B-150454, DEC. 12, 1962

B-150454, DEC. 12, 1962

TO MR. JACK D. ROBINSON, EDITOR, ELECTRICAL WEST:

THIS IS IN REPLY TO YOUR LETTER OF NOVEMBER 8, 1962, IN WHICH YOU REQUESTED INFORMATION ON THE COST TO THE FEDERAL GOVERNMENT OF MONIES LENT TO THE RURAL ELECTRIFICATION ADMINISTRATION.

UNDER EXISTING LAWS, INTEREST PAID BY THE RURAL ELECTRIFICATION ADMINISTRATION ON ITS BORROWINGS FROM THE TREASURY MAY NOT EXCEED 2 PERCENT A YEAR, THE RATE OF INTEREST PAYABLE BY RURAL ELECTRIFICATION ADMINISTRATION BORROWERS. THE ADMINISTRATION HAS PAID INTEREST AT THE LOWER OF 2 PERCENT OR RATES ESTABLISHED BY THE SECRETARY OF THE TREASURY AT THE MULTIPLE OF ONE-EIGHTH OF 1 PERCENT NEXT LOWER THAN THE TREASURY'S AVERAGE INTEREST RATE ON THE AMOUNT OF OUTSTANDING MARKETABLE PUBLIC DEBT OBLIGATIONS AT THE BEGINNING OF EACH FISCAL YEAR. SINCE 1954 SUCH AVERAGE INTEREST RATE HAS BEEN ABOVE 2 PERCENT.

THE FOLLOWING TABLE, DERIVED FROM INFORMATION CONTAINED IN THE ANNUAL REPORT OF THE SECRETARY OF THE TREASURY ON THE STATE OF THE FINANCES FOR THE FISCAL YEAR ENDED JUNE 30, 1961, AND THE DAILY STATEMENT OF THE UNITED STATES TREASURY, JUNE 29, 1962, SHOWS THE AMOUNT DUE THE FEDERAL GOVERNMENT BY THE RURAL ELECTRIFICATION ADMINISTRATION AND THE AVERAGE INTEREST ON OUTSTANDING MARKETABLE OBLIGATIONS AT THE BEGINNING OF THE FISCAL YEARS 1954 THROUGH 1963.

TABLE. BEGINNING OF BALANCE DUE AVERAGE INTEREST ON FISCAL YEAR TREASURY OUTSTANDING MARKETABLE

(MILLIONS)OBLIGATIONS (PERCENT)

1954 $ 1,933 2.207

1955 2,091 2.043

1956 2,207 2.079

1957 2,3432.427

1958 2,519 2.707

1959 2,728 2.546

1960 2,923 2.891

1961 3,155 3.449

1962 3,332 3.063

1963 3,484 3.285

WE BELIEVE THAT IN CONSIDERING INTEREST COSTS FOR THIS PURPOSE, USE OF THE AVERAGE INTEREST RATE FOR THE TOTAL OF OUTSTANDING MARKETABLE OBLIGATIONS IS REASONABLE.