The New York herald., 1922-12-26
KAHN OFFERS NEW
FOREIGN DEBT PLAN
Banker Would Defer Interest
Payments and Cut Them
to Minimum.

Otto II. Kahn. banker. in a letter to
Senator Reed Smoot Of Utah, member
of the Debt Refunding Commission. made
public yesterday by the committee Of
American business men. has outlined a
plan whereby he believes America can
consistently aid toward relieving the
European situation and at the same
time meet the sentiment Of the country
which Seems opposed TO the cancellation
OF the allied indebtedness 10 the United
States.
Mr.. Kahn expressed himself as being
strongly in favor Of tn, policy OF cam
ceiling at least portion o: the indebted
ness of the allied nations.
II am convinced that II would be to
our ultimate advantage to do So he
wrote. II feel sure that such action
would turn out a good Investment.
But If public opinion and Congress
will not at present consent to the re-
linquishment on our mar. OF q portion
OF the allied debt" the letter continued,
(which relinquishment. be ii understood,
is suggested only in return for, and ST.
simultaneously with, measures on the part
of the European nato1s to bring about
that change of mental and moral atti-
tude and actual conditions which is
Indispensable il the world again is to
be on an even keel--thel my suggestion
would be the following:
"Of the two and three quarter billion
dollars. or thereabouts. which our Gov
ernment loaned to .he allied nations
after the armistice. that portion, at least,
as was not applied to Tie settlement OF
war contracts here, or Is offset by valid
counter claim. Is intrinsically dstin-
!, hi he Inv .aff In oil
debt TO US. II should be promptly put
in the way OF repayment with a reason
able rate OF interest. For instance,
America might stimpulate interest at the
rate of 3 per cent. or 5 Y per cent. and
an annual sinking fund eff ] per cent.
beginning after, say, five years. This
Refunding Commission ought TO be en-
powered, according to its judgment. TO
postpone the beginning OF. interest pay
ment likewise for flve years.
"As to the remaining $3.50. 900 900.
or thereabouts. there should be no at
tempt to apply the same formula to
every country. The fefunding Commits
sion should go thoroughly into the eco
nomic and financial and general situa-
ton OF all countries concerned and make
fair and final settlement. subject to
the approval of Congress.
Even upon Americas financially
most potent debtor. Great Britain. she
should not impose the exceedingly heavy
burden of paying az per cent. interest
from the start and redecmlng the prin-
clpaI within twenty-five years. ] would
suggest in the case of that country. as
an Illustration. that there be paid an
annual sinking fund of three-quarters
Of / per cent. Such a sinking fund. II
invested Mt the rate of per cent, would
ex:in.uish the debt in forty-seven years.
"In addition to the sinking fund OF
three quarters OF per- cent. interest
should be charged on the debt at the
rate Of. say 2 per cent. for the first
period of eight years. n per cent. for
the second. 3 per cent. for the third.
3is per cent. for the fourth. per cent.
for the ffth and Az per cent. for the
ilnal seven year period.
~ similar formula might be applied
In the case of France, making the sink
ing fund one-half of per cent. only'
which, II invested at the rate OF per
cent, would extinguish the debt In fifty
six years. and charge "A purely nominal
rate of interest. or perhaps no interest
nt all. for the first eight year period
The rates OF interest for further periods
might be made even more moderate than
those suggested in the case Of England
"The question of the feasibility. ac'
ccptability and extent OF payment II
( kind in lieu of cash should also bt
within the purview OF the commission:
Investigations and recommendations"