If the scandals and losses involved by loan issues were always on this
Gargantuan scale, there would be little difficulty about disposing of
them, both on economic and moral grounds, and showing that there is, and
can be, only one side to the problem. But when it is only a question,
not of fraud on a great scale but of a certain amount of underhand
business, such as is quite usual in some latitudes, and a certain amount
of doubt as to the use that is likely to be made by the borrower of the
money placed at its disposal, it is not so easy to feel sure about the
duty of an issuing house in handling foreign loans. At a point, in fact,
the question becomes full of subtleties and casuistical difficulties.

For instance, let us suppose that an emissary of the Republic of
Barataria approaches a London issuing house and intimates that it wants
a loan for 3 millions sterling, to be spent half in increasing the
Republic's navy, and half in covering a deficit in its Budget, and that
he, the said emissary, has full power to treat for the loan, and that a
commission of 2 per cent. is to be paid to him by the issuing house,
which can have the loan at a price that will easily enable it to pay
this commission. That is to say, we will suppose that the Republic will
take 85 for the price of its bonds, which are to carry 5 per cent.
interest, to be secured by a lien on the customs receipts, and to be
redeemed in thirty years' time by a cumulative Sinking Fund working by
annual drawings at par, or by purchase in the market if the bonds can be
bought below par. If the Republic's existing 5 per cent. bonds stand,
let us say, at 98 in the market, this gives the issuing house a good
prospect of being able to sell the new ones easily at 95, and so it has
a 10 per cent. margin out of which to pay stamps, underwriting and other
expenses, and commission to the intermediary who brought the proposal,
and to keep a big profit to themselves. From the point of view of their