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67™ CONGRESS

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2D SESSION

DECEMBER 5, 1921-SEPTEMBER 22, 1922

SENATE DOCUMENTS

V ol. 1

WASHINGTON




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GOVERNMENT PRINTING OFFICE

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1921




67t h C o n g r e s s \

2d Session

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q1 ?1 N t a

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SENATE

/ D ocument

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No g6

LOANS TO FOREIGN GOVERNMENTS
RESUME
OF THE LAWS UNDER WHICH LOANS WERE MADE
TO FOREIGN GOVERNMENTS DURING
. AND SINCE THE WAR
AND

THE MAIN FEATURES OF THE LOANS AS
DISCLOSED BY CORRESPONDENCE BETWEEN
THE PRESIDENT, THE STATE DEPARTMENT,
THE TREASURY DEPARTMENT, AND FOREIGN
GOVERNMENTS SUBMITTED TO THE
COMMITTEE ON THE JUDICIARY




PRESENTED BY MR. REED

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DECEMBER 6, 1921 — Ordered to be printed

WASHINGTON
GOVERNMENT PRINTING OFFICE

1921

COMMITTEE ON THE JUDICIARY.
SIXTY-SEVENTH CONGRESS, FIRST SESSION.
KNUTE NELSON, o f Minnesota, Chairman.
W IL L IA M P. DILLINGH AM , o f Vermont.
CHARLES A. CULBERSON, o f Texas.
FRAN K B. BRANDEGEE, o f Connecticut.
LEE S. OVERMAN, of North Carolina.
W ILLIA M E. BORAH, o f Idaho.
JAM ES A. REED, o f Missouri,
A L B E R T B. CUMMINS, o f Iowa.
HENRY F. ASHURST, o f Arizona.
L e BARON B. COLT, o f Rhode Island.
JAMES K. SHIELDS, o f Tennessee.
THOMAS STERLING, o f South Dakota.
THOMAS J. W ALSH, of Montana.
GEORGE W. NORRIS, o f Nebraska.
RIC H A R D P. ERNST, o f Kentucky.
SAMUEL M. SHORTRIDGE, o f California.
G e o r g e L. T rea t , A ssistan t Cleric.
C a rl W . B o r d s e n , A ssistant Clerk.

2




UNITED STATES FOREIGN LOANS DURING THE
WAR AND SINCE THE WAR.
Resume of the various laws under which loans were made to foreign Gov­
ernments; loans made to foreign Governments during the war and since
the war; and the outstanding features of these loans as disclosed by the
investigation of all of the foreign-loan correspondence left with the
United States Senate Judiciary Committee.

P repared for t h e C o m m i t t e e b y D o n M . H u n t .

During the progress of the war Congress passed four acts known
as the four Liberty loan acts. Shortly after the close of the war
Congress passed an additional act known as the Victory loan act.
The provisions of the first Liberty loan act are practically the same
as those in the second, third, and fourth Liberty loan acts. The fol­
lowing are the important sections of these acts relative to the making
of foreign loans:
AN ACT To authorize an issue o f bonds to meet expenditures for the national security
and defense, and for the purpose o f assisting in the prosecution o f the war, to extend
credit to foreign Governments, and fo r other purposes.
S e c . 2. That for the purpose of more effectually providing for the national
security ancl defense and prosecuting the war by establishing credits in the
United States for foreign Governments, the Secretary of the Treasury, with
the approval of the President, is hereby authorized, on behalf o f the United
States, to purchase at par, from such foreign Governments then engaged in war
with the enemies of the United States, their obligations hereafter issued, bear­
ing the same rate of interest and containing in their essentials the same terms
and conditions as those of the United States issued under authority of this act,
to enter into such arrangements as may be necessary or desirable for establish­
ing such credits and for purchasing such obligations of foreign Governments
and for the subsequent payment thereof before maturity, but such arrangements
shall provide that if any of the bonds of the United States issued and used for
the purchase of such foreign obligations shall thereafter be converted into
other bonds of the United States bearing a higher rate of interest than 3| per
cent per annum under the provisions of section 5 of this act, then and in that
event the obligations of such foreign Governments held by the United States
shall be, by such foreign Governments, converted in like manner and extent into
obligations bearing the same rate of interest as the bonds of the United States
issued under the provisions o f section 5 of this act. For the purposes o f this
section there is appropriated, out of any money in the Treasury not otherwise
appropriated, the sum of $3,000,000, or as much thereof as may be necessary:
Provided, That the authority granted by this section to the Secretary o f the
Treasury to purchase bonds from foreign Governments, as aforesaid shall cease
upon the termination of the war beUveen the United States and the Imperial
German Government.

These sections are from the first Liberty loan act approved April
24,1917 (40 Stat., p. 35).
The second Liberty loan act approved September 24,1917 (40 Stat.,
p. 288), contains substantially the same clauses relative to making




3

4

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E .

loans to foreign governments and accepting their obligations. It
increases the amount and in section 2 provides that the obligations
to be received from foreign governments must mature at a date not
later than the bonds of the United States issued under and by virtue
of the authority of the two Liberty loan acts.
Under and by virtue of this authority so granted the Secretary of
the Treasury made the loans and accepted obligations from foreign
governments. The obligations so accepted, however, were not drawn
in accordance with the terms of the Liberty loan acts, which provide
that they shall bear the same rate of interest and contain in their
essentials the same terms and conditions as those of the United States
issued under the Liberty loan act.
On the contrary, all obligations of foreign governments, accepted
by the Treasury Department have been demand obligations, none of
them having a fixed maturity.
Because of the fact that the Treasury Department had already
accepted demand obligations from foreign governments under the
first Liberty loan act, they had the following sections adopted in the
second liberty loan act.
Sec. 3. The Secretary of the Treasury is hereby authorized, from time to time,
to exercise in respect to any obligation of foreign governments acquired under
authority of this act or of said act approved April 24, 1917, any privilege of
conversion into obligations bearing interest at a higher rate provided in or
pursuant to this act or said act approved April 24, 1917, and to convert any
short time obligations of foreign governments which may have been purchased
under the authority of this act or of said act approved April 24, 1917, into
long-time obligations of such governments, respectively, maturing not later
than the bonds of the United States then last issued under authority of this
act or of said act approved April 24, 1917. as the case may be, and in such
form and terms as the Secretary of the Treasury may prescribe; but the rate
or rates of interest borne by any such long-time obligations at the time o f their
acquisition shall not be less than the rate borne by the short-time obligations
so converted into such long-time obligations.

The act then provides that the Secretary of the Treasury may sell
the obligations of foreign governments and apply the proceeds on
account of the principal loaned them.
The third Liberty loan act increases the appropriation made in the
second Liberty loan act to $5,500,000,000. (Approved Apr. 4, 1918,
40 Stat., p. 502.)
The fourth Liberty loan act increases the amount appropriated or
provided for by $1,500,000,000 making a total of the four Liberty
loan acts of $10,000,000,000 for the purposes set forth in the act. The
fourth Liberty loan act was approved July 9, 1918 (40 Stat., p. 844).
The Victory loan act, approved March 3, 1919 (40 Stat., p. 1309),
after the date of the armistice, provides that the Secretary of the
Treasury can, with the approval of the President, establish credits for
foreign governments for the purposes only of providing for the pur­
chase of property owned directly or indirectly by the United States
and for the purchase of wheat which has been guaranteed by the
United States.
We, however, need pay no attention to the Victory loan act in con­
sidering these foreign loans, as the Secretary of the Treasury states
in his report for 1920 that no obligations of foreign governments
were accepted under the Victory loan act.
In addition to the authority granted in the acts above referred to
for the acceptance of obligations of foreign governments, Congress



FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

5

passed an act which authorized the Secretary of War to sell surplus
war materials remaining in Europe after the war to foreign govern­
ments and accept their obligations in payment thereof. (Act May 10,
1918, 40 Stat., p. 548.)
Congress also passed an act providing $100,000,000 for European
relief. (Act of Feb. 25, 1919, 40 Stat., p. 1161.) Congress also pro­
vided that the United iStates Grain Corporation should supply flour
and wheat for the relief of European peoples to the extent of
$50,000,000. (Act Mar. 30, 1920, 41 Stat., p. 548.) Under these two
acts last referred to numerous obligations of foreign Governments
were accepted. The above acts constitute all of the authority under
which the Secretary of the Treasury could act on the acceptance of
European obligations.
Under the Liberty loan act, up to the date of the armistice, Novem­
ber 11,1918, approximately $8,000,000,000 had been loaned to foreign
Governments.
Since the date of the armistice approximately $1,500,000,000 has
been loaned to foreign Governments.
Credits have been established for foreign Governments, on which
advances have not as yet been made, to the extent of approximately
$129,000,000.
O f the original $10,000,000,000 provided for by Congress, approxi­
mately $300,000,000 over and above the $129,000,000 already referred
to remain. I f the present Secretary of the Treasury takes the same
position as the former Secretary of the Treasury, namely, that he
has the right under the law to continue making these loans, then
the $300,000,000 and the $129,000,000 above referred to are still avail­
able for this purpose.
On November 15, 1920, the latest available report, various foreign
Governments were indebted to us for interest on these obligations
to the extent of approximately $693,000,000.
On November 15,1920, the sum total of foreign obligations received
on account of sales of surplus war supplies amounted to $563,000,000.
Foreign obligations received from the American Relief Adminis­
tration on account of relief rendered pursuant to the act approved
February 25, 1919, and held by the Treasury as custodian, amount
in all to $84,000,000.
From the correspondence and data available to this committee,
copies of which are attached hereto, it appears that Treasury Depart­
ment officials of the TJnited States were aware of the fact that they
had no legal authority to continue the loaning of money raised from
the people of the United States by the sale of Liberty bonds and by
taxation to foreign Governments, for the purpose of prosecuting the
war, after all hostilities had ceased. As evidence of this fact, the
following paragraph appears in the report of the Secretary of the
Treasury for 1918, page 37:
On the morning of November 15, 1918, there remained an available authori­
zation for the establishment of credit in favor of foreign governments amount­
ing to $1,828,023,334. To what extent these governments will require further
credits before the termination of the war depends upon factors that can not
now be determined. It is important that our foreign loans be discontinued as
soon as may be, having due regard to the conditions of our industries and the
essential needs of the foreign governments; in the meantime they should be
held down to a minimum. Nevertheless, until certain of the allied countries
can resume their normal activities the United States should be prepared to



6

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

sell them on credit, even after the declaration of peace, foodstuffs, raw ma­
terials, and manufactured products of which they may be in need. I shall
recommend the enactment of legislation extending the authority to establish
credits in favor of foreign governments for a reasonable period and within
reasonable limits for these needs grouping out of the war.

In accordance with the statement made in the 1918 report above
referred to, Secretary McAdoo did appear before the House Com­
mittee on Ways and Means on December 12, 1918, and asked for
legislation to extend his authority to make foreign loans. He stated
in part:
It seems to me the part of prudence and wisdom, as well as enlightened
self-interest, to make the balance of the existing appropriation for the purchase
of obligations of foreign governments, available for advances for purposes grow­
ing out of war needs.
The purposes to which I particularly refer, as growing out of the war situa­
tion, and which I had in mind in making this recommendation, are the supply­
ing of foodstuffs and materials for sucli time and to such extent as may be
necessary to tide allied countries over until they are able to resume the pur­
chase of food supplies through the ordinary channels, to aid in the recon­
struction of the devastated areas of Belgium, Northern France, Italy, and else­
where, generally to assist in restoring the economic life of those allied coun­
tries most seriously affected by the war.
It is impossible to determine the amount of the aid which it may be desired
to give until both the extent of their requirements and the extent to which
the countries themselves can be financed in other ways have been investigated.
I do not recommend that one and a half billion dollars be placed at the dis­
posal of the Allies; I only ask that the Treasury be put in a position to make
advances up to that amount for purposes tvhicli may be approved, with of
course the approval of the President always, and coming within the terms of
the bill, at such times and under such conditions as the circumstances may
call for. * * *
The amount that is estimated be made available under the existing appro­
priation is, as indicated in my letter of December 5, 1918, about $1,500,000,,000.
In considering this sum, it is pertinent to observe that before the war the
annual investment by Great Britain in Colonial and foreign securities and
ventures was estimated at not less than $1,000,000,000. The proposed addi­
tional advances of $1,500,000,000 constitute only a small proportion of the needs
of France and Belgium for the work of restoration, but icith judicious manage­
ment the advances made by our Government, to the extent they may be made at
all, will make possible the tiding of these nations over the period of transition.
Now, gentlemen, this suggestion about the enlargment of the poiver to make
loans out of the present available appropriation for that purpose, to foreign
governments, is largely a counsel of prudence. I do not know that anything
will be required. Certainly if the Congress should not be in session after
March, next (and it won’t be for a short time, at any rate, I imagine, because
even if an extra session were instantly called, it would take a reasonable time
for the Congress to organize), if in the interval any exigency arose where it
was obviously to our interest to make further loans to foreign govern­
ments, certainly the Treasury ought to be put in a position to meet those
exigencies. * * *
Then, again, there are reconstruction questions which are coming up all the
time and which will become more and more urgent with the return of peace,
questions of food supply, etc., which will have to be decided instantly.
And if the occasions should arise, where it was in our own interest (even if we
did not care about the interest of these other people, but in our own interest),
to protect us in our economic situation, to make this advance, and we had no
power to do it, we might bring some injury to ourselves. And, therefore, I think
we ought to have the power necessary, so that ice can act if an exigency arises.
*

*

*

The purpose of this amendment is to enlarge the power so that you may
lend for other purposes than those necessitated by the war * * *
I f ive are given the authority in the proposed amendment here to lend
money to the allied Governments for reconstruction purposes, food, or any
other purpose contemplated by the amendment to the extent such loans may be




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

7

made in the fiscal year 1920, tve might have to sell more bonds or war savings
stamps or short-time certificates.
Mr. T r e a d w a y . It is entirely indefinite at the present time; no applications
have come forward from representatives of governments which you have in
mind?
Secretary M c A d o o . Belgium, Serbia, and France have all made intimations
they would like to know if we would make such loans. * * *
/ have answered we have no power to consider such loans now ; we have no
authority to make such loans. I do not know that we shall have to at all, even
if this authority is granted.

Shortly after the above testimony was given in the House Ways
and Means Committee, on December 16, 1918, Secretary McAdoo
resigned and Secretary Carter Glass took his place.
Secretary Glass appeared before the Committee on Ways and
Means of the House of Representatives, February 15, 1919, on a
hearing on the fifth Liberty bond bill, known as the Victory loan
bill.
At the outset of his testimony before this committee he presented
to the committee a tentative draft of a bill which gave him the addi­
tional authority referred to in the McAdoo testimony, namely, the
authority to continue the loans authorized for war purposes during
peace time for reconstruction and food relief. On page 17 of the
fifth Liberty bond bill hearing Secretary Glass states:
For these reasons I urgently ask the authority to broaden the purposes for
which the loans to foreign governments may be made. I do not ask an in­
creased appropriation, and it would not be my purpose to avail of the authority
where commercial loans or the powers of the War Finance Corporation could,
in my judgment, be used to meet the requirements. I do, however, feel very
strongly that before the Congress adjourns powers should be given sufficiently
broad to enable the situation to be dealt with. We are creditors o f the Euro­
pean Allies to the extent of over $8,000,000,000, and we have a very real
interest in the early restoration of their economic life and their ability to
enter upon foreign trade. * * *
I am convinced that exports must be greatly curtailed unless the Government
for the present emergency (and only during that emergency) lends financial
aid along the lines I have indicated. I view with the greatest concern the task
o f raising the funds needed by the Government this year; but I am, never­
theless, willing somewhat to increase those needs for this purpose, being satis­
fied that the resultant effect will be such that the task as a whole will thereby
be lightened.

At the same hearing, page 36, Mr. Rathbone, Assistant Secretary
of the Treasury, testified as follows:
At the present time our authority to advance is limited to the purpose of the
national security and defense and the prosecution of the war. The authority
we ask now is to make advances for the purpose o f promoting commerce.

Again, on page 39, Mr. Rathbone states:
This bill ( the proposed bill drawn by the Secretary of the Treasury) extends
the time for the making of the loans and the purpose for which the loans may
be made. In selling railway material, or in selling cotton, you can hardly say
nono that would be in aid of the prosecution of the war, or for the national
security and defense. Now, we are limited in making advances to aid in the
prosecution of the war and for the national security and defense, and that is
the reason we inserted the provision we might make loans to promote foreign
commerce.

The House Ways and Means Committee did not agree with either
Secretary McAdoo or Secretary Glass, and refused to grant the au­
thority requested. The result was that they drew a new bill, which
passed substantially as drawn and which differed radically from the




8

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

bill as proposed by Secretary Glass. The new bill culminated in the
Victory loan or fifth Liberty loan act.
The attitude of the House Ways and Means Committee was shown
by the speech of Congressman Kitchin, chairman of the committee,
in the House of Representatives on February 25, 1919, found in the
Congressional Record, on page 4273, of that date, which is in part
as follows:
Section 7 (the section extending the authority for foreign loans) needs a
little explanation. Secretary McAdoo, before he left the Treasury Department,
and Secretary Glass asked the Ways and Means Committee to authorize the
Secretary of the Treasury to establish credits in the United States in behalf
of foreign Governments to the amount of the unexpended balance of the amount
that we authorized in former acts, which is about one bilUon and a half
dollars. In other words, they asked that tee should loan our allies one year
after the termination of the war one and one-half billion dollars. By that we
would have to go out in these Liberty or Victory loan campaigns and ask the
people to subscribe a billion and a half dollars more than was necessary to
meet the debts of our Government, that we might lend it to foreign Governments,
so that the foreign Governments could lend it to their citizens to buy from
our citizens, or the foreign Governments could buy direct from our people or
from our Government what they desired.
The committee thought we ought not to do that, and I think the committee
was unanimous in the opinion that certainly this was not the time for the
Government to loan a billion and a half dollars more to the Allies, especially
when we had to go and get it from taxation of the people or by selling bonds
to the people to get the money. To say the least, we felt that to provide for
such a loan at this time was premature.

It is sufficient to say that the authority was not granted, but the
Treasury Department continued making the loans to foreign Govern­
ments for reconstruction purposes after all hostilities had ceased.
The following are some of the more important facts as disclosed
by the correspondence between the Treasury Department and foreign
Governments:
Note: The citations given here refer to sections of this brief which
follow:
No. 1. Approximately $1,500,000,000 was loaned to foreign Gov­
ernments after all hostilities ceased. This money was raised from
the American people by Liberty Loan drives and taxation and was
authorized to be used for the purpose of the prosecution of the war
and loaned to Governments then engaged in war with enemies of the
United States. (See Treasurer’s Report, 1920, pp. 342-347; secs. 101,
116, 147.)
No. 2. Treasury Department officials were aware of the fact that
they had no authority to make such loans after hostilities had ceased.
(See data above referred to; also secs. 8 ,1 1 8 ,1 1 9 ,1 2 5 ,135a, 137,151,
186.)
No. 3. Millions of dollars worth of products purchased with
United States money loaned to foreign Governments were sent di­
rectly to Germany with our sanction. In other words, money raised
from the American people for the purpose of the prosecution of the
war against Germany found its way into Germany with the sanction
of the Treasury Department of the United States, while Germany
was yet our technical enemy. (See correspondence under England
on the sale of American pork products to Germany; secs. 16, 19, 20.)
No. 4. Forty-eight millions of dollars of the American people’s
Liberty loan money was used for the purpose of sending supplies into




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

9

Austria, which country was then our enemy. (See English, French,
and Italian files; secs. 27, 168.J
No. 5. Millions of dollars or this Liberty loan fund was loaned to
foreign Governments and by them loaned to various relief and recon­
struction organizations, thus circumventing the act of Congress.
(See Belgium file; also secs. 25, 29, 31, 33, 128, 147, 151, 162.)
No. 6. Money was loaned by the United States to these various
Governments so that they could repay it to the United States as in­
terest on loans already made. (Sees. 129,188, 19.)
No. 7. Millions of dollars of this Liberty loan money were loaned
to Great Britain, after all hostilities had ceased for the purpose of
allowing her to build up her export trade and return to a normal
basis. Thus the money raised from the American people to prosecute
the war was used by Great Britain in competition with American
foreign trade. (See sec. 7.)
No. 8. One hundred thousand dollars of America’s Liberty loan
money was used for expenses of the Russian delegation at the peace
conference. This with the approval of the Treasury Department.
(Sec. 73.)
No. 9. Twenty-six thousand dollars of America’s Liberty loan
money was used as expenses of the delegates from Liberia to the peace
conference. This with the approval of the Secretary of the Treasury
and President. (Sec. J
No. 10. Millions of dollars from this fund were loaned to Govern­
ments not then actually in existence. Czechoslovakia was not a
nation until it was created by the treaty of peace of June, 1919.
Serbia had no parliamentary form of government during the time it
received loans from this country. (Secs. 116, 170, 172, 182.)
No. 11. Moneys from this fund went with the approval of the
Treasury Department to the aid of three separate de facto govern­
ments in Russia, namely, the Kerenski government, the Kolchak
government, and the Wrangel government. (Secs. 82-93.)
No. 12. The Treasury Department continued making advances to
foreign Governments while, at the same time, it was holding consulta­
tions and parleys with foreign Governments on a possible cancella­
tion of all debts as proposed by these Governments; see secs. (3-a)
30, 36, 37, 39, 41, 42, 43, 44, 46, 47, 134b, 165.
No. 13. Various branches of the United States Government made
payments of cash to foreign Governments, which Governments were
indebted to the United States both on loans and interest, when those
payments should have been made to the United States Treasury and
credited to the account of the-Government to which they were due.
(Secs. 23, 66, 91, 98.)
No. 14. Numerous loans were made from this fund for the purpose
of increasing our influence in the European political situation at
the peace conference; not for the purpose of the prosecution of the
war. In this instance see Greece, sec. 99; see also secs. 3b, 115.
No. 15. The Treasury Department allowed the payment out of this
fund of interest and bonds of foreign Governments held by private
citizens of the United States. These private loans were given prefer­
ence over the United States loans. (Secs. 61, 67.)
No. 16. The Treasury Department continued making these loans
to Governments supposed to be engaged in war with enemies of the




10

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

United States for the purpose of prosecution of the war after the
peace treaty was signed and after January 10,1920, when the formal
proces verbal of ratification was deposited, and the Governments
receiving the money were actually and technically at peace with
Germany.
No. 17. Most of the money loaned to foreign Governments was
used to make purchases in the United States. By continuing the
making of loans to foreign Governments after the armistice so that
they could return to normal, the Treasury Department prevented
the United States from returning to normal, because the purchases
made in the United States with such loans kept the prices in the
United States at a war instead of a prewar level. (See secs. 10, 11.)
No. 18. The Treasury Department accepted demand obligations
from foreign Governments for all of the loans they made when all
of the sections of the acts, authorizing these loans, provide for obli­
gations of the same tenor and effect as the particular Liberty loan
by which the money was raised. The demand obligations, above re­
ferred to, having no maturity date and no definite interest-paying
date, made it an easy matter for the foreign Governments to defer
the payment both of principal and interest, as the whole matter was
left in a very indefinite and uncertain state. (See secs. 3-6.)
No. 19. Throughout the entire correspondence between the State
Department, the Treasury Department, the President, and various
foreign Governments, submitted to the committee, there is no record
or mention that any of the departments of this Government re­
quested an opinion from the Attorney General as to their authority
to continue making loans for the purpose of the prosecution of the
war after all hostilities had ceased. In fact there is no record show­
ing that any legal opinion was ever asked in regard to this matter.
The countries to which the United States loaned money are taken
up in this brief in the following order:
Great Britain, sections 1 to 47, inclusive.
Russia, sections 48 to 98, inclusive.
Greece, sections 99 to 115, inclusive.
Czechoslovakia, sections 116 to 133, inclusive.
France, sections 134 to 140, inclusive.
Cuba, sections 141 to 142.
Liberia, section 143.
Bumania, sections 144 to 145.
Belgium, sections 146 to 155, inclusive.
Italy, sections 156 to 169, inclusive.
Serbia, sections 170 to 192, inclusive.







GREAT BRITAIN

1
1




SECTION 1.
Great Britain.

Under the various Liberty loan acts which authorized the Secretary
of the Treasury, with the approval of the President, to make loans to
foreign Governments then engaged in war with enemies of the United
States for the purpose of the prosecution of the war, a sum of
$4,277,000,000 was loaned to Great Britain. Up to November 15,
1920, the latest available report, Great Britain was indebted to the
United States for interest on this loan to the sum of $314,582,824.97.
Approximately $3,950,000,000 of credit was established for Great
Britain prior to November 11, 1918, the date of the armistice, and
approximately $330,000,000 of credit was established to Great Britain
since that date. We hold no obligations of Great Britain for surplus
munition of for food supplies sold to her after the armistice.
The following are some of the outstanding facts concerning the
loans to Great Britain, as shown by the correspondence attached
hereto:
None of the money paid by the United States to Great Britain
for the transportation of troops was credited to the account of Great
Britain as a partial payment on her loan or interest. All of it was
paid directly to the British Government.
Large sums of money were loaned to Great Britain and by her re­
loaned to France, Italy, and Belgium. Some of these reloans con­
tained the express provision that the produce and merchandise pur­
chased with these loans was to be purchased from Great Britain.
Money raised from the American people by Liberty loans and
taxation found its way ultimately into the hands of the enemy. The
correspondence shows that this was first done when Great Britain
purchased a large amount of pork products in this country and, with
the approval of the Treasury and State Departments of the United
States, resold this pork product to Germany for German relief.
The correspondence also shows that $48,000,000 of this sum was
loaned to England, France, and Italy, and by them reloaned to
Austria, which country was our enemy.
The correspondence shows that large sums of this money were
loaned to England for the express purpose of allowing her to return
to normality. The correspondence shows that in at least one in­
stance the officials of the Treasury Department recommended loans
to England, so that she could compete with the United States in
foreign trade, and so that England could build up her merchant
marine to prewar level, so that the money of the United States was
used against the United States in developing England’s merchant
marine and export trade.
The correspondence shows that while we were loaning these enor­
mous sums to Great Britain, so that she could return to normality,




13

14

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

she was using large sums of money to obtain a world-wide monopoly
in oil and oil fields. The report of Mr. Skinner, the American com­
mercial attache, shows that some of this British money gained con­
trol of the Royal Dutch oil interests, which company has large hold­
ings in the United States, Mexico, and South America. (See sec. 9.)
The committee will undoubtedly be interested in the attached cor­
respondence showing the various communications and proposals
received from Great Britain in regard to a cancellation of all loans:
SECTION 2.
Situation of English and American Loans November 2, 1918.
N o v e m b e r 2, 1918.
: Your letter of the 28th instant has been duly received,
presenting an approximate estimate of the cash position of the British Treasury
in the United States for the month of November and the estimated expenditures
of the British Treasury in the United States for that month.
In order to have these figures accord with the plan that the bank balances
in the United States of the British Treasury should average $50,000,000, the
advance to your Government from the United States Treasury on Thursday,
the 7th instant, should be $10,000,000 instead of $20,000,000, as stated in your
preliminary figures. If you find that the disbursements of the British Govern­
ment to the United States have to be met more rapidly than you now antici­
pate, I shall be glad if you will advise me accordingly, with a view of increasing
the advances to your Government from the Treasury so as to maintain the
average bank balance at $50,000,000. On the other hand, I should like it under­
stood that if as a result of the expenditures of your Government in the United
States proceeding less rapidly than you now anticipate, or of other receipts of
the British Government in the United States not included in your estimates, the
bank balances of your Government in this country are increased beyond the
average of $50,000,000, you will advise this department accordingly, with a view
o f decreasing the proposed advance to your Government from the Treasury
during the current month.
I am, my dear Sir Hardman,
Very truly, yours,
D e a r S ir H a rd m a n

A lbert R a t h b o n e .
S ir H a r d m a n L ev e r ,

The Plaza Hotel, New York City.

B r it is h W ar M is s io n ,
O f f ic e of t h e B r i t i s h T r e a s u r y R e p r e s e n t a t iv e ,

23 Wall Street, New York City, November 29, 1918.
Hon. A l b e r t R a t h b o n e ,
Treasury Department, Washington, D. C.
D e a r Mr. R a t h b o n e : I have pleasure in presenting the following approximate
estimate of the cash position of the British Treasury in the United States of
America for the month o f December (figures in millions) :
40
December 2. Balance in hand (estimated)--------------------------------------------Estimated expenditure December 2------------------------------------—10
December 3. Balance in hand---------------------------------------------------------------Receipts
United States Treasury--------------------------------------- 20
France---------------------------------------------------------------- 10




Estimated expenditure December 3 and 4--------------------

30

30
24

------

+6

15

FOREIGN LOANS AN D A U T H O R IT Y FOR M A K IN G SAM E.

December 5. Balance in hand---------------------------------------------------------------Receipts:
United States Treasury-------------------------------------- 30
Italy------------------------------------------------------------------6$
Estimated expenditure December 5 to 9_______________

36$
42$

36

---

—6

December 10. Balance in hand---------------------------------------------------------------Receipts:
United States Treasury--------------------------------------- 25
France__________________________________________ 10

30

Estimated expenditure December 10 and 11___________

35
24

--- +11
December 12. Balance in hand__________________________________________
Receipts:
United States Treasury--------------------------------------- 30
Italy____________________________________________
6$
Estimated expenditure December 12 to 16--------------------

41

36$
40$
----------

— 4

December 17. Balance in hand (carried forw ard)-----------------------------------Receipts:
United States Treasury__________________________ 20
France__________________________________________ 10

37

Estimated expenditure December 17 and 18___________

30
22

------

+8

December 19. Balance in hand__________________________________________
Receipts:
United States Treasury__________________________ 30
Italy------------------------------------------------------------------6$

45

Estimated expenditure December 19 and 23___________

36$
44$

--December 24. Balance in hand__________________________________________
Receipts:
United States Treasury__________________________ 10
France__________________________________________
10
Estimated expenditure December 24__________________




37

20

12
-------

December 26. Balance in hand__________________________________________
Receipts:
United States Treasury__________________________ 30
Italy------------------------------------------------------------------6$
Estimated expenditure December 26 and 30___________

—8

36$
44$

+8

45

16

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

December 31. Balance in hand__________________________________________
Receipts:
United States Treasury__________________________ 10
France__________________________________________ 10

37

20
Estimated expenditure December 31_________________

12

-----January

+8

2. Balance in hand__________________________________________

45

The expenditure coming in course o f payment during December, particularly
in respect of food and cereals, is considerably above the average.
The balances stated include all the cash resources of the British Treasury
in the United States, leaving no further funds available for the purpose of
meeting capital liabilities. I beg to request on behalf of my Government that
advances be made by the United States Treasury on the dates named. The
figures of the advances will be reduced by any further sums which may be reim­
bursed by Italy during the month in respect of British claims still outstanding.
I am, dear Mr. Rathbone,
Yours, sincerely,
S. H a r d m a n L e v e r ,
Financial Secretary to the Treasury.

SECTION 3.
Demand Obligations Were Taken by Treasury Department as a Temporary
Measure.
London,

November 80, 1918.

S e c r e t a r y of S t a t e ,

Washington:
Urgent 4189. November 30, 8 p. m.
McAdoo from Crosby, 802. Referring to Treasury’s addressed to Sir Hard­
man Lever, date not given, in which attention is called to the fact that the Sec­
retary of the Treasury is under no commitment to convert existing obligations
into long-time obligations. The chancellor writes me as follows: “ Will you be
so good as to inform the Secretary of the United States Treasury that while I
am, of course, aware that the British treasury obligations held by the United
States Treasury are at present in form and in fact demand obligations, my
understanding of the position is that he has only wished to keep them in this
shape pending the final determination as to the most appropriate form of fund­
ing bonds into which they are to be ultimately converted and that there is not,
in fact, any intention on his part to demand payment from us or to take any
other advantage from the present form of the obligations except to retain a
free hand as to the manner in which they shall be eventually funded.
“ The above had, of course, always been the informal understanding between
the responsible representatives of both Governments, but in view of the letter
communicated by Sir Hardman Lever I think it better to put it in writing.”
Hope your personal views on this subject will be indicated to either the borrow­
ing Governments or to your subordinates before January 1, next.
L a t jg h l in .

SECTION 3-A.
First Cancellation Proposal, December 4, 1918.
London,

December 4, 1918.

S ecretary of S ta t e ,

Washington, D. C.:
Important, 4307, December 4, 6 p. m.
McAdoo from Crosby, 811. Chancellor revived suggestions made before of
possibility of cancellation of all loans made by one associated Government to
any other for the conduct of the war. I stated that so far as I know such an




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

17

idea had never for a moment been entertained by you and the subject was
dropped. Similar suggstions in unofficial but important quartrs are not infre­
quent in London and Paris.
Second. Keynes has suggested in several conversations theory that future
aid to Allies should now be taken over by us so that as nearly as possible our
loans to Allies should equal those o f the British. This thought appears also
in letter from the chancellor to me received to-day referring to Italian situa­
tion in which statement is made that chancellor called attention o f Stringher
to fact that aggregate of British Government loans to Italy were double those of
the United States and that their further action toward Italy must be deter­
mined by Italian arrangements with us.
Third. It seems not improbable that war debts of allied countries and future
credits will figure at the peace conference in an endeavor to conciliate rival
claims for large indemnities and other advantages.
Fourth. Under these circumstances it appears probable that by now insist­
ing upon our obligations as being not only technically but in every sense true
demand obligations we may thus cause considerable friction and increase the
probability that a situation considered dangerous by the borrowing Govern­
ments would be presented to the peace conference as a matter for adjustment
at its hands. The contention will no doubt be made that in lending to treas­
uries known to be empty we could not legitimately expect immediate payment
on demand and that any use of the technical position by us for obtainment of
other objectives could be construed as an act of bad faith.
Fifth. I f you desire to keep the financial relations free from such possibili­
ties and unless political department of our Government prefers to preserve
existing situation for such use as President may determine, I have to suggest,
in addition to recommendation conveyed in my No. 802, that a somewhat more
definite statement be made to the allied borrowing Governments of your
views on this subject. Think all allied Governments, especially British and
French, desire a frank discussion, with the view o f agreeing upon the earliest
maturities at which they could be expected to liquidate their obligations, with
the necessary provisos for protecting dollar exchange and other conditions
appearing in draft of bond prepared and shown to allied financial representa­
tives in the summer of 1917 [only date]. Davis and Cravath agreed with above
views.
L a u g h l in .

SECTION 3-B.
Norman H. Davis Advises Against Discontinuing Foreign Loans, as It Would
Affect Our Influence at the Peace Conference.
S p e c i a l U n i t e d S t a t e s C o m m is s io n e r o f F i n a n c e i n E u r o p e ,

Sunderland House, Gurzon Street, London, W. I., December 5, 1918.
D e a r R a t h b o n e : In continuance o f my letter written to you yesterday, I
understand that Italian prewar total imports amount to 6,000,000,000 lire and
their total exports to 4,000,000,000 lire. In addition to this, they received
about 1,000,000,000 lire from tourists’ trade and a like amount from Italian
emigrants. It is apparent, therefore, that Italy will have to improve consid­
erably its prewar trade in order to obtain sterling and dollars with which to
pay the interest on their debts to the United States and England. I think,
therefore, that we will have to carry their interest for them for probably two
or three years in addition to granting certain credits during the next few
months for the purchase of raw materials with which to start their export
trade. As the $6,500,000 transferred weekly by Italy to England covers prin­
cipally cereals, it certainly will not be necessary to continue this, or at least
very much of this, after the 1st of February next, having already been taken
care of in the loan for the wheat. Italy is to get a credit of 18,000,000 florins
from the Dutch, and is also to have 40,000,000 pesos o f the credit which is
practically closed with Argentina, and this should assist most materially in
covering their neutral requirements.
I have had a talk with Keynes regarding the $10,000,000 a week advanced to
France for transfer to the British. He is reluctant to see this stopped, but I
told him of your views regarding this matter and advised him informally not
to make any further advance commitments expecting to be covered from this

S, Doc. 86,67-2----- 2



18

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

source. Roughly speaking, as I remember, about half of this amount is
required to cover foodstuffs purchased from us which Keynes admits has been
substantially taken care of from February 1 in the loan made for the pur­
chase of the 100.000,000 bushels of wheat. Most of the other half of this
amount is used for neutral tonnage and insurance on same, and, as I explained
to Keynes, the francs purchased by our nationals should give them sufficient
dollars or sterling to cover this amount. Keynes, of course, is afraid of our
shutting off on this, because they have probably been using some of the funds
received from the sale of francs for American and British private require­
ments to meet some of their expenditures here, which has prevented them from
the necessity of borrowing for some time from the British, except for payment
of interest. They have, however, I judge, been covering most of their require­
ments here from the sale of their own war bonds, which has been done with the
approval of the British Treasury.
From the Treasury standpoint it is advisable, of course, to cut off as soon
as possible our advances to the allied Governments. But, on the other hand,
from a political standpoint it may be advisable not to cause too much anxiety
just before the peace conference. As I have already advised you, the British
treasury has notified the French and Italian treasuries that they are through
making advances to them. They have either done this in order to force them
on us or for political reasons in order to force their opinions at the peace con­
ference in consideration of then agreeing to additional advances. The British
treasury attitude regarding relief has changed considerably from what it was
when I left here in October. In discussing the question of relief to Belgium
and Serbia, Keynes told me substantially that he had changed from his original
idea of dividing the financial assistance into three parts, because in view of the
fact that they have advanced considerably more than w have to these coun­
^e
tries, we should be willing to finance practically all of the relief. I told him
that we might be willing to finance the relief to the extent o f the supplies fur­
nished from the United States, but it would not be because they had advanced
more or less to these countries than we have, and that we would not even dis­
cuss any arrangements on the basis of what they had done before we came into
the war, nor should we take the position that the war should be continued for
a year or two in order to enable us to loan as much to the other Governments
as the British had loaned them.
McAdoo’s resignation has increased the uncertainty and unsatisfactory situa­
tion here, which makes me want to go home. Auchinoloss, however, has ex­
pressed a definite desire to have me remain in Paris with the peace delegation
for financial work, and I shall return to Paris at the end o f this week and
have a further talk with him. In the meantime I hope to hear something from
you which may clarify the situation.
With best regards, I am,
Sincerely, yours,
N o r m a n H. D a v is .
Hon. A l b e r t R a t h b o n e ,
Assistant Secretary of the Treasury.
P. S.—Hoover and Hurley are not in agreement as to the administration of
the enemy tonnage if procured for the relief requirements. Hurley returned
here last night and Hoover returns to-morrow, but I suppose the difference will
be adjusted.
Hoover seems quite prepared to follow the views of the Treasury in regard
to the financing of relief.
I suppose you have already considered the possibility and advisability of
applying whatever sums we have to pay for the German ships and for the
enemy property taken over by the custodian (and which will probably be pay­
able to France and Belgium as indemnity) to the liquidation of French and
Belgian obligations.
D e c e m b e r 6, 1918.
D e a r R a t h b o n e : Keynes told me yesterday that Lever had reported an inter­
view with you and your refusal to advance funds to take up their February 1
maturities. He seemed very muchly worried about it, and stated, in substance,
that they could not possibly be in a position to pay this off by that time and
that he thought we ought to make the advance. I told him that this was
essentially a matter which must be handled in Washington, because the changed
conditions had necessarily altered the position of the Treasury. I assume that
you naturally doubt the power of the Secretary of the Treasury or the advisabil­




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

19

ity of making such an advance. It seems to me they should be able to float a
renewable loan in the United States, provided this does not conflict with any o f
Leffingwell’s plans for domestic finance. Keynes took the position that even in
normal times the only possible way they could pay this off would be to sell
sterling against dollars or to ship gold, and that as they have to apply all o f the
dollars received from the sale of sterling to meet their purchase requirements,
and that as they can not spare the gold, it is rather difficult to know what to do.
I merely call your attention to the fact that if they can not place a new loan
and you wish to assist them in the matter, our Army will owe the British,
according to present estimates, about $400,000,000. a part of which might be
applied for the above purpose. I realize that this would be a certain camouflage
if they are still borrowing from us at the time these accounts are paid. I do
not remember the class of securities that are back of this loan or how rapidly
they could be sold to pay oft’ the loan, but it had occurred to me that you might
make a definite short-time loan against those securities for later treatment, but
not knowing the conditions at home I could not give a definite opinion, even if
it were desired.
Another word about Italy. I am told our total prewar exports to Italy
amounted to about $160,000,000 per annum. If this is correct, it w^ould seem
that, aside from advancing them the money to liquidate their war contracts in
the United States and the $90,000,000 already advanced for wheat, they should
not require very much more from us.
I inclose herewith copy of a letter and statement received from the British
treasury regarding Italian neutral expenditures. [Not received for file with
this letter.]
Sincerely, yours,
N o r m a n H. D a v is .
Hon. A l b e r t R a t h b o n e ,
Assistant Secretary of the Treasury.

SECTION 4.
In Possible Repayments Advances for Food and Clothing Were to Be Con­
sidered the Same as Advances for Reconstruction.
D e c e m b e r 13, 1918.
London.
For Crosby from Rathbone. Treasury 687. Embassy’s 4505, December 11,
10 a. m. Your 829. First. In our 627 to Paris referring to continuation o f your
numbers 811 and 814, and particularly to paragraph 3, we asked you to
advise British, French, and Belgian treasuries that before any arrangements
are effected making British loans to Belgium charge against indemnities United
States Treasury desires to be informed of terms and scope of any such con­
templated arrangements and an opportunity to present its views before any
such arrangements are entered into. Treasury feels that the policy of asking
a lien on indemnities not yet arranged presents many difficult questions and
that it can not express an official opinion without full consultation with other
departments. It may be that provisions governing the question could be more
conveniently and equitably arranged after or contemporaneously with the
determination of the amount and form of indemnities. I suggest you discuss
situation with the British Treasury and advise as to the reasons which lead it
to consider action now desirable and whether it proposes to suggest the applica­
tion of the same principle to advances for reconstruction to France or other
countries.
Second. I should be glad if meanwhile British Treasury should find it prac­
ticable to postpone taking the step indicated, but do not feel warranted in ask­
ing it to do so. In general it should be understood and accepted by Great Britain
and by any countries to which Great Britain and United States may both have
made or be making advances that if any charge or lien is given to Great
Britain the United States shall be entitled on demand later to receive an
exactly similar lien for advances of the same general character.
Third. We may desire to claim that our advances for food and clothing should
be regarded for these purposes,as falling in same general class as advances
A m e r ic a n E m b a ssy ,




20

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

for reconstruction, and we are certainly not prepared to do anything that would
constitute an admission to the contrary.
Fourth. To the extent that France uses for reconstruction dollars which
under present arrangements would be applicable to reduction of France’s net
indebtedness to us, the indebtedness which would have been retired becomes an
advance for reconstruction. This applies to all our special credits to France.
A lb e r t R a th b on e,

Assistant Secretary of the Treasury.

SECTION 5.
Two Hundred and Fifty Million Dollars Credit to England to Meet Out­
standing Commitments and Make New Purchases Until Normalcy Is
Restored.
D ecem ber

18, 1918.

A m e r ic a n E m b a s s y .

Lon (bon:
For Crosby from Rathbone. Treasury, 651.
First. The following letter delivered to British representatives:
“ In accordance with your request the Secretary of the Treasury is prepared
to establish special credits in favor of the British Government up to $250,000,000,
to be made available from time to time as may be agreed, against the duly
executed obligations of your Government in substantially the form inclosed
herewith. These special credits will be so established and advances made
therefrom on the understanding (1) that your Government, in payment for
sterling hereafter furnished by yonr Government at the request of the Secre­
tary of the Treasury (whether in pursuance of a request heretofore of here­
after made), will accept the surrender to its representatives in the United
States of an equivalent principal amount of its obligations hereafter executed
in the form inclosed, your Government, at the time of the surrender to its
representatives of such obligations to make payment in dollars of the interest
accrued thereon; (2) that your Government will from time to time, up to July 1,
1919, at the request of the Secretary of the Treasury, and on such dates as he
shall request, deposit sterling to the credit of the Treasurer of the United States
or to the credit of such other person as the Secretary of the Treasury may indi­
cate, with the Bank of England, or with such other depositary or depositaries in
the United Kingdom as the Secretary of the Treasury may from time to time
designate, up to an amount equivalent at the fixed rate of $4.76ts to the pound
7
sterling, to $250,000,000; (3) to the extent that the Secretary of the Treasury
may cause reimbursement to be made in cash (dollars) to your Government for
any sterling hereafter furnished at his request (whether in pursuance of a re­
quest heretofore or hereafter made) the special credits hereinbefore mentioned
will be reduced by a corresponding amount.
“ It is the expectation of the Secretary of the Treasury that the dollar funds
provided to your Government through the use of these special credits will be
sufficient to enable it not only to meet its outstanding commitments in the United
States, but also such other purchases as it may desire to make in the United
States until the normal peace channels of finance will be available for the pur­
poses of your Government.”
Second. British representatives have agreed to understandings numbered one,
two, and three in said letter, but further state that chancellor regards it as
certain that some additional advance over the $250,000,000 will be required by
British Government, and that chancellor is considering question and will com­
municate at an early day as to amount of such further requirements.
Third. In view of arrangement made as above we no longer require British
to obtain approval before entering into American contracts, and accordingly
embassy’s 4667 from London, December 17, 10 a. m., your 841, and embassy’s
4669, December 17, 10 a. m., your S42, sent by Cook, requires no action or con­
sideration on our part.




A lb e r t R a th b o n e ,

Assistant Secretary of the Treasury.

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E .

21

B r it is h W ar M is s io n ,
O f f ic e of t h e B r i t i s h T r e a s u r y R e p r e s e n t a t iv e ,

New York City, December 18, 1918.
Hon. A l b e r t R a t h b o n e ,
Treasury Department, Washington. D. C.
D e a r M r. R a t h b o n e : In reply to your letter of tlie 18th of December, I have
pleasure in formally confirming on behalf of my Government the request that
I made to you that a special credit of $250,000,000 be opened in favor of the
British Government on the understanding that advances thereunder will be
liquidated by means of sterling credits furnished in London to the United States
Government within the above total, as and when required by the Secretary of
the Treasury.
I agree on behalf of my Government to the understandings numbered 1, 2,
and 3 in your letter, subject to which the special credit of $250,000,000 will be
established by the Secretary of the Treasury and advances thereunder made
by him.
In regard to the last paragraph of your letter, I note that the Secretary of the
Treasury’s expectation that the dollars provided by means of this special credit
will suffice to enable my Government not only to meet its outstanding commit­
ments in the United States but also to make such other purchases in the United
States as may be required until normal peace channels of finance are available.
On this I confirm what I said to you verbally, that the chancellor o f the ex­
chequer regards it as certain that some additional advance over and above this
$250,000,000 will be required by the British Government in order to meet its
needs in the United States during the period of transition to normal peace con­
ditions. The chancellor of the exchequer is carefully considering this question
and will communicate with you at an early date as to the amount of such fur­
ther requirements.
Yours, very truly,
S. H a r d m a n L e v e r ,
Financial Secretary to the Treasury.

SECTION 6.
Form of Certificate or Obligation Taken from All Foreign Governments.
C e r t if ic a t e of I n d e b t e d n e s s — S i x t h S e r ie s .

The Government of the United Kingdom of Great Britain and Ireland, for
value received, promises to pay to the United States of America, or assigns, the
sum o f --------------------------------------------------------------------------- on demand, with in­
terest from the date hereof, at the rate of 5 per cent per annum. Such prin­
cipal sum and the interest thereon will be paid at the Subtreasury of the
United States in New York, or, at the option of the holder, at the Treasury of
the United States in Washington in gold coin of the United States of America
of the present standard of weight and fineness, or, at the option of the holder,
at the Bank of England, London, England, in pounds sterling at the fixed rate
of $4.76ts- to the pound sterling, and at any such place of payment without de­
7
duction for any British taxes, present or future.
This certificate will be converted by the Government of the United Kingdom
of Great Britain and Ireland, if requested by the Secretary of the Treasury of
the United States of America, at par, with an adjustment of accrued interest,
into an equal par amount of five per cent convertible gold bonds o f the Gov­
ernment of the United Kingdom of Great Britain and Ireland conforming to the
provisions of acts of Congress of the United States known respectively as
second Liberty bond act, third Liberty bond act, and Fourth Liberty bond act.
I f bonds of the United States issued under authority of said acts shall be con­
verted into other bonds of the United States bearing a higher rate o f interest
than four and one-half per cent per annum, a proportionate part o f the obli­
gations of the Government of the United Kingdom of Great Britain and Ireland
o f this series acquired by the United States under authority of said acts shall,
at the request of said Secretary o f the Treasury, be converted into obligations
o f said Government of the United Kingdom of Great Britain and Ireland bear­




22

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

ing interest at a rate exceeding that previously borne by tills obligation by
the same amount as the interest rate of the bonds of the United States issued
upon such conversion exceeds the interest rate of four and one-half per cent
but not less than the highest rate of interest borne by such bonds of the United
States.
For the Government of the United Kingdom
of Great Britain and Ireland.
Dated t h is ------day o f ---------- , 1918.

SECTION 7.
Legal Right of the United States Treasury to Loan Money After Cessation of
Hostilities Questioned—Great Britain Desired Loans Continued Until Their
Export Trade Returned to Normal—Wanting the United States to Loan
Them Money to Allow Them to Compete with the United States in Foreign
Trade.
D e c e m b e r 26, 1918.
Memorandum.
The British claims against Italy have been brought up to date; their account
with France up to the end of October has also been sent to the French financial
representatives in the United States. It shows a somewhat heavy deficit (over
$60,000,000) against France at the end of October. Provided, however, that
the weekly payment of $10,000,000 is continued up to, say, the end of April,
1919, this deficit may be largely liquidated, since cereal payments, which have
been very heavy lately, will have practically come to an end.
The chancellor of the exchequer accepts the understanding that the special
credit of $250,000,000 will not be used to alter the present rate of sterling
exchange. It is possible, however, that he may desire to fix a slightly wider
margin between the paying and selling rates, but no change of the mean rate
is contemplated in the near future.
The India office is anxious to take delivery of the balance of the 200,000,000
ounces of silver and would like arrangements made for it to be shipped as fast
as possible in instalments not exceeding 10.000,000 ounces. The British Gov­
ernment’s ability to agree to delivery being taken depends, however, on the
amount of the further advance which the United States Treasury may agree to
make to it. The chancellor of the exchequer is anxious to agree to the balance
of silver being taken as he regards it as important, if not vital, to the stability
of the Indian currency system, and he hopes that the Secretary of the Treasury
will provide us with the necessary funds to take the silver. In putting the gen­
eral requirements of the British Treasury before the United States Treasury,
however, the Chancellor o f the Exchequer thinks it convenient to separate silver
for India under the Pitman Act from our general requirements as he feels that
some undertaking from the United States Treasury as to its willingness to
finance silver purchases is essential before he can finally commit himself ta
take it.
In estimating our future requirements, the chancellor of the exchequer feels
great difficulty in looking ahead for more than three months, it being im­
practicable at present to make any estimate for a period later than that which
is much better than a guess. In view of the expressed desire of the Secretary
of the Treasury, the chancellor of the exchequer names a figure below and
explains, so far as he can, the assumptions on which it is based, but he points
out that it may be wide of the mark either in excess or in defect. I f the
urgency of the United States Treasury to have a final estimate from him at
the present time is based on questions as to its legal power to make the ad­
vances in the future, he trusts that they will open credits on a liberal scale
trusting to the British Treasury not to draw any more than the* circumstances
show to be its immediate minimum requirements.
The two principal unknown factors in forming a judgment on the situation
are first of all the date at which British export trade may be expected to revive
to its normal dimensions. Even after industry is fully reestablished an interval
must necessarily elapse before the recovery is reflected in our export returns.
The assumption on which the chancellor of the exchequer proceeds below is




FOREIGN LOANS A N D A U T H O R IT Y FOR M A K IN G SAM E.

