In 1930 there were 12,000,000 members of building and loan associations which owned assets of $8,800,000,000.26 Concerning postal savings, there were on June 30, 1939, 2,767,417 depositors and a balance to the credit of depositors of $1,262,291,829.27 In 1929, only 11,037 out of 416,584 depositors owned deposits of $2,500, the maximum permitted.28

While formal savings institutions may for the most part be utilized by those who have comparatively small or medium-sized amounts to invest, very wealthy individuals tend either to invest their savings directly or place them in the hands of trustees for investment. Such savings are reflected in the ownership of real estate, of private and public debt, and of corporate stock, and are discussed elsewhere in this chapter.

Business Savings.

Business savings are defined by Altman as "the amount of money left in the hands of a business enterprise after paying all the expenses of production, including rent, interest, wages, taxes, etc., and after payment of dividends to preferred and common stockholders. In the case of unincorporated business enterprises savings are equal to the amount left in the business after the payment of profits to the owners." 29 He estimates that business enterprises in prosperous years have contributed about two-fifths of total gross savings.30 His calculations of business savings for all nonfinancial enterprises, unadjusted for capital gains and losses, are as follows, for selected years: 31

Corporations account for the bulk of business savings. There is considerable evidence of a high degree of concentration of corporate savings in the hands of the large corporations.32 In 1936, of the 478,857 reporting corporations, 751 corporations-those with assets over $50,000,000-saved $1,165,000,000 out of the $2,924,000,000 gross savings of all reporting corporations. In other words, less than twotenths of 1 percent of the corporations accounted for over 40 percent of the gross savings. In 1937, of the 477,838 reporting corporations, 749-with assets over $50,000,000-made gross savings of $1,344,000,000 out of the total of $2,906,000,000 reported. Less than two-tenths of 1 percent of the corporations accounted for more than 46 percent of the gross savings.33

26 Hearings before the Temporary National Economic Committee, Part 9, p. 3772. 27 United States Board of Trustees, Postal Savings System, Annual Report of the Postal Savings System, 1939, p. 1.

28 Information from Donald Sham, The United States Postal Savings System, in preparation. Prior to 1930 the depositors were predominantly a low-income group, living in urban centers; but since the depression there has been a change in the type of depositor as well as an increase in the number of depositors. In Chicago, for example, there was prob ably a large number of school teachers among the new depositors.

In 1932, the number of depositors passed the million mark for the first time and since 1933 it has been well over 2,000,000. (Annual Report of the Postal Savings System, 1939,

p. 5.)

Hearings before the Temporary National Economic Committee, Part 9, p. 3679. For other concepts and estimates of business savings, see R. W. Goldsmith, Studies in Income and Wealth, vol. III, pp. 284-285; and Maurice Leven and associates, America's Capacity to Consume, p. 98. 30 Temporary National Economic Committee Monograph No. 37, Savings, Investment, and National Income, p. 20.

31 Ibid., appendix I.

32 Ibid., p. 22.

33 Ibid., appendix VII. It should be noted that these figures must necessarily come from the returns of corporations submitting balance sheets. It is considered probable, however, that corporations which do not submit balance sheets have assets less than $50,000. See hearings before the Temporary National Economic Committee, Part 9, p. 4050.

The available information concerning the ownership of corporations which do the saving is contained in chapter VII.

OWNERSHIP OF DEBT

Debts incurred by individuals, business enterprises, and Government bodies are owned by other individuals and groups who hold the debt certificates. While a debt certificate-in the form of a bond, mortgage, note, etc.-is issued to the lender at the time the obligation is incurred, it may pass through the hands of many owners through subsequent transfers. The question of whether or not concentration exists in the ownership of debt, therefore, must be answered by determining the aggregate volume of the various classes of outstanding debt and the amounts held by the present owners.

The following section is a brief discussion of the available material on the amount, composition, and ownership of the Government, or public, debt and of such private categories as farm mortgage debt, urban mortgage debt, and corporate debt.

Public Debt.

The public debt is made up of obligations of the Federal, State, and local governments to make payments of interest or principal, or both, on stated or determinable dates. The Treasury computed the total gross Federal debt to be $36,425,000,000 in 1937 and $37,165,000,000 in 1938.

