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Dated January 3, 1922.
Recd. 1:52 p.m.

Secretary of State,
Nashington, D. C.
1, January 3,

B 613.

4 p.m.

Germany paid 1:1,745,605.11 December 30 through

Federal Reserve Bank New York to National Bank Belgium on account
Belgian priority.

This sum represents conversion part paper marks

received from customs duties and export taxes.



January 3, 4 p.m.



January 4,


Dear Mr. Gilbert:

Thank you for your letter of December 31 enclosing
cory of a telegram from the Amerieem unofficial Reprecentutire

with the Reparation Commission with respect to the oenversion
of currencies -dyable to Belgium on ,ceount of reparations.
Very truly ycurs,

J. H. CUE,
Deputy Governor.

Honorable 3. P. Gilbert, Jr.,
Under Secretary of the Treasury,
Washington, D. C.


4A0OPY - XD

Dated January 10


Jeoretary of state

8, January 10
B 616.

4 p.m.

German Government announces following payments:


Federal Reserve Bank, Nex York, 5,000,000 Belgian franca National
Bank Belgium, 5,000,000 French fr3mos Bank of Frince, 845,00J pounds
sterling Bank of England.

All foregoing payments applicable Belgian priority and
represent conversion paper mark proceeds customs receipts and
export levy due January 1st.

Total eciLivalent about 0,625,000.

Actual completion above payments not yet confirmed.
January 10

5 p.m.




January 12, 1922.

:7 LI._.'1!T

14 dear Governor:



I enclose for your information a copy of
a cablegram dated January 10, 1922, from the
merican unofficial representative at the Reparation Commission as to unconfirmed German payments.

Very truly yours,

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



an.,:ary 12, 1922.

Dear Ur. Case:

We have been sending from time to time copies of cables from
Boyden relating to reparation matters.


Since 1:r. Strong h%s been

think this flow of cables has somewhat ceased.

I write to ask

whether you would be interested in receiving these cables in '.Ir. Strong's

If so, let me know and I will arrange so that they automatically

go forward.

Yours very truly,

Assistant Secretary.

J. H. Case, Esq.,
Deputy Governor,
Federal Reserve Bank,
Federal Reserve Station P.O.,
New York, N. Y.





Dated January 12, 1922,

Rec'd 13th, 1:15 a. m.

.secretary of State,


12, January 12, 8 p. m.
Number 617.

Pursuant reparation decision 1459 Commission turned

over to Bank of Lt(gland 150,000,000 paper marks ahineland customs

duties collected while sanctions in force March 8th, 1921, to May 1st,

Conversion these paper marks completed January tenth realizing

pounds sterling 376,078 which will be debited against costs British
army and up to May 1st, 1921.

Paper marks collected Rhineland cus-

toms from May 1st, 1921, to removal of sanctions in October not yet
converted but still held in Rhineland banks.
ary 10th our 8-616 now confirmed.


Payments cabled JanuJanuary 12, 9 p. m.



By request of the State Dept. I be dat..
conts!red herein is for informs:L:0n or
Trresnry officials ard is not to Do given
to any one outside of the Secretary's


January 13, 1.422.

Dear kr. Wadsworth:

Answering your letter of January 12, I shall be glad to
have you send to 111,:, in the absence of Governor Strong, copies of

cables from Mr. Boyden relatine to reparation matters.
Very truly yours,

Deputy Governor.

Honorable Eliot %scielorth,
Assistant Secretary, Treasury Department,

LautiagWa, D. C.



January 13, 1922.

Dear Mr. Gilbert:

than4 you for yopr confidential letter
cnclosint copy of cablepra...

of January 12

received from the American unofficial

representative at the Reparation Commission.

The payment which

having been

to tne

received by us for the

the German Government announced as

Federal Reserve Ban4 of rew York has been
account of the

liat tonal Bank of Belgium.

Very truly yours,


H. C.4.3E,

Deputy Govermr.
Honorable S. t'. Gilbert, Jr.
Under Jecretary of the Treasury,
Wasaincton, D. C.



Dated Jamary 14, 1922.
Rec'd 5:27 p.m.

Secretary of State,
Washington, D. C.

January 14, noon.


Reference our 3 -634 and B-611.

Adverse exchange has prevented any conversion Italian lire now invested Italian national bonds.

French Government has transferred to

Belgian Government French bonds nominal value about two hundred ten
million francs market value about sixteen million dollars being
investments of French francs mentioned our B-604.

Belgium agrees accept debit reparation account market value of bonds
date of transfer and convert gradually as required.


0 X


- ID





Dated January 18, 1922,
lith, 9:15 a. n.

Secretary of state,

19, January 18, 8 p.m.

Jan,ary 17th German Government directed payment account National

Bank Belgium applicable Belgian priority following sums:

"2,429,297; one

million pounds sterling; five million Belgian francs: four million French

This payment approximately equivalent thirty-one million gold

apparently made compliance Reparation Commission's decisions at Cannes.
Actual payment not yet confirmed.




- ID



Dated Jan. 21, 1922.
vacd. 3:46 a.m. Jan. 22.

Secretary of State,
Washington, D.

Jan. 21, 5 p.m.

B 624.

Payments mentioned our

622 confirmed as made January 18.



Gernany with the consent of the Allies,
The remaininr7 7,7, milliards shall be distributed as



Others Powers entitled to


22,0 milliards



The british and French Governments agree not to call
for repayment of advances made during the Afar to Allied

or Associated Governments signatory to the Treaty of
Versailles unless and until, and in any fvent to no

greater extent than they may be themselves called upon
to make payments to the Government of the United States
of America in respect of advances made

y that

Government, vs the result of default by Germany in
respect of her recondsry liability of 65 milliards,


The Receipts from Germany in respect of the costs of

the Aries of Occupation shall be distriouted between
Great Britain, France and belgium on the basis of the

maintenancr in the british, Yrench and Belgian Armies

men respectively, in the 01.1upiee Areas, in

the following percentages


Great Lritain 33.0


Any reduction in the number of :nen

maintained shall

entail a proportionate reduction in the amount to which
each Power is entitled under this clause.

(8) The

Allies agree to cancel the liability of Austria

and :ungary in respect c: re-nration under the Treaties
of ..]t,

ler!,ain and Trianon, respectively, and to reduce

the liability of Bulgaria for reparation under the
Treaty of Weuilly to 30 million pounds gold to be
distributed as ,,viy be agreed .etween Italy, Serbia Roumania
Federal Reserve Bank of St. Louis




::eadu oticreeneet I:etven the theueelveu.


oteoithstanding and without prejedice to anything

contained in the Treaty of Versailles, or in any subsequent
Inter Allied Agreemel;t;


As from the lot January 1922, no Ally shall be
entitled to Any further paynent in roupect of
Costa of Arey of Occupation up to that date.
Ally shall bt called u7ion to account for or to


pay over to t::e leparation Corytteraion the value

of any deliveries or payments received before the
lst Jan.:ary 1922.


All sums in the hands of the Renaration Commission
on the let January 1922 resu1tini from undistribute

Aaaets or fra paynents received either under the
k;chedule of Pnymenta or the Treaty of Versailles
shall be paid to Lelgiu:I.

paragraphs (2) and (3)

For the purposes of

the awls distributed by

the Reparation Commi43ion since the list

subject to agreemonta


or repayneet on deeand of

the Reparation Cortaluaion ehall be regarded as

having been diatrituted to and received by the
Ally in whoa-0 hando the auee, are in fact )eld
on lut January, 192'-',


The share of the Britiah ::::epire of the 35

milliards shall be 2 milliards lelich shall be ree

garded au One hundred million pounds which shall
not bear interest for three years from the let
January, 192, Thereafter it uha?1 bear interest


It; ahall be paid out of receipts under the

Reparation Recover; Act, unless otherwise srtiafied by



P.eparation to which auch Allied or
As,aciated Power is
entitled under any Allied Agreement
of which Ger,lary

shall have been notified.

The waount to 've credited

to Germany in reoect of oupplies made
under such agreenenta to tic detortnined by agreement between

appointed by each side subject to
Repration Complisaion.

Sie approvr11 of the

in the event of disagreelcient

or disapproval by the lieparatiora Coos:sill:don by a neutral

In the event of default by Gernawthis
shall be determined forthwith and the
ausperaion of the
obligationa prescribed in the 6Chedule of Payments

Gerin.ny Shall release to the reparation Comte

rlission the bonds of

.4elries A and 1' and C

referred to

in clause 6 and shall be entitled to the return
of the
Treasury bills referred to in Clause 5,

,000ndary liability aLd has paid by -mane

of loans raised

abroad in respect of her primary reparation liability
drini; the year lut January 1022 to the 1st J'tnuary 123
not 1es.1 tLan 3 milliards cold mar' s.






not less than Tmilliards void nar s,


ess than 10 milliards cold 'lax .s,



ss than 5 milliards by other mens,

d by Cernany in each year whether in

ct of her primary liability shall

deposit with the Reparation Como

ear the payment of her Vqaparation

greement Ger,ian


Treasury Pills to


e]lcy of the acre(r:ent the Ger nn

and C delivered under the .schedule

deposited to a


:Aink in the

ny and the Allies, and the annual

f then and all other oblicatione

dule of Pc.4yments shall be suspended.

ee, subject to the approval of the

, to enter into Agreemntu with any

Power for the supply of such material

y be required by the Allied or

in the total of the proportion of






The reconstitution of the Peichoba'.k so au to place

it in a position to impose terms in accordinc:: advances

to the Ger-an Governmert torether with the appointukAA to
the i.oard of a neutral banker to be dhoaen by the Tieparation

Comniasion in agreement with, the Gerian Covernnent without
whose conocnt no advances should be ylnde to the Ger,lan

Customs duties on exports to bo calculated in Gold

and paid in the equivalent in paper marks Tulin;
time of clearance, such rate heir,,

t the

fixed by the Lcjaration

Commission at regular intervals not exceeding one week
in accordance with market quotations,

The internal price of coal to be raised to the extent

required by the Ilcoarotion Colmassion so au to brim,:
it irito reasonable relation to the world price.

