The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1910-12-11
HEAVY CANAL DEBT
Congress TO Relieve Demands
Upon National Treasury.
MANY REMEDIES POSSIBLE
May Issue BOnds-Eneet of a New
Series on Present HOIders-Nevv
Panama Bond Issue of Doubtful
Enleaey-other Methods Proposed
by National Bankers.

New York, Dec 2-Expenditures on ac-
count of the purchase and construction OF
the Panama Canal to date aggregate
S2so. 70S. 900. OF this sum S., SOC 900 was
provided by bond sales. and slSS, SSa. 600
has been advanced from the general fund
Of the Treasury. which is now entitled 10
reimbursement in that amount This fact
constantly suggests a bond issue OF some
kind as means of replenishing the gov
ernments cash, AS work on the canal
progresses further inroads must be made
into Treasury holdings Already this
fiscal year the general fund has con
tributed $ls612OOO 10 canal expenditures
At this rate over 100000 must be pro-
vided for the remaining seven months Of
the year to end June 30. 1911. Where the
money is to come from is problem.
Tariff Act Provisions.
The tariff act Of August 8. 1909. con-
tained authority 10 issue Panama bonds,
at a rate not exceeding per cent. TO the
amount of $50, 600. This is the sum
determined upon as necessary to effect re
endorsement TO the Treasury for advances
from the general revenues and TO pay for
the work remaining TO be done before the
canal is completed. These estimates,
therefore, contemplate a further expendi-
ture fer construction alone OF S156, Gel. 900.
How this sum is 70 be provided and when
are questions which government officials
must face.
Money in Treasury.
The Treasury Is no worse OF than it
was two months ago, when the situation
was analysed in this circular. Then the
working cash stood at 100000 and the
general fund at $50, 000O00. The working
cash is stll at the So, 600 600 mark. while
the general fund has fallen 20 SS6.OO00 900.
Under necessity the working cash may
occasionally be permitted TO decline 10
Sl590. eco. so that It would seem. with 8
margin of more than twice that sum. the
Treasury is really in position 10 with
hold Panama financing for some months.
Nevertheless, the situation is such that
a bond issue is always TO be expected.
Should the Supreme Court decide against
the constitutionalitY OF the corporation
excise tax, the Treasury would be under
the necessity of refunding some So, 900, 900.
This would force an issue of bonds at
once.
Effects OF Bond Issue.
As TO what kind of bonds may be is
sued when the proper time arrives, it Is
good faith can resort to the Panamas
authorized by the act of August 3, 1909
such an issue would send below par SAL
100000 outstanding 3. In the absence OF
an adjustment OF the circulation tax this
would be inevitable. The - were all is
sued under attractive inducements, which
resulted in holders of per cent. 4 per
cent. and per cent bonds accepting In
their stead the low Understanding . per
cent bonds. The particular tndncement
was reduction of the circulation tax
from / per cent 10 y per cent per annum
on circulation secured by the Is. If now
the government should issue higher in
terest-bearing bonds without safeguard
ing this privilege it would most seriously
and injuriously affect the holders of the
. per cents.
It has been argued tnat the govern
ment might put out some new Panamas
at 2ik Der cent. such bonds, subjecting
circulation to a tax Of / per cent, would
then be on a parity with 2 per cent
bonds. which subject circulation 10 a
tax of Il per cent But. as this circular
has time and again demonstrated, this
proceeding would be, so far as circula-
tion is concerned, in effect to issue more
per cent bonds. Such a contingency Is
not desirable from any standpoint II
would not preserve the integrity OF the
outstanding Is, and it would lead almost
certainly 10 further imitation of national
bank note circulation. The Is need a
little more than the protection OF a
parity.
Certificates of Indebtedness
The alternative TO an issue Of Panama
bonds is. Of course, an issue OF per
cent one-year certificates of indebted
ness. They may or may not be available
in circulation accounts according to the
view of the Secretary of the Treasury
at the time of their issue. Such an issue,
put out when money market conditions
are favorable. would tide the Treasury
over until the postal savings bank
scheme has been tried. If government
finances could AFFORD 10 wait a while,
perhaps postal depositors would exchange
their deposits, paying 2 per cent per an
mum. for the 21h per cent bonds author
lied by the postal savings bank law
(Which are not available for circulation,
in amount sufficient 10 finance the Treas
ury, thus avoiding the embarrassing sit
uation which now confronts the govern
ment in the matter OF so handling the
government loans as to keep faith with
the holders OF previous issues.
Bonds Could BE Easily Sold.
It is conceded that even under all the
circumstances the government would not
BE- without a market for an issue OF new
Panama bonds IL could establish such
market by leaving a large portion OF
ali OF the proceeds with the banks, using
the bonds as security therefor. but this
has been done before with harmful re-
suits. funds being shortly withdrawn
and the banks forced to make use Of the
released bonds in their circulation &C