10A MAIL TRIBUNE, Medford, Oregon, Thursday. Auguri 7, 1958
Longer Term Conversion Bonds
Suggested by New York Bank
rM '4
By ELMER C. WALZER
UPI Financial Editor
New York (CPU With the
government bond market in a
turmoil it is suggested that
the treasury
get busy with
some longer
term conver
sions on the
order of the
recent Cana
dian govern
ment financ
ing. First Na-
Elmer Walzer tional City
Bank of New York makes this
suggestion following hectic
speculation in U.S. bonds that
required billions of dollars of
Treasury and Federal reserve
support to bring some order
into the market.
The Treasury support has a
deflationary impact in that it
takes bonds off the market.
But it cuts into Treasury
funds.
Federal Reserve support of
the bond market pumps more
credit into the economy on top
of a rise of more than $8 bil
lion in bank credit in the first
half of 1958. Ths credit has
a way of going to work and
here then is an inflationary
push that is causing worry
among the experts.
Some Problems
With the bond market now
showing some semblance of
stability, the Treasury still is
faced with many problems.:
1. It must raise $10 to $12
billion in new money to make
up for a Treasury deficit this
year. And it will be competing
with recovering industry
which will need funds
2. It must retain a market
for $22 billion of 91-day bills
3. It must refinance $46
billion of marketable certi
ficates, notes and bonds ma
turing in the next 12 months.
The way things look right
now the financing ahead must
be done through the bank of
issue. In other words, the
Treasury in depending on
banks for its financial lends
a hand to a big credit infla
tion. In ths connection, First Na
tional City Bank says:
"Financing governmental
deficits through banks of is
sue is a hazardous business.
"It raises the specter of un
controlled inflation . . .
"It can create circumstances
in which government bonds
can be made saleable only if
fi'f;
TEAMSTER PRESIDENT
James R. Hoffa, president
of the Teamsters Union,
made a return appearance
before the Senate labor
rackets committee in Wash
ington, just in time to face
questions about the "human
torch" attack on one of his
associates, Frank Kierdorf,
of Flint, Mich. ,
they are tied to cost of living
indexes or the price of gold.
"The unfortunate aspect of j
the Federal Reserve's massive
intervention is that it . gives
encouragement to inflationary
psychology."
First National City says the
sounder way is to follow the
Canadian example. Canada
launched a huge refunding in
volving about 45 per cent of
the $14 billion Canadian na
tion debt.
Canadian Plan
Canada offered holders of
$6.4 billion 3 per cent victory
bonds issued during World
War II and due from 1959 to
1966 four noncallable securi
ties ranging from 3Vz years to
25 years with no investor per
mitted to exchange for a ma
turity shorter than he held.
Higher coupons sweetened
the issues and bonuses were
thrown in. Coupons ranged to
4V per cent, the highest rate
on dominion bonds since 1932.
This, says First National City,
"looks good to conservatve in
vestors even in an age of
creeping inflation.
"The Canadian plan ac
complishes at one fell swoop
what Secretary of the Treas
ury Robert B. Anderson has
been attempting to work out
slowly, over an extended per
iod of time.
"The beauty of it is that
the Bank of Canada is re
lieved from pressure to help
the government with its fin
ancing problems.
"This sort of step is one
we should be considering."
But the bank considers as
most essential getting govern
ment expenditures and fin
ancial commitments ' under
control and adds:
"Is is not fair to ask anyone
to buy bonds of a government
which seems to be embarked
on deficits as a way of life."
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