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Executive Order 11198 🏛️✅ Zone 1: Maximum Authority Constitutional Neutral (+0.02) 📜 Art. I §8: Delegated Tariff & Commerce Execution

Executive Order 11198—Imposition of Interest Equalization Tax on Certain Commercial Bank Loans

Lyndon B. Johnson Lyndon B. Johnson
•
Wednesday, February 10, 1965
•
3 min read (501 words)

Executive Brief • At a Glance

⏱️ 3 min read (501 words) • ● In Effect
🎯 Primary Mandate

The provisions of section 4931 shall apply to acquisitions by commercial banks of debt obligations of foreign obligors to the extent set forth herein.

View all 4 directives ↓
⚖️ Constitutional Footing
🏛️✅ Zone 1: Maximum Authority
Express or Implied Congressional Authorization
📜 Art. I §8: Delegated Tariff & Commerce Execution
Framers' constitutional debate ↓
🏛️ Scope & Affected Sectors
Private Citizens & Property Owners Foreign Nations & International Entities Financial Institutions & Monetary Authorities
Inspect unabridged text ↓

Plain-English Translation & Framers' Constitutional Analysis

Early Statesman synthesis distilling legal jargon into practical meaning, statutory anchors, and structural constitutional impacts.

Signed by President Lyndon B. Johnson on February 10, 1965, this order concerns Imposition of Interest Equalization Tax on Certain Commercial Bank Loans. Section 1. The provisions of section 4931 shall apply to acquisitions by commercial banks of debt obligations of foreign obligors to the extent set forth herein. Sec. 2. (a) Section 4914(j) (1) (A) (ii) and section 4915(c) (2) (A) shall continue to apply; (b) Section 4914(b)(2)(A) shall continue to apply only to an acquisition of a debt obligation of a foreign obligor repayable exclusively in one or more currencies…

Constitutional Assessment: This action represents an orderly exercise of Article II administrative discretion, managing the internal machinery and personnel of the executive branch without abridging the ancient liberties of the people.

Key Directives & Operative Actions

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The provisions of section 4931 shall apply to acquisitions by commercial banks of debt obligations of foreign obligors to the extent set forth herein.

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Section 4914(j) (1) (A) (ii) and section 4915(c) (2) (A) shall continue to apply; (b) Section 4914(b)(2)(A) shall continue to apply only to an acquisition of a debt obligation of a foreign obligor repayable exclusively in one or more currencies other than United States currency which is made by a commercial bank at its branch located outside the United States; and (c) The tax imposed by section 4931 (c) shall apply to an acquisition of a debt obligation of a foreign obligor having a period remaining to maturity of one year or more and less than 3 years which is made by a commercial bank, other than the acquisition of a debt obligation of a foreign obligor— (1) Arising out of a transaction described in section 4914(c) (1) (B), (2), (3)…

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An acquisition by a United States person which is a commercial bank of a debt obligation of a foreign obligor described in Executive Order No. 11175 dated September 2, 1964, shall be subject to the tax imposed pursuant to this order without regard to the provisions of Executive Order No. 11175.

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The Secretary of the Treasury or his delegate is authorized to prescribe from time to time such regulations, rulings, directions, and instructions, and to require such reports of information, as he shall deem necessary to carry out the purposes of this order.

Constitutional & Societal Entities Impacted

🏛️ Private Citizens & Property Owners 🏛️ Foreign Nations & International Entities 🏛️ Financial Institutions & Monetary Authorities

Policy Areas & Topics

🏷️ Economy & Finance
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The Framers' Constitutional Council

1787 Prism

Evaluating this order against the constitutional debates of 1787 and the limits of Article II executive power.

🏛️✅ Zone 1 (Maximum Authority)
§

"When the President acts pursuant to an express or implied authorization of Congress, his authority is at its maximum, for it includes all that he possesses in his own right plus all that Congress can delegate."

— Justice Robert H. Jackson, Youngstown Sheet & Tube Co. v. Sawyer (1952) Express or Implied Congressional Authorization
JM

James Madison

Separation of Powers & Legislative Primacy

"The constitutional magistracy was designed not to invent policy, but to be the faithful instrument of the laws passed by the people's representatives." — Speech in the First Congress (1789)

Madison would approve the structural posture of this order. The President acts strictly in subordination to statutory authority granted under Article II, Section 3 ("take Care that the Laws be faithfully executed"). The checks and balances hold firm because the policy origin remains with the legislature.

Madisonian Stance: Concurring (Statutory)
AH

Alexander Hamilton

The Energetic Executive & Unified Command

"The direction of war implies the direction of the common strength; and the power of directing and employing the common strength must be under the direction of the single hand of the Executive." — Federalist No. 74 (1788)

Hamilton would forcefully champion executive discretion here. For foreign entanglements, commerce defense, and national security, deliberative assemblies are too slow and faction-ridden. A unified, energetic Executive exercising swift command is precisely what the Philadelphia Convention intended for national preservation.

Hamiltonian Stance: Supportive of Execution
GM

George Mason

Bill of Rights, Due Process & 10th Amendment

"The president will be surrounded by flatterers and sycophants... and the great powers of the executive will gradually absorb the liberties of the people." — Cato IV (Anti-Federalist, 1787)

The Anti-Federalist prism advises continuous democratic vigilance. Even routine administrative directives aggregate centralized federal power away from town halls and state assemblies toward a distant executive apparatus.

Anti-Federalist Stance: Eternal Vigilance Required
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Five Measurable "Constitutional Friction" Dimensions

An objective audit measuring potential separation-of-powers tension against the United States Constitution and established Supreme Court doctrine.