The mount of the aunual payments provided for by
the .ichedule of Payments, which are postponed, shall

bear interest at

during; the moratorium period, oucl,

interest Lein


added to the capital of the debt,

Gernmy's liability for the coots ot the Arnica of


.p to the 1st January 192f". to be re:arded

as diacharged.

After the 1st January 1922 her liability
to be limited to 1110 million Cold maro pluu the value

of "presations° and of the coat of the U.O.Arny.

4...Aw Allied to withdraw the ArrAies of Occupation

not Este

than the lot -ay 1925 provided that Cor:-Iari,

ia not in default in respect of any payment due under her

Proposals for the Reconstraction of the
ArralqAments for Reparation by Ger 'any,

?ART I,.


heads of Agreemeit between the Allies and Gerylany.
Germany's total liability for re,)aratior as on

the 1st January 1922 Shall Le limited to 100 milliard gold

Of this amount, 35 milliards shell represent a

primary liability which shall be disCharged within

Germaxly's liability with resnect to the rerlaining

65 milliards shall be secondary are

contingent and shall

nature as and when, sari: to the extent to which, any Allied

or As-ociated Government signat.)ry to the Treaty of Versailles
is called u:)on to re-pay to any other Allied or As,ociated

G9vernment advances made for War purposes durin


the ay founts hereof res-jActively to be recognised rl:d acreed.

Geriany to balance her budret and to cease the

further issue of notes at the earliest possible mcmnt,

and to issue loans the proceeds of Which shall be applied
to the payments to be made under this Agreement.
Ger,lany to agrec to (a)

Complete withdrawal within such

e7iod as -ay be

deter-tined by the Reparation Con-lisQion of the

food 71.nd

railway subsidies.

Increase in 7 ,atal chard -es sufficient to cover the

deficit in postal administration,

Increase it taxation in the ,marrer and to the extent

required' :y the heparat ion Co7mlission.

such reduction as :-qty be required by the T,:e.Aration

Conmiaslon in expewAture on administrative se vices..



The internal price of coal in Germany to be raised.


not later than 1st

arch, 1922,

to a figure not less than

three-fourths of the world price of coal and to be ke.,t

thereafter up to such )roportionate figure.

Committee of Guarantees to work out in co-operation


with the German Government a plan for (lying adequate
cLu..ity for foreign loans to be raieed by Germany, and

such loans to be issued withthe approval of

the `separation




The ,ost-Ar!Astice and Reconstruction 'oebt of Telgium

and any other l'ost-Armietice Debts due to the drifted

Kingdom ano

ranee to be funded in the form of a:


per ainum for sinking fund.

The question of writing off the Reparation ,ebt

of Austria and liungary and reducing the julgarian Debt
from ,Z90,00(),0

to (say) £30,)09000 to be carefully

considered without delay.

lussian Debts not to be included in the General zettle.

ment but to be separately considered.

(co long as ehe is not in default) for any cum exceeding
160 million gold marks per annum (glue "prestntions etc.")
for the

ritish French and relgian Inaies.

The cost of the

United ,totes Army of Occupation both ''efore and after let

January, 1922, to be treated as a matter for arreement 1:etween
the United States of America and ;lemony.


In consideration of the espension of the ..chedule
of l'ayments, Germany to acree to the following conditions, the
due fulfilment of -!hich

ball be 1.upervised by the 'reparation

CommiEsion IThich shall h-we the right, if it ic of opinion
that :ermany it not observing the conditions, on givint; three

months' notice, to terminate this agreement and to revive the
:schedule of layments:.

ludget to be balanced as soon ac possible and in no

case later than the 'Aid get of 1c24.

All subsidies to ceace not later than let Jul.., 1922.


All tudget deficits, so long as they exist,

to be

covered try internal loans, other than Treasury hillfl discounted
7rith the reichslank.

.sett to the r?eichebank to be dreressively reduced.


.eichsbank to be given a due measure of independence

(under the supervision of a -edtral adviser to te appointed
by the German Government in acreement with the F4eparation

new issues of raper Currency to bepermitted beyond

a maximum to be fixed forthwith, and ste,a) to be taken at an

early date to introduce a new currency unit in place of the
paper mark.

Customs -utiei

to be collected in cold.


consideration the suzc already received in cash, kind, and

:roperty, etc., ty the inuividual powers up to 71st
1 91 inclusive;

each Allied rower to retain the

receipts -Thich are in fact in its

ands on .1st Jecember, 1921

and not to be called upon to acco.tnt

c)r them to the reparation


.vercetagee unmodified would give

Prance 73 the s 66.6

= 26.66 milliar

10 the

agium 8 the etc.

Each Power entitled to a share in the 4% milliards to he

allowed to negotiate, vul,ject to the approval of the reparation

Commission, agreements for deliveries in kind up to the amount
of its share at any time remaininc unpaid, saferuards ae to

valuations being provided for by requiring valuations to be
made by one va.Lter for Germany, one for the recipient 1-'ower,

Ind an Umpire appointed by the heparation Comlission.

.;ermany to agree to use her beet endeavours to raise by

international loan operations sums of not lets than
milliards in 1922
7 milliards in 1.923

lu milliards in 1924
10 milliards in 1925

and the Allied Governments to agree to withdraw their Armies
of - ceupation not later than let ilay 1926, if before let

January 1926 Germany har discharged, with interert,
milliards out of the 4u milliards, 211E any sums


ayable by

her up to that date in re, pect of her contingent liability of
G5 milliards.

fl-e cost of the Armies of

ccupation other than that of

the United states of America up to '1st .ieeemter 1V11 to be

rogardeu as satisfied by the paymente made up to that uate,
and as from lst January, 19::2, Germany than not be liable



when notice is given, part passu with any German Government obligation then outstanding.
.' ranee

(c) The Gov emmente of the United JAngdom a.nd


agree that they will demand payment of dete owed to
them by other Allied Governmente only if and in so far as
they (i) are themeelvee called on by the United


Government to make payment and (ii) fail to recover
from Germany.

(Taking the Inter-Allied

arDetts as leing approximatiy

40 milliards due to the United ::tater, of NmericA, ZO

milliards due to the United Kingdom, and b milliards due
to 'ranee).

(u) of the remaining 45 milliards due from ,:ermany,


milliaros to be converted into a sterling debt of
£260,000,000 to the

ritieh Gov ernment carrying no

interest for 3 years and thereafter, interest at 5; per
annum payable half- yearly.

This debt to be eatisfied

during the -rivet 7 years out of the droceede of the

Peparation (Pecovery) Act i.evy or any similar levy
imposed by any ;Titieh ;)ominion or Colony


olbject to a

first charge on the Iritish levy for the costs of the
3q.itish Army of

in kind as

,-ccupation) or by means of such deliveries

Irty be agreea with the German Government with the

apc.roval of the 7:eparation Comroission and thereafter in

ouch manner Is may be aFreed upon.

,Ayments in rtw)ect of

this X250,00000c to he divided se to 10,!. to the fritish
xchequer and as to 90% to the jominions etc. (including


(e) The remaining 4_, milliards to carry interest at

per annum payable half-yearly and to to divided am3-1.- the
Allies rovers (other than the :ritieh
ance with the


aspire) in acc3rd.

a lercentages, subject to such :codifica-

tions, if any, as may be agreed u on after ta:Ang into




for a fi

The following plan is dut forward as a has


discussion rathr than 'LE representing a filal and coneidereo judgment on the suljecte with .1-ich it de-le.

q The central feature is the eurgeetion that Germany

accept A liability for all Inter-Allied -p' t, each

t,eing contingent upon the extent to H-ich creditor

Governments call upon ie'rtor Covernnente for payment, and

that in consideration for Germany's accepting this contingent liability the amot:nt of Germany's 1:e.,.aration

s!o4iu be reduced ty the fall -valunt of the inter-


reparntion dn.t of

-41111rds (subject to certain ldjustmentr), and in order to
cut ehort interminahle accounting comulic'Itions and value Lion disputer, it ie ;,ropeed that
(a) non-German reparation shall be regarded ns
amounting to 25 milliards, and the payments llrefA.dy

made ly Germany up to :1st A3cenlber 19"l inclusive
RP reducing her outstanding riell as on let Jqnuary
to ex- ctly 11c milliards.

(b) In satisfaction of G5 milliards of this debt Ger.
many to accept a con:.incent !i1)ility to 'pay on

demand any principal or interest in rerpect :3f Inter.
Allied -ar .Jebts which any creditor Government

exact from any debtor Government.


LblicatinE of the

German Government :,ayable -kt one month't notice to a

total of 65 milliards to be de,osited with the
Reparation Cdarlirsion to rank, sr and when


rralirlifignrbt rs,
bittbarL*. 04:


Dated January 30, 1922,

seed 9:22 a.m.

Secretary of state,

41, January 30, 10 a.m.

German Government January 27th ordered following payments

made to National Bank Belgium account Belgian priority:


Belgian francs, 1,000,000 dollars, 250,000 pounds sterling, 20,000,000
French francs.

Foregoing second payment 31,000,000 gold marks every ten days conformity decision commission January 13th.

Payments not yet confirmed .






Dated January 31, 1922.
Rec'd 1:24 p.m.

Secretary of State,

44, January 31, 3 p.m.

Reference my B-60.

Payment suns mentioned now confirmed.

Also additional nine million French francs.
thirty-one million gold marks.

Total approximate value


Re payments to National Bank Belgium ordered by German Government.


ii Cc


Data Mb. $,
..ecd. 12:61 p.m.

Secretary of State,

67, February 8, noon.

German Governmont February seventh ordered following pay-

ments made to National Bank Belgium account Belgian priority; 34,003,000
Belgian francs, t1,000,300,

5000 pounds sterling, 17,308,00) trench

Approximate gold mark value above amounts 30,810,89.


going third payment 31,300,000 gold -narks every ten days oonformity

decision commission January thirteenth.

Payments not yet eonfirmed.



4.10FY -



Dated February 9, 1922
Recd. 2:46 p.m.

Secretary of ',Asti,

64, February 9, 3 p.m.

