The Minister in Liberia ( Hood ) to the Acting Secretary of State

No. 107

Sir: This Legation has the honor to herewith transmit the reply of the Liberian Government, in answer to the Department’s cablegrams No. 17, dated May 20th [23d], No. 23, dated July 13th, and No. 26, dated August 17th, regarding certain financial information requested, and the reasons for the action taken in the matter of the use of the German Liquidation Funds with the Bank of British West Africa.

With reference to the action taken by this Legation in the matter of the German Liquidation Funds, it has the honor to submit that as shown in the dispatch to the Department, No. 58, dated May 12th,18 with enclosures from the General Receiver of Customs and the Secretary of the Treasury of the Republic of Liberia, the whole embarrassing condition of the Liberian Government was set forth. As early as April 15, 1922, in the Legation’s cablegram No. 16, the President of Liberia said,

[Here follows the text of the telegram printed on page 616.]

Following this, Legation’s cablegram, No. 18a, of May 15th, to the Department, said the following:

[Here follows the text of telegram printed on page 617 as telegram no. 18, May 13.]

To this, the Department replied by asking that the Liberian Government produce certain financial information, which it was unable to do in time to get any word from the United States, that would relieve the situation.

During all of this period, the Manager of the Bank of British West Africa had been basing his action with the Liberian Government and his representations to his directors in London, upon whatever assurance could be given by this Legation of the loan becoming effective. This Legation was able, for some time, to present the facts concerning the loan in such a way as to hold the credit of the Bank for the Government; but finally, the prolonged delay and inability to state anything sufficiently assuring brought a cablegram from London withdrawing the credit of the Bank unless the American Minister would endorse the German Liquidation proposition.

The operations of the Bank of British West Africa are almost the subject of as much consideration in the British Colonial offices as if they were affairs of direct government action; all the foreign nations, here represented, regarding [regard?] the pending loan negotiations [Page 624] as the announcement of the United States’ willingness to become sponsor for Liberia. It is difficult to realize the emergency of the situation without immediate and direct contact with the condition.

The Legation had cabled the Department on April 15th concerning the situation, but had no reply until sending another cablegram, dated May 15th [13th?], during which period the crisis had only been averted by Legation’s aforesaid representations; the situation every hour grew more acute, all time had elapsed.

In this grave condition, and embarrassed and perplexed situation, this Legation acted:

Because the crisis was as these dispatches have indicated, or else the Government of Liberia, the Manager of the Bank of British West Africa and the London directors falsified them.
Because this Legation understood the policy of the United States toward Liberia, as far as it could legitimately be, was to save and preserve it as an independent autonomous State.
That the circumstances confronting the Liberian Government at the time the action was taken, would compel it to cease functioning, and this failure, considering it’s relation to all foreign powers; and especially to those to whom it was indebted, must have precipitated international complications.
Because the endorsing of the German Liquidation Collateral Plan did not involve the United States unless the Loan Agreement became effective.
Because the matter had to be decided before any further instruction could have been received, the Bank of British West Africa having waited one month for some information from this Legation with regard to the pending Loan Agreement, as would be sufficient guarantee for further advances to the Liberian Government.

This Legation feels severely and regrets exceedingly the disapproval expressed at what at the time seemed to be the best and only course that could be taken.

I have [etc.]

Solomon Porter Hood
[Enclosure 1]

The Liberian Acting Secretary of State ( Barclay ) to the American Minister ( Hood )

Mr. Minister: With further reference to your despatch of July 22nd, 1922, embodying the full text of a cable from the Department of State, Washington, with regard to the financial arrangements of May 27th between the Liberian Government and the Bank of British West Africa Limited, I have now the honour in behalf of the Government of Liberia to offer the following observations thereon:

[Page 625]

It will be remembered that President King, before he left Washington on his last visit submitted a memorandum19 to the Department of State pointing out that owing to the terms of the then existing arrangements between the Bank of British West Africa Limited, and the Liberian Government, a financial crisis as then foreseen was imminent, and therefore requested the Department to use its good offices to the end of securing the consent of the Bank of British West Africa to increase the annual unit of the credit to one hundred and fifty thousand dollars instead of one hundred and eight thousand dollars, beginning as from the first of October, 1921, and continuing until the proposed Loan Plan goes into operation. In acknowledgment of this memorandum the Department of State in an undated note to President King,20 stated, “the matters called to the attention of the Department in this letter will receive careful consideration.”

