Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-26


Trust Of Chicago, and many others that
might be named, IS such that they have
not depended on the returns of one or
two years to maintain rates of dividends.
They have either revised their capital
structures so that the element of fixed
debt has been eliminated or modified
or have set aside in special reserve
account proportion of the earnings Of
prosperous years In these reserves
stockholders have a proprietorship. It
was for such periods as the present
that they were established. Now Is
the time to draw on them.
The first fruits Of the Hoover debt
holiday" have been disappointing,
although much greater accomplish
ments for the peace of the world than
had originally been conceived promise
to blossom shortly. 1t is as important
that France and Germany create a
political entente cordial as that means
be discovered for relieving the Reich
of its present financial embarrassment.
Not the least of the gain that has been
made by reason of the crisis is that Of
bringing the United States into the
open in all questions Of international
policy and of squarely, and on a parity
with other nations in conference, voic-
ing its opinions and casting its vote.
This should work great good in re-
/ moving the confusion that surrounds
so much Of the business of origination
and distribution of foreign loans In
! dollar form. No chapter in recent
/ American finance has done more to
destroy confidence in the sagacity Of
! American bankers than that covering
such loans. The investing public have
the feeling that they have been fooled
in being urged to buy all sorts of Eu-
ropean and South American issues
whose current prices emphasize the risk
i that attached to them when they were
in their prime. There has been great
lack of correct information coneering
their status In the schedule of govern
ment obligations and an almost total
lack Of sponsorship when they fell on
evil days.
Chile Unable to Pay.
Less than two months ago
recognized expert in South American
finances announced that of all loans
in the Southern Republics those of Chile
were most acceptable for investment.
Chile has just acknowledged inability
to pay current interest. The reports
of the Investment Bankers Association
on foreign securities have been extremely
casual and unconvincing. They have
shown lack of an intimate understand
ing of the economic and political back
ground of the countries whose loans
have been reviewed They were good
selling talk" That is ALL
The general policy of underwriters Of
foreign loans to step aside" when
holders of these loans were attempting
to sell them during the crisis has de-
stroyed much good will that had been
| developed over long period Of years.
This is particularly true Of German and
South America issues. Not even the
obligations of Poland, Italy, Austria, or
Hungary have fluctuated with the vio-
lence of the German government 512s
since they were sold in June, 1890.
Recently the first mortgage loans of
what is considered the strongest public
utility in Germany. one able to ride
any storm that might break over the
Reich, dropped % points in one day
on the sale of five bonds. It has not
been uncommon for foreign bonds that
had previously been given the highest
rating to be absolutely unstable In
fact, there have been situations on the
stock exchange which might we'll have
brought inquiry as to why no market
was being made for certain issues.
Domestic Financial Needs.
There is the same need for a more
conscientious setting up of the financial
structures of domestic companies. the
purchase Of whose bonds and stocks by
the public was solicited. Certain in
dustrial corporations in the past year
and half have presented statements
that expert accountants could not
reconcile and whose promising features
developed the lure for speculative profit
or gave assurance of investment
stability. The letters now being pub
lished in the newspapers from innocent
victims of too intensive and too con-
centrated selling campaigns are signif-
cant of change of attitude on the
public's part toward vendors of securities.
Andre Maurois, the French writer, in
recent article discusses business
morals from a new angle and makes
this striking statement: If people lose
confidence in the security of invest
ments, cspitalistic society will not be
able to go on" This is important in a
country like the United States, where
the gain in the number Of shareholders
in the past decade has been three and
four fold. The collective influence Of
this great army of corporation owners
can make for prosperity or for panic,
according as it is rightly or wrongly
directed.
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