# 1922 Encyclopædia Britannica/Liberty Loan Publicity Campaigns

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LIBERTY LOAN PUBLICITY CAMPAIGNS. — The success of the Liberty Loan campaigns in the United States, after its entrance into the World War, must be judged in the light of the fact that, before 1914, America had little experience of raising huge amounts of capital for lending abroad. At the outbreak of the war the United States was a debtor nation. It was indebted to foreign creditors on capital account to the estimated extent of $3,500,000,000. Since July 1913 there had been, moreover, a steady export of gold, which had occasioned grave apprehension among American bankers; and in June 1914 New York
clearinghouse banks had fallen $50,000,000 below their legal gold reserve requirements. On July 31 1914 drafts payable in gold were coming due immediately on the arrival of shipments of American railway and industrial securities sold abroad, and later, but within a few months, obligations to the amount of $600,000,000 would have to be met with gold in London and on the European continent. Foreign exchange leaped to the unheard-of figure of $7 for the pound sterling early in August. By Jan. 1 1915, however, financial conditions in the United States assumed a different aspect in consequence of the action of the bankers, assisted by the U.S. Treasury, in devising and making available a gold fund of $100,000,000 to protect the country's foreign credit. The warring nations were placing in haste huge orders for munitions of war, foodstuffs and general supplies. Exchange rates thus not only became normal, but turned in favour of the United States. Exportation of gold ceased, and its flow towards the United States began. In Sept. 1915 England and France contracted in New York for the Anglo-French loan of $500,000,000. From Sept. 1 1915 to April 15 1917, a period of 19 months, the belligerent nations negotiated loans in the United States amounting to $1,650,000,000, at a rate not exceeding 5½%; and the net balance of imports of gold into the United States during the same period was $1,074,777,133. These conditions in April 1917 are significant in contrast with those of July 30 1914.
When the United States entered the war it was apparent that huge sums would have to be made available by the U.S. Government for the use of the Allies as well as for its own expenses. The stupendous cost of the war to England, France and Italy clearly indicated that the United States must secure a war-chest of thousands of millions of dollars. Taxation and bond issues were the only methods by which the needed money could be raised. Congress, April 24 1917, 18 days after the declaration of a state of war, authorized the Secretary of the Treasury to issue bonds of the United States to the extent of $5,000,000,000. These Liberty Loan Bonds carried interest at the rate of 3½% per annum, were tax-exempt, and convertible into bonds bearing higher interest if any subsequent series should be issued at a higher rate. The unprecedented issues of loans by foreign Governments, and the purchase of large blocks of American railway and industrial securities which foreign holders had unloaded on the New York market during 1915 and 1916, however, seemed to have absorbed all the fluid money in the country. It was most uncertain how 3½% bonds would fare in the open market while those of England and France were yielding 5½%, and railway and industrial securities carrying 6% were selling below par. Leading bankers in all parts of the country advised that the issue should not be in excess of $500,000,000, in the belief that the market could not absorb more. In the face of these discouraging advices the Secretary of the Treasury determined, nevertheless, to be influenced only by the essential requirements of the Government. He fixed upon the amount of $2,000,000,000, and offered the loan to the public May 17 1917, believing that an appeal to the patriotism of the people would bring a satisfactory response. This first offering closed June 15 1917, with subscriptions by 4,000,000 people aggregating $3,035,226,850. Then, within the next 23 months, at intervals of about 6 months, there followed the Second, Third, Fourth and Fifth Liberty and Victory loans, aggregating $19,000,000,000 more, and in each campaign the offerings were over-subscribed. But this was only as a result of an appeal to the public such as had never before been attempted.
Appeals to the people, however patriotic they may be, cannot be forcefully made without organization. A selling agency had to be created, one that would be nation-wide in its operations, replete with energy, enthusiastic in its patriotism, and determined to uphold American honour and credit.
Geographically the United States is divided into 12 financial sections, each of which is termed a Reserve Bank District, with its Reserve Bank. The Federal Reserve Board was located in Washington. The system was but newly created, and had begun to function early in 1915. After the United States entered the
war a War Loan Organization under the Treasury Department was established at Washington, and in each of the 12 Federal Reserve Districts a Central Liberty Loan Committee was constituted, with the governor of the Reserve Bank as chairman, and to these committees was entrusted the work of selling the bonds in their respective districts.