At the end of March of the present year the Liberian Government found itself confronted with the financial crisis anticipated by President King, the seriousness and urgency of which was fully realised by the American Minister Resident at this Capital and the Acting Financial Adviser.

On the thirteenth of April, 1922, President King, through the courtesy of Your Legation, forwarded to the American Secretary of State the following urgent and confidential cablegram:

[Here follows the text of telegram number 16, April 15, from the Minister in Liberia printed on page 616.]

After the despatch of the above cablegram, by the President, the situation was becoming more acute daily, and not having heard from Washington, the Liberian Secretary of State on the tenth of May, addressed a note to Your Excellency acquainting you with the financial situation then confronting the Liberian Government, as outlined therein, and requesting Your Excellency to immediately advise Washington of the contents of said Note and inform the Liberian Government of the State Department’s views in the premises.

It was not until the twenty-third of May that answer to the above representations was received asking for certain accounts, and practically conveying the idea that the crisis, with respect to which the American State Department’s intervention was sought, in its opinion did not exist, or ought not to exist.

While the Liberian Government had no objections to furnish the desired accounts, as since his return to Monrovia from the United [Page 626] States, President King has been most anxious that upon the financial position in Liberia from time to time the Government of the United States should have the fullest and latest information, yet it was also conscious of the fact, that to obtain all the data required for the accounts as asked for would necessarily have taken some months to procure. In the meantime, during this period, what was to be done to overcome the pending financial crisis? No remedy, not even of a temporary character, to relieve the situation was suggested by the American State Department, whose attention had been called directly by President King in his cable despatch of the thirteenth of April herein above referred to, and subsequently through your Legation by this Department in its Note of May tenth, 1922.

In the face of such a grave situation, and under the circumstances above referred to, the Liberian Government had no alternative but to take such steps that were in its opinion, as well as that of the American Agents here on the spot, necessary to relieve the financial situation which then presented itself, and considers that it was fully justified in so doing.

It is a well understood and accepted principle of political administration that those placed in supreme authority shall take care that the State, the interests of which are committed to them, suffer no harm.

I must further: point out to Your Excellency that the Liberian Government cannot accept as existing the implications of fact, of conduct, or of policy in the cable from the American Department of State as embodied in your despatch now under reply.

The implications of waste as indicated by demand for accounts is [in] the opinion of the Liberian Government quite unfounded. As a matter of fact the Liberian Administration during the World’s war, and since, has not, as most governments were compelled to do, augmented salaries to meet the rise of prices, but rather reduced the already meager official salaries by an average of fifty per cent, except where action was forbidden, as in the case of Judges, and one or two other officers, by the constitution of the State. Of this fact the American State Department was fully cognizant.

The demand for accounts was also indicative, in the opinion of the Liberian Government of a certain amount of distrust of the statement of the President and also of the American Agents here on the spot as to the imminent financial situation which the Liberian Government would very soon be confronted with. That such a feeling of distrust existed is further accentuated by the remarks made in the cable under review, where it is said, “the Department is not convinced from the information that such an emergency existed as required the execution of the arrangement between the Bank in [Page 627] such haste as to render impossible to await an expression from this Government with regard thereto.”

If such an attitude of mistrust of representations made by the Liberian Government is to be maintained by the American State Department, and especially when these representations are confirmed by the American Agents here, and who are in a better position to know the actual facts than those in the Department at Washington, then there will be that lack of friendly cooperation and understanding between the two Governments which is essential to the carrying out of the projected program for Liberia’s financial rehabilitation and development. The policy which the Liberian Administration understood was to be adopted, was one of helpfulness, of collaboration for the furtherance of its essential interests. Furthermore, the Government of Liberia does not understand why the very unusual step of communicating the censure of your Government upon its official representative here should be made to it. The Liberian Government finds itself most embarrassed by such a procedure, as it could not, without violating official proprieties attempt to vindicate the actions of the American Official Representative.

