

J5;070

11075

is 200

11.085

45779

n.oez

45 798

11.078
11.068

i2955
J^.95b

1988-Jan
••::

r.'"

^O°?"baterori':ei;?ted-avera%e

^h^"rn'grinrre::rvr o:?t?::
,,

l-„5

Of exchange

V^'^^

6.656

n.3|3

.0,64

9.373
9.937
'9-?!?
9.765

r;o?5^ieir?y^?ii r«2:ange Stabilisation Fund
6/

4391
1J.585
11 .318
318

^jj

;"and 1981

857

^niion Mn

---ng^SlJl^nr-lg^Stn-h^se-afe^t^lue'd

10.803

SD«

U' t^e irasart n^'"
rar^e^agr^rd^po; ^r rhe-p^rtrer
^to^purchase^f ore, gn^
unit

States^nas

90ld held.
,K
c .M.l
nrawino Account
Drawing
Special
includes allocations of SDR's in J^-^
Fund, plus or minus trans
in the International Monetary
actions in SOR's.

^^^^^^
10.804

\\-^^]\

9.589

te'r"s

,795

9.8"

linrR'
5/

«„

4.586
3.999

9.08

11.06
11.063

certificates to the
all

,,.3„

9.174

^^^^3

^"^
^ B^Z^^ll^rTlt S^rllinfbf HsS:; ::-:
against
Federal Reserve at the same rate
4/

1?1

^s.3,s

rates for the

>l^^il-^'^^

£/

.641

;

u.ojb

43:l86
42.730

rights

right

'J'"'^:;/;^"^^'!"
needed.
reiTtld to
""s related
additional amounts
United States could purchase

fj^.ucally
^

68
INTERNATIONAL FINANCIAL STATISTICS
Table IFS-2.

Selected U.S. Liabilities to Foreigners
[in

mi1Hons

of dollars]

abilities to foreign countries
Official

Liabilities
reported
by banks

End of

calendar
year or
month

1984
1985
1986
1987

1987-Mar
Apr
Hay
June....
July
Aug
Sept
Oct
Nov
Dec

1988-Jan
Feb

Mar

Total

(1)

(2)

U.S.
(3)

institutions 1/

Liabilities to
other foreigners

MarketOther
able U.S. Nonmarket- readily
Treasury able U.S.
marketbonds
Treasury
able
Liabilibonds and
and
liabili- ties to
notes J^/
notes 1/
ties 4^/
banks ^/
(4)

(5)

(6)

tary in-

(7)

18)

(9)

(10)

(11)

(12)

545,799
606,077
740,909
868,695

174.580 86,065
172,493
79,985
205,210 103,569
253,604 120,650

69,019
77.154
91,368
122,555

5,800
3,550
1,300
300

13,695
11,803
8,973
10,098

257,460
290,954
381,607
468,854

99,169
126,240
138,790
137.631

67,894
74,331
79,875
79,575

31,275
51,909
58,915
58,056

747.146
770,463
775.929
774.015
769.240
779.463
818.604
836,868
843,183
868,695
855,583
871,571
882,454

220.852
230,017
230.386
232.575
226,825
232,184
233,848
246,231
247,706
253,604
260.961
270,432
279,281

99.585
102.073
106.516
110.235
112,490
115,102
116,440
118,911
120.764
122,555
127.658
134,824
142,837

1.300
1,300
1.300
700
600
300
300
300
300
300
300
300
792

8,875
8,823
9,005
8.900
8,777
8,845
9,363
9,863
9,840
10,098
9.845
9,787
9,945

378.546
394.089
404.403
396,213
397,824
401,975
436,535
451,430
446,405
468,854
446,542
445,693
449,198

131,953
129.509
131.326
133,682
133,908
136,912
137,594
128,472
137,420
137,631
139.067
144.416
145,326

75.466
76.916
79.447
76,876
75,747
78,576
79,911
78,729
81,853
79,575
80,374
80.058
79,969

56.487
52,593
51,879
56,806
58,161
58,336
57.683
49,743
55,567
58.056
58,693
64.358
65.357

111,092
117,821
113.566
112,740
105,058
107,938
107,745
117,156
116.801
120,650
123,157
125,520
126,199

\J Includes Bank for International Settlements.
2/ Derived by applying reported transactions to benchmark data.
T/ Beginning in March 1988. includes current value of zero-coupon.
20-year bond issue to Government of Mexico.
Also see
footnote 1, Table IFS-3.
Includes debt securities of U.S. Government corporations, federally sponsored agencies, and private corporations.
il Includes liabilities payable in dollars to foreign banks and
liabilities payable in foreign currencies to foreign banks and
to "other foreigners."

Liabiliti
to nonmon

Liabili- MarketNonmarket- ternation
ties
able U.S. able U.S.
al and re
reported Gov't
Treasury
gional or
by banks bonds
bonds and
ganizatio
Total in U S
notes _7^/
2^/
6^/
8^/

notes held by

8^/

14,590
16,390
15.302
8.606
15,795
16.848
9.814
11,545
10,684
8.392
10.627
10,735
11,653
8.606
9,013
11,030
8,649

Principally the Internal
Development, the Inter-A
Asian Development Bank.

Note. --Table is based on Treasury Department data and on data
reported to the Treasury Department by banks, other depository
institutions, and brokers in the United States.
Data correspond
generally to statistics following in this section and in the
"Capital Movements" section.
Table excludes International
Monetary Fund "holdings of dollars" and holdings of U.S.
Treasury letters of credit and nonnegot abl e noni n teres t-beari ng
i

69
INTERNATIONAL FINANCIAL STATISTICS
Table IFS-4.

Weighted Average

Exchange Rate Changes

for the Dollar

[Percgnt change relative to exchange rates as of end-May 1970]
Trade-w
or depr

-14.6
-21.5
-18.4
-15.0
-3.4
+9.2
+21.8
+41.9
+35.6
+28.9
+17.4

1977
1978
1979
1980
1981
1982
1983

1984
1985
1986
1987
1987-Apr.
May..
June.
July.
Aug.
Sept.
Oct..
Nov..

Dec

1/
*"

+5.962.7
n.a.

Equation two Is used to calculate a trade-weighted average of
the foreign exchange cost of dollars:

This table presents calculations of weighted average percentage changes In
the rates of exchange between the dollar and certain foreign currencies, in
order to provide a measure of changes in the dollar's general foreign
exchange value broader than a tneasure provided by any single exchange rate
Calculations are provided for two sets of countries that account
change.
U.S. bilateral trade patterns in
for a major share of U.S. foreign trade.
1972 are used as a convenient, readily available proxy for the assignment
of relative weights to individual exchange rate changes, although such
weights do not provide a full measure of individual currencies' relative
itiportance in U.S. international transactions because they take no account
The calculations do not purport to represent
of factors other than trade.
a guide to measuring the impact of exchange rate changes on U.S.
International transactions.

(E02)

Xj/EX is U.S. exports to country 1, as
proportion of total U.S. exports to
countries In the set.

all

Equation three combines the above export-weighted and import-weighted
averages to provide an overall measure of exchange rate change:
(EQ3)

Equation one is used to calculate a trade-weighted average of changes in
the dollar cost of foreign currencies:
E,,

KaS/fCj

» Hj/IM)

is the percent change In the dollar

cost of foreign currency

1; and

Imports from country 1, as
proportion of total U.S. Imports from
all countries In the set.

