The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-01-24
what Is . Business Basis for the
New Victory Loan?


New Victory Loan?
There may be. we hope there Is.
general agreement with the belief Of
Mr.. McGARRAH, president Of the Me-
chanics and Metals National Bank
and assistant chairman of the Cen
tral Liberty Loan Committee of New
York, that the next Government loan
should be issued on n business basis.
II 1t Is not 80 issued 1t will fail. There
can be, however. and no doubt there
Is, n wide difference OF opinion as to
what, under all circumstances, is the
wiser and surer business basis.
1t Is Mr.. McGARRAH's view that
for the next issue and presumably for
still later issues which will be neces-
sary the Interest rate should be 5 per
cent. But is there any certainty that
per cent. interest rate Is the sou-
ian-of the Governments problem
Is it fact that the gross interest
rate means or can mean ms much to
the investor on a business basis as
the net interest rate?
The big investor cannot get net Of
per cent. out Of any bond that is
taxable. He may not get 8 per cent. He
may not get even half the gross in
terest. Unless he can foretell what
the taxes are going to be-and no man
can foretell such thing-the gross
rate cannot possibly mean to him
what an absolutely sure net rate
means to him.
But we must also consider the duty
Of the Government and the duty Of
everybody to the little investors who
already have put their savings into
billions Of dollars Of the existing Lib
erty bonds. Those bonds are now
well below par. With a per cent.
bond outstanding they would go cor
reSpondingly further below par. Gov
eminent bonds In the hands Of per-
haps 20,O00.00O American people
would look to them as sick as the
securities of a fake mining scheme or
empty oil we'll.
Now, the actual interest received by
the little bondholders is not Of great
consequence to them. Nothing can
better emphasize this truth than the
concrete example Of the difference in
money returned to the holder of
per cent. bond as against the holder of
Az per cent bond Of $1,000. The
interest at 4 per cent. Is $40 a year
The interest at Az per cent Is S42.5O
n year. The difference Is q mere $3.50
year, or little more than 90 cents n
month. On 500 bond the difference
Is only % cents year. or little
more than two cents a month.
But to the little investors the integ-
rity of the face value of their Gov
eminent bonds is everything. When.
through loss of employment or through
sickness or through any other misfor-
tune the little investors are compelled
TO sell their bonds, they should never
be called upon to take 5000 for the
thing for which they paid $1,000 into
the United States Treasury. When
they are forced to borrow on what
should be the strongest and most sa-
cred security on earth they should not
be sold out because that security has
shrunk in market value to the amount
they have borrowed on il.
The little investors in Liberty bonds
should not be made the victims of the
money squeezers as tens Of thousands
Of them are being made this very day
soldiers coming home without any
pay in their pockets; wage earners
out OF their jobs in war industries !;
mothers and wives and children
whose supporting men lost their lives
on the battlefield or in the army
hospitals.
Again. we must consider the saw
ings banks. the insurance companies
and similar institutions acting as
trustees for the American public
lney nave luNeSteu HuHureuS OI MILL
ions Of their resources in the outstand-
ing Liberty bonds. The new bonds at
3 per cent, driving down the market
value of their present holdings. would
Immediately impair their assets seri-
ously, might impair them. in some in
stances. fatally.
The United States Government can
not fail to take these facts into con-
sideration; the American people can
not. We do not hesitate to affirm,
therefore, that Mr.. McGARBAH's opin-
ION Of what Is a business basis for
| future issues OF Victory bonds IS
wrong.