Evening star., 1933-12-24
Foreign Bondholders Unite.

Unfortunate American possessors of
between $4,000, ,0oo,0oo and $4,000, ,o0o,-
900 in foreign bonds now in default or
threatened with default have Just
formed the Foreign Bondholders' Pro-
tective Council, Inc. The organization
was perfected under Treasury auspices
at Washington, though it is in no sense
Federal agency.
The new securities act gave the Presi-
dent '7--Enissive authority to create a
governmental corporation to look after
American holdings Of foreign bonds, but
Mr.. Roosevelt concluded the work could
be more usefully entrusted to a body of
private citizens. Chartered under the
laws OF Maryland, the Protective Coun-
Gil has elected Raymond B. Stevens, a
former Federal trade commissioner and
financial adviser to Siam, as permanent
president. The board Of directors in
cludes Newton D. Baker. Charles Francis
Adams, Frank o. Lowden, Philip La
Toilette. j. Reuben Clark, Roland S.
Morris. Thomas D. Thacher, Pierre Jay
and others Of prominence, representing
various sections of the country and
political affiliations.
The council will render assistance to
American investors in all defaulted pub
lie bonds issued by foreign governments,
states or municipalities, but will not
concern itself with obligations of pri-
vate foreign corporations. The council
will be non-protit making. It's directors
serve without compensation. Working
funds will be raised by contributions
from bondholders, individuals, banks or
business concerns, and possibly from
endowed foundations.
The councils initial statement re-
minds holders Of bonds in default that
worldwide depression conditions make
prompt resumption Of interest and sink
ing fund payments impossible. Debtor
countries, on the other hand, are
warned not TO look upon the formation
OF the council as an indication that
American bondholders are ready to ne
gotiate permanent settlements on the
basis Of present impaired capacity of
debtors to pay. Patience on both sides
and the recovery of world trade" the
council points out, "are necessary pre-
requisites to satisfactory negotiations
Tor resumption or settlements"
The Federal securities act. under the
aegis Of which the Bondholders' Pro-
tective Council is founded, has as its
underlying principle, Let the seller be-
ware" Hitherto, it has been the buyer
OF securities who had to beware" It
would be an exceedingly useful adjunct
OF the councils activities If they could
include the systematic exercising of
certain moral pressure on so-called
"houses of issue"-that is, banking con-
Germs which specialize in floating for
eign bonds in the United States and too
often in foisting them upon unsuspect-
ing American investors. Recent revela-
tions before Senate investigating COM
nnttees disclosed some tragic facts on
this score. In return for fat commits
sions, banks and bankers Of repute have
not hesitated to sponsor in this country
issues Of bonds which turned out hardly
to be worth the paper on which they
were engraved. The rotten fruits of
many Of these transactions are included
in the billions Of vanished dollars which
have now come under the protection Of
the Bondsolders' Protective Council.
The latter will render an inestimable
public service if it can preserve Ameri-
can citizens from exploitation BY
financiers whose interest in foreign in
vestments too often ends with the col
lection of their fees.