The Washington herald., 1921-06-18
Harding Decides on Plan
For u. S. to Absorb
Allied Debts.
WILL ASK CONGRESS
TO GIVE SANCTION
Increased Interest Rate
Expected to Attract
Investors.
By ARTHUR SEARS HENNING.

by II SEARS
President Harding and his Cabinet
decided yesterday to lunch their
plan for the refunding of the ma
tion's $4,000. .OOO. 900 war loans to
The allies into definite obligations
and for the sale of such securities
20 the American people.
The first step on the part of the
administration will be to ask Con-
gress for specific authority to carry
out this plan when it is worked out
in detail by the Treasury.
This is one phase of a vast and
complicated project for the financ-
ng OF world war debts. comprising
not only the 10000. 900 900 loans of
the allied and associated nations to
each other. but the $4,000, 900, 900
German reparations.
Rejects Debt Cancellation.
The proposals of the French and
British governments for a mutual
cancellation of war debts among
the allies have been rejected by the
United States and are considered
definitely shelved.
II the Harding plan for the re-
funding of foreign loans and their
absorption by the people works out
successfully. it is believed that
similar course will be adopted by
the allies in dealing with their
debts to each other.
The American Government loans
to the allies are:
To Great Britain. s4.21o 900, 900.
To France. 100000. 900.
To Italy. S1.625 200. 900.
To Belgium. s400. .00O. 900.
To Russia, $3.50. 100000.
To Jugo-Slavia, 500. 900 900.
To others, S175, ,0OO.0 900.
Total. ss,450. 900. 900.
Billion Due In Interest.
Nearly $1,000. 900. 900 more is now
due from the allies in the interest
IN these loans, which has not been
vaid for two years and will not be
paid for another year at least
Under the aHrding refunding plan
these loans TO the allies, which are
acknowledgements of Indebtedness,
would be refunded into bonds ma
turing 30 or 40 years hence at a
higher rate of interest. The increase
In the interest rate above per cent
would be sufficient to yield the addi-
tional amount due to the United
States in defaulted interest.
These allied government bonds
then would be placed on the market
by the United States government
from time to time and sold to in
vestors. The proceeds from the sale
of the bonds to individual investors
would be employed by the govern
ment to retire liberty bonds.
May Meet Opposition.
This proposed treatment of the
defaulted interest differs from the
Houston plan. under which the
amount in arrears would be made
PAYABLE in twelve equal annual in
staIlments. The Harding plan for
the treatment of the defulted inter-
est Is likely to meet opposition in
Congress. particularly on the part
of those who contemplate employ
ing the back interest. when paid, to
finance the soldiers bonus.
whether the allied bonds when
sold to the people should be guar
anteed by the United States is al
other question that will come up
in Congress when the authorization
bill is considered. One suggestion
hitherto made is that the govern
ment issue bonds against the allied
lands and sell the American bonds
to investors
The administration plan, however,
so far as it has been disclosed up
to date, contemplates the sale of the
allied bonds themselves to investors
without guarantee. The object
would be to make them attractive
investments, which is one reason for
increasing the rate to take care OF
the interest in arrears.
Needs Authority of Congress-
The British debt will be the first
one refunded. negotiations to this
end having recently been resumed
between the Treasury and the Brit
ish Embassy. There would have been
considerable criticism, however. had
the administration proceeded to re-
fund the loans without specific au-
thority of Congress, and Secretary
Mellon advised the President that
the authority OF the Liberty Bonds
act is insufficient TO carry out the
Harding plan.
whether German indemnity bonds
will appear in the American market
is a subject of discussion. The
French government proposes to is
sue bonds against the German bonds
and the French bonds doubtless
will materialize here as security
for loans by American financiers. or
as securities offered directly to
American investors.
Influences which have arisen in
connection with foreign trade, ex-
change rates, have prompted the
suegestion that America cannot re-
Ueve her domestic depression nor
determine her national fiscal policy
until the loan situation is adjusted.