If the contingent or guaranteed debt of the United States is added, the gross Federal debt was $41,120,000,000 in 1937 and $42,143,000,000 in 1938.34 Probably the best estimate for the total State and local debt was made by the Treasury also. It was $19,595,000,000 for 1937.35

Several estimates have been made of the ship of the public debt by type of holder. mates by the National City Bank of New States Treasury.

distribution of the ownerTables 27 and 28 are estiYork and by the United

TABLE 27.-Distribution of United States Government direct and guaranteed debt as of June 30, 1930 and 1940

34 Certain governmental corporations and agencies are authorized to issue bonds and other obligations guaranteed by the United States. Although these are primarily obligations of the issuing agencies, and the assets of these agencies are to be used for their payment, they are classified as contingent liabilities of the United States. (Annual Report of the Secretary of the Treasury, 1938, pp. 20, 72, 492, and 520.)

35 Treasury Department. Securities Exempt From the Federal Income Tax as of June 30, 1937 (hereafter referred to as Treasury Greybook), p. 52. Gross debt includes all types of debt obligations. Net debt is computed by deducting from the gross debt figure the net balance in the Treasury general fund. Sternberg, using a net debt category which eliminated duplicating and overlapping debt, estimated the total net Federal debt as $32,834,000.000 in 1938 and $35.221,000.000 in 1939, and that of the State and local governments as $15,276,000,000 in 1938 and $15,583,000,000 in 1939. (J. W. Sternberg, Indebtedness in the United States, 1929-30, Survey of Current Business, June 1940, p. 15.) He describes overlapping debt as that which is incurred at two or more stages in the performance of a single purpose. "Thus, when the Federal Government or a Federal corporation issues bonds, which in turn provide funds to purchase mortgages on households, the overlapping debt of the intermediary agency must be eliminated, leaving only the debts of the end borrower in the net-debt totals" (Ibid., p. 13).

TABEL 27.-Distribution of United States Government direct and guaranteed debt as of June 30, 1930 and 1940-Continued.

Total banks.

Federal Reserve banks.

Total insurance companies.

Total accounted for..

Balance unaccounted for, held by individuals, corporations, trustees, etc..

Percentage distribution:

Commercial banks..

Savings and private banks.

United States agencies and trust funds.

Insurance companies..

1 Private bank holdings amounted to $2,000,000 in 1930 and to $49,000,000, in 1940. 2 Partly estimated.

Source: bulletin of the National City Bank of New York, New York, January 1941, p. 10.

TABLE 28.-Ownership of the State and local bonded debt, for dates around June

30, 19321

1 It is not possible to secure data for comparable dates for all investor groups. Where possible, the data are for June 30, 1932; however, since several of the figures are only rough approximations, the fact that the dates are not exactly the same for all the figures does not impair their usefulness for the present purpose. 2 Accounted for mainly by corporations other than banks and insurance companies, trust accounts not included with individual holdings, individuals with incomes of less than $5,000, and foreign holdings. Source: D. C. Horton, Long-Term Debts in the United States, Government Printing Office, Washington 1937, p. 185.

+117

+240

Table 29, compiled by the Treasury Department, gives an estimate of the holdings of tax-exempt securities by various classes of investors, for dates ranging from 1934 to 1937. The financial corporations (banking, insurance, real estate, holding companies, stock and bond brokers, etc.) are the largest single group of corporate owners of tax-exempt securities. Moreover, the Treasury Department has estimated that their share of these securities has been increasing from

TABLE 29.-Estimated total volume of tax-exempt securities and recorded holdings of selected categories of investors (as of varying recent dates)

1 The available records of private investments in tax-exempt securities refer to varying dates ranging over a 3-year period and, therefore, are not totaled. In the aggregate they cover approximately 34 of the total, or 36.6 billion dollars, consisting of 27.3 billion dollars of U. S. Government and Federal agency securities and 9.3 billion dollars of State, local, and Territorial issues. Furthermore, the tax-exempt security holdings of the individual categories of private investors above enumerated are themselves incomplete. Securities reported to be held by individuals filing income tax returns, for instance, are known to be incomplete due to the under-reporting of securities held directly, and especially those held indirectly through partnerships and fiduciaries.

