The Western news. [volume] (Libby, Mont.) 1933-current, 1937-06-03
SEEN
HEARD
around the
NATIONAL
CAP1TAL
BY Carter Field i

keted huge amounts of foreign bonds
to American investors, may never
see the return of the good old
DAVIS" The business hasn't been so
good for some years, now--not since
the depression began, and default
ing by so many foreign govern
ments developed. Also it has been
handicapped sharply by the Hiram
Johnson law, which prevents mar
keting in this country Of bonds OF
any government that has defaulted
on its debts to the United States
government.
But-many bankers have thought
all this would pass. 1t was just
temporary. Some day something
would be done about the war debts.
There would be settlements or
forgiveness, or both. Whereupon the
business would go back to normal.
But for some time the securities
and exchange commission has had
fishy eye on these prospects for an
other day of foreign bond selling,
and an even fisher eye is being
cast by many members of the house
and senate.
The most recent gesture in this d.
rection was made by Senator Allen
]. Ellender of Louisiana, who in
troduced bill which is receiving
so much quiet support that it seems
practical certainty something like
it will be passed. sooner or later
There is no hurry. Americans have
not quite recovered from the burn
ing they took on the defaulted for
eign bonds. As a matter OF fact, the
average investor thinks that partlc-
ular debacle was worse than II
was, which attitude is most dis
couraging to would-be bond sales
men for foreign issues.
The Ellender bill would add new
section to tie securities act making
it unlawful to sell in the United
States securities issued by foreign
government unless the net proceeds
derived from such securities by the
issuing government are equal t Q
| the par value of the securities, ex-
cept that the securities commission
may allow service charge of not
to exceed two per cent OF the par
value to be deducted from the pro-
ceeds to be received by. the govern
ment selling the bonds
Enormous Profits
THE purpose of the BILL" Mr..
Ellender explains, is to reduce the
spread between the price paid to
foreign governments for their
bonds and the price at which such
bonds are offered to the public. A
foreign bond for which the issuing
government receives lightweight
per cent of its face value may now
| be sold on the American market
for ninety-nine. The investing public
is led to believe that it is getting
a bargain since the sale price is
still below par. The underwriters
receive enormous profits. 1t is, be-
| lieved that such situation leads
to an unwarranted amount of for
eign financing in this country and
encourages unhealthy practices ir
the conduct of such financing.
Under the proposed bill the gov
eminent would receive face value
for it's bonds, less the service charge
allowed by the commission, which
could not for this purpose exceed
two per cent. Thus the profits q
the underwriters could be excessive
only if the bonds we're offered t.
the public at a price above par. 1t !:
felt that this fact would tend t.
reduce the large price spread nov
possible and lead to more careful
consideration Of the value of such
bonds by the investing public"
No allowance is permitted in tn,
bill ''for the assumption of risk:
or for the value Of the trade nam,
or good will of the persons render
ing such service which SEEM
rather unnecessary in view of tn,
fact that the total service charge
permitted is to be two per cent
The bond salesman seems to quail
ify as the Vanishing American!
Irks Air officials
The race between bigger AM
heavier airplanes and the larger
better, surfaced airports that tn
new planes require is bringing gra
hairs to aviation officials. 1t seem
a natural enough development, bu
it has plenty Of complications.
is somewhat like the older story c
the production of armor which wi
resist shell from any existing CUR
then bigger gun that will pierc
. 1t. and then thicker and toughe
armor-and then repeatl
Perhaps an apter comparison
whether to build bigger locks {
the Panama canal, or build the bi
new ships according to freak spec
fications so they may still 6
! through.
The difficulty in this race b.
tween airplanes and airports lie
in the answer to the question: WI
will finance the bigger airports?
American cities have already il
: vested more than $500, 600, 900 in al
ports. They have about got to tt
=