The plan offers the most direct incentive to economize and save ever offered to the people of the country. When the Government makes it possible for everyone to know that by saving 25 cents, which otherwise would have been wasted, he can invest that 25 cents in a Government obligation, it is a definite objective to which each one's economy may be directed. In other words, it is possible to transmute one's economies into a specific obligation of the Government, and each one who saves is able to know that his economy is producing a concrete result advantageous to himself, of benefit to his Government, and a direct contribution to the winning of the war.

I look upon the war-saving campaign which the department has now inaugurated as promising the most wholesome benefits to the American people, and producing fundamental conditions that will be of immense help in financing, as well as in successfully prosecuting, the war.

Interlocked with the question of "small savings" which can be invested in war-savings stamps at interest is the question of “large savings" which can be invested in Liberty bonds at interest. The men and women of large and moderate means owe a greater duty, because they have a larger margin of income, to cut off self-indulgences, to deny themselves useless and needless luxuries, to make sacrifices of comforts, pleasures, and conveniences that will effect genuine economies and set an example to the Nation. Every dollar saved represents actual supplies saved and made available for heroic soldiers and suffering civilians in Europe and America.

It is easy to visualize the course of a dollar saved from waste and invested in Government bonds: First, it goes to the Government as a loan for the war; second, it is expended by the Government for food, clothing, and ammunition which go directly to a gallant soldier or sailor, whose fighting strength is kept up by the food, whose body is kept warm by the clothing, and whose enemy is hit by the ammunition. It has not been expended in the purchase of needless food and clothing for the man at home, and is, therefore, released for the use of the soldier; it is saved wealth to the man at home and can be loaned to his Government at interest, with resulting benefit to himself and to his Government.

The man who subscribes for a Government bond, and is advertised as a patriot for doing so, is not a patriot if he immediately sells that bond on the market when he does not imperatively need the money. It is not mere subscription to a bond that helps the Government; it is the actual purchase of the bond and the keeping of the bond that really helps. The people must save and invest in Government bonds. It is by actually lending money to the Government and not by merely promising it and shifting the load to some one else that the citizen really helps in this great time. If loans are made to the Government

and bonds are taken therefor, the lender is supposed to deny himself something which releases, in turn, a demand on the vital supplies or stores of the country and puts the Government in position to buy the supplies thus released and to furnish them to our armies and navies. But if the lender immediately sells his bonds, relieves himself of the obligation to save vital supplies, and goes on wasting them, he does his country a grievous injury and hurts himself as well.

I want to make it clear that there is no desire on the part of the Government to prevent or to interfere with freedom of legitimate trading in Government bonds-that is, trading in good faith.

We must realize that the Government's credit is vital to the success of the war; that it underlies every activity. It is a sacred duty of every citizen, and it should be regarded as a glorious privilege by every patriot to uphold the Government's credit with the same kind of self-sacrifice and nobility of soul that our gallant sons exhibit when they die for us on the battle fields of Europe. It is as imperative to sustain the Government's credit as it is to sustain our armies, because our armies can not be sustained unless the Government's credit is always above reproach.

I have indulged the hope that additional bonds could be sold on such reasonable terms that the remainder of the funds required to meet the estimated expenditures for the fiscal year 1918 might be raised by that means and thus escape additional revenue legislation at this session of the Congress. It is my earnest conviction that the general economy of the country should be permitted to readjust itself to the new revenue laws before consideration should be given to the imposition of additional tax burdens. If a situation should develop where the Government could not sell convertible and partly tax-exempt bonds upon a 4 per cent basis, it would, I believe, become necessary to seriously consider further revenue legislation. In my judgment an increase in the rate of interest on such bonds would be extremely unwise and hurtful. The higher the rate on Government bonds, the greater the cost to the American people of carrying on the war and the greater will be the depreciation in all other forms of investment securities. We can not regard without concern serious declines in the general value of fixed investments. It should be the earnest endeavor of everyone to prevent this, and I earnestly hope that the processes of education and of unselfish consideration of the problem from the standpoint of the general interest will provide the necessary remedy.

The Government must, if necessary, absorb the supply of new capital available for investment in the United States during the period of the war. This, in turn, makes it essential that unnecessary capital expenditures should be avoided in public and private enterprises. Some form of regulation of new capital expenditures should be pro

vided. The subject is having deep study, and I hope to be able to submit some suggestions during the session of the Congress which will be of a constructive, as well as of a regulatory, nature. It may also become necessary to concert some constructive measures through which essential credits may be provided for those industries and enterprises in the country essential to the efficient and successful conduct of the war. The subject requires the best thought and study. It is receiving the most earnest consideration.

The courage and resources of the Nation are so abundant that America's success in the war is beyond question if they are properly organized and intelligently used. The economic and financial condition of the country was never so strong and America's spirit was never more aroused to the importance and necessity of going forward, resolutely and regardless of sacrifices, to the accomplishment of the great task to which God has called us.

