868.51/1090

The Secretary of State to the Minister in Greece ( Skinner )

No. 151

Sir: The Department has noted with interest your despatch No. 509 of March 15, 1928, discussing the inclusion in a loan proposal of an obligation on the part of the Hellenic Government, should the terms be accepted, that, prices and quality being equal, American machinery and supplies are to be employed in erecting and equipping the plant to be constructed from the proceeds of the loan.

The question of banking policy which you discuss is, of course, in some measure a controversial one, particularly as there is a strong economic argument that foreign loans must in any event result in the exportation from the lending country either of gold or of other commodities and that the conditioning of loans on the purchase of particular exports might diminish both foreign borrowing and the total of exports from the lending nation.

The related question of governmental policy has presented itself from time to time for consideration. The Department, in considering proposed foreign loans regarding which American bankers consult it, has not felt warranted in bringing pressure upon the interested bankers to the end that the loan proceeds be expended in the United States. The present policy of the Department in its correspondence with bankers regarding contemplated foreign loans, when they involve the expenditure of all or part of the proceeds for constructive works, is to inquire in what manner the proposed works will be carried out, and to express the hope that American firms may be afforded the freest opportunity to compete for such work on equal terms and that the proposed contracts and the procedure in connection therewith will not in any way interfere with such free opportunity.

I am [etc.]

For the Secretary of State:
W. R. Castle, Jr.