Evening star., 1953-05-13
Burgess Predicts
More Investment
OF NOn-Bank Funds
BY Donald B. HodIey


Because of higher interest
rates, the Treasury will be able
to rely mainly on nom bank
funds for the remainder of this
calendar year and thus will avoid
adding to imitation.
This was predicted yesterday
by w. Randolph Burgess, deputy
to the Secretary of the Treasury,
in an address before the Ma
tional Association of Mutual
Savings Banks in the Shoreham
Hotel.
Mr.. Burgess said the recent
30-year 3l4 per cent bond issue
of the Treasury uncovered more
investment money than expected.
He added that higher interest
rates have brought some COM
pensation for millions of families,
the value of whose savings have
been cut in half by imitation.
Fun0S Tor investment.
With savings continuing to
mount, and with around 80 per
cent Of 1853 corporate income
tax payments out of the way by
midyear, corporations will have
large amounts available for in
vestment in the second half, he
said.
I'VE hope to attract these
funds and should need very little
from the banks" he added.
Mr.. Burgess said the Treasury
does not intend to push the
market too hard with long-term
issues, realizing that the transi-
ton will have to be gradual. but
he added: 1--WE are on the right
track"
Three conclusions can be
drawn from results of the initial
long-term offering, he said.
First, there Is available a sub
stantial amount of investment
money which can be reached
with bond carrying a competi-
tive interest rate. Even in the
bull market, the number of nom
bank buyers has risen with the
rate.
Second. the long term market
has been overloaded because too
many people have been trying to
borrow at the same time. A de-
lay of some projects would be
wholesome both for the market
and the business situation.
Time will be needed for alb
sorption of the new issues. In
the meantime, the Treasury will
proceed cautiously. though it
should not always be at the end
of the queue and SO be forced
into inf1ationary bank financing.
Third, the free rider. accus-
toned to pegged m~rkets. had a
wholesome lesson, but must be
screened more carefully next
time"
Cites "SOund Money"
Recalling the administration
dedication to two pillars of pol
icy, strong defense and a
strong economy. he added: "A
strong economy to the Treasury
means sound nn0npV"
Pointing out that sale of short
term securities to banks is highly
inflationary, Mr.. Burgess said
the only other alternative was
to distribute more of the debt
among non-bank investors at
time when the market was con-
gested by the greatest borrow
ing demand in its history.
I'VE didn't pull the higher
rate out of thin air." he said.
1T was dictated by market con-
ditions." he emphasized.
The preceding adminiStra-
tions policy of financing the
Government by placing short
term securities in the banks and
then calling upon the Federal
Reserve System to support the
price of Government securities
in the market had much the
same effect as printing so much
money, he said.
1T was one of the major
causes of imitation in the cost
of living, which cut the buying
power of the dollar in half since
just before World War H." he
contended.
Treasury COmpetes.
when the Treasury sells
short-term securities to banks,
the money supply is increased
by the amount of borrowing.
Borrowing outside the banks, on
the other hand, reaches gen.
uine savings. Money which
might have gone into other in
vestment outlets goes instead to
the Government. The Treasury
completes for available loan