The reserve stock of $1 silver certificates in the Treasurer's reserve consisted of 3.3 million completed sheets on June 30, 1950, approximately 10 days' supply. It has been impossible to supply the demands of the banks for replacements during the past year and it is in this denomination that additional production is urgently required. The blank paper in reserve on June 30, 1950, consisted of 3,708,000 sheets and will be completely exhausted prior to the close of the fiscal year. The situation which confronts the Department with respect to the $1 denomination is extremely serious and must be remedied at the earliest possible date. Due to an increase in the cost of distinctive fiber paper from 48.75 cents a pound to 53.25 cents a pound for the fiscal year 1951, and an increase in expressage rates from $1.90 a hundredweight to $2.05 a hundredweight, the estimated purchase from funds requested for the fiscal year 1951 was reduced from 127,795,000 sheets to 120,221,000 sheets, a loss of 7,574,000 sheets. The appropriation estimate for the fiscal year 1951, under the title "Distinctive paper for United States currency," submitted by the Bureau of the Public Debt, Treasury Department, was augmented by the transfer of the cost of securities paper from the appropriation estimate "Administering the public debt" to the extent of $145,000, resulting in a total of $1,845,000 as reported by the Senate Appropriations Committee. In the oral hearings before the subcommittees of the House and the Senate, every effort was made to emphasize the critical situation which had developed with regard to the currency situation and the reserve stocks of currency paper. No relief has been experienced as to the reserve stocks of currency, but rather the situation has become even more aggravated and these stocks are dangerously low. Because of our inability to supply the Federal Reserve banks with a sufficient quantity of new dollar bills, it has been necessary for them to pay back into circulation many bills which are in such soiled and limp condition that they should be retired and replaced by new notes. This situation is rapidly reaching the point where many private banks of the country will protest having to handle such bills because of public complaints. As a matter of fact many circulated notes in this condition are now being returned immediately to Federal Reserve banks without any attempt on the part of private banks to force them on their customers. This supplemental appropriation estimate of $575,000 includes funds for the purchase and transportation of 41,254,000 sheets of distinctive fiber paper for the printing of currency only, and does not increase the amount requested for the printing of securities. The requirement for the additional currency is due to the critical state of the stock of $1 bills, of which the completed quantity on hand in the Office of the Treasurer of the United States has been reduced to approximately 10 days' supply. The stocks in the Federal Reserve banks are in only slightly better shape. It has become a matter of major concern to the Treasury Department, sufficiently so that it does not appear possible or logical to further postpone increasing the quantity available for issue and to establish an adequate reserve. Of the distinctive fiber paper requested herein, 21,254,000 sheets will be required to print $240,000,000 in $1 silver certificates, which will be used to bolster the stocks in the Treasurer's office and in the Federal Reserve banks, and 20,000,000 sheets will constitute a reserve stock of blank paper for future printing of any denominations required. The cost of printing the $240,000,000 in $1 silver certificates is covered in a supplemental estimate submitted by the Bureau of Engraving and Printing concurrently with this estimate for paper. The regular program of the Bureau of Engraving and Printing for fiscal 1951, apart from the special program for producing 240,000,000 $1 bills, will completely exhaust the blank paper available from the regular appropriation. Mr. GARY. Mr. Kilby, will you justify this item for the committee? Mr. KILBY. Yes, Mr. Chairman. GENERAL STATEMENT Within the appropriation for 1951 as it passed the Senate, $1,845,000 was allowed for the purchase of distinctive paper for the production of securities and currency. That amount at the price of 53 cents a pound will produce 120,221,000 sheets of distinctive paper. The amount of paper in reserve on June 30, 1950, consisted of 3,708,000 sheets, so that a total of 123,929,000 sheets will be available for the program for fiscal 1951. The Bureau of Engraving and Printing tell me that within the amount which has been allowed for their appropriation for 1951, they will be able to produce 116,000,000 sheets of completed currency. That with the spoilage will require approximately the total number of sheets of blank paper that will be available so that our stocks will be completely exhausted at the end of the year on that program. The purpose of this supplemental estimate is to provide a sufficient quantity of distinctive paper to produce a program