With regard to the General Receiver of Customs and Financial Adviser, it is respectfully submitted that under the existing Loan Agreement of 1911 [1912?], he is a Liberian Official, recommended indeed by the President of the United States, but commissioned and paid by the Liberian Republic. The General Receiver of Customs in financial matters, is the adviser of the Liberian Government. Therefore, when the American State Department subjects him to its official censure and further directs that censure be communicated to the Government of Liberia, there is but one inference to be drawn, and that is, that both the officer and the administration he is serving are occupying such subordinate positions with reference to the Government of the United States as make them both amenable to its direct authority and fit subjects for administrative rebuke. This implication the Government of Liberia cannot admit; as the effect would be to neutralize any efficient service which said officer might be able to render, or the Government of Liberia might require, since he would under such circumstances be compelled to consider himself not at liberty to give advice before his ideas had previously been approved by the Government of the United States.

The Government of Liberia does not understand the meaning and intent of the American State Department’s instructions to the Acting General Receiver to the effect, “that the Department expects him to protect financial interests of Five Million Dollar Loan Negotiations.” In the financial agreement of October 1921, the Government of the United States expressly stipulated that it was not to be considered [Page 628] bound by the said agreement until it has been passed by Congress, and had been approved by the President of the United States.

Upon that understanding it was approved by the Legislature of Liberia. It is therefore most respectfully submitted that the Liberian Administration within the terms of the Agreement concluded with the Plenary Commission, had perfect liberty of financial action so far as the revenues upon which the proposed loan are to be secured until the agreement comes into force. To say otherwise, would mean that the agreement created at the time of the signature a status quo which bound Liberia indefinitely, or at least until the agreement had received Congressional approval. In other words, Liberia from the 28th of October, 1921, was absolutely bound by the terms of an agreement not yet in force or approved by the American Congress. This implication the Government of Liberia regrets it cannot admit, but rather it takes the position that until the Government of the United States becomes duly empowered to assume and carry out the obligations placed upon it under the provisions of the proposed Loan Agrement of 1921, the said Agreement remains inoperative and therefore none of the rights and privileges therein conceded and granted, can be legally exercised. However, as the Liberian Government does not wish its position as herein above indicated, to be misunderstood, and probably construed as a desire on its part for concealment of facts, the necessary financial data requested in Your Excellency’s despatch of May twenty-fifth, 1922,21 have been prepared and is herewith transmitted, as well as the appended copy of the special arrangement with the Bank of British West Africa Limited, in which will be seen, on perusal, that all interests which might appear to be jeopardised in the future by said arrangement were carefully safeguarded and protected.

In conclusion Mr. Minister, I desire to point out that while my Government is fully conscious and appreciative of the efforts that are being put forth by the American State Department to hasten the consummation of the proposed loan by Congress, yet it must frankly admit that the very long delay of Congress in giving its approval to the proposed loan has been a source of grave embarrassment to the Liberian Administration, in practically every phase of its activities. If this situation is not early remedied, it would have a most disastrous effect upon the vital interests of the Republic, the possibilities of which must be of great moment and concern to the Liberian Government. Hence, we cannot too strongly emphasize the urgency for immediate action on the part of the American [Page 629] Congress with respect to the agreement concluded with the Liberian Plenary Commission by your Government now a year ago, less two months.

With the assurances [etc.]

Arthur Barclay
[Enclosure 2]

The Liberian Secretary of the Treasury ( Harris ) to the Liberian Acting Secretary of State ( Barclay )

Dear Mr. Secretary: With further reference to your despatch No. 420/L in connection with the cablegram received from Washington State Department requesting more information respecting the revenues and the collateral security offered the Bank of British West Africa Limited, from the German Liquidation Fund, for the continuation of our monthly advances until at such time that the Government assets are in a more healthy condition, in reply, I have the honor to submit the following information:—

(1) “Exact amount remaining in the Bank of British West Africa Limited, July 1, 1922”.

