The New York herald., 1874-12-08
the SOUTHERN DEBT.
Details Of the London Scheme for Fund
Ing the Old Bonds.
IT'S LEGAL ASPECT.

RICHMOND. Va. Dec .. 1sSk
The statement I seiegraphed TO the HERALD
few weeks ago TO the efect that the for
eign bondholders Of the Southern States had pro-
posed, through an accredited agent. to fund tho
entire debts OF those States at q reduced rate OF
interest," within the capacity OF each to pay, has
created widespread sensation, not only among
the bondholders but among ofi1cials, legislators
and the people generally. The scheme involves
over $3.50 0o0 900 OF debt and while 1t Is admitted
TO be feasible, and will afford the Southern States
an opportunity TO revive their credit as well as ia
pay their debts, the naodus operandt is generally
misunderstood, and. as seen by the press COM
ments, widely misconstrued. Legislation IL to be
had which will compel each State to comply
rlgidly with the terms OF the compact, and which
win enforce prompt collection and payment of
the interest on the new bonds as IL falls due.
THE MACHINERY
provided for the collecting OF the tax to pay the
interest and raising proper sinking fund for tho
new bonds Is q provision that every year the Au-
ditor Of the State shall levy tax on the assessed
property OF the State and collect IL through the
proper o1cers. This tax Is to be levied and collect
ed separately ana distinctly from all other State
taxes ana the money raised by it is to be kept
apart and sacredly appropriated to the payment
OF the interest and the raising OF sinking fund.
The law, which Is understood to have been pre-
pared by Won Knapp OF Berlin, ana judah p.
Benjamin, OF London, the highest foreign authori-
ties on American law, also provides that In case
the Auditor refuses or negects to levy and collect
thia tax as provided ana required by IL, then any
bondnoldcr may apply TO any Court State or fed
eral, having general common law jurisdiction, Tor
an order requiring him to do so and authorizing
the ofncers OF sucn Court to enforce the order.
Thus and here 1t IS where the
MIsAPPREHENsION EXISTS.
There win be no suit against State, but the
Court operates directly on an o1icer Of the State.
as was done by the Supreme Court OF the United
States in the case OF the Tennessee and Arkansas
bank notes, where the treasurers Of those States
were forced to receive certain bank notes IN pay.
ment OF taxes and debts Que the sta.es. This rms
dlfnculty that might arise, provided the Legisla.
ture OF each OF the States agrees to IL, and sur:
render their control OF the State finances. 1t VIII
be seen that the state Will not be involved In any
litigation. but that 1t VIII be between the bond
holders and the Auditor or Treasurer, as the case
may be- and the law expressly states that this right
to enforce collection OF this tax Is contract be-
tween the State and the bondnolders. havo
given this much OF the legal operation OF the pro-
posed plan, which can be safely taken as an alb.
quired to pass before becoming partlcipator IN
It's results whether they be beneficial or otherwise.
There Is no doubt whatever, lrom al can learn,
ably received. It VIII De ssouty and stuooornIy
far as can be ascertatned with the limited inlor.
nation at hand, the scheme OF the American Bond
Funding ana Banking ASSOCIATION. Limited. OF
states BY funding their debts and placing them
on the markets Of the world on favorable basis,
alike beneficial to the bondhoder and the CREDITOR
IT'S ORIGIN AND HISTORY.
The Council OF Foreign Bondhoders OF the Lon
b.
default IN the payment Of the interest ON the
q ns o a
denouncing Virginia for not complying with tie
terms OF her own Funding bill OF 1870 This at
terested In Southern securities, ana they con-
suited with lawyer formerly o resident Of chi.
curtties" This gentleman Tor twenty i've years
70 ao eniorc. % their = rights against i. raliways
cities and counties OF Iowa, Illinois and
Mitigation whereby the supreme % Court m OF Of the
United states mad been got to decide that munich
pal and other bonds when issued bv political cor.
the citizens and can ue collected through the
courts. The supreme Court OF Iowa mad origin
ally held the same way, but the people made q
new constitution and elected new Supreme
Court which reversed the former decisions; and
was therefore necessary to protect the rights Of
the bondnolders. In some OF this litigation. where
Gil to levy . tax and pay debt and those author
tiles would refuse to do So because they were re.
Federal Court would put the Whole @ city M govern iI
ment IN jail until they dld levy the
necessary tax. In some cases the Court would
direct It's Marshal to levy and collect such tax as
was necessary 70 pay the debt. This line OF de-
cisions governs che policy to be pursued by tho
foreign DOndhoderS; and they further decide that
when bonds are issued. and the law which au-
tnorizes the issue also provides tax to pay tho
interest on them and sinking fund 70 pay the
principal wnen due-thcn such law is CONTRACT
betmeen the State and the bondholder. and
CANNOT BE REPEALED OR MODIFIED,
but that the tax thus provided must be collected.
and the proceeds applied to the to which it ID
pledged. Upon the principle OF these decisions,
w hirn dc ~ h
heea arranged to fOat all the debts OF all these
states on the terms - proposed For thus
ing Association has been organized with sufrclent
capital to accomplish IT'S objects. Its capitalists
ested and dealing IN American securltes-the
Rothscnlds, Gilliatss and Barlngs, OF London,
besides some or the most influential financial nrms
OF Germany. They have had the law ABOVE referred
to prepared, and they propose TO State that she
w 90 s t anu sn fes 10 them
binds itself TO receive these new bonds and "a
return to The State the old bonds in exchange az
soon as they can get possession OF them. The
proposed new bond is to bo made payable In
London in gold coin SO as to meet the legal tender
interest viii vary Ia State according to her
ability to pay. The syndicate controlling
titles OF southern securities. With their influence
IN financial circles they expect to place these
Terms Tney viii be % prey aS Ss
interest will always be promptly paid In London
and they expect 70 sell them at much higher
made o bring. A gold bond payable IN London is
considered worth more thau 0ne-hith more than
gold bond payable In New York, and, as proof Of
this they refer TO the TACT that before the war the
State bonds payable In London bearing i've per
cent brought as much as bonds OF the same state
payable in New York bearing six per cent and
then both bonds were payable In gold.
THE SOUTHERN DEBT.
The origfnstors OF his scheme, in which 30 much
legal ability Is involved and which so great imam
cia influence Is supporting, propose to handle the
following debts:-
Alabama ACKNOWLEDGEMENTS. SSl7S0la
Ark 55iAOU
Florida. l,2Ss607
Georgia dlo5 SO
Louisiana N013,i07
Mississippi. ....................... 26i06l0
North Carolina 2,UDuUO0
4, 70