"Draft C"

There was a great folding of silk pajamas and brushing of well cut suits in Paris last week. John Pierpont Morgan, mightiest of U. S. bankers, was leaving town. The nations which fought the World War had agreed at last how the staggering costs and damages were to be paid by the loser Germany. Mr. Morgan's financial prestige and wisdom were no longer required. He gave power-of-attorney to his partner and alternate, Thomas W. Lamont, and boarded the Mauretania for home.

It was not that Banker Morgan had personally brought about the agreement. But his departure, not for a Mediterranean yachting cruise this time but for the distant U. S., signalized the finality and success of the efforts of his fellow delegate, Owen D. Young. The press of all nations concerned joined in thoroughgoing applause for the onetime New York plowboy who, real author of the so-called Dawes Plan of 1924 and patient chairman of the so-called Second Dawes Committee, had at last had his name written into the history of world finance as author of the now-agreed-to Young Plan.

The Plan. Late last week precise, efficient Sir Josiah Stamp, head of the British Delegates, busied himself with the actual mechanical details of writing out and rushing to the printers the final draft of the agreement, known to the delegates as Draft C. Beyond that there remained only the affixing of the delegates' signatures and its submission to and (presumably) ratification by the governments of England, France, Belgium, Italy, Japan, the U. S. and Germany. The final obstacle--the Belgian franc business--seemed to have disappeared when Germany solemnly pledged herself to settle the War currency question before Sept.1, when the Young Plan becomes effective.

The Dawes Plan of 1924 fixed the annual sum Germany must pay her creditors (595 million dollars) but left undecided the total sum, or the number of years in which final payment was to be made.

By the Young Plan the total was fixed at $8,806,000,000 cash. On the instalment plan, over an agreed stretch of 58 years, this sum will become, with cumulative 5% interest, 27 billions. This sum, huge though it sounds, is 116 billions less than the creditor nations demanded at Versailles ten years ago.

The standard annual payment under the Dawes Plan is 595 millions. The Young Plan reduces this to $487,600,000. Of this amount, Germany must pay unconditionally in cash and deliveries-in-kind about $158,400,000. The rest will be met by the sale of bonds, financed and guaranteed by an international bank of settlement, sold to private individuals in Europe and the U. S.

No government will guarantee these bonds, merely the private bankers on the board of the international bank. They will be in effect mortgages against state-owned German railroads and privately owned German industries.

All profits from the sale of the bonds and other enterprises of the international bank will be applied to the further reduction of Germany's debt. Germany hopes that after 37 years these profits will pay the balance of her reparations.

Concessions. At its final acceptance last week, the plan included the following important concessions to Germany:

1) In event of an economic crisis in Germany, the creditors agreed to allow a two-year inner moratorium to Germany on conditional payments until German credit should be reestablished.

2) The creditors agreed to give up their lien on the German state railways (established under the Dawes Plan) in return for a claim on the gross income of the railroads. That income is now between 144 and 168 millions per year. So long as the railroads continue producing such revenue, they will furnish nearly all the unconditional portion of each annual payment.

3) Germany's large payments under the Dawes Plan may cease on Sept. 1, instead of on Jan. 1, 1930, as the creditors originally demanded.

4) Germany to cease paying the costs of the Rhine Army of Occupation after Jan. 1, 1930. This points to a speedy evacuation of the Rhineland by all except the French, who, militarists pointed out, will find it just as cheap to support their army in Germany as to support it at home.

Belgian Francs. The item left unsettled, last week, as Draft C was prepared for signature, and which had threatened at the last minute to delay the signatures of France and Belgium, was this:

When the Germans occupied Belgium in 1914, Belgian gold and money was removed from Belgian banks, and German marks planted in their place. With the fall of imperial Germany, the marks became worthless.

From the beginning of this year's conference, peppery Emile Francqui, head of the Belgian delegation, demanded complete redemption of these worthless paper marks, which Germany's hard-driving Dr. Hjalmar Schacht consistently refused to grant. Bitterly personal were the Schacht-Francqui set-to's. Belgium's Francqui went so far as to accuse Germany's Schacht of having taken part himself in the pillage of Belgian banks as a member of General von Bissing's staff.

Chairman Owen D. Young saw the impossibility of any immediate agreement on this point, decided that the matter should be settled privately between the Belgian and German governments.

Peppery Francqui was not satisfied. He swore roundly that he would not sign any debt agreement whatever unless the Belgian mark claim, amounting to an additional six million dollars per annum for 37 years, was settled. Of grave importance was the arrival in Paris of Belgium's Prime Minister, Henri Jaspar, to confer behind locked doors with Delegate Francqui. Emile Moreau, chief of the French delegation, announced that he too would not sign Draft C of the Young Plan unless the Belgian mark claim was settled.

In time to prevent the scrapping of Draft C and the probable disruption of the conference arrived a note from the German government to Dr. Schacht, authorizing him to pledge settlement. Through Chairman Young the note was immediately transmitted to the Belgians.

Secret Agreement. Quite as important as the delegates' agreement to the Young Plan was an understanding, reached semisecretly by the German, French and British delegates, regarding Europe's debts to the U. S. It was privately agreed that in case of any future reduction or cancellation of Allied war debts by the U. S. Government, Germany's reparations payments would be reduced by two-thirds of the amount involved.

This was one more move on the part of England and France to lay responsibility for Germany's 58 years of payments squarely upon the U. S.

"Cancel our war debts," the Allies said in effect, "and we will immediately cancel Germany's reparations, forget about the War and go back to work."

Washington took little notice of this secret agreement; stayed firm in its oft-repeated position that there is no connection between Germany's debts to England and France, and those countries' debts to the U. S.