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Institute.

ter
A

.1
tanc'
am .

e or
W-

oo^
1:ria

Rome: Worcester, Mass. Died Nov.

b. Phila.
igi.41,64N, James Addison Jr., banker; Elizabet
and
0.0. 11. 1879: s. Judge James A.
Coll. 1 Ye.
--......,leurtnand) L.; student Haverford (Pa.)
Haverford, 1925
"Val Y War Coll., 1912; LL.D.,
'
Pvt. Bat11l. Esther Tone Griswold. May 22. 1925. capt. vols.
7,7,..k. P1. Vols., Spanish -Am. War, 1894; U.S. Army
,apme Insurrection, 1399-1900; entered
1901; chief Am. MI). Mission with French
Staff, asst.
Sept. 1914 -June 1917; col. Gen.
Principal asst. to Her :-?-f of staff G.11.9.. A.E.F.
after Ar-

bert
1"- .iiec;

In relief operations In Europe

European

rep.

U.S.

Grain

Corp ,

also In

advisers to
rrze codrelinating operations of tech.
Europe;
new states of Central and Eastern Council,
fep . financial sect., Supreme Economic
same; adviser to Am.
7, or communications sect.

Administration In connection with Rime an Re- t
from Army, July)
-', June 1921 -June 1923; resigned

741
del. to Reparstint
1m. unofficial
19=1. Asst.
1923; Am. unofficial del
Commn.. Dee. 1919-July 1.
1925; Am. tmofficia
1923-May 31.
to same, Aug. I.
Ministers. 1974. Fl
rep.. London Conf. of Prime Associated with Dillon.
Flom
Ministers' Conf.. Paris, 1925.

'13.

Read & Co., bankers.

Bala. Montgomery

June 1925-. Protestant.

Co., Pa.

Deceased.

ASSISTANT SECRETARY OFTHE TPEASURY
WASHINr.;TON

May 24, 1921.
My dear Governor:

MAY 3 1 1921

Referring to our telephone conversa-

tion, I enclose for your information a
copy of the Secretary's letter of this
date to the Secretary of State with regard to the telegram of May 17, 1921,
from the Unofficial American Representa-

tive. on the Reparation Connission as to

the elan to realize in dollars on gold
and foreign currency received from Germany.

Very truly yours,

Beniamin Strong, 3sq.,
Governor, Federal Reserve Bank,
New York,



1 enclosure.

Y.




COIY

May 24, 1921.

Dear Mr. Secretary:
1 have the honor to acknowledge receipt of the

Assistant

Secretary of State's letter of May 2c, 1921, transmitting for the

information

of the Treasury a

paraphrase of a telegram dated May

17, 1921, from the Unofficial American Impresemtative on
aration Consnission

with regard to

the Rep-

the plan of the Commission to

nandle certain reparation payments received from Germttny by trans-

mitting

gold to the United States for sale for dollars and

with

ing other currency for dollars,
the United States.

resulting

1 have given careful

exc.h,ng-

dollar denDsits in

consideration to the sub-

)ect of this telegram and discussed it with the Federal Reserve
Borrd and kederll ,teserve Bank of New York.

suggestions to offer, but wishes to

transmit

The Treasury has no
for .your

information

and attention an infoanal suggestion received from the Governor
of the reder^1 '.eserve Bank of "AV

York that if the

foreip-, cur-

rencies which are to be exchanged for dollars involve any substantial sales of South Iaericsul and Central 'merican balances

'blab may be available to Germany, the operation of exchanging
14A-(1,14

these balEzees for dollars 'kw

V

further disrupting the South Ameri

can and Central ;mat-lean exchnnres with




this country.

In view

Y
-2of this suggestion, it may be that the State Derrtasent will
wish to exercise sufficient supervision over the exchange operations proposed. in the .separation Commission's pinn to safeguard

the foreign trade of this country against undue disturbance of
the exchanges.

Very trul j yours,
(Signocl)

A. W. Mellon

Secretary.

The Honorabl e

The Secretor-, of State,
Washington, D. C.




COPY
CABLE MESSAGE FROM THE DEPARTMENT OF STATE.

TO THE AMUICAN AMBASSADOR AT PARIS,
May 24, 4 p. m., 1921, No. 268.

PARAPHRASE

Communicates for Boyden a message B-240.

Reference is

made to the Embassy's cable message of April 6, B-444, and the
message of the Department of State of March 26, 1921, B-218.
Message is marked urgent and in confidence.

The Department is

advised by Speyer and Company that they are considering a proposition to lend money to Germany to be expended in the purchase of
products of the United States.

They ask that you will express

your personal opinion on the points mentioned below:

One.

Would

it be proper that the firm should apply directly to the Commission
on Reparation for the purpose of obtaining the Commission's consent
that priority should be granted to an issue of treasury notes,

which issue would have priority over the obligations of Germany
resulting from the stipulations of the peace treaty?

Two.

Would

it be proper for the firm to transmit this application through the
delegation of the United States?
France residing in Paris.

him?

Three.

The firm has an agent in

Should the application be made through

If suggestion three is thought best and the application shall

be made through him, should he and the United States delegation
cooperate in making it?

Four.

What position would the Commission

be apt to assume as regards the proposal of the firm, and what




lbo
- 2 -

procedure should properly be adopted with a view to obtaining the
assent of the Commission?

Five.

To whom should the application

be addressed, and what form should be used?
The details of the plans of the firm are not within the
Department's knowledge and the fact that the Department forwards
their request must not be taken as indicating that the United
States endorses it.

If, however, you find that you can discreetly

and with propriety obtain the information desired by the firm, you
will transmit it by cable.

Di-JT/ECD-SS




(COPY)

PARA2BBASE OF TvIYaitha.

From:

The Unofficial American Delegate on the Reparation Commission,
through the American Embassy, Paris.

Dated: Yay 31, 7 P. id.

Received June 1, 5.47 A. L.
No. 360 - B-469.

This is supplementary to my B-482.

Commission convinced that

it is necessary, if possible, to find another method of protecting
itself against exchange risk, because of effect of recent transfer

German payment to the United States, also fear of effect of similar
transfers in the future, and later retransfers to Europe. It is now
planned to deposit payments in Belgian, English, French, and perhaps
Italian banks, government where money deposited to assume exchange
risk, and profits, if any, to go to such government. BOYDEN.




dA.LLiLas

COPT
CLBLE LEFEAGE FROM AUFRICAN MISSY, MEIS
LILY 31, 7 p.m., 1921.

No. 360

PARAPHRASE

Communioatesa message from Boyden B-485 cent ss a supplement
to his message B-482.

The Commission has become convinced that,

if the change is found possible, they must find a way to avoid the
risk of loss by exchange in the matter of G,.rmany's reparation
payments.

This conviction has resulted from the change produced

by the recent payment transferred to the Untted States in Eettlemeat of Germany's reparation debt.

The Commission appreciates

that similar transfers in the future and re-transfers to European
countries may damage the latter.

The Commission has now under

consideration a plan that the German payments should be deposited
in banks of Belgium, Great Britain and France and possibly in
those of Italy.

In this event the Govornment of the country

in whose banks the payments are deposited will take the loss by
exchange itself, if there be a loss, and the gain, if there be
a gain.

Di -JT/all -SS




May 31, 1921.

Dear Vr. Gileert:

Thane you for your note of Lay 24, enclosing a copy of Secretary
Vellen's letter of lay 24, addreeEed to the Secrotery of State, on the
cubject of the tcheme for making reparation payeents.
My only euggeetion in regard to this letter ie that the oomment

should not be confined to South American and Central American coentries alone,
although there,probably,greater difficulties would reeult from large trans,-

actions than in European markets, where the exchanges ere broader and more
active.

*e will need a little elperieace in handling this matter before it

is caajbie to gaga the effect of the eoheme now propeeed.

There has been a

very sharp decline in the rates fur sterling, and a less important decline in
60i4.6 of the other exchanges, which -Jaw caused by large pun:hat:leo of dollare by

Germeny, or by those representing Germany in arranging these payments.

A

few wonthe ago, 415 millions: was paid into us, one-half for the credit of the

Eaak of Englead, and one-half for the credit of the &sae of France, but really
for account of Lae Re-pazition Commission, and we have within the last day or

two received further paymante aggregating *35 millions for credit of these two
institutions.

It iv currently reported that the German Government has deliver-

ed treasuri tills indorsed by certain German banks, aggregating the equivalent
of ;'.200 eeillieee, 430 eillione of which will be payable in sterling, e60 millions

payable in franoe, and 00 eillione payable in dollars, within a period of sixty
days (unless renewals are arranged).




To what extent these payments, predicated

lay elf 1921

12

upon previous accumulations of dollar

Tay disturb the exchanges, cannot now

be forecast, but it seems to me that the Department of State, and especially
our representatives in Paris, should have a careful eye upon the situation,
and should especially keep us promptly informed of proposals before they are
actually consummated in af,J.esments.

Yours very truly,

Benj. Strong,
Governor.

Honorable c. P. Gilbert, Jr.,
Assistant Secretary of the Treasury,
Treasury De:Art.qent,
Washington, D. C.




TREASURY DEPARTMENT

Washington

ASSISTANT SECRETARY




June 8, 1921.

4.

JUN 1 3

1921

My dear Governor:

I transmit herewith a copy of another paraphrase

6IN.5)3$

of a cablegram froVm

L.

. Boyd

,

the Unofficial American

Representative on the Reparation Commission, with regard
to possible changes in the procedure for handling German
reparation payments.
of this date.

I enclose also a copy of my reply

The Treasury will be glad to have any

comments or suggestions which the Federal Reserve Bunk
of New York may be willing to offer in the matter, in
order that the Department of State may be further advised
as to the views of the Treasury and the Federal Reserve
Bank.

Very truly yours,

vo yieituk9\
Benjamin Strong, Esq.,
Governor, Federal Reserve Bank,
New York, N. Y.
2 enclosures.

231.1vR Crilli-X77033
GOVERNOR'S SEC'Y.

JUN 1i)




ass

"r:i2 1

4
June 8, 1921.

The liassralils
The Secret&ry of State.

Biz:
By direction of the

ecretary,

aleknewlodcp receipt of

your letter of June 4, 1221, with the enclose. paraphrase of a
telegram dated Uay 31, 1921, from

hoyden (Ye. 489) statinv that

1he Reparation Commdssion is endeavouring to find a different method

st

headliag the reparation payments received from Germany in order to

protect itself against the exchange risk. There is no doubt that the
recent transfers of reparation payments to the United states And the

prospect of similar transfers in the future have had a disturbing
effect on the exchanges bet -aeon this country and Europe, gal the

Treasury is much interested in the suggestion that the Jommission
proposes to make deponits of future reparation payments in Belcian,
English, French, and nerhaps Italian banks, in order to avoid the
rick of loss by exchange. Copies of the tele Aram in question, to-

gether with a copy of another paraphrase of Ur. Boyden's telegram

No. 3-489, hews teen sent to the Moral Reserve Bank of New York
with a request for its comments and euggestione. Upon receipt of
advioes from the

1.e.dera1 Reserve Bank of -,7sw York, the Treasury

will

communicate fu-rther with the Department of Aate in the matter.




Respectfully,

(Mined) S. P. Gilbert, Jr:
., .ssistant Seeretery of the Treasury.




%It

asions other than those

on questions relating

r article 260, part

er consideration.

n questions relating

er discussion. sommission

delegates on commis ion

so provizionallai appoints

st members uomaittee

nalities and to set as
Sub-paraEraph. Seat

may be transferred with

ce including Germany.

rection commission

first. TO secure

treaty. second. To

of bonae prescribed
th,i,t may be proportion-

male by vermany in

ule as folloze: (a)-

land custome duties

port and export duties;
on value all aerman

evy of not less than
25 per cent















TREASURY DEPARTMENT

Washington,

ASSISTANT SECRETARY

June 9, 11214
JUN 1 3 1921
My dear Governor:

In connection with our correspondence as to the
German reparation payments, I enclose for your information
311ea

copy of ri

cablegmrar

the American nnbassy at Paris,

No. 360, transmitting a message from this Government's un-

official representative on the Reparation Commission, as to

possible changes in the procedure for handling the reparation payments.

It would appear from this message that the

effect which the transfers

have had upon the

European exchanges has not been altogether satisfactory from
the point of view of the Commission and the European Govern-

ments involved, and that on this account there is some nros-

pect of relief from similar transfers in the future.
Very truly yours,

BenlEurtin Strong,

Governor, Federal Reserve Bank,
New York, N.

1 enclosure.




Y.




or*

921

ality

WT. 113-50-1-20

TELEGRAM

FEDERAL RESERVE BANK
YORK

WIRE TRANSFER
DIVISION

PRIVATE WIRE INCOMING
'4
JUN 1 3 1921
29bd mq Washinoton Dc

9th 444p

F-trong.

State Dept has transmitted following paraphrase of a cablegram from
Boyden, this governments unofficial representative on the reparations
cornmistion; "the commission has become convinced that if the change

is found possible, they must find

e.

way to avoid the risk of loss by

exchange in the matter of Germany's reparation payments. This conviction has
resulted from the change produced by the recent payment transferred to the
US in settlement of 'Thrnianye

reparation debt. The commission appreciates

that similar transfers in the future and re-transfers to European countries
may damage the latter. The commission has now under consideration a plan that
the German

payments should be deposited in Banks of Belgium GreatBritain and

France and Possibly in those of Italy. In this event the Government of the
country in whose banks the payments are deposited will take the loss by exchange
itself

,

if there be a loss, and the gain, if there '.-)e a gain.

l'ouid be

"

glad to have statement of your views. Letter follows.




937a

Gilbert

OrEoLEE.RGRAPH
'

'4 TOR

F2 /Ai
0-1U1V




-,




4

2 5 1921

JAM ES

A. LOGAN
13. S.

Jr.

Paris, 7 rue de 2ilsitt.
6 July, 19a1.

PERSONAL

dear Ben,
I have been in Berlin fol.:, the last month. Upon my return
to Paris I found your nice letterhich I read and immediately
destroyed.
I cannot tell you, old man, how much I appreciate your
kindness and good advice in this matter. Frankly, I was very much
touched by the tone of your letter which I really appreciate. while
I felt very much the same as you did about the gentleman in question,
I nevertheless was getting a little bit restless. I definitely made
up my mind some months ago that I would quit the Army at the first
favorable opportunity.
It now looks as if we would have some official
connection with the Reparation Commission, and while I may be fooling
myself, I am inclined to think the Authorities will want me to stay on
as Assistant Delegate.
If the situation develops as I see it, and if
As
I am offered the job, I will immediately resign from the Army.
Assistant Delegate I woulq4st a good salary and would be in a good

tactical position to v,ork7447somethinE else.
resignation at any time.

I can caele

-1/V/11

I had a most interesting time in Berlin as an obseyveflth
the Committee of Guarantees. For your personal and oonf ential
information I enclose herewith draft of a cable repor
to the State
Department concerning the work in Berlin.
I believe this will interest
you.
I also enclose copy of the Schedule of Payments which you will
need for reference when reading the draft cable.
Again all my thanks to you and with warmest personal
regards, I remain,
Faithfully yours,

itto.._ 4
The Honorable Benjamin Strong,
Governor Yew York Federal Reserve Dank,
New York.




ab.'- Croak

157..
NtkallitYLES

ISO:* 4.1,

7.4.



(Flit

,

;

Ze

27)zra




1111111111111NEW"

Charge 'tote
/Prepared hys
dimes A, Logue,. Jr.

4 Jay. 19

.=holuanes,..

Committee Marmatees after two weeks Sittings Euld bearings 4armans Berlin

retursad via Coblens Jame twenty Math.

Purpeey of rayttag arrange pr ketical

details of schedule of kayments BR/LC=7J rzepsratio Commission Amex 908 Bi....A.C1C13(4:

Olsoussios was frank. -uood spirit both sides.

PAUGRAM

Following brief Lam Uses rvport.

germeme Berlin wanted discuss new index Ile suggested subheading

(a) ploopmmOk Ise article four Sohedule PArnents,
heyesatica Commission solely dismgelemt.

V'

Committee rotemed ste.ting

Dear equivalent in MIMOSAS", (a) stake

beestMNIMMmitairily mikes Mu Was depeedent an old Ledge,
to measure Gummys economic prosperity.

lesi plepese Is

is

If amp satisfactors mesemee tam diseefeeedy

this Imaimsge most be Amapa before sem be adopted, but fact that present inaSit

autarchy Sande restrict German experts so hompering her °commie prosperity
immorally remaielsed,

SUSVISMAPH L.,

(Mormons requested definition word *exports* wobisuJihyi (a)

article four :chilkoule claiming fallacy using "total eagort Mere as When
prosperity or as bAsis
is astual 46./

unual payounts,

Pointed out that bites peustic:aly results

tax an each class experte with result imports which osemot bear lowilea

will automatically oesse to disadeustege not gals germser but Axe countries from
whisk latter buys r.nd to which Germomy sells.

asp argued nhilitp *sports suer

not determinable by viewing industry eelleetively or Lesragieg wide =rein
indulArioe with Barrer margin .finishing

eemelesion business.

Committee as

result of this dissuasion' referred to Asportiom Commission following questions










admits motorail yield two immured, milliom gold marks.

Timally tecnty five percent

export levy-predmeen rams milliard We tersdrent fitly million gold mixts per annum
leas Recovery 2.ct reeeipts or tem lorired, seventy five milllen

gotl a's*.

per

quarter which figure lerovielonlly Maitre".
B.

IRSPAUSIAPSI

are GOWN

For year mimeteel treaty MO mdastsua treaty *yeas Obileatieem

(a) tour instalments rive Moire& alines soli roakey mad

(b) Ivo

quarterly instalments variable searaavitr it fitteema VOOPMMOM said diStesall Pespowdy

aorta provisionally estimated an above basis at three Ihnotred teemty film million
gaol* marks eaab,

dbligotion to thirtieth Veil niseterm treaty We therefore two

milliard six hundred fitly million gold marks,
geld marks article flee liebedals;

deliveries hind;

To be savored tor

(a) area milliard

(b) ass milliard tee hundred million gold marks

(e) soy Modred fifty million gold masks framevery Acts

This

bases %Armee three he mtard minim gold marks reqaircd secured hp resaurees
syseiriodi ortiele seems rehedmie.

Oemmittee asoordingly eonsidero payment ouster

effective from fifteenth ihrisabor meat and pwlyient levy Weal, five payment seaports
ofteotta, from rirtetalth ieesembousext will yield three losmired sillies sod requests
me,
Germane Ws aseessary arrowroots, Provided above estimates realisedireseseary

retort year rimless trimly ere nineteen Wooly two to other ~moos those
Opeeitied article seism 30hedmle+
WirsBASRAPIt 0.

