The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1931-12-10
HINT FOREIGN
BONDS INVOLVE
BANKING GOUGE
Senator, Demanding Probe,
IntimateS He Can Prove
u. S. MulCted.
CHARGE MARKET KlTING'
Public High PRESUMED in
Blue sky Propositions,
Observers Say.
BY WILLIAM PHILIP SIMMS
Soripps- Howard Foreign Editor

BY WILLIAM fHlLlE OlhNO
Scripps-Howard Foreign Editor
WASHINGTON, Dec. 10.-Behind
Senator Hiram Johnson's demand
for a congressional investigation of
the deluge of foreign bonds sold in
this country lies a story of revolu-
tions, toppled relationships and dy-
nasties that have cost American
investors literally billions of dollars.
What the Californian seeks to
bring out, among other things, is
why such colossal sums we're loaned
TO tottering governments-bill of
dollars worth of foreign securi-
ties being unloaded on confident
purchasers within a few months of
these governments overthrow.
The senator intimates he will be
able to show that in many instances
the bankers commissions from the
sale Of these bonds we're enormous.
A glance at the daily market quota
tions suffices to show the depth to
which many Of these securities have
fallen.
Latin American bonds particu-
larry have been hit hard. One
batch of these, with a par value of
$lOO,OO0,0OO, today is quoted around
100000, representing a paper loss,
at least, of approximately $92,000,-
600 to the original purchasers.
Old Charges Aired
Other bonds, which sold around
80, now are quoted at from So to
SIS or $40.
More than a year ago Lawrence
Dennis-former charge daffaires in
Nicaragua and who resigned to en-
ter large banking house in New
York-made the charge that bank
ing Syndicates deliberately had
'jazzed up" the foreign security
market in this country and then
'unloaded."
The height of the prosperity
wave, he said, was "the heydey of
the foreign bond racket" COMPETE
ton was keen among the houses
sponsoring such loans. Bidding for
new speculative foreign issues was
spirited The group which could
go tarthest, or thought it could, in
jazzing up the credit of the Dor
rowers,' got the business.
Called Market Rigging"
THE more speculative the ISSUE"
he added, "the larger the spread for
the bankers"
This practice Dennis called mar
ket-rigging." And while he had
found that British concerns frowned
upon it, "our bankers, who are more
imbued with the spirit and the
methods of the higher salesman
ship, claim the new issues need ar
tiflcial support for successful place
ment One might, of course,
query: Successful for whom?"
Nations which were unable to bal
ance their budgets and whose finan-
cial structures were unsound. Den
mis- indicated, had little difficulty
in obtaining huge loans in this
country. The American SyndicateS
utilized sunshine propaganda" and
''unloaded' on ready purchasers.
Mentioned 10 RevoIts
President Hoover, in his message,
pointed out that in the last two
years there have been nineteen rev.
olutions, and fourteen countries
have been unable to meet their ex-
terror obligations.
AT least a dozen of the revoltS
mentioned by the President were
south of the Rio Grande. Argen-
tina. Brazil, Chile, Cuba, Ecuador,
Bolivia, Peru, Paraguay, Venezuela,
Salvador, Guatemala, Honduras and
other Central and South American
republics have suffered political up
heavals.
Many OF these revolutions, Latin
Americans charge, have been linked
closely with foreign loans. Die
tators, self-perpetuating presidents
and political cliques have borrowed
lavishly to bolster themselves in
power.
MOulu frODe frOpaganua
Not infrequently. it is claimed, the
proceeds of some of these loans, in
stead of going into public enter
prises, have gone largely for po-
litical support. And when the loan
market finally shut down on the
borrowers, their regimes fell.
1t is into all such deals involving
the loss of billions to the American
public who bought foreign securities
in good faith on the sunshine
propaganda of the responsible syn
dicates, that Senator johnson would
probe.
Not counting the $4,000 600, 900
war debts which European powers
owe the United States, foreigners
owe private investors in this coun-