Full text of Z.1 Financial Accounts of the United States : December 1955 : Flow of Funds in the United States, 1939-1953

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FLOW OF FUNDS
IN THE UNITED STATE:




1939-1953




P u b lis h e d D e c e m b e r

1955

Library of Congress Catalog Card Number 55-60013

PREFACE
A comprehensive accounting for the flow of funds through the economy has long been
needed to fill a major gap in statistical information. Measures of current productive ac­
tivity and of the interrelations among production processes have been highly developed in
such tools as the Federal Reserve index of industrial production, the Department of Com­
merce national income accounts, and the Department of Labor inter-industry studies. These
measures do not, however, focus on financial processes—the creation and exchange of money
and other credit instruments; in fact, they purposely abstract from these processes. There
has thus been lacking a comprehensive picture of the circuit flow of payments and receipts,
a picture that portrays transactions in financial instruments and existing assets as well as
transactions in the output and distribution of currently produced goods and services.
In view of the importance of such a record in providing background perspective for
credit and monetary administration, the Board of Governors of the Federal Reserve System
early in the postwar period authorized its Division of Research and Statistics to participate
in studies leading to the systematic estimation of transactions involving the use of credit
and money. The pioneering phase of these studies was directed by Professor Morris A.
Copeland, now of Cornell University. Professor Copeland’s project was sponsored by the
National Bureau of Economic Research, financed by a grant from the Committee for Eco­
nomic Development, and carried on with the cooperation of the Board of Governors. Pro­
fessor Copeland’s report on his system of accounts was published by the National Bureau
in 1952 as A Study of Moneyflows in the United States.
Professor Copeland’s exploratory work fully demonstrated that a national accounting
record of the economy’s flow of funds was feasible. Accordingly the Board of Governors,
in view of its need for this kind of analytic framework, instructed its staff in 1948 to develop
a national flow-of-funds accounting system which could be kept up to date on a regular
basis. Limitations of historical data and the many technical problems to be overcome made
it necessary to restrict the period over which the accounts would run, and the year 1939
was selected as the beginning point for the record.
The task of compiling a detailed flow-of-funds system of accounts has involved much
careful and painstaking adaptation of existing data and estimates. Indeed, the construction
of the present accounts would not have been feasible without the rich availability today of
statistical information generally. This data availability is the product of persistent efforts
on the part of public and private agencies over past decades to enlarge our factual knowl­
edge about economic processes.
As work on the accounts has progressed, many developments in concept, organization,
and content have been made. To some extent, these developments have been facilitated by
increased availability of relevant data. More important have been improvements resulting
from experimental use of the accounts in analyzing economic developments and changes
in institutional arrangements for channeling funds in their flow through the economy.
The present study is the Board’s first published report on this undertaking. From in­
ception as a Board project, the study has been under the direction of Daniel H. Brill, who
has been responsible for the conceptual and statistical development of the accounts and the




IV

PREFACE

form of presentation. The final stages of the work were under the direct supervision of
Stanley J. Sigel, who also had immediate responsibility for the detailed integration of con­
cepts and data for the several accounts and prepared the Federal Government, State and
local government, and banking sector accounts. Other staff collaborators in the study
include: Dorothy S. Projector, who was responsible for the consumer and the nonbank
financial institutions accounts; Stephen P. Taylor, who prepared the business sector ac­
counts; Evelyn M. Hurley, who had charge of the rest of the world sector account and
supervised the project’s clerical staff; and Helmut Wendel, who participated in the final
drafting of the text for publication. As a Division of Research and Statistics undertaking,
the project has been under the general guidance of Kenneth B. Williams, Assistant Director
of the Division.
Development of a national system of accounts of such inherent complexity has neces­
sarily required the collaboration of other Government agencies, private organizations, and
many individual members of the economics profession. Wide circulation and discussion
of successive progress reports have helped us to draw upon the knowledge and experience
of numerous experts outside the Board’s staff.
Development of the flow-of-funds accounts and improvement on the statistical data
and estimates will obviously not end with their publication here. The present program
calls for carrying the record forward on an annual basis, but experimental work is being
initiated looking toward a more current basis of reporting. The structure of the accounts
will continue to be modified as new data become available, as experience with their use
makes substantive changes advisable, and as significant changes in institutional arrange­
ments manifest themselves.

R a l p h A. Y o u n g , D irector
Division of Research and Statistics
Board of Governors of the Federal Reserve System
W

a sh in g to n ,

D . C.

November 23, 1955




CO N T E N T S
Chapter 1
A FLOW-OF-FUNDS SYSTEM OF NATIONAL ACCOUNTS
PAGE
Introduction ..................................................................................................................................................................

1

Structure

S ummary ..................................................................................................................

3

A ccounts

of

in

O rganization

of the

A ccounts...............................................................................................................................

6

Scope

A ccounts..............................................................................................................................................

7

of the

C lassification

of

T ransactors...........................................................................................................................

8

C lassification

of

T ransactions.............................................................................................................................

9

C ross-Classification
T iming

of the

N etting

C ontrast

M ethods U sed
Illustration
Revision

and

T ransactions............................................................................

A ccounts........................................................................................................................................

12
14
14

O ther N ational A ccounting Systems...................................................................................

15

in

of

C onsolidation

12

A ccounts.........................................................................................

and

with

T ransactors

A ccounts............................................................................................................................................

in the

Combination

of

Compiling

A daptation

the
of

in the

A ccounts......................................................................................................

D ata ..............................................................................................................

16
19

E stimates.................................................................................................................................................

19

Summary ........................................................................................................................................................................

19

G uide

22

of

to the

A ccounts............................................................................................................................................

Chapter 2
CONSUMER SECTOR
Introduction
C omparison

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

41

Consumer Sector Statement....................................................................................................................................
Nonfinancial Sources of F unds.................................................................................................................
P a y ro ll............................................................................................................................................
Interest ..........................................................................................................................................
Dividends ......................................................................................................................................
Insurance benefits.........................................................................................................................
Grants and donations................................................................................................................
Tax refunds....................................................................................................................................
Net withdrawals by proprietors................................................................................................
Sales receipts.................................................................................................................................
N et Increase in Liabilities.........................................................................................................................
Consumer credit...........................................................................................................................
M ortgages......................................................................................................................................
Security loans...............................................................................................................................
Policy loans...................................................................................................................................

44
44
44
45
45
45
46
46
46
47
47
48
48
48
49




P ersonal Sector

41

N ational Income A ccounts.........................................................

with

in

vi

C O N TEN TS
PAGE

Consumer Sector Statement—cont.
Valuation Adjustment.........................................................................................................................
Nonfinancial Uses of Funds...............................................................................................................
Durable goods.......................................................................................................................
Nondurable goods...............................................................................................................
Services .................................................................................................................................
Taxes ...................................................................................................................................
Home purchases...................................................................................................................
Grants and donations.........................................................................................................
Insurance premiums.............................................................................................................
Net Increase in Financial Assets.......................................................................................................
Currency and deposits.........................................................................................................
Federal obligations...............................................................................................................
State and local obligations.................................................................................................
Corporate securities.............................................................................................................
M ortgages.............................................................................................................................
Miscellaneous assets.............................................................................................................
Discrepancy .........................................................................................................................................
Memorandum—Income in Kind.......................................................................................................

49
49
49
50
50
51
52
52
52
53
53
53
54
54
54
54
54
55

Relationships to Other Presentations.........................................................................................................
Payroll Receipts and Wages and Salaries.........................................................................................
Interest .................................................................................................................................................
Dividends .............................................................................................................................................
Consumer Benefit Receipts and Transfer Payments.....................................................................
Insurance benefits.................................................................................................................
Grants and donations.........................................................................................................
Nonfarm Proprietors’ Net Withdrawals and Noncorporate Net Income..................................
Farm Proprietors’ Net Withdrawals and Farm Net Income ....................................................
Consumer Taxes and Personal Taxes...............................................................................................
Consumer Nonfinancial Receipts and Personal Income...............................................................
Consumer Nonfinancial Expenditures and Personal Consumption Expenditures....................
Consumer Financial Flows and Individuals’ Liquid Saving.......................................................
Consumer financial assets and individuals’ liquid assets..............................................
Consumer liabilities and individuals’ debt.....................................................................

55
56
57
58
58
58
59
60
61
62
63
66
69
69
71

Chapter 3
CORPORATE BUSINESS SECTOR
I n t r o d u c t io n

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

................................................................................. 81

C o r p o r a t e B u s in e s s S e c t o r S t a t e m e n t ........................................................................................................ 81

Operating Nonfinancial Sources of Funds..................................................................................... 81
Sales and receipts from operations ................................................................................. 82
Rents and royalties................................................... ........................................................ 83
Interest ........................................................................................................................... ... 83
Dividends and branch profits....................................................................................... ... 83
Grants and donations........................................................................................................ 83
Other Nonfinancial Sources of Funds ....................................................................................... ... 83
Insurance benefits .......................................................................................................... ...83
Tax re fu n d s.................................................................................................................... ...83
Real estate transfers ..........................................................................................................84




v ii

contents

PAGE
C orporate B usiness Sector Statement— cont.
N et Increase in Liabilities.........................................................................................................................
Bank loans other than m ortgages...........................................................................................
Trade d e b t ....................................................................................................................................
Corporate securities ...................................................................................................................
Mortgages ....................................................................................................................................
Miscellaneous liabilities ............................................................................................................
Operating Nonfinancial Uses of Funds..................................................................................................
Payroll ..........................................................................................................................................
Interest ..........................................................................................................................................
Rents and royalties ..................................................................................................................
Insurance premiums ..................................................................................................................
Taxes ............................................................................................................................................
Grants and d on ation s................................................................................................................
Operating uses not elsewhere classified.................................................................................
Other Nonfinancial Uses of F unds..........................................................................................................
Capital expenditures...................................................................................................................
Change in inventory .................................................................................................................
Profits taxes .................................................................................................................................
Renegotiation payments ..........................................................................................................
Dividends and branch profits..................................................................................................
N et Increase in Financial A s s e ts ............................................................................................................
Currency and deposits ..............................................................................................................
Federal obligations .....................................................................................................................
Trade c r e d it.................................................................................................................................
Corporate securities ..................................................................................................................
Valuation Adjustment .............................................................................................................................
Discrepancy ..................................................................................................................................................
Memoranda:
Depreciation and amortization charges.................................................................................
Profits tax liabilities.....................................................................................................................
R elationship

of

C orporate N et O perating Surplus

to

C orporate P rofits...........................................

84
84
84
84
84
84
84
85
85
85
85
86
86
86
86
86
87
87
88
88
88
88
88
88
89
89
89
91
92
92

Chapter 4
NONFARM NONCORPORATE BUSINESS SECTOR
I n t r o d u c t io n

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

N

B u s in e s s S e c t o r S t a t e m e n t .................................

98

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

99

Operating Nonfinancial Sources of Funds..................................................................................
Sales and receipts from operations................................................................................
Rents ...............................................................................................................................
Interest receipts ..............................................................................................................
Other Nonfinancial Sources..........................................................................................................
Insurance benefits ..........................................................................................................
Real estate transfers......................................................................................................
Net Increase in Liabilities............................................................................................................
Bank loans other than mortgages......................... .....................................................
Trade d e b t .....................................................................................................................
Mortgage d e b t ................................................................................................................
Miscellaneous liabilities .................................................................................................
Operating Nonfinancial Uses of Funds.....................................................................................
Payroll ............................................................. ................................................................

100
100
100
100
100
100
100
100
100
100
100
101
101
101

o n co rpo ra te




viii

C O N TEN TS
PAGE

N

o n corporate

B u s in e s s S e c t o r S t a t e m e n t —

cont.

Operating Nonfinancial Uses of Funds—cont.
Interest ...........................................................................................................................
Rents .............................................................................................................................
Insurance premiums .....................................................................................................
T a x e s...............................................................................................................................
Operating uses not elsewhere classified........................................................................
Other Nonfinancial Uses of Funds.........................................................................................
Capital expenditures .....................................................................................................
Change in inventory......................................................................................................
Net withdrawals by proprietors.....................................................................................
Net Increase in Financial Assets...................................................................................................
Currency and deposits .................................................................................................
................................................................
.........................
Federal obligations
Trade credit ..................................................................................................................
Other assets ....................................................................................................................
Valuation Adjustment ..................................................................................................................
Memorandum—Depreciation Charges .......................................................................................
R e l a t io n s h i p o f N o n f a r m N o n c o r p o r a t e O p e r a t in c S u r p l u s t o P r o p r ie t o r s ’ N e t I n c o m e
.

101
101
101
101
101
101
101
102
102
102
102
102
102
102
102
102
102

Chapter 5
FARM BUSINESS SECTOR
Introduction ....................................................................................................................................................... 106
F arm Business Sector Statement................................................................................................................... 107
Operating Nonfinancial Sources of Funds..................................................................................... .. 107
Sales and receipts from operations................................................................................... .. 107
Rent receipts ......................................................................................................................... 107
Grants and donations......................................................................................................... .. 107
Other Nonfinancial Sources............................................................................................................... .. 108
Insurance benefits ............................................................................................................... .. 108
Real estate transfers............................................................................................................. .. 108
Net Increase in Liabilities................................................................................................................. .. 108
Bank loans other than mortgages..................................................................................... .. 108
Trade debt ........................................................................................................................... .. 108
M ortgages............................................................................................... ............................. .. 108
Miscellaneous liabilities ..................................................................................................... .. 108
Operating Nonfinancial Uses of Funds........................................................................................... .. 109
Payroll ................................................................................................................................... 109
Interest ..................................................................................................... ........................... .. 109
Rents ....................................................................................................................................... 109
Insurance premiums ......................................................................................................... .. 109
T a x e s .................................................................................................................................... .. 109
Operating uses not elsewhere classified........................................................................... .. 110
Other Nonfinancial Uses................................................................................................................... ..110
Capital expenditures ......................................................................................................... ..110
Change in inventory........................................................................................................... ..110
Net withdrawals by proprietors....................................................................................... ..112
Net Increase in Financial Assets....................................................................................................... ..113
Memoranda:
Depreciation charges ......................................................................................................... ..113
Consumption oudays ......................................................................................................... .113
Relationship of F arm Operating Surplus to F arm N et Income.........................................................114




CONTENTS

ix

Chapter 6
FEDERAL GOVERNMENT SECTOR
PAGE
Sector C overage .................................... ,.................................................................. ................................................. 117
T ransaction C overage ..............................................................................................................................................
T iming

117

T ransactions..........................................................................................................................................

118

C omparison with O ther P resentations..............................................................................................................
Sector Coverage ..........................................................................................................................................
Extent of Consolidation.............................................................................................................................
Transaction Coverage ...............................................................................................................................
Extent of N etting........................................................................................................................................
Timing ...........................................................................................................................................................

119
120
120
121
121
121

of

F ederal G overnment Sector Statement............................................................................................................ 122
Nonfinancial Sources of Funds................................................................................................................. 122
Tax receipts ................................................................................................................................. 122
Renegotiation receipts................................................................................................................ 124
Insurance premiums................................................................................................................... 124
Grants and donations................................................................................................................. 125
Interest receipts............................................................................................................................. 125
Rents .............................................................................................................................................. 126
Sales of other goods and services........................................................................................... 126
N et Increase in Liabilities......................................................................................................................... 126
Federal obligations....................................................................................................................... 126
Trade debt...................................................................................................................................... 127
Miscellaneous liabilities.............................................................................................................. 127
Nonfinancial Uses of Funds..................................................................................................................... 128
Payroll .......................................................................................................................................... 128
Interest .......................................................................................................................................... 128
Rents ............................................................................................................................................ 129
Insurance benefits......................................................................................................................... 129
Grants and donations................................................................................................................. 129
Tax refunds................................................................................................................................. 130
Purchases of other goods and services................................................................................... 131
N et Increase in Financial Assets............................................................................................................ 131
Currency and deposits.............................................................................................................. 131
Trade credit................................................................................................................................. 132
M ortgages...................................................................................................................................... 132
132
State and local obligations............................................................. ....................................
Miscellaneous financial assets.................................................................................................. 132
R elation to T reasury A ccounts and Banking Statistics............................................................................
Federal Nonfinancial Receipts and Federal Cash Income..............................................................
Federal Nonfinancial Outlays and Federal Cash O utgo..................................................................
Federal Obligations, the Public Debt, and N et Cash Borrowing.................................................
Public debt and Federal obligations .....................................................................................
Federal obligations and net cash borrowing........................................................................
Federal Cash Holdings and the General Fund Balance....................................................................
Federal Cash Holdings and Related Banking Statistics..................................................................

134
135
137
140
140
141
143
144

Chapter 7
STA TE A N D LOCAL GOV ERN M EN T SECTOR
I n t r o d u c t i o n ..................................................................................................................................................................................................
Sta te

and

L ocal G




overnm ent

S e c t o r S t a t e m e n t ............................................................. ................................................

151
152

CONTENTS

X

PAGE

State

L ocal G overnment Sector Statement— cont.
Nonfinancial Sources of Funds.................................................................................................................
Tax receipts ..................................................................................................................................
Insurance p rem iu m s...................................................................................................................
Insurance benefit receipts.................................. ............................................ ...........................
Grant and donation receipts........................................................................ ...........................
Interest ..........................................................................................................................................
Rents ............................................................................................................................................
Sales of other goods and services...........................................................................................
N et Increase in Liabilities...........................................................................................................................
Nonfinancial Uses of F unds.......................................................................................................................
P a y ro ll............................................................................................................................................
Interest payments.........................................................................................................................
Rent payments.............................................................................................................................
Insurance premiums...................................................................................................................
Insurance benefits.........................................................................................................................
Grant and donation payments..................................................................................................
Real estate purchases...................................................................................................................
Purchases of other goods and services.................................................................................
N et Increase in Financial A ssets..............................................................................................................
Currency and deposits..............................................................................................................
Federal obligations ........................................................... .........................................................
State and local obligations........................................................................................................
Discrepancy ...................................................................................................................................................

and

152
152
152
153
153
153
153
153
153
154
154
154
154
154
155
155
155
155
155
155
155
155
156

R elationships with N ational I ncome A ccounts........................................................................................... 156
State and Local Government Receipts.................................................................................................... 157
State and Local Government Expenditures......................................................................................... 158

Chapter 8
BANKING SECTOR
Introduction

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

.................................................................... 162

C ommercial Bank Subsector................................................................................................................................. 163
Commercial Bank Assets........................................................................................................................... 164
Commercial Bank Liabilities..................................................................................................................... 166
M utual Savings Banks

and

P ostal Savings System S ubsector....................................................................168

F ederal R eserve Subsector........................................................................................................................................168
T reasury M onetary F unds Subsector.....................

.......................................................................... ..170

T he C onsolidated A ccount ......................................................................................................................................173
Banking Sector Statement...................................................................................................................................... 177
Bank Credit and Currency and D eposits............................................................................................. 177

Chapter 9
INSURANCE SECTOR
L

if e

I n s u r a n c e C o m p a n ie s S u b s e c t o r .....................................................................................................

L

if e

I n s u r a n c e C o m p a n ie s

194

195
Nonfinancial Sources of Funds................................................................................................... 195
Interest, dividends, and rents....................................................................................... 195
Insurance premiums ..................................................................................................... 195




S t a t e m e n t ...................................................................................................

CONTENTS

Xi
PAGE

L ife I nsurance C ompanies Statement— cont.
Nonfinancial Sources of Funds—cont.
N et receipts from real estate transfers...................................................................................
Receipts from sales of other goods and services................................................................
N et Increase in Liabilities....................................................................................... ..................................
Bank loans other than mortgages.........................................................................................
Miscellaneous liabilities ............................................................................................................
Nonfinancial Uses of F unds.......................................................................................................................
P a y ro ll............................................................................................................................................
Dividends ......................................................................................................................................
Insurance p rem iu m s...................................................................................................................
Insurance benefits .......................................................................................................................
T a x e s ..............................................................................................................................................
Real estate transfers .......................................................................................................... ........
Purchases of other goods and services.................................................................................
N et Increase in Financial Assets..............................................................................................................
Valuation Adjustment ...............................................................................................................................
Discrepancy ..................................................................................................................................................
Memorandum—Policy R eserves..............................................................................................................
Technical N ote on Life Insurance Companies Subsector................................................................

196
196
196
196
196
197
197
197
197
197
197
197
197
198
198
198
199
199

S elf-A dministered P ension P lans Subsector.................................................................................................... 200
S elf-A dministered P ension P lans Statement ..................................................................................................
Nonfinancial Sources of F unds................................................................................................................
Nonfinancial Uses of Funds ...................................................................................................................
N et Increase in Financial Assets............................................................................................................

201
201
201
201

O ther I nsurance C ompanies Subsector..............................................................................................................

201

O ther I nsurance C ompanies Statement..............................................................................................................
Nonfinancial Sources of Funds................................................................................................................
Interest and dividend receipts..................................................................................................
Insurance p rem iu m s...................................................................................................................
Insurance benefits received ......................................................................................................
Other goods and services..........................................................................................................
Nonfinancial Uses of F unds.......................................................................................................................
P a y r o ll............................................................................................................................................
Dividend p aym en ts.....................................................................................................................
Insurance premium payments............................................................................... .............
Insurance benefits paid..............................................................................................................
T a x e s ..............................................................................................................................................
Purchases of other goods and services...................................................................................
N et Increase in Financial Assets............................................................................................................
Valuation A d ju stm en t........ ............................... .......................................................................................
Discrepancy ...................................................................................................................................................
Technical N ote on Other Insurance Companies Subsector..............................................................

202
202
202
202
202
203
203
203
203
203
203
203
203
203
204
204
204

Chapter 10
OTHER INVESTORS SECTOR
N onprofit O rganizations Subsector, ....................................

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

.................................. 210

N onprofit O rganizations Statement ........ .................................
.......................... ..................................
Nonfinancial Sources of Funds........................................
........ ..................................................
Property income ......................................
..................... . ..................................... ...........
Grants and d onations................. ........
...........................................................................
Sales of other goods and services........................................ ..................................................




211
211
211
211
211

xii

CO N TEN TS
PAGE

N onprofit O rganizations Statement— cont.
N et Increase in Liabilities....................................................................................................................... 211
Nonfinancial Uses of Funds....................................................................................................................... 211
Payroll ........................................................................................................................................... 212
Interest, rent, and insurance premiums ............................................................................... 212
Grants and donations .............................................................................................................. 212
Purchases of other goods and services................................................................................... 212
N et Increase in Financial A ssets............................................................................................................ 212
Currency and deposits................................................................................................................. 212
Federal obligations ..................................................................................................................... 212
Corporate securities..................................................................................................................... 212
Savings

and

Savings

and

L oan A ssociations Subsector...........

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

212

L oan A ssociations Statement ........................................................................................................
Nonfinancial Sources of F unds................................................................................................................
N et Increase in Liabilities.......................................................................................................................
Nonfinancial Uses of F unds.......................................................................................................................
N et Increase in Financial Assets............................................................................................................
Currency and deposits ..............................................................................................................
Federal obligations .....................................................................................................................
M ortgages......................................................................................................................................
Miscellaneous assets ...................................................................................................................
Discrepancy ..................................................................................................................................................

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

213
213
213
213
213
213
213
214
214
214

F inancial I nstitutions N ot E lsewhere C lassified Subsector.......................................................

214

F inancial I nstitutions N ot E lsewhere C lassified Statement ................................................................
Nonfinancial Sources of Funds................................................................................................................
N et Increase in Liabilities ..................................
..........................................................................
Corporate securities.....................................................................................................................
Miscellaneous liabilities ............................................................................................................
Nonfinancial Uses of F unds.......................................................................................................................
N et Increase in Financial Assets..............................................................................................................
Trade c r e d it..................................................................................................................................
Federal obligations .....................................................................................................................
Corporate securities ...................................................................................................................
M ortgages......................................................................................................................................
Miscellaneous assets ...................................................................................................................
Discrepancy ................................................................................................................................................

216
216
216
216
216
216
216
216
216
216
216
217
217

Chapter 11
REST OF T H E W ORLD SECTOR
I n t r o d u c t io n
C o m p a r is o n s
R

.............................................................................................................................................. 222
w it h

O t h e r C o m p il a t io n s

of

I n t e r n a t io n a l T

r a n s a c t io n s

.......................................... 222

W o r ld S e c t o r S t a t e m e n t ......................................................................................................224
Nonfinancial Sources of Funds......................................................................................................224
Investment income ........................................................................................................ .225
Insurance premium receipts.............................................................. ............................ .225
Sales of other goods and services to United States..................................................... .225
Grants and donations........................................................................ ............................ .226
Net Increase in Liabilities............................................................................................................ 226
Currency and deposit liability....................................................................................... 226
Bank loans ..................................................................................................................... 226

e st o f t h e




C O N TEN TS

X lll
PAGE

R est

W orld Sector Statement— cont.
N et Increase in Liabilities—cont.
Securities ........................................................................................................................................226
Miscellaneous liabilities ............................................................................................................ ..226
Nonfinancial Uses of F unds.......................................................................................................................227
Investment income paid............................................................................................. .................227
Insurance b en efits.........................................................................................................................227
Purchases of other goods and services.....................................................................................227
Grants and d on ation s.................................................................................................
. .. 228
Net Increase in Financial Assets.............................................................................................................. 228
Currency and deposit assets.......................................................................................
. . . 228
N et purchases of gold from United States.......................................................................... 228
Federal obligations ....................................................................................................
. 228
Corporate securities .................................................................................................................. ..228
Miscellaneous assets .................................................................................................................. ..228
Discrepancy ............................................................................ ....................................................................229
Memoranda:
United States Government payments in kind abroad ................................................... ..229
Foreign government payments in kind to United States...................................................229

of the

Chapter 12
PAYROLL AND INVESTMENT INCOME
Introduction

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

. 231

P ayroll ............................................................................................................................................................................231
I nterest ............................................................................................................................................................................232
Interest Receipts ............................................................................................................................................232
Consumer sector .........................................................................................................................233
Federal Government sector ......................................................................................................233
Life insurance companies subsector.........................................................................................233
Self-administered pension plans subsector.......................................................................... ..233
Nonprofit organizations subsector......................................................................................... ..233
Interest Payments...........................................................................................................................................233
Consumer sector ........................................................................................................................233
Federal Government sector.......................................................................................................233
Banking sector ............................................................................................................................234
Savings and loan associations subsector.............................................................................. .234
R ents

and

Royalties.................................................................................................................................................. .234

D ividends and B ranch P rofits................................................................................................................................. .235
Payments ........................................................................................................................................................235
Corporate business sector.......................................................................................................... .235
Farm business, banking, and insurance sectors...................................................................236
Other investors sector................................................................................................................ .236
Rest of the world sector............................................................................................................ .236
Receipts ..........................................................................................................................................................236
Consumer sector ......................................................................................................................... .236
Corporate business sector.......................................................................................................... .236
Insurance sector .................................... .................................................................................... 237
Other investors sector................................................................................................................ .237
Rest of the world sector....................... .................................................................................. .237
N et W ithdrawals




by

P roprietors..........................................................................................................

. . . 237

xiv

C O N TEN TS
Chapter 13
INSURANCE PREMIUMS, INSURANCE BENEFITS, A N D GRA NTS A N D D O N A TIO N S

PAGE
I nsurance P remiums ................................................................................................................................................ 241
P rivate I nsurance P remiums ............................................................................................................................... ..241
Premium Receipts ........................................................................................................................................241
Insurance sector ...........................................................................................................................241
Rest of the world sector............................................................................................................ ..243
Premium Payments ......................................................................................................................................243
Consumer sector ...........................................................................................................................243
Farm business sector.....................................................................................................................244
Other sectors ............................................................................................................................. ..244
G overnment I nsurance P remiums .......................................................................................................................
Premium Receipts ......................................................................................................................................
Federal Government sector......................................................................................................
State and local government sector...........................................................................................
Premium Payments ....................................................................................................................................
Consumer sector .........................................................................................................................
State and local government sector.........................................................................................
Other sectors ...............................................................................................................................

245
245
245
246
247
247
247
247

I nsurance B enefits .................................................................................................................................................. 248
P rivate I nsurance B enefits ......................................................................................................................................248
Benefit Receipts ............................................................................................................................................248
Consumer sector ......................................................................................................................... ..248
Farm business sector.................................................................................................................. ..249
Insurance sector ...........................................................................................................................249
Other sectors ............................................................................................................................... ..249
Benefit Payments ..........................................................................................................................................249
Insurance sector ...........................................................................................................................249
Rest of the world sector.............................................................................................................. ..250
G overnment Insurance B enefits .........................................................................................................................250
Benefit Payments ..........................................................................................................................................250
Federal Government sector........................................................................................................250
State and local government sector........................................................................................... ..251
Benefit Receipts .......................................................................................................................................... ..251
Consumer sector ..................... ................................................................................................... ..251
Corporate business sector............................................................................................... .......... 251
State and local government sector........................................................................................... ..251
G rants

D onations..............................................................................................................................................
Receipts .............................................................................................................. ..........................................
Payments .......................................................................................................................................................
Consumer sector ........................................................... .........................................................
Corporate business sector............................................................. ............................................
Federal Government sector......................................................................................................
State and local government sector...........................................................................................
Nonprofit organizations subsector...........................................................................................
Rest of the world sector............................................................................................................
Nonfarm noncorporate business sector...............
.........................................................

and

Chapter 14
TAXES A N D T A X REFUNDS

T axes




. . . 261

251
252
252
252
253
253
254
254
255
255

CONTENTS

XV
PAGE

T

a x es — c o n t .

Coverage of Tax Transaction Category.......................................................................................
Timing ..........................................................................................................................................
Types of Taxes.............................................................................................................................
Sources of Data for Tax Receipts.................................................................................................
Federal tax receipts........................................................................................................
State and local tax receipts.............................................................................................
Sources of Data for Tax Payments...............................................................................................
Consumer sector ............................................................................................................
Business sectors ..............................................................................................................
.
R e f u n d s .........................

R e n e g o t ia t io n
T

ax

P a ym ents

261
262
262
263
263
264
264
264
265

............................................................................... 266
............................................................. 267

Chapter 15
REAL ESTA TE TRANSFERS A N D O T H E R GOODS A N D SERVICES

Real E state T ransfers.................................................................................................................................... .270
Purchases of Real Estate................................................................................. ................................. .271
Consumer sector ..................................................................................................................271
Corporate business sector....................................................................................................272
State and local government sector................................................................................... .272
Insurance sector ..................................................................................................................272
Sales of Real Estate..............................................................................................................................272
Consumer sector ..................................................................................................................272
Corporate business sector................................................................................................... .273
Nonfarm noncorporate business sector............................................................................. .273
Farm business sector............................................................................................................273
Insurance sector.................................................................................................................. .273
Other investors sector..........................................................................................................273
Other Goods and Services.................................................................................................................................273
Sales of Other Goods and Services................................................................................................... .275
Consumer sector .................................................................................................................275
Corporate business sector.....................................................................................................275
Nonfarm noncorporate business sector........................................................................... ..275
Farm business sector.............................................................................................................276
Federal Government sector............................................................................................... ..276
State and local government sector................................................................................... ..276
Banking sector .....................................................................................................................276
Insurance sector ...................................................................................................................276
Other investors sector...........................................................................................................276
Rest of the world sector..................................................................................................... ..276
Purchases of Other Goods and Services.............................................................................................277
Consumer sector ...................................................................................................................277
Corporate business sector.......................... ..................................................................... ..277
Nonfarm noncorporate business sector........................................................................... ..277
Farm business sector.............................................................................................................277
Federal Government sector............................................................................................... ..278
State and local government sector..................................................................................... ..278
Banking sector .....................................................................................................................278
Insurance sector ...................................................................................................................278
Other investors sector...........................................................................................................278
Rest of the world sector .....................................................................................................278
Discrepancy ........................................................................................................................................ ..278




CO N TEN TS

xvi

PAGE

...............................................................................................
Consumer Purchases of Other Goods and Services ................................................................
Federal Government Purchases of Other Goods and Services...............................................
State and Local Government Purchases of Other Goods and Services ..................................
Rest of the World Purchases from the United States .............................................................
Private Capital Expenditures............................................. ........................................................
Private capital expenditures, by type and sector.........................................................
Capital expenditures for new housing..........................................................................
Business capital expenditures.......................................................................................
Private capital formation.................................. .........................................................

R e l a t io n s h ip s

to

O

ther

C o m p il a t io n s

279
280
281
286
287
288
289
291
293
294

Chapter 16
CURRENCY AND DEPOSITS

Introduction
M ail F loat

............................................................................................................................................................... 303

and

Bank F loat.................................................................................................................................... 304

C urrency and D eposit A ssets of the F low-of-F unds Sectors....................................................................
Balances of Individuals, Partnerships, and Corporations................................................................
Demand deposits .......................................................................................................................
Currency ......................................................................................................................................
Time deposits .............................................................................................................................
Government Cash Balances.......................................................................................................................
N et Cash Balances of the Rest of the World Sector..........................................................................
Rest of the world assets............................................................................................................
Rest of the world liabilities........................................................................................................
D iscrepancy

307
308
308
311
311
312
312
313
314

............................................................... ................................................................................................. 315

Chapter 17
GOLD AND TREASURY CURRENCY

Introduction

............................................................................................................................................................... 317

G old T ransaction Subaccount.............................................................................................................................
Asset Side ....................................................................................................................................................
Banking sector ...........................................................................................................................
Rest of the world sector............................................................................................................
Discrepancy ................................................................................................................................................

317
318
318
318
319

T reasury C urrency T ransaction S ubaccount....................................................................................................319
Asset Side ........................................................................................... ...........................................................319
Banking sector ........................................................................................................................... ..319
Federal Government sector........................................................................................................319
Liability Side—Federal Government sector......................................................................................... ..320
Discrepancy ...................................................................................................................................................320
T echnical N ote ......................................................................................................................................................... 321

Chapter 18
BANK LOANS O T H ER T H A N M ORTGAGES

Introduction




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

. . . 324

C O N TEN TS

XVII
PAGE

S c o pe

of

the

A c c o u n t ...........................................................................................................................................................................

E s t im a t in g P r o c edu res

T

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

325

Total Bank Loans.........................................................................................................................
Bank Loans Other Than Mortgages...........................................................................................
Commercial and industrial loans.................................................................................
Agricultural loans ........................................................................................................
Loans to brokers and dealers in securities....................................................................
Other loans to purchase securities................................................................................
Other loans to individuals.............................................................................................
Loans to banks..............................................................................................................
Other loans ....................................................................................................................
Federal Reserve loans....................................................................................................
Discrepancy ....................................................................................................................

325
326
326
326
327
327
328
328
328
328
329

e c h n ic a l

N

ote

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

324

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

329

Chapter 19
FEDERAL OBLIGATIONS A N D STA TE A N D LOCAL OBLIGATIONS

F ederal Obligations ...................................................................................................................................... .336
Derivation of Liabilities......................................................................................................................336
Derivation of Assets............................................................................................................................337
Consumer sector ..................................................................................................................337
Corporate business sector....................................................................................................337
Nonfarm noncorporate business sector ........................................................................... .338
State and local government sector.. . ...............................................................................338
Banking sector ............................................. ......................................................................338
Insurance sector ..................................................................................................................338
Other investors sector........................................................................................................339
Rest of the world sector..................................................................... ............................... .339
Discrepancy ........................................................................................................................................340
State and L ocal O bligations........................................................................................................................ .340
Derivation of Liabilities....................................................................................................................340
Derivation of Assets................................: ........................................................................................ .341
Consumer sector ................................................................................................................341
Corporate business sector................................................................................................... .341
Federal Government sector............................................................................................... .341
Banking sector ....................................................................................................................341
Insurance sector....................................................................................................................341
Other investors sector..........................................................................................................341
State and local government sector ................................................................................. .342

Chapter 20
CORPORATE SECURITIES A N D MORTGAGES

............................................................................................................................... ... 345
Net Issues .......................................................................................................................................345
Corporate business sector ...............................................................................................346
Banking sector ................................................................................................................346
Other investors sector .................................................................................................. ..346
Rest of the world sector................................................................................................ ..346

C o r p o r a t e S e c u r it ie s




xviii

CONTENTS
PAGE

C orporate Securities—cont.
Net Purchases .....................................................................................................................................
Consumer sector .............................................................................................................
Corporate business sector...................................................................................................
Nonfarm noncorporate business sector.............................................................................
Banking sector ...................................................................................................................
Insurance sector...................................................................................................................
Other investors sector.........................................................................................................
Rest of the world sector.....................................................................................................
Discrepancy .........................................................................................................................................

346
347
347
347
347
347
347
348
348

Mortgages ............................................................................................................................................................348
Mortgage Assets ..................................................................................................................................349
Consumer sector ..................................................................................................................350
Nonfarm noncorporate business sector........................................................................... .350
Federal Government sector............................................................................................... .350
Banking sector ....................................................................................................................351
Insurance sector ..................................................................................................................351
Other investors sector......................................................................................................... .352
Mortgage Liabilities ..........................................................................................................................352
One- to four-family nonfarm properties......................................................................... .353
Multifamily and commercial properties......................................................................... .353
Farm properties ..................................................................................................................354
Mortgage Assets of Banking System............................................................................................... .354

Chapter 21
T RA D E CREDIT A N D MISCELLANEOUS FIN A N C IA L TRANSACTIONS
T

M

rade

a n d T r a d e D e b t .....................................................................................................................357
Assets ............................................................................................................................................ .358
Corporate business sector................................................................................................358
Nonfarm noncorporate business sector........................................................................ .358
Federal Government sector........................................................................................... .358
Other investors sector.................................................................................................... .358
Liabilities ........................................................................................................................................358
Consumer sector .......................................................................................................... .358
Corporate business sector................................................................................................359
Nonfarm noncorporate business sector........................................................................ .359
Farm business sector...................................................................................................... .359
Federal Government sector............................................................................................. .359
Other investors sector.................................................................................................... .359
Discrepancy ....................................................................................................................................359

C r e d it

F in a n c ia l T r a n s a c t io n s ................................................................................................. 359
Transactions by Type.................................................................................................................... 361
Transactions by Sector.................................................................................................................. 365

is c e l l a n e o u s

APPENDIX A
DISCREPANCIES IN T H E FLO W -O F-FU N D S ACCOUNTS
I n t r o d u c t io n .............................................................................................................................................. ..371
I n c id e n c e o f I n c o n s is t e n c ie s ....................................................................................... .............................. ..372
I l l u s t r a t io n s o f D is c r e p a n c y T r a n s f e r s ...................................................................................................374
S u m m a r y o f D is c r e p a n c y L o c a t io n s ........................................................................................................ ..375




CONTENTS

x ix

APPENDIX B
FLOW-OF-FUNDS COVERAGE OF GROSS NATIONAL PRODUCT
.....................................................................................................................................................

PAGE
379

P ersonal Consumption Expenditures.........................................................................................................

381

G ross P rivate D omestic Investment...........................................................................................................
New Residential Nonfarm Construction.........................................................................................
Other New Construction and Producers' Durable Equipment...................................................
Change in Business Inventories.......................................................................................................

384
384
384
384

N et F oreign Investment.................................................................................................................................

384

G overnment P urchases of Goods and Services.........................................................................................
Federal Government...........................................................................................................................
State and Local Government.............................................................................................................

385
385
386

Introduction

EXPOSITORY TEXT TABLES
Summary of Flow-of-Funds Accounts for 1953 .............................................................................

4

Transaction Detail Shown in Two Sector Accounts ................................................... ...........................

11

Relationship of Consumer Nonfinancial Sources of Funds in Flow-of-Funds Accounts to Personal
Income in National Income Accounts, 1950 .........................................................................................

20

Relationship of Consumer Nonfinancial Uses of Funds in Flow-of-Funds Accounts to Personal
Consumption Expenditures in National Income Accounts, 1950 .....................................................

20

Annual Summaries of Flow-of-Funds Accounts, 1939-53....................................................................... 24-38
Commercial Bank Assets ...................................................................................................................

164

Commercial Bank Liabilities and Capital Account .....................................................................

167

Postal Savings System Assets and Liabilities ...............................................................................

168

Federal Reserve Assets and Liabilities .............................................................................................

169

Treasury Monetary Funds Assets and Liabilities ...................................................................................

170

Distribution of Assets and Liabilities of Treasury Monetary Funds Subsector among Component
Accounts.........................................................................................................................................................

172

Relationships among Gold and Treasury Currency Transaction Account, Currency and Deposits
Transaction Account, and Treasury Monetary Funds Subsector of the Banking Sector ..........

322

Debtor Sectors and Types of Mortgage D e b t .....................................................................................

354

Miscellaneous Financial Transactions, by Type .......................................................................................

361

Miscellaneous Financial Transactions, by Sector.............................................

365

Location of Discrepancies...................................................................




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

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

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

376

XX

CO N TEN TS

FLOW-OF-FUNDS ACCOUNTS AND RELATED TABLES
Sector Account Tables
PAGE

1. Consumer Sector: Sources and Uses of Funds Statement ...............................................................
2. Relationship of Consumer Receipts of Payroll in Flow-of-Funds Accounts to Wages and Salaries
in Personal Income ...........................................................................................................................
3. Relationship of Consumer Receipts of Interest and Dividends in Flow-of-Funds Accounts to
Interest and Dividends in Personal Income ..................................................................................
4. Relationship of Consumer Receipts of Insurance Benefits and Grants and Donations in Flow-ofFunds Accounts to Transfer Payments in Personal Incom e...........................................................
5. Relationship of Net Withdrawals by Nonfarm Proprietors in Flow-of-Funds Accounts to Nonfarm
Proprietors’ and Rental Income in Personal Incom e......................................................................
6. Relationship of Net Withdrawals by Farm Proprietors in Flow-of-Funds Accounts to Farm Pro­
prietors’ Income in Personal Income ...............................................................................................
7. Relationship of Consumer Tax Payments in Flow-of-Funds Accounts to Personal Tax and Nontax
Payments in National Income Accounts .......................................................................................
8. Relationship of Consumer Nonfinancial Sources of Funds in Flow-of-Funds Accounts to Personal
Income in National Income Accounts.............................................................................................
9. Relationship of Consumer Nonfinancial Uses of Funds in Flow-of-Funds Accounts to Personal
Consumption Expenditures in National Income Accounts ...........................................................
10. Relationship of Consumer Financial Sources and Uses of Funds in Flow-of-Funds Accounts to
Securities and Exchange Commission Series on Liquid Saving by Individuals...........................

73
74
74
75
76
76
77
78
79
80

11. Corporate Business Sector: Sources and Uses of Funds Statement ............................................... 96
12. Relationship of Corporate Net Operating Surplus in Flow-of-Funds Accounts to Corporate
Profits before Tax in National Income Accounts .......................................................................... 97
13. Nonfarm Noncorporate Business Sector: Sources and Uses of Funds Statement ..................... 104
14. Relationship of Nonfarm Noncorporate Business Net Operating Surplus in Flow-of-Funds Ac­
counts to Nonfarm Proprietors’ and Rental Income in National Income Accounts............. 105
15. Farm Business Sector: Sources and Uses of Funds Statement ....................................................... 115
16. Relationship of Farm Business Net Operating Surplus in Flow-of-Funds Accounts to Farm
Net Income in National Income Accounts ................................................................................. 116
17. Federal Government Sector: Sources and Uses of Funds Statement ............................................
18. Relationship of Federal Government Nonfinancial Receipts in Flow-of-Funds Accounts to
Federal Government Cash Operating Income in Treasury Accounts ....................................
19. Relationship of Federal Government Nonfinancial Expenditures in Flow-of-Funds Accounts to
Federal Government Cash Operating Outgo in Treasury Accounts ........................................
20. Relationship of Federal Obligations in Flow-of-Funds Accounts to Public Debt and Net Cash
Borrowing Series in Treasury Accounts
................................................................................
21. Relationship of Federal Government Currency and Deposit Holdings in Flow-of-Funds Accounts
to Balance in General Fund of the Treasurer of the United States ........................................
22. Relationship of Federal Government Currency and Deposit Holdings in Flow-of-Funds Accounts
to United States Government Cash Balances as Reported in Banking Statistics.........................

147
148
148
149
149
150

23. State and Local Government Sector: Sources and Uses of Funds Statement ............................ 160
24. Relationship of State and Local Government Nonfinancial Receipts in Flow-of-Funds Accounts
to State and Local Government Receipts in National Income Accounts .................................. 161




XXI

CO N TEN TS

PAGE

25. Relationship of State and Local Government Nonfinancial Expenditures in Flow-of-Funds Ac­
counts to State and Local Government Expenditures in National Income Accounts............. 161
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.

Banking Sector Assets and Liabilities, Illustrative Consolidation, 1950 ......................................
Commercial Bank Subsector: Assets and Liabilities........................................................................
Mutual Savings Bank and Postal Savings System Subsector: Assets and Liabilities.......................
Federal Reserve Subsector: Assets and Liabilities ............................................................................
Treasury Monetary Funds Subsector: Assets and Liabilities...........................................................
Consolidated Banking Sector: Assets and Liabilities......................................................................
Banking Sector: Sources and Uses of Funds Statement ..................................................................
Bank Credit ..........................................................................................................................................
Mortgages Held by the Banking System ...........................................................................................
Bank Loans Other Than Mortgages, by Sector ................................................................................
Securities and Other Investments Held by the Banking Sector ...................................................
Currency and Deposits .......................................................................................................................

180
182
183
184
185
186
187
188
189
190
191
192

38.
39.
40.
41.

Insurance Sector: Sources and Uses of Funds Statem ent.................................................................. .207
Life Insurance Companies Subsector: Sources and Uses of Funds Statement ............................ .208
Self-Administered Pension Plans Subsector: Sources and Uses of Funds Statement ..................209
Other Insurance Companies Subsector: Sources and Uses of Funds Statem ent..............................209

42.
43.
44.
45.
46.

Other Investors Sector: Sources and Uses of Funds Statement .....................................................
Nonprofit Organizations Subsector: Sources and Uses of Funds Statement ..................................
Savings and Loan Associations Subsector: Sources and Uses of Funds Statement .....................
Financial Institutions Not Elsewhere Classified Subsector: Sources and Uses of Funds Statement
Rest of the World Sector: Sources and Uses of Funds Statement ...............................................

218
219
220
221
230

Transaction Account Tables
47.
48.
49.
50.
51.

Payroll .................................................................................................................................................... 238
Interest .................................................................................................................................................. .239
Rents and Royalties............................................................................................................................... .239
Dividends and Branch Profits .......................................................................................................... 240
Net Withdrawals by Proprietors........................................................................................................ .240

52.
53.
54.
55.
56.
57.
58.

Insurance Premiums ........................................................................................................................... .255
Private Insurance Premiums .............................................................................................................. .256
Government Insurance Premiums ...................................................................................................... .257
Insurance Benefits ............................................................................................................................... .258
Private Insurance Benefits .....................................................................................................................258
Government Insurance Benefits ........................................................................................................ .259
Grants and Donations ......................................................................................................................... .260

59.
60.
61.
62.

Taxes and Renegotiation Paym ents.................................................................................................... .268
Tax Receiptsj by Type ......................................................................................................................... .268
Tax Payments, by Sector and Type of T ax..........................................................................................269
Tax Refunds ..........................................................................................................................................269

63. Real Estate T ransfers............................................................................................................................. 298
64. Other Goods and Services .................................................................................................................. 298
65. Relationship of Consumer Purchases of Other Goods and Services in Flow-of-Funds Accounts
to Personal Consumption Expenditures in National Income Accounts .................................. 299




XXll

C O N TEN TS

PAGE

66. Relationship of Federal Government Expenditures for Other Goods and Services in Flow-ofFunds Accounts to Federal Government Purchases of Goods and Services in National Income
Accounts ............................................................................................................................................
67. Relationship of State and Local Government Expenditures for Other Goods and Services in
Flow-of-Funds Accounts to State and Local Government Purchases of Goods and Services
in National Income Accounts ......................................................................................................
68. Relationship of Rest of the World Purchases of Other Goods and Services in Flow-of-Funds Ac­
counts to Net Foreign Investment in National Income Accounts ........................................
69. Private Capital Expenditures, by Type and Sector, 1950 ................................................. 301
70. Relationship of Purchases of New Nonfarm Housing in Flow-of-Funds Accounts to Residential
Construction Activity in National Income Accounts ....................................................................
71. Relationship of Business Capital Expenditures in Flow-of-Funds Accounts to SEC-Commerce
Series on Plant and Equipment Expenditures ............................................................................
72. Relationship of Private Capital Expenditures in Flow-of-Funds Other Goods and Services Category
to Private Construction and Equipment Expenditures in National Income Accounts.............

299

300
300

301
302
302

73. Currency and D eposits......................................................................................................................... 316
74. Gold and Treasury Currency .............................................................................................................. 323
75. Bank Loans Other Than Mortgages, by Sector ................................................................................ 333
76. Bank Loans Other Than Mortgages, by Type of Loan ................................................................ 334
77. Federal Obligations ............................................................................................................................... 343
78. State and Local Obligations ................................................................................................................ 344
79. Corporate Securities............................................................................................................................... 355
80. Mortgages ............................................................................................................................................. 356
81. Trade Credit ........................................................................................................................................ 368
82. Miscellaneous Financial Transactions ........................................................................ ................... 369
Appendix Tables
83. Discrepancies and Valuation Adjustments ....................................................................................... 378
84.
85.
86.
87.

Flow-of-Funds Coverage of Gross National Product, 1950 ............................................................387
Omissions and Differences, 1950 ........................................................................................................ .388
Flow-of-Funds Coverage of GNP, 1939-53 ......................................................................................... .389
Summary of GNP Components by Flow-of-Funds Sectors, 1939-53 ................................ ......... .390




CHAPTER 1
A FLOW-OF-FUNDS SYSTEM OF NATIONAL ACCOUNTS

Insight into the functioning of an economy esses can be seen most clearly when measure­
can be greatly enhanced by casting avail­ ments of both types of activity are organ­
able information into a systematic and com­ ized into a single internally consistent eco­
prehensive structure of economic accounts. nomic record. To be of maximum useful­
Application of accounting discipline to the ness for such purposes, the record must be
organization of economic data aids in both extensive in scope and encompass all major
collection and interpretation of economic types of transactions in which financial fac­
knowledge, for it highlights gaps in the tors influence and are influenced by other
basic statistics and clarifies interrelations economic developments. The record needs
among the parts of the structure.
also to be detailed to permit identification of
In recent years, the economist’s tools for the economic groups participating in each
analysis have been enlarged by the develop­ major type of economic activity and to per­
ment of two systems of economic account­ mit varied combinations of these groups and
ing, one for the nation’s income and its ex­ activities for testing analytic hypotheses.
penditures on current production, and the Finally, to permit meaningful comparison
other for input-output interrelations among and aggregation of component parts, the
major industrial groups. Both systems of ac­ record should be consistent in definition and
counts have contributed substantially to un­ measurement.
The flow-of-funds system of national ac­
derstanding of production and distribution
counts is an important step toward meeting
processes.
Analysis of a modern economy with a these standards. The system encompasses
complex financial structure calls for addi­ all transactions in the economy that are ef­
tional tools of different orientation. In a fected by a transfer of credit and/or money.
highly interdependent economy such as ours, The boundaries of the system extend beyond
credit and monetary developments neces­ the measurements of national output alone.
sarily play a strategic role. Changes in li­ Since flows of funds arise in transfers of
quidity, portfolio composition, credit avail­ existing assets as well as in purchases and
ability, and incentives to use credit are re­ sales of current production, the accounts in­
flected in markets for goods and services clude measures of transactions in land, ex­
and thereby in the changing total and com­ isting homes, and used automobiles in addi­
position of spending and output. Likewise, tion to measures of purchases and sales of
changes in the level and pattern of income, new homes and new automobiles. Flows of
prices, expenditures, and output influence funds also arise out of shifts in composition
the flow of funds through financial channels. of portfolios. Therefore, transactions in
The nature and extent of interdependence mortgages, securities, trade credit, and other
among these financial and nonfinancial proc­ financial instruments, as well as changes in




1

2

F L O W -O F -F U N D S IN T H E U N IT E D STATES,

cash balances, are measured in the system.
In the flow-of-funds system, records of all
these flows are organized into detailed state­
ments of the sources and uses of funds for
each of 10 major groups or sectors into
which the economy is divided. In general,
each group is composed of economic units
similar with respect to function and insti­
tutional structure. The flow-of-funds sectors
are:
Consumers
Corporate business
Nonfarm noncorporate business
Farm business
Federal Government
State and local governments
Banking system
Insurance
Other institutional investors
Rest of the world

The three major financial sectors are fur­
ther subdivided into component groups for
which flow-of-funds accounts are also pro­
vided. Thus, the sector account for the bank­
ing system is built up by consolidating ac­
counts for four subsectors: (1) commercial
banks, (2) mutual savings banks and the
Postal Savings System, (3) the Federal Re­
serve System, and (4) Treasury monetary
funds. The insurance sector statement is the
summation of three subsector accounts: (1)
life insurance companies, (2) self-adminis­
tered pension plans, and (3) other insurance
companies. The account for other institu­
tional investors is developed by combining
statements of sources and uses of funds for
three subsectors: (1) nonprofit organizations,
(2) savings and loan associations, and (3)
other financial institutions.
The flow-of-funds sector accounts can be
visualized as a set of interlocking balanceof-payments statements, each of which, in




1939-53

major respects, is similar in format to balance-of-payments statements that have been
developed to record the flow of international
payments. Each flow-of-funds sector account
records the sector’s purchases and sales of
commodities and services, its credit and capi­
tal outflows and inflows, and the changes in
its monetary balances.
Each transaction recorded is reflected in at
least four entries in the accounts of partici­
pating sectors. For example, a transaction
consisting of a purchase of goods for cash is
entered as a purchase of goods by the buyer,
a sale of goods by the seller, a reduction in
cash for the buyer, and an increase in cash
for the seller.1 Such a transaction has two
nonfinancial entries—the purchase and sale
—and two financial entries—the reduction
and the increase in cash. Some transactions
are entirely financial in character, for ex­
ample, purchases of securities for cash or re­
payments of debt in cash; in these cases, all
entries reflect changes in financial claims.3
It has been found convenient in describing
the accounts to refer to the nonfinancial en­
tries of the transactions recorded as “non­
financial transactions” and to call the finan­
cial entries “financial transactions.”
For many analytic purposes, it is useful
to distinguish, in the nonfinancial transac­
tions, the types of goods and services ex­
changed, or the immediate purpose served
by the exchange; and, in the financial trans­
actions, the types of financial instruments
used in payment or exchanged against other
financial claims. Accordingly the transac­
tions of the individual sectors in the flow-offunds accounts are classified into 12 non­
financial and 9 financial categories:
1 Some transactions, such as purchases involving part cash
and part credit payment, involve more than four entries.
2 Transactions that are entirely nonfinancial (barter, for
example) are not recorded in the accounts.

A SYSTEM O F N A TIO N A L ACCOUNTS

Nonfinancial

Financial

Payroll
Interest
Rents and royalties
Dividends
Net withdrawals by pro­
prietors
Insurance premiums
Insurance benefits
Grants and donations
Taxes
Tax refunds
Real estate transfers
Other goods and serv-

Currency and deposits
Gold and Treasury
currency
Bank loans other than
mortgages
Federal obligations
State and local obli­
gations
Corporate securities
Mortgages
Trade credit
Misc. financial assets
and liabilities

These classifications are carried through
all sector accounts consistently, so that each
sector’s contribution to particular phases of
economic activity can be traced. In addition
to being recorded in the sector accounts,
transactions in each of these categories are
summarized in transaction accounts. Sig­
nificant components of these transaction cate­
gories are also recorded in the accounts, and
for most of the financial transaction cate­
gories estimates have been developed of the
stock of assets and liabilities outstanding as
well as of the net flows of these claims. The
transaction classifications used in the flow-offunds accounts do not single out any par­
ticular concepts of income, consumption,
saving, or investment. Rather, the transac­
tion detail permits the user to make com­
binations of data that will serve alternative
formulations of these concepts.
This cross-classification of the data by sec­
tors and transactions provides a valuable sta­
tistical control over the estimates incorpo­
rated in the accounts. The transaction
groups are so defined that the sum of all
payments should equal the sum of all re­
ceipts in each category. Concomitantly, each
sector’s sources of funds should equal its uses
of funds. The discrepancies that arise in
many sector and transaction accounts are im­




3

portant guides to the improvement of esti­
mating procedures.
Str u ctu re o f A ccou nts in Su m m a r y

A summary of the structure of the accounts
depicting the interrelations of all transactions
in the economy for one year, 1953, is pre­
sented in the table on page 4. Similar sum­
maries for each year covered by the accounts
are presented at the end of the chapter.
For each sector of the economy, the col­
umns of the table record sources of funds
(receipts) and uses of funds (payments)
in terms of several groupings of nonfinancial
and financial transactions.3 When read
across, the table shows the participation of
each sector in each group of transactions.
The kind of information provided by the
summary table can be illustrated by answer­
ing the following question about the eco­
nomic activities of the consumer sector in
1953: How did consumers as a group make
purchases of goods and services amounting to
238 billion dollars (including 64 billion for
new and old houses and consumer durables),
provide for insurance, retirement and gifts to
the extent of 23 billion, pay taxes to the
amount of 41 billion, and add nearly 13 bil­
lion to their cash and other financial assets
—a grand total of 314 billion dollars ?
The funds available to consumers from
cash wages and salaries, it can be seen,
amounted to roughly three-fifths of this sum.
Another fifth of the payments was made out
of investment income of various kinds.
There remains then about one-fifth to be ac­
counted for, or a sum of around 60 billion
dollars.
From the table it can be seen that over
one-third of this balance was covered from
8 The coverage of these transaction groupings is indicated
in the notes following the summary tables at the end of the
chapter.




SUMMARY OF FLOW-OF-FUNDS ACCOUNTS FOR 1953
S *=Sources of Funds, U = U ses of Funds
(Annual flows, in billions of dollars)
Business
Sectors

Consumer
Corporate

Transactions

S

U

U

S

Non­
corporate
S

Farm
S

y

Financial institutions

Government
Federal

U

St. and loc.

U

S

U

S

Banking

Insurance

S

U

S

U

6.2
*

.3
2.1 3.5
.3 29.0 16.7
.7
.8
'
.1 ’
.2
*
.1
*
.2

Rest of
the world

Total

Other
S

U

S

U

S

U

N onfinancial
A
B

c

D
E
F
G
H
I

J

Payroll....................................................... 1QS 5
Receipts from and payments on invest­
m ent ....................................................... 59.4
Insurance and grants.............................. 23.9
2.6
Taxes and tax refunds
....
22.0
Capital acquisitions .
Net change in xwoefitoties
New fixed capital..................
...
Other..................................
. . . . 22.0
Purchases and sales of other goods and
services..................................................

118.7

2.7
16.3
22.7
40.9
63.8
39.4
24.4

20.0 17.5 40.0
12.2 1.0 3.0
36.0
6.8
26.7 1.5 6.0
.9
1.6
5.1
24.9
.2 1.5 *
.2

19.0

2.6

30.0

9.7
1.3
.5
.2

1.9

13.5

.8 1.0
1.1 13.0 1.0 5.5
.4 7.5 14.4 11.9 11.7
.4
1.1 64.8 3.1 21.4
.4 5.0 ♦
4.2
.1 7.8
.3
7.2
4.6
4.2
*
.1
./
.5
.4
6.4

.8

T o ta l................................................. 303.4 301.8 550.0 555.3 215.9 215.9 31.7 32.8 78.4 85.1 40.0 40.4

7.0

155.4 538.3 341.8 195.8 130.2 29.8 10.8

5.0 38.8

5.8

.7

4 .4

2 .6

.5

3.4

1.7
5.7

1.5
1.4
*
2.1

.5
2.2

♦

195.5

195.5

1.9
.3
*

101.4
82.8
89.4

101.4
83.0
89.6

820.9

819.5

2.1
4.9

3 .0 15.8 14.3

5 .9 33.0 23.9 12.3 12.4 18.4 16.5 1,290.0 1,290.0

F in an cial1
K
L
M
N
O

Currency and deposits..........
Federal obligations. . . .
M ortgages.......................
Corporate securities and State and
local obligations...................................
O ther..........................................................

p

T o ta l.................................................

Q
R
s

6.2

4.4
.3
.6

1.3

4.5

3.2
4.4

6.7
- .6

.1
1.1
.3
.1

*

1.8

.4
.6
.5

.4

1.6

—.6
2.3

.6

5.2
*

.1

- 1 .6
.3
- .3
.2

3.6

1.0
1.8

5.0

.3

.1
.2

.9
2.5
1.1
1.4

.3

.2
♦
2.J

*

6.5
.2

.4
4.5

.2
- .2
3.7
.3
.9

*

.1
.6

.3
.6

5.0
5.2
9.8

5.0
5.1
9.8

.1
1.4

10.9
11.8

10.8
10.8

41.5
.6 2.3
42.6
.3 9.1 5.0 5.0
3.6 3.0 5 .2 5.8
5.3 - 1 . 4
10.7 12.9 7.4 1.6 3 .5 3 .2 1.0 *
G rand to ta l.................................... 314.4 314.4 557.4 557.4 219.3 219.3 32.8 32.8 83.7 83.7 43.6 43.6 12.2 12.2 33.3 33.3 17.3 17.3 19.0 19.0 1,332.7 1,332.7

Memoranda:
QNP identifiable in J
Bank credit in P .. , . .

3,5

215.1

.5

29.5

1.2

6.9

.6

6.9

.9

57.9

.7

24,4

♦

1.4
6.9

♦Less thaji 50 million dollars.
t Financial sources of funds represent net changes in liabilities; financial uses of funds represent net changes in financial assets.
N o t e .— For contents of each line, see notes to summary tables, pp. 39-40.

*
- .1

10.7

-.2

- 1 .9

6.9

350.9
6.9

A SYSTEM O F N A TIO N A L ACCOUNTS

receipts from the sale of tangible capital
assets—houses and other real estate, automo­
biles, and the like. Somewhat more than this
came from insurance benefits, pension re­
ceipts, gifts, and public and private aid. Tax
refunds were the source of another 3 billion
dollars.
Consumers financed the remaining 11 bil­
lion dollars of their total expenditures and
acquisition of assets through borrowing.
One-third of this borrowing was from banks.
Consumer mortgage debt rose during the
year by 6 billion dollars and other indebted­
ness increased in round numbers by 5 billion.
Thus we have a full accounting of consumer
receipts, expenditures, and finances in a
single statement.
At the same time the table shows these
consumer transactions in their relation to
transactions of all other sectors. For ex­
ample, of the 196 billion dollars of payroll
received by consumers, corporate business
paid three-fifths, governments one-sixth, non­
corporate business a little less, and all other
groups less than one-twelfth.
Examples of the interrelations can also be
drawn from the financial area. Thus the in­
crease in consumer mortgage debt was twothirds of the total increase of 10 billion dol­
lars in mortgage debt for the economy. Of
the 10 billion increase in mortgages, the bank­
ing system took 2.5 billion, and this was onethird of the total increase in bank credit.
The increase in bank assets was associated
with an increase of 5 billion dollars in cur­
rency and demand and time deposits. All
sectors except the Federal Government in­
creased their holdings of currency and de­
posits and the consumer sector’s increase ex­
ceeded 4 billion dollars, or one-third of that
sector’s total increase in financial assets.
The table is also relevant to other questions
concerning relations among sectors and




5

among transactions. For instance, what
sources of funds financed the 38 billion dol­
lars of business capital investment? How
did the Federal Government finance pay­
ments of 85 billion dollars when its tax re­
ceipts were 65 billion? H ow did insurance
underwriters dispose of their 33 billion dol­
lars of insurance premiums and investment
income receipts? The general function of
this summary table is to facilitate quick ac­
counting answers to these and comparable
questions.
Many readers will be interested in the
amounts of gross national product, as pre­
sented in the national income accounts of
the Department of Commerce, that are re­
flected in the nonfinancial transactions of the
various flow-of-funds sectors. These are
shown in line R of the table. The amounts
shown for each sector include the pertinent
elements of all components of GNP. The
entry for the consumer sector, for example,
reflects consumer purchases of new residen­
tial housing for owner-occupancy, which are
part of the gross private domestic investment
component of GNP, as well as the elements
of personal consumption expenditures that
are in the nonfinancial transactions of that
sector.
It needs to be emphasized that the table
serves only to bring together in summary
form the many measurements compiled on
flows of funds. It presents a highly simplified
picture of the flow of funds through the
economy in a single year. More significant
information can be obtained by examining
both the changing patterns of these flows
over time and the substantially greater
detail recorded in the full sector and trans­
action statements presented and described
in the separate chapters of the report.
Data cast in the sector and transaction
groupings adopted for the accounts provide

6

F L O W -O F -F U N D S IN T H E U N ITED STATES, 1939-53

the bases for many different investigations
of the functioning of the economy. They
make it possible, for example, to observe
changing patterns in utilization of credit
and capital markets as fluctuations in produc­
tion and consumption occur. The accounts
indicate the financial channels and instru­
ments used by each sector in accumulating
financial assets and in financing expendi­
tures. In particular, relationships of the
banking system to the rest of the economy
through changes in bank credit and the
money supply are presented in the full con­
text of each sector’s sources and uses of funds.
The scope of the accounts and their structural
interdependence are designed to facilitate in­
quiry into how financial factors influence,
and are influenced by, other economic de­
velopments.
The flow-of-funds record has already
proved itself to be of value in these types of
inquiry. By supplementing the accounts
with collateral data, it has been possible to
trace and evaluate changes in the structure
of private debt since the end of the war. The
record has been particularly helpful in identi­
fying the economic groups borrowing, the
types of expenditures financed by debt, the
financial channels through which funds were
obtained, and the relationship of the rise in
debt to the commitment of income for serv­
icing debt.
The structure has also contributed helpful
perspective on current and prospective eco­
nomic developments by providing a frame­
work for integrating measures of income,
consumption and capital expenditures, and
borrowing and lending. The period for
which the accounts have been developed—
from 1939 to the present—is long enough for
the record to be used in drawing some tenta­
tive inferences with respect to cyclical and
trend relationships among spending, saving,




and financing. Since the accounts are now
available only on an annual basis, their ap­
plication to observation of seasonal and other
short-term fluctuations is limited. As the
record goes forward and the frequency of re­
cording increases, however, the usefulness of
the accounts in evaluating trends will grow.
O r g a n iz a t io n o f t h e A c c o u n t s

The organization of the flow-of-funds
structure of accounts derives from its main
objective, namely, to provide a comprehen­
sive and systematic economic record that will
facilitate study of the interrelations among
financial and nonfinancial processes. Four
basic principles of organization are ap­
plied in meeting this objective. First, trans­
actors are grouped into sectors according to
dominant economic characteristic. Second,
transactions are grouped to distinguish types
of goods or services bought or sold and chan­
nels of financing used. Third, each sector
account is comprehensive with respect to the
sector’s use of credit and money. Finally,
all sectors’ flows of funds are classified in a
broadly comparable pattern.
Basic principles, however, do not ade­
quately define any national accounting sys­
tem. Analytic orientation shapes not only
the over-all framework of the system of ac­
counts but also the treatment of each trans­
action recorded in the accounts. Frequently
alternative treatments seem equally valid in
terms of objectives of the system; even more
frequently lack of data requires some com­
promising of general principles. It is only
through a detailed study of the decisions
made in constructing a comprehensive na­
tional accounting system—the choices of con­
cept and statistical procedure—that the po­
tential usefulness of the end product can be
assessed.
Accordingly, the following description

A SYSTEM O F N A T IO N A L ACCOUNTS

7

The flow-of-funds accounts include all
transactions which (1) involve at least two
separate economic units and (2) are effected
through transfers of credit and money. This
perspective results in the exclusion, so far as
possible, of transactions internal to the ac­
counts of a single economic unit, such as a
corporation or a family, and of barter and
imputed transactions.
Internal transactions are such bookkeeping
transfers as allocations of funds to various
reserve accounts, and interplant transfers
among the establishments of a single enter­
prise. Such internal transactions are not re­
corded in the flow-of-funds system because
they do not involve two separate economic
units and are not effected through the trans­
fer of money or credit.4 Some of these in­
ternal entries, however, have economic sig­
nificance. For example, charges to deprecia­
tion reserves directly affect tax liabilities and
also have a bearing on investment, dividend,
and other business policies of the economic
unit. Similarly, charges to reserves for bad
debts by financial institutions may exert an
influence on credit availability. Business net
income, although a significant influence on
many business decisions, is not treated as a
flow-of-funds transaction, since it is an entry
on the books of a single transactor, trans­
ferring the net excess of crests over debits

in the operating account of the business to
some capital account of the same transactor.5
For many types of economic analysis, these
internal transactions must be considered.
Therefore, while they are excluded from the
regular structure of accounts, several of the
most important of them are shown as memo­
randa items or valuation adjustments in the
appropriate sector accounts or in accompany­
ing tables.
Since the flow-of-funds accounts are
oriented toward transactions effected through
the use of credit or money, barter or pay­
ments in kind and most imputed transactions
are excluded. Thus imputations such as
those related to the national income treat­
ment of home ownership are not included
in the flow-of-funds accounts.
The flow-of-funds accounts do, however,
record some transactions in a form different
from that given by the actual pattern of
flows. Thus, although employers deduct
withholding taxes from wages and transmit
the taxes directly to the Government, the
flow-of-funds accounts present the transac­
tion as one in which gross wages are paid
to employees and the employees in turn pay
the tax to the Government. This treatment
provides a more meaningful presentation of
the distribution of direct tax payments among
taxpayers.
Another transaction that is recorded in a
form other than that in which it occurs is the
payment of insurance premiums through
brokers, who deduct commissions and ex­
penses and remit the balance to the principal
insurance company. In the flow-of-funds
accounts the premium payments are recorded
as going directly to the insurance company,

4 While the accounts do not record internal transactions
of a single economic unit, transactions among the com­
ponent units of each sector are recorded, except in the
consolidated accounts for certain sectors—banking, the
Federal Government, and the rest of the world.

8 It should be noted that while the flow-of-funds ac­
counts do not record profits and net income as such, they
do record on a gross basis the transactions with other trans­
actors that, together with certain internal transactions, de­
termine corporate profits and noncorporate net income.

sets forth some of the more important de­
cisions that underlie the flow-of-funds ac­
counts. Areas of decision discussed relate
to the scope of the accounts, the classifica­
tion of transactors, the classification of trans­
actions, and other technical features.
Sco pe o f t h e A ccounts




8

F L O W -O F -F U N D S IN T H E U N IT E D STATES, 1939-53

with the company in turn remitting to the
brokers the amounts due for brokers’ charges.
The flow-of-funds transaction category
“net withdrawals by proprietors” records
transactions between unincorporated busi­
nesses and their proprietors as consumers.
To the extent that proprietors make no sepa­
ration or distinction between business and
consumer accounts, this transaction category
contains some imputations.6
C l a s s if ic a t io n o f T r a n sa c t o r s

The grouping of economic units or trans­
actors in the flow-of-funds system takes into
account the nature and extent of their parti­
cipation in financial flows as well as in trans­
actions for goods and services. In light of
the analytic objectives of the system, some
groupings of transactors are obvious: busi­
nesses should be distinguished from consum­
ers, and governments from both of these.
Such distinctions are essential, but others
are also needed. Financial patterns of cor­
porate and unincorporated businesses are suf­
ficiently different to require separate ac­
counts. Agriculture operates within an in­
stitutional complex substantially different
from that relating to other types of business;
the differences call for a separate accounting
for farm business activities. Essential differ­
ences between the Federal Government and
the State and local governments suggest the
value of keeping separate records of their
transactions. The importance of financial
institutions in the problems to which the
flow-of-funds accounts are addressed, and
the differences in their portfolio manage­
ment practices, require separate account­
ing for each of the major types of finan­
cial institutions—the banking system, insur­
ance companies, other institutional investors
e This does not apply to all unincorporated business, as
indicated in note 7 following.




—and for the main components of each type.
In combining individual transactors into
these sectors and subsectors, an attempt has
been made to record all of the transactions—
current and capital, financial and nonfinan­
cial—of each transactor in a single sector ac­
count. In some cases, however, this is not
feasible. For example, business activities of
all unincorporated enterprises (other than
farms) are recorded in one sector account,
and the consumer activities of proprietors
of these enterprises are recorded with those
of other consumers in the consumer account.
This involves some division of the activities
of single transactors since the business and
personal accounts of some proprietors are so
commingled as to prevent any distinction or
to make artificial any analytic separation.7
Data for more satisfactory solutions to this
problem are not available.
There is one other significant departure
from the principle of recording all transac­
tions of a given transactor in the same sector
account, but this is the result of deliberate
choice rather than lack of data. Certain
credit and monetary activities of the Federal
Government—the Postal Savings System, the
Exchange Stabilization Fund, the gold ac­
count, the silver account, and other elements
in Treasury currency accounting—are classi­
fied as part of the banking sector in the flowof-funds structure, rather than as part of the
Federal Government sector. Placing these
accounts in the banking sector combines in
one sector account all of the economy’s mone­
tary liabilities and reserves. This combina­
tion of activity and institutional sectoring has
proved of value in clarifying relationships
7 This difficulty Elates primarily to sole proprietorships—
enterprises with single owners—and to some extent to
corporations entirely family owned. Presumably the ac­
counts of partnerships, of corporations with dispersed owner­
ship, and of many sole proprietorships make the distinction
more clearly.

A SYSTEM OF N A TIO N A L ACCOUNTS

between bank credit and the money supply.
One penalty for sectoring along institu­
tional lines is some degree of impermanence
in the basic organization of the accounts.
As new functional and institutional arrange­
ments arise, the classification of sectors will
have to be revised. This need has already
been demonstrated; in the brief period since
exploratory studies were first undertaken,
several changes in sector structure have been
made. Some of these have resulted from the
changing availability of data; others—such
as the separate subsector accounts provided
for private pension systems and savings
and loan associations—reflect recent growth
in the importance of these institutions in
channeling flows of funds.
C l a s s if ic a t io n o f T r a n s a c t io n s

The focus of the flow-of-funds accounts
on the interrelations among financial and
nonfinancial processes is a major determinant
of the way in which transactions are classi­
fied. As a primary distinction in each sector
account, financial transactions—transactions
in financial assets and liabilities—are re­
corded separately from transactions in goods
and services. Within each of these broad
groups, further distinctions are made. Non­
financial transactions that have greatest bear­
ing on credit developments are distinguished
in the sector accounts from others whose re­
lationship to financial developments is more
remote. In the financial area, the classifica­
tions distinguish different types of credit in­
struments, credit institutions, or borrower
groups.
The definition of each transaction cate­
gory is carried through uniformly in all sec­
tor accounts. As noted earlier, some 21 types
of transactions are identified. They are de­
fined, in general, so that the total flow of
funds balances for each transaction category;




9

that is, the sum of all sector payments equals
the sum of sector receipts for each type of
nonfinancial transaction, and net borrowing
equals net lending for each type of financial
transaction.
In addition, certain components of these
major transaction groups are identified—in
either sector or transaction accounts—where
such detail is of value in analysis. Thus,
supplementing the over-all record of flows of
insurance premiums, there are separate sub­
sidiary accounts for premium transactions
under government insurance programs and
private insurance contracts. Comparable de­
tail is given for insurance benefits. Tax pay­
ments and receipts are cross-classified by type
of tax, by level of government receiving the
tax, and by sector paying the tax. Bank
credit is identified by type of bank asset and
by borrowing sector. A complete account
of receipts and payments is presented for
each of the major transaction classifications
and subclassifications, and much of this de­
tail is also given in individual sector ac­
counts.
In addition to detail within the transac­
tion classifications, the sector accounts in
some cases show further transaction detail
for which it is not possible to develop com­
plete subsidiary transaction accounts, that is,
transaction detail that cannot be identified
in terms of both receipts and payments. This
detail relates for the most part to business
and consumer capital outlays. It is possible
to indicate the sectors making such outlays,
but it is not possible, in the available statis­
tics on business sales, to identify by sector all
the receipts arising from these expenditures.
To make the accounts as useful as possible,
these business and consumer capital outlays
are recorded separately in the individual sec­
tor accounts, even though receipts from these
transactions are not segregated. In addition,

10

F L O W -O F -F U N D S IN T H E U N ITED STATES, 1939-53

some groupings of transactions in the sector
accounts cut across the standard transaction
classification system; this occurs mainly with
respect to capital outlays.
In summary, the sector statements differ
one from another with respect to the amount
of detail shown. Some detail can be carried
through all accounts but is included only
where it has significance; some detail shown
in certain accounts cannot be identified con­
sistently throughout the structure. Because
of space limitations, some of the pertinent
detail is shown in the transaction accounts
rather than in the sector accounts. The table
on page 11 shows the extent to which de­
tail within the 21 major transaction cate­
gories is recorded in two of the major sector
accounts—those for consumers and for cor­
porate business. Items marked with an as­
terisk are presented in even more detail in
the transaction accounts.
No one system of transaction classification,
of course, can be pertinent for all possible
applications of the accounts. Transaction
groupings in the accounts are designed so
that they can be easily rearranged to meet
special needs. For example, the flow-offunds accounts impose no specific concepts
of saving or of investment on the data; the
analyst is free to combine various transac­
tion categories or subcategories into any of
several saving or investment concepts in or­
der to test particular hypotheses of behavior
patterns.
While transactions in financial claims are
distinguished, in general, from transactions
in goods and services, some difficulties are
encountered in trying to carry through this
distinction consistently. One major prob­
lem arises in classifying flows between pro­
prietors of unincorporated business and their
enterprises. It is impossible to determine
separately the amounts proprietors withdraw




from their enterprises as reductions in capital
and the amounts they withdraw as compen­
sation for their managerial or labor func­
tions. For an official of a corporate organiza­
tion, it is possible to distinguish the salary
he receives from any dividends he gets on
company stock he owns; in turn, these can be
distinguished from proceeds of any sales of
this stock or any payments made to acquire
additional stock. For the proprietor of an
unincorporated business, all of these flows
must be combined, for statistics are not avail­
able to effect a separation. The flow-offunds transaction category “net withdrawals
by proprietors” is equivalent, therefore, to a
mixture of several financial and nonfinancial
flows.
The treatment of proprietors’ incomes de­
scribed above, while representing a departure
from general classification principles used in
the accounts, does not give rise to any statis­
tical discrepancy in either sector or transac­
tion accounts, for the transaction is classified
and treated in the same way for both the
paying and receiving sectors.
There are classification inconsistencies in
the accounts related to the treatment of gold
and silver. Gold and silver are products to
the companies that mine them and raw ma­
terials to industrial and artistic users. To the
banking system, however, these metals are
part of the monetary base. This basic differ­
ence in significance for different groups in the
economy is reflected in classification incon­
sistencies in the flow-of-funds accounts.
Thus changes in the United States gold stock
are considered to be financial transactions for
the banking sector (and also for the rest of
the world sector, if the gold is purchased
from or sold to foreign countries) but sales
of gold by domestic mining companies and
domestic purchases of gold for industrial and
artistic use are classified as nonfinancial

11

A SYSTEM OF N A TIO N A L ACCOUNTS
T r a n s a c t i o n D e t a i l S h o w n in T w o S e c t o r A c c o u n t s

Detail shown in consumer sector account
Major transaction classifications

N onfinancial:

Payroll
Interest*
Dividends
Net withdrawals by
proprietors*

Insurance benefits:
Private—
Life, etc.*
Other*
Government*
Grants and dona­
tions:
Fed. Govt.
State and local
Private*
Taxes and renegotiations..........................

Tax refunds ..............................................
Real estate transfers..............................'j

Tax refunds
Sales receipts:
Homes
Autos, etc.

Other goods and services...................... I

Fin ancial:
Currency and deposits ............................
Gold and Treasury currency....................
Bank loans other than mortgages...........

Uses

Sources

Payroll
Interest
Rents

Insurance premiums:
Private—
Life, etc.
Other*
Government*

Grants and dona­
tions*
Taxes:*
Income*
Property
Other*
Home purchases:
New*
Existing
Durable goods
Nondurable goods
“Other” services

Sources

Uses

Interest
Rents and royalties
Dividends and
branch profits*

Payroll
Interest
Rents and royalties
Dividends and
branch profits*
Insurance premiums:
Employment
taxes*
Other*

Insurance benefits*

Grants and dona­
tions

Consumer credit
from banks
Security loans
from banks
Federal obligations*
State and local
obligations
Corporate securities

Corporate securities..................................

Mortgages

Trade credit................................................

Mortgages:
Banks
Other
Consumer credit
from nonbank
lenders

Miscellaneous financial transactions. . . .

Other vsecurity loans
Policy loans

Miscellaneous assets:
Savings and loan
shares
Credit balances at
brokers
Other*

Grants and dona­
tions*

Profits tax payments*
Other taxes*
Renegotiations
Tax refunds
Real estate transfers

Sales and receipts
from operations

Currency and
deposits:
Time deposits

Federal obligations....................................
State and local obligations.......................
Mortgages...................................................

Detail shown in corporate sector account

Capital expenditures:
Plant and equip­
ment
Other
Change in inventory
Operating usae n.e.c.

Currency and
deposits
Bank loans other
than mortgages:
Commercial and
industrial
Other*
Federal obligations*
Corporate securities:
Net bank pchses.
Mortgages:
Owed to banks

Corporate securities*!

Trade debt:
Federal Govern­
ment advances
and prepayments
Other trade debt
Miscellaneous
liabilities

Trade credit:
Receivables from
Federal Govern­
ment
Other trade credit

♦Indicates items for which more detail is given in transaction accounts or detailed taoles accompanying them.

transactions of the business sectors. Comparable differences exist in the case of silver,
not only with respect to domestic production
and industrial use but also with respect to
imports. International transactions in silver
are classified as nonfinancial rather than




financial flows in both the conventional balance-of-payments statement and the flow-offunds accounts.
These inconsistent classifications give rise
to minor statistical imbalances that are com­
pensating within transactions accounts and

12

F L O W -O F -F U N D S IN T H E U N ITED STATES, 1939-53

do not contribute to any sector account dis­
crepancies. The discrepancies in the gold
and Treasury currency transaction account
arising from the difference in classification
are matched by part of the discrepancy in
the transaction account for other goods and
services.
C ro ss - C l a s s if ic a t io n o f T r a n sa c t o r s a n d
T r a n s a c t io n s

The extent to which specific participants
in intersector flows can be identified in the
accounts falls short of a complete “to-whomfrom-whom” arrangement. Such an ar­
rangement would be one in which each sec­
tor’s disbursements and receipts are classi­
fied not only in terms of the types of activity
involved, but also in terms of the sectors
with which each type of transaction is ef­
fected. Statistical information currently
available does not permit such complete iden­
tification of credit and money transactions.
Where data permit, specific identification
is provided of the sectors to which particular
payments are made or from which particular
receipts have come. In the nonfinancial area,
this identification is made in the transaction
categories for payroll, insurance premiums
and benefits, grants and donations, taxes,
tax refunds, and net withdrawals by pro­
prietors of unincorporated businesses. It is
not possible, however, to provide all of this
detail for the other nonfinancial transac­
tion categories: interest, rents, dividends, real
estate transfers, and purchases and sales of
other goods and services.
Most financial flows of funds can be meas­
ured only in terms of net changes in stocks
of assets and in liabilities, rather than in
terms of gross flows of acquisitions and sales
and extensions of credit and repayments.
Since gross flows data are necessary in order
to identify the sectors participating, it is not




possible to construct a “to-whom-fromwhom” statement for financial transactions.
However, a “who-owes-what-to-whom” ar­
rangement of data has been constructed for
many categories of financial transaction.
This has been possible for transactions in
which one sector alone is either the debtor
or creditor, such as the transaction categories
for currency and deposits, bank loans, Fed­
eral obligations, and State and local obliga­
tions, and also for components of other finan­
cial categories.
T im in g o f t h e A cc o u n ts

Another aspect of the flow-of-funds sys­
tem to be considered is the timing basis for
recording transactions in the accounts. Some
transactions are recorded on a payments or
cash accounting basis; that is, as of the time
payment for the transaction is made. Others
are recorded on an accrual basis; that is, en­
tries are made as of the time payment is
earned or an obligation is incurred.
For each type of transaction, the choice
of timing basis rests on particular analytic
considerations. Taxes are recorded in the
accounts when received by the government
because analysis of the impact of government
financing on capital markets is facilitated by
data recording fluctuations in government
cash revenues. On the other hand, pur­
chases and sales of goods are recorded on an
accrual basis, that is, as of the time the title
to goods is transferred and an obligation to
pay arises, because the total volume of sales
is considered to be a more significant eco­
nomic fact than is the volume of cash receipts
from sales. Also, the credit extensions in
such accrual transactions give rise to financial
instruments that may often be negotiable or
capable of use as collateral for other borrow­
ing. Measurements of fluctuations in trade
credit—business, consumer, and government

A SYSTEM OF N A TIO N A L ACCOUNTS

—are an integral part of any picture of the
total flow of funds through financial chan­
nels.
While both cash and accrual measures are
used in the flow-of-funds accounts, the two
are not combined in any given transaction.
Thus insurance premium transactions are on
a cash basis in both paying and receiving sec­
tor accounts, as of the time the premiums are
received by the insurance sector. On the
other hand, consumer purchases from busi­
ness and the corresponding sales by business
are recorded as of the time ownership is
transferred.
The use of both cash payment and accrual
bases of accounting does not give rise to dis­
crepancies between receipts and payments for
transaction accounts or for sector accounts
so long as there is consistent timing of the
four entries for each transaction. When con­
sumers purchase goods from business on
credit, the purchases enter the consumer sec­
tor account as nonfinancial uses of funds at
the time consumers acquire title to the goods.
At the same time, a source of funds is re­
corded in the consumer account to reflect the
increase in consumer liabilities for the
amounts owed to the seller. A correspond­
ing sale simultaneously enters one of the
business sector nonfinancial accounts as a
source of funds and an increase in trade re­
ceivables is recorded as a business use of
funds. Conceptually, the four entries for
each transaction insure a balance in both the
sector sources and uses of funds accounts and
in the transaction receipts and disbursements
accounts.
If both participants in each transaction
recorded all entries simultaneously, no tim­
ing discrepancies would arise in the accounts.
This concurrence is infrequent, however,
and imbalances in the accounts result. For
example, debtors usually reduce their records




13

of the amounts they owe when a check in
payment is mailed, but creditors may not
write down their comparable asset until after
the check has been received. At any point
in time, holder records of the amounts owned
of a particular financial asset tend to differ
from the sum of debtor records of the
amounts owed.
This lack of simultaneity in recording debt
repayments also introduces a discrepancy
into another transaction account, that for cur­
rency and deposits. The debtor’s record of his
cash balance is immediately reduced by the
amount of the check written; the creditor’s
record of his cash balance is not increased
until the check is received; bank records of
deposits are not changed at this stage of the
transaction. Thus, the total liability for de­
posits as recorded in bank records tends to be
larger than the sum of individual holder rec­
ords of deposit balances by the amount of
checks in the mail.
Other lags are also reflected in the flow-offunds system. For example, withholding
taxes deducted from wages by employers are
recorded in the accounts as paid by consum­
ers at the time they are withheld. However,
some time usually elapses before the amounts
withheld actually enter Treasury records be­
cause of the schedule according to which the
withholdings are deposited by employers in
Treasury accounts at depositary banks or are
transmitted to Internal Revenue collectors
and thence to the Treasury. This, and other
timing lags, resulted in a substantial discre­
pancy in the account for tax payments and
receipts in 1943, when the withholding tax
was first introduced, and in small discrepan­
cies in subsequent years.
For the most part, timing discrepancies
arise in cases of reliance on two sources of
data for the same transaction. When the
books of one participant to a transaction

14

F L O W -O F -F U N D S IN T H E U N ITED STATES, 1939-53

serve as a basis for estimating the amount
of the transaction for another sector, usually
no timing discrepancy enters the accounts.
N e t t in g i n

the

A ccounts

Another aspect of the system worthy of
note is the extent of netting in the accounts,
that is, the extent to which receipts or expen­
ditures are recorded separately or have been
offset against each other. For most analytic
purposes, it is desirable to have available
measures of receipts and disbursements on a
gross basis. This is particularly true in deal­
ing with aggregates for unlike types of
transactors or transactions, for the net figure
often conceals significant deviations in be­
havior.
The effect of fiscal policy on the economy,
for example, can be appraised more clearly
when Government revenues and expendi­
tures are each considered separately than
when only the net deficit or surplus is con­
sidered. Similarly, net changes in public or
private debt may be an inadequate measure
of the role of financial flows in the economy.
Data on gross borrowing and debt repay­
ments, as well as measures of the debt out­
standing, are desirable in order to assess the
relation of the financial situation to develop­
ments in production and expenditures.
Unfortunately, available data on gross
flows are limited. This is particularly true
in the financial area. In the nonfinancial
area, it has been possible to construct gross
measures for most types of transactions—
wages, interest, dividends, rents, insurance,
taxes, grants and donations, and “other goods
and services.”
In the financial area, however, only net
changes in each type of asset and liability
can be carried through the accounts con­
sistently. Measures are available of gross




borrowing and repayment on certain types of
financial instruments, but there are few, if
any, measures of gross flows for each of the
sectors participating. For example, the Se­
curities and Exchange Commission provides
estimates of gross new issues and gross re­
tirements of corporate securities, but there
exist only fragmentary data relating to the
gross sales and purchases of these issues by
the sectors investing in these securities.
Gross home mortgage borrowing and ap­
parent retirements of home mortgages can
be estimated with some degree of confidence,
but there are few statistical clues to provide
even a crude measure of the gross turnover
of mortgages on nonresidential and multi­
family properties in specific lender port­
folios.
For an interlocking system of accounts
measuring the flow of funds through the
financial as well as the nonfinancial sectors
of the economy, the only practical expedient
in view of the limited availability of gross
financial flows is to use net changes in each
type of asset and debt to represent flows of
financial funds. In application to problems
of analysis, however, the accounts can be sup­
plemented by the data on gross financial
flows that are available.
C o m b in a t i o n a n d C o n s o l id a t io n i n t h e
A ccounts

Most sector accounts record intrasector as
well as intersector flows of funds. In other
words, most sector accounts are on a com­
bined as distinct from a consolidated basis.
For example, transactions among consumers
such as payment of wages to domestic ser­
vants, or mortgage loans extended by one
consumer to another, are included in the con­
sumer sector account. Transactions among
corporate businesses or among farm busi­

A SYSTEM O F N A TIO N A L ACCOUNTS

nesses are also included in the corporate and
farm business sector accounts, respectively.
Inadequacies in basic statistics prevent es­
timation of all intrasector flows within the
consumer and business sectors. Thus, there
are no measures of interbusiness exchanges of
existing plant and equipment in the accounts,
nor of the flows among consumers of gifts
or short-term loans. To the extent that data
permit, intrasector transactions are recorded
in the following sector accounts: consumer,
corporate business, noncorporate business,
farm business, State and local governments,
insurance, and other investors.
There are three sector accounts—banking,
Federal Government, and rest of the world
—that have been recorded on a consoli­
dated basis rather than on a combined basis.
This has been done in order to highlight the
significance of the activities of these sectors
with respect to other sectors of the economy.
The banking sector account is a consolidated
statement for all components of the banking
and monetary system. Transactions among
these components, particularly between the
Federal Reserve System and the private bank­
ing system, are given in subsector accounts,
but the full sector account shows only trans­
actions between the banking and monetary
system and the other sectors. Similarly, the
Federal Government sector account is on a
consolidated basis. Transactions among
various branches of the Government are not
shown, in order that transactions of the Fed­
eral Government with other sectors may be
more clearly indicated. Finally, the rest of
the world sector account is a consolidated
statement, recording transactions of foreign
countries with the United States. Transac­
tions among foreign countries, which do not
enter directly into the United States balance
of payments, are not shown.




15

C o n t r a s t w i t h O t h e r N a t io n a l
A c c o u n t in g S y s t e m s

The principles of sector organization and
transaction coverage and classification de­
scribed above broadly distinguish the flow-offunds accounts from other national account­
ing systems which have different aims. In
part, the differences reflect the different ana­
lytic orientations of the various systems.
Both the national income accounts and the
interindustry accounts (also known as the
input-output accounts) focus on transactions
in goods and services. The objective of the
national income system of accounts is to
measure the market value of current produc­
tive activities and the distribution of this
value among the factors of production. The
focus of the input-output accounts centers on
interindustry technological relationships—in
other words, the interdependence of the
structure of production. Financial flows, such
as transactions in cash balances, securities,
or other financial instruments, are not re­
corded in either system.
Neither of these accounting systems is or­
ganized primarily in terms of groupings of
whole decision-making units. No attempt is
made in these systems to record all the ac­
tivities of each economic unit in a single ac­
count. In fact, the separation of activities
of given units is a central characteristic of
the organization of these systems.
In the input-output structure, the main
system of classification distinguishes indus­
tries, products, or industrial processes. Thus,
transactions of a multiproduct enterprise
may be allocated to several industrial classi­
fications, by product where feasible, by es­
tablishment where necessary. Processes and
products may be divorced from the enter­
prise if greater stability of technological re­
lationships can thus be obtained.
In the national income accounts, classi­

16

FL O W -O F -F U N D S IN T H E U N IT E D STATES, 1939-53

fication is based on a combination of activity
and economic unit consideration. The focus
of the national income structure is on pro­
duction and on utilization of resources for
both current consumption and additions to
capital goods. These are the main classifica­
tion bases of the structure. Transactions
representing utilization of resources for cur­
rent consumption, such as consumer expen­
ditures for food or clothing, or business cur­
rent outlays for wages and salaries, are re­
corded in sector accounts broadly akin to the
groupings in the flow-of-funds accounts.
Transactions in capital items—investment in
plant and equipment by business and home
purchases by consumers, however, are con­
solidated into a single account in which are
recorded investment activities of all private
sectors of the economy.
The focus of the flow-of-funds accounts on
the interplay between financial and non­
financial factors in the economy results in
a substantially different selection and organi­
zation of economic d^ta from those found in
these other widely used systems of national
accounts. The inclusion of transactions in
existing assets and in financial claims, the
inclusion in each sector account of all trans­
actions in which the components of the sec­
tor engage, and the grouping of economic
units so as to distinguish participants in credit
as well as goods and service transactions re­
flect the analytic orientation of the system,
an orientation toward problems in which
economic decisions are influenced by flows
and stocks of financial claims as well as by
current production, income, and consump­
tion.8
8 A more complete discussion of the differences among
the national income accounts, the input-output accounts,
and the flow-of-funds accounts is given in a paper by
Stanley J. Sigel, “A Comparison of the Structures of Three
Social Accounting Systems,” included in Studies in Income
and Wealth, Vol. 18, National Bureau of Economic Re­
search, New York, 1955.




These general differences among the sys­
tems as a whole are reflected in specific dif­
ferences between particular series in the flowof-funds accounts and related series in other
systems. These specific differences are dis­
cussed in the next section.
M e t h o d s U sed i n C o m p i l i n g t h e A c c o u n t s

The flow-of-funds accounts as presently
constructed have been developed from avail­
able statistical series; no special direct com­
pilations of new data have been made. Ex­
tensive adaptation of existing series has been
required, however, to make use of them in
the accounts. It has also been necessary to
estimate some figures from sample and
benchmark data, and in some cases from
quite fragmentary evidence using crude
methods of estimation.
A great variety of sources of data has
been utilized in compiling accounts. The
most important single source of data on
nonfinancial transactions has been the sta­
tistical material underlying the national in­
come accounts. Through the generosity of
officials of the National Income Division of
the Office of Business Economics of the
United States Department of Commerce,
basic statistics used in compiling their na­
tional accounts have been made available for
rearrangement into sector and transaction
categories for the flow-of-funds system.
Data compiled by many other Government
agencies have also been used. United States
Treasury data, both those pertaining to op­
erations of the Federal Government and
those obtained from tabulations of tax re­
turns, have been a key source of informa­
tion. Financial materials compiled by the
Securities and Exchange Commission and
the Housing and Home Finance Agency,
as well as the banking and other financial
data compiled by the Federal Reserve Sys­

A SYSTEM O F N A TIO N A L ACCOUNTS

17

tem, the Comptroller of the Currency, and the cost of land for new homes, accordingly,
the Federal Deposit Insurance Corporation, are utilized to supplement the measurements
have provided a foundation for the financial of consumption expenditures and construc­
components of the flow-of-funds accounts. tion activity in the national income system
Other sources have included various Census in deriving the consumer sector account in
compilations, Spectator insurance reports, the flow-of-funds system.
Transaction classification adjustments.
Department of Agriculture occasional and re­
current studies, and others too numerous to There are a number of differences in the
classification and grouping of transactions
list here.
Construction of the accounts has been as between the flow-of-funds accounts and
mainly a task of integrating this mass of the national income accounts. In the latter
data into the framework of the flow-of- system, for example, some consumer pur­
funds system—assigning transactions to ap­ chases of services from governmental units,
propriate sectors, adjusting transactions to such as payments for tuition to State uni­
appropriate timing bases, eliminating dupli­ versities, or fees paid to public hospitals,
cate transactions, and filling transaction gaps. are classified in the category “personal taxes
The differences between flow-of-funds and nontaxes,” rather than with the com­
series and comparable series in other statis­ parable purchases from private enterprises
tical compilations can be classified into a which are classified as consumption expendi­
number of types. These types of differences tures. In the flow-of-funds consumer sector,
are described and illustrated below. This payments for services, whether to govern­
classification of differences is applicable both ments or businesses, are combined in a single
to the derivation of flow-of-funds series and transaction category.
to the comparison of these series to published
Sector coverage adjustments. There are
data not used in their derivation. In most also differences in the groupings of trans­
cases the illustrations contrast usage of data actors between the flow-of-funds and other
in the consumer sector of the flow-of-funds accounting systems. For example, the per­
accounts with usage in the personal sector of sonal sector account in the national income
the national income accounts.
structure includes expenditures by nonprofit
Transaction coverage adjustments. Since institutions and disbursements by pension
the scope of the flow-of-funds system is wider plans as well as those by consumers. In the
than that of the accounts from which source flow-of-funds system, separate sector accounts
data are obtained, it is often necessary to sup­ are provided for the receipts and disburse­
plement these sources with other informa­ ments of nonprofit organizations, pension
tion. In the national income accounts, for plans, and consumers.
Sector allocation adjustments. These ad­
example, transactions in land and existing
homes are not measured, for these are not a justments result from differences in the allo­
part of current productive activity that it is cation of transactions to sectors, even where
the purpose of these accounts to describe. comparable groupings of transactors exist.
The significance of such transactions for In the national income accounts, operating
financial analysis requires their inclusion in and maintenance expenditures on owner-oc­
the flow-of-funds record. Estimates of con­ cupied homes—including interest payments
sumer purchases of existing homes and of on mortgages—are classified as payments by




18

F L O W -O F -F U N D S I N T H E U N IT E D STATES, 1939-53

the business sector rather than by the personal with their World War II services are re­
sector. In the flow-of-funds accounts, ex­ corded in the personal sector account of the
penditures for home ownership and mainte­ national income system as transfer payments
nance paid by owner-occupants are classified received by persons as of the time these
bonds were redeemed. In the flow-of-funds
as payments by the consumer sector.
Netting adjustments. To the extent pos­ accounts, they are recorded as consumer re­
sible, nonfinancial transactions are recorded ceipts as of the time the bonds were issued.
Adjustments for valuation differences.
on a gross basis in the flow-of-funds accounts.
In the data sources used in compiling the Some transactions are recorded in the flow-offlow-of-funds accounts, receipts and expend­ funds accounts with valuations different
itures are sometimes offset against each other. from those in other accounting systems. An
For example, in the personal sector of the example is the difference in recording
national income system, tax refunds received changes in farm inventories as between the
by persons are netted against their tax pay­ national income accounts and the flow-ofments. Such tax payments and the refunds funds accounts. In the national income ac­
are treated on a gross basis in the consumer counts, changes in farm inventories are esti­
sector account of the flow-of-funds structure. mated as the market value of the change in
Consolidation adjustments. These ad­ physical stocks. In the flow-of-funds ac­
justments refer to the extent to which inter­ counts, the change is valued on a cost basis,
unit flows within each sector are recorded in comparable to the basis used in recording
the accounts. For example, as noted above, nonfarm inventory changes in both the flowthe national income account for the personal of-funds and the national income systems.
sector consolidates the activities of nonprofit
Adjustments for differing estimates.
organizations with those of consumers. In Some measurements incorporated in the
this consolidation, flows between component flow-of-funds accounts differ statistically
groups of the sector are eliminated. Thus, from measurements of the same transactions
personal donations to, and grants from, phil­ in other accounting systems, even though no
anthropic institutions are not recorded in difference in concept is evident. Such differ­
the national income accounts, nor are con­ ences can be illustrated from the business
sumer purchases of services from schools, hos­ investment area. Flow-of-funds measures
pitals, and other nonprofit institutions. In of business capital outlays are derived from
the flow-of-funds accounts, philanthropic, the Securities and Exchange Commissionreligious, educational, and other nonprofit Department of Commerce survey of plant
organizations are classified in the sector ac­ and equipment expenditures. The measures
count for other institutional investors, and of analogous expenditures in the national
transactions of these groups with consumers income system are derived from a combina­
are specifically recorded.
tion of sources that are independent of the
Timing adjustments. Transactions are SEC-Commerce data for most years. After
sometimes entered in the flow-of-funds ac­ allowance for conceptual differences between
counts on a timing basis different from that the two series there remains a statistical dif­
employed in other national accounting sys­ ference that must be recognized in reconcil­
tems. For instance, armed forces leave ing the national income and flow-of-funds
bonds issued to enlisted men in connection accounts.




A SYSTEM O F N A T IO N A L ACCOUNTS
I l l u s t r a t io n o f A d a p t a t io n o f D a t a

19

The problem of statistical revision is a
continuing one. For recent years in par­
ticular, many data represent preliminary es­
timates pending the availability of final
benchmark information.
For example,
Statistics of Income, an important bench­
mark source of data, is published annually
by the Internal Revenue Service from taxreturn tabulations. These tabulations are
usually published about two years after the
close of the calendar year. When they be­
come available final estimates dependent on
tax data are made for the year covered, and
the preliminary estimates for following years
are adjusted to reflect the new tax-return
information. Revisions are necessary over
longer periods of years when new Censuses
become available and when data are gath­
ered on previously unexplored parts of the
economy.
It is also reasonable to expect that in the
future there will be modification in the struc­
ture of the accounts or alterations in the type
of detail shown as changes occur over time
in the relative importance of types of trans­
actor or transaction and as new sources of
data and calculation techniques become
available.

Tables are presented in the report in con­
nection with the sector and transaction ac­
counts explaining relationships between flowof-funds series and corresponding series in
other accounting systems and in other bod­
ies of statistical compilations. The detailed
differences between series are grouped in
terms of the types of adjustments discussed
above.
An illustration of the relationship tables
and of the adaptation of existing data to
flow-of-funds accounting is given in the
tables on page 20. These tables show the
steps necessary to move from the national
income accounts measures of personal in­
come and personal consumption expenditures
to the flow-of-funds measures of consumer
nonfinancial receipts and expenditures. The
figures, which pertain to 1950, indicate the
order of magnitude of the different types of
adjustments made.
Many of the other relationship tables pre­
sented throughout the report are also com­
parisons between flow-of-funds concepts and
series and national income system concepts
and series. In addition, other comparisons
between these two systems can be made by
appropriate identification of lines in the flowSu m m a r y
of-funds accounts rather than in relationship
The key features of the flow-of-funds ac­
tables. Relationships to the national income
counts
may be summarized as follows:
system are not brought together in any single
1.
The
accounts include all transactions
place but are shown in the appropriate chap­
that
involve
at least two separate economic
ters of the report.
units and that are effected through transfers
R e v is io n o f E s t im a t e s
of credit or money. They exclude barter,
In the preparation of this report for pub­ bookkeeping transfers among the internal
lication, it was necessary to set a relatively accounts of a single transactor, and imputed
early cut-off date for the figures used. The transactions. Some of the internal transfers
tables in the report incorporate data that excluded from the accounts proper are re­
were available at the end of 1954; they do corded as memoranda.
2. Measures of the flow of funds are organ­
not reflect revisions and new data that have
ized into sources and uses statements for 10
become available since that time.




F L O W -O F -F U N D S IN T H E U N IT E D STATES, 1939-53

20

R e l a t io n s h ip

of

C onsu m er
to

P erso na l

N o n f in a n c ia l
Incom e

in

Sources

of

F unds

N a t io n a l I n c o m e

in

F l o w -o f - F u n d s

A cco un ts,

A c c o rN rrs

1950

f In billions of dollars]
A

P erso n al in com e in n a tio n a l incom e a c c o u n ts ...........................................................................................................................

B
C
D
E
F
G

A d ju stm e n ts fo r differences in transaction coverage : 1
Minus: Imputed and in-kind income in wages and salaries and in interest...................................................................................
Minus: Imputed and in-kind income in proprietors’ and rental income.........................................................................................
Plus:
Interest on tax refunds.............................................................................................................................................................
Plus:
Receipts from sales of homes, cars, and other goods...........................................................................................................
Plus:
Benefits from private life insurance annuity and retirement programs2 ..........................................................................
Plus:
Benefits netted against nonlife insurance premiums in personal consumption expenditures 3 ..........................................

16.1
4.0
1.7

H

Plus:

A d ju stm e n t fo r differences in tim in g:
Net issues of armed forces leave bonds and adjusted service bonds................................................................................

-.1

I
J

Plus:
Plus:

A d ju stm e n ts fo r differences in consolidation:
Grants and donations received from nonprofit organizations............................................................................................
Insurance benefits received from self-administered pension p lan s....................................................................................

.1

K
L

A d ju stm e n ts fo r differences in transaction classification:
Minus: Consumer bad debts in personal income..............................................................................................................................
Plus:
Personal contributions for social insurance deducted in calculation of personal income..............................................

.3
2.9

M
N

A d ju stm e n ts fo r differences in sector coverage:
Minus: Interest, dividends, and transfer payments received by nonconsumers in personal sector of national income ac­
counts 4 ...................................................................................................................................................................................
Minus: Employer contributions to self-administered pension plans..............................................................................................

O
P
Q
R

A d ju stm e n ts fo r differences in sector allocation:
Minus: Interest receipts of nonfinancial nonfarm noncorporate business......................................................................................
Minus: Employer contributions to insured pension plans and insurance programs....................................................................
Minus: Net funds left in and invested in noncorporate businesses by consumer sector.............................................................
Plus:
Benefits from real property insurance received by nonfarm home owner-occupants.....................................................

1.4

S
T

Plus:
Plus:

A d ju stm e n ts to p u t n e t ite m s on gross basis:
Tax refunds...............................................................................................................................................................................
Personal cash remittances from abroad netted in personal consumption expenditures..................................................

*1.7

Equals: C o n su m er nonfin an cial sources of fu n d s in flow -of-funds a c c o u n ts ..................................................................

238.6

U

227.0
6.7
5.4

.1

.7

1.1

.9

.1

.1
.2

N o t e .—Details

may not add to totals because of rounding.
*Less than 50 million dollars.
1 Government benefit payments under deposit insurance programs are too small to be shown separately but are reflected in line U.
2 Excludes benefits received from self-administered pension plans, which are entered as line J below.
3 Benefits from private insurance policies covering automobiles and other personal property and from accident and health and hos­
pitalization policies. Benefits from life insurance, real property insurance, and private pension plans are included in other adjustments
to personal income on lines F, J, and R.
♦Consists of interest, dividend, and transfer receipts of nonprofit organizations; interest received by self-administered pension plans;
profits of Military post exchanges, Navy exchanges and ships’ stores.
R e l a t io n s h ip o f C o n s u m e r N o n f in a n c ia l U ses o f F u n d s i n F l o w -o f - F u n d s A c c o u n t s
to

P e r s o n a l C o n s u m p t io n E x p e n d it u r e s in N a t io n a l I n c o m e A c c o u n t s ,

1950

[In billions of dollars]
A

Persons

B
C
D
E
F
G

A d ju stm e n ts fo r differences in transaction coverage:
Minus: Imputed expenditures for food, clothing, shelter and services1 .....................................................................
Minus: Imputed expenditures ior cost element in life insurance premiums2 ............................................................
Plus:
Insurance premiums for private life insurance, annuity and retirement programs3 ..................................
Pius:
Nonlife insurance benefits netted against premiums in personal consumption expenditures....................
Plus:
Purchases of existing houses4 .............................................................................................................................
Plus:
Gross purchases of used goods from dealers less dealers’ margins included in A .......................................

H

Plus:

A d ju stm e n t to p u t n e t ite m s on a gross basis:
Personal cash remittances from abroad netted in personal consumption expenditures..............................

I
J
K

Plus:
Plus:
Plus:

A d ju stm e n ts fo r differences in consolidation:
Purchases from nonprofit organizations............................................................................................................
Grants and donations to nonprofit organizations............................................................................................
Insurance premiums to self-administered pension p lan s................................................................................

3.3
4.2
.3

L

A d ju stm e n t fo r differences in sector coverage:
Minus: Current expenditures of nonprofit organizations in personal consumption expenditures..........................

6.7

M
N
O

Plus:
Plus:
Plus:

A d ju stm e n ts fo r differences in tran saction classification:
Taxes paid by consumers in flow-of-funds accounts 6 .....................................................................................
Payments to public institutions included with personal taxes and nontaxes in national income accounts.
Consumer contributions for social insurance in flow-of-funds accounts®....................................................

