Evening star. [volume] (Washington, D.C.) 1854-1972, 1908-06-22
BONDS WILL SOON BE DUE
May Be Extended for a Period of
Ten Years,
IMMENSE WORKING BALANCE
Large Sums on Deposit in National
Observation-Disclosures Of Banks
for Circulation.

Within the next few days Secretary
Cortelyou Is expected to take action for
the retirement Of nearly $64. 100000 Of out
standing 3 per cent bonds. issued June 13,
1893, to obtain funds for the Spanish
American war. They are redeemable after
August 1. although it is within the power
Of the Secretary OF the Treasury to con-
tinue them for another ten years. This
he will not do. because OF the interest
charge Of per cent. The Secretary will.
it is understood. do one of two things.
either redeem the bonds or refund them
into per cents. But for the peculiar f.
nancial system by which the United
States is practically compelled to MAIN
tain an interest-bearing debt that the ma
tional banks may have government bonds
as security for their circulation the bonds
would be promptly paid of and the in
terest charge stopped. When bonds be-
come scarce, however. at least the 2 per
cent bonds. which are preferred by ma
tional banks because of a smaller tax on
circulation based on them, banks resort
to reduction of circulation to obtain the
increasing prices arising from scarcity.
and the effect is not good in the business
world. When bonds are easily obtainable
and prices are down circulation is main
tanned.
Immense Amount Available.
The interest bearing debt of the coun-
try is now $S97 100000. But for the sys-
tenn requiring government bonds as a
basis for circulation the debt would be
$50 100000 to 500, 600, 900 less. The large
amount of public money now deposited in
national banks would have been used in
decreasing the debt as the bonds became
due instead of extending it for the bene-
fit of bank circulation.
Secretary Cortelyou is abundantly pre-
pared to pay off the soon-to-mature per
cent bonds. He has on hand a working
balance of about $71,OOO.OO0. That is.
the Treasury vaults hold that much
money above liabilities. National banks
cept $12.OOO,OOO placed with them to the
credit of disbursing officers. is subject to
withdrawal upon Secretary Cortelyou's s
order. The bulk of this has been left
with the banks simply because the Treas
ury had no use for it.
In reaching a decision not to redeem
bonds, but to refund them into per
cents. Secretary Cortelyou will consider
whether it is wise to take from the
banks that amount of bonds at this time.
and whether it will depreciate the price
Of government bonds should he refund.
In the event that he should redeem the
bonds. taking from the bond market about
$64. 600 600 bonds. the probabilities are
to 1 per cent. On the other hand, If the
SIS are refunded. followed later by the
issue of more Panama bonds for funds
for the Panama canal, there Is prospect OF
the government bond market going some
what lower.
New Conditions Created.
The currency bill recently passed by
Congress makes it less necessary than
before to maintain the government debt
for the aid Of bank circulation. In the
past a money stringency was relieved
in one of two ways or by both. The
banks were called upon to increase
their circulation as fast as possible and
all the available funds the government
had at its disposal were poured into
national banks as deposits. When banks
found it necessary to build up their
circulation the great trouble was to get
government bonds at reasonable prices.
The bond market promptly sailed up
ward and the banks found little or no
profit in taking out more circulation.
Cnder the new law the Secretary of the
Treasury. If he deems crisis at hand.
may permit banks to issue additional
circulation upon bonds other than gov
ernment and upon approved collateral.
Secretary COrtelyou will unquestion-
ably consider this fact in whatever he
does
Secretary Cortelyou must give thought
to still another phase of the situation.
Despits the fact that he has on hand and
in the banks about 500, 600 600 surplus, he
is confronted this year with a deficit of at
least $50, ,OOO.OOO. There may be a deficit
in the next fiscal year and the next
which would eat into his cash account at
a rapid rate. But for this years deficit
the available cash would be around $3.50
OpOUUO. Up to the close of last week the
deficit for the year was S62 .5s4 900
against a surplus at this time in the last
fiscal year of $7S.OOO.OOO. The falling off
has been in receipts from all sources
besides heavy increased expenditures. The
Secretary will, therefore, determine
whether the redemption of the } per cents
will deplete his cash in the face of a
possible deficit in the next few years.