Evening star., 1939-06-25
New Deal Believed
Entering Third Phose
BY O,oen L. Scott.


plans, promises to be less one Of reform
and more one of action.
Essentially, the idea Is for Govern
ment to direct into use q larger portion
of this country's vast unused financial
resources. Government, In other words,
is preparing gradually to step in to NIL
void that has been left by private
capital stepping out.
Loud cries already are going up from
to be an inevitable trend toward large
scale Government banking in the In
vestment field.
President Roosevelt has expected those
cries and is trying now to soothe the
fears Of private finance, while inducing
Congress to take the initial steps that
will enable the Government to broaden
and to intensity its banking activities.
What now is to happen is becoming
very clear
The setting Is this: On the one hand
is the base for an almost hmitless sup
ply of bank credit. On the other hand
are many things that this country needs
to have done in the way of TRANSPORTS
ton improvement and housing improve
ment and industrial development. In
between are millions of idle men.
Private capital, for whatever reason,
is not using those idle bank resources to
bring together the men who are idle
and the jobs that need to be done.
Consequently, Government is being
driven gradually into doing that job
Whether that drift is wise or not, or
necessary or not. is proving to be beside
the point as the pressures inherent In
this situation are exerting themselves
The facts Of the matter are these:
Government Is able today to borrow
money at the lowest cost in history.
Investors are falling over themselves to
give the Government their savings for
periods up to five years at q cost to the
Government Of less than / per cent per
year. They are ready to give the Gov
ernment their money for long periods
at cost Of under per cent . year.
Money, like men, is begging for . chance
to 60 to work at q very low wage.
Private industry is not giving work to
that money.
The very pressure that led Government
finally to put idle men to work on proj-
ects OF various kinds now is driving Gov
ernment to find ways to put idle money
to work. In one case, private industry
shifted part Of its responsibility and
now, IN another case. private finance is
shifting part Of its responsibility.
How Government can function in the
finance field is shown by two recent
illustrations. Both concern the Recon-
struction Finance Corp-a Government
banking agency created by Herbert
Hoover and not by President Roosevelt.
In one case, California wanted to
finance vast water project to cost
5000 100000. Private finance was offered
q chance to bid on bonds for this project
to bear per cent interest and did not
bid. The r. F. c., using Government
credit, underworld the project, cut the
interest rate to per cent, and then
turned around and sold $3.50 600 900 of
the issue to the very private interests
that were not interested in the first place
at profit to the Government of $l1,-
100000.
In second case, the San Francisco
Oakland Bridge was to be financed. This
was ST.. .000,0 900 operation In the past
1t would have been financed by private
underwriters. But again the r. F. c..
had to do the job, and it has just COM
pleted the sale of per cent bonds at a
profit to the R. F. c. of 100000.
Here were two sample operations in
which public improvements were financed
at low interest rates and in which the
Federal Government stepped out from
under by sale of the bonds to the public,
thereby realizing profit to itself.
Deals Of this kind on q smaller scale
are taking place almost every day. In
those deals the Federal Government is
acting as an investment banker and is
making real profit from its operation.
If Government can finance worthwhile
self-liquidating public works at . profit
to itself and on basis that enables the
borrower to obtain low interest rates,
why should not this policy-approved by
a preceding Republican administration
be broadened to cover a wide field Of
| investment?
1t Is with that thought in mind that
the third New Deal is to operate.
number of ideas are crystallizng to
take shape if Congress agrees to extend
and to increase slightly powers that al
| ready exist.
One idea is to use Government credit
to finance the building of large amount
Of railroad equipment that then would
be leased to the railroads. The roads
themselves often do not have a credit
standing that would enable them to bor-
row cheaply. If the Government did the
borrowing, and, through its ability to get
cheap money, could cut the cost Of equip
ment, the railroads might be able to
modernize and to cut costs at the same
time. Such, at least, Is the reasoning.
! second idea is to set up an author
ity that would lend money to munich
| palities for construction of high-speed
streets. A study by the Bureau of Public
Roads has revealed that the great need
in this country from a transportation
standpoint is for through traf1ic arteries
in the larger cities that will permit cars
to move at high speed and in safety.
| The recommendation was for depressed
streets, with cross streets at the present
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