Sosthenes & Mititza

After World War I, while their Government pursued a policy of political isolation, U. S. businessmen took to the high seas, developed industries abroad, sent their sweat home in dividends. By 1938 the U. S. had $1,350,000,000 of direct investments (mostly in subsidiaries of American corporations) in Europe alone. Meanwhile, as Hitler knocked the ethical props from under European capitalism, most U. S. businessmen in Europe were ready to clear out if they could take their shirts with them.

One of the worst hit was International Telephone and Telegraph Co., caught off side in Rumania, Norway, France, etc. In 1930 I. T. & T.'s common sold for 77 3/8, last week for 2 7/8. With $108,105,000 of its $503,674,000 assets invested in Europe, I. T. & T. netted $7,039,000 in 1938. By 1940's first half this net was cut to a loss of $126,977 (before any provision for war losses on European properties). Before this report came out, I. T. & T.'s lanky Sosthenes Behn started to save I. T. & T.'s shirt if he could.

In July he took a trip to Bucharest, dropped in to see Mititza Constantinescu, Finance Minister and Governor of the Rumanian National Bank. To Mititza, Sosthenes' story was familiar and sad. In 1930 I. T. & T. had paid $7,678,000 for 88% of the capital stock in Rumanian Telephone Co., which then had 50,000 telephones installed and terrible service. By 1940 the subscribers had risen to 102,268; the company was making $1,500,000 a year (20% on its original investment). But I. T. & T., because of exchange restrictions, got only pocket change. To Mititza & Sosthenes the logical solution was a sale.

Back in Manhattan, President Behn negotiated by transatlantic telephone. He had one good talking point on his side. Rumanians were once international capitalists too, had $50,000,000 of investments and other balances in the U. S., frozen (since Oct. 10) by Roosevelt decree. Hinting that the U. S. State Department might consent to a legitimate swap, Colonel Behn got Governor Constantinescu to talk it over with Premier General Antonescu.

Last week the Colonel's job was done. The State Department revealed its first big unfreezing: I. T. & T. had sold its Rumanian subsidiary for $13,798,000 (book value $25,942,000). According to terms, I. T. & T. waives claim to properties in areas ceded by Rumania (to Russia, Hungary), and still owns a $500,000 manufacturing plant to supply what will probably become a nationalized Rumanian Telephone Co. What I. T. & T. plans to do with the money President Behn will not say. Best guess is that I. T. & T. will use it to bolster its cash position, build up its properties in friendlier South America.

In State's willingness to defrost foreign funds, U. S. businessmen saw a hope that the rest of Europe's frozen balances here --estimated at $3,000,000,000--might be used as a bargaining wedge for other deals.

In an experiment designed to 1) improve wool clips, 2) find new uses for cotton, 500 cotton coats (at 90-c- apiece) were shipped to Wyoming this week to be worn by sheep as a protection against post-shearing cold. Feature: like maternity dresses, the coats may be let out for lamb-heavy ewes.

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