800.51W89 Great Britain/337

The Secretary of State to the British Ambassador (Lindsay)

Excellency: I fully appreciate the importance of the proposal contained in your note of November 10th and the seriousness of the situation upon which it is predicated. The mere fact that your Government suggests the necessity of a review of the intergovernmental financial obligations now existing between our two nations presents a circumstance which must be given most serious consideration. In a matter of such importance there must be allowed no opportunity for misunderstanding or failure to reach conclusions satisfactory to both Governments and peoples.

With this end in view, you will permit me to recall very briefly some of the essential conditions and limitations which would control on the part of this Government such a review and might affect its result. Not only is there reserved to the Congress of the United States the ultimate decision in respect to the funding, refunding or amendment of these intergovernmental obligations under consideration, but the Congress in the past has itself provided the machinery in the shape of the World War Foreign Debt Commission for the investigation of the facts and for making recommendations upon which such action might be taken. The Executive might recommend, but the facts and evidence were submitted to and the decision made by the Congress, acting through this machinery.

You will also appreciate that your present suggestion of a general review goes far beyond anything contemplated or proposed at any time in the past either by President Hoover or by this Government and that even the suggestion quoted in your note was not adopted by the Congress of the United States.

In view of these facts and in the light of the historic position of the United States that reparations are solely an European question in which the United States are not involved, I am sure that no inference can be intended that the settlement of German reparations at [Page 757] Lausanne was made in reliance upon any commitments given by this Government.

I appreciate the importance of the step mentioned in your note which has been taken by the governments at Lausanne in respect to the reparations due them from Germany and the possible effect upon those creditor nations of the loss of that source of income. I am not oblivious to the fact that the world-wide depression and the concurrent fall of prices has increased the weight of debts in many parts of the world; nor to the fact that the decrease in international trade has increased the difficulties of obtaining foreign exchange. I also recognize the relation which these facts may bear to the process of recovery. On the other hand, it must be remembered that these incidents of the depression have also fallen with great weight upon the American people and the effects upon them directly as taxpayers or otherwise of any modification of an agreement with respect to debts due to this country cannot be disregarded. I assume that it was for the purpose of deliberately and carefully giving due weight to such conflicting elements in the world situation, differing as they would in various countries, that this Government adopted the system which I have described. I confess that I cannot see any presentation in your note which would be likely to induce the Congress of the United States to act upon the question any differently now from the manner and the principles upon which it has acted in the past.

The attitude of the President, therefore, is that for any suggested study of intergovernmental financial obligations as now existing, some such agency as I have referred to, should be created to consider this question individually with each government as heretofore. The President is prepared to recommend to Congress that it constitute an agency to examine the whole subject.

As to the suspension of the installment of the British debt due on December 15th, which is one of the objectives in your note, no authority lies within the Executive to grant such an extension, and no facts have been placed in our possession which could be presented to the Congress for favorable consideration.

Such importance is attached by our Government and people to the maintenance of the original agreements in force by the payment on December 15th as to far outweigh any reasons now apparent for its suspension, and by such payments the prospects of a satisfactory approach to the whole question, in my opinion, would be greatly increased.

Accept [etc.]

Henry L. Stimson