882.6176 F 51/61
The General Receiver of Customs of Liberia (De la Rue) to the Chief of the Division of Western European Affairs (Castle)
[Received September 2.]
My Dear Mr. Castle: The results of Saturday’s conferences and one held today with Mr. Firestone, Col. Crews52 and Mr. Firestone, Jr., have so far shown no difficulty as to the terms of control of finances or the general plan of the Loan. The Bank’s tendency at present is to recommend that a loan be entered into for $5,000,000. and bonds will be authorized for that amount. It is suggested, however, that only $2,500,000. be actually issued and that this be spread over a period of two years because it is felt that no more than this will be needed during 1926 and 1927 and that it is more than probable this amount will carry on the public works contemplated through 1928. This is especially true because the idea is to make the charges for sinking fund and interest payments as small as possible. For instance we are now discussing making no payments for sinking fund for the first five years and paying interest only on the bonds which are actually issued. This plan will reserve to the use of Liberia a larger proportion of the revenues and in this way we augment our available funds to a very great extent so that it will be unnecessary to use up the credit established by the bond issue as rapidly as would otherwise be expected.
The difficulty seems to be this. If the City Company contracts to furnish $5,000,000. over a period let us say of six years, we will have [Page 449] to pay a higher rate because of the various contingencies that must be taken into consideration by the Bank in guaranteeing these payments for a future period. If, on the other hand, we do not need $5,000,000. in the next two or three years but only need $2,500,000 then we can get $2,500,000 for very much less proportionately than if we had to pay on $5,000,000. over six years and only use $2,500,000. in the first three. The advantage therefore appears to be with the Liberian Government in accepting a contract to advance $2,500,000. against bonds in this manner and leaving the issuance of the balance of the bond issue an open matter for discussion two or three years from now.
The disadvantage is of course that two and a half or three years from now should we desire to issue the $2,500,000. remaining of the bond issue or any portion thereof it is possible that the City Company would refuse to handle these bonds or that by reason of world money conditions or wars, etc., other companies would likewise refuse to handle the balance of the bond issue. This would place the government in a position such as it found itself in a few months ago when it tried to issue the balance of the bonds of the 1912 Loan which had been reserved for public works and found itself unable to place these bonds.
My personal thought is that with the Firestone development proceeding in an orderly way and with various public works more or less completed the capital value of the bonds would be so strong as to destroy the disadvantages mentioned, subject, of course, to unexpected contingencies such as war, financial depression, etc.
I consider that the Firestone Company would, moreover, be so interested in the issuance of these bonds if further public works finances were needed that we would have a strong ally in securing a market, and that it would be to our advantage to take this risk.
I hope I have made the situation quite clear and that you will find an opportunity to give the matter some thought because it is a very serious decision to make and I confess I would be most grateful for the benefit of your personal opinion. As you will have seen Mr. Barclay today it is unnecessary for me to comment upon his personal attitude other than to remark that in his private conversations with me he is deeply grateful for the courtesy that is being shown him and fully appreciates its significance. Granted that no unfortunate misunderstanding or difficulty takes place, I believe the attitude of the whole Liberian people toward the investment of American capital and toward the interest of the United States in their country will be strongly influenced by the reaction of Mr. Barclay to his treatment here.
Very respectfully and sincerely yours,
- Col. Ralph Crews, member of law firm of Shearman & Sterling.↩