USA > Indiana > The war purse of Indiana; the five liberty loans and war savings and thrift campaigns in Indiana during the world war > Part 23
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241
THE WAR PURSE OF INDIANA
Federal Reserve District
Quota
Subscriptions
New York
900,000,000
Treasury Department
1,115,243,650 17,917,750
Totals
$3,000,000,000
$4,176,516,850
The total number of subscribers to this Loan in the nation, as listed by the Treasury department, was 18,376,815.
Treasury Totals for Fourth Loan
The Fourth Liberty bond act was passed by Congress, and approved July 9, 1918. The authorization of twelve billion dollars in bonds, car- ried in the Third bond act, was increased to twenty billions. During the summer of 1918 conditions changed materially. Uncertainties as to results of the pending legislation concerning taxation and as to the effect of the new taxes on income and the market value of the bonds "rendered it essential to adopt measures to make the bonds as attractive as possible, to protect investors in them, and to strengthen further the investment market for Government obligations."10 Every possible pre- caution had to be taken at that time, not only to make the new issue a success but to stabilize the rate at 41/2 per cent.
Eventually additional exemption from taxes was granted to the bonds. It was provided that the interest on $30,000 of bonds of the Fourth Liberty Loan should be exempt, until two years after the ter- mination of the war, from surtaxes and excess profit taxes and war- profits taxes. The taxpayer who subscribed for $30,000 of these bonds and still held them at the time of making his tax return would also receive an exemption from such taxes for a like period as to the inter- est received after January 1, 1918, on an aggregate amount of $45,000 of bonds of previous Liberty Loans (not including 31/2 per cent. bonds of the First Liberty Loan, which were permanently and totally exempt except as to state and inheritance taxes) and subscribers in lesser amounts were to receive a proportionate similar exemption.
These new exemptions were in addition to exemptions already granted to Liberty bonds, under the act of September 24, 1917, as amended.
The Fourth loan was offered to the public September 28, 1918. The campaign closed October 19, 1918. The bonds were dated October 24, 1918, and were due October 15, 1938. They were redeemable at the pleasure of the United States at par and accrued interest on and after October 15, 1933, and the interest was payable April 15 and October 15. Subscriptions for $6,000,000,000-the largest loan that ever had been attempted in the history of the world-were invited and the right was reserved to allot additional bonds up to the full amount of any over- subscription.
The total amount of bonds sold and allotted to purchasers on this loan (as of September 30, 1919) was $6,992,927,100. The nation was at its peak of war fervor during the Fourth loan and the oversubscrip- tion of this enormous total of bonds clearly emphasized the spirit of the
10. U. S. Treasury Report, 1918, pp. 13-19.
16-21521
242
INDIANA WORLD WAR RECORDS
people during the "fighting days" of the early fall of 1918, just before the defeat of the enemy.
The Treasury department estimated that the Fourth loan was sub- scribed to by 22,777,680 persons and that 84 per cent. of the subscribers took $50 and $100 bonds, while more than 99 per cent. took bonds in amounts from $50 to $10,000.
Because of adjustments made by the Treasury department in cer- tain groups of Fourth loan bonds, notably those purchased in the Army, the accurate federal reserve district quotas and subscriptions were not available, but the official Treasury statement of bonds sold and allotted in each federal reserve district was as follows:
Boston, $632,101,250; New York, $2,044,901,750; Philadelphia, $598,- 763,650; Cleveland, $701,909,800; Richmond, $352,685,200; Atlanta, $217,885,200; Chicago, $969,209,000; St. Louis, $295,340,250; Minne- apolis, $242,046,050; Kansas City, $295,951,450; Dallas, $145,997,950; San Francisco, $462,250,00; Special, $33,885,550; Total, $6,992,927,100.
Treasury Totals for Victory Loan
The third session of the Sixty-fifth Congress passed the (Fifth) Vic- tory Liberty Loan act and it was approved March 3, 1919, the day before the Congress expired. The statute authorized issuance of United States notes to the extent of not over $7,000,000,000 upon such terms and conditions and at such rate as the Secretary of the Treasury might prescribe.
It was provided that the maturities should be not less than one year nor more than five years from date of issue. The campaign opened Monday, April 21, and closed Saturday, May 10, 1919. A total of $4,500,000,000 in Victory loan notes was offered to the public. The terms were the most favorable of any of the Loans, as exemplified by the fact that they topped the entire bond market, for long periods.