23

artificial, viz, that up to June, 1919, British export trade will not have shown
any important revival, although the prospective diminution in our purchases
is fully allowed for, and that, after that date, it will have revived so com­
pletely as to render it unnecessary for him to ask further assistance from the
United States Treasury.
In point of fact, the revival will of course be gradual and some relief may
be expected before June, 1919, but a normal state of affairs can hardly be
reached before the end of the year. But for the purpose of a rough estimate
the above assumption is likely to lead to as trustworthy a result as any other.
The second great unknown factor is the extent to which the United Kingdom
will be required to finance the Allies and to take a hand in providing, tem­
porarily at least, liquid resources for reconstruction in the rest of Europe.
The magnitude of this task is in itself obscure, but even apart from this
obscurity the share which is likely to fall upon the United Kingdom is largely
dependent upon the policy which is pursued by the United States Treasury.
Broadly speaking, the more ample the assistance which is afforded by the United
States Treasury to France, Italy, Belgium, and other European countries the
less will be the assistance which the British treasury will require from the
United States Treasury. In particular, the burden that falls upon sterling
exchange is determined mainly by the balance of indebtedness in favor o f the
United States from the rest of the world as a whole. It is dependent only in
a secondary degree upon the level of British purchases in the United States.
It is impossible, therefore, until the future policy of the United States Treasury
as regards loans to countries other than the United Kingdom is known, to make
a useful guess as to the extent to which the United Kingdom will be able to
support itself by purchase of dollars over the commercial exchange.
Subject to the above observations and on the assumption that dollar reim­
bursements will be received from France and Italy for expenditure already
incurred and for cereals, the chancellor of the exchequer suggests a figure of
$500,000,000 for the further advance required by the British treasury to cover
its outgoings in respect o f food, sugar, cereals, oil, leather, tobacco, silver
(exclusive of tht Pittman Act silver), additional cotton, Canada interest other
than interest payable to the United States Treasury, or, in other words, an
advance of $500,000,000 plus the net amount required for Pittman Act silver
and for interest payable to the United States Treasury up to the 30th o f June,
1919.
The chancellor of the exchequer concludes, as he began, with the conjectural
character of this figure and repeating that it may possibly prove wide o f the
mark either in excess or in effect.

SECTION 8.
Treasury Department Admits That Loans Can Be Made Only to Prosecute
the War—British Commitments on December 1, 1918, After the Armistice
Were $154,000,000.
D e c e m b e r 31, 1918.
The memorandum o f December 26, 1918, which you
handed me last Friday, has received the careful consideration of this depart­
ment.
I regret that the United States Treasury is not in a position, even if the
existing legislation permitted it, to advance to your Government $500,000,000
in addition to the balance of the $250,000,000 special credit which still remains
available to your Government.
Now that the war is virtually ended and the attention of our people is being
more and more concentrated on private endeavor, the meeting of our own large
war expenditures and the advances in the nature of relief which this Govern­
ment is being called upon to make to countries that are utterly unable to care
for their necessary expenditures for this purpose imposes a burden upon the
United States Treasury which can not be extended to meet the suggested
additional advance to your Government.
Even were such not the case, the existing legislation authorizing the loans
to be made by the Secretary of the Treasury to foreign Governments does not
contemplate advances for some of the purposes indicated by the memorandum.
D ear

S ir H a r d m a n :




24

FOREIGN’ LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

You will recall that the only loans which the Secretary of the Treasury may
make to foreign Governments are for the purpose of our national security and
defense and the prosecution of the war.
In the judgment of this department a large part o f the outstanding obligations
of your Government maturing February 1,1919, will be converted in accordance
with the option given the holders thereof. It should be possible for your
Government to float a loan on our market at this time on terms it could accept
and sufficient in amount to provide for the payment of such of the obligations
of your Government as mature on February 1, 1919, and are not converted and
to leave a substantial balance to meet other requirements of your Government
in the United States. It is probably possible to increase the amount of your
treasury bills outstanding. You have already been informed of the view of the
Treasury that it does not see its way in any event to make advances to your
Government to meet these maturities, or to make advances to your Government
for other purposes, which could be met by your Government if its maturities
are refunded and not paid.
You will recall that your estimate as of December 1, 1918, showed that, apart
from maturities and commitments for food and cereals, the outstanding com­
mitments of your Government less estimated cancellations aggregated $154,000,000. During the month of December your Government has received:
Loans from this Government___________________________________ $186,000,000
In reimbursement for sterling furnished this Government________
45,029,000
Reimbursement in dollars from the Italian Government (exclusive
of the $6,500,000 per week on account of cereal purchases)_____
20,000,000
Total____________________________________________________ 251,029,000
Of the special $250,000,000 credit recently established in favor of your Gov­
ernment, there still remains available $193,981,000.
In addition, your Government has received dollar reimbursement from France
and has claims against other foreign Governments for dollar reimbursement
aggregating many millions of dollars. It will also be in control o f dollar
funds arising from sales of wool, ocean transportation of troops, sales of securi­
ties, sales of materials, and other proceeds of liquidation of war activities.
It is the view of this department that many of the requirements of your
Government in this country can be met through the private credits ordinarily
extended by private interests in normal times and conditions. Since many of
the purchases of your Government are, I understand, now made on the basis
of immediate payment, the change to a commercial basis allowing a reasonable
interval between purchase here and payment should afford marked relief in a
situation which is essentially of a temporary character.
I also wish to refer again to the American and neutral securities which are
available for sale by your Government, or which it may make available for sale.
Foreign currencies realized upon such sales could in many instances be ad­
vantageously exchanged into dollars at the present exchange rate, or they might
be utilized in defraying the cost of raw material entering into commodities
that your Government may desire to purchase in the United States.
I sincerely hope, and I have no reason to doubt, that by effective use of the
method suggested and others the financial requirements of your Government
can be met without undue strain.
The Treasury would have been glad if it could have seen its way by advances
to make the task easier, but I am sure you will appreciate the heaviness of the
burdens which the Treasury has to bear, and will realize both the legal and the
practical difficulties which prevent its acceding to your request.
I will write you later regarding the sale of silver to your Government under
the authority of the Pittman Act, and also regarding the dollar payments which
have for some time been made weekly by the French Government to the British
treasury.
Very truly, yours,
A l be rt R a t h b o n e .

Sir S. H a r d m a n L e v e r ,
c/o The Plaza Hotel, Neio York City.




FOREIGN LOAN’S AND A U T H O R IT Y FOR M A K IN G SAM E .

25

SECTION 9.
England’s Attempt at World Oil Monopoly—Royal Dutch Co. Purchase.
(No. 6917.

600.4117/7.)
A m e r ic a n C o n s u l a t e G e n e r a l ,

London, England, October 15, 1918.
Subject: The British Government and the Royal Dutch Co.
The honorable the S e c r e t a r y o f S t a t e ,
Washington.
Si r : I have the honor to refer to the department’s No. 2774 o f September 5,
1918 (600.4117/6), on the subject of the acquisition by the British Government
of debentures of the Royal Dutch Co. The department brings to my attention
a memorandum prepared by the legal adviser of the Standard Oil Co. and also
a memorandum from the Treasury Department of the United States. I beg
leave tG report on the whole subject as follows:
The view expressed by the Treasury Department that the legal staff o f the
Standard Oil Co. are entirely in error in describing the disposition of securities
deposited with the American Dollar Securities Committee is no doubt correct.
I am unable to find that any of the securities taken over by the American
Dollar Securities Committee in this country have been employed as collateral
for advances from the United States Government. As the whole world knows,
certain prewar loans of the British Government were secured by shares of
this kind, and since the United States has come into the war American and
other securities have been acquired by the British Government for the stabiliza­
tion of exchange in various countries. It is altogether likely that shares of
some classes have been acquired by the British Government with ulterior
objects in view, and there seems to be no reasonable doubt that this is the
case as to the Royal Dutch concern.
It is- a matter of common knowledge that the British community is very greatly
interested at present in securing control of oil production in various parts of the
world not only for domestic purposes but for the alimentation of the mercantile
and military fleets. Expensive research work is being undertaken at this
moment in the United Kingdom under the direction of Lord C'owdray and
efforts are being made to obtain and hold financial control in the case of pro­
ducing properties in Persia, Mexico, Venezuela, the United States, Java, and
very likely in other regions. It is not possible, of course, to know the precise de­
tails either as to existing or contemplated organizations. These comprehensive
plans, to which I have alluded, constitute a very important link in the chain of
defensive commercial measures undertaken with a view to making the United
Kingdom completely independent of all other countries for the operation of
its fleets, and the maintenance of its essential industries. To this end, as I
have already reported (see my No. 6278 of June 7, 1918) a provision has been
introduced in the defense of the realm regulations, which is specifically applica­
ble to any oil field, which sets out that “ A person shall not, without the con­
sent of the board of trade, transfer or agree to transfer to or for the benefit o f
an alien or a foreign controlled company any interest in any property or
undertaking to which this regulation applies.,, It follows from this that in
so far as the Royal Dutch Co., or the Shell Transport and Trading Co. (Ltd.),
to which it is allied control oil properties in California and Oklahoma or any­
where else it is forbidden, under severe penalties, that the ownership in those
enterprises, or any portion thereof, shall be purchased or sold by an American
citizen. No doubt the department will desire to inquire very closely into this
legislation whereunder a British-owned company obtains possession o f oil fields
in the United States under such circumstances that it is unlawful for an Ameri­
can citizen to acquire any interest therein.
Now, with respect to the Royal Dutch Co., the situation appears to be that
this concern is a very valuable portion of the total interests of the Shell com­
bination which seems to be the British rival of American oil interests. The
Royal Dutch Co. is, indeed, domiciled legally in the Netherlands, and its share­
holders and directors are largely Dutch, but at the same time the control is
intertwined with the Shell Transport & Trading Co. (Ltd.), and the ultimate
control, without any reasonable doubt, is entirely British, if not vested in the
British Government itself. The fusing of these interests is admitted without the
slightest concealment. In an official circular of the company, which is now
under my eyes, the following statements appear:



26

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

* The various properties of the Shell Co. and those of the Royal Dutch Co.
*
were pooled as from the 1st January, 1907, being from that date vested in
various subsidiary companies, in all of which the capital is held in the pro­
portion of 60 per cent, by the Royal Dutch Co. and 40 per cent by the Shell Co.
“Apart, therefore, from the return received on private investments and loans,
the whole of the yearly income of the Shell Co. is drawn from dividends de­
clared by the various subsidiary companies.
“ Tfre amount of income so received and the dividends paid since the amalga­
mation are given below :
Shell dividends

Income from the subsidiary companies:
free o f tax.
1907
£556,001 15
1908
632,952 20
1909
601, 408 22i
191 0
668, 690 22i
191 1
•_________________________________________
591, 212 20
191 2
1, 038. 215 30
191 3
1, 506, 903 35
191 4
1, 553. 484 35
191 5
1, 647. 234 35
191 6
1, 613, 724 35
1917 (not yet published).
“At the date of the amalgamation the interests of the Royal Dutch and
Shell Cos., apart from tank steamers and distributing agencies, were mainly
confined to oil producing properties in the Dutch East Indies, and even now
practically the whole of the revenue is drawn from this source, it still being
considered good policy to husband the bulk of the profits earned by subsidiary
companies operating in other parts of the world.
“ The subsidiary companies holding either direct or through further sub­
sidiaries the interests of the amalgamation in the Dutch East Indies and the
fleet of tank steamers are the Bataafsche Petroleum Maatscliappij and the
Anglo-Saxon Petroleum Co. (Ltd.). The balance sheets of neither of these two
companies for the year 1917 were available at the date of the Shell meetings,
but during 1916 £750 000 had been allocated to insurance and war risk funds
and no less than £2,500,000 allowed for depreciation before the declaration of
the yearly dividend. Since 1907 a total sum of £11,000,000 has been allowed for
depreciation alone by the Bataafsche and Anglo-Saxon Cos. The financial posi­
tion of the Bataafsche is enormously strong, cash in hand and sundry debtors
amounting together, on the 31st of December. 1916, to no less than £7,300,000.
The private holding of t'he Shell Co. in British Government securities amounted
to £2,400,000, and, altogether, the Royal Dutcli-Shell combine, either direct or
through their subsidiary companies, at the present time controls liquid assets of
the value of at least £20,000.000.
“ There is not space in a pamphlet of this description to give a full account
of the combine’s subsidiary companies operating in ail parts of the world, but
below are a few remarks on the better-known holdings.”
The few remarks just referred to include descriptions of interests of the
combination in Russia, Egypt, Mexico, Rumania, Venezuela, Trinidad, and the
United States.
As to the United States it is remarked:
“ In the United States, through the Shell Co. of California and the Roxana
Petroleum Co., the Royal Dutch Shell Combine has invested some £7,000,000 in
the purchase of oil properties in California and Oklahoma and in the building
o f refineries and pipe lines. On this investment no return has yet been received,
though there is not the smallest doubt that the results of last year’s trading
would have justified a very substantial dividend. From the properties in Cali­
fornia alone the production of the combine’s subsidiary was more than 4,800,000
barrels, or roughly 700,000 tons, while the price of oil has trebled since the
acquisition of the properties. Now that the combine’s refining and distributing
organization in the LTnited States is complete, a revenue of from £2,000,000 to
£3,000,000 per annum seems very possible from the properties there.”
I am in a position likewise to contribute the following notes respecting the
activities of this combination:
“ The Anglo Persian Co. owns a concession expiring in 1961 from the Persian
Government, giving them the right to search for and deal with petroleum, natural
gas, asphalt, and ozorerite throughout a large portion of the Persian Empire.




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

27

The company also owns a large majority of the shares of the First Exploitation
Co. (Ltd.) and the Bakhtiari Oil Co. (Ltd.), the whole of the shares o f the Brit­
ish Tanker Co. (Ltd.), the British Petroleum Co. (Ltd.), the Homelight Oil Co.
(L td.), and the Petroleum Steamship Co. (Ltd.). The company’s fleet as of the
close o f 1917 numbered 22 vessels.
“ In 1914 a contract was entered into to supply the British Government with
oil fuel, and in May, 1914, the Government agreed to subscribe for 2,000,000
ordinary and 1,000 preference shares and for debenture stock up to a total of
£199,000. The Government has the right to appoint two ex-officio directors (with­
out share qualification) to the board of the company and its subsidiary com­
panies, and the said directors can negative any resolutions of the board, subject,
however, to the right of the board to appeal to the Government.
“ The total capitalization o f the company consists of 3,000,000 ordinary and
2,000,000 participating preference shares of £1 each, fully paid.
“ From this ownership of the British Government, it will be observed that the
Government controls the company.
“ Our opinion is obtained from stock-exchange houses and financiers in the
city that the British Government has been buying shares of Royal Dutch in
New York, the general opinion being that these purchases and further acquisi­
tion of oil company shares are made with the purpose of insuring a sufficient
fuel supply to the vessels of His Majesty’s navy.”
If the department desires to continue the investigation of this matter and will
suggest the particular points in which it is interested, I shall be very glad to
proceed with the inquiry.
I have the honor to be, sir,
Your obedient servant,
R o b e r t P . S k in n e r ,

American Consul leneral.
(711.3.)

SECTION 10.
Davis Advises Loans to Foreign Governments Until the High-Priced Goods
in America Are Disposed of, Thus Keeping Up the Prices to the American
Consumer.
2 r u e S t. F l o r e n t i n ,
Paris, 7 th January, 1919.
D e a r R a t h b o n e : In telephone conversation with Keynes, primarily in ref­
erence to British purchases of pork in tlxe United States, he expressed con­
siderable concern over their present relations with the American Treasury. I
could not understand quite clearly all he said, but, in substance, it was to the
effect that Lever was having a lot of trouble with the Treasury and they were
worried because of the $250,000,000 credit established in their favor, to be
repaid in sterling, would not be sufficient to meet their requirements. I told
him that such matters were now being handled entirely in Washington, but
as nearly as I could gather, the American Treasury was adopting about the
same policy as the British treasury had adopted with the Allies. He told me
he thought they would not be able to use this money for the purchase o f pork in
accordance with the January and February program, because this money would
have to be used for more urgent requirements. I intimated to him that their
worry was probably due to the fact that the British treasury has not kept in
close touch with the American Treasury (as was recommended some time ago),
because its representative in New York could not very well by an occasional
visit to Washington or by letter keep fully conversant with the views and
policy of the American Treasury, which must necessarily change with changing
conditions and which made it more necessary for such matters to be handled
now in Washington. I told him, however, that although it is now manifestly
impossible for the American Treasury to continue advances as heretofore and
that all purchases and financing should be restored to normal channels at the
earliest possible moment, my personal opinion was that the American Treasury
would be as reasonable and just as possible under the circumstances and
would be inclined to make advances for a short time yet to cover approved
purchases in the United States which could not be otherwise financed.
It is more and more evident every day that if we ever expect to obtain a
satisfactory peace settlement, it will be necessary for the various departments
of our Government to coordinate their policies with those of the Peace Com­



28

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

mission. The allied Governments, and especially England, appear to be greatly
concerned lately about their future financial position, and aside from the fact
that it is not good policy, at least at present, to increase their worry by with­
drawing financial assistance too rapidly and radically, it is, in my opinion,
good business to make advances rather liberally until we can get rid of the
large surplus stocks of higli-priced guaranteed food products. Otherwise, the
price must drop with the consequent disturbance and a loss to the producers
and to the country of probably more than would have to be loaned to tide
over the situation during the next two or three months. Most confidentially,
I am satisfied that to-day it would be difficult to negotiate a satisfactory peace.
The British are considerably disturbed over the proposed purchase by our Gov­
ernment of the International Mercantile Marine. They have the impression
from various statements that we are deliberately attempting to destroy their
mercantile marine and they are all the more disturbed about this proposed pur­
chase, because they can not understand why we would want to pay such a
ridiculous price for this stock unless there is something other than the actual
acquisition of the property back of it, and until this matter is disposed of satis­
factorily, it will be a waste of time to sit down at the peace conference. The
British have just made a contract with the Belgians to sell them (the Belgians)
5,00,000 tons of new ships at $110 a ton, and Hurley says that we will have to
shut down at some of our shipyards because we will have no need for the ton­
nage, and it is therefore difficult to see why we should acquire the Mercantile
Marine stock on the basis of about $200 a ton. I am inclined to think, however,
that this deal will be dropped immediately.
In my opinion, we should by no means give in to the British or anyone else on
questions of vital importance where we are in the right, but we can make a
more determined successful stand where we are right if we do not first get into
difficulties over questions where we are in the wrong.
Another thing which has disturbed the British has been the announcement
that the increase in the Amercan Navy will not be a burden to America as it
will be sustained by English taxation paid to use as interest on their debt. Some
of the British are now saying that they have no intention of collecting their
Italian and French loans because they can not afford to put themselves in the
position now of taxing the peoples of those Governments to pay the British. If
the British intend to cancel those loans, my own opinion is that it will be for some
other reason, and that in their present state of mind they would take this high
position in order to try to cause embarrassment to us. In spite of the fact that
the President and the Secretary of the Treasury are of the opinion that the dis­
cussion of our obligations should not and will not come up at the Peace Confer­
ence, I myself can not see how it can be avoided unless we pursue a very careful
policy in order to prevent it. it may even be advisable to agree to postpone the
collection of the interest for a year or so until trade gets adjusted and they can
meet same without the shipment of gold, which they can not do without weaken­
ing their positions considerably.
I have had several talks with Col. House along the lines indicated in this
letter and find that my opinions are substantially the same as his. I have also
told Col. House that, in my opinion, it would be very advisable, at least a little
later on, for either you or Leflingwell to come over here in order to see the situa­
tion from this viewpoint and discuss the general problems of finance in relation
to the whole question at issue. I realize that it would be very difficult for either
one of you to get away, but I think it will be necessary and that the Peace Com­
mission will so request. As you are probably aware, the President has, upon the
recommendation of Col. House, designated Hoover, Hurley, McCormick, Baruch,
Col. House, and myself as a council, to be presided over by the President, and in
his absence by Col. House, with a view of coordinating the different activities
and of determining policies to be pursued in the peace negotiotions. Under the
plan proposed, you and Leflingwell would also sit on this council while here. I
realize the advantages of your plan to force all financial discussions to Washing­
ton, but on the other hand, if you desire to settle up a lot of these questions
amicably, you could do so more easily and effectively by a discussion here with
the heads of the various treasuries than by dealing with their representatives In
Washington. Col. House fully realizes the importance of official Treasury repre­
sentation at the Peace Conference, and the President will no doubt do likewise
as the situation develops, and if you can get away from Washington some
time in the near future and will so advise me, I will take the matter up with Col.
House with a view o f having the President or the Peace Commission request it.
Crosby’s experience and knowledge, of course, could be used to considerable ad­
vantage, but his determination to publish his book on the League of Nations may



FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

29

prevent it. This, I understand, will be decided by the President to-day or to­
morrow.
This peace proposition is going to be a tough one and will eventually get down
to a question of negotiation just like that in the formation of a syndicate or any
other business undertaking and can never be put over any other way.
Very sincerely, yours,
N o r m a n H. D a v is .
Hon. A l b e r t R a t h b o n e ,
Assistant )S
Secretary of the Treasury.

SECTION 11.
Secretary Glass Does Not Accept Davis’s Stand.
(Charge to Treasury Department.)
J a n u a r y 8, 1919.
American Embassy, Paris:
(For Davis from Glass, Treasury.)
Embassy’s 6635, January 6, 10 p. m. Your 922.
First. Our 689 to Crosby contained the following: “ Are unwilling to agree
to extend further credits to British as an inducement to them to purchase pork
they do not need. Even if legal power existed, we could not make loans for
purposes which would tend to prevent artificially a reduction of price o f food
to our domestic consumers. Believe if British negotiate loan on this market,
increase amount o f their Treasury bills, sell American securities, and avail of
ordinary channels for private credits, they will be able to finance their needs
here until restoration of normal conditions. I f after resort to such means
British find some of their requirements here are not provided for, we are pre­
pared to consider applications for further advances to British.”
Second. In establishing $250,000,000 special credit for British, wT
hich in effect
is an exchange of pounds for dollars and not a loan, it w as understood British
T
could use dollars as they pleased, provided they asked for no further loans from
Treasury.
Third. We had not understood that program of foreign Governments had
binding effect, but that is for Food Administration to decide. It must be of
great importance to us that some of our contracts abroad should be canceled.
Further, think it important to bear in mind that the attitude of our govern­
mental departments in regard to cancellations of contracts and provisional
orders of foreign Governments here is likely to have bearing on the attitude of
foreign Governments regarding the cancellation o f our contracts abroad.
Fourth. If pork is held at an artificial price the cost of living is maintained
at an unnecessarily high level, with a reflex effect on all industry. Many cases
have arisen in which maintenance of prices by artificial means has been urged,
in order to avert losses or loss of profits to Government agencies or to industries
whose production has been stimulated for war purposes. The Treasury has con­
sistently taken the position that a general readjustment of prices was inevitable
and in the interests of the entire people desirable, and that it could not be a
party to any plans designed or tending to retard the process artificially. It has
held that any legal or moral commitments of our Government should be met by
direct appropriation and ♦direct payment, and not by indirect protection of
prices. That this position is sound is recognized by Food Administration in its
joint communication to Congress regarding wheat guaranty. The Treasury can
not now take any different attitude in regard to hog products.
Fifth. I f Italy were purchasing here meats other than pork we should be
prepared to urge that she take instead the meat of wiiich we have a surplus.
We understand from Food Administration this is not the case, and we can not
press purchases of pork upon Italy, though prepared for a time to make
advances to cover supplies thereof Italy may require.
Sixth. I f Italy is not willing to execute contract for definite purchase of its
proportion of 100,000,000 bushels of wheat, Treasury prepared to refuse further
advances for Italy’s current cereal purchases until its share o f 100,000,000
bushels so far as Italy has already paid therefor has been exhausted. See
our 650.




C a r t e r G la s s ,

Secretary of the Treasury,

30

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

SECTION 12.
Great Britain Loans Belgium $45,000,000, This Loan to Have Preferential
Payment Over All Other Loans.
(Paraphrase of a cablegram from the American ambassador at London,
England. Dated January 9, 1919, at 8 p. m. Received 4.20 a. m., January
10, 1919. No. 218. Routine.)
The following is very confidential (from Crosby, No. S68, for the Secretary
of the Treasury) :
*
1. An agreement has been reached by the treasury of Great Britain to estab­
lish in favor of the Government of Belgium a credit of £9,000,000, and this is to
include the credit of £4,000,000 against repayment from enemy indemnities
reported in my No. 904. which is referred to at the present time as being on
condition that the American and French Governments agree to the proposed
course and agree to the provision of similar facilities, “ mutatis mutandis,” up
to the same limit in each case.
2. The borrowings will be represented by treasury bills of Belgium of short
date, renewable until the receipt of compensation from the enemy powers
shall enable them to be discharged in accordance with the following conditions,
namely, the first receipts which accrue to the Government of Belgium in re­
spect of compensation or indemnity from the enemy powers shall be applied
to the liquidation of the treasury bills mentioned above Paris with the
liquidation of any other similar advances received from any of the asso­
ciated Governments, always subject to such general principles as the peace
conference may lay down with reference to the disposition to be made of the
assets which the enemy powers make available.
3. It is stated that the object of this credit is the facilitation of the task of
the Government of Belgium and of nationals of Belgium in placing orders
for tlie manufactures and produce of the United Kingdom necessary for restor­
ing Belgium, pending the receipts of compensation from the enemy powers.
The prime minister of Belgium has made voluntary representation as to
quick action and has requested a larger credit than that granted by the
International Exchange.
4. The British treasury advises me that the Government of France has
opened in favor of the Belgian Government a 100,000.000-franc credit for
purposes of reconstruction. Presumably similar conditions as to priorities with
reference to enemy indemnities will be adopted by the Government of France
as those appearing above in formal agreement with British.
5. It is further stated by the treasury of Great Britain “ that they are not
willing to take any action in which claims upon the German indemnity would
be involved without the full knowledge and consent of the American and French
Governments ” and also “ that they however recognize the need for an in­
creased and immediate provision if Belgian industry is to be restored.” It is
apparent that they consider that the condition recited above in paragraph No. 2
is enough safeguard with reference to the disposition to be made of the
assets which the Central Powers may make available.
6. It is held by this British treasury that the indemnity funds which Belgium
and France may collect should not be considered as available for the purpose
of paying future or existing debts of the Government of Belgium contracted for
purposes other than reconstruction, and that they will not urge that indemnities
of this character if obtained shall constitute a part of the general assets of
Belgium to wT
hich Great Britain will look to cover general advances. It appears
that this position at least is tenable with reference to that portion of the
indemnity which will actually be expended in reconstruction although if any
greater amount should be obtained Belgium’s general creditors may properly
hold that such excess should be available for the extinction of general indebt­
edness.
7. I f this point of view is adopted by you the only objection we could have
to the procedure would be based upon the Belgian Government’s failure to ob­
serve the request made: that no arrangement of the character in question
should be entered into without first permitting you to express your views
thereon. I made this request known to them in an official letter, a copy of
which was sent to the treasuries of Great Britain and France.
8. The arrangement of the treasury of Great Britain, it appears, has been
published in Berlin, and that grave concern would be created by any suspension
in the execution of it.



FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

31

9. I shall, however, in view of the facts, referred to above, and of the
further fact that you likely hold that no reconstruction loans can be made
by us under the present statutes if altered, that we make no request for sus­
pension of the agreement just entered into by the British, request the finance
minister of Belgium to observe in the future the request to which reference
is made in the seventh paragraph above.
10. Some financial institutions of the United States contemplate negotiating
with Belgian interests for credit for reconstruction work. I have ascertained
that the establishment of credit by the British Government has had the
natural effect of delaying private initiative. Belgium does not prohibit such
inquiry, but the finance minister of Belgium holds, as British treasury officials
report to me, that the Government of Belgium fears that exchange will be
injuriously affected by the shortcomings on the part of Belgian nationals in
the establishment of private credits, and therefore it is their desire to have
a fund, through credits recently established by France and Great Britain and
a similar one to be sought from America, covering urgent public needs as for
railways and permitting money to be advanced by the Government to appli­
cants at practically gold parity of exchange. The parties obtaining such credit
would be presumed to have an advantage through exchange rate in the final
cost of reconstruction plans over others would hastily do their own financing,
and the advantage referred to is supposed to have a deterrent effect upon un­
wise private initiative. Apparently this reasoning is not sound, as the re­
sult would be a general demand for governmental finance and has already
led to the delays mentioned above.
11. However, wre are not seriously concerned with reference to this aspect
of the matter, although it illustrates the possible embarrassment from a large
resort to governmental credits for private purposes.
12. A Belgian finance official has inquired of me whether the United States
would permit a Belgian Government loan from the American public through
bankers? In view of the fact that I had no knowledge of your views on this
subject, I would not express an opinion to him, but I wish to say that it is
my opinion that this is probably the best way out o f the reconstruction problem
in Belgium, if the Government of Belgium insists upon endeavoring to finance
Belgian nationals and provided always that you would not consider that our
own financial operations would be inconvenienced by such loan. It is thought
probable, at least, that the matter will be promptly presented through Amer­
ican bankers, who may have been, or will be, approached by the Government
of Belgium on this loan.
13. The agent of the Belgian Government here is not ready as yet to sub­
mit new" estimates for army but makes the statement that the Belgian Gov­
ernment contemplates increasing its army by approximately 100,000 men. The
result will be the demobilization of approximately 100,000 men who have seen
service at the front, but the taking on of approximately 200,000 young men
of military age who have not seen service. While there are domestic reasons
for the procedure outlined, it appears to me impossible to suppose that such
an increase of military strength is necessary to prosecute the war against
Germany. The treasury of Great Britain is disturbed by considerations of a
similar character, but will, no doubt, pass the Belgian requisition for an in­
creased number of uniforms, supplying such uniforms from old stocks in Great
Britain, of small value otherwise.
14. The independent determination of governments of Europe of demoneti­
zation (demobilization), and, generally, organized military organizations, must
present very difficult questions in so far as the support of these organizations
by American funds is concerned. I will report, in conformity with the views
which were expressed in my No. 920, to our political representatives in Paris,
as I now report to you in regard to the proposed increase in the strength of
the Belgian army. At the present time my personal recommendation would be
against the support of increased numbers, British here to express a final opin­
ion on the subject, since it is connected with considerations of a political
character not in my hands.
D a v is .
L ondon,

January 9, 1919.

S ecre t a r y of S t a t e ,

Washington, D. C.:
(195. Jan. 9. For Rathbone from Cook. Routine.)
No. 864. Your 761. It is not expected that any large quantity of hog products
will be sold to Swedish Government, nor am I advised at present what amount



32

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

they will require. At present British are attempting to sell about 12,000 tons to
Holland; understand sale has not been consummated. Heretofore trades with
neutrals have been at market rate of exchange. Will keep you advised if hog
products purchased by British in America are sold to Sweden.
D a v is .

SECTION 13.
Norman H. Davis on Continuation of Loans, January 16, 1919.
P a r i s , January 16, 1919.
or S t a t e ,
Washington, I). C.
Important 6781. January 16, 6 p. m.
For Glass from Davis No. 937. Your 694. First. I am in general agreement
with your economic principles and think that at the earliest possible moment all
governmental financial support or control of trade should be withdrawn and all
sales and purchases placed in private hands as before the war. While I think
it inadvisable to make loans or maintain restrictions now which would tend to
prevent artificially a reduction of price of food to our domestic consumers I also
think it inadvisable to cause an artificial reduction in the price of feeds which
would happen unless control of purchases is likewise withdrawn. The pork
producers and manufacturers have been working under governmental control
with limited profits and the manufacturers have upon certain assurances pur­
chased and laid down pork for January shipments and part of February upon
programs handed in on fifteenth of December which were in orders.
Second. Hoover informs me that our exportable surplus of pork products for
January and February is about equal to our domestic consumption, in which
case the gain to the domestic consumer in any reaction in price would be a
corresponding loss to the producer of hogs, the manufacturer of hog products,
and to the country, and a corresponding gain to the foreign purchaser irrespec­
tive of the question of the objects involved. Hoover and I have been endeavor­
ing to get all control withdrawn but as normal fair prices can not be negatived
by withdrawing artificial control or support on one side without the correspond­
ing withdrawal on the other, we have suggested to the Allies that they take
only the surplus stocks held under assurance as to disposal and price for ship­
ment in January and part of February and that by the latter part of February
all control over sales be withdrawn in the United States and that simultane­
ously the allied governments discontinue purchasing through the one allied
purchasing agency and turn all purchases back into the hands of private mer­
chants and importers.
Third. Understand British are willing to purchase such portion o f their
January pork program as may be desirable provided we will advance the
funds for same as was contemplated by them when program was prepared and
submitted.
Fourth. Keynes claims that the credit of $250,000,000 which has been estab­
lished in their favor to be repaid in sterling will not give them sufficient, funds
to meet this purchase and take care of other more immediate requirements.
Because while they will need the pork shortly, they can allow their stocks to run
below normal and withdraw from the market temporarily. This of course
would cause an artificial break in market and they could purchase much
cheaper, which they feel justifiable if we withdraw our financial assistance.
Keynes also contends that we should not remove control and finance on one
side until the other is actually and effectively in a position to resume inde­
pendent private trade, and that during at least early part of peace negotiations
war can not be over. Furthermore, that if we are satisfied our associates are
doing their best to get independent as soon as possible, we should not press them
further, making it clear, however, that while a continuation of assistance on
previous basis is strictly temporary it is not to be brought to a sudden con­
clusion; also that general policy here during conference and complicated
economical position o f Allies and the rest of Europe (? ) it quite unjust to pre­
serve a strict and unadulterated treasury policy with regard to other con­
siderations and the position as a whole. Keynes apparently agrees with your
general principles that all trade and finance should be placed in private chan­
nels as possible, but contends that just at this particular moment it is embar­
S ecreta ry




FOREIGN LOANS AN D A U T H O R IT Y FOR M A K IN G SAM E .

33

rassing to them from many standpoints to be forced so suddenly to negotiate
largely private loans. I told Keynes that such questions must necessarily be
handled in Washington, and merely transmit this for your information.
Fifth. So far as I can ascertain from Hoover there is no commitment to any
food producer except in respect to pork, which expires in March, but which
can be canceled end of February, provided advances are continued normally
for January and February, and also in respect to wheat, which can be consid­
ered several months hence.
Sixth. In substance, while I am opposed in principle to high artificial prices
I do not see how a normal and unartificial price can be obtained unless the
markets are thrown open to the producer, and, as the producer has been under
governmental control, I doubfc if control should be entirely withdrawn until
there is a free market for the disposal of his products.
B l is s .
J a n u a r y 16, 1919.
Memorandum for Mr. Rathbone.
Referring to the attached cable No. 868, I do not see how we can submit to
the segregation o f indemnities for the security of British loans to Belgium un­
less upon the understanding that we are to make no further loans to Belgium.
R. C. L e f f i n g w e l l ,
Assistant Secretary o f the Treasury.

SECTION 14.
Reply to Belgium on British and French Loan—Our Advances for Food and
Clothing After the Armistice Were to Be Treated as Though for Recon­
struction.
J a n u a r y 18, 1919.
Paris.
For Davis from Rathbone. Treasury 716.
Embassy’s 6780, January 16, 6 p. m. Your 936.
First. Refer to Crosby’s 868 regarding Belgium.
Second. Secretary has written Belgian minister as follow s: “ I have before
me your letter of the 16th instant addressed to Mr. Rathbone in reply to his
letter of January 3, and note that the negotiations in London referred to were
not with banks but with the British Treasury, and that the draft of the under­
standing which was arrived at had been communicated to Mr. Crosby on Janu­
ary 7.
“ The Treasury has just received cables from Europe, from which I under­
stand that the British Treasury has agreed to establish in favor of your Gov­
ernment a credit of £9,000,000 for the purchase of reconstruction supplies in
Great Britain on condition that the first receipts which accrue to the Govern­
ment of Belgium in respect of compensation or indemnity from enemy powers
shall be applied to the liquidation of the Treasury bills to be issued against
such credits rari rassu with the liquidation of any other similar advances re­
ceived by your Government from any of the associated Governments, subject
nevertheless to such general principles as the peace conference may lay down
with reference to the disposition to be made o f the assets which the enemy
powers make available. It is not entirely clear from these cables whether the
arrangement mentioned is conditional upon the United States and French Gov­
ernments agreeing to the proposed course and to the provision of similar
facilities.
“ I am informed that your Government is negotiating for the establishment of
a credit in its favor on simila? conditions by the French Government.
“It is the vieto of the United States Treasury that advances made to your
Government after the cessation of hostilities and the reoccupation of Belgian
for food, clothing, and other relief purposes must be regarded as in the same
category as advances for reconstruction of physical properties, distinguishing
advances falling within this category from advances for military purposes.
It follows therefore that the United States Treasury must take the position
that the advances which it has made to your Government for food and relief
S. Doc. 86, 67-2------ 3

A m e r ic a n M is s io n ,




34

FOREIGN LOANS AND AU T H O R IT Y FOR M A K IN G SAM E.

purposes during tliis period must receive treatment as favorable as that ac­
corded to advances which may be made to your Government by the British
or French Governments for reconstruction purposes, and I am unable to see
my way to continue to make advances to your Government for food and relief
purposes beyond the commitments which have already been entered into by
the Food Administration unless this principle is accepted by your Government.
“ I am sending a copy of this letter to the United States Food Administration
so that it may be governed accordingly, and to the representatives of the
British and French Treasuries for their information.”
Third: Guaranty trust with Treasury approval consented to negotiate re­
garding placing Belgian loan on our markets. These negotiations were broken
off by Belgium about time agreement with British Treasury was made. Have
asked Belgian Minister to ascertain why negotiations were broken off in view
of United States Treasury’s desire that allied Governments should so far as
possible provide for their needs in United States from private sources.
Fourth: It is important that Treasury’s position as indicated in paragraphs
second and third be brought before our peace mission. It should be made clear
to them that we have sought to avoid this issue, but our hand was forced by
arrangements negotiated between British and Belgium Governments and it is
deemed imperative that Treasury should immediately secure its position in
order to adequately protect the advances we are making Belgium for food and
relief purposes. The monthly advances for these purposes have been largely
increased since the signing of the armistice.
F ifth: Referring to paragraph 15 of Crosby’s 8(58 it is essential that in
present circumstances our advances to allied Governments for military pur­
poses should be rapidly cut down and wholly cease at an early date. This
applies to Belgium as well as other allied countries. Outside of commitments
for food we are not approving Belgian applications for purchases for military
purposes except in comparatively small amounts.
A lb e r t R a th b on e,

Assistant Secretary of the Treasury.

SECTION 15.
Secretary Glass’s Reply to Norman H. Davis on British Loans.
[N ot by wireless.]

January 20, 1919.

Paris.
For Davis from Glass. Treasury 728. Your 937.
First: I am glad to have your full statement of views as while I am clear
regarding the essential principles to be followed I desire to give full weight
to your recommendations and the views of other departments in applying such
principles.
Second: It is the settled policy of Treasury to discourage efforts to main­
tain high prices. Where legal or moral commitments exist to producers they
should be met by direct appropriation by Congress and not by continuation of
high prices through artificial means with resulting maintenance of high cost
of living and other economic evils of utmost gravity. I am not willing to
make loans to allied Governments in order to assist other departments of
Government to continue artificial high prices in pursuance of a policy of which
I emphatically disapprove. I am not willing to force upon Great Britain a
loan for which she has not made application in order to enable Food Ad­
ministration to force upon her the purchase of pork which she is unwilling to
buy at artificial prices. Treasury has never refused loan to British required
to meet their purchases inUnited States.
T hird: Treasury was not consulted in advance either by British or Food Ad­
ministration regarding financing of ultimate purchase of stocks laid down by
packers or regarding assurances given to packers. Before negotiating special
credit arrangement with British we asked Food Administration if there were
any impending questions between it and British which it thought should be
taken into account in these negotiations and were ad vised that there were not.
Fourth. I am satisfied British underrate their financial resources apart from
United States loans. No information furnished by British to indicate that
A m e r ic a n M is s io n ,




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

35

credit of $250,000,000 is inadequate to meet their needs if supplemented as it
should be by other means, such as loans and employment of private credits.
Reimbursements from other Governments will also aggregate a large sum.
Fifth. Referring Keynes statement of British position which you transmit
can not consider any further loans to British without evidence of their require­
ments in reasonable detail and statements as to what they are prepared to
do to provide funds from other sources. Upon such a presentation should
feel bound to give request for loan careful consideration notwithstanding the
burdens of the Treasury. See our 689.
Sixth. Hoover cable 24 to Richard creates impression that extraordinary
efforts are being made to support market prices and that case is not one of
market being artificially broken by failure of British to give expected order.
Understand proposed British order only 23,500 tons, which would seem to be
too small to break any market except one being artificially supported.
Seventh. Consider British situation governed by entirely different considera­
tions from those relating to continental situation where question o f maintain­
ing order paramount.
C a r te r G la s s ,

Secretary of Treasury.

SECTION 16.
Hoover’s Cable on Surplus Pork Supply.
From: Ammisslon, Paris.
T o: Opnav.
Food 262. Food Administration as the result o f conversations we have to-day
proposed following contract to British. We omit preamble which recites moral
obligations involved and that it has not been presented to our Treasury pend­
ing views British food ministry. We anticipate ultimate entire sale 100,000
tons to Germany and northern neutrals and thus perhaps with temporary ad­
vances from our Treasury it would be carried through without substantial ex­
tension credits. “ It is agreed as follow s: One, the British Government will
place orders for 100,000 tons of pork products (hereafter referred to as the
February order) in the United States before January 25 for February delivery
or payment. Two, the above February order or such quantities as may be sup­
plied in advance from the present current United Kingdom stocks shall be con­
sidered available for resale in Europe under the following conditions: (a) In
case orders for February shipment betwreen this date and end of February from
neutral countries shall be placed in the hands of the British authorities for
purchase or shipment from the United States, portions of the February order
shall be transferred by apec to the agents of such neutrals in the United States,
who will pay directly therefor to the American producers; (b) in case advances
have been or should be made from current stocks in the United Kingdom to
neutral countries before the end of February, then the British Government
shall arrange that an equal portion of the February order shall be paid for
by neutral buying agencies in the United States directly to all American pro­
ducers; (c) in case of any orders from Germany for February shipment between
this date and the end of February the cash provided by Germany therefor shall
be transferred to the United States in payment for an equal portion of this
February order; (d) in case advances are made from the United Kingdom from
existing current stocks to Germany, the cash realized therefrom shall be trans­
ferred to the United States in payment of similar portion o f the above Febru­
ary order; (e) in case o f shipment to liberated countries by the British Govern­
ment from this February order (or advance shipments from existing United
Kingdom stock to liberated countries) or such amounts as may be reserved
out of the February order for the use of the United Kingdom, then the United
States Treasury will advance the necessary amounts to pay therefor in the
usual manner. Three, the British and United States Governments mutually
agree to withdraw all import and export restrictions on pork products, beef,
and condensed milk on Febuary 28, 1919. The British Government agrees to
abandon all purchases of pork products through the Government and allied
purchasing agencies after February 28 and the United States Government agrees
to withdraw its requirements of governmental approval o f such purchases or
support of American prices at the same date, to the intent that normal trade re­
lations are reestablished in these commodities. Four, if the British Government



36

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

shall have stocks of pork products February 28 which they dispose of abroad for
receipts effective as exchange, they will refund in dollars to the United States
Treasury the amounts realized from such sales, or with the consent of the
United States Treasuhy use such funds for additional purchases of food in the
United States. Five, the United States Food Administration has en route
20,000 tons of pork products to the northern ports of Europe. These 20,000
tons are held in reserve for Belgium use, or any excess thereof for sale to
Germany or neutrals or relief purposes, and such excess as there may be
over Belgian needs shall be dealt with pro rata with any amounts dealt with
from the above February order of the United Kingdom.
H oover .

January 23, 1919.
Op-19. Food Administration.
Mr. Snyder responsible for answer.
Copies sent to Richard, Gray, Whit marsh, Mitchell, Hallowell, Snyder.
American Mission, Hoover Cables Incoming.
A m e r ic a n M is s io n , P a r is ,

SECTION 17.
Summary of Great Britain’s After-the-War Attitude on Trade and Finance.
A m e r ic a n E m b a s s y ,
O f f ic e of t h e C o m m e r c ia l A t t a c h e ,

London, November 22, 1918.
B r i t i s h T r ad e A t t it u d e T o w a r d t h e U n it e d S t a t e s .

Memorandum for Mr. Irwin Laughlin, American C'harg^ d’Affaires: Follow­
ing your suggestion, I shall try to summarize briefly in the form of this
memorandum information relating to the British trade attitude toward
America, which I have in the past few days talked over with you. Mr. Edward
Price Bell, who is in charge of the European service of the “ Chicago Daily
News,” has told me that he had reason to fear that well informed American
official opinion was likely to be unduly suspicions of British ambitions for sea
power and trade domination.
To counteract what he considered a mistaken attitude on the first point, he
sent a long cable to his paper on November 6, in which he tried to show
that Great Britain was entitled to her predominant naval power. His main
argument was substantially that stated at a recent meeting of the American
Lunch Club by Admiral Sims, who said that Great Britain’s lines of com­
munication are sea routes and that her position is, therefore, different from
that of the United States or any other great power. Mr. Bell also tried to
give assurance that Great Britain always had and always would use her naval
power for ends in which the United States had a common interest. A qualifica­
tion which occurs to me is that America may soon possess merchant tonnage
equivalent to that of Great Britain and have a foreign trade of greater rela­
tive importance to out national prosperity and of more serious competitive
character as concerns Great Britain. We may, therefore, have greater interest
in sea routes and may be brought into more severe competition with Great
Britain, and our interests instead of being largely supplementary as formerly
may be to an extent opposed to one another.
Mr. Bell also wrote a memorandum intended to allay trade suspicion of
Great Britain, which the visiting delegation of editors of the American daily
press propose to present to the President and ask that permission be granted
to give it wide publicity in America. Mr. Bell denies that there is any un­
friendly spirit in Great Britain toward America and tries to disabuse our
people of any idea of this kind. He is, no doubt, correct in a general way.
Any American who has been here recently has had plenty of personal evidence
of the hospitality and genuine cordiality of the British people. Just how far
this sentiment will make impossible conflicts of economic interests is another
matter. Mr. Bell’s attitude is to get rid of suspicion and take as genuine the
obvious good will toward America. Let us hold on to this good will by all
means, but let us also examine for our own guidance just what sort of a trade
attitude Great Britain would like to have America adopt. Whether or not
British good will is dependent upon our falling in with her plans or not may be
considered later.



FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

37

FINANCE.

Great Britain must furnish work for the demobilized soldiers. To do this
an early revival of the export trade is essential. There is also the desire to
make as much profit as possible in order to hold up exchange and relieve the
present weakened financial position. It is hoped here that America will not
enter the field as a financial competitor. The British financial position at
present is not a very strong one, because they have a highly inflated currency
and are faced with great burdens in the way of taxation. The demands of
labor, which can hardly be avoided, will make it difficult for Great Britain to
early put herself again in a sound financial position. If America, in a strong
financial position, were to have the ambition to compete outright and try to
take away the chance of profitable financing previously held by this country,
it would not be an easy position to meet. If, on the other hand, American
financiers are ready to go in with the British, who have had more experience,
this would leave the machinery largely in the control of British banks and
financial houses, but it might result in the greatest profit to both countries.
During the war, American financiers have taken the position that they would
not consider any financial expansion abroad of a commercial character until
the war obligations were satisfied. During the past year I have had corre­
spondence with a number of leading American bankers who are in position to
establish business overseas. As indicating at least one point of view, there is a
letter which I have just received from Mr. Archibald Kains, president o f the
American Foreign Banking Corporation, which has been organized by 16
or more large American banks in different cities. I had pointed out to Mr.
Kains the advisability of establishing an American branch bank in Australia
rather than making connections with existing banks. Mr. Kains replied that all
the world was coming to America for financing and that we would have plenty
to do without going out for business. He also said that for American banks to
try and compete openly with British banks reminded him of the small boy who
had tried to teach his grandmother to suck eggs. If this is typical of American
banking opinion, we w ould not use our present financial strength to try and
T
get hold of the world’s financial machinery. This would be very satisfactory
to the British.
If, however, American banks are ever going to compete outright with
British banks in the financing of foreign commerce, the most favorable oppor­
tunity is now, when our trade adjustments are being made and when we
have a relatively strong financial position. If our banks are content to finance
our foreign trade through British banks our commerce will be under a certain
handicap. With our normal high rate of wages we can not confidently suffer
higher costs of doing foreign business. I am in favor of going ahead without
delay in establishing branches of American banks abroad and stabilizing
dollar exchange. It is a question of degree. Shall we make a substantial
start or go slow and play safe? It is no time for over-extension certainly,
but if we believe in the future of our foreign trade we should have the courage
of our convictions.
m erchant

m a r in e .

It would be shutting our eyes to the obvious if we were to try to believe
that Great Britain has no apprehension of the potential competition of the
new American merchant marine. I have recently talked quite frankly with
the editor and publishers of the well-known British shipping journal “ Fair
Play,” as well as with others who are informed as to the feeling of shipping
interests here. British shipping has been self-supporting and a productive
national asset. The principal points which are in the minds of British ship­
ping men in viewing the future American competition can be summarized, par­
tially, at least, as follow s:
1.
Mr. Hurley made a statement regarding American railway rates, in
which he inferred that export differentials could be utilized to develop the
American merchant marine. They fear here that such export differentials may
be made for American-owned ships and not for British ships. Presuming that
American railways and American ships are both operated by the Government,
it is feared that a through rate from an inland point to an oversea point might
be made, which would give American ships an advantage over British ships
in competing for cargoes. Seeing that Mr. Hurley’s statement was not in detail
they read this interpretation into what he said. This interpretation is not un­




38

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

natural, seeing tliat Germany and adjacent countries were accustomed, prior
to the war, to give railway export differentials in favor of their own shipping.
2. During the war a large number of British ships have been diverted from
normal trade routes to carry American troops and supplies to Europe. At the
same time it is said that markets previously supplied from Great Britain had
been supplied in increasing measure by direct shipments from America. We
have, of course, made a special effort to increase our exports in markets
where the exchange has been running against us, and our export figures to
such markets as South America have greatly increased. At a time when
British ships have been taken from some of these routes, there is a feeling
that America has been fortunate in getting a foothold in British markets as a
result of the war.
3. British shipyards have been working to a certain extent on repairs for
warships, which has cut down the output of merchant tonnage and has made
it impossible for Great Britain to keep up with the great increase in tonnage
in America. It is felt that this fact should result in a certain amount of
appreciation on the part of America when it conies to a question of keen
competition in shipping.
4. There is considerable anxiety regarding the general statement that cer­
tain trade routes belong to America. It is feared that this is meant to imply
that the South American market is one which the United States is especially
entitled to. Seeing that the bulk of trade in this market has been British
trade and that all trade has been carried largely by British ships, this position,
if it was maintained, would meet with disagreement. British ships have pre­
viously run on all the trade routes of the world and they can not see why
any particular route should be considered as the special province of America.
5. At least 250 British merchant marine officers have been loaned to America.
Their salaries have been doubled. It can not be expected that they will
freely return to the British merchant marine at this great salary disadvantage,
and it is feared that this loan may work out in an embarrassing way to the
British merchant marine. British officers and British seamen have helped
in the development of the American merchant marine, where wages and con­
ditions of living have been better. It is feared that this competition may result
injuriously to the British merchant marine.
The British shipping people have been in the game a long time and are in­
terested in the return that they get on their investments. They are business
people and are very anxious that they should not suffer as the result of changes
made by the war. They probably would be very glad to go into pooling agree­
ments with American ships, which would result in a fair profit being obtained
for both.
A movement has been under way for some time toward a consolidation of
British shipping interests. For example, the P. & O. Co. has purchased the
Union Steamship Co. of New Zealand and the New Zealand Steamship Co.,
thereby gaining a firm hold on liner tonnage to Australia and New Zealand.
Prominent officials of this consolidated company were influential in British
shipping circles. When 1 left Australia in September, 1917, the prime minister,
Mr. W. M. Hughes, told me confidentially that these officials in the Ministry of
Shipping, who were primarily concerned with the development of the P. & O.
communications to Australia and New Zealand direct from Great Britain, were
adverse to an increase in shipping across the Pacific from Australasia to Ameri­
can ports. Other combinations have since been perfected in British shipping
circles and probably there is the same desire to protect former lines of British
shipping communications to other parts of the world. Carrying out this ten­
dency toward consolidation may be cited a United States Army Intelligence
report which has just come to my attention, which is as follow s:
“ Lieut. Col. H. D. Behrend. of Liverpool, a retired British Army officer,
largely identified with the shipping industry in Liverpool, left for London
November 19, 1918, to complete the purchase of five ships to be added to the
Scandinavian service in which his firm are interested.
“ The ships are new, just having been completed in British yards, average
tonnage 4,500 and the price to be paid for them is about £145,000.
“ Col. Behrend informs the writer that, in his belief, the day of the English
tramp steamer is done, and that in the future the shipping industry of Eng­
land will be conducted by large companies formed from the consolidation of
existing lines; in other words, he predicts an English shipping trust covering
water transportation to and from the United Kingdom as conducted by British

ships.”



