his would
never have happened," said the London bankers. They knew that the
Grizzled Old Lion of American Finance always held that character was the
best collateral. In the war emergency, however, many American bankers
thought to the contrary and the net result was that with all external
loans thereafter England and France have been forced to dig into their
strong boxes and do what any individual does when he borrows money--put
up a good margin of security.

An illustration of this secured obligation of the British Government is
the issue of $300,000,000 Five and a Half Per Cent Gold Notes dated
November 1, 1916. Principal and interest are payable without deduction
of any English tax in New York and in United States gold coin. The
holder of these notes, however, has the option to get his money in
London but at a fixed rate of $4.86 per pound sterling, the normal value
of the pound in peace time. Since the pound sterling at the time this
article is written is quoted at $4.76, this is a decided advantage.

The new English loan is secured by stocks and bonds whose total market
value is not less than $360,000,000. One group of this collateral
consists of stocks, bonds and other obligations of American corporations
and the obligation, either as maker or guarantor, of the Government of
the Dominion of Canada, the Colony of Newfoundland and Canadian
Provinces and Municipalities. The second group included obligations of
Australia, Union of South Africa, New Zealand, Argentina, Chili, Cuba,
Japan, Egypt, India and a group of English Railway Companies. I
enumerate this collateral to show the inroads upon British securities
that increasing war cost is making. This collateral must always show a
market value margin of twenty per cent above the amount of the loan. It
means that should there be any slump the English Government must supply
additional security.

This issue was brought out in two forms. Half of the loan is in Three
Year Notes due November 1, 1919, which were issued at 991/4 and interest
and yielding over 5.75 per cent: the other half is in Five1/4 Year Notes
due November 1, 1921, brought out at 981/2 and interest and yielding about
5.85 per cent. These Notes are redeemable at the option of the
Government at various interest dates between 1917 and 1920 at prices
ranging from 101 to 105 and interest.

Having established the precedent of a secured loan, all succeeding
English issues in this country have been backed up w