Money: Toward a Crisis

Congress' refusal to act on the Administration's debt-management program last week continued to disrupt the market for Government and corporate securities. Even as President Eisenhower drafted a special message urging Congress to lift the 4 1/4% interest-rate ceiling on long-term Government bonds, the Treasury announced that it had to pay 3.824% interest on short-term (91-day) bills, the highest since the bank holiday of March 1933.

The effects of the Treasury's reliance on short-term borrowing in the midst of an overall tightening of the money supply (TIME, Aug. 31) were readily apparent. By drawing $1.6 billion in new cash during the last month, Treasury financing--despite Federal Reserve Board buying support--boosted the rate on 26-week Treasury bills to a record 4.15%. The yield on most long-term Government bonds was more than 4% for the first time since the 1930s, and some yields rose as high as 4.8%. Corporate bond yields also rose; unable to sell their public-utility offerings at the issued price, three Manhattan underwriting syndicates broke up.

Unless Congress acts, the troubles of the Treasury and the money market will worsen in October and November. Then, to raise about $7 billion to finance the seasonal deficit and another $8.9 billion to meet debt coming due, the Treasury will have to go to market with more short-term issues.

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