Papers Relating to the Foreign Relations of the United States, The Paris Peace Conference, 1919, Volume V

Paris Peace Conf. 180.03401/107

IC–170Q

Notes of a Meeting Held at President Wilson’s House in the Place des Etats-Unis, Paris, on Thursday, April 10, at 4 p.m.

Paris, April 10, 1919, 4 p.m.

• Present
  • United States of America
    • President Wilson.
    • Mr. Lamont.
    • Mr. Norman Davis.
    • Mr. Baruch.
    • Mr. McCormick.
  • France
    • M. Clemenceau.
    • M. Klotz.
    • M. Loucheur.

      M. Sergent.	}	French Ministry of Finance.
      M. Jouasset.
      M. Cheysson.
      M. Lyon.

  • British Empire
    • The Rt. Hon. D. Lloyd George, M. P.
    • The Rt. Hon. A. Bonar Law, M. P.
    • The Rt. Hon. Lord Sumner.
    • Lord Cunliffe, G. B. E.
    • Lt Col. Sir M. Hankey, K. C. B.
  • Italy
    • H. E. M. Orlando.
    • H. E. M. Crespi.
    • M. d’Amelio.

Interpreter—Prof. P. J. Mantoux.

1. Reparation: Constitution of the Commission M. Klotz, at the request of President Wilson, explained the reason of the Meeting being held. As a result of a Meeting held on the previous Monday,¹ a Committee had been formed to consider a Memorandum by Lord Sumner in regard to the constitution of the proposed Inter-Allied Commission, which was to determine the amount of damage for which compensation is to be made by enemy States under Article 3 of the Articles already agreed to.²

Lord Sumner had proposed a text which he said was open to amendment. The French Delegation wished to raise three points of principle.

President Wilson suggested that it was premature to bring points even of principle before the Supreme War Council before the full report of the Committee was available, and a final effort had been made by the Committee to settle the points themselves.

Mr. Lloyd George suggested that there was some advantage in considering points of principle even before the Commission had reported. It had always been agreed that if the experts could not reach unanimous conclusions the Supreme Council should take the matter up. He understood that the following two points of principle were raised; one, as to whether the United States of America could participate in the Commission at all; two, question of a bond issue.

M. Klotz added, three, the question of unanimity by the Commission in regard to the manner in which any balance remaining unpaid by the enemy should be dealt with.

2. Participation by the United States of America in the commission President Wilson said that the first point was not one of principle at all, and he could accept it at once. If the arrangements for the Commission were sound, the United States of America would participate. Otherwise, they would not.

3. Unanimity of the Commission Mr. Lloyd George said that this settled the first point. As regards the question of unanimity, he reminded the Supreme Council that this had been agreed to at the meeting held at the Rue Nitot on Monday afternoon, April 7th.³ He confirmed his recollection of what occurred by reading the following extract from the Secretary’s notes of that Meeting:—

“The principle of unanimity in the instructions by the Allied and Associated Governments to the Commission in regard to the manner in which any balance remaining unpaid by the enemy should be dealt with, was accepted subject to a reservation by Colonel House, who said that he had no authority from the President to settle the matter.”

President Wilson suggested it was premature to try and settle questions of this kind before the report of the Committee on the whole subject was available. Already the Supreme Council were being brought into the work for which the Committee had been appointed. He did not consider this a right or wise procedure. On the question of unanimity, what he had previously agreed in consultation with his own experts, although he had not finally decided the point until the report on the whole subject was available, was that unanimity was essential in regard to the cancellation of any part of the enemy debt.

(President Wilson read from a document prepared by the United States experts as a draft for his consideration, but which had not been circulated).⁴

Mr. Lloyd George and Mr. Bonar Law said that if this was his view, there was no more to be said, since all were in agreement.

Mr. Lloyd George pointed out that two of M. Klotz’s points had now virtually been settled.

M. Loucheur asked if this decision meant that a majority vote would suffice to decide the means of payment. Supposing for example a majority of the Commission were to decide that half the amount for reparation was to be paid in marks, would a majority vote suffice in such a case?

