Evening star., 1932-04-24
BY GASToN NERVAL.

r READ a few days ago, printed in
parallel columns, two interesting
stories on the front page of local
4 paper. One was an account Of ref
erences made by Gov. Roosevelt, In
broadcast speech, to the Indebtedness
of New York State. The other reported
a special meeting of prominent bankers
and financial experts, in the State De-
partment, for the purpose OF establish
ing an organization to protect American
holders of foreign securities
The reader may have some difficulty
in discovering the connection. Yet, If
he bears in mind the explanations
offered by Gov Roosevelt for the huge
Indebtedness of his State and the
causes which provoked the gathering in
the State Department, the difficulty will
disappear.
The Governor related how in the
years of prosperity" the gentlemen Of
Wall Street had embarked in an orgy
Of money lending to the State authori-
ties. Without investigating the real
ability of the State treasury to incur
such large financial obligations-or per-
haps knowing that it was borrowing be-
yond its own capacity-the bankers
offered all kinds Of long and short term
loans and credits.
Tempting Offers.
The State was almost dragged into
borrowing by the tempting offers OF
bankers, who suggested and promoted
public works, development of natural
resources and financial enterprises with
the sky as limit.
Of course, the bankers unloaded the
bond issues upon the public. Their in
terest, thus, ceased when these were
marketed and their commissions re-
ceived. But when the world crisis set
in and New York State, like every other
State or Nation, felt it in a particular
way in the alarming decrease of its in
come, the excesses of reckless borrowers
and reckless lenders had to be ac-
counted for
Once more, of course, the public is
forced to pay the fiddler Private in
vestors who had given the money to
the bankers now find themselves with
their hands full of deprecated bonds
And the taxpayers Of the State in gen.
eral are expected to pay larger taxes to
cover the Governments obligations.
The story, with little variation, Is the
same as that of the famous Latin
American loans Of the last IL years
With the aggravating circumstance that
the economic crisis having hit them
harder, and their obligations being
larger, the Southern countries have been
compelled, with very few exceptions
temporarily to stop payments on their
debts. And so the American holders oi
such securities have been made the
principal victims of the reckless borrow
ing to which careless American banker,
contributed.
Not long ago had occasion to discus.
the Latin American debts, commenting
upon the disclosures of the recent sena-
torial investigation conducted by Sen
ator johnson. I said at that time
that 1t was not only the responsibility
of the Latin American governments fol
contracting loans beyond their means
but also that of the bankers for induc'
ing them to do so, that the Senate in
vestigation had revealed.
UnethicaI Practices.
In this instance, moreover, the con.
duct OF the bankers appeared even more
ccndemrable. for the senatorial in
quiry disclosed certain practices
among which the bribery of foreign
government officials and the conceal
ment Of facts from the investors wert
not the least important-very much II
conflict with the ethics Of money lend
ing.
From the lesson of such unfortunat,
experiences as those revealed by thu
johnson inquiry, as / said at the time
the necessity OF avoiding similar occur
rences In the future emerged clear