“ J. D. W h e l p l e y . ”

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E .

39

TRADE.

The trade interests in this country, that is, the manufacturers and exporters,
are desirous of securing as early return to favorable conditions for private
business as possible. They desire, for instance, that British ships may be put
back on normal routes as soon as possible. They also feel that protection for
a certain period at least should be given to British industries during the period
of reconstruction. As an example, American motor cars have ceased to come
to this country for the retail trade, and in addition to the restrictions there is
at present a duty. Great Britain munition firms, such as Vickers, are going
to be able to change their plants over to the manufacture o f low-price motor
cars. If they have a certain time they can possibly obtain a firm grip on the
British market for low-price motor cars, so that it will be difficult, if not im­
possible, for American cars previously sold in this market to regain their posi­
tion. There are many industries which have enjoyed temporary protection
during the war which desire sufficient protection during reconstruction and
possibly afterwards. In some instances control has gone farther than this,
as is the case of the nonferrous metals industry. The Overseas Trade Depart­
ment and commercial interests generally, I think, look upon an imperial prefer­
ence tariff as a matter of domestic policy. These instances which I have men­
tioned are illustrations of things in which the commercial interests in this
country are interested, and on which probably they wish American opinion to
look as just local British problems. The idea o f no economic barriers they feel
has got to be whittled down to a point where this principle will not interfere
with ambitions which particular interests have in mind.
France, Belgium, and other countries which are going to be in particular
need of essential materials for reconstruction, hope that arrangements will be
made to give them these supplies under war conditions; that is, with priorities
in shipping and manufacture and with credit for what they purchase. As
an example of this, I can give you a confidential incident. The French Govern­
ment applied to representatives of the American War Industries Board in
Paris for 70,000 tons of steel rails per month during 1919. They endeavored
to get this order in under war conditions a few days before the armistice was
signed. I talked with a committee of Belgian industrials in Paris who I know
had the same idea; that is, that they should be taken care o f first. I f the
United States is to pour out its resources in the way of providing materials
for reconstruction in Europe for a year or two and at the same time is quite
willing to suffer the cessation of normal exports o f finished goods, for which
we have had an established trade good will, we will be pursuing a policy of
generosity. Nothing, it seems to me, is more important than the fact that we
should remain true to the motives which have been sincere. The last thing
that we should do would be to try to take any commercial advantage of the
war, which we could through out strong position. If, however, we are negligent
of our financial machinery, our shipping machinery, and the normal organiza­
tion of our foreign trade, as operated by individual firms and on special and
favorable lines, we will be giving our Allies a head start. It therefore is a
policy to keep America quiescent, whereas our Allies, who have suffered more
than we have, are eagerly trying to get their industries and trade in shape,
there is no reason why we should not do this with our eyes open.
This also, I should say, again is a matter of degree. I f American com­
merce is held back for generous motives when our Allies are forging ahead,
the day may come when American commerce will reap great disadvantage.
We can be generous where generosity is due and firm where our own com­
mercial interests are entitled to their due. I think that Allied friendship can
stand this strain as it ought to.
trade pro pagan da.

The British Ministry of Information has been active in setting the British
point of view before our people at home, and have, as well, entertained various
delegations of editors in this country. What are their motives?
Sir Arthur Steel-Maitland, Bart., M. P., Parliamentary Secretary of the De­
partment of Overseas Trade, welcomed the American delegation of trade jour­
nalists on Nevember 12 at a luncheon given by the English-Speaking Union.
He said quite frankly that he believed that every possible effort ought to be
made to obtain better acquaintance and understanding between trade interests




40

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

in America and Great Britain. In the problems of peace now arising we would
have to realize that human nature was not perfect and that there are many
difficult, particular questions which would have to be settled. With sympathetic
understanding between British and American trade interests we could feel
more sure that our great objects would be obtained without permitting these
practical adjustments to have a major influence. In making these remarks he
saw me sitting not far away and took occasion to say, in a laughing way, that
he had already talked these matters over with a friend who was sitting on
his right In explanation I may say that some six or eight months ago I had
a number of conversations with Sir Arthur about an exchange of visits be­
tween American and British commercial organizations. This was something
which Dr. Page had asked me to attempt to bring about. At this time I be­
came quite well acquainted with Sir Arthur and with other men in the
Overseas Trade Department and we talked rather frankly about the situation.
I remember saying that at least in certain quarters in America British afterthe-war plans for trade were creating anxiety. Sir Arthur replied that in
Great Britain they thought that we were going much farther than they had
and he cited the American International Corporation as an example. He
was very anxious that these visits should not be merely social affairs but that
they should actually get ahead with certain definite things. He believed, for
one thing, that it would be a good thing to have financial cooperation between
the United States and Great Britain, and that in other instances we might
get together and divide contracts in South America and in other places. The
British Board of Trade and commercial organizations in this country have
been very favorably attracted by the idea of combination since the war.
There have been a great many combinations here in industry. They are
occurring almost weekly. An export corporation is now being formed in
Manchester which will have $1,000,000 a year to spend in promoting foreign
trade. They have not our traditional dislike for combination as represented
by political sentiment in America. They are favoring combination in Great
Britain and they probably would be glad to have us work with them.
Sir Arthur Steel-Maitland has recently told the American Chamber of Com­
merce in London that the British Government is anxious for close cooperation
between Great Britain and the United States in all matters which must for
some time remain subject to Government control. Their chief interest is in
the control of raw materials after the war, and the earliest possible under­
standing between the two Governments is desired. Sir Arthur suggested that
the American Chamber of Commerce in London ask the United States Govern­
ment, through the Chamber of Commerce of the United States of America, to
indorse the early appointment of an allied international commission to deal with
the distribution of raw materials after the war.
It must be quite evident that Great Britain feels that America has been
holding back during the war and that it is now essential for America to come
out in favor of allied commercial control. There has probably been no direct
attempt to influence America in this direction, but it has probably been con­
sidered all to the good if American public opinion has been put in a frame o f
mind to approve this kind of close economic cooperation.
My opinion is that there is every reason for allied economic control as long
as it is necessary to have a lever to make Germany live up to the peace terms.
It may also be necessary to safeguard the interests of our allies who have been
invaded. I have reason to believe that British hopes go farther than this.
They wish to have a head start in reconstruction as far as their own industries
are "concerned, and to receive high prices for the raw materials they have to
sell, which may restore the financial position o f the country.
I am in favor of allied control of economic goods as long as it is necessary
to coerce Germany and help our less fortunate allies. When this is accomplished
I believe that an early return to free conditions of private buying and selling
will obviate possible international misunderstandings and be the best all around
for effective industry and commerce. American business will not stand being
fettered any longer than patriotism requires. Then I am opposed to interna­
tional government trusts which will entirely alter our economic system and give
advantage to the Government which can bargain most shrewdly. This is not a
kind of international relation which can be faced with hope for future security
and good will.




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

41

CONCLUSION.

Can we bargain for our own interests and maintain the good will of Great
Britain?
They may say that we are letting Germany down too easy and that we have
not suffered a long war. British labor, however, which is coming to be a most
important factor, is for a liberal settlement. The British Government can not
go too far in standing for the objects of special interests. If we are diplomatic
and yet firm, I think that we can carry our liberal case a long way toward at­
tainment. We may have to make concessions for a period of transition, but
we can narrow this period down to some reasonable limit. It will be necessary
for us to have a solid understanding of our own case and to put it forward.
When we make concessions it must be understood by our allies that they are
concessions. We need to look at these great issues in proper proportion. It
is not necessary to be suspicious because our allies are going to be rather de­
termined to get what they w.ant. It is certainly unwise to ignore these eco­
nomic issues and trust blindly to good will. We must be prepared for com­
mercial bargaining. If we are steady and true to our national interests, as
well as to great principles of international policy, we will gain respect, which
is the best basis for any permanent international good will.
P h i l i p B. K e n n e d y ,
American Commercial Attachd.

SECTION 18.
United States Money for Food in Belgium to Be Treated the Same as Money
for Rehabilitation.
P a r is ,

February 6, 1919.

S ecre t a r y of St a t e ,

Washington, D. 0..*
616, February 6, 11 a. m.
D-23. For Rathbone. Referring to your dispatch of January 18 to Baron
De Cartie, I transmit herewith copy of letter addressed by British Treasury
to Compte de Grunnei, of Belgian commission.
“ I beg to confirm our telephonic conversation of to-day with reference to
the proposal of the United States Government that advances made by that
Government for the Commission for Relief in Belgium on account of food and
relief for the Belgian people should be considered as ranking with the ‘ similar
credits’ which, under the agreement between His Majesty’s Treasury and
the Belgian Government, are to rank pari passu, repayment out of the first
installments of any payments for reparation or indemnity made by Germany
to Belgium.
“ His Majesty’s Treasury is prepared to regard American C. R. B. advances
at present date as ‘ similar credits ’ in the above sense on condition that the
British C. R. B. credits are also regarded and that the British Treasury shall
receive the same proportion of the amount recovered out of the indemnity as
the British gross contribution, whether made in cash or in bonds, to America
bears to the total cost of the contribution of the leading powers for Belgium
relief. In so far as recoveries are made in cash, the British Treasury would,
of course, be prepared to apply the proper proportion of that cash toward
redeeming the corresponding bonds given by them to the Government o f the
United States.”
In transmitting to Hoover a copy of above letter from British Treasury
dated February 1, the Belgian delegate, Baron Hymen, states that he has in­
structed Belgian Minister in Washington to accept the proposals o f American
Treasury. Am informing Baron Hymen that this matter must be dealt with
you in Washington, but that, in my opinion, you will probably insist that the
advances, which will rank pari passu between the American, French, and
British Governments as a claim against German indemnities, must be those made
for relief and reconstruction purposes on and after November 11 last, instead
of February 1, as proposed by British. Davis.




A m e r ic a n M is s io n .

42

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

SECTION 19.
England Sold Pork Supplies, Purchased in This Country with United States
Liberty Loan Money Loaned for the Purpose of Prosecution of the War,
to Our Technical Enemy, Germany, with the Approval of the Treasury
Department—The Gold Received Was Placed in the English Treasury and
Not Credited on the English Debt Here—Thus the Money Raised from
the American People to Prosecute the War Went to the Aid of the Enemy
with the Treasury Department’s Sanction.
[Paraphrase o f cablegram .]

From : American Mission, Paris, France.
Dated: February 21, 11 p. m.
Received: February 22, 2 a. m.
Number: 848.
For Rathbone, No. D-71. A statement has been submitted by Hoover to the
effect that the British have sold 30,000 tons of pork products to Germany and
12,000 tons to neutrals. In order to enable England to dispose of some old
stocks, Hoover consented to this sale. Hoover could have made these sales
himself, and intended to do so, but allowed British to make them in order that
old stocks which might have become stale might be worked off. Hoover con­
sented to this sale upon condition that corresponding orders be placed by
British in the United States or else return cash advanced by the Treasury to
them for the original payment of stuff resold. As agreed, British have placed
order for 12,000 tons replacement and Hoover has telegraphed his [willingness?]
to remove control on pork market. That this information be kept confidential
for a few days is earnestly desired by Hoover. If found pressing in the mean­
time, British to place order for balance of twenty [five?] thousand tons so
that withdrawal may be announced by him of his staile ration of pork products
without risk of a demoralized market, thus leading to an orderly return to un­
controlled market. Hoover has also requested that a ruling that unified buying
in the United States is illegal be issued by the Attorney General. Claiming that
no time limit was placed on this replacement order and seeking to attach condi­
tions making Hoover guarantee m a x im u m prices during the next six months,
Hoover states that the British are delaying replacing order for 25,000 tons sold
to Germany. Hoover contends that they should return cash or place this order
at once in accordance with agreement, and requests that notification to this
effect should be made to the British Government by the Treasury Department.
He is anxious to have the matter settled by February 24 in order to make
announcement. Taking the situation as it stands, the suggestion of Hoover
may be the best way to secure a prompt and orderly return to natural market.
Following is for your information: Arrangement was made whereby England
is to receive from Germany in payment of above food 25,000,000 marks in neu­
tral currencies and 100,000,000 marks in gold. The neutral currencies in which
payment is made are none of them currencies which are required by us at this
time and they are not taken at the par of exchange. With reference to the
gold, the conditions are outlined in your 758 (? ) acceptable to the French Gov­
ernment, they have waived any claim that the gold be turned over to them, for
some reason not disclosed to us. The arrangement of Hoover with the British
Government was made independently, producing no disadvantage in it to us.
A m e r ic a n M i s s i o n .

SECTION 20.
Hoover Approves of the Sale of Pork to Germany.
[Paraphrase o f a cablegram.]

From the American Mission at Paris, France.
Dated March 4, 1919, at 2 p. m.
Received 8 :1 1 p. m.
No. 1021.
The following is for Rathbone, No. D-96, reference to his No. 834, filed
March 1, 1919.
1.
Your understanding is correct that our suggestion was not accepted by
the French and that they waived claim to gold.



FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

43

2.
However, gold is not available to us on account of the fact that the
British made sale of the food in question to Germany and the gold is to be
received by them on the understanding that the British shall use the dollar
equivalent for replacement order in the United States in accordance with
agreement made icith Hoover without our approval being previously obtained,
but it was not thought by Lamont, Strauss, and myself that it would be wise
to make any objection because it was not our opinion that we were badly in
need of gold but that if should take it, the opposition would only be increased
which has been manifested here by the Allies, based on our readiness to
transact business in comparison with Allied unreadiness. Negotiations to lift
blockade and to make possible to Germany to pay for, are being hampered by
this feeling. The sale o f Army assets in Spain to assist us in meeting our
maturities has been suggested to Hollas. Lamont and Strauss are going to
Spa this evening and will be gone until Friday. Davis.
A m e r ic a n

M is s io n .

SECTION 21.
Loans to Serbia to Be Secured by First Lien on German Indemnities to Serbia.
M a r c h 8, 1919.
The United States Treasury has received an ap­
plication from the Kingdom of the Serbs, Croats, and Slovenes for a credit of
$40,000,000, or 200,000,000 francs, to enable the purchase by that Government
o f certain commodities from the American Expeditionary Forces. In con­
nection with this application, the Government above mentioned has offered
to secure the repayment o f advances made against such credit by that part
of the war indemnity to be paid by Germany which will be allotted to the
Kingdom of the Serbs, Croats, and Slovenes, with'the understanding that the
reimbursement of the advance should be made out of the said indemnity.
Before acting upon this offer, the United States Treasury would be glad
to be informed whether the giving of this security would, in the judgment
of your Government, in any way prejudice the interest which it has in the
indemnity to be awarded the Kingdom of the Serbs, Croats, and Slovenes by
reason of the fact that your Government has made advances to said Govern­
ment during the war. The United States Treasury does not desire to take,
as against your Government or the other Governments which have made war
advances to Serbia, any advantage through the acceptance of security for the
advances it has made, or may make Serbia or the Kingdom of the Serbs, Croats,
and Slovenes.
I shall be glad also for suggestions from your Government as to whether
it might not be advisable for the United States Treasury to accept such security,
in case the Treasury decides to establish such credit and make advances there­
from, with the distinct understanding with the Kingdom of the Serbs, Croats,
and Slovenes that such security shall be held for the benefit o f such advances
as have been made, or may be made to Serbia, or the Kingdom of the Serbs,
Croats, and Slovenes, by the Governments associated in the war, in such pro­
portion as shall be determined by such lending Governments, or as may be
decided at the peace conference, or in accordance with principles thereat de­
termined.
I am, my dear Mr. Blackett,
Very truly, yours,
M y D e a r M r. B l a c k e t t :

A lb e r t R a t h b o n e .

Mr. B a s i l B l a c k e t t ,
23 Wall Street, New York City, N. Y.

SECTION 22.
United States and British Treasury Understanding on Serbian Loan.
M arch

27, 1919.

M r. B a s i l B l a c k e t t ,

23 Wall Street, New York, N. Y.
: I have received your letter of the 2;6th instant in reply
to my letter of March 8 regarding an application received by the United States
Treasury from the Kingdom of the Serbs, Croats, and Slovenes for a credit of
$40,000,000, or 200,000,000 francs.
D e a r M r. B l a c k e t t




44

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

I understand from your letter that it is the opinion of the- British Treasury
that all advances made by the various Governments associated in the war to
the Servian Government, or to the Kingdom of the Serbs, Croats, and Slovenes,
from the date of the armistice until the signing of peace should rank equally
as a first lien on the indemnity to be received by that country from the enemy.
This view would not seem to be entirely in accord with the resolution w^hich I
understand has been passed by the supreme economic council, to the effect that
relief and reconstruction credits to Servia and certain other countries should
be made a first charge against receipts 011 account of reparation and indemnity.
Mr. Davis cables that such general principle has been approved by the allied
governments in respect ol the particular countries mentioned.
In the judgment of the United States Treasury, the question o f the liens for
advances made to the various allied governments by the governments asso­
ciated in the war upon indemnities to be received from the enemy is one that
had best be discussed in Paris. I am, therefore, communicating the views o f
the British Treasury, as set forth in your letter, to Mr. Davis, asking him to
discuss the matter in Paris with the representatives of your Government and
the representatives of the other Governments concerned.
In the meantime I take pleasure in informing you that the United States
Treasury has advanced to the Czecho-Slovak Government $22,350,000, all of
which was advanced after November 11, 1918. The Treasury has not, however,
acted on the application for the $40,000,000 credit before mentioned.
I am, my dear Mr. Blackett,
Very truly, yours,
A lbert R a t h b o n e .
M arch

27, 1919.

[N ot by wireless.]
A m m is s io n ,

Paris.
For Davis from Rathbone. Treasury 924.
See our 921, paragraph 2.
First. British in reply to our letter (see par. 11, our 862) state character of
advances made or contemplated to be made by British Treasury to Servia since
date of armistice, and states opinion of British Treasury that all of its ad­
vances between date of armistice and date of peace should rank equally for
purposes of claims upon indemnity with any advances made by United States
to Servia, and, further, that all advances by United States or British to Servia
made before signature of peace should rank equally as a first lien on indemnity
and take precedence of any advances made after signature o f peace.
Second. Advising British (A ) its view apparently not in entire accord with
resolution of supreme economic council (see your 151, par. 3) ; and (B ) that
questions of liens on indemnities should be discussed in Paris (see our 780,
par. 4).
Third. French have informally stated no preference in respect of indemnities
awarded Servia should be given to advances made by associated governments
since armistice over French advances to Servia during war.
Fourth, British position regarding lien of advances to Servia apparently
not precisely same as its position regarding lien of advances to Belgium (see
our 780, 774, and 716), nor lien of advances to Italy (see our 901, par. 1).
A lb e r t R a th b on e,

Assistant Secretary of Treasury.

SECTION 23.
The United States Paid Great Britain Over $90,000,000 for the Transportation
of Our Troops March 27, 1919, when the Business-Like Thing to Have Done
Would Have Been to Credit Great Britain on Her Debt or Interest with
This Amount.
T reasu ry D epartm en t,

Washington, March 27,1919.
Memorandum for Mr. Rathbone:
I spoke to Gen. Hines to-day in regard to the amount due the British Gov­
ernment for transportation. He informed me that his latest figures show a
total amount due o f about $90,000,000, on account of which $35,000,000, roughly,



FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

45

has been paid, leaving $55,000,000 due for the transportation of troops. There
will also be a payment on account of cargo, but he does not estimate this at
more than $2,000,000 or $3,000,000. The final figures are now being compiled
by months and as the amounts are determined payment is to be made to the
British Government. I will make sure that we are currently kept informed
in regard to these payments.
G eorge O. M a y .
H o tel de C r il l o n ,

March 29, 1919.
--------- . 1. I have received advices to the effect that, at the request
of the British, French, and Italian Governments, the United States Treasury
Department is prepared to establish credits in favor of each of these Govern­
ments to the extent of $10,000,000 to each, for the payment of food purchased
in the United States, and used by these respective Governments, up until
September 1 next, for relief in Austria to prevent the further spread of anarchy.
2. In order to put this arrangement into effect and to secure payment from
Austria to the allied governments for this food supplied to Austria, the allied
governments are to make an agreement substantially along the following lines:
(a)
The Austrian Government will formally agree, and at once proceed to
proceed to place at the disposal of Great Britain, France, and Italy, the state
forests, salt mines, and certain other of its assets satisfactory to these countries.
(&) Great Britain, France, and Italy will undertake to supply GermanAustria with food commodities not to exceed $30,000,000 in all, which is the
estimated amount, at least, necessary to keep that country supplied until the
next harvest.
(c)
Up to the amount of $30,000,000, these advances to Austria will be a
first charge to be repaid before any reparation payments which the peace
treaties may require Austria to make.
3. The above credits are established upon the understanding that the Gov­
ernments of Great Britain, France, and Italy will apply the proceeds of any
funds received by them under this arrangement to the repayment of their
obligations incurred to the United States for the purchase in the United States
of foodstuffs supplied to Austria.
4. The funds so provided may be applied only for the payment of foodstuffs
transported and distributed under the direction of the supreme economic
council through the office of the director general of relief, and the allied com­
missions operating under his direction.
Very sincerely, yours,
D ear

United States Commissioner of Finance.
A true copy:
H e n r y C. B r e c k ,

Secretary to Finance Commissioner of United States.

SCHEME FOR THE REHABILITATION OF EUROPEAN CREDIT AND FOR FINANCING RELIES’
AND RECONSTRUCTION.
A p r i l , 1919.
1.
(i) German bonds to be issued to a present value of £1,000,000,000 and to
a face value of £1,200,000,000 carrying interest at the rate of 4 per cent per
annum and sinking fund at the rate of 1 per cent per annum as from January
1,1925, these payments to have priority over all other German obligations what­
ever, including additional claims for reparation not covered out o f the above,
the difference between the face value and the present value representing the
funding of interest from January 1, 1920, up to January 1, 1925.
(ii) Austrian, Hungarian, and Bulgarian bonds to be issued to the present
value of £125,000,000, £170,000,000 and £50,000,000, respectively, on similar con­
ditions. (N. B. Turkey to be dealt with separately.)
(iii) Rumanian,1 Polish, Czecho-Slovakian Jugo-Slav,1 and Baltic States
bonds to be issued to the present value of £15,000,000, £40,000,000, £20,000,000,
£15,000.000, and £10,000,000, respectively, on similar conditions.
1 Rumania and Serbia also to receive a share o f reparation.




46

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

2. Interest on each of the issues of enemy bonds under 1 (i) and (ii) above
to be guaranteed jointly and severally by the other enemy states, in the event
of any one of them failing to provide the payments due.
3. In the event o f the failure of the above guaranties, interest at 4 per cent
on all the above bonds to the aggregate present value of £1,500,000,000 (or
£1,800,000,000 as from January 1, 1925), to be guaranteed by the principal
allied and associated governments, by the three Scandinavian Governments, and
by the Governments of Holland and Switzerland.
4. In the event of the guaranty under (3) becoming operative, the guarantee­
ing Governments to be responsible in proportions determined in advance, as
set forth in the accompanying schedule A.
5. In the event of any of the guaranteeing Governments failing to meet
their guaranty, the remaining guaranteeing Governments to make good this
failure in the same proportions among themselves as under (4), but in no event
shall any one of such guaranteeing Governments be liable for more than double
its original proportionate share.
6. A failure of any Government to meet its guaranty under the above
clauses to be considered by the financial section of the League of Nations, and
if judged by them to have been avoidable shall be punished by such penalty
of forfeiture of a financial, economic, or commercial character as the League
o f Nations may determine.
7. The bonds to be free of all taxation in all the issuing or guaranteeing
States.
8. Of the £1,000,000,000 bonds to be issued by the German Government
£724,000,000 shall be paid to the allied and associated governments on account
of sums due for reparations; £76,000.000 shall be utilized for the discharge
of existing debts to the three Scandinavian countries, Holland, and Switzer­
land, and the remaining one-fiftli of the total, namely, £200,000,000 shall be
left in the hands of the German Government to be made available for the
purchase of food and raw materials.
9. Of the bonds amounting to £345,000,000 in all to be issued by the Austrian,
Plungarian, and Bulgarian Governments, four-fifths in each case shall be paid
over to the allied and associated governments on account o f sums due for repa­
ration, the remaining one-fifth being left in the hands of these Governments for
the purchase of food and raw materials.
10. The bonds amounting in all to a present value of £1,000,000,000 to be
received by the allied and associated governments on account of reparation
to be divided between them in the proportions determined upon by them for
the division of reparation receipts generally.
11. The bonds to be accepted at their par value plus accrued interest in
payment of all indebtedness between any of the allied and associated govern­
ments.
12. The bonds to be acceptable as firs-class collateral for loans at the central
banks of all the issuing or guaranteeing States, subject to such terms and
limitations as may be in force with these institutions from time to time.

Schedule A .

Per cent.

United Kingdom-------------------------------------------------------------------------------------United States___________________________________________________________
France---------------------------------------------------------------------------------------------------Italy_____________________________________________________________________
J a p a n ___________________________________________________________________
Belgium-------------------------------------------------------------------------------------------------Norway, Sweeden, Denmark, Holland, and Switzerland___________________

20
20
20
10
10
5
15

A m e r ic a n C o m m i s s io n to N e g o t ia t e P e a c e ,
H o te l de C r il l o n ,

Paris, April 1, 1919.
Mr. J. H . K e y n e s ,
Treasury Chambers,
London, S. W.
England.
D e a r K e y n e s : With reference to your letter o f March 18 relative to the
replacement order for pork, I do not see the necessity for your pursuing the
matter further unless it is ascertained that the replacement order has not been



FOREIGN LOANS AND AU T H O R IT Y FOR M A K IN G SAM E .

47

made in New York in accordance with the understanding. If this is not done
I assume that I shall hear something further about it and if so shall advise
you.
Sincerely yours,
N o rm an H . D a v is .

SECTION 24.
British Proposal to Have German Bonds Accepted at Par by All the Allies
as Payment of AH Indebtedness— New Credit Established.
A p r i l 2, 1919.
Dear Mr. B l a c k e t t :
I have received your letter of March 26, 1919, regarding further advances
to your Government from the United States Treasury beyond the undrawn
balance of the special credit established during December, 1918, in favor of
your Government by the Secretary of the Treasury, now amounting to
$24,323,824.75. I understand from our talks on the subject that the assurances
as to further advances which your Government now desires to receive will in
its judgment cover all the advances which it will require from the United
States Treasury other than for United States purchases as British share of
European relief, and it is on that understanding that I am replying to your
letter and setting forth the following arrangement which the United States
Treasury is prepared to make:
(1) For all future advances to your Government from the United States
Treasury, whether made from the undrawn balance of the special credit of
last December or otherwise, your Government will give its demand obligations,
payable in dollars, or at the option of the holder in sterling at the cable buying
rate on the New York market at noon of the day o f demand [as fixed (deter­
mined) by the Federal Reserve Bank of New York.]
(2) Your Government will from time to time, at the request of the Secretary
of the Treasury, and on such dates as he shall request, deposit sterling to the
credit of the Treasurer of the United States, or to the credit of such other
person as the Secretary of the Treasury shall indicate, with the Bank of Eng­
land or with such other depositary or depositaries as the Secretary of the
Treasury may indicate up to £55,000,000 sterling.
(3) For sterling so deposited at the request of the Secretary o f the Treasury
your Government is to receive in payment thereof either, as the Secretary of
the Treasury may elect:
(a)
Dollars credited to your Government at the Federal Reserve Bank of
New York at the sterling cable buying rate on the New York market at noon
of the day of deposit of such sterling as fixed by the Federal Reserve Bank of
New York, or
(&)
The surrender of obligations of your Government then held by the
United States to the representatives of your Government in Washington or
New York, or appropriate notation thereon of payment on account o f the
principal of any such obligations if not fully paid, such surrender or notation,
as the case may be, being regarded as equivalent to due demand of payment
of the principal of the obligation surrendered or of the part o f the principal
set forth in any such notation as of the date of such deposit of sterling; the
accrued interest on any such obligation so surrendered or upon the portion
of the principal thereof set forth in any such notation to be paid in dollars
simultaneously with the surrender thereof or the making of such notation
thereon, as the case may be, by the deposit of the amount of such interest to
the credit of the Treasurer of the United States with the Federal reserve bank
of New York.
(4) To represent the interest which shall become due during April and May,
1919, on obligations of your Government now or hereafter held by the United
States, except interest on such of said obligations as shall be surrendered
or upon which notation of partial payment shall be made, in payment for
sterling deposited as above provided, the Secretary of the Treasury will ac­
cept demand obligations of your Government bearing 5 per cent interest and
payable in dollars or at the option of the holder in sterling at the buying
rate on the New York market at noon of the day of demand as fixed by the
Federal Reserve Bank of New York. It would be intended by the Secretary
of the Treasury to use these obligations after their receipt for the payment
of sterling thereafter furnished at the request of the Secretary of the Treasury




48

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

with the view of having such obligations paid in full in this manner at the
earliest practicable time.
(5) The Secretary of the Treasury will from time to time establish credits
in favor of your Government in the aggregate amount of $150,000,000, in ad­
dition to the unexpended balance of $24,323,824.75, to be availed of from
time to time against obligations of your Government in a corresponding amount,
to such extent and for such purposes as shall be approved by the Secretary
of the Treasury. Said amount of $150,000,000, whether before or after its
establishment in wrhole or in part as an additional credit, and said unex­
pended balance of the credit heretofore established, are to be reduced by the
following amounts:
(6) All dollars paid after March 26, 1919, for sterling deposited by your
Government at the request of the Secretary of the Treasury;
(&) All amounts paid after March 26, 1919, under the agreements mentioned
in your letter of March 26, 1919, covering transportation of troops and cargo
for the United States Government and for the sale of Australian wool,
and. all other amounts paid after March 26, 1919, in dollars by the United
States Government or any department or agency thereof to the British Gov­
ernment or to any department or agency thereof in the settlement or partial
settlement of claim s;
(c) The amounts at which all gold delivered after March 26, 1919, to the
Secretary of the Treasury, pursuant to the arrangement set forth in Lord
Reading’s letter of May 28, 1918, shall be received by the Treasury; and
( d) The amount of all dollars paid in reimbursement after March 26, 1919,
to the British Government by other Allied Governments, except to reimburse
payments made after March 26, 1919, by the British Government for such other
Governments with the approval of the Secretary of the Treasury.
(6) To the extent that any payments of the character mentioned in (a ),
(&), (c) and (d) o f paragraph (5) shall be received by the British Govern­
ment after the credits hereinbefore mentioned shall be availed o f such amounts
shall forthwith be paid by the British Government to the Secretary of the
Treasury, to be by him applied toward the payment of the principal of obliga­
tions of the British Government held .by the United States.
(7) At the election o f the Secretary of the Treasury the British Treasury
will accept obligations of the British Government held by the United States, or
appropriate notation thereon of payment on account of the principal thereof,
at par in payment o f all claims of the British Government or any department
or agency thereof against the Government of the United States or any depart­
ment or agency thereof. If payment of any such claim is to be made in sterling
obligations of the British Government payable only in dollars, or notation
thereon as aforesaid accepted in payment of such claims, will be accepted in
Washington or New York as the equivalent of sterling at the cable buying
rate on the New York market at noon of the day of surrender or notation, as
the case may be, as fixed by the Federal Reserve Bank of New York. The
accrued interest on all obligations, or upon the portion of the principal thereof
set forth in any such notation accepted in payment of any such claims, is to be
paid in dollars simultaneously with the surrender thereof or the making of
such notation, as the case may be, by the deposit o f the amount of such
interest to the credit of the Treasurer o f the United States with the Federal
Reserve Bank of New York.
I understand that the foregoing arrangement has been accepted by your Gov­
ernment, and shall be glad if you will accordingly confirm the same.

SECTION 25.
The United States Loaned England Money to Take Care of Her Share of
European Relief.
A p r il

2, 1919.

(Not by wireless; charge to Treasury Department.)
A m e r ic a n M is s io n ,

Paris.
(For Davis from Glass. Treasury 943.)
First. Unexpended balance of credit in favor o f Russian Provisional Govern­
ment in amount of $137,270,250 has been withdrawn with authority of President
heretofore given.



FOREIGN LOANS AND A U T H O R IT Y FOR M AK IN G SAM E.

49

Second. British credits authorized by President but not yet established ap­
proximate two hundred million.
Third. Unexpended balance of British credits heretofore established approxi­
mate twenty-four million.
Fourth. British estimate cash requirements during April substantially one
hundred twenty-five million, exclusive interest payment due United States that
month, about fifty-six million.
Fifth. Discussing with British establishment o f further credit of between
one hundred and fifty million and two hundred million, and in addition to
arrange method to take care of their interest payments to United States during
April and May, approximating eighty million, by establishment of additional
credit or otherwise. Proposing that new credits established are to be reduced
by amounts of sterling furnished us, gold received under Pitman silver ar­
rangement, w ool payments, and charge for transportation of troops paid to
T
British Government and possibly certain dollar reimbursement from allied
governments.
Sixth. Treasury obligated to establish additional credit in favor of British
to care for its United States food purchases made to furnish British share of
European relief. See paragraph 7 our 921.
Seventh. Please obtain President’s approval to my establishment of further
credits to British beyond amounts previously approved by him up to one
hundred fifty million. Cable when such approval obtained and forward ap­
proval by mail.
Eighth. Do not commit Treasury to above arrangement with British, as details
affecting amounts, etc., are being worked out here with Blackett.
Secretary of the Treasury.

SECTION 26.
New Agreement on British Credits.
A p r il

14, 1919.

D ear M r . B l a c k e t t :

I have received your letter o f March 26, 1919, regarding further advances
to your Government from the United States Treasury beyond the undrawn
balance of the special credit established during December, 1918, in favor of
your Government by the Secretary of the Treasury, which on the date o f your
letter amounted to $24,323,824.75.
~ince the date of your letter substantially all of said credit balance has been
advanced to your Government against its obligations payable in dollars or at
the option of the United States in sterling at the cable-buying rate on the New
York market at noon of the day of payment, as determined by the Federal Re­
serve Bank of New York. In addition, a further credit was established in
favor of your Government on April 9, 1919, in the amount of $20,000,000, all
of wiiieh has been advanced to your Government against its obligations in like
form as those last mentioned. It was intended when this credit was established
that it should form part of a larger arrangement which has now been perfected
and made, for convenience as of March 26, 1919, and this $20,000,000 is to be
considered as included in said larger arrangement.
I have now received through you the estimate of the British Treasury that
its requirements for dollars in the United States through the month of June
next, exclusive of the amount of interest due on the obligations of the British
Government held by the United States, will approximate $250,000,000.
The arrangement herein set forth is designed to take the place of any exist­
ing commitments of the United States Treasury to establish credits in favor
of your Government. The following is my understanding of the arrangement
which has been made and I shall be obliged if you will be good enough to
confirm it:
First. For all future advances to your Government from the United States
Treasury'your Government will give its demand obligations, payable in dollars,
or, at the option of the holder, in sterling at the cable-buying rate on the New
York market at noon of the day o f demand, as determined by the Federal
Reserve Bank of New York.
S. Doc. 86, 67-2------ 4




50

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

Second. Your Government will from time to time, at the request of the Sec­
retary of the Treasury, and 011 such dates as he shall request, deposit sterling
to the credit of the Treasurer of the United States, or to the credit of such
other person as the Secretary of the Treasury shall indicate, with the Bank of
England or with such other depositary 01* depositaries in the United Kingdom
as the Secretary of the Treasury shall designate, up to £55,000,000 sterling.
Third. For sterling so deposited at the request of the Secretary of the
Treasury your Government is to receive in payment thereof either, as the Sec­
retary of the Treasury shall elect, (« ) dollars credited to your Government
at the Federal Reserve Bank of New York at the cable-buying rate for sterling
on the New York market at noon of the day of deposit of such sterling, as fixed
by the Federal Reserve Bank of New York; or (b) obligations of your Govern­
ment then held by the United States at par of principal, either surrendered to
representatives of your Government in Washington or New York, or indorsed
with appropriate notation showing payment on account of principal if not fully
paid; such surrender 01* notation, as the case may be, being regarded as the
equivalent of due demand of the payment of the principal of the obligations
surrendered or of a part of the principal set forth in any such notation, as o f
the day of such deposit of sterling. Accrued interest up to the date of such
deposit of sterling 011 any such obligations so surrendered or upon the portion
of the principal thereof set forth in any such notation, to be paid by your Gov­
ernment in dollars simultaneously with the surrender of such obligations or
the making of such notation thereon, as the case may be, by the deposit o f the
amount of such interest to the credit of the Treasurer of the United States with
the Federal Reserve Bank of New York.
Fourth. The Secretary of the Treasury will from time to time establish
credits in favor of your Government in the aggregate amount of $200,000,000
(the $30,000,000 credit established in favor of your Government on April 9,
1919, to be deemed a part of said credit of $200,000,000) to be availed of from
time to time against obligations of your Government in a corresponding amount,
at such times as shall be approved by the Secretary of the Treasury. The
aforesaid obligation of the Secretary of the Treasury to establish credits in
favor of your Government is subject to reduction as hereinafter set forth.
Fifth. Your Government has received dollars since March 26, 1919, and may
in the future receive dollars from the following sources :
(a) In payment for sterling deposited by your Government at the request
of the Secretary of the Treasury;
(b) Under the agreements mentioned in your letter of March 26, 1919,
covering the transportation of troops and cargoes for the United States Govern­
ment, and for the sale of Australian wool, and through other payments by the
United States Government or certain of its departments or agencies to the
British Treasury, in settlement or partial settlement of claim s;
(c) From the United States Treasury for gold delivered to the Secretary
o f the Treasury pursuant to the arrangement set forth in Lord Reading’s letter
o f May 28, 1918;
(d) From certain allied Governments in settlement of claims of the British
Government for dollar reimbursement.
All dollars received by the British Government from any of such sources in
excess of $50,000,000 and exclusive of (1) dollars received in reimbursement
from other allied Governments for payments made after March 26, 1919, by
the British Government for such other Governments, with the approval of the
Secretary of the Treasury; and (2) dollars received by the British Treasury
which are essentially reimbursements of sums spent by it prior to April 6,
1917; shall, if the Secretary of the Treasury shall so request, be forthwith
paid by the British Government to the Secretary of the Treasury, to be by him
applied and as he shall determine toward the payment of the principal of or
interest upon obligations of the British Government held by the United States,
or in case the Secretary of the Treasury shall so determine, from time to time
such amounts may be retained by the British Government and the Secretary of
the Treasury in such event may in his discretion reduce by a corresponding
sum his commitment under this arrangement to establish credits in favor of
the British Government.
Sixth. The Secretary of the Treasury may, at his option, reduce his com­
mitment to establish credits in favor of your Government under this arrange­
ment by the sum of $43,750,000, or such portion thereof as the Secretary of the
Treasury shall deem fair, in the event of the failure of the British Government
to reach an agreement with the Grain Corporation regarding the delivery of and




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

51

payment for tlie 100,000,000 bushels of wheat purchased of the Grain Corpora­
tion by tlie Wheat Export Company for account of the British, French, and
Italian Governments.
Seventh. At the election of the Secretary of the Treasury the British Gov­
ernment will accept its obligations held by the United States, or appropriate
notation thereon of payment on account of the principal thereof, at par in
payment of all claims of the British Government or any department or agency
thereof against the Government of the United States or any department or
agency thereof. If payment of any such elaims is to be made in sterling,
obligations o f the British Government payable only in dollars, or notation
thereon, as aforesaid, accepted in payment of such claims, will be accepted in
Washington or New York as the equivalent of sterling at the cable buying rate
on the New York market at noon of the day of surrender or notation, as the
case may be, as determined by the Federal Reserve Bank o f New York. The
accrued interest on all obligations, or upon the portion of the principal thereof
set forth in any such notation, accepted in payment of any such claims will
be paid by the British Government in dollars simultaneously with the sur­
render of such obligations or the making of such notation thereon, as the case
may be, by the deposit o f the amount of such accrued interest to the credit
of the Treasurer of the United States with the Federal Reserve Bank of New
York.
Eighth. The existing credit balance in favor of your Government in the
amount of $323,824.75 is to be withdrawn.
I appreciate that this arrangement does not fully assure your Government
of the provision for all its estimated requirements for dollars through June,
1919. The Secretary of the Treasury does not, however, feel that so far in
advance he could properly assure your Government of the establishment of
credits in its favor to meet all of said requirements. However, under the
arrangement as made the Secretary of the Treasury will have authority in the
light of the circumstances as they may then exist to permit, if he shall then
so determine, the use of dollars accruing to your Government from any of the
sources mentioned to meet the dollar requirements of your Government in the
United States. However, if after the credits assured your Government by the
arrangement set forth have been availed of your Government desires to apply
for a further extension of credit in its favor any such application will receive
the careful consideration of the Treasury. I should, however, point out in this
connection that such credits can not, except for the limited purposes set forth
in the Victory Libery Loan Act, be established after the termination of the
war, and further that the limitations of the appropriation provided by the
Congress may make it impossible for the Secretary of the Treasury to estab­
lish either before or after the termination of the war credits in favor of your
Government in addition to those provided for in the foregoing arrangement.
I am, my dear Mr. Blackett,
Very truly, yours,
A lb e r t R a t h b o n e .

Mr. B a s i l P. B l a c k e t t ,
23 Wall Street, New York City, N. Y.

SECTION 27.
United States Loaned a Total of $16,000,000 Each to Great Britain in France
and Italy for Foodstuffs to Be Sent to Austria. These Loans Were Made
in This Way to Circumvent the Acts of Congress. Thus $48,000,000 of the
American People’s Liberty Loan Money, Raised to Prosecute the War, Was
Loaned for the Aid and Comfort of Our Enemy Austria.
A p r il

23, 1919.

S e c r e t a r y of S t a t e ,

Washington, D. < .
7
(1755. April 23, 11 p. m.)
D-241. For Rathbon. One. Reference your 963, paragraph one.
I quote herewith reply received from Keynes to my letter of March 29 in
regard to the $30,000,000 Austrian relief credit:
“ I have submitted to Sir John Bradbury your letter of 29th March in which
you state the conditions on which the United States Treasury Department is




52

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

prepared to establish credits in favor of tlie British, French, and the Italian
Governments to tlie extent of $10,000,000 to each for the payment of food pur­
chased in the United States and used before September 1 next for relief in
Austria. Sir John Bradbury authorized me to transmit to you the acceptance
of these conditions by the British Treasury subject to the two observations:
One, that as you are aware no formal agreement on the proposed lines has yet
been made with the Austrian Government and that the olTer of the United
States Treasury would not, according to our understanding, fall through if for
any reason our best effoits fail to secure an agreement precisely in the form
indicated; and, tw o : As regards paragraph 8 of your letter, that the funds
received by us in repayment from Austria may not necessaarily be dollars or
readily convertible into dollars and that, according to our understanding, we
shall not be required to reply unless and until we ourselves receive payment in
a form readily convertible into dollars.
“ I take this opportunity to say with reference to ]\Ir. Hoover’s proposal that
our loan of .$10,000,000 to Austria should be increased to $15,000,000, and that
the chancellor of the exchequer has signified his approval to this proposal (the
additional $5,000,000 to be taken as was the case with the original $10,000,000,
out of our apportionment of £12,500,000 for relief) subject to France and Italy,
also agreeing to a similar increase and subject to the United States Treasury
agreeing to apply the arrangement set forth in your letter now under reply to
the increased figure of $15,000,000.
“ I. M . K e y n e s .”

2. Hoover now estimates that it will require $15,000,000 additional to care
for Austrian relief until next crop and I therefore recommend that an addi­
tional credit of $5,000,000 to each England, France, and Italy, a total of
$15,000,000, be established on the same condition as the $30,000,000 credit.
Please [advise] immediately about this.
3. Referring to Keyne’s letter, paragraph 2, subsection 2. I suggest that you
authorized me to inform the British that their proposal is accepted with the
understanding that our Treasury shall have the option of accepting repayment
from the British either in dollars or at our option in whatever funds Austria
may use to pay England, should the British consider it impossible to convert
these readily into dollars.
D a vts ,

American Mission.
A

p r il

23, 1919.

D ear M r. B la c k e tt :

Have you been able to obtain figures showing the advances of the British
treasury to Italy for its purchases without the British Empire during the
period from July 1 to December 31, 1918, both dates inclusive? I expect very
shortly to receive from Mr. Alliata the final figures of Italian purchases in
neutral countries chargeable against the credit for such purchases established
by the United States Treasury in favor of the Italian Government during
the year 1918. I f both sets of figures can be obtained it should be possible to
dispose of the claims of the British treasury against Italy for dollar reim­
bursement on account of British advances for Italian neutral expenditures
during the period mentioned. I should be glad to get this matter out of the
way, and I assume that you would also.
Very truly yours,
A lbert R a t h b o n e .

P. B l a c k e t t .
23 Wall Street, New York, N. Y.

M r. B a s i l

P a r is ,

May 2, 1919.

S e c r e t a r y of S t a t e ,

Washington.
(D-269. For Rathbone. Reference your 1005.)
President has approved establishment of additional credits of $5,000,000
to each of the governments of Great Britain, France, and Italy. These credits
to be used for the purchase of food in the United States and supplied by them
for the relief of Austria. Formal letter being forwarded to Secretary of
Treasury.




D a v is .

American Mission.

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.
[2 GOO.

June 16, 8 p. m.

D -346.

For Rathbone.

53

One.]

S e c r e t a r y of S t a t e ,

Washington.
According to estimates estimate now supposed to be final, tlie $45,000,000
already provided for Austrian relief by the establishment of credits of
$15,000,000 to each England, France, and Italy, will fall short by approximately
$3,000,000 of completing the Austrian relief program until harvest. I recom­
mend the establishment of an additional credit of $1,000,000 in favor of each
England, France, and Italy, upon the same terms and conditions as the credits
aggregating $45,000,000 already established for Austrian relief. This entire
$48,000,000 credit will be used exclusively for dollar expenditures. Additional
expenditures for supplies, freights, and expenses, which now represent dollar
expenditures, will be met by England, France, and Italy from their own
resources.
Two. Relief administration is completing accounts as to expenditures so far
incurred, and I shall furnish this to you within a few days.
D a v is ,

American Mission.

SECTION 28.
All Advances for Relief and Reconstruction to Have Priority of Payment.
[Paraphrase o f a cablegram from the American Mission at Paris, France, dated Apr. 30,
1919, at 8 p. m., received May 1 at 3 03 a. m „ No. 1878.]

The following is for Rathbone, No. D -261:
1. Reference is made to the third paragraph o f my No. D-151 and the fourth
paragraph of my No. D-199, and I have to report that on the 14th day of April
this resolution was referred to the Supreme Economic Council for more definite
interpretation and referred back to the finance section with full power to in­
terpret and act. The following is the act of the finance section of April 24:
“ It was agreed: (1) That all advances made to those countries, namely, the
advances detailed in the resolution of the Supreme Economic Council during
that armistice for reconstruction and relief shall be entitled to such priority.
(2) By relief must be understood all advances for raw materials, clothing,
drugs and hospital supplies, and railway material; reconstruction includes the
provision of such things as horses, lubricating oil, leather belting, vehicles, and
other transportation means not required for military purposes, but reconstruc­
tion does not include miscellaneous articles of industry. Reference must be
made to the finance section of all doubtful cases, as for example in certain cir­
cumstances the provision of machinery for purposes of agriculture before they
can be included in the categories of reconstruction and relief. The right was
reserved by Mr. Collier to bring up at a later date the matter o f extending the
definition of relief.”
2. With reference to your Nos. 947 and 924, the first and fourth paragraphs
thereof, and paragraphs two and three of my No. D-199, I have to state that
the action stated above settles any doubt as to the position of Great Britain.
Refer to my No. 212 and paragraph four of my No. 240 and note that Belgium
is included in the list of countries whose payment for reparation and indemnity
are subject to this lien. It should also be noted that the advances made be­
tween the date of tlie armistice and the 1st of February are included. The
matter has again been mentioned to Keynes, who agrees to make it clear to the
treasury of Great Britain.
3. With reference to the third paragraph of your No. 924 and the third para­
graph of my No. D-199, it is admitted by the French that this priority is now
settled. The reservation made by them above might accompany report by more
detailed definition of the terms o f relief and reconstruction. *
4. The minutes of the meetings at which this action was taken wT confirm
ill
this cable.




D a v is ,

American Mission.

54

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

SECTION 29.
The Belgian Account for the Commission for Relief in Belgium.
B r it is h W ar M is s io n ,
O f f ic e of t h e B r i t i s h T r e a s u r y R e p r e s e n t a t iv e ,

New York City, May 5, 1919.
The Hon. A l b e r t R a t h b o n e ,
% of The Federal Reserve Bank,
New York City.
D e a r M r, R a t h b o n e : Referring to your letter of April 16 regarding the
British Government’s claim for dollar reimbursement on account of Belgian
relief expenditure, I have now received from the treasury, London, further
information as requested in your letter, which will I hope enable the final
disposition of these claims now to be made.
(1) Wheat Commission claims for flour, beans, etc.—I am informed that
of the total claims of $4,837,959.58 the amount which refers to the crop year
1917-18 is $1,278,475.01. As this amount is less than the figure of $l,68i.000
mentioned in your letter I assume that no further question will arise as re­
gards this claim.
(2) Value of specified articles in 20,000,000 rations.— I have pleasure in con­
firming your assumption that the specified articles referred to represent
American food products contained in the rations and computed at the f. o. b.
values at American ports as specifically approved on behalf of the United States
Treasury before the rations were issued.
(3) Ministry of Shipping claims for expenditure in the United States of
American port dues, etc.— A full schedule is being mailed to me showing the
sums recoverable. As regards that part of the services which was rendered in
1917, if the claim had been promptly paid by the Commission for Relief in
Belgium it would necessarily have been paid for out of the dollar funds of the
Commission for Relief in Belgium as at that time the United States was
financing all the expenditure of the Commission for Relief in Belgium. The
fact that there has been delay in payment does not appear to modify the
principle on which the claim is justified.
(4) Boots, cotton, etc., items.—The item $476,500 for cotton material and
hosiery, etc., subsequent to the German retreat was specifically agreed to on
behalf of the United States Treasury before the goods were supplied. All the
other cases of supply were approved on the specific condition that they should
be paid for by dollar transfers by the Commission for Relief in Belgium
and it appears to the British treasury that it is only just that the commission
should now carry out its undertaking. For example, on February 12, 1918,
in response to a most urgent application, the approval of the British treasury
was given for an expenditure on boots in the following fo rm :
“Approved on the condition that the Commission for Relief in Belgium trans­
fer dollars equivalent to £150,000 out of their United States funds to the British
treasury account with Morgans in New York. At a time when we are import­
ing leather from the United States the above is clearly a proper claim on
American funds.”
(The actual expenditure on boots in this case appears
eventually to have been somewhat less than originally approved.)
(5) Ministry of Food services prior to 1918.—This claim for $176,251.51 rep­
resents supplies of fish made to the Commission for Relief in Belgium during
1917, which, if promptly paid for, would necessarily have been paid for in
dollars as the United States was at that time financing all the expenditure of
the Commission for Relief in Belgium.
I am, dear Mr. Rathbone,
Yours, sincerely,
B a s il P . B la c k e t t ,

For the Financial Secretary to the Treasury.
MEMORANDUM REGARDING BELGIUM RELIEF CLAIMS— MR.
MAY 5, 1919.

