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WAR LOANS
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UNITED STATES
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ROBINSON & CO.
26 EXCHANGE PLACE
NEW YORK


WAR LOANS
OF THE UNITED STATES
EOBINSON 85 C0.
f5 Exchange Place
New York
U. S. Government Bonds
and other
Investment Securities
“ . . . the right is more precious than peace, and we
shall fight for the things which we have always carried
nearest our hearts—for democracy, for the right of
those who submit to authority to have a voice in their
own governments, for the rights and liberties of small
nations, for a universal dominion of right by such a
concert of free peoples as shall bring peace and safety
to all nations and make the world itself at last free.
To such a task we can dedicate our lives and our for-
tunes, everything that we are and everything that we
have, with the pride of those who know that the day
has come when America is privileged to spend her
blood and her might for the principles that gave her
birth and happiness and the peace which she has treas-
ured.”
flddress of President Wilson to the Congress
of the United States, 1157172, 1917.
Copyright, 1917
ROBINSON & C0.
New York
t§-?-z<?MV"/q
WAR LOANS
OF THE UNITED STATES
CONTENTS
Introduction .
Period from 1775 to 1811
Period from 1812 to 1815
Period from 1816 to 1845
Period from 1846 to 1860
Period from 1861 to 1865
Period from 1866 to 1893
Period from 1894 to 1899
Period from 1900 to 1917 . .
1917—The Liberty Loan . .
Interest-bearing Debt of the United States
Text of Act Authorizing the Liberty Loan
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WAR LOANS OF THE UNITED STATES
kg , T is perhaps not generally realized
that in the hundred and forty-one
(Va. “55% years of its existence the United
States of America has taken part in
five eventful wars. To-day, when fac-
ing the sixth and greatest conflict in its history,
or in that of the whole world, for the successful
prosecution of which there has been authorized
by the Congress of the United States the most
extensive measure of war finance ever promul-
gated, at one time, by any country, it is of more
than academic interest to cast a glance backward
at those earlier wars which have been instru-
mental in the upbuilding of the American na-
tion, and to learn how they were financed. To
this end, the following brief résumé of war loans
past and present is submitted.
HE financial history of the United States
has its roots in war. It sprang into being
in the latter part of the eighteenth century,
when, as a result of the revolt against “taxation
without representation,” it became necessary for
the colonies to devise some means of meeting the
expenses of the army. There were many experi-
ments, most of them disastrous, some of them as
revolutionary as the War itself, until finally, in
1789, the new constitution laid the foundations
of the present fiscal system of the Federal Gov-
ernment.
At the beginning of the Revolutionary period,
the problem of financing the war was solved
largely by the issuance of bills of credit; about
three years later requisitions to be met by local
taxation were made upon the various States, and


Introduction
Period from
1775 to 1811
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WAR LOANS OF THE UNITED STATES

