Evening star., 1936-12-16
BY JAY FRANKLIN.

By JAY FRANKLIN.
TINE recent Treasury hotation Of
long-term bonds at az per
cent may look as relevant as
Il the latest improvement in q
Rolls Royce to the man with a thin
dime, but 1t represents the opening Of
the New Deal drive to force a wedge
between banking and industry in order
to free our productive energies from
the dead hand Of conventional invest
ment.
The present marriage Of industry
and banking Is more like q shotgun
wedding than the Romeo and Juliet
affair it appears to the outside world.
The old Wall Street gag was to throw
an industry into difficulties by tying
up its credit and then to place the
financial rescue party" In control
of the board Of directors. That's
what happened to the railroads way
back. That's what happened to Gen.
eral Motors when the Du Pont-M Nor
gan combine took 1t away from Du-
rant. That's what the bankers tried
to do to Henry Ford at least twice.
That's what happened to the motion
picture industry when A. T. & T. and
Atlas moved in on Hollywood. And
that Is why business after business, in
self-defense, has piled up big corpo-
rate reserves in order to avoid the
chill lips of the financial kiss OF
death.
p,,t ~ ~. ,,,hola nooderp America
has completed the process by which
the bankers dominate industry. and
although they have thereby eliminated
most Of the financial risks, still con-
slider themselves entitled to specu-
lative returns on their sure-thing in
vestments.
S1S6, ,e00, 900, 600 Debt
The Nations debt structure-the
basic credits which support our indus
try, agriculture, Government, cur
rency and banks-is estimated at
about sl36, ,o00. 900 900. OF this sum.
Federal debts represent some s35,00o.-
O0O, 900. State and local debts some
$4,000, 900 900. Thus more than $780,
600, 600, 900 OF our total indebtedness
nearly 40 per cents "riskless' in
terms OF modern finance, for If our
public credit collapses no other credit
has any particular value so far as our
banks are concerned. The rate we pay
on this riskless capital is what deter
mines all other interest rates in the
long run.
Senator Henrik Shipstead Of Min
nesota was the first to open fire on
this angle Of the national debt. He
tangled ineffectively with Andrew
Mellon in an effort to beat down the
Federal rate to ga per cent Today
the composite rate on all Federal OBJ
legations Is around 2.42 per cent. but
this is still too high. The Treasury
and the Federal Reserve will not rest
until they have driven 1t down to 2
per cent or even less.
Controls Own Credit.
Under Morgenthau and Eccles. the
government has resumed control Of
its own credit and is thereby putting
the heat under the frigid interest rates
in other fields of investment. This
by product of Roosevelt's free-spend-
ing policy offers the following possi-
bilities for future borrowing from
banks:
Government bonds-2 per cent;
State and local bonds-3 per cent;
mortgages, railways, long g-term indus
trial bonds per cent; intermediate
credit-4-5 per cent; personal credit,
chattel and crop loans, etc.-5-6 per
cent; commercial credit and call
money-flexible.
These rates are intended only to
illustrate the need to diversity. special
ize and render more flexible our gen.
eral credit operations. Why should
s per cent be sacred, the Federal Re-
serve officials are asking themselves,
when risks are eliminated? Why
should installment-buyers pay the
finance companies" usurious 10 to
II per cent, when depression expert
ence proved them the most reliable