Evening star. [volume] (Washington, D.C.) 1854-1972, 1920-06-11
UCEL0AN BASIS
ON LIBERTY BONDS
Chicago Reserve Bank
Makes Market Value, and
Not Par, Effective.
BY I. A. FLEMING.

ID A
The Federal Reserve Bank OF the
Seventh District. Chicago. served notice
on all member banks. that, beginning
this morning. members notes would be
accepted for discount backed by govern
ment securities on the basis OF valua-
ton, as follows: Liberty bonds, $S5 ;
victory notes, sos. and Treasury GER
tiicates. par.
Heretofore all government securities
have been accepted at par Tho con-
trolLer Of the currency has given permits
sion to the banks to carry their govern
ment securities at face value.
1t is not known whether other federal
reserve districts will adopt the same
rule, but if they do 1t will be dis
tinct disappointment to bankers. who
can see no reason why the government
should not back its issues.
If the valuation basis continues for
Chicago district alone, 1t will probao bly,
mean that there are some peculiar
conditions prevailing there that require
adjustment, such as the purchase OF
bonds in the market at low price
and an attempt to borrow even more
than was paid for them. or some large
blocks of frozen" loans that the off,
Gals wish to remove.
The chances are that the action Will
operate against the market for lib
erty issues.
Local stock Market.
There was less trading on the loca!
exchange with prices steady. Capital
Traction sold at Sc: Lanston moved
up to TIN. Chesapeake and Potomac
telephone IS were soft at Sc. while
Railway As sold at 53h and 53A
Graphophone Dividends.
Regular dividends on the common
and preferred shares Of the Columbia
Graphophone Company have been de-
clared payable July l.
Government Finances.
Secretary Houston has prepared and
furnished to the bankers Of the coun-
try condensed statement Of the
finances Of the government, in which
he says that for the first quarter
Of the present fiscal year there was
a deficit in government financing of
SI70. 000,0 900; in the second quarter.
ended December 81. 1919. a surplus Of
$3.50. 100000; in the third quarter a
surplus OF nearly $500. 100000, while
the current quarter. ending June 30.
should also show a surplus. The
completed fiscal year should show1it-
tie if any deficit. the government
receipts against current disburse-
ments. for the frst full fiscal year
after the fighting stopped"
The total gross debt Of tho United
States June 80, 1919. was S25 ,000,-
900; on August 81. 1919. 1t was $26.-
500. 100000. and this was reduced in
May to $4,000. 100000.
Further reductions are predicted.
The period of upward OF twelve
months since the victory loan was
floated has witnessed great expansion
Of credits. but steady liquidation Of
government war securities. The fed
eral reserve banks combined loans.
secured by government war securi-
ties. has been reduced s4oo.ooo.0oo.
while other loans and investments
have increased $1,000. 900. 900.
All reporting banks-about 500
controlling 40 per cent of CONNER
and investments by $4,000, 900, 900. one
third of which represents war securi-
ties liquidated.
Bankers Have Grievance.
Some leading bankers find them
selves in position where they deem
1t the part of justice to cancel buying
orders Of customers for the cheaper
issues Of Treasury certificates and
substitute to higher yield. simply be-
cause the continual increase in the
rate paid by the Treasury has fire.
quently been announced before de-
liveries have been made on lower
Understanding certificates. They
still contend that all outstanding GER
rate OF any issue and not be de-
preciated by the most recent issues.
Moreover. they dispute the statement
of reserve bank official that such
an exchange of low rate for highest
rate certificates would be illegal.