New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1914-10-05
Secretary Gets State Loan
at6Per Cent when 4.2S
Was Possible.
100000 u. S. FUNDS
OUT OF TREASURY
Banks Were Ready to Aid With
out Deposit-Costs the
People $24,0S0.
From Tic Tribune Bnrcou .

Washington, Oct. a.. Secretary Nc
Adoo's frank avowal to-day that he
had aided the State of Tennessee IN
obtaining from the National Park Bank
Of New York a loan of Sl,4OO,OOO by
dcpositing with the latter institution
100000 Of government funds WAS re
ceived with surprise in Washington
banking circles.
The surprise springs from the fact
that il was known here that the state
of Tennessee could have obtained the
loan from the National City Bank OF
New York and the Riggs National Bank
Of Washington on terms which the
Secretary Of the Treasury himself
might decide to be reasonable. There
was amazement that Secretary McAdoo
sbould have chosen. under the clrcum-
stances. to put out 100000 of govern
mcnt funds at time when the admin
istration is calling for an additional
fund Of S100,000,000 to be raised ny
the war revenue bill TO protect the
Treasury from the necessity OF ealing
in loans already made to national
banks.
Secretary Explains.
Secretary McAdoos explanation OF
the negotiations is made in telegram
he sent to-day to the editor of The
Nashville Banner" and made public at
the Treasury Department. It Is as roll
lows:
at is not customary for the Treas.
urv Department to publish details Of
transactions with individual banks, but
TO set at rest various mlsstatements
that have been made about the state OF
Tennessee loan. gladly reply to your
letter. The National Park Bank agreed
TO take 100000 one year per cent
notes of the State Of Tennessee at par
without any commission, and ! agreed
To give the bank, which is a regular
United States depository, special de-
posit of 100000, which rs subject 70
call at an ytimc ! was glad to do this
i'm order TO save the state from pos
sible default upon its obligations,
which, ! was told, would have hap
pened. if the state had been unable to
effect the loan.
"Previous deposits made with the
National Park Bank several weeks be-
fore were for crop moving purposes
and had no relation whatever to the
state Of Tennessee loan, which at That
time | had not even heard OF.
The offer of the National City Bank
and the Riggs National Bank was
made at the time Secretary McAdoo
was criticising national banks Tor
charging or attempting TO charge eN-
orbitant rates Of interest
Could Have Fixed Rate.
As an evidence Of the purpose OF
both these institutions TO cooperate
with the Treasury Department in re-
lieving financial distress, 1t was pro-
pcsed that Secretary McAdoo should
Tx the rate Of interest. The preya-
lent rate is not less than d per cent
but. in view Of the fact that the loan
outstanding, which the state desired to
.uke UP, was mat at rate OF APP
proXimately as per cent, according
to the reports OF the State Treasurer,
it would have been not unreasonable
for Secretary McAdoo, If the repre-
sontatives of the State of Tennessee
accented the proposition Of the Ma
tional City and the Riggs national
banks, to have fixed that rate to have
saved the state from loss.
As il is, the State of Tennessee loses
the difference between per cent and
4.28. the rate which Secretary McAdoo
would have been warranted in fixing,
while the government has deposited
$500, 900 in national bank, which 1t
might equally as well have retained IN
its own vaults.
Incidentally, the National Park Bank
pays to the government only per cent
on the government deposit Of 100000.
while it charges the State Of Tennessee
therefor per cent, which means neat
little profit of $4,000 a year to the
Park Bank, while the increased cost TO
the people Of Tennessee, OF Nh. Nc
amounts TO $24,0S0.
Apart from the circumstance Of the
loan. there is disposition IN Washing
ton TO regard the action of Secretary
McAdoo as radical departure from
practices in the Treasury Department