The sun., 1916-10-02
Spectators Reminded That
Foreign Liquidation May
Increase in Volume.
BRITISH PLANS REVIEWED
Study Of Latest "Schcmc"
Shows There IL Little Dan
ger Of Important Selling.

thhf uNtvTs OUo Vi NV Et1trlbpTS vi
the New York Stock Exchange had thi.
TO say on Saturday:
Tho fact seems to have been ignored
or at least CLOSED over that under tho
terms Of the loan (to Great Britain) tho
collateral stocks may be sold and the
British notes taken up-or that other
securities may be substituted and the
originals sold. Also that the 800. 600, 900
tof American securities) referred 20 may
constitute only a part, possibly only n
small part Of the securities of this. char
acter owned or controlled BY the British
Government. The amazing fact
can railroad eecurities) has been abb
sorbed In eighteen months--easiiy. with
out disturbances. at times on n rising
market-this fact does not contradict
the existence OF n great supply stu owned
abroad, n with The continuance Of the
war much OF II is destined still to be sold
here"
II "a true mat the 800. 900. 900 Of
American securities deposited as mart
collateral for the recent $3.50, 900, 900
British loan constitutes n small part Of
the American securities SIN owned or
controlled by the British Government. or
nv British subjec,s. II Il true-and this
also has been pointed out more than
INV III tuis NOiuIIlH-InNt COnrlnNeN UnNl-
dalton for foreign account should he ex-
peoted. II may he misleading. however.
to direct such pointed attention to the
possibility OF sale of collateral recently
deposited against The British loan.
rrOvisions of British "Scheme,"
a largo amount OF American stocks
and bonds was bought ny the British
Government. but II was known that nu-
NJ Estg.L
c~urities objected to selling wins, they re-
garded "a peculiarly attractive invest-
ments. For this reason arrangement.
were made FOR the British Treasury to
borrow the securities which Il could not
purchase.
NOT long ago new mobilization
scheme was put into effect. This scheme
embraces n In a sense supersedes the
original mobilization scheme, and all ,s-
sues listed under tie orig nal scheme
may be subject 10 tho second ore. Some
OF the provisions OF this second scheme
are rs follows:
While the securities are on deposit with
the Treasury the lender will receive
from the Treasury all interest and d!v!-
bends paid on the securities, and In nd
di.!on each year onc-half Of I per cent
OF tho face value OF the securities. The
Treasury reserves tho RICH, 20 dispose
OF the securities. THIS was necessary in
order 20 utilize the s,oris ana bonds
a. collateral, bu. in the event OF their
being disposed Of the Treasury must
either repurchase the securities In order
to return them or must pay 20 tho lender
tho deposit value Of the securities Plus
> per cent.
When this provision was announced u
was feared that the British Treasury
planned to n advantage OF any ad-
vance In price in the American market
TO sell The securities. II was rea soned
that II they could be sold at an advance
OF moro .han 5 per cent. there would he
an actual prob, for tho Treasury On the
transaction.
Treasury Explains.
To set thcs. fears at rest q suose-
qucnt announcement was made that In
case the Treasury found Il necessary
10 sell the securities the lender should
receive mt the end OF the deposit period
ms fun share OF the average price actu-
ally realized On the sale. even though
the av"rlge price should exceed the de-
posi-, plus ; per cent. aud !, was pointed
gu. that there was no intention Of sell
Ing the securities unless th.s should be-
come necessary, or in other words un-
less tie Treasury could not otherwise
pay back the loans received IN this
country.
II would be foolish 70 assume tina,
he British Treasury was not acting n
rood faith when II outlined It's plan 70
British holders Of American seCu- tiles
II appears that under the provisions OF
the scheme the British Treasury tech.
nically could undertake a gigantic spec
ulat'on, that H.. hat Il could undertake
to Sell the borrowed securities at prlces
more than ) per cent. higher han tibet,
deposit value ard then buy them bach
At less than the selling price, We're Il
possible for auch Il plan 20 be carried on,
successfully the Treasury would no, lost
the premium OF 8 per cent. which 4, ha.
assumed 10 pay IN case Of sale. a. 4
could return the securities instead OF IN,
amount received on the original sale
but the undertaking would be dange-ou,
because OF the tremendous volume o.
securities involved, and 1t would be al
moet impossible OF accomplishment.
So in actual fact the terms Of n,
latest mobilization scheme provide al
most positive assurance that II the Brit
ish Government remains solvent Their,
will be comparatively little " any forcet
selling OF American securities for British
account during the war period. becnus,
there II ample reason TO believe tina
the great majority OF British holder,
who have not already sold their securities
will deposit them with tho Treasu-N
rather than sci! them In the open market
Distribution Possibilities.
The latest estimate OF tho Nationa
City Bank OF the amount OF liquidation
of foreign interests In this country sine
the outbreak OF the war Is 81 COO. 600. 900
IL should not be overlooked in this con
nect!on that no one knows what Dercent
age OF the stocks and bonds making M
that total has been actually absorbed
Large blocks Of securities were taken b,
American institutions, rot with the lnten
ton OF keeping them permanently but u
selling them gradually as market condl
tons permitted.
The absorptive power o' the market II
no last two or three wc"i. has been ap
parent to all, and Il MAY he reasonahl,