The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1873-01-25
HIr. Boutwell's Funding Policy and
tho Now Syndicate.


Boutwells plan for funding the debt, after
having taken vast amount of evidence on
the subject, and Congress not being likely to
interfere, the Secretary Mas deemed this an
approval, virtually, of his operations with and
through the Syndicate. Properly enough
therefore, he has proceeded to carry out the
scheme to the extent of converting the remain
inc three hundred millions of fve-twenties ont
| Of the five hundred millions that were to be
converted into new FIVE per cents, in accord
ance with the Funding act of Congress,
through an agency similar to that which he
employed before for the conversion Of the
first portion of this part of the debt The
operation is pretty well understood, as it has
been fully discussed in the press and Congress
Jay Cooke 4 Co. were the Syndicate engaged,
as is known, to dispose of the one hundred
and thirty-fve millions out of the two
hundred millions of new five per cents,
the balance of sixty-fve millions having been
taken by the national banks, or, we might say,
perhaps, having been forced by the govern
ment upon them. In the fresh arrangement
for placing the three hundred millions other
parties have been engaged to share the bust
ness and profits with Jay Cooke & Co. These
are Morton, Bliss Il Co., and Drexel, Morgan
& Co. The Jay Cooke party claim to have
the Rothschilds with them, and it is said the
others represent Barring Brothers and other
firms in Europe. The two parties are to have
one hundred and fifty millions each to manipu-
late. No more respectable names or efficient
| c%ob oh ov,tu ha
the business. So far there is nothing OBJ
jectonable. 1t is natural that these bankers
should advocate the Syndicate plan and make
what money they can in the regular course of
business. If there be any blame for adopting
this costly mode of funding the debt it rests
with the Secretary of the Treasury.
1t will be well, perhaps, to revert TO the
Funding act of Congress. Fifteen hun
dred millions Of the fve-twenties, SIX per
cents, were to be converted, withouthny in
crease of the debt into three classes Of bonds
bearing five, four and half and four per cent
interest Five hundred millions Of these
were to be converted into fives, three hundred
millions into four and haifs and seven hun
dred millions into tours. Mr. Boutwell, led
Congress to believe he could fund the debt on
these terms. He found, however that that
was not as easy to do as he had imagined.
Either on account of the difficulty, or because
he wanted to favor certain parties with a
profitable job, he employed the Jay
Cooke Syndicate Congress had limited
the expenses including commission, of
converting the debt to one-half of
one per cent not imagining, We suppose, that
any additional cost would or ebuld be incurred
But Mr.. Boutwell, discovered q way Of getting
round the law without dirttly violating it.
In addition to the one-half of one per cent
allowed by Congress, which he granted the
Syndicate as commission, he gave three
months interest on the tonds upon the as
sumption that this periodof time was neces-
sary to effect the negotiation or change of Sc
curities, thus making tie commission really
one and three-quarters PER cent But besides
that compensation the Syndicate, while draw
ing three months interest on the bonds, had
the use of a hundred and thirty-fve millions
for three months. What was made out of that
weS,do not know. The same operation is to be
repeated for placing the remaining three hun
dred millions of five per cents by the new
Syndicate. The actual cost, therefore, to
the government, ( reckoning the interest
given on the five per cent bonds, will
be FIVE millions two hundred and
fifty thousand dollars. If we reckon the
interest on the six per cents it would amount
to six millions Whether all or the g,eater
part of this will be clear profit to Syndicate
must depend upon the state of the market and
the skill of the agency. The same may be
said as to the use of this vast sum for three
months.
We admit that it is desirable to convert the
present debt into one bearing lower rate Of
interest, even at the cost Of one and three
quarters per cent, if that be necessary, for the
saving Of one per cent year will reduce the
burdens of the people. But there are other
considerations not to be lost sight of. First,
then, could not the five or six millions given
to the Syndicate, or the greater part of it, be
saved by the Treasury Department transactng
its own business? Unless the object be to
force the conversion of our securities in the
market, which would be very questionable
policy, we cannot see why the Secretary of the
Treasury could not use all the means of adver-
tisement and agencies in different parts Of
this country and the world as well as the
Syndicate and that without mourning such q
cost. The greater part of people who desire
to invest in United States securities would
prefer, probably, to deal directly with the
Treasury Department The utmost cost, then,
would hardly amount to third of that paid
to the Syndicate. If the whole fifteen hundred
millions should be turned over to this agency
for conversion the unnecessary loss to the
country will not be less than ten millions. Our
New York fnanciers would give Mr.. Boutwell,
n useful Lesson If he wOuld take II They will