Inside Plug; Outside Pay

Last February the U. S. Supreme Court laid down the law of the 59-c- dollar in a decision as full of holes as Swiss cheese. Last week President Roosevelt decided it was time to plug up the holes with some new legislation. Two of the most serious implications in the law as the Supreme Court laid it down were as follows:

1) By a 5-to-4 split the Court denied the right of holders of U. S. obligations to force the Government to keep its promise to pay them in 100-c- gold dollars. The Court's reasons: Those who sued had not actually proved a loss and to pay them in 100-c- dollars ($1.69 in 59-c- dollars) would result in their "unjustified enrichment." This apparently left the door open for suits by those who could prove a real loss; left the Treasury with an immense contingent liability on the $10,000,000,000 of Federal gold-clause bonds outstanding.

2) On one point the nine Justices were unanimous: the Government had no moral right to repudiate its own promises to pay in gold. Said the Court: "While the Congress is under no duty to provide remedies through the courts, the contractual obligation still exists and, despite infirmities of procedure, remains binding upon the conscience of the sovereign."

Such language laid Franklin Roosevelt wide open to being called a conscienceless sovereign by rampant Republicans in the next political campaign. Therefore, the President last week addressed a special message to Congress. Excerpts:

"The continuing possibility of actions by litigious persons leaves open the continuing possibility of speculation. There is no public interest, under these conditions, in permitting a handful of private litigants to exploit the general public in the hope of a wholly speculative private profit. . . .

"I recommend, therefore, the enactment of legislation which will make clear that it is our fixed policy to continue to treat the bondholders of all our securities equally and uniformly, to afford any holder of any gold clause security, who thinks he could by any possibility sustain any loss in the future, an opportunity to put himself immediately in a position to avoid such future loss, and to remove all possibility of any suits designed to hamper the Government in administering the public debt. . . .

"Not only justice to the holders of our currency and of our securities who support and rely on our policy of equal and uniform treatment to all, but also the interests of our entire people require that the Government of the United States make it clear that it cannot and will not consent to the use of its courts in aid of efforts to sabotage the operations of government or in aid of private speculation."

The title of saboteur-or-speculator was thereby conferred on no less a person than Robert Alphonso Taft, son of William Howard Taft, who has commenced suit for $1.07 against the Government, for interest on a gold-clause bond.

Next day a joint resolution was introduced in the House to carry out the President's program. After four resonant whereases, the resolution reached the two sore spots.

To put a quietus on accusations that the U. S. was welshing, holders of Government gold-clause bonds were to be offered an immediate chance to exchange their securities for 1) otherwise identical non-gold-clause bonds, or 2) cash at par. This was a plain invitation by the Government to the public: If you are afraid of inflation, cask your bonds now and use the money to hoard commodities or anything else you think will protect yon from inflation. Little danger did the Treasury run of the public's demanding $10,000,000,000. Any bondholder who wants cash can do far better by selling his Federal securities on the market (last week Governments were up to 117) than by demanding par value from the Treasury. The offer is to expire Sept. 1 "unless extended from time to time by the Secretary of the Treasury." If Government bonds start to slump, Secretary Morgenthau can be counted on not to extend it. Thus the offer will doubtless remain what it was meant to be, a solemn though meaningless gesture of U. S. good faith.

Not meaningless was that portion of the resolution designed to prevent any bondholder who can prove damages from collecting from the U. S. Taking refuge behind the ancient rule of law that the sovereign can not be sued without its consent, the resolution would withdraw "any consent which the U. S. may have given" to the assertion of any claim against the Government for payment in 100-c- dollars on any of its securities, coins or currencies. Besides closing the door to legal action, the resolution put an extra padlock on by providing that no money shall be disbursed from the Treasury to pay any such claims.

One angle of the dollar controversy the Supreme Court did not pass on last February concerned the question of how much the U. S. owes foreign nations to whom it has promised 100-c- gold dollars. This question has been a hot issue with the Republic of Panama to which the U. S. promised to pay 250,000 100-c- dollars per year as rent for the Canal Zone. In 1934 and again last February Panama indignantly rejected checks for 250,000 59-c- dollars. Last week, on the same day that the President sent his message to Congress, it was unofficially made known in Washington that the State Department had decided to honor the pledge of the U. S. to its neighbor republic, would pay 370,000 59-c- dollars as the equivalent of the rent promised.

Particularly pleased was Panama's President Harmodio Arias. Two years ago he traveled to the U. S., enjoyed two nights at the White House, a State dinner, and most of all an opportunity to sit in on one of Franklin Roosevelt's press conferences. Struck with admiration he flew home and startled Panama by instituting press conferences of his own. Year ago he returned Franklin Roosevelt's hospitality, had an elevator installed in the Presidencia so that he and beauteous, curvesome Senora Arias could make the U. S. President comfortable when he came to dine. But until last week all Dr. Arias had got from his fellow ruler was 1) an offer of 59-c- dollars for Canal rent; 2) a Roosevelt order permitting the sale of liquor in the U. S. Canal Zone which thus deprived Dr. Arias' constituents of a profitable business.

Dr. Arias' gratification at last week's victory was not tempered by the fact that the rent money will never get nearer Panama than Manhattan since the canal rent is pledged to pay U. S. holders of Panama bonds. President Arias has refused to follow Franklin Roosevelt in one respect: he has been a strict budget-balancer and the rent money will help even if it never reaches home. Lest, however, any U. S. citizen profit by his Government's keeping its word, Panama immediately demanded that its U. S. creditors accept 4% instead of the 6- 1/2% interest promised them.

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