The Birmingham age-herald., 1921-06-04
Daily Financial Gossip
By HOLLAND

New York, June 3.-(Special)- There is nothing new, at least not new to our leading men of finance, in the reports which come from Washington that it is the hope and expectation of the administration that the Liberty bonds will be exchanged for bonds is- sued by Great Britain, France, Italy and Belgium for the purpose Of taking up the demand notes now held in the treasury which represent the debt or
 the allies to this government. Prop- ably the intimation contained in Pres
 ident Harding's address in this city q
 few days ago that within reasonable
 period the obligations of our allles
 which are now held in the treasury
 department will be represented by long
 time bonds which ultimately will be
 absorbed by the people, has occasioned
 a revival of discussion upon this suD-
 ject.
 But there is no man of high finance
 in this city who did not know soon
 after President Harding was inaugu-
 rated that he and the Secretary Of the
 Treas MT. Mellon, contemplated
 with favor the proposition that the allies debt to the. United States be so financed as ultimately to be absorbed by the people, and that in this way
 part of the Liberty bonds could pass from government responsibility into
 the hands of the people.
 Long ago Henry F. Davison lnti-
 mated that the debt which is owed to us by our allies, and which the sale to the public of Liberty bonds made possible could be converted into long time security into which the owners of Liberty bonds could fund their hold ings or could market them out of funds which represented public invest
 ment in these long time bonds.
 There began a somewhat persistent agitation in favor of the cancellation by the United States of this debt. This agitation was not confined to Great
 Britain or Europe. Americans of na-
 tional reputation urged action of that kind. But it was speedily demon strated that the American people would not be willing to assume that debt. For if it were cancelled it would in fact if not in name, become an ob- | legation upon the people. There are excellent technical reasons why can cellation of this debt would be not only impracticable so far as the United States is concerned. but really
 would be harmful in the long run to our allies.
 The German ReparatiOn. . | It may be, our men of finance say that the beginning of payments by | Germany on account of the reparation which she has accepted will be oi some influence, not unfavorable, Tn the Istupendous international financing without any precedent in the worlds s
 history, which is necessary if the ai- lied debt of about $10,000, ,0O0,O00 to the United States, or nearly $llOoo,-
 100000 including deferred interest, is | in the expectation that ultimately
 these will be absorbed by the Ameri-
 can people.
 A Doubtful Point.
 When this matter was under discus sion as it has been in this city since the President spoke, there inevitably rises one doubtful point. The Presi-
 dent and the Secretary, of the Treas
 ury are understood to favor the plan whereby the allies would issue long term bonds at fair rate of interest which might be sold to the American public and with the funds thus se- cured the Liberty bonds as they be- came due could be redeemed. But all
 along the impression has prevailed
 that this financing would be repre- sented by an exchange of all the de- mand notes which are not held in the treasury for long time bonds which will bear a rate of interest that will be satisfactory. But if this were dons
 then the treasury department would
 be compelled to carry these bonds Tor
 years. They would represent an as set The interest upon them. which would aggregate probably $500, .000
 year. would be paid in at the treas ury department. The American pub, lie although it did within two years lend to the government $20,000,000, 00O, accepting Liberty bonds and Victory notes as evidences,Sof the loan, could not be expected to invest $Io.O00,000, 900 in long time bonds at once. There fore either the government must hold the demand notes until they are from time to time exchanged for long time bonds issued. by our debtor allies or else these demand notes must be at
 one time and in one general piece of financing exchanged for long time bonds.
 1t Is Public Interest.
 The details of this proposed tinanc- ing are likely to be somewhat tech-
 nically understood only by the treas
 ury department and by the leading
 bankers. But for the general public
 the proposition Is of the utmost inn
 portance. In the nrst place that the
 President should have at this time
 hinted at method of handling this
 debt and at the same time of redeem
 ing the Liberty bonds is locked upon
 here as indicating that the government at Washington is certain that the time has come when this momentous mat
 ter must be disposed of. If it be sat- isfactorily disposed of it will lift a burden. and 1t will stimulate business. In the next place it leads the pubic which now holds Liberty bonds and Victory notes to the belief that speed fly. after the financing is completed, these bonds and notes will command par in the markets.