Savannah morning news. [volume] (Savannah) 1868-1887, 1881-03-21
OUR WASHINGTON LETTER.
The Financial Policy OF the Garfield
Administration The Maturing
Five Per Cent. Renda-E fleet of
REr. BaVardss Amendment.

WASHINGTON, March lS.-A good deal or In
terest is manifested in regard to the policy
that will be adopted by Secretary Window in
dealing with the six hundred and odd millions
of five and six per cent. bonds which will be-
come redeemable between now and July 1st
1t is known that there remains an unissued
balance Of one hundred and four millions of
the bonds authorized by the funding act of
1870. This amount viii be available on the lst
of May, at which time the per cent. bonds be-
come redeemable and the bonds may be issued
either as ~ per cents. redeemabIe after July
Ist 1891, or as 4 per cents. redeemsble after
September 1st 1907.
The impression seems to be general that the
bonds will be issued as four per cents, and this
impression is probably based upon the fact
that SUCH bonds would carry o slightly lower
rate of interest than the four and half per
cents. But there are grounds for saying the
department is seriously considering the quas-
ton and, it is believed that, after carefully
weighing the respective advantages possessed d
by the two classes, decision In favor OF the
four and a half per cents. may not improba-
bly, be arrived at. In the first place it will not
be forgotten that the various votes had in Con-
greSs gp upon the the recent funding pill
for short bond. In both houses
the majorities In favor of q short option of re-
deemability were large, and the opinion was
had been mace by the Congress which author
lied the per cent. thirty year bond. 1t u.s.
perhaps q sufficient answer to this last men
toned opinion to recall the fact that in 1870
4 per cent. bond for short period would have
met with little favor from the investing
classes; but, in justification of the present
opinion OF Congress, 1t will readily be admitted
that our credit has not only greatly improved,
but that we have entered upon an era OF debt
paying in lieu of debt creating.
In paying of the debt during the past few
years the Treasury Department has been under
the necessity of buying its own bonds at O pre-
MUM, owing to the fact that the various pc
riods Of redsemability has been fixed at dates
too far in the future. and the public has at
times shown itself restive under these large
payments on account Of premiums; there
fore Congress wisely provided In the bill re
Gently vetoed that the option of redeema-
bility should fall i'm at the expiration Of one
year for one class of the new securities, and
In five years For the other. 1t Is believed that
these considerations will outweigh with the
Secretary OF the Treasury the apparent ad-
vantage to be gained by issuing the bonds
advantage pertains to the 4 per cents
seems doubtful when it is considered that
when once issued they must continue to bear
interest at that rate for upwards of ttUsnty-si1
years, except, of course, such as are bought
in from time to time by the Treasury at such
rates as the market establishes The interest
payments alone to the year 1907, prior to
which year the government could not redeem
the bonds except by the consent of the owners
would amount to about one hundred and four
millions of d0lIdrsP For like amount Of 4B.per
cents, on the contrary, the interest payments
to the date OF redeemability would
reach but forty five millions. In view of these
considerations, and especially of the fact that
our policy of regular and rapid payments
of the principal of the debt is likely to be con-
tinued. there seems to be little doubt that the
shorter bond is the more preferable. Another
fact is that the AZ per cents can be sold at a
price which is slightly more favorable for the
government than that which could be realized
for the 4s. The present net prices of the 4s
and AS are, respectively, 112 $500 and
Ill S3-10o. Computations based upon these
net prices show rate OF interest
yield to the investor, il carried to maturity,
of 3-29 and 320 per cent. per annum regpec-
lively, and this shows that apart from the de-
sirableness OF as short an option of redeema-
bility possible, the ~ per cents are slightly
more advantageous to the government IN point
Of annual interest cost.
1t is probable that one hundred millions of
the AZ per cents could now be sold for l11M or
1f14 and accrued interest, at which price the
actual interest cost to the government would
be less than 313 per cent. per annum; in other
words, 1t would be equivalent to placing a loan
st that rate.
Some misapprehension exists as to the effect
OF what is called the Bayard amendment to one
Of the appropriation bills. This amendment
does not authorize the employment OF any
portion OF the Treasury reserve fund In the re-
dempti0n OF bonds, but simply grants authori-
ty for the use OF any surplus moneys that may
accrue IOF tn6 FetiFemenJ OF United States
bonds In excess Of the requirements of the
sinking fund. Such transactions have been
heretofore made, and for very large amounts
In the aggregate without any expressed
authority of law. There viii be no
depletion of the reserve fund for
any such purpose Secretary Sherman, who
accumulated that fund under the authority of
the resumption act. long ago informed COM
mittee OF Congress that he did not regard that
fund as coming within the scope of ''money 10
the Treasury not otherwise appropriated"
He declared that IL was appropriated being
dedicated to q specific purpose to-wit: the re-
demption in coin, on demand, Of United States
notes, Ii Is not at all likely that Secretary
Sherman's policy in regard to the necessity Of
maintaining specie payments by means of this
fund will be departed from in the slightest par.
ticular.
The surplus revenues viii, however, be
punctually applied 20 the retirement of inter-
est-beaFing obligations PoroxAc.