M,-/£M is U.S.
a

Where:

C(E„ * m/m+x)«(-l)]

[E, * x/m+x]

m/m+x is U.S. imports as a proportion
of Its toul trade with all countries in
the set; and
x/m+x is U.S. exports as a proportion of
its toUl trade with all countries in the

E_ is the weighted average of percentage
changes in the dollar cost of Individual
foreign currencies;
flj/fc^

E_ is the weighted u.^.u-^^
age u.
of ^«.v^>.»t,e
percentage
Changes in the foreign currency cost of
dollars;
flfCj/$ Is the percent change in the
foreign currency 1 cost of dollars; and

The equations used ire as follows:

Where:

Ej «t(4fc,/S * X^/tX)

Where:

Exchange rate data used in constructing the Indices reported here differ
somewhat from those used in earlier calculations to more accurately reflect
end-of-period currency values.

{EOD

5,053.9

+20.7
+24.0
+24.8
+29.1
+26.4
+29.1
+25.9
+22.0
+17.4
+27.6
+30.5
+24.6
4/+27.5

1988-Jan..
Feb.
Mar.
Apr.

-1.0
-4.1

+6.6
+21.3
+58.9
+141.2
+446.4
+1.853.3

set.

Australia, Austria, Belgium-Luxembourg, Canada, Denmark, Finland, France,
Germany, Greece, Iceland, Ireland, Italy, Japan, the Netherlands, New
Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, and United
Kingdom.
3/ The currencies of 46 IMF member countries which account for approximately
~ 90 percent of U.S. total trade.
It is expected that this series will be replaced next quarter.
5/ This series has been discontinued.

~2_/

CAPITAL MOVEMENTS
INTRODUCTION

Background
Data

movements between the United States
have been collected in some form since 1935.

relating to capital

and foreign countries

Reports are filed with district Federal Reserve banks by commercial
banks, other depository institutions, bank holding companies,
securities brokers and dealers, and nonbanking enterprises in the
United States. Statistics on the principal types of data by country or
geographical area are then consolidated and are published in the

Treasury

Bulletin.

United States, including the branches, agencies, subsidiaries, and
other affiliates in the United States of foreign banking and nonbanking firms. Entities that have reportable liabilities, claims, or securities
transactions below specified exemption

levels

are exempt from

reporting.

Banks, other depository institutions, and some brokers and
dealers file monthly reports covering their dollar liabilities to, and
dollar claims on, foreigners in a number of countries. Twice a year,
as of June 30 and December 31, they also report the same liabilities
and claims items with respect to foreigners in countries not shown

used in the Treasury
have been revised a
number of times to meet changing conditions and to increase the
usefulness of the published statistics. The most recent, general
revision of the report forms became effective with the banking
reports as of April 30, 1978, and with the nonbanking reports as of
December 31, 1978, Revised forms and instructions are developed
with the cooperation of other Government agencies and the Federal
Reserve System and in consultations with representatives of banks,
securities firms, and nonbanking enterprises.

separately on the monthly reports. Quarteriy reports are filed with
respect to liabilities and claims denominated in foreign currencies

Basic Definitions

by the report.

The reporting forms and instructions
International Capital (TIC) Reporting System

The term "foreigner" as used in the Treasury reports covers all
and individuals domiciled outside the United States,
and the foreign branches,
subsidiaries, and other affiliates abroad of U.S. banks and business
central
banks, and other official
central
governments,
concerns; the
institutions of foreign countries, wherever located; and international
and regional organizations, wherever located. The term "foreigner"

ws-a-ws foreigners Effective January 31, 1984, the specified
exemption level applicable to the monthly and quarteriy banking
reports was raised from $10 million to $15 million. There is no
separate exemption level for the semiannual reports.
Banks, other depository institutions, securities brokers and
and in some instances nonbanking enterprises report
their transactions in long-term securities with foreigners; the
applicable exemption level is $500,000 on the grand total of
purchases and on the grand total of sales during the month covered
dealers,

monthly

Quarterly reports are

filed

by exporters, importers, industrial

institutions

and commercial concerns,

including U.S. citizens domiciled abroad,

other depository institutions and brokers, and other nonbanking
enterprises if their liabilities to, or claims on, unaffiliated foreigners
exceed a specified exemption level on a two quarter-end average

also includes persons

known by

the United States to the extent that they are

reporting institutions to

be acting on behalf

of foreigners.

In general, data are reported opposite the foreign country or
geographical area in which the foreigner is domiciled, as shown on
the records of reporting institutions. For a number of reasons, the
geographical breakdown of the reported data may not in all cases
reflect the ultimate ownership of the assets. Reporting institutions
are not expected to go beyond the addresses shown on their
records, and so may not be aware of the country of domicile of the
ultimate beneficiary.
Furthermore, U.S. liabilities arising from
deposits of dollars with foreign banks are reported in the Treasury
statistics as liabilities to foreign banks, whereas the liability of the
foreign bank receiving the deposit may be to foreign official
institutions or to residents of another country.

Data pertaining to branches or agencies
institutions are reported

foreign

official

opposite the country to which the

official

belongs. Data pertaining to international and regional
organizations are reported opposite the appropriate international or
regional classification except for the Bank for International Settlements, which is included in the classification "Other Europe."
institution

Reporting Coverage
Reports are required from banks, other depository

institutions,

bank holding companies, International Banking Facilities (IBF's),
securities brokers and dealers, and nonbanking enterprises in the

basis. Effective March 31 1982, this exemption level was set at $10
million, up from $2 million. Nonbanking enterprises also report for
each monthend their U.S. dollar-denominated deposit and certificates of deposit claims of $10 million or more on banks abroad.
,

Description of Statistics
Section
presents data on liabilities to foreigners reported by
banks, other depository institutions, brokers, and dealers in the
United States. Beginning April 1978, the following major changes
were made in the reporting coverage: Amounts due to banks' own
foreign offices are reported separately; a previous distinction
between short-term and long-term liabilities was eliminated; a
separation was provided of the liabilities of the respondents
I

their custody liabilities to foreigners; and foreign
currency liabilities are only available quarteriy. Also, beginning April
1978, the data on liabilities were made more complete by extending
to securities brokers and dealers the requirement to report certain of
their own liabilities and all of their custody liabilities to foreigners.
Effective as of January 31, 1985, savings and loan associations and
other thrift institutions began to file the TIC banking forms. Previously
they had reported on TIC forms for nonbanking enterprises.

themselves from

Section II presents the claims on foreigners reported by banks,
other depository institutions, and brokers and dealers in the United
States. Beginning with data reported as of the end of April 1978, a
distinction was made between banks' claims held for their own
account and claims held for their domestic customers. The former
are available in a monthly series whereas the latter data are
collected on a quarterly basis only. Also, the distinction in reporting
of long-term and short-term components of banks' claims was
discontinued. Maturity data began to be collected quarterly on a time

remaining
'

Copies

o( the reporting (orrre

Data Management. Office
ol

and

instructions nnay t>e obtained from the Office of

the Assistant Seaetary for Intetnatlonal Affairs. Department

the Treasury. Washington. D.C. 20220, or from

district

Federal Reseree banks.

financial institutions other than banks,

maturity basis as

opposed

the

historic

original

Foreign currency claims are also collected on
a quarterly basis only. Beginning March 1981, this claims coverage
maturity classification

CAPITAL MOVEMENTS
was extended

to certain

items

and dealers in
above concerning the

the hands of brokers

the United States See notes to section
reporting of thrift institutions.

