The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1903-10-06
THE BOND ISSUE.
THE Official and CommercialsRecordl

|
The announcement from Washington
| that the new Hawaiian Territorial
bonds will be received by the United
States Treasury as security for deposits
| of Federal money and the issue of pa
per money by banks of issue, is one
of the greatest financial Importance.
The probability is, that while the an
nouncement correct in effect, it is
not entirely so in detail.
The security required to be deposited
in the Treasury, against which bank
notes are issued by the national banks,
is fixed by law, national bonds alone
being permitted. Not even state bonds
are allowed to be used for this purpose
1t does not, therefore appear to be pos
sible that Hawaiian bonds can, by
ruling of the Secretary of the Treas
ury, be permitted to be received as
security for this purpose.
There is no law however respecting
the security to be deposited to secure
deposits made in banks by the Treas
ury. In fact there is no law permit
ting deposits by the Treasury in bank.
1t is an act of discretion on the part
of the Secretary, which has been ex-
ercised whenever the Treasury held so
large a surplus as to embarrass the
financial situation by the large with
holding of money.
Until recently, national bonds only
We're permitted to be deposited as Sc
curity for this purpose,
The demand for national bonds as
security for note issues has been so
great, however, that there We're not
enough bonds available for both pur-
poses, and two years ago Secretary
Shaw made a ruling that State bonds
would also b. received as security for
deposits. He even proposed that GER
tain selected railroad bonds be also
accepted. 1t is doubtless under this
discretionary power that Secretary
Shaw has acted.
His action in accepting state bonds
was severely criticised at the time and
the railroad bond proposition was al
most universally opposed. The objec-
ton to state bonds is that in case of
population of the bonds or default
therein, the Treasury would have no
means of enforcing payment against
q sovereig-. state This danger is a
theoretical one only, so far as the more
rasrnncilN1a concerned, DuI
is a real one as to others, as several
states. Virginia notably, have repudiat-
ed bond issues. and are still under the
| stigma of being regulators.
The Territorial bonds do not fall
| within the reason of objection to state
| bonds, as, being subject to congress
| sional control, if Hawaii should ever
| attempt equalization, it is entirely
within the power of Congress to levy
a tax on the Territory and pay the
bonds therefrom.
| Even though the Territorial bonds
| are not allowed to be deposited as Sc
| curity for bank issues, the effect Will
be the same if they are accepted as
| security for deposits, as such accept
! ance will release an equal amount OF
| federal bonds which can then be used
for issue purposes.
The collateral uses to which federal
| bonds are allowed to be put have
| placed even two per cent. national
bonds at premium. The allowance OF
| a similar use for territorial five per
! cent bonds, with practically a I. ;
| Treasury endorsement back of them
| should yield a heavy premium
Hawaii is to be congratulated upon
this certificate of good character
which has been placed upon her bonds
] ~ the national government.