Far future years impossible essotly estimate ',raspy's

obligations but provisionally asssmed as throe milliard Wee hada* million
geld smirks.

Tots aware& trg(a) deliveries kind omit milliard two bmaarod

(b) 1speretier ReseVeirg Ast reesipta wad Went five persent expert

le, sae milliard two homired fiftralnions

(e) oustoms two In aired

Mal two milliard pis hundred fifty million leaving aerial% six hundred fifty
willies gold marks,



31,ThilreGRLPH D, .ftrerant &Klett must be covered
revenues.

asNlcred

Proposed tam revel's's, as revised by Committee, yield one milliard

three hanared million sari mares cr doable mmemmt required,

Committee williatg

swept fifty percent ybld provided sin kealovell eat fiftp million gold swedes

aotually realised reserving right require Langer poseeoftes if peeeeeosp mei
any deficit ;.;chedele Payments,

Tborotere starting first

two Coma/Use will motive la) customs

.ew nineteen West,

lb) twenty five ferefrut lel, opperte

anti (a) in adiAtion such permutes* as noccecary of assigned revenues propound
and accepted by GassAttes.

tAmpaAssa,S

Ovoilltee reserves rights under article tro forty eight

Wroaty to pretest oerlos booth

papciewilAm P,

Wes WUXI:

oircumittnres UN UCC1

NOM MFO ORIEL - Materpregatim or *sports dud shafts

See paragraph one iAna slalompraph A this cable.

a.

YOWE THEM

- Levy on Emporia,

Refers to Genesee

presentation econsode Pond political difficulties manning direct export levy
twenty five poroent paragrt.ph b article seven Sobedolo.

elates levy fthatmle

Payments net mop sense ten but oolhol preourIn nessosorp foreign values,

willing swept alternative reeemrees

committee

it asourIng tionotrog fore tam v-, rues but no

seisms yet Moonset tolfille this oendition6 der oircunstmoes onnnet respoom,
sopert levy end requests Normans prepare measures neeesrary to molt levy operative,

Ceestttee hemmer West estoal opertion system defered subject Palming reserves
estemomietoes, viz 001111 ?w este quarterly payment under Schedule Comae* will
detersieo see representing teen* the pereent value exports durimS preeims
quarter with islostieno iiscovery Act solleetions arime period.

Gormomo to pop

this ma

first two nose,

Wesel

aittraes iu Um

equal instfilne, te viz e

t

the seems 0110 Meath WW1 wog Wares as gliegrtillj date timed by




Sebedmie.

cc6regmede semismdi peer, Committee eimounmo seams deliveries mind etfeelled

ehenemnp first last waffle:lent o.k,

dme februsep

firtommtilimmol se

abeeesseenpmment will &ray is po e. dee letrreery fifteenth ami Met hollmleest

jpifeidellossolbor riftposta, Osmoittoo

reeeMes right put direst levy in eperstion

mit mmunedie tom/ dose not free SeMesse bum Obligation notifying Committee

glaftir pialegoilklifkit article *ma sor preposel Wass altiedishirc
taw rereest
litAutV,
SIMPAIttettailtis IMOM YIN Q140 eleteme,

reeeipts teem*

retie Sermon difficulties aesimmost

Omport emit leper% &sties sl Wedefilees vibes tariffs is tommeitionsl stage BRACUTS
ONINNINN

SOW Nils

eft negedlettogw, etunercial trenties mni Ibis prevision embpruomMheg

volt/ moults Iron poropepb
illIONVIMAr COMM more, owethortsotima

eight article MOM .chedule,

eabotituto other rawness far proseede

tistese Wassweetto vitt osavolgies wives pliwaraglA 0 /Article iota lisboisie.
dermitsee ~owls coif dememit but roDeuMeee provisiomally rtthts meetve prior

mottoe of yalropegabo ottoottog weft penal bat Gamow Mit Waal egalmittee
orroogoosst whoa lode, Rommotatios kolas until Noy first obiotowei twooty two
olbleet removal lout Committee swarm right terminating win, emmont,

Permute

abiemni customs strt November fifteenth. deposits being effected monttly.
Deposits held to trust until &Atom voten parents beers. due under nrtiole four

ale UR UJE.
ODUSIASIAPI T. mon pre wort Cortrol or

Committee emenfte

peewees, ielegstion *write function to verify Semen etatisties &matte, pepeeste
under Soltoule, Committee soutempletea Amtlettcl control #ith occasional
verification Lie

data et mines by restricted number tremens* isepeeters UN U(Vg
Cummittes beard (*mans Jrne twenty troth after delivery

abate notes,




Latter offered only two ob:eettons, vie moo (a) question neeeesitt

of committee
11/1111-1-1-1--

!

Note one.

ecC taking fifhlf psrsonS receipts all Issas listed ss sentamplatod

AottOR Heienstag feeilitated it list ntesSed.

Cssmittee asked written

(a)

4nentiened extensive olitSrol implied This Ms as dal asrmnn

public opinion.

Committee agreed moped mpplisatisa sastemplateissutrol except

PrePsesist

ereation Berlin Delegatiam, salmi Gamma la tom to draft piss control inoffensive
public opinion but coverlet reepeamsbilitiss Committee under lichednle.
- AIIISMIessse,

PtnAGWPX fai..
Plalmeismd.

dermas semplaissdumjastified 0Ontinuntion SOOSSois enaction,

Clairdes RhimelaisiCamodssims lisassing imparts to value betvssa

five Imbed sallies sad ems milliard peer mums monthly lasludiag luxury rms other
articles Gomm prohibited list.

Drew satsatioa to lielkalSO *Persia Imiertotims

spirits for Alnslami east refusal permit bigortstion into none %writer, iris lases
surplus German stooks, else paroul pest peabsges to eleven pseuds permitted aster
without inv;:ootion Or OS..

deramas pointed to effect ,111 fort:vane on exchange

and ability meeting pspsemts sus lee bends.

committee on invitation Amine lard

Otelmiasielt easferredwith latter coblems Jens thirtieth,

During Conference British.

Magian 041111140.101MWS sni Italian OSOnereita observer gpmak, asgrseced views that

OOMMIMIO SOM0,100. WO edmimisterad parslg as sanctions remariless *osmosis eons'sOISTIOSS.

COnmiSsioll stated orders Council Ambassadors direeted OM 001% to use

1

utmost liberality graatimg licenses wherever possible giving preforms, importation

Allied commodities mum shish liketristiess they wort following with no mmtbarity
disregard.

Cora lesion stated demsasifIgurso value licensed imports iodate amaggow

rated but real effect would to felt wins formidable deliveries water three assure,

lisonssc gk alrea4 Wonted aotually sasmsasa,

commission Stated their instrustiame

contemplated sedirSament Utc,vamamstama regulations and in oddities lissnsing
import. prehtlinsi bp itsismairsgslaidamm,




isgardimg spirits it aw, shartags

suppl-:? Ltinelaad instructions contemplate making geed Shortage by foreign

Import mtber th

Commission stated limMes wanted

by import from aermng.

valid three months irres_peetive continuation sanctions,
fstariG114.141

presente

Britt*, Belgian and. Italima Member* Committee comrsatsss jointly

resolution proposing Committee advise Allied Ueversments ti.

mommlo stv,,hdpeint

l

taking

t execution Lich*aluls rInyments considers

t aiming snly

it micht te point out that-tobsule cayments might be mere songletely executed and
bonds prosortbed by that 5Mbedule more fully

pteed if economb sanctions

at present In force in Rhino twerillatims were suppreased 111;,IL

French member

declined joining but speed with action Committee to t full extract
including resolution be sent officially t

Anatol;

basielssy Comittee to oath membor

requesting latter %Renault IMMO his Government whisk was adopted,

241AGW.PH

Above report refers say aorssn payments unser $ohodule.

Dees not include Arne:zits cost Armies Osompatim at present estinatei between We
bumdred forty and five hundred million gold marks per year mai sisarkes wigs

commitments approximating Ms hundred million gold merles within next two poems
latter questions not falling-within purview committee,
PA2AGIUPB LIGHT.

Copies aorman proposal and -::otes Cowittee including

Committee's iltineland resolution left condidentially with Dresel,

full text cf :dotes with sem coments.




vereMnsx.

moiling

-2.21 2L,Yal,; JUILISSIOD

1W. 973
:otter

the ZrietIslastenkommission coActerning the:

currencies in which "Arman7 should effect her payments.

JTI,LAJLL

ris,

ji.ne 11, 152

he 161st :Leetini-: of the Finance 3ervioe'

omAiission, held on Lai 2E, 1921, I beg

]ore the unuesirable consequences to the

he coAltries concerned if 3erulan7 is co

ollars all the instalments necessary

drafts handea over by the sermon.

nti-al

e,D,ration

:o emission.

x a.: possible to obviate these conse
layinil the following proposals be

signif7 its willingn

,nt;

ot.r.:,r el/1.re .cies, to be aetermi

It'm ...;ouission inform me at once
'::i.

it desires to receive the payments

u_,J to the end of tLis uonth.

cp_rati.3n

state between

July,

..,uEust 1 and 5, the currencies in whi,

the uarrents to he

r- to the end

end .f

7.ro,:reflient .JaknJt at present state eve




aeproximata




approximately the maximum

ay pants that it will be able

to make to the Reparation Commission in the
various months.
The amount of suah payments depends absolutely
on the state
of the ourrenoy market in each case.

The German Government

pan therefore only propose that the communications requested in paragraphs

and 3 be made, so ac to indicate t'ne per-

centage of the total payments to be effected up to the end
of the month in question which the Reparation Commission

would be willing to receive in currencies other than dollars.
tr-

Aw

'*7;',V

'

54- In re'ara to the rate of exchange at whch the vari-

gold marks, the ,;erman Government considers that the rat
-

4-

a

to be; adopted must be the rate current in

on which-Abe payment is actuall7 made.
In regard to pay:.,ents soon to be made the German Govern-

'

ment would desire to effect a certain percentage, to be deter
mined by the Reparation commission, in Italian lire.

The

German Government has now 45 million lire in the Banoa d'Itali
at Rome, the proceeds of auvajaces on coal.

This sum might

be put at the immediate disposal of the Commission as a pa

ment on the rparation account.
I should be extremely obliged if you ooula give me an
early reply to these proposals.
,:icnea: Von .'ertnen




'

-

.riti 0:1 Jommission.

d"41-771/
ALI/2X .;0.

a.

rep17 to th

974

letter from the .._rildt.-1.1orraission

r',..lutive to the currencies in which

;,:,rmanj should effect her

paj,dents.

b. Draft decision concerning the currencies in which Germany
should effect her pa;T:ienta.

_ote. The two drafts ,ere adopted without amendments at the
196th and 199th meetings. (Decisions 1366 and 1369).
4,ItiTAX 974 a.

DROPT.

?rom the separation ;ommission.
To the Eriegslastenkommission.
:ehe Reo,ration Uommission has the honour to refer to

the letter 4.3171 aduressed to it on the 11th June b, the
LriegslastenLomlission and received on June 16, on the suit.iect of the currencies in which the lommission desires to

accept paywent in redemption of the crafts issued by the
German ,:,overwlent unuer ,Irtiele 5 of the Soheaule of Pay,aar.ts.

orumr to avoid any uisturbance of the exchan7es, the
..:Ozi:Assion considers that during the month of June no further
.

2urchases of dollars should be made.
(spot

It is prepared to ao-

Tient .Luring this month as follows:

2ounds sterling to an amount of ;10 million;
fr .nos to

frLtno8 or

ai,onnt emivelent to n5

dllion Fold

ounuz eterline within the limits indi-

cated




to an amount equivalent to a total o
a, within this total of 100 million

r a,the Reparation Jommission is prepared to accept:
o a total of 35

iiliion 3wiss francs;

to a total of 30 million dutch florins;

?owns to a total of 30 million Scandinavian

total of 15 million pesetas.
se the Jonimission would be clad to ob

at 20 million :miss francs.

The JomMission finds it necessary to adopt as the

of exchanrw for oalculaVng the gold credit to German
these ,:ay tints, not the actual rate of tYe uzij of f.u-

whick -a Jgent

but the averaile of the rates of,

effected and of the

rip

v.(5 preoed

The rates taken will b
i144i

FOr pounds sterling: the aver__-,.e rat:

cated. and certified by the Bank of

_,Inr7

the dollar on the ..ondon market.
or Trench francs: the o,:ficial rate of

!

of t4e

Yrench franc to the dollar in __iris.
For Belgian francs, the official rate of exit

11111

Belgian franc to the dollar in Brussels.
?or 1)a; ent in

crowns :Inu pectuJ, the
in the follo,Jin

n,e of"

The value o
2rench francs at the

<AV

rage rate of exchange prevailing

between them and the franc on the Paris

Bourse chi

the da

of pa anent and of the two preceding

The franc value thus

obtained. wi I be 'translated

dollars at the average rate of el-change of

the

into

franc to th

dollar on the Paris Bourse for the same da

It is obvious that this system ha
giving an opportunity for the manipul
In the event of any such manipulation
mission reserves to itself the right to
.cent that may appear to it ,pore desirabl

In accordance with the desire expres
c;Jvern ent

anu the 5th
it

VI

of the se

uc

t

to

in 1:-.a.-ment in the course a

J.C3 .3 0

...)nthe

idake a

1.re s

arose
on

is abl_

ua..naent, in _Italian lire and hopes to

hurt;: :;r com,Lunication to the :::xieRslaste

the near futu

6-Lio

i114i.,LX
.,:teparati974 b

many shoun effee

orc:

2'..urbai1.)e. in the

to

bra. aJe b

JO I1-2-10

http://fraser.stlouisfed.org/
u ,llars to
Federal Reserve Bank of St. Louis

_cot

`t,,,e

r.

.:-.Yrrian7 of arge q
Jue -Lrauct the 301- eut,le 0
_

manta




ding the adou
len Governments, wh'.ch is

b

I

the Jonference of the Al-

meet short17, of definite

concerning the definite distribution of
s, it is decided to adopt for the month of
June 1921 the arrangement, described below, on the understand -

'at the Jommission reserves the right to have recourse to

ther arrangement should difficulties arise in the execu'at tentatively adopted for this month.
II

omission takes note of the agreement of the Governments
eat Britain, France and Belgium to assume the risk of
100se8 and gains on exchange resulting from pajments made
by Germany in certain ii:uropean currencies and up to certain

definite limits.
An7 loss or ,i]ain on exchange resulting from these opera-

tions will be carried to the debit, or the credit (as the eas
.

may be) of the lower guaranteeing the currency, in the books
of the Reu_iration Jommission.

Great Britain agrees to guarantee sterlinp to an amour
of L10 million.

Belgium agrees to guarantee Belgian francs to an amour
equivalent to 25 million g. m.

France agrees to guarantee Drench francs,

sterling

and other currencies within the limits defined below to an
amount equivalent to 100 million gold marks.
The limits to which France is prepared to guarantee
currencies other than French francs and pounds sterling are.
Swiss francs, 35 mil:ion.

Dutch florins, 30 million.
Jiorwegian, Swedish or Danish crowns: 30 million.

2esetas:




-5-

PesetaS: 15 million.

France aesires, with regard to the currencies mar
teed by her, that payments should be made by preference
over all other currencies in 'Swiss francs up to a total of

20 million Swiss francs.

The Commission decided to accept payuaats made by Ge
many in the currencies indicated above provided tha
fall within the limits stated.
The Governments of Great Britain,

?canoe and Belgium

will have a orior claim to take the risk on exchange resulting from payments made by Germany in their respecti
national currencies up to a li dt of 10 million pounds
sterling for Great Britain, 100 million gold marks in
Prench francs for ?canoe, 25 million gold marks in Belgian
francs for Belgium.

The payments t%-us made will be deposited to the aoo
of the Reparation .:.mmission in the national bank of the

guaranteeing Power if these payments are made in the currency of that Power.

If they are made in another money,

they will be deposited either to the account of the nation
bank of the Power concerned in a bank chosen by it and sit
ted on the territory of the lower, in whose ourrenay the'p
rent Ills been mane, tie State national bank remaining respon-

sible vis a vis the Reparation Commission, or directly to
the account of the Renaration Commission In a bank chosen
O7 the Conn fission acJL situated un the territory of the P

in whose currency the payment has been made.
sacra of the guaranteeing Governvients will receive from
ti :e RenJaration Commission full authority to convert at an'

tiwe into other Zuropean currencies tle stuns in connection,
with




-6-

with which they assumed the risk of exchange.

The .govern

mente oonoerned will notify the Reparation (;ommission with
out delay of any such operations as it may undertake.

No.

oonversion into dollars will be made except after an acre
meat between the various guaranteeing Powers.
In order to calculate the credit in o_ld .aarks

g1ven to Germany for payments in _uropean currencies effooted in virtue of the present arrangement, the Jommissio

decides to adopt not the rate of exchange of the dal of
payment but the average of the rates of the .:a7 of pa:Tment

and of the two

receding days.

The rates adopted as th._? basis of conversion will be

the followinE:

For pounds sterling, the average rate of exchange ind oated and certified by the Bank of ::n gland of the pound t

the dollar on the London market.
For French franca, the official rate 3_,exchange o
the French 'franc to the dollar in Paris.

For Belgian francs, the official rate of exchange of
the Belgian franc to the dollar in Brussels.
For payment. in swiss francs, Dutch florins, icandinacal-.
vian crowns and pesetas, the gold mark credit will be

culated in the following manner:

The value of these currencies will be calculated in
French francs at the average of the rates of exchange breBourse on
vailing between them and the franc on the Paris
uaT of ouyInent and oo the two mrecedir? ua-rs.

dollars
franc value thus obtained will be translated into
fr.J.nc to the dollar on
the average rate of exchange of the

the raris Bourse for the same uays.
ICI




June 13, 1921.

Deer Mr. Gilbert:

I em in receipt of your telegram of the 9th, together with your letters

of the 8th and 9th, with the enclosures mentioned, all relating to a possible
change in the plan now in operation, by which the German Government is

+s

king

reparation payments throTlh this market.

e have assumed that the method so employed is practically unavoidable
for the following principal reasons:
(1) The Allied governments would naturally select dollars for a large part

of the peyeents because of the ameeet of the indebtedness 'wing by the Allied
governments and their citizens in this country.
(2) If the burden of mating payments in dollars is placed upon Germany,

Germany mseumes the risk of loss 3f exchenee in furnishing needed dollere to the
Allied governeents.
7t,)

the United StRteR being the only country which is free to ship

gold, our exchange would naturally be preferred over others.
(4) Dollars are available for making payments in all parts

the world,

and the possible lose due to a decline below gold parity is ediskiaated by the fact
that we ship gold.

