New-York tribune., 1921-05-26
Harding's Plan Calls for
Marketing of Foreign
Obligations, With This
Governments Guaranty
Proceeds Must
Be Expended Here
Revival of Our Business
Abroad Is Predicted as
Result of New Policy
By Carter Field

WASHINGTON, May 25.-Liberty
bonds are to be paid off, as the first
few issues mature, out of the pro-
| ceeds of British, French, Italian and
Belgian bonds sold to American in
vestors. Thus the $4,000, 100000 of
Allied debts to the United States
government will be transferred to
the American people. To make the
Allied bonds attractive to American
investors it is probable that this gov-
ernment will guarantee them, both
as to principal and interest.
This is perhaps the most spectacu-
lar detail of the international finan-
cial policy which President Harding
has worked out and which has been
approved by the Cabinet. The details
The Tribune is able to-day to pre-
sent exclusively TO its readers.
Covers German Bonds
The new policy applies not only
to the Allied debt to the United
States but to the German repara-
ton bonds, billions of dollars of
which would soon be offered to
American investors if the Allied
governments had their way. 1t also
applies to any issues of European
bonds-especialiy if they are being
sold in behalf Of governments
where the proceeds or the money Oh
1ained from the American investors
buying the bonds is to be spent else
where than in the United States.
No pressure on Europe to paw her
debts in the near future is contem-
plated. For instance, there is no OBJ
ic ,tion on the part of the government
to the sale of S1o0, 100000 of French
bonds now going on through New York
banking houses, for the reason that
the proceeds are being used to paw off
Old obligations here and also to finance
a small amount of exports. But those
two reasons are the only ones which
thus government intends to recoenize
as legitimate in future extensions of
credit to Europe. When new loans are
made here the money must be used
either for the payment of existing
debts, or the purchase of American
goods for export
u. s. Is Primary Guarantor
As to the Allied debts to the nited
States, President Harding feels. as in
dlcated by paragraph in his New
CORK speech, that the present condi-
tion is not satisfactory, for several
reasons.
The ,l,h, President in mis- speech said:
!, me eXlgencies of war compelled
the government to take bv taxation
much wealth from our people "a ba
loaned to our allies. This is the basis
OF their obligation to us, and il is not
good form in which to hold the obli-
gatlons OF one people to another neo.
pie. 1t is altogether to be houed that
IN IN reasonable period we NAV chance
the form of these obligations and dis
tribute them among all the people. We
nope that this may be accomplished,
ana also that there NAV he eifact;v
reduction of the cost Of government
In these ways we hope to release
great volumes of wealth and credit fron,
the burden that government has been
imposing, and make it available for
the development of domestic industry
and the expansion of foreign trade"
Inc president proposes that as the
LIBERTY bona issues mature the Allies
sh0uld issue long-term bonds carrying
llberai interest rate, and that fbesa
bonds should be sold to the American
Puollc, using the proceeds to retire the
Liberty bonds. The guarantee of these
Allied bonds by this government would
not materially affect the present situa-
tion, slnce the government is, OF course
obligated for the Liberty bonds. which
by this process would be Cancelled.
Transfers Debt to individuals
The big advantage would be that the
CHiIeo states government, save for
TINS guaranty feature, would then no
removed fronG the transaction. and tbe
Aimed governments would be indebted
TO individual American investors n
would no longer be possible, one Cab,-
net member pointed out to-day, for the
AIMED governments to suggest, every
Time America proposes any change in
me ne lhIernauonal situation, that some-
thlng be done about these debts.
Another feature which occurs readilv
to every banker is that after this ex-
change had been brought about, any
DEFAULT in interest by an Allied gov
ernment would brand that government
for generations with the American i'm
yesting public, and the bond houses
"nlch handle securities of such char
acter. The result would be that the
defaulting country would virtually be
deprived of any opportunity to obtain
credit IN the richest country in the
world
On the German reparation bonds the
situation is this: The Allies will Be
handed by Germany, in the near future.
some billions of dollars of gold mark
bonds. The French and Belgian gov
ernments have no desire to hold these
bonds, and will be anxious to sell them
Wherever they would bring the highest
price, which is in the United States.
this being almost the only country ~
the world which has q lot of money
waiting investment. This government
has 40 objection to the purchase of