No. 504.
Mr. Schuyler to Mr. Fish.

No. 114.]

Sir: The Russian government has just issued a new consolidated railway loan to the amount of £15,000,000, the success of which is considered a matter of congratulation.

In 1870 the government found that Russian credit was lowered by the different railway companies going on the foreign markets separately in [Page 1065] order to realize their capital. The government, therefore, invented a system of connecting together several railways or groups of railways, and obtaining a loan for them jointly, with the guarantee of the government for the payment of interest.

The first loan of £12,000,000 at 5 per cent. was brought out in 1870, at 79¼; the second for the same sum in 1871, at 81½; the third for £15,000.000 in 1872, at 89; and the fourth for the same amount in 1873, at 93.

As each new loan was taken at a rate still more advantageous to the government, and was largely over-subscribed, the ministry of finances thought that it might do much better; consequently the present loan of £15,000,000 was placed at 4½ percent, and was given at 92, which is equivalent to a little over 102 for a 5 per cent. loan. Of this loan £2,000,000 were reserved, that is, were taken by the department of appanages of the Imperial family, £8,000,000 were placed on the foreign market, and £5,000,000 were reserved for Russia. The result of this loan in Russia showed the judgment of the minister, for the subscription amounted to £29,541,540, or nearly six times the amount.

The roads for which the loan was taken have most of them been begun, but none of them will be in a position to pay interest during the present year, and it is therefore worthy of notice that the amount which has to be paid at one year’s interest on the present loan (£675,000 or nearly five millions of rubles) will completely swamp the expected surplus of the present year of 3,255,783 rubles.

It is not, however, to be supposed that the £29,541,540 subscribed was a genuine subscription, but it is a part of the speculation which is now so rife here. People knew that the previous loans had been oversubscribed, and therefore everybody thought it necessary to subscribe for five or even ten times as much as they wanted, in the hope of getting something, and even this something was not desired as an investment, but the subscribers were anxious to sell out during the rise which would probably occur as soon as the result of the subscription was declared. In previous years the direction of the bank has allotted the amounts to the subscribers at pleasure, but this year the allotments were made at a regular percentage, all subscribers up to £5,000 receiving in full, and the rest taking 16 per cent.

In consequence of all the large financiers having as much of the loan as they desired, as well as on account of rumors that the loan had not gone well in London, the price on the Bourse did not at once rise. The rate of interest at the government bank has since been lowered from 3 to 2 per cent., and consequently at all the other banks from 4 to 3 per cent., the result of which has been to send much money on the exchange for the purchase of various stocks, and thus cause a general rise in funds and much speculation.

I have, &c.