The Minister in the Dominican Republic ( Schoenfeld ) to the Secretary of State

No. 594

Sir: I have the honor to acknowledge receipt of the Department’s instruction No. 97 of August 30, 1932, (File No. 839.51/3785 [3786]), regarding the suggestion made by the Financial Adviser to the Dominican Government that an eventual arrangement for the transfer of the Fiscal Agency for Dominican loans from Lee, Higginson and Company to another banking firm should have in view the possibility of effecting an exchange of bonds carrying a lower rate of amortization than the Dominican bonds now outstanding.

I brought the substance of the Department’s instruction to the attention of Mr. Dunn prior to his departure for the United States today. Mr. Dunn informed me that he feared he had not made his position on this matter clear. He explained that what he had in mind was a general understanding with the new Fiscal Agents that they would not oppose an exchange plan of this kind in principle, as Messrs. Lee, Higginson and Company had done when it was suggested last year. Mr. Dunn pointed out that, having been in the securities business himself, he realized that a banking firm was primarily interested in the profit to be made from a refunding operation which would be naturally much greater than would be the fee for its part in effecting an exchange operation. He added that what he meant to convey in his letter and memorandum enclosed with my despatches Nos. 545 and 553 was that if a bond exchange plan could be worked out on terms satisfactory to the Department of State, the Dominican Government and the bondholders, it was desirable that the banking firm which was acting as Fiscal Agent should not actively oppose the execution of such a plan but rather cooperate in putting it through. It was an understanding of this kind which he hoped could be reached with the new Fiscal Agents for Dominican loans when the resignation of Lee, Higginson and Company takes effect.

Respectfully yours,

H. F. Arthur Schoenfeld