Evening star., 1940-08-14
Defense Program
Expected TO Spur
Securities Market
Financing for Armament
Declared Too Big q Job
For Government Alone
BY ]. G. DONLEY,

BY j. G. DONLEY,
Consolidated News Feature Writer.
NEW YORK. Aug. l4.-When it
gets into its stride the defense pro-
gram should provide considerable
stimulus for the new capital issues
market
So long as the war continues in
Europe the war business and the
business of preparing for war will
be good, even if the eventual effect
of such activities is bad. And if the
desired revlsions are made III the
security and exchange regulatory
| acts, and new tax legislation gives
investors a break, there should be
/ an excellent chance to permit the
defense program to kill two birds
with one stone-that is. make the
| country strong IN a military sense.
and revitalize 1t economically.
Pointing to the need of private as
we'll as public funds for defense
efforts. the latest issue of the mag
azine Banking. official organ of the
American Bankers Association.
says. The money that the Govern
ment will spend and lend tor arma-
ment will be only a fraction Of the
amount to come from banks, corpo-
rate surpluses and other private
sources" Banking concludes that
the lob is far too big for the Gov
ernment to finance and handle,
even if it wanted to-"
No Stimulus Yet.
So far, however, there is little
indication of war or rearmament
stimulus to the new securities mar
ket. During the first seven months
of this year, according to compila-
ton by the commercial and f1nan-
cial chronicle. the total of new COR
porate capital raised, exclusive OF
refunding operations, was S308.S17.-
1856. which compares with 1927 ,523.-
2l0 and s493 ,061 1881 during the like
periods of 1889 and 1888, lespec-
lively.
AS a matter of fact. war has hurt
the capital market more than 1t has
helped it. When Germany invaded
the Low Countries early In May,
more than 100000 900 in new Sc
curity offerings in shape TO come TO
market during that month had TO
be delayed because Of resultant un-
nn1Ii+in1NS
not until July that most of these
deferred offerings finally were
brought out. The June total Of
corporate security issues Of all kinds
for both refunding and new money
purposes was the smallest since las
September, the first month of hos
tilities.
National defense can either vi
talize or sap our whole national
energy, depending on how we'll we
keep balance between defense pro-
duction and the other SO per cent
of our activity" says the August
survey of business of the American
Federation of Labor. Pardonably
the A. F. of L. insists that the vital
thing is larger flow of income to
workers to keep consumer goods in
dustries growing normally and pre-
vent top-heavy defense develop
ment.
Jobless Problem Stressed.
That is all right. so far as it goes,
But business has quite as much eX-
cuse for urging the vital nature of
profits sufficiently large after taxes
to stimulate rather than choke off
the flow into industry of the new
money needed to finance defense
production while maintaining
growth in peacetime activities.
And business can bolster its case
by quoting the overall conclusion
of two-year survey of the capital
markets recently completed by the
BroOkings Institution. The results
have just appeared in the book,
Capital Expansion, Employment
and Economic Stability"
The conclusion is that go " We
cannot expect to have economic
stability so long as millions re-
main unemployed, and we cannot
expect to eliminate unemployment
without an expansion of capital
enterprise. Stagnant capital mar
kets inevitably involve unemploy-
ment, and unemployment means
social and political instability. Sim
ilarly, restricted capital expansion
means low national income and
consequent fiscal and general finan-
cial instability.
The re-establishment of the
stable conditions which are so
sorely needed in the United States
at this critical period in world
history largely depends upon the
removal of unnecessary impedi-
ments to the flow of funds into
constructive capital developments
and the restoration of confidence
in the future of private enterprise"
And the Brookings Institution
finds that even the larger corpo-
rations, as well off as they have
been in respect to working capital,
could not finance a great expansion
without resort to the financial
markets.