Public ledger. [volume] (Memphis, Tenn.) 1865-1893, 1877-08-11
e. WHITMORE,
Publisher and Proprietor.
"PIacing Loans. {"

W hNlA q SOfNAhiiAShO heRo w bOl
row money, the amount is usually
too large to be raised in the way
adopted by men or business firms.
That way would be to go to capi-
talist, and raise a loan on the terms
he proposed. There are two rea-
sons why with governments this
course cannot be taken. The first,
which is all-suflicient, is that no
capitalist would have enough money
to lend ; but even if a Cresus
could be found, it is for the interest
of governments to cause competi-
tion, so as to get as much money
for as little interest as possible.
Several other methods are adopt
ed, which we will briefly describe.
When the amount to be borrowed
is not very large, bids are some
times called for. If the State of
New York wishes to borrow ten
million dollars, this would be the
best and cheapest way. The public
would be invited to bid for five
per- cent bonds, saying how many
they would buy and what premium
they would pay. The loan would
be awarded to those who offered the
largest premium, until the full
amount was sold.
Another way is by popular sub.
scriptions. This is always adopted
by the French government. Sup
pose it is necessary to raise 1,000,-
100000 francs-$200,0 The
rate of interest is made low, and
the bonds are sold at discount.
The public would be asked, for ex-
ample, to subscribe for three per
cent. rentes at 20 francs on the 100.
OF course, in order to raise 1,000,-
100000 francs, the government
must issue bonds to the amount Of
LAPS, $4,000 francs, and must pay
three per cent. interest on the
whole, or nearly $4,000, 900, which
would be Al per cent. on the amount
it actually received. 1t almost al
ways happens in France that many
times the amount asked for is
subscribed, and each subscriber is
allowed to take only fixed pro-
portion Of the sum he asked for.
The manner in which our 7-30
loan was "placed during the war
was a modification of this plan.
I'VE did not raise the loan all at
once, as is done in France; but we
allowed the public to subscribe for
all it would take at par in green
backs, and whenever it suited the
people to take them; and we never
got too much for our purposes.
Still another way is to employ
eminent bankers, and their stand
ing in the financial world. UusuaIly
only one clearinghouse is engaged
in the work, but the process is the
same as when an association, or
syndicate of bankers, undertake
the loan-such as that which is
now reGunding our own national
debt.
These bankers are always men
having a very large capital Of their
own, and of the highest standing
and reputation for financial skill.
The government that is to borrow,
first decides at what rate it is will
ling to issue its bonds, and then
agrees to sell them to these bankers
at that rate. Sometimes Il contract
is made for the whole sum, at other
times for Il part, with the privilege
of taking more; and again the
bankers only agree to dispose of
what they can. But in any case,
they become to . certain extent
indorsers of the bonds. That is TO
say, when they ask the public to
purchase them, they are understood
J to express the opinion that the
! interest and principal of the bonds
will be paid.
The choice between these meth
! ods is a matter of much impor'
tance. Neither is absolutely tht
! best, or even better than any othel
J one method. 1t is certain that thu
9 popular subscription works with tn
. best results in France; and it /
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