Message to the Senate Returning Without Approval S.J. Res. 212 "Joint Resolution Directing the War Finance Corporation to Take Certain Action for the Relief of the Present Depression in the Agricultural Sections of the Country, and for Other Purposes"

The White House, January 3, 1921.

To the Senate of the United States:

I am returning without my signature, Senate Joint Resolution 212, "Joint Resolution directing the War Finance Corporation to take certain action for the relief of the present depression in the agricultural sections of the country, and for other purposes."

The Joint Resolution directs the revival of the activities of the War . Finance Corporation. This Corporation is a Governmental agency. Its capital stock is owned entirely by the United States. It was created during hostilities for war purposes. The temporary powers which it is now proposed to revive were conferred in March, 1919, to assist if necessary in the financing of exports. The general powers of the Corporation expire six months after the termination of the war and the special powers with respect to the financing of exports expire one year after the termination of the war. While we are technically still in a state of war, it unquestionably was presumed, when this added power was granted, that peace would have been formally proclaimed before this time and that the limitation of one year would have expired.

In May, 1920, in view of the fact that export trade had not been interrupted but had greatly expanded, and that exports were being privately financed in large volumes, the War Finance Corporation, at the request of the Secretary of the Treasury and with my approval, suspended the making of advances.

This Resolution was passed by the Congress apparently in view of the recent sudden and considerable fall in prices, especially of agricultural commodities, with the thought that some European countries to which certain products were customarily shipped before the war might again be enabled to resume their importation, and that larger masses of domestic exports to European countries generally might be stimulated, with the resulting enhancement of domestic prices. I am in full sympathy with every sound proposal to promote foreign trade along sound business lines. I am not convinced that the method proposed is wise, that the benefits, if any, would offset the evils which would result, or that the same or larger advantages cannot be secured without resort to Government intervention. On the contrary, I apprehend that the resumption of the Corporation's activities at this time would exert no beneficial influence on the situation in which improvement is sought, would raise false hopes among the very people who would expect most, and would be hurtful to the natural and orderly processes of business and finance.

Large Government credits were extended during the war to certain European Governments associated with us in the struggle. These ceased several months after the armistice, except for commitments already made, either directly or indirectly. The recent Brussels conference, composed of experts from many European countries and from other nations, itself expressed the opinion that further credits should not be accorded directly by Governments. I do not believe that they should be accorded indirectly.

Exports of domestic products have not declined since the armistice. On the contrary, they have greatly increased. From an aggregate value before the war of less than two and one-half billions of dollars, and of about six billions the last year of hostilities, they rose in the calendar year 1919 to more than $7,900,000,000, and this figure will probably be exceeded for the last calendar year. For the first eleven months of the last calendar year we exported more than seven and one-half billion dollars' worth of domestic merchandise. These have been largely privately financed. The difficulty in the way of still larger exports does not seem to lie so much in the lack of financial ability here as in Europe's lack of means to make payment. Her productive energies and the services which she renders have not yet reached a point where they balance the value of commodities taken from this nation, and her ability to furnish for additional exports securities which business men would feel justified in taking is restricted. The experts of the Brussels conference reported that "one of the chief obstacles to the granting of credits is the absence in borrowing countries of sufficient securities for ultimate repayment." Until this obstacle is removed, it is difficult to see how materially larger exports to Europe are to be made even if exporters, aided or unaided by Government finance, stand ready to do their part. It is remarkable that Europe is able to make an effective demand for as large a volume of our goods as she is making. It is gratifying evidence of her recovery and progress towards full production and sounder financial conditions.

Under the law, if the activities of the Corporation were resumed, no direct advances could be made to producers and, if they could be, they would not accomplish the object in view. They would not create demand for our products. They could be made only to exporters or to banks engaged in financing exports and if they did in some measure stimulate exports they would probably not have the effect apparently most desired of substantially increasing those of agricultural commodities. Already, with the larger volume of exports which Europe is taking from us, she is exercising her option of taking a smaller volume of some of our principal agricultural products, such as meats, presumably because she herself has become more largely self-sufficient, or is again providing herself with supplies from distant countries which, with the opening up of shipping since the armistice, have once more found their place in the markets of the world.

It is highly probable that the most immediate and conspicuous effect of the resumption of the Corporation's activities would be an effort on the part of exporters to shift the financing of their operations from ordinary commercial channels to the Government. This would be unfortunate. It would continue the Government as an active factor in ordinary business operations. If activities of any considerable magnitude resulted, they would necessitate the imposition of additional taxes or further borrowing, either through the War Finance Corporation or by the Treasury. In either case new burdens would be laid upon all the people. Further borrowing would in all likelihood tap the very sources which might otherwise be available for private operations or which the Treasury is now compelled to reach to meet current obligations of the Government. There is no question that the borrowing of the Government should be limited to the minimum requirements, and that the Government should not be called upon further to finance private business at public expense. To the extent that Europe is able to furnish additional securities, private financial institutions here will doubtless find means of giving the necessary accommodation. The way has been opened for added legitimate efforts to promote foreign trade. Financial agencies in aid of exports, privately financed, have already been planned to operate under the Act approved December 24, 1919, authorizing the organization of banking corporations to do foreign banking business. One corporation has been organized in the South and a second of large scope is in course of development. These agencies may be expected to act as promptly and as liberally and helpfully as sound business conditions will permit. Through reliance on such enterprises, rather than through Government intervention, may we expect to secure a return to stable business relations. For many months there has been a demand that war agencies should be abolished and that there should be less Government interference with business. I have sympathized with this view, and believe that it is applicable to foreign trade as well as to domestic business. I am of the opinion that now, more than two years after the armistice, the nation should resume its usual business methods and return to its reliance on the initiative, intelligence and ability of its business leaders and financial institutions.

We shall not witness an immediate satisfactory adjustment of domestic and international trade relations. The burdens of war are not lifted when the fighting ceases. One sad thing about war is that it leaves behind it a legacy of economic ills and of suffering from which there is no escape. Conditions, however, are improving both here and abroad. The difficulties with which we are now confronted are of small consequence in comparison with those which we have met and overcome. Fuller restoration awaits the adoption of constructive measures of large consequence: the secure establishment of a just peace in the world; the cessation of fighting everywhere; the more complete resumption in Europe of the normal courses of industry, the return of her people to sounder fiscal and banking policies and the breaking down within her borders of harmful restrictions.

WOODROW WILSON.