Bank of England advises pursuant to instructions Commission

paid British Government, January 14th, f'58426.16 from reparation funds.

Above represents balance proceeds deliveries dye stuffs Textile Alliance
prior lay first due England account army costs.


Dated Pebruary 14, 1922
riecd. 2:36 p.m.

Secretary of State,

70, February 14, 4 p.m.
3 -635.

Our B-632.

Payment sums mentionei confirmed and additional

500,000 Belgian francs National Bank Belgium.

Totil paylents February

8th approximately 30,968,00J gold marks.








February 17, 1922.

Dear Paddy:

I have just received copies of two cables respecting
reparation payments, doubtless comici; fro's you, for wMch I


very much obliges, and which I hope you will continue tc send
as as we really find it important to keep poeted on how these
matters ^re progressing.
Tours sincerely,

Honorable Eliot Wadsworth,
Assistant Secretary of the Treasury,
Trc&sury Department,
Washington, D. C.



February 18, 1422.

Sir Basil P. Elackett


the merket should


still further.


of my personal views and of our policy with
far I think, without being
euccess in assisting

friend Norman is fully advised

respect to this development, end so

vainglorious, vs can claim to have realised Knee

toward the recovery of the value af

foreign currencies,

measured in dollars.

You have sant me a rather difficult memorandum to comeent upon, and




of the scheme therein
possibly mure complete
less not

do not

think I ehruld express an



views as to

the ,letail

ly ancwlerige of the situation abroad, while

acme who express opinions in the press, is neverthe-

adequate te. give any definite julgeent as to Germany's ability to pay,

nor as to the


in division of eaysents, etc.,

so I shall only comment upon

the recital in the

axon!, the Allied governments;

-reamble which reads:

"The central feature is the suggestion that Germany should
accept a liability :er all inter -Allied debt, such liability
which creditor governments
being contingent upon the extent
call upon dotter governments for ; :cement ***"
My interpretation ef thi is thst the author o; the riemerandum expects
the United States Government tc :reps for eayeent er its claim:. ageinEt the Allied
Governments; bet that the Allied levernmente intend to ,'rese fur !,:eymeeet !Irene,
themselves ...ell;


the extent that the Unites'

tat ms presses fur eayment.

Dieregerding all of the ether ;.revisicns of the memorandum, this seems

tc suggeet that in case

the. United Stetes Gevernment calls upon the Allies to pay

ti sir debts to it, the Allies shall at once n. e demends of eoual
Germany, and in case Germany deeps act

reepend, the

creditor Allied

extent. upon

shall treks claime upen the debt -r Allied Ge-,vernments.

Please understand that my comments are strictly my own; that I have tee
information at the moment of any program by our Gcvernment; and could not in any

event speak for the eficers of the Geverneent.
This v uld appear to be an

Germany three:4

likely to be a

The coms.ents eculd be as fCilcws:

ingenious methed

of traneferring pressure u;:en

the Allied Governments now debtor to us,

cause of dispute and bad

fee!ing in case

an:I would seem to me
it .were



February 18, 1922.

Sir basil P. Blackett


seems tc make the payment c° reperetic

s to th- extent of 85 milliards, contingent

upon its being forced upon Germany by demands ef equal ameunte made by the United
States upon Allied Governments.

Frankly, it strikes me it ic

calculated to

facilitate the adjuetment ef this difficult matter.

Yee eteuld possibly consider the present situation in this country.

Congress has passed a bill extending only limited peters te a ceamiseLn of five,
tc be apptinted by the Preeident, to negotiate an adjustment of indebtedness ::.Vin,,

to this Government.

The limitations imposed upon the commission indicate the

mind ef Cengrese, which ie that the debt should be paid; that the interest sh_uld
be not lees than provided by existing law; that the chligetions should mature in

not longer than 25 years; and that the obligation of one government should not be
taken in settlement of the debt Jr another government.

(I 3.r not attempting a

recital of al; of the provisions as /ou deubtless have them before you.)

last is important in its bearing upon y-ur prpcsal.


It aeons tc no it evidences

a desire upon the part ef Congress tc prevent our getting intj I pceitio


our claims may be converted, directly or indirectly into claire upon Germany.
ceurse, the Allied Governments have the right to enter into any arrangement

ameng themselves that they please fr efecting an adjustment of the Inter-Allied

There is nethine' in the funding bill whic

iltimates that it is the

intention of Congress that the officers of ;ur gL.vernment shall interpose as to any
such arrangements.

You gill find, however, in reeding the reccrd cf the hearings

before the Senate and house comeittees that there appear to be strong objections
to any plan for swapping lebte, and the point I maks in regard to the sentence

euoted above is simply the practical one cf avoiding the creation of a situation
by the making of formal agreements which might in any way hamper or embarrass
perfect freedom in dealing vith the whole subject.

I em not arguing the merits

of the question, but simply stating the facts.

My understanding of public opinion in this country at the -resent time
is somewhat as follows:


Sir Basil P. Blackett


Demands for government economy are insistent.
tax reductions.

February 18,


The same is true fer

The need for further revenues enlargos, as estimates indicate a

deficit in cur budget for the coming financial year.

Cengross seems insistent

upon passing a bill authorizing the payment of large bonuses to those ehe served
in the ear, ehich may add to the liabilities of the guvernment any There fr:e tee
to five billion dollars.

There is ne general public understanding of the ability

of the debter nations to :ay, re_r cf ehat economic disturbance might result from
successful collection.

The President is resorted to have definitely advised

uesibere of Congreee that he is opposed to any plan for making the cayment of bonuses
tc soldiers contingent or dependent in any say upon the collection of debts (need
us by the Allied Governments.

There is a section of eublic opinion, hoe much can

not be estimated, ehlch favors cencellation all around.

Another section ehich

favors forgiveness of intereet for a long period, five to ten years even.


are not vocal, and it is charged that these vi?es are selfishly held by those mho
are themselves interested in securities uf foreign governments and fear that their's
sill not be paid if our government insists upon the collection of debts ogling to it.

From this you mill gather that there is a confused public opinion here, and, as I
firmly believe, very little real knowledge of the facts, in or eutside of Congress.
!fox that the funding Lill has passed, I thing: my judgment is that the test course

freer now on, bah for cur gevernmeet and for these governments ehich are indebted
to us,

vill be to promptly undertake negetiatiens and incurs Chet the cemmissien

gets both all the facts, and 4 thorough knowledge as fell of the economic problems
*rapped up in the = attar of debt collection, including reparations.

In general

I should ear that me agreement by the :ertias ether than the United States ehich
appears t.

be designed ti treesfer .ressure uson Germany weuld be unfortunate.

/net is m,re needed in this country than anything -lee just now is real 'enceledge
of these matters.

The Commission affords the means fur conveying it.

If it

might superficially appear that cur attitude inwards some of these difficult matters
is seifich or inspired by any antagonism er animus, I think you should promptly

dismiss the


My belief is that ignorance explains most of our difficulties

Sir Basil P. Blackett


February 18, 1922.

and it is a most natural ignorance vhen c -e considers our distance from the

scene of affairs and cur lack of constant contacts such as you have and ve have not.
These expressions would not be complete without my adding one word, which
I ar sure you will not misunderstand.

For the past year, and longer than that,

some of the most responsible men in the country who are nut only impartial, but

even friendly to the vnrious Alied Governments, have begun to questicn the wisdom
of generous policies in these matters, so long as evidence of extravagance in
Government finance by some of the dotter nations continues to be so obvious.
This especially relates to the maintenance of large military establishments, to
the payment of doles, and to financing by printing money rathar than by t-,.xee, loans,
etc., etc.

Ihile indulging in these confidential and discursive comments, growing
.ut of your letter, let me add the following purely personal views:
I believe the Treaties no

submitted to Aar Senate, as tho result

f t1.e

lashington conference, will probably be promptly ratified after dircussion.
take some time.

If it is the desire of the foreign governments th


It may

our government

should :articipate in a conference to discuss economic matters, I can not help but
feel that the Treaties must first be ratified before an answer should be expected
from lashington.

This simply means that it might be crecrtune to delay the Genoa

conference for some months, as press despatches now indicate may be done.
I also think that it will be inopportune for such a conference to discuss
the terms of settleeent of the Inter-Allied debt, (ae to the United States), except
through the newly constituted comeiesion, which I am confident will be a good one.

The outstanding public question in this country to-day is the distress of the

It is both economic and political.

ge '.ave a mist important election

in November when a considerable part of the Senate, and aver two-thirds of the

the House of Representatives, C(119 up for re-election.

deal with luesticne of a character requiring important

an election of this character is pending.

It is difficult
,t a time when

All of these ecnomic questions seem to

Sir Basil P. Blackett

February 18, 192,2.

*be reflected back in one respect or another, to the plight of the farmers, vhich
has been Best deplorable.

I can not help but feel thet the officers of some cf

the foreign gevernments interested in these questions may not alwpsys be as well

advised as is desirable as to political ccnditicne in the united States.


doubtless heard, for instance, cf the Administration and Congress being "bulldozed" by a se-called agricultural bloc, thr_ugh the exercise ef the power to
defeat legislation without any pester to pass legislation.

Nctvithrtsnding that

some of the members cf this group in Congress have bitterly criticised me personally,
I must frankly state that I have a great sympathy ' r their difficulties.

There are

a number ef states in this country where ever 75 eer cent ef the value of the
produce is agricultural, and vhere financial paralysis hAs everteken a large proportion cf the population.

Their representatives in Congress are subj,ct to

tremendous pressure from home to adopt measures t- relieve this distress.
reasures they propose may not always be wise.


My experience with them has been

that meet of these men desire to be reasonable and are honest, striving with a
situation which, frankly, is toe difficult for them, and would be too difficult fir
no to solve were I in their position.
to pass legislation to forgive

Can men in these circumstances be expected

cr greatly reduce t10 or tll billions of dett at

a time when the burden of heavy taxation is felt and when distress of that character prevails?

It seems to be only human nature thet they sleuld hesitate to do

until they are pretty well essured that its collection will result in more herd-

ship than would forgiveness cr deferment.
In the long run, as I have repeatedly stated, when the people of this
country knew the facts, they can be relied upon tr deal honorably and even generously with such a matter as this foreign debt.

