The Daily Alaska empire., 1938-10-08
Government Bonds
(New York Times)

|
 Last month witnessed the seeming paradox of a decline in outstanding United States securities, to- gether with of the largest oversubscriptions on record for $700oO0000 in new issues. It probably will be said that subscriptions for that amount in bonds running respectively five and fourteen years, and bearing interest at only 1is and 21b percent, were sent in before the European crisis became acute. Nevertheless, against the $700000000 asked for cash tenders of less than $7549278850 were reported The offer was oversubscribed nearly ten times, and the amount actually allotted by the Treas lrv exceeded S8o300o0OO
 What, it may be asked the meaning of so extraordinary cver-appcation at a time when
 the magnitude of the public debt already directing 10 the Governments fiscal program highly unfavor able comment? The question is partly answered but only partly, by the we-known fact that when large applicants expect such oversubscripton as will make necessary the cutting down of individual subscrp-
 lions, subscribers will increase correspondingy, above what they expect in the end to get the amount of their application. If they guess wrongly, they are sometimes placed in awkward situation, but banks have to measure the probable subscription lpretty closely. This suggests that the amount of over-applcation does not indicate exactly at times even approximately, what the investing community was prepared to take.
 But even so it is evident that the investing con- munity was entirely ready to cover on the Govern ments terms, all the $7O0000000 asked
 for by the Treasury this there are several obvi- ous explanations. One is the plethora of bank funds
 the existing surplus reserve of more than S3000000000
 nearly high record of their history at the member banks and the existing difficulty of finding profitable use for it. Another, which affects also such large
 institution investors savings banks and insurance companies, is the relatively small volume of new highgrade securities lately offered by private indus try Company issues for capital during the first eight months of 1939 barely exceeded 6000000 GOO, against more than S95o0o0000 during 1937 As for the investing communitys willingness to accept for so large loan rates low 21a and 1 E percent it will be observed that banks getting barely percent high-grade commercial paper that their
 loans of commercial character still $500 900 900
 less than year ago, that the Federal Reserves re- discount rate is only percent and that competitive discounting of Government paper for three months brings return only small fraction of 1 percent
 But is no judgment passed on the economic situa- tion created by the lavish increase in public indebtedness? Under existing circumstances, appar- ently not If business active and business loans rising to normal figures if the status of existing securities were not impaired by reduced business profits at home and the threat of abroad if in other words the comtry's banking business were on normal basis-then the response of the banking community. might be different As matters stand in these roubous times the credit of the United States Government which is judged not much absolutely as relatively remains very high.