Memorandum by the Economic Adviser (Feis)

After discussion with the Secretary and the members of the Delegation,83 I talked with Schacht this afternoon. I told him that I was talking not as a member of the Delegation, but as an official of the Department of State.

I told him that reports reaching the American Government of the German plans for the handling of their debts had been disturbing. First, American attention had been struck by the fact that full service was to be continued on the Standstill short term credits while being completely [Page 443] suspended on the long term debt. The American investors were more interested in the long term debt and this policy would be likely to have an unpopular effect in the United States. I added that interpretation being put upon it in some quarters was that he was being governed inordinately by consideration of the Bank of England and British interests.

I continued that the American Government did not wish to interpose itself in his decisions as between different classes of creditors, especially as this might work to the injury of the American interests now being paid. But I ventured the suggestion that in the development of his policy if he gave full heed to the interests of the thousands of bondholders that would prove to be the most popular and desirable policy from the standpoint of American opinion.

He replied that he understood this; that in his decision he had been influenced by the fact that the Standstill Agreement was a definite contract only three months old and he did not like to be put in a position of breaking that contract. He added that within the very near future further discussion would take place with the standstill creditors, with a view to seeing whether distinction should be made between them. He promised the fullest possible consideration for the viewpoints I had put forward. In various indirect ways he implied that it was very likely he would shortly announce the maintenance of service on the Dawes and Young Plan loans, which probably had a certain preference (possibly even over the short term creditors).

In the second place, I told him that certain of his remarks as reported to us were construed as indicating a possible plan of discriminating between creditors of different nations in accordance with the trade balance as with Germany and each other country.

I rapidly reviewed the whole history of the American position as regards discriminatory trade and debt agreements and dwelt particularly on our opposition to clearing agreements which created discrimination in the discharge of debts. He stated that he wholly agreed with this position, and that it had been the Swiss who had been trying to force it upon him. He joined in the opinion that such agreements tended to bring trade down to an ever increasing minimum.

I stated that if the matter arose for discussion if it would help to be able to say that this Government was opposed to any such arrangement, he could do so.

In conclusion, he gave me definite assurance that he would not sanction any policy of discrimination as between creditors of different nations.

  1. At the World Economic Conference; for correspondence concerning this Conference, see vol. i, pp. 452 ff.