The total subscriptions to the last Loan, which was widely dis- tributed, amounted to $5,249,908,300-an oversubscription of $749,908,- 300, or 16.66 per cent. The oversubscription was rejected and a total of four and one-half billions allotted.11
The Treasury's statement of subscriptions allotted to the various Federal Reserve districts (as corrected up to September 30, 1919) fol- lows: Boston, $371,910,150; New York, $1,318,041,150; Philadelphia, $376,290,100; Cleveland, $443,802,250; Richmond, $210,889,300; Atlanta, $133,080,800; Chicago, $694,330,000; St. Louis, $201,787,600; Minne- apolis, $170,076,650; Kansas City, $192,429,300; Dallas, $84,002,500; San Francisco, $294,905,050; Special Treasury Allotment (includes adjust- ment October 1, 1919), $6,767,800; Total, $4,498,312,650.
11. This total was slightly reduced later as the result of adjustments and cancel- lations of Army and Navy subscriptions.
LIBERTY BOND ISSUES ANALYZED
A detailed government analysis of the various issues pre- pared by the Federal Reserve Bank officials follows herewith :
(243)
.
LIBERTY BONDS AND VICTORY NOTES
Title
Short Title
Amount Outstanding on Dec. 31, 1919
Date of Issue
When Redeemable or Payable
Interest Payable
First Liberty Loan- 372% Bonds of 1932-1947 . . First 312's. . Converted 4% Bonds of 1932-1947 . . First 4's. . . . Converted 414% Bonds of 1932-1947 . . First 414's ..
$1,410,074, 400
June 15, 1917
November 15, 1917.
Redeemable on or after June 15, 1932 ..
Second Converted 414% First Second Bonds of 1932-1947 . . .
414's . . . .
3,492,150
October 24, 1918 ...
Second Liberty Loan- 4% Bonds of 1927-1942 .... Converted 414% Bonds of 1927-1942 ..
Second 4's ..
573,290,050
November 15, 1917
Redeemable on or after November 15, 1927 ..... Payable Nov. 15, 1942 ... .
- May 15, November 15
Third Liberty Loan- 414% Bonds of 1928)
Third 41/4's
3,780,831,050
May 9, 1918
.
Payable Sept. 15, 1928 .. . .
March 15, Sept. 15.
Fourth Liberty Loan-
414% Bonds of 1933-1938. . Fourth 414's
6,573,880,150
October 24, 1918. .
Redeemable on or after October 15, 1933. ...... | Payable October 15, 1938
April 15, October 15.
Victory Liberty Loan- 434% Notes of 1922-1923. . Victory434's
3,551,023,850
May 20, 1919
.
334% Notes of 1922-1923. . Victory 334's
940,465, 100
May 20, 1919. .
Redeemable June 15 or December 15, 1922 ..... ) Payable May 20, 1923 ..
June 15, December 15, and May 20, 1923.
INDIANA WORLD WAR RECORDS
June 15, December 15.
410,772,250
May 9, 1918
Payable June 15, 1947. ...
-
Second 414's
2,853,134,150
May 9, 1918 .
1
244
139,981,600
245
THE WAR PURSE OF INDIANA
"Liberty bonds and Victory notes are issued in both coupon and registered form, in the following denominations: coupon, $50, $100, $500, $1,000, $5,000, $10,000; registered, $50, $100, $500, $1,000, $5,000, $10,000, $50,000, $100,000; except that the First 31/2's are not issued in coupon form in denomi- nations of $5,000 and $10,000, nor in registered form in the denomination of $50.
"31/2 per cent. Liberty bonds and 33/4 per cent. Victory notes exempt from federal, state, and local taxation: Such bonds and notes are exempt, both as to principal and interest, from all taxation (except estate or inheritance taxes) now or here- after imposed by the United States, any state, or any of the possessions of the United States, or by any local taxing authority.
"4 per cent. and 41/4 per cent. Liberty Bonds and 43/4 per cent. Victory Notes exempt from state and local taxation and from normal Federal Income Tax: Such bonds and notes are exempt, both as to principal and interest, from all taxation now or hereafter imposed by the United States, any state, or any of the posessions of the United States, or by any local tax- ing authority, except (a) estate or inheritance taxes, and (b) graduated additional income taxes, commonly known as sur- taxes, and excess-profits and war-profits taxes, now or here- after imposed by the United States, upon the income or prof- its of individuals, partnerships, associations, or corporations.
"4 per cent. and 41/4, per cent. Liberty bonds entitled to lim- ited exemptions from Federal Income Surtaxes and Profits from graduated additional income taxes, commonly known as surtaxes, and excess-profits and war-profits taxes, now or hereafter imposed by the United States, upon the income or profits of individuals, partnerships, associations, or corpora- tions, in respect to the interest on principal amounts thereof as follows:
$5,000 in the aggregate of First 4's, First 41/4's, First Sec- ond 41/4's, Second 4's and 41/4's, Third 41/4's, Fourth 414's, Treasury Certificates, and United States War Savings Certificates.
