Evening star., 1933-01-05
|DEbT REPR|SALS
BY SENATE SEEN
Johnson's Views Held No
Mere Empty Talk in Urging
Ban on Loans to French.
BY DAVID LAWRENCE.

The Senate has stood aside for three
weeks to let diplomacy work out solu-
ton of the French default of December
Is, but since the government at Paris
shows no signs of reversing its atti-
tude the guns of Senate denunciation
now are let loose.
It is not mere words either. Senator
johnson of California has sympathetic
audience on both sides OF the chamber.
His suggestion that legislation be adopt
ed prohibiting all loans hereafter TO
countries which have refused to honor
their obligations is not an empty threat.
In the mood of Congress today 1t can
be passed. This would me n that
French cities as we'll as French COM
panies would find it difficult to get
financed In America. Whether 1t would
20 to the extreme of prohibiting finan-
cial intercourse with France is doubt
full. Such step would be as injurious
to American commerce as 1t would be
to France.
Would Restrain Bonds.
But the fiotation of bonds would be
restained by the johnson proposal and
there appears little doubt here that
such a step would be constitutional: IL
was fully discussed at the time that
various foreign governments were en-
gaging in what seemed to be monopo-
listic practices in products consumed
In America and for which financing was
desired. MFR. Hoover as Secretary OF
Commerce and Mr.. Kellogg as Secretary
of State endeavored by diplomatic
means to secure compliance with the
American viewpoint, contending in their
conferences with American representa-
tives of financial interests that This
would be the only way to stop legisla-
ton imposing an embargo on foreign
loans.
These informal arrangements, where
by the State Department and interna-
tional bankers were to consult before
any loans were hoated, have been crltl-
cized by the Democrats, particularly
Senator Glass Of Virginia, as implying
guarantee by the American Govern
ment when loans are permitted to be
fioated. It is a discretionary power
for which today there is no authority
of law. The bankers themselves die
not like It and there have been in the
past sharp differences of opinion be-
tween them and the Department OF
State.
If Mr.. JohnSon's threat is carried
out, some Government agency would be
vested with the power to decide whether
a loan should be banned under the law
designed to bar loans to countries
which had dishonored their signatures
Some of these foreign loans are fire.
quently foated in London and parts OF
the issue are purchased in the United
States by investment houses. The law
would have to cover this point in order
to prevent any retail distribution OF
such bonds, and there arises the ques-
L.. -, f1N1fl1 tRa nm
lawful for individuals to buy directly
or Montreal.
Legal Question Complex.
The question of enforcing laws or
foreign loans is complex and it has
been debated ever since the investiga-
ton conducted by Senator johnson into
the whole matter of foreign bonds.
Certainly the French default has
complicated the foreign bond situation
considerably in so far as remedial legis-
lation is concerned, and now that Sen
ator johnson has been given the added
ammunition of the French government s
refusal to pay. the export of American
capital resources comes once more into
the picture as likely to bring compre-
hensive legislative restrictions, some
thing which at the moment reflects
pique over the French position, but
which may be embarrassing as economic
recovery proceeds and France ano
America are forced into common po-
sition in defending the gold standard.
The effect of the Senate speeches
may be to hasten a French payment
Senator Reed of Pennsylvania predicted
that the French press would not pub
lish the criticism expressed by the
American Senate. But it is a safe as
sumption that the French embassy is
reporting every detail to Paris, including
the possibility Of legislative reprisals.
Copyright, 1881