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.”

[Gary Kempf]

Pay up China!!!!

[jtdev1]

Good Luck!

Can you imagine Congress doing something against China? All the Chinese have to do is not show up at the next US Bond sale...

They''ve got us by the short hairs...

[emelder]

Congress has absolutely zero clout with China. Most likely, we will be at war with Chine within 12 years ... was is always about money and resources, and always made worse by lack of understanding between cultures, and demonification of the prospective "enemy". It''s coming and it won''t be pretty.

[Torilin]

The Chinese government formally repudiated the payments in 1983, claiming it does not recognize the debts of pre-Communist governments-----------That pre-communist government(Taiwan, ROC) is still in existance and China claim it as its own! If they want to claim Taiwan as its own then they also claim the debt as well! PAY UP, DON''t BE a DEADBEAT!!

[emelder]

oops ... war ... not "was"

[averjane]

What''s right is right. Does anyone know the difference anymore is what I will be waiting to see. The way the world has flipped flopped on these 2 words; right and wrong, wrong has become the right way to do things and the right way is now wrong. Now I know I''ve read something somewhere that said this would happen one day...let me think...now where did I see that...Oh now I remember, it was the B-I-B-L-E. Yeah, that''s the book for me! But the world hates that book because it holds us accountable! All you have to do is read the pages and it will tell you something about yourself. Every one of our consciences will be pricked by its contents. I feel an ouch when I read it sometimes but that''s usually because at the time I am spiritually or physically sinning and it''s words remind me and I come back to my God given senses. His word is alive and on fire, so burn now or burn later but you will burn!

[markbrookhar]

I doubt they pay, it may be the same China, but it is a totally different government. The old China of the 1930-1940''s no longer exists. It is sort of like making a new company pay the debts of a defunct company no longer in business simply because the new company operates out off the old company building and makes the same product, but didn''t buy the old company, only ran it out of business.

[rosieod4prez]

jtdev1 - And if they don''t show up at the next bond sale then our economy takes a hit.

The more devastating that hit, the more it hurts China. The US is their number 1 customer. What happens when you don''t have customers ?

I have been to China. I know the people. They love their Country as much as we do, but don''t mistake "Country" for "Government".


So WHO is eally the problem here ? Congress. Another reason for a 9% rating. And as long as you allow them to get away with this sort of government, you are ultimately to blame.


I say - vote out the incumbent in Congress - I don''t care what party they are in. Instead of them listening to those that give the most to their re-election, we need to make them realize the ONLY way they hang onto their jobs is by listening to the PEOPLE!!!!

[chatmandu002]

Hey I''ve got an idea. Why don''t we refuse to recognize our debt to China''s communist government.

[johnstossel]

Good luck collecting!!! You will probably have as much success as the government does to make their currecy float instead of being pegged to the dollar. If we get too rough with them they will quit sending us all of the junk that is on Wal-Mart''s shelves. If Wal''Mart doesn''t have this stuff they will have lay offs and hurt our economy. We can''t make this stuff anymore because all of our factories are boarded up to prevent vandalism by the that can''t collect on their china bonds. One thing leads to amother...

[aggiekat2004]

AverJane, believe what you want to believe. But the bible does NOT hold people accountable. Most self-proclaimed christians that I know are NOT accountable, instead blaming everything wrong with their lives and society on other religions.

I dated a guy who claimed to be a good christian, but thought it was okay to kill *** because they had sinned against "his God." When I reminded him that killing was against the Ten Commandments, he said it "didn''t apply in that situation."

[forthepeopl1]

Concerns about the international breadth of the fallout from Fannie and Freddie''s problems also eased. South Korea''s central bank denied a media report that it had unrealized losses of more than $7 billion in investments in U.S. agency debt including bonds issued by Fannie Mae and Freddie Mac.

Bank of China 3988.HK 601988.SS , meanwhile, may hold roughly $20 billion worth of bonds issued by Fannie and Freddie, according to a research note by analysts at CLSA.

A Bank of China spokesman could not immediately be reached for comment. Because the U.S. government has taken steps to support Fannie and Freddie, CLSA said in its note that it regards the credit risk for the two as near to that of a sovereign credit rating for the government itself.

[aggiekat2004]

That was "kill g-a-y-s" that got censored. Thanks again, CBS, for not letting us type a fairly benign word.

[harp1963]

George Bush will make sure China doesn''t pay a penny.

[kennedy7955]

I have a bond from the First Republic of Czechoslovakia. I don''t think they are going to pay either.

[pvperson]

260 billion would work out to over 17 million each. How much were these bonds worth in 1939? $10,000 at 5% over 70 years would only be $304,264.