only during the later stages of the war was any
concentration of financial responsibility efiected.
On June 22, 1775, within a week of the battle of
Bunker Hill, there were issued $2,000,000 bills
of credit. By November, 1779, the total amount
of such issues had reached $241,552,780, and in
addition, paper notes aggregating $209,524,7 76
had been put out by the individual states. At
this time the value of the continental currency
in specie showed marked depreciation, being
3812 to 1, and a few months later provision was
made by Congress for the acceptance of paper in
the place of silver at the rate of 40 to 1.
In explanation of this condition of the country’s
finances, it must be borne in mind that of the
alternatives, borrowing by voluntary loans, and
taxation, domestic borrowing among the strug-
gling colonies was impossible, and foreign bor-
rowing, at least during the early years of the
war, difficult of accomplishment, while as to fed-
eral taxation the new confederated government
had to walk very warily among states jealous
of their powers of self-taxation and political in-
dependence.
The first domestic war loan, made in June, 1775,
for the purchase of gunpowder, was for a very
small amount, stated to be about £6,000! No
regular loans were authorized by Congress until
October, 1776, when authority was granted to
borrow $5,000,000 at 4 per cent. The rate proved
too low, and was raised to 6 per cent.; but even
so, after twelve months less than $4,000,000 had
been disposed of. By 1780, subscriptions to va-
rious issues had been made to the extent of $63,-
289,000, the specie value of which was, however,
only $7,684,000. After March, 1782, interest on
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ROBINSON 85 Co.
the loans was not met, and the Government is-
sued certificates of interest indebtedness.
The Government credit at this period reached
so low an ebb that liquidated and certified claims
against it were worth less than 15 cents on the
dollar. By 1786 the national financial system
had broken down completely; further borrowing,
either domestic or foreign, was impossible, and
it was realized that if the republic were to con~
tinue some readjustment, particularly with re-
gard to its financial affairs, was imperative. The
outcome of this dissatisfaction was the Conven-
tion of 1787, which resulted in the drafting of
the Constitution of the United States.
It is fitting at this time to recall the provi-
sions of the Constitution which relate to public
finance:
“The Congress shall have power to lay and
collect taxes, duties, imposts and excises, to
pay the debts and provide for the common
defence and general welfare of the United
States . . .”
“All bills for raising revenue shall originate
in the House of Representatives, but the
Senate may propose or concur with amend-
ments as on other bills.”
(The Congress shall have power) “to bor-
row money on the credit of the United
States.”
“All debts contracted and engagements en-
tered into before the adoption of this Con-
stitution shall be as valid against the United
States under this Constitution as under the
Confederation.”
(The Congress shall have power) “to raise
and support armies, but no appropriation of
WAR LOANS OF THE UNITED STATES
money to that use shall be for a longer term
than two years.”
The Treasury Department was established in
1789, and Alexander Hamilton appointed by
President Washington as the ‘first Secretary of
the Treasury. In his report on the public credit,
Hamilton emphasized the necessity, in order to
ensure a proper financial standing for the young
republic, of the establishment of a sound na-
tional credit. The national debt was the price
of the national liberty, and it was felt that no
part of it could in honor be repudiated.
The debts assumed by the new Government ag-
gregated $72,775,895, of which $40,256,802 rep-
resented domestic debt of the Confederation,
$19,962,219 the debts of the constituent States,
and $12,556,874 the borrowings from foreign
governments, chiefly Holland and France.
From the outset Hamilton had clearly in mind a
definite fiscal system which should include pro-
vision for additional revenue, the adjustment of
the national debt, extinction of the State debts,
and the establishment of a national coinage and
a national bank. The first problem to be taken
up was that of the national debt. In January,
1790, Hamilton submitted his “Report on Public
Credit,” and in August of the same year the
passage of the Funding Act of 1790 laid the
foundation of that prompt liquidation of obliga-
tions which for upward of a century has char-
acterized the financial policy of the United
States. '
Briefly, the act provided for a loan of $12,000,000
for the payment of foreign debt, for a loan to
the full amount of the domestic debt, and for a
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third loan of $21,500,000 with which to take up
the State indebtedness. Quarterly payments of
interest were instituted, and the national rev-
enues pledged to the payment thereof. On the
whole, the funding was carried out with a good
measure of success, and within a few years the
old obligations had almost disappeared. In Jan-
uary, 1791, on a specie basis, the debt of the
United States stood at $75,463,476, and fluctu-
ated between this sum and its maximum of $86,-
427,120, reached in 1804, until 1806, from which
date a steady decrease was maintained. The
principal loan raised during this period of liqui-
dation was for $13,000,000, issued in 1803 to pay
for the purchase by President Jefferson of the
province of Louisiana for the United States.
To understand, in these days of discussion of
billions of dollars, something of the tremendous
problem which confronted the young Secretary
of the Treasury, the economic conditions of the
country at that time should be kept in mind.
The population of the United States did not
reach 4,000,000, one sixth-of which was colored.
It congregated chiefly along the Atlantic sea-
board, and Pittsburgh was a western pioneer
settlement. The largest city in the country,
New York, had but 33,000 inhabitants, and in
only six cities did the population exceed 7,500.
Agriculture was the principal occupation. There
were but few means of communication; roads
were poor; navigation was little developed, and
throughout the entire country there were but
seventy-five post-offices, with only three mails a
week between such important centres as New
York and Boston!
Such was the United States at the opening of
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WAR LOANS OF THE UNITED STATES
Period from
1812 to 1815
the nineteenth century. The European war,
however. proved a stimulus to the commerce of
the country, which expanded rapidly; revenues
were ample; economy in expenditures was the
avowed policy of President Jefferson, and of Gal-
latin, who had succeeded Hamilton as Secretary
of the Treasury, and notwithstanding the finan-
cing necessitated by war with Tripoli, by 1811,
the year before war was declared with England,
the public debt had been reduced, in the short
space of eleven years, from $86,000,000 to $45,-
000,000.
HE opening of the war with England
found the United States without any defi-
nite financial policy, although for sev-
eral years prior thereto there had been warn-
ings of what was likely to occur. Neither the
army nor the navy was on a footing of "pre-
paredness,” and, while as far back as 1807
Gallatin had given some attention to devising
fiscal resources which would be available in case
of war, the policy of “wait and see” had pre-
vailed. It is of particular interest to us at this
time to note Gallatin’s proposal that war expend-
itures should be met with loans, and that in-
creased taxation should be adopted solely for the
payment of annual expenses on a peace basis,
the interest on existing loans, and the interest on
any new debt, the theory being that war would
inevitably deplete individual resources, curtail
profits, and interfere with the export of surplus
agricultural products, a condition of affairs
which the then Secretary of the Treasury was
unwilling to intensify by any taxation beyond
what was strictly necessary.
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Prior to the actual declaration of war in June,
1812, two loans were authorized, one for $5,000,-
000 and one for $11,000,000. Immediately fol-
lowing the outbreak of hostilities, treasury notes
to the extent of $5,000,000 were issued and cus-
toms duties were doubled; but inasmuch as the
chief commerce of the United States had been
with what was now an enemy country, the latter
measure proved but a broken reed of war finance.
From March, 1812, to February, 1815, fifteen is-
sues of stock and treasury notes were made, bear-
ing interest at the rates of 5 2-5, 6 and 7 per cent.
The various authorizations aggregated $189,436,-
800, not all of which, however, was issued. The
first loan, for $11,000,000, made prior to the war,
bore interest at 6 per cent. and was not allowed
to be sold under par; but in February, 1813, when
a 6 per cent. loan for $16,000,000 was authorized
it became necessary to accept bids below par,
and even then the loan was placed with difficulty.
In March, 1814, the privilege was granted for the
first time of allowing subscribers to existing
loans to participate in any more favorable terms
which might be accorded with subsequent is-
sues. This policy had the effect of lowering the
price of Government issues in order to secure
further concessions, and some of the loans of the
later period of the war were issued at a discount
of 12, 20 and even 35 per cent. By March, 1815,
when the last war loan was made, public credit
had risen again, and the loan was negotiated at
an average discount of a little more than 5 per
cent. The loss to the Government on the stock
and notes issued during this period was very
great, and it was stated later by the House Com-
mittee of Ways and Means that for loans ag-
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WAR LOANS OF THE UNITED STATES

gregating more than $80,000,000 face value the
Treasury had received only $34,000,000 as meas-
ured in specie. .
The issues of treasury notes made by the Gov-
ernment during the war of 1812 bore interest
chiefly at 5 2-5 per cent., except for those in de-
nominations of less than $100, which were non-
interest-bearing. They had no legal tender qual-
ities and, with the exception of the later issues,
were too large to get into general circulation.
They remained at par in specie until the banks
generally suspended specie payments in August,
1814, and at the close of the war the notes then
outstanding were funded into interest-bearing
stock.
An interesting comparison with the magnitude
of the scale on which governmental expenditures
are now conducted is afforded by the fact that
the total expenditures during the 1812-1815 war
period for naval and military purposes, interest
on loans, pensions and miscellaneous items
amounted to $119,624,000, and that by 1816, at
the close of the war, the public debt of the
United States was but $127,334,933. This sum
appears almost trifling in a day when a cheque
for $200,000,000 is handed over without cere-
mony to the governor of the Bank of England as
America’s first contribution, as an ally, to the
common cause; when foreign loans to the extent
of nearly $3,000,000,000 are placed in this coun-
try without difficulty on an average of a 6 per
cent. basis; when the authorization of a $7 ,000,-
000,000 war loan at 311/2 per cent. is taken almost
as a matter of course; and only as we are re-
minded of the happenings of a century ago can
we realize the true significance and appreciate in
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their proper proportions the great events of the
present day.
Shortly after the close of the war of 1812-1815,
the Government began the payment of its out-
standing debt, and by the Act of March 3, 1817,
ordered an appropriation to the Sinking Fund
from current revenues of $10,000,000 annually,
with the further provision that all surplus in-
come in excess of $2,000,000 be devoted to that
purpose. After the final war loan of 1815, no
further issues of Government bonds or notes
were authorized until 1837 . Within this time,
largely as a result of the sale of lands, the entire
debt had been paid off, surely a record in the
financial history of nations, and a treasury sur-
plus of about $28,000,000 distributed among the
various States.
HE twenty years following the cessation of
hostilities were a period of international
peace, of industrial and agricultural ex-
pansion, and, as usual, of considerable specula-
tion and extension of credit. To quote from
President Wilson’s “History of the American
People”:
“All banks were banks of issue. Those that
did not have the Government’s money to
lend, loaned their own abundant notes. Pa-
per money seemed to pour of a sudden from
every town and hamlet, and speculation be-
gan to heap risk upon risk to make use of it.
The real money centres of the country had
little part or lot in the business. Enterprise
ran freest where chiefly compounded of hope
--where the resources of the country, though
unmistakably rich with every promise of
Period from
1816 t0 1845
13
WAR LOANS OF THE UNITED STATES
Period from
1846 to 1860