The Treasury Department allotted to each district the amount of bonds it was to sell, and each central committee divided the allotment throughout its territory, calling upon its sub-committees in various localities to have their quotas subscribed. The men who served on the central committees and on the principal sub-committees represented the most capable, experienced and influential men in their respective communities — financial, professional and industrial. The success of all the loans was largely due to the perfection of the selling organizations and to the energetic action of the central committees under the direction of the Treasury Department. American women figured in every great war movement, and in these campaigns they proved their value in an entirely new capacity as sellers of bonds. They perfected a nation-wide organization — the National Woman's Liberty Loan Committee, which coöperated with the Liberty Loan Organizations of the Federal Reserve Districts. They had enrolled on their committees 800,000 women during the campaigns for the Fourth and Fifth loans.
Inasmuch as New York City is the heart of financial America, and as the Second Federal Reserve Bank is there, a description of the bond-selling campaign there will be sufficient. The Central Liberty Loan Committee of the Second Federal Reserve District was composed of Benjamin Strong, chairman; James S. Alexander (President National Bank of Commerce); George F. Baker (chairman board of directors, First National Bank); Allen B. Forbes (Harris, Forbes & Co.); Walter E. Frew (president Corn Exchange Bank); Gates W. McGarrah (President Mechanics and Metals Bank); J. P. Morgan (J. P. Morgan & Co.); Seward Prosser (president Bankers' Trust Co.); Charles H. Sabin (president Guaranty Trust Co.); Jacob H. Schiff (Kuhn, Loeb & Co.); Frank A. Vanderlip (president National City Bank); Martin Vogel (Assistant Treasurer of the United States, in charge of the Sub-Treasury in New York, and representative of the Secretary of the Treasury); James N. Wallace (president Central Union Trust Co.); Albert H. Wiggin (president Chase National Bank); and William Woodward (president Hanover National Bank). These men met daily during each campaign. They formed sub-committees on distribution publicity speakers' bureaus, banks and trust companies, various industries, manufactures and professions, each composed of the leading men in their respective industries and professions. Every city town and village had its Liberty Loan Committee as part of this huge organization. Each district was given its allotment, and daily returns were reported to the Central Committee throughout each campaign. If the reports from any district showed that it was lagging behind, speakers of national repute were sent to arouse it. Campaigns of education were inaugurated making widely known the causes of the war, the object sought by victory, and the necessity of financing the Allies and supporting the military arm of the Government. To the thoroughness of the educational campaign may be attributed much of the success of the issues. It convinced everyone that each man, woman and child must “do his bit,” It made an army of workers with an individual responsibility. No device to assemble crowds was ignored, and there was no assembly without its speakers. Bands, processions, parades, balloon ascensions, flights of aeroplanes dropping leaflets, steeple climbers, altars of liberty, “Nation Days” for aliens and citizens of foreign birth, and, later, captured tanks, cannon and submarines, pyramids of German helmets — all were used. Walls were covered with special cartoons; magazines and newspapers contained full pages of advertising. “Buy a bond” was a slogan from which there was no escape. In café and club, in hotel corridor and restaurant, between the acts in the theatre, and in all public places came the cry “Buy a bond.” The jargon of the money market was abandoned. It was not the question of investment versus investment, or interest rate versus
interest rate. It was that of the National Treasury in need of funds. Performance of patriotic duty and pride in American institutions was the key of the educational campaign. When the great “drives” came the nation responded to a man. Every village and city in the land sought not merely to sell its quota of bonds, but strove to “go over the top.”
The Treasury Department and the central committees realized that the people did not have sufficient available money to pay in cash for the bonds, and therefore the slogan “Borrow, buy and save” was employed, and the banks throughout the country were urged to make loans freely to subscribers who offered bonds as collateral. The banks aided the small investors by financing their subscriptions, permitting them to pay off in monthly instalments, with interest at the coupon rate. The large mercantile and industrial establishments likewise financed the subscriptions made by their employees. In the later campaigns coupon instalment books were introduced. The banks aided the large investor to subscribe beyond his available cash resources by loaning on the subscriber's three-months note, with the bonds as collateral, and with the privilege of one, two or three renewals of three months each, with interest at the coupon rate. Usually a substantial payment in reduction of loan was required and the rate of interest raised at the end of the renewal periods. There was no special rule, each bank using its own judgment in individual cases. The banks, in turn, rediscounted these notes at their Federal Reserve Banks, thereby maintaining a liquid position. Had this “borrow-and-buy” method not been put into practice, the people would not have been able to subscribe and pay in cash the vast amounts necessary. The mere “borrow-and-buy” method in itself may not have been economically sound, but with it was joined the slogan “Save,” in order that the borrowings might be repaid, and the borrowing was a war necessity. Immediately after the Armistice there was an orgy of spending, prices of all commodities rose, and merchants found that they required more cash to expand and increase their inventories. This need resulted in a wide selling movement of the bonds, and was in great measure the cause of their selling temporarily below par.
