Congress Passes $7,000,000,000 Bond Bill to Carry on the War
First Liberty Loan of $2,000,000,000 Oversubscribed by 4,000,000 Wage Earners Ways and means for carrying on the War were the immediate concern of Congress.
The mobilization of America's wealth; the issue of bonds to finance America's war operations; the extension of unlimited credit to the impoverished Allies; the passage of a War Revenue Bill ; control of food supplies ; the creation of an Aerial Fleet; an embargo on exports to neutral countries to prevent their reshipment to Germany; an Espionage Bill; a measure of compulsory military service by Selective Draft, to provide an Army of 500,000 men, to be followed by another draft calling out 1,000,000 men—these were the tremendous legislative tasks confronting Congress.
The administration asked authority for a bond issue of $7,000,000,000. Of this amount $5,000,000,000 was to be raised by public subscription and $2,000,000,000 by Treasury Certificates of indebtedness, the latter to be redeemed in a year by aid of new war taxation. Both bonds and certificates were to bear interest at 3 ½ per cent annually. It was understood that $3,000,000,000 of the public bond issue was to be apportioned as a loan to the Allies at the President's discretion.
After two days' debate, the colossal bond issue was authorized by unanimous vote of Congress on April 14, 1917. Three days later the Senate passed the bill by a vote of 84 to 0. All partisanship was laid aside, the hitherto hostile or pacifist factions uniting in support of the Government.
A War Revenue Bill, designed to raise $2,500,000,000 by extraordinary taxation of incomes and industries was passed on October 2, 1917
First Liberty Loan Oversubscribed
On May 14, 1917, Secretary of the Treasury William McAdoo announced that the first offering of bonds would consist of a $2,000,000,000 Liberty Loan, bearing interest at 3 ½ per cent and open to popular subscription at par in denominations as low as $50. The twelve Federal Reserve Banks were to act as agents, each in its own district, but subscriptions likewise were to be sought by all banks, trust companies, private bankers and bond houses the country over. The subscriptions came pouring in at once and on June 15, 1917, when the lists closed, it was found that the Liberty Loan had been greatly oversubscribed, 4,000,000 persons having subscribed for $3,035,226,850 of the loan.
Second Liberty Loan a Great Success
The Second Liberty Loan campaign, which opened on October 1, 1917, and closed on October 27, 1917, was more successful even than the first. The total amount offered was $3,000,000,000, bearing interest at 4 per cent. These bonds were convertible to any subsequent series bearing interest at a higher rate than 4 per cent. There were 9,000,000 subscribers to this loan. The subscriptions totaled $4,617,532,300. Only $3,808,716,150 of this amount was allotted.
The term "Liberty Loan" was applied originally to the $5,000,000,000 of the $7,000,000,000 first war budget voted by Congress on April 14, 1917, which was to be met outside of taxation. Soon, however, the term was applied to the $2,000,000,000 of the $5,000,000,000 which was offered to popular subscription. The rate of interest was 3 ½ %, with the provision that it would be raised equal to any higher rate of interest which might be paid on later loans. Bearer bonds were offered in amounts of $50, $100, $500, and $1,000; and registered bonds from denominations of $100 to $100,000. The bonds mature in 30 years from the date of issue, June 15, 1917, but are redeemable in whole or in part, at the option of the United States, on or after 15 years, at par and accrued interest. Two per cent of the amount of the bonds was payable on application, 18% on June 28, 20% July 30, 30% August 15, and 30% August 30. Interest is payable on June 15 and December 15 of each year. Bonds are exempt from all Federal, State and local taxation, excepting estate and inheritance taxes. When subscriptions were closed on June 15, it was found that the loan had been largely oversubscribed.
The Second Liberty Loan campaign occupied most of the month of October, 1917. The details were much the same as those of the First Loan, as described above; but the rate of interest was 4%, thus automatically making the rate of interest for the First Liberty Bonds equal to this rate. The minimum subscription was placed at $3,000,000,000: and it was announced that half of the subscriptions between this sum and $5,000,000,000 would also be issued. Total subscriptions by the public amounted to $4,617,532,300; so that the amount issued became $3,808,766,150.
The Third Liberty Loan campaign was inaugurated on April 6, 1918, the first anniversary of the entrance of the United States into the European War. The campaign closed on the following May 4, 1919. The amount of the loan was $3,000,000,000 and oversubscriptions, and the rate of interest was 4 ¼ %, to which the bonds of the First and Second Liberty Loans were as a consequence converted. The bonds were issued to mature in ten years from the date of issue. Five per cent of the amount subscribed for the various bonds was due on subscription, 20% on the following May 28, 35% on the following July 18, and 40% on the following August 15. The lowest denomination of the bonds of the Third Liberty Loan was $50.
The bonds of the Third Liberty Loan were not convertible to any higher rate of interest. The total subscriptions to the Third Liberty Loan were $4,176,517,550, an oversubscription of 39%, every federal reserve district oversubscribing its quota.
The campaign for the Fourth Liberty Loan opened on September 28, 1918, and closed on October 19, 1918. The amount was set at $6,000,000,000; the rate of interest was 4 ¼% and the bonds will mature on October 15, 1938, although they may be redeemed at the pleasure of the United States at par and accrued interest any time after October 15, 1933.
In spite of undeniable evidence that the Central Powers were in the last stages of their resistance to the Allies and that the end of the war would probably be in sight before the end of the year, and despite a violent epidemic of influenza which swept the country from one end to another, disarranging all activities of the American people and bringing sorrow and desolation to tens of thousands of American households, the loan was an unqualified success. When the books had closed, it was found that the loan had been oversubscribed more than 14%, the total subscriptions being above $6,850,000,000, making this the largest popular loan ever floated in the history of the world. The number of subscribers was above 21,000,000, as compared with 4,500,000; 9,500,000; and 18,300,000 in the First, Second, and Third Liberty Loans respectively.
When the United States entered World War I in April 1917, the Federal Government was faced with the monumental task of mobilizing American society. Early in the war, President Woodrow Wilson appointed a Committee on Public Information headed by journalist George Creel to lead the propaganda effort. One way for the Government to get out its message was the poster. Noted artists volunteered their time and talents to the committee and designed posters urging enlistment in the armed forces, conservation, industrial mobilization, subscriptions to Liberty Loans, and other patriotic duties. Paul Stahr's design for "Be Patriotic" is typical of many World War I posters. It aimed to be spiritually uplifting and depicted the ideals for which Americans were fighting.