Memorandum by the Assistant Secretary of State (Bundy)

In a telephone conversation today I told Judge Schoenrich that a letter from Dunn in Santo Domingo indicates a plan to insert in [Page 119] preamble of emergency law a suggestion that it has been impossible to reach prompt and final agreement with American Government in regard to proposed issue of new bonds in exchange for present bonds. This implies that United States can agree to an exchange of bonds held in fact by private individuals. This is incorrect and objectionable although United States Government would perhaps consider any proposal eventually made in agreement with bond holders.

The fiscal agents have stated substantial exchange can not now be accomplished willingly. Substantial exchange certainly seems impossible without strong banking cooperation. Dunn’s proposed bond exchange plan contemplates forcing unwilling bond holder to exchange by withholding all payments on present bonds. This is complete repudiation of all present obligations and is necessarily objectionable. It would be preferable to withhold any final action of any sort until Mr. Schoenfeld arrives in Santo Domingo October 4th and Mr. Pulliam32 arrives here October 3rd giving opportunity for complete discussions.

Judge Schoenriph said he would communicate the ideas expressed to Mr. Dunn by telegram.

H[arvey] H. B[undy]
  1. William E. Pulliam, General Receiver of Customs.