abundant profit, were as yet undeveloped,
awaiting the slow processes of industry. The
bubble of credit glistened resplendent with
all the hues of the round globe, until Gen-
eral Jackson himself, in his rough honesty,
pricked it.”
It is necessary to consider these matters in or-
der to arrive at an understanding of the panic
which, partly as a result of the conditions above
outlined, but also because of crop failures at
home and banking failures abroad, overtook the
country in 1837. Thus national disaster came at
a time when the Treasury had pledged itself to
large outlays for public improvements and when
its expenses had been increased by the Florida
war for the removal of the Seminole Indians
from that territory, and the next few years, with
one exception, showed an annual deficit. To
meet the strain, several issues of treasury notes,
bearing interest from 1 mill per cent. to 6 per
cent., were sold at par, and in 1841, 1842 and
1843 long-term loans at par were authorized.
The interest rates on the first issue, 5 2-5 per
cent. to 6 per cent., did not attract capital, and
although later the rate was increased and bonds
were sold at less than par, recovery from the
panic was slow and there was no general confi-
dence in the financial policy of the Government,
a feeling which was intensified by the financial
collapse of several of the State governments.
HE Mexican War, which broke out in May,
1846, was a comparatively short contest,
ending with the peace proclamation of Feb.
2, 1848. The expenses of the War Department
during the three years from April 1, 1846, to April
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1, 18119, aggregated $99,604,016, an excess over the
three normal previous years of $63,605,621, and
were met by loans in the form of treasury notes
and stock. Two long-term loans were issued at a
5 2-5 per cent. interest rate. and one bearing 6
per cent, all being placed at par or at a premium.
The contrast between the ease with which the
Mexican war loans were floated compared with
the difficulty experienced in financing the War of
1812 is an excellent illustration of the advance
in wealth and credit made within one generation.
The recuperative power of the country after the
panic of 1837 is evidenced also by the fact that
whereas in 1841 loans were placed with difficulty,
in 1846 subscriptions to the amount of $57,723,-
000, almost all of them at or above par, were re-
ceived for an $18,000,000 issue. This confirms
once more what history has so often recorded,
that it is always less difficult to obtain funds for
carrying on a war than for the more prosaic pur-
poses of an era of unemotional peace. More sig-
nificant, as indicative of the fast developing
power of the nation, is the fact that, for the first
time since the foundation of the Government,
subscriptions were made in specie.
The fifteen years between the war with Mexico
and the Civil War were fruitful ones in the de-
velopment of the United States. At home, im-
migration on what was then regarded as an un-
precedentedly large scale began to develop, and,
a greater factor perhaps than any other, an era
of railroad construction commenced which
opened up new sections of the country at the
rate of about 1,000 miles per annum. The large
territory which had been ceded by Mexico and
the extraordinary development of California fol-
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WAR LOANS OF THE UNITED STATES

lowing the discovery of gold also played a part
in the general economic stimulation of the {na-
tion. Abroad, the removal of import duties in
England resulted in increased exports, chiefly
agricultural, from the United States, the revolu-
tionary disturbances on the continent and the
famine in Ireland created a further demand for
American food products, and the increased pur-
chasing power of the American people was re-
flected in the quickening experienced by all lines
of American industry. “An age of machinery
was pushing forward every process of produc-
tion, every means of communication, everything
that touched either thought or effort.” (Wil-
son’s “History of the American People.”)
An important result of the general prosperity, in
which, of course, the National Treasury shared,
was a resumption of the liquidation of the public
debt. At the end of the Mexican War the debt
of the United States amounted to $63,000,000 and
in 1850 was increased another $5,000,000 by the
payment of the Texan Indemnity. From that
year it decreased steadily until, on January 1,
1857, it had been reduced to $28,699,831.
Further reduction for a considerable period was
prevented by the panic of 1857. The condition
prevailing at that time was due partly to the in-
evitable reaction from a period of reckless specu~
lative enterprise, in which industrial develop-
ment had outstripped the credit facilities of the
country, and was due also in great measure to
the restoration of peace in Europe releasing once
more for productive purposes the manhood of the
nations. Exports of wheat from Russia were re-
sumed, and the foreign agricultural trade with
this country suffered accordingly; there was a
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sudden decrease in the output of the gold mines,
and a sharp commercial and banking panic was
followed by years of depression. The Treasury
recorded deficits instead of surpluses; the na-
tional revenue system proved insufficient for nec-
essary supplies, its instability being adequately
characterized by Justin S. Morrill, a Republican
member from Vermont, when he stated that “the
Government was obliged to go to bed without its
supper every time the imports of the week fell
short a million at the port of New York.” In
1860 total receipts from public lands, customs
and miscellaneous sources aggregated only $56,-
054,000, as against $74,056,000 five years earlier.
During the whole of this five-year period heavy
expenditures had been necessary, chiefly on ac-
count of several wars with the Indian tribes. In
order to provide for these expenses and in antici-
pation of internal difficulties, several loans had
been issued by the Government, until by the end
of 1860 the public debt amounted to $87,718,660.
It was thus, with a depleted treasury and im-
paired national credit, that the Government of
the United States found itself called upon to face
the greatest civil war in history.
HE first shot of the Civil War was fired
at Fort Sumter on April 12, 1861, and
during the four years which followed
one of the most pressing problems of the Gov-
ernment was that of national finance. So low
had the public credit fallen that in Decem-
ber, 1860, in order to float one-year treasury
notes at par it had been necessary to pay
12 per cent. interest on the larger part of the
issue. In February, 1861, a small amount of ten-
Period from
1861 to 1865
17
WAR LOANS OF THE UNITED STATES

