I hear that two banks, the London City & Midland with its $525,000,000 of deposits, and Lloyds’ Bank, both refused to rediscount.  They believed the investments in commercial paper they had made were perfectly good, and that they were as well able as the Bank to wait for payment until one year after the war if necessary.

But to date more than half of these rediscounted bills have been paid.

It may be of financial interest to narrate how payments could be accomplished when by the King’s orders there could not be any “dealings with the enemy” and payment to either side was forbidden by both.  Yet the Dresdner Bank and other big German and Austrian banks have to date met fully one half their London obligations.

They were enabled to do this because their London branches were independent institutions whose independence was recognized by the British government.  The London branches were thus liquidated, collecting in and meeting their obligations at maturity, so far as possible.

Liquidation in acceptances is one of the keys to the success of the English loan.  While England had the ability before the war to discount $2,500,000,000 of acceptances, and with the present expanded base of the Bank would, without war, have the ability to discount $3,000,000,000, or three times our national debt, there is now no large business offering.  The discount credits can therefore be measurably turned to the war-loan account.  One of the biggest acceptance houses in London told me that the post-moratorium bills, or the new acceptances made after the moratorium, could not amount to more than 80,000,000 pounds, or $400,000,000.

With the liquidation on account of pre-moratorium bills and the absence of new business I should estimate that the London money market was able to take care of the 350,000,000 pounds loan put forth in November by the government without much regard to the investing community.

With expanding trade and confidence, English investment interests can absorb the major part of this huge loan before next summer, when another loan of about equal size must be put forth, according to present calculations.  This second loan will probably be for three or four hundred millions pounds sterling, bear 4 per cent, and issue at par.  The November loan was issued at 95 per cent and it was announced in Parliament that the Bank of England would loan the issue price at one per cent under the Bank rate.

That the loan was fully subscribed is not contradicted by the small fraction of discount soon quoted on the full-paid loan.  One could fully pay the loan, taking the discounts on undue maturities and sell at a fraction under 95 and still make a profit.

I believe the estimate of an annual English surplus for investment of $2,000,000,000 per annum is far too low.  This figure is upon the basis that only about 20 per cent of the river of interest, dividends, and profits flowing annually to British pocket-books is available for reinvestment.