Full text of Treasury Bulletin : June 1988
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Items of Special Interest: ECONOMIC POLICY " The Direct Revenue Effects of Capital Gains Taxation: Time-Series Evidence" (Page A Reconsideration of the 2) 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 1, 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. in at 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" 2 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 3 legislation; July 1, 1981, to June 30, 1983 8 FINANCIAL OPERATIONS FEDERAL FISCAL OPERATIONS Analysis -Budget results for the FFO-1. -Summary of fiscal second quarter, fiscal 1988 13 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 20 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 of Government 22 23 25 TREASURY in Federal Reserve and tax and loan note account balances 26 FEDERAL DEBT FD-1. -Summary of Federal debt 29 FD-2. -Interest-bearing public debt 29 FD-3. -Government account series 30 FD-4. -Interest-bearing securities issued by Government agencies 31 FD-5— Maturity distribution and average length FD-6— Debt subject to statutory limitation 32 of marketable interest-bearing public debt held by private investors 32 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 33 TREASURY FINANCING OPERATIONS 36 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 40 IV Contents Page PDO-2.-Offerings of 42 bills PDO-3.--Public offerings of marketable securities other than regular weekly Treasury PDO-4. --Allotments by investor classes U.S. for public 44 bills 46 marketable securities SAVINGS BONDS AND NOTES SBN-1 .-Sales and redemptions by SBN-2. -Sales and redemptions by SBN-3 48 series, cumulative period, all 48 bonds and notes combined series of savings -Sales and redemptions by period, series E, EE, H, and 49 HH OWNERSHIP OF FEDERAL SECURITIES OFS-1 -Distribution of Federal securities by class of investors OFS-2. -Estimated and type 51 of issues 51 ovi^nership of public debt securities by private investors MARKET YIELDS Treasury market bid yields at constant maturities, 1 53 982-87 54 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 57 FEDERAL AGENCIES' FINANCIAL REPORTS 59 FA-2. -Direct and guaranteed loans Chart— Direct and guaranteed loans 63 INTERNATIONAL STATISTICS INTERNATIONAL FINANCIAL STATISTICS IFS-1 — US 67 reserve assets 68 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 IN THE UNITED STATES 72 by type of holder 73 to foreigners 74 CM-l-2. -Total liabilities by type, payable CM-l-3.-Total liabilities by country 75 CM-l-4. -Total liabilities by type and country 76 in dollars CLAIMS ON FOREIGNERS REPORTED BY BANKS IN THE UNITED STATES CM-ll-1 -Total claims by type 77 Chart— Claims on 78 foreigners 79 CM-ll-2 -Total claims by country CI^-ll-3. -Total claims on foreigners by type and country reported by banks in the United States 80 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, IN and dollar claims on. foreigners 81 in countries and areas not reported separately 82 AND CLAIMS ON, FOREIGNERS REPORTED BY NONBANKING BUSINESS ENTERPRISES IN THE UNITED STATES CM-IV-1, --Total liabilities and claims by type 83 CM-IV-2 -Total liabilities by country 84 CM-IV-3. -Total liabilities by type and country 85 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 of 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 86 87 IN 88 88 89 90 91 92 FOREIGN CURRENCY POSITIONS SUMMARY POSITIONS FCP-l-1 -Nonbanking firms' positions 94 FCP-l-2 -Weekly bank positions 94 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 97 FCP-IV-2 -Weekly bank positions 97 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 VI 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: r may not add to totals because IN 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 V 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 in 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 v Fund Reports: Airport and ainway Asbestos trust Black lung Civil trust V fund fund v fund disability trust service retirement and v 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 V fund Hazardous substance superfund v Highvi/ay trust fund v Inland w/aterwaysArust fund v Leaking underground storage tank National service life trust fund "y insurance fund v Nuclear waste fund Railroad retirement account Reforestation trust fund "V 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 in 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 of 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 we 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 in 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 we 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, in 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 in likely to result the CBO study imply that a revenue from lowering the top marginal rate to 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 of table displays 1 in refer to the real and CSTK billions of dollars, estima- we report are those taken from the CG the is change components represents the change inflationary in net of CRGNP and GNP change in 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 in 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 S. is 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- we the basic regression specification, in 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 us 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- We 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 1 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 3. As we will demonstrate below, this has important 1978 and 1981 tax law implications for the estimated impacts of the changes. A difficulty in change CIGNP, in with the Treasury regression specification is that the component with no apparent intuitive meaning; it nega- is several sample years of positive inflation, and would be non- zero outside the base year even if avoid this problem by redefining multiplied by the there were no CIGNP percentage change CRGNP be the residual growth GNP change in current dollars, in variable price change as lagged nominal 1954-85 sample period are shown in We GNP GNP deflator, and letting CRGNP then measures real the which seems a more useful present purposes. The results of for is 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 1 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 in table this is entirely an 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 2, percent. One could object that it is 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 of 1980 and 0.38 in point first-year the Treasury report in 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 