Details of the Loans. — The Liberty Bonds and Victory Notes were issued under authority of the Acts of Congress approved April 24 1917, Sept. 24 1917, April 4 1918, July 9 1918, Sept. 24 1918 and March 3 1919, and pursuant to official Treasury Department circulars. The following are some of the details in connexion with their flotation:— The First loan was a 30-year 3½% loan dating from June 15 1917; interest payable semi-annually (as in the case of all the loans); redeemable at the option of the Government on and after June 15 1932 and exempt from all taxation, except inheritance and estate taxes, both as to principal and interest. This exemption made the First loan especially desirable for persons with large incomes and kept its market price higher than that of subsequent issues. The amount offered and issued was $2,000,000,000, the subscription $3,035,226,850. Subscriptions opened May 17 1917 and closed June 15 1917.
The Second Liberty Loan was a 4% issue dated Nov. 15 1917; maturity Nov. 15 1942 but redeemable on and after Nov. 15 1927. It was convertible into subsequent issues of bonds bearing a higher rate than 4% and was exempt from state and local taxes and from the normal income tax, but not from estate and inheritance taxes, or from the super-tax, on personal incomes or the excess and war profits taxes on corporate incomes above $5,000. Thus by increasing the interest rate and restricting the tax exemption these bonds were made more attractive to small than to large investors. Subscriptions for this Second loan began Oct. 1 and ended Oct. 27 1917. The total amount sought by the Treasury Department was $3,000,000,000, but the Secretary reserved the right to allot additional bonds up to one-half the amount of any over-subscription. Subscribers were permitted to make payment in four instalments, and this plan of allowing deferred payment to be completed in about three months was followed in subsequent campaigns. Many banks and business houses allowed their clients and employees to distribute the payments over still longer periods. The subscription was $4,617,532,300 and the issue $3,808,766,150. The Second loan was issued under the Act of Sept. 24 1917, authorizing total bonds of somewhat more than $7,000,000,000.
The Third Liberty Loan was an issue of 10-year 4½% bonds dated May 9 1918 and not redeemable until maturity, Sept. 15 1928. The exemptions were the same as in the Second loan, but the privilege of converting these bonds into those of future issues was withheld. The amount offered was $3,000,000,000 and the Secretary reserved the right to accept any over-subscriptions. The loan was offered to the public on April 6 1918, the first anniversary of the declaration of war by the United States, and the campaign closed May 4. These bonds were authorized under the Third Liberty Loan Act of April 4 1918, which made them available for use in the payment of estate and inheritance taxes and authorized the Secretary of the Treasury to purchase each year 5% of each outstanding issue of Liberty bonds, with the exception of the First. This provision was designed to stabilize the price of Liberty bonds in the market. The amount subscribed and issued was $4,176,516,850.
The Fourth Liberty Loan consisted of 20-year 4¼% bonds, dated Oct. 24 1918, maturing Oct. 15 1938, but redeemable after the end of 15 years. These bonds were not convertible into future issues and the exemptions from taxation were similar to those provided for the Second and Third loans, although it was provided that $30,000 of these bonds were to be exempt from surtaxes for two years after the end of the war, while an original subscriber holding this amount would also be entitled for the same period to an additional exemption as to any previous issue of 4% and 4¼% bonds to the extent of $45,000. Subscriptions to this issue, for which $6,000,000,000 was asked, began Sept. 28 and ended Oct. 19 1918. The Secretary of the Treasury accepted all over-subscriptions. The total subscription was $6,992,927,100, due to later adjustments the amount actually issued was $6,964,524,650. “The success of this largest of all loans,” the Secretary said in his annual report for 1918, “was the greatest financial achievement in all history and a wonderful manifestation of the strength and purpose of the American people.” The Fourth Liberty Loan Act of July 9 1918 had increased the authorization for Liberty loans from $12,000,000,000 to $20,000,000,000; it also increased the authorization for the purchase of Allied Government securities from $5,500,000,000 to $7,000,000,000.
The Victory Liberty Loan was an issue of 3- and 4-year interchangeable 3¾% and 4¾% notes dated May 20 1919 and maturing May 20 1923, but redeemable June 15 and Dec. 15 1922. The 3¾% notes were exempt from all except estate and inheritance taxes; the 4¾% notes from all except inheritance taxes, surtaxes and excess-profits taxes. The amount of the issue was $4,500,000,000 and the Secretary of the Treasury, Carter Glass, who had succeeded Mr. McAdoo, announced that over-subscriptions would not be accepted. Subscriptions began April 21 and ended May 10 1919. The amount offered was $4,498,312,650 and the subscription $5,249,908,300.