BLACKETT’ S LETTER OF

Claim No. 1. Wheat commission claims for flour, beans, etc., appears to be
in order.
Claim No. 2. Value of specified articles in 20,000,000 rations also appears to
be in order.



FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

55

Claim No. 3. Ministry of shipping claims for expenditure in the United States
of America port dues, etc., should await receipt of full schedule and information
from the commission for relief in Belgium as to whether expenditures of
American vessels in Europe are met from their dollar resources or from other
resources. See our letter of April 10.
Claim No. 4. Boots, cotton, etc., items: There does not appear to be any
record of the approval of the item of cotton material and hosiery by the Treas­
ury in New York and Mr. Cook states that he is satisfied it was not approved in
London. In this connection, Mr. Crosby cabled on December 31, stating that
the request had been referred to him, and positively recommending that it
be not allowed. As regards the other items, while the approval by the British
Treasury may have been given on specific conditions, there is no evidence that
such conditions were assented to by the United States Treasury and, therefore,
these claims would also seem to fail. Mr. Cook suggests that we secure from
Mr. Poland, through Mr. Rickard, some further information in regard to the
claim for boots.
Claim No. 5. Ministry of food services prior to 1918. There is nothing to
indicate that this is a claim arising from the United States, and in view of
this fact and of its age the claim should be disallowed.

SECTION 30.
Suggestion for Cancellation of Debts, July 25, 1919.
L o n d o n , July 25, 1919.
: Inclosed is confirmation of a cable which I sent you
through Ambassador Davis, in the embassy code, and which may astonish you
a b it; so I am writing you an explanation.
After talking with the officers of the Bank of England and with a very able,
intelligent, and thoroughly reliable newspaper man named Kiddey whom Nor­
man invited to his house for dinner for the purpose, and after talking yester­
day with the chancellor, I am convinced that the immediate task now ahead
of us which will help conditions over here more than anything else is to get
some sort of a definition of the terms of the debt of the allies to the United
States, and particularly of the British debt. I shall not attempt to repeat
conversations in detail, but there is undoubtedly in existence here a latent
underlying feeling that the allies have made the great and most vital sacrifices
in the war, both of men and finance and in material damage suffered; that our
sacrifices have been slight and our profits immense, and that the existence
of this great debt due on demand is a sword of Damocles hanging over their
heads.
The premium on dollars, now increasing so rapidly, gives them a feeling
of great concern as to how they are to meet the interest payments, particularly
this fall when they feel matters will more or less reach a crisis, without pay­
ing so heavy penalties as to be embarrassing and humilating, and to con­
template going into the market to raise $100,000,000 in exchange, at present
rates and under present conditions, is really a cause of great anxiety.
I saw the chancellor yesterday under the following circumstances: Tuesday
night Gov. Cokayne had a meeting with him and told him I was here, and he
sent word to me through Gov. Cokayne that he hoped I would be sure and
see him before leaving for Paris and finally made an appointment for 4 o’clock
yesterday (Thursday, the 24th). We had a chat of about an hour and a
quarter, much of the time merely discussing matters of mutual interest, such
as our program and theirs, taxes, reconstruction, etc. I have made no sug­
gestions nor have I in any way disclosed our views or feelings except to state
that England and the United States must in some way preserve good relations
and work together; that the means must be found to overcome the difficulties
in the way of getting investment money from America to help proper recon­
struction work, and that now that the treaty with Germany is formulated it
might be well for these discussions to take place at Washington with thor­
oughly responsible people there for the purpose. I did point out how important
it was that Great Britain should be well represented at the Embassy in Wash­
ington when Reading’s place is filled, and how important it was that we
should both be well represented on the Reparations Commission. As to the
latter, he assured me that if the man to whom the position had been offered
D ear L e ffin g w e ll




56

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

would accept it we would be thoroughly satisfied. He made no reference to
a definition of the terms of their debt to us until about as I was leaving it
came up in a response to my inquiry as to whether there were any pending
tangles between the financial departments of the two Governments that were
unadjusted and causing difficulty. This led him to remark that as to the
debt he thought it would be improper for the debtor to approach the creditor
with proposals.
You may be sure of my discretion in discussing these matters with him, or
with anyone else, but I can see the need of prompt treatment of this matter.
Possibly you will consider that I have changed my views because I recall stat­
ing to you that I did not think it was our duty to approach the debtor. In that
I believe I was wrong.
I gather by implication that there is a feeling here that we should try and
have some cancellation of debt all around. It was too indefinite for nre to
suggest any particulars, and it is hard to say how such a cancellation could
take place without an actual reduction in indebtedness due us, wiiich is not to
be contemplated, in my opinion.
I am sending this letter in the embassy pouch. It is quite informal and con­
fidential, but I thought you would like to have a line on how things are going.
On arriving I found that the Bank of England expected me to make my office
with them while in London, and my old friend Norman took me right to his
house, where I have been staying since arrival. They have made me feel most
at home, and there is the keenest possible desire that in every way relations
between America and England should be strengthened. In a sense it is pa­
thetic. Englishmen have betrayed so little of that sort of thing in the past and
it emphasizes their need at the moment.
The whole German gold matter is held up until I see Hoover in Paris, and
there is nothing to report on that.
The coal strike at York of which you doubtless see much in the newspapers,
has some quite serious aspects. The difference is over adjustment of piece­
work, in which the Government seenrs to have played a rather stupid part, but
the younger mine workers have broken away from their older leaders and are
making rather unreasonable demands.
One serious development is the use of the strike for political purposes, the
so-called “ Triple A lliance” of labor unions at a meeting now being held pro­
posing frankly that the strike be used to force the discontinuance of conscrip­
tion and the withdrawal of troops from Russia.
The picture of the situation here, as I gather it from only a fewTdays’ visit,
is really distressing alongside of our situation at home, and naturally one’s
sympathies are aroused. I can not believe, and so far have received no evi­
dence to justify the belief, that any such condition exists as Vanderlip pictured
on his return.
There is not time now to write you as full an account of some of these mat­
ters as I would like to, but when I reach Paris there will be, and I will write
you through the embassy at length.
With warmest regards to all in the Treasury, and particularly your good self,
Faithfully, yours,
B en R . S tr o n g .

Hon. R. C. L e f f i n g w e l l ,
Treasury Department, 'Washington, D. C.
[N ot by wireless.]
T r e a s u r y D e p a r t m e n t , July 31, 1919.
For S t r o n g from Leffingwell (Treasury 1170),
Admission, Paris.
Your T 1 received. Treasury is ready to discuss funding demand loans
whenever the British Government desires to take the matter up. This the
British Government knows. It has had neither ambassador nor high commis­
sioner here “for months. There is nothing that the American Treasury can do
about the matter. If British bankers are worried why don’t they get their
Government to act. I do not understand that the British Government shares
any fear that there will be difficulties on account of interest payments in
autumn.
R. C. L e f f i n g w e l l ,
Assistant Secretary of the Treasury.




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E .

57

SECTION 31.
The United States Loaned Money to England and France, and They Made
Loans to Belgium for Rehabilitation on Condition That No Purchases
Should Be Made Out of the Money So Loaned in the United States.
AGREEMENT BETWEEN THE BRITISH, FRENCH, AND BELGIAN GOVERNMENTS RELATING
TO THE EUROPEAN EXPENSES OF THE COMMISSION RAVITAILLEMENT BELGE.

(1) The British and French Treasuries undertake to make a loan for the
purposes of the relief commission up to an amount not exceeding £1,500,000
per month. Of the actual expenses of the commission one-third will be borne
by the French Government as representing the expenses in Northern France
and the remaining two-thirds will be advanced by the British and French
Governments to the Belgian Government in equal portions to cover the cost of
relief in Belgium.
(2) The control of the expenditure out of this loan will be centralized in
London through the C. I. R. and items of expenditure by the relief commission
will only be chargeable against this loan if they have received the previous
approval of the representatives of the British and French Treasuries.
(3) Such approval will be given subject the following understandings:
(a)
No purchases of commodities obtainable from the United States or em­
ploying raw material obtainable from the United States will be paid for out
of the loan furnished by the British and French Governments.
(&) Permission to purchase in neutral countries with which there are ex­
change difficulties will not be guaranteed and must be subject to the financial
situation from time to time.
(c) The ration of food or clothing will be subject to revision from time to
time by agreement between the French and British Governments, according to
circumstances and to the advice given by the blockade ministries of the two
Governments.
( d) Due*account will be taken of the question of the total supplies of any
commodity available for the Allies as a whole and of the available tonnage.
(4) The above arrangements will take effect from January, 1918. In the
event of the above figure of £1,500,000 monthly proving insufficient, the question
of the monthly amount will be immediately reopened.

SECTION 32.

British Proposed to Defer Payment of Interest.
N e w Y o r k , August 29, 1919.
The Hon. A l b e r t R a t h b o n e ,
Treasury Department, Washington, D. C.
D e a r M r . R a t h b o n e : I have pleasure in placing informally before you the
following general statement in regard to the commitments and liabilities of
the British Treasury in the United States at the present time. The figures
which I shall give are based on the following assumptions:
1. That by some means or other the British Treasury will be relieved o f the
necessity of paying interest this year on its debt to the United States Treasury.
2. That it will be unnecessary for the British Treasury to make any appre­
ciable reduction in the volume of treasury bills outstanding.
3. That it will be possible to make arrangements to refund on the market
publicly issued bonds maturing on November 1.
I f any of these assumptions are falsified by events the difficulties of our
position wrill be proportionately aggravated. The British Government is al­
ready committed or practically committed to a program involving the pur­
chase of wheat and hog products in the United States between now and the
end of December to the value of approximately $250,000,000. In addition : t
‘
has prospective purchases to make in Canada. For all these purchases it is
at present finding the necessary dollars across exchange, and its policy is to
continue this as long as practicable. It is, however, the general opinion that
if the whole burden of these purchases is thrown on exchange, sterling may
become unsaleable in New York, a contingency which has almost been realised
within the last few days. In addition approximately $110,000,000 are re­




58

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E .

quired to meet tlie British Government’s direct war liabilities, including sugar,
and it requires some $20,000,000 to meet interest on public issues during the
remainder of 1919. This makes a total of $380,000,000 required between now
and tlie end of December as a minimum.
It does not appear to be safe to hope that more than $130,000,000 can be
found over the exchange under present conditions. If it be assumed that as
much as $130,000,000 can be found over the exchange there will remain at
least $250,000,000 to be provided by some other means. Our present balance
is something under $50,000,000,«so that at least $200,000,000 have to be looked
for from some source other than our existing balances and purchases of ex­
change.
I am, dear Mr. Rathbone,
Yours, sincerely,
B a s i l P. B l a c k e t t ,
British Treasury Representative.

SECTION 33.
British Claims for Relief in Belgium Allowed.
Septem ber

4, 1919.

The United States Treasury has, through its representa­
tive, Mr. May, been discussing in London the claims of the British Government
for reimbursement in respect of Belgian relief.
The following claims of the British Treasury for reimbursement appear to
be w'ell founded, and, therefore, provided the C. R. B. regard these claims for
reimbursement as valid, the United States Treasury, if requested so to do by
the Belgian Government, is prepared to establish credits to the extent that may
be necessary in favor of that Government, and at such time or times as may
be arranged to make advances from credits so established to it for the purpose
of enabling tlie payment of a corresponding amount to the C. R. 'B. so that
it can make necessary reimbursement in dollars to the British Treasury not
exceeding tlie net amount of $7,376,649.25 in settlement of the claims hereafter
mentioned:
Royal Commission, claim on wheat supplies____________________ $4, 256, 650. 62
Ministry of food, for bacon and lard____________________________ 1, 611, 545. 61
Claim 04809 for________________________________________________ 3, 204,107. 42
and for (as part of tlie authorization for 20,000,000 rations
furnished by the British Army, said amounts representing
the f. o. b. values of American goods included in such
rations) ________________________________________________
90,146. 36
Claim 03800 for biscuits, really part of the claim in connection
with rations_________________________________________________
381, 252. 04
D e a r M r. R i c k a r d :

Tlie aggregate of these claims is_______________________
From wliich, however, there should be deducted the sum o f______

9, 543, 702. 05
2,167,052. 80

Counterclaim of the C. R. B. for charter hire against the
British Government, leaving a balance o f______________ 7, 376, 649. 25
There is a further claim for lard supplied by the Ministry of Food at the
same time as the 20.000,000 odd rations, apparently under a misapprehension
that it was covered by that authorization. Although this claim is based on a
relief authorization, in a measure it covers supplies not handled by the C. R. B.
and, therefore, the United States Treasury is dealing with the matter as a direct
claim of the British Treasury against the Belgian Government for dollar
reimbursement separate and apart from relief.
The following claims for dollar reimbursement in connection with Belgian
relief have also been presented by the British Treasury:
Claim 4760, hosiery and woolens----------------------------------------------- $476, 500.00
Claim 8301, cotton materials__________________________________
95,688.00
Claim 10137, linen and other materials__________________________
494.00
Claim 2692, cotton materials____________________________________
47. 88
Claim 1787, cotton thread______________________________________
537.00
T o t a l____________________________________________________



573,266.88

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

59

Two items for 1917 expenditures:
Ministry of shipping______________________________________ $1, 724, 506. 75
Ministry of food__________________________________________
169, 853.19
The first-mentioned claims aggregating $573,266.88, according to tlie informa­
tion given to Mr. May by Mr. Poland and Mr. Gay, as well as by the British
Treasury, are for supplies furnished on assurances of the C. It. B., or Mr.
Hoover, that dollar reimbursement would be arranged. The two claims for
1917 expenditures are made on the ground that the United States agreed to
finance all relief expenditures after June 1, 1917, and that this arrangement
continued till January 1, 1918. This is supported by a war cabinet minute by
Sir Robert Cecil reporting a call by Mr. Hoover on April 16, 1917, to advise that
the United States proposed to take over the cost of Belgian relief in full and
that he was taking the matter up with the Belgian and French Governments
accordingly.
No assurance had ever been given or authorized by the United States Treas­
ury that it would make advances to enable the payment of these claims to be
made, nor do the claims come within the general classes for which the Treasury
is prepared to make advances for the purpose of dollar reimbursement.
Whether or not these claims of the British Treasury should be paid by the
C. R. B. depends on the arrangements made by Mr. Hoover or the C. R. B.
with the British Government. The Treasury is not prepared to establish
credits in favor of the Belgian Government to meet these claims, but if the
commission for relief is of the opinion, in view of all the facts, that dollar
payment should be made to the British Government of the amount of these
claims, the Treasury will make no objection to the use of funds of the C. R. B.,
which I understand w^ill be available for the purpose and to that extent will
not require that such funds be applied to the payment of obligations of the
Belgian Government held by the United States and received by it in connection
with payments made to the C. R, B. for relief purposes.
A further cla:m has been presented by the British Treasury, amounting to
$715,750, in respect of boots, but as it is claimed by Mr. Poland and admitted
by the British Treasury that no assurances as to reimbursement have been
given in regard to this item, either by the Treasury or the C. R. B., I presume
the C. C. B. will not desire to make this reimbursement, and the Treasury
is not prepared to make any advance to enable reimbursement to be made or
to consent to funds which would otherwise be applicable to retire Belgian
obligations held by the United States being applied in making reimbursement
therefor.
I am. dear Mr. Rickard,
Very truly, yours,
A lbert R a t h b o n e ,

Esq.,
American Relief Administration,
115 Broadway, New York, N. Y.

E d ga r R ic k a r d ,

D ep a rtm en t o f S ta te ,

Washington, September 18, 1919.
The honorable T h e S e c r e t a r y o f t h e T r e a s u r y .
S ir : I have the honor to transmit herewith a copy of a telegram dated Sep­
tember 15, 1919, from the American Ambassador at London, with reference to
the British Government obligations held at the United States Treasury, upon
which, under present arrangements, interest is payable every six months, the
next payment being due on October 15. The obligations are at present payable
on demand, and the communication refers to the informal discussions which
recently took place in Paris and Washington regarding the postponement of
the payment of interest and the conversion of the demand obligations into long­
term obligations, stating that it was clearly understood by Mr. Blackett, of
the British Treasury, before leaving America that the United States Treasury
was expecting the appointment of a British Treasury representative to proceed
at an early date to Washington to discuss these matters, but that upon return­
ing to London he finds the British Treasury under the impression that the
United States Treasury does not desire these matters to be taken up formally.
The British Treasury, therefore, wishes to know definitely whether the United




60

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

States Treasury desires the British Treasury representative to proceed to Wash­
ington at an early date for this purpose.
I shall appreciate your advice on this matter for the information o f the
British Government.
I have the honor to be, sir,
Your obedient servant,
A l v e y A . A d e e , Second Assistant Secretary.
(For the Acting Secretary of State.)
Inclosure: Copy of telegram No. 3037, dated September 13, from embassy,
London.

SECTION 34.
J. P. Morgan & Co. Were Made the British Financial Agents in the United
States and Took Over the British Account from the Federal Reserve
Bank.
F ede r a l R es erve B a n k of N e w Y o r k ,

November 8, 1919.
Esq.,
Assistant Secretary of the Treasury,
Washington, D, C.
D e a r S ir : For your information I wish to advise you that we have received
a letter from the Secretary of the British Treasury informing us that the Lords
Commissioners of His Majesty’s Treasury have appointed Messrs. J. P. Morgan
& Co. as their agents in the United States for transactions between the British
Treasury and the United States Treasury, and in accordance with the instruc­
tions of the Lords Commissioners we have closed the account on our books in
the name of “ The Government of Great Britain and Ireland.”
Very truly, yours,
J. E. C r a n e ,
Manager, Foreign Department.
R . C. L e f f i n g w e l l ,

SECTION 35.
Proposal Handed to Mr. Blackett, British Financial Representative, for LongTime Obligations of Foreign Governments to Take the Place of Demand
Obligations.
Exclusive of the allied obligations to receive special treatment (such as
obligations given in connection with food supply of Austria, etc.), it is pro­
posed to refund the allied obligations held by the United States into two prin­
cipal series of bonds, with subseries to deal with different interest payment
dates, as follows:
{a) One series to include obligations purchased from proceeds of the first
Liberty loan under the act of April 24, 1917, to bear interest at 5 per cent; to
be dated April 15, 1919, and to mature June 15, 1947, providing for semiannual
payments of interest, which in one subseries of bonds will be specified to be
made on April 15 and October 15, and on the date of maturity.
(b)
The other series to include obligations purchased from the proceeds
of the second, third, and fourth Liberty loans under the act of September 24.
1917, and amendments, to bear interest at 5 per cent, to be dated April 15,
1919, and to mature October 15, 1938, providing for semiannual payments of
interest, which in one subseries of bonds will be specified to be made on
April 15 and October 15.
It is recognized that certain of the allied governments will not be in a posi­
tion for the first one, two or three years to provide for the payment Ol the
current interest on these obligations unless devoting to such interest payments
resources which could be more advantageously applied to reconstruction pur­
poses in the general effort to obtain normal conditions and financial stability
in Europe. In cases where there shall be a postponement of interest payments,
it is proposed to deal with obligations, taking as an example a three years




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

61

postponement of interest payments and a subseries of bonds in which interest
payment dates will be fixed as April 15 and October 15, something about as
follow s:
Both of said series of bonds shall provide that interest payments for the first
three years shall be deferred: that is, there shall be no payment of interest on
October 15 and April 15 during the period October 15, 1919, to April 15, 1922,
both inclusive; the accumulated 15 per cent interest to be paid without com­
pound interest in semiannual installments (a) in the case o f the 1947 series,
of i per cent on each of the interest payment dates, October 15, 1922, to April
15, 1924, both inclusive (at the rate of \ per cent per annum), o f \ per cent
on each of the interest payment dates, October 15, 1924, to April 15, 1926, both
inclusive (at the rate of 1 per cent per annum), and of f per cent on each of
the interest payment dates, October 15, 1926, to April 15, 1934, both inclusive
(at the rate of 1£ per cent per annum) ; and (&) in the case of the 1938 series,
of i per cent on each of the interest payment dates, October 15, 1922, to April
15, 1924, both inclusive (at the rate of 1 per cent per annum) ; of £ per cent on
each of the interest payment dates, October 15, 1924, to April 15, 1926, both in­
clusive (at the rate of 1 per cent per annum), and of % per cent on each of the
interest payment dates, October 15, 1926, to April 15, 1934, both inclusive (at
the rate of 1^ per cent per annum).
The bonds of both series shall contain provision for a cumulative sinking
fund to provide for a partial amortization of the principal thereof before ma­
turity. The amount of this sinking fund shall be measured by (a) a specified
percentage of the original principal amount of the bond, to be paid semiannually
on interest-payment dates, and (&) the part o f 2^ per cent semiannual interest
payments computed on the original principal amount of the respective bonds
which shall not be required to pay interest in view of the previous payment
of a part of the principal amount of the bond.
For the 1947 series bonds the sinking-fund payments under (a) above, on
the interest-payment dates, October 15, 1928, to April 15, 1930, both inclusive,
shall be
of the original principal amount of the bond (at the rate of I
per cent per annum) ; on the interest-payment dates, October 15, 1930, to April
15, 1934, both inclusive, shall be
of the original principal amount of the
bond (at the rate of 1 per cent per annum), and thereafter on the interestpayment dates until maturity shall be 1
per cent of the original principal
amount of the bond ( at the rate of
per cent per annum). For the 1938 series
of bonds the sinking-found payments under (a) above on the interest-payment
dates, October 15, 1928, to April 15, 1930, both inclusive, shall be \ per cent of
the original principal amount of the bond (at the rate of %per cent per annum) ;
on the interest-payment dates, October 15, 1930, to April 15, 1934, both inclusive,
shall be i per cent of the original principal amount of the bond (at the rate of 1
per cent per annum), and thereafter on the interest payment dates until ma­
turity shall be 11 per cent of the original principal amount of the bond (at the
rate of 2£ per cent per annum).
The above provisions would result in semiannual payments for the services
o f the loan, in accordance with the following tables of annual payments, all
percentages being based on the original principal amount of the bonds of each
series.
Series dated Apr. 15, 1919, due June 15, 1947.

Interest and sinking fund payment dates.

Oct.
Oct.
Oct.
Oct.
Oct.
Oct.
Oct.

15,1919, to Apr.
15,1922, to Apr.
15, 1924, to Apr.
15,1926, to Apr.
15,1928, to Apr.
15, 1930, to Apr.
15, 1934, to Apr.

15, 1922, both inclusive.............
15,1924, both inclusive.............
15,1926, both inclusive.............
15,1928, both inclusive.............
15,1930, both inclusive.............
15, 1934, both inclusive.............
15, 1947, both inclusive.............




Annual
Annual
interest
Period (excess to Annual sinking- Annual
back
covered. sinking interest. fund in­
total.
stalment.
fund).
Years. Per cent. Per cent. Per cent. Per cent.
3
2
5
5*
2
5
6
1*
2
5
6^
1*
2
5
7
1*
4
1
5
1*
13
5
2h

h

n
n

62

FOREIGN LOANS AND A U TH O RITY FOR M A K IN G SAM E.

Scries dated Apr. 15, 1919, due Oct. 15, 1938.

Interest and sinking fund payment dates.

Oct. 15, 1919, to Apr.
Oct. 15, 1922, to Apr.
Oct. 24, 1924, to Apr.
Oct. 15, 1926, to Apr.
Oct. 15,1928, to Apr.
Oct. 15, 1930, to Apr.
Oct. 15, 1934, to Apr.

15, 1922, both inclusive.............
15, 1924, both inclusive.............
15, 1926, both inclusive.............
15, 1928, both inclusive.............
15, 1930, both inclusive.............
15,1934, both inclusive.............
15, 1938, both inclusive.............

Annual
Annual
interest
Period (excess to Annual sinking- ! Annual
back
covered. sinking interest. fund in­
total.
stalment.
fund).
Years. Per cent, Per cent. Per cent. Per cent.
3
J
2
5
5*
2
1
5
6
2
5
1J
h
H
2
5
¥
1"
4
5
ll
n
4
5
2h
7*

N o v e m b e r 8, 1919.
I have now had an opportunity of discussing with
the Chancellor of Exchequer tlie question of the conversion of the demand
obligations of the British and allied governments held by the United States
Treasury into the form of long-term bonds. The Chancellor of Exchequer
desires me to say that, on the understanding that such conversion will not in
any way prejudice the general question of interallied indebtedness, to the ulti­
mate settlement of which along broad lines he attaches great Importance, he is
of opinion that a satisfactory solution of the particular question of conversion
of demand obligations can quickly be reached along the general lines tentatively
proposed in the memorandum which you gave me on Saturday, November 1.
As I stated to you in Paris the Chancellor of Exchequer is prepared to give
analogous treatment to the obligations of allied governments held by the British
Treasury. In this connection he desires me to express his entire concurrence
in your view that their community of interests as the two chief creditors makos
close cooperation between the British and American Treasuries of vital im­
portance in these matters.
It is his strong hope that the two treasuries will work together with a view
to finding the right solution for the important problems which have arisen
and will arise in regard to questions of interallied indebtedness and German
reparation.
The only point in your memorandum on which the Chancellor of Exchequer
desires to make any reservations at the moment is the sinking fund provision.
He would prefer on the whole that specific provision should not be included for
repayment of debt before the due dates. According to calculations which I
have had worked out. the sinking-fund provision would operate to redeem
before maturity 17.783 per cent of the bonds maturing in 1938. and 55.718 per
cent of the bonds maturing in 1947. In any case the latter figure seems
too high.
The most important point outside your memorandum which was discussed
between us (with the exception of the proposed exclusion from the general
funding arrangements of particular classes of advances about which I am
writing separately) was the question of the marketability of the bonds. I
understand that the United States Treasury would be prepared to accept a
fewTbonds for large amounts (such as $1,000,000,000) with some understanding
that the obligor would, if called upon by the holder, i. e. by the United States
Treasury, after the expiration of a period which you suggested might be five
years from the date of the bond, exchange the large bond into smaller bonds
of normal market denominations. The Chancellor of the Exchequer regards
it as essential that, so long as there is a considerable amount of British Gov­
ernment indebtedness held by the public in the United States o f America,
British credit should be protected against any possibility of an issue on the
market by the United States Treasury either of British Government bonds
held by them or of any United States Government or other security based on
the British obligations. In his opinion, therefore, it should be an under­
standing, if possible, expressly stated in the bond and, if not, included in
the settlement now to be reached that the United States Treasury will not
without the consent of the obligor sell, hypothecate, or in any way deal with
their interest in the British Government bonds held by them throughout the
period of the bonds. It does not seem to the Chancellor of Exchequer that the
D e a r M r. R a t h b o n e :




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

63

provision for not splitting the large bonds would be a sufficient protection, and
in any case the period o f five years would be too short.
The Chancellor of Exchequer understands that you may be able to come to
London shortly to continue discussion of this subject. He asks me to say that
he looks forward to welcoming you here at an early date, and that he is con­
vinced that your presence would be most valuable in securing early and rapid
progress in the matter.
I have the honor to be, dear Mr. Rathbone,
Your, faithfully,
B a s i l P. B l a c k e t t .

SECTION 36.
Rathbone’s Answer to Blackett on Funding of the Debt and Cancellation of
the Loans.
H otel de C r il l o n ,

Paris, November 18, 1919.
D e a r B l a c k e t t : Your three letters of November 8 were received the early
part of last week and I regret that until the end of last week I had been unable
to give then consideration.
At the outset, permit me to assure you that I appreciate the mutual ad­
vantages of my going to London at an early date and discussing with the
Chancellor the many questions, some of which we touched upon in our recent
talk, which must arise concerning the form of obligations to be given by the
various debtor countries in exchange for the present obligations now held
mainly by the British and American Governments. I am also deeply sensible
of the courteous message of the Chancellor that he looks forward to wel­
coming me in London. However, the pressing demands made upon my time
here in regard to financial questions daily arising under or in respect to the
Peace Treaties that have been formulated make it impossible for me, as yet,
to fix a time for my visit to London. I have explained to Sir John Bradbury
more in detail than it is possible to do in a letter, the difficulties that stand
in the way of my leaving Paris at present, and trust that he may soon have
an opportunity to explain my situation in this respect to the Chancellor or
to you.
I note that the Chancellor attaches great importance to the ultimate settle­
ment along broad lines of the general question of interallied indebtedness.
Ju st what is meant by that expression I do not know, but feel confident there
is C ° such Question now under discussion or consideration. The United States
Treax"ury has in no wise cllan^'e(1 the views it has expressed, or modified the
position ^ at ** lias taken *n the past, and regards the several obligations of
thp vnrin '1S Allied Governments held by the Government of the United States
as renresen
eac^ to the United States.
Indeed, under the
nrP<5Ant atafrn
only congressional action would authorize the Treasury to
tnkp n riiffprpnt Position. You will recall that I stated to you in our recent
talk nnri t nnw pa
the statement, that our Congress would have the same
’r
onfhnnVA the Treasury to deal with obligations of Allied Governinpnt«i IipI^ hv thP Tin te(i States having a fixed date of maturity as it now
has to authorize the T n > ™ 2 ' % £ . with the denmml oblisnti,ms of AUled
GW h T ttS
■uidum which I handed yon in Paris dealt gene r S l v l f ? w it h T e q„“
; c 'f ™ dates of
<2 > ‘ "terest P ™ n t
dates and (3) sinking fund navmt 'nts as aPPlied t0 obligations to be received in
exchange by Greaf Britain
the J Inited States f. om France- Ital5 I5e,« ium’
r
'>
Servia, Rouniania, and Czechoslovakia '
1
S
of tlie opinion that a solution can be K
‘ '"e s ° f such memo­
randum, and that he is prepared to give
-^ish T r e a ^ r T I trust that The
tions of Allied Governments held by the Bi
statement to this effect in your letter is
l*ebtor com m a s coM ern eT of
arrangement by both our Treasuries with the v h
the Unite(i cfite s
the definitive obligations to be received on such
Treasury is firmly convinced that such method of pi
and delnv
most harmonious results with the least possible friction
I regret that the Chancellor desires at tho moment to
mrpa„lirv fppl€J
’
garding the sinking fund provision. The Secretary of the
uiy Iee b very



64

FOREIGN LO ANS AND AU T H O R IT Y FOR M A K IN G SAM E .

strongly that such a provision should be included in the long-time obligations,
and believes that the soundness of the sinking fund principle is universally
recognized. Indeed, in providing for the gradual and orderly extinguishment
of the debt, such a provision should, in his judgment, be welcomed by the debtor
countries. It permits plans to be made sufficiently far in advance for the
measures needed to make revenues meet this budget item. I am inclined to
agree with you that the sinking fund tentatively suggested for the 1947 bonds
would op rate to redeem before maturity too large a proportion of the principal
o f the debt. I should be glad of your suggestion as to a rearrangement of the
sinking fund payment as applied to this series of bonds.
I quite understood the advantage from the point of view of the United States
Treasury, as well as from that of the Chancellor, of protecting British credit
and the most unfortunate consequences w hich would result if the obligations of
T
the British Government now held by the United States were offered for sale di­
rectly or indirectly on the American market, w hile considerable amounts of
T
British Government obligations were held by the American public and while
sterling exchange was at an appreciable discount. Nevertheless the United
States Treasury can not but insist that in all respects it has and, in its dis­
cretion, is entitled to exercise, all the attributes of ownership in respect of
the demand obligations of the British Government held by the United States,
and must have similar rights in respect to any obligations taken in exchange
therefor. In my judgment, neither the Secretary o f the Treasury nor any
other official of the United States Government has authority, either by provi­
sion in any obligations taken in exchange for those now held, or otherwise, to
stipulate that the same shall not be disposed of by the United States Govern­
ment at its pleasure. It had been my idea that any long-time obligations re­
ceived in exchange by the United States might be in large denominations (iipt
necessarily of $1,000,000,000), coupled with an agreement of the obligor, upon
demand, to exchange the same for smaller denominations (which, as you
point out would meet normal market requirements). It was in an endeavor
to meet, so far as possible, the situation to which you called attention that I
suggested the possibility of providing that the agreement of the obligor to
convert bonds of large denomination into bonds of small denomination should
become effective only after a period of substantially five years from the date
of the obligations, and I then said that if such suggestion should prove accep­
table to the Chancellor I would submit it to the Secretary of the Treasury.
It has been the view of the United States Treasury that the demand obliga­
tions of your Government representing certain special advances could not be
included in any general arrangement for the conversion of demand obligations
into obligations having a fixed date of maturity. This view of the Treasury
I have communicated to you and to Sir Hardman Lever in Washington on a
number of occasions many months ago, and I again referred to it in my recent
talk with you. The special cases in question are those mentioned in your
letter. I have not, however, the data before me to enable me to agree on the
exact amount of the particular advances.
As to the Austrian relief loan, I see no reason why the terms of long-time
obligations given in exchange should not follow the terms of other long-time
obligations received by the United States in exchange for British demand
obligations, with additional provisions assuring to the United States the ad­
vantages accorded it under the arrangements pursuant to which the advances
were made, which are fully set forth in previous correspondence between the
Treasuries on the subject. This I believe substantially accords with the
views expressed in your letter regarding this particular advance.
I do not recall that I made any specific suggestions at our recent talk regard­
ing the exchange of British obligations representing the United States advances
to your Government for the purpose of meeting its secured debt incurred in the
United States before the entry of my Government into the w ar. The repre­
T
sentatives of the British Treasury in the United States have been fully cogni­
zant o f the views of the United States Treasury that this particular debt should
be treated on what might be termed something of a commercial basis. The
suggestion of a three-year postponement of interest on the obligations repre­
senting this debt and its payment in five years grew out, as I recall it, of our
talk regarding advantages to the British Treasury, if arrangements could be
made for the withdrawal, at an early date, of a large part of the securities in
respect of which the United States has subrogation rights to secure the pay­
ment of these advances. I am by no means wedded to the idea of a threeyear postponement o f interest payments in respect to these advances, nor to



FOREIGN LOANS AND A U T H O R IT Y JFOR M A K IN G SAME.

65

the particular period o f five years for its repayment, but I do feel and know
it is the view of the Secretary of the Treasury as it was of his predecessor,
that these advances should receive special treatment. You will recall that, so
far as it was possible, it was sought to put the United States in the position
of the previous holders of the obligations, and in the letter recently prepared
and agreed to, defining the terms upon which the securities were held in subro­
gation, express stipulations were made regarding the sale of the subrogated
securities.
The United States Treasury has never accepted the principle that a pay­
ment by Great Britain on account o f her indebtedness to the United States
required the receipt by Great Britain of a similar account from the Allied
Governments indebted to Great Britain. On the contrary, the United States
Treasury has always taken the position that the question of the British debt
to the United States was a question between these two Governments alone.
The principle of common action which we discussed at our recent talk was,
as I understand it, the principle of proportionate equality in the collection by
Great Britain and the United States o f the obligations of a common debtor to
both countries.
I was under the impression, though not so distinct but that I may be entirely
mistaken, that I had at one time discussed with you in Washington the views
of the United States Treasury in regard to similar treatment of the various
Allied countries, common debtors to Great Britain and the United States. It
has always been my feeling that, while politically there was every reason for
according equality of treatment to the respective debtors, such political equality
of treatment did not necessarily mean similar terms and conditions. The
financial and economic conditions of one debtor country as compared with an­
other are and will be so fundamentally different that similar treatment in re­
gard to the debts o f all countries would from the standpoint of financial and
economic considerations, prove much more onerous upon one country than upon
another.
I should be glad to receive an indication of the views of the British Treasury
as to whether the rough scheme as to date of maturity, in teres t-payment dates,
and singink-fund provisions which I handed you the other day (modified as
aforementioned) should apply to all the countries which are the common debtors
of Great Britain and the United States or whether, in certain cases, a different
position should be taken by the two Treasuries in the respects mentioned.
The United States Treasury has not proposed to treat obligations given by
France for advances made to retire its obligations that have matured on the
American market differently than other French obligations held by the United
States. You will recall the pressing demand made by Mr. Clemanceau during
a very dark period of the war that America turn over to France a large amount
of gold, so that French credit and the position of the Bank of France should
be protected. When this demand was made it was at once communicated to
Lord Reading by Mr. Crosby. The United States Treasury, to meet the emer­
gency which appeared to it to be grave, among other things, agreed to advance
to France, or to permit France to use, dollars accruing to it as the countervalue of francs furnished by France to the American Army, in amount sufficient
to defray the French maturities on the American market to which you have
called attention.
The unpaid balance of the sales of silver to the British Government under
the Pittman Act is a small amount in comparison with the entire debt of
Great Britain to the United States. Perhaps I may be pardoned for stating
that the United States Treasury has felt particularly proud of what was ac­
complished in regard to that silver sale, and feels confident that when the
circumstances are recalled to the Chancellor he will endeavor to meet in all
respects the views of the American Treasury in regard to the balance of this
advance. You are aware that the silver question has been a bitter political
issue in the United States, and that widely divergent views on the subject are
held by Members of the Congress, but, notwithstanding, in the emergency which
was made known to tlie Treasury by representatives of your Government, a
bill was prepared, introduced into Congress, and passed with the hearty sup­
port of all factions within the unprecedented period of about one week, as a
result of which there wT immediately placed at the disposal of your Govern1
as
ment substantially 200,000,000 ounces of fine silver out of our currency reserves,
S. Doc. 86, 67-2------5




66

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

In addition the Treasury made from time to time as required other advances
to your Government to enable it to procure on the open market additional
quantities of silver for use in India. The amount of such advances were only
limited by the amount of the silver that your representatives found it possible
to purchase on our market. The silver market was put under control and
the most urgent demands o f other countries for silver were curtailed or
refused so as to enable the representatives of your Government to obtain the
greatest possible amount of silver to meet the Indian situation. As a further
aid to your Government’s purchase of silver, the Secretary of the Treasury
waived, until notice from him to the contrary, the compliance by your Govern­
ment of the provision in the arrangement effected between the Treasury and
Lord Reading as to the limit of price which your Government should pay for
silver, purchased in the United States or elsewhere, until the United States
silver reserve should be restored. The Secretary of the Treasury does not
ask any special treatment of the advances made to your Government for the
purchase of silver on the open market, but he does feel most strongly that the
loan from our silver reserve purchased under the Pittman Act must be treated
very differently from the general advances made to your Government during
the war. He feels that the arrangement made for the repayment of this loan
should in our common interest be such as to be beyond criticism from all pos­
sible points of view. Under the arrangement set forth in Lord Reading’s letter
of May 28, 1918, to Mr. Leflingwell, your Government agreed to supply to the
United States Government telegraphic rupee credits on India at the rate of 1
rupee equals 35.73 cents, and a possible reduction in that price was contem­
plated. The cooperation of your Government in endeavoring to restore the
parity of exchange whenever the dollar is at a discount wT pledged by Lord
as
Reading’s letter, from which I venture to quote as follows :
“ 3. The agreement appears to me to mark an important step in the joint
policy of our two Governments of supporting the exchange value of the dollar
and the sovereign, and of facilitating the transactions which are essential to
Allied war trade. The Secretary of State for India, as I told you in my letter
of April 29, has only reluctantly raised the rate of exchange above the previous
parity of 16 pence per rupee for demand bills, and I understand it is still his
policy to revert to the former standard whenever in his judgment the reverse
step or steps can expediently be taken. Meanwhile, and I mention this because
the point is one I understand on which you have felt some apprehension, you
may feel assured of the sympathetic support of the Government of India in
maintaining the credit of the dollar in India as far as this comes within their
legitimate sphere o f action.
“ 4. As I informed you, the British Government will be glad to cooperate with
the Government of the United States in endeavoring to restore the parity of ex­
change wherever the dollar is at a discount.”
Instead of the American dollar approaching a parity with the rupee, the con­
trary is the case, the rupee now selling in the United States at approximately 1
rupee=42.70 cents. The embargo on the import of gold into India except
through the Indian Government, while preventing a drain of gold from the
United States, operates to increase the cost to American importers of their
Indian purchases and this increased cost inures to the benefit of the Indian
Government. The silver reserve of the United States, which my Government
might have authorized to be used to meet the cost of American Indian pur­
chases, is now represented by demand obligations of your Government. The
United States Treasury has suggested:
(a) The payment of $40,000,000 in gold provided for under Lord Reading’s
letter in India instead of New York, thus enabling the United States to obtain
rupees therefor at the rate of 15 rupees to the pound sterling.
(b) The furnishing of rupee credits to the United States Government to the
equivalent of $40,000,000 and at the rate mentioned above in lieu of the de­
livery of the corresponding amount of gold, or
(c) The agreement of the British Government to now apply in payment o f
these demand obligations both principal and interest an amount equal to the
dollars heretofore paid for rupee credits supplied in the United States since
your Government ceased the supply of rupee credits to the Federal Reserve
Bank of New York, and thereafter to continue to sell, at an amount per month
to be agreed upon, rupee credits in New York at parity of the London rate
for telegraphic transfers on India, as determined by the rate for sterling ex­
change on the New York market, and to apply dollars as so obtained to the
payment of the principal and interest of said advance.



FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

67

In our recent conference we spoke of a further alternative, namely, to pro­
vide for the payment of this loan, principal and interest, at the end o f a threeyear period, if an examination of the figures of the rupee sold through the
Federal Reserve Bank of New York w w ld indicate that under present condi­
tions the proceeds of rupee credits sold in the United States would pay the
advances in question in substantially that length of time. Whether such plan
would meet the views of the Secretary of Treasury, I can not say, but I feel
quite clear that the arrangement you suggest applicable to but $40,000,000 of
these advances, would not appeal to him as meeting the situation.
In connection with these silver advances I feel I must refer to your state­
ment that in the original agreement there is no provision that the proceeds
of the gold shipped by India should be applied by the British Treasury in
reduction of the indebtedness of your Government to the United States. As
that arrangement was made between the British Government and the United
States Treasury, which held obligations of the British Government, payable
on its demand, to many times the amount involved, a provision in the agree­
ment to pay when received the proceeds of the gold to the United States seemed
surplusage. Moreover, if any such payment to the United States Treasury had
been made during the period of active fighting, it would have meant corre­
spondingly additional advances by the Treasury to the British Government with
an unnecessary diminution of the amount of the appropriation available for
loans by the United States to foreign Governments.
I quite appreciate the force of what you write regarding the agreement of
June, 1917, in regard to British expenditures for France. I recall that Sir
Hardman Lever recollected handing a copy of that agreement to Mr. Crosby
just prior to the latter’s leaving the United States for Europe in November,
1917. Unfortunately the copy so supplied could not be found in the files of the
Treasury, nor did Mr. Crosby recollect having received it. After you had
supplied to me the portion of Lord Reading’s letter that had been so mutilated
as to be illegible, the Treasury requested of Sir Hardman Lever a copy of this
agreement, with which formal request somewhat later Sir Hardman Lever com­
plied. I remember also that Mr. Crosby was, at the outset, somewhat appre­
hensive because of the large proportion of the Treasury loans made to Great
Britain, but during the early months of 1918 I explained to you that the Treas­
ury was not concerned in the proportion of loans made to any country provided
the aggregate was fairly apportioned to meet the requirements of each country
in the United States.
You will recall that the reply of the Secretary o f the Treasury to the then
chancellor’s communication, in which he referred to the British Treasury acting
as a conduit pipe, was delivered to Lord Reading in the late spring or early
summer of 1918. This reply reviewed the situation and definitely refused to
make reimbursement to your Government for any of its expenditures for
France within the British Empire or for all of its like expenditures for neutral
purchases. This formal statement of the position of the United States Treas­
ury was in effect a restatement of the position that had been taken during the
previous months, as to which the representatives in Washington of the British
treasury had been fully informed. I shall not burden this letter with a re­
statement of the contents of that communication, nor with the contents of my
letter to Lord Reading, written at about the time that the weekly dollar pay­
ments of France to the British treasury ceased, nor to the repeated statements
made to the representatives o f the British treasury in Washington that the
treasury’s failure to prevent the weekly dollar payments being made on the
running account must be understood to be without prejudice and subject to
the ultimate adjustment o f that account. It was regrettable that during the
interval which elapsed between the two communications before referred to no
agreement was reached between the treasuries in regard to the past and future
financing of the neutral expenditures of France. I do not understand, however,
that at any conference which followed the delivery of the reply of the Secretary
of the Treasury any different position was taken by the United States Treasury
than that set forth in such response.
In an endeavor to settle this troublesome question of the claims o f the British
treasury for dollar reimbursement against France, Italy, and Belgium (in­
cluding Belgian R elief), the United States Treasury has treated the matter
as a whole and has endeavored to make all the concessions to the views of
the British treasury found possible within the principles laid down in the
communication from the Secretary o f the Treasury to the Chancellor o f the




68

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

Exchequer. In our recent talk I referred to some of these concessions affecting
not only the dollar reimbursement claim against France, but also to the similar
claims against Italy and Belgium. The Treasury appreciates the desirability
of a speedy settlement of these questions, and it was to effect such a settle­
ment, and influenced by the various considerations touched upon in your letter,
that it was prepared to make the concessions referred to.
I am very reluctant to reopen the question of cereal allocation in respect
of which a definite settlement was finally reached after exhaustive study.
Nevertheless, I have cabled Washington your remarks upon the subject and
await its advices.
I do not understand the last sentence of your letter regarding dollar reim­
bursements. It is my understanding that any amounts that may be received
from Italy on British treasury dollar reimbursement claims was dedicated by
your letter of August last to payment of obligations of your Government held
by the United States. At our recent talk I suggested as a part of the settle­
ment of the dollar reimbursement claims that the Treasury would be prepared,
in order to facilitate the settlement proposed, to consent that the agreed
amounts of these claims against Italy, Belgium, and Commission for Relief in
Belgium, should be applied to the payment of obligations of France held
by the United States, instead of as agreed by your letter of last August, and
that the balance of any further amounts required to correct overpayments
of France on the running account should be provided through a further credit
from the Treasury to Great Britain. This suggestion was made so that the set­
tlement of the dollar reimbursement claims would not affect the cash position
of your Government in the United States, which we had formerly discussed,
and in the light of which your letter of last August was written.
I note that the British treasury feels that if the position of the United
States Treasury regarding dollar reimbursements remains unchanged it must
ask France to fulfill its engagement under the agreement of June, 1917, and I
take pleasure in assuring you that the United States Treasury will make no
objection to your Government receiving from France its obligations payable
in dollars for amounts payable by France in dollars under that agreement.
I do not see that France, in view of its reconstruction requirements, can afford,
at the present time, to pay in cash either the principal of or interest upon its
war indebtedness to Great Britain or to the United States. It is in recognition
of that fact that the United States Treasury is disposed for a time to defer the
payment of interest on the obligations which it holds of the French Govern­
ment. Moreover, the United States Treasury would deprecate the taking of
any position not in accord with the principle of equal proportionate treatment
in the payment by allied governments of their war debts to the respective allied
and associate powers.
I trust you will pardon the undue length to which this letter has run. Its
length is another illustration of the advantages of a face-to-face talk. I have,
however, as far as possible, endeavored to write on the lines of our talks in
Washington, which I shall always look back upon with so much pleasure;
stating our exact views fully and without withholding anything for the purpose
of future negotiation. If I have failed in diplomatic expression, I trust
you will forgive me.
I am, my dear Mr. Blackett,
Very truly yours,
A lbe rt R a t h b o n e .

B. P. B l a c k e t t , Esq.,
Treasury, Whitehall, 8. IT'. 1, London.

SECTION 37.
Views of the Secretary o f the Treasury on the Loan Situation.
Since the armistice the United States Treasury has advanced to the Govern­
ments of the Allies as of the close of business November 15, 1919, the sum of
$2,329,257,138.55, and there remained on November 15, 1919, an unexpended
balance of $593,628,111.45 from the total loans of $10,000,000,000 authorized
under the Liberty loan acts. The Treasury sees no need of an additional ap­
propriation for Government loans, though it may later have occasion to ask
the Congress to make some further modification of the terms under which the




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

69

existing appropriation is available. The Treasury asked and obtained power
for the War Finance Corporation to make advances up to the amount o f
$1,000,000,000 for nonwar purposes, and the War Finance Corporation is pre­
pared to make such advances. The Secretary of War is authorized to sell his
surplus stores on credit.
The power which at present exists in the Government or governmental agen­
cies to assist in meeting Europe’s financial needs is therefore considerable.
This power must, of course, be exercised with extreme caution and with the
most careful regard for the urgent needs of our own people for an ample sup­
ply of foodstuffs and other necessities of life at reasonable prices.
The Treasury is prepared at the convenience of the Governments o f the Allies
to take up with their representatives the funding of the demand obligations
winch the United States holds into long-time obligations, and at the same time
the funding during the reconstruction period or, say, for a period of two or three
years, of the interest on the obligations of foreign Governments acquired by
the United States under the Liberty loan acts.
The Treasury believes that the need of Europe for financial assistance is
very great and very real, though it has been very much exaggerated here and
abroad. Our hearts have been so touched by the suffering which the war left
in its train and our experience is so recent of the financial condition which
existed during the war (when men were devoting themselves to the business of
destruction) that we are prone to overlook the vast recuperative power inherent
in any country which, though devastated, has not been depopulated and the
people of which are not starved afterwards. We must all feel deep sympathy
for the suffering in Europe to-day, but we must not permit our sympathy to
warp our judgment and by exaggerating European financial needs make it
more difficult to fill them. Men must go back to work in Europe; must con­
tribute to increase production. The industries of Europe, of course, can not be
set to work without raw material, machinery, etc.. and to the extent that these
are to be secured from the United States the problem of financing the restora­
tion of Europe belongs primarily to our exporters. Governmental financial as­
sistance in the past and talk of plans for future Government or banking aid
to finance exporters has apparently led our industrial concerns to the erroneous
expectation that their war profits, based so largely on exports, will continue
indefinitely without effort or risk on their part. To them will fall the profits
of the exports and upon them will fall the consequences of failure to make the
exports. As soon as domestic stocks, which were very low at the time of the
armistice, have been replenished, those industries which have been developed
to meet a demand for great exports paid for out of Government war loans will
be forced to close plants and forego dividends unless they maintain and develop
an outlet abroad. The industries o f the country must be brought to a realiza­
tion of the gravity of this problem: must go out and seek markets abroad;
must reduce prices at home and abroad to a reasonable level, and create or
cooperate in creating the means of financing export business.
Since armistice day the consistent policy of the Treasury has been, so far
as possible, to restore private initiative and remove governmental controls and
interferences. It has been the view of the Treasury that only thus can the
prompt restoration of healthy economic life be gained. The embargoes on gold
and silver and control of foreign exchange have been removed, as well as the
voluntary and informal control of call money and tiie stock exchange loan
account. The control exercised by the Capital Issues Committee over capital
issues have been discontinued. Thus the financial markets of the United States
have been opened to the whole world and all restrictions removed that might
have hindered America’s capital and credit resources, as well as its great gold
reserve, from being available in aid of the world’s commerce and Europe’s
need.
There are those who believe that the dollar should be kept at par, no more
no less, in the market of foreign exchange. I f effective action were taken to
carry out such a policy, it could only be done by drawing gold out of the
United States when the dollar would otherwise be at a discount and by in­
flating credit when the dollar would otherwise be at a premium.
The dollar is now at a premium almost everywhere in the world. Its arti­
ficial reduction and maintenance at the gold par of exchange in all currencies
is quite unthinkable unless we propose to level all differences in the relative
credit of nations and to substitute for our gold reserve a reserve consisting
of the promises to pay o f any nation that chooses to become our debtor. In­
equalities of exchange reflect not only the trade and financial balance between



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FOREIGN LOANS AND AU T H O R IT Y FOR M A K IN G SAM E.

two countries, but particularly after a great war such as that we have been
through the inequalities of domestic finance. The United States has met a
greater portion of the cost of the necessary war measures from taxes and bond
issues than any other country. Largely as a consequence of this policy the buy­
ing power of the dollar at home has been better sustained than has the buying
power at home of the currency of any European belligerent. For the United
States to determine by governmental action to depress the dollar as measured
in terms of foreign exchange, and to improve the position of other currencies
as measured in terms of dollars would be to shift to the American people the
tax and loan burdens of foreign countries. United States Government action
at this time to prevent in respect to foreign exchange the ordinary operation
of the law of supply and demand which automatically sets in action corrective
causes, and to make an attempt to prevent the dollar from going to a premium
when its natural tendency is to do so, would as a natural consequence stimu­
late our exports and through the competition o f export demand with domestic
demand maintain or increase domestic prices. Had the allied Governments,
after they had relaxed the war control of their imports, attempted to continue
to hold the exchange value of their currencies in the United States at an arti­
ficial level by further borrowings, the effect would necessarily have been to
stimulate their imports and to discourage their exports, thus aggravating their
already unfavorable international balances.
It is essential to discriminate between plans on the one hand to support
exchange by direct action of the United States Government and plans on the
other hand to facilitate the extension of private credit and the investment of
private capital in Europe. To the former the Treasury is utterly opposed.
Of the latter the Treasury heartily approves.
Some progress has already
been made in placing in the United States through private channels the loans
of allied and neutral European countries and municipalities. The Treasury
favors the making in our markets of such loans which contribute to relieve
the exchanges. I am sure that American exporters and European importers
will lay the basis of credit in sound business transactions and I know that
American bankers will not fail to devise means of financing the needs of the
situation, nor American investors to respond to Europe’s demand for capital
on a sound investment basis.
Meanwhile it is well to remember the silent factors which are always at
work toward a solution of the problem. Immigrants’ remittances to Europe
are and will continue to be a very large item in rectifying the exchanges.
Foreign travel will be a further item. Another very important factor is the
purchase of European securities and repurchase of foreign-held American se­
curities by American investors. But the principal factor in Europe’s favor is
the inevitable curtailment of her imports and expansion of her exports. These
processes, of course, are stimulated by the very position of the exchanges which
they tend to correct.
T reasu ry C h a m b e r s,
W h i t e h a l l S. W .,

December 8, 1919.
Hon. A l b e r t R a t h b o n e .
D e a r M r. R a t h b o n e : I am much obliged to you for your letter inclosing a
statement of the views of the Secretary of the United States Treasury. I will
write to you again as soon as I have had time to consider and examine them.
Yours, sincerely,
A u st e n C h a m b e r l a in .

