"There was paid to him for commissions (apart from expenses) on the three loans, out of the above proceeds, the sum of £216,852. He also received out of the same proceeds £41,090, being the difference between £370,000 cash paid to him by the trustees and £328,910 scrip returned by him to them. This £41,090 probably represents the premiums paid on the purchase of the scrip before or immediately after the allotment of the loan, and was certainly a misapplication of the proceeds of the loan.

"Mr. L---- was also paid, out of these proceeds, a further sum of £57,318, nearly the whole of which seems to be a payment in discharge of an allowance of £8 per bond in respect of the dealings in the 1867 loan.... In addition ... it will be remembered that Mr. L---- received £50,000 'to maintain the credit of Honduras.'

"He also on the 18th of June, 1872, obtained £173,570 by delivering to the trustees ... 5042 bonds of the 1870 loan, at £75 Per bond and 33,000 bonds of the 1869 loan at 104 francs per bond, and retaking them at the same time from the trustees at £50 and 104 francs per bond respectively. Mr. L---- had contracted to pay for these bonds and they had been issued to him at the prices of £75 and 104 francs respectively, and the remission in the price therefore amounted to a gift to him of £173,570 ... out of this portion of the loan of 1869, and the loan of 1870, Mr. L----has received in cash, or by the remission of his contracts, £955,398."

It is little wonder that Honduras has been in default on these loans ever since. In its Report the Committee commented severely on the action of Don C---- G----, the London representative of the Republic. "He sanctioned," it says, "Stock Exchange dealings and speculations in the loans which no Minister should have sanctioned. He was a party to the purchase of the mahogany cargoes, and permitted the public to be misled by the announcements in relation to them. By express contract he authorized the 'additional drawings.' He assisted Mr. L---- to appropriate to himself large sums out of the proceeds of the loans to which he was not entitled." Very likely he had not a notion as to what the whole thing meant, and only thought that he was doing his best to finance his country along the road to wealth. But the fact remains that by these actions he made his Government a party to the proceedings that were so unfortunate for it and so ruinous to the holders of its bonds.

After its examination of these and other less sensational but equally disastrous issues the Committee made various recommendations, chiefly in the direction of greater publicity in prospectuses, and ended by expressing their conviction that "the best security against the recurrence of such evils as they have above described will be found, not so much in legislative enactments, as in the enlightenment of the public as to their real nature and origin."

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 own immediate interest there is every reason why they should close with the bargain, especially if we assume that the Republic is fairly rich and prosperous, and that there is little fear that its creditors will be left in the lurch by default.