Evening star., 1932-06-18
SUCCESSFUL DEBT
FARLEY EXPECTED
Bankers Are Hopeful of Def.
mite Program at Lausanne
Conference.
Special Dispatch to The Star.

NEW YORK, June !" ternational
bankers in New Yorl. ',e opening
address of Prime Ramsay
Macdonald of Great before the
Lausanne reparatiorS conference With
much satisfaction. There was general
approval of the emphasis he placed On
acting speedily in a crisis greater than
any that ever afflicted the world in
time OF peace" instead of letting this
situation drag along to the point OF
exhaustion OF the countries most affect
ed by it.
In the past few days, or since the
conference in Paris between the heads
OF the British and French governments,
tnere has been a new confidence eX-
hlbited in the financial district concern
ing the outcome at Lausanne This
has been reflected in the sharp ad-
vance in all German securities. with
the government loans up to 10 points
from their recent low levels and munich
pal and corporation bonds equally i'm
proved. Pressure to sell dollar securities
OF German origin has lifted. In it's
place dealers in these issues have found
buylng orders, Of which a large part
were for foreign account.
New Moratorium Predicted.
There is, however body Of opinion
that still holds to the view that a
moratorium will be declared in Ger
many this Summer and that it will
include not only political but private
oeDts. This has been strengthened by
VISITS here recently Of representatives
OF German banks and business or
ganizations. They have advised their
American correspondents that they did
not see how Germany could continue
10 pay interest on long term dollar
bonds or short-term bank credits owing
TO sle difficulty of securing exchange
ana TO the universal opinion throughout
the Reich that such a program was un-
tenable in view of the conditions that
face it.
Those who have insisted that Ger
many will declare a moratorium and
INCLUDE IN this private as we'll as polit-
lcaI debts have been willing to admit
that she might at the same time 90
on paying the interest on the so-called
7 per cent Dawes loan of the Govern
ment and the 5 2 per cent Young loan,
while deferring payments under the
SINKING fund agreement in these loans
This feeling has been responsible for a
part OF the strength in these two issues
this week.
The Dawes loan, issued in 1924, is
celptS from German customs duties,
from taxes on tobacco, beer and sugar
and from revenues of the alcohol
monopoly. In the year when this loan
was Hoated these revenues covered the
service Of it about 16 times Receipts
from customs and from the other taxes,
except that on sugar, have steadily in
creased In 1880 they were more than
double those of 1924. With the reduc-
ton, meanwhile, in the outstanding
amount of the loan. the coverage, ac-
cordlng to the last report. was nearly
80 times requirements The loan Is
now approximately Sl50000 900. COM
pared with the original amount of about
5000 100000. 1t was floated not only
IN the United States. but in Great Brit
ain, France and Switzerland.
Method of Payment.
Revenues available for the per cent
Government loan are now paid into
the Bank for International Settlements.
! This institution forwards the proper
tionate amounts to the paying agents
| for interest and sinking funds in the
various countries in which the loan was
Issued. When it was placed there was
no Bank for International Settlements,
as this was a creation Of the Young
| plan. In the event of default on the z
| per cent loan. therefore, the funds al
| located out of customs or taxes would
go to the Reichsbank, as they did prior
to 1880 and during the period when s.
Parker Gilbert acted as agent for rep
arations in Germany.
Bankers today said that should de-
| fault occur on the government rs they
| doubted very much whether the coun-
tries affected would appoint collector
of customs. as they realized this would
| lead to serious political embarrassment.
Funds would probably be paid into the
Reichsbank in reichsmarks. If bond
| holder demanded his portion of the COL
! lection he would have to apply to the
| bank for "devisen." The bank, in at
tempting to check exports of capital
| from Germany, would probably refuse
the application. The great difficulty in
a case of this kind is that of securing
exchange so long as Germany cannot
obtain foreign credits and her trade
balances are insufficient to cover her
| foreign obligations.