Evening star., 1933-02-28
SENATE EXTENDS
BANK BOND PROBE
Securities Affiiiates of More
Big Banks Probably Will
BE Studied.
nv the Associated Press.

Dc OlUOiCNs
~ the Associated Press. p,
For at least another year the Senate
Banking Committee will be free to pur-
cue its inquiry into the stock market
activities of banks, and 1t was indicated
today several other securities afiliates
of big banks are to come within the
committees study.
In the midst Of the committees in
vestigation of the activities of the Ma
tional City Co. the securities affiliate
of the National City Bank, the Senate
adopted a resolution prolonging the life
Of the investigation until the end OF
the first session Of the next Congress.
Senator Couzens, Republican, OF
Michigan, told Ferdinand Pecora, the
committee counsel, during the hearing
today that he had some information
regarding the Chase Securities Corpo-
ration that he desired to give Pecora.
The corporation is the investment afhli-
ate of the Chase National Bank.
Costigan Offers Resolution.
The resolution extending the inquiry
was offered by Senator Costigan (Dem-
ocrat) of Colorado, who said there was
no desire on the part of any one to stop
the INQUIRY at time when the COM
mittee was tn the midst of an important
task.
II assume" he said, that no mem
ber of the Senate will want to interfere
with this inquiry at a time when gen
eraI approval is being expressed OF tne
need for remedial legislation to deal
with such facts as have been reVealeo
by the investigation"
Byrnes Questioned.
Arnold M. ByrneS. q former vice pres
ident Of the National City Co.. gave the
committee information about South
American loans today.
Byrnes. who left the National City
Co. in 1881. was questioned about the
sale of Peruvian, Chilean and Brazilian
securities.
Previous testimony had been that
the company participated in the sale
of 500 900 600 in Peruvian securities,
although repeated warnings had been
given to the company that the financial
and political condition o. Peru was
bad. Charles E. Mitchell. chairman OF
the National City Bank, resigned
we might not agree to your classifi-
cation of the mer who took pessi.
mistic view of Peruvian conditions,
Byrnes said.
Pecora then asked about communi-
cation from j. II. Durrell, overseas man
aeer of the bank, in July, 1927, which
said Peru's condition was bad.
Doubts Seeing Letter.
Byrnes said he did not think he saw
the Durren letter.
Pecora inquired about a $50,000,000
loan to Peru in December, 1927, In
which the company participated.
Were the contents OF the DurreH
letter subject of discussion before the
loan?"
TT wasn't discussed with me-" Byrnes
answered.
DO you recall participation by the
company in an $500 900 loan to the
State of Minas Gereas in Bra1l?" Pc
cora asked.
Yes" Bynes answered. adding it
was felt the State was good risk
The loan was made in March, 1873.
First Loans In United States.
WAS this the first time the State
had come to the American market Tor
f1nancing?" Pecora asked.
Yes"
where had 1t gone for financing
hefore?"
ITO Paris for some" Byrnes said.
adding that the amount OF loans noateo
in Paris amounted to about AZ million
dollars.
Are any of these Brazilian loans in
TOifyanc asked
"Oh, yeS," ByrneS answered.
do you know of any default In any
of these Minas Geraes loans before the
National City Co. agreed to underwr1te
the $8,500,000 loan IN 1922" Pecora
asked.
Wants to Define Default.
Bvrnes said he wanted to define de-
fault. He added that he understood
some complication arose because OF the
failure of French banking house that
had been acting as the Paris fiscal
agent of Minas Geraes.
Pecora asked if there were not litiga-
ton between French bondholders OF
Minas Geraes securities and the State.
YES" Byrnes said. there was an
agreement between the state and the
bondholders."
Byrnes testified the $8,500,000 loan
lldO Dccu 1lOdLCo az o. II PANS AAAeSA SSc'
What was the spread to the National
City Co. on this hotation?" Pecora
asked.
Apparently the net cost was s3.167
per cent" Byrnes replied. I'VE bought
the bonds on a fat basis"
Pecora then asked about an issue OF
$4,000 Of 61a per cent bonds OF the
State In September, 1929.
AT what price was the issue oftered?'
TT was offered at 81 and interest"
Byrnes replied.
Quizzed on Proceeds.
"Your statement, or circular on this
eight million loan," Pecora said, states
that the proceeds were to be utilized to
increase the economic productivity OF
the State"
"Yes it was" Byrnes said.
Now isn't it fact that much of this
Joan went to pay off short-term mdebt-
edness of Minas Geraes?" Pecora in
quired.
well, yes" Byrnes answered.
How much went to pay of this
short-term Indebtedness"
Byrnes said between three and four
millions.
Now, why wasn't the American in
vesting public told in plain language
that this money was to be used to pay
short-term Indebtedness"
Two Coupons Unpaid.
They parleyed back and forth until
Byrnes said;
In my opinion, no investor was in
terested in the slightest. I don't think
it would have affected anybody's judg-
ment. The important thing was the
essential purpose for which the money
was to be used"
Are both these (Minas Geraes) bond
issues now in default?" Pecora asked.
The last two coupons have not been
paid" Byrnes responded.
What is the first issue quoted at
uow?" Pecora asked.