It is difficult to see how any arrangement can be worked out which will
be satisfactory in operation, and which will relieve the Allied governments of
possible exchange losses, due to the conversion of their own currency into dollars,
in case dollars are required

or making payment in this country.

it seems to re

that the Allied countries are somewhat in the position of e creditor collecting
from a debtor and requiring the debtor to furnish checks upon a bank which is free
from the restrictions of
from such restrictions.



a

moratorium, and upon which they can draw with freedom

12

-

Mr. Gilbert

June 13, 1921.

eI/had assumed that the reported delivery by the German Government of three

easury bills, of which 00 millions were payable

specifically in dollars,

o tee eemend of the Allied governments, and arose from the fact that they

ed needing that &mount of dollars.
epeoulating somewhat upon the future developments of theme payments, it

ear that as Germany is forced to accumulate foreign currencies in order tc

e payments, the mark will decline, due to very excessive issues of their

ncy.

A further depreciation in the mark, unless accompanied be corres-

ncreases in wages, simply increases the advantage which Germany now seems

over other industrial nations in the cost of production.

IL Amaj, there-

that Germany will enjoy an aovantage in exporLing manufactured articles to

countries of Europe, and the rest of the world, and that payeent for those

will actually be made by drawing upon the dollars already paid to the credit

lied countries by Germany.

If this operetiOn is a continuous one, it

ply mean that Germany, as has all along Peen expected, would meet her

n obligations by exports of goods, and tha.,; Lae banging treastutions cover-

reparation payments and exports would be conducted is dollars with our

tha!,e

If, on the other hand,/exports pecowe a menace LO the industrial recovery
generally, we might expect the Allied oeuatriea, by the imposition of

n their own imports, or export duties on German exports, te

the flow

out of Germany, in which event Germany would default.
It might be furtber suggested that the industrial stimulation would result in

r being fully employed, and would lead to unrest among the laboring

n, demands for higher veees, better standards of living, and gradually

production would ap,roach production costs in other countries.
These suggestions are made simply to indicate the probability that these

ents by Germany may lead to far-reaching, and possibly disturbing, develop-

the world's trade and in the foreign exchanges, as great even as those
the financing of the war itself.




June I!, 16,21.

4(5
.-

+gym not prepered to earth.t it would to dse for us to protest agAmst
the employment of our banking machinery for the conduct of these transactions.

14,

must not overlook the fact that the dollars paid into this market must be spent here,
and if not employed in paying interest to our government on loans made during the

mar, it is quite likely that they will be employed in purchasing American goods by

the Allied goverwleate J7 their oitiens; or if employed in curchaeing goods from
Germany, they .ill ;irascibly in turn be used by Germany, to some extent, in buying

ram materials ir this country.

It is, however, importvnt that we should know just what is planned by
the Reparation Commission, and I hope that Mr. Boyden will cable as soon as anything new develoi:s.

Thanking yeu for 1;eepin4,: us informed, I beg to remaie,
Your

very truly,

Strong,
Governor.

Honorable S. P. Gilbert, Jr.,
Assistant Secretary cf the Tre.a.eury.
Treasury Department,
Washin6toa, D. C.
BS: M61







t
-2He pointed out that, before the war, Great Britain and Germany
were the largest exporters of manufactured and partly manufactured
goods.

Fran all manufacturing countries of the world, the total exports

of the above mentioned articles in 1c12 aggregated ;1,300,000,000
of which the two countries named were responsible for b700,000,000.

The effect of the 26 per cent tax on German exports and shipping.
On this point he stated that while the tax v.tuld compel Germany,

in future competition, to produce goods at 74 per cent of the cost of
corresponding goods in Great Britain, this would not be difficult if
wages now current in Germany were not raised, - particularly of those
goods manufactured from her own home produced raw materials, and fin-

ished articles on which the charge for labor is a high proportion of
the whole cost.
Anotherrresource to which Germany could turn for means of payment

is contained in profits on shipping, and international clanking and

insurance, - all of which are not affected by the 26 per cent tax Moreover reduction in wages, owing to the tax, would not be limited
to German export trades;

it would affect her shipping industry, and

while ships would be built and manned on the German basis of cost,

freight and passenger rates would be on the international level, - in
other words the tax would constitute a bonus or preference to that
amount in favor of German shipping, and also to banking and insurance.
British Trade in danger.
Mr. lIcli-nna proceeded to say:

"The conclusion to which I am driven

is that if Germany is able to ne et her obligations she will in doing
so gravely impair our own international trade. Her highly developed
manufacturing and commercial power brings her into di rect competition

with us mom than any other nation in the world, and, whether she pays

through visible L,r invisible exports, it is our trade that will
be mainly affected. If on the other hand, she fails to meet her







- 3 -

obligations, we shall be thrown barn; again into the condition o f

political unsettlement which is so perilous to European peace and
so harmful to a trade revival.

It will perhaps be seid, "Here's a paradox:

If Germany rays

her debt to us, it is argued that it will benefit German trade and
injure ours.

It has always been urged that it is good for

our

trade

that we should buy in the cheapest market."
For my part I think the paradox is capable of a simple explanation.
IT IS NOT TEE PAYLIENT OF THE GERMAN GOODS WHICH CaiSTITUTES AN

INJURY TO OUR TRADE. BUT THE GERMAN CAPACITY TO PAY US.
LABOUR CCEDITIONS ON THE GERAN PEOPLE WHICH ENABLE

WE FORCE

THEM INCOLIPITITION

WITH US TO PRODUCE GOODS OF EVERY HIND CHEAPER THAI WE CAN.

THUS WE

CCLTEL OUT TRADE RIVALS TO LIVE UNDER CONDITIONS WHICH ENABLE THEM TO

UNDERSELL US III EVERY FOREIGN LitallT.
shall rece ive, i t is true, our share o f the German indemnity,

which at i is maximum would be about 1a80,000,000 a year, but the con-

ditions which enable Germany to pay us this amount will enable her to
imperil- our export trade, which, including invisible exports, is now well
over f.1,100,000,000 a year."

Means of recovering indemnity from Germany.
"Germany ought to pay to the utmost limit of her power to repair
the damage she did in the war.

"Interest on the prewar debts due to the creditor countries was
paid by the export of raw materials and food.

Nothing stands in the

way of Germany being required to send to this country and France and
the rest of the allied countries, to each according to its requirements,
articles such as coal, timber, potash, sugar, all of which Germany
produces in great quantities.
It would mean undoubtedly that much German capital and labour

would have to be withdrawn from manufacture and devoted to the pro-

- 4 -

duct ion of the materials recuired by the countries to which she is

indebted, but this is a penalty which German industry might very
properly be called upon to pay.
GERMANY'S MANUFACTURES AND SHIPPING, SO FAR FRC?! BEING BENEFITED,
WOULD BE AT THIS DISADVANTAGE IN COL1PETITION V;ITH OU1

- THAT

ABILITY TO DEVOTE CAPITAL AND LABOUR 10 TIaLi L'OULD BE LARGELY RESTRICTED.
The Reparations Commission have power to call for payment by Germany
of any kind of goods to the value of L100,000,000 a year.

I propose

that this pomr should be exercised, and that Germany should not be
left at liberty to provide this sum by selling all over the world such
goods as she pleases."

711.AN.BC




ALFRED NUTTING,
Clerk, American Consulate General,
London, England.

3 -

by unscrupulous speculation.

In 1920 this organization bought 24 milliard paper marks' worth
of foreign money, that is, about 2 millards a month, equivalent to 170 to
180 million gold marks' worth.

These 24 milliards were used for account of

reparations payments, Clearing Offices, International Postal, Telegraph and
Railway settlements, essential food supplies, and minor governmental commdtments.

The German government hopes by means of a prudent policy to

procure the necessary foreign money to pay at the dates fixed, but it must
do this without entirely ruining the rate of the mark.

The foll

shows the purchases in terms of paper marks, for 1920 and up to June 17, 1921:




1921

1920

January
February
L.arch

April

Lay
June
July

August
6eptember
October
November
December

636,751,000
1,919,516,000
2,954,626,000
2,129,001,000
1,644,641,000
1,446,445,000
1,154,366,000
1,075,295,000
2,353,726,000
2,717,262,000
3,164,607,000
1,612.057,000
23,012,717,000

January
February
)arch
April
Lay
June 1 to 17,

2,439,310,000
1,625,134,000
2,366,366,000
2,499,717,000
3,654,670,000
2.104.040.000

14,691,257,000

YEVDRApDUE CN THE Mitt-.A.N SITUATION

I - Schedule of Reparations payments

For 1921-22 the schedule calls for four installments of
500,000,000 gold marks each and two quarterly installments of the
variable annuity due November 15, 1921 and February 15, 1922, provisionally estimated at 325,000,000 gold marks each.
to April 1922 is, therefore 2,650,000,000 gold marks.

The obligation
This is to be

covered by 1,000,000gold marks payable in accordance with the regular
quarterly schedule and 1,200,000,000 gold marks deliveries in kind, and
150,000,000 geld marks payable under the Recovery Act.

This leaves a

balance of 300,000,003 gold marks required secured by resources includ-

ing the proceeds of all German maritime and land customs dues, and in
particular the proceeds of all import and export duties, the proceeds
of a levy of 25 per cent. on the value of all exports from Germany (with
certain exceptions), and the proceeds of any direct or indirect taxes as
may be proposed by the German government and accepted by the Committee of
Guarantees in addition to the specified taxes.

The Committee of Guarantees

decided that the payment of customs should be effective from November 15
and the payment of the 25 per cant. export levy should be effective from
December 15, and should yield 300,000,000 gold marks.

For future years the Committee of Guarantees has stated tnat it
will not be possible to estimate Germany's obligations, but provisionally
assumed the annual sum as 3,300,000,000 gold marks, this to be covered by
000

1,200,000gold marks deliveries in kind, 1,250,000,000 Reparation Recovery
Act receipts and 25 per cent. export levy, and 200,000,000 customs receipts,
a total of 2,650,000,000 leaving a deficit of 650,000,000 gold marks to be
covered by additional assigned revenues.

Proposed tax revenues as made by

the German government and accepted by the committee yield 1,300,000,000 or
double the amount



required.

The Committee has stated it will accept 50 per

- 2 -

cent. of the yield of these tuxes reserving the right to require a larger
amount if necessary to meet any deficit in Reparation Payments.

These

payments include only the actual reparations and do not include the cost
W_kA.4.1/,;,9

5-1")

of the armies of occupation estimated at 245,000jo00 gold marks per year
and clearing office commitments estiEated at 500,000,00J gold marks within
next two years.

IL - German Exchange Situation.

In order to provide the exchange for the reparations payments
the German government has made use of the Central Exchange Office, a
limited liability corporation organized in 1914, guaranteed by the commonwealth, which works very closely with the large banks through the medium
of the Reichsbank baying foreign money with paper marks.

Since this

foreign currency is the normal produce of commerce it is to the advantage
of the banks to sell the surplus currency at their disposal.

The government has attempted to prevent the banks from buying
such currency and reselling it as a speculation and has also tried to force
the people to declare their holdings of such money, but the purchases of

exchange by the Central Bureau has had a disturbing effect on all the exchange markets mainly because of the active and powerful speculation in
Germany and other countries.

Speculators buy foreign exchange, preferably

U. S. dollars, with Raichamarks knowing that the German government must in
tarn buy this exchange from them in order to be able to meet its reparations
payments.

The continuous rise of foreign exchange in Germany us compared

with the Reichsmark has induced everybody to hold back in offering foreign
exchange, thereby practically closing the exchange market to the German
government.

According to Herr Bergman, Financial Representative of the

German Government in Paris, the German government is in a "corner" formed




TREASURY DEPARTMENT
ASSISTAMrSECRETARY




Washington,

JUN 2 0 1921

June 17, 1921.

Dear Ben:
AL\11%

Herewith is a copy of cablegram outlining the provisional
plan of organization of the Committee on Guarantees, formed in connection with the carrying out of Germany's agreement to pay reparations.
There is a good deal of information in this which is not of importance
but I thought you might like to have the Whole thing as a record in
case of matters turning up in the future regarding the activities of
this Committee.

Please treat as confidential.
Very truly yours,

Honorable Benjamin Strong,
Governor of the Federal ReF,erve Bank,
New York, N. Y.

Enclosure.




ASSISTANT SECRErARY or= THE TREASURY
WASHINGTON
June 17, 1921.

dear Governor:

1 have received and read with great interest
your further

letter\14

June 13, 1921, in regard to the

reparation payments, and hav\e/transmitted a copy, together with a copy of your letter of :,lay 31st, to the

State Jetartment for its information and attention.

I

am glad that ;roc took this occasion to outline your sug-

gestions and to emphasize

the

important bearing vtich

the need of the Allied Governments for dollars has on
the situation.

The special attention of the State De-

partment has been called to the importance of prompt
advice from Mr. Boyden whenever there are any develop-

mnts in connection with the reparation payments.

I

shall, of course, arrange to send you copies of any
further cablegrams and other advices in the matter as
soon as they are received by the Treasury.
Very truly yours,

Benjamin Strong, Esq.,
Governor, Federal Reserve Bank,
New York,
Y.



":",.







ASSISTANT SECRETARY OF THE TREASURY
WASHINGTON
June 17, 1921.

Pt.

CONFIDMTILL

JUN 2 0 1921
My dear Governor:

In connection with

my earlier

this date about reparation pa-Tments,

letter of

1 enclose for

your confidential information a copy of

a

raraphrase

of a cablegram transmittinE a message from the State
Department to Mr. Boyden, dated May 24, 1921, as to
a proposition to lend money to Germany to be spent
in the nurchase of goods in the United States.

The

Treasury has just received copies of this message
and

it occurred

to me it might interest you.
Very truly yours,

itilAcztk
Benjamin Strong, Esq.,
Governor, Federal Reserve Bank,
New 'Cork, N.

1 enclosure.

T.

17.751. G73"

trr

,
777/.

SAON83A00







Copy

UNITEL, STATES UNOFFICIAL DELEGATION
REPARATION COLLEISSION.

462.00829/837

7, rue de Tilsitt,
Paris, France,
17th Juno, 1921.

my dear Er. Secretary;
I beg to acknowledge Ilssistant Secretary Fletcher's
letter of June 3d with enclosures.

I called the attention of the Department to this matter
because it was obvious that purchase by or for the Reparation
Commission of dollars in considerable amounts would add a
disturbing factor of importance to the exchange situation.
This actually proved to be the case and the Commission received protests from bankers and from governments. The difficulty was not confined to the original purchases, because
it will later be necessary to bring the money back to Europe,
which involves the same sort of disturbance, reversed.
The result has been an effort by the Commission to protect itself against the risk involved in holding payments
made in various currencies other than the dollar, and for the
present at least this has been accomplished.. The arrangement
involves the assumption of the risk by various governments
interested in reparations and in view of their assumption of
the risk, the Reparation Commission gives the:a the profit,
if any.

The arrangement is provisional and may be terminated by
each government or by the Commission at any time, No govern
ment has yet been willing to assume the risk beyond a definite
amount, so that if the payments by Germany should reach proportions now unexpected, the scope of the arrangement would have
to be enlarged or else the Commissi:m would revert again to
the purchase of dollars.
I enclose a copy of the arrangement which is now in force
with Great Britain, France and Belgium. It is possible that
Italy may make the same arrangement.
The deposits still remain deposits to the credit of the
Reparation Commission. England confines its guarantee to
sterling; France extends its guarantee beyond francs to currencies of certain other countries. There is a definite advantage




-2-

to the governments in making available to the banks, which
are connected with governmental operations, larger deposits
than would otherwise be available, and Prance at least sees
an advantage in having part of these deposits available in
currencies of countries other than France.
As the proceedings of the (;ommission are confidential,
the document enclosed is also confidential and it may perhaps
be undesirable that the details of these governmental arrangements should go beyond the Department itself.
Yours very truly,
(Signed)

The Secretary of State,
State Department,
Waahington, D. C.

R.

W. Boyden.




Copied by EH/

Annex 974 b.
16th June, 1921.

DRAFT mcisior.
1.

In order to avoid disturbance in the dollar exchange
in consequence of the purchase by Germany of large quantities of dollars to meet the payments due under the
Schedule of Payments and pending the adoption by the
Conference of the Allied Governments, Itich is to meet
Shortly, of definite recommendations concerning the
definite distribution of reparation funds, it is decided
to adopt for the month of June 1921 the arrangement
described below, on the understanding that the Commission
reserves the right to have recourse to any other arrangement should difficulties arise in the execution of that
tentatively adopted for this month.

9

The Commission takes note of the agreement of the
Governments of Great Britain, France and Belgium to
assume the risk of losses and gains on exchange resulting from payments made by Germany in certain European
currencies and up to certain definite limits.

Any

loss or gain on exchange resulting from these operations
will be carried to the debit, or the credit (as the case
may be), of the Pober guaranteeing the currency, in the
books of the Reparation Commission.
Great Britain agrees to guarantee sterling to an
amount of Ta 10 million.

Belgium

Belgian francs to an
amount equivalent to 25 million g.m.
France




.7)

4

.11=1

France agrees to guarantee French francs, b sterling
and other currencies within the limits defined below
to an amount equivalent to 100 million gold marks.
The limits to which France is prepared to guarantee
currencies other than French francs and pounds sterling
are -

Swiss francs

35 million

Dutch florins

30

11

Yorwegian, Swedish or
Danish crowns.

30

11

Pesetas

15

France desires, with regard to the currencies
guaranteed by her, that payments should be made by
preference over all other currencies in Swiss francs
up to a total of 20 million Swiss francs.
The Commission decided to accept payments made by
Germany in the currencies indicated above provided that
they fall within the limits stated.

The Governments of Great Britain, France and Belgium
will have a prior claim to take the risk on exchange resulting from payments made by Germany in their respective
national currencies up to a limit of 10 million pounds
sterling for Great Britain, 100 million gold marks in
French francs for France, 25 million gold marks in Belgian francs for Belgium.

The payments thus made will

be deposited to the account of the Reparation Commission
in the national bank of the guaranteeing Power if these
payments are made in the currency of that Power.

If they
are

-3-

are made in another money, they will be deposited
either to the account of the national bank of the Power
concerned in a bank chosen by it and situated on the
territory of the Power in whose currency the payment has
been made, the state national bank remaining responsible
vis a vis the Reparation Commission - or directly to the
account of the Reparation Commission in a bank chosen by
the Commission and situated on the territory of the
Power in Whose currency the payment has been made.
Each of the guaranteeing Governments will receive
from the Reparation Commission full authority to convert
at any time into other European currencies the sums in
connection with which they assumed the risk of exchange.
The Governments concerned will notify the Reparation
Commission without delay of any such operations as it (sic)
may undertake.

No conversion into dollars will be made

except after an agreement between the various guaranteeing Powers

.

In order to calculate the credit in gold marks to
be given to Germany for payments in European currencies
effected in virtue of the present arrangement, the Commission decides to adopt hot the rate of exchange of the
day of payment but the average of the rates of the day
of payment and of the two preceding days.




