Evening star., 1930-06-17
MAY HALT BOND TALK.
Senate Move May End State Depart
ment Comment.
NJ DAVID LAWRENCE

OF more than passing importance Is
the resolution adopted by the United
States Senate requesting the Depart
inent Of State to explain under what
sanction Of law does it base It's right
either to approve or disapprove invest
ment securities offered for sale in the
money markets of the United States
by foreign governments, corporations or
individuals"
The issue was raised particularly In
connection with the recent announce
naent that the Government Of the United
States did not disapprove of the German
reparations loan. thus implying to many
people that 1t favored the transaction.
senator Glass Is not opposed at all to
the State Departments position in this
particular matter, but he does not see
what business 1t is Of the American Gov
eminent to say anything about 1t at all.
AS matter Of fact, the right of the
state Department to approve or diSap-
prove foreign loans of any character has
never been assumed by the department
except by implication. The usual course
In the past has been not for the depart
nent to approve or disapprove the fner-
It's OF q loan, but simply to say that II
had no objection to the flotation on the
grounds Of public policy.
Original Idea Extended.
The practice originated with the
Harding administration when various
European governments were not dis.
posed to fund their war debts with the
United States, and public opinion In
this country was opposed to the lending
OF money to foreign countries whose
governments were not ready to begin
payment OF their war debts to America,
informal conferences between New
York bankers and the Department of
State resulted in an understanding of
an entirely voluntary character, backed
only by the sanction of public opinion
at the time. It provided that, as @ mat
ter OF courtesy, the investment bankers
would In each case notify the DEPART
ment OF State of loans they intended to
noat, so as to give the department an
opportunity OF interpoSing an objection.
No penalty was provided in the event
that the objection Of the Department
Of State was ignored, sbut while the war
debt questions remained unsettled not
. single instance Of disagreement of
this kind between the Department of
State and investment bankers occurred.
Later on, however, the same princi-
pie OF objeeting to foreign loans on the
ground Of public policy was extended by
the Department of State to cover loans
intended for foreign corporations tied
UP with government monopoIies Her
bert Hoover, as Secretary of Commerce,
was the sponsor of this policy, and
there were q number of instances of
dtscord between the investment bank
ers ard the Department of State, which
resulted IN at least two cases of total
disregard by the bankers of the OBJ
1ections made by the department.
1t has always been assumed that,
Irrespective Of the fact that the Depart
fnent Of State was not operating under
the specific authority of any law, 1t
could publicly announce its objections
and interfere considerably with the
Notation OF loan to American investors.
While the bankers at no time sought
the moral support OF the American
Government for their loans, they re-
allied the danger Of It's moral oppo-
sttion.
Monopoly Loan Fights Rouse Ire.
When the Departments of State and
Commerce, acting together, were trying
70 prevent the fiotation of loans to for
eign corporations or governments en-
gagged in q monopoly in the production
or marketing of an essential commodity,
on the ground that American conSum-
ers would be mulcted, there was much
discussion OF possible legislation specific
ally prohibiting such loans. 1t was the
threat Of such legislation which kept the
investment bankers from kicking over
the traces and making public protest
against the two departments in ques-
ton, though TO be sure the murmurings
of the New York financial district
against Government interference with
Hs5vate investments were frequently al
She boiling point.
The effect OF the Senate resolution
may be to put an end to the custom al
together. until such time as the Govern
rnent feels it is necessary to exert simi-
lar power. and in that event IL will de-
pend upon the acuteneSs of the ,,tuation
whether Congress will authorize tht
Department Of State to pass upor
foreign loans.
Copyright. 1896