Foreign Relations 5
No. 825, Vol. III
Papers Relating to the
(In Three Volumes)
Government Printing Office Washington: 1945
102 FOREIGN RELATIONS, 1930, VOLUME III
this loan is payable to the Reich in two tranches, one of a face amount of $50,000,000 on August 30, 1930, and a second of a face amount of $75,000,000 on May 29, 1931. The syndicate will place the proceeds of the first tranche, in April 1930, and of the second tranche middle of June 1930, at the disposal of the Reich. The members of the international syndicate will be announced later. As will be recalled, the proceeds of the match loan were to serve for the reduction of the current debt of the Reich. Through a discounting of the proceeds of this loan the Reichsfinanz will immediately effect this reduction of the current indebtedness. Aside from the foregoing, the debt reduction will be carried out as provided the law of December 24, 1929, which is to be effected. In the course of the fiscal year 1930-31 through new taxes and economies in the amount of $450,000,000 Reichsmarks."
Mr. Thomas W. Lamont of J.P. Morgan & Co. to the
Under Secretary of State (Cotton)
. . . . . . .
GERMAN ANNUITY BONDS
As I told you over the telephone: the first and probably the only issue which will be offered simultaneously in the markets of the world is scheduled to be sufficient in amount to an effective $300,000,000. Depending, therefore, upon the interest and the discount, if any, the par value of the issue $300,000,000 as a minium and perhaps a very few million above that as a maximum. Of the $300,000,000, $200,000,000 is for the of the creditors and, of course, to go to Germany’s general credit with them, and $100,000,000 is to go to the German Government for immediate requirements in connection with the German Railways and the German Post Office requirements. This latter strikes us as excellent, because engaging the further co-operation of Germany.
The total issue will be divided up into various tranches, each issue to be made in the currency of the country where the tranche is issued. It is expected that be French, British, Belgian, Italian, American, Swedish, Dutch, Swiss, German and possible Japanese tranches. Over there they have had an idea that the American market might do the largest share. Our own idea has been that the American market ought not to take an in excess of that which the French market takes and not to exceed an amount sufficient to yield $100,000,000. Our mind is not closed
on the matter, because we have not heard all the facts of the situation, which will be communicated to me when I reach Paris. But this is the way we feel at present. The other markets, with the exception of the which will take a substantial amount, will be rather limited in amounts which they are able to take. But it is important to have Germany herself somewhere in the picture as a subscriber to the bonds.
There are several reasons why we think it is important that the investment market should share substantially in this operation.
One is that this is the final liquidation of the War so far as the settlement of great economic questions is concerned, and obviously it is greatly to the interest of American trade to have this great question settled.
Second, it was a cardinal principle of the American delegates at the Conference to urge that Germany be taken effectively out of receivership; that the heavy mortgage liens upon her railways and industries be abolished, and that she be put upon her honor to carry out her obligations. We feel that in this way the good will of her people could be best engaged. The present plan carries out that principle which is, if I may call it so, an American one and was well recognized and appreciated at the time by the German delegates.
If we should fail to offer a substantial portion of the bonds here, the American investment market would, in any event, because of the keen demand for bonds, buy a large quantity of these bonds. Obviously it would be much better to have them buy dollar bonds to have them buy foreign currency bonds, because by such an arrangement we should gain all the disadvantages and none of the advantages of a direct issue.
If you find by April 4th or 5th that there is going to be serious difficulty at Washington, then that fact should be privately communicated to me through our firm here. My partners will keep you posted as the situation develops on the other side. I shouldn’t think that active negotiation itself and the figuring out of prices and terms would be undertaken much before the middle or third week in April.
|Sincerely yours,||T. W. LAMONT|
W. Randolph Burgess, Assistant Federal Reserve Agent of the
Reserve Bank of New York, to the Acting Secretary of State
Dear Mr. SECRETARY: Confirming my telephone conversation I am enclosing a copy of a cable we have just received from Governor Harrison dated March 29, together with a copy of our cable to him dated March 38
104 FOREIGN RELATIONS, 1930, VOLUME III
In view of your suggestion that the date of Governor Harrison’s return, which we expect to be about April 6, may be too late for his further views on this question to be of value, we are to-day cabling him suggesting that he send any further amplification he wishes by cable.
|Very truly yours,||W. RANDOLPH BURGESS|
The Federal Reserve Bank of New York to the Governor of the Bank
No. 15. J.P. Cotton would like your opinion concerning amount of American participation which would be desirable in any early reparation bond issue either as to absolute amount or proportion of total. He is desirous of getting your views before your return. For your guidance our opinion follows:
“There are evidently two questions involved first, the amount of such bonds our market will take, and second, the question of public and political reaction. As to the first we believe our market, could now absorb not more than $100,000,000 if the issue is made attractive.
The second point has been accentuated by recent speeches of Louis T. McFadden (22) and there is undoubtedly considerable suspicion and opposition by reason of which it would appear desirable that our participation should be not over one-third of the total and should be well within the absorptive power of our market. On the other hand it would seem that for us to take too small a participation would cause unfavorable European reaction.”
The Governor of the Federal Reserve Bank of New York (Harrison)
to the Bank
No. 14. For Crane. Your No. 15. My views definitely expressed to Emile Moreau,(23) Gates W. McGarrah, (24) S. Parker Gilbert, N. Dean Jay (25) and others in light of all aspects of situation are briefly that American participation should not exceed 1/3 of total, should not exceed $100,000,000 in any event and if possible should be no greater than French participation. In general Gates W. McGarrah and N. Dean Jay agree with this formula as does even Emile Moreau in principle though latter feels it not possible for French to take more than $80,000,000. Anxious to amplify these views on my return.
