Mellon's "Boldness"

The Secretary of the Treasury, particularly, "the greatest Secretary of the Treasury since Alexander Hamilton, cannot afford to indulge in wishful thinking. Financiers were inclined, last week, to be instructed, rather than startled by what financial writers called Secretary Mellon's "bold" plan for refinancing the Third Liberty Loan which matures in September. With the money market hitting its highest since 1920 Secretary Mellon offered to exchange 3 1/8% bonds for the 4 1/4% Third Liberty Bonds, which mature in September. He gave the new bonds a life of 12 to 15 years. Like most Government securities, they were only partially taxexempt. The conclusion was that no matter how high money may be now, Secretary Mellon believes that 3 1/8% will be a sufficiently attractive rate to keep Government bonds near par from now till 1940. In other words, in Mr. Mellon's judgment, a decade of "easy" money lies ahead.

The retirement plan for the Third Liberties was consistent with Secretary Mellon's retirement of Second Liberties last year. In June, 1927, about one-sixth of the 4 1/4% Second Liberties, then outstanding, were retired by an issue of 16-to-20 year bonds, bearing only 3 1/8%. This year's offer was to retire at 3 1/8% as many 4 1/4% Third Liberties as people cared to bring in for exchange, and besides to sell for cash $250,000,000 worth of the 3 1/8% bonds, or about one-fifth the amount of Third Liberties outstanding.

To make the exchange offer more attractive, the Treasury promised to pay the interest on Third Liberties turned in during the balance of their life.

To make the cash offer more attractive, the Treasury announced that no other long-terms bonds would be offered in connection with the Third Liberty Loan.

Inside of 24 hours, the cash offer was oversubscribed by $475,000,000. Provident owners of Third Liberties hastened to convert their holdings before July 31.