Evening star., 1920-03-13

tent upon directing the attention OF
the Federal Reserve Board and tn"
Secretary of the Treasury to the h'Sh
rates of interest which obtain for call
money in New York and other Sth-
ters. Senator owen is convinced that
the unlimited interest when Is PEI
mltted to be charged tor these l"Ll@
Is harmful to sound ilnanctLS- ne
introduced this week and the senate
adopted the following resolution:
That the Federal Rc+oTVe boafN pt
directed to advise the Senate "it''t
is the cause and Justtncdtlon iof IN
usuriouS rates of interest on totI"t-
eral call loans in the financial Gen
ters. under what law authorized an"
what steps. if any. are required 10
ahate this condition.
He is the author of measure 700
seeking to limit the margins anu 'i'.
rates on such loans. During feecht
debate in the Senate. attention VIZ
called to the fact that the Naiue y"
the liberty bonds was being dtpf'Ss
cd senator owen charged lnlmt-
diatelv that one of the things "hiCh
are GcDrcsSing The value OF the ooii"s
is extraordinarily high rates OF m
tcrest which have prevailed upon INC
stock exchanges. ;a
The statutes of New York" he Said,
or more which is secured by cailatefal
is not subject to the laws OF usuiS
Money lenders can now charge loo PEI
cent for such loans. SO the pfa'tit'
has prevailed when 1t was deslr>a "
stop speculation or to cause peLt
market as the case might be am
not sure just where to draw the hne
at times-of raising the interest rate
up to 10, II. 30 per cent on can loans
and as high as 80 per cent mas lt-
Gently been charged. When that nap
pens the commercial rates all over
the country-and commercial rates
are now running from to per cent
making Il tax directl% upon the cost
of living-have the effect. because
bonds bear low rate o.
interest. of bearing the value OF
those bonds. So the people who bought
those bonds for patriotic purposes
have already a loss liz depreciation OF
S1.15O. 10000 That is the estimate OF
the loss on the government bonds is
sued.
When the Treasury induces the
people to buy those bonds at par II
ought not to establish a policy or per
mit policies OF others that would
lower the value of the bonds. To buy
those bonds at below par through the
War Finance Corporation | do not ap-
prove. 1t would be better to buy at
par and better to have the reserve
banks limit loans and give lower IN
terest on loans made.
My opinion is that the true way
to stop speculation in stocks is to
raise the margin and to refuse loans
for such purposes. 1t is entirely within
the discretion of a bank TO refuse
loan for speculative purposes in in
vestment securities. There was re-
employed in New York banks
$1,000 o0o.00o in speculative investments
alone
Liberty Bond Discount.
The practice of the federal reserve
banks in charging ; per cent for the
discount of the liberty bonds. when
he interest which the government
bonds bear is below per cent. was
criticised by Senator Smith of south
Carolina. He said that many OF the
banks of the country purchased these
bonds largely because of patriotism,
and that now they are sustaining
loss in attempting to negotiate these
bonds. and that other paper which
they hold is better collateral than the
bonds. He said that this
is one reason why the bonds are so far
below par. and will force them still
further down because the banks can
not afford to hold them if they can
not use them in their discount busi-
ness without loss. He urged the
Senate banking and currency com
l1ittee to give the matter ltS atteh-
ton
senator Thomas of Colorado also
attacked the practice of the fedora
reserve banks in charging per cent
interest not only on the government
bonds when offered for discount pat
also on the Az per cent certlncates
Of ind debtedness sold to the banks by
the government to enable the gov
ernment to meet its running expenses.
He said that the government mad
given assurances to the purchasers OF
these certificates. ard also to pur-
chasers of the bonds that the dlS-
count rate would not he raised above
the interest bearing covenant OF the
bonds and certificates. He mention
ed the case of one bank which pur-
chased S1n.000,oc0 worth OF the GER
tifcates of indebtedness upon TINS
assurance. Today, he said. the inter
est rate charge in the division in
cent for the discount of these GER
tificates. He charged this was
breach of faith.
The recent proposal of former Sec
retary of the Treasury McAdoo that
the government reduce taxes and
criticised in the Senate by
Senator Kellogg of Minnesota. He
said that Mr.. McAdoo's proposal was
to reduce taxes a billion dollars.
HE knows that, of course. is popu-
lar with the American people" said
tennlates also the ncn-cOllection
of the interest on the S1o.Ooo.O0o.O 900
which this country has loaned to Tor
eign nations, and to fund the 5000
600 900 interest into bonds and to sell
the bonds to the people. His next
scheme is to postpone for two years
the collection of the sinking fund to
retire the government bonds already
issued Thereby making it possible
to reduce taxation S25O.oOo,o 600 more
Then he urges us to find 100000
somewhere. by reducing
expenditures.
Senator Kellogg said that the issue
of new bonds would tend further to
d estrov the value of the bonds now
out He said that 1t would be neces-
sary to find purchasers of the new
bonds. if they are to be sold at par,
TO fix a high rate of interest or to
make them tax exempt. The Treasury
faces an enormous deficit this wear.
he said, and the plan suggested by
Mr. McAdoo would make the situation
worse instead of bettcring it.
Merchant Vessel Transfer.
The Senate commerce committee,
headed by Senator Wesley L. Jones of
Washington. is graphing with task
of vital Importance to the business
interests of the COuntry-the trans
fer of S2,500, 100000 worth of mer-
chant vessels from the ownership of
the government to private owner
ship. it is necessary. for success III
this great undertaking, not only TO
transfer these vessels to American
hands to sail under the American
flag. but also to obtain price for
them which Will insure an adequate
return to the government.
Much of the work of transfer from
government to private hands of the
vessels owned by the government nee
essarily is of administration. 1t must
be handled by the United States Ship
ping Board. But nevertheless. the leg
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