New-York tribune., 1909-12-19
MUST SHIFT BONDS
M4CTE4GH BULLS
PER CENTS.
State, City and Railroad Bonds
Eliminated as Security
for Deposits.
rFrorn The Tribune Rnr-au l

Washington. Dec 1S-The Treasury
Department took measures to-day To
steady the prices Of the . per cent bonds
and to prevent their falling below par.
Under the law requiring him TO give
notice Of what bonds will be accepted as
security for deposits of public money in
national banks. Secretary MacVeagh an
nounced that hereafter state, city and
railroad bonds will not be accepted as
such security.
The following bonds will be available 70
insure the government against the loss Of
it's national bank deposits: United States.
Philippine, Porto Rican and District Of
Columbia bonds. at par; bonds OF the
Hawaiian Territory. at 90 per cent of
par; bonds Of the Philippine Railway
Company, at 90 per cert Of market
value, but not exceeding 90 per cent ~
par.
Mr.. MacVeagh also announced that no
additional deposits are now contem-
plated. All banks holding deposits OF pub
lie funds secured by bonds other than
those enumerated by Mr.. Macveagh will
be required TO withdraw such bonds be
fore February 1, 1910, and TO substitute
therefor tbs bonds described in the fore
going statement.
Under the present regulations state,
city and railroad bonds are accepted as
security for government deposits at 30
per cent OF their market value. not ex-
ceeding 90 per cent par. At the close Of
business yesterday bends Of this char
acter pledged as collateral for govern
ment funds amounted TO S9969, 500. Most
of the government deposits in national
banks are now secured by the per cent
consols Of 1880 More than S4,000000 is
secured by Philippine 4 per cent bonds,
and S499, 900 by Porto Rican / per cent
loans The Philippine Railway Com
pany's bonds, which draw per cent
interest, now secure S136O00 of govern
ment deposits, while the District of Co
lumbia bonds secure S1SO,OO0. The bonds
of Hawaii secure S4S7. 600.
The effect of Mr.. MacVeagh's decision
will be 10. create a market for nearly
S1O,OoO,OO0 more government bonds, and
it is hoped this will have a salutary in
fluence on the IS In his annual re-
port Mr.. MacVeagh said it was high
time for the government TO realize that
IL does not have a , per cent borrowing
power. NO government, however rich,
has = per cent borrowing power" he
said Possibly IL would have been bet
ter never 10 have issued = per cent bonds
or bonds at any rate of interest below
the borrowing power Of the government
in the open investment market" Mr.
MacVeagh then suggested a : one rem
edy for the problem suggested by the
outstanding IS a varying tax on the
circulation privilege.
State, city and railroad bonds were
first accepted as security FOR govern
ment deposits when Leslie NJ. Shaw was
Secretary of the Treasury. Later. under
Mr.. Cortelvou. when the panic Of 1907
made it necessary for national banks to
take extraordinary steps 10 prevent
financial disaster, permission was given
to use this class Of bonds TO secure the
deposits of government funds, thus re-
leasing government bonds and making
them available to secure the additional
circulation needed by the banks 10 tide
over the crisis.