Evening star., 1933-11-05


will be unable to avoid discussion
i of the very important problem
of defaulted Latin American
debts. Only a few days ago the chief
Mexican delegate and foreign minister
Of Mexico came to Washington on his
way to Montevideo and the newspapers
reported that one of the main objects
of his visit to the State Department was
to point out the dangers involved in the
proposed Federal control Of foreign
loans.
The first suggestions toward the es-
tablishment Of such control were
made on the heels Of the front-page
disclosures Of . senatorial investigation
Of Latin American loans some time ago
by Senator Hiram johnson. In that
of the Latin American governments for
but also that OF the bankers for in
ducing them to do 50, had been plainly
revealed.
The conduct Of the bankers appeared
even more condemnable, for the sena-
torial inquiry disclosed certain practices
among which the bribery of foreign
government officials and the conceal
| ment Of facts from the investors were
not the least important-very much in
conflict with the ethics Of money lending.
Control One Solution.
From the lesson of such unfortunate
experiences as those revealed by the
Johnson inquiry the necessity Of avoid
/ ing similar occurrences in the future
emerged clearly. And the only ap-
propriate way to avoid them seemed to
be the establishment of an institution
which would exercise some sort of con-
trol-if only moral control, based on
publicity-upon all foreign loans floated
in the United States.
Agitation in congressional circles for
the establishment Of that control, re-
vealed that the disclosures of the Sen
ate investigation had not been made
IN vain. It was reported that members
OF the Senate were discussing the pos
sibilities of creating an institution along
the lines of the British Corporation OF
Foreign Bondholders
Congressional leaders, however. were
not clear on the amount of Federal
Government cooperation required in
these plans. Was the proposed insti-
, tuition to be a Government-controlle
! one? Or one supervised by the bankers
themselves? Or was 1t to be an inde-
| pendent association. made up Of prom
| inent citizens - prominent for their
honesty. independence and financial
knowledge?
Choice May Decide Success.
Yet this was a most important point
| to decide. The whole success of the
| scheme might depend upon which one
| Of the three roads was followed. One
prominent member Of the Senate made
reference to the fact that "the British
Corporation of Foreign Bondholders has
| made excellent use of the British diplo-
matte service in such connections and
added that 1T is assumed here that the
State Department might prove equally
useful to American bondholders."
! This seemed to indicate that the ad-
| vice of Senator Johnson might be fol
| lowed As will be remembered, at the
| conclusion Of his spectacular inquiry
| to regulate, through Government con.
troll. the flctation of foreign bonds. tn,
| first required full publicity for all pro.
posed loans. the Information to bt
| filed with the Commerce Department
The second provided for the establish
ment of Federal foreign loan board
| with power to scrutinize all foreign -loar
/ proposals and reject them at its owr
discretion. The third imposed stiff pen
alties for any one floating the bonds
of a foreign country already in default
to the United States.
Danger in Situation.
Senator johnson. as he himself tolo
! the Senate would make the Govern.
ment the arbiter in the offering Of for.
| eign securities" Now. would this bt
/ the proper cure? It hardly seems so
If one considers the dangers and thu
political complications which it might
involve. 1t may be a cure even more
dangerous than the disease.
I In the first place, the charges o.
American imperialism" and American
dollar diplomacy" which have been SC
| frequent in the past, would find en-
couragement in the power given tht
State Department to say the final wore
on loans ard credits to latin American
| governments.
| Would not private foreign finances