Memorandum by the Assistant Secretary of State (Bundy)

Mr. William E. Dunn called today and I told him that I trusted the Dominican Government would send no notification of a change in the Emergency Law without a good deal more time for consideration; that if they did, this Government would necessarily have to take a [Page 616] position which would be most unsatisfactory to the Dominican Government. I told Mr. Dunn that the situation was very different from that confronting the United States in October, 1931; that, as I analyzed the picture, it is no longer a question of emergency to keep the wheels of the Government running but is more analogous to the case of receivership where the receiver wants to borrow from receivership certificates. Diverting further amortization would in substance be loaning the bondholders’ money to the Dominican Government. Before any such procedure could be contemplated in Washington there would have to be a showing similar to that presented in a receivership that loans are absolutely vital to the preserving of the receivership property and the maintenance of it in such shape that it can continue to operate and pay the interest on the debt.

I suggested to Mr. Dunn that the preliminary of any such showing would, in my judgment, have to be an independent investigation by experts known to the Department to be both able, responsible and disinterested. I further felt that this Government should have in front of it a statement from bondholders or their representatives approving such report. Therefore, it seemed to me that the first step is to go ahead to try to get these preliminary measures taken, namely, some bondholders representation and an independent investigation. Mr. Dunn stated that this was in line with what he had been thinking and that his idea of a note from the Dominican Government was merely an outline including the preliminary steps which I had mentioned and that the preliminary note would not call for any decision by this Government.

Mr. Dunn stated that he would go to New York to discuss the matter with Counsel there and try to see whether it was possible to draft preliminary correspondence along these lines, also making progress with respect to the bondholders end. Thereafter he would come back to Washington and report what he had been able to accomplish.

H[arvey] H. B[undy]

November 23, 1932.

This morning I called Mr. Dunn in New York on the telephone and read him the preceding memorandum. I further stated that since seeing him I had had a chance to look over the draft note and that this draft did not seem to me to meet the situation. Mr. Dunn stated that he would work upon the matter further and come back to Washington at the beginning of next week.

H[arvey] H. B[undy]