Evening star., 1927-10-17
LAW ON FOREIGN
LOANS IS SECUTED
Controversy Centered About
PermanenCy of Present
U. S. Policy.
BY DAVID LAWRENCE.

Senator Glass says the Department
OF State has no authority to veto for
eign loans-and the Department of
State agrees with him. The Virginia
Senator states that it would be un-
constitutional to pass a law placing
an embargo on credits to foreign gov
ernments--and again most officials
of the Government who have dealt
with the subject say the question
will never need to be handled by law.
The controversy that has arisen
over the State Departments policy in
reference to foreign loans is solely as
to when the policy should be termi-
mated. Neither President Harding nor
Secretary of State Hughes, who orig
mated the policy, ever contemplated
that it would be permanent. 1t was
1naugurated merely as a step i'll the
foreign policy of the Government in
dealing with war debts and Just as
many things can be done by common
consent without law or authority, II
all parties agree, so the bankers vol
UNFAIRLY agreed to let the State De-
partment know when they had any
foreign loans coming.
Merits Not Passed On.
The State Department specifically
declared that it would merely state
whether or not it had any objection
to the floating of the loan and this
was not to be taken as in any way
passing on the merits of the loans.
When the United States was en-
deavoriug to bring European nations
in line in the matter of war debts, the
American bankers thought it patriotic
not to lend money to countries which
were declining to fund their debts to
America. The Department of State
q
than any law to veto such f1otations
even if the bankers had not agreed
with the departments policy. 1t was
the power of public sentiment and
moral suasion.
If the President or Secretary of
State had seen fit to issue a statement
appealing to the American people not
to let their funds go to foreign coun.
tries which had failed to recognize or
settle their war debts, the chances are
that the fiotation Of such loans to
American investors would have been
difficult for the bankers.
So on all sides it has been agreed
that where the Department of State
wanted banker cooperation on broad
questions of international policy, the
bankers would follow the wishes of
the Government. The fact that the
State Department had no legal power
IN Lne ndLLer mas long Deon recognized,
in fact, on two occasions, loans were
fioated despite the frowns of the State
Department and no penalty was ap-
piled nor was any public comment
made by the Government.
Legislation Discussed.
There has been talk of law to pre-
vent indiscriminate lending to foreign
countries, but the thought back Of
this was to prevent loss to American
investors and to prevent the Govern
ment here from becoming in any way
a guarantor Of foreign loans. 1t was
assumed that under the license sys-
tenn some constitutional authority
would have been found, but neither
the Harding nor Coolidge administra-
ton has ever encouraged the idea Of
legislation.
When the French debt question is
settled, and possibly before, the policy
of passing on foreign loans will have
been terminated. In fact, If invest
ment bankers had ever decided to pull
out Of the informal truce entered
into under the Harding administra-
ton, they would have found very little
resistance against their course except
at moments when critical negotiations
with foreign governments were in
progress.
fCopyright. 1927