Richmond times-dispatch. [volume] (Richmond, Va.) 1914-current, 1920-05-30
Protect the Bondholders

W/HEN the United States was at war, its
w fate in the balance, money in terms
of billions was vital necessity. To secure
that money the government sold tremendous
amounts in bonds to hundreds OF thousands
OF loyal citizens. The people were asked
to loan their credit to the government as 4
patriotic duty. Almost one man they re-
sponded. or this bond buying army. thou
sands borrowed money from the banks. The
reserve banks rcdscounted notes secured by
the bonds at attractive rates, and told each
of the member banks just how many bonds
ii expected to place. With bond buying
thus made easy and with continued urging
on the part of the government. Il vast num-
her of citizens bought more bonds than they
have been able to pay for up to this time.
Now ii is the duty of the United States gov
eminent to protect the market price on
these bonds. Its honor is a; stake, and il
it fails the loss will he more than that rep
resented in the loss of millions of dollars TO
those who put their trust in Washington.
Necessity for curtailing general credit so
as To control speculation i'll stocks and COM
modities is recognized and appreciated by
every thinking person, but the control of
general credits should be brought about
without requiring thousands of patriotic
citizens to take the tremendous losses which
they now are being forced to take on ac
count of the attitude of the Federal Reserve
Board toward loahS on LIBERTY ana victory
bonds.
The Federal reserve banks have the power
to reduce gold reserve requirements on note
issues. If they have not, Congress could
easily pass remedial legislation in respect
to such requirements. AT present the re-
serve banks have approximately S3,000,000,-
coo Of Federal reserve notes outstanding.
About onchalf of these notes arc secured
by United States government bonds, and
all of them have behind them a 40 per cent
reserve in gold.
Why should not the gold reserve on that
part OF the Federal reserve currency
cured by government bonds be reduced say
10 per cent? This would release approx
matciy $4,000 900 in gold. and would
give the Federal reserve banks the power
TO issue an additional billion dollars in cur
rcncy secured by commercial paper should
it be necessary or desirable to do SO. In or
der to prevent Liberty bonds being used for
further expansion of credits for COM
mcrcal other purposes. the amount OF
notes issued against them should be based
on tho amount of bonds held by the banks
on April l, 1920.
Through action of the government, the
national banks were permitted to issue cur
rency against government bonds issued for
war debts and were required 10 keep only
per cent reserve for redemption purposes.
AS result, the per cent DOnuS OF lne SO'-
eminent today are selling a moro than par,
while the per cents arc selling around
81
The Federal reserve banks through their
members should be able to say to the pub
lie that they will carry these bonds for the
buyers, just as they said to the national
banks they would carry the old bonds for
them. IL is not fair just to the patriotic
citizens of this country TO force them TO
pocket such losses, and immediate steps
should be taken 10 right this great wrong.
This is not time when credit should be
made easy for unprodnctivc purposes. but
the present market conditions for the war
bonds preventablc, and it will be grave
lack OF judgment ii the government does
not take steps to stabilize the market 1t is
serious emergency. and delay is costing
this country many millions Of dollars.