860f.51/410 supp.: Telegram

The Secretary of State to the Minister in Czechoslovakia (Einstein)


30. Refer Department’s No. 21, June 9, 7 p.m. Department has been informed by bankers that their representatives in Prague indicated to President Masaryk and to Foreign Minister Beneš that until a reply should be received from the Czechoslovak Government to this Government’s recent note regarding refunding of indebtedness of Czechoslovakia to the United States, the Department would not be disposed to view with favor a loan to Czechoslovakia, and that for the purpose of cooperating with the Department, the bankers suspended negotiations.

Department is now informed by bankers that Czechoslovak authorities have in meantime requested National City Company to make an offer on loan in question and they fear that agreement will be reached between National City Company and Czechoslovak Government, conditioned on favorable action by Department, whereby they will be excluded from business which they initiated.

Department does not desire, of course, to favor one firm of American bankers over another, but at same time Department feels that it would be hardly fair to Dillon, Read and Company if their position should be prejudiced by reason of their cooperation with Department. You are instructed, therefore, to make discreet inquiry, and if as result of your inquiries you find that the National City Company or any other American banker is negotiating a loan with Czechoslovak Government, you will request the representative of that banking firm to call upon you at the Legation, and you will inform him (1) that until a satisfactory reply is received from the Czechoslovak Government to the Department’s note regarding refunding of Czechoslovakia’s indebtedness to the United States, the Department cannot view with favor flotation of a Czechoslovak loan in this country; and (2) that Department would strongly disapprove conclusion of any loan agreement or option between a foreign borrower and American banker specifically conditioned upon Department’s favorable action respecting it. Department desires to be consulted before any agreement with prospective foreign borrower is concluded; it is not willing that preliminary contracts be signed conditioning final [Page 41] loan contract upon Department’s offering no objection to proposed transaction.

Telegraph action taken, giving name of any American banker at present negotiating with Czechoslovak Government.