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

with the turn OF the fiscal year the
money market outlook has assumed
new Importance. for the next six
months will witness extraordinary
financing, not alone for the Govern
ment but for the hundreds Of private
corporations which are engaged upon
work that is vitality needed for
war purposes. The fact that such q
powerful corporation as the Union
Pacific Railroad had to pay last week
6h per cent. for $4,000, 900 loan
through the sale Of ten yetr 6 per
cent. bonds, reflects the difficulty of
borrowing large sums in a war mar
ket Yet these needs have to be met
IL it is possible to satisfy the demands
without detriment to the Government
which must have first call upon the
money market throughout the war
period. What, then, are the prospects
OF raising the vast sums needed to
finance American industry during the
coming year of heavy war OUTLAWS,
high taxation and worldwide compli-
cations?
Great Things at Stake.
The chances are that legitimate de-
mands will be provided for, IL they
are brought within reasonable limits
as modified first Of all by the press
ing Government needs. Nothing worth
while in a commercial sense would
survive should the war fail and this
country fall under German rule. II
would be folly, therefore, for the bank
ers to finance any project which in
terfered with the work of winning the
war in the shortest possible time. After
this vital need has been provided for
the corporation demands can be taken
up in the order Of their Importance
In such considerations, however, the
new tax burdens have 20 be reckoned
with, since it is obvious that IL the
earnings of business are to be seri-
ously curtailed the credit of tax pay
ing corporations will be imperilled
This is apparent, since bankers must
see a margin Of profit for all borrow
ing corporations sufficient to insure
their continued prosperity. II the
margin is too small to protect them
during a period Of business depression
SoNCEHl6 Tic NlClSSlluutS WHICH SuCtl
seasons always involve. a restriction
Of credits would result. This is in
evitable. since banking is largely a
cold blooded business which consists
chiefly in lending other people
money.
Influential Factors.
The future OF the money market
therefore. must be largely influenced
by the bearing Of the new tax law
upon the incomes OF corporations,
individuals and institutions. Great
Britain, which last year raised through
taxation $4,000. 100000 - about the
amount we raised here-has provided
for increases aggregating $4,000. 900
during the coming twelve months
This country could stand a similar
increase without much trouble. but
should taxation be doubled at once
instead Of by gradual increases. and
the attempt made to raise $4,000, 000,-
900 without greatly increasing the
number Of things taxed. the effort to
pay over such an unprecedented tax
fund would force thoroughgoing re-
adjustment in business and money
market affairs. Until the public knows
therefore, what portion of it's income
the Government will take through
taxation it cannot tell what surplus II
will have for investment. The rein
vestment Of July dividends and In.
terest payments may be held up pend.
ing the announcement Of the new taa
schedules.
High Bids for Capital.
But the per cent. offered by Dor
rowers Of high credit may be calcu-
lated to bring out every dollar thai
even cautious investors can spare
Four per cent. loans running from
one to six years and put out by cor
porations of excellent credit have beer
offered at prices showing an income
return ranging from 6& to 7% pei
cent. on the investment. These loans
are perfectly safe and in a norma
market could be placed for very much
less. The market price Of longer
term securities Is also exceptionally
attractive. But tax exempt bonds
especially New York city issues, have
advanced sharply within the last
month in response to the broader buy
ing by investors who feared the ef'
fects of increased taxation. There
are about $4,000, 00O. 900 Of tax exempt
bonds outstanding in this country fol
such buyers. including the first Lib
erty Loan, which was exempt from al
taxation. The list will probably bt
enlarged as soon as States and mu-
inequalities resume borrowing in a
normal way.
Treasury's Borrowings.
Any consideration of the money
market situation must take account
also of the short term borrowings by
the Federal Government, in connec'
ton with the war OUTLAWS on its owr
account and for the benefit Of it's al
lies. These borrowings are in record
volume and will amount to $4,000, oOo''
900 within the next four months
through the sale every other Tuesday
Of $3.50, 900 900 of United States Treas
ury certificates of indebtedness. IN
asmuch as these certificates are is