Dollars & Diplomacy

Last week the Senate Finance Committee dug deeper into the kind of foreign financing U. S. bankers do not discuss in detail on the front pages of the Press. Chief digger was white-crested Senator Hiram Johnson of California, determined to make political capital for his isolationist theory of foreign relations by exposing the loss of financial capital by U. S. investors in foreign securities. That his tactics annoyed the White House, the Department of State and the bankers, only spurred him on to greater inquisitiveness. Under scrutiny by the committee last week were loans to South American governments of which $815,000,000 are now in default. Whenever he could Digger Johnson tried to prove that the State Department had been the partner of bankers in foreign fields. A typical yarn from the patchwork testimony:

Colombia, Shortly after his election to the Presidency in 1930, Dr. Enrique Olaya journeyed to the U. S. with all the usual trappings of a good-will visitor. In New York he was welcomed by Mayor Walker. A special train carried him to Washington where President Hoover gave a White House dinner in his honor (TIME, June 16, 1930). Secretary Stimson also gave him a big dinner at which Dr. Olaya met Secretary of the Treasury Mellon. They talked socially about Colombia's financial plight. Though Mr. Mellon later denied it. President-elect Olaya was sure he heard the Treasury Secretary mention Colombia's oil.

Back in New York Senor Olaya, now behind the back of an innocent Press, took up the real purpose of his visit--a loan. He dropped into J. P. Morgan & Co. But Mr. Lament seemed chilly. He dropped into National City Co. to see Victor Schoepperle, who had visited Colombia. But Vice President Schoepperle did not think a loan could be arranged unless Colombia adopted a "businesslike" administration. Weary of shopping about Wall Street for cash, President-elect Olaya consented to these terms, and sailed for Colombia with the promise of $20,000.000 in short term bank credits from National City, payable in installments.

Once safely installed in the President's Palace at Bogota, one of Senor Olaya's jobs was to take up what was known as the Barco oil concession, valued at $300,000,000 or more. This concession, con trolled by Gulf Oil Corp. which is largely owned by Secretary Mellon & Family, had been canceled by the Colombian Government in 1926. The State Department in 1928 gently pressed for its restoration.

In May 1931, the final $4,000.000 in Colombia's bank credit was unaccountably held up in New York. President Olaya complained to Secretary Stimson who went in person to see the attorney of National City Co. in New York. The hankers were not urged not to be "unduly technical." Mr. Schoepperle insisted that the Colombian budget had not been balanced as agreed and as for the Barco con cession, he did not "give a damn." On June 20, 1931 the Barco concession was restored to Gulf Oil Corp., to the large satisfaction of the State Department. On June 30 Mr. Schoepperle released the final $4,000,000 installment to Colombia, again to the large satisfaction of the State Department.

Had Statesman Stimson, as it appeared circumstantially, played the Barco con cession against the $4,000,000 loan and thus secured a triumph of dollar diplomacy? No, was his indignant answer. The two matters, while parallel, were separate and distinct. The State Department insisted that its sole concern in these negotiations was "the fostering of friendly relations."

House Cat. The State Department's policy of requesting bankers to submit their proposed foreign loans for diplomatic inspection began in 1922. Its pur pose then was to thumbscrew European nations into funding their War debts to the U. S. by denying them fresh credits until they had done so. When all funding was completed, the State Department continued to act as a fiscal censor with the idea of bridging the abyss between Big Business and U. S. foreign policy. While it contended that it did not pass on the security or merits of foreign loans, its method of reporting "no objection" diplomatically to them was often construed by bond salesmen as left-handed approval and used accordingly. Severest critic of this State Department policy was irascible little Senator Carter Glass of Virginia. He exploded:

"The State Department is morally responsible for every dollar lost on these investments. They had a clerk passing on the loans who didn't know any more about it than my house cat!''

This file is automatically generated by a robot program, so reader's discretion is required.