New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1916-09-07

rowed from the loan banks perma-
nently he would lose about I. per cent
a year.
The war loan banks were OF consid-
cradle use during the first loan, when
reople had not yet got accustomed to
business life under war conditions;
ia per cent Of the subscriptions to
the first Joan were paid with money
secured on collateral from the war
loan banks. The part played by these
banks declined quickly; it had fallen
10 81 per cent at the second loan. 1t
was ga per cent at the third and about
6 per cent az the fourth loan.
The German war loan banks have
played a sound and honorable part in
the floating OF the great German war
loans. There is no mystery about them.
Their statements are published regu-
larry and their policy has been con
servative. No doubt. u is possible that
they might make mistakes by lending
TOO much on bad securities and leaving
too small a margin. But they have
been very careful. They are lending
only % per cent Of the nominal value
on Russian bonds, which are quoted IN
London between 70 per cent 10 90 per
cent. As long as they keep 70 these
methods conservative finance IS evil
IDENTIFY more discernible in Germany
than in England lg).
British Policy.
British critics Of German war finance
are evidently forgetful Of the methods
thew themselves employ. When the
first British war loan was started, THE
Commercial and Financial Chronicle
wrote: Overwhelming results are ex-
p.cted. as the Bank of England, by
agreement with the government, is pre-
pared 70 lend at per cent below the
bank rate on the loan without addi-
tional security" The Bank Of England
was willing 70 lend at per cent on
the deposit of the war stock without
/ collateral and without margin. sub
scribers could immediately borrow the
money from the bank which they had
invested in the loan. They would en-
10Y the privilege Of borrowing per
cent below the bank rate for three
years, after they had paid up complete
~. Notwithstanding these benefits, the
first loan was not success. Il Melted
4.0s per cent, whilst the reduced bank
rate was at that time 4 per cent II
was soon quoted at discount
The policy Of France was little
sounder. The Bank Of France offered
TO lend money at eis per cent, one
half per cent above the discount rate
on the new loan, with a margin OF %
Ger cent. II wisely provided for the
possibility of a decline Of the loan
which the Bank Of England had not
done. As the British loan has fallen
20 Sc. the value on which the bank was
willing TO lend extra-cheap money has
declined by per cent. The value OF
the German bonds, which had q margin
Of % per cent. remained steady. Eng
land believes that buying British bonds
AZ the Bank of England with money
borrowed on the security Of the same
bonds from the Bank Of England IS
such good finance that no margin IS
needed. If German raises money at
81 per cent on first class American
security with q margin Of so per cent,
surely this is not "frenzied finance"
England mas gone one step further
/ She has resorted 70 forced loans. Hold
ers of good foreign securities are com
pelled to sell them or to lend them 70
the British Treasury. They are paid
for them in per cent Exchequer
bonds. if possible. II they refuse TO
hand over their good foreign securities
they are punished severely; 10 per cent
Of their net income is taken from them
by a special income tax. No doubt this
is an excellent method Of getting credit
abroad. but il IS downright coercion. A
howl Of indignation would have been
raised II the German government had
forced the holders OF mortgages on
German and foreign property TO ex-
change them against German war loans
How loudly would the appeals in the
name Of outraged liberty have rung in
the ears Of sympathetic neutral nations
IA Rate Of interest. taxing into account
-e,a,---ent az nar in 1928: