Evening journal., 1922-03-13
by banks under this provision.
Viewpoint of the Treasury.

by banks under this provision.
Viewpoint of the Treasury.
From the point OF view OF the
Treasurey the most serious aspect
of these loans on adjusted service
certificates is the fact that the
loans would be fioated at the banks
on the credit OF the United States.
The plan In substance. therefore.
involves a dangerous abuse Of
the Governments credit, for II
contemplates the issue of a vast
amount OF Government ohliga-
tlons which are non-negotiable
and have no present realizable
value unless pledged with banks,
in which event the obligations be-
come, in effect, two or three year
notes, which the Government
would be Obliged TO pay off in
1925 upon default by the veterans.
This practically means that
cash payments on adjusted ser
vice would be financed for the
next three years through a forced
loan from the banks This is bor-
rowing on the credit of the United
States fully as much as II the loans
were made direct by the United
States and financed by direct bor-
rowlngs on Government bonds.
notes or certificates OF Indebted
ness.
In fact, from the point OF view
OF the banking system and the
general financial situation, II
would be far better II a bonus
Is to be financed by borrowing
for the Government TO resort TO
direct borrowing and to provide
for direct policy loans on ad-
justed service certificates from
the outset than TO attempt TO
to avoid direct cost to the Govern
ment for the time being at the ex-
pense Of both the banking system
and the Governments credit.
Sound Business Method
II Congress concludes TO adopt
soldiers bonus with paidup en-
dowment insurance as It's chief
feature, the direct or regular way
would be to authorize insurance
certificates with provisions for di-
rect policy loans and the amortiz-
alton of other reserves that would
be required as a matter of sound
business policy.
A certificate plan on this basis
II chosen by all ex-service men
eligible TO elect II, would. accord
ing to the best available estimates,
mean an aggregate liability of
about S4,5OO. 900, 900. and on that
basis OF twenty-year maturity
would involve the following cur
rent charges each year for the
next twenty years: % The pay
ments necessary each year on ac-
count Of the maturity OF certia-
Gates by death, averaging about
S4O.O0O,000 year; CD Amortlza-
tion payments, computed az 4 per
cent. compounded annually. cal
culated to provide within twenty
years for the whole liability, av-
eraging about S12S.0O0.OOO a year,
and go provision for direct poll
icy loans from the Government on
about the same basis as is GUS
tomarily allowed by life insurance
companies In an amount that
would probably average not less
than 5000 100000 year for the
first two or three years Of the op-
Grafton Of the plan.
on this basis an Insurance plan,
standing by itself, would cost at
the minimum abont 100000 900
a year for the next few years. The
necessity for amortization. II an
insurance plan is to be adopted
becomes clear upon an examina-
ton Of the outstanding public
debt. The heaviest payments un-
der an insurance plan would fall
In the same period when the
longer term Liberty bonds be-
come due, for on a twenty year
basis the certificates would ma
ture in 1912. II the bonus bill
should be passed this year.
Maturity OF Liberty Loans.
The Fourth Liberty Loan. which
amounts TO over s6.300,O00.0O0
natures in 1898; the Second Lib
erty Loan $4,000, 100000 natures
IN 1912. and the First Liberty
Loan, which amounts to almost
S2.OOO.O00.0O natures in 1941.
with these heavy maturities OF
the public lebt. aggregating abou
$1,000. 100000. Il would be highly
imprudent to lay up another ma
turity of between $4,000, 900, ,0ol
and S4.OOO,OOO,OOO in the sam'
period without making provision
for It's amortization in the mean
time.
II Is clear from these estimate
that whatever form the soldiers
bonus may take, whether It con
templates a thorough going insur
ance plan or follows the outline
OF the bill which IS now pending
il will cost from S30O.O0O.OO0 {