New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1919-03-02
SmOOt Bond
III Ian Feared
BY Bankers
Some Say Complete Demon
alizatiOn Would Follow
Scheme for u. S. to Sell
Believe Idea Dangerous
Senator's Bill Provides That
New Securities Bear Inter-
est al Escciwccn SOP. G..

Complete decentralization Of the exist
ing investment structure Of the coun-
try, with extremely unfavorabc effects
upon outstanding Liberty Loan issues
and corporate securities generally, is
predicted by Wall Street bankers if the
bill introduced into the Senate by Sena-
tor Smoot of Utah, providing for the
issuance and sale in the open market
of bonds or debenturcs guaranteed by
the United States Government and Sc
cured by the obligations of the Allied
and other foreign governments to
which this country made advances. Is
enacted and made operative.
The latest figures show that the
United States Treasury has advanced
to all Of the Allies $S,695, 157, 1886, Sc
cured by the I. O. US Of the different
governments. To attempt to issue
securities bearing a high rate of in
terest and carrying the guarantee of
the United States Government against
these obligations and offer them to the
public, would, in the opinion of the
bankers, literally swamp the investment
market and cause hundreds of millions
of dollars depreciation in outstanding
issues. In other words, the bankers be-
heve the plan to be extremely danger
GUS and entirely out of order at this
time. No doubt is expressed as to the
STABILITY of stock securities, which,
with fairly high rate of interest and
the guarantee of the United States,
would cause the liquidation of huge
amounts of outstanding securities by
holders scrambling to buy these bonds.
"lf the amount were two or three
hundred millions of dollars, or as
much as a billion dollars,' said a
member of a large international bank
ing house, "thesc bonds might be sold
IN the open market without endanger-
ing other issues. But to let loose
seven or eight billion dollars worth
OF such attractive securities would be
like opening the flood gates. The whole
aspect of the investment market would
be changed at once. The deluge would
be so great that it would drown cor
poratc borrowing and put our great
industrial concerns which need CAPT
tai IN serious financial straits
Would Convert Allied Bonds
According to the text of the Smoot
bill as introduced into the Senate, the
proposed now issues would have a
maturity of not less than five years
nor more than twenty-five, would bear
interest at tho rate Of between and
6 per cent a year, and would carry the
guarantee of the United States gov
eminent both as to meeting both princi-
pal and interest from the date of is
suance to maturity.
The Allied obligations could be con
vertcd, the bill provides, into either
bonds or dcbentures, with coupons at
tached and easily negotiable They
would bear the redemption privilege
whereby the foreign government, by
arrangement with the Secretay of the
Treasury, could call them at any time
on payment of principal and accrued
interest. The text Of the bill Isl
"That within twenty days after the
passage Of this act the Secretary of
the Treasury shall negotiate and ar
range with the governments Of Great
Britain and France, Kingdom of Italy
Kingdom of Belgium and Kingdom OF
Rumania. and other governments
whose obligations arc hold BY the gov
eminent Of the United Staips through
their duly accredited Representatives
to the United States. all Of whom are
indebted to The United States In latgt
sums Of inuupy hy reason Of lbnns
nnde 10 ihrni from limo 10 tie hy the
United States. that such loans be- cor.
vorlhl into nikelhhlH ana Ahenbe So
eUiillps either bonds 90 dehanlures
with coupons attached, pngolihhn II
form, payable ia dollars, and Ia iuwfu
money Of lho llniiod aintes, either /,
bearer or the registered hodor al
anmo, hnVlnp a maturity of moi leR'
lhnn nv Yonis, nor more than twenty
five yonrH, and bearing Il rnte Of in
terosi of not more thnn II per cent PEI
unnum, or not less than b per centun
per nnnum payable annually
payable in dollars in lawful money Of
the United States, which bonds or de
bontuycs shall be divided into dcnomi
nations of 81 900, $780, 500 aud $50
lawful money Of the United Statcs.
United States Would Guarantee
"rhe Secretary Of the Treasury i,
hereby authorized and directed to in.
dorsc on each and every such bond
dobon'urc, or obligation, payable NJ
aforesaid guaranty on behalf Of The
lnl'Nu states government, guarantee
ing bearer, or the registered holder OF
said bond, dcbcnturc, or obligation, the
payment Of the principal OF said bond
dcbenturc, or obligation, together viii
the interest accrued thereon, from
time to time, until maturity. Said OBJ
legation may contain n redemption
privilege at par and accruco interest
from and after a date agreed upon be
tween the Secretary Of the Treasury
and government or governments issu
ing such obligations, through their &C
credited representatives.. That the sale
bonds and debentures may be re-
deemed in the following manner:
United States to BE Backer
"When the Secretary of the Treas
ury shall receive from the foreign gov
eminent or governments issuing such
bonds, debentures, or obligations, the
principal and interest due on before
the date fixed in the said bond, de.
bcnturc, or obligations for it's rcdemp.
ton, he shall advertise the fact that
the said bond, debenture, or obligation
will be paid, together with the &C
crucd interest on a date mentioned. lr
two newspapers published IN the prin.
cipal cities Of the Unitcx States hav.
ing population Of over 100000, ant
on and after the date mentioned ir
such notice the interest on said bond
debenturc, or OBLIGATION shall ccnsc