Another important change in the claims reporting, beginning
quarterly data as of June 30, 1 978, was the adoption of a
of "foreign public borrower," which replaced the
previous category of "foreign official institution" to produce more
meaningful information on lending to the public sector of foreign

with

claims held through banks in the United States. Beginning with data
reported as of December 31, 1978, financial liabilities and claims of
reporting enterprises are distinct from their commercial liabilities and
claims; and items are collected on a time remaining to maturity basis
instead of the original maturity basis used previously.

new

broadened concept

countries.

The term

"foreign public borrower"

encompasses

central

governments and departments of central governments of foreign
countries and of their possessions; foreign central banks, stabilization funds, and exchange authorities; corporations and other
agencies of central governments, including development banks,
development institutions, and other agencies which are majorityowned by the central government or its departments; State,
provincial, and local governments of foreign countries and their
departments and agencies; and any international or regional
organization or subordinate or affiliated agency thereof, created by
treaty or convention between sovereign states.
Section III includes supplementary statistics on U.S. banks'
and claims on, foreigners. The supplementary data on
banks' loans and credits to nonbank foreigners combine selected
information from the TIC reports with data from the monthly Federal
Reserve 2502 reports submitted for major foreign branches of U.S.
banks' dollar liabilities to,
banks. Other supplementary data on
liabilities to,

and banks' own

dollar claims on, countries not regularly reported

separately are available semiannually

the June

and December

issues of the Treasury Bulletin.

Section IV shows the
foreigners

exporters,

liabilities to,

importers,

Section V contains data on transactions in all types of long-term
domestic and foreign securities by foreigners as reported by banks,
brokers, and other entities in the United States (except nonmarketable U.S. Treasury notes, foreign series; and nonmarketable
U.S. Treasury bonds and notes, foreign currency series, which are

shown in the "International Financial Statistics" section, table IFS-3).
The data cover new issues of securities, transactions in outstanding
issues, and redemptions of securities. They include transactions
executed

in the United States for the account of foreigners, and
transactions executed abroad for the account of reporting institutions
and their domestic customers. The data include some transactions
which are classified as direct investments in the balance of
payments accounts. Also, see notes for section above concerning
I

the reporting of

thrift institutions.

The

geographical breakdown of the data on securities
shows the country of domicile of the foreign buyers and
case of outstanding issues, this may
differ from the country of the original issuer. The gross figures
contain some offsetting transactions between foreigners. The net
figures for total transactions represent transactions by foreigners
with U.S. residents; but the net figures for transactions of individual
countries and areas may include some transactions between
transactions

sellers of the securities; in the

foreigners of different countries.

and claims on, unaffiliated
and commercial

industrial

concerns, financial institutions other than banks, other depository
institutions, brokers, and other nonbanking enterprises in the United
States. The data exclude the intercompany accounts of nonbanking
enterprises in the United States with their own branches and
subsidiaries abroad or with their foreign parent companies. (Such
transactions are reported by business enterprises to the Department
of Commerce on its direct investment forms.) The data also exclude

The data published in these sections do not cover all types of
reported capital movements between the United States and foreign
countries. The principal exclusions are the intercompany capital
transactions of nonbanking business enterprises in the United States
with their own branches and subsidiaries abroad or with their foreign
parent companies, and capital transactions of the U.S. Government.
Consolidated data on all types of international capital transactions
are published by the Department of Commerce in its regular reports
on the U.S. balance

payments.

72
CAPITAL
Section

Liabilities to

Table

MOVEMENTS

Foreigners Reported by Banks

CM-l-1. -

Total Liabilities by

Type

the United States

of Holder

[In millions of dollars]

liabilities
foreigners
reported by IBF's

Total

Official

institutions 1/

Banks and ottier foreigners

Payable

Payable
End of

Total

calendar year
or month

liabllities
(1)

1984
1985
1986
1987

1987-Mar
Apr.

May
June
July

Aug.
Sept.
Oct.
Nov
Oec

r
r
r
r

1988-Jan
Feb.
Mar.

p
p

foreign
curren-

Total

dollars

ciesl/

(2)

(31

Payable

415,893
451,094
570,900
673,534

86,065
79,985
103,569
120,650

571,274
597,839
603,408
589,918
584,657
593,904
632,021
650,989
650,946
673,534
656,031
659,993
660,759

111,092
117,821
113,566
112,740
105,058
107,938
107,745
117,156
116,801
120,650
123,157
125,520
126,199

Payable
in

foreign
curren-

Total

dollars

ciesl/

(5)

(6)

(4)

(7)

Payable
Payable
in

Total

dollars

(8)

(9)

325,354
365,285
461,482
548,429

316,787
349,920
431,822
493,598

8,567
15,365
29,660
54,831

4,473
5,824
5,849
4,455

4,454
5,821
5,807
4,373

454,012
471,005
483,850
473,089
473,570
480,551
516,446
530,159
528,257
548,429
526,916
525,751
529,167

415,929
432,922
445,767
434,071
434,552
441,533
470,652
484,366
482,464
493,598
472,086
470,920
474,336

38,083
38,083
38,083
39,018
39,018
39,018
45,793
45,793
45,793
54,831
54,831
54,831
54,831

6,170
9,013
5,992
4,088
6,029
5,416
7,830
3,673
5,888
4,455
5,957
8,722
5,393

6,084
8,927
5,907
4,005
5,946
5,332
7,751
3,594
5,809
4,373
5,875
8,640
5,311

Includes Bank for International Settlements.
7/ Principally the International Bank for Reconstruction and
Development and the Inter-American Development Bank.
3/ Data as of preceding quarter for non-quarter-end months.
1/

to all

foreign
currencies3^/

Payable
Payable
in

dollars
(11)

(10)

20
3

42
82

86
86
86
83
83
83
79
79
79

82
82
82
82

foreign
currencie5 2/
(12)

170,736
183,175
226,607
261,776

4,549
10,191
22,387
44,665

215.600
222.705
230,022
228,820
231,717
235,610
250,167
262,646
251,818
261,776
245,662
243,746
244,252

27,979
27,979
27,979
30,843
44,665
30,843
36,624
36,624
36,624
44,665
44,665
44,665
44,665

CAPITAL MOVEMENTS

TO FOREIGNERS
CALENDAR YEARS 1983-88

LIABILITIES

Reported by International Banking

Facilities

and by Banks

the

United States
700

1983

1984

1985

1986

END OF PERIOD

1987

1988, 1st Qtr.

