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Ad on Israel Loan Guarantees

February 10, 1992

The advertisement "Myths & Facts: Why the U.S. Must Not Provide Unconditional Loan Guarantees to Israel" is replete with factual errors (Part A, Jan. 23).

First, Israel's request for loan guarantees is purely a humanitarian project to help resettle the enormous influx of Soviet and Ethiopian immigrants. Attempts to link loan guarantees to the peace process distort Israel's humanitarian effort to provide safe and secure haven to the immigrants.

Secondly, the ad completely distorts Israel's credit-worthiness. Israel is asking the U.S. government to co-sign loans because with the government as guarantor, Israel will be able to obtain private commercial loans at more favorable interest rates and with extended repayment periods.

There is little reason to doubt Israel's ability to repay the loans. In its annual debt repayments to its creditors--international banks, private American banks, government bonds and the U.S. government--Israel has never defaulted on a loan and has never missed a loan payment.

Thirdly, the U.S. taxpayer will not pay for this program. The only cost involved is a small percent to be set aside by law in the event that Israel cannot meet its debt obligations. Israel has indicated that it is prepared to cover this cost.

Contrary to the assertions of the ad, loan guarantees to Israel have no impact on domestic loan guarantee programs. The 1990 Budget Enforcement Act has enacted rigid barriers separating the domestic, international operations and defense areas of the budget.

Consequently, the impact of any new program is limited only to its area of the budget. Even if loan guarantees to Israel do not come to pass, the budget allotment for domestic programming would not increase. And, in fact, loan guarantees to local governments are granted in far larger numbers than to foreign ones.

Finally, loan guarantees to Israel will stimulate the American economy in a number of ways. Already, a number of U.S. housing and construction firms, suffering from a depressed economy at home, have been awarded contracts in Israel. In 1990 alone, U.S. companies won 75% of tenders, leading to contracts worth an estimated $250 million.

ALAN WALLACE, Chair, Civil Rights Committee, Pacific Southwest Region Anti-Defamation League

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