Israeli Loan and Peace Talks

Douglas Jehl and Norman Kempster’s article (front page, Sept. 7) about President Bush’s decision to delay Israel’s $10-billion loan guarantee request for 120 days requires clarification. They wrote that “the plan would cost the American taxpayers nothing as long as Israel repays the loans.” This is simply untrue.

One cost is the amount of loan reserves that must be set aside in case Israel defaults on the loans. The Office of Management and Budget has yet to determine the actual amount that must be set aside. The reserves would be real monies and would constitute a cost to the taxpayer.

A second cost is administrative--the costs of simply operating and monitoring the program over its 30-year life span. The figures that I have seen indicate that these administrative costs could vary between $40 million and $140 million per year.

If Israel defaults on the loans guarantees, then the U.S. taxpayer will have to pick up the tab. The total cost may then run as high as $112 billion to $117 billion (average 8.6% interest rate). For those who maintain that the chances that Israel would default are negligible because Israel has never defaulted on any loans, I must point out that the only reason that Israel has never defaulted on a loan is because either Congress forgave the debt or because Congress gave Israel the money with which to pay its U.S. debts.

ARCH MILLER, Arcadia