23.9

P
Q
R

A d ju stm e n ts fo r differences in sector allocation:
Minus: Premiums for accident and health and group hospitalization insurance paid by business.......................
Plus:
Operating expenses of nonfarm owner-occupied homes 7 ...............................................................................
Plus:
Purchases of new homes (including land costs)...............................................................................................

.5
5.3
10.7

s

Equals: Consum er nonfinancial uses of fun d s in flow-of-funds acco u n ts....................................................

241.6

194.0

N o t e .—Details

may not add to totals because of rounding.

19.6

2.0

6.6

1.7
12.9
3.6

1.0

2.9

*Less than 50 million dollars.

1 Includes imputed purchases of services of financial intermediaries other than life insurance companies.
2 Equal to those operating expenses of life insurance companies and fraternal orders arising in handling of
3 Excludes premiums paid to self-administered pension plans, which are entered on line K.

life insurance policies.

4Gross prices paid by buyers. Includes also sellers’ payments of commissions to real estate brokers.
5The relationship between personal taxes and nontaxes in national income accounts and consumer taxes in flow-of-funds accounts
is described in the report.
6Equal to “ personal contributions for social insurance” in the national income accounts.
7Maintenance and repair costs, mortgage interest, real property insurance premiums, and premiums for Federal Housing Administra­
tion insurance on home mortgages. Taxes on owner-occupied properties are included in line M .




A SYSTEM O F N A T IO N A L ACCOUNTS

major sectors of the economy. These sectors
divide the economy in terms of types of
economic unit rather than types of activity.
In general, all transactions of an economic
unit are recorded in a single sector account.
There are two exceptions to this general rule.
First, the business activities of proprietors
of noncorporate enterprises are separated
from their activities as consumers. Second,
certain Federal monetary funds are recorded
in the banking sector account rather than
in the Federal Government sector account.
3. Similar transactions are grouped to­
gether. The main system for classifying
transactions is a balancing one that meas­
ures receipts and payments for each kind of
transaction consistently throughout all sector
accounts. There are 12 categories of non­
financial transactions representing purchases
and sales of goods and services, returns on
investments, insurance, tax payments, and
transfers for charitable and similar purposes.
There are 9 categories of financial flows,
representing net changes in major types of
financial claims.
For many problems, it is desirable to have
a breakdown of these balancing categories
into significant components. Therefore,
balancing subcategories are provided for
many of the transaction accounts. For oth­
ers, identical breakdowns cannot be carried
through for all sector accounts, but detail
useful in analysis is presented in the sector
accounts to the extent possible.
4. For certain kinds of transaction it is
possible to trace each sector’s dealings with
other sectors. This type of “to-whom-fromwhom” arrangement of the data is presented
for several of the nonfinancial transaction
categories, and “who-owes-what-to-whom”
arrangements are presented for a number of
the financial transaction groups. Because the
necessary data are not available, it is not pos­




21

sible to carry through this organization of
the data completely.
5. The flow-of-funds accounts utilize both
payment and accrual accounting. Some
transactions are recorded on a payments basis
(as of the time of cash settlement), while
others enter on an accrual basis (as of the
time an obligation to pay is incurred). Ob­
jectives of the accounts determine the basis
used to record each type of transaction. Once
the appropriate timing basis is determined
for a transaction category, it is applied uni­
formly, with minor exceptions, throughout
all sector accounts. Financial transactions
reflect the timing bases on which the non­
financial transactions are recorded. For ex­
ample, purchases on credit are reflected at
full value in the nonfinancial transaction
entries, and a concomitant increase is re­
corded in the financial asset and liability
entries for the debt arising in the transaction.
The variety of time bases used does not in
itself introduce discrepancies between the
sources and uses of funds for any sector ac­
count, or between receipts and payments in
any transaction account.
6. Gross flows of funds are recorded for
most nonfinancial transactions, but only the
net changes in each type of financial asset
and liability are incorporated in the sector
accounts. Some measures of gross financial
flows are available. These are not in suffi­
cient detail, however, to be carried through
consistently in both debtor and creditor sec­
tor accounts.
7. Measurements shown in the accounts
are derived by adapting existing data to the
definitional criteria of the flow-of-funds ac­
counting system. Where source data have
been inadequate, it has been necessary to
prepare special estimates. In some areas, as
in the noncorporate business sector, estimat­
ing procedures have had to be relatively

22

F L O W -O F -F U N D S IN T H E U N IT E D STATES, 1939-53

crude. The user of (he accounts is cautioned
to become familiar with the flow-of-funds
statistical and accounting procedures ex­
plained in detail in the report.
A comprehensive system of national ac­
counts serves to highlight important statisti­
cal gaps and thereby to stimulate and direct
efforts to improve the quantitative informa­
tion available. At the same time, even blank
cells in a structure of accounts aid in prevent­
ing omission from consideration of such
qualitative information as may be brought
to bear on the unmeasured cells.
8. The structure of the flow-of-funds ac­
counts is intended to reflect those functional
and institutional features of importance in
analyzing the role of financial factors in eco­
nomic fluctuation and growth. As these
features change, it has been, and will con­
tinue to be, necessary to modify the structure
of the accounts. Also as new data are col­
lected and improvements made in existing
data, the estimates incorporated in the flowof-funds accounts will be revised.
9. The organization of accounts is directed
to the economy of this country; it is not ap­
plicable without modification to other econ­
omies in which institutional structures and
available data differ markedly.

these chapters follows the sequence of items
shown in the tables.
In Chapters 12 through 21, these flow-offunds estimates are recapitulated into ac­
counts for receipts and disbursements in
each major type of transaction. Chapters
12 through 15 cover nonfinancial trans­
action categories and the remaining chap­
ters cover financial categories. A consider­
able amount of detail and breakdowns within
the major transaction categories are pre­
sented in the transactions chapters. Some
of this detail is in the basic transaction ac­
count tables and some is in subsidiary tables.
For most of the financial transaction cate­
gories, measures of stocks as well as of net
flows of financial instruments are given.
Most of the discussion of estimating pro­
cedures and of sources of data is to be found
in the text accompanying the transaction
accounts but in some instances this informa­
tion is in the sector chapters.
The discrepancies that arise in the sector
and transaction accounts are discussed in the
appropriate chapters. Appendix A presents
a summary of the discrepancies in the system
and a general discussion of their nature, of
their role in the system, and of the interrela­
tions among them.
In addition to presenting the various ac­
G u id e t o t h e A c c o u n t s
counts for sectors and transaction categories,
The following chapters of the report pre­ several chapters—Chapters 2-8, 15, and 18—
sent and describe annual estimates of the include tables that give in detail the relation­
flow of funds for the years 1939 through ships between specific items in the flow-of1953. In Chapters 2 through 11, these esti­ funds accounts and analogous series in other
mates are organized into sector and subsector statistical compilations or systems of account­
sources and uses of funds statements. The ing. Many of these tables present relation­
text accompanying each sector account de­ ships with series in the national income ac­
scribes the concepts employed, the scope of counts; reconciliations with banking, Treas­
economic activity included in the various ury, and Securities and Exchange Commis­
categories of receipts and disbursements, and sion data are also shown. By means of these
implications of the measurement techniques tables it is possible to integrate the flow-offor use of the data in analysis. In general, funds accounts with other published data in
the sequence of the discussion in each of analysis. Most of these relationship tables




A SYSTEM O F N A T IO N A L ACCOUNTS

present data for 1939 and 1947-1953; com­
parable data for other years are available on
worksheets. Some of the banking reconcilia­
tions in Chapter 8 are given in schematic
form with no data shown.
Appendix B of the report contains an
analysis of the amount of gross national prod­
uct, as defined in the national income ac­
counts of the Department of Commerce, that
can be said to be included in transactions re­
corded for the flow-of-funds accounts.
There is much detail in the transaction




23

accounts not shown in the sector accounts,
and some significant groupings in the sector
statements are not shown in the transaction
accounts. For these reasons, the maximum
information can be obtained from the sta­
tistical system presented here only by using
the sector accounts in conjunction with the
transaction accounts and, in some cases, with
the relationship tables. The detailed table
of contents and listing of tables facilitate in­
terrelated use of the tables.




N>
4^

SUMMARY OF FLOW -OF-FUNDS ACCOUNTS FOR 1939
S = Sources of Funds, U = Uses of Funds
(Annual flows, in billions of dollars)
Business
Sectors

Consumer
Corporate

T ransactions

S

U

S

U

Non­
corporate
S

Government
Farm
S

U

Federal
S

U

Financial institutions

St. and loc.

U

S

U

Banking
U

S

Insurance
S

U

xvesi oi
the world

Other
S

U

S

U

Total

S

U

Nonfinancial
A
B
C
D
E
F
G
H
I
J

Receipts from and payments on invest­
ment ......................................................
Insurance and grants..............................
Taxes and tax refunds............................
Capital acquisitions................................
Net change in inventories....................
New fixed capital..................................
Other capital acquisitions....................
Purchases and sales of other goods and
services..................................................
T o ta l.................................................

45.3

26.8

6.2

9.8
2.3
6.3
5.4
.3
5.0
.1

7.0 11.9
.2
.7
2.3
.4 1 . 8
.1
1.7
.4 *

— .1

45.5 124.5 80.2 49.8 33.8

8.0

2.8

.7

1.6

1.6

2.2

.3

72.6 73.1 129.5 130.8 5 7 .4 56.7

8 .9

8 .4

7 .5

10.3

13.7

13.6

2 .3

—. 1

5.2

1.0

18.3 6 . 0
6.3 6.5
*
2.9
2.7 11.3
2.7

4.7
.3
♦

8.0
3.4

4.0

.8

.4
.7
-.1

3.5
.1
.4
.8

—.1
.9

.4
1.8

4.5
♦

.2

2.9

4.1
7.7

.1
.6

*

*

4.2

1.2

.9
4.2
2.1

2.1

.5

.8

.6
2.0

.8

*

*

* ’1

1.4
6.4

*

*

.6

4.0

1.3

*

*

.2
.2

*
.2

1 .7

*

1.1

.1

*

.5
.4

.2
.2

♦
*

.5

.3
.3

45.3

45.3

35.3
21 9
12.3

35.3

192.6

193.9

21.2

12.3

.2

.9

1.1

.8

3.1

3.7

8.0

6.0

3 .2

3 .0

3 .6

4 .3

306.7

308.0

.2

.2

1.0

5.2

5.0

2.1

2.2

F in an cial1
K
L
M
N

2.7
.6

O

Currency and deposits............................
Federal obligations..................................
M ortgages.................................................
Corporate securities and State and
local obligations...................................
O ther.........................................................

.6

.3

P

T o ta l.................................................

1.2

2 .5

Q

Grand to ta l....................................

R

Memoranda:
GNP identifiable in J ................................
Bank credit in P ......................................

s

1.0

*

.2
.1

.2

- .8

- .5

- .2

.4
*
—. 2

-.7

.2
2.1

.1

—. 2

—. 2
.1

*

*

1.1

A
.7

.1

.3

—. 1

*

-.1
.2

.8

1.9

—.1

.4

-.3

.2

2.1

-.7

.1

.1

74.1 74.1 130.3 130.3 5 7 .4 57 .4

8.6

8.6

9 .6

9 .6

13.8

13.8

.3

61.5

.2

5.8

2.0

'-!i

*

1.9

1.5

5.1

.2

*

.9

*

—. 2

.1

.3

- .2
.2

5 .0

5 .3

.1

1.8

.3

.2

7 .3

7 .3

8.1

8.1

3 .5

3 .5

♦

2.0

.5

♦Less than 50 million dollars.
1Financial sources of funds represent net changes in liabilities; financial uses of funds represent net changes in financial assets.
N o t e . —For contents of each line, see notes to summary tables, pp. 39-40.

-.1

*

.2

- .4
3.9

-.1
- .1

8.0
.2

.3
.5

1.5

*

-.1

- .4

- . 3 - 1.8
3 .3

3 .3

.4

- .5
1.7

- .5
2.7

9 0

9 .9

316.0

316.0

2.0

88.1
2.0

.7

2.6
-.1

-.1
- 2.8

.4

-.1




SUMMARY OF FLOW -OF-FUNDS ACCOUNTS FOR 1940
S = Sources of Funds, U = Uses of Funds

(Annual flows, in billions of dollars)
Business
Sectors

Consumer
Corporate

Transactions

Non­
corporate

Government
Farm

Federal

U

S

Financial institutions

St. and loc.

U

S

Banking

Insurance

Rest of
the world

Other

U

S

Total

U

Nonfinancial
A
B
C
D
E
F
G
H

I

Payroll......................................................
Receipts from and payments on invest­
m ent......................................................
Insurance and grants.............................
Taxes and tax refunds...........................
Capital acquisitions................................
Net change in inventories....................
New fixed capital.................................
Other capital acquisitions....................
Purchases and sales of other goods and
T o ta l.

1.0

29.7

6.8

6.3
6.7
3.1
3.7 13.9

4.9 10.1
.3 2.6
.1
7.1

9.4
4.5

6.3

7.3 13.2
.3
.7
2.5
.4 2.4
.3

49.1
19.9
6.7

3.7

8.0
1. 6

.1

.4

4.0
3.8

.1

-.1

.4
1.3
.3

1.0

2. 1
-.1

48.1 139.7 88.5 53.6 35.8

8.1

2.9

79.4 79.1 145.0 146.1 6 1 .5 6 1 .3

9 .1

9 .3

.4

4.3

2. 1

1.3
3.0

4.1

.1

8.1

.1

1.0

1.7

1.0

1.7

5.3

.1

*

.7

1.3

.2

.9
4.5

1. 1

1.4
6.7

2.0

*

.6

1.3
.2

*

*

.2

49.1

49.1

37.4
22.4
13.4

37.4
22.5
13.4

213.3

214.1

2.3

.3

.2

.2

1.2

3.4

4.6

8.6 10.6 14.3 1 3.7

2 .3

1.8

8 .4

3 .3

3 .9

5 .3

335.8

336.6

.7

6.9
2.3

6.1

1.8

F in an cial1
K
L
M
N
O
P

Q

Currency and deposits...........................
Federal obligations.................................
M ortgages................................................
Corporate securities and State and
local obligations..................................
O ther........................................................
T o ta l............
Grand total.
Memoranda:
GNP identifiable in J .
Bank credit in P ..........

2. 2
-.2

2.1

.5

1.1

.1

.7

- .7
.4

1.8

2 .4

- .3

-.1

2.3

-.1

-.1
.1
.6

.4

.3

.4

.2

81.5 81.5 146.6 146.6 6 1 .8 6 1 .8

9 .4

9 .4

65.9

1.8

1.9

.3

1.6

3 .8

.2

.7

8.5

-.1

—

2.6

*

2.4

-.6

6.9

-!i

.1

.i

1.0

.3

2 .5

.4

.3

-.1

1.4
.3

-.2

2.4
1.0

.5

5.7

.2

.2

- 3 .2

3.9

5.0

.7

7 .3

7 .5

.2

.2

-

2.8

14.2

14.6

11.0 11.0 14.6 14.6

9 .6

9 .6

8.6

3 .5

3 .7

350.3

350.3

3.0

97.6
3.0

1.4

5.9

.3

7.7

.4
3 .0

♦Less than 50 million dollars.
1Financial sources of funds represent net changes in liabilities; financial uses of funds represent net changes in financial assets.
N o t e . —For contents of each line, see notes to summary tables, pp. 39-40.

N>
VI

1.0

2.7

1.4




|N>

ON

SUMMARY OF FLOW -OF-FUNDS ACCOUNTS FOR 1941
S = Sources of Funds, U = Uses of Funds
(Annual flows, in billions of dollars)

Consumer
Corporate
U

S

Transactions

S

U

Non­
corporate
S

Financial institutions

Government

Business
Sectors

Farm
S

U

St. and loc.

Federal
U

S

U

S

Banking
S

U

Insurance
S

U

Other
U

S

U

f A-f
the world

S

Total

U

S

U

*

61.0

61.0

41.8
23.7
16.7

41.8
23.7
16.7

271.2

272.7

Nonfinancial
A

B
c
D
E
F
G
H
I
J

K
L
M
N
o

........ ..
Pavrnll
Receipts from and payments on investInsurance and grants..............................

23.1
6.6

*

4.5

Other capital acquisitions....................
Purchases and sales of other goods and
T o ta l.................................................
F in an cial1
, ,
..
Federal obligations..................................
Corporate securities and State and
local obligations...................................

p

Total

o

Grand to ta l....................................

R
S

61.0

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

Memoranda:
XT1i
AoY\1a «m T

*lvess tnan on million uouars.

6.8
7.6
3.8
17.5

5.2 10.7
.3 3.1
.1 9 .4
11.8

3.3
8.4
_2

11.7
4.5 5 7

7. 9
.3
.5

.5

15.0
.9
2.7
3.1

7
2 .3
*

.5
.5

*

5.2
.1
.4
1.6

2
1.4

*

54.7 181.7 115.2 63.3

40.9

11.1

3 .3

95.1 91.3 187.3 188.1 72.1

71.1

12.1

11.7

’ 1.2

3.5
2.5
.1

_ .l

’ ' *.5

-.9
.6

.1
3.8

5 .8

3 .8

1 .7

.9
2.0
.2

.5
.5
.1

1.3

.1

3.3

2.7
.2

*

.1

5.2

3 .5

4 .7

5 .9

414.3

415.8

*

*

-.4
.2

7.6
11.4
1.1

7.0
11.3
1.1

- .3
—.8

-.3

- .3

7.0

8.5

.3 - 1 . 3

26 .9

27 .7

5 .0

441.5

441.5

7.1

122.7
7.1

.2

.2

1.0

9 .1

6 .5

3 .9

.4
.2

7.6

♦i

- .5

1.1

.5

.1
.4

*
.4

*

.3

.1

7 .4

8.0

.1

2 .4

.4

.9

14.7 10.0

10.0

9 .3

9 .3

4 .3

4 .3

.6

- .2

^

-.1
1.1

3 .5

7.7

16.7
4 .7

4.7

.3

*

.3
4.3

1.9

- .2

i.

♦

.4
7.1

iFinancial sources of funds represent net changes in liabilities; financial uses of funds represent net changes in financial assets.
N o t e .—For contents of each line, see notes to summary tables, pp. 39-40.

.1

.8

.4

*

.5

*

. . .2

2.6

- .3

.2
.3

.2

2.5

1.7

.6
.5
.3

.2

13.6

11.4

*

He

2 .0

.1
.5

.6
1.8

14.9

14.7

1 .9

.1
4 .2
.2

9 .3

1.6

12.2 12.2 24.6 24.6

1.1

.2

*

- .2

*

*

1.5
7.3

12.5 22 .3

—.3

6 .7

.1

.8
.1
.1

1.3

2 .3

.2

2.1

*

1.4

12.2

.7

.8
4.5

1.4

.7

1.0

.3

.3
4.2
8.5

.7

4 .0

12.4

75.4

1.3
2 .7
.1
3.7

3.6

-.1

1

- .2

97.1 97.1 191.2 191.2 73.2 7 3 .2

.7

.5

.4
2 .4
8.1
.1

1.2

.8

.6

4.5

5 .3

1.0

8.5

38.0

1.0

- .2

*

2.9
.1

*
.3

5 .0

*

1.1




SUMMARY OF FLOW-OF-FUNDS ACCOUNTS FOR 1942
S = Sources of Funds, U = Uses of Funds

(Annual flows, in billions of dollars)
Business
Sectors

Government

Financial institutions
icest oi
the world

Consumer
Corporate

Transactions

S

U

S

Non­
corporate

U

S

U

Farm
S

Federal

U

S

U

St. and loc.
S

U

Banking
S

Insurance

U

S

U

Other
S

S

U

U

Total

S

U

80.0

80.0

45.3
26.5
24.4

45.3
26.5
24.5

322.6

324.0

498.8

500.2

21.5
45.4
- .9

20.1

.4
*

-

N onfinancial
A
B
C
D
E
F
G
H
I
J

Receipts from and payments on invest­
m ent......................................................
Insurance and grants.............................
Taxes and tax refunds...........................
Capital acquisitions................................
Net change in inventories....................
New fixed capital.................................
Other capital acquisitions....................
Purchases and sales of other goods and
services.................................................

80.0

48.8

1.2

26.5

6.9

4.3

6.6

8.6

.6
.1

*
6.5
3.9 13.8
3.9

62.9

9.6
3.8
14.2

8.7 17.3
.4 1 . 0
2.9

6.8

1.0

.5
6.2
.1

8.3
5.5

1.3

11.1

1.0

1.2

.2
1.0

*

.7
.6

*
*

124.6 77.4 48.9 15.3

2.0

.6
1.3

4.1

4.5

10.1

5
7.1
.1
3.3
.5 15.8
.1

1.7
3^2
’l
9.5

.1

9.3
.2

.8

2.1

4.7

*2

8.6

*

.1

1.1

1.1

1.5

7*7

!2

.1

4 .4

*

1.3
.6

2.4

.2
.2

.1

.2

.2

*

.6
.6

.5

.2

.4

*

.1

.2

*

.1

*

.9

.2

2.8

.4

.1

.2

1.0

1.3

1.0

4.2

4.2

T o ta l................................................ 117.0 99.9 217.1 207.7 87.4 8 2 .4 16.6 15.0 23 .7 6 4 .5 15.5 13.8

2.6

1.8

9 .6

6.6

4 .5

3 .6

4 .8

4 .8

.i

.l

*

*

212.1

4.1 39.9

.3
4.5

.7
.7

2.2

F in an cial1
K
L
M
N

Currency and deposits...........................
Federal obligations.................................
M ortgages................................................
Corporate securities and State and
local obligations..................................

.4

6.3
8.7

3.7

1.9

6.1

1.6
—. 2

-

.1

-.2

1.1

1.0

45.4

-.3

7.3

.2

.3

- .4
— l

*

21.5

24.4
- .3
_

—.1

—.3
3 2
.3
*
.1 - .3

*

.7

*

45.3
- .9

- 3 .7

- .5
.4

—. 2
—. 6

P

T o ta l ..................................................... - 3 . 2

14.7

—.7

.5 21.2 21 .4

#1

2 .9

3

1.2

2

.2

6 4 .7

62.8

Q

Grand t o ta l ....................................... 114.1 114.1 216.4 216.4 86.2 86.2 16.0 16.0 73 .0 73.0 14.7 14.7 23 .8 23.8

9 .8

9 .8

4 .8

4 .8

5 .0

5 .0

563.8

563.8

O

R
S

Memoranda:
GNP identifiable in J ............................
Bank credit in P ..................................... -

80.4
1.0

-

—. 2
—.7

8.8 - 1.2

7.3
2.1

—.1

*

—. 1

.5

-.2

3.9

1.7

3 .7

-.6

1.0 4 9 .3

8 .5

1.4

3.1
-.1

24.4

55.5

- .8

-.1

- .8

- .3

7.5

*

-

7
2.0

.5
21.0

♦Less than 50 million dollars.
1Financial sources of funds represent net changes in liabilities; financial uses of funds represent net changes in financial assets.
N o t e . —For contents of each line, see notes to summary tables, pp. 39-40.

.3

*

.5
—. 2

3.0

*

.1

- .2

—. 1

1.1

- .3

*

—1 . 0
-.8

158.8
21.0

21.0




N)
oo

SUMMARY OF FLOW -OF-FUNDS ACCOUNTS FOR 1943
S = Sources of Funds, U = Uses of Funds
(Annual flows, in billions of dollars)

Consumer
Corporate
S

Transactions

S

U

U

Non­
corporate
S

U

Financial institutions

Government

Business
Sectors

S

St. and loc.

Federal

Farm
U

S

S

U

U

Banking

Insurance

U

S

S

U

S

Rest of
the world

Otlher
U

S

U

Total

S

U

Nonfinancial
A
B
c
D
E
rr
r
G
H
I

102.3 1.4
Payroll
Receipts from and payments on invest31.1 6 . 8
6.4 1 0 . 1
Insu ranee and grants..............................
*
T qyoo onH faY i*pfutlHc
18.4
4.3 13.0
4.3
Purchases and sales of other goods and

J

4.3
1.1

*

59.2

12.7

9.8
4.5

9.0 18.9
.3 1 . 0
3.0
.8
.5
—. i
\9
.5 *

21.6

4.6
—.5
5.1
*

7.0
6.0

.7

10.1
.1

.6

4.5
.5 33.5

.6

.4

1.0

— .2
1.1

..4

4.8

19.5

1.7

.4
4.5
8.7

2.5
3.4
.1

.1

5.7

.l

5.6
.1

.7
4.6

2.3
♦

.7

.2

*

.4
2.8

2.3

7.3 67.8

.1

.6

4.3
.3

3.0

.2

.1

.3

.1

*
*

.5
.7

.5

.2

.4

♦

.1

*

.2

2.7

5.8

*

.2
.2

1.5
81

*

.7

T otal ............................................... 144.2 121.3 248.2 239.3 98.4 92.2 21.3 19.2 46.0 98.9 15.9 13.5

71.7 242.8 139.7 88.7 55.8 19.5

.7

*

1.5

.9

.7

102.3

102.3

50.6
28.9
42.3

50.6
28.9
43.9

374.3

375.6

.3

1.1

1.5

1.2

5.8

3.9

2.0 10.2

6.6

5.2

3 .9

6.3

4.5

598.5

601.4

.4
1.3
*

♦

*

.6
.6

23.7
52.9
-1 .4

22.7
52.6
- 1 .4

- 1 .9
1.3

- 1 .3

.7

.2

F in an cial1
n

a

a

Corporate securities and State and
local obligations...................................

1

.2

10.5
11.9
—?

O £*• t

K
L
M
N

4.3

3.0

6.2

1.8

- .9

- .3

1.4

*

- .4

52.9

—. 8
.3

—. 1
- .4

-.2

—. 1
.4

- .3

*

- .8

10.1 - 1 .0

5.1

- .8

1.4 54.6

.4 23.7

1.9

1.1

- .7
-.1

-

1.2

- .2

*
- .3

.2

3.9
*

25.8
- .4
.2

.3
-.3

.2

- .8

*

.2

*

.1
.1

.7

*

p

Total ...............................................

3.9

.7

1.9

1

.

1.9

74.4

74.2

Q

Grand to ta l.................................... 143.6 143.6 247.4 247.4 97.4 97.4 20.5 20.5 100.7 100.7 14.8 14.8 26.1 26.1 10.3 10.3

5.9

5.9

6.4

6 .4

673.2

673.2

24.5

190.8
24.5

o

R
S

Memoranda:
iHAfififioKtp 2ti T
Ponlr
iti P
^l^ess m an ou muuon uouars.

-i.o
- .8

—. 2

22.7

5.3

87.8
-.1

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

—.3

1.1

2.3

—. 2
, ,

,

.7

1.8

25.8

1.8 - 1 . 2

85.1

A

- .4

- .4

1.3 23.3 24.2

7.2

^

*
• »

.5
24.5

iFinancial sources of funds represent net changes in liabilities; financial uses of funds represent net changes in financial assets.
N o t e .—For contents of each line, see notes to summary tables, pp. 39-40.

*

-

3.3
-.1

1.8

1.6




SUMMARY OF FLOW -OF-FUNDS ACCOUNTS FO R 1944
S = Sources of Funds, U = Uses of Funds
(Annual flows, in billions of dollars)
Business
Sectors

Consumer
Corporate

Transactions

S

U

S

U

Non­
corporate
S

Government
Farm
S

U

Federal

U

S

Financial institutions

St. and loc.

U

S

Banking
S

U

Insurance

U

S

S

U

ivesi oi
the world

Other
U

S

U

Total

S

U

N onfinancial
A
B
C
D
E
F
G
H
I
J

113.0 1.7
Receipts from and payments on invest­
m ent...................................................... 34.1 6 . 8 4.6
7.4 11.3 1.4
Insurance and grants.............................
Taxes and tax refunds...........................
.3 19.8
.5
Capital acquisitions................................
5.2 14.2
Net change in inventories....................
New fixed capital.................................
7.2
Other capital acquisitions....................
5.2 7.0
Purchases and sales of other goods and
services.................................................
78.7 254.7

62.1

14.0

10.1

8.8

4.8
27.5
4.4
- 1.1
5.4
.1

.3
.7
.7

.8

21.0
1.1

.7

3.3
1.7
.5
1.2
*

.5
.5

149.6 100.7 65.2 20.3

1.9

24.9

10.6
.1

3.2
4.4
.9

.6

4.9
.5 42.9
1.3
.1
— .2
1.5
.1

5.0
.4
4.5
9.1

.7
4.6

2.5
*

2.6

.6

.1

2.5
.1

.6

9.8 73.0

*
2.5

.9

.8
.2
.2

1.6

.1

9.1

4.6
.3

.3

.1

2.9

.4
3.1

♦

1.7
.6

3.4
.1

*

T o ta l................................................ 160.1 132.5 261.3 258.4 110.5 106.3 22.3 20.6 58.2 109.0 16.5 13.9

6.2

*

.8

.1

.3

*

.5
.9

.2

.5

*

.6
.2

113.0

54.3
32.2
52.9

54.3
32.2
52.5

403.6

407.8

656.0

659.8

.1

.1

.3

1.1

1.6

1.3

6.4

4.7

2.2 11.3

7.1

5.7

4.5

7.1

5.5

.4

.1

*

1.6
.2

.1
.6

.2

113.0

F in an cial1
K
L
M
N
O

1.0

.2
—. 1

.l

*
1.3

P

T o ta l................................................

5.0

1.1

2.4

.3

2.0

90.1

88.0

Q

Grand to ta l................................... 161.4 161.4 261.5 261.5 111.5 111.5 21.9 21.9 117.5 117.5 15.3 15.3 31.1 31.1 11.8 11.8

6.8

6 .8

7 .4

7.4

746.2

746.2

30.3

206.0
30.3

R

s

Memoranda:
GNP identifiable in J ............................
Bank credit in P .....................................

13.9
13.3
.5 *

.4
4.9

*

1.4

1.6

—. 6

2.7
*

—.4

*

- .9
1.5

- .6
.8

—.4

1.6

.8

.1

1.2 27.8

.2

5.0

.9

5.1

- .3

.7

95.3
.6

.9

5.2

.4

2.1

*

*

27.9

27.9
—. 2

—. 2
5.2
*

.1
1.2

.6

.3
—.3

1.9 28.0 29.1

.6

.2
2.2

28.0

—. 6

1.3 -

1.4 59.3

2.7

10.3

58.0

—. 1 -

1.1

- .5

1.2

8.5 - 1 .1

90.7

7.3
.1

*
*

*

.5
30.3

*Less than 50 million dollars.
1Financial sources of funds represent net changes in liabilities; financial uses of funds represent net changes in financial assets.
N o t e . —For contents of each line, see notes to summary tables, pp. 39-40.

N>
V£>

7R O
58.0

Currency and deposits...........................
Federal obligations.................................
M ortgages................................................
Corporate securities and State and
local obligations..................................
O ther.........................................................

.4

*

*

3.8

.1

*

-

28.1
58.5

- .6

- .6

—1.5

—1 . 0
2.9

6.1

1.6




SUMMARY OF FLOW -OF-FUNDS ACCOUNTS FOR 1945
S = Sources of Funds, U = Uses of Funds
(Annual flows, in billions of dollars)
Business
Sectors

Consumer
Corporate
U

S

T ransactions

S

U

Non­
corporate
S

U

Financial institutions

Government
Farm
S

Federal

U

S

U

St. and loc.
S

U

Banking
S

U

Insurance
S

U

.8

1.0

.9

1.7
9.9

*
5.0
.3

jxest oi
the world

Other
S

U

S

U

Total

S

U

N o nfinancial
A
B
c

D
E
p
G

H
I
J

Payroll....................................................... 113.2 1.9
Receipts from and payments on invest36.4 6 . 8 4.7
1.5
Insu ranee and grants.............................. 1 0 . 2 1 2 . 0
1.3 22.7
.8
Taxes and tax refunds ........................
16.5
6.0
Capital acquisitions................................
Net change in inventories....................
8.5
New fixed capital..................................
6.0 7.9
Other capital acquisitions....................
Purchases and sales of other goods and
8 8 . 1 246.9
services..................................................

58.8
10.1

4.7
25.9
6.1

—1.0
7.0
.1

15.4
8.9
.4
1.0

1.0

26.1

2.0

22.2
1.2

.8

.7

3.6
2.5
.4
2 .1

.5

*

.5

11.4

.6

.2
4.7
.7 43.7
*
1.0
- .4
1.5

*

4.1
7.2
2.1
1.8

5.5
.5
4.6
9.5

1.7
.1

.7
5.0
.7
*

.7

2.9
*

.2

*

*

.3

.7
3.4

.2

*

.2

*

.6

*

.9

.2
1.1

*

.6
.2

113.2

113.2

57.4
36.6
55.4

57.4
36.6
55.5

410.4

414.4

.2

*

*

*

1.8

.2

3.0

.4

.3

.3

1.3

1.9

1.4

7.1

6.7

T o ta l................................................. 167.2 148.0 253.8 255.8 121.8 117.9 23 .8 22.1 59.0 95 .8 17.4 14.9

3 .4

2 .5

12.1

7 .7

6.0

4 .9

8 .5

7 .5

672.9

677.0

.6
.8
.6

.2

.6
.6

24.8
41.6
.9

24.3
41.9
.9

.4

.2
1.1

- .2
1.6

- .9
4.2

7.3

150.3 111.5 73.0

21.8

7.0

9.9 54.5

2.8

F in a n c ia l 1
K
L

o

Currency and deposits
......................
Federal obligations
............................
Mortgages
..
................................
Corporate securities and State and
local obligations ..............................
Other .....................................................

p

T o ta l.................................................

o

M
N

R
s

.9

14.2
9.5
.3

- .3
.6
.1

1.4

*

2.9
1.9
.4

—. 1

*

41.6

4.4

.7 24.8
2.2

- .6

2.5

1.1

-.1

*

- 1 .5

- .4

2.0 24.7 - 1 . 4

-.3

2 .5

6 .3

-.2

1 .4 40.1

3 .2

4.7
-.1

.9
3.6

.8

.1

.2

—. 2

1.5

2.6 25.0

26.5

.2

5 .4

1.7

2 .5

1.6

2 .5

70 .8

74.8

G ra n d t o t a l .................................... 169.3 169.3 252.5 252.5 124.3 124.3 23 .5 23.5 99.0 99.0 16.8 16.8 28 .4 28.4 12.3 12.3

7 .7

7 .7

10.0

10.0

743.9

743.9

26.8

204.4
26 8

—1.4
1.1

2.1

105.9
1.2

1.4

7.0

1.7

3.0

*

2.6

-.1

21.7

74.4

- . 6

-.6

.4

—.3

*

.1
.1

Memoranda:
GNP identifiable in J .............................
Bank credit in P
.................................

- .7
- .7

.1

21.7
.2

- .6

7.8

*

.6

26.8

♦Less than 50 million dollars.
iFinancial sources of funds represent net changes in liabilities; financial uses of funds represent net changes in financial assets.
N o t e . —For contents of each line, see notes to summary tables, pp. 39-40.

*

.1

4.1
.1

.2

1.0

.2




SUMMARY OF FLOW -OF-FUNDS ACCOUNTS FOR 1946
S = Sources of Funds, U —Uses of Funds

(Annual flows, in billions of dollars)
Government

Business
Sectors

Consumer
Corporate

T ransactions

S

U

S

U

Non­
corporate

S

U

S

Farm

Federal

U

S

Financial institutions

St. and loc.

U

S

U

Banking
S

Insurance
S

U

U

IS-CSfc UI
the world

Other
S

U

U

S

Total

U

S

Nonfinancial
A
B

c

D
E
F
G
H
I

J

Payroll...................................................... 109.6 1.9
Receipts from and payments on invest­
m ent.......................................................... 44.5 7.2 5.5
Insurance and grants............................. 16.6 12.5 1 . 1
1.7 2 1 . 0
Taxes and tay refunds...........................
1.1
.1
Capital acquisitions................................ 10.3 30.7
Net change in inventories....................
New fixed capital.................................
18.3
.1
Other capital acquisitions.................... 10.3 12.3
Purchases and sales of other goods and
106.0 279.5
services.................................................

63.9

17.8

2.2

11.6

9.9 27.5
.5 1.4
4.1
5.1
1.1
.4
3.9
.8
1.1

.9 13.6

4.9
22.4
19.6
6.0
12.4
1.3

.8

.4
.4

.2
.6
2.0

—.2
2.3

6.3

13.1
.4
4.0
38.2
*
*

4.8
12.6

2.7

.5
5.7

.7
5.9
1.5

.9

1.4
.1

*

.1

.2

.1

3.5

.5
3.8

3.1

.2

1.7
11.4

.9
.4

T o ta l.................................................... 182.7 179.4 287.2 302.1 140.9 141.1 27.0 26.5 54.6 49.6 19.8 17.9

179.6 129.5 85.3 24.8

7.9 11.9 15.4

3.3
*

10.6

1.0

1.3

1.0

.3

.8

5.6
.3

3.6

.1

.7
1.0

*

.2
1.0

*

.8
.2

109.6

109.6

67.8
44.6
51.6

67.8
44.7
51.5

470.3

473.6

.6

*

.6

.1

.2

*

2.1

.1

.4

1.6

2.2

1.7

6.4

3.0 13.7

9.0

6.6

6.1

7.6 12.5

743.9

747.3

.3
—. 6

- .3

- 9 .1
-2 2 .5

-1 0 .5
-2 2 .4

6.2

6.2

1.9
9.6

11.3

11.6

F inancial1
K
L
M
N

7.8
.4
.7

-22.8

3.6

o

Currency and deposits...........................
Federal obligations.................................
Mortgages................................................
Corporate securities and State and
local obligations..................................
O ther.........................................................

1.2

P

T o ta l................................................

4.8

Q

Grand to ta l.................................... 187.7 187.7 296.6 296.6 143.0 143.0 27.2 27.2 28.8 28.8 19.4 19.4 - 5 . 7 - 5 . 7

R

s

Memoranda:
GNP identifiable in J .............................
Bank credit in P .....................................

♦Less than 50 million dollars.

.8

.6

1.3

—. 8
.9

.9

2.2
6.0

*
4.8

.7

.4
.5

.2

9.0

9.4

- .8

2.1

1.7

.2

- .8

134.0
2.0

1.0

- 6 .7
1.2

3.0

-22

♦

1.1

- 3 .3

2.5

.6 -25.8 -20.8

3.8
.2

-15.3

1.1
- .2

- 9 .1

- .4
-.1

4.9

19.7

^5

19.4

- .4
- .4

.4

- .5

*
—.3

.2

-15.3
2.7
.6

3.7

.4 —9.5 - 8 . 3

9.7

*

1.3
.5

.7
- 9 .0

1F in an cial sources of fu nd s represent n et changes in lia bilities; financial uses of fu nd s represent n et changes in financial assets.
N o t e .— F or co n ten ts of each line, see n otes to sum m ary tab les, pp. 39-40.

- .2

2.1
-.1

- .2

4.0

13.6 13.6

.1

1.8

.2

.4
.2

—. 1 —. 2
3.8 - 1 .3

1.5

2.1

3.4 - 1 . 7

8.1

8.1 11.1 11.1

1.3

*
- .4

.2

- .5

4.9

5.1
- .1

.1

2.0

- 1 4 2 - 1 3 .7
729.8

729.8

- 9 .0

202.3
- 9 .0




N>

SUMMARY OF FLOW -OF-FUNDS ACCOUNTS FOR 1947
S = Sources of Funds, U = Uses of Funds
(A nnual flow s, in billion s o f dollars)

Consumer
Corporate
S

Transactions

U

U

S

Non­
corporate
S

Federal

Farm
S

U

Financial institutions

Government

Business
Sectors

U

S

U

St. and loc.
U

S

Banking

Insui-ance
S

U

S

U

ReS t of
the vvorld

Otlher
U

S

U

S

Total

S

U

Nonfinancial
A
B

Payroll
Receipts from and payments on invest-

c
D
E
F
G
H
I

Insu ranee and grants..............................
Capital acquisitions. . . ...........................

121.0

25 0
10.0 12.6
Purchases and sales of other goods and
services
.............................................

J

75.1

2.1

50.2 8 . 1
16.9 13.8
1.7 24.0
1 0 . 0 37.7

13.2

6.2

.7 6 . 1
.9 20.7
. 2 19.4
1.2
17.5
2
6

2.4

19.5
11.2
.6

1.7
1.7

30.0
1.6

4.3
5.6
.1
5.1
.4

7 5

9.3

16.3
.4 4.6
.3 4.7 11.7
.4
.7 38.2 2 . 6
*
.4 2 . 2
1.0
—1.2
1.0
3.5
*
*
.4

1.0

.5
6.7
12.1

.7
6.9

3.4

.3 13.3
.5

6.5
.3

.8
1.0

*

.2
1.0

1.1

♦

.4

121.0

121.0

76.0
48.5
52.8

76.0
48.6
53.1

564.4

567.8

.2

.8

.1

.1
.2

.8

.5

1.9

2.7

1.9

7.7 16.3

3.5 15.7 10.4

7.7

7.0

8.9 17.8

862.8

866.4

- .3

3.7
- 6 .3
7.2

4.9
- 6 .3
7.2

.1
.6

*

2.5
.9
4.1

.1

2.5
.2
4.0

12.6

.1

.1

4.2

9.2

1.8

1.1

2.7

T o ta l................................................. 199.8 203.7 365.0 370.5 154.9 157.4 31.5 32.3 52.5 41.7 22.7 22.0

118.1 357.0 235.9 141.4 96.3 29.7 10.5

1.4

1.1

3.5
*

.4

F in an cial1
K
L
M
N

„

A A

Federal obligations..................................

2.7
k .2

.5

1.2

3.2

.2
1.6

4.2
6.9

7.5

6.8 12.3

Corporate securities and State and
IaoqI nKli'cyaHnTiQ

o

-

1.8

- .2

- .2
—. 8

2.1
1.2

.9

.1

7.6

2.1

.2
1.0

.5

8.5

3.7

1.0

.6

*

-

♦

5.0

- . 2 - 7 .4

3.4

-

3.7

1.0

1.1

*

.9
.9

- .6

- 6 .3

1.6

1.6

.1

-

.4
- .7
1.5

6.6
2.6

3.8

*

.1

- .4
*

.6

2.6

*

1.1

1.0

7.6

.2

♦

.2
2.1

.7
.4

.2

5.1

2.3

3.4

*

7.9 -

- .2
2.0

5.9

5.9

22.8

21.0

p

T o ta l.................................................

1.9

4.7

4.7

8.0 - 1 . 9

33.3

32.8

Q

Grand to ta l.................................... 207.5 207.5 377.3 377.3 158.6 158.6 32.1 32.1 45.1 45.1 24.2 24.2

8.7

8.7 16.0 16.0 10.1 10.1 16.8 16.8

896.4

896.4

*

.9
2.5

2.5

228.1
2.5

R
S

Memoranda:
iHAtififioKlA in T
3.0
^l^ess m an ou million uoiiars.

153.8

2.5
. .

20.3

„

6.0

1.4

.4

4.3

-

15.2
6.6

1.6

.9

12.5

iF in a n cia l sources of fu nd s represent n et changes in liabilities; financial uses of funds represent n et changes in financial a ssets.
N o te .— F or co n ten ts of each line, see n o tes to sum m ary tab les, pp. 39-40.

.1

6.0

.4

.4

8.9




SUMMARY OF FLOW -OF-FUNDS ACCOUNTS FOR 1948
S = Sources of Funds, U = Uses of Funds

(Annual flows, in billions of dollars)

rvesu ui

Consumer
Corporate
S

Transactions

U

Financial institutions

Government

Business
Sectors

S

Non­
corporate
S

U

Farm
S

U

Federal

U

S

U

St. and loc.
S

Banking
S

U

Insurance

U

U

S

S

Total

the world

Other

S

U

U

U

S

Nonfinancial
A

B

c

D

E
F

Q

H
I
j

133.2 2 . 1
Payroll
*#
Receipts from and payments on invest54.7 9.4
Insurance and grants............................. 16.6 15.0
'ToVAC onH fftY rAflltlHc
1 8 23.8
Po ntf ol QPOIIIGlf1AT1Q
io !7 42.5
' f i /*ftspiiinl.
r u b # * s'/i'H ii/il /I/*SIM4

28.9
10.7 13.7

?

Purchases and sales of other goods and

83.5

2.5

9.5

15.2
.4
.3

.5 4.7
4.6 11.5
40.2 2 . 2

21.1

7.1 15.0 12.3 34.8
1.8
.6
.7 6.7
4.8
.5 23.7
5.0
.2 2 2 . 0
2.0
2.1
1.0
19.7
4.0
..2 .2 2.0 *

1.0

.8

.4
.4

5.4
1.1
4.3

H
e

*

8.7
.6

7.7
13.8

.7
8.2

1.3
3.9
*

.3 14.7
.4

4.5

*

7.2
.4
.3

*

.1
.2

.1

3.6
.2

.1
.6

4.5

6.0

1.0

3.9

4.7

9.0

.2

1.2

T o ta l................................................ 216.9 219.3 407.0 411.0 167.4 170.9 30.9 33.2 51.3 41.4 25.9 26.3

126.4 398.6 260.2 152.5 103.4 29.1

2.0

1.2

1.2

*

12.2

3.8

2.9

1.6

.4

.5

2.1

3.7 17.3 11.7

.8
1.1
*

*

.3
2.4

1.3
.3

*

133.2

133.2

83.4
52.3
56.2

83.4
52.3
56.0

617.2

615.0

1.2

1.2
3.1

2.1

8.6

8.1 12.5 14.5

9.8

942.3

939.9

*

.3
- .4
1.5

-

.8
6.8

7.0

1.3
- 7 .3
7.0

8.3
11.7

12.0

12.8

F in an cial1
K
L

M
N

o
p
Q
R
s

P tifrp tirv anH Hpnnsif’fi

nhllcrfltiAtifi

Mnrtcy^ffPQ

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

- .4
4.0

1.1
.6

1.4

2.2

5.8

Corporate securities and State and
local obligations
......................
Other
..............................................

2.8

1.4

T o ta l................................................

6.8

4.9

.3
.7

1.6

*
4.1

8.9

5.2

1.3

- .3

1.0

- .7
.6

.2

2.3

- .4
1.4

1.8

3.6

- .1

2.0

-

.8
.6

1.1
6.8

*

- .5

*
1.4

2.3

- . 3 - 7 .3

2.6

2.3

*

.1

.8

*
*

*

-

- 2 .5

6.2
2.1

2.2

5.5

- .1

.4
.1

.5
4.8

.2

.1

1.5

.5
.3

1.9 - 1 .5

1.1

.2

5.3

1.6

2.2

.1

.1

- .2

8.4

1.5

.9

1.9 - 1 . 2

20.9

21.3

Grand t o ta l................................... 224.0 224.0 415.9 415.9 171.0 171.0 32.9 32.9 44.1 44.1 28.3 28.3

5.4

5.4 17.5 17.5 10.2 10.2 14.4 14.4

963.5

963.5

*

- .4

- .4

248.6
- .4

Memoranda:
flM p iHpiitifiAhlp in T
Rati It rrpHit in P

♦Less than SO million dollars.

167.4
2.1

.9

7.4

5.8

23.7
1.0

1.2

-

18.9
6.2

.4

15.2

1.0

1F in an cial sources of funds represent n et changes in liabilities; financial uses of funds represent n et changes in financial assets.
N o t e .— F or co n ten ts of each line, see n otes to sum m ary tab les, pp. 39-40.

.1

*

7.1

2.0
.2




4^

SUMMARY O F FLOW -OF-FUNDS ACCOUNTS FOR 1949
S = Sources of Funds, U = Uses of Funds
(Annual flows, in billions of dollars)

Consumer
Corporate
S

Transactions

S

U

U

Non­
corporate
S

Farm
S

U

Financial institutions

Government

Business
Sectors

Federal

U

S

St. and loc.
S

U

U

Banking

Insurance

S

U

S

U

4.1
*

1.4 2.3
.3 15.6
.4
♦
.1

S

Total

the world

Other
U

S

u

S

U

Nonfinancial
A
B
c
D
E
F
G
H
I
J

Payroll ..................................................... 132.6 2 . 1
Receipts from and payments on invest­
7.3
ment ....................................................... 52.3 1 0 . 6
.6
Insurance and grants.............................. 18.4 15.4
.4
2.4 2 2 . 2
Taxes and tax refunds ......................
.2
12.5 43.6
Capital acquisitions..............................
Net change in inventories
28.9
New fixed capital
.2
12.5 14.7
Other capital acquisitions
Purchases and sales of other goods and
125.8 380.3
services..................................................

80.7

2.4

21.1

15.6 13.1 33.4
7.0
.6
1.9
24.9
5.0
15.9 1 . 6 3.9
—.2
—1.6
17.4
4.1
.2 1.6 *

.9 13.5
.3
.3

10.3
.6

4.7
38.5
4.4 *
— .2
4.5
*
.8

.3
.3

4.8
14.6
2.8

1.5

9 .6
.6

.8

9.4
15.2

9.6

1.5
*

1.3

5.2

.1

4.9
.3
5.2

.6

T o ta l................................................. 218.1 219.7 388.8 389.5 167.3 167.9 28.9 30.7 49.0 48.5 29.4 30.4

4.8

245.4 152.0

102.6

27.4

9.3

5.2

14.4

4.2

.4

*
.3

.2

7.6
.4

.9

1.1

4.5

1.1

*

.2

1.6

.1
.2

1.6

2.1

3.9 18.2 12.3

*

3.2

1.8

.3
4.1

1.4
.4
♦

3.3

2.2

8.9

9.0 13.6 14.1

9.1

132.6

132.6

82.6
58.1
56.5

82.6
58.1
56.6

597.1

596.2

926.9

926.1

12.3

F in an cial1
K
L
M
N

.4

.5

o
p

T o ta l.................................................

1.1

Q

Grand to ta l.................................... 225.4 225.4 392.4 392.4 170.0 170.0 30.1 30.1 50.5 50.5 31.9 31.9

*

.8
2.2

R
s

Memoranda:
....................
QNP identifiable in J
Bank credit in P ......................................

♦Less than 50 million dollars.

—1 . 1
1.3

.3
-.3

Currency and d e p o sits..........................
Federal obligations..................................
Mortgages
. . .
Corporate securities and State and
local obligations...................................
O ther.........................................................

1.2
2.0

.6

1.3

3.3

1.8
1.8

4.6
—2 . 2

6.9

4.4

3.6

3.6

1.9

168.1

-

1.2

*

- . 6

.5

- .2

1.5

1.7

.9

*

- .4

3.7

2.7

1.8

1.2

- .6

1.6

1.3

4.4

6.2
.2

—.4

- .1
1.2

2.5

2.1

2.5

24.2

.9

.5

17.8

*

.1

1.2

.2

2.0

.3

.6

17.6
1.6

.2

- .4

- .7

1.6

2.1

.1

- .1

*

.1
.1

1.4

.7

1.2
2.0

2.1

6.5

6.5

7.3

7.9
5.5

1.3
*

4.5

.3

.2

*

.2

.2

1.6

.3

1.2

*
- .3

1.5

2.4

.2

6 .2

1.9

1.8

1.2

-.1

23.3

22.7

6.2

6 .2 18.4 18.4 10.8 10.8 14.8 14.8

950.5

950.5

*
.3

1Finan cial sources of fu nd s represent n et changes in liabilities; financial uses o f funds represent n et changes in financial assets.
N ote .— F or co n ten ts of each line, see n otes to sum m ary tables, pp. 39-40.

.5

7.9

.1
.1

- .2

6.2

2.4

247.5
2.2




SUMMARY OF FLOW -OF-FUNDS ACCOUNTS FOR 1950
S = Sources of Funds, U = Uses of Funds
(Annual flows, in billions of dollars)
Business
Sectors

Consumer
Corporate

T ransactions

S

U

U

S

Government

Non­
corporate
S

Farm
S

U

Federal

U

S

Financial institutions

St. and loc.

U

S

U

Banking
S

Insurance

U

S

U

ivesi oi
the world

Other
S

S

U

Total

U

S

U

N onfinancial
A
B
c
D
E
F
G
H
I
J

Payroll...................................................... 144.6
Receipts from and payments on invest54.3
Insu ranee and grants............................. 21.9
1 .7
Taxes and tax refunds...........................
Capital acquisitions................................ 16.1
Net change in inventories..................
\e w fixed capital.................................
Other capital acquisitions.................... 16.1
Purchases and sales of other goods and
services.................................................

88.7

2.3
12.0

17.2
23.9
55.4
37.2
18.3

2.3

22.8

17.8 14.3 33.9
8.5
.7 2 . 2
.4 23.7
5.4
. 2 24.0
1.5 7.4
4.9
1.5
18.8
5.9
.2
.2 1.5 *

8.2
.8

11.3

10.3

13.5
.6
5.0
.6
.8
.4
.3 5.8 16.5 1 0 . 1 10.7
.9 37.9 2 . 2 16.5
4.8 *
*A
1.7
' 5.7
*
4.8
5.4
1.6
*
*
.4
.4

1.0

T o ta l................................................ 238.6 241.6 452.6 453.0 180.9 183.0 31.0 31.7 49.1 49.4 31.9 33.5

5.1

111.2

4.7

12.7

4.8

.1
.7

10.0

1.5
.3
.5
.1

6.0

130.7 443.0 290.3 164.4

29.2

1.4
4.4
*

.4

1.9
2.5

.3
11.5

20.1

1.2

4.9

1.1
1.1

*

.6
.2

*
1.9

*

.1
.2

1.9

.4

2.4

4.2 23.1 16.8

*

3 .4

3.6

.3
3.5

144.6

144.6

87.4
68.4
56.5

87.4
68.5
57.1

1 680.4

678.8

1.6

*

.3

2.4 11.5 11.3

j

9.7 10.0 15.4 13.2 1,037.3 1,036.4

F in an cial1
K
L
M
N

6.5

1.2
.2
.6

O

Currency and deposits...........................
Federal obligations.................................
Mortgages................................................
Corporate securities and State and
local obligations..................................
O ther.........................................................

4.7

2.3

p

T o ta l................................................

11.2

1.7
2.9

—.5
.4

13.8

2.9

1.0

4.9 16.2 18.6

4.3

2.0

.6

3.4
11.1

- .5

.8

1.4

1.7

.2

.6
.7

- .3
-.1

.4

.3
- .2

.2

.3
*
—.5

.1
.8

3.3

1.2

1.2

.9

3.3

.5
1.8

7.1

- 3 .5
3.5

-

.2
1.2

*

3.2

*

4.0

—. 1

.2

.3
1.4

2.1

7.1

3.7

—. 1
10.1

—. 2
10.1

.1
- .6

1.7
5.6

.2

.2

.3
2.7

.5
.3

.3
.9

*
1.9

7.3
23.0

25.9

6.5

7.3

.2

6.3

3.0

2.7

1.4

3.6

47.7

47.7

8.0

Grand to ta l.................................... 250.2 250.2 468.9 468.9 185.2 185.2 31.2 31.2 50.3 50.3 35.2 35.2 11.6 11.6 23.2 23.2 12.7 12.7 16.8 16.8 1,085.3 1,085.3
R
s

Memoranda:
GNP identifiable in J .............................
Bank credit in P .....................................

4.1

183.3

3.2

26.0

6.5

8.1

3.6

-.1

- 3 .6

23.1

19.4
1.6

*

1.1

9.0

♦Less th an 50 m illion dollars.
1Finan cial sources of funds represent n et changes in liabilities; financial u ses of funds represent n et changes in financial a ssets.
N o t e .— F or co n ten ts of each line, see notes to sum m ary tables, pp. 39-40.

.1

—2 . 2

8.8

.3

.1

9.1

274.1
9.0

v*>
ON

SUMMARY O F FLOW -OF-FUNDS ACCOUNTS FO R 1951
S = Sources of Funds, U = Uses of Funds
(A nnual flows, in billions o f dollars)

Sectors

Corporate
S

T ransactions

S

U

U

Non­
corporate
S

Rest of
the world
Farm
S

U

Financial institutions

Government

Business
Consumer

St. and loc.

Federal

U

S

U

S

U

Insurance

Banking
S

S

U

S

U

Total

Other
S

U

U

U

S

N onfinancial
A
B
c
D
E
jr
G
H
I

Receipts from and payments on invest­
ment .....................................................
Insurance and grants..............................
Taxes and tax refunds

po nital opn11icifionQ
,VW /’hfl'MO P 7W
J V fixed capital

2.5

57.6 13.2
20.5 19.1
1 . 8 32.8
17.1 55.4

16 3

11.3

.6
.7 5.2
7.1 13.8 10.7
53.0 2 . 1 18.2
*
3.0 *

.8
10.6

2.5

26.1

102.0

8.7 18.4 15.7 36.4
10.3
1. 1
.9 2 . 6
5 9
.3 31.2
. 2 30.8
1.3 5.7
9
8.1
22.5
4.8
2
1.3 *

14.8
.4
.3

1.1

.6

1.0
6.2

.6
5.6

6.9

5.2

6.0

.7

T o ta l................................................. 265.0 265.6 510.4 518.1 199.2 199.1 35.1 36.0 66.1 65.4 34.7 35.6

5.6

.6

142.6 500.0 325.4 181.4 122.4 33.0

11.2

3.0
.1

*

5.4 25.0

.2

.3 23.1
.6
*
.1

13.6

.1

*

36.1
17.1 19.3

2.8

1.6

.5

1.3
5.3

.6
.2

2.9

1.2

*

.4
2.9

1.9
.3
*

2.1

.2
.4

1.3

168.0

168.0

93.8
72.0
73.3

93.8
72.0
74.2

763.6

765.0

2.1

*

*

*

3.7

2.1

1.6

4.9
*

6.4
.4

Purchases and sales of other goods and
services..................................................

J

168.0

3.9

2.6

14.5 15.8

4.6 26.3 19.7 10.5 10.9 17.8 18.0 1,170.8 1,173.0

F in an cial1
K
L
M
N

4.1
- 1 .4

Currency and deposits
KpHprpl nhliiyatiAMG
A/T

nrt (xaopc

5.8

2.8

5.7
7.1

4.7

8.5 14.5

7.8

—. 2

.6
.8

.1
- .6

.2

.4

1.8

-.1
2.0

.9

3.2

3.2

1.3

1.4

1.6

.4

1.2

1.8
1.0

.6

9.0

.6

.2

- 2 .3
3.2

.8

2.7

.6

-.1

.3

*

- .2

*

9.0
- . 6

9.4

2.0

-

8.9
1.1

9.4

o

Corporate securities and State and
local obligations ..............................
Other
...............................................

p

T o ta l.................................................

Q

Grand to ta l.................................... 272.0 272.0 524.8 524.8 202.4 202.4 36.4 36.4 67.1 67.1 37.2 37.2 15.3 15.3 26.6 26.6 14.6 14.6 19.0 19.0 1,215.3 1,215.3

R
S

Memoranda:
G \ p identifiable in J
Bank credit in P

.8

6.6

1.7

2.4

195.4

4.8

.2

33.3

6.6
— .1

.2

*
.4

1.6

.7

1.0

1.7

2.5

40.7

8.1

.5

2.5

.8

1.6

21.2
1.1

.2

1.2

.4

5.0

.2

.2

.4
3.6

- .4
1.5

1.0

.7

9.1
17.6

9.7
17.4

9.6

9.7

.2

6.7

4.1

4.0

1.2

.5

44.2

44.1

.2

*

1.1

9.7

*Less than 50 million dollars.
.
1 Financial sources of funds represent net changes in liabilities; financial uses of funds represent net changes m financial assets.
N o t e . —For contents of each line, see notes to summary tables, pp. 39-40.




5.4

*
.4

9.5

.4

.1

.2

.4

9.7

316.3
9.7




SUMMARY OF FLOW -OF-FUNDS ACCOUNTS FOR 1952
S = Sources of Funds, U = Uses of Funds
(Annual flows, in billions of dollars)
Government

Business
Sectors

Consumer
Corporate
S

Transactions

U

S

U

Non­
corporate

U

S

Farm

Federal

U

S

St. and loc.

U

S

Financial institutions

U

S

Banking

Insurance
S

U

S

U

xvtrot* ui
the world

Other
S

U

u

S

Total

S

U

N onfinancial
2.5

109.4

28.1

14.6

9.1 19.1
1.2 11.3
.3 38.2
.3 26.3

16.6 41.2
.9 2.8
6.3
4.8
1.2

2.5

A
B

Payroll...................................................... 182.3
Receipts from and payments on invest-

c

.4
Insurance and grants............................. 22.0 21.0
Taxes and tax refunds............................ 2.1 38.5
.5
Capital acquisitions ............................ 21.7 59.7
2
.7
2.8
Net change in inventories
.
23.3
5.3
35.8
4.6
New fixed capital.................................
*
.2
1.2
.5
.3
21.7 23.9
Other capital acquisitions
Purchases and sales of other goods and
150.0 512.4 328.7 187.3 124.5 31.8 11.2
services.................................................

D

E

F
G
H
I
J

61.0

1.2

13.8
.9
.4
7.3
65.1
1.1
*
6.0

19.1

12.5

5.4
.7
13.6 11.3
2.5 20.0
4.3
.1

.9
11.3

4.2
.1

.1

5.5 34.3

5.5

*

2.3

1.8
5 .6

*

7.2

1.8
3.2
.3 26.2
.8
.1

.1

6.7

.5

6 .0

.8

.6

T o ta l................................................ 289.1 286.2 523.4 532.9 206.0 207.8 33.9 34 .9 78.8 79.1 37.5 37.9

6 .3

.2
15.1
.6
.3

4.1
1.5
5.5

*

182.3

182.3

1.8
.2

100.2
77.2
87.5

100.2
77.3
88.0

786.9

787.5

*

2.0

.3
.4

*

.4
2.2

2.0

*

*

1.4
1.3

3.3

4 .4

5 .4

29.8 21.9

11.4

2.2
2 .6

.2
-.2
2 .0

*
.5
4.0

2.8

15.1

11.6 17.7

15.5
17.6 1,234.1 1 ,235.3

F in an cial1

K

L
M
N

o
p
Q
R

s

Currency and d e p o sits.........................
Federal obligations................................
Mortgages
........................................
Corporate securities and State and
local obligations ................................

.6
-.3

7.4

*
5.9

.7

1.1

4 .6

3.1
3.4

7.3
5 .9

10.5

14.8

14.3

1.5

-.5
—.2
.3

.5

.2

.2
6 .0

1.3

.2
1.0

.8

6 .5

2.8

.8

1.2

4 .4

1.9
.5

.2
1.3

.3

8.6

4 .6

4 .4

1.6

16.0

16.0

19.3

*

10.0

♦Less than 50 million dollars.

5 .8

29.0

203.9
3.2

.8

3 .2

-.1
.7

11.6 12.1

3.6

4 .5

.1
.7

Grand to ta l.................................... 299.9 299.9 537.7 537.7 208.9 208.9 35.1 35.1 83 .6 83.6 4 0 .7 4 0 .7 17.9 17.9 30.1 30.1
Memoranda:
GNP identifiable in J
...............
Bank credit in P .....................................

4 .8

.2

*

6.5
.1

.2

3.2

.6
.3
2.9

.3

T o ta l................................................

.3
1.8

10.8

1.5
5 .9

*

.4

.6
1.5

53.4

8 .0
.6

2.2

2 .3

22.6
1.2

*

1.3
11.5

1F inan cial sources o f funds represent net changes in liabilities; financial uses o f fu nd s represent n et changes in financial assets.
N o t e .— F or co n ten ts of each line, see notes to sum m ary tab les, pp. 39-40.

*

.4
1.0

10.8
4 .4
9.0

11.3
4.3
9 .0

*
-.2

11.3
19.1

11.9
18.7

1.2

54.8

55.4

19.3 1,289.2 1,28 9 .2

—. 2
.2

333.8
11.6

11.5




00

SUMMARY OF FLOW -OF-FUNDS ACCOUNTS FOR 1953
S = Sources of Funds,

U =Uses of Funds

(A nnual flows, in billions of dollars)

Consumer
Corporate
S

Transactions

U

S

U

Non­
corporate
S

U

Financial institutions

Government

Business
Sectors

Farm
S

Federal
U

S

St. and loc.
S

U

U

Banking

Insurance

S

U

S

U

1.9

2.6

6.2
*

2.1
.3
.8
.1
.1

3.5
.3
29.0 16.7
.7
*
.2

Rest of
the world

Total

Other
S

U

S

U

S

U

N onfinancial
A
B
c

D
F
G
H
I
J

19.0
13.5
2.6
118.7
30.0
...................... 195.5 2.7
Payroll
.
Receipts from and payments on invest­
.8 1.0
ment ....................................................... 59.4 16.3 9.7 20.0 17.5 40.0 1.1 13.0 1.0 5.5
.4 7.5 14.4 11.9 11.7
.4
Insurance and grants.............................. 23.9 22.7 1.3 12.2 1.0 3.0
.5 36.0
6.8
1.1 64.8 3.1 21.4
2.6 40.9
Taxes and tax refunds
4.2
.1 7.8
.2 26.7 ' ’i ’.s 6.0 .4 5.0 *
22.0 63.8
Capital acQuisitions
.9
.3
1.6
Net change in inventories
7.2
4.6
4.2
24.9
5 1
39.4
New fixed capital..................................
*
.1 .1 .5
.4
.2 .2 1.5 *
22.0 24.4
Other
Purchases and sales of other goods and
155.4 538.3 341.8 195.8 130.2 29.8 10.8 5.0 38.8 5.8 6.4
services..................................................
T o ta l................................................. 303.4 301.8 550.0 555.3 215.9 215.9 31 .7 32 .8 78 .4 85.1 40.0 4 0 .4

.8
7 .0

*

*
.5

3.4
23 .9

1.5
1 .4
*

.5

2.2

2.1
2.1

.2

5 .9 33.0

.7

4.4
1.7
5.7

4.9

*

195.5

195.5

1.9
.3
♦

101.4
82.8
89.4

101 .4
83.0
89.6

820.9

819.5

3.0 15.8 14.3

12.3 12.4

18.4

16.5 1,29 0 .0 1,290.0

F in an cial1

o

Currency and d e p o sits..........................
Federal obligations.. .
..
....
Mortgages
.. .
Corporate securities and State and
local obligations
O ther.........................................................

P

T o ta l.................................................

K

L
M
N

Q
R
s

6.2

4.4
.3

.6

1.3

3.2
4.4

-.6

10.7 12.9

7 .4

4.5

6.7

.1
1.1
.3

.1
1.6

*

.4

1.8

.6
.5

1.6

—.6
2.3

3 .5

3 .2

5.2

.4

.6
1.0

*
*

- 1 .6
.3

1.0
1.8

5.0

- .3

3.6

.3

.1
.2

1.1
1.4

.3

5 .3 - 1 . 4

3 .6

3 .0

5 .2

5 .8

.3

.1

.2

Grand to ta l.................................... 314.4 314.4 557.4 557.4 219.3 219.3 32.8 32 .8 83 .7 8 3 .7 43.6 43 .6
Memoranda:
GNP identifiable in J
Bank credit in P

3.5

215.1

.5

29.5

1.2

6.9

.6

6.9

.2
*
2.1

.9
2.5

.9

57.9

.7

24.4

12.2 12.2
*

1.4
6.9

*Les3 th a n 50 m illion dollars.
1F inan cial sources of fu nd s represent n et changes in liabilities; financial uses of funds represent n et changes in financial assets.
N o t e .— F or co n ten ts of each line, see n otes to sum m ary tables, pp. 39-40.

*

.2
-.2

6.5

.2

.4
4.5

.3
.9

9 .1

5 .0

5 .0

33 .3 33 .3

*

17.3

-.1

*

3.7

17.3

10.7

.1
.6
.6
19.0

-.2

.6

.3

5.0
5.2
9.8

5.0
5.1
9.8

.1

10.9

11.8

10.8
10.8

2 .3

42.6

41.5

1.4

19.0 1,3 3 2 .7 1,3 3 2 .7

- 1 .9

6.9

350.9
6.9

A SY STEM O F N A T IO N A L A C C O U N T S

Notes to Summary Tables
These notes describe, line by line, the contents of
the transaction groupings used in the preceding
summary tables. More detailed tables and more
detailed descriptions are given in the appropriate
chapters of the report.
Line A—payroll. Mainly cash wages and salaries
before withholdings for income taxes and for em­
ployee contributions to social insurance. Excludes
wages paid in kind and employer contributions to
social insurance funds and to private pension and
welfare funds.
Line B—receipts from and payments on invest­
ment. Gross payments and receipts of monetary
interest, rents and royalties, dividends and branch
profits, and net withdrawals of funds by proprietors
from unincorporated enterprises. Excludes im­
puted interest and imputed rents.
Line C—insurance and grants. Insurance pre­
miums and benefits and gross payments and re­
ceipts of grants and donations. The insurance
transactions cover all types of private and govern­
ment insurance, including retirement and pension
programs. Employment taxes and benefits under
the various social insurance programs are included.
Grants and donations include intergovernmental
grants both foreign and domestic, donations to and
by nonprofit organizations, and government and
business grants to consumers, etc. Excludes gifts
in kind.
Line D—taxes and tax refunds. Includes all taxes
other than employment taxes, which are recorded
under insurance premiums in line C. Also in­
cludes cash transactions arising from renegotiation
of government contracts. All taxes and refunds
are recorded as of the time paid and received, not
as of the time accrued.
Line E—capital acquisitions. Expenditures un­
der capital acquisitions are shown in a three-way
breakdown. Sources of funds on this line consist
mainly of receipts from the sales of real estate. Re­
ceipts corresponding to capital purchases other than
of real estate are in general recorded in line I rather
than in line E.
Line F—net changes in inventories. Include in­
ventory valuation adjustment. Shown only for
business sectors. Changes in farm inventories are
at cost rather than market value and include
changes in inventories held under CCC direct and
guaranteed loans. All of line F is part of the flow-




39

of-funds transaction category “other goods and
services.”
Line G—expenditures for new durable equip­
ment and for construction. For consumer sector:
purchases of new consumer durable goods and pur­
chases of new nonfarm homes (excluding cost of
land). For business sectors: expenditures for new
plant and equipment; corporate and noncorporate
business expenditures for purchases of new non­
farm residential housing for tenant-occupancy and
net change in work in process on all nonfarm resi­
dential construction; farm business expenditures for
outlays for new farm dwellings as well as for new
service buildings. For government sectors: ex­
penditures for construction. For financial institu­
tion sectors: expenditures for construction and
equipment. All of line G is part of the flow-offunds transaction category “other goods and serv­
ices.”
Line H—other capital acquisitions. For con­
sumer sector: purchases of existing houses, land,
used consumer durable goods, and brokerage fees
and settlement costs in connection with home pur­
chases; sales of existing homes, land, and used con­
sumer durable goods. For business sectors: cor­
porate—purchases of used equipment from Federal
Government, purchases of land in connection with
residential construction, security flotation costs,
brokerage fees and settlement costs; sales of prop­
erties under lease-back agreements. Noncorporate
—purchases of used equipment from Federal Gov­
ernment; net receipts from real estate transfers.
Farm—net receipts from transfers of farm land.
For Government sectors: purchases of land; sales
of land. For financial institution sectors: purchases
of properties in connection with lease-back agree­
ments; net receipts from transfers of foreclosed
properties. Line H consists of all transactions in
the flow-of-funds real estate transfers category and
some transactions in the “other goods and services”
transaction category.
Line I—purchases and sales of other goods and
services. All expenditures for and receipts from
the sale of goods and services other than those listed
separately in the summary tables. Consists of all
transactions in the flow-of-funds category “other
goods and services” except for the capital transac­
tions covered in line E.
Purchases and sales under capital acquisitions
(line E) and purchases and sales of other goods and
services (line I) together make up the two flow-

40

F L O W -O F -F U N D S I N

T H E U N IT E D STATES, 1939-53

o£-funds transaction categories—real estate trans­
fers and “other goods and services.” All purchases
and sales in the real estate transfer category are
included in line E and also included in line H .
Purchases and sales of “other goods and services”
are divided between lines E and I. Capital expend­
itures in the transaction category “other goods and
services” are shown in line E but, in general, the
corresponding sales are in line I.
Line J—total nonfinancial transactions. The sum
of lines A through E and line I.
Financial transactions. Lines K through P pre­
sent net changes in each sector’s liabilities (with
appropriate sign) under sources of funds and net
changes in each sector’s financial assets (w ith ap­
propriate sign) under uses of funds. The financial
parts of the sources and uses columns for each sec­
tor are thus in terms of changes in liabilities and
in financial assets respectively rather than in terms
of gross financial sources and uses of funds. The
row totals for each financial transaction category
should be interpreted in the light of this treatment.
Line K—currency and deposits. Changes in cur­
rency, demand deposits and time deposits. Changes
in the banking sector’s liability for currency and
deposits differ from changes in the sum of holder
records principally because of fluctuations in mail
float. The currency and deposit totals shown in
the total column reflect the netting of rest of the
world liabilities for American-held foreign cur­
rency and deposits against foreign holdings of
American currency and deposits; these are shown
gross in the sector column for the rest of the world.
Line L—Federal obligations. Changes in Federal
Government debt—direct, fully guaranteed, and
not guaranteed—other than changes in currency
items in the public debt and changes in debt held
by agencies or funds of the Federal Government
sector. Includes changes in debt for accrued in­
terest and for securities not issued for cash. Ex­
cludes government debt for accounts payable and
trust and deposit liabilities, which are included in
“other” financial transactions on line O.
Line M—mortgages. Changes in all debt and
holdings of debt secured by real estate.
Line N —corporate securities and State and local
obligations. N et issues, sales, and purchases of pri­
vate corporate debt and equity securities, of foreign
securities, and of debt of State and local govern­
ments.




Line O—other financial transactions. Covers
all other financial instruments: trade credit; bank
loans other than mortgages; gold and Treasury cur­
rency; and miscellaneous financial transactions such
as savings and loan and credit union shares, Federal
Government loans to foreign and domestic borrow­
ers, Government subscriptions to international or­
ganizations, customers’ credit and debit balances,
policy loans, capital stock and bonds of various agri­
cultural credit institutions, private interest in partlyowned government corporations.
Line P—total financial transactions. The sum of
lines K through O. The totals under sources rep­
resent total net changes in liabilities; the totals un­
der uses represent total net changes in financial
assets.
Line Q—grand total. Sum of line J, line P, and
valuation adjustments and statistical discrepancies
not shown separately on the summary tables. The
size of the totals on line Q for each sector is de­
pendent upon the method of presentation of the
financial transactions and hence these totals have
no particular significance as the total sources of
funds and the total uses of funds of the sectors.
Differences between total sources of funds and
total uses of funds for each transaction category
(as shown in the “total” column) are attributable
to valuation differences, timing differences, and
other statistical inconsistencies.
Line R—G NP identifiable in flow-of-funds non­
financial transactions. Line R records the amount of
total gross national product, as presented in the na­
tional income accounts of the Department of Com­
merce, that can be said to be covered by the non­
financial transactions of each flow-of-funds sector.
While the memorandum line is shown under uses
of funds in the summary tables, to some extent line
R is net of receipts included in flow-of-funds non­
financial sources of funds because of the net basis
of several elements in GNP. The contents of the
line, its derivation, and the exact relationship to
GNP are described in an appendix to the report.
Line S—ban\ credit in line P. N et changes in
each sector’s obligations held by the banking sys­
tem. Bank credit recorded for banking sector on
line S differs from banking sector’s , total change
in all financial assets shown on line P in that the
former excludes changes in holdings of gold, silver,
and other Treasury currency assets.

CHAPTER 2
CONSUMER SECTOR
The consumer sector in the flow-of-funds
accounts comprises individuals in their capac­
ity as members of households. The account
for the consumer sector sources and uses of
funds covers natural persons and personal
trusts. Other sector statements record the ac­
tivities of aggregations of individuals, such
as nonprofit, religious, or welfare organiza­
tions, the activities of individuals as pro­
prietors of unincorporated businesses, and the
lessorship activities of persons who rent out
their property.1
The sector account records all nonfinancial
and financial consumer transactions effected
through the use of money and credit. Ex­
penditures for the purchase and maintenance
of homes for owner occupancy are recorded
in the account. Imputed transactions and
payments or receipts in kind are excluded.
As a corollary of the treatment of lessor­
ship of property, under which all rents are
recorded as paid to the business sectors in
the flow-of-funds accounts, the consumer sec­
tor is not shown as receiving rents. Con­
sumer sector receipts in the form of net with­
drawals by proprietors from unincorporated
enterprises include withdrawals of net in­
come arising from the leasing of real prop­
erty.
To the extent that available data permit,
the consumer sector account is presented on a
combined rather than a consolidated basis.
That is, transactions among consumers—such
as payments to domestic help, or sales of
homes by one consumer to another—are in­
cluded. However, no measurements could

be obtained for some transactions among
consumers—such as gifts, nonmortgage bor­
rowing, interest payments on such borrow­
ing, and transfers of used automobiles and
other durable goods.
C o m p a r is o n w i t h P e r s o n a l S e c t o r i n
N a t io n a l I n c o m e A c c o u n t s

The account for the flow-of-funds con­
sumer sector is closely related in many re­
spects to the account for the personal sector in
the national income accounts.2 On the other
hand, the personal and consumer sectors dif­
fer with respect to sector coverage, transac­
tion coverage, classification of transactions,
timing of transactions, allocation of transac­
tions among sectors, and extent of consolida­
tion and netting. For example, the flow-offunds account for the consumer sector records
transactions in specific assets and liabilities
and the personal sector account does not.
Moreover, many differences exist even with
respect to analogous series in the two systems
(for example, personal income and nonfinan­
cial sources, personal consumption expendi­
tures and nonfinancial uses).
Many of the specific differences between
the consumer and the personal sectors in the
two systems stem from differences in the
handling of certain complexes of transactions,
in particular from differences in the treat­
ment of transactions associated with home
ownership, life insurance, nonprofit organi­
zations and self-administered pension plans,

2 The major components of the personal sector account
of the national income accounts are sources of funds from
personal income, uses of funds for personal consumption
1 It has not been possible to separate the accounts of profit expenditures, for personal taxes and nontaxes, and for the
sharing and welfare funds from those of consumers.
residual personal saving.




41

42

FLO W OF FU N D S IN T H E U N ITED STATES, 1939-53

and unincorporated businesses. The differ­ of funds by the consumer sector. No im­
ences with respect to each of these complexes puted expenditure or imputed income flows
may be summarized as follows:
on account of home ownership are recorded
1.
Home ownership is not recorded as a in any sector.4
personal sector activity in the national in­
2. Transactions involving life insurance are
come accounts. The purchase of new resi­ also treated differently in the personal and
dential construction is treated as part of busi­ consumer sectors. In the national income ac­
ness purchases on capital account and is re­ counts neither gross life insurance premiums
corded as an activity of the saving and in­ paid nor gross life insurance benefits received
vestment account. Home owners are con­ by the personal sector are recorded in the per­
sidered to rent their homes from themselves sonal sector account. Instead, a purchase of
as business landlords. Their activities as rent­ services from life insurance companies (part
ers are recorded in the personal sector, while of the business sector in the national income
their activities as landlords are entered in the accounts) is imputed to the personal sector
business account. The business account as part of personal consumption expenditures.
in the national income structure is charged This imputed purchase is equal to the operat­
with the operating and maintenance expenses ing costs of life insurance companies and fra­
of home ownership—mortgage interest, taxes, ternal orders in handling life insurance. The
depreciation, etc. The gross rental value of investment income received by life insurance
owner-occupied homes is imputed as an ex­ companies is imputed as an interest payment
penditure of the personal sector account (as to the personal sector as part of personal in­
a component of personal consumption ex­ come. It follows from these treatments that
penditures) and as a receipt of the business the net increase in the equity of policyholders
sector.8 The difference between the gross im­ and beneficiaries in life insurance assets (after
puted rent and the expenses of home owner­ elimination of the effect of capital gains and
ship is classed as part of the business sector’s losses and other asset revaluations) is, in ef­
net income, and, in turn, this net imputed fect, a component of personal saving.
rental income is returned to the personal sec­
In the flow-of-funds system, on the other
tor as a component of personal income.
hand, gross flows of benefits and premiums
In the flow-of-funds accounts, on the other between the consumer and insurance sectors
hand, the home-owning and maintaining ac­ are recorded; no imputed transaction or ac­
tivities of consumers are not split off from crual of liabilities in connection with con­
their other activities; all these activities are sumer equity in assets of life insurance com­
recorded in the consumer sector, not in the panies is entered in the accounts. All pre­
business sectors. Consumer outlays for pur­ miums for life insurance are classed in the
chases of new nonfarm homes for owner oc­ insurance premium transaction category
cupancy, and consumer costs for operation, without attempt to distinguish between the
maintenance, and repair of these homes part of the premium that might be construed
(other than depreciation, which is not a flow4 The purchase and operation of farm dwellings is re­
of-funds transaction) are all recorded as uses corded in the farm business sector in the flow-of-funds
accounts, but no imputed income or expenditure flow be­
8 This gross imputed space rent is computed as the amount tween the farm and the consumer sectors is recorded. See
that would be paid by home owners if they rented similar
discussion of flow-of-funds treatment of farm housing, Ch.
dwellings.
5, p. 110.




C O N SU M ER SECTOR

43

as representing current services rendered to sented in separate subsector accounts. These
consumers by insurance companies, and the subsector accounts record their transactions
part of the premium representing saving with consumers as well as with businesses
done through insurance companies. How­ and governments. Donations and other pay­
ever, the increase in life insurance policy re­ ments to these organizations by consumers
serves is shown as a memorandum in the life are classed as consumer uses of funds, and
insurance companies subsector account, Table similar payments by these institutions to con­
sumers as consumer sector sources of funds.
39, page 208.
3.
Activities of nonprofit organizations Similarly payments to these institutions by
serving individuals5 and self-administered sectors other than the consumer sector are
pension plans are part of the personal sector recorded as receipts of these subsectors and
account in the national income system. Since are not reflected in the consumer sector ac­
the personal sector account is on a consoli­ count.
4. Unincorporated business enterprises and
dated basis, neither consumer payments to
nonprofit organizations nor payments by the consumer activities of the proprietors of
these organizations to consumers (except for these enterprises are entered in different sec­
wages and salaries) are recorded. Transac­ tors in both the national income and the flowtions of nonprofit organizations with other of-funds accounting systems. In the national
national income sector accounts are included income accounts, the entire net income of un­
in the various elements of the account for incorporated business is recorded as trans­
the personal sector. For example, investment ferred to the personal sector account as a
income received by nonprofit institutions and component of personal income. That part
corporate and government donations to them of the net income left in or reinvested in the
are included in personal income, and their business is, in effect, part of the personal
current expenditures involving payments to sector’s “personal saving” and as such is trans­
other sectors are included in personal con­ ferred from the personal sector account to
sumption expenditures. Similarly, transac­ the gross saving and investment account
tions between self-administered pension plans along with other elements of personal saving.
and other elements of the personal sector (for This treatment implies that net saving of un­
example, payments of benefits by the funds) incorporated businesses is done, not by the
are not recorded in the consolidated personal business sector, but by the personal sector.8
sector account, but payments to the funds by The treatment thus differs from the treat­
sectors other than the personal sector (for ex­ ment in the national income accounts of net
ample, employers’ contributions to the funds saving by corporate business, which is re­
and the funds’ receipts of investment income) corded as done in the business sector.
are recorded as receipts of the personal sector
In the flow-of-funds structure, the transac­
as part of personal income.
tions recorded between unincorporated busi­
In the flow-of-funds accounts, on the other nesses (in the noncorporate business and
hand, nonprofit organizations and self-ad­ farm business sectors) and their proprietors
ministered pension plans are not part of the (in the consumer account) represent es­
consumer sector. Their activities are pre6 Some gross saving in the form of capital consumption
5 These organizations are chiefly religious, educational, and allowances is done by unincorporated enterprises in the na­
philanthropic institutions, hospitals, and labor unions.
tional income business sector.




44

FLO W O F FU N D S I N T H E U N IT E D STATES, 1939-53

timated amounts of cash withdrawals
from the business (whether greater or less
than current-year net income) and of new
funds put into the business by proprietors.
Statistically, it has not been possible to sep­
arate these two flows and they are shown
netted together in the transaction category
net withdrawals by proprietors.
The
amounts of these net withdrawals may be
larger than net income to the extent that
they include additional withdrawals of
equity, or they may be smaller than net in­
come to the extent that net income is left in
the business or the proprietor puts new funds
in the business to finance increases in its as­
sets or decreases in its liabilities. One of the
results of this treatment is that, whereas in
the national income accounts saving out of
the net income of unincorporated business
occurs only in the personal sector and not in
the business sector, in the flow-of-funds ac­
counts such saving can occur both in the
noncorporate business sectors and in the con­
sumer sector.7
The major structural differences just re­
viewed and other conceptual differences be­
tween the personal sector account in the na­
tional income accounts and the consumer
sector account in the flow-of-funds accounts
result in many differences between compar­
able items in the two sets of accounts. The
specific adjustments to the personal sector ac­
count required in order to adapt it to the
flow-of-funds framework are presented in
Tables 2-9 on pages 74-79, and the relation­
ships are described in detail on pages 55-69.8
In these relationship tables the differences
are grouped according to the type of differ­
ence, such as differences in sector coverage,
transaction coverage, transaction classifica­
7 See also Ch. 4, p. 98, and Ch. 5, pp. 106 and 112.
8 See also Table 65, p. 299, and Table 70, p. 301.




tion, etc., rather than in terms of the com­
plexes described above.
These relationships all involve nonfinan­
cial transactions. The relationship between
the consumer sector financial sources and
uses of funds in the flow-of-funds accounts
and the Securities and Exchange Commis­
sion series on liquid saving by individuals is
presented in Table 10 on page 80 and de­
scribed on page 69.
T h e C o n s u m e r Sector St a t e m e n t

The sources and uses of funds statement
for the flow-of-funds consumer sector is pre­
sented in Table 1 on page 73. The discus­
sion of the sector account in this chapter deals
principally with the concepts used in con­
structing the account. Statistical derivations
of the estimates incorporated in the table are
described mainly in later chapters on the
transaction categories.
Nonfinancial sources of funds (line A ).
The total of nonfinancial sources of funds of
the consumer sector is the sum of consumer
receipts under the various nonfinancial cate­
gories specified in the account. It includes
consumer sector receipts from sales of tan­
gible assets such as homes and automobiles
as well as receipts of current income.
The relationship between total nonfinan­
cial receipts of the flow-of-funds consumer
sector and personal income in the personal
sector of the national income accounts is pre­
sented in Table 8 on page 78, and described
on page 63.
Payroll (line B) consists of wages and sal­
aries, including executives’ compensation,
commissions, tips, and bonuses paid to per­
sons in an employee status; directors’ fees;
pay of the military reserve; compensation of
enemy prisoners of war; and minor items
such as jury and witness fees. The series

CO N SU M ER SECTOR

covers only cash payroll; it excludes pay in
kind and pay earned but not yet received.
Payroll is recorded gross, that is, before de­
duction of tax withholdings and of employee
contributions to social insurance and pension
funds. Employer contributions to social and
private insurance, retirement, and pension
funds are not included in payroll; these are
recorded as employer payments of insurance
premiums to the private and government sec­
tors administering such funds.
The relationship between payroll receipts
of the flow-of-funds consumer sector and the
wage and salary component of personal in­
come in the national income accounts is pre­
sented in Table 2 on page 74 and described
on page 56.
Interest (line C) is monetary interest re­
ceived by consumers on funds lent to others
—to governments, businesses, financial insti­
tutions, and other consumers.9 This line con­
tains no imputed interest.
Interest receipts of the consumer sector in­
clude net accrual of interest payable on
United States savings bonds. The cash in­
terest receipts of the sector can be computed
by deducting the excess of accrual of interest
over cash payments of interest on redemp­
tions of savings bonds. This net accrual in­
terest component of total consumer receipts
is shown separately on line C of Table 48—
Interest—on page 239.
Dividends received on holdings of shares in
savings and loan associations and credit
unions are classed with interest receipts in
the flow-of-funds consumer sector (as they
are in the national income personal sector).
To the extent that interest on time deposits
at banks and dividends on savings and loan
0 Interest received from other consumers covers only the
interest received on mortgage loans to other consumers.
Intrasector transactions in short-term debts and the interest
paid on such debts are not recorded in the account since
relevant data are not available.




45

and credit union shares are paid by a credit
to consumer accounts, such receipts are re­
flected in the flow-of-funds interest category
at the time of the credit.
The relation between consumer sector re­
ceipts of interest and personal interest in­
come in the national income accounts is pre­
sented in Table 3 on page 74 and is de­
scribed on page 57 of this chapter.
Dividends (line D ) represent the return
on equity funds invested by consumers in
corporate enterprises. Dividends on saving
and loan and credit union shares are classed
as interest receipts in line C and are not in­
cluded in dividend receipts. Because of the
form in which data are available, the series
shown here as consumer dividend receipts
represents dividends declared, rather than
dividends paid.10 Dividends paid would be
more consistent with the structure of the sec­
tor account; the use of dividends declared
contributes a slight amount to the discrep­
ancy in the sector account.
The relationship between the flow-of-funds
consumer sector receipts of dividends and the
dividend component of personal income in
the national income accounts is presented in
Table 3 on page 74 and described on page 58.
Insurance benefits (line E) consist of the
benefits paid to the consumer sector by pri­
vate insurance companies and pension plans
(line F) and the insurance benefits paid to
the consumer sector by the Federal and State
and local government sectors (line I).
The relationship of insurance benefit re­
ceipts as recorded for the consumer sector of
the flow-of-funds accounts and social insur­
ance benefits as recorded in the transfer pay­
ments component of personal income in the
national income accounts is presented in
Table 4 on page 75 and described on page 58.
30For description of the dividend transaction account see
Ch. 12, p. 235.

46

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

Private insurance benefits (line F ) consist of the
benefits and dividends received on all policies held
by consumers with private insurance companies, in­
cluding payments received from employee insur­
ance programs administered by these companies
and benefits received from self-administered pen­
sion plans. Private benefits from life policies, an­
nuities, and pension plans are shown in line G and
all other private benefits in line H .
Benefits from life policies, annuities, and pension
plans (line G ) consist of receipts from life insurance
companies, insurance programs of fraternal orders,
and self-administered pension plans. Consumer re­
ceipts from life insurance companies consist of bene­
fits in connection with death claims, matured en­
dowments, annuities, cash surrender of policies,
and policy dividends. Line G includes total pol­
icy dividends paid by life companies—including
dividends applied against premiums, those left
with the company to accumulate at interest, and
those paid in cash—as well as policy proceeds.
Policy proceeds and policy dividends are shown
separately on lines D and E respectively of Table
56—Private Insurance Benefits—on page 258. Pri­
vate insurance benefits other than those from life
and annuity policies and pension plans (line H )
consist of accident and health and hospitalization
benefits; benefits from insurance on motor vehicles
and other personal and real property; and benefits
from private workmen’s compensation plans.
Government insurance benefits (line I) include re­
ceipts from social insurance funds—old-age and
survivors insurance; unemployment compensation,
both railroad and State; retirement for railroad and
government civilian employees; national service life
insurance and Government life insurance (including
dividends on both); and cash sickness compensa­
tion. Receipts from workmen’s compensation
funds administered by State governments, and bene­
fits paid by the Federal Deposit Insurance Corpora­
tion in liquidating claims of depositors of closed
banks are also included.

sumer sector receipts of grants and donations
in the flow-of-funds account and the total
of transfer payments other than social insur­
ance benefits included in personal income in
the national income accounts is presented in
Table 4 on page 75 and described on page 59.

Grants and donations (line J) consist of
consumer receipts of relief payments, pay­
ments to veterans, and other grants received
from the government sectors; and philan­
thropic, charitable, and other grants received
from the private sectors. No gifts in kind
are included. A reconciliation between con­

Tax refunds (line N ) are Federal Govern­
ment cash refunds of taxes to consumers. The
refunds are recorded in the consumer account
as of the year of receipt.
N et withdrawals by proprietors (line O)
represent the total cash withdrawals from un­
incorporated enterprises by their proprietors




Federal Government grants (line K ) consist prin­
cipally of consumer receipts of Federal Government
payments for direct relief and various payments to
veterans for which no current service is required,
such as military pensions, readjustment and sub­
sistence allowances, and bonuses. Armed forces
leave bonds are included at time of issue. Minor
amounts of other types of transfer payments, such
as payments to United States prisoners of war and
Atomic Energy Commission fellowships, are also
included.
State and local government grants (line L ) consist
of consumer receipts of State and local government
payments for direct relief, veterans’ aid and bonuses,
and the care of foster children in private homes.
Private grants and donations (line M ) consist of
receipts from business, from nonprofit organiza­
tions, and from the rest of the world sector. Re­
ceipts of grants from business (corporate and non­
farm noncorporate) include cash prizes, unrecov­
ered thefts, and personal injury payments to em­
ployees and others. Corporate business payments
in connection with private welfare and profit-shar­
ing plans are also included here as consumer re­
ceipts of grants and donations.
Receipts from nonprofit organizations consist of
benefit payments by labor unions and fraternal or­
ganizations (other than death benefits from the in­
surance programs conducted by such organizations)
and donations from private charities. Finally, per­
sonal remittances in cash from the rest of the world
are included. No estimates have been made of con­
sumer receipts of scholarships, fellowships, and re­
search grants made by nonprofit institutions, or
of gifts by one consumer to another.

CO N SU M ER SECTOR

less the consumer sector’s new investment in
these enterprises.11 The net withdrawals may
be regarded as a combination of several types
of transactions: (1) the equivalent of wages,
salaries, interest, and dividends received by
proprietors, plus (2) the equivalent of pro­
prietors’ withdrawals from the paid-in capi­
tal or earned surplus of the enterprise, minus
(3) new capital subscribed or lent to these
Enterprises by proprietors or other consumers.
Net withdrawals are from both the non­
farm noncorporate business sector (including
lessorship of property) and the farm business
sector. The amounts received from each of
these sectors are shown in Table 51—Net
Withdrawals by Proprietors—on page 240.
The relationship between the flow-of-funds
consumer sector receipts in the form of net
withdrawals by proprietors and proprietors’
net income in personal income in the national
income accounts is shown separately for the
nonfarm and farm components in Tables
5 and 6 on page 76.
Sales receipts (line P) are consumer re­
ceipts from the sale of tangible assets such as
homes, automobiles, furniture, and clothing.

47

tions between consumers is available. The series
shown includes the value of goods traded in the pur­
chase of other products, such as trade-ins on auto­
mobile purchases, as well as receipts from direct
sales by consumers to dealers. This treatment is
matched by showing consumer purchases gross of
trade-in allowances.

N et increase in liabilities (line S) repre­
sents new borrowing by consumers less re­
payments on existing debts.12 Borrowing
consists for the most part of net extensions
of credit to consumers by banks, other finan­
cial institutions, and businesses. The only
interconsumer debts recorded are those aris­
ing from mortgages given by consumers to
other consumers. No measures of short­
term or intermediate-term loans from one
consumer to another are available.
Loans to individuals for business purposes
are excluded insofar as possible. Some credit
obtained by individuals to purchase automo­
biles and other durable goods for use in both
consumption and business purposes is in­
cluded because the data to apportion these
loans properly are not available. On the
other hand, bank loans to farmers to finance
purchases of consumption goods are excluded
to the extent that they are not segregated
Sales receipts from homes (line Q) represent con­
sumer receipts in the flow-of-funds transaction cate­ from production loans to farmers in banking
gory for real estate transfers. The receipts shown statistics. Mortgage debt on farm residences
are only those from sale of owner-occupied nonfarm is also excluded, since all purchase, construc­
residences. They do not include proceeds from the tion, and maintenance costs of farm build­
sale of farms or of residential property owned by
ings, both residential and business, are re­
consumers for investment purposes; these sales are
corded
as uses of funds by the farm business
classified as receipts of the farm business sector and
sector.
In any case, it is not possible to dis­
the noncorporate business sector. Sales are recorded
before deduction of commissions paid to real estate tinguish the debt on farm residences from
brokers in connection with transfers of property.
that on other farm buildings and land. All
Sales receipts from automobiles, furniture, clothing,
and other consumer goods (line R) represent con­ of such farm debt is included as a liability
sumer receipts in the flow-of-funds category for of the flow-of-funds farm business sector.
transactions in other goods and services. Only sales
Some of the available measures of con­
to dealers are included; no measure of such transac12 Repayments of debt reflected in line S include regular
11 For further discussion of this transaction category, see payments of debt required by instalment contracts and
p. 43 of this chapter, Ch. 4, pp. 98 and 102, Ch. 5, pp. 106 amortized mortgages as well as prepayments and other
retirements of debt.
and 112, and Ch. 12, p. 237.




48

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

sumer debt are presented in terms of the col­
lateral securing the loan, rather than the
purpose of the borrowing. These two bases
of classification may not always coincide, as
in the case when a loan to pay medical bills
is secured by a mortgage on a home. In
fact, precise classification of loans by purpose,
which is desirable analytically, is not pos­
sible. However, the breakdowns shown for
consumer sector debt can be considered to
approximate roughly a classification by pur­
pose of loan: mortgages are usually incurred
in connection with home purchases; security
loans are associated with purchases of stocks
and bonds; and consumer credit and policy
loans are associated with purchases of other
goods and services. To some extent these
loan classifications cut across the standard
flow-of-funds financial transaction categories.
Thus, the category bank loans other than
mortgages for the consumer sector consists
of three items in the consumer account: bank
consumer credit (line U ), bank security loans
(line A A ), and bank debt matched by hy­
pothecated deposits (included in line S but
not shown separately). The flow-of-funds
category “miscellaneous financial liabilities”
for the consumer sector is equal to debit bal­
ances owed to brokers and dealers in securi­
ties (line BB) and policy loans (line CC).
Other consumer credit (line V ) is the flowof-funds transaction category trade credit
for the consumer sector, and mortgages (line
W ) are a component of the flow-of-funds
mortgage category.
The relationship between net increases in
consumer liabilities as recorded in the flowof-funds accounts and net increases in indi­
viduals’ debts as recorded in the Securities
and Exchange Commission series on liquid
saving is presented in Table 10 on page 80
and described below on page 69.
Consumer credit (line T ) is the Federal




Reserve series on short- and intermediateterm consumer credit. It includes credit used
to finance the purchase of commodities and
services for personal consumption or to re­
finance debt originally incurred for such
purposes, and loans for repair and moderni­
zation of homes (both loans insured by the
Federal Housing Administration and non­
insured loans).
The increase in the amount of consumer credit
owed to banks (line U) includes both the net credit
extended directly by banks to consumers and the
net purchases of consumer paper by banks from
automobile dealers, retailers, and other financial in­
stitutions. Consumer credit owed to others (line V)
consists of instalment credit held by sales finance
companies, credit unions and other nonbank finan­
cial institutions, and retail outlets; charge accounts;
and service credit extended by the medical profes­
sion, utility companies, and educational institutions.

Mortgages (line W ) represent increases in
debt secured by owner-occupied nonfarm
residences. It does not include business debt
or individuals’ debt on residential property
held for investment or business purposes, con­
struction loans owed by builders, or farm
mortgages, all of which are shown in the
flow-of-funds accounts as debts of the ap­
propriate business sectors.
Increases in mortgage debt to banks, both com­
mercial and mutual savings banks, are shown sep­
arately in line X.
Mortgage debts to others
(line Y) consist of those owed to savings and loan
associations, life insurance companies, the Federal
Government, nonfarm noncorporate business, credit
unions in the financial institutions n.e.c. subsector,
and other consumers. Savings and loan shares
pledged against mortgages have been deducted from
the debt owed these associations.

Security loans (line Z) arise, in general,
in connection with consumer purchases of
stocks and bonds.
Security loans owed to banks (line AA) are loans
for the purpose of purchasing or carrying stocks,

CO N SU M ER SECTOR

49

bonds, and other securities; and security loans owed
to others (line BB) are debit balances owed to
security brokers and dealers.

of the flow-of-funds accounts and personal
consumption expenditures in the personal
sector account of the national income ac­
Policy loans (line CC) consist of loans on counts is presented in Table 9 on page 79
life insurance policies and are owed to the and described on page 66.
The detailed categories in which consumer
life insurance companies subsector, fraternal
sector
nonfinancial uses of funds are shown
orders in the other insurance companies sub­
sector, and the Federal Government sector in this sector statement do not coincide in
(on national service life insurance and Gov­ all cases with those used in the flow-of-funds
standard system of transaction classification.14
ernment life insurance policies).
Thus consumer sector expenditures in the
Valuation adjustment (line D D ). This
flow-of-funds transaction category “other
is essentially an adjustment applied to the
goods and services” are not explicitly shown
data available on changes in consumer debts
as such in the consumer sector account but
to correct these data for revaluations and
various components of the category are given.
other unilateral changes that are not flowThe consumer sector purchases of other
of-funds transactions. Data on consumer
goods and services are made up of purchases
debts are obtained from lender records, most
of durable goods (line b), nondurable goods
of which reflect not only repayments by bor­
(line c), other services (line h), and new
rowers but also write-offs of bad debts. In
home purchases exclusive of land costs (line
some instances lender records present loans
n less land costs). Consumer sector expendi­
net of valuation reserves, and in such cases
tures in the flow-of-funds transaction cate­
changes in net loans outstanding reflect net
gory of real estate transfers consist of land
changes in the amount of these reserves in
costs in line n and purchases of existing
addition to repayments. The valuation ad­
homes (line o). The relations of all but one
justment is an approximation of write-offs by
of the foregoing components of the flow-ofcreditors reporting loans gross plus charges
funds consumer sector purchases of “other
to reserves for loans reported net of such
goods and services” to comparable compo­
reserves.13 O n ly. write-offs of bad debt
nents of personal consumption expenditures
charges relating to nonmortgage debt have
in the national income accounts are described
been included, since data on mortgage write­
immediately below.16 The relation of con­
offs are not available.
sumer sector total purchases of other goods
Nonfinancial uses of funds (line a). Con­ and services to total personal consumption
sumer nonfinancial uses of funds include expenditures is summarized in Table 65 on
disbursements for all goods and services, page 299 of Chapter 15 and described on
taxes, insurance, and religious and philan­ page 280 of that chapter.
thropic purposes. They include outlays for
Durable goods (line b) consist principally
tangible assets as well as expenditures for cur­
14 See table on p. 11 of Ch. 1.
rent consumption.
“ The one component whose relationship to the corre­
The relation between total nonfinancial sponding national income accounts series is not described
uses of funds in the consumer sector account in this chapter is new home purchases (line n). The rela­
13 For further discussion of bad debt reserves, see Ch.
3, p. 89.




tionship of this item to private new nonfarm residential con­
struction in the national income accounts is presented in
Ch. 15, Table 70, p. 301 and the text on p. 291.

50

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

of consumer sector purchases of automobiles,
tires and tubes, automobile accessories and
parts, furniture, and various kinds of house­
hold durable equipment. The series includes
purchases of used cars, furniture, etc. from
dealers as well as purchases of new durables.
No data are available on consumer purchases
of used durable goods directly from other
consumers.
Line b differs from the durable goods component
of personal consumption expenditures in the na' tional income accounts principally in that the latter
series includes purchases of used cars and other
durables from dealers on a net basis (that is, only
the dealers’ gross margins rather than the whole
value of the purchase are included in the consumer
durable goods component of gross national prod­
uct). The flow-of-funds series on consumer pur­
chases of durables includes used durables from all
dealers on a gross basis, that is at the full purchase
price.

Nondurable goods (line c) include ex­
penditures for food, clothing, semidurable
house furnishings, gasoline and oil, mainte­
nance and repair on homes, household sup­
plies, and other goods of relatively short use­
ful life.
The series shown for consumer sector purchases
of nondurable goods on line c differs from the non­
durable goods component of personal consumption
expenditures in the national income accounts in the
following respects:
1. Imputed purchases of food, clothing, and fuel
received as income in kind are not recorded in flowof-funds accounts but do enter personal consump­
tion expenditures.
2. Maintenance and repair expenditures on owneroccupied nonfarm homes are included in consumer
purchases of nondurable goods in the flow-of-funds
accounts, whereas in the national income accounts
such outlays are treated as expenditures for inter­
mediate products by the business sector.
3. Personal consumption expenditures in the na­
tional income accounts include space rent—cost of
renting quarters exclusive of the charges for utilities




or fuel included in many rental contracts—in
the category of service expenditures. Both direct
consumer outlay for fuel and outlays for fuel by
landlords recovered in rent payments are combined
into an estimate of total personal expenditure for
fuel, which is part of expenditures for nondurable
goods in personal consumption expenditures. In
the flow-of-funds accounts, on the other hand, total
contract rent is classed as a service outlay by
consumers. Only fuel direcdy purchased by con­
sumers is classed in the nondurable goods category
on line c.

Services (line d) cover expenditures for
such personal services as payroll to domestic
help, interest on consumer debts, contract
rent, utilities, recreation, upkeep of automo­
biles, tuition payments, etc.
Consumer sector outlays for services on line d
differ from the comparable component of personal
consumption expenditures in the national income
accounts in several respects. The following transac­
tions included in personal expenditures for services
in the national income accounts are excluded from
the flow-of-funds series on consumer sector pur­
chases of services:
1. Imputed expenditures for rent, imputed ex­
penditures for services of financial intermediaries,
pay in kind to domestic servants, and imputed pur­
chases of services equal to the expense of handling
life insurance. These imputed and in-kind transac­
tions are not recorded in the flow-of-funds accounts.
2. Current expenditures of nonprofit organiza­
tions. Nonprofit organizations are in the “other
investors sector” in the flow-of-funds accounts. Thus
the expenditures of these organizations are not in­
cluded in consumer uses of funds.
3. Net purchases (purchases less sales) from
pawnbrokers and miscellaneous second-hand stores.
These purchases, shown on a net basis and as pur­
chases of services in personal consumption expendi­
tures, are recorded gross and shown as consumer
expenditures for durable goods in the flow-of-funds
account.
4. Personal cash remittances to foreign countries
less personal cash remittances to the United States
by foreigners. Gross flows of remittances are
classed as receipts and payments of grants and do­
nations in the flow-of-funds structure.

CO N SU M ER SECTOR

51

5. Insurance premiums (net of benefits) in con­ ployers for these items furnished in kind are re­
nection with automobiles, personal property, acci­ flected in other transaction categories in the sector
dent and health, and hospitalization policies. The account.
insurance premium and benefit transactions of the
Interest payments (line f) record interest paid by
flow-of-funds consumer sector are not shown under the consumer sector on mortgages, security loans,
the general heading of purchases of services in the and other debt. Line f does not include interest on
sector statement.
debt owed by one consumer to another except for
Contrariwise, some transactions that are included interest on intrasector mortgage debt.
in the flow-of-funds series on consumer sector pur­
Rents (line g) cover the contract rent paid by
chases of services are not included in the services tenants of nonfarm residences. The series includes
component of personal consumption expenditures charges for utilities and other services to the extent
that they are part of the rental contract. It does
as recorded in the national income accounts:
1. Mortgage interest and commissions to brokers not include imputed space rent for owner-occupied
in connection with the sale of owner-occupied non­ nonfarm properties, nor does it include rent pay­
farm homes. In the national income accounts these ments—imputed or cash—on farm residences.
O ther services (line h) consist of items in the
outlays are treated as expenditures for intermediate
flow-of-funds
transaction category “other goods and
products by the business sector.
services.”
This
is only part of consumer sector
2. Consumer purchases from nonprofit organiza­
tions—fees to private schools and hospitals, fees and purchases in the “other goods and services” cate­
dues to labor unions and social clubs. Such pur­ gory; lines b, c, and most of n are also in that
chases are not included in personal consumption transaction category.
expenditures since, as indicated earlier, the nonprofit
Taxes (line i) paid by the consumer sector
organizations are part of the consolidated personal
represent
the current payment of taxes (not
sector in the national income accounts and most
types of transactions between consumers and these the accrual of tax liabilities) to the Federal
organizations are eliminated in consolidation.
and the State and local government sectors.
3. Certain payments to public institutions (such Tax payments are recorded gross of refunds.
as tuition and hospital fees to public institutions).
(Refunds to the consumer sector are shown
These items are included in personal tax and nontax
separately
as a source of funds.) Taxes do
payments in the personal sector of the national in­
come accounts but as payments for services in the not include employment taxes or other con­
flow-of-funds consumer account.
tributions to social insurance funds, which
4. The part of consumer contract rent payments are shown under insurance premium pay­
that covers fuel expenditures made by landlords.
ments. Payments of taxes recorded for the
This part of contract rent paid is treated as a pur­
chase of services along with the rest of rent pay­ consumer sector do not include sales or
ments in the flow-of-funds accounts but as expendi­ excise taxes on goods or services purchased
tures for nondurable goods in personal consumption by the sector. Such taxes are included in
expenditures of the national income personal sector. the price of goods and services purchased by

Expenditures for services by the consumer
sector shown on line d are made up of
several flow-of-funds transaction categories—
payroll, interest, rents, and part of the trans­
action category “other goods and services.”
Payroll payments (line e) consist of cash wages
paid to domestic servants. These payments do not
include the value of meals or lodging furnished in
kind. Any expenditures by consumer sector em­




the sector, and the business sectors selling
such goods are shown as paying these taxes.
Not all payments to the government sectors
are classified as taxes. Purchases of govern­
ment products and services, such as tuition
fees and public hospital fees, are included in
“other services” (line h) rather than in taxes.
The relation between total tax payments
by the flow-of-funds consumer sector and

52

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

personal tax and nontax payments by the
personal sector of the national income ac­
counts is presented in Table 7 on page 77
and described on page 62 of this chapter.
Payments of income, property, and “other” taxes
by the consumer sector are given in separate lines.
Income taxes (line j) include those paid to Federal,
State, and local governments. Federal income taxes
include withheld income taxes, which are recorded
as paid by the consumer sector at the time they are
withheld by employers. (Correspondingly, payroll
receipts are shown before the deduction of withheld
taxes.) Property taxes (line k) on personal property
and owner-occupied nonfarm homes are paid to
State and local governments. Special assessments
are also included in line k. Other taxes’ (line 1)
consist of Federal estate and gift taxes, auto use tax
and dividend tax, and fines and fees; and State
and local government death and gift taxes, motor
vehicle and operators’ licenses, other taxes, and fines
and forfeits.

