862.51/2850: Telegram
The Agent General for Reparation Payments ( Gilbert ) to the Secretary of State
[Received March 25—12:55 p.m.]
For Cotton. Berlin, March 25th. Your two messages received this morning.
First, my only direct information about the contract comes from George Murnane who told me himself that it would be expressly subject to the consent of the Department. See my message March 22, 1930.
Second, I think you are misinformed as to position of French authorities. I understand that French have limited both their consent and their participation to what is absolutely necessary at this time and [Page 99] that Bank of France particularly would like to see transaction restricted to the 50 million dollars needed by German Government at end of June to repay existing bank debts.
Third, I am not informed about British attitude but presumably this is being handled by Higginson and Company in London.
Fourth, I should be the last to suggest closing our market to all foreign capital demands but I do think there is serious question as to whether German public authorities should be allowed unlimited access to our market for purpose of financing their budgetary deficits. I regard present transaction as something of a test case, and the problem may become urgent if the American money market remains easy and the German appetite for German public expenditures continues unrestrained.
I have not cabled to request any action of the Department but simply to give you my opinion fully and frankly. I remain of the same opinion indicated in my message of March 22, 1930, and I am opposed to the present credit unless it is clearly and definitely understood that the funds are to be applied immediately to the retirement of existing debt. This may possibly be the fact, but if so I should think it could readily be stated either as part of the contract or in an official statement by the German Government. Even then I believe there are strong presumptions against any American credits to the German Government until the Young Plan19a is actually in force, partly because of the questions of reparation priority which still persist under the Dawes Plan19b but principally because of the undesirability of asking American investors to shoulder any of the political risks which necessarily remain until the new plan has gone into full operation. To the best of my information and belief the German Government needs no new credits at this time except perhaps for a few weeks and in relatively moderate amounts, and in present state of German money market these could easily be provided by the German banks. Perhaps later, toward the end of June, 50 million dollars or thereabouts will be needed to cover bank debts then maturing, but by that time the Young Plan will presumably be in force.
Sixth, am sending this message through my Paris office in order to save time.