The Washington herald., 1918-10-25
LOAN MACHINE
WORKS NICELY
Success Due to Wonderful
Banking Efficiency,
Says Holland.

me "SlG 'eS
that greatest selling campaign the
world has ever known, a remark was
attributed 10 benjamin Strong. jr., OF
the Federal Reserve Bank. in the New
York district, that he would be more
than gratlfed il the total individual
to the loan should reach
as high as 600. OC0 or approximately
one to every four. of the people OF the
United States. Frequently while the
was in progress some OF
those who were directing II spoke
as though 1t would DE almost or as
great importance from many points VI
view II at least 25Oo00oo individual
to the loan were made
as would be the caseswere the entire
six billions subscribed or even over
1t was possible within twenty-four
hours after the campaign ended 10 re-
port that the evidence was plentiful
thai this extraordinary number or IN
~ al subscriptions had apparently
ecured. One of the reasons
subscription by 25.OOo.000 indi-
was deemed Of great impor-
was the belief that II this hope
M,lc realized it could be stated with
.onfidence that the attitude of the
American people toward investment
of a considerable part of their saw
ings in securities that are safe and
bear interest has been wonderfully
changed within year. In other
words the experience which has been
met with in floating the four series
of liberty bonds has been OF the
highest value in teaching the Ameri-
can people, and especially those
whose incomes are moderate. rea-
sonable habits OF thrift. This les
son, now well taught. will. the lead
ers say, make all the more easy the
difficult task of readjustment TO peace
conditions after the war is ended
These total subscriptions by individ-
uals who, as a whole, constitute one
fourth Of the population OF the United
States, make it certain that loans
which Secretary MCAdoo is hereafter
to offer will be aS fully subscribed
as was the Fourth Liberty Loan
Symmetry in Financing.
The financing of this loan is frankly
spoken Of by those who have had
share in achieving its
success, as an excellent demonstration
OF the symmetry, efficiency and ca
pacity of American banking and f.
nanclng institutions. There was no
creaking OF the machinery. 1t worked
with wonderful symmetry, not only in
the large financial Centers, but also
in other districts where banking IA
cilities are not very large.
Many times the question has been
asked, how the Treasury Department
is to realize Immediately upon the
of s6.OO0,OoO, 900. That in
Quiry is explained by the common
understanding that there is in the
United States in actual money an
amount which is much smaller than
s5 Oc0 10000 yet the banks have un-
dertaken to finance Immediately the
payment to the government of the
aggregate amount of the Fourth Lib
erty Loan. 1t is impossible at pres
ent to estimate that part of the loan
which was paid for in cash and by
checks drawn on bank accounts. But
the presumption is that the larger
part of the subscriptions was made
either on the instaIlment plan or
the borrowing of funds or
credit from the banks. To make the
explanation clearer it may be worth
while to trace the course of procedure
which follows the purchase of a $50
bond upon the installment plan. There
is a first payment OF 81 in cash. The
bank receives that much cash at the
beginning OF the transaction. Then
there are to be subsequent install
ments until the bond is paid for. The
bank charges AZ per cent interest. but
receives that interest not from the
customer but from the amount nomi-
mated in the bond. The $50 bond is
held by the bank as security until all
the installments are paid, and the Sc
curity is perfect.
Banks Arrange Credits.
The banks make arrangements
the Federal Reserve Banks,
if necessary, credits are es-
tablished. this makes the proceeds
from the subscriptions Immediately
available to the Treasury Depart
ment, except that Treasury certif-
Gates which the banks have been buy
ing for six months are turned i'm in
Payment of the prOportionate share
which these certificates bear to the
loan. For Secretary McAdoo found it
eXpedient. even necessary. to discount
the 5000, 10000 loan by selling Treas
ury certificates to the banks. these
certificates to be used in payment of
to the loan.
The presumption is strong also that
III NpllAt VI lllC ldI ger lllldlltldl CEN
ters underwriting agreements Were
made between groups of banks
whereby the financing of the sub
to the loan could be more
easily achieved
Many times since the campaign be-
gan late in September the statement
has been made by leading bankers
that this financing. which has been in
progress for a little over a year, and
which has brought to the Treasury
s12, ,0OO. 10000 in the form
Of loans, presented an absolutely new
and original proposition. There were
no precedents for it in the United
States. 1t was necessary to work out
the problem by utilization of new
factors. This has been done by the
American banks in cooperation with