The Waterbury Democrat., 1933-09-20
Especial to the Democrat)

of the problem of foreign bonds defaulted to the extent of approxi- mately s100, 1000, 900 a year and held by more than 50o,0o0 citizens of the United States is the aim of the Manufacturers Association of Connecticut in an inquiry begun in cooperation with the National Fed eratoin of Foreign Trade associa- tons into the proposed formation of a corporation of Foreign secur- ity Holders" as provided in the federal Securities Act of 1933.
 With foreign bonds outstanding in the United States at present 70 the extent of about s7,o00, ooo, 900, of which the amount estimated to be in some form of default is something in excess of S1,b00, ,000,- 900, there has up to the present time been no affective protective agency authorized or qualified to take care of the interests of the bondholders in any negotiations with the debtor countries to bring about the resumption of payments or to arrange necessary compro. nlises. The situation has been steadily growing more difficult, ac- cording to tho association, as re- mittances of interest have in some cases been unnecessarily withheld and the market price of the bonds thus artificialiy depressed, with the result that many bonds have been repurchased by the issuing ..~.,A.a ..a ate at AhA aa 0RtfNA VHPiRAa now prevailing, to the prejudice of the holders of the bonds.
 James D. Bryan, chairman of the assoc citations, foreign trade commit tee, said to-day that the first step toward relief will be to ask all foreign bondholders in Connecticut to cooperate by petitioning the fod- eral trade commission (the body authorized in the Securities ect) to organize at once the proposed se- curity holders corporation. Blank petition forms for the purpose are available, he said, at the associa- . tion's headquarters at DO Lewis street, Hartford.
 In cmprasizing the practical im- portance of the situation, both to individual and corporate foreign bondholders in Connecticut and to the export interests of the state, MT, Bryan said: This matter has q direct relationship to our foreign trade, and the interests of Amer ican bondholders should Do pro- tcctcd by just such q foreign bono holders organization as is provid- ed for in tho present Socuritiel Law. Permanent cooperation should be assured to tho protection of our bondholders by cooperation of practical foreign traders as well as bankers and government departments, and this cooperation is essential to the resumption on q sound basis of American invest nient in foreign securities.
 Numerous bondholders organi- zations, including the Latin Ameri. can Bondholders Association, nave operated for the benefit Of the public, but no generally ,represen. tative organization has as yet bech set up for this purpose. The ad- ninistration should act with rea- sonable promptness Tn setting up the organization provided Tor un. der the Securities Act as the onIy means now possible by which united action and effective cooper. alton of all interests can set to work to clear up. the confusion sur. rounding our foreign investment situation.
 "Almost half of the bonds now in default have been issued by na. tional governments and almost three. quarters have been issued by either state, municipal or brown, cial governments, the defauIteo bonds having been divided into the following groups;
 National governments $60S,ssi'SV' Provincial 'gOyts. S276,7OS,S0o Municipal govts. $fe6,222'aot Banks $i2l,OoV'VV' Institutions and Corporations
 S23s,321, ,40'
 "In addition to the foregoing our committee has found tha there are between 100 and 200 mil' lion dollars of bonds in some de- gree of technical default. In thu case of defaults Or even of threat ] ened defaults of domestic issues IT inc United States, the legal ma chinery available, the method qf it use and the means of enforcing inc rights of the bondholders ar' well known and methods of pro cedure well established. In tho cas' of foreign bonds, however, no ad' ] eouate machinery Is available, me | thods of procedure are tndennit' and practice and precedent not es' tablished. It is but natural, there fore. that in establishing methodi | of procedure our own experience which dated from not much moro than ten years ago and undel which most of the issues now 1T default were made between l924 and 1929, is not sufficient to cop' with the problem and we mus turn to Great Britain and some Q the other European countries t' profit from the practices whlci have stood the test of their mucf longer experience.
 "These nations generally follow the practice of Great Britain, ant the model of all their arrange ments, which with some modthca lions is entirely suitable to oul problem, is the British Council O. Foreign Bondholders. This organ ization, dating from 1868, is gov erned by a council of twenty-on' members. of whom six are nom mated by the British Bankers as sociation and six by the London Chamber of Commerce, with nint members nominated by the othel twelve. It enjoys the confidence ol the British investing public as wei as of the issuing houses, and hal been an indispensable guardian o! public interests in Great Britain which has protected the British position throughout the financia world.
 "The American plan, set up in the Securities act. provides for six directors including the chairman and vice-chairman and depends therefore, very greatly upon the high personal standing and disin- terestedness of the directors to be Appointed.
 | "Investors and export rterf throughout the United States are not only keenly interested in hay. ing the administration initiate this protection of our foreign bondhold-