war a War Loan Organization under the Treasury Department
was established at Washington, and in each of the 12 Federal
Reserve Districts a Central Liberty Loan Committee was con-
stituted, with the governor of the Reserve Bank as chairman,
and to these committees was entrusted the work of selling the
bonds in their respective districts.
The Treasury Department allotted to each district the amount of bonds it was to sell, and each central committee divided the allotment throughout its territory, calling upon its sub-commit- tees in various localities to have their quotas subscribed. The men who served on the central committees and on the principal sub-committees represented the most capable, experienced and influential men in their respective communities financial, pro- fessional and industrial. The success of all the loa'ns was largely due to the perfection of the selling organizations and to the ener- getic action of the central committees under the direction of the Treasury Department. American women figured in every great war movement, and in these campaigns they proved their value in an entirely new capacity as sellers of bonds. They perfected a nation-wide organization the National Woman's Liberty Loan Committee, which cooperated with the Liberty Loan Organiza- tions of the Federal Reserve Districts. They had enrolled on their committees 800,000 women during the campaigns for the Fourth and Fifth loans.
Inasmuch as New York City is the heart of financial America, and as the Second Federal Reserve Bank is there, a description of the bond-selling campaign there will be sufficient. The Central Liberty Loan Committee of the Second Federal Reserve District was composed of Benjamin Strong, chairman; James S. Alexan- der (President National Bank of Commerce); George F. Baker (chairman board of directors, First National Bank); Allen B. Forbes (Harris, Forbes & Co.) ; Walter E. Frew (president Corn Exchange Bank); Gates W. McGarrah (President Mechanics and Metals Bank) ; J. P. Morgan (J. P. Morgan & Co.) ; Seward Prosser (president Bankers' Trust Co.); Charles H. Sabin (president Guaranty Trust Co.); Jacob H. Schiff (Kuhn, Loeb & Co.); Frank A. Vanderlip (president National City Bank); Martin Vogel (Assistant Treasurer of the United States, in charge of the Sub-Treasury in New York, and representative of the Secretary of the Treasury); James N. Wallace (president Central Union Trust Co.); Albert H. Wiggin (president Chase National Bank); and William Woodward (president Hanover National Bank). These men met daily during each campaign. They formed sub-committees on distribution pub icity speak- ers' bureaus, banks and trust companies, various industries, manufactures and professions, each composed of the leading men in their respective industries and professions. Every city town and village had its Liberty Loan Committee as part of this huge organization. Each district was given its allotment, and daily returns were reported to the Central Committee throughout each campaign. If the reports from any district showed that it was lagging behind, speakers of national repute were sent to arouse it. Campaigns of education were inaugurated making widely known the causes of the war, the object sought by victory, and the necessity of financing the Allies and supporting the mili- tary arm of the Government. To the thoroughness of the edu- cational campaign may be attributed much of the success of the issues. It convinced everyone that each man, woman and child must " do his bit," It made an army of workers with an indi- vidual responsibility. No device to assemble crowds was ignored, and there was no assembly without its speakers. Bands, pro- cessions, parades, balloon ascensions, flights of aeroplanes drop- ping leaflets, steeple climbers, altars of liberty, " Nation Days " for aliens and citizens of foreign birth, and, later, captured tanks, cannon and submarines, pyramids of German helmets all were used. Walls were covered with special cartoons; magazines and newspapers contained full pages of advertising. " Buy a bond " was a slogan from which there was no escape. In cafe and club, in hotel corridor and restaurant, between the acts in the theatre, and in all public places came the cry " Buy a bond." The jar- gon of the money market was abandoned. It was not the ques- tion of investment versus investment, or interest rate versus in-
terest rate. It was that of the National Treasury in need of funds. Performance of patriotic duty and pride in American institutions was the key of the educational campaign. When the great " drives " came the nation responded to a man. Every village and city in the land sought not merely to sell its quota of bonds, but strove to " go over the top."
The Treasury Department and the central committees real- ized that the people did not have sufficient available money to pay in cash for the bonds, and therefore the slogan " Borrow, buy and save " was employed, and the banks throughout the country were urged to make loans freely to subscribers who offered bonds as collateral. The banks aided the small investors by financing their subscriptions, permitting them to pay off in monthly instalments, with interest at the coupon rate. The large mercantile and industrial establishments likewise financed the subscriptions made by their employees. In the later cam- paigns coupon instalment books were introduced. The banks aided the large investor to subscribe beyond his available cash resources by loaning on the subscriber's three-months note, with the bonds as collateral, and with the privilege of one, two or three renewals of three months each, with interest at the cou- pon rate. Usually a substantial payment in reduction of loan was required and the rate of interest raised at the end of the renewal periods. There was no special rule, each bank using its own judgment in individual cases. The banks, in turn, redis- counted these notes at their Federal Reserve Banks, thereby maintaining a liquid position. Had this " borrow-and-buy " method not been put into practice, the people would not have been able to subscribe and pay in cash the vast amounts neces- sary. The mere " borrow-and-buy " method in itself may not have been economically sound, but with it was joined the slogan " Save," in order that the borrowings might be repaid, and the borrowing was a war necessity. Immediately after the Armistice there was an orgy of spending, prices of all commodities rose, and merchants found that they required more cash to expand and increase their inventories. This need resulted in a wide sell- ing movement of the bonds, and was in great measure the cause of their selling temporarily below par.
Details of the Loans. The Liberty Bonds and Victory Notes were issued under authority of the Acts of Congress approved April 24 1917, Sept. 24 1917, April 4 1918, July 9 1918, Sept. 24 1918 and March 3 1919, and pursuant to official Treasury Department cir- culars. The following are some of the details in connexion with their flotation : The First loan was a 3O-year 35 % loan dating from June !5 1917; interest payable semi-annually (as in the case of all the loans) ; redeemable at the option of the Government on and after June 15 1932 and exempt from all taxation, except inheritance and estate taxes, both as to principal and interest. This exemption made the First loan especially desirable for persons with large incomes and kept its market price higher than that of subsequent issues. The amount offered and issued was $2,000,000,000, the subscription $3,035,226,850. Subscriptions opened May 17 1917 and closed June 15 1917.
The Second Liberty Loan was a 4% issue dated Nov. 15 1917; maturity Nov. 15 1942 but redeemable on and after Nov. 15 1927. It was convertible into subsequent issues of bonds bearing a higher rate than 4% and was exempt from state and local taxes and from the normal income tax, but not from estate and inheritance taxes, or from the super-tax, on personal incomes or the excess and war profits taxes on corporate incomes above $5,000. Thus by increasing the interest rate and restricting the tax exemption these bonds were made more attractive to small than to large investors. Subscriptions for this Second loan began Oct. I and ended Oct. 27 1917. The total amount sought by the Treasury Department was $3,000,000,- ooo, but the Secretary reserved the right to allot additional bonds up to one-half the amount of any over-subscription. Subscribers were permitted to make payment in four instalments, and this plan of allowing deferred payment to be completed in about three months was followed in subsequent campaigns. Many banks and business houses allowed their clients and employees to distribute the pay- ments over still longer periods. The subscription was $4^617,532,300 and the issue $3,808,766,150. The Second loan was issued under the Act of Sept. 24 1917, authorizing total bonds of somewhat more than $7,000,000,000.
The Third Liberty Loan was an issue of lo-year 4! % bonds dated May 9 1918 and'not redeemable until maturity, Sept. 15 1928. The exemptions were the same as in the Second loan, but the privilege of converting these bonds into those of future issues was withheld. The amount offered was $3,000,000,000 and the Secretary reserved
