Evening star., 1932-08-07

Reduced to simpler terms the Gepre-
citation per bond of 81 900 denomination
is S7I6.38, compared with an average
price of issue of $971 ST. a shrinkage
of almost IA per cent. Such is the
price which American investors paid
for the privilege of what euphemiS-
tically may be termed investing in the
cities and towns of one of their South
ern neighborS, the Republic of Ar
gentina. To be sure, they are reminded
that the losses incurred by American
investors as a result of their holdings OF
real estate and railroad securities are
equal to, If not greater than, those in
Cured in Argentine city loans. While
this is true, one must not lose sight OF
the fact that the American investor
was not obliged to travel several thou
sand miles to register losses ranging up
to IA cents on the dollar. He could
have accomplished as much at home,
with less inconvenience.
Only four Argentine municipalities
sought and, found accommodations in
the American market. Many more
could have done so had they but de-
sired. Distance lent enchantment and
lack of information concerning the
financial responsibilities Of the debtor
facilitated MS efforts to secure loans
Those were the halcyon days when
everything foreign was absorbed with
unbounded enthusiasm! What mat
tered past fiscal performances, attitude
in the past toward creditors, capacity
to paw and similarly irrelevant
phrases?
Americas neighbors were quick tc
learn the true state of affairs in the
United States. They borrowed regard
less of whether proceeds from loans
could be employed productivity. Terms
which were harsh did not worry them
They, too. believed it possible that Sc
curities and commodities would rise
higher and higher. If they did not
hold such view, their North American
friends and advisers taught it to them
| The investing public continued tc
dwell in a fools paradise. Little die
they realize that, of loan proceeds
large sums were used to pay service on
existing debts In other words, new
loans were contracted to meet old ones
All was we'll as long as the stream
of gold was flowing southwark. The
state of bliss lasted less than a decade
The bubble finally burst. The boom
| collapsed. Loans stopped, productive a.
| well as others The burden had become
! too great. Debtors adopted a polcy o.
/ following the lines of least resistance
/ viz, suspension of payments, or default!
/ an institution as old as that OF LEND
! ing. an unfortunate but inevitable BY
product of the latter
| 1t is of interest to point out tha'
each of the Argentine cities which
borrowed has past" that is, eacf
| defaulted at or time or another or
~N' urit
! ton, of course, of those cities which
never borrowed. OF these, the circular
! or prospectuses descriptive of loan
could proudly proclaim that there wa
| no record of default. The prospectus
describing the bonds of one of the cities
which the American investor was In
vited to buy, tells of the municipallt.
| in question having faithfully met II
! foreign commitments for 20 years. |
| does not give the reason for thu
! seemingly excellent performance. Th
/ secret resides in the fact that the cit.
referred to had not borrowed in 2
years. 1t had borrowed before and ha'
defaulted on each occasion.
1t is misleading statements OF thl
! kind against which the investor shoult
/ be protected. 1t is said that Gov
Roosevelt contemplates advocating il
his campaign talks the organization
a body which will supervise foreigl
loans to be placed in the American
market. 1t is like locking the stabl
after the horse is gone. Moreover, ther
has been in existence in the Unite'
States, for several months, such al
organization. Reference is made to tn
American Council of Foreign Bond
holders, Inc.
Whether a political body is preferabl
| to a private group which endeavors +
operate independently Of but not neces
Sarily in opposition TO, the bank
identified with the origination and dis
tribution of foreign loans. should b
left to the investors to decide In an
event, the policy which Washington ha
: pursued in the past in regard to foreig
loans is admittedly inadequate, as thou
sands-nay, millions-of bondholder
) can testify.
(CopyTight, 1892. by North American News
paper Alliance, Inc.)