817.516/168a: Telegram

The Secretary of State to the Chargé in Nicaragua (Hanna)


111. The Department has learned that the President of Nicaragua is insisting that the National Bank loan $50,000 to … The National Bank feels that this is very unsound business as … has not the resources to justify such a loan which the manager of the bank68 feels confident will be defaulted. The manager states he fears the President of Nicaragua will insist upon the matter being presented to the advisory board of the National Bank. The manager states that under the by-laws the advisory board passes on loans recommended by the manager and as he will not recommend this loan it should not come before the advisory board. However, the President of Nicaragua may insist and the board will approve. It will then have to be submitted to the board of directors in New York which he feels confident will support the manager and refuse the loan. This may cause the advisory board to resign or it may cause the President of Nicaragua to change the directors, in which case there would be a change of management also.

If the policy is pursued of overruling the manager of the National Bank in matters of this sort of purely business judgment and good business management, the National Bank may well be bankrupted and the stability of the currency affected causing a serious situation.

Discreetly investigate this matter; and, should you find the facts to be as stated, please call on the President of Nicaragua and discuss the matter informally with him in a most friendly manner pointing out the folly and danger of administering the National Bank on any but sound business principles and of interfering with the technical staff of the bank in such matters. It is my sincere hope that the President of Nicaragua will concur with my views in this matter, in which case he might care to withdraw the request for the loan in question, or at least authorize you to inform the Department of State for the information of the bankers that he does not expect a reply to his recent telegram insisting upon a loan. You may state that the Secretary of State has personally discussed and carefully considered the matter and that he is much troubled over the consequences, which he fears would follow, to the financial stability of Nicaragua if the policy should be adopted of interference by public officers with the purely business operations of the National Bank.

  1. L. S. Rosenthal.