Evening star., 1925-01-02
BONUS FINANCING
PLAN ANNOUNCED
Two S5O,0oO,O00 Blocks of
Treasury Certificates Will
Start Fund.

Secretary Mellon today announced
the Governments plan for the nrst
years operation under the adjusted
compensation act looking toward
financing the soldiers bonus.
The Treasury, Secretary Mellon an
nounced. has issued two blocks of
obligations of $50,0O0,0 900 each-five
years special Treasury notes, payable
January l. 1880, and one year special
Treasury certificates of Indebtedness
each carrying per cent interest,
payable annually, or on the prior
redemption of the security.
These securities are not placed on
the open market. They are Kept
within the Treasury for the purpose
of opening the account, which is 70
wears, under the soldier bonus act
must provide about $4,00O,OOO,OOO to
redeem the soldier bonus certlhcate'
beginning of Sinking Fund.
The 500 1000, 900 called for by the
adjusted compensation act was au-
thorized by the deficiency bill signed
December ). and is the beginning OF
the bonus sinking fund.
Secretary Mellon explained that
under the plan of sale of the special
securities direct" the Treasury Will
he in position when the bonus ma
lures about 1874 Ito do the necessary
financing
existing without being compelled to
sell a lot of miscellaneous Govern
ment securities, perhaps unsuited to
the market and to the Treasury S
program"
Secretary Mellon explained the
working of this plan of financing
by illustrating its first operation, as
follows:
ION December Is, 1924" said Secre-
tary Melons statement, the Treas
ury in addition to any money to
purchase investment for the fund re-
uuired 1925, 100000 TO carry it through
10 the next financing period in March.
1926, and sold for cash about S225,-
100000 of it's per cent bonds or
l944-54 As of January 1, 1925, the
Treasury sold to the fund $100,000,-
600 of its special notes and special
certificates of Indebtedness, making
total sale in December and January
of 1925, ,OO0, 600 of Government obli-
cations.
Saved Interest on S100,O0O.OOO.
This was the plan actually used
Had the other method of applying
the appropriation to the purchase OF
securities in the open market been
adonted. the Treasury would have
had to sell for cash $325,0OO,OOO or
its bonds on December Is, 1924, and
consequently would have lost the IN
terest on Sl00,000,000 from December
Is until the securities for the fund
could be bought on the market after
January l, 1925.
There is, as will be noted, no diner
enCe in the final amount of pubic
debt incurred between the plan OF
selling special securities direct to the
fund and the plan of using the fund
TO buy securities in the market. In
either case the fund would hold SlOO,-
600, 600 of Government obligations, ana
there would be S100,00O,O00 less OF
such obligations in the hands OF the
general public. 1t seems quite clear,
therefore, that the sale of the special
securities direct was the only feasible
way of handling the investment re-
auired by the Congress"
The Secretary explained that the
operation was based upon require
ment of the adjusted compensation
act, which provides for approprl-
ations on January in each year to
the adjusted service fund of an
amount based upon the amounting
experienced table of mortality, which,
if kept invested at per cent COM
pounded annually, would be sufficient
to paw the face value of the adjusted
service certificates upon maturity IN
90 years or upon prior death of the
veteran.