The

-4-

The rates adopted as the basis of conversion will
be the following For pounds sterling - the average of exchange indicated and
certified by the Bank of England of the
pound to the dollar on the London Market.
For French francs -

the official rate of exchange of the
French franc to the dollar in 7aris.

For Belgian francs -

the official rate of exchange of the
Belgian franc to the dollar in Brussels.

For payment in Swiss francs, Dutch florins, Scandinavian crowns,
and pesetas - the gold mark credit will be calculated in the
following manner The value of these currencies will be calculated in French
francs at the average of the rates of exchange prevailing
between them and the franc on the Paris Bourse on the day
of payment and on the two preceding days.

The franc value

thus obtained will be translated into dollars at the average rate of exchange of the franc to the dollar on the
Paris Bourse for the same days.

The Commission reserves the right of the Italian

3.

Government to make a proposal analogous to those which
have been made by the Governments of Great Britain,
France :end Belgium.




to.

June 20, 1.921,

Dear Eliot!
I

f1:444 enclosed

ain pleased to have the copy of cab e

,

in your letter of June 17, outlining the provisional plan of
organization of the Committee an Guarantees, formed in connection

with the carrying out of Grmanyle agreement to pay reparations.
I shall appreciate your keeping me advised e.s to these tatters,
and shall Lraut the inforvlatiGn btriotly colfidential.
lith many thulks,
Yours very truly,

Honorable Eliot ladsworth,
Assistant Secretary of the Treasury,
Treasury Department,
Washington, D. C.

Gain




June nt 1921.

Dear Eliot!

I am pleased to have the copy of cab e

alr, enclosed
114

in your letter of Juno !7, o.itlining the provisional Dian of

organization of the Oomaittee an Guarantees, formed in connection
with the carrying out of Garwany's agreement to pay reparations.
I shall appreciate your keeoing me advised as to these matters,
and shall Lreut the informatiGn strictly confidential.

With many thmks,
Yours very truly,

Honorable Eliot Wadsworth,
Assistant Secretary of the Treasury,
Treasury Department,
Washington, D. C.
GBtIM




June 20, 1921.

Dear Eliot:

Formal 5cknowledgment of yours of June 17 his been forwarded.

This is just a personal line to suggest the Aisdom of

having Boyden and i..ogan impressed with the need ,f transmitting

information regarding poesibi, pending decisions by both the
COMMibrA311 and the Committee in all matters relating to Germany's

borrowings abroad, and Germany's reparation payments, before those

decisions are made, or policies are adopted by either bAy.
I suppose

it

is superfluous

emphasize this, but

whenever it is pcesibe for them to convey such inforRstion in time
to have it studied over here before action is taken, we will certainly
find it an advantage to us to have it in advance.
Yours very truly,

Honorable Eliot Wadsworth,
Department of State,
Washington, D. C.
BStlilt




June ?O, 1921.

My dear Mr. Gilbert:

I um auteful to yuu fur cull of parphraFe of
a cablegraqi tranr,mitting a Nesevtige from the State Depart-

ment to Mr. 3oyden, dated May "4, which you co kindly
enclosed in your letter of .june V7.

Yours vary tfuly,

Honorabl S. F. Gilbert, Jr,,
Aseistaat Secretary of the Trep_Pury,
Treasury Department,
Naehington, D. C.
GBIMM




June 20, 1921.

My dear Mr. Gilbert:
I thank you for your note of the 17th, enclosing s. co-2y of a

paraphrase

cable-dram transmitted by the Department of State to

which arrived during my absence, and has been

Mr. Boyden, dIted May

acknowlek;ed by my secretary.

can hardly express an opinion in regard to the purpose of
the communication to Mr. Boyden. without some further knowledge of the
amount and terms of the proposed loan.

possibly you will be able to

keep me further informsd.
The comment might be made, howovei, thAtt certain of the Allied

governments may sot view with favor a proposal contemplating priorities
of this character.

At any rate, so long as the firbt reparation payment

stipulated t/.1 b. rude by Germany before September first is still most

uncertain as to conclusion.
Yours very truly,

Benj. Strong,
Governor.

Honorable E. P. Gilbert, Jr.,
Assistant Secretary of the Treasury,
Treasury Department,
Washington, D. C.
BS:MM



ASSISTANT SECRETARY OF THE TREASURY
WASHINGTON

My dear Governor:

I received your letter of June 20, 1921, with
regard to the cablicram frcm the Depultent of State to
Mr. Boyden as to the proposition made by certain New

York bankers for a loan to the *man Government, with

certain priorities over reparations. If I receive any
further information in the matter, I shall be glad to
you.

Very truly yours,

Benjamin Strong, Esq.,
Governor, Federal Reserve Bank,
New York, N. Y.




-Iill,1
,

0°7

,... -5.-

-)s

),:D




ASSISTANT SECRETARY OF THE TREASURY
WASH I NG' ON

June 30, 1921.

Dear Ben:
0\11/12

114

You wrote me a little while ago about the desirability
of having prompt information as to decisions of the Reparation
Commission about payments and other matters.

I took this up

with the State Lepartment and now have a letter saying that
they have cabled Boyden asking that such information be forwarded.
1.1ways yours,

Honorable Benjamin Strong,
Federal Reserve Bank,
Iew York, N. Y.




A04.`

9
-*

alio°







6
sr."

COPY)

*A-

PT

Green
Paris

Dated July 6th, 1921
Recd. 7th, 525pm,
Secretary of State,

rashington, D. C.
Section one.

431, July 6th, 9 pm.
B-51I.

Committee guaranteed after two weeks sittings and

hearings Germans Berlin returns of via Coblenz June 29th, purpose of

meeting arrange practical details of schedule of payments (reparation
commission annex 908).

Discussion was frank, good subject both sides.

Following brief Logan -Heel report.
One.

Germans Berlin wanted to discuss new index as suggested

sub-heading B, paragraph two, article four, schedule.
refuwed stating reparation commission solely competent.

Payments committee

Word equivalent in

sub- heading B unfortunate because necessarily makes new index dependent
on old index.
prosperity.

Real purpose index is to measure Germany's economic
If any satisfactory measure ever discovered this language

must be changed before con be adopted but fact that present index naturally
tends restrict German exports eo hampering her economic prosperity generally
recognized sub-paragraph A.

Germans resistance to definition of vcrd

exports- sub-heading A, article four schedule claiming f &llacy using

(total export figure) as index prosperty or as basis of annual payments,
pointed out that index practically results in actual 26 per cent tex on
each class exports with the result exports which cannot bear burden will
automatically cease to disadvantage not only Germany but also countries
from

They argued ability

from which latter buys and to which Gemany sells.
exports

bear 2E,

per cent not determinable by viewing industry collectively

or averaging wide

margin

commission bold attempt.

to Reparation Commission

industries with narrow margin finishing and
Committee as a result of this discussion referred
following questions relating to valuation of

exports for the purpose of applying 26 per cent indes:

(A), whether

value imported raw material should be deducted from export value
manufactured product; (B), should value goods manufactured outside
imported

by Germany merely for the purpose of resale outside Germany be

included in exports; (C) same question goods foreign origin subject only
in Germany to commission operations; (D), should value reparation deliveries
like coal be included in exports; (E),

various

articles are both imported
Should gross exports

and exported by Germany, for instance coal, wheat.
be reckoned or merely excess
Two.

exports over imports

these articles.

German proposal for payments assumed German exports 1920

at five milliard gold marks, thus total annual
three hundred million gold

marks.

obligation

Also assumed value

three milliard

deliveries in kind.

(B), also tvo hundred

(A), one milliard three hundred and fifty million.

sixty million allied collections by reparation recovery acts assumed follow
British example reducing

collections to 26 per

cent.

(C), foregoing

leaves one milliard six hundred ninety million gold marks to be

other

source for

which they

obtained

offered committee guarantees receipts following

revenues totalling 25 milliard paper marks (figures revenues below
expressed paper marks), viz., tax on capital revenue one milliard four

hundred million, tax on sugar one milliard two hundred million, brandy

monopoly one milliard five hundred million, tax on




tobacco two

milliard
seven

PT




-3sever hundred million, tax on coal four milliard five
turn over tex (unsatze Tener) thirteen milliard seven
Sub-paragraph (A).

Foregoing revenues represent impor

present receipts same sources.

In certain cases laws

drafted and before Reichstag, in other cases laws not

calculations based on exchange rate approximately 15 p
one gold mark.

Sub paragraph (B).

As method obtainin

Germans proposed continuing present method foreign exch
through central exchange office (deviser. Zuteilungen).

operates as semi -governmental agency purchasing quietl
and bourses.

This office lust year purchased over 23

marks foreign exchange.

During January-May 1921 forei

purchases approximated 13 milliard.

This exchange use

reparations clearing offices, international postal tel

way settlements essential food supplies and minor gover
commitments.

Food control to be released shortly, pur

open market.
Three.

View obvious exchange uncertainties

limits delinquent on Germany to gold mark values.
Four.

Committee after hearings communicated

28th, its decisions in (?) notes briefed as follows: su
A, note one "general principles".

Ihile appreciating

substitution other resources than those specified para

article seven schedule committee cannot prosent stage a

base excepted schedule primarily on resources specified

alternative revenues proposed only require consideratio

rT

-4Note

specified resources not sufficient to guarantee full obligation.

deals separately with; (A), obligations of Germany for year 1921-1922;
(B), obligations of Germany future years.

Distinction due fact first

installment variable annuity due only November 15th.

Committee

provisionally willing to accept German estimate 1920 exports value
five milliard gold marks.

Committee provisionally admits value deliveries

kind current year one milliard two hundred million gold marks.

As

reparation recovery act present only in force United Kingdom committee
provisionally admits only 150 million gold marks.
customs yield two hundred million gold marks.

Provisionally admits

Finally, 25 per cent

export levy produces one milliard two hundred fifty million gold marks
per annum lose recovery acts receipts or two hundred seventy-five

million gold marks per quarter which figure provisionally admitted
sub-paragraph B.

For year 1921-1922 obligations are: (A), four

installments five hundred million gold marks, and; (B), two quarterly
installments does not affect annuity due 15th, November and 15th February
next provisionally estimated on above basis at 325 million gold marks
each.

Obligation to 30th April 1922 therefore two milliards 650 million

eeld marks.

To be covered by (A) one milliard gold marks article five

schedule, (B) one milliard 200 million gold marks deliveries kind, (C),
150 million gold marks recovery act.

This leaves balances 300 million

gold marks required secured by specified article seven schedule.
Committee accadirely considers payment customs effective from 15th
4446,111040°-:--

November next

ill yield

/J

necessary arrangements.




.J il:

0,000,000 ar.

12A-4--,rb4Uests :3

4/

any make

Provided above estimates realized not necessary
resort

PT

- 5-

A

resort year 1921-1922 to other resources those specified article
seven schedule.

Sub-paragraph C.

For future years impossible exactly

estimate Germany's obligations but provisionally assumed as 3,300,000,000
gold marks.

To be covered by (A), deliveries kind 1,200,000,000;

(B), reparation recovery act receipts and 25 per cent export levy
1,250,000,000; (C), customs 200,000,000, total 2,650,000,000 leaving
deficit 650,000,000 gold marks.

Sub-paragraph (D).

must be covered by additional assigned revenues.

Foregoing deficit

Proposed tax revenues

as revised by committee yield 1,300,000,000 gold marks or double
amount required.

Commit Ate willing to accept 50 per cent yield

provided 650,000,000 gold marks actually realized reserving right
require large percentage if necessary meet any deficit schedule
payments.

Therefore starting first May 1922 committee will receive

(A) customs; (B) 25 per cent levy exports and; (C) in addition such
percentage as necessary of assigned revenues proposed and accepted by
committee.

Sub-paragraph (E).

Committee reserves rights under article

248 treaty to protect service bonds in all circumstances.
(F).

Note two "interpretation of exports and change index ", see paragraph

one and sub-paragraph (A), this cable.
300 (

Sub-paragraph

) levy on exports.

Sub-paragraph (G).

Note

(Ranking?) Germans presented economic and

political difficulties resulting direct export levy 25 per cent paragraph
B, article seven schedule.

States levy schedule payments not any sense

tax mut method producing necessary foreign values.

Committee willing to

accept alternative resources if assuring required foreign values but no
scheme yet advanced fulfills this condition.

Under the circumstances

cannot renounce export levy and requests Germans prepare measures
necessary







c

7

1(7!," \OWLEDGED
THE UNDERSECRETARY OF THE TREASURY
JUL 1
WASHINGTON
July 11,

5 1921

1921:11S'

NON141°)

"I\
11y dear Governor:

I enclose for your confidential informtion a copy of a cablegram dated July 6, 1921,

which has been received from the American Embassy
at Paris, with further reference to the ue marl

reparation payments.
Very truly yours,

Benjamin Strong, E sq. ,

Governor, Federal Reserve Bank,
New York, N. Y.
1 enclosure.







DEPARTMENT OF STATE
Washinzt on

July 11, 1921.
In reply refer to
TA 462.001129/637

Tha Honorabla
Tha Sacratary of the Treasury.
Sir:

Rafaranca is made to your lattar of May 24, 1921, regarding
Via interest of the Traasury and of tha Fadaral Reserve Bank of
Naw York in reparation paymants made or to ba made by Germany.
A copy of your lattar was transmitted to Mr. Boyden, the

Unofficial American Dalagata on tha Reparation Commission, and
ha has now transmitted to tha Department furthar details in ragarl
to the arrengemants male by tha Paparation Commission to protact

A copy of Mr. Boyden's lattar and

itself against exchanga risks.

enclosure are forwarded har3with.

You will nota that tha enclosura

is transmittad in strict confidenca.
I hav3 the honor to 6a,Bir,
Your oba'iiant sarvant,

For the Sacratary of State:

(SGD.) F. M. DARING,
Assistant Secretary.
nclosura.
Copy of latter of
Tung 17, with anclosura.




July 1S, 1921.

Dear Mr. Gilbert:

I thanx you for your letter of July 11, enclosiL
copy of cable,:ram, dated July 6, 1921, received from the

American Embassy at Paris, in reference to the German reparation payments, which you forwarded to us for our confidential
information.
Yours very truly,

Benj. Stron,7,

Governor.

Honorable S. F. Gilbert,Jr.,
Undersecretary of the Treasury,
Treasury Department,
Washington, D. C.




CONFIDENTIAL

July 15, 1921.

Dear kr. Gilbert:

Referring to your favor of July 11, enclosing copy of cablegram dated
July 8, on the subject of German reparation payments.

It contains so many

references to previous communications and to documents to which ts1 have not

access, that much of it I cannot understand.
It appears that the proposals now under consideration contemplate
three general methods of payments:
(1) Deliveries in kind.

(?) Peymente which will be made abroad to the Allies under the head

of"reperation recoveries."
(8) Payments which will originally be assembled c/ Germany in marks,

and which must be converted into foreign currescies either by Germany before
payment, or by the Allied governments after receipt.

It is with this fund that

we are more concerned than any other, as the process of conversion is what
disturbs the exchanees.

Do you feel that we are udequately advised by experts

on the ground on this particular phase of the matter, SO tiv.t unnecessary ex-

change disturbances, detrimental to the interests of this country, may be avoided.
on the whole, and in the long run, I do not think it will be to our
ultimate disadvantage to-have these payments "bankedm(Eo to speak,) in this
country.

it is during the process of accumulation of dollars thA we suffer

the"growing pains."

Once the dollars are accumulated, however, they must be

employed in this country by the Allied governments, or by those to whom they ere
transferred by the Allied governments in the purchases ef go de, er in the payment




July 15, 1921

The probable ultimate effect, under existing conditions, will be to

of dente.

facilitate our exports, or where debts are °wind: in this country to facilitate
their collection.

It seems to me that our policy should be directed towards regulating
the methods employed so Lh,t a minimum of fluctuation in exchange pill result,
recognizing all the time that the intermediate exchange disturbances, while u
disadvantage, will ultimately lead to our own gain.

If there matters are reaching a point of decision, I further take the
liberty of suggesting the advisability of a conference of well posted foreign

exchange men, who might indicate a course of procedure aa a guide to the
Treasury in keeping track of tbie affair.
Yours verf truly,

benj. Strong,
loverncr.

Honora'ole S. P. Gilbert, Jr.,
Undersecretary of the Treasury,
fre.--sury Department,

Washington, D. C.
b.9:1111




COPY.
Green
Paris
Dated July 16, 1921
Recd. 9;15 P.M.

VHL

Secretary of State,
Washington, D. C.
449, July 16, 5 P.M.
B-515.

Bergman today in a conversation with Logan regarding

German payments stated:
First.

Germany paid to date three hundred million account first

milliard leaving seven hundred million gold marks payable before August
31st.

This balance partly already covered but Germany still short four

to five hundred million gold marks foreign exchange.

This fact common

knowledge results in wholesale selling of paper marks by speculators who
buy foreign exchange, preferable dollars.
Second.

There is a real explanation of the present rise in dollar

exchange as compared with all foreign exchange though in the beginning this

rise probably attributable to dollar purchases under instructions Reparation
Commission in connection with first payments.

Exchange rates other European

countries follow movement of paper mark relation dollar.

From May to

middle July cable rate pound sterling fell from $4.00 to 3.65,guilder fell from
.33 to about .32.

When mark rose lately New York from 1.28 to 1.35 correspond-

ing improvement reflected other European rates; no other explanation is possible
except speculation.
Third.

This situation will be aggravated, perhaps result in crisis

affecting all European exchanges unless remedied.




Suggests as remedy extension

- 2 -

of time, say three months for payment.

Ordinarily

German Government easily

secures 150 gold marks monthly therefore extension would permit purchases, but

more important still would hamper speculators who now have absolute certainty
to work on; thinks therefola effect of formal extension would be to permit
Germany to fulfill obligation by August 31st without taking advantage of extension.

German Government for political reasons cannot request extension but

hopes Reparation Commission may in interest not only Germany but in general
interest suggest foregoing remedy".
Ber7lanls foregoing views as to result of extension probably too
optimistic.

Believe British, French, and Belgian treasurys considering

proposal and that question will probably come before Commission shortly.

Suggest our Trea3ury and Federal Reserve be immedi2tely and confidentially
advised of situation.

Boyden.
HFI1RICK

HS




UNITED STATES UNOFFICIAL DELEGATION

REPARATION COMMISSION

7 rue de Tilsitt

Paris, France,
July 18, 1921.

Hon. Benjamin Strong,
Governor, Federal Reserve Bank,
New York City,
U. S. A.

1,1r dear Ben:

I have gathered from seeing copies of your recent letters
to the Treasury Department that you are quite interested in
Boyden has asked me to forward
the German exchange situation.
you some additional data on this subject, which I do with great
pleasure.

140

A,.

