New-York tribune., 1918-01-13

effect on INC Stock Market yeSter- (
days Slight decline being due chief
lv to other things, largely to selling
ly professional traders who pre-
ierred to be cut OF the market over
the holiday. In some quarters there |
was disposition to regard govern
ment regulation of the capital mar
Nets with disfavor, but it is really a
constructive move, and would be !
more likely to exert favorable than
an unfavorablc influence on most Sc
curities on the Stock Exchange list, |
1oy the simple reason that majority
Of them represent businesses which !
can be classified as essential. More
over. the probabilities are that the
aggregate Of corporate financing
would BE increased were the Treas
ury's plan put into operation. Ap-
pications for new capital have been
in extremely small volume of late.
because Of the high price for money
and the fact that government financ-
ING has absorbed most Of the funds
available for investment. Under
the plan as outlined in the Washing
ton dispatches, it would be much
easier for corporations engaged in
essential work to procure funds than
it is at present, since they would
have active government assistance.
The only unfavorable phase Of the
matter, in the opinion Of one banker,
was that government and corporate
finance might become so inextricably
intertwincd that it might be difficult
TO unto the knot and restore the
freedom of industry after the war.
One thing of incalculable value
which would result from government
regulation of security issues would
be that fraudulent promotions would
cease. The scores of millions of dol
lars which arc each year transferred
from the pockets of unwary Gin
vestors" to those of unscrupulous
promoters through the medium Of
fake oil, mining, motor and other
companies would find their way into
legitimate securities.
1t seems to be reasonably sure
that the next issue of Liberty bonds
will be brought out on a basis to
yield more than per cent, but
whether this should be done by in
creasing the rate Of interest or by
ctfering the bonds below par is a
much debated question. In so far
IS the cost of the money to the gov
ornment is concerned, there is no diff
ference between Offering 4 per cent
bonds at price which will yield 4 Il
per cent, and issuing at par bonds
bearing the latter rate OF interest.
Nor would the effect upon existing
corporate securities be any different /;
in either case they would tend to ad-
Just themselves to tho increased
cost of capital, which henceforth,
for the duration of the war, will be
measured by the yield on govern
ment bonds. But there is psy-
Geological difference between the
two methods which is of great i'm
portancc and which has to be taken
into account by those who must de-
termine the issue. The problem is
created by the fact that the out
standing 4 per cent issue is selling
below par, which obviously makes it
lmpractlcable or at least very diff
cult to float at face value bonds
question is whether the offering OF
bonds below par would attract
enough bargain counter buying te
Offset the possible loss Of confidence
which might follow the tacit officia
admission that United States bond:
were not worth face value. Un
doubtedly, as one writer puts it, th'
Offering Of Liberty bonds at dis
count, would "appeal to the magma
tion," but the trouble is that tn
imagination does not work alon!
fixed lines. Many persons looking
ahead would visualize rise to par
or beyond, or would see the certaint
OF repayment at par at maturity
But many others would look tn
other way, and ask perhaps, "if 90
why not 95, or lower?" The fall i
the outstanding per cent issue t
nearly SO has not stimulated tn
imagination sufficiently to cause
rush of buying, though selling ha
not been heavy, either. Except i
the case Of rich men who purchase
the 319 per cent bonds because Q
the tax exemption, Liberty bond
have not been bought for the II
terest return. Most subscription
We're made because it was patriot
to buy the bonds and because the
Afforded an easy and attractlv