Evening star., 1933-04-09
Movement in Progress Toward Reduction
Of the Debts of American Municipalities

granting less interest for deposits,
should demand more interest on loans.
Thereupon the idea arises that the
Reconstruction Finance Corporation of
/ the United States Government should be
authorized to make advances to munich
palities in order to finance their oper-
ations until refunding loans can be Sc
cured in the private money market at
rates more reasonable and tolerable.
This idea was brought forward emphati-
cally at the conference of mayors in
Washington last February It was
strongly backed by Mayor Frank Muir
ply of Detroit. 1t represented one more
appeal to governmental finance in the
midst of inadequacy or of excessive ex-
actingness by private finance.
X X X
| One special reason why the munich
palities find themselves in great exist
ing or potential difficulties is again as
sociated with the present condition of
private enterprise. At the beginning
of the depression, under the Hoover ad-
ministration, it was assumed and as
serted that the relief of the destitution
caused by the depression could be and
would be borne by private philan-
thropy. As the depression has devel-
oped and deepened, this expectation has
been increasingly frustrated. Today the
best assembled statistics indicate that
only some 10 per cent of the cost Of
the relief of destitution is now being
borne by private philanthropy and that
fully 80 per cent of it is getting carried
by the public tax-collecting bodies of
the country.
The crux of the situation is that
many of these bodies cannot both re-
lieve the destitute and pay the prin-
cipal and interest on their debts. Many
of them have been extremely jealous in
the reduction of their current expenses.
Detroit has reduced its current expenses
per annum by more than $40 900 ,000
1t finds itself nevertheless still unable to
satisfy the claims of its debtors during
its next fiscal year.
Scholars such as Paul T. Betters, sec
retary of the United States Conference
Of Mayors, and Carl H. Chatters, execu-
tive director of the United States Mu-
nicipal Finance Officers Association,
feel thereupon that debt reduction leg
islation on behalf of municipalities is
legitimately needed and is desirable
both from the point of view of the
debtors and from the point of view of
the creditors.
X
1t is feared by some that unless or
derly reduction in accordance with cir
cumstances is permitted, there may be
numerous drastic moves such as the
one recently consummated by the Gov
ernor of Arkansas. He and his Legisla-
ture, by an act of State sovereignty,
have refunded the highway bonds of
Arkansas into new securities at the
arbitrary rate Of interest of only 3 per
cent. The litigation which thereupon
will presumably be started by some
creditors may perhaps be greater in its
expenses than in its returns. To avoid
such incidents it is argued that our
great financial institutions which are
large owners of municipal bonds should
positively favor all reasonable action by
the Congress looking toward all really
necessary readjustments Of the burden
which those bonds represent.
In any case 1t is optimistically be-
lieved here that reductions of municipal
indebtedness, like the other indebted
ness reductions now under way, should
be regarded not as disastrous. but as
beneficial fittings of excessive weights
from the country's new economic life in
the coming new deal"
Copyright 1881