New-York tribune., 1921-05-27
Fiilla1lciers Like
Bond Plan, but
Advise Caution
Sale Of Allied Obligations 10
Retire Liberty Issues IL
Called Ideal Theoretical
Solution of Debt Problem
Would Educate Investors
Suggest Harding Begin With
British Pledges Offered
Without Endorsement

New Works principal men Of finance
yesterday characterized tho Admins
tration's reported program for retiring
some OF the Liberty bonds through
the sale TO American investors of
Allied obligations to tho Treasury at
Washington az an ideal theoretical
solution" There was, however, a di-
vision of opinion of the practically of
the plan, and q general feeling that the
campaign could not be hurried through.
The president of one Of the largest
national banks suggested that the plan
Of transferring Allied debts to the
United States government to private
investors be worked out slowly. He
urged that the government begin by
Offering to exchange to Liberty bond
holders, par for par, $500,000,000 of
obligations of Great Britain, which
ewes the Treasury $4,277 100000 He
expressed the opinion that British
bonds, in reasonable amount, could be
sold on a 5ta to s per cent basis, run
ming twenty years, without the in
dorsemeht of the American govern
ment. Great Britain, he said, would
not permit Endorsement, as il would
regard it as a reflection on its own
ability, unaided, to discharge It's obi.
bankers seemed to be that indorse-
ment was unlikely.
Make every dollar Of Allied bonds
sold," the bank president mentioned
declared, Cancel an equal amount of
Liberties. Otherwise. you dissipate
your assets, for the Allied debt to the
Treasury is an asset, without dimin-
ishing yo1r liabilities.
"It would be a friendly act for in
vestors to take these obligations from
the government
Other bankers expressed the view
that Allied bonds could be offered on
an exchange basis for Liberty bonds
so attractively that the exchange feat
ure would attract enough buying of
Liberty issues to bring them closer to
par
Another point made was that the
offering of Allied bonds to investors
under the sponsorship of the Ameri-
can government would have far-reach-
ing publicity and educational effect,
and would win TO the ranks of foreign
boEdholders thousands who at present
are either unfamiliar With or preju-
0Iced against such securities. One
banker suggested that the educational
ramifications of such campaign would
react favorably on foreign trade and
heighten the prestige of the United
States as a ctedt nation.
One international banker, though
approving the idea, warned against Of
fering Allied bonds until such time as
investment specialists believed con-
ditions ripe. The general view was
that any action would be long deferred,
as before the Treasury could take steps
in exchange for Liberty bonds or
through direct sale, it must hold con-
versations with the Allies regarding
funding the obligations, which are not
IN the nature of temporary. floating
indebtedness, and the resumption of
interest payments which in 1920, were
deferred for three years. One banker
said he thought it would be two years
before much could be done, and the
absorption, on large lcalc, of Ger
man reparation bonds in this market
would be deferred a decade.
"The proposals of the Administra-
tion may be looked upon at present as
toy balloons sent out to feel out senti-
pent," said one dominant factor in the
American investment market.
In discussing the obstacles to the re-
alization of the Administrations tenta-
tive plan, another iinancier said that
the amount of the Allied debt-S9, 9,771.-
139 39,636-was so large that it could not
Uc absorbed DV the investment marke L
in a single gulp, and that it would be
impracticable to offer it piecemeal. since
so doing would tend to make investors
hold off in anticipation of more attrac-
tive terms. Another obstacle which
this analyst pointed out was that a
segment of public opinion in some of
the Allied countries still hopes to have
the Allied debt to the Treasury can.
celod in whole or part, and would on
pose transfer of the obligations to
individual investors on the ground that
so doing would make deferment of in
terest or principal impracticable lewitho out
tremendously damaging the credit of
the borrower. 1t was asserted that the
British, however, are for paying the
debt, and that the Continental borrow
ers would probably want to do so as
soon as able.
Among the advantages seen was that
the Administration program would
solve the problem of meeting Liberty
bond maturities, would reduce taxa,
tion to pay bond interest, and would
if consummated, kill off propaganda to
have the loans Cancelled.