Distribution unknown.

Source: U. S. Treasury Department, Securities Exempt From the Federal Income Tax as of June 30, 1937

p. 113.

year to year, from 67 percent of all tax-exempt obligations owned by corporations submitting balance sheets in 1926 to 74 percent in 1930 and 90 percent in 1935.3

36

Concentration of ownership appears in both the institutional and individual holdings of public debt. The largest corporations and the wealthiest individuals tend to own the largest proportion of the taxexempt securities.37

One indication of the concentration of corporate ownership of taxexempt securities is seen in table 30, which shows receipts of tax

36 Treasury Greybook, p. 107. The percentage of the public debt held directly by individuals with incomes of over $5,000 may not seem large, although the estimate is based on income tax returns and is clearly an understatement. (Ibid., pp. 99-101; A. G. Hart, Debts and Recovery, Twentieth Century Fund, 1938, p. 123.)

An estimate by Harley Lutz, of the ownership of State, local, and Territorial debt in 1937, which uses $19,298,000,000 as the total value of these bonds, assigns 26.1 percent of the total to taxable corporations, 3.1 percent to individuals with net incomes under $5,000, and 40.8 percent to individuals with net incomes of $5,000 and over, including partnerships, estates, and trusts. (See hearings before the Special Senate Committee on Taxation of Governmental Securities and Salaries, 75th Cong., 1st sess., p. 119.)

87 It should be noted that the total volume of tax-exempt securities is not equivalent to the total volume of public debt, although one term is often used for the other. The gross volume of public debt includes both interest-bearing and noninterest-bearing obligations. But noninterest-bearing securities are of no importance for exemption from income tax, and they are not included in volume of tax-exempt securities. Nevertheless, the total volume of tax-exempt securities is larger than the gross amount of borrowing from the public since the former includes some duplication and some items such as securities issued by

exempt interest in 1937 by corporations of different sizes. Although the amount of interest received does not increase steadily in size of asset class, there is an extraordinary concentration in receipts by the largest corporations. The corporations in the asset classes under $1,000,000, which comprise 94.4 percent of the corporations submitting balance sheets, received only 5 percent of the tax-exempt interest reported. On the other hand, the corporations in the asset classes over $1,000,000, comprising but 5.6 percent of the reporting corporations, received 95 percent of the interest reported by all corporations submitting balance sheets. Moreover, the 394 largest corporationsthose with assets of over $100,000,000-accounted for 56.8 percent of the interest received by the 416,902 reporting corporations.

TABLE 30.—Wholly tax-exempt interest receipts for all corporations submitting balance sheets, by asset classes, for the year 1937

Source: U. S. Treasury Department Statistics of Income, 1937, Part. II, pp. 80-81.

Some information concerning the public debt holdings of individuals can be obtained from the Federal individual income tax returns on holdings of tax-exempt securities. In 1938 the Treasury made a study of tax-exempt securities as of June 30, 1937. The authors estimated that the gross volume of tax-exempt securities was $65,648,000,000. Nongovernmental owners held $50,522,000,000 of this, since $15,126,000,000 was owned by Federal, State, local, and Territorial governments, or their agencies, and by the Federal Reserve banks.

A special analysis of 1934 income tax returns of individuals with net incomes of less than $5,000 indicates that they held at the close of that year $827,000,000 of Federal securities and $507,000,000 of the State and local obligations."

38

In 1935 individuals with incomes over $5,000 owned $2,063,000,000 of Federal securities and $2,562,000,000 of State, local, Territorial, joint stock land banks—which are not contained in the public debt. (Treasury Greybook, p. 5.)

The data on holdings of tax-exempt securities are incomplete since the information on ownership of such obligations required in income tax returns is of a merely supplementary, informational nature. The Treasury reports that the available records of private owner ship of tax-exempt securities account for three-fourths of the estimated volume of net outstanding tax-exempt securities. The ownership of the remaining amount is unknown. (Ibid., pp. 100, 112-113.) 38 Treasury Greybook, p. 101.