462.00R294/861: Telegram

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

122. Embassy’s No. 82, May 5, 10 a.m.83 Bogdan of Schroeder Company has just received a communication from Reichsbank stating definitely, after dtie consideration that it cannot accept Schroeder proposal which contemplated transfer at contractual rate. Reichsbank referred to desperate foreign exchange position and claimed that such transfer would invite charges of discrimination against other countries with which present negotiations are going on to avoid coercive clearing. Reichsbank is understood to have emphasized anxiety to have Germany removed from list of defaulting nations and asked for Schroeder’s further suggestions possibly through an additional export transaction. Bogdan says discount of 5.31 percent resulting from comparison of contractual rate with current rate is insufficient for such a transaction.

He thinks, however, if Treasury is prepared to deviate from previous policy of insistence on contractual rate and could accept old par of 4.20 or 23.80 cents per mark the resulting discount would enable the creation of an additional export transaction which he has in mind and believes can be speedily consummated and that Reichsbank would cooperate in granting necessary permits. Before broaching this plan specifically he wishes to know reaction of Treasury to principle of accepting transfer at lower than contractual rate, it being understood that such exception could conceivably be made without in any way prejudicing the rights of the American Government as to future payments by Germany. He asks early reply.

  1. Not printed.