onthly d with be? Strauss t know hat the was reone was ntil the en was r. The with the Co., the that we e money d out at se of the Clearing nt-well, ime that is that it gas that. g of, and ovince of ch you ir g out the s paid out s Snare & Bank of nt spread, of Bogota, tgages in Mr. JOHNSON. Did you have an intermediary there? Senator JOHNSON. Who was it? Mr. BRECK. I think his name was Borda, a Colombian. Senator JOHNSON. Did he come to you with that particular loan? Mr. BRECK. He did not. He came to the Central Union Trust Co. at that time. Its representative was in Colombia at the time and discovered the business and asked us if we would like to do it, and we said we would, and Mr. Borda received the customary intermediary commission. Senatotr JOHNSON. What did he receive? Mr. BRECK. I think it was 15 per cent on our net originating profits, which is another way of measuring the commission at times. I think it averaged about three-eighths of 1 per cent, or between one-quarter and three-eighths of 1 per cent. Senator JOHNSON. Of the total loan? Mr. BRECK. Yes. Senator JOHNSON. Did the State Department ever ask you to make a loan to Nicaragua? Mr. BRECK. I think Mr. Strauss might answer that. Senator JOHNSON. Do you recall that, Mr. Strauss? Senator JOHNSON. Tell us about that. Mr. STRAUSs. Toward the end of the Taft administrationSenator JOHNSON (interposing). Oh; it was back there, was it? Mr. STRAUSS. Yes. The State Department, and I think Mr. Knox was still the Secretary of State; but soon after that he was succeeded, I think by Huntington Wilson, the Under Secretary of State. As you will probably recall, there was appointed, either by the United States or with the approval of the United States, an American to advise Nicaragua as to what to do with its disordered financial and economic condition. The name of the gentleman appointed will occur to me in a moment. He went down there and looked into the situation and, I believe, made a report to Nicaragua, which was filed with the State Department; and soon after that the State Department, through him, asked us to submit to its representative; and I am trying to be as technical as possible as to just what course it took to show that it was with the sanction of Senator JOHNSON (interposing). Unless you wish to do it I do not care for the technical details, although that is up to you. Mr. STRAUSS. They are all matters of public record and I am willing to state them. Senator JOHNSON. Well, I think you acted under the State Department. Mr. STRAUSS. We would not have acted if we had not had the State Department back of us, or if we had not thought the State Department was back of the matter. Senator JOHNSON. I understand that. Now, I further understand that they made a request of you. Mr. STRAUSS. For the moment, about that I can not just recall. Senator JOHNSON. Do you remember any other loan made by you to Nicaragua at the request of the State Department? Mr. STRAUSS. As long as we were the bankers for Nicaragua in any shape I will say that we did nothing that was not either approved by the State Department or at its suggestion. Senator JOHNSON. I am not questioning that. But in the last ten years did you make any loan to Nicaragua at the suggestion of the State Department? Mr. STRAUSS. I just want to ask one of my partners here. Senator JOHNSON. All right. Mr. STRAUSS. Since 1926 we have not had any connection, I believe, with Nicaraguan finances. Mr. BRECK. No; I will say that we made a bank loan to the Bank of Nicaragua. Senator JOHNSON. When was that? Mr. BRECK. In 1926 and 1927, I believe. Senator JOHNSON. And that was made at the instance or suggestion of our State Department, was it not? Mr. BRECK. I do not know about that. Mr. STRAUSS. Let me very briefly say this: In years gone by, way back in the Taft administration, my brother and I-and my brother is now dead-handled that matter. Then as the years went by it was taken up by other partners. That is the reason I am somewhat hazy about it now. But the earlier part of it I am quite familiar with. When we get down to the more modern times I do not think Mr. Breck knows much about it, for one or another of our partners handled it. But I can briefly say this: That we never made a public issue on