Home purchases (line m) consist of the
consumer sector’s purchases of new and exist­
ing nonfarm homes for owner-occupancy,
shown separately in lines n and o. Line m
represents total purchase price, not cash
downpayment, and includes cost of the
structure, land costs, builder’s profits, and
outlays for brokers’ fees and title search.
Additions and alterations to owner-occupied
homes are included with new home pur­
chases, but maintenance and repairs are
classed with nondurable goods purchases.
Purchases of farm homes for owner-oc­
cupancy and of residential properties for
investment purposes are excluded from line
m. These purchases are classed as expendi­
tures of the farm sector and the nonfarm
sectors, respectively.
Home purchases combine two flow-offunds transaction categories—“other goods
and services” and real estate transfers. Part
of the cost of new home purchases on line n
is applicable to land costs, and is therefore




classed in the real estate transfers category
in the flow-of-funds structure, while the re­
mainder of the cost of new homes is classed
as a transaction in “other goods and services.”
The total paid for purchases of existing
homes (line o) is part of the transaction
category real estate transfers.
The relation of new home purchases as
recorded in the flow-of-funds consumer sec­
tor to the nonfarm residential construction
component of gross private domestic invest­
ment in the national income accounts is
presented in Table 70 on page 301 and de­
scribed on page 291 of Chapter 15.
Grants and donations (line p) consist prin­
cipally of payments to nonprofit organiza­
tions and personal cash remittances to the
rest of the world. Grants to nonprofit or­
ganizations include not only cash gifts but
also transfers of securities and real property
(valued at market prices) to the extent that
such transfers are included in the tax data
that are the basic source of information in
this area. A minor amount of donations
to the Federal Government is also included,
but no measure of gifts from one consumer
to another is available for inclusion.
Insurance premiums (line q) consist of
premium payments on policies written by
private insurance companies, employee con­
tributions to private pension plans, and pay­
ments to both the Federal and the State and
local government sectors, chiefly in connec­
tion with social insurance programs. Addi­
tional detail on these payments is given in
Tables 53 and 54 on pages 256-57.
Private premiums (line r) include payments for
life policies, annuities, and retirement systems, and
those for other private insurance policies. Con­

sumer sector payments of life and annuity premiums

(line s) include payments for disability and double
indemnity provisions, and employee contributions
to private pension plans, both those administered by

C O N S U M E R SECTOR

insurance companies and the self-administered.
Other private premiums (line t) consist of payments
for accident and health and hospitalization insur­
ance and for insurance on automobiles, other per­
sonal property, and real property.
G overnm ent insurance premiums (line u) are paid
to both government sectors. The premiums to the
Federal Government sector are in connection with
various social insurance programs—old-age and sur­
vivors insurance (including contributions of the
self-employed), Federal employee retirement, and
railroad retirement. In addition, payments to the
Federal Government sector include premiums for
national service life insurance and Government
life insurance, and for Federal Housing Admin­
istration mortgage insurance. Consumer insur­
ance premiums to the State and local government
sector consist of payments in connection with unem­
ployment insurance, government employee retire­
ment systems, and sickness compensation funds.

N et increase in financial assets (line v)
represents the consumer sector’s gross ac­
quisitions of deposits, securities, and other
financial claims, less reduction of these assets
through withdrawals, sales, etc.16 Since per­
sonal trusts and welfare and profit-sharing plans are part of the consumer sector,
their financial transactions are reflected in
the appropriate financial asset. Security
transactions represent funds used in the pur­
chase of securities net of funds realized
through sale and retirement.17 Realized
capital gains or losses are reflected in the
dollar amounts of the transactions, but re­
valuations not realized through market trans­
actions are not reflected.
18It should be noted that all transactions in insurance
premiums and benefits are classed as nonfinancial transac­
tions in the flow-of-funds accounts, and therefore no finan­
cial assets in the form of claims on insurance reserves are
recorded. Since data on changes in insurance reserves have
analytic value for some purposes, a memorandum item is
shown on the life insurance subsector account recording
the changes in aggregate policy reserves of life insurance
companies.
17 They also reflect gifts of securities to nonprofit organi­
zations to the extent that grants and donations (line p) in­
clude such gifts.




53

A summary of the relation between net
increases in the consumer sector’s financial
assets as recorded in the flow-of-funds ac­
counts and net increases in individuals’ liquid
asset holdings as recorded in the Securities
and Exchange Commission series on liquid
saving is given in Table 10 on page 80 and
described on page 69.
Currency and deposits (line w ) consist of
changes in the consumer sector’s holdings
of time and demand deposits with domestic
and foreign banks and the Postal Savings
System, and in consumer sector holdings of
United States currency. Deposits are re­
corded on a holder-record basis, not a bankrecord basis. Time deposits, including de­
posits with the Postal Savings System as well
as those at commercial and mutual savings
banks, are shown separately in line x of
the table.
Federal obligations (line y) cover con­
sumer sector transactions in savings bonds
and other types of Federal obligations, in­
cluding net acquisition of such debt not
purchased for cash. Thus net changes in
holdings of armed forces leave bonds and
adjusted service bonds are included, and
transactions in United States savings bonds
reflect net accrual of interest payable (that
is, the excess of accrual of interest over cash
payments of interest on redemptions of sav­
ings bonds). A breakdown of consumer sec­
tor transactions in Federal obligations be­
tween transactions in securities issued for
cash and other transactions in Federal obli­
gations is shown in lines c and d of Table 77
on page 343 of Chapter 19. The cash series
is equal to the consumer sector’s transactions
in Federal obligations, less transactions in
armed forces leave bonds and adjusted service
bonds, and less the excess of accrual of in­
terest over cash payments of interest on re­
demptions of savings bonds.

S4

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

State and local obligations (line z) repre­ in the calculation of totals and allocations
sent the consumer sector’s net acquisition of to parts, of errors in data sources, and of
securities issued by State and local govern­ errors in adjustments to data sources.
ments.
Most of the consumer sector nonfinancial
Corporate securities (line aa) consist of sources of funds and financial uses of funds
the consumer sector’s net acquisitions of are calculated as residuals on the correspond­
securities issued by domestic and foreign ing flow-of-funds transaction accounts. The
corporations and by foreign governments. bulk of nonfinancial uses of funds is derived
Mortgages (line bb) represent net changes from basic data underlying the national in­
in consumer holdings of mortgages on resi­ come accounts but even here, in most cases,
dential properties, farm properties, and non­ the essential calculation procedure is the der­
farm commercial properties.
ivation of a residual from a control total.
Miscellaneous assets (line cc) consist of The financial sources of funds are derived
transactions in the following types of assets: mainly by adjusting source material.
In some of the transaction accounts where
Savings and loan shares (line dd) net of shares
pledged against mortgages (which are also deducted the consumer entry is the residual, the en­
from mortgage debt owed by the consumer sector); tries for other sectors are themselves residuals
Credit balances at brokers and dealers in securities on the sector accounts. The most important
(line ee), both free and other balances;
of these are net withdrawals by proprietors,
Other miscellaneous assets (line ff), which in­
clude (1) credit union shares, (2) an asset to cor­ which are calculated as residuals on the non­
respond to loans in process from savings and loan corporate business and the farm business
associations,18 (3 ) deposit claims with life insurance sector accounts. Any errors or imbalances
companies (dividends left at interest and proceeds
in these sectors are thus reflected in the con­
of policy settlements left by beneficiaries on deposit
with insurance companies), and (4 ) trust and de­ sumer sector discrepancy, which can for
posit liabilities of the Federal Government (mainly that reason be viewed as incorporating the
pay and personal funds of military and civilian per­ “discrepancies” for all three sectors.19
sonnel overseas left on deposit with the Govern­
The discrepancy in the consumer sector
ment).
account thus reflects imbalances and statisti­
Discrepancy (line gg). The discrepancy cal errors not only in estimates made specifi­
in the consumer account arises for a variety cally for the consumer sector account but also
of reasons. A major statistical problem in the in estimates in many other parts of the struc­
account is that there is little direct informa­ ture. The interrelations between discrepan­
tion on the activities of consumers as such.
cies and errors in the various flow-of-funds
Practically all the data in the consumer ac­
count are derived either as residuals by de­
“ Similar considerations apply to the nonprofit organiza­
ducting participation of other groups from tions and the self-administered pension plans subsectors. In
both these accounts, transactions in corporate securities are
control totals or by using and adjusting the calculated as residuals on the subsector accounts, and con­
records of the other parties to the transaction. sumer sector transactions in corporate securities are in turn
calculated as a residual on the corporate securities transac­
The consumer sector discrepancy thus re­ tion account.
Errors in allocation of transactions among noncorporate
flects the net effect of imbalance and errors
business, farm business, nonprofit organizations, self-admin­
18 Such an asset is recorded in the consumer account istered pension plans, and consumers do not contribute to
to offset the loans in process but not yet made that are the consumer sector discrepancy since such errors result in
offsetting errors in the consumer sector account.
recorded as a consumer sector mortgage liability.




CO N SU M ER SECTOR

sector and transaction accounts are discussed
in Appendix A, page 371.
Memorandum. In addition to receipts re­
corded in the flow-of-funds consumer sector
account, consumers receive some income in
kind. The memorandum income in kjnd.
(line ii) records some of these receipts—
nonfarm wages and salaries received in kind
and the value of food and fuel produced and
consumed on farms. The series is composed
of the following elements from Table 39 of
the 1954 edition of National Income, a sup­
plement to the Survey of Current Business:
food furnished commercial and government
(including military) employees, meals fur­
nished domestic servants and nurses, stand­
ard clothing furnished the military, em­
ployees’ lodging, and food and fuel produced
and consumed on farms (including both
amounts consumed by farm proprietors’ fam­
ilies and the amounts furnished farm labor­
ers in kind).

55

The series on line ii does not cover all inkind receipts of consumers. For example,
it does not include the housing facilities
provided in kind by the farm business sector
to farm families and farm laborers. (See
discussion on page 112 of Chapter 5.) 20
While the flow-of-funds system does not
record in-kind flows, it does record the out­
lays for procurement or production of the
items paid in kind. In line ii, the nonfarm
wages in kind are recorded on the same basis
as they are reflected in the flow-of-funds ac­
counts, that is at cost to employers of fur­
nishing the food, clothing, shelter, etc. The
food and fuel produced on farms and con­
sumed by farm laborers and families, on the
other hand, are recorded in line ii at market
values rather than on the cost basis on which
outlays in connection with these items are
included in uses of funds of the farm busi­
ness sector account.

RELATIONSHIPS TO OTHER PRESENTATIONS

In the preceding part of this chapter, ref­
erence has been made to differences between
the presentation of consumer activities in
the flow-of-funds accounts and the recording
of personal or individual activities in the
national income accounts and in the liquid
saving series of the Securities and Exchange
Commission. These differences are presented
systematically in a group of tables at the
end of this chapter. Differences between
components of the consumer sector’s non­
financial sources of funds and analogous
measures comprised in personal income in
the national income accounts are given in
Tables 2-6 on pages 74-76 and summarized
in Table 8 on page 78. For nonfinancial
expenditures, Table 7 on page 77 presents
the relation between the recording of taxes




in the two sets of accounts and Table 9
on page 79 gives the relations of the con­
sumer sector’s total nonfinancial uses of
funds to personal consumption expenditures
in the national income accounts. A sum­
mary statement of the relationship of the
consumer sector’s purchases under the flowof-funds transaction category “other goods
and services” to personal consumption ex­
penditures is presented in Table 65 on page
299 and described on page 280 in Chapter 15.
The financial components of the flow-offunds consumer account—net increases in
liabilities and in financial assets—are related
20 Neither does it include the imputed net income recorded
in the national income accounts arising in connection with
the imputation of rental values for nonfarm owner-occupied
dwellings and with the imputed interest from financial
intermediaries.

56

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

to the Securities and Exchange Commission
series on individuals’ liquid saving in Table
10 on page 80 and described on page 69.
The flow-of-funds series differ from anal­
ogous measures in other national accounting
systems and compilations of data on many
scores—transaction coverage, sector coverage,
sector allocation, extent of consolidation and
netting, valuation, statistical estimates, tim­
ing, etc. The tables describing the relation­
ships between the flow-of-funds and other
measures are organized in terms of the types
of adjustments necessary to arrive at the
flow-of-funds concepts from the analogous
concepts in the national income accounts or
the Securities and Exchange Commission
series.21
P a y r o l l R e c e ip t s a n d W ages a n d S a l a r ie s

The relationship of consumer sector re­
ceipts of payroll in the flow-of-funds accounts
to the wages and salaries series in the na­
tional income accounts is presented in Table
2 on page 74. There are two parts to the
table. The first part (lines A through C)
shows the relationship between two wage
and salary concepts in the national income
accounts. The second part (lines C through
F) relates wage and salary disbursements in
personal income to the payroll series in the
flow-of-funds consumer sector account.
The wages and salaries component of
national income (line A ) is defined in the
1954 edition of National Income as “mone­
tary remuneration of employees commonly
regarded as wages and salaries, inclusive of
executives’ compensation, commissions, tips,
and bonuses, and of payments in kind which

represent income to the recipients.” To some
extent it is on an income-earned rather than
an income-paid basis, since it includes cer­
tain of the more significant retroactive wage
payments as of the time the wages were
earned.
Excess of wage accruals over disbursements
(line B) is deducted in order to convert the
wages and salaries component of national
income to an income-paid rather than an
income-earned basis. Both personal income
and the flow-of-funds payroll series are on
an income-paid basis in this regard.
Line A minus line B yields the series
wage and salary disbursements in personal
income (line C ).22 The following adjust­
ments are necessary to adapt the wage and
salary disbursements series to the flow-offunds series on consumer receipts of payroll.
T ra n sa c tio n c o v e ra g e a d ju s tm e n t

Pay in kind (line D ) is deducted since it
is not a transaction involving transfer of
credit or money. The pay-in-kind items
included in line C and deducted in line D
are the following: (1) food furnished gov­
ernment (including military) and commer­
cial employees; (2) standard clothing issued
to military personnel; (3) board, lodging,
and other perquisites furnished hired farm
workers; (4) meals furnished domestic serv­

22 Before the institution of social insurance contributions
by the self-employed, the national income accounts showed
“wage and salary receipts” rather than “wage and salary
disbursements” as a component of personal income. The
receipts concept differs from the disbursements concept by
the deduction of employee contributions for social insur­
ance. With the institution of social insurance contributions
by the self-employed, personal contributions for social insur­
ance, including employee and (for 1952 on) self-employed
contributions, are shown as a deduction item applicable to
the total of elements making up personal income rather
21 Some of the specific differences between concepts can than to wage and salary disbursements alone as was the
earlier treatment. In the 1954 edition of National Income,
be assigned to more than one category of adjustment. In
“wage and salary receipts’* is no longer shown as a series
such instances, an attempt has been made to assign the adjust­
in the national income accounts or supporting tables, al­
ment to the dominant cause of difference between the
though the data to calculate it are presented.
measures.




CO N SU M ER SECTOR

ants and nurses; and (5) lodging furnished
to nonfarm employees.

57

the flow-of-funds consumer sector shown on
line I.

Transaction classification adjustment
Transaction coverage adjustments
Payroll items in the “other labor income”
Interest paid to consumers in connection
component of personal income (line E) rep­ with tax refunds (line D ) is added, for it is
resent certain types of payments for labor not included in the net interest component
service classed as payroll in the flow-of-funds of personal income but is in the interest
accounts and as “other labor income” (not receipts of the flow-of-funds consumer sector.
as wages and salaries) in the national income
Imputed interest in personal income (line
accounts. These items consist of military E) is deducted. This item consists of the
reserve pay, compensation of enemy prison­ property income of various financial inter­
ers of war, directors’ fees, jury and witness mediaries—banks, life insurance companies,
fees, compensation of prison inmates, etc.23 savings and loan associations, and credit
unions—that, in the national income ac­
I nterest
counts, is transferred through imputed trans­
The relationship of consumer sector re­
actions from these financial institutions to
ceipts of interest in the flow-of-funds accounts
the personal sector. The flow-of-funds ac­
to the interest component of personal income
counts do not record these imputed transac­
in the national income accounts is presented
tions.
in the first part (lines A through I) of Table
Sector coverage adjustment
3 on page 74.
The net interest component of national
Interest receipts of nonprofit organizations
income (line A ) is defined in the 1954 edi­ and self-administered pension plans (line F)
tion of National Income as “total interest are deducted, since the activities of these
(monetary and imputed, private and govern­ organizations, which are in the national in­
ment) accruing to United States persons and come accounts personal sector, are not part
governments minus total interest paid by of the flow-of-funds consumer sector.
United States governments.” The interest
Sector allocation adjustment
component of personal income (line C) is
Interest receipts of nonfinancial nonfarm
obtained by adding net interest paid by gov­
noncorporate
business in personal income
ernment (line B) to line A. Line B includes
net interest paid by both Federal and State (line G) are deducted. In the national in­
come accounts, all monetary interest received
and local governments.
The following adjustments are necessary by unincorporated enterprises (other than se­
to reconcile the interest component of per­ curity and commodity brokers and certain
sonal income with the interest receipts of loan companies) is assumed to be received by
the owners of the enterprises in a personal
23 These are not all the components of “other labor in­
rather
than a business capacity and is, there­
come” in the national income accounts. Some components
—compensation for injuries and employer contributions to fore, included in the interest component of
welfare and profit-sharing plans—are included in the flowpersonal income. In the flow-of-funds ac­
of-funds account for the consumer sector as part of receipts
of insurance benefits or grants and donations, while still
counts, this interest is recorded as a receipt
other components—employer contributions to private pen­
of the noncorporate business sector, not of
sion plans and insurance programs—are recorded as receipts
the consumer sector.
of the flow-of-funds insurance sector.




FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

Transaction classification adjustment
Dividend receipts of mutual insurance
companies (line H ) are added. In the na­
tional income structure such receipts are
classified as interest receipts. Because of
the calculation procedures used in estimating
the interest and dividend receipts of the per­
sonal sector, this classification results in an
overstatement of the net flow of dividends to
the personal sector by the amount of mutual
insurance company receipts and a corre­
sponding understatement of the net flow of
monetary interest to the personal sector by
the same amount.
In the flow-of-funds structure these receipts
are classified as dividend transactions. It is
necessary, therefore, to adjust for the under­
statement in the interest component of per­
sonal income and for the overstatement in
the dividend component of personal income.
Line H is the interest adjustment, and line L
the corresponding dividend adjustment.24

panies adjustment has been described under
line H.
C o n s u m e r B e n e f i t R e c e ip t s a n d T r a n s f e r
P aym ents

The relationship of consumer sector re­
ceipts of insurance benefits and of grants
and donations in the flow-of-funds accounts
to the transfer payments component of per­
sonal income in the national income accounts
is presented in Table 4 on page 75.
T ransfer payments in personal income
(line A ) consist of insurance benefits from
social insurance funds (line B) and other
government and business transfers (line C).
The adjustments needed to arrive at the cor­
responding series in the flow-of-funds con­
sumer sector account—consumer receipts of
insurance benefits (line I) and consumer re­
ceipts of grants and donations (line R)—
are shown separately in the table and de­
scribed separately below.

D iv id e n d s

The relationship of consumer sector re­
ceipts of dividends in the flow-of-funds ac­
counts to the dividend component of per­
sonal income in the national income accounts
is presented in the second part (lines }
through M) of Table 3 on page 74.
The dividend component of personal in­
come (line J) is adjusted to remove dividend
receipts of nonprofit organizations (line K)
and of mutual insurance companies (line L)
to arrive at consumer sector receipts of
dividends in the flow-of-funds accounts
(line M ). The adjustment for nonprofit
organizations arises because of differences in
sector coverage. The mutual insurance com­
24 Dividend receipts of mutual savings banks are also
classified as interest in the national income structure. Since
the amounts are minor, no reclassification is made in the
flow-of-funds accounts.




Insurance Benefits
In reconciling social insurance benefits
in personal income (line B) with flow-offunds consumer sector receipts of insurance
benefits (line I) the following adjustments
are made:
Transaction classification adjustment
Benefits from workmen’s compensation
funds (line D ) are added. These receipts
are included in the “other labor income”
component of personal income, whereas in
the flow-of-funds accounts they are classified
as insurance benefits. Benefits from funds
administered by State and local governments
and by self-insurers, as well as benefits from
commercial carriers, are included in this
adjustment.

C O N S U M E R SECTOR

Transaction coverage adjustments

59

nection with maintaining homes are recorded
in the business sector in the national income
accounts and in the consumer sector in the
flow-of-funds accounts.

Benefits from private life insurance, an­
nuity, and retirement programs (line E)
are added, since they are not recorded as
sources of funds in the personal income
Grants and Donations
series. (Benefits from self-administered pen­
sion plans are entered separately on line G.)
Reconciliation of other government and
Benefits from nonlife insurance policies business transfers payments in personal in­
other than insurance on real property (line come (line C) with flow-of-funds consumer
F) are added. In the national income ac­ sector receipts of grants and donations
counts, these benefits are not part of personal (line R) requires the following adjustments:
income but are netted against total premiums Transaction classification adjustments
on such policies and the net payment is re­
Consumer bad debts included in business
corded as part of personal consumption
expenditures. The adjustment item added transfer payments in personal income (line
here consists of benefits from private insur­ J) are deducted since they are treated as
ance covering automobiles and other per­ adjustments to financial transactions in the
sonal property and from accident and health flow-of-funds accounts and do not enter con­
and hospitalization policies. (Benefits from sumer sector nonfinancial receipts.
Employer contributions to profit-sharing
real property insurance are entered on line
and welfare plans (line K) and courtH.)
Government payments under deposit in­ awarded benefits received by employees in
surance programs, not included in the per­ connection with personal injuries (line L ),
sonal income computation of social insurance both of which are classified as “other labor
benefits, are also added, but are not shown income” in the national income accounts, are
separately in Table 4 because of the small added since they are classed as grants and
donations in the flow-of-funds accounts.25
amounts involved.
Consolidation adjustment

Adjustment from net to gross basis

Insurance benefits received from self-administered pension plans (line G) are added.
Such benefits are not recorded in the per­
sonal sector account of the national income
accounts since the activities of the plans are
consolidated with those of consumers in
the national income structure. Transactions
between these plans and consumers are re­
corded in the flow-of-funds system.

Personal cash remittances from abroad
(line M), netted against personal cash re­
mittances paid to foreign countries in per­
sonal consumption expenditures in the na­
tional income accounts, are added. In the
flow-of-funds accounts, such remittances
from abroad are recorded gross as part
of receipts of grants and donations by con­
sumers and gross remittances going abroad
are part of consumer payments of grants
and donations.

Sector allocation adjustment
Benefits from real property insurance re­
ceived by nonfarm home owners (line H ) are
added. Home-owners’ transactions in con­




25 Court-awarded benefits received by employees in con­
nection with personal injuries are included in the compen­
sation for injuries component of “other labor income.”

FLO W O F FU N D S I N T H E U N IT E D STATES, 1939-53

60

Consolidation adjustments
Grants and donations received by con­
sumers from nonprofit organizations (line
N ) are added. These items are not recorded
in the national income personal sector ac­
count since they are eliminated by consoli­
dation, but they are recorded in the flow-offunds consumer sector account, which shows
transactions between consumer and nonprofit
organizations.
Sector coverage adjustments
Transfers to nonprofit organizations from
governments (line O) and from business
(line P) are deducted since the activities of
nonprofit organizations are not recorded in
the consumer sector account in the flow-offunds system. Profits of Military post ex­
changes and Navy exchanges and ships’
stores, which are not part of the consumer
sector, are also removed as part of line O.
Timing adjustment
N et issues of armed forces leave bonds and
adjusted service bonds—the excess of issues
over redemptions— (line Q) are added. Re­
ceipt of these bonds is recorded in the flowof-funds consumer sector account at the time
of issue, not at the time of redemption as is
done in the personal sector of the national
income accounts.
N o n f a r m P r o p r ie t o r s ’ N e t W it h d r a w a l s
and

N on co rpo ra te N e t I n c o m e

The relationship of net withdrawals by
nonfarm proprietors in the flow-of-funds ac­
counts to nonfarm proprietors’ net income
and net rental income of persons in personal
income in the national income accounts is
presented in Table 5 on page 76. (Table 6
on page 76 presents the corresponding rela­
tionship for farm net income.)




Basic differences between the flow-of-funds
and the national income accounting systems
in recording flows of funds between pro­
prietors of unincorporated businesses and
their enterprises are also discussed on page
43 in this chapter. Table 5 should be con­
sidered in conjunction with the sources and
uses statement for the nonfarm noncorporate
business sector in Table 13 on page 104 of
Chapter 4, and the reconciliation in Table 14
on page 105 between net operating surplus
of the flow-of-funds noncorporate business
sector and nonfarm proprietors’ and rental
income in the national income accounts.
Nonfarm proprietors’ and rental income
in personal income (line A ) consists of the
net income of unincorporated business and
professional enterprises and the net rental in­
come of persons, both of which are com­
ponents of personal income in the national
income accounts. The series includes the in­
ventory valuation adjustment.
Adjustment for differences between net in­
come and net operating surplus (line B) is a
summation of the adjustments contained in
Table 14 on page 105, where the national
income accounts series on unincorporated
business net income is compared to the net
operating surplus concept derived from the
flow-of-funds accounts. The adjustment con­
sists largely of the deduction of imputed and
in-kind income and the addition of deprecia­
tion charges.
Line A plus line B yields net operating sur­
plus of the flow-of-funds noncorporate busi­
ness sector account. Thus the remainder of
Table 5 consists of all entries in the nonfarm
noncorporate business sector account other
than operating sources and uses of funds and
other than net withdrawals.
Valuation adjustment (line C) is a de­
duction of bad debt charges. This adjust­

61

CO N SU M ER SECTOR

ment is not an item of difference between
nonfarm proprietors’ income in personal in­
come (line A ) and net withdrawals by non­
farm proprietors in the flow-of-funds ac­
counts (line J) since it is a deduction item
in the calculation of both series. However,
it is a difference between line A and net op­
erating surplus of the flow-of-funds noncor­
porate business sector since it is a deduction
in calculating net income but not in calculat­
ing net operating surplus (see line D of Table
14, page 105), and as such it is part of line
B in Table 5. As it is not a difference be­
tween lines A and J, it is deducted in line
C to offset its inclusion in line B.
Transaction classification adjustments
Expenditures for construction and equip­
ment (line D ) and increase in inventories
(line E) are deducted. In the national in­
come accounts, these capital investment ex­
penditures are not classified as transactions
to be deducted from gross receipts in the cal­
culation of unincorporated business net in­
come. In the flow-of-funds structure, capital
expenditures are classed among the uses of
funds deducted from the noncorporate sec­
tor’s sources of funds in the calculation of net
withdrawals by proprietors and thus the
amount available for such withdrawals is
less than business net income by the amount
of funds invested in business tangible assets.
Transaction coverage adjustments
Insurance benefits received (line F), net
receipts from real estate transfers (line G),
net increase in liabilities (line H ), and net
increase in financial assets (line I) are trans­
actions of the flow-of-funds noncorporate
business sector that are not recorded in the
national income accounts. They contribute
to the difference between unincorporated
business net income in the national income




accounts and net withdrawals by proprietors
in the flow-of-funds accounts, the sources of
funds (lines F, G, and H ) making the
amounts available for net withdrawals larger
than business net income and the uses of
funds (line I) making such amounts less.
F a r m P r o p r ie t o r s ’ N e t W it h d r a w a l s a n d
F arm N et In com e

The relationship of net withdrawals by
farm proprietors in the flow-of-funds ac­
counts to farm proprietors’ net income in
personal income in the national income ac­
counts is presented in Table 6 on page 76 (see
also discussion on page 43 of Chapter 2).
Table 6 should be considered in conjunction
with the sources and uses statement for the
farm business sector in Table 15 on page 115
of Chapter 5 and the reconciliation in Table
16, page 116, between flow-of-funds farm
business sector net operating surplus and pro­
prietors’ net income in the national income
accounts.
F arm proprietors’ net income (line A ) is
a component of personal income in the na­
tional income accounts.
Adjustment for differences between net in­
come and net operating surplus (line B) is a
summation of the adjustments contained in
Table 16 on page 116, which compare the na­
tional income accounts series on farm net in­
come to the net operating surplus concept de­
rived from the flow-of-funds accounts. The
principal adjustments are: deduction of im­
puted and in-kind income, addition of de­
preciation charges, and an adjustment to re­
move unrealized income in the national in­
come accounts associated with the valuation
of farm inventory changes at market value
rather than at cost. Line A plus line B yields
the net operating surplus of the flow-of-funds
farm business sector.

62

FLO W O F FU N D S IN

T H E U N IT E D STA TES, 1939-53

As in the nonfarm reconciliation in Table
5, the remaining differences between the na­
tional income series on farm income and the
flow-of-funds net withdrawals by farm pro­
prietors consist of all sources and uses of
funds in the flow-of-funds farm business sec­
tor account other than operating sources and
uses and other than net withdrawals.
Transaction classification adjustments
Farm expenditures for construction and
equipment (line C) and increase in farm in­
ventories (line D ) as recorded in the flow-offunds farm account are deducted. In the na­
tional income accounts such capital expend­
itures are not classed as items to be de­
ducted in the calculation of net income. In
the flow-of-funds structure these expenditures
are recorded as uses of funds by the farm
sector and as such are deducted in the cal­
culation of net withdrawals. The amount
available for net withdrawals is thus less
than net income by the amount of these
expenditures.
Profit taxes and dividends paid by cor­
porate farms (line E) are not deducted in the
calculation of the farm net income com­
ponent of personal income in the national
income accounts. In the flow-of-funds ac­
counts these taxes and dividends are recorded
as uses of funds of the farm business sector
and so are deducted in the computation of
net withdrawals by farm proprietors.
Transaction coverage adjustments
Insurance benefits received (line F), net
receipts from real estate transfers (line G),
net increase in liabilities (line H ), net in­
crease in financial assets (line I) are transac­
tions of the flow-of-funds farm business sec­
tor that are not recorded in the national in­
come accounts. They thus contribute to the
difference between farm net income and




flow-of-funds net withdrawals by farm pro­
prietors, the sources of funds (lines F, G, and
H ) making the amounts available for net
withdrawals larger than farm net income
and the uses (line I) making such amounts
less.
C o n s u m e r T a x e s a n d P e r s o n a l T a x es

The relationship of consumer sector tax
payments in the flow-of-funds accounts to
personal tax and nontax payments in the
national income accounts is presented in
Table 7 on page 77.
Personal tax and nontax payments as re­
corded in the national income accounts (line
A ) consist of payments by the personal sec­
tor to the Federal Government (line B) and
to State and local governments (line C). The
following discussion of the adjustments re­
quired in going from the personal tax series
to flow-of-funds consumer taxes (line G ), for
which the Federal, and State and local com­
ponents are shown separately on lines H and
I, indicates which adjustments are applicable
to Federal (line B) and which to State and
local (line C) personal taxes.
Adjustment from net to gross basis
Tax refunds (line D ) that are netted
against tax payments in the calculation of the
personal tax series in the national income ac­
counts are added back in for the flow-of-funds
accounts, where tax payments and refunds
are both recorded on a gross basis. This ad­
justment is applicable to Federal personal
taxes (line B) only.
Transaction classification adjustment
Payments to public institutions for tuition
fees, for fees to public hospitals, and for sim­
ilar purposes included in personal tax and
nontax payments in the national income ac­
counts (line E) are deducted in deriving the

C O N S U M E R SECTOR

63

flow-of-funds consumer sector tax payments,
since in the flow-of-funds accounts such pay­
ments are classified as purchases of “other
goods and services” rather than as tax pay­
ments. This adjustment applies mainly to
State and local personal taxes and nontaxes
(line C).

tables for some of the personal income com­
ponents (other labor income and personal
contributions to social insurance, a negative
component of personal income). In addi­
tion, some components of flow-of-funds con­
sumer nonfinancial sources have no corre­
sponding elements in personal income.

Sector allocation adjustment

Transaction coverage adjustments

Property taxes on nonfarm owner-occupied
dwellings (line F), which are recorded in the
national income accounts as paid by the busi­
ness sector, are added, since they are classed
as consumer sector payments in the flow-offunds accounts. The adjustment applies to
State and local personal taxes (line C) only.

Imputed and in-kind income in wages and
salaries and in interest (line B), contained in
personal income, is deducted. The items
covered by line B are also in line D in Table
2 and line E in Table 3, and are discussed on
pages 56 and 57.
Imputed and in-kind income in proprie­
tor’s and rental income (line C), as contained
C o n s u m e r N o n f i n a n c i a l R e c e ip t s a n d
in personal income, is deducted. The items
P erso n a l I n c o m e
covered by line C are incorporated in line B
Table 8 on page 78 presents the relation­ of Table 5 and line B of Table 6 but are not
ship of consumer sector total nonfinancial discussed in connection with those tables.26
sources of funds in the flow-of-funds ac­ The net imputed rental income from ownercounts (line U ) to total personal income occupied dwellings, farm and nonfarm, and
in the national income accounts (line A ). the value of farm products withdrawn in
Tables 2-6 on pages 74-76 and described on kind and consumed directly by farm oper­
pages 56-62 present the corresponding rela­ ators and their families, are in personal in­
tionships of most of the components of per­ come but are not part of consumer sector non­
sonal income to analogous components of financial sources of funds. These imputed
consumer sector nonfinancial sources of and in-kind flows are not recorded in the
funds. Therefore many of the adjustments flow-of-funds accounts.
which have been discussed for the preceding
Interest on tax refunds due (line D ) is
tables also appear in Table 8. However, added since it is not in the personal income
some of the adjustments in the component series but is in consumer nonfinancial sources.
reconciliations are not necessary in going This item is also on line D of Table 3.
from one total to the other, since they repre­
Receipts from sales of homes, cars, and
sent differences in component classification other goods (line E) are added. In the na­
of certain items as between the two total tional income accounts, transfers of such ex­
series rather than differences in the coverage isting assets are not recorded and these con­
of the two totals. On the other hand, some sumer receipts are not part of personal in­
adjustments not contained in the component
26 They are discussed in connection with line B of Table
reconciliation tables are necessary in reconcil­
14, p. 105, and line B of Table 16, p. 116. See Ch. 4,
ing the totals since there are no relationship p. 103 and Ch. 5, p. 114.




64

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

come.27 They are part of the nonfinancial
receipts of the flow-of-funds consumer sector,
consisting of the consumer sector’s receipts
under two flow-of-funds transaction cate­
gories, real estate transfers and “other goods
and services.” Since these receipts are not
in personal income, this adjustment does not
appear in any of the preceding component
reconciliations.
Benefits from private life insurance, an­
nuity, and retirement programs (line F) are
added since they are not recorded as sources
of funds in the personal income series. (Bene­
fits from self-administered pension plans are
entered separately on line J. This item is
also on line E of Table 4.
Benefits netted against nonlife insurance
premiums in personal consumption expendi­
tures (line G) are added. These benefits, not
in personal income, consist of benefits from
private automobile, personal property, and
accident, health and hospitalization insur­
ance. (Benefits from real property insurance
are entered on line R below.) This item is
also on line F of Table 4. Government de­
posit insurance benefits, not in personal in­
come, are also added but are not shown sep­
arately in Table 8 because of the small
amounts involved.
Timing adjustment
N et issues of armed forces leave bonds and
adjusted service bonds—the excess of issues
over redemptions—(line H ) are added. Re­
ceipt of these bonds is recorded in the flowof-funds consumer sector account as of the
time of issue, not as of the time of redemp­
tion as is the case in the personal sector of
27 The factor incomes and product arising in connection
with these transfers are included in the national income
accounts. Thus dealers* gross margins on used cars sold
to consumers are included in persona! consumption expend­
itures and in the appropriate charges against product.




the national income accounts. This item is
also on line Q of Table 4.
Consolidation adjustments
Grants and donations received from non­
profit organizations (line I) and insurance
benefits received from self-administered pen­
sion plans (line J) are added. These items
are not shown as receipts of the personal
sector of the national income accounts since
the institutions are part of the personal sector
and these transactions between them and
other elements of the sector are eliminated
in consolidation. The flow-of-funds system
records these institutions in other sectors and
records all transactions between them and
consumers. These items are also on lines N
and G of Table 4.
Transaction classification adjustments
Consumer bad debts included in business
transfer payments in personal income (line
K) are deducted since they are treated as
adjustments to financial transactions in the
flow-of-funds accounts and do not enter con­
sumer sector nonfinancial receipts. This item
is also in line J of Table 4.
Personal contributions for social insurance
(line L) are added. These contributions are
deducted from personal sector receipts in the
calculation of personal income. In the flowof-funds accounts, consumer sector nonfinan­
cial sources of funds are shown gross, without
deduction of consumer contributions for
social insurance. The contributions deducted
in computing personal income must there­
fore be added back to arrive at consumer
nonfinancial sources. (Payment of the con­
tributions is also shown gross as a consumer
sector use of funds under insurance pre­
miums.) Through 1951, the series consists
of employee contributions only, and there­

CO N SU M ER SECTOR

after also includes contributions of self-em­
ployed persons. This adjustment does not
appear in any of the component reconcilia­
tions.
Sector coverage adjustments
Interest, dividends, and transfer payments
received by nonprofit organizations and self­
administered pension plans in the personal
sector of the national income accounts (line
M) and employer contributions to self-ad­
ministered pension plans (line N ) are de­
ducted. (Employer contributions to pension
plans administered by insurance companies
are deducted in line P.) These institutions,
which are in the personal sector of the na­
tional income accounts, are not in the flow-offunds consumer sector but are in separate
subsectors, and their receipts, which are in
personal income, are not part of consumer
sector receipts. The adjustments in line M
also appear on lines F and K of Table 3 and
lines O and P of Table 4. The adjustment
on line N , which represents part of the “other
labor income” component of personal in­
come, does not appear in any of the com­
ponent reconciliations since no specific rela­
tionship table for “other labor income” is
shown.
Sector allocation adjustments
Interest receipts of nonfinancial nonfarm
noncorporate business in personal income
(line O) are deducted since these receipts
are allocated to the noncorporate business
sector, not to the consumer sector, in the flowof-funds accounts. This adjustment also ap­
pears on line G of Table 3 (see discussion on
page 57).
Employer contributions to insurance pro­
grams and to pension plans administered by
insurance companies (line P) are deducted.
In the national income accounts such pre­




65

miums are received by the personal sec­
tor as part of “other labor income.” In
the flow-of-funds structure, such premiums
are recorded as flowing directly from business
sectors to the insurance sector and do not
enter consumer sector nonfinancial sources.
This adjustment does not appear in any of
the component reconciliations since no spe­
cific relationship table for “other labor in­
come” is shown.
N et funds left in and invested in noncor­
porate businesses by the consumer sector
(line Q) are deducted. This item, together
with the imputed and in-kind income in pro­
prietors’ and rental income (line C), con­
stitutes the difference between proprietors’
and rental income in personal income and
net withdrawals by proprietors in the flowof-funds accounts. Consumer sector sources
of funds differ from personal income by the
net amount of funds retained or invested in
noncorporate enterprises.28 Line Q is
roughly equal to net investment in fixed
capital and inventories plus the net increase
in financial assets less the net increase in
liabilities of the enterprises. See also Tables
5, 6, 14, and 16.
Benefits from real property insurance re­
ceived by nonfarm home owner-occupants
(line R) are added since these receipts of the
flow-of-funds consumer sector are not part
of the receipts of the national income per­
28 It should be noted that in the flow-of-funds accounts
outlays made for the acquisition and operation of farm
dwellings are classed as expenditures of the farm business
sector, not of the consumer sector. This classification re­
sults from the difficulty in separating costs, mortgage pay­
ments, and expenses attributable to farm business operations
from those attributable to farm family activities. The net
withdrawal of funds by farm proprietors, recorded as a
source of consumer funds, is net of these housing expenses.
Thus the cost of acquiring and maintaining farm dwellings
is a component of line Q, net funds left in noncorporate
business. This means that part of the consumption expend­
itures of farm households is done by the farm business
and given in kind to households.

66

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

sonal sector, which excludes transactions in­
cident to home ownership. This adjustment
also appears on line H of Table 4.
Adjustments from net to gross basis
Tax refunds (line S), which are netted
against tax payments in calculating the per­
sonal tax series in the national income ac­
counts, are added, since both tax refunds and
payments are recorded on a gross basis in the
flow-of-funds accounts. This adjustment
does not appear in the reconciliations to per­
sonal income components (Tables 2-6) but
it is matched by the adjustment on line D
of Table 7.
Personal cash remittances from abroad
(line T ) are added since these receipts of the
consumer sector in the flow-of-funds accounts
are netted against expenditures rather than
recorded in receipts of the personal sector in
the national income accounts. The adjust­
ment also appears on line M of Table 4.
C o n s u m e r N o n f i n a n c i a l E x p e n d it u r e s a n d
P e r s o n a l C o n s u m p t i o n E x p e n d it u r e s

Table 9 on page 79 presents the relation­
ship of total nonfinancial uses of funds of
the consumer sector in the flow-of-funds
accounts (line S) to total personal consump­
tion expenditures in the national income
accounts (line A ). The relationship be­
tween consumer sector purchases of other
goods and services and personal consumption
expenditures is given in Table 65 on page
299 of Chapter 15.
Transaction coverage adjustments
Imputed expenditures for food, clothing,
shelter, and services in personal consumption
expenditures (other than imputed purchases
of “services” from life insurance companies)
but not recorded as uses of funds of the flowof-funds consumer sector are deducted on




line B. This adjustment covers imputed con­
sumption expenditures in connection with
food furnished government (including mili­
tary) and commercial employees and meals
furnished domestic servants and nurses;
standard clothing issued to military person­
nel; lodgings furnished employees; food and
fuel produced and consumed on farms; gross
imputed rental value of farm dwellings; gross
imputed space rental value of nonfarm
owner-occupied dwellings; and services fur­
nished without payment by financial inter­
mediaries other than insurance companies.
The deduction of imputed expenditures
for cost element in life insurance premiums
in personal consumption expenditures (line
C) and the addition of insurance premiums
for private life insurance, annuity, and re­
tirement plans in consumer sector nonfinan­
cial uses of funds (line D ) are the adjust­
ments for the differences in coverage of life
insurance transactions in personal consump­
tion expenditures and in nonfinancial uses
of the flow-of-funds consumer sector. The
personal consumption expenditures series
does not cover life insurance premiums paid,
but shows instead an imputed purchase of
services equal to the costs of the insurance
companies in handling the life insurance; the
flow-of-funds consumer sector account does
not cover this imputed transaction, but shows
the gross premiums for life insurance paid
by consumers.
The adjustment in line C comprises total
operating expenses of private life insurance
companies and fraternal and assessment as­
sociations, excluding payments to policyhold­
ers and expenses allocated to accident and
health insurance. It thus includes expenses
of handling group life plans and pension
plans administered by insurance companies,
which are pardy financed by employers. The
adjustment in line D consists of gross pre­

CO N SU M ER SECTOR

miums paid by consumers to these organiza­
tions for various kinds of private life and
annuity insurance. This adjustment does not
include consumer premiums to self­
administered pension plans, which are en­
tered separately on line K, or premiums for
social insurance programs, listed in line O.
Nonlife insurance benefits netted against
premiums in personal consumption expendi­
tures (line E) are added. The nonlife insur­
ance component of personal consumption ex­
penditures consists of net premiums paid,
that is, gross premiums paid less gross bene­
fits received. The nonlife insurance com­
ponent of nonfinancial uses of the flow-offunds consumer sector consists of gross pre­
miums paid. The difference between the
two is thus benefits received. The adjust­
ment on line E consists of consumer sector
benefits from insurance on automobiles and
other personal property and from accident
and health and hospitalization policies.
Purchases of existing houses (line F) are
added. Transfers of existing assets are ex­
cluded from the personal consumption ex­
penditure series of the national income ac­
counts but are included in flow-of-funds con­
sumer expenditures. The flow-of-funds series
on such purchases includes the total amounts
paid by the purchaser in the acquisition of
existing homes. In addition to purchases of
existing homes, line F includes the commis­
sions paid to brokers by sellers of existing
homes. In the national income accounts the
payment of commissions on these transactions
is classified as a current business expense.
Gross purchases of used goods from deal­
ers less dealer/ margins included in line A
(line G) are added. Purchases of used cars
and other used goods from dealers enter per­
sonal consumption expenditures in the na­
tional income accounts only by the amount




67

of dealers’ gross margins on such goods sold
to the personal sector rather than by the full
purchase price. In the flow-of-funds ac­
counts, the consumer sector’s gross purchases
of used cars and other goods from dealers
are recorded. The adjustment on line G
represents the difference between estimated
consumer purchases of used goods from deal­
ers and the dealers’ margins included in per­
sonal consumption expenditures. It is also
used as an estimate of the consumer sector’s
receipts from the transfer of automobiles and
other goods to dealers shown on line E of
Table 8.
Adjustment from net to gross basis
Personal cash remittances from abroad
(line H ), which are netted against the per­
sonal cash remittances paid to foreign coun­
tries in the calculation of personal consump­
tion expenditures in the national income ac­
counts, are added since consumer sector non­
financial uses in the flow-of-funds accounts
include the gross remittances paid.
Consolidation adjustments
Purchases from nonprofit organizations
(line I), grants and donations to nonprofit
organizations (line J), and insurance pre­
miums to self-administered pension plans
(line K) are added. These consumer ex­
penditures are not recorded in the personal
sector account of the national income system
since the activities of these institutions are
consolidated with those of consumers in the
personal sector account. These expenditures
are part of nonfinancial uses of funds of the
flow-of-funds consumer sector.
Sector coverage adjustment
Current expenditures of nonprofit organi­
zations in personal consumpion expenditures
(line L) are deducted. These organizations

68

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

are in the personal sector in the national in­
come accounts. Their expenditures are not
in the flow-of-funds consumer sector non­
financial uses of funds since the organiza­
tions are not in the flow-of-funds consumer
sector.
Transaction classification adjustments
Taxes paid by consumers in flow-of-funds
accounts (line M) are added since personal
consumption expenditures do not include
tax payments and such payments are part
of total nonfinancial uses of funds of the con­
sumer sector in the flow-of-funds accounts.
Line M is the flow-of-funds series on con­
sumer sector payments of taxes. The rela­
tion between this series and the personal tax
and nontax series in the national income ac­
counts is presented in Table 7 on page 77.
Payments to public institutions for tuition
fees, for fees to public hospitals, and for
similar purposes that are in the national in­
come accounts personal tax and nontax pay­
ments (line N ), but are not in flow-of-funds
consumer taxes (shown in line M), are also
added. In the flow-of-funds accounts, these
payments are classified as purchases of other
goods and services, and must thus be added
in going from personal consumption expend­
itures to consumer sector nonfinancial uses.
Consumer contributions for social insur­
ance in the flow-of-funds accounts (line O)
are added. These contributions are a non­
financial use of funds by consumers in the
flow-of-funds structure, but are not part of
personal consumption expenditures in the
national income accounts. In the personal
sector of the national income accounts they
are netted against receipts rather than shown
on the expenditures side. Line O is equal to
the series “personal contributions for social
insurance” in the national income accounts.




Sector allocation adjustments
Personal consumption expenditures include
premiums for accident and health and group
hospitalization insurance that are paid by
business (line P).29 These personal con­
sumption expenditures are balanced on the
receipts side of the personal sector of the
national income accounts by employer con­
tributions to private pension and welfare
funds, a part of “other labor income” in per­
sonal income. In the flow-of-funds accounts,
the consumer sector neither receives the funds
nor pays the premiums (the premiums are
paid directly by the business sectors to the in­
surance sector) and line P must be deducted
in arriving at consumer sector nonfinancial
uses.
Operating expenses of nonfarm owner-oc­
cupied homes (line Q) are added. They are
classed as consumer sector purchases in the
flow-of-funds accounts. In the national in­
come accounts these expenses are not part of
personal consumption expenditures, but are
treated as intermediate expenditures of the
business sector. The expenses included in
this adjustment consist of maintenance and
repair costs, mortgage interest, real property
insurance premiums, and premiums for Fed­
eral Housing Administration insurance on
home mortgages. Property taxes are not in
line Q since they are part of the adjustment
on line M. Depreciation costs are excluded
since they are not a flow-of-funds transaction.
Purchases of new homes including land
costs (line R) are added. In the national
29 This line differs from line P of Table 8. In that table,
line P includes employer contributions to pension and group
life insurance plans administered by insurance companies,
as well as contributions for accident and health and hos­
pitalization insurance. In Table 9, these items are shown
as two separate deductions. Purchases of life insurance
and pensions financed by employers are removed as part
of the deduction on line C (the life insurance expense
item), and contributions to accident and health and hos­
pitalization are deducted in line P.

CO N SU M ER SECTOR

income accounts, the purchase of new con­
struction is not part of personal consump­
tion expenditures but is recorded in the sav­
ing and investment account as part of busi­
ness investment; and land costs, since they
represent transactions in existing assets, are
not recorded at all. In the flow-of-funds
accounts, consumer purchases of new homes
are included in nonfinancial uses of funds of
the consumer sector. For relationship be­
tween this line and the new residential con­
struction series in the national income ac­
counts, see Table 70 in Chapter 15.
C o n s u m e r F in a n c i a l F l o w s a n d
I n d iv id u a l s ’ L iq u id S a v in g

The relationship of the financial sources
and uses of funds of the flow-of-funds con­
sumer sector to the Securities and Exchange
Commission series on liquid saving by in­
dividuals is presented in Table 10 on page
80.30 Liquid saving by individuals is de­
fined by the SEC as covering “in addition to
personal holdings . . . saving [in certain
specified forms] of unincorporated business,
trust and pension funds and nonprofit insti­
tutions . . . In addition, the method of cal­
culation results in the inclusion of the hold­
ings of credit unions and miscellaneous agri­
cultural credit organizations. The types of
assets covered in the SEC series are currency
and bank deposits, savings and loan associa­
tion shares, government and corporate securi­
ties, and equity in private and government
insurance.
In terms of this definition the flow-of80With the SEC release covering the fourth quarter of
1954, the form of presentation of this SEC series was
changed. The name of the series was changed from “total
liquid saving” to “change in net claims.” A subtotal ex­
cluding equity in government insurance was introduced.
Since the release indicates that the changes in presentation
are tentative, pending completion of a more general review
of savings estimates, the “liquid saving” terminology has
been retained in this report.




69

funds consumer sector financial transactions
cover only personal holdings and holdings of
personal trusts for a somewhat different set of
transactions assets. In reconciling the two
series, it is necessary to adjust for these differ­
ences in sector and transaction coverage.
There are also differences with respect to
netting and with respect to statistical
estimates.
The SEC series on liquid saving by in­
dividuals (line A) consists of net increase in
individuals’ liquid asset holdings (line B)
less net increase in individuals’ debt (line
M ), both as measured by the SEC. Recon­
ciliation with the financial transactions re­
corded in the flow-of-funds consumer sector
account is presented separately for assets
(lines B through L) and liabilities (lines M
through R).
Consumer Financial Assets and Individuals’
Liquid Assets
The following adjustments are necessary to
reconcile net increase in individuals’ liquid
asset holdings as measured by SEC (line B)
with net increase in consumer financial
assets in the flow-of-funds accounts (line L).
Sector coverage adjustment
The SEC series on individuals’ liquid assets
includes some nonconsumer transactions in
financial assets (line C ), which are deducted
in reconciling to flow-of-funds consumer sec­
tor assets. Items deducted in this adjustment
are the following:
Increase in currency and deposits held by noncor­
porate business (farm and nonfarm), nonprofit or­
ganizations, self-administered pension plans, credit
unions, and miscellaneous agricultural credit organi­
zations.
Increase in savings and loan shares held by credit
unions.
Increase in United States Government securities
held by nonfarm noncorporate business, nonprofit

70

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

organizations, self-administered pension plans, credit
unions, and miscellaneous agricultural credit organi­
zations.
Net acquisition of corporate securities by nonfarm
noncorporate business, nonprofit organizations, and
self-administered pension plans.

Transaction coverage adjustments

in the United States possessions and in closed banks,
which are not included in the flow-of-funds measure
of consumer financial assets.
Differences in United States Government securi­
ties because of a timing adjustment for the war
years made in the calculation of the SEC measure
but not in the flow-of-funds calculations.
Loans in process from savings and loan associa­
tions, not included in liquid saving but included
in flow-of-funds assets to offset the comparable item
included in mortgage debts owed by consumers.
Trust and deposit liabilities owed by the Federal
Government to consumers included in flow-of-funds
consumer sector financial assets but not included in
the liquid asset figure.

Increases in equity in insurance included in
the SEC series (line D ), which are not re­
corded under consumer financial assets in
the flow-of-funds accounts, are deducted.
Deposit claims with life insurance com­
panies (line E) are classed as consumer as­
sets in the flow-of-funds system but are not
Adjustment from net to gross basis
covered in the SEC series; increases in these
claims are therefore added.
Changes in ban\ loans to individuals to
Changes in credit union shares, customer acquire securities netted against security pur­
credit balances at brokers and dealers, and chases in the liquid asset holdings series (line
mortgages held by consumers but not re­ H ) are added because security purchases are
corded in individuals’ liquid saving are recorded gross of borrowing in the flow-ofadded on line F. This adjustment, partic­ funds accounts.
ularly with respect to credit union shares and
Adjustments for differing estimates
customer credit balances, may also be viewed
as an adjustment arising from differences
Difference in estimate of float applicable
in consolidation, since credit unions and non­ to currency and deposits (line I) is de­
corporate businesses are classed as individuals ducted.81 The SEC and flow-of-funds cal­
in the liquid saving concept and their trans­ culations use or imply different estimates of
actions with consumers are eliminated in float. These estimates disagree partly be­
consolidation. To the extent that consumer cause of the use of different estimates of total
mortgage assets are owed by individuals, float and partly because of differences in esti­
their exclusion from line B and their inclu­ mates of float applicable to deposits of in­
sion in line L may also be viewed as a con­ dividuals, partnerships, and corporations.
solidation difference. However, mortgages
Difference in estimate of changes in nonheld by consumers may also include mort­ individual holdings of currency and deposits
gages owed by nonindividuals, and to that and securities (line J) is deducted. This ad­
extent, the adjustment is better viewed as justment item consists of differences in esti­
arising from a coverage rather than a con­ mates of government, corporate business, in­
solidation difference.
stitutional, and foreign holdings of cash and
Other transaction coverage differences securities. The derivations of both the SEC
(line G ), which are added to the SEC series, individuals’ holdings and the flow-of-funds
consist of:
consumer holdings of cash and securities inDifferences in currency and deposits arising from
the inclusion in liquid savings of deposits in banks




S1 See discussion of float in Ch. 16, p. 304.

CO N SU M ER SECTOR

volve the deduction of nonindividual hold­
ings from totals of the cash or securities out­
standing. Thus any differences between SEC
and flow-of-funds estimates of nonindividual
holdings result in differences between in­
dividuals’ and consumer holdings.
Other differences in estimates, deducted in
line K, consist of the following:
Differences in estimates of foreign bank deposits
owned by domestic individuals, partnerships, and
corporations. Estimates of such deposits are added
to holdings of deposits in domestic banks in deriv­
ing cash assets of both SEC individuals and flow-offunds consumers.
An adjustment for lost currency incorporated
in the flow-of-funds calculation.
A minor adjustment for holdings of noninterestbearing State and local government debt, which are
excluded from the SEC liquid saving calculation.

Consumer Liabilities and Individuals’ Debt
The following adjustments are necessary
in reconciling the net increase in individ­
uals’ debts in the SEC liquid saving calcula­
tion (line M ) with the net increase in con­
sum er sector liabilities in the flow-of-funds
accounts (line R ):
Transaction coverage adjustments
Changes in debit balances at brokers and
dealers and consumer credit owed to indi­
viduals (line N ), which are not recorded in
SEC net increase in individuals’ debt, are
added. Consumer credit owed to individuals
is that owed to nonfarm noncorporate busi­
ness and credit unions. Since nonfarm non­
corporate business (including brokers and
dealers) and credit unions are classed along
with consumers as individuals in the SEC
measure, the adjustments on line N might
also be viewed as arising from differences in
consolidation.
Home mortgages owed to individuals net
of mortgages owed by nonconsumers (line




71

O) are added. The SEC series on nonfarm
residential mortgage debt included in line M
represents all debt on one- to four-family
nonfarm residential properties owed to non­
individuals (that is, to corporations, Federal
Government, and financial intermediaries)
and only such debt. Thus the SEC series as­
sumes that all such debt is owed by individ­
uals. The SEC series further involves the
assumption that debt on one- to four-family
nonfarm residences owed to individuals is
owed by individuals, and thus such debt is
not recorded in the consolidated account for
individuals.
On the other hand, in the flow-of-funds
structure, some debt on one- to four-family
homes is assigned as a liability to the cor­
porate and nonfarm noncorporate business
sectors as well as to the consumer sector; and
mortgage debt is shown with no consolida­
tion within groups. Thus flow-of-funds con­
sumer sector mortgage debt included in line
R is greater than SEC individuals’ mortgage
debt included in line M by the amount of
home mortgages owed to individuals by in­
dividuals and is less by the amount of mort­
gages on one- to four-family structures owed
by corporate and noncorporate builders and
landlords. The net adjustment for these dif­
ferences is made on line O.32
Changes in policy loans and other (line P)
are added. Policy loans are netted against
equity in insurance in the SEC presentation,
but are included in consumer sector liabilities
in the flow-of-funds accounts. The adjust­
ment includes loans on national service life
insurance and Government life insurance as
well as on private life insurance. Line P also
includes bank debt matched by hypothecated
deposits, which is not recorded in individ­
32 Only a single net adjustment is made because to some
extent elements in the two parts are offsetting and separate
presentation would thus have little significance.

72

FLO W O F FU N D S IN T H E U N ITED STATES, 1939-53

uals’ debt in the SEC calculation of liquid
saving.
Adjustment from net to gross basis
Bank loans to consumers to acquire securi­
ties (line Q ), which are netted against se­
curity purchases in the SEC calculation of
liquid saving, are added. This adjustment

differs from the one in line H in that only
loans owed by the flow-of-funds consumer
sector are recorded in line Q, whereas the
adjustment on line H is the deduction made
in the SEC calculations and thus also in­
cludes loans owed by other segments of the
SEC individuals group, such as security
brokers and dealers.

Footnotes for Table 1 on opposite page.
*Less than 50 million dollars.
**Net uses (+ ) or net sources ( —) not accounted for.
1 Includes benefit payments from private pension plans.
2Consumer receipts in flow-of-funds transaction category “other goods and services.” Includes trade-in allowances associated with purchase
of automobiles; also includes sale of furniture, clothing, and other consumer goods.
3 Includes small amount of bank debt matched by hypothecated deposits not shown separately.
4Trade debt owed to sales finance companies, credit unions, other nonbank financial institutions, and retail outlets.
5Debit balances owed to brokers and dealers in securities.
6Lines B B and CC constitute consumer debt in the flow-of-funds category “miscellaneous financial transactions.”
7Lines b, c, h, and m together equal consumer expenditures in the two flow-of-funds transaction categories, “other goods and services” and
“real estate transfers.”
8Contract rent.
9Includes cost of land, a component of the flow-of-funds transaction category “real estate transfers.” Also includes consumer expenditures
for capital improvement of existing houses.
I °lncludes employee contributions to private pension plans.
I I Mainly payments under old age and survivors insurance, government employee retirement, and veterans’ life insurance programs.
12Time deposits with commercial and mutual savings banks and Postal Savings System.
13
Credit union shares, loans in process from savings and loan associations, deposit claims with life insurance companies, and trust and deposit
liabilities of the Federal Government.
14Food furnished commercial and government (including military) employees; the value of food and fuel produced and consumed on farm s;
meals furnished domestic servants and nurses; standard clothing furnished the military; and lodging furnished nonfarm employees.
N ote .— D etails may not add to totals because of rounding.




For description of table, see p. 44,

C O N S U M E R SECTOR

73

TABLE 1—CONSUMER SECTOR: SOURCES AND USES OF FUNDS STATEMENT
(In billions of dollars)

1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951

1952 1953

Sources of funds
Nonfinancial sou rces..................................... 72.6 79.4 95.1 117.0 144.2 160.1 167.2 182.7 199.8 216.9 218.1 238.6
Payroll............................................................ 45.3 49.1 61.0 80.0 102.3 113.0 113.2 109.6 1 2 1 . 0 133.2 132.6 144.6
3.7 3.6 3.6 3.4 3.2 3.3 3.7 4.2 4.6 5.1 5.6 6 . 1
Interest..........................................................
3.7 4.0 4.4 4.2 4.4 4.6 4.6 5.7 6.4 7.1 7.3 9.0
Dividends.......................................................
Insurance benefits.......................................... 4.3 4.6 4.4 4.4 4.2 4.6 5.6 7.0 7.3 8 . 0 9.8 13.1
3.3 3.4 3.4 3.4 3.4 3.6 3.9 4.3 4.8 5.3 5.8 6.5
Private.........................................................
2.7 2.6 2 . 6
2.7 2.9 3.0 3.3 3.5 3.8 4.1
2.8 2 . 8
Life policies, annuities 1 ........................
2.4
.8
.9 1 . 1
1.5 1 . 8
O ther.......................................................
.6
.6
.7
.8
1.2
2.0
1.0
2.7 2.5 2.7 4.0 6.6
Government..................................................
1.0 1.1 1.0 1.0
17
•<?
8.7
2.0
2.1
2.2
2.2 2 . 2
2.8
4.6 9.7 9.6 8.5 8 . 6
Grants and donations...................................
T
.6
.6
.6
.9 2.6 7.2 6.5 4.7 4.7 4.2
K
.5
.5
Federal Government. ..................................
L
State and local government.........................
1.1 1.0 1.0 1.0 1.0 1.0 1.0 1.3 1.9 2.5 2.5 3.0
.6
.9 1.0 1.1 1.2 1.3 1-4. 1.5
M
Private.........................................................
.4
.5
.5
.8
*
*
*
*
*
2.4 1.7
.3 1.3 1.7 1.7 1 . 8
N
Tax refunds....................................................
O
Net withdrawals by proprietors.................. 10.9 12.3 15.1 18 49 23.4 26.2 28.1 34.7 39.2 42.4 39.4 39.2
P
2.7 3.7 4.5 3.9 4.3 5.2 6 . 0 10.3 1 0 . 0 10.7 12.5 16.1
Sales receipts..................................................
Homes..........................................................
1.9 2.6 3.0 2.5 3.2 4.1 4.8 8.8 7.9 7.7 9.1 12.6
0
R
Automobiles, etc.2.......................................
.8 1.1 1.5 1.5 1.1 1.1 1.1 1.4 2.2 3 .0 3.4 3.6

A
B
C
D
E
F
G
H
I

6.8
.9
1.9

6.9 11.2
2.7 3.7
1.0 1.6
1.7 2.1

6.6 10.5 10.7
.7 4.4 3.7
.1 1.9 1.5
.6 2 A 2.2

.2
.2

.5
.1
.4

.9
.3
.6

3.6
1.5
2.1

4.0
1.3
2.7

3.6
1.0
2.7

6.5
2.2
4.3

5.8
1.6
4.3

5.9
1.6
4.2

6.2
1.7
4.5

-.1
-.1

.4
.1
.3

.8
.5
.3

.7 - 1 .5
.6 —.7
.1 - . 7

.3
-.1
.4

.8
.2
.6

-.2
-.1
- .1

.2
.1
.1

.5
./
A

-.2

-.2

- .3

- .3

-.2

4.2
1.8
2.4
*
-.1
.1
*

.3

.3

.2

.2

.2

Z
AA
BB

Security loans................................................
B anks..........................................................
Other5 6 ........................................................

-.2
-.1
- .1

- .3
- .1
- .J

- .2

-.1

CC

Policy loans 6 ..................................................

^.1

- .2

DD Val. adj. (debt write-offs, n e t)...................

.3

Total, above sources......................

2.6

7.5
3.2
1.3
1.9

.2
.4

EE

2.1

42.1 45.4 43.1
17.1 21.7 2 2 . 0
13.4 16.7 16.8
3.7 4.9 5.3

4.8
2.7
1.2
16

Mortgages.......................................................
Banks..........................................................
Other ............................................................

1.1

1.8

8.1

.3
.3

W
X
Y

.6

3.6
2.5
2.0

8.1

2.0

1.2
.9
.1
.8

.4
.7

3.6
2.6
1.9

1.2
.2
.1
.1

N et Increase in liab ilities3..........................
Consumer credit............................................
Banks..........................................................
Other* ..........................................................

1.8

7.9
3.7
2.4
1.8

1.7 —3.2 - . 8
. 8 - 3 .2 - 1 . 1
.3 - 1.0
4
.5 - 2.2 - . 7

S
T
U
V

1.1

265.0 289.1 303.4
168.0 182.3 195.5
6.7 7.1
6.6
8.9 8.9 9.2
1 2 . 6 13.9 15.8
7.6 8.3 9.4
4.5 4.7 5.2
3.1 3.6 4.2
5 .0 5.5 6 A

.4
.1
.3

1.2

.4
.8

.3
.8

-.1
-.1

.3

*

.6

-.1

.2

.3

2.8

-.1

-.1
*
.1

.2

.2

.2

.1

.2

.3

.4

.3

.3

.3

.3

74.1 81.5 97.1 114.1 143.6 161.4 169.3 187.7 207.5 224.0 225.4 250.2 272.0 299.9 314.4

U ses of funds
a
b
c
d
e
f
g
h

Nonfinancial u ses7......................................... 73.1 79.1 91.3 99.9 121.3 132.5 148.0
7.5 8.9 1 1 . 1
8.4 7.7 7.9 9.2
Durable goods.................... . .........................
Nondurable goods.......................................... 33.9 35.9 41.4 48.3 54.7 60.1 67.6
Services........................................................... 18.5 19.4 2 1 . 0 2 2 . 8 25.2 27.2 29.1
Payroll.........................................................
1.0 1.0 1.0 1.2 1.4 1.7 1.9
Interest . ......................................................
1 A 1.5 1.6 1.5 1.3 1.3 1.3
Rents6..........................................................
4.6 4.8 5.1 5.4 5.5 5.6 5.4
Other............................................................ 11.6 12.1 13.2 14.7 17.0 18.7 20.4

179.4
17.3
81.7
33.4
1.9
1.6
5.6
24.3

203.7 219.3
2 2 . 8 25.3
91.8 97.8
36.5 40.1
2.1 2.1
2.0 2.5
6.1 6.9
26.3 28.6

219.7
27.0
96.3
42.2
2.1
2,9
7.7
29.5

241.6
32.2
99.6
45.4
2.3
3.5
8.5
31.1

265.6
30.9
109.4
48.9
2.5
4.0
9.2
33.2

286.2
31.7
114.6
52.4
2.5
4.6
10.0
35.3

301.8
35.0
118.0
56.3
2.7
5.5
10.8
37.4

1

Taxes...............................................................
Income.........................................................
Property......................................................
Other.................................. *........................

2.9
1.1
1.0
.8

3.1
1.3
l.i
.8

3.8
1.9
1.1
.8

6.5 18.4 19.8 22.7 2 1 . 0 24.0 23.8 22.2 23.9 32.8 38.5 40.9
4.4 16.3 17.5 20.2 18.4 20.9 20.4 18.5 19.9 28.2 33.4 35.2
1.1 1.2 1.2 1.3 1.4 1.7 1.0 2.3 2.6 3.0 3.4 3.9
1.0
.9 1.0 1.2 1.2 1.4 1.5 1.4 1.4 1.6 1.7 1.9

m
n
o

Home purchases............................................
New 9 ............................................................
Existing............. .. - ................................

3.8
1.8
2.1

5.0
2.2
2.8

6.3
2.8
3.5

5.4
1.9
3.5

5.3
.8
4.5

6.3
.8
5.5

7.2 13.3 14.9 17.3 16.7 23.2 24.5 28.0 28.8
.8 3.2 5.6 8.4 6.9 10.7 11.1 11.2 12.1
6.4 10.1 9.3 8.9 9.8 12.6 13.4 16.7 16.8

P

Grants and donations...................................
Insurance premiums..................................
Private.........................................................
Life policies, annuities, etc . 1 o..............
O ther......... , ...........................................
Government1 1 ....................................

1.3
5.2
4.5
3.8
.7
.6

1.4
5.4
4.7
3.9

1.9
5.7
4.9
4.0
.9
.8

2.3

2.9
7.2
5.3
4.4

3.1

3.2

8.2

8.8

5 .0
4.1
.9
1.2

5.9
4.8

6.4
5.2

V
W
X

Net increase in financial a ssets.................
Currency and deposits..................................
Time deposits1 2 ..........................................

2.5
2.7
.8

2.4

y

Federal obligations........................................
State and local obligations...........................
Corporate securities......................................
Mortgages.......................................................

.2

.5
- .4
- .3

i
j
k

q
r

s
t

u

z

aa
bb
CC
dd
ee
ff
gg

hh

Miscellaneous assets......................................
Savings and loan shares.............................
Credit balances at brokers..........................
Other1 3 ........................................................

- .3
- .5
*

Total, above u ses............................

For footnotes see opposite Page.




.7
2.1

.7

.1

.1

.3

.4
.2

*

*

1.0

1.1

1.2

1.9

2.3

2.4

2.0

5.8 14.7 22.7 27.8 24.7
3.5 6.3 10.5 13.9 14.2
♦
.7 4.1 6.6 8.2

9.0
7.8
5.0

6.8
2.7
2.2

2.5
-.1

- .7
.1

*

8.7 11.9 13.3 9.5
- .3 - . 1 - . 1 - . 2
-.3 - . 8 - 1.2
*
- .2
.3

- .2
- .2

.6

*

.2

.3

Discrepancy**.................................................. - 1 .6

Memorandum:
ii
Income in kind 1 4 ...........................................

.8

4.1 4 .0
10.9 11.4
8.6 9.1
6.0
6.3 6.5
1.9 2.3 2.5
2.2 2.2 2.3

6.2

.4
.2

*

*

.4
.3
.1

-.5

.9
.5
.1
.3

1.5
.9
.2
.5

2.1

-.3

1.1

-3 .3

1.0
.2
.9

3.4
9.2
7.1
5.6
1.6

.4
- .2
- . 6

.7

3.7
10.1

8.0

1.8

.5
- .3
.5

4.9 4 .4
- . 4 - 1.1
.8
.9
1.1
1.2
1.1
.6

4.4 4.7 4.9 5.2
14.4 16.1 17.6
9.8 10.9 12.1 13 A
6 .9 7.5 8 . 1
8.7
2.9 3.4 4.0 4.7
3.0 3.5 3.9 4.1

12.8

4.9
A

1.3
.6
1.1
.6

*

.2 - 1 .4
.4
.7
2.4

.4

1.5
.1
.2

2.3
1.5
.4
.4

- . 7 - 3 .1

-.1

1.2

3.7

1.6

1.2

*

1.8

.9
2.2

.7

2.4
2.0

3.4
3.0
-.2
.7

*

.5
-

*

.6

.6

1.4
1.2
-.1
.3

.9
1.2
.1
- .3

8.5 14.8 12.9
7.4 4.4
4.1
1.9 4.1 4 .0

1.2

2.2 - 1 .0

.3
2.0
1.2
.6

4.4
3.6

*

.8
- .2

74.1 81.5 97.1 114.1 143.6 161.4 169.3 187.7 207.5 224.0 225.4 250.2 272.0 299.9 314.4

1.8

1.8

2.4

3.7

5.2

5.9

6.4

4.6

4.3

4.3

3.9

3.9

5.0

4.9

4.6

74

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

TABLE 2—PAYROLL RECEIPTS AND WAGES AND SALARIES
Relationship of Consumer Receipts of Payroll in Flow-of-Funds Accounts to Wages and Salaries in Personal Income
(In billions of dollars)
1939

1947

1948

1949

1950

1951

1952

1953

A

Watfes and salaries rnmnnnent of national in co m e.............................. . . . . . .

B

Minus:

c

Eaiialu W a4e and salarv disbursements in nersonal incom e.........................

45.9

D

Minus:

A d ju stm e n t fo r differences in transaction coverage:
Pay in kind......................................................................................................

.7

2.1

2.2

2.2

2.3

3.2

3.2

3.0

E

Plus:

A d ju stm e n t fo r differences in transaction classification:
Payroll items in “other labor income” component of personal income1.. .

.1

.2

.3

.4

.4

.4

.4

.5

F

Equals: Consum er receipts of payroll in flow-of-funds accou n ts...............

Excess of wase accruals over disbursements..............................................

45.9 122.9 135.2 134.3 146.5 170.9 185.0 198.0
*
*
*
*
.l
—.1
122.8 135.1 134.4 146.5 170.8 185.1 198.1

45.3 121.0 133.2 132.6 144.6 168.0 182.3 195.5

*Less than 50 million dollars.
M ilitary reserve pay, compensation of prisoners of war, directors’ fees, jury and witness fees, compensation of prison inmates.
N ote .—Details m ay not add to totals because of rounding. For description of table, see p. 56.

TABLE 3—INTEREST AND DIVIDENDS
Relationship of Consumer Receipts of Interest and Dividends in Flow-of-Funds Accounts to Interest and Dividends
in Personal Income
(In billions of dollars)
1939

1947

1948

1949

1950

1951

1952

1953

Interest com ponent of national in com e.............................................................

4.6

3.8

4.5

5.2

5.9

6 .8

7.4

8.4

Net interest paid by government.................................................................

1.2

4.4

4.4

4.6

4.7

4.8

4.9

5.0

C

Equals: Interest com ponent of personal in com e..............................................

5.8

8.2

9.0

9.8

10.6

11.6

12.3

13.5

D
E

Plus:
Minus:

A d ju stm e n ts fo r differences in tran saction coverage:
Interest on tax refunds..................................................................................
Imputed interest in personal income...........................................................

♦
2.0

*
3.3

.1
3.7

.1
4.0

.1
4.4

.1
4.8

.1
5.3

.1
5.9

F

Minus:

A d ju stm e n t fo r differences in sector coverage:
Interest receipts of nonprofit organizations and self-administered
pension plans...............................................................................................

.1

.2

.2

.2

.2

.3

.3

.4

Minus:

A d ju stm e n t fo r differences in sector allocation:
Interest receipts of nonfinancial nonfarm noncorporate business............

.2

.1

.1

.1

.1

H

Plus:

A d ju stm e n t fo r differences in tran saction classification:
Dividend receipts of mutual insurance companies....................................

.1

.1

.1

.1

.1

I

Equals: Consum er receipts of interest in flow -of-funds accou n ts..............

3.7

4.6

5.1

5.6

6.1

6.6

6 .7

7.1

J

Dividend com ponent of personal in co m e............................................................

3.8

6.5

7.2

7.5

9.2

9.1

9.1

9 .4

K

A d ju stm e n t fo r differences in sector coverage:
Minus: Dividend receipts of nonprofit organizations..............................................

.1

.1

.1

.1

.1

.1

L

A d ju stm e n t fo r differences in transaction classification:
Minus: Dividend receipts of mutual insurance companies....................................

*

M

Equals: Consum er receipts of dividends in flow-of-funds a ccou n ts..........

3.7

A
B

G

Plus:

♦Less than 50 million dollars.
N o t e .—Details may not add to totals because of rounding.




*
*

.1

.1

.1

.1

.1

6.4

7.1

7.3

9.0

8.9

For description of table, see pp. 57 and 58.

.1
.1

.1
.1
8.9

9.2

C O N SU M ER SECTOR

75

TABLE 4—CONSUMER BENEFIT RECEIPTS AND TRANSFER PAYMENTS
Relationship of Consumer Receipts of Insurance Benefits and Grants and Donations in Flow-of-Funds Accounts to
Transfer Payments in Personal Income
(In billions of dollars)
1939

1947

1948

1949

1950

1951

1952

1953

A
B
C

Transfer paym ents in personal in com e...............................................................
Insurance benefits in transfer payments..............................................................
Other government and business transfer payments..........................................

3.0
.9
2.1

11.8
2.4
9.4

11.3
2.6
8.7

12.4
3.8
8.6

15.1
6.5
8.6

12.6
4.8
7.8

13.1
5.3
7.8

13.8
6.2
7.6

I)

Plus:

A d ju stm e n ts to insurance benefits—
For differences in tran saction classification:
Workmen’s compensation benefits classified as “other labor income”
in personal income................................................ ‘....................................

.7

.8

.8

.2

.5

.5

.6

.6

2.8

3.2

3.4

3.7

4.0

4.3

4.6

5.0

.3

1.0

1.2

1.4

1.7

2.3

2.7

3.2

*

.1

.1

.1

.1

.2

.2

.2

K
F

Plus:
Plus:

For differences in transaction coverage:1
Benefits from private life ins., annuity, and retirement programs2........
Benefits netted against nonlife insurance premiums in personal con­
sumption expenditures3.............................................................................

G

Plus:

For differences in consolidation:
Insurance benefits received from self-administered pension plans..........

H

Plus:

For differences in sector allocation:
Benefits from real property insurance received by nonfarm home
owner-occupants..........................................................................................

.1

.2

.2

.2

.2

.3

.3

.3

I

Equals: Consum er receipts of insurance benefits in flow -of-funds
a ccou n ts.....................................................................................................

4.3

7.3

8.0

9.8

13.1

12.6

13.9

15.8

.3

J
K
L

A d ju stm e n ts to o th er govern m en t an d business transfer p a y m e n ts—
For differences in tran saction classification:
Minus: Consumer bad debts in personal income.....................................................
Plus:
Employer contributions to profit sharing and welfare plans, classified
as “other labor income” in personal income...........................................
Plus:
Court-awarded benefits received by employees, classified as “other
labor income” in personal income............................................................

.3

.3

.4

.3

.3

.3

*

.3

.3

.3

.4

.5

.7

.7

.7

*

.1

.1

.1

.1

.1

.1

.1

4c

.1

.1

M

Plus:

For differences in n ettin g :
Personal cash remittances from abroad netted in personal consumption
expenditures..................................................................................................

X

Plus:

For differences in consolidation:
Grants and donations received from nonprofit organizations..................

.2

.6

.6

.7

.7

.7

.8

.8

O
P

For differences in sector coverage:
Minus: Government transfers to nonprofit organizations4 ....................................
Minus: Business transfers to nonprofit organizations.............................................

.1
*

.4
.2

.5
.2

.5
.2

.5
.3

.5
.3

.5
.3

.5
.3

Q

Plus:

*

.2

- .3

- .1

- .1

- .2

*

*

R

Equals: Consum er receipts of grants and donations in flow -of-funds
accou n ts......................................................................................................

9.6

8.5

8.6

8 .7

7.9

8 1

8.1

For differences in tim in g :
Net issues of armed forces leave bonds and adjusted service bonds........

2.0

*

*

*

*

*

*Less than 50 million dollars.
1Government benefit payments under deposit insurance programs are too small to be shown separately but are reflected in line I.
2Excludes benefits received from self-administered pension plans, which are entered as line G below.
3Bene fits from private insurance policies covering automobiles and other personal property and from accident and health and hospitalization
policies. Benefits from life insurance, real property insurance, and private pension plans are included in other adjustments to personal income
in lines E, H, and G.
4Also includes profits of Military post exchanges and Navy exchanges and ships’ stores not shown separately.
N ote .—Details may not add to totals because of rounding. For description of table, see p. 58.




76

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

TABLE 5—NONFARM PROPRIETORS’ NET WITHDRAWALS AND NONCORPORATE NET INCOME
Relationship of Net Withdrawals by Nonfarm Proprietors in Flow-of-Funds Accounts to Nonfarm Proprietors’ and
Rental Income in Personal Income
(In billions of dollars)
1939

1947

1948

1949

1950

1951

1952

1953

10.0

26.5

28.8

29.3

31.3

33.9

35.7

36.8

C

Adjustment for differences between net income and net operating
surplus2 ........................................................................................................
Minus: Valuation adjustment (bad debt charges)..................................................

.7
.2

.8
.2

.9
.2

1.0
.2

1.1
.2

1.2
.2

1.1
.2

.9
.2

D
E

A d ju stm e n ts fo r differences in transaction classification;
Minus: Expenditures for construction and equipment...........................................
Minus: Increase in inventories1.................................................................................

1.7
.1

5.5
.1

4.0
1.0

4.1
- .2

5.9
1.5

4.8
.9

4.6
.2

5.1
.9

F
G
H
I

Plus:
Plus:
Plus:
Minus:

A d ju stm e n ts fo r differences in transaction coverage:
Insurance benefits...........................................................................................
Net receipts from real estate transfers.........................................................
Net increase in liabilities...............................................................................
Net increase in financial assets.....................................................................

.2
.4
- .1
.4

.6
1.7
3.7
1.0

.6
2.0
3.6
- .1

.6
1.6
2.7
1.8

.7
1.5
4.3
2.0

.9
1.3
3.2
3.2

.9
1.2
2.8
.8

1.0
1.5
3.5
3.2

J

Equals: Net withdrawals by nonfarm proprietors in flow-of-funds
accou n ts.....................................................................................................

8.9

26.5

30.9

29.3

29.3

31.4

35.9

34.3

A

Nonfarm proprietors* and rental incom e in personal in com e1 ...................

B

Plus:

1After inventory valuation adjustment.
2Net operating surplus of nonfarm unincorporated business in flow-of-funds accounts differs from noncorporate income component of personal
income principally by exclusion of imputed and in-kind income and inclusion of retained charges in the flow-of-funds concept. A detailed state­
ment of differences between the concepts is given in Table 14, p. 105.
N ote .—Details may not add to totals because of rounding. For description of table, see p. 60.

TABLE 6—FARM PROPRIETORS’ NET WITHDRAWALS AND FARM NET INCOME
Relationship of Net Withdrawals by Farm Proprietors in Flow-of-Funds Accounts to Farm Proprietors’ Income in
Personal Income
(In billions of dollars)

1939

1947

1948

1949

1950

1951

1952

1953

A

Farm proprietors* n et incom e in personal in co m e..........................................

4 .3

14.5

16.7

12.7

13.3

16.0

14.2

12.2

B

Plus:

Adjustment for differences between net income and net operating
surplus1........................................................................................................

- .9

- .8

- 2 .4

- .3

.3

- .6

- .3

.1

C
D
E

A d ju stm e n ts fo r differences in transaction classification:
Minus: Farm expenditures for construction and equipment..................................
Minus: Increase in farm inventories in flow-of-funds accounts.............................
Minus: Profit taxes and dividends paid by corporate farms.................................

.9
- .1
*

3.5
- 1 .2
.1

4.3
1.1
.1

4.5
- .2
.1

4.8
*
.2

5.6
.6
.2

5.3
.7
.2

4.6
.3
.1

F
G
H
I

Plus:
Plus:
Plus:
Minus:

A d ju stm e n ts fo r differences in transaction coverage:
Insurance benefits...........................................................................................
Net receipts from real estate transfers........................................................
Net increase in liabilities...............................................................................
Net increase in financial assets.....................................................................

.1
- .1
- .3
.2

.2
.4
.6
- .2

.2
.4
2.0
- .3

.2
.3
1.2
- .6

.2
.4
.2
- .5

.2
.6
1.3
.4

.2
.5
1.2
.2

.2
.4
1.0
*

J

Equals: Net withdrawals by farm proprietors in flow-of-funds accounts.

2.0

12.7

11.6

10.2

9.9

10.7

9.4

8.8

♦Less than 50 million dollars.
JNet operating surplus of farm businesses in flow-of-funds accounts differs from farm net income component of personal income principally
by exclusion of imputed and in-kind income and inclusion of retained charges in flow-of-funds concept. A detailed statement of differences between
the concepts is given in Table 16, p. 116.
N ote .—Details may not add to totals because of rounding. For description of table, see p. 61.




77

CO N SU M ER SECTOR
TABLE 7—CONSUMER TAXES AND PERSONAL TAXES

Relationship of Consumer Tax Payments in Flow-of-Funds Accounts to Personal Tax and Nontax Payments in
National Income Accounts
(In billions of dollars)

A
B
C

Personal tax and nontax p aym ents in n ation al incom e a ccou n ts..............
Federal......................................................................................................................
State and local...................................................................................................... ..

D

Plus:

E

A d ju stm e n t fo r differences in transaction classification:
Minus: Payments to public schools, hospitals, etc., classed as purchases of serv­
ices in flow-of-funds accounts2 ..................................................................

A d ju s tm e n t to p u t n e t ite m s on gross basis:
Tax refunds1....................................................................................................

1939

1947

1948

1949

1950

1951

1952

1953

2.4
1.2
1.2

21.5
19.7
1.9

21.1
19.0
2.1

18.7
16.2
2.5

20.9
18.2
2.7

29.3
26.3
3.0

34.4
31.1
3.2

36.0
32.5
3.5

*

1.7

1.8

2.4

1.7

1.8

2.1

2.6

.6

.8

.9

1.0

1.0

1.0

1.1

,4

F

Plus:

A d ju stm e n t fo r differences in sector allocation:
Property taxes on nonfarm owner-occupied dwellings3 ............................

.8

1.4

1.7

2.0

2.3

2.6

3.0

3.4

G
H
I

Equals: Consum er paym ent of taxes in flow-of-funds accou n ts.................
Federal......................................................................................................
State and local.........................................................................................

2.9
1.2
1.6

24.0
21.3
2.7

23.8
20.7
3.1

22.2
18.5
3.7

23.9
19.8
4.1

32.8
28.1
4.7

38.5
33.2
5.3

40.9
35.0
5.9

♦Less than 50 million dollars.
:The tax refund adjustment applies to Federal taxes only.
2Mainly State and local.
3The property tax adjustment applies to State and local taxes only.
N o t e .—Details may not add to totals because of rounding. For description of table, see p.
For Tables 8-10, see following Pages.




62.

78

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

TABLE 8—CONSUMER NONFINANCIAL RECEIPTS AND PERSONAL INCOME
Relationship of Consumer Nonfinancial Sources of Funds in FIow-of-Funds Accounts to Personal Income in National
Income Accounts
(In billions of dollars)
1939
A

Personal incom e in national incom e a cco u n ts.................................................

B
C
D
E
F
G

A d ju stm e n ts fo r differences in tran saction coverage:1
Minus: Imputed and in-kind income in wages and salaries and in interest..........
Minus: Imputed and in-kind income in proprietors’ and rental income..............
Plus:
Interest on tax refunds...................................................................................
Plus:
Receipts from sales of homes, cars, and other goods.................................
Plus:
Benefits from private life insurance, annuity, and retirement programs2.
Plus:
Benefits netted against nonlife insurance premiums in personal con­
sumption expenditures3.............................................................................

H

Plus:

A d ju stm e n t fo r differences in tim in g:
Net issues of armed forces leave bonds and adjusted service bonds.. ..

*

Plus:
Plus:

A d ju stm e n ts fo r differences in consolidation:
Grants and donations received from nonprofit organizations..................
Insurance benefits received from self-admin, pension plans.....................

*

I

J
L

A d ju stm e n ts fo r differences in tran saction classification:
Minus: Consumer bad debts in personal income.....................................................
Plus:
Personal contributions for social insurance deducted in calculation of
personal income...........................................................................................

M
N

A d ju stm e n ts fo r differences in sector coverage:
Minus: Interest, dividends, and transfer payments received by nonconsumers
in personal sector of national income accounts4 ....................................
Minus: Employer contributions to self-administered pension plans.....................

O
P
Q

A d ju stm e n ts fo r differences in sector allocation:
Minus: Interest receipts of nonfinancial nonfarm noncorporate business............
Minus: Employer contrib. to insured pension plans and insurance programs. ..
Minus: Net funds left in and invested in noncorporate businesses by consumer

R

Plus:

K

Benefits from real property insurance received by nonfarm home
owner-occupants..........................................................................................
A d ju stm e n ts to p u t n e t ite m s on a gross basis:
Tax refunds......................................................................................................
Personal cash remittances from abroad netted in personal consumption
expenditures...............................................................................................

S
T

Plus:
Plus:

U

Equals: Consum er nonfinancial sources of fun d s in flow -of-funds
a ccou n ts.....................................................................................................

1947

1948

1949

1950

1951

1952

1953

72.9 190.5 208.7 206.8 227.0 255.3 271.2 286.1

10.0
3.2

5.9
5.0
.1
10.7
3.4

6.2
5.2
.1
12.5
3.7

6.7
5.4
.1
16.1
4.0

8.0
5.9
.1
17.1
4.3

8.5
6.3
.1
21.7
4.6

9.0
6.6
.1
22.0
5.0

1.0

1.2

1.4

1.7

2.3

2.7

3.2

.2

- .3

- .1

- .1

- .2

*

*

.6
.1

.6
.1

.7
.1

.7
.1

.7
.2

2.8
2.5

5.4
4.7

2.7
2.8
.3

*

.2

♦

.8
.2

.8
.2

.3

.3

.3

.4

.3

.3

.3

.3

.6

2.1

2.2

2.2

2.9

3.4

3.8

4.0

.2

.9
.5

.9
.5

.9
.6

1.1
.9

1.2
1.2

1.3
1.6

1.3
1.9

.2

.2
.8

.1
.9

.1
1.1

.1
1.4

.1
1.7

.1
1.9

.1
2.3

1.0

- 3 .0

- 1 .8

- 2 .6

.1

1.9

- 1 .8

- .7

.1

.2

.2

.2

.2

.3

.3

.3

*

1.7

1.8

2.6

.1

1.7
*

2.1

.1

2.4
*

1.8

*

♦

♦

*

♦
*

72.6 199.8 216.9 218.1 238.6 265.0 289.1 303.4

♦Less than 50 million dollars.
1 Government benefit payments under deposit insurance programs are too small to be shown separately but are reflected in line U.
2Excludes benefits received from self-administered pension plans, which are entered as line J below.
3Benefits from private insurance policies covering automobiles and other personal property and from accident and health and hospitalization
policies. Benefits from life insurance, real property insurance, and private pension plans are included in other adjustments to personal income on
lines F, R, and J.
4Consists of interest, dividend and transfer receipts of nonprofit organizations; interest received by self-administered pension plans; profits
of Military post exchanges, Navy exchanges and ships’ stores.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 63.




79

CO N SU M ER SECTOR

TABLE 9—CONSUMER NONFINANCIAL EXPENDITURES AND PERSONAL CONSUMPTION
EXPENDITURES
Relationship of Consumer Nonfinancial Uses of Funds in Flow-of-Funds Accounts to Personal Consumption
Expenditures in National Income Accounts
(In billions of dollars)
1939
A
B
C
D
E
F
G

Personal consum ption expenditures in national incom e a ccou n ts............
A d ju stm e n ts fo r differences in tran saction coverage:
Minus: Imputed expenditures for food, clothing, shelter, and services1..............
Minus: Imputed expenditures for cost element in life insurance premiums2___
Insurance premiums for private life insurance, annuity, and retirement
Plus:
programs3....................................................................................................
Nonlife insurance benefits netted against premiums in personal con­
Plus:
sumption expenditures...............................................................................
Purchases of existing houses4........................................................................
Plus:
Gross purchases of used goods from dealers less dealers’ margins in­
Plus:
cluded in A .................................................................................................
Plus:

A d ju stm e n t to p u t n e t ite m s on gross basis:
Personal cash remittances from abroad netted in personal consumption
expenditures.................................................................................................

I
J
K

Plus:
Plus:
Plus:

A d ju stm e n ts fo r differences in consolidation:
Purchases from nonprofit organizations......................................................
Grants and donations to nonprofit organizations......................................
Insurance premiums to self-administered pension plans...........................

L

A d ju stm e n t fo r differences in sector coverage:
Minus: Current expenditures of nonprofit organizations in personal consump­
tion expenditures........................................................................................

M
N

Plus:
Plus:

O

Plus:

A d ju stm e n ts fo r differences in transaction classification:
Taxes paid by consumers in flow-of-funds accounts®................................
Payments to public institutions included with personal taxes and non­
taxes in national income accounts............................................................
Consumer contributions for social insurance in flow-of-funds accounts®..

H

1947

1948

1949

1950

1951

1952

1953

67.6 165.0 177.6 180.6 194.0 208.3 218.4 230.1
22.2
2.1

23.9
2.2

7.4
1.0

15.6
1.5

17.2
1.7

18.2
1.8

19.6
2.0

3.8

5.8

6.1

6.3

6.6

7.1

7.6

8.1

.3
2.1

1.0
9.5

1.2
9.1

1.4
10.1

1.7
12.9

2.3
13.8

2.7
17.2

3.2
17.2

.8

2.2

3.0

3.4

3.6

3.7

4.9

5.3

.1

.1

*

*

*

*

*

1.1
1.2

*

2.5
3.5
.2

2.8
3.8
.2

3.0
3.8
.3

3.3
4.2
.3

3.6
4.4
.4

4.0
4.7
.5

4.5
4.9
.6

2.3

5.2

5.8

6.2

6.7

7.3

7.9

8.4

2.9

24.0

23.8

22.2

23.9

32.8

38.5

40.9

.4
.6

.6
2.1

.8
2.2

.9
2.2

1.0
2.9

1.0
3.4

1.0
3.8

1.1
4.0

*
1.3
1.8

.2
4.4
5.6

.3
5.1
8.4

.3
5.2
6.9

.5
5.3
10.7

.7
5.8
11.1

.8
6.4
11.2

.9
6.9
12.1

*

25.4
2.4

R

A d ju stm e n ts fo r differences in sector allocation:
Minus: Premiums for accident and health and group hospitalization insurance
paid by business..........................................................................................
Operating expenses of nonfarm owner-occupied homes7..........................
Plus:
Plus:
Purchases of new homes (including land costs).........................................

S

Equals: Consum er nonfinancial uses of funds in flow-of-funds a cco u n ts.. 73.1 203.7 219.3 219.7 241.6 265.6 286.2 301.8

P

Q

♦Less than 50 million dollars.
1Includes imputed purchases of services of financial intermediaries other than life insurance companies.
2Equal to those operating expenses of life insurance companies and fraternal orders arising in handling of life insurance policies.
3Excludes premiums paid to self-administered pensions plans, which are entered on line K.
4Gross prices paid by buyers. Line F also includes commissions paid to real estate brokers by consumer sellers of existing houses.
5For reconciliation of personal taxes and nontaxes in national income accounts to consumer taxes in flow-of-funds accounts, see Table 7.
•Equal to “Personal contributions for social insurance” in the national income accounts.
7Maintenance and repair costs, mortgage interest, real property insurance premiums, and premiums for Federal Housing Administration
insurance on home mortgages. Taxes on owner-occupied properties are included in line M .
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 6 6 .




80

FL O W OF FU N D S IN

T H E U N IT E D STATES, 1939-53

TABLE 10—CONSUMER FINANCIAL FLOWS AND INDIVIDUALS’ LIQUID SAVING
Relationship of Consumer Financial Sources and Uses of Funds in Flow-of-Funds Accounts to Securities and Exchange
Commission Series on Liquid Saving by Individuals1
(In billions of dollars)
1939

1947

1948

1949

1950

1951

1952

1953

AV SEC series on liquid saving by individuals (line B less line M ) 2.....................

4 .2

6 .7

3 .0

2 .9

1.8

11.8

13.6

13.4

B

Net increase in individuals* liquid asset holdings3 .........................................

5 .5

13.9

9 .9

9 .1

12.2

18.9

23.7

22.9

C

A d ju stm e n t fo r differences in sector coverage:
Minus: Nonconsumer transactions in currency and deposits, savings and loan
shares, U. S. Govt, securities, and corporate securities included in line B*.

.5

.3

1.3

2.6

1.9

3.0

D
E
F

3.0

7.1

7.3

.2

.2

6.1
.2

5.0

.1

.2

8.3
.3

9.3
.3

8.3
.3

2

.6
.2

.6

G

A d ju stm e n ts fo r differences in tran saction coverage:
Minus: Equity in insurance........................................................................................
Plus:
Deposit claims with life insurance companies............................................
Plus:
Credit union shares, customer credit balances at brokers and dealers,
and mortgages not recorded in individuals’ liquid saving....................
Plus:
O ther 5 ...............................................................................................................

.8
-.1

1.1
.1

.7
*

.8
.1

1.0

H

Plus:

.4

.3

.2

- .3

.6

.4

1

2.3

-.2

-.5

I

J
K

*

A d ju stm e n t to p u t n et ite m s on gross basis:
Bank loans to individuals to acquire securities netted against security
purchases in liquid saving.........................................................................

-.2

- .8

A d ju stm e n ts fo r differences in sta tistic a l estim ates:
Minus: Difference in estimate of float in currency and deposits..........................
Minus: Difference in estimate of nonindividual holdings of currency and
deposits and securities................................................................................
Minus: Other®...............................................................................................................

.1

-.2

-.2
-.2

*
*

-

1.1

*

- .3
.5
*

-.1

.

*
*

.1
.1

.3
-.1

*
*

*

-.2

.3
.4

L

Equals: Net increase in consum er financial assets in flow -of-funds
accou nts..................................................................................................

2 .5

6.8

4.9

4.4

4 .9

8 .5

14.8

12.9

M

Net increase in individuals* d eb t7 ......................................................................

1.3

7.2

6 .9

6 .3

10.4

7.0

10 .1

9 .5

A d ju stm e n ts fo r differences in tran saction coverage:
Debit balances at brokers and dealers and consumer credit owed to
individuals not recorded in individuals’ liquid saving...........................
Home mortgages owed to individuals net of mortgages owed by non­
consumers8 ..................................................................................................
Policy loans and other 9 ..................................................................................

.1
-.1

- .3

A d ju stm e n t to p u t n e t ite m s on gross basis:
Bank loans to consumers to acquire securities netted against security
purchases in liquid saving..........................................................................

-.1

-.1

N

Plus:

O

Plus:

P

Plus:

Q Plus:
R

Equals: Net increase in consum er liabilities in flow -of-funds accounts10.

.5

1.2

.1

7 .5

.4

.7

1. 1

- .6
.2

- .2
.2

- .7
.3

-.1

-.1

6 .8

6 .9

.2

11 .2

*

.7
7

_

.3

-.1

6 .6

- .4
.

1

.7
- .5
.3

.1

.1

10.5

10.7

♦Less than 50 million dollars.
JW ith the SEC release covering the fourth quarter of 1954, the form of presentation of this SEC series was changed. The name of the series
was changed from “ total liquid saving” to “change in net claims.” A subtotal excluding equity in government insurance was introduced. Since
the release indicates that the changes in presentation are tentative, pending completion of a more general review of savings estimates, the “liquid
saving” terminology has been retained in this report.
2The SEC series in this table reflect data consistent with the SEC release on volume and composition of individuals’ saving, July-September,
1954.
3 Currency and bank deposits, savings and loan shares, equity in insurance, and securities as recorded in SEC series.
tra n sa c tio n s of nonfarm noncorporate business and farm business sectors, self-administered pension plans, nonprofit organizations, and credit
unions and miscellaneous agricultural credit organizations in the financial institutions n.e.c. subsector.
5Differences in currency and deposits arising from the inclusion in SEC of individuals’ deposits in banks in possessions of the United States
and closed banks, which are not included in the flow-of-funds measure; differences in U. S. Government securities because of timing adjustment
in war years introduced by SEC but not adopted for the flow-of-funds accounts; loans in process from savings and loan associations, not included
in SEC but included in flow-of-funds to offset their inclusion in mortgage debt statistics; and trust and deposit assets due from the Federal Gov­
ernment not included in SEC.
differences in estimate of foreign bank deposits owned by domestic individuals, partnerships and corporations; an adjustment for lost cur­
rency incorporated in the flow-of-funds derivation; and a minor adjustment to include holdings of noninterest bearing State and local government
debt that are excluded from SEC. For 1953 only, reflects revisions in statistics on ownership of Government securities incorporated in flow-offunds accounts but not in SEC series shown on line A .
7Mortgage debt on 1 - to 4-family dwellings and consumer credit owed to nonindividuals as recorded in SEC series.
8Mortgages on 1- to 4-family nonfarm structures only.
9Policy loans on national service life insurance, Government life insurance, and private life insurance, and bank loans secured by hypothecated
deposits.
10 For 1953 only, reflects an upward revision of 0 . 6 billion dollars in consumer credit not incorporated in SEC series shown on line M.
N ote .—Details may not add to totals because of rounding. For description of table, see p. 69.




CH A PTER 3
CORPORATE BUSINESS SECTOR
The corporate business sector account
records the flow-of-funds transactions of
private business corporations engaged pri­
marily in producing and selling goods and
services. Some private corporations, prin­
cipally financial intermediaries, are in other
flow-of-funds sectors.
The corporate business sector covers all
private domestic corporations other than
banks, insurance companies, open- and
closed-end investment companies, corporate
farms, and some miscellaneous agricultural
credit corporations. The sector excludes
foreign subsidiaries of domestic corporations
to the extent that the accounts for these
subsidiaries are not consolidated with those
of the parent company in tax returns. It
includes, on the other hand, branches in
the United States of foreign corporations to
the extent that these branches are included
in the corporate statistics of the Internal
Revenue Service. The sector also excludes,
wherever possible, the activities of pension
plans set up by corporate business, for these
activities are recorded in the flow-of-funds
account for the insurance sector.
For the purpose of measuring nonfinancial
transactions, the corporate unit is taken to
be the unit reporting for tax purposes to the
Internal Revenue Service. In measuring fi­
nancial transactions, the corporate unit is
taken to be the entity reflected in the two
series compiled by the Securities and Ex­
change Commission, “working capital of
U. S. corporations” and “net change in cor­
porate securities outstanding.” The SEC
working capital series is based on Internal
Revenue Service data and hence reflects the




extent of consolidation in tax returns for
the years for which Internal Revenue Serv­
ice data are available. There is a two- to
three-year lag in publishing tax data, and
for recent years the working capital data are
extrapolations subject to revision. There are
no universe benchmarks for corporate secu­
rity issues, and the SEC series may differ
from tax data over the entire period in
levels of consolidation. The flow-of-funds
sector account is a combined rather than a
consolidated statement in that transactions
among the corporate units in the sector
are included.
C orporate B usiness S ector S t a t em en t

The flow-of-funds statement of the sources
and uses of funds of the corporate business
sector is presented in Table 11 on page 96.
The flow-of-funds accounts for the corpo­
rate and other business sectors present non­
financial sources and uses of funds in gross
form rather than in the net form so often
found in business sources and uses of funds
statements. The flows are presented in gross
form in order to identify all transactions
explicitly in both the sector and the trans­
action accounts. The gross form is also use­
ful analytically since it permits analysis of
the often disparate movements of the ele­
ments of receipts, costs, taxes, and dividends.
Nonfinancial sources of funds (line A ).
Nonfinancial transactions in the flow-offunds business sector statements are divided
into two categories—operating and “other.”
Operating items are those that are reflected
in conventional income statements. “Other”
nonfinancial items consist of dividend and
81

82

FLO W

O F F U N D S IN

T H E U N IT E D STATES,

1939-53

profits tax payments, capital investment, and The total in line C is computed as follows
transactions usually classed as surplus ad­ (with each item adjusted for sector cover­
justments, for example, tax refunds and re­ age):
negotiation payments.
Gross sales and receipts from operations—
By deducting operating uses from operat­ Plus:
(1) The value of sales eliminated through
ing sources in the flow-of-funds accounts, it
war contract renegotiation before tax re­
turns were filed and hence not included
is possible to compute a net operating surplus
in the tax tabulations. (T he actual pay­
that is analogous to profits before tax in
ments made to the Government in renego­
conventional accounting income statements.
tiation settlements are recorded in the sec­
This net operating surplus differs concep­
tor statement as uses of funds at the time
tually from conventional net income princi­
of such payments.)
pally in that the operating surplus does not Plus:
(2) Those rental receipts in tax data,
reflect book costs, such as depreciation and
such as equipment rental receipts and
hotel room rentals, that are included in
bad debt charges, that are deducted in com­
corporate sales in Table 29 of National
puting net income but that do not require
Income, 1954 edition, supplement to the
money payments or increase liabilities. A full
Survey of Current Business.
reconciliation between net operating surplus Minus: (3) The operating receipts of the real
in this flow-of-funds account and corporate
estate industry as recorded in Statistics
profits before tax in the national income ac­
of Income. These receipts are deducted
in calculating line C since they are classed
counts of the Commerce Department is pre­
as rents in the flow-of-funds accounts
sented in Table 12 on page 97 and discussed
(as they are in the national income system)
on pages 92-95. Corresponding reconcilia­
and are reflected in line D.
tions of farm and nonfarm noncorporate net
Plus:
(4) Miscellaneous receipts—the tax return
operating surplus to published net income
category “other receipts” after deducting
series are presented in Chapters 4 and 5.
profits of foreign branches of domestic
corporations. Profits of foreign branches
Operating sources of funds (line B) are
are classed in flow-of-funds accounts in
the flow-of-funds transactions that are gen­
the dividends transaction category. The
erally reflected in profit and loss statements.
remaining miscellaneous receipts that are
Sales and receipts from operations (line C)
added in this adjustment include such
are by far the largest nonfinancial source of
items as income from sales of scrap, sal­
funds for the corporate sector. In the flowvage, or waste, profit from sales of com­
modities other than the principal com­
of-funds system line C is the total of corpo­
modity
in which the corporation deals, and
rate receipts in the transaction category
income
from minor operations. Miscel­
“other goods and services.”
laneous receipts undoubtedly include some
The basic series is the sum of gross sales
transactions that are not sales of goods
and receipts from operations, as published
and services and hence are not balanced
by the Internal Revenue Service in Part 2 of
by purchases of “other goods and services”
in this and other sectors, but no further
Statistics of Income, adjusted to flow-of-funds
breakdown of the category is possible.
corporate sector coverage. Several adjust­
Plus:
(5) Tips paid to employees of the cor­
ments are made to the basic series in order to
porate business sector. This adjustment
make it conform to the transaction coverage
is necessary in order to include in sales
of the flow-of-funds category “other goods
of “other goods and services” an item that
and services,” of which it is a component.
is included in purchases of “other goods




C O R PO R A T E B U SIN E SS SECTOR

and services.” Data on purchases include,
for each sector, tips paid as part of outlays
for goods and services, and this adjust­
ment adds tips to business sales in order
to balance the “other goods and services”
transaction account. The tips are also
added to business payroll outlays and
consumer receipts of payroll. This treat­
ment corresponds to that used in the na­
tional income accounts.
Plus:
(6) Estimated sales taxes not included
in receipts on corporate tax returns. All
sales taxes received by governments are
shown in the flow-of-funds system as tax
payments by the business sectors, and sales
taxes paid by consumers are included in
consumer purchases from business. This
adjustment is therefore needed to include
in sales receipts in “other goods and
services” an item that is in purchases of
“other goods and services.” It is also
needed in order to include in corporate
sources of funds the sales taxes that are
in corporate uses of funds.
Minus: (7) Operating subsidies paid to corpora­
tions by the Federal Government. These
subsidies are classed as grants and dona­
tions in the flow-of-funds structure and
are described below under that transac­
tion category.
Equals: Sales and receipts from operations for
the corporate business sector (line C ).1

Rents and royalties (line D ) are all re­
ceipts of the sector so classified in Statistics
of Income except the equipment and other
rentals, noted above, that are added to sales
and operating receipts. The series includes
operating receipts of the corporate real estate
industry as reported in the tax data.
Interest (line E) is all corporate sector
receipts of interest. It is based on Internal
Revenue Service data and is therefore largely
on an accrual basis.
1 For years for which Statistics of Income is not yet avail­
able, total operating sources of funds are estimated on the
basis of National Income Division estimates of corporate
sales.




83

Dividends and branch profits (line F)
comprise all dividends received from do­
mestic and foreign corporations and the
profits of foreign branches paid or accruing
to domestic parent corporations. Foreign
dividends and branch profits are recorded
net of foreign taxes paid on them.
Grants and donations (line G) are operat­
ing subsidies paid by the Federal Govern­
ment. This transaction category excludes
subsidies that are part of a purchase and
sale program or are in the form of payments
for specific services rendered, such as mail
transportation by airlines; this type of sub­
sidy is included in sales receipts. (See dis­
cussion in Chapter 6, page 130.)
Other nonfinancial sources of funds (line
H ) cover receipts that do not usually arise in
the primary business activities of the sector.
Insurance benefits (line I) are all pay­
ments received from claims arising under
insurance coverage of the assets or activities
of the sector. The payments are from private
insurance carriers except for a small amount
of Government war damage insurance bene­
fits during the war.
Tax refunds (line J) are receipts of Fed­
eral tax refunds. They consist mainly of
profits tax refunds but include also small
amounts of refunds of customs duties and
processing taxes. This transaction category
includes excess profits tax refund bonds as
a refund at the time of issue, that is, when
the excess profits tax was paid to the Gov­
ernment. Concomitantly, a corporate use
of funds is recorded in line v to reflect the
increase in corporate holdings of Federal
obligations. The redemption of these bonds
after the war is shown as a liquidation of
Federal obligations and an increase in cor­
porate cash assets.

