Voters to Blame

Seldom does a corporation turn on its security holders and give them a lecture on morals, but last week Pacific Gas & Electric Co. did just that. In 1911 Pacific issued $35,782,000 of 5% Refunding Mortgage bonds due in 1942. In order to induce foreigners to buy them, it gave bondholders the option of payment in sterling, guilders or Swiss francs as well as dollars.

Since 41% has been lopped off the U. S. dollar, some U. S. holders, denied by the law the privilege of demanding payment in gold, have been sending their coupons abroad for collection in guilders or Swiss francs, still at gold par. Last week Pacific Gas & Electric notified the New York Stock Exchange that such bondholders "are evading the law, i. e. are accomplishing in a roundabout way what Congress has prevented them from doing directly." The company announced that henceforth it would pay interest in foreign currency only on bonds which were proved to have been continuously owned and held abroad since May 1.

To justify its action. Pacific Gas & Electric bluntly blamed its stockholders for their own loss:

"The responsibility for this law [forbidding the payment of debts in gold or its equivalent] rests upon the citizens of the United States who elected, by an overwhelming majority, the President and Congress who enacted it. This company is compelled to accept payments of amounts due it in legal tender currency. Obviously, it would be unjust and unreasonable for such citizens, who have by their elected representatives created the present situation, to compel this company to pay them in the equivalent of gold coin of the former standard, by sending their interest coupons abroad for collection."

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