The Ambassador in Germany (Sackett) to the Secretary of State
[Received January 23—10:40 a.m.]
18. My telegram No. 5, January 7, 4 p.m., section 2. Work of Standstill Committee completed. Mr. Wiggin has privately given me copy of its proposed report. It contains résumé of German economic situation and much theorizing and gives substance of new Standstill Agreement which is to run for 1 year but with earlier maturity in the event of “unfavorable developments” permitting creditors to resume freedom of action. No immediate repayments. Schedule of future payments is to depend on transfer capacity of Reichsbank. An advisory committee is to represent creditors which will receive continuous information on all incoming and outgoing foreign exchange. A German committee for foreign debts will be established with a view to prevent dissipation of foreign exchange to debtors not included in Standstill. Foreign and German banks will stand on same basis with respect to collateral from German non-banking debtors. I understand this means sharing of collateral. At the option of the creditor cash advances to German banks may be converted into 10-year notes bearing 6 percent interest for which as inducement special security will be deposited with trustee. Foreign creditors also have right to convert unsecured cash advances into blocked investments in Germany under effective Reichsbank control. Interest reduction will be recommended for creditor countries with relatively lower rates.
The Committee formally recognizes that German Government payments to other countries and the question of inter-allied debts have an intimate connection. This was incorporated in the report in the hope of securing French signature. Committee strongly urges facilitating of foreign trade and positive and prompt action in the sphere of international cooperation.
Signatures by those members whose banks have already given authority and initialing by the others except possibly Sweden, are expected today though Mr. Wiggin tells me privately that final French attitude is still dubious.