Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1890-12-15
PIrTsBURG. MONDAY, DEC. Is, 1890.
BONDS FOR BANKERS.

BONDS FOR BANKERS.
The conferences of the Secretary of the
Treasury and the financial leaders of the
Senate with the representatives of the New
York banking interests, have settled, as far
as the agreement of these authorities can,
that the Treasury is to be authorized to issue
two per cent bonds on which the banks can
increase their circulation, The other meas
ures for relieving the financial striDgency-
namely, the purchase of SIS, ,000, 600 of silver
bullion now in the market, and the issue of
notes upon it, together with permission to
the national banks to issue their notes up to
the par value of the United States bonds
held by them, are open to favorable consid-
Grafton. But the proposition that after the
Treasury has been paying off its bonds for
fifteen years, it shall now proceed to issue
new bond simply to serve special interest,
is alike bad principle and bad policy.
The DISPATCH, as all its readers know,
is warm supporter of the national banking
system. For the purpose of perpetuating
the benefits of that system, it has favored
the designation of other frst-class securities
as basis for circulation to take the place OF
the disappearing United States bonds. But
ii has al avs held as an axiom that the peo-
pie of the United States cannot be asked to
bear th burden Of debt perpetuated beyond
the time when the Treasury is able to pay
it, or of a new debt created simply for the
purpose of giving the national banks more
circulation. To let them use bonds already
in existence is a measure for the public ben
eft as we'll as the benefit of the banks; but to
create debt simply for their sake is taxing
the public to paw interest on the debt for
the benefit OF class.
1t is true that the bill of Senator Sherman,
which may be taken as the approved form
of this proposition, contemplates the use of
the S1OO, 900, 900 realized by the sole use of
the bonds in the purchase of the higher
priced bonds. But it cannot be taken for
granted that the sale and purchase can be
made on such equal terms that the Treasury
will reduce its debt by the conversion of the
senior issues exactly as much as it in
creases its debt by the new issue. 1t
is plain that if the money market will
afford demand for United States
2per cent bonds at par, there will be no one
desirous of selling other United States
bonds unless at a premium that will make
the interest less than 2 per cent With the
public knowledge that the Treasury is COM
PEELED to buy 500, ,OOO, 900 worth of 411Es or
Is after selling that amount of 2s, we may
be certain from past experience that the
Treasury will do well to get in the bonds
la L.
rate as high as ~ per cent But tor the
Treasury to borrow 500, 100000 at per
cent and then to turn around and invest the
money at Ia per cent means an annual
loss which will represent capital of about
$5,O000O0 to be paid by the people simply
for the benefit of the banks.
The same consideration of the practical
operation OF the conversion of older bonds
into . per cents raises decided doubt
whether the measure will at all meet the
the purpose of affording a security on which
mere bank circulation will be increased.
The sole reason why bank circulation has
doubled is that the premium on United
States bonds has become so high that the As
and AIS only yield an interest rate on the
investment necessary to purchase them, In the
neighborhood of per cent. But if the
banks find circulation improbable on the
basis of the present bonds, which are about
az per cent investment what inducement
will there be for them to take out circula-
ton on another issue which is no more than
a 3 per cent investment? The fact that bank
circulation has decreased ever since the
price of United States bonds made them less
than 21I per centinvestment might suggest
that this measure will not at all mend mat
tiers. 1t is certain at least that the banks
will not use the new issue unless it Yields q
better rate OF interest than the older issue at
current prices, and whatever increase there
is in the rate Of interest must of course come
out of the people.
The bad policy of such measure appears
most emphatically in the contrast it affords
in the attitude of legislation toward the
people and toward the financial classes. The
ruling powers in the financial world very
strongly condemn the current propositions
to increase the non-interest bearing circula-
tion; and in the wild form in which those
propositions are presented, the condemna-
tion is right. But what a contrast is afforded
when, for the interest of the monetary Gen.
ters, not only the circulation is to be in
creased, but the interest-bearing debt and
the cost to the public Treasury is to be in
creased with i'll Taking it in all its aspects
this proposition is about as ill-considered as
any which has ever received the approval of
the leading financial minds of the country.