New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1920-05-24
Selling by Firms in Need,
Liquidation by Those
Who Borrowed to Blv
and Timidity Are Blamed
Experts Give Opinions
Greatest Opportunity i'm
Fifty Years Is Offered
Investors, Financiers Saw

half century as a result of their re-
cent severe decline in market value"
This is the consensus of opinion of
The leading fiscal authorities at Wash
ington and of the principal banking
minds of Wall Street.
In response to an invitation from The
Tribune the Secretary of the Treasury,
The governor of the Federal Reserva
Board, the Comptroller of the Currency
and heads of several of the greatest
banking institutions in America pre-
pared statements explaining in simple
language why the obligations of the
limited States have tumbled far below
par.
All agree that the intrinsic worth Of
the promise of the government to pay
back it's borrowings is unimpaired and
that the decline of the bonds and notes
in the open market place represents
mainly an adjustment 20 the changing
conditions in the money marts.
Heavy selling by corporations in
need Of funds which the banks were
disinclined to furnish, liquidation by
those who borrowed to buy and found
bonds by means of bank loans, and
the market by those who were alarmed
bv falling quotations-these are men
toned as leading causes of the move
ment which last week carried the gov
eminent securities to the lowest prices
since they were issued during the five
great war loan drives. when millions of
persons purchased them in their patri-
otto zeal without mueh thought of the r
investment worth.
Jacob H. Schiff, head of the banking
firm of Kuhn, Loeb & Co., and mem
Der Of the Central Liberty Loan Com
mittee, and several other contributors
TO this symposium frankly admit that
the bonds and notes were placed on
terms that were below the prevailing
market rate. Patriotism was relied
upon to sell the securities, and gradu-
ally the bonds and the notes are seek
with other securities.
Permanent Investors Get Bonds
Moreover, since the last loan was
foated a year ago, interest rates have
progressively climbed because of the
worldwide scarcity Of capital, and all
bonds consequently have fallen off in
market value. The Treasury and Fed
eral Reserve officials in recent months
have used their influence to get the
bonds out of the banks and into the
hands of permanent investors, and
report success in this flow of the
bonds from their temporary lodging
place and strong boxes of individuals
This change of ownership, accelerated
by the raising of rediscount rates at
the Federal Reserve banks, tends to
relieve the banks of their strain and
TO bring the country closer to a more
normal financial condition, the Off
Gals point out.
Secretary Houston, in this connec-
ton. reveals that during the past
year or more Liberty bonds and Vic
tory notes have been gradually shift
ing from the hands of those who Dor
rowed to buy them and were unable
or unwilling to save and pay for them
into the hands OF permanent investors
whose holdings are taken out Of the
banks and put away in safe deposit
vaults. One evidence of this is the
tremendous decrease in banks hold
ings Of and loans upon government
war securities during the last year
Another indication of the steady alb
sorption which is proceeding is the
TACT that the principal amount OF
Liberty bonds and Victory notes which
are held in registered form instead of
coupon form has increased SIS per cent
or 60 per cent since original issue and
IS steadily increasing"
And Comptroller Williams explains
that the national banks of the country
are now lending only on s1,o0,OOO,-
900 of Liberty bonds and Victory notes.
although the national banks of the
United States Mr.. Williams said.
placed with their customers and
Clients majority, or say $11 100000
ooo of the S21,500, 100000, of Libert =
bonds and Victory notes which have
oeen t1oated by the government in the
last three years, the bonds have been
50 we'll distributed that the national
oanks at this time are only lending on
ABOUT 81 100000, 900, or 5 per cent of
me total issue. The national banks
themselves are holding for investment
IN tne aggregate about 1000, 000,0 900
sadlhonal, or about 5 per cent of the
TOTAL amount outstanding"
Statistics on War Debt
Mr. Harding. head Of the Reserve
board, who spoke for the state banks
which are in the Reserve system, as
wen as the national banks, prepared in
sefesting statistical data regarding the
war debt. 'In consequence of the plac-
ing OF the Victory loan," Mr.. Harding
9,eec sn between May and November,
tssls, the amount of the war debt of
lhe united States exclusive of war
savings and thrift stamps) has in
s sos from about $22 ,200,0O0,O00 to
sslII1,ooOoo,O00, notwithstanding a re-
uuctlon in the amounts of Treasury
ooeer a antes outstanding from $780,
OMoo0 to s2,700,000,O00. During the
zane period the estimated bank hold
d ags OF United States war securities
assciined from over $5,00O,00O, 900 to
soout $4,000, 100000, while bank loans
mn a aa securities declined from ST.
',voooo,o00 to about 81, 45O,0 100000. The
sloss amount Of Liberty bonds and Vic
i;Vry notes in the hands of the public
,sn,eof esed from 9O0,0OO,00O to about
sSO00 100000
h. ~! ~. net amount owned at present
~, 'ne public is about $1,4Oo,OO0,000
ms MS, .ais amount representing approx
amo;y the total of advances by banks
i;ssinst the pledge of the correspond
~ amount of Liberty bonds and Vic
ny notes. 1t is to be noted also that
tic. .s to,al of United States war securi-
ooN s nae neid by the public includes $422,-
ow U,ooV OF government war obligations
Co. nea at present by the War Finance
,U,o..ppo,ration. AS the entire Capital
S'0sA, Of the War Finance Corporation
ss. owned by the Treasury, it would
fren m proper to deduct this amount
tb s s tne total held as investment by
ths paoIlc. This deduction being made,
Nv amount which the public so held
ooo npr'l 81, 1920. would be $17,837,000
:, houston Analyses Break