The Acting Secretary of State to the Commission to Negotiate Peace
344. Alien Property Custodian requests following reply be sent to your telegram number 40 and dated December 21, 10:00 a.m.
“Referring to the discussions relative to the settlement of enemy debts we have been considering these questions here with the British Embassy and others. We have concluded that the method of settlement appropriate for the Allies is not appropriate for America principally because Alien Property Custodian has already collected a very large amount of enemy debts in this country. He has adopted a pre-war rate of exchange approved by the Treasury Department [Page 623] and has given full acquittances as authorized by Act of Congress to American debtors. Alien Property Custodian is still making such settlements and intends continuing expeditiously as authorized by Congress. The settlement of enemy debts in this country is thus an integral part of activities of Alien Property Custodian and must be disposed of as part of the general question of disposition of enemy property taken over by the Alien Property Custodian.
After consultation with the State Department, the Custodian offers the following general principles for disposing of the entire question of enemy debts and enemy property:
- First, property taken by Custodian belonging to all others except nationals of Germany and Austria should be returned.
- Second, moneys received by the Alien Property Custodian either from the collection of debts owed by American nationals to German and Austrian nationals or from the sale of enemy property in this country owned by such enemy nationals, shall constitute a fund from which American claims for private debts and for private property in enemy countries shall be paid.
- Third, the balance of the fund shall be available for disposition by the peace conference either by payment to respective enemy governments or settlement of obligations of enemy governments or nationals, as may be decided.
- Fourth, to carry out this course Custodian would continue to collect all enemy debts in this country and to sell all enemy property reported or which should have been reported under Trading with Enemy Act including all enemy vessels taken over by Presidential order.
- Fifth, claims of American nationals against German and Austrian nationals and against German government should be ascertained and finally adjudicated by State Department or an American commission appointed by President. American claimants having property in enemy country must surrender such property to enemy governments as condition of having their claim adjudicated here.
- Sixth, this plan would permit American government to deal separately and finally with all property and debts within21 its jurisdiction and settle with all American claimants leaving enemy countries to deal with their own nationals. Enemy subjects whose property has been taken in America would have claim against their own governments therefor and enemy governments would have right to take over American property with which to pay such subjects. The balance in America would be credited to enemy government and would be disposed of as provided at peace conference. If peace conference decided balance of enemy property in America should be used to offset or pay for allied property seized by Germany and Austria, in that case enemy government would have full value to pay their subjects for all property taken here. In case enemy governments desire to utilize balance in this country in payment of other obligations such as war indemnities or Governmental purchases or obligations [Page 624] of any character, enemy governments would then be obliged to exercise their own sovereign rights as against their own nationals and settle with them accordingly.
- Seventh, in any case action of Custodian here can not be subject to review except by American government because Custodian as authorized by Acts of Congress has already sold many properties transferring titles to American citizens arid giving acquittances for proceeds. In such action Custodian has particularly endeavored to eliminate enemy businesses improperly menacing American business or competitors. Any attempt to review action of Custodian through discussion of values received by him or rates of exchange or currency or otherwise would create interminable confusion and might result in serious claims against American government. Custodian has endeavored in every case to secure full value for German enemy property and he must not be accountable to any one except American government.
- Eighth, this procedure requires careful study of detail. Custodian desires to be advised whether principles are accepted and whether details should be studied here.
- Ninth, the principles herein described were submitted in writing to the President and approved by him. The President took with him Custodian’s tentative plan for disposition of enemy debts and property.”
From Polk for the Secretary of State.
In general Department believes that the above draft states a fair plan. Woolsey fears however that there are certain points to be covered and he is not in entire agreement with the Alien Property Custodian as to his plan. Woolsey is sick and I was unable therefore to have him confer with Palmer and submit his views.
- A portion of this telegram, consisting of the rest of this sentence, the two sentences that follow, and the third sentence through the word “allied”, was omitted from the telegram as received by the Commission to Negotiate Peace (Paris Peace Conf. 711.63113/3).↩