Evening star., 1933-03-01
DEBT SCALING NOW
CHIEF RELIEF HOPE
Bankruptcy Legislation Sig-
nificant in View of Doubt
full Initiation Outlook.
BY MARK SULLIVAN.

/
| called an act to facilitate voluntary
scaling down of debt, is important in
[ itself and as a sign Of fundamental
| trend.
! The basic condition underlying every
| thing in business and politics is that
| present prices of goods cannot permit
| payment of debt created when prices
were much higher That is the fixed
; and inescapable dilemma from which
cne of two courses must be taken. For
| over three years, public policy and much
| private policy went on the assumption
! that prices of goods might rise naturally
! and thus cure the situation.
What IS new now and has grown
gradually for about six months is con-
| viction on the part of Government
agencies and others that no immediate
rise in prices great enough to take care
of debts is likely to occur naturally
With acceptance of this condition, the
dilemma is being faced frankly. Choice
is now being deliberately made between
the two ways out of it. Each way has
attracted many partisans.
One way is to bring about by legis-
lation an artificial rise in prices which
will permit debts to be paid. Advocacy
of this path takes the form of proposing
to initiate the currency. 1t is about this
HletIlpu tiloI lAooe VI eAAo e"An 40 S~N
rent.
The other path out of the dilemma is
to scale down debts to point where
it is practicable to pay them at the
present prices of goods. 1t is as a step
along this path that the so-called emer-
gency bankruptcy bill has been passed.
100 Imitation Bills.
The significant thing is that whereas
most of the talk is about imitation OF
the currency, the only legislation
actually passed is one which makes
start along the line of scaling Gown
oCbt. There are more than 100 bills
in Congress locking toward currency
imitation. No one of them has mace
even faint progress toward enactment
On the other hand, the present Dill
for scaling down debt is the one meas,
ure which in a mass OF important ana
needed legislation of all kinds IN this
6ilatorv Congress, has actually thrust
itself forward with such vitality as to
get itself passed. 1t is significant that
the vote in the Senate was A to ..
In the House the vote expressing be-
lief in this way out of depression was
equally heavy, 201 to 43.
The proof seems convincing that
scaling down of debt and not currency
Imitation is the trend upon which the
country has embarked. Not only that.
Scaling of debt can be accomplished,
or at least many in Congress think 1t
can be accomplished. in two ways: one
is scaling down by fiat, by act OF Con-
gress For this purpose scores OF Dllls
are pending No one OF them Is gong
to be enacted. The other way OF seal
ing down debt is by voluntary compro-
l,14,, IL
is for facilitating this process that the
present measure is passed. This Is
substantially the only measure dealing
with the fundamental condition that
has actually achieved passage.
The sum of all is that scaling down
of debt by mutual agreement between
debtor and creditor seems the path by
which the country is going to work OUT
of this depression. Any careful distilla-
ton of everything that is under way
in Congress or out would reveal vol
untary, scaling down of debt as the
fundamental trend.
Provision of Bill Passed.
The bill passed this week by the Sen
ate and already passed by the
House provides method whereby the
debtor and his creditors may come TO-
gether under the supervision OF the
courts and work out either scaling down
of principal, or scaling down OF interest,
or extension of time, or all three.
Speaking loosely and without taxing
into account differing versions OF the
bill as passed by Senate and House, the
measure sets up a process to be used
by persons or corporations not neceS-
sarily insolvent, but who, as described
in the careful words of the bill, are
unable to meet their debts as they
mature" There is one process for
farmers and other individuals, another
for railroads and another for other cor
porationS.
Again, speaking roughly, farmer
or individual unable to meet his debts
as they mature can go into court with
a statement of his condition. The court
will thereupon take action which
amounts to moratorium and which
prevents any one creditor pressing his
claim to the disadvantage of others.
During the moratorium the debtor
must work out plan for compromise.
If the plan is accepted by a majority
of the creditors, even so small a ma
confirm it. Action by the court, of
course, binds the remaining 49 per cent
of the creditors. For railroads and other
corporations the proportion of creditors
whose assent is required is larger.
creditors holding two thirds in amount"
The House version of the bill provides
for all three types of debtor, farmers
and other individuals, railroads, and
other corporations. The Senate version
omitted provision for ordinary corpora
tions on the ground that Senators had
not enough time to familiarize them
selves with this part of the bill. The
two versions, are now in a committee
conference from House and Senate. Out
of this will emerge some one form Of
the bill which both chambers will adopt
and President Hoover will sign.
This measure, when 1t becomes law,
will have significance far beyond what
is ordinarily realized 1t is a recognition
that inability of a debtor to pay under
present conditions is an utterly different
thing from what under normal condi-
tions is called bankruptcy. The bill
recognizes that present Inability to pay
Is the consequence OF what may be
called an act of nature affecting the
whole country.
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