Mr. Bonar Law explained that M. Loucheur’s suggestion was that in fact by some such decision as he had quoted as an example, the Commission might by a majority remit part of the payment although by their constitution they would be prevented from doing so directly.

President Wilson pointed out that the raising of this point illustrated his whole objection to the present discussion. An isolated question of this kind was brought forward and was at once found to possess many ramifications. To a member of the Commission who was fully conversant with all aspects of the subject, these ramifications were familiar. He, himself, however, not being so conversant with the subject was unwilling to express an opinion on an incomplete document. He was prepared to say, however, that with regard to any remission of part of the enemy’s debt there must be unanimity. He was not prepared, however, to agree in an incomplete scheme, and as yet, no complete report had been presented.

M. Clemenceau said he had had doubts as to whether the question could be settled this afternoon, but he had brought it up because there had been a general desire that it should be raised. As the report was not complete, however, he was prepared to postpone further discussion.

Mr. Lloyd George pointed out the advantages of hearing the Experts and deciding in their presence if possible. The Experts he pointed out had been arguing about these questions for months. Eventually, however, they always came up against big questions which they could not take the responsibility of deciding. In the present instance there were one or two such points—for example—the question of a bond issue. If you remit it to the Experts they would be bound to come back and say that questions of principle were raised which they could not decide. He would like the Supreme Council to reach an agreement on points of principle and then give their instructions to the Experts.

President Wilson said he had no objection to discussing the Bonds scheme if one was ready to be discussed.

M. Clemenceau agreed that the attempt should be made to discuss it.

4. Question of German Bond Issue Mr. Lloyd George repeated the suggestion he had made in personal conversation with President Wilson in the morning. His proposal was that instead of fixing in the Treaty of Peace a sum which Germany was to pay, the Commission itself should be instructed, after seeing all the claims, to fix the amount of the Bond issue which should be made by the enemy. The British and French point of view in this matter was identical. If, for example, it was laid down now that there should be a first Bond issue of six thousand millions sterling, critics in Parliament would at once say “this is all they are to pay”. If the amount was left to the Commission to fix, they could be given an indication not of the actual amount but of the principles on which the amount should be assessed. This would surmount some of the parliamentary difficulties which he and M. Clemenceau would have to face. Mr. Bonar Law who had already been confronted with this question in Parliament, was in full agreement with him.

M. Klotz said it was not so much a question of making provision for a certain amount as of fixing the first instalment of what would have to be paid later. From a public point of view the Governments would be asked for guarantees. What were their guarantees? At the meeting on Monday at Rue Nitot he had suggested a lien on customs, ports, shipping etc. Mr. Lloyd George had replied “no, not that.” The Commission it was now proposed should agree on a figure. What guarantees had we that after two years the enemy would pay? How could Governments prepare their Budgets for 1920 and 1921? The inclusion of a figure of 150 billions of francs (6,000 million Pounds) would give great satisfaction to public opinion. In private transactions where there was no land or other property that could be mortgaged a bond was usually given; similarly that would be an advantage in this public transaction; if no figure was quoted public opinion would say “You have constructed a wonderful machine but you have no coal for it.” An issue of bonds would give great satisfaction both to the public and to Parliament.

Mr. Lloyd George said that his suggestion was that the Commission should immediately, after examining the claim, announce the amount of an immediate issue of bonds to be made by the enemy. He did not think that M. Klotz could have apprehended his proposal.

M. Klotz asked whether Mr. Lloyd George considered that a Commission could be constituted soon enough to meet immediately and to announce the amount at the very moment of the signature by the enemy of the Treaty of Peace.

Mr. Lloyd George replied that this depended on how soon the Nations had their claims ready.

President Wilson asked what use it was proposed to make of the bonds.

M. Klotz said that the Commission would retain the bonds. It must carefully avoid distributing quantities of bonds at once to different nations. This would lead to great dangers. Each Nation, however, under his scheme, would know how much it would get and could issue the bonds retained by the Commission as a sort of collateral for a part of its financial operations during the next two years. At the end of the two years a distribution of the bonds would be made. On the date of the signature of the Treaty of Peace Germany would hand over bonds for Six thousand Million Pounds. Although the Commission would not make a distribution Nations could raise credit on the bonds. In a word, the Nations would not receive the bonds to sell but would issue them as collateral for the purpose of getting credit.

