Evening star., 1932-03-27
on Foreign Bonds
Seen Americans Need

Continued From Third Page)
ing factors, responsibility for which
seems too plain to pass unnoticed.
From the evidence disclosed at the
senatorial hearings, such responsibility
appears equally divided between the
New York bankers and the Latin
American governments concerned.
The bankers are to be blamed for
their oyerzealous efforts in lending to
governments beyond their capacity to
pay. They are to be blamed for the
methods employed to practically force
those loans upon the governments in
need. They are accused of having dis
regarded patent facts and repeated
warnings, some times from their own
experts; Of having bribed foreign gov
ernment officials; and of having delib-
erately deceived American investors by
presenting half-truths or by concealing
facts which investors had right to be
told.
Behind Sale of Bonds.
AS a liberal magazine puts it, "the
three series of Peruvian bonds, total
ing hundred millions, now in default,
might not have been sold SO readily If
the banking syndicates had been
obliged to publish the fact that they
we're paying half a million dollars to
the son of the President of Peru"
Many of these loans were handled
by investment bankers who acted solely
as brokers. Their interest, therefore,
ceased when the bonds were marketed
and their commissions received They
encouraged governments to borrow
mr. {hoV, fInvr could thaY
unloaded the bond issue upon the
public.
Furthermore, a prominent bank
diplomat openly made the charge, be-
fore the Senate Investigation Com
mittee, that bankers rugged the
market" to build up the price of certain
Latin American bonds which they
were interested in selling. BY the
process of dressing up the market"
they were able to artificially raise the
prics until they had unloaded their
share of the bonds.
This, and other disclosures, among
which the practices followed to bribe
foreign government officials were the
most reproachable, established without
doubt the part of the blame which
was the bankers.
As for the responsibility Of the Latin
American governments, although the
main reason for their inability to pay
is an outcome of the world economic
depression, the Senate investigation
has revealed certain circumstances
which must have necessarily influenced
the course of events. And which must
be avoided If further loans are to be
contracted in the future.
Some Of those governments abused
their foreign credit in a dangerous
way, and nearly all of them over
borrowed money in a varying degree.
Most of them were careless in the
spending of the funds thus secured.
EXtravagant expenditures was the sin
of almost every one Of the Latin
American governments which were
overthrown by revolution in the last
two years. Positively this was one of
the causes of such revolutions.
Still others misdirected the product
of the foreign loans to channels other
than those stipulated in the contracts:
internal politics, preservation of the
government in power, elections, arma-
ments, and so on.
1t has been necessary that these
shady facts be unearthed, in order that
public opinion in this country may
understand that something else than
IuSIc p6ISOLdl, peIIy pOuGlCS was
behind the Latin American revolutions
of 1880 and 1881.
And SO it has been necessary that
the dubious ways employed by certain
bankers be unveiled, in order that
public opinion may realize the amount
of ill-feeling and suspicion which mis-
conducted finances can cause in inter-
national relations.
Avoidance Of the Future.
From the lesson Of these unfortunate
experiences, one thing emerges clear,
that similar occurrences must be
avoided in the future. But is Federal
Government control the remedy?
1t seems to me that the method sug-
gested in the Senate is hardly the
solution. To give the State Depart
ment the final word in loans to Latin
American governments would only
confirm the charges, frequently made
in that part of the world, and in
Europe, that private American inter-
national finances are supervised by the
Washington government. Or vice-versa.
If the State Department were to
control the issuance Of foreign loans
IN the United States, it would be said
that the fate OF Latin American coun-
VI ItS WOulO Tie QlCLdU6S
Of Washington. Probably they would
receive more consideration from the
Federal Government than they have
in the last few years from the Wall
street bankers but, on principle from
political point of view, they could
not regard the interference Of the
State Department without protest.
In fact, the United States would be
the one to lose more, for the charges
Of American imperialism" and dol
lar diplomacy" which have been so
earnestly played up abroad in the past,
would receive further encouragement.
On the other hand, it is plain that
some sort of control is needed to avoid
the repetition of such unconscionable
acts as those disclosed by the senate
rial investigation.
Probably the solution will be found
in the establishment of private, inde-
pendent associations to disseminate in
formation regarding economic and
financial conditions In foreign coun-
tries where American capital Is in
vested. Two Of these already have
been formed.
When the American investor be-
comes accustomed to following the
advice Of independent, disintereSted
associations the problem Of interna-
ticnal finance will cease to cast a
shadow on the road of inter-Ameri-
can friendship.
(Copyright, 1922