To query 1.

(a) Exact debit balance due Bank of British West Africa Ltd. July 1, 1921, £17,502.2.0, or $84,010.08.
(b) Exact debit balance due Bank of British West Africa Lt. July 1, 1922, £28,944.11.6. $138,933.96

(2) “Exact amount of Internal Revenues including Hut Tax collected for period July-Dec. 1921, and Jan. to April 1922.

To query 2.

(a) Amount Internal Revenues collected including Hut Taxes to Dec. 31, 1921 for six months $119,241.25
Note: Lost in the exchange rate at Bank on five Franc pieces $19,000.00
(b) The amount Internal Revenues from January to April 1922 $27,344.70
Note: It is to be observed that the increase of the revenue collection is always during the last six months of the year.

(3) “Estimate Internal Revenue including Hut Tax to be received during portion of time from May to September 1922.

To query 3.

(a) Estimate collection for above period approximately $100,000.00
[Page 630]

(4) “Has all Hut Tax due this fiscal year been collected? If so, when does the next year Hut Tax begin?

To query 4.

Not yet; about 28% collected.
Begins January 1923.
Note: Revenues for the two first quarters (March and June) are usually small.

(5) “What is the floating debt to date, and by what amount has it increased since March 31, 1920 [1921?]?

To query 5.

(a) The floating debt to July 1, 1922 $436,742.20
1921 366,674.79
(b) Increased by $70,967.41
(c) Statement of present floating Indebtedness:

floating indebtedness of liberia
july 1, 1922

[Page 631]
Due B. B. W. A. Ltd. to July 1, 1921:
On acct. Loan Agreement 1917 $106,346.70
Interest and Com. from 1917 32,587.20 $138,933.90
Due Account sums advanced Plenary Commission 18,140.00
Due Advances U. S. Gov’t. Lib. Commission to Paris Peace Conference 30,000.00
Floating indebtedness (estimated by the G. R. C. handed American Legation Mar. 31, 1917 [1921]:
Arrears L. F. F. officers to Mar. 21 $22,462.68
“   “   men “  “  “  93,537.32
“   salary Customs Service 19,000.00
“   “  Civil Administration to March 1922 34,151.70
Due on revenue cutter Nov. 30, 1920 Las Palmas 10,096.26
Additional interest (estimated) 300.00
L. F. F. outstanding bills and other obligation receivership 2,100.00
Loan Ex. Mining Company 8,000.00 189,647.96
Woermann headmoney contract 4,083.63
Awarded German Merchants for damages River Cess War 5,601.77
Due estate J. G. B. Lee 1,720.29
Due J. L. Memmett & Co. Acct. school books etc 484.63
Dutch Co. for advances Minister Crommelin a/c salary for supplies Kru coast Commission 1916, and Stipend 7,418.47
Post office indebtedness to Money Order Bureau and Sea-transit fee including interest $17,833.60
Due League of Nations (about) 12,076.37
Due U. S. Navy Department 1,370.51
Due Bureau Union Int. & Artistic 1,476.42
Due Hy. Goode & Sons, & Wm. Kidd & Arthur Williams 3,611.20
French Cable Co. and other claims 3,143.45
Claim Indian Merchants 1,200.00 $60,020.34

For your better information you will find a copy of the Bank’s letter referred to, as well as a Memorandum to His Excellency the President of Liberia.22

I have [etc.]

J. J. Harris
  1. Not printed.
  2. Not printed; see memorandum of conversation between President King and the Assistant Secretary of State, Nov. 8, 1921, Foreign Relations, 1921, vol. ii, p. 390.
  3. Note of Nov. 14, 1921; not printed.
  4. See telegram no. 17, May 23, to the Minister in Liberia, p. 618.
  5. Letter and memorandum not printed.