837.51/1572: Telegram
The Ambassador in Cuba (Welles) to the Acting Secretary of State
[Received 2:05 p.m.]
76. My telegram No. 62, May 25, 5 p.m. and the Department’s telegram No. 38, June 3, 2 p.m. [noon.] The Manager of the Chase Bank advises me that the Government and the bankers have apparently reached a deadlock. The present proposal of the bankers provides that the Government should make commitments to reduce the $20,000,000 bankers’ credit in the same proportion as is provided for with regard to the sinking fund of the $40,000,000, 1945 gold bonds outstanding which amounts to 5 percent each 6 months or 10 percent yearly. If satisfactory arrangements are concluded for the payments due this month it will leave the coming 2 fiscal years free (except for interest charges) before amortization charges commence and there consequently should be a considerable amount applicable to the bankers’ credit during this period even if collections of public works revenues should not increase in amount. The annual reduction of the credit on the same basis as the bonds would imply, therefore, an annual payment of approximately $1,600,000. Whatever portion of this could not be met from the public works revenues the bankers desire should be included in the general budget.
The Cuban Government has rejected this proposal but has intimated that if the bankers would reduce their request to a minimum payment of the one-half the percentage applied to the sinking fund for the bonds, or 5 percent, this proposal would be acceptable. The Secretary of the Treasury is confident that no part of this annual minimum payment of about $800,000 would have to be met from general funds although, of course, the Government would be committed to complete the amount required from the general funds in the event that income from public works revenues were insufficient.
The Manager of the Chase Bank informs me that his principals agree to the compromise proposal but that their associates are unwilling to accept it. It would seem to me that the compromise agreement should be acceptable to all concerned.
[Page 575]In view of the public declaration made by the President yesterday as to the policy he has committed himself to pursue13 I am very glad to withdraw my request that the bankers refrain temporarily from making any definite commitments in the nature of concessions or accommodations to the Government.