DEBT FUNDING

Otago Witness, Issue 3595, 6 February 1923, Page 21

DEBT FUNDING

MR STANLEY BALDWIN'S VIEWS. LONDON, January 28: Mr Stanley Baldwin (Chancellor of the Exchequer), interviewed, said that the great difference between America and Britain was that in the United States the final settlement of the debt question was in the hands of the politicians. The Secretary of the American Treasury could undoubtedly have arranged terms with the British Covernment had it been desired, but the matter had been immensely complicated by getting into the hands of Congress. It had to be remembered that America politically was still a country in which the bulk of the people had no know ledge of international trade. Moot of the senators came from agricultural and pastoral communities. Whether the debt was funded now or in the future it could only be funded on such terms as could be got from Congress. There had been an advance in American opinion in a very short time regarding the debt, but it was hardly possible that Congress would be able to eat its own words and reduce the terms from 6 per cent, over all to 3 or 3£ per cent, for a period of years. It was a matter of opinion whether it would be possible to fund the debt for many years. The American people as a whole thought that they were behaving with extraordinary generosity in making the offer w hich they had made. He was afraid that the English people would not think so. There was no hope at present of getting America to offer better terms. The interest at 3 or 3j per cent, would amount to about £30,000,000. Mr Baldwin said he thought that the strain of paying 4 or 5 per cent, on the whole debt would be greater than Britain could carry. If she had to Day 5 per cent., as she was bound to do bv the original agreement when the debt was contracted, the accumulated interest would have to be added to the capital year by year. That would mean that Britain would only be paying on account, and the debt would increase year bv vear —a ghastly thought. WASHINGTON, January 29 Senator M'Kellar, in a speech in the Senate, said that the British Government should disavow Mr Stanley Baldwin’s statement in which he asserted that the United tSates Senate was made up of members of the agricultural and pastoral communities, who did not the existing position regarding the meaning of the international debt. Senator M'Kellar said: “I cannot believe that the British people entertain the view which Mr Baldwin expresses. They have alwavs been a debt-paving people. They have not treated their obligations as a scrap of paper, and it is inconceivable that these self-respecting people will permit one of their own number to utter these uncalledfor, untrue, and discourteous words.” Senator M'Kellar demanded the disclosure of the identity of the American diplomats who gave the assurances that debt funding would be carried out under certain conditions not published, which a ■London newspaper says provided 2 tc 3 per cent, interest on ‘£20,000,000 annually. In concluding, Senator M'Kellar said: ‘‘Where is the great Ambassador, Colonel Harvey? Why does he not raise his voice on behalf of the Government of the American people? Has he lost his voice permanently? He never seems to be on hand when something real is going on.” STATEMENT BY SIR ROBERT HORNE. OTTAWA. January 31. At Montreal Sir Robert Horne, in a speech, said that Britain would pay her debt to the United States in full, but she was entitled to a less exacting bargain than was arranged during the war. It must be remembered that Britain had not only left an amount of loan cash in the United States, hut the total amount of monev spent there bv her exceeded the British debt to the United States. Britain, if she made full return of the debt now, would he paying more than she originally received, due to the difference in the cross rates then and now. ACCEPTED BY BRITAIN. LONDON. -January 31. Britain has accepted the American debt terms. WASHINGTON. January 31. While there are no official comments, pending Sir - Auckland Geddes's notification of the British acceptance, the Administration is highly pleased with the news. EFFECT ON FOREIGN EXCHANGES. NEW YORK. January 31. Sterling rose to 4.64 within 15 minutes of the receipt of the news of the British acceptance of the . debt terms. The French franc is steadily declining, and today is quoted at 5.88. A DEBT TO BRITAIN. LONDON, January' 30. The Daily Express says: ‘‘ln view of the American demands for the strictest honouring of Britain’s obligations, it should be pointed out that a number of Southern States owe Britain £12,000,000, which was borrowed for public improvements 47 years ago.” AMERICAN LEGISLATORS HOPEFUL. NEW YORK, January 31. The Washington correspondent of the New York Times states that members of the House of Representatives generally express relief and hopefulness at the British acceptance of the American debt terms. It is understood that two Bills will be introduced in Congress—(l) immediatelyauthorising the Debt Commission to conclude the funding with Britain on the lines of the terms cabled on January 27; and (2) an amendment to the present