74
CAPITAL
Table

CM-l-2. -

MOVEMENTS

Total Liabilities by Type, Payable

Part A

Foreign Countries

Dollars

75
CAPITAL MOVEMENTS
Table

CM-l-3. -

Total Liabilities by Country

[Position at end of period

Austria
Bel g1 urn- Luxembourg
Bulgaria
Czechoslovakia
Denmark
Finland
France
German Democratic RepubM
Germany
Greece
Hungary

Italy

13,260

Netherlands
"or.ay
Poland
Portugal
Romania
Spain
Sweden
Switzerland
Turkey
United Kingdom
U.S.S.R
Yugoslavia
Other Europe
Total

Europe

Canada
Latin America and Caribbean
Argentina
Bahamas
Bermuda
Brazil
British West Indies
Chile
Colombia
Cuba
Ecuador
Guatemala
Jamaica
Me»lco
Netherlands Antilles
Panama
Peru
Trinidad and Tobago
Uruguay
Venezuela
Other Latin America
and Caribbean
Total Latin America
and Caribbean

Asia:
China:

Mainland
Taiwan
Hong Kong
India
Indonesia
Israel
Japan
Lebanon. ...'.'.'.'.'.'.'.'.'.'.'.'.'.'.
Malaysia
Pakistan
Phil Ipplnes
Singapore
Syria
Thailand
on-exporting countries 1,
Other Asia
Total

Asia

Africa:
Egypt
Ghana
Liberia

Morocco
South Africa
Zaire
Oil-exporting countries
Other Africa
Total

Africa

Other countries:
Australia
All other
Total other countries...
Total

foreign countries..

International and regional:
International
European regional
Latin American regional..
Asian regional
African regional
Middle Eastern regional
.

Total international
and regional

Grand total

.438

29.486
429
79.757

nnHons

of dollars]

76
CAPITAL

MOVEMENTS

Table CM-l-4. - Total Liabilities by Type and Country, as of Mar.
rPosUlon
Total

Total

liablli

;

To foreign official
institutions and
unaffiliated foreign

Payabli

Payable
in

dollar:

foreign

(

10,090

9,304

786

7,418

1988, Preliminary

payable in dolla
foreigners

Treasury
tions

31,

1n millions of dollarsl

I
77
CAPITAL MOVEMENTS
Section

II.

Claims on Foreigners Reported by Banks
Table

CM-ll-1, -

the United States

Total Claims by Type

[Position at end of period 1n minions of dollars]
Calenda
year
1985

Type of claim
Total

claims

447,363

Payable in dollars
own claims on foreigners...
Foreign public borrowers
Unaffiliated foreign banks:
Deposits
Other
Own foreign offices
All other foreigners

Banks'
.

Claims of banks' domestic
customers
Deposits
Negotiable and readily
transferable Instruments
Collections and other

Payable In foreign currencies
Banks' own claims on foreigners...
Claims of banks' domestic
customers
Memoranda:
Claims reported by IBF's
Payable in dollars
Payable In foreign currencies

Customer liability on acceptances
Claims with remaining
maturity of 1 year or less:
On foreign public borrowers
On all other unaffiliated
foreigners
Claims with remaining
maturity of more than 1 year:
On foreign public borrowers
On all other unaffiliated
foreigners

Establishment of International Banking Fa
beginning December 1981.

Sept.

CAPITAL MOVEMENTS

CLAIMS ON FOREIGNERS

CALENDAR YEARS
Reported by International Banking

1982-87

Facilities

and by Banks

the

United States

1982

1983

1984

1985

END OF PERIOD

1986

1987

(Preliminary)

79
CAPITAL
Table CM-ll-2.

tPosUlon

Austria
Belgium- Luxembourg
Bulgaria
Czechoslovakia
Denmark
Finland
France
German Democratic Republic
Germany
Greece
Hungary
Italy

Netherlands

Nomay
Poland
Portugal
Romania
Sp«tn
Sweden
Sultzerland
Turkey
united Kingdom
U.S.S.R
Vugoslavla
Other Europe
Total

MOVEMENTS
Total Claims by Country
mnnons of dollar

at end of period In

1,084
1,149
11.758

10,536

82,149

2,613
4,043
1,989
78,741

162

Latin tmerica and Caribbean:
Argentina
Bahamas
Bermuda
Brazil
British Uest Indies
Chile
Colombia
Cuba
Ecuador
Guatemala
Jamaica
Mexico
Netherlands Antilles
Panama
Peru
Trinidad and Tobago
Uruguay
Venezuela
Other latin America
and Caribbean

2,195
2,723
3,117
1,609
87,077
445
1,910
923

25,653
41,021
6.719
3,351

32,175
1,503
6,827
1,967

Total Latin America
and Caribbean

Asia:
China:

Mainland
Taiwan
Hong Kong
India
Indonesia
Israel
Japan
Korea
Lebanon
Malaysia
Pakistan
Phil ippines
Singapore
Syria
Thailand
Oil-exporting countries 1/
Other Asia
Total Asia

Africa:
Egypt
Ghana
Liberia

Morocco
South Africa
Zaire

on-exporting countries

Other Africa

Africa

Other countries:
Australia
All other
Total

other countries

Total

foreign countries..

International and regional:
International
European regional
Latin American regional
Asian regional
African regional
Middle Eastern regional

Grand total

13,739

1,005

1,031
1,404
15,010

2,628
1.637
79,632

2,977
1.848
86,653

3.096
3,141
1.707
79,706

,113

172
1,071
76

2.101
2,544
3,688
1,253

Europe

Total international
and regional

897
1,039
11,812

2.24g
1.251
663
9.703
1,910
B22

Canada

Total

1,003
1,049
13,069

177

1,708
8.139
490
797

2.123
35.633
9,596

1,000
4,670
483

25,438
43.219
6,634
2.891

,631

2,170
3,800
1.578
85,599
387
1,908
631

CAPITAL

MOVEMENTS

Table CM-ll-3. - Total Claims on Foreig iers
by Type and Country Reported by Banks In the United State

as of Dec.

31,

1987

nil

[Pos

Total

reign publ

claims
payable

afflHatCi)

(6)

Bulgaria
Czeclioslovaltia

Denmark
Finland
France
German Democratic Republ
Germany
Greece
Italy..!!.'!!.'!!.'!!!!!!!!
Netherlanils

Poland!!!!!!!!!!!!!!!!!!
Portugal
Spain..!!!!!!!!!!!!!!!!!
Sweden
Switzerland
Turkey
United Kingdom
U.S.S.R

3.554
1

.762

79,778

Other Europe
Total

Europe

141.274

atin America and Caribbea

Argentina
Bahamas
Bermuda
Brazil
British West Indies
Chile
Colombia
Cuba
Ecuador
Guatemala
Jamaica
Hekico
Netherlands Antilles
Panama
Peru
Trinidad and Tobago
Uruguay
Venezuela
Other Latin America
and Caribbean
Total Latin America
and Caribbean

China:

Taiwan
«ong Kong
India
Indonesia
Israel

!!!!!!!!!

Lebanon! !!!!!!!!!!!!!!!!

Pakistan
Philippines
Singapore
Syria
Thailand
Other Asia

Total Asia
frica:

Egypt
Ghana

Morocco..!!!!!!!!!!!!!!!
South Africa
Zaire
Other Africa
Total Africa
ther countries:

Australia
All other
Total

other countries.

Total

foreign countries

nternational and regional
International
European regional
Asian regional
African regional...

1,914
2,302
3,324

(7)

(81

81
CAPITAL MOVEMENTS
Section

III.

