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October 16, 1945. Honorable Fred K« Vinson, Secretary of the Treasury, Washington 25, D. C. Dear Mr. Vinson: After further consideration of the decisions which we reached last Thursday on the terms of the proposed British credit, it has occurred to me that some clarification is needed on one or two points, I should therefore Ilk© to subs&t the folloidrtg suggestions for consideration by the Committee: 1. The provision for deferment of principal payments should b© elaborated to define when such deferred payments should be s&de and -what interest, if any, should &ce\asaalite on t h « during the period of deferment. I would propose that any deferred principal payments should be paid off, with Interest accumulated at 2 per cent, in the years foiloidng the original tens of the credit, unless at the time some other specie*! arrangement is agreed upon. Thus if only one principal payment were deferred, the life of the credit would be extsanded by one year; if 5 principal payments were deferred, the credit would run 5 years longer; etc. 2. for the out I believe some clarification is EISO required the principle of p&ri p&ssu arcortination of dollar credit m& of ths- sterling debts arising of th© funding of war balances. a« Since we h&ve adopted the sinking fund principle for amortisation of the dollar credit, strict application of the pari pas.su principle to the sterling debts would &ean that repayment of such debts (which i*re to be non-interest bearing) would have to proceed not in equal annual installments but in installments increasing in sise during the period of amortisation. I doubt if Honorable Fred M. Vinaon the Cofflndttee intended to impose this r e quirement. I would propose, therefore, that the principle of p&ri passu treatment should be interpreted to allow repayment of the sterling debts in equal annual installraents running for a period at least as long aa the period fixed for the dollar credit. b* The further iuestion way arise of how pari passxi treatment should be interpreted in the c&ae of deferment of princlp&l payments on the <foll&r credit. I would suggest that the credit agreement provide that if the capital repayment in &ny year on the dollar credit (or mf portion of such repayment) i s deferred, the repayments due on the sterling debts in th»t y*ar (or the corresponding proportion thereof) should also be deferred for the same period. Very truly yours, (Signed) M. S. Eccles S« Becles, "h&lreian. Copy sent to Messrs. Clayton, Wallace, and Angell.
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