Memories May Fade, But Fine Print Doesn’t

China Still Owes Billions Of Dollars In Unpaid Bonds To 15,000 U.S. Families

(CBS)  This story was written by CBS News producer Stephanie Lambidakis for CBSNews.com.

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For more than a half century, the Laband family of Orange County, California, has been waging an unsuccessful legal fight to force China to make good on a promise that was etched in gold. The promise came in the form of bonds sold by China, backed by gold reserves along with the full faith and credit of China's government.

From 1900 to 1938, the Labands and thousand of other Americans eagerly snapped up the bonds as a sound investment and a patriotic way to help China, an ally, build its economy.

But since 1939, China hasn’t paid a nickel to the Labands or the 15,000 other mostly working-class families who counted on the interest payments for economic survival. By their tally, The People’s Republic of China owes them collectively at least $260 billion.

The Chinese government formally repudiated the payments in 1983, claiming it does not recognize the debts of pre-Communist governments. Tired of being ignored by China and snubbed by the federal government, the bondholders have gone to Congress.

Today, the families plan to show a House Foreign Affairs subcommittee the ornate bonds and the fine print that says in four languages that the debt is binding “upon the Government of the Republic of China and its successors.”

Pierre Laband, 60, is among the bondholders who travelled to Washington at their own expense. His father, Walter Laband, started buying the bonds in 1913 and depended upon the 5-percent interest payments to help make ends meet. He is outraged that China still refuses to pay.

Jonna Bianco, the President of the American Bondholders Foundation, told CBS News that the bondholders helped build China’s economic might, and at a time when Americans are hurting economically, “We need to hold people’s feet to the fire. We need to hold China accountable.”

Bianco is pressing Congress to approve two non-binding resolutions that would hit China where it hurts: its high-flying credit rating. If approved, the measures would demand that China disclose in SEC filings that it defaulted on the long-ago bonds. “China defaulted on a very large debt,” Bianco says. “When we default, it goes on our credit ratings. Certainly, we’ve seen that with the subprime mortgage, WorldCom and Enron disasters.”

The bondholders believe they’re on solid legal ground. “China has flouted its international legal obligations to honor the sovereign debt incurred by its predecessor government, as well as its obligations as a member of the World Trade Organization to abide by international financial norms,” said David H. Laufman, the Washington, D.C., attorney representing the American Bondholders Foundation.

Laufman points out that China, when threatened economically, has paid its bond debts before. In 1987, China settled with the British Government when it blocked China’s state-owned enterprises from Britain’s capital markets. He says that without pressure from Washington, China will “continue to thumb its nose at American bondholders.”

[karolus2-2009]

The world if rife with crooks who attempt to get away with the spoils without facing up to their responsibilities and duties; it is also rife with apathetic (and in my view pathetic) onlookers.

Sometimes this happens with the active or passive collusion of governments, when the immunity of a fellow government is at stake.

The simple fact is: China borrowed, China must pay back. Or do we no longer need to pay our debts?

If it were not for people like Ms. Bianco and her extremely competent team, rule of law (remember rule of law, all you wise commentators above? That thing the US stands for?) would be trampled into the ground even more than it is already.

Hats off to you, Ms. Bianco. You and your team are doing a risky job which most people are afraid to undertake.

A friend (who does not hold chinese bonds).

[runningralph]

clgl-fubar,
I did see the clause. However, it has no legal merit. It would be the same as if I borrowed money and wrote on the note that you would pay it back when you never signed it. The US did indeed claim that Taiwan was the legal government of China and blocked their entry into the UN for decades. And we fought them in Korea and Viet Nam because they were trying to export communism. But they have stopped doing that and taken up capitalism instead. So I no longer have a beef with them. Maybe if the Taiwan government decides to reunite with the mainland the bonds could be paid.
As far as what constitutes a legal government, Mao said that political power comes out of the barrel of a gun. Military power after all is the bottom line.

IF Saddam had issued bonds in order to raise cash, and IF his supporters purchased those bonds in order to support him. Would we now insist that Iraq pay off those bonds to Saddams old supporters?

