Evening star., 1930-12-07

represent distribution Of an addi-
tional $1,640, 100000.
II know of no Justification" he said,
for approximately doubling in effect
the distribution provided for in the
adjusted compensation act by the device
OF payment is years in advance Of
maturity, particularly when such a pro-
poSal involves an enormous additional
burden on the taxpayers Of the United
States
Mr.. Mellon said he was definitely
of the opinion that the Government
cannot successfully sell $500 600, 900
OF bonds for this purpose at this time" !"
Doubts Real Benefits.
He conceded there was some argu-
ment" in favor of giving the veterans
cash on the present actual value of
their certificates involving $1,77o. 900 900,
but he expressed serious doubt that
these payments would constitute a real
benefit to the veterans. He called at
tention to the insurance for the future
carried by the certificates and the abil-
ity Of the holders to borrow on them.
Vandenberg suggested as q minimum
measure that the Government reduce
the 6 per cent rate charged on the
loans from the certificates.
The letter Of Secretary Mellon con-
tinued:
But we must also consider the other
side OF the picture. The additional
funds are to be obtained by borrowing.
An issue of bonds for this purpose
would draw money out of the bond
market and make funds less available
Tor other issues. Business recovery is
In some degree at least dependent on
good market for new securities to
supply the needs of various business
enterprises. To the extent that funds
seeking investment are diverted to the
purchase OF Government bonds to be
issued for this special purpose. to that
extent is the capital market depleted
OF FUNDS otherwise available for indus
Trial and other employment.
Plan Not Equitable.
Moreover, even II the general eco
nomic effect would be beneficial-and
do not believe that it would-are
we justified in attempting to achieve
such result at the expense Of the
veterans? Is 1t any more sound or
equitable to invite them to cash in
their endowment insurance policies and
to spend the proceeds for current ex-
penses than to invite other policy
holders throughout the country ia
forego the benefits of future protection
and to make a similar sacrifice in the
hope Of giving temporary stimulus to
business? Business must look to other
means of recovery than the dissipation
of savings.
Finally we come to the third con-
sideratior, as to whether the borrowing
OF the vast sum needed can be effected
without interference with public debt
operations and without greatly in
creased interest costs on the public
debt. My opinion is that it cannot.
In March, 1881, the Treasury is faced
with public maturities in excess of
81 100000, 900, calling for q large re-
funding operation. While the market
for Government securities is at present
good, we cannot take it for granted
that it has a capacity to take an in
definite amount of these securities.
1T will be a sufficient task to float
an issue or issues already planned with
out an additional one, and putting in
additional issues will undoubtedly re-
suit in a higher cost of credit to the
Government. Moreover, the day Is not
distant when many billions of dollars
Of bonds bearing a Az per cent in
terest rate become calable. A large
! increase in the public debt at this time
/ whether in the form of short-term
paper or even long-ter1n bonds, must
necessarily adversely. affect the ex-
| tremely important refunding operations
that must be undertaken"