84

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T H E U N IT E D STATES, 1939-53

Real estate transfers (line K) represent
proceeds from the sale of industrial prop­
erties to the insurance sector under lease­
back agreements. This series does not pur­
port to represent all real estate sales by the
sector: it reflects the one type of corporate
nonresidential real estate sale for which
data are available. (Sales of new homes by
corporate speculative builders are in operat­
ing sources of funds.)
N et increase in liabilities (line L) repre­
sents new funds net of repayments raised
by corporations in the sector through longand short-term borrowing, issue of new
stock, trade debt, and prepayments by
customers. Negative quantities indicate net
uses of funds to reduce liabilities. The
figures reflect debt owed within the corpo­
rate sector (other than to own affiliates) as
well as debt owed to other sectors.
B an\ loans other than mortgages (line
M) are all funds supplied by banks to the
corporate business sector except funds sup­
plied through mortgage loans and through
bank purchases of corporate securities. They
consist of commercial and industrial loans
(line N ), which include open market paper,
and other loans (line O). “Other loans”
comprise loans to purchase securities, Fed­
eral Reserve industrial loans, and bank loans
to corporate personal loan companies. In
the years 1942 to 1945, line O also includes
bank loans to corporate processors guaran­
teed by the Commodity Credit Corporation.
In these years such loans were not classified
in the commercial and industrial loan cate­
gory in banking statistics.
Trade debt (line P) has two components,
Federal Government advances and prepay­
ments and other trade debt. Government
advances and prepayments (line Q) are cor­
porate liabilities arising from prefinancing
of war contract production. These liabilities




are discharged by delivery of goods. Other
trade debt (line R) consists of notes and ac­
counts payable by the corporate sector other
than such debt owed to banks.
Private advances and prepayments, while
perhaps substantial in such industries as con­
struction and shipbuilding, cannot be esti­
mated from available statistics. The failure
to include private advances can give rise to
discrepancies in the corporate sector state­
ment.
Corporate securities (line S) are the total
cash proceeds of debt and equity security
issues before deduction of flotation costs, net
of cash retirements of securities. Flotation
costs are recorded as a nonfinancial use of
funds by the sector. N et purchases by banks
(line T ) represent the net change in the
banking sector’s holdings of corporate secu­
rities.
Mortgages (line U) represent all mortgage
debt, bank as well as nonbank, owed by
corporations. The series covers debt secured
by both residential and commercial prop­
erties. Owed to ban\s (line V ) is the net
change in banking sector holdings of corpo­
rate mortgage debt.
Miscellaneous liabilities (line W ) are debts
owed the Federal Government, arising pri­
marily through loans and corporate secu­
rities held by the Reconstruction Finance
Corporation.
Nonfinancial uses of funds (line a). Non­
financial uses of funds in the flow-of-funds
business sectors include total current out­
lays as well as capital expenditures.
Operating uses of funds (line b). This
group of expenditures corresponds approxi­
mately to the deductions from gross revenues,
other than book charges such as depreciation,
depletion, and bad debt charges, that are
made in computing corporate profits before
taxes. The flow-of-funds series on operating

C O R PO R A T E B U SIN E SS SECTOR

uses of funds conforms to tax data in the
use of a cost-of-goods-sold concept. That is,
it reflects an adjustment to total purchases to
allow for changes in inventories. There is
a difference, however, in the valuation of
the adjustment for inventory change, de­
scribed in the discussion of line p on page
87.
The total of operating uses is computed
directly from total compiled deductions of
the corporate sector as published in Statistics
of Income as follows:2
Compiled deductions—
Minus: (1) Book items not reflecting flow-offunds transactions—depreciation, deple­
tion and amortization, net loss on sales
of other than capital assets, and bad debt
charges. (Bad debt charges reappear in
line aa below as a valuation adjustment
to trade credit.)
Minus: (2) State income taxes, which are in­
cluded in line q under “other” nonfinan­
cial uses of funds.
Plus:
(3) Tips and sales taxes that are added
to sales and receipts from operations. As
discussed under line C, these items are
components of payrolls (line c) and taxes
(line i).
Plus:
(4) Change in inventory over the year,
as recorded on corporate books. This
item was deducted in computing compiled
deductions as recorded in the tax data
in order to adjust the year’s total pur­
chases (including labor) to an estimate
of current and previous years’ purchases
related to the current year’s receipts. By
adding back the change in inventory, the
compiled deductions series is converted
back to a series on actual purchases during
the year.
Minus: (5) Change in the physical volume of
inventories, valued at average prices for
the year. Since total actual purchases—
compiled deductions after the four adjust3 As a preliminary step, compiled deductions and the five
adjustments itemized are all corrected to the sector cov­
erage of the flow-of-funds corporate business sector.




85

ments above—are all valued at prices
prevailing during the year, the deduction
of inventory change valued at the same
prices leaves operating uses, the resulting
series, ako valued at year-average prices.
Valuation of inventory change is discussed
under line p on page 87.
Equals: Total operating uses of funds for the
corporate business sector.3

Payroll (line c) represents the corporate
sector’s cash pay to employees. It is re­
corded before deduction of withheld taxes
and employee contributions to public and
private pension, retirement, insurance, and
welfare plans. It excludes employer con­
tributions to such programs, which are in
the flow-of-funds categories for insurance
premiums and grants and donations. It also
excludes all pay in kind (such as food fur­
nished to employees); the expenditures made
by corporations in connection with pay in
kind are included in operating uses n.e.c.
(line k).
Interest (line d) is all monetary interest
paid for funds borrowed by the corporate
business sector.
Rents and royalties (line e) are all such
payments made by corporations, other than
the equipment and other rentals that are
classified as purchases of “other goods and
services.”
Insurance premiums (line f) are all pre­
miums and employment taxes paid by the
corporate business sector to the insurance
sector and to the government sectors. The
series consists of the following components:
Employment taxes (line g )—old-age and survi­
vors insurance; railroad retirement; unemployment
compensation; and railroad unemployment com­
pensation.
3 For years for which Statistics of Income is not yet avail­
able, total operating uses of funds is computed as the
difference between total operating sources and net oper­
ating surplus (computed on the basis of the relationship
between corporate profits and operating surplus).

86

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T H E U N IT E D STATES, 1939-53

Other (line h )—employer contributions to pri­
vate pension plans, both insured and self-adminis­
tered; employer contributions to group insurance
plans; workmen’s compensation, public and private,
and sickness compensation; property and liability
insurance; and war damage insurance.

Taxes (line i) represent sales and gross
receipts taxes, property taxes, licenses, fees,
and all other tax payments except employ­
ment taxes and profits taxes. Employment
taxes are classified as insurance premiums
(in line g), and profits taxes—Federal and
State and local—are recorded on line q under
“other” nonfinancial uses of funds.
Grants and donations (line j) consist of
allowable contributions as tabulated by the
Internal Revenue Service, plus employer
contributions to welfare and profit-sharing
plans, unrecovered thefts, and uninsured ac­
cident compensation.
Operating uses not elsewhere classified
(line k) is the residual operating use of
funds, covering operating expenditures not
specifically included in lines c through j.
It includes purchases of goods given to em­
ployees as pay in kind. The series is pre­
dominantly purchases of materials and sup­
plies, but it also includes advertising, business
services, etc. It differs from the total of
such purchases during the year by the
amount of inventory change in line p. (See
discussion on page 85.)
Operating uses n.e.c. is part of total corpo­
rate expenditures classed in the flow-offunds transaction category “other goods and
services.” The other parts of corporate ex­
penditures in that category are capital ex­
penditures (line m ), except the land pur­
chases included in line m, and change in
inventory (line p).
Other nonfinancial uses of funds (line 1)
consist for the most part of capital expendi­
tures, profits tax payments, and dividend
payments.




Capital expenditures (line m ) are prima­
rily outlays on plant and equipment charged
to capital account. Plant and equipment
expenditures (line n) are an estimate of the
corporate component of the SEC-Commerce
series on plant and equipment expenditures
and represent expenditures for new capital
assets subject to depreciation. They exclude
acquisitions of land, used plant and equip­
ment, and all outlays by real estate, financial,
and agricultural corporations.
Other capital expenditures (line o) cover
expenditures by corporate landlords for res­
idential properties, including land costs. Line
o also includes several other capital expendi­
ture items. These are: (1) change in con­
struction work in process by corporate con­
tractors; (2) purchases of used equipment
from the Federal Government in 1946 and
1947; and (3) flotation costs of corporate
securities issued by the sector, including in­
vestment bankers’ margins.4
Capital expenditures by the corporate sec­
tor are part of the “other goods and services”
transaction category except for land pur­
chases for residential construction, which
are in the real estate transfers category.
Flow-of-funds estimates of corporate capi­
tal expenditures are deficient in that no data
are available to estimate land purchases other
than for residential construction or to esti­
mate used equipment purchases other than
from the Federal Government after the war.
The omissions are offset to some extent by
the lack of data on sales of real estate and
used equipment other than the small amount
shown in line K.
4 Flotation costs are treated in the flow-of-funds accounts
as a corporate purchase in the “other goods and services”
category because they are in business operating receipts in
that category. Correspondingly, issues of corporate securities
are shown in sources of funds gross of costs and are hence
on a comparable basis with purchases of corporate securities.

C O R PO R A T E B U SIN E SS SECTOR

The relationship between corporate capital
expenditures in the flow-of-funds accounts
and corresponding series in the national in­
come accounts and other compilations is
presented in a series of tables in Chapter 15.
Change in inventory (line p). Inventory
changes as recorded in each flow-of-funds
business sector account are an allocation of
the total nonfinancial expenditures of the
sector and as such should be valued at prices
current during the year of change.5 What
is wanted is a measure of the difference be­
tween total purchases of labor and materials
during the year and the purchases needed
to maintain a constant physical volume of
inventories. In the case of inventory ac­
cumulation, the measure should represent
the funds actually invested in additional in­
ventories; and in the case of decumulation,
it should represent funds released from in­
ventory investment as physical purchases fall
below physical withdrawals. That is, the
inventory change series wanted is one that
reflects net changes in physical inventories
valued at average prices for the year of the
materials and services going into the in­
ventories.
The nonfarm inventory change component
of gross national product in the national in­
come accounts provides such a measure, and
the corporate component of that series is
used in line p.6 This measure of inventory
change is consistent with the structure of
the flow-of-funds business sector accounts,

87

which record all transactions occurring in
the accounting period at the prices prevail­
ing during the period.
Other systems of inventory change valua­
tion can of course be easily substituted in the
accounts, if the appropriate changes are made
in change in inventory (line p), total oper­
ating uses (line b), and operating uses n.e.c.
(line k). Most of these systems, however,
are intended to identify costs incurred in
past years as well as in the current year in
producing the current year’s sales, and such
systems are therefore not directly relevant
to analysis of the current year’s purchases
and their financing.
Inventory change reflects value added in
production as well as purchases of materials
and thus contains payroll elements that
should be deducted from total payrolls (line
c) rather than from “other goods and serv­
ices.” However, there are no data on the
payroll components of inventory change and
the total change is treated as a part of “other
goods and services.” This does not affect the
total of operating uses but only its distribu­
tion between payroll and operating uses
n.e.c. Similarly, it does not affect the totals
of payrolls and “other goods and services”
but only their distribution between operating
and other uses of funds.
Profits taxes (line q) are the payments by
the corporate business sector to Federal and

the change in physical volume of inventories valued at an
average of prices prevailing during the year for cost ele­
6 It should be noted that no matter what valuation basis ments of the inventories. This differs from change in re­
is used for the inventory series, there is no change in the ported book value of inventories from which the GNP series
total nonfinancial uses or total purchases of other goods and is derived by the amount of the inventory valuation adjust­
services by the sector. These are measured without refer­ ment. The application of this valuation adjustment removes
ence to the inventory line. The choice of inventory change from the book value change figures the component that
valuation affects only the division of these totals between reflects only differences between the prices at which inven­
operating uses and other uses. The issue in the choice is tories are carried on the books at the opening and at the
the selection of the inventory change concept (and the closing of the accounting period. These opening and clos­
operating uses concepts) most appropriate to be considered ing prices are determined by the method of costing and are
as components of these total uses, given their definition and not necessarily related to either market prices existing at the
opening and closing dates or average prices prevailing dur­
coverage in the flow-of-funds accounts.
* The GNP series for nonfarm inventory change measures ing the period.




88

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T H E U N IT E D STATES, 1939-53

State and local governments of taxes on
corporate income and of related taxes such
as excess profits taxes and the unjust enrich­
ment tax. The series included in the flowof-funds account is the tax payments, not
the accrual of tax liabilities. Tax payments
for which excess profits tax refund bonds
were issued are included. (The treatment
of these tax refund bonds is described in
the discussion of tax refunds, line J.) Profits
taxes as shown in line q differ from corpo­
rate profits tax collections in Treasury data
in that they include State and local profits
taxes and exclude payments by corporations
not in this flow-of-funds sector—banks, in­
surance companies, investment companies,
and farms.
Renegotiation payments (line r) represent
the payments by corporations to the Federal
Government resulting from the renegotia­
tion of war contracts. These payments are
recorded in the flow-of-funds accounts of
the corporate and Federal Government sec­
tors at the time that repayments are made;
they are not offset against sales receipts of
the years in which the original sale was
made. The series shown measures only
that part of total renegotiation settlements
that is paid to the Government in cash.
Other parts of the settlement are offset
against tax refunds due corporaticns arising
from renegotiation and are met through
reductions in receivables from the Govern­
ment. (To the extent that such reductions
in receivables are reflected in changes in the
sector’s financial assets as recorded in the
sector account, an element of discrepancy is
introduced into the sector statement.)
Dividends and branch profits (line s) rep­
resent all dividends declared by the corpo­
rate business sector and all branch profits
paid or accruing to foreign parent corpora­
tions by American branches. Intercorporate




dividend flows are included. The series on
line s is used as an approximation of divi­
dend payments, for which no data are avail­
able.
N et increase in financial assets (line t)
is the net change in financial claims held in
the sector. The series does not include long­
term investments in affiliates.
Currency and deposits (line u) are the
cash balances of the sector as taken with
minor adjustments from the SEC release,
“Working Capital of U. S. Corporations.”
Two cash items that are not always given
in corporate reports on cash accounts are
added to the SEC series. These are in con­
nection with taxes withheld from employees
but not yet paid to governments, and with
funds received from security issues for re­
financing purposes but not yet applied to
retirement of old securities or debt. Cash
balances of investment companies are de­
ducted from the SEC total as a sector cover­
age adjustment since such companies are not
in the flow-of-funds corporate business sec­
tor.
Federal obligations (line v) represent the
Federal Government securities held by the
corporate business sector. Line v includes
excess profits tax refund bonds, which were
issued during the war and redeemed for
cash in 1945 and 1946. It also includes in­
creases in interest accrued on Treasury bills
allocated to this corporate sector.
Trade credit (line w) is the notes and ac­
counts receivable by the corporate sector.
Like trade debt it has two components.
Receivables from Federal Government (line
x) consist of the trade credit extended by
the corporate business sector to the Govern­
ment, largely on defense production. The
series used is that published in the SEC
release on corporate working capital* It
excludes receivables from Government cor­

C O R PO R A T E B U SIN E SS SECTOR

porations, which are in other trade credit
(line y) with all other short-term notes and
accounts receivable. Line y is net of reserves
for bad debts.
Corporate securities (line z) are an esti­
mate of changes in the corporate sector’s
holdings of marketable securities other than
government securities. The series corresponds
in coverage with net new issues of corporate
securities (line S) and therefore excludes
investment in securities of affiliated com­
panies (as defined for the SEC series on
net new issues). It should be noted that
line z does not cover portfolios of regulated
investment companies, since these companies
are classified in the “other investors” sector
in flow-of-funds accounts.
Valuation adjustment—bad debt charges
(line aa). The need for this adjustment
arises from the form of the data available
on trade credit.
The available data on receivables, in Sta­
tistics of Income, show gross amounts held
by creditors, bad debt reserves as a deduction
from receivables, and bad debt charges as
an income deduction. It is not possible to
identify bad debt writeoffs in these data.
However, the changes in receivables net of
reserves are equal to gross credit extended
minus gross receipts on accounts and minus
bad debt charges (additions to bad debt re­
serves).7 These data, which are used in the
sector statement, thus reflect internal charges
that are not flow-of-funds transactions.
The appropriate flow-of-funds entry for
trade credit would be either gross credit ex­
tended minus gross receipts on accounts, or,
if it were desired to record the write-offs
as donations from the creditor to the debtor,
gross credit extended minus gross receipts on
7 Writeoffs against the reserve are deducted from both
gross receivables and reserves and do not affect the level
of net receivables. Writeoffs not covered by the reserve
are included in bad debt charges in the income statement.




89

accounts and minus accounts written off as
uncollectible. In either case, adding back
bad debt charges is the appropriate valua­
tion adjustment. In the former case, line aa
is an adjustment for an inappropriate finan­
cial entry; and in the latter case, it is an
adjustment for an inappropriate financial
entry and an omitted nonfinancial use of
funds.8
Since the valuation adjustment is a cor­
rection for an inappropriate entry and not
a flow-of-funds transaction, it can be viewed
as an identifiable component of the over-all
discrepancy between the corporate sector’s
sources and uses of funds as recorded. Other
valuation adjustments should be included
for book changes in valuation of Federal
obligations and other marketable securities
as assets, insofar as these changes are reflected
in the sector accounts. The amounts are
known to be small, however, and no separate
estimates have been included. These changes
are therefore reflected in the discrepancy
(line bb).
Discrepancy (line bb). The discrepancy
is the excess of recorded sources of funds
over recorded uses after allowing for the
valuation adjustment. The discrepancy arises
from two types of inconsistency in the con­
struction of the sector statement. There are,
first, statistical inconsistencies between trans­
action estimates that are based on tabulated
tax-return totals for all corporations and esti­
mates for other transactions based on a
variety of sample information. Secondly,
there are some transactions that are implicitly
reflected in either sources or uses of funds
without the required offsetting entry needed
to balance the account.
8 That is, after the adjustment total uses reflect gross
extensions less payments received, which is numerically
equal to results of the desired treatment, where writeoffs
as deductions from gross credit offset writeoffs as donations
in creditors’ uses of funds.

90

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With respect to statistical inconsistencies,
many of the data for both the sources and
the uses sides of the account are derived
from Statistics of Income tabulations for the
corporate universe and are virtually free
from internal discrepancy.8 The adjustments
that are made to Internal Revenue Service
data (principally for differences in sector or
transaction coverage) do not impair this
consistency, since each adjustment appears
in two offsetting entries in this account.10
The more important series that are com­
puted independently of Internal Revenue
Service data, and are thus potential sources
of discrepancies with Internal Revenue Serv­
ice data, are the following:
Sources
Uses
Insurance benefits Capital expenditures
Tax refunds
Profits tax payments
Bank loans
Corporate securities
Corporate securities
Mortgages

A detailed discussion of the calculation of
these series is given in the chapters describ­
ing the transaction accounts, but two ways
in which the series differ from the tax-return
data may be noted here. The first is one
of timing: these series are calendar-year
totals, whereas the tax-return data are totals
for corporate fiscal years ending in the period
from July 1 of the tax year to June 30 of
the following year. Roughly 5 to 10 per
cent of the flows in Statistics of Income relate
to months before or after the stated calendar
year, and the dating of balance sheet items
diverges correspondingly from December 31.
9 For the two or three most recent years Statistics of
Income is not available and inconsistencies can arise be­
tween nonfinancial transactions, based on national income
data, and financial items derived principally from Securities
and Exchange Commission materials.
10 Some of the adjustments to currency and deposits are
unimportant exceptions.




In general, this difference should have little
effect on discrepancies since the industries
important in major transaction types, such
as corporate security issues and capital
expenditures, are on a calendar-year basis to
a greater degree than others. A somewhat
larger discrepancy may occur in the trade
industry group, where current assets and
trade debt are heavily weighted with Janu­
ary 31 figures, while the bank loan series
used in the accounts refers to December 31
data.11
The second type of difference between tax
and nontax sources of data is probably more
important: the nontax sources do not reflect
adequately changes in the corporate business
population that are reflected in the tax data.
When an existing proprietorship incorpo­
rates, for example, the flow-of-funds state­
ment for the corporate business sector re­
flects the entry of current assets and trade
debt into the sector, and the part-year operat­
ing flows and dividends, since all of these are
in the tax-return tabulations that are the
source of these series. The sector account
does not reflect long-term debt or corporate
securities issued to finance the incorporation
of the enterprises entering the sector, since
the methods used to compile the basic series
are not sensitive to such intersector move­
ments. The net effect on the discrepancy is
not entirely predictable, but it is likely that
in this case uses of funds will exceed sources,
since the financial sources of working capital
are missing. Correspondingly, liquidation of
corporations tends to cause an excess of
11 The corporate profits tax payments series is the source
of another type of timing discrepancy, since it is based
on calendar-year collections reports of the directors of
internal revenue, the timing of which in the past has
lagged considerably behind the actual payment of taxes.

C O R PO R A T E B U SIN E SS SECTOR

sources over uses.12 Discrepancies arising
from this source were largest at the begin­
ning of the war, when many corporations
shifted to noncorporate status after the ex­
cess profits tax was imposed, and after the
war, when many firms were reincorporated
or newly incorporated.13 The effects of these
shifts can be seen in the movement of the
discrepancy from 1941 to 1943 and from 1945
to 1947.
Of the other major factor contributing to
the discrepancy—omission of items that
should be in the sector statement but that
cannot be estimated—perhaps the most im­
portant example is transactions in existing
assets, that is, in real estate and used equip­
ment. As a minimum the statement should
have the net flow on this account between
corporate business and other sectors.
Discrepancies also arise from the use of
accrual rather than cash data on dividends,
interest, and rents paid and received. In
order to balance the sector statement com­
pletely it would be necessary to include asset
and liability accounts reflecting the differ­
ences between accruals and cash payments
of these items.
Several other factors contribute to the dis­
crepancy, but their combined effect is prob­
ably not large.14 It should be noted that the
12 The timing in Statistics of Income of balance-sheet
movements reflecting liquidation is complicated, but in
general the movements do not appear in tax data until
the following year, since all part-year returns are included
in the tabulations.
13 A special tabulation by Internal Revenue indicates that
in 1946 more than 8 billion dollars of assets were brought
into the corporate sector through incorporation of new
firms and the transfer of unincorporated enterprises to
corporate status. (Statistics of Income, 1946, Part 2, pp.
32-33.)
14 For example, uninsured losses from accidental damage
(which are reflected in operating uses although they are
not flow-of-funds transactions); the omission of deferred
revenues and expenses, mortgage holdings as assets, valua­
tion adjustments to trade debt in bankruptcies, reorgani­
zations, and negotiated settlements; and variant accounting
treatments of renegotiation settlements.




91

sources of discrepancy discussed above are
entirely separate from the normal estimating
errors that can be expected in using sample
or incomplete information for such series as
capital expenditures and corporate security
issues.
Memoranda. The flow-of-funds accounts
record only transactions between different
transactors effected through the use of
money and credit. No internal transactions
between one account and another of a given
transactor are recorded. Each transactor
thus enters the accounts on a consolidated
basis. However, some internal transactions
thus eliminated are of interest or of analytic
significance. The following memorandum
lines record aggregates of some of these
internal transactions in the corporate sector.
These lines are not part of the sources and
uses of funds statement for the corporate
business sector.
Depreciation and amortization charges
(line dd) and depletion charges (line ee)
have analytic usefulness to the extent that
they produce tax savings and influence busi­
ness decisions on capital expenditures and
dividend payments. The series presented
here are those published in Statistics of In­
come adjusted to the flow-of-funds corporate
business sector coverage. Line dd differs for
the war years from the corporate deprecia­
tion series incorporated in the national in­
come accounts because of accelerated amorti­
zation of war plant facilities in 1945, when
business was permitted to write off all un­
amortized war plant facilities remaining on
the books. In the national income accounts,
the accelerated amortization charges are
allocated to the earlier years for which they
were applicable as income deductions, where­
as line dd shows only the amounts charged
in the original tax returns.

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Profits tax liabilities (line ff) are Federal
and State taxes accrued on corporate income
for the year. Tax accruals are not transac­
tions in the flow-of-funds system, in which
taxes are recorded when paid. The pay­
ments series follows accruals of the preced­
ing year fairly closely, with deviations re­
flecting payments of earlier years’ taxes,
adjustments of the liabilities as originally
filed, and timing problems.
The Federal tax liability included here is
as reported in Statistics of Income, and the
State tax liability is as estimated for the na­
tional income accounts. The total series dif­
fers from the corresponding national income
series in that it omits several adjustments
made to Statistics of Income data, such as the
addition of taxes on audit profits and deduc­
tion of tax credits on renegotiation settle­
ments, accelerated amortization, and foreign
taxes on dividend income. These adjustments
are presented in Table 38 of the annual pres­
entation of the national income accounts in
the Survey of Current Business.
Many forms of corporate sources and uses
of funds statements show the tax accrual for
the year as a use of funds (either explicitly
or by showing income as a source after
deducting tax accruals) and also show the
change in balance-sheet levels of tax liabil­
ities as either a source (if accruals exceed
payments during the year) or a use (if pay­
ments are the greater). Line ff and line q
in the table can be used to convert the flowof-funds sector statement to that formula­
tion.
C o r p o r a t e N e t O p e r a t in g S u r p l u s a n d
C o r p o r a t e P r o f it s

The nonfinancial sources and uses of funds
shown in flow-of-funds accounts for the
business sectors have been divided into two
categories, “operating” and “other.” The




difference between operating sources and
operating uses is referred to here as net
operating surplus, which may be considered
as the flow-of-funds analogue of profits in
accrual accounting.
The relationship between these two con­
cepts for the corporate business sector is pre­
sented in Table 12 on page 97. The table
shows the type of adjustments necessary to
go from corporate profits before tax in the
national income accounts (line A ) to net
operating surplus of the corporate business
sector in the flow-of-funds accounts (line

J

)’5

The corporate profits series and net operat­
ing surplus are both based on Statistics of
Income and are statistically consistent. For
years for which Statistics of Income is not yet
available, 1952 and 1953 in this report, the
relationship in Table 12 is used to derive the
flow-of-funds net operating surplus from the
national income estimate of corporate profits.
With net operating surplus thus estimated
and total operating sources independently
estimated, operating uses for 1952 and 1953
are computed as the difference between op­
erating sources and net operating surplus.
The corporate profits series of the na­
tional income accounts and the net operating
surplus series of the flow-of-funds accounts
differ with respect to sector coverage, the
classification of certain transactions as to
whether they enter the calculation of the
series, the valuation of certain items enter­
ing the two calculations, the extent of inter­
corporate consolidation, and the sectors to
which certain transactions are allocated.
15 The relation of operating surplus to the Internal Revenue
total of compiled net profits can be developed from Table
12 and the reconciliation of national income corporate
profits to profits as reported in Statistics of Income. The
national incomz-Statistics of Income reconciliation is pub­
lished in Table 38 of National Income, 1954 edition, sup­
plement to the Survey of Current Business.

C O R PO R A T E B U SIN E SS SECTOR

The specific adjustments in Table 12 are
grouped in terms of these major types of
conceptual differences between the national
income and flow-of-funds series. To some
extent, the classification of individual ad­
justments must be arbitrary, as some of the
items can be usefully considered from sev­
eral viewpoints.
Corporate profits before tax (line A ) is
the national income series defined as “. . .
the earnings of corporations organized for
profit which accrue to residents of the nation,
measured before Federal and State profit
taxes, without deduction of depletion charges
and exclusive of capital gains and losses.”
As the definition implies, the concept of
corporate profits includes dividends received
from foreign corporations by individuals in
the United States and thus contains an in­
come element that is unrelated to the cor­
porate business sector or to any United States
corporations. The series is shown before
application of the inventory valuation ad­
justment.
Sector coverage adjustments
Profits of ban\s, insurance companies, and
corporate farms (line B) are deducted from
total profits shown in line A in order to
eliminate components that are in other sec­
tors in the flow-of-funds structure.16 The
data are from Table 18 in National Income,
1954 edition.
Rest of the world component of national
income corporate profits (line C) repre­
sents net corporate earnings accruing to
United States residents from foreign cor­
porations.17 Since the flow-of-funds corpo16 No adjustment is needed for investment companies,
since their income receipts are mainly dividends. These
dividend receipts are excluded from national income profits
to avoid double counting of income accruing to individuals.
17 Specifically, it is composed of foreign dividends received
by U. S. individuals and U. S. corporations and foreign




93

rate sector covers only domestic corporations,
the rest of the world component is deducted
here as a sector coverage adjustment.18 Ele­
ments of the rest of the world series that af­
fect the corporate sector account are handled
explicitly elsewhere.19
Transaction classification adjustments
Depreciation and amortization (line D )
are deducted in computing corporate income
in the national income accounts and are
shown, along with corporate income, as
charges against gross national product. De­
preciation and amortization are not deducted
in computing net operating surplus and these
charges must therefore be added back to cor­
porate income in this reconciliation. Since
depletion charges are not treated as charges
against business income in national income,
no corresponding adjustment is needed for
depletion.
Bad debt charges (line E) are a book entry
classified as an operating cost in corporate
profits, but since they are not a transaction
between separate economic units, they are not
an operating use of funds in the flow-offunds accounts. They are therefore added
back to profits in this reconciliation. Bad
debt charges are shown in the flow-of-funds
corporate sector account as valuation adjust­
ments. The data for lines D and E are from
the national income accounts.
Profits revealed by tax audit (line F) are
included in corporate profits before tax in
branch profits accruing to U. S. corporations (all after
foreign tax liabilities) less U. S. dividends and branch
profits accruing to foreigners.
18 Line C constitutes the difference between corporate profits
as shown in the national income account for “consolidated
business income and product,” and total corporate profits
in the national income system.
19 Corporate sector receipts of foreign dividends and branch
profits are in line I of Table 12, and dividends and branch
profits paid to the rest of the world are a nonoperating use
of funds and thus do not affect operating surplus.

94

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

the national income accounts but are not
reflected in flow-of-funds net operating sur­
plus. Corporate profits as reported in Statis­
tics of Income are compiled from the original
tax returns submitted to the Internal Reve­
nue Service by corporations and do not re­
flect the results of subsequent audit of tax
returns by the Internal Revenue Service for
conformance with tax regulations. The Na­
tional Income Division estimates the amount
of additional profits disclosed by Internal
Revenue audit and adds it to the Statistics
of Income data on corporate net income as
part of the computation of corporate profits
before tax.
The national income estimates of audit
profits are based on Internal Revenue data
on additional tax assessments made against
corporate income as a result of the audit
procedure. These added taxes reflect a wide
variety of adjustments to tax returns, such
as revision of depreciation charges, reclas­
sification of charges from income accounts
to capital accounts, revaluation of capital
gains and losses, and disclosure of unreported
income.
In order to incorporate such adjustments
into the flow-of-funds accounts, it would be
necessary to distinguish between types of ad­
justment, since they call for varying treat­
ments.20 There is, however, no information
available by type of audit adjustment, and it
is therefore necessary to make an assumption
as to the nature of profits revealed by audit.

In the national income accounts, the assump­
tion is that the audit profits represent
profits in the meaning and definition of the
series, corporate profits before tax. The as­
sumption that has been used in the flow-offunds accounts is that most of these adjust­
ments represent either revisions of items that
are not flow-of-funds transactions or trans­
fers of transactions between operating and
nonoperating accounts that do not affect
flow-of-funds transaction classification or dis­
crepancies. On the basis of this assumption,
audit profits are not entered into the flowof-funds accounts and therefore constitute a
reconciliation item in Table 12.
Adjustments for valuation differences
Inventory valuation adjustment (line G)
is discussed on page 87. The national in­
come series on corporate profits before tax,
as on line A above, reflects the book valua­
tion of inventory change in tax-return data,
whereas net operating surplus in the flowof-funds accounts reflects the average-cost
valuation. Differences in methods of valu­
ing inventory change result in different meas­
ures of operating deductions and thus of
net income. The inventory valuation ad­
justment must therefore be added to corpo­
rate profits to adjust for this conceptual
difference.21
There is another difference in valuation as
between lines A and J, not shown on Table
12 since it does not affect the years covered
by the table. This difference relates to the
valuation of corporate wartime sales to the
Federal Government subsequently affected
by the renegotiation of war contracts. In the
national income accounts, all series con­
cerned—corporate sales, corporate profits,

20 Thus, revisions of depreciation charges and capital
gains and losses do not affect flow-of-funds accounts. Re­
classification of transactions between income and capital
accounts would require reallocations between the operating
and other sections of the sector statement in Table 11 but
would not affect the totals of sources and uses of funds
in the statement, nor, presumably, classification of items
in flow-of-funds transactions categories. Disclosure of in­
come would require additions to the sources side of the
21 This adjustment would not be necessary in a reconcilia­
statement and would thus affect the discrepancy in the
tion to the national income series “corporate profits and in­
accoufit.
ventory valuation adjustment.”




C O R PO R A T E B U SIN E SS SECTOR

corporate profits tax liabilities, Government
expenditures—are recorded at the subse­
quently renegotiated values rather than at
the values in which the transactions origi­
nally occurred. For example, renegotiations
completed in 1946 of sales originally made
in 1942 are deducted from the original re­
cording of sales and profits in the national
income computations for the year 1942. The
flow-of-funds accounts, on the other hand,
record all transactions at the time they occur
and at the values at which they occurred.
Renegotiations appear in the accounts at the
time payments on account of renegotiation
are made, not at the time of the original
transaction, and sales as recorded in the year
when the original transaction occurred are
not revised. Profits before tax in the na­
tional income accounts are thus less than
corporate net operating surplus in the flowof-funds system by the amount of sales re­
negotiated.
Consolidation adjustment
Domestic dividends received by the corpo­
rate sector (line H ) are deducted from cor­
porate profits in the national income ac­
counts, because the national income business




95

sector account is on a consolidated basis.
The flow-of-funds corporate sector account
is on an unconsolidated basis, and transac­
tions between corporations in the sector are
not eliminated. Thus, in order to go from
national income corporate profits to flow-offunds operating surplus, domestic dividend
receipts of corporations are added back.
Sector allocation adjustment
Branch profits and foreign dividends re­
ceived by the corporate business sector (line
I) are classified in national income accounts
as income from the rest of the world accru­
ing to United States residents. In the national
income accounts, the dividends are carried
directly to the personal sector account and
the branch profits to the savings and invest­
ment account; neither item is reflected in the
business sector’s income in the national in­
come accounts. The flow-of-funds accounts
present these transactions as they occur, that
is, as payments from the rest of the world
sector to the corporate business sector rather
than as they ultimately accrue. Consequently
they are reflected in net operating surplus
and are added to corporate profits in this
adjustment.

TABLE 11—CORPORATE BUSINESS SECTOR: SOURCES AND USES OF FUNDS STATEMENT
[In billions of dollars]
1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
Sources of funds
A

Nonfinancial sources..................................... 129.5 145.0 187.3 217.1 248.2 261.3 253.8 287.2 365.0 407.0 388.8 452.6 510.4 523.4 550.0

B
C
D
F
G

O p era tin g .......................................................... 129.2 144.7 187.0 216.6 247.6 260.2 252.6 285.5 363.3 405.7 387.6 451.2 508.9 521.7 548.2
Sales and receipts from operations i ............. 124.5 139.7 181.7 2 1 2 . 1 242.8 254.7 246.9 279.5 357.0 398.6 380.3 443.0 500.0 512.4 538.3
2.2
2.2
2.3 2.4 2.5 2 . 8 3.1 3.5 3.6 4.0 4.4 4.7 5.1
2.0
2.1
Rents and royalties........................................
.7
.7
.8
.9
.9 1 . 0
.8
.8
.8
.7
1.1
1.3 1.4 1.5 1.7
Interest............................................................
Dividends and branch profits....................... 2 . 0
2.3 1.4 1.3 1.5 1.4 1.9 2 . 2
2.7 2 . 6
2.9 2.9 2.9 3.0
2.1
♦
*
♦
*
*
.9 1 . 0
.6
.1
.2
.1
.5
.1
.1
.2
Grants and donations....................................

H
I
T

O th e r ..................................................................
Insurance benefits..........................................
Tax refunds.....................................................

E

K

.3
.2

*

N et increase in liab ilities.............................
M
Bank loans other than mortgages................
N
Commercial and industrial.........................
O
Other.............................................................

.8

L

.8

.7

.1

.3
.3

.4
.3

.5
.5

.1

.1

.1

1.6
1.0

*

.9

.6
.3

- .8
.4

1. 7 - 1 . 6
.1

.2
.2

*

Trade d eb t......................................................
Fed. Govt, advances and prepayments____
Other trade debt............................................

*

S
T

Corporate securities.......................................
Net purchases by banks..............................

- .5

-.3

.1

-.6

-.3

-.3

U

Mortgages.......................................................
Owed to banks..............................................
Miscellaneous liabilities................................

.2

.1

-.1

*

.9

.4

-.1

♦
♦

.5

3.8 - . 7
1.7 - 1 .5

P
Q
R

V
w

.4

.6
*

1.7
.5

.8

1.1
.1

.2 - 1 . 4
.9
.9
.5
.3
.6

.4

1.3
.7
.5

1.2

1.4

1.5

1.7

1.8

.6

.8

1.0

1.1

.4

.4

.3

.2

.2

.2

.2

.2

.3
.3

1.1

.9

1.7
.6

9 .4 12.3
2.4 2 . 2

8.9 3.6 16.2 14.5 14.3
2.4 4.4 2.7
.5 - 2 . 2

3. 2

.6 - 2. 3
-.1
.1

-.8

2. 5
-.2

.5
.2

7.4

*

2.3
.1

4. 3
.1

2. 6
.1

-.1
.1

.1

- 1.3

3.7

4.6

1.1

8.7

2.8

- . 6

-.8
4. 5

-.1
4. 7

1. 1

-.1

.4
8. 3

3.2

-.9
-.4

♦

-.1

-.4
.5

.9
1. 9

1. 0
2.2

-.1
-.5

- .2

- .8

- . 6

2.2

4.2

5.8

4.6

3.4

5.7

7.3

6.7

-.4

*

- .7

-.4

.4

.2

.1

- .3

*

1.3

1.7

.8

.2
1. 8

1. 2
-.4

-.1
.1

1.3
.5

.2
-.3

2.0

♦

1.1
.5
.5

.2

-.1

*

*
-.2

.5

.2

.1

1.2

♦
- .3

.3
-.2

*

1.2

*

.3

.1

1.4
*

.4

♦

.3
.1

*

.6

.2

.3

1.1

1.3

*

1.6
.5
♦

*

.3

*

.2

X

Total, above sources...................... 130.3 146.6 191.2 216.4 247.4 261.5 252.5 296.6 377.3 415.9 392.4 468.9 524.8 537.7 557.4

a

Nonfinancial u se s........................................... 130.8 146.1 188.1 207.7 239.3 258.4 255.8 302.1 370.5 411.0 389.5 453.0 518.1 532.9 555.3

b
c
d
e
f
R
h
i
j

O p era tin g .......................................................... 119.0 131.0 167.4 188.7 215.5 229.5 227.8 263.9 334.1 368.8
Payroll............................................................. 26.8 29.7 38.0 48.8 59.2 62.1 58.8 63.9 75.1 83.5
2.0
2.1
1.9 2 . 2
2.5 2.4 2.3 2 . 2
2.1
Interest............................................................
2.4
2.2
2.3 2.4 2.4 2.5 2 . 8 3.4 3.9
Rents and royalties........................................
2.0
2.1
2.2
2.4 2.9 3.5 4.1 4.2 4.0 4.3 5.4 5.9
Insurance premiums......................................
1. 9 1. 9
1. 7
1. 6
1. 3
1. 6
1. 9
1. 0
1. 1
1. 9
Employment taxes...................................
2. 4
2.3
2. 7 3. 5
1. 3
1. 5
2 . 0 2. 2
Other.........................................................
3.9
1. 2
6.9 7.6 8.5 9.5 1 0 . 6 11.4 1 2 . 2
Taxes 2 ..............................................................
5.3 5.7 6 . 6
.6
.2
.4
.6
.2
.2
.3
.6
.7
Grants and donations....................................
.8
Operating uses n,e.c. 3 ................................
80.2 88.5 115.2 124.6 139.7 149.6 150.3 179.6 235.9 260.2

352.6 408.6 460.5 474.2 499.3
80.7 88.7 1 0 2 . 0 109.4 118.7
3.3 3.6 3.9
2.7 2 . 8
4.1 4.5 4.9 5.1 5.5
7.5 8.9 1 0 . 0 10.7
6.1
3.0
7.0

3.0
7.8

1

O th e r..................................................................
Capital expenditures......................................
Plant and equipment4 ................................
Other 5 ...........................................................
Change in inventory®....................................
Profits tax payments.....................................
Renegotiation payments...............................
Dividends and branch profits......................

37.0 44.4 57.6 58.7
17.6 19.1 22.7 23.5
16.1 16.6 21. 4 22.4
1.5 2.5 1.3 1. 0
2.8
- 1 . 6 4.9 8 . 1
9.9 16.6 2 2 . 1
12.2
♦
*
*
.1
10.5 1 0 . 2 10.4
8.8

56.1
25.1

Uses of funds

k

m
n
o
D
q
r
s
t
u

y
z

Net increase in financial assets7................
Currency and deposits..................................
Federal obligations........................................
Trade credit....................................................
Receivables from Federal Govt.....................
Other trade credit.........................................
Corporate securities.......................................

aa

Valuation ad ju stm en t (bad debt charges)

V

w

X

11.8 1S.1 20.7 19.0 23.8 28.9 28.0 38.1 36.4 42.2
5.2 6.4 8.5 6.3 5.1 5.5 7.1 13.7 18.2 19.9
5.6 7.6 6.1 4.9 5. 3 6.8 11.5 16. 4 18. 6
4. 3
.8
.2
.1
.2
.4 2.1 1. 8 1.3
.8
.9
6.0
1.2
.5 - . 5 - 1 . 1 - 1 . 0
.3 1 . 6 3.3
2.1
1.4 2 . 8
7.2 12.4 16.9 14.6 1 1 . 0 9.1 11.4
1.1
.1
2.0
1.8
1.6
.7
.3
5.1 5.2 5.6 5.6 6 . 8
5.3 5.6 6 . 2
7.6 8.7
1.9

3.8

1.0

2.2
- .2

♦

*

.7
.1

1.9
.1
1. 8
*

.5

.5

.7

6.7
.9

8.8 10.1
3.7 4.3

2.0

6.1

4.0

- .7

dd
ee
ft*

- .4

1. 0
.5 3 . 4
3. 5 - 4 . 1 - 1 . 4
-.1
-.2 - . 2

.6

bb Discrepancy**................................................... - 2 . 9 - 3 .8 - 4 .3
cc

6.2

.4

.3

5.0 - . 3 - . 8
8.5
.4 - . 3
1.0
2.1
4.9
. 6 - 6 .7 - 1 . 2
- .4 - . 6
4.8 7.6
- . 3 - 2 . 0 - 2 . 0 — .7
1.4 6. 8 8. 3
-.1
*
*
*
*
.3

.2

.3

.5

- . 6 - 2 .3 - 2 .1 - 3 . 2 - 4 .9 - 2 . 2

5.2
.3
.7
4.1
♦

1. 9
4. 2

2. 5
5.0

3.0
5.9

12.7 13.8 14.6 16.1 17.2
1.4 1.4 1.4
1.0
.8
245.4 290.3 325.4 328.7 341.8

3.7 18.6
1.7
1.2
2.9
2.0
. 6 13.8
*
1. 1

7.8
1.8
1.0

4.7

24. 0

1.1
1.6

18.8
*
10.6

6.5

1.6

.6

.1
1.1
.1

- .3
6.0

1. 6
3. 1

.1
5.9

.1

.2

.1

.6

.6

.6

.7

- . 9 - 1 . 4 - 3 .3 - 1 .6 - 2 . 3

- .2

4. 1
*

.6 12. 7
-.1

.5

.6

-.2
.3
.2

Total, above u s e s............................ 130.3 146.6 191.2 216.4 247.4 261.5 252.5 296.6 377.3 415.9 392.4 468.9 524.8 537.7 557.4
Memoranda:
Depreciation and amortization charges8. ..
Depletion charges8 ........................................
Profits tax liability 9 ......................................

3.3
.4
1.3

3.4
.5
2.6

3.8 4.2 4.5 4.8 5.8
.7
.5
.6
.6
.7
7.3 12.3 16.0 14.9 10.7

4.2

5.2

6.2

.8

1.2
11.0

11.8

8.7

1.7

7.1 7.7 8.9 1 0 . 0
2.1
1.5 1.7 2 . 1
9.5 16.8 21.4 19.0

11.1
2.1
20.1

♦Less than 50 million dollars.
**Net uses ( + ) or net sources ( —) not accounted for.
1 Equal to corporate sector receipts under the flow-of-funds transaction category “other goods and services.”
2Other than employment taxes and profits taxes, which are shown elsewhere in the table. The sum of lines i and q equals corporate sector
payments under the flow-of-funds transaction category “taxes.”
3The sum of lines k, m, and P equals corporate sector expenditures under the flow-of-funds transaction categories “other goods and services”
and “real estate transfers.”
4For 1945 and subsequent years, the corporate component of the SEC-Commerce series on plant and equipment expenditures. Earlier years
are estimated from related data.
R esidential construction by corporate landlords, change in construction work in process, and used equipment purchases.
6After inventory valuation adjustment.
7Includes State and local obligations not shown separately.
8 As reported in income tax returns.
9Federal tax liability as filed with tax returns plus State tax liability as estimated by Department
of Commerce.
N o t e . —Details may not add to totals because of rounding. For description of table, see p. 81.




96

97

C O R PO R A T E B U SIN E SS SECTOR

TABLE 12—CORPORATE NET OPERATING SURPLUS AND CORPORATE PROFITS
Relationship of Corporate Net Operating Surplus in FIow-of-Funds Accounts to Corporate Profits before Tax in
National Income Accounts
(In billions of dollars)

1939

1947

1948

1949

1950

1951

1952

1953

A

Corporate profits before tax in n ation al incom e accou n ts1.........................

6.4

29.5

32.8

26.2

40.0

41.2

37.2

39.4

B
C

A d ju stm e n ts fo r differences in sector coverage:
Minus: Profits of banks, insurance companies, and corporate farms.................
Minus: “ Rest of the world” component in national inco ne profits series........

.5

1.2
.7

1.7

2.0
.8

2.0
1.0

2.0
1 .2

2.3

2.5

.8

1.1

1.1

D
E
F

A d ju stm e n ts fo r differences in tran saction classification:
Plus:
Depreciation and amortization charges.......................................................
Plus:
Bad debt charges............................................................................................
Minus: Profits revealed by tax au d it........................................................................

3.3
.5

5.2
.5
.4

6.2

7.1

7.7

8.9

.6

.5

.6
.6

.6
.6

10.0
.6
.6

11.1
.7

.6

G

Plus:

A d ju stm e n t fo r differences in valuation:
Inventory valuation adjustm ent..................................................................

- .7

- 5 .9

2.2

1.9

- 4 .9

- 1 .3

1.0

Plus:

A d ju stm e n t fo r differences in consolidation:
Domestic dividends received by corporate business sector......................

1.7

1.5

1.8

1.7

1.9

1.8

1.8

I

Plus:

A d ju stm e n t fo r differences in sector allocation:
Branch profits and foreign dividends received by corporate business

J

Equals: Corporate n et operating surplus in flow-of-funds a cco u n ts.........

K
L

Memoranda:
Nonfinancial operating sources of funds...................................................... 129.2 363.3 405.7 387.6 451.2 508.9 521.7 548.2
Nonfinancial operating uses of funds........................................................... 119.0 334.1 368.8 352.6 408.6 460.5 474.2 499.3

H

1 Before

.2




-

.6

-

1.0

1.8

.3

.6

.8

.8

.9

1.0

1.0

1.0

10.2

29.2

36.9

35.0

42.7

48.4

47.6

49.0

inventory valuation adjustment.

N ote .— D etails may not add to totals because of rounding.

.5
.5

For description of table, see p. 92.

CHAPTER 4
NONFARM NONCORPORATE BUSINESS SECTOR

The nonfarm noncorporate business sector
covers all unincorporated businesses with the
following exceptions: farms, mutual financial
institutions such as savings banks and build­
ing and loan associations, and nonprofit in­
stitutions—schools, religious organizations,
and philanthropic groups. The sector in­
cludes mutual organizations engaged in pro­
duction or commerce, such as farm market­
ing, purchasing and utility cooperatives, but
not farm financial cooperatives, which are
included in the “other investors” sector. All
lessorship of real property is treated in the
flow-of-funds accounts as business activity
and all noncorporate lessors are included in
this sector.
Both this sector and the farm business sec­
tor (to be discussed in the next chapter) ex­
clude the consumer activities of proprietors.
The receipts and expenditures recorded are
those of the enterprise; the assets and debts
included are those held or owed in the name
of the business. The activities of the proprie­
tor as a consumer are recorded in the con­
sumer sector.
Dividing the business and consumer trans­
actions of proprietors in this way between
the business and consumer sectors is artificial
to some extent since many decisions to buy
and sell or to lend and borrow are based on
a proprietor’s entire financial situation. In
single proprietorships particularly, consumer
investments such as new homes may com­
pete with business expenditures for a com­
mon pool of funds and available credit. The
problem is further complicated by the pres­
ence of investments that are made for both
consumption and business use, such as physi­




cians’ automobiles and, in the farm sector,
electric power systems.
One treatment that would avoid these
problems and perhaps increase the usefulness
of the accounts for some purposes would be
to combine in a separate sector the business
and consumer accounts of sole proprietors
and their families.1 The difficulty in doing
this, however, is statistical: consumer sector
data are not available in a form that would
show separately proprietors’ and nonpro­
prietors’ consumer transactions—consump­
tion expenditures, nonbusiness income, con­
sumer debt, and financial assets such as
Federal obligations and corporate securities.
While tentative estimates along these lines
have been developed for farmers, they are
not yet of sufficient detail to apply to the
flow-of-funds aggregates of consumer data,
and nothing comparable to the farm study
is yet feasible for nonfarm proprietors.
In flow-of-funds accounts, therefore, the
noncorporate sector accounts are in general
limited to transactions and financial accounts
directly related to the operation of business
firms, and proprietors’ consumer activities
are left in the consumer sector. This divi­
sion of accounts makes it necessary to show
in some transaction account the transfers be­
tween proprietors’ consumer accounts and
1The proposal is often made to merge the accounts not
only of sole proprietorships and their owners but of all
noncorporate businesses and their proprietors either in a
separate sector or as an unidentified part of an expanded
consumer or personal sector. This is not a satisfactory ap­
proach. Even if it were known (which it is not) that
sole proprietors make no distinction between their busi­
ness and personal accounts, the same could not be main­
tained with respect to unincorporated partnerships.

98

N O N FARM

N O N C O R P O R A T E B U SIN E SS SECTOR

their business accounts—new equity capital
invested in the noncorporate business sector
and withdrawals of income and capital. In
the flow-of-funds accounts this is done on a
net basis through a separate transaction ac­
count, net withdrawals by proprietors.
The use of a single net transaction, reflect­
ing both financial and nonfinancial flows, to
show the relations between enterprises and
their proprietors is dictated by the lack of
data bearing directly on these flows between
noncorporate businesses and the consumer
sector. Were suitable data available, a
preferable treatment would be to show sepa­
rately the withdrawals from the sector
treated as current income by proprietors and
the net amounts of new capital invested in
the sector by proprietors. In this form the
noncorporate business sectors would have
transactions corresponding to dividends and
net new equity issues in the corporate busi­
ness sector. With the data at hand, however,
these flows can be computed only as a com­
bined residual on the entire sector account.
That is, net withdrawals by farm and non­
farm proprietors are estimated by totaling
all sources of funds accounted for in the flowof-funds sector accounts and subtracting
from the total all accountable uses—invest­
ment in plant, equipment, and inventories,
and net additions to business financial as­
sets.
The use of such a residual transaction
leaves no way to measure directly the omis­
sions and inconsistencies in the noncorpo­
rate business sectors between total estimated
sources and total estimated uses of funds.
The net effect of errors in the noncorporate
accounts becomes part of net withdrawals
and is transferred to the consumer sector
account, where it is reflected in the discrep­
ancy in the consumer sector account along




99

with other errors and inconsistencies in that
account.2
The behavior of net withdrawals depends
to some extent on the allocation of proprie­
tors’ transactions between the consumer and
business sectors. For example, if a proprie­
tor’s holdings of Federal obligations are
treated as a consumer asset, a decision to
finance business capital expenditures by
liquidating bond holdings is reflected in the
accounts as a decrease in consumer financial
assets and an investment flow through the
net withdrawals category from consumers
to the business sector; whereas if Federal
obligations are treated as a business asset
there is a conversion of assets within the
business sector and the consumer account is
not affected. The nonfarm noncorporate ac­
count covers only the business activities of
proprietors. However, the allocation of some
transactions, particularly financial transac­
tions, between the business and consumer
sectors cannot be precise. While in some
cases it is based on data specifically pertain­
ing to business, such as trade credit and se­
curity holdings of security dealers, in other
cases more indirect allocations had to be
used.
N o n c o r p o r a t e B u s in e s s S e c t o r S t a t e m e n t

Annual estimates of the transactions en­
gaged in by the nonfarm noncorporate busi­
ness sector are presented in a sources and
uses of funds statement in Table 13, page 104.
Many of the concepts and definitions used
in this sector statement are the same as those
used in the corporate sector statement, al­
ready discussed in Chapter 3. These discus­
sions are not repeated in the present chapter.
2 Insofar as such noncorporate discrepancies arise from
errors in allocating proprietors* activities between the con­
sumer and the business sectors, they offset the corresponding
consumer discrepancies when transferred to the consumer
account.

100

F L O W O F F U N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

Nonfinancial sources of funds (line A ).
As in the corporate business sector, nonfinan­
cial transactions include gross sales and other
income and gross operating costs rather than
a net entry such as profits or retained earn­
ings.
Operating sources of funds (line B) are
distinguished from other nonfinancial
sources. (See the discussion of nonfinancial
sources for the corporate business sector,
Chapter 3, page 81.) Subtraction of op­
erating uses (line b) from operating sources
gives the net operating surplus of the sector,
a flow-of-funds analogue to accrual net in­
come. The relation between flow-of-funds
net operating surplus and the national in­
come series on nonfarm unincorporated
enterprise net income is presented in Table
14 on page 105 and described on page 102
in this chapter.
Sales and receipts from operations (line C)
include all business receipts by the enterprises
in this sector from the sales of goods and
services other than rent and interest. It
includes the gross receipts of self-employed
professionals, such as doctors, dentists, law­
yers, etc., receipts from the rental of business
equipment (but not from the rental of real
property), tips received by employees of un­
incorporated enterprises, and an estimate of
the sales taxes not included in the statistics
on noncorporate sales receipts. The tips and
sales taxes appear again in the sector account
as operating uses, the former under payrolls
(line c), the latter under taxes (line i). Line
C is the total of the sector’s receipts in the
flow-of-funds transaction category “other
goods and services.”
Rents (line D ) include all rents and royal­
ties received by nonfarm noncorporate busi­
ness, including receipts from the lessorship
of residential properties, but excluding re­




ceipts from the rental of equipment. Equip­
ment rental receipts are included as sales
receipts.
Interest receipts (line E) are the gross
monetary interest received by the sector.
Other nonfinancial sources of funds (line
F) are those not arising in the primary busi­
ness activities of the sector. Insurance bene­
fits (line G) consist of benefits received
from private insurance companies under
policies covering property damage and theft.
Real estate transfers (line H ) are the net
receipts of noncorporate businesses from the
sale of real property to other sectors; they do
not include receipts from the sale of used
industrial plant and equipment, for which
no estimates were developed.
N et increase in liabilities (line I) rep­
resents funds raised by borrowing and in­
creases in trade payables less funds used to
retire such debt. Net new equity capital
invested in the sector by proprietors is not
included in this section of the table; it is a
negative component of net withdrawals by
proprietors (line p).
Ban\ loans other than mortgages (line J)
consist of commercial and industrial loans to
noncorporate firms (line K ) ; and bank loans
to security brokers and dealers, part of other
loans to individuals, and a minor amount of
loans to personal loan companies (all in line
L)-3
Trade debt (line M) represents notes and
accounts payable other than short-term debt
to banks.
Mortgage debt (line N ) is all noncorporate
business borrowing secured by residential,
industrial, and commercial properties, in­
cluding loans for construction obtained by
3In 1953, line L also includes loans to farm cooperatives
guaranteed by the Commodity Credit Corporation and clas­
sified in banking statistics as loans to farmers.

N ON FARM

N O N C O R P O R A T E B U SIN E SS SECTOR

noncorporate builders. The category in­
cludes mortgage loans from banks (line O).
Miscellaneous liabilities (line P) consist of
Rural Electrification Administration loans
to utility cooperatives and customer credit
balances owed by security brokers.
Nonfinancial uses of funds (line a). The
detail presented under nonfinancial uses of
funds departs from the standard flow-offunds transaction categories in that pur­
chases of “other goods and services” are
divided into operating purchases n.e.c., capi­
tal expenditures, and changes in inventories.
Operating uses of funds (line b) as a con­
cept is explained in the discussion of line A
of corporate business sources of funds, Chap­
ter 3, page 81. For nonfarm noncorporate
business there are no data bearing directly
on operating uses such as tax-return data
provide for the corporate business sector and
the series must be computed as a residual:
operating sources of funds minus net operat­
ing surplus. Net operating surplus for the
sector is derived directly from the national
income series on noncorporate net income.
The derivation is presented in Table 14, page
105, and is described on page 102.
Payroll (line c) represents the cash pay to
employees of noncorporate business (includ­
ing tips and commissions). It excludes
wages in kind. It is measured gross of tax
withholdings and employee contributions to
public and private pension and retirement
plans, and it excludes employer contributions
to such plans. Employer contributions are
classified in payments of insurance pre­
miums (line f).
Interest (line d) is the gross monetary
interest paid on the debts of noncorporate
business.
Rents (line e) are all rents and royalties
paid by the noncorporate business sector ex­




101

cept equipment rentals, which are in “other
goods and services.”
Insurance premiums (line f) include em­
ployment taxes (line g) and employer con­
tributions to private pension plans and pre­
miums for insurance coverage of business
property and activities (line h ) . The specific
content of line f is listed in the discussion of
insurance premiums for the corporate busi­
ness sector (page 85).
Taxes (line i) represent the payment of all
business taxes, fees, and fines levied on the
sector, except social insurance taxes (included
in insurance premiums). They consist
mainly of sales taxes (which are recorded as
paid by the seller rather than the purchaser)
and property taxes. They do not include
the individual income taxes paid by business
proprietors, which are recorded as a con­
sumer rather than a business use of funds.
Operating uses n.e.c. (line j) represent
purchases in the transaction category for
“other goods and services” that are allowable
deductions on income tax returns. As in the
corporate sector this series is computed as a
residual—total operating uses less those spe­
cified in lines c through i.
Other nonfinancial uses of funds (line k)
consist of capital expenditures, change in in­
ventories, and net withdrawals by proprie­
tors.
Capital expenditures (line 1) correspond
in content to corporate sector capital expendi­
tures, described on page 86. Plant and
equipment expenditures (line m) are an es­
timate of the noncorporate component of the
SEC-Commerce series on plant and equip­
ment. Other capital expenditures (line n)
consist of outlays not covered by the SECCommerce data: investment in new residen­
tial properties and in residential construction
work in process, and equipment purchases
by professionals and salesmen. In 1946 and

102

F L O W O F F U N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

1947 line n also includes estimates of pur­
chases of used equipment from the Federal
Government.
Change in inventory (line o) is the net in­
crement in value of inventories after inven­
tory valuation adjustment as shown for non­
corporate business in the national income
accounts plus the change in inventories held
under Commodity Credit Corporation loans
by farm cooperatives. The series represents
change in physical inventories valued at av­
erage cost prices prevailing during the year.
The concept of inventory change appropriate
to the flow-of-funds accounts is discussed
in Chapter 3, page 87.
N et withdrawals by proprietors (line p),
as explained earlier (page 98) are the net of
all flows between proprietors’ consumer and
business accounts. They combine income
withdrawals in the nature of salaries, interest,
and dividends with net flows of proprietors’
capital into and out of their enterprises. The
lack of direct data on these transactions
makes it necessary to compute net with­
drawals as a residual—total accountable
sources of funds less accountable uses of
funds. Net errors in the noncorporate ac­
counts are thus transferred to the consumer
sector and combined with consumer account
discrepancies.
The relation of this net withdrawal series
to nonfarm noncorporate net income in the
national income accounts is presented in
Table 5, page 76, and described on page 60.
N et increase in financial assets (line q).
The financial assets recorded here are those
of noncorporate enterprises as such and do
not include assets of proprietors as con­
sumers. Currency and deposits (line r) are
the business cash balances. Federal obliga­
tions (line s) comprise U.S. Government ob­
ligations held by unincorporated businesses,
including the holdings of noncorporate secu­




rity brokers and dealers. Trade credit (line t)
is the notes and accounts receivable of non­
corporate businesses, including the receiva­
bles of self-employed professionals. Other
assets (line u) consist of the corporate secu­
rity holdings of noncorporate security brok­
ers and dealers, mortgage holdings, and mis­
cellaneous assets (customers’ debit balances
with brokers).
Valuation adjustment (line v) is an esti­
mate of bad debt charges. The need for this
adjustment is discussed in Chapter 3, page
89.
M emorandum. The flow-of-funds state­
ment of sources and uses of funds does not in­
clude depreciation charges (line x), since
they are intra-firm accounting entries and do
not require use of money or credit. They
have analytic importance, however, insofar
as they affect income taxes and proprietors’
decisions on capital expenditures and income
withdrawals and are therefore presented here
as a memorandum item.4
N o n f a r m N o n c o r p o r a t e O p e r a t in g
S u r p l u s a n d P r o p r ie t o r s ' N e t I n c o m e

The relationship of the net operating sur­
plus of the flow-of-funds nonfarm noncorpo­
rate business sector to the sum of nonfarm
proprietors’ net income and net rental in­
come of persons in the national income ac­
counts is presented in Table 14, page 105. Net
operating surplus, the difference between
the sector’s operating sources and operating
uses of funds (repeated from the sector state­
ment as lines H and I in Table 14), is derived
for this sector through this relationship to
the national income series. These national
income series thus enter into the computation
of net withdrawals by proprietors, which are
* The series on line x differs from the noncorporate de­
preciation series shown on line 24 of Table 6 of the 1954
edition of National Income in that line x includes deprecia­
tion on residential and farm properties owned by the sector
and excludes accidental damage.

NON FARM

N O N C O R P O R A T E B U SIN E SS SECTOR

a residual depending partly on the level of
operating surplus.
Table 14 presents this relationship in terms
of adjustments that are necessary to derive
net operating surplus (line G) from the
national income series on nonfarm non­
corporate business income and rental in­
come of persons (line A ).5 Line A is shown
after allowance for inventory valuation ad­
justment.
Transaction coverage adjustment
Imputed net rental income (line B),
which is a component of rental income of
persons in the national income business sec­
tor, is the difference between gross imputed
rental value placed on owner-occupied
homes and the costs of maintaining these
homes, including depreciation. In the na­
tional income accounts, the gross imputed
rental values and the home operating costs
are treated as business sector receipts and ex­
penses. In the flow-of-funds accounts, the
gross rental values are excluded as imputed
transactions, and the operating expenses of
owner-occupants are classified as consumer
uses of funds. The data relating to imputed
rentals, therefore, do not enter the flow-offunds noncorporate business accounts in any
way, and imputed net rental income is
deducted in deriving net operating surplus
from the national income series.
5 Line A includes inventory valuation adjustment. The
separate series making up line A are shown in Table 1 of the
1954 edition of National Income, a supplement to the Survey
of Current Business, as income of business and professional
unincorporated enterprises and rental income of persons.




103

Transaction classification adjustments
Depreciation charges (line C) and bad
debt charges (line D ) are classified as oper­
ating deductions in computing net income
in the national income accounts. In the flowof-funds accounts they are not deductions in
computing net operating surplus, since they
are not flow-of-funds transactions. (Bad debt
charges enter the accounts as valuation ad­
justments.) Net operating surplus is thus
larger than net income by the amount of
these two items, and they must therefore be
added back to the national income series in
deriving net operating surplus.
Sector allocation adjustment
The interest income adjustment (line E)
represents the earnings on Federal obliga­
tions held by firms other than security brok­
ers and dealers. In the national income
accounts such interest is treated as personal
interest income. In the flow-of-funds accounts
it is included in receipts of the noncorporate
sector and hence is reflected in net operating
surplus.
Adjustment for differing estimates
Added maintenance and repair expense
of residential landlords (line F) reflects re­
visions in the maintenance and repair series
published by the Department of Commerce
that became available after publication of
the 1954 edition of National Income. The
adjustment reflects an allocation of the revi­
sions among owner-occupants, noncorporate
landlords, and corporate landlords.

104

FLOW

O F FU N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

TABLE 13—NONFARM NONCORPORATE BUSINESS SECTOR: SOURCES AND USES
OF FUNDS STATEMENT
(In billions of dollars)
1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
Sources of funds
57.4 61.5 72.1 87.4 98.4 110.5 121.8 140.9 154.9 167.4 167.3 180.9 199.2 206.0 215.9

A

N onfinancial sources.....................................

B
C
D
E

O p era tin g.......................................................... 56.8 60.9 71.3 86.0 97.6 109.6 120.5 139.4 152.6 164.8 165.1 178.7 197.1 203.9 213.4
Sales and receipts from operations 1 ........... 49.8 53.6 63.3 77 A 88.7 100.7 111.5 129.5 141.4 152.5 152.0 164.4 181.4 187.3 195.8
8.9 8.7 8.7 9.7 1 1 . 0 1 2 . 1 1 2 . 8 14.1 15.4 16.4 17.2
7.0 7.2 7.9 8 . 6
R en ts...............................................................
.1
.1
.1
.1
.1
.2
.2
.2
.2
.2
.2
.3
.3
Interest...........................................................
.2
.3

F
G
H

O th e r..................................................................
Insurance benefits.........................................
Real estate transfers.....................................

T
T
K
L

Net increase in lia b ilities.............................
Bank loans other than mortgages...............
Commercial and industrial........................
Other............................................................

M

Trade d eb t......................................................

N
O

Mortgage debt...............................................
Owed to banks.............................................

P

Miscellaneous liabilities2 ..............................

Q

Total, above sources..............................

.7

.7
.3
.4

.2

.4
- .1
- .2

*
—.2

.2
-.1

*
—. 1
.4

.2
- .2

.1
.1

-.1

*

A

14
.4

.8
.3
.5

1.0
.3
.7

1.4
.4

1.5
.5

1.0

1.1

1.1 - 1 .2 - 1 .0
.4
.3 *
.4
.2 — .3
*
.2
.3

.9

2.5

.8
.3
.5

1.0

.4
.2

- .1
.1

- .5
-

- .3

- .3

- .9
— .3

A

A

1.1

.6

— .3
.9

2.1
1.8
.4
.7 1.6
1.1 - 1.2

2.3
.6
1.7

2.6
.6
2.0

2.2
.6

3.7

3.6

2.7

.6

1.1

1.0

*

1.4
-A

.6

1.6

.5
.6

A

.7

1.3

.2

-.2

.5
*
- .1

1.3
.6

1.6

1.2

.4

1.3
.3

.2

.2

.2

.4

A

.8
- .6

2.1
.7
1.5

2.1
.9
1.3

2.1
.9
1.2

1.5

4.3
2.9
2.4

3.2

2.8

.5
- .6

2.5
1.0

- .6

.2

- .5
-.1

- .7
.9

3.5
.7
-.2
.9

2.1

1.0

1.0

1.4
.5

1.5
.6

1.8

.3

1.4
.7

.3

.6

.3

.1

.5
-.1

57.4 61.8 73.2 86.2 97.4 111.5 124.3 143.0 158.6 171.0 170.0 185.2 202.4 208.9 219.3

Uses of funds
a

Nonfinancial u se s........................................... 56.7 61.3 71.1 82.4 92.2 106.3 117.9 141.1 157.4 170.9 167.9 183.0 199.1 207.8 215.9

b
c
d
e
f
g
h

O perating3........................................................ 46.1 48.8 56.2 67.0 75.5 86.3 96.0 111.7 125.3 135.0 134.7 146.3 162.0 167.0 175.6
8.5 1 1 . 1 12.7 14.0 15.4 17.8 19.5 2 1 . 1 2 1 . 1 2 2 . 8 26.1 28.1 30.0
6.2
6.8
P ayroll............................................................
1.3 1.3 1.3 1 . 2
.9
1.2
1.4 1 . 6
1.7
1.1
.9
.9 1 . 0
1.2
1.6
Interest...........................................................
1.8
1.8
1.9 1.9 1.9 1 . 8
1.9 2 . 2
2.9 3.2 3.5 3.6 3.9
2.5 2 . 8
R ents...............................................................
.7
.7
1.9 2 . 2
2.5 2 . 8 2.9
.9 1 . 0
1.0
1.1
1.1
1.3 1 . 6
1.8
Insurance premiums......................................
.6
.6
.2
A
.5
.6
.2
.3
.3
A
.3
.4
A
Employment taxes......................................
.3
.3
.6
.5
.6
.7
.8 1.0 1.2 1.4 1.5 1.7 1.9 2.1 2.3
.5
.7
Other ............................................................

i
j
k
1

m
n
0

P

Taxes 4 ............................................................
Operating uses n. e. c . 5 ................................

u

t

5.0

5.4

102.6 111.2

5.9 6.3 6 . 8
122.4 124.5 130.2

O th e r.................................................................. 10.6 12.5 15.0 15.4 16.7 19.9 21.9 29.4 32.1 35.9 33.2 36.7 37.1 40.8 40.3
1.7 2 . 1
.9 1 . 2
2.1
4.7 5.5 4.0 4.1 5.9 4.8 4.6 5.1
2.3 1 . 0
Capital expenditures.....................................
.9 1.2 1.9 3.3 4.2 3.4 3.2 4.1 4.2 4.0 4.4
1.2 1.6 1.8 1.1
Plant and equipment6 ................................
.6
.6
.7
.1 *
.6
Other 7 ..........................................................
.2 1.4 1.3
.9 1.8
.5 *
.5
.5
.9
.4
.9
.2
.2 - . 1
.5
.4
-.2
1.5
Change in inventory 8 ...................................
.1
.3
.7
.1
1.0
8.9 1 0 . 1 11.9 14.2 15.9 18.3 19.4 24.3 26.5 30.9 29.3 29.3 31.4 35.9 34.3
Net withdrawals by proprietors...................
Net increase in financial a sse ts.................
Currency and deposits..................................
Federal obligations........................................
Trade credit...................................................
Other assets 9 ..................................................

q
r
s

2.3 2.5 2.7 2.9 3.0 3.3 3.6 4.1 4.3 4.8
33.8 35.8 40.9 48.9 55.8 65.2 73.0 85.3 96.3 103.4

V

Val. adj. (bad debt charges).......................

w

Total, above u ses............................

X

Memorandum :
Depreciation charges....................................

*

.4
.4

.4
- .4

.3
.7
*
- .3

-.1
.2 .2

1.9
.5
.5
.8

.1
.2

5.1

3.7
1.9

5.1
3.0

1.6
.6

1.8
.1
.2

2.7
.5
.3

.1

.1

- .4

.2

1.6

6 .3
2.9
1.9

1.7

1.0

.8
- .8
1.2

.5

.5

.1

.1

1.0
- .2
- .8

.9

1.1
.2

-

- .1
1.0

- .7
1.4
.2

.2

2.0

3.2

.8

1.2
- .2
2.1

1.8
.3
- .3
1.3
.5

- .5
.4
1.3

.2

.2

.1
.2

.8
- .5
- .2

.9

3.2
.4
.6

.6

1.9
.3

.2

.2

57.4 61.8 73.2 86.2 97.4 111.5 124.3 143.0 158.6 171.0 170.0 185.2 202.4 208.9 219.3
1.7

1.8

2.0

2.3

2.3

2.1

2.2

2.4

3.0

3.4

4.1

4.4

4.9

5.4

5.6

♦Less than 50 million dollars.
1 Nonfarm noncorporate business sector receipts in flow-of-funds transaction category “other goods and services.”
2 Rural Electrification Administration loans to cooperatives and customer credit balances with brokers.
3 Includes small amount of grants and donations not shown separately.
4Other than employment taxes, which are classified under insurance premiums.
5Lines j, I, and o together equal nonfarm noncorporate business sector expenditures in the flow-of-funds transaction category “other goods
and services.”
6 For 1945 and subsequent years the noncorporate component of the SEC-Commerce series on plant and equipment.
Earlier years estimated
from related data.
7Auto purchases by professionals and salesmen, residential construction by noncorporate landlords, change in construction work in process
by noncorporate contractors, and purchases of used equipment.
8After inventory valuation adjustment.
9 Mortgages, corporate securities, and miscellaneous financial assets (customer debit balances with brokers and capital stock of banks for
cooperatives).
N o t e . —Details may not add to totals because of rounding. For description of table, see p. 99.




NON FARM

105

N O N C O R P O R A T E B U SIN E SS SECTOR

T A B L E 14—N O N F A R M N O N C O R P O R A T E O P E R A T IN G SU R PLU S A N D PR OPRIETORS* IN C O M E
Relationship of N onfarm N oncorporate Business N et Operating Surplus in Flow -of-Funds Accounts to Nonfarm
Proprietors’ and Rental Income in N ational Income Accounts
(In billions of dollars)
1939

1947

1948

1949

1950

1951

1952

1953

26.5

28.8

29.3

31.3

33.9

35.7

36.8

A

Nonfarm proprietors* and rental incom e in n ational incom e a ccou n ts1..

10.0

B

Minus:

A d ju s tm e n t fo r differences in tran saction coverage:
Imputed net rental income of persons from owner-occupied dwellings..

1.3

2.1

2.4

3.0

3.4

3.7

4.2

4.6

Plus:
Plus:

A d ju stm e n ts fo r differences in transaction classification:
Depreciation charges......................................................................................
Bad debt charges............................................................................................

1.7

3.0

3.4

4.1

4.4

4.9

5.4

5.6

.2

.2

.2

.2

.2

.2

.2

.2

E

Plus:

A d ju stm e n t fo r differences in sector allocation:
Noncorp. interest income attributed to households in personal incom e..

*

.2

.1

.1

.1

.1

.1

.1

F

A d ju stm e n t fo r differences in sta tistic a l estim ates:
Minus: Added maintenance and repair expense of residential landlords.............

.4

.4

.4

.2

.3

.4

.4

G

Equals: Net operating surplus of nonfarm noncorporate business in
flow-of-funds acco u n ts..........................................................................

10.7

27.3

29.8

30.3

32.5

35.1

36.9

37.7

H
I

Memoranda:
Nonfinancial operating sources of funds......................................................
Nonfinancial operating uses of funds...........................................................

56.8 152.6 164.8 165.1 178.7 197.1 203.9 213.4
46.1 125.3 135.0 134.7 146.3 162.0 167.0 175.6

C
D

*Less than 50 million dollars.
1After inventory valuation adjustment.
N o te.—Details may not add to totals because of rounding.




For description of table, see p.

102.

CHAPTER 5
FARM BUSINESS SECTOR

The flow-of-funds farm business sector ac­
count includes some transactions made by
farm businesses for farm operators’ families.
However, most farm operator transactions
not directly related to farm business activities
are excluded from this sector account. Thus,
the account does not cover farmers’ nonfarm
business income (such as rentals from non­
farm property and royalties), wages received
by farm families from other farmers and
from nonfarm work, interest and dividend
income, and most of the consumption ex­
penditures, consumer debt, and consumer
financial assets of farm families.
The problems of segregating the business
activities from the consumer activities of
proprietors of noncorporate businesses, dis­
cussed in Chapter 4, page 98, are more acute
in the farm business sector than in the non­
farm noncorporate business sector. Farmers’
production and financial transactions serve
consumer and business purposes jointly to a
greater extent than comparable nonfarm
items. For some purposes the farm sector ac­
count would be more useful if it combined
all of the consumer as well as business trans­
actions of farm operators. At present, how­
ever, most of the nonfarm income, consumer
expenditures, and consumer debt of farm
families are not identifiable separately in
statistics on consumer activities, and it is not
possible to transfer such transactions to the
farm sector account. With improvements in
1For details on treatment of transactions with nonfarm
basic data, this identification may be possible
landlords, see discussion of farm rents paid, p. 109.
2 The Balance Sheet of Agriculture has somewhat dif­ in the future. On the other hand, it is also
ferent transactor coverage and transaction treatment and
not possible to exclude all consumer trans­
coverage from the farm income statistics published by the
actions from the farm sector account; there
Department of Agriculture.

The farm business sector account, pre­
sented in Table 15 on page 115, records the
transactions of farm enterprises. The farm
business sector covers only farm operators.
It excludes farm cooperatives and nonfarm
landlords of farm property.1 Farm market­
ing, purchasing, and utility cooperatives are
included in the nonfarm noncorporate busi­
ness sector, and farm financial cooperatives
are in the “other investors” sector. The farm
business sector includes corporate as well as
noncorporate farms, but the corporate com­
ponent is small (6 per cent of sales in recent
years).
The farm business sector has the same
transactor coverage as statistics on farm
operator income published by the Depart­
ment of Agriculture; there are, however,
several differences between the two compila­
tions in transaction coverage and treatment,
which are discussed below in the descrip­
tion of farm sector transactions. The flowof-funds sector account differs in several re­
spects from the Balance Sheet of Agriculture,
published by the Department of Agricul­
ture.2 The main differences are that the
Balance Sheet includes farmers’ consumer
assets and liabilities as well as business items,
and it includes the real estate assets and real
estate debt of nonfarm landlords, whereas
the flow-of-funds farm sector statement is
focussed on the business activities of farm
owner-operators and tenant-operators.




106

F A R M B U S IN E S S SECTOR

are consumer transactions, related mainly to
housing and home produced food and fuel,
that are integrated into farm income and
finance statistics and that are not identifi­
able separately in the source data. Differ­
ences in treatment of these and other items
between the flow-of-funds accounts on the
one hand and Department of Agriculture
farm income statistics and the national in­
come accounts on the other are discussed on
pages 112 and 113.
F a r m B u s in e s s S e c t o r S t a t e m e n t

The statement of sources and uses of
funds for the farm business sector is given
in Table 15 on page 115.
Nonfinancial sources of funds (line A ).
As in the other business sectors, the farm
sector account presents nonfinancial trans­
actions on a gross basis in that it includes
total operating receipts and expenses rather
than a single net income item. Operating
sources and uses, which are shown separately
from other nonfinancial transactions, are the
flow-of-funds transactions that enter the
computation of farm net income. The prin­
cipal income and expense items excluded are
nonmoney income and depreciation and
other book costs that are internal transac­
tions not involving the use of money or
credit. Table 16 on page 116 and the text on
page 114 present a reconciliation between
net operating surplus—the difference be­
tween operating sources and operating uses
in the flow-of-funds accounts—and farm net
income in the national income accounts.
Operating sources of funds (line B) are
the cash receipts of farm operators that enter
gross farm income in Department of Agri­
culture statistics. Operating sources exclude
the nonmoney components of gross farm in­
come—net increase in market value of in­
ventories, nonmoney components of gross




107

rental value of farm dwellings, and value of
farm products consumed directly on farms.
Treatment of net inventory change is dis­
cussed on page 110, and the other two non­
money components of farm income are dis­
cussed on page 113.
Sales and receipts from operations (line C)
are the farm sector’s receipts in the flow-offunds transaction category “other goods and
services.” They cover all receipts from the
sale of crops and livestock.8 Line C differs
from cash receipts from marketings as pub­
lished by the Department of Agriculture in
one respect. The Agriculture series includes
the proceeds of CCC loans (both direct and
guaranteed) as sales, whereas the flow-offunds accounts treat these loans as a financial
source of funds and exclude them from sales
at the time the loan is made. At the time
the commodities securing the loan are re­
leased to the CCC in lieu of repayment of the
loan, the transaction is reflected in sales and
in reduction of liabilities of the farm sector.
If the loans are repaid, there is a reduction
in liabilities and no entry is made in sales.
Rent receipts (line D ) represent gross in­
come of farmers from real estate rented out
for farming. They exclude receipts of non­
farm landlords and farmers’ rental income
from nonfarm activities.
Grants and donations (line E) are subsidy
receipts from the Federal Government other
than those received through loan programs
and purchase and sale programs such as
CCC price support programs. Currently,
the subsidy payments recorded here are
chiefly for soil conservation programs, but
during the war years livestock subsidy pay­
ments were an important component. The
3 Line C includes sales of crop shares by landlords, both
farm and nonfarm; these sales are matched by equal
amounts included in gross rents paid on the uses of funds
side of the sector account.

108

FLOW

O F FU N D S IN

T H E U N IT E D STA TES, 1939-53

Department of Agriculture series on Govern­
ment payments published in Farm Income
Situation includes Government payments to
nonfarm landlords and payments of rent by
the Government to farmers. Both of these
have been excluded from line E, the former
because they are receipts of another flow-offunds sector and the latter because they are
already included in farm rent receipts (line

sumer borrowings by farmers except insofar
as they are included in bank loans to farmers
in banking statistics.
B an\ loans other than mortgages (line J)
consist of bank loans to farmers guaranteed
by the CCC (line K) and other agricultural
loans by banks to farmers (line L). Line K,
based on banking statistics, differs somewhat
from similar series in CCC records because
of differences in timing and coverage.
D).
Trade debt (line M) is short-term pay­
Other nonfinancial sources of funds (line
F) consist of insurance benefits and liquida­ ables to nonbank nongovernmental lenders
tion of capital assets.
on business purchases. It excludes payables
Insurance benefits received (line G) rep­ on household purchases.
resent benefits received by farm businesses
Mortgages (line N ) represent farmers’
on fire, hail, windstorm, motor vehicle, and debt secured by farm real estate including
Federal crop insurance. They do not include debt secured by farm dwellings. Detail is
insurance benefits received by farm proprie­ shown for amounts owed to banks (line O),
tors as consumers.
to the Federal Government (line P), and to
Real estate transfers (line H ) are net sales others (line Q ). These data exclude farm
of real estate by the farm sector to other mortgage debt owed by nonfarm landlords
sectors. The series used represents total sales and differ in this respect from mortgage debt
of farm real estate (that is, of land used in shown in the Balance Sheet of Agriculture.
farming activities both before and after In the flow-of-funds accounts, farm mortgage
the sale) by farmers less total purchases of debt of nonfarm landlords is part of the
farm real estate by farmers.4 The data are mortgage debt of nonfarm sectors, mainly
from Department of Agriculture preliminary of the noncorporate business sector.
Mortgage debt owed to the Federal Gov­
estimates of transfers of farm real estate.
Transfers of land out of or into farming ernment by the farm sector is held by
activities are not covered by the data, but the Farm Mortgage Corporation, the Farm­
they are a small proportion of total transfers. ers Home Administration, and, through
Most farm land purchases by nonfarm sectors 1946, by the Federal land banks. In 1947
are for farm real estate investment or for the last of the Federal Government equity
operation by individuals and firms entering in Federal land banks was retired and for
1947 on these banks are shifted in the flowthe farm sector.
N et increase in liabilities (line I) covers of-funds accounts to the financial institutions
mainly farm business debts and mortgages n.e.c. subsector of the “other investors” sec­
on farm property, including farm dwellings. tor. Lines P and Q reflect this shift in 1947.
Miscellaneous liabilities (line R) are the
The farm sector account does not cover con­
nonmortgage debts owed to the Federal
* Only actual transactions are recorded. The ownership
of farm land is also transferred between sectors when farmers
Government—Farmers Home Administra­
discontinue operations to become nonfarm landlords and
tion
and Commodity Credit Corporation—
when nonfarm owners start operating their property as
farmers, but there are no data on these changes.
(line S) and to the financial institutions




F A R M B U S IN E S S SECTOR

n.e.c. subsector—production credit associa­
tions, livestock loan companies, and agricul­
tural credit corporations.
The bulk of farmers’ debt owed to or
guaranteed by the Federal Government can
be identified in the sector account. It com­
prises bank loans guaranteed by the CCC
(line K ), mortgages owed to the Federal
Government (line P), and miscellaneous
liabilities owed to the Federal Government
(line S). Farm debt guaranteed by the Vet­
erans Administration and farm debt to finan­
cial institutions closely affiliated with the
Federal Government, although owned pri­
vately, are included in other liability items
in the account but are not identified.
Nonfinancial uses of funds (line a) are
divided between operating and other.
Operating uses of funds (line b). As in
other business sectors, operating uses repre­
sent the amounts that would have been spent
during the year, in the transaction categories
included, if the physical volume of inven­
tories at the beginning and end of the year
had been the same. (See discussion in Chap­
ter 3, page 87.) Line b differs from the De­
partment of Agriculture series for produc­
tion expenses, published in Farm Income
Situation, in three respects: (1) it excludes
perquisites to hired labor, which are not
money transactions; (2) it excludes depre­
ciation charges, which are internal book­
keeping entries not involving two transac­
tors; and (3) it is adjusted for changes in
inventories. In the Department of Agricul­
ture net income computation, inventory
change is treated as income (positive or
negative) and is added to cash receipts rather
than deducted from production expenses as
is done in computing the flow-of-funds op­
erating uses. (See page 110 for a detailed
discussion of treatment of inventory.)




109

Payroll (line c) represents the cash wages
paid by farm enterprises; the series excludes
pay in kind. The data are gross of employee
contributions to social insurance (which
start in 1951), but exclude employer con­
tributions.
Interest (line d) is the interest payable by
farmers on debt owed by the farm sector. It
differs from Department of Agriculture cost
data in that it excludes interest on farm
mortgage debt owed by nonfarm landlords.
Rents (line e) represent gross rents paid by
the farm sector to all landlords. In the De­
partment of Agriculture data all expenses of
nonfarm landlords—taxes, fertilizers, etc.—
are combined with the corresponding pro­
duction expense items for owner-operators
and for farm landlords, so that only the net
income (after costs) of nonfarm landlords
is shown as farmers’ rent payments. In the
flow-of-funds accounts, all farm rents paid
are shown gross, and the farm expenses of
nonfarm landlords are recorded in the ac­
counts of other sectors. Crop shares paid to
nonfarm landlords are included in both farm
sales receipts (line C) and rent payments.
Insurance premiums (line f) consist of
premiums paid by farm business for fire,
hail, windstorm, vehicle, and Federal crop
insurance, and in later years, employment
taxes. Premiums for farm house protection
are included but not those for automobiles
used for consumer purposes.
Taxes (line g) consist of farm property
taxes paid by farmers and motor vehicle
taxes allocated to farm business expenses.
Line g excludes personal income taxes
(which are consumer sector transactions), all
taxes of nonfarm landlords (recorded in
other sectors), employment taxes (recorded
as insurance premiums in line f), corporate
profit taxes (recorded in “other” nonfinan-

110

FLO W O F FU ND S IN

T H E U N IT E D STA TES, 1939-53

cial uses in line i), and motor vehicle taxes
that are allocated to consumer activities.
Operating uses not elsewhere classified
(line h) represent current expenditures made
directly by farmers for seed, feed, and other
farm supplies, and for maintenance of equip­
ment and structures. All such expenditures
except those allocated to inventory change in
line m are included. The estimates in line h
are derived from current farm operating
expenses as published by the Department of
Agriculture in Farm Income Situation, with
several adjustments to fit them into the flowof-funds structure. The following items are
deducted from the Department of Agricul­
ture series: (1) hired labor,5 nonreal estate
taxes and interest, and insurance premiums;
(2) operating expenses of nonfarm land­
lords;® and (3) purchases allocated to in­
ventory change, which are treated as an in­
vestment item in “other” nonfinancial uses
below.7 Maintenance and repair expenses
are added to the residual to arrive at the
series on line h.8
Other nonfinancial uses of funds (line i).
The total on line i includes profits taxes
and dividends of corporate farms not shown
separately in the sector statement. Together
these range from 20 million dollars to 200
million a year over the period covered.
Capital expenditures (line j) consist of
outlays for construction and equipment.
Construction expenditures (line k) are farm
6 Both cash wages and the value of perquisites. In De­
partment of Agriculture accounts, perquisites to hired labor
are treated as both a cost and an income item. In the flowof-funds account, they are excluded from both sources and
uses, and only the cost of supplying perquisites is reflected in
operating uses.
0 See discussion of line e, p. 109.
7 See discussion of line m.
8 Maintenance and repairs, in the Agriculture data, are in­
cluded in depreciation of farm capital rather than in the
current operating expenses series. Depreciation charges
per se are not flow-of-funds transactions, but maintenance
and repairs arc.




outlays for residential and operating struc­
tures excluding maintenance and repairs, as
published by the Department of Commerce.
Although residential construction is an ex­
penditure for consumer purposes, farm
houses are integral with farm land and serv­
ice buildings in many real estate transfers
and as a basis for farm mortgage borrowing,
and transactions affecting farm houses can­
not be segregated from other real estate
transactions in a way that would improve
the accounts analytically. The effect of in­
cluding housing activities in the farm busi­
ness sector account is discussed below under
net withdrawals by proprietors (line n).
Equipment expenditures (line 1) represent
farm business purchases of new and used
autos and trucks (net of trade-ins), new
tractors and farm machinery, and attach­
ments and repair parts for tractors and
machinery. Equipment purchased for house­
hold use only is excluded. The series used
does not cover used tractors and machinery;
since these transfers are largely within the
sector, their omission results in an under­
statement of sources as well as of uses of
funds. Where an equipment dealer acts
as intermediary in such a transaction, uses
exceed sources in the farm sector account by
the amount of the dealer’s margin, which is
a net use of funds for the farm sector not
recorded in the account.
Change in inventory (line m) measures
the change in crops and livestock held valued
on a current outlay basis. The series is a meas­
ure of the difference between total outlays for
current operations during the year and the
amount of such outlays that is included in
operating uses of funds (line b). Operating
uses is an estimate of what total current out­
lays would have been if the physical volume
of inventories had been the same at the end

F A R M B U S IN E S S SECTOR

of the year as at the beginning.9 The inven­
tory change series on line m is based on De­
partment of Agriculture data on farm in­
ventories but differs conceptually from the
Agriculture series in valuation and coverage.
The Department of Agriculture series on
farm inventory change (which is also the
series used in the national income accounts)
represents net changes in physical quantities
valued at year-end prices. It differs from
most data on nonfarm inventories in that it
represents market values (selling prices) of
inventories rather than expenditures to ac­
quire and produce them. In nonfarm busi­
ness, inventory is generally valued at cost
or market price, whichever is lower; inven­
tory cost represents expenditure for raw
materials and production costs of goods in
process and finished inventory; inventory
change is deducted from outlays in order to
estimate the cost of goods actually sold dur­
ing the year. In the Department of Agricul­
ture accounts, in contrast, inventory change
is valued at market prices (that is, selling
prices) and is adde,d to sales receipts in order
to estimate value of production during the
year.10
With all farm inventories valued at market
prices, the inventory series of the Depart­
ment of Agriculture includes, together with
purchase costs and production outlays, the
unrealized income of farmers arising from
their labor and capital input into inventory
accumulation. When inventories rise over
a year the farm net income series of the
Department of Agriculture includes these
unrealized earnings on the inventory incre­
9 See discussion of inventories and their role in the flowof-funds accounts in Ch. 3, p. 87.
10The farm inventory change component of GNP in the
national income accounts incorporates directly the Depart­
ment of Agriculture series on farm inventory change. Since
the GNP nonfarm inventory series is on a cost basis, the
farm and nonfarm components of GNP inventory change
have different conceptual significance.




111

ment; when inventories decline, the net in­
come series excludes the net income realized
from inventory liquidation but recorded as
net income in earlier years.
In the flow-of-funds business accounts, in­
ventory change is an allocation of total ex­
penditures to nonoperating uses of funds.
It would be inappropriate to include un­
realized income in the farm sector’s inven­
tory change series since it is not in the total
being allocated. The farm inventory change
series used in the flow-of-funds accounts
therefore represents only transactions allo­
cated to inventory accumulation or decumu­
lation and thus corresponds conceptually
with the nonfarm inventory change series in
the flow-of-funds accounts. Hence operating
surplus is related to the year’s sales rather
than the year’s production.
The flow-of-funds farm inventory series is
estimated from the Department of Agricul­
ture series on the basis of the relation be­
tween production expenses and the market
value of production during the year. While
the estimate is a rough one, its use is war­
ranted by the substantial gap between the
market value of inventories and the operat­
ing purchases that can be allocated to them.
As in both the national income and the
flow-of-funds series on nonfarm inventory
change, the farm inventory series excludes
capital gains and losses arising from price
changes during the year. It differs in con­
cept from the nonfarm inventory change
series (after inventory valuation adjustment)
in the flow-of-funds and national income
accounts only in that it is valued at year-end
cost levels rather than at average cost for the
year.
The farm inventory change series on line
m also differs from the Department of Agri­
culture series in coverage of inventories
pledged as security for loans held or guar­

112

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

count is transferred to the consumer sector
through the net withdrawals transaction
category and is reflected (or offset) in the
consumer sector account discrepancy.
Certain differences in transaction coverage
between net withdrawals by farm and non­
farm proprietors give somewhat different
meanings to the two series. In the first place,
all farm family transactions related to hous­
ing—buying, selling, construction, rents,
operating costs—are covered in the farm
business sector account, whereas the corre­
sponding transactions of nonfarm proprietors
are covered in the consumer sector. Secondly,
some of the food and fuel consumed by farm
families is produced on the farm, and the
operating costs related to such production
are included in the farm business sector uses
of funds. The withdrawal of these products,
however, does not appear as such in flow-offunds accounts. Goods taken from inventory
for home use are relatively unimportant in
the nonfarm sector account. They are
treated there as sales and in the consumer
sector as uses of funds.12
Thus, there are sizable amounts of trans­
actions in the farm business sector account,
having no counterpart in the nonfarm non­
corporate sector account, that directly bene­
fit farm families and that are not reflected in
net withdrawals by farm proprietors. This
difference between the two noncorporate
business sectors may be significant for cer­
tain types of analysis and comparison.
Net withdrawals by farm proprietors (line
n) would be larger by the amount of ex­
penditures allocable to farm family purposes
if these expenditures were excluded from the
these farm business sector account and put into the

anteed by the CCC. In the Agriculture in­
come data CCC loans are treated as cash re­
ceipts from marketings, and the pledged in­
ventories are excluded from the farm inven­
tory series even though farmers still have
title to the inventories.11 The same treatment
is reflected in the national income accounts,
where increases in pledged inventories are
included in purchases by the Federal Gov­
ernment rather than in gross private do­
mestic investment. In the flow-of-funds ac­
counts, however, crop loans to farmers held
or guaranteed by the CCC are shown as a
financial source of funds for the farm sector,
and inventories securing these loans are in­
cluded in the farm inventory series (line m ).
They are recorded in sales only when they
are actually sold or transferred to the Gov­
ernment as payment of the loan liability.
N et withdrawals by proprietors (line n)
represent funds withdrawn from farming
for consumption expenditures and for invest­
ment outside farming, net of proprietors’
capital funds transferred into farming from
nonfarming uses. Transfers of income in
kind are an important exclusion that is dis­
cussed further below.
As in the nonfarm noncorporate sector,
there is no specific information on the total of
net withdrawals by proprietors or its financial
and nonfinancial components. The total
must be estimated as a residual on the entire
farm sector account—total sources accounted
for less total uses accounted for. The net
withdrawal series thus reflects whatever sta­
tistical inconsistencies are present between
farm sources and uses of funds; the net
amount of errors and omissions in the ac­
11 However, in the Balance Sheet of Agriculture
pledged inventories are included as farmers’ assets and the
CCC loans as offsetting liabilities. The Balance Sheet treat­
ment parallels the flow-of-funds treatment except in that
inventories are valued at market price rather than outlay
cost.




12 This treatment of nonfarm withdrawals is dictated by
statistical considerations and is based on the assumption that
proprietors report such withdrawals as sales in income tax
returns.

F A R M B U S IN E S S SECTOR

113

consumer account, since withdrawals would ment. These charges are presented as a
then include funds to be used for such pur­ memorandum item because they may have
poses. Such expenditures are discussed later influence on proprietors’ decisions on capital
under “Memoranda.” The difference in net expenditures and income withdrawals. Line
withdrawals would be still larger than indi­ r is the series published by the Department
cated in line n if production for farm family of Agriculture less the maintenance and re­
use were treated as imputed sales to the con­ pair expenditures included in that series.
sumer sector at market prices. Net with­ Maintenance and repairs are flow-of-funds
drawals would then include a transfer of the transactions and are included in operating
full market value of income in kind needed uses of funds.
to finance the imputed purchase.
Consumption outlays included above (line
N et increase in financial assets (line o). s) are an estimate of the outlays for farm
Financial assets in the farm business sector family purposes included in operating uses
account consist almost entirely of currency of funds. They consist of approximations to
and deposits (line p), which include only the the production costs of home-consumed food
currency and deposits estimated to be held by and fuel, rental value of tenant-occupied farm
farm enterprises as such and exclude those dwellings, and operating costs (taxes, inter­
held by farm households. Other financial est, etc.) of owner-occupied farm dwellings.
assets attributed to this sector (classed in It differs from corresponding series published
the transaction category miscellaneous assets) by the Department of Agriculture and in­
consist of farm holdings of the capital stock cluded in the national income accounts,
of production credit associations and na­ which represent the market value of food
tional farm loan associations. Annual and fuel withdrawn and full gross rental
changes in these holdings are too small to be value of owner- and tenant-occupied farm
shown separately in the farm sector sources houses, and which include the market value
and uses of funds statement, but they are in­ of perquisites going to farm labor.18
The series in line s can be deducted from
cluded in the totals. Information is not avail­
able on net flows of capital between farmers farm sector operating uses of funds (line b)
and nonfinancial farm cooperatives; the in order to estimate net operating surplus
omission of these flows from the accounts from production going into market sales.
affects net withdrawals by proprietors in To make an estimate of net withdrawals by
both the farm and the nonfarm noncorporate farm proprietors that encompasses only busi­
business accounts but does not affect the sum ness activities, it would be necessary also to
identify capital transactions in farm housing
of the two net withdrawals.
Farm holdings of other financial assets —construction, purchase and sale of existing
(for example, Federal obligations) are as­ farm houses, and borrowing and repayment
sumed to be held by farm proprietors as con­ of mortgage debt secured by farm houses.
sumers rather than as entrepreneurs and are Although farm dwelling construction ac­
tivity is available in Department of Com­
shown in the consumer sector account.
Memoranda. Depreciation charges (line
13 The series included in the national income accounts are
r), as in the other business sectors, are not shown in National Income, 1954 edition, supplement to the
Survey of Current Business as lines 1(4) and IV(3) of Table
flow-of-funds transactions and are not a com­ 30
and line 10 of Table 39 (not shown separately in Table
ponent of the farm business sector state­ 30).




114

FLO W O F FU ND S IN

T H E U N IT E D STATES, 1939-53

merce data, it is not possible to identify farm
housing in data on farm real estate transfers
and financing.
F a r m O p e r a t in g S u r p l u s a n d F a r m
N et Incom e

The relationship between farm net operat­
ing surplus in the flow-of-funds farm busi­
ness sector and farm enterprise net income
in the national income accounts is presented
in Table 16 on page 116.
As in the other business sector accounts,
net operating surplus in the flow-of-funds
farm business sector account is the difference
between total operating sources and total
operating uses of funds (lines B and b of the
sector statement, Table 15, and reproduced as
lines G and H in Table 16). Farm sector
operating sources and uses of funds are de­
rived from the body of data published by the
Department of Agriculture in Farm Income
Situation and underlying the Department of
Agriculture (and national income) series on
farm net income. Farm net operating sur­
plus in the flow-of-funds accounts is there­
fore statistically consistent with farm net in­
come. There are several conceptual differ­
ences between the two series. The relation­
ship between the two series presented in
Table 16 is in terms of the adjustments that
must be made to farm net income in na­
tional income accounts (line A ) to derive
net operating surplus (line F). Line A is
identical with the Department of Agriculture
series for net income of farm operators from
farming and is taken from Agriculture data.
Transaction coverage adjustment
Imputed and in-kind income (line B) are
included in the farm net income concept but
are not reflected in net operating surplus,
since they are not flow-of-funds transactions.
The imputed and in-kind income in line A




that are deducted on line B differ from line s
of Table 15 in that food and fuel components
are valued at market prices and owner-occupied housing are valued at gross rental
value. Line B excludes perquisites to farm
workers, which are not included in line A.
Transaction classification adjustments
Insurance benefits received by farm opera­
tors (line C) are netted against their outlays
for insurance premiums in the national in­
come accounts and thus enter the net income
computation as a positive element. In the
flow-of-funds accounts, the benefits are clas­
sified as nonoperating sources of funds and
are thus not in net operating surplus and are
deducted in going from net income to net
operating surplus.
Excess of depreciation over maintenance
and repairs (line D ) is an estimate of the
depreciation charges in the calculation of
line A that are not flow-of-funds transac­
tions. The term “depreciation” in Depart­
ment of Agriculture statistics and as used in
the stub for line D covers both maintenance
and repair expenditures, which are flow-offunds uses of funds, and depreciation charges,
which are not. Line D is an adjustment for
that part of “depreciation” that is not classi­
fied as a use of funds in computing net
operating surplus.
Adjustm ent for valuation differences
Unrealized income (line E) is a compo­
nent of farm net income arising from valua­
tion of inventories at market prices in the
Department of Agriculture data. Inventory
change in flow-of-funds accounts represents
only the outlays for production purposes
allocated to inventory (see discussion on page
111). The unrealized income is therefore
deducted in going from net income to net
operating surplus.

115

F A R M B U SIN E SS SECTOR
T A B L E 15—F A R M BUSINESS S E C T O R : SO URCES A N D USES O F F U N D S S T A T E M E N T
(In billions of dollars)

1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
Sources of funds
A

Nonfinancial sou rces....................................

8.9

9.1 12.1 16.6 21.3 22.3 23.8 27.0 31.5 30.9 28.9 31.0 35.1 33.9 31.7

B
C
D
E

O p era tin g .........................................................
Sales and receipts from operations 1 ...........
R ents...............................................................
Grants and donations2 .................................

9.0

9.1 12.1 16 5 20.8 21.7 23.2 26.4 31.0 30.4 28.4 30.5 34.4 33.2 31.1
15.3 19.5 20.3 2 1 . 8 24.8 29.7 29.1 27.4 29.2 33.0 31.8 29.8
8.1
11.1
.9
.9 1 . 1
.4
.5
.7
.7
.8
.8
.9 1 . 0
1.1
1.1
1.0
.2
.2
.2
.2
.4
.5
.5
.6
.6
.3
.2
.2
.6
.6

F
G
H

O th e r..................................................................
Insurance benefits.........................................
Real estate transfers.....................................

-1

- 1

.1
-.1

.1
-.1

I
,T
K
L

N et increase in lia b ilities............................
Bank loans other than m ortgages...............
Loans guaranteed by CCC.........................
Other loans to farmers.................................

- .3
*
*
*

.4
.1
.1

.1
.1

.2
-.2

M

Trade debt......................................................

- .3

.1

.1

N
O
P
Q

Mortgages.......................................................
Owed to banks.............................................
Owed to Federal Government3 ....................
Owed to others3 ............................... ..........

-.2

R
S

Miscellaneous liabilities4 ..............................
Owed to Federal Government......................

.1

T

Total, above sources......................

8.6

a

Nonfinancial u se s...........................................

8.4

9.3 11.7 15.0 19.2 20.6 22.1 26.5 32.3 33.2 30.7 31.7 36.0 34.9 32.8

b
c
d
e
f
g
h

O perating..........................................................
Payroll............................................................
Interest...........................................................
R ents...............................................................
Insurance premiums......................................
Taxes 5 .............................................................
Operating uses n.e.c . 6 ...................................

5 6

5.7

6.8

i
j
k

2.8
.9

m
n

O th er7................................................................
Capital expenditures.....................................
Construction8 ..............................................
Equipment..................................................
Change in inventory.....................................
Net withdrawals by proprietors..................

o
V

8.0

.4
.6

*

- .J
.1

.2

-.1

★
*
*

.1

.1

.1
*

.1

.1
.2

-.1

*
-.1
*

-.1

.6

.1

.5

.1

.1

.6
.1

.1

.4

.5

.5

-.8
-.2

-.2
*

- .3
*
*
*

- .2
*
—. l

-.1

-.1

*

*

-.3

- .4
*
- .4
-.1

- .4
*
—.3
-.1

__ |
—.2
*

*
*

*
*

_ j
-1

*

- . 6

*

-.1

-.2
*
-.1

-.1

.6

.6
.2
.4
.2
.1

-.2
.3
.2
*

.4

.6
.2
.4

.4
.2
.3

.6

2.0

1.2

1.2

.2

.2

*

.3

.6

.7

.7

.2

.2
.6

.2

.2

.5

.4

.4
.2
-.1

./
./

-.6
.5

1.3
.5
-.1
.6

.3

.8
.3

.2

.3

.2

.2

.4

.1
.1

.2
.1

.3

.4

.2

.3

He
.3

.3
.2

.5
.5

-.2
- .3

.4
He
He
.4
He
-.1

.2
- . 2 - 1.0
*
1.0
*
-.1
*
-.1

*

*
*

.1

.6

1.2 1.0
.5
.6
.4 1.0
.1 - .4
*
-A
.5
.1

He
.4

.4
*
He
.4

.2

.2

.2

.2

9.4 12.2 16.0 20.5 21.9 23.5 27.2 32.1 32.9 30.1 31.2 36.4 35.1 32.8

Uses of funds

1

.4
2.9

.4
3.3

8 .3 10.6 11.2 12.2 14.0 17.3 16.0 16.1 16.9 18.9 19.3 18.9
1.3 1.7 1.9 2 . 0 2.2 2.4 2.5 2.4 2.3 2.5 2.5 2 . 6
.9
.4
.4
.4
.4
.4
.5
.5
.6
.8
.6
.8
1.9 2 . 1
2.2
2.8
3.1 3.1 2.7 2.9 3.3 3.4 3.2
2.2
.1
.2
.4
.4
.1
.1
.2
.3
.3
.3
.3
.3
.4
.4
.7
.9 1 . 0
1.0
.5
.5
.6
.6
.7
.8
4.1 5.8 6 . 2
7.0 7.9 10.5 9.0 9.3 1 0 . 0 1 1 . 2 1 1 . 2 1 0 . 8

3.5

4.8
1.4
.3

6.7
1.3
.3

.8

.8

1.0

.5

.5

1.0
.1

1.1
.1

.5
1.5

.4

2.8

.2
.7

1.0

.2
.8
.3

.1

1.1

1.1

8.5
1.1
.3
.9

-.1
2.0

.2

.6

2.2

3.2

4.7

7.5

- .2
8.0

N et increase in financial a ssets9...............
Currency and deposits..................................

.2

.2
.2

.5
.5

1.0

.2

1.4
1.4

1.4
1.4

q

Total, above u ses............................

8.6

r
s

Memoranda:
Depreciation charges....................................
Consumption outlays included above10. . . .

1.0

- .2

9.4
1.5
.3
1.2

9.8 12.5 15.1 17.1 14.7 14.8 17.1 15.6 13.9
1.5 2.3 3.5 4.3 4.5 4.8 5.6 5.3 4.6
.3
.9 1.3 1.4 1.5 1.6 1.8 1.9 1.7
1.2 1.4 2.2 2.9 3.1 3.1 3.7 3.4 2.9
*
- . 4 - . 2 - 1.2 1 . 1 - . 2
.3
.6
.7
8.7 10.4 12.7 1 1 . 6 1 0 . 2 9.9 10.7 9.4 8 . 8
1.4
1.4

.6
.6

- .2
-.2

- .3
- .3

—.6
- .6

- .5
- .5

.4
.4

.2
.2

He
He

9.4 12.2 16.0 20.5 21.9 23.5 27.2 32.1 32.9 30.1 31.2 36.4 35.1 32.8

.7

.7

1.6

1 .6

.8
1 .8

1.1
2.2

1 .2

2.5

1.5
2.6

1.6
2.8

1.6

3.2

1.9
3.5

2.4
3.6

2.9
3.2

3.3
3.0

3.6
3.4

3.8
3.4

3.9
3.4

*Less than 50 million dollars.
'Farm business sector receipts in flow-of-funds transaction category “other goods and services.”
2Government payments, primarily for soil conservation.
3Large change in 1947 reflects shift of Federal land banks from Federal Government sector to financial institutions n.e.c. subsector.
4Includes small amount owed to financial institutions n.e.c. subsector not shown separately.
6 Excludes employment taxes, which are classified under insurance premiums in line/, and profits taxes, which are in “other” uses, line i.
6Lines h, j, and m together equal farm business sector expenditures under flow-of-funds transaction category “other goods and services.”
7 Includes small amount of profits taxes and dividends not shown separately.
8Includes farm residential construction.
9Includes small amounts not shown separately (capital stock in production credit associations and national farm loan associations) classified
in flow-of-funds transaction category “miscellaneous financial transactions.”
10Production costs of food and fuel produced on farms and consumed by farm families; gross rental value of tenant-occupied farm houses;
and operating costs of owner-occupied farm houses.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 107.




