DEBT FUNDING

Otago Witness, Issue 3594, 30 January 1923, Page 19

DEBT FUNDING

THE AMERICAN TERMS. NEW YORK, January 27. The New York Times’s Washington correspondent states that the Treasury Department has announced the terms which the American Debt Commission proposed to the British. The terms include retroactive interest at the rate of 4] per cent, from the date on which the obligations were contracted to the date of the completion of the funding arrangement. The rate now being charged is 5 per cent. The American Commission, furthermore, suggested interest at the rate of 5 per cent, for the first 10 years after the funding arrangements had been completed, the rate being increased to per cent, thereafter. The total debit will be liquidated aft-er 62 years' amortization. Provisions for the yearly payments of the principal would also be established, the amount for the first 10 years being approximately onehalf per cent, on the entire principal. Commenting on the interview which Mr Stanley Baldwin granted on his arrival here, London Treasury officials said that the terms as he stated them according to pres* despatches received were not exactly the nearest approach to the arrangement arrived at, although they were correct in some particulars. It is understood that the British Commission first sought an interest rate of 2’ per cent, from the date on which the debts were contracted until the funding was arranged, and per cent, thereafter. The American Commission believed that Congress would not accept such an arrangement, and pointed out that the rate they proposed would mean a general average of approximately- less than 4 per cent., which is the rate that the United States pays the holders of Liberty bonds and other long-time loans arising out of the war. The Treasury Department planned to use the funds derived from the British debt to pay off these American obligations. January 28. The New York World’s Washington correspondent states that the officials in Washington, particularly members of Congress, are astonished at the cabled reports of Mr Baldwin’s statement on his arrival to the effect that the debt had become a political issue, and that the senators controlling the situation did not understand finance. The officials state that they do not believe the correctness cf the reports, but if thev are true the remarks are highlv impolitic, and will further diminish the likelihood of an early settlement of the debt question.