The Washington herald., 1919-03-12
ALLIES OWE 10
BILLION TO U. S.
These Loans Will Probably
Be Covered by Notes,
Says Holland.

- le" IuOhNnS aKtcf w uAlidin ". MI
Adoo became Director General Of the
Anertean railroad systems some OF his
friends inferred that he had in mind
the utilization OF the loans made by
the United States to foreign countries
so that these loans could be employed
IN aiding the railroads OF the United
States or possibly In giving to the
government some partial ownership In
them.
Mr.. McAdoo's idea seems to have
been the employment OF the bonds into
which the demand notes given by the
nations which borrowed from the
United States will be converted these
<eonds might be made available for
governmental purposes. especially in
connection with the railroads Moth
ing came OF this plan and perhaps Mr..
McAdoo did not seriously consider IL.
II possibly led to another proposition
to which Mr.. McAdoo's successor as
Secretary OF the Treasury. Mr. Glass.
appears to have given some considers-
ton.
The United States Treasury is to
hold visible evidence OF the Obli-
cations OF foreign nations not in
excess OF $4,000. 100000 unless Con-
gress should hereafter permit in
creased loans to be made. or this
amount somewhat IN excess OF SSS.-
900. 600. 900 have already been lent to
foreign governments. We may in
crease the amount to $4,000. .000.-
600. All OF these obligations are
represented by notes payable upon
demand which are now held in the
Federal Treasury. They constitute
a stupendous treasury asset While
no official statement has been
made which would give information
about the rate Of interest these de-
msnd notes carry. nevertheless the
opinion is commonly held by inan-
cial readers that the rate is per
cent
Therefore. II by the end OF this
year approximately $4,000, 100000
in the forms OF loans and credits,
represent the money obligations or
other countries to the United States,
then the Federal Treasury will be
in receipt each year of about $780,
100000 in the form Of interest.
The best informed among the lead
ers In the financial district have al
ways been Of the opinion that as soon
as possible after official announce
msnt Is made by proclamation by the
President that the war is ended, our
debtors will seek to take up these de-
rnand notes and in place Of them TO
give bonds which will have a long
term OF years to mn. Secretary Glass
has had under consideration the prop
osition that the government Of
fer these bonds to American in
ried the guarantee OF the American
government they would find a ready
market. But II that were done then
perhaps as much as $1,000. .oOO. 900. GER
tainly as much as 5000 no 900 Of new
securities would be offered in the open
market The long life and the inter
est rate. combined with the credit and
the guarantee both OF the United
States and the European nations
which borrowed Of US, would be likely
to make the bonds a tempting propo-
, sition. But the question at once arose,
what would he the effect upon other
securities IL an unheard of issue of
from IS. .OOO. DON. 90 to SO. .OCO OOO.OOo Of new
securities were placed upon the mar
ket. The best opinion seems to have
been that the effect could not be 9TH
eTwise than demOralizing. There Is
no doubt about the ability of the
American market to absorb these Sc
Curities. II We can provide the gov
ernment in the remaining three and a
half months OF the fiscal year with
81. 900. .O0OO. 900. s7.OOO. .OCOOCN of which
represent the nth and last Liberty
Loan, and 5000. 90 900 the revenue re-
celved under the new tax bill. then
IT is a reasonable inference that Amer
lean investors. individuals. corpora
tions and banks will be able to absorb
these foreign bonds behind which
stand the guarantee of the United
States. But the effect OF unloading
upon the market. even gradually. such
an enormous amount OF new securities
would Inevitably be the sale ot other
securities in order to secure the fund.-
, with which to buy these foreign bonds.
That might be disastrous. II might
involve our financial structure snd IN
various ways result in unfortunate or
demorallzins conditions.
Secretary Glass Abandons the Plan.
tary Glass has decided not TO atterrt
to market these foreign bonds in the
United States. The question then
arises, What is to he done with them
II the demand notes are convert ed
into long time bonds M undoubtedIy
they will he. then these bonds will re.
main in the vaults Of the Trea suTy
Department They will appear as nr
asset and one which may be carried
for a long time. For il is inconceiv.
able. in the opinion Of the best an.
thorities. that our debtors will be able
to liquidate this enormous debt until
at least two generations have come
and gone. Therefore the bonds will
remain almost permanently in the
treasury.
When final settlement Is mnde Il
may he discovered that there will be
a considerable reduction in the aggre.
gate OF the debt owned by Europe to
tho United States We are to pay
England. some OF the authorities say,
as much as 800 for each soldier car
ried across the sea We are to pay
England for other services that nation
! has given Those who are best In
formed say that we shall be COM
PEELED to pay a large sum to France
because we bought many munitions In
France and because we made very
large use OF her railroads.
A leading executive In the Quarter
masters General Department who re-
turned from France a day or two said
this morning that the vast amount
OF supplies which the United States
sent to France for the purpose OF
feeding. clothing and otherwise caring
for our soldiers there, were all trans
ported from the harbors 10 the bases
and thence to the various places where
they were needed by the French rail-