"Perfectly Phenomenal"

Secretary of the Treasury Morgenthau had no reason to believe that his spring financing operations would be anything except a success (TIME, March 9). But when his offerings were last week oversubscribed nearly seven times, the Secretary was forced to admit that it was "perfectly phenomenal." For $1,250,000,000 worth of bonds and notes the Treasury received subscriptions footing up to no less than $8,459,000,000.

When Treasury issues are oversubscribed, the individual subscriptions are merely scaled down proportionately. Banks, corporations, bond dealers, private investors therefore generally ask for more securities than they really expect to get. This time the Treasury's offerings were very tempting in comparison with other Government issues, with the result that subscriptions were "padded" more than usual. Moreover, in their eagerness to get bigger allotments, some dealers persuaded friendly corporations to put in additional subscriptions for them. One Midwest manufacturer, Mr. Morgenthau declared, had sent in a "terrific subscription," obviously a "phony." All suspiciously large subscribers were put on the carpet by Treasury or Federal Reserve agents, asked to justify their bids.

Secretary Morgenthau said he had had "an awful time with free riders." In Wall Street parlance a "free rider" is a person who buys a new issue not for investment but for the speculative possibility of immediately selling it in the open market at a profit. For free riders the Treasury's long-term bonds turned out to be a joy ride, since they promptly rose more" than 1 1/2% above the offering price of par.

Having eliminated as many "free riders" and "terrific subscriptions" as possible, the Treasury announced that bids for $5,000 or less would be filled in full, that others would be allotted 18% of the notes requested, 13% of the long-term bonds. On a $559,000,000 conversion offer that accompanied the big cash offer, the Treasury reported that practically all the maturing securities would be exchanged, that 90% of the holders wanted long-term bonds, not notes. Overjoyed was Secretary Morgenthau that his long-term issues had at last become more popular than his short-terms, indicating rising confidence in New Deal finances, about to be bolstered as they are by fresh taxation.

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