The Secretary of State to Blair & Company, Incorporated

Sirs: I beg to refer to this Department’s letter of September 18, 1925, in reply to your inquiry regarding the proposed purchase and sale by you and your associates of $3,000,000, Six Months, 6%, Treasury Gold Notes of the Government of the Kingdom of the Serbs, Croats and Slovenes and to subsequent conversations on this subject with your representative, Mr. Chandler P. Anderson.

It appears from the information with which Mr. Anderson has furnished the Department that you and your firm are committed to the Yugoslav Government in respect of the financing in question and that, apart from any other considerations, it is not improbable that if you should withdraw at this time from the transaction, the notes now outstanding would go to default and serious loss would be occasioned to American holders of Yugoslav securities. The Department regrets that the contemplated financing was not brought to its attention sufficiently in advance of your commitment thereto as to permit your decision in the matter to be guided by the Department’s views with respect to the extension of credit to the Yugoslav Government.

As stated in the Department’s letter of September 18, 1925, this Government does not view Yugoslav financing with favor at the present time. The reasons for its attitude were fully explained to Mr. Anderson and are, as you know, due to the failure of that Government [Page 741] to take steps looking to the refunding of its indebtedness to the United States. In view of your commitment, however, and actuated by a desire to avoid possible embarrassment and loss to American investors, the Department, while maintaining its position as set forth in the above-mentioned letter of September 18, 1925, and without in any sense establishing a precedent, is willing to state that it will interpose no objection to the purchase and sale by you of the $3,000,000, Six Months Notes in question for the purpose of refunding an equal amount of Six Months Notes maturing September 30, 1925. The Department desires it to be understood, however, that objection will be offered to any further renewal of the present credit or to the extension of additional credit until a satisfactory understanding is reached between the Yugoslav Government and the World War Foreign Debt Commission regarding the refunding of the former’s indebtedness to the United States. Accordingly it would object to the purchase and sale by you of the $2,000,000 additional notes, referred to in your letter of September 17, 1925.

I am [etc.]

Frank B. Kellogg