Mr. Lamont said that this question had been discussed by a special Committee, which had been very largely in accord on all points except as to M. Klotz’s proposed amount, namely, 30 milliards of dollars (6,000 million pounds). He (M. Klotz) had said that this was only a suggestion as a basis for consideration. The only difference that he could see between M. Klotz and Mr. Lloyd George was that the former wanted to name the sum now, and Mr. Lloyd George did not.

President Wilson said that his understanding of his conversation with Mr. Lloyd George was that he had not doubted for a moment the desirability, if not the necessity, of an issue of sufficient bonds to sustain the credit of the nations concerned. What they doubted was the advisability of stating the sum arbitrarily, for it was only arbitrarily that they could do it at the present time. He agreed, however, that the Commission should be empowered to determine the sums of the bonds to be immediately issued by the German Government.

Mr. Lamont said that the United States Delegates had intended to propose that the Commission should meet within a week of the signature of the Treaty of Peace.

M. Clemenceau asked if they would meet and decide?

President Wilson said it would decide if it had the data in its hands.

M. Orlando suggested it would take six months to collect the claims.

Mr. Lloyd George said that it would not take so long to collect provisional claims.

President Wilson said he was informed that France was the only country that had not yet put in its figures.

M. Clemenceau said the reason of this was partly the extent of the figures, and partly because of the earnest desire of France not to exaggerate.

M. Klotz said that France would give a figure very carefully drawn up and without any exaggeration.

M. Clemenceau said that France desired to state a figure that was less than the total amount to be claimed. Because they were doing this, however, they did not wish to disappoint public opinion. If, however, no figure was mentioned, public opinion would not only be disappointed, but would think that Germany was being spared. What inconvenience, he asked, would result from saying that there would be an issue of such and such an amount of bonds? As regards Mr. Lloyd George’s remark on the parliamentary point of view, he was not sure, since opinion in the two countries was very different. If, however, no figure should be named, perhaps a date could be given. He was very anxious to reach an agreement, and to do so he would make a concession, provided a date were given by which the Commission should report. To agree without either a figure or a date was further than he could go.

Mr. Lloyd George did not see why the Commission should not be brought together, as Mr. Lamont had suggested, immediately after the signature of the Treaty of Peace, provided that the claims could be put in at once. Many of the figures could be reached by a mere process of addition. For example, pensions, which alone came to thousands of millions, could be established at once. The Commission could then name a sum, so to speak, on account, and decide that Germany should issue bonds for this amount. He did not see why more than 48 hours should be required for this.

President Wilson said he was somewhat mystified by this discussion. Months had been spent in trying to reach a figure, then it had been decided to drop the attempt. Now it was proposed to ask the Commission to name it right away. Were we not agreed, he asked, that the amount of the bonds issued by Germany should be determined by the Commission at the earliest possible date?

Mr. Lloyd George suggested that the date should be a fortnight after the claims had been put in.

M. Clemenceau said he might accept Mr. Lloyd George’s proposal, although he found it difficult. Supposing someone were to steal his watches, his pictures, his statues, his furniture, etc., and the thief was caught. He would not know the value immediately, but he could give an approximate figure for temporary settlement. However, he would agree, provided that President Wilson would agree.

President Wilson said he had already expressed his agreement.

M. Clemenceau asked whether the amount was to be decided unanimously, or by a majority of the Commission.

Mr. Lloyd George said, surely by a majority.

M. Clemenceau said he would accept.

President Wilson said he could not accept a majority, and must insist on unanimity.

M. Clemenceau made two observations in regard to this. First, it was always possible to take an unanimous decision in a small meeting of statesmen. This, however, was much harder in a large technical Commission. Consequently, if unanimity was essential, the period of a fortnight proposed by Mr. Lloyd George was an illusion, because the Commission would never agree within that time. Second, it had been suggested by United States experts in the course of the discussion that part of the payment could be allowed to be made in paper marks. This would be disastrous from the point of view of public opinion.

