Great Falls tribune. [volume] (Great Falls, Mont.) 1921-current, 1922-07-23
EASY BORROWING PERIOD AHEAD
FOR MUNICIPALITIES, SAYS BABSON;
INTEREST DECLINE TO CONTINUE

Wellesley Hills, Mass, July a.
While discussing the opportunities in
the present bond market, Roger W
Babson, the statistician, Saturday made
the following statement regarding the
future of municipal issues:
son, have been hard for cities and
towns desiring to borrow money. Dur
ing the war an unwritten ban was
placed upon municipal borrowing and
unnecessary public building. Directly
after the war money was scarce and
rates were high. 1t has only been with
in the last few months that cities and
towns have been able to secure what
money they have desired at a fair rate.
Municipal fathers. contractors, and in
vestors are now wondering whether the
present decline in rates is temporary
or will extend over several years.
Study of the situation leads ~ to
believe that the present decline in in
terest rates will continue and that
cities and towns will be able to borrow
freely during the next few years. It
even looks as if city fathers will soon
be solicited by bond houses for issues
to sell. Up to the present time. city
officials have been obliged to hunt up
banks to buy their securities. The time
will soon come when the bankers will
be sending buyers throughout the coun-
try to hunt up bond issues that they
can sell. The next few years will see
a. scramble for bonds N the part of
the dealers far greater than any pre-
vious scramble for money on the part
of the cities and towns. The law of
h1tcynooc orr1nc cfs11 nnoNNfoS AS Ua
have had years of advancing interest
rates we will have years of declining
interest rates. Moreover, these cycles
cannot be suspended or changed any
more than we can suspend or change
the tides of the E
I'm addition to the law of cycles.
the tax situation is very much in favor
Of municipal borrowing. Before the
days of income taxes and surfaces,
bonds of our best cities sold on q 3h
per cent basis, and even better. Now.
when wealthy men are obliged to pay
surfaces of from 80 per cent to so
per cent, these tax-exempt bonds OF
cities and towns should be in great de-
mand. Some of my associates even
state than many of these bonds may
60 up until they are on a 211 per cent
basis, or less. OF course. this also
to the government bonds, al
though the government bonds are
short time and therefore not so
attractive to the investor. Cities and
towns will temporarily be greatly bene-
in their borrowing by any amend
ment to the constitution making all
bonds taxable. If such a legislation is
attempted, there naturally will be a lot
tax-exempt bonds put on the mar
knt Jy,cS ypAnAIyn~ oyUh vA~fonn
feel that such a flood of securi-
ties would depress the price, but others
that if they are to be the last
o. ~tax-exempt securities. the market
will absorb easily all they offer. Which
ever is the case. cities and towns will
have no difficulty in disposing of their
securities during the next few years,
and the interest rates should steadily |
and continually decline.
This means that municipalities
Immediately adopt civic plan |
hing schemes continued Mr.. Babson,
and probably should make during the
text five years, such improvements as
hey ordinarily would make in 10. The
to make hay is while the sun
and the time to borrow money
long term loans is when money rates
re low. Hence, cities and towns
not only borrow large sums and
invest the same for their current needs,
'ut should borrow large sums and in
est the same for use for years to
ONE. especially during the next period
# unemployment.
IF cities were operated in a bust
less way they would borrow their
money at times like the present, stow
/ away, and then spend it when the
ext period of unemployment comes.
By spending it at such times, they not
My could get the work done very
luch cheaper. but they could perform
distinct service to the people of their
The general custom fol-
is the reverse. Cities. now do
heir construction work when it is easy