WALL STREET: Dollars for Britain

Great Britain will not have to liquidate any more of its U.S. holdings to pay for war materials. This was the final decision reached last week in the long fight between Federal Loan Administrator Jesse Jones (who did not want liquidation) and Secretary of the Treasury Henry Morgenthau Jr. (who did).

Jones won the fight by simply moving faster. In June he got authority from Congress to make RFC loans to help foreign governments get maximum dollar exchange out of U.S. investments. Last week he used this power to lend Britain $425,000,000, which will be used for pocket money and to pay for armament orders placed before Lend-Lease went into effect.

As security Britain put up $205,000,000 worth of listed stocks in U.S. corporations, plus stock in 41 British-owned U.S. insurance companies (including Globe Indemnity and Royal Indemnity) estimated to be worth $180,000,000, plus an estimated $115,000,000 of unlisted securities in 46 privately owned U.S. corporations—including Delta & Pine Land Co., Dunlop Tire & Rubber, Clark Thread, Josiah Wedgewood & Sons (china), Yardley of London (cosmetics) Also assigned to RFC were the earnings of 41 U.S. branches of British insurance companies. Since total earnings of these investments have averaged about $36,000,000 a year—enough to amortize the loan at 3% interest in 15 years—Jesse Jones figured he had made a good deal and announced that he was ready to make more on the same basis. This meant that Britain, which to date has sold around $350,000,000 of listed U.S. stocks and privately owned American Viscose Corp., could collateralize instead of sell the remainder (estimated at $900,000,000).

For Britain this is a real break. It will enable her to keep the earning power of her remaining U.S. assets intact for the post-war period. Moreover, it avoids forced sale of these assets at the fire-sale figures which would have to be quoted to attract war-dulled investors. The sale in May of American Viscose, which has a book value of $122,000,000 and earned $7,885,000 last year, netted only $54,348,923.

To Wall Street the deal meant the loss of big commissions (bankers got $7,824,717 on the Viscose sale) but an end to the depressing effect British liquidation has had on U.S. securities markets. To Jesse Jones, who henceforth will hold the paper of Britain's firms in the U.S., it meant a lot of interesting new companies in his private empire. But to the Morgenthau theory that Britain should cut loose all U.S. holdings as a token of good faith before accepting Lend-Lease aid, the deal apparently wrote finis.