⚖️ Discretionary Twilight Zone
35 / 100 friction index
Dimension 1 • Art. I, §1 & §8

Legislative Encroachment & Purse

Moderate Friction

Administers commerce or fiscal programs requiring ongoing statutory delegation and legislative oversight.

Benchmark: Power of the purse, taxes/tariffs, and rule of law reserved to Congress.
Dimension 2 • Art. II, §1 & §3

Executive Scope & Faithfulness

Low Friction

Exercises standard supervisory executive authority to faithfully execute existing statutes.

Benchmark: Faithfully execute laws enacted by Congress vs. unilateral decree.
Dimension 3 • 10th Amendment

Federalism & State Sovereignty

Moderate Friction

Engages state and local partners in cooperative federalism programs.

Benchmark: Police powers and un-delegated responsibilities reserved to the States.
Dimension 4 • 5th & 14th Amendments

Due Process & Individual Rights

Moderate Friction

Applies regulatory or compliance standards to private contractors or commercial entities.

Benchmark: Protection of private property, contracts, liberty, and procedural justice.
Dimension 5 • Separation of Powers

Youngstown Jacksonian Tier

Low Friction

The President operates strictly as the constitutional Chief Executive, carrying out policy established by Congress with strong statutory backing.

Benchmark: Express or Implied Congressional Authorization
⚖️ Audit Synthesis

This order operates within Justice Jackson’s Zone of Twilight, resting upon concurrent presidential authority or congressional silence.

Weighted composite: Art. I (25%), Art. II (25%), Federalism (15%), Due Process (15%), Youngstown (20%).
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How to read these dimensions: Executive power expands whenever an administration acts without explicit statutory authorization from Congress (Article I), touches upon police powers historically reserved to the states (Tenth Amendment), or limits private rights and property without judicial process. A low friction score indicates strict concordance with enacted law; a high friction score highlights orders testing the limits of presidential discretion.
Total Words
501
2,949 characters
Estimated Read Time
3 min
@ 200 words / min
Flesch-Kincaid
25
Post-Graduate Legal
Language Tone Score
+0.02
Constitutional Neutral
How is this scored?
Text size:

Official Archival Text

View Source Document
📑Sections Outline (5 sections)
Sec. 1Sec. 2Sec. 3Sec. 4Sec. 5

By virtue of the authority vested in me by chapter 41 (sections 4911 through 4931) of the Internal Revenue Code of 1954, as added by the Interest Equalization Tax Act, approved September 2, 1964 (Public Law 88-563,78 Stat. 809), by section 301 of title 3 of the United States Code, and as President of the United States, it is hereby determined that the acquisition of debt obligations of foreign obligors by commercial banks in making loans in the ordinary course of the commercial banking business has materially impaired the effectiveness of the tax imposed by section 4911 of the Internal Revenue Code of 1954, as added by the Interest Equalization Tax Act, because such acquisitions have replaced acquisitions by United States persons, other than commercial banks, of debt obligations of foreign obligors which are subject to the tax imposed by section 4911, and it is hereby ordered that—

Section 1. #sec-1

The provisions of section 4931 shall apply to acquisitions by commercial banks of debt obligations of foreign obligors to the extent set forth herein.

Sec. 2. #sec-2

(a) Section 4914(j) (1) (A) (ii) and section 4915(c) (2) (A) shall continue to apply; (b) Section 4914(b)(2)(A) shall continue to apply only to an acquisition of a debt obligation of a foreign obligor repayable exclusively in one or more currencies other than United States currency which is made by a commercial bank at its branch located outside the United States; and (c) The tax imposed by section 4931 (c) shall apply to an acquisition of a debt obligation of a foreign obligor having a period remaining to maturity of one year or more and less than 3 years which is made by a commercial bank, other than the acquisition of a debt obligation of a foreign obligor— (1) Arising out of a transaction described in section 4914(c) (1) (B), (2), (3), (4), or (5), or section 4914(d),,which is transferred in accordance with section 4914(j) (1) (A) (ii) or (iii); or (2) Repayable exclusively in one or more currencies other than United States currency if such acquisition is made by a commercial bank at its branch located outside- the United States.

Sec. 3. #sec-3

An acquisition by a United States person which is a commercial bank of a debt obligation of a foreign obligor described in Executive Order No. 11175 dated September 2, 1964, shall be subject to the tax imposed pursuant to this order without regard to the provisions of Executive Order No. 11175.

Sec. 4. #sec-4

The Secretary of the Treasury or his delegate is authorized to prescribe from time to time such regulations, rulings, directions, and instructions, and to require such reports of information, as he shall deem necessary to carry out the purposes of this order.

Sec. 5. #sec-5

This order shall be effective with respect to acquisitions made during the period beginning on the day after the date on which such order is issued and ending on the date set forth in section 4911(d). LYNDON B. JOHNSON The White House, February 10, 1965.

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Referenced By Later Executive Orders (2)

Subsequent presidents who cited, amended, continued, or revoked this directive in later orders.

References Executive Order 11328—Modifying Executive Order No. 11198, Relating to the Interest Equalization Tax on Certain Commercial Bank Loans
Lyndon B. Johnson • 1967-02-20
References Executive Order 11304—Amending Executive Order No. 11175 Relating to the Exclusion For Original or New Canadian Issues Where Required for International Monetary Stability
Lyndon B. Johnson • 1966-09-12
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Scholarly & Legal Citations 

Exec. Order No. 11,198 (Feb. 10, 1965), https://executiveordersarchive.org/orders/app-executive-order-11198-imposition-interest-equalization-tax-certain-commercial-bank-loans.