116

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

T A B L E 16—F A R M O P E R A T IN G SU RPLU S A N D F A R M N E T IN C O M E
Relationship of F arm Business N et Operating Surplus in Flow-of-Funds Accounts to Farm N et Income in N ational
Income Accounts
(In billions of dollars)
1939

1947

1948

1949

1950

1951

1952

1953

A

Farm n et incom e in national incom e a cco u n ts................................................

4.3

14.5

16.7

12.7

13.3

16.0

14.2

12.2

B

A d ju stm e n t fo r differences in tran saction coverage:
Minus: Imputed and in-kind income1......................................................................

1.6

3.5

3.6

3.2

3.0

3.4

3.4

3.4

C
D

A d ju stm e n ts fo r differences in transaction classification:
Minus: Insurance benefits received...........................................................................
Plus:
Excess of depreciation over maintenance and repairs...............................

.1

E

.2

.2

.2

.2

.2

2.4

2.9

3.3

A d ju stm e n t fo r differences in valuation:
Minus: Unrealized income arising from valuation of inventory changes at
market prices...............................................................................................

-.1

- 1 .0

1.1

-.1

*

.6

.5

.2

F

Equals: Farm business operating surplus in flow-of-funds a ccou n ts.......

3.4

13.7

14.3

12.4

13.5

15.4

13.8

12.2

G
H

Memoranda:
Nonfinancial operating sources of funds......................................................
Nonfinancial operating uses of funds...........................................................

9.0
5.6

31.0
17.3

30.4
16.0

28.4
16.1

30.5
16.9

34.4
18.9

33.2
19.3

31.1
18.9




3.8

.2

1.9

*Less than 50 million dollars.
1Gross rental value of farm dwellings and value of farm products consumed directly by farm operator families.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 114.

3.6

.2

.7

3.9

CHAPTER 6
FEDERAL GOVERNMENT SECTOR

This chapter describes the flow-of-funds
sector for the Federal Government and
compares the treatment of Federal Govern­
ment activities in the flow-of-funds system
with that in other accounting systems or
compilations of data.
S e c t o r C o v er a g e

The Federal Government sector of the
flow-of-funds accounts includes, with the
exceptions noted below, all branches of the
Government (legislative, judicial, and ex­
ecutive); all departments and independent
agencies, as reflected in the general and spe­
cial accounts; all trust, deposit, and other
funds; all Government corporations,
whether wholly or partly owned by the
Government, and all of the Government’s
business-type enterprises and credit agencies.
The following instrumentalities of the
Federal Government are not included in this
flow-of-funds sector: the District of Colum­
bia, the Postal Savings System, the Exchange
Stabilization Fund, the Board of Governors
of the Federal Reserve System, and certain
monetary accounts—the gold account, the
silver account, and an account constructed
from the “Statement of the Public Debt” and
the “Circulation Statement of United States
Money” to record certain currency liabilities
of the Federal Government.
The District of Columbia is classified in
the State and local government sector because
its functions and patterns of expenditures
resemble more closely those of other munici­
palities than they do those of Federal agen­
cies. The banking and monetary units ex­




cluded from the Federal Government sector
are included in the banking sector in order
to consolidate into one sector account all
units in the domestic economy which hold
monetary reserves or bear some liability for
currency and deposits.
Corporations and cooperatives sponsored
and supervised by agencies or corporations of
the Government but not owned (either
wholly or partly) by the Federal Govern­
ment are excluded from the Federal Govern­
ment sector. For example, such institutions
as production credit associations and na­
tional farm loan associations—cooperatives
owned by farmers but organized, sponsored,
and supervised by the Farm Credit Adminis­
tration—are not classified as part of the Fed­
eral Government sector in the flow-of-funds
accounts. Rather, they are classified in the
financial institutions n.e.c. subsector of the
“other investors” sector.1
T r a n s a c t io n C o v er a g e

All transactions involving flows of money
or credit between the Federal Government
1For two groups of financial institutions—the Federal
land banks and the Federal home loan banks—the sector
classification changes in the period covered by the accounts.
Both types of banks are classified as partly owned Govern­
ment corporations in the Federal Government scctor for
years in which the Treasury held any capital stock of the
banks. As of the time of final retirement of Treasury-held
capital stock, the institutions are excluded from the Federal
Government sector and classified in the financial institutions
n.e.c. subsector of the “other investors” sector. The Gov­
ernment’s proprietary interest in the Federal land banks
terminated in 1947, and in the Federal home loan banks
in 1951.
The Federal Deposit Insurance Corporation is included
in the Government sector for all years since the Government
holds the entire equity in the earned surplus of the Cor­
poration. In the period covered by the accounts, the Cor­
poration had no capital stock outstanding.

117

118

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-J3

and other sectors are recorded in the sector
account—transfer payments as well as ex­
penditures for goods and services, changes
in debt and financial assets as well as non­
financial transactions.2
Transactions between components of the
Federal Government sector are not recorded
in the account; the sector account is on a
consolidated basis. Transfers of funds from
the general account to the trust funds, in­
vestment of trust funds in Federal debt, and
Treasury purchases of capital stock from
and advances to Government corporations
are typical of the intra-Governmental trans­
actions excluded from the consolidated ac­
count.
All nonfinancial transactions of the Fed­
eral Government sector with other sectors
are recorded in the flow-of-funds accounts
on a gross basis. Tax refunds are recorded
as a use of funds and are not netted against
tax receipts; Postal revenues and expendi­
tures are each shown separately rather than
as net expenditures after deduction of re­
ceipts. Similarly, Government corporation
activities are recorded gross.
Each category of financial transaction,
however, is recorded on a net basis. Decreases
in each type of asset are offset against in­
creases in the same asset category; repay­
ments of each type of debt are netted against
new borrowing through the same category
of debt.

or services is acquired rather than as of the
time of cash settlement. The recording of
these transactions with this timing is re­
flected in the entries for trade debts and re­
ceivables in the sector statement.
Many other types of Government trans­
action in the flow-of-funds account are not
on a cash basis, but are timed with the crea­
tion (or extinction) of debts. Thus, tax re­
funds include excess profit tax refund bonds
at the time of issue rather than at the time
of redemption; grants and donations include
armed forces leave bonds at time of issue
rather than at time of redemption; tax pay­
ments include taxes paid in tax and savings
notes as well as those paid in cash; insurance
premium receipts include some premiums
paid in armed forces leave bonds as well as
those paid in cash; purchases of other goods
and services include Commodity Credit Cor­
poration acquisition of farm commodities in
exchange for loans held by the CCC; miscel­
laneous assets include subscriptions to the
International Monetary Fund and Interna­
tional Bank for Reconstruction and Develop­
ment paid in issues of Federal debt to these
institutions as of the time of issue rather than
as of the time of redemption of these notes.
On the other hand, some transactions are
recorded in the flow-of-funds Government
sector account on a cash receipts timing basis.
For example, taxes are recorded when re­
ceived by the Government rather than when
the taxpayer recognizes a liability for future
T i m i n g o f T r a n s a c t io n s
payment. The receipts basis for recording
Most Government purchases of goods and taxes was chosen partly because of its signifi­
services as shown in the flow-of-funds sector cance in analyzing effects of revenue fluctu­
are recorded as of the time title to the goods ations on the current financing needs of Gov­
ernment and business and partly because of
2 Most, but not all, transactions of the Federal Govern­
ment are cleared through and reflected in the Treasurer’s the lack of definiteness of the amount of tax
account. However, in the flow-of-funds Federal Govern­ liability as it accrues. However, the signifi­
ment sector account, an attempt is made to cover all Gov­
ernment transactions, including those not reflected in or cance of tax accruals for the planning of busi­
clearing through the Treasurer’s account.
ness expenditures and the anticipation of




FE D E R A L G O V E R N M E N T SECTOR

future Government revenues requires that
both receipts and accrual measures of taxes
be used in analysis. To this end, accruals of
corporate tax liabilities are shown as infor­
mational items in the corporate sector ac­
count, while measures of current tax re­
ceipts are included in the Federal and corpo­
rate accounts proper.
From the preceding paragraphs, it can be
seen that the flow-of-funds Federal Govern­
ment sector account includes both cash and
accrual transactions. With respect to the
cash transactions, additional timing problems
arise. To the extent that cash outlays for
expenditures or for debt settlement are in­
cluded in the account and are paid by check,
the payments are recorded on a checks-paid
as opposed to a checks-issued basis. That is,
cash payments are recorded as of the time the
checks are cleared and debited against Gov­
ernment accounts, not as of the time the
checks are issued.3 This differs somewhat
from the timing basis used in most other
sector accounts, in which cash expenditures
or settlements by check are recorded as of
the time the checks are issued.
Cash transactions of disbursing officers
that are paid out of balances not held at
the Treasury rather than by checks drawn on
the Treasury are recorded in the flow-offunds Federal Government sector account as
of the time these expenditures are made by
disbursing officers, not as of the time dis­
bursing officers write checks against Treas­
ury accounts in order to obtain funds for
disbursement.4
3 This is true for the total of cash payments. However,
some of the individual classifications of transactions in the
flow-of-funds Federal Government account are on a checksissued basis. Such timing inconsistencies are reflected in
the transaction category for purchases of other goods and
services, which is calculated as a residual.
4 There is a similar timing problem with respect to cer­
tain receipts which are first received by disbursing officers




119

C o m p a r is o n w i t h O t h e r P r e s e n t a t io n s

The flow-of-funds account for the Federal
Government sector differs with respect to
scope and structure from other systems of
recording Government activities. The dif­
ferences arise in part from the requirements
of fitting the flow-of-funds Government sec­
tor into the interlocking system of accounts
presented here, and in part from the type of
analytic problems to which the flow-of-funds
system is directed.
Many of the differences are presented in
detail in a series of relationship statements
(Tables 18-22 discussed later in this chapter,
and Table 66 in Chapter 15, page 299). At
this point, only a broad summary is given
of the major differences in concept among
four methods of recording Government
receipts and disbursements—the Treasury
cash consolidated system,” the administrative
budget, the Federal Government account in
the national income system of the Depart­
ment of Commerce, and the Federal Govern­
ment sector account in the flow-of-funds
system.
The Treasury cash consolidated system, as
and later transferred to and recorded in the Treasurer’s
account. However, the information is not available for
the adjustments necessary to make the flow-of-funds Federal
Government receipts reflect the earlier timing for these items.
3 During fiscal 1954, the Treasury instituted many changes
in Government accounting procedures. These latest steps
in the Treasury’s long-range program for the improvement
of Government reports are not reflected in this presenta­
tion, which covers the period from 1939 through calendar
year 1953. Therefore, the terms used and Treasury con­
cepts referred to here are those applicable to the period
covered here rather than those now in use by the Treasury.
Specifically, the terms cash income, cash outgo, and general
fund balance are used here rather than the recently intro­
duced cash deposits, cash withdrawals, and balance in the
Account of the Treasurer of the United States. The adjust­
ments necessary in adapting Treasury data to flow-of-funds
concepts described in this chapter refer to Treasury con­
cepts and measures as published in the Treasury Bulletin
up to the end of calendar year 1953 and do not necessarily
apply in all details to present Treasury concepts and pro­
cedures.

120

FLO W

O F FU N D S IN

T H E U N IT E D STATES, 1939-53

this term is used in this report, refers to
Treasury accounts for cash operating income,
cash operating outgo, net cash borrowing,
and the balance in the general fund of the
Treasurer of the United States."
The administrative budget by itself does
not constitute a balanced system, but a system
can be built up from the following items as
shown in the table “Summary of Federal
Fiscal Operations” published in the Treasury
Bulletin: budget expenditures, budget re­
ceipts, net receipts of trust account and other
transactions (trust account expenditures and
receipts, deposit fund net expenditures, net
investments by Government agencies in pub­
lic debt securities, net redemptions of securi­
ties of Government agencies in the market),
the clearing account, the public debt, and the
general fund balance. This system, to be
referred to here as the administrative budget
system, differs from the Treasury cash con­
solidated system in two principal respects:
the budget system is not a completely con­
solidated system, and the timing with which
some transactions enter the budget system
differs from the recording in the cash system.
Sector coverage. The Federal Govern­
ment sector account in the flow-of-funds
system covers substantially the same Govern­
ment entities as the cash consolidated and
the administrative budget systems with some
exceptions: the flow-of-funds Federal Gov­
ernment sector excludes the District of Co­
lumbia and certain monetary accounts; it
includes certain transactions in connection
with the counterpart funds not covered in
the other systems. The Federal Government
subsector of the national income accounts
6 In calendar 1947, the drawing down of the Exchange
Stabilization Fund in connection with the payment of the
United States subscription to the capital of the International
Monetary Fund and the International Bank for Reconstruc­
tion and Development must also be included to balancc
the cash system for that year.




differs from the others in that it excludes the
operating accounts (with a few minor excep­
tions) of most Government corporations,
credit agencies, and the Post Office. These
operating accounts are recorded in the busi­
ness sector account of the national income
accounts.
Extent of consolidation. The administra­
tive budget system is, in general, a combined
account, that is, many transactions among
Government entities are recorded. For ex­
ample, payments of interest from the general
account to trust accounts and from Govern­
ment corporations to the Treasury are
recorded. The flow-of-funds account, the
cash consolidated system, and the national
income system Government account are all
on a consolidated basis, that is, in general no
intrasector transactions are recorded.
Since the sector coverage of the three con­
solidated presentations is not identical, the
results of the consolidation differ. In addi­
tion, there are differences in the extent of
consolidation of specific items. Thus in the
national income system, contributions of the
general Government as employer to its em­
ployee retirement systems, and contributions
by the Government to the veterans’ life in­
surance funds are not eliminated in the con­
solidated Government sector account but
appear as both expenditures and receipts
because these expenditures are part of various
conceptual totals in the national income sys­
tem. In the flow-of-funds and the cash con­
solidated systems, these transactions are
eliminated in the consolidation process. In
both national income and flow-of-funds ac­
counting, Government payrolls are measured
gross of deductions for employee contribu­
tions to Government retirement funds, and
Government receipts include these employee
contributions. In the cash consolidated sys­

FE D E R A L G O V E R N M E N T SECTOR

tem, on the other hand, these transactions
are eliminated in the process of consolidation.
Transaction coverage. The flow-of-funds
Federal Government sector account, the cash
consolidated system, and the administrative
budget system cover all types of transactions
—financial as well as nonfinancial, capital as
well as current, transactions in existing assets
and intermediate transactions as well as in­
come transactions and transactions in cur­
rent production. In the national income sys­
tem account for the Federal Government,
however, financial transactions, sales of exist­
ing assets, and certain other nonfinancial
transactions in general are not recorded.
Transactions in kind, such as clothing and
food furnished employees, are recorded in
the national income Government account but
not in the flow-of-funds account or in the
other systems. However, this affects pri­
marily the classification of transactions rather
than any totals of expenditures. In the flowof-funds accounts, purchases of goods given
as wages in kind are recorded as Federal
Government purchases of goods, whereas in
the national income account the value of such
purchases is shown as Government wage
payments and excluded from the purchase of
goods by the Government.
E xtent of netting. In the flow-of-funds
account for the Federal Government, an
attempt is made to show all nonfinancial
transactions on a gross basis, but each cate­
gory of financial transaction is recorded net
(borrowing less debt repayment, increases
in assets less decreases in the same type of
asset). In the other three systems, many
nonfinancial as well as financial transactions
are recorded on a net basis. For example,
in the national income Government sector
account, interest received is netted against
interest paid, sales of surplus property are
netted against purchases of goods and serv­




121

ices, etc. Similarly, the receipts and expend­
itures totals of the cash consolidated and
the administrative budget systems reflect a
considerable amount of netting. Many re­
ceipts of Government corporations and of the
Post Office are netted against expenditures,
and other receipts are netted against expend­
itures as credits to appropriations or in re­
volving funds. Similarly some Government
lending activities are netted against non­
financial activities in the cash consolidated
and administrative budget systems.7
Timing. Not all transactions are recorded
with the same timing in all four systems but
no simple generalization distinguishing the
systems with respect to this characteristic is
possible. The comparison must be made in
terms of specific transactions. Some of the
more important differences in timing among
the systems are noted below and others are
noted in the following sections.
1. In the flow-of-funds and the national income
accounts, Government purchases are generally re­
corded as of the time of passage of title of the goods
purchased, but in the cash consolidated and the ad­
ministrative budget systems, purchases are in gen­
eral recorded as of the time of cash payment.
2. In the flow-of-funds and the administrative
budget systems, transactions involving payments in
the form of the issue of public debt are recorded
as of the time of issue of the debt. In the cash con­
solidated system, such transactions are recorded as
of the time of redemption of the debt, and in the
7 Government corporation statements on income and ex­
pense and on sources and applications of funds have pro­
vided much detailed information on a gross basis since
1944, but the budget and the cash consolidated accounts
include only the net expenditures of corporations. Beginning
in February 1954, the Monthly Statement of Receipts and
Expenditures of the United States Government records not
only the budget net expenditures of each Government cor­
poration but also the gross receipts and expenditures going
into each net expenditure. These gross figures, however,
rcflect the lending programs as well as the nonfinancial
transactions of the corporations and thus, as presented in
the Monthly Statement, do not provide all the information
nccessary to present corporation nonfinancial expenditures
anti receipts on a gross basis.

122

FLOW OF FU ND S IN

T H E U N IT E D STATES, 1939-53

national income system both bases are used with derived directly from Treasury data. Changes
some transactions on an issue basis (for example, instituted by the Treasury in 1954 will pro­
accrued interest on savings bonds) and others on a
vide more direct sources of data for some
redemption basis (for example, armed forces leave
of
the adjustments needed in the construc­
bonds).
tion
of the Federal Government sector ac­
3.
In the flow-of-funds, cash consolidated, and ad­
count
in future years. The adjustments de­
ministrative budget systems, taxes are recorded as
of the time received. In the national income ac­ scribed in this chapter, however, are in terms
counts, business taxes are recorded on a liability of the Treasury concepts, data, and pro­
basis and personal taxes at the time of payment.
F ederal G overnment S ector Statement

The Federal Government sector account in
the flow-of-funds system is presented in
Table 17 on page 147. The account is based
essentially on Treasury data and records,
adjusted for specific conceptual differences
with respect to sector coverage, transaction
coverage, timing of transactions, classifica­
tion of transactions, and extent of consolida­
tion and netting. The adjustments made to
Treasury data are summarized in Tables 1821 on pages 148-49 and are described in the
text beginning on page 134.
The detailed statistics needed for many of
the adjustments come directly from Treasury
data. Data for some adjustments are ob­
tained from other sources of information,
such as the National Income Division and
the Balance of Payments Division of the
Department of Commerce. Some of the ad­
justments had to be estimated on a rough
basis, particularly those which involved
shifting to a calendar year basis certain
Treasury series published only for fiscal
years. Therefore the final results presented
in the sector statement, while derived largely
from Treasury data, should not be consid­
ered as an official Treasury record.
Over the years, there has been steady de­
velopment and improvement of Treasury
accounting and reporting systems, and with
this there has been a corresponding increase
in the number of adjustments that can be




cedures as they existed before these most
recent changes.
Nonfinancial sources of funds (line A ).
The nonfinancial sources of funds recorded
in the flow-of-funds account for the Federal
Government sector include all Federal Gov­
ernment sources of funds except receipts
from the repayment of debts owed to the
Government, the drawing down of the
Government’s financial assets, and the in­
currence of Federal debt. Since the sector
account is on a consolidated basis, receipts
by one Government agency from another are
excluded.
The total of nonfinancial sources is derived
directly from Treasury data rather than by
summing the individual categories of re­
ceipts. The derivation of the total from the
Treasury cash income series is summarized
in Table 18 on page 148. Most of the indi­
vidual receipt categories shown in the sector
account are also derived by adapting Treas­
ury data to the requirements of flow-of-funds
accounting, but a few are computed by ad­
justing data compiled by other Government
agencies. One category—receipts from sales
of other goods and services—is calculated as
the residual remaining after deducting all
other types of nonfinancial receipts from the
total of nonfinancial sources.
Tax receipts (line B) are by far the largest
nonfinancial source of funds of the Federal
Government. This flow-of-funds category
includes all internal revenue receipts except

F E D E R A L G O V E R N M E N T SECTOR

employment and social insurance taxes,
which are classified in the flow-of-funds ac­
counts as insurance premium receipts. In
addition, the flow-of-funds category of tax
receipts includes customs receipts and the
taxes, permits, fees, and fines in miscellane­
ous budget receipts.
Taxes are recorded in the flow-of-funds
sector account as of the time they are
recorded in the Daily Treasury Statement,
that is, approximately when they enter the
general fund of the Treasurer. The time of
recording in the Daily Treasury Statement
differs from that in the reports of the collec­
tors (now directors) of internal revenue as
published in the Treasury Bulletin. Receipts
are reported on the collectors’ basis when
classified on the books of the collectors, not
when entered in the account of the Treasurer
of the United States.8
The Daily Treasury Statement and the
collectors’ bases are both later than the time
the paying sector makes the tax payment.
This is particularly important in the case of
withholding taxes. For withheld taxes, the
lag may extend up to several months. The
lag is at a maximum when employers trans­
8 As a result of changes in Treasury recording procedures,
some statements given here concerning relative timing of
receipts in various Government records are not applicable
from 1954 on. In particular, since July 1, 1954 changes
have been instituted to bring the reporting of most taxes
paid to depositaries on the same timing basis in the reports
of the depositaries, in the reports of the collectors, and in
the Monthly Statement of Receipts and Expenditures of
the United States Government.
In the period covered by this report, the Daily Treasury
Statement basis may be earlier or later than the collectors’
basis. In the case of taxes paid directly to the Internal
Revenue Service (such as nonwithheld individual income
taxes and part of the withheld taxes), the collectors’ record­
ing may be as much as a week or 10 days earlier than the
Daily Treasury Statement recording. On the other hand, in
the case of taxes paid into designated depositaries and re­
ported later to the Internal Revenue Service (such as a large
part of withholding taxes), the Daily Treasury Statement
recording may be several months earlier than the collectors’
recording. (This statement of relative timing of reports
is not applicable to the period after July 1, 1954.)




123

mit taxes only once a quarter to the Internal
Revenue Service instead of depositing the
funds in designated depositaries; it is at a
minimum in cases where employers with­
hold and deposit in the designated deposi­
taries on the same day. Both withheld and
nonwithheld taxes paid directly to the In­
ternal Revenue Service probably have a
minimum lag of several days between the
time of payment and the time of recording
in the Daily Treasury Statement, but this lag
can be much greater, particularly at the prin­
cipal tax collection dates when the volume of
returns to be processed increases sharply.
As a result of these various lags, receipts
of individual income taxes in the Federal
Government sector account differ from the
income tax payments recorded in the flowof-funds consumer sector account. The dif­
ference represents (1) the lag between the
time the employer withholds taxes and the
time he pays them over to the Treasury or
to a designated depositary and (2) the lag
between payments of withheld and nonwith­
held income taxes and the time the taxes
are processed and enter the Daily Treasury
Statement. The difference between pay­
ments and receipts, which is reflected in a
discrepancy in the tax account, was especially
large in 1943 when the income tax with­
holding system was introduced.
Both receipts and payments of Federal
taxes other than individual income taxes are
recorded in the flow-of-funds sector state­
ments on a Daily Treasury Statement timing,
and thus give rise to no discrepancy in the
tax account.
While tax accruals are not recorded in the
Federal Government sector statement, tax
receipts reflect payments in the form of cer­
tain Federal obligations as well as cash pay­
ments. Tax and savings notes and tax
anticipation bills are acceptable for payment

124

FLOW

O F FU N D S IN

T H E U N IT E D STATES,

of Federal taxes, and the flow-of-funds ac­
counts as well as Treasury accounts record
payments in this form as of the time these
securities are turned in to the Treasury for
tax redemption.
Tax receipts are shown under four sub­
heads in the sector account:
Individual income taxes (line C ): withheld and
nonwithheld income taxes and the victory tax of
1943.

Corporate income taxes (line D ): all receipts of
corporate income and profits taxes—normal tax
and surtax and excess profits tax.
Excise and gross receipts taxes (line E ) : customs
receipts and the following components of miscel­
laneous internal revenue—liquor taxes, tobacco
taxes, manufacturers’ and retailers’ excise taxes, and
miscellaneous taxes (except the dividend tax and
the auto use tax).
Other taxes (line F ): estate and gift taxes, stamp
taxes, capital stock tax, dividend tax and auto use
tax (all in miscellaneous internal revenue); and the
taxes, permits, fees, and fines in miscellaneous
budget receipts.

Renegotiation receipts (line G) represent
cash payments by business to the Govern­
ment resulting from renegotiations of mili­
tary contracts. The treatment of renegoti­
ations in the flow-of-funds accounts differs
from that in the national income accounts.
In the national income accounts, the series
shown for Government purchases, corporate
sales, profits, and profits tax liabilities in war
years reflect renegotiation adjustments occur­
ring subsequent (often several years subse­
quent) to the original transactions. Thus
sales during the war years as recorded in the
national income accounts are lower than the
amounts shown on business records for those
years—lower by the amounts the sales were
reduced through subsequent renegotiation of
contracts.9 Profits and tax liability figures

1939-53

in the national income accounts were corre­
spondingly reduced to reflect all renegotia­
tions. In the flow-of-funds accounts, how­
ever, these transactions are recorded at their
original values before any renegotiation,
that is, the sales figures are recorded at the
original values and in the year in which the
sales were made. Similarly, the payments by
business to Government which arose from
contract renegotiations are recorded in the
flow-of-funds accounts as separate trans­
actions. They enter the flow-of-funds ac­
counts in the years in which cash settlements
required by renegotiation took place.
The renegotiations receipts series shown in
the flow-of-funds accounts represents that
part of the renegotiations settlement result­
ing in cash payments. The entire amount
renegotiated is much larger, but part is set­
tled by offset against business receivables
from the Government and part against tax
refunds due to corporations on account of the
renegotiations.
Insurance premiums received by the Fed­
eral Government (line H ) include receipts
under the following Federal programs: oldage and survivors insurance, railroad retire­
ment and railroad unemployment insurance,
Federal unemployment insurance,10 Federal
employee retirement plans, life insurance for
veterans, crop insurance, insurance of de­
posits at banks and at savings and loan asso­
ciations, mortgage insurance, and wartime
insurance for damage to shipping and other
property. Line H also includes deposits
made by State unemployment insurance ac­

10 Tax on employers of eight or more under the Federal
Unemployment Tax Act, as amended. Employers receive
tax credits for most of their Federal tax liability under this
9 Business records as presented in the compilations of tax Act for the unemployment insurance taxes collected by State
governments. The relatively small amount of unemployment
returns in Statistics of Income for any given year reflect
taxes collected directly by the Federal Government serves in
those renegotiations applicable to that year’s transactions
part to finance the administrative costs of the unemployment
that occurred before the filing of tax returns, but do not
compensation system.
reflect subsequent renegotiations.




FE D E R A L G O V E R N M E N T SECTOR

counts in the Federal unemployment trust
fund.
Since the Federal Government sector state­
ment is on a consolidated basis, premium re­
ceipts shown exclude Government contribu­
tions as employer to the retirement funds,
Government contributions to the veterans’
life insurance funds, and other transfers to
insurance trust funds from the general fund.
Premium receipts, in the main, are recorded
as of the time they are reported in the
Daily Treasury Statement.
Employment taxes (line I) include receipts under
the old-age and survivors insurance, railroad retire­
ment, railroad unemployment compensation, and
Federal unemployment insurance10 programs. A
relatively small amount of social insurance premium
receipts not classified as employment taxes in the
Treasury compilations are included in line I: State
deposits in the old-age and survivors insurance fund
(in trust account receipts from 1951 on), transfers
by states to the railroad unemployment insurance
account (in trust account receipts for 1939-41), rail­
road unemployment insurance taxes (in miscel­
laneous budget receipts), railroad unemployment
insurance contributions (in trust account receipts),
and old-age and survivors insurance taxes on the
self-employed (1952 on).11
Employment taxes exclude deposits in the Fed­
eral unemployment trust fund by State unemploy­
ment insurance funds. These deposits are shown
on line K.
Other premiums (line J) include contributions of
Federal employees to retirement funds; national
service life insurance and Government life insur­
ance premium receipts; Federal Deposit Insurance
Corporation premium receipts; Federal crop insur­
ance premium receipts; Federal Housing Admin­
istration mortgage insurance premium receipts;
Reconstruction Finance Corporation war damage
insurance premium receipts; Maritime Commission
and W ar Shipping insurance premium receipts, etc.
The premiums under the national service life in­
11 In the fiscal year totals published in the Treasury Bul­
letin, these taxes on the self-employed appear under em­
ployment taxes, but in the monthly figures which have
to be added to get calendar year totals, they are recorded
under income taxes.




125

surance program include those paid in the form of
armed forces leave bonds as well as payments made
in cash. Detail on receipts by some of the programs
noted here is given in the Government insurance
premium transaction account (Table 54 on page
257).
State deposits in Federal unemployment trust
fund (line K ). Deposits by State unemployment
insurance funds in the Federal unemployment
trust fund are classified in the flow-of-funds ac­
counts with Federal insurance premium receipts.
Similarly, State withdrawals from these funds are
shown with Federal insurance benefit expenditures.
These deposits and withdrawals could be considered
as financial transactions, with the Federal Govern­
ment acting principally as a depositary for State
government funds. However, these transactions be­
tween Federal and State governments have been
classified among the nonfinancial categories in the
flow-of-funds structure in order to maintain uni­
formity in the treatment of all transactions relating
to the social insurance funds.

Grants and donations received by the Fed­
eral Government (line L) consist of cash
unilateral transfers from abroad, as obtained
from balance-of-payments statistics, and a
very small amount of consumer gifts and
contributions to the Federal Government.
Foreign unilateral transfers are mainly re­
verse lend-lease in cash and transfers in con­
nection with counterpart funds.
Gifts in kind are not included in the grants
and donations category. Gifts in kind from
the rest of the world sector—which were
much larger during the war than cash gifts—
are shown as a memorandum in the rest of
the world sector account in Table 46 on
page 230.
Interest receipts (line M) are the gross
interest receipts of the Federal Government
from the other sectors. Intra-Government
interest transactions, for example Govern­
ment trust fund and Government corpora­
tion interest receipts from the Treasury and
Treasury interest receipts from Government
corporations, are excluded. Interest received

126

FL O W O F FU N D S IN

T H E U N IT E D STA TES, 1939-53

by the Postal Savings System and the Ex­
change Stabilization Fund is also excluded,
since these units are classified in the banking
sector rather than in the Federal Government
sector in the flow-of-funds structure. Re­
ceipts of interest are not netted against in­
terest payments.
Included in the interest receipts are interest
payments to the Treasury by the Federal
Reserve System under the provisions of Sec­
tion 16 of the Federal Reserve Act. This
interest is recorded in the Federal Govern­
ment sector account as of the time the receipt
is reflected in the Daily Treasury Statement
and in the Treasurer’s general account at
Federal Reserve Banks. This item is classi­
fied in budget miscellaneous receipts under
“Dividends and other earnings” and is
treated in the national income accounts
under corporate profits tax accruals.
Rents (line N ). This series represents
receipts by the Federal Government and
Government corporations from the leasing of
property, including rentals from land, resi­
dential housing, and equipment facilities.
Royalties from the leasing of mineral
grounds are also included.
Sales of other goods and services (line O).
This category, calculated as a residual, rep­
resents Federal receipts from sales of surplus
goods and scrap and salvage materials, sales
of commodities and services, and fees and
other charges for services. It includes the
gross nonfinancial receipts of the Post Office
and Government corporations not elsewhere
classified in the sector account, and gross
miscellaneous nonfinancial revenues of the
general and special accounts and the trust
funds. Sales on credit as well as cash sales
are included.
Line O also includes Federal proceeds
from real estate transfers, that is, receipts
from sales of land and existing structures.




These proceeds arise from sales of property
acquired as collateral on foreclosed or aban­
doned mortgages, as well as from sales of
public lands and buildings. While real
estate transfers constitute a separate trans­
action category in the flow-of-funds accounts,
estimated receipts from real estate transfers
by the Federal Government are too small
to be shown separately in the sector account.
Net increase in liabilities (line P). Fed­
eral liabilities in the flow-of-funds accounts
consist of trade debt, Treasury currency
liabilities, Federal obligations, and miscel­
laneous liabilities. Contingent liabilities aris­
ing out of Government guarantees of loans
are not included.
Federal obligations (line Q ), the largest
debt category, include all securities issued by
the Treasury and by Government corpora­
tions and credit agencies that are held
outside the Federal Government sector. The
category covers debt issued by the Treasury,
debt issued by Government corporations and
agencies and fully guaranteed by the Treas­
ury, and debt issued by Government cor­
porations but not guaranteed by the Treas­
ury. It covers issues and transactions in
issues whether or not cleared through or
reflected in the accounts of the Treasurer
of the United States. It includes both cash
and noncash issues. The relationship of this
flow-of-funds category to other concepts of
Federal debt in general use is given in Table
20 on page 149 and described on page 140.
Net changes in Federal obligations held by the
banking sector (line R) and by other sectors (line
S) are shown separately in Table 17.
Federal obligations are also recorded in the sector
account in the two categories— securities issued for
cash (line T ); and other securities (line U ). The
noncash issues on line U result from the use of
obligations as means of payment for expenditures.
Thus some interest is paid in an increase in debt (as
in savings bonds), some tax refunds were paid in

FE D E R A L G O V E R N M E N T SECTOR

excess profit tax refund bonds, some grants and
donations were paid in armed forces leave bonds,
and part of the Federal Government subscriptions
to the International Monetary Fund and the Inter­
national Bank for Reconstruction and Development
was paid in debt instruments. These Government
outlays are recorded in the appropriate flow-offunds accounts as of time of issue of these debts
and, concomitandy, the debt incurred is recorded
in the financial category Federal obligations as a
security not issued for cash. The issues recorded
in line U consist of armed forces leave bonds, ad­
justed service bonds, notes issued to the Interna­
tional Monetary Fund and the International Bank
for Reconstruction and Development, excess profits
tax refund bonds, and net accrued interest on sav­
ings bonds and Treasury bills (that is, accrued dis­
count on savings bonds and bills, less interest paid
on savings bonds and bills redeemed).
All other Federal obligations are classed as securi­
ties issued for cash.12 This latter category is ap­
proximately equivalent to net cash borrowing in
the cash consolidated system, but there are some
minor differences in sector and transaction cover­
age, classification, and timing. These differences
are shown on Table 20 on page 149 and are dis­
cussed on page 140.
The distinction between the two components of
Federal obligations—securities issued for cash and
other securities—is not a distinction between cash
transactions and noncash transactions. Rather it is
based entirely on the condition of original issue,
and does not necessarily imply the same type of
redemption. Thus, securities issued for cash in­
clude tax and savings notes, some of which are
redeemed in payment of taxes rather than for cash;
and issues included in the “other securities” cate­
gory, while not issued for cash, are in general re­
deemed for cash. Exchanges and refundings of
maturing security issues are netted out and do not
appear as changes in either category.

127

able of both the general Government and the
Government corporations and enterprises.
It does not include notes payable, such as
some Federal land bank notes in 1945 and
1946, bank for cooperatives notes to commer­
cial banks, and Commodity Credit Corpora­
tion demand obligations owed to commercial
banks arising from drafts and invoices paid
by commercial banks for the Commodity
Credit Corporation. All such notes are classi­
fied in Federal obligations rather than in
trade debt.
Miscellaneous liabilities of the Federal
Government sector (line W ) consist of two
categories—trust and deposit liabilities, and
private interest in Government corporations.

Trust and deposit liabilities consist of liabilities
arising out of moneys left on deposit with, or en­
trusted to, the Federal Government and Govern­
ment agencies. These include (1) the trust and
deposit liabilities of the trust accounts (other than
the social insurance accounts) and of the deposit
funds, such as funds held in trust for Indians,
foreign government funds left on deposit with
the Mutual Security Administration acting as pur­
chasing agent for these countries, pay of the Army,
etc., and personal funds of military and civilian per­
sonnel overseas left on deposit with the armed
forces, war claims and other claims funds, funds of
civilian internees and war prisoners, deposits of the
Central Bank of the Philippines with the Treasury,
Federal Government liabilities arising out of the
issue of various occupation currencies; (2) the
liability of the Treasury to the Postal Savings Sys­
tem on account of funds deposited; and (3) the
trust and deposit liabilities of Government corpo­
rations, mainly of the Federal home loan banks
(prior to 1951), the Commodity Credit Corporation,
Trade debt (line V) represents debts owed the Reconstruction Finance Corporation, and the
by the Federal Government sector arising United States Maritime Commission. As noted
out of the circumstance that cash payments earlier, deposits in and withdrawals from the Fed­
for purchases usually occur some time after eral unemployment trust fund are treated under
title to the goods purchased has been ac­ nonfinancial flows rather than under financial trans­
actions.
quired. The category includes accounts pay­
Private interest in Government corporations rep­
13 Minor amounts of Federal Housing Administration
resents
the paid-in capital stock and paid-in surplus
debentures issued in exchange for mortgages on properties
—that is, capital issues less retirements—held by
are included in the category of securities issued for cash.




128

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

transactors other than the Federal Government.
This series does not measure the total change in
equity in Government corporations owned by such
transactors, since changes in earned surplus are not
recorded in the flow-of-funds structure. This flowof-funds series records only intersector transactions
in capital stock or surplus which result in an
actual source (or use) of funds to Government
corporations.

Changes in the Treasury currency liabili­
ties of the Federal Government sector, in­
cluded in the total change in liabilities in
line P, are too small in most years to be
shown separately in the sector statement.
The sector’s Treasury currency liabilities con­
sist of liabilities in connection with Federal
Reserve Bank notes, national bank notes,
United States notes not backed by gold re­
serve, and minor coin. The flow-of-funds
Treasury currency transaction category is
described in Chapter 17 beginning on page
319.
Nonfinancial uses of funds (line a). Total
nonfinancial uses of funds by the Federal
Government sector include the nonfinancial
expenditures of all parts of the Government
—general and special accounts, trust ac­
counts, corporations, and enterprises—in
transactions with other sectors of the system
of accounts. The category excludes all finan­
cial expenditures—loans made, securities pur­
chased, other increases in the Government’s
financial assets, and retirement of Govern­
ment debt.
Purchases of goods and services are re­
corded in the flow-of-funds account, insofar
as practicable, as of the time title passes to
the Federal Government, not as of the time
cash payment is made. Insofar as possible,
expenditures are recorded gross, that is, re­
ceipts are not netted against expenditures,
nor are expenditures netted against receipts.
The total of nonfinancial uses is derived
by adjusting the Treasury series on cash




outgo to meet the requirements of flow-offunds accounting. The adjustment steps
are shown in Table 19 on page 148 and
described on page 137. Most of the individ­
ual categories of expenditure are also derived
by adjusting Treasury data or other Govern­
ment statistics. One category, purchases of
other goods and services, is calculated as the
residual between the total and the sum of all
the other categories of nonfinancial uses.
Payroll (line b) includes the gross cash
pay of Government civilian employees and
the gross cash pay and allowances of mem­
bers of the armed forces, payments to mili­
tary reservists, payments to prisoners of war,
etc. It excludes pay in kind to military and
civilian employees. Payroll is recorded before
withholding deductions for income taxes,
employment taxes, or employee contributions
to retirement systems. The series excludes
contributions made by the Federal Govern­
ment as employer to retirement funds and to
the old-age and survivors insurance fund.
Interest expenditures (line c) represent
total interest payments made to other sectors
by the Federal Government sector in cash
and in increases in interest accruals. The
series excludes payments of interest from one
Government agency, trust fund, or corpora­
tion to another. As noted earlier, the Postal
Savings System and the Exchange Stabiliza­
tion Fund are classed in the banking sector
of the flow-of-funds accounts, and interest
paid by the Treasury to them is included in
Government interest payments. Interest on
savings bonds and Treasury bills is included
at the time such interest accrues.13
13 Interest paid on the rest of the public debt is to some
extent recorded on an accrual basis since 1949. Beginning
in November 1949, the Daily Treasury Statement has re­
corded interest on marketable securities as of the time due
and payable rather than as of the time actually paid by the
Treasurer.

FE D E R A L G O V E R N M E N T SECTOR

The series includes interest paid in connec­
tion with tax refunds and on Government
corporation and agency borrowing as well
as interest on the public debt as recorded in
the Daily Treasury Statement. Interest pay­
ments are shown gross, that is, receipts from
other sectors are not netted against Govern­
ment interest payments.
Cash interest payments (line d) is a measure of
all cash interest payments made by the Federal
Government. It includes the cash interest paid on
the redemption of Government securities (Treasury
bills and savings bonds) sold on a discount basis.13
N e t accrual of interest payable (line e) consists of
accrued discount on savings bonds and Treasury
bills less interest paid on savings bonds and bills
redeemed.

Rents (line f). This series represents pay­
ments by the Federal Government for leased
space it occupies and for the land it leases.
Some of the payments made to agriculture
under conservation programs take the form
of payments of rent, both to farmers and to
nonfarm landlords of farm land. These
payments are recorded here as rent payments
rather than as subsidy payments.
Insurance benefits (line g). The Federal
Government sector pays insurance benefits
under the various insurance programs listed
earlier in the section on insurance premiums.
Three major categories of payments are
shown: social insurance benefits, other bene­
fits, and withdrawals of deposits from the
Federal unemployment trust fund by the
State funds.
Social insurance benefits (line h ) consist of bene­
fits paid under the old-age and survivors insurance,
railroad retirement, and railroad unemployment
insurance programs. The great bulk of these bene­
fits has been under the old-age and survivors insur­
ance program. Unemployment compensation bene­
fits under State programs are not recorded here as
they are payments of insurance benefits by the
State and local government sector, not by the
Federal Government sector.




129

Other benefits (line i) consist of payments made
in connection with Federal employee retirement
systems, deposit insurance, crop insurance, war
shipping and war damage insurance, Federal Hous­
ing Administration mortgage insurance, and the
national service life insurance and Government life
insurance programs. National service life insurance
and Government life insurance dividends to policy­
holders as well as insurance benefits are included in
this category. Detail on some of these programs
is given on page 259 in Table 57 on Government
insurance benefits.
State withdrawals of deposits from the Federal
unemployment trust fund (line j) are included
under benefit payments to maintain uniform treat­
ment of social insurance funds. (See discussion
of these deposits in relation to line K, page 125.)

Grants and donations (line k) consist of
payments made by the Federal Government
for which no specifically identifiable good,
service, or claim is given in exchange at the
time of payment. In some cases, for example
mustering out payments to discharged serv­
icemen, the distinction between grants and
donations and payments for services may not
be clear-cut. In the allocation of such bor­
derline cases, the treatment of transfer pay­
ments in national income accounts has been
followed. Government payments in the
grants and donations category may be made
in cash or in Federal debt instruments (for
example, armed forces leave bonds).
Not all forms of Government aid are re­
flected in this transaction category. It ex­
cludes gifts or grants in kind to the extent
they are identified as such; purchase of the
goods given as gifts in kind is recorded in
the category for Federal Government pur­
chases of other goods and services. Gov­
ernment loans are excluded from the cate­
gory; all Government lending programs are
recorded as Federal financial transactions.
Government subsidy programs conducted
through the purchase and sale of commodi­

130

FLOW

O F FU N D S IN

T H E U N IT E D STATES, 1939-53

ties are not covered by this transaction category.
Grants-in-aid to State and local governments
(line 1) consist of cash grants to State and local
governments under public assistance, hospital con­
struction, health, housing, school construction and
maintenance, resource and conservation, highway
and airport, and other programs. Grants-in-aid in
kind (such as surplus food given to local govern­
ments) are excluded. Loans to State and local gov­
ernments, some of which are included in the Fed­
eral budget as grants-in-aid, are recorded in the
flow-of-funds accounts as increases in Federal Gov­
ernment financial assets.
Grants and donations to the consumer sector
(line m ) consist of all direct cash relief payments;
military pension, disability, and retirement pay­
ments; the issue of adjusted compensation bonds
and other adjusted compensation benefits; muster­
ing out payments; cash terminal leave payments and
the issue of armed forces leave bonds; readjustment,
self-employment, and subsistence allowances to vet­
erans; and miscellaneous transfer payment to con­
sumers.
These grants and donations to the consumer sec­
tor differ from Federal transfer payments in the
national income accounts in several respects: the
flow-of-funds series excludes insurance benefits
(which are shown in another transaction classi­
fication) and transfer payments to nonprofit or­
ganizations (which are shown as receipts of another
sector account); it includes armed forces leave bonds
and adjusted service bonds as of time of issue rather
than as of time of redemption. (See Table 4 on
page 75.)
Grants and donations to the rest of the world sec­
tor (line n ) consist of all grants to foreign govern­
ments and international organizations other than
those specifically identified by the Balance of Pay­
ments Division as grants in kind; purchases of
goods immediately or subsequently given or leased
to other countries (mainly under the wartime lendlease program or under postwar recovery and mu­
tual defense and security programs) are recorded
with other Federal Government purchases of goods
and services as of the time of purchase. The ex­
cluded in-kind transfers are shown as a memoran­
dum in the sources and uses of funds statement
for the rest of the world sector in Table 46 on
page 230 of Chapter 11.




Grants and donations to other sectors (line o)
consist mainly of subsidies to agriculture and busi­
ness. The category also includes small amounts of
grants to nonprofit organizations.
Not all programs to aid business and agriculture
are included in grants and donations. Subsidies
that are part of a purchase and sale program or
are in the form of payment for the performance
of specific services are excluded from the category.
It is difficult to arrive at a definitive concept or
measure of subsidies in such purchase and sale pro­
grams. No attempt has been made to identify
the subsidy element in purchase and sale programs
in which the Government may support market
prices, pay more than current market price for
a service or a good, or sell a good or service for
less than the cost of providing it or make no spe­
cific charge for it. In these cases, the Government
purchases and sales are classed in the flow-of-funds
accounts as Government purchases and sales of
other goods and services. Only if no specific or
identifiable purchase by the Government is involved
is a Government expenditure classed in the grants
and donations category.
Following these rules, payments of grants and
donations by the Federal Government to the cor­
porate business sector include Reconstruction
Finance Corporation wartime subsidies to pro­
ducers, United States Maritime Commission sub­
sidies for ship construction and operation, and pay­
ments to exporters under the International Wheat
Agreement program. No subsidies have been allo­
cated to the nonfarm noncorporate business sector.
Federal payments of grants and donations to the
farm sector are mainly payments under soil con­
servation programs and wartime livestock subsidy
payments. Price support operations of the Com­
modity Credit Corporation are treated as Federal
lending and Federal purchase and sales operations.
Payments of grants and donations to the farm sector
exclude payments to nonfarm landlords and Gov­
ernment payments to farmers classified as rent
payments.

Tax refunds (line p) include such refunds
paid either in cash or in Federal Government
debt instruments. The series does not in­
clude reduction of tax liability, forgiving of
taxes, or tax refunds due that are netted
against tax or renegotiation payments or

FE D E R A L G O V E R N M E N T SECTOR

against Federal Government receivables.
Tax refunds are recorded as of the year of
payment of the refund, and are not referred
back to the year of original liability or to the
year of original overpayment. Tax refunds
exclude interest paid by the Government on
refunds owed; these interest payments are
included in the interest payment category.
The tax refunds recorded in the flow-offunds sector account include not only cash
payments but also the issue of excess profits
tax refund bonds. These enter tax refunds
as of time of issue. Subsequent redemption
of the tax refund bonds is treated as a reduc­
tion of assets by the corporate sector and a
reduction of liabilities by the Federal Gov­
ernment in the year of redemption.
Tax refunds to the consumer sector (line q ) con­
sist almost entirely of refunds on individual income
taxes. The series also includes small amounts of
refunds of employment taxes and of estate and
gift taxes. Tax refunds to the corporate business
sector (line r) consist of corporate income and
profits tax refunds and a small amount of excise
tax refunds.

Purchases of other goods and services
(line s). This category comprises all Federal
Government sector purchases and nonfinan­
cial expenditures other than those listed
separately and is the largest single category
of Government expenditures in almost all the
years covered by the flow-of-funds accounts.
The series is calculated as a residual by de­
ducting all other nonfinancial expenditures
in the account from the total of Federal
Government nonfinancial uses of funds.
The category includes the gross nonfinan­
cial expenditures of the general and special
accounts, as well as such expenditures by
Government corporations, business-type ac­
tivities, and trust funds. It includes pur­
chases from domestic business, purchases
from abroad, and purchases of professional




131

services not included as wages and salaries.
It includes purchases of goods intended to be
resold, those intended to be given to other
sectors in the form of pay in kind or grants
in kind as well as purchases of goods in­
tended for the Government’s own use. The
series shown in line s also includes Gov­
ernment purchases of land, which are too
small to warrant separate identification.
Purchases made through book credit as
well as those effected through cash payments
are included, and corresponding changes in
trade payables are entered in the financial
account of the Federal Government sector.
The relationship between Federal Govern­
ment sector purchases of other goods and
services in the flow-of-funds accounts and
Federal Government purchases of goods and
services in the national income accounts is
shown on Table 6 6 on page 299 and discussed
on page 281 of Chapter 15.
N et increase in financial assets (line t).
The financial assets of the Federal Govern­
ment recorded in the flow-of-funds sector
account are currency and deposits, trade
receivables, mortgages, State and local obli­
gations, corporate securities, Treasury cur­
rency assets, and miscellaneous financial
assets.
Currency and deposits (line u). The bulk
of the cash balances of the Federal Govern­
ment sector is part of the general fund of
the Treasurer of the United States.14 The
currency and deposit holdings of the Federal
Government in the flow-of-funds structure
include the following assets of the general
fund: gold and silver held at monetary
value, currency, deposits at Federal Reserve
14 In the middle of fiscal year 1954, the Treasury dropped
the use of the term “general fund.’* The former “general
fund," along with the gold account and the silver account,
is now shown under the title “Account of the Treasurer
of the United States.” The term “general fund” has been
retained in this report for convenience in exposition.

132

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

Banks, Treasury tax and loan accounts at
commercial banks, and other deposits at
domestic and foreign banks; that is, all assets
of the general fund except silver bullion held
at cost value, which in the flow-of-funds
system is classified as a Treasury currency
asset.
The Federal Government sector also holds
assets classed as currency and deposits in the
flow-of-funds accounts that are not in­
cluded in the assets of the general fund.
These additional cash assets are disbursing
officer cash balances, both domestic and for­
eign, that are excluded from general fund
assets; other Government foreign currency
and deposit holdings; and the cash balances
of Government corporations not held at the
Treasury.
Detailed statements of the differences be­
tween Federal Government holdings of cur­
rency and deposits as recorded in the flow-offunds accounts and ( 1 ) the general fund
balance and (2) Government balances as re­
corded in banking statistics are presented
in Tables 21 and 22 respectively on pages
149 and 150 and are described on pages
143-46.
Trade credit (line v). The Federal Gov­
ernment sector has trade credit assets in the
form of advances and prepayments made by
the Government (mainly to facilitate war
and defense production) and trade notes
and accounts receivable arising in the normal
operations of Government corporations.
Mortgages (line w ). The Federal Gov­
ernment sector has acquired, under various
programs, a substantial volume of residential
and farm mortgages.15 The principal resi­

dential mortgage programs over the period
covered by the flow-of-funds accounts were
conducted by the Federal National Mortgage
Administration, the Reconstruction Finance
Corporation, the Home Owners’ Loan Cor­
poration, and the Federal Housing Admin­
istration; the principal farm mortgage pro­
grams were conducted by the Farmers Home
Administration, the Federal land banks, and
the Federal Farm Mortgage Corporation.
The mortgage assets of the Federal Gov­
ernment sector include only mortgage loans
actually made or mortgages actually ac­
quired; mortgages guaranteed by the Federal
Government but held by others are not
included.
State and local obligations (line x ) . Fed­
eral Government loans and advances to State
and local governments and acquisitions of
State or local government securities are in­
cluded as Federal Government holdings of
State and local obligations. Loans and ad­
vances are mainly in connection with the
Public Housing Administration programs,
but the Reconstruction Finance Corporation,
the Federal Works Agency (now General
Services Administration), and the Rural
Electrification Administration have also
made loans to State and local governments
and to State and local government enter­
prises.
Miscellaneous financial assets (line y). All
financial assets of the Federal Government
not specifically classifiable in another cate­
gory are recorded in miscellaneous financial
assets. This category includes both loans
and securities.

Foreign loans and securities held by the Federal
Government
sector (line z ) consist of (1) loans to
15 From 1939 through 1946, changes in Federal Govern­
ment holdings of farm mortgages and residential mortgages the rest of the world sector—loans by the Export-

were about equal. The change shown in Government mort­
gage holdings for 1947 is in farm mortgages, mainly
reflecting the shift of the Federal land banks from the Fed­
eral Government sector to the financial institutions n.e.c.




subsector of the “other investors” sector. From 1948 on,
changes in Government mortgage assets are almost entirely
in holdings of residential mortgages.

FE D E R A L G O V E R N M E N T SECTOR

Import Bank and Reconstruction Finance Corpo­
ration, Treasury loan to Great Britain, loans under
European Cooperation A dm inistration/M utual Se­
curity Administration (now Foreign Operations Ad­
ministration) programs, lend-lease credits, credits
on sales of surplus ships and other surplus property,
raw materials credits to occupied areas, United
Nations building loan, etc.; and (2) Treasury sub­
scriptions to the International Monetary Fund and
International Bank for Reconstruction and De­
velopment, which are in the rest of the world sector.
Loans guaranteed by the Export-Import Bank but
not held by Government agencies are excluded
from Government financial transactions in the flowof-funds account.
Other miscellaneous loans and securities held by
the Federal Government sector (line aa) consist of
all Government miscellaneous financial assets other
than those which are the liabilities of the rest of the
world sector. The category consists of the follow­
ing loans and securities:
1. Loans to the consumer sector—loans on na­
tional service life insurance and Government life
insurance policies, and loans on adjusted service
bonds;
2. Loans to the corporate business sector10—
Treasury and Reconstruction Finance Corporation
loans to railroads, Maritime Commission ship con­
struction and reconditioning loans, Reconstruction
Finance Corporation loans to industry, loans to
industry under various war and defense programs
(Smaller W ar Plants Corporation, Defense Plant
Corporation, Defense Supplies Corporation, Metal
Reserve Corporation, Rubber Reserve Corporation,
Defense Production Act activities, etc.), and mis­
cellaneous loans to business;
3. Loans to the nonfarm noncorporate business
sector17—loans to farm marketing cooperatives,
farm purchasing cooperatives, and utility coopera­
tives ( including commodity and storage facility
loans to cooperatives under Commodity Credit
Corporation programs) by the banks for coopera­
tives, the Agricultural Marketing Act revolving
fund, the Federal intermediate credit banks, the
Farmers Home Administration, the Commodity
Credit Corporation, the Rural Electrification Ad­
16 For Federal Government holdings of corporate securities,
see p. 134.
17 Bank loans to cooperatives guaranteed by the CCC are
not included in Federal Government loans; they are shown
as assets of the banking sector.




133

ministration, and other Government credit agencies;
4. Loans to the farm sector18—commodity and
livestock price support loans and storage facility
loans by the Commodity Credit Corporation, pro­
duction and subsistence loans, disaster loans, and
emergency crop and feed loans by the Farmers
Home Administration and other Government farm
credit agencies;
5. Loans to and securities of the banking sector—
loans by the Reconstruction Finance Corporation
and the Federal Deposit Insurance Corporation,
which have been gradually liquidated over the
period covered by this report; Treasury holdings
of the capital stock of the Exchange Stabilization
Fund;
6. Loans to life insurance companies by the Re­
construction Finance Corporation and the Federal
home loan banks;
7. Loans to and securities of savings and loan
associations subsector—loans by the home loan
banks (prior to 1951) and the Reconstruction
Finance Corporation; holdings of shares in savings
and loan associations by Home Owners’ Loan Cor­
poration and other Government agencies;
8. Loans to and securities of financial institutions
n.e.c. subsector—Federal intermediate credit bank
loans, advances, and discounts to production credit
associations; Federal intermediate credit bank loans
and discounts to livestock loan companies and
agricultural credit corporations; Reconstruction
Finance Corporation loans to joint stock land
banks; Production Credit Corporation holdings of
the stock of production credit associations.

Two other categories of financial assets
held by the Federal Government sector—
Treasury currency and corporate securities—
are included in the total net increase in finan­
cial assets on line t of the sector account, but
the amounts involved are too small to be
shown separately. Treasury currency assets
of the Federal Government sector consist of
the silver bullion valued at cost held in the
general fund of the Treasurer. (See discus18 Refers only to loans to farmers held by the Federal
Government sector. Loans by Government credit agencies
to financial institutions serving farmers are shown as loans
to the financial institutions n. e. c. subsector, and loans
to farmers guaranteed but not held by the Government
are shown as financial assets of the holders of the loans.

134

FL O W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

sion of the Treasury currency transaction
category in Chapter 17 beginning on page
319.) Corporate securities held by the Federal
Government consist almost entirely of hold­
ings of preferred stock of banks issued to the
Reconstruction Finance Corporation. Such

holdings have been gradually reduced over
the period covered by this report. Recon­
struction Finance Corporation and Treasury
loans to railroads and other businesses are
included in Federal Government holdings
of miscellaneous assets already discussed.

RELATION TO TREASURY ACCOUNTS AND BANKING STATISTICS

The flow-of-funds Federal Government
sector account is derived for the most part
from Treasury data by adjusting Treasury
series for various differences in concept—
differences in transactions coverage, classi­
fication of transactions, timing of transac­
tions, sector coverage, extent of consolida­
tion, and netting. Some of these differences
have been noted in the preceding discussion
(see pages 119-22). In this section of the
chapter, the differences will be examined in
greater detail. In particular, the relationship
of the major components of the Treasury
cash consolidated system—cash income, cash
outgo, net cash borrowing, and changes in
the general fund balance—will be related to
the analagous components of the flow-offunds Federal Government account.
Both the flow-of-funds account for the
Federal Government sector and the cash
consolidated system of recording Federal
activities are balanced accounts, that is, in
each of them receipts minus expenditures
equals increases in assets less increases in
debt.19 Although the respective definitions
of receipts, expenditures, assets, and debt
differ, the fact that both are balanced systems
means that for every adjustment necessary
“ In the flow-of-funds sector, nonfinancial receipts minus
nonfinancial expenditures equals net increase in financial
assets minus net increase in financial liabilities.
In the cash consolidated system, cash operating income
minus cash operating outgo equals increase in general fund
balance minus net cash borrowing.




to go, say, from cash income in the cash con­
solidated system to nonfinancial receipts in
the flow-of-funds account, there is a balanc­
ing adjustment between some other ele­
ments in the two systems.
The conceptual balance in the cash con­
solidated system and in the flow-of-funds
sector account provides an important com­
putation short-cut. If all but one of the
major flow-of-funds transaction subtotals
in the Federal Government sector are cal­
culated, the remaining subtotal category is
given as a residual, without the necessity of
applying adjustments to the corresponding
cash consolidated system figure. Since it is
easier to identify and make adjustments to
cash income than it is to cash outgo, the non­
financial expenditures total for the flow-offunds sector account can be computed as a
residual after the calculation of total nonfi­
nancial receipts and of changes in financial
assets and liabilities. The equivalent and
more direct computation of total Federal
Government nonfinancial expenditures by
adjusting the cash outgo series is also given
in Table 19 on page 148 and described on
pages 137-40.
Relationships of the key flow-of-funds
measures in the Federal Government sector
account to corresponding series in Treasury
and banking data are given in Tables 18-22
on pages 148-50. The tables are described in
the following sections of this chapter.

FE D E R A L G O V E R N M E N T SECTOR

F ederal N
and

o n f in a n c ia l

R eceipts

F ederal C a sh I n c o m e

Table 18 on page 148 presents the relation­
ship of the nonfinancial receipts of the Fed­
eral Government sector of the flow-of-funds
accounts (line J) to Federal Government
cash operating income in the Treasury cash
consolidated system (line A ) . 20 The rela­
tionship is shown in term of the types of ad­
justments necessary to go from the Treasury
series to the flow-of-funds series.
Transaction classification adjustments
Cash income includes some financial re­
ceipts, which are excluded from the flow-offunds total of Federal Government non­
financial receipts.
Proceeds from sales and repayments of
Government loan and security holdings in
cash income (line B). Most Government
lending operations are not reflected in cash
income. In general, proceeds from repay­
ments are netted against loans made, and the
net lending enters cash outgo. In a few
instances, however, repayments of loans and
proceeds from disposition of securities are
recorded in miscellaneous budget receipts
and enter cash income. Repayments of the
Treasury loan to Great Britain and of loans
made by the Rural Electrification Admin­
istration and the Farmers Home Admin­
istration are the most important examples.
These loan repayments are recorded as finan­
cial transactions in the flow-of-funds ac­
20 For the years 1943-53, the series for cash operating in­
come used in Table 18 and for cash operating outgo used
in Table 19 are taken from the Treasury Bulletin. The
Treasury Bulletin has published these series back through
1943 incorporating revisions for changes in definition that
occurred in 1947 and 1949. The Treasury Bulletin figures
for earlier years have somewhat different definitions. For the
years 1939-42, the figures used have been derived by
adjusting the published figures to a basis comparable to
the later years. In 1954, the cash operating income series
was replaced by the cash deposits series and the cash
operating outgo series by the cash withdrawals series.




135

counts, and are therefore deducted here as
a step in arriving at nonfinancial receipts.
Trust and deposit receipts in cash income
(line C). Some trust account receipts repre­
sent funds received as deposits and held in
trust by the Government, such as receipts in
connection with pay of the Army, funds
held for military personnel overseas, deposits
of civilian internees and war prisoners, war
claims, deposits of foreign countries under
the programs of the Mutual Security (later
the Foreign Operations) Administration,
Indian trust funds, etc. These trust and
deposit receipts are in cash income but are
classified as financial transactions in the
flow-of-funds account. They must there­
fore be deducted from cash income in the
flow-of-funds calculation of Federal Gov­
ernment nonfinancial receipts.
Sector coverage adjustment
Receipts of the District of Columbia (line
D ) . The nonfinancial receipts of the District
of Columbia government enter the Treasury
series on cash income. In the flow-of-funds
system, the District of Columbia is in the
State and local government sector, not in
the Federal Government sector, and these
receipts are excluded from the nonfinancial
receipts of the Federal Government sector.
Consolidation adjustment
Contributions to retirement f unds by Fed­
eral Government employees (line E). The
cash consolidated system and the flow-offunds Federal Government account are both
on a consolidated basis, but the nature of the
consolidation differs in one respect: Federal
Government employee contributions to re­
tirement funds withheld from pay by the
Government are eliminated in the process of
consolidating Treasury accounts to arrive at
cash income. In the flow-of-funds accounts,

136

FLOW

O F FU N D S IN

T H E U N IT E D STATES, 1939-53

payroll is recorded gross of such withhold­
ings and the employee contributions to re­
tirement funds are recorded as Federal Gov­
ernment receipts from the consumer sector.
They are thus not eliminated in the consoli­
dation of the flow-of-funds Federal Govern­
ment account.
Transaction coverage adjustment
Receipts of counterpart and other funds
not in cash income (line F). Prior to the
fiscal year 1954, the cash consolidated system
excluded most receipts and expenditures of
Federal Government foreign accounts arising
in connection with counterpart funds. The
flow-of-funds Federal Government sector ac­
count includes these transactions and it is
necessary to add receipts of these funds to
cash income to arrive at the sector’s non­
financial receipts. Also included in line F
are premiums received in 1947 by the na­
tional service life insurance trust fund in the
form of armed forces leave bonds. These
premium receipts are not included in cash
income, but are included in nonfinancial
receipts of the flow-of-funds Federal Gov­
ernment account.
Timing adjustment
To the extent that receipts are recorded
on different timing bases in Treasury cash
income and in flow-of-funds Federal Gov­
ernment nonfinancial receipts, adjustments
between the two series are required.
Net receivables arising from sale of surplus
property abroad (line G). An adjustment
is required to shift some of the receipts in
cash income from a cash basis to a cash and
credit basis. Sales of surplus property, etc.
abroad on credit enter cash income at time
of cash settlement; they are recorded in the
flow-of-funds Government nonfinancial re­
ceipts at time of sale. The increase in Gov­




ernment loans on account of such sales
represents the amount by which the flow-offunds nonfinancial receipts exceed cash
income because of this difference in timing.21
Adjustments from net to gross basis
The largest differences between cash in­
come and the flow-of-funds nonfinancial re­
ceipts arise from the circumstance that many
Government transactions that enter the cash
consolidated system on a net basis are re­
corded in the flow-of-funds accounts on a
gross basis.
Nonfinancial receipts of Government cor­
porations and agencies netted against ex­
penditures in cash outgo (line H ). Some
Government receipts are not recorded in cash
income, but are netted against expenditures
in cash outgo. In particular, nonfinancial
receipts of most Government corporations
and enterprises are so netted; some proceeds
from sales of Government property are
credited to appropriations and netted against
expenditures; and transactions of the Post
Office are reflected only in cash outgo and its
gross receipts do not enter cash income. As
21 Two other minor timing adjustments to the cash in­
come scries should have been made in arriving at the
flow-of-funds series on Federal Government nonfinancial
receipts. Certain receipts of the Government are recorded
in suspense accounts pending final determination of their
proper classification or ultimate disposition. These suspense
accounts are part of the net deposit funds which do not
enter cash income, their receipts entering cash outgo as
negative expenditures. As a result, these receipts are re­
corded in cash income as of the time they are transferred
from the suspense account to some receipt category,
rather than as of the time they are initially received. How­
ever, because of the lack of pertinent information in a readily
available summary form and because of the relatively small
magnitudes involved, no adjustment is made to cash income
to change the timing.
Also, certain receipts received initially by disbursing
officers and later transferred to the Treasury are recorded
in the Treasurer’s account when transferred. This timing
does not accord with the objectives of the flow-of-funds
Government sector account, in which the receipt should be
entered when received from the public by any agent of
the Government. Again, lack of information on the amounts
involved preclude adjustment for this difference in timing.

FE D E R A L G O V E R N M E N T SECTOR.

these are all shown gross in the flow-of-funds
system, the receipts excluded from cash in­
come are part of flow-of-funds nonfinancial
receipts.
Tax refunds netted against tax receipts in
cash income (line I). In cash income, both
tax refunds in cash and redemptions of excess
profits tax refund bonds are netted against
tax receipts. In the flow-of-funds accounts,
taxes are shown gross of refunds.
F ederal N

o n f in a n c ia l

O utlays

and

F ederal C a sh O utgo

Table 19 on page 148 presents the relation­
ship of nonfinancial expenditures of the
Federal Government sector of the flow-offunds accounts (line P) to Federal G overn­
ment cash operating outgo in the Treasury
cash consolidated system (line A ) . 22 The
relationship is shown in terms of the types
of adjustments necessary to go from the
Treasury series to the flow-of-funds series.
Transaction classification adjustments
Cash operating outgo (line A) contains
many financial transactions—it includes cer­
tain financial uses of funds and it is net of
certain financial sources of funds. In par­
ticular, it includes the net expenditures (ex­
penditures minus receipts) of Government
corporations and credit agencies (with some
exceptions), of deposit fund accounts, and
some transactions of the Exchange Sta­
bilization Fund. These net expenditures
that are part of cash outgo include financial
transactions (other than those with other
parts of the Federal Government and other
than those entering the calculation of net
cash borrowing) so that some financial uses
of funds of these corporations, agencies, and
funds increase cash outgo and their financial
sources decrease cash outgo. Since these
22 See p. 135, note 20.




137

financial transactions do not enter the flowof-funds Federal Government sector’s rionfinancial expenditures, several adjustments to
cash outgo are required.
Cash subscription payments to the IMF
and IBRD and net redemption of notes issued
to them (line B). Subscriptions to the Inter­
national Monetary Fund and International
Bank for Reconstruction and Development
are classed as financial transactions in the
flow-of-funds accounts. Consequently the
payments on these subscriptions that are re­
flected in cash outgo are deducted in arriving
at flow-of-funds nonfinancial expenditures.
Net increase in Government holdings of
other loans and securities in cash outgo (line
C). These financial elements in cash outgo
are not part of the flow-of-funds Federal
Government sector nonfinancial expendi­
tures and are deducted in going from cash
outgo to the flow-of-funds series.23
Net redemptions of Government securities
not cleared through the Treasurer’s account
but included in cash outgo (line D ). Net
cash borrowing does not, in general, reflect
those transactions in securities issued by
Government agencies that are not handled
through the Treasurer’s account.24 These
financial transactions are reflected in cash
153The deduction for this adjustment is not equivalent to
the total net increase in loans and securities recorded in the
flow-of-funds Federal Government sector statement for the
following reasons: (1) some loan repayments (mainly re­
payments of Rural Electrification Administration and Farm­
ers Home Administration loans and of the Treasury loan
to Great Britain) are reflected in cash income, not in cash
outgo; (2) the net increase in loans associated with net
credit sales abroad and the decrease in Federal Govern­
ment holdings of the capital stock of the Exchange Stabiliza­
tion Fund do not enter cash outgo; (3) the adjustment for
subscriptions to the IMF and to the IBRD is made sep­
arately on line B; and (4) reductions in Federal Govern­
ment loans in the flow-of-funds sector account in 1947
and 1951 resulting from the handling of the change in
classification of the Federal land banks and the Federal
home loan banks are not reflected in cash outgo.
24 See discussion of comparison between net cash borrow­
ing and Federal obligations on pp. 141-43.

138

FL O W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

outgo and must be excluded in arriving at addition, the retention in net cash borrowing
flow-of-funds Government nonfinancial ex­ of Federal land bank net issues from 1947
on and of Federal home loan bank net issues
penditures.
Financial transactions of trust funds and from 1951 on (at which dates the Govern­
deposit funds included in cash outgo ment’s proprietary interests in these banks
(line E). Trust and deposit liabilities of the were terminated) has not been followed in
trust funds and deposit funds are classed as the flow-of-funds measure. These differences
financial transactions in the flow-of-funds in definition and measure of financial trans­
accounts. The deduction from cash outgo actions result in corresponding differences
necessary to arrive at flow-of-funds non­ between cash outgo and flow-of-funds Gov­
financial expenditures consists of the gross ernment nonfinancial expenditures.
decrease in trust and deposit liabilities of Sector coverage adjustment
the trust fund accounts and the net decrease
Expenditures of District of Columbia (line
in the trust and deposit liabilities of deposit
G ). The cash consolidated system includes,
funds.25
but the flow-of-funds Federal Government
Other financial transactions reflected in sector account excludes, the District gov­
cash outgo (line F) that are deducted in ernment. In going from cash outgo to flowcalculating flow-of-funds Government non­ of-funds Federal nonfinancial expenditures,
financial expenditures consist of several types adjustments are made to cash outgo to deduct
of items. They include the net increase in the District’s expenditures and to add trans­
the cash balances of Government corpora­ fers from general account to the District.
tions and enterprises not kept with the
Consolidation adjustment
Treasury,20 the net decrease in private in­
Contributions to retirement funds by Fed­
terest in Government partly owned corpora­
tions resulting from the retirement and issue eral Government employees (line H ). Gov­
of capital stock, and the net decrease in the ernment payrolls enter cash operating outgo
trust and deposit liabilities (other than those net of these contributions since no cash flow
owed to other Government agencies) of from the Government is involved; the con­
tributions are made through a payroll deduc­
Government corporations and enterprises.
Minor conceptual differences in sector tion. The nonfinancial expenditures recorded
coverage and some statistical differences in in the flow-of-funds account for the Federal
source material result in differences between Government sector include payroll before
net cash borrowing and the flow-of-funds these contributions are deducted, and an
category Federal obligations with respect to adjustment to cash outgo is required identical
the holding of Government securities by to the one made to cash income for this
Government corporations and agencies. In difference in consolidation.
Transaction coverage adjustment
25The adjustments necessary for trust funds and those
required for deposit funds differ since most trust account
receipts and expenditures enter cash income and outgo on
a gross basis, whereas deposit funds enter only cash outgo,
and are recorded there on a net basis.
26 Changes in balances of Government corporations and
enterprises kept on deposit with the Treasury do not enter
cash outgo.




Government expenditures out of counter­
part funds not in cash outgo (line I). As
explained in connection with the adjust­
ments to cash income, prior to fiscal 1954
cash outgo did not include Government

FE D E R A L G O V E R N M E N T SECTOR

expenditures out of counterpart funds.
These expenditures are included in the flowof-funds Federal Government sector account.
Timing adjustments
To the extent that expenditures are
recorded in Treasury cash outgo and in flowof-funds Federal Government nonfinancial
expenditures on different timing bases, ad­
justments between the two series are re­
quired.
Net increase in excess of payables over re­
ceivables (line J). To adjust Government
expenditures from the time-of-payment basis
of cash outgo to the time-of-purchase basis
wanted in the flow-of-funds account, it is
necessary to add to cash outgo the increase
in Government payables and deduct the in­
crease in Government receivables; that is,
to add the increase in the excess of payables
over receivables.
The adjustments for both payables and
receivables are applicable to cash outgo. The
payables and receivables pertain in part to
expenditures by the general Government and
in part to net expenditures by Government
corporations. For the general Government,
receivables arise in connection with advances
and prepayments made by the Government,
and thus affect the timing of expenditures
just as do the payables, which arise in con­
nection with lags in payment for purchases.
For Government corporations, both payables
and receivables are adjustments to cash
outgo since they both affect the timing of
the net Government corporation expendi­
tures included in cash outgo.
Timing adjustments for Government ex­
penditures effected through issues of debt
(lines K and L ). When nonfinancial expend­
itures are effected through the issue of Gov­
ernment debt rather than through payment
in cash, the transactions are recorded in cash




139

outgo when the debt is redeemed and in
flow-of-funds Government nonfinancial ex­
penditures when the debt is issued. It is
necessary therefore to add to cash outgo the
net increase in accrued interest on savings
bonds and Treasury bills (that is, the excess
of interest accruals over interest payments)
(line K) and the excess of issues of armed
forces leave bonds and adjusted service bonds
over cash redemptions and the net increase
in excess profits tax refund bonds (line L).
Other timing differences (line M). Some
outlays are recorded in cash outgo as of
the time funds are transferred to disbursing
officers’ balances held outside the Treasury,
rather than as of the time the officers make
disbursements. The adjustment to cash
outgo required to arrive at a figure which
reflects disbursing officer expenditures rather
than transfers to their cash balances held out­
side the Treasury is equivalent to adding
the net decrease in the liabilities of the gen­
eral fund of the Treasurer (other than those
liabilities attributable to Postal Savings Sys­
tem deposits with the Treasury), the net
decrease in disbursing officer domestic bal­
ances not in the general fund, and the net
decrease in Government foreign balances not
in the general fund (other than those arising
in connection with counterpart funds).
Adjustments from net to gross basis
The adjustments on account of differences
in netting and grossing are identical with
those already discussed on page 136 in con­
nection with adjustments to cash income.
That is, in order to gross the expenditures
netted against receipts or the receipts netted
against expenditures, identical amounts are
added to both expenditures and receipts.
These adjustments are Government corpora­
tion and agency nonfinancial receipts, postal
revenues, and certain receipts from sales

140

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

credited to appropriations netted against ex­
penditures in the calculation of cash operat­
ing outgo (line N ) ; and tax refunds netted
against tax receipts in cash income and ex­
cluded from cash operating outgo (line O).

Corporation, the Federal Public Housing
Administration (and its predecessors), the
Home Owners’ Loan Corporation, and the
Federal Housing Administration. In the
years shown in Table 20, only Commodity
Credit Corporation and Federal Housing
F ederal O bligations , t h e P ublic D ebt ,
Administration obligations are of import­
a n d N et C a sh B orrowing
ance. At the end of 1953, the series con­
sisted
almost entirely of Federal Housing
The relationship of Federal obligations in
the flow-of-funds accounts to the public debt Administration debentures.
Federal securities (line C). The direct
and net cash borrowing series in Treasury
accounts is presented in Table 20 on page 149. public debt (line A ) and all fully guaranteed
The table consists of two parts—lines A securities of Government agencies and cor­
through I describing the relationship be­ porations that are held outside the Treas­
tween the Treasury series on Public Debt ury (line B) together constitute the direct
and the flow-of-funds series for Federal ob­ and fully guaranteed debt of the Federal
ligations, and lines J through M describing Government. This is the series entitled
the relationship between net changes in the “Federal securities” in Treasury publications.
flow-of-funds Federal obligations and the The total of Federal securities, less the cur­
Treasury series on net cash borrowing by the rency items in the public debt and the Postal
Savings and Panama Canal bonds, is the
Government.
debt total subject to the statutory debt limi­
Public Debt and Federal Obligations
tation.
Gross direct public debt (line A ) consists
Treasury reporting of the amount of
of securities issued directly by the Treasury Federal securities held by Federal Govern­
and of certain currency liabilities of the ment agencies and trust funds, as published
Treasury as recorded in the “Statement of in the Treasury Bulletin table on “Owner­
the Public Debt.” The series does not in­ ship of Federal Securities,” is shown on
clude any securities issued by Government line D.
corporations.
Deducting the Government holdings (line
Fully guaranteed securities issued by U. S. D ) from total Federal securities (line C)
Government corporations and agencies (line yields the series D irect and fully guaranteed
B). Certain agencies and corporations of the debt held by the public (line E), as pub­
Government issue securities, fully guaranteed lished in the Federal Reserve Bulletin.
as to interest and principal by the Treasury.
The flow-of-funds category Federal obli­
The amounts of such fully guaranteed securi­ gations (line I) differs from this series on
ties held outside the Treasury are recorded direct and fully guaranteed debt (line E) on
on line B. These amounts have been rela­ three counts.
tively small in the postwar period but were
Sector coverage adjustment
substantial before and during the war. Agen­
cies which have issued such guaranteed
Federal securities held by the Postal Sav­
securities include the Commodity Credit ings System, Exchange Stabilization Fund,
Corporation, the Federal Farm Mortgage District of Columbia trust funds, and from




FE D E R A L G O V E R N M E N T SECTOR

195 / on home loan banhj (line F). In the
calculation of direct and fully guaranteed
debt held by the public, the Postal Savings
System, the Exchange Stabilization Fund,
and the District of Columbia Government
are considered as parts of the Federal Gov­
ernment, whereas in flow-of-funds sectoring
these are treated as part of the non-Government public. The first two are classified in
the banking sector and the third in the State
and local government sector. Also, the
Treasury series on ownership of Government
securities continues to classify the securities
held by the home loan banks after 1951 as
intra-Government, although the Govern­
ment’s proprietary interest in these banks
terminated in 1951. The home loan banks
are classified in the flow-of-funds financial
institutions n.e.c. subsector from 1951 on.

Transaction classification adjustments
Debt issued by Government corporations
and agencies not guaranteed by U. S. Gov­
ernment (line G ). The flow-of-funds Fed­
eral obligations category includes all security
obligations of the Federal Government held
by sectors other than the Federal Govern­
ment. The concept of direct and fully guar­
anteed debt held by the public, as published
in the Federal Reserve Bulletin, excludes ob­
ligations of Government corporations and
agencies not guaranteed by the United States
Government. The amount of these non­
guaranteed issues held by the public (that
is, those not held by the Treasury) is in­
dicated in line G .27 In the years shown in
Table 20, these issues consist of obligations of
the Federal intermediate credit banks, the
banks for cooperatives, and, prior to 1951,
the Federal home loan banks. Federal land

141

banks have also issued such nonguaranteed
securities. As noted earlier, these land bank
bonds are reclassified as miscellaneous lia­
bilities of another flow-of-funds sector as of
the end of 1947 and the Federal home loan
bank bonds are similarly reclassified as of
the end of 1951, when the Government’s
proprietary interests in these banks were
terminated. The series shown on nonguar­
anteed securities (line G) and on Federal
obligations (lines I and J) reflect these shifts
in classification in 1947 and in 1951.
Currency items in the public debt (line H ).
The series on direct and fully guaranteed
debt held by the public (line E) includes
certain currency items, such as deposits for
redemption of Federal Reserve Bank notes,
which are classified as Treasury currency
liabilities rather than as Federal obligations
in the flow-of-funds account for the Federal
Government sector.
Federal Obligations and Net Cash
Borrowing
Another measure of Federal debt is the
Treasury series on net cash borrowing (line
M ) . 28 Since this series is available only in
terms of net changes and not in terms of
levels of debt outstanding, it is compared to
net increases in the flow-of-funds Federal
obligations category (line J) rather than to
the levels of Federal obligations (line I).
Transaction coverage adjustment
Securities not issued for cash (line K ).
Net cash borrowing excludes, and Federal

28 The concept and measure of net cash borrowing was
changed somewhat in fiscal 1954. The new concept, which
was first published in the April 1954 issue of the Treasury
Bulletin, has not been incorporated here; the definition and
measure of net cash borrowing used here is that published
in the Treasury Bulletin through the March 1954 issue. The
27 Nonguaranteed securities in line G and in the flow-of- figures for the years shown (1947-53) were published in the
funds category Federal obligations include all such issues Treasury Bulletin. For earlier years, estimates of net cash
whether or not they are cleared through the Treasurer’s borrowing have been derived from data on net cash outgo
and on changes in the general fund balance.
account.




142

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

of Federal Farm Mortgage Corporation and the
Home Owners’ Loan Corporation securities account
for most of the difference in that year, (b) Federal
Housing Administration debentures issued in ex­
change for mortgages and property were not re­
flected in the Treasurer’s account, (c) From 1942
through 1945, the Treasurer’s account did not
reflect issues of Commodity Credit Corporation
demand obligations to commercial banks. In addi­
tion, throughout the period, Commodity Credit
Corporation guaranteed securities were recorded on
a slightly different timing basis in the Treasurer’s
account than in the guaranteed securities compo­
nent of Federal securities.
2. Federal obligations include, and net cash bor­
rowing excludes, net transactions in securities of
Government agencies not guaranteed by the
Government that are not reflected in the Treas­
urer’s account. The principal nonguaranteed issues
thus excluded from net cash borrowing are securi­
ties and notes of the banks for cooperatives, securi­
ties of the Federal intermediate credit banks, some
securities and notes of the Federal land banks be­
fore 1947, and some Commodity Credit Corpora­
tion obligations in 1944 and 1945. Beginning in
1952, transactions in issues of the Federal inter­
mediate credit banks enter net cash borrowing even
though they are not reflected in the Treasurer’s
account.
Timing , transaction, and sector adjustments
3. The Government’s proprietary interest in the
Federal
land banks and in the home loan banks
The following differences between Federal
ceased in 1947 and 1951 respectively, but the
obligations and net cash borrowing, com­ Treasurer has continued to act as agent in the issue
bined in line L, are too small in the years and redemption of Federal land bank and home
covered by Table 20 to be shown separately. loan bank obligations. Transactions in these securi­
1.
Federal obligations include and net cash bor­ ties are reflected in the Treasurer’s account and
rowing excludes net transactions in guaranteed se­ enter net cash borrowing even after the Govern­
curities that are not handled through the Treas­ ment’s proprietary interest has terminated. Federal
urer’s account. This results in a difference between land bank bonds (from 1947 on) and home loan
the two series only prior to 1946. Beginning in bank bonds (from 1951 on) are excluded from the
July 1946, all transactions in guaranteed securities flow-of-funds category of Federal obligations; the
are cleared through the Treasurer’s account and are debts of these banks have been attributed to the
flow-of-funds other investors sector, not to the Fed­
reflected in net cash borrowing.
eral
Government sector, since those dates, and their
In the years before 1946, the difference between
net
issues
are not included in Federal obligations.
the change in guaranteed securities held outside
In
addition,
the change in Federal obligations in
the Treasury and the transactions in guaranteed
1947 and 1951 reflects these shifts in classification
securities cleared through the Treasurer’s account
is attributable to several factors: (a) In 1939 the while net cash borrowing does not.
4. Part of the difference between Federal obliga­
Treasurer’s account for guaranteed securities re­
flected only issues and not retirements. Retirements tions and net cash borrowing is attributable to

obligations include, transactions in debt not
originally issued for cash. Debt changes
excluded from net cash borrowing are ac­
crued interest on outstanding savings bonds
and Treasury bills, and changes in amounts
outstanding of armed forces leave bonds, ad­
justed service bonds, excess profits tax re­
fund bonds, and notes issued to the Inter­
national Monetary Fund and the Interna­
tional Bank for Reconstruction and Develop­
ment.
In the Treasury cash consolidated system
the issue of these securities is not recorded,
since no cash transaction occurs at the time
of issue. Payments made at the time of re­
demption are recorded in Treasury cash
operating outgo (or cash operating income
for excess profits tax refund bonds) and do
not enter net cash borrowing.
The difference between Federal obliga­
tions (line J) and Federal obligations not
issued for cash (line K) is equal to the flowof-funds series on Federal obligations issued
for cash (shown as memorandum line N ).




F E D E R A L G O V E R N M E N T SECTOR

143

differences in amounts subtracted for Federal Gov­
When owed to non-Governmental sectors,
ernment agency and trust fund holdings in the these liabilities are recorded as debts of the
calculations underlying the two series. This dif­
Federal Government sector. For example,
ference stems partly from differences in coverage;
for example, the net cash borrowing calculation the general fund liability for Postal Savings
System deposits with the Treasury is classed
treats the District of Columbia government and
the home loan banks (after 1951) as parts of the in the flow-of-funds account as a trust and
Federal Government, and the flow-of-funds Federal deposit liability (in miscellaneous liabilities)
obligations calculation treats them as part of the of the Federal Government sector owed to
“public.” The difference also stems from differ­
the banking sector. When the general fund
ences in timing of changes of agency holdings in
the two calculations. Among the agencies whose liability is owed to other parts of the Federal
net purchases of Federal securities are recorded Government sector, as in the case of de­
with different timing in the two calculations are the posits of postmasters and disbursing officers,
Federal home loan banks (before 1951), the Fed­ the liability is eliminated in the process of
eral intermediate credit banks, the Production
consolidation.
Credit Corporation, and the Indian trust funds.
5.
Net cash borrowing includes changes in cur­ Timing adjustment
rency items in the public debt. In the flow-ofDisbursing officers and other cash bal­
funds accounts these currency items are excluded
ances not in general fund (line C). The gen­
from Federal obligations and classified as Treasury
eral fund balance excludes some Treasury
currency liabilities of the Federal Government.
F ederal C a sh H

oldings a n d

G eneral

F u n d B alanc e

Table 21 on page 149 presents the relation­
ship of currency and deposit holdings of
the Federal G overnm ent sector of the
flow-of-funds accounts (line G) to the bal­
ance in the general fund of the T reasurer
of the U nited States as shown in the Daily
Treasury Statement (line A ). The relation­
ship is shown in terms of the adjustments
necessary to go from the general fund bal­
ance to the flow-of-funds series.
Adjustment from net to gross basis
Liabilities of the general fund (line B).
The general fund balance (line A) is equal
to the assets of the general fund less the
liabilities of the general fund. These liabili­
ties are not deducted in computing the Fed­
eral Government sector holdings of currency
and deposits in the flow-of-funds accounts
and they must therefore be added back to
the general fund balance in deriving the
flow-of-funds series.




foreign currency holdings and some disburs­
ing officers’ cash balances. These exclusions
affect the timing with which transactions are
recorded in Government accounts.29
The excluded balances of disbursing of­
ficers consist of some foreign and domestic
bank deposits and of holdings of foreign and
domestic currencies. Prior to 1944, the bank
balances were included in general fund
assets, but were also recorded in general
fund liabilities; therefore they were excluded
from the general fund balance. For years
prior to 1944 the adjustment to include these
balances in the Federal Government sector’s
currency and deposit assets is part of the
adjustment on line B. From November 15,
1944, bank balances of Government officers
other than the Treasurer of the United States
are excluded from both the assets and the
liabilities of the general fund. For the
period after that date, the adjustment to
include these balances in the currency and
39Other exclusions of cash balances from the general fund
balance that do not affect timing are discussed under lines
D and E.

144

FLO W

O F FU N D S IN

T H E U N IT E D STATES, 1939-53

deposit holdings of the Government sector
is part of the adjustment on line C.
N o estimates of these excluded bank bal­
ances are available for the period from No­
vember 15, 1944 to June 30, 1954, when the
Treasury began to receive reports on dis­
bursing officer balances held outside the
Treasury. Rough year-end estimates for
1944 and 1953 are based on general fund
figures of November 14, 1944 and Table 18
(Cash and Related Items Held Outside the
Treasury, June 30, 1954) of the Combined
Statement of Receipts, Expenditures and Bal­
ances of the United States Government for
the fiscal year ended June 30, 1954. For
intervening years, the estimates are a straight
line interpolation between the 1944 and 1953
estimates. Line C also includes rough esti­
mates of disbursing officers’ holdings of cur­
rencies, based on the June 30, 1954 Treasury
report, on balance-of-payments statistics, and
on other sources.
Transaction coverage adjustment
Government counterpart fund balances not
in the general fund (line D ). Neither the
Government foreign balances arising in con­
nection with transactions in counterpart
funds nor the receipts into and expenditures
out of these balances are reflected in the
Treasurer’s accounts.30
Transaction classification adjustments
Cash balances of U. S. Government cor­
porations held outside the Treasury (line E).
The general fund balance excludes currency
and deposits owned by Government corpora­
tions but not held at the Treasury. Net
increases in these cash balances enter budget
30 Beginning in fiscal 1954, certain expenditures out of
these balances (and an equal amount of receipts) are in­
cluded in budget expenditures (and receipts), but the
balances themselves have not been included in the general
fund balance.




expenditures and cash outgo. In the flow-offunds system, these cash items are part of
currency and deposit assets of the Federal
Government sector and they are therefore
added here. A corresponding adjustment is
made to cash outgo to exclude changes in
these items from nonfinancial expenditures.
Silver bullion carried at cost value in the
general fund (line F). General fund hold­
ings of the silver bullion valued at cost are
not classified as part of the Federal Govern­
ment sector’s currency and deposit assets in
the flow-of-funds accounts but rather are
recorded as Treasury currency assets of the
Federal Government sector. This silver, in
contrast to the other silver holdings of the
general fund, enters neither the banking sys­
tem’s currency and deposit liabilities nor the
banking system’s silver assets in conventional
banking and monetary statistics. (See dis­
cussion of the flow-of-funds Treasury cur­
rency transaction category beginning on
page 319 of Chapter 17.)
F e d e r a l C a s h H o l d in g s a n d R e l a t e d
B a n k i n g S t a t is t ic s

Table 22 on page 150 presents the relation­
ship of Federal Government sector cur­
rency and deposit holdings in the flow-offunds accounts (line L) to U nited States
Government cash balances as reported in
banking statistics (line A ). The banking
series to which comparison is made is the
series on United States Government balances,
shown in the table “Consolidated Condition
Statement for Banks and the Monetary Sys­
tem” published monthly in the Federal Re­
serve Bulletin. The relationship can be most
easily described in terms of the adjustments
made to each of the three major components
of the published banking statistics series—
balances at Federal Reserve Banks (line B),
balances at commercial and mutual savings

F E D E R A L G O V E R N M E N T SECTOR

banks (line C), and Treasury cash (line D)
—in going from United States Government
cash balances as reported in banking statistics
(line A ) to the flow-of-funds Federal Gov­
ernment sector holdings of currency and
deposits (line L) and its comparable com­
ponents (lines M, N, and O).
Adjustments to balances at Reserve Banks
Balances in process of collection at Federal
Reserve Banks (line E). Checks deposited
by the Treasury at Federal Reserve Banks
but not yet credited to the Treasurer’s ac­
count at the Federal Reserve Banks are in­
cluded in the flow-of-funds Federal Gov­
ernment sector’s cash assets. These items
are excluded from Treasury balances at the
Federal Reserve in banking statistics (line
B). (See further discussion of these items
in Chapter 16 on currency and deposits, par­
ticularly the section on bank float beginning
on page 304.)
A minor timing difference, too small to be
shown separately, between banking records
and the flow-of-funds estimates arises because
the latter series is based on Treasury data
reported in the Daily Treasury Statement.
This statement is published only for work­
ing days. When December 31 falls on a
Saturday or Sunday, banking statistics on
Government balances at Federal Reserve
Banks for the end of the year reflect trans­
actions for one day more than is picked up
in the year-end Daily Treasury Statement.S1
Adjustments to balances at commercial
and mutual savings banks
Cash balances of U. S. Government cor­
porations held outside the Treasury (line F).
Bank deposits of Government corporations
are not in general classified in banking sta­

145

tistics as United States Government balances.
They are part of the flow-of-funds Govern­
ment sector cash balances.
Differences in Treasury and banking re­
cordings (line G ). There are differences,
probably arising from differences in timing
and coverage of reports, between the series
on Federal Government deposits at commer­
cial and mutual savings banks as recorded
in the general fund of the Treasurer and
the amounts recorded in banking statistics.
From 1944 on, part of the difference is at­
tributable to the fact that, from November 15,
1944, the general fund does not record bank
balances of Government officers other than
the Treasurer of the United States. Line G
in Table 22 is the difference between bank­
ing statistics and general fund recording,
except that for years after 1944 estimates of
the balances of Government officers other
than the Treasurer are removed from the
difference. Estimates for these balances are
included in the flow-of-funds recording for
Federal Government cash balances.32 In
other respects, however, differences between
bank and Treasury recordings are also differ­
ences between bank and flow-of-funds re­
cordings, since the flow-of-funds Federal cash
balance series is essentially an adjusted gen­
eral fund series.
Adjustments to other balances
Gold holdings of Exchange Stabilization
Fund in Treasury cash (line H ). In the
period 1939 through 1946, Treasury cash
included not only the currency and deposit
assets of the general fund but also the gold
claims held by the Exchange Stabilization
Fund. Since the Exchange Stabilization
Fund is classified in the banking sector in the
flow-of-funds system, the Fund’s holding of

81 For the years before 1947, this timing difference is not
32 These balances are discussed in the text for line C
separable from the timing adjustment in line E.
; of Table 21, p. 143.




146

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

gold claims enters the banking sector account
rather than the Federal Government sector
account.83
Gold reserve held against United States
notes (line I). In banking statistics, the gold
reserve held against United States notes is
shown as part of Treasury cash holdings,
and thus as a liability of the banking system
to the Government. In the flow-of-funds
accounts, this gold reserve is an asset of the
Treasury monetary funds subsector of the
banking sector (which also carries the liabil­
ity for the United States notes) rather than
as an asset of the Federal Government sector.
Government foreign balances not in ban\
records (line J). Foreign balances of the
Federal Government sector are not included
in the domestic banking system’s record of
33 In the flow-of-funds banking sector account, the Fund’s
holdings of gold claims are classified as a negative miscel­
laneous liability rather than as a currency and deposit asset
in order to conform to the treatment in the “Consolidated
Condition Statement for Banks and the Monetary System”
as published in the Federal Reserve Btdletin.

Government balances. These foreign bal­
ances are, however, part of the Federal Gov­
ernment sector’s holdings of currency and
deposits in the flow-of-funds accounts.34
Line J covers all Government foreign bal­
ances, including those that are not part of
the assets of the general fund of the
Treasurer.
Other differences (line K ). These consist
of various cash balances attributed to the
Federal Government sector in the flow-offunds accounts but not recorded as Govern­
ment balances in the banking series. It
includes some general fund cash assets and
estimated currency holdings of disbursing
officers not recorded in the general fund.
It also reflects minor differences in the re­
cording of certain currency items as between
the Treasury cash series in banking statistics
and the general fund.
94The general treatment of holdings of foreign deposits
and currencies in the flow-of-funds accounts is discussed in
Chapter 16 on currency and deposits. In particular, see
p. 312.

Continuation of footnotes for Table 17 on opposite page.
I °A11 securities issued by Federal Government sector and held by other sectors. For description of content and relationship to other concepts
of Federal debt, see Table 2 0 and accompanying text, pp. 140-143.
I I Principally trust and deposit liabilities.
Also includes a minor amount of private interest in mixed-ownership Government corporations.
i 2Mainly old-age and survivors insurance benefits; also includes railroad retirement benefits and a minor amount of railroad unemployment
compensation benefits. Excludes payment of unemployment compensation by State unemployment compensation funds and withdrawals by
State funds from Federal fund.
13Federal Government employee retirement benefits, national service life insurance and Government life insurance benefits^ (including policy
dividends), and benefits under crop, war damage, mortgage, and deposit insurance programs.
14 Excludes loans, unilateral transfers in kind, and grants in kind.
1 5Terminal leave and adjusted service payments made in form of bond issues are included at time of issue, not at time of redemption.
i 6 3ubsidy payments to business and agriculture and grants to nonprofit organizations.
1 in clu d es excess profits tax refund bonds at time of issue.
18Includes small amount of real estate purchases.
1 9Includes small amounts of changes in holdings of corporate securities and of Treasury currency assets not shown separately.
20Includes subscriptions (whether paid in cash or by issue of special notes) to the IM F and IBRD.
N o t e .— D e ta ils m a y n o t a d d to t o ta ls b e c a u s e o f r o u n d in g .




F o r d e s c rip tio n o f ta b le , see p. 1 2 2 .

147

FE D E R A L G O V E R N M E N T SECTOR

T A B L E 17—F E D E R A L G O V E R N M E N T S E C T O R : SO URCES A N D USES O F F U N D S ST A T E M E N T
(In billions of dollars for calendar years)
1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
Sources of funds
A
R
C
D
E
F

Nonfinancial sou rces.....................................
Tax receipts1 ..................................................
Individual income......................................
Corporate income........................................
Excise2 ........................................................
Other3 ..........................................................

7.5
4.5
.9
1.0
2.1
.6

8.6 12.5 23.7 46.0 58.2
5.3 8.1 15.8 31.9 40.9
1.0 1.6 4.0 14.3 17.5
1.3 2.6 7.0 12.2 16.8
2.4 3.1 3.7 4.4 5.5
.6
.8 1.0 1.0 1.1

G
H
I
T
K

Renegotiation receipts..................................
Insurance premiums......................................
Employment taxes4 ....................................
Other premiums 5........................................
State deposits in unemploy, trust fu n d ... .

1.8
.8
.2
.8

2.1

L
M
N
O

Grants and donations#.................................
Interest7 .........................................................
R ents...............................................................
Other goods and services8 ............................

*

*

*

.4

1.0
.2
.9

*

.4
.8

.8

2.4
1.1
.2
1.0
*
.4
*
1.6

3.3
1.4
.7
1.1
*
.4
.1
4.1

1.6
4.5
1.7
1.4
1.3
*
.4
.3
7.4

59.0
42.0
19.7
14.5
6.5
1.3

54.6 52.5 51.3 49.0 49.1 66.1 78.8 78.4
37.6 37.9 40.0 38.4 37.9 53.0 65.1 64.8
18.0 20.2 20.0 17.6 18.5 26.3 31.9 33. Q
11.0 9.1 11.1 12.0 9.9 16.6 22.1 19.0
7.6 7.7 7.8 7.9 8.5 9.1 10.1 10.8
.8 1.0 1.0 1.1
.9
.9 1.0 1.1
*
*
*
.1 *
.3
.7;
.1
3.9 4.4 4.5 4.4 5.7 6.9 7.2 7.4
1.9 2.4 2.5 2.5 3.5 4.3 4.8 4.9
1.1 1.1
1.1 1.0
.9 1.0 1.0 1.1
.9 1.1 1.0 1.0 1.2 1.5
t .4 1.4

4.8
1.9
1.5
1.3

1.8
4.6
1.9
1.5
1.2

.1
.3
.3
9.8

.1
.1
.2
.3
.3
.2
9.9 11.9

2.0

2.5 12.2 49.3 54.6 59.3
2.3 11.4 45.4 52.9 58.0
1.4 4.7 24.4 25.8 27.9
.9 6.7 21.0 27.0 30.1

.2
.4
.1
6.0

-25.8 - 7 .4 - 7 .3
-22.5 - 6 .3 - 6 . 8
-15.3 - 6 . 6 - 6 . 2
- 7 .2
.3 - . 6

R
S

N et increase in liab ilities0..........................
Federal obligations1 0 ....................................
Owed to banking sector............................
Owed to others..........................................

2.1
2.1
1.5

T
U

Securities issued for cash...........................
Other securities............................................

2.1
*

2.3 11.4 45.3 52.7 57.3 40.7 -22.7 - 8 .3 - 6 .7
*
.9
.2 2.0 - . 1
.1
.1
.2
.8

V
W

Trade d eb t.....................................................
Miscellaneous liabilities 1 1 ............................

*
*

*

P
0

X

Total, above sources....................

a
b
c
d
e

Nonfinancial u se s...........................................
Payroll............................................................
Interest...........................................................
Cash payments............................................
Net accrual of interest Payable..................

f
g
h
i
j

R ents...............................................................
Insurance benefits..........................................
Social insurance benefits1 2 ........................
Other benefits1 3 ...........................................
State withdrawals from unemploy. tr. fu n d .

k
m
n
o

Grants and donations 1 4 ................................
To State and local govts..............................
To consumer sector1 6 .................................
To rest of the world.....................................
To other sectors1 ®.......................................

P
q
r
s

Tax refunds....................................................
To consumer sector.....................................
To corporate business sector1 7 ...................
Other goods and services1 8 ..........................

t
u
v
w
y
z
aa

Net increase in financial assets 19 .............
Currency and deposits..................................
Trade credit...................................................
Mortgages.......................................................
State and local obligations...........................
Miscellaneous assets......................................
Foreign loans and securities20 ..................
Other............................................................

bb

Total, above u ses...........................

.6

.1

.7
4c

3.6

1.2

.1

.2

40.1
41.6
21.7
19.9

.3
.3
.1
9.2

- . 1 - 2 .1 .7 1.4

2.2
1.0

- .9
-.1

-.1
- .3

.2
.5
.1
5.2

.1

.2

.5
.1
4.8

.6

.1
.8

.1
.9
.t
5. t

.1
5.4

.1
5.5

1.6 1.2 1.0
-.1 - . 6
2.0
- . 4 - 3 .6
.8
2.4 3.5 - 1 .5

4.8
4.4
2.2
2.2

5.3
5.2
.9
4.3

- . 8 - 1.2
.8
.6

3.7
.7

4.5
.7

.1

- .1
.3

1.7
.3
*
-.4

1.2
.1

1.6

*

.3

9.6 11.0 24.6 73.0 100.7 117.5 99.0 28.8 45.1 44.1 50.5 50.3 67.1 83.6 83.7

Uses of funds

1

X

10.3 10.6 22.3 64.5 98.9 109.0 95.8 49.6 41.7 41.4 48.5 49.4 65.4 79.1 85.1
4.0 4.0 5.3 1 0 . 1 19.5 24.9 26.1 13.1 9.3 9.5 10.3 11.3 16.3 19.1 19.0
3.7 4.4 4.4 4.5 4.7 4.8 5.0 5.1 5.2
1.4 2 . 1
2.8
1.0
1.1
1.1
1.0 1.1 1.1 1.3 1.9 2.5 3.3 4.0 3.9 4.0 4.1 4.2 4.3 4.4 4.6
*
*
.6
.6
.6
.7
.6
.8
.2
.3
.4
.5
.1
.1
.5
.2
.9
.2
.2
.5

.2
.8
.2
.2
.3

.3
.8
.3
.2
.3

.4
.8
.3
.4
.1

.4
.4
.1

.4
1.5
.4
.6
.5

.4
2.4
.6
.7
1.1

.2
2.2
.7
.7
.8

.2
2.3
.9
.6
.9

.2
3.5
1.1
.7
1.7

2.0

1.9
.8
.6
*
.5

2.3
.9
.6
.2
.6

2.7
.9
.5
.1
1.1

3.6
.9
.9
*
1.7

5.8
.9
2.6
.6
1.7

10.2

9.5
1.7
6.5
.5
.7

9.1
2.0
4.7
1.8
.6

11.0

.2
.8
.1
.2
.4
2.1

1.0
.5
*
.6
*
*

.1

2.2

- .7
- .7
.1
-.2

.6

.8

1.1
7.2
.5
1.4

2.2
4.7
3.6
.5

1.4
3.4
1.4

.2

.2
4.4
2.3
1.3
.8

.3
4.8
2.7
1.1
1.0

.3
5.7
3.6
1.2
1.0

10.3
2.3
4.2
3.0
.7

9.4
2.5
3.7
2.4
.8

2.6
3.6
1.7
.8

8.8

8.7
2.8
3.6
1.6
.7

6.2

2.5 3.1
2.2 2 . 8
.1
.9 2 . 1
2.7 2 . 6
2.2 2 . 1
.1
.1
.1
♦
*
♦
.3 1.3 1.7 1.7 1 .8 2.4 1.7 1.8 2.1 2.6
.1
.5
.8 l . l
.9
.5
.4
.4
.3
.3
.5
.1
.1 ♦
2.3 13.0 49.4 73.5 75.6 56.3 16.4 13.5 13.5 15.9 14.4 28.0 38.6 43.0
*

.4
—. 6
.7

.1

-.1
.1
.2

.1

./
.2

*

*

*

.9
.6

.4

2.3
1.7
.2
- .2
.1

.5
.4
.1

8.5
7.3
1.7
- .4
*
*
*
*

1.8 8.5
1.9 10.3
- .9
.8
- .7 - . 6
-.1
-.1
*
-.1
.1
.2
-.2 - .3

3.2 -20.8 3.4
4.4 - 2 2 . 8 - . 6
- .7 - .9 - .4
- .4 - 1 .0
- .6
*
*
*
.5 3.4 5.4
.8 3.5 6.7
* - 1.2
- .4

2.6
- .5
*

1.1

2.1
.5
*
.5

.1
2.0

-.1
1.2

1 .1
.9

.5
.7

.9
- .3
.4
.3
.1

.5
.1
.3

1.7
.1
1.0
.6

.3
- .3
.2
- .5

4.5 - 1 .4
1.9 - 1 . 6
.<) - . 1
.5
.3
.3 - . 3
.9
.3
.4
.2
.5
.1

9.6 11.0 24.6 73.0 100.7 117.5 99.0 28.8 45.1 44.1 50.5 50.3 67.1 83.6 83.7

♦Less than 50 million dollars.
1 Excludes employment taxes.
2Includes alcoholic beverage tax, tobacco tax, and most Treasury miscellaneous taxes and customs receipts.
3Estate and gift, stamp, capital stock, dividend, and auto use taxes; and taxes, permits, and fees and fines in miscellaneous budget receipts.
4 All premium receipts (whether classed in Treasury data as tax, trust account, or miscellaneous budget receipts) under old-age and survivors
insurance, railroad retirement, railroad unemployment insurance, and Federal unemployment insurance. Excludes deposits of employment tax
receipts under State unemployment insurance programs.
5 Contributions by Federal Government Employees to retirement funds; national service life insurance and Government life insurance premium
receipts; and premiums for crop insurance, deposit insurance, mortgage insurance, and war risk and war damage insurance. Excludes Federal
Government contributions to retirement funds and to veterans’ life insurance funds.
6Mainly cash unilateral transfers from rest of the world sector.
7Includes Federal Reserve System payments to Treasury under Sec. 16 of Federal Reserve Act.
8lncludes a small amount of receipts from real estate transfers.
^Includes changes in Treasury currency liability not shown separately.
(Footnotes continued on opposite page.)




148

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

TABLE 18—FEDERAL NONFINANCIAL RECEIPTS AND FEDERAL CASH INCOME
Relationship of Federal Government Nonfinancial Receipts in Flow-of-Funds Accounts to Federal Government
Cash Operating Income in Treasury Accounts
(In billions of dollars for calendar years)
1939

1947

1948

1949

1950

1951

1952

1953

F e d e r a l c a s h n n e r a t i n d in c o m e l ....................................................................

6 .4

44.3

45.0

41.4

42.5

59.3

71.4

70.4

A d ju stm e n ts f o r differences in tran saction classification:
Minus: Proceeds from sales and repayments of Government loan and security
holdings in cash income, classed as financial transactions in flow-offunds accounts.............................................................................................
Minus: Trust and deposit receipts in cash income, classed as financial trans­
actions in flow-of-funds accounts..............................................................

*

.2

.1

.l

.2

.2

.3

.2

*

.3

.4

.1

.3

.5

.2

.3

Minus:

A d ju s tm e n t f o r differences in sector coverages
Receipts of District of Columbia, included in State and local govern­
ment sector in flow-of-funds accounts......................................................

*

.1

.l

.l

.1

,1

Plus:

A d ju s tm e n t fo r differences in consolidation:
Contributions to retirement funds by Federal Government employees. .

*

.2

.3

.3

.4

.4

.4

Plus:

A d ju s tm e n t fo r differences in tran saction coverage:
Receipts of counterpart and other funds not in cash income2 .................

.1

*

.2

.1

.l

Plus:

A d ju s tm e n t f o r differences in tim in g :
Net receivables arising from sale of surplus property abroad......................

.1

*

*

—. 1

H Plus:
I

Plus:

A d ju s tm e n ts to p u t n e t ite m s on gross basis:
Nonfinancial receipts of Government corporations and agencies netted
against expenditures in cash outgo...........................................................
Tax refunds netted against tax receipts in cash income............................

1.1
.1

5 .7
2 .6

4 .4
2 .3

4 .7
2 .8

4 .7
2 .2

J

Equals: Federal Government nonfinancial receipts in flow-of-funds
a cco u n ts......................................................................................................

7.5

52.5

51.3

49.0

49.1

A
B
C

D

E
F
G

.l

*

-.1

—.1

5 .1
2 .1

5 .2
2 .5

5 .1
3 .1

66.1

78.8

78.4

♦Less than 50 million dollars.
f e d e ra l cash operating income for 1939 as published in the Treasury Bulletin has been adjusted to basis comparable to the latest cash operating
income concept.
2Includes national service life insurance premium receipts in 1947 paid in form of armed forces leave bonds and not in cash operating income.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 135.

