The New York herald., 1922-02-28
Bonds of Debtor to Be Col
lateral for Issue of Five
Billion U. s.. .41-2s.
MELLON CONSIDERING IT
Fly in Ointment Is France and
Italy Cannot Pay In
terest for Years.
Special Dispatch to THE NEW YoaK HERALD.
N. New York Herald Bureau, =
Nras Iii, ,arto oh

New York Herald bureau,
Washington, ID. c., Feb. 27.
Great Britain will be able immedi-
ately to begin interest payments on
her war debt of more than four billions
Of dollars to the United States under a
plan to fund the debt at Az per cent.
interest for fifty years with per
cent. sinking fund, in the opinion of
Walter S. Tower, commercial attache
Of the American Embassy in London.
The text of an important memoran-
dunn on the allied war debt to this
country prepared by Mr.. Tower for
Post Wheeler, counselor of the Amer
lean Embassy, has been received in
Washington and a copy obtained by
THE NEW YORK HERALD.
1t deals specifically with a funding
plan suggested by B. F. Yoakum OF
New York, railroad financier, which is
Treasury Mellon and the Funding
Commission recently appointed by
President Harding.
"A significant thing about the memo
randum of Mr.. Tower is that he says
many financial leaders in England be-
lieving the present fiscal policy un-
sound, think the United States would do
Great Britain great service by adopt
ing firm attitude regarding the debt.
Main Points of Plan.
The other allied nations could not
meet the interest payments immedi-
ately, in the opinion of Mr.. Tower, who
says:
''The main points in the Yoakum plan
probably would meet with general APP
proval. not only In the United States,
but also In the debtor countries. Two
fundamental ideas apparently lie be-
hind the suggestions.
First. The need for reduction of
taxes In the United States, and
Second A definite ARRANGEMENT re-
garding payment OF interest and prin-
cipal of war debts to the United
States. in order that the European
countries may know exactly where
they stand in this matter.
Both Of these detectives are not
only desirable but necessary for the
full recovery Of industrial and trade
activity.
",rhe main idea in the plan is to
refund the debts at AZ per cent in
terest for fifty years with 2 per cent.
sinking fund. The bonds given by the
european nations Oh lfllS DdSiS Woulu
then be used as collateral by the United
States Government for the issue of say
5000. COO oO0 of AZ per cent Treasury
bonds, which would refund a like
amount of outstanding war loans. In
terest and sinking fund payments on
the foreign government issues, held as
collateral for this domestic issue, would
provide for both interest payment and
amortization.
'From the standnoint OF the Euro
pean countries believe the plan would
be acceptable in the main. Fifty years
is long enough for any refunding issue
TO run and Az per cent Is not too high
rate of interest, at least under exist
ing conditions.
Britain's Favored Position.
"~rhe Immediate criticism which am
sure would develop, however, would be
that Britain alone Is in a position Inn
mediately to pay interest on Ms share
of the debt. to say nothing of payments
into sinking fund. Clearly France Is
not now and for five years may not be
In a position to pay anything either on
interest or principal account. For Italy
IL may be ten years before such pay
ruents can reasonably be expected. Even
Britain, according to some opinions can
and will pay only in the event that the
united states taxes 1lrm stanq ana
indicates the necessity of having such
payments undertaken Immediately.
"If the suggestions made by Mr..
Yoaltum were modified In such respects
as to provide for postponing interest
payment, and payments into the sinking
fund, according to the varying prospec-
tive ability of the several countries to
discharge their obligations. think the
opinion here would be very favorable to
the plan as an effective solution of a
vexatious and disturbing nrohlarn