Grand Forks herald. [volume] (Grand Forks, N.D.) 1916-1955, 1921-02-11
SELLING BONDS

In its February issue the North
Dakota Banker explains some of the
conditions surrounding the sale Of.
bonds. A summary Of the article
was given in The Herald a few days
ago. 1t vas explained there that
bonds issued for large amounts are
seldom sold direct to those who are,
to retain them, but are bought in
bulk for the purpose Of being redis-
tributed. In this respect bonds are
like most other commodities in that
they are seldom sold direct by the,
producer to the ultimate consumer.
The reasons are practically identi-
mand comes from a great number of
small purchasers with whom it is
neither convenient nor profitable for
the producer to deal directly. In the
bond business. as in most other lines
OF business, there is need for the SER
vices of the ,"middleman," an indi-
viduai whom it seems impossible to
eliminate, in spite of all. the denunci-
alton that has been hurled at him.
1t is true that during the war perl
cd the United States government sold
some t~wenty-four billion dollars
worth of bonds by means Of methods
different from those usually employed.
In theory the bonds were to be sold
directly to the people, and many Of
them were so placed. Nobody vas
hirad IN ID .olJ;-~ o, 80 o-9
missions were paid. All of the money
that the individual investor paid went
directly to the treasury of the Unit
ed States. ~
But the sales organization created
for the disposal Of those bonds was
the largest and most complete Of any
ever built up for any purpose. In
every city, township and hamlet in
the county there were men who de-
voted a large share of their time to
the sale of these bonds. If these peo-
pie had been paid ordinary prices
for their services the sale would haze
been one of the most expensive on
record. In this case no account was
kept of time or labor. The object
was, first to obtain money for the
government, and second, to place the
bonds of the nation in as many hands
as possible.
Without the patriotic incentive
which existed in tina case no such
plan could have been used, and, if
attempted, it would o have had the
slightest chance of success. And
even with all the effort that was put
forth. it was necessary to fall back.
on the middleman, although in this
case he served without pay. Large
sums were advanced by the banks to
carry bonds in transit from the gov
eminent to the individual purchaser.
In many cases these bonds were car
ried for months by the banks. In
some cases the original subscribers
have not yet paid for them. There
has therefore been a very consider
able investment in these bonds by
banks and brokers who were no in
the first instance expected to carry
them.
VAN ~ AA1AO NC
conducted on that basis. . Ever the.
largest purchasers of bonds for in
vestment seldom care to carry large
BLOCKS of one particular issue, no
matter how sound it. may be. 3 The
large bond buyer buys relatively
small blocks of bonds of many issues,
thus distributing his investment over
a wide field Of industry COM
merce. Hence bond houses buy large
blocks of bonds, not for their own in
vestment, but for resale to their Gus
toners, and the actual placing Of the
securities in the hands of the final
investor often involves the services of
several Intermediates.
Eastern bond houses have indicated
a willingness to take quantities of
North Dakota bonds if the conditions
surrounding them were such that
they could dispose of the securities to
their customers. These bonds REPRE-!
sent important industrial experiments
by the state. Prospective, dealers
were willing to undertake the sal of
several million dollars worth of these
bonds. relying on the faith and credit
Of the state for their redemption, but
they desired some assurance that in
order to maintain faith and credit
the state would observe reasonable
caution and prudence in the further
management of it's affairs. That as
surance the officials of the state re-
fused to give, hence the existing stu
alton. :