New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1881-11-23
HnT 10 Use THE SURPLUS.


Thus far the invitations of Secretary Folger
have brought scarcely any bonds into the
Treasury. To-day there will be another OPP
portunity to sell not exceeding S2,OOO,OOO OF
three and a half per cents OF any class, AT the
Sub Treasury here, at par and accrued interest
to date, hut the condition of the market is such
that the offers are generally expected to be
not much larger than those of the last or
the previous Wednesday. Though offers OF
SO. 900. 900 each week were invited, only
81 900 in all were received, and the announce
ment that any part of the Sl,OOOOOO would be
taken on Monday or Tuesday at the price named
has met with not single response. Thus II Is
evident that the Secretary, whenever it becomes
necessary for him to make an outlet for the
surplus revenue of the Treasury, will be obliged
TO consider other methods than those hitherto
adOptcd-by him.
AS vet there has been no occasion for especial
haste. The money market has been close, but
no serious stress has resulted from any accumu-
lation of surplus in the Treasury. In fact, had
there been such stress in the money market
prOper. bonds to some amount would doubtless
have been offered to the Treasury, though the
amount might not have been large enough to
rather from lack of confidence in securities OF
certain classes, and from the uneasiness pro-
duced by the bank failures elsewhere than
from any actual excess of legitimate demand
for money over supply in this market. The
Treasury, too, has occasion to increase ITS re-
serve to some extent on account OF the
SO. OO0, 900 of called bonds which will have to
be paid in December. If it has been able TO do
this at a time when the demands for Legitimate
business were not severely pressing, it will he
ip the better position to meet any needs that
may arise hereafter.
But this very difficulty which now com
Dels the Treasury to accumulate and hold
| $4,000, 900 against bonds which must be met
! in December, but which may not be presented
until the call natures, Illustrates one grave de-
| feet in the plan of calling bonds a method of
| disbursing a surplus in the Treasury. The
bonds called may or may not come i'll for three
| months, but the Treasury must be prepared to
| meet them at the maturity of the call, and
therefore this plan ties up the resources Of the
| Treasury to some extent, and debars it from
employing in immediate relief of the market
any surplus that it may receive. The expert
| ence Of the Treasury under recent calls justfes
an earnest rccomme ndatiOn that the Secretary
should consider some other method Ct using
any surplus that he may have.
| There is ant ther difficulty. Many OF the
three and half per cent bonds are used rs a
| basis for bank circulation. About 10 per cent
| Of them are so employed at this time, so that
calls for these bonds necessarily disturb the
currency issuing banks and affect the supply of
currency. Not a few Of the banks, upon finding
that their three and half per cent bonds have
been called, and rejecting that all the bonds of
that class may be disturbed by legislation this
winter conclude to retire their circulation tor
the present, wholly or in part, and to wait until
the policy of the Government as to its bonds
has been more clearly defined. In time of
possible monetary strngency it is no light dis
advantage that some banks are moved to sur
render circulation, while others are deferred
from increasing their circulation until existing
uncertainties have been removed.
1t has been repeatedly urged that the Treas
ury can avoid both of these difficult es by
purchasing bonds, instead of calling bonds.
Moreover, it Las been repeatedly shown that
the unprecedented double option IN favor of
the Government, which the three and half per
cents give, makes that class of bonds much
more advantageous to the Government than
any other form of securities outstanding. 1t
would pay the Government better, in the end, to
buy fixed date bonds at such price that the
investment would yield only per cent than
to retire three and a half per cent bonds which.
it has the right to pay at any time or to leave
outstanding for century, at its pleasure.
These considerations were urged upon Sccre-
tary Folger's predecessor, but, being compelled
TO act in some way at a time when the
President could not be fully consulted, Score.
tary Window naturally preferred to call three
and half per cents enough to answer the inn
mediate purpose. Secretary FOger has oppOr-
tunity now TO give the whole subject new con-
.sderation.
II is possible that some prompt and certain
disbursement of Treasury surplus may soon
become necessary. Monetary stringency,
though not serious as yet, may mt any time
become serious and pressing. Experience has
proved that the Treasury cannot rely upon
calls for bonds as a means OF making prompt
disbursements. 1t can make sure of discussing
definite sum. at definite time, in one way
only--by inviting offers to sell bonds OH given