841D.51/140
Memorandum by the Assistant Secretary of State (Castle)
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Yesterday afternoon I had a conference with Mr. Cosgrave6 on the subject. He said that the Free State was in an exceedingly difficult position in the matter. He said that many Irishmen whom he had met in America, Irishmen who sympathized with the Free State, had remarked with vigor that the duty of the Free State now was to get its finances in order and forget all about these Republican bonds, especially since the court in New York had ruled that the Free State was not the successor of the Republic. He stated, however, that, in spite of any of these arguments, his Government fully intended to stand back of the declaration of the Dail that the Free State would assume responsibility for this money.
Mr. Cosgrave said that the Free State wanted to return to the original subscribers all the money they had subscribed, plus interest, because [Page 85] his Government felt that this money had been subscribed to free Ireland and that Ireland had been freed. I asked him whether it was true that the Free State had actually received something over three millions of the money. He said this was entirely untrue, that it had received the equivalent of about $300,000, which was available after the rebellion was crushed, but that it would be impossible to say of the money sent from America or the money collected in Ireland what proportion had been used in a way to bring about the establishment of the present government and what had been used in direct opposition to the present government. This, in his opinion, is an unimportant matter because, after all, the purpose of the subscribers has been fulfilled even if not in the way that Valera foresaw. He says that the Free State, although it wishes to return the money, wishes to return it only to the original subscribers, that it desires to repay them, as I said above, with interest, but, on the other hand, it has no intention of repaying the face value of the receipts for bonds to people like Walsh, who have bought these receipts in the belief that the Free State would pay whatever they may have said, at perhaps 10% of their face value. He says, furthermore, that he does not see how the Free State can take action to make this repayment until the Bondholders Committee has distributed the money which it now holds. Mr. Walsh, as you remember, told us that the expenses of the committee had been heavy and that, although they had held up 33% of the money collected in America, they would only be able to return about 20% of the money to the bondholders. Mr. Cosgrave says that if they return this 20% to the original subscribers, the Free State would then make up the remaining 80%. I suggested that it might be possible to make a statement that 33% of the money had been turned over to the Bondholders Committee, that naturally the bondholders would look to the committee for the return of that amount and that the Free State would pay to them direct the full balance. Mr. Cosgrave said this would not be in accord with the desires of his Government because it would mean that the bondholders would not get the full amount they had subscribed and that the blame would somehow be made to fall on the Free State. I told him that I rather doubted his reasoning in this matter, since the thesis appeared to be so clean cut that nobody could deny it.
Mr. Cosgrave said that another difficulty which we did not appreciate here was that over $2,000,000 was subscribed in Ireland itself and that, naturally, the Irish subscribers must be treated exactly as the American subscribers were treated, that this was exceedingly difficult because during the troubles when the English were still in control, a receipt for these bonds was considered proof that the holder of the receipt was a rebel and he was thrown into jail. The result of this was that numbers of receipts were destroyed.
[Page 86]I could not help sympathizing with Mr. Cosgrave’s point of view in general, although I think his desire to repay the full amount of the bonds is a kind of exaggerated honesty. It seems to me that if he would put in a bank a fund from which the original holders of receipts could draw 66% of what they paid, he would leave the committee rather up in the air. I entirely sympathize with his total unwillingness to return the money to the subscribers through the Bondholders Committee because he says it is a well known fact that Walsh and Ryan have already made a great deal of money out of it. He said he is not willing to have them make a further percentage on the money furnished by the Free State which they have consistently tried to injure. I also sympathized with his wish not to return the face value of the bonds to men who have speculated in them and have bought the rights of the original holders.
Mr. Cosgrave said finally that he was determined that the money should be repaid and that he would be most grateful for any suggestions which we could make here either directly or through the Minister as to how this could be accomplished with fairness to the bondholders and without involving the Free State in any dealings with Messrs. Walsh and Company. He said that, for example, if the Bondholders Committee would even now leave the money which had been allocated to them in the hands of trustees, the Free State would not touch a cent of it except to add sufficient to it to pay the original holders of bonds in full. He asked whether I thought there was any possibility that Mr. Walsh would agree to this, but I was unable to give him any encouragement.
That is the situation at present and I doubt whether it gets us very far ahead so far as the bondholders are concerned.
- President of the Executive Council of the Irish Free State.↩