Memorandum by the Chief of the Division of Latin American Affairs (Morgan) of a Conversation With Mr. R. W. Hebard of R. W. Hebard and Company of New York, February 15, 1927

Mr. Hebard, after asking about the Nicaraguan situation, said that he had been approached by the Government of Adolfo Diaz for a loan of $600,000. He described the urgent need of the Diaz Government [Page 425] for money and said that he would like to help them out in any way possible but frankly he did not know where he could raise the money in New York. In any case he knew that the first question asked by his associates would be the attitude of the Department of State and this was what he desired to know.

In reply Mr. Morgan told Mr. Hebard that the Department was not disposed to offer any objection to such a loan as the Department realized that the Diaz Government needed money to maintain order in the country. As Mr. Hebard knew, the Diaz Government had been recognized and the United States was according it moral support, therefore the United States would not view with disfavor a loan to the Diaz Government at this time but Mr. Hebard must distinctly understand that this was not to be interpreted in any way as a guarantee of the loan by the State Department nor must he consider that the State Department was suggesting or recommending that the Diaz Government be aided financially. Mr. Hebard said that he thoroughly understood that the State Department was simply making the usual statement that it made when a loan was contemplated to a recognized constitutional government, that the State Department had no objection to offer. Mr. Morgan said that was correct. Mr. Morgan said that he understood that this loan did not contemplate any bond issue in the United States, that it was simply an advance of money by private interests to the Diaz Government for a short term and bearing a fair interest. Mr. Hebard said yes, the loan would be $600,000. for two years with interest at eight per cent, there might be some initial discount, that this would depend upon the people who were prepared to put up the money, he could not say but in any case he would see that the Diaz Government got fair terms. $100,000. of the money was to be used for paving and the rest for current expenses. Mr. Morgan said that he had heard that the loan also carried some provision for an option on the purchase of the railroad. Mr. Hebard said that was incorrect, that the negotiations for an option on the railroad were entirely separate and were to be carried on in the interests of Mr. Minor C. Keith. The loan transaction was a personal matter between Mr. Hebard and the Diaz Government.