30,000 of First Second 414's, until the expiration of two years after the termination of the war, as fixed by proclamation of the President.
30,000 of Fourth 414's, until the expiration of two years after the termination of the war.
246
INDIANA WORLD WAR RECORDS
30,000 in the aggregate of First 4's, First 414's, First Sec- ond 414's, Second 4's and 41/4's, Third 414's, and Fourth 414's, as to the interest received on and after January 1, 1919, until the expiration of five years after the termination of the war.
45,000 in the aggregate of First 4's, First 41/4's, Second 4's and 414's, and Third 414's, as to the interest re- ceived after January 1, 1918, until the expiration of two years after the termination of the war; this exemption conditional on original subscription to, and continued holding at the date of the tax re- turn of, two-thirds as many bonds of the Fourth Liberty Loan.
20,000 in the aggregate of First 4's, First 41/4's, First Sec- ond 41/4's, Second 4's and 41/4's, Third 41/4's, and Fourth 414's, as to the interest received on and after January 1, 1919; this exemption conditional upon original subscription to, and continued hold- ing at the date of the tax return of, one-third as many notes of the Victory Liberty Loan, and ex- tending through the life of such notes of the Vic- tory Liberty Loan.
$160,000 total possible exemptions from federal income sur- taxes and profits taxes, subject to conditions above summarized.
"All Liberty bonds and Victory notes exempt from taxes in hands of foreign holders: Bonds, notes, and certificates of indebtedness of the United States and bonds of the War Fi- nance Corporation are, while beneficially owned by a nonresi- dent alien individual, or a foreign corporation, partnership, or association, not engaged in business in the United States, ex- empt, both as to principal and interest, from any and all taxa- tion now or hereafter imposed by the United States, any state, or any of the possessions of the United States, or by any local taxing authority.
"414 per cent. Liberty bonds and 43/4 per cent. Victory notes receivable at par in payment of Federal Estate and Inheri- tance Taxes: All such bonds and notes which have been owned by any person continuously for at least six months prior to the date of his death and which upon such date constitute
247
THE WAR PURSE OF INDIANA
part of his estate are receivable by the United States at par and accrued interest in payment of federal estate or inheri- tance taxes.
"5 per cent. Bond Note Purchase Fund .- The Secretary of the Treasury is authorized from time to time until the expira- tion of one year after the termination of the war (as fixed by proclamation of the President) to purchase 4 per cent. and 41/4 per cent. Liberty bonds, and 33/4 per cent. and 43/4, per cent. Victory notes; the par amount of the bonds or notes of any issue which may be purchased in any twelve months pe- riod not to exceed one-twentieth of the par amount thereof outstanding at the beginning of such period.
"21/2 per cent. Cumulative Sinking Fund .- For the fiscal year beginning July 1, 1920, and for each fiscal year thereafter until all Liberty bonds and Victory notes are retired, the Victory Loan act appropriates, out of any money in the Treas- ury not otherwise appropriated, for the purpose of a sinking fund, an amount equal to the sum of (1) 21/2 per cent. of the aggregate amount of such bonds and notes outstanding on July 1, 1920, less an amount equal to the par amount of any obligations of foreign governments held by the United States on July 1, 1920, and (2) the interest which would have been payable during the fiscal year for which the appropriation is made on the bonds and notes purchased, redeemed, or paid out of the sinking fund during such year or in previous years.
"Conversion Privileges .- 43/4 per cent. and 33/4 per cent. Vic- tory notes are interconvertible. Liberty First 4's are con- vertible into Liberty First 41/4's. Liberty Second 4's are convertible into Liberty Second 414's. No other conversion privileges are extant.
"The principal and interest of all Liberty bonds and Victory notes are payable in United States gold coin of the present standard of value.
"Liberty bonds and Victory notes are issued under authority of the acts of Congress approved April 24, 1917, September 24, 1917, April 4, 1918, July 9, 1918, September 24, 1918, and March 3, 1919, and pursuant to official Treasury Department circulars, from which the statements in this form are sum- marized, and to which they are subject."
248
INDIANA WORLD WAR RECORDS
INDIANA BANKS BUY CERTIFICATES OF INDEBTEDNESS
The sale of United States Treasury Certificates of Indebtedness to banks in Indiana and throughout the country, provided current funds for the Government in the periods between the various Liberty bond issues. They were commonly called "shock absorbers" for the bond campaigns.
