Evening star. [volume] (Washington, D.C.) 1854-1972, 1940-12-07

Plenty of plans
are being dis
cussed among David Lawrence.
Government officials for helping
Britain finance the war, but they are
plans that involve American private
capital and not direct Government
loans.
That's why, when Jesse Jones,
Federal Loan Administrator. says
Britain is good risk" and Secre-
tary of the Treasury Morgenthau
concurS. they merely mean it would
be a sound investment for American
capitalists to ask American investors
to lend money on British securities.
The talk is that Britain holds
about $4,000, 100000 worth of invest
ments in this hemisphere. A huge
private corporation or finance COM
pany would be formed to finance
British purchases of American ma
terials and manufactured products.
The British would pay for their de-
tense orders in cash as provided by
law, but the money would come from
a large fund set up in behalf of
British security owners, who would
hand their money to the British
government for the purpose of max
ing these purchases.
Put Check on Payment.
The finance corporation would ask
that all the British securities be de-
posted as collateral for the loan. If
at the end of Is or 20 years the
British didn't pay back the loan or
If they didn't meet the annual
sinking fund payments to be pro-
vided, then the collateral would be-
come the property of the American
finance corporation.
Since the securities in question
are stocks and bonds of companies
located in this country and in other
parts of the Western Hemisphere,
the citizens of the United States
would merely be lending money
based on collateral, much of which
would be readily marketable on the
stock exchanges.
It becomes, therefore, banking
transaction in which American
banks probably would participate
heavily Possibly the Reconstruct
ton Finance Corp. which has
already helped to finance private
companies engaged in war orders
for the British, and our own Gov
eminent would in some way make
a market for the bonds of the new
finance company or might even pur-
chase some of the new securities.
The R F. C. has the power to buy
or sell securities in American private
corporations.
But. it will be asked, isn't this an
indirect way to lend money to the
British government? Strictly speak
ing, probably it would be, but doubt
less legal opinions will be forthcom-
ing contending that since the prop
erty belongs to British citizens as
individuals and they are putting up
the securities also as individuals,
the whole transaction can be viewed
as coming within the existing law.
Public Sentiment as Factor.
Clearly if public sentiment favors
extending financial aid to Britain
by this circumvention of the
statutes, there will be as little
criticism as there was when the
average destroyers were sent
abroad, even though the language
of the statute in the opinion Of
many lawyers explicitly forbade
such a step.
When the national will is over
vhelmingly in favor of step In
time of war or near war, the tend
ency is for Congress to 60 along
without raising any obstacles. Some
thing of the same sort will doubt
less develop when the question OF
credits is worked out.
The simple truth is that the Brit
tsh need cash with which to buy
ornaments. They have certain
amount of wealth in the form OF
securities belonging to their own
citizens. Since the American neu-
trality laws require cash on the
barrel head, the British will insist
that they ought to be able to supply
securities as payment. But the
United States, on the other hand,
might suffer if the securities were
suddenly Hquidated. So in the end
it will be explained that acquies-
cence in this roundabout method
of financing is really in the interest
of our domestic economic situation,
which, in turn. becomes a concern
of the R. F. c., and the latter, of
course, is interested in financing
American production and recovery
programs.
Two Sided Problem.
The whole problem contains in
ternal and external factors, and
that is what makes it possible for
the administra ton, if it so desires,
to furnish the financial machinery
for the release of private credits or
even for the guarantee Of the financ-
ing operation by participating in
the purchase of the bonds Of Amer
ican-owned and American managed
finance companies handling the Sc
curities Of British citizens.
1t will be recalled that national
defense orders are intertwined for
the most part now so that most fac
tories are working partly on British
and partly on American needs. The
present underpinning of Treasury
funds loaned through the r. F. c.
theoretically is to support our Gov
ernmentS oun pI1rchaSeS from
American factories, but actually
American Government money also
supports the whole production