SECTION 38.
Chamberlain’s Reply for England.
T reasury C h am bers,
W h i t e h a l l S. W .,

December 11, 1919.
I have now been able to consider carefully the state­
ment of the views of the Secretary of the United States Treasury which you
were good enough to transmit to me under cover of your letter of the 2d instant.
You are already aware that the British Government accepts as far as they
are concerned the suggestions of the United States that the demand obligations
D e a r M r. R a t h b o n e :




FOREIGN LOANS AND AU T H O R IT Y EOR M A K IN G SAM E .

71

of the Allies should be funded into long-time obligations, and that for a period
of two or three years, preferably three, the interest on the obligations of foreign
Governments acquired by the United States should also be funded, and that
we are ready to extend similar treatment to our allies in respect of their obliga­
tions to us.
In like manner we find ourselves in complete accord with the desire of the
American Treasury to restore as soon and as far as possible private initiative
in matters of trade and credit and to withdraw governmental control and in­
terference. We have restricted our control of capital issues within such
narrow limits that it may now be said to be almost nonexistent, and we have,
as you are aware, for some time withdrawn the artificial support of the ex­
changes, which was a necessary, though regrettable, incident of war finance.
The effect of the fall in the dollar exchange is seen in our trade returns with
America. The comparative depreciation of sterling necessarily restricts that
trade and makes it the interest of this country to secure wherever possible
those articles which are necessary to it in countries where the exchange is less
unfavorable. We recognize that only by increasing our exports to and dimin­
ishing our imports from those countries in which sterling is at a discount can
we reestablish an equilibrium or reach healthy conditions. Even private credits
increase our total foreign indebtedness, and though they may be necessary in
some circumstances and as a temporary expedient, pro tanto increase the diffi­
culties of the future.
In this connection I venture to observe that the request made to us for
immediate repayments on account of United States advances to the United
Kingdom would seem scarcely consistent w^ith the general policy laid down in
the report of the Secretary of the Treasury. Such repayments must neces­
sarily add to our difficulties in dealing with the immediate problem of financing
necessary imports from the United States while they make it more difficult
for the United Kingdom to contribute assistance to the general restoration of
Europe.
As regards the general position of Europe, I entirely agree with the Secretary
of the Treasury that it should not and must not be regarded merely from a
humanitarian or charitable point o f view. The British Government have no
wish that their own share in that situation should be regarded in this light,
nor do they think that such a point of view would lead to a true appreciation
of the problem with which the world is confronted. The trouble is in our
opinion too deep-seated and too widespread to be capable of solution by appeal
to sentiment. What, in our opinion, is needed is a comprehensive plan to
restore and restart the broken machinery of modern civilization over a large
part of Europe. The nations which are least broken by the five years of war,
including the neutrals as well as the United States and England, ought to
regard it not so much as a duty which they owe to the world but as a neces­
sary measure of self-protection to take a long view of their interests and to
cooperate in such a recuperation of the shattered portions of the world as will
enable international trade to resume its normal course to the common ad­
vantage of all concerned.
In our view the requirements of the situation exceed the limits of private
enterprise and private resources, and it would exceed the power of any single
nation to deal adequately with it. Private enterprise can and should do much,
but I can not help thinking that comprehensive international cooperation is
necessary to pave the way to the resumption of conditions in which private
enterprise can act with success. This does nc': mean that limitless sums are
required by way of advances from the United States; comparatively small
sums might suffice provided they were raised and made available in accordance
with a reasoned and definite plan of international reconstruction. The British
Government would be quite ready to join in the discussion and elaboration of
proposals of this character, and, in spite of the immense sacrifices which the
United Kingdom has made during the war and of the immense strain placed
upon its resources by the assistance which it has already accorded to its allies
and others, would do its best to forward the success o f any scheme which might
be agreed upon. We do not pretend to be in a position at the present time
to play the leading part in such a scheme, but we should do our best to con­
tribute our share to its success.
Yours, sincerely,
A u st e n C h a m b e r l a in .

Hon. A l b e r t R a t h b o n e .



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FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E,

SECTION 39.
Blackett, the British Financial Representative, Proposed Parley on Question
of Cancellation of the Loans, February, 1920.
F e b r u a r y , 1920.
In continuation of previous correspondence and dis­
cussions on the subject of interallied indebtedness, and with particular refer­
ence to our discussions in Paris during tlie last fortnight, I am desired by the
Chancellor of the Exchequer to write to you as follows:
It has been the view of the British Government that the existence of a vast
mass of intergovernmental indebtedness not only involves very grave political
dangers, but also forms at the present time a most serious obstacle to the
recuperation of the world and particularly of continental Europe from the
immense strain and suffering caused by the war. They have more than once
suggested informally to representatives of the United States Treasury that
steps should be taken by the two Governments in concert to find some large
solution of this problem, and as yon are aware the Chancellor of the Exchequer
expressed himself ready to take any steps toward relieving tlie Governments
which are debtors to the Brit'sli Government of the burden of their debts
which the United Slates Treasury might feel able to propose in regard to the
obligations of the Governments which it holds. These suggestions have not
hitherto been placed on formal record, and it is for the purpose of formal
record that they are mentioned here.
The formal discussions on these matters have been confined to the questions
of postponement o f interest on intergovernmental obligations and the conversion
of such obligations into long-term bonds. The urgent necessity for such action
does not appear to the Chancellor of the Exchequer to require any lengthy
demonstration. His only doubt is whether such action is sufficient in present
circumstances to afford the requisite relief for the financial and economic
disorders of the world. The British and United States Governments are in entire
agreement with the policy which lias been publicly stated both by the British
Chancellor of the Exchequer and by the Secretary of the United States Treasury
that no further loans should be made by one Government to another (subject
to exceptional cases of relief loans to such countries as Austria and Poland).
For continental Europe generally, recourse to such intergovernmental loans
being barred, the problem of finding the minimum amount of foreign exchange
absolutely necessary to enable it to secure essential imports is an extraordinary
difficult one, and in such circumstances it seems to the Chancellor of the
Exchequer to be out of the question that the available foreign exchange should
be subjected to a claim by tlie creditor Governments for payment of interest
until a reasonable opportunity lias been allowed for recuperation. It is further
most desirable that potential private lenders should be relieved of the fear,
which tends at present to check the granting of commercial credits, that the
creditor Governments might for some reason or another call for immediate
repayment of the principal of the demand obligations of the debtor Govern­
ments held by them.
The potential private lenders are to be found to some extent in the neutral
countries, but mainly in the United States of America and the United Kingdom.
In the United Kingdom the supply of foreign exchanges, as the discount o f
sterling in terms of the dollar shows, is at present far short of the demand,
and that demand is conditioned, be it remembered, rather by the general Eu­
ropean demand for dollars and other extra-European currencies than by the
requirements of the United Kingdom alone, and it is out of this supply that
the relief loans required by Austria and Poland must be provided. In these
circumstances the chancellor of the Exchequer desires to make the following
proposals:
(a ) That the United States Treasury and the British Treasury should agree
in principle, if so requested by the various Governments concerned, to postpone
for a period of three years—that is to say, from April and May, 3919, to April
and May, 1922, the collection of interest upon obligations held by them repre­
senting advances to Governments of the European Allies in connection with the
war, including, in the case of the United States Treasury, advances to the
British Government.
(b) That the two Treasuries should agree in principle, if so requested by
the Governments concerned, to convert into long-term bonds containing substan­
D e a r M r. R a t h b o n e :




FOREIGN LOANS AND AU T H O R IT Y FOR M A K IN G SAM E.

73

tially similar conditions regarding interest, sinking fund, and dates o f ma­
turity, the short-term obligations of the Governments of the European Allies
held by them, including, in the case of the United States Treasury, obligations
of the British Government. (It is not intended to exclude the possibility of
minor exceptions being made to the proposed principles in special cases.)
The chancellor of the exchequer is prepared to agree in principle, if thought
necessary by the United States Treasury, to some provision being included for
protecting the exchange of the creditor Governments if and when the currency
of the debtor Governments reaches a point so near to par as to be within the
prewar gold points.
I have the honor to be, nry dear Mr. Rathbone,
Yours, faithfully,
B a s il P . B l a c k e t t .

P. S.— On learning that these proposals are acceptable to the United States
Treasury, a formal request for postponement of interest on British obligations
will be addressed to you.

SECTION 40.
Cable from Wallace on Funding of Interest and Concellation.
P a rts,

February 10, 1920.

S e c r e t a r y of S t a t e ,

Washington:
(For Leflingwell and Davis. R-305. Department’s 313, February 7, 8 p. m.,
your R-221.)
(1st) I am clear that interest upon interest should not be charged, and under­
stand that this is Treasury’s considerations. View legislation merely permit­
ting us in effect to loan new sums carrying interest with which debtors will
pay interest as it accrues worse than useless.
(2nd) I quote letter just received from Blackett, as follows:
“ In continuation of previous correspondence and discussions on the subject
of inter-Allied indebtedness, and with particular reference to our discussions
in Paris during the last fortnight, I am desired by the chancellor of the ex­
chequer to write to you as follow s:
“ ‘ It has been the view of the British Government that the existence of a
vast mass of intergovernmental indebtedness involves very grave political dan­
ger, but also formulates at the present time a most serious obstacle to the
recuperation of the world, and particularly of continental Europe, from the im­
mense strain and suffering caused by the war to-day. More than once sug­
gested informally to representatives of the United States Treasury that steps
should be taken by the two Governments in concert to find some large solution
of this problem, and as you are aware, the chancellor of the exchequer expressed
himself ready to take any steps toward relieving the Governments which are
debtors to the British Government of the burden of their debts which the
United States Treasury might feel able to propose in regard to the obligations
of the Governments which it holds. These suggestions have not hitherto been
placed on formal record, and it is for the purpose of formal record that they
are mentioned here.
“ ‘ The formal discussions on these matters have been confined to the questions
of postponement of interest on intergovernmental obligations and the conver­
sion of such obligations into long-term bonds. The urgency of such action
does not appear to the Chancellor of the Exchequer to require any lengthy
demonstration. His only defect is whether such action is sufficient in present
circumstances to afford the requisite relief for the financial and economic dis­
orders of the world. The British and United States Governments are in en­
tire agreement with the policy of taxing publicly stated both by the British
Chancellor of the Exchequer and by the Secretary of the United States Treas­
ury, that no further loans should be placed by one government to another
subject to exceptional cases of relief loans to such countries as Austria and
Poland. For continental Europe generally recourse to such inter-governmental
loans being barred, the problem of finding the minimum amount of foreign
exchange absolutely necessary to enable it to secure essential imports is an
extraordinarily difficult one, and in such circumstances it seems to the Chancellor
of the Exchequer to be out of the question, that the available foreign exchange



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FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

should be subjected to a claim by the creditor governments for payment of
interest until a reasonable opportunity has been allowed for recuperation. It
is further most desirable that potential private lenders should be relieved of
the fear which tends at present to check the granting of commercial credits,
that the creditor governments might for some reason or other call for imme­
diate repayment of the principal of the demand obligations of the debtor gov­
ernments held by them.
“ ‘ The potential private lenders are to be found to some extent in the neutral
countries, but mainly in the United States of America and the United Kingdom.
In the United Kingdom the supply of foreign exchanges, as the discount of
sterling in terms of the dollar shows, is at present far short of the demand and
that demand is conditioned, be it remembered, rather by the general European
demand for dollars and other extra European [fabricating?! currencies than
by the requirements of the United Kingdom alone and it is out of this supply
that the relief loans required by Austria and Poland must be provided. In
these circumstances the chancellor of the exchequer desires to make the
following proposals: (a) That the United States Treasury and the British
Treasury should agree in principle, if so requested by the various governments
referred to, to postpone for a period of three years—that is to say, from April
and May, 1919, to April and May, 1922—the collection of interest upon obliga­
tions held by them representing advances to countries of the European Allies
in connection with the war, including, in the case o f United States Treasury,
advances to the British Government.
“ ‘ (b) That the two Treasuries should agree in principle, if so requested by
the Governments concerned, to convert into long-term bonds containing sub­
stantially similar conditions regarding interest, sinking fund, and dates o f
maturity the short-term obligations of the Governments of the European Allies
held by them, including, in case of the United States, treasury obligations of
the British Government (it is not intended to exclude possibility of minor ex­
ceptions being made to the proposed principles in special cases). The chan­
cellor of the exchequer is prepared to agree in principle, if thought necessary
by the United States Treasury, to some provision being included for protect­
ing exchange of the creditor Governments if and when the currency of the
debtor Governments reaches a position so near to par as to be within the
prewar gold points.’
“ P o s t s c r i p t . —On learning that these proposals are acceptable to the United
States a formal request for postponement of interest on British obligations
will be addressed to you.”
(3rd) Foregoing letter shows what British are prepared to do in way post­
ponement interest during three-year period. Prior to that date I understand
they have in effect added interest to principal just as we have. I do not
understand British have forgiven interest unless possibly in case of Belgium,
but am writing Blackett asking him information as to matters referred to
your paragraph 6th and 7th and will cable on receipt of reply.
(4th) Have not conferred with French as to what they will do regarding
deferring interest on their comparatively small advances. However, have no
doubt France, in order to obtain postponement of interest from America and
British, will be prepared to postpone interest on advances made by France
in the same manner as agreed between America and Great Britain. I have
felt it was useless to enter into lengthy discussion with France in postponement
of interest until we had agreed in principle with British. Bloch, when repre­
senting French Treasury, made no objection to this procedure. Writing French
asking information as to points (a ), (e ), (d ), and (e) of your paragraph 6th
and paragraph 7th, and will cable you result.
(5th) You will understand that my talks with British have been confined
to countries to which we have made loans other than Russia, Cuba, and Greece.
It may be that there should be postposement of interest in case of Greece, but
in view of terms of Paris agreement I have not yet attempted to deal with
our loan to Greece.
(6th) By private bankers.
(7th) Should add that detailed information regarding extent to which interest
has been referred would naturally have been taken up after agreement with
lending governments had been reached and lending governments were prepared
to indicate to their common debtors exactly what they were prepared to do
regarding (a) exchange of demand obligations for long-time obligations and
(b) postponement of interest payments.



W allace.

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75

SECTION 41.
Treasury Department Memorandum for President Wilson Against
Cancellation.
Your recent message through the British embassy, in which among other
matters you advocate a general cancellation of intergovernment war debts,
has been received, and Rathbone has transmitted to me a copy of a communi­
cation received by him from Blackett in respect to the funding of the demand
obligations of allied governments held by the United States and England,
respectively, in which the same subject is also raised.
1. At the outset, I desire to express my concurrence that the financial and
economic problems of the world are very closely connected, and Great Britain
and the United States naturally look with concern upon the difficulties which
confront continental Europe. The United States Treasury has been greatly
interested in such information as was available concerning the position of
Great Britain, and has viewed with great pleasure and satisfaction the progress
which your Government has been making toward the return to a peace basis.
The United States is in the fortunate position of having been able to make
even greater progress in this respect. While we have in the United States
many difficult problems at present with which to contend, and while there is
a widespread feeling that taxes should be reduced and governmental loans
discontinued, our financial conditions are so far the reverse of critical that
I have no reason to suppose that in so far as concerns conditions in the United
States credits from private sources will not be available for assistance to
continental Europe on sound and adequate security upon terms which recognize
the world-wide shortage of capital resulting from five years of warfare.
2. Funding of the short-term obligations into long-term obligations is a
matter as to which no question has been raised by our Congress and there
should be no difficulty in dealing with this phase of the proposed arrangements
in the manner outlined by Mr, Rathbone. As you have no doubt heard from Mr.
Rathbone, it may be impossible to reach without congressional approval a final
settlement in respect to the interest accruing during the next two or three
years.
3. I regret that conditions are such as to cause you concern in respect to
the Anglo-French loan maturing this fall, and sincerely hope you will have no
difficulty in making satisfactory arrangements to take care o f it.
4. As to the engagement of the British Government in respect to advances
for the purchase of silver under the Pitman Act, this matter is being dealt
with by Mr. Rathbone, who undoubtedly will give full consideration to any
proposal that you have to make in that connection. It is unfortunate that
the Indian Government has not seen fit to take Lteps to limit the importation
of gold into India. Failure to do this is making heavy demands on our gold
reserves. I f continued, this is likely, materially, to impair the ability of our
financial markets to assist Europe.
5. Being in hearty accord with you as to the desirability o f maintaining in­
ternational good-will and understanding, I am in favor o f every reasonable
effort directed to that end, and am opposed to any action which may have a
contrary effect. For these reasons I regret exceedingly that any proposal for
a general cancellation of all intergovernmental war debts should be made
and encouraged. Any movement to this end would most naturally result in
creating in the minds of those who would expect to be benefited thereby not
only the hope that such a plan will be adopted, but would also probably tend
to mislead them into believing in the justice, importance, and necessity of such
a contribution, which if not granted by those who are expected to make it
can only have a harmful result.
Apparently in the hope that the inevitable consequences of the war could be
avoided, various schemes including that for a general coneellation of inter­
governmental war debts were, as far back as January a year ago, launched
in one way or another before it could possibly be foreseen whether or not any
measures were necessary other than that o f the adoption of sound economic
policies, including increased work and production and decreased consumption
and expenditures on the part o f the debtors as well as the creditors o f the
world. I had not heretofore understood that the British Treasury seriously
favored any such plan, although in so far as concerns the British Government,
a general cancellation o f debts as proposed would be of certain advantage and
probably would not involve any sacrifice or contribution. As there are no



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FOREIGN LOANS AND AU T H O R IT Y FOR M A K IN G SAM E.

obligations of tlie United States Government which would be canceled under
such a plan the effect would be that in consideration of a cancellation by the
United States Government of the obligations which it holds for advances made
to the British Government and the other allied Governments, the British Gov­
ernment would cancel its debts against France, Italy, Russia, and her other
allies. Furthermore, your proposal, as I understand, is not based on the
eventual inability of the respective debtor governments to pay their external
debts, but upon the assumption that such a cancellation would improve their
credit, hasten the economic rehabilitation of continental Europe, and improve
international good-will and understanding. In the interest of good-will and
understanding you will, I am sure, desire that I shall present my views not
less frankly than you have done.
Such a proposal, in my judgment, lacks many essential elements of justice,
necessity, expediency, and possibility. It does not involve any mutual sacrifices
or contributions on the part of all the governments concerned, but would in­
volve a unique and almost solitary additional contribution from the United
States. I am surprised that it should be renewed so insistently, especially
when there is no evidence that the debts can not be paid or that the contribution
involved would solve or, in any event, be more than a slight contribution toward
a solution of the difficulties of continental Europe. It does not deal with the
matters out of which the present financial and economic difficulties of Europe
chiefly grow and acceptance of such a plan would not solve those difficulties.
The United States is most earnestly desirous of the prompt financial and
economic rehabilitation of Europe, and in furtherance of that desire has
rendered considerable assistance. Since the armistice the United States Gov­
ernment has extended to foreign governments financial assistance of approxi­
mately $4,000,000,000. This is a very large proportion of the total financial
assistance rendered by the United States Government to the allied governments
before the armistice. Negotiations for funding the principal of the foreign
obligations held by the United States Treasury and postponing or funding the
interest accruing during the reconstruction period are in progress. What this
Government could do for the immediate relief of the debtor countries has, there­
fore, been done. Their need now is for private credits. The steps making it
possible to obtain these can be taken only by the debtor governments them­
selves. I do not think that at the present time the foreign obligations held by
the Government of the United States constitute a practical obstacle to obtain­
ing credits here, nor do I think that the European countries wT
ould obtain a
dollar additional credit as a result of the cancellation of those obligations. On
the contrary, it* might have a bad effect because our investors would construe
such cancellation as an indication of the inability of the debtor governments
to pay. The indebtedness of the allied Governments to each other and to the
United States is not a present burden upon the debtor governments, since they
are not paying interest or even, so far as I am aware, providing in their budgets
or taxes for the payment of either principal or interest. It is not possible
•upon any basis of experience or of existing fact to conclude, if the arrangements
are made which it is hoped to make for the funding of the short-time obliga­
tions into long-time obligations and for the postponement of funding of interest
accruing during the next two or three years, that the respective governments
will not thereafter be able to meet instalments of interest and principal as
they mature.
With the adoption of such measures as their respective Governments can and
should take to assist in a general recovery, I have great confidence in the abil­
ity of the peoples of continental Europe to return to their natural pursuits of
industry and to rehabilitate their trade and commerce sooner than might be
expected after such a destructive war. Some of the debtor Governments have
not levied taxes sufficient to enable them to balance their budgets, nor have
they taken any measures to reduce their budgets to meet their income. There
has been little disarmament. No appreciable progress has been made in de­
flating excessive issues of currency nor in stabilizing the currencies at their
respective approximate present values. In my judgment it is most essential
that there should be a prompt, practical, and definite settlement of the German
reparation question, and the immediate adoption of policies which would set
Germany and Austria free economically in order that they may make their
necessary contribution to the economic rehabilitation o f Europe.
Realizing that the present economic ills of Europe grow not out of interest
which the debtor Governments are not now paying upon their debts to the
United States nor out of principal which is to be funded, but that a release



FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

77

from such difficulties, in so far as that can be obtained, is primarily within
the control of the debtor Governments and the peoples themselves, the Ameri­
can people and the American Congress would not, I am satisfied, look with
favor upon the proposal to them of a cancellation of the obligations held by
the United States Government when it can not be shown that the necessity
for such action is immediate, or that all reasonable measures have been taken
by the debtor Governments to make it possible for them to meet their foreign
obligations, or that the request is part of a necessary composition with all
creditors, domestic and foreign, public and private.
A proposal that the United States should cancel its debts against the allied
Governments would, as you must realize, lack many of the essential elements
above indicated. It would simply result, in effect, in the cancellation by one of
the principal creditors of its claims in order that the claims of the other
creditors might remain intact, and would transfer from the peoples o f the
debtor Governments to the shoulders of the people of the United States the
taxes necessary to liquidate the outstanding obligations of the United States
Government representing the loans made by it to the allied Governments. The
United States Government in little over two years raised for war purposes
through taxes and loans approximately $37,000,000,000, out of which were made
to the allied Governments the loans to assist them in winning the war. The
United States Government has neither received nor sought substantial material
benefits from the war or under the terms of the treaty of peace. On the other
hand, the Allies, although having suffered greatly in loss of lives and prop­
erty, have under the terms o f the treaty of peace and otherwise acquired acces­
sions o f territories, properties, raw materials, and other advantages, including
their claims against Germany for vast indemnities. It would seem that if full
account were taken of these there would be no incentive, desire, or reason to
call upon the United States for further contributions.

SECTION 42.
Letter to the President on Cancellation.
F e b r u a r y 21, 1920.
Memorandum for the President:
As you are aware, efforts beginning with the peace negotiations were made
to bring about a cancellation of our debts against the allied Governments, but
the question was not presented in such a definite way as to require us to take
any formal action. Much to the surprise of the Treasury, in connection with
negotiations which have been under way with the British Treasury regarding
the funding of short-time obligations of the allied Governments into long-time
obligations and the extension of the interest accruing thereon during the next
two or three years, the question has been formally raised by the British
Treasury, both in a communication to Mr. Rathbone and also on a message
from the chancellor of the exchequer sent through the British Embassy in
which, among other questions, the chancellor in effect invites the American
Treasury to a consideration of a general cancellation of all intergovernmental
war debts.
Before his departure for a three days’ absence Secretary Houston approved
the inclosed reply, which he proposes to send to the chancellor if it meets with
your approval. In order not to consume your time in reading the chancellor’s
message, which deals with many questions between the two Treasuries, I am
attaching an extract from that portion of his message dealing with this subject.
For some reason of his own, the chancellor bases his proposal partly on the
theory of an alleged probable financial stringency in this market, which would
make it impossible to obtain private credits here. Just as the people of Europe
were misled into believing German reparations would supply the deficit in
budgets, they are being misled into believing a cancellation of their external
governmental debts will later solve their other difficulties. While the Allies
have never bluntly so stated, their policy seems to be to make Germany
indemnify them for having started the war and to make us indemnify them for
not having entered the war sooner.
Will you kindly indicate your approval or such instructions as you care to
give in respect to the proposed reply ?
(Signed)
N o r m a n H. D a v is .




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FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

F e b r u a r y 23, 1920.
: With reference to my memorandum of February
21, inclosing a proposed reply to the chancellor of the exchequer regarding
the cancellation o f intergovernmental war loans, I desire to submit for your
further information the following consideration:
Without any specific proof, I have for some time suspected that the loans
made by England to France and Italy have not the same standing as our
loans to the Allies. I recall that Mr. Lloyd George told me England could
not afford to force those countries to pay her. Article X I o f the pact o f
London states that:
“ Italy shall receive a military contribution corresponding to her strength
and sacrifices.”
I do not know what this means. It may mean corresponding financial assist­
ance to Italy during the war or after the war or both. In either case it most
probably has a direct relation to the obligations of the Italian Government
now held by the British Government, and it may well be that the British desire
a general cancellation of intergovernmental war debts as a means of discharg­
ing secret treaty provisions. If such is the case, the British might thus in
great part at our expense discharge their treaty obligations.
Article X IY of the pact of London provides that “ Great Britain undertakes
to facilitate for Italy without delay and on favorable conditions the conclusion
of a loan in the London market amounting to not less than 50,000,000 pounds.”
The reference herein to immediate financial assistance may well indicate
that Article X I referred to general financial assistance on a larger scale.
Cordially and faithfully, yours,
(Signed)
N o r m a n H . D a v id .
M y D e a r M r. P r e s i d e n t

T h e P r e s id e n t ,

The White House.
F e b r u a r y 26, 1920.
The document attached hereto, entitled “A proposed
message from the Secretary of the Treasury to the British Chancellor of the
Exchequer,” has been under consideration by Mr. Norman Davis and me for
more than a week. It is in response to a message which came to the Treasury
through the British Embassy from the chancellor about 10 days or 2 weeks
ago. It bears principally on a suggestion contained in his message bearing oil
the general cancellation of interallied debts.
The question with me is whether you would approve my sending such a reply.
Mr. Davis and I are of the opinion that a reply should be sent and that this
will cover the ground. Perhaps you may prefer that no reply whatever be
sent. I should be glad to know your views and to have your instructions.
I am returning Mr. Davis’s memorandum of February 21, which he sent to
you at my request, and also his letter to you of February 23, giving further
information bearing on the matter, particularly parts of articles of the pact of
London.
Faithfully, yours,
D. F. H o u s t o n .
D e a r M b. P r e s i d e n t :

T h e P r e s id e n t .

The White House.

SECTION 43.
Message from the Secretary of the Treasury to England on Cancellation.
m essage

fro m

the

secretar y

OF t h e t r e a s u r y to t h e c h a n c e l l o r of t h e
exchequer.

Your recent message through the British Embassy, in which among other
things you suggest a general cancellation of intergovernmental war debts,
has been received, and Hathbone has transmitted a copy of the communication
sent him by Blackett dealing with the funding of the demand obligations of
the allied Governments held by the United States and England, respectively, in
which the same subject is raised.
I concur with your view that the financial and economic problems of all the
world are closely connected and that Great Britain and the United States
naturally look with concern upon the difficulties which confront continental



FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

79

Europe. Tlie United States Treasury has been greatly interested in information
reaching it concerning the situation of Great Britain and has viewed with
pleasure and satisfaction the progress which your Government has been making
toward a return to a peace basis. While we are at present confronted with
difficult problems, our financial situation is not at all critical. On the contrary,
it is such that I have reason to think that credits from private sources may
be made available to continental Europe on sound and adequate security and
on terms which recognize the world-wide shortage of capital resulting from
five years o f warfare.
Funding of the short-term obligations into long-term obligations is a matter
as to which no question has been raised by our Congress and there should be
no difficulty in dealing with this phase of the proposed arrangements in the
manner outlined by Mr. Rathbone. As you have no doubt heard from Mr.
Rathbone, it may be impossible to reach without congressional approval a
final settlement in respect to the interest accruing during the next two or
three years.
I regret that conditions are such as to cause you concern in respect to the
Anglo-French loan maturing this fall, and sincerely hope you will have no
difficulty in making satisfactory arrangements to take care o f it.
As to the engagement o f the British Government in respect to advances for
the purchase of silver under the Pittman Act, this matter is being dealt with
by Mr. Rathbone, who undoubtedly will give full consideration to any proposal
that you have to make in that connection. It is unfortunate that the Indian
Government has not seen fit to take steps to limit the importation of gold into
India. Failure to do this is making heavy demands on our gold reserves. I f
continued, this is likely materially to impair the ability of our financial markets
to assist Europe.
As to the general cancellation o f intergovernmental war debts suggested by
you, you will, I am sure, desire that I present my views no less frankly than
you have presented yours. Any proposal or movement of such character would,
I am confident, serve no useful purpose. On the contrary, it would, I fear,
mislead the people of the debtor countries as to the justice and efficacy of
such a plan, and arouse hopes, the disappointment o f which could only have
a harmful effect. I feel certain that neither the American people nor our
Congress, whose action on such a question would be required, is prepared to
look with favor upon such a proposal.
Apparently there are those who have been laboring for some time under the
delusion that the inevitable consequences of war can be avoided. As far back as
January a year ago, before it could possibly be foreseen whether any measures
were necessary other than the adoption o f sound economic policies, various
schemes, including that o f a cancellation o f intergovernmental war debts, were
launched. Of course, I recognize that a general cancellation of such debts
would be of advantage to Great Britain, and that it probably would not in­
volve any losses on her part. As there are no obligations of the United States
Government which would be canceled under such a plan, the effect would be
that in consideration o f a cancellation by the United States Government of
the obligations which it holds for advances made to the British Government
and the other allied Governments the British Government would cancel its
debts against France, Italy, Russia, and her other allies. Such a proposal does
not involve mutual sacrifice on the part of the nations concerned. It simply
involves a contribution mainly by the United States. The United States has
shown its desire to assist Europe. Negotiations for funding the principal of
the foreign obligations held by the United States Treasury and for postponing
or funding the interest accruing during the reconstruction period are in prog­
ress. Since the armistice this Government has extended to foreign Govern­
ments financial assistance to the extent of approximately $4,000,000,000. What
this Government could do for the immediate relief of the debtor countries has
been done. Their need now is for private credits. The indebtedness o f the
allied Governments to each other and to the United States is not a present
burden upon the debtor Governments, since they are not paying interest, or
even, as far as I am aware, providing in their budgets or taxes for the payment
of either principal or interest. At the present time the foreign obligations
held by the Government of the United States do not constitute a practical
obstacle to obtaining credits here, and I do not think that the European coun­
tries would obtain a dollar additional credit as a result o f the cancellation o f
those obligations. The proposal does not touch matters out of which the pres­
ent financial and economic difficulties of Europe chiefly grow. The relief from



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FOREIGN LOANS AND AU T H O R IT Y FOR M A K IN G SAM E .

present ills, in so far as it can be obtained, is primarily within the control of
the debtor Governments and peoples themselves. Most of the debtor Govern­
ments have not levied taxes sufficient to enable them to balance their budgets,
nor have they taken any energetic and adequate measures to reduce their
expenditures to meet their income. Too little progress has been made in dis­
armament. No appreciable progress lias been made in deflating excessive issues
of currency or in stabilizing the currencies at new levels, but in continental
Europe there has been a constant increase in note issues. Private initiative
has not been restored. Unnecessary and unwise economic barriers still exist.
Instead of setting trade and commerce free by appropriate steps, there appear
to be concerted efforts to obtain from the most needy discriminatory advantages
and exclusive concessions. There is not yet apparent any disposition on the part
of Europe to make a prompt and reasonable definite settlement of the reparation
claims against Germany or to adopt policies which will set Germany and Aus­
tria free to make their necessary contribution to the economic rehabilitation of
Europe.
After taking all the measures within their power, one or more of the debtor
Governments may ultimately consider it necessary or advantageous to make
some general settlement of llieir indebtedness. In such a case, they would, I
presume, propose to all creditors, domestic and foreign, a general composition
which would take into account advantages obtained by such debtor country
under the treaty of peace. How the American people or the American Con­
gress would view participation in such a composition, I can not say. It is very
clear to me. however, that a general cancellation of intergovernmental war
debts, irrespective of the positions of the separate debtor Governments, is of
no present advantage or necessity. A general cancellation as suggested would,
while retaining the domestic obligations intact, throw upon the people of this
country the exclusive burden of meeting the interest and of ultimately extin­
guishing the principal of our loans to the allied Governments. This Nation has
neither sought nor received substantial benefits from the war. On the other
hand, the Allies, although having suffered greatly in loss of lives and property,
have, under the terms of the treaty of peace and otherwise, acquired very con­
siderable accessions of territories, populations, economic, and other advantages.
It would, therefore, seem that if a full account were taken of these and of the
whole situation, there would be no desire nor reason to call upon the Govern­
ment of this country for further contributions.

SECTION 44.
Cancellation and Interest-Funding Negotiations.
P a r i s , May 25, 1920.
Washington:
Most urgent. 1198. May 25, 7 p. m.
R-530. Secretary of the Treasury, Leftingwell and Davis from Rathbone.
Supplementing my R-529.
First. In writing chancellor before I left London I stated as follow s: “ I have
explained to Mr. Blackett quite fully the legal situation which exists regarding
the demand obligations which the United States Treasury holds of the British
Government and the firm necessity of our asking for payment of the interest?
which has accrued on these demand obligations if we are unable to postpone
such collection in accordance with the terms of long-time obligations in such
form as it may be agreed upon and which your Government will agree to deliver
in exchange for such demand obligations upon the request of the Secretary of
the Treasury.”
Second. Under date of May 19 I received following letter from chancellor:
“ I am very sorry that I did not see you again before I left, but, as Blackett
explained, my time was fully occupied by deputations with whom I had already
made appointment. I have reported to the cabinet the general tenor of the
discussions which have passed between us and of the arrangements which we
were seeking to effect for the settlement of outstanding points, but amidst the
pressure of other urgent business they have not hitherto been able to give to
these questions the full consideration which they deserve. I avail myself, there­
fore, of your kind offer to come and see me again before you sail for America.
If you could fix your visit for Tuesday, the 1st, or Wednesday, the 2d June,
I think I could promise to be in a position to express our considered opinion
to you.”
S e c r e ta r y o f S ta te ,




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E .

81

Third. Before replying to that letter I received telephone message from Brit­
ish Embassy quoting telegram stating that chancellor had written me further
letter which would render it unnecessary for me to go to London.
Fourth. Have just received the following letter from chancellor: “ The cabi­
net has this morning given prolonged and careful consideration to the proposals
which have been discussed between us for the treatment of British indebtedness
to the American Government and the parallel treatment by both the United
States and Great Britain of the debts due to them by France, Italy, and other
allied Governments. Since I had my last meeting with you the discussion be­
tween the prime ministers of France and Great Britain at Lympne have, on the
initiative of the French, resulted in an agreement that in order to provide a
solution for the economic difficulties which are gravely weighing upon the gen­
eral situation of the world and in order to mark a definite beginning of the era
of peace the settlement of the debts between them and the other European allies
should proceed on parallel lines with such of the reparation debts of the Central
Empire.
“ The question of European indebtedness to America was not discussed at
this conference at which no American representative was present, but before
proceeding further with the consideration of detailed proposals for the treat­
ment of the British debt to the United States Government, which, as explained
by you, were intended to form the basis for similar arrangements between the
Unied States and Great Britain on the one hand and the allied nations indebted
to both of them on the other, we feel that their applicability to the general
situation must be further explored and that it raises questions of great ini'
portance unsuited for departmental treatment between our ttco treasuries.
Discussions on the subject took place at an earlier (?) between President
Wilson and the prime minister and the prime minister proposes now to resume
these discussions and will send a communication on this subject for the Presi­
dent’s consideration. It was with great reluctance that I made my request
that you should return here, for I fear that it would have involved considerable
inconvenience to you and I am glad that such a decision removes the necessity
for interfering with your plans. My only regret is that it also deprives me of
the pleasure of seeing you again and personally offering you my good wishes in
an emergency.”
Fifth. Am writing chancellor to-day as follow s: “ I was about to sign a
letter to you advising that I would be in London on 1st in accordance with
the suggestion in your letter o f the 19th instant when I received your *message
that you had written me another letter which would render my visit to London
unnecessary. I have now the honor to acknowledge the receipt of your letter
of May 21 which reached me this morning. In view of the communication
which the prime minister is about to send to the President, I have referred
your letter to the Secretary o f the Treasury and shall not now attempt to
discuss the matter you refer to beyond restating the views of the United States
Treasury that the questions relating to the debt of the British Government to
the United States Government must be settled by those two Governments only
and that the indebtedness of other Governments to the American Government
or to the British Government and the payment by Germany of reparations are
in no way related to the postponement of interest on our behalf and funding
of the obligations of the British Government held by the United States
Treasury nor to the other matters which were discussed during my month’s*
stay in England for that purpose. Permit me to express my regret that the
termination of my pleasant negotiations with the British Treasury, which when
I left Mr. Blackett on the 18th instant had resulted in substantial agreement on
nearly all points and gave fair promise that agreement would be speedily reached
on the few matters that remained to be settled. You will recall that the ar­
rangement under discussion was one which it was clearly understood that
neither the American nor the British Treasury intended to adopt in dealing with
the obligations of other Governments held by them, respectively. Regretting
that I shall not have the pleasure of seeing you again before leaving for
America, I am, my dear Mr. Chancellor.”
Sixth. In view of practical refusal of British Government to further negotiate
on these points, there is nothing more that can be done here so far as questions
with British are involved, and in view of sudden turn taken by these negotiations
I believe it would be inadvisable for me to attempt negotiations here with other
countries. May 25,11 a. m.
W allace.

S. Doc. 86,67-2------ 6



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FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

SECTION 45.
British Call Off Negotiations for Funding Debt.
I. The Secretary of the Treasury has received the letter addressed to As­
sistant Secretary Rathbone by the chancellor of the exchequer under date of
May 22, 1920, and has consulted with the President in regard to the same.
II. It has been at all times the view of the United States Treasury that ques­
tions regarding the indebtedness of the Government of the United Kingdom of
Great Britain and Ireland to the United States Government and the funding of
such indebtedness had no relation either to questions arising concerning the war
loans of the United States and of the United Kingdom to other Governments or
to questions regarding the reparation payments of the Central Empires of
Europe. These views were expressed to the representatives of the British
Treasury constantly during the period when the United States Government was
making loans to the Government of the United Kingdom and since that time in
Washington, in Paris, and in London. The views of the President on the sub­
ject were stated at length to the prime minister in a letter dated May 5, 1919.
III. While at the outset of Mr. Ratlibone’s d ;scussions with Mr. Blackett of
the British Treasury during the latter part of the year 1919 and the beginning
of the year 1920 in Paris and in London it was thought that the arrangements
being discussed for the funding of the obligations of the United Kingdom held
by the United States might form the basis of arrangements thereafter to be
made with other debtor Governments by t*he United States and British Treasu­
ries, respectively, later Mr. Blackett made it plain that the British Treasury
proposed to make other and different arrangements as to the obligations it
held of allied Governments and thereafter the discussions in London between
Mr. Blackett and Mr. Rathbone proceeded on that basis.
IV. While the Secretary of the Treasury has felt some surprise that Mr.
Rathbone’s negotiations in London, undertaken there at the suggestion of the
British Treasury, have been interrupted, he desires to express his regret that
the chancellor of the exchequer does not himself feel able to continue the same.
Congress has. however, delegated to the Secretary of the Treasury the sole au­
thority to deal with these matters and the Secretary suggests that such repre­
sentative of the Government of the United Kingdom as has the necessary au­
thority to negotiate with him the fulfillment of the obligation o f the Govern­
ment of the Un'ted Kingdom to convert their demand obligations held by the
United States Treasury into long-term obligations proceed to Washington for
that purpose.
V. In his letter of May IS, 1920. to the chancellor. Mr. Rathbone advised
that he had theretofore explained to Mr. Blackett the legal situation which
made it necessary that payment of accrued interest on demand obligations of
the British Government held by the United States Treasury should be asked
unless postponed in accordance with the terms of long-time obligations in such
form as might be agreed upon and which the Government of the United King­
dom would agree to deliver in exchange for such demand obligations upon the
request of the Secretary of the Treasury. Accordingly the Secretary of the
Treasury expresses his hope that the interrupted negotiations for the funding
of the demand obligations of the Govenment of the United Kingdom be resumed
at the earliest possible date.
VI. In Mr. Blackett’s letter of .Tune 1, 1920, to Mr. Rathbone he suggested the
immediate settlement of the various questions discussed in London, with which
the British Treasury is competent to deal, thus leaving a clear field for
further discussion of long-term bonds. The Secretary of the Treasury does not
feel able to release the Government of the United Kingdom from its obligations
in respect to the so-called subrogated securities except in connection with an
agreement regarding the long-term bonds; otherwise he is prepared to meet the
suggestion made by the British Treasury and to agree with it regarding the
Pittman silver advances and dollar reimbursement questions in accordance with
the text of the memoranda on these subjects which Mr. Rathbone handed Mr.
Blackett in London as a result of their discussion. I f these matters are thus
arranged the Secertary of the Treasury is likewise prepared in order to comply
with the suggestion made by the British Treasury to enter into the following
agreement regarding the United States advances to the United Kingdom for
Austrian relief, viz:
“ Of the demand obligations of the Government of the United Kingdom held
by the United States Government, obligations aggregating $10,000,000, principal



FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

83

amount represent advances to the United Kingdom for its purchases of food­
stuffs in the United States subsequently sold by the United Kingdom to Austria,
all in pursuance of arrangements for the relief of Austria made by or on behalf
of the Governments of the United States, the United Kingdom, and other gov­
ernments. It is understood that the British Treasury will pay forthwith the
principal of said demand obligations held by the United States Government in
the amount of $16,000,000, together with interest accrucd thereon at the rate of
5 per cent to the date of payment as to $8,000,000 thereof from zipril 15, 1919,
and as to the remaining $8,000,000 from May 15, 1919; but such payments shall
in no manner release the Government of the United Kingdom from its under­
taking to sell to Austria foodstuffs purchased in the United States to the value
of $16,000,000 as provided in the arrangements for the relief of Austria herein­
before referred to.”

SECTION 46.
Message from the British Prime Minister to the President on Cancellation.
EXTRACT FROM BRITISH PRIME MINISTER’ S LETTER OF AUGUST 5,
PRESIDENT.

1920, TO THE

I come now to the other question I wish to write to you about, and that is
the knotty problem of interallied indebtedness. Indeed; I promised Mr. Rathbone long ago that I would write to you about it, but I have had to put it off
for one reason and another till now. The British and the French Governments
have been discussing during the last four months the question of giving fixity
and definiteness to Germany’s reparation obligations. The British Government
has stood steadily by the view that it was vital that Germany’s liabilities
should be fixed at a figure which it was within the reasonable capacity of G e r ­
many to pay, and that this figure should be fixed without delay, because the
reconstruction of Central Europe could not begin nor could the Aliies themselves
raise money on the strength of Germany’s obligation to pay them reparation
until her liabilities had been exactly defined. After great difficulties with his
own people, M. Millerand found himself able to accept this view—but he pointed
out that it was impossible for France to agree to accept nothing less than it was
entitled to under the treaty, unless its debts to its allies and associates in the
war were treated in the same way.
This declaration appeared to the British Government eminently fair. But
after careful consideration they came to the conclusion that it was imposible
to remit any part of what was owed to them by France except as part an ] par­
cel of all around settlement of interallied indebtedness. I need not go into the
reasons which led to this conclusion which must be clear to you. But the prin­
cipal reason was that British public opinion would never support a one-sided
arrangement at its sole expense, and that if such a one-sided arrangement
were made it could not fail to estrange and eventually embitter the relations
between the American and British people, with calamitous results to the future
of the world. You will remember that Great Britain borrowed from the United
States about half as much as its total loans to the Allies, and that after
America’s entry into the war it lent to the Allies almost exactly the same
amount as it borrowed from the United States of America. Accordingly, the
British Government has informed the French Government that it will agree to
any equitable arrangement for the reduction or cancellation of interallied in­
debtedness, but that such an arrangement must be one which applies all around.
As you know, the representatives of the Allies and of Germany are meeting at
Geneva in a week or two to commence discussion on the subject of reparation.
I recognize that in the midst of a presidential election and with Congress not
in session it is impossible for the United States to deal with this question in
a practical manner, but the question is one of such importance to the future of
Europe, and indeed to the relations between the allied and associated powers,
that I should very much welcome any advice which you might feel yourself
able to give me as to the best method of securing that the whole problem could
be considered and settled by the Uuited States Government in concert with its
associates at the earliest possible moment that the political situation in America
makes it possible.
There is one other point which I should like to add. When the British Gov­
ernment decided that it could not deal with the question of the debts owed to



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FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

it by its allies except as part and parcel of an all-around arrangement of inter­
allied debts, the chancellor of the exchequer told Mr. Rathbone that he could
not proceed any further with the negotiations which they had been conducting
together with regard to the postponement of the payment of interest on the
finding of Great Britain’s debts to America. I should like to make it plain that
this is due to no reluctance on the part of Great Britain to fund its debt, but
solely to the fact that it can not bind itself by any arrangement which would
prejudice the working of any interallied arrangement which may be reached
in the future. If some method can be found for funding the British debt which
does not prejudice the larger question, the British Government would be glad
to fall in with it.

SECTION 47.
Letters Showing United States' Treasury Refused to Consider Cancellation.
DRAFT.

It should be pointed out at the outset that the Secretary of the Treasury is
authorized by United States law to arrange for the conversion of the demand
obligations of the British Government into its obligations having a fixed date
of maturity, in accordance with the agreement of the British Government to
make such exchange on demand contained in its existing obligations. In con­
nection with such exchange, the Secretary of the Treasury has authority to
arrange for the postponement of interest payments. No authority has been
given by the Congress to any one to exchange, remit, or cancel any part of the
indebtedness of the allied governments to the United States represented by
their respective demand obligations. It would require congressional authority
to authorize any such dealing with the demand obligations and, as stated in
the letter of November 18, 1919, from then Assistant Secretary of the Treasury
Rathbone to Mr. Blackett, of the British Treasury, the Congress has the same
authority to authorize any disposition of obligations of the British Government
held by the United States, whether represented by demand obligations or by
obligations having a fixed date of maturity. Frankness, however, compels the
statement that it is improbable that either the Congress or popular opinion
in this country will ever permit a cancellation of any part of the debt of the
British Government to the United States in order to induce the British Govern­
ment to remit, in whole or in part, the debt to Great Britain of France or of
any other of the allied governments, or that it would consent to a cancellation
or reduction in the debts of any of the allied governments as an inducement
toward a practical settlement of the reparation claims. As a matter of fact,
such a settlement, in our judgment, would in itself increase the ultimate
financial strength o f the Allies.
Suggestions looking to the cancellation or exchange of the indebtedness of
Great Britain to the United States were made when the President was in
Paris. Like suggestions were again made by the chancellor of the exchequer
in the early part of the present year. The United States Government by its
duly authorized representatives has promptly and clearly stated its unwilling­
ness to accept such suggestions each time they have been made and has pointed
out in detail the considerations which caused its decision.
The views of the United States Government have not changed, and it is not
prepared to consent to the remission of any part of the debt of Great Britain
to the United States. Any arrangements the British Government may make with
regard to the debt owed to it by France or by the other allied governments should
be made in the light of the position now and heretofore taken by the United
States, and the United States, in making any arrangements with other allied
governments regarding their indebtedness to the United States (and none are
now contemplated beyond the funding of indebtedness and the postponement of
payment of interest) will do so with the confident expectation of the payment
in due coruse of the debt owed the United States by Great Britain. It is felt
that the funding of these demand obligations of the British Government will
do more to strengthen the friendly relations between America and Great Britain
than would any other course of dealing with the same.
The United States Government entirely agrees with the British Government
that the fixing of Germany’s reparation obligation is a cardinal necessity for
the renewal of the economic life of Europe and would prove to be most helpful



FOREIGN LOANS AND AU T H O R IT Y FOR M A K IN G SAM E .

