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71stCongress,3dSession......................HouseDocumentNo. 825,Vol.III PapersRelatingtothe ForeignRelations ofthe UnitedStates 1930 (InThreeVolumes) VolumeIII UnitedStates GovernmentPrintingOfficeWashington:1945 96FOREIGNRELATIONS,1930,VOLUMEIII ment,aimingatthesamegoal,havealwaysbeenreadytojoinactionthatmighthelptopromote internationalgoodwillandfacilitateeffectivedisarmament.If,therefore,theallegedsuggestion ofsomefurtherextensionofthePactofParistowardsconsultationshouldbediscussed,the GermanGovernment,beingoneoftheoriginalsignatoriesofthePact,wouldgladlycooperate andassumethatitwouldbegiventheopportunitytoexpresstheirviews. WASHINGTON,November20,1930. ___________________________________________ LOANSBYAMERICANBANKSTOTHEGERMANGOVERNMENT(16) 862.51/2848:Telegram TheAgentGeneralforReparationPayments(Gilbert)totheSecretary ofState Paris,March22,1930 [Received7:45p.m.] Supplementingmybriefmessageoflastevening,(16a)Iunderstandthatathreecornered transactionhasbeenarrangedbetweenLeeHigginsonandCompany,theGerman Government,andKruegerToll,accordingtowhichAmericancreditsaretobeprovidedfor GermanGovernmenttotheamountof50milliondollarsonMarch31stforaperiodoffive monthsandtothefurtheramountof75milliondollarsonJune1stforaperiodofoneyear,all bywayofanticipatingtheloanof125milliondollarswhichtheGermanGovernmentistoget underitscontractwiththeSwedishMatchTrust.NotwithstandingrepeatedinquiriesIhavenot yetbeenabletoanyinformationinthematterfromtheGermanGovernment,George Murnane,(17)calledlateFridayafternoontotellmethatagreementhadbeenreachedFriday morningandthatthecontractwasabouttobesigned.Headdedthatthecontractwould expresslysubjecttotheconsentoftheDepartmentofState.Inordertoavoidanypossibilityof misunderstanding,Iamcablingtoadviseyouasfollows: First,thattheAgentGeneralandtheotherreparationauthoritieshavenotbeenconsultedin anywaywithregardtothistransactionbyeithertheGermanGovernmentortheReichsbank. Second,thatthefirstchargeinfavorofreparationsstillremainsinfullforceandeffectunder Article248oftheTreatyofVersailles(17a) 16.ForpreviouscorrespondenceregardingtheflotationofGermanloansintheUnitedStates, seeForeignRelations,1928,vol.ii,pp.898ff. 16a.,Notprinted. l7.MemberofthefirmofLee,Higginson&Co. 17a.Treaties,Conventions,etc.,19101923,vol.m,pp.3329,3439.

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16a.,Notprinted. l7.MemberofthefirmofLee,Higginson&Co. 17a.Treaties,Conventions,etc.,19101923,vol.m,pp.3329,3439. GERMANY97 andthattheAgentGeneralandthetransfercommitteeundertheDawesPlanmaintaininall respectsthepositiontakeninthematterofSeptember20,1926,withregardtothePrussian externalloan.isalreadyinpossessionofthisletter,(18)whichappliestoexternalloansor creditsoftheReich. Third,thatinmyopinionthefundamentalquestiononthemeritsthepurposeforwhichthe proposedcreditsaretobeused.IimmediatelyraisedthisquestionwithMr.Murnane,who believes50milliondollarsoftheproceedswillbeneededtocoverbankdebtstothesame amountwhichmatureinJune.Hecouldgivenoinformationhowever,astotheuseoftherest oftheproceeds,andthecontractwillcontainnoprovisionswhatevertodefineofthecredits.It seemstomethatthispointshouldbenotmerelyfromthebankingstandpointbutalsoontheof accesstotheAmericanmarket.Theoperationmightbejustifiedifitwereclearlyanddefinitely understoodthatweretobeappliedimmediatelytotheretirementofdebt.Butwithoutthis safeguardthemoneyislikelytobenewexpendituresandtoenabletheGermanGovernmentto postponeoncemorethenecessarymeasuresoffinancialinterferingwiththeinstitutionofthe YoungPlanandthemobilizationofthereparationbonds.Inthissense,ismostuntimely,since thefinancialprogrammeforthecomingfiscalyearistobesettledwithinthenextfewweeksisa realdangerthatnewcreditswillsimplyrelievetheGovernmentfromthepressurethatotherwise existstoputitsfinancesinorder. Fourth,itseemstomethatthistransaction,onthepresentshowing,raisesageneralquestion astohowfartheGermanGovernmentandpublicauthoritiesaretobeallowedtohave recoursetotheAmericanmarketforthepurposeoffinancingtheirbudgetarydeficits.The GermanGovernmentsoonerorlatermustfacetheproblemofsettingitsfinancialhousein order,anduntilithasdonesoitdiesnotmakeagoodcaseforforeigncredits. Fifth,IhadintendedtosendthismessagethroughtheAmericanEmbassyinBerlinbutithas justnotifiedmethatitprefersnottoit. S.ParkerGilbert 18.Notprinted:itisfromtheAgentGeneralforReparationPaymentstotheoftheReich Annex2976B3(862.51P95/9). COMMENT ThisisthebeginningoftheforgivingofthetotalGermandebtsowedtheUnitedStates,and theUnitedStatesmeaningyou,arenowsubsidizingGermanywithyourtaxdollarstohelpthe bankspaythismoneytotheGermangovernment.NotonlyGermany,butothercountriesas well,wereborrowingfromtheAmericanBanks.ThisiswhatleadtotheBankshavingnomore moneyintheirreservesthatcausedFDRtoinstitutein1933the1917TradingwiththeEnemy actthatwasactuallywrittenbytheFederalReservetoPresidentHoover.Hooverdeclined sayingitwasunconstitutional.However,thedayafterHooverleftofficeFDRinstitutedexactly whattheFederalReserveBoardwrote,calledCongressonMarch9,1933,andrammedthe proposedstatutewrittenbytheFederalReserveBoardliterallydowntheirthroatstheycould donothingbutagreebecausetheexecutiveorder2039wasalreadywrittenunderthe emergencypowersact.