TABLE 2.-RECENT DEMAND FOR TAX EXEMPT MUNICIPAL SECURITIES, PERCENT DISTRIBUTION BY INVESTOR

Line 2-Best's "Fire and Casualty Aggregates and Averages," as modified by the Securities and Exchange Commission. Line 3-Securities and Exchange Commission, based on surveys of nonfinancial corporations.

Line 4-Residual: Derived by subtracting aggregate of annual net change of holdings of municipal securities of identifiable institutional groups from estimated total net change of holdings for all holders.

Tax bracket percentages: Office of Tax Analysis, Treasury Department.

TABLE 3.-DISTRIBUTION OF "INDIVIDUAL" DEMAND FOR TAX EXEMPT MUNICIPAL SECURITIES BY INCOME

Sources: Col. 1; Office of Tax Analysis, Treasury Department. Col. 2; Federal Reserve Board, unpublished data from consumer survey; made public in the hearings before the House Ways and Means Committee on "President's 1967 Tax Proposals" (Aug. 14-15, 21–25), p. 195. col. 3; col. 2 percentages applied to 3 percent; col. 4; col. 2 percentages applied to 19 percent.

TABLE 4.-PROSPECTIVE DEMAND FOR MUNICIPAL SECURITIES BY INVESTORS CLASSIFIED BY

1 Percent attributed to life insurance company purchases; deducted from 48 percent tax bracket. Sources:

TABLE 5.-NET INTEREST COST OF MUNICIPAL BONDS 1 SOLD IN DECEMBER 1967 2

1 Excludes securities maturing in less than 1 year.

2 Undated bond sales attributed to December, if description of sale indicates it was probably sold in December.

Source: The Weekly Bond Buyer municipal bond sales section (December 1967, January-February 1968) and specia tabulation by Investment Bankers Association.

TABLE 6.-YIELDS OF U.S. GOVERNMENT INSURED MERCHANT MARINE BONDS COMPARED TO YIELDS ON COMPARABLE U.S. TREASURY BONDS, SELECTED ISSUES, 1962-67

Sources: Bonds issued in 1962-66: Morgan Stanley & Co., special study. Bonds issued in 1967: newspaper advertisements and Merrill Lynch, Pierce, Fenner & Smith, Inc.

TABLE 7.-FEDERAL COSTS ARISING FROM SUBSIDY OF GUARANTEED TAXABLE MUNICIPAL BONDS

TABLE 8.-TAX REVENUES ARISING FROM GUARANTEED TAXABLE MUNICIPAL BONDS

(a) Distribution of bond amount (col. (2)) according to tax bracket distribution shown in table 4 (in ascending order). (b) For each subamount of bonds, multiply by percent return (6.25 or 6.50 percent);

(c) Multiply resultant return by respective tax bracket.

TABLE 9.-NET REVENUES OR LOSSES ARISING FROM FEDERAL SUBSIDY OF GUARANTEED

Senator PROXMIRE. Thank you very much.

Our next witness is Mr. Benjamin F. Bailar, senior assistant postmaster general, Postal Service, accompanied by Mr. Richard F. Gould, assistant postmaster general, finance department, and Roger P. Craig, deputy general counsel.

Would you identify the other gentleman?

STATEMENT OF BENJAMIN F. BAILAR, SENIOR ASSISTANT POSTMASTER GENERAL, POSTAL SERVICE, ACCOMPANIED BY RICHARD F. GOULD, ASSISTANT POSTMASTER GENERAL, FINANCE DEPARTMENT; ROGER P. CRAIG, DEPUTY GENERAL COUNSEL; AND JAMES W. HARGROVE, CONSULTANT

Mr. BAILAR. Mr. Chairman, I am Ben Bailar. On my right is Mr. James W. Hargrove, consultant to the Postal Service and previously Senior Assistant Postmaster General.

Senator PROXMIRE. There was a book about you.

Mr. HARGROVE. About somebody by my name. I am afraid you date yourself by remembering.

Senator PROXMIRE. I was an old man when the book was written. Mr. BAILAR. Mr. Chairman, to your right is Roger P. Craig, and further to your right is Richard F. Gould.

We welcome an opportunity to testify on S. 3001, a bill which would centralize certain Federal and federally-assisted borrowing activities in a newly-created Government instrumentality, the Federal Financing Bank.

Mr. Chairman, this entire issue is of fundamental importance to the Postal Service, and I would like to submit the entire statement for the record. With your permission, I have marked a few excerpts I would like to read. I think it will take less than 10 minutes.

First of all, let me state for the record the Postal Service supports the concept of the Federal Financing Bank. We think that such legislation is long overdue, and that the Treasury Department is to be commended for proposing such legislation. However, we would like to bring to the committee's attention some special considerations which place the Postal Service in a position different from that of all other Federal agencies.

Under the Postal Reorganization Act, enacted August 12, 1970, the Postal Service was established as an independent establishment in the executive branch of the Government, with the responsibility for operating the Nation's postal system and improving the quality of mail

service.

One of the principal areas of legal independence granted to the Postal Service was control of its own financing activities, independent of supervision or control by other executive agencies, including the Department of the Treasury. The purpose of this financial independence was to insure the continuing availability of funds for investment in the improvement of the quality of mail service.

It has been stated that section 7 of the proposed legislation does not require or intend that the Treasury Department have any role in or any veto power over the development or implementation of the programs of the various agencies.