Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-02-22
MEN AND MONEY
By NJ. S. Rukeyser.
fCopyrirllt. 1877

tCopyright. 1877
France Is breaking through the in
ternational capital blockade.
In spite of the unwillingness OF
British and American bankers, In def
erence to the wishes of their re-
spective governments. to float new
French government bonds until such
time as the French Parliament ratifies
the pending agreements to fund out
standing debts to the London and
Washington governments, france mas
been getting outside capital.
The infiltration Is coming directly
from Holland and Switzerland. whose
bankers are eager to take advantage
Of the present opportunities to step
In where the London and New York
bankers fear to tread, and, indirectly,
also from British and American
sources.
The situation illustrates in classic
manner the difficulty Of damming up
economic streams by the erection OF
purely political barriers. Just as
water seeks its own level. capital flows
to the places where 1t can command
the best return.
With the two chief money markets
of the world-New York and London
temporarily closed to her, France has
nevertheless in striking manner been
putting it's financial house in order
since last July. The improvement in
the position of the franc in interna-
tional exchange is largely the result
of better management in Paris or the
business of government. The outside
capital has been a minor factor.
Rising confidence induced wealthy
French capitalists, whose funds earlier
had engaged in a flight from the
franc, to bring home their wandering
funds to France.
Big Stick Has Failed.
Some of the leading international
bankers In Wall Street have indicated
in conversation that the effort of New
York and London to use their lend
ing power as big stick over France
has failed They hold that. If France
now ratifies the debt agreements. IT
will be because the French authorities
are convinced 1t is good business and
good politics. rather than because of
capital starvation. One partner in an
international banking firm was in
clined to believe that France felt it.
self now in a position to demand more
favorable terms.
OF the loans which have recently
been fioated in Holland and Switzer-
land. blocks have been bought and
imported by New York interests.
Besides there have been larger pur-
chases in New York of stocks of
French compa MES The effort of such
purchases is the same as an export or
loan OF capital to France.
There have also been some advances
to France from Canadian sources.
Tt In an open secret that some OF
the big Wall Street investment houses
are anxious to see the political atmos-
phere cleared so that they will be
free to lend to France.
Several large houses-apart from j.
p. Morgan & Co., which has acted
as fiscal agent for France and which
has headed the syndicate which
brought out the various French gov
eminent dollar bond issues-are TAX
ing a. more optimistic view Of French
credit and viii make a drive for
French business when 1t becomes po-
liticallv possible to do so.
Little Hope of Modified View.
There is little hope in the finan-
ciaI district that Washington will mod |
ify it's attitude toward French f1nanc- |
ing until the French Parliament acts |
on the debt funding proposal.
Shortly after the armistice, the |
State Department inaugurated the
extra-legal policy of expecting Amer
lean banking houses to consult 1t |
loans to foreign govern |
ments The successive Secretaries Of |
State made 1T clear that they would |
not 1n4mally approve any proposed |
issue, but would Indicate disapproval |
Il there were any. Former Secretary |
Hughes clearly outlined the new
When proposed issues
were submitted, the State Department |
consulted the Department of Com |
merce, and would express opposition
if any issues came into conflict with |
the major diplomatic policies of the
MFR. Hughes interpreted
this primarily as a ban against loans
to foreign governments for militia
ristic purposes.
The ideal of the State Department
has been high-minded, no doubt. but
has been somewhat difficult OF en-
forcement. There have been cases
where foreign governments borrowed
for purely constructive purposes, such
as hydro electric developments or the
building OF highways and canals.
Although the borrowed capital was
used for the commendable purposes
stated, the loans had the effect of
freeing other resources of the borrow
err, including domestic taxation, for
purely mflitaristic purposes.
Hard to Keep Tabs.
In practice, in personal finance, as
in Government operations, 1t is diff
cult for the lender to keep tabs on the
use Of borrowed funds. Most CONNER
cial bankers believe that is the task
OF the borrowers. The lenders are
primarily concerned with assurances
that funds will be repaid.
France improved its technical bank
ing position also by inducing it's own
nationals to sell gold boards to the
government.
In connection with Frances attempt
to put its financial house In order it
Is well to recall that 1t was more than
two years behind Germany. and nearly
two years behind England in starting
postwar deflation. However, being so
able to shorten the process. Mean
time. however, 1t Is still stimulating
It's exports at the expense of. low
wages to its own population.
Thus far In the international as
poets OF the attempt of the present
coalition government to set Frances
finances Alright, 1t has been Raymond
Poincares' round.
When he was called to save the
franc last Summer he was roundly
criticized, in Germany particularly, as
one who had no grasp of economics.
Poincare, however, had the wisdom to
rely on expert advice.
THE BUSINESS OF GETTING