I dread the possibility of our drifting

or being gradually maneuvered into the position because of political or ether
conditions abroad, or possibly because of cur own ignorance of insisting on the one

hand that our recent Allies must pay vhat they Owe ue in full, while at the
time le may seem to be complaining that those same nations are insist tine too
Federal Reserve Bank of St. Louis

that Germany, our recent enemy, must pay debts so Justly owed.


February 18, 1c?2.


I am 4riting this long letter for the nurpose cf expressing the view

that much #hich msy me'de you restless about our attitude may be due to the ignorance

of our public; that under those conditions delay in preeeing questions for decision
is alNaye vise; and that certain special conditions now exioting, other than the

ignrEnce I refer to, make it peculiarly desirable that no haste be made in pushing
plans to alter the status of these matters, except !t be after deliberate examina-

tion cf the facts and a start in negctiatins thr'ugh cur Commiesin.
You see I have taken your invitaticn as excuse ftr writing y. u a lecture,


-Mich I apolcgi:.e, but which I


you will arrreciate is sent in te

friendliest passible spirit cf belpfUliness.
.Pith best regards, I no,

Faithfully pours,

Sir Besil P. Blaokett,
Treasury Chambers,
ihitehall 5.4.,
London, England.

411111i tEASURY



Feb. 21,


Governor strong


Recd. Februnry 18, 1)22,
10:20 a.m.


secretary of State,

German Government February sixteenth advises made

follovsing payments reraration account:

Twenty-five million Belgian francs, three hundred thousand
pounds sterling; thirty million French francs, one pillion four

hundred thirty thousnd dollars.

111 effected through Reichsbank

excert one million four hundred thirty thousand dollars nrJde by

foregoing to meet thirty-one million

gold marks payment due February eighteenth under decision commission
January thirteen.

Payments not yet confirmed.



Dated Feb. 22 , 1922
Rood. 12:06 p...


Secretary of State,


83, labruary 22, 3 p.m.
B -637.


Our B-636.

=ayments mentioned confirmed.

Germany further

January thirtieth 13,848 dollars 44 oents federal reserve credit

national bank Belgium.

Belgian !riority amount the customs exports

receipts November rrior reparation oommission decision January thirteenth.


:bbruary 23, 1922.

Dear '.:addy:

,he copies of the two cables dated Asbruary 14, and
18, with respect to reparation payments, have been received, and
1 :appreciate your courtesy in forty. riling thin for our confidential


Yours sincerely,

Hon. Lliot ;aidsworth,
2,ssistant Qecretary of the Treasury,
Treasury Department,

Washington, D. C.

Paris, 18 rue ue Tilsitt.
24 February 1922.


14 dear Ben,

Loose in file

I enclose herewith the following documents, viz:

Exhibit A - Annex C.G. 134d, which is a Comparative Study of the
Burden of Taxation in Germany and France by the Information
Service of the Reparation Commission. this report shows the
difficulty in arriving at any definite conclusion on this subject.
A consideration of this question is made incumbent upon the
Commission by sub-paragraph b, paragraph 12, Annex II of Part
VIII of the Treaty. A cursory examination of the document
enclosed herewith demonstrates the difficulty of this task.
Exhibit B - A Statistical r.lvamination of the German rational Budget
of Expenditures for 1921/22 and 1922/23. A casual examination of
some of the items set forth on paces 15 to 23 inclusive opens criticism that the German Government "is doing business as usual" without
reference to its position vis a vis the reparation settlement.
Items marked with green pencil on page 18 are specially illuminating.

Exhibit C - Annex 1267 is the Report by the Committee of Guarantees'
Berlin Delegation on the ;;;ensures of Control over Foreign Bills
Bought in the Open Larket.
Exhibit D - Annex 1247 is a copy of the Report Requested from the
German Government by Decisio4 Adopted by the Reparation Commission
on January 13, 1922. (Inthis connection see sub-paragraph b
of Annex A enclosed with my letter to you of February 16th).

Exhibit E - Annex 1282 are the Remarks by the Intelligence Service
of the Reparation Commission in Connection with the German Idemorandum,
(See ixhibit D above and especially sub-annex 2 of
Annex 1247a.
annex I therewith).
Exhibit A with my letter of February 16th sets forth the
The Germans,
provisional payments to be effected by the Germans.
7th and
to date, have met the January 18th, Hanuary 28th, February
paid over, to date,
In other words they have
February 17th payments.
From what I gather the Germans are only in a
144 million gold marks.
this provisional arrargement
position to continue to make payments under
27th and Larch 9th, and perhaps
on the following dates, viz: February


Larch 19th. On this _atter date they will be at the end of their
The present dowTward trend in the value of the paper
mark indicates this time as being about the breaking point.
best observers in Germany confirm this view and from what I gather
the Germans are now preparing to inform the Commission accordingly.
I hope that before this time the question will be referred by the
L.11ied Governments to the Reparation Commission and that this
latter body will see the light and base German payments for this
year on Germany's capacity. The amount which will have been paid by
.arch 19th, according to my estimate, will be approximately
is the same figure which Germany offered
200 million Lold marks
last December as being their best cash payments on account of the
January 15th and February 15th instalments under the Schedule of
i-ayments of _ay 5, 1921.

I believe that the Allied Governments hope that the
Commission's decision for this year will be base) on the unconfirmed
Cannes Conference basis (see Lxhibit C to thy letter of February 16th).
I personally question whether Germany is in a position to reach the
Cannes figures on "reparation" payments. As a matter of fact in addition
to the "reparation" figures mentioned, approximately 30 million gold
...arks per month throughout the year must be made forthcoming on account
of "clearing of ice" transadtions.

6,-,AJ`-'2"Ar Faithfully yours,


The Honorable Benjamin Strong,
Governor Federal Reserve Bank of Kew York
New York city,



1,ii,A13 28 192?

1=. rue de Tilsittki



Dear Ben,

Loose in fil

I enclose herev:ith ;:eekly Beichsbank Statements
covering the period January 14th up to and including February
It occurs to me that you may find this information
15th 1942.
useful in this form. If so I will be tlad to keep sending L.ou
copy of the weekly statements as they appear. If they are not
useful and if you have the information from other sources
please let me know and I will not forward them.

The present downward trend in the value of the paper
mark indicates clearly that an early revision of the fiLures
for German reparation cash payments is imperative. The matter
was brought up this morning in the Commission at the instigation
of the British and it was agreed to hold formal conversations
between the Delegates commencing the first of next ve6k on this
The present provisional schedule of
most important subject.
payments under which the Germans are operating was enclosed
I still maintain
hibit A.
with my letter of February 16th as
the views expressed in the last half of my letter of February
44, 1922.

Faithfully yours,

5 incls.


he Honorable Benjamin Strong:,
J-overnor Federal Reserve Bank of New York,
New York City, r. Y.


D?.ted 1:artria 5, 1922

Aeceived 5th 9:45 a.m.

..;e0 °tar.; of State,


96 11roh 5, le a.m.

8641 February 22 commission paid Great Britain
158,000 Danish crowns proceeds sale German aeronautical material,

approximate vlue 6,389 pounds sterling applicable oritish army costs
prier lay first.

Payments mentioned my b-639 confirmed.








fro:n Lir. Wadsworth.

Dated :arch 6, 1322
deceived 11:54 a.n.
Secretary of ;Mate,
98 liirch 6, 4 p.m.


dank of E.ngland notified Col:mission February 27th

24,106 pounds sterling equivalent twenty million paper marks proceeds
sale war material received and applied against British army °sets prior
Jay first.





?'irch 0, 10.1,7.

My dear Lcgie:

I am more than grateful tc you for your letters of February 16

vhich I have read vith a great deal of interest; but so far

have not had time to go over the enclosures vhich accompanied them.


in leaving to -day for a ten days pleasure trip, it may be some time

before you get any comnents on these documents.
that you say about the course of the mark hereafter, expresses
just atout the feeling that I have had myself.
had such a rough tric, over.

The same renort comes to me from everybody.

The ocean is nut behaving veil this linter at all.
test regards to Boyden, and the same to yourself.

Colonel James 'A. Logan, Jr.,
18 rue de Tilsitt,
PariE, France.


Please give my

Dated :ilaroh 9, 1922

Recd. 10:15 a.m.

Jecretary of State,
104, :_arch 9, 10 a.m.
payments b,


German Government larch 7 announces following
Reich' yank to National Bank Belgium, Belgian
Belgian francs 4,000,000, pounds 1,400,000, French

franc' 7,500,000 approximately 30,253,340.86 gold marks.
609,449 gold marks mentioned our B-640 as overdue February
18th now reported as over payments.

Revised figures indicPte

tot-il of 932,815.45 gold marks overpaid between January 18th
and February 28th.




%iAR 28

Paris, 18 rue de Tilsitt, a s.
10 March, 1922,

LT dear Ben,

he difficulties of the continued payment by Germany
of 31 million gold marks each ten days as provisionally fixed
after the failure of the Cannes conference are now being presented
acutely as registered by the continued decline in the value of
the paper mark.
Germany has just effected the payment of her
instalment due Larch 8th with the effect which you have perhaps
noted on her exchange position. She may be able to make her
Larch 18th payment but this can only result in a further fall in
If any attempt be made to continue payments at the
present scale after March 18th, I am satisfied it can only be
accomplished with most disastrous exchange results.

The Reparation Commission had an informal meeting last
week when the situation was discussed. All except Dubois the Frenchman
were in favor of putting the brakes on the demands of Germany for
payments and reverting without delay to the schedule of payments
in the Cannes project, (see Art. 6, Exhibit C with my letter to
you of February 16th). Dubois expressed himself as being strongly
opposed, giving every indication that in the event of a vote he
would be formally opposed.
On the other hand, French officials, including de Lasteyrie,
appear willing to revert to the Cannes schedule.
They do not say
this publicly for under the Poincar6 policy of putting the decision
up to the Reparation Commission they have Lractically transferred
responsability vets h vis French public opinion to the Commission
and particularly Dubois. Dubois is a French political leader not
directly affiliated with the Poincare party and it will therefore be
interesting to see if and when the vote is forced (which I expect
shortly) he will maintain his present position, reaping any glory
that there may be in it with the French public, or perhaps even resigning
or bowing to the majority.
I am satisfied that the Cannes figures
will be shortly adopted by a majority vote and I have few tears to shed
and only a small floral tribute to place on Dubois tomb if he decides
to suicide.

