Evening star., 1934-01-09
|MOVE TO STABILIZE
| j. S. ISSUES SEEN
Brokerage Firm Buys Nearly
All Paper Offered at
New York.
BY CHARLES F. sPEARE.

Special Dispatch to The Star.
NEW YORK, January 9.-Since the
Treasury budget was announced last
Thursday. a firm Of specialists in Gov
ernment bonds has had its brokers on
the floor Of the New York Stock Ex-
change taking practically all of the
Treasury paper offered. They have
been the main source Of support for
bonds and notes on sale for the ac-
count of institutions and private in
veStors.
The assumption is that they have
been acting for the Federal Reserve
Board and that the funds necessary to
cover their purchases have been a part
of the money subscribed by members
to the Deposit Guarantee Corporation
This amounts roughly to $500, 600, 900.
The significance of this is that it is
apparently one phase of the Govern
ment program, whose major project is
the disposal, 50 far by undetermined
means, of S6,000,0O0 900 of additional
Treasury paper before June 80 and the
refunding of s4,0o0,0o0,000 maturing
Short-term obligations.
Must Be Covered Soon.
The first portion OF the new loans
must be covered soon. 1t is necessary,
therefore, to insure stable market for
outstanding loans. If it were private
enterprise and the year were 1929 there
would already have been set in motion
"sweetening" process by means of
which the outstanding bonds would
have been bid up above the price at
which new ones were to be sold. The
Government, however is not supposed
to indulge in practices of this sort,
though it has been quite clever in its
marketing psychology. Note, for in
stance, the 10-point jump in the last
two business days of the Home Owners
Loan Corporation per cent issue.
The laws of demand and supply have
not been abandoned by the financial
districts, even though other traditions
of $4,000 600, 900 more Government
bonds coming on a market that was
having some difficulty in absorbing sales
of existing issues did not look good to
Wall Street, whose lead in judging cur
rent values of Treasurp paper the rest
Of the country follows. This compelled
the Treasury to provide buying power
sufficient to take offerings at the market
and keep its most recent loans as near
to par as possible. This is what is now
being done.
Two Methods Cited.
Assuming that it is successful and
that prices are held, there ere two
methods by which the Government
could undertake to finance its S60o0,-
100000 loan. The better way, if
feasible, would be by the offer of long
term bonds for public subscription,
This would place them in the hands of
individuals and permit strictly bank
funds to function in the interest of
general business. The size of the loan,
however, seems to make such a plan
impracticable
For one thing it would have to be
sold in sections, with the possibility that
each new portion would require higher
rate of interest than the preceding one
in order to make it go over" This, in
turn, would affect the prices not only of
old Treasury loans but those of corpora
ton securities as well. Public psychology
is entirely different today than it was
IN the time of the last Liberty loan and
public resources free to subscribe TO
such loans are much smaller.
Such a set of circumstances makes
the second method appear the more
probable. 1t places the burden entirely
on the banks of the country, working
together. with the Treasury and the
Federal Reserve System and the Recon-
struction Finance Corporation not far
in the background. 1t also brings into
action some of the latent provisions of
the emergency banking act passed by
the last Congress.
tCopyrisht. 1934)