[averjane]

aggiekat2004

Your boyfriend was obviously not in line with the Bible''s teachings, he will answer for himself, not I. I have enough of my own to answer for. And unlike the other self proclaiming Christians you''ve talked to, I do not blame anything on other religions, I see it for what it is, SIN. Wherever you find it, it''s all the same. And thank you, I will believe what I want. Isn''t this country and this faith great! I have the right and choice to do that and so do you.

[nolalou]

All China has to do is say "Fine, we''ll pay up when the U.S. Government pays back the almost 1 Trillion dollars this administration has borrowed! "

[qntmlpr]

If the PRC always claim that they are the successive and rightful Government of all of China since thay have this fantasy of claiming Taiwan as their own province; participate (and keep Taiwan out) in world body organizations such as the United Nations and especially now that money is pouring in to china from their flood of exports, then they should make good faith and honor the unpaid bonds.

[lib_crusher]

All China has to do is say "Fine, we''''ll pay up when the U.S. Government pays back the almost 1 Trillion dollars this administration has borrowed! "

Posted by nolalou at 12:12 PM : Jul 17, 2008

Yeah really. Thanks Bill Clinton!

[nssherlock1]

Actually, the roots of the government that issued the bonds are in Taiwan. That''s where Chiang Kai-shek went to when the communist kicked him out of the mainland.

[forthepeopl1]

Fannie and Freddie shares have declined by about 80 percent this year. The slump in the two mortgage agencies has sparked a new catchphrase -- ``Too Chinese to Fail'''''''' -- based on the $974 billion of U.S. agency debt held by foreign investors, a fivefold increase since 2003.

Financial markets and U.S. legislators alike have derided U.S. Treasury Secretary Henry Paulson''''s plan to bail out the mortgage lenders. One of the two key elements is illogical, while the second is plain outrageous.

Just last week, Fannie Mae said it ``has access to ample sources of liquidity, including access to the debt markets.'''''''' Freddie Mac said it was ``adequately capitalized, highly liquid and an essential part of the nation''''s housing system.'''''''' Either they are being economical with the truth, or the decision to let them borrow from the Federal Reserve''''s discount facility is window-dressing that serves no real purpose.

Defending the Indefensible

Worse is the scheme to allow Paulson to dip into the nation''''s tax revenue to purchase shares in Fannie and Freddie -- shares that investors have already deemed to be almost worthless. If the mortgage lenders can''''t survive in their current form, the government shouldn''''t be defending the indefensible.

In April, Standard & Poor''''s said the risk that the U.S. would have to prop up its so-called Government Sponsored Enterprises posed a bigger threat to the country''''s AAA rating than its willingness to underwrite securities firms.

[libo_nazi]

We should pay it back right now when the dollar is at a low. Think about it, if the dollar is only worth half of what it was when the money was borrowed we will be getting away with only paying back half of what we really owe. how pissed off do you think it would make China if we pay them back with de-valued dollars, and then within a month or two the dollar rises in value to it''''s former worth?
Then we can cut off all imports of chinese goods and ruin thier economy. They are the enemy and the more of their people in poverty the more of a burden there is on the govt'''', and that is good for us.

Posted by getoffmine at 12:21 PM : Jul 17, 2008

Nah, even the dollar is worth too much for that still. We should pay then back in crappy fireworks, cheap plastic toys, and Walmart managers!

[forthepeopl1]

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

# 1

%u201Cupon the Government of the Republic of China and its successors.%u201D


SUCCESSORS - THATS ALL THEY NEED!!!! TO PROVE THEY OWE THEM THE MONEY.

[forthepeopl1]

NEED TO NUKE THEM ANYWAYS

[kennedy7955]

"260 billion would work out to over 17 million each. How much were these bonds worth in 1939? $10,000 at 5% over 70 years would only be $304,264. Posted by PVperson"

It is an interesting question you pose as your math is correct.

[pat1967-2009]

260 billion would work out to over 17 million each. How much were these bonds worth in 1939? $10,000 at 5% over 70 years would only be $304,264.


15000 families, not 15000 bonds. I would guess there were many, many more bonds than 15000.

[libo_nazi]

I would be LMAO at the utter irony of this, if it didn''''t look like these *** morons weren''''t engaging more U.S. taxpayer money and what freaking little clout we have left in this world poking a stick at a nation who owns so much of our debt and economy it hurts, from the land of debt defaulters and @$$wipes trying to collect $250 BILLION dollars on some twenty cent bonds purchased from a pre-communist China.

Posted by prometheus41 at 12:34 PM : Jul 17, 2008

Yeah really. Thanks Barry Saddam Obama!

