Omaha daily bee., 1911-03-24
ROOT FAYORS new BOND LAW
Says it Will Increase the Interest
Returns to the State.
DOES NOT FAVOR AMENDMENT
New Law Would Create an AdditiOnaI
Market for Nebraska securitIes--
Root Says IT r. Good
Legislation.

Legislation.
j. c. Root chairman OF the investment
OF the woodmen OF the World,
which association has about Sl2,0OO.OOo in
vested in bonds. states that he considers
House Roll No. 20, excellent legislation.
This is a bill authorizing the state board
OF educational lands and funds to sell
state bonds which are now owned by the
school fund and invest the funds in Ne
braska bonds.
This will create an additional market for
Nebraska securities, and viii further in
crease the interest return on the school
fund investments" said Mr.. Root. Il can
see no reason why any one can raise any
argument unfavorable TO such a bill
would however. recommend killing the
amendment to this bill recommended by
the senate judiciary COMMITTEES. This
provides that the board Of
educational lands and funds in re-investing
the proceeds from the sale of the state
bonds shall buy only direct from the
authorities issuing same, and further
make their purchases in the order in
which the requests by the various NUM-
cipalities are filed with the state treas
urer The theory and intent of this
is unquestionably good, but
when applied to practice viii not work
out In the first place practically none OF
the state bonds now owned are worth par.
A considerable amount Of the state bonds
bear only per cent and slA per cent; the
balance pay only per cent The prtnci-
pal market. or the market where the high
est prices are paid for state bonds Is
among the savings banks in New York
and the New England states.
Omaha Bonds Good,
City Of Omaha bonds are also legal in
vestments for eastern savings banks, and
are as we'll regarded by financial inter
ests as any OF the state bonds, especial!
those issued by the southern states. W.
know that City of Omaha bonds can b.
purchased today to net about 4h pei
cent. which is equivalent TO about sS1
for a twenty-yeRr 4 per cent bond. Thi
gives a very good comparative idea o
the market value Of the state bonds nov
owned by the school fund. In other words
the various 4 per cent state bonds ar
worth IS to SO. and the 3 per cent AM
SIb per cent bonds considerably less.
"The state bonds are all carried on tn
books OF the school fund at par. Although
a great number of them we're purchases
at discount. they were placed In the in
vestment list at par, and the disooun
Immediately credited to the temporar
school fund. Under the provisions OF tn
constitution the permanent school fun
cannot be impaired, and accordingly an
state bonds disposed Of cannot be sold 10
less than par AS the bonds are not wort
par and the bonds bearing only and 8
per cent, probably never will be wort
par until they actually mature, the onl
possible way to dispose Of them and realiH
par would be by making trades with cas-
ern bond brokers. That this can be don
to advantage was shown by ex-stai
Treasurer Brisn's experience with tn
Douglas County Court House bonds
In January, 1899 Mr.. Brian contracts
Ito purchase from Douglas county sS0oo
of the new court house 4 per cent bond
at par, he agreeing to take them as Il
Douglas county commissioners needed q
money. Owing 20 the various delays
1.-THE work on the new building only
small portion OF the amount were take
lup by the state until the summer Of isl
AT that time the bond market was vel
dull and a number Of municipalities q
bonds on the general market. Some
Them had began construction on waite
works plants and made contracts for v
Irious other improvements and were co
Isiderably embarrassed when they foul
that. owing 20 the tghtness OF the mon
market. they were unable to dispose
their securities. The state treasurer h
several hundred thousand dollars on han
b l.. - nEr NJ -
! various municipal bonds, owing to /
commitments 10 Douglas county
Douglas county bonds last summer we
only worth about IS on the general ms
ket. and as they held the state contra
, 10 buy them AZ par the commissions
were unwilling to release the state trei
, ursr from his commitment Through {
agency OF eastern bond dealers howev,
a number OF the various municipaHt
over the state arranged to dispose Of tn
bonds in the following manner. Mr.. Bri
told them that he would purchase Tn
, municipal bonds n they would arrange vi
4 some broker or banker 70 agree 70 "a
} ian equal amount OF the Douglas oOu1
! bonds from the local commissioners.
: oonsidsrsble number OF various cities a
school districts. among which rec
. Alliance, Valentine ana Ogalaila, arrang
10 pay eastern bankers q bonus II IN
would purchase certain amounts Of
I douglas county bonds az par This
abled the state treasurer % be relsas
from his commitment 70 Douglas eoun
and he was thus able 20 bay the munich
bonds on a basis 10 net the school ~
, "a per cent and per cent, compared wi
ionly 4 per cent on the Douglas eouu
bonds The municipalities were very mn
, pleased. as they were able 10 IN this -
tcomplets thelr improvements