is 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 by 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 in 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 is variable RCG is A-3 of the logarithm the logarithm of the of CBO study. the logarithm of realized capital GNP price deflator, RGNP is the and RLSTKS the end-of-year stock of household is 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 II 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 in 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 in of realizations with respect to graphs this pattern for each changes in this level. of the equations. Specifications Figure 2 1 , 2, 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 in 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 in highly favorable despite the significant reduction in from the 1 II. CBO Capital Reconsideration of the Gains Realizations Study 032 reduction a The central conclusion of the 1988 CBO study, or at least the is that a reduction in 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 is positive for and specifications, all though much smaller table 4. Apparently, the particular choice of in realization variable does not Characteristics of tions is that the proposed CBO rate reductions. A second In and 1981 acts provide no guide that case, simulations of the to future revenue inspection this explanation also appears to have effects. little that is 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 in indicate revenue implications is 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 is 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 in CBO CBO study and phenomenon implicit in our figure in 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 is internally inconsistent at the theoretical level. use It is 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 is misleading because coefficients usually refer to tax rate variable, while the unitary elasticity require- refers to the different final repre- is microsimulations, however, because they imply very different ment reductions. Simulation mettiod. The is 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 in 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, in 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 is It the logarithm of realizations in sentative of the operational assumption that, at conclusion that has received the most attention, argument this -percentage-point change in fact CBO's aggregate regressions how individual taxpayers to changes in capital gains tax rates. To make is marginal rates. the simulations were taken from in average capital gains tax rate, a considerably both level and percent, compared variability. In to 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 of some taxpayers declare net long-term losses. Any have direct revenue-enhancing results some reason increase their losses in response rate reduction will if do not to for taxpayers lower tax rates. matical results. First, the tax cuts have rate to change schedule proportionately, much more elastic at high than low rates This relationship implies that a proportionate reduction in mar- ginal tax rates will increase the share of gains taxed at the highest rates, so the average tax rate falls less than proportionately. So long as revenue gains at high rates predominate over revenue losses at lower rates, Gravelle's criterion on the realization elasticity need not be met for a tax rate cut to 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." It is 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 is 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 in 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. is rather than being also reasonable to expect a further indirect revenue impact from the positive growth in supply-side impact of rate reductions on economic general In 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, we regressions, with their large sample sizes demographic detail, believe that cross-section and are the most reliable bases the results presented here do indicate is that detailed wealth for inferences. when the and What sample is 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 1 2-5 TABLE 3 2-6 2-7 FIGURE 1 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 I. S. 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, as 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 in 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 in 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 we both under prior law 1 . 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 of The fifth section presents the simulation the effects of tax reform as well as some of is such a loan then included is in later recovered, If 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. in 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 in 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 In in 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, 3. 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 of 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 of 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 is the equivalent of percentage of carryback period deducted to offset the effect of the phasing-down of eligible in increased the likelihood NOLs that could be the current year rather than carried forward into future years. Tax reform requires carryback and financial institutions 15-year to 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. B. General Tax Reform Provisions Affecting Commercial Banks to 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 to 1 from the U.S. Government at a zero Interest rate and then only paying back 74 cents (34/46) upon recapture. 2. to in 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 to . 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 or 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, in addition to 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 of only First, expiration of minimum may be tax regular tax Minimum however, 3. is liability is extent resulting are attributable to not allowed as a carryfon/vard credit. interest of 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 of the banks' deductions arise from investment tax their leasing activity. the after-tax cost of leasing activity IV. will total assets. A 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 is 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 of of accounting is change in accounting methods must be Included not in taxable income over a 4-year period. 5. 