Evening star., 1931-12-27
BY FRANK H. SIMONDS.
7 LEVIED with the slightest degree
! Of detachment, the storm in
" Congress over the Hoover NOR
' atorium and the underlying


This forensic battle over the debts mus
resemble struggle as to the ownership
Of a cargo embarked upon ship ALREADY
burning at sea. AS the debate on Capt.
tol Hill grows more furious, the progres.
of the flames in Europe becomes more
rapid
Irritation and disgust awakened BY
the disregard of facts and lack of re.
Straint in the language of certain Con-
greSSmen should not draw attention
from the basic fact 1t is true that the
whole congressional episode in the END
can have no immeCaite value, but it /;
no less true that protection for the fu.
ture may result from the exposure O.
the truth as to the past.
Today the debate is going forward
over the question of whether it Woulc
be wise to reduce or even cancel tht
war debts owed by our allies of the
great conflict in order to save The
private investments which were made
chiefly in Germany, but also in Europe
generally after adoption Of the Dave!
plan in 1924. Congress is endeavorine
TO prevent any form of debt cancella
ton which would help the private in.
vestor but mulct the public Treasury
and the taxpayer.
1t is perfectly true that in theory
debt cancellation would put the burden
of interest and amortization of sum!
lent the allies upon the shoulders Of
the American taxpayer and relieve the
European taxpayer of the load Since
reduction Of reparations in equa
amount would accompany this process
the German taxpayer would be simi.
larly relieved. Only America woulc
then be called upon to discharge thi!
considerable burden Of the European
conflict
1t is similarly true that removal o.
the debts by cancellation would-agair
IN theory-lncreaSe the value of thu
private investments in Germany. For
relieved of the burden of reparations
the Germans might be able to carry
the load of these private obligations
And it is obvious that all who hole
those securities are interested in any
such cancellation.
Laying aside for the present the
demagoguery of much of the congress.
Slonsl cloquence, it is, nevertheless
true that the main indictment is vel
founded. Assuming, without the small.
est warrant in fact, that the making
OF the Dawes plan marked the decisive
turn In Europe and that hencefortI
peace and order were to prevail, tn,
great banks and most bankers of New
York led and encouraged the American
people IN an orgy of buying of Euro
pean securities. Hand in hand Will
this security buying was the accept
ance by banks of short-term German
paper.
The banker deceived himself and hi
fellow couhtrymen about the European
situation. He guessed wrong and when
IN 1880. the worldwide economi
smash was accompanied in Europe b.
renewed Franco-German political ten
sion, the banker found himself in th
situation of having sunk some billion
OF American money in Central Euro
pean securities and short-term loans
He was utterly without defense. Their
was not one word of Justification will
which he could face his customers WhC
had trusted his judgment.
Passed on to Buying Public.
He had not been a criminal thi
banker, but he had been a fool beyonc
all possible belief. But many in Con
gress and the larger part of the Amer
lean people seem satisfied that he wa
a knave and not fool.
The difficulty of the bankers pun
lshment is tWc-fold In q larger meas
ure it is not possible to get at tn
banker at all. because he acted only a
distributing agent. The great bank
ing firms have bought great blocks O
German securities and passed them OF
TO tte investing public. 1t is this pub
tic which stands to lose if German,
GOES not repay private loans.
In the second place, many banks ar
oVerladen with German securities OF
tn
Short-term paper. If it were once es
tabllshed that Germany could not repa,
TINS Shcrt-term item in a reasonably
brief time, the consequences could b,
serious in the extreme These conse
quences would not be serious for tn,
bankers exclusively or even chiefly. TIL,
effect would be felt by millions who ar
investors in all forms of securities, for
elgn and domestic. Certain bank
would almost inevitably fail unless tn
Government intervened.
Thus Congress cannot now get a
the financial leaders who were respon
sible for the present trouble withou
lnf1icting enormous injury upon
wholly innocent public. And all i
can do to the flnanciers in practice i
TO expose them as having been guilt
OF the most incomprehensible mis-
judgment
Underlying all this snarl. however |
the reality of broader and more Vita
world situation. Both war debts an
commercial debts are based upon
Europe which is visibly steadily an
unmlstakably sinking more and NOR
deeply In moraSs of political an
economic trouble. Germany. the kew
) stone of the arch, is patiently on tn
edge Of financial bankruptcy and 90
lltlcal upheaval. She cannot paw eithe
reparationS or private obligations now
nor Is there any prospect that she cal
90 II In any time today calculable
Reputation Possible.
In this situation Great Britain. Ital
ana Belgium, the main beneficiaries @
German reparations other than France
ana our chief debtors on account @
war loans, lacking German payment
cannot pay us. Under their respectiv
debt settlements they are entitled t
seek partial moratoriums from us anc
had President Hoover not created
general standstill, would have bee,
forced to take advantage of thes
provisions. II and when the Hooye
moratorium ends they certainly wi
TAKE that course. Any effort to pres
them unduly would force them int
open reputation.
France can pay, but France will no
pay, because she holds that her obliga
: tlon is binding only as Germany pay
her. And, because of her legal positio
under the treaties, France can prever
any payment by Germany of privat
loans save with her consent. So. eve
II Germany could pay private loan
France could veto that process whi]
reparations remained unprovided fo
Thus, in substance, France is in a posi
: tlon TO tell the United States that
cannot collect private debts from Ger
!, many save as France collects reparation
debts. And as we press France fc
debt payment France will press Ger
= many for reparations, and Frenc
= pressure will still further accentuat
l German chaos.
! Engaged in Suicide.
The brutal truth about the whol
! problems Of debts, both governments
Q and as the result of private inyestmer