The Ambassador in Germany (Dodd) to the Secretary of State

No. 116

Sir: With reference to my despatch No. 91 of August 22, 1933, concerning the various plans for the issuance of Konversionskasse certificates of indebtedness under the German Partial Moratorium effective July 1, 1933, I have the honor to report that virtually no progress has been made with respect to the satisfactory handling of such certificates in the United States.

Several days ago I was informed by the Berlin representative of the American bond holders that Dr. Schacht had rejected the plan for the stamping of coupons as a substitute for scrip and that he insisted on the issuance of the scrip. He took the view that with the issuance and sending of the scrip to the United States, it would be placed at the disposition of the creditors there and that it would be their responsibility to arrange incidental internal matters which might interfere with the handling of the scrip in the United States.

I was today informed by the American representative mentioned above that the paying agents in the United States have cabled directly to Dr. Schacht telling him that it is the Reichsbank’s duty to have the scrip registered under the United States Securities Act. My informant considers the situation to be very unclear and unsatisfactory from the standpoint of the American creditors and hopes to make some progress through his principals in New York in the near future.

The viewpoint of Dr. Schacht is not readily understandable if, as he has previously stated, he desires to promote German exports in every way possible. The difficulties of handling the evidences of indebtedness of the Konversionskasse would appear to minimize their availability for the promotion of German trade and thus defeat, so far as their availability in the United States is concerned, the evident primary purpose of the German Partial Moratorium. However, if the certificates of indebtedness when issued are not utilizable in the United States, the repurchasing agency of the German Government, which presumably will be the Gold [Page 448] Discount Bank, would of course not be called upon to repurchase them even at half of their face value as has been estimated, and would therefore be able to retain the full 50 per cent of the non-transferable interest until some other arrangement can be worked out.

It is understood that holders in Germany of coupons within the scope of the Partial Transfer Moratorium will be treated in the same way as foreign holders and will be obliged to accept 50 per cent of their interest in Konversionskasse Certificates redeemable in Germany at the rate prevailing abroad.

There is also a well advanced plan to transfer all other blocked mark accounts, with the exception of Registered Mark accounts which fall within the Standstill Agreement, to the Konversionskasse, for the purpose of unification of their use in trade promotion.

Respectfully yours,

William E. Dodd