The Secretary of State to the Minister in Colombia (Caffery)
45. The position of the bankers is as follows: On December 31, 1930, the credits expired. They were renewed for a term of 6 months by agreement. No agreement now exists for extending them beyond June 30, 1931, because it was contemplated that long-term financing would take place by that time. Such financing is absolutely out of the question because of present market conditions. Even if the $4,000,000 credit were given it would likewise expire on June 30. The bankers are willing to give the $4,000,000 and desire to enter into a new agreement to cover the entire $20,000,000 involved. Short-term financing now on the basis of present market prices of Colombian bonds would be at 10 percent. Nevertheless, the bankers are willing to extend the credits for a period of 90 days at 7 percent provided they are paid an initial commission for issuing the short-term credit of one-fourth of 1 percent of the total amount of $20,000,000, that is, $50,000. This is to cover the amount they are out for expenses for cables ($35,000) and maintenance of Messrs. William J. Samels38 and Howard M. Jefferson39 in Colombia ($9,000).
Today Mr. W. W. Lancaster40 was in Washington and it was pointed out to him that some of the expenses for cables were due to the failure of the bankers to pay the last $4,000,000 and in bringing up new conditions. He admitted this, but also stated that a good deal of it concerned the fiscal agency agreement and the endeavor to find a satisfactory formula for President Olaya, who had stated to the Colombian Congress that he had a definite promise of $20,000,000 from the bankers under the letter of June 20, 1930, at a time when the bankers claim this was not true. It was pointed out to Mr. Lancaster that the bankers agreed to give the $20,000,000 provided President Olaya did certain specific things which he has since done. Mr. Lancaster telephoned the bank officials and they stated that they would not insist upon the commission of one-fourth of 1 percent (which, for a 90-day credit added to the 7 percent interest would make a total of 8 percent) provided the President should make some gesture toward meeting the amounts they are out for expenses.
We should like to have your views on this and to know whether you think the President would be disposed to offer half of the expenses. [Page 36]We consider this to be a very small matter for the bankers to quibble over, and although they may eventually yield under pressure, yet we want you to know their views, and before going back at them to know whether you think President Olaya would be willing to settle the entire matter by some such offer.