New-York tribune., 1918-09-12
McAdoo Tax Plan
Causes Sharp Rise
In Liberty Bonds
Profit Taking and More
Conservative Views Re-
suit in Reaction Later

In the movement of prices Of out
standing Liberty bond issues on the
Stock Exchange and In the expression
of opinion by leading bankers. Wall
Street yesterday placed its seal Of ap-
proval on Secretary McAdoo's pro-
posal to extend the tax exempt feat
ure of the national war bonds. AS a
result Of the recommendation to in
crease the exemption from the surtax
of outstanding bonds by $4,000 Lib
erty bonds of the first three issues
were quoted at an advance Of from
1 to 31s per cent, in the morning,
though later in the day a large part
of the gain was lost.
BY making Liberty bonds more at
tractlve from the investment point Of
view, bankers argued that the pro-
posed changes would greatly broaden
the market for the bonds and would
aid materially in heightening the sue
cess of the fourth Liberty loan. AL
though the view was widely held that
Mr.. McAdoo went as far as practicable
IN suggestions as to the extent to
which the exemptions should be
widened, some bankers felt the
principle ought to be carried still fur
ther. Good as far as it goes" was
the characterization by one important
banker of the new plan.
Bond Traders Took Profits
On second thought bond traders
took the view that the market had re-
sponded to the McAdoo proposals too
violently, and the prices on the Liberty
bonds reccded in the later trading, In
the first hour of trading the second
AIS, the converted bonds of the Sec
ond loan, spurted most spectacularly.
Against a closing price Tuesday Of
94Ha, they opened at SO and quickly
rose to 98 They closed at 1856. The
third 4 rs, the bonds of the third Lib
erty loan. which closed Tuesday at SO,
sold up to 97.1O within fifteen minutes
OF the opening ana closed at 1854. I'm
converted bonds of the second issue
rose from 94.46 to 90 and closed at
$3.50. The 3 Y bonds of the first issue.
which are exempt from state and
Federal taxes, declined from 1O1.34 to
1OO.62. On the rise of the bonds. there
seemed to be much profit taking, which
contributed to the reaction. A bond
expert characterized the inward
tendency of the early part of the day
as puppy furry"
Plan to Keep Issues Near Par
The bankers who are members of a
special committee headed by George
W. Hodges to consider methods of
stablizing the value Of Liberty bonds
met for three hours yesterday. After
the conference it was said that the
committee was seriously considering a
plan materially different from the
Canadian Victory bond programme to
keep the bonds around par In view
OF the Secretary of the Treasury's in
dorsement in a general way Of the
Canadian method, this statement was
regarded with especial interest.
Varied comment was made bv in
dlvldual bankers on Mr.. McAdoo's pro-
posal that the limit which a national
bank may loan to one person or firm
be increased beyond the present limit of
10 per cent of the banks surplus and
reserves to holders OF Liberty bonds
In some quarters it was pointed ont
that the removal of the present arhi.
trary limitation would helpfully elimi-
nate an lnsurmountablc obstacle in
merltorlous cases of commercial credit
some, however, maintained that. unless
vigorously controlled, the su uggested
change might lead to daneerous in
f1atlon OF bank credits.