Papers relating to the foreign relations of the United States, 1931, Volume I

462.00R296/4975: Telegram

The Consul at Basel (Cochran) to the Acting Secretary of State

Basel, August 19, 1931—10 a.m.
[Received 10:40 a.m.]

So-called still stand representatives reached an agreement²² at midnight which provides for the continuation up to the total of outstanding credits to German debtors for 6 months from the date of signing the agreement subject to the B. I. S. and associated Central Banks renewing their existing credits to the Reichsbank for a similar duration. German Gold Discount Bank to provide limited guarantees. By Government decree or otherwise it will be secured that foreign creditors of German banks receive equal protection to that of creditors residing in Germany. B. I. S. has agreed to set up a committee to deal with any differences arising from the agreement.

The report of the Committee of Ten was signed at 1 a.m.²³ B. I. S. is forwarding copies of this, together with the agreement of the still stand representatives as an annex, to MacDonald and to the governors of the 10 Central Banks represented by the original committee. The report of the latter recommends:

(1st) that the existing volume of Germany’s foreign credits should be maintained;

(2d) that part at all events of the capital which has been withdrawn should be replaced from foreign sources;

(3d) that any additional credits provided should be in the form of a long-term loan and that such parts of the existing short-term debt as may suitably be treated in this way should be converted into long-term obligations.

The report states that the present Government has given proof of its determination in difficult circumstances to put Germany’s finances on a firm basis and that if the policy is rigorously pursued it will greatly contribute to the improvement of Germany’s credit. The report appeals to the Governments of the world that before the expiration of the credits whose prolongation was recommended by the London Conference they give to the world the assurance that international political relations are established on a basis of mutual confidence which is essential to economic recovery and that the international payments to be made by Germany will [not] be such as to imperil the maintenance of her financial stability. The report also points out that Germany’s case illustrates the futility of an international financial system involving the payment of large sums by debtor to creditor countries while at the same time putting obstacles in the way of the free movement of goods.

Cochran

22. Agreement between the German Banker’s Committee and Germany’s Foreign Bank Creditors; text printed in The Financial News, London, September 15, 1931. This agreement became operative for a 6 months’ period calculated from September 1, 1931. It was subsequently extended an additional year.
23. For text, see Moratorium on Foreign Debts: Hearings before the Committee on Ways and Means, House of Representatives, 72d Cong., 1st sess., on H. J. Res. 123, pp. 27–43.