USA > Indiana > The war purse of Indiana; the five liberty loans and war savings and thrift campaigns in Indiana during the world war > Part 7
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Additional
51,800
Additional
50
Totals
$8,153,000
$11,750,100
Financial Status Following Close of Second Loan Campaign
A summary of the financial conditions in Indiana during and subsequently to the Second loan campaign is given by Leonard L. Campbell, who served during the majority of the loans as office manager of the Indianapolis headquarters, and who spent much time in the field as an organizer during the sales of certificates of indebtedness. His report said :
"The Second loan was a long time 4 per cent. issue, and through a semi-organization a degree of distribution of the bonds to the final investors was obtained, but this distribution was in no way to be compared with that of later issues, which were distributed through more elaborately constructed sales organizations.
"Just before the close of the campaign of the Second Lib- erty Loan many counties in Indiana were short of their quotas and it was necessary for the banks to assume the unsold por- tion of the respective quotas on their own accounts. By rea- son of this, there were in the Indiana banks more Second loan bonds at the close of that campaign, than remained in the banks from the First loan, or from any of the following is- sues. The volume of this bank underwriting of the bond pur- chases at the close of the Second loan was due, doubtless, to the readjustment of state finances by the First loan campaign and to the fact that the system of distributing the bonds to the general public was as yet imperfect at the close of the Second loan.
"When the Second loan bonds were sold on the various stock exchanges, those desiring to sell exceeded those desiring to buy, thus causing the market to sag so that those bonds which were left in the hands of the banks at the close of the Second
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THE WAR PURSE OF INDIANA
loan could not be sold without. a loss. The banks therefore held their 4 per cent., Second loan bonds, and on May 15, 1919, following the completion of the Victory Liberty Loan campaign, there was in the hands of the banks a larger per- centage of the Second 4 per cent. bonds than of all the other loans.35
"The result of the depressed market for the Second loan convinced all connected with the war loan organizations that in subsequent loans some means should be evolved whereby the bonds could be put directly into the hands of the ulti- mate market-the individual investor-by the Treasury de- partment.
"It was apparent at that time that the normal financing channels sufficient for government needs could not continue to absorb the new war finance demands and that hoarded funds of individuals throughout the state and nation would have to be called on to carry the additional new burdens. This source, of hoarded wealth, also would become inadequate shortly, it was determined after the results of the Second loan had become generally analyzed.
"It was at this point in the development of the war financing that the organization heads throughout the country and the State of Indiana, as well, began to realize that subsequent loans probably would have to be floated in great measure through the use of the credit of the ultimate consumer."36
This utilization of the vast credit fabric of the individual investor in America probably had its real beginning during the Second loan, although, of course, the partial payment plans evolved in the First loan for the sale of bonds to indi- viduals really was exemplifying the use of credit. It was not until the latter days of the Second loan, however, that the leaders in the state began to realize definitely that the great reservoirs of personal credit of the nation must be utilized if the war financing program went on in such proportions as it had been started. This question of distribution of the bonds became, of course, the fundamental one, as the pro- gram developed, and authorities are agreed that in the Sev- enth Federal Reserve District the distribution of the war loan bonds eventually exceeded in its thoroughness that of
35. For a long period following the war these "Second Liberties" were depressed on the bond markets to very low selling prices.
36. Notes on Indiana Business Conditions During the War; Leonard L. Campbell. Manuscript filed with State War History Collections.
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INDIANA WORLD WAR RECORDS
any other federal reserve district. In simpler words this means that more individuals and corporate investors pur- chased bonds, in proportion to the total possible investors in the Seventh district (of which Indiana was a part) than in any other district in the country.
It was, therefore, the apparent lack of distribution that appeared in Indiana at the close of the Second loan that brought the problem of a more elaborate organization for sub- sequent flotations directly home to the leaders of the war finance program. The same was true throughout the country generally. It is now definitely known that in reality rela- tively small proportions of the needed money was forthcoming from the ultimate investors. The banks and trust companies had to rush to the rescue during the closing days of the cam- paign, and underwrite millions of dollars of the securities, trusting that they would be able to sell them later or hold them for their own investment. In many instances the lat- ter alternative was forced upon the financial institutions for several months following the close of the Second loan cam- paign.