In the previous lette , in which I sent you a copy of our
cable report to Thshington, the German exchange situation was
However, I am enclosinL herewith copy of
fairly well covered.
a report from the General Secretariat of the Committee of Guarantees
on the account given by 17r. Ritter of the German Government, on
June 18, of the functioning of the Devisenbeschaffungsstelle.
This latter office was referred to in our cable as the Central
Exchange Office.

As Exhibit B, I enclose a list, showing the amount of paper
marks used by the Central Office in the purchase of foreign exchange
during the years 1920 and 1921 from January to the seventeenth of
June.
Exhibit C will show the detailed transactions of this same
office, from January to May, 1921.

Ls Exhibit D, I enclose copy of a memorandum, which was prepared
for me by Herr Bergman, following a conversation I had with him on
July fifteenth, relative to the exchange situation as he sees it.
This memorandum served as a basis for the dispatch We sent to the
State Department July 16, 1921, a copy of which you probably now have.




-2-

Hamburg.
Bergman is a confrere of Melchoir Warburg et al
lent in
He is the Financial Representative of the German Gove
Paris, and it is thru him that the Reparation Commission maintains
I am inclined to
general liaison with the German Government.
think that Bergman's views as to the immediate situation are
I am, also, inclined to think that the
somewhat pessimistic.
results of his proposed extension of time are somewhat optimistic.
However, it is interesting.

I am sending the foregoing letter to you by safe hands, and
I know you will appreciate the confidential character of the
information.
Faithfully yours,

JAL /SR




Dear Ur, Wadsworth:

Replying to your note of July 18, enclosing a copy of Ambassador
Herrick's cable of July 16, B -516, the following comments occur to me:
First:

It is, I believe, common knowledge that Germany is still

or.ort a very large but unknown amount in balances available for reparation
payments.

It puts the exchange market and exchange dealers generally in the

position of being able to trade against a very large short account in
exchange which must be covered and does create a somewhat hazardous situation in the exchange market.
Second:

Any considerable movement in the major exchanges (that

is, in the rate for sterling in Nov York or dollars in London) will be reflected under present conditions to a more or less corresponding degree in
all other exchanges by reason of the arbitrage.
Third:

As to dollars already accumulated and those which may

be hereafter accumulated in an orderly fashion without Um due disturbance
to rates, there will be an ultimate advantage to this country because those
credits once established here must ultimately be employed in this country,
either in paying debts to our Government or our citizens, or in the purchase
of goods in this country.

The disturbance to the exchange market resulting

from the use of these dollars by the foreign Governments which control them
will be much less and much easier to oontrol than will the disturbance occasioned by the enforced accumulation of dollars by Germany at a rate beyond
what the normal development of exchange permits.
Fourth:

Avoidance of extreme and violent fluctuation in exchange

is the object to be attained by regulatibn.



Regulation necessarily implies

that accumulatien shall not be attempted by Germany at a rats greater than
exoharge would normally be created by trade or than can be erected by the
floating of loans and the arrangement of similar credits in currencies Which
Germany seeks to accumulate.
LLy personal belief is that Germany cannot and should not be
allowed to mak() payments at a rate greater that,. that which is possible

under exioting world trade conditions and credit conditions.

This means

slowing down the rate of reparation payments and probably deferring to
same extent the conclusion of the immediate payment now pending.
There is some fares in the suggestion that, if an announcement
of an extension is made, the extension will be less needed than if no
such announcement is made.
41-

The whole sublest of the reparation payment opens up 1.14 vista
of speculation as to possible consequences, *J oh 1 believe, in the interest
of our own commerce, should be studied and understood and, 'hen understood,
effort should be made to influence a reasonable control of the operation.

yni,rm vary truly.

Honorable Eliot Wadsworth,
Assistant Secretary of the Treasury,
Washington, D. C.




THE UNDERSECRETARY OF THE TREASURY
WASH I NGTON

July 20, 1721.

Ly dear Governor:

In connection with my previous correspondence
as to the reparation payments rm,de or to be made by
Germany, I enclose for your confidential inforrration
a copy of a letter dated July 11, 1921, from the

assistant Secretary of Jtate, together with copies
date of June 17th from

of the enclosed

Lr. Boyden, and the draft decision of the Reparation

Commission, dated Jam 16th.

The Treasury will be

glad to have any comnents which you may wish to offer.
Very truly yours,

Benjamin Strong, Esq.,
Governor, Federal Reserve Bank,
New York, N. Y.

Enclosures.







4

July 2i, 192'.

CONFIDENTIAL

Dear Mr. Gilbert:

Thank you for your confidential note of July 20, enclosing
certain correspondence on the subject of German reparation payments.
'

I had opportunity tc read this in Washington yesterday, and my leVtter
addressed to Assistant Secretary Wadsworth, of which I handed you a
copy, contains comments which it seems to me are justified, both in
regard to this correspondence and Ambassador Herrick's cable No. 5-518,
on the same subject, which was sent to me by Assistant Secretary
Wadsworth.

Yours very truly,

Benj. Strong,
Governor.

Honorable L. P. Gilbert, Jr.,
Undersecretary of the Treasury,
Treasury Department,
Washington, D. C.
ES: MM







aT?




July 2C, 19P1.

Dear !Ir. Gilbert:

Thie is to aoknowled7e
letter of July 7.6, enclsain

thaaks receipt of your

for :ur c.-)nfidaatisl inforiatio7:

v

I jc4714

copies of Annexes No. 97,5 srld 974 a, and b

f the fu

Com:lesion, with respect to the currencies in --:hif,th the

German Govtirnment is to motke reparation paynentF.

Yours very truly,

ben,. Strong,
Governcr.

honorable S. P. Gilbert, Jr.,'
Undersecretary of the Treasury,
Troftaury Department,
Washington, D. C.




JAMES A. LOGAN

Jr.

Paris, 7 rue
rAlsitt.
26 July, 1921.

PERSOKLI

dear Ben,

I am enclosing herewith, for your confidential information,
the following documents, viz:
-/.

1,-"meriorandum

the
fro el

Delegation of the Committee of
Guarantees at Berlin", dated July 4, 1921, This memorandum encloses
copy of a German Note prepared by the German binis try of Finance
on the German Budget for the year 1921 etc. The covering memorandum
is explanatory of certain parts of the German rote and was prepared
by the representatives of the Committee of Guarantees at Berlin.
re., 9_0

2.- "Finarcial program of theCerman Goverment", dated July
This paper has been prepared by the representatives of
15, 1921.
the Committee of Guarantees at Berlin and should be read in connection
with copy of our cable to the State Department, B-511, dated July 6,
1921, which I forwarded to you in my letter of July 6, 1921.
-

71-0

This paper has
3.- "Balance Sheets of the "D" Banks or 1920".
been prepared by the representatives of the Committee of Guarantees
at Berlin.

4.- "Draft report from the Committee of Guarantees to the
Reparation Commission concerning the interpretation of the word
"exports" in the Schedule of Payments." The Committee of Guarantees,
during its recent visit to Berlin, was instructed by the Reparation
Commission to ascertain the views of the German Government regardim
the definition of the word "exports" as applicable under the Schedule
of Payments, and upon the total value of which the Index referred to
in Article 4 of the Schedule of Payments (copy of Which I have sent
This question is referred to in the above
you) should be based.
mentione cable to the Mate Department. This pater is the Committee's
report to the Reparation Commission but has not as yet been passed on.
5.- "Report of a conversation ;ith Herr Bergman" concerning the
possibility of raising an internal loan within Germany to meet
immediate payments on Reparation ac ourt.
i
6.- Extracts from astatimeL a re,,art made to the state Department
concerning recent conversations between Loucheur and Ilathenau



JAMES A. LOGAN

Jr.

regarding suggested method for "Deliveries in Kind" to erance.
You will of course ai;I:xeciate the confidential character
of all the foregoing. I hope you will find them interesting.

Faithfully yours,.

Ciel""'"""
Incls.

The Honorable Benjamin Strong,
Governor New York Federal Reserve Bank,
New York City.




443111.

COPY

OREM
Paris,

Dated July 27, 1921.

Rec'd 10:14 P. M.

i 164.*

AUG 1 1121
Secretary of State,

nDR m Mom' IWOr

Washington.

of my/ Yon

462, July 27,
B-519.

9 P.M.

Reparation Commission carries deposit sixty-four

million dollars Federal Reserve credit Bank of England and
Bank of France.

Bank of !hgland reports communication

Federal Reserve July 11th in substance: "View conditions of
money market prefer not guarantee in advance rate reinvestments.

Will reinvest best rate of interest obtainable

and reserve one quarter one per cent per annum from such
rate compensation our services guarantee and commitment purchase
fifteen ''.ays notice of the (?) charge one quarter one per cent

yiel'ing one hundred and sixty thousand dollars annually considered high.

Bank of Englary' carries three million sterling

account much more active Whose fifty thousand pounds free deposit yielding commission ore sixteenth one per cent.

Finance

service they represent one eighth of one per cent sufficient.
Suggest Department discuss matter Federal Reserve finance service suspending action pending reply.

Boyden.

HERRICK
HPD




COPY
CIRvEN

Paris,

rated July 281921.

Bec'd 2:43 P. M.

Secretary of State,
Washington.

463, July 28, noon.
R 520.

Your B 259, July 26.

Arrangement for guarantee against

e,:change risks by flovernments continued for July.

change for August.

Boyden.

FIFIZRI7,TC

LM




Do not expect any




Cs

THE UNDERSECRETARY OF THE TREASURY
WASHINGTON

CMFIDFNTIAL
July 28,

1921.

My dear Governor:
I enclose for your information a copy of
a cablegram from Mr. Boyden, dated July 25, 1921,

as to the reparation payments which the Geraan Government expects to make this week wad the first week
in August.

Very truly yours,

3`

Benjamin Strong, Fag.,
Governor, Federal Reserve Bank,
Ferieral Reserve Station P. 0.,
New York, N. Y.

1 enclosure




Fillu,ti-Af

THE UNDERSECRETARY OF THE TREASURY
WASHINGTON

AN vv ERED
JUL 3p

July 29, 1921.

1921

WA
Dear Mr. Case:

I transmit herewith a copy of a cablegram
dated July 27, 1921, from Mr. Boyden on the question

of the compensation of the Federal Reserve Bank of
New Tork for its services in connection with Reparation Commission deposits for account of Bank of
England and Bank of France.

I understan3 that Gov-

e-nor Strong has alrea'y seen a copy of this cablegram in Washinvton.
Very truly yours,

J. q. Case, rag.,
Deputy Governor, Feri_eral Reserve Bank,
Federal Reserve Station P. 0.,
New York, N. Y.

1 enclosure.




i
TRANSLATION OF A REPLY FROM THE GERMAN
GOVERNMENT OF THE FIVE NOTES OF THE COMMITTEE OF

C

,GUARANTEES SENT 28th. June, 1921.

CONFIDEN1 IAL
12.3.1-11T, 29th July, 1921.

The Chairman of the
jeutsche Xriegslastenkommission.

Sir,

In the name of the German Government and with reference to the
letter of the Imperial Chancellor, N°. V.L. 5533, of the 1st July, 1921,
the German Kriegclastenkoramission has the honour to make the following

reply to the notes transmitted on the 28th June, 1921:
The German Government has no objections to raise to the estimates
drawn

up by the Committee of Guarantees in Note 1, under Article IV of the

Schedule of Payments of the 5th May, 1921, in respect of the payments to be

made by Germany in 1922 and the following years.
In regard to the dates of payment, however, attention is drawn

to one point, which still requires explanation.

_According to the scheme

of the Committee of Guarantees, the marterly annuities,

Which under the

Schedule of Payments, fall due on the 15th May, 16th Jugust, 15th November
and 15th February, shall be paid at the rate of one third two months in
advance, and another third one month in advance.

Should this scheme be

literally applied, the German Government would have to pay 4 x 1/3 of
275 millions

two months, and 4 x 1/3 of 275 millions one month before

the date provided for in the Schedule of Payments, Which would amount to
a charge of roughly 4,625 millions mold marks per annum.

The German

Government is of the opinion that this charge is not provided for in the

Schedule of Payments of the 5th May, 1922, and recuests the Committee of
Guarantees to confirm that, if GerMany aarees to the method of payment
laid down in Note 1, she will be credited with interim interest at the
rate of 5% in the usual manner on the sums paid in before the due date.
The

Committee of Guarantees further requires that the Customs

receipts shall continuously be paid in foreign currencies or gold at such
a place as shall be indicated by the Committee of Guarantees.
Government, therefore, would be obliged continuously

The Garman

to procure currencies

for Customs receipts said mould lose its necessary freedom of action owing



to the necessary general procuring of currencies.

The Gerean Govern-

ment is of the opinion that the spirit of the Sohedule of Payments would
be complied with if the Customs receipts were paid in quarterly instalments, vie. if

the, corresponding value of the Customs receipts for the

next but one preoedine German financial quarter were paid on the 15th
January, 15th !pril, 15th July and 15th October.

In the opinion of

the German Government, however, it is not necessary continuously to
Change the Customs receipts into foreign currencies;

it will be quite

sufficient if they remain attached fer the purposes of the Committee of
auarantees until the payment of the qaarterly instalment of the fixed
aunuity has boen covered by deliveries in kind, or by some other moans.

II.

In accordance with
of Payments of the

rticle VII, f2, Sab-Para, c of the $chedu.1e

5th May, 1921, the German Government has offered to

transfer the revenues of sex different taxes,

makine a sum total of

25,000 million paper narks, as security for that part of the German debt
vhich is not covered by deliveries in kind or the receipts obtained in
Great Britain through the "German Reparations Recovery Apt", provided
that the claims to the import and export duties and revenues arising
out of a tax on expert values,

under Article VII,

r2, Sub-Peras. a and

b are reneunced.
On the Other hand the Committee of Guarantees has declared that

it amid not for the

moment renounce the claim to the Custeme receipts,

which were assessed at 400 million Bold marks, nor to the revenues
arising from a tax on export values, provided for in 'art. 7, /e2,Sab-loarae

b of the Jchedule of Payments.

The Committee is merely willing to

allow the revenues from the six other taxes to rank as a supplement,

and claims 64 of these by way of guarantee.




S
(3)
The German Government is therefore face to face with an
entirely new situation.

The offer ofthe revenues arising out of

6 taxes and amounting to 25,000 millions, as a substitute for the
eurcos of revenue required under Art. VII,

2 sub- paras. a and

b, and supplementary to them, was made for the purpose of covering a sum of 1690 million gold marks.

Since the Committee of

Guarantees considered itself for the time being unable to renounce
the sources of revenue mentioned in Art. VII, § 2, sub-paras. a
and b, either in point of fact or on a question of principle and
particularly demanded the payment of the equivalent value, it is
now necessary to offer a supplement to the funds mentioned to the
amount of 650 million gold marks.

Under these oircumetanoeo

the Geyman Government can no longer keep open its offer of the
lEsth June. It also greatly reerets that it cannot comply with the

suggestion o_ the Committee of Guarantees to the effect that
half of the revenues arising out of the 6 different taxes should
be treated as a supplement.

The German Government i

obliged

to take steps to ensure that its financial and political freedom
of action is not restricted any further than is made
absolutely necessary through the direct application of the
Schedule of Payment::.

Ueneceosary work and expense world also

result from the transfer of the revenues of 6 different taxes.
The Gorman Government therefore proposes to the Commitece.

tee of Guarantees, as security for the sum of 65u,gold market

-

the revenues of the turnover tax (exeluding luxury tax) up to the
amount of 12,600 million marks. In doing so, the Gorman
Government acts on the supposition that the bill for an increase
of the turnover tax will become law and come into force as from
the let April 1922. Should this supposition prove false, the
German Government reserves trio right to/







submit other proposals immediately.

The Committee

Of Guarantees is hereby requested to accept this
proposal as,supplement to the other funds allooated.

With regard to the assignment of Customs receipts,
the German Government, in order to avoid any possible
misunderstanding, explicitly states that under Customs
duties which are assessed at 200 million gold marks,
in conformity with the German statements made at the
morning Sitting of the 18th. July 1921, only those
taxes should be understood which are levied on the import
of goods in accordance with the German Customs tariff
and German law upon the payment of Customs duties in
gold.
ill.

with regard to the suggestion of the Committee

of Guarantees as to the desirability of stabilizing
the rate of exchange of the mark by balancing the budget
and by stopping any further note issues, the German
Government begs to point out that at the present moment
a large financial programme is being prepared in aocord-

ance with which existing taxes will be considerably
increased and new taxes introduced.

By this means it is

hoped to balance the receipts and expenditure of the
ordinary Budget.

Expenditure necessary to the execution

of the Peace Treaty, which will be required for a longer
period, and in particular expenditure in connection with
the execution of the Schedule of Payments and the cost
of the Armies of Occupation, will be verged

-

CIO

(5)

into the ordinary budget, eo that out of the expenditure occaoioned by the Peace Treaty, only those amount

which may be

expected to be reduced in the near future, will remain on the
fytraordinary budget.

The right of examining in detail the

teuVrewel

mode of payment is aeolenved until the seearate figures have been
fin aly established.

The opportunity is hoevver now taken of

pointing out that the expenditure of the ordinary budget is
increased by more than 100,000 milliene, and that this finan-

cial prognems makes very heavy calls indeed upon German
This transformation of the budget will only

taxpayers,

come into full effect in 1922 and the following years.

It

rill therefore only be possible gradually to restrict new note
issues. In hoe

ar the attempts to arrive at a balancing of

the budget and the suspension of the issue of ne, notes are
capable of realisation will furthermore de end considerably
upon the facilities granted to Germany to ro-trict unproductive
expenditure under the Peace Treaty.

The German Government is

ready to supply the Commitee of Guarantees, ueon request, with
fuller details as to the amount of what, in its opinion,
constitutes unproductive,expenditure, together with ieformation
regardine the object of such ee9enditure.

Opportunity is now

taken of drawine eoecial attention to the cost of occupation
of the

Ilineland, the expense c).' the Interallied fissions of

Control, and to certain military measures taken by these Bassions.
IV.

The second Note of the Committee of Guarantees exhaus-

tively summarises all the r marks which helve been made on the
German side in regard to the meaning of "3xDort" and improve..

rents to be made with regard to export statistics.
V.

As has been pointed out meny times by the German

representatives at the joint meetings, considerable hesitation
is felt in regard to the direct collection of 25% of the

equivalent value of German eports.
sary on thi,



It does not appear neces-

occasion to go once more in detail into the

46)
difficulties.which stand in the way of direct collection.
The German Government maintains its polt of view: in fulfilmant
of the r?quest contained in Note 3 it will AoTever prepare a system for the direct collection of a certain percentaGe of the
equivalent value of exports.