(22) Representative Louis T. McFadden, of Pennsylvania, Chairman of the Banking and Currency Committee.
(23) French banker and statesman, later Governor of the Bank of France
(24) President of the Bank for International Settlements.
(25) Partner of Morgan & Cl*, Paris.
Memorandum by the Under Secretary of State (Cotton)
April 4, 1930.
Mr. Ogden Mills of Treasury, Governor Young of the Federal Board, Mr. Roland Boyden (26) and myself. Discussed Mr. Lamont’s letter to me of March 27th and Mr. W. Randolph Burgess' letter to me of March 31st, with their enclosures.
It seemed to be the unanimous opinion of those present, subject with Mr. Robinson,(27) that they were willing to recommend that some participation in the proposed German loan be permitted but that consent to such participation should not be condition on any political agreement of any kind or any agreement for change in the Young Plan and that roughly, participation of not more one-third seemed desirable.
The point at which there was any doubt was as to the function of the Federal Reserve Board in acting on the final form of application when it was made by the Reserve Bank. It was suggested that the function of the Reserve Board in that particular was to be confined to the purely banking aspects of the situation and that suggestion seemed to find favor. The parties interested will be informed of and final action.
J. P. Morgan & Co. to the Under Secretary of State (Cotton)
New York, May 21, 1930.
Dear Mr. SECRETARY: Confirming Mr. Lamont’s statement to you on the telephone, the German government proposes to issue, to the Young Plan and the Hague Agreements,(27a) an amount of 35 year 5 1/2% bonds sufficient to produce approximately $300,000,000 in effective proceeds; two-thirds of the loan represents the capitalization annuities payable to the creditor powers and one-third money borrowed by the German government for the German Railways and Posts. The loan is to be international and it is proposed to offer it in the United States, France, Great Britain, Switzerland, Holland, Belgium, Italy, Sweden, and Germany in separate tranches in the currencies of those countries respectively. The amounts of the
(26) Formally unofficial representative of the United States with the Reparation Commission
(27) Presumably Henry M. Robinson of Los Angeles, California, unofficial adviser to President Hoover
(27a) Great Britain, Cmd. 3484, Miscellaneous No. 4 (1930): Agreements Concluded at the Hague Conference, January 1930.
106FOREIGN RELATIONS, 1930, VOLUME III
several tranches have not yet been definitely determined, but it is not expected that the amount offered here will exceed $100,000,000 par amount of bonds or $85,000,000 effective proceeds; and it is expected that a substantially equivalent amount will be issued in France.
|I am [etc.]||[Signature illegible]|
The Secretary of State to J.P. Morgan & Co.
Sirs: The receipt is acknowledged of your letter of May 21, regarding the contemplated issue of bonds of the German Government.
The Department does not desire to interpose objection to the proposed financing.
|Very truly yours,||H.L. Stimpson|
AGREEMENT PROVIDING FOR THE DISCHARGE OF GERMANY'S WAR INDEBTEDNESS TO THE UNITED STATES, SIGNED JUNE 28, 1930 (28)
The Secretary of State to the Secretary of the Treasury (Mellon)
Sir: I have the honor to refer to the recent oral request of Mr. Redpath of your Department for an expression of this Department’s view as to whether the proposed agreement between the United States and Germany for the settlement of the indebtedness of the German Reich to the United States on account of the awards of the Mixed Claims Commission, United States and Germany, and the costs of the United States army of occupation, and the notes to be exchanged between the two Governments at the time of the execution agreement, if signed by the German Ambassador under the power of attorney given to him by his Government, will constitute valid and binding international obligations of the German Government. The agreement provides in paragraphs numbered 9 and 10 as follows:
9. Compliance With Legal Requirements. —– Germany and the United States, each for itself, represents and agrees that the execution and delivery of this Agreement have in all respects been duly authorized and that all acts, conditions, and legal formalities which should have been completed prior to the making of this Agreement have been completed as required by the laws of Germany and of the United States respectively and in conformity therewith.
(28) For previous correspondence concerning this agreement, see Foreign Relations, 1929, vol. II, pp. 1083 ff.
The above shows how the private power brokers, J.P. Morgan & Co., who stand to gain more, money wise, are involved in these convention talks. The average American cannot do what J.P. Morgan and others can as they control many aspects of the banks and Congress. You can see that the speeches of McFadden had an impact when they said the suspicions of the American people would be raised if the previous agreed amounts were to be loaned.
You can also see that the Young Plan is of critical importance. All throughout these Foreign Relations Books The Young Plan is mentioned as well as the Hague Agreements. However, these three books do not go into detail what these Plans are. I am sure you can read what is happening here with the United States being the sugar daddy to the world. This is only one country that is being loaned money. The Constitution does not provide that the United States take care of the world. But the big businesses, having holdings in many of the countries, were instrumental in seeing these loans were given in order to increase their profits. You, however, were left holding the debt as was stated in 1933, when Congressman McFadden stated that the entire property of all Americans was used to back these loans. Simply stated, the Internal Revenue Service is the collecting agents for the Federal Reserve, who controls all banking, and must sop up the debt obligations to pay the bankers who loaned all this money. Further on I will show how the IRS is more private than you think.