Memorandum by the Chief of the Division of Latin American Affairs (Morgan)

As there will presumably be no bond issue floated in this country it would appear to be unnecessary for the Department to make a formal statement of no objection with regard to this loan. The Department said when President Diaz expressed the desire to borrow money in New York that this did not seem to be a propitious time for the Nicaraguan Government to attempt any new financing and the reestablishment of peace appeared to be the first essential for Nicaragua. However, the Diaz Government appears to be very hard pressed for funds and the Minister has been complaining to me almost every day about the situation. According to him the chief reason why the revolution is progressing so successfully is that Diaz has no money to pay his troops. The Minister has asked whether the United States Government would not advance money to Diaz and I have of course told him that that was quite impossible. It did not occur to me that any private interest would be willing to advance money to Diaz at this time but if Hebard and Company are willing to do it without asking any special guarantee from the State Department or any more protection than is usually accorded to a company making a loan to a recognized government I think it would be an excellent thing [Page 424] and might materially assist the Department in carrying out its Nicaraguan policy. Apparently of the $300,000. advanced $100,000. will be used for street paving, a most worthy object, and $200,000. for combating the revolution, also under the circumstances a very worthy object.