Evening star., 1934-01-17
FINANCING
OUT OF PICTURE
Federal Governments Needs
Leave Little Place for
Other Issues.
BY CHARLES F. SPEARE.


NEW YORK, January l7-For two
reasons 1t now seems unlikely that en-
ployment of private capital In the first
half Of 1884 will be important as
stimulant to business
The first reason is that the demands
OF the Government are so great that
they exhaust the supply of liquid cap
ital; the second is that with the as
surance Of protection to Government
credit which has again been given by
President Roosevelt In his latest none
tary message, the obligations of the
United States Treasury stand pre-
eminent. No corporation issue can
compete with them The recovery Of
the last few days indicates that some
OF the early frightened owners have
been buying them back.
Specifically, the proposal Of the Pres
ident is that $4,000, 100000 Of the cap
tured profit on gold to be taken over
by the Treasury is to be employed
for purchases and sales Of gold, foreign
exchange and Government securities.
1t Is also to be used for the mainte-
nance Of the credit Of the Govern
ment."
Protection Set Up
For several weeks the Treasury has
been protecting its paper against the
offerings of timid investors, taking
practically all Of the bonds offered and
keeping the price decline within small
figure. 1t proposes to continue this
policy. If the confidence of the public
in Treas sury loans returns to the de-
gree held before imitation began to vex
the investor the Government bond mar
ket can take care of itself 1t will
not be required that Government agents
hover over 1t like protecting angels day
after day.
Illustrating the effect of the closing
Of the capital market to new issues and
the wide opening of the market for
Treasury paper, life insurance COM
pany has just completed the purchase
OF a substantial block of a Pennsyl-
vania Railroad divisional per cent
bend at 10l ,. to yield about $50 per
cent. rs these bonds are taxable, the
return on them is less than on several
o. the non-taXable longterm Treasury
issues. The willingness OF the buyer to
pay the price was due to the scant sup
ply of high-grade corporation mortgages
III the market. and the preference for
railroad security rather than better
revenue Government loan suggested its
lear that the abundance of Treasury
paper would result in a drop in its
quoted values.
Increased Only S41, 100000.
The total of all corporation bonds
offered for sale last year was about
S229 100000 OF this. Sr88, 900, 900 was
for refunding purposes, so only SAL
100000 represented new capital outlay.
AT the same time, Sl0,376 900 900 of
Treasury financing was negotiated. of
which S3022 100000 was new money.
Ii We add the 1888 emissions of stock,
mainly those of breWerieS and distil-
leries, amounting to about Sl53 900 900,
the total of all new corporation capital
oraWn from the investment market last
year would not equal good week S
business in 1928 or in 1929
There are those who maintain that
there can be no prosperity until the
capital market is revived with private
funds tempted back into it by attractive
equities and by a sufficient return on
investment. The argument on the other
side Is that the proceeds of Govern
ment loans on the scale proposed will
accomplish what private capital has
previously been able to do. and do it
more quickly The debatable point Is
whether the food of new Treasury
paper will not break down the price
structure and create a resistance from
protential buyers that might seriously
affect the selling campaign covering
S6 900 000, 900 of additional loans and
a refunding of $4,000 900, 900 maturing
notes.
1t is obvious that there cannot be
at this time a normal market for
private capital and an abnormal and
constant supply of Treasury paper. 1t
IS true that in 1929 the total of cor
poration financing exceeded the sum
of the proposed Government loans of
$40 900 900, 900 and that there was then
a further amount of s1.430,0Oo, 900 to
the credit of municipalities. The ma
tional income four years ago, however,
was far greater than 1t Is today and
the temper of the public bold instead
Of timid.
(Copyrfght. 1e34)