Immediately following the close of the Second loan, it be- came apparent to Hoosiers that practically all other types of normal financing would have to be curtailed. Mr. Campbell's report referred to above said:
"Not only were the people being urged to purchase Liberty Bonds through use of their individual credit-that is, by an- ticipating their future earnings, but 'Win The War First' became the popular slogan and other channels of investment, such as exist through the issuance of municipal bonds for public buildings and bonds to pay for the improvement of roads, were to a very large degree curtailed."37
37. As a mere indication of the vast curtailment in building, which resulted directly from the need for diverting all possible money into the war program, a report of a country-wide résumé of building conditions may be found in Building Age, a trade paper in New York, issue of September, 1921. This résumé, obtained from answers to questionnaires sent to 1,000 Chambers of Commerce in the United States more than two years after the close of the World War, related only to the actual construction needs of cities at that time, and does not include the enormous amount of funds needed to bring the country's roads, waterways, transportation systems and other lines of de- velopment hack to normal. The report placed the total expenditure for needs in con- struction in Indiana at $152,385,000, and added that "the obvious faet revealed by the information is that the greatest need generally in the country is for houses. 1.142,433 being needed to relieve the immediate shortage, at an estimated cost of $5,378,089.500."
It is interesting to note that the estimated cost of relieving the housing shortage at that date in America was approximately one-fourth of the total flotation of Liberty Bonds during the war period.
.
FIGHT
OR
BUY BONDS
THIRD LIBERTY LOAN
CHAPTER IV. THE THIRD LIBERTY LOAN IN INDIANA
War laid its awful hands on Indiana between the Second and Third loan campaigns. Gradually the people perceived that if the mighty struggle was to be won, America must play her part. The State had gained the glory of firing the first shot at the enemy, through Sergeant Alexander Arch, the "red-haired gunner" from South Bend.1 Then, sorrow- fully, the state had accepted that other inevitable honor,- the death of Corporal James B. Gresham, of Evansville. He had fallen, one of the first three Americans to die facing the foe, in a memorable trench raid, on November 3, 1917.2
Gradually the people of Indiana had come to look with fear at the newspapers, for there came to be always that long list of names, in bold-faced type, and after each one: "Killed in action-somewhere in France." Each new morning brought the gamble of guessing whether it was your boy, or only the boy who lived next door, or in another state, whose name would be found there.
The Hoosiers of the Rainbow Division had embarked in October, 1917, silently under the censorship, for France, and had landed safely. Letters were coming home from them. At least there was a grain of comfort in the fact that the dreaded U-boats had not taken their toll from the One Hun- dred Fiftieth Field Artillery, Indiana's unit in the famous Forty-second Division. Back home in Indiana the life of the people had changed. They were no longer in a trance, stunned by the magnitude of the world conflagration. They were part and parcel of it. Public opinion,-governor of free peoples- had arisen to its full majesty. It was supreme and it pointed its finger here, there, everywhere, while the three million souls of Indiana's population hastened to do its bidding. And what mattered it if the casualty lists were seeping back, full of agony to some of those who read. There were others to be cared for "over there". Socks must be knitted. Food must
1. The Associated Press reports of October 30-31, 1917, carried the story announcing that Sergeant Alexander Arch of South Bend, Indiana, had fired the first shot sent into the German trenches by the American forces. The shot was fired at 6:05 o'clock on the morning of October 23, 1917.
2. See Gold Star Honor Roll, p. 10, published by the Indiana Historical Commis- sion, 1921. U. S. Official Bulletin, November 5, 1917.
(73)
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INDIANA WORLD WAR RECORDS
be saved. Crops must be grown plentifully. Solvent busi- nesses must be relegated to inactivity, for others to utilize their laborers and their materials for war. Mothers must be comforted-yes. But mothers must be protected, through all the world. And so, through the weeping, and the sacrifice, and the horror of it all, ran ever stronger that gallant pride in accomplishment that had made Indiana what it was. Mis- takes might be made by the million. But a wavering of the soul in that crisis in Indiana-never. "Win The War!" That was enough. It answered everything.
