FISCAL: March Money

No private company could stay long in business if it tried to copy the U. S. Government's methods of financing itself. The Federal Treasury is the country's most prodigal borrower. It operates in the red as a matter of principle. Its preoccupation is keeping one short jump ahead of its creditors. Yet its credit is the highest in the world; financiers vie to lend it money; its profits (surplus) cause the nation to rejoice.*

This week the Treasury was winding up one of its quarterly financing programs which was larger than usual. Such transactions in March, June, September and December are designed not so much to raise additional cash from the money world as to shift the Government's obligations from one pocket to another.

The U. S. owes its citizens about $16,000,000,000. That is the Public Debt. Its War peak was $27,000,000,000. A reduction of $11,000,000,000 in twelve years gives citizen-creditors ample confidence in their Government's ability to pay some day. This debt is roughly divided into three classes: 1) bonds totaling $12,700,000,000; 2) short-term obligations (Treasury notes, certificates, bills) amounting to $2,600,000,000; 3) miscellaneous reserve funds (i. e. for the Bonus, for employe retirement, etc.) of $750,000,000. The smartest fiscal brains in the Federal service are employed to manipulate this debt to the best government advantage. The Treasury's long-range purpose is to filter the bond obligations gradually down through the short-term debt class and thus extinguish them. Its immediate purpose is to keep its notes, certificates and bills turning over & over in such a way that it will get the most money for the least interest.

The March 16 turnover fairly illustrates the operation. Last month Undersecretary of the Treasury Ogden Livingston Mills summoned his department experts to conference, began going over the Government's financial requirements. On the debit side they listed:

$1,109,000,000 in Treasury notes falling due March 16.

200,000,000 requested by the Veterans Bureau for Bonus loans.

525,000,000 for the ordinary expenses of the Government.

$1,834,000,000 Total

On the credit side they placed approximately $425,000,000 as income tax payments due March 16. It took no Treasury expert to see that about $1,400,000,000 would have to be raised to tide the Government over.

Because W. Randolph Burgess of the New York Federal Reserve Bank is wise in the ways of the money market, Undersecretary Mills called him in to help determine just how the Treasury should borrow this huge sum with the least disturbance to public credit. Mr. Burgess brought word that the New York bond market, having recovered from its first Bonus scare, was ripe for a U. S. notation. Mr. Mills agreed; the Treasury would put part of its offering in bonds.