Business: Embarrassing Questions

Last month, the New York Times's scholarly Berlin correspondent, Otto D. Tolischus, cabled home a learned, heavily statisticized summary of an official survey of Nazi economics. Appended to his cable was a casual last paragraph which remarked that unofficial estimates placed Germany's secret debt at between 20-25,000,000,000 marks, and her total public debt at upward of 64,000,000,000 marks ($25,683,200,000). Last week SEC embarrassed the Nazi Government by asking it to tell all about its hush-hush bookkeeping.

The German Government laid itself open to questions by registering an issue of $70,000,000 of 3% bonds. These were not to be sold in the U. S.—they could not be. They were to be offered in lieu of interest for the years 1937-40 to U. S. holders of $250,000,000 of German bonds. As if the Nazi Government were a deceptive promoter, SEC cracked down with the threat of a stop-order, set August 15 for public hearings.

Missing from the German statement was the following information required from those who offer securities to U. S. investors: 1) "The German Budget.—The German Government has furnished no statements of its receipts and expenditures for any year since 1935."

2) "The German Public Debt ... the registration statement does not disclose the entire amount of floating debt of the German Government or an adequate history of defaulted obligations."

3) "The German Gold and Foreign Exchange Position. . . . The registration statements have not been adequately amended to set forth requested information vital to American investors respecting present German resources of gold and foreign exchange."

4) "Preferential Treatment Accorded to Nationals of Other Countries. . . ."

While Germany's representatives in the U. S. spluttered that no statement of condition could be demanded of a sovereign nation, SEC's five members (three Democrats & two Republicans in full accord) enjoyed the well-earned slap which they had given the Nazi face.

To U. S. citizens stuck with German bonds, SEC's refusal to let Germany "pay" was no great loss, if anything, opened possibilities of a better deal. The bonds were last week kicking around in Wall Street for 25¢ on the dollar, in Germany, at 60 pfennig on the 100 pfennig Reichsmark (good only in Germany). If SEC had accepted the application, bondholders would have got $35,000,000 of bonds (1937 and '38 interest) which at 3% would have netted them about $1,000,000 a year in usable money. British holders of German bonds got a better deal which gave them about $15,000,000 real money on $30,000,000 owing in 1937 and 1938 interest.