The New York herald., 1922-06-19
Railways as Collateral.

Railways as Collateral.
Judging from much that one hears
and reads, it Is probable that certain
properties of the German Government,
such as railways, mines and forests,
will be canvassed as valuable col
lateral II would sound we'll in a pros
pectus to say TO the lender: 10! TIE
German railway system cost several
billion dollars (whatever it may be)-
and this is all yours if the German
Government fails to pay your interest
and principal Yet 1t seems TO me
rather cEimerical.
What would the bondEolders' COM
mttee do with the German railway
system, the Government by supposi-
ton being in default? Can the COM
mittee come into Germany and operate
the railways? Can the Government
abdicate it's power over rates, wages
and in favor of foreigners without
bringing disorder in the State? No.
If we suppose a surplus availablS from
this particular property Of the people
that surplus would already have been
turned over to the bondholders. II we
suppose a deficit--well, who wants to
inherit a deficit?
The only one of these special Sc
curity plans which is measurably free
from the faults inherent in them all
is one proposed by DIR. Schacht, d.
rector of the National Bank for
Deutschland" 1t supposes export
monopolies to be formed by tie Ger
man Government for controlling the
sale, not the production. Of few
great articles largely sold abroad.
Potash is an example. The company
organized for this article would have
foreign as we'll as German directors.
They are supposed to be men familiar
with the particular industry placed in
their hands. The gross return from
export sales would be turned over by
them to the service of the debt. The
producers would be paid by the Gov
ernment.
DR.. Schacht's Plan.
Taking into account the several
articles which have a safe minimum
sale abroad (under peace conditons)
DR.. Sctacht thinks an annual payment
for interest and sinking fund of about
$50, 900, 900 might be counted upon.
To substract such a sum from Ger
many's foreign income would of course
leave a big hole to be filled in bal
ance sheet now running against this
country.
When I pointed out this fact to DR..
Schacht and asked his solution OF the
difficulty he answered: "Yes, l see
that clearly; but l would like to see
our Government forced to diminish
| imports consumed In this country. II
the amount in question went directly
| from the, export monopolies to the
debt, then we should be forced to those
economies which no individuals In any
country voluntarily make. The press
ure must be automatic in its action
upon the citizen. Either by positive
prohibition or by very high import
taxes such economy can be brought
about. and for the amount in ques-
ton it can be done without producing
suffering among the poorer people,"
understand that this plan has re-
ceived favorable comment in France
and that many German officials think
we'll of it. but prefer a first trial OF
their general credit.
Perhaps no disturbance of treaty re-
lations would be required for, giving,
| by this plan, fair assurance 70 the
| lender 1t remains that If in any way
whatever Germany can demonstrate
her ability to pay a considerable sum
annually the French may prefer TO
| take it directly rather than to get
more just now through the use of this
sum for interest and sinking fund of a
| loan. But if the tide runs as 1t is now
setting a strenuous effort will be made
by many interests ito put the loan
over" From passing Americans / un-
derstand that the effort will include a
request to our Government that 1t
| should recommend the investment to
our people.
/ hope President Harding will be a
| new Ulysses bound to the mast and
his Cabinet a new Argive crew with
| ears stuffed to resist the siren voices
that may call them to such action.
That way trouble lies--of more kinds
than 1 can now recite.
Since Mr.. Crosby wrote the above article
the conference or international bankers In
Paris announced that II was not possible
at the present time to 40 anything In arrang-
ing n loan for Germany.