Morgenthau's Underwriters

The U.S. Treasury last week announced that in December it is going to have to borrow $9 billions--largest financing in history. At the same time it became clear that Henry Morgenthau Jr. is at long last changing the Treasury's methods of bond distribution to conform to methods used in the Liberty Loan drives of World War I and successfully practised by Canada in this war.

Instead of trying to raise money each month, the Treasury will from here on out have bigger concentrated campaigns at two-month intervals. Securities sold in the $9 billion issue will be tailored to every type of investor. Commercial banks, investment houses and dealers will be organized into selling teams, and commercial banks have been warned that the amount of securities they will have to absorb depends directly on the success of the public campaign.

By these steps Mr. Morgenthau has devised an underwriting mechanism which it is hoped will push at least $4 billions worth of the new issues into private and corporate hands, with the commercial banks taking the rest. Even this will be far more than is good for them to take. Speaking before a bankers' convention in New Jersey, thoughtful Marcus Nadler, professor of finance at New York University, pointed out that if and when the banking system holds $100 billions of Government debt (June 30 they held $33 billions), it will be receiving roughly $2 billions in interest each year. Such a situation would be made to order for soft-money advocates like Representative Wright Patman, who could make the plea: "Why pay this subsidy? Why not print greenbacks?" With that warning at their backs, it was certain that Mr. Morgenthau's underwriters would work hard.

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