Evening star., 1933-04-16
BY GASTON NERVAL.
LEGISLATION suggested by P

EGISLAT1ON suggested by FTeSl-
dent Roosevelt to curb specula-
ton and dubious practices in the
IL marketing Of securities and
bonds has revived talk Of the
convenience Of extending Government
tions contracted in this country.
The majority Of these being the de-
faulted debts Of Latin American govern
ments which have been forced to stop
payments by the severity Of the world
wide economic depression, the measures
suggested to establish Federal control
Of all future foreign loans would
naturally affect the Southern republics
in particular.
Some time ago had occasion to dis
cuss similar proposals, made on the
heels of the front-page disclosures Of
senatorial investigation conducted by
Senator Hiram johnson. In that inves-
tigation not only the responsibility OF
contracting loans beyond their means,
but also that Of the bankers for In
ducing them to do so had been plainly
revealed.
The conduct Of the bankers appeared
even more condemnable, for the sena-
torial inquiry disclosed certain prac-
tices-among which the bribery OF for
eign government officials and the con-
cealment Of facts from the investors
were not the least important-very
much in conflict with the ethics OF
money lending.
Control Necessary.
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 appro-
pirate way to avoid them seemed to be
the establishment of an institution
which would exercise some sort OF con-
trol-if only a moral control, based on
publicity-upon all foreign loans f1oated
In the United States.
The renewed agitation in congress
slonal circles for the establishment Of
such a control Is an evidence Of the
fact that the disclosures of the Senate
Investigation were not made in vain.
1t is reported now that members of the
Senate are discussing the possibilities
of the British Corporation of Foreign
Bondholders, which has rendered such
splendid service on the other side OF
the Atlantic.
The press announcements. however,
are not clear enough on the extent
of the Federal Governments coop
Grafton in these plans. Is the proposed
institution to be a Government-con-
trolled one? Or one supervised by the
bankers themselves? Or is it to be
an independent association, made up
of prominent citizens prominent for
their honesty, independence and f1nan-
cial knowledge?
Yet, this is a most important point
- 10 r1t ,I~l4 0f &ln
scheme may depend upon which one
of the three roads is followed. One
Of the press communiques makes ref
erence to the fact that "the British
Corporation Of Foreign Bondholders
has made excellent use Of the British
diplomatic service in such connections"
and adds that 1T Is assumed here that
the State Department might prove
equally useful to American bond
holders"
Government as Arbiter.
This seems to indicate that the ad-
vice of Senator johnson may be fol-
lowed. AS will be remembered, at the
conclusion Of his spectacular inquiry,
Senator johnson introduced three bills
to regulate, through Government con-
troll, the fotation of foreign bonds.
The first requires full publicity for all
proposed loans, the information to be
filed with the Commerce Department.
The second provides for the establish
ment of Federal Foreign Loan Board
with power to scrutiniZe all foreign
loan proposals and reject them at its
own discretion. The third imposes stiff
penalties for any one floating the
bonds of foreign country already in
default to the United States.
Senator johnson, as he himself told
the Senate, would make the Govern
ment the arbiter in the offering of
foreign securities" Now, would this
be the proper cure? It hardly seems
so, If one considers the dangers and
the political complications which it
might involve. To my mind, it would
be a cure even more dangerous than
the disease.
In the first place, the charges of
American imperialism" and American
dollar diplomacy" which have been
SO frequent in the past, would find
encouragement In the power given the
State Department to say the final word
on loans and credits to Latin American
governments.
Would not private foreign finances
appear thus supervised in this country
by the Washington authorities? On
the other hand, would the statesmen
at the White House and the State De-
partment be able 70 convince the
world that they were completely i'm