The President of the German Reichsbank ( Schacht ) to the American Chargé in Germany ( White )69

Sir: In definite reply to your kind letter of March 19,70 I have the honor to make the following comments on your questionnaire.

  • Nos. 1 and 2. All the categories of loans mentioned are regarded by us as private loans on which Germany is obligated to pay interest and to amortize in accordance with the contract period. According to their origin the Dawes and the Young Loans71 are indeed of a political nature. Germany, however, has always regarded all loans, the bonds of which are in the hands of the private public, as private loans.
  • No. 3. My remark concerning the alleged political character of the private foreign debt has evidently been misunderstood. In my speech before the American Chamber of Commerce in Berlin, I wished to make clear the following: According to the Layton Report 10,300 million marks foreign exchange proceeds from private foreign loans were employed for the transfer of reparations. On this amount we have furthermore transferred interest since 1924. Thus the Layton amount plus interest is exactly as great as that sum which we today still owe as private foreign obligations. This does not in any manner alter the private character of these debts and the obligation to pay them. It is, however, proven that the present transfer difficulties of Germany arise solely and completely from the political compulsion of the reparation payments whereas we have already completely repaid that amount of foreign loans whose proceeds could have been employed for the reconstruction of Germany’s economic life.
  • No. 4. In the period between the origin of the loans and the present, the conditions in the world have indeed altered to an extraordinary extent to the disadvantage of Germany. Since then numerous countries have increased their tariffs and introduced import contingents and import prohibitions, and numerous countries have been compelled by their foreign exchange difficulties to restrict their imports from Germany. Similarly Germany, as a result of its foreign [Page 472] exchange difficulties, is no longer in a position to purchase sufficient raw materials although it is dependent upon the improvement of these raw materials and the sale of the finished goods. It is furthermore to be pointed out that the conditions for the promotion of German export envisaged in the Young Plan have in no wise been realized. In particular the International Bank in Basle has not developed into the institution it was planned to be.
  • No. 5. The contractual and moral obligations of Germany to repay her loans made in the United States are today exactly the same as at the time when the loans were made. The only difference is that the conditions which make the payment of interest and the repayment of these loans difficult were not recognized as clearly at that time as they are today, in particular one did not see clearly at that time the economic effect of the reparations settlement for Germany and the world.

From none of the aforementioned reasons do I deduce a claim on the part of Germany to repudiate her loans. The violation of Germany’s legal and moral rights lies prior to the time at which the loans were made, and it is not the holders of the loans who are responsible therefor.

I do, however, believe that the altered economic conditions and realizations support the wish that Germany should sit down together with the representatives of her creditors to discuss the changes and consult together what can be done in view of the impossibility for Germany to transfer the present debt burden.

Moreover as I have never wasted time in repining over the past, I would also like to make an attempt to draft a constructive plan for the future. In this plan I have limited myself to developing a few basic ideas and renounce all details which are in every respect pliable and subject to alteration. I had already announced this plan to Ambassador Dodd some time ago, and I now have the honor to transmit it to you as an enclosure.72 I explicitly remark that the attached plan is no official document but that both this letter and the plan are due to my personal initiative although I believe that the German Government would agree to a discussion of the ideas put forward.

I am [etc.]

Hjalmar Schacht
  1. Transmitted to the Department by the Chargé in his despatch No. 681, April 5; received April 20.
  2. Not printed.
  3. For the Dawes Plan, see Great Britain, Cmd. 2105 (1924): Reports of the Expert Committees Appointed by the Reparation Commission; see also Foreign Relations, 1924, vol. ii, pp. 135 ff.; ibid., 1925, vol. ii, pp. 133 ff.; ibid., 1927, vol. ii, pp. 722 ff. For the Young Plan, see Great Britain, Cmd. 3343 (1929): Report of the Committee of Experts on Reparations; see also Foreign Relations, 1928, vol. ii, pp. 871 ff.; ibid., 1929, vol. ii, pp. 1025 ff.
  4. Not printed.