Voluntary Henry

A lonely, stubborn champion of "volun-tary" war bond sales, Henry Morgenthau last week saw ominous clouds of opposition gathering. Marriner Eccles of the Federal Reserve, Harold Smith of the Budget Bureau, Leon Henderson of OPA had ganged up against him, to champion forced savings. So Henry the Morgue pondered his own dozen schemes for raising money the voluntary way and took stock of results to date. In the twelve months to the end of April, the Federal debt had increased $17 billions. That was a fair measure of Henry's success in selling Treasury securities. Only $5,389,349,000 were in war savings bonds.

Sop That Surplus! War savings bonds were designed not only to provide Treasury cash but to sop up the surplus income of U.S. citizens, thus checking inflation. This was the special purpose of the Series "E" bonds (no more than $5,000 to a customer), designed for small-income people. But only $2,872.319,000 of Series "E" were sold--about half the year's total. Even after Pearl Harbor, nearly half of war bond sales were in the other two series (up to $50,000 to a customer) which appealed to rich men, trusts, corporations and non-commercial banks.

Those sales have little or no effect on current purchasing power. The little fellow, crux of the inflation problem, was not being deflated. Moreover, although "voluntary" bond sales ran to big totals, against these totals stood war expenditures fit to grey the hair of any fiscal officer.

Last July, for the first time, monthly outgo crossed $1 billion. By January 1942 the $2 billion milepost whizzed by. In April the figure was $3.2 billions; an incredible billion-a-week total is in sight. To maintain a 50-50 ratio between borrowing and taxing to meet war costs, Henry the Morgue faced the job of selling about $25 billions a year of Treasury securities. Notion Counter.

His basic idea was to set up a notion counter displaying securities for every purse and taste--transfera-ble bonds for banks, temporarily nontransferable ones for insurance companies, permanently nontransferable ones for individuals; stamps for 10-c-, bonds for $10,000. The catch in the scheme was how to keep up a steady selling rate of $2 billions a month. The great banks and insurance companies, few in number, buy in huge blocks up to $100 millions at a time; then they sit back and wait for new funds to accumulate. But if sales of war bonds are to be no more than $600 millions a month, they will soon have to average $1.4 billions a month. The alternatives, under the voluntary plan: 1) a great increase in sales of war savings bonds; 2) heavy sales of Treasury securities to banks and institutions--and inflation be hanged. Here the word "voluntary" in Henry's plan began to lose its pristine purity. On May 1, he launched a drive aimed at 10% of everybody's income. Quotas, to be "re-vised and stepped up" later, were established for all 3,070 U.S. counties; 200,000 members of local War Savings Bond Committees went to work. Investment security dealers saw an opportunity to be patriotic and to gain favor by ringing doorbells without getting paid for it. The 150th anniversary of the New York Stock Exchange, celebrated this week, took the form of a war bond rally.

Compulsory Volunteering. The U.S. thought back to the whoopla, the tormented emotions, the naked coercion of the Liberty Loan drives of World War I, and it didn't like what it remembered. Houses of non-buyers, then, were painted yellow by vigilantes. Citizens were free to buy voluntarily--provided they bought. Said Historians Charles and Mary Beard: "Whoever refused to answer the call was liable to be blacklisted by his neighbors or associates and enrolled in the Doom Book in the Department of Justice." Henry Morgenthau was not for this kind of "voluntarism"--in a nation fighting for freedom, he still shied away from candid compulsion. And he was as yet unwilling to admit that truly voluntary sales will not suffice.

This file is automatically generated by a robot program, so reader's discretion is required.