twenty-year 6 per cent. bonds was sold at a 91/2
per cent. discount. When, on March 4, 1861,
the Lincoln administration entered upon what
was surely the most trying ordeal ever faced by
the public servants of any country, they found
practically an empty treasury. Customs re-
ceipts, at first‘ the main source of revenue, grad-
ually fell off during 1861, until at the end of the
year the returns from this source were only
$39,582,000, as compared with $53,187,000 in
1860; sales of public lands in the same period
had dwindled from $1,778,000 to $870,000, and the
total revenue for the year from all sources ag-
gregated only $41,476,000 with which to meet an
expenditure of $66,650,000.
For Secretary of the Treasury President Lincoln
appointed Salmon P. Chase, an Ohio lawyer,
who had rendered distinguished service as Sena-
tor from and Governor of that State. When
Congress assembled in special session on July 4,
1861, Secretary Chase had formulated his plan
of war finance. He estimated the sum required.
during the ensuing year to be about $320,000,000,
of which more than $100,000,000 was already
“earmarked” for existing obligations. To pro-
vide for ordinary expenditures, including interest
and sinking fund requirements, he proposed to
resort to taxation and to meet the extraordinary
war expenditures by means of loans.
Every available form of credit was used to pro-
vide funds with which to carry on the conflict.
There were issued by the Treasury interest-
bearing short-term notes and long-term bonds,
demand notes which were receivable for cus-
toms, legal tender notes, and a score of different
forms of paper, with interest rates ranging from
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7 3-10 per cent. down to demand notes bearing
no interest, and maturities of from thirty days
to forty years. Provision was made for funding
the various obligations by reserving the option of
redemption within a comparatively short period
after the close of the war, when, it was believed
by the Secretary of the Treasury, the debt could
readily be refunded at lower rates of interest.
The majority of the interest-bearing loans were
placed at par, the average nominal rate of in-
terest being 6 per cent.; but inasmuch as pay-
ment was made largely in currency the rate was
really much higher, as at the time the loans were
issued the premium on gold ranged from 1/4 to
9% per cent.
The total loans of various classes issued to meet
the costs of the war aggregated approximately
$4,000,000,000, the proportion of long and short
term obligations being about 40 per cent. and 60
per cent. respectively. During the earlier period of
the war the country was flooded with short-time
paper, which served in many instances as currency
and aggravated the prevalent speculation.
A detailed history or even an adequate summary
of the financing of the Civil War would require
almost a book in itself, and is not possible with-
in the limits of this publication. There were two
great popular war loans—the 6 per cent. “Five-
Twenty” Year Loan of 1862 and the 7.30 per
cent. Three Year Loan of 1864. Of the former
issue, an amount of $500,000,000 was authorized,
to dispose of which the Treasury exhausted every
means at its command with but little success.
Even though the Loan Act of February 25, 1862,
which provided for the issue, authorized their
sale “at market value,” by December, 1862 less
19
WAR LOANS OF THE UNITED STATES

than $24,000,000 had been disposed of. Secre-
tary Chase then enlisted the co-operation of Jay
Cooke, a private banker of Philadelphia.
The methods employed by Cooke were, fifty
years ago, unusual, and are of especial interest
to us at this time, when we are called upon to ab-
sorb an issue ten times greater- The services of
the press throughout the country were enlisted,
not only in the larger cities but in the most iso-
lated rural districts. Nearly 3,000 agents were
sent into the remotest villages and hamlets, and
into the mining camps of the West. So great
was the success of Cooke’s campaign that it be-,
came necessary for Congress to authorize an ad-
ditional amount of the bonds to satisfy the de-
mand. In all, bonds aggregating $514,771,660
were placed with the public at par in currency.
The commission paid by the Government was
one-half of 1 per cent. on the first $10,000,000
bonds sold and three-eighths of 1 per cent. on
the remainder. ' _
Cooke’s plan of selling through agents who were
not under the control of the Government met
with much criticism, on the ground that it af-
forded opportunities to syndicates and specu-
lators. Again, it is worthy of note, in connec-
tion with the $5,000,000,000 War loan of 1917,
that banking service and newspaper publicity
have been placed at the disposal of the Govern-
ment without charge, and that financial ‘institu-
tions throughout the length and breadth of the
land, in many cases at considerable cost of time
and money, are rendering patriotic service in or-
der that the loan may be a success.
The second great experiment in war finance was
the “Seven-Thirty” per cent. Three-Year Loan
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ROBINSON 8: Co.
issued under the Acts of June 30, 1864, and
March 3,1865, of which a total amount of $829,-
992,500 was placed at par in currency. By the
end of 1864 only $110,800,000 of the notes had
been sold, and again the services of Jay Cooke
; and his agents were utilized, with the result that
between February and July, 1865, three issues of
the notes had been dis osed of. About $530,-
000,000 of the entire 829,992,500 issued was
placed in the months of June and July, 1865, im-
mediately after the close of the war.
One loan which did not'prove a success was an
issue of $200,000,000 Five-Forty Year 6 per cent.
bonds, authorized by Congress in 1864. The
rate of interest was subsequently reduced to 5
per cent., which in all probability accounts for
the unpopularity of this particular loan.
The public debt stood at its highest pointvon Sep-
tember l, 1865, when it reached $2,846,000,000,
less $88,000,000 ‘in the Treasury, leaving a net
debt of $2,758,000,000, bearing five different rates
of interest and maturing at nineteen different
periods! '“Eight-ninths of it consisted of transient
forms issued under laws made up to a great ex-
tentof incomprehensible verbiage . . . and
expressing irl the aggregate nearly one hundred
contingencies of duration, option, conversion, ex-
tension, renewal, etc.”
No review of the Civil War period and the re-
construction erapwhich followed would be com-
plete without mention of the National Banking
Act, which became operative on February 25.
1863, and was recast in the law of June 3, 1864.
By this act provision was made for a national
currency, secured by United States bonds, which
gradually forced into retirement the various
21
WAR LOANS OF THE UNITED STATES
Period from
1866 to 1893

State bank issues. The system developed slowly
at first, chiefly in the Western States, and after
a year and a half of operation comprised only
584 banks, with a circulation of $65,000,000; but
after the redrafting of the act in 1864 had amend-
ed certain defects in the original law, and more
particularly after Congress in_1865 passed a law
taxing State bank issues, the development of the
national banking system was assured.
The National Banking Act came into being dur-
ing the Civil War. The new Federal Reserve
Act, passed in December, 1913, may also be said
to have received its “baptism of fire” in those
dark days of 1914 when the flaming torch of war
was brandished round a startled and unprepared‘
world. That it has stood the test well the sound-
ness of the finances of the United States at the
present time bears eloquent testimony. Un-
doubtedly the fact that by 1914 the Federal Re-
serve system was in operation enabled this coun-
try to withstand without disturbance a condition
which in other times would probably have pre-
cipitated one of the most severe panics in the
history of the nation.
6H1?) proclamation of peace on May 29, 1865,
brought with it the opportunity for a thor-
ough overhauling of this unwieldy mass of
the public debt. To quote from President, then
General, Garfield: “In the midst of the war, when
the blood of the nation was up; when patriotism
was aroused, when the last man and “the last dol-
lar were offered a willing sacrifice, it was compar-
atively easy to pass financial bills and raise mil-
lions of money. But now when we gather up all
of our pledges and promises of four terrible
22
ROBINSON 85 Co.

