The Department of State to the German Embassy


The Government of the United States wishes to bring before the German Government the following considerations bearing upon its treatment of American holders of German bonds:

[Page 339]

1. The Government of the United States is of the opinion that it is incumbent on the German Government to do its utmost to see that the obligations which various German borrowers undertook when contracting loans in the United States are met, and is of the opinion that the substantial lightening of Germany’s external obligations that has taken place since the moratorium initiated by the Government of the United States39 gives ground for the expectation that ultimately they will be fully met.

2. That during any emergency period such as the present when the German Government may consider itself compelled to enforce through exchange control a reduced service on these debts the Government of the United States is strongly of the opinion that the treatment accorded American creditors should be on a most favored nation basis and be equivalent to as good treatment as may be accorded any other creditors of the German Government or of German interests.

3. In accordance with the preceding, it wishes to protest against the action of the German Government in offering fuller service to the holders of German bonds in other countries than was offered to the American holders.

The contention which may be put forward that the state of the balance of direct commodity trade between Germany and individual other countries, as compared with the direct balance of commodity trade between Germany and the United States, justifies discriminatory treatment seems to this Government to ignore the following important facts:

That there are other elements entering into the total economic relationship between Germany and various other individual countries, commonly known as the invisible items in international trade, such as tourist expenditures, payments for shipping services, emigrant remittances and the like.
The purchases of the United States in areas of the world outside of Germany, for example, in the Dutch East Indies, create purchasing power in these outside areas which indirectly contributes to the purchases of German goods by other countries.

4. It may furthermore be pointed out that the decline in the gold value of the dollar, as compared with the mark and the currency of various other countries during recent months, has resulted in a great reduction in the burden of both the principle and the current service of the German securities held in the United States, measured in terms of marks.

5. Furthermore, it may be observed that the introduction of a practice of discrimination by the creditors on the basis of direct bilateral trade balance is one calculated to create a new area of international controversy. If some creditors press their advantages in [Page 340] particular situations to the detriment of other creditors and if debtors yield to such pressure, creditors on the one hand will do mutual injury to each other and debtors will create unfriendliness towards themselves in those countries suffering from discrimination.

The American Government has abstained in various debt situations from conduct which might give rise to these results—which in general will only diminish further the prospects of a restoration of world credit conditions and a better balanced trade situation between all nations.

6. In view of the readiness with which American financial assistance was extended to Germany during its post war period of recovery, this Government feels that American bond holders will not be able to understand the practice of discrimination against them and will have a strong sense of having been injuriously treated.

The American Government at this time expressly refrains from even a mention of the possibility of retaliatory measures, except to point out informally that if the German Government pursues a policy of discrimination in favor of the creditors of other nations as compared with American creditors, there will without doubt arise in the United States a serious demand for practical action to which the American Government could not lend a deaf ear.