838.51/1373a: Telegram

The Secretary of State to the Chargé in Haiti ( Dunn )

126. For General Russell.

National City Bank advises Department that members of French Parliament have asked Minister of Foreign Affairs what measures he expects to take to obtain payment in gold of coupons of Haitian bonds of 1910. When this was known offering of these bonds on French bourse was completely stopped. There appears, therefore, to be serious possibility that French holders of 1910 bonds may demand payment in gold. National City Bank’s lawyer advises that French courts in such case might permit attachment of funds on deposit in Paris. To avoid this possibility the National City Bank [Page 412] requests that instructions to them in Hord’s letter of November 22nd31 be changed so that francs held in Paris may be held in general account of National City Bank and not in any special account or for the account of the Haitian Government, and that instructions should state that such deposits are to be held by bank subject to further orders of Financial Adviser in reference thereto. It also suggests that any funds now deposited to credit of General Receiver in Paris might be transferred temporarily in francs to New York, to obviate possibility of attachment by bondholders.

National City Bank points out that provisions of 1896 and 1910 contracts do not require publication by fiscal agent of notice of redemption. In view of possible complications it would seem better that Haitian Government should instruct Haitian Minister in Paris to publish required notices, stating definitely that redemption will be at rate of 1,000 francs for one thousand franc bond, 500 francs for five hundred franc bond, etc.

National City Bank suggests that instead of depositing francs with fiscal agents of French loans in advance of day of redemption, Haitian Government arrange, if possible, with French fiscal agents to accept National City Bank’s guarantee of payment for all redeemed bonds and their commissions, in French francs, and not in gold, when French bank draws on National City Bank, through Paris branch, and delivers redeemed bonds to Paris branch. The French loan contracts apparently do not provide for the deposit of francs with the fiscal agents at time of publishing notice of redemption. National City Bank also suggests that Mr. Hord instruct bank that it need not comply with second paragraph of Hord’s letter of November 22nd regarding notification to fiscal agents of purchases and deposits of francs.

1896 loan contract apparently does not require any specific period for publication of notice prior to redemption. Unless there is something in Haitian or French law to prevent, it would, therefore, appear possible to redeem 1896 bonds on December 31st, the next interest date.

National City Bank suggests that it might be possible to allow Haitian Government interest rate higher than one and one-half per cent now allowed, if bank could expect that funds would remain on deposit with, it for a definite period. Since 1910 loan contract requires three months’ notice it would seem that the greater portion of deposits would remain with bank for that period, especially as [Page 413] purchases of bonds in open market are said to have ceased, as result of cessation of trading in 1910 bonds on bourse.

In view of very serious embarrassment which would result if any action of French bondholders should delay refunding plans, Department believes that suggestions of National City Bank should receive careful consideration and that instructions should be sent to bank at once dealing with the points indicated. Please inform Department of any steps taken.

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