Out Bursts Johnson

"Mr. President!"*

The strident Californian voice of Senator Hiram Johnson rolled out imperiously across the well-filled Senate chamber. In his hand he held a speech, too important to be delivered from memory. His white crest quivered with indignation and behind his spectacles his blue eyes gleamed resentfully. He was about to vent the full measure of his political bitterness, the full force of his distrust as as isolationist, and the full brilliance of disgruntled hindsight, upon the gentlemen who had conducted the country's international finance for the past decade. His speech summarized his conclusions on the Finance Committee's recent investigation of foreign loans. He had precipitated that inquiry, had cross-examined famed money lenders of Wall Street, had developed concrete arguments for Federal supervision of international finance. Without his customary shadow-boxing gestures he began reading his address. Excerpts:

"The story of our foreign loans is a sordid tale, grotesque and tragic. ... In the investigation there were disclosed certain ugly facts which enabled us to understand and resent what has been done to the investing American public ... a dazed people whose pockets have been picked. . . . The utterly unrestrained duping of investors, the smug complacency of the great financial prestidigitators are all shown. . . . The sale of foreign securities was not only unrestrained by our Government but the peculiar system adopted by the State Department enabled international bankers to foster sales and convey the impression that their securities were satisfactory to our Government. . . .

"Money was plentiful. The mad orgy was on. Speculation was encouraged not only by bankers greedy for profits but by the very Government itself. In one aspect the people themselves were to blame; but in another every rule of fair play, every principle of forthrightness and honesty acquit those ignorant of finance and transfer the guilt to the international bankers who coined the ignorance and confidence of their customers. ... If ever there was a racket imposed upon the American people, that racket is the racket that has been played upon American investors by the international bankers with the securities they retailed.

"International bankers reversed the financial rule of the centuries and the policy became one of the lender seeking the borrower instead of the borrower seeking the lender. . . . The bankers had just one thought and that was profits. . . . The banker with money pouring in began to regard himself as a superman and soon in his egotism became convinced the Lord had endowed him with a peculiar prescience and ability which raised him into a royally created class, far more blessed by a discriminating and wise Creator. ... It is little to be wondered at if the ordinary investor approached in some trepidation this gorgeous creature, begged for advice and counsel and with gratitude accepted his direction. The poor investor saw only one of God's anointed; but the anointed, none too proud to take any sum from any person upon any representation, thought only of the profits accruing. . . . The hats of our people were doffed to this Jovelike creation. . . .

"The money madness of our people, the greed and even worse of international bankers and the smug complacency and supine indifference of Government have contributed to the unhappy results."

Specifically Senator Johnson excoriated the scramble of U. S. bond houses for South American issues, the "bribing" of a Peruvian President's son to make a loan, the restoration of the Barco oil concession to the Mellon interests by Colombia while the State Department sped up a National City Bank loan (TIME, Jan. 25). He showed statistically how U. S. private loans to 16 European nations with a par value of $1,667,562,000 had depreciated 43% to $925,559,000, how $1,600,000,000 invested in South American securities had shrunk to a cash value of $422,000,000, with $815,468,300 in actual default.

Senator Johnson's proposed remedy: a Government foreign loan board to pass on the soundness of all proposed issues.

*Tbe Vice President is thus addressed as the presiding officer of the Senate.

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