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 to tax allowed as a carryfonward credit against the to liability tax credit rules. and minimum carried over to other taxable years. Second, liability tax 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 it 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 it The $5 5 right of Tax Reform over Time and on Small and Large billion in additional tax revenue corner of table 10.4 is shown in 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 to billion in 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 is 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 C. 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 to 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 In regular lax rate and/or m 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 in 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 11 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 1 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). in 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 in the fiscal year of the is 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 in deposit funds when such money is 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 12 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 total Federal securities and Treasury in balances [generally] in [usually] provides budget authority the form of appropriations, then which is 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 in another State. . 13 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 of 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 14 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 15 FEDERAL FISCAL OPERATIONS Table FFO-1 .--Summary of Fiscal Operations [In millions of dollafs. Source: Monthly Traasury Slalemenl ot Receipts and Outlays of Ihe Untied Stales Governmentl Total on-budget and off-budget results Total On-budgel cm-budget Total On-budgel receipts receipts receipts outlays outlays Off-budget outlays Total On-budget Off -budget surplus surplus surplus delldt deficit deleft () (-) () Borrowing from the public-Federai securities Public debt securiiies 1983 16 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 M A M J Government J FISCAL YEARS 1987 AND 1988 17 FEDERAL FISCAL OPERATIONS Table FF0-2.--0n-budget and Off-budget Receipts by Source [In millions of dollars. Source: Monthly Treasury Slatemenl ol 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 .. 18 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 19 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 80 60 40 1 20 I Individual Income Corp. Income I Social Insurance isa W^ Customs Duties Misc. Receipts I Excise Estate and Gift TAXES AND OTHER RECEIPTS 20 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 ol 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 21 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 .. 22 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 in 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 eo 236 236 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. 23 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 24 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 I Contractual Services & Supplies Acquisition of Capital Assets Grants & Fixed Charges XXXXXXX»$$$$$$$$$< »^igKg»Ii'»»Ii $«$$$^>$$$$^XXXXXXXXXXXXXXX^^^ — 1 50 150 100 $ 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 26 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 2, 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. On occasion, to 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 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] . . 27 ACCOUNT OF THE Table UST-1 .--Elements of Changes U.S. TREASURY Federal Reserve and Tax and Loan Note Account Balances-Con. In [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, of securit^s and taxes. Represents checks paid, wire transfer payments, drawdowns on make payment in letters of 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. 28 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. in 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. 29 FEDERAL DEBT Table FD-1. --Summary of Federal Debt [In millions ol dollare. Source: Monlhly Treasury SlatemenI ol Recelpis and Oullays of the Uniled Stales Governmenl] Amount outstanding Endol fiscal or year month 5 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 I .. 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 32 FEDERAL DEBT Table FD-5.--Maturity Distribution and Average Length of IVIarl<etable Interest- Bearing Public Debt Held by Private Investors [In End of fiscal or year month millions ot dollars. Source: Otiice ol 1987 -Mar Apr May June July Aug Sept Oct Nov Dec 1988- Jan Feb Mar Analysis in 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 33 FEDERAL DEBT 34 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 36 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. An 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 in 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 it 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 2, addition to the $9,253 million of tenders accepted in auction process, $1,098 million was accepted from In 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 1 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 3, was accepted million at yields ranging price 99.427. These totaled $344 million. Competitive tenders accepted from private investors totaled $8,658 million. percent, In addition to the $9,002 million of tenders accepted in 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 37 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 4, was accepted at yields until of 1 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 In addition to the $8,764 million of tenders accepted in $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 in $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 On million. each accepted tender. for February 1988 February 17 the Treasury announced that it 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 On $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 of price These totaled $940 million. 99.973. Competitive tenders accepted from private investors totaled $7,586 million. percent, 38 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 in $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 to 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 39 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. A listed in maturity separate breakout is 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 on 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 40 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 of the Public Debl of |he United Slates, and Office of Amount Oats of malurflies Government Finance and Market Analysis in ihe Office ol the Secretary] Amount ot matuntie 41 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 U bids tendered Regular weekly: (13-iieek and 26-«eek) 1987-Dec. 3 10 1988-Mar. June Mar. June 17 Mar. 24 Mar. 31 Mar. June June 1988-Jan. 7 14 June Apr. July Apr. July 21 Apr. July Feb. 28 Apr. 4 July May 11 18 25 Mar. 3 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. 