THE BOND-SELLING EXTRAVAGANZA OF THE 1920'S AND ITS AFTERMATH
INVESTMENT bankers of the United States sold, mainly in the domestic market, huge quantities of government and government-guaranteed bonds of foreign countries during the twelve years following 1918. The total par value of the long-term issues of this type marketed by American investment houses during this period was approximately $6.2 billion. Latin America's share of these issues was nearly $1,894 million, more than 30 per cent of the total, and the gross profits of the bankers from the sale of these bonds amounted to some $95 million, or an average of 5 per cent of the face value of the Latin-American long-term issues which they floated. The large flotations of the government bonds of Canada, Europe, and the rest of the world yielded approximately equal profits. But citizens of the United States who purchased these securities soon discovered that in most instances they must suffer for their imprudence.
The vast majority of American investors who bought LatinAmerican government bonds were unaware of the debt records of these governments. They had little or no knowledge of the long history of Latin-American defaults or of the scandals in which British investment houses were involved in the 1820's and again in the 1860's and 1870's. Their experience with such bonds was limited. Except for Mexican bonds, it included nothing that recommended caution. Aside from Mexican government and government-guaranteed securities, purchases of United States citizens before 1919 had been confined mainly to the bonds of