The Birmingham age-herald., 1913-07-09
Bonds Directly to the People

Bonds Directly to the People
An enormous amount of bonds oi
stock is absorbed by the public with
out any record of that fact being made
or any public, knowledge or informa
tion regarding it being published. II
every considerable community in the
United States small manufacturing
companies market their bonds in small
lots among the people of the commune
ty in which the manufactures are
situated. At the latest annual meet
ing of the Association of the American
Electric Railway companies the state
ment was made that by far the larger
portion of the capital needed for the
establishment of traction systems has
been secured by marketing bonds oil
stock in comparatively small blocks
with the people who lived in the COM
munities in which the traction reads
are to be operated
The city of New York some years age
attempted to market an issue of bonds
lirectly from the city authorities to the
people, but the attempt was not very
successful The recent offerings for
New York city bonds have been al
public competition, therefore anybody
who possesses, savings sufficient 30
buy even as small an amount as one
bond at par value of a hundred dol
lars can bid for it and If the bid is
high enough he may secure reward
There are a good many small blocks
of New York state bonds that have
been secured in this way.
The real estate Incorporated companies
have worked out a simple and yet very
skillful plan for niarketing in small lors
proportionate parts of mortgages. They
do this by the issuing OF certificates rep
resentins certain proportionate part oi
a mortgage and guaranteeing the pay
ment of the principal and interest which
this certificate represents. A business
amounting to millions has been built up In
this way. Yet few years ago it was
thought impracticable to split up the
mortgage bonds so that there could ba
many owners instead of one
John Sherman's Attempt
The attempt of JOHN Sherman when Sec
retary of the Treasury to market directly
from the treasury department to investin.
purchasers an issue of bonds the pro-
.ceeds Of which Secretary Sherman ex-
pected to r.;e to Facilitate the resumption
of specie payment in 1879 IS a historic
failure. 1t was the one failure of Secre-
tary Shermans administration. But i,
was failure because the Secretary did
not perfect adequate machinery by means
of which this issue of bonds could hay e
passed from the treasury department so
investing purchaseIs.no matter how small
each individual purchase was. The de-
nomination OF some of these bonds was as
low as $50. There was perfect demonstra-
ton of the ability and the eagerness of the
public to buy these bonds directly from
the treasury department, but the Secrs-
tary or his assistants had not devised
means by which this issue could be kept
from brokers or others who wanted to buy
them for speculative purposes.
Twenty Years After
Twenty years later an Assistant Secrs-
tary of the treasury, Frank A. Vanderl,p,
now president of the National City bank
OF this city, undertook to pass an issue OF
100000, 600 of bonds directly from the
treasury department to investors 1t was
known that a majority of the purchases
would be made by national banks The
bonds were especially available for ma
tional banking purposes. But there was /
considerable portion of the public that
would, it was presumed, be glad to gel
some of these bonds if they could buy
them at first hand or directly over the
counter of the treasury department
The Secretary of the Treasury. Lyman
]. Gage, placed the matter in the hands
OF Mr. vanderlip. After carefud study
Mr.. Vanderlip was convinced that nothing
was needed to assure the success of the
proposition, but the creating and perfect
ing of adequate machinery for this special
purpose. To do that was work of two
or three months IT entailed the employ
ment of a large body of special clerk
Every possible loophole was foreseen and
means taken to prevent the escape of any
bonds through loopholes into the hands oil
speculative purchasers. The design was
to pass this large issue of bonds. In blocks
big or little, directly from the treasury
department to investing purchasers, with