588 IOWA DEPARTMENT OF AGRICULTURE 



old credits piled up in seaboard banks is what the new corporation is 

 established for. 



The practicability of financing our export trade thru the organization 

 of such corporations as are contemplated by the Edge Act is clearly 

 expressed by the following statement of Senator Edge: 



"The procedure under the prospective law is simplicity itself; it is 

 merely the application to international trade of the accepted method by 

 which John Doe sells his business to penniless Richard Roe, and yet 

 obtains actual cash payment in the transaction. The American ex- 

 porter or manufacturer may sell his goods to an impoverished foreign 

 purchaser — a foreign government or a private concern. One of the 

 proposed corporations then may accept collateral from the purchaser, 

 acceptable to the Federal Reserve Board, and against this issue deben- 

 tures to sell to investors, and the money so received will be paid to the 

 American seller. Thru the powers granted to these proposed corpora- 

 tions, they may accept even mortgages on the plants or other real prop- 

 erty of the purchasers. Thus a foreign concern in need of raw material 

 may obtain it by giving a mortgage on its plant, and eventually by turning 

 this raw material into finished product will be able to redeem its col- 

 lateral and to put aside a little profit besides," 



The granting of long-term credits, however, for periods beyond ninety 

 days, which are much needed by the European purchaser of our goods, 

 offers a far more serious situation and present facilities are admittedly 

 inadequate. Let us suppose, for instance, that a corporation whose 

 properties are in the devastated section of France desires to buy 

 American machinery to start rebuilt factories in operation, and that it 

 desires to buy on credit, giving as security for the purchase price, only 

 corporate bonds which mature eight or ten years hence. Even tho satis- 

 fied as to the safety of the security offered as collateral for the extension 

 of the credit, the American manufacturer is in most cases unable to carry 

 it until maturity because this would tie up and deprive him, for many 

 years, of the use of the capital which he requires in his business. There- 

 fore the seller is compelled to lose the sale unless the bonds can be 

 quickly converted into cash. It is possible here to relieve the situa- 

 tion by an arrangement made with a corporation organized under the 

 Edge Act to take such foreign securities, advance the cash, and within 

 such limitations as the law and the Federal Reserve Board prescribe, 

 issue its own notes which could then be offered to the public for in- 

 vestment. By this method the purchaser at once receives the purchase 

 price, and the European buyer obtains the goods. The credit is success- 

 fully passed to the American investor. 



How to Raise the Money. 



Now, the process of raising funds with which the Foreign Trade 

 Financing Corporation will do business is simple in manner but per- 

 haps a little more difficult in fulfillment. First of all, the $100,000,000 of 

 capital will probably be raised by the banks and the large manufacturers 

 of the country, and by this process that much money will be taken out 

 of the current channels of short-time credits and thereby cripple our 

 banking facilities to just that extent. This may be a slightly painful 

 operation, but the end justifies the means. 