- Supplementary

Liabilities

Table CM-lll-1.

and Claims Data Reported by Banks
Dollar Claims on

the United States

Nonbank Foreigners

[Posttior at end of period in millions of dollars]

dollar
claims on non
bank foreigne
Total

1983
1984
1985
1986
1987

1987-Feb.
Mar.
Apr.
May

June
July

44,970
43.062
46,812
41,812
41,417

78,867
72,914
65,468
56,445
50,390

164,554
165,245
168,982
165,126
164,169
164,888

66,376
67,306
70,631
65,627
66,728
70,744
66,126
67,730
66,159
70,563
66,868
64,813
63.316

41,727
41,949
42,233
42,588
42,034
41.742
42,701
42.315
42,564
42,357
41,417
40,494
40,696

56,451
55,561
56,118
56,911
55,407
52,402
52,525
52,871
53,473
52,595
50,390
50,282
49,604

162,916
162,196
165,515
158,675
155,589
153,616

1988-Jan.

Federal

76.113
75.952
63.880
68.454
66.868

161 ,352

Aug.
Sept.
Oct..
Nov.
Dec.

199.950
191,928
176.160
166.711
158.675

CAPITAL MOVEMENTS
Table CM-lll-2.
in

Dollar Liabilities to, and Dollar Claims on, Foreigners

Countries and Areas Not Regularly Reported Separately
[Position at end of period in millions of dollars]
Total

liabilities

Calendar year

Total

ban

CAPITAL
Liabilities to,

MOVEMENTS

and Claims on, Foreigners Reported by Nonbanking Business Enterprises

the United States

CM-IV-1. - Total Liabilities and Claims by Type
[Posmon at end of period in millions of dollars]

Table

Calendar year

Type of

MabllUy

Total

liabilities

or claim

Payable in dollars
Financial
Commerc al
Trade payables
Advance receipts and other
i

;

Payable in foreign currencies.
Trade payables
Advance receipts and othe
Total claims

Payable in dollars
Financial:
Deposits
Other
Commerci al
Trade receivables
Advance payments and othe
:

Payable in foreign currencies
Financial
Deposits
Other
:

ance payments and othe

22.233
8.700

1986

1967

84
CAPITAL
Table

CM-IV-2. -

MOVEMENTS

Total Liabilities by Country

Position at end of period in millions of dollars]

stria

epubli

tugal.

United Kingdom.
U.S.S.R

Other Europe.

10,333

in America

and Caribbe

Indie

..
.

85
CAPITAL MOVEMENTS
Table CM-IV-3. - Total Liabilities by Type and Country, as of Dec. 31, 1987, Preliminary
[Position at end of perioj

millions of dollars]
Financial

Austria
Bel gium- Luxembourg
Bulgaria
Czechoslovakia
Denmark
Finland
France
German Democratic Republic
Greece
Hungary
Italy
Netherlands
Norway
Poland
Portugal
Romania
Spain
Sweden
Switzerland
Turkey
United Kingdom
U.S.S.R..

1.039
39

6,350

Other Europe

Europe

Total
inada

itin America and Caribbean:

Argentina
Bahamas
Bermuda
Brazil

British West Indies
Chile
Colombia
Cuba
Ecuador
Guatemala
Jamaica
Hexico
Netherlands Antilles
Panama
Peru
Trinidad and Tobago
Uruguay
Venezuela
Other Latin America and

Latin America and

Total

>ia:

China:

Mainland
Taiwan
Hong kong
India
Indonesia
Israel

Japan
Lebanon!!'.;! ..!

Malaysia
Pakistan
Philippines
Singapore
Syria
Thailand
Other Asia
Total Asia
Af

Egypt
Ghana
Liberia
Morocco
south Africa
Zaire
Other Africa
Total Africa
0th

countries:
ralia
al

other countries.

ational and regional
rnational
pean regional
Latin American regional
Asian regional
African regional
Middle Eastern regional

Total

International

than S500.000.

and

liabilities

86
CAPITAL MOVEMENTS
Table

CM-IV-4. -

Total Claims by Country

osition at end of period In millions of dollari

8,699

CAPITAL MOVEMENTS
Table CM-lV-5. - Total Claims by Type and Country, as of Dec.
[Position at end of period In mllHons of dollars]
Financial claims
Total

31,

1987

88
CAPITAL
Section

Transactions
Table

[

mllHons

MOVEMENTS

Long-Term Securities by Foreigners Reported by Banks and Brokers

CM— V— 1. —

Foreign Purchases and Sales of Long-Term Domestic

negative figures Indicate net sales by foreigners or

of dollars;

net outflow of capital

U.S. Gov' t corporati
and federally sponso

asury bonds and note

rketable

the United States

Securities by Type

r£0r

from the United States]

and othe

Gr
Net
foreign fo
foreign purpu

ign Gross

ign

chases

itie

Net
foreign
purchases

Gross
foreign Gros
purfore
chases
sale

(10)

21 ,499

507

29,208
19,388
25,755
1988-Jan-Harp26,688

8,135
14.214
31,188
20,300

1984
1985
1986
1987r

B7-Mar.
Apr.r
Hay.
June.
July
Aug.r
Sept.
.

6.992
-3.196
-284
12.281
807
1

.110
523

-1,232
6,380
2,675
4.645
12,083
9.960

5.906
2,489
4.447
3.719
2.251
2,612

1,175
4,340
6.976
4.975

126.230
118.464
106,733
133,917
112.230
111,621
109,026
129.106
104,809
81,644
102.852
145.183
130,559

-469

-1,804
-3,894
-717
4,927
1

,359

,341

176
-637

2,466
1.854
1.794
5.118
7,169
8.013

-7,964
5,823
2,496
622
5,662
999

Table
of

236,338
214,838
15,989
5,003
440
498,587
469.379
20.633
6.278 -1.103 1,084,326 1,064,938
-131 -5,302 1,337.347 1.311.592
-896
405,282
378,594
7.284

dollars;

2,891
1

,790

4,013
3.635
2.802

CM-V-2. -

133.222
115.258
106.449
146,198
113,038
112,731
109,549
127,873
111 .189

84.319
107 .497

157.267
140.518

16,844
24,960
37.105
42.794
103
7.820

815
614
184
996

4,375
2,999
2,771
4.371
3.441
2,673
3.502
3.828
2.802
3,382
2

,222

2,694
2.904

15,669
20,620
30,130
37,818
7,717

11.721
39,792
43.672
22.720
2.304

4,843
2,918
2,410
3,786
2,880
2,608
2,687
3,214
2,619
2.386
2.610
2.759
2.348

4.317
3.257
1.753
1.530
2.314
1.396
3.061

5.031

1987-Mar.r.
Apr.r.
Hay r.
June r
July r
Aug.r.
Sept.r
Oct.
Nov.
Dec.

.
.
.

19a8-Jan.
Feb.r.
.

Mar. p.

