The controversial $1 billion loan to bail out the Hunt brothers of Texas after their silver-speculating spree will be used primarily to settle the Hunts' foreign debts, a Federal Reserve Board report on the loan discloses.

Almost two-thirds of the $1 billion will be used either to pay the Hunts debts to foreign banks or to meet obligations of an offshore silver investment company, the report shows.

The billion-dollar bail-out loan has been negotiated with a group of major banks under the guidance of Federal Reserve Board Chairman Paul A. Volcker.

Volcker was drawn into the talks because he had urged banks not to make loans for speculative purposes, and the bankers were reluctant to lend so much to the Hunts without Volcker's knowledge.

Congressional critics have been complaining for weeks that the Hunts got their huge loan at a time when farmers and other businesses were having trouble borrowing to meet their normal credit needs.

The Federal Reserve defended its role in the Hunt loan in a long report sent to Senate Banking Committee Chairman William Proxmire (D-Wis.), who is holding hearings this week on the silver debacle.

The agency argues that because the loan "strengthens the position of creditors, it is not contrary to the broad public interest in the stability of financial markets and institutions."

Volcker and James Stone, chairman of the Commodity Futures Trading Commission, have testified repeatedly they feared that if the Hunts were unable to pay their debts, American banks and brokers would get in financial trouble and the panic might spread throughout the economy.

Most of the institutions that will be paid off with the $1 billion loan aren't in the United States, the Federal Reserve's own review of the Hunt loan discloses. According to the Fed, here is now the Hunts plan to use the money:

$260 million to pay debts of International Metals Investment Corp. (IMIC), a Bermuda company controlled jointly by the Hunts and several Saudi Arabian investors.

$175 million to repay "U.S. branches and agencies of foreign banks" for loans they made directly to the Hunts.

$100 million to repay foreign banks for money loaned indirectly to the Hunts through commodity brokers. The foreign banks loaned the money to the brokers, who reloaned it to the Hunts.

$150 million to the Hunt family-owned Placid Oil Co. to repay Placid for money it already has used to pay Hunt debts to foreign banks.

$260 million to repay Placid for money it has used to pay Hunt debts to U.S. banks.

$35 million to repay directly U.S. banks for loans to the Hunts.

Only the last two items will go directly to pay the Hunts' debts to U.S. banks, and they account for less than one-third of the billion.

Part of the $260 million to be used to pay obligations of the Bermuda Company, IMIC, also may flow to American companies, but how much couldn't be determined from the Federal Reserve report.

CFTC investigators have determined that IMIC is owned jointly by Nelson Bunker and W. Herbert Hunt, a corporation controlled by Hunt family trusts, and two Saudi Arabians, Sheikh Ali Bin Mussalam and Sheikh Mohammad Aboud Al-Amoudi.

Bunker and Herbert have promised to pay personally IMIC's debts to U.S. banks and brokerage houses.

CFTC officials say those debts apear to be substantially less than the Federal Reserve has reported. The Federal Reserve report is based on communications with the Hunts and their banks, but auditors from the commodity agency have had access to the books of the companies the Hunts did business with.

IMIC is believed to have suffered heavy losses on silver speculation outside the United States, but federal investigators have no way to find out about that.

As the Federal Reserve acknowledged in its report to Proxmire, "because of the many entities involved -- including foreign entities -- and the complexity of the transactions, all of the facts of the case may never be known with precision."

Nor have federal authorities been able to find out the names of the foreign banks to whom the Hunts owe money.

Two foreign banks have been indentified among groups of lenders who loaned money to the Hunts' principal silver broker, the Bache Group Inc. and its subsidiaries.

Bache borrowed $4 million from the Royal Bank of Canada and $4.8 million from Barclay's Bank of England, according to CFTC records.

When they testified before a congressional committee last month, Bunker and Herbert Hunt listed another foreign lender, Swiss Bank Corp. among their creditors.

The Hunts are expected to face new questioning about their foreign debts when they return to Washington on Thursday to testify before Proxmire's committee.

Hearings on silver also are being held this week by a Senate agriculture subcommittee chaired by Sen. Donald Stewart (D-Ala.).

The Hunts' silver-speculation debts totaled $1.765 billion as of March 31, the peak of their borrowings, according to the Federal Reserve.

The Hunts borrowed from 12 U.S. banks, one foreign bank and the U.S. branches or agencies of four other foreign banks, the agency said.

The Federal Reserve estimates that somewhat less than half those debts have been repaid so far, mostly be selling the Hunts' silver.

The remaining debts will be "restructured" through a complex arrangement involving Nelson Bunker and Herbert Hunt, another brother Lamar and Placid Oil, which is owned by the Hunt family trusts.

The banks will loan the $1 billion, or thereabouts, to Placid and will get mortgages on not only Placid's properties but virtually everthing else owned by the three brothers.