85

in the interests of peace throughout the world; however, it fails to perceive
the logic in the suggestion in effect either that the United States shall pay
part of Germany’s reparation obligation or that it shall make a gratuity to
the allied governments to induce them to fix such obligation at an amount
within Germany’s capacity to pay. This Government has endeavored hereto­
fore in a most friendly spirit to make it clear that it can not consent to connect
the reparation question with that of intergovernmental indebtedness. It would
seem wise, therefore, that our position should be clearly understood in order
to avoid any further delay in a constructive settlement of reparations with the
hope that the debts to this Government can form a part of such settlement.
The long delay which has occurred regarding the funding of the demand
obligations is already embarrassing the Treasury, which will find itself com­
pelled to begin to collect back and current interest if progress is not made
with the funding. Unless arrangements are completed for funding such loans,
and in that connection for the deferring of interest, in the present state of
opinion here they are apt to become a dangerous source of misunderstanding
and bitterness with our people.
It is highly important that a British representative, with proper authority,
proceed to Washington without delay to arrange to carry out the obligation of
the British Government to convert its demand obligations held by our Treas­
ury into long-time obligations.
The United States Government recognizes the importance, in the interests
of peace and prosperity, of securing the restoration o f financial and industrial
stability throughout Europe. The war debts of the allied governments, the
treaty obligations of Germany under the reparation clauses of the treaty o f
Versailles, and the annexes thereto, and of other enemy and exenemy countries
under the treaties nogotiated with them, the administration of countries under
the mandates provided for by such treaties, and the existing arrangements
between the Governments of various countries have or may have an important
bearing in making plans to accomplish such restoration. It is the view o f the
United States Government that in accrediting a representative to Washington
for the purpose mentioned it might prove expedient that the British Govern­
ment should authorize him to enter into discussions of all of these matters
with the proper representatives of the United States Government.
O ctober

11, 1920.

Personal and private.
Hon. N o r m a n D a v is ,
Assistant Secretary of State.
M y D e a r D a v i s : I inclose herewith a draft of a letter for the President’s
consideration, covering the financial part of the prime minister’s letter to the
President. I believe you have gone over the substance of this very carefully
with Mr. Kelly. I think we ought immediately to connect what the State De­
partment has to say with this and send a complete letter to the President.
Faithfully, yours,
D. F . H o u s to n .
(Copy was sent Mr. Davis in the Secretary’s letter of Oct. 11, 1920.)

I turn now to the problem of interallied indebtedness which you raise. I
must deal with this matter with great frankness, as I am sure you wish me
to do. It is desirable that our position be clearly understood in order to avoid
any further delay in a constructive settlement of reparations, which may arise
from the hope that the debts to this Government can form a part of such
settlement. It will be helpful if, first o f all, I indicate our legal situation.
The Secretary of the Treasury is authorized by United States law to arrange
for the conversion of the demand obligations of the British Government into
its obligations having a fixed date of maturity, in accordance with the agree­
ment of the British Government to make such exchange on demand contained
in its existing obligations. In connection with such exchange, the Secretary
of the Treasury has authority to arrange for the postponement of interest pay­
ments. No power has been given by the Congress to any one to exchange,
remit, or cancel any part o f the indebtedness of the allied governments to the
United States represented by their respective demand obligations. It would
require congressional authority to authorize any such dealing with the demand




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FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

obligations, and. as slated in tlie letter of November 18, 1919, from Mr. Rath­
bone to Mr. Blackeit, of the British Treasury, the Congress has the same au­
thority to authorize any disposition of obligations of the British Government
held by the United States, whether represented by demand obligations or by
obligations having a fixed date of maturity. It is highly improbable that either
the Congress or popular opinion in this country will ever permit a cancellation
of any part of the debt of the British Government to the United States in order
to induce the British Government to remit, in whole or in part, the debt to
Great Britain of France or any other of the allied governments or that it
would consent to a cancellation or reduction in the debts of any o f the allied
governments as an inducement toward a practical settlement of the reparation
claims. As a matter of fact such a settlement, in our judgment, would in
itself increase the ultimate financial strength of the Allies.
You will recall that suggestions looking to the cancellation or exchange of
the indebtedness of Great Britain to the United States were made to me when
I was in Paris. Like suggestions were again made by the chancellor of the ex­
chequer in the early part of the present year. The United States Government
by its duly authorized representatives has promptly and clearly stated its
unwillingness to accept such suggestions each time they have been made, and
has pointed out in detail the considerations which caused its decision. The
views of the United States Government have not changed, and it is not pre­
pared to consent to the remission of any part of the debt of Great Britain to
the United States.
Any arrangements the British Government may make with regard to the
debt owed to it by France or by the other allied governments should be made in
the light of the position now and heretofore taken by the United States, and the
United States, in making any arrangements with other allied governments re­
garding their indebtedness to the United States (and none are now contem­
plated beyond the funding of indebtedness and the postponement of payment of
interest) will do so with the confident expectation of the payment in due course
of the debt owed the United States by Great Britain. It is felt that the funding
of these demand obligations of the British Government will do more to
strengthen the friendly relations between America and Great Britain than would
any other course of dealing with the same.
The United States Government entirely agrees with the British Government
that the fixing of Germany's reparation obligation is a cardinal necessity for
the renewal of the economic life of Europe and would prove to be most helpful
in the interests of peace throughout the w orld; however, it fails to perceive
the logic in a suggestion in effect either that the Untied States shall pay part
of Germany's reparation obligation or that it shall make a gratuity to the allied
governments to induce them to fix such obligation at an amount within Ger­
many’s capacity to pay. This Government has endeavored heretofore in a most
friendly spirit to make it clear that it can not consent to connect the reparation
question with that of intergovernmental indebtedness.
The long delay which has occurred in the funding o f the demand obligations
is already embarrassing the Treasury, which will find itself compelled to begin
to collect back and current interest if speedy progress is not made with the
funding. Unless arrangements are completed for funding such loans and in
that connection for the deferring of interest, in the present state of opinion here,
there is likely to develop a dangerous misunderstanding. I believe it to be
highly important that a British representative with proper authority proceed to
Washington without delay to arrange to carry out the obligation of the British
Government to convert its demand obligations held by our Treasury into long­
time obligations.
The United States Government recognizes the importance, in the interests of
peace and prosperity, of securing the restoration of financial and industrial sta­
bility throughout Europe. The war debts of the allied governments, the treaty
obligations of Germany under the reparation clauses of the treaty of Versailles
and the annexes thereto, and of other enemy and ex-enemy countries under the
treaties negotiated with them, the administration of countries under the man­
dates provided for by such treaties, and the existing arrangements between the
Governments of various countries have or may have an important bearing in
making plans to accomplish such restoration. It is the view of the United
States Government that in accrediting a representative to Washington for the
purpose mentioned it might prove expedient that the British Government should
authorize him to enter into discussions of all of these matters with the proper
representatives of the United States Government.







RUSSIA

87




SECTION 48.
Russia.

Memorandum, prepared for the Senate Committee on the Judici­
ary, from the correspondence of the Treasury Department covering
the loans to Russia. In order that this data may be properly un­
derstood a brief word of explanation is necessary.
The Milyukoff government succeeded the Czar’s government in
Russia during March, 1917. This government was afterwards known
as the Kerensky Provisional Government. Boris Bakhmeteff was
sent on a special mission to the United States by the Kerensky Pro­
visional Government late in the spring of 1917, the mission having
much the same duties as the Root Mission from the United States to
Russia. After Bakhmeteff arrived here he was appointed as the
ambassador from the Kerensky Provisional Government.
Under the four Liberty bond acts the Government of the United
States was authorized to loan money to foreign Governments then
engaged in war with enemies of the United States for the prosecu­
tion of the war. Pursuant to these acts the Treasury Department
established credits for the Kerensky Provisional Government of Rus­
sia in the aggregate of $450,000,000. On this credit $187,729,750 was
advanced to Russia.
The date of the advances and the amounts so advanced are as fol­
lows: June 6,1917, $35,000,000; June 13, 1917, $10,000,000; August 1,
1917, $2,500,000; August 22, 1917, $2,500,000; August 24, 1917, $37,500,000; August 30, 1917, $10,000,000; September 25. 1917, $15,000,000; October 2, 1917, $22,200,000; October 11, 1917, $20,000,000;
October 24, 1917, $5,000,000 ; November 1, 1917, $31,700,000; Novem­
ber 15,1917, $1,329,750.
The advancement made on October 24 was for a specific purpose
to be used through Rumania. This advance was afterwards with­
drawn. The advance on November 15 was an advance made to pay
interest due the United States.
In addition to the $187,000,000 loan, above referred to, there is
now due, as shown by the Treasury report of the date of November
15,1920, $14,092,609 30, which is the interest due on the Russian loan.
We also hold obligations of the so-called provisional Russian Gov­
ernment for war material sold by the War Department to various
branches of that Government, dated August 8, 1919, $406,092. We
also hold the obligations of the provisional government for food­
stuffs sent through the American Relief Administration the sum of
$4,465,465.07. This obligation is dated July 1,1919. This money was
taken from the President’s fund of $150,000,000. In addition to these
sums there were a number of private loans floated in this country
r
through J. P. Morgan, The Guaranty Trust Co., The National City
Bank, and other large banking institutions prior to our entrance into
the war. These private loans to Russia aggregate over $96,000,000.
Summing up all of these obligations we find that we are now holding
Russian obligations aggregating over $302,000,000.
in addition to these loans to the provisional Government of Russia
direct we hold the obligations of various subdivisions of what was



89

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FOREIGN LOANS AND AU TH O RITY FOR M A K IN G SAM E.

formerly the Government of Russia in the aggregate of over $30,000,000. These obligations are from the Government of Esthonia,
Finland. Latvia, and Lithuania. I f these Governments remain as sepa­
rate Governments, then, of course, these obligations will eventually be
paid by them if paid at all. But if Russia when it finally emerges from
its present chaotic condition insists on recognition of its original
boundaries, these Governments will be a part of Russia.
Immediately after the fall of the Kerensky government on Novem­
ber 1, 1917, the Treasury Department canceled all of the credits over
and above the $187,000,000 referred to.
The first act of the new bolshevik government of Russia was to de­
clare that all foreign loans were from that date null and void.
When the United States Government first started making advances
to the Kerensky provisional government that government then had
to its credit in the National City Bank of New York City approxi­
mately $11,000,000. In addition to the advances made by the United
States Government it sold property belonging to the Russian Govern­
ment in this country and realized therefrom approximately $13,000,000. This made the total of its available balances approximately

$211,000,000.
During the summer of 1917 the provisional government entered into
large contracts with American contractors for various war supplies.
When the provisional government fell these contracts were in various
stages of completion. Our Government, instead of declaring the pro­
visional Government of Russia a bankrupt and stepping in and taking
complete charge of the assets and administering the estate, continued
to recognize the provisional government’s ambassador, Mr. Bakhme­
teff, and allowed him to carry on the functions of his office to the end
that he settle up the affairs of the Kerensky government under the
United States Treasury supervision of his bank balance.
During his term of office here as a de facto ambassador of the
Russian people, Mr. Bakhmeteff has represented first the Milyukoff
Kerenski government, second the Kolchak government of Russia,
third the Wrangel government of Russia, and at the present time
there is no faction in Russia strong enough to set up a de facto
government which he could possibly represent.
Some interesting facts about the unbusinesslike manner in which
the Russian affairs were administered by this government are shown
by the fact that the War Department of the United States Govern­
ment purchased from the provisional Russian government after its
fall war munitions which had been contracted for by that govern­
ment to the extent of $11,000,000. Instead of paying that $11,000,000
into the United States Treasury and crediting that sum as a payment
on the Russian loan the $11,000,000 was paid into the National City
Bank to the credit of Mr. Bakhmeteff.
The Shipping Board chartered some vessels belonging to the pro­
visional Russian Government. It paid Mr. Bakhmeteff over $1,400,000 for these vessels. This money was paid direct to the National
City Bank to Mr. Bakhmeteff’s credit, but none of it was paid to the
United States Government for credit on the loan or on the interest
due from Russia. About $300,000 remains due the Russian Govern­
ment from the Shipping Board on these stocks. The Navy Depart­
ment of the United States Government was indebted to the Russian
Government for certain vessels it used. It also made payments direct



FOREIGN LO ANS AND AU T H O R IT Y FOR M A K IN G SAM E.

91

to Mr. Bakhmeteff instead of paying this money into the United
States Treasury, where it could be credited on the Russian loan.
There was a fund of $1,000,000 in gold deposited in the Mint at
San Francisco, Calif., by the provisional government of Russia, as
a forfeiture on certain war supplies which were to be purchased from
the War Department of the United States. When the Kolchak gov­
ernment fell this contract could not be carried out. According to
the contract the $1,000,000 in gold was put up as a forfeiture. The
War Department of the United States settled with the Russian Am­
bassador, charging him only $585,000 on the contract. The remaining
$415,000 which this Government then had in its possession was im­
mediately turned over to Mr. Bakhmeteff, instead of being credited
on the Russian loan or interest.
At the time of the fall of the Kerensky government there was ap­
proximately $56,000,000 in the National City Bank to the credit of
that government.
According to Mr. Bakhmeteff’s report, over $50,000,000 munitions
and supplies have been sent from this country to Russia. Practically
all of these supplies could have been sold in this country and the
money credited on the Russian loan if the matter had been handled
in a businesslike manner.
In the data which I append hereto I desire to call especial atten­
tion to the enormous expenditures which were made by Mr. Bakh­
meteff out of this fund. You will note in one of his salary reports
that he used approximately $2,500,000 for this fund. With this fund
he was keeping up the embassy here, two or three consulates in this
country, and several offices in Russia.
I want also to call the attention of the committee to the $100,000
item of expense for sending the Russian provisional government
ministers and agents to the peace conference.
It is also interesting to note that we paid $1,239,000 as a printing
bill for printing Russian paper money in this country, and you will
find in the attached correspondence letters in which the defaeto Rus­
sian ambassador requests that we keep up the embassies of the de
facto government in South America.
I want to also call your attention to a cablegram from Ambassador
Francis in which he states that Boris Bakhmeteff, the ambassador
for the provisional government, was the financial agent of the Czar
of Russia. He also cabled that the former Czar of Russia Avas the
owner of approximately $100,000,000 of stocks and bonds in various
business concerns and railroads in this country. It would seem that
these stocks and bonds having been purchased with the money of the
Russian people would be subject to attachment by the Government
of the United States and in that way this Government could get back
some of the millions it has put up for Russia.
I
will attach hereto the letter and documents which go to substan­
7
tiate the statement made above.
In order that the committee may have the views of both the Treas­
ury Department and Mr. Bakhmeteff about these loans, I have at­
tached a synopsis giving the attiude of the Assistant Secretary of the
Treasury and Mr. Bakhmeteff.
To make the Russian expenditures and loans complete, there
should be added the amount spent out of the presidential fund not
already referred to.



92

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

Acording to a partial report by President Wilson of the expendi­
tures made by him under the $150,000,000 appropriation given him
for the purpose of prosecuting the war it appears that he spent
$15,815,523.67 for investigation, propaganda, relief work, and the
operation of the railroads in Russia in 1917 and 1918. This report is
filed with the Secretary of the Senate. The report includes the
$5,000,000 given to the Archangel district for relief purposes already
referred to. It also includes an additional $5,000,000 for relief work
T
and $4,500,000 for operation of the Siberian Railroad and an addi­
tional item of $1,000,000 for military supplies in Russia. Also
$25,000 for a publicity campaign in Russia during 1917; $50,000 for
the Root Mission; and $50,000 for the Railroad Mission.
All of these expenditures were made direct and we hold no obliga­
tions from the Russian Government or promises from them to repay
this fund.
In addition to the funds above referred to a letter from Newton
D. Baker, former Secretary of War, dated February 1, 1921, copy of
which is attached to this report, shows that the cost of our military
forces in the Archangel district from August 1, 1918, to March 31,
1920, amounted in all to $1,149,428.88. This letter also shows that
the expenditures by the War Department for the United States mili­
tary forces in Siberia from August 1, 1918, to August 24, 1920,
amounted in all to $8,049,068.31. These items of course were expendi­
tures by the Government of the United States and we hold no promis­
sory note from Russia to cover them.
T reasury D epartm en t,

Washington, June 28, 1919.
Memorandum for Mr. Leffingwell:
The Russian situation must be dealt w
’ith as a whole. The payment of interest
on Russian securities held by private persons in the United States is only one
element of the Russian financial situation which has produced one of the most
difficult problems arising- out of the war, and one in which the results obtained
by the work of the State Department and the Treasury Department are a source
of much satisfaction to those departments. Before the entry of the United
States into the war the Russian Government had made large purchases in this
country. These were financed in part by the British Government, which through
J. P. Morgan & Co., who were then acting as the purchasing agents for the British
Government, made a certain number of contracts for the Russian Government.
In addition to their British credits, the Russian Government also obtained
credits amounting to .$86,000,000 from bankers in the United States. A table of
these private banking credits follow s:
Details of Russian loans.
!
Title.

1
Term. Rate.

Amount.

Russian Treasury i Years. Pet.
notes 1.................
1
5 2 $11,000,000
Russian credit4 _
_
3
G 5 50,000,000
§
Russian Treasury
notes...................
5
5* a 25,000,000

When made.

April,
June
Dec.

1916
1916
1,1916

When
payable.

April,
June,
Dec.

1917
1919

Interest
payable.

Collateral
and
secured.

Rubles.
Nov. l,Mayl 3
145.000.000
7
150.000.000
(6
)

1,1921

1 Renewed to May, 1918; again May, 1919. When this matured in May, 191S. holders urged to extend
to May, 1919, upon an irrevocable allocation of funds being made to meet interest maturing during year.
Interest rate seems to have changed at May 1, 1918. to 6 per cent.
2 With National City Bank of New York.
1Russian internal bonds.
‘‘The rate of per cent paid to syndicate by Russian ministry of finance on rubles and a commission
of 1 per cent payable every 3 months. These charges, calculated in rubles, to be paid in dollars, at thf
rate of 1 ruble, or 33£ cents.
5 With syndicate of American bankers, headed by National City Bank of New York.
1Every 6 months.
^Credit at State Bank. Petrograd.




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

93

When the United States entered the war and began raising great loans from
its own people, it ceased to be proper to allow the foreign Governments to come
into the money market in competition with the Liberty loans. The United States
undertook to finance the requirements of the foreign Governments in the United
States. A part of these requirements in the case of the Russian Government, as
in the case of the British Government and the French Government, which had
raised loans from private bankers, was the interest on such loans from private
sources. When the United States undertook to finance the requirements of the
Allies, the first step was to obtain from the various countries estimates of the
financial help which they would need. In accordance with the statute authoriz­
ing the making of loans to foreign Governments, the Secretary of the Treasury
from time to time established credits in favor of the respective governments.
This establishment of credits did not thereupon give the respective governments
a right to draw against the United States for the amount of the credit, but
was in the nature of an apportionment to any government of a share in the
funds which the Treasury was from time to time in a position to advance.
The establishment o f the credit usually stated that the credit was to be availed
of against the obligations of the Government from time to time in sucli amounts
and for such purposes as should be agreed upon with the Treasury. In order
to keep the various governments from bidding up prices against each other,
and against the United States, each Government was required to enter into a
separate contract with the Secretary of the Treasury whereby three commis­
sioners were appointed in connection with their purchases. The commissioners
appointed in the contract made by the different countries were all the same
and constituted the so-called allied purchasing commission, to which all the
Governments proposing to make purchases in the United States were required
to submit the contracts which they proposed to make. The first credit in favor
of the Russian Government was for $100,000,000 on May 16, 1917. The first
advance of cash against this credit, however, was not made until July 6, when
$35,000,000 wT advanced. At the date of this advance the Russian Govern­
as
ment still had with the National City Bank deposits of between $21,000,000
and $22,000,000, being the proceeds either of British credits or of the abovementioned loans made from private bankers. Later in July, Mr B. Bakmeteff,
the ambassador representing the so-called Provisional Government of Russia,
or Kerensky government, submitted a general summary statement of the require­
ments of his Government in the United States, showing the necessity for $733,900,000. In this summary statement were contained items of interest up to the
1st of January, 1918, on the above-mentioned indebtedness of the Imperial Gov­
ernment to private banking interests in the United States. This was in accord­
ance with the declaration made by the Kerensky Government of its assumption
of the debts of the Imperial Government. The Provisional Government, as rep­
resented by Mr. Bakmeteff, proceeded to make contracts with the approval of
the purchasing commission and the War Industries Board for the purchase of
supplies in the United States, and the Treasury continued to establish credits
and to make advances in accordance with the statement presented to you by
Mr. Polk.
As of the 1st of November, 1917, the total established credits were $450,000,000
and cash advances had been made to the extent of $186,400,000. On November
7 the Kerensky government was overthrown. On the 15th the first payment of
interest on obligations held by the United States was due and the Treasury
advanced against an obligation signed by Mr. Bakmeteff the sum of $1,329,750,
which were at once repaid to the Treasury as interest on advances which had
been made by it to Russia. This brought the total of the cash advances made
by the Treasury of the United States to $187,729,750. No further cash advances
have been made to the Russian Government by the United States and the excess
of credits established in favor of Russia above the amount of these advances
has been withdrawn. It is to be remembered that at the time of the overthrow
of the Kerensky Government it was not in this country considered certain that
the bolsheviks were in fact successful and, if so, that they would be able to
maintain their power, as the news at that time was far from clear. By the
1st of December, however, the success of the bolsheviks appeared to be certain.
Thereupon there was presented the extraordinarily difficult question of dealing
with the Russian financial situation in the United States. x\s of the 1st o f
December, the unpaid balances on contracts made by the Russian Government




94

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

with our people was something over $102,000,000. The contracts were in all
stages of performance. The funds on hand of the Russian Government in the
United States amounted to about $56,000,000. These funds consisted of cash,
and it is impossible to say how far they consisted of the $21,000,000 which the
Russians had before the United States began making advances to it, and how
far they consisted of the proceeds of advances by our Treasury.
Two important considerations were involved in liquidating the Russian situa­
tion : The first was, in so far as possible, to prevent actual losses to American
contractors; the second was to save for Russia as much as possible of the sup­
plies which had been contracted for. The great danger was that, if the Russian
financial situation in the United States was to he treated as a case of insolvency
on a large scale, there would be a so-called race of diligence by the contractors
who had contracts, and by the banking interests who had advanced money, to
grab everything in sight for the purpose of securing their claims. This would
undoubtedly have resulted in very great losses, particularly to the contractors,
and nothing would have been saved for Russia. To prevent this situation, the
State Department and the Treasury cooperated to direct a liquidation which
would prevent such a calamity. At the end of December. 1917, as a result of
the payment, cancellation, or reduction of contracts, the unpaid balance of con­
tracts, which a month before, amounted to over $100,000,000, was less than
$50,000,000.
On the 1st of May, 1919 the estimated position of the Russian Government,
allowing for amounts expected to be received and payments expected to be
made, showed a balance of $800,000, aside from the liquidation of the socalled Remington contract, which is now in arbitration and which may result
in a debit of about $3,000,000. This situation does not take into account prop­
erty of the cost of probably between $25,000,000 and $50,000,000, which has
been conserved for the Russian Governmnet, and most of which has been
shipped to Russia during recent months. In order to protect the material
which was being conserved for the Russian Government, it was quite as
necessary to prevent the occurrence of a default on obligations due to bankers
in this country, as it was to liquidate the claims of the contractors. For this
reason it was necessary that an extension be arranged of the $11,000,000 of
notes, the principal of which fell due in April, 1917, and to pay the interest
which became due from time to time on the bonds held by private interests
in this country. Accordingly, the United States Government did not object
to the payment out of the funds at the disposal of the Russian Government of
interest upon the external obligations of the Russian Government held by
private interests as it became due. Part of the funds at the disposal of the
Russian Government consisted of the proceeds of rails and other merchandise
which had been sold at advantageous prices as a part of the liquidation.
These funds, together with the proceeds of the chartering of certain ships be­
longing to the Rilssian Government, amounted to in the neighborhood of
$13,000,000. The rails owned by the Russian Government in this country had
been bought in part out of United States credits and in part out o f other re­
sources of the Russian Government, in the proportion roughly of 40 per cent
out of United States credits and 60 per cent out of other resources. The total
expenditures reported by the Russian Government to have been made since
December 1, 1917, amount to about $66,000,000, or about $10,000,000 more
than the cash on hand December 1, 1917. Considering this fact and consid­
ering that some part of the cash on hand December 1, 1917, may properly be
attributed to the balance of $21,000,000 on hand before any United States
advances were made, it can be argued with considerable plausibility that the
interest, amounting to about $9,000,000, paid by the Russian Government to
the private holders of bonds in this country was not paid out of United States
advances or the proceeds thereof. On the other hand, it is clear that even
assuming such interest to have been paid out of American advances for the
purpose of keeping the Russian financial situation in this country together,
with the result that our contractors have lost nothing and a large salvage
has been obtained for the Russian Government and large payments of freight
have been made in sending much of this salvaged material to Russia, where it
is so greatly needed, such payments have been a small price for an aston­
ishingly great and creditable result.




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAME,

95

SECTION 48-A.

BakhmetefTs Resume of Russian Loans.
M a rch

12, 1920.

M r. W ad e H . E l l i s ,

Southern Building, Washington, D. C.
Si r : In response to your request on behalf of the subcommittee of the Com­
mittee on Foreign Relations, United States Senate, which is investigating
Russian propaganda in this country, I furnish you herewith a copy of a letter
addressed to me under date of March 4, 1920, by the Russian Ambassador at
Washington, together with a copy of its inclosure, relating to the liquidation
of the financial business of the Russian Government in this country.
I am, sir,
Your obedient servant,
F r a n k L. P o l k ,
Acting Secretary of State.
(Inclosure: Letter from Russian Ambassador; copy of inclosure.)
A ide M e m o ir e s ,
I. PERIOD PREVIOUS TO THE BOLSHEVIKI REVOLUTION.

1. In accordance with the acts of April 24 and September 24, 1917, credits
were established at different periods by the United States Treasury in favor
of the provisional government of Russia, the amount of such credits totaling
$450,000,000. A special appropriation was decided upon besides for the pur­
chase of additional railway material, but this allocation, on account of events,
did not become effective.
Advances amounting in the aggregate to $191,400,000 were made against
these credits during a period beginning July 6, 1917, and ending November 1,
1917. A further advance of $1,329,750 was effected on November 21, 1917, for
the specific purpose of paying interest due to the United States Government
on moneys theretofore advanced. The $1,329,750 was immediately paid back to
the United States Treasury.
The total advances of $192,729,750 included $5,000,000 allocated for a spe­
cial operation with Rumania. As this transaction did not materialize, the
$5,000,000 was returned December 3 to the United States Treasury.
Deducting such $5,000,000 from the total leaves $.187,729,750 as the actual
advances made by the United States to the provisional government of Russia.
2. For such advances the United States received obligations of the provi­
sional government of Russia. The funds were advanced at a time when the
provisional government was functioning as the legally recognized Government
of Russia. The embassy was acting as an agency of such Government and
the authorities in Petrograd were entirely responsible for the disposition of
funds during this period.
3. Besides money received from the United States the Russian Government
possessed in this country certain funds remaining from proceeds o f previous
financial transactions. The balance of such funds on July 6, 1917, the date of
receipt of the first advance from the United States Treasury, represented
$22,643,891.75. About $6,500,000, derived from different sources other than
United States loans, was further credited to the accounts of the Russian Gov­
ernment within the period between July 6 and December 1, 1917, and wr used
as
in common with moneys received from the United States Treasury.
II. PERIOD AFTER THE BOLSHEVIKI REVOLUTION.

1.
On November 8, 1917, the provisional government of Russia fell and the
power in Petrograd was seized by the bolsheviki. As a result the United States
Government suspended further advances of cash and the balance of credits,
established in favor of the Russian Government, became ineffective.
The embassy was faced thus with a situation where it was compelled to
handle rather extensive liabilities incurred by the Russian Government in
the United States, relying solely on funds on hand on different governmental
accounts.




96

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

It was, however, the firm decision of the embassy to use its best endeavor to
meet as fully and for as long as possible the obligations of the Russian Gov­
ernment in this country. Such course was considered an act of justice toward
the American contractors and bondholders who in best faith had entered into
transactions with Russia. It was believed, moreover, that it would well
serve the future relations of Russia with this country if forced disruption of
business relations could be avoided and Russia’s liabilities liquidated by amiable
compromise and settlement.
It was generally felt besides that the period of no legal government in Rus­
sia would be of shorter duration, and was judged desirable, therefore, to con­
tinue more or less a normal course of relations so that, with a legal government
restored, business activities could be resumed without interruption.
2. The funds at hand being inadequate to meet the liabilities as they stood,
it was imperative to proceed at once with a systematic revision of all con­
tracts for the purpose of arriving, by agreement, at proper cancellations or
reductions. The policy of the embassy, however, was to effectuate such reduc­
tions only as far as was required .by financial exigencies. The aim of the
embassy was to conserve as much as possible the supplies, those on hand
as well as those due on incompleted contracts, with the view to shipping them
as soon as practicable to Russia.
3. After consultation with the United States Government and the banking
institutions it was decided to amalgamate the different funds available on
Russian governmental accounts, irrespective of their previous destination,
into a special segregated set of accounts with the National City Bank of New
York. The funds credited to these “ liquidation accounts ” were to be con­
sidered as placed in trust for the following purposes:
Payments on contracts, as well as expenses for transportation, insurance,
and inspection; payment of obligations arising from loans; upkeep of Russian
institutions in the United States, and other administration exuenses.
Although no formal agreement was entered between the United States Gov­
ernment and the ambassador, still there was an understanding with the De­
partment of State and the Treasury, as a result of which the distribution of
the funds was effected with the knowledge and subject to the control of the
Treasury. A list of proposed payments was presented to the Treasury from
week to week and only disbursements to which it took no exception were
made. In addition, a monthly statement was presented to the Treasury in
the regular established form.
4. Such procedure was decided upon in the latter part of November, 1917,
and the “ liquidation accounts ” were thereupon established with a balance of
$47,010,203.94. Due to previous segregations or particular conditions, it was
necessary to leave $9,166,517.9S on accounts “ set aside for specific purposes.”
It was understood, however, that in so far as these specific liabilities might
later be reduced, moneys set free would be used for general liquidation require­
ments. In fact, the account set aside for specific purposes were subsequently
reduced to $6,047,272.87 and the balance of $3,119,245.11 added to the liquida­
tion fund. Such balance of $47,010,203.94 and $9,166,517.98 included the total
of funds, derived from Russian governmental accounts, which came under the
control of the ambassador.
The aggregate of $56,176,721.92 ($47,010,203.94 and $9,166,517.98) was subse­
quently increased by funds derived from the disposition of certain supplies,
receipts from charter of Russian steamers, proceeds of certain adjustments,
etc. From such miscellaneous sources the ambassador secured $22,507,626.01,
which added to the initial $56,176,721.92 made the sum of $78,684,347.93, this
being the grand total of funds under control of the ambassador from December
1, 1917, until January 1, 1920.
It is apparent that a considerable portion of this fund was not derived from
United States Treasury loans. In fact the major part of funds added after
December 1, 1917, had no connection whatever with United States Government
advances. Within the total of $78,648,347.93 at least $26 400.000 can distinctly
be traced as not being United States Treasury money. The definite figure of
non-American moneys in the balance of $52,284,347.93 can not be established
with precision, at; most accounts in the past were credited with both American
and non-American funds.




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

97

III. RESULTS OF LIQUIDATION.

1. The most important and intricate part of the liquidation procedures
referred to contracts for different kinds of supplies, the amount of liabilities
on which, in the end of November, 1917, was about $103,000,000. The reduction
and cancellation procedure was accomplished in closest collaboration with the
United States Government, which was especially concerned about the success­
ful performance of the undertaking.
The general line established was that while strictly military contracts were
canceled in the greatest possible measure, arrangements affecting supplies for
civil purposes, were reduced only in measure, as was imperatively necessitated
by the shortage of funds. In most cases the revision of Russian contracts served
as a basis for a diversion of production for supplies needed by the United States
or by the other Governments at war with Germany.
The position of business on January 1, 1920, leaves no outstanding liabilities
whatever with reference to contracts placed in the United States by the Rus­
sian Supply Committee prior to the Bolsheviki revolution. The liquidation
of Russia's obligations in this line has been completed without any defaults in
payments and has been consummated entirely to mutual satisfaction on lines
of amiable agreement.
2. As to the financial liabilities arising from loans previously made by the
Russian Government through private financial concerns, the embassy, being in
no position to meet the maturing principal, has continued, as long as possi­
ble, current payment of interest. As a matter of fact interest was paid in
full approximately for 18 months, that is, until June, 1919, when the exhaus­
tion of funds compelled the discontinuance of the established practice. The
circumstances accompanying such suspension were explained, together with the
assurance of payment of defaults by the future recognized legal Russian Gov­
ernment, in communications addressed to the banks and made public through
their respective circulars together with a statement issued by the Acting Sec­
retary of State.
3. Shipments of supplies to Russia were resumed in the latter part of 1918
and continued in 1919. On January 1, 1920, practically the whole of the stocks,
of which the greater part consisted of railway material, shoes, leather, and
agricultural implements, had been shipped to Siberia, to the south and into the
northern regions of Russia.
As to the disposition of materials by sale, the purpose of the embassy has
been to conserve all possible supplies. In fact, no leather, shoes, agricultural
implements or material needed by the civil population were sold. The major
part of the sales consisted of rails, required by the United States and other
cobelligerent Governments for military purposes. The sale, under such cir­
cumstances was a transfer of supplies to an allied army. This fact was in
conformity with the general policy of the embassy, which together with loyal
Russia, not having recognized the treaty of Brest-Litovsk, considered itself at
war with the Central Powers and endeavored to be of any possible assistance
to the common cause. The only sale of any importance outside of rails was a
stock of barbed wire, needed at the Italian front at a most critical moment.
4. The total disbursements from December 1, 1917, to January 1, 1920,
amount to $77,302,935.99, leaving a balance of $1,381,411.94. Of this figure
$461,313.44 is the remainder of the “ liquidation accounts,” while $920,098.50
is the balance of the accounts “ set aside for specific purposes.” This balance
represents a special reserve, secured to guarantee the claim of such Russians
who in time had arranged for transfer of their savings through the Russian
consulates to their relative in Russia. The reserve is maintained in order to
refund transfers which could not be delivered due to disturbed conditions on the
other side and exactly corresponds to the remaining total of unrefunded
transfers. This is emphasized because of misrepresentations which have ap­
peared as to the use of funds entrusted to the consulates.
5. In the total amount expended at least one-third is money derived from
sources other than American credits. Thus not only all expenses concerning
the upkeep of Russian institutions but the total of interest paid to American
bondholders is amply covered by funds which the Russian Government pos­
sessed or which have been received by the embassy independently of the ad­
vances made by the Department of the Treaury.
March 1, 1920.
S. Doc. 86,67-2------ 7




98

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAME.

SECTION 49.
National City Bank Deposit.
N o v e m b e r 22, 1917.
Mr. S e c r e t a r y :
Mr. Gardin, a vice president of tlie National City Bank, informs me that his
bank has on deposit between $60,000,000 and $70,000,000 in various accounts
for the Russian Government, and inquires whether, in view of the existing
situation in Russia, he should continue to honor drafts upon these accounts
drawn by those representatives of the Provisional Russian Government who
wrere accredited to him by it before the recent disturbances.
These amounts on deposit doubtless represent sums advanced by the United
States before the recent disturbances in Russia and for which the United States
holds the certificates of indebtedness of the Provisional Russian Government.
Mr. Gardin’s question seems to me to be one which can only be answered prop­
erly by you. As checks for large amounts may be presented any day, it seems
to me to be a matter of first importance that the views of the State Department
should be indicated promptly—to-day if possible. Mr. Gardin came here in
person and is hoping to take back with him instructions upon the point. What
he would like to know is whether he should honor checks drawn in the manner
indicated, and may continue to do so until otherwise notified by you.
Cordially, yours,

D ear

W m . G. M c A doo ,

Secretary.
The honorable the S e c r e t a r y or S t a t e .

SECTION 50.
Treasury Department Memo on Russian Loan.
T r e a s u r y D e p a rtm e n t,

Washington, November 26, 1911.
The Russian Government has received in cash up to date $192,729,750. From
the information so far obtainable, it would appear that approximately $48,400,000 represents payments on account of old contracts for purchases in this
country, and approximately $25,000,000 payments from cash received on ac­
count of new contract* (for which allocations were made) ; $1,829,750 represents
interest payments, and $50,000,000 was account of Finland, which leaves a bal­
ance of approximately $68,000,000, which was practically a free credit turned
over to the Minister of Finance. This $68,000,000 plus the $50,000,000 for Fin­
land, makes a total of $118,000,000, which did not represent purchases in this
country and no definite information has been given as to how this was employed.
N. H. D.

SECTION 51.
Bolshevik Government Cancels All Loans.
S to c k h o lm ,

December 7, 1917.

1137, 7th.
S e c r e t a r y of S t a t e ,

Washington D. C.:
Stockholm’s Dagblad to-day publishes following from Petrograd, via Svenska
Telegram Bureau: The Maximalist, Laurie, has published article in Pravda,
stating that it will be necessary to annul all war loans taken up or guaranteed
by Russian Government.
Pravda is chief organ of Bolsheviks, and Laurie lived here in Stockholm until
outbreak of revolution, known as student o f economic questions.




M o r r is .

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

99

SECTION 52.
Resume of Russian Financial Loan— Situation by Basil Miles, of State De­
partment, Showing Need of Money for Relief, Propaganda, and $2,500,000
for Officers’ Salaries.
D e c e m b e r 10, 1917.
Memorandum for the Secretary.
Referring to the attached long memorandum, handed me by M iles: It seemed
to me that we should adhere to our program, namely, to insist upon slowing
down on all Russian contracts for rifles, munitions, etc., and to oversee the
expenditure of the money now on hand with a view to the protection of Ameri­
can manufacturers, who have made contracts with the Russians. However, I
think that the present situation calls for large expenditures and organization
for propaganda, and for relief, and that food and military supplies should be
sent forward to Russia, that so far as the money is on hand, here available, for
the purpose it should be used and that so far as it is wanting the President’s
discretionary fund should be used. I question very much the advisability of
sending forward railroad equipment until there is some definite assurance that
it can be effectively used for Russian relief and not for German military pur­
poses.
It is also important that the United States should decide promptly whether
it will give aid to Kalendin and the southern Russians. It seems to me that
this matter is one of the most vital matters in the war at the present moment.
I hope very much that you and Secretary Lansing will be able to have a con­
ference concerning it, if possible, with the President.
R. C. L e f f i n g w e l l .
The S e c r e t a r y o f t h e T r e a s u r y .

RUSSIA.
D e c e m b e r 11, 1917.
Credits have been established in favor of Russia to the amount of $450,000,000,
including one of $125,000,000* established immediately before the collapse of
Russia and to which were attached conditions making its availability, to say
the least, extremely doubtful. Excluding that credit, the amount of credits was
$325,000,000 and the amount o f actual advances to Russia is $187,729,750. The
establishment of a credit meant that the United States had set aside out of the
total authorized by Congress to be loaned to foreign Governments a specific
amount which would be loaned to Russia upon receipt of her bonds or cer­
tificates of indebtedness. In certain instances American manufacturers made
inquiry and were informed of the establishment of these credits and that the
Russian ambassador had requested that a specific amount be set aside against
their contracts to be paid out to the duly accredited representative o f the Rus­
sian Government with the understanding that such sum would be used by him
only in payment of the liability of the Russian Government under the contracts.
This arrangement was, of course, ineffective to protect the American manufac­
turer in case there were no Russian Government or no accredited representative
of the Russian Government, or if the Russian Government and its accredited
representative failed to avail themselves o f the credit for the purpose indicated,
or, perhaps, if Russia ceased to be in the war. This was understood by those
American manufacturers who gave the matter any consideration, and it is safe
to guess that they all realized that the United States was prepared to lend money
to the then existing Russian Government and was not guaranteeing the con­
fined existence o f the Russian Government or its continuance in the war.
Some of the contracts were approved by the Purchases Commission, consisting
of Messrs. Baruch, Lovett, and Brookings. The arrangement under which the
Purchases Commission was formed provides as follow s:
“ Nothing herein contained, expressed or implied, nor anything done or omitted
by the commission, shall impose any obligation or liability upon the United
States whether to advance moneys, to establish credits, or otherwise.”
When the Russian affairs became acute the National City Bank had $60,000,000
or $70,000,000 on deposit in various accounts subject to the order o f various
representatives of the Russian Government, and they asked the Secretary of the




100

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

Treasury whether the City Bank was protected in paying upon their checks.
The Secretary of the Treasury consulted the Secretary of State and, at the
suggestion of the Secretary of State, Mr. Polk and Mr. Leffingwell saw the Rus­
sian ambassador who agreed to take the initiative in limiting the liabilities of
the Russian Government under exstng contracts as far as that could be done in
cooperation with the Purchases Commission, and to render so much as possible
of the funds on deposit with the City Bank available for the inevitable payments
to American manufacturers.
The Bolsheviki Government has disavowed the ambassador and the other
representatives here and the City Bank has received cable instructions from
Petrograd not to honor their orders.
1. In the existing situation of Russian affairs it is submitted that to allow
the situation to drift and to encourage the City Bank to permit Ughet with
Bakhmeteff’s acquiescence to dissipate the great fund which is in the City Bank
involves more risk than to deal firmly with the situation.
2. That the City Bank should be told to permit such payments only as are
approved by the representatives of the Purchases Commission, consisting of
Messrs. Baruch, Lovett, and Brookings.
3. That American manufacturers should be told by the Purchases Commission
to adjust their contracts on the basis of terminating work at once with a mini­
mum of loss, and that they should be paid out of the funds in the City Bank.
4. That ay\ exception should be made in the case of such materials and sup­
plies as are needed for relief, and that no further work should be done under
contracts for arms or munitions, and that contracts for railroad equipment
should be stopped or work on them postponed until some definite assurance can
be given that the equipment can be effectively used by skilled crews adequately
protected.
Generally speaking, it is believed that the United States should, through the
Red Cross, and perhaps with the aid of the President’s discretionary fund, en­
gage immediately actively, but unofficially, with works of relief and propaganda
in Russia; that it should not sanction the dissipation of the fund in the City
Bank by the Russian supply committee for purposes which may well be regarded
as inimical by the Russian people, but should sanction the use of that fund in
so far as it may be necessary to cover contracts entered into before the latest
revolution with the American manufacturers.
With respect to the specific question of silver, it is a grave responsibility to
direct the City Bank to pay $500,000 for silver to be sent through the British to
Kaledin. That involves a question of State.
The situation has drifted for two weeks during which the ambassador has
gone through the motions of trying to do what was indicated to him by Mr. Polk
and Mr. Leffingwell and has done precisely the opposite. His whole policy is to
carry on as though nothing had happened and hope that before the funds are
exhausted the situation will have been reversed and his party be in power.
Although the City Bank have said from time to time that there were $60,000,000
or $70,000,000 in the City Bank, the Russian ambassador now states that there
in only $52,000,000, of which upward of $9,000,000 is in special accounts and
can not be touched. $20,000,000 he proposes to set aside for American contracts.
$6,000,000 he proposes to use for payment of interest on the old Russian debt to
and including July 1 next, etc., and $10,000,000 for certain special contracts, etc.,
of which $3,000,000 is for transportation, and $2,500,000 for the office expenses
and salaries of the supply committee up to next July.




101

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

SECTION 52-A.
Table Showing Russian Loan Expenditures to December 12, 1917.
Distribution of cash advances to Russia to December 12, 1917.
Purchases in United States.

Total.

Date of payment.

1917.
July 6.....................................
July 13...................................
Aug. 1 ...................................
Aug. 22.................................
Aug. 24.................................
Aug. 30.................................
Sept. 25.................................
Oct. 2 ...................................
Oct. 11...................................
Do...................................
Nov. 1...................................
Nov. 20.......... ......................

$35,000,000
10,000,000
2.500.000
2.500.000
37; 500,000
10,000,000
15.000.000
22,200,000
5,000,000
15.000.000
31,700,000
1,329,750

Total...........................

Not ap­
Approved proved by
by Pur­
Purchases
chases Com­ Commis­
mission.
sion.

187,729,750

Finland
payments.

Silver.
Total.

$26,300,000 $26,300,000

$8,000,000

7,900.000

15,900.000

3,900,000

3,300,000

7,200,000

13,600,000

1.000,000

14,600,000

25,500,000

38,500,000

64,000,000

$2,500,000
2,500,000

$10,000,000
i

| 10.000,000
I
15,000,000
5,000,000

i ......................................

10,000,000

50,000,000

15,000,000

Other purposes.

Date of payment.

Current
expenses
of Russian
Credit
Trans­
sian Min­ operations. portation.
istry of
Finance.

Expenses
of Rus­ Interest on
Swedish sian mis­
United
payments. sion in
States
United
loans.
States.

Total.

i

1917.
|
■Tlllv fi____________ :___ ..
Aug. 24................... $15,000,000
Oct. 2...................... 15.000.000
Nov. 1 .................... 15.000.000
Nov. 2 0 ...................
Total.............. 45,000,000

$7,000,000

$1,329,750

$1,500,000
1. (500.000

% . 000.000
h
•

800,000
7,800,000

1,300,000

1

$8,700,000
21,600,000
15,000,000
17,100,000
1,329,750

1,329,750

63,729,750

$200,000
!

...........................

__________________ ! ________________i ___________________
i

4,400,000 ; 5,000,000

200,000

Note.— The sum of $5,000,000 was advanced on October 24 on account of Rumania, but was refunded
December 7.
D e c e m b e r 12, 1917.
Mr. H. U g h e t ,

Russian Financial Attach6,
Flatiron Building, New York City.
D e a r S i r : We beg to refer to a copy of a letter which you have left with us
dated November 28, 1917, addressed to The National City Bank of New York by
His Excellency the Ambassador of the Provisional Government of Russia, in
respect to the disposition of all moneys now standing at his disposal and all
money which he may hereafter deposit.
There are no moneys deposited with this company standing at the disposal of
His Excellency. Of course, any money which His Excellency may hereafter de­
posit with us will be subject to his instructions or those of his duly constituted
successor.
We have, however, an account in which there is a balance of $4,976,722.78
standing to the credit of the Ministry of Finance, Section Etrangere. This was
opened in July, 1916, and moneys in this account may be paid out only upon the
signature of two of certain designated officials of the Ministry of Finance.




102

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

It has been customary for us to honor cable instructions directing payments out
of this account, which cable instructions have in each case been confirmed by
proper written orders. Under present conditions we do not see how we can honor
such cable instructions, nor do we see how we could honor written orders signed
by the persons previously designated to draw 011 this account without the as­
surance of our Government that such persons still have authority to act. Nor
have we any authority for the transfer of these funds.
We must, therefore, for the present continue to hold these funds to the credit
of such account.
Very truly, yours,
President.

SECTION 52-B.
Czar Nicholas’s Holdings of Millions in American Companies—Bakhmeteff,
the Czar’s Financial Agent.
Cable message from American Ambassador at Petrograd to the Secretary of
State.
No. 2105, December 15, 6 p. m.
In answer to inquiry concerning money of people under Czar, the Bolshevik
newspaper Pravda states to-day that investments in the United States are held
by Nicholas as follow s:
In Pennsylvania Railroad, $50,000,000; in New York Metropolitan, $16,000,000;
in New York Central, $5,000,000; and in Baltimore & Ohio, $5,000,000. The
Pravda adds that Mr. BaJchmetcff, Russian Ambassador in Washington and
professor of Petrograd Polytechnic Institute, teas Nicholas's financial agent. I f
the department approves, this is also for the information of the Russian Am­
bassador.

SECTION 53.
Russian Contract Situation December IT, 1917.
T r e a s u r y D e p a rtm e n t,

Washington, December 11, 1911.
D e a r M r. P o l k : I beg to acknowledge the receipt of the communication of
December 7 from the Department of State, inclosing a paraphrase of a tele­
gram from the American ambassador at Petrograd, dated December 1, 1917,
making certain inquiries as to the status of credits for purchases of the Rus­
sian Government. All of the final details of Russian expenditures on contracts
from November 1 to date have not been received, and the Purchases Commission
has not as yet been able to furnish us with definite information as to the value
of clearances and the amount of orders now ready to be shipped. I beg to
submit, however, the approximate estimates obtained on the above items and
the other information requested by the ambassador at Petrograd for your
guidance in replying to the cable received from him :
Total credits established in favor of Russia, $450,000,000, of which $75,000,000
was for the account of Finland.
Total cash advanced, $187,729,750, of which approximately $74,000,000 was for
payment on account of purchases here, $50,000,000 for account of Finland, and
$63,729,750 for other purposes, leaving an unconsumed credit o f $252,270,250.
According to latest reports received, the balance due by Russian Government
on uncompleted contracts on November 1 was $108,295,590 payable from United
States credits, and $22,431,900 payable from other credits.
As nearly as we can ascertain the approximate value of clearances amounts
to $12,000,000, and purchases ready for shipment, $25,000,000. This does not
include clearances and stock on hand on old contracts made under British or
other credits.
Very truly, yours,
Hon. F r a n k L. P o l k ,
Counselor for the State Department.




FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

103

SECTION 54.
Ambassador Francis Says "Russia Is No Longer in the War.”
[Paraphrase o f a telegram from the American ambassador at Petrograd, dated Dec. 17,
received Dec. 20, 1917.]

2113, December 17, 11 p. m.
The conclusion of the armistice is for a period of 28 days. This may be
terminated on a notice of seven days, but in the event that no such notice shall
be given, the extension of the armistice is automatic. According to what I
have heard it is Trotsky’s opinion that a success has been achieved, but another
success of the same character is worse for him than defeat. In my opinion its
significance is that Russia is no longer in the war. On Saturday Trotsky made
a speech in which he threatened the use of the guillotine, and it was said by
Lenine that the government of the soviet was above the government of the con­
stituent assembly, and he argued in favor of the justice of the treatment of the
cadets. I received a visit from two Poles who alleged that they wT
ould be
able to raise an army of Poles to fight Germany amounting to 800,000 men, and
that in the Austrian Army—400,000 men of Polish nationality— would fight against
the Central Empire. So many of these rumors appear to have no foundation,
but I will make an investigation and report. I do not regard the statement
as of much importance. The report goes that it is being arranged that the
commissioners of Germany shall come to Petrograd with a view to peace ne­
gotiations, and that German soldiers should protect them in Petrograd. Within
the vicinity of the embassy there have been fewer depredations, but in other
sections they continue, and the nerves of the people are so badly shaken that
they would be glad to have a monarchy, or even German rule, if there could be
thereby restoration of order.
This afternoon there was a meeting of the diplomatic corps for consideration
of the note respecting couriers. (Reference is made to my No. 2107.) There
was an adjournment of the meeting until the 20th, after provision had been
made for the appointment of the committee o f one employee of the neutrals
and two of the allied powers who should receive instructions to make an unoffi­
cial visit to the Smolny Institute, and advise them of the impossibility of the
plan proposed, and to furnish them with a suggestion as to another. The em­
ployees selected were the Danish, French, and British, as it is stated that
those Governments require the employment of couriers. Provided there is no
prohibition of telegrams I will not need a courier for a month. My colleagues
express fear that this prohibition of telegraphing will be enforced. The propo­
sition to accept the plan of Trotsky with the condition attached that no propa­
ganda work should be done by couriers was opposed by me, and I put the ques­
tion to the meeting: “ Is there a diplomatic mission o f the soviet government
in any capital?” A statement was made in reply by the Dutch minister, “ In
Sweden,” but the minister of that power was not present at the meeting. I
learned that the French and British embassies have been asked to vis§ the
passports of the soviet couriers, but that they refused to do so, stating that
there has been no recognition of the soviet government. I have received no
application to vise the passport of a courier to the United States.

SECTION 54-A.
Russian Bank Accounts.
D e c e m b e r 26, 1917.
: The sums which the Russian Ambassador regards as avail­
able for payments upon American contracts are insufficient to cover those con­
tracts. You are familiar with the difficulty of handling the situation other­
wise than through funds already at the disposal of the Russian representatives.
There is a fund of $9,000,000 or thereabouts which is in the City Bank and
which the ambassador regards as not available because not subject generally to
his instructions. There is a fund of $4,000,000 or thereabouts in the hands
of the Guaranty Trust Co. as appears from their letter to you of which you
sent me a copy with your letter of December 15. A fund amounting to £3,000,000 in all was transferred in amounts of £1,000,000 each on October 9, October
D e a r M r. P o l k




104

FOREIGN LO ANS AND A U T H O R IT Y FOR M A K IN G SAM E.

