Evening star., 1933-01-29
FARM DEBT COMPROMISE
BLOW AT DEPRESSION
Congress More Likely to Pass Measure
Providing Equitable Adjustment in
Federal Courts Than Initiation Bill.

| imitation OF currently would tend to
raise for time the prices of goods and
OF some kinds of securities Though
decidedly not ALI, there has been,
among other results of this common
state Of mind, tendency toward higher
prices Of many commodities and Of
some forms of securities.
I repeat, to washington as distinct
from the financial communities, this
! Judgment about the future trend Of
| legislation does not at this moment
seem sound.
To complete the picture of attempted
and feared imitation, the measures de-
! signed to raise prices by that process
take mainly three forms. They are:
! Proposals to increase the quantity Of
| currency by additional paper money,
| proposals to use silver in one way or
another as a basis for additional cur
rency and proposals to reduce the
quantity Of gold in the standard dollar.
OF the three. If any one makes progress,
it would seem to be likely to be the last,
the suggestion Of reducing the gold con-
tent Of the standard dollar But the
actual ultimate action Of Congress, if it
takes any action. fof tbe amelioration
of the ornamental condition seems, to
| washington, not likely to take the form
OF imitation to raise prices.
Imitation Chances Slim.
As one reason for this Judgment. 1t Il
absolutely certain that no currency in
| dation can be enacted in the present
| session OF Congress which lasts until
March 4. 1t Is absolutely certain that
President Hoover would veto such an,
action; and the certainty of Mr. Hoover'st
veto deadens the initiative of these Whot
propose infiationary measures. AS re-
spects the new Congress which will
/ NJ Qnt a %t-..-
| upon Gov. Roosevelt. If he should be
as firmly and continuously opposed to
imitation as Mr.. Hoover is. there would
be no imitation. The common judgment
Is that Mr.. Roosevelt is firmly and de-
pendably opposed to imitation
The more probable-indeed the GER
tain line OF attempt to correct the
fundamental distortion of the relation
between debtor and creditor is to reduce
the amount Of the debt. This type Of
effort will go on. 1t seems likely to
make progress both among the people
! in the form of voluntary action and also
through legislation by Congress.
Reduction Of debt is taking place
steadily regardless Of any action Of
Congress Reduction of debt comes
about every day through foreclosure
| and through voluntary compromise be-
tween debtor and creditor.
The aggregate of this sort of thing,
going on every day, is enormous 1t il
| one of those quiet processes which,
without the aggregate of it catching
much public attention. becomes the
most potent single force working for
the end Of depression and the setting
up of business for a new period OF
prosperity.
Efforts to reduce the amount of debt
by legislation take several forms. The
| sponsors Of 1t include some Of the
ableSt men IN Congress, in both parties
men OF the type Of Joseph T. Robin
son OF Arkansas, Democratic Senate
leader; the accurate minded and also
high-minded Democratic Senator Cor
| dell Hull Of Tennessee: the orthodox
| conservative Republican Senator Dam
lei o. Hastings of Delaware. A line
between the CongreSmen who propose
currency imitation and those who pro-
pose debt reduction is. as respects eco
nomlc orthodoxy, a line between the
sheep and the goats.
Loans to Debtors.
Some Of the measures to relieve de-
preston by relieving debtors aim to-
| ward loans of Government money to
debtors through the Reconstruction
Finance Corporation. In most of the
cases, such loans would be confined to
situations in which the creditor agrees
, to accept reduction in rate of in
! terest
All these measures to relieve debt
must. OF course. stop short of the pro-
hlbltlon, implicit in the Constitution.
| winch prevents changing the terms Of
a private contract. Under present con-
dltions, this constitutional limitation is
not serious handicap. Most private
creditors have learned by this time
that they cannot collect the whole that
Is due them and will be only too ready
to accept voluntarily an Opportunity
presented to them by legislation to COL
lect more than they otherwise could. or,
Tor example, to preserve the principle
| OF the debt while the rate of interest
is cut in half
Among measures for the relief OF
deotorS, one that Is likely to pass at
thls session gives to debtor unable
to meet his debts as they mature" tie
rlght TO take sanctuary in the Federal
courts. The courts are given the duty
and opportunity to, in effect, declare
a moratorium indefinite in length.
During the moratorium the court sl1.
pervlses process in which the debtor
makes compromise with his cred
itors. A striking point is that a minor
lty OF the creditors is bound by any
compromise entered into by a major
| .eJ' AIC IudJUIlly must De majority
IN numbers of individual creditors and
also majority in amount of claims.
Ihe compromise may take the form Of
g reduction of the debt, or a reduce
tion IN rate Of interest. or an exten-
sion OF time, or all three. or it NAV
take any other form equitable under
the circumstances.
After the compromise is effected the
court will ratify it, providing only that
1t Is in the Judgment of the court.
equitable" that it is feasible" that
1t is for the best interests of all the
creditors" and that it promises the
financial rehabilitation of the debtor.'
1t Is this last. the financial rehabili-
tation Of the debtor" that marks the
new measure off from bankruptcy or
any other existing legal process for
dealing with an embarrassed debtor.
The bankruptcy law aims to oust the
debtor from his property; the new
measure aims to keep him In possess
sion, and at the same time to be. in
the language Of the bill, Equitable"
to the creditors.
! This bill seems certain to pass In
the present session, and it is along lines
similar to this (rather than CURRENCY
inf1ation) that action by Congress to
relieve debtors and achive the cure Of
depression, seems likely to go.
Prince Michael Tries