1.607

.752

6.859
6,201
6,060
5,972
4,426
5,160
5,330
2,913
3.391
2.802
3.759
4.868

10.730
21,835
42,391
40,310
9,125
3,435
3,602
4,448
4,530
3,659
3.030
2,099
4,060
2,767
3,074
2,583
3,281

net outflow of capital

Foreign bonds

-2,980 59.834 62,814
4,941 81,995 77,054
18,719 148,114 129,395
16,223 249,072 232,849
-761
47.299 48,059
5.054
3.337
3,677
1,631
1,760
228
3,034
2,452
-6,699
-3,004
25

-377

23,085
20,788
19.649
18,698
23,664
24,807
22,489
30,237
13.626
13.627
12,916
16,343
18,040

18 ,031
17 .451
15 ,972
17 .067
21 ,903
24 ,579
19 .455
27 .784
20 ,325
16 .630
12 ,891
16 .720
18 ,448

from the United States]

Foreign stocks
Gross
foreig
sales

1986r
1987r
1988-Jan-Ma

.270
146
317
218
478

86,063
63.029
11.429

Foreign Purchases and Sales of Long-Term Foreign Securities by Type

negative figures indicate net sales by foreigners or

Net

1984
1985

22.452
61 ,627

Net

foreign
purchase

89
CAPITAL MOVEMENTS
Table
[In Billions of don

CM-V-3 -

Net Foreign Transactions

1es by

Long-Term Domestic Securities by Type and Country
foreigners or

net ootflo. of capital

from

CAPITAL MOVEMENTS

NET PURCHASES OF LONG-TERM DOMESTIC
SECURITIES BY SELECTED COUNTRIES
Calendar Years 1984 through 1988,

First

Quarter

Canada
GermaVi^"

^* ^'
[

Japan_

Svyitzerla'nd

United kingdom

1984

1985

1986

YEARS

1987

1988, IstQtr

CAPITAL
Table

CM-V-4.

MOVEMENTS

Foreign Purchases and Sales of Long-Term Securities,

by Type and Country, During First Quarter 1988, Preliminary
[In

_Eur
Market
able

atnions

of dollars]

ales by foreign

CAPITAL MOVEMENTS
Table

CM-V-5.

- Foreign

Purchases and Sales

Long-Term

Securltle

by Type and Country, During Calendar Year 1987
[In

nllHons

JolUrs]

by forelqne

ales by foreigne

encies Bonds Stock
(3)

Finlanil

France
German Dem Rep.

(4)

(5)

(91

(101

(11)

(12)

113)

(U)

FOREIGN CURRENCY POSITIONS
INTRODUCTION

Background
Data have been collected since 1974 on the foreign currency
positions of banks and nonbanking firms in the United States, and on
those of foreign branches, majority-owned foreign partnerships, and
majority-owned foreign subsidiaries of U.S. banks and nonbanking
firms. Reports cover five major foreign exchange market currencies
and U.S. dollars held abroad. Reporting has been required pursuant
to title
of Public Law 93-110, an amendment to the Par Value
Modification Act of September 21, 1973, and implementing Treasury
regulations. Statistics on the positions have been published since
March 1977 beginning with data for December 1975.
II

"Majority-owned foreign partnerships" are those organized under the laws of a foreign country in which one or more nonbanking
concerns or nonprofit institutions in the United States, directly or
indirectly, own more than 50 percent profit interest. "Majority-owned
foreign subsidiaries" are foreign corporations in which one or more
nonbanking business concerns or nonprofit institutions located in the
United States, directly or indirectly, own stock with more than 50
percent of the total combined voting power of all classes of stock
entitled to vote, or more than 50 percent of the total value of all
classes of stock.

Reporting Threshold

The report forms and instructions used in the collection of bank
data were revised effective with reports as of March 16, 1983, for the
weekly reports The most recent revision of the nonbank foreign
currency forms (see below) became effective as of the last business
day of March 1983.

Common

Definitions

and Concepts

The term "United States" means the States of the United
States, the District of Columbia, the Commonwealth of Puerto Rico,
American Samoa, Midway Island, the Virgin Islands, and Wake Island. The term "foreign" means locations other than the "United
States " The term "worldwide" is used to describe the sum of "United
States" and "foreign" data.
United States include amounts reported by sole
proprietorships, partnerships, and corporations in the United States
including the U.S. branches and subsidianes of foreign nonbanking
concerns, in the case of "nonbanking firms' positions," and the
agencies, branches, and subsidiaries located in the United States of

Data

foreign

for the

banks and banking

institutions,

the case of the weekly

"bank positions."

Data for "foreign branches" and "abroad" include amounts reported by the branches, majority-owned partnerships, and majority-

The exemption level applicable to banks and banking instituwas $10 million equivalent through January 1982, when was
$100 million. The exemption level applicable to nonbanking
business concerns and nonprofit institutions was $1 million equivalent on all nonbank forms from March 1975 through November 1976.
It was raised to $2 million equivalent on the monthly reports of positions held in the United States from November 1976 through September 1978. The exemption level was raised to $3 million on foreign
subsidiary positions on June 30, 1977, and for positions held in the
United States on September 30, 1978. The exemption level for nonbanking firms was raised to $100 million on positions in the United
States in January 1982 and on foreign branch and subsidiaries positions in March 1 982.
tions

raised to

Firms must report their entire foreign currency position in a
if a specified U.S. dollar equivalent value
reached in any category of assets, liabilities, exchange contracts

specified foreign currency
is

bought and sold, or the net position in the currency. In general, exemption levels are applied to the entire firm. In reports on their foreign branches, majority-owned foreign partnerships, and majorityowned foreign subsidiaries, US banks and nonbanks are required
to report the U.S. dollar-denominated assets, liabilities, exchange
contracts bought and sold, and net positions of those branches,
partnerships,

and subsidiaries with reportable positions

the speci-

fied foreign currencies.

owned

subsidiaries of U.S. banking and nonbanking concerns In
general, these data do not reflect the positions of foreign parents or
foreign parents' subsidiaries located

abroad except through

inter-

Description of Statistics

company accounts. The data
few foreign-owned

include the foreign subsidiaries of a
-based corporations.

Data collected on the Treasury foreign currency forms are pubin the Treasury Bulletin in seven sections. The first section
presents a summary of woridwide net positions in all of the currencies reported. Sections II through VI each present data on a
specified foreign currency. Section VII presents the U.S. dollar positions of the foreign branches and subsidiaries of U.S. firms which are
required to report in one or more of the specified foreign currencies.
lished

Assets, liabilities, and foreign exchange contract data are reported on the basis of time remaining to maturity as of the date of the
report, regardless of the original maturity of the instrument involved
"Spot" means due for receipt or delivery within 2 business days from
the date of the report "Short-term" means maturing in 1 year or less
from the date of the report.

FOREIGN CURRENCY POSITIONS
Section

Table FCP-l-1.

— Summary Positions
— Nonbanking Firms' Positions^

[In millions

of foreign currency

Japane

9/30/87 ....

units.

FOREIGN CURRENCY POSITIONS
Section

II.

- Canadian

Dollar Positions

96
FOREIGN CURRENCY POSITIONS
Section

III.

Table FCP-ill-1-

- German Mark Positions
- Nonbanking Firms' Positions'

[In millions of narks]

r44,249
1.048

Exchange bo

97
FOREIGN CURRENCY POSITIONS
Section

IV.

Table FCP-IV-1.

- Japanese Yen Positions
- Nonbanking Firms' Positions

[In billions of yen]

ange bought £/

r2,294
233

Exchange sold £/

98
FOREIGN CURRENCY POSITIONS
Section

Table

Cln

Assets

(1)

l\\:

12/ 31/87

LUbil ties
i

—

Swiss Franc Positions

FCP-V-1. - Nonbanking
mllHons

Exchange bought

Firms' Positions-'

francs!

_4/

Exchange sold

_4/

Net
posi-

tion
(2)

(4)

(5)

FOREIGN CURRENCY POSITIONS
Section

Table

VI.

