Evening star. [volume] (Washington, D.C.) 1854-1972, 1946-02-02
Loan to Great Britain
Would Benefit u. S.
Proposed Financial Assistance
Seen Returning in Trade
BY Berfram Benedict


Seen Returning in Trade
BY Berfram Benedict
"Why should we make a new loan
to the British when they welshed on
the loan we made them during the
last WARP" will be asked again and
again in Congress, where the new Brit
ish loan agreement is said to face a
very rocky road, indeed, Congress ira
ditionally takes the bit in its teeth
when it comes to foreign loan.
After World War I Congress in set
ting up the World Debt Commission.
February 8, 1922, specified that the in
terest rate in refunding agreements
replacing the wartime debts should be
at least ~ per cent. Congress speci-
fed also that any new bonds taken
in exchange for wartime bonds should
mature no later than 1947. Congress
eventually had to agree to less onerous
conditions. In 1881 Congress consented
to the one-year Hoover moratorium on
all intergovernment debts, but rejected
Mr.. Hoover's proposal to have the debt
agreements reconsidered.
After the moratorium expired, Great
Britain paid in full the first war debt
payment due. During the ensuing new
negotiations on the debt, the British
made two token" payments on the
next debt payments due.
President Roosevelt declared that
these token payments kept Great Brit
ain from the status of a defaulter.
Thereupon Congress said, in effect, "Oh,
yeah?" and passed, in April, 1884, the
johnson Act. This banned new loans
in the United States for any country
in arrears, wholly or partly. on its war
debt payments-and Great Britain made
no more payments.
The advances to Great Britain In
World War totaled $4.3 billion. Re-
payments were s2.1 billion almost one
half the original advance. But failure
to make interest and principal pay
ments as due increased the obligation
Git was funded at s46 billion in 1928.
and the amount In default, as OF last
July, was s6.4 billion.
The new loan agreement is different
In almost every respect from the old
war debt. Only $3.50 million goes to
settle the lease-lend account ION this
congressional action is not needed.
Wiped off the books is the bulk of lease
lend, about s25 billion net. The re-
naming s37 billion of the loan is for
new economic and financial transac-
tons. The old war debt was to settle
for goods and services consumed or per-
formed in the past.
The loan goes largely for purchase of
raw materials and equipment to help
restore the British economy. Much or
most of the advance will be spent in the
United States or in countries that buy
from the United States. The war debt
funding agreement had no such pur-
pose.
The loan Is tied up with international
transactions to promote world trade
Great Britain is to end at once exchange
S0AisAoAo oiA uoJ -ody UuSAlSSS u dilS-
actions with Americans, and within a
year exchange controls throughout the
entire sterling area. All discriminatory
restrictions on American goods are to
end within year, and the British En-
pire tariff preferences are to be steadily
reduced. Further British American
tariff rate reductions are to be consum-
mated. After World War I American
tariff increases made the war debt pay
ments even more difficult
In any year of economic and financial
stress, the payments for that year on in
terest (not on principaD are to be
wiped out. No such provision was con-
tanned in the war debt refunding sys-
tenn, which was knocked galley-west by
the worldwide depression of 1930-32.
Interest works out to 1,6 per cent net
q per cent but with no payments for
five years.. The British war debt inter-
est rate was about 3.3 per cent. The
loan repayments, over so years, are to
come to slls million annually (the
United States eventually receiving a
total of s22 billion more than it lent:
the annual war debt repayments, over
81 years, were about $3.50 million an
nually. After World War I Great Brit
ain was still a creditor nation; TODAY,
as result of World War II, it Is a