The New York herald., 1921-04-20
Liberty Bonds at Par.
Professor Stewart Of Amherst Praises
the Thompson Proposal.

To THE NEW YORK HERALD: You de-
scribed recently the plan proposed by
M. w. Thompson, governor OF the war
Credits Board, for restoring Liberty
bonds to par. The proposal is so orig
inal and yet so fundamentally sound
that It deserves the fullest consideration.
The pressure Of other problcc,s. such
as revision of taxation and ter ma
ton of foreign policy, requires much
attention that there Is danger e. forget
ting the financial problems Immediately
ahead. When il is realized, however,
that within the next two years the Gov
ernment must provide for the refinancing
OF seven billion of its short term debts
II IL evident that now is the time for
making plans and not year from now.
Mr.. Thompson, whose official experience
during the war acquainted him with
the practical difficulties of Government
finance. has shown how the Government
may meet these requirements of ref
nancing and may also help develop
class of permanent investors.
The simplicity of the plan Is one of
its chief merits. 1t begins with the rec
ognition of the fact that the credit of
the Government has been undermined
among that large class OF small in
vestors who subscribed for Liberty
bonds and who have watched the price
OF those bonds steadily decline. II Is
OF no use to explain to them that the
market rate of interest on investment
securities has risen and so their bonds
must inevitably fall below par. The
OILY way 10 restore their confidence Is
to bring the bonds back to par.
How? BY exchanging for the out.
standing Liberties new bonds with an
adjustable interest rate which will be sci
serni-annually at the point which will
keep the bonds at par. Instead of
fixed interest rate. with a fluctuatine
principal as In the Liberties the proposal
Is TO issue bonds with flexible interest
rate and fixed par.
Whom the Government can say 70 the
investors, "You may put your savings
into Government securities with the as
surancc that all you put In may be
withdrawn without loss OF principal
then Il need not worry about its re-
financing. But In order that such a
statement may carry conviction to the
subscribers to Liberties 1t win be neces.
sary to reestablish prestige by Offering
TO exchange for the outstanding securi-
ties the new type OF bond proposed by
Mr.. Thompson.
There is n further consideration which
should recommend such a plan to the
Government and TO the financial commu.
nifty. Not merely is Il a way OF meeting
the obligations of the Government e
the holders OF Liberty bonds and OF pro-
viding a certain market In which &c
carry out its refundlng operations but II
also has vast possibilities as a way Of
developing a class Of ultimate investors
who will become steady purchasers OF
other investment securities. II Is not yet
too late 10 convert into permanent inves-
tors many OF those small subscribers &c
Liberty bonds who became for the frs
time owners OF securities.
III action Is postponed or II the policy
Qf drifting is pursued no preaching OF
thrift win ever persuade those who lost
money on Liberties to invest again. But
legislation passed at this Congress which
would bring Liberties TO par would not
merely give renewed confidence In Gov.