462.00R294/854: Telegram

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

49. There was due and payable on September 30, 1933, under the German-American Debt Agreement of June 23, 1930, the sum of 4,027,611.95 Reichsmarks, of which 1,529,049.45 Reichsmarks represented semi-annual instalment under the Hoover Moratorium Agreement of May 26, 1932,458,562.50 Reichsmarks represented semi-annual interest on postponed payments on account of army costs and 2,040,000 Reichsmarks represented semi-annual interest on postponed payments on account of mixed claims. The Debt Agreement provides that the bonds issued thereunder [Page 479]

“shall be payable, both principal and interest, if any, at the Federal Reserve Bank of New York for credit in the general account of the Treasurer of the United States in funds immediately available on the date when payment is due …82 in an amount in dollars equivalent to the amount due in Reichsmarks, at the average of the middle rates prevailing on the Berlin Bourse during the half-monthly period preceding the date of payment.”

Germany did not make the payment due September 30 in dollars in New York as contemplated by the Debt Agreement, but instead deposited the 4,027,601.95 Reichsmarks in the Conversion Office for German foreign debts in Berlin for the Federal Reserve Bank of New York to the credit of the general account of the Treasurer of the United States. Upon receipt of advice of this, the German Government was notified that the Treasury had taken due note of that Government’s action in this respect, but called attention to the above provisions of the Debt Agreement with respect to the manner in which the payment was required to be made and also notified Germany that the deposit of Reichsmarks in Berlin could not in any way alter the provisions of the Debt Agreement with the United States or prejudice the rights of this Government.

The amounts due on March 31, 1934, for interest only, were paid by Germany in dollars at the Federal Reserve Bank of New York in accordance with the Debt Agreement.

The J. Henry Schroder Banking Corporation has presented to the Treasury Department on its own initiative the question of the possible transfer into dollars of the Reichsmarks deposited last September with the Conversion Office. The Treasury is desirous of having this transfer made and the dollars paid over to it at the rate applicable under the terms of the Debt Agreement of June 23, 1930, provided that this can be accomplished without prejudice to the rights of the United States with respect to any and all payments now in arrears, or which are called for in the future under the said agreement. If Germany had made the payment last September in New York in dollars, as contemplated by the Debt Agreement, it appears that the transfer would have been made at an average rate approximating 36 cents to the Reichsmark. The rate at which the transfer could be made at the present time will, no doubt, be less than this rate. This will make it necessary for the Treasury to claim from Germany the difference between the rate at which transfer would have been effected last September and the rate at which it may now be effected. Payment of this difference will place the German Government in a current position with respect to interest payments. You are authorized to discuss [Page 480]the whole situation with the Berlin Office of the Schroder Banking Corporation with a view to their working out a concrete plan. After Schroder and you have worked out a plan which in their and your opinion offers us required protection and would seem to be acceptable to the German Government, please cable us essence such plan before initiating any direct negotiations with German Government.

Hull
  1. Omission indicated in the original telegram.