The Washington herald., 1917-06-26
HOLLAND LETTER
The Biggest Daily
Financial News Feature of
the Counhy's Best Newspapers.

Although the clerical work connect
ed with the allotlng and placing of
the 500. .Oy9.1O liberty loan is so
great in some of the institutions
throuGh which subscriptions passed
mat 1t Is estimated that the clerks
will be compelled to handle from Is 90
TO $1,000 separate pieces. nevertheless.
1t is the understanding here that the
Secretary OF the Treasury. Mr.. Nc
AdOO, Deihg relieved of this RESPONSE
oility. now has time to consider the
next Offering of loan to the Ameri-
can people. - A question frequently
asked. or thought often sugge Sted. is
| this: In view of the fact that the
liberty loan was oversuhscribed by
nearly 80 per cent. will not Secretary
McAdoc feel justified in fixing the in
terest rate upon the new loan at 3I2
per cent. The opinion commonly pre-
walls that he may find 1t expedient.
especially for one reason, to fix the
rate upon the new loan at per cent
This special reason is based on the
fact that hundreds of thousands OF
popular subscriptions were received
from the people in amounts Of 81, ,00G
or less, because these subscribers were
persuaded that the bonds would in
short time bear a higher rate Of in
terest. Secretary MCAdoo did intimate
when making the offering that in case
higher rate was fixed upon for the
.
liberty loan bonds could be exchanged
for the bonds which bore the higher
rate of interest. Therefore, il is
deemed probable that many thousands
would be grievOusly disappointed. per-
maps lTritated, we're the Secretary to
fix the rate upon the new loan at 3l2
That is a question upon which he will
undoubtedly take advice from those
who are best qualified to give it, or,
IN other worCs, rom those who will
assist him in placing the new loan.
The United States has always paid
its bonded debt at par or at a pre-
MUM. One Of the best examples OF
this policy was that which was adopt
ed by the government soon after the
war with Mexico. The Treasury De
partment then deemed it the best
policy to buy up it's bonds. although
some of them had been sold at a dis
count. Therefore. the government en-
tered the open market and bought the
bonds at the current rate of premium.
IN fact, the government bought in the
early part of the administration of
Preside It Pierce bonds which did not
fall due until 1867, although these com
manded q per cent premium. In the
first year of the administration of
President Buchanan, the Treasury De-
partment had paid $S.OOO,OO0 in pre-
mirms when buying $53,0Oo,00O of debts.
Whatever the market rate NAV be for
4 per cent bonds. should that be the
rate fixed by Secretary McAdoo for
the new loan, and consequently for the
present loan at 312 per cent, it is re-
garded as certain that if the prece-
dents ere followed. these 4 per cent
bonds, after the close of the war. and
the inevitable triumph of the allies. of
which President Wilson has recently
given assurance, will command a good
premium.
In 1857 a large issue of refundipg
bonds, which bore per cent interest,
commanded a premium so that the
bonds stood at about 100. At this rate.
ana with twenty years still to run, the
bonds netted the investor only 2k per
cent per annum. Yet they We're a
IaVor'te investment. One bank in New
York City purchased and sold in 1879
approximately $7S0. 900 900 of govern
ment bonds, the principal part of
which were 4 per cent
A curious Illustration of the temper
OF the American people and especially
or investors towards government
bonds is furnished by the experiences
with the IL per cent bonds. AL
though there was no great difficulty
In marketing this issue, nevertheless
these bonds were never really popu-
lar. They did not command the pop
ularity which was the good fortune
OF the per cent bonds In 1887 the
IL per cent bonds, which had a lit
tie over four years to run, command
ed approximately 110. and the net
yield to the purchaser was 2 IA per
Purchasers of IL per cent bonds