years, and redeem them out of the solid re-
sources of the people in time of peace, the prob-
lem is far more difficult.”
The Funding Act of April 12, 1866, empowered
Congress to convert temporary and short-term
securities into long-term bonds. Within two
years this class of indebtedness had been re-
duced by $900,000,000, and additional funding
acts were passed in 1870, 1871, 1873 and 1875.
On September 18, 1873, the failure of Jay Cooke
& Co. ushered in what until 1907 was known as
the panic. Money had been scarce for two years
and rates of interest high. Large expenditures
were being made for new railroad developments,
building and agricultural expansion, and for the
time being the unprecedented progress of the
country outstripped its financial resources. The
depression which followed the panic was severe,
and retarded funding operations for a time; but
by 1879, when specie payments were resumed,
bonds to the extent of $1,395,345,950 had been
paid off and the credit of the Government was
on a 4 per cent. basis, as against a 151/2 per cent.
basis fifteen years earlier, when the gold value
of the Government’s notes was only 38 per cent.
Nothwithstanding the sale of bonds for refund-
ing and specie resumption purposes, and for pay-
ment of the Halifax fisheries award, the debt de-
creased steadily year by year, until in 1893 it
amounted to $833,969,475, less than one-third of
the maximum outstanding in 1865. Further re-
ductions were prevented by the panic of that
year, which caused the revenues of the Govern-
ment to decline sharply, as a result of the de-
moralization in every department of the indus-
trial life of the nation.
23
WAR LOANS OF THE UNITED STATES
Period from
1894 to 1899

serve and prevent the suspension of spe-
cie payments in gold, it was found neces-
sary to resort to the issuance of bonds. In
January, 1894, $50,000,000 Ten-Year 58, au-
thorized under the Resumption Act of 1875,
were sold, yielding a premium of $8,660,917,
and in November of the same year a like
amount was sold for $58,538,500. The issues
met with gratifying success, when it is taken
into consideration that at the time of the earlier
sale of bonds the President was obliged to veto a
IN 1894, in order to protect the gold re-
bill which provided for coining the silver seigno~~
rage, and that an effort was made in the courts
to prevent the Secretary of the Treasury from
selling bonds at all. In February, 1895, the Gov-
ernment contracted with certain bankers for the
purchase of 3,500,000 ounces of standard gold,
which was paid for by means of $62,315,400
bonds bearing interest at 4 per cent. and re-
deemable after 1925. The price realized for the
issue was 104.4946, making a yield of approxi-
mately 3.75 per cent.
In December, 1895, the gold reserve stood at
$79,333,000 and was still further reduced as a
result of President Cleveland’s Venezuelan mes-
sage. The Government thereupon placed $100,-
000,000 additional bonds of the loan of ‘1925, ad-
vertising publicly for offers, with the result that
4,640 bids were received and the bonds sold at
a premium of 11.166 per cent. Notwithstanding
the bond sale, the gold reserve remained low, and
in July, 1896, fell to $90,000,000. There was
much hoarding of gold by reason of apprehen-
sion as to the success of the silver movement in
the November presidential election. In 1897,
24
ROBINSON 85 CO.

however, William McKinley was installed as
President of the United States. Gold began to
emerge from its hiding places, a stirring revival
of business prosperity set in, and the Treasury
Department was again placed on a sound finan-
cial basis. '
Early in 1898 financial reconstruction was halted
by the war with Spain. Under the War Revenue
Act of June 13, 1898, there was sold at par as a
“popular war loan” $200,000,000 bonds bearing
3 per cent. interest, redeemable after 1908 and
payable in 1918. The bonds were issued in de-
nominations of as low as $20, and so widespread
was the patriotic desire to share in the financial
conduct of the war that there were 232,224 sub-
scriptions for amounts of $500 or less and 88,002
applications for larger sums.
The Spanish War was short, and while in the
years 1898-1901 expenditures for the army and
navy aggregated $842,000,000, as against some
$328,000,000 less during the four preceding
years, the flourishing state of the country en-
abled'them to be easily borne. Government rev-
enues were abundant, harvests bountiful, and
new records of foreign commerce were being
made,
N March 14, 1900, by the enactment of the
gold standard law, the United States
was finally committed to the payment of
all government paper in gold coin. The act
provided also for the refunding into new
thirty-year 2 per cent. bonds of the 3s of
1908-1918, the 45 due in 1907 and the 5s
due 'in 1904, a total of $839,000,000. Of this
amount, bonds to the extent of $445,940,750 were
converted prior to January 1, 1901, after which
Period from
1900 to 1917
25
WAR LOANS OF THE UNITED STATES

the operation was suspended until 1903, in order
that bonds might be reserved for the purposes
of the Sinking Fund. In 1903, 1905 and 1907
more than $200,000,000 bonds additional were
converted. The total conversions amounted to
$646,250,150, and resulted in an annual interest
saving of over $16,000,000. Under the Acts of
June 28, 1902, December 21, 1905, and August 5,
1909, there have been issued $54,631,980 Panama
Canal 2 per cent. bonds redeemable after August
1, 1916, and payable in 1936; $30,000,000 25 re-
deemable after November 1, 1918, and payable
in 1938, and $50,000,000 3s payable June 1, 1961.
Other indebtedness comprises the 2% per cent.
Postal Savings Bonds, 3 per cent. Conversion
Bonds and 3 per cent. One-Year Treasury Notes,
details of which will be found in the financial
statement on page 33.
Until the issuance of $50,000,000 Panama SS in
1911, all bonds bore the circulation privilege, but
the establishment of a Federal Reserve Board at
Washington and twelve Federal Reserve Banks
throughout the country has rendered the retire-
ment of the bond-secured circulation of national
banks only a matter of time.
The Federal Reserve Act of 1913 permits the re-
funding of 2 per cent. bonds against which there
is no circulation outstanding to the extent of
$25,000,000 annually, and to date bonds to the
extent of $48,597,200 have been converted into
Thirty-Year 3 per cent. Conversion Bonds or
One-Year 3 per cent. Treasury Notes.
On March 31, 1917, the total interest-bearing
debt of the United States stood at $1,023,357,250,
the debt on which interest has ceased at $1,459,-
630 and the debt bearing no interest at $257,227,-
26
ROBINSON 8n C0.

466, a total of $1,282,044,346. Against this there
was a cash balance in the Treasury of $74,216,-
460, leaving a net debt of $1,207,827,886.
N April 2, 1917, President Wilson, address-
ing the Congress in extraordinary session,
stated that “the day has come when Amer-
ica is privileged to spend her blood and her might
for the principles that gave her birth and happi-
ness and the peace which she has treasured.” On
April 6, 1917, the President proclaimed the ex-
istence of a state of war between the United
States and the Imperial German Government,
and on April 24, 1917, there was enacted a war
revenue measure which ushered in a new era in
United States Government finance.
“The world must be made safe for democracy.”
To contribute to this end America, the premier
democracy and richest nation on the globe, has
ranged herself definitely on the side of the En-
tente Allies, pledged to render all the moral and
material assistance in her power, and, as an earn-
est of her high resolve, has already approved a
War loan of $7,000,000,000, the greatest credit
ever authorized at one time. The full text of the
act authorizing what the Secretary of the Treas-
ury has happily termed the “Liberty Loan” will
be found on page 35 Briefly, the act provides
for a bond issue of $5,000,000,000, at a rate of
interest not to exceed 31/2 per cent. The pro-
ceeds from the sale of $3,000,000,000 of the issue
may be used in extending credits to foreign gov-
ernments engaged in war with “enemies of the
United States.” To the extent that this is done,
the obligations of such governments, bearing the
same rate of interest as the United States bonds.
19 17
The
" Liberty Loan”
27
WAR LOANS OF THE UNITED STATES

