The $10 billion advanced by the United States to friendly governments during and immediately after the war had unquestionably been regarded as loans by both lender and receivers. In the U.S. Congress, a few voices were raised in support of the thesis that the advances should be viewed simply as part of America's contribution to the war, as a means of enabling others to do what, for the moment, the United States could not do with its own army and navy. There were warnings, too, of the ill will that might result from an American effort to collect the debts from governments that the war left close to bankruptcy. But such pleas and warnings went almost unnoticed, and President Wilson and his advisers rebuffed all proposals for cancellation of the debts or for discussing them at the Paris Peace Conference.
In June 1921, President Warren G. Harding proposed that Congress empower the secretary of the Treasury to negotiate with the debtor governments adjustments of the war debts as to terms, interest rates, and dates of maturity. Congress responded by an act (9 February 1922) creating the World War Foreign Debt Commission, with the secretary of the Treasury as chairman and authorizing it to negotiate settlements on terms defined by the act. No portion of any debt might be canceled; the interest rate must not be less than 4.5 percent, nor the date of maturity later than 1947. The commission found no debtor government willing to settle on these difficult terms. The procedure it adopted, therefore, was to make with each debtor the best terms possible (taking into account in the later settlements "capacity to pay") and then to ask Congress in each case to approve the departure from the formula originally prescribed.
In this way, between May 1923 and May 1926, the World War Foreign Debt Commission negotiated settlements with thirteen governments. Settlements with Austria and Greece were later made by the Treasury Department. With the exception of Austria, which received special treatment, all the settlements provided for initial payments over sixty-two years. No part of the principal was canceled in practice, and the rates of interest were so adjusted downward that varying portions of the debts were actually forgiven. Comparing the total amounts to be paid under the settlements with the amounts that would have been paid at the interest rate of 4.5 percent originally prescribed by Congress, one finds effective cancellations ranging from 19.3 percent for Finland and 19.7 percent for Great Britain to 52.8 percent for France and 75.4 percent for Italy. The amounts of the principal funded, the rates of interest to be paid, and the portions of the debts that were in effect canceled can be seen in the table.