462.00R294/840: Telegram

The Secretary of State to the Ambassador in Germany (Dodd)

35. Please call at the Foreign Office and after appropriate discussion leave an Aide-Mémoire64 on the following lines:

“March 13 the German Ambassador calling on the Secretary of State referred to payments due by Germany March 31, 1934, under the Debt Agreement of June 23, 1930,65 and the Hoover postponement agreement of May 26, 1932.66 He stated that his Government was unable to make this payment amounting to some 127,000,000 Reichsmarks when due and he desired to find ways of arriving at some adjustment which would have the effect of postponing payment. He added that the entire debt due from his Government to ours would have to be readjusted but that this matter need not be taken up until a little later.

“It appears that in this as in other debts payable by foreign governments to the United States under agreements authorized by act of Congress, there is no power in the executive branch of the American Government to agree to the postponement of payments due thereunder except as stated in the agreement.

“The payments due March 31, 1934, differ in part from strictly intergovernmental debts in that some 125,000,000 Reichsmarks out of 127,000,000 Reichsmarks thereof are payable by Germany in respect of awards of an international tribunal in favor of American claimants against Germany. The disposition of these payments is regulated by an act of Congress establishing a deposit fund and a scheme of priorities which would permit payments to some German interests while American private claimants remain unsatisfied. The Congress has [Page 470]appropriated and paid considerable amounts into this deposit fund and it now contains substantial balances. In the circumstances it is probable that the Congress would take immediate cognizance of this situation.

“Consideration of the attitude to be taken toward the German Ambassador’s request for postponement of the maturities of March 31 is rendered more difficult by the effect on public opinion of reports from Germany of agitation against the foreign debts of Germany and Germans such as the recent remarks of the President of the Reichsbank of which extensive excerpts were telegraphed verbatim to the American press. Doctor Schacht is quoted as saying:

‘In the well-known Layton report67 on the 1931 Basle conference,68 you can read for yourselves that 10,300,000,000 marks for these commercial loans never found their way into German business but were used directly for effecting reparation payments. Yet these 10,300,000,000 marks of debts still live on in a commercial shape.

‘When you add the interest we have paid on that amount since 1924, when you take into consideration further that our debts abroad now total only 15,000,000,000 marks, you can see that Germany’s total present foreign debt corresponds exactly with its political origin, whereas all indebtedness which has been used not for reparations but for German industry has been paid back in full.’

This in connection with other expressions from Germany is immediately and inevitably interpreted by public opinion in the United States to imply that all that Germany owes privately was really for political account and should therefore be written down if not entirely wiped out.

“Without desiring to enter into discussion of the German debt situation on the basis of remarks of the kind quoted, it is felt that the German Government should not be left in ignorance of the unfortunate impression created on American public opinion. In considering what position it can take toward the maturities of March 31, 1934, my Government desires to call attention to the difficulty of the creditor taking any action to mitigate the unilateral nature of failure to pay money owed by the German Government when high-ranking German authorities are describing the debts of all German borrowers, whether national, municipal or corporate who have borrowed abroad since the war as ‘political’ debts with some implication that they should not be met.

“In the circumstances my Government requests some explicit reassuring statement of the German Government affirming its recognition of the obligation that debts be paid up to the full capacity of payment of the debtor and as to the intention of the German Government to do everything in its power to see that this obligation is faithfully carried out.”

Hull
  1. Presented to the German Government on March 26, 1934.
  2. Annual Report of the Secretary of the Treasury … 1930, p. 341.
  3. Ibid., 1932, p. 292. For pertinent correspondence, see Foreign Relations, 1932, vol. i, pp. 614 ff.
  4. Great Britain, Cmd. 3995, Germany No. 1 (1932): Report of the Special Advisory Committee Convened Under the Agreement With Germany Concluded at The Hague on January 20, 1930 (Basle, December 23, 1931).
  5. See Foreign Relations, 1931, vol. i, pp. 332 ff.