will be purchased. The remaining $2,000,000,-
000 is to be used in meeting expenditures author-
ized for the maintenance of national security and
defence. There is authorized also, as a means of
securing ample funds to meet the present needs
of the Government, the issuance of Certificates
of Indebtedness aggregating $2,000,000,000, and
payable within one year from the date of issue.
A further new authorization is that of $63,945,-
460 bonds to redeem an equal amount of the
ipianish War Loan 3s which mature in August,
8.
The bonds are to be offered as a popular loan at
not less than par, the details of issuance being
left to the discretion of the Secretary of the
Treasury, who on May 2, 1917, announced that
the first offering would be for $2,000,000,000,
bearing interest at the rate of 31/2 per cent. per
annum. Subscriptions will be received until
June 15, 1917. Provision for payment is made
as follows: Two per cent. on application, 18 per
cent. on June 28, 20 per cent. on July 30, 30 per
cent. on August 15, and 30 per cent. on August
30. Accrued interest will be payable with the
final payment. The bonds will be dated June 15,
1917, and will be ready for delivery on that date.
They are to mature in thirty years and after fif-
teen years will be redeemable, in whole or in
part, at the option of the United States, at par
and accrued interest. Interest is to be payable
June 15 and December 15 in each year. The
bonds will be issued in both coupon and regis-
tered form, coupon bonds in denominations of
$50, $100, $500 and $1,000, and registered bonds
in denominations of $100, $500, $1,000, $5,000,
$10,000. $50,000 and $100,000. Principal and in-
28
ROBINSON 36 CO.

terest is payable in United States gold coin of
the present weight and fineness. Both principal
and interest are exempt from all Federal and
State taxation, except estate or inheritance taxes.
The bonds do not bear the circulation privilege.
In making the announcement of the issue, Sec-
retary of the Treasury McAdoo stated:
“The greatest immediate service the Amer-
ican people can render in this war for uni-
versal liberty throughout the world is to fur-
nish the means for its vigorous prosecution.
This bond issue is the first step. I earnestly
bespeak the co-operation of every citizen
throughout the length and breadth of the
land in this great service of patriotism.”
It is provided that if, during the war between
the United States and Germany, subsequent is-
sues are made at a higher rate of interest, the
bonds issued under this act may, at the option
of the holder, be converted into securities bear-
ing the higher rate of interest on such terms and
conditions as the Secretary of the Treasury may
prescribe. In the event of bonds being issued
subsequently at a rate exceeding 31/2 per cent.
per annum, the obligations of foreign govern-
ments held by the United States must also be
converted into bonds of the prevailing rate of
interest. The act empowers the Secretary of the
Treasury to issue, in addition to the $7,000,000,-
000 and $63,945,460 newly authorized securities,
bonds to an aggregate amount of $472,000,000
already authorized under the Revenue Act of
August 5, 1909, the National Defense Act of
June 3, 1916, the Shipping Act of September 7,
29
WAR LOANS OF THE UNITED STATES

1916, the Revenue Act of March 3, 1917, and a
Joint Resolution of March 4, 1917. These au-
thorizations were made for reimbursement of the
Treasury on account of expenditures incurred in
construction of the Panama Canal; for expendi-
tures on account of the Mexican situation; the
construction of an armor plate plant and a ni-
trate plant; the construction of the Alaskan Rail-
way; the purchase of the Danish West Indies,
and the establishment of a Naval Reserve and a
Merchant Marine. The conversion privilege ac-
corded to the new authorizations applies also to
bonds issued under authority of these earlier acts.
Upon the issuance of all the bonds and certifi-
cates now available, the interest-bearing debt of
the United States, as at present authorized,
would be as follows:
Interest-bearing debt outstanding,
as per table on page 33 . . . . . . . . $1,023,357,250
Additional bonds authorized under
previous acts . . . . . . . . . . . . . . .. 472,000,000
New War Loan of April 24, 1917 7,000,000,000

$8,495,357,250
This represents a per capita debt of approxi-
mately $83, as against an estimated per capita
wealth of about $2,176, assuming the wealth of
the United States at the end of 1916 to be ap-
proximately $220,000, 000,000. The per capita in-
terest charge would be approximately $2.80,
against an estimated per capita annual income
of $370, or 0.76 per cent.
By way of comparison it may be noted that Great
Britain, with a per capita wealth of approxi-
mately $1,900 and a per capita income of only
30
ROBINSON 85 Co.

about $240, is supporting a per capita debt of
approximately $440.
In our consideration of the credits to be granted
to our allies it should be remembered that inas-
much as we shall receive from them at par an
equal amount of their bonds at the prevailing
rate of interest for every dollar we lend to them,
the actual net indebtedness of the United States
will be much less than appears on the surface. It
should be remembered also that practically the
entire amount of such credits will be spent by the
foreign governments in the United States.
Between August, 1914, and the entrance of the
United States into the conflict on April 6, 1917,
Great Britain, France, Canada, Italy and Russia
have placed loans in the United States aggre-
gating nearly $2,500,000,000. These loans have
been placed for the most part on practically a 6
per cent. basis, so that by enabling the Allies to
procure funds at 3% per cent. material assistance
has been given to the Allied cause. But more,
much more, is needed. The United States, with
its vast wealth and population, is now commit-
ted definitely on the side of democracy to the
successful prosecution of the war. Men, money
and munitions must and will be forthcoming.
For millions of our people the most direct way
of ensuring the success of our arms will be by
subscribing to the extent of their ability to the
great “Liberty Loan.” It is true that we do not
-——yet—~feel the. same compulsion to make finan-
cial or other sacrifices as do those nations fight-
ing for their existence, but we mean to see this
task of aiding in the democratizing of the world
through to the end, and if sacrifices are necessary
they will be cheerfully borne.
31
WAR LOANS OF THE UNITED STATES

This $7,000,000,000 loan ,must be, in the last
analysis, a popular loan of the people, undertaken
not solely from an investment standpoint, but
rather because it will afford to many the only
means of testifying to their belief in and willing-
ness to participate in the greatest battle for the
right ever waged by democracy in its centuries
of existence. England has already spent more
than twice $7,000,000,000 in the prosecution of
the fight for freedom, in addition to sacrificing
the lives of thousands upon thousands of the
very flower of her manhood. France has done
likewise, and has witnessed also the desecration
of her churches, the ruin of her fair cities, the
wanton spoilation of her fertile country. -A great
opportunity for service has now been granted to
every man, woman and child in the United
States; a chance to express in practical form be-
lief in that creed so nobly enunciated by the great
patriot who died fifty-two years ago—“that gov-
ernment of the people, by the people, for the
people, shall not perish from the earth.”
Let us then here dedicate ourselves “to the great
task remaining before us; that from these hon-
ored dead we take increased devotion to the cause
for which they . . . gave the last full measure
of devotion; that we here highly resolve that the
dead shall not have died in vain.”
May 21, 1917. ROBINSON 85 Co.
32






