Evening star., 1932-03-27

FOLLOWING a senatorial in
l. vestigation which abounded in
front page disclosures, it has
l. been proposed in the Upper
House Of Congress that loans
to foreign governments should be placed
under the control of the Federal
authorities.
The investigation was primarily
concerned with the loans extended by
New York bankers to some Of the Latin
American governments, so the sug-
gestion for supervision Of further loans
by the State Department is under
stood to be directed mainly to control
financial relations between Wall Street
and the Latin American capitals.
Although the world Wilderness OF the
present economic depression accounts
for much of it, the figures concerning
the status of those loans and the
methods followed in their negotiation
which the senatorial investigation dis
closed-have attracted the attention
of the public to the need of remedytng
a situation so full Of financial and
political complications.
BY January l of this year defaults
on Latin American bonds held in the
United States amounted to $85O0OO,
600, according to list compiled by the
Senate Finance Committee. This In
cluded government, municipal and local
loans contracted in the last few years
by nearly all the countries on the other
side of the Rio Grande.
Shrinkage Of Value.
In the meantime, the value Of Latin
American bonds listed In the market
has shrunk to unusually low levels.
Although this is principally a conse-
quence of the crisis, and investors in
Latin American bonds are not alone In
their misfortune, this depreciation IN
value has added to the seriousness OF
I the situation.
The conclusion Of Senator Johnson's
spectacular investigation of Wall Street
deals with Latin American governments
may be characterized in five words:
Reckless borrowing from reckless
lenders.
1t is not only the responsibility Of
| those governments for contracting
loans beyond their means, but also
that Of the bankers for inducing them
to do so, that the Senate investigation
has brought to the limelight.
For the last 10 or Is years, and after
Europe had been eliminated as
market for their bonds, the Latin
American countries, almost without
exception, have been living in an orgy
Of foreign loans, chiefly coming from
the United States.
! At an astonishing pace, with a
! sightlessness common to both borrowers
| and lenders, Wall Street sent to Latin
| America, in the period which has just
| concluded, flood of millions of dollars,
| linked with unsound securities and in
vestmentS the returns of which were
, not properly estimated.
Latin American governments were
materially dragged into borrowing by
| the tempting offers of Wall Street
scouts, who wished to develop all
kinds of natural resources in those
countries, uplift the national standards
Of living and in general provide them
| with the most modern luxurious and
expensive comforts Of machine civiliZa-
ton.
For these enterprises, without which
the young Latin American republics
were slowly but normally progressing,
/ money was lacking within the country
! itself. But Wall Street was always
ready to provide it, most willingly, with
great credit facilities. Not only that.
Wall Street also furnished the experts,
the constructing companies, the building
materials, the machinery.
Profits Beyond Power.
| The Latin American countries thus
set loose in trend of life out of pro-
portion with their own economic
rhythm, pledged to realize profits
which the normal development of their
means of production could not afford
the banking transactions which made
possible the development enterprises"
became really financial adventures of
highly speculative nature.
The slightest hindrance, the least
failure in the original plan of ac-
complishments, had necessarily to
upset the whole Of this artificial
situation. The more so, when to the
evil Of overborrowing the mischiefs