Evening times-Republican. [volume] (Marshalltown, Iowa) 1890-1923, 1903-03-27
R[FUND|NG TIE DEBT
Secretary Shaws Action of the
Greatest Importance to the
Country
BANK CIRCULATION
The Banks Will Be Able to Exchange
Short Term Bonds for Those Run
ming Twenty Seven Years-Will Be
Great Aid and Probably Proven.
Threatened strinsency.

Il
Washington, March 27.-The an
nouncement Thursday that the secre-
tary of the treasury had determined tC
| take up the work of refunding the ma
1 tional debt came with Il great deal OF
interest in financial circles. The re-
| funding operations We're suspended by
Secretary Gage for reasons not entire
| ly satisfactory at that time. Shaw has
decided to take up the work, after full
consultation with the financial authori-
ties of New York and elsewhere. The
result of this will be to get rid of a
large percentage of the higher priced
government bonds and substitute them
for per cent bonds, put on the market
at a premium of per cent and which
are never likely TO get far above par.
Furthermore. under the existing law,
the circulation on the 2 per cent bonds
is taxed only at the rate of half a cent
a year, whereas all other circulation
|
The refunding of the 3 and per cent
loans. which are due in 1908 and 1907,
will therefore add largely to the avail
able supply of government bonds and
thus furnish an inducement to the nat
ional banks to increase their circula-
ton.
The ability of the treasury to loan
more money to the national banks un-
der the present law has practically ter
minated, first because the available
cash balance is not any too large, and.
secondly, because the supply of govern
ment bonds is so small there is little
more inducement for the banks to re-
ceive government deposits than to is
sue circulation.
II the secretary's plans are carried
out it will put into the hands of the
banks for basis for government de-
posits no less sum than $S30.000.000
of government bonds. In this way
1t ought to be easy for the big national
banks to issue enough circulation to
provide money for moving the crops
next fall without producing any UNI
usual stringency In the money market.
There now are outstanding total
of about $233,0O0.O0O per cent bonds,
which are not redeemable until 1907,
and s97,OOO.000 3 per cent bonds. re-
deemable after Aug. l, 1908, these last
being all that are left of about twice
that amount originally issued to pay
the expenses of war with Spain.
The circular issued by the secretary
Of the treasury gives notice that h.
will exchange 2 per cent bonds payable.
thirty years from April 1, 1900, for
these short term 3 and per cent bonds
On the basis already established by law.
The refunding act of 1900 provided
that the outstanding bonds of 1907 and
1908 might be called in on a valuation
not greater than their worth to yield
an income of On per cent per annum.
Under this authority, Secretary Gage
exchanged 2 per cent bonds al par, but
nasmuch as they Immediately went to |
/ premium, Secretary Shaw proposes |
10 make the exchange on the basis of
per cent premium for the new bonds |
and valuation for the old bonds, as
figured out, to yield an income of IN |
ger cent per annum.
It is believed that the holders of these
ponds now outstanding will be only too
glad to exchange them for the new
. per cents on the basis indicated, be-
,ause in this way they give up govern
nent securities running only three and
our years for those which have still
wenty-seven years to run. Secretary
shaws circular explains that settle
nent will be reached on the usual terms
made for the accrued interest and sim
hot Ha Iafa OP Av,y.t1
When the refunding goes into operas
ion again, and the date when the
ponds are actually offered to the treas
Try.
The law itself provides an additional
Incentive because the bonds of the new
ssue having the highest numbers will
lie the first to be called for redemption
after 1880, so that the earlier Il bend Is
purchased. the longer it has to run.
For the benefit of the general public
should be explained carefully that
he prospective issue by the secretary
# the treasury of about $330,000,000
worth of 2 per cent government bonds
ices not mean a bond sale at all. None
# these 2 per cent bonds can be sold
Inder any circumstances. They must 1
re issued solely in exchange for the
government bonds at higher rate OF
interest. The public debt of the United
states is neither increased or dimin
shed, but the annual interest charge
which the people have to pay. will of
curse, be greatly reduced. II
There are now outstanding $446.O00.-
90 of these 2 per cent bonds, which
we're issued in exchange for governs
nent securities paying much higher
ate. If the secretary succeeds in put
ing out all the bonds he has offered
n the circular today, there will be is
ued total of about S775.00O,O00 in !
hese low rate securities out of only
GA. Sal $50, which represents the ag
regate interest bearing debt of the
'nited States. il
This is an extraordinary financial T,
howing. and it is also worthy of note
hat the Cnited States today is able
0 put out its per cent bonds readily /,
or refunding purposes at premium
f per cent as offered by the secre-
airy of the treasury. whereas British {
onsois, paying the same rate of in (
crest, are not worth as much.
1t is the opinion of the experts at the
reasury that the refunding operations
hus begun again certainly will induce
he national banks to take out circu-
alton in large quantities and without
clay, because they can do this profit
l>lx, TI,a nycbnrUp nf the Z and mar I