of 20,000,000 sheets of $1 bills over and above the regular program of the Bureau and to have a balance in reserve of 20,000,000 sheets of blank paper at the end of the year. This program is being submitted jointly with the program of the Bureau of Engraving and Printing under which they have an estimate of $2,800,000 which is designed to produce this 20,000,000 sheets over and above their regular program as an emergency measure, because our stocks of completed currency are almost entirely exhausted and we are really in a very critical condition. SUBSTANDARD CONDITION OF CURRENCY The currency which is in circulation is substandard. It has become progressively poorer over the past few years because the production has not been sufficient to replace this outworn paper at a time when it should be withdrawn from circulation. Consequently, the reserve banks have been paying the currency back into circulation and we have now reached the point where a number of the banks of the country are protesting acceptance of what they feel to be substandard currency that is being furnished them by the Federal Reserve banks to be paid into circulation. In a number of instances, some of these banks have returned the used notes to the Federal Reserve Bank with the comment that they just do not feel like paying that sort of money to their customers, and they wish the Reserve Bank would supply them with better currency. That situation is rapidly growing worse and it is really essential to have this program in order to restore our stocks so that we can pay out somewhat better currency. CURRENCY IN CIRCULATION Mr. GARY. How does the currency in circulation now compare to the normal circulation? Mr. KILBY. I would say that it is, on the average, in appreciably poorer condition than it was 3 or 4 years ago. Mr. GARY. I mean in volume; prewar for example. Mr. KILBY. The amount of currency in circulation, Mr. Chairman, has remained fairly constant during the past 5 years. On June 30, 1945, there was $26,700,000,000 in circulation; and on June 30, 1950, there was $27,200,000,000 in circulation. Mr. GARY. How does that compare with prewar? Mr. KILBY. I do not have the exact figure with me, Mr. Chairman, but in 1940 and 1941 I think it was around 5 or 6 billions in circulation. Mr. GARY. Will you furnish us a tabulation showing the currency in circulation by years from 1935? Mr. KILBY. We will be very glad to furnish such a tabulation. Mr. GARY. You may insert it at this point in the record. (The table referred to is as follows:) 1 The supplemental estimate is to produce $240,000,000 in $1 silver certificates, to augment existing stocks in that denomination, which are now inadequate to meet replacement demands. Mr. KILBY. Mr. Chairman, I think I should mention that the problem is not directly related to that increase in circulation, though, because the increase in circulation is primarily accomplished through the larger denomination Federal Reserve notes and not through an increase in the quantity of silver certificates, particularly the onedollar bills, which represent our crucial problem at the moment. Mr. GARY. The present situation is brought about largely because during the war you did not print as much paper money as normally; is that correct? Mr. KILBY. The production was down somewhat during that period. An interesting table showing the way our stocks have been depleted, I believe, appears in the justification of the Bureau of Engraving and Printing which indicates that in 1943 we had a reserve of 48,000,000 sheets, which has dwindled progressively until June 30, 1950, when we only had 6,800,000 sheets or about one-seventh of the reserve stocks that we had 7 years before. Mr. GARY. As long as these two items are so closely related, suppose we take up the other item right now and get the whole problem before us and then we can discuss it. Mr. KILBY. That would be an excellent idea, Mr. Chairman. BUREAU OF ENGRAVING AND PRINTING SALARIES AND EXPENSES Mr. GARY. The second item is the request for $2,800,000 for salaries and expenses of the Bureau of Engraving and Printing. We will insert at this point in the record the justification accompanying this request. (The pages referred to are as follows:) PURPOSE AND NEED FOR SUPPLEMENTAL FUNDS The appropriation originally requested for the operation of this bureau in the fiscal year 1951 amounted to $16,035,000 and included provisions for the production of 117,000,000 sheets of United States currency. A supplemental estimate for $900,000 to cover the cost of wage increases granted to unclassified employees was also submitted, making a total estimate of $16,935,000 requested by this bureau. The House subsequently cut this estimate by $535,000, of which all but $100,000 has been restored by the Senate. If the amount approved by the Senate is sustained in conference, this bureau will receive an appropriation of $16,835,000 which will allow for the production of 116,000,000 sheets of currency. However, the Bureau of the Public Debt in a memorandum dated July 25, 1950, advised this bureau that in addition to their