31, and November 12 for account of the Russian Government to the London City
and Midland Bank. Limited, in London, as appears by Mr. Gardin’s letter of
November 23, of which a copy is inclosed herewith.
The question whether and to what extent and in what manner these sums
could be made available for payment to American manufacturers is one upon
which the State Department can, T think, be of very great assistance, and,
if you should be willing to take these matters up with the ambassador, I should
be glad if you would have him come to see you and let me be present with a view
to discussing these things.
Very truly, yours,
R . C. L e f f in g w e l l .

Hon. F r a n k L. P o l k ,
Counselor for the Department of State, Washington.
P. S.—I learn just now that Prof. Lomonosoff has funds which are subject
to his own disposition, w hich make him apparently more or less independent
T
of the ambassador. It would be interesting to find out what is the amount of
these funds and what are the conditions with respect to them.

D iv i s i o n of O p e r a t io n s ,
U n it e d S t a t e s S h i p p i n g B oard E m e r g e n c y F le e t C o r p o r a t io n ,

Washington, January 4, 1918.
Mr. N o r m a n H. D a v is ,
Assistant Secretary of the Treasury.
Washington, D. C.
D e a r S i r : I beg to acknowledge the receipt of two statements of Russian
materials, which you were kind enough to return to me by your letter of
January 2.
Very truly, yours,

Additional payments to be made by the Provisional Government of Russia from
funds in the National City Bank.
Secretarial department:
P. A. Morosoff, traveling expense___________________________
Various employees, financial department—Extra compensationP. A. Morosoff, office expense______________________________
Mur man Railw ay:
Jacob Dreyfus & Sons, clothing_____________________________
New England Steamship Co., freight_______________________
Naval department:
Melchoir, Armstrong & Dessau, spare parts_________________
Melchoir, Armstrong & Dessau, motors____________________
C. D. Durkee & Co., ships’ telegraphs______________________
P. Hansen, cartage________________________________________
Commissariat department: United States Horse Shoe Co., horse
shoes________________________________________________________
Russian financial attach^:
French technical bureau___________________________________
American Bank Note Co____________________________________
C. J. Medzikhovsky_________________________________________
V. P. Ananieff_______________________________________________
Eng. Goodkoff_______________________________________________
Machinery department:
Barber Colman Co., machinery______________________________
National City Bank, account General Electric Co., machinery.
B. F. Sturtevant Co., freight_______________________________
Central war industrial committee:
McElwain, Morse & Rogers, shoes___________________________
Endicott, Johnson & Co., shoes---------------------------------------------




$260. 72
883.16
2, 000. 00
6, 328. 38
6. 78
354. 00
28, 880. 00
887. 50
9. 27
18, 841. 55
67, 300.00
59.000. 00
806. 33
168. 80
350. 00
137.17
3, 677. 00
228. 62
65, 302. 80
112,346. 20

FOREIGN LOANS AN D A U T H O R IT Y FOR M A K IN G SAM E.

105

Transportation department: Emergency Fleet Corporation (de­
ferred payment not included in total)________________________
$535,801.35
Railway department: Greenlee Brothers Co., machinery__________
1,674. 00
All Russian Zemsky Union, account Pekosnarm: Sutten-Vaughn
Equipment Co., saws_________________________________________
3, 780. 00
Additional items:
National City Bank, interest on 6£ per cent credit operations,
due Jan. 10_____________________________________________ 1, 625,000. 00
One-fourth per cent commission to National City Bank_______
125, 000. 00
K. Falion, representative of the ministry of supplies_________
10, 000. 00
Peoria Cordage Co., for 500 tons binder twT
ine_______________
212,914.00
International Harvester Co., freight________________________
233, 719. 86
Bishop Alexander (clergy, etc., in America)________________
24,000.00
Total____________________________________________________ 2,590,856.14

SECTION 55.
McAdoo’s Letter Stating That United States Should Recognize No Govern­
ment in Russia Which Did Not Validate All Russian Loans— Lansing’s
Reply.
J a n u a r y 17, 1918.
Hon. R o b e r t L a n s i n g ,
Secretary of State.
D e a r M r. S e c r e t a r y : I need not, of course, remind you o f the difficulties
which have arisen in connection with the Russian revolution nor of the steps
which have been taken to meet them. As to these, you have been, directly and
through the Counselor of the Department of State, kept fully informed. Credits
have been established to the amount of $325,000,000 against which advances,
evidenced by demand obligations signed by Mr. Bakhmeteff as ambassador of
the Provisional Russian Government, have been made to the aggregate amount
of $187,729,750. A further credit of $125,000,000 was established on November
1, 1917, but to it were attached conditions which, in view of the existing situa­
tion, are regarded as making it unavailable and concerning which credit, there­
fore, no public announcement has been made in this country.
Heavy commitments had been assumed by the Russian representatives
here, as to many of which the Treasury Department had been notified and as
to some of which the Treasury Department had been in direct communication
with the American contractors. In close consultation with the Department of
State and the Treasury Department the Russian representatives here have made
adjustments in respect to these commitments and payments to these contractors
out of funds which were on deposit in the National City Bank subject to their
draft before the change in the Russian situation early in November.
With reference to all of these matters, I have to suggest that if and whenever
there shall be presented to you the question of recognizing any government in
Russia other than the Provisional Russian Government, with which we have
been dealing since the entrance of the United States into the war, the United
States should make a condition of its recognition of any such government the
ratification of the indebtedness incurred by the Provisional Russian Government
to the United States and of all the terms and conditions thereof, and the ratifi­
cation of the transactions of the representatives here of the Provisional Russian
Government which have been had under the supervision or in consultation with
the United States as represented by the Department of State and the Treasury
Department. I f and when the question of any such recognition of another gov­
ernment in Russia should arise, I should be glad if you would consult me in
order that I may make more specific suggestions with reference to such ratifi­
cation as I shall be able to do on account of my familiarity with the details of
these loans and transactions.
I am, my dear Mr. Secretary,
Cordially, yours,
Wm. G. M c A d o o , Secretary.




106

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.
T h e S e c r e ta r y o f S ta te ,

Washington, January 17, 1918.
Hon. W i l i a m G ib b s M cA d o o ,
Secretary of the Treasury, Washington.
M y D e a r M r. S e c r e t a r y : I acknowledge the receipt of your letter o f even
date with reference to credits established by this Government in favor of the
provisional Russian Government.
I thank you for the information contained in this letter, and I can assure you
that before any other government in Russia is recognized, I shall confer with
you fully as to the best method of providing for the recognition by such govern­
ment of the indebtedness incurred by the provisional Russian Government to
the United States.
I am, my dear Mr. Secretary,
Sincerely yours,
R obert L a n s i n g .

SECTION 56.
Bolshevik Decree Canceling All Loans.
D e p a rtm e n t o f S ta te ,

Washington, February 11, 1918.
The Secretary o f State presents his compliments to the honorable the Secre­
tary of the Treasury, and has the honor to give herewith, for his information, a
paraphrase of a telegram No. 2348. February 8, 10 p. m., received from the
American ambassador at Petrograd, as follows:
“ A decree of the council of commissaries has just been approved by the cen­
tral executive committee of the soviet, and it cancels all state loans and all
guarantees undertaken by previous regimes and states ‘ all foreign loans are
annulled wholly and without exception.*
“ This action, to the extent which this Government has the power, repudiates
all foreign loans.”

SECTION 57.
Resolution of Interallied Financial Council Not to Recognize Russia Till
Promise of Loan Payments.
L ondon,

February 14, 1918.

S e c r e t a r y of S t a t e ,

Washington:
No. 68. For McAdoo from Crosby. At meeting of finance section o f interally
council on Friday, Bonar Law and Klotz both being present, Klotz proposed
following resolution, which was adopted:
“ The finance section of the interally council on war purchases and finance,
referring to the statement put forward by the diplomatic conference of London
on February 18. 1831, regarding Belgian affairs:
“ It is a principle of commanding nature that treaties do not lose their value,
whatever be the changes that intervene in the interior organization of peoples.”
Recommends for the consideration of the Governments represented the
following statement:
“ Whereas the Imperial Russian Government, when it contracted liabilities,
undoubtedly represented Russia and definitely obligated i t ;
“ Whereas this obligation can not be repudiated by any authority whatever
governing, or which should eventually govern, in Russia without shaking the
very foundations of the law of nations;
“ Whereas there would be in that case no more security in the relations
States and it w ould be impossible to enter into a contract over any long period
T
of time on account of the risk of such a contract being eventually ignored;
“ Whereas such a policy would mean the destruction o f the credits of States
as much from a political as from a financial viewpoint;
“ Whereas a State could not borrow money under normal conditions if the
lender’s only guaranty was the maintenance of the constitution under which
the borrowing government as representing the country puts out a call for
credit;



FOREIGN LOANS AN D A U T H O R IT Y FOR M A K IN G SAM E.

107

“ Whereas no principle is more clearly settled than the one according to
which a nation bears the responsibility o f the acts o f its government and the
liabilities incurred are not affected by any change in authority;
“ Whereas the obligations o f Russia bind and w ill bind the new State or the
T
group of new States that represent or will represent Russia n ow :
“ Therefore, the allied powers will take into consideration the principles
above mentioned in every negotiation relating to the recognition of the flew
State or new States that are eventually to be constituted in Russia.”
In voting for the resolution, chancellor of the exchequer and myself were
moved by consideration that, being only a recommendation of the general prin­
ciple of our respective governments, we were not in any way compromising
their action, and at the same time, according to Klotz representations, might,
if the governments accept the recommendation, aid him in some of his great
difficulties. Due to the vast amount of Russian obligations held in France,
my own opinion is that the paragraphs defining the general principle of re­
sponsibility of succeeding governments for debts of predecessors has been
already so often stated that repetition scarcely necessary. Most important
part has to do with suggestion that no recognition o f new States, carved out
of original Russian territory, should be made without provision for adoption
of part o f general debt.
P age.

SECTION 57-A.
Payments on Russian Contracts.
F e b r u a r y 21, 1918.
While I understand that M r. Davis has kept you advised
and has consulted with you from time to time regarding the payments and set­
tlements which have been made on the Russian contracts, I am sending here­
with for your records additional data and statements, showing the payments
made against the contracts up to February 1, 1918, and the arrangements made
in relation to the cancellation and postponement of certain of said contracts.
As you will notice from the inclosed statements, the unpaid balances on Russian
contracts on December 1,1917, amounted to $102,604,496.62, and on February 1,
1918, to $13,731,410.35. This considerable reduction, made during December
and January, in the current balance due was obtained as follow s:
Paid in cash__________________________________________________$19,977,649.11
Canceled_____________________________________________________ 24,185, 872. 02
Postponed------------------------------------------------------------------------------ 44, 836,162.14
The amounts “ postponed” are deducted from the original amount due be­
cause, I understand, there is no definite obligation on the part of Russia to pay
the amounts composing this item, except in July and October, next, to receive
from the Remington Co. 245,000 rifles at approximately $30.00 apiece. However,
there will no doubt be a credit against this from the sale of a certain part of
the machinery, etc., belonging to Russia, as contemplated under the settlement
agreement between the Remington Co., the War Department, and the Russian
Government. As you will notice, however, from this agreement, the Remington
Co. does not expect this Government to furnish any further funds for this pur­
pose.
According to the inclosed statement furnished to us, the Russian ambassador
had, on January 31, 1918, from the funds which had been set aside by him for
payment on account of contracts, a balance in the National City Bank of $11,950,631.54 available for payments under class 1, and $3,983,063.23 for payments
under classes 2, 3, and 4, making a total of $15,933,694.77. Class 1 comprises
the items payable on purchase contracts, and while it appears that the balance
due on contracts as of February 1, 1918, amounts to about $1,781,000 more than
the balance of funds set aside for class 1 payments, Mr. Ughet expects to
have sufficient funds to make these payments, with the exception of the Reming­
ton rifle contract, by making further considerable reductions in the contracts
and also possibly by transferring additional funds from other accounts for pay­
ments under class 1. Mr. Ughet thinks there will be sufficient funds from the
sale of rails or other materials to meet the payments on Remington rifles if
the Russian Government should not otherwise be in a position to do so.
Very sincerely, yours,
D e a r M r. P o l k :

K . C . L e f f in g w e l l .

Hon. F r a n k L. P o l k ,
Counselor for the Department of State*



108

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

SECTION 58.
State Department Assisting in Sending Supplies to Russia.
D e p a rtm e n t o f S ta te ,

Washington, February 25, 1918.
Mr. R. C. L e f f i n g w e l l ,
Assistant Secretary of the Treasury,
Washington, D. C.
M y D e a r M r, L e f f i n g w e l l : The department has received your letter of
February 21, with inclosures, asking whether the Russian Purchasing Commis­
sion in this country should be furnished with the facilities of the Allies’ Pur­
chasing Commission.
This department believes that at the present time it would be extremely
unfortunate for the Russian people to receive the impression that they are being
abandoned by the Allies or by the United States. Consequently, the department
has been assisting the Russian authorities in this country in forwarding non­
warlike stores, including railway material, agricultural machinery, binder twine,
army and civilian shoes and leather, together with miscellaneous Red Cross
supplies. We have been of the opinion that the limited tonnage available to
Russia makes it impracticable to deliver supplies in large enough quantity—
even in the case of railway material—to become by any possibility a military
factor.
The department accordingly believes that the Russian commission might well
have the advantage of the facilities afforded by the Allies’ Purchasing Com­
mission. In view of the present German advance, however, the department
would be glad to have brought to its attention all shipments which may be
made, as it has obviously become necessary to take additional precautionary
measures to safeguard the supplies from falling into German hands. This is
especially true in regard to shipments destined for Petrograd or Moscow.
I am, my dear Mr. Leffingwell,
Very sincerely, yours,
R obert L a n s i n g .

SECTION 58-A.
Treasury Department Memo on Russian Finance and Contracts, March 1,1918.
[Written on margin:] Mr. Davis: Please prepare letter on these lines to
Polk. R. L.
T r e a s u r y D e p a rtm e n t,

Washington, March 1, 1918.
re.—Disposal of Russian materials and funds:
Mr. Ughet informs me that, substantially, all Russian purchases made here
prior to our entry into the war with funds advanced by the British Government
were made through J. P. Morgan & Co., and that practically all o f the other
direct purchases were made with funds obtained through loans placed with
American banks. Russia placed in this country $11,000,000 in 5 per cent oneyear notes, which have been renewed twice and which mature May 1; also,
$25,000,000 of Russian 5$ per cent bonds were sold to a syndicate of bankers;
and $50,000,000 was obtained through a syndicate of banks, headed by the
National City Bank, and
per cent certificates were issued against the un­
used rouble balance. In addition, some interior Russian bonds were sold here.
Mr. Ughet further states that the rails and approximately 9,000 tons of
barbed wire, which are stored by Russia in this c untry, were purchased some
time prior to our entry into the war and paid for in most part from the pro­
ceeds o f loans obtained through American banks. One contract for 35,000 tons
o f barbed wire, which is. now being delivered, was placed through Morgans on
behalf of the British Government, and the British Government has already dis­
posed of approximately 10,000 tons of this barbed wire to our War Department,
and is applying the proceeds in reduction o f Russian obligations held by Great
Britain.
Mr. Ughet also informs me that the British Government, with the consent of
the Anglo-Russian subcommittee, is disposing of all of the materials which were
purchased through Morgans with British funds and applying the proceeds in
reduction of Russian obligations held by Great Britain. It would seem, thereM em oran du m




109

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

fore, that the British Government is looking after its interests very well in this
respect, and that they could have no claim whatever in respect to the rails and
Mr. Ughet understands that the British lay no claim whatever to any interest
in the rails.
The above-mentioned 9,000 tons of barbed wire are being sold to the Italian
Government and Mr. Ughet is of the opinion that the proceeds from this sale
should be applied in providing interest for an additional year on the $11,000,000
note issue maturing May 1, and that any other surplus funds obtained from the
sale of materials purchased and paid for from the proceeds of the above-men­
tioned American loans should be used, as far as practicable, to paying the in­
terest on the other above-mentioned credits. Mr. Ughet’s personal opinion is
that there are sufficient funds on hand to meet the actual current obligations
for contracts, with the exception o f the Remington rifle contract.
It now appears that the Russian ambassador has ample funds in the Na­
tional City Bank to meet the balance due on all contracts here (with the ex­
ception of the Remington rifles to be delivered in July and October) for pur­
chases, freight, expenses, and interest to May 1 on all Russian loans placed
through American banks.
It should be determined, therefore, what application shall be made o f the sur­
plus funds derived from the sale of the rails and other materials purchased with
funds advanced to Russia by American banks and by the United States Gov­
ernment, and whether or not entire preference should be given to the Reming­
ton rifle contract, or to the payment of interest on the Russian credits and
obligations placed through American banks and the obligations held by this
Government.
Liabilities as per list of March 1, 1918.
Statement No. 1_______________________________________________$5, 754,932. 76
Statement No. 2________________________________________________ 4,895, 330.14
For salaries, etc-----------------------------------------------------------------------551,444.84
Total liability_______________________________________ ____ 11, 201, 707. 74
Bank balances, March 1.
National City Bank (account A ) -----------------------------------------------$9, 304, 860.84
National City Bank (account B ) parts (amounts concerning
transactions of Russian financial attache are excluded)______
14, 252.72
National City Bank (account C )----------------------------------------------- 3, 420, 074.14
T ota l----------------------------------------------------------------------------- 12, 739,187. 70
Statement of payments made during February.
From account A, total paid-------------------------------------------------------- $2,812, 546. 72
From account B, total paid-------------------------------------------------------170,642.17
From account C, direct payment------- ---------------------------------------461. 74
T ota l___________________________________________________

2,983,650. 63

Artillery Department:
No. 146, class 1-----------------------------------------------------------------Freight and expenses on guns, class 2_ ____________________
_
No. 322, class 2___________________________________________

520.00
1,000. 00
26,097. 29
27,617. 29

Technical Department:
No. 300, class 1___________________________________________

11,461.88

All-Russian Zeusky Union A /C Pekosnarm:
No. 127, class 2------------------------------------------------------------------No. 124, class 1------------------------------------------------------------------

1,168.00
210. 00




,

1 378.00

110

FOREIGN LOANS AND A U T H O R IT Y FOR M A K IN G SAM E.

Commissariat Departments:
No. 131, class 1____________________________________________
No. 133, class 1_____________________________________________
No. 135, class 1_____________________________________________
No. 138, class 1_____________________________________________
No. 136, class 1____________________________________________

$132,165. 26
241,630. 06
262, 797. 08
284, 800. 74
1,078,605. 54
1,999,998. 68

Ministry of Supplies:
No. I l l , class 1____________________________________________ ____ 65,226. 00
No. 100, class 1_________________________________________________ 56, 230. 90
No. 113, class 1_________________________________________________ 88,888. 80
No. 108, class 1____________________________________________ ____ 23, 762. 60
No. 107, class 1____________________________________________ ____ 99,433. 80
333, 542.10
Railway department:
No. 208, class 2___________________________________________
No. 197, class 1___________________________________________
No. 41, class 1_____________________________________________

93, 904. 80
6,663. 60
2,007. 22
102, 575. 62

Military attach^:
Protection account, class 4_____________ __________________

100.00

Naval department:
No. 226, class 1___________________________________________
No. 218, class 1___________________________________________
No. 213, class 1___________________________________________
No. 214, class 1___________________________________________
No. 58, class 1____________________________________________

2,307. 50
6,600. 00
3,306.18
548. 35
25,106. 25
40,068. 28

Machinery department:
No. 290, class 2___________________________________________
No. 82, class 1_____________________________________________
No. 279, class 1____________________________________________
No. 260, class 1-----------------------------------------------------------------No. 280, class 1___________________________________________
No. 80, class 1-------------------------------------------------------------------

377. 31
435.10
250. 00
1, 721. 50
1, 551. 20
1,040.00
5,375.11

Agricultural department:
No. 180, class 1___________________________________________
No. 181, class 1___________________________________________

27, 766.00
44,452. 80
72,218. 80

Secretarial department:
Various expenses, class 4_________________________________
Nondepartmental payments:
Various salaries, class 4__________________________________
Murman port:
No. 10, class 1_____________________________________________
No. 10, class 2--------------------------------------------------------------------Transportation—special:
Various payments, class 2-------------------------------------------------Transportation—general:
Various payments, class 2-------------------------------------------------Account “ C ” :

Class 4 ________________________________________________



35,997. 19
6,223.81
10. 567. 34
129.50
10, 696.84
25, 020. 88
140, 272. 24

461.74

Ill

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
Account “ B ” :
( See special statement____________________________________

$170,642.17

Summary:
Artillery department______________________________________
Technical department_____________________________________
All-Russian Zemsky Union, account Pokosnarm____________
Commissariat department_________________________________
Ministry of supplies______________________________________
Railway department______________________________________
Military attache__________________________________________
Naval department_________________________________________
Machinery department____________________________________
Agricultural department__________________________________
Secretarial department____________________________________
Nondepartmental payments________________________________
Transportation— Special___________________________________
Transportation—General---------------------------------------------------Murman port--------------------------------------------------------------------Russian financial attache__________________________________
Direct payment from compte cheque_______________________

27,617.29
11,461. 88
1, 378. 00
1,999,998. 68
333, 542.10
102, 575. 62
100. 00
40, 068. 28
5,375.11
72, 218.80
35,997.19
6, 223.81
25, 020. 88
140, 272. 24
10,696.84
170, 642.17
461. 74

Total____________________________________________________
Total payments for February:
Class 1 ___________________________________________________
Class 2________________________ ______________ $287, 970.02
Class 3_______________________________________ 129,200.00
Class 4_______________________________________
46,585.22
------------------Grand total____________________________________________

2,983,650. 63
2,519, 895.39

463, 755. 24
2,983,650.63

Russian financial attache account “ B ” payments for February.
1918.
Feb. 6.
6.
6.
6.
6.
7.
13.
13.
13.
19.
19.
23.
23.
26.

To C. J. Medzikhovsky, class 4____________________________
To V. P. Ananieff, class 4_________________________________
To J. Goodkoff, class 4__________________ _________________
To Western Union Teegraph Co., class 4__________________
To Western Union Telegraph Co., class 4_________________
To National City Bank, account General Electric Co.,
class H------------------------------------------------------------------------To American Bank Note Co., class 3______________________
To American Bank Note Co., class 3______________________
To Purchasing Commission, class 3_______________________
To Allis Chalmers Mfg. Co., class 1______________________
To G. Klodnitzky, class 4_________________________________
To American Bank Note Co., class 3______________________
To American Bank Note Co., class 3______________________
To Western Union Telegraph Co., class 4__________________

$677. 80
168. 80
350. 00
98. 50
7.25
4, 928. 40
58, 500. 00
500. 00
11, 200. 00
22, 711. 29
2, 349. 00
58, 500.00
500. 00
151.15
170,642.17

M a r c h 5, 1918.
: I beg to submit for your consideration the following infor­
mation in regard to the disposal of Russian materials and funds:
Mr. Ughet informs me that, substantially, all Russian purchases made here
prior to our entry into the war with funds advanced by the British Govern­
ment were made through J. P. Morgan & Co., and that practically all of the
other direct purchases were made with funds obtained through loans placed
with American banks. Russia placed in this country $11,000,000 in 5 per cent
one-year notes, which have been renewed twice and which mature May 1 ; also,
$25,000,000 of Russian 5$ per cent bonds were sold to a syndicate of bankers;
and $50,000,000 was obtained through a syndicate of banks, headed by The
D e a r M r. P o l k




112

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

National City Bank, and 6^ per cent certificates were issued against the unused
rouble balance. In addition, some interior Russian bonds were sold here.
Mr. Ughet further states that the rails and approximately 9,000 tons o f barbed
wire, which are stored by Russia in this country, were purchased some time
prior to our entry into the war and paid for in most part from the proceeds of
loans obtained through American banks. One contract for 35,000 tons of
barbed wire, which is now being delivered, was placed through Morgans on
behalf of the British Government, and the British Government has already dis­
posed of approximately 10,000 tons of this barbed wire to our War Department,
and is applying the proceeds in reduction of Russian obligations held by Great
Britain.
Mr. Ughet also informs me that the British Government, with the consent of
the Anglo-Russian subcommittee, is disposing of all of the materials which were
purchased through Morgans with British funds and applying the proceeds in
reduction of Russian obligations held by Great Britain. It would seem, there­
fore, that the British Government is looking after its interests very well in this
respect, and that they could have no claim whatever in respect to the rails, and
Mr. Ughet understands that the British lay no claim whatever to any interest
in the rails.
The above-mentioned 9,000 tons of barbed wire are being sold to the Italian
Government and Mr. Ughet is of the opinion that the proceeds from this sale
should be applied in providing interest for an additional year on the $11,000,000
note issue maturing May 1, and that any other surplus fuuds obtained from the
sale of materials purchased and paid for from the proceeds of the above-men­
tioned American loans should be used, as far as practicable, to paying the
interest on the other above-mentioned credits. Mr. Ughet’s personal opinion is
that there are sufficient funds on hand to meet the actual current obligations
for contracts, with the exception of the Remingon rifle contract.
It now appears that the Russian Ambassador has ample funds in The Na­
tional City Bank to meet the balance due on all contracts here (with the ex­
ception of the Remington rifles to be delivered in July and October) for pur­
chases, freight, expenses, and interest to May 1 on all Russian loans placed
through American banks.
It should be determined, therefore, what application should be made of the
surplus funds derived from the sale of the rails and other materials purchased
with funds advanced to Russia by American banks and by the United States
Government, and whether or not entire preference should be given to the Rem­
ington rifle contract, or to the payment of interest on the Russian credits and
obligations placed through American banks and the obligations held by this
Government.
Referring to our conversation on the above subject, my understanding is that
you are of the opinion that such surplus funds, if any, should be applied by the
Russian Ambassador to payment of interest on Russian credits and obligations
up to and including July 1, and to any other current obligations as they become
due, rather than setting aside a specific amount for payment in July and Octo­
ber on the Remington rifle contracts.
Very sincerely, yours,
R. C. L e f f i n g w e l l .
Hon. F r a n k L . P o l k ,
Counselor for the Department of State.
[Mr. Polk replied March 7, and we again wrote Mr. Polk March 12.]

SECTION 59.
Russian Decree on Annullment of Loans.
D e p a r t m e n t of C o m m e r c e ,
B u r e a u of F oreig n a n d D o m e s t ic C o m m e r c e ,

Washington, March 23, 1918.
The D e p a r t m e n t o f t h e T r e a s u r y ,
Washington, D. C.
D e a r S i r : I take pleasure in referring to you the attached copy of a com­
munication received by this bureau from one of its foreign representatives, as




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

113

indicated below. The bureau is interested in any special comment you may
have to offer, but no formal acknowledgment of this reference is necessary.
Very truly, yours,
C. D. S n o w ,
Assistant Chief of Bureau.
Submitted b y : Commercial Attachg W. C. Huntington.
Place: Petrograd, Russia.
Dated: Received here March 21,1918.
Subject: Copy of decree adopted by the council of the commissaries of the
people on January 1 regarding the annulment of State loans.
ANNULMENT OF LOANS.

The following decrees have been adopted by the council of the commissaries
of the people of January 1 regarding the annulment of State loans:
1. All State loans concluded by the Government of the Russian landowners
and Russian bourgeoisie, which are enumerated in the inclosed statement, are
being annulled (canceled) from December 1, 1917. The December coupons are
not subject to payment.
2. In the same way all guaranties are being annulled, which have been given
by the above-mentioned Governments on the loans of various concerns and insti­
tutions.
3. Absolutely and without any exception, all foreign loans are being an­
nulled.
4. Short time obligations and series of the State chancelery are remaining in
force. Interest on them is not paid, but their obligations have the same validity
as the credit notes.
5. Citizens of limited means possessing the securities of the interior loan,
which are annulled for a sum not exceeding 10,000 roubles (at normal value),
receive a lifelong yearly annuity from the State amounting to the sum equiva­
lent to the interest derived from the securities which belong to them.
6. Citizens possessing the annulled securities for a sum exceeding 10,000
roubles do not receive any indemnification for the annulled papers which belong
to them.
7. The deposits in the State savings banks and interest on them are inviolable.
All the obligations of the loans to be annulled belonging to the savings banks
are being replaced by a book debt of the Russian Peasants’ and Workers’ Re­
public.
8. The cooperative stores, local self-government, and other universally bene­
ficial or democratic institutions possessing obligations of tlio loans to be an­
nulled will be satisfied on the basis of the rules which are being worked out
by the chief council of national economy together with the representatives of
these institutions if it can be proved that these obligations have been purchased
prior to the publication of the present decree.
R e m a r k . —The local organs of the Chief Council of National Economy have the
right to determine which institutions come under the head of universally bene­
ficial or democratic.
9. The general management o f the liquidation of the State loans is intrusted
to the chief council of national economy.
10. The whole matter of liquidating the loans is intrusted to the State bank,
whose duty it is to immediately commence the registration of all the obliga­
tions of the State loans in the hands of the various proprietors, as well as the
other intrest-bearing papers; both of those subject and not subject to annul­
ment.
11. The councils of the workers’, soldiers’, and peasants’ deputies form, in
connection with the local councils of national economy, commissions for the
determination of which of the citizens come under the head of having limited
means.
These commissions have the right to annul in their entirety savings obtained
not by means of labor, even if these savings do not exceed the sum of 5,000
roubles.
This decree is to be discussed by the Central Executive Committee.
N. G o r b u n o f f ,
Secretary of the Council of National Commissaries.
V y e k , January S/16, 1918.
S. Doc. 86,67-2------8



114

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
SECTION 60.
Interest Table.

Payments of interest and other current liabilities on credit operations of the
Russian Government due between June 1, 1918, and January 1, 1919.
1. Twenty-five million 5^ per cent bonds.
$687,500.00
(a) Interest due from June 1, 191.8________________________
Commission N. C. B. of New York § per cent of the value of the
coupons__________________________________________________
859 38
Do_____________________________________________________
687, 500. 00
Dec. 1, 1918________________________________________________
859.38
2. Eleven million 5 per cent Treasury notes, (b) Interest due
Nov. 1, 1918____________________________________ __________ _
275,000.00
3. Fifty million credit:
(a) Interest 6? per cent due July 10. 1918__________________ 1,625,000.00
Commission N. C. B. of the New York j per cent of the value
of the operation July 10, 191S____________________________
125, 000. 00
Oct. 10, 1918_______________________________________________
125,000.00
Total until Jan. 1, 1918__________________________________ _ 3, 526, 718. 76
4. Jan. 10, 1919. Payment of the $50,000,000 credit:
Interest________________________________ ___________________ 1, 625,000. 00
Commission_________________________________________________
125, 000. 00
Total_____________________________________________________ 5,276, 718. 76

SECTION 59-A.
Memo on Disposal o f Russian Supplies.
RUSSIAN SUPPLIES.

Memorandum of plan for disposing of Russian supplies which, when ap­
proved by the British and French Governments, is to be submitted by cable to
the Secretary of the Treasury at Washington.
Supplies originally intended for Russia are now distributed as follows:
(a)
In the United States; (7j) in Great Britain, or in British ships which
will eventually land their cargoes in Great Britain; (e) in France; {d) in
Italy; (e) at Archangel and Murmansk; ( f ) at Vladivostock and other ports
in the Far East, chiefly Japanese ports.
Payment for these supplies has been made in the main, if not entirely, by
some of the following methods:
{a) By funds advanced by Great Britain; (b) by funds advanced by France;
(c) by funds advanced by the United States.
(Russian funds in the United States, Great Britain, and France, not “ ear­
marked ” as having been provided by any particular Government, will be treated
herein as if advanced by the country in which the funds were deposited.)
Inasmuch as many of these supplies are likely to deteriorate, and many of
them are required for the allied armies or for the United States Army, it is de­
sirable that existing oragnizations be coordinated for disposing of them (in
so far as possession of them can be had), to the best possible advantage for all
concerned. To this end the following plan is proposed:
(1)
Russian supplies now in Great Britain, or which may be returned in
the future, to continue to be disposed of under the direction of the existing
Treasury Committee formed for this purpose, to which has been attached a
United States representative to control the disposal of stores unloaded in the
United Kingdom purchased in the first instance in the United States, either
out of Russian funds or out of funds advanced by the United States Govern­
ment. Should in the future goods be returned to the United Kingdom purchased
in the first instance out of funds advanced by the French Government or Rus­
sian credits in France, a French representative shall be attached to the above
committee for the control of such goods.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

115

(2) Russian supplies now in America, or wT
hich may be returned in the
future, to be disposed of under the direction of an American committee to
which shall be attached representatives of the British and French Governments
for the control of goods purchased out of funds advanced by the British or
French Governments.
(3) Russian supplies in France to be disposed of under the direction of the
French Government, the disposal of any Russian goods in France purchased out
of British or United States credits being controlled by representatives of the
British 01* United States Governments.
In disposing of Russian supplies, wherever they may be, the following prin­
ciples shall govern:
(a) The French Government shall have preference in the purchase of sup­
plies paid for out of advances made by the French Government, or out of
Russian funds in France.
(b) The British Government shall have preference in the purchase of sup­
plies paid for out of advances made by the British Government, or out of
Russian funds in Great Britain.
(c) The American Government to have preference in the purchase o f sup­
plies paid for by advances made by the American Government, or out of Rus­
sian funds in the United States.
After the above preferences have been recognized the remaining goods shall
be disposed of in sueli manner as to realize the best possible results.
The proceeds of the liquidation of goods, after deducting any expenses in­
curred in effecting their sale, shall be disposed of as follow s:
(a) The proceeds of goods paid for out of advances by Great Britain shall
be turned over to the British treasury, to be dealt with as it shall deem proper.
( b) The proceeds of goods purchased from advances made by the French
Government shall be turned over to the French treasury, to be dealt with as it
shall deem best.
(c) The proceeds of goods purchased by advances made by the United States
Government shall be turned over to the American Treasury, to be dealt with
as it shall deem best.
So far as supplies purchased from advances made by the United States, or
from Russian funds in the United States are concerned, none shall be sold
without tlie consent of the representative of United States Government, whose
approval shall also be necessary before possession is taken of any such sup­
plies still in the hands of the Russians.
If the Supreme War Council shall so direct, a military committee shall
be established at Versailles, to be consulted, in case of need, regarding the dis­
posal of the Russian military supplies herein dealt with, in so far as they are
not purchased by the respective Governments under the preferences established
as above provided.
Sunderland House, Curzon Street, London, W. 1, March 19, 1918.

SECTION 61.
Payment of Interest on Private Loans Before Government Interest Payments
Are Met.
A p r i l 19, 1938.
: As you will recall, $11,000,000 of Russian notes placed
in this country and now outstanding mature on May 1, next. I understand that
about $2,500,000 of these notes are owned by the National City Bank or the
National City Co., and that the Russian ambassador has proposed to pay one
year’s interest on those notes if the holders agree to extend the same, but his
proposal has not as yet been accepted. In case the ambassador’s proposal is
not accepted before May 1, I should like to know if the State Department
would permit the National City Bank to apply, without the consent of the Rus­
sian ambassador, any part of the Russian deposits held by the bank to the
payment of the principal or interest of any o f said notes after their maturity,
or to refuse payment of checks drawn against said deposits because the bank
or anyone else held some of these notes then past due.
Very sincerely, yours,
R. C. L e f f i n g w e l l ,
Hon. F r a n k L. P o l k ,
Counselor for the Department of State.
M y D e a r M r. P o l k




116

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
A pun. 24. 1018.

My Dear Mr. Polk : I am inclosing herewith copy of a letter which I wrote
on April 13 to Mr. Ughet, Russian financial attache, and copy of a letter to me,
dated April 22, from the National City Bank, in reference to the adjustment
of Russian Government accounts in accordance with letters of instruction from
the Russian ambassador and from the Russian financial attach# on November
28 and December 1, 1917. As you will recall, this was in pursuance of our con­
versations with the Russian ambassador. I had assumed that the accounts had
been arranged in accordance with the* instructions given in those letters, but
apparently the bank has postponed completing the arrangement pending the
definite approval of this department. As an approval of tlie arrangement as
set forth in the above-mentioned letters involves the approval of the Russian
ambassador’s power or action, it is not a question which the Treasury Depart­
ment can answer. The National City Bank has informed the Treasury Depart­
ment from time to time in respect to payments which the Russian financial
attach^ wished to make, and, so far as I know, the National City Bank has
only made payments to which this deprtment offered no objections.
It seems to me that the course which has been pursued by the National City
Bank up to the present time has been one which has relieved the Government of
the United States of grave embarrassment and that if it is prepared to con­
tinue to pursue a like course it would be desirable that that bank should have
the definite approval of the Department of State, if that department can con­
sistently give such approval.
As you know, a substantial sum of money remains on deposit with the City
Bank, a part of which at least is the proceeds of loans made by the United
States.
The $11,000,000 of Russian notes which were placed in this country about
three years ago mature on May 1, next. Mr. Ughet, Russian financial attach^,
states that he has just had a meeting with officials of the National City Bank
representing that bank and other note holders, and that they have positively
refused to accept the payment of one year’s interest and extend the notes. In
my opinion, it would be unfortunate if at present the Russian financial situauation here should be brought to a crisis, and it would be advisable to have
a meeting with the National City Bank and any other substantial note holders.
If you are of the same opinion I suggest that you arrange an early conference
with the note holders.
I understand that the Russian Government has in the United States various
military and civilian supplies, purchased in part from United States advances,
which probably could be disposed of for from $25,000,000 to $40 000,000; that
the cash in the National City Bank is probably sufficient to pay In full all
unsettled claims of contractors, at least for commodities heretofore delivered;
and that there is a deposit of about $5,000,000 in the Guaranty Trust Co., of
New York. Six months’ interest will, on May 15, 191S, be unpaid on the de­
mand and past-due obligations of the Russian Government held by the United
States.
I understand that Mr. Davis, of this department, is to confer with you about
all these subjects to-morrow morning.
Very sin c e r e ly , y o u r s .
R . C. L e f f t n g w e l l .
Hon. F r a n k L. P o l k ,

Counselor for the Department of State

.

A p r i l 29, 1918.
: If it meets with your approval, I will be obliged if you
will have the following message, which I have prepared in pursuance of our con­
versation, cabled to Assistant Secretary Crosby at London:
“ From Secretary of Treasury for Crosby. No. 164. Russian one-year notes,
to amount of $11,000,000. placed through National City Bank three years ago,
and which have been renewed twice, mature May 1. Russian Ambassador
has funds available for paying interest for six months or one year in case
notes are extended, but can not, of course, pay principal. It is very desirable
that these notes be extended without protest or attempt on part of note holders
to attach any Russian property here, which would create a crisis and might
force this Government to take over all Russian assets and apply proceeds to
credit of Russian obligations. It seems advisable from note holders’ stand­
point to grant extension and not create a situation whereby this Government
would be compelled to take an antagonistic position to protect its own in­
terests, leaving little or nothing for note holders. Notes are held by National
M y D e a r M r. P o l k




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

117

City Bank and few other large interests, all or substantially all assenting to
extension, with exception of $2,500,000, which were purchased by the Russian
Corporation in England, of which Holden is president, through proceeds loan
from City Bank. City Bank has asked consent of Russian Corporation to
grant extension, blit has demanded payment of its loan or additional collateral.
Russian corporation replied that it could give no additional security, but has
indicated its willingness to extend notes, provided City Bank would extend
loan without additional securities. Am advised that Russian corporation has
other assets, and as City Bank has been cooperating satisfactorily in this and
other Russian matters, have -agreed to use good offices to get additional se­
curity, if available, from Russian corporation. This, of course, is a delicate
matter, but British representative suggests advisability of our suggesting that
you take matter up unofficially with British Treasury, explaining that ap­
parently nothing would be gained by refusing to extend notes and that City
Bank is entitled to additional security.
Very truly, yours,
R . C. L e f f i n g w e l l .
H on . F r a n k L. P olk,

Counselor for the Department of State.
[On margin: Mr. Crosby replied by his No. 175, May 2.
to Polk, May 6.]
_ _

See also our letter

M a y 4, 1918.
Inclosed herewith you will please find a table pre­
pared by the Treasurer of the United States showing the amount of interest
which become due on May 15, 1918, on the obligations of the Russian Govern­
ment held by the United States at the close of April 27, 1918. It is my under­
standing that your Government will pay on May 15 the interest to that date on
all obligations of your Government then held by the United States. Please
make check payable to the order of “ Assistant Treasurer of United States,
New York, for credit general account Treasurer o f United States,” and deliver
the same to the Assistant Treasurer of the United States at the subtreasury
in New York.
A word of explanation in regard to the inclosed table may not be out of place.
On November 15, 1917, the United States held obligations of your Government
aggregating in amount $187,729,750, of which $97,500,000 in amount were then
hearing interest at the rate of 33 per cent per annum, and $90,229,750 at the
1
rate of 4| per cent. Interest on such 44 per cent obligations has been computed
for the period November 15, 1917, to May 15, 1918, at the rate of 4£ per cent.
Under date of November 15, 1917, I wrote you reminding you that it would be
necessary to increase the interest rate upon all or part of the 3£ per cent obli­
gations of the Russian Government held by the United States.
The aggregate amount of the loans made to the Governments of the Allies
under the act approved April 24, 1917, was $2,114,000,000. The amount of 81
per cent bonds of the United States not yet converted into 4 per cent bonds is
something under $1,480,000,000. The difference between these two amounts, or
$684,000,000, is nearely one-third of the total of such loans. Accordingly, for
convenience, interest is being charged on $32,500,000 or one-third of such obli­
gations of your Government at the rate of 4 per cent and on the balance of
$65,000,000 of such obligations of your Government at the rate of 3 i per cent.
The privilege of the holders to convert 3£ per cent bonds of the United States
into 4 per cent bonds does not expire until May 15, 1918, and the privilege of
the holders to convert 3£ per cent bonds and 4 per cent bonds of the United
States into 4i per cent bonds commences as of May 9, 1918, so that the amount
of interest to May 15, 1918, on the obligations of your Government held by the
United States is necessarily figured approximately, and further adjustment of
interest may be required after final figures are available.
It is hoped that the rate to be borne after May 15, 1918, by all the shorttime obligations of your Government held by the United States will shortly be
determined, and, in that connection, the conversion privileges in respect of
both the 3i per cent and the 4 per cent United States Liberty bonds must be
borne in mind.
I am, my dear Mr. Ambassador,
Very truly, yours,
R. C. L e f f i n g w e l l .
His Excellency B . B a k h m e t e f f ,
Ambassador Extraordinary of the Provisional Government of Russia,
The Embassy, Washington, D. C.
D e a r M r. A m b a s s a d o r :




118

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Interest on obligations of the Provisional Government of Russia held by the
United States Apr. 27, 1918. as demand obligations.

Date of obligation.

Principal.

Interest
Interest from
rate at
Nov. 15,1917,
which
or date, to
computed. May 15,1918.
Per cent.

July 6 .. .
July 13..
July 13..
Aug. 1...
Aug. 22..
Aug. 24..
Aug. 30..
Aug. 30..
Sept. 25..
Sept. 25..
Sept. 25..
Oct. 2 ...
Oct. 11..
Oct. 11..
Oct. 11..
Oct. 11..
Nov. 1...
Nov. 15..

$35,000, 000.00
5.000, 000.00
5.000, 000.00
2.500, 000.00
2.500, 000.00
137, 500, 000.00
5.000, 000.00
5.000, 000.00
5.000, 000.00
5.000, 000.00
5.000, 000.00
22, 200, 000.00

5.000, 000.00
5.000, 000.00
5.000, 000.00
5.000, 000.00
31,700, 000.00
1,329, 750.00

Total.

187,729, 750.00

3h

3i
3
1
3i
n

3m
4
4

4i

4
1
4i
4
1
4
1
41

4i
41
41

.

$607, 465. 75
86 780. 82
86, 780. 82
43, 390.41
43, 390.41
708, 643.84
99, 178.08
99, 17S. 08
105, 376.71
105, 376.71
105, 376.71
467, 872.60
1 5 376.71
0b
105, 376.71
105, 376. 71
105, 376.71
668, 088. 36
28, 024.94
3,674,431.08

JOn $15,000,000 interest computed at 3 per cent; on $22,500,000 interest computed at 4 per cent.
.J

SECTION 62.
Memo on Deferring the Payment of Russian Interest to the United States.
T re a s u r y D e p a rtm e n t,

Washington May 10, 1918.
Memorandum for Mr. L e f f i n g w e l l :
Mr. Polk, of the State Department, told me by telephone this afternoon that
Mr. Phillips had communicated to him the substance of his talk with you this
morning relative to the collection of interest accruing on May 15 on the Russian
obligations. In substance, the views of Mr. Polk, as expressed to me, are that
it would be inadvisable just now to use up all the Russian funds now available
for payment of interest. I explained to him that alter paying the balance due
on the Russian contracts, amounting to approximately $4,000,G O there would
O,
be a balance in bank of approximately $8,200,000 and that our interest would
amount to approximately $3,700,000, and that to pay interest on other Russian
obligations up to and including July 10, an additional $3,000,000 would be re­
quired, but that enough rails could be sold to cover all of this. Mr. Polk then
stated that in view of the fact that it might be most desirable a little later on
to ship all of the material^ required to Russia, and even go to Congress and
ask for an appropriation for assisting Russia further, it seemed inadvisable
just now to jeopardize the collection of our principal by forcing collection of
interest at this moment. He further stated, however, that we would not be
running any risk in postponing the collection of interest, at least temporarily,
because we could at any time collect the interest by taking over the Russian
assets in this country. I explained to him that in view of the fact that we
had just permitted the payment of interest on the $11,000,000 note issue, the
Treasury Department could not very well justify allowing everyone else being
paid to date and only to stop the payment of interest at the time that our
interest becomes clue, and that it would be still more difficult to justify our
action if we permit the interest to be paid on the other obligations on June 1
and July 10. He agreed that if we should not collect our interest, it would
be inadvisable to allow interest to be paid on the other obligations on June 1
and July 10, but as he has been sick for some time and is leaving in the morn­
ing for Atlantic City to recuperate, he expressed the hope that you would post­
pone action until his return and we could discuss further the entire Russian




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

119

situation. I asked him if the Secretary o f State would write us a letter
along this line and he replied that as he was more conversant with the matter
himself, he would prefer that I talk to Mr. Miles and request him to draft a
letter to be sent to him for signature and stated that he thought, under the
circumstances, the Treasury Department would be entitled to a letter from the
State Department. I told him that I would endeavor to talk with you and then
communicate with him further to-night, and he suggested that if you wished
to talk with him yourself, he would be glad to have you call him at his home.
N . H. D a v is .
N e w Y o r k , July 2, 1918.
My D e a r Mr. L e f f i n g w e l l : Referring to your letter of May 4 and subsequent
conference which we have had at the State and Treasury Departments regard­
ing the payment of interest due May 15,1918, on the loans granted by the United
States to Russia, and ultimately taking into consideration the letter which Mr.
Polk addressed to me on June 22, I beg to state that I am prepared to have this
interest paid at the earliest possible convenience.
However, at the present moment the free balance of our accounts is approxi­
mately of $5,000,000, out of which on the 10th of July we have to pay the interest
and the commission on our banking operation of $50,000,000, being $1,750,000;
besides this a certain amount is needed for different emergency expenses as for
transportation, expenditures in connection with the personnel and for different
claims of American manufacturers, but on the other hand considerable payments
are due to my accounts from the United States Shipping Board and from the
office of the Director of Military Railroads.
In view of the above, I would propose the following procedure of payment of
interest:
(1) Out of the cash balance now at my disposal, I am willing to pay at once
$1,000,000, check for which amount, drawn in favor of the Secretary of the
Treasury of the United States, please find inclosed herewith.
(2) On June 26 I addressed a note to the Secretary of State informing him
that I was absolutely agreeable that the proceeds of the merchandise purchased
on account of American and Russian credits and sold in England be applied in
partial cover of above said interest.
Information reached me to the effect that the Treasury Department had been
advised by the Equitable Trust Co., of New York, of the receipt by their London
office of two amounts of £370,650.10 and £8,731.0 in connection with the Russian
liquidation in England. These funds would have to be transferred to the disposal
of the Secretary ot the Treasury on account of interest due on Russian obliga­
tions held by this Government; after that this transaction will have gone through
the books of Mr. S. Ughet, Russian financial attache, and the funds have been
deposited with the National City Bank of New York to the credit of my
account.
The amounts in question will represent approximately $1,800,000.
(3) The balance of payment, approximately $800,000, will be paid at the
earliest possible convenience, as soon as sufficient funds for this purpose shall
have accumulated at my disposal out of proceeds for the merchandise sold in
this country or in England and acquired on account of American or Russian
credits, or from the amounts payable to me by the United States Government for
chartering of the ships.
Hoping that this proposal will meet with your approval,
I am, my dear Mr. Leffingwell,
Very truly, yours,
B, B a k h m e te ff,

Ambassador of Russia.
Hon. R. C. L e f f i n g w e l l ,
Assistant Secretary o f the Treasury
of the United States, Washington, D. C.
D e p a rtm e n t o f S ta te ,

Washington, July 10, 1918.
My D e a r M r. L e f f i n g w e l l : Your communication dated July 8 inclosing
copy of a letter dated July 2, addressed to you by His Excellency B. Bakhmeteff,
ambassador extraordinary of the provisional government of Russia, suggesting
a method for the payment of the interest which became due on May 15 on



120

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

obligations of tlie Russian Government held by the Government of the United
States, and your reply thereto dated July 8, have been received.
The Department of State sees no objection to the plan of arrangement re­
garding the settlement of these obligations, and, therefore, has transmitted your
communication to Ambassador Bakhmeteff in accordance with your request.
I am, my dear Mr. Leffingwell,
Very truly, yours,
W il l ia m P h il l ip s .

Hon. R. C. L effingwell ,
Assistant Secretary of the Treasury Department,
Washington, D. C.

SECTION 63.
United States Shipping Board Payments to Russian Ambassador.
FINANCIAL ATTACH^ TO THE RUSSIAN EMBASSY.
N e w Y o r k , July 6, 1918.
Esq.,
Care Office of Assistant Secretary to the Treasury,
Washington, D. C.
D e a r Si r : Please find inclosed herewith three statements showing the
amounts due to us from the United States Government for charter money on
the five steamers of the Russian volunteer fleet, the first statement, amounting
to $1,108,755.75, being the gross amount receivable, from which has to be de­
ducted, as per list No. 2, the amount of $702,121.51 covering expenses in con­
nection with chartering of steamers, as well as amounts due the United States
Government in connection with same.
List No. 3 is a recapitulation of said two lists and shows that the net balance
due to us is $493,271.74.
Believe me, dear sir,
Yours, very truly,

A lb e r t R a th b on e,

S h ip le y ,

Russian Financial AttacM.
J . D . J o l c o w s k i,

Secretary.
Due from United States Government charter money for five steamers of the
Russian volunteer fleet, in accordance icith respective charter parties, dated
in Washington, D. C,, March SO 1918, as per Mils presented to division of
,
operations, Emergency Fleet Corporation, United States Shipping Board,
Washington, D. C.

Per steamship Omsk, 11,950 tons dead-weight:
1, for first month, Apr. 4r-May 4________ $49, 592. 50
6, for second month, May 4 -June 4______ 49, 592. 50
11, for third month, June 4-July 4______ 49, 592. 50
16, for fourth month, July 4-Aug. 4____ 49, 592. 50
----------------Per steamship Irtysh, 7,100 tons dead-weight:
Bill No. 5, for coal______________________________
581. 25
Bill No —, for first month, Apr. 20-May 20______ 29,465. 00
Bill No. 10, for second month, May 20-June 20____ 29, 465. 00
Bill No. 15, for third month, June 20-July 20_____ 29,465.00
----------------Per steamship Nijni No vgorod, 4,380 tons dead-weight:
Bill No. 3, for first month, Apr. 11-May 11 _______ 18,177. 00
Bill No. 8, for second month, May 11-June 11____ 18,177.00
Bill No. 13, for third month, June 11-July 11_____ 18,177.00
----------------Bill
Bill
Bill
Bill

No.
No.
No.
No.