The Victory Liberty Loan Act (March 3 1919) under which the loan was floated, provided certain additional tax exemptions for holders of various issues of Liberty loans. It was calculated that the total possible exemption under these and earlier provisions was $160,000 in Liberty bonds and notes, not including the first 3½% bonds and the 3¾% Victory notes which were always exempt.
The following tables show with respect to the five U.S. war loans the quotas, subscriptions and allotments for the twelve Federal Reserve Districts of which the cities named are the Reserve banking centres. For the Third loan certain additional data are given.
First Liberty Loan (1917)
| District | Quota | Subscription | Allotment |
| Boston | $240,000,000 | $332,447,600 | $265,017,900 |
| New York | 600,000,000 | 1,186,788,400 | 593,987,000 |
| Philadelphia | 140,000,000 | 232,309,250 | 164,759,750 |
| Cleveland | 180,000,000 | 286,148,700 | 201,976,850 |
| Richmond | 80,000,000 | 109,737,100 | 88,593,650 |
| Atlanta | 60,000,000 | 57,878,550 | 46,283,150 |
| Chicago | 260,000,000 | 357,195,950 | 272,702,100 |
| St. Louis | 80,000,000 | 86,134,700 | 65,029,450 |
| Minneapolis | 80,000,000 | 70,255,500 | 53,759,250 |
| Kansas City | 100,000,000 | 91,758,850 | 62,182,900 |
| Dallas | 40,000,000 | 48,948,350 | 36,663,550 |
| San Francisco | 140,000,000 | 175,623,900 | 149,044,450 |
| Total | $2,000,000,000 | $3,035,226,850 | $2,000,000,000 |
More than 4,000,000 persons subscribed to this loan, and 99% of the subscriptions were from $50 to $10,000. There were 21 subscribers for $5,000,000 and over, aggregating $188,789,900.
Second Liberty Loan (1917)
| District | Quota | Subscription | Allotment |
| Boston | $300,000,000 | $476,950,050 | $407,713,700 |
| New York | 900,000,000 | 1,550,453,450 | 1,151,184,900 |
| Philadelphia | 250,000,000 | 380,350,250 | 295,127,000 |
| Cleveland | 300,000,000 | 486,106,800 | 409,787,200 |
| Richmond | 120,000,000 | 201,212,500 | 182,581,700 |
| Atlanta | 80,000,000 | 90,695,750 | 82,943,050 |
| Chicago | 420,000,000 | 585,853,350 | 525,955,600 |
| St. Louis | 120,000,000 | 184,280,750 | 150,122,200 |
| Minneapolis | 105,000,000 | 140,932,650 | 131,972,450 |
| Kansas City | 120,000,000 | 150,125,750 | 136,549,500 |
| Dallas | 75,000,000 | 77,899,850 | 74,567,100 |
| San Francisco | 210,000,000 | 292,671,150 | 260,261,750 |
| Total | $3,000,000,000 | $4,617,532,300 | $3,808,766,150 |
There were approximately 9,306,000 subscriptions to the Second loan; of this number 99% were for amounts ranging from $50 to $50,000 and aggregating $2,488,469,350.
Third Liberty Loan (1918)
| District | Quota | Subscription and Allotment | % of Quota | No. of Subscribers | % of Pop. |
| Minneapolis | $105,000,000 | $ 180,892,100 | 172.28 | 1,221,504 | 23.6 |
| Kansas City | 130,000,000 | 204,092,800 | 156.99 | 1,190,193 | 16.0 |
| St. Louis | 130,000,000 | 199,835,900 | 153.72 | 1,186,377 | 12.7 |
| Atlanta | 90,000,000 | 137,649,450 | 152.94 | 584,196 | 5.8 |
| Dallas | 80,000,000 | 116,220,650 | 145.27 | 719,210 | 12.7 |
| Philadelphia | 250,000,000 | 361,963,500 | 144.79 | 1,670,229 | 25.2 |
| Richmond | 130,000,000 | 186,259,050 | 143.27 | 858,358 | 9.2 |
| Chicago | 425,000,000 | 608,878,600 | 143.26 | 3,479,315 | 24.7 |
| Boston | 250,000,000 | 354,537,250 | 141.81 | 1,512,555 | 22.7 |
| San Francisco | 210,000,000 | 287,975,000 | 137.13 | 1,402,584 | 21.1 |
| Cleveland | 300,000,000 | 405,051,150 | 135.02 | 1,440,681 | 15.4 |
| New York | 900,000,000 | 1,115,243,650 | 123.91 | 3,043,123 | 23.2 |
| Treasury Department | | 17,917,750 | | 68,490 | |
| Total | $3,000,000,000 | $4,176,516,850 | 139.21 | 18,376,815 | 17.7 |
It will be noted with respect to this loan that the Treasury Department calculated the relative standing of the districts with regard to the amounts by which they exceeded their quotas. It should be noted, however, that this rank shifted with various loans; for example the Minneapolis district, which here stands first with a percentage of 172.28, subscribed less than its quota in the First loan, while the New York district's subscription was nearly 200% of its quota in that loan. In the Third loan bonds were allotted to the full extent of the subscriptions.
