Short-Term Money

Not since World War II had the Treasury faced as tough a financing problem as confronted Secretary George M. Humphrey last week. Actual payouts for defense goods hit their peak at a time when the deficit for the fiscal year just ended reached $9.3 billion. This was $3.4 billion higher than Harry Truman's January estimate, and more than double last year's deficit. To meet the cash requirements of the next three months, Humphrey had to raise $6 billion--in a soft Government securities market (TIME, May 25).

Last week Humphrey, who had wanted to put more of the U.S. debt into long-term bonds, was forced to swallow a short-term financing nostrum which had lain unused on the shelf since 1934. He will offer $5.5 to $6 billion worth of income-tax anticipation certificates, paying 2 1/2% and maturing in eight months. As an added inducement, the certificates will pay interest to March 22, 1954, even if used March 15 to pay taxes. Humphrey hopes to sell at least $1 billion of the certificates to non-bank buyers, but expects banks to take the rest for resale to corporations. To sweeten sales, banks can keep the money they pay for certificates until the Government writes checks against it, thus not depleting their loanable funds right away.

Although Humphrey did not like it, the short-term paper seemed the only answer in a market still upset by his 30-year bond issue of April, and congested by more than $7 billion worth of federal, state, city and corporate bonds offered so far this year--the biggest six-month total in history. Explained Humphrey's deputy, W. Randolph Burgess: "Savings money of the type you tap when you offer a long-term security accumulates slowly. You can't go to the well too often. You have to allow time for the well to fill up again."

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