THE FIRST LIBERTY LOAN OF 1917.

By the act approved April 24, 1917 (18 days after the declaration of a state of war between the United States and the German Government), the Secretary of the Treasury was authorized, with the approval of the President, to issue bonds of the United States to the extent of $5,000,000,000 at a rate of interest not to exceed 31 per cent, convertible into bonds bearing a higher rate of interest than 3 per cent if any subsequent series of bonds should be issued at a higher rate of interest before the termination of the war (copy of the act of Apr. 24, 1917, attached as Exhibit A).

Acting on this authority the Secretary of the Treasury on May 14, 1917, through Treasury Department Circular 78 (Exhibit B), formally offered the first issue of bonds for public subscription in the sum of $2,000,000,000. It was decided to call this issue the First Liberty Loan of 1917. This name was selected because the proceeds of the loan were to be used for the purpose of waging war against autocracy.

These bonds were dated June 15, 1917, and bear interest at the rate of 34 per cent per annum from that date, payable semiannually on December 15 and June 15. They will mature June 15, 1947, but the issue may be redeemed on or after June 15, 1932, in whole or in part, at par and accrued interest, after three months published notice, on any interest day. The bonds are exempt, both as to principal and interest, from all taxation, except estate or inheritance taxes imposed by authority of the United States or its possessions or by any State or local taxable authorities. Under the terms of the issue the holders of these bonds are given the right of conversion in accordance with the authority granted by the act.

Because of the size of this financial undertaking there was no precedent to guide the Government as to the amount of bonds which

the country would readily absorb at one time and there was much confusion of counsel as to the amount of the initial offering. Many students of finance and men experienced in large bond operations believed that the first issue should not exceed $1,000,000,000, and some thought that the amount of the first loan should not exceed $500,000,000. After receiving views and suggestions from bankers, investment houses, business men, and investors in all parts of the country, I finally determined to make the amount of the loan $2,000,000,000. This decision was controlled by the essential requirements of our own part in the war and the necessities of the foreign Governments to which the Congress had authorized the extension of credits.

It was determined to make the appeal direct to the people, and every effort was made to give every man, woman, and child an equal and ample opportunity to subscribe. The 12 Federal reserve banks, which are fiscal agents of the Government, were used as the central agency in each of the 12 Federal reserve districts for receiving subscriptions, for taking care of the details for the allotment of subscriptions, the handling of payments after allotment, and the delivery of the bonds. Each of the Federal reserve banks created Liberty loan committees in cities and towns throughout its district, and in this manner 12 great organizations were constructed for the expeditious handling of the unprecedented operation. Bankers, business men, bond houses, newspapers, press associations, and citizens generally cooperated in a great movement that vibrated with energy and patriotism and swept the country from coast to coast in the greatest bond-selling campaign ever launched by any nation.

In an effort to arouse as much interest as possible and to leave no stone unturned to place the issue fully before the people, I made a trip through the country, visiting 23 cities, making public addresses in each, and keeping in close touch with the department at Washington by mail and telegraph. This was a part of a campaign of education for the purpose of explaining more fully the causes of the war and placing the necessities of the Government and the advantages of the bonds before the people of the country. It was especially necessary, because it was estimated by bankers that there were only about 350,000 bond investors in the United States; the people generally were, therefore, unacquainted with Government bonds. The following cities were visited: New York, Boston, Detroit, Chicago, Milwaukee, Minneapolis, St. Paul, Des Moines, Omaha, St. Joseph, Denver, Kansas City, Kans., Kansas City, Mo., Topeka, Kans., St. Louis, New Orleans, Birmingham, Chattanooga, Louisville, Cincinnati, Columbus, Pittsburgh, and Baltimore.

The total subscriptions to the first Liberty loan amounted to $3,035,226,850-an oversubscription of $1,035,226,850, or nearly 52 per cent more than the amount offered.

More than 4,000,000 men and women subscribed for the bonds. Of this number, it is estimated that 3,960,000 people, or 99 per cent, subscribed in amounts ranging from $50 to $10,000, while the number of individual subscribers to $5,000,000 and over was 21, their subscriptions aggregating $188,789,900.

One of the chief purposes of the campaign was to distribute the Liberty bonds widely throughout the country and place them, as far as possible, in the hands of the people. This was important because the strength of Government finance, like the strength of Government policies, rests upon the support of the people. The large number of subscribers, especially the large number of small subscribers, was most gratifying and indicated that the interest of the people had been aroused as never before in an issue of bonds.

The subscriptions were closed on June 15, and on June 22 the allotments were announced. The following table shows in detail the subscriptions and allotments by Federal reserve districts:

FIRST LIBERTY LOAN.

Subscriptions and allotments of subscriptions by Federal reserve districts.