Los Angeles herald., 1909-07-20
CONGRESS STRUGGLES
WITH VEXED PROBLEM
OF NEW BOND ISSUE

WASHINGTON, July 19.-How to
Drotect from serious depreciation OUT
standing United States bonds Is the IN
tricate problem which contronts con-
gress in connection with the authorlza-
tion of a new issue. and IT is thought
its solution can only be effected
through some equitable adjustment OF
the tax on circulation.
According to present plans, the sec
retary of the treasury VIII be author-
ized to issue from time to time addi-
tional Panama canal bonds up 10
c190, ,569, ,O20 bearing not to exceed .
per cent interest.
The governments interest bearing
debt at this time aggregates approx
imately $913,0 000 of which nearly
1871, ,O00, 900 is in per cent bonds. or
this total the national banks OF the
country have on deposit in the treasury
securities of circulation of about S64o'-
600 900 Four-hfths of the entire ma
tional debt, therefore, is in these two
classes of 2 per cent bonds.
Might Depreclate Twos
Under existing laws national bank
notes when secured by 2 per cent bonds
are subject to a tax of one-hat or L
per cent per annum, while circulation
based on bonds bearing higher rate
of interest pays tax of per cent.
IT has been estimated at the present
market price of both per cent con-
soils and Panamas there already mas
been on the whole amount outstanding
n depreciation in the price at which
the government holds them of ABOUT
$4,000 900. 1t is believed in some quar-
ters that to issue any considerable por-
tion of the threes, which 1t is proposed
to authorize with circulation privileges
not materially inferior to those accord
ed the twos, probably would further
depreciate the latter which might
reach a point even below par, thus i'm
pairing the public credit. There are
S64. 900 900 in 3 per cent bonds and ap-
proximately $11S,000,000 in 4s now out
standing.
Secure Bank Circulation
The latter, however, are mostly held
for Investment and are little used as
a basis of circulation and therefore
need not be the subject of any special
concern in this connection. The threes,
however, to the amount of $1S, ,S37, $50,
are on deposit in the treasury to Sc
cure national bank circulation, and any
increase or decrease in the circulation
privileges accorded any class of bonds
will have an important bearing on their
market value.
The question, therefore, before con-
gress is how not to discredit the per
cent DO0uS NOW up lOi anu
at the same time make the proposed
issue OF per cents as attractive to in
vestors. number of suggestions Of
nossible 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 now collected under the
existing law.
Would Decrease Rate
Another proposition Is to decrease
the rate on twos with or without in
creasing the rate on the threes, and
stiII another is to increase the tax on
threes, allowing the rate on twos to
remain as at present
II is argued the government could
well afford to reduce the tax on cir
culation in view of the fact that the
records of the treasury department
show the banks have paid into the
treasury in taxes since the beginning
OF the national banking system about
$3.50 O00, 900 in excess of the cost of the
operation of the currency bureau.
Another proposition advanced is to
withhold from bonds of the proposed
issue ali circulation privileges, and still