Evening star., 1932-01-11
Former Agent at Lima Testi-
fies Commerce Department
Urged Optimism.
CRITICAL TESTIMONY
PROTESTED BY BOLIVIA
Former Diplomat Says Probe Would
Have Shown Loans to Two
Latin Nations Unwise.
BY the Associated Press.

A former American commercial at
tache at Lima, Peru, told today of re-
ceiving reprimand from the Com
merce Department for sending pessi-
mistic reports of the financial conditions
in that country.
At about the same time Oliver c.
Townsend was telling the Senate
Finance Committee of this, the Minister
of Bolivia was protesting to the State
Department against suggestions that his
country would not liquidate its obliga-
tons. His note described such testi-
mony as "unfriendly."
Townsend said he had been instructed
in a Letter from Thomas R. Taylor, as
sistant chief of the Bureau of Foreign
and Domestic Commerce, that opti-
mistic reports were needed.
Made UnfavorabIe Reports.
Earlier, Lawrence Dennis, q former
officer in the American diplomatic
service, now connected with a New
York banking house, had told the COM
mittee of unfavorable reports he had
sent his company when it was con-
templating Peruvian and Bolivian loans.
Minister Luis Abelli of Bolivia told
the State Department today the present
unhappy economic condition of his
country had required temporary sus-
pension of payments of interest and
sinking funds on the bonds, but that
the Bolivia government had every in
tentlon of resuming payments
The statements to which he protested
had been made In testimony before the
Finance Committee in its foreign
securities investigation.
In his testimony Dennis said Bolivi-
an financial conditions were chaotic
at the time loans were made to that
country. He agreed with Senator John
son OF California, sponsor of the in
tions there and in Peru would have
shown the loans were unwise and like
ly to default
Views Caused Debate.
He added that he reported these
conditions to j. and w. Seligman Co.
and that his views on Peru caused a
constant debate" with his company.
They wanted to convince me, and
I think they believe themselves, the
loans were sound" he said.
Dennis predicted an agreement would
be made to pay off the bonds on the
basis of 10 or Is cents on the dollar.
He said the bankers would Ibid up
the market" on bonds while they sold
the securities.
The banking house, Dennis added,
might lose a few hundred thousand in
holding up the market. but this would
be debited as an expense in marketing
the bonds.
Earlier at todays hearing a letter
written in 1925, by S. Parker Gilbert,
then agent general for reparations, ex
pressing "amazement at the reckless
ness of American bankers in selling
read before the committee by Senator
Johnson
Previous testimony has shown mil
lions of dollars Of German securities
were sold in this country since the let
ter was written.
Clearly Instructed, He Says.
Townsend declared he was clearly in
,tructed that optimistic reports were
needed from Peru. He said he had come
as near a warning in his reports as he
could of the weakness of bonds being
doated in America for that country.
These bonds, totaling S100 100000,
Are now in default. Townsend was at
Lima from December, 1926, to Decem-
Der, 1929. He submitted memorandum |
which he wrote February 10, 1927, about |
4 dinner given in Lima by S. A. Ma
yinnis, former American Minister to |
Bolivia, who, according to previous tes- |
,imony, aided in negotiating the Pc
'uvian loans.
The memorandum, read by Johnson,
aid the dinner was "a fair sample of |
what the local society folk are treated |
entertainment by pro-
noters seeking favors of one sort or
mother from the Government"
After the Senate convened, Senator
Dill. Democrat, Washington, arose to
lenounce the methods bankers had
lsed in floating foreign securities. He
attacked statements be-
ore the committee that private debts
re sacred but public debts are political
when bankers reach the sordid
Iepths Of saying that private debts are
acred but public debts are political I
remble for the future of my Govern
aent," Dill said