Evening star., 1937-01-24
Present Popularity Con-
trasts With Dark Outlook
Three Years Ago.
TAX ARREARAGES CUT
ALONG WITH EXPENSES
Cities, Counties and States Find
Less Need for Borrowing and
List Grows Thinner.
BY STEPHEN DICKINSON,
Associated Press Financial Writer.

NEW YORK, January 23-Mu-
nicipal bonds are more sought after
today than a debutante with dowry
Three years ago they were as popular
as divorce with a diary.
The fact was emphasized recently
when New York City sold, at record
low money cost. $50,O0O,Oo0 Of long
term bonds.
AS recently as 1888. New York's
loans we're selling at wide discounts
some as much as 20 per cent below
their face value. The Empire City's
experience was, in lesser or greater
degree, that of the vast majority oi
American municipalities.
The abrupt change in status of mu-
nicipal credit throughout the coun-
try was effected Immediately after
people stopped borrowing" from their
towns, cities, counties and States and
resumed their tax payments.
The tax arrearages were, in effect
loans, and of a type which the local
governments could not discount. II
took pressure of a sort difficult to ap-
ply to end this kind of free ride" on
the credit of municipalities. But once
burgomasters and their official fami-
lies were shown how and given nc
alternative but to do it, the transfor-
nation began.
Seek Privilege to Lend.
Today most communities and other
political subdivisions can go to their
bankers and get loans for the asking
In fact the banks vie for the privi-
lege of lending.
In keeping faith-with SIS ,000, ,000,-
900 or more at Stake-hard- bitten Wall
Street experts in municipal credit say
the American people have vindicated
the theory self government begins at
home and stays there until it gets re-
suits. Roughly 100000 voters hired
the money to run their towns and
paid it back in spite of the depression.
Today a lean and hungry munici-
pal bond market forages for choice To-
cality issues and grows thinner as
cities, counties and States find less
and less need for borrowing.
In fact, so voracious has the appe-
tite of municipal bond buyers become,
that some market experts have been
sounding a note of caution. Even
the record low general level OF money
rates cannot make prices go up for
ever, these authorities have pointed
out.
Gain Is Phenomenal.
They concede. however. that even
should coming months see towns and
cities paying little more for funds,
the strengthening of their funda-
mental position has been phenomenal.
This situation has brought about a
complete reversal of the depression
relationship between local govern
ments and bankers. When several
years ago sorely tried heads of
many political subdivisions had about
reached the end of their rope, they
called upon the banks to devise ways
and means of restoring the munich
palities' credit.
The suggestions offered varied con-
siderably with each situation, but
they all met on the common ground
the community must put its house
in order" This meant clearing up tax
delinquencies, instituting administra-
tive economies and adopting "pay-as-
you-go" policies.
Some local governments remon-
strated violently over what they
termed the banks usurpation of pub
lie Office. But, with few exceptions,
they capitulated and took the pre-
scribed number of bitches in their
belts.