Evening star. [volume] (Washington, D.C.) 1854-1972, 1913-07-29

department would have to take action"
although he did not indicate the nature
of the course he had in mind.
The Secretary insists that there has
been no decline in the intrinsic value Of
the government IS. and that there is
nothing in the administration measure to
warrant apprehension regarding their flu
ture usefulness. In fact, he says their
being considered
Holdings Of Banks.
Banks throughout the country own al
most entirely $3.50, $50, 1870 of the = per
cents. Their market value today was ap-
proximately S3o,Vo,OOO less than when
the banks bought them. Almost all the
entire issue is used as security for ma
tional bank notes. AT the present price,
however, the discrepancy between the
market value and the issues of notes
against the bonds is covered by what Is
known as the per cent redemption fundr
deposited by the banks with the Treas
ury to care for retirements of national
bank notes
Secretary McAdoo announced it was
not his intention to require the banks
to charge off the present depreciation
below par, but that the banks might
continue to put in the bonds at par
in their statements to the controller Of
the currency, at least until some ma
terial change in conditions should COM
pei the adoption of another course"
Secretary's Statement.
In statement issued at the Treasury
Department. Secretary McAdoo de-
clared the = per cents were worth par
notwithstanding their decline in the
New York market, and continued:
"The idea seems to be that the coun-
try banks, which hold about tWo-thirds
of the per cent bonds, and use them
as the basis for their circulating notes.
may be induced to unite with the New
York city banks in opposition to the
bill if they can be made to believe that
the proposed currency measure is go
losses to the banks. This is, Of course,
unfounded.
Meantime it is folly for any bank to
sell government IS at sacrific be-
cause Of any apprehended legislation
adverse to government bonds, as no
such legislation will result. In the 124
years Of it's existence the government
has kept faith scrupulously with it's
creditors. and it is not going to change
its honorable character now. If the
necessities of any bank oblige it to sell
bonds at depressed prices, that, of
course, is another matter-a matter
solely for the bank to determine.
Worth of Bonds Advanced.
Not only has nothing occurred to i'm
pair the value of the per cent bonds,
but the amendment already adopted by
the banking currency committee of the
House enhances their intrinsic worth;
"d). Because the banks and all other
holders of , per cent bonds are given a
privilege. not now possessed, of ex-
changing the 2s for IS, without the cir
per anrYum of their holdings, present or
hereafter acquired. So long as they do
not make the exchange, they may retain
or sell and buy the 2 per cent bonds and
exercise the circulation privilege attach
ed thereto.
''(2D At the end of twenty years. the
government will pay at par and interest
all per cent bonds which at that time
remain outstanding In view Of the fact
that the IS have no due date. and are
payable after 1890 only at the option of
the government, the definite promise OF
payment at the end of twenty years is
distinctly beneficial to the holders of
the = per cent bonds
Shows Amusement.
THE Secretary spoke with amusement
of the grave statements sent out from
New York to the effect that II the cur
rency bin shall pass and government de-
posts are put in the federal reserve
banks, the 2 per cent bonds now used to
secure deposits will be thrown on the
market and their value thereby impair
ed AS only $l3.9O0.OO0 of the IS. out OF
a total OF $3.50, $50. 100 are used to secure
government deposits it can be readily
seen how trivial this is. If these bonds
are not used to secure deposits they can
be used for additional circulation
Nearly all of the IS are owned by
the banks. IL the yrice is marked down,
il is because the banks themselves are
putting pressure on the market and
depressing the value of their securities.
The fault is their own. Ii would seem
the part of good sense and good business
not to do it, The Secretary expressed
the hope that the process. il continued
will not be carried to a point where the
department will have to take action.
Always a Marrow Market.
There is and always has been a mar
just as there is for many inactive high
grade corporation bonds. and every one
knows how easy il is 10 put up or down
the quotations for such bonds, espe-
cialIy when favorins state of mind has
been shilfully created.
The department has. because of its
relation to the banks and its necessarily
important part III the financial affairs OF
| the country a deep interest in the wei.
| fare of the banks, in the stability OF the
| financial situation and in continuance
| of the prosperity now attaching to agri.
cultural and industrial enterprises and
general business.
For these reasons" the Secretar,
| said that he hoped that the bank,
would not consider suggestion from
him impairment.
Would Restrict Credits.
I'm many quarters there is a disposi
| lion on the part of the banks to re-
| strict legitimate credits. There is moth
| ing i'm the situation to warrant such ;
| course. The banks should not put up
due restraints on business"
| should any unusual stringency an
pear the Secretary said that it coul,
| easily be met through resort to tn,
| $500 600 900 emergency currency nov
| held in reserve, which can be issued II
! the banks need 1T or by use OF the re.