Mr Lloyd George, on the question of unanimity, said that if this was demanded as essential, it would be fatal to the whole scheme, and there would be no alternative but to fix the figure now. He understood that the Commission would consist of representatives of the United States, the British Empire, France, Italy and Belgium. If any of these powers declined to agree, they could hold the Commission up indefinitely. Belgium, for example, might say:—“We won’t agree unless you will agree to so and so”. They might say they would not agree unless they themselves were given one or two thousand million bonds. He was only quoting Belgium as an example, but the same might apply to any of the states involved.

President Wilson said that the object of the bonds was to provide collateral for borrowing purposes, and some of this borrowing would have to be done in the United States of America. If there was an extravagant issue of bonds, it would upset the credit of the world. Bankers would not lend on a depreciated security. He did not want to be obstructive, but he must state that if this question was to be decided by a majority, it would not be wise for the United States of America to participate.

Mr. Lloyd George said it was most important for the United States to participate, because they were the only really impartial power in the matter.

President Wilson said that the United States would be more than willing to participate, but they must have this safeguard. The initial steps would affect the whole structure of credit of which the United States were a part. Consequently, they could not afford to be outvoted.

Mr. Lloyd George agreed that the United States was a country to which the other Powers would all have to resort for credit. The British Empire, however, was also affected. Some of the things which Belgium and France needed most come from the British Empire, for example—wool and machinery, which the United States of America would not alone be able to supply. He was unable, however, to see how American or British credit would be affected by too many marks being put on the market. It would merely affect the value of the marks themselves.

President Wilson pointed out that any country that accepted marks as collateral would be affected.

Mr. Lloyd George said that the United States would use its own judgment as to the value of the marks. If bankers were not satisfied that their value as collateral was sufficient, they would not lend. They would only give credit to the extent to which they believed the collateral to be sound.

President Wilson said Mr. Lloyd George had overlooked one point. It was not to the interest of the world that the credit of France or Great Britain should be depressed. If a beginning were made by the issue of a huge sum in bonds, and Great Britain and France sought to borrow, the bankers would say that they were borrowing on the strength of a collateral that had been issued too profusely, and thus the whole structure of credit would be affected.

Mr. Bonar Law agreed, but said that this was exactly what the Commission would have to bear in mind as regards fixing the amount to be issued. If unanimity was insisted on, any State could hold up the Commission either way, whether the amount was not regarded as big enough or as too big.

Mr. Lloyd George suggested that the Commission should have powers to decide how much of the paper could be put on the market at one time, in order to counter the risk of the market being flooded.

President Wilson agreed that this should be part of the scheme.

Mr. Davis said that the Commission should not put loose on the market a larger amount than that for which Germany was in a position to meet the coupons.

Mr. Lloyd George recalled that in previous discussions on fixing the amount that Germany could pay, it had always been assumed that she would not be able to pay for the first two years and that the greater part of the payment would have to begin in the third year. There was no reason why bonds should not be issued to be payable later on.

Mr. Bonar Law pointed out that bonds would be available as credit as long as people thought that ultimately they would be paid. Otherwise they would not be available.

President Wilson suggested that a non-essential subject was now being discussed. If the question were to be decided by a majority vote but nevertheless the United States of America did not agree and issued a minority report, they would really kill the whole scheme of credit. Consequently, the scheme had to be acceptable to the United States of America. The same applied to Great Britain.

M. Clemenceau suggested that the United States of America was a country where there were great varieties of opinion and was not certain that everyone would accept the decision of the Government.

President Wilson pointed out that the Secretary of the Treasury would have a good deal to say.

Mr. Lamont suggested that the Committee might fix a minimum sum for the bond issue to be adopted by the Commission.

Mr. Davis suggested that the Committee might come together again to consider this question.

Mr. Lloyd George agreed and proposed that, after this preliminary discussion, the experts should resume their meetings and endeavour to fix on a minimum sum.

(This proposal was adopted and the Supreme Council adjourned).

Villa Majestic, Paris, 10 April, 1919.

1. See IC–170K, p. 44.
2. Ante, p. 49.
3. See IC–170K, p. 44.
4. Several such drafts are printed in Burnett, Reparation at the Paris Peace Conference, vol. i, pp. 877, 893, 896, 903.