The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1898-12-07
rights and privileges of the national bank
ing system might merit approval"
NEW BOND ISSUE.
Successful Floating of the LOan-Dan-
ger in Fixing Rate of Interest.

NEW BOND ISSUE.
Successful Floating of the LOan-Dan-
ger in Fixing Rate of Interest.
Regarding the war bond issue the secre-
tary says: Under the caption of Loans
and Currency on Page "a of this report.
will be found particulars lin the way of in
formaton) as to the issue of $500 000, 900 8
per cent. bonds, authorized by the act of
June Is, 1898. When the bill was reported
which after amendment became the law
some doubt was expressed by those best
acquainted with such matters whether bonds
bearing so low a rate as per cent. could
be sold except at a discount. There were
substantial facts cited in support of such
opinion. The then recent declaration of war
with Spain had disturbed the always sensi-
tive conditions of trade and finance. The
morbidly timid along our eastern and
northern coast were in a state of more or
less alarm. The simpler-minded depositors
in savings banks made Withdrawals of their
funds; the commercial banks in the larger
cities sympathetically suffered through loss
of cash reserves to savings Institutions The
rate of interest rose; the price of securities
declined Even old issues of United States
bonds fell to point where they would yield
to the investor from 81 to 325 per cent. per
annum upon an investment then made. Such
was the condition of the financial market in
the latter part of April and the earlier part
Of May last.
There was another factor, however,
which operated to secure a successful nego-
tiation Of the now loan at per cent, which
it is well to note. That factor was the self
interest of national banks. These institu-
tions as a whole then enjoyed an unavailed-
of privilege under the law to issue nearly
four hundred millions in circulating notes.
True, the condition precedent to the exer-
else OF such privilege was the deposit of
United States bonds, the price of which in
the public market had SO advanced as to
destroy the motive of profit for the exercise
of the privilege. Owing to the feature of
the national banking act which restricted
the issue Of circulating notes to 80 per cent
of the face of the bonds deposited as Sc
curity, q per cent. interest bond at par
when used for the purpose indicated, yields
better returns to the banks than or per
cent. bonds at the rate Of premium then or
now prevailing. 1t is demonstrated that the
per cent. bonds at par would afford to
national banks the means of obtaining
through circulating notes profit of SUBJ
stantially IA per cent. on the amount in
N6Sleu. IHaL ILLS pTOll WOulu 1uIIllSH d
sufficient motive for the banks as a whole to
take up 500, 900 600 in bonds need not be
argued; it is self-evident. These conditions
practically insured the successful negotia-
ton at par Of the loan at the rate of 3 per
cent. This was quickly perceived in the
money market, and joined to easier condi-
tons in general finances, it operated to es-
tablish a prospective premium on the an
foin cd OF fba
the act was approved, the whole issue Of
$780, 100000 could have been sold at a pre-
MUM of probably 21a per cent. This could
hardly have been foreseen, and it was evl-
IDENTIFY the opinion of Congress also that a
wide distribution of the obligations among
the people, at the uniform price of par, was
of more value to public interest than the
realization of possible bonus from small
groups Of professional dealers. The dis
eliminating mandate of the law was thus
expressed:
1.-THE bonds authorized by this section
shall be first offered at par as a popular
loan, under such regulations, prescribed by
the secretary of the treasury as will give
States to participate in the subscriptions to
such loan, and in allotting said bonds the
several subscriptions OF individuals shall be
first accepted and the subscriptions for the
lowest amounts shall be first allotted.
SUBSCRIPTIONS.
"Obedient to the fair spirit Of the law, the
Treasury Department sought by every
means to extend the opportunity for sub
scription to all the people. Every newspaper
in the United States was supplied with in
teresting and instructive information rela-
tive to the issue, which, with few excep-
lions, was patriotically and free of charge
prominently displayed. Blank forms for SUB
scriptions, with circulars of information
were supplied to more than 1900 money or
der postoffices, every express Office and all
the banks. A period of thirty-one days was
allowed for the receipt of subscriptions A
summary of subscriptions received, CLASH
fed as to amounts, is here given:
-Snhscrinti ions for. S,nn nnh Incs