New-York tribune., 1881-03-23
4 POINT IN REFUNDING.

The main object of those who hold that an
extra session of Congress is necessary Is To
proyide for refunding the and d per cent
bonds which become redeemable this summer.
In financial circles it is well known that some
pr0yIsiOn for these bonds is absolutely ntces-
sary. When bonds bear nOInOre coupons ana
there is no provision tor paying interest OH
them hereafter, there is the highest evidence
that it is the intention of the Government 10
nav the principal Failure to do so would be
se,iously injurious to the public credit. Hence,
in oil discussions in regard to Iefunding 1t has
been held necessary, not only to pass bill, but
to pass such a bill that funds shall without
doubt be forthcoming to meet the maturing
bonds. ANY measure that might perhaps fail to
secure the needed money has been held not only
unwise, but positively inadmissbIe. The public
credit requires not merely the Oifer or DOrds
upon which some persons think money ought 10
be raised, but the actual raising or money
Fortunately, there is no doubt that ample means
can be raised on very favorable terms. The
question is whether a per cent bond, for a
moderate term, Can not only be sold but after
ward maintained at par, and If so, by what
means. II not, it is reasonably certain that
3lo ner cent bond can he both sold aud main
tained at par.
In the present state of the money market
with the ruling rate OF interest unusually low
throughout the commercial world, theIe are
still many who doubt whether per cent bond
can be largely sold unless steps are taken to
make that bond more available than it would
he under present legislation as basis for Ma
tional bank circulation. British cOnsols arc
selling at par, but the accrued interest makes
the bond proper worth less than par, and the
copsols are virtually perpetual bond France
has lust placed large per cent loan, also per-
petua but at price less than 30 cents on the
dollar. 1t has Teen the established policy of
the United States to borrow no money at less
| than 100 cents on the dollar. The per cents
| of 1907 sell at 1872, at which price the pur-
| chaser would receive during the twenty-six
years only 1925 per cent yearly on his invest
ment But II is not now thought desirable to
negotiate another large loan for as long term
| as twenty five years, aud shorter bond would
| command a lower price. Moreover, if taken at
| par in these times, such bond might fall below
par when money commands higher interest.
Asall know, dangerous monetary disturbances
would be caused If any large class OF United
| States bonds should sink below par. If per
cents should be largely sold, they would enter
into the deposits of banks, and into the reserves
| of savings banks, insurance and trust COM
panies. so that it would become a matter OF
vital importance to the country that their
market value shonld not decline. The price OF
other bonds is sustained, and will be, by the
fact that the National banks can realize mod
crate profit upon circulation, even when that
circulation is secured by per cent bonds only,
and while the banks have their present taxes to
pay. But, those taxes remaining, the banks
would not End circulation profitable, if secured
by per cent bonds only. Therefore, they
would not buy thom freely, and take the risk OF
their depreciation. The most powerful OF all
sustaining forces being thus withdrawn from
that class of bonds, q moderate selling move
ment by holders would at any time be likely to
cause the price to fall below par.
But if the Government should throw off the
tax on all circulation based OIL per cent bonds,
the whole situation would be changed at once.
Then every National bank would find untaxed
circulation based on 3 per cents precisely as
profitable as the taxed circulation based on d