WAR FINANCE

Akaroa Mail and Banks Peninsula Advertiser, Volume LXIV, Issue 6581, 31 October 1939, Page 3

WAR FINANCE

WARRING NATIONS CANNOT BORROW IN U.S.A., SAY EXPERTS

Treasury experts said the neutrality and Johnson acts forbade any of Europe's warring countries from borrowing any money from any individuals or firms in this county.

The ban, also, applies to Canada and the other British dominions or possessions which hgve entered the war.

Both acts prohibit the purchase by "any person within the United States" of the securities of a belligerent nation, in the- case of the Neutrality Act, or of a defaulter on debts arising from the World' War, in the case of the Johnson Act.

Unofficially, experts interpret this to mean that the United States Government, or one of its corporations, could make such loans, but they indicate strongly that no such loans have been considered. *

The only exception from the bans is the one invoked last week by President Roosevelt which permits continuation of ' normal peace-time commercial transactions." A committee of State, Treasury and Commerce Department officials has been set up to determine what conies under this exception.

The Johnson Act was passed in 193-1 to prevent European countries which. had defaulted on their war d,e.bts from borrowing more money in this country until they got cheir old debts in good standing. The latest total of principal and interest owed by European governments to the Treasury is $14,473,478,027. Only peaceful Finland is in good standing.

Neither act makes any clear difinition of how far an English factory for instance,- might borrow in this country, although the English Government itself is banned. Both .acts say the ban applies to the government, subdivision, or agent of the government affected by the prohibition. Some experts have speculated, for instance, that private English oi Canadian firm could borrow money in this country if it could prove it was not an agent of its government. Other experts dispute this "loophole" interpretation.

The Neutrality Act not only forbids the purchase of the securities of a jarring nation, but also forbids the sale or exchange of existing securities of, the belligerent,