New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1917-04-19
Wednesday,, april is, 1911.


concerned with two things-frst,
safety Of principal and, second
weld. The corporation planning to
issue securities must take account OF
these factors and be prepared to
met the standards established by
connection for funds if it hopes to
secure the favor Of the investor.
The forthcoming government loan
will have the advantage Of an Gle
ment which does not enter into cor
rorate securites-the appeal to pa
triotism. The potency Of that APP
peal can hardly be overestimated.
I Already thousands Of investors have
placed orders with bankers and
brokers' to purchase as much Of the
cold Glory Loan as they can afford,
regardless Of the terms Of issue.
An interesting question concern
ing patriotism in connection with
the war loan is raised by James 5.
Alexander, president Of the National
Bank of Commerce in New York, IN
an article prepared for the next is
sue of the System" magazine. IT
is this, in effect: Should the gov
/ eminent. relying on patriotism to IN
sure the success OF the operation,
+ bring out the loan on a basis which
would yield less than a fair rate"
Money, he says, should either he
given or loaned to the government.
If it is given the matter of yield
does not enter the equation. If II
is loaned, however, fair market
rate should be paid, Just as the gov
eminent should pay fair price for
the supplies which it must purchase
from producers. would it be fair"
Mr.. Alexander asks, by way of illus
tration, "to purchase supplies at a
price far below the market, while
our Allies arc obliged To purchase
the same supplies at price above
the market rato?' lie continues:
Tho question Of patriotism is in
volyed in the attitude Of the people
towards taxation. A patriotic people
will not object 20 taxation. | be
Icyo that the people Of the United
States to-day will come forward in
this great emergency as fully as any
people have ever come forward in
such a situation. But believe that
poor and rich alike will prefer 20
give their money 10 the government
under thorough scheme Of taxa
ton and allow this money 70 be
used by the government for the pur-
chase Of supplies at fair rates, and
for the payment of interest on bonds
at fair rates. rather than to be asked
10 sell their merchandise below the
market and to subscribe TO loans
which are below the market
For temporary purposes the United
states can borrow on short term
notes any rcas enable amount that u
may desire ~ very low rate. when
IL come 20 long term bonds | be
lcvc that they should be put on a
basis of fair return. The Amehcan
government can afford TO pay fair
price for what 1t gets. In fact, the
T-,t4oI c4,4or Eo,.or,,y,o ont copnot
afford not TO pay fair price. Long
term bonds should be put on basis
which will invite subscriptions from
an the people at the outset. Large
institutions should not be called
upon TO strain their distributing
machinery in order TO place bonds
which are really not on a fair basis
and consequently not on sound
basis.
More than this Not only is it I'M
democratic TO expect the large tinan-
cial institutions of the country TO
undertake 10 place long-term bonds
at less than fair rate of interest,
but it is at best a temporary OK
pedient. High pressure methods may
succeed in bringing about the dis
tribution Of a comparatively small
amount Of bonds. But high pressure
methods will not bring about any
thing like permanent scheme OF
national financing In the end the
people and not the banks must take
up the bonds, the banks giving their
services where they are needed.
This is a clear statement Of the
situation, except in one particular.
Mr.. Alexander gives no intimaton
Of what he considers a fair rate of
return on the proposed bond issue.
The bonds are to be offered at par
and will bear 81 per cent interest.
Is that a fair return? The answer
must necessarily be merely an eX-
preston of opinion. since there is
no way Of determining just what is
fair, especially since government bor-
rowing will be on a scale never tried
before by any nation, and the ex-
tent Of the operation is an impor-
tant factor. 1t by no means neces-
sarily follows that 3l9 per cent is
rot a fair rate Of interest on the