Foreign Debtors

Secretary of the Treasury Mellon has, apparently, as Chairman of the World War Debt Commission, taken over the onus of the Commission's work. For the moment it is not so great as it will be later. Last week's developments:

Italy. The Italian debt mission (TIME, July 6) called at the Treasury Department for its second conference on the funding of Italy's $2,000,000,000 debt. When the meeting was over, it was announced that there would be no more conferences until late in August. The reason? Apparently Mr. Mellon made it plain that any settlement must be made on the basis of Great Britain's settlement and any modifications must be based on proven incapacity of Italy to pay. Mario Alberti, Italian expert, replied that Italy was the only nation in Europe which was now spending less for military purposes than before the War; that higher taxation would drive capital out of Italy; that, allowing Italy a standard of living only half that of the U. S., taxation is now six times as oppressive there as here --and that consequently Italy must be treated more leniently than England. Mr. Mellon evidently demanded detailed proof of these assertions. And Mr. Alberti is going to Italy to gather his data--and return with them in August.

France. Ambassador Daeschner intimated to Secretary Mellon that France would send a debt mission in September to settle the question of funding France's debt of $4,000,000,000. It was suggested that Finance Minister Caillaux might head the mission, but Paris doubted whether he could manage to leave the struggling French Parliament at that time.

Russia. In the $12,000,000,000 of War debts owed the U. S. by foreign nations, there is an item of $251,379,035.49 carried on the Treasury's books as owing from Russia. It is the one item on which it is improbable that much if anything will ever be paid. The debt was incurred for war purposes by the Tsarist and Kerensky regimes. When the Kerensky regime went under in November, 1917, most of the Russian money in this country was deposited with the National City Bank of New York. Certain amounts were added to this deposit; and, finally, with the U. S. Treasury's acquiescence, about $76,000,000 worth of Russian debts to individuals and corporations in this country were paid off. The balance, $70,426, was paid to the U. S. Government as "interest." It hardly seemed likely that any more would ever be paid. But, last week, one Serge Ughet won a damage case from the Lehigh Valley R. R., with a verdict of $853,000. Serge Ughet is carried on the State Department's official diplomatic list as "financial attache" of Russia. Mr. Ughet has nothing to do with the Soviet Government. He represents no existing government. He represents a state that once was. He was left behind by the last Russian Ambassador, M. Bakhmeteff, to settle such of the late Russian Government's debts as could be settled. His verdict of $853,000 from the Lehigh Railroad was for losses of War supplies belonging to the late Russian State. The proceeds are supposed to go to the U. S. Treasury as "interest."

Yoakum. Benjamin F. Yoakum of Manhattan is a railroad man. His father was a doctor and a minister in Texas. The son began his career as a "colonization agent" of a Texas railroad. He rose, became a railroad president (St. Louis & San Francisco). He gave "much thought" to the cost of living, etc. In February, 1922, he came forward with a plan for funding foreign War debts to the U. S. He proposed that the debtor nations issue to the U. S. 4 1/2% 50-year bonds with a sinking fund of 2% yearly. With these as collateral, the U. S. should issue its own bonds of like nature to replace part of its debt. In that way, he calculated the U. S. would be able, relieved of so much of its debt, to reduce taxation.

Of course, such funding of the debts as has been done or as is in prospect is on much more lenient terms* than Mr. Yoakum proposed. Recently, he went to Mr. Coolidge with another proposal for funding outstanding debts. Mr. Coolidge referred him to Senator Smoot who is a member of the Debt Funding Commission. Mr. Yoakum saw Mr. Smoot last week and this time his terms were very lenient: 79 years instead of his former 50 for payment. He would likewise have the first year's interest payment be paid on he 79th year, the second year's on the 78th, and so on all through the period. This would reduce the first payment on a $4,000,000,000 debt such as France's from about $150,000,000 to about $40,000,000-- equivalent to a heavy reduction in interest. He further recommends that these terms should be made also to those nations, including England, who have already refunded their debts on a less lenient basis.

Said Mr. Yoakum after his interview:

"I found that Senator Smoot was fully impressed with the great and far-reaching importance of promptly reaching a settlement. . . . On the other hand, he cannot overlook the fact that any adjustment arrived at between the representatives of the foreign nations and the Debt Commission of this country will have to go to Congress for final ratification. Unquestionably, many members of Congress will not view the problem in the broad light that it is entitled to, and will fight for the best settlement based upon a money consideration only. The fact which forms the fundamental basis of the world's future is that this country today stands as the only nation of the world resting solidly upon democracy, and that we cannot afford to hold out or even contend for the last cent that can be taken from our debtor nations at the imminent risk of creating a feeling that we forced an unfair settlement rather than one of liberality."

* The terms of the standard debt agreements so far made (with Great Britain, Poland, Hungary, Lituhuania, Findland); payments over 62 years; interest first at 3%, later at 3 1/2%.