The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1898-12-07

been taken of public necessities by inter
medaries who made unfair proi1t between
the government and the people, they hailed
with satisfaction this attempt 10 deal df-
rectly with the citizen. There was a great
moral value in this, difficult to estimate in
terms of money yet worthy of consideration
in the mind of the statesman Was the OPP
Grafton advantageous, also, from an eco
nomic standpoint? AS already indicated, a
bonus of perhaps five millions could have
been secured by Offering the loan to competi-
tive bidding. That was the sacrifice made
in order to place the loan directly with the
people at the uniform price of par.
OWNERSHIP CONCENTRATING.
1.-THE act now under consideration was no
doubt Influenced by the theory, If not def
nitely shaped on it, that the dissemination
of government securities among the people
would attach the holders thereof by closer
bonds of sympathy to the government, and
secure from all such more jealous watch
fulness public affairs; for it is this
kind Of watchful interest which best Sc
cures the welfare and perpetuity of free
state. If this motive operated in the legls-
latlVe councils, its practical value was not
so permanent as could be hoped for. AS be-
lore stated, allotmentS were made to less
than 32o,OOO persons, aggregating $780, 600
From the moment the bonds were issued
until the present time a movement of con-
centration has been observable. At this
time $7 ,36l 600, the original holdings of
about 10000 subscribers, have passed into
corporations. To this extent the moral
value OF, private ownership has already dis
appeared.
1.-THE loan was promptly taken; in fact, it
was subscribed for many times over. From
this 1t may be assumed that similar results
would follow on future occasions. 1t will
not do to rest securely on such an asSump-
ton. In fixing the conditions of a proposed
bond as to time and rate of interest, Con-
gress is in essence formulating g. proposal
The pubic-the> investor-iS yet to deter
mine whether or not the proposal is salts
factory. Congress cannot exactly hit the
mark in advance. II it determines that the
proposed bond shall not be sold at less than
par, 1t must so fix the rate of interest and
time OF payment as to make the new Secur-
1ty somewhat more attractive than out
standing issues-price being considered
1t must also make allowance for disturb
ance in the previous market equilibrium A
large addition to a previous supply, other
things being the same, tends to reduce the
price, whether of commodities or securities.
l repeat that in legislative act 1t is i'm
possible to forecast and exactly determine
these ruling factors. Economically consid-
cred, the part of wisdom would seem to be
to provide a sufficient margin OF new advan-
tageS In interest, or otherwise, to float the
loan successfully, and then allow the mar
ket, by fair competition, to reduce the mar
gin thus provided to the narroWest limit
The new bonds were properly fixed at per
cent Strict business logic dictated that they
should enter into competition with the older
issues; 1T was the only way by which their
true relative value could be determined In
stead of this, the whole issue was offered to
the subscribing public at the uniform price
of par. Nevertheless, the experiment may
be considered a justifable one, and it worked
out in way to strengthen the national
credit. From it, however, useful suggestion
may be derived.
SUBJECT TO DANGER
'It is evident that an attempt by Con-
gress to fix the proper rate of interest to
justify an offer of the governments oblga-
tions at par will always be subject to one
of two dangers
'First-If the rate of interest be fixed too
IoW-tlme and circumstances being consid-
ered-the loan may fail, with the conse-
quence OF serious arrangement to rhe LtSo.s-
ury; or
Second-If the rate of interest be fixed
too high, and the issue offered at par, while
1t will be eagerly taken, the result may be
a great economic waste to the treasury.
1.-THE considerations thus presented lead to
the conclusion that while the features in
tended to make the loan a popular one
should be preserved, provision should also be
made to secure to the government the high
est value attainable under the fair opera
ton OF the popular-lOan principle. 1t is but
commonplace to alege that in it's relation
to business affairs the government should
have strict regard to the principles which
everywhere and elsewhere obtain, /. e., in
the purchase of material and supplies re-
qured for public use, it should-aS it does
seek the lowest price for the same goods;
and, conversely, ir. the sale of what it may
have to SELL whether of material of its
own interest bearing obligations, it should
also seek to realize the highest attainable
price Should eXigencieS ariSe-not now OBJ
Servable-under which further issues under
the act of June IL should be made neces-
sary, it would seem wise to modify in some
way the mandatory provision which would
now require an offer of the same to the peo-
pie at par. With q market premium of
per cent now established. and conditions
remaining the same, such a proceeding
would involve an inexcusable economic
waste. On the other hand. as before noted,
il is not to be expected that previous mar
fully a
addition to the market supply. believe
that with some extension of discretionary
power to the administrative department of
the government in this connection, the
popular features OF the present act can be
fully preserved, while the risk of uTdue sac
rifice in maintaining that valuable principle
may be obvated.
FINDER the provisions of the act one-tenth
of J. per cent. of the amount of the bonds
authorized was allowed to pay the ex-
pense of preparing advertising, and shipping
the same The records show an average
cost to the government OF per cent as the
expense Of negotiating and distributing Sc
curities in the past The experiment proves
that the allowance Of one-tenth for expenses
in connection with. the late issue was in
tWentieths, of 1 per cent, the total cost rose
to thirty-fve hundredths of per cent. dis
tributed follows:
Compensation of temporary clerks, mes
Engraving and plate printing s., sls 80
FaRp iqI oad PRINTING blank forms i2sS7
Typawriting machines, purchase and
r LeJ 81 fans eiectric lighting wirin.
ETC., in city postoffce building.... 2.056.4 3
Tables and chairs bought and rented... l,l5469
Miscellaneous 3s43 OS
Total s292. $50 %
1.-The express charges for carrying the
bonds, it is estimated, will amount TO
ready having been audited and approved,
but which do not appear in tho above