Why Does China Owe Americans $1 Trillion?

An Interview with Jonna Bianco of the American Bondholder Foundation
by Jerry Gordon (June 2012)

“China’s Secret? It owes Americans nearly $1 trillion,” Parker notes in his opening stanza how this boon to the US economy could be implemented with a stroke of President Obama’s pen:

China has a secret: It owes American investors hundreds of billions of dollars.

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“How to Reduce the Federal Deficit by $750 Billion.”  We noted:

The Parker article addressed the means available to the Obama Administration to resolve the defaulted pre-1949 Chinese debt and boost the economy:

The U.S. government has a legal obligation to its citizens. The 1933 Securities Act established both the Foreign Bondholders Protective Council, under State and Treasury, and the Corporation of Foreign Security Holders, under the SEC, to get foreign governments to address debts owed to private U.S. investors. Housed in a Virginia suburb, the council in 47 instances settled the debts of foreign governments, including communist ones, to U.S. citizens. In 1975, the Polish government paid U.S. investors one-third the face value, or $8.5 million, of nine different series of bonds, all inherited from previous governments.

All that has to happen is that President Obama issue a proclamation to stand up the corporation, and a staff, at the SEC. The bondholders would bring their bonds in for examination and verification of the certificates and serial numbers. Then the corporation could get about settling the issue through payment, reissue of bonds, restructuring or even settling the debt. Many of these people are not wealthy investors but just everyday citizens. Bianco herself is a Tennessee cattle farmer.

In 1970, the Foreign Claims Settlement Commission (FCSC), a quasi-judicial, independent agency within the Justice Department, considered a claim on defaulted pre-1949 Chinese Bonds under the International Claims Settlement Act of 1949. In FCSC Decision No. CN-47 dated March 18, 1970, the FCSC concluded that the bonds at issue had been in default since 1939 and the claims based on those bonds did not come under the purview of the Act, and accordingly denied the Claim.

raised more than $42 million from those banks and investment firms salivating at the golden opportunity of entering the vast Chinese marketplace.

Against this background, we interviewed Ms. Bianco on what the PRC owes Americans nearly $1 trillion in debt.

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