Obviously the Cannes figures are only a temporary palliative
designed to tie the situation over for a few months. Germany can
only meet the cash payments involved under the Cannes schedule up


J. A. L. J

P ap,

until say August of this year, and therefore we must expect another
breaking point in cash payments and further conversations at
It is a pity that German payments cannot be settled
that time.
once for all, but apparently this is impossible, political exigencies
prevent any other solution than that of approaching the ultimate
The fact must not be lost sight of
goal by a series of jumps.
that in addition to the demands on Germany fcr foreign exchange on
account of reparation payments, there exists the Treaty requirements
of the "clearing office payments" which involve the payment of an
additional 35 million gold marks per month. This Germany is now
meeting and must continue to meet up until March 1923 at least.
There was also a payment made under Article 58 of the Versailles
Treaty on account of Alsace-Lorraine liquidations on December 15th
There is an outstanding balance on
last of 10 million francs.
this latter account of approximately 90 million francs to be paid
this year.

Faithfully yours,

The Honorable Benjamin Strong,
Governor, Federal Reserve Bank of
New York, New York







Dated March 11, 1922,
'ecld 3 P.M.

Secre'ary of state,

109, March 11, 5 p.m.

-"aymenrits notions(' our 5..644 conrirued.


8th Commis,ion paid National Bank Belgium account priority
1,996,598.35 Belgian francs approximately 718,000 gold marks
proceeds ergo German coke %uxemburg December.





i'441 28

Paris, 2ardh 17, 1922.

?lersonal and Confidential.

'4 dear Ben :

I enclose herewith a copy of the
French text of the Financial Arrangement
of :!arch 11, 1922 signed by the Finance

Ministers of Belgium, France, Great Britain
and Italy.

Faithfully yours,



The Honorable Benjamin Strong,
Governor, Federal Reserve Bank
of New York,
New York, U. S. A.








13. S.
Paris, :larch 17, 1922.

Personal and Confidential.

Subject: Reparation Situation and Proposed
Organisation of Committee of Financiers to advise on the possibilities and ways and means of Germany
floating a lari;e external loan.

dear Ben:

In my letter of March 10th and previous letters, I referred
to the difficulties of the continued payment by Germany of 31,000,000
gold marks each ten clays, as provisionally fixed by the Reparation Commission after the failure of the Cannes Conference.
All Allied Govern ments have now left the entire question of postponing reparation payments
during the year 1922 to the Reparation commission, as contemplated by paragraph 12 (b) of Annex II of Part VIII Versailles Treaty.

Duoois, the Frenchman, while still opposing any reduction from
"31,000,000 every ten days" is weakening and I believe will bow to the
inevitaole, Which today is the Cannes schedule (see Par. 6, Exhibit C,
my letter of February 17th).
The majority on the Commission are prepared
to officially adopt the Cannes schedule.
Seydoux tells me both Poincare
and De Lasteyrie hold Dubois' position untenable and that in their opinion
the Commission is wise, in view of the present trend in German exchange,
to revert immediately to the Cannes schedule.
However, these political
gentlemen having "tagged" Dubois with the responsibility vis-a-vis French
public opinion are not indulging in any public utterances of these personal
views as conveyed confidentially to me by Seydoux.
At a recent unofficial Commission meeting, Dubois was forced
to agree to an official consideration of the question next Friday, March 17th,
and at the same time (larch 15th) an "official" statement was given to the
Press to the effect that "The Reparation Commission was earnestly engaged
in considering the German position, particularly with regard to reparation
cash payments; that the Commission intended having an official meeting next
Friday, when it was hoped that some definite conclusion would be reached"
This announcement was made in an endeavor to suPport the falling mark.
Today Dubois has been granted up until Monday, :.Larch 20th, for "additional
I believe the Cannes schedule will be adopted Monday or Tuesday
Dubois may vote against it and may even resign (however, he may disappoint me in this Particular), but the majority will carry it.


To Governor Strong - Personal and Confidential.

O. A. L. Jr.



At the unofficial meeting, .:arch 15th, the British Delegate,
Sir John Bradbury, submitted the enclosed draft resolutions and letter, which
he Proposes officially submitting to the Commission Friday, viz:
Exhibit 1 -

Draft resolution of Reparation Commission reducing
Germany's total cash payments on account of reparations
from January 1, 1922 to December 31, 1922, from approximately 1,612,000,000 gold marks
31,000,000 every
ten days) under the "provisional schedule" now in force,
to a total cash payment during the same period by
Germany (i.e. including payments effected from January 1st
to date), of 720,000,000 gold marks on account of reparations (i.e., the Cannes schedule).


2 -

A draft letter from the Reparation Commission to Dr.
Wirth, Chancellor of the Reich, notifying the German
Government of the decision in (1) above and laying down
certain principles of budget reform, increases in taxation, control of the issue of paper money through the
-reichsbank, internal loans, etc., with a threat that if
these Principles are not made effective before 31st May
1922 German payments revert automatically to those of the
formal Schedule of Payments of May 5th, 1921. (The
"separate communication" referred to in the last paragraph of this draft letter has not been formulated, being
dependent on the adoption of the draft resolution in
exhibit (3) below).


3 -

Draft resolution contemplating the
Committee of Experts to consider the
possibilities, ways and means, etc.,
Government floating a large external

appointment of a
question of the
for the German

Attention is particularly invited to the fact that the enclosed
exhibits are only in Provisional craft form of proposals; that they have not
as yet been considered by the Commission and to date only represent the views
of the British Delegate.
My personal view, (Exhibit 1), so far as even the reduction of the
German cash payments on account of reparations from the present provisional
figures to the Cannes figures is concerned, has been covered in previous letters.
Concisely, this view is that the Cannes schedule without an external loan will
break down some time in August 1922.
However, the adoption of the draft resolution, or something approaching it, will have the oeneficial immediate effect
of steadying German exchange and thus giving a breathing space during which more
conservative factors can make themselves felt.
The craft letter, (Exhibit 2) is, in my opinion, generally sound,
subject to the specific reservations raised in the preceding paragraph and
also subject to certain questions of detail.

J. A. L. Jr.

TO Governor Strong - Personal aria Confidential.



The draft resolution Exhibit 3, contemplating the appointment of a
Committee of Experts (Financiers) to consider the possibilities of Germany
raising a foreign loan "to be applied to the redemption of a Part of the
capital of the Reparation debt" is, in my view, the most important step ever
contemplated by the Reparation Commission and, if adopted, would create an
agency the results of whose work might have far reaching effect in the settlement of the whole reparation problem.
I Personally do not know what the
situation is at home and whether or not our Government could appoint a representative banker, or group of bankers, to this Committee as "American Financial
It is obvious that the French, Italians and Belgians are feeling
the "tactful pressure" now being applied to them both airectly and indirectly
through our financial houses in America in the latter's treatment of foreign
Government tenders for loans,
The saner element, both in the Governments and
Putsiaea_are 'vial aware that the German Government has no foreign exchange
available to turn over to them on account of reparations and that the only hope
is to interest foreign bankers to advanne money to Germany for the purpose.
They also reluctantly realize that when the question comes up of Germany borrowforeign money, the conditions and amount of such loan will not be dictated
by the politician but by the fellow who is going to lend the money.
If this
resolution goes through and if our internal political situation and Government
policy would permit, and if American bankers were interested, the time is rine
for a good constructive stroke at the Reparation question.
Obviously, no
sound banker would advance a cent to Germany to be paid over to the Allies
unless his loan be protected by the German renaration bill and other treaty
There is
charges being reduced to a figure that "Germany can and will pay".
If all
an unlimited field of real constructive activity for such a Committee.
agree to a sane treatment of Germany, a substantial business loan, properly
secured, might have an excellent effect by immediately providing money urgently
needed for reconstruction of devastated areas, while at the same time putting
On the other hand, if a business
the damper on a lot of political nonsense.
arrangement be impossible, the reasons for failure would become public and
would go far in the education of public opinion by forcing it to realize the
The scheme has the additional feature that it can be worked on
our part through private bankers, with perhaps representatives of the Federal
Reserve Bank, without the direct interjection of our Government into any
political phase of the question.
The question concerning the possible appointment of a Committee
of Experts (Exhibit 3) has not the same pressing importance as the readjustment of German cash payments (Exhibits 1 and 2) and therefore I have every
reason to believe that no definite action will be taken on this phase for
If you are interested in this matter, it is important
two or three weeks.
not to confuse the possible creation of a Committee of Experts (Financiers)
to consider the external loan possibilities with another Committee of 'axperts
(exchange men) which has already been created by the Reparation Commission
This latter Committee, its functions,
and is now in process of orgalisation.
etc., are limited, as already explained in previous communications, to giving
advice as to the method of handling German cash payments so as to least disThe other Powers have
turb exchange - a very restricted field of work.
nominated Exchange Experts for this purpose, (see attached list of names), but
it is not yet decided whether or not we are to add someone from home. It goes
Federal Reserve Bank Jr. Louis
.1. A. L. of St. To

Governor Strong - Personal and Confidential.

11011 J. A. L. Jr. To Governor Strong - Personal and Confidential.

List of Exchange Experts
nominated oy Allied Governments as members of the
advisory Committee of F.xchane Experts organised by the
Reparation Commission.
(See end of page 3, this letter).



Omer Lepreux, Vice-Governor of the
National 3ank of Belgium.



Joe Nathan, Financier, business man,
etc. etc.


Sadahiko Nakane, superintendent of
the London Agency of the Bank of
Japan, 7 bishop's Gate, London, E.C.2

Great Britain - Sir Charles
Banking Elpert
of distinction.


