The Secretary of State to the Vice President of the National City Bank (G. E. Gregory)
Sir: The Department has carefully considered the terms of the Agreement regarding the transfer of the Contract of Concession of the National Bank of the Republic of Haiti, which Agreement was concluded on February 20, 1922, between yourself and Mr. J. Charles Pressoir, Secretary of State of Finance and Commerce of the Republic of Haiti.74
You will recall that at a conference held in the Latin American Division of the Department of State on February 3, 1920,75 the representatives of the Bank agreed upon certain modifications to be made in the Contract of Concession of the National Bank in order that the transfer of the Concession to the National City Bank of New York might meet with the approval of the Department of State. After the Haitian Government had indicated its unwillingness to accept the modifications agreed upon, the Department of State, nevertheless, gave its approval to the purchase of the National Bank of the Republic of Haiti by the National City Bank with the express understanding that the National City Bank would accept and consider operative as a part of the Contract the modifications of that Contract agreed upon by the Department and the National City Bank, so soon as the Haitian Government might consent to the transfer of the Contract to the new Bank. It was further understood that if other modifications, which did not alter the essential features of the Contract as modified by the Agreement with the Department, should be suggested by the Government of Haiti, these modifications might be incorporated without relieving the Bank of the obligation to consider operative the essential modifications agreed upon by the Department of State and the Bank.
The Department of State cannot but feel that the Agreement recently concluded by you with the Secretary of State of Finance and Commerce of the Republic of Haiti, in Port au Prince, departs in several material points from the principles established by the [Page 524] Agreement between the Department of State and the National City Bank. The most important of these differences are the following:
1. The Agreement between the Bank and the Department provided for the abolition of the commissions collected by the National Bank for the treasury service, as provided in Article 17 of the Concession76 and Article 4 of the Agreement of July 10, 1916.77 In lieu of these commissions, it was agreed that the Bank should receive payment on account of the treasury service at the following rate: When the total receipts of the Government in a given fiscal year amount to six million dollars, the Bank should receive a commission of sixty-eight thousand dollars. For each additional one million dollars of the Government’s income the bank should receive an additional ten thousand dollars, and when the income of the Government was less than six million dollars, the commission received by the bank should be decreased at the rate of ten thousand dollars for each million dollars by which the Government’s income was less than six million dollars. In no fiscal year, however, should the payment to the Bank on account of the treasury service exceed the sum of one hundred thousand dollars.
The Agreement recently concluded by you in Port au Prince on the other hand retains the principle of the commission providing that this commission shall be one per cent upon all moneys received by the Bank for account of the Government with the minimum of sixty thousand dollars and a maximum of one hundred thousand dollars. The Agreement further provides that a commission of one-quarter per cent shall be paid the Bank on the actual amount of specie received by the Bank from the proceeds of loans floated abroad.
The Department feels that the provision regarding commissions is objectionable chiefly because it might be so interpreted, in conjunction with other provisions of the Concession, as to involve the payment by the Government to the Bank of a commission of one-quarter per cent upon the entire proceeds of the foreign loan, the flotation of which is now under consideration. The Agreement concluded between the Bank and the Department would have done away with the commission in question, thus making possible a considerable saving to the Government of Haiti. No good reason is perceived for the payment of a commission to the National Bank upon funds which the Government of Haiti may wish to pay directly to its foreign creditors from the proceeds of a loan floated in the United States.
2. Under the Agreement with the Department the National Bank of Haiti was to have allowed the Government interest on its credit balances at the current rate allowed by the Bank on demand deposits. If the Bank were unable to allow interest on gold deposits it was to transfer the funds to New York allowing interest thereon at the rate allowed by the National City Bank of New York for foreign demand deposits. This provision does not appear in the Agreement concluded at Port au Prince. While the Department understands that the National Bank of Haiti does not now allow interest on any demand [Page 525] deposits, it feels, nevertheless, that if, at some future time, the Bank should allow interest on other demand deposits, such interest should also be paid to the Government of Haiti.
3. The provision in the Agreement concluded in Port au Prince for the issuance of three per cent bonds to retire a portion of the nickel currency does not appear to provide a sound or practicable means for maintaining the parity of this nickel currency. This Government is especially interested in the establishment in Haiti of a sound and adequate currency system, and it was for this reason that it suggested a carefully prepared modification of the Concession regarding the fractional currency, which modification was accepted by the Bank in its Agreement with the Department.
4. It had been agreed between the Bank and the Department that the Financial Adviser should have the right to inspect the operations of the Bank at any time. Under the new Agreement such inspection must be made through the medium of expert accountants, chosen in accord by the two contracting parties. The Department feels that the Financial Adviser himself should have the right, personally, to inspect the operations of the Bank, if he considers such inspection necessary.
5. The Agreement concluded in Port au Prince omits the provision giving the Government of Haiti a preferential right, in the event of the sale of the stock of the National Bank by the National City Bank, to purchase this stock at the same price which may be offered by any other bona fide purchaser. The Department feels that this provision constitutes an important safeguard for the interest of the Government of Haiti.
The Department fully realizes the undesirability of reopening the whole matter of the modification of the Concession, and it desires in every way to facilitate the reaching of an accord between the National City Bank, the Government of Haiti, and the Department of State. It feels, however, that the principles established by the Agreement of February 3, 1920, between the National City Bank and the Department, should be maintained. It is constrained, therefore, to insist upon the elimination from the Agreement recently concluded in Port au Prince of the portion relating to the issue of bonds for the stabilization of nickel currency, and the substitution therefor of the provision regarding the fractional currency as contained in the Agreement between the Department and the Bank. It must also insist upon the inclusion of the provision relating to the payment of interest on deposits, referred to as point two above, and upon the inclusion of the provision relating to the sale of the stock of the Bank, referred to as point five above.
If these changes are made, the Department is disposed to accept the remaining provisions of the Agreement between yourself and the Haitian Government, provided that the National Bank of Haiti will address letters to the Financial Adviser of Haiti and to the Department giving the following assurances: [Page 526]
- That the National Bank of Haiti interprets the provision regarding the commission to be paid upon the proceeds of loans floated abroad as not applying to such part of the proceeds as may be employed abroad by the Republic for the payment or refunding of its obligations.
- That the National Bank of Haiti will at all times permit the Financial Adviser personally, or through his agents, to inspect the operations of the Bank, and to call for such reports from the Bank as he may deem necessary.
The Department will be glad if you so desire to instruct the American High Commissioner at Port au Prince to recommend to the Haitian Government the acceptance as amendments to the Bank’s Concession of the modifications above suggested, relating to the fractional currency, the payment of interest on deposits, and the sale of the stock of the Bank.
I am [etc.]