Title of Loan Authorizing Act Rate When When-Redeemable Interest Amount Outstanding March 31’ 1917
Issued or Payable Payable Issued Registered Coupon Total
Consols of 1930 .............. -- March 14, 1900 2% 1900 Pay. after April 1, 1930 J. A, I, O. a3646.250,150 $603,625,350 $2,663,500 $606.288.850
L03!) of 1908-18 .............. -. June 13. 1393 3% 1898 Re‘ltaiftfgrugflf 11.51%” F. M. A. N. b 198,792,660 47,678,960 16.266500 63.945460
Loan of 1925 ................. -- January 14, 1875 4% 1895-96 Pay- after Feb- 1, 1925 F, M. A, N. c 162,315,400 101,385,950 17,103,950 118,489,900
- 02 . . 1
PanSgi'iaesCI91€6l-&(?I.1: ........ __ I “i? ii? 195%nd 2% 1906 Re‘iaiitiiugli. 19316916 F- M‘ A- N- d 54-631'980 49307-140 10340 42817.48‘)
Series 1908 ............... -- 1 “523121992 as“ 2% 1908 Reg-339,631,305; 1163318 F. M, A. N. e 30,000,000 26,009,220 169,380 26.178.600
Series 1911 ............... -- F filgrgblgllllgairid 3% 1911 Pay. June 1. 1961 M. J. S. D. 50,000,000 41,606,100 8,393,900 50.000.000
Conversion Bonds ........... -- Dec.23,1913 3% 191617 Pay-3° gffiufém date J. A, J, 0. 25,057,200 5,906,700 19,150,500 25,057,200
1-Year Treasury Notes ...... .- Dec. 23, 1913 3% 1916-17 Pay-1 yeggggm date J. A. J. 0. 23,540,000 1,660,000 21,330,000 23,540,000
Certificates Of Indebtedness--- March 3, 1917 2% 1917 Pay. 1 "11° 29' 1917 At Maturity 50.000000 50000000 ---------- -- 59000-000
Postal Savings Bonds - Recfl 'after 115m frfgm date 1 99 2 9 151 800
Series) _ _ _ _ _ _ _ _ _ _ _ _ _ __ June 25, Pay‘ Ian. 11 Jan‘ July Aggregate of interest-bearing debt ---------------------------------------------------------------------- -- $1,250,627.13) $936'803'460 $861553-790 1$~023'357'250

a of this amount $21,266,300 have been converted into Conversion Bonds, and $18,695,000 into One-Year Treasury Notes.
b Of this original amount issued $132,449,900 have been refunded into the 2% consols of 1930, and $2,396, 800 have been purchased for the sinking fund and canceled

INTEREST-BEARING DEBT OF THE UNITED STATES
GOVERNMENT (Payable on or after specified future dates)
August 5, 1909.
(lst to 11th Series) ------- -- June 23’ 1910 2%01) 1911.16 0 iisoSn‘iedateagiissgerS. Jan. Ju y 9.151.800 S's—H780 829.0 0 ' -
Postal Savings Bonds 1917-1937 Red. after Jam 1. 1918
and $500 have otherwise been purchased and canceled.
c Of this original amount issued $43.825.500 have been purchased for the sinking fund and canceled.
d Of this original amount $1,886-500 have been converted into Conversion Bonds, and $2,928.000 into One-Year Treasury Notes.
e Of this original amount issued $1,904,400 have been converted into Conversion Bonds. and $1,917,000 into One-Year Treasury Notes.
GROSS DEBT
Debt bearing no interest .......................................... -- $257,227,466
Debt on which interest has ceased ................................ -- 1.459.630
Interest-bearing debt .............................................. -- 1,023,357,250
Aggregate .................................................. -- $332,044,346
NET DEBT
Gross debt (opposite) ____________________________________________ __ $382,044,346
Deduct—
Balance available to pay maturing obligations (see above) ..... .- 74,216,460
Net debt ................................................... __ $207,827,886
ROBINSON 8: Co.

TEXT OF THE ACT AUTHORIZING THE
“LIBERTY LOAN”
An Act To authorize an issue of bonds to meet
expenditures for the national security and de-
fense, and, for the purpose of assisting in the
prosecution of the war, to extend credit to for-
eign governments, and for other purposes.
Be it enacted by the Senate and House of Rep-
resentatives of the United States of America in
Congress assembled, That the Secretary of the
Treasury, with the approval of the President, is
hereby authorized to borrow, from time to time,
on the credit of the United States for the pur-
poses of this Act, and to meet expenditures au-
thorized for the national security and defense
and other public purposes authorized by law not
exceeding in the aggregate $5,000,000,000, ex-
clusive of the sums authorized by section four
of this Act, and to issue therefor bonds of the
United States.
The bonds herein authorized shall be in such
form and subject to such terms and conditions of
issue, conversion, redemption, maturities, pay-
ment, and rate and time of payment of interest,
not exceeding three and one-half per centum per
annum, as the Secretary of the Treasury may
prescribe. The principal and interest thereof
shall be payable in United States gold coin of
the present standard of value and shall be ex-
empt, both as to principal and interest, from all
taxation, except estate or inheritance taxes, im-
posed by authority of the United States, or its
possessions, or by any State or local taxing au-
thority; but such bonds shall not bear the circu-
lation privilege.
$5 ,000,000,000
Bonds
Authorized
Interest rate
not to exceed
3 %%. Bonds
exempt from
taxation
35
WAR LOANS OF THE UNITED STATES
To be a
“popular loan”
and offered at
not less than par
Credits
to Allied
Governments

The bonds herein authorized shall first be offered
at not less than par as a popular loan, under such
regulations prescribed by the Secretary of the
Treasury as will give all citizens of the United
States an equal opportunity to participate there-
in; and any portion of the bonds so offered and
not subscribed for may be otherwise disposed of
at not less than par by the Secretary of the‘
Treasury; but no commissions shall be allowed
or paid on any bonds issued under authority of
this Act.
Sec. 2. That for the purpose of more effect-
ually providing for the national security and de-
fense and prosecuting the war by establishing .
credits in the United States for foreign govern-
ments, the Secretary 'of the Treasury, with the
approval of the President, is hereby authorized,
on behalf of the United States, to purchase, at
par, from such foreign governments then en-
gaged in war with the enemies of the United
States, their obligations hereafter issued, bearing
the same rate of interest and containing in their
essentials the same terms and conditions as those
of the United States issued under authority of
this Act; to enter into such arrangements as may
be necessary or desirable for establishing such
credits and for purchasing such obligations of
foreign governments and for the subsequent pay-
ment thereof before maturity, but such arrange-
ments shall provide that if any of the bonds of
the United States issued and used for the pur-
chase of such foreign obligations shall thereafter
be converted into other bonds of the United
States bearing a higher rate of interest than three
and one-half per centum per annum under the
provisions of section five of this Act, then and in
36
ROBINSON 85 CO.

