The bankers, as consolidated bondholders, would naturally like to see the Russian indemnity, as a special water-tight item on the books, cancelled so that the funds available for this service might be thrown into surplus and used for the service and amortization of the consolidated domestic bonds. This year's disappointing Customs returns, the suspension of drawings and events such as Dr. Sun's threat to seize the Canton Customs make them nervous and all the more anxious to see the consolidated domestic bonds better secured. They recently watched with 4 interest to see what attitude the Government and Sir Francis Aglen, custodian of the service, would take towards Mr. Karakhan's much advertised present of the Russian indemnity to the Peking schools. They argue now that the attitude taken clearly sanctions the inclusion of the Russian indemnity in general Customs funds and that whatever is released through the amortization of the 4th Year Loan 1s automatically surplus and should be devoted to the service of the consolidated bonds.
Tt will be remembered that when Mr. Karakhan offered the Russian indemnity to the Peking schools, his proposal was officially ignored and it was argued in all Government financial circles that while a breach of diplomatic relations does. not cancel ordinary loan obligations, such a breach does automatically cancel indemnities; that the Russian indemnity had therefore ceased to exist as such several years ago; and that Mr. Karakhan was therefore giving away something of which neither he nor his Government had the right to dispose. The bankers, taking this as their cue, therefore argue now that since there is no such thing as a Russian indemnity, the Government cannot hypothecate something which has ceased to exist for the service of a new loan taking precedence over the consolidated domestic loans in the scale of priority.
Text read from the printed page and cleaned; old type leaves the occasional error.