462.00 R 29/211: Telegram

The Secretary of State to the Ambassador in France (Wallace)

986. For Boyden from Davis. Treasury B–34.

Your B–82.67

  • First: While France may not yet be prepared to fix German liability at a definite reasonable sum, future developments will undoubtedly force them to change their present attitude. I am satisfied that it is impracticable and will not be necessary to determine upon any complicated plan of conversion as outlined by Kent, and if it is not possible to fix the German liability at an amount which Germany can pay, then in any event it should be possible to fix an arbitrary amount, as indicated in your paragraph 6th. For these reasons I am reluctant to enter into another study of the plans indicated by Kent, but if you find it necessary to reach some decision, I may say that I am inclined to his second proposal, but prefer to have you exercise your own judgment. Your paragraph 5th states most accurately our views as to the necessity of fixing the German liability at an amount reduced to Germany’s reasonable expectant capacity to pay. Press despatches indicate that present compromise plan of the British and French premiers is to fix a minimum sum which may be increased under certain conditions. This, in my judgment, is most unwise and impracticable. Such a plan would destroy all incentive on the part of Germany because the harder the Germans work and the more they save, the more they would have to pay, and it would also diminish, if not destroy, the confidence in the bonds which would be issued by Germany. The longer a constructive settlement is delayed, the less Germany will be able to pay and consequently the smaller amount will have to be fixed eventually for the indemnity. The French are better losers than winners. Their minds are concentrated on what Germany owes and should pay and [Page 391] they seem incapable of realizing that the longer they hold out for the full amount the worse conditions in Germany will become and the less Germany will be able to pay. I judge from press despatches that they are beginning to realize Germany’s limitations of economic recovery, because, although they do not yet give up the hope of collecting the full amount some way, they are apparently trying to devise some scheme whereby the United States will either guarantee the German indemnity or will pay such part as Germany cannot pay. They still have the idea that the United States is a Santa Claus.
  • Second: I quite agree with your views as to the legal position of the Reparation Commission. It would be most advisable if before the meeting at Spa the Commission could register its views even with the dissenting French opinion. This would be a proper function of the Commission, which will lose its powers and influence unless it exercises them, and would have influence on the Conference at Spa. I rather suspect that when the French do finally give in, as they must, on fixing the German liability, they will endeavor to find some supposedly logical means for connecting with reparations the payment of their indebtedness to the United States and England.
  • Third: Referring to your paragraph 7th, I shall endeavor to have our claims revised and sent to you. While the fixing of the German liability at a sum considerably less than what Germany actually owes under the categories of damage in the Treaty would involve a proportionate cancellation or reduction in claims by the respective governments and might eventually require Congressional approval on our part, there are apparently no obstacles now to our agreeing to a fixed indemnity. The Executive Department has the power to file or withhold the filing of claims, and the President has, for instance, declared his intention not to collect for pensions.
  • Fourth: I do not believe that your paragraph 7th correctly states our position. I doubt if we can use the ex-German ships held by us towards payment of our claims. If we adhere to the Wilson-Lloyd George Agreement68 and Congress so approves, we must pay into the Reparation fund the value of those ships in excess of the value of the ships allocated to us against our losses. If we do not adhere there is the possible eventuality of paying German private owner direct. My understanding is that if we ratify the Treaty and Congress so approves we can only collect from the Alien Property fund for the damages to American property in Germany during the war and for our claims for losses prior to our entry into the war, or debts owed Americans by Germans. If the balance of the fund is retained, the cash value may be received as credits to Germany on her reparations [Page 392] obligations. On other hand, subject to Congressional action it can be returned to German owners. I also understand that we are to collect direct from Germany for the cost of the Army of Occupation, and that this has no relation to the Alien Property Custodian fund. It is not advisable to make any move regarding the Armies of Occupation because this is essentially a political question. We explained during the peace negotiations that the expenses incurred for the Armies of Occupation would reduce correspondingly the amount which Germany can pay for reparation.
  1. Ante, p. 386.
  2. Post, p. 512.