Sterling Positions

FCP-VI-1. - Nonbanking Firms' Positions^
[In millions of pounds]

ange bought £/

.rJ4,509
r820

Net
position 5/

100
FOREIGN CURRENCY POSITIONS
VII. - U.S. Dollar Positions
- Nonbanking Firms' Foreign

Section

Table FCP-VII-1.

Abroad
Subsidiaries' Positions

Lin mi llions of dollars]

Liabilities

Exciiange

bought

4^/

Exchang

(2)

Table FCP-VII-2.

Weekly Bank Foreign Office Positions

[In millions of dollars]

abilities 9/

ange bought 10 /

7/01/87
7/08
7/15/87
7/22/87
7/29/87

309.543
314,862
307,702
310,198
310,388

400,340
406.030
401,487
403,718
322,945

656,985
723,642
642,772
677.069
570,548

561,070
625.616
543.359
577.122
553.345

S/05/8
8/12/87
8/19/87
8/26/8

311.625
317,032
319.354
309.443

323.041
326,345
330,185
318.837

582,390
576.595
642.467
615,870

564.771
561.150

601.736

6,203
6,132
4.579
4.740

9/02/8
9/09/87
9/16/8
9/23/8
9/30/87

424.034
318.188
330.074
334,203
332.921

432.752
329,599
336,685
344,334
344,924

610,538
610,387
621,268
639.199

597.381
593,977
603.042
597.550
622.288

4.908

10/07/8
10/14/8
10/21/8
10/28/8

326,773
333,646
341,982
345,569

338,041
346,758
353,361
358,476

618,635
634,701
670,371
703,758

603.690
616.551
654.297
685.549

11/04/8
11/11/8
11/18/8
11/25/8

347,399
361,509
351,464
345.810

358.972
372.066
360.440
355,705

693,072
754.906
704.062
675.063

12/02/8
12/09/8
12/16/8
12/23/8
12/30/8

339.447
341.850
342.376
335.250
336.838

348.318
349,376
352,014
343,339
346,085

684.764
628.504
626.704
592.405
584,602

See footnote

following page

611 ,761

627 .057

677,473
741,600
691 ,192

5,628
6,427
4,646

3.677
5,038
4

.695

5.302

4.026
2.749
3.894

663,213

1.955

673,021
610.261
614.620
580.254
572.240

,872

2,717
2,446
4.062
3.115

101

FOREIGN CURRENCY POSITIONS
Footnotes to Tables FCP-I through FCP-VII

SECTION

Excludes receivables and inslajimeni paper soW or discounted before maturity, fixed

Worldwide net posiltons on the
business concerns

last

business day

o( the

calendar quarter

nonbanking

the United States and their foreign branches and majority-owned

partnerships and subsidiaries. Excludes receivables and installment paper which have been
sold

discounted

before

maturity.

U.S.

parent

corrpanies"

investment

their

assets

(plant

and

Capitalized plant

Includes both spot and forward

Columns

Foreign branches and majority-owned partnerships and subsidlahee only.

^ Weekly workjwide net posilnns of banks and banking

exchange

and 3 less columns 2 and

investment

majority-owned

foreign

rales.

Representative rates on the report date. Canadian dollar and United Kingdom pound rales
are expressed

Institutions In

parents'

and equipment leases are excluded.

majority-owned foreign subsidiaries, fixed assets (plant and equipment), and capitalized
leases tor plant and equipment.

and

equipment),

subsidiaries.

U.S. dollars per unit of foreign currency,

all

others

the United Stales,

foreign units per U.S.

dollar.

and

their foreign

and

liabilities.

branches and majority-owned foreign subsidiaries. Excludes capital assets

Banks and banking
majority-owned

Foreign branches and majority-owned subsidiaries only.

Institutions

subsidiaries. In

the United States and their foreign branches and

section

VII,

foreign

subsidiaries only.

Excludes capital assets.

SECTIONS

THROUGH

VII

Excludes capital

Positions of nonbanking business concerns

the United

branches and majority-owned partnerships and subsidiaries.
foreign branches

liabilities.

Includes bolh spot and fonward

exchange

Stales and their foreign

and majority-owned partnerships and subskJiaries

Columns 3 and 9

sec1k}n VII positions of
only.

See

footnote 6.

less

columns 6 and

12.

contracts.

branches

and

majority-owned

102

EXCHANGE STABILIZATION FUND
INTRODUCTION
ments as liabilities, they must be redeemed by the ESF only in the
event of liquidation of, or U.S. withdrawal from, the SDR Department

Background
Fund (ESF) was established under
the Gold Reserve Act of January 30, 1934(31 U.S.C. 822a). This act
authorized the establishment in the Department of the Treasury of a

The Exchange

Stabilization

stabilization fund to be operated under the exclusive control of the
Secretary of the Treasury, with the approval of the President, for the
purpose of stabilizing the exchange value of the dollar. Subsequent
amendment of the Gold Reserve Act modified the original purpose
somewhat to reflect termination of the fixed exchange rate system.

of the

IMF

or cancellation of

SDRs

SDR

certificates-Issued to the Federal Reserve System
against SDRs when SDRs are "monetized" and the proceeds of the
monetization are deposited in an ESF account at the Federal Reserve Bank of New York.

Description of Tables

The resources of the fund consist of
invested in U.S. Government securities,
(SDRs), and balances of foreign currencies.
The
been

principal

special

drawing

sources of income or losses for the

profits or losses

foreign exchange,

dollar balances, partly

and

on holdings

and transactions

rights

ESF have
SDRs and

the interest earned on assets.

Table ESF-1 presents the assets, liabilities, and capital of the
ESF. Data are presented in U.S. dollars or U.S. dollar equivalents
based on current exchange rates computed according to the accrual
method of accounting. The capital account represents the original
capital appropriated to the ESF by Congress of $2 billion, less a
subsequent transfer of $1.8 billion to pay for the initial U.S. quota
subscription to the IMF. Subsequent gains and losses since inception are reflected in the cumulative net income (loss) account.

Definitions

Special drawing r/p/7fs.--lnternational assets created by the
Fund (IMF). They serve to increase international liquidity and provide additional international reserves, and may
be purchased and sold among eligible holders through the IMF.
International f^onetary

SDR

allocations. -IhB counterpart of

based on members' quota

SDRs

the IMF. Although

issued by the IMF

shown

ESF

state-

Table ESF-2 presents the results of operations by quarter. Data
are presented in U.S. dollars or U.S. dollar equivalents computed
according to the accrual method of accounting. The "Profit (loss) on
foreign exchange" includes realized profits (losses) on sales of foreign currencies as well as revaluation gains (losses) on currencies
held. "Adjustment for change in valuation of SDR holdings and allocations" reflects the net gain (loss) on revaluation of SDR holdings
and allocations for the quarter.