L. Picard, Sous- Gouverneur de la
Banque de France.






List of Enclosures with letter of J.A.L., Jr. to Governor
Jtrong of Federal Reserve Bank.
Letter dated '."arch 17, 1922.
..ilkhibit 1.)




Described in letter.


Reparation Commission:

Document, Berlin


Document, Paris





Annex Nos. 538/13 bis.





12 84




130 7

B. Austria and Hungary.
I. S.

No. 583 586


584 592
585 593

41i1L11 d.-:41:1711..)


Dated :arch 18, 1922.
Ito. 126, .darch 18, noon.


German Jovernment announced _larch 16th payment by :teichsbank

5,000,000 Belgian fruncs; 1,100,030 pounds sterling; 10,000,000 wench

francs; and by 3evisenbeschaffungstelle 16,000,0,0 Belgian francs; total
approxifiately 31,000,000 gold istirl+.s.

These not yet confireed Will go

to France instead of Banjul". Joe our b-654.

41,4a 28


:larch 23, 1922.

Dear Ben:

Perhaps you read irench.

ere does.

If not, no doubt some one

Here is a letter from a Belgian which was

to me by de Cartier.

The aan who wrote the letter is

high in Belgian financial circles.

when we meet.


I will tell you his

It is rather an interesting comment on

look it over or have some one translate it

u -.nd let me know if you agree.

Always yours,

Honorable Benjamin Strong,
Federal Reserve Bank of !Tew York,
New York, N.Y.



7russels, February 11, 1922

My dear friend,

During a trip which I have just taken in the Succession
States of the former Austria-Hungarian Empire, I was able, in the course
of various conversations with public men of these countries, to get an
idea of the plan which these states had decided upon for their economic

This plan, for all these countries, is copied from the one

which Austria has established in agreement with Germany.

The numerous indications which I saw right and left show
very clesrly that the plan in question has been studied and developed to
the last detail since the armistice.
The indispensable basis for the realization of this plan
is the arrival at an understanding with the Allies on the subject of the
reparations, resulting in the fixing of the total at such-and-such a compensatory figure; that is to say, that it is indispensable for Germany that
she be told, once and for all, what is the maximum amount that she will be
required to pay in gold.

To arrive at this compensatory agreement is the

object towards which all her efforts have for two years been tending, for
as long as this fundamental decision is not reached, it will be difficult
for her to proceed without unexpected results, towards the realization of
the plan which she has conceived.

This consists, in fact, of devaluating

her money as sosn as the principle of compensation has been accepted, and
a figure has been specified.
At this point, she will try to assemble a sufficient reserve
of foreign securities or of gold - either by succeeding in raising a loan,
or by making her manufacturers, who all possess abroad immense reserves of
foreign securities, furnish her the sums which she will need.

This gold


of which the government has maintained, it continues the monopoly now at
prices inferior to the cost price, instead of demanding of the manufacturers
who acknowledge considerable profits - the increase of the workers' wages.
The case of coal is still more typical.

We see, in fact, the Boche govern-

ment effect a regular "dumping" here, granting all industries, even the most

prosperous, enormous concessions, either in the form of special transportation
rates, or even in money.

It is a fact that we have been able to obtain from

certain Boche factories the official invoices and the secret invoices remitted
to the manufacturers for the coal which was delivered to them, and the price

of which, at the close of the account, appears at 310 marks a ton, delivered
at the factory, or less than $1.50, when in Belgium, the cost price of coal,
at the pit, is more than $4.50.
All these favors granted to the manufacturers represent the
price paid for their complicity in the execution

adopted; their

role is to establish, thanks to the favors accorded them, the large reserves
of foreign securities which they own today outside of the German frontiers.
In a word, all this is still part of this famous plan which has as its aim,
in reality, to bring Germany to internal bankruptcy, without one's being able
to say, however, that she is stopping the payment of her debts, since she will
continue to pay them in paper marks.

This what I shall call scientific


In order the better /judge the retlults which Germany intends to

derive from it, let us take a concrete example.
The Government of the Reich owes at the present time to her


and also to the foreigners who have rushed after German stocks

which Boche propaganda made them expect would rise rapidly) a total of from
three to four hundred billion marks.

In gold, this represents scarcely one

billion or one billion and a half dollars, say, 20 dollars per capita at the
Federal Reserve Bank of St. Louis

- 4

- 5 -

to prepare for her future generations an absolutely privileged situation in
the world whose economic conquest will be an accomplished fact.
This plan is also the one which Austria has adopted, and


following her example, all the Succession States of the Austro-Hungarian

See how striking is the comparison which can be made between
Austria's situation and that of our country, Belgium.
of about eight millions.

Each has a population

Austria has, or will have at the moment when she

hopes to be able to realize the Boche plan, a debt of about 300 billion crowns,
which represent today 150 million gold francs.

This de

den of 20 gold francs per capita, while in our case, even if we should apply
an arrangement of the Austrian plan, we could never devaluate our money except

upon the basis of its present rate of exchange, which is still from 30 to
405 of its gold value; that is to say, our 40 to 50 billions gold paper debt
would still represent ten to fifteen billions in gold, say, 1500 gold francs
per capita.

I told you at the beginning of this letter that this plan has
been prepared since the armistice; I have had the proof of it in the course
of numerous conversations.

As soon as her plan of restoration was well studied out and
definitely agreed upon, that is to say, from the beginning of 1919, Germany
began, through her agents and the mediation of her friends abroad, an Um
restrained propaganda in all the countries of the world, in Asia, South America,
the United States,everylhere, in short, in order to spread the idea of the
rapid economic reestablishment of Germany and consequently of the rise (*her
exchange - at that time, the mark was worth 40 to 50 centimes.

At the same

time, through the intervention of the German banks, she enlisted all her great
manufacturers, all her business men, in a word, all her accomplices, in selling

- 6 -

marks in order to raise the large reserves in foreign securities which the
Germans now possess abroad.

Thus one sees today Germans owning in Holland

assets of from five to six million florins; in Belgium, several hundred/francs;

in Argentina, hundreds and hundreds of millions of pesos; in the United States,
I do not know how many dollars.


How much does this total of foreign securities in the hands
of the Germans amount to today?

No one can say, but nevertheless, it is to

be borne in mind that in the course of the discussions of the Supreme Council,

allusion was made to the figure of a billion dollars, without raising any
protest from the German delegates.
Now that the mark has fallen to less than a farthing, and will

be kept at this rate of exchange, if indeed they do not try to make it go lower
still, how much would Germany need to buy back all the marks that she has sold
in the entire world:

Scarcely a few tens of millions of dollars, leaving

her thus a considerable profit on the speculation which she has carried on
thanks to the propaganda conducted by her government.

And it is precisely

this profit which is going to serve her, later, in establishing the gold reserve of the banking institutioAkhich she intends to create.
From all that precedes, it follows very clearly that if we do
not pay attention, and if we do not find a way to parry the blow with which
the Roches are threatening humanity, we are going to find ourselves, in a
few years, Americans and English as well, and especially the countries with
a favorable exchange today, in a frightful situation.
In my humble opinion, ono remedy exists:

To declare to Germany,

clearly and precisely, that the total amount of the indemnity which she owes,
by virtue of the Treaty of Versailles, will be exacted to the last centime,
even if the payments have to be distributed over a century, at the risk of
having fixed each year the amount of the sum to be paid the followini: year,

in proportion to the capacity of the country.


- 7


To act otherwise, that is, to satisfy the desire of the

Boche government in indicating a compensatory figure, is to impose upon
our children a situation from which they will be unable to extricate themselves except by another war.

How, moreover, could so many people be deceived by the illusion that the Germans, who have always taken a long-sighted view of the
future, would have accepted the situation in which the war has placed them,
such a situation as the Treaty of Versailles imposes upon them, if they had
not already traced for the future a plan for an economic campaign, a plan
drawn up by men gifted with that mentality which even before the war they

were known to possess, that is to say, a spirit of conquest and of economic
and political domination?
Today, my dear friend, you see all Germany turning towards

But it is solely because before 1914 he was one of the most

ardent promoters of world economic conquest.

At that time, in order to

realize the projects of the Empire, he made use of the powerful instrument
which he had at his disposal and which was called the "A. E. G." from the
name of a combination of electrical trusts which he had created, and the
action of which is felt not only in Germany, but in France, America, Italy,
Belgium, and everywhere else.

Rathenau, let is be said, is one of the keenest blades in
Germany, he has the aualities of his race, the gift of flattery, of lulling

He has made use of these gifts in the past and will use them

again in the future, but when he believes he has attained his ends, he will
raise his head to rule those whom he has conquered.
Vie Belgians have had the proof of this during the war.


as a matter of fact, came here formerly to secure the control of many electrical
concerns; he entered into relations with a number of our business men whom he
flattered and cajoled.

Then the war came, there was not a man who did so

much harm to the Belgians and French of the occupied regions as this softspoken Rathenau.

It was he who was the author of the requisitions of machines

and industrial material; it was he again who conceived the destruction of

It is understood that what I am writing you is said merely in
a quite personal capacity, and that I do not wish my name to be published,

nevertheless there is no harm in your quoting me in your conversation with
your friends over there.
"ery sincerely yours,

Translated by
K. D. Frankenstein,
Statistics Dopt.
March 24, 1922.


Paris, 18 rue de Tilsitt.
24 March, 1922.


Subject: Reparation situation and Proposed
Organization of Committee of Financiers to
advise on the possibilities and ways and
means of Germany floating a large external

My dear Ben,

With my letter of March 17th I enclosed a draft decision
as Exhibit 1 and a draft letter as Exhibit 2 which had been formulated
by the British Delegate and submitted for the action of the Reparation
These Exhibits proposed an immediate and substantial reducCommission.
tion of the demands on Germany for reparation payments during the year
1922 and the conditions under which such partial moratorium would be
I enclose herewith as;

Exhibit A - the formal decision of the Reparation Commission taken
on March 21st 1922,
and as:

Exhibit B - the formal letter of the Reparation Commission which has
been sent to the German Government under date of March
21st 1922,
The enclosed draft decision and letter were apiroved in the
Commission by unanimity.
It was obvious during the last few conferences
preceding the formal adoption of the decision and letter that Poincare
and de Lasteyrie had forced Dubois to back down from the position he had
previously taken.
This action of the French Government is in my opinion
most encouraging.

