The sun. [volume] (New York [N.Y.]) 1833-1916, 1914-02-14
hay state Bond Strategy

! Ohe vi tlic IbVulaT lueHS OF Tue Oay
In the process of democra tizing finance
has been political agitation Of projects
for selling public securities without re.
course TO the intermediate assistance
Of bankers and their facilities for dis
tribution to investors. No experiment
OF the sort has been Mt all conclusive,
nor will any empirical conclusion I've
possible unless n large number of Mt
tempts are made by governmental treas
urics To dispose Of a large total of pub
lie obligations directly ''over the coun.
ter to public buyers
Most VI the offerings which have been
disposed Of in this fashion have gone
very slowly and have been for moderate
amounts only. Much more experience
will he needed before it can he deter.
mined whether or not a sound public
policy is denoted by this departure from
| established practice. OF one thing the
public and It's representatives IN office
may be sure. however. and this is that
state Treasurer MANSFIELD OF Mnssa-
chusetts has just set an example which
Is neither to be commented nor likely
TO he widely followed.
Having advertised for some time that
S6.325. 600 of 4 per cent. bonds, matur.
ing over Il series of years, the state
Treasurer on Tuesday last, the adver-
tised day of sale. rejected all the pro.
posals made by the various banks and
banking firms which submitted proffcrs.
There were nine of these. aud the best
of them would have taken the whole
bond issue on basis 10 yield $3.50 per
cent. a year 10 the purcha ser. giving
the State u premium of more than IA
per cent. above par for the bonds. Even
allowing for the present ease of the
money market this booked like very
satisfactory subscription indeed. and
showed that the Commonwealth en-
bond Offering last month was taken on
a basis of yield about ive-eighths of
per cent. higher.
Accordingly. there was no little sur
prise when the Massachusetts Treas.
urer refused all the bids ana announced
that he would dispose of the bond issue
over the counter at the highest price
which bankers had offered. the 3.5NJ in
come basis. Curiosity rs to his ren sons
for doing so elioited the prompt eN-
PLANTATION that the state Treasurer np-
parently never had any intention of
accepting the subscriptions OF dealers.
Their bids were rejected. not because
of any fantastic notions n To- til" worth
of capital. but because of the Trcasur-
er's promise in his campaign for elcc-
don that he would sell State bonds di-
rectly 10 investors.
1t appears that he egarded the adj
vertisemcnts which he had publishe in
the newspapers. inviting proposals for
the issue of bonds in question. as purely
II formality in perfunctory compliance
with the law. lie explains that he
made no personal requests for bids and
that no one was compelled 10 submit
them. What hc does not explain is that
he failed to make IL known that he
would accept nn proposals in response
10 the adyertise mrntS as II result of
which he obtained the very valuable
Judgment of the Ma s>lchusetts bankers
on the market worth of the bonds Of
fered. He obtained this Judgment not
by way of opinion but in convincing
form which may help him To dispose
of the issue successfully in the way that
he has gone about to sell il.
lie thinks now that 1t will never
again he necessary for the state To ap-
peal to bond dealers in Massachusetts,
and makes the windy avowal that in
the future, AZ In the past, he will place
his reliance in the people, hut II is not
hard 10 guess that he will have TO.
such tactics as he employed can be
adopted once, but can hardly he used
twice. On another occasion when the
money market Is not so easy as now
and the public attitude toward sccuri.
ties is somewhat less optimistic than
1t has lately become Massachusetts, Is
likely to regret Treasurer MANsrIELp's
circumvention Of It's bankers. We i'm
agine also that one immediate effect of
Trea surer MANsFIEID's device will be to
compel public financial officers else.
where to give guarantees of good faith
when they advertise for bids for pub
lie securities.