Amendment by Rage

Last week the House of Representatives buckled down to work on the Hoover Moratorium. Behind it was a June promise to the President to ratify. Upon it were the anxious eyes of 15 debtor nations about to be relieved of paying the U. S. $246,000,000. Patriotism and prejudice, high motives and low manners marked its labors.

Because the War Debt agreements are not treaties but revenue laws of the U. S., the President's most able advocates of postponed collections marched not to the Senate but to the Ways & Means Committee of the House to make their best pleas. First to enter the ornate marble committeeroom was Ogden Livingston Mills, Undersecretary of the Treasury on whom the President leaned heavily during those troublous June days before France was jockeyed into line for the Moratorium. He told plump, mild-eyed Democratic Chairman James Collier and his 24 committee colleagues that Congress would be "everlastingly disgraced" if it failed to approve the agreement.

Secretary of State Stimson read the committee a long and rather dull statement detailing Germany's plight just before the Moratorium announcement. When the committee began a series of gentle questions, Statesman Stimson grew fussy and fidgety. "You can't send a sheriff overseas to collect the debt, you know," he snapped at one heckler. Henry Pomeroy Davison, youthful partner of J. P. Morgan & Co., was hastily summoned from New York to deny published reports that debtor nations had on deposit with his firm funds to make their Dec. 15 payments.

The best Administration argument advanced for the Moratorium was that by saving Germany from an economic and perhaps a political crash, it had preserved the U. S. from the financial consequences of such a downfall. Two points which were not effectively rebutted by White House spokesmen: 1) Europe, for all its alleged penury, has made no serious movement toward armament reduction; 2) every dollar postponed on the War Debts must be made up by a new tax dollar from U. S. citizens.

Never Again! The Ways & Means Committee was ready to give Mr. Hoover his Moratorium this time--but never again! Its members by a 16-to-9 vote tagged the resolution with this all-important amendment:

"It is hereby expressly declared to be against the policy of Congress that any of the indebtedness of foreign countries to the United States should be in any manner canceled or reduced and nothing in this joint resolution shall be construed as indicating a contrary policy, or as an implication to give favorable consideration at any time to a change in the policy hereby declared."

Exciter. On the floor of the House came the greatest Moratorium excitement. Chief exciter was a thickset, sturdy, 55-year-old Republican Congressman from Canton, Pa. by the name of Louis T. McFadden. He started life as a red-headed office boy in Canton's First National Bank, worked himself up to its presidency. He was elected to Congress 17 years ago, served for ten years as chairman of the House Banking & Currency Committee. After him is named the McFadden Branch Banking Act (1927). As an oil stock promoter, he got into unsavory trouble in New York when an investor sued him for fraud. Shrewdly familiar with banking technique, Congressman McFadden bitterly hates & fears international bankers. He has inveighed against the Young Plan, against the Bank for International Settlements, against the Federal Reserve's participation in European finance. His howls and yelps have been generally ignored by responsible men about Washington who set him down as a sincere but misguided fanatic on international finance.

'Infamous." Last week Congressman McFadden arose before the House and delivered an hour-long speech against President Hoover and the Moratorium. His thesis was that international bankers for Germany had conspired with the White House to effect debt postponement and ultimately cancellation of Reparations. Excerpts:

"The President, without any legal authority, virtually brought about a loss to this country of $245,000,000 in one year and paved the way for much greater losses. . . . He proposed we should take money away from the men, women and children of this country and give it to Germany. This was an infamous proposal! "He was afraid to do this thing alone at the bidding of the German international bankers, so he asks the leaders of Congress by telegraph and telephone to consent to his proposed illegal action in advance. . . . Mr. Hoover is not running a coal mine here. He is not a dictator. . . . I don't vote on matters concerning the welfare of the United States in a telephone booth. . . .

"After completing his underhanded arrangements which savored more of the ways of an oriental potentate drunk with power than of a U. S. President, Mr. Hoover with a dramatic flourish made his proposal, linking it as usual with a lot of false and insincere humanitarianism. . .

"Behind the Hoover announcement were many months of furtive preparation. The German budget had to be doctored and left unbalanced. Germany, like a sponge, had to be saturated with American money. Mr. Hoover himself had to be elected President. . . . The Hoover proposal originated in the offices of the German international bankers in New York, not in the mind of President Hoover. . . .

"While our men were walking the streets in a vain search for employment, the President secretly approached Germany and asked if he could do anything toward getting her Reparations obligations lightened. He thought he had his secret so closely guarded that the people of the U. S. would never be able to find out his part in the plot concocted against them. . . . He proposed to sell us out to Germany! . . . It would be interesting to find out if Herbert Hoover was acting as the legal agent of Germany or as President of the United States. We cannot have an agent of Germany acting as President."

