The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-01-28
Experiment in Finance With
Political Motive Works
Out Well.
ANNOUNCE BANK MERGER
Amalgamation Approved in
Most Quarters, but "Money
Trust" Cry Is Heard.

as the Canadian plan OF controlling the
prices Of the Dominions internal war
loans
This week the special victory loan
committee, which has controlled the
trading In the two large popular loans
of the Dominion, was virtually dissolved,
Its activities coming to an end for the
time being with the listing Of the bonds
OF the second victory loan OF 1918 on the
Canadian stock exchanges. The bonds OF
the first victory loan OF 1917 had been
listed in the closing days of December
last
In the case of both loans the commit
tee controlling the trading, allowing
fixed price to the seller OF the bonds
and charging a point higher TO the buyer.
had reached an impasse. Successive ad-
vances In the fixed prices had failed to
dislodge offerings sufficient to take care
OF the demand. In one maturity of the
1918 loan the surplus of buying orders
over selling orders when the committee
decided to throw up its hands and
transfer the trading to the open market
was close to 100000. a considerable
excess when allowance Is made for the
moro or less restricted character OF our
investment markets. All the bonds are
selling at premiums over their issue
prices and they have continued to ad
vance on the stock exchanges.
Experiment Proves Success.
An unusual experiment in stabilizing
prices for war loans has therefore
closed with every element Of success.
It was closely examined by the
authorities In charge OF your Liberty
loans. but not favored by the majority.
Our own experience warrants some
doubt as to whether. in vSsw of the
heavy market that has prevailed for
Liberty bonds. the experiment of a con-
trolled market in the Initial period OF
redistribution would not have been
worth while. This Is with admission of
contrasting features between the war
loans of the two countries; ours were
sold with full exemption from income
taxes and at price conforming with
the conditions existing in the investment
markets, while your bonds were sold
on a basis that demanded a patriotic
concession from the buyer.
As to the political motive in the back
ground OF the Canadian experiment. II
was there at the outset. fully recognized
by those conversant with the situation.
but not openly discussed. The First
Victory Loan campaign was completed
a few weeks before a general Dominion
election In which Conservatives and
Liberals had united in a coalition to
defeat the anti-conscriptions. To list
the bonds on the stock exchanges, so
the view ran, would invite disaster The
largest war loan previously fioated in
Canada brought In subscriptions of only
s1S3,o00.o0O, against s420, 5000 offered
by the public in this first big popular
loan. Some holders would have TO sell
once there was market, and where the
buying power would come from after the
exhaustive canvass Of investment re-
sources Just completed no one could
say. A severe fall in the market price
OF the bonds seemed inevitable, and
with one person in every nine a sub
scrioer to the loan antl-conscr!ption
orators would have been placed in
possession of telling point against the
Government, just how telling those who
know Canadian politics may judge.
Non-Government Committee.
n was In this situation that this idea
OF . controlled market developed and
the Special Victory Loan Committee,
with offices at Montreal, Toronto and
Winnipeg, was organized. 1t was a
ion-government body, although It had
tho support OF the Government, which
conveniently overlooked for the time be-
ing its undertaking in the prospectus
The original idea OF the committee
was to find buyers for the bonds. and,
as the work appeared one OF some diff
Guilty. the granting OF the spread of one
point between the buying and the SELL
ing price as commission to dealers
who brought in buying orders looked
reasonable enough. NO commission was
paid In respect to selling orders. The
dealers Mad every incentive to find
buyers. none TO find sellers. In three
months the market had begun to change
from preponderancy OF selling to a
preponderancy OF buying. Advances in
the prices became necessary to maintain
balance. Those who had doubtfully
embarked on the experiment "blundered
into 1t, as some OF them freely ad-
nitted afterward. rubbed their eyes
with amazement. Instead OF having to
find buyers their task became to find
sellers.
Some interesting deductions from the
success of the plan seem reasonably
clear. The stablizing of the price of
the first Victory Loan quite evidently
was OF large influence on the success OF
the second. Against a subscription OF
S<20.000,000 from S74,331 subscribers in
1917 the subscription to the loan OF
1913 was S695,0O0.0OO from l,1O4,lO7
subscribers. There was no dissatisfied
element among the new buyers of bonds
because of falling market In their
purchases of the first loan. Further
tho Government was able to AK a better
price for the second than FOR the first
loan the latter was a u Per cont bond
at a net cost, allowing for q concession
Of interest IN the first coupon. OF about
es.8. The former. with the came inter.
est return. was sold at 100 and in,
terest
Bargain Hunters disappointed.
Back of the success Of the plan o.
course was this. that the very weight o.
. $500, o00.00 loan would have broker
the price In the first stages of redistr
button. when bonds that some sub
scrbers never intended to keep woulC
have been sold. BY extending the periot
OF redistribution over a fairly length,
period and putting the whole bond sell
ing organization OF the country to worl
these loosely held bonds were hnall,
placed with real investors. The credi
Of the Government was sustained anC
no one suffered. II exception be made o
bargain hunters who. at the expense o
the sellers necessities might hav,
bought at favorable prices In an opeI
market
Big Bank Merger Announced.
The third big merger OF Canadian
banks In year was announced th
week. the Minister OF Finance havinI
given his consent 10 a union OF TIL
Bank of Nova Scotia and the Bank o