The Secretary of State to the Minister in the Dominican Republic ( Schoenfeld )
Sir: The Department has received and given careful consideration to your despatch No. 545, of August 10, and your despatch No. 553 of August 17, 1932,20 commenting upon and enclosing copies of correspondence exchanged between Mr. Dunn, the Financial Adviser to the Dominican Government, and Messrs. Lee, Higginson and Company, concerning the possibility of continuing the Fiscal Agency in the hands of the affiliate of this Company, namely, the Lee, Higginson [Page 607] Corporation. The Department has noted that Mr. Dunn appears to feel that it will be necessary to take steps to change the present form of the Dominican external debt and suggests that the transfer of the Fiscal Agency be made the occasion to modify the loan contracts so that the Fiscal Agent will retire unless he can reach an agreement with the Dominican Government regarding whatever operation is undertaken for refunding the debt or effecting an exchange of bonds.
The Department is inclined to feel that the arrangement contemplated above is one which can not properly be entered into by the Fiscal Agent. Should such a scheme be followed out, the Dominican Government would apparently impose its will concerning a rearrangement of its debt on the successor to the Fiscal Agent. In other words, that Government would presumably see to it in advance of designating such a successor that the latter would be willing to carry out a refunding or exchange arrangement agreeable to the Dominican Government. Of course, such arrangements to this end as the Government might desire might fail to be to the advantage of the bondholders in whose interest the Fiscal Agent is presumed to act. In brief, it is believed that the interests of the bondholders might not be served by this suggested modification of the loan contracts and in view of the treaty agreement which this Government has entered into with the Dominican Government on the strength of which the bonds in question were sold in the United States, the Department would not desire to see any modification made in the loan contracts which might be of disservice to the bondholders. It would appear doubtful also if a Fiscal Agent would desire to engage in advance to bind himself to approve an exchange plan, the terms of the new bonds not being stated. This would appear to be true even if the Fiscal Agent would not be expected to approve such a plan unless it had already received the Department’s approval, since it is entirely conceivable that the Fiscal Agent might see objections to such a plan which had not occurred to the Department.
The Department has no comments to offer concerning the other questions which the Financial Adviser has raised, namely, the possibility of modifying the provisions in the loan contracts for publication of any resignation of the Fiscal Agent, or the question of requesting the Fiscal Agent to segregate the Dominican account from other funds in his possession.
There is enclosed for your further information a copy of a memorandum on this subject prepared in the office of the Legal Adviser.21
Very truly yours,