However, I remain of the opinion that the figures of cash
payments (Exhibit A) are beyond Germany's capacity; that Germany can
only meet such payments up until August 15th at the maximum and at
that time, though preferably before, they must be revised.
'With regard to the letter (Exhibit B), this is of course an
"ideal" arrangement but imposes conditions which in my view can never
The reform of German finance is essential for reparations,
be carried out.
but there is no way of permanently reforming German finance or of obtaining
the maximum possible indemnity which does not begin by reducing the total
In other words I am convinced
to a figure within Germany's capacity.
that the increase in taxation necessary not only in raising cover for the
existing German budgetary deficit, but also the additional cover required
to meet reparation payments set forth in the decision is outside Germany's





I personally doubt if the Wirth Government will weather
the storm and therefore look with considerable apprehension to the
resulting political, financial and business disturbances which are
If the W'irth Government which is conciliatory
bound to follow.
falls, the danger is of its being succeeded by a reactionary Government with the result that more fuel will be added to the flames.
If by chance Germany could develop a new Government willing and
stroOg enough to exact the measura contemplated by the Commission's
letter, I should nevertheless anticipate very complete business disturbances during the period of adjustment to the new conditions,
also the final failure of the measures adopted to produce any close
It is obvious that so long as this
approximation to the results desired.
letter remains in full force there is no possibillty of Germany securing
external short term credits even for slamm amounledhich to tide over
Fortunately the letter
the situation in which it is now placed.
is carefully worded and while giving satisfaction to the lessening
extreme anti-German public feeling in Allied countries, nevertheless
leaves loop-holes through which very considerable amendments are
The advantage however of the latter is that
possible at any time.
it is likely to bring matters to a head without delay.

The fight in the Commission the last few days before the
enclosed decision and letter were approved, and after Dubois had
agreed to the reduced payments, centered on the nature and extent
of control to be exercised by the Reparation Commission over German
The French Government through Dubois was for a
control somewhat approaching that of the "The Ottoman Debt", or
"The Chinese Customs Administration", whereas the other Delegates
were opposed to any such method of mixing up or assuming direct
responsability in any way whatsoever in German administration.
The French proposed the organization of a "Committee
of Guarantees" with headquarters in Berlin, nominally under the
Reparation Commission but "with authority to report direct to the
Allied Governments". The obvious purpose of this arrangement was to
set up a new body for handling reparation questions with a new constitution from which latter the few redeeming parts of the Versailles Treaty
concerning "considerations of Germany's capacity", "German internal
taxation not to exceed that of the highest enforced in any Allied
In other words the whole
countries" etc.. could be eliminated.
proposal was "political eyewash" designed to cater to public opinion.
The other Delegates counter-attacked by maintaining that this proposal
contravened the words and intent of the Treaty; that they would not
recommend the setting up of any such veiled form of independent "Committee
of Guarantees" in Berlin and that as future. developments in the German
situation might require the presence of the Reparation Commission
permanently in Berlin they proposed that the Allied Governments
be asked at once to give their consent to the transfer of the Reparation

e')- A A. L .



Commission's permanent headquarters from Paris to Berlin "if and when the
German situation requires additional direct control of German administration".
The French immediately withdrew their proposal and the whole matter was
I do not want to give an exaggerated impression of the importance of the foregoing French Government's proposal as it was not forced
I am inclined
way and as Dubois himself was obviously against it.
in an
to believe that it was a sort of political ballon d'essai of de Lasteyrie.
The British proposal for the appointment by the Commission
of a Committee of Financiers to consider the possibilities, ways and
means of Germany floating' an external loan (see my letter Larch 17th
and Exhibit 3 therewith), has not as yet come up for the formal
I still hold the views expressed
consideration of the Commission.
in my previous letters as to the importance and the possibility of
this Committee's operations being the opening wedge for a business
settlement of the entire reparation question. Admittedly the proposal
has certain phases which are "loaded" and a good target for public
outcry ("Interference of Loney Interests", "London Financiers", "all
Street Dictation" etc..) as any business settlement would have to
"prick the balloon" of pthlic opinion in certain Allied countries.
On the other hand I believe that the far sighted Allied politician
now realizes that his Government for its very existence needs hard
cash; that the total of the reparation bill and practically any
schedule of cash payments which can be evolved in the present situation
are ridiculous and that he is therefore about ready to lend his influence
to solving the present dilemna on sound businees lines involving heavy
concessions in exchange for others granting a loan to Germany with what
If money could be made forthcoming on business lines from
to pay him.
the joint loans of financial groups of all Allied and neutral countries
and America, the devastated Allied areas could be restored and thus
reasonable and equitable reparation claims once and for all satisfied.
I also enclose the following documents as being of possible
interest to you, viz:

Document Paris 530 - The Commonwealth Draft Law Concerning The
Reform of The Constitution of The Reichsbank.
Document Berlin 546 - Financial Position of The Reich.
Document Berlin 547 - weekly Statement of the Reichsbank.

I.S. 601 -Veekly Balance Sheet of The Austro-Hungarian Bank.
1.6. 608 - Weekly Bank Statement of The Hungarian Bank.
Faithfully yours,
7 incls.

The Honorable Benjamin Strong,

Governor, Federal Reserve Bank New York.
Federal Reserve Bank of St. Louis

In connection with the control



Page 4

question referred to in page 2 of the foregoing letter.
The original ideas so Bar as t control of the Reichsbank
was concerned and which was at first fathered by Bradbury
contemplated insisting that in addition to the Reichsbank's
complete separation from the Reich, a neutral adviser was
to be added to its staff to have a general supervisory action
The French were quite insistent that
on its operations.
Bradbury's ideas be put into effect and that provision for
the neutral adviser be incorporated in the letter to the
German Government. Bradbury then said in explanation of
his change of view that he had been talking quite recently
with Le Normand (your friend of the Bank of England) and
that the latter's arguments against the appointment of a
neutral adviser had changed his opinion. Bradbury went on
to say that Le Normand is personally taking a great deal
of interest in the Reichsbank and "as a matter of fact
considersiit one of his children and was giving its operations his closest personal attention". He then said that
all of the great Governments' banks, referring not only to
the Bank of England but also to the Federal Reserve Board,
would not regard with indifference any endeavor of the
Allied Governments to mix up in the internal affairs
of the Reichsbank by the proposed appointment of a neutral
financial adviser, but that they were entirely in accord
with the Reparation Commission in insisting upon the
autonomy of the Reichsbank from Reich's control.

March 28, 1922.
My dear Logie:

I am much indebted to you for your letters of larch 5, 10 and 17 (2),
which are most illuminating.

I hope you can continue to send me the Reichetank

statements, and in that connection, that is your personal view in regard to the

various estimates

which A made of the amount of so-called exported German capital?

I recently eat an estimate of 90 billion marks.

Assuming that this figure is correct,

which I would greatly doubt, at an average value of the mark of one cent, it would

represent 000 millions.

I do not believe that one-half of that figure is justified,

but admit that I am guessing largely, although we must remember that the German
Government seems to have disposed of 25 or 30 billion marks in one way or another in
acquiring the foreign currencies with which to make reparation payments, and to the
extent that these have been made in foreign currencies, the amount of the foreign
hoard has correspondingly been depleted.
Another point on which I would like to have your opinion is as to the
efficacy of the plan just ado;:ted tc restore autonomy to the Reichsbank.
the terms of the bill?

that does autonomy mean?

that are

And how effective will the proposal


Another point is as to the reports now in hand that the internal debt of
the Imperial Government has been extinguished.

How was it done, if it was done?

I would like very much to know some more about that.
As to your letter of March 10, the Cannes project now having been adopted,
it remains to be seen what will be the resulting effect upon the mark, provided
Germany assents to the demands embodied in the last communication of the Reparations

My guess is that the only thing that can save the mark sill be

thorough-going adoption of the demands of the Commission by the German Government;
is that

socially tnd politically possible?

I very much doubt it, as you seem to,

Colonel James A. Logan, Jr.

March ?8,

discussed in your letter of March 17, and ,hich is indeed a moat interesting
resume' of the situation.

I have read it with keen interest.

A surmise as to the German condition has been growing in my mind in recent
months, and I am wondering to that extent your views might confirm it.

It seems to

me that the German profiteer, that is to say, the business men of the Stinnes type,
has sought to take advantage of the depreciation in the currency to scoop up all the
fixed property that can be bought, that it is probable that these purchases are
-ade with h cautious avoidance of fixed interest bearing obligations of definite
maturity, and th-t when the complete collapse of the German mark takes place, these
gentlemen will be found in possession of vast properties !which will in turn produce

to them vast profits if they are able to retain them upon the b5sis of some restoration of the value of the German mark, even as a consequence of devaluation or repudia,
A good line mould be had upon this subject if one could ascertain just how


these gentlement have conducted their creretions, and whether they have been undertaken by h scrupulous avoidance of the issue of fixed interest bearing obligations.
This would be the key to their policy.

Should my surmise be correct, then it mill

to seen that the German Government, in order to meat reparation payments, and at
the same time protect the value of the mark, must impose taxes which would take
away from these gentlemen the enormous paper profits which they have realized, or
expect to realize.

Therefore, if the German Government is dependent upon the

support of the large business interests, will they not resist a sound financial
program, and will not, their demands to defeat it result in the downfall of' the

present government?
I em much interested in whpit you trite about the contemplated appointment



committee of experts to consider the possibilities of foreign loans tc


At the first opportunity ashen I am in fashington possibly I may be able

to ascertain a little bit of what might be expected.

I would greatly doubt any

affirmative position being possible by our government, but, on the other hand, they
 be unwilling

to interfere in case our tankers undertook to eesociete themselves



7,8, 19'n.

ssi::y not until after the election, the development of some sort or constructive

program, if that is politically possible. To attempt to hasten matters much beyond
this till be very difficult just now, although I gather that it is the desire cf
the Administration thct we should be officially represented on the Reparations
Commission, in the interest of our own country's affairs, and that the ?resident, so
I have been told, hes not hesitated to state thie.
Thank you also for the French text of the financial -:.rrangement covered

by yours of March 17, which I shall have translated here.
My best regards to you, and apologies for such an une.tiefactory reply to
your fine letters.

