Evening star., 1931-12-27
TRADE RELIEF CENTERED
ON CREDIT CORPORATION
Real Turn in Depression Hoped for in
1892, With Normal Conditions
Two or Three Years Later.
BY DAVID LAWRENCE.

NatiOnal politics ana the business
outlook are so closely interrelated that
It Is difficult to chart the course of one
without the other.
The reconstruction program now
pending before Congress means more to
the rehabilitation of credit and the res
toration of public confidence than any,
thing thai has been proposed since the
depression began. The Democrats know
that business can be helped by Govern
ment cooperation. But they also know
that better business situation during
1882 may mean the reelection Of Re-
publican President. So their dilemma
is how to help the country back on its
feet without helping to re-elect a Re-
publican President.
Republicans on the other hand know
full well that with the Democrats re-
sponsible for the legislation in the
House of Representatives and with the
balance OF power in the hands of the
Democrats in the Senate, it is incum-
bent upon the Republicans not to wait
on their Democratic brethren, but to
ChallenSe them to present better leg
islatlve program than the one proposed
by the Chief Executive.
Plenty of gloom has been brought
mere from all parts of the country, i'm
pressing upon Congress the size of its
obligation. The turning point in busi-
ness may we'll come within the next 80
Gays. The crisis has reached the point
where public confidence can be restored
only by some gigantic moves. And pri-
Vate capital Is unable to mobilize itself
effectively for the moment. Hence the
Job Is on the hands of the Government.
Wait Government Action.
For While Government aid Is decried,
the fact nevertheless. is that the cap
talns of finance snd the leaders of
business are waiting for Government
action. They were disappointed when
of the House and Senate did not seem
10 rise to the gravity of the occasion
they did not take the same serious view
OF the needs for emergency legislation
as 90 business men. The Christmas re-
cess may change this.
Literally thousands of plans have
been mailed here or presented in per-
son to members of the different branch
oe OF the Government. Most of these
plans make the mistake of confusing
The effect for the cause. Efforts to cure
unemployment by creating Jobs have
been futile thus far. The underlying
causes of the depression remain thus
far unhealed.
The foreign trade of the United
States used to be in the neighborhood
of nine billions of dollars. Today it is
scarcely four billion. This means that
American factories and plants have
had to shut down and throw out of
work millions of men because five bill
lion dollars worth of trade has been
lost. Similarly, the people of the
United States have failed to buy from
countries all over the world approx
1mately five billion dollars worth of
goods. This in turn has depressed other
countries
How to restore foreign trade is one
OF the paramount questions of the
hour Trade cannot come back until
credit has been furnished to some of
the countries needing it. This does not
mean governmental credit but export
and import credit. One of the pur-
poses OF the Reconstruction Finance
Corporation is to finance export trade.
1t may even be used indirectly to ex-
tend short-term credits now outstand-
Ing which are causing so much concern
to the banks on both sides of the At
1antic. Until there is an improved
credit situation the possibility of re-
storing foreign trade may be considered
remote.
The Railroad Problem.
Another conspicuous situation is that
of the railroads. While the increased
freight rates are expected to develop
enough revenues to take care OF the
railroads whose earnings may not equal
their interest requirements, the ques-
tion of refunding railroad bonds that
come due next year is hanging over
the whole bond market Here the Re-
construction Finance Corporation may
come in play again. 1t would be
rp1otiyp1u sim Yllo tfor
ration to underwrite the fotation of
railroad bonds.
But the new corporation is not likely
TO regard the flotation of railroad Sc
curitieS as a good risk unless there
are some constructive steps taken to i'm
prove the situation as between the rail-
roads and their competitors. The pres
ent chaos may lead to such constructive
steps in the next go days, so that the
financing of the railroads during 1882
can come about in natural course.
The big problem, however, is how to
reopen the long-term money bank Of
America-namely, the bond market.
The use of $2,000,00O, 900 of capital to
stabilize the bond market has been ad
vocated again and again by private
bankers. But the money has not been
forthcoming, because there are so many
elements in the situation which inter
fere with the formation of any such pool
The Reconstruction Finance Corpora
tion, however, with s2,O00,O00,00O of
money, might be in a position to en-
courage the investment of many billions
of dollars more by private capital.
AS long as Uncle Sam underWrites the
bonds through the Reconstruction FL
nance Corporation there will probably
be an abundance Of credit. But even the
bonds that are underwritteh will be for
only two or three years. This will mean
further financing to supersede tempo
rary arrangements made through the
Reconstruction Finance Corporation. In
other words, it is assumed that If the
next two or three years can be safely
traversed, the railroads will be able to
get financing in the normal way later
on. 1t is not assumed that the under
writing through the Reconstruction FL
nance Corporation will mean any extra
cost to the railroads, so the element of
financing costs will not enter into the
problem
Credit Is the Key.
All this merely means that the key
to the next few months of business ac-
tivity lies in the credit situation. once
the bond market is stabilized through
the Reconstruction Finance Corporation.
'' "iA 4'"' SS'Sioi edoSe VII 1litel coI
rates, making them steadier and reviv-
ing other instruments of credit.
The National Credit Corporation was
expected to do big job in stabilizing
the banking situation, but thus far not
many loans have been made, and it is
generally supposed here that the private
bankers did not feel they could enter
into any long-term obligation to take
care of frozen credits in various banks
without getting at the same time some
assurance from the Government,
through an organization like the Re-
construction Finance Corporation, that
these long-term assets would be slowly
taken care of by an emergency organi-
cation.
To put it in another way, the Ma
tional Credit Corporation is not inclined
to make any loans that commercial