The German Government however

reserves the right of getting into touch once more with
the Committee of Guarantees on this matter.
VI.

i

Lo far as the organisation of a system of supervision

concerned, reference is made to the verbal statements of

lerr Schroeder at the interview of the .9th June.

The German Government has the honour to state once
more th:A it regards the prescribed measures of supervision as
too 1E1.r-reaching.

It is of the opinion that these measures

will prove a source of difficulty and/







(7)
friction of all kinds Which would be calculated
to endanger the material aims of the control.

The r_ason for providing securities in
accordance with Art. VII of the .,chedule of Payments

is to provide the holders of the bonds to be issued
with security that the service of interest and
amortisation will be carried out correctly and
punctually.

Au exact dates of payment are prescribed

under Article IV of the Schedule of Payments, and
as the individual payments are to be maaa by a number
of instalments during the intel'ost year (aiAgenjahr),

this alreaay amounts to a guarantee for the proper
functioning of the bond service, and the secarity
required under Article VII of the Schedule of Payments
should be regarded as additional thereto. In other
words recourse ehould only be had to the Guarantees
if, and as soon as, the current obligations are
not fulfilled correctly and punctually.
long as the individual payments ar

punctually effected, there

Therefore so

correctly and

no necessity for the

establishment of an organisation to control the
matter in detail.
The proposed Lazpervisory Organisation

demands much more than that which has hitherto been

expected of other States on the taking up of foreign
Financial cont;o1 has so far only been
exercised over :hates, the administration of which at
critical moments should really not be compared with
that of the present German 1L:aUnistration. In Germany

the Finance Aiministration con ucts its business in an

S
40




(8)
appropriate and orderly manner, strictly observing all
the regulations of its service.

The Committee of Guarantees requires:-

(a)

Control over the correct entering-up and
classification of export values by the
Imperial Statistical Bureau (Statistische
"eicheamt);

(b)

Control over the finance administration
in general, and over the correct entry
classification and delivery of the Customs

receipts and receipts from the various
taxes which h -ve to be h :nded over as

security for the remainder of the interest
which is not otherwise covered.

The following remarks are made in connection with (a):The German Government agrees to an of_icial
of the Committee of Guarantees being attached to the
Imperial Statistical Bur eau (Statistisohe iteichsamt),

ior the purpose of studying the methods employed

when establishing trade statiAics, so th-A he may a :ure
himself of the manner in which these methods arc
applied, and of their Luccess, and report thereon to
the Committee of Guarantees.

The Imperial Statistical Bureau (Statietisches
1lichsamt) will be instructed to supply all information
required to this end, and to grant permission for
the examination of the official files. This permission
however is granted subject to only ouch information
being required as may be really necessary for the fulfilment of the objects of the Committee of Guarantees; and




(9)

also that the Imperial Statistical Bureau (Statistisches
Reichsamt) will not be called upon to :Jve information
beyond that which it may susely under the legal provisions

governing its relations with the public Who are undr
the obligation to furnish such statistics. Officially
speaking, the German Government acts on the supposition
that Buell information can only be required as a matter

of principle from the President of the Impsrial
',:;tatistical Bureau (StatiAisches iteichsamt).

In

order to simplify work, the President will appoint
senior official to whom the representative of the
Committee of Guarantees must apply for assistance.

The representative of the Committee of Guarantees

will rceive all possible assistance within the above.
mentioncs:' limits.

The German Government also agrees to an
occasional inspection of the Declatation Offices
(Anmeldestellen), where the representative of the

Committee of Guarantees can assure himself of the manner in
which the export declarations

made, and of their

regular transmission to Berlin,

The German Government however considers it

necessary that this suervisor should always be
accompanied by an official of the Imperial Statistical
Buy.eau (Statistische

i:eichsamt).

The German

Government is of the opinion that only by such means will
it be possible for any objection which may be raised by
the representative of the Committee of Guarantees, to be
qaickly and adequately ;salt with and misunderstandings
avoided.

There will be difficulties in the mky of the

quarterly convoction of the Trade Statistics Board




(9)
also that the Imperial Statistical Bureau (Statistisches
Reichsamt) will not be called upon to give information
beyond that which it may supply under the legal provisions

governing its relatione with the public Who are undr
the obligation to furnish such statistics. Officially

speaking, the German Goverment acts on the supposition
that such information can only be required as a matter
of principle from the President of the Imperial
eeatistical Bureau (Statiitisohes Iteichsamt).

In

order to simelify work, the President will appoint
senior official to whom the representative of the
Committee of Guarantees aunt apply for assistance.

The representative of the Committee of Guarantees
erill receive all possible assistance within the above.
mentioned limits.

The German Government also agrees to an
occasional inspection of the Declatation Offices
(einemeldestellen), where the representative of the

Committee of Guarantees can assure himself of the manner in
which the export declarations are made, and of their
regular transmission to Berlin.

The German Government however considers it
necessary that this supervisor should always be
accompanie

by an official of the Imperial Statistical

Bueeau (Statietischee ileichsamt).

The German

Government is of the opinion that only by such means will
it be possible for any objection which may be raised by
the represent' tive of the Committee of Guarantees, to be

qeickly and adequately

salt with and misunderstandings

evoided.

There will be difficulties in the way of the

quarterly convocation of the Trade Statistics Board




(10
(Handelsstatiotieche Beirxt), as the Zact should not be

overlooked that it will in many cases be impossible for
the honorary active members to accept the invitation to
the quarterly meetings.

The re.:_rman Government there-

fore suggests th.A the representative of the Committee
of Guarantees shall by virtue of his work at the
Imperial Statistical Bureau (Statistisches Reichsamt),
-ecide whether it will be necessary to call the

quarterly meeting of the Trade Statietics Board
(Handelestatistische
Annex I.

eiret).

Annex I with 10 sub-annexes contains -

classified and explained - the regulations governing trade
statistics.

The foibwing explanation is given in connection
with (b):...

According to Note

a,

N° 2 the Committee of

Guarantees wishes to depute to the Imperial Ministry of
Finance a special representative belonging to the Delegation of the Committee in Be:elin, to whom Shall be accorded

the right of examining all documents (instruction;,

circulars, etc.) relative to the assessment and collection
of the

sources of revenue.

The representative

shall also be empowered to demand that the monthly
summaries of receipte from the allocated sources of
income be submitted to him.

A number of supervisors

attached to his service are to obtain explanations
from the district and local officials of the Imperial
Finance AJministration, and chock their account.ikeeping.

in this way there would be the

special

supervision of the

Delegation of the Committee of Guarantees in addition to
the existing German control over the actual /




entry of ell Uleetome duties and tax amounts which are

legally payable, their entry in the preeoribed receiptbooks; the correct transfer of the entries on the
reeeipteregistere of the Colleotion Depots, the eeoeipt
Registers of the Oberfinanaleausen end the: Of icial

eceip :.eporto of the Imperial Aetistry of Finance, whieh

have to bo published monthly. In addition to the Gore=
control there would also be the further su,:ertition

of the Dele6etion of the Committee of Guarantees,
exercised in one way or another.

such oupervieion would only appear justifiable
in the eyes of the Gertean Government if eeirean

methods were ina equate or insu:ficient.
Annex II.

Annex 11 with il sub -annexes, eiveo an

exact eeplanation of the organisation and adminieration
of receipts, and particuleely of the organisation of the
correct and complete method of dealing with such receipts.

According to thie every poceible_guarantee ie furnished that
all eum

legally due for Cuetome: 7)utiez or Tax amounts

and all other '.1 ",20 :Till be collected; that the ',mounts
lend

thus collected will be entered in the
this

ceipt :..00ks;/from

ill be transferred ':v:ry month etel quarter on the

leceipt4-egieters and 6tatements of it coipte, ethich have
to be handed in to the Imperial Aceounto G.iLice of the
Imp xial Itinistry of Finance,

To b gin with, prellianary

books to the Roceint peaks are kept.

The prescribed

eertifice stating thet the data contained in the
iteoeipt elegietere of the Collecting Ofeices reeree with

those of the Aeoeipt Books, ero made out in the Local
Administrations by senior of-Ticials of the l'inance




(10
Administration who have not been concerned in the collection
of the ,..cceiptu nor is tao kossoing of thu aoceipt-Buoks.
The certific.?,t.:s concerning the 00=0ot-tie:is of the ,reports

drawn up by the "uberfinanzkasoon" are issued by the
senior :Directors of Accounts is the district administration,

,hich are ov r the Gborfinanzka;sen".

In this manner

there is complete contrail and Guarantee in rot:meet of the
acurate tr:,nsaription of the :taxes legally due into the
eoeilyt Looks, and thoir correct transfer from these 4,oceipt,

ooks into the

,ceeipt- .ogisters and

solApt.,eports. In

addition, provision i s made for a fu thor control

of

the

books by the Accounts Of ices of the Lanaeefinannanter.
Finally, the hie host Accountancy Service of th:: himpire,

the Accountancy Department (.echlun3ihof) in Pot,dam,

verifies the individual accounts to be presented to it by
the "Obarfinanzkassen", and the g.noral account to be
drawn un by the Imcrial Paying-in Office (reichAuptkaSse).
In addition to this, the prescribe.1 ordinary and e traordi.nery
gua-antee,

mnd revenue rovisions off r a still furtber

In the opinion of the Gorman Goverment, this

well-trou-ht out, porfeete.,1 systIm of control, rhich has

stood the t,:st for more than 100 yer

,

offers every

guarantee which the Committee of Guarantees could desire in
view of ita responsibility in the matter.
The iiormaa Uovornment taereforJ requests that
aupervioora shoula not be sent to the ..ijis'c,rict and Local

Offices to collect information aaj examine the books and

accounts kept in those oficos,
It would also appear unaoceusary to the German
Government for an official to be aermanonday, W.taehed to
the Im.vrial Ministry of Finance, and for him to be (supplied)




(13)
anpplied with ell the 6;eheral decrees and documonts relating

to the prescribed sources of revenue, rrom which the
monthly receipt reports are prepared by the Imperial ;einitity
of finance.

The general orders in connection with Wetoms

:Mies are regularly published in the weeichezoliplatts,
and those referrine to taxes in the "Aeichesteuerblatt".

These two oeeicial pepere, of which copies are attachou to
Annex II at; emb-annexen 12 and 15, will be LeeLaazaz
supplied in as many copies ae r ouiredto the eJelegation of
the (krmetittee of Guarantees.

4iurthermore, Vie Delegation of

the Committee of Ceerentece will receive eeverai copies
of the monthly

ecaipt eeporte drawn up by the Imperial

XiniEery of '2inancee (Oub-Annex 7 to Annex II).

oho ld the

Cometittee fuether desire to send a representative to

examine the doeumento (monthly an' quarterly eeceipt sports
of the Nebertineezkaeeena) upon whioh the totl monthly
iie;ures for the revenues accruing out of the Gu.tams

euties and Taxes lo the whole empire, ere estebliehed by
he imperial Aceountency =epertment of the Lini try of
einanoa, the Geretan Goverment is willin8 to give tne
neoetesary instructions to this effect.

It is however

requested th..,t the officiel thus 7.ieleeuted ehoul- only

conduct such examination and verification of the total
monthly return of Cueteme duties en,:, turnover tax, wren the

finl .figures hove been eatabliehed and published in the

eleidiel heccipt oporte.

The Receipt eenorte of the

uuberfinenzkaueon" contain, as may be seen froa aubunnexes
ti and a of Annex II, not only the nonthly or quarter y receipte flean Cu tome, including; extra chergee and

also the receipts free the numeroun other branches of
Imperial Texes.

They met therefore bo passed through the




(14)
Imperial Accountancy Department so that the total figures
for the separ-to in;:eo may be worked out, an

can only

be eubmittod in a elaseified form when each montios work
has been completed, i.e. when the Official -eceipt 1eport
has been drawn up,

or the same reaoon it ie not po.eible IVO

supply the zoresentative of the iieleeneion of the Commitee
of Guarantees with these eeceipt 1:oports, ae only one copy

eC oaoh is forwardcj to the Imperial Aceountency Department.
These lieporte can be examined in the Imp .vial Aeeountanoii
Department it .pelf.

The Imperial Linietry of elnanco will appoint a
ienior off iceal who ;-111 tranreait the wishes ol the represen-

tetive of the CeeemiLtee of 'euaranteee to the proper quar-

ter, and the services of this Official Alould be employed in
each matters,
The

bove observations furnish the Committee of

Guarantees with a complete explanation of the existift
Gexman reeulatione eoveenine the correct collection and
eeeploymnt of the eevenues of ehe
eutur

neeotiations with the Commiteee of Guaran-

teee would, in the opinion of the Geeman Government, be
conoiderably facilitated, if one or more representatives of
the Committee of Guara7Itees were deputed to visit the

competent offices and convince himself or themselves of the
correct working of the organisation as explained above, on
the basis of the doe-temente and regulations which have been

transmitted. The Carman Government is always willing, upon
request, to eive the required instructions to this effect,
arc l to Brant all necessary facilitiesee

I hove the honour to be, LA.r,

Imperial eeinietry of iinenoe
Geheime IAiZL Si,,

Aiwa 1

LIST OF LAWS IN FORCE TIM REGARD TO
TRADE STATISTICS.

lub-unex

la_

Regulation relating to statistics of trade

with foreign countries dated 7th. February 1906
(Reiche-Gesetzbl. 2nge 109),

Exeoutorj ord,-rs and service regulations in
Sub -Annex s
I
Connection therewith dated 9th. February 1906
(Ccntralblatt fur des Jeutsche Reich no.9, .'age 137)
Decree of the Bundesrat dated 5th. April 1909

Sub-Annex

13

with regard to alterations in Para. 20 of the
executory orders regarding the statisti.cs of trade with
foreign countries dated 7th. February 1906 and Annexes

(&) and (C) of the statistical trade list (increase of
those goods for which in certain trade indices, beside the
statistical number, the usual trade term is rlso to be
included, and the extension of the obligation of declaring export value to 1336 Nrn. and with regard to import
to 32 Km. (Zentralblatt fir dab Deutsche Reich, gage
141)
-Lkinal




Decision of the Rundesrat dated 9th. Lebruary
1911 with regard to rlterations in the executory orders
and service regulations regarding the law in respect of
4

the statistics concerning trade with foreign countries dated
7th. February 1906 and also '=nnexes A and C of the

statistical trade list (increase of those goods for which
in certain trade indices, beside the statistics' number,
the usual trade term is also to be included and the
extension of the oblige tion of declaring export value to
all goods and as regards import to 61 lime of the statistical
trade list). (Zentrar.bl. fir des Deutsche Reich, ?age 41)

Au u

r P TAWS IN FORCE !VI TH REGARD TO
TRADE 3TATISTICS,

T.1"7,11

Sub-Anne:z

1.

S jib - Anne Z

I

Lt.

Regulation relating to statistics of trade

with foreign countries dated 7th. February 1906
(Reiehs-Gesetzbl. rage 109),

Exeoutory orders and service regulations in
connection therewith dated 9th. February 1906
(Centralblatt fiir des .0eutsohe Reich 1 o.9, .Wage 137)

Sub-Annex

I3

ao

Decree of the Bundearat dated 5th. April 1909

with regard to alterations in Para. 20 of the
executory orders regarding the statistics of trade with
foreign countries dated 7th. February 1906 and l'ernexes

(A) and (C) of the statistical trade list (increase of
those goods for which in certain trade indices, beside the
statistical number, the usual trade term is "lso to be
included, and the extension of the obligation of declaring export value to 1336 urn. and with regard to import
to 32 Urn.

(Zentralblatt fiir dee L'eutsehe Reich, Wage

141)
Su47-Anne

I




Decision of the Bundearat dated 9th. February
1911 with regard to rlterations in the executory orders
and service regulations regarding the law in respeot of
AL

the statistics concerning trade with foreign countries dated
7th. February 1906 and else annexes A and C of the

statistical trade list (increase of those goods for which
in certain trade indices, easide the statistical number,
the new)l trade term is also to be included and the
extension of the oblige tion of declaring export value to
all goods and as regards import to 61 Urn. of the statistical
trade list). (ZentraLbl. fur des Deutsche Reich, ,'age 41)




Annex II




Statement with regard to existing German reCulations concernins the assurance of returns, exact statistics
and payment of customs receipts and the turnover tax.
(1)

ORGANISATION OF

STATS; FINANCA

ADMINISTRATION,
A,

General:

The central administration of the whole of the
financial administration of the State is the State L- inistry

of Yinance (Reichsfinanzministerium).

Below this come the

Provincial Finance Bureaux (Landesfinanerater)(26), from
which again depend the finsncial offices for the ndministration of direct and trede taxes and the Chief Cu toms
Offices for the administration of the Customs and sxcise
(Verbrauchssteuer).

Under the Chief Customs Office come

the ordinary Customs Offices (several thousands) which are
entrusted Tith the levying and collection of the Customs and
vise duties.

In addition, the districts of the Chief

Customs Offices arc divided into suoervisory districts for

the supervision of the general Cuytom. and Axcise Department.

These supervisory districts are p_dministered by

special officials.

n the Customs
3ervjce:

The Customs louses and their dependent Customs
Receipt Bureaux are under the orders of the Customs
Cashiers.

In the case of small Cu .toms Offices these

officials are the Heads of the General Customs and -Excise

supervising services of the districts in Which such Customs
Offices are situated.

In the case of larger Cu toms

Offices these officials are the suservisors (Amtsvorst5nde).




These cashiers are not concerned in the administration of
the current cash receipts.

The cashiers are under the

orders of the Heads of the Chief Cu toms Offices: These
again are under the order;

of the President of the Department

for Cu .toms and Axcise :uties of the Provincial Finance

Bureaux (Landeefinanzftter). At the head of the
Divisions of the Provincial Finance
it; the President.

thole of the

ureaux (Landesfinanzgmter

The Higher Finance 'Bureau (Oberfinanzkasse)

to which the Cu toms Cash Offices are subordinate is incorporated in the Provincial Finance Bureaux (Landesfinanz!Later).

The Central Cash Department for the State is the

State Treasury (eichshauptkasse).
C.

junervision of the Cash -receipts as re;:ards the Turnover

The remarks made above with regard to the supervisory service of cash receipts for the Customs Administration
also holds good for the State Taxation Administration which,

together with the former, constitutes the State Finanoe
Administration, together with the Administration for the
Turnover Tax.

In the place of the Chief Cu tom

Offices and

the Customs Offices come the Finance Offices (1'inanz5mter) an
in the place of the Cu ,;toms Cash Bureaux (Zollkassen) come
the Finance Cash Bureaux (i?inanzkassen).

(1

cola* T ION A1ND V...AIFICATION OF TIt; CULiToikJ

MCZIPT..
The import of goods from abroad according to the

Customs Union Law of the let July 1869 is linked up with
certain lines (Anilways) and landing places.
as soon as receive

All goods

must be notified to the Customs Offices

situated at these places.

