Evening star., 1940-12-13
Two Laws CompIicote
British Loan Plan
Johnson and Neutrality Act
Pose Questions as to
Foreign Credits
By Bertrunl Benedict.

credits from Uncle Sam now, or Is Albion
only being perfldious again? Also, If
American loans and credits are to be
advanced to Great Britain, how get
around the laws which now forbid them?
These two questions are likely to
dominate the new session Of Congress.
Senators and Representatives were being
heard from on the theme even while
Secretary of the Treasury Morgenthau
was comforting with a representative Of
the British Treasury on British financial
needs. 1t is not unlikely that Congress
will vote to investigate British financial
resources In this country and British
holdings OF American securities.
Two laws now on the statute books
of the United States distinctly bear
upon any financial aid which the United
States might extend to Great Britain.
One is the johnson Act Of 1884, the
other Is the Neutrality Act OF 1889. A
strong attempt will be made in the new
Congress to repeal the former and
amend the latter
Great Britain comes under the john
son Act through having defaulted on its
war debt payments to the United States
over the last eight years. The johnson
Act says that no new securities of any
nation thus in default may be bought or
sold in the United States. This OBJ
viously makes impossible the sort of loan
which Great Britain, joined by France,
sold in this country in the last war
hafo he, hall
the johnson Act expressly does allow
United States Government corporations
and hence presumably the Government
itsef-to take up new securities of war
debtor nations.
Even II the johnson Act should be
repealed, it is dificult to guess whether
the British could successfully float a war
loan in the United States, for purchase
by private interests and individuals. It
is true that the British war loans Of
perhaps $3.50 900 900 floated in the United
States last time we're fully redeemed. 1t
is true also that all OF the private credits
amounting to perhaps several billion
dollars-for British war orders in 19l4-17
were fully honored.
But, after all, the British Government
is officially in default to the United
States Government for money borrowed
during the last war. And British chances
| OF getting even military stalemate look
less rosy in this war than in the last
one.
The Neutrality Act of 1899 applies to
countries proclaimed by President Roose-
velt as at war, whether or not they are
in default to the United States. No
person may sell or buy new securities of
such bellgerent country, and no per-
son may even extend credit to it. Pre-
sumably the United States Government
or United States Government agency
is not considered person" under the
scope of this act.
It Is difficult to ascertain from the
record just what the sentiment of Con-
gress Is on making loans to nations
fighting Germany, Italy and Japan. For
instance:
When the present Neutrality Act was
under discussion in the special session
in the fall OF 1889. amendments were
offered in both House and Senate to
forbid any Government corporation to
extend credit to belligerent country.
They were defeated, but by narrow
margins.
In 1910 Congress increased the lend
ing power of the Export Import Bank,
ostensibly to authorize loan to Finland.
The Senate rejected by voice vote an
amendment which would have forbidden
the bank to make loans directly to any
foreign government as such. Neverthe-
less some Senators. whether or not cor
rectly to be classed as isolationists,
demanded that Congress, rather than the
officials of the Export Import Bank.
determine whether such loans were to
be made.
Among the protestants was Senator
George. who now holds the al-important
post Of chairman Of the Senate Foreign
Relations Committee. He warned:
mo country, and particularly no free
country, goes to war in one stride It
moves cautiously, because public senti-
ment must support it, step by step, until
one day we may find ourselves in a posi-
ton where we cannot well turn back '''
If the hour comes when the great cities
OF Paris and London, and the area en-
braced within the little island of England
and the nation of France itself, are
actually threatened, sentiment in this
country, generally sympathetic with the
cause Of Britain and France, may we'll
drive us nearer to further loans and to
additional loans that we do not want to
take"
On the other hand, President Roosevelt
In his speech to the American Youth
Congress at about the same time called
the suggestion that American aid to
Finland would lead to war between the
United States and the Soviet Union,
About the silliest thought that I ever
heard advanced in the SO years Of nv
life"
Congress in increasing the lending
powers of the Export Import Bank did
restrict the banks lending program. One
restriction was that the bank might
make no loans to any country in default
on its debt to the Government of the
United States. thus paralleling the
johnson Act. A second restriction was
that the bank might make no loans for
the purchase of munitions.
If the President tries to get these laws
changed so as to authorize credits to
Great Britain, the debate in Congress
might stretch over months. If he tries