Evening star., 1932-04-24
VALUE OF FOREIGN LOAN
CONTROL BY US. DOUBTED
Formation of Independent Groups Called
Best Way of Protecting
American Investors.

And the only appropriate way to avoid
them seemed to be the establishment of
an institution which would exercise
some sort of control-if only a moral
control, based on publicity-upon all
foreign loans floated in the United
States
The meeting last week at the State
Department Of leading banking au-
thorities for the purpose of forming
such an organization Is an evidence
OF the fact that the disclosures of the
Senate investigation have not been
made in vain. 1t is reported that the
meeting discussed the possibility OF
creating an institution along the lines
of the British Corporation OF Foreign
Bondholders, which has rendered such
splendid service on the other side OF
the Atlantic.
Is the proposed institution to be a
Government-contro one? Or one
supervised by the bankers themselves?
or is it to be an independent association,
made up of prominent citizens-prom-
inent for their honesty, independence
and financial knowledge?
An Important Point.
Yet, this is a most important point
to decide The whole success OF the
scheme may depend upon which one
of the three roads is followed. One OF
the press communicates makes reference
to the fact that the British Corpora
ton of Foreign Bondholders has made
excellent use of the British diplomatic
service in such connections" and ADDS
that sit is assumed here that the state
Department might prove equally uselul
to American bondholders."
This seems to indicate that the advice
of Senator johnson may be followed.
AS will be remembered, at the conc!u-
sion of his spectacular inquiry the
Senator introduced three bills TO regu-
late the flotation of foreign bonds
through Government control. The
first REQUIRES full publicity for all por-
posed loans, the information to be hled
with the Commerce Department. The
second provides for the establishment
of a Federal foreign loan board with
power to scrutinize all foreign loans
proposals and reject them at its own
discretion. The third imposes stiff
penalties for any one floating the bonds
of foreign country already in default
to the United States.
Senator johnson, as he himself told
the Senate, would make the Govern
ment the arbiter IN the offering OF Tor
eign securities" Now. would this be
the proper cure? 1t hardly seems SO,
If one considers the dangers and the
political complications which it might
involve To my mind, it would be
cure even more dangerous than the
disease.
Would Add to Charge.
In the first place, the charges Of
American imperialism" and American
Dollar Diplomacy" which have been
so frequent in the past, would find en-
couragement in the power given the
State Department to say the final word
on loans and credits to Latin American
governments.
Would not private foreign finances
appear thus supervised in this country
by the Washington authorities? On
the other hand, would the statesmen
at the White House and the State
Department be able to convince the
world that they we're completely i'm
mune to the influence of the Wall
Street magnates, whose financial opera
| tons abroad they had to pass upon?
Who could deny the perils Of such
close interrelation between politics
and finances? Let us only mention two
! typical and opposite examples.
Let us suppose that there is Latin
American government which the United
States does not recognize In view of
existing treaty provisions. Let us sup
pose that such a government applies
| to Wall Street for funds. Both SUPPOSE
tions are perfectly possible. and the
latter one unavoidable, as New York
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