The Daily Alaska empire., 1935-03-18
The "BaDy Bends"
CNew York Herald Tribune1

Initial reports on the sales of the new United States savings bonds-the so-called baby bonds indicate that their reception has been distinctly sat- isfactory to the Treasury. The latter, it is said expects to see $40000000 of the securities dis tributed to the public by the end of the present month.
 The bonds designed specifically to appeal to the out-and d-out saver, and especially the small saver. This is to be seen in several of their dis tinctive featues In the first place, they in denominations ranging from $10,000 all the way down to pieces of $25. In the second place, they emphasize at all points the element of safety, as against convenience. They registered securities and hence the owners are protected against loss forgery, theft destruction. On the other hand they lack certain of the convenences attaching to the ordinary bond, which is negotiable and trans ferable at will and for which established market exists Furthermore, while the yield to maturity on these discount bonds 29 per cent is about half of l per cent above the current rate of interest paid savings deposits it is to be noted that the maximum yield is obtainable only by holding the bonds the full ten years. The person who purchased today a discount savings bond having maturity value at the end of years of $1O0 would pay for it SIS. For sixty days he would not be permitted to redeem it at any price, and if he redeemed it within Ia year he would receive only his $75 back-that is, he would receive return his investment. The rate of return from the end of the first year on would be progressive, but during the early years, should he elect to redeem his bond the holder would receive substantially less than the going rate Iof about 2h per cent paid savings deposits
 To one paragraph in the Governments state ment announcing the offering it fair to attach good deal of significance That is the paragraph in which it is stated that postal savings bank depositors may withdraw their savings without loss of interest and exchange their savings certf cates for the securities at the postoffice window"
 The fact is that two recent developments have served to put the postal savings system in some what anomalous position One of these is the establishment of system of guaranteed bank de- posits under the r. D. l. o.; the other is the pre- vailing low rate of interest. So long the small depostor can place his funds with a commercial bank, which pays 2l2 per cent and have them guaranteed by Government agency up to $5,000, there plainly little incentive for him to put them into the postal savings banks which pay but ? per cent and that only deposits up to $2500 The effect of the prevailing low level of interest rates is to discourage the commercial banks from accepting these postal savings deposits from the Government and paying the latter the established rate of 2s per cent.
 That the present baby bond" campaign will undoubtedly enable the Government to tap certain new sources of investment funds is unquestonable It will attract the savings, for example of persons in communities without banking facilities where distrust of the banks has not entirely abated; and many persons of small moderate means who have funds for which they fairly certain they will have no need for at least ten years will see in the bonds the President put it. "a good proposi- tion" So far as their contribution to financing the current Government deficit is concerned, however they scarcely be counted upon except in quite modest degree. Their larger significance, it would appear lies in their role supplement-and quite possibly, in the long run, a successor-to the postal savings system.