New-York tribune., 1922-10-29
Cessation of Large Scale
pureLa-ing by Banks and
Corporations Lessons
Buying Power i'm Market
Decline Called Temporary
Selling 10 Obtain Funds
for Productive Enter,
prise Is One Facto RI

erty Loan issues again find
themselves In the position of
owning security based upon what
Is admittedly tic best credit In the
world. that of the United States gov
ernment. but bond on which they
cannot realize 100 cents on the dollar
at the nations trading posts. The
First Liberty 31s per cent bonds. be-
cause of special tax exemptions, and
the notes of the Victory Liberty
Loan, because they now class as
short-term paper. still command q
slight premium over the price at
which they were first publicly dis
tributed,
All other issues have recede6 In price
from the hard-won level of par or bet
ter, attained only after many months
Of slow and--from the standpoint of
the tor-discouraging progress
from the minimum quotations to which
tbs post-srmistice .nhstion had forced
these iow-yieiding securities.
There has so far been little ind.ca-
tion OF the extent to whlck this latest
reaction In Liberty bond prices has
caused apprehension upon the part Of
the small investor, The decline after
the war shook his confidence in the
governments good faith, he could not
understand why something had been
sold TO him FOR q dollar that he could
not get dollar for, Since then the
recovery has restored his confidence,
and from his greater experience in in
vestn'ent matters he is less likely to be
worried by the present price unsettle-
nent, more particularly as financial! au-
thorites are agreed ttat Il probably
will be neither extensive nor extended
Wanis to Knosc Why
Nevertheless, when the United States
government floats bond Issue that
within less than fortnight, Is selling
at q discount, when its war loans not
only fail to hold their premium, but
drop below par. the layman---and the
banker as well--is likely to ask what
the reasons are
Peak prices for Liberty bonds we're
attained late ia July, when with money
exceptionally easy the bond market
gave one Of the most consistent and
extraordinary displays of strength
bankers recall at this season The ad-
vance was based primarily upon the di.
version OF surplus bank funds into in
vestment channels and by the tempo
rary placement in the market Of ex-
cess cash in the hands Of corporations.
The effectiveness Of these purchases in
stimulating the rise in prices WAS en-
phasi2ed by the limited liability OF
securities suitable for their purposes.
Liberty bonds benefited probably
more from the demand from these
sources than almost any other class of
bond up TO about the end Of July By
that time they had reached 80 high
tfas banks and corporations began TO
turn their attention TO other high
grade securities, notably underlying
railroad bonds. and Liberty bonds suf-
tered In consequence, There was still
large demand, but bonds were in
freer supply to meet it as some banks
liquidated their holdings to switch to
issues presenting greater return.
The support which bank and corpor-
alton buying had extended TO the Lib
erty bond market was thus withdrawn
II has lately been contendsd that sell
ing by banking institutions has been
since midsummer on an important
scale and that IL has been principal
ASStoi III causing the decline In prices
es the government bond group The
statistical evidence TO hand does not
fuily confirm this theory nor does the
testimony of individual bankers and
bond men on the subject.
Bank Holdings
The returns submitted by member
banks to the Federal Reserve Board
sho" the following weekly variations
IN goverhment bond holdings from the