Please remember me to Eoyden.

Also bear in mind that I have

not been in Narhington recently and have had nc opportunity to talk gin the people
over there.

Icurs sincerelf,

Colonel James A. Logan, Ir.,
18 rue de Tilsitt,
P-ris, France.

March 28, 1021.
Dear ?faddy:

I have received, and with this am returning, the document handed you by

your Belgian friend, and take the liberty of making the comments which you ask for.
First, it strikes me as having behind it a certain amount of animus, and
being written in a skeptical vein, which is liable in so many cases to result in
the conjuring up of ghosts, and in general does not impress me at all favorably.

Let me refer to a few -articular points:

I doubt if the German Government has undertaken as a national policy

the devaluating of the German mark.

This idea, or plan, being adopted as a

principle of national finance as expressed in the document you sent me strikes me
as a conspiracy between the government and large German manufacturers.


tion to be undertaken as hinted involves such a reconstruction of values, of wages,
of taxes, of the whole internal economy of the nation, that, if undertaken at one
stroke, as suggeeted, it would likely bring about a social upheavel.

The relation

between debtor and creditor, between employer and employe, between landlord and
tenant, mould be so disturbed, and E0 muct, distress would result that I cannot be-

lieve that any such scheme in the nature of a national conspiracy could have been

Ae I understand the situation in Germany, there are two points of

view in regard to reparation payments held by two classes of people.

One class,

largely comprising the present government, is disposed to make an effort to meet

he reparation demands down to the point of exhaustion.

This does involve a

constantly depreciating currency, and I have no doubt that there has been a lack

of intelligent and energetic effort to reform government finance so as to protect
the mark against decline, but I seriously doubt whether this contemplates the
policy eventuating, es indicated in the paper.

Another party, I have been


Honorable Eliot Nadsworth

March '8,

'told, believes that it is a mistake for Germany to continue to undertake to make
payments upon a scale and at a rate beyond her capacity, and that they would prefer
to go to the extreme of having Germany subjected to military occupation rather than
see the econoeic situation retch complete exhaustion.

They hold the vies, I am

informed, that the military occupation of Germany and the administration of its
affairs by the Allied Governments would ?rove a calamity to those who attempted it,
and it would be better to have thet experience and get it over with than to see
Germany economically destroyed by an impossible program of reparation paynento.

The plan to constitute a nee state institution of issue is suite

contrary to rewent developments, all of which indicate the intention of the German
]overnment to restore a reasonable degree of autonomy to the Reichstank, which was
lost when the Imperial Government disappeared.

Besides that, a proposal to render

the paper mark of' the Reichebank valueless ano then establish a new currency, while

it might relieve the German Government of the payment of its internal debt, it would,

on the other hand, encounter difficulties with the Reparations Commission of a
character that would be insurmountable.

In point of fact I believe that the old

internal debt of the Imperial Government, contracted during the war and prior thereto,
bee been substantially extinguished already, with the exception of the debt of abcut
135 or 140 billion marks te the Keichebauk, and we all know that Gereangs external

debt has been almost negligible in mount since the repayments were effected to
Holland, Scandinavia and Switzerland sometime ago.

I have no figures to support

this geueral understanding, but believe it will be found tc be substantially accurate.

Recent advices indicate that plans have already been 2erfected, and in

some instances put into effect, for abandoning the government's monopoly of the
purchase and distribution of certain essentials.

The plan which can almost be described as a conspiracy, outlined in

the document, seems to be predicated upon the belief that German citizens have vast
resources accumulated abroad in foreign currencies.

The amount of these resources

I an confident eil7 be found to be greatly exagorated.

recently seen

The highest estimate I have

is 90 billion paper marks, th-t is to say, an amount much exceeding


Honorable Eliot iadeworth

*e -ball of the total note circulation of the iteichebank.

March 23, 1.922.

This figura strikes me ee

unreasonable, especially in view of the fact that some 23 billion marks, as I recall
were employed ty the German ",;overnment in one way or another in accumulating the

funds with which to make the first year's payments af one billion gold mares on
reparations account.
its, basis

In general, my impression of the Itemorandum is that
has no foundation.
what mould be
In fact, it is simply an indication ofAthe stupidity of the German Government in

attempting a vast scheme of national bankruptcy and repudiation upon a basis which

would be suite likely to bring about a optical and eocial upheave' and defeat the
very object which it seeks to accomplish.

The chances are that conelete knowledge

of the facts would indicate that the German Government
attem-ting to resist

on the one head, been

reparation payments by every means in her eever, and, on the

other hand, to the extent Ot reparetien eayments hare seen forced the 3evernment
with a certain wilful negligence, undertaken Ineens to meet the payments,
which have resulted le a depreoietion of the currency, which they have viewed with
a certain complacency, for reasons which are not touched upon at all in this memorandum.

One can only surmise what those reasons ere, but my own surmise is that

certain ambitious and selfish people in Germany have grasped the opportunity to buy
up property and manufacturing plants and all sorts of fixed assets with this depreciseed currency, paying for them in such manner that they do not incur fixed
intsreet bearing obligations of fixed maturity, and with the expectation that when
the collapse comes, and the ultimate restoration to a sounder currency basis is
effected, they will be left with these properties, measured in value of an appreciated
mark, and will have vastly profited by the general

lisaster to the German people.

Under sue., conditions es these if the German Government relies for its support upon

the so-called business interests of the country, it is relying for support upon the
very people who would resist any program of sound finance which would, of course,
involve taxing the paper fortunes which they are now making, practically out of


March ?Hp 1922.

In conclusion, therefore, I mould accayt the statement in this TtemoranduT
vith a good deal r.f reservation.

Yours sincerely,

Honorable Eliot 4adsvorth,
Assistant Secretary of the Treasury,
Treasury- Dt?artmEnt,
Axhington. D. C.




J. A. L. Jr.


Pa g



of desiring to secure some sort of an interlocking arrangement with
their allies which will protect Great Britain from the necessity of
paying us anything which if we force her/she must do to protect her
world credit. All the foregoing must be accepted with reserve.
However the position irf many of the above particulars will be largely
cleared up through the press before you receive this letter.
The Bradbury proposal for the appointment by the Commission
of a Committee of Financiers to consider the possibilities, ways and
means of Germany floating an external loan (see Exhibit 3 with my letter
of Larch 17th) has been presented formally to the Commission and accepted
The plan has purposely been allowed
"en principe" by the latter body.
to leak out into the press with a'.ew to "sounding" public opinion.
I personally gather from the French press that the reaction of public
I don't intend to imply by this
opinion is more or less favorable.
that the French public's stomach is entirely ready to digest the entirt
meal which must necessarily be served it by the Committee of Financiers,
but the same stomach is far from feeling satisfied with the meals supplied
it in the last few years by the empty utterances of Supreme Council's
politicians, etc.. You will readily see from the foregoing that I am
somewhat of an enthusiast on the question of a Committee of Financiers.
All of the members of the Commission, excepting Dubois who is
showing only slight hesitancy, agreed to immediately propose this measure
to the German Government. Dubois hesitates in view of the non-reply of
the German Government to the Commission's letter of Larch 21st. Obviously
he is torn by two conflicting emotions, first: the somewhat technical
aspect of the Germans' position of non-reply to the letter, and second:
the fear that if the Committee of Financiers' plan be not immeaiately set
in motion the Germans' position at Genoa will be strengthened. Others
on the Commission feel that better results would be accomplished by initiating
the work of the Committee of Financiers before the Germans can make any
I am now inclined to
reparation presentation at the Genoa Conference.
believe that this proposal will be definitely agreed to and that preliminary
steps for the organization of this Committee will be effected the early
part of next week.

As regards the Bradbury proposal for the organization of a
Committee of Financiers (Exhibit 3 with my letter to you of Larch 17th),
the following remarks relating to its proposed personnel may interest you.
Delacroix who is proposed by Bradbury as President is an ex-Prime Linister
of Belgium. While something of a "wind-bag", he is nevertheless very adroit,
a man wdalf.considerable ability with a broad view, and above all an excellent
He will do more or less what Bradbury wants and at the same
All around I think it is
time will maintain the confidence of the French.
the best selection which could be made. D'Amelio who is proposed by
Bradbury as Vice-President is the Assistant Italian Delegate on the Commission.
He is quiet fellow, seldom opening his mouth and easily suppressed at any









d a pretty good all round fellow.
He is an Italian Judge
Bradbury's underlying reason
n proposing d'Amelio as Vice-Pres
was for the purpose of giving Italy theempty honor of being represented
on the committee in the office of Vice-President, which would ipso facto
eliminate the possibility of Italy's claiming any further representation
on this body. Past experience in Allied financial conferences has clearly
shown that Italy, while never having anything to offer, particularly
money, nevertheless usually sends some wind-bag of a politician who more
often than not follows the cue and casts his vote with the French. For
the foregoing reasons I consider Bradbury's proposals pretty good.
I enclose the following documents as being of possible interest
e 0 you, viz:
Document Berlin 555 -Weekly Statement of the heichsbank.
I.S. 623 - 7:eekly Balance Sheet of the Austro-Hungarian Bank.

Faithfully yours,
2 incls.

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

P.S.- I do not want to imply by my references to the "ideal"
letter referred to in the second paragraph, page 1 of
this letter and in previous letters that the majority
of the Commission were not ftlly aware of the fact that
the conditions imposed were more or less ridiculous.
However it is framed on strict Treaty principles and
therefore in the present situation political exigencies
necessitated its being forwarded to the Germans, an
effort being made at the time by the more thoughtful
to make it as harmless as possible.
phase was not arrived at with great success. On the other
hand it has the decided advantage, just because it is so
ridiculous and because it is based on the strict wording
of the Treaty, of forcing an earlier issue of the whole
reparation question.
The more thoughtful, and unquestionably
Bradbury, had this phase fully in mind when the letter was


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