Evening star., 1933-03-13
PLANS
aMAY Be POSTPONED
=
Government Would Probably
: Be Unable to Obtain Fa-
: vorabIe Interest Rates.
BY CHARLES F. SPEARE.

Especial Dispatch to The Star.
% NEW YORK, March 13.-With the
banking situation in its present con-
fused state, 1t is impossible to forecast
The attitude of holders of about $780,
100000 Of Treasury 334 per cent and
= per cent notes maturing on March
As. The only concrete opinion so far
voiced by institutions that hold the
4ulk Of this paper IS that 1t will be
renewed for short period at an in
&erest rate Of AZ or 5 per cent.
= The difficulty is that this brings in
no new money to the Treasury, whose
balance is dropping at the rate of $25,-
D00,0 to $30,O00,O00 a day and is now
&round $150,000,000, compared with
f600,000,000 at the end of last year.
On this basis the Government by next
"wednesday will have a working bal
Rnce less than $10O,000,000 which would
IS routine functioning.
Revenues Decline.
: The situation is complicated by the
Tact that receipts from the first in
6tallment of the income tax on March
is, recently estimated at about $175,-
DOC, 900, may be in part held up owing
to the restriction on the release of de-
5posits by banks throughout the country.
AT the same time revenues of other
kinds are being reduced in consequence
OF the slowing down in domestic trade
and by orders affecting the arrival OF
goods from foreign countries.
The estimated revenues from income
80 were $860,000, ,000 The Treasury
statement at the end of last week
showed that in the first eight months
OF this period the amount actually paid
Into the Government was 1888, 200, 900,
compared with $661 ,000,000 for the cor
responding period of the last fiscal year.
. Prior to the start Of the banking
crisis last month, when money was
otill easy and all Treasury short-term
issues were heavily oversubScribed, there
Fas plan under way for refunding
both the First Liberty "a per cent
bonds and the Fourth Liberty 4l4s.
This would have made necessary a
campaign in which to interest the gen.
Tral public in new long-term Govern
ment issue. 1t was then felt that SUBJ
ecriptions might be obtained with a
Eoupon rate of 3A per cent. At that
time the rediscount rate Of the Federal
Reserve banks of New York and Chi
Eago was 21a per cent, and in the
Dther 10 districts 31a per cent. All
are now quoting the latter figure. The
fhen Secretary of the Treasury felt
that a large refunding operation could
be successfully carried through al
Though some of his associates belived
bat the interest rate could not be less
That the interest rate could not be less
3or per cent.
Recent Sale of Bills.
= The latest index of the credit of the
Government is provided in the sale last
week of $75,000,000 Treasury discount
bills on about "a per cent basis. Two
things are, therefore, obvious: First,
That the refunding operation must be
Indefinitely postponed; second, that, if
the Government is to obtain any large
amount Of money to project its relief
program or to ease the banking situa-
tion, 1t must develop a public interest
IN its securities and issue new loan
1t an attractive rate of interest. This
compels it to place its credit on a
Pound basis through economy and the
balancing Of the budget as a prelim-
mary to any anticipated popular loan.
e The time seems to be opportune for
xuch a loan. The advantages of it both
70 the Government and to the banks
are worth considering Long before the
banking crisis became acute bank de-
positorS were withdrawing funds and
buying Government bonds They did
this for two reasons-to add, as they
thought, to the safety of their princi-
pal and to increase the income on it,
for they were everywhere faced with a
reduction in the interest on their time
Hr savings deposits to per cent and
The almost total elimination of any re-
turn on demand deposits. With the
public assured that the credit of the
Government will remain foremost
throughout the world, it is believed it
would welcome an opportunity to sub
Scr1be to a new loan at a rate of inter-
est, possibly as low as 31a per cent and
certainly at per cent, and that great
deal Of money now in boarding would
Come into sight when given such an
bnducement.
Governments Opportunity.
There Is plan to issue emergency
currency of $4,000, 100000 A Govern
ment loan of this amount could be
covered by funds that now have no
employment and are secretly located.
The time is ripe for the administration
70 make a patriotic appeal to the pub
lie to support the Government in its
financial requirements and, at the same
time, offer it an interest rate induce
ment that 1t could not afford to ignore.
Copyright. 1933)