103

EXCHANGE STABILIZATION FUND
Table ESF-1 .--Balances as of Sept. 30, 1987, and Dec. 31, 1987
[In

Assets,

liabilities,

and

thousands

ol dollars]

Sept. 30. 1987.
through
Dec. 31. 1987

capital

Assets
U.S. dollars:
Held at Federal Reserve Bank of
Held with Treasury:
U.S. Government securities

New York

Other
Special drawing rights
Foreign exchange and securities ':

German marks
Japanese yen
Pounds sterling

2.465.044

7.270

9.078.385

1.204.453

4.136.264
1.864.169
15.645
23.330

Swiss francs
Mexican pesos

1,620.465

607.01
1.067.000

356.402
(1,083,260)

2,914
4,B09

514,285
1,067,000
10.282,838
4.492,666
780.909
18.559
28.139

Argentine auslrals

Ecuador sucres
Accounts receivable

Total assets

31 .426

19.288.278
Uabilities arxj capital

Current

liabilities:

Accounts payable
Advance from U.S. Treasury (U.S. drawing
on lli«F) ^
Total current

Other

liabilities

liabilities:

Special drawing rights certificates
Special drawing rights allocations

Total other

liabilities

Capital:
Capital account

Net income (loss) (see table ESF-2)

Total capital

Total

liabilities

and

capital

62,610

66.623

1.067,000

1.067.000

1,129.610

Special Reports

us.

CURRENCY AND COIN OUTSTANDING

AND IN CIRCULATION

108
U.S.

CURRENCY AND COIN OUTSTANDING AND

CIRCULATION

INTRODUCTION

Purpose and Scope
U.S. Currency and Coin Outstanding and in Circulation
Statement is prepared on a monthly basis to inform the public of the

The

and coin which are used as a medium of extotal thereof, as of the end of a given accounting
month. End-of-quarter data are then published in the Treasury
face value of currency

change and the
Bulletin.

The statement defines the total amount of currency and coin
outstanding and the portion of which is deemed to be in circulation.
Although it still includes some old and current rare issues of coin and
currency which do not circulate or may do so to a limited extent,
Treasury policy is to continue their inclusion in the statement since
such issues were originally intended for general circulation. The
statement also provides a brief description of the various issues of
U.S. paper money and further presents a comparative amount of

money

circulated

relation to population.

History

Monthly statements of currency and coin outstanding and in
have been published by the Department of the Treasury
These statements were originally prepared by the Division of Loans and Currency, which was then under the Office of the
Secretary of the Treasury but later became part of the Public Debt
Service (currently known as the Bureau of the Public Debt) in 1929.
The statement was published with the title "Circulation Statement of
United States Money" from 1923 through December 31, 1965. Concurrently, from December 31, 1919, to September 30, 1951, the
Office of the U.S. Treasurer published a statement entitled "Monthly
Statement-Paper Currency of Each Denomination Outstanding."
Two months after the Office of the US Treasurer assumed publication of the "Circulation Statement of United States Money." a revision
was made to the statement to include denomination detail of the
currency in circulation. Publication of the "Monthly Statement-Paper
Currency of Each Denomination Outstanding" was discontinued, and
the revised version which combines information from both statements is now known as the United States Currency and Coin Outstanding and in Circulation Statement. The statement in 1983
ceased to be published as a separate, monthly release and instead
was incorporated into the quarterly Treasury Bulletin as a special

Definition of

The

Terms

"Amounts outstanding and in circulation"
issues by the Bureau of the Mint which are purposely
intended as a medium of exchange. Therefore, coins sold by the
Bureau of the Mint at premium prices are excluded. However, uncirculated coin sets, sold by the Mint at face value plus a handling
charge, are included.
includes

classification

all

The term "Federal Reserve notes" refers to issues by the U.S.
Government to the public through the Federal Reserve banks and
member banks. These notes represent U.S. Government
obligations. Currently, the item "Federal Reserve notes-amounts
outstanding" consists of new series issues. The Federal Reserve
their

note

the only class of currency currently issued.

"U.S. notes" are also known as legal tender notes and were
issued in five different issues; namely, (a) First Issue -1862 ($5 to
$1,000 notes), (b) Second lssue-1862 ($1 to $2 notes), (c) Third
lssue-1863 ($5 to $1,000 notes), (d) Fourth lssue-1863 ($1 to
$10,000 notes), and (e) Fifth lssue-1901 ($10 notes).

The column for "Currency no longer issued" consists of gold
and new series), silver certificates (old and new
Federal Reserve notes (old and new series), national bank
notes (old and new series), and Treasury notes (1890 series).

circulation

certificates (old

since 1888.

series).

report.

"Dollar coins' include standard silver coins

and nonsilver

coins.

"Fractional coins" include subsidiary coins in denominations of
50 cents, 25 cents, and 10 cents and minor coins (5 cents and 1
cent).

Reporting Sources
Data used in the preparation of the U.S. Currency and Coin
Outstanding and in Circulation Statement is derived from monthly
reports required from Treasury offices, various U.S. Mint offices, the
Federal Reserve banks, and the Federal Reserve Board. Such reports convey information about the amount, class, and denomination
of new issues of currency and/or coin, of destroyed and replaced
currency, and of currency and coins withdrawn from circulation. Estimates of population from the Bureau of the Census are used in the
calculation of money circulated per capita.

109
U.S. Currency

and Coin Outstanding and
[Source: Financial

Management

Circuiation

Service]

AMOUNTS OUTSTANDING AND IN CIRCULATION
Mar. 31. 1988

Currency
Total

Arrxjunts outstanding
Less amounts held by:

TheTreasury
The Federal Reserve tanks

Amounts

in circulation

currency and

Currency no

coin

longer issued

Dollars

$273,507,642,075

$255,791,746,177

$255,200,331,476

$322,539,016

$268,875,685

$17,715,895,898

$2,024,703,898

$15,691,192,000

488.240.378
45,960,793,710

33,486.971
45,481,067,108

2.155,880
45,481,039,164

31,098,839
-

232,252
27,944

454,753,407
479,726,602

340,121,367
154,374,220

325,352,382

227,058.607,987

210,277,192,098

209,717,136,432

291,440,177

268,615,489

16,781,415,889

1.530.208,311

15.251.207.578

CURRENCY

114,632040

CIRCULATION BY DENOMINATION

Amount
Federal

Currency
no longer

Reserve

(in

millions)

issued

4.198.030.379
755,268,782
5,313,091,005
11,559,561,200
59,192.288,780
27,837,882,550
101,089,174,800
151,232,000
175,422,000
1,790,000
3,450,000

$2
$5
$10

$20
$50
$100
$500
$1,000
$5,000
$10,000

143.481
132.862.866
112.028.910
5,950
3.380

46.395.500

152.077.020
12.972
37.399.635
24.620.640
20,172,460
11,588,150
22,201,600
189,500
208,000
45,000
100,000

487

Fractional parts
Partial

4.045,809,878
622,392,944
5,163.662,460
11,534.934,610
59,172.112.940
27,826,241.400
101,020.577.700
151.042,500
175.214.000
1.745.000
3.350.000

210,277,192,098

Total currency

Issued on and after July 1 1 929.
^ Excludes coin sold to coliectors at premium prloes.
^ Includes $481 .781 .898 in standard silver dollars.
.

Sept. 30, 1985
Sept. 30, 1980
une 30, 1975
une 30, 1970
une 30, 1965
une 30, 1960
une 30, 1955
une 30, 1950

$227,058.6
223,511.4

$924.68
910.85

207,782.1
187.337.4
129.916.9
81.196.4
54.351.0
39.719.8
32.064.6

854.31

30^29.3
27.156.3

782.45
581.48
380.08
265.39
204.14
177.47
182.90
179.03

487
25

115

notes

Mar. 31, 1988
Feb. 29, 1988
Mar. 31, 1987

209.717.136.432

291.440.177

the Census estimates of population.
denominations not presented for redemptic

Based on Bureau

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