862.51/3616: Telegram

The Chargé in Germany (Gordon) to the Acting Secretary of State

96. My 90, June 3, 1 p.m.76 While it was clear that some kind of transfer moratorium measures would be taken before Schacht77 went to London and while Schacht’s declarations of intention during last week’s conversations with the creditors’ representatives had covered action of the nature which was taken yesterday, I had, in common with various citizens of the United States and other creditor countries in Berlin, hoped that Schacht when it came to translating words into action might confine himself to securing from the Cabinet a general transfer moratorium empowering act without giving it specific application.

In accordance with the terms of the law enacted yesterday specifically envisaging exceptions to its operation the general view here seems to be that the service of the Dawes loan78 will certainly be excepted from this transfer moratorium, that the chances are more than even that the service of the Young loan79 will also be and that exceptions as to the service of loans of corporations having substantial attachable assets abroad will be the subject of further bargaining and seriatim adjustment.

While I do not mean to cast doubt upon the realization of these expectations I feel that the form of yesterday’s action has rendered the situation more inelastic in this respect than might have been hoped and has given Schacht a regrettable tactical advantage. I also think it unfortunate that a transfer moratorium should have been declared on the [Page 440] service of the Dawes and Young loans even if it be intended eventually to rescind this action.

Both the letter of the Reichsbank to the Chancellor formally declaring the moratorium and the official communiqué issued in connection therewith exclude from technical operation of the moratorium obligations covered by Standstill agreements which must be taken to include those covered by the public debtors agreement as well as by the main German credit agreement of 1933.80

I am informed that this thorough-going exception was only inserted at the last moment as a result of foreign creditor pressure exerted through German banks. It is anticipated, however, that Schacht will seek in London to modify such sweeping exception and in this he will doubtless be assisted by the long-term creditors’ contention that some credits under the Standstill agreements are in the nature of disguised long-term obligations especially those short-term loans which are tied up with long-term bond issues and are thus not entitled to exception from the transfer moratorium on the plea of preserving to Germany an adequate flow of current working capital.

  1. Not printed.
  2. Hjalmar Schacht, president of the Reichsbank.
  3. See Great Britain, Cmd. 2105 (1924): Reports of the Expert Committees appointed by the Reparation Commission; also Foreign Relations, 1925, vol. ii, pp. 133 ff.
  4. See Great Britain, Cmd. 3343 (1929): Report of the Committee of Experts on Reparations; also telegram No. 117, December 28, 1929, to the Ambassador in Germany, Foreign Relations, 1929, vol. ii, p. 1105.
  5. The German Credit Agreement of 1933 (Druckerei der Reichsbank, Berlin).