The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1909-07-19
BOND PROBLEM.
How to Float a Big Issue of
Canal Securities
And Not Lower Market Value of
Government Paper.
DDTNEN TWhC TNAW W1NT
PRICE HAS FALLEN.
on Issues Already
Out Is $18,OOO,OOO.
Worth That Much Less Than
They We're Sold For.

Washington, July 19-How to
protect from serious depreciation out
standing United States bonds is the
interesting problem which confrontS
auth oriZation of a new issue and it
is thought it's solution can only be
effected through some equitable ad-
justment of the tax on circulation.
According to present plans the sec
retary of the treasury will be auth
orized to issue from time to time ad-
ditional Panama canal bonds up to
$3.50, ,569,020 bearing not to exceed
three per cent interest.
The governments interest-bearing
debt at this time aggregates approx
mately $10,093, 100000 of which near
" 1871. 100000 is in per cent bonds.
OF this total the national banks of
the country have on deposit in the
treasury securities for circulation of
about $500, 100000. F'our-fifths of
the entire national debt therefore is
in these two classes of two per cent
bonds
Under existing laws national bank
notes when secured, by two per cent
bonds are subject to a tax of one
half of one per cent per annum while
circulation based on bonds bearing
higher rate of interest pays tax Of
one per cent. It has been estimated
that at the present market price of
both two per cent consuls and Pana-
mas, there already has been, on the
whole amount outstanding, a depre-
citation from the price at which the
government sold them of about $1S,-
100000 and it is believed in some
quarters that to issue any consider
able proportion of the threes, which
it is proposed to authorize with cir
culation privileges not materially
inferior to those accorded the twos,
probably would result in the further
depreciation of the latter which
might reach a point even below par,
thus impairing the public credit.
There are $64 100000 in per cent
bonds and approximately $11s, 100000 in
fcurs, now outstanding. The latter,
however, are mostly held for investment
and are little used as basis for cir
culation ard therefore need not be the
subject of any special concern in this
connection.
The threes. howeer. to the amount
of $1S,S37,S20 are on deposit in the
treasury to secure national bank cir
culation and any increase or decrease
in the circulation privileges accorded
this class of bonds would have an i'm
portant bearing on their market value.
The question therefore before con-
gress is how not to discredit 2 and 3
per cent bonds now up for circulation
and at the same time make the pro-
posed issue of per cents attractive
to investors. A number of suggestions
OF possible solutions of the problem are
known to be under consideration. One
of them is to reduce the circulation
tax on per cents to something below
the half per cent row collected under
the existing law. Another proposition
is to decrease the rate on twos with
or without increasing the rate on the
threes and still another IS to increase
the tax on threes. allowing the rate on
twos to remain as at present.
1t is argued that the government
could well afford to reduce the tax on
circulation in view of the fact that the
records of the treasury department
show that the banks have paid into the
treasury II. taxes since the beginning
of the national banking system about
$3.50. 900 in excess of the cost of the
operation of the currency bureau. An
other proposition advanced Is to with
hold from bonds of the proposed issue
all circulation privileges and still an
other suggestion is that the levying n
tax on bond secured circulation be
wholly repealed. It is not believed,
however that these two last sugges-
tions will be taken into serious con-