Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-08-21
new FEDERAL LOAN
WILL AID BANKERS
$4O0, 900, 900 in Certificates
to Provide Short-Term
Investment Means.
BY PRESTON S. KRECKER.
oeoial Dispatch to The Star.

Special Dispatch to The Star
NEW YORK, August 21.-Banks with
surplus funds and no convenient place
to put them will shortly have an op-
portunity to buy a new Government
short-term lean. The United States
Treasury is preparing to borrow, about
the middle of next month, an amount
estimated around four hundred million
dollars.
The new loan will take the form of
certificates of Indebtedness. This will be
welcome to bankers, because they pre-
fer that type Of Government borrowing
rather than the newfangled non-interest-
bearing Treasury bills which the Gov
eminent has been issuing in recent
months.
The advantage to banks of certificates
of Indebtedness is that subscriptions en-
tail no cash outlay. A bank can buy the
certificates simply by crediting the
United States Treasury with the amount
of its subscription. That subscription
goes on the books as Government de-
post to be drawn upon later when the
Treasury needs the money. The non
Understanding Treasury bill. on the
other hand, is cash subscription loan.
No credits are allowed as substitute
for the coin of the realm.
Fewer Certificates.
Since resorting to non-lnterest-bear-
ing bills the Treasury has been issuing
certificates in smaller amounts than
previously. Because of the diminishing
supply of certificates banks are glad to
hear of a new issue.
This new loan will be sold to provide
funds for two maturing short-term
loans. One is an issue Of 31s per cent
certificates of Indebtedness amounting
issue totaling $50,000,000. The GER
-tificates fall due September Is, while
the notes are payable a little later.
While the Treasury has not indicated
how large the new issue will be, 1t is
reasonably certain to equal the amount
of the maturing loans and possibly will
exceed them.
Increased expenditures for farm re-
lief running into many millions, to-
gether with declining customs and in
come tax receipts, have altered the
materially. Uncle Sam is not as
flush" as he was before the crash of
last Fall. AS result 1t has not been
possible to reduce the public debt in
the way the Government had been
doing over period Of years.
Index to Conditions.
The rate at which the Treasury bor-
rows invariably Is q matter of interest
TO bankers and investors, because the
Government rate Is interpreted as an
index of money conditions. Last Sep
TENDER the Treasury borrowed about
$500, 0O0, 900. That loan, like the forth
coming one. took the form of an issue
of certificates of indebtedness. The
Government had to pay 47s per cent
for that loan.
1t will do a great deal better this
year. If the open market rates for
money! on or about September Is are
what they are today the Treasury prob
ably could borrow on a short-term note
at a rate of 21s per cent 1t may even be
that it will be able to make better
terms. The term of the loan will be a
factor, as well as the open market
money rates at the time of issue.
In any event, the Government is
bound to save substantial amount,
since it hardly will pay more than as
to IN per cent, whereas the issue it
will redeem pays 3S per cent. The is
sue is bound to be heavily oversub-
scribed.
Copyright. 1s3o)