AMERICAN AID TO BRITAIN

Dominion, Volume 34, Issue 85, 4 January 1941, Page 13

AMERICAN AID TO BRITAIN

Government, Not Wall

Street LONG-TERM FINANCING THOUGHT PROBABLE NEW YORK. November 30. Wall Street is thinking quite a bit about the financing of American aid to Britain, when and if that aid begins to outgrow its picayune stage and the assembly lines start working for Britain tn volume, writes Harold Fleming in the "Christian Science Monitor.” On one thing most people here seem to agree. There will be long-term financing of Britain iu Wall Street. It will be done in "Washington, directly, by the United States Government.

Principal reason for this is that if there is any financing at all it will be on a scale such as Wall Street no longer is able to handle. The simple item of 12,000 bombers recently mentioned by the President in his campaign tor third term would come to round 2,000,000,000 dollars, or four times what "Wall Street raised for the Allies a quarter-century ago. Modern war is immensely more costly than it used to be. If the British tire to be given a 50-50 claim on the output of our leading war industries, and our war programme is to be stepped up to capacity, it means that help to Britain may run into the neighbourhood of 5,000,000',000, 10,000.000,000 dollars, or even more —at any rate several times more than the help extended on credit a quarter-century ago. More and more it is being vigorously pointed out that Britain has little chance of surviving without such help, for the present breathing space till next spring is a breathing space tor the Germans as well as the British, one which they are most assuredly capitalizing to increase their armament superiority. The limit of American aid seems likely to be found in bottlenecks such as shipping or material sources rather than in financing. Washington the Better Bargainer. Another reason why the financing is likely to be done in Washington is that Washington can drive harder bargains than Wall Street. All Wall Street can do is act as intermediary for the public to lend the money to Britain on nothing but a war debt promise. Washington can do better. It can insist on getting more na_ys.« and air bases: on perhaps the turnover of some of Britain’s security holdings oj even property holdings in South Aniprica; perhaps on American participation in the .fin and rubber cartels; perhaps on British taking of American farm products in preference to those of the Empire; and on other such miscellaneous concessions. A third reason why the financing will come from Washington instead of Wall Street is of course that such is the political trend anyway —tor better or for worse. The banks here are still smarting over Jesse Jones’ announcement' of 14 per cent. RFC money for bankable defence contracts. That means most of the business will go to the RFC, for the banks can’t possibly meet that rate except in the case of the largest loans. The coming boom in American business will put the Government’s corporate subsidies and affiliates, like the R.F.C., in a splendid financial position, bailing them out and putting them back in the black, and this will make it easier tor them to advance money for any and nil imaginable defence purposes. There is not even a hope here that the banks might be able to advance money to Britain on U.S. Treasury pledge. If the Treasury is going to go bond tor Britain, it will undoubtedly see that some of its corporate children get the business. That is the Washington fashion. A World War Myth. However, Wall Street will shed few tears for the lost business. The British and French bonds which it sold during the World War were good, and were paid off on the dollar, but ever Since tlie World "War a myth has been crystallizing about these loans, to the effect that they caused us to go to war. The argument was that the United States had to “bail out” the buyers of British and French war bonds. As a matter of fact, the bonds were all thoroughly secured at the time we were entering the war, but the idea has become a part ot modern political folklore that “the interests” got us into the last war and wouldn’t mind getting us into the next. So the Street is just as pleased that the financing isn’t likely to come this way. . r Some people are even conjecturing how the (“neutral”) American Government will do the financing. Curiously enough, there will be no need of amending the Johnson Act, which bars loans to war-debt defaulters. It only bars private loans. There is nothing to prevent the Treasury or its affiliates from lending all they want. Congress need only’ appropriate the money—or take off the limits, for instance, on the foreign lending programme of the Ex-port-Import Bank. There is some talk of the American gold being used in the operation. Such talk was heard a year ago in connexion with South American loans. The plan would.be for us to buy some of Britain’s possessions for gold. Then Britain could use the gold to buy aeroplanes from us. The gold wouldn’t actually come up to daylight at Fort Knox-, but just get shoved bound from page to page by’ the bookkeepers to complicate a simple swap transaction, make it look more impressive, and take some of the blight of absurdity off the present, gold situation. (Another way’ to help Britain would be, of course, to raise the price of gold, the principal commodity Britain now has to sell.)