The Washington herald., 1917-06-28
HOLLAND LETTER
The Biggest Daily
Financial News Feature of
the COunhy's Best Newspapers

Not again will any broker, at least
Of reputable standing. accept an or
der from a customer to sell liberty
loan bonds short. There was no in
cident associated with the floating of
the liberty loan which occasioned so
much criticism as did the sale of a
small block OF liberty bonds in the
open market short, presumably, and
at a figure slightly below par.
OF course, if anyone who is thS
owner of a liberty bond and who Is
in desperate need of money offers to
willing to bargain for IL at a price
below par, nobody could interfere
with sale of that kind. But a trans
action of that kind would not be what
is known as selling short. There has
been established, it is understood, a
strong influence of the governors of
the stock exchange. that no liberty
loan bonds shall be sold short.
The reasons for this understanding
are excellent, and they are justified
by an experience in the case Of Sc
curities of another kind.
Some years ago a tacit understand
ing was reached, with the full ap-
proval of the governors of the stock
exchange, by which brokers agreed
that they would under no circum-
stances accept an order to sell the
SWIM Va d bdllh SllOIl= nat
standing was based upon the belief
that it was the wiser part, in fact,
imperative, that there should be no
speculation in bank stocks of a kind
which would involve the selling of
these securities short. OF course,
the purchase of bank stock at the
market rate, and If that transaction
Is carried out, some other broker sells
the stock, but the transaction Is a
genuine one. This tacit understand
ing has served we'll to steady the
market for bank stocks and to con-
vince every one that all dealings of
this kind are genuine and are not un-
dertaken in order to depress artificial
ly the value of the stock.
1t Is of Importance that the market
value of the liberty loan bonds shall
be so maintained as to reflect unim-
paired credit of the government. The
government has never, at least since
the early days Of the civil war, pur-
| chased its own bonds upon a falling
market. In fact, it has always paid
par or better when buying its own
bonds. Sometimes this has entailed
good deal OF expense, but 1t was ex-
pense which was deemed well worth
while, since 1t served to maintain the
credit Of the government.
Several years ago. DR.. John Bassett
Moore served as a member of the Pan
COMMISSION, which
nearly all of the South American
states. That service was performed
two or three years before DR.. Moore
was called from his chair as professor
In Columbia University, to serve as
counsel for the State Department in
the first year of President Wilson'S
first administration. Upon his return
from South America, DR.. Moore spoke
with some amazement of industrial
conditions which he discovered there,
especially the cotton manufacturing
industry, which is becoming more and
more important in Peru, having been
there developed and stimulated by
the American house of W. r. Grace
and Company. Careful investigation
into commercial and financial condi-
tions persuaded DR.. Moore that II the
United States is to have permanently
satisfactory and rapidly Increasing
commercial relations with South
America, there must be established a
monetary unit, which will pass at its
face value in both countries. Thereby
what is known as dollar exchange will
be the more easily established He
and those associated with him in the
Pan-Amercian financial conference
have reached the conclusion that this
unit should be, in its relation to the
dollar, similar to the French franc
piece. If adopted, 1t would be known
as the American franc, and 1t would
be so coined as to have the value
of approximately one-fifth of the
American gold dollar.