a good reputation as an issuing house takes years to build up, and is
very easily shaken by any mistake, or even by any accident, which could
not have been foreseen but yet brings a loan that it has handled into
the list of doubtful payers. Mr. Brailsford, indeed, asserts that it may
be to the advantage of bondholders to be faced by default on the part of
their debtors. It may be so in those rare cases in which they can get
reparation and increased security, as in the case of our seizure of
Egypt. But in nine cases out of ten, as is shown by the plaintive story
told by the yearly reports of the Council of Foreign Bondholders,
default means loss and a shock to confidence, even if only temporary,
and is generally followed by a composition involving a permanent
reduction in debt and interest. Investors who have suffered these
unpleasantnesses are likely to remember them for many a long year, and
to remember also the name of the issuing house which fathered the loan
that was the cause of the trouble.

There are thus many good reasons why it is the business of a careful
issuing firm to see not only that any loan that it offers is well
secured, but also that it is to be spent on objects that will not
impair the productive capacity of the borrowing country by leading it
down the path of extravagance, but will improve it by developing its
resources or increasing its power to move its products. On the other
hand, the temptation to undertake bad business on behalf of an
importunate borrower is great. The profits are considerable for the
issuing house and for all their followers in the City. The indirect
advantages, in the way of trade orders, conferred on the lending
country, are also profitable, and there is always the fear that if
London firms take too austere a view of what is good business for them
and the borrowing countries, the more accommodating loan-mongers of
foreign centres may reap the benefit, and leave them with empty pockets