The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1918-03-19
TOPEKA STATE JOURNAL
INFORMATION BUREAU
FREDERIC J, HASKIN, Director.
Washington, D. c.
WAR FINANCE CORPORATION.
Washington, d. c.

vided in the bill esta blishing the war |
finance corporation. Only one act OF |
the war congress-the selective draft |
act OF May 1S-can really compare
with it in Importance, in novelty ana |
in far-reaching effect
The war finance corporation bill ran |
the gauntlet of terrific senate oppo- /
sition before it emerged successful
tho modified; it still has several lines
of trenches to carry in the ways and |
means committee and on the floor OF |
the house, and then in conference. 1t !
is likely to be sent back to conference |
two or three times. But it will pass |
1t is certain to pass, in spite OF the |
fact that many of the men voting for |
it preface their votes by stating that
they disa pprove of it.
1t will pass because it is an abso- |
lutely necessary piece of war legis-
lation. The form in which it will be-
come law is already practically set
tied. altho long and heated contro-
versy will modify its details.
This great piece of legislation con-
tains two vital features. They are
closely allied, but SO distinct that they
might have been established in separ-
ate acts Each of them confers enor-
nous power on the federal executive.
One is the section authorizing the War
Finance corporation to issue huge
quantities of bonds The amount will
probably be limited to 100000 900,
altho the house favors a smaller sum.
The effect of this power will be to give
the federal government control of the
liquid capital of the nation, in the
large financial sense 1t represents an
irresistible balance of financial power
in the present state of the money
market
The second significant provision is
the clause establishing a capital is
issues of securities in excess of $780,
600 This committee of five men will
have greater power over American
business than any group or agency in
history. Their function will be to de-
eide whether or no a new enterprise,
or new bond issue. is contributory
to the successful prosecution of the
war. If they decide that it is not,
that enterprise is probably doomed.
The original draft of the bill gave
this capital issues committee the
actual power to forbid the floating of
loans not contributory to prosecution
of the war. This grant of power
alarmed the senate, and they amended
the section SO that the committee
should be without power to do more
than recommend. The effect will be
practically the same. If the capital
issues committee passes adversely on
a bond e-"blacklists'' it, as the
procedure has been termed-no stock
exchange will deal in the bonds, their
security value will be vitality impaired,
ana the chances are a thousand to one
against the issue ever being floated
even if the FRONTIERS do not feel pa
triotically obligated to heed the ad-
verse decision of the committee
rms piece of legislation, which as it
| has been phrased, moves the. finan-
| cial center of the world from Wall
street to Fifteenth and Pennsylvania
| avenue (the United States treasury
and confers on a group of five men
the power of life and death over
American business" would never have
M -
| except for the pressure of absolute ne
cessity. That necessity exists in the
| state of the money market in the
| United States today. and in the i'm
pending flotation of further huge lib
| erty loans.
The combined effect of the first
and second liberty loans and the war
taxes will be to drain the country of
large part of its liquid financial assets.
Meanwhile, the abnormal expansion
| of war industry calls for an unusual
amount of liquid resources. The prac-
teal effect of this situation, which has
been characterized by experts as
| grave in the extreme, is to hamper
and construct finance and industry,
! an devon to bring up the prospect of
considerably higher interest rates on
| future issues of government bonds. 1t
| is undesira bic to float government
| loans at rate of more than four per
| cent, quite aside from the increased
ponding semiannual increase of the
circulating medium and the resulting
initiation of the currency and price in
creases in all lines, because when the
rate passes four per cent, various 9TH
| er classes of investments are hard hit.
A notable example is the case of the
savings banks, with their four per
cent rate. 1t is feared that govern
ment bonds at four and a half per
cent will divert huge sums from
| H. "a i
nancial structure.
1t is impossible to summarize brief
" the innumerable ramificationS of
the effect of the war loans and war
taxes on the financial situation, but
it is sufficient to say that they have
affected it radically, and that the
war finance corporation bill is adj
vanced as an instrument by which the
government will be able to control the
money market, to increase safely the
liquidity of the nations assets, and to
direct those assets into channels
where they will do most to win the
war.
In addition to it's power to prevent
the tying up of capital in non-essen-
tial enterprise, the corporation will
have the positive power of assisting
any industry which is contributory to
the prosecution of the war. 1t will
probably begin with a capital OF
$5Oo,OOO,0O0, and the additional re-
| source OIL " ISSUE JULIUS u y
to $4,000, 100000. From this enor-
nous reservoir of liquid capital, il
can pour stream of financial life
blood into any enterprise whose sus-
F tenance and expansion it deems neces-
sary.
TIE corporation will be intimately
| connected with the Federal Reserve
, hank and in this connection lies its
power The twelve regional banks
of the federal reserve, with their
thousands of member banks, control
the finances of the nation and hold
the gold reserves which render the
| United States. financially impreg nab BILE
Bank notes, issued against their re-
5 serves represent the nations potentia
reserve of liquid paper, which the