Thus did Indiana come to the winter of 1917-18. That winter was bitterly cold. Blizzards interrupted traffic and brought dire coal shortages. That winter brought thousands of women in Indiana to the factories and the shops, where their husbands or their brothers or even their sons had worked before. That winter saw these women take up men's tasks unfalteringly, cheerfully, courageously.
That winter saw public opinion in Indiana begin to seek out the traitor. Often it did not find him-except by the whispers of his neighbors. And, while there was much talk of traitors, there were, after all, very few. Negligible they were, as a matter of fact. But the pursuit of them, fancied or real, served as a valuable part of the great war propa- ganda, which kept Hoosiers at the top notch of enthusiasm for the well-doing of the thing at hand. War had become a reality even at home in Indiana. And Indianans hurried to a war basis of living. They learned not to count the cost in mere things, or mere time, or mere effort, or mere sacrifice, when public opinion dictated the path of war endeavor. They, too-as had the French-chose the all-embracing "C'est l'guerre", and Americanized it, or Hoosierized it.
This spirit of determination to win at all costs continued throughout the war. Verification of it comes in the figures appended elsewhere in this volume with regard to subsequent Liberty Loans. Even the terse and gaunt figures of the Fed- eral Reserve Bank show that Indiana oversubscribed her Lib- erty Loan allotments conclusively and overwhelmingly after the Second loan campaign.
The newspapers of the period between the Second and Third loans are full of war and its ramifications into the civilian population of the state. Early, after the close of the Second loan period, the agitation began-first among the school teach-
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THE WAR PURSE OF INDIANA
ers of the state-which eventually was to take the strangle- hold of the German language from the elementary schools of Indiana. In the middle of the nineteenth century, apparently, the plot of the far-seeing Teutons to control America, had fastened itself on the school system of Indiana.3
"Back Home in Indiana"
Before the winter of 1917-18 had fairly started a wide- spread fuel shortage had become apparent. Eventually "heat- less" days on which all the industries of the state and prac- tically all business houses closed, became necessary, and cur- tailment of the use of fuel was rigidly enforced.
Food conservation had come definitely. A sugar shortage loomed. Millions of dollars' worth of the product of Hoosier war gardens, stored in cans and jars by thrifty housewives throughout the state, kept the home tables substantially filled, even when prices began to soar. Also the war gardens re- leased tons of food for the fighting men.4 Also they assisted in leaving the balances in the poorer families, by which gov- ernment securities eventually were purchased. Public opinion kept "meatless days" and "wheatless meals" from violation in Indiana more effectively than even a state law could have done.
And the war contracts had begun to pour into the industries of the state. The Indianapolis Star, of December 2, 1917, said that many millions of dollars were being brought into Indiana through war. These war contracts called for diverse prod- ucts, ranging from electric lanterns to motors, from ammuni- tion boxes to war helmets, from chests to hold dishes in army hospitals to Liberty motors for the airplanes, from brass oil cans for artillery purposes to saws for the building of wooden ships. The territory of which Indiana was the center became a veritable Garden of the Gods, in so far as production was
3. The Seventy-first session of the Indiana General Assembly passed an act, ap- proved February 25, 1919, prohibiting the teaching of German in the elementary, pri- vate, and parochial schools of the state. Acts of 1919, Chap. 18.
4. In an official report prepared by Walter Q. Fitch, Secretary, Indiana Committee on Food Production and Conservation, it is estimated that during the two years 1917- 1918 more than 1,100,000 gardens were planted in Indiana, and the produce raised from these is estimated at $12,000,000. The report shows that over 100,000 acres in the state were devoted to the growing of vegetables for home consumption. One acre of garden produce was grown for every 12 people living on the farms throughout the state, while in the towns of less than 12,500, one acre was grown for every 58 persons: in the larger cities one acre for every 102 persons was grown. Report found in papers relating to Food Production in Indiana During the World War; Indiana State Library.
