The producers news. [volume] (Plentywood, Mont.) 1918-1937, 1936-02-21
How US. Held Bag for
$1,000 900 Morgan
: french Loan Revealed

WASHlNtTlONs- INTO ZIG
last Ian. of their study of the mum
itions industry the senate NUM-
tons committee delved into the fl
nancial aspects Of the world war
loans. -
After having drawn from ]. P.
Morgan and his associates q story
which showed how the United
States was drawn into the war by
the pull Of commercial relations,
the committee turned to it's last
phase of inquiring into the posi-
bilities of government ownership
of munitions. firms.
LET u. 8.
HOLD SACK SO n
Resumption Of testimony by the
bankers told the story Of how the
bankers slipped from under bad
loans and left the United States
Treasury holding the sack. The
bare outlines as related by Nor
gan, Thomas Lamont, Morgan
partner, Albert Rathebone and
Russell Leffingwell, assistant Sec
retaries of the Treasury in war
: years, was concerned in part with
American Foreign Securities cor
poration.
In August, 1916, the Morgan
group formed the American For
eign Securities corporation capi-
talized at SO, 1000, 900. The corpor-
alton was formed to lend $780,
} 900, 600 to France. Under the con.
tract France was TO pay TX per
cent and placed with the corpora
ton 100000, 900 of securities Of
various neutral countries and of
$50, OOO, GOO Of American bonds as
security. The American Foreign
Securities corporation then sold
500, OO0, 900 Of its own bonds, pay
ing 8 per cent interest, supplying
the remaining $4,000, 900 needed.
FRANCE
| GIVEN LOAN
Under the terms Of the corpor-
alton articles, the $3.50, OOO, 900
collateral could be replaced with
/ substitutes with but few restric-
tions. When neutral bonds began
/ to show signs of weakening the
Frech government received from
| the United States Treasury $780,.
/ O0O, 900 as q loan. Then the French
/ government withdrew the collater
i al IL had placed behind the Amer.
| lean Foreign Securities corpora.
| ton loan and substituted a $780,,
| OOO, 900 certificate of indebtedness.
on the United States Treasury.
| In this way the United States
Treasury came to the backing O.
the Morgan loan to France and tn,
/ Morgan concern was able to nix
itself of possible unsound securi
ties held against the French loan
i The certificate Of indebtedness
was cashable on Aug. 4, 1919, th,
day the French debt to the Amer
? lean Foreign Securities corpora
bon matureds Accordingly, afte
buying other bonds against thi
1. $10O, 600, 900 Treasury certificate
the corporation on August 1, 1918
cashed the certificate for II 900,
,, 900 and paid off its note holders
A surplus Of $4,000, 900 was lief
! the corporation. This $4,000, 600 i
: effect, came from the Unite
States Treasury, committee inyes
igators assert, due TO the natur
Of the transaction by which th
government financed Morgan loan
to France. French debts To th
Morgans were paid by The tay
) payers of the United States bu
the French debt to- the taxpayer
is still awaiting payment.
Ct COST OF
: u. 8. PLANT =
: Following the Morgan test
4 mony the munitions. counnitte
heard a. report from valuation ~
l gineers Of the Interstate Cor
: merce commission. The reno,
stated that for S47. OO0. 600 A
|. United States could establish
. plant capable Of manufactur;n
all the munitions and buiIdino ms ::
val vessels needed by the cover
} ment:: It was revealed that s.
I government could build 4 81 O00
600 cruiser for about $4.OO0. o6O ;
2 well-equipped government nav
n yards. ~