File No. 817.51/918a

The Acting Secretary of State to Minister Jefferson


With reference to your December 31, 3 p.m.,4 first sentence, second paragraph, and your January 12, 4 p.m. The Department of State, in view of the desire expressed by the Government of Nicaragua, has lent its good offices for the bringing about of a satisfactory plan looking towards reorganization and reform in the finances of that [Page 1121]Republic, in cooperation with the bankers. This plan was finally elaborated after much thought and labor on the part of the Department and bankers. Every step discussed in the conference reported to you December 22, 1916,5 was thought out with great care. The basis of this plan clearly necessitates arrangement with Ethelburg Syndicate, and is contingent upon the appointment of a Financial Adviser as is also any emission of bonds to aid in the payment o claims against the Government.

The Department has been informed from various sources that apparent hostility and unfriendly feeling exists in Nicaragua against the bankers, Ham and the State Department, and that this is very prejudicial to American interests.

The bankers have conferred with the State Department in regard to these reports and they have expressed their feelings that unless a radical change is brought about in the sentiments reported they will withdraw their suggestions and cooperation in the plan for the financial rehabilitation of Nicaragua.

They also state that they will withdraw from negotiation with the Corporation of Foreign Bondholders of London as this corporation has been relying upon their representations as to the friendly attitude of the Nicaraguan Government.

The cooperation of bankers must necessarily be on strictly business basis and it was upon strictly business terms that the Department was able to secure their cooperation, and unless the arrangements as contemplated in the plan originally proposed are carried out the Department may be unable to lend its good offices to any further arrangements. It is also evident that no other bankers will be willing to negotiate with the Government of Nicaragua should it be clearly seen that Brown Brothers and Company and Seligman and Company do not desire to proceed on account of not being able to obtain the cooperation of the Government of Nicaragua which they consider necessary.