By now the foundations of a huge war machine had been laid by legislative and executive action; but it was discovered that a vital factor in modern wars had been overlooked. An enormous air fleet was necessary to provide further eyes for the Allies. Congress repaired this omission by voting $640,000,000 for building 22,000 airships and for raising and equipping an American corps of 100,000 aviators.[Back to Contents]
CHAPTER LXVII
MEN AND MONEY IN MILLIONS
The country early realized the practical effect of the legislation passed by Congress enabling the President to call on the national resources in men, money, and material for conducting the war with Germany.
The Administration's first nation-wide appeal was for money. Under the Bond Bill it was empowered to raise war funds, and proceeded to do so by floating the first issue of the "Liberty loan of 1917," this being a demand for $2,000,000,000 from the popular purse. The money raised was to provide credits to the Allied governments to meet the enormous war purchases they were making in the United States, and, like previous accommodations to them, this provision of funds was not so much a loan as a transfer or exchange of credits. American money was lent to the Allies, deposited in American banks, to enable them to buy American products. Not a cent of the Liberty loan went out of the country.
It was the largest single financial transaction ever undertaken by the United States Government. It greatly exceeded all previous bond issues and squarely brought the country to face the necessities of war finance on a huge scale. But the prewar period, which produced a high tide of prosperity, due to the unexampled calls on American industries by the Allied Powers, had revealed the enormous wealth and economic strength of the American investing community, as well as a flourishing condition of the working population. The Government entered upon the financial operation with no misgivings and the result proved its confidence in the success of the loan. Bank subscriptions were discouraged. National loans hitherto issued in war time were floated as a basis of national currency and were taken up by the banks in large amounts. But the Liberty loan was an appeal to the million—to several millions; to the man in the street, the small tradesman, the salaried class. Workers realized that in subscribing to the loan they were not only securing an absolutely safe investment, but were providing funds for wages and profits. The money they invested as a loan to the Allies was applied by them to buying American goods.
The Liberty loan was floated on May 14, 1917, in denominations as low as $50, rising to $100,000, at 3-½ per cent. interest, redeemable in fifteen or thirty years. The banks of the country, national and State, the trust companies, newspapers, department stores, express companies, and numerous corporations and firms placed their establishments and staffs at the national service for receiving applications, which came from all classes. The response flagged as the date for closing the subscription lists neared (June 15, 1917), but there was a rally at the last moment by small investors, and the lists closed with the loan greatly oversubscribed.
Germany had been watching its progress. There were lulls during the month in which the loan was under issue and Germany was eager to see in a passing slowness of response a popular unwillingness to shoulder the burden of war and an apathy that she welcomed. The people had no spirit for the war and it was largely a bankers' loan, said her spokesmen. Anticipating this criticism the Government, aided by the press, publicists, and bankers, conducted a propaganda which successfully impressed the country that a large popular oversubscription could not be misconstrued by Germany, as it would convince her that there would be no stinting of national resources by the United States to aid the Allies in encompassing her defeat. The result showed that a request for $2,000,000,000 had been met by a response of $3,035,226,850 from over 4,000,000 investors, mainly for small amounts. The success of the loan, especially in its appeal to modest purses, was imposing. Secretary McAdoo of the Treasury thus expressed the Government's gratification:
"The widespread distribution of the bonds and the great amount of the oversubscription constitute an eloquent and conclusive reply to the enemies of the country who claimed that the heart of America was not in this war. The result, of which every citizen may well be proud, reflects the patriotism and the determination of the American people to fight for the vindication of outraged American rights, the speedy restoration of peace, and the establishment of liberty throughout the world.
"The Congress pledged all the resources of America to bring the war to a successful determination. The issue just closed will serve as an indication of the temper and purpose of the American people and of the manner in which they may be expected to respond to future calls of their country for the necessary credits to carry on the war."