The Birmingham age-herald., 1914-01-27
NEW YORK'S RECENT
BOND ISSUE TAKEN
BY FOREIGN BANKS
State Made Handsome Prof
it by Being Forced to
Wait a Year
is TRUE INDICATION
OF BETTER FEELING
Accepted by Bankers as First Definite
and Visible Change in Public
Sentiment Respecting
Business
by HOLLAND.

ny HOLLAND.
New York, January 26.-(Special)-New
Yorks state sale last week of a block
OF 100000 bonds bearing per cent in
terest and having a long life took place
at what bankers say was a psychological
moment.
A year ago New York state found it
impossible to market block of bonds of
this size and was therefore compelled to
seek the discount or short term notes.
which much be paid on February l of this
year The recent marketing of the iden-
tical issue proposed but withdrawn
year ago with aggregate Offering of
SOL, 100000 or, in other words with an
oversubscription five times the amount of
the bonds, points, specifically at least,
to great change In money market con-
ditions and in the confidence of those
who have money to invest.
From one point of view, a judgment of
this kind is based upon rather superficial
features of this successful marketing, but
from another point of view the transac-
ton is accepted by bankers here as the
first definite and visible recognition of
the change in public sentiment respecting
business and finance which has taken
place within a few months.
Undoubtedly the comptroller OF the
state, William Sohmer. had what he be-
lieved to be fair. although informal, as
surances that If he made his Offering at
this time would be marketed and at a
good premium. For had money market
conditions today been similar to those of
a year ago Comptroller Sohmer probably
would have learned that It was mex
pedient to make an offering of long time
bonds, whereas men of capital, particu-
larly those having large international re-
lations, would be this year prepared to
make a single offering at premium for
the whole issue.
When mer of finance in this city COM
mented upon the transaction, as they
have frequently done since 1t was COM
pleted last week, saying that it took
place at the psychological moment, they
meant that it supplemented President
Wilson's address to Congress; that 1t dis
closed G. renewed disposition of capital
to make investment and 1t gave assur-
ances of a satisfactory condition of the
money market
The stock exchange of this city has
been now for several weeks making dis
closures of this kind, but by piecemeal,
so to speak Apparently the stock ex-
change has begun to discount prosperity
and activity of the immediate future.
But there has been no large, imposing
transaction reflecting all of the condi-
tions necessary for prosperity until this
marketing of SOL 100000 of New York state
bonds was compassed.
A Superficial Feature
A comment frequently made. by those
who have been discussing this transac-
ton is this: 1t reflects the desire OF capi-
tai to make Investment in safe securities
bearing interest at an average rate of
per cent which will be included in the
taXgatherers' demand. Aside from the
premiums these bonds have obtained.
they will entail no expenses i'm the form
of taxation, state or national. Their in
come cannot be reached by internal rev.
enue collectors
Therefore, 1t has been assumed that
one eXplanat ton of the oversubscription
of this issue is the desire of those who
possess capital to exchange investments
which the tax collectors can reach for
those which are beyond his power.
How far this explanation goes one
can tell, for the many bidders upon the
offering made no reference to their mo-
tives.
A Test of Another Kind
The sale of these bonds to one bidder
seems to confirm the opinion of those
who have asserted that the time is not
yet come when an Offering of municipal
or state securities can with confidence
be made to the general public. For
the past year or two. experimental tests
of this kind have been made, one in
Philadelphia, one in Baltimore. one in
St Paul, and others have been contem-
plated. None of them has demonstrated
the complete practicability of offerings
OF this kind directly to the public. So
that 1t is asked If a state with such high
credit as that of New York found that
| even in a public offering a single bidder
| could outbid 500, some of the plain
people who put in bids. can 1t be rea-
sonably presumed that the railroad COM
panies of the United States could rely
| upon direct purchase by the public of
offerings of their securities? Even the
| Pennsylvania railroad few years ago.
| according to President Rea. discovered
| that its own stockholders fHere not
| ready to accept an offering of 800, 900, 900
| in stock. This issue, therefore, was in
| evitably financed by bankers who re-
ceived a commission of 21a per cent.
Nearly Five Hundred Bidders
| New York states credit is unimpeach-
able. Based upon that credit the state
offered to sell s5l,OOO,O00 of bonds bearing
| ~ per cent interest and running for a
term of years. Yet for this offering only
| 900 bids were put in. although it had been
advertised all over the state. Any citizen
was at liberty to bid, knowing that all
that would be required of him was a
small deposit accompanying the bid to
show the good faith and that the bid
must not be less tndn the par OF the
bonds.
One group of International financiers
captured the whole and showed a good
deal of strategy in fixing the price which
1t was willing to give for the bonds at
figure which presumably nobody else
would offer for the entire lot. 1t bid
601 above par and IL accom-
panied its bid with the required certified
check in the show of good faith. There
was nothing for the comptroller to do
but to accept this bid, although there
were few containing offerings a little
better than 106.G7 BY deferring last
year this issue until February of this
| year the state gets a premium of $3 10O.-
| 900 dollars. IF from that sum be de-
Quoted the charge to the state for dis
counting it's short-term notes of last year
| there still will remain handsome profit
| for the state out of the transaction. In
F, figuring the net gain of the state, it is
| essential that the two ransactions-that t
| of the short-term notes of last year,
which this issue will be used in part