30 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 Av - 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 \J 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 1, 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 HH 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 14.633 -1 409 339 409 339 -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 38 -1 Nov Dec 59 Jan -57 Feb Mar 22 -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 50 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. 1 51 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 2 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 I 136.1 137.2 140.6 149.5 160. r260.3 r268 .6 r267 .0 287.3 insurance compami pension funds, al 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 I States. Estimate' accounts, and 52 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 at 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 is 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. 53 MARKET YIELDS Treasury Market Bid Yields [Source: Ottlce ol End iaa2 June Dec. 1983 June Dec 19S4 June Dec 198S June Dec ol 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 at Constant Maturities, 1982-87 GovernmenI Finance and Market Analysis In Ihe Ofllce ot Ihe Secrelary) 54 MARKET YIELDS Table MY-1.--Treasut7 Market Bid Yields [Source: Oftice of 1-yr. Monthly average at Constant Maturities: Governmenl Finance and Market Analysis 2-yr. 3-yr. In Bills, Ihe Otiice of Ihe Secretary] 5-yr. Notes, and Bonds* 55 MARKET YIELDS 56 MARKET YIELDS Table MY-2,"Average Yields of Long-Term Treasury, Corporate, and Municipal Bonds [Source:^ Office ot Governmern Finance and Market Analysis in the Oftice ol the Secfelary] New Aa New Aa Treasury Treasury New Aa New Aa Treasury New Aa New Aa 30-yr. corporate municipal 30-yr. corporate municipal 30-yr. corporate municipal bonds bonds bonds bonds bonds bonds bonds bonds bonds Treasury 57 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 78 i iiimii 79 i iiiiii|iiiiii 80 i i ii i|iiniiimT'''''''''T'' ''' 81 82 83 ' """1" '" '''' l 84 CALENDAR YEARS 85 'I" "I 86 87 ""I""" 88 58 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 I 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. 59 FEDERAL AGENCIES' FINANCIAL REPORTS — Table FA-2. [In thousands Direct of dollars. and Guaranteed Loans, Dec. Source: SF 220-8, compiled by Financial I 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 of 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 60 FEDERAL AGENCIES' FINANCIAL REPORTS Table FA-2. — Direct and Guaranteed Loans, Dec. 31, I Amount Maximum Amount Maximum outstanding authority outstanding authority — Wholly owned Government enterprises U.S. dollar loans Department of Defense Ryukyu Islands, construction Total Department of of 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 Department of Health of 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 61 FEDERAL AGENCIES' FINANCIAL REPORTS Table FA-2. — Direct and Guaranteed Loans, Dec. 31, 1987 Guarantees or insurance Direct loans or credit Agency and program 1 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 of 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. 62 FEDERAL AGENCIES' FINANCIAL REPORTS Table FA-2. — Direct and Guaranteed Loans, Dec. 31, I 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 to 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 I independent agencies —Con. Guarantees or insurance Direct loans or credit Agency and program 1987 63 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 ^ f 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 a p 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 V Treasury 2/ Total _ Hsetri/ asbcv* ±j 1- \\-\\\ \\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» :::: O" 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 i^ 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 i ;"and 1981 , . 857 . ^niion Mn ---ng^SlJl^nr-lg^Stn-h^se-afe^t^lue'd . 10.803 SD« e" t e 't - e U' t^e irasart n^'" rar^e^agr^rd^po; ^r rhe-p^rtrer ^to^purchase^f ore, gn^ unit d 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 1 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 U rights - right ^ 'J'"'^:;/;^"^^'!" needed. reiTtld to ""s related additional amounts United States could purchase ^, fj^.ucally ^ ^ if 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 Total (1) (2) in 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." V bj 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 of 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. a 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 E = 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_/ V 70 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 in 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 of 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 of 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, to maturity basis as opposed to the historic original Foreign currency claims are also collected on a quarterly basis only. Beginning March 1981, this claims coverage maturity classification 71 CAPITAL MOVEMENTS was extended to certain items in and dealers in above concerning the the hands of brokers the United States See notes to section reporting of thrift institutions. I 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, US and banks' own dollar claims on, countries not regularly reported separately are available semiannually in the June and December issues of the Treasury Bulletin. Section IV shows the foreigners by 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 of payments. 72 CAPITAL Section I. - Liabilities to Table MOVEMENTS Foreigners Reported by Banks CM-l-1. - Total Liabilities by Type in 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. r May June July r Aug. Sept. Oct. Nov Oec r r r r 1988-Jan Feb. Mar. p p in foreign curren- Total dollars ciesl/ (2) (31 Payable 415,893 451,094 570,900 673,534 86,065 79,985 103,569 120,650 86,065 79,985 103,569 120,650 571,274 597,839 603,408 589,918 584,657 593,904 632,021 650,989 650,946 673,534 656,031 659,993 660,759 111,092 117,821 113,566 112,740 105,058 107,938 107,745 117,156 116,801 120,650 123,157 125,520 126,199 111,092 117,821 113,566 112,740 105,058 107,938 107,745 117,156 116,801 120,650 123,157 125,520 126,199 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 73 CAPITAL MOVEMENTS TO FOREIGNERS CALENDAR YEARS 1983-88 LIABILITIES Reported by International Banking Facilities and by Banks in 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 in Dollars . 