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INDIANA WORLD WAR RECORDS
concerned. For from it went the vast bulk of meats, canned goods, grain, grain products and other foodstuffs for the fighting men of our armies and our allies, and at the same time the great industries turned out the actual implements of war and the clothing of the soldiers and the transporta- tion elements that made America's mammoth war program bloom suddenly into a reality.5
Those months, after all, were wonderful back home in In- diana. Perhaps in centuries there will not be again the spir- itual, mental and organizational awakening that came to the population of the state in those days. Later days of the war brought even greater sacrifices, yet the enthusiasms of the later days were tinged with the strained over-exertion of the war's continuance. But in the winter of 1917-18 it was the real beginning of the Great Adventure, even here at home. Never had hope played a more important part in the lives of Indianans. Never had the determination of the individual to succeed become so general, at least in that generation. Never had self-abnegation so uniformly become the popular thing. In a word, never had patriotism flared in the hearts of such a throng of Indianans.
No hour in the home lives of the women was spared from knitting, except for the essentials of the home, or other war work. Even the firemen of the towns and cities throughout the state stopped playing cards in their leisure hours and went to knitting for the soldiers. It actually was determined that the public schools were non-essentials, when it came to a question as to whether fuel should be conserved for indus- tries or should be burned to keep the schools open. And the schools were closed, in the emergency.6
Patches became badges of honor. Evening lunches at so- cial parties in homes became signals for social ostracism of those participating. The use of wheat bread on tables became as unpopular as sneering at the flag. And the saving of a dollar to invest in government securities became the goal of
5. Concrete figures cannot be given here except to state that some of the individual contracts awarded to Indiana firms ran into the hundreds of millions of dollars. See Ben- edict Crowell's American Munitions, 1917-1918, p. 46, 144-5, 149-50, 307, etc. Also see footnote reference, Chapter III, p. 43.
6. Ruling issued by Assistant State Fuel Administrator, Alex R. Holliday, January 2, 1918, announced "We consider the pay rolls of industrial enterprises more important now than keeping the schools open ; especially when the time lost in the winter can be made up in June or July, when coal is not needed." Indianapolis Star, January 3, 1918.
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THE WAR PURSE OF INDIANA
business conscience. It is small wonder, therefore, that from that time on Indiana's war loans were oversubscribed, even in the face of bitter difficulties. The meaning of war, even 4,000 miles away, had come home to the people.
The Hoosier began to know more about his neighbor's life and business than ever before. This was true, in ever-increas- ing ratio, in the banking world. The viewpoint of the bankers of Indiana and America was made over in the crucible of the war. And the viewpoint of the average citizen towards his bank and his banker was made over by the war. The patron of the bank came to know his bank, and its functioning, and the bank came to know much more of the full details of the earning power and the investing power of its patrons. And gradually the banker drew out from his shell and came to lead the procession of war effort. He could no longer live behind his marble counters. Cooperation and wider trust came more and more to supplant secrecy and distrust among individuals as well as banks.
Bonds and Taxation
That the government had adopted the plan of taxation as well as bond issues to finance the war came home painfully to Hoosiers shortly after January 1, 1918. The enormous task of 'gathering the Liberty tax' started then and, in addi- tion to the millions diverted to government use from the pockets of the citizens through the voluntary loan system, other millions were to be diverted from that time on through the income and excess profit taxes, which congress had adopted as a method of assisting in paying war costs.
It was announced in Indiana on January 2, 1918, that "the government expects to receive $1,200,000,000 from income taxes before July 1, including $666,000,000 from individuals and $535,000,000 from corporations. This is more than one third of the $3,400,000,000 estimated receipts under the war revenue act passed by the Congress at the last session. Ex- cess profits taxes are expected to bring the government $1,- 220,000,000."7
Since these taxes were chargeable against the incomes and excess profits of the year 1917, it will be seen that the govern- ment's finance policy for the war approximately had split the
7. Indianapolis Star, January 2, 1918. Reports of the U. S. Internal Revenue Col- lector show that the people of Indiana paid the following amount of taxes: For 1918, $57,580,376.13 ; for 1919, $59,900,712.85 ; for 1920, $73,608,766.91 ; total, $191,089,855.89.