TABLE 19—FEDERAL NONFINANCIAL OUTLAYS AND FEDERAL CASH OUTGO
Relationship of Federal Government Nonfinancial Expenditures in Flow-of-Funds Accounts to Federal Government
Cash Operating Outgo in Treasury Accounts
(In billions of dollars for calendar years)

A

FoHoral ra s h nnpratlnd m ifdnt

B

Minus:

C

Minus:

D
E
F

Minus:
Minus:
Minus:

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

A d ju stm e n ts fo r differences in transaction classification:
Subscription payments to International Monetary Fund and Inter­
national Bank for Reconstruction and Development in cash outgo
Net increase in Government holdings of other loans and securities in
cash outgo....................................................................................................
Net redemptions of Government securities reflected in cash outgo........
Financial transactions of trust and deposit funds in cash outgo.............

Minus:
Plus:

A d ju stm e n t fo r differences in consolidation:
Contributions to retirement funds by Federal Government employees..

I

Plus:

A d ju stm e n t fo r differences in transaction coverage:
Government expenditures out of counterpart funds not in cash outgo

J
K
L

Plus:
Plus:
Plus:

A d ju stm e n ts fo r differences in tim ing:
Net increase in excess of payables over receivables..................................
Excess of interest accruals over interest payments...................................
Excess of issues of armed force leave bonds and adjusted service bonds
over cash redemptions 3 ..............................................................................
Other timing differences................................................................................

H

M

Plus:

N

Plus:

1947

1948

1949

1950

1951

1952

1953

9.4

38.6

36.9

42.6

42.0

58.0

73.0

76.5

♦

-.1

-.1

.3
*
-.1

A d ju stm e n t fo r differences in sector coverage:
Expenditures of District of Columbia 2 .......................................................

G

1939

.1
*

1.8

.4

.2

—.3

*

4.2

2.2
-.1

1.7
♦

1.7

.5
- .4

.7
♦

.6
- .1

1.1
-.1
.2
-.1

- .2
.1
—. 1

.1

.1

.1

.1

.2

.3

.3
.1

- .2

*

*

—.2

.7
*
*
♦

.1

.1

.1

.4

.4

.4

.4

.l

.l

*

2.0
- .1
—. 1

.l
*

*

- .5
.5

.4

- .9

.6

.8
.6

.6

.6

.7

.8

*
*

.2
.1

- .3
*

-.1
.1

—. 1
—. 1

—. 2
—.1

*
*

*
*

-.1

.6

4.7

5.1

2.6

4.4
2.3

4.7

Plus:

1.1
.1

5.7

O

A d ju stm e n ts to p u t n e t ite m s on gross basis:
Nonfinancial receipts of Government corporations and agencies netted
against expenditures in cash outgo..........................................................
Tax refunds netted against tax receipts in cash income..........................

2.8

2.2

2.1

5.2
2.5

5.1
3.1

P

Equals: Federal G overnm ent nonfinancial expenditures in flow-of-funds
a ccou n ts.....................................................................................................

10.3

41.7

41.4

48.5

49.4

65.4

79.1

85.1

♦Less than 50 million dollars.
1Federal cash operating outgo for 1939 as published in the Treasury Bulletin has been adjusted to basis comparable to latest cash operating
outgo concept.
2AIso includes small adjustment to add general account transfers to District of Columbia.
3
Also includes net increase in excess profits tax refund bonds, which is small in years shown but of substantial amount from 1944 through
1946.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 137.




149

FE D E R A L G O V E R N M E N T SECTOR

TABLE 20—FEDERAL OBLIGATIONS, THE PUBLIC DEBT, AND NET CASH BORROWING
Relationship of Federal Obligations in Flow-of-Funds Accounts to Public Debt and Net Cash Borrowing Series in
Treasury Accounts
fin billions of dollars for calendar years)
1947

1948

1949

1950

1951

1952

1953

Amounts outstanding at year-end
Gross direct public debt of U. S. G overnm ent............................................................... 256.9 252.8 257.1 256.7 259.4 267.4 275.2
Plus:
Fully guaranteed securities issued by U. S. Government corporations and
*
*
*
.1
.1
agencies1 ....................................................................................................................
.1
.1
Equals: Federal securities (direct and fully guaranteed d eb t)............................................ 257.0 252.9 257.2 256.7 259.5 267.4 175.2
Minus: Direct and fully guaranteed debt held by U. S. Government agencies and
trust funds 2 .............................................................................................................. 34.4 37.3 39.4 39.2 42.3 45.9 48.3
Equals: Direct and fully guaranteed debt held by public3

222.6

215.5 217.8 217.5 217.2

221.6

226.9

3.0

2.9

2.8

1.2

.8

.5

.5

.9
.5

.5

A d ju stm e n t fo r differences in sector coverage:
Federal securities held by Postal Savings System, Exchange Stabilization Fund,
District of Columbia trust funds, and Fed. home loan banks (from 1951 on).

3.4

3.3

3.2

2.9

G
H

A d ju stm e n ts fo r differences in transaction classification:
Plus:
Debt issued by Federal agencies not guaranteed by U. S. Government4 ..........
Minus: Currency items in the public d eb t............................................................................

.7
.7

1.0
.6

.8
.6

I

Equals: Federal obligations in flow-of-funds accounts.

226.0 219.2

221.2

221.1

Plus:

220.5 224.9 230.1

Annual increases
J

Federal obligations in flow -of-funds accounts.

- 6 .3

-

6.8

2.0

-.1

.3

- .1

- .6

4.4

5.2

.7

.7

K

A d ju stm e n t fo r differences in transaction coverage:
Minus: Securities not issued for cash.........................................................

L

Minus:

- .3

.2

M

Equals: Federal n et cash borrowing

- 7 .9

- 6 .9

1.7

- .9

-

1.2

3.4

4.6

N

Memorandum:
Federal obligations issued for cash in flow-of-funds accounts5.

- 8 .3

- 6 .7

1.7

- .8

-

1.2

3.7

4.5

2.0

A d ju stm e n ts fo r differences in tim in g , tran saction , a n d sector
coverage...........................................................................................................

He

.8

.6

*

.1

.4

-.1

*Less than 50 million dollars.
1 Excludes fully guaranteed securities held by Treasury.
2As given in table “Ownership of Federal Securities” published in the Treasury Bulletin.
3As defined in Federal Reserve Bulletin presentation “Ownership of U. S. Government Securities, Direct and Fully Guaranteed.”
4 Excludes nonguaranteed securities held by the Treasury.
5 Equal to line J minus line K.
N o te .—Details may not add to totals because of rounding. For description of table, see p. 140.

TABLE 21—FEDERAL CASH HOLDINGS AND GENERAL FUND BALANCE
Relationship of Federal Government Currency and Deposit Holdings in Flow-of-Funds Accounts to Balance in
General Fund of the Treasurer of the United States
( A m o u n t s o u t s t a n d i n g a t e n d o f c a l e n d a r y e a r , i n b il l i o n s o f d o lla r s )

General fun d balance
Plus:

A d ju stm e n t to p u t n e t ite m s on gross basis:
Liabilities of the general fund.........................................

Plus:

A d ju s tm e n t fo r differences in tim in g:
Disbursing officers’ and other cash balances not in general fund.

Plus:

A d ju stm e n t fo r differences in transaction coverage:
Government counterpart fund balances not in general fu n d ... .

A d ju s tm e n ts for'differen ces in tran saction classifi­
cation :
Plus:
Cash balances of Govt, corporations held outside Treasury..........
Minus: Silver bullion carried at cost value in general fund......................
Equals: Federal Governm ent currency and deposit holdings in
flow-of-funds a c c o u n ts ...........................................................

1938

1939

1947

1948

1949

1950

1951

1952

1953

3.1

2.5

3.1

4 .2

4.7

4.2

4.3

6.1

4.6

.2

.2

.4

.4

.4

.5

.5

.5

.4

.4

.3

.3

.3

.4

.4

.5

.1

.2

.2

.3

.2

*

*

*

.5

.1
.6

.1
.1

.1
.1

.1
.1

.1
.1

.1
.1

2.8

2.2

3.9

5.0

5.5

5.2

5.4

.1

*Less than 50 million dollars.
N o t e . —Details may not add to totals because of rounding. For description of table, see p. 143.




.1

.1

*

*

7.3

5.7

150

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

TABLE 22—FEDERAL CASH HOLDINGS AND RELATED BANKING STATISTICS
Relationship of Federal Government Currency and Deposit Holdings in Flow-of-Funds Accounts to U. S. Government
Cash Balances as Reported in Banking Statistics1
(Amounts outstanding at end of calendar year, in billions of dollars)
1938

1939

1947

1948

1949

1950

1951

1952

1953

A
B
C
D

U. S. G overnm ent cash balances as in banking sta tistics1.............
At Federal Reserve Banks............................................................................
At commercial and mutual savings banks.................................................
Other (Treasury cash)..................................................................................

4.5
.9
.9
2.7

3.9
.6
.8
2.4

3.7
.9
1.5
1.3

4.9
1.1
2.5
1.3

5.4
.8
3.2
1.3

5.0
.7
3.0
1.3

5.1
.2
3.6
1.3

6 .9
.4
5.3
1.3

5.6
.3
4.5
.8

K

Plus:

A d ju s tm e n t to balances a t Federal Reserve Banks: 2
Balances in process of collection at Federal Reserve Banks.......

.1

*

.1

.1

.1

.1

.1

.2

.1

F
G

A d ju stm e n ts to balances a t com m ercial an d m u tu a l
savings banks:
Plus:
Cash balances of Government corporations held outside the
T reasury.........................................................................................
Minus: Differences in recording....................................................................

.1
-.1

.1
- .1

.1
.1

.1
.2

.1
.2

.1
.2

.1
.4

.1
.3

.1
.5

H
I
J
K

Minus:
Minus:
Plus:
Plus:

A d ju stm e n ts to oth er balances:
Gold holdings of Exchange Stabilization Fund in Treasury cash ..
Gold reserve against U. S. notes, in Treasury cash......................
Government foreign balances not in bank records.......................
Other differences................................................................................

1.8
.2
*
♦

1.8
.2
*
*

.2
.1
.1

.2
.2
.1

.2
.3
.1

.2
.3
.1

.2
.4
.1

.2
.5
.1

.2
.5
.1

L

Equals: Federal Govt, currency and deposit holdings in flow-offun d s a cco u n t.............................................................................
At Federal Reserve Banks........................................................
At commercial and mutual savings banks.............................
Other...........................................................................................

2.8
1.0
1.0
.8

2.2
.7
1.0
.5

3.9
1.0
1.5
1.4

5.0
1.2
2.4
1.4

5.5
.9
3.1
1.5

5.2
.8
2.9
1.5

5.4
.5
3.3
1.6

7.3
.6
5.1
1.7

5.7
.5
4.0
1.2

M
X
0

*Less than 50 million dollars.
1 Balances as reported in “Consolidated Condition Statement for Banks and the Monetary System,” published monthly in the Federal Reserve
Bulletin.
2 Minor differences between Daily Treasury Statement and Federal Reserve Bank recording of Government balances a t Federal Reserve Banks
not shown separately.
N o t e . —Details may not add to t o t a ls because of rounding. For description of table, see p. 144.




CHAPTER 7
STATE AND LOCAL GOVERNMENT SECTOR
This flow-of-funds sector comprises all
State and local political subdivisions in the
United States and its possessions. It includes
State governments, the government of the
District of Columbia, the governments of the
territories and possessions, municipal and
county governments, school districts, town­
ships, and special districts. It includes
all of their departments, activities, agencies,
funds, corporations and enterprises (such as
State liquor monopolies and municipally
owned utilities), and authorities (such as toll
roads and port authorities).
The sector account is a combined statement
of the accounts of all individual government
units. All transactions among the different
government units (such as transfers of funds
between a State government and a local gov­
ernment) are recorded. Each of these trans­
actors, however, is represented to the extent
possible by a consolidated account. Thus
transactions among the various departments,
funds, enterprises, and authorities of a single
government unit are not recorded in the sec­
tor account.1
All types of transactions of the State and
local government sector are recorded—finan­
cial as well as nonfinancial, current as well
as capital. Nonfinancial transactions are re­
corded gross; this is true of receipts and ex­
penditures of enterprises as well as of general
government. Purchases and sales are re­
corded as of the time of purchase, not the

time of cash settlement.2 All tax receipts
are on a cash basis.
Most basic data pertinent to State and local
governments are compiled by the Bureau of
the Census. Census data relating to non­
financial receipts and expenditures have been
adapted by the National Income Division of
the Department of Commerce in construct­
ing the State and local government com­
ponents of the government sector of the na­
tional income accounts.3 In turn, the
national income accounts figures for the State
and local government subsector are used in
constructing the estimates of nonfinancial
expenditures and receipts for the State and
local government sector account of the flowof-funds system. Financial data for State and
local governments needed for the flow-offunds accounts are not recorded in the na­
tional income subsector account and are
based on data from the Bureau of the Census,
the Treasury, the Securities and Exchange
Commission, and other sources.
Conceptual differences between the na­
tional income system and the flow-of-funds
system require numerous adjustments to the
State and local government subsector of the
national income accounts with respect to sec­
tor and transaction coverage, transaction clas-

2 It is assumed that there is little difference between the
purchase and cash timing bases for this sector and that no
adjustments of source data are required. On the same as­
sumption, changes in trade receivables and payables are not
recorded.
3 These components of the government sector of the na­
tional income accounts (presented in Tables 8 and 9 of the
1 Pertinent data are not available to effect a complete con­ 1954 edition of National Income, a supplement to the Sur­
solidation with respect to debt and interest transactions be­ vey of Current Business) are referred to in the following
tween government units and their own sinking and trust pages as the State and local government subsector of the
funds.
national income accounts.




151

152

FLO W

O F FU N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

sification, timing, etc. Major differences be­
tween the presentation of State and local
governments in the two systems are:

and local governments as calculated for the
national income accounts and presented in
Table 8 of the 1954 edition of National In­
1. The flow-of-funds sector account includes, and come, a supplement to the Survey of Current
the national income subsector account excludes, the Business. The relationship between these
operating accounts of State and local government two series is presented in Table 24 on page
enterprises and corporations and of State unem­
161 and described beginning on page 157 of
ployment insurance trust funds;
this
chapter.
2. The flow-of-funds sector account combines and
Tax
receipts (line B) are the largest item
the national income subsector account consolidates
the accounts of the various government units in the of nonfinancial sources of funds. Taxes are
sector;
shown on a collection basis, not on a liability
3. T h e flow-of-funds sector account records
incurred basis. Nontax receipts representing
nonfinancial transactions on a gross basis, and the
national income subsector account records some sales of goods and services are excluded from
this category and are included in sales of
transactions on a net basis;
4. The flow-of-funds sector account records trans­ other goods and services (line R). Social in­
actions in existing assets and financial transactions, surance receipts, such as unemployment com­
neither of wThich is recorded in the national income
pensation taxes and contributions to civil
subsector account.
service retirement funds, are not included in
Detailed statements of relationships be­ taxes but are shown under insurance pre­
tween the flow-of-funds sector account and mium receipts (line H ).
the national income subsector account are
Tax receipts are grouped into five cate­
presented in Tables 24 and 25 on page 161 gories. Individual income taxes (line C )
and in Table 67 on page 300, and described consist of State and local income taxes. Cor­
on pages 156-59 of this chapter and on pages porate income taxes (line D ) are recorded on
286-87 in Chapter 15.
a collection, not on an accrued liability basis.
Sales, excise, and gross receipts taxes (line E )
St a te a n d L ocal G o v e r n m e n t S ector
consist
of general sales taxes; gasoline, liquor,
St a t e m e n t
and tobacco sales taxes; insurance, public
The sources and uses of funds statement utilities, parimutuel, amusement, and other
for the State and local government sector of gross receipts taxes; and severance taxes.
the flow-of-funds accounts is presented in Property taxes (line F) consist of personal
Table 23 on page 160.
and real property taxes, and special assess­
Nonfinancial sources of funds (line A ). ments. Other taxes (line G) consist of mo­
Nonfinancial sources of funds of the State tor vehicle and operators’ licenses, business
and local government sector of the flow-of- licenses and permits, document and stock
funds structure consist of all receipts, other transfer taxes, death and gift taxes, fines, for­
than receipts from the issue of debt and the feits, and other taxes.
liquidation of financial assets, of the general
Insurance premiums (line H ) comprise re­
governments, trust funds, and government ceipts under the several types of insurance
enterprises in the sector. Nonfinancial re­ programs shown separately. Employment
ceipts are shown gross.
taxes under the unemployment compensation
The flow-of-funds total of nonfinancial system (line I) are collected by the State
sources is derived from total receipts of State funds and are shown in the flow-of-funds ac­




STATE A N D L O C A L G O V E R N M E N T SECTOR

153

counts as State and local premium receipts. Other intrasector transfers include the non­
Deposit and withdrawal transactions between loan disbursements by States to local govern­
the State unemployment insurance funds and ments for special functions and for the sup­
the Federal unemployment trust fund are port of general government activities, and a
shown separately in the insurance premium small amount of funds transferred by local
and benefit categories. Government em­ governments to other local units and to the
ployee retirement contributions (line J) in­ States.
clude payments by State and local employees
The sector receives interest (line P) and
into government retirement funds. They ex­ rents (line Q) from investments and proper­
clude government contributions as employers ties held by the various government units
and other transfers from general government and agencies in the sector. Interest and rent
accounts to such retirement funds. Other receipts are recorded gross.
premium receipts (line K) consist of pre­
Sales of other goods and services (line R)
miums received under State workmen’s com­ consist of all nonfinancial proceeds of State
pensation and cash sickness programs.
and local governments not classified in pre­
Insurance benefit receipts of State and local vious lines. The series includes the gross
governments (line L) consist of State unem­ sales of government enterprises—liquor mo­
ployment insurance fund withdrawals from nopolies, publicly owned utilities, etc.—and
the Federal unemployment trust fund. Clas­ miscellaneous receipts from the operations of
sification of this item is discussed on page 125 general government services. Line R also
in Chapter 6 on the Federal Government includes proceeds from real estate transfers,
sector.
which cannot be separately identified except
Grant and donation receipts (line M) com­ in recent years.
prise Federal grants-in-aid and transfers from
N et increase in liabilities (line S). The
other State and local governments. The cate­ only liabilities recorded for the sector are in
gory excludes loans and grants in kind. Fed­ the category State and local obligations.
eral grants-in-aid (line N ) consist of cash
State and local obligations (line T ) com­
grants from the Federal Government under prise the total debt outstanding of the sector.4
highway, airport, health, education, public The category covers loans as well as security
assistance, hospital and school construction, issues. It includes all State and local debt
and other programs. Transfers from other held by State and local governments and
State and local governments (line O) con­ their trust and sinking funds.5
sist of cash transfers among State and local
The flow-of-funds category State and local
governments. The same item appears also
obligations differs from the Securities and
under State and local government grant and
Exchange Commission series on State and
donation expenditures. Transfers of shared
local debt in that the former includes hold­
revenues from States to local governments
ings of State and local debt by Federal Gov­
are the largest element of this subcategory;
ernment agencies, corporations, and trust
the initial collection of State-imposed and
4 No estimates are available on trade debts owed by State
State-collected shared-revenue taxes is shown
in the account as tax receipts and the amounts and local governments.
5 Such holdings include own debt held by individual gov­
shared with local governments are shown ernment units. Data are not available to eliminate these
again under intergovernmental transfers. holdings from total State and local debt held by the sector.




154

FLO W

O F FU N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

funds; by State and local sinking funds; a n d
by State and local trust funds (excluded from
the Securities and Exchange Commission
series for the years 1946 on). For derivation
of the flow-of-funds series, see discussion of
State and local obligations in Chapter 19,
page 340.
State and local obligations are shown with
two kinds of detail in Table 23. Lines U and
V show changes in ban\ holdings of State
and local obligations and changes in all other
holdings.. The breakdown of State and local
obligations in lines W through AA is partly
based on type of issue and partly on holder.
Because of data problems, this breakdown
cannot be made consistently for the whole
period covered by the table.
N et issues to nongovernment holders (line
W ) are the Securities and Exchange Com­
mission series on State and local government
security issues. The series excludes holdings
of State and local debt by Federal Govern­
ment agencies and trust funds, by State and
local sinking funds, and (for 1946 on) by
State and local trust funds. Prior to 1946,
the SEC series included holdings of State and
local trust funds. Changes in long- and
short-term components of net issues to non­
government holders as calculated by the SEC
are shown on lines X and Y.
Federal loans (line Z) consist of Federal
Government loans and advances to State and
local governments and purchases of their
debt issues. These loans are mainly in con­
nection with the Public Housing Adminis­
tration programs, but the Reconstruction Fi­
nance Corporation, Federal Works Agency,
and Rural Electrification Administration also
have made loans to State and local govern­
ments and public enterprises.
Other net security issues (line AA) consist
primarily of holdings of State and local se­
curities by State and local trust funds (for




1946 on) and by State and local sinking
funds. They also include a minor amount
of noninterest-bearing debt. Prior to 1946,
the State and local trust fund holdings are in
line W.
Nonfinancial uses of funds (line a). Total
nonfinancial uses of funds of the sector con­
sist of all expenditures, other than payments
for retirement of State and local government
debt and acquisition of financial assets, made
by general governments, trust funds, and
enterprises in the sector.
The total of flow-of-funds nonfinancial
uses is derived from total expenditures of
State and local governments as calculated for
the national income accounts and presented
in Table 9 of the 1954 edition of National
Income, a supplement to the Survey of Cur­
rent Business. The relationship between State
and local government nonfinancial expendi­
tures in the two systems is presented in Table
25 on page 161 and described on page 158.
Payroll (line b) consists of the cash pay of
all State and local government employees (in­
cluding those of government enterprises),
jury and witness fees, and compensation of
prison inmates. It excludes pay in kind and
government contributions to employees’ re­
tirement funds.
Interest payments (line c) represent
amounts paid on all obligations of the sector.
The figures are shown gross, that is, interest
receipts are not netted against payments. It
has not been possible to eliminate from either
payments or receipts the payments between
components of the same government unit,
such as interest paid by municipalities on ob­
ligations held by their own sinking funds.
Rent payments (line d) represent pay­
ments for use of leased properties.
Insurance premiums paid by the State and
local government sector (line e) consist
mainly of State deposits of unemployment

STATE A N D L O C A L G O V E R N M E N T SECTOR

insurance taxes with the Federal unemploy­
ment trust fund. (See Chapter 6 on the Fed­
eral Government sector, page 125, for a dis­
cussion of the classification of this item.)
In some years line e also includes a small
amount of State social insurance contribu­
tions under Federal programs.
Insurance benefits (line f) are paid by the
sector in connection with the unemployment
compensation system (line g), government
employee retirement systems (line h), and
workmen’s compensation and cash sickness
programs (line i).
Grant and donation payments (line j) in­
clude cash transfers to other State and local
governments (line k) described under cor­
responding receipts above, grants and dona­
tions to consumers (line 1), and a small
amount of grants to nonprofit institutions not
shown separately. Payments to consumers
include direct relief and public assistance pay­
ments (including payments made out of
Federal Government grants to the States for
such purposes), veterans’ aid and bonuses,
etc. Grant and donation payments exclude
assistance in kind. They also exclude bene­
fits from social insurance and retirement
funds, which are recorded under insurance
benefits paid (line f). Grants and donations
paid to consumers by this flow-of-funds sec­
tor differ from personal transfer payments
recorded for the corresponding sector of the
national income accounts by ( 1 ) the amount
of social insurance and retirement benefits
included in the latter series but classified as
insurance benefits in flow-of-funds, and ( 2 )
transfer payments to nonprofit organizations
—part of the personal sector in the national
income accounts and of the “other investors”
sector in the flow-of-funds system. (See dis­
cussion of transfer payments in Chapter 2
on the consumer sector, page 59).




155

Real estate purchases (line m) consist of
purchases of land and existing structures.
Purchases of other goods and services (line
n) comprise all nonfinancial expenditures of
the sector other than those separately identi­
fied earlier in the table. The series includes
gross purchases by government enterprises
and general government expenditures; cur­
rent operating outlays and capital expendi­
tures (except purchases of land and existing
structures) such as payments for construc­
tion and equipment; and purchases of items
for resale and for pay in kind, as well as pur­
chases of goods for direct use of State and
local governments.
Construction expenditures (line o). This
memorandum gives the magnitude of ex­
penditures by State and local governments
(including government enterprises) on new
construction as shown in construction statis­
tics and in State and local government ex­
penditures in the national income accounts.
These construction expenditures are not
strictly a component of purchases of other
goods and services (line n) since they include
force account construction which is reflected
in payroll (line b) in the flow-of-funds sector
statement.
The relationship between purchases of
other goods and services in this flow-of-funds
sector account and purchases of goods and
services (component of gross national prod­
uct) in the corresponding national income
subsector account is presented in Table 67 on
page 300 and described in Chapter 15 on
page 286.
N et increase in financial assets (line p).
Financial assets held by the sector include
currency and deposits (line q), Federal obli­
gations (line r), and State and local obliga­
tions (line s). The State and local obliga­
tions held by the sector are principally in
sinking, trust, and retirement funds. Invest­

156

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

ments by these funds in issues of their own
government units have not been deducted
because of lack of adequate information. In
recent years, there are indications that some
State trust funds are acquiring corporate se­
curities and mortgages. No adequate infor­
mation on these acquisitions is available but
the amounts are still relatively small.
Discrepancy (line t). The accounting and
statistical relations among the various sources
used to compile the State and local govern­
ment sector account do not automatically
provide a balanced account. While the dis­
crepancy cannot be allocated precisely among
the contributing factors, the main causes can
be stated.
The most serious problem relates to tim­
ing. As the flow-of-funds sector account
utilizes information with inconsistent tim­
ing, a statistical discrepancy is inevitable.
Census reports on State and local finances
are in terms of fiscal years that vary among
government units. There is no way of ad­
justing the Census compilations to put the
individual reports on a uniform dating
basis; moreover, it is not certain that the
calendar year best approximates the aver­
age timing of the individual reports making
up the Census totals. Some other sources of
information and estimates are on a uniform
timing basis for all State and local govern­
ments; they are on a calendar year basis or
can be adjusted to one. These data relate
mainly, but not entirely, to financial trans­
actions.
Most nonfinancial transactions in the flowof-funds sector account are derived from the

national income subsector account (which in
turn is based on the Census reports) and are
thus on an average fiscal year basis. Most
of the financial transactions, on the other
hand, are estimates with specific calendar
year timing; this is true of holdings of cur­
rency and deposits and Federal obligations,
and practically all of State and local debt.
State and local holdings of State and local
debt as published in the annual reports of
the Secretary of the Treasury, however, are
on a June 30 fiscal year and are adjusted for
timing for use in the flow-of-funds account.
The discrepancy in the sector account is thus
mainly due to using a combination of fiscal
year, calendar year, and adjusted fiscal year
timings.
Discrepancies also arise from the dif­
ferent estimating procedures underlying the
basic statistics used to construct the account.
Thus, the information on local governments
is based on blowups of sample data; most of
the nonfinancial transactions of State govern­
ments are derived from universe-wide re­
ports; some of the information on State and
local obligations is based on attempts to re­
cord all transactions as they are reported in
the press or elsewhere; deposit holdings and
part of State and local obligations come from
the records of other parties to the transac­
tions; and holdings of Federal obligations are
based on Census compilations with varying
fiscal year bases and adjusted to a uniform
calendar year timing on the basis of pertinent
but indirect information. In use of such a
variety of sources and methods, discrepancies
are bound to arise.

RELATIONSHIPS WITH NATIONAL INCOME ACCOUNTS

The remainder of this chapter discusses
in detail the relationships between the totals
of nonfinancial transactions of the State and




local government sector account in the flowof-funds system and corresponding totals in
the national income accounts. The relation-

STATE A N D L O C A L G O V E R N M E N T SECTOR

ship between purchases of other goods and
services by this flow-of-funds sector and State
and local government purchases of goods and
services (a component of gross national prod­
uct) in the national income accounts is dis­
cussed in Chapter 15, page 286.
S t a t e a n d L o c a l G o v e r n m e n t R e c e ip t s

Table 24 on page 161 presents the relation­
ship of total nonfinancial receipts of the flowof-funds sector to total State and local govern­
ment receipts in the national income ac­
counts. The table indicates the types of ad­
justment necessary to go from the national
income series to the flow-of-funds series.
Total State and local government receipts
in the national income accounts (line A)
consist of the following national income sys­
tem receipt categories: personal tax and non­
tax receipts, corporate profit tax accruals, in­
direct business tax and nontax accruals, con­
tributions for social insurance, and Federal
grants-in-aid.6 State and local government
sector nonfinancial receipts in the flow-offunds accounts (line K) differ from this na­
tional income accounts total because of differ­
ences in sectoring and transaction treatment.
Adjustments from net to gross basis
Items shown on a net basis in the national
income accounts subsector are shown gross
in the flow-of-funds sector.
Interest received (line B). In the national
income subsector account, interest receipts
are netted against interest payments and are
thus not included in the receipts total as
they are in the flow-of-funds receipts total.
Expenditures netted against receipts (line
C). Expenditures associated with certain
commercial activities of State schools are
netted against receipts from these activities

157

in the Census compilations of State receipts.
This netting is reflected in the national in­
come subsector account for all years but not
in the flow-of-funds sector account in years
for which pertinent data on a gross basis are
available. (The information is available for
recent years only.) A similar netting of re­
ceipts against expenditures in the case of
local governments was not taken into ac­
count in the calculation of the flow-of-funds
total.
Consolidation adjustments
Intergovernmental grants other than from
the Federal Government (line D ). The
flow-of-funds sector account is a combined
statement and the national income subsector
account is a consolidated statement. Thus
the national income subsector account ex­
cludes, and the flow-of-funds sector account
includes, cash grants-in-aid received by State
and local government units from other such
units.
Government contributions as employer to
general government employee retirement
funds (line E) are included on an uncon­
solidated basis in the receipts and expendi­
tures of the national income State and local
government subsector since they are part of
national income and product concepts. In
the flow-of-funds sector, these government
contributions to retirement funds are ex­
cluded from receipts and expenditures since
each State and local government transactor
is treated on a consolidated basis.
Sector coverage adjustments
In the national income system, operating
accounts of State and local government en­
terprises are in the business account,7 and the

7 The current surplus of these enterprises is carried to the
These receipts appear in Table 8 of the 1954 edition of State and local government subsector account, but as a nega­
tive expenditure rather than as a receipt.
National Income.
6




158

FLOW

O F FU N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

State unemployment insurance accounts are
in effect consolidated with the Federal unem­
ployment trust fund in the Federal Govern­
ment subsector. In the flow-of-funds system
State and local government enterprises and
State unemployment insurance accounts
are in the State and local government sec­
tor. Hence in deriving flow-of-funds non­
financial receipts, the following items must
be added to State and local government re­
ceipts in the national income accounts: op­
erating receipts of government enterprises
(line F) and receipts of the State unemploy­
ment insurance accounts both in the form
of employment taxes for unemployment in­
surance (line G) and in the form of with­
drawals by State funds from the Federal un­
employment trust fund (line H ). The with­
drawals in line H are recorded under insur­
ance benefits in the flow-of-funds system.
(See Chapter 6 on the Federal Government
sector, page 125).

basis. Hence the excess of State and local
corporate profits tax accruals over cash tax
receipts is subtracted in the relationship table.
The similar adjustment which should have
been made for the accrual basis of State and
local indirect business taxes in the national
income accounts has been omitted because
of the uncertain timing of this item as it
actually enters the national income accounts,
the lack of statistical basis for an adjustment,
and the probably small magnitude of the
adjustment.
Conceptually, a need for further timing
adjustments arises mainly from the differing
fiscal years of the various State and local gov­
ernments as reflected in the Census reports
used in the derivation of tax figures in the
national income accounts. However, in view
of the small magnitudes involved and the ap­
proximate nature of the results, this adjust­
ment is not made.
Sta te and L ocal G o v e r n m e n t

Transaction coverage adjustment
Receipts from sales of properties (line I).
The national income accounts exclude, and
the flow-of-funds accounts include, receipts
from the sale of land and existing properties.
Estimates of these transactions for this sector
are available in Census reports of State and
local government receipts for recent years
only.
Timing adjustment
Excess of profits tax accruals over cash tax
receipts (line J). The national income ac­
counts record taxes paid by business as of the
time the tax liability accrues rather than as
of the time the taxes are paid. This is true
of both corporate profits taxes and indirect
business taxes. In the flow-of-funds accounts,
State and local tax receipts are on a time of
collection basis, not on an accrued liability




E x p e n d it u r e s

Table 25 on page 161 presents the rela­
tionship of total nonfinancial expenditures of
the flow-of-funds sector to total State and
local government expenditures in the na­
tional income accounts. The table indicates
the types of adjustment necessary to go from
the national income series to the flow-offunds series.
Total State and local government expend*
itures in the national income accounts
(line A ) consist of the following expenditure
categories in the national income system:
purchases of goods and services, transfer pay­
ments, and net interest paid, less current sur­
plus of government enterprises.8 State and
local government nonfinancial expenditures
in the flow-of-funds accounts (line K) dif­
8 These expenditures appear in Table 9 of the 1954 edition
of National Income.

STATE A N D L O C A L G O V E R N M E N T SECTOR

fer from the national income accounts total
(in line A ) because of differences in sectoring
and transaction treatment. The conceptual
differences and adjustments discussed under
the derivation of flow-of-funds total nonfi­
nancial receipts in connection with Table 24
apply here with only minor exceptions.
Adjustments from net to gross basis
Interest receipts netted against expenditures
(line B). See discussion on page 157 of line
B of Table 24.
Current surplus of government enterprises,
included as a negative item in State and local
government expenditures in the national in­
come accounts (line C). In the national in­
come system, the State and local government
subsector account does not include the op­
erating accounts of State and local govern­
ment enterprises, which are in the business
sector. However, the current surplus of the
government enterprises, that is the excess of
operating receipts over operating expendi­
tures, appears as a payment from the business
sector to the State and local government sub­
sector. This surplus is recorded as a negative
expenditure rather than as a receipt in the
State and local government subsector ac­
count, and thus reduces total expenditures in
that national income account. The flow-of
funds nonfinancial expenditures are not re­
duced by such netting of receipts, and line
C adjusts for this deduction in the national
income expenditure total. This adjustment
has no direct counterpart in the receipts re­
lationship table (Table 24) but line C plus
line G of the present table are equal to line
F of Table 24.
Expenditures netted against receipts (line
D ). See discussion on page 157 of line C of
Table 24.




159

Consolidation adjustments
Adjustments on the expenditure side for
differences in consolidation—Intergovern­
mental grants other than to the Federal Gov­
ernment (line E) and Government contribu­
tions as employer to general government
employee retirement funds (line F )—are
identical with those on the receipts side al­
ready discussed on page 157 in connection
with lines D and E of Table 24.
Sector coverage adjustments
Differences in sector coverage lead to ad­
justments on the expenditure side similar to
(though not identical with) those on the re­
ceipts side.9 The following categories of ex­
penditures must be added to State and local
government expenditures in the national in­
come accounts in order to derive the non­
financial expenditures for the flow-of-funds
sector. Operating expenditures of govern­
ment enterprises (line G ) , 10 and expenditures
of the State unemployment insurance funds
—Benefits paid by State unemployment in­
surance funds (line H ), and Deposits in Fed­
eral unemployment trust fund of unemploy­
ment insurance taxes collected by States (line
I). These deposits in line I are classed in the
flow-of-funds accounts under insurance pre­
miums.
Transaction coverage adjustment
Purchases of land and existing assets (line
J) are included in the expenditures of the
State and local government sector in the flowof-funds accounts, but excluded from State
and local government expenditures in the na­
tional income accounts.
9 See discussions on pp. 157-58 in connection with lines
F-H of Table 24 and on this page in connection with line C
of Table 25.
30 Capital expenditures of these enterprises are already in
the national income subsector expenditure total.

160

FLOW O F FU N D S IN

T H E U N IT E D STA TES, 1 9 3 9 - 5 3

TABLE 23—STATE AND LOCAL GOVERNMENT SECTOR: SOURCES AND USES
OF FUNDS STATEMENT
(In billions of dollars for calendar years)
1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
Sources of funds
A
B
C
D
E
F
G

Nonfinancial sou rces.....................................
Tax receipts i ..................................................
Individual income......................................
Corporate income........................................
Sales, excise, etc.2 .......................................
Property3 ....................................................
Other4 ..........................................................

H
i
J
K

Insurance premiums......................................
Employment taxes 5 ....................................
Govt, employee retirement6 .........................
Other7 ..........................................................

L
M
N
O

Insurance benefits8 ........................................
Grants and donations...................................
Federal grants-in-aid 9 ................................
Transfers from other State and local govts..

P
Q
R

Interest...........................................................
R ents...............................................................
Other goods and services10...........................

S
T
U
V

N et increase in lia b ilities............................
State and local obligations11.........................
Owed to banks.............................................
Owed to others.............................................

W
X
Y
Z
AA

Net issues to nongovt. holders12..............
Long-term................................................
Short-term................................................
Federal loans..............................................
Other 13.........................................................

BB

Total, above sources......................

13.7 14.3 14.9 15.5 15.9 16.5 17.4 19.8 22.7 25.9 29.4 31.9 34.7 37.5 40.0
7.7 8 . 1
8.5 8 . 6
8.7 9.1 9.5 1 0 . 6 1 2 . 1 13.8 15.2 16.5 18.2 2 0 . 0 21.4
.2
.3
.4
.4
.2
.3
.3
.5
.7
.8
.4
.6
.9 1.0 1.1
.1
.5
.6
.2
.2
.3
.4
.5
.5
.5
.7
.6
.8
.9
.8
1.9 2.1 2.4 2.4 2.3 2.4 2.7 3.4 4.1 4.8 5.1 5.6 6.2 6.9 7.3
4.5 4.6 4.7 4.6 4.7 4 .8 4.9 5.1 5.6 6.2 7.0 7.5 8.1 8.8 9.6
.9 1.0 1.0 1.0 1.0 1.1 1 .1 1.2 1.4 1.6 1.8 2.0 2.2 2 .4 2.6
1.0

,9
.1
.1

1.1

.9
.1
.1

1.3
1.1
.1
.1

1.4
1.2
.1
.1
.3
2.7
.9
1.9

.4

.5

.3

2.6

2.6

2.6

1.0
1.6

.9
1.7

.8
1.8

1.6

1.3
.1
.1

1.5
1.3
.1
.1

1.4
1.1
.2
.1

2.2
3.9

.2
.1

.2

.3
.3
3.8

.2

.2

3.1

.3
.3
3.4

.2

2.5

.2
.2
2.8

.3

2.3

4.2

4.8

- .4
- .4
.4
-.8

1.6

2.3
2.3
.4
2.0

2.5
2.5
.9
1.6

3.3
3.3
1.6
1.7

.1

1.4
1.3
.1
*
.2

2.1

2.1

2.7
2.5
.2

.2
.1
2.2

.3
.3
.3

- .3
-.3
-.2
-.1

- . 8 - 1 . 2 - 1 .1 - . 6
- . 8 - 1.2 - 1.1
- .6
.1
.4
- .3 - .4
- . 6 - . 8 - 1.2 - 1.0

.3
.1
.2

- .3
-.2
-.1

.1
-.1

.1
-.1

- .7 - 1.0
- .5 - .8
-.2 -.1
*
-.1

.2

.3
-.1
*
-.1

-.1

7.7
2.5
5.2

.9
5.4
2.0
3.4

.2

*

1.4
6.9
2.3
4.5

.8

4.5
1.7
2.7

.1
2.0

- 1

.2

- .8

- .7
-.1
- .2

- .4
- .4
*
*
- .2

.2

-.1
.2
*
- .4

1.6

.9
.7

2.0
.1
.1
.2

1.7

2.2
1.5
.5
.2

1.8

1.1

.2

.2
-.1

6.1

1.2
.4
.2

3.3
1.1
2.2

.1
1.8

.1

1.5
1.0
.3
.2

.9
1.9

.1

.2
.1

1.5
1.0
.3
.2

2.8

.9
1.9

1.6

*

1.5
1.1
.2
.2

2.9
.9
1.9

.1
2.8

.5

1.3
.9
.2
.2

.3

1.9
.1
-.1

.5

.8

.1

1.0
8.2

2.2
1.3
.6
.3
1.0
8.8

2.6
5.5

2 .8
5 .9

5.2

.4
.3
5.5

.5
.3
5.9

2.5
2.5
1.1
1.3

3.2
3.2
1.2
2.0

3.6
3.6
.7
2.9

2.0

2.6
2.3
.3
.3
.3

3.6
3.2
.4
- .3
.3

.3

.5

2.2

1.4
.5
.3

.4

2.0
*
.3
.2

13.8 14.6 14.7 14.7 14.8 15.3 16.8 19.4 24.2 28.3 31.9 35.2 37.2 40.7 43.6

Uses of funds
a
b
c
d
e
f
g
h
i

N o n fin a n cia l u se s...........................................
Payroll............................................................
Interest...........................................................
R ents...............................................................
Insurance premiums14....................................
Insurance benefits.........................................
Unemployment compensation benefits.......
Govt, employee retirement...........................
Other 7 ..........................................................

j
k
1

Grants and donations15.................................
Transfers to other State and local govts.. . .
Transfers to consumers..............................

m
n
o

Real estate purchases...................................
Other goods and services..............................
Construction expenditures16........................

P
Q
r

Net increase in financial assets.................
Currency and deposits..................................
Federal obligations........................................

s

S t a t e a n d lo c a l o b li g a t i o n s

17...................................

t

Discrepancy**..................................................

u

Total, above u se s............................

13.6 13.7 13.6 13.8 13.5 13.9 14.9 17.9 22.0 26.3 30.4 33.5 35.6 37.9 40.4
4.2 4.3 4.5 4.5 4.8 5.0 5.5 6.3 7.5 8.7 9.6 10.3 11.3 12.5 13.5
.8
.7
.6
.8
.7
.7
.6
.6
.5
.6
.6
.7
.7
.8
.6
.1
.1
.1
.1
.1
.1
.1
.1
.2
.2
.2
.2
.2
.2
.1
.8
1.0
1.0
1.1 1.3 1.3 1.2
.9 1.1
1.0 1 . 2
1.5 1.4 1.4
1.0
.7
.4
.4
1.9 1.5 1.7 1 . 8
.8
.6
1.2
2.2
.6
.8
1.5 1 . 2
.4
./
.1
.5
.3
.3
.4 1.1
.8
.8 1.7 1.4
.8 1.0 1 .0
.2
.2
.2
.6
.2
.2
.2
.3
.3
.3
.3
.4
.4
.5
.2
.1
.1
.1
.1
.1
.1
.1
.1
.1
.2
.2
.2
.3
.2
.1
1.6
1.1
*
4.3
2.1

1.7
1.0
*
4.0
1.7

1.8
1.0
*
3.9
1.4

2.9
1.9
1.0
*
3.8
1.1

2.9
1.9
1.0
*
3.4
.7

2.9
1.9
1.0
*
3.5
.6

3.0
1.9
1.0
*
3.7
.7

.1

.7
.4
.1

.6
.4

.5

1.3
.4
1.1
- .2

1.9
.2
2.2

2.6
.7

- .1

2.8

-.1

*

.1

2.8

.2

.2

.3

2.8

*

.2

.5

.2

*

.3
.4

13.8 14.6 14.7 14.7 14

8

3.6
2.2
1.3

4.7
2.7
1.8

6.0

3.4
2.6
.2
8.4
3.6

.1

.2

4.9
1.4

6.7
2.5

.4
1.1

1.9
.9
.9
.1

1.5

.4

.5

-.5

2.2

- .2

- .3

- .5

-.4

- .7

1.2

.8
.6

.1

6.4
3.9
2.5
.3
10.1

4.9
1.1
.4

7.6
4.5
3 .0

8.1

5.5
2.6

8.5
5.9
2.5

.4
.4
.5
.5
11.4 12.4 12.7 13.6
5.4 6.4 6.7 7.2
1.8

1.6

2.3

3.0

.6

.6
.8
.2

1.5

.6

1.0
1.8

•5

.7
.5

.4

- .1

.2

7.7
5.2
2.4

*

.2

.3

.6

.2

15.3 16.8 19.4 24.2 28.3 31.9 35.2 37.2 40.7 43.6

*Less than 50 million dollars.
**Net uses (+ ) or net sources ( —) not accounted for.
1 Excludes unemployment insurance taxes.
2General sates, gasoline, liquor, and tobacco sales taxes; insurance, public utilities, parimutuel, amusement, and other gross receipts taxes;
and severance taxes.
3 Personal property taxes, real property taxes, and special assessments.
4Motor vehicle and operators’ licenses, business licenses and permits, document and stock transfer taxes, death and gift taxes, fines and
forfeits, and other.
5Unemployment insurance taxes.
•Government employee contributions to retirement funds. Excludes government contributions.
7State workmen’s compensation and sickness compensation programs.
8Withdrawals by State unemployment insurance funds from Federal unemployment trust fund.
9 Excludes loans and grants in kind.
10Includes receipts from real estate transfers.
11 Change in total debt of State and local governments, including debt held within sector.
l2Prior to 1946, line W includes holdings by State and local trust funds. For 1946 and subsequent years these holdings are in line A A .
13 Holdings by State and local sinking funds plus small amount of noninterest bearing debt.
Beginning 1946 includes holdings by State and
local trust funds.
14Mainly deposits by State unemployment insurance funds in Federal unemployment trust fund.
1 includes small amount of transfers to nonprofit organizations subsector not shown separately.
16Line o includes payroll expenses in force account construction and is therefore not entirely a component of line n.
17Holdings of State and local government debt by sinking, trust, and retirement funds of State and local governments.
N o t e . —Details may not add to totals because of rounding. For description of table, see p. 152.




161

STA TE A N D L O C A L G O V E R N M E N T SECTOR

TABLE 24—STATE AND LOCAL GOVERNM ENT RECEIPTS

Relationship of State and Local Government Nonfinancial Receipts in Flow-of-Funds Accounts to State and Local
Government Receipts in National Income Accounts
(In billions of dollars)
1939

1947

1948

1949

1950

1951

1952

1953

15

6

17.8

19.6

21.5

23.5

25.5

27.5

.3

.3

.3

A

Total State and local govt, receipts in national income accounts1 .

B
C

Plus:
Plus:

A d ju stm e n ts to p u t n e t ite m s on gross basis:
Interest received...................................................................
State expenditures netted against receipts..........................

D
E

A d ju stm e n ts fo r differences in consolidation:
Intergovernmental grants (other than from Federal Government).
Plus:
Minus: Govt, contributions to general govt, employees’ retirement funds .

1.6

.2

2.7
.3

3.4
.4

3.9
.4

4.5
.5

5.5
.7

5.9
.7

F
G
H

Plus:
Plus:
Plus:

A d ju stm e n ts fo r differences in sector coverage:
Operating receipts of government enterprises2 ...................................
Receipts from State unemployment insurance taxes.........................
Withdrawals by States from Federal unemployment trust fund. . .

1.1

2.7

3.0

3.2

3.3

1.1
.8

1.0

1.0

1. 2

4.0
1.4

4.2
1.3

1.0

1.0

Plus:

A d ju stm e n t fo r differences in transaction coverage:
Receipts from sales of properties..........................................................

9.6
.2

.2

.9
.4

.9

1.7

1.4

.1

A d ju stm e n t fo r differences in tim ing:
Minus: Excess of profits tax accruals over cash receipts.....................................
Equals: State and local govt, nonfinancial receipts in flow-of-funds ac­
c o u n ts..................................................................................................

.5

13.7

.1

.1

-.1

.2

22.7

25.9

29.4

31.9

-.1

37.5

34

40.0

♦Less than 50 million dollars.
1
Personal tax and nontax receipts, corporate profit tax accruals, indirect business tax and nontax accruals, contributions for social insurance,
and Federal grants-in-aid, as shown in National Income, 1954 edition, a supplement to the Survey of Current Business, Table 8 .
2These receipts are not reflected in line A since operating accounts of government enterprises are in the business sector of national income
accounts; net receipts of these enterprises are treated as negative expenditures rather than as receipts in the State and local government account
of the national income system.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 157.

TABLE 25—STATE AND LOCAL GOVERNMENT EXPENDITURES
Relationship of State and Local Government Nonfinancial Expenditures in Flow-of-Funds Accounts to State and
Local Government Expenditures in National Income Accounts
(In billiors of dollars)
1939

1947

1948

1949

1950

1951

1952

1953

22.6

23.9

25.5

27.3
.5
1.3

A

T otal State and local govt, expenditures in nation al incom e accounts1 ..

9.6

14.5

17.9

20.4

B
C
D

Plus:
Plus:
Plus:

A d ju stm e n ts to p u t n e t ite m s on gross basis:
Interest receipts netted against expenditures.............................................
Current surplus of government enterprises, deducted from expenditures2
State expenditures netted against receipts..................................................

.2

.3

.3

.8

.8

.3
.9

E
F

A d ju stm e n ts fo r differences in consolidation:
Plus:
Intergovernmental grants (other than to Federal Governm ent)...........
Minus: Govt, contributions to general govt, employees’ retirement funds . . . .

G
H

Plus:
Plus:
Plus:

I

A d ju stm e n ts fo r differences in sector coverage:
Operating expenditures of government enterprises2 ................................
Benefits paid by State unemployment insurance funds...........................
Deposits in Federal unemployment trust fund of unemployment insur­
ance taxes collected by S ta te s................................................................

.4

.3

.4

.4

1.0
.2

1.1
.2

1.2
.2

.2

1.6
.2

2.7
.3

3.4
.4

3.9
.4

4.5
.5

5.2
.6

5.5
.7

5.9
.7

.7
.4

1.9

2.2
.8

2.3
1.7

2.4
1.4

2.6
.8

2.8
1.0

3.0

.8

.8

1.1

1.0

1.0

1.2

1.5

1.4

1.4

.2

.2

.3

.4

.4

.5

.5

22.0

26.3

30.4

33.5

35.6

37.9

40.4

J

Plus:

A d ju stm e n t fo r differences in transaction coverage:
Purchases of land and existing assets............................................

*

K

Equals: State and local govt, nonfinancial expenditures in flow-of-funds
accounts..................................................................................................

13.6

1.0

♦Less than 50 million dollars.
1 Purchases of goods and services, transfer payments, net interest paid, less current surplus of government enterprises, as shown in National
Income, 1954 edition, a supplement to the Survey of Current Business, Table 9.
2 Operating accounts of government enterprises are in the business sector of national income accounts.
Current surplus of these enterprises,
th at is, excess of operating receipts over operating expenditures, is a payment from national income business sector to government sector, where
it appears as a negative expenditure. Line C plus line G in this table equal line F in Table 24.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 158.




CHAPTER 8
BANKING SECTOR

The banking sector in the flow-of-funds
accounts is a grouping of all transactors in
the domestic economy that bear liability for
currency and bank deposits or hold mone­
tary reserves. Assets of this sector are bank
credit, gold, and other monetary reserves; its
principal liabilities are the currency and
bank deposits held by the other sectors. The
transactor units encompassed in the sector
include commercial and mutual savings
banks,1 the Federal Reserve System, and
such funds or accounts of the Federal Gov­
ernment as fulfill some banking or monetary
function.
In order to emphasize the relations of the
banking system as a whole to the other
sectors, the over-all account for the banking
sector is a consolidation, rather than a com­
bination, of accounts for the components of
the banking and monetary system. In the
process of consolidation, most transactions
among the components are eliminated.
These intrasector relations, many of which
are of substantive importance in understand­
ing the monetary mechanism, are disclosed
in subsidiary partial balance sheets that have
been set up for the four components of the
sector: ( 1 ) commercial banks, ( 2 ) mutual
1 The commercial banks in the flow-of-funds banking sec­
tor are those in the continental United States. Banks in ter­
ritories and possessions are not included in the banking
sector; the activities of such banks are recorded in the
account for the financial institutions n.e.c. subsector of the
other investors sector. Branches in the United States of for­
eign banks whose activities are not covered in United States
bank condition reports are also included in the financial insti­
tutions n.e.c. subsector. Foreign branches of United States
banks are classified in the rest of the world sector.




savings banks and the Postal Savings System,
(3) the Federal Reserve System, and (4)
Treasury monetary funds.2 These compo­
nent groups are, for the most part, counter­
parts of groupings common in banking and
monetary statistics. The exception is the
Treasury monetary funds subsector, which
has no single counterpart in banking, mone­
tary, or Treasury data.
The partial balance sheets for each of the
subsectors and for the consolidated sector are
presented in Tables 27-31 on pages 182-86.
The process of consolidating the subsector
accounts to arrive at the consolidated sector
account is shown in detail for an illustrative
year (1950) in Table 26, page 180, and is
described on pages 173-76. To clarify the
process through which the accounts for the
four subsectors are consolidated into the
single flow-of-funds account for the banking
and monetary system, available data for each
of the subsectors have been rearranged in
these partial balance sheets to distinguish
transactions with the nonbanking public
from transactions with other parts of the
banking sector. Also, the data have been
regrouped into the transaction classifications
adopted for the whole flow-of-funds
structure.
The coverage of transactions recorded in
the component balance sheets differs from
3 Only the financial assets and liabilities are presented for
the component subsectors. For the over-all banking sector,
there is also presented, on a consolidated basis, a full sources
and uses of funds statement giving the nonfinancial as well
as the financial transactions in which the sector participates.

162

B A N K IN G SECTOR

that in the usual presentations of comparable
data. Financial assets and liabilities of each
of the subsectors are shown in the partial
balance sheets, but tangible assets, such as
bank premises and fixtures, are not included.
In place of a conventional net worth state­
ment, only those liabilities resulting from
actual flows of funds appear in the accounts.
Funds received from paid-in capital or paidin surplus are recorded as liabilities in the
subsector accounts but no earned or other
surplus reserves are shown. The description
of each subsector includes a discussion of
these regroupings of data and of the relation­
ship of the flow-of-funds presentation to the
basic banking and monetary statistics from
which it is derived.
Apart from these differences in classifica­
tion and coverage, an attempt has been made
to develop the flow-of-funds consolidated
account with a minimum of deviation from
other measures of bank credit and cur­
rency and deposits. In particular, the account
has been constructed to conform to the
measurements of these concepts as they ap­
pear in the Federal Reserve Bulletin in the
monthly table “Consolidated Condition
Statement for Banks and the Monetary
System.” 3 Conformity to this published
table has, in a few instances, involved de­
parture from strict application of accounting
rules in consolidating subsector accounts into
the over-all banking sector statement. Such
departures are described later in the chapter
(pages 174-75).

163

C o m m e r c ia l B a n k S u b sec to r

The commercial bank subsector consists
of all commercial banks in the continental
United States covered in the reports of the
Comptroller of the Currency under the
categories national banks, State commercial
(and stock savings) banks, and private banks;
that is, all banks other than mutual savings
banks. The subsector excludes banks in
territories and possessions, branches in the
United States of foreign banks the activities
of which are not reported in the Comp­
troller’s reports, and foreign branches of
United States banks.
Table 27 (page 182) is the flow-of-funds
presentation of the financial assets and liabili­
ties of the commercial bank subsector. The
relationship between the form and organiza­
tion of this flow-of-funds presentation and
the recording of assets of commercial banks
in the annual reports of the Comptroller of
the Currency is given in the table on page
164, and a corresponding comparison of
liabilities in the table on page 167.4 These
tables give a summary of the adaptation and
rearrangement of Comptroller data necessary

4 Data on commercial and mutual savings banks are com­
piled and reported by several agencies—the Federal Reserve
System, the Comptroller of the Currency, and the Federal
Deposit Insurance Corporation. The annual reports of the
Comptroller of the Currency are cited as the source of data
in this volume in order to provide the reader with a single
convenient reference and thus to facilitate comparison be­
tween the flow-of-funds presentation and other presentations
of banking statistics. However, the Comptroller is not the
original source for all data published in the Comptroller
reports and the data are available in other publications.
Over the period covered by the flow-of-funds accounts,
classifications of banking data in Comptroller reports have
3 The flow-of-funds presentation of banking sector assets changed. The discussion here refers to the most recent
classification system.
and liabilities (Table 31, p. 186) is very similar to the pub­
lished consolidated condition statement. On the asset side,
The Comptroller’s reports do not record totals for all
commercial banks; these must be obtained by combining
the totals are identical for the two presentations but there
are some differences in classification and in detail shown;
several of the bank classifications shown in the reports.
the liability sides are identical except for “capital and
Also, Comptroller’s reports show totals both for banks in the
miscellaneous accounts, net” in the latter presentation and
continental United States and for banks in the United States
“corporate securities’* and “miscellaneous liabilities’* in the
and possessions. Only the continental United States figures
former.
are used in this flow-of-funds subsector account.




164

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

to facilitate consolidation and to conform to
the flow-of-funds structure. The lines taken
from the Comptroller’s report are designated
by letters to the left of the lines and these
letter designators are noted again to the
right of the flow-of-funds categories to indi­
cate where the Comptroller’s items appear
in the flow-of-funds subsector account. Where
the letter designator is in parentheses, it

indicates detail obtained from a data source
other than the Comptroller’s reports.
Commercial bank assets. Under commer­
cial bank assets, as shown in the accompany­
ing table, the currency and deposit assets
attributable to the flow-of-funds commercial
bank subsector are equal to the sum of the
Comptroller’s series for currency and coin
and for balances with other banks, including

C o m m e r c ia l B a n k A s s e t s 1

Comptroller classification

A
B

Currency and coin
Balances with other banks, including reserve bal­
ances and cash items in process of collection:
(Bl) Member bank reserves
(B2) Other interbank deposits with domestic
banks
(B3) Cash items in process of collection
(B4) Due from foreign banks
Loans and discounts:
C Real estate loans
D Loans to banks—
(D l) Loans to domestic banks
(D2) Loans to foreign banks
E

Other loans and discounts2—
(E l) Loans and advances to CCC3
(E2) Other loans

U. S. Government obligations direct and fully
guaranteed

G Obligations of States and political subdivisions
H

Other bonds, notes and debentures:
(H i) Federal agencj' securities not
guaranteed
(H2) Federal land bank issues (for 1947
on) and
Federal home loan bank issues (for
1951 on)
(H 3) Other

Flow-of-funds classification
Currency and deposit assets:
Due from banking sector—
Currency and coin—A
Member bank reserves— (Bl)
Other interbank deposits— (B2)
Cash items in process of collection—(B3>
Due from foreign banks—(B4)
Mortgages—C
Bank loans other than mortgages:
Loans to domestic banks—(D l)

Loans to others— (D 2 )+ (E 2 )
Federal obligations—(El) + F + (HI)
State and local obligations—G

Corporate securities— (H 3)+ (I2)

Corporate stock:
(11) Federal Reserve Bank stock
(12) Other

Miscellaneous financial assets—(H2)-f-(Il)

J

Bank premises, real estate, and comparable invest­
ments

Omitted from partial balance sheet: classed as non­
financial transactions

K

Customers liability on acceptances outstanding

Omitted: contingent asset

L

Other assets

Omitted: principally accrual assets

1 Letter designator in parentheses indicates detail not available in the Comptroller’s reports.
2 The sum of Comptroller categories commercial and industrial loans; loans to farmers directly guaranteed
by the CCC; other loans to farmers; loans to brokers and dealers in securities; other loans for the purpose of pur­
chasing or carrying stocks, bonds, and other securities; other loans to individuals; all other loans.
3 In commercial and industrial loans. See Ch. 18, p. 324, note 3.




B A N K IN G SECTOR

165

reserve balances and cash items in process cial and industrial loans, but are classed with
of collection. These assets are grouped in other bank holdings of Government debt
the subsector account to distinguish the in the Federal obligations category in the
amounts due from other components of the flow-of-funds accounts.5 The flow-of-funds
domestic banking sector from those due from category bank loans other than mortgages
foreign banks. The latter items are liabilities shown for the subsector thus corresponds to
of the flow-of-funds rest of the world sector. the following loan classifications in the
In turn, the amounts due from domestic Comptroller’s reports: commercial and in­
banking and monetary institutions are di­ dustrial loans (with the exception just
vided into currency and coin held by com­ noted); loans to farmers directly guaranteed
mercial banks, member bank reserves with by the CCC; other loans to farmers; loans
the Federal Reserve System, other interbank to brokers and dealers in securities; other
deposits with domestic banks, and cash items loans for the purpose of purchasing or carry­
in process of collection. Data for these com­ ing stocks, bonds, and other securities; other
ponents, each of which plays a separate role loans to individuals; loans to banks; and all
in the consolidation process, are obtained other loans.
Flow-of-funds categories for securities
from sources other than the Comptroller’s
reports.
held by the commercial bank subsector do
Mortgage loans, the next item on the not in all cases correspond identically to the
subsector account, correspond to the Comp­ Comptroller’s classifications. As was noted
troller’s category for real estate loans, except above, flow-of-funds Federal obligations in­
for a difference in treatment of valuation clude bank loans to the CCC, which are
reserves. In the Comptroller’s reports, in­ included in the Comptroller’s reports as
dividual loan categories for years after 1947 commercial and industrial loans rather than
are shown gross of valuation reserves, as holdings of Government securities. Fur­
whereas in the flow-of-funds subsector ac­ ther, the Federal obligations category in­
count each major loan category is shown net cludes securities issued by some Government
agencies that are not guaranteed as to prin­
of valuation reserves for all years.
The next major item in the subsector cipal and interest by the United States Gov­
account, bank loans other than mortgages, ernment. These unguaranteed issues are
corresponds in general to the Comptroller’s classed in the Comptroller’s reports under
classification loans and discounts. There “other bonds, notes, and debentures.”
The flow-of-funds item State and local
are three specific differences: ( 1 ) the flowgovernment
obligations is identical to the
of-funds category excludes real estate loans,
Comptroller’s
category of similar title. The
which are shown in the mortgage category;
( 2 ) there is a difference in treatment of flow-of-funds corporate security item, how­
valuation reserves after 1947, as noted above ever, differs in several respects from the sum
under mortgages; and (3) this flow-of-funds of the Comptroller’s items corporate stocks
loan transaction category does not include and “other bonds, notes, and debentures.”
5 See note 3 on p. 324 of Ch. 18 for a description of these
loans and advances by banks to the Commod­
bank loans to CCC. Bank loans to farmers guaranteed by
ity Credit Corporation. These are included CCC are classed in the loan total in both the flow-of-funds
in the Comptroller’s classification of commer­ and Comptroller’s accounts.




166

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

Member bank holdings of Federal Reserve
capital stock are shown separately and classed
as miscellaneous financial assets rather than
as corporate securities in the flow-of-funds
accounts. So also are the outstanding bonds
of the Federal land banks beginning 1947
and of the Federal home loan banks begin­
ning 1951. For years prior to these dates,
these securities are classed as Federal obliga­
tions, but for the years after the termination
of the Government’s proprietary interests in
these institutions, the liability for the bonds is
a miscellaneous liability of the “other inves­
tors” sector in the flow-of-funds accounts.
Finally, as noted above, securities issued by
Government corporations but not guaranteed
by the Government, included in the Comp­
troller’s series “other bonds, notes, and deben­
tures,” are classed in the flow-of-funds ac­
counts as Federal obligations.
The table on page 164 shows that all com­
mercial bank loans and investments given
in the Comptroller’s report are also covered
in the flow-of-funds subsector account, but
that the component elements are rearranged
to accommodate both the needs of consolida­
tion and the standard classification system
used in the flow-of-funds structure. How­
ever, several of the Comptroller’s categories
of bank assets other than loans and invest­
ments do not appear in this flow-of-funds
partial balance sheet. These include the
items for bank premises and real estate
owned, and for investments indirectly repre­
senting these premises or other real estate.
Construction of bank buildings, purchases
of equipment, and purchases of realty are
classed in the flow-of-funds structure as
nonfinancial transactions.
Other assets recorded in the Comptroller’s




reports but excluded from this flow-of-funds
subsector account are customers’ liability on
acceptances outstanding and the Comp­
troller’s category “other assets.” Acceptances
outstanding, that is, not held by the report­
ing bank, are essentially contingent assets
matched by contingent liabilities; in the
flow-of-funds accounts such contingent bal­
ance-sheet items are not recorded. (Accept­
ances held or purchased on the open market
by reporting banks, on the other hand, are
bank assets included in the flow-of-funds
account. They are components of the com­
mercial and industrial loan category.) The
“other asset” item is excluded because it
represents mainly accrual entries which do
not reflect the timing on which nonfinancial
transactions enter the flow-of-funds accounts.
Commercial bank liabilities. Under com­
mercial bank liabilities in the table on page
167, the Comptroller’s reports on deposits
have been rearranged to distinguish intrasec­
tor deposit liabilities from those owed to
other sectors. The flow-of-funds account for
commercial bank liabilities does not classify
as a deposit liability balances due to banks in
United States possessions, which are in­
cluded in the Comptroller’s category of de­
posit liabilities. Since banks in United States
possessions are not included in the flow-offunds banking sector, balances owed by do­
mestic banks to these institutions should be
treated like other deposits owed to non­
banking sectors. However, in order to con­
form to conventional measures of currency
and deposits and to the consolidated condi­
tion statement in the Federal Reserve
Bulletin, which do not record these balances
under deposits, they are recorded as mis­
cellaneous liabilities instead of deposit liabil-

167

B A N K IN G SECTOR
C o m m e rc ia l B a n k L ia b il i t i e s a n d C a p it a l A c c o u n t1

Comptroller classification
M

Demand deposits:
M 1 Individuals, partnerships and corporations
M2 Certified and cashiers’ checks, etc.
M3 States and political subdivisions
M4 U. S. Government
M5 Banks in the United States—
M5a Domestic banks
M5b Banks in possessions2
M6

N

Banks in foreign countries

Time deposits:
N 1 Individuals, partnerships and corporations
N2 States and political subdivisions
N3 U. S. Government
N4 Postal saving
N5 Banks in the United States
N6 Banks in foreign countries

Flow-of-funds classification
Deposit liabilities:
Other demand deposits—M l+ M 2 -f M3
U. S. Government deposits—M 4+N 3
Due to banking sector—M5a-j-N4-f-N5
Foreign bank deposits—M 6+ N 6
Other time deposits—N1-J-N2

Bank loans other than mortgages—0

O

Bills payable, rediscounts, and other liabilities for
borrowed money

P

Other liabilities:
(PI) Due to own foreign branches
(P2) Other

Miscellaneous liabilities:
Due to banks in possessions—M5b
Due to own foreign branches— (PI)
Other—(P2)

Q

Capital accounts:
(Ql) Paid-in capital
(Q2) Other capital accounts

Corporate securities—(Ql)
Omitted: not a flow-of-funds financial category

Acceptances executed by or for account of reporting
banks and outstanding

Omitted: contingent liability

R

1 Letter designator in parentheses indicates data source other than the Comptroller’s reports.
2 Derived from asset side of Comptroller’s tables.

ities of the commercial bank subsector.0 In
addition to this adjustment to the total of
deposits, the classifications used in the Comp­
troller’s reports are rearranged somewhat in
order to combine various types of foreign and
United States Government deposit balances.
Other liability categories require less com­
plex adjustments. Thus the Comptroller’s
category for bills payable, rediscounts, and
other liabilities for borrowed money is in­
corporated in the flow-of-funds account in
6 Similarly for some of the war and early postwar years,
some balances of foreign governments and foreign purchas­
ing commissions are also subtracted from the Comptroller’s
deposit total since these balances are not included in pub­
lished series on total demand deposits adjusted. These bal­
ances are recorded as miscellaneous liabilities of the banking
system in the flow-of-funds accounts. Sec Ch. 16, p. 313.




the category bank loans other than mort­
gages. However, acceptances executed by
or for account of reporting banks and out­
standing, another of the Comptroller’s cate­
gories, are contingent liabilities of banks and
as such are excluded.
Amounts due to foreign branches of do­
mestic banks, loans from the Federal Gov­
ernment, and unallocated liabilities are
classed as miscellaneous liabilities in this
flow-of-funds subsector account. The sum
of these last three items is equal to the
Comptroller’s series “other liabilities.” Bal­
ances due to banks in United States pos­
sessions are also included in miscellaneous
liabilities in the flow-of-funds subsector.

168

FLO W O F FU N D S I N T H E U N IT E D STATES, 1939-53

The final item to be considered on the sub­
sector partial balance sheet is the corporate
securities category. This is an approxima­
tion of bank paid-in capital outstanding,
including paid-in surplus as well as paid-in
capital stock. Flow-of-funds accounting
does not record allocations of receipts to
surplus or reserves in the accounts of a single
transactor. Hence, the total funds raised by
security issues are the only element of a con­
ventional capital account shown in the sub­
sector account. Paid-in capital has been
estimated roughly by adding estimates of the
annual net increase in paid-in capital and
paid-in surplus to an approximation of the
accumulated paid-in capital and paid-in sur­
plus outstanding in 1938.
M u t u a l S avings B a n k s

and

P ostal

S avings S y s t e m S u bsecto r

The mutual savings banks and Postal Sav­
ings System subsector consists of all mutual
savings banks as shown in the reports of the

Comptroller of the Currency and the Postal
Savings System operated by the Post Office
Department. Table 28 (page 183) is the
flow-of-funds presentation of the financial
assets and liabilities of the subsector.
Adaptation of mutual savings bank and
Postal Savings statistics to the requirements
of the flow-of-funds accounts follows, in gen­
eral, the same procedures as were described
above for commercial banks. Data for the
flow-of-funds account for mutual savings
banks are taken from Comptroller annual re­
ports (after 1948). Since the adaptations are
essentially the same as those made for com­
mercial banks, it is not necessary to repeat
the detailed description given in the preced­
ing section of this chapter. Data for the
Postal Savings System component of this
subsector account are obtained from reports
of the Postmaster General. A schematic
presentation of the way in which these data
are adapted for the flow-of-funds subsector
is given in the accompanying table.

P o s t a l S a v in g s S y s t e m A s s e t s

Postmaster General’s report

and

L i a b il it i e s

Flow-of-funds classification

Assets
A
B
C

Deposit assets—A
Federal obligations—B
Miscellaneous financial assets—C

Working cash—depositary banks
Investments, U. S. securities
Other assets

Liabilities
D

Due depositors: outstanding principal (certificates
of deposit)

Postal savings deposits—D

E

Other liabilities

Miscellaneous liabilities—E

Federal Reserve Subsector
The Federal Reserve subsector consists of
the 12 Federal Reserve Banks and the Board
of Governors of the Federal Reserve System.
Table 29 (page 184) is the flow-of-funds




presentation of the financial assets and liabili­
ties of the Federal Reserve System.
The rearrangement of items in the annual
statement of condition of the Federal Reserve
Banks (as published in the Board of Gov­

169

B A N K IN G SECTOR

ernors’ annual report) into the classifications presentation, in most cases, is clearly indicated
adopted for the flow-of-funds account fol­ in the table and requires no further com­
lows the principles described earlier. The ment. In a few cases, some further expla­
various adjustments to the Reserve Bank nation is merited.
The liability for deposits at Reserve Banks
statement are summarized in the accompany­
ing table. The nature of the differences in as shown in the flow-of-funds subsector
F e d e r a l R e s e r v e A s s e ts a n d L ia b ilitie s 1

Reserve Bank statement classification

Flow-of-funds classification

Assets

A
B
C

Total gold certificate reserves
F. R. notes of other banks
Other cash

Currency and deposit assets:
Gold certificates—A
Federal Reserve notes—B
Other currency—C

D

Total U. S. Government securities

Federal obligations—D

E

Discounts and advances:
E l For member banks
E2 For others

Bank loans other than mortgages:
To domestic banks—E l
To others—E2-|-F

F
G
H
I

Industrial loans
Uncollected cash items
Bank premises
Other

Miscellaneous financial assets—G
Omitted
Omitted
Liabilities

J

Federal Reserve notes, net:
J 1 Held by other F. R. Banks
(J2) Held in Treasury
(J3) Held by others

K

Deposits:
K1 Member bank—reserve account
K2 U. S. Treasurer—general account
K3 Foreign
K4 Other—
K4a Nonmember bank—clearing ac­
count
K4b
K4c
K4d
K4e

L
M
N

Officers and certified checks
F. R. exchange drafts
International organizations
A llother:
(K4el) Exchange Stab. Fund
(K4e2) Other

Deferred availability cash items
Other liabilities
Capital accounts
N1 Capital paid in
N2 Surplus and other

Currency and deposit liabilities:
Federal Reserve notes—J
Held by other F. R. Banks—J 1
Held in Treasury— (J2)
Held by others—(J3)
Deposits—
Member bank reserves—K1
Other banking sector deposits—K 4a+ (K 4el)
U. S. Treasurer—general account — K2
Foreign— K3

Miscellaneous liabilities:
Other—K 4b+K 4c
Deposits of international organizations—K4d
Omitted
Deferred availability cash items—L
Omitted
F. R. paid-in capital—N1
Omitted

1 Letter designators in parentheses indicate data source other than Annual Report of the Board of Governors.




170

FLO W

O F FU N D S IN

T H E U N IT E D STATES,

Fund balance sheets published in the Treasury
Bulletin, are shown in the flow-of-funds subsector
statement under “other banking sector deposits”
along with nonmember bank clearing accounts.
These intrasector balances are ultimately eliminated
in the process of consolidating the component ac­
counts of the banking sector.
Other differences between the subsector ac­
count and the annual condition statement reflect
the exclusion from the flow-of-funds partial bal­
ance sheet (but not from the sector sources and
uses of funds statement) of tangible assets (such
as bank premises) and the exclusion from the
flow-of-funds account of certain accrual assets,
liabilities, and capital accounts.

Account differs from die total deposit liabili­
ties recorded in the condition statement in
several respects:
1. Deposits representing amounts due the Gov­
ernment for interest on Reserve notes, but not
yet credited to the United States Treasurer’s ac­
count at Federal Reserve Banks, have been excluded
from flow-of-funds deposits. (These deposits are
part of the “all other” deposits category in the
Reserve statement.) In the flow-of-funds accounts,
payments of such interest are recorded on a cash
basis, and no accrual liability is recognized. These
deposits are also excluded from deposit totals in
the published consolidated condition statement.
2. Deposits of international organizations and
certain other elements of “other deposits” are classi­
fied as miscellaneous, rather than as deposit, liabil­
ities in the flow-of-funds account. In this manner
the deposit figure arrived at by consolidating all
the subsector accounts agrees with the series on
deposits as shown in the published consolidated
condition statement.
3. Some deposit categories shown on the Reserve
Bank statements are detailed more finely in the
flow-of-funds account so as to facilitate consolida­
tion. Thus Exchange Stabilization Fund balances
at the New York Reserve Bank are included in
the “all other” deposit category but not specifically
identified on the Reserve Bank statement. These
balances, obtained from Exchange Stabilization
T reasury

M onetary

1939-53

T r ea su ry M o n e t a r y F u n d s S ubsector

The Treasury monetary funds subsector
is a combination of four accounts which
record functions of the Federal Government
that are essentially monetary in nature.
Three of these are explicit accounts in Treas­
ury records—the Exchange Stabilization
Fund, the gold account, and the silver ac­
count—and the fourth, called here the “other
Treasury currency account,” is an account
constructed from Treasury data to record
those Government currency liabilities (and

F unds

A sse ts

and

L ia b il it ie s

Exchange Stabilization Fund
Treasury account classification

Flow-of-funds classification
Assets

A
B
C
I)
E

Cash
Treasurer of the V. S.—gold*
Treasurer of the l T. S.—checking acc’t.
F. R. Bank of N. V.—special acc’t.
Disbursing officer balances

V

Special acc’t. of Sec. of Treasury—gold

G
H

Due from foreign banks, etc.
U. S. Government securities

I

Accrued interest and receivables

Currency and deposit assets
Gold claims—B
Foreign currency and deposits—G
Other—D + E
Gold assets
Other gold—F
Federal obligations—H
Miscellaneous financial assets—C
Omitted
Liabilities

J
K




Capital accounts
Accounts payable, other accrued liabilities, and reserves

Miscellaneous liabilities—J
Omitted
(Continued on next page)

liA N K IN G

171

SECTOR

T r e a su r y M o n e t a r y F u n d s A sse t s a n d L ia b il it ie s —

Continued

Gold Account
Treasury account classification

Flow-of-funds classification

Assets
A

Gold

Gold assets
Monetary gold stock—A
Liabilities

B

Gold certificates2
Bl Held by Federal Reserve
B2 Held by others

C
D
E

Exchange Stab. F und 1
Gold reserve against U. S. notes
Gold in general fund of IT. S. Treasurer

Currency and deposit liabilities
Claims on gold—B
Held by Fed. Reserve—Bl
Held by Exchange Stab. Fund—C
Reserve against U. S. notes—D
Held in general fund—E
Held by others—B2
Silver Account

Treasury account classification

Flow-of-funds classification
Assets

A
B

Treasury currency assets
Silver assets—A-f-B3

Silver bullion
Silver dollars

Liabilities

C
D
E

Currency and deposit liabilities
Other currency liabilities—C + D + E ;{

Silver certificates outstanding
Treasury notes of 1890
Silver at monetary value in general fund of U. S. Treasurer

Other Treasury Currency Account 4
Treasury records

Flow-of-funds classification

Assets
A
B
C
I)
E
F

Silver dollars in circulation outside Treasury
Subsidiary silver coin
Deposits for redemption of F. R. Bank notes and nat’l bank
notes
Gold reserve against U. S. notes
Excess of t T. S. notes over gold reserves
Minor coin

Treasury currency assets
Silver assets—A -f-B 5

Reserve against U. S. notes- -D
Other—C + E + F

Liabilities

G
H
I
J
K
L

Silver dollars in circulation outside Treasury
Subsidiary silver coin
Minor coin
U. S. notes
Fed. Res. Bank notes
National bank notes

Currency and deposit liabilities
Other currency liabilities—G through L 5

Prior to 1947.
Gold certificate fund—Board of Governors of the Federal Reserve System, and redemption fund—Federal Reserve notes.
See also “other Treasury currency” account following.
Lines A , B, F, and G through L are from the Treasury’s “ Circulation Statement of United States Money.” Lines C, D and E are
from the “Statement of the Public Debt.”
6 See also silver account preceding.
1
2
3
4




172

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

corresponding assets) that are not covered
in other components of the sector.
The account for the subsector records the
liability for all United States currency, in­
cluding that held in the banking sector,
except Federal Reserve notes. In addition to
currency liabilities, the subsector’s liabilities
include the capital stock of the Exchange
Stabilization Fund. The assets of the sub­
sector consist mainly of gold, silver and other
Treasury currency assets,7 and currency and
deposit assets.
The flow-of-funds presentation of the
financial assets and liabilities of the subsector
is given in Table 30 (page 185). This ac­
count is made up of the financial assets and
7 See description and discussion of the Treasury currency
transaction category in Ch. 17, p. 319.
D is t r ib u t io n

of

A ssets

and

L ia b il it ie s

of

T rea sury

M o n eta ry F unds Su bsecto r am ong C o m po n e n t A cco un ts 1

Treasury monetary
funds subsector

Ex­
change Gold
Stabili­ ac­
zation count
Fund

Silver
ac­
count

Other
Treas­
ury
cur­
rency
ac­
count

X

X

Assets
Gold assets:
Monetary gold stock..............
Other gold................................

X
X

Treasury currency assets:
Silver assets.............................
Gold reserve against U. S.
notes and other Treasury
currency assets....................
Currency and deposit assets2. . .

X
X

Federal obligations.....................

X

Miscellaneous financial assets..

X

Liabilities
Currency and deposit liabilities:
Claims on gold........................

X
X

Other currency liabilities. . . .
Miscellaneous liabilities.............

X

X

*For a statement on the relationship of the Treasury monetary
funds subsector to the gold and Treasury currency transaction ac­
count and the currency and deposit transaction account, see Ch.
17, p. 321.
2GoldI claims,
c
foreign currency and deposits, and other currency
and deposits held by the Exchange Stabilization Fund.




liabilities of the four components of the
subsector. Separate accounts are not shown
for the components, but the role of each in
Table 30 is indicated in the accompanying
table.
The assets and liabilities of the components
of the subsector are also shown in the deriva­
tion table on pages 170-71. In this table the
adaptation of various Treasury records to the
flow-of-funds subsector account for Treasury
monetary funds is shown separately for each
of the four components of the subsector.
The Exchange Stabilization Fund prior to
1947 held claims on gold, which are part
of the currency and deposit transaction cate­
gory. The Fund also holds gold assets—the
“active” gold of the Fund—that are part of
the gold and Treasury currency transaction
category.8
The gold account’s assets consist of the
monetary gold stock; its liabilities (part of
currency and deposit liabilities) are gold cer­
tificates and other claims, including the resid­
ual claim of the general fund of the Treas­
urer of the United States, against the gold.
The silver account’s assets consist of silver
bullion at monetary value and the silver in
the silver dollars held in the account (both
part of Treasury currency transaction cate­
gory). The liabilities (part of currency and
deposit liabilities) consist of silver certifi­
cates outstanding, Treasury notes of 1890,
and the residual claim of the general fund
against the silver assets of the account.
For the fourth component of the subsector,
the constructed “other Treasury currency
8 The active gold and monetary gold stock are the domes­
tic gold assets in the transaction account, gold and Treasury
currency. The active gold of the Exchange Stabilization
Fund, which is not an asset of the gold account component
of the subsector and is not part of the monetary gold
stock, is a working balance. Most of the gold transactions
of the Treasury are conducted through the Fund, which buys
gold from and sells gold to foreign monetary authorities for
dollars.

B A N K IN G SECTOR

account,” the liabilities are the currency
liabilities not covered elsewhere in the sec­
tor and consist of Federal Reserve Bank
notes and national bank notes, United States
notes, standard silver dollars in circulation
outside the Treasury, and all subsidiary silver
coin and minor coin. The assets of this con­
structed account are the gold reserve against
United States notes, deposits at the Treasury
for redemption of Federal Reserve Bank
notes and national bank notes, the value of
silver in silver dollars in circulation outside
the Treasury and in subsidiary silver coins,
and the credit of the Federal Government
securing minor coin and the excess of United
States notes outstanding over the gold re­
serve against such notes. All of these asset
items are part of the flow-of-funds Treasury
currency transaction category. (However,
the gold account’s liability for the gold re­
serve against United States notes is part of the
currency and deposit liabilities of the gold
account.)
T h e C o n s o l id a t e d A c c o u n t

The process by which the consolidated
sector account is derived from the four sub­
sector accounts is illustrated in Table 26
(page 180). Parts A through D of the table
show the financial assets and liabilities of
each of the banking subsectors for year-end
1950. Part E shows assets and liabilities of
the consolidated sector for the same date
with each item cross-referenced to its source
in one of the component subsector accounts.
The consolidation process does not in all
instances adhere to usual accounting pro­
cedures. Some deviations from conventional
methods of consolidation are necessary in
order that the consolidated totals yield pub­
lished measures of bank credit, deposits,
Treasury currency, and Treasury cash.9 Cer­




173

tain intrasector asset and debt relationships
are not eliminated, but rather are carried
forward to the consolidated account. In
some instances, these unconsolidated items
are recorded on both the asset and liability
sides of the consolidated account. In other
cases, they are recorded as liabilities and off­
setting negative liabilities. These deviations
are described in detail below.
Intrasector relationships eliminated in con­
solidation include member bank reserves,
interbank deposits and loans, and intrasector
currency holdings. Member bank reserves
are part of the currency and deposit assets of
the commercial bank subsector (item A4 in
the illustrative table). These are offset in
consolidation against the Federal Reserve
subsector liabilities for such reserves (item
c l 8 ). Other intrasector claims eliminated in
consolidation are interbank deposits (A5,
B3, and D12 against a20 and cl9); interbank
loans (A10 and C8 against a26); Federal
Reserve holdings of gold certificates (C3
against dl7); Federal Reserve notes held
by other Federal Reserve Banks (C4 against
cl4); and other currency held by Federal
Reserve Banks (C5 against d23). All of
these items represent intrasector relationships
which can be specifically identified and elim­
inated in consolidation.10
9 As given in the table, “Consolidated Condition Statement
for Banks and the Monetary System,” regularly published in
the Federal Reserve Bulletin.
10 Some paired items are not always of the same mag­
nitude on the books of the debtor and the creditor. These
differences, arising usually from differences in timing of the
respective reports, contribute to the discrepancy in the con­
solidated sector account. This discrepancy is not shown as
a separate line in the illustrative table, but is incorporated
as part of the discrepancy shown on the full statement of
the banking sector’s sources and uses of funds, Table 32.
In the consolidated condition statement published in the
Federal Reserve Bulletin, such timing differences are incor­
porated into the item “Capital and miscellaneous account*
net.”

174

FLO W O F FU N D S I N T H E U N IT E D STATES, 1939-53

Some intrasector claims cannot be speci­
fically paired of? for elimination in the con­
solidation process. For example, currency
held by commercial banks (A3) includes in
undetermined proportions both Federal Re­
serve notes (a liability of the Federal Re­
serve subsector, c l 6 ) and silver certificates,
coins, and other currency liabilities of the
Treasury monetary funds subsector (d25).
Intrasector currency assets and liabilities that
cannot be paired and specifically offset
against each other are eliminated by adding
all currency liabilities not identified as to
holders (c l 6 , d21, and d25), and subtracting
the currency assets of the banking subsectors
(A3 and B2) not identified by subsector of
liability. This process yields essentially the
same total for the consolidated banking
sector’s liability for currency outside banks
(e29) as would be achieved in a specific con­
solidation process.
Similarly, cash items in process of collec­
tion cannot be paired off as assets and liabili­
ties of specific subsectors. Therefore in com­
puting the banking sector’s liabilities for
demand deposits adjusted (el9), the sub­
sectors’ demand deposit liabilities (a23 and
b l 7 ) are added and their assets in the form
of cash items in process of collection (A 6
and B4) are subtracted.' 1 Again, this yields

essentially the same deposit total as would a
specific consolidation.
In accordance with customary practice,
some interbank claims are not eliminated in
consolidation. Federal Reserve stock, an
asset of the commercial bank subsector
(A16), and a liability of the Federal Reserve
subsector (c23), is carried to the consolidated
account, where it is recorded as a miscel­
laneous financial asset in item E15 and as a
miscellaneous liability in e32. Other intra­
sector relationships that are not eliminated
include the gold claims held by the Exchange
Stabilization Fund and the gold reserve
against United States notes.
The Exchange Stabilization Fund’s assets
(DIO) in the form of holdings of gold claims
(extinguished in 1947) were liabilities of the
gold account in the Treasury monetary funds
subsector (d l 8 ). Instead of being eliminated
in consolidation, both the asset and the
liability appear in the consolidated account,
d l 8 as part of the consolidated sector’s cur­
rency liability for Treasury cash (e30), and
DIO as a negative liability in the miscel­
laneous liabilities category of the consoli­
dated account (e32). (Treatment of metal­
lic gold held by the Exchange Stabilization
Fund is discussed below.) Similarly, the
gold reserve underlying United States notes,
which is both an asset (D 6 ) and a liability
(d20) of the Treasury monetary funds sub­
sector, is retained in the consolidated account.
It is included there as part of Treasury cur­
rency assets (E2) and as part of the currency
liability of the sector shown under Treasury
cash (e30).
In summary, then, some intrasector assetdebt relationships are specifically eliminated
in consolidation, some that cannot be

11 One major exception is the treatment of the Federal
Reserve asset uncollected cash items (CIO) and of the
Federal Reserve liability for deferred availability items (c25).
In order to maintain continuity with the published series
on currency and deposits, the difference between Federal
Reserve uncollected cash items and deferred availability
items (the net commonly identified as Federal Reserve float)
is treated in the flow-of-funds accounts as a deduction from
the miscellaneous liabilities of the banking system (in e32)
rather than as a deduction from the sectors’ deposit liabilities.
This preserves the consolidated basis of the total amount
of liabilities of the sector, but it yields a partially uncon­
solidated deposit component of the total. See also discus­
sion of bank float in Ch. 16, pp. 304-07.
Federal Reserve float does not appear as such in Table 26.
of the table) it is a negative component of e32, since CIO is
In the Federal Reserve subsector account, it is equal to
a negative component of e32 and c25 a positive component
CIO minus c25. In the consolidated banking sector (part E
(included in c22).




B A N K IN G SECTOR

specifically offset are eliminated by a net­
ting process, and others are carried to the
consolidated account as asset and liability
entries or as liability and offsetting negative
liability entries.
Special treatment is also accorded some
relationships with other sectors—the gold
holdings (that is, the so-called active gold) of
the Exchange Stabilization Fund, the de­
posits of domestic banks in foreign banks,
currency held by banks in United States
possessions, and deposits of the Postal Sav­
ings System and the Exchange Stabilization
Fund with the Treasury.
The metallic gold held by the Exchange
Stabilization Fund (D 3)—the “active” gold
—is a gold asset of the banking sector not
included in the monetary gold stock. How­
ever, in conformance to published series,
where the asset side of the consolidated
banking system account records only those
metals designated as part of the economy’s
monetary reserves, this gold is classed in the
consolidated sector account as a negative
liability rather than as a positive asset and
is included in e32.12
Deposits of commercial banks in foreign
banks (A7) and the foreign currency and
deposits owned by the Exchange Stabiliza­
tion Fund ( D l l ) are not recorded as assets
of the consolidated account. Following the
procedure used in published series, these
foreign assets of the domestic sector are
netted against the banking sector’s liability
to the rest of the world. Therefore these
commercial bank and Fund claims are de­
ducted from foreign bank claims on com­
mercial and Federal Reserve Banks (a22
and c2 1 ) to yield the item in the consolidated
account, foreign bank deposits, net (e27).
33For a more complete discussion of gold assets, see Ch.
17, p. 318.




175

Banks in United States possessions are not
part of the flow-of-funds banking sector (or
of the consolidated condition statement in
the Federal Reserve Bulletin). Hence cur­
rency held by these institutions should not
be eliminated from currency liabilities in
the process of consolidating the banking
sector. However, to conform to the tradi­
tional series on currency outside banks,
which excludes currency held in banks in
possessions, such items are excluded from
the flow-of-funds series on currency liabili­
ties of the consolidated sector (that is, are
excluded from items e28 and e29) and are
treated instead as part of miscellaneous lia­
bilities of the banking sector in item e32.
The amounts involved are small in all years.
Deposits of the Postal Savings System and
the Exchange Stabilization Fund with the
Treasury (B12 and D13) are not recorded
under assets in the consolidated statement.
In the flow-of-funds consolidated sector ac­
count, these miscellaneous financial assets
are netted against miscellaneous liabilities
in item e32.
The items remaining in the consolidated
account after these consolidations and net­
tings are performed include, on the asset
side, metallic reserves and bank loans and
investments and, on the liability side, essen­
tially the currency and deposits and other
debts owed by the banking system to other
sectors.
The metallic reserves include the monetary
gold stock (El) and the silver in Treasury
currency assets (E2). In addition to the
metallic silver component of Treasury cur­
rency assets, item E2 includes the gold re­
serve against United States notes, deposits
made with the Treasury for the redemption
of Federal Reserve Bank notes and national
bank notes, and the credit of the United
States securing both minor coin in circula­

176

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

tion and that part of the United States notes
outstanding not backed by the gold reserve.13
The remaining assets of the sector repre­
sent bank loans and bank investments in
securities of other sectors. Loans are sub­
divided into two flow-of-funds transaction
categories—mortgages and bank loans other
than mortgages. The investment total in­
cludes four flow-of-funds transaction cate­
gories—Federal obligations, State and local
obligations, corporate securities, and miscel­
laneous financial assets.14
The liability side of the consolidated ac­
count includes the banking system’s net lia­
bility for deposits and currency, the corpo­
rate security obligations of commercial banks,
and various miscellaneous liabilities.
The deposit total (e l 8 ) excludes domestic
interbank deposits and is net of cash items
in process of collection (with the exception
of Federal Reserve cash items noted earlier).
Both are eliminated in the consolidation
process. Also, deposits of domestic banks
in foreign banks are deducted from the de­
posit claims of foreign banks on the domes­
tic banking system (e27).
The currency liability total (e28) excludes
bank vault cash, but it does include certain
currency items held by components of the
sector, namely, the gold reserve against
United States notes and Exchange Stabiliza­
tion Fund holdings of gold claims. (The

Fund’s holdings were liquidated in 1947 and
no longer affect the consolidation.) The
currency liabilities also exclude currency held
by banks in United States possessions.15
The liability item for corporate securities
(e31) represents commercial bank paid-in
capital. The liability of Federal Reserve
Banks for their paid-in capital is recorded
in the miscellaneous liabilities category. The
miscellaneous liabilities item (e32) also in­
cludes deposits of international organizations
at Federal Reserve Banks, certain deposit
balances of foreign governments and pur­
chasing commissions at commercial banks
during war and early postwar years, the
amounts owed by commercial banks to their
own foreign branches, amounts owed to the
Federal Government for loans, the liability
of the sector for currency and deposits held
by banks in the possessions, the capital stock
of the Exchange Stabilization Fund, Fed­
eral Reserve liabilities for officers’ checks and
exchange drafts, and unidentified liabilities
of the banking sector. In addition to these
debts, line e32 includes certain asset items
carried in the consolidated account as nega­
tive liabilities—Federal Reserve float, the
active gold and (through 1947) gold claims
held by the Exchange Stabilization Fund,
and deposits of the Postal Savings System and
the Exchange Stabilization Fund with the
Treasury.16

33Monetary gold stock (E l) and Treasury currency (E2)
are identical in amount with the corresponding items in the
consolidated condition statement published in the Federal

53Total currency and deposit liabilities (el7) and the detail
shown (el 8 through e30) are identical with the correspond­
ing items in the Bulletin consolidated statement. Two sub­
totals (e24 and e28) in the flow-of-funds table are not shown
in the Bulletin table.
16 The items in e31 and e32 are also reflected in “capital
and miscellaneous accounts, net” in the consolidated con­
dition statement published in the Federal Reserve Bulletin.
“Capital and miscellaneous accounts, net” also cover items
omitted from the flow-of-funds partial balance sheet and
other items reflected in the difference between total assets and
total liabilities recorded in the flow-of-funds consolidated
statement. The sum of this difference and items e31 and e32
is equal to “capital and miscellaneous accounts, net” in the
Btdletin presentation.

Reserve Btdletin.
u The total of loans (E3) and investments (E6) is iden­
tical with total bank credit in the Bulletin consolidated con­

dition statement. There are some differences in classification
of items: Federal obligations in the flow-of-funds presentation
include loans and advances by commercial banks to the CCC,
which are under loans in the Bulletin presentation, and non­
guaranteed securities issued by Federal Government corpora­
tions, which are under other securities in the Bulletin state­
ment. Apart from differences in amount of detail shown,
these constitute the only differences between the asset sides
of the two presentations.




B A N K IN G SECTOR

Banking asset and liability accounts,
1938-53. Table 26 illustrates, for a single
point in time, the procedures by which the
financial assets and liabilities of the four
subsectors of the banking sector are consoli­
dated into a single statement of the assets
and liabilities of the full banking sector.
Similar statements of assets and liabilities
for the subsectors and the consolidated sec­
tor for the year-ends 1938 through 1953 are
presented in Tables 27 through 31 on pages
182-86. These tables are keyed in the same
manner as the illustrative table in order to
facilitate reconstruction of the consolidation
process for any of the year-ends. However,
some items of small magnitude, which are
shown on the illustrative table in order to
demonstrate their treatment in the consoli­
dation process, are omitted in Tables 27
through 31.
T

he

B a n k in g S ecto r S t a t e m e n t

The preceding tables have dealt only with
the financial assets and liabilities of the
banking sector. Changes in these financial
items, while of primary interest for mone­
tary analysis, are but part of the total flow
of funds through the sector. In addition
to net financial sources of funds, banks also
receive interest, dividends, rents, fees from
services, and returns from sales of property.
In addition to net financial uses of funds,
they pay wages and salaries, interest, rents,
insurance premiums, taxes, purchase mate­
rials used in the course of business, and ex­
pend for new structures and equipment. All
of these transactions are recorded in the
full statement of the sources and uses of
funds of the banking sector in Table 32 on
page 187.
Only a few of the salient features of the
sector sources and uses statement are noted
here, since the derivation of the financial




177

components of the banking sector account
has already been discussed in detail, and the
derivation of most of the nonfinancial com­
ponents is given in the text accompanying
individual transaction accounts in later chap­
ters of the report.
Payments of interest are recorded in two
separate categories. The interest recorded
as an operating use of funds by the banking
system (line d) includes interest paid to de­
positors and interest paid on funds borrowed
by banks. The interest recorded under “other
uses” in the sector account (line 1) is the
amount paid by the Federal Reserve System
to the United States Government in con­
nection with Federal Reserve notes outstand­
ing under Section 16 of the Federal Reserve
Act.
In the process of consolidating the asset
and liability accounts for the four subsectors
into the banking sector account, discrepan­
cies arise when items which should be offset­
ting, such as commercial bank assets in the
form of reserves and Federal Reserve liabili­
ties for these reserves, sometimes differ in
magnitude because of differences in timing of
reports.17 These differences are not recorded
on the illustrative table but are incorporated
in the discrepancy line (line x) of Table 32.
This discrepancy line also reflects errors in
estimating nonfinancial sources and uses of
funds for the sector.
Bank credit and currency and deposits.
In addition to the preceding tables on bank­
ing system assets and liabilities, estimates
have been prepared of the indebtedness of
each nonbank sector to the banking sector,
and the amount of currency and deposit as­
sets held by each nonbank sector. The bases
17 See note 10 on p. 173. These timing differences are
reflected in the item “capital and miscellaneous accounts,
net” in the “Consolidated Condition Statement” published
in the Federal Reserve Bulletin.

178

FLO W O F FU ND S IN

T H E U N IT E D STATES, 1939-53

for such estimates—and their quality—vary
widely. Some of these items are derived
from the records kept by the banking sys­
tem’s debtors and creditors. Others are ob­
tained by allocating bank records on the
basis of sample studies, and still others
through residual estimating techniques. The
procedures used in developing these esti­
mates are described in detail in other chap­
ters of the report.
Table 33 on page 188 records the distribu­
tion of total bank credit among the other
flow-of-funds sectors. This is a summary of
three more detailed presentations which fol­
low, showing the distributions of each of
three major components of bank credit—
mortgage loans, bank loans other than mort­
gages, and securities and other investments
held by banks.
Bank holdings of mortgages (Table 34 on
page 189) show the amounts of farm and
nonfarm mortgages held by commercial and
mutual savings banks, and the total mortgage
indebtedness of each nonbanking sector to
these banking institutions. The total series
on bank assets (line A ) is net of valuation
reserves for all years. Beginning in 1948,
however, the distribution of these bank as­
sets by type of property securing the debt
and the distribution of bank mortgages by
debtor sectors are presented gross of valua­
tion reserves. In Part A of Table 34, where
annual net changes are shown, an adjust­
ment has been made to offset the effect of
the change in reporting procedures on the
entries for 1948. However, in Part B of the
table the levels of holdings for year-ends
1947 and 1948 are discontinuous in this re­
spect. Derivation of the estimates of mort­
gages owed to banks by each sector is de­
scribed in Chapter 20.




Table 35 on page 190 presents estimates
of the distribution of bank loans other than
mortgages in terms of flow-of-funds sector
groupings; details on the amounts owed by
each sector in terms of call report classifica­
tions of bank loans are presented in Table 75
on page 333. As in the case of the preceding
table on mortgages, the total of nonmortgage
loans held by banks is shown net of valua­
tion reserves but the amounts owed by
debtors are shown gross of these reserves
from 1948 on. Procedures used in deriving
these estimates are described in Chapter 18.
Table 36 on page 191 presents information
on the securities and other investments held
by the banking sector on several bases. First,
the securities are shown classified in group­
ings approximating those used in bank con­
dition statements (lines A through L). On
lines M through X, these investments are
cross-classified in terms of the banking sub­
sector holding the security and the flow-offunds transaction category in which each
type of security falls. Finally, on lines Y
through e, the securities are classified in
terms of the flow-of-funds sectors owing the
debt. Since bank investments include several
flow-of-funds transaction categories, the de­
scription of the derivation of the figures
shown is given in several chapters of the re­
port, namely, Chapters 19,20, and 21 on Fed­
eral obligations, State and local obligations,
corporate securities, and miscellaneous finan­
cial assets.
Following these tables on the distribution
of bank credit, the distribution of currency
and deposits among sectors holding cash
balances is given in Table 37 on page 192.
The first part of the table shows the various
components of bank liabilities for currency

B A N K IN G SECTOR

and deposits as given in the “Consolidated
Condition Statement” published in the Federal Reserve Bulletin. The second part of the
table presents estimates of the holdings of
currency and deposits by each of the flow-offunds nonbank sectors. For an explanation




179

of the discrepancy between the total of currency and deposit assets and the total of currency and deposit liabilities, and for a de­
scription of the procedures used in estimating
each sector’s holdings of currency and de­
posits, see Chapter 16.

TABLE 26.—BANKING SECTOR

Illustrative Consolidation
(In billions of dollars,
A.

COMMERCIAL BANK SUBSECTOR

Assets

Liabilities
40.3
40.1

Due from banking sector........................
Currency............................................
Member bank reserves.....................
Other interbank deposits................
Cash items in process of collection.
Due from foreign banks.........................

2.2

17.5
10.9
9.6
.2

Mortgages..................................................

13.4

Bank loans other than mortgages..........
To domestic banks..................................
To others................................................

38.9
*
38.9

Federal obligations...................................
State and local obligations......................
Corporate securities..................................
Miscellaneous financial assets.................
Federal Reserve Bank capital stock. . . .
Other........................................................

63.1

al9
(a20)
a 21
a2 2
a23
a24

Deposit liabilities......................................................
Due to banking sector.............................................
U. S. Government deposits.....................................
Foreign bank deposits............................................
Other demand deposits...........................................
Other time deposits.................................................

155.2
1 2 .2
3 0
1.8
101.9
36.3

a25
(a26)
a27
a28
a29
a30

Corporate securities..................................................
Bank loans other than mortgages...........................
Miscellaneous liabilities............................................
Deposits of banks in U. S. possessions.................
Due to own foreign branches..................................
Other........................................................................

2.8

a31

T o ta l..................................................................

159.9

.1
.6
1.2

8.1

2.4
.8

.2
.6
166.9

A 18
C.

.1
1.8

FEDERAL RESERVE SUBSECTOR

Assets

Liabilities

Cl
C2
(C3)
(C4)
(C5)

Currency and deposit assets..................................
Due from banking sector........................................
Gold certificates................................................
Federal Reserve notes......................................
Other currency..................................................

21.9
21.9
21.5
.2
.3

cl2
c l3
(cl4)
cl 5
c l6

Currency and deposit liabilities..............................
Federal Reserve notes.............................................
Held by other Federal Reserve Banks..........
Held in Treasury...............................................
Held by others..................................................

43.1
23.6

20.8

cl7
(cl8)
(cl9)
c20
c2 1

Deposits..................................................................
Member bank reserves.....................................
Other banking sector deposits.........................
U. S. Treasurer—general account
Foreign deposits................................................

19.5
17.7

Miscellaneous liabilities............................................
Federal Reserve paid-in capital............................
Deposits of international organizations................
Deferred availability cash items............................
Other........................................................................

3.2

C6

Federal obligations...................................................

C7
(C8)
C9

Bank loans other than mortgages..........................
To domestic banks..................................................
Toothers.................................................................

.1
.1
*

(CIO)

Miscellaneous financial assets—uncollected cash
item s.......................................................................

4.3

T o ta l....................................................................

47.0

C ll

c2 2
c23
c24
c25
c26
c27

T otal..................................................................

E.

.2
.1

23.4

.2

.7
.9
.2
*
2 .9
*
46.2

CONSOLIDATED

Assets
El

Monetary gold stock—D 2 ...........................................................................................................................

E2

Treasury currency—D 4 ................................................................................................................................

22.7
4.6

E3
E4
E5

Loans...............................................................................................................................................................
Mortgages— A 8 + B 5 ..................................................................................................................................
Loans other than mortgages—A 11 -\-B6-\-C9...........................................................................................

60.4
21.4
39.0

E6
E7
E8
E9
E10
El 1

Investments....................................................................................................................................................
Federal obligations......................................................................................................................................
Commercial banks—A 1 2 ......................................................................................................................
Mutual savings banks—B8 ..................................................................................................................
Postal Savings System and Exchange Stabilization Fund—B 9 + D 8 ............................................
Federal Reserve Banks—C6 ................................................................................................................

111.3
97 .6
63.1
10.9
2.9
20 . 8

E l2
E13
E14
El 5

Other investments........................................................................................................................................
State and local obligations—A 13+B 10.............................................................................................
Corporate securities—A14 -j-Bl 1 .........................................................................................................
Miscellaneous financial assets—A15...................................................................................................

13.7
8.2
4.6

T otal...............................................................................................................................................

199.0

.8

♦Less than 50 million dollars.
N o t e .—The kind of type used for the key to the left of each line of the subsector accounts indicates how the item recorded is treated
in consolidating the subsector accounts to obtain the account for the consolidated banking sector.
A key set in roman type, e.g. A8 , a21, denotes th at the asset (or liability) is also carried as an asset (or liability) in the consolidated
account.
A key set in italic type, within parentheses, e.g. (A 4), (cl8), indicates th at the item is part of a specifically identifiable intrasector
relationship, and that it is eliminated in consolidation and not carried to the consolidated account.




180

ASSETS AND LIABILITIES
for Single Year-End
December 30, 1950)
B.

MUTUAL SAVINGS BANK AND POSTAL SAVINGS SYSTEM SUBSECTOR
Assets

B1
(B2)
(B3)
(B4)

Liabilities

.8
Currency and deposit assets ................ ..........
Currency..................................................... ............... 1
Deposits...................................... ............... 7
*
Items in process o f collection..............

B5
B6

M ortgages....................................................
Bank loans other than mortgages..............

137
B8
B9

Federal obligations..................... ................. ..........
Mutual savings banks................................ ..........
Postal Savings System............................... .......

BIO
B ll
(B12)
B13

8.0

............... 1

13.8
10.9
2.9

State and local obligations..................
Corporate securities......................................
Miscellaneous financial assets ...............

............... 1
2.3
............... 2

T o ta l ......................................

25.2

D.

bl4
bl5
b l6
bl7
b l8
bl9

Deposit liabilities.......................................... ............
Mutual savings banks........................................
U. S. Government deposits ............
Other demand deposits .................
Other time deposits ..................... .......
Postal Savings deposits.............................. ..........

b2 0
b21
b22

Miscellaneous liabilities............................... ........................2
Mutual savings banks................................ ................ 1
Postal Savings System............................... ............... 1

20.0

2 .9

b23

TREASURY MONETARY FUNDS SUBSECTOR

Assets

Liabilities

D1
D2
(D3)

Gold assets...............................................................
Monetary gold stock...............................................
Other gold................................................................

22.7
.1

D4
D5
D6
D7

Treasury currency assets.........................................
Silver assets............................................................
Gold reserve against U. S. notes...........................
Other........................................................................

4.6
3.6
.2
.9

D8
D9
(D10)
(D ll)
(D12)

Federal obligations...................................................
Currency and deposit assets....................................
Gold claims held by Exchange Stabilization Fund
Foreign currency and deposits..............................
Other........................................................................

*

(D13)

Miscellaneous financial assets.................................

*’ ’ *
.2
*

T o ta l..................................................................

27.6

D14

23 0
20.0
*
*

dl5

22.8

.2

Currency liabilities...............................................

d l6
(dl7)
d l8
dl9
d2 0
d2 1

Claims on gold....................................................
Held by Federal Reserve Banks.................
Held by Exchange Stabilization F u n d .. . .
Held in general fund of Treasurer..............
Reserve against U. S. notes.........................
Held by others..............................................

d22
(d23)
d24
d25

Other currency liabilities.....................................
Held by Federal Reserve Banks..................
Held in Treasury............................................
Held by others.............................................. .

d26

Miscellaneous liabilities.........................................

d27

T otal................................................................

27 3
21.5
1.1
.2

*

.2

*
4.3

27.5

BANKING SECTOR
Liabilities
el 7

Currency and deposit liabilities.................................................................................................................

184.4

el 8
e 19

Deposit liabilities......................................................................................................................................
Demand deposits, adjusted—a23 + b 17-A6-B4..............................................................................

157.7
92.3

e20
e21
e22
e23

Time deposits, adjusted......................................................................................................................
Commercial banks—a24...................................................................................................................
Mutual savings banks—bl8 .............................................................................................................
Postal Savings System—b l9 ............................................................................................................

59.2
36.3
20.0
2.9

e24
e25
e26

U. S. Government deposits................................................................................................................
Federal Reserve Banks—c20............................................................................................................
Commercial and mutual savings banks—a21 -\-bl6 ........................................................................

3.7
.7
3 .0

e27

Foreign bank deposits, net—a22 +c21 —A7 —D11.........................................................................

2.5

e28
e29
e30

Currency liabilities....................................................................................................................................
Currency outside banks—c l6 +d21 +d25 —A3 —B2......................................................................
Treasury cash—cl5 + d l 8 + d l 9 + d 2 0 + d 2 4 ...................................................................................

26.7
25.4
1.3

e31
e32

Corporate securities—a25...........................................................................................................................
Miscellaneous liabilities—a27 +b20+c22 +d26 -B 1 2 -C IO -D IO -D 1 3 - D 3

2.8
9

T o ta l.....................................................................................................................................................

