Barred Bonds

Russia's railroads were mortgaged by the Tsarist regime to fight Russia's battles. Many a U. S. citizen bought the bonds. Having overthrown the Tsarist regime, the Soviet repudiated all Tsarist debts. U. S. citizens sighed and put their Russian rail-road bonds away expecting never to think of them again except as quaint keepsakes.

Last month, however, the Soviet revived the subject of Russian railway bonds. Only, instead of offering to make the old bonds good, or to issue new ones in their place, the Soviet airily added insult to injury by offering to sett new bonds, secured by the same old railways. The total issue proposed was $30,000,000, offered in England and the U. S. Interest was promised at the attractive rate of 9%.

Knowing well that the U. S. State Department scrutinizes all foreign loans offered to the U. S. public by U. S. banks, and knowing that such scrutiny would scarcely ensure success to a loan for a country which is not recognized by the U. S., the Soviet carried out its transaction privately and directly with U. S. citizens, by mail. To assure U. S. buyers, however, it was necessary to get some U. S. banks to act as agents, to pay out dollars for interest and amortization. The Soviet engaged, among other banks, the Chase National Bank of New York, the Amalgamated Bank of Chicago, the Bank of Italy in San Francisco.

The first news the State Department got of this arrangement was when the Chase National et al, advertised themselves as agents for the Soviet, and when holders of the oldtime Russian bonds protested. Then the State Department investigated.

Last week, the State Department "objected" to the Soviet loan. The objection was unprecedented in that the U. S. bankers interested, since they were not floating the loan but only giving it port facilities, had not asked the State Department to announce its attitude. The objection was impressive, since it put the State Department in the role of a defender of citizens' safe-deposit boxes. The objection was effective. The Chase National notified the State Department that it would "gladly refrain" from carrying out its Soviet depositor's instructions.

In Moscow, officials fumed at Secretary Kellogg's "diehard" attitude toward Russo-American trade relations.

Arthur Brisbane, Hearstling paragrapher, applauded the State Department as follows: "Too bad Wall Street's boy financiers did not have somebody like Secretary Kellogg to keep them from buying the Tsar's bonds, and even more preposterous bonds issued by Kerensky. Largely on account of those bonds this country is not permitted to do business with Russia."