Los Angeles herald., 1908-01-30

I
its aid In every possible legal and
proper form.
Explains New Issue
Concerning the allotment of the new
i issues of securities he says:
Their character was such that 1t
was ANTICIPATED most of the subscrip-
tions would come from national banks;
| that no 2 per cent bonds afforded such
| privileges to national banks as a basis
of note circulation; that there were
strong inducements to the banks out
side private investors, who would find
in the bonds nothing more than the best
form of security paying only 2 per cent
per annum, and that 1t was expected
and this expectation was fulhlled-that
| the bonds would be used chiefly as a
basis for a national note circulation and
that such circulation would contribute
its share to relieving the acute
pressure of currency which existed
throughout the country.
Even If there had been no other
justification for limiting subscriptions
to national banks, this consideration
that the bonds would be used to meet
the pressure for currency--would in the
opinion OF the department have justi-
fed an absolute restriction to the
awards.
1.-The legal right of the department to
curities to such persons and banks and
in such amounts as it might see ut
can hardly be called in question in view
of the fact that the circular offering
the Panama bonds contained this dis
tinct provision:
1.-The department also reserves the
right to reject any and all bids, II
deemed to be to the interests OF the
United States to do So
HOhViouSlV a0 far the OffeT or Sc
curities was Influenced by the desire
to prevent distress in the money mar
ket, 1t would have failed of its purpose
If awards had been made even to bona
fide bidders which would have resulted
in large drafts upon the reserve money
of the banks. and would not have aid
ed in drawing money from private
boards. 1t was therefore decided in the
ccse of the Panama bonds to make no
awards to individuals in excess OF $l0,-
900. It was also decided to accept the
highest bids OF national banks for the
remainder of the issue, after these
minimum allotments to individuals.
Bonds Over Subscribed
1.-THE total bid for the Panama canal
bonds,'' continues the secretary,
amounted to 1920. 604,5S0. or more
than forty-four times the amount Of
fered. This fact, not heretofore an
nounced, would have stamped the loan
as an even more success than 1t was.
If all these bids could have been re-
garded as made in good faith by re-
sponsible parties
Examination of the bids showed,
however, that many of them were not
only speculative in character, but that
they were made In many cases for very
large amounts by those who were per-
sonally irresponsible and incapable of
having made even the smallest prelim-
mary payment Il such payment hao
been required.
when the awards were made, there
fore. the bonds were awarded without
hesitation to national banks in those
cases where the prices offered were
102 Is or higher and where the bid
appeared in other respects to be made
In good faith, and with full capacity
on the part of the bidder to execute
his contract.
1.-THE awards made to individuals
were for $4,000 or less, because such
bids had at least prina facie appear
ances of good>faith.
Even upon this basis the payments
made after the allotment of the bonds
showed that a considerable portion Of
these small bids were speculative"
There was less margin for speculation
in the case of per cent certificates
of one year did not allow for any con-
siderable premium without extinguish-
ing the amount OF interest. They were
issued at par and this made them i'm
mediately available, as 1t was not nee
essary to secure bids as in the case Of
Panama bonds.
They therefore afforded a convenient
means to the banks at once TO In
crease their circulation. For this rea-
son the secretary Of the treasury
thought proper to announce at an
early day that offers of the individuals
would no longer be received and 1t
was ultima tely decided to make no al
lotments except to national banks.
This decision was dictated by two con-
siderations--frst, the desire to stimu-
late the issue of bank note circulation
for a period which would relieve the
crisis; and second, the fact that the
announcement of the issue Of the new
securities had already 10 a large ex-
tent accomplished its intended purpose
and had made it unnecessary to issue
more than a fraction of the full
amount.
The issue of these securities was sus-
pended, therefore, before the date first
named for closing the receipt of SUBJ
scriptions, the total amount of the
subscriptions having reached $50, 959, 800.
The amount issued was only SIS 436,
500. as all of these We're registered and
issued to national banks with the un-
derstanding that they should be used
as basis for increasing their circula-
ton or to secure public deposits, they
are all on deposit with the treasurer
of the United States for these pur-
poses.
While the awards of per cent bonds
were made primarily to the highest
bidders among national banks, the eff
feet of the awards was to distribute the
bonds among banks in forty of the
forty-six states of the union.
Less Widely Distributed
The one-year certificates were dis
tributed less widely, but were taken
however by institutions in at least
eighteen states. The issue OF the Pan
anna bonds would have been required
in any case within short time to
meet the expenses OF construction of
the canal, and the secretary of the
treasury, ii is argued. could hardly
be held responsible for the effect of
such issues of volume of banknote cir
culation, whatever might be his opin-
ion as to the desirability of the infla-
| ton which might result.
Practically, therefore, the RESPONSE
bility resting upon him relates only to
the $15.435,500 in the one-year certifi-
Gates and will terminate with their
maturity and redemption on November
80 OF this year.
Concerning this distribution of public
moneys in banks throughout the coun-
try, the secretary says that this has