Memorandum by Mr. Winthrop R. Scott of the Division of Latin American Affairs

Conversation: Mr. W. E. Dunn, Financial Adviser to the Dominican Government.
Mr. Bundy.
Mr. Scott.

Mr. Dunn stated that he wished to report concerning the matters he had discussed in New York. First, with regard to the Fiscal Agency contract; he said that practically any of the big financial institutions with the exception of the National City Bank were willing to take over the agency on the same basis on which it was now operating which involved the payment of two per cent by the Fiscal Agent to the Dominican Government on funds on deposit with the Agent; the members of the Lee, Higginson Corporation, with the exception of Mr. Blair in Chicago, were not anxious, according to Mr. Dunn, to take on the new Fiscal Agency. He expressed his opinion that Lee, Higginson would be content simply to act as paying agent in their Boston and Chicago offices for the coupons presented in those cities. He added that he thought the Guaranty Trust Company might perhaps be the most suitable institution to take over the agency as that organization had previous experience in Dominican financial matters although President Trujillo was not particularly friendly to that company because of a misunderstanding. The President thought that the Guaranty Trust owed the Dominican Government about $45,000; as a matter of fact Dunn had now found out that this money did not belong to the Dominican Government but was being held by the Guaranty Trust Company against payment of bonds of the 1908 issue which had not been presented for payment; within the last few days, however, [Page 610] $39,000 of these bonds had been presented so that there remained only a few thousand dollars in this fund.

Mr. Dunn next referred to the plan for working out (if possible through an agreement with the bondholders or an organization representing them) a new arrangement by which additional funds would be made available to the Dominican Government for urgently needed reconstruction and rehabilitation purposes. Mr. Dunn stated that he had discussed this matter with various bankers and other financial people in New York and that they had been in general accord that such a procedure was desirable.

In reply Mr. Bundy pointed out the great difficulty from the Department’s point of view of any change which might divert further funds from the bondholders. He pointed out that this Government had gone very far in its acquiescence in the breaking of the convention; that this action had in fact released the very substantial amount of $1,500,000 per annum to the Dominicans. Mr. Bundy pointed out further, and stressed the point, that the first problem was for the Dominicans to show 100% performance during the first year the Emergency Plan was in operation; this would be essential from the Department’s point of view and in his opinion from that of the Bankers and bondholders as well. The question was left with the understanding that Mr. Dunn would prepare an objective and comprehensive statement showing the details of what he had in mind and the Department upon receipt of this statement would give consideration to the matter.

Mr. Dunn next spoke of the question of silver coinage, stating that he had discussed this with Professor Kemmerer22 who thought the plan was sound with the understanding that appropriate legislation would be passed providing the necessary reserve for the new coins et cetera and providing that there were reasonable assurance that such legislation would not be subsequently revoked by the Dominican Congress. Mr. Dunn explained that the coinage of silver pesos of convenient size was necessary to replace the old cart wheel pesos. He estimated that the operation would provide a profit of about $100,000.

Mr. Bundy stated that without studying the proposition in great detail he was not prepared to make any statement about it. Of course, the Department would not wish to interfere with a legitimate coinage operation; on the other hand it would be interested were the Dominican Government to attempt some inflationary scheme.

The interview closed, Mr. Dunn stating that he was returning to Santo Domingo on October 6.

W[inthrop] R. S[cott]
  1. Edwin W. Kemmerer, economist, Princeton University.