862.51/2097
The Ambassador in Germany ( Schurman ) to the Secretary of State
[Received November 9.]
Sir: I have the honor to report that a conference on the general financial situation in Germany took place at the Commonwealth Ministry of Finance in Berlin, on the 20th instant, between the representatives of the various state governments, municipalities and other governmental organizations. It is stated that the Commonwealth Minister of Finance urged the states and municipalities to observe the [Page 179] greatest economy, and that the Vice President of the Reichsbank supported the policy of Dr. Schacht, President of the Reichsbank (now in the United States), by opposing the constantly increasing demands of municipalities for foreign loans.
The following communiqué was issued by the Commonwealth Ministry of Finance after the termination of the Conference:
“The Advisory Board for foreign credits, which has been formed at the Ministry of Finance and which must pass upon the foreign credits of the communes, points out that thus far loans have been issued in the United States of America with the consent of the Advisory Board only to the cities of Berlin, Cologne and Munich. Lately, various applications of other communes have been submitted to the Advisory Board by the competent State Governments. The Advisory Board will, however, examine every case as to the absolute necessity and usefulness of such loans. The Advisory Board takes the attitude that only in very exceptional cases will it be possible to prove the productivity of foreign loans sought by cities, and it is of the opinion that, in all cases where this is not possible, foreign credits should not be granted to German cities, because of considerations for the protection of the German currency. The curtailment of funds available for German economy by loans made to cities must also be prevented, for it seems much more urgent to provide industry and agriculture with foreign credits, so far as they can be utilized to favor exports or indirectly to diminish imports, than to make funds available to communes for purposes which, though valuable as such, may be set aside for a later time.”
This unfavorable attitude of the Advisory Board toward foreign loans to German municipalities because of doubt as to the productivity of such loans, and out of consideration for the protection of the German currency, is especially interesting in connection with the Department’s telegram No. 184 of October 17, 7 p.m., quoting the reply which the Department is making to American bankers who consult it regarding the proposed flotation of German loans in America.
I have [etc.]