Debt Funding Bill applying the same terms in regard to funding to the other Allies’ debts. Despite the confidence that the first Bill vyiD be passed by the House of Representatives, difficulties are nevertheless foreseen. The advocates of a cash bonus for soldiers will make a determined effort to amend the Rill providing that money's obtained shall be used for paying a bonus. The same move will also probably be made in the Senate. There is likewise danger that the ‘resentment in regard to Mr Baldwin’s statement may influence senators in the agricultural west. Senators Johnston and M'Kellar have already expressed opposition to the terms. F ebruary 1. The New York press is nearly unanimous in approving of Great Britain’s acceptance of the debt terms. A TEST OF SINCERITY. WASHINGTON, February 1. The State Department is in receipt of official notification of Britain’s acceptance of the debt proposals. The American Commission called a meeting for late today to draft plans for presenting the terms to Congress. It is learnt that the Commission was divided regarding the procedure, some members favouring the broadening of the Debt bunding Act and leaving the Secretary of State and the Commission to complete the arrangement. The other members prefer to submit a Bill approving of a specific Anglo-Ameri-can agreement. The British Government, through its Embassy, disavowed Mr Baldwin’s alleged aspersions on the. American Congress. The statement read: ‘‘The remarks attributed to Mr Baldwin in cer tain organs of the American press” (that the debt had got on the nerves of the American people, and that Congress would not be willing to eat its own legislation) “are without discoverable foundation.' Mr Edmonds (member of the House of Representatives) introduced a resolution in the House providing that anv American citizen who believes in the cancellation of war debts can wove his sincerity by turning in the Liberty.' bonds at the Treasury and accepting no compensation, the Secretary of the Treasury" to be authorised to cancel an equal amount of any nation’s debt which such citizen designates. SHORT MEETING OF CABINET. LONDON, F ebruary 1. The decision regarding the British debt to America was discussed at Tuesday’s Cabinet meeting, but a night was allowed in order that some of the members of the Cabinet who were doubtful of the wisdom of encumbering nosterity yvith an annual burdpn of £30,000,000 might sleep on it. As a result the Cabinet unanimously accepted the view that immediate acceptance was desirable in order that the present Congress, which terminates on March 4. might deal yvith the question. It needed only 10 minutes to clinch the matter, so that the meeting of Cabinet was one .of the shortest on record. ,A factor which helped members of the Cabinet to make un their minds was a strong opinion in financial and commercial circles in favour of an immediate solution of the problem, SENATOR BORAH DISSATISFIED. NEW YORK, February 2. Senator Borah has issued a statement declaring himself dissatisfied yvith the debt terms. He yvould rather see all tile Allied debts cancelled than that the present economic conditions in Europe should continue. The funding of debts would not resurrect Europe economically, and American commerce would continue to. lose a total greater than that of the debts. Mr Forknev (member of the House of Representatives) stated that President Harding favours the application of the interest on the British debt to soldiers bonuses, and there is a possibility of an amendment nroviding that soldiers’ bonuses may be attached to the neyv debtfunding law, although President Harding opposes the conjunction of the tsvo measures The President feels that nothing should be done regarding the bonus until interest in sufficient amount has been received. BRITISH BANKERS OPINION. LONDON, February 1. Sir Harry Goschen (Director of the National Provincial and Union Bank of England), presiding ty-er a meeting of the National Provincial Union Bank, said that yesterday’s Cabinet decision regarding the American debt stood out as a landmark in Britain’s financial progress. “Some might think,” he said, “that the rate of interest was more onerous than might have bean exnected when the purposes for yvhich the money reouired was considered, but the Government deserved sincere congratulations for its courage in facing the situation. BITTER PARTISAN DEBATE. WASHINGTON, February 3. The Senate was in an uproar this evening yvhen a discussion on the British debt terms was started bv Senators Lodge, Heflin, M'Kellar, Robinson, and others. Senator Heflin intimated that ex-Pr-si-dent Taft, when in England last summer, might have been the one who promised low interest rates, and he insinuated that Mr Taft renresented Wall street. Senator Glass bitterly arraigned Senator Heflin for liis attack on England, and Senator Heflin yvas called to a point of order by Senator Wadsworth. Several senators nearly came to blows The debate was bitterly partism. ANXIETY IN FRANCE. PARIS, February 2. Le Journal says: ‘.‘The Anglo-American agreement provides that no debtor of the United States shall receive more favourable treatment than Britain.” Le Journal hopes that the rumour interprets the clause inaccurately, otherwise it settles the fate of the French debt.”

COMPLETE AGREEMENT REACHED. WASHINGTON, February 2. The American commission has reached a complete agreement with the British Ambassador, Sir Auckland Geddes, regarding the debt funding plan. DETAILS OF THE AGREEMENT. WASHINGTON, February Ihe Treasury Department has issued a statement giving details of the debt funding agreement. The payment of the principal is to be made by annual graduated instalments ranging from 23,000,000d0l for the current year to 157,000,000d0l in the sixtysecond year, when the total sum will be repaid. The rate of interest wili be 3 per cent, for 10 years, and 3£ per cent, for the succeeding period, calculated on the unpaid balance. The local principal indebtedness is placed at_ four billion six hundred million dollars, for which British Government bonds will be issued to the United States Government at par. Britain has the option of repaying the principal in three year periods. The principal of the notes to be refunded is 4,074,818,558 dollars, and the interest accrued .and unpaid to December 15, . 1922, at the rate of per cent., is 629,836,106d01, the total being approximately' 4,705,654,465 dollars. The payments made in October and November last, with 4£ per cent, interest, total 100,526,379d01, leaving a balance of 4,604,128,035d01, of which 4,128,085 dollars is payable in cash'. The principal of tile bond issue of four billion six hundred million dollars is payable by annual instalments on a. fixed schedule, subject to the right of the British Government to make the payments in three-year periods and pay off additional amounts of principal on any interest date upon 90 days’ notice being given. For the first five years one-half interest mav he deferred and added to the principal, bonds being isssued similar to those of the original issue. Any payments of interest and. principal may be made in any United States Government bonds issued since April 6. 1917, such bonds to be taken at par and accrued interest. It is stated that President Harding opposes a rider to the debts settlement providing, that the money shall be used to pay the soldiers’ bonus, believing that the debt legislation should stand on its own merits. President Harding does not object to an amendment giving the Democrats representation on the Debt Commission. AMERICAN SENATOR REBUKED. WASHINGTON. February 2. Senator Heflin was twice rebuked for his remarks on February 2 by Senate vqtes, which called the remarks improper, and ordered their expungment from the records. OPPOSITION WEAKENING. NEW YORK, February 3. According to the New York Times’s Washington correspondent the opposition to the Administration’s plan for funding the British debt appears to be weakening in both branches of-Congress, and a prediction was made to-day that the necessary law would be - passed during the present session and before the adjournment on March 4.