The Wilmington morning star., 1947-04-02
Risks In Political Loans
BY PETER EDISON

WASHINGTON. r e S p o n sibilltieS now
iheaped on the well-informed American people
/ are enough to bend them bowlegged. In ad-
dition to knowing all about how to fight global
wars, run the domestic economy, and take
care of foreign policy matters, they must now
learn all about international high finance.
President Truman's new doctrine starts with
a modest request for $500 million worth OF
aid for Greece and Turkey. But it's a cinch
that if the United States goes into this bust
ness, that amt gonna be all. An entirely un-
official guess is that in the end and on a
worldwide basis, this may cost upwards OF
So billion a year.
The $A billion questions for the taxpayer
are whether this is cheaper than wars and
will he foot the bills?
There are three ways of labelling out this
international aid-loans, political loans, and
outright grants. The s4OO million for Greece
and Turkey is in the aforementioned class.
There is no idea that any Of it will ever
be repaid, except maybe in good will and
added American security.
This is important to understand. 1t explains
why the President put the issue up to Con-
gress instead Of suggesting that the deal be
handled as a loan through the U. S. govern
ment's Export-In1port Bank Of Washington. or
the new World Bank, whose full and right
name is the International Bank for Recon
struction and Development.
Both these outfits are supposed to be banks
in the stricter meaning OF the word. The Elk
port-Import Bank is limited by law to making
loans for expanding foreign trade, with rea-
sonable assurance that the loans will be re-
paid. The World Bank also has a mandate
to operate on a business basis, making eco
nomic rather than political loans.
Pressure to force both banks into making
political loans to bolster friendly but shaky
foreign governments has been heavy.
Last year there was a showdown session
on this issue at the White House. Directors
OF the Export-1mport Bank were
to the Presidents offihe. There Undersecre-
tary Of State Will Clayton presented the case
for having the bank make political loans to
back up U. S. foreign policy.
Directors Of the bank, headed by William
McChesney Martin, Jr., opposed Clayton's
proposal. It was pointed out that if the Export
Import Bank began to make political loans
on bad security, with small chance Of re-
payment, Congress would quickly crack down
and put the bank out Of business. In the end,
President Truman backed up the bank. In
January, 1916, the Export-Import Bank All
thorized a reconstruction credit to Greece Of
only $25 million. Of this SUM only five million
has been advanced. Greece already has a
huge national debt-including a $S7 million
World War I debt to the U. S.-which it has
been unable to service for years.
An effort was then made to persuade di-
r~ectors Of the World Bank that they should
enter this field of shadowy high finance. The
whole story has never been revealed. But the
long and short Of it was that Emilio G.. Cola
do, former State Department economic adj
wiser and a great believer in pouring the
millions on any world trouble spot as a cure
for every i'll, has been removed from the banx
staff. A tough team of Wall Street bankers
undei former Assistant Secretary of War John
J. McCloy has taken over. Under this now
management there is every indication the
World Bank won't make political loans.
American past experience in this political
loan business has not been too good. Tn 1e41
the U. S. by another act of Congress .loaned',
China $500 million, interest free. There was
no U. S. control on how the money was ~
be spent. Repayment was to be arranged AZ
the end of the war, but nothing has heen
done about it. ~
On the contrary, after the, war was over
another $500 million of Export-Impor thank
FUNDS were earmarked for future loans to
CHINA. Actual disbursements have been hold
up, however, until Chinese economic-and M.
htlcal-conditions become more stable. This l.
an example OF how the administration can
properly make negative recommendations nm
Export-lmport Bank loans to back up the u.
:: foreign policy of not giving more aid to
lCnlna TILL her government is reformed.