188.1

A key set in roman type, within parentheses, e.g. (A3), (A7), indicates th at the asset is carried to the consolidated account as a de­
duction from liabilities. Some of such assets are part of intrasector relationships that, because the liability counterparts cannot be
specifically identified in subsector accounts, must be eliminated by appropriate netting in the consolidated account, e.g. (A3) carried to
line e29. In other cases, the assets so designated are not part of intrasector relationships to be eliminated in consolidation but are subsector
assets carried as negative liabilities in the consolidated account, e.g. (A7) carried to line e27.
A key set in italic type indicates an informational total, e.g. A 1 (or informational detail, e.g. a28) in the subsector accounts not specifi­
cally needed in the consolidation.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 173.




181

182

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

T A B L E 27—C O M M E R C IA L BANK SU B SE C T O R : A SSETS A N D L IA B IL IT IE S
(In billions of dollars a t calendar year-end)
Line 1

1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951

1952 1953

Assets
At
A2
(A3)
(A4)
iA5>
(A6 )
(A 7)

Currency and deposits assets. . . 17.7 22.5 27.1 26.5 28.0 27.7 30.2 34.8 34.2 37.5 38.6 35.6 40.3 44.6 44.7 44.8
Due front banking, sector........... 17.6 22.4 27.1 26.5 28.0 27.6 30.2 34.8 34.2 37.5 38.6 35.6 40.1 44.6 44.6 44.8
Currency................................
1.0
1.3 1.4 1.3 1.5 1.7 1.9 2 . 0
1. 1
2.2
2.0
2.0
2.2
2.7 2 . 8
2.5
8.7 1 1 . 6 14.0 12.4 13.1 1 2 . 8 14.3 15.8 16.0 17.8 20.4 16.4 17.5 19.9 19.8 2 0 . 0
Member bank reserves........
Other interbank deposits. . . 6 . 2
7.9 9.0 9.3 9.5 8.9 1 0 . 2 11.5 1 0 . 0 1 0 . 2
9.4 9.8 10.9 1 2 . 0 11.9 1 2 . 1
Cash items in process of col­
lection ................................
1 .8
1.9 2.9 3.5 4.1 4.5 4.1 5.6 6 . 1
7.2 6 . 8
7.3 9.6 1 0 . 0 1 0 . 2 1 0 . 2
*
*
*
*
*
*
*
*
Due from, foreign banks............
.1 *
.1 *
.2
.1
.1
.1
3.9

AS

Mortgages.....................................

A9
(AlO)
A ll

Bank loans other than intgs.......
To domestic banks.....................
To others....................................

12.4 13.0 14.3 16.9 14.5 14.5 17.0 2 0 . 8 23.7 28.6 31.7 31.5 38.9 43.4 48.8 51.2
*
*
*
*
*
*
*
*
*
*
*
*
*
*
./ *
12.4 13.0 14.3 16.8 14.5 14.4 16.9 20.8 23.7 28.6 31.7 31.5 38.9 43.4 48.7 51.2

A 12
A13
A14
A15
A 16

15.5 16.8 18.4 22.5 42.1 60.7 78.5 91 .9 76.0 69.9 63.4 67.7 63.1 62.2 64.0 64.0
3.1 3.4 3.7 3.7 3.6 3.3 3.5 4.0 4.4 5.3 5.7 6.5 8 . 1
9.2 1 0 . 2 1 0 . 8
2.4 2 . 0
2.4 2.5 2.4 2 . 0
3.5 3.1
2.9 2 . 6
2.0
2.2
2.4 2.3 2 . 1
2.1

A 17

Federal obligs................................
State and local obligs...................
Corporate securities.....................
Misc. financial assets..................
Federal Reserve Bank capital
stock......................................
Other...........................................

A IS

T o ta l.................................

56.4 63.2 71.1 77.3 95.4 112.8 135.8 158.8 148.2 153.8 152.8 155.8 166.9 177.2 186.3 190.5

4.2

4.5

4.9

4.7

4.5

4.4

4.7

7.2

9.4

10.7 11.4 13.4 14.3 15.4 16.4

.1

.1

.1

.1

.1

.2

.2

.2

.2

.8

.8

.8

.8

1.2

1.2

1 .2

.1

.1

.1

.1

./

.2

.2

.2

2

.2
.6

.2
.6

.2
.6

.2
.6

.2
1.0

.3
.9

.3
.9

Liabilities
alQ
U 20)
a il
a 22
a23
a24

Deposit liabilities......................... 51 .1 57.7 65.2 71.0 88.7
7.0 9.0 10.0 10.0 10.0
Due to banking sector................
.9
.8
.8 1.9 8.4
U. S. Govt, deposits..................
.9
.8
.5
.8
Foreign bank deposits...............
.8
Other demand deposits.............. 27.9 31.7 37.8 42.5 53.1
Other time deposits.................... 14.9 15.3 15.8 15.9 16.3

a25
<a2 i)

3.2 3.1 3.0 2 . 8
Corporate securities.....................
*
*
*
*
Bank loans other than mtgs.......
_7
.3 ! A
Misc. liabilities.............................
.6
Deposits of banks in U. S. pos­
.1
sessions .................................. ji
•/
•'l
I
2
2 '! .11
Due to own foreign branches. . . \
./
.4
.4
Other...........................................|
.2
.1 \

All

a28
Cl29
a30
a31

T o ta l................................. !i 54

6

105.5
9.6
10.4
.9
65.3
19.2

127.6
10.7
20.8
1.0
71.0
24.1

149.9
12.4
24.6
1.3
81.4
30.1

2.7
*

2.7
*
.8

2.7
.I
.9

2.8
.2

.8

.7

./
2
.5

./
2
.5

.1
2
.6

./
2
.4

138.9
11.1
3.1
1.4
89.5
33.8

144.0
11.5
1.4
1.4
94.4
35.2

142.7
10.6
2.4
1.6
92.3
35.8

145.1
11.1
3.2
1.5
93.1
36.1

155.2
12.2
3 .0
1.8
101.9
36.3

164.7
13.2
3.6
1.8
108.3
37.9

172.8
13.2
5.3
2.0
111.7
40.7

176.6
13.5
4.5
2 .3
112.6
43.7

2.8

2.7

*
1.4

2.8
.1
1.8

3.0
He

3.1

3.2

.1
1 .1

2.8
.1
1.2

2.8

.5

2.1

2.4

2.4

.1
2

.2

.1
.3
.8

./
.4
.9

.1
.6
1.2

.1
.7
1.3

.1
.7
1.6

.6
1.7

*

/
.7

.2

.1

j 61.1 68.9 74.5 92.2 109.0 131.3 153.6 142.3 147.9 146.8 149.2 159.9 169.9 178.4 182.2

♦Less than 50 million dollars.
‘The keys in this column indicate how the items recorded in the lines are treated in consolidating the accounts of the banking subsectors
into the account of the consolidated banking sector. For an explanation of the keys, see note to Table 26, p. 180.
N ote .— D etails m ay n ot add to totals b ecause of rounding.




For description of table, see p. 163.

183

B A N K IN G SECTOR

TABLE 28—M UTUAL SAVINGS BANK AND POSTAL SAVINGS SYSTEM SUBSECTOR:
ASSETS AND LIABILITIES
(In billions of dollars at calendar year-end)
1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953

Line 1
Assets
Currency and deposit assets2 . . .
Currency....................................
Deposits......................................

.7
./
.6

.9
.1
.8

1.0

.1
.9

.1
.7

.7
.1
.6

.8
.1

.6

.1
.5

.6

.8

.7

.1
.7

.9
.1
.8

.9
.1
.8

.9
.1
.7

B5
B6

Mortgages.....................................
Bank loans other than mtgs.......

4.8

4.8

4.9

4.8

4.6

4.4

4.3

4.2

4.4

4.9

5.6

6.5

.1

.1

.1

.1

.1

.1

.1

.1

.1

.1

.1

.1

B7
B8
B9

Federal obligations.......................
Mutual savings banks...............
Postal Savings System..............

4.0
2.9
1.1

4.3
3.1
1.2

4.4
3.2
1.2

5.0
3.7
1.3

5.9
4.6
1.3

7.8
6.1
1.7

10.6

BIO
B ll
(B12)

State and local obligations..........
Corporate securities.....................
Misc. financial assets...................

.7
1.7

.6
1.6
.1

.6
1.5

.4
1.3

.3

.2

.1

.1

1.2
.1

1.1
.1

.1
1.1
.2

B13

T otal..................................

12.0

bl4
bl5
bl9

Deposit liabilities.........................
Mutual savings banks3 .............
Postal Savings deposits............

b2 0
b2l
b22

Misc. liabilities.............................
Mutual savings banks...............
Postal Savings System..............

b23

T o ta l.................................

Bl
(B2)
(B3)

.1

.8

.1
.5

.8

.9
.1
.8

8.0
.1

9.7

.1
.7

.1

13.5 15.0 15.3 14.8 14.6 13.8 12.5
8.3 10.7 11.8 12.0 I t .6 11.5 10.9 9.8
2.3 2.8 3.2 3.3 3.2 3.1 2.9 2.6
.1
1.2
.2

.1

.1

1.3

1.7

.2

.2

.1
2.2
.2

1.0

1.0
.1

11.2
.1

12.8
.2

12.0

11.6

9.5
2.6

9.2
2.4

.1
.8

.8

.1

.1

.1

2.3

2.3

2.4

.3
2.9

.4
3.3

.2

.2

.2

.2

.1

12.3 12.6 12.6 12.9 14.5 16.9 19.8 21.9 23.1 23.8 24.6 25.2 26.0 27.7 29.4

Liabilities
11.5 1 1 . 8 1 2 . 0 1 1 . 8 1 2 . 1 13.5 15.7 18.3 2 0 . 2 2 1 . 2 21.7 22.5 23.0 23.6 25.2 26.8
10.3 10.5 10.7 10.5 10.7 11.7 13.4 15.4 16.9 17.8 18.4 19.3 20.0 20.9 22.6 24.4
1.3 1.3 1.3 1.3 1.4 1.8 2.3 2.9 3.3 3.4 3.3 3.2 2.9 2.7 2.5 2.4
*
*

.1

*
*

.1

*
*

.1

*

.1

.1

*
*

.1

.1

H?
.1

*

.1

.1

*

.1

.1

*

.1

.1

.2
.1
./

.2

.1
.1

.2
.1
.1

.2
.1
.1

.2

.1
.1

.3
./
.2

.4
.2
.2

11.6 11.9 12.0 11.9 12.1 13.6 15.8 18.4 20.3 21.3 21.9 22.7 23.2 23.9 25.5 27.1

♦Less than 50 million dollars.
1The keys in this column indicate how the items recorded in the lines are treated in consolidating the accounts of the banking subsectors
into the account of the consolidated banking sector. For an explanation of the keys, see note to Table 26, p. 180.
2Includes cash items in process of collection (line B4 in Table 26), too small to be shown separately.
3Consists almost entirely of “other time deposits” (line b l 8 in Table 26). U. S. Government deposits and “other demand deposits” (lines
b l 6 and b l7 in Table 26) are too small to be shown separately.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 168.




184

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-J3

TABLE 29—FEDERAL RESERVE SUBSECTOR: ASSETS AND LIABILITIES
(In billions of dollars at calendar year-end)
1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953

line 1
Assets

18.8 18.3 18.8 21.9 23.4 23.6 21.9 2 2 . 0 22.5 21.9
1 2 . 2 15.6 2 0 . 1
20.8 21.0 20.2
12.2 15.6 20.1 20.8 21.0 20.2 18.8 18.3 18.8 21.9 23.4 23.6 21.9 22.0 22.5 21.9
1 1 . 8 15.2 19.8 20.5 2 0 . 6 19.8 18.4 17.9 18.4 21.5 23.0 23.2 21.5 21.5 2 2 . 0 21.4
*
He
*
*
.1
.2
.2
.2
.2
.2
.2
.1
.1
.2
.2
.2
.4
.3
.3
.3
.4
.3
.2
.2
.3
.3
.3
.3
.3
.3
.3
.4

Cl
C2
(C3)
(C4)
(C5)

Currency and deposit assets...
Due from banking sector...........
Gold certificates...................
Federal Reserve notes.........
Other currency.....................

C6

Federal obligations......................

2.6

2.5

2.2

2.3

6.2

C7
(C8)
C9

Bank loans other than mtgs........
To domestic banks.....................
To others....................................

*
*
*

*
*
*

*
*
*

He
He

*

He
He
He

He
He
He

*

[CIO)

Misc. financial assets (uncollect­
ed cash item s)...........................

1.2

1.7

2.1

2.4

T o ta l..................................

C ll

.7

.9

.9

11.5 18.8 24.3 23.4
.1

.1

He

.3
.2

2.2

22.6

.2
He

23.3 18.9

.1

.2
He

He

20.8

.1

.1

He

.1

.1

.2

.1

2.6

3.0

2.9

2.9

23.8 24.7 25.9
He

.2

.1

*

H«
He

He

4.3

3.9

4.2

He
He
He

4.2

15.5 18.9 23.2 24.3 28.9 33.9 40.2 45.0 44.9 47.6 49.9 45.5 47.0 49.7 51.6 52.1

Liabilities
cl2
cl 3
(cl4)
cl5
c l6
cl7
(cl8)
(cl 9)
c2 0
c21
c2 2
c23
c24

Currency and deposit liabilities.. 14.5 17.8
4.5 5 .0
Federal Reserve notes................
*
Held by other F.R. banks... *
*
*
Held in Treasury..................
Held by others...................... 4.4 4.9

22.0

5.9
*
He

27.2 32.0 38.1 42.8 42.2 44.2 46.6 41.8 43.1 46.1 47.4 47.8
8.2 12.2 16.9 21.7 24.6 24.9 24.8 24.2 23.5 23.6 25.1 26.2 2 0 . 0
He
.1
.1
.2
.2
.2
.2
.2
.2
.2
.1
.2
.2

22.8
He

5.9

8.1

.1
12.1

.1

.1

.1

.1

.1

.1

.1

.1

.1

.1

.1

16.7 21.5 24.4 24.7 24.6 23.9 23.3 23.4 24.8 25.9 26.3

Deposits...................................... 10.0 12.9 16.0 14.6 15.0 15.1 16.4 18.1 17.3 19.3 22.4 18.3 19.5 21.0 21.2 21.2
8.7 11.7 14.0 12.4 13.1 12.9 14.4 15.9 16.1 17.9 20.5 16.6 17.7 2 0 . 1 2 0 . 0 20.2
Member bank reserves........
.4
.2
.5
.5
.3
.3
.3
.2
.2
.2
.2
.2
.3
.3
Other banking sector dep.. .
.2
.2
U.S. Treasurer—general ac­
.4
.6
.4 1 . 0
.4
.7
.4
.9
.9
.8
.9 1 . 1
.2
.4
.6
.8
count ..................................
1.4 1 . 2
.4
.4 1 . 1
.9
.6
.8
.9
.5
.4
.2
.8
.8
.5
.6
Foreign deposits...................

c25
c26

Misc. liabilities.............................
Federal Reserve paid-in capital.
Deposits of international organ­
izations ...................................
Deferred availability cash items.
Other...........................................

c27

T o ta l..................................

.9
.1
.7
.1

*

.9
.1

1.0

./

1.3
.1

1.5
.1

.8

.8
.1

1.1
.1

1.2
.1

1.6

.2

1.4

He

1.8

1.8

2.2

.2

3.0
.2

2.8

He

1.6

1.6
*

2.0

.3
2.4

.3
2.3

.2

He

.2

He

He

.2

He

3.0
.2

3.2
.2

.3
2.4

He

He

2 .9
He

3.0
.2
*
2.7
He

3.6
.3

3.6
.3

He

He

J .J
He

He

15.4 18.8 23.0 24.1 28.7 33.6 39.9 44.6 44.4 47.1 49.4 44.8 46.3 49.1 51.0 51.4

♦Less than 50 million dollars.
*The keys in this column indicate how the items recorded in the lines are treated in consolidating the accounts of the banking subsectors
into the account of the consolidated banking sector. For an explanation of the keys, see note to Table 26, p. 180.
N ote .— D etails may not add to totals because of rounding.




For description of table, see p. 168.

185

B A N K IN G SECTOR

TABLE 30—TREASURY MONETARY FUNDS SUBSECTOR: ASSETS AND LIABILITIES
(In billions of dollars a t calendar year-end)
1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953

Line 1
A ssets2
Dl
D2
(D3)

Gold assets..................
Monetary gold stock.
Other gold.................

14.6 17.8 2 2 . 0 2 2 . 8 22.7 2 2 . 0 2 0 . 6 2 0 . 1 20.7 22.9 24.4 24.6 2 2 . 8 ? 2 .9 23.3 2 2 . 1
14.5 17.6 22.0 22.7 22.7 21.9 20.6 20.1 20.5 22.8 24.2 24.4 22.7 22.7 23.2 22.0
He
He
He
He
He
.1
.2 *
.2
.1
.2
.1
.1
.1
.1
.2
3.0
2.2
.2
.6

3.1
2.4
.2
.6

3.2
2.5
.2
.6

3.6
2.7
.2
.8

4.1
2.7
.2
1.2

4.1
2.8
.2
1.2

4.3
3.1
.2
1.1

1.9

1.8

2.0

2.0

2.0

2.0

2.0

1.8
*
.1

1.8
*
*

1.8
*
.1

1.8

1.8

1.8

1.8

D4
D5
D6
D7

Treasury currency assets..........
Silver assets..............................
Gold reserve against U.S. notes.
Other.........................................

2.1
.2
.6

D9
(DIO)

Currency and deposit assets
Gold claims held by Exchange
Stabilization F und................
Foreign currency and deposits. .
Other...........................................

(D ll)
(D12)
D14

T otal2.

dl5

Currency liabilities. . .

2.8

He

He

.2

.2

He

.2

He

4.6
3 .3
.2
1.1

4.6
3.4
.2
1.0

4.6
3.4
.2
1.0

4.6
3.5
.2
1.0

4.6
3.6
.2
.9

2.0

1.9

.2

.1

.1

.2

1.8

1.8

.1

.1
.1

. ./

He

.2

He

.2

.1

He

4.7
3 7
.2
.9

4.9
5.0
.2
.9

A

.2

.2

.1

.2

.2

He

He

.2

./

4.8
3 .8
.2
.9

19.3 22.6 27.1 28.0 28.4 28.1 26.8 26.5 27.2 27.6 29.1 29.3 27.6 27.7 28.3 27.2

Liabilities

d l6

id 17)
d l8
d l9
d2 0
d2 1
d22
(d23)
d24
d25

Claims on gold..........................
Held by Federal Reserve
Banks................................
Held by Exchange Stabiliza­
tion F u n d........................
Held in general fund..........
Reserve against U. S. notes.
Held by others....................
Other currency..........................
Held by Federal Reserve
Banks...............................
Held in Treasury................
Held by others....................

d26

Misc. liabilities.

d27

T o ta l...

17.3

20.6

25.1 26.0 26.4 26.0 24.7 24.4 25.1 27.3 28.8 29.0 27.3 27.4 28.0 26.9

14.5 17.6 22.0 22.7 22.7 21.9 20.6 20.1 20.5 22.8 24.2 24.4 22.7 22.7
11.8
1.8

15.2 19.8 20.5
1.8

20.6

19.8 18.4 17.9 18.4 21.5 23.0 23.2 21.5 21.5

1.8
.2
.2
.1

1.8
.2
.2
.1

1.8
.2
.2
.1

1.8
.2
.2
.1

1.8
.2
.2
.1

1.8
.1
.2

1.1
.2

1.1
.2

1.1
.2

1.1
.2

i.o

He

He

He

He

He

He

.7

.4

.2
.1

.2
.1

1.8
.2
.2
.1

2.8

3.0

3.1

3.2

3.6

4.1

4.1

4.3

4.6

4.6

4.6

4.6

4.6

4.7

.4

.3

.3

.3

.4

.3

.2

.2

.3

.3

.3

.3

.3

.3

*

22.0

22.0

21.4
.5

1.0
.2

.2
He

He

4.9
.3

.4

He

He

.1

.1

He

He

2.4

2.6

2.8

3.0

3.3

3.7

3.8

4.1

4.2

4.2

4.3

4.3

4.3

4.4

4.5

4.5

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.0

2.0

.2

.2

.2

.2

.2

.2

.2

.1

He

.2

2J .2

He

.1

He

He

He

He

He

19.3 22.6 27.1 28.0 28.4 28.0 26.7 26.4 27.1 27.5 29.0 29.2 27.5 27.6 28.2 27.1

*Less than 50 million dollars.
xThe keys in this column indicate how the items recorded in the lines are treated in consolidating the accounts of the banking subsectors
into the account of the consolidated banking sector. For an explanation of the keys, see note to Table 26, p. 180.
2Includes Federal obligation and miscellaneous financial assets (lines D 8 and D13 in Table 26), which are too small to be shown separately.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 170.




186

FLOW

O F F U N D S IN

T H E U N IT E D STATES,

1939-53

TABLE 31—CONSOLIDATED BANKING SECTOR: ASSETS AND LIABILITIES
(In billions of dollars at calendar year-end)
Line

Assets
El

E2
E3
E4
E5
EO

E7

E8
E9

ElO

E ll
E12
E13
El 4
E15

1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 j 1951 1952
i
I

7!
i
l
I
Loans............................................. 2 1 . 2 2 2 . 2 23.7 26.6 23.9 23.4 25.7 29.9 35.5 43.0 48.3 49.6 60.4 i
8.7 9.0 9.4 9.7 9.4 8.9 8.7 9 .0 11.6 14.2 16.3 17.9 21.4
Loans other than mortgages. . . . 12.5 13.1 14.4 16.9 14.6 14.5 17.0 20.9 23.9 28.7 32.0 31.7 39.0
Treasury currencv........................

14.5 17.6

22.0

3.0

3.1

2.8

22.7 22.7 21 .9
3.2

3.6

4.1

20.6

20.1

20.5

22.8

4.1

4.3

4.6

4.6

Investments.................................. 31.3 32.4 33.8 38.0 61.8 8 6 . 8 114.8
Federal obligations.................... 22.1 23.6 25.0 29.8 54.2 80.0 108.0
Commercial banks................ 15.5 16.8 18.4 22.5 42.1 60.7 78.5
8.3
2.9 3.1 3.2 3.7 4.6 6 . 1
Postal Savings System and
1.1
1 .2
1.3 1.4 1.7 2.3
Exch. Stab. F und.............
1.2
2.5 2 . 2
2.3 6 . 2 11.5 18.8
Federal Reserve Banks........ 2 . 6
Other investments......................
State and local obligations. .
Corporate securities.............
Misc. financial assets...........
T o ta l.................................

E16

24.2 24.4
4.6

4.6

22

4

6

?> 7 23.2
4 7

22.0

4.9

67.6 75.5 80.5
24.0 26.6 29.1
43.5 48.9 51.4

137.5 1 2 2 . 8 117.9 1 1 2 . 1 113.1 111.3 113.7 117.4 119.3
129.7 114.4 107.7 101.5 101.2 97.6 98.5 100.7 101.5
91.9 76.0 69.9 63.4 67.7 63.1 62.2 64.0 64.0
10.7 1 1 . 8 1 2 . 0 11 . 6 11.5 10.9 9.8 9.5 9.2
2.9 3.2
24.3 23.4

9.2
3.8
5.3

8.8
4.0
4.7

8.8
4.3
4.4

8.3
4.2
4.0

7.6
3.9
3.5

6.7
3.5
3.0

6.9
3.6
3.1

7.8
4.1
3.6

.1

.1

.1

.1

.1

.2

.2

.2

3.3
22.6

3.3 3.1
23.3 18.9

2.9
20.8

2.7 2 . 6
2.4
23.8 24.7 25.9

8.4 10.1 10.6 11.9 13.7 15.3 16.7 17.8
4.5 5.3 5.7 6 . 6
8.2
9.3 10.5 11 .2
3.8 4.0 4.1
4.5 4.6 4.7 5.0 5.4
.2

.8

.8

.8

.8

1.2

1.2

1. 2

69.8 75.2 82.7 90.6 112.1 136.2 165.3 191.8 183.5 188.2 189.3 191.7 199.0 208.7 220.9 226.7

L iabilities
el7

4.8

i!

Currency and deposit liabilities.. 63.2 68.4 75.2 82.8 104.3 128.0 156.0 180.8 171.7 175.3 176.1 177.3 184.4 193.4 204.2

e l8
el9

Deposit liabilities...................... 54.7 59.5 65.7 71.0 88.2 106.8 130.1 152.0 142.7 147.5 148.7 150.6 157.7 165.8 175.5 180.3
Demand deposits, adjusted. 26.0 29.8 34.9 39.0 48.9 60.8 66.9 75.9 83.3 87.1 85.5 85.8 92.3 98.2 101.5 102.5

e2 0
e 21
e2 2
e23

Time deposits, adjusted. .. . 26.3 27.1 27.7 27.7 28.4 32.7 39.8 48.5 54.0 56.4 57.5 58.6 59.2 61.4 65.8 70.4
Commercial banks............. 14.8 15.3 15.8 15.9 16.4 19.2 24.1 30.1 33.8 35.2 35.8 36.1 36.3 37.9 40.7 43.7
Mutual savings banks....... 10.3 10.5 10.7 10.5 10.7 11.7 13.4 15.4 16.9 17.7 18.4 19.3 20.0 20.9 22.6 24.4
Postal Savings System. . . .
1.3 1.3 1.3 1.3 1.4 1.8 2.3 2.9 3.3 3.4 3.3 3.2 2.9 2.7 2.5 2.4

e24
e25
e26

l \ S. Govt, deposits............
Federal Reserve Banks. . . .
Commercial and mutual
savings banks.................

.9

e27

Foreign bank deposits, n e t. .

.6

e28
e29
e30

Currency liabilities....................
Currency outside banks. . . .
Treasurv cash.......................

8.5
5.8
2.7

8.8
6.4
2.4

9.5 11.8 16.1 21.1 25.9 28.8 29.0 27.8 27.4 21.7 26.7 27.6 28.8 28.9
7.3 9.6 13.9 18.8 23.5 26.5 26.7 26.5 26.1 25.4 25.4 26.3 27.5 28.1
2.2
2.2
2.2
2.3 2.4 2.3 2.3 1.3 1.3 1.3 1 .3 1.3 1.3
.8

e31
e32

Corporate securities.....................
Misc. liabilities............................. j

3.2

3.1
.5

3.0

e33

.9

.6

1.5
.6

25.6
1.0

3.5
.4

2.3
.9

3.6
1 .1

4.1
.8

3.7
.7

3.9

5.6
.4

4.8
.3

1.9

8.4 10.4 20.8 24.6

3.1

1.5

2.5

3.2

3.0

3.f>\! 5.3

4.5

1.5

1 .6

1.9

1.7

2.1

2.2

2.5

2

1.1

2.8

.4

.9

.8

.8

1.2

1.9

1 .0

2.8

.9

9.2
.8

2.7
.8

11.0

.6

2.3

2.7
.5

21.2

.4

2.2

2.7
.4

2.1

2.8

.5

2.8
.2

2.7
1.2

2.8

1 .3

2.8

1.5

2.8

.9

2

.3

3.0
1 .4

2.5

2.7

3.1

3.2

2.0

2. 2

T o ta l..................................j 66.9 71.9 79.2 86.6 107.8 131.1 159.1 184.1 174.6 179.3 180.1 181.6 188.1 197.8 209.4 214.6

N o t e .—Details




1 .8

may not add to totals because of rounding. For description of table, see p. 173.

187

B A N K IN G SECTOR
T A B L E 32—B A N K IN G S E C T O R : SO URCES A N D USES O F FU N D S ST A T E M E N T
(In billions of dollars)
1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951

1952 1953

Sources of fu n d s
2.3

?.3

2.6

2.6

2.8

3.1

3.4

3.8

4.0

4.5

4.8

5.1

5.6

6.3

7.0

2.3

2.3

3.0
2.4

3.3
2.7

3.8
3.1

4.0
3.3

4.5
3.7

4.8
4.0

5.1
4.2

5.6
4.8

6.3
5.4

7.0

1.8
.2

2.5
1.9

2.7

1.8
.2

2.5
1.9

.6

.1
.6

.2

.3

.1
.6

.1

.3

.7

.7

.2
.8

R
c
D
F

O p era tin g ..........................................................

F

O th e r 1 ................................................................

*

*

G
H

N et in crease In lia b ilitie s............................

5.0
5.2
4.8
3.8

7.3
6.9
6.1
5.2

.8

.7
.5
,1

1

J

Demand deposits, adjusted..................

K
T,
M

*

N
n
p

U. S. Govt, deposits..............................
Commercial and mutual savings banks

Q

R

.5
.2

- .3
- .3

2.1
.2

.1

.1

.1

.4

.4

.4

.4

.5

.1

.1

.2

./

1

7.0
4.8
1.6
.6

6.4
-.1
6.5

— .2

1.8

10.2

.1
— .1
.5
1.1

.6

.7

- .4

.1

.6

.3

.7
.9

2.3
2.3

4.3
4.3

5 .0
4.9

4.7
4.7

.1

.1

1.6

- .2

He

V
W

Corporate securities......................................
Miscellaneous liabilities................................

—. 1
—. 1

-.1

- .2

X

T o ta l, above so u rc e s......................

7.3

U

4.3
2.9
1.1
.4

He

He

- .3

T

.7
.5
.1
.1

He

.6

.5
9.6

He

10.0

He

-.1

—. 1

— .1
2.0 10.3

He

-.1

8.7
6.1
2.0
.6

5.5
3.7
1.5
.4

4 .7
.9
3.7
.8
4.9 1.2
3.8 - 1 . 6

1.5

*

1.9
.2

6.5
7.1
7.1
6.5

9.6
9.0
6.0

9.6
3.3

1 .1

.6

2.2

4.3

1.2

11.6
10.8

.6
.6
- .1

.3
.9
— .1

.7
— .3

1.5
.9
— .2

1.7
— .2

4.4 - 2 2 . 1 — 1 . 2
.5 - . 6
.5
3.8 -21.5 - 1 .7

1 .3
.3
1.0

.5
- .3
.8

- .4
_ 2
- . J

.2
- .4
.6

.1
1 .6

-.2

.4

- .3

He

2.9
3.0
—. 1
.1
.1

1.1

.2 —1.2
.2
- .3
He'
— .9
He

— .4

- .4
*
He

He

.4

He

— .7
- .7
He
He

.3

—. 6

23.8 26.1 31.1 28.4 - 5 . 7

8.7

5.4

6.2

11.6

.8

.2

.2

./

.1

.1

—
He

1.2

.9

1.0

.<)

4.6
3 .0
1.8
— .2

.0
He

—.3

He

1.8

5.2
5.0
4.9

-.2

He
He
He

6.0
.2
.8
*

2.5
1.4
.9
.l

He

—.3

.1

*

7.4 2 1 . 2 23.3 28.0 25.0 - 9 .5
7.6 21.5 23.7 28.0 24.8 - 9 .1
5.3 17.2 18.6 23.3 21.9 —9.4
4.0 9.9 11.9 6 . 1
8.9 7.5

liability........................................
Cuwency outside banks........................
T reasury cash.........................................

s

C urrency

.2

.4

- 4
- 3
-.1

*

Foreign bank deposits, n e t..................

.2

1.2

.6

—.5

He

.7

.1

.1
.2

15.3 17.9

12.2

.2

.4

Uses of fu n d s
a

N onfinancial u se s...........................................

1.7

1.8

1.9

1.8

2.0

2.2

2.5

3.0

3.5

3.7

3.9

4.2

4.6

5.4

5.9

b
c
d

O perating u se s ................................................
Payroll............................................................
Interest 2 .........................................................
Rents...............................................................
Insurance premiums3 ....................................
Taxes4 .............................................................
Operating uses n .e .c . 5 ..................................

1.5

1.5

1.6

1.6
.7
.4

1.8

2.0

2.3

2.6

3.2
1.4

3.9

1.1
.6
.1

3.0
1.3

3.5

.8

2.8
1.3
.7

1.6

.8
.1

.8
.1

.1

1.8
1.0
.1

4.4
1.9

.3

.3

.3

.3

.1

.2

.4

.2

.2

e

f

g

h
i
j
k

O ther u se s..........................................................
Construction and equipment 5 .....................
Profits taxes...................................................
1
Interest 2 ..........................................................
m
Dividends.......................................................

n
o

He

.6

.6

.6

.5

.5

.5

1.5
.7
.4

.1
.1
.1
.1

.1
.1
.1
.2

.1
.1
.1
.2

.1
.2
.1
.1

.3

*

He

.3

He

.2
.1

.2
.1

.2

.2

.3

.3

.8

.4
He

He

4

.5

.3
.1

5.3
3.1

7.5
4.4

.2

.1

.1

.3

.3

.3

.3

.3

.2

.2

.2

21.4 24.2 29.1 26.5 - 8 .3
He
—. 8 —1.3 —. 6
.5
.4
.4 He
.2
.2
-.1
2 . 6 - 2 .4
2.5 4.0 3.0
.3 —.3 - . 4 — .2
.2
2.7

4 .7

s
t
u
v

Federal obligations 7 ......................................
State and local obligations...........................
Corporate securities......................................
Miscellaneous assets 8 ....................................

w

V alu atio n a d ju s tm e n t, n e t ........................

.1

.1

X

Discrepancy**..................................................

.2

.3

.1

y

T o ta l, above u se s............................

7.3

9.6

10.0

.3
1.5
.2
- .6

*

1.3
.3
1.4
.3
- .3
*

1.6
.l
.7
.3
.5

.2

.2

q
r

.6

1.4

1.0
.l
.3

1.1

.2

.5

.7

8.0

.7
.2

4.7 24.4 25.8 27.9 21.7 -15.3 - .3 - .4
.1
.4
.4
He
-.5 - .5
.5
.2
He
He
*
He
He
He

2.4

7.3

He

He

4.8

3.3

- .3

2.6

2.1

1.6

He

-.1

- .3

- . 2

.5

He

He

- .4

- . 2

23.8 26.1 31.1 28.4 - 5 . 7

1.5

6.6

.9
.2

.6
He

-

6.2

.4
*

1

.2 —1.7

.2

.3
.4

9.7

12.1

He

7.3
3.5

.1
4.6
2.7

- . 4 - 3 .5
.9 1 .f
.4
.2

.8
1. 1
.1

.1
.2

.2

.5

.3

- .3

8.7

5.4

6.2

He

.1
He

11.6

.1
.6

.4

.4

1.1

-.2

.1

.4

He

2.2

.l
.4

.1

.3

He

- .4
He

.8

1.2

.1

.3

He

.8

.7

.1

He

.2

.(

.3

.3

.l
.3

#5

.1

He

1.2

.4

.2

.3

.9

. 4

.1

He

He

.2

.3
.l
.4

.1

.3

He

.2

.1

.1

He

N et in crease in financial a s s e ts ...............
Gold stock......................................................
Treasury cu i rency... ..................................
Bank loans other than mortgages6 .............
M ortgages.......................................................

P

.2
.1

1.0
.6
1.
.2
.1

He

.4

5.8
.5 —1 . 2
1
.l
5.3 2.5
2.6
2.5

2.2
1.2
He

.3

He

.9
.7
.3

.2

.2

.3

.7

.1

.1

15.3 17.9

12.2

*Less than 50 million dollars.
**Net uses (+ ) or net sources ( —) not accounted for.
real estate transfers. Also includes small amount of insurance benefits.
2Line d excludes interest paid by Federal Reserve System to Treasury under Sec. 16 of Federal Reserve Act, which is line I below. Both
lines exclude imputed interest.
3Private insurance premiums, old age and survivors and unemployment insurance taxes, and premiums paid to FDIC.
4Mainly property taxes. Excludes profits taxes.
5Lines h and j together equal banking sector expenditures under the flow-of-funds transaction category “ other goods and services."
®Excludes bank loans to Commodity Credit Corporation on its demand obligations. These are classified as commercial and industrial loans
in banking statistics, as Federal securities in Treasury debt data, and as Federal obligations in flow-of-funds accounts.
7Includes holdings of both direct and fully guaranteed and nonguaranteed Federal obligations. Also includes Commodity Credit Corpora­
tion demand notes (see note 6 ). Includes Federal Land Bank bonds prior to 1947 and Home Loan Bank bonds prior to 1951. Figures for 1947
and 1951 reflect declines attributable to shift in classification of Federal Land Bank bonds and Home Loan Bank bonds from Federal obligations
to miscellaneous assets.
increases in 1947 and 1951 represent mainly shifting of Federal Land Bank bonds and Home Loan Bank bonds to this category.
N o t e . —Details may not add to totals because of rounding. For description of table, see p. 177.
Contents of assets and liabilities of con­
solidated banking sector are given in description of subsectors and of process of consolidation, pp. 163-76.
1 Mainly




188

FLOW

O F FU N D S IN

T H E U N IT E D STATES, 1939-53

TABLE 33—BANK C R E D IT 1
A.

A n n u al changes, in billions of dollars

1939 1940 1941 1942 1943 1944 1945

Sector

1946

1947 1948 1949 1950 1951 1952 1953

A
B
C
D
E

N et change in assets2.................................
Commercial banks.......................................
Mutual savings banks................................
Postal Savings System ................................
Federal Reserve...........................................

2.0
.1
.1
-.1

3.0
3.3
*
*
-.3

7.1 21.0 24.5 30.3 26.8 - 9 .0
16.7 17.7 20.4 18.5 - 1 0 . 0
6.8
.4 1 . 1
.1
2.1
2.3
1.5
*
.4
.5
.1
.6
.3
.1
3.9 5.3 7.3 5.5
- .8

- .9

a
b
c
d

N et change in liabilities3 ..........................
Consumer......................................................
Mortgage loans..........................................
Bank loans other than mortgages............

2.0
.3
.2
.1

3.0
.7
.3
.4

7.1 21.0 24.5 30.3 26.8
.7 - 1 . 0 - . 2
.6
1.2
.4
.1 *
.1
.3
.5
.3 - 1.1 - . 3
.9

1.5
.5

2.5
3.0
1.8
1.2

e
f
g
h

Corporate business......................................
Mortgage loans..........................................
Bank loans other than mortgages............
Corporate securities..................................

.2

.8
-.6

.7
*
1.0
- .3

1 .4
*
.9
.5

3.0
.3
2.4
.2

2.5
.3
2.2
*

i
j
k

Nonfarm noncorporate business................
Mortgage loans..........................................
Bank loans other than mortgages............

-.1

-.1

1.3 - 2 . 1
*
-.1
1.7 - 1 .5
- .3 - .4
.3 *
- .1 — .3
.4
.3

1.7

1.1

.6
.4

1.4
.4
1.0

1.0

1

Farm business..............................................
Mortgage loans.........................................
Bank loans other than mortgages.............

.2

.4

1.2

m
n

.1

.1

o
P
r

Federal Govt . 4 ............................................
State and local govts...................................
Insurance 5 ....................................................

s
t

Other investors 6 ..........................................
Nonprofit organizations7 ..........................
Financial institutions n.e.c.*..................

-.1

-.1

- .1

Rest of the world 8 ......................................
Bank loans other than mortgages.............

-A

-.1

X

y
z
aa

2.0

*

.1
-.2
*
*
*
1.5
.2

-.1

*

-.1

*

.2
.2

1.4
.3
-.1

-.1

*

.2
.2

-A
-.1
*

-.1

-.1
.4
- .4

-.3
- .3
*
-.2
*
-.2

*
*

.9
.9

.4
-.2
.6
*
*
*

-.1

1.8
*

*

.1

- 9 .0
2.0

.2
.1

2.5 - . 4
2.3 - 2 . 0
.9
.8
.1

.3

Sector

9.0
6.5
.9

1.0
-.1

-.1

- .2
1.8

.9 - 4 .6
- .4

9.7 11.5
5.9 9.0
.9 1.7
- .2

3.0

6 .9
4.1

.9

1.8
- .2
1.2

- .1

2.4
1.9
1 .0
.9

9.1
4.1
2.2
1.9

9.7 11.6
1.7 3.6
1.6 1.6
.1 2.0

7.0
3.5
1.7
1.7

.9 - 1 . 6
.3
.3
.5 - 2.2
.1
.4

3.2
.6
2.4
.2

4.8
.5
4.4
*

3.2
.3
2.7
.2

*

1.3
.3

3.6
.7
2.9

-A
.5
-.6

.8

.6
.2

.5

.6

2.1

1.3
.8

.3
.6

1. 1
.2

-A

.2

-.1

.5

- . 4 - 3 .6
.9 1 . 6

.8
1.1

*

1.2

4.7 24.4 25.8 27.9 21.7 - 1 5 .3 - 6 . 6 - 6.2
.1
.4
-.2
.4
.4
- .3 - .4
.9
.4 *
—.4
*
*
*
.1
.1
.4 *
-.1
*
*
.1 *
-.1
.1
-.1 -.1
.6 *
*
*
.4
.2
-.1
-.1
.2
.1
*
*
*
*
.2
.2
.2
.1

Discrepancy1**................ .............................
B.

2.2
5.9

*

.1

.1

*

.1

-.2
-.2

1

.1

.3
.2
.1

.1

1

1

*

*

.4
.3

.1

.5
.2
.3

1.2

.5
.7
*

.6

.5

.6

2.2
1.2

.9
.7

*
*
*

- .1

-.1

*

.4
.3

.2

- .2

.1

— .3

.1

.1

.1

A m o u n ts o u tsta n d in g a t y ear-en d , in billions of dollars
1938 1939 1940 1941 1942 1943 1944 1945

1946

1947 1948 1949 1950 1951 1952 1953

A
B
C
D
E

T o ta l a s se ts 2 .......................................
Commercial banks............................
Mutual savings banks.....................
Postal Savings System ....................
Federal Reserve................................

52.5 54.6 57.6 64.7 85.7 110.2 140.5 167.4 158.4 160.8 160.5 162.7 171.7 181.3 192.9 199.8
38.6 40.6 43.9 50.7 67.4 85.0 105.5 124.0 114.0 116.3 114.3 1 2 0 . 2 126.7 132.6 141.6 145.6
10.4 1 0 . 8 11.9 13.9 16.2 17.7 18.6 19.4 20.4 21.3 22.3 24.0 25.8
10.2
10.2
10.2
1.2
1.3 1.3 1.7 2.3 2 . 8
1.2
1.1
2.4
3.2 3.3 3.2 3.1 2.9 2.7 2 . 6
2.6
2.3 6 . 2 1 1 . 6 18.8 24.3 23.5 2 2 . 6 23.5 19.0 2 0 . 8 23.8 24.7 25.9
2.5 2 . 2

a
b
c
d

T o ta l lia b ilitie s ..................................
Consumer..........................................
Mortgage loans...........................
Bank loans other than mtgs............

52.5 54.6 57.6 64.7 85.7 110.2 140.5 167.4 158.4 160.8 161.1 163.5 172.6 182.3 193.9 200.9
5.9 6.5 7.6
5.5 5.8 6.4 7.1 6 . 1
9.6 12.7 15.1 17.0 2 1 . 0 22.7 26.3 29.8
2.9 3.1 3.4 3.8 3.9 4.0 4 .0 4.3
5.8 7.6 9.0 10.0 12.2 13.8 15.4 17.2
2.6 2.7 3.0 3.3 2.2 1.9 2.5 3.4
3.8 5.1 6.0 7.0 8.8 8.9 10.9 12.6

e
f
g
h

Corporate business...........................
Mortgage loans..............................
Bank loans other than mtgs...........
Corporate securities.......................

i
j
k

Nonfarm noncorp. business..............
Mortgage loans..............................
Bank loans other than mtgs...........

7.3
4 .0
3.4

7.2
4.0
3.2

7.1
4.1
3.0

7.4
4.0
3.4

7.4
3.7
3.8

1

Farm business...................................
Mortgage loans..............................
Bank loans other than mtgs...........

1.7
.6
1.1

1.7
.6
1.1

1.9
.6
1.3

2.1

2.0

m
n

.5
1.5

o
P
q
r

Federal Govt . 4 ..................................
State and local govts........................
Banking.............................................
Insurance 5 .........................................

s
t
u

Other investors ...............................
Nonprofit organizations................
Mortgage loans.........................
Bank loans other than m tgs.. .
Savings and loan assns5................
Financial institutions n.e.c A ........

V
w
X

y
z

aa

Rest of the world.............................
Bank loans other than mtgs...........
Corporate securities.......................

bb D iscrep an cy 1**...................................
For footnotes see opposite page.




10.5 10.7 11.4 12.7
1.1 1.1 1.1 1.1
4.4 5.2 6.2 7.8
5.0 4.4 4.1 3.8

10.6

1.0
6.3
3.3

10.5 11.4
.9
.9
6.7 7.6
2.9 2.9
7.1
3.3
3.8

12.8

.9
8.4
3.4

15.7 18.3 19.4 17.8 2 1 . 0 25.9 29.0 29.5
1.2 1.5 1.9 2.2 2.8 3.3 3.6 3.9
10.9 13.1 13.8 11.5 13.9 18.3 20.9 20.9
3.7 3.7 3.8 4.1 4.3 4.3 4.5 4.7

7.5
3.1
4.4

9.2
3 .0
6.1

10.2

11 . 6

3.6
6.6

4.0
7.6

1.8

1.8

.5
1.3

.5
1.4

1.9
.5
1.3

2.1

2.5
.8
1.7

12.7 14.1 17.6 17.5 18.3 19.5
4.4 4.7 5.4 5.9 6.5 7.0
8.3 9.4 12.3 11.6 11.8 12.5
3.8
.9
2.9

4.0
.9
3.1

22 A 23.6 25.0 29.8 54.2 80.0 108.0 129.7 114.4 107.7 101.5
3.8 4.0 4.3 4.2 3.9 3.5 3.6 4.1
4.5 5.3 5.7

.6
1.5

.1

.1

.1

.1

.1

.2

.2

.9
.9

.8

.8

.8

.8

.8

.8

.2

.2
.6

.7
.2
.5

.2
.6

.2
.6

.4

*

.7

.7
.4
.3

.8

*

He

.6

.3
.3

He

He

.5
.3
.3

.8

.8

.5
.2
.2

.8
.2
.6

He

.4
.2
.2

.4
.2
.2

.7
.2
.6

.1
.4
.2
.2

.7
1.4

3.9
1.0
2.9

4.4
1.0
3.4

5.0
1.1
3.9

5.6
1.1
4.5

97.6 98.5 100.7 101.5
8.2
9.3 10.5 1 1 . 2
.2
.2
.3
.3

.2

.2

.2

101.2
6.6
.2

1.3
.6
.3
.3
.1
.6

1.3
.6
.3
.3
.1
.6

1.4
.6
.4
.3
.1
.6

1.7
.9
.4
.5
.2
.6

2.0

.1

.9
.8
.3
.5
.1

.9
.4
.4
.2
1.0

.8
.5
.4
.2
.9

.6

.8

1.2

1.4
1.0
.4

1.2

.9
A

1.3
1.0
.4

1.7
1.2
.5

1.9
1.3
.5

1.0
6

.7

.8

.9

1.0

1.1

1.1

.2

.4
1.0

.8
.2
.6

.5
.2

.6
.2

.8
.4

2.0

1.9
.8
.5
.2

.2
.9
1.6

189

B A N K IN G SECTOR

TABLE 34—MORTGAGES HELD BY TH E BANKING SYSTEM 1
A.
Sector

A n n u a l changes, in billions of dollars

1939

A
B
C
D
E

N et change in a ssets1...................................
Commercial b an k ..........................................
Nonfarm properties, 1-4 fam ily..............
Nonfarm props., multi-family and com...
Farm properties..........................................

*

F
G
H

Mutual savings banks 2 ................................
Nonfarm properties, 1-4 fam ily..............
Nonfarm props., multi-family and com. ..

*
*
*

a
b
c
d
e

N et change in liab ilities3............................
Consumer.......................................................
Corporate business........................................
Nonfarm noncorporate business..................
Farm business................................................

*

or
&

Discrepancy1♦♦................................................
B.
Sector

1940

1941

1942

1943

1944

-.4
-.2

- .2

.2

2.7

-.1

.3

2 .4

2 .2

1.7
.6
.2

1.7
.4
.1

.3

.3

.3

- .3

.3

.3

.3

-.1

.3

.3

.2
.1

*
*
*
*
*

.3
.2
.1
*

*
*

.3
.3

*
*

- . 2
He

-.1
He

*
*

-.2

-.2

-.1

-.1

-.1

-.1
*

.3

- .3

-.4

.4

.1
-.1

- .2
A

-.1

- .3

- .3

*
*

-.1

- .1

.2
.1
.1

He

-.1

-.1

*

-.2
-.1

*

1945

He

He

-.1

He

- .3
He

-.1
He

1946

.2
.1

2.1

1949

1.6

1 .3

1.0
.3

He

He

1950

1951

3.5

2.7

.7

1 .9

.9

.5
.2

1.5
.4
.1
1 .5

.9
.6

1.0
.6

2.7
1.5
.3

2.6

2.1
1.3

1.6

3.6

1.0

2 .2
.6

.6

.4

.3

.3
.3

.2

.1

.1

1.8

.3

.4
He

.1

1 .0

1 .5

.9

.5
.4

.2
.3

2.5

1.1

1 .7

He

1953

2.6
1.0
.1
.1

.7

.4

1952

.8
.2

.4
.3

.1

-.1
.1

2.6

1948

.2
.2

-.1

*

1947

He

.8
.2

1 .6

.9
.6

1.2
.4

2.7

2.6

1.6

1.6

.3

2.5
1.7

.5
.5

.7
.1

H«

.1

*

.6
.1

.2
.5
He
He

*

A m o u n ts o u tsta n d in g a t y ear-en d , in billions of dollars
1938 1939 1940 1941 1942 1943 1944 1945 1946' 1947 1948 1949 1950 1951 1952 1953

T o ta l a sse ts 1 .........................................
Commercial banks..............................
Nonfarm props., 1-4 fam ily..........
Nonfarm props., multi-family and
commercial...................................
Farm properties...............................

8.7
3.9
1.9

9.0
4.2
2.1

9.4
4.5
2.3

9.7
4.9
2.6

9.4
4.7
2.7

8.9
4.5
2.7

8.7
4.4
2.7

9.0 11.6 14.2 16.3 17.9 21.4 24.0 26.6 29.1
4.7 7.2 9.4 10.7 11.4 13.4 14.3 15.4 16.4
2.9 4.6 6.3 7.3 7.9 9.4 10.2 11.1 11.9

1.5
.5

1.6
.6

1.6
.6

1.7
.5

1.5
.5

1.4
.5

1.3
.5

1.4
.5

2.0
.7

2.3
.8

2.6
.9

2.8
.9

3.2
1.0

3.4
1.0

3.5
1.1

3.7
1.1

F
G
H

M utual savings banks 2 .....................
Nonfarm props., 1-4 fam ily. . . . . . .
Nonfarm props., multi-family and
commercial..................................

4.8
2.1

4.8
2.1

4.9
2.2

4.8
2.2

4.6
2.1

4.4
2.0

4.3
1.9

4.2
1.9

4.4
2.0

4.9
2.3

5.6
2.8

6.5
3.4

8.0

9.7
5.3

11.2

12.8

4.3

2.7

2.7

2.7

2.6

2.5

2.4

2.3

2.3

2.4

2.5

2 .9

3.3

3.9

4.5

5.1

a
b
c
d
e
f

T o ta l lia b ilitie s....................................
Consumer............................................
Corporate business.............................
Nonfarm noncorporate business.. . .
Farm business.....................................
Other investors 4 .................................

8.7
2.9

9.0
3.1

9.4
3.4

9.7
3.8

9.4
3.9

1.1

1.1

1.1

1.0

4.0

4.0

4.1

1.1

4.0

.6
.2

.6
.2

.6
.2

.6
.2

3.7
.5

8.9
4.0
.9
3.3
.5

8.7
4.0
.9
3.1
.5

.2

.2

.2

9.0 11.6 14.2 16.6 18.3 21.8 24.5 27.1 29.6
4.3 5.8 7.6 9.0 1 0 . 0 1 2 . 2 13.8 15.4 17.2
.9 1 . 2
1.5 1.9 2 . 2
2.8
3.3 3.7 3.9
3.0 3.6 4.0 4.4 4.7 5.4 5.9 6.5
7.0
.9 1 . 0
.5
.7
.8
.9
1.0
1.1
1.1
.4
.4
.4
.4
.2
.3
.5
.5
.3

g

D iscrepancy 1♦*.....................................

A
B
C
D
E

.3

.4

.4

.5

6.2

.5

7.4
5.5

.5

♦Less than 50 million dollars.
♦♦Excess of liabilities over assets.
!Note 1 , Table 33, applies also to this table. Detail by type of property is gross of reserves beginning 1948.
2 Includes small amount of farm mortgages not shown separately.
3 Includes small amount owed by nonprofit organizations subsector not shown separately.
4Nonprofit organizations subsector.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 178.

Footnotes for Table 33 on opposite page.
♦Less than 50 million dollars.
♦♦Excess of liabilities over assets.
1 Through 1947, bank loans are net of valuation reserves as both assets and liabilities.
Beginning 1948, loans on the liability side are gross
of reserves but loans on the asset side are net of reserves, in conformance with changes in reporting procedures, and sum of liabilities therefore
differs from total assets by amount of such reserves. Changes from 1947 to 1 948 in bank loans outstanding, as shown in Part A of this table,
have been adjusted to eliminate effect of this change in reporting.
2 Includes holdings of Federal obligations by Exchange Stabilization Fund too small to be shown separately.
3 Includes paid-in capital of Federal Reserve Banks not shown separately.
4Prior to 1947, bonds of Federal Land Banks are included in Federal obligations and beginning 1947, in miscellaneous liabilities of financial
institutions n.e.c. subsector. In 1951 there was a similar shift in classification of the Federal Home Loan Bank bonds. The 1947 and 1951
figures on lines o and x reflect these shifts in sector classification. Both shifts reflect termination of Federal Government equity in these banks.
5Bank loans other than mortgages.
^Includes loans to savings and loan associations subsector not shown separately.
7 Mainly bank loans other than mortgages.
in clu d es bank holdings of foreign securities not shown separately.
N o t e .—Details may not add to totals because of rounding.
For description of table, see p. 178.




190

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

TABLE 35—BANK LOANS OTHER THAN MORTGAGES, BY SEC T O R 1
A.
Sector

1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953

A
B
D

Net change in assets2 3................................
Commercial ban k ..........................................
Federal R eserve............................................

a
b
c
d

Net change in liab ilities2 ............................
Consumer.......................................................
Corporate business........................................
Nonfarm noncorporate business.................

e
f
h

Farm business................................................
Insurance........................................................
Other investors..............................................
Rest of the world..........................................

i

Discrepancy1♦♦................................................

K

Annual changes, in billions of dollars

B.
Sector

.6
*

.6

.6
.1
.8
- .2

*

1.3
1 .3
*
1.3
.4
1.0
-.1

2.6 - 2 . 4
- 2 .4
*

- .1

2.6 - 2 . 4
.3 - 1 . 1
1.7 - 1 .5
.4
.3

2.6

*

.2

-.1
-.1

-.1
-.1

*

2.5
2.5
*

4.0
3.9
*

3.0
2.9

- .1
- .3
.4
*

2.5
.5
.9

4.0
.9
.9

3.0
.5
2.4
.4

4.8

.6

2.2
1.1

.1

.3

1.2

.2

- .2
.2

-.1
.2

-.1

*

.2

*

- .2

*

.1

*
*

*
*

*
*

.6

1.8

.4

*
*

.1

—.4
.1
.2

- .2
.1

4.8
4.9
-.1

1.2
2.2
1.0

3.3
3.1
.1

3.3
.8

.5 -

- .3
- .2
-.1

- .2
.9

*
- .2

.1

7.3
7.3
- 1.

4.6
4.6
*

5.3
5.3
*

2.5
2.5
*

7 .4
1.9
2.4
2.9

4.6

5.4

.1

2.0

4.4

2.7

2.5
1.7
*
.7

- .6

.2
.1

.1

.2

.5

-.1

*

.5
*

.3
*

.6
-.1

.1

*

- .3
*

A m ounts outstanding at year-end, in billions of dollars
1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953

A
B
C
D

Total assets3.........................................
Commercial bank...............................
Mutual savings ban k ........................
Federal Reserve.................................

12.5 13.1 14.4 16.9 14.6 14.5 17.0 20.9 23.9 28.7 32.0 31.7 39.0 43.5 48.9 51.4
12.4 13.0 14.3 16.8 14.5 14.4 16.9 2 0 . 8 23.7 28.6 31.7 31.5 38.9 43.4 48.7 51.2
.1
.1
.1
.1
.1
.1
.1
.1
.1
.1
.1
.2
.1
.1
.1
.1
*
*
*
*
*
*
*
*
*
*
*
*
.1
.1
.2
.1

a
b
c
d

Total lia b ilities2..................................
Consumer............................................
Corporate business............................
Nonfarm noncorporate business. . . .

12.5 13.1 14.4 16.9 14.6 14.5 17.0 20.9 23.9 28.7 32.3 32.1 39.5 44.1 49.5 52.0
2.6
2.7 3.0 3.3 2 . 2
1.9 2.5 3.4 3.8 5.1 6 . 0
8.9 10.9 1 2 . 6
7.0 8 . 8
4.4 5.2 6 . 2
7.8 6.3 6.7 7.6 8.4 10.9 13.1 13.8 11.5 13.9 18.3 20.9 20.9
3.4 3.2 3.0 3.4 3.8 3.8 4.4 6 . 1
6.6
7.6 8.3 9.4 12.3 1 1 . 6 1 1 . 8 12.5

e
f
g
h

Farm business....................................
Insurance.............................................
Other investors...................................
Rest of the world...............................

i

Discrepancy1*♦.....................................

1.1

.7
.4

1.1

1.3

1.5

1.5

1.3

1.3
.4

1.4

1.7

2.9

3.1

2.9

3.4

3.9

.5
.3

1.4
.4

.6

.6
.2

.6
.2

.6
.2

.6
.2

.8

.6
.6

.4

.4
1.0

.6
1.0

.6
1.2

.6

.8

.4
.9

1.3

1.0

.4

.4

.5

.5

.6

.6

.3

.5

4.5
.5

♦Less than 50 million dollars.
♦♦Excess of liabilities over assets.
1Note 1 of Table 33, p. 189, applies also to this table. For details on type of bank loan owed by each sector, see Table 75, p. 333.
2Note 6 of Table 32, p. 187, applies also to this table.
3 Includes small amount of mutual savings bank loans other than mortgages, not shown separately.
N o t e . —Details may not add to totals because of rounding. For description of table, see p. 178.

Footnotes for Table 36 on opposite page.
♦Less than 50 million dollars.
1 Includes loans and advances to CCC, classified as bank holdings of Federal debt in Treasury statistics and in flow-of-funds accounts, but as
commercial and industrial loans in banking statistics. Shown separately in line L.
2As classified in banking statistics. See note 1.
3Line E includes bank holdings of Federal Land Bank bonds through 1946, and of Federal Home Loan Bank bonds through 1950, after which
the bonds are shifted to line H as liabilities of financial institutions n.e.c. subsector.
4As classified in banking statistics. Principally stock of domestic corporations; also includes foreign stock and member bank holdings of
stock in Federal Reserve Banks.
5Grouped by flow-of-funds transaction category for each subsector. For the consolidated banking sector the relation between these cate­
gories and banking statistics groupings of bank investments shown above is as follows: Federal obligations—lines B + E + L ; State and local
obligations—line C; corporate securities—lines F +G +K ; miscellaneous financial assets—lines H + / . Includes small amounts of Federal obliga­
tions held by the Exchange Stabilization Fund but not shown separately.
6Federal obligations.
7 Includes changes in banking sector liability for Federal Reserve Bank paid-in capital not shown separately.
8Includes small amount of foreign stock not shown separately.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 178.




191

B A N K IN G SECTOR

TABLE 36—SECURITIES AND O THER INVESTM ENTS HELD BY TH E BANKING SECTOR
A. Ann ual changes, in billions of dollars
1939 1940 1941
A
B
C
D
E
F
G
H

Total bank in ve stmen ts1 ..........................
U. S. Govt, direct and fully guar, obligs. 2 .
Oblig. of State and local govts...................
Other bonds, notes, and debentures..........
U. S . Govt. sec. not guar*.......................
Foreign bonds............................................
Domestic bonds..........................................
Other bonds3 ............................

1.1
1 .4
.2
-.5
.1
*
- .5

1.4
1.3
.3
-.2
.1
*
- .3

Corporate stocks 1 ........................................
finvt J

-.1

*

Memoranda:
M Banking subsector in vest.5......................
Commercial banks.......................................
N
O
Federal obligs.............................................
P
State and local obligs.................................
Corporate securities..................................
Q
R
Misc. finan. assets....................................

1.1
1.1
1.3
.2
- .4

1.4
1.7
1.6
.3
-.2

S
T
U
V

Mutual savings banks.................................
Federal obligs.............................................
State and local obligs.................................
Corporate securities..................................

.2
-.1
- . 1

W
X

Postal Savings System 6 ..............................
Federal Reserve 6 .........................................

.1
-.1

Y
Z
a
b
c
e

Issuing flow-of-funds sector7..................
Federal Govt................................................
State and local govt....................................
Corporate business......................................
Rest of the world........................................
Other investors 3 ..........................................

1.1
1.5

I
L

O t h e r i m a r . n h l if f s . o f F f> rl

*

*

*

*

.2

- .6

*

.1
*
-.1
- .3
1.4
1. 4
.3
-.3
*

1946

1947 1948 1949 1950 1951 1952 1953

4.2 23.7 25.0 28.1 22.6 - 1 4 .7 - 5 . 0 - 5 . 7
4.7 24.4 25.7 27.8 21.4 - 1 5 . 3 - 6 . 0 - 6 . 4
.4
-.2 -.3 -.4
.4
.4
.1
.9
*
-.2 -.4 -.4
.4
.6
.5
.3
*
*
.1 *
.1
.3 - . 4
.2
*
*
He
He
*
*
.2 He
He
- .3 - .4 - .3
.3
.1
.5
.1
.6 He
He
*
He
He
He
*
-A
-.1
He
.1
.2
.2
—.3 - . 2

1.0 - 1 . 8
- .2 -3.9
.9 1.6
.3
.5
.4
-He1
He

4 .2 23.7 25.0 28.1 22.6 - 1 4 .7 - 5 .0 - 5 . 7
3.9 19.1 18.0 18.0 14.3 - 1 5 . 4 - 4 . 8 - 6 . 5
4.1 IP .6 18.6 17.9 13.3 - 1 5 .8 - 6.2 - 6 .5
*
- .1 - .3
.2
.5
.4
.4
.9
He
.1 - . 1 - . 4
- .3 - .3 - .4
.4
*
*
He
He
He
*
.6 He

1.0 - 1 . 8
5.5 - 2 . 8
4.3 - 4 .6
.9 1.6
.2
.2
.1 He

.2
.5
-.2
-.1
*

*

1942 1943 1944 1945

.1

.6
.9
-.1
-.2

1.3
1.5
-.1
-.1

2.2
2.2
-.1

.1
3.9

.4
5.4

.5
7.3

He

2.4
2.4

He

1.3
1.1

He

.5
He

.2

.3

.6
5.4

.3
-.9

A
-.8

He
He

He

He

- .4
.1
-.1
.3
He

A

3.7
2.2
1.2
.2

He

He

He

./
.1
.1

1.9
.9
.7
.2

He

He

He

./
.2
.1

2.4
.4
- .9
1.1
-.1
.4

3.7
2.6
1.8
1.0
-.2

-.6 -.8
- . 6 - 1.0
He
.1
-.1
.2

.2
- .4
.2
.5

.3
-.2
.1
.4

-.2
1.9

-.2
3.0

-.1
.9

-.2

1.0 - 1 . 8
- . 4 -3.5
.9 1.6
.4
.2

2.4
.8
1.1

3.7
2.2
1.2
.2
.1

A
-.1

.5

.1

He

-.1 - A
.8 - 4 . 4

4 .2 23.7 25.0 28.1 22.6 - 1 4 .7 - 5 .0 - 5 . 7
4.7 24.4 25.8 27.9 21.7 - 1 5 . 3 - 6 . 6 - 6 . 2
.1
.4
.4
-.2 - .3 - .4
.9
.4
He
He
.2
-.3 -.4 - .4
.5
.1
*
He
H<
He
*
*
He
.2
.6 He

.1

He
He

.1
- .4
He

.1

.4
.1

2.4
1.2
1.1

He

He

He

.1

.1
.3

He

He

He

1.9
.6

He
He
He

.6

1 .2

1.9
.9
.7
.3
.1

He

B. Amounts outstanding a t year-end in billions of dollars
1938 1939 1940 1941
A
B
C
D
E
F
G
II

I

J

K

L

Total bank inve stmen ts1 .............
U. S. Govt, direct and fully guar.
obligs. 2 .........................................
Oblig. of State and local govts__
Other bonds, notes, and debents..
U. S. Govt. sec. not guar.3 ..........
Foreign bonds..............................
Domestic bonds............................
Other bonds3 ................................
Corporate stocks 8 ..........................
Federal Reserve stock..................
Stock of domestic corps...............
Other guar, obligs. of Fed. Govt. 1

Memoranda:
M Banking subsector in vest.1
N
Commercial bank...............
O
Federal obligs...................
P
State and local obligs.......
Q
Corporate securities.........
R
Misc. jinan. assets...........

1942 1943 1944 1945

1946

1947 1948 1949 1950 1951

1952 1953

31.3 32.4 33.8 38.0 61.8 86.8 114.8 137.5 122.8 117.9 112.1 113.1 111.3 113.7 117.4 119.3
21.7 23.1 24.4 29.0 53.5 79.2 107.0 128.4 113.1 107.1 100.7 100.5 96.6 97.8 100.0 100.9
4.5 5.3 5.7 6.6 8.2 9.3 10.5 11.2
3.8 4.0 4.3 4.2 3 .9 3.5 3.6 4.1
4.5 4.9 5.2 5.5 6.0 6.0 6.1
6.3
5.1 4.6 4 .4 4.2 3.7 3.3 3.4 4.0
.7
.6
.7
.7
.7 1 .0
.6
.7
.8
1 .0
.8
.6
.7
.4
.5
.8
.2
.2
.2
.2
.2
.2
.2
.4
.4
.4
.6
.4
.5
.3
.3
.5
3.3 3.4 3.4 3.8 4.0 3.9 4.0 4.2
4.3 3.8 3.5 3.2 2.8 2.5 2.5 3.0
.6
.6
.6
.6 1.0
.9
.9

.7
.3
.5

.8
.3
.6

31.3 32.4 33.8 38.0 61.8 86.8 114.8 137.5 122.8 117.9 112.1 113.1 111.3 113.7 117.4
22.3 23.4 25.1 29.0 48.2 66.1 84.2 98.4 83.1 78.3 71 .8 77.2 74.4 74.9 77.5
15.5 16.8 18.4 22.5 42.1 60.7 78.5 91.9 76.0 69.9 63.4 67.7 63.1 62.2 64.0
4.4 5.3 5.7 6.5 8.1 9.2 10.2
3.1 3.4 3.7 3.7 3.6 3 .3 3.5 4.0
2.5 2.4 2.0 2.2 2.4 2.3 2.1
3.5 3.1 2.9 2.6 2.4 2.0 2.0 2.4
.2
.2
.2
.1
.1
.1
.1
.2
.8
.8
.8 1.2 1.2
.8
.1

119.3
78.1
64.0
10.8
2.1
1.2

.8
.1
.6

.7
.1
.6

.7
.1
.6

.7
.1
.5

.6
.1
.5

.6
2
.4
.2

.5
.2
.4
.5

.5
.2
.3

.2

He

.5
.2
.3

.5
.2
.3
He

.5
.2
.3
He

He

.6
2
.3

.6
.2
.4
He

He

S
T
U
V

Mutual savings ban k . .
Federal obligs.............
State and local obligs..
Corporate securities. ..

5.3
2.9
.7
1.7

5.3
3.1
.6
1.6

5.3
3.2
.6
1.5

5.5
3.7
.4
1.3

6.1
4.6
.3
1.2

9.6 11 .9
8.3 10.7
.1
.1
1.1 1.2

13.2 13.7 13.8 13.9 13.2 12.4 12.7 12.9
11.8 12.0 11.6 11.5 10.9 9.8 9.5 9.2
.1
.1
.1
.1
.1
.1
.3
.4
1.3 1.7 2.2 2.3 2.3 2.4 2.9 3.3

W
X

Postal Savings System6.
Federal Reserve®............

1.1
2.6

1.2
2.5

1.2
2.2

1.3
2.3

1.7 2.3 2.8
1.3
6.2 11.5 18.8 24.3

2.9 2.6 2.6 2.4
3.2 3.3 3.2 3.1
23.4 22.6 23.3 18.9 20.8 23.8 24.7 25.9

Y
Z

Issuing flow-of-funds sector.
Federal Govt...........................
State and local govt............... .
Corporate business..................
Rest of the world...................
Banking sector.........................
Other investors 3 ..................... .
For footnotes see opposite Page.




7.4
6.1
.2
1.1

.6
.2
.4
.3

31.3 32.4 33.8 38.0 61.8 86.8 114.8 137.5 122.8 117.9 112.1 113.1 111.3 113.7 117.4 119.3
22.1 23.6 25.0 29.8 54.2 80.0 108.0 129.7 114.4 107.7 101.5 101.2 97.6 98.5 100.7 101.5
4.5 5.3 5.7 6.6 8.2 9.3 10.5 11 .2
3 .8 4.0 4.3 4.2 3.9 3.5 3.6 4.1
3.7 3.7 3 .8 4.1 4.3 4.3 4.5 4.7
5.0 4.4 4.1 3.8 3.3 2.9 2.9 3.4
.4
.4
.4
.2
.2
.2
.2
.2
.2
.4
.5
.6
.5
.3
.3
.3
.2
.2
.2
.2
.2
.2
.2
.2
.2
.3
.1
.3
.1
.1
.1
.1
.6
.6
.6 1. 0
.9
.9
.6

192

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

TABLE 37—CURRENCY AND DEPOSITS
A. Annual changes, in billions of dollars
Sector
A
B
C
D
E
F
G

Net change in liability (of the banking
sector).......................................................
Currency outside banks..............................
Demand deposits adjusted 1 .......................
Time deposits adjusted 2 ............................
Commercial banks....................................
Mutual savings banks..............................
Postal Savings System.............................

H
I
J
K

U. S. Govt, balances...................................
A t Federal Reserve Banks........................
A t com. and mut. svgs. banks..................
Treasury cash...........................................

1939 1940 1941 1942 1943 1944 1945
5.2
.6

3.8
.8

*

.5
.2

6.9
.9
5.2
.7
.5
.1
*

- . 6

- . 6

1.6

- .3
*
- .3

- .3
-.1
-.2

.5
1.1
*
- .4

L

Foreign bank deposits, n e t........................

.6

.7

a
b
c
d
e

Net change in assets3................................
Consumer.....................................................
Corporate business......................................
Nonfarm noncorporate business................
Farm business..............................................

5.0
2.7
1.0

6.1
2.1
2.2

.4

.7

.2

.2

f
g

Federal Govt. 4 ............................................
A t Federal Reserve Banks........................
A t com. and mut. svgs. banks..................
Other currency and deposits.....................

- .7
- .4
*
- .3

— .3
-.2
-.2

State and local govts...................................
Insurance 5 ....................................................
Life insurance companies........................
Other insurance companies......................

-.1

h

i
j
k
1

n
o
P

q
s
t
u
V

Other investors 6 ..........................................
Nonprofit organizations...........................
Savings and loan associations.................
Rest of the world 3 ......................................
Discrepancy..................................................
Timing difference7 ......................................
Other 8 ...........................................................
For continuation of table, see opposite Page.




7.6 21.5 23.7 28.0 24.8
2.3 4.3 4.9 4.7 3.0
8.9
4.0 9.9 11.9 6 . 1
*
.7 4.3 7.0 8.7
.1
.5 2.9 4.8 6.1
-*. 1 .1 1.1 1.6 2.0
.1
.4
.6
.6

- . 6

.4
.3
.1
.1

.3
.2
.2
*

*

.2
.2

.1

*

.1

.8

.7

.2
.2

.8
.8
*

6.4
- .1
6.5
*
.1

7.0
3.5
.9
.5
.5

20.1

1.7
.6
1.2
*

7.3
.5
6.7
.1

.4

.2
-.3
-.2
-.1

-.1

-.2
*
*
*
*
- .4

1.9 10.3
-.2 - .1
2.0 10.3
.1
.1
.6

-.1

1946

1947 1948 1949 1950 1951 1952 1953

- 9 .1
.2

7.5
5.5
3.7
1.5
.4

4.3 - 22.1 - 2 . 1
.5
-.6
.5
3.8 - 2 1 .5 - 1 .7
*
- .9
-.1
*
- .3 -.2

22.7 28.1 24.3 - 1 0 .5
6.3 10.5 13.9 14.2
7.8
3.7 4.3
.4 - . 3
1.0
1.9 3.0 1 . 6
2.9
.8
1.4 1.4 1.4
1.0
.6
1.9 10.3
-.1 -.1
1.9 10.3
.1
.2
.4
.2

*

.1

.1
.1

-.1

*

-.2
*

.4
.3

.4

.7

.6

.5

1.4
1.3

.9

.1

.1

.2

.7

.7

.5

- .1
♦
- .1
-.1
.1

2.1
-.2
-.2

.1

*

.1
.6

*

.6
.3

.6

.5
.1

.2

.9
.4
.2
.2

.3
.2
.1
.5

*
*
*
- .3

1.1
.2

*

1.3 1.3
*
-

1.2

.3
1.0
*
.4

4.9
2.7

4.4 - 2 2 . 8 - . 6
.3 - 1.0
.3
3.8 - 2 1 .5 - 1 .7
.2
- .3
.8

.2
- .2

.2

3.7
.8
- .3 - .4
3.8 - 1 . 6
2.5 1 . 1
1.4
.6
.9
.6
.1 - . 1

1.2
.6
1.8

-

1.3
- .4 .3

1.2

- .7

1.1

*

.2
.9

5.0
.9
4.6
3 .0
1.8
-.2

1.8

- 1 .4
*
-.8
- .5

1.5
.9
-.2

.5
— .3
.8
*

- .4
-.2
- .3
*

.2
- .4
.6
*

.1
1.6
*

.6
.2

*

.4
.7

3.7

1.1
1.2

1.2

.3

1.7
.8

6.0
2.2

-.2

.2

.2

5.0
4.4

1.8
1.2

-.5

.4

.5
- .3
.7
.1

- .3
-.1
-.2
.1

- .4
.4
.1

.4
*

.1
*

*

.1

-.1
.1

*
-.2
.1

- .5
- .5

.4
.4

3.4
3.4

*

*

.1

.6
.2

.1

.1

*

.6

8.9 11.3
7.4
4.1

- .6

.3
.2
.1
.5

*

10.8
1.2

.7
- .3

.8

*
-.1
*

9.0
.9

.3
.9
-.1

1.0

- .3

7.1
*
6.5

3.3
4.3
2.8
1.7
-.2

.2
1.1

.6
.2

*

.1

.2

*

.6
.2

.4

1.0
.2

.1
.1

.1
.6

.4
.1

.5

.1
.1

.1

*

1.9 - 1 . 6
.1 - . 1
1.7 - 1 .0
.1 - . 5

.6

-.1

*

.6

- .5

*

.4
- .5
- .4
-.1

.2
.1
.3

*
.1
-.1

193

B A N K IN G SECTOR
T A B L E 37—C U R R E N C Y A N D D EPO SITS— Continued
B. A m ounts outstanding a t year-end, in billions of dollars
Sector

1938 1939 1940 1941 1942 1943 1944 1945
63.2
5.8
26.0
26.3
14.8
10.3
1.3

68.4
6.4
29.8
27.1
15.3
10.5
1.3

75.2
7.3
34.9
27.7
15.8
10.7
1.3

H
I
J
K

U. S. Govt, balances........................
A t Federal Reserve Banks.............
A t com. and mut. svgs. banks. . . .
Treasury cash................................

4.5
.9
.9
2.7

3.9
.6
.8
2.4

3.3
.4
.8
2.2

5.0 11.4 13.3 23.6 27.9
.4 1.0
.9
.8
.6
1.9 8.4 10.4 21.8 24.6
2.2 2.2 2.3 2.4 2.3

Foreign bank deposits, n e t..............

.6

1.2

1.9

1.5

L

Federal Govt . 4 ..................................
A t Federal Reserve Banks.............
A t com. and mut. svgs. banks. . . .
Other currency and deposits..........

1.0
1.0
.8

j
k

State and local govts........................
Insurance...........................................
Life insurance companies.............
Self-admin, pension plans............
Other insurance companies...........

m
n
o
P
q
r
s

t
u
V

2.3

2.2

2.1

5.8
.4
3.1
2.3

3.7
.9
1.5
1.3

4.9
1.1
2.5
1.3

5.4
.8
3.2
1.3

1.9

1.7

2.1

2.2

Total assets3....................................... 59.8 64.8 70.8 77.9 98.0 120.7 148.8 173.1 162.6 167.5 168.8 169.6
Consumer.......................................... 33.3 36.0 38.1 41.6 47.9 58.5 72.4 86.5 94.3 97.0 96.6 95.5
9.7 1 0 . 8 13.0 13.9 17.5 2 1 . 8 2 2 . 2 2 2 . 0 23.0 25.1 25.5 26.7
Corporate business...........................
Nonfarm noncorp. business............
4.7 5.1 5.8 6.3 8.2 1 1 . 2 1 2 . 8 15.7 16.5 16.3 15.3 15.6
8.4 8 . 2
2.6
7.9 7.3
1.7 1.9 2 . 1
3.6 5.0 6.3 7.8
Farm business. . . .............................

f
g
h
i

1

1.6

128.f
18.8
60.8
32.7
19.2
11.7
1.8

1947 1948 1949 1950 1951 1952 1953

180.8 171.7 175.3 176.1 177.3 184.4 193.4
26.5 26.7 26.5 26.1 25.4 25.4 26.3
75.9 83.3 87.1 85.5 85.8 92.3 98.2
48.5 54.0 56.4 57.5 58.6 59.2 61.4
30.1 33.8 35.2 35.8 36.1 36.3 37.9
15.4 16.9 17.7 18.4 19.3 20.0 20.9
3.3 3.4 3.3 3.2 2.9 2.7
2.9

Liability (of the banking sector). . .
Currency outside banks..................
Demand deposits adjusted 1 ............
Time deposits adjusted 2 ..................
Commercial banks..........................
Mutual savings banks...................
Postal Savings System..................

a
b
c
d
e

104.3
13.9
48.9
28.4
16.4
10.7
1.4

156.0
23.5
66.9
39.8
24.1
13.4
2.3

A
B
C
D
E
F
G

82.8
9.6
39.0
27.7
15.9
10.5
1.3

1946

2.8

3.3
1.0
2.0
.3

10.6

12.5 2 2 . 8 27.2
1.5 1.4 1.3 1.7
8.7 10.6 20.8 24.6
.4
.7
.5
.9

4.4
.7
3.2
.5

4.0
1.9
1.0
*
.8

4.4

.9

4.6
1.5
.7
*
.7

1 .6

1.6

1.8

2.2

1.6

.7
1.0
.5

.4
.8
.3

3.7
1.3
.8
*
.5

3.6

Other investors.................................
Nonprofit organizations................
Savings and loans assns................
Financial institutions n.e.c...........
Rest of the world 3 ...........................

1.2

1.4
1.1
.2
.1

D iscrepancy........................................
Timing differences7 ..........................
O ther 8 ................................................

3.4
1.3

3.6
1.4

2.1

2.1

.9
.2
.1
1.4

1.6

*

.9
.7

2.2

1.2
.3
.2
2.9
4.4
2.2
2.1

1.8

*

.9

5.0
1.6

*

.9
.7

5.2
1.5
.7
.1
.7

5.8
1.5
.8
.1
.7

6.9
1.7
.8
.1
.9

204.2
27.5
101.5
65.8
40.7
22.6
2.5

209.2
28.1
102.5
70.4
43.7
24.4
2.4

5.0
.7
3.0
1.3

5.1
.2
3.6
1.3

6.9
.4
5.3
1.3

5.6
.3
4.5
.8

2.5

2.3

2.5

2.7

173.2 182.2 193.5 198.5
96.7 1 0 0 . 8 108.2 1 1 2 . 6
28.3 30.2 30.7 30.8
16.4 17.6 17.1 17.5
7.2 7.4 7.3
6.8

5.0
1.2
2.4
1.4

5.5
.9
3.1
1.5

5.2
.8
2.9
1.5

5.4
.5
3.3
1.6

7.3
.6
5.1
1.7

5.7
.5
4 .0
1.2

7.8

8.5
2.1

9.5
2.4
1.0
.2
1.2

10.1
2.6

10.6
2.8

.9
.1
1.1

8.9
2.2
.9
.1
1.2

11.6

2.2

1.1
.3
1.3

3.0
1.2
.4
1.4

3.6
2.7
.7
.2
4.2

4.2
3.1
.8
.3
4.1

4.8
3.6
.9
.3
4.5

5.0
3.7
.9
.4
4.8

3.9
1.0
1.5
1.4
1.0
.1
1.1

1.1
.2
1.2

1.2
.3
.2
2.5

1.2
.4
.1
2.4

1.6
.4
.1
3.1

2.1
.4
.1
3.1

2.6

3.1
2.6
.4
.1
3.4

3.4
2.8
.5
.1
3.9

3.4
2.8
.5
.2
3.6

3.7
3 .0
.5
.2
4.1

3.7
2.9
.6
.2
4.1

5.0
2.7

6.3
4.0
2.3

7.2
4.7
2.5

7.2
4.6

7.7
5.0
2.7

9.1
6.4
2.7

7.8
6.9
.9

7.3
6.4
.9

7.8 1 1 . 1 11.3 10.7 10.7
6.9 10.3 10.4 1 0 . 0 1 0 . 0
.9
.9
.8
.7
.9

2.2

2.1

2.6

♦Less than 50 million dollars.
1 Demand deposits other than interbank and U. S. Government, less cash items in process of collection.
2 Excludes interbank time deposits, U. S. Treasurer’s open account time deposits, and deposits of Postal Savings System in banks.
3Sector balances include some holdings of foreign currency and deposits. In this table liability for these holdings have been netted against
rest of the world holdings' of balances in the United States and do not affect the total of currency and deposits. Rest of the world assets and
liabilities in this category are shown separately in Table 46, p. 230, and Table 73, p. 316.
4For description of the flow-of-funds concept of Federal Government cash balances, see Ch. 6 , pp. 131 and 143.
6Includes small amount held by self-administered pension plans subsector not shown separately.
•Includes small amount held by financial institutions n.e.c. subsector not shown separately.
7 Mainly mail float.
8Arises mainly from treatm ent of gold claims of Exchange Stabilization Fund in consolidation of the banking sector and from treatm ent of
lost and destroyed currency.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 178. See also Table 26 on p. 180 with discussion
on pp. 173-76, and discussion of Table 73 in Ch. 16.




CHAPTER 9
INSURANCE SECTOR

The insurance sector covers all domestic
insurance companies, self-administered pen­
sion plans, and the insurance activities of
fraternal orders. The sector is divided into
three subsectors—the life insurance com­
panies subsector, the self-administered pen­
sion plans subsector, and the other insurance
companies subsector. The full sector state­
ment of sources and uses of funds presented
in Table 38 on page 207 is a combination of
the individual subsector accounts, which are

presented in Tables 39, 40, and 41 on pages
208 and 209.
No description of the sector coverage, trans­
action coverage, or the line-by-line contents
of the sources and uses statement is given for
the insurance sector as a whole. All such
descriptions are given below for each sub­
sector separately. The derivations of in­
surance premium and benefit transactions are
described in Chapter 13.

L IF E IN S U R A N C E C O M PA N IE S SU BSECTO R

The life insurance companies subsector
comprises the legal reserve life insurance
companies whose income, expenses, and bal­
ance sheets are reported in the Life Volume
of the Spectator Insurance Year Boo\. The
subsector account covers not only life insur­
ance activities but also activities of the acci­
dent and health departments of life insurance
companies, including those accident depart­
ments whose income and expense statements
are reported in the Fire and Casualty Volume
of the Year Boo\.
The subsector account records, to the ex­
tent possible, all the transactions in which
the companies in the subsector engage.1
Premiums and investment income are the
principal sources of funds; and benefits,
operating outlays, and acquisition of finan­
cial assets are the principal uses of funds.
Premiums and benefits are recorded in
their full amounts as nonfinancial transac­
tions. Benefits are not netted against pre­

miums and no specific identification is made
in the flow-of-funds subsector account of
any “saving” element in the premium and
benefit transactions. As a consequence of this
gross presentation of premium and benefit
flows, liabilities to policyholders in the form
of policy reserves are not treated as flow-offunds transactions. These reserves represent
life companies’ internal bookkeeping alloca­
tion of premiums and do not represent addi­
tional funds flowing from policyholders to
life companies.2 Some transactions between
life insurance companies and policyholders
and beneficiaries are recorded as financial
transactions in the subsector account. (See
description of deposit liabilities on page 196).
Wherever possible, the nonfinancial trans­
actions of the subsector are shown gross; thus,
premium receipts are gross, before any de­
duction for dividends applied against pre­
miums or for commissions to agents and

8 While not part of the subsector sources and uses of funds
1 No data arc available on reinsurance transactions between
life insurance companies and such transactions are not re­ statement, policy reserves are shown as a memorandum in
Table 39.
corded in the subsector account. Sec discussion on p. 195.




194

IN S U R A N C E SECTOR

brokers; and investment income is gross of
investment expenses. Correspondingly divi­
dends applied, commissions, and expenses
are shown as uses of funds. However, avail­
able data do not permit presentation of gross
flows in all instances. Thus in life insurance
company records, premium receipts (from
direct writing of policies and from reinsur­
ance of policies written by other companies)
are presented net of premiums paid by life
companies for reinsurance and the reinsur­
ance premiums paid are not shown as an
outlay. Similarly benefits received under re­
insurance contracts are netted against benefit
payments by life companies. Such reinsur­
ance flows are assumed to take place within
the life companies subsector. Thus neither
the receipt nor the payment of reinsurance
premiums and benefits appears; and pre­
mium receipts represent only those from di­
rect writings and benefit payments represent
only those to beneficiaries.
The treatment of transactions in connec­
tion with life insurance in the flow-of-funds
accounts differs markedly from that in the
national income accounts. The differences
have already been discussed in connection
with the insurance transactions of the con­
sumer sector (see Chapter 2, page 42). The
differences are also reflected in the treatment
of life insurance companies.
In the flow-of-funds accounts, life insur­
ance companies are treated as a separate sub­
sector; in the national income accounts, life
insurance companies are part of the consoli­
dated business account. The flow-of-funds
account for life companies records all their
transactions with other sectors. The national
income accounts record no premiums or
benefits for life companies. Instead they re­
cord an imputed sale of services equal to
the costs of operations of the life insurance
activities of the companies plus the profits




195

of incorporated companies, and an imputed
payment of interest equal to their investment
income. The flow-of-funds account does not
record such imputed transactions.
L if e I n s u r a n c e C o m p a n ie s St a t e m e n t

The sources and uses of funds statement
for the life insurance companies subsector
is presented in Table 39 on page 208.
Nonfinancial sources of funds (line A)
consist principally of insurance premiums
and investment income. Receipts from sales
of foreclosed properties, insurance benefits,
and miscellaneous receipts are also included.
The total of nonfinancial sources is obtained
by adjusting total income as presented in the
Spectator Insurance Year B oo\ to a flow-offunds basis. These adjustments are described
in a technical note on page 199.
Interest (line B), dividends (line C), and
rents (line D ) represent life insurance com­
panies’ returns on their investments in mort­
gages, in government and private securities,
and in real estate. These receipts are re­
corded gross of investment and real estate
expenses.
Insurance premiums (line E) are the re­
ceipts from direct writing of several general
types of policies. The bulk of premiums is
received from the consumer sector but the
total also includes payments by employers in
connection with various employee insurance
programs, that is, retirement, accident and
health, and group life insurance. The pre­
miums are recorded gross of dividends to
policy-holders and of commissions (both of
which are recorded as uses of funds in the
subsector account).
Lines F through H present a classification
of premiums by type of policy. Premiums
from life policies, annuities, etc. (line F)
consist mainly of life and annuity premiums,
including receipts for disability and double

196

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

indemnity provisions and for insured pen­
sion plans. Receipts from supplementary
contracts involving life contingencies are also
entered here. Accident and health policy
premiums (line G) are the receipts of the
accident departments of all life companies.
Other premiums (line H ) are receipts of
life companies for workmen’s compensation,
automobile insurance, and other property
insurance.
N et receipts from real estate transfers
(line I) represent sales of properties acquired
through foreclosure net of the acquisition
of properties through current foreclosures.
Receipts from sales of other goods and
services (line J) represent all nonfinancial
receipts of the subsector not classified in the
foregoing categories. The series is computed
as the difference between total nonfinancial
sources (line A ) and the estimates on lines
B through E and I. It is roughly equivalent
to the Spectator item “other receipts.” Ex­
amination of detailed statements for a
few companies indicates that the method of
computation of this item undoubtedly picks
up some elements that are inappropriate
for inclusion in the flow-of-funds statement.
Data on the inappropriate elements are not
available; presumably the amounts involved
are small.
N et increase in liabilities (line K ) con­
sists of net funds obtained from bank bor­
rowing and from deposits left with insur­
ance companies by consumers.
Ban\ loans other than mortgages (line L)
comprise loans to insurance companies in
connection with purchases of Federal obli­
gations. The only information available re­
lates to loans made in 1944 in connection
with one of the war loan drives and repaid
in 1946.
Miscellaneous liabilities (line M) consist
of deposit liabilities in connection with divi­




dends which policyholders leave with in­
surance companies to accumulate interest,
and in connection with proceeds of policies
left on deposit by beneficiaries—supplemen­
tary contracts not involving life contingen­
cies.
Supplementary contracts arise when bene­
ficiaries leave the proceeds of policy settle­
ments with insurance companies to be repaid
in definite instalments, with interest. Both
in flow-of-funds accounts and in insurance
company accounts, the full amount of the
policy settlement is recorded as a benefit
payment. In insurance company account­
ing, amounts not withdrawn by beneficiaries
are recorded as nonfinancial nonpremium
receipts, and actual distributions of instal­
ments to beneficiaries are shown as non­
financial nonbenefit payments. In the flowof-funds accounts, the amounts not with­
drawn by beneficiaries and the distribution
of instalment payments are treated as
changes in financial claims by the consumer
sector against the life insurance subsector,
that is, as transactions in a deposit balance.
The net of these “deposits” on supplementary
contracts less instalment payments appears
in the flow-of-funds accounts as increased
financial liabilities of insurance companies
and increased financial claims of consumers.3
8 Some supplementary contracts involve life contingencies.
These arise when beneficiaries use the proceeds of policy
setdements to purchase what are in effect life annuities. In
insurance company accounting, as in flow-of-funds accounts,
the proceeds are recorded as benefits paid by the companies.
For years before 1951 the “deposit” is treated in both in­
surance and flow-of-funds accounting as a premium receipt.
Beginning with 1951, however, insurance accounts no longer
treat these deposits as premium income, although flow-offunds accounts continue to do so.
Actual disbursements of benefits under such supplementary
contracts involving life contingency should be included in
flow of funds as nonfinancial payments in the benefits cate­
gory and are so treated beginning with 1951. However,
for years before 1951, data for payments on contracts in­
volving life contingencies are not available separately from
those which do not involve such contingencies. Hence, for
years before 1951 all payments on supplementary contracts

IN S U R A N C E SECTOR

Nonfinancial uses of funds (line a) are
mainly payments of benefits to policyholders
and various operating outlays—commissions,
medical fees, real estate and investment
expenses, etc. Dividends to stockholders,
taxes, and purchases of new construction and
of existing properties are also included. The
total of nonfinancial uses is obtained by
adjusting total disbursements as presented
in the Spectator Insurance Year B oo\ to a
flow-of-funds basis. These adjustments are
described in a technical note on page 199.
Payroll (line b) consists of cash wages and
salaries paid to employees, including com­
missions to agents hired by the company on
a commission basis. Commissions paid to
agents set up as separate business entities,
noncorporate or corporate, are included as
purchases of other goods and services in
line 1.
Dividends (line c) are only those paid to
stockholders. Dividends to policyholders are
classified as benefit payments.
Insurance premiums (line d) consist of the
payment of premiums for property insurance
and employee insurance programs and em­
ployment taxes under various social insur­
ance programs—old-age and survivors insur­
ance, and unemployment compensation.
Insurance benefits (line e) consist of death
claims and various payments to living policy­
holders, including policy dividends. U fe
policy and annuity benefits (line f) consist
of death claims and payments to living
policyholders for matured endowments, an­
nuities (including retirement benefits under
pension plans administered by life com­
panies), disability payments, and cash sur­
render values. Beginning with 1951 pay­
ments on supplementary contracts involving
are treated as contributing to a decrease in miscellaneous
liabilities. This misclassification does not contribute to dis­
crepancies in any sector or transaction account since it is
carried through consistently in all accounts affected.




197

life contingencies are included.4 Accident
and health benefits (line g) consist of bene­
fits paid by the accident departments of all
life companies. Other benefits (line h) are
payments by life companies for workmen’s
compensation, automobile insurance, and
other property insurance. Dividends to
policyholders (line i) include those applied
against premiums and those left to accumu­
late at interest, as well as cash dividends.
There are corresponding treatments of pre­
miums and miscellaneous liabilities.
Taxes (line j) consist of all taxes except
employment taxes. They include State taxes
on premiums, Federal income taxes, real
estate taxes, and miscellaneous taxes, licenses,
and fees.
Uses of funds on account of real estate
transfers (line k) represent insurance com­
pany acquisitions of business real estate for
investment purposes. Estimates are based
on balance-sheet increments in the category
“commercial investment real estate” as shown
in the Life Insurance Fact Boo\. Most of
these properties were acquired from cor­
porations under lease-back arrangements. In­
surance company acquisitions of real estate
held for company use and of residential in­
vestment real estate are considered purchases
of new construction and thus are included in
other goods and services. Acquisitions of
properties through foreclosure are netted
against sales of real estate in line I and are
not included in line k.
Purchases of other goods and services (line
1) include commissions paid to agents who
operate as independent business entities,
medical fees, real estate expenses other than
taxes, miscellaneous management expenses,
etc. They include capital expenditures such as
purchases of new construction as well as op­
erating outlays. Line 1 is computed as the
4 See preceding note 3.

198

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

difference between total nonfinancial uses securities (line q) held by the subsector con­
(line a) and the sum of expenditures item­ sist of bonds and stocks issued by domestic
ized on lines b through e, j, and k. Because corporations, foreign businesses, foreign gov­
of the method of calculation of total non­ ernments (both central and local), and the
financial uses and of purchases of other goods International Bank for Reconstruction and
and services, line 1 probably includes ele­ Development. Mortgages (line r) represent
ments inappropriate for inclusion in flow-of- debt secured by residential, commercial, and
funds accounts, but adequate information farm properties. Miscellaneous assets (line
for removing these items is not available.
s) consist of policy loans to consumers.
N et increase in financial assets (line m)
Valuation adjustment (line t). As was
consists principally of transactions in mort­ indicated above in the discussion of the finan­
gages and government and private securities. cial assets of the life insurance companies
It also includes changes in policy loans and subsector (line m ), the valuation adjustment
cash balances.
is a single adjustment factor needed to com­
Financial assets of insurance companies are pensate for bookkeeping revaluations re­
recorded at amortized value or market price flected in the changes in the individual finan­
in the sources of information available: the cial assets recorded for the subsector.
Spectator Insurance Year B oo\ and the Life
Discrepancy (line u) in the life insurance
Insurance Fact Boo\. Thus changes in assets companies subsector account arises mainly
computed from these records reflect book­ from the difficulties and uncertainties in­
keeping revaluations as well as actual flows volved in adapting records based on life in­
of funds between life insurance companies surance company accounting practices to the
and other sectors. Information is not avail­ requirements of a flow-of-funds sources and
able to adjust the computed change for each uses of funds statement. The valuation ad­
category of asset holding separately. As a justment described above reflects inability
result, the asset holdings are presented in to adjust the records of financial assets to
the flow-of-funds account as recorded in in­ a flow-of-funds basis. The series on line u
surance company statistical presentations and reflects other inconsistencies of treatment.
thus reflect asset revaluations that are not For example, there are problems in connec­
flow-of-funds transactions. The valuation tion with the timing of transactions. Begin­
adjustment on line t compensates for these ning with 1951, life insurance aggregates as
revaluations.
presented in the Spectator Insurance Year
Currency and deposits (line n) represent Boo\ are on an accrual basis rather than a
changes in the subsector’s holdings of United cash basis. Thus the nonfinancial flows in
States currency and deposits in banks. Fed­ the flow-of-funds account, derived from these
eral obligations (line o) include all life in­ insurance compilations, are to some extent
surance company holdings of United States on an accrual basis but the corresponding ac­
Government securities. The line is meas­ crual assets and liability items—due and de­
ured before deduction of any bank loans to ferred premiums and interest and investment
finance the purchase of such securities. State income accrued, and due and accrued ex­
and local obligations (line p) consist of hold­ penses—are not recorded among the finan­
ings of debt issued by State and local gov­ cial transactions of the flow-of-funds subsec­
ernments in the United States. Corporate tor account. This inconsistent timing in the




IN S U R A N C E SECTOR

account, which is due to lack of information
on which to base the appropriate adjust­
ments, is reflected in the discrepancy begin­
ning in 1951.
Memorandum. Changes in policy reserves
do not constitute flow-of-funds transactions
and are thus not part of the sources and uses
statement. Since such data are of interest
in many analytic problems, changes in policy
reserves have been entered as a memoran­
dum. Policy reserves (line w ) reflect changes
in reserves arising from life and annuity con­
tracts, including supplementary agreements,
T

e c h n ic a l

N

ote on

and from disability and accidental death pro­
visions. In addition, accident and health
reserves are included beginning with 1948:
data on these are not available for earlier
years, but the changes for those years are
apparently small.
It should be noted that policy reserves are
a measure of neither cash surrender value
to policyholders nor policyholders’ equity in
life insurance companies. The policy re­
serves exceed cash surrender value, but un­
derstate policyholders’ equity since changes
in surplus are excluded.

L i f e I n s u r a n c e C o m p a n ie s S u b s e c t o r

This note describes the derivation of total non­
financial sources and uses of funds for the life in­
surance companies subsector. The basic source for
income and expense figures for this subsector is the
Life Insurance Volume of the Spectator Insurance
Year B oo\. This source of data, however, omits
certain activities of life companies that have to be
added in the derivation of the flow-of-funds account
in order to present a complete statement of sources
and uses of funds of life insurance companies. For
the years 1939 through 1946 accident and health
premiums and benefits of life insurance companies
are not recorded in the Life Volume, although the
balance sheets recorded in this volume reflect the
activities of these departments of the companies.
The necessary data on these premiums and bene­
fits for 1939 through 1943 are obtained from a
tabulation of accident and health departments of
life companies presented in the Casualty and Surety
Volume of the Year B oo\; and for 1944 through
1946, are estimated from data in the Netv Y o r\
Insurance Report.
In addition to this modification, the nonfinancial
activities of the accident departments of Aetna Life
Insurance Company and Travelers Insurance Com­
pany have to be added for all years. The balance
sheets of these companies as recorded in the Life
Volume of the Year B oo\ reflect the activities of
their accident departments, but the income and
expenses (as well as the balance sheets) associated
with their accident departments are presented in
the Fire and Casualty Volume as part of casualty




199

company data rather than as part of life company
data.
Derivation of totals of nonfinancial sources and
uses for the life insurance companies subsector is
effected by adjusting to a flow-of-funds basis the
total income and disbursements as derived from
the Life Volume and the noted additions. In
1951 the basis upon which income and expense
items of life insurance companies were reported
in the Spectator volume was changed, and as a
result there are differences between the adjustments
required to arrive at flow-of-funds transactions for
the years through 1950 and the adjustments for
subsequent years.
For the years 1939 through 1950, in order to
derive total flow-of-funds nonfinancial sources of
the subsector, profit and loss on investments and
receipts from supplementary contracts not involving
life contingencies are deducted from total income
as reported in the Spectator volume. These de­
ductions are needed because the corresponding
flow-of-funds entries are not part of nonfinancial
sources but appear as valuation adjustment and mis­
cellaneous liabilities respectively. Proceeds from
sales of properties acquired through foreclosure net
of the acquisition of properties through current
foreclosures are not in the Spectator income total
and are added.
The total of flow-of-funds nonfinancial uses is
derived in a similar manner, that is, adjustments
are made to total disbursements as presented in the
Spectator volume. Amounts paid on supplemen­

200

FLO W O F FU N D S IN

T H E U N IT E D STATES,

1939-53

penses (general expenses charged to investment in­
come as distinguished from premium income), cal­
culated as the difference between gross investment
income of life insurance companies as estimated by
the National Income Division and net investment
income reported in the Spectator volume, is added
to both income and expenses as presented in the
Spectator volume. In the flow-of-funds statement,
receipts from supplementary contracts involving life
contingencies are included in premium income for
these years as for the earlier period. No adjust­
ments are made to shift the totals of nonfinancial
sources and uses from an accrual to a cash basis
consistent with the earlier years.2
Beginning with 1951 payments on supplementary
contracts involving life contingencies are available
separately in the Spectator Insurance Year B oo\
from other supplementary contracts and are treated
1 As noted on p. 196, amounts paid on supplementary as benefit payments rather than as decreases in liabil­
contracts involving life contingencies should be classified as ities in the flow-of-funds account.

tary contracts are deducted since they are financial
transactions—part of miscellaneous liabilities—in
the flow-of-funds account.1 Purchases of real estate
for investment (both commercial and residential
properties) and of real estate held for company use,
which are not reflected in the Spectator disburse­
ments total, are added.
Beginning with 1951 changes were made in the
Spectator presentation of income and expenses.
The statement was put on an accrual basis; invest­
m ent income reported net of investment expenses;
and receipts from supplementary contracts involv­
ing life contingencies classified as other income
rather than premium income.
These changes necessitated modifications of the
flow-of-funds calculation procedures. For 1951 and
subsequent years, an estimate of investment ex­

benefit pajments rather than as financial transactions. Hence
only amounts paid on contracts not involving life contin­
gencies should be deducted here. For years before 1951,
however, data are not available separately for the two types
of payments and both are treated as financial transactions;
hence both are deducted in calculating nonfinancial uses for
those years.

2 However, for certain flow-of-funds nonfinancial transac­
tions, for example taxes, payments rather than accruals have
been entered. To the extent that cash payments differ from
the accruals incorporated in the Spectator total, the “other
goods and services” transaction of the flow-of-funds sub­
sector is affected, since it is calculated as a residual.

S E L F -A D M IN IS T E R E D P E N S IO N PLA N S SU BSEC TO R

The self-administered pension plans sub­
sector, presented in Table 40 on page 209,
consists of all private pension plans spon­
sored by employers for employees other than
plans administered by insurance companies.
For the most part, the plans involve separate
funds administered by employers either di­
rectly or through a bank or other agent as
trustee, but direct payments by employers
without the establishment of a fund are also
reflected. The subsector does not include
profit-sharing plans or health and welfare
funds.
The transactions recorded are those in­
volving money or credit—premiums and con­
tributions, benefits, operating expenses, in­
vestment income, and acquisition of financial
assets. Changes in reserves are not flow-offunds transactions and do not constitute ad­




ditional sources or uses of funds. Premiums
are recorded gross of benefits payments.
The flow-of-funds treatment of self-ad­
ministered pension plans differs from that
accorded them in the national income ac­
counts. In the national income accounts, the
activities of these plans are included with
those of consumers, nonprofit organizations,
and personal trusts in the personal sector.
Their transactions with consumers are not
recorded since the personal sector account is
on a consolidated basis in this respect. Pay­
ments by employers to the funds are shown
as payments to the personal sector—as part
of employer contributions to private pension
and welfare funds, a component of “other
labor income” in personal income. Accu­
mulation of assets by the funds is in effect
part of personal saving. In the" flow-of-funds

IN S U R A N C E SECTOR

accounts, these plans are shown as a sep­
arate subsector and transactions between the
funds and employers and between the funds
and employees and in the capital markets
are shown explicitly.
S e l f - A d m in is t e r e d P e n s io n P l a n s
St a t e m e n t

There is little direct information on the
activities and transactions of self-administered pension plans and the subsector state­
ment is built up mainly on the basis of in­
direct but related data. Data from Statistics
of Income, published annually by the Internal
Revenue Service, are an important part of
the construction of the account. For years
subsequent to the latest Statistics of Income
it is necessary to extrapolate the latest
available Internal Revenue Service data and
the estimates for these years are subject to
considerable error. Currently the Securities
and Exchange Commission is undertaking a
survey of corporate pension plans that will
provide both income and balance sheet in­
formation. The Treasury has also expanded
its survey to cover total assets in addition to
holdings of Federal obligations. Data pro­
vided by these programs will permit great
improvements in this account in the future.
Nonfinancial sources of funds (line A)
consist of investment and premium income.5
Interest and dividend receipts (line B) repre­

201

sent the subsector’s return on its investment
in securities of the Federal Government and
of corporate business. Insurance premiums
(line C) consist of contributions to the plans
by employers and employees.
Nonfinancial uses of funds (line a) are
mainly payments of insurance benefits to re­
tired employees (line b). A small amount
of operating expenses (purchases of other
goods and services) is included but is not
shown separately in the table.
N et increase in financial assets (line c).
The financial assets attributed to the self-administered pension plan subsector are cash,
Federal obligations, and corporate securities.
There is no direct information on the total
change in assets. Line c is computed as the
difference between total sources (line D ) and
total nonfinancial uses (line a) . 6 The ac­
count thus shows no discrepancy. Currency
and deposit holdings, not shown separately
in the table, are estimated at 3 per cent of
total assets. Federal obligations (line d) in­
clude all the subsector’s transactions in
United States Government debt. Estimates
of the subsector’s holdings of Federal obliga­
tions are based on the Treasury ownership
survey. Corporate securities (line e) include
both stocks and bonds. Computed as a resid­
ual on the whole subsector account, this line
reflects all errors and inconsistencies in the
account.

O T H E R IN S U R A N C E C O M PA N IE S SU BSEC TO R

The other insurance companies subsector,
presented in Table 41 on page 209, consists
principally of the fire, marine, casualty, and
surety companies whose incomes, expenses,
and balance sheets are reported in Spectator
volumes. In addition, hospitalization and

health plans, the life insurance activities of
fraternal orders, and workmen’s compensa­
tion programs administered by self-insurers
are included in this subsector.
As in the case of life insurance companies,
this subsector’s flows are presented in terms

6 There is no independent estimate of total uses of funds
5 As no borrowing is recorded for the subsector, tota>
(line f); they are taken as equal to estimated total sources
sources of funds shown on line D are identical with non­
(line D).
financial sources on line A.




202

FLOW

O F F U N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

of the immediate object of payment or re­
ceipt. Premium receipts appear as a non­
financial source of funds and the uses of these
premiums by insurance companies are re­
corded in a variety of nonfinancial and finan­
cial transactions. The internal accrual trans­
actions of crediting these premium receipts
to reserves and surpluses are not flow-of-funds
transactions, and no liability for reserves or
surplus is recorded in the flow-of-funds state­
ment.
Since the account is on a combined basis,
insurance transactions between different com­
panies in the subsector should be recorded.
However, for the years before 1950 informa­
tion on reinsurance transactions is not avail­
able so that the account is on a consolidated
basis prior to that time. For 1950 on, the
reinsurance transactions are recorded in the
account.7
O t h e r I n s u r a n c e C o m p a n ie s St a t e m e n t

The account for the other insurance com­
panies subsector is based on several sources
of data which can be used in the flow-offunds structure only with considerable adjust­
ment. Even where relatively detailed infor­
mation for types of income and disburse­
ments is available, as for companies reported
in the Spectator Insurance Year Boo\, the
categories do not necessarily coincide with
flow-of-funds transaction categories and the
form of the data reported varies over time.
For other groups of companies or institu­
tions, for example the hospitalization plans,
less detailed information is available although
in most cases data on premiums and benefits
are available separately from other flows.
With respect to financial transactions, only
total assets can be obtained for some groups
of companies. The derivations used in con' Sec p. 205 for fuller discussion of reinsurance.




structing the account are discussed in a tech­
nical note on page 204.
Nonfinancial sources of funds (line A )
consist mainly of premium receipts but bene­
fits under reinsurance contracts, investment
income, and other nonfinancial receipts are
also included.8 The total of nonfinancial
sources of funds is derived by combining and
adjusting totals from the source materials as
described in the technical note.
Interest receipts (line B) and dividend re­
ceipts (line C) are the subsector’s income on
its investment in mortgages and government
and corporate business securities.
Insurance premiums (line D ) consist of
the following:
1. Premium receipts from direct writings
of fire, marine, casualty, and surety com­
panies reported in the Spectator volumes, in­
cluding mutual accident and sick benefit
associations and “additional” companies not
presented in the main Spectator aggregates;
2. Premiums from reinsurance assumed
from foreign companies;
3. Premium receipts from reinsurance as­
sumed from domestic companies beginning
in 1950;
4. Premium receipts of the Blue Cross,
Blue Shield, and independent hospitalization
and health plans;
5. Premium receipts of the life insurance
activities of fraternal orders;
6 . Premium receipts of workmen’s com­
pensation funds administered by self-insurers.
Insurance premiums are recorded gross of
dividends to policyholders, which are shown
as a use of funds in the flow-of-funds account.
Insurance benefits received (line E) consist
principally of receipts under reinsurance
contracts. Through 1949 only such transac­
8 As no borrowing is recorded for the subsector, total
sources of funds shown (line G) are identical with nonfinan­
cial sources (line A).

