462.00 R 294/132: Telegram

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


122. W–6. The following proposition for settlement was unanimously made by the Allies.

1. The amount of the United States claim should be reduced: (a) by value of paper marks requisitioned, (b) by value of armistice material which is estimated at a maximum of 59,000,000 gold marks, (c) by part of the value of German ships seized under the Act of the United States Congress, such amount to be arrived at in the following manner.

The tonnage of German ships shall first be used to rebuild American tonnage losses in the war up to the recent ratio of the replacement of tonnage lost in the war by Great Britain and France, which was accomplished from tonnage of German ships seized by Great Britain and France. Suppose for example that German seized tonnage had [Page 136] replaced British and French tonnage loss to an average of 50 percent; then enough German seized tonnage should be applied by the United States to replace 50 percent of tonnage lost by the United States. The balance of tonnage remaining in the hands of the United States to be valued on the basis which was applied at Spa. Note I: Bradbury without further knowledge of the situation estimated the mean ratio at 50–60 percent and the deduction under 1[c?] at maximum of 90,000,000 gold marks. Note II: Details under 1 (c), are very complicated, and involve question of ships that were seized by an act of war and put through the prize courts. Also various classes of tonnage subject to replacement and valuation. This is the first time German ships have been mentioned in the Conference.

2. Amount claim arrived at to be paid in twelve equal annual installments beginning 1923. Installments due first four years shall have priority on all cash paid by Germany in each year up to 25 percent, (a) If no cash paid by Germany no payments to be made to us. (b) If 25 percent of amount paid by Germany not sufficient to meet annual installment in any of first four years deficit not to be payable following year, but (c) at the end of four years total deficits shall be added to installments due last [eight years?] one-eighth of total deficits to each installment, (d) After four years annual installments shall have priority on payments cash by Germany up to 100 percent thereof. Deficits to accumulate and be immediately payable from future cash payments by Germany, (e) No interest allowed on installments.

3. Allies made reservation as to ownership of cash collected in occupied area. I gather they were not in accord as to final application cash accruing present Franco-Belgian operations.

4. British state that receipts under Recovery Act, although debited on books Reparation Commission, are treated as delivery in kind and not cash.

5. In short United States priority only as to cash received by Reparation Commission from German Government for distribution.

6. England claims that amount still due her account cost army of occupation 69,000,000 gold marks. France claims due her 145,000,000 gold marks. They give up priority on such claims until Belgian priority liquidated.

7. Allies ask United States to endeavor accept dyes in some way so as to reduce amount claim.

8. Exact legal procedure not determined. Bradbury suggested agreement between Allies one side, United States other side, covering proposed transactions. Allies would then turn over such agreement to Reparation Commission with instructions to carry out.

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  • Comment 1. Presume deductions 1 (a) and (b) feasible.
  • Comment 2. Your instructions seem to prohibit deduction 1 (c). Allies pressed hard on this deduction claiming tonnage seized by United States to replace 50 percent of tonnage lost by the United tonnage seized by United States would have been deliverable to Reparation Commission except for special action Congress of United States. Status of some of ships taken over through prize courts still unsettled but understand in general such ships were not credited to account of Reparation Commission but do figure in replacement ratio. Am not familiar enough with this ship question to make recommendation.
  • Comment 3. United States receives no share in past payments by Germany. Allies very stiff on this point. Bradbury stated that money paid by Reparation Commission to the British Government now in Treasury could not be paid out without Act of Parliament. In view of recent settlement debt of the British Government to the United States93 with burden imposed upon tax payers did not think Parliament would pass legislation. Other representatives quite definite that they could make no repayments. Convinced they are sincere and that demand on our part will indefinitely postpone any settlement. This point might be yielded as last resort in negotiating other points if you determine that a settlement without an immediate payment is feasible.
  • Comment 4. I have investigated the cash position of the Reparation Commission, find available practically no cash.
  • Comment 5. If we suppose United States claim to be 960,000,000 gold marks, the annual installment would be 80,000,000. The United States would receive installments due if Germany paid 320,000,000 annually the first four years. Inside the eight years if Germany paid 80,000,000 gold marks United States would receive installment due.
  • Comment 6. Made inquiry as to effect of a moratorium. This, Allies understand, would postpone payment the annual installment as provided paragraph 2.
  • Comment 7. Made inquiry as to the situation which would develop in case that Germany made no payments in cash for twelve years. In reply Allies stated that nothing would be received by United States.
  • Comment 8. Made inquiry as to what would happen if, through a loan or in some other manner, Germany should make any large payment in [cash.] Allies thought might arrange to clean up all installments due up to date of such payment.
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  • First query. Is United States willing to accept the principle of payment from receipts in the future alone?
  • Second query. With regard to installments, will United States insist on less than twelve? If so, how many installments?
  • Third query. Will more than 25 percent priority be asked by United States? For the sake of appearances I am inclined to suggest not and because 25 percent share sufficient if Germany makes a small substantial payment.
  • Fourth query. Should not deficit be payable immediately when funds available on any basis of installments: (a) Under terms of priority; (b) under priority for larger percentage which when deficit incurred would automatically accrue to the United States?
  • Fifth query. Could any assets now in Reparation Commission be taken by United States, such as securities of various corporations, the Bagdad Railway and the like, hold them as security with right of liquidating them? I shall investigate available assets, but doubtful whether such plan would be effective and what effect on public opinion it would have.
  • Sixth query. Would the Allies be likely to resort to various plans for payment in kind and reparation recovery, hoping thereby to divert cash from the Reparation Commission, or is the satisfaction of the claim of United States too small to be of important influence, the difficulty of agreement among the Allies too great for procedure of this nature?

The terms offered can be bettered, in my opinion. Representatives of Allies have shown sincere desire that settlement be reached. The next meeting will take place March 14. Wadsworth.

  1. Telegram in five sections.
  2. See Combined Annual Reports of the World War Foreign Debt Commission, p. 106.