The Washington herald., 1912-06-02

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New York city bonds have a wide sale
because they are very marketable Be-
sides, the resources OF this city are very
great, and there are unusual safeguards
placed about the limit OF It's indebted
Iesa. Another feature OF New York City
bonds. created TO give a wide popularity,
nomination OF SO. or any multiple OF
that sum. These are perhaps the only
hish-class bonds in the world which are
available in such small amounts- Usual
" the denomination OF municipal bonds
Is 800 and 1900
One OF the most striking features OF
the municipal bond situation to-day Is
the increase in the interest rate every
where Formerly many issues bearing
interest at 3, ana Sih per cent were placed
At par, and sometimes at a goSd prem
ium. At the present time some Of the
larger cities, whose credit Is beyond
question and whose bonds are the best In
the municipal field, are paying interest
rates varying from ~ to per cent.
In the West, drainage and irrigation
Issues bear an almost uniform rate OF
8 per cent. while school bonds are being
issued at per cent Nowhere else
in the entire range OF the Investment
field can such rates OF interest be OBJ
tanned on absolutely safe security.
Municipal bonds are issued In coupon
or In registered form The advantage
OF coupon bond over a registered bond
Is its negotiability. Anyone may use IT,
The owners name is not written upon
II and II passes by delivery, the same as
a SO bill A registered bond, however,
is safer in many respects. II the holder
does not own a safe-deposit box and
keeps the bond in his home, It Is value
less to anyone who might steal Il, as II
Is made out in the owners name, which
is recorded in the City Treasurer's once.
When the interest on a registered bond
natures, q check for the amount Is
mailed directly to the registered holder;
whereas, II an investor holds a coupon
bond he must cut OF each coupon every
six months and deposit II in his bank or
collect IL from the fiscal agent OF the
municipality.
In buying bonds, there are many things
to be considered. Those which are a d.
rect obligation Of the issuing municipal
ity are the highest grade OF security.
This means that the city Is directly re-
sponsible for their payment at maturity.
There are municipal bonds which are
not a direct obligation. These comprise
bonds issued for paving, sidewalks, sew
ers, and other street Improvement pur-
poses, part OF the cost Of which Is paid
~ " eoAAAAAAh RANRNAAg ONhEl6 HhO6c
property Is benefited by the improve
ments. These are called assessment
bonds. and usually pay as high as and
81 per cent
On account OF the numerous legal pre-
liminaries that attend the bringing out
Of municipal bonds, Il is necessary that
their legality be unquestioned. The in
vestor, therefore, should buy them from
banking houses who have made an In
most eminent legal experts. The invest
or should remember. too. the very i'm
pOrtant fact that the more marketable
his bond the more desirable II is. II he
should be called upon suddenly TO real
ize on the bond. IL should be one that
can readily be sold.
Il Is inadvisable to buy bonds Of towns
which depend for their prosperity on one
or two manufacturing plants. Some
times these plants are moved to other
cities, and as a result the original towns
where they were located suffer greatly,
and their securities are deprecated. This
consideration applies also 10 small min
ing towns, as a mine may become ex-
hausted and the inhabitants remove else
where. The cities whose bonds are most
attractive are those which are thriving,
and whose prosperity and organization
promise TO be permanent
The large bulk Of municipal bonds Is
bought by bankers, who make the hand
ling Of them a speciality. They buy them
in bulk and sell them to investors. saw
ings banks, trust companies, estates, and
national banks.
In the Eastern States. the laws cover
ing the investment OF funds by savings
banks provide that they may be invest
ed IN municipal securities Cas well as in
the hrst-mortgage bonds Of certain rail-
roads), although the laws vary in their
details. In New York the laws are very
rigid. Savings banks cannot purchase
the bonds OF any city whose debt limit
is in excess OF per cent Of the assessed
valuation. II h not so many years ago
that the savings banks In New York
were permitted to invest In municipal
bonds issued in the State OF New York
only. Within the last few years the law
has been broadened. permitting the saw
ings banks in New York to hold the
bonds OF Lowell. Holyoke. Fall River,
Cambridge, Louisville, Portland, Ne,
Bridgeport, Wilmington, New Bedford,
Lynn, Detroit. Somerville, Scranton.
wilkesbarre, Providence, Milwaukee,
Hoboken, Boston, Philadelphia, Pittsburg.
Camden, n. J., Jersey City, Omaha, st.
Louis, San Francisco, Los Angeles, Bal
timcre, New Haven, 81. Paul, Minneap-
oils, Reading, Cincinnati. and Indianap-
oils. 1t was not until 1855 that the saw
Ings banks in New York were legally
permitted to GUY railroad bonds.
The savings benk laws Of Massachu-
setts are even more rigid than those Of
New York. In order that q bond may
be legal for savings banks in Massachu-
sets, the issuing municipality must not
have a debt exceeding per cent OF the
assessed valuation. All the States, IN
their laws governing investments Of
funds Of savings banks. make provision
for the investment in municipal securi-
ties, with various restrictions, such as
the population Of the city, the percent
age of debt to assessed valuation Cknown
as the net debO and the fact that they
have never iefaulted In the payment OF
their interest or principal, or II there is
any litigation pending or affecting pre-
vious issues.
In some Of he States the laws permit,
in arriving at the net debt, a deduction
OF the municipal debt created for water
purposes, and also a deduction for the
amount Of money in the sinking fund.
They allow these deductions on the the
ory that waterworks are self-sustaining,
and they are justified in deductIng the
balance In the sinking fund which Is set
aside for the purpose OF reducing the
debt. In some cases the limit OF in
debtedness Is arrived at by taking the
average assessed valuations for the pre-
vious ten years.
A dealer in buying municipal bonds
studies also. in addition to the above
the record Of the place, popu-
laton. financial condition, the debt limit,
II any, and the tax limit II any, the pur-
pose OF the issue, the rate Of interest