HOW DONALD TRUMP COULD FINANCE HIS WALL:
A LESSON FROM HISTORY
by Donald Goldsmith
President Trump’s glorious border wall continues to face a financing problem: Although he insists that Mexico will pay the construction costs, currently estimated at $15 billion to $25 billion, the Mexican government continues in its adamant refusal to do so. Here is a plan to cut the Gordian knot of this impasse, and to test the depths of Trump’s fervent supporters.
This approach derives from an intriguing episode in American history, the “cotton bonds” that the Confederate States issued early in 1863, at a time when the Confederacy, prevented from exporting its cotton by the Union blockade, found a partial solution to its need to obtain foreign currency in the agile mind of its commissioner in Paris. John Slidell, a transplanted New Yorker who had become a senator from Louisiana before the Civil War, had reached France after a famous episode when he and James Mason, the Confederacy’s commissioner to England, had been taken into custody by an American warship while sailing on a British ship through international waters. After nearly triggering a war with the United States, the commissioners were released, allowing them to exert their best efforts — in vain, as things turned out — to persuade the British government and the court of Louis Napoleon III to recognize the Confederacy.
Slidell well deserved his name: One of the slyest of operators, he was described by a contemporary as a man who, when in prison, would conspire with the mouse against the cat rather than not conspire at all. His daughter was engaged to marry a French banker, Frederic d’Erlanger, of the firm of Erlanger et Cie., second in importance only to the Rothschilds. The commissioner and the banker concocted a scheme to issue bonds of an unusual sort: In addition to receiving the traditional interest payments, at an annual rate of 7 percent, bondholders would be entitled to redeem the bonds for cotton (eight 500-pound bales for every £100 of face value), delivered at a Confederate port once the war ended. Since this represented less than one-third of the going price for cotton, the bonds offered Confederate sympathizers a means of supporting the cause while simultaneously expecting to reap a financial windfall.
With Erlanger et Cie. reaping a sizable commission, British and French citizens bought bonds worth $15 million ($300 million today). Before long, however, the Confederacy’s sagging fortunes, along with Union reminders that before the war Jefferson Davis had urged the state of Mississippi to default on its bonds, brought the bonds’ value to zero, leaving the bondholders with beautifully engraved certificates as a souvenir.
What does this mean for Trump and his wall? Taking a cue from the efforts by Slidell and Erlanger, Trump should create an issue of “wall bonds,” or, better, “GLORIOUS WALL BONDS,” which could carry a highly attractive annual interest rate of, say 12, or — why stint? — even 15 percent. The interest would accrue, to be promptly repaid, along with the principal, from the proceeds that the United States government would receive from Mexico. This bond issue would allow the millions of Trump supporters who believe his promises the chance to acquire both political satisfaction and financial gain. If, for example, two million of these supporters each purchased $10,000 of these bonds, $20 billion would flow into the general fund of the United States. The bondholders could confidently await an annual return on their investment many times greater than anything that a stock-market fund could provide. What could go wrong?