Repudiated Indebtedness of American States

May 22, 1925

Report Outline
Amounts of Defaulted State Bonds
History of Repudiated State Debts
Causes of Repudiation
Remedies for Repudiation

The proposal that the foreign indebtedness repudiated by various American states during the last century be made the basis of claims by European governments for reductions in their war debts to the United States was originally brought forward in the British Parliament in 1922 when negotiations were in progress at Washington for the funding of the British debt. Discussion of this proposal has recently been revived in the British press and is now being carried on in the Continental press with critical comment upon the present attitude of the United States toward debtor nations.

The repudiated indebtedness of American states to foreign investors is not large by comparison with the debts owed to this country by European nations, nor are claims on account of this indebtedness properly chargeable against the Government of the United States. The distinction between the responsibilities of the states and the federal government is not well understood, however, in Continental countries. And the issue is further confused by the fact that the obligations of the states were once assumed by the federal government, and it was later proposed in Congress, in order to protect the credit of the United States in Europe, that some of the state debts now in question be discharged by the government at Washington.

It is recognized that the situation will hold possibilities of considerable embarrassment for the United States should claims for offsets on account of these state debts be brought forward in the forthcoming negotiations with France and other debtor nations. In preparation for this contingency a study of the whole question of repudiated state debts has been undertaken by the Treasury Department.

ISSUE TRACKER for Related Reports
Budget and the Economy
Regional Political Affairs: Europe
State, Local, and Intergovernmental Relations