Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-07-24
BY PRESTON S. KRECKER.
'ecisl Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, July "a. Political
events frequently have interesting roper
cussions in financial markets. Appar-
emily 1t is far cry from the London
naval pact to Wall Street finance, and
yet the relationship Is actually very
European government and corporation
bonds listed on the New York Stock
Exchange Immediately following the
news that the United States Senate had
ratified the treaty.
Many of the better known foreign
bonds sold at new high prices for the
year when all doubt regarding the fate
of that famous compact was removed, a
, result for which American investors in
foreign bonds may thank their Sem
ators.
AS a matter of fact, everything which
tends to establish the security of Eu-
rope is an additional guarantee that
bonds sold in this country by European
nations and corporations will be met,
principal and interest, as due.
American Investments Abroad.
That is a matter of considerable i'm
portance to American banks and prl-
vate investors, who have invested bill
lions of dollars in foreign securities,
Europeans and other borrowers abroad
have been selling bonds to us for sew
eral years at a rate of about 81 500, 00O,-
600 year. In the first six months of
the present year they sold us approx
mately $3.50, 900 Of bonds. =
A mistaken idea is abroad in certain
parts of this country that we should
not lend our money to foreigners.
Some folks believe foreign bonds are
something to be Stunned as bad busi-
ness. They think we should spend all
of our money at home. That spirit was
especially manifest when the recent
German reparations loan was about to
be put on the market, but it crops out
periodically whenever foreign loans are
under discussion.
1t is undoubtedly true that all for
eign loans offered for sale in this
country should be scrutinized very
carefully by our bankers before they
try to interest American investors in
them. That is not, however. because
they are foreign bonds. In fact, the
very same precautions should be taken
when domestic issues are offered for
sale. A bad debt is bad debt, whether
1t is domestic or foreign.
Quality Of Foreign Loans.
There is nothing inherently undesir-
able in a foreign loan as such. The
only question should be whether the
security behind it is good. The respon-
sibility of determining that question
rests on the shoulders of the American
bankers who underwrite foreign loans.
An analysis of defaulted bonds probably
would reveal that the vastly prepon-
derant percentage of bad investments
has been domestic securities.
AS a matter of fact the investor IN
foreign bonds has the benefit of one
curb which does not function over do
nestle issues. and that is certain SUI
pervision by the Government in Wash
ington. Ever since the war brought
horde of foreign seekers for credit to
American shores the State Department
has exercised the right to ban a pro-
posed foreign loan II it saw fit. The
Government has consistently consulted
with bankers regarding every foreign
| loan publicly offered. 1t satisfies itself
on several points before sanetioning
, such loan-whether the country seek
: ing the loan has ever defaulted on its
foreign obligations, whether the govern