FORTY-THREE governments have borrowed money in the United States through public offerings of dollar bonds in the New York market. The amount of their issues now outstanding is, in round numbers, three billion dollars. Political subdivisions of 26 foreign governments -- that is, states, provinces, departments and municipalities -- have also offered nearly two billions in dollar bonds in the United States, and private foreign corporations have floated another three billions. These are the estimates made by the Institute of International Finance, and they show that total outstanding issues of foreign dollar bonds amount, in round numbers, to eight billion dollars. This sum is exclusive of the war debts owed to the United States government, which with principal and unpaid interest now amount to approximately twelve billions.
All the war debts, except the small amount owed by Finland, are now in default; but for the time being these obligations have ceased to be a pressing diplomatic problem. The repeated exchange of notes between the United States and the leading war debtors has led to an impasse, and both sides are now disposed to hold the matter in abeyance until a more propitious season. In the meantime, the dollar bonds of twenty foreign national governments are wholly or partly in default, and these defaults are probably having more effect today on the foreign relations of the United States than the 99.9 percent default of the war debtors.
Ordinarily, the United States Government does not undertake to obtain through diplomatic channels the payment of claims which its citizens may have against debtors in foreign countries. Foreign loans are made at the lender's risk. The government assumes no responsibility for them, but it will endeavor to protect its citizens against unfair treatment and especially against discrimination by the foreign debtor in favor of creditors in other countries.
American holders of foreign dollar bonds have met with a variety of treatment from debtor governments since 1931. For convenience, the debtors may be grouped into four classes.
1. In the
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