817.77/251: Telegram

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

159. Your 268, November 9, 1 p.m. The Pacific Railway is the property of a company incorporated in the United States and legally under the control of its Board of Directors, who are responsible for its management and its funds. While the Government which owns the stock is, of course, free to do whatever it likes with the company, it would appear that any disposition of the property should be made in a legal manner through action by the Board of Directors and not by arbitrarily assuming control of the property and of the funds. I feel constrained to ask you to point this out to President Moncada, because I fear that the action reported in your telegram above referred to, if persisted in, will not only interrupt the orderly operation of the railroad, but also make a most unfortunate impression on any new bankers who may look into the Nicaraguan situation. It is difficult to see how a railroad can continue to operate when all of its funds are deposited to the credit of the Government.

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The Department has taken a very unusual step in expressing to American bankers its interest in President Moncada’s efforts to reorganize Nicaragua’s financial administration. I hope, therefore, that it may be found possible to avoid action which is likely to render futile the Department’s efforts to be helpful.

The Board of Directors will meet Wednesday afternoon and it would be desirable that the President should send them before that time any new instructions which he may have to impart.