Burlington weekly free press. [volume] (Burlington, Vt.) 1866-1928, 1880-01-23


lin the L. $ senate, January Is. lSso.l
Mn. President: The main question
about the further rcfunding OF that portion
of the public debt which soon becomes que
or redecmablc, is to determine the rate oil IN
tercst the future loan shall bear Ol course
the lowest rate at which the loan will lloat al
mar is the one that should he chosen. We
cannot decently offer the terms OF bank
rupt-thc alternative of this or no'hlng.
The difficulty seems to be that our present
per cents have risen to a small percentage
above par, but not SO much as TO make %
per cent equivalent to par. What eject
large amount of bonds suddenly thrown up
on the market at lower rate of interest
would have upon their current price Is some
what doubtful, but an increased supply
ordinarily brings some depression IN the
price of all commodities, and in tins case Il
like result could hardly he avoided. To tbs
pose of Il national loan at less tlan par anu
thus add to the aggregate OF the public debt
ia moi 10 he thought Of. To offer loan on
terms that our own people may refuse would
hardly seem more prudent. The value of
United States loan bearing rate of interest
less than per cent would appear to he
sufficiently tested by that OF the $50 per
cent loan, amountingto Sl3, 5oO,O 600 and run
ming so years, of the District OF Columbia,
where the United States government has not
only guaranteed the interest, but has also
pledged its faith to see that sinking fund is
provided for the gradual payment of the
principal. This has been done, which should
make the loan practically as good as any
loan of the general government can be, anu
vet it is selling to-day at much less than par,
or at ST. cents on the dollar, with hve
months of accrued interest, or Il per cent,
leaving it at So. cents. A loan at $40 ny
the main responsible party would naturally
bring less than loan at 3 65 per cent inter
| est. The additional obligation OF the DIS
| trict may not add much to the value OF
| United States securities, but it should not
diminish it much. The question remains
whether it would not be easier ut this time to
refund with bonds which will bring pre-
MUM by that much reducing public debt,
ana thus obtain financially all the advantage
| possible in a lower rate of interest. The
| lowest rate of interest that can he expected
| to hold our public securities at par year after
| wear, it appears to me. cannot bc much less
| than per cent All concessions now OBJ
tainablc below that rate would be secured
even though higher rate were to be nomn-
ally provided.
In offering any proposition by which the re-
| funding of that portion of thepublic debt bear
| ing 5 or 6 per cent interest is contemplated,
| il is proper to inquire as to whether or not
our refunding acts have operated advantage
| ousy and whether they may not lie susctp-
| tible of improvement. lnder the existing
laws our bonds could not be sold for less
than par, but J of per cent has been ap-
| propriated for expenses and orcomnlsslons.
The sales and exchanges lately effected have
amounted to $40, Sl5, $50, and the half of
cent on this sum would be SO, 10, 200 Is;
but the amount expended was only S2,59l,-
922 26 /; leaving unexpended, 81, 3Ol AZ.
| This. | believe is the first instance where
any considerable part of the per cent or OF
the of per cent appropriation has been
used and saved.
The whole of the per cent loan issued
since January l. 1873, was free for every
body who chose to take it. There has been
since no syndicate monopoly, but subscrip-
tions have been received at par and accrued
interest
The methods by which Great Britain OBJ
tanned loans at 3 per cent now forming the
bulk of her public debt, were the most Inn
provident feats of craftsmanship in the his
tory of that Government. Take one ex-
ample out of many. A loan of no less than
f36, 100000 (S1s0, 900, O0O) was bargained
for in 1915, where it was stipulated that
every subscriber of f100 (S500) should be
entitled to fl74 (ss70l of 3 per cent stock,
and fl0 $50 of per cent stock. Here
was an artificial capital of -fe4 $500 Great
ed and to be added to perpetual debt Tor
every f1OO (S500) advanced. There is high
British authority (McCulloch) fer stating
that this loan, without any doubt, might
have been procured by an addition OF / or
per cent to the interest without any increase
of the principal. The amount OF money
raised by Great Britain from 1893 to 1916 on
stock issued was 50, 600, $50, 900 (reckoning
S. to the pound but the stock actually
issued bearing per cent interest was 33 per
cent more, or SO, SS1 ,O0O 000 together with
frequent long annuties
| 1t must be borne in mind that loan of
$500, 100000, to run fifty years at 81 per
cent interest, would be far more expensive
to the country than the same loan At 4 per
cent for thirty years That is TO say, we
should be required to pay fourteen hundred
millions of interest on the 3. per cent loan,
instead of nine hundred and sixty millions
on the per cent loan. a long fifty-ycar
loan is thus soon stripped of all attractions.
