The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1933-02-06

Thus the sacredness of the in
terest rate, even though safeguarded
IN legal contracts, has been chal-
lenged.
Moral suasion, however. is the ex-
tent OF the power Of congress and
the President to act in this direc-
ton. The bill now before congress.
carefully drafted by lawyers of the
house judiciary committee. and
known as the La Guardia -McKeown
bill, goes far in bringing pressure
upon creditors.
Allows Scaling of Debts
The bill directs federal courts to
supervise and approve arrange
mentS between creditors and debtors
for scaling down Of debts, both
corporate and personal, and author
ICES reorganization of corporations.
This defatiOn of debts is condi-
toned upon consent of a majority
OF each class Of creditors involved in
any given case. At present. a mi
nority Of stock or bondholders have
the power to block such action by
corporation arrangements.
AS to the railroads, among the
hardest hit of the debtors by the
present dislocation, the La
Guardia -McKeoWn bill provides
for interstate commerce COM
mission supervision, in addition to
the federal court, to prevent bank
ers from getting control and huge
tees-as they have done in railroad
receiverShips in the past.
An even more direct conversion
plan, now before congress, with good
chances Of passing before the end
of the year, is the farm mortgage
refinancing plan sponsored by Henry
Morgenthau Jr., President-EleCt
ROosevelt's farm adviser.
Would Cut Interest
Whereas the La Guardia -MCKeoWn
bill probably will result in in
dividual agreements writing down
the face value Of debts, the Morgen-
thau-Roosevelt plan, embodied in
bills by Democratic Leader Joseph
T. Robinson and Farmer-Labor
Senator Henrik Shipstead, would
cut interest rates.
Under this plan, the government
would take over all first mortgages
on farms, amounting to about nine
billion dollars, and burdening more
than 40 per cent of all the farms
in the country, and issue new
mortgages in their place. A two
year moratorium on all payments by
the debtor would be allowed, and
thereafter the farmer would pay "a
per cent interest and Ia per cent a
year on principal.
Now he is paying per cent in
terest. The government would pay
off the present mortgage holders
with United States bonds paying 2
per cent interest. All government
farm loans would be consolidated
under this plan, as well as those
privately held mortgages whose
owners found that the farmer was
not able to pay at the old rate.
Turns to Conversion
Moreover, the government itself,
as twenty billion dollar debtor,
has turned to conversion to save the
taxpayers a penny here and there.
1t is replacing bonds it issued some
time ago at 37i per cent with new
bonds at 23s per cent.
Present expectations are that
about seven billion dollars in Lib
erty loan bonds. which the govern
ment can call this year will be re-
placed by an issue carrying lower in
terest-perhaps l per cent lower,
which would mean a saving of sew
enty millions a year to the gov
eminent.
Advocates of conversion believe
private lenders and borrowers Will
find it necessary to follow the gov
ernment's example.
Conversion plans even have been
proposed to the courts in an effort
to force the law to recognize that
dollar today is harder to- earn than
when We incurred most of our debts.
In a civil suit filed in White Plains.
n. Y. recently, a debtor brought a
test case, petitioning the court to
reduce the interest charge on a
mortgage because the increased
value of the dollar now made his
nominal 6 per cent interest payment
the equivalent of 9.72 per cent-a
rate which the debtor termed usur-
iouS.
The next story will explain infla-
ton plans and proposals.