From thi

moment onwards the

goods ar,1 controlled while they remain in Germany

uninterruptdly by a syJtem of Cu:toms papers and registers




(notification of entry of goods, consignment notes and

waybills) and are supervised until they pass into free

coaerce, having paid Cu toms duty, or on account oi their
being free of duty or until they are re-exported. The amount
of duty to be paid is noted on the Cu toms papers and a
note ma Se thst collection has been effected, the booking

dumber in the Customs Receipt Book being given.

The daily

elms on account of a single customs receipt are transferred
from the Cu tome ieceipt Look into the actual Cash 'Book.

The declarant receives a leceipt for every payment made
direct to the Cash Office.

In this receipt the number of

the Receipt Book also has to be given under which the amount
is entered. The declarant has an actual interest in
obtaining this receipt as it forms a proof that he had paid
the Customs duty on the goods.

The Customs Service must, as a matter of principle, be carried out by two clzicials.

The management of

the cash business io also on principle in the hands of two
officials (Cu. toms Offices which are run by one official

alone, are situated on unimportant routes where there is
not such traffic, and the receipts are unimportant).

The

bupervisory Cashiers (Kassenaufsichabeamten) and the Heads
of the Chief Customs -ffices are continuously vidting

the

Customs Offices for the purpose of verifying the conduct
of business without any previous warnins, or for the holding

or psviously-arranged ordinary or extraordinary surprise
cash examinations.

In the same way the

Department for Customs and :;xeise Duties of the i'rovinoial
:Finance Lureaux (Landesfinanz5mter)

occasionally verifies

the cors:uct of the Customs Offices in regard to business and

cash administration.

At the end of every month and quarter the results
s-esssia7

of the period in question arc cstaii,leshe-d.

AR.C2

These results

are immediately transmitted to the "nigher ginance Bureaux"
(Oberfinantkassen) in monthly and quarterly Receipt Registers

(Ainnahmenachweisungen) attested by the Supervisory
Sub(Annex 1)

Caehiers (Kaesenaufsichtsbeamten) (compare § 98 of the
annexed model of a formular for the Yinanc

Bureaux

(11nanzkassen) which is provisionally valid, and the proofs
of the Receipt je,isters).

The Higher Finance Bureau

(Oberfinanzkaese) classifies the data received, enters
Sub(ennexes 6 & 4)
them every quarter in the Account Book kept by it, and

transmits the results for the whole distridt of the Provincial Finance Office (LandesfinInzamt) in the form of monthly
or quarterly Receipt Reports, to the State Accountancy
Sub(Annex 2)

Department (eeichsrechnungestelle) of the State .elnietry of

Finance. 0 38 of the formular for the "Higher Finance
Sub(Annex 4 &

Bureaux" (Oberfinanzkaesen) and proofs of the 1eceipt
eports).

On the basis of those documente, the State

Accountancy Department (eeichsrechnunesetelle)prepares a
vammery from which the revenue arieing out of each individual branch of receipts, and arising out of this the
Customs eeceipts for the whole State may be seen.

This

summary is published in the "Reichsanzeiger" and tee "Zentralblett far das Deutsche -eich".
Sub(Annex 7)

A copy of the eummary for

the month of Lay 1921 is annexed hereto.

At the end of the year, the Higher Finance
Bureaux (Oberfinanzkassen) prepare in addition a epecial
detailed Register (Ainzelnachweis) of the receipts as
recorded in the Receipt Registers and Summaries, as per
Sub}

example annexed.

In these detailed Registers (: Anzelnach-

(Annex 8)




weis) the annual results of the individual sources of revenue
are given separately according to Customs Offices (eollkansen
The detailed register (einzelnachweis) which forms the
basin upon which the "Rechnungshof" of the Genlan State
(which i s entrusted with the supervision of all revenues of

the :state), can verify the annual account :,

is also submitted

to the Impeeial State Accountancy Department (Reichsrechnunge

stone).

The digher Pinance Bureaux (Oberfinanzkaesen) must

in addition draw up a final administrative account

(Verwaltunguab:Lchluss)
with

Sub+Annex 9

:Alb-,nnexe

It,

for the official year in accordance

and transmit it to the estate Accountancy
Thi.: final adminis-

Department Loicherechnungsstelle).

trative account must include the toal receipt., and
expenditure of the Nigher Yinance bureaux (Oblrfinanzkassen).
The correctness of thin account and its agreement with the
books of the Hi6ner Yinance .LAireaux (Uberfinanzkassen) and

the above-mentioned detailed iegister

(inzelnachweis) of

revenue, must be explicitly attested by the .2irst Accountant
(-:rste

ieollnunessclirektor)

of the Provincial finance Office

(Landesfinanzamt) after a thorough comparison.

(3)

FURTILlit 123ASUR

Q

PaOTZ.VION

SXMLINATION

OF ipOOJCS AU) 1...:.:CO4D16_,

As stated above

No.

(

)

the Customs Offices

(Lollkassen) close the Cu tome :leceipt 'Books once a

quarter, and thereupon forward them with all records and
preliminary books to the Provincial Finance Officee
:pub-Annexes

In accordance with the annexed decision

(Landesfinanzmter)

10 & 11.




of the Bundesrat,

aced 27th -ovomber 1913 - $? 1300 of the

Protocol and N 159 of the printed matter

the Provincial

Finance Offices (Landesfinanzamter) comparethe preliminary
books and records with the entries in the Receipt Books, so
that no actual receipts arc miesinL; from the Receipt Looks;

check the correctness of the adc'itione in the heceipt Nooks

and the accurate transfer of their total amounts to the
additional Registers (detriled -o6ister of 1,eceipts
(- I:inzelnachweis der Einnahme), final alministrrtive account.,:

(Verwaltungsabschluss), annual accounts, deports on
r.cceipto) and verify the correctne s of the records both for
exactitude of subject matt-,r and accuracy of calculation.

Jbjcctionn are explained and remedied. Should there be
missini;; amount

,

they will be called in and entered on the

current receipt books.

In this manner every possible care 1:!, taken to prevent irregularities, which is guarantee .1 by the _act that

A.1 Customs and Tax Receipts to Ahich the estate is entitled,

re correctly recorded on

reported to the State Accountancy

Department (Reichsrechnung:etelle) every month.
(4)

COLL3CTION AND it.4;OUADING
H.

TUARVT4h TAX.

Turnover Tax declarants must notify the Tax Office
upon the cormencoment of their commerciial or professional
business, and must surrly notes for the purpose of establish-

ing the amount of the Mx to be levied.

They arc subject to

A.tcxt---




tm

control.

The competent authorities for the administration,
establishment and collection of the Turnover-Tax are the

Finance Offices (Finanzamter), Turnover Tax Office (UmsatzteuerF-Iter). Over these come the irovincial l'inance offices
(Landesfinanz6mter).

The Turnover Tax Offices must keep the most complete list possible of the Tax declarants (list of names,

turnover-tax register) based upon the declarations furnished
by the latter, and the information received from the 2rovincial authorities (Landoebehoerden) (i'olice authorities and

those who are concerned viith the control of arofiteering,etc.)

The Turnover Tax Offices must also call upon the Tax
jeclarants to provide kurnwv:r ilex Jeclarut,,ione with retard

to the total amount of taxes to be paid. The Turnover Tax
Office controls the punctual return of these declarations
by the help of the Turnover Tax ::e6isters. The Turnover Tax

Office examines the declarations, assesses the tax and
enters the contents of the declaration and t:se amount of tax

thus assessed in a Turnover Tax List kept for each calendar
year.

This takes the place of a Debit '.iegister for tax




tax amounts which are payable, and of

Control Book for

those which have been collected (Debit and net Tieceipts),

and serves as a control over the punctual entries of the
amount. due.

The Tax Loclarent reoeivesanotification from the
Turnover Tax Office, stating the result of the assessment,
and inviting payment of the Tax within two weeks.

In

addition to the Turnover Tax List for the calendar year, a
'2urniver Tax

eceipt Book must be kept for the financial

year. Both of thee books, together with the records belonging thereto must be forwarded to the l'ovincLal Finance
uffices (LandesfinanzEmter) by the let Decdtber for
examination purposes.

The remarks made under (3),

t.

1

also apply to the manner in Which the verifice.tion of the
books, etc. must be carried out in this case.

The Provincial finance Office (Landesfinanzamt)
can further decree thrt officials appoint 7,d for this pur-

post may from time tc time check the kee-ping of the Turnover

Tax Lists and all other business records et the Head Office.

When doing soy the Turnover Tax Lists and -eceipt Books
are examinedAosee that they are correct find agree with
each other, and the Receipt Looks and Annexes ar,.' checked

as regards accuracy.

iqnally, trial examinations must be made with the
help of the Turnover Tax ReEisters, Lists of Names, Records,
Tax :Declarations, Deports, etc., in order to see tether the

Tax is being a2sessed punotually, and calculated correctly.
The 'jtate Lini:ter of Finance m7y entrust other authorities

than the provincial Vinanz Offices (Landesfinannamter)
with this examination.

When deliveries against Rlyment arc effected by
persons who do not conAact 7.ny commercial lyisiuess, or when

furnished slee ing or (!wellin; premises are let temporarily

against payment of at least t3 _arks per day

night, the







Vrintims tiorko, 1411

as be r,:rperted tO the zAtIts 4aelpoitailey

Dopertnent (= -10hsree_nuw-eltelle) elmry month se (*parts!.
am!, be entered by the latter in the reportv
1p rtgerdinki the

it 4rwoo

tel .e.c.eeipti, of the State'.

The nineunt it the eaoh be

of th(# Ca4tome 4;ffiews

(Ze114;i &;eA nuA net, as a matter of prineiples bl in exams
of th

IntAimme figure need. by the kronidanta

nuance Offiefts (Lendeefinsesfikter),

tho ilrovinola

Co4teme 0fficr's

(2011kn:Iser) mixt therefore transfer to the Aigh flames
( -erfinannkneson) all reyular reeol'Ite, imeadiatoly
tk

J1

natuol oatPA, te-c!oth??:r oath the 4iroo and adeoetoohneks

t< At the and of tho may, ore in 070.1114 of the maxima

meant llewed.

Iva _7toention to thiii rule is only plrmIttod

the monSylorneont is rmptro4 to met on :meats 'Mich 'nave
b,san l'keouneorl arthAire to Vo r-de temodifttely.

lad or VII year tho entire

At the

t tr, r ooipto Met be transferred

to the Ael tiatlyloo ciffitioo (Oberfinanskessen),

th4 lutu*t5 th Mae Ylima OfTioes (

fly this

arfinAnakassen)

*high are in recAlqr toul% with the lielehehenipthasetoil mast

truomflr to the LAW all 7,11soipts without any vreePtiOus

aftlr flAotion of the ordinary exponliture,

iihartirl

State

3'
OUTGOILG

Prepared by:
James A. LOtgAn, Jr.

B.

,.

30th July, 1921.
sf

CONFIDENTIAL
SECaTaTi;

GTOk;

Further reforemoe

3 -,623
FIBS?

Sub-paragraph One

definition word

-

,trtiole Four

L.,t1024

our 1-511 July sixth STOP

1,,,ports

UN,UOTE

sub-heading A

Sohedule Payments shortly oomes before Comalio3101; for determination STOP

View far-reaohing general economic effect as well .,s effect on market our raw
materials such

ootton and copper deem desirable again plum sitw.tion before

Department STOP
-31:0014iD

-

Geremn exports officially oLcselfie4 as follows OMB A- OOTL

General Comoros U11-40024 inoludes all goods passing out over German frontiers STOP
B

Value not recorded JTOP

.VOTE Aotual Commeroe Illi-JIOTE same as VOTE General

Commeroe UN. UOTE with exception that value non- dutiable gooey in direct trmsit thru
Germany suoh as Swiss and Czasoho-lovakian deducted :ATOP

eleven billion marks STOP

Value such exports 1913

1;stiL.ated value 1920 including reparation deliveries in

kind five billion eight hundred million cold arks

-

TJOTZ

4)eoial Commerce

Ullf.ADVL same as ,..,UOTI; Actual Comoro, UN.102-13 with deduction following 001,11

One -

Be-exported dutiable goods passing thru Germany Athout transformation .STOP

:ewe -

Goods bel-mging to foreign nationals brot to Gerrazny in bond for finishing and
re-exported a2OP
to Germany JTOP
STOP

Three - Gersun goods sent abroad for finishing in bond and return
such exports 1913 ten billion marks excluding precious metals

listinated value 1920 five billion fifty-three million fold mialcs STQP

THUD - Germans propose definition

JJOTa axports UN4OTB be bLsed on IOTE

Special Comoros UNOOTE with following modifioations 00101:

A

4xelude non-dutiable

foreign goods originally deolared intended for oonsumption but actually re-exported



from bend ,:7fithout trneforre;,tior: Including ootton rubber juto eta. IMP

Exclude mart value formio'. goods aubleet

B

re-emported .52;le

V.,riouts Lr slates bot;.) laa.,4rted ..ral OA:Cautati b j 4.1rata.ny for

C

jer):11/45 request oz, 7 va.lu, OX404a auGil

jCia

example ooJ1

4mt prooaa-Aztic :ind than

v,tlue rfirkratton tiolivorlea 14, irizd

usporte be loal...Alttal aaile

/al foreign

ilermman proposal leplias thot 117.4),J21:

FlUZZi

exortoe be Gel .Aotea irow viauu tot].

msterills sLterluti Gersuey

*mother ettse czo ro-portoc: without trL il3foruution or 'A.3001 tr.

ineldort to a4;ort

tip, cos r*-adporte -ander 01ass

",,:; .,Ada

was billion

191.1

etillioa as:4%z.: t'.

iLti

exports

1411 proOosooe

L:oovw three buadyed

ia.terti,ls finial:oat find To-expo-not cur.4 B we,

million mr-rte :4)13

uo

exports over

Aitiowis tosui at ()Ter Cass trillion :trio Irta.dret

x.

commairee Illt,i;07.4 191.3 in *attest/mg

46.44eteu free ',JAM:.

et%den is.turprei4sion stemiroia ty 4tarra_uns

±_brilore index

,bev. 1;obotit4le PI.Freesitsa drfifted tb7..t

Zr-eitki

presort lernrm outecory

Somrorce

Irdez upon ',Allots

LV.L. tc, Iv need

liotraLleas ceonocuto objeotiont oorvireed

variable :aluity to be /1..mkut

majority telegit-a* Commission 7.1.11 prose for awl purely A1411.01,A1 interieretaktion

which is in sv.just...x3t 41(1:net

- do pointed out our Cable B-61i Index realli rent-Ate 131
per -neat tax on wioil *Lila oxdort3

resalt trLa"flo Ntiloh *An 2;0, b4.a*

intionittleaLly 51v.34 to ille,dv:xtz;ge ;lot 0s44

Utter Imp and eibeT3

ti,7:1101 stg soils 32'Z

will interfere with 001ratrJro1/41
Ageriagi

01;11

tv.vrt7-31z
ina41,01)

!inaski bat ;a1110 Dour trios frnm which
1.1terprotatiam

s

0::113.68.1 AA)

rey judgment acrrettnmonts oonoernee. our

LOIN :12tiolly,ted,

totvosu

nhke the

laWniefirj Oluir.6-13.11 in present trilielL or better adopt eorio new indai

- auct,mst attention Alpt=r taw t Ootarueroe be male& to foreoitig A0i)



JAI/a

Dear lir. Gilbert:

I have your latter of Julys enclosing copy of :1'. Boyden's
cable of July 27 regarding our compensLtion in connection with th'3 investmerit of Reparation Corriission funds on behalf of the Bank of England and
Bank of France.

We received a

cnbleltiLrom

the Bank of England on this

subject, and nithough ye felt 1/4 of 1% to be a fair charge, ire have, after
again carefully oonsidering the :latter, replied to the Bank of Englnnd that

we geed to the Roparation °omission's suggestion of 1/8 of 1,4: as
caJLE:ensation for our services, guaranty and

comitzaent

to purchase any

or all of the securities on 15 days' notice.
Very t

J. II.

Deputy
Honorable S. P. Gilbert, Jr.,
Under Secretary of the Treasury,
Washington, D. C.




4

C

warrior.

July 30, 1921.

CutiFIDENTIAL

Dear Mr. Gilbert:

V
I thank vu for copy of a cnblegram from Mr. EidtAn,
dated July 25o :21, r.c

t

the reparation payments which the Corwin

Governmout expects to make this week and the first week in August,
and which you e

kindly sent us for our inforamtion in rur favor of

July 24
Yours very truly,

Benj. Strong,
Governor.

Hunormble S. ?. Gilbert, Jr.,
The Undersecretry
tee Treasury;
Treasury Depattmoht,
Washington, D. C.

GB:a




c.-16(1
THE UNDER SECRETARY OF THE TREASURY
WASH I N GTO N

August 2, 1921.

My dear Governor:
I received in due course your letter of July 15, 1921,
with reference to the German reparation payments.

Subsequent de-

velopments indicate that arrangements have now been made, with
some success, for payments in other foreign currencies, rather
than dollars, with guaranties against exchange risks be the Gov ernments concerned.

A cablegram dated July 28th from Mr. Boy-

den, a copy of which it enclosed, indicates that these arrangements have been continued for July and will probably not be
changes for August.

I quite agree with you as to the ultimate effect of convere

sion into 'oilers, and the desirability of avoiding undue 1isturbances in the exchanges while 'oilers, or for that matter, other
currencies are being accumulated.

It is at Least ^oubtful whether

our repraaantatives abroad understand the exchange situation, and
whether they ere alive to the methods that shoull be employed to
reduce exchange fluctuations to the minimum.

On the other hand,

the situation is largely in the ham's of the Reparation Cannission
and the principal allied Governments, any so long as we are kept
fully advised of developments, and so far as possible -iven advance notice, I should be discinclined to call any conference of

foreign exchange men such as you suggest.
woull be advisable?



Do yoa still feel it

After all, the interest of this Covernmnt,

as a Government, in the method of making the reparation payments,
is quite remote, and I should think that those directly conce-ned,
including the allied lovermaents and the foreign exchange men in
this country, could be expected to watch the situation and in the
long run to eliminate exchange disturbances so far as possible.
Very truly yours,

Benjamin Strong, Esq.,
Governor, Federal Reserve Bank,
Federal Reaerva Station P. O.,
No
York, N. T.

1 enclosure




(9
THE UNDERSECRETARY OF TH E T
WASH I NGTONNC

eDGel)
1921

S'
August 2, 191.
My dear Governor:

I enclose for your information a copy of a
aespat.
(21i411 the American Conlulate General, at TonQ.

don, Pngland, which sums arises a recent address by Mr.
Re7ina1d McKenna as to the method of making the German
reparation payments..__.,

Very truly yours,

Benjamin Strong,
Governor, Federal Reserve Bank,

Federal Reserve Station P. 0.,

New York, N. Y.

