National Finances

Coincident with news that France intends to float in the U. S. a refunding loan of at least $100,000,000 came an announcement that Prime Minister Raymond Poincare, popularly known in France as "Papa" Poincare, had in the last year lopped 14,000,000,000 francs (about $547,400,000 at present rates of exchange) off the state debt to the Bank of France.

M. Poincare, who is also Minister of Finance and cousin of the famed mathematician, Jules Henri Poincare, took over the control of French finances last year (TIME, Aug. 2, 1926). At that time, with the franc daily plunging to new depths, the amount the state owed the Bank of France stood at 38,350,000,000 francs -- 150,000,000 francs under the newly constituted limit, previous Finance Ministers having raised the loan limit to keep pace with the printing presses.

Last week the total advances that the Bank has made to the state stood at 24,650,000,000 francs and the legal limit of the government's borrowing capacity established by law at 32,000,000,000 francs. Thus, whereas France last year had a margin of only 150,000,000 francs upon which to draw, today she has 7,350,000,000 francs at her disposal in a currency worth nearly double what it was. This improvement is due: a) to the daring reforms put into effect by M. Poincare, recently dubbed "Master of France," who not only has been a financial wizard but virtually a fiscal dictator; and b) to the patience of the people of France.

This does not mean, however, that the national debt of France has been reduced in the same proportion as its debt to the Bank of France, for some of the amount was only canceled against new conversion bonds subscribed by the French public, which still remain a governmental liability. However, the position of the Bank, which last year was in sore straits, is much improved; for, meantime it has increased its gold reserves to $800,000,000 and holds nearly $1,000,000,000 in foreign currencies, which represents credit transactions made possible by the repatriation of French capital--a sign that confidence has returned to stay.

This improvement in French state finances was put forward as good propaganda for a conversion loan in the U. S. On account of her financial instability and the fact that the Mellon-Berenger debt accord was not ratified by the French Parliament, France was obliged to pay 8% on some issues floated in the U. S. Now, pointing proudly to the achievements of a year, M. Poincare proposes to borrow money at a cheaper rate to pay back the outstanding indebtedness to the U. S., thus saving a considerable amount in interest.

At present there exists a ban against lending France money, a course of action tacitly approved by Wall Street. But it was thought possible that U. S. Secretary of the Treasury Andrew W. Mellon may recommend that U. S. President Coolidge and the U. S. State Department modify U. S. policy to permit a refunding loan.

U. S. Secretary of State Frank Billings Kellogg last week received a letter from Senator William Edgar Borah, who had heard that the proposed new French borrowings in the U. S. would be 100 millions at 6%. Mr. Borah, chairman of the foreign relations committee of the U. S. Senate, recalled that the last U. S. offer to adjust the French debt was to accept fifty cents on the dollar and 1 1/4% interest. This offer France refused as oppressive, unjust. Said Mr. Borah: "The disparity between the two propositions seems worthy of consideration. Is the American taxpayer being swindled or is the French taxpayer being exploited?"