The banks were first invited to purchase these certificates between the Second and Third loans. The response was not generous. No great amount of publicity had been given the plan and no organization for the distribution had been built. The maturities of these certificates were within the time set for the last payment on the various issues of Lib- erty bonds, sold on the government installment plans. Banks having purchased certificates were permitted to pay for subsequent purchases of Liberty bonds bought for customers by using the certificates.
In June, 1918, a meeting was held in Chicago of the district or- ganizers, who constituted a field force or selling agency for treasury certificates in the Seventh Federal Reserve district. M. A. Traylor, the director of sales for treasury certificates for the district, was the speaker at this meeting. Will H. Wade (the state director of sales for various Liberty Loan campaigns in the northern counties of Indiana) was made state director of sales for treasury certificates. His vice- director was Chester A. Jewett. State organizers included John P. Todd, E. A. Roberson, S. N. Campbell, William A. Rowe, R. D. Jack- son, L. L. Campbell, W. W. Bonner, W. H. O'Brien, and others. County directors of sales and vice-directors were chosen in Indiana.
The bankers associations in many counties gave full support to the work as they did invariably in the Loan campaigns. Each bank was re- quested to subscribe bi-weekly to each issue of treasury certificates an amount equal to approximately two per cent. of its total resources.
The certificates matured from three to five months after date of issue. A similar program of organization was used by the counties in the Eighth Federal Reserve District.
"Naturally," said one state organizer of much experience in the sales of these certificates, "among approximately one thousand banks, there were those which did not respond so promptly or so generously as others, and while there were a few who never supported this program as they should have done, the number of these was small."2
The sale of the "shock absorbers" made it possible for banks gradu- ally to build up invested sums for use in paying for Liberty bonds,
1. Leonard L. Campbell, who served as office manager of the state headquarters for the Liberty Loans at Indianapolis, and as office manager of the Certificate of In- debtedness distribution in the northern counties of Indiana, is the principal authority for the facts set out in this record of Indiana banks of the northern counties in the Certificates of Indebtedness distribution.
2. Mr. Campbell, speaking for his own territory in certificate sales, reported that the first county to go on record as underwriting or agreeing to take its full quota of all subsequent issues was Delaware, and "it may be further stated that no county was more dillgent or punctual in the performance of the task assigned to it than Delaware County. Perhaps a large amount of the credit for this record is due to the Director of Sales, Karl Oesterle, of the Delaware County National Bank, and the Vice-Director of Sales, Mr. Fred Rose, of the Union National Bank, both of whom were intensely interested in the program and active at all times."
249
THE WAR PURSE OF INDIANA
subscribed by their customers during subsequent Loans, without sudden withdrawals of cash resources and resultant serious banking disturb- ance.
The certificates bore 41/2 per cent. interest. Some certificates were sold in Indiana in anticipation of the Second Liberty Loan but the amount was very small as compared with that sold in anticipation of later Loans. The systematic distribution began following the Third loan.
On January 22, 1918, the Treasury department announced the first issue of the series in anticipation of the Third Liberty Loan. The quota for the northern counties of Indiana on that particular issue was $4,280,000. A total of $4,292,000 was subscribed. In the issue dated February 8, the sixty-eight northern counties' quota was $5,350,000, and the amount subscribed $5,651,000. Of the issue dated February 27, the quota was $5,350,000 and the subscription $9,351,000.3 Of the issue dated March 20, 1918, the northern counties' quota was $6,400,000, to which was subscribed $6,637,000. The quota for the April 10 issue was $6,615,000 and the northern counties subscribed only $6,209,000. On April 22, with a quota of $6,615,000, the subscription was only $5,838,000.
At this time the records show that there were eight hundred thirty- five banks throughout the Indiana counties of the Seventh Federal Re- serve District. Of these one hundred eighty-eight had subscribed to the First issue, three hundred sixty-four to the Second, five hundred twelve to the third, four hundred five to the Fourth, two hundred ninety- seven to the fifth, and two hundred fourteen to the Sixth issue of the series in advance of the Third loan. This gives an average of three hundred thirty banks out of eight hundred thirty-five subscribing to each of these bi-weekly issues.
On June 25, 1918, subscriptions were invited to the first issue of treasury certificates in anticipation of the Fourth Liberty Loan.
