paying maturing debts, since each year’s maturities will be paid from the year’s taxes. Purchases of existing public utility plants are of rare occurrence, and are apt to be preceded by long periods of negotiation. When they occur they can, if foresight be exercised, usually be financed without full cash payment at one time.
Today, when a large issue of bonds is made, the banker, while ostensibly paying his own money to the city, actually pays to the city other people’s money which he has borrowed from the banks. Then the banks get back, through the city’s deposits, a large part of the money so received. And when the money is returned to the bank, the banker has the opportunity of borrowing it again for other operations. The process results in double loss to the city. The city loses by not getting from the banks as much for its bonds as investors would pay. And then it loses interest on the money raised before it is needed. For the bankers receive from the city bonds bearing rarely less than 4 per cent. interest; while the proceeds are deposited in the banks which rarely allow more than 2 per cent. interest on the daily balances.