IN S U R A N C E SECTOR

tions with foreign companies are recorded.
Beginning with 1950, reinsurance benefit re­
ceipts from domestic companies are also in­
cluded. In addition to the reinsurance
receipts, the subsector also receives a small
amount of benefits from property insurance
carried.
Receipts from other goods and services
(line F) consist of all nonfinancial sources
other than interest, dividends, and insurance
premiums and benefits. The series is com­
puted as the residual nonfinancial source.
The decline between 1948 and 1949 is prob­
ably attributable to changes in the basis of
recording data in the Spectator volumes in
1949 (see technical note beginning on the
following page).
Nonfinancial uses of funds (line a) are
mainly payments of benefits to policyholders,
premiums for reinsurance, and various oper­
ating outlays—commissions, legal expenses,
investment expenses. Dividends to stock­
holders, taxes, and purchases of real estate are
also included. The total of nonfinancial uses
is derived by combining and adjusting totals
from the source materials as described in the
technical note.
Payroll (line b) represents cash wages and
salaries paid to employees, including com­
missions to agents hired by the company
on a commission basis. Commissions paid to
agents set up as separate business entities,
noncorporate or corporate, are included in
payments for other goods and services.
Dividend payments (line c) are only those
paid to stockholders; dividends to policyhold­
ers are included in insurance benefits.
Insurance premium payments (line d) con­
sist of reinsurance premiums paid, premiums
paid for other types of private insurance—
property insurance and contributions to em­
ployee insurance programs—and a minor
amount of employment taxes. Through




203

1949, only reinsurance premiums paid to for­
eign companies are recorded; beginning with
1950, reinsurance premiums paid to other
domestic companies are also included.
Insurance benefits paid (line e) consist of
the following:
1. Direct losses paid by the fire, marine,
casualty, and surety companies reported in
the Spectator volumes, including mutual ac­
cident and sick benefit associations and “addi­
tional” companies not presented in the main
Spectator aggregates;
2. Reinsurance losses paid to foreign com­
panies;
3. Reinsurance losses paid to domestic com­
panies for 1950 on;
4. Benefits paid by Blue Cross, Blue Shield,
and independent hospitalization and health
plans;
5. Benefits paid by life insurance activities
of fraternal orders;
6 . Benefits paid by workmen’s compensa­
tion funds administered by self-insurers;
7. Total dividends paid or credited to
policyholders.
Taxes (line f) include Federal income
taxes, property taxes, gross receipts taxes, and
other taxes.
Purchases of other goods and services (line
g) includes commissions paid to agents who
operate as independent business entities, legal
fees, advertising costs, miscellaneous operat­
ing costs, capital outlays for construction, and
all other nonfinancial uses other than pay­
roll, dividends, insurance premiums and
benefits, and taxes. The series is computed
as the residual nonfinancial use.
Net increase in financial assets (line h)
consists mainly of the subsector’s transactions
in Federal obligations (line j), State and
local obligations (line k), and corporate se­
curities (line 1) including securities of for­
eign governments. Transactions in cash

204

FLO W O F FU ND S IN

T H E U N IT E D STA TES, 1939-53

(line i), mortgages, policy loans, and minor
amounts of unidentified assets are also in­
cluded.
Valuation adjustment (line m ). As in the
case of life insurance companies, changes in
holdings of assets as reported in the basic
statistical sources and as used in the subsector
account reflect not only funds applied to pur­
chase assets and proceeds from sales of assets,
but also revaluations of assets held.9 These
changes are thus not the appropriate meas­
ures of financial flows for the flow-of-funds
accounts, which should reflect only the net
9

According to p. vii of the 1953 Spectator Insurance Year
. . bonds are carried
at their amortized value, whenever allowed, or alternatively
at their market value. Stocks are valued at either their
market value or the value determined by the National As­
sociation of Insurance Commissioners.”
Boo\, Fire and Casualty Volume,

T

e c h n ic a l

N

o te on

O t h e r I n s u r a n c e C o m p a n ie s S u b s e c t o r

The account for the other insurance companies
subsector is based on several sources of data. Vol­
umes of the Spectator Insurance Year B o o \ covering
fire, marine, casualty, and surety companies provide
the bulk of the information .1 Supplementary data
are obtained from the Life Insurance Volume of
this Year B o o \t and from the Department of Com­
merce, the Social Security Administration, and the
Securities and Exchange Commission.
The income and expenditure statements and the
balance sheets of fire, marine, casualty, and surety
companies are presented and summarized in Spec­
tator volumes. The transactions of these companies
constitute an important part of the activities of the
subsector. In some years certain casualty and surety
companies did not report full detail on income, ex­
penditures, and balance-sheet items, so that their
activities are not included in Spectator aggregates.
However, some information for these companies is
presented in supplementary tables of the Casualty
and Surety Volume of the Year B oo\ and this is
used to incorporate the activities of these companies
in the flow-of-funds account.
Information on hospitalization and health plans
is obtained from the Social Security Administra­
1The Spectator volume covering nonlife companies was
discontinued after publication of 1952 data. Estimates for
1953 were derived from a variety of sources.




between funds actually applied during the
year and funds actually realized during the
year. Data are not available for adjusting
each asset separately. The valuation adjust­
ment on line m is an over-all adjustment to
compensate for the unwanted effects of re­
valuations on changes in assets recorded in
the subsector account.
Discrepancy (line n) reflects the net ef­
fect on the account of errors and inconsisten­
cies (other than those reflected in the valua­
tion adjustment) in the treatment of the
source materials. The larger discrepancies
in 1949-51 seem to be associated with the
shift in 1949 in the types and forms of data
available in the basic reports (see technical
note below).

tion and from supplementary tables in the Casualty
and Surety Volume of the Spectator Insurance Year
B o o \. Data for the insurance activities of fraternal
organizations come principally from the Life Insur­
ance Volume of this Year B oo\ and are supple­
mented by information from the Securities and Ex­
change Commission. Finally, workmen’s compen­
sation funds administered by self-insurers are based
on data from the National Income Division of the
Department of Commerce.
W ith respect to nonfinancial transactions, the
general procedure is one of ( 1) building up totals
of nonfinancial sources and uses from the Spectator
Insurance Year B oo\ and the other sources, (2) dis­
tributing these totals among flow-of-funds transac­
tion categories primarily on the basis of Spectator
information for insurance premiums and benefits
and National Income Division data for other non­
financial flows, and (3) calculating sales and pur­
chases of other goods and services as residuals.
W ith respect to financial transactions, a consider­
able amount of balance sheet information is avail­
able for the companies included in the Year B oo\
aggregates. For other companies only total assets
are available and in such cases the portfolio is as­
sumed to be distributed among various types of
assets in the same proportions as for companies for

IN S U R A N C E SECTOR

205

in constructing the account for the flow-of-funds
subsector.
2. Tim ing basis of the accounting statement.
Companies included in Spectator nonlife aggregates.
Data reported for fire, marine, casualty, and surety For the years through 1948, the Spectator published
companies in the Spectator Insurance Year B oo\ income and expenditure statements on a cash basis.
require adjustments on account of ( 1) duplication As the flow-of-funds insurance account is recorded
of companies, ( 2 ) timing basis of the accounting on a similar basis, no adjustment for timing of
statement, (3) reinsurance flows, and (4) capital transaction recording is needed for these years. For
the year 1949 however, these statements as pub­
gains and losses. These are discussed in turn.
1.
Duplication of companies. For the years 1939 lished in the Spectator volumes were shifted
through 1949, aggregates for fire and marine com­ from a cash to an accrual basis. Supplementary
panies were presented in one Spectator volume, tables in these Spectator volumes furnish par­
while those for casualty and surety companies ap­ tial information on premiums written and losses
peared in another. There is some duplication be­ and expenses paid. W ith this information and with
tween these two volumes, since some companies balance-sheet information on changes in reserves, it
write policies in both fields and complete statements is possible to convert the data on an accrual basis
for these companies were presented in both volumes. into a statement on a cash basis comparable to the
This duplication must be removed in using the earlier statements. For example, in 1949 informa­
data. Moreover, as was indicated in the discussion tion on premiums earned but not on premiums writ­
of life companies, statements for the accident de­ ten is available for nonstock casualty and surety
partments of Aetna Life and Travelers Insurance carriers. N et premiums written were calculated
Co. were included in the Casualty and Surety Vol­ as premiums earned during 1949 plus the change
ume, although their complete balance sheets (but in the unearned premium reserve during 1949.
Similar procedures were followed for other items
not complete income statements), including the
of income and expense presented on an accrual
assets and liabilities associated with the accident de­
basis only.
partments, are presented in the Life Insurance
For the years 1950 through 1952, although the
Volume. As all activities of these two companies
Spectator continued to publish income and expendi­
are included in the flow-of-funds life insurance com­
ture statements on an accrual basis, considerably
panies subsector, they must be eliminated here to more information on cash flows was available than
avoid double-counting between the two subsectors. for 1949. Consequently only a few items had to
A special tabulation of assets as recorded in Spec­ be converted to a cash basis.
tator volumes eliminating the duplication described
3. Reinsurance flows. Fire, marine, casualty, and
above and excluding the assets of the accident de­ surety companies reinsure a large portion of their
partments of Aetna and Travelers was obtained policies. These transactions occur primarily within
from the Debt Division of the Analyses Staff in the the other insurance companies subsector, although
Treasury Department. The ratio of total assets from the subsector also has reinsurance transactions with
the Treasury tabulation to total assets from both foreign companies in the rest of the world sector.
Spectator volumes served as an adjustment factor For the years 1950 through 1952 total reinsurance
to eliminate the duplication in income and disburse­ premiums received and paid by nonlife insurance
ments. Data for Aetna and Travelers were re­ companies are available from the Fire and Casualty
moved from the Spectator totals before this adjust­ Volume of the Spectator Insurance Year B oo\, and
ment was made since they were eliminated in sepa­ the gross flows of reinsurance premium payments
rate adjustments.
and reinsurance premium receipts are recorded in
For the years 1950 through 1952, the Spectator the flow-of-funds subsector account. Data on the
published one volume covering fire, marine, cas­ part of these flows received from and paid to for­
ualty, and surety companies—the Fire and Casualty eign companies by the other insurance companies
Volume—and the duplication was eliminated. The subsector are obtained from the Balance of Pay­
adjustment to eliminate the accident departments ments Division of the Department of Commerce.
of Aetna and Travelers continued to be necessary
For the years before 1950, however, Spectator
which asset distributions are reported in the Year
B oo\.




206

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

data are presented in a different form and gross re­ panies in Spectator volumes increased sharply from
insurance flows are not available. For these years, 1948 to 1949, it appears that data from the supple­
reinsurance premiums paid are netted against total mentary tables are included in the main Spectator
receipts from premiums—both those from direct aggregates. Hence no adjustment is made for these
writings and those from reinsurance. However, years.
data on reinsurance premium transactions with for­
Hospitalization and health plans. Estimates of
eign companies are obtained from the Balance of premiums and benefits of hospitalization and health
Payments Division and are incorporated in the ac­ plans are obtained from the Social Security Ad­
count; that is reinsurance premiums received from ministration. Total assets of Blue Cross and Blue
and paid to foreign companies are recorded as Shield are available from the Spectator Insurance
sources and uses of funds, respectively, of the other Year B oo\ covering casualty and surety companies
insurance companies subsector.
and are distributed by type of asset in the flow-ofThus, there is a discontinuity in the premium funds statement on the basis of data for companies
series from 1949 to 1950. For 1939 through 1949, reporting types of assets. No asset information is
the premium figure is net of reinsurance transac­ available for other hospitalization and health in­
tions that occur entirely within the other insur­ surance plans.
ance companies subsector, but gross of reinsurance
Fraternal organizations. Information on the in­
transactions with foreign companies. For 1950 on, surance activities of fraternal organizations is re­
it is gross of all reinsurance flows. Similar con­ corded in the Life Insurance Volume of the Spec­
siderations apply on the benefits side with respect tator Insurance Year B oo\ and consists of data on
to losses paid on reinsurance policies.
premiums, other receipts, benefits paid, other ex­
4.
Capital gains and losses. Profits and losses penditures, and total assets. A distribution of assets
on investments are removed from reported income by type was obtained from the Securities and Ex­
and disbursements since the corresponding flow-of- change Commission.
funds entries are covered by financial transactions
Workmen’s compensation funds administered by
and the valuation adjustment.
self-insurers are included in this subsector. In con­
Casualty and surety companies excluded from nection with these funds, premiums are recorded
Spectator aggregates. For the years 1939 through as being paid by the various flow-of-funds business
1948 mutual accident and sick benefit associations sectors to this subsector and benefits are recorded
and “additional” companies which did not sub­ as paid to consumers by this subsector. Estimates
mit detailed information are not included in of benefits paid by self-insurers to consumers are
Spectator basic aggregates, but data on a less de­ derived by deducting from the national income ac­
tailed basis are presented in supplementary Spec­ counts series on compensation for injuries (a com­
tator tables. The activities of these organizations ponent of “other labor income”) benefits paid by
are in the flow-of-funds other insurance com­ commercial carriers and government administered
panies subsector. Information provided by the sup­ workmen’s compensation funds. Since no measure
plementary tables is adequate for nonfinancial trans­ of payments into self-insurers’ funds is available,
actions and assets are distributed on the basis of the estimate of benefits paid is also used as a meas­
data for companies reporting types of assets.
ure of premiums paid by self-insurers to the other
Beginning with 1949 such supplementary tables insurance companies subsector. Correspondingly
are no longer presented. Since the count of com­ no accumulation of assets is recorded.




207

IN S U R A N C E SECTOR
T A B L E 38—IN S U R A N C E S E C T O R : SO U R C ES A N D USES O F FU N D S S T A T E M E N T 1
(In billions of dollars)

1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
Sources of funds
9.6 10.2 11.3 12.1 13.7 15.7 17.3 18.2 23.1 26.3 29.8 33.0
2.4 2.7 3.0
1.3 1.3 1.4 1.5 1 . 6
1.7 1.9 2 . 1
1.2
.2
.3
.3
.3
.3
.1
.1
.2
.2
.1
.1
.1
.1
.2
.2
.2
.2
.2
.1
.1
.1
.1
.1
.2
7.7 8 . 0 9.1 9.9 11.3 13.2 14.6 15.5 19.3 2 2 . 0 24.9 27.5
♦
*
1.3 1.4
.9 1 . 1
.1
.1
.1
.1
.1
.1
*
*
*
*
*
*
.2
.3
.3
.2
.2
.1
.4
.4
.4
.2
.3
.3
.4
.5
.5
.3
.5
.3

8.0

8.4

9.1

1.1
.1
.2

1.1
.1
.2

1.2
.1
.2

6.4
*
*

6.7
*
♦

7.2
*

.2

.2

.2
.2

N et increase in lia b ilities............................
Bank loans other than mortgages...............
Miscellaneous liabilities................................

.1

.2

.1

.1

.2

.6
.4

.1

.2

.1

.1

.2

.2

Total, above sources......................

8.1

8.6

9.3

9.8 10.3 11.8 12.3 13.6 16.0 17.5 18.4 23.2 26.6 30.1 33.3

N onfinancial u ses3.........................................
Payroll............................................................
Dividends........................................................
Insurance premiums 2 4 ................................
Insurance benefits2 ........................................
Taxes...............................................................
Real estate transfers.....................................
Other goods and services..............................

6.0

6.3

6 .5

.8
.1
.1

.8
.1
.1

.8
.1
.1

6.6
.9

6.6
.9

7.1
.9

.1
.1

.1
.1

.1
.2

1.0
.1
.2

.1
.2

.1

.1

.2

3.9

4.0

4.1

4.2

.2

.2

4.9
.3

5.4
.3

.3

.2

4.5
.3

6.2

.2

4.1
.3

.3

.3
6.9
.3

.3
7.3
.4

.9

1.0

1.1

1.0

1.1

1.1

1.3

.1
1.6

.2
2.0

.2
2.2

.2
2.2

2.5 2.9 3.3 3.7
9.0 10.7 11.8 13.0
.6
.6
.6
.7
.2
.2
.3
.2
2.4 3.0 3.3 3.5

1.8
.3
.5

1.9
.3

2.4

2.9
- .3
3.2

5.4

4.0

6 .2

6.3

6.7

8.6

.1

.2

.2

.2
- .2

in
n
o

N et increase in financial a sse ts.................
Currency and deposits..................................
Federal obligations........................................
State and local obligations...........................
Corporate securities......................................
Mortgages.......................................................
Miscellaneous assets......................................

P

Valuation ad ju stm en t..................................

q

Discrepancy**..................................................

r

Total, above u se s...........................

A
B
C
D
E
F
G
H

Nonfinancial sou rces.....................................
Interest............................................................
Dividends........................................................
R ents...............................................................
Insurance premiums2 ....................................
Insurance benefits2 ........................................
Real estate transfers......................................
Other goods and services..............................

I

k
L

J

*

.2

- .2
- .4

.2

.2

.2

.2

.2

.3

.3

.2

.2

.2

.2

.2

.2

.2

.3

.3

Uses of funds
a
b
c
d
e
f
g

h
i
i
k
1

.2

.7

.6
.1
.8

-.1
1.1
-.1
1.1

.3

.5

- .2
.2

.1

.1

.3
- .3
*

.3

.3

.3

.3

8.1

8.6

9.3

.2
-.1

*

- .2

- .2

3.9
.2

3.9
- .3

5.0
- .2

5.2
- .6

7.7

9.0 10.4 11.7 12.3 16.8 19.7 21.9 23.9
1.9 2 . 1
2.3 2.6
1.8
1.3 1.4 1 . 6

.1

.2

4.7
- .5
1.3

1.3
-.1
2.2

5.1 5.3
.4 *
- . 7 - 2 .5
.5
.1
3.7 5.0
1.5 2 . 2
*
.1

*
- .3

.9
*
- .3

—.4

- .5

- .9

.1

.1

.2

.2

.1

.5

.3

.6

-.1
- .2

.5
-.1

*
.5

.2

.2

- . 7 - 1 . 2 - 2 .3
.4
.4
.5
3.9 3.6 5.0
2.1
3.2 3.2

.2

.5

.2

.2

.2

6.0
2.0
.1

—.4

- .6

- .2

- .4

.5

.7

.4

*

.2

9.1
*

.2

.8
5.7
2.1
.2

.4
- .1

9.8 10.3 11.8 12.3 13.6 16.0 17.5 18.4 23.2 26.6 30.1 33.3

♦Less than 50 million dollars.
**Net uses ( 40 or net sources ( —) not accounted for.
1 Details for component subsectors are presented in Tables 39-41 for life insurance companies, self-administered pension plans, and other in­
surance companies.
2 The substantial increase in 1950 reflects inclusion, beginning in 1950, of domestic payments of reinsurance premiums and benefits by "other
insurance companies” subsector.
3 Includes small amounts of interest and rent not shown separately.
4 Includes small amount of employment taxes.
N o t e .—Details




may not add to totals because of rounding. For description of table, see references for Tables 39-41 following.

208

FLO W O F FU ND S IN

T H E U N IT E D STATES, 1939-53

TABLE 39—LIFE INSURANCE COMPANIES SUBSECTOR: SOURCES AND USES
OF FUNDS STATEMENT
(In billions of dollars)
1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
Sources of funds
A
B
C
D

N onfinancial sources1...................................
Interest...........................................................
Dividends.......................................................
R ents...............................................................

E
F

Insurance premiums......................................

4.0

Life policies , annuities , etc.2 ......................
Accident and health ......................................
Other ...............................................................

3 .8
.2

G
H

I
J

Real estate transfers3 ...................................
Other goods and services..............................

5.4
1.0

*

5.5
1.0

*

*

1.0

*

.2

.2

*

5.9

6.1
1.1

*

6.6
1.1

*

.2

.2

7.2
1.2

*

7.6
1.3

*

.1

.2

8.2
1.3
*

.1

8.7
1.4

9.3
1.5

.1

.1
.1

.1
.1

9.8 10.7 11.8 12.9 14.2
1.7 1 . 8 2 . 0
2.2
2.4
.1
.1

.1

.2

.1
.2

.1
.2

.1
.2

4.2

4.3

4.5

4.8

5.3

5.7

6.2

6.8

4 .4
.3
.1

4 .9
.4
.1

5 .2
.4
.1

8.3

9.2

11.0

4 .2
.3
.1

7.6

10.1

4 .1
.2

7.3

3 .9
.2

5 .7
.5
.1

6 .2
.5
.1

6 .6
.7
.1

6 .8
.7
.1

7 .3
.9
A

7 .9
1 .2
.1

8 .5
1 .4
.1

9 .1
1 .7
.2

.2
.2

.2
.2

.1
.2

H
e

*

H
e

*

H
e

H
e

.2

- .2
—.4

.2

*

*

*

.2

.2

.3

.3

.1

.1

.1

.1

.2

.2

.2

.3

.3

.3

.3

.4

.2

.2

.2

.2

.3

.3

.2

.2

.2

.3

.3

K
T,
M

Net increase in lia b ilit ie s ...........................
Bank loans other than mortgages................
Miscellaneous liabilities4 ..............................

.1

.2

.1

.1

.2

.6
.4

.1

.2

.1

.1

.2

.2

.2

.2

.2

.2

N

Total, above sources......................

5.5

5.7

6.0

6.3

6.7

7.7

7.7

8.0

8.9

9.5

a
b
c
d

N onfinancial u se s5........................................
Payroll............................................................
Dividends 6 .....................................................
Insurance premiums......................................

3.7
.5
*
*

3.8
.5
*

3.7
.5

3.6
.5
*

3.7
.6
*

3.9

4.2

4.6

*

*

.1

A

.1

e
f
g
h
i

Insurance benefits.........................................

j
k
1

*

10.0 10 8 12 0

13.2 14.5

Uses of funds

.1

.6

.6

.8

5.3
.8

5.8
.9

6.1

6.7

7.9

1.1
.1
.1

1.2
.1
.1

.1

.1

.1

.1

.1

1.0
.1
.1

*

H
«

H
e

H
e

8.7
1.3

9.4
1.4

.1

.1
.2

.2

2.7

2.8

2.7

2.8

3.0

3.1

3.4

3.7

5.0

5.4

6.1

2 .1
.1

2 .0
.2

2.1
.2

2 .2
.2

4.0

4.4

2 .2
.1

2.6
2 .0
.1

2.6

2 .2
.1

2 .3
.2

2 .5
.3

2 .7
.4

2 .9
.4

3.1
.5

.5

.5

.4

.4

.4

.4

.5

.5

.6

.6

.6

.7

3 .4
.8
.1
.8

3 .5
1 .0
.1
.9

3 .9
1.1
.1
1 .0

Taxes...............................................................
Real estate transfers 7 ...................................
Other goods and services.............................

.1

.1

.1

.1

.1

.1

.1

.1
.1

.3

.3

.3

.3

.3

.4

.2
.6

.2
.2

.3

.1
.2
.6

.2

.3

.2
.2
.6

m
n
o

N et increase in financial a ssets.................
Currency and deposits..................................
Federal obligations........................................

1.5

1.6

2.1

2.4

3.1

3.9

4.0

3.1

3.4

3.4

3.8

.2

.1

- .2

P
q

State and local obligations...........................
Corporate securities......................................

r
s

Mortgages......................................................
Miscellaneous assets 8 ...................................

.2
-.1

Life policy and annuity benefits2 ...............
Accident and health benefits........................
Other benefits.................................................
Dividends to Policyholders...........................

*

.4

*

*

.5

.9

.2

.1

.6

.7

-.1
1.2

*

- .2

*

.2

*

*

- .2

.1

He

He

3.2

4.4

4.0

-.2

- .4
.4

- .4
.5

*

*

- .2

- .2

-.1
- .1

- .2

- .2

*

*

.2

.3

.5

He

.2

2.5

- .3
.4
*
- .3

.3
- .2

*

.7 -.1
2.1

.5

1.6
He

3.2
1.5

He

He

-.1

He

He

.7

He

- 3 .3 - 1 .5 .3
4.3

2.9

2.2
.1

2.1
.2

.2

.3
.2
1.0

.3
.3
1.1

4.7

3.9

3.9

.1
1.8

.1

He

- 2 .4

- .8

- .4

.1
2.8

.1
2.2

He

He

2.8

3.3

3.2

3.2

1.9

.2

.2

.1

t

Valuation ad ju stm en t..................................

- .2

- .3

- .5

.1

-.1

Discrepancy**..................................................

.2

.2

.2

.2

.2

.2

.1

.4

.2

.3

.1

.4

.2

He

v

Total, above u ses............................

5 .5

5.7

6.0

6.3

6.7

7.7

7.7

8.0

8.9

9.5

10.0

10.8

12.0

w

Memorandum:
Policy reserves 9 .............................................

1.3

1.4

1.7

1.9

2.3

2.5

3.1

3.0

3.0

3.3

3.3

3.4

3.6

.1

He

- .1

- . 2

4.9
.1

u

.1

.4
.2
1.2

2.1
.2
.2
He

13.2 14.5
4.0

4.1

*Less than 50 million dollars.
**Net uses ( -f-) or net sources ( —) not accounted for.
1 Includes small amount of insurance benefits not shown separately.
2 Includes disability and double indemnity provisions and insured pension plans.
3Net sales of properties acquired through foreclosures.
4Change in policyholders’ dividend accumulations and in reserves for supplementary contracts not involving life contingencies,
includes small amounts of interest and rent not shown separately.
^Dividends to stockholders only; dividends to policyholders are included in insurance benefits.
7Property acquired under lease-back arrangements.
8Policy loans to consumers.
9Changes in life, annuity, supplementary contract, disability, and accidental death reserves for all years, and in accident and health reserves
also beginning with 1948. Data on changes in accident and health reserves are not available for years prior to 1948, but changes were small.
N o t e : Details may not add to totals because of rounding. For description of table, see p. 195.




209

IN S U R A N C E SECTOR

TABLE 40—SELF-ADMINISTERED PENSION PLANS SUBSECTOR: SOURCES AND USES
OF FUNDS STATEMENT
(In billions of dollars)
1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
Sources of funds
A
B
C

Nonfinancial sou rces.....................................
Interest 1 .........................................................
Insurance premiums......................................

D

Total, above sources......................

a
b

Nonfinancial u ses2.........................................
Insurance benefits.........................................

c
d
e

Net increase in financial assets3...............
Federal obligations........................................
Corporate securities......................................

f

Total, above u se s............................

.1

*

.1

*
*

.1

.1

.1

*

*

He

.1

.1

.1

.5

.6

.6

.8

.9

1.0

1.3

1.8

2.4

.1

.1

.2

.4

.1

.1

.2

.5

.5

.7

.1
.8

.1
.8

.1
1.2

.2
1.6

.2
2.1

2.6

.1

.2

.5

.6

.6

.8

.9

1.0

1.3

1.8

2.4

2.9

.1

.1

.1

.1

.1

.1

.1

.2

.2

.2

.2

.1

.1

.1

.1

.1

.1

.1

.2

.2

.2

.1

.4

.5

1.6

2.2

2 .7

.2

.2

.2

.1

.5

.8
.3
.5

1.1

.2
.2

.7
.3
.4

.7

.1

.5
.3

.9

1.4

.2
2.0

2.4

.5

.6

.6

.8

.9

1.0

1.3

1.8

2.4

2 .9

*

He

2.9
.3

Uses of funds
♦
*

*
*
.1

*

*
*
*

.1

He

He

*

He

He

.1

*

.1
- .1

He

.1

He

.1

He

.2

.1

.3

.2

.2

*Less than 50 million dollars.
1 Includes dividend receipts.
2 Includes small amount of operating expenses not shown separately.
8 Includes small amount of currency and deposits not shown separately.
N o te .—Details may not add to totals because of rounding. For description of table, see p. 201. The results of a Securities Exchange |Commission survey of pension plans for 1951-54 became available too late for incorporation in this account. The results of the survey call for down­
ward revision in the estimates of flows through pension plans in recent years.

T A B L E 41—O T H E R IN S U R A N C E C O M PA N IE S SU B SE C TO R : SO U R C ES A N D USES
O F FU N D S S T A T E M E N T
(In billions of dollars)
1939 1940

1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953

Sources of funds
2.5

2.8

3.2

3.4

3.4

3.6

4.0

5.0

6.3

.1
.1

.1
.1

.1
.1

.1
.1

.1
.1

.1
.1

.1
.1

.1
.1

.1
.1

2.3

2.5

2.9

3.1

3.1

3.3

3.6

4.5

5.7

6.5

7.0

.1

.1
.1

A
B
C
D
E
F

Nonfinancial sou rces.....................................
Interest...........................................................
Dividends.......................................................
Insurance premiums 1 ....................................
Insurance benefits1 ........................................
Other goods and services..............................

G

Total, above sources......................

a
b
c
d
e
f
g

Nonfinancial u s e s ...........................................
Payroll............................................................
Dividends 2 .....................................................
Insurance premiums1 ....................................
Insurance benefits1 ........................................
Taxes...............................................................
Other goods and services..............................

h
i
j
k

Net increase in financial assets3...............
Currency and deposits..................................
Federal obligations........................................
State and local obligations...........................
Corporate securities......................................

He

m

Valuation a d ju stm en t..................................

He

.1

.1

n

Discrepancy**..................................................

.1

.1

.1

.1

o

Total, above u se s............................

2.5

2.8

3.2

3 4

He

He

He

He

He

He

7.1
J
.1

7.4 11.1 12.7 14.5 15.9
.2
.2

.1
.1

9.8
.9

.2
.2
11.2
1.1
.1

.2
.2
12.8

.2
.2

.1

.1

14.0
1.3 1.4

.1

.1

.1

.1

.1

.1

.1
.1

.1
.2

.1
.2

.3

2.5

2.8

3.2

3.4

3.4

3.6

4.0

5.0

6.3

7.1

7.4 11.1 12.7 14.5 15.9

2.2
.3

2.4
.3

2.7
.3

2.9
.4

2.9
.4

3.1
.4

3.4
.4

4.2
.5

5.1

5.8
.7

6.0

.1

.1
.1
1.2
.1

.1
.1

.1
.1
1.6
.1
.8

.1
.1

.1
.1
1.6
.2
.8

.1
.1
1.8
.1

.9

.1
.1
2.2
.1
1.2

.9

.5

1.1

.4

.2
.2

.7

.5

.1
.2

.2
.2

.1

Uses of funds

1

He

1.1
.1

.(

.2

.2

.1
.1

He

.1

.1

.7

.3
*

1.4

He

.7
He
He
He

.3

.4
5
!i

1.5
.1
.8

.7

-.1
.2
He
H«

He

.7

.5
-.1

- .2

.3

.3

-.2

- .2

He

He

3.4

3.6

He

-.1
.6

He
He

.6
.1
.2

.1
.2

.8
.1
.2

2.7

3.1

3.2

.1

.2
1.6

1.5

1.1

1.5

1.4
.2

He

.2

.1

- .4

.2

.1

.1

.1

.1

.1

4.0

5.0

6.3

7.1

He

.4
.4
.6

9.9 11.6 13.1 14.3
.9 1 . 0
1.1
1.2
.1

.1

.1

2.4
4.4
.4
1.7

2.7
5.5
.3

3.2

3.5

6.2

6.8

2.0

2.2

.4
2.3

1.2

1.8

1.5

.1

.1
.2

1.2

He

.4
.3
c

He
He

.3

.4
.7

.4
.5
.7
—.3

- .3

- .4

- .3

.2

.3

.2

He

.2

.7
.5
.2
- .1

7.4 11.1 12.7 14.5 15.9

*Less than 50 million dollars.
**Net uses (+ ) or net sources ( —) not accounted for.
xThe substantial increase in 1950 in insurance premiums and benefits reflects inclusion, beginning in 1950, of reinsurance premiums and
benefits paid by domestic carriers to other domestic carriers. For more detail, see Tables 53 and 56, pp. 256 and 258.
2 Dividends to stockholders only.
Dividends to policyholders are included in insurance benefits.
3Includes small amount of mortgages, policy loans, and miscellaneous assets not shown separately.
N ote .—Details may not add to totals because of rounding. For description of table, see p. 2 0 2 .




CH APTER 10
O TH ER INVESTORS SECTOR
The other investors sector is made up of
three subsectors—( 1 ) nonprofit organiza­
tions, ( 2 ) savings and loan associations, and
( 3 ) financial institutions not elsewhere classi­
fied. The statement of sources and uses of
funds for the full sector, presented in Table
42, page 218, is a simple combination of the
statements for the individual subsectors,

which are presented in Tables 43, 44, and 45
on pages 219-21. No description of the
sector coverage, the transaction coverage, or
the line-by-line contents of the sources and
uses of funds statement is given for the sector
as a whole. All such descriptions are given
below for each of the subsectors separately.

N O N P R O F IT O R G A N IZ A T IO N S SU BSEC TO R

The nonprofit organizations subsector
comprises nonprofit private schools and hos­
pitals, charitable and welfare organizations,
religious organizations, labor unions, social
and athletic clubs, foundations, and other
nonprofit groups serving consumers.1 The
subsector excludes the insurance activities of
these institutions, which are classified in the
“other insurance companies” subsector of
the insurance sector. The subsector also ex­
cludes trade associations, other nonprofit
groups serving business, and farm and non­
farm cooperatives of various kinds perform­
ing essentially business functions, which are
classified in the nonfarm noncorporate busi­
ness sector or the financial institutions n.e.c.
subsector.
The subsector account attempts to cover
all transactions of nonprofit organizations
effected through the use of money and
credits.2 Nonfinancial tra n sa ctio n s are
shown on a gross basis; receipts of donations,
for instance, represent all receipts and are

not net of payments of donations. Financial
transactions are shown in term s of net
changes in the subsector’s assets and liabili­
ties.
The flow-of-funds treatment of nonprofit
organizations differs from the national in­
come treatment. In the flow-of-funds struc­
ture, the activities of these organizations are
shown separately but in the national income
structure they are consolidated with those
of consumers, trust funds, and private pen­
sion plans in the personal sector. In this
consolidated personal sector account, for
example, charitable contributions between
nonprofit organizations and other elements
of the personal sector and payments of fees
by households to nonprofit schools and hos­
pitals are canceled out and do not appear.3
Transactions of nonprofit organizations with
other sectors of the national income system
are recorded in the national income accounts.
Thus the current expenditures of these or­
ganizations other than their gifts and dona-

1 Schools and hospitals operated for profit are classified in
the nonfarm business sectors.
2 As indicated in later discussion, the account may cover
transactions not involving money or credit to the extent that
the data used in estimating donations received include gifts
in the form of real property.

3 The consolidation of elements of the personal sector is
not complete, however. Wages and salaries in expenditures
of nonprofit organizations are included in both personal
consumption expenditures and personal income, since they
are part of national incomc and product totals as defined
in the national income accounts.




210

O T H E R IN V ESTO R S SECTOR

tions to consumers are part of personal
consumption expenditures and their receipts
of investment income and of contributions
from other national income sectors are part
of personal income. The capital expendi­
tures of these organizations are part of busi­
ness purchases on capital account in the
national income gross saving and investment
account.
Derivation of the account for this flow-offunds subsector from the national income
accounts may therefore be thought of as ( 1 )
deconsolidation of the national income per­
sonal sector account to restore flows between
nonprofit organizations and other “persons,”
and ( 2 ) removal of all activities of nonprofit
organizations to a separate subsector account.
The difference between the flow-of-funds
and the national income treatment of these
organizations is reflected in the tables in
Chapter 2 relating transactions of the flow-offunds consumer sector to corresponding
series for the personal sector of the national
income accounts.4
N o n p r o f i t O r g a n iz a t io n s S t a t e m e n t

As indicated in the chapters describing
transaction accounts, the estimates for the
nonprofit organizations subsector are built
up from a variety of data. Statistical gaps
remain since for some pertinent transac­
tions there is no information available. The
sources and uses of funds statement for
this flow-of-funds subsector is given in
Table 43 on page 219.
Nonfinancial sources of funds (line A )
consist mainly of grants and donations and
of fees received by nonprofit schools and
hospitals. The total includes receipts of
insurance benefits not shown separately in
the table.

211

Property income (line B) rep resents
receipts of interest, dividends, and rents and
royalties.
Grants and donations (line C) are the
largest source of funds for the subsector.
Government grants (line D ) since World
War II have been principally from the Fed­
eral Government. They represent mainly
veterans’ tuition and research grants paid to
nonprofit colleges and universities, and con­
struction grants to nonprofit hospitals.
Private grants and donations (line E) are
from the consumer and corporate business
sectors. In addition to cash gifts, the series
includes transfers of securities and real prop­
erty, valued at market prices, to the extent
that such transfers are included in the tax
data that are the basic source of information
on such gifts. No estimate is included for
grants from one nonprofit organization to
another.5
Sales of other goods and services (line F)
represent all nonfinancial sources other than
those in the lines above. The series covers
charges for tuition, room, and board at
private schools, fees at private hospitals, dues
and fees received by labor unions and social
clubs, and miscellaneous sales receipts of
colleges and universities from publications,
athletic events, etc.
N et increase in liabilities (line G ). Non­
profit organizations owe small amounts of
debt in the form of mortgages (not shown
separately in the table), ban\ loans other
than mortgages (line H ), and trade debt
(line I).
Nonfinancial uses of funds (line a) re­
corded for this subsector cover grants and
donations, other current expenditures, and
expenditures for construction and equip­
ment. Nonfinancial uses should also in-

4 See Tables 3, 4, and 8 on pp. 74, 75, and 78; see also
6 Similarly the subsector’s payments of grants and donaTable 65 on p. 299 of Ch. 15.
tions (line f) exclude grants paid within the subsector.




212

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

elude acquisitions of existing real property
by purchase and by gift to the extent that
receipts of grants and donations in line C
include gifts in kind, but no data are avail­
able on these transactions.
Payroll (line b) represents cash payments
of wages and salaries. Wages in kind, such
as food and housing supplied to employees,
are excluded from line b. Outlays made by
nonprofit organizations in furnishing these
wages in kind are reflected in other non­
financial uses.
Interest (line c) is paid on bank loans
and mortgages, and rent (line d) on office
space, etc. occupied on a tenant basis. In­
surance premiums (line e) cover payments
of property insurance premiums, employer
contributions to private pension and insur­
ance programs for employees, and employ­
ment taxes under social insurance programs.
Grants and donations (line f) cover benefit
payments by labor unions and fraternal or­
ganizations (other than insurance benefits)
and donations by private charities to con­
sumers and to the rest of the world sector.
Like grant and donation receipts (line C),
this series excludes grants from one organiza­
tion to another within the sector. Because
data are not available, line f does not cover
payments to the consumer sector in the form
of scholarships, fellowships, and research
grants.®

Purchases of other goods and services (line
g) represent outlays for current expenses
other than those in lines b-f and for construc­
tion and equipment (line h). The latter
consists of outlays for new churches, schools,
hospitals, social clubs, and recreational facil­
ities and for hospital and school equipment.
N et increase in financial assets (line i).
No direct estimates are available of either
levels or changes in levels of total financial
assets held in the nonprofit organizations
subsector. Scattered information is available
from the Internal Revenue Service and other
agencies for particular years or for segments
of the subsector, but it provides an inade­
quate basis for the estimates needed for the
subsector account for the whole period
covered. It is therefore necessary to com­
pute line i as a residual—total sources of
funds (line J) less nonfinancial uses (line a).
After allocating amounts to holdings of cur­
rency and deposits (line j) and Federal obli­
gations (line k) on the basis of Federal Re­
serve and Treasury data, the remainder of
line i is classified as net acquisitions of corpo­
rate securities (line 1). Line 1 includes net
acquisition of securities through gifts as well
as net purchases. Because it is calculated as
a residual on the whole account, it reflects
the net effect of errors and omissions in
computation of the other entries for the
subsector.

SA VIN GS A N D L O A N A SSO C IA TIO N S SU BSEC TO R

The savings and loan associations subsec­
tor comprises all operating savings and loan
associations, cooperative banks, and home­
stead associations reported in the Home Loan
Bank Board publication, Trends in the Sav­

ings and Loan Field. It includes Federaland State-chartered associations, insured and
uninsured associations, members and non­
members of the Federal Home Loan Bank
System. The principal activity of savings

6 The aggregate amount of these outlays is usually not
very large but may have exceeded 50 million dollars annually
in recent years. This omission results in misallocation of
transactions in the flow-of-funds accounts, but it does not
affect discrepancies. The net effect is that purchases of

corporate securities by the nonprofit organizations subsector
are overstated, consumer purchases of corporate securities
are understated, and consumer receipts of grants and dona­
tions are understated.




O T H E R IN V ESTO R S SECTOR

213

Government advances (line G) comprise
Federal Government share capital and ad­
vances from the Reconstruction Finance
Corporation and (through 1950) the Federal
S a v in g s a n d L o a n A s s o c ia t io n s S t a t e m e n t
home loan banks. The last of the Federal
The sources and uses of funds statement Government’s equity in the FHLB was re­
for the subsector is presented in Table 44, tired in 1951, and starting in that year the
on page 220 .
FHLB are classified in the financial institu­
Nonfinancial sources of funds (line A ). tions n.e.c. subsector of the flow-of-funds
The principal nonfinancial source is interest accounts. For 1951 on, advances to the sub­
receipts (line B), mainly from mortgage sector by the FHLB are classified as other
loans but also from holdings of Federal obli­ miscellaneous liabilities (line I), not as Gov­
gations and miscellaneous financial assets. ernment advances. The entries for 1951 on
Real estate transfers (line C) represent sales lines G and I reflect the shift in classification
less acquisitions of properties taken over of advances outstanding.
through foreclosure of mortgages.7 Total
Loans in process (line H ) are recorded as
real estate assets in this category have been liabilities to match mortgages that are in­
very small in recent years. Total sources of cluded in mortgage assets (line g ), but for
funds in line A include rent receipts and which funds have not yet been advanced.
private insurance benefits too small to be
Nonfinancial uses of funds (line a) con­
shown separately.
sist mainly of dividends to depositors (classed
N et increase in liabilities (line D ). Al­ as interest payments in flow-of-funds ac­
most all of the subsector’s liabilities are counts) and operating expenses. Interest
classified in flow-of-funds accounts as mis­ (line b) includes interest on FHLB and RFC
cellaneous liabilities (line E). Lines F advances as well as dividends on savings capi­
through I present a breakdown of these tal. The dividends include credits to de­
liabilities. The total in line D also includes positors’ accounts as well as cash payments.
a small amount of bank loans other than Other nonfinancial uses (line c) are operat­
ing outlays for payroll, rent, insurance pre­
mortgages not shown separately.
Private capital (line F) is the net change miums, and other goods and services.
N et increase in financial assets (line d).
in savings capital deposited by flow-of-funds
private sectors. It consists primarily of con­ The financial assets of savings and loan asso­
sumer sector deposits (or net purchase of ciations consist mainly of mortgages, about
shares) but also includes deposits by credit 80 per cent of total assets in recent years, and
unions. Line F excludes shares pledged cash and Federal obligations. The total net
against mortgage loans, since mortgages increases in line d include changes in share
(line g) are shown net of these pledged loans to consumers not shown separately.
Currency and deposits (line e) represent
shares.
changes in cash balances held by the subsec­
7 Valuation of foreclosed properties presents certain prob­
tor. The series excludes subsector deposits
lems. For the flow-of-funds accounts, the most appropriate
valuation for recording the acquisition of the foreclosed with Federal home loan banks, which are
property is the amount of the mortgage that is written off classified in the miscellaneous financial trans­
from the mortgagee’s assets in foreclosure. See Ch. 15, p.
actions category (line h). Federal obliga­
270.

and loan associations is mortgage lending
on residential properties, financed from sav­
ings deposited by consumers.




214

FLOW

O F FU N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

tions (line f) are transactions in direct and
fully guaranteed debt of the Federal Govern­
ment.
Mortgages (line g) consist primarily of net
changes in loans to consumers secured by
one- to four-family nonfarm residential prop­
erties. A small proportion of mortgage hold­
ings, estimated at 5 per cent, is secured by
other types of properties. Line g is net of
changes in share capital pledged against
mortgage loans, but it includes loans in proc­

ess, against which line H under liabilities is a
contra item.
Miscellaneous assets (line h) consist of
holdings of stocks in Federal Home Loan
Banks, deposits in these banks, and minor
amounts of unidentified assets.
The small discrepancy (line i) in the ac­
count arises in the estimation of nonfinancial
transactions, which are based on sources
other than the Home Loan Bank Board.

F IN A N C IA L IN S T IT U T IO N S N.E.C. SU BSEC TO R

This subsector is a residual group of mis­
cellaneous financial institutions. The sepa­
rate elements in the subsector have little in
common with one another but their activities
are not of sufficient magnitude to warrant
showing each type in a separate account.
The subsector covers credit unions, invest­
ment companies, banks in United States pos­
sessions, agencies of foreign banks in the
United States, livestock loan companies,
agricultural credit corporations, Federal land
banks (beginning 1947), national farm loan
associations, production credit associations,
joint stock land banks, and Federal home
loan banks (beginning 1951). The subsec­
tor also covers a few transactions in which
the participant in the subsector cannot be
identified specifically.
The sources and uses of funds statement
for the subsector, presented in Table 45 on
page 221 , is a combined rather than consoli­
dated account, so that transactions between
members of the subsector are recorded in the
table rather than washed out. The various
components of the subsector do not all en­
gage in all of the transactions shown on the
subsector account. In the following descrip­
tions of the major components of the subsec­
tor, the transactions in which each engages
are indicated.




Credit unions comprise both Federal- and
State-chartered organizations. Their prin­
cipal function is extension of short- and intermediate-term credit to consumers (line d)
financed from shares purchased by consum­
ers (part of line E).
Investment companies are those registered
with and reporting to the Securities and Ex­
change Commission and include both openend and closed-end companies. These com­
panies raise funds in the capital market
mainly through sales of shares to individual
investors (line D ) and invest the funds
largely in marketable corporate securities
(line f). They receive and pay out dividends
(lines B and b) and interest.
Banks in United States possessions are clas­
sified in the financial institutions n.e.c. sub­
sector in order that coverage of the flow-offunds banking sector may conform to the
coverage of banking statistics published in
the Federal Reserve Bulletin, which exclude
such banks. The deposit liabilities of these
banks are a miscellaneous liability of the sub­
sector (part of line E), and their assets are
in several flow-of-funds categories (part of
lines e, g, and h).
Agencies of foreign banks in the United
States are branches of foreign banks that
have not obtained charters to do a banking

O T H E R IN V E ST O R S SECTOR

business in the United States. They are en­
gaged primarily in financing foreign trade.
Their activities are reflected mainly in line E.
Livestock loan companies and agricultural
credit corporations make loans to farmers
(recorded in line h) and receive credit from
Federal intermediate credit banks (recorded
in line E).
The next four groups are credit agencies
operating under the supervision of the Farm
Credit Administration. The twelve Federal
land banks make mortgage loans secured by
farm real estate, financing their operations
mainly through issue of bonds on the open
market. In the flow-of-funds accounts, these
banks are included in the Federal Govern­
ment sector for the years 1939 through 1946.
The last of the Government’s equity in the
banks was retired in 1947, and beginning
with that year the banks are classified in the
financial institutions n.e.c. subsector. All
stock in the banks is now owned by na­
tional farm loan associations, which are also
in this subsector. Federal land bank transac­
tions are mainly in lines E and g, where
entries for 1947 reflect the shift in classifi­
cation of outstanding liabilities and assets of
these banks from the Federal Government
sector to this subsector.
National farm loan associations are farmerowned cooperative organizations that par­
ticipate in the Federal land bank lending
program. They investigate loan applica­
tions and make recommendations to the land
banks but do not lend directly from their
own resources. Their assets consist princi­
pally of the capital stock of the Federal land
banks, and their liabilities consist principally
of shares in the associations held by farmers.
Transactions in these items are in lines E and
h.
Production credit associations are farmerowned organizations that make short-term




215

loans to farmers to finance current opera­
tions, breeding, and farm equipment pur­
chases. These associations were formerly
financed partly by stock sales to the Government-owned production credit corporations,
but over the years the Government equity
has been almost entirely retired. The asso­
ciations are mainly financed in their current
operations by rediscounting of loans at Fed­
eral intermediate credit banks, which are
Government owned. Transactions of pro­
duction credit associations are mainly in lines
E and h.
Joint stock land banks have been in liqui­
dation since 1933 but small amounts of their
assets and liabilities were outstanding in
some of the years covered by the table.
Federal home loan banks, classified in
the flow-of-funds Federal Government sector
through 1950, are included in this sector be­
ginning 1951, when the last of the Govern­
ment’s equity investment was retired. The
home loan banks were established in 1932
to provide secondary financing of mortgage
lending activities of savings and loan asso­
ciations, savings banks, and insurance com­
panies through advances to member associa­
tions, banks, and insurance companies.
Sources of capital funds for the Federal home
loan banks are stock purchases by member
institutions, demand and time deposits held
for member institutions, and obligations sold
on the open market to banks, insurance com­
panies, and others. (All of these sources of
funds are recorded in line E.) Uses of funds
are mainly advances to members (in line h),
secured and unsecured by mortgage assets
of the members. Entries in lines E and h
for 1951 reflect the shift in classification of
outstanding liabilities and assets of the Fed­
eral home loan banks from the Federal Gov­
ernment sector to this subsector.

216

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

F i n a n c ia l I n s t it u t io n s n .e .c . S t a t e m e n t

The quality of information available for
constructing this account varies widely.
Complete balance-sheet information is re­
ported for banks in possessions, Federal land
banks, Federal home loan banks, national
farm loan associations, joint stock land banks,
and production credit associations. (In some
years only fiscal year figures were available
for farm credit agencies, and it was neces­
sary to interpolate data to derive calendar
year figures.) Adequate information is also
available for credit unions and investment
companies.8 For the remaining institutions
—livestock loan companies and agricultural
credit corporations and United States agen­
cies of foreign banks—only fragmentary in­
formation can be obtained.
Nonfinancial sources of funds (line A )
consist mainly of dividends received by in­
vestment companies on their corporate se­
curity holdings (line B). Line A also in­
cludes minor amounts of interest, rent, and
insurance benefits not shown separately.
N et increase in liabilities (line C). All
liabilities of the subsector are classed in the
miscellaneous financial transactions category,
except the corporate securities that are issued
by investment companies (line D ).
Miscellaneous liabilities (line E) comprise
a variety of items:
1. Credit union shares;
2. Deposit liabilities of banks in United States
possessions and of agencies of foreign banks in
the United States;
3. Deposit liabilities of Federal home loan banks
(beginning 1951);9
4. Borrowings by production credit associations,
livestock loan companies, and agricultural credit
8 However, SEC tabulations of investment company data
were discontinued in mid-1954.
9 For the years in which these groups are brought into the
subsector, 1947 and 1951, their total financial assets, debts,
and paid-in capital are recorded as positive elements of the
subsector’s financial transactions.




corporations from F e d e r a l intermediate credit
banks;
5. Borrowings by joint stock land banks from
the Reconstruction Finance Corporation;
6. Debt and equity securities issued by Federal
land banks (beginning 1947) and Federal home
loan banks (beginning 1951 ) ; 9
7 . Capital stock issued by national farm loan
associations, production credit associations, and
joint stock land banks.

Miscellaneous liabilities owed to ban\s
(line F) consist of bonds of the Federal land
banks and the Federal home loan banks held
by banks.9
Nonfinancial uses of funds (line a). The
principal nonfinancial uses of funds by the
subsector are dividend payments by invest­
ment companies (line T>). Line a also in­
cludes small amounts of operating expenses
not shown separately.
N et increase in financial assets (line c).
Changes in currency and deposits and hold­
ings of State and local obligations are in­
cluded in line c but not shown separately.
Trade credit (line d) represents net exten­
sions of short- and intermediate-term loans
to consumers by credit unions. Federal obli­
gations (line e) are held as assets by most
groups in the subsector.
Corporate securities (line f ) represent port­
folio purchases by investment companies less
cash receipts from their portfolio sales. The
series differs from changes in balance-sheet
levels as conventionally reported by invest­
ment companies in that it does not reflect
revaluation of assets.
Mortgages (line g) represent net changes
in residential mortgages held by credit
unions and banks in United States posses­
sions and in farm mortgages held by joint
stock land banks and, beginning 1947, Fed­
eral land banks. The increase shown for
1947 reflects the entry of the Federal land

O T H E R IN V ESTO R S SECTOR

bank holdings into this subsector from the
Federal Government sector.
Miscellaneous assets (line h) consist of a
variety of items:
1. Credit union holdings of savings and loan
shares;
2. Holdings by banks in United States posses­
sions of currency, coin, balances with banks, and
loans other than mortgages;
3. Loans to farmers by production credit associa­
tions, livestock loan companies, and agricultural
credit corporations;
4. National farm loan association holdings of
Federal land bank stock (included in all years);
5. Holdings of Federal land bank and Federal
home loan bank debt allocated to this subsector;10
6. Beginning 1951, certain financial assets of
Federal home loan banks, mainly advances to sav­
ings and loan associations. The increase in line
h for 1951 reflects the entry of these assets into
the subsector from the Federal Government sector.

Discrepancy (line i). While most of the
data for this subsector are derived from com­
plete financial statements for the component
groups in the subsector, there are a few types
of imbalance in the account that produce dis­
crepancies between total sources accounted
for and total uses accounted for.
There is, first, some discrepancy in every
year arising from the allocation to the sub­
10 Beginning 1947 and 1951 respectively.
years, classified as Federal obligations.




Before those

217

sector as assets of certain securities that can­
not be identified as to holder. These securi­
ties include some bonds of the Federal land
banks and the Federal home loan banks, and
some debt issued by Government corpora­
tions but not guaranteed by the Treasury.
Year-to-year changes in these residual hold­
ings allocated to this subsector enter the dis­
crepancy.
Secondly, a discrepancy arises in 1947 in
connection with the transfer of Federal
land banks to this subsector. The total assets
of the land banks are shown as uses of funds
for 1947, and their total debt and paid-in
capital as sources of funds. The banks’ re­
serves and earned surplus—the difference
between assets on the one side and debt and
paid-in capital on the other—make up most
of the 1947 discrepancy. A corresponding
item of small magnitude for Federal home
loan banks is reflected in the 1951 discrep­
ancy.
Other discrepancies arise from incomplete
coverage of transactions for some subsector
components. The principal omissions are in
the data for agencies of foreign banks in the
United States. For these agencies only one
transaction is included—changes in deposit
liabilities—since data on other items are not
available.

218

FLOW

O F FU N D S IN

T H E U N IT E D STATES, 1 9 3 9 - 5 3

T A B L E 42—O T H E R IN V E ST O R S S E C T O R : SO U RCES A N D USES O F FU N D S S T A T E M E N T 1
(In billions of dollars)
1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
S ources of fu n d s
A
B
C
D

K
F
G

II
I
J

K
L
M

N onfinancial sources 2 ..................................
Interest......................................................... ..
Dividends.......................................................
R ents...............................................................
Grants and donations...................................
Real estate transfers.....................................
Other goods and services..............................

3.2
.3

3.3
.3

3.9
.4

4.5
.4

5.2
.4

5.7
.4

6.0

6.6

.2
.1
1 .2
.2
1.1

.2
.1

.2
.1
1.8
.2

.1
.1

.2
.1

.2
.1

.2
.1

2.4

.2
.1

3.0

3.3

.1

.1

1 .3

1.5

3.4
*
1.9

3.5
*

1 .3

.1
1.6

N et in crease in liab ilitie s 3 ..........................
Bank loans other than mortgages...............
Corporate securities......................................
Miscellaneous liabilities4 ..............................

.3

.4

.3

.7

1.1

1.7

Owed to hanks ................................................

T o ta l, above so u rces......................

1 .3
.2
1 .2
.2
-.1

*
*.3

*.1
♦.3

*
*

3.5

3.5

3.0
1 1

.3
.1
.1
.1

.1
.1

-.1

*

*

.4

*

*

.4

.5

7.7
.6

8.6
.6

.3

.3

8.9
.7
.3

9.7 10.5 11.4 12.3
.7
.8
1.0
1.2
.4
.4
.3
.4

.1

.1

.1

4.5

4.9

2.2

4.4
*
3.3

3.6

1.5

2.3

1.9

3.0

.1
.1

- .2
.2

- .2
.2
2.2

1.6
-.1
.1

.4
3.7

.5
3.9

*

3.1

*

.2

*

*

*. 2

*. 6

*1 . 0

*1.4

1.4

4.3

4.8

5.9

6.8

7.7

8.1

10.1

10.2

10.8

3.1

3.5

3.9
1.5

4.5
1.7

6.1
2.1

.2

.2
.1
.2
.1
.6

2

7.0
2.5
.3

8.1

1.2

3.6
1 .3

4.9

1.1
.2

9.0
3.2
.4
.3
.3
.3

./

.6

1.5

*

*

.3
1.6

./

.3
2.4

*

.1

.1

.1

4.1
*
2.7

5.2

*

5.4

.1

5.6

He

He

3.9

4.4

4.9

4.1

4.6

He

.4

He

5.0
-.1

He

.4
4.6

*

12.7 14.6 16.0 17.3

Uses of fu n d s
a
b
c
d
e
f

K

h

i

N onfinancial u s e s ..........................................
Payroll............................................................
Interest...........................................................
Dividends.......................................................
R ents...............................................................
Insurance premiums8 ...................................
Grants and donations...................................
Other goods and services.............................

.3
1.1

.1

m
n
o
P

Discrepancy**..................................................

.3

.1

q

T o ta l, above u se s............................

3.5

3.5

k

1

.4

.4
1.2

*.9

1.2
.1
-.1

.2

.2

*.1
- .1

*

.1

*

-.1

- .2

.2
.1

- .3
.3

.1
.1

1 .2

*. 2
- .2

.2

.2
.1
.1

.3

II

N et in crease in financial assets 6 ...............
Currency and deposits..................................
T rade credit...................................................
Federal obligations........................................
Corporate securities......................................
Mortgages......................................................
Miscellaneous assets......................................

j

.3

.7

.1

.3

.6
.4 *

4.3

1

.2

1.9

A
.2
.1

.7
1.4
2.4
.4

*.4

*

1.3
.2
*

1.6
.2
.2

1.8
.2
.1
.2
.2
.8

.3
.3
.2
.2

.8

1.5

2.3

2.5

2.1

♦. 6

.3
.1
-.6

.8

.8

.8

.8

3.3

3.8

4.3

4.7

*3.4

2.2

*1 . 8

*

2.7

4.0

4.4

.1

.1

.2

.6
.1

.6
.2

- .4

.1
-.1

.3
- .4

.3

.2
.2
.2

.7
2.7

.4

.4

- .4
.7

.6
A

1 .8
.1

2.6
.2

.8

2

.3
.3

.3
5

.2

i'.F

1.4

.2

.2

-.1

.1

*

*

.1

- .1

.4

- .1

- .4

-.1

*

5.9

6.8

7.7

8.1

10.1

10.2

10.8

4.8

10.9
3.7
.5
.4
.3
.3
.3
.3
.3

12.4
4.4
.7
.4
.4
.4
.4
.4
.4
.9 1 . 0
4.8 5.1

2.9
.4

10.0

11.6

3.4
.5

4.1

-.1

.5
2.1
.1

*

2.0

1.4

- .3

.6

5.0
.2

.4
- .2

2.9
.5

.3
3.7
.5

*

-.1

-.1

12.7 14.6 16.0 17.3

♦Less than 50 million dollars.
**Net uses ( + ) or net sources ( —) not accounted for.
1 Details for component subsectors are presented in accompanying tables for nonprofit organizations, savings and loan associations, and finan­
cial institutions not elsewhere classified.
2 Includes small amount of private insurance benefits not shown separately.
3 Includes small amount of trade debt not shown separately.
4 Includes small amount of mortgages.
includes small amount of employment taxes not shown separately.
6Includes small amount of State and local obligations not shown separately.
N o te .— D etails m ay not add to totals becau.se of rounding.




For d escription of table, see references for T ables 4 3 -4 5 follow ing.

219

O T H E R INVESTORS SECTOR
TABLE 43—N O N PRO FIT ORGANIZATIONS SUBSECTOR: SOURCES AND USES
OF FUNDS STATEMENT
(In billions of dollars)

1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
Sources of funds
2.7

3.3

.2

.2
1.8

A
B
C
D
E
F

Nonfinancial sources1...................
Property income2 ..........................
Grants and donations...................
Government..................................
Private.........................................
Other goods and services..............

2.6

1.1

1.2

G
H
I

N et increase in liabilities3 ..........
Bank loans other than mortgages
Trade deb t......................................

- .1
-.1
*

- .1
-.1
*

*

T otal, above sou rces.. . .

2.5

2.6

3.3

2.6

2.8

3.0

d
e
f
g
h

Nonfinancial u se s.........................
Payroll..........................................
Interest.........................................
Rents.............................................
Insurance premiums....................
Grants and donations.................
Other goods and services............
Construction and equipment. ..

1.0
.1
.1
.1

1.1
.1
.1

1.1
.1
.1
.1

.3

.3
1.1
.3

i
j
k
1

N et increase in financial assets
Currency and deposits................
Federal obligations......................
Corporate securities....................

- .1

m

Total, above u ses..........

2.5

J

.2
1 .2

.1
1.2

1.3
./
1.2

3.9

4.7

5.2

5.5

6.0

7.0

7.8

8.0

8.7

9.4 10.1 10.8

.2

.2

.2

.2

.2

2

.2

.2

.2

.2

.2

.2

.1
1.8
1.3

2.4
.1
2.3
1.3

3.0
.1
2.8
1.5

3.3
.2
3.1

3.4
.2
3.2
1.9

3.5
2
3.3
2.2

4^1
.4
3.7
2.7

4.5
.4
4.1
3.1

4.9
.5
4.4
3.6

5.2
.4
4.8
3.9

5.4
.4
5.0
4.4

5.6
.4
5 .2
4.9

.1
.1

.1

.1

.1

4.4
.4
4.0
3.3
*
*
*

1.6

.1

- .1
*
*

*

4 0

4.7

5.1

5.5

3.1
1.3

3.5
1.4

4.1

.1
.1
.1

.1
.2
.1

1.6
.1
.2
.1

.1
.1

*

.1

*

*

*

.1

.3

He

.2
.1

He

.2

*

He
-.1

-.1
.1

- .2
.1

6.0

7.0

7.9

8.0

9.1

9.4 10.3 10.8

4.4

5.5
2.1
.1
.2
.1
.8
2.2

6 .4
2.4

7.4

1.8
.1
.2
.1
.8

8.2
3.1

9.0
3.4

9.8 10.3
3.7 4.0

.1
.2
.2
.8

.1

.1

.3

.3
.3

3.3
1.2

3.7
1.6

4.2
1.9

.5

- .2

He

.2

-.1

- .2
-.2

.1

-.1
.2

.1

n

crp

Uses of funds

1.0

.3
.2
-.1
- .2

.1

- .2
.1
*
- .2

2.6

.4

1.1

*
*

.6

.4

1.1

1.2

.3

.2

*

.3

.9

1.2
.3

.1

.3
3.3

.3

.6

.6

.3

4.0

4.7

.7
1.4
./
1.0
.5
.4

1 .5
2

.6

.5

1.1
.6

.2

.3
.3

5.1

5.5

*

.2

.7
2.7
.8
*
*

2.8
.1
.2
.2
.8

.6
*

.3

.6

.3

6.0

7.0

7.9

♦Less than 50 million dollars.
1 Includes small amount of private insurance benefits not shown separately.
2 Dividends, interest, and rent receipts.
3 Includes small amount of mortgages not shown separately.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 211.




.1
.2
.2

*
*

8.0

.2
.8

.4
9.1

4.6
2.1

.3
.3
.9
4.7
2.0

- .4
.4

- .1
.5

.8

-.1

-.7

11.0
4.3

.1

He
- . 6

.1

.3
.3
1 .0

5 0
2 1
-.2
A
- .3
He

9.4 10.3 10.8

220

FLO W O F FU N D S IN T H E U N IT E D STATES, 1939-53

TABLE 44—SAVINGS AND LOAN ASSOCIATIONS SUBSECTOR: SOURCES AND USES
OF FUNDS STATEMENT
(In billions of dollars)
1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
Sources of funds
A
B
c

Notifin^nHnl sources1
Interest...........................................................
Real estate transfers.....................................

D
E
F
G
H
1

Net increase in liab ilities2..........................
Miscellaneous liabilities................................
Private capital3 ..........................................
Government advances4 ................................
Loans in process.........................................
Other 5 ..........................................................

J

Total, above sources......................

a
b
c

.5
.3

5
.3

.5
.3

.4
.3

.4
.3

.4
.3

.2

.2

.2

.1

.1

.1

.2

.4
.3
.4

.1

.4
.4
.6
—.1
*

.8

.3
—.1
*

*
*
*
*
*

.2

*
*

.2

*
*

.1

.8

*
*

.8

*

.4
.3

1.3

*

.4
.4

*

.5
.4

*

.6
.5

.6

*

.7
.7

.8

1.3
1.4
1.2
.1
.1

1.4
1.4
1.2
.1
.1

1.5
1.5
1.5
- .1
*

2.1

1.2
.1
*

1.5
.4
.1

2.1
— .8
*
.8

1.2

2.0

.9
.9

1.1
1.1
*

3.2
3.2
3.1

3 .8
3.8
3.7

.1
.1

.1
.1

.8
*

1.1
*
.1

1.2

1.2

.6
*

2.1
2.1

*

.6

.7

.8

.5

.8

1.2

1.6

1.7

1.8

1.8

2.1

2.8

2.9

4 .2

4 .9

Nonfinancial u se s ..........................................
Interest...........................................................
O ther 6 .............................................................

.2

.2

.3

.3

.3

.3

.3

.2

.2

.4
.3

.5
.3

.6
.4

.1

.1

.1

.1

.2

.2

.5
.3
.2

.2

.8
.5
.3

.9

.J

.2

.4

.2
.1

.2

.3

.2
.i

d
e
f

Net increase in financial assets7...............
Currency and deposits..................................
Federal obligations........................................

.2

.3

.5

.3

.6

1.0
—. 1

1.5

1.3

2.2

2.3

3.4

4 .2
*

- .4

1.6
.J

.8

1.4
*
.7

g

.2

.6

1.8

h

Mortgages3 .........................................................
Miscellaneous assets 8.......................................

l

Discrepancy**..................................................

.1

.1

j

Total, above u ses............................

.6

.7

Uses of funds
.2
.1

*
*
*

.2

*
*
*

.3

*
*
*

.5

*

*
*

.1
.2

*

.8

.2

*
*
*

.5
*

*

.5

.8

*

*

*

1.2

1.6

.1

*

.2
.2

1.5
*
- .3
1.7

- .3
1.4

.1

.1

-.1

- .1

1.7

1.8

.1

*

*

.1

.1
.1

.1

1.3

2.0

1.9

2.8

.2

*

.2

.2

.3

.6

.3

.1

3.6
.3

*

*

*

*

*

- .1

1.8

2.1

2.8

2.9

4.2

4 .9

*Less than 50 million dollars.
**Net uses ( -f) or net sources ( —) not accounted for.
1 Includes small amounts of rent and private insurance benefits not shown separately.
2 Includes small amounts of bank loans other than mortgages not shown separately.
3Shares pledged against mortgages are not included in private capital and are deducted from mortgage assets.
4 U. S. Government share capital and Reconstruction Finance Corp. advances for all years, and Federal home loan bank advances until 1951.
See note 5.
5Advances from Federal home loan banks to savings and loan associations, transferred from Government advances in line G in 1951, when
retirement of Government equity in these banks was completed.
6Expenditures for payroll, rents, insurance premiums, and other goods and services.
7Includes small amount of share loans to consumers not shown separately.
8Stock in Federal home loan banks, deposit liabilities of these banks to savings and loan associations, and minor amounts of unidentified
assets.
N o t e .—Details may not add to totals because of rounding.
For description of table, see p. 213.




O T H E R IN V ESTO R S SECTOR

221

T A B L E 45—F IN A N C IA L IN S T IT U T IO N ? N.E.C. SU B SE C TO R : SO U R C ES A N D USES
O F FU N D S S T A T E M E N T
(In billions of dollars)
1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
Sources of funds
A
B

Nonfinancial sources1...................................
Dividends.......................................................

C
D
E
F

Net increase in lia b ilities............................
Corporate securities2 ....................................
Miscellaneous liabilities3 4 ...........................
Owed to banks.............................................

G

Total, above sources......................

a
b

Nonfinancial u ses5.........................................
Dividends.......................................................

c
d
e
f
g
h

N et increase in financial assets6...............
Trade credit 7 .................................................
Federal obligations........................................
Corporate securities 8 ....................................
Mortgages4 .....................................................
Miscellaneous assets 4 9 ................................

i
j

*

.1

.1

.1

.1

.1

.2

.2

.2

.3

.3

.1

.1

.1

.1

.1

.1

.2

.2

.2

.2

.2

1.0

.3

.2

.2
.8

.1
.2

.3

*

.1

He
He
He

He

.1

He

.2

H«

.3

.3

.2

.1
.2

.3

.1

.5

.2

.1

.2

.3

.4

.1

.1

.2

.2

.1

.1

.1

.2

.2

.1

.1

.2

He

.6

.6

.4

1.2

.1

.2

.1

.1

.3
.3

He

.3
.3

.3
.3

.3
.3

.4
.3

.4
.4

.4
.3

.6
.3
.4

1.9
.4

1.2
.5

1.6

.6

1.1
.4
.7

.1

.1

He

.3

He

He

.5

.7

.9

2.3

1.5

1.5

.3

.3

.2

.2

.3
.3

.4
.3

.5
.4

.5
.4

.5
.4

2.1

1.1

Uses of funds

*
*
*
*

.1

*

.1

He
He

He
.1

.2

- .1
He
H«
.1

He
He
He

Discrepancy**..................................................

.2

He

- .1

Total, above u ses....................................

.5

.2

.1

-.1
.2
He
He
-.1
He

.2

He
He
He

.1
.2

He

.1

He
He
He

.1

He

.3

*

.4

He
He

.4

-.2
He

He
.1

-.2
.1
He

.1

.1

.4
.4

.6

He

.4

1.2

.4

.3

.1
-.1
.1

.9

.1
- .1
.2
He

.2

.1

.1
-.1
.2
.1
He

- .3

-.1

1.2

.5

He

.5
.2
He
.1
.1
.1
He

.7

.9

He

.3
.3

.2
.1

1.1
.3

He

.5

.3

1.3

.1
.2

.1
.2

- .3

- .1

2.3

1.5

.1

- .1

1.5

♦Less than 50 million dollars.
**Net uses ( + ) or net sources ( —) not accounted for.
1 Includes small amounts of interest, rents, and insurance benefits not shown separately.
2 Net sales of own securities by investment companies.
3Credit union shares; capital stock of national farm loan associations, Federal land banks beginning 1947, Federal home loan banks beginning
1951, joint stock land banks, and production credit associations; bonds of joint stock land banks, Federal land banks beginning 1947, and Federal
home loan banks beginning 1951; deposit liabilities of banks in U. S. possessions and amounts they owe to continental banks; and other miscel­
laneous liabilities.
4The substantial increases for 1947 in line E and line g and for 1951 in line E and line h result from shift of Federal land banks and Federal
home loan banks to this subsector from the Federal Government sector in those years.
in clu d es small amounts of expenditures for interest, insurance premiums, and other goods and services not shown separately.
6Includes small amount of currency and deposits and State and local government obligations not shown separately.
7Credit union loans.
8Net purchases of corporate securities by investment companies.
9Savings and loan shares; Federal land bank stock and, beginning 1947, bonds; beginning 1951, bonds of Federal home loan banks; begin­
ning 1951, Federal home loan bank advances to savings and loan associations, and minor amounts of miscellaneous assets of these banks; loans
extended to farmers by various farm credit organizations; and miscellaneous assets of banks in U. S. possessions.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 216.




CH APTER 11
REST OF TH E W ORLD SECTOR

The rest of the world sector in the flow- fers in kind between the United States Gov­
of-funds accounts comprises the residents and ernment and foreign governments are shown
governments of all countries outside the as memoranda in the sector statement.
Nonfinancial transactions of the rest of the
United States and its territories and posses­
sions. The sector includes all international world sector with domestic sectors are re­
organizations (such as the United Nations, corded on a gross basis; receipts are not
International Monetary Fund, and Inter­ netted against payments, nor payments
national Bank for Reconstruction and De­ against receipts. Financial transactions are
velopment) and employees of these organiza­ recorded on a net basis: increases in each type
tions who are not citizens of the United of asset are offset by decreases in the same
States. Foreign subsidiaries and foreign asset category, and borrowing is offset by
branches of domestic corporations are also repayments within the same debt category.
included in this sector, as are embassies and However assets are not netted against liabili­
consulates of foreign countries in the United ties, nor decreases in one asset type against
States and American citizens permanently increases in another, etc.
residing abroad who are not employees of
C o m p a r is o n s w i t h O t h e r C o m p i l a t i o n s o f
the United States Government. American
I n t e r n a t io n a l T r a n s a c t io n s
subsidiaries and American branches of for­
eign corporations and foreign individuals
The flow-of-funds account for the rest of
temporarily employed in the United States the world differs from the balance-of-payby an American employer are excluded from ments statement presented by the Balance of
the rest of the world sector, being included Payments Division of the Department of
in the appropriate domestic sectors.
Commerce in the Survey of Current Business
The sector account is on a consolidated and from the rest of the world account of the
basis. Transactions among elements within national income accounts as published in the
the rest of the world sector are not shown; 1954 edition of National Income, a supple­
the account records transactions between the ment to the Survey of Current Business,
rest of the world sector and the domestic Tables V and 11 . The three presentations
sectors in the flow-of-funds accounts.
differ with respect to sector coverage, trans­
The transactions recorded for the sector action coverage, classification of transactions,
are those involving the use of money or and extent of netting in the accounts.
credit. Imputed transactions and transactions
Sector coverage. The balance-of-payments
in kind are excluded.1 However, such trans­ statement and the flow-of-funds account have
1In many instances of foreign aid, it is difficult to dis­ identical sector coverage for the rest of the
tinguish between cash grants and in-kind grants. The inworld. The coverage of the national income
kind grants excluded from the transaction coverage of the
rest
of the world account differs conceptually
flow-of-funds account are those specifically identified as
from
that of the balance-of-payments state­
such. See discussion on p. 226.




222

R EST O F T H E W O RLD SECTOR

ment and the flow-of-funds account in one
respect: United States territories and posses­
sions are considered as part of the rest of the
world instead of as part of the domestic
economy. Statistically, however, the national
income rest of the world account reflects an
adjustment for this difference only for the
years 1941-46.
The flow-of-funds account for the rest of
the world and the balance-of-payments state­
ment record the transactions between the
rest of the world and the United States, par­
ticularly the nonfinancial transactions, from
opposite viewpoints. Thus the flow-of-funds
account presents the rest of the world ex­
ports to and imports from the United States;
the balance-of-payments statement presents
the same transactions as United States im­
ports from and exports to the rest of the
world.
Extent of netting. In the flow-of-funds
sector account all nonfinancial transactions
are recorded on a gross basis. In the pub­
lished balance-of-payments statement, pur­
chases and sales of goods and services are
presented on a gross basis but unilateral
transfers from the United States to the rest
of the world are shown net of unilateral
transfers from the rest of the world to the
United States. On the more detailed balanceof-payments worksheets, these unilateral
transfers are computed on a gross basis. In
both presentations the financial data are
recorded on a net basis.
The rest of the world sector statement in
the national income accounts (Table V in
the 1954 edition of National Income) is
entirely on a net basis. “Transactions of the
rest of the world with the United States”
(Table 11 in the same publication) presents
all totals on a net basis but also shows gross
sales and purchases as subsidiary detail.




223

Transaction coverage. The flow-of-funds
sector account records only transactions in­
volving use of money or credit; transactions
identified as imputed or in-kind transactions
are not recorded. In both the balance-ofpayments statement and the national income
sector account, the excess of current domestic
gold production over nonmonetary domestic
gold consumption appears as an imputed sale
of goods by the United States to the rest of
the world and the excess of nonmonetary
domestic consumption of gold over domestic
production appears as an imputed purchase
of goods by the United States from the rest of
the world. This treatment is also reflected in
“net foreign investment” in the national in­
come rest of the world account and in the
balance-of-payments gold entry which shows
the total net change in the United States
monetary gold stock rather than net pur­
chases of gold by the United States from the
rest of the world. The flow-of-funds account
for the rest of the world excludes this im­
putation from both the nonfinancial and
financial transactions.
In the balance-of-payments statement, un­
ilateral transfers in kind as well as those in
cash are recorded. The in-kind gifts are
treated as unilateral receipts or payments and
the value of the goods and services is included
in either the imports or exports of the United
States. Neither the goods and services nor
the corresponding unilateral transfers associ­
ated with gifts or grants identified as being
in kind are recorded in the rest of the world
sector account of the flow-of-funds or the
national income systems.
Transaction classification. The grouping
of financial transactions in the flow-of-funds
rest of the world sector account differs from
that in the balance-of-payments statement.
“Direct investments” of the balance-of-payments statement are in the flow-of-funds

224

FL O W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

miscellaneous financial transactions category.
“Portfolio” investments are part of the fol­
lowing flow-of-funds transaction categories:
corporate securities, bank loans, and miscel­
laneous financial transactions. Net flows of
“U. S. Government long-term capital” are
reflected in miscellaneous financial transac­
tions, and net flows of “U. S. Government
short-term capital” in currency and deposits
and miscellaneous financial transactions. Net
flows of “U. S. private short-term capital”
are included in currency and deposits, bank
loans, and miscellaneous financial transac­
tions. “Transactions in U. S. Government
securities” are in Federal obligations. “Short­
term liabilities to foreign banks and official
institutions” are reflected in currency and
deposits and miscellaneous financial trans­
actions, and “other short-term liabilities” are
part of miscellaneous financial transactions.
In the national income account for the rest
of the world, cash unilateral receipts from
the United States (that is those unilateral
receipts not specifically identified as being
in kind) are treated as sales of services by
foreigners to the domestic sector (households
or the United States Government) making
the transfer. Similarly cash unilateral pay­
ments by the rest of the world to the United
States are treated as purchases of services
by foreigners from the domestic sector receiv­
ing the gift. In the flow-of-funds account
these cash unilateral transfers are classed as
grants and donations rather than as sales and
purchases of services.

to transaction coverage, classification of trans­
actions, netting, and for the differences in
sign and direction of flow associated with
the difference in perspective previously men­
tioned. No adjustments for sector coverage
are necessary since the flow-of-funds sector
and the balance-of-payments statement are
identical in this respect. Many of the data
needed for the adjustments are also obtained
from the detailed balance-of-payments rec­
ords. Data for some adjustments, however,
are obtained from Treasury and banking
statistics.
Nonfinancial sources of funds (line A )
consist of all receipts of the rest of the world
sector from the United States except the
drawing down or liquidation of financial
assets or the incurrence of debt. Nonfinan­
cial sources of funds are shown gross.
The total of nonfinancial sources is de­
rived by adding total imports of goods and
services of the United States as reported in
the official balance-of-payments statement
and United States gross unilateral transfers
to abroad as obtained from the Balance of
Payments Division of the Department of
Commerce and adjusting this sum to elimi­
nate imputed and in-kind receipts contained
in these series insofar as they can be identi­
fied.
The first adjustment arises in connection
with net domestic gold production and con­
sumption. To balance its inclusion of the
excess of United States domestic gold produc­
tion over United States domestic nonmone­
tary consumption in industry and the arts in
R e st o f t h e W orld Sec to r St a t e m e n t
the entry for United States purchases of gold
The sources and uses of funds statement from abroad, the balance-of-payments state­
for the rest of the world sector of the flow- ment includes the net domestic production of
of-funds accounts is presented in Table 46 gold as an imputed export or import of
on page 230. The sector account is based goods by the United States depending upon
essentially on balance-of-payments data, ad­ whether domestic production or domestic
justed for conceptual differences with respect nonmonetary consumption is larger. In the




R EST O F T H E W ORLD SECTOR

flow-of-funds accounts, the net domestic pro­
duction is not treated as a gold flow between
the United States and the rest of the world
and the imputed exports and imports of
goods associated with the balance-of-payments treatment are excluded from the non­
financial sources and uses of funds of the rest
of the world sector account.
The second adjustment is in connection
with unilateral transfers in kind. In the
balance-of-payments statement, in-kind gifts
from the United States are treated as unilat­
eral transfer payments by the United States
to abroad and the value of the merchandise
is included in United States exports of goods
to abroad; similarly foreign gifts in kind to
the United States are treated as unilateral
transfer receipts of the United States from
abroad and the value of the merchandise is
included in United States imports of goods
from abroad. In the flow-of-funds accounts,
which conceptually exclude transactions not
involving the use of money or credit, uni­
lateral transfers identified as being in kind
and the corresponding merchandise flows are
not recorded in the sources and uses of funds
statement for the rest of the world sector.
In calculating the sector’s total nonfinancial
sources of funds, the in-kind components
of United States imports and the United
States unilateral transfers in kind to abroad
that are specifically identified as such by the
Balance of Payments Division are deducted
from the sum of the balance-of-payments
series described above. (A corresponding
deduction is made in the calculation of total
nonfinancial uses of funds.)
The total of nonfinancial sources derived
in this way is distributed, largely on the basis
of information furnished by the Balance of
Payments Division, among various flow-offunds transaction categories—dividends and
branch profits, interest, insurance premiums,




225

insurance benefits, sales of other goods and
services, and grants and donations. Receipts
of insurance benefits (mainly on reinsurance
contracts) are included in line A but are
too small to be shown separately in the table.
Investment income (line B) includes all
interest, dividends, and branch profits re­
ceived by or credited to the rest of the world
from investments in the United States after
payment of all United States taxes. It is
equal to the series income on investment in
“imports of goods and services” of the United
States, a category of the balance-of-payments
statement. Dividends (line C) represent
dividends paid or credited to the rest of the
world from United States corporations.
Branch profits (line D ) comprise the profits
of United States branches of foreign corpora­
tions paid or credited to the foreign parent
companies. Interest (line E) is monetary in­
terest paid or credited to the rest of the world
from the United States.
Insurance premium receipts (line F) are
mainly in connection with reinsurance as­
sumed. They are net of commissions paid
to American companies.
Sales of other goods and services to the
United States (line G) include rest of the
world sales of goods to the United States,
United States purchases of silver from abroad,
expenditures by American citizens for travel
abroad, United States ocean-shipping com­
panies’ expenditures in foreign ports, pay­
ments for the use of foreign vessels and
freight cars, rentals on foreign films, patent
royalties, licensing fees, copyrights, expendi­
tures by Federal agencies and their personnel
abroad, and other miscellaneous sales of
services. The series is calculated by deduct­
ing the following items from the balanceof-payments category “imports of goods and
services of the United States”: the imputed
item “net nonmonetary consumption of

226

FLOW

O F F U N D S IN

T H E U N IT E D STATES, 1939-53

gold,” the value of the merchandise identi­
fied as foreign in-kind transfers to the United
States, and the investment income and esti­
mates of insurance premium and benefit re­
ceipts just discussed.
Grants and donations (line H ) consist of
all Federal Government grants to foreign
governments and international organizations
(line I) except those identified as transfers
in kind, and personal and institutional cash
remittances to abroad (line J). The category
is recorded gross, that is rest of the world
payments of grants and donations are not
netted against the sector receipts. The cate­
gory excludes personal and institutional gifts
of food and clothing abroad and United
States Government unilateral transfers speci­
fically identified by the Balance of Payments
Division as transfers in kind.
In many instances, under the procedures
of the Government aid programs, such as
the wartime lend-lease program and the
postwar recovery and mutual defense pro­
grams, a distinction between cash grants and
grants in kind is not meaningful. The inkind grants by the Government excluded
here consist only of transfers of commodities
actually owned by the Federal Government
and services supplied by the Government to
foreign countries under grant programs to
the extent that these can be identified. The
excluded in-kind transfers of the Federal
Government are shown as a memorandum
on line s of Table 46.
Net increase in liabilities (line K) repre­
sents the net change in financial liabilities
of the rest of the world owed to the United
States. Negative entries indicate that repay­
ment of debt to the United States exceeds
new borrowing from the United States. The
total net increase in liabilities of the rest of
the world to the United States as shown on




line K is equal to the net outflow of United
States capital as recorded (with minus signs)
in the balance-of-payments statement.
The currency and deposit liability (line L)
recorded in the flow-of-funds rest of the
world sector account represents deposit liabil­
ities owed to the United States Government,
banks, and nationals, and foreign currencies
held by the United States Government. In
the currency and deposit account (Table 73),
this item is not shown on the liability side
of the account but is netted against the rest
of the world holdings of United States cur­
rency and deposits (shown on line 1 of the
sector account). See Chapter 16, page 312.
BanJ{ loans (line M) represent all funds,
net of repayments, supplied by the banking
sector to the rest of the world sector except
through bank holdings of foreign securities.
These loans include commercial and indus­
trial loans to the rest of the world by United
States commercial banks (including open
market paper and participations in ExportImport Bank loans), loans to foreign banks
by United States commercial banks, and Fed­
eral Reserve Bank loans on gold.
Securities (line N ) consist of the net sales
of foreign stocks and bonds in the United
States. They include bonds of foreign gov­
ernments and of the International Bank for
Reconstruction and Development as well as
private foreign securities. They exclude se­
curity issues by foreign corporations to Amer­
ican affiliates. Line N is the rest of the world
sector liability entry in the flow-of-funds cor­
porate securities transaction category.
Miscellaneous liabilities (line P) include
all liabilities of the sector not specifically
classified in any other flow-of-funds financial
transaction category. Line P is computed as
a residual by deducting from total financial
sources the estimates for changes in currency

R EST O F T H E W ORLD SECTOR

and deposit liabilities, bank loans, and
securities.
The miscellaneous liabilities include debt
to the Federal Government (line Q) arising
from lend-lease settlements, purchases of sur­
plus property, Export-Import Bank direct
loans, the British loan and other loans under
postwar recovery programs, and United
States Government subscriptions to the Inter­
national Monetary Fund and International
Bank for Reconstruction and Development;
and other debt (line R) to United States
residents, including debit balances owed to
United States brokers and dealers in securi­
ties. The category also includes unidentified
liabilities of the sector and liabilities for
which no corresponding assets have been
identified or specifically allocated in domestic
sectors, such as direct investments abroad by
United States corporations and short-term
advances by Federal procurement agencies
that are not separately identified for inclu­
sion in the debt owed to the Federal Govern­
ment.
Nonfinancial uses of funds (line a). The
total of nonfinancial uses of funds is derived
by adding exports of goods and services of
the United States as reported in the balanceof-payments statement and the Balance of
Payments Division series on gross foreign
unilateral transfers to the United States and
adjusting this total to remove imputed and
in-kind elements insofar as they can be iden­
tified. These adjustments (for excess of
domestic gold production over domestic non­
monetary gold consumption, for foreign
unilateral transfers in kind to the United
States, and for merchandise flows in con­
nection with United States unilateral trans­
fers in kind abroad) were described in con­
nection with the derivation of total non­
financial sources of funds for the sector.




227

The total nonfinancial uses of funds of the
sector fall in the following flow-of-funds
transaction categories: payroll, interest, divi­
dends and branch profits, insurance pre­
miums, insurance benefits, purchases of
other goods and services, and grants and
donations. Payrolls, the gross cash wages and
salaries paid by foreign governments and
international organizations to United States
residents in this country, and payments of
insurance premiums, consisting mainly of
premiums paid to American companies on
reinsurance after the deduction of any com­
missions retained by the ceding companies,
are too small to be shown separately.
Investment income paid (line b) includes
all interest, dividends, and branch profits
paid or credited by the rest of the world sec­
tor to the United States. This income is
net of foreign taxes paid on it. It is equal
to the income on investment in “exports of
goods and services” of the United States, a
category of the balance-of-payments state­
ment. Dividend payments (line c) comprise
all dividends paid or credited by foreign cor­
porations to United States corporations and
nationals. Branch profits (line d) represent
the profits of foreign branches of United
States corporations paid or credited to the
parent companies. Interest (line e) is all
monetary interest paid or credited by the rest
of the world to the United States.
Insurance benefits (line f) are paid by in­
surance companies in the rest of the world
sector to United States companies, mainly for
losses on reinsurance.
Purchases of other goods and services from
the United States (line g) represent foreign
purchases of goods, expenditures of foreign
residents in the United States, payments to
United States ship operators for carrying pas­
sengers and freight, and many miscellaneous

228

FLO W O F FU N D S IN

T H E U N IT E D STATES, 1939-53

expenditures. The series is calculated by de­
ducting the following items from the balanceof-payments category “exports of goods and
services” of the United States: the imputed
item “net domestic gold production;” the
value of the merchandise identified by the
Balance of Payments Division as in-kind
grants sent abroad by the Federal Govern­
ment and American individuals and philan­
thropic organizations; and the payments of
investment income, payroll, insurance pre­
miums, and insurance benefits just discussed.
Grants and donations (line h) consist of
gross cash unilateral transfers to the United
States Government by foreign governments
(line i) including cash reverse lend-lease,
transfers in connection with counterpart
funds, and transfers in connection with “spe­
cial currency” transactions in occupied coun­
tries during and immediately after the war;
and of foreign private gifts to United States
citizens and institutions (line j). Grants and
gifts in kind are not included. In-kind
grants to the Federal Government from for­
eign governments are shown as a memo­
randum in line t of Table 46.
N et increase in financial assets (line k)
consists of the net changes in financial claims
against the United States held by the rest of
the world sector. These assets fall into sev­
eral flow-of-funds transaction categories: cur­
rency and deposits, gold, Federal obligations,
corporate securities, and miscellaneous assets.
The total net increase in financial assets is
the sum of the balance-of-payments series on
net inflow of foreign capital to the United
States and the net purchases of gold from the
United States as recorded in line m.
The currency and deposit asset (line 1) re­
corded in the flow-of-funds rest of the world
sector account represents currency and de­
posit liabilities of the United States banking




system held by foreign banks, governments,
and nationals.2 The category excludes for­
eign deposits in United States financial insti­
tutions not part of the banking sector. (See
Chapter 16, page 313.)
N et purchases of gold from the United
States (line m) consist of the excess of rest
of the world imports of gold from the United
States over exports of gold to the United
States plus the net increase in gold held in the
United States under earmark for foreign
countries. This item differs from the gold
entry in the balance-of-payments statement
in that the flow-of-funds figure excludes the
net United States domestic consumption of
gold. (See discussion on page 223.)
Federal obligations (line n) comprise the
foreign ownership of United States Govern­
ment securities, including holdings by the
International Monetary Fund and the Inter­
national Bank for Reconstruction and Devel­
opment of the special notes issued as part
payment of the United States subscriptions
to these organizations.
Corporate securities (line o) consist of net
purchases by foreigners of the securities of
United States corporations. The category ex­
cludes foreign direct investments in Ameri­
can business.
Miscellaneous assets (line p) of the rest of
the world consist of foreign customers’ credit
balances with United States security brokers
and dealers; deposits of foreigners in United
States branches of foreign banks excluded
from United States banking statistics; foreign
deposits with the banking sector not classified
in currency and deposits (such as deposits of
international organizations at the Federal Re­
serve Banks, the liability of the banking
2 The entry for currency and deposit assets of the rest
of the world in the currency and deposit transaction account
(Table 73) is net of the rest of the world’s currency and
deposit liabilities, that is, it is equal to line 1 less line L of
Table 46. See discussion in Ch. 16.

R EST O F T H E W O RLD SECTOR

sector “due to own foreign branches,” and for
a few war years deposits of foreign govern­
ments and purchasing commissions at com­
mercial banks); foreign trust and deposit as­
sets held with the Federal Government; un­
identified foreign financial assets and assets
for which no corresponding liabilities have
been identified or specifically allocated in do­
mestic sectors (such as foreign direct invest­
ment in American business and trade credit
extended by foreign exporters). Line p is
computed by deducting other types of assets
(lines 1 through o) from total net change
in financial assets on line k.
Discrepancy (line q) is equal to the “er­
rors and omissions” line in the balance-ofpayments statement of the Department of
Commerce.
Memoranda. The flow-of-funds account
for the rest of the world sector excludes
transfers in kind that are identified as such




229

by the Balance of Payments Division. The
transfers in kind made by the United States
Government and by foreign governments ex­
cluded from the sector account are shown
as memoranda on lines s and t.
United States Government payments in
kind abroad (line s) are primarily merchan­
dise transfers identified as being in kind aris­
ing out of the Federal Government’s various
foreign-aid programs, such as lend-lease, mili­
tary aid, and civilian supplies furnished to
occupied areas. Overhead costs and other
service expenditures paid out of appropriated
foreign-aid funds—whether spent in the
United States or abroad—are generally in­
cluded as in-kind unilateral transfers in bal­
ance-of-payments statistics.
Foreign government payments in kind to
the United States (line t) are predominantly
reverse lend-lease settlements made in the
form of goods.

230

T H E U N IT E D STA TES, 1939-53

FLO W O F FU N D S IN

TABLE 46—REST O F T H E WORLD SECTOR: SOURCES AND USES OF FUNDS STATEMENT
(In billions of dollars)

1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953
Sources of funds
A
B
C
D
E

Nonfinancial sources1...................................
Investment income from 17. S......................
Dividends....................................................
Branch profits.............................................
Interest........................................................

3.6

3.9

4.7

4.8

6 .3

.2

.2

.2

.2

.2

F
G
H

Insurance premiums2 ....................................
Other goods and services (sales to U. S.)3...
Grants and donations4 .................................
From U. S. Govt.........................................
From others.................................................

*
3.1
.2
*
.2

1

J
K
L
M
N
O
P
Q
R

Net increase in lia b ilities............................
Currency and deposits5 ................................
Bank loans......................................................
Securities 6 ......................................................
Net purchases by banks..............................
Miscellaneous liabilities................................
Owed to U. S. Gov't.7 .................................
Owed to others8 ...........................................

*
*

.2

—.3
.2
-.1
-.1

*
-.3
*
— .3

*
*

.2

*
*

*
3.4
.3
*
.2

.2

*
4.3
*

.2

.2

-.2
*

*
*
*
*

- .1

*
*

-.1

*
*

*
4.2
.4
.2
.2
.2

.3
*
♦
.3
.4

./

*

.1
.1

7.1

8.5

.2

.2

.1

*
*

*
*

*
5.8
.4
./
.3

*
6.4
.5
♦
.4

*
*
*

.1

.1
*
.1
.1

*
*

.1

.1

7.7

9.8
2.3
1.8
.5

3.4
- .3

8.0

1.9

1.2

1.4

.1
.2

-.1
.2
.1

.1
- .2

.2
.1

.6
.5

1.6
.2
.2
.2

*

.1

.8

.8

.1
-.1

*
3.7
3.3
.4

3.3

3.7

5.0

5.0

6 .4

7.4 10.0 l t . l

5.3

5.9
.5
.3
.J
.2
*

4.8
.5
.2
.1
.2

4.5
.5
.3
.1
.1

5.5

.3
.1
.2

*

*

*

4.2
*

3.9

.1

5.2
*

./

*

S

Total, above sources......................

a
b
c
d
e

Nonfinancial u ses9 ........................................
Investment income paid to l T. S .................
Dividends.....................................................
Branch profits.............................................
Interest.........................................................

4.3
.5
.3
./
.2

f
g

Insurance benefits10.......................................
Other goods and services (purchases from
U. S. ) 3 ........................................................
Grants and donations to IT. S. 4 ..................
From foreign governments..........................
From others.................................................

*

*

3.7
♦

4.6

.1
.1
.2
A
.2
9.1 11.5 14.5 15.1 15.8
4.0 3.4 2 . 8
2.1
2.0
3.6 3 .0 2.4 1.7 1.6
.4
.4
.4
.3
.4

.1

6.4
.9
.5
.4

*

*

8.9 12.5 13.6 15.4 17.8 17.7 18*4
.2
.4
.3
.3
.3
.4
.5
.2
.2
.2
.2
.3
.2
.3
*
*
*
*
.1 *
.1
*
.1 *
.1
.1
.1
.1

.1
1.1

.3

.2
-.1

.2

.2

7.1

.1
.1

7.6

./
-.2

.1

./

*

*

.1
.1

*

.8

.5
.4

*

.2
7.7
6.9
.8

*
1.7
1.1
.6

*
*
1.3
.5
.8

*

1.2
-.1

.3
.4
.1
.7
.2
.6

.3
.8

.1
.7

1.6
*
A
.2

.1

1.2

.4
.8

.6
*
- .3
.1

./
.9
.2
.7

16.8 14.4 14.8 16 8 19.0 19.3 19.0

Uses of funds

h
i
j
k

*

.6

*

*
♦

.6

.2
.,2
.1

4.7

.1

7.5 12.5 17.8 14.5 14.1 13.2 18.0 17.6 16.5
.6
.8
1.1
1 .3 1.4 1 . 6
1.9 1 . 8
1.9
.6
.7
.4
.4
.7
.7
.2
.3
.5
.5
.6
.2
.6
.6
.8
.3
.8
.9
.2
.2
.2
.3
.3
.4
.4
.4
.3
*
1.
.1
.1
.1
.1
A
A
A
6.7

.1

*

.2

.1

.1
*

11 . 6
.1

*

.1

16.3
.3
./

12.8
.2

.2
.1

12.3 11.3 15.8 15.5 14.3
.1
.2
.3
.1
.1
.1
.1
.2
*
*
*
*
*

m
n
o
P

N et increase in financial assets................. - 1 .8 —2.8 - 1 .3
Currency and deposits 5 ................................
1.0
.7 - .4
Net purchases of gold from U. S .11............. - 3 .0 - 4 .1 - . 6
*
*
Federal obligations........................................
.2
Corporate securities...................................... - . 1 - . 2 - . 3
Miscellaneous assets 12..................................
.2
.8
-.2

.4
*
- .3

-.1

*
*

q

Discrepancy13...................................................

.8

1.3

.5

*

*

*

r

Total, above u ses....................

3.3

3.7

5.0

5.0

6.4

7.4 10.0 11.1 16.8 14.4 14.8 16.8 19.0 19.3 19.0

s
t

Memoranda :14
U. S. Govt, payments in kind abroad........
Foreign government payments in kind to

1

.9

*

.2

1.9
.6

.1

.1

.7

1.3

*

.6

2.0
.6

2.5 - 1 . 7 - 1 .9 - 1 .2
.4
.6
.2
- .3
.5 - . 7 - 2 . 1 - . 6
.6
- .5
.6
.1
- .2
1.1

*

- .2
- .6

.2

- .2
.1

- .2
.1

.9

1.2

7 .0 14.7 16.1

8.9

2.1

1 .9

2.5

2.3

2.8

.2

A

.1

1.0

2.1

- .1
.1
- .2
.1

*

3.6
.3
1.7
1.4
*

*

*

1.2
.4
- .4

.5

2.0

1.2

2.3

*

*

♦

2.3
.3

.2

1.2
.6
.1
.2

.5

.2

1.0

.1
.8

.1

- .2

.8

.5
- .2
-.1

♦

3.1
*

4.8
*

i
*Less than 50 million dollars.
1 Includes small amount of insurance benefits not shown separately.
2Premiums for reinsurance paid by U. S. insurance companies to foreign companies.
3Line G excludes net U. S. domestic consumption of gold and line g excludes net U. S. domestic production of gold. U. S. balance-of-payments data include these net gold items in the category merchandise, a d justed. Both lines also exclude value of goods transferred as unilateral
transfers in kind.
4 A11 unilateral transfers other than those specifically identified as transfers in kind.
5The entry for the rest of the world sector in the flow-of-funds currency and deposits transaction account is the net currency and deposits
assets of the rest of the world, that is line I minus line L. Line I consists of holdings of U. S. currency and bank deposits by foreign banks, gov­
ernments, and nationals. Line L consists of holdings of foreign currency and deposits by U. S. Government, banks, and nationals. See discussion
of rest of the world currency and deposits in Ch. 16, p. 312.
6Flow-of-funds corporate securities transaction category; net sales in the U. S. of securities issued by businesses, governments, and the IBRD
in the rest of the world sector.
7Loans from U. S. Government and U. S. Government subscription to IM F and IBRD.
8For 1947 on, mainly direct investments of U. S. corporat ions in foreign subsidiaries. Also includes debit balances with U. S. brokers and
dealers and other debts to U. S.
9Includes small amounts of payroll and insurance premiums for reinsurance paid by foreign companies not shown separately.
10Insurance benefits paid by foreign companies on reinsurance.
^Consistsof net imports of gold from U.S. plus net increases in foreign gold held under earmark in U. S. Differs from U. S. balance of pay­
ments category gold sales or purchases by exclusion of net domestic consumption or net domestic produc tion of gold.
^Foreign claims against United States not classified elsewhere.
13Errors and omissions line of the balance-of-payments statement.
14Government transfers in kind excluded from lines I and i.
N o t e .—Details may not add to totals because of rounding. For description of table, see p. 224.




CHAPTER 1 2
PAYROLL AND INVESTMENT INCOME

This chapter covers five separate categories
of nonfinancial transactions—payroll, in­
terest, dividends and branch profits, rents
and royalties, and net withdrawals by pro­
prietors. The estimates for these categories
are based primarily on data underlying cor­
responding categories in the national income
accounts. The differences between flow-offunds and national income accounts in the
treatment of the transactions, as described
below, are principally in the sector allocation
of components, the coverage of imputed
transactions, the recording of gross rather
than net flows, and in a few cases the classi­
fication of transactions. The summary ac­
counts for the five flow-of-funds transaction
categories are shown in Tables 47-51 on pages
238-40.
P ayroll

The payroll category in the flow-of-funds
accounts, presented in Table 47 on page 238,
covers all cash payments of wages and sal­
aries by all sectors. It excludes wages in kind
such as food and clothing furnished to em­
ployees. It also excludes employer contribu­
tions to social and private insurance, retire­
ment, and pension funds. It is, however,
measured before deduction of employee con­
tributions to such funds and before income
tax withholdings.1
In addition to all cash elements of wages
and salaries in the national income accounts,

the flow-of-funds payroll category includes
some elements of “other labor income” in
personal income in the national income ac­
counts: military reserve pay, directors’ fees,
jury and witness fees, fees to justices of the
peace, and compensation of prisoners of war
and of prison inmates.2
Flow-of-funds payments of payroll are
based on Commerce Department worksheet
data underlying wages and salaries and other
labor income in the national income ac­
counts. Industrial detail in the Commerce
data is recombined and adjusted to flow-offunds sector and transaction coverage in or­
der to compute payroll payments by flow-offunds sectors. All sectors make payroll pay­
ments. The underlying national income
data are described in the 1954 edition of Na­
tional Income, a supplement to the Survey
of Current Business, published by the Depart­
ment of Commerce.
Total payroll receipts are taken as equal
to the sum of estimated payments. The con­
sumer sector is the only sector with payroll
receipts as a source of funds. The relation­
ship between consumer sector payroll re­
ceipts in the flow-of-funds accounts and
wages and salaries in the national income
accounts is presented in Table 2 on page 74

2 Not all of “other labor income” is covered in the flowof-funds payroll category. The other components are re­
corded in the flow-of-funds insurance premium and grants
and donations transaction accounts: employer contributions
for private pension plans (excluding profit sharing), em­
1 Withheld taxes and employee contributions to these ployer contributions for group insurance, and compensation
funds appear as uses of funds by the consumer sector under
for iniuries (excluding court-awarded benefits to employees)
taxes and under insurance premiums. The national income
are in the insurance premiums category; and employer
accounts have the same treatment with respect to withheld
contributions for private welfare plans, employer contribu­
taxes, but employee contributions are deductions from per­
tions for profit-sharing plans, and court-awarded benefits
sonal sector sources of funds rather than components of uses
to employees (included in compensation for injuries) are
of funds.
part of the grants and donations category.




231

232

FLO W O F FU N D S IN

T H E U N IT E D STA TES, 1939-53

and discussed on page 56 of Chapter 2.
The data for this relationship table come
from tables in the 1954 edition of National
Income, and from the worksheets underlying
these tables.
I nterest

The interest category in the flow-of-funds
accounts, presented in Table 48 on page 239,
covers gross monetary interest paid and re­
ceived by each sector. Interest received is not
netted against interest paid. The flow-offunds interest account does not include any
imputed interest payments or receipts.
The flow-of-funds interest transactions ac­
count is partly on a cash and partly on an ac­
crual basis. For certain types of interest it
records interest accrued or interest payable;
thus interest on savings bonds and Treasury
bills is on an accrual basis both in the uses
of funds of the Federal Government sector
and in the sources of funds of the sectors
holding these Federal obligations. Matching
this accrual element in interest transactions
is the inclusion of accrued liability for in­
terest on savings bonds and Treasury bills
in the Federal obligations financial category.
In Table 48, interest payments of the Fed­
eral Government sector and interest receipts
of the consumer sector show detail on cash
payments and net accruals.
Many of the data on other interest pay­
ments and receipts used to construct the in­
terest transaction account are also on an ac­
crual basis. The accrual or payable series have
not been considered sufficiently different
from interest payments to warrant the intro­
duction of net change in interest accruals as
a financial transaction type or to adjust the
interest to a payment basis.
The basic source of information for the
flow-of-funds interest account is the Depart­
ment of Commerce worksheet material un­




derlying “personal interest income” and “net
interest” in the national income accounts.
The flow-of-funds interest transaction ac­
count differs from the interest series in the
national income accounts and worksheets
with respect to transaction coverage and sec­
tor allocation of the interest transactions.
The flow-of-funds interest category excludes
the imputed interest components of the na­
tional income interest data; includes interest
payments by the Federal Reserve System to
the Treasury, which are classed as profits
taxes in the national income accounts; and
includes interest on tax refunds, which are
not part of the interest calculation in the
national income accounts.
In terms of sector allocation, the major dif­
ferences relate to the different sectoring in
the two systems of home ownership ac­
tivity, nonprofit organizations, self-admin­
istered pension plans, the Postal Savings
System, and the Exchange Stabilization
Fund.
Thus, in constructing the flow-of-funds
account from national income account work­
sheets, industry detail on both payments and
receipts in these worksheets is regrouped to
fit flow-of-funds sector coverage, imputed in­
terest transactions are excluded, and certain
other adjustments described below are made
to fit the coverage of flow-of-funds sectors
and the interest transaction account. Addi­
tional sources of data are used for some of
the specific adjustments and entries. The
following description of this account covers
only deviations in coverage, classification, and
source material from corresponding items in
the national income accounts or worksheets.
The national income data on interest and the
sources of those data are described in the 1954
edition of National Income.
Total interest receipts (line A ) are taken
as equal to total interest payments (line a).

PA Y R O L L A N D IN V E S T M E N T IN C O M E

The various sector receipts are, in general,
derived by appropriate regrouping and ad­
justing of monetary interest receipts (that is,
other than imputed receipts) on the work­
sheets for the national income accounts. Dif­
ferences between treatment of interest re­
ceipts in the flow-of-funds and national in­
come accounts appear in the receipts of the
consumer, Federal Government, and insur­
ance sectors.
Consumer sector receipts (line B) are cal­
culated as a residual—the difference between
total interest paid by all sectors (including
consumer) and total receipts by all sectors
except consumer. Personal interest income
in the national income accounts is similarly
a residual. The detailed relationship be­
tween the two interest series is presented in
Table 3 on page 74 and discussed on page
57 of Chapter 2.
Federal Government sector receipts (line
F) differ from the corresponding series for
the national income accounts in several re­
spects. Line F includes interest receipts from
the Federal Reserve System under Section 16
of the Federal Reserve Act; in the national
income accounts these are classified as taxes.
Flow-of-funds Federal Government receipts
exclude receipts by the Postal Savings Sys­
tem and the Exchange Stabilization Fund,
since these are classified as components of
the banking sector. Since the flow-of-funds
Federal Government sector account is fully
consolidated, it does not reflect interest pay­
ments from one Government agency to an­
other within the sector, whereas the national
income accounts series on gross interest re­
ceived by the Government (shown as a com­
ponent of Government net interest) includes
interagency interest transactions. In addi­
tion to national income statistics, the follow­
ing sources of data are used in developing
the series on line F: Board of Governors of




233

the Federal Reserve System, annual reports
of the Postmaster General, the Daily Treas­
ury Statement, and the Treasury Bulletin.
The interest receipts of the life insurance
companies (line J) exclude dividend receipts
of mutual life insurance companies, which
are treated as interest receipts in the national
income structure of accounts but as dividends
in flow-of-funds accounts. Dividend receipts
by other mutual financial institutions—such
as savings banks and savings and loan associa­
tions—are small and no adjustment is made
to eliminate them from interest receipts.
Interest receipts of self-administered pen­
sion plans (line K) and of nonprofit organi­
zations (line N ) are part of personal interest
income in the national income accounts. The
amounts are estimated on the basis of pen­
sion plan assets and scattered information on
investment income of nonprofit organiza­
tions.
Total Interest payments (line a) are esti­
mated by summing the specific sector pay­
ments. Differences on the payments side of
the account between flow-of-funds and na­
tional income accounts are in the coverage
of payments by the consumer, Federal Gov­
ernment, and banking sectors, which are dis­
cussed here.
Consumer sector payments (line b) include
intere