The McFadden speech left the House thunderstruck. The argument that the Moratorium favored international bankers was old and trite but the charge that the President had "sold out" to them was recklessly new and shocking. Red with rage, Democrats as well as Republicans stampeded to the President's defense. One woman member cried "Shame! Shame!'' and almost fainted. Speaker after speaker yelled that the Pennsylvania Congressman had cruelly slandered Mr. Hoover. The word "impeachment" kept bobbing up in the debate.

Congressman McFadden took all this tongue-lashing in poker-faced silence. Senator Reed of Pennsylvania, his lean face twisted into an expression of deep hurt, announced that he had arranged with the Post Office Department to deprive Mr. McFadden of all patronage, to treat him "as if he had died," to secure his defeat for re-election next year. President Hoover pointedly passed over his name in inviting congressional leaders to a White House breakfast, according to his secretariat, "for obvious reasons and by unanimous consent." Refusing to retract his intemperate words, Congressman McFadden boldly asked for a House hearing to offer evidence in proof of his charges.

The House spent eight hours in formal discussion of the Moratorium resolution before putting it to a vote. Galleries were packed and the air tense with nervous excitement but there was little new or startling left to be said by either side. In nobody knows how many different forms the Moratorium's friends repeated that President Hoover had saved the world. Its foes, with no originality, kept insisting that he had done nothing of the sort, that U. S. recovery was not dependent upon European dabbling.

In last June's telegraph & telephone poll President Hoover lined up 276 Congressmen for his Moratorium. But when long after the dinner hour the House voted on the resolution, the President found 317 members on his side. The opposition was composed of 95 Democrats, five Republicans. Thus the Moratorium, amendment and all, was passed over to the Senate.

Outrageous Effrontery. Foreign affairs are not the treat for the Senate that they are for the House. Besides, the international-banker complex is far more acute and articulate in the upper chamber. Thus it was that such a steady, level-headed supporter of President Hoover and Secretary Mellon as Senator Reed broke loose last week in a stinging tirade against those financiers "who have put out so-called private loans to European countries which they would like to see paid by means of cancellation" of public debts. Said he:

"To ask that these private claims should be given priority over intergovernment debts seems to me to be a piece of out-rageous effrontery. . . ."

Sleeves up; Sleeves down. In an effort to link the Moratorium with international finance, Senator Hiram Johnson had induced the Senate to investigate the great bond houses which deal in European securities. Last week the Senate Finance Committee sat down to this inquiry while Senator Johnson rolled up his sleeves for what he confidently expected to be a shocking expose of cancellation agitation. Two of New York's most famed bankers were examined carefully but there were no horrors, no sensations. Senator Johnson rolled his sleeves down in obvious disappointment.

Tom, Dick & Harry. First witness was Thomas William Lament of the House of Morgan. His smiling courtesy, his unruffled frankness, his quiet manners charmed and disarmed hostile Senators. In great detail he explained how his house --merchants, not bankers--had issued $1,807,578 worth of foreign securities since 1920, how each loan had been distributed through syndicates, how the profits ("spread") had always been kept reasonable. He denied that the House of Morgan had "coerced" any firm to buy its bonds, that U. S. banks were "loaded up" with these foreign securities.

"In other words, Tom, Dick & Harry have taken the loss on these foreign bonds, not the bank?" asked blind Senator Gore.

"It is a very deplorable thing," replied Mr. Lament quietly, "but it is the great investing public upon which these declines in every kind of bond have chiefly fallen, rather than on the banks."

Yolk. Next witness was Charles Edwin Mitchell of National City Bank of New York whose company had handled $1,071,955,000 worth of foreign loans in the last decade. Aggressively Mr. Mitchell argued that these advances were good and useful because they stimulated U. S. foreign trade. German economy, he declared, was "the goose that is laying the golden egg." Asked Senator Gore: "Yes, but who gets the yellow of that egg?"

Declared Banker Mitchell: "The holdings of foreign securities in New York banks are in no case enough to influence their determination in regard to debt cancellation one iota. . . . I don't believe in cancellation as it is generally spoken of. I'm inclined to believe that, here and there, it will be determined that there should be some scaling. Very often as a banker we take a credit we could force the full payment of but get more out of by some other course."

Yoke. A revolt by the younger generation of Germany against Reparations was predicted by Banker Mitchell. Senators sat at taut attention when he said: "These young people see that not only they but their progeny and their progeny's progeny must go on paying a debt for which they were not responsible. They feel they are under a heavy yoke and they are growing rebellious. It is something that is readily understandable. . . . I'm not preaching any doctrine of cancellation but I'm trying to develop some of the psychology of the people that may have a direct bearing on this question."

But Mr. Mitchell was unable to answer Senator Reed's question as to why "the progeny of Americans who had nothing to do with the World War should bear the burden while the progeny of other nations go scot free."

The Senate Finance Committee returned from this tangent for ten minutes in which time it favorably reported out the Moratorium resolution. Republican leaders hoped to give President Hoover a Christmas present by whipping the measure through the Senate before this week's holiday recess.

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