Evening star., 1934-04-08
American, British and Dutch
Actions Help to Clear
Finance Problems.
HELD THREAT
TO TREASURY PROGRAM
Political Maneuvers for Elections
Expected to Endanger Gains
of Administration.
Special Dispatch to The Star.

NEW YORK, April THE series
of fiscal refunding operations under
taken here and abroad this week may
have more lasting effect on world
finances than the reversal of bond
price tendencies. Bonds in New
York this week virtually retraced the
ground lost in the preceding two
weeks
The United States Government and
New York State financing and the
British and Dutch operations over
seas added another chapter to world
recovery, which "old-fashioned" econ
omlsts insist started in London June
30 1882, when Chancellor of the
Exchequer Chamberlain announced
the conversion Of Great Britain's 5
per cent war loan of 1929-1947. then
outstanding in the amount of f2,086.-
405 1899, into a 3i2 per cent loan.
This cut interest charges about f30,-
100000 and made net budgetary
saving of f23,000.000 after allowing
for resultant reduction in income
tax and surtax.
This British action, which encour-
aged many nations throughout the
world to embark on similar pro-
grams. took place within nine months
after the empire went off the gold
standard, on September q, 1881.
The United States undertook the
-oII1 nf into oh Hat
u, 1888, or six months after it quit
the gold standard, April 19. with the
calling of .90O,O00,00O of Fourth
Liberty PAS for retirement April Is,
1884, and offering in exchange 10 to
II year bonds paying 4l4 per cent
interest the first year and 3l4 per
cent thereafter.
Britain Pushes Plans.
Following its favorable budgetary
showing for the fiscal year ended
March 81, 1884, Great Britain has
continued the program begun in 1882
with the offer of t15O,000000 of 3
per cent bonds at 90 to retire f1O5.-
100000 of 4 per cent treasury bonds.
Holland this week in offering a new
per cent bond issue also effects
considerable saving in interest
charges
Our initial attempt during the de-
preston to whittle down National
Government debt charges was not
especially successful. Only about
5000, ,000,0 900 of the fourth Liberty
4l4s called for April Is were turned
in as result of the October II ex-
change offer. This relatively poor
rate Of conversion was due to the
Federal monetary program. The
Government started its gold buying
policy shortly thereafter. All Federal
Government bonds naturally declined.
The newly offered bonds, the 44s-
GAS, dropped well below par. Some
converters were sorry they had made
the exchange.
There is one axiom. however, that
applies SO generally to Government
conversion offers throughout the
world that it is worth noting here
the first conversion Cffer is always
the most attractive to bondholders.
This was true of the Treasury's Oc-
tober II offer. Those who accepted
it are receiving l per cent more for
six months longer than those who
refused
The rapidity with which the Federal
Government is able to convert its un-
wieldly short term debt into long time
obligations and the success which the
Treasury enjoys in reducing interest
rates thereon depend not SO much on
skillful judgment of money markets
and other economic factors influenc-
ing f1otationS as on the actions and
proposals of our legislators.
Program Threatened.
Attempts to jam through legislation
quickening the march of imitation
will depress Government bond values
and disrupt the Treasury's program,
no matter how it tries to support the
market through the buying of Feder-
ais for various investment accounts.
Additional silver legislation, proposals
for new money to create a revolving
fund to refinance mortgage indebted
ness, the renewed agitation TO: i'm
mediate payment of the soldiers
bonus, and additional expenditures
dll Vi lIlclll oplClillu pOllllSdl HId-
neuvers in an election year-will have
a depressing effect on a constructive
Treasury program.
Almost simultaneous with the an
nouncement of the Treasury's eX-
change offer came fairly definite word
that the Fletcher-Rayburn securities
act of 1888 would be amended in
minor way. Much as corporations
and investment bankers may criticize
that act, which effectually stopped the
flow of capital to private industry, it
must be conceded that the securities
law helped the Government to obtain
funds far more cheaply than if it had
had to compete against private bor-
rowers. Perhaps the securities act
of 1888 was designed especially for
that purpose. The British started
their government conversion program
differently. They simply banned all
new issues from June until october,
1882. while the war loan SIS were
being exchanged for 31as, and kept
close watch on foreign loans there
after until the government financing
program was we'll under way.