SCANDALS: Gaiety & Honesty

Back in January 1937, few shrewd investors would have wasted a second look at bonds of the tiny Philippine Railway Co., sick sugar-hauling road on the islands of Panay and Cebu. Selling around $11, the $8,549,000 issue was about to mature, apparently a total loss to U. S. bondholders. Then came rumors that Washington might act, that the Philippine Commonwealth would redeem the issue at $65. Bonds shot up to $31 in January and February as speculators bought for the rise, crashed when President Manuel Quezon denied his Government was buying them. Smelling a rigger, SEC investigated, found the...

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