In the early 1920s, the State Department began to review proposed U.S. loans in foreign countries to make sure these didn't undercut U.S. diplomatic objectives.
Among other things, State frowned on loans that could be used by foreign states to buy armaments. State wasn't very successful in deterring these types of loans. In his history of the program, written in 1950, Herbert Feis noted, that
...borrowers and bankers were seldom naive enough to place before the state Department a loan prospectus which stated that the proceeds were for armaments or other military expenses.
Moreover,
Borrowers never explicitly asked for dollars to buy armaments or support armies. They sought loans for other purposes, and paid their military expenditures out of other funds.
Ultimately, the program
...did not significantly affect the state of armaments, and it did not prevent American capital from providing future aggressors - Germany, Jpaan, and Italy - with the industrial base for their military program.
Other elements of the review program were more successful:
Trivial though the incident was, this account of the part played by the American Government in guiding the flow of American capital abroad should not omit one example of diversity.
In 1925 the Pilsner Brewery of Czechslovakia proposed to sell bonds in the United States. The State Department frowned. In the days of constitutional prohibition, it would have been hard to let the transaction pass. Hence, the bankers were informed that the transaction was "of doubtful propriety in view of the spirt of the existing law."
So it turned out that we financed the great steel and aluminium factories of Germany, and that we provided the means for reconstructing the Italian shipyards that built the cruisers that had to be met at Taranto. But we abstained from providing new vats for Pilsner beer. Perhaps the panjandrums of historical theory, like Marx or Toynbee, have an easy explantation for this. But the rest of us can only conclude that Puck was roaming through the corridors of history in that decade.
Herbert Feis, The Diplomacy of the Dollar, pgs 30-33.
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