that event the obligations of such foreign gov-
ernments held by the United States shall be, by
such foreign governments, converted in like man-
ner and extent into obligations bearing the same
rate of interest as the bonds of the United States
issued under the provisions of section five of this
Act. For the purposes of this section there is
appropriated, out of any money in the Treasury
not otherwise appropriated, the sum of $3,000,-
000,000, or so much thereof as may be necessary:
Provided, That the authority granted by this sec-
tion to the Secretary of the Treasury to pur-
chase bonds from foreign governments, as afore-
said, shall cease upon the termination of the war
between the United States and the Imperial Ger-
man Government.
Sec. 3. That the Secretary of the Treasury, un-
der such terms and conditions as he may pre-
scribe, is hereby authorized to receive on or be-
fore maturity payment for any obligations of
such foreign governments purchased on behalf
of the United States, and to sell at not less than
the purchase price any of such obligations and
to apply the proceeds thereof, and any payments
made by foreign governments on account of
their said obligations to the redemption or pur-
chase at not more than par and accrued interest
of any bonds of the United States issued under
authority of this Act; and if such bonds are not
available for this purpose the Secretary of the
Treasury shall redeem or purchase any other out-
standing interest-bearing obligations of the
United States which may at such time be sub-
ject to call or which may be purchased at not
more than par and accrued interest.
See. 4. That the Secretary of the Treasury, in
Redemption
of
Bonds
Additional
Loans
Authorized
37
WAR LOANS OF THE UNITED STATEs
Redemption
of 3%
Loan of
1908-18

his discretion, is hereby authorized to issue the
bonds not already issued heretofore authorized
by section thirty-nine of the Act approved Aug-
ust fifth, nineteen hundred and nine, entitled “An
Act to provide revenue, equalize duties, and en-
courage the industries of the United States, and
for other purposes”; section one hundred and
twenty-four of the Act approved June third, nine-
teen hundred and sixteen, entitled “An Act for
making further and more effectual provision for
the national defense, and for other purposes”;
section thirteen of the Act of September seventh,
nineteen hundred and sixteen, entitled “An Act
to establish a United States shipping board for
the purpose of encouraging, developing, and cre-
ating a naval auxiliary and a naval reserve and a
merchant marine to meet the requirements of the
commerce of the United States with its Terri-
tories and possessions and with foreign coun-
tries, to regulate carriers by water engaged in
the foreign and interstate commerce of the
United States, and for other purposes”; section
four hundred of the Act approved March third,
nineteen hundred and seventeen, entitled “An
Act to provide increased revenue to defray the
expenses of the increased appropriations for
the Army and Navy and the extensions of -
fortifications, and for other purposes”; and the
public resolution approved March fourth, nine-
teen hundred and seventeen, entitled “Joint reso-
lution to expedite the delivery of materials, equip-
ment, and munitions, and to secure more expedi-
tious construction of ships,” in the manner and
under the terms and conditions prescribed in sec-
tion one of this Act.
That the Secretary of the Treasury is hereby au-
38
ROBINSON 85 CO.

thorized to borrow on the credit of the United
States from time to time, in addition to the sum
authorized in section one of this Act, such addi-
tional amount, not exceeding $63,945,460 as may
be necessary to redeem the three per cent. loan
of nineteen hundred and eight to ninteen hun-
dred and eighteen, maturing August first, nine-
teen hundred and eighteen, and to issue therefor
bonds of the United States in the manner and
under the terms and conditions prescribed in sec-
tion one of this Act.
Sec, 5. That any series of bonds issued under
authority of sections one and four of this Act
may, under such terms and conditions as the
Secretary of the Treasury may prescribe, be con-
vertible into bonds bearing a higher rate of in-
terest than the rate at which the same were is-
sued if any subsequent series of bonds shall be
issued at a higher rate of interest before the ter-
mination of the war between the United States
and the Imperial German Government, the date
of such termination to be fixed by a proclamation
of the President of the United States.
See. 6. That in addition to the bonds author-
ized by sections one and four of this Act, the
Secretary of the Treasury is authorized to bor-
row from time to time, on the credit of the United
States, for the purposes of this Act and to meet
public expenditures authorized by law, such sum
or sums as, in his judgment, may be necessary,
and to issue therefor certificates of indebtedness
at not less than par in such form and subject to
such terms and conditions and at such rate of in-
terest, not exceeding three and one-half per
centum per annum. as he may prescribe; and
each certificate so issued shall be payable, with
Conversion
Privilege
$2,000,000,000
One-Year
Certificates of
Indebtedness
Authorized
39
WAR LOANS OF THE UNITED STATES
Deposit of
proceeds
in banks

the interest accrued thereon, at such time, not
exceeding one year from the date of its issue, as
the Secretary of the Treasury may prescribe.
Certificates of indebtedness herein authorized
shall not bear the circulation privilege, and the
sum of such certificates outstanding shall at no
time exceed in the aggregate $2,000,000,000, and
such certificates shall be exempt, both as to prin-
cipal and interest, from all taxation, except estate
or inheritance taxes, imposed by authority of the
United States, or its possessions, or by any State
or local taxing authority.
Sec. 7. That the Secretary of the Treasury, in
his discretion, is hereby authorized to deposit in
such banks and trust companies as he may desig-
nate the proceeds, or any part thereof, arising
from the sale of the bonds and certificates of in-
debtedness authorized by this Act, or the bonds
previously authorized as described in section four
of this Act, and such deposits may bear such rate
of interest and be subject to such terms and con-
ditions as the Secretary of the Treasury may pre-
scribe: Provided, That the amount so deposited
shall not in any case exceed the amount with-
drawn from any such bank or trust company and
invested in such bonds or certificates of indebt-
edness plus the amount so invested by such bank
or trust company, and such deposits shall be se—
cured in the manner required for other deposits
by section fifty-one hundred and fifty-three,_Re-
vised Statutes, and amendments thereto: Pro-
vided further, That the provisions of section fifty-
one hundred and ninety-one of the Revised Stat-
utes, as amended by the Federal Reserve Act and
the amendments thereof, with reference to the
reserves required to be kept by national banking
40
ROBINSON 86 CO.

associations and other member banks of the Fed-
eral Reserve System, shall not apply to deposits
of public moneys by the United States in desig-
nated depositaries.
Sec. 8. That in order to pay all necessary ex-
penses, including rent, connected with any op-
erations under this Act, a sum not exceeding
one-tenth of one per centum of the amount of
bonds and one-tenth of one per centum of the
amount of certificates of indebtedness herein au-
thorized is hereby appropriated, or as much
thereof as may be necessary, out of any money
in the Treasury not otherwise appropriated, to
be expended as the Secretary of the Treasury
may direct: Provided, That, in addition to the
reports now required by law, the Secretary of
the Treasury shall, on the first Monday in De-
cember, nineteen hundred and seventeen, and an-
nually thereafter, transmit to the Congress a de-
tailed statement of all expenditures under this
Act.
Passed House of Representatives, dprz'l 14, 1917
Passed Senate, 1115777 17, 1917
dppro‘ved by President, April 24, 1917
Provision
for
expense
of floating
issue
41
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