Nicaraguan bonds, and what we did was handled jointly with other firms, at one time Brown Bros. and the Guaranty Trust Co. of New York, I think, and at another time with the Guaranty Trust Co. of New York but without Brown Bros. & Co.; we made them bank loans or bank credits with which to reorganize their currency, and we undertook then the control of the state railroad, which was being operated at 100 per cent of the gross receipts, and we sent down railroad men to manage it, and it was a very different sort of thing from anything we are discussing here. Senator JOHNSON. Do you ever remember a railroad loan being made there? Mr. STRAUSS. Yes, sir. Senator JOHNSON. When was that made? Mr. STRAUSS. It was very far back, over 10 years ago, I should say, before the World War. Senator JOHNSON. Do you remember who was the Secretary of State at the time? Mr. STRAUSS. I think Mr. Bryan, if I am not mistaken. Senator JOHNSON. I thought that might bring about your recollection. Was it during Mr. Kellogg's time? Mr. STRAUSS. Oh, no. I think it was during Mr. Bryan's time as Secretary of State. Senator JOHNSON. It was done at the instance of the State Department, however, was it not? Mr. STRAUSS. It was either done at their instance or in such a way that they were assuming the responsibility for inviting us. Senator JOHNSON. I was just curious, and that was all, as to the mode of making these loans. Take the Mortgage Bank of Bogota, $3,000,000, was that done through an intermediary? gua in er apme last tion of 1, I be ne Bank or sug by, way brother by it was omewhat familiar not think partners made a = handled Guaranty with the Os. & Co.; reorganize the state the gross nd it was ssing here. oan being Mr. BRECK. That is the one I just mentioned, about having been brought to our notice by the representative of the Central Union Trust Co. who was in Colombia and who talked with this Colombian named Borda about it, and when the business was done Mr. Borda received a commission. Senator JOHNSON. Now let us take the Department of Cundinamarca. That was a $12,000,000 loan. Was that made through an intermediary? Mr. BRECK. Through the same intermediary. Mr. BRECK. Yes, sir. Senator JOHNSON. What did he receive on that? Mr. BRECK. I think he received 15 per cent of our net originating profit, which works out somewhere between one-quarter and threeeights of 1 per cent of the face amount of the issue. Senator JOHNSON. Was he in the bond business? Mr. BRECK. No. He was an individual. He was a promoter. Senator JOHNSON. Did you ever investigate that matter so as to ascertain? Mr. BRECK. I never met Mr. Borda. Senator JOHNSON. Was there any competing for his particular business by any American firms that you were aware of? Mr. BRECK. We were told during our negotiations that other houses had representatives in Colombia who wanted to do the business. But that was usual and often the case in connection with foreign loan negotiations, that there was competition for loans. Senator JOHNSON. What date was that loan made? Mr. BRECK. June of 1928. Senator JOHNSON. What is its condition now? Mr. BRECK. Do you mean are payments being made regularly? Mr. BRECK. They have been. But as you know, the Republic of Colombia has issued a decree controlling the exchange, so that the departments can not buy foreign exchange with which to pay their loans. Senator JOHNSON. Therefore they have defaulted in the matter of the interest? Mr. BRECK. Not yet. Senator JOHNSON. They will default, however, under that decree if it is enforced? Mr. BRECK. They must. Senator JOHNSON. When is the next interest payment due? Senator JOHNSON. Do you mean May 1, 1932? Mr. BRECK. Yes. Senator JOHNSON. Well, have you consulted Mr. Borda about that at all? Mr. BRECK. No. Senator JOHNSON. Why not? Mr. BRECK. We have consulted the department about it. It was their responsibility, the department of Cundinamarca. Senator JOHNSON. Well, Borda received a considerable commission, you say, something like one-half of 1 per cent. Mr. BRECK. Not that much. Somewhere between one-quarter and three-eighths of 1 per cent, I don't remember exactly. Senator JOHNSON. Next you have the city of Rio, $13,000,000. Mr. BRECK. That was an issue the leaders in which were Blair & Co. We were in