Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1922-03-13

the varying cost of bonus accord
ing to what percentage of veterans
might chose the different plans OF
payment offered.
Mr.. Mellon called attention to the
fact that the bill makes no provision
for raising additional revenue to
meet the cost of the bonus and re-
called TO Mr.. Fordney President
Harding's letter of February is in
which it was suggested that a gem
eral sales tax be enacted to provide
the necessary funds or the bonus
legislation be postponed. Secretary
Melons letter in part, says:
The Secretary's Letter
1.-THE bill makes no provision
whatever for sinking fund, amorti-
cation or other reserves against
either the liability that would be
thrown upon the government in
1925, or against the liability on the
certificates at the end of 20 years,
nor does it make any provision for
the payments which could accrue in
ordinary course from year to year on
account of the death of veterans.
THE direct cost of the government
of a bill carrying these provisions
for about 4.500,OOO ex-service men is
almost impossible to estimate be-
cause of the uncertainty as to which
of the plans will be chosen, and in
what proportions, = but
hn
pared tables of estimated cost on the
assumption that 40 per cent. will
choose the certificate plan, o3 per
cent. the farm and home aid plan,
five per cent. the vocational training
plan and two Per cent. the land Set
to the cost of the certificate plan. IL
is assumed that half of the veterans
will borrow on their certificates from
the banks and default on their loans,
in view of the attractive provisions
for cash redemption in case OF de
fault. 1t appears from
these tables that on the basis as
sumed by the actuary the total direct
cost to the government in the fiscal
year 1923 would be $50. 954 900; in
the fiscal year 1924. S2l6.44O 600: in
the fiscal year 1925. S12S, O13.OOO and
in the fiscal year 1926. for the most
part by October II. 1925. when the
adjusted service certificates used as
a security for bank loans would have
to be redeemed $6lJ. S2I22.OOO.
This would mean total payments
within about :. II years of over ST.
POO, 900, 900.
Burden on Banks
apart from the direct cost Of the
bill, a most serious feature is the
provision for bank loans upon adj
justed service certificates during the
period between its passage and Sept.
80 1870. The effect of this provision
is to transfer the cost OF policy
loans from the government to the
banks, and to place in the banks.
and to the extent that the eX-service
men are able to obtain loans from
them, a mass of unliquid, non-ncgo-
liable paper upon which the banks
will be unable to realize until 1925.
The result would be frozen bank
loans and imitation of currency and
credit. TO the extent that the banks
are obliged to make loans on adj
justed service certificates. their abiI-
ity to take care OF the demands OF
business and industry will he CORES
reduced, and even though
the paper accrued by the certificates
may not be eligible for rediscount at
the federal reserve banks. the indi-
rect result is certain to be increased
borrowings BY member of banks
from the federal reserve banks.
A Dangerous Abuse
"F'rom the point of view OF the
treasury, the most serious aspect of
these loans on adjusted service GER
tificatcs is the fact that the loans
would be flowed at the banks on the
credit of the United States. The