Fourth Liberty Loan (1918)
| District | Quota | Subscription and Allotment |
| Boston | $ 500,000,000 | $ 632,101,250 |
| New York | 1,800,000,000 | 2,044,901,750 |
| Philadelphia | 500,000,000 | 598,763,650 |
| Cleveland | 600,000,000 | 701,909,800 |
| Richmond | 280,000,000 | 352,685,200 |
| Atlanta | 192,000,000 | 217,885,200 |
| Chicago | 870,000,000 | 969,209,000 |
| St. Louis | 260,000,000 | 295,340,250 |
| Minneapolis | 210,000,000 | 242,046,050 |
| Kansas City | 260,000,000 | 295,951,450 |
| Dallas | 126,000,000 | 145,997,950 |
| San Francisco | 402,000,000 | 462,250,000 |
| Other Subscriptions | | 33,885,550 |
| Total | $6,000,000,000 | $6,992,927,100 |
As in the case of the Third loan, bonds were alloted to the full amount of the subscriptions. The number of subscribers to this loan was 22,777,680.
Victory (Fifth) Liberty Loan (1919)
| District | Quota | Subscription | Allotment |
| Boston | $ 375,000,000 | $ 425,159,950 | $ 371,910,150 |
| New York | 1,350,000,000 | 1,762,684,900 | 1,318,041,150 |
| Philadelphia | 375,000,000 | 422,756,100 | 376,290,150 |
| Cleveland | 450,000,000 | 496,750,650 | 443,802,250 |
| Richmond | 210,000,000 | 225,146,850 | 201,889,300 |
| Atlanta | 144,000,000 | 143,062,050 | 133,080,800 |
| Chicago | 652,500,000 | 772,046,550 | 694,330,000 |
| St. Louis | 195,000,000 | 210,431,950 | 201,787,600 |
| Minneapolis | 157,500,000 | 176,114,850 | 170,076,650 |
| Kansas City | 195,000,000 | 197,989,100 | 192,429,300 |
| Dallas | 94,500,000 | 87,504,250 | 84,002,500 |
| San Francisco | 301,500,000 | 319,120,800 | 294,905,050 |
| Other Subscriptions | | 11,140,308 | 6,767,800 |
| Total | $4,500,000,000 | $5,249,908,300 | $4,498,312,650 |
The total number of subscribers to this loan was 11,803,895.
In addition to the great war loans, the Treasury Department placed on sale beginning in the autumn of 1917 War Savings Certificate Stamps in two denominations, 25 cents (thrift stamps), and $5 (war savings stamps). The latter were sold at rates beginning at $4.12 each, increasing one cent monthly to $4.23 and matured in 5 years, at the end of which time the Government agreed to redeem them at $5 each, this being equivalent to 4% interest compounded quarterly. The war savings stamps were designed to be attached to a folder called War Savings Certificate, which had spaces for 20 stamps (see Savings Movement). Treasury Savings Certificates, in denominations of $100 and $1,000, were also issued, which increased monthly in value at the same rate as the stamps. Up to June 1919 the net cash receipts from War Savings Certificates amounted to about $950,000,000. At that time the total indebtedness of the United States was approximately $26,597,000,000, or $249.38 per capita, the annual debt charges being about $8.38 per capita. It was estimated that at the close of the war at least 20,000,000 persons, and probably as many as 25,000,000, were holders of Liberty bonds. Although complete data were not available it seemed probable that the war loans of the United States were much more widely distributed among the population than those of any other country. By an Act of March 3 1919 Congress established a cumulative sinking fund amounting to 2½% annually of the aggregate total of the loans outstanding July 1 1920, less the amount which had been invested in foreign Government securities.
For a study of the U.S. Government's financing of the war, see Jacob H. Hollander, War Borrowing (1919).
(M. V.*)