Evening star., 1929-12-16
TREASURY HOPES
TO CUT INTEREST
Success of Short Term Bill
Financing Pleases Govern
ment Authorities.
BY ]. C., ROYLE.

The tremendous flood of money avail
able for investment was made thorough
ly evident by the heavy oversubscription
of the short term Treasury bills put
out by the United States Treasury, ac-
cording to Treasury officials here today.
Bids were asked on $1OO,0o0,000 or there
abouts. The total. amount applied for
was $223,901 900.
Even more striking evidence of the
financial prosperity of the United States
was given by the interest return which
the successful bids carried. The highest
tender was 99.310. Since the bills have
90-day maturity, this was equivalent
to an interest rate of about 234 per
cent annually. The lowest bid received
amounted to 99.152, or the equivalent
of 33s per cent. In other words, the
Government had to pay only 234 per
cent for the money which it borrowed
from the American puplic. Treasury
officials feel that this was a thorough
tribute to the financial stability OF
the money market and an assurance
of adequate funds and credit through
1880.
Policy New in United States.
This was the first time that the
United States Treasury had ever coll
Quoted financing on a discount basis.
The policy was adopted largely because
1t had proved so successful in Eng
land. 1t was new to American bankers
and investors. Despite the fact that
the English financiers are thoroughly
familiar with the system, know how to
prepare their bids and where to take
them, the number of bids received for
the Washington offering was fully five
times as many as has ever been received
for similar British issues.
Undersecretafy of the Treasury
Ogden L. Mills declares this achieve
ment q tribute to the f1exibility of the
American financial mind. It has a
ready become evident that these short
term Government securities will be
snapped up instantly as medium, for
the investment of trust funds.
They will offer an excellent resting
place for trust moneys over the year
end settlement period and put to work
with safety large sums which have been
withdrawn from the call money mar
ket and from Stock Exchange tranSac-
tions. Treasury officials regard the sue
cess of the offering still more remark
able in view of the fact that it took
place at time when there is normally
a money stringency and when funds
are being drawn in to meet year end
dividend interest and maturity require
ments.
Mr.. Mills. pointed out today that the
Government had been enabled to fill
requirements at much cheaper rate
than they would have to pay through
the medium of certificates OF indebted
IleSS even at the rate of the last issue
short-term financing was done through
certificates of indebtedness, the Treas
ury was accustomed to leave the money
in the banks until it was needed. This
was usually an average of IS days. Dur
ing that time the banks paid to the
Government interest at the rate OF
per cent year. The Government on
the other hand had to pay the interest
rate named in the security and lost the
amount represented by difference be-
tween the two.
Under the present Treasury bill SyS-
tenn of financing, the Treasury can
float short-term securities as 1t needs
the money. I'm other words" Mr..
Mills added. "le aFs not in q position
where ce hsFe 10 borrow lot Of
n.orcy aud hold L in anticipation OF
neeoc 1oa Wnicn We only have eSti-
mates" MI. Mills citco as sn example
LIE 1dCG GLlAG CuS CcOSId1 d9c11Cy 4110
told the Treasury that It would need
$45, 100000 to run it from September
Is to December S. It turned out that
not nearly $45 100000 was needed, yet
the Treasury had to borrow the money
and pay interest on it from September
on.
Balances in Banks.
''Now when money is needed for any
Government activity" Mr.. Mills con-
tinued, 1--WE can offer the bills on notice
of a day or so. We will sell just enough
bills to fill the needs of the time and
make the maturity fit into a known
time of income, that on dates when
taxes come in Mr.. Mills explained that
the Treasury bill system did not de-
stroy the present system of quarterly
financing altogether, but it will mean
that the department need not await
quarterly date on which to offer its
securities.
Once the new system gets fully into
operation, it will enable the Treasury
to operate with smaller balances in the
depository banks throughout the coun-
try. 1t does not mean that these ball
ances will be cut sharply, but as GCV-
ernment finances settle down the
amount held in the banks will grad
ually be reduced.