Evening star., 1933-04-09
BY VILLA HARD.

b1 VILLA HARD.
In spite Of everything the depres-
sion continues implacably on its way
toward more and more reductions of
debts; and this development increas-
1ngly influences the progress of legis-
lation at Washington.
TIE latest candidates for statutory
permission to facilitate prompt reduc-
tions of debts are the municipalities
ST the United States. Their presence
here for that purpose absolutely COM
pletes the circle of debtors seeking
easier compositions with their creditors.
The administration is listening to
appeals from its governmental debtors
abroad. The last administration en-
acted a statute for promoting debt
readjustments on behalf of individual
American debtors and on behalf of
railroad corporations. Considerable re-
ductions in the debts of industrial
corporations have been happening
through ordinary legal processes. The
present administration is organizing
large legislative schemes for the
shrinking of the debts of farmers.
Every important indebted element ex-
cept the municipalities has long been
engaged in efforts directed toward the
tightening of its debt burden. Now
come the municipalities to make it
unanimous.
Legislation on their behalf has been
introduced by Representative Wilcox
of Florida and by Representative Nc
Leod of Michigan. Representative
Wilcox's idea fundamentally is that
municipalities shall be allowed to re-
duce their debts, both as to principal
and as to interest in case the reduc-
tions proposed are accepted by credi-
tors representing rs per cent Of the
total Indebtedness involved. Repre-
sentative McLeod's idea includes the
proposition that municipalities might
be granted a moratorium, during
which they would be under no obn-
cation to make any debt payments at
ALL Mr.. Mcleod has recently COM
bined his notions and Mr.. W1coxs
notions into one inclusive bill.
Presumably Mr.. Mcleod Is especially
moved by the situation in which the
city of Detroit finds itself. Its tax levy
for its next fiscal year amounts to $685.
0O0, 900. It's tax delinquencies during the
current fiscal year are amounting to
some SO per cent of It's tax levy. In
it's next fiscal year they presumably will
reach at least that figure. The city
of Detroit will probably be fortunate
if in its next fiscal year 1t collects "a
per cent of its tax levy.
It's income thereupon will be, say,
s44, 100000. Then comes the shock
furnished by its debt. In that same
fiscal year in which its income will be
Cat the most) S44,000,000, its pay
ments due on its debt will be 34,O00,-
900.
In such circumstances the need for
unusual measures is apparent. The city
of Detroit to date has not been in any
way in debt default. Meanwhile the
record of numerous other American
municipalities has been by no means so
fortunate.
Today there are at least nine hun
dred American counties, cities, towns
and other local taxing districts that are
in admitted default upon their debt
obligations. In many of these instances
the creditors in general are willing to
accept some reduction OF principal or
some reduction of interest In order to
secure resumption of payments on lower
scales with minimums OF losses.
The difficulty so far has been that
municipalities have not enjoyed the
SdIIle legal ldCllltlCo lOi SOAAPOoAbAoAAo
with their creditors that have been en-
joyed by indebted individuals or in
debted private corporations. The essen
tial aim of the legislation now pend
ing in the Congress on behalf of mu-
inequalities is to give them the begin
nings, at any rate, of legal parity with
debtors of other sorts.
The total amount of money brought
into question is enormous. 1t exceeds
the total of all the Indebtedness of all
the farmers of the United States. The
top figure for agricultural Indebtedness
Is in the neighborhood Of twelve billion
dollars. 1t has furnished Washington
with one of its greatest political issues.
Meanwhile, however, the total local gov
ernmental Indebtedness of the United
States is in the neighborhood of sixteen
billion dollars. Little of it, relatively,
is State Indebtedness. Overwhelmingly
it is indebtedness resting upon munich
palities and other political subdivisions
Of States.
The argument for permitting NOR
atorium on some of it is grounded in
part upon the present policies or ne
cessities of bankers. Numerous cities
seeking to refund some part of their
present Indebtedness have found them
selves obliged by bankers to pay in
creased interest rates.
X
The city of Chicago, for instance, in
refunding certain 4 per cent bonds,
was recently compelled to pay per
cent for new money. Akron, Ohio, has
also been compelled to pay per cent.
Some cities have been compelled to pay
even as much as z per cent.
This tendency is denounced by the
officials of many cities as being contrary
to the proper normal trend of prices
and of interest rates during the present
depression and deflation. They argue
that commodity prices have been going
down and that the price of money also
should go down. They point out that
the price of money has indeed been go-
| ing down in the rate Of interest paid
4 by bankers generally on deposits. They
iy,nt1iro ufl1v IL ahOaild taa that hanrarc