FISCAL: Hard Times Profit

Hard times reacted last week to the peculiar benefit of the Treasury Departmen and thereby to the indirect benefit of every U. S. citizen. It was possible for Secretary Mellon to execute a major refunding maneuver with exceptional profit. He offered for public subscription a $325,000,000 issue of one-year Treasury certificates. Because of "easy money" resulting from the plenitude of investment capital, he set the interest rate at 2⅜ %—a record low. In June 1929, he had had to pay as high as 5⅛% for his public borrowings. The previous record low rate was 2¾|% in 1924. To Secretary Mellon's delight, the Treasury offering was oversubscribed almost four times.

Secretary Mellon was no man to rest on these fiscal laurels. Interest on the public debt is a major item of Federal expense. To reduce that interest, to get the cheapest loans possible is the eternal duty of a vigilant Treasury Secretary. Therefore last week Secretary Mellon announced that his department would on March 15, recall $1,149,380,050 in Government obligations which normally would not mature for a year or more. The Treasury is now paying 3½% interest on these notes. Every banker knew that Secretary Mellon had recalled these issues with the expectation of refunding them with other offerings at a lower rate. If the refunding operation is carried out next spring on the same advantageous terms as prevailed last week, U. S. taxpayers stand to gain more than $10,000,000.

One dark thought: Secretary Mellon apparently does not anticipate any such sudden upturn of U. S. business in the next six months as would reproduce the "tight money" situation and a marked increase in the rate of interest the Treasury must pay for cash.