LIBERTY LOANS, the name given to the four loans floated by the United States of America during the World War. A fifth loan, floated after the Armistice, was called officially the Victory Liberty Loan, but more generally the Fifth Liberty Loan. Be tween May 14, 1917, when the First Liberty Loan was offered to the public, and May 1o, 1919, when the campaign for the fifth loan was brought to a close, the people of the United States sub scribed $24,072,257,550. Of this amount, $21,435,370,600 was finally accepted by the secretary of the Treasury. The Fourth Lib erty Loan, concluded Oct. 18, 1918, was the largest single loan issued by any of the belligerents, and realized a total of nearly seven thousand million dollars. The number of subscribers to this loan was more than 22,000,000, or more than one-fifth of the total population of the United States. Moreover, the Government was able to dispose of the Liberty bonds on very favourable terms : they were issued at par, the rate of interest varying from 31% on the first loan to 41-% on the fifth. There were a number of reasons for the favourable terms obtained. The United States was immensely wealthy, and had just passed through a period of great prosperity; its record for quick payment was unique; pa triotic spirit was at a high pitch; advertising on an unexampled scale was undertaken; and the rate offered, while lower than those of European countries, was high as compared with the 3% and 2% paid in recent years on its government bonds.
When America entered the World War the Government realized that, in addition to the money needed to prosecute the war by the United States itself, large sums must be raised to relieve the already overstrained credit of the European allies. The total amount of these loans to foreign countries (not including later sales of war material) was $9,598,236,575. This money was part of the amounts raised in the Liberty Loans. The financial policy of the Government was to raise from one-fourth to one-third of the necessary funds from taxation, the remainder from loans. The Government strove also, not only to extend the debt over a period of years, but to distribute it as widely as possible. The success of the policy was indicated by the facts that 59.13% of
the individual subscriptions for the fourth loan were for $5o bonds, and that approximately 25,000,000 persons were, at the end of the war, holders of Liberty Bonds. Before the United States entered the war it was estimated that there were only about 350,000 bond investors in the nation. Many who bought Liberty Bonds were not wealthy, but borrowed, often at high rates of interest, the money with which to pay for them.
Under the act of April 24, 19i 7, the secretary of the Treasury was authorized to issue bonds to the extent of $5,000,000,000 at a rate not to exceed these bonds to be convertible into bonds of a higher rate if such should be issued before the end of the war. The secretary of the Treasury made the first issue, $2,000, 000,000 and proceeded to create a war loan organization in the Treasury Department. The 12 Federal Reserve banks were used as the central agencies in the 12 Federal Reserve districts, and each of these banks formed Liberty Loan committees. To each district a "quota" or proportional part of the whole issue was al lotted, and the Treasury Department made use of every available means of publicity. As a result the first loan was over-subscribed by more than $1,000,000,000. In subsequent campaigns the meth ods employed in placing the first loan were developed and ex tended. In each city an organization known as Four-Minute Men was formed; these men visited places of public resort, including the theatres and cinemas, and spoke for four minutes on behalf of the loans. The Government assisted local authorities in organiz ing street parades in which men from the training camps par ticipated; captured German war material was displayed; distin guished soldiers and other visitors from Great Britain, France and the other allied nations were given elaborate receptions. These campaigns were of great value as a means, not only of selling the war bonds, but of keeping up morale. The following are the fig ures of the number subscribing to each of the Loans, the total amount asked for, the subscriptions and allotments:— Between 1927 and 1935 all these loans were paid off or con verted into lower rate loans. (F. H. H.)