the purchase group, but they conducted the negotiations and headed everything. Senator JOHNSON. You had nothing to do with the intermediary in that instance? Mr. BRECK. No, sir. Senator JOHNSON. Do you know whether or not there was some particular individual in that issue who obtained a commission? Mr. BRECK. I do not know. Senator JOHNSON. But Blair & Co. were the ones who initiated it? Mr. BRECK. Yes. Senator JOHNSON. But you were a member of the original group, were you not? Mr. BRECK. Yes, sir. Senator JOHNSON. What is this next one, Fried. Krupp? Mr. BRECK. That is a German steel and iron company. Senator JOHNSON. You have a loan of $10,000,000 to them? Mr. BRECK. We were the members of the original group. It has since been paid off in full. Senator JOHNSON. How about the loan to the city of Rio? Mr. BRECK. That has been since paid off in full. Senator JOHNSON. Both of these are paid off in full? Mr. BRECK. Yes, sir. Senator JOHNSON. Next, Cunard Steamship. That has been paid? Mr. BRECK. Yes, sir. Senator JOHNSON. That was for $7,500,000? Mr. BRECK. Yes, sir; $7,500,000. Senator JOHNSON. Did you have an intermediary there? Mr. BRECK. I do not know. Brown Bros. & Co. sold that issue. Senator JOHNSON. The next one is Leonard Tietz (Inc.), $3,000,000. What was that? Mr. BRECK. That was a German department store. That issue was sold by Lehman Bros. Senator JOHNSON. When was it that that was purchased? Mr. BRECK. In January of 1926. Senator JOHNSON. I notice there was a spread there of 14. What was it purchased for, at what price? Mr. BRECK. They were purchased at a cost of 83. Senator JOHNSON. And sold at what? Mr. BRECK. Sold at 97. Senator JOHNSON. Did you take that loan up with the State Department? Mr. BRECK. I assume that Lehman Bros. did. We were not the leaders and naturally we would not do so. Senator JOHNSON. In taking up any of these loans with the State Department did you advise them at any time of the purchase price and then of the selling price? Mr. BRECK. No; we did not. We told them of the amount of the financing, as I recall it, that was contemplated. I will be glad to send you a copy of our letter to the State Department, which was usually in general language. I think the cost price might have been mentioned, but I would have to consult our letters in order to tell Senator JOHNSON. Please send us a copy of one of your letters of the regular sort. Mr. BRECK. All right. (See exhibits at conclusion of testimony.) Senator JOHNSON. Next is the Berlin City Electric Co., $1,000,000. Has that been paid off? Mr. BRECK. Yes. Senator JOHNSON. Did you have an intermediary there? Mr. BRECK. I do not know. Hallgarten & Co. headed that issue, and I do not know the details. Senator JOHNSON. Berlin City Electric Co., $2,000,000. Has that been paid off? Mr. BRECK. I think it has; yes. Senator JOHNSON. Did you have an intermediary there? Mr. BRECK. I do not know, sir; because we did not head the issue. Senator JOHNSON. Republic of Cuba, $9,000,000. Do you recall that? Mr. BRECK. Yes, sir. Senator JOHNSON. Give us the date, please. Mr. BRECK. That was offered in July of 1927. Senator JOHNSON. Were you the original sponsor of that loan? Senator JOHNSON. Was there an intermediary there? Mr. BRECK. I do not know. Senator JOHNSON. Cunard Steamship Co., $2,500,000. Mr. BRECK. That is another issue that has since been brought out. Mr. BRECK. I do not know. Senator JOHNSON. Mortgage Bank of Venetian Provinces, $5,000,000. Mr. BRECK. Yes; in November of 1927. Senator JOHNSON. Did you have an intermediary there? Mr. BRECK. I do not know. Hollins & Co. headed that issue. Senator JOHNSON. So you have no idea as to whether there was anybody who received a commission in that as intermediary or not? Mr. BRECK. My impression is that they paid somebody a commission, but I have no knowledge of it. Senator JOHNSON. Hellenic Republic, $7,500, and another one of $7,500. Mr. BRECK. $7,500,000; they were 1-year notes offered in May of 1930, and paid off by a similar amount of notes now outstanding. Senator JOHNSON. Have you any short-term credits with Germany? Mr. BRECK. No, sir. Senator JOHNSON. Have you dealt in any? Mr. BRECK. I do not understand that. Senator JOHNSON. Have you dealt in any short-time credits of Germany? |