Evening star., 1933-12-06
DEFAULT NATIONS
T0FAcE REPR|SALS
Johnson Bill Barring Securi'
ties Transactions As
sured of Passage.
BY DAVID LAWRENCE.

European countries which failed to
pay their war debts to the United
States face some serious reprisals.
It became known today that the
Roosevelt administration is telling in
auirers that the passage of the johnson
bill at the coming session of Congress
may be taken for granted.
The effect of the bill. which was
sponsored by Senator Johnson OF Cali
fornia. was favorably reported to the
Senate and is now on the calendar,
will be of concern to anybody who holds
the bonds or obligations of any foreign
government or any foreign cities and
who attempts to sell them on the
market or in the stock exchanges within
the jurisdiction of the United States.
For if the measure is passed, it will
become unlawful to buy or sell any
foreign securities. The general impress
sion has been that the bill referred only
to future flotations, but an examination
of the text reveals that, unless amended.
everything now issued may be prohibited
from sale This involves many hun
dreds of millions of dollars of securities
held by American investors.
Debtor Nations Hit.
Here is the text of the bill:
Hereafter it shall be unlawful Tor
any person within the United States or
any place subject to the jurisdiction OF
the United States to loan money to, or
to purchase or sell the bonds or other
obligations of, any foreign government.
including any political subdivision
thereof, while such government or
political subdivision is in default in the
1f ri
thereof, to the Government and or to
any citizen of the United States or to
any corporation organized in the United
States.
Any person violating the provisions
of this act shall upon conviction thereof
be fined not more than $4,000 or I'M
prisoned for not more than five years,
or both
"As used in this act, the term per-
SON includes individual, partnership.
corporation or association"
1t will be noted that the bill, If ap-
piled to France, would mean that the
securities of the various French cities
might be held to be barred from sale
In America, since French cities are
political subdivisions of a government
which is presumably in default on its
obligations to the American Govern
ment.
German Ban Included.
Also, If the German government,
which has borrowed various sums of
American citizens, should default on
its private debt, that is bonds and
notes held by American corporations.
then it becomes unlawful for any Sc
curities of the German Reich or Ger
man cities to be bought or sold within
the United States.
It would be possible, of course, for
Canadian stock exchanges to buy and
sell these foreign securities, but such
transactions if undertaken through the
use of the United States mails might
mean trouble for American investors,
as this might constitute conspiracy to
violate the laws of this country. Also
1t might induce complications for per-
sons who were expected to record for
income tax purposes the amount OF
money received from sale of foreign
securities, should it have to be dis
closed that a sale of foreign securities
took place in violation of law.
1t may be, of course, that the bill
will be amended SO as not to refer to
securities already issued, but as the
measure stands today it involves all
sales and purchases. There is also the
possibility that the President may not
ment in default" He has had occasion
to speak of the French debt situation
as payment deferred" but that was
when he was trying to persuade the
French government to make payment
last Spring on the installment due in
December, 1882
Tokens Prevent Default.
The British government is technically
not in default, because what are known
rs token payments have been made
acknowledging the debt. There may
be, too, opportunity for grave legal COM
plications even With reference to British
securities sold in America because the
question of whether a foreign govern
ment has or has not defaulted may not
be matter of opinion, but a question
Of fact.
Many defaults on bond interest or
principal occur in the commercial world
in which the holder of the securities
chooses not to regard them as in de-
fault and takes no steps to enforce col
lection. but the status of defaulted
obligation has always been simple to
determine-if interest or specified in
stallments on principal are not paid,
the general practice has been to regard
the issue of securities as being default.
The johnson bill was frankly aimed
at those countries which failed to pay
their war debts, as well as those foreign
governments which f1oated securities in
America at great loss to American in
vestors.
(Copyrisht, 1889