The Washington herald., 1913-10-04
WHEN THE BOND
BUYER BALKS

Copyright 1915 by g. II. Keys New York.
Early this summer the bond buyers of
the United States and Europe served
notice on all whom il might concern that
they did not want any more bonds for
the time being. They said that they had
enough. and in a good many cases limited
that the creation Of any more would be
considered an unfTiendly act. 1t was a
real ultimatum.
or course. it came on gradually; il II
had not there would have been a world
wide panic right there and then. II Capi-
tai ever forms a union and acts as a
unit assuming an attitude like that. the
world OF industry and finance will apply
for a receiver the next day. As IL was
it was bad enough. Some of the imme-
date results OF II are worth looking at
to discover how much of a factor the
bond buyer is in the ordinary affairs OF
the world.
big Southern State. which had some
debt coming due threatened to default.
and caused a tremendous cOmmotion
before il finally decided that If bondhOld-
ers would not help it out it would have
recourse to the note broker and pay an
eXorbitant rate for a shOrt-time accom-
modation. \ Western city refused to pay
its debts. In half 4 thousand other cities
sewers. streets, parks. and other public
enterprises that were well under way
were abandoned or postponed. new
navy, proposed by a South American re-
public. was abandoned. In practically
every country on that continent public
works and enterprises were showed over
into the future.
The railroads Cancelled dozens of extern
sions and branches for which surveys
already made and in
Cancelled also orders for rails and other
material which had already been placed.
No railroad system in the United States
is today carrying forward any large
plans for extending its main lines, reach
ing new markets or opening up new ter
ritory.
In the companies that provide facilities
for light, heat, power. and water curtail-
ment became the immediate order of the
day. Bankers who had always poured
immense sums of money into these great
enterprises, wherever they might be. alb
solutely refused to bid on new bonds of
any sort. In one striking case where
immense expenditures were so far under
way that they could not be abandoned.
prosperous company suspended its divi-
dends, which were very well earned, in
deed, and announced that it would con-
tinue the work out of its earnings, but
hoped some day TO be able to sell some
more bonds and repay the stockholders
for their expenditure. There was so much
work of this sort under way at the time
that the public utility companies were,
perhaps, hit harder than any other class
when the bond buyers baked.
In Wall Street the effect was striking
Since it was almost impossible to sell
good bonds at reasonable prices, the
bankers, who are very versatile people
and quick on their feet. suggested vari-
Gus other expedients. In the case of the
Pennsylvania, for instance, it was easy
enough to make a stock issue and sell it
to the old stockholders at a bargain
price. A great many other strong rail-
roads. public utility. and industrial COM
panies were urged to borrow for year
or so on temporary notes. They did it
to the extent Of several hundred millions
of dollars. The bondhOlder, who used to
think he was very lucky II he got more
than 4 per cent on his bond, jumped at