825.516/141: Telegram

The Ambassador in Chile (Culbertson) to the Secretary of State

89. Referring to your telegram No. 34, June 14, noon,12 the following draft of decree law dated June 8th was published in the newspapers but has not yet been published in the Official Gazette:

  • Article 1. The Central Bank of Chile is declared the bank of the State.
  • Article 2. The shares of classes B, C and D, mentioned in article 2 of decree law 486 of August 21st, 1925, shall be redeemed for their nominal value.
  • Article 3. As soon as this decree becomes effective, the Board of Directors designated in chapter 3 of the above-mentioned decree law shall be abolished and the Government shall take over the administration of the Central Bank of Chile.”

Lawyer of National City Bank and lawyer of Central Bank consider legal position of Central Bank unchanged since the decree taking over the bank does not carry Puga’s signature and has not been promulgated.

The second draft decree law provided for the changing of the organic law of the Central Bank so that the Board of Directors would consist of only three members appointed by the Government. This decree was not signed by Puga, was not promulgated in the Official Gazette and has not been made effective. This draft decree was a step taken by the Junta at the time when it demanded a loan from the Central Bank of 50,000,000 pesos which was refused.

Apparently the idea of the Junta now is to leave the institution unchanged in order to avoid difficulties with foreign banks. Present officers are considered to have full capacity to handle foreign transactions of bank. Old directors with the exception of Garces Gana and Burr have not formally resigned and are merely inactive for the present.

I was reliably informed today that Guaranty Trust justified refusal to honor drawings last Saturday by lack of knowledge of the legal status of the Central Bank and is now endeavoring to obtain from the Government guarantees for payment of old loans in return for resumption of payment of drawings.

  1. Not printed.