Blair & Company, Incorporated, to the Secretary of State

Sir: We beg to acknowledge your letter to us dated September 23, 1925 in which you refer to the State Department’s letter of September 18, 1925 in reply to our letter of September 12, 1925 with reference to the proposed purchase and sale by us and associates of $3,000,000. Six months 6% Treasury Gold Notes of the Government of the Serbs, Croats and Slovenes, for the purpose of refunding an equal amount of Six Months Treasury Gold Notes held by American investors maturing September 30, 1925, and are pleased to note the Department interposes no objection to such purchase and sale by us.

This contemplated financing was brought to the attention of the Department at the earliest practicable time. As you are already advised, this financing was not the loan of new money to the Jugo Slav Government, but was for the purpose of taking care of securities maturing on September 30th which had been previously issued in this country with the knowledge of and without objection from the Department. Our representative arrived at Belgrade to discuss the matter of this maturity on September 10, 1925. Having determined the intention of the Jugo Slav Government not to repay the notes but to sell an issue of refunding notes running for a period of six months more, we addressed to the Department our letter of September 12th, to which the Department’s letter of the 18th was a reply.

Having no reason to believe that the State Department would interpose objection to this renewal of a transaction which it had already passed on two prior occasions, and no reply having been received from the State Department until the arrival on September 21st of your letter of September 18th, and the time for action being very [Page 744] limited because the notes were about to mature on September 30th, our representative in Belgrade was permitted to go ahead with the arrangements for refunding the issue. We could not have withdrawn from those arrangements at that late date without serious embarrassment to the Jugo Slav Government and serious impairment of our good relations with it.

The original advance of money which these notes represent was made in the summer of 1924, and we refer to the official letter of the Department, dated July 24, 1924,5 advising us that the Department offered no objection to the financing.

In connection with that financing an advance of certain additional sums was under consideration by the issue of the bonds of the 1922 Gold Loan, which, by the contract of purchase of the notes, were then and still are under option to us, and in connection therewith, in December 1924, Mr. W. B. Poland, on our behalf, made a special trip to Washington, at which time he called on Mr. Leland Harrison, Assistant Secretary of State, and also upon other representatives of the Department, as well as upon the Secretary of the Treasury and the Secretary of Commerce, for the purpose of determining, as fully as possible, the attitude of our Government to the negotiations which would be necessary in connection therewith, and we respectfully refer to our letter to the Department of December 15, 1924,5 in which we stated that we did not wish to proceed seriously with these negotiations until we were sure there was no objection by the Department of State, and to the reply of the Department under date of December 18, 19245 confirming the fact that there was no objection to the issue of these securities in the American market.

The project of issuing bonds has not proved feasible up to the present time and when the original issue of notes came due in March, 1925, it was necessary to extend them by an issue of new six months notes, namely the notes now maturing. Under date of March 18th we advised the Department that we had about concluded arrangements to purchase these notes, and under date of March 20th were promptly advised by the Department that it offered no objection to the floatation of this issue on the American market.

We recite the above facts in order to show you that not only had we no reason to expect an adverse reply to our letter of September 12th or to believe the matter was not being brought to the attention of the Department sufficiently in advance of our commitment to permit our decision in the matter to be guided by the Department’s views with respect to the extension of credit to the Jugo Slav Government, as suggested in your letter of September 23rd; but, on the contrary, [Page 745] we, and the American investors who were our clients in the purchase of the notes had every reason to believe and expect, when making their investment, as well as now, that the State Department would interpose no objection to an issue of new short term notes in lieu of the notes the issue of which the Department had already approved, and the extension of which was involved in the negotiations of which the Department had been advised by our letter of December 15, 1924, especially since we had received no intimation whatever of any change of attitude on the part of the Department.

We have at all times endeavored to cooperate fully with the State Department when considering finance for the Jugo Slav Government. When we received the first intimation of the attitude of the Department with respect to such matters at the time when the Jugo Slav Loan of 1922 was under consideration, we placed ourselves wholly at the disposal of the Department, and we have before us a letter signed by Mr. Hughes, then Secretary of State, acknowledging the aid of our representative, Mr. Sheldon, at Belgrade, as well as an official telegram of the Department advising us that an understanding had been reached between the American Chargé d’Affaires at Belgrade and the Jugo Slav Government. We have also understood that subsequently representatives of the Jugo Slav Government came to this country in connection with its debt to the United States, with what result we have never been officially advised. And we beg to call your attention to the fact that the original advance of money represented by these notes and the official letter of the Department with respect thereto, dated July 24, 1924 above referred to, was subsequent to the visit of these representatives.

We desire to continue our cooperation, and in expressing this intention, we feel that we should be permitted to add that as American bankers endeavoring to aid, as circumstances will permit, in the rehabilitation of one of our allies in the World War, owing debts to our Government, we had reason to hope for the cooperation of the State Department with us as well. We beg to point out that it makes our position very difficult, both as to prestige abroad and our duty to our clients here, to find, after our careful efforts as recited above to ascertain the general attitude of the Department, that it had changed its position within so very short a time of an imminent maturity, and without previous warning to us which would permit us to accommodate ourselves to its position without causing serious misunderstandings abroad and embarrassments to us, our associates and clients here. We also feel that unless the maturity of the present issue of six months notes can be satisfactorily otherwise provided for, we, and the investors who have purchased from us, are entitled, in view of the past action of the Department, to expect [Page 746] that it will interpose no objection to any necessary refunding of these notes at maturity. Credits which have once been passed without objection and which need to be refunded at maturity are very different from fresh credits for new money. In view of the exchange problems which must continue until all currencies are stabilized, an objection to a credit of this character would constitute such drastic action that we cannot believe that the Department, after full consideration of all the equities involved, will continue the position with respect to such credits as is intimated in your letter.

Since the receipt of your communications we have made representations to the Jugo Slav Government and are just in receipt of unofficial cable advices from which we understand that the Government has decided to send a mission to the United States to discuss its debt.

We have also written the Jugo Slav Government an official letter, in which we advise it that in our opinion it will greatly enhance the credit of their Government in this market and will contribute to the possibility of further offerings of securities if it will make an early effort to reach an understanding with the World War Foreign Debt Commission regarding the refunding of the Jugo Slav Government’s indebtedness to the United States.

We reiterate our desire to cooperate with the Department in this matter and are ready to place ourselves at your disposal in any other practical manner which you may suggest.

We beg to remain [etc.]

Blair & Co. Inc.
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