The sun. [volume] (New York [N.Y.]) 1916-1920, 1918-07-01

sued In denominations as low as $500
they are available as investments for
even the smallest banking institutions
in the country. The allotment Of the
certificates will equal IN per cent. of
the gro~s resources Of each bank and
trust company, and the indications
are that these certificates will be dis
tributed pretty generally throughout
the United States. These certificates
will be offered in anticipation Of the
fourth Liberty Loan and accepted at
par in payment for the new bonds.
Later on in the summer the Treasury
will offer a $4,000, o00.0 900 issue to the
public direct for use in paying the
taxes due in June next.
Safeguarding the Money Market.
Sale of these certificates will be Of
assistance to the money market in
providing for the gradual withdrawal
of the money which must be sur
rendered to the Government in pay
ment for bonds and taxes. This meth
cd has the twofold advantage Of CIV
ing the Government the use Of the
money before the fourth Liberty Loan
is issued and before the June taxes
are due and in avoiding the strain
that would result from the adjustment
Of such enormous cash payments on
one day. A similar procedure was
followed in February, when the Treas
ury asked the banks to invest in such
certificates 2 per cent. Of their gross
resources every other week and so
protect the money market from undue
strain last week. This mode of settle
ment proved highly successful and
made possible an easy adjustment at
a time when record payments were
being financed. The fourth Liberty
Loan offering will provide a new test
for the money market in that the
minimum OF $4,000 100000 of bonds
will probably be offered. This will
be much the largest loan ever offered
by any Government, and notwithstand-
ing the reports that the interest rate
on this loan would be raised from
Az per cent. to AZ per cent. the
probability is that the lower rate will
prevail But it Is essential that this
great loan should be paid for with
Treasury certificates OF Indebtedness
rather than with cash.
The Coming Six Months.
1t is never possible accurately 20
forecast money market developments
in war time, for conditions are alb
normal and intense industrial activity
often prevails These conditions call
for a good deal Of new financing. with
a reimbursement Of credits and larger
demands for mercantile accommoda-
ton. 1t costs more to do business to-
day than ever before, owing to the
high prices for raw material and the
steadily advancing wage scale. The
time Is near at hand when the banks
Of the principal reserve cities must
make heavy shipments Of currency to
the harvesting sections Of the West.
1t will take more money to move the
crops this year than ever before. in
consequence Of the high wages paid
farm hands and the excessive cost Of
feeding the several hundred thousand
men. women and boys who VIII par
ticipate in the harvesting operation.
The money value Of this years crops
will break all records, since the whole
world is calling for American produce.
The Worlds Banker.
At a time, therefore, when the
United States Is acting as banker for
the rest of the world, and when the
American gold reserve forms the
financial backbone for the allied
forces, it Is essential for the banks Of
this country to keep liquid" and to
refer to the War Finance Corporation
the large number OF applications for
long term loans for the essential in
dustries. That corporation was Or
ganized to meet just such needs. and
since it is empowered to make loans
for periods Of five years or less 1t
can undertake a vast amount OF
financing which the commercial banks
were never designed to carry. The
position and their officers intend that
they shall remain so. Offers Of high
interest rates and commissions for
loans running beyond the six months
period have been turned down by
officers in control of the large city
institutions, who realize that in war
time It Is essential to carry larger
reserve than usual and 10 restrict IN
vestments for the most part to snort
term advances. Every bank mas us
peculiar problem to solve. however, In
responding to the needs OF its own
customers. so it is not practicable for
even the Comptroller Of the Currency
to Law down hard and fast rule for
all institutions to follow. But the
memory of such money markets as
were encountered In August, 1914, in
November. 1907. and In the fall OF
1898 is fresh enough in the minds
Of most money changers to cause them
TO avoid unnecessary risks in war
times.
Siren q thening the Banking System.
In the effort further to organize the
country's credit power a movement
has been started to strengthen the
Federal Reserve Bank system through
securing the support OF State banks
not yet allied with It, Although the
system has grown materially within