The operations of refunding are all expos
ed to the broadest light, and leave record
at every step. The recent funding opera
tions have been accomplished in accordance
With LAWS nTsy il passed by CONGRESS
in accordance with the law passed in 1879.
The Secretary of the Treasuryis entitled to the
credit of executing these laws with skill and
good temper | am not here to praise HIM,
but | am willing to trust him with power 10
repeat his work.
IT'S EFFECT Upon THE NATIONAL BANKS.
1t may be argued, as there are about
5000, 000, 900 of the bonds rcdeemable In
1881 now held in the Treasury as security
for the national banks, that the banks, at
least, would be compelled to exchange that
amount on whatever terms Congress pleases
to prescribe. National banks are institutions
| for the public benefit, but the stockholders
cannot be expected to manage them at posi-
tive loss From time to time a considerable
number have surrendered their charters or
their circulation for the reason that the lat
| ter, being 80 per cent upon the amount OF
bonds deposited for security, and further
subject to reduction on account OF the re
serve required and taxes imposed, was no
longer scrviceable. But By per cent bond
deposited with the United States Treasurer as
security for the notchodcrs of national banks
would be heavy reduction of the security
now required. The notes of the national
banks should be kept secure beyond any
contingency, and if bonds of less value are
substituted a greater margin must be re-
quired.
The taxes, State and United States, paid
bv national banks in the States of New York,
OHIO, Tennessee, Illinois, Wisconsin, Kansas
and Nebraska, in 1878. were 3 per cent or
morc-considcrably more in New York and
in the cities of New York, Albany, Chicago
and Milwaukee they were 5 per cent or over.
| Subject to these restrictions and these heavy
/ taxes, if based upon bonds AT 3, per cent
| interest it is not improbable that u large
surrender of banking privileges would be
inevitable.
| GREAT BEITAIN'S ADVANTAGE CONSIDERED.
There is no doubt that at last the reputa-
ton won by the United States as Il debt-pay
ing Government assures to us.loanab!c funds
on better terms than are obtanable by any
other firsl-class political power, save that
which shares with us the representation OF
tue Anglo-Saxon race. If Great Britain has
u fractional advantage in the rate Of interest
paid, it arises
First-FrOm the capital accumulated III
| by-gone centuries, now confined TO the old
and narrow field of the sea grit islands
and
Second-To the idea OF perpetual non-pay-
ment of the principal, coupled with prompt
payment of the interest forever. The tradi-
tons of the American people are strongly
opposed TO the bondage of a perpetual debt,
and they mean TO have what we owe paid off
as it has been done in time past, within
reasonable time. If We were 10 consent to
issue loan redeemablc century hence, or
even a half century hence, possibly slightly
better terms might be secured; but not
enough better to compensate for the endu-
rance, through such IA protracted period OF
an inilcyiblc load Of taxation. The United
States propose to stop all intcrest-not by
reputation, but by an honest payment of
the principal.
TIE TRUE POLICY OF TIE UNITED STATES.
No loans have recently been negotiated by
any Government on the European continent
on better terms than We have just obtained.
To reach cur present standing of credit, the
task has been prolonged and difficult. To
maintain it will require perpetual vigilance.
(lur debt in 1StK VuS very llrpp III over