The Sun.
London, England, 1870-01-25 00:00:00

TILE UNITED STATES FUNDING BILL.

(From the Anglo-American Times.)

The question is of great interest whether Mr.
BOUTWELL can, after passing his new Funding Bill
through Congress, float loans at 41 per cent. on the
European markets. He intends to try, although
grave doubts as to his success have been expressed
at Washington by these best acquainted with the
subject. We have already given a sketch of the
proposed bill, and we have often stated the advan-
tages offered to the foreign holders of Five-Twenties
to exchange them for the new Bonds ; but the differ-
ence is, we fear, too great between a Six per Cent.
Loan and a Four-and-a-Half per Cent. Loan, more
especially when the former is not at par, and the
latter cannot be offered at less than par. The
writer has asked some of his acquaintances who
hold 5-20's What they will do, and those uncon-
nected with commei cial pursuits have, for the most
part, answered that they would exchange for Four-
and- a-Half Bonds with the interest payable in Eu-
rope, arguing that their bonds bad cost them an
amount which would yield upwards of five per cent ,
in their opinion a fair interest on a very good security.
But this argument in reality is opposed to Mr.
BOUTWELL'S success. Having bought low, and
finding Uncle SAM a good paymaster, non-com-
mercial men are unwilling to change, and accept a
loss considering themselves fortunate that by early
investment the purchase has been, and will continue
to be, remunerative. But it is doubtful whether the
same people would buy at par United States Bonds
yielding only 41 per cent. It may be taken for
granted that a loan at such a figure must be almost
wholly placed in London, for there is no other part
of the world where such interest would be accepted.
Many Germans may exchange their 5-20 Bonds,
but few Germans will be induced to make
fresh investments at the new rate, as their own
Government loans and the best railway securities
give more. The same may be said of Paris, where
United States securities have never been in favour.
To London alone can Mr. BOUTWELL turn, for in
London alone a lender does not laugh at a bor-
rower who proposes to give him 41 per cent. Most
securities pay more ; all Colonial Debentures yield
a higher rate ; but then the colonies are steadily
and persistently increasing their debts instead of de-
creasing them, as in the case of the United States.
Some of their bonds, too, are of a questionable cha-
racter, for who that knows New South \Vales or
Qieensland would consider their security sufficient.
With India, however, an experiment is to be tried
which will furnish a test to Mr. BOUTWELL. The
Secretary of State for India has been informed by
telegram that the Government propose to discharge
a Five per Cent. Loan on the 31st of next March,
allowing the proprietors the option of transferring
their notes into a new loan bearing four and a half
per cent., and running for 15 years, notices of
transfer to be received at the Bank of England
from the Ist to the 15th February. We grant that
the difference is great between a five, and a six per
cent. loan ; but the real question for an investor is
whether the United States or British India suppli, s
the better security. If Americans wished to bairn
what the talk on repudiation and the eishonest aci
of some States have done for their credit, they
have only to contrast the price of a Federal loan
with an Indian loan on the London market. In-
dian 5 per Cents. payable in London are 112, Four
per Cents. more than 1001, while even the Rupee
p tper till this announcement, yielding 5 per cent.,
payable in India; was 106.. Here we have 4 per
Cents., with the guarantee of the Indian Govern-
ment only, but payable in London, over par, and
the Indian Government believes it can place an
Indian loan at par, yielding 41 per cent., principal
and interest being payable in Calcutta. This cer-
tainly is encouraging to Mr. BOUTWELL, for v. hat
man, not profoundly ignorant of both countries, can
believe that the-security of India is not inferior to
that of the United States ? As regards the ability
to pay, the Union stands foremost of all nations,
proving the fact by that most indisputable of all
arguments, iu paying the principal of the debt at
the period of the greatest depression, immediately on
the close of an exhausting war. It is not the abi-
lity of the Union that is doubted, but its honesty, its
honesty, too, being doubted from the acts of some
States, as well as the taint communicated to a coun-
try by the unchecked career of such men as FISK,
GOULD, and Co. It is in vain to endeavour to
separate, when discussing the subject with English-
men, the proceedings of the Supreme Court of New
York with that of the Supreme Court of the United
States. They see in the one only a grander develop-
ment of the other, and know nothing of the essential
difference. In the same way the proceedings that
wrecked the Erie, and the Atlantic and Great West.
ern, extend to all United States investments; for
in large monetary transactions this fact should
never be overlooked, that it is the money of
numbers which makes up the grand total and
enables the one financial house to do the whole busi-
ness. Therefore it is the general opinion, however
ignorant or unjust, which makes or mars the loan ;
and, however honourable, as always has been the
course of the Federal Government, the conduct of
individual States (which it cannot control) endea-
vouring to escape the burden of their obliga-
tions, will reflect injuriously upon it. India is of
all countries held by the most insecure tenure.
There, an alien race rules over an immense popula-
tion, subject to constant wars, and forced to main-
tain a supremacy at sea as a necessityof the situa-
tion. No security can be really good not based on
the willingness of the people for whom the money
was raised to refund it. The overthrow of ti
British Government in India weld wi. 0
Indian loans; ti ote t Foe
ish, u, Egyp. . I/I

i{•

have the squie it

the British Coloni,s, or proi:

Germany, and certainly [JOc with the
The difference is this : that the Government ea:.
be wiped out, but the people cannot ; hence the dif-
ference to the investor, whether he is lending only
to a Government or to a people. Essentially is this
difference to be found between the loans to India
and to the United States, making those to the latter
infinitely superior. It is a singular fact, and one
that ought to he brought to the atrention or VA. i;
vestor, that the very discussion on
has so injured`, he f_r,dit ot I :!7“;1,..6,
had it been under: toad, have raisc.ti ae,-1

the reason is connected wan our foregoing remark.
If there be truth in ;Oka_ we say, that-a capitalist
ought to lend to a people rather than to a Govern-
ment, be will see the- importance that the whole
subject of the loan should have been discussed and
the national course decided on by the people. The
difficulty of the lender is to learn whether the
people are parties to the loan. In war, the Repre-
sentatives or the Executive may have to borrow at
once, and although the people are responsible for
the agents they elect, what the discussion in
the United States has done is this : it has irre-
vocably fixed on the citizens of the Republic the
National Debt as repayable, principal and inte-
rest, in coin. Therefore it has conferred a better
security than that given to the Bonds of any other
nation. The Supreme Court of the United States
has just ruled, with reference to taxation of the
National Banks, that neither the currency nor the
national bonds are liable to taxation, and that the
national bonds are payable in coin, and bearing
coin interest. Thus the discussion in the United
States has extracted from the PRESIDENT, the Fede-
ral Legislature, the people, and the Supreme Court,
the expression of one opinion, and if this does not
fix the debt on the shoulders of the people, we do
not know what can. The closer the subject is in-
vesti gated, the better will appear the security ef
the United States Bond?, yet we believe it.jo be
more than doubtful whether Secretary Bo2TIVELL
can float the proposed loan. What be has to learn is
the gross ignorance of the Uhited States prevail-
iug in Feigland, th: only country where the loan
could float. It was but the other day a geneeman
of large means, educated at Oxford, and connected
with a high oflietil in America, asked us, " What are
Five-Twenties ?" It was not that a mere explana-
tion of the term was required, but that the words
conveyed no'idea to his mind. The time will come
when U.S. loans at four and a half per cent. will be
immediately taken in England, hut our impres-
sion is that Mr. BOUTIVELL is now in advance
of the time, and that he must be prepared for
failure.