50 JOURNAL OF FORESTRY 



of the nations capital which is the source of government borrowing 

 when this becomes necessary. 



The effect of these or similar provisions which have been only 

 briefly indicated seems to me obvious, namely, that these securities 

 issued under the supervision of the U. S. Government can legitimately 

 seek a conservative investment field which means at the start perhaps 

 4H to 5 per cent money, and ultimately perhaps 4 per cent money. 

 Of course, the expense to the central association and provision for 

 reserve funds means that the ultimate borrower must pay from J^ to 1 

 per cent more than the central issue. 



Although only government supervision is contemplated here, it 

 would be legitimate to make these carefully guarded securities legal 

 investment for savings banks, insurance companies, trust funds, etc. 

 As funds of these institutions are constantly increasing, there is no 

 doubt of there being an abundance of capital seeking such an invest- 

 ment as this, if it is put on a strictly gilt-edge basis, and why can it 

 not be. Is there any danger of these more than $7,000,000,000 of 

 assets of forest industry shrinking even 25 per cent? No one will 

 I think, affirm this. Then, bonds based on 50 per cent of the present 

 values must be safe as to principal if each collateral bond issue is based 

 on careful appraisal and forms a conservative percentage of the appraised 

 value. On considering the question from the standpoint of the collateral 

 bond issues; it is obvious that while possibly some concerns, owing to 

 too heavy indebtedness, already, could not now get out a safe bond 

 issue ; it must be that large numbers of concerns have assets and income 

 which warrant good sized issues with no doubt as to their safety. These 

 are entitled to cheaper money, but their relatively small issues now 

 attract no attention in the money market, and, moreover, suffer by the 

 general reputation of timber bonds. The plan of handling them by this 

 central association contemplates that should any collateral issue default 

 and have to be liquidated, the liquidation will be done "within the 

 family" without loss to the investor in the central bond issue. These 

 liquidations should be handled by the next department. 



These suggestions do not contemplate the furnishing of short term 

 loans through the central association. These should, as heretofore, 

 come from the banks. In so far, however, as the income of individual 

 companies is conserved through paying lower interest rates on long term 

 loans, then short term credit should be bettered. This is, of course, of 

 mutual interest to the industry and the banks, because at the same time 

 the credit of the industry is bettered , the safe loan field of the banks is 



