Bankers & Bolsheviks: International Finance and the Russian Revolution by Hassan Malik. Our interview with the author; and win a copy of his book.
In the years leading up to World War 1, and then the Russian Revolution in 1917, Russia had become the world’s largest net international debtor. It was borrowing heavily to finance industrialisation (railroads, oil, iron and cotton production) and as its population grew it saw rapid economic growth. WW1, and the earlier 1905 conflict with Japan had also resulted in rising debt. At the same time there was a globalisation of international finance, and French investors in particular were eager to lend to Tsarist Russia (Russian bonds are recommended investments, alongside British Consols, by a character in Proust’s Remembrance of Things Past, a book which, like me, you own but have not read).Related, a 2009 post, "So a Sicilian mafioso walks into HSBC…":
Despite the rise of revolutionary pressures within Russia (Lenin had explicitly written that he’d repudiate the debt) and rising debt burdens that might have necessitated a restructuring even if there’d been no revolution, the money kept flooding in. An American bank (an ancestor of Citi) even opened a branch in Russia after the events of October 1917....MORE, including video
...In a less sophisticated move, I once had a slightly deranged money guy insist that his $1 Billion of Japanese government bonds were good collateral. Here's one of the issues he proffered...
...For the longest time Carl Marks & Co. (or was it Herzog?) made markets in defaulted bonds, for some reason I remember the Kingdom of Serbs, Croats and Slovenes 8's of 1922.
It may have been a different S,C&S issue, I can't find any record of the paper. Off to Zagreb?
[try 'off too, Zagreb' -ed.]
Here's a quick story about this odd corner of the market, from Time Magazine, Aug 8, 1983:
...Foreign bonds are riskier because it is difficult to force payment or arrange settlements. The Wall Street firm Carl Marks & Co. is still fighting a class-action suit against the People's Republic of China to recover losses from Hukuang Railroad bonds issued by the imperial Chinese government in 1911. Last year a U.S. district court in Alabama ordered China to cough up to U.S. bondholders the unpaid principal plus the interest that has been mounting at 5% annually, a total of $41.3 million. Marks also has two suits against the Soviet Union involving $75 million in dollar-denominated bonds issued by the imperial Russian government. The bonds, held by U.S. investors, were repudiated by Moscow after the 1917 revolution. Daniel Collier, a Marks vice president, is not holding his breath. In his firm's offices, one of the Russian bonds is mounted, with a small hammer beside it, along with the words: IN CASE OF SETTLEMENT, BREAK GLASS.
Even if the court actions fail, some of the paper still has value. A Hukuang Railroad bond for 20 gold pounds ($96) that is in good condition is worth from $50 to $100 as a collector's item....