original request of 117,000,000 sheets they will need 20,000,000 additional sheets of $1 silver certificates in order to meet current redemption demands and to replenish the reserve stocks. Because of our inability to supply the Federal Reserve banks with a sufficient quantity of new dollar bills, it has been necessary for them to pay back into circulation many bills which are in such soiled and limp condition that they should be retired and replaced by new notes. This situation is rapidly reaching the point where many private banks of the country will protest having to handle such bills because of public complaints. As a matter of fact many circulated notes in this condition are now being returned immediately to Federal Reserve banks without any attempt on the part of private banks to force them on their customers. It has become a matter of major concern to the Treasury Department, sufficiently so that it does not appear possible or logical to further postpone increasing the quantity available for issue and to establish an adequate reserve. The following tabulation shows the decrease in the stock of $1 bills in the Office of the Treasurer during the past few years: It will be noted that the Treasurer's reserve stock as of June 30, 1950, was $40,000,000 (3,385,333 sheets) which represents about a 10 days' supply. These stocks are at such a dangerously low level that they provide no means whatever of relieving the serious situation which now prevails. At the present time the Department would be unable to meet any unusual or increased demands above the normal replacement requirements. It is necessary that current redemption requirements be met and that an adequate reserve stock be established at an early date. Due to the limited number of plate printers available this program cannot be accomplished on a 40-hour week basis. It is proposed to operate the plate printing division and its allied functions for 28 Saturdays during the balance of the fiscal year 1951. In order, therefore, to relieve the present critical currency situation a supplemental appropriation of $2,800,000 for the production of an additional 20,000,000 sheets of one dollar silver certificates is requested. Mr. HALL. Mr. Chairman, Mr. Kilby covered our part of this program pretty thoroughly. I may repeat that the request is for $2,800,000. We will print 20,000,000 sheets of one-dollar silver certificates which seems to be the critical point in the program. Our appropriation for the year, for the current year, $16,835,000 will only produce 116,000,000 sheets. Originally, the estimate was $16,935,000. PURCHASE OF PAPER Mr. GARY. Does your Bureau actually manufacture this paper? Mr. HALL. No, it is purchased from the Crane Co. in Dalton, Mass. Mr. GARY. You print it? Mr. HALL. We print it. Mr. GARY. Have you got a sufficient quantity of paper on hand? Mr. HALL. There is not a sufficient quantity of paper on hand to print 20,000,000 sheets we are asking funds to print. Mr. GARY. Additional? Mr. HALL. Yes, sir. Mr. GARY. What part of this goes for the actual purchase of paper? Mr. HALL. $575,000. Mr. GARY. The first item is used for the actual purchase of the paper that is necessary to print the money. Mr. HALL. That is correct, sir. NECESSITY FOR OVERTIME WORK Mr. GARY. Now, this request for $2,800,000 is the additional expense in your Bureau for the actual printing of the money that is necessary. Mr. HALL. As I pointed out, we would only be able to print 116,000,000 sheets if the amount of money is made available to use as reported by the Senate, $16,835,000 The original estimate was for 117,000,000 sheets which falls short of the actual requirements of the Bureau of Public Debt at the present time. This additional money will require work in the Bureau on 6 days a week owing to the manpower situation. The cost of production will be increased because of the fact that the 20,000,000 sheets will be produced at overtime rates. Mr. GARY. Are you still having difficulty in getting necessary skilled printers to carry on this work? Mr. HALL. Yes; we are recruiting all there are available. Mr. GARY. So that instead of employing new men with this additional amount, you will use the men that you now have on overtime. Mr. HALL. If there were available plate printers, we would put them on and work straight time. Mr. GARY. Well, are you operating at capacity on a 40-hour week? Mr. HALL. Yes, sir. Mr. GARY. So that if you did employ additional men you would have to employ them on extra hours. Mr. HALL. They would work on the second shift. It would be within the 5 days, but nights. ESSENTIALITY OF ADDITIONAL FUNDS Mr. GARY. Do you consider that the additional money is absolutely essential under present conditions and that this is the least amount for which it can be provided? Mr. HALL. According to the best information available to us from the Bureau of Public Debt and through the Federal Reserve banks I would say this is as little as we can get along with. Mr. GARY. I want to say this: We are facing conditions now which are such that none of us knows what is going to happen. We have |