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INDIANA WORLD WAR RECORDS
monetary requirements into two important divisions; one to be met by some six or seven billions annually in Liberty Bond issues, and the other to be met by the eventual proceeds of the war revenue act. The vast burden of the Liberty Loans and the Thrift and War Savings Stamps and the Red Cross gifts and the Y. M. C. A. gifts and the myriad other war- time diversions of money from peacetime purposes was added to in even more vast amounts by the war taxes. And, as so often was emphasized during the Loan drives, the money paid out for taxes was not to come back directly. This underlying fact, of course, had much to do eventually with educating the people generally to buy bonds to the limit. They were invest- ments, not bills payable,
Prior to the Third liberty loan campaign a factor in the financial situation appeared which was to cause difficulty in later financing. This was the decline in price of Liberty Bonds offered on the open market late in 1917. The price had declined to 971/2 per cent. of par. This situation was ex- tremely natural, but it caused much worry. Congressman Will R. Wood, of the Tenth Indiana District, introduced a bill in the Congress early in December, 1917, which would have made it unlawful either to buy or sell a Liberty Bond for less than par. Secretary of the Treasury McAdoo was quoted as saying that he had evidence that German influences or sympa- thizers were back of the underselling of the bonds. Editorials appearing in Indiana newspapers of that date pointed out that buyers of bonds ultimately would receive full value for the money that had been invested. At that particular moment money was worth a little more in the market than it was when the bonds were sold, but the public was assured that German agents or no one else could keep down the price of United States government securities for a long period of time. The Wood bill never became a law.8
8. Financiers of long experience knew that the prices of the bonds would fluctuate between the drives and after the war. This they did. At one time in the period of depression following the war practically all issues of the bonds were selling at dis- counts of from fifteen to twenty per cent. Within a few months' time, however, all the issues 'came back' (spring of 1922), and some of them went above par. As long as the purchaser of the Liberty Bond held his hond for investment, he could not lose. For the government of the United States (the banker of the world following the war) ultimately was to redeem the bonds at 100 cents on the dollar.
It was only a very small percentage of the total holdings of bonds that found their way to the open market in the period between the Second and Third Liberty Loans. Yet that small percentage represented a vast increase in the supply of Government securities above the former normal demand. This and other reasons caused the mar- ket values to go down. It is known that at certain periods during and immediately
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THE WAR PURSE OF INDIANA
Indiana Prepares for Third Financial Drive
Early in 1918 plans began to be laid for the Third loan cam- paign. George H. Dunscomb, of the First National Bank, of Chicago, had been named by the Federal Reserve Bank to suc- ceed C. Frederick Childs on the reserve organization as di- rector of sales for the northern Indiana counties. Additional departments were created under the state headquarters for these counties. Walter Greenough, of Indianapolis, became federal reserve director of publicity for the northern counties. Jesse E. Eschbach, of Warsaw, long a member of Indiana leg- islatures, and then Speaker of the House of Representatives, was named as federal reserve chairman of the state loan speakers' bureau, under the district bureau at Chicago.
In addition to the construction of a sales organization, which should include direct representatives of the federal reserve bank in each small unit of each county, plans also were formu- lated whereby the organizational life of the state as a whole would be touched at strategic points and each of the thousands of state-wide and local groups of individuals would become a participant in the campaign. Committees of all types were named by various bodies throughout the preparatory period, and eventually more people became interested in the Third loan than in either of the previous drives. Mr. Wade and other members of the campaign committee, which had func- tioned in the Second loan, worked almost incessantly during February of 1918 to keep the old Loan organization intact and to prepare for the elaboration they knew must come. Similar elaborate organization plans were undertaken in the twenty- four southern counties.
State leaders were invited to a dinner, February 20, 1918, given at the Claypool Hotel, Indianapolis, as one of the eight district meetings held in the northern sixty-eight counties.9
following the war, small purchasers of bonds, finding themselves in need of money, quickly, sold their bonds at great sacrifice. The author has heard of examples in the coal fields of Indiana, where men with ready cash bought $50 Liberty bonds from coal miners at as low as $25 and $30 each. As the inflation of the war period went on ; as demands for ready cash became imperative with some large and small bond buyers ; as the government tax requirements on business mounted ; in a word, as the demand for money became more pressing than the desire to hold the bonds for the interest they would bring-many bonds were thrown on the open market. Price declines were inevitable. And, in turn, as money became 'easier', following periods of 'tightness', the increasing demand for the bonds sent prices up. In other words, the Liberty issues soon took an important place in the securities markets-subject to the many factors of value, which govern trading.
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