Evening journal., 1912-05-08
NEW NEWS OF YESTERDAY
The Unexpected Develop
ment That Frustrated the
Governments First Loan
By Holland.

One of the main features of the
plan worked out by John Sherman
when he was Secretary of the Treas
ury under Hays for the resumption
of specie payment by the Federal gov.
ernment, which had been fixed by law
10 begin on January 1879, was the
refunding of all of the bonds issued
by the Federal government from
Civil War days until 1879. Congress
had authorized new issues bearing in
terest at less rate than the original
bonds
Secretary Sherman also authorized
the sale of some forty million OF gov
eminent securities issued in denomi-
nations of ten dollars. The money re-
ceived from these securities was TO be
utilized by him in a part OF the re-
funding operations. II was the first
time the government had made the
experiment of issuing securities in
small denominations. But the sale or
these securities was peremptorily
and suddenly stopped by Secretary
Sherman only a day or two after the
public had been invited to subscribe
for them
In a conversation which / had with
Secretary Sherman about a year af-
ter his service as Secretary of the
Treasury ended, ! asked him why, az
ter the elaborate preparations he had
made for issuing a popular loan that
would pass directly from the Treas
ury Department to the people, and not
through the hands of bankers, he had
suddenly ordered the sale of these Sc
curtles to stop.
THAT was due" replied Senator
Sherman, ito a curious and uneXpect-
ed situation which suddenly develop
ed even before the securities were Of
fered for sale. They were not bonds;
they we're refunding certificates. Any
one who bought them had the right
to exchange them for government
bonds bearing FIVE per cent. interest
Il had long been of the opinion thai
If the people of moderate incomes oi
savings had an opportunity to buy
government bonds they would gladly
invest much of their money in sucf
securities. It seemed to me that the
experiment could be easily made a
the time we were approaching the re
sumption of specie payment. But il
order. TO make a popular subscription
possible. IL was necessary that tn
securities be of small denomination
I caused some inquiries 10 be made il
France, where popular subscription
had been successful, and I found tha
the working people Of France gladl
invested in securities whose denoml
nation was equivalent TO ten dollar
of our money I therefore arrange
for an issue of some forty millions G
loan certificates to be sold practical
w at par in denominations Of ten dol
lars each BY arrangement with tn
Postmaster General. ] made the posi-
masters of some of the larger cite
of the United States the fiscal agent
of the government in the transaction
when ! reached the Treasury d.
partment on the first day when th
subscription was to be offered, foun
a telegram from New York stain
that since a little past midnight
line Of expectant purchasers ha
formed from the doors of the pos
office far down Broadway. A lit
later I received another despatc
stating that in the line we're sewers
hundred persons who had been en-
0lOlou DlI udhhtAo anu VI iShN-o
take place in it so as to get some
the certificates | puzzled over th'
little while and telegraphed to Ne
York for information
Later in the afternoon. after Il
close of the first days subscription
received a telegram stating that Il
loan certificates commanded pr
MUM due to the fact that they cou
he converted into government bond
which bore a considerable premiu
in the market. It was plain that q
bankers and brokers of New York M
hired hundreds of men to get in
line and buy loan certificates, +
there was a good profit for them IN
transaction Of that kind.
"Of course that defeated my pu
nose. and it was for that reason tn
I ordered the sales stopped. I learn
= valuable lesson. however, which W
that if the people have a chance tn
will buy government bonds in lar
amounts If the denominations
small. But I also learned that If tn
we're to be done without bankers a
brokers' stepping in. the entire su
.ecrintion would have to be ma