The Chargé in Poland (Nielsen) to the Secretary of State

No. 1171

Sir: I have the honor to report that there are only one or two details to be added to my telegram No. 50, June 10, 1936,30 reporting that Professor Adam Krżyzanowski of Kraków University, and Mr. Józef Rucinski, Counselor of the Ministry of Finance, are to depart for the United States on June 14 for the purpose of explaining to “the interested parties” the general situation with regard to difficulties which Poland anticipates in connection with making future payments, on its obligations held in the United States, and the specific situation with regard to each Polish issue held there.31

In a series of despatches, the most recent one of which is No. 1097, April 17, 1936,30 Mr. Cudahy32 reported the fears of the Embassy that Poland might not be able indefinitely to meet its obligations in the United States, and the conversations which he had held with Colonel Adam Koc, formerly Under Secretary of State in the Ministry of [Page 415] Finance, and others with regard to the matter. The Ambassador reported that one of two possibilities presented itself; either the Polish Government might persuade bondholders in the United States to accept lower rates of interest on their Polish obligations and extension of the period over which the several issues are to be amortized, or it might find itself compelled to suspend payments. In the latter event the Ambassador urged that the Polish Government make an honest, dignified, explanation to American investors a considerable time in advance of the suspension. This suggestion met with Colonel Koc’s approval and he undertook to present frankly to the Embassy, for the information of the American Government, the facts of the matter in the event that it should become necessary to suspend payments. It will be recalled that Colonel Koc resigned from the Ministry of Finance some months ago to become the President of the Bank of Poland, and that he subsequently resigned from the latter post. At present he is Commander of the Union of Polish Legionnaires.

In the course of my conversation on June 10 with Count Józef Potocki, Director of the Western Department of the Foreign Office, who had asked me to call on him, he remarked that members of the Government had discussed so frankly with the Ambassador the matter of Polish obligations in the United States that he wished the Embassy to be informed concerning the mission of Professor Krzyżanowski. He added that the Polish Embassy in Washington had been informed by cablegram that he had intended to have with me the conversation that we were having at the moment.

Count Potocki’s reference to what clearly are the Ambassador’s conversations with Colonel Koc, although the Director did not mention Colonel Koc by name, and an ambiguous reference to Poland’s foreign exchange restrictions, cause me to suspect that Professor Krzyżanowski is to prepare the ground for a default by Poland next autumn or winter on all or some of the obligations rather than to attempt a refunding operation. I offer this surmise with some reservation, for Count Potocki was not disposed to make as frank a statement of the facts in the matter as Colonel Koc had led the Ambassador to believe would be made. He sought to avoid questioning by stating that he had not discussed in any detail with Professor Krzyżanowski his mission to the United States and that he therefore could not speak with full authority concerning it. Yet it is quite clear that since Colonel Koc no longer is a member of the Government the Director was designated to give the Embassy the advance intimation of approaching difficulties in making payments on Poland’s obligations in the United States that was promised to the Ambassador. His passing reference to the control of foreign exchange transactions which [Page 416] Poland has been compelled to institute34 may have been intended as a move to tie suspension of further payments to that control. Yet the possibility can not be excluded that Professor Krzyżanowski has been given instructions by the Vice Premier35 to go no further initially than to seek a conversion of some or all of the outstanding issues, with the hope that he may be able to arrange for such favorable terms that a default by Poland will at least be postponed.

Count Potocki intimated that in dealing with its obligations in the United States his Government has it in mind to separate them into two categories; those issues which are the direct obligations of the State, and all other issues. He said that he thought that Professor Krzyżanowski would begin work in New York “where most of the obligations are concentrated” and that, of course, he would have the collaboration of Mr. Janusz Żóltowski, Financial Counselor of the Polish Embassy at Washington. He added, as was reported in the telegram under reference, that it would be left to Professor Krzyżanowski and Mr. Rucinski to decide whether it would be advisable for them to proceed to Washington for the purpose of consulting with officials of the American Government. I gathered the impression that Professor Krzyżanowski will consult with the Polish Ambassador36 before taking a decision in this matter. Upon my departure, after thanking Count Potocki for the information he had given me, I told him that I thought it quite probable that Professor Krzyżanowski would find it worth his while to have conferences with officials of the State and Treasury Departments.

The Polish press this afternoon carries a brief announcement to the effect that Professor Krzyżanowski and Mr. Rucinski are leaving for the United States for the purpose of explaining to Americans the economic situation in Poland and the significance of Polish foreign exchange restrictions.

Respectfully yours,

Orsen N. Nielsen
  1. Not printed.
  2. For detailed descriptions of the various issues of Polish bonds referred to here and hereafter, see Foreign Bondholders Protective Council, Inc., Annual Report, 1936 (New York, 1937), pp. 675 ff.
  3. Not printed.
  4. John Cudahy, Ambassador in Poland.
  5. See telegram No. 33, April 27, 3 p.m., from the Ambassador in Poland, p. 402.
  6. Eugenjnsz Kwiatkowski, also Polish Minister of Finance.
  7. Count Jerzy Potocki.