The Washington herald., 1917-06-19
HOLLAND LETTER
The Biggest Daily
Financial News Feature Of
the country's Best Newspapers.

To the citizens Of Baltimore. who
heard the Secretary OF the Treasury,
Mrs McAdoo, deliver the final speech
of his entire itinerary in campaign
Of education for the liberty loan, he
said that II the war lasts twelve
would need 80 pOO, ,OOO, 900, Of which
amount q, 800. ,600 should be obtained
through taxation and $500, 100000 by
bond issue. This announcement came
as no surprise to some Of those In the
financial district who have bsen siy-
several weeks in aid Of subscriptions
!! to the liberty loan. One of the rea-
sons why these men were anxious
that the loan should be oversubscribed
ana that there should be large .popu-
lar subscription VA Tas o,, the belief that
all the easier to prepare for financing
a new loan which they knew the Seq
retary of the Treasury purposed offer.
ing within a few months.
Secretary MeAdoo's relation to the
highly successful floating of this stu.
pendous loan Is now spoken OF as an
achievements which will be sure TO be
! ranked with the historic achievements
of the Treasury Department. AL
though there have been occasional
comments, intiinating that in some de-
tails the Secretary might have chosen
a wiser way than that which he did
adopt, nevertheless there have been
without dissent cordial words of ap-
proval and admiration for the leader
ship the Secretary has shown in this
transaction.
One Of the bankers whose flrm made
very large subscription. to the lib
erty loan said this morning that all
this loan had spoken In terms of ad-
miration of the courage which Secre-
tary McAdoo revealed when he de-
cided to make an offer of s2.ooo. 900. 900.
although knowing that at the same
time he would ask Congress to per-
feet a war revenue tax bill which
would yield almost as much.
None Of Mr.. McAdoo's predecessors,
excepting possibly the first Secretary
of the Treasury. Hamilton, and JEFF
ferson's Secretary of the Treasury,
Albert Gallatin, was confronted with
a problem Of ouch stupendous propor-
factors as was the case with Score
tary McAdoo, when, Immediately after
We entered into war, he began to plan
for the offering of very large loan
to the American people. Secretary
Chase, in Lincoln's administration,
had not only American but European
markets to approach to float his loan.
When John Sherman was preparing
for the resumption of specie payments
on the first Of January, 1873, he knew
that the bonds which he would offer
for that purpose would be easily abb
sorbed by the banks. Secretary Sher-
man did hope that a considerable por-
ton of these bonds would be bought
by the people. But the machinery for
distribution Of that kind was not suf-
flcient.
Furthermore, other Secretaries OF
the Treasury, when Offering loans,
contemplated also payment OF COM
so-called "Windoms'' in 1881. For
secretarv Window refunded o per cent
bonds into 3H per cent bonds and did
all except clerical to the Treasury De-
partment. So also Secretary Gage
paid no commissions for floating the
Spanish war loan.
Another Important Point.
1t is the understanding here that when
Secretary McAdoo was in informal
consultation with financiers OF whose
Judgment he had high opinion. at the
time he was contemplating an offer
OF 1900 600 600, he intimated that it
was. his purpose to float that stu
perdous loan without any expense
at all in the form OF commissions.
He knew that It must be fioated ut
par. There would necessarily be some
large expenses entailed in adYertis-
ing and in the campaign of educa-
ton which Secretary McAdoo planned.
But aside from those expenses. the
cost, Of placing the loan would be.
in dollars and cents, nothing. But
it would. he was sure. entail great
cost in form OF service, for, in order
to succeed, it would be necessary for
men of finance, men of the banks
try, to undertake free OF expense a
campaign of education, giving much
valuable time to the work since the
people Of the United States has lit
tie or no experience in investment in
government securities.
Only Our Home Market.
Secretary McAdoo realized from the
beginning, and was reported to have
frankly spoken to those with whom
he was in conference about the mat
ter. that the only market for g, ,OO0, ,OOO,-
sues which it was his forecast he
would be obliged to offer, was with
the people of the United States, or
with the financial Institutions in this
country. England. France and all
the other allies have found markets 1
not only at home but in the United
states where they could place their
securities and receive in turn cash
or its equivalent in credit But world
conditions. Secretary McAdoo said,
were such that it would be impossi-
bic and in fact not desirable to place
any, of the bonds with investors in
foreign countries.
But details Of this kind and many
others were carefully considered by
the Secretary before he made his pub
lie Offering. One Of the most inn
portant of the details was what the
rate Of interest upon the bonds should
be: The decision involved careful con-
sideration of a good many factors,
some of them very technical. But
Secretary McAdoo also realized that
1t might be inevitable. and it was GER
tainly probable, that the next offering
higher rate OF interest than S1-2 per
cent. 1t is the common expectation in
the financial district that a new issue
Will bear as much as per cent, and
the Secretary was careful to provide,
in order to prevent discrimination
against the first issue Of bonds, that
these could be eXchangeable for bonds
of the new issue that brought a
higher rate Of interest. Probably
bonds of the liberty loan win not be
actually exchanged for the bonds of
the new issue, but instead there will
he stamped upon them a pledge BY
the government that thereafter these
bonds will bear the higher rate Of in
terest.
1t was only at the last moment that
Secretary McAdoo felt justified in say.
ing that within the next twelve
months the United States must have
as much as $40, 000, ,000, 900 In order to
carry on the war, nearly one-fifth Of
which would be obtained by war
taxes. The figures of themselves are
SPOKEN Of as revealing the magnitude
Of the undertaking upon which the
United States has now entered as one
Of the allies in the war with Germany,
and now the most powerful of any Of
the allies in resources of all kinds
tood' munitions, supplies. Red Cross
years, in fighting men and fighting
apparatus. HOLLAND.