If we raise the viciousness and murderousness of Saddam by several orders of magnitude, then we have the Kuomintang government of Chaing-Kai-shek.

I cannot support paying off those Bonds.

[rosieod4prez]

The next President sould say our bonds are no longer going to be paid, and then we pay the Chinese bonds off.

Simple solution!

[bozworth4]

SHHHHHHHHHHHH! Don''t make the Chinese mad. They will call our bonds. Wonder what kind of mall they will build at arlington? What kind of sauna will work at old faithful? All the big redwoods will make a wonderful palace. Us common people can live in the parks.

[stn_sage]

My comments are as follows:

1. These bonds should be considered legally binding!

2. Some reasonable financial agreement should be negotiated and settled upon!

3. If they don''t honor them, they face the possibility that other countries WILL treat them the same way in the future!

4. By settling, they can put the issue to rest once and for all time!

[rosieod4prez]

"Invest in the Amero, the Dollar is going to be worth less than the peso soon. - Posted by six-six-seis



Is there anyway we can get this news out in Spanish to all the illegal immigrants ? Maybe they will leave the country.


We KNOW our congress won''t do anything about that issue.

[rosieod4prez]

runningralph - read the article again...

What it says is, "the ornate bonds and the fine print that says in four languages that the debt is binding "upon the Government of the Republic of China and its successors."


Are you trying to tell us the Mainland Chinese Government is not a legitimate successor ?




Then again, maybe we should tell the Chinese no more trade until they pay the bonds in full. And if they refuse, then we pay them and declare our bonds null and void which we have sold to China.

The government that was running China from 1900 to 1938 was run out of mainland China by the Chicoms after WWII. The Chinese Nationalist government moved to Taiwan. If anybody should pay it should be the Taiwanese government. Collecting on those bonds is like trying to spend Confederate money.

Posted by runningralph
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Ok, but it should be paid exclusively by the mandarin mainlanders who occupied Taiwan and committed genocide on the native Taiwanese.

[runningralph]

The government that was running China from 1900 to 1938 was run out of mainland China by the Chicoms after WWII. The Chinese Nationalist government moved to Taiwan. If anybody should pay it should be the Taiwanese government. Collecting on those bonds is like trying to spend Confederate money.

Purchasing bonds to support Chang-Kai-shek''s regime would be like buying bonds from Hitler or Hussien.
Only Chang was a helluva lot more crooked, corrupt and murderous. I don''t think they should pay ''em.

[ozarkbard]

So they invested their money into another country and lost.

I sure wish more of that same thing would be happening today.

[nikkicatt1]

Why does anyone trust any government? Please remember that "THE GOVERNMENT" is made up of "PEOPLE". Greedy, money hungry people. How many countries have we given aid to that have turned around and either attacked us, their own people or neighboring countries? Bring our troops home and lock the borders!!!

[talkingham]

Anyone who bought those bonds was an idiot. China was already on the verge of war with Japan at that time as well as in the middle of a civil war-- really great investment savy people. I''ve got some swampland down heah in fat old Southern states you can invest in-- actually pretty good investment since there''s so much methane (nat gas) in those swamp bottoms!

[six-six-seis]

Invest in the Amero, the Dollar is going to be worth less than the peso soon.

[six-six-seis]

LOL. that would be funny if threatened, they threaten back to dump the debth theive bought from the SHRUB''s war into the market.

[iuphockey12]

I WONDER IF THEY''LL GIVE US FREE DERIVERY IF WE ASK FOR THE MONEY BACK

[nssherlock1]

They can probably trade those Chinese bonds for some Enron stock even up.

[awenshok]

How ''bout they pay the bonds we hold (I got 2) and we pay off the US govt bonds they hold. They no pay, we no pay -- oh, and no capital makrets access, either. And quit using so much oil -- get your own.

[vnveteran72]

China: "Sorry Folks, but Shrub showed up and we gave HIM all your money"....."He said you wouldn''t mind"...