Deseret evening news. [volume] (Great Salt Lake City [Utah]) 1867-1920, 1909-07-19
CONGRESS FACES
ANOTHER N PROBLEM.
is How to Protect from Serious
Depreciation Outstanding
United States Bonds.
NEW ISSUE CAUSES TRoU BILE.
Two Remedies Suggested: 10 Reduce.
Tax on Circulation, and TO With.
hold Circulation Privileges.

Washington, July 19.--Iow to pro-
tect from serious depreciation out
standing United States bonds is the
intricate problem which confronts Con
gress in connection With the authori-.
cation of a new iseue and 1t is thought
its solution can only be effected
through some equitable adjustment of
the tax on circulation. According to
present plans the. secretary of the
treasury will be authorized to issue
from time to time additional Panama
canal bonds up to $500, 56o,02o bearing
not to exceed 8 per cent interest.
The governments interest bearing
debt at this time aggregates approx
imately s91300O,0OO Of which nearly
s7s1 100000 is IL 2 per cent bonds. OF
this total the national banks of the
country have on deposit in the treas
5ury securities for circulation of about
s64O 100000. Four-fif or the entire
national debt, therefore, is in these two
classes of 2 per cent bonds
Under existing laws national bank
notes when secured by2 percent bonds
are subject to tax Of "a or ! per
cent per annum. While circulation bas-3
ed on bonds bearing higher interest
pays a tax Of l per cent. 1t has been
estimated that at the present market
price or both per cent consols and
Panamas there has already been, on the
whole amount outstanding, a deprecia-
ton from the price at which the gov
eminent holds them Of about SIS, 100000
and it is believed In some quarters
that to Issue any considerable portion
3of the threes. which 1t is proposed to-
authorize, with circulation privileges.
not material M Inferior With those ac-
corded the twos, probably would re-
suit in the further depreciation of the
latter@which might reach q pointieyen
below par, thus impairing the public.
credit. There are $64,0000 900 in 3 per
cent bonds and approximately $1lS.000,-a
600 in fours now outstanding. The lat
Z ter. however, a re mostly held for in
5vestment and are little used as a basis
for circulation and therefore need not
z be the subject of any special concern:
in this connection. s9 ~ "a s
81 The SIS, however: to- the amount of
I, s 20! are on deposit IN the treas :
iurv to secure national bank circula-
itl0E&E ana any increase or decrease IN
the circulation privileges accorded any
class of bonds would have an import
ant bearing on their. market value
The question, therefore, before Con-
gross. is how not to- discredit the 2 and
8 per cent bonds now up for circulation
and ut the same time make the pro-
posed issue OF 3 per cents attractive to
Investors. A number of suggestions Of
possible solution OF the problem are
known to be under&consideration One
OF them is to reduce the circulation tax
scnt2 per cents to something below the
per cent now collected underline ex-
listing law. Another proposition is to
decrease the rate on 2's with or without
increasing the rate on the; s. $, and still
another Is to- increase the tax on IS
allowing the rates on Is to remain as
at present. Il b .s 85;
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 in taxes since the beginning
of the national banking system about
S160,000,000 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 circulatin privileges and still am
other the suggestion is that the levy
ing tax on bond-secured circulation
be wholly repealed. tits not believed,
however. that these two last sugges-
tons will be taken into serious con-
sideration.