The quota in that issue for the northern counties was $11,407,000 and five hundred eighty-seven of the eight hundred thirty-five banks in the Seventh District subscribed a total of $11,660,000. The July 9th issue gave these counties the same quota of $11,407,000 and $10,833,500 was subscribed by six hundred twenty banks. The July 23rd issue carried a quota of $7,604,000 and the total subscription was $9,506,500 by six hundred forty-eight banks. The quota for the August 6th issue was $7,604,000; amount subscribed $10,015,500; subscribing banks six hundred sixty-two. On the September 3rd quota, $7,604,000, the amount subscribed was $11,487,500, with six hundred twenty-one subscribers. On the September 17th quota, $9,126,000, a total subscription of $9,923,- 000 was recorded, with five hundred ninety-eight subscribers. The Octo- ber 1st quota was $7,604,000, with $10,033,000 subscribed by five hun- dred thirty-nine banks.
The aggregate subscription of the northern counties to this series in anticipation of the Fourth loan was 116 per cent. of the quota.
After this series closed each bank in the district which had sub- scribed its aggregate quota was awarded a certificate of "Distinguished
3. The explanation of the large oversubscription on this occasion lay in the fact that March 1, was the day of returning property for taxation,
250
INDIANA WORLD WAR RECORDS
Financial Service" by the Treasury department. These certificates were much sought after by the banks and they usually were framed and dis- played in a prominent place in the bank's lobby.4
After the Fourth Liberty Loan campaign had closed it was ap- parent there was continued need for further interim financing of the government, and again a meeting was called by the Federal Reserve Bank in Chicago. Arrangements were announced for the continuance of the Certificate of Indebtedness campaign. On December 5, 1918, the Treasury department announced its first issue, for a national total of $600,000,000, in anticipation of the Victory loan. This issue was fol- lowed bi-weekly by others, the certificates continuing to bear 41/2 per cent. interest and maturing from four to five months after date.
The last issue in the Victory loan series was dated May 1, 1919. Of the Victory loan series there were ten issues, varying only as to ma- turity date and total. There were five issues of $500,000,000 each, four of $600,000,000 and one for $750,000,000.
Indiana banks in the northern counties purchased 130 per cent. of their total quota in this series, which would amount approximately to $110,000,000. This series met with a more generous response and a larger percentage of subscribing banks than any preceding series.5
The Seventh Federal Reserve Bank in Chicago during the periods between Loan campaigns extended credit to both its member and non- member banks in order to enable them to purchase certificates and at the same time promote wide distribution.
4. That the selling campaign was intensive is shown in the experience of John P. Todd, one of the state organizers, who is known to have made a very strenuous effort to sell Treasury certificates to the receiver of one of the state banks, the doors of which had been closed the morning of Mr. Todd's visit; and it is of record that the certificates, which this bank had purchased prior thereto, constituted its best asset.
5. Federal Reserve reports available in Indiana for this series did not give totals by states. Verbal reports received at state headquarters from time to time, however, bore out above statements.
CHRONOLOGY OF THE FEDERAL RESERVE BANK OF CHICAGO
[No similar chronology of the activities of the Federal Reserve Bank of St. Louis, to which the twenty-four southern Indiana counties were tributary, was available for this volume.]
The chronology of the operations of the Federal Reserve Bank of Chicago, acting as fiscal agent for the Government in parts of five middle-western states during the war period, was prepared by bank officials following the close of the Victory loan. This official record of the part taken by the sixty-eight northern counties of Indiana in war financing includes comparative figures for the other states or sections thereof which made up the Seventh Federal Reserve District. Some deviation from Loan and Certificate of Indebtedness totals shown else- where in this volume as Federal Reserve figures, is apparent. Recon- cilement was impossible. The chronology as furnished by the statistical department of the Federal Reserve Bank of Chicago follows:
Chronology of the Federal Reserve Bank of Chicago Fiscal Agency Operations 1917-1920.
1917
February 1-Germany begins unrestricted submarine warfare.
3-Ambassador Count Von Bernstorff given passports and Ambassador James W. Gerard ordered withdrawn.
7-United States Senate endorses Wilson's action in breaking with Germany.
March 31-Government sells $50,000,000 Certificates of Indebtedness to Federal Reserve Banks. Chicago Reserve Bank took $5,000,000. Certificates bearing 2% and maturing June 29, 1917.
April
2-President Wilson at special session of American Congress asks that existence of state of war with Germany be declared.
4-Senate passes war resolutions.
6-House passes war resolutions.
4 to 6-Conference of Governors of Federal Reserve Banks held at Washington. War financing discussed. Secretary McAdoo tells Governors he would further employ powers given him in Section 15 Reserve Act and expand limited Fiscal Agency functions first assigned Federal Reserve Banks on January 1, 1916.
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