75 CAPITAL MOVEMENTS Table CM-l-3. - Total Liabilities by Country [Position at end of period In 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 1 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 2, 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 I dollar: foreign ( > y 10,090 9,304 786 7,418 1988, Preliminary payable in dolla foreigners 1 Treasury tions . 31, 1n millions of dollarsl I 77 CAPITAL MOVEMENTS Section II. - Claims on Foreigners Reported by Banks Table CM-ll-1, - in 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 U 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 U Establishment of International Banking Fa beginning December 1981. Sept. 78 CAPITAL MOVEMENTS CLAIMS ON FOREIGNERS CALENDAR YEARS Reported by International Banking 1982-87 Facilities and by Banks in 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 1? 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 2/ 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 1 ,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 1 ,631 2,170 3,800 1.578 85,599 387 1,908 631 80 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 i 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 in 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 r 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. 1/ 199.950 191,928 176.160 166.711 158.675 Re 82 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, 83 MOVEMENTS and Claims on, Foreigners Reported by Nonbanking Business Enterprises in 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 < n 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 Ci Latin America and Total I >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 V. - Transactions Table [ In mllHons in 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; s a net outflow of capital U.S. Gov' t corporati and federally sponso asury bonds and note rketable in the United States Securities by Type r£0r from the United States] and othe Gr Net foreign fo foreign purpu ign Gross s ign chases s 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 1 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 7 .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 a 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 1 22.452 61 ,627 Net foreign purchase 89 CAPITAL MOVEMENTS Table [In Billions of don CM-V-3 - Net Foreign Transactions in 1es by Long-Term Domestic Securities by Type and Country foreigners or a net ootflo. of capital from 90 CAPITAL MOVEMENTS NET PURCHASES OF LONG-TERM DOMESTIC SECURITIES BY SELECTED COUNTRIES Calendar Years 1984 through 1988, First Quarter 50 40 30 Canada GermaVi^" ^* ^' [ Japan_ /X . _ . Svyitzerla'nd United kingdom -- 1984 1985 1986 YEARS 1987 1988, IstQtr CAPITAL Table CM-V-4. - 91 MOVEMENTS Foreign Purchases and Sales of Long-Term Securities, by Type and Country, During First Quarter 1988, Preliminary [In _Eur Market able >y "> atnions of dollars] ales by foreign 92 CAPITAL MOVEMENTS Table CM-V-5. - Foreign Purchases and Sales of Long-Term Securltle by Type and Country, During Calendar Year 1987 [In nllHons of JolUrs] by forelqne ales by foreigne encies Bonds Stock (3) 1 Finlanil France German Dem Rep. (4) (5) (91 (101 (11) (12) 113) (U) 93 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, in 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 it 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 in 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 US 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. 94 FOREIGN CURRENCY POSITIONS Section I. 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 95 96 FOREIGN CURRENCY POSITIONS Section III. Table FCP-ill-1- - German Mark Positions - Nonbanking Firms' Positions' [In millions of narks] 3/ r44,249 1.048 Exchange bo 4/ 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 y LUbil ties i V V. — Swiss Franc Positions FCP-V-1. - Nonbanking mllHons of Exchange bought Firms' Positions-' francs! _4/ Exchange sold _4/ Net posi- tion (2) (4) (5) 5/ 99 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 V 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 2 ,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 I Worldwide net posiltons on the business concerns in last business day o( the calendar quarter of nonbanking the United States and their foreign branches and majority-owned partnerships and subsidiaries. Excludes receivables and installment paper which have been sold or discounted before maturity. U.S. parent corrpanies" investment In 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 1 exchange and 3 less columns 2 and investment in majority-owned foreign rales. 4. 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. in U.S. dollars per unit of foreign currency, all others the United Stales, in 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 in the United States and their foreign branches and section VII, foreign subsidiaries only. Excludes capital assets. SECTIONS II THROUGH VII Excludes capital Positions of nonbanking business concerns in the United branches and majority-owned partnerships and subsidiaries. foreign branches liabilities. Includes bolh spot and fonward 1 exchange Stales and their foreign In 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 of and transactions In 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 in SDRs the IMF. Although issued by the IMF shown in 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. 5 103 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 1 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 IN 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 in 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 is 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 in 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 IN 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 $1 $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 ot Represents value ot certain panial THIS FORM CAN BE REPRODUCED. Superintendent of Documents Subscriptions Order "6191 It's DYES, 1. The total cost of please send my order is International customers please 'lease 4. me $ . CHOICE easy! TREASURY BULLETIN subscriptions to the at $20 each per year. All prices include regular domestic postage and handling and are subject to change. add 25%. Type or Print 3. 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