1 enclosure




d

i ;.

r =fr




I

August 3, ',921.

Dear Mr. Gilbert:

I have for acknowledgment your

ett,er of August 2, ea-

closing for our information copy of deepatch from the American
Conoul-General at London, which summarizes a recent address by
Mr. heL;inald Yolienna,

fis to the method of making the Germaa

reparation paymente, for which please acceiA thanks.
cure very truly,

benj. Ctrong,
Guvernor.

Honorable E. P. Gilbert, Jr.,
Unuer Secretary of the Treasury,
Treasury Department,
eashington, D. C.
GLI:UX




c;) 1
JAMES A. LOGAN

Jr.

iaris, 18 rue de Tilsitt.
4 Au Lust, 1921.

dear Ben,
On July 26th I wrote you a letter enclosing f' certain

I have not been able
papers which I thought would interest you.
to find any safe messenger until todaz, so you vill receive my
letter of duly 46th with this letter.

I au enclosing herel,ith for your confidential information
viz:

LOOSE IN Hot.

1.- Annex 1026, which is a general report bz- the Committee
of Guarantees on its operations in Berlin during the month of June.
You already have this information in a somewhat condensed form in
the cable which I sent you in my letter of July 6th, This may
hacever clear up some doubtful points.

2.- Annex 1027a to f. this is a printed copy of the *draft
report" in typewritten form enclostd in my letter of July 26th
as item Yo. 4,
3.- Copy of a cable report to the State Department, B-523,
dated July 30th. Asa matter of fact, since this cable was sent
the (Jlestion came before the Commission and while no definite action
was taken at the time there was a consensus of opinion that "actual
com_erce" referred to in Fifth Paragraph of cable aj lied, though
additional consideration was to be given to whether or not the
value of "deliveries in kind" should be included.

4.- Copies of documents ros. 17, 40, 41, 46, 47, 48, 50, 51,
and 52, of the Committee of Guarantees which I have just received.
I have not had a chance to read them all carefully but from a casual
examination I believe they twill contain much of interest to you.
They are all documents which have been prepared by our Information
Service in Berlin.
As exhibit) to my letter to you of Jul-, 18th, I sent you
copy of a memorandum given me by Bergman regarding the exchange situation.
7e Lre just today in receipt of the following: confidential information
from our representatives in Berlin:




"Prom reliable confidential information believe
that German Government will be obliged to

JAMES A. LOGAN Jr.

"announce about AA:ust 20th their inabilit, to
Loll
meet entire obligation of One
narks which they must deliver Allies before
They have made every effort but
August 71st.
Governmental Authorities doubt satisfactory
results".
I am now preparing a cable for the State Department with this
information which you will probably see before this letter reaches
I believe that the Germans are being squeezed by speculators
you.
today and that this has much to do with the weakening of the paper
The Germand may contemplate breaking such speculation by
mark.
On the
an announcement public or through leakage of the foregoing.
other h4nd such an announcement might even further weaken their paper mark.
You are a better financier than I so I will leave you to make the guess.
I don't take it too seriously.

You will, of course, appreciate the confidential character
of all the foregoing information which I am sending you with Boyden's
"unofficial" approval.

Faithfully yours,

C-4
JiLiTT
Incls.

The Honorable Benjamin Strong,
tiovernor Federal Peserve Bank of Yew York
New York City, Y.Y.




eiq
JAMES A. LOGAN Jr
Faris, 18 rue de Tilsitt.
8 August, 1921.
eVC

Nctc ,,n14"""
\ %2'
PERSOVAL

NV1C3

11.

-....y

dear Ben,

I enclose herewith, for your information, copy of Annex
Uo. 1045 of the Reparation Commission.
This is a copy of the letter,
addressed by the Reparation Commission to the German Government advising
the latter of the decision regarding the interpretation of the tord
"exports" which occurs in Article 4 of the Schedule of Payments.
2he
same :.iuestion was referred to in enclosures 2 and 3 in my letter to
you of August 4th.
It is of interest to note the next to last paragraph on
page 3 of the Annex. You will see that while the Commission maintains
its position under the existing schedule of Payments, it nevertheless
impliedly invites the German Government to submit proposals for
another index, or even farther by suggesting to the Germans that they
propose fixed payments disregardin the index theory.

Faithfully yours,

.JAI/BD
1 incl.

The Honorable Benjamin Strong,
Governor, Federal Reserve rank of Yew York,
rev York City, T_ T,




Tra i

5Lt

iur ea

.

3614.
ci26.44,z,x._"04,-qtm,&41M 14a)
ors. F

roe r P

THit R3'

C 1;

Da IDi Vita 30 TH3 ,4 ORD
"IMPO3T8".

In its letter of :lay 25, 1921, the Eriegslastenkoon
requested the lieparati L,oininio ion to give an interpretation of
the word. "exiorts", which occurs in Article 4 of the ache dale of
Paymente. At the leetini; of June 14, 1921, the 2.0aration Commission directed. the

ea?

I

(wAi--c,..tirf.,,,z.k, to take advantage of

its visit to 3erl in to learn the views and objections of the
German C.tovernment in regard. to this matter, so as to enable the
iteparati of Commission to adopt a decision an the questiun with
full .6:no..ledge of the facto.

In its letter of July 21, 1921, the German ,lovernent
sent to the Reparation :;o.unisaion a report on the remarks aubmittedi
by the aerqian ;overnment ;

the 41.esti. on ;vnich the Reparation Com-

ilow to settle is whether the word. "exports" in
.:srticle 4 of the :schedule of ?Yiyments is to receive the definition
givech it by the Jerraans in their statistics before and since the
mission Ilt.r3

war, that is, in 1913 and in 1920, or la to receive a more restriated interpretation, founded chiefly on the measure in v.-hich
an export asy be considered to increase the wealth of the exporting country.

The difference is iaportant, :.;ince if theseeond interprettztion is adopted the figure of 10,892 million gold marks
reported by the :Lerman lovernment in its export statistics for
1913 will be reduced to 7,466 million, and -.A11 inevitably be
still further reduced by t logical ,vpi.)1 luat ion of the principles underlying this interpretation.
The aepare.tion Com:pies' an 0 )i; s not ignore the fact treat



3614- 2.

all of Germany's itxporte are not a source of wealth to her, savoy ially not to the amount of 26%; it does not,
ver, e Qua ider

that it can give to the word "exports" any other interpretation
thah that which the Jarman Government itself gave to it in the
exl:ort statistics. The f allowing reasons are advanced in support

of this point of view:
1.

ehen the aeparation Commiesion drew up the euhedule of

Paymente on !::y b, 1921, its purpose was to determine the ,,ethode

by which Germany. migat pay off her reparation debt. It eished to
postpone the t-331.1.0 of a portion of the bonds representing this

debt accordirtz to an index that it has chosen. In adopting this
it took as a basis the figures of the German statistics,
aseiming that th3ee figures develop as prices rise and Germten induetry revives. It would .,t3 giving a false value to these basic
figures ins to the index itself if the %Joni "expirts" now received
an interpretation different f..-on that on vhich the calculations
leers based which determined the choice of the index, and it would.,
by rotLicing the varlaule ennuity, indefinitely postpone the payment
of interest on the entire debt and consequently the clearing up of

the latter.

g

The 00 iecti ons urged against t hi s interpretation Eire

based on a /aloe conception of the lain idea of the eohechile of
Payments.

eh:. Acperati on L:Otalliedi on aid not intend that the

reparation debt should be paid solely from the profits which
Germen industry might realise from its exports. This erroneous
2Irtiele 4, which adopts
°inception arises from a confusion
ah index, and i,rticle 7, which provides a guarantee by means of a
levy on ex:forts. The ;schedule of i'aymente, in an essential
corollary, sed on the Germ au Government the obligati on of
reimbursing the exportere for this levy.
It might doubtless be maintained that the index th-us
3.



3614- 3.

defined would remit in a conflict of intereete between the exporters axii t.fte maze of Ger:aan taxpayers, since it is to the advantage of the latter to reduce the wtriable annuity and to postpone the
payin off o.f tile reparation debt, whereas the forzer wish to
develop their oiiSirlas in order to increase their profits.
1'tie se are disadvantages whicn might lead the German

Government lo examine tae question and to propose new indices, or
to formulate other plans for thc.3 payment of the debt ; they cannot,
however, iuil.ihe e the ileparati on C °anis i on to modify the index
-which hae

1'

d. aS the oasis for its caloulations and its economic

eetimates.

The Reparation Commissi on reserves the ritat to decide

later whatnot- it is neceseary to include in the index the deliver
lee in kind. made by Germany to t he ,11ies, in particular those
goods which Germany would not have exported by way of normal
commeroe and which would not normally be included among her coatmercia i. e.Kpor t d.







4421




S

THE UNDERSECRETARY OF THE TREASURY
WASHINGTON

(S1,11"
C 01,1`

.

August 10, 1921.

icy dear Governor:

I enclose for your confidential information
a copy of a paraphrase of a cablegram received
from Boyden, dated august 5, 1921, as to the
possibility that the German Government will be

unable to meet the reparation

pay/rent due in

xl.ugust.

Very truly yours,

Benjamin Strong, Esq.,
Governor, Federal Reserve Bank,
New York, N. Y.
1 enclosure.




(COPY)

PARAPHRASE, OF CABLEGRAM.

PROM

..nierican Embassy at Paris, Prance.

Luglmt 5, 1921, 5 p. m.

RECLIOW:

LIZer,USt 5, 1921, 3s37 p.

INi:9d Rs

477.

B-526.

Referenoe is made to our cablegram B-516.

The

following order has been reoeived by the 0ommissiou
from its Berlin representative:

"It is believed from confidential end reliable
information elat German Gevermmsnt will be obliged to

announce about the 20th of magma their inability to
moat the entire obligation of am milliard gold marks
4qich they must deliver to the Allies before the 31st
of ,:algust. Every effort has beat Inds by them but

governmental nut:parities dembi astisfastory results."

,bile I de not take Ike /brewing seriously, sugoast a confidential reference to toe litlers1 Bosom
Board and the Treasury Department.




Boyden..

K.

7,
THE UNDER SECRETARY OF THE TREASURY
WASH I N GTON

t

, 1K1.

Dear Governor Strong:

I enclose for your information a copy
of a paraphrase of a cablegram, dated AlEust 19,
1921, from Li-. Boyden, with further reference to

reparation payments by the German Government on
august 20th and L.ugust 25th.

Very truly yours,
0

)

Benjamin Strong, Esq.,
Governor, Federal Reserve Bank',
New York, N. Y.
1 enclosure.







(COPYi

Green
Paris

Dated August 19th, 1921.
Recd. 942 a.m.

Secretary of State,
'ashington, D.

517, Atugust 14t0, luank

B-649.

Supplementing my Amb40.

tiormma tioverament notified .Reparation uounission would

pay Atuguat 20th, seoeunt Beltsiam Government twelve million seven

hundred fifty thousand dollars; six million pounds sterling, twenty
three zillion five hundred thousand terenah Francs; ten million

1 el6lau frame; in addition twelve million marks gold ooin (see $518) Zorwerded New Yak steadier "SUWALKI" expected to arrive august
18th.

Further payments would he effected August 2:,th.

One Anion

two hundred fifty thousand of fore,svin, would be am:signed Morgan,

New York, account British Treasury. hoyden.




HERR.ICK.

CABLE MESSAGE FROM TIM ALEIRICAIT AIIBASSADOP. AT PARIS AUGUST 8, 1921,

4 p. m., ITO. 516.
l'ATAPIE A r,

Communicates message from Boyden, 3-548, referriru to hi 8

message 3-545 and preceding messages relating to the same subject.
Logan has been told by Bergmann that he has

just

received

information from Germany that that Government will before the date

August 31, Enke payment of the entire milliard, and

that this

payment

will be made without dra.ving cm the metal reserve of the "'each 73ank'c,

as had been previously expected. It vAs added by Bergoann that
Germany, with a view to making the entire payment by August 31,

had obtained through the Reich Bank loans for short terms from
Great Britain, S7itzerltuu1 and the :Tetherlands, amounting to a

total of some three hundred million marks gold. Some of these

loans fall due before

the

rniOdle of

3eptcsaber.

It was understood

generally that these loans for short terms had been =ado, but the
dates when they fell due were not known by speculators. Conse-

quently, it was said by Bergmann that he thought the existing low

value of the mark might be maintained after the last of the present
month, Ira =oh as payment of these short term
made.

It is suggested that the Federal `reserve and the Treasury

might be

confidentially advised.

Di-xr/ss-GE/I



obligations mist be

ASSISTANT S'ECRETARY OF THE TREASURY
AS H I N GTO N

es,
August 22, 1921.

AN

A

e

.?*

Lear Bens

a

Attached are two cable items which may be of
interest to you.

It is a little dangerous to send them

while you are in your present company:'but still I am
taking the chance.




Hoping to see you tomorrow night,
Yours always,

EMERPT FROM CABLE B-543, Dated AUGUST 15, 5 P. M., PARIS.

)

Article Six.

Governments recommend Reparations Comndssion take

all precaution prevent reparation payment causing exchange fluctuations.
Suggest cooperation exclusively invited national banks of issue powers
represented Reparations Commission and the United States and possibly
German banking organization designated German Government.




COPY
-copy-

raris, 18 rue de Tilsitt,
22 Aeeust 1821.

Controller-General Lauclere,
president, Committee of Guarantees,
ilotel Astoria, Paris.
Ly dear Controller-General:

It seems clear that Germany will complete the one milliard
payment by August 31. Doubt as to this point and the influence
of the vacation season have led to an interval of inactivity.
I take it for granted that the Committee will now promptly come
to life and proceed to carry into practical effect the decisions
as to the security to be obtained from Germany *Ind as to the
supervision to be exorcised over Germany's finances and customs;
also that the Committee will shortly hold another conference with
the German Government in Berlin.
But 1 wish to suggest the necessity of considering certain
broader lines of policy. The appointment of this Committee as a
special instrument of the Reparation Comrission for dealing with
the indemnity and the bonds, and with German finances in their
relation to the indemnity and the bonds emphasizes greatly the
responsibility of tae h.C. :yen more than before the Powers whom
we represent and world opinion will naturally and rightly look to
the Reparation Commission, and the Committee of Guarantees to
influence the course of events within the prescribed limits, to
point out measures necessary to reach the desired ends, to warn
of impending danger, to pass judgment on Germany's efforts and
their success or failure. Our work should now be of more positive
and constructive character than before.
I believe this
only a duty, but an opportunity both for the Commission and the
Committee.
In elaboration of the foregoing, lot me suggest two lines
of policy:
First.
I believe that it is utterly impossible for Germany
to pay the army costs, the clearing house balances, the expenses
of the various commissions and the reparation commissions and the
reparation annuities, unless some working scheme for large deliveries
I believe also that it is necessary and
in kind is arranged.
practicable to use German labor in the devastated regions.




Apart




-3

There are plenty
redly tried to fulfil her obligations'?
of journalists, politicians, and partisans in Germany and
elsewhere whose loud vociferations of opinion can be foretold today. But the question whici, will then be the most
important ,,uestion in the vorld ought to be answered by
the best authority in the v.orld. The Commission and the
Committee ought to be in position to speak with that
authority.
I request that the Secretary General of the Committee
have this letter reproduced in French and English and circulated as a regular annex. I also request that it be
entered on the 4:.geuda for consideration at the next meeting of the Committee of Guarantees.




Faithfully yours,
(Signed) James A. Logan, Jr.,
Unofficial Representative
of the United States with the
Committee of Guarantees.

August Z5, 1921.

Der Mr. Gilbert:
I acknowledge with thanks receipt of your letter of
August 20 enclosing for our confidential information a copy of
a :arnphrase of F cble dated August 19, 1921, fr:le Mr. Boyden
with reference to Reparation payments by the Germnn Government.
Very truly yours,

J. H. CA.

Deputy Go

Honorable S. P. Gilbert, Jr.,
Under Secretary cithe Treasury,
Washington, D. C.




or.




THE UNDER SECRETARY OF THE TREASURY
WASHINGTON

u vs t 26, 1913.

Dear Governor Strong:

I enclose for your confidenti
information a copy of a cablegiam received to-day from i.r. Boyden, ,7ith fur-

ther reference to the German reparation
pa,yzents due august 31st.

Very truly yours,

A,
Benjamin Stroni;, Esq.,
Governor, Federal Reserve Bank,
leri York,
Y.

1 enclosure.




co

A

No/i

S St:CY.

01LINal

COPY

0

kie,

Ind

di e.

CABLE MESSAGE FROM THE AMERICAN AMBASSADOR AT

ERiL ISERIE
August

25,

9 P.M., 1921, No. 523.

PARAPHRASE)

Communicates a message from Boyden, B-552.
vious message B-549.

Referring to pre-

Announcement was male at 12 M, August 25,

that

there remains as the balance of the Milliard due August 31, gold marks two
hundred forty-one million five hundred thousand.

Announcement was also

male that on August 26, payments would be made as follows:

sterling

two m'llion; dollars fourteen million seven hundred thousand; Belgian
francs twenty-five million; French francs twenty-seven million five
hundred thousand.

On August 23, official information reached the Com-

mission from the Germans that forty-two million marks in specie had

been sipped to Brussels from the Reicnsbank, to meet any deficit which
might exist after Germany ha: compi.etad her payments in the currencies

ofthe allied nations; but at Brussels no information had been received
that the specie had been really forwarded.

Should the other paymente

which have been notified oe completed, the additional fort! -two million
would exceed the amount Germany is bound to pay.

I think it likely that

Germany announced the above mentioned specie shipment as a precaution in
case she might not obtain some of the loans made for !short periods.

As regards this, please consult my messages 548 and 545.




THE UNDER SECRETARY OF THE TREASURY
WASHINGTON

H
August 27,

CONFIDENTIAL

1921.

My dear Governor:
I quote for your further inf...,rmation it

connection with German reparation payments the following cablegram from Yr. Boyden, received to-lay
through the State Department:
"B-553.
In reference
B-552.
Germans
officially advise'' to August 26 that Aelgium
refuses to accept 42,000,C00 gol4 and Reichsbank will ship tc Nem vork for Reparation
Account between fifty to sixty million mold
marks August 27 or 29."

Yours very truly,

Ben,iamin Strong, Esq.,
Governor, Federal Reserve Bank,

New




York., N. Y.

°




August 29, 1921.

Dear Mr. Gilbert:

I ack7ledge nith thanks receipt of your letters of
August 26 and 27 quoting for our confidential information two
cablegrams received frcia Mr. Boyden in connection with German
Reparation payments.
Very truly y urs,

(. H. CAA'
Deputy Governor.

Honorable S. P. Gilbert, Jr.,
Under Secretary of the Treasury,
Washington, D. C.





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102