Evening star., 1936-09-13
TREASURY STARTS
T0REF|NANCE DEBT
ON LONGER TERMS
Action May Indicate Belief
That Money Rate Has
Touched Low.
STABLE LEVEL LIKELY
WELL INTO NEXT YEAR
Attitude of Banks and Insurance
Companies Toward Shift in
Policy Studied.
BY CHARLES F. SPEARE.
tnh tn ThA Gtar

BY CHAhLES r. SfEhhEs
Special Dispatch to The Star.
NEW YORK, September 12.-Dur-
ing the week, The United States
Treasury offered for sale s9l4,0O0, 900
Of 234 per cent bonds, with the due
date in 1859. The importance of this
is that it marks the beginning of a
program for refunding a portion Of
the embarrassing short term debt Of
the Government.
Part of the loan was for the pur-
pose of retiring Ia per cent notes.
So the Treasury chose at this time
to pay more for its money while
obtaining the advantage Of getting 1t
for a 23-year period at remarkably
low rate.
The implications Of this are i'm
portant, also the reactions from it.
1t may mean that the Treasury Is
winding up its financing with short
paper on the assumption that the
money rate has touched its low. though
it may remain at the present level for
months. 1t seems to be the general
banking world belief that the rate will
stay stable throughout the year, and,
perhaps, well into 1887. But money
cannot forever continue cheap The
Treasury rate has controlled nearly
all corporation financing. 1t domi-
mates the bank loan situation.
At the end of 1885, the seven larg-
est life insurance companies in the
United States held in their portfolios
81 800 10000 of Government paper.
The banks of the country are said to
have 10 times this amount.
Attitude Awaited.
What is to be their attitude now
that the Treasury has given notice
that it proposes to seek long term
loans whenever possible.
Will they shift from six and nine
months paper and maturities rang
ing from two to five years into the
longer issues or continue to put
liquidity ahead of the higher income
available from a long term invest
ment? OF course, If it is true, as
Frank Knox, Republican candidate
for Vice President says. mo life in
surance policy is secure. no bank de-
posit safe" it makes little difference
what attitude they take in this transit
ton stage. Fortunately. the average
citizen is not frightened by such
political buncombe.
There has been for some time a
steady movement on the part Of
institutions out of short into longer
Government obligations. Those that
took this step six months or year
ago have realized not only a most
satisfactory return in income. but
a substantial appreciation in capital
investment. This has been one Of
the prominent negatives to the argu-
ment in behalf of pending imitation.
perhaps unconsciously presented, by
a group of the shrewest buyers OF
securities in the country.
Rails Near 1888 High.
The average Of railroad stocks this
week has approximated the high in
1888, New interest has been given to
this group, as also to speculative
railroad bonds, by the evidences now
multiplying that the steam carriers
have turned the corner" Following
the July gain in operating revenues
of 129 per cent comes the I. c. c.
report for August, showing an increase
over the same month last year of
about 20 per cent. In the Eastern
district, passenger revenues rose over
IS per cent. Those for September,
with the largest Labor day movement
of rail travellers on record, will doubt
less continue this trend. 1t is fair to
assume that most of the solvent roads
will not only earn their fixed charges
in 1885 but, in spite Of heavy main
tenance expenditures, show a surplus.
That the public believes they may
again pay dividends is apparent in
the accumulation this week of rail-
road stocks selling in range between
$40 and $50 a share. Likewise, it
shows increasing respect for defaulted
railroad bonds, whose position in any
reorganization must be improved over
the original proposals by the fact Of
monthly earnings well in excess Of
estimates when plans for recapitaliza-
ton were first set up.
Dividends and Wages Up.
In the industrial and public utility
list Of stocks, demand this week has
been enlarged by increased dividends.
These are a practical proof of the
gain in profits reported in monthly
and quarterly statements throughout
the Summer. Another evidence of
this is the higher pay granted to their
employees by several large manufac-
turing concerns.
The drought situation has ceased
to be an influence in speculative secu-
rites and fading one in commodity
markets.
The Government report this week
on the condition of cotton on Septem-
ber l showed loss Of 1850, 900 bales,
compared with the month previous,
and . prospective crop of only 11,12l.-
900 bales.
This, however, would be 5 per cent
greater than last year and IL per cent
more than in 1894.
Tha NEoS~a .la~k;o. nf1~Iau