[blessed1959]

harp1963

you are hilarious!!!! you will have nothing to talk about when bush is out of office!!! I bet you blame him for your pitiful lot in life and of course, 9/11 and Hurricane Katrina...

[missingamerica]

Now here is an exercise in

"Gee, I know that most of the Congress and the entire Administration is owned by corporate interests who in no way, shape or form will do anything that might jeopardize the profits that come from good trade relations with China, but I think I will bash my head against that brick wall anyway."

[rgrxx175]

is that the same thing as collecting from your bookie that owes you $100 but you owe him $10,000 in other bets...

[missingamerica]

It does provide us with a solution to our own debt crisis, though.

We simply designate one day - May 1st might be appropriate - where we declare the United States to be a Communist nation and renounce all of our debts.

Oh, and spend like friggin'' madmen on that day, because we can declare ourselves to be a Democracy on May 2nd and renounce those debts, too!

[beehive21-2009]

The USA should deduct it off our bill,if we owe the Chinese anything ?

[jjp735i]

People turning to Congress for help? Unless you are "special interest" with money in hand, your wasting your time. We don''t have a Congress any more. We have the House of Greed and the people are not welcome with out cash in hand.

[lemonskink]

Congress can''t do a thing for these people, because Congress can''t or won''t impeach the criminals of this administration who''ve been hell-bent on destroying America for their own personal gain. There is no doubt in my mind that the house must be cleaned from the top to the bottom of the vermin. It''s time to start over folks.

[liberalme]

The USA should deduct it off our bill,if we owe the Chinese anything ?
Posted by beehive21 at 12:46 PM : Jul 17, 2008

How is the US government entitled to any of that money?

These people are looking for help from our government, but with no money attached, the government won''t do a thing---these people will have better luck at winning the lottery than getting "free" help from the government.

[forthepeopl1]

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 %u201Cupon the Government of the Republic of China and its successors.%u201D

[fedup_w_pols-2009]

Wow what a shocker a Communist country not wanting to pay up. I don''t know why anyone would be surprised about this. After all China is the main country in all the world known for reverse engineering everything they make from others patents and products only to make substandard clones to then sell back into those same markets. The ignore patent laws and copyrights as well. If big pharma has a hard time getting the Feds to make China stop counterfitting their drugs after all they pay the politicians I wouldn''t hold my breath hoping for help reclaiming your money. Unless of course your in the politicians pocket like Pharma.

[pdchapin]

Basic concept in contract law is that there must be an agreement between the parties. No agreement, no binding contract. The current government of China never agreed. The successor clause is as meaningless as a person taking out a loan that indebted his children. International agreements are different but I haven''t seen anything here from anybody who actually knows whether they have a legal case of not.

[amazedd]

Could the Government buy, or bid for, said debt from the people and then collect it from the Chinese; by deducting it from it''s own Chinese IOU''s? Win-win, like, see?

[rgrxx175]

oh great just remind china how much money we owe them

[tmn]

The Chinese Govt. may well decide to pay off the bonds in Wal*Mart gift cards, since they pretty much own the firm...

[Torilin]

Hey I''''ve got an idea. Why don''''t we refuse to recognize our debt to China''''s communist government.


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Posted by chatmandu002
Well, then they wont lend you any more money, silly.

[libo_nazi]

You know, if the U.S. actually recognized international law and the U.N. international courts, you might have a case here.

Posted by prometheus41 at 01:32 PM : Jul 17, 2008

LOL!!!!! When has the US ever ignored them? uhhh...what??? never!

[panla]

If China claims it doesn''t have to honor its commitments because it was not the government to sign the agreement, then by that logic, Britain didn''t need to hand back Hong Kong because it didn''t sign the agreement with the Communist government.

[jackp32]

Our corrupt politicians have allowed China to hold the U.S. financially hostage. We cannot offend them or we risk a financial collapse. They thumb their noses at us while our gov''t shakes in fear of what they can do to us. They will own us someday so you better learn the chinese language.

[aldon61]

I bet every one of these people would take 1 million dollars as a settlement. That would amount to $1.5 Billion. Our government should try to broker this deal because if they back their countrymen, China just might want payment on the debt they hold. Not good for us!

[endpcnow]

Jackp32: You are absolutley correct. Also, our corrupt, blood sucking, chicken @#$% politicians won''t do anything unless they somehow get a cut. Congress is the most despised institution in America . . . even more so than the IRS!! And they kiss China''s arse.

[creeper00]

So they''re looking for pressure from Washington. Are you kidding? From those clowns in Congress who can''t even say "no" to a president with an approval rating of 23 percent?

[eggy1620]

It should be perfectly acceptable for China to walk away from these debts. Then the US government would have justifaction to walk away from the US debt owned by China.