$198,370.00

88,976. 25

54,531.00

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

121

Per steamship Toula, 3,120 tons dead-weiglit:
Bill No. 4, for first month, Apr. 12-May 12______$12, 948. 00
Bill No. 9, for second month, May 12-June 12____ 12, 948. 00
Bill No. 14, for third month, June 12-July 12------- 12,948. 00
----------------- $38, 844. 00
Per steamship Kishenev, 3,120 tons dead-weight:
Bill No. 2, for first month, Apr. 9- May 9-------------- 12, 948. 00
Bill No. 7, for second month, May 9-Jnne 9______ 12, 948.00
Bill No. 12, for third month, June 9 -July 9_______ 12,948. 00
----------------38, 844.00
Total on bills already presented__________________________
Up to Dec. 31,1918, will still be due:
Per Omsk__
For fifth month, Aug. 4-Sept. 4__ $49, 592. 50
For sixth month, Sept. 4-Oct. 4__ 49, 592. 50
For seventh month, Oct. 4-Nov. 4_ 49, 592. 50
For eighth month, Nov. 4-Dec. 4_ 49, 592. 50
For ninth month, Dec. 4 -Jan. 4_
_ 49, 592. 50
----------------- 247, 962. 50
Per Irtysh—
For fourth month, July 20-Aug. 20_ 29, 465. 00
For fifth month, Aug. 20-Sept. 20_ 29,465. 00
For sixth month, Sept. 20-Gct. 20_ 29, 465. 00
For seventh month, Oct. 20-Nov. 20_ 29, 465, 00
For eighth month, Nov. 20-Dec. 20_ 29,465. 00
For ninth month, Dec. 20-Jan. 20- 29, 465. 00
----------------- 176, 790.00
Per Nijni Novgorod—
For fourth month, July 11-Aug. 11_ 18,177. 00
For fifth month, Aug. 11-Sept. 11_ 18,177. 00
For sixth month, Sept. 11-Oct. 11_ 18,177.00
For seventh month, Oct. ll-N o v .ll_ 18,177. 00
For eighth month, Nov. 11-Dec. 11_ 18,177. 00
For ninth month, Dec. 11-Jan. 11_ 18,177.00
----------------- 109,062.00
Per Toula—
For fourth month, July 12-Aug. 12- 12, 948. 00
For fifth month, Aug. 12-Sept. 12_ 12,948. 00
For sixth month, Sept. 12-Oct. 12_ 12, 948. 00
For seventh month, Oct. 12-Nov. 12_ 12,948. 00
For eighth month, Nov. 12-Dec. 12_ 12, 948. 00
For ninth month, Dec. 12-Jan. 12_ 12,948.00
----------------- 77,688.00
Per Kishenev—
For fourth .month, July 9-Aug. 9_ 12, 948. 00
For fifth month, Aug. 9-Sept. 9—
12,948. 00
For sixth month, Sept. 9-Oct. 9_
_ 12, 948. 00
For seventh month, Oct. 9-Nov. 9_ 12,948. 00
For eighth month, Nov. 9-Dec. 9_
_ 12, 948. 00
For ninth month, Dec. 9-Jan. 9___ 12,948.00
----------------- 77,688.00
-----------------

419,565.25

689,190. 50
1,108, 755. 75

Statement of expenses in connection icith statement of chartering steamers of
the Russian volunteer fleet to the United States Government and amounts
due the United States Government in connection with charter of “ Omsk”
and “ Irtysh ”
Paid to United States Government insurance premium for Omsk
for voyage from Norfolk to Liverpool___________________________$86,637.50
Paid to United States Government insurance premium for steamship
Omsk for voyage from Liverpool for New York (money to be re­
funded)________________________________________________________ 86,637.50




122

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Advanced to Mr. I. V. Shestaeovsky, to pay off Russian crew ex
steamship Irtysh _______________________________________________$46, 019. 90
Advanced to Canadian Pacific Railroad for dispatch and paying off
crew ex Nijni Novgorod, Toula, and Kishenev___________________ 132, 000. 00
Remark No. 1: Captains and officers of Russian volunteer fleet
steamers which are now in New York and which are considered
dismissed claim their bonuses and reserve funds, in all due to
them ___________________________________________________________ 90, 000. 00
Remark No. 2: Mr. Poliakoff, formerly captain of steamship Kamenetz Podolsk, has already presented, through an attorney, claim
for $15,000.
Due to United States Government charter money for steamship Omsk
voyage Norfolk-Liverpool from Apr. 3-May 22, 1918______________ 110, 826. 61
Due to United States Government for repairs of steamship
Irtysh, approximately_________________________________ $130,000
Due to United States Government for repairs steamship
Nijni Novgorod, approximately_______________________
20, 000
-------------- 150, 000. 00
Total_______________________________________________________ 702,121. 51
Statement of account with United States Government for charter money, etc.,
on steamers “ Omsk” “ Irtysh ” “ Nijni Novgorod” “ Toula” “ K ishenev”
up to Dec. 81, 1918, and expenses in connection therewith.
DEBIT.

CREDIT.

Charter money due per
Dee. 31, 191.S, as per
list No. 1___________ $1,108, 755. 75
To be refunded, insur­
ance
premium
on
home trip of steam­
ship
Omsk
from
Liverpool
to
New
York,
money was
paid prior to United
States
Government
taking the steamer
over at Liverpool-----86, 637. 50

Total as per statement
No. 2 attached______
Balance d u e f r o m
United States Gov­
ernment per Dec. 31,
1918________________

1,195, 393. 25

$702,121. 51

493, 271. 74

1,195, 393. 25

SECTION 64.
Statement of Condition of Russian Account August, 1918—'This Also Shows
the Enormous Salaries of the Russian Embassy and Officials Allowed by
the United States Out of This Liquidation Fund.
FINANCIAL ATTACHE TO THE RUSSIAN EMBASSY.
F l a t ir o n B u il d i n g ,

Neto York, August 20, 1918.

Mr.

A lbert R a t h b o n e ,

Care Assistant Secretary of the Treasury Department.
D e a r M e. R a t h b o n e : In accordance with your request, I beg leave to tender
you some data concerning the disbursements up to August 1, 1918, and the
estimated expenditures from said date up to January, 1919.
Inclosed please find a copy of a letter addressed on December 27, 1917, to
Hon. R. C. Leffingwell by the Russian ambassador with two accompanying
statements, which we have to consider as the starting point of our figures.
Said documents show the cash available at that time subdivided into different
clashes of expenditures.
I further inclose several statements showing the disbursements made up to
August 1, 1918, the estimates of future expenses up to January, 1919, as well
the cash statement as of August 1, 1918.



FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

123

These estimated expenses show a total of $6,359,594.0S. A further amount
of about $750,000 should be taken into account for obligations on various orders
placed from Petrograd. This brings the total to $7,i09<594.08.
The cash on hand on August 1, 1918, shows $4,975,490.70. This amount must
be reduced by $865,925.08, representing interest paid to the United States Gov­
ernment and not included in the inclosed statements of disbursements. On
the other hand, an amount of about $400,000 must be added, this amount being
the estimated net income from charter of Russian steamers to the United States
Government. The total means available would thus reach the amount of
$4,509,565.62.
The balance of $2,600,028.46, to cover the estimated payments in case of
necessity, could be provided for from the proceeds of sale of various goods
standing at our disposal.
I hope that the above information will meet your request, and I hold myself
at your entire disposal for any additional data which you might find necessary.
Believe me, dear Mr. Rathbone,
Very sincerely, yours,
Russian Financial AttacM.
T r e a s u r y D ep a rtm en t,

Washington, August 27, 1918.
Memorandum for Mr. Rathbone:
The principal conclusion I draw from the attached figures is that there are
a number of items as to which our information is not very full or clear.
In the month of June the only very large item is salary and office expenses,
$71,307, apparently covering salaries and expenses of the embassy and con­
sulates. There is a corresponding amount in May of $59,517. In April the
amount shown under this heading is $223,958.58, which probably covers more
than one month, as there are no exactly corresponding items shown in the earlier
months.
The payments for expenses of railway men in Russia amount to a substantial
sum, a large proportion of the total being paid through Prof. Lomonossoff.
In December there are some very large items for salaries and expenses,-as
follow s:
Artillery department____________________________________________ $422, 822. 88
Secretarial department---------------------------------------------------------------- 244, 876.00
Prof. Lomonossoff________________________________________________ 300, 000. 00
L. TiajolofC______________________________________________________
57, 054. 86
There is an artillery department item of $86,604.55 in January, but no similar
items thereafter. In March there is an item of expenses of consulates at Chicago
and Pittsburgh, $50,000.

SECTION 65.
Large Salaries.
Russian expenditures, class 4*
DECEMBER, 1917.

Artillery department, Col. V. Oranovsky (N. Y .), salaries and ex' penses_______________________________________________________
Technical department, M. Yassukovitch, salaries and expenses_
_
Secretarial department:
C. J. Madjikhovsky and Ananieff, salaries and
expenses____________________________________ $244, 876,00
S. Ughet, salaries and expenses________________
10,000. 00
V. P. Ananeiff, salary and expenses____________
128.66
Prof. Lomonossoff, salary and expenses---------- 300,000. 00
W. P. Anderson—
Salaries and office expenses---------$7,249. 71
Salary and expenses____________ 2, 840. 00
Subsidy on account of services—
308.46
Christmas gratuities to employees766.10
---------------11,164.27



$422,822. 88
20,000.00

124

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Secretarial department— Continued.
L. Tiajoloff—
Salaries and office expenses___ $57,054. 36
Salaries and Xmas gratuities_
_ 3, 970. 83
--------------P. A. Morosoff (New York), salaries and office
expenses------------------------------------------------------A. A. Vinoff (commissary department), salaries_
Y. Petropavlosky, salaries and expenses________
Various employees—
Extra compensation for Novem­
ber __________________________
$826.37
Salaries for December__________ 3,080. 00
Christmas gratuities____________ 1, 783. 75
---------------A. N. Sakhnovsky (New York), legal services
and expenses________________________________
Lieut. Karpoff, traveling expenses_____________
P. A. Morosoff, traveling expenses______________
S. Ughet, traveling expenses___________________
Lieut. Iampolsky (Canada)___________________
R. V. Poliosky, traveling expenses______________
C. J. Medzikhovsky—
Traveling expenses_____________
$50.18
Salaries for employees__________ 1, 825. 36
---------------Col. Donnovlsky, traveling expenses—:__________
Lieut. Platonoff, expenses London to New York_
Miscellaneous—
Rent for New York office, Decem­
ber __________________________$1,650. 75
New York office expenses, Decem­
ber ___________________________
552.45
Western Union Telegraph Co (Gen.
* K h robroff)________________________ 4, 910. 52
---------------

$61, 025.19
906. 93
40, 815. 00
5,900.00

5, 690.12
15,946.97
23. 00
455.00
631. 62
346.51
125.91

1, 875. 54
75. 30
957. 50

7,113. 72
$708,057. 24

Nondepartmental payments:
W. P. Anderson—
Daily money for two months______________
Advance for Mr. Ignative________________
L. Tiojoloff—
Return expenses to Russia of various officersAdditional salary for various officers______
Salary for Col. Abbott____________________
Lieut. Maletsky, return expenses to Russia______
Lieut. Dmetneff, return expenses to Russia______
Capt. Grinoff, salary due in Russia______ :_____
Zimdin & Co. (telegraphic)-------------------------------

1, 644. 46
500.00
6, 878. 39
1,208. 74
1,000. 00
641. 46
641. 46
2, 345. 27
.92
14,860.70

Salaries:
J. Goodkoff, salary for November_____________
C. J. Medzikhovsky, salary for November______
Y. P. Ananeiff, salary for November__________

350.00
806. 33
168. 80
1, 325.13

Miscellaneous:
Coudert Bros., New York, legal services________
Western Union Telegraph Co., bills for November

639. 67
1,114. 66
1,754.33
., 168,820.28

JANUARY 1918.

Artillery Department, Col. Y. Oranovsky, expenses for January _«




$86, 604.55

125

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
Nondepartmental:
Representative money for Anderson and Kachetkoff_______________________________________
Col. Abbott, salary for December______________
B. L. Brazol (New York), supplementary money
Lieut. Konshin (New York), salary due in Russia-

C 561. 30
7,
1,000.00
510.97
423. 60
$9,495. 87

Secretarial:
Various employes—
Extra compensation for December. $883.18
Salaries for January------------------ 3,115. 00
3, 998. .18
P. A. Morosoff—
Office expenses__________________ 2,817.34
Traveling expenses______________
260. 72
C. J. Medzikhovsky, traveling expenses__________
Gen. A. Ziegler, traveling expenses_____________
J. D. Jolkovsky, office expenses________________
R. Poliokoff—
Office expenses for December and
January______________________ $2,822. 95
Supplementary money____________ 2,022. 72
Traveling expenses______________
260. 00

3,078. 06
115. 36
54. 85
50. 00

5,105. 67
12, 402.12
Salaries:
Goodkoff_____________________________________
Medzikhovsky_________________________________
Anoneiff _____________________________________

350. 00
806. 33
168. 80

K. F. Fabian, salaries and expenses____________________ ________
Bishop Alexander, upkeep of North American Orthodox Mission_
V. Novitsky (Washington), office expenses______________________
S. Ughet (financial attach^)), salary and expenses_____________
Account C, direct payment (Compte cheque)____________________
Miscellaneous, telegraphic_____________________________________
Total.

• , 325.13
1
12, 600. 00
24, 000. 00
6, 000 00
5, 832. 92
1,652. 30
.92
159, 913. 81

FEBRUARY, 1918.

Secretarial department:
A. N. Avinoff (commissary departmentt) office
expenses for four months____________________ $26, 788. 73
C. D. Medzikrovsky—
Supplementary money_____________________
2,200. 00
Various employees’ salaries for January and
F eb ru a ry _______________________________
3, 627. 42
P. A. Morosoff, office expenses-------------------------906. 04
S. Ughet, traveling expenses___________________
390. 90
R. Poliakoff, traveling expenses------------------------55. 55
Miscellaneous—
Rent for February, New York
office__________________________$1,650.75
Expenses, New York office--------377.80
--------------2,028. 55
$35,997.19
Nondepartmental payments:
L. D. Tiajoloff—
Salaries for various officers------------------------Return to Russia of Col. Bek______________

5, 582.35
641. 46
6,223.81

Salaries:
Goodkoff______________________________________ ______350. 00
Medzikhovsky__________________________________ _____ 677. 80
Ananieff---------------------------------------------------------------------168. 80




,

1 196.60

126

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

G. Klodnitsky, salaries and expenses-----------------------------------------Account C. direct payment (Compte cheque)___________________
Miscellaneous:
J. J. Connor, salary__________________________
$100.00
Western Union Telegraph Co. (Ughet for De­
cember and January)_______________________
256.88
-------------------Total_____________________________________________________

$2, 349. 00
4G1. 74

356.88
46, 585.22

MARCH, 1918.

Nondepartmental payments:
L. D. Tiajoloff—
Advance for salaries____________________
Salary of Col. Abbott______________________
Salary of Mr. Chicoff______________________
Lieut. Alexeew, return expenses to Russia______

$11, 009. 20
2, 000. 00
1, 881.00
494. 77
$15, 384.97

Salaries:
350. 00
Goodkoff______________________________________
Medzikhovsky_________________________________
1, 355. 60
Ananieff_______________________________________
377. 60
-------------------K. F. Fabian, sala ries and expenses_______________
8, 500.00
V. Petropavlosky, salaries and expenses____________
8, 000. 00
1,503.80
Col. Nikolaieff (Washington), expenses____________
M. Oustinoff (New York), expenses of consulates
at Chicago and Pittsburgh_______________________
50,000. 00
10,000.00
W. Baslikiroff (New York), expenses______________
W. P. Anderson:
Expenses of two engineers__________$1, 800.00
Assistance to f gricultural instructors. 1, 500. 00
--------------3,300.00
Col. Gadsevitch, expenses___________________________
263. 37
N ovitsky (W a s h in g to n ), expenses __________________
9,000.00
Miscellaneous:
J. J. Connor, salary_______________
$100. 00
Expenses of advertising bonds, N. C. B_
150. 23
--------------250.23
Railway department:
Count Shulenburg, expenses of raihvaymen in
R ussia______________________________________
95, 560. 23
Prof. Lomonossoff, expenses of railwaymen in
Russia______________________________________
500. 00

2,043 20
8, 500. 00
8, 000. 00
1,503.80
50,000. 00
10,000.00

3,300.00
263. 37
9,000.00

250.23

96,060. 23
Secretarial department:
M. Yassukovitch, salaries and office expenses___
W. P. Anderson, office expenses________________
Coudert Bros., legal services to Dec. 31, 1917___
Capt. Visotsky, expenses of reorganization of
archives_____________________________________
S. Koshkin, traveling expenses-------------------------M. Schumantoff—
Salary and expenses__________$5,154. 00
Traveling expenses_____________
150, 54
---------------L. D. Tiajoloff—
Office expenses__________________
495. 54
Salaries for March_____________ 2,215.00
--------------A. Vinoff, salary_______________________________
C. J. Medzikhovsky, traveling expenses_________
P. A. Morosoff, traveling expenses______________
A. Polouboyarenoff, traveling expenses_________
J. D. Jolovaky, petty cash for office____________
R. Poliakoff, traveling expenses________________
S. Ughet, traveling expenses---------------------------


10,000.00
2, 960. 69
25,117. 00
1, 600.00
23. 67

5,304. 54

2, 710. 54
1, 314. 53
100. 36
150. 54
23. 58
50. 00
70. 00
260.72

FOREIGN LOANS AND AUTHORITY FOE MAKING SAME.

127

Secretarial department—Continued.
Various employees—
Extra compensation for February. $582.03
Salaries for March______________ 2,935.00
Miscellaneous—
Office expense, New York_________
305. 82
Rent for February, New York____ 1, 650. 75
Western Union Telegraph Co. ( Gen.
Khrabroff)____________________ 1,725.22

$3, 517.03

3, 681. 79
$56,884. 79
T ota l____________________________________________

261,190. 79

APRIL, 1918.

Railway department:
Prof. Lomonossoff—
Expenses of railwaymen in Russia________
Purchase of technical books_______________
Upkeep of Railway Mission for May_______
Nondepartmental payments:
Salary for Col. Abbott for March and April____
Medzikhovsky, return trip to Russia of GudkoflL
Tiajoloff, salaries for April____________________

$69,608. 79
1,000.00
15, 000. 00
$85, 608. 79
2, 000. 00
962. 00
6,471. 38

Transportation department, Medzikhovsky, rent for temporary
storage _______________________________________________________
Salaries:
Medzikhovsky, salary for April________________
$677. 80
168.80
Ananieff, salary for April______:________________
Provisional ambassador, expenses and salaries of embassy and
consulates____________________________________________________
Col. Nikolaieff, subsidy to officers_______________________________
Account C______________________________________________________
Provisional ambassador transfer to Riggs Bank for salaries and
expenses of embassy and consulates___________________________
Miscellaneous:
Rent for storage places_______________________
$510. 60
Military attache_______________________________
32. 28

9, 433. 38
1,950. 00

846. 60
10, 000. 00
5, 000. 00
283. 76
223, 958. 58

542. 88
Secretarial department:
Tiajoloff—
Office expenses__________________ $565.97
Liquidating bonuses to employees- 8, 736, 65
Liquidation of Remington plant_ 5, 000. 00
Pushkiroff, salary for March_________________
Jolosky, petty cash -----------------------------------------Various employees:
Extra compensation for March____ $535. 49
Extra compensation for April_____
485. 64
Salaries for April________________ 2,935. 00

14, 302,. 62
300. 00
50.00

3,956.13
A. Vinoff:
Office expenses____________________
Liquidating bonuses________________

10, 720. 62
21, 955.48
32,676. 30

Gen. Khrabroff, advance for office ex­
penses ________________________________ ___________
Wissotsky:
Advance salary of Stasenko
for April------------------------ $175.00
Salaries of employees to
May 1 __________________ 160.00



2,000.00

835.00

128

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

M. Yussukovitcli, advance for storage____________
W. P. Anderson:
Representative money from Jan. 1 to
May 1____________________________ $2, 000. 00
Office expenses and salaries________
1, 752. 29
Traveling expenses-------------------------250.90
----------------Gen. Ziegler, traveling expenses___________________
S. Ughet, traveling expenses_______________________
R. Poliakoff, traveling expenses____________________
C. J. Medzikhovsky:
Traveling expenses_________________
$140. 36
Liquidating bonuses________________
4,054. 26
----------------A. N. Sakhnovsky, extra salary from
Jan. 1 to Nov. 1_________________________________
Miscellaneous:
Rent for April (New Y ork )_________ $1, 650. 75
Western Union Telegraph Co.—
Bills for March________________
464.44
New York Telegraph Co., bills
for A p ril____________________
38. 75
Remington Arms (supplies)____
664.82
Office expenses and supplies____
615.98
-----------------

$1,000.00

4,003.19
4, 003.19
73.95
521. 44
81.10

4,194. 62
1, 753. 04

3,434.274
$68, 682.13

Total_____________________________________________________

406,306.12

MAY, 1918.

Railway department:
Count Shulenburg—
Expense of railway men in Russia_________
Prof. Loirronossoff—
Expense ot railway men in Russia__________
Upkeep of Railway Mission for June_______

$75, 000. 00
45, 575. 49
15,000. 00

Salaries, Medzikhoosky, salary for May__________________________
K. F. Fabian, representative Moscow district supply committee_
Anderson, W P., and E. Berry, agricultural instructors___________
Nelse Johnson, trip to Russia__________________________________
Gen. A. Dobraj insky (salaries)__________________________________
Y. Petropavloosky, revision of operations of Russian institutionsS. MacTaggert, expense in ChristianiaAccount C__________________________________________
Miscellaneous, Western Union Telegraph Co_________
Chancery and archives, E. W itssotsky:
Advance for May, salaries__________ $59, 517. 00
Office expenses_____________________
1,000. 00
Claims against Russian Supply Co_
5,000. 00
Expense for detective work________
500. 00
Advance for immediate expenses____
4,000. 00
Advance for treatment of Strutzinsky____________________________
120. 00
Telephone service---------------------------150.00
Traveling expenses_________________
2, 000. 00
Advance for overtime______________
1,000.00
Advance for rent___________________
2,074.17
$75,361.17
S. Ughet, expenses of Washington office_____________
500.00
C. J. Medzikhovskv, advance for Brooklyn rent_____
250.00
Petropavlosky, salaries and (expenses of representative
of Russian State control_________________________
15,000.00
Condert Bros., legal services and expenses_________
4,003. 26
G. Y. Shestocovsky, advances for telephone, etc______
150. 00




$135, 575. 49
1, 065. 55
4,150. 00
450. 00
2, 080. 45
6,169. 66
6, 000. 00
215. 89
748. 76
46.06

129

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
Capt. Smirnoff, reimbursement for rent o f May--------Mrs. O. Leichter (N. Y .), reimbursement funeral
' expenses of S. Leichter-----------------------------------------

$73. 33
500.00
-------------------

$95, 837. 76

Total____________________________________________________

252, 339. 62

JUNE, 1918.

Railway department:
L. Lipets—
Expenses of railwaymen in Russia_________
Traveling expenses_________________________

$12,000.00
5,000.00
------------------Medzikhovsky, salary for June-------------------------------------------------Fabian, expenses for June______________________________________
Novitsky, office expenses________________________________________
Petropavlosky, salaries and expenses________________________
Engineer Paykine, salary due from Russia______________________
Miscellaneous, Barrow, Wade & Gutherie, accounting____________
Chancery and archives:
Adrianoff, salary from Aug. 1,1915 to Apr. 17-182, 737. 34
Rent for May (N. Y .)_________________ $128.00
Rent for June (N. Y .)________________ 147.50
-----------275.50
Wissotsky, reimbursement for storage__________
255.30
------------------Advances:
E. Wissotsky, salaries and office expenses for
June_______________________________________
71, 307. 00
C. J. Medzikovsky, funds advanced for trans­
portation section_____________________________
15, 000.00
------------------Total_____________________________________________________

$17,000.00
1,052. 55
1, 340. 00
9, 000. 00
1, 200.00
1, 546. 43
5,000.00

3,318.14

66, 307.00
125,764.12

SECTION 66.
United States Nayy Department Payments to the De Facto Russian
Ambassador.
28-905-1176
N a v y D e p a rtm e n t,

Washington, September 24, 1918.
The honorable the S e c r e t a r y o f t h e T r e a s u r y .
Subject: Payment of charter rate for steamers Foam, Ripple, and Spray.
Reference: {a) Secretary of State, letter dated May 2, 1918, to the honorable
the Secretary of the Navy; (b) Third District Naval Force, requisition No.
139, Bureau S. O., dated July 20, 1918; (c) Third Naval District Reserve
Force, requisition No. 140, Bureau S. O., dated July 20, 1918; ((Z) Third
District Naval Force, requisition No. 141, Bureau S. O., dated July 20, 1918;
( e ) Third District Naval Force, requisition No. 186, Bureau S. O., dated
August 3,1918; ( f ) Third District Reserve Force, requisition No. 196, Bureau
S. O., dated August 2, 1918; (g) Third District Naval Force, requisition No.
500-S. O., dated September 9, 1918; ( h) Third Naval District, requisition No.
492, Bureau S. O., dated September 9, 1918; (i) Third District Naval Force,
requisition No. 502, Bureau S. O., dated September 9, 1918.
Inclosure: Copy of reference ( « ) , (&), (c), (d ), (e ), ( f ), ( g ), (ft), and (i).
The above requisitions cover the payment of charter rates on the steamers
Foam, Ripple, and Spray, which have been chartered from the Provisional
Government of Russia.
The Secretary of State suggested, in reference( a ), “ that the approval of the
Treasury Department be obtained for the payment of the charter hire to the
individual named in the charter party.” The Secretary of State evidently
S. Doc. 86,67-2------9



130

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

deemed it necessary to have a competent authority to decide whether or not
the individual named in tlie charter party was the proper and competent
person to receive payment on behalf of the Provisional Russian Government.
It would be appreciated, therefore, if the Secretary of the Treasury would
express an opinion as to whether the party referred to in the attached requisi­
tion, namely “ S. Ughet, Russian financial attache, Flatiron Building, New
York City,” is the proper party to receive the payments called for in the above
requisitions.
Refund of pairers is requested.
J o se ph u s D a n ie l s .

SECTION 67.
Treasury Department O. K.’s Payment of Private Loan Interest from this
Fund.
O c t o b e r 21, 1918.
J. T. C o s b y , Esq.,
Vice President National City Bank of New York,
55 Wall Street, New York City.
D ear S ir : With reference to your letter of October 10, the Treasury Depart­
ment raises no objections to the payment amounting to some $20,000 for the
coupons maturing this month on the Russian internal
per cent bonds.
Yours, very truly,
A lb e r t R a t h b o n e .

GOM. JF.

SECTION 68.
Money Sent from this Fund to Pay Upkeep of Embassies o f De Facto Russian
Government in Belgium and Norway.
N o v e m b e r 2, 1918.
Esq.,
Care of Department of State, local.
D e a r M r. M ii.e s : In accordance with my telephone conversation with you,
we have advised M r. Ughet, Russian financial attache, that there is no objec­
tion to the transfer of $17,000 and $8,000, respectively, to the Russian legations
in Norway and Belgium. These funds are to be taken from accounts over
which we have exercised no direct jurisdiction.
Very truly, yours,

B a s il M ile s ,

N o rm an H . D a v is .

SECTION 69.
November 1,1918, Account.
Estimated situation of accounts of the Russian Government in the United
States of America.
ASSETS AS OF NOVEMBER 1, 1918.

1. Cash:
Account A------------------------------------------------------------------Account B------------------------------------------------------------------Account B (confirmed credit for payments for interest
on $11,000,000—5 per cent bonds, May 1,1919,included).
Account C------------------------------------------------------------------Account D____________________________________________
Account H ------------------------------------------------------------------Account M------------------------------------------------------------------Total________________________________________________
2. Amounts receivable on invoiced sales:
a. Rails, up to Dec. 1, 1918_____________________________
b. Various, up to Jan. 1, 1919----------------------------------------


$1,281. 944. 60
215, 377. 49
330,000.00
767, 410. 05
21, 623. 02
4, 993, 338. 72
26, 725. 00
7, 636, 418. 88
141,033.34
199, 935.93

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
3. Estimated receipts for rails sold but not invoiced up to
Apr. 1, 1919_____________________________________________
4. Estimate of gross income up to Jan. 1, 1919, for charter of
volunteer fleet steamers (net income $419,950.74 up to Feb.
1, 1919)__________________________________________________
5. Estimate of receipts for charter of trawlers (up to Jan. 1,
1919)____________________________________________________
6. Estimated interest on various accounts in the National City
Bank (2 per cent on $6,000,000 for two months, from Nov.
1, 1918, to Jan. 1, 1919)__________________________________
7. Estimate of receipts for sale of Remington’s equipment, up
to Feb. 1, 1919__________________________________________
8. Credit balance as of Nov. 1, 1918, of the a /c of the liquidation
of the Remington rifle contract_________________________
Total________________________________________________

131

$G, 977, 551. 37
1,152,072.25
49,112.87
20, 000. 00
3, 697, 649. 19
391, 638. 26
20, 265, 412. 09

LIABILITIES AS OF NOVEMBER 1, 1918.

1. Payments on statements of liabilities No, and 1 and No. 2____
2. Payments on orders of the chancery of credit:
a. Moscow Machine Tool Works________________________
b. Canning machinery__________________________________
c. Reserve for unsettled payments---------------------------------3. Estimated operative expenses of transportation section, up
to Jan. 1, 1919__________________________________________
4. Estimated expenses in connection with charter of Hussion
volunteer fleet steamers up to Jan. 1, 1919________________
5. Estimated freight expenses of Railway Mission up to Jan.
1, 1919, $490,725.24, less amount included in statement
No. 1, $108,725.24________________________________________
6. Estimate of operative expenses of information and report sec­
tion for storage and insurance___________________________
7. Payments for air brakes for closed cars (the sum is approxi­
mation ) _________________________________________________
8. Payments on spare parts for closed cars---------------------------9. Payments for bank notes___________________________________
10. Estimated expenses on the order foi 50-copek treasury bills_
11. Estimate for expenditures on personnel up to Jan. 1. 1919___
12. Interest up to Jan. 1, 1919, on $25,000,000, 5| per cent bonds_
Commission________________________________________________
13. Interest on $11,000,000, 5 per cent bonds up to May 1, 1919
(confirmed credit)---------------------------------------------------------14. Interest up to Jan. 10, 1919, on $50,000,000, 6J per cent bondsCommission-----------------------------------------------------------------------15. Estimated payments on coupons of Russion internal war loans
up to Jan. 1, 1919-----------------------------------------------------------16. Payment to Remington A. U. M. C. Co. for rifles___________
17. Estimated expenses of the Remington trustees______________

1, 201, 733. 51
82, 748. 50
165, 000. 00
150,000. 00
892,000.00
732,121. 51
3S2, 000. 00
14, 000. 00
350, 000.00
300, 000. 00
214, 800. 00
225, 000. 00
150, 000. 00
687, 500. 00
859. 38
330,000.00
1, 625,000. 00
125, 000. 00
35,000.00
6, 808, 350. 00
42,087. 45

Total____________________________________________________ 14, 513, 200. 35
Credit balance------------------------------------------------------------------------- 5, 752,211. 74
Grand total--------------------------------------------------------------------- 20,265,412.09

SECTION 70.
Bakhmeteff Gives His I. O. U. for Almost $5,000,000 of Interest Due the
United States.
R u s s ia n E m b assy,

Washington, November lJf, 1918.
The honorable the S e c r e t a r y o f t h e T r e a s u r y .
M y D e a r M r. S e c r e t a r y : Referring to your letter of October 31 in regard to
the interest due on the 15th of this month on the obligations of my Govern­
ment held by the United States, I desire to inform you that at the moment I



132

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

have not the cash available which will enable me to pay the interest in the
amount of $4,728,997.60 due on that date.
I have executed and hand you herewith a certificate o f indebtedness for
$4,728,997.60, payable on demand, and ask that you receive the same in lieu of
a cash payment of the interest referred to, due on the 15th of this month. You
will observe that this certificate of indebtedness is payable on demand, so that
if we are unable 1:0 agree upon arrangements relating to the postponement of
any cash payments from my Government, you are in a position to demand pay­
ment of this certificate.
Very truly, yours,
B. B akh m eteff,

The Extraordinary Russian Ambassador.

SECTION 71.
President Wilson Transfers $5,000,000 from His Special War Fund Given Him
to Prosecute the War for Winter Supplies to Russians in Archangel Dis­
trict, November 20, 1918, Nine Days After the War Was Over.
N o v e m b e r 20, 1918.
H. H. P i e r c e , Esq.,
War Trade Board, Washington, D. C.
D e a r M r. P i e r c e : In accordance with your request over the telephone, I
inclose copies of the letters in connection with the allotment by the President of
$5,000,000 from the appropriation of $50,000,000 for national security and defense
for the purpose of providing for winter supplies for the civilian population of
the Archangel district of Russia.
Very truly, yours,
N. K elley.

SECTION 72.
Kolchak to Pay All Foreign Loans if Successful—He Was Therefore Given
Aid by United States.
P e k in g ,

November 27t 1918.

S ecretary of S t a t e ,

Washington:
Following from Omsk. 207. Twenty-seventh. All-Russian Provincial Govern­
ment has issued following statement: “ Considering ourselves proper and lawful
successors to all lawful Russian Governments which existed up to the end of
October, 1917. The Government were such, Admiral Kolchak at its head takes
the stand of absolutely executing according to the reestablishment of whole
Russia all financial obligations which the Government has taken upon itse lf; for
instance, the payment of interest, the settlement of interior and foreign loans,
payments per contracts, the supporting of employees, pensions and all sorts of
other payments payable legally from the treasury. The Government has declared
that all financial acts which were established by the soviet conference are
unlawful and are not to be executed, being acts established by rebels. Signed,
Admiral Kolchak and the members of the Government.” Minister of Finance
Michaeloff confirmed this statement to me yesterday. He further stated that it
took 500,000,000 rubles monthly to meet the expenditures of the new Govern­
ment—350,000,000 were necessary for army and 100,000,000 for Siberian Rail­
road, leaving only 50,000,000 for miscellaneous expenses. Harris.
R e in s c h .

SECTION 73.
One Hundred Thousand Dollars from Liquidation Fund for Expenses of De
Facto Russian Government to the Peace Conference.
D e c e m b e r 5, 1918.
: In the current statement of proposed disbursements of the
Russian Government in the United States is an item of $100,000, to be placed
at the disposal of the ambassador for expenses at the peace conference.
D e a r M r. P o l k




FOREIGN" LOAN'S AND AUTHORITY FOR MAKING SAME.

133

I im informed by Mr. Ughet that you have approved in principle such an .allo­
cation, and I should be glad to be advised whether you think it desirable, upon
political grounds, that the allocation should be allowed to be made without
any objection being interposed by the Treasury.
Statements submitted by Mr. Ughet show assets exceeding liabilities on con­
tracts and other current liabilities, exclusive of interest due to the United
States of about $2,800,000.
Yours, very truly,
A lbe rt R a t h b o n e .

Hon. F r a n k L. P o l k ,
Acting Secretary of State, Washington.
D e p a rtm e n t o f S ta te ,

Washington, December 7, 1918.
M y D e a r M r. R a t h b o n e : I have your letter of December 5, in which you in­
form me that in the current statement of proposed disbursements of the Russian
Government in the United States is an item of $100,000 to be placed at the
disposal of the Russian ambassador for expenses at the peace conference.
If the Treasury Department concurs, I would offer no objection to this sum
being placed at the disposal of the ambassador, and so informed the ambassador
in view of the representations he made concerning his proposal to be in Paris
during the time of the peace conference.
I am, my dear Mr. Rathbone,
Very sincerely, yours,
F r a n k L. P o l k .
The Hon. A l b e r t R a t h b o n e ,
Assistant Secretary of the Treasury.
D e p a rtm e n t o f

S ta te ,

Washington, December SI, 1918.
M y D e a r M r . R a t h b o n e : I have your letter of December 12, 1918, with refer­
ence to the sum of $100,000 to be placed at the disposal of the Russian am­
bassador for expenses at the peace conference.
I talked with the Russian ambassador about placing this sum at his disposal,
and from what he told me I do not believe it is excessive, and consequently see
no objection to placing the entire amount at his disposal.
I am, my dear Mr. Rathbone,
Very truly, yours,
F r a n k L. P o l k ,
Acting Secretary of State.
Hon A l b e r t R a t h b o n e ,
Assistant Treasurer.

SECTION 74.
Lansing Postpones Collection of Money Due United States in Order to Keep
Up Russian Embassy.
D e p a rtm e n t o f S ta te ,

Washington, November 29, 1918.
M y D e a r M r. P r e s i d e n t : The Russian ambassador, from Russian funds
available to him, has been paying interest on the following Russian obligations
held in this country:
1. Russian obligations held by the Treasury____________________ $187, 729, 750
2. Russian Government credit advanced by National City Bank
in 1916 -----------------------------------------------------------------------------50,000,000
3. Russian bonds bought by a syndicate of banks, including
National City Bank, and partly sold to the public___________
25,000,000
4. Russian notes held by group of banks------------------------------------11, 000,000
The Treasury Department advises me that while adequate funds may be
available later, for example, from the sale of certain Russian supplies in this




134

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

country, the Russian ambassador lias not now sufficient funds on hand to
meet the interest on these obligations as they fall due. I f the interest is
collected, the embassy and the Russian consultes still maintained as usual in
the United States, will be forced to close; Russia will be without representa­
tion.
The Treasury takes tlie position that unless political considerations, known
to the Department of State, urge the contrary, the Government’s interest
must be protected before that of the private banks; in other words,
that interest on obligations held by the Treasury must be collected before in­
terest can be paid on private holdings. I believe that political considerations
justify the Government in postponing collection of the interest due it, and, if
another arrangement can not be reached, allowing the Russian ambassador to
pay the interest on obligations held by the banks and by the public, and to
defer payment 011 obligations held by the Treasury.
I have favored maintaining Russian representation in the United States as
long as may be practicable. Moreover, the Government has announced its
settled purpose to assist Russia; the public has assumed no such commitment.
I think it but a matter of just policy to defer for the time or postpone until
the establishment of orderly government the collection of interest due the
United States on and after November 15, 1918. I shall be glad to know if
you concur, as an interest payment on $25,000,000, noted above, is payable
Monday, December 2: the ambassador will require authority to pay.
Faithfully, yours,
R obert L a n s i n g .

The P r e s i d e n t ,
The White House.
D epartm ent

of

State.

Washington, January 7, 1918.
M y D e a r M r. S e c r e t a r y : Referring to our conference yesterday regarding
Russian bonds and obligations in this country, I believe the situation is such
that it would be unfortunate if we offered any objection at this time to the
payment of interest 011 the $50,000,000 of Russian bonds due January 10, 1919.
I believe political considerations should prompt us to acquiesce in the payment
of this interest and shall be glad to know that you concur. It strikes me as
especially important that 110 action should be taken which might affect Rus­
sian interests unfavorably until the general question of the relation of our­
selves and the other associated Governments toward Russia is more clearly
defined.
I am, my dear Mr. Glass,
Very sincerely, yours,
F r a n k L. P o lk.

The Hon. C a r t e r H. G l a s s ,
Secretary of the Treasury.
N e w Y o r k , January 14, 1919.
Sir : Referring to the interest due the 10th of January on our “ report ”
operation of $50,000,000, with a syndicate of American banks headed by The
National City Bank of New York, I beg to state that while this matter was
taken up with the Hon. A. Rathbone, Assistant Secretary of the Treasury,
Mr. Rathbone informed me that the United States Government would see 110
objection that this payment on the 10th of January be made by me, provided,
however, that the Russian embassy pays to the Treasury Department, in cash,
the sum of $300 000, to apply on account of interest due on November 15,
1918, to the United States Government on the advances made to the Russian
Government.
In pursuance of this specific request I beg to inclose herewith my check for
$300,000 to your order, representing a part of the cash payment of the interest
due to the United States Government on November 15, 1918.
I would be very much obliged if you would kindly cause the usual receipt
to be made and forwarded to me.
Very truly, yours,
Serge U g h et,

The S e c r e t a r y o f t h e T r e a s u r y ,
Washington, D. C.



Russian Financial A ttache

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

135

SECTION 74-A.
State Department’s Resume of Russian Situation.
D e p a rtm e n t o f S ta te ,

Washington, December 13, 1918.
D e a r M r. S e c r e t a r y : Referring to Department’s letter of May 14, 1917, in­
closing a telegram from the American ambassador at Petrograd, dated May 11,
1917, stating that the Russian charg£ d’affaires here had been authorized to
act for Russia until the arrival of Mr. Bakhmeteff about June 15, 1917, and
referring to the letter of Mr. C. Onou, the Russian charge d’affaires, to Mr.
Oscar T. Crosby, Assistant Secretary of the Treasury, dated May 16, 1917, in­
closing copies of two telegrams of the Russian minister of foreign affaires and
stating that they authorize him in the name of the Russian Provisional Govern­
ment to incur obligations in its behalf under the act of Congress approved
April 24, 1917, to sign the bonds of his Government to be purchased by the
United States and to agree to terms and conditions in connection with the
same, which will be an essential part of the transaction, and referring also
to department’s letter of May 17, 1917, inclosing a telegram from the American
ambassador at Petrograd, dated May 15,1917, stating that he had been formally
advised by the Russian foreign office of the designation by the Russian Govern­
ment of its charg6 d’affaires here, Mr. Onou, in the name of his Government
to sign obligations and to make declarations in connection with loans until the
arrival o f Mr. Bakhmeteff, and referring further to department’s letter of June
22, 1917, inclosing the powers of Mr. Bakhmeteff, Russian ambassador to the
United States on special mission, authorizing him to enter into financial agree­
ments between the two Governments and to sign the obligations of Russia
thereunder, and referring finally to department’s letter of October 25, 1917,
inclosing a mail dispatch from the American ambassador at Petrograd, dated
September 11, 1917, transmitting a note of August 14/27, 1917, of the Russian
foreign minister, stating that the Russian ambasador at Washington was
authorized to sign in the name of the Russian Provisional Government shorttime obligations for advances made by the United States Treasury, I have the
honor to confirm your informal advices that demand obligations o f the Pro­
visional Government of Russia payable to the United States of America have
been executed and issued by Mr. B. Bakhmeteff, in the name of the Provisional
Government of Russia from time to time, and delivered to you in the total
face amount of $187,729,750, of which obligations in the face amount o f $186,>
400,000 were so delivered between July 6,1917, and November 1,1917, both dates
inclusive, against the contemporaneous payment to Mr. Bakhmeteff for his Gov­
ernment of cash to the full face amount of the respective obligations, and a
further obligation in the amount of $1,329,750 was executed by Mr. Bakhmeteff
in the name of his Government under date of November 15, 1917, and delivered
to you on November 20, 1917, against a cash advance in like amount made to
Mr. Bakhmeteff to enable his Government to pay the interest which became due
on November 15, 1917, on its obligations then held by the United States. In
view of the circumstances above set out, the above-mentioned obligations issued
and executed by Mr. Bakhmeteff in the name of and under full powers of the
Provisional Government of Russia are regarded by this department as valid
and binding internationally and have its sanction.
I am, dear Mr. Secretary,
Very sincerely, yours,

The

F ran k L. P olk.
S ecreta ry o f t h e T rea su ry .

SECTION 75.
Interest Memorandum.
MEMORANDUM RE GENERAL RUSSIAN POSITION AND INTEREST DUE BY RUSSIA.

At the time the Kerensky government was overthrown by the Bolsheviks,
and advances to Russia by the Treasury were discontinued (that is,
about November 1, 1917), the Russian Government had outstanding large
contracts which it expected to meet out o f United States credits. Its cash




136

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

resources were far from adequate to meet is obligations, but after much ne­
gotiation and effort cancellation and sales were effected which put tlie Russian
Government in tlie possession of sufficient funds to meet its liabilities on tliese
contracts as reduced and to leave a certain balance.
The principal commodity available for sale was a supply of 243,000 tons
of rails, of which 220,000 tons were on the eastern seaboard. The sale of
these rails seemed especially desirable; first, because they were needed for
military railways in France; second, because they were causing congestion
at ports; and, third, bcause the proceeds would greatly alleviate the financial
situation of the Russian Government. It appeared that these rails were not
purchased from either British of United States Government advances, but from
the proceeds o f securities sold by Russia in the United States, comprising
$11,000,000 of one-year notes, wliicli have been three times renewed, now
maturing May 1, 1919; $50,000,000 6i per cent credit negotiated through syndi­
cate bankers and maturing in June, 1919; $25,000,000 Russian 5£ per cent
bonds, and some interior Russian bonds. The interest on these borrowings has
been paid as it matured up to the present time. When the $11,000,000 of notes
matured on May 1 last, the Treasury opposed all suggestion as to payment on
account of the principal, and eventually the holders agreed to extend them
until May, 1919, upon an irrevocable allocation of funds being made to meet
the interest maturing during the year. On May 15, 1918, interest became due
to the United States Treasury to the amount of $3,674,431.08. Payments
amounting to $1,865,925.08 were made in cash on July 3 and August 17, 1918,
and the remainder is expected to be met out of the proceeds of the sale of
certain cargoes realized in England upon the diversion of the steamers from
Russian ports by reason of the unfriendly developments in Russia. These
cargoes consisted largely of goods purchased out of United States credits, and
the proceeds of the cargoes are being deposited with the Treasurer of the
United States, the amount at present being $1,903,806. The Russian ambassa­
dor has undertaken to defray, out of his general funds, the amount due to
certain private owners of cargo; these payments are estimated at $85,000, of
which approximately $65,000 have been paid.
Upon November 15, 1918, interest became due to the United States to the
amount of $4,728,997.60. No cash has been paid, but the ambassador has
given a demand note to represent the amount of this interest.
With the approval of the State Department, the Treasury interposed no
objection to the payment of interest, which became due on December 1, on
the $25,000,000 bonds held by the American public. After conference between
the President and the Secretary, the Treasury on December 11 expressed the
view that the interest which becomes due on January 10 on the $5,000,000 6|
per cent credit should not be paid, so long as interest due the United States re­
mained unpaid. Mr. McAdoo, however, advised that the President had given
no directions in regard to the matter and the Treasury was free to adopt such
policy in regard to the matter as it should deem wise.
Mr. Ughet, the Russian charge d’affairs, is extremely anxious that this in­
terest, which amounts to $1,625,000 plus a commission to the bankers of
$125,000, should be paid. He argues forcibly that Russia having avoided
default in the United States until now it is undesirable that default should
occur just when the peace conference which is bound to concern itself with
the future policy toward Russia is about to meet, and just after the Omsk Gov­
ernment, which is regarded by him as the nucleus of a future Russian Govment, has announced its policy of recognizing and meeting Russia’s external
obligations. He also urges that the loan of $11,000,000, maturing May 1, is
secured by Russian internal bonds of a face value of 145,000,000 rubles, and
that any default now would greatly depreciate the value o f these ruble bonds
which the holders of the $11,000,000 notes may naturally be expected to
realize if the note is not paid.
Statements submitted by Mr. Ughet indicate that the Russian Government
will be unable to meet its maturing obligations and provide for its outstanding
contracts very much longer. His estimate made as of January 1 shows that
after collecting all accounts due and meeting maturing interest, current ex­
penditures, and payments on contracts there will be a deficit on May 1 of
$1,660,000 without allowing for any interest due to the United States Govern­
ment. Examination of this statement which was furnished yesterday raises
some questions as to the correctness of the basis upon which it is prepared, but
it. is doubtless sufficiently accurate to form the basis for determination of a
general policy. One very uncertain item in the statement is the provision of




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

137

$2,761,000 for net amount payable under a contract with the Remington Arms
Union Metallic Cartridge Co. The amounts payable under this contract are
now the subject of arbitration and there is a wide difference between the
claims of the two parties, so that the amount payable may be substantially
increased or reduced. On the other hand, it does not now seem probable that
any determination on this question will be reached before May 1.
Attached is the statement received and also a condensed summary thereof.
It will be observed that the principal expenditures for the five months are for
freights, transportation expenses, and expenditures in connection with the
Russian railways, all of which seem vitally important to the relief and economic
reconstruction of Russia. The principal assets are the cash and accounts
receivable arising from the sale of rails.
The considerations in favor of the payment of interest have already been
brought forward. From the purely Treasury standpoint the question resolves
itself into one as to the relative priority of its claim for interest and other
claims against Russia, and from a broader standpoint it may be regarded as a
question of priority between (1) interest due to the United States Government,
(2) interest due to other parties, (3) existing contract obligations, and (4) ex­
penditures for transportation of supplies now owned by Russia in the United
States to Russian points.
On November 16, 1918, being the last for which a statement is available, the
tonnage of materials belonging to the Russian Government on hand at various
United States ports amounted to 81,839 tons, the principal item being 73,440
of railroad equipment—locomotives, cars, and car parts.
The following further considerations are put forward for whatever weight,
if any, they may have:
During the period since November 1, 1917, approximately $7,000,000 have been
paid in interest, etc., on the bonds held by private holders in the United States.
Approximately $12,000,000 has been realized or is due for property sold which
was originally acquired from the proceeds of these bonds. As between the
United States and Great Britain the principle has been followed that control of
property realized should be with the Government which financed the original
purchase.
At November 1, 1917, the debt to the public represented about 32 per cent;
that to the United States about 68 per cent of the borrowings of Russia in the
United States. If the property then on hand had been distributed to creditors
pro rata the private creditors would have received a sum substantially in
excess of the amount which they have received up to now.
Of course, the United States has received less in proportion to its debt than
the private creditors, but it may be urged that it has been a party to the dis­
position of the assets in other ways and has an important political interest
at stake while the private creditors had no such voice or interest.
Attached is a memorandum of Russian bonds which could be pledged to
secure the interest now due the United States, if deemed advisable to receive
the same. It is possible that the Russian Government might be induced to pay,
say, $300,000 on account of this intrest in cash.
A. R.
J a n u a r y 3, 1919.
Summary of Russian financial statement as at Jan. 1, 1919, toith estimated
expenditures to May 1, 1919.
A Q oatc•

Cash______________________________________________________ $5, 415, 071. 09
Accounts receivable________________________________________ 5, 8S4,175.13
Together________________________________________________ 11,299, 246. 22
Liabilities and reserves for expenditures:
Balances of contracts for materials, etc------------------------------Freight (ocean and rail) and storage charges Jan. 1. to May
1,1919___________________________________________________
Due to Shipping Board for requisitioned steamers Jan. 1, to
May 1,1919______________________________________________
Payments on account of bank notes and 50-kopeck bills--------Interest and commission—
Due Jan. 10, 1919______________________ $1, 750, 000. 00
Due February to May, 1919--------------------175,000. 00
---------------------


1, 781, 778. 64
5, 337, 000.00
600, 000. 00
350,300.00

1,925,000.00

138

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Expenses of Russian representatives, Jan. 1 to May 1, 1919_
$175, 000. 00
Expense* of Russian representatives, Jan. 1 to May 1, 1919—
175, 000. 00
Miscellaneous______________________________________________ •
30, 888. 43
Estimated balance due on Remington contract______________ 2. 761, 058. 00
Total____________________________________________________ 12,961,025.07
Estimated deficit on May 1, 1919___________________________

1,661,778.85

SECTION 76.
Treasury Department O. K.’s Shipping Board Payment to De Facto Russian
Ambassador Without Making Attempt to Collect This Money for the United
States and Crediting Russia’s Loan or Interest Account.
D

ear

M

r.

J a n u a r y 20, 1919.
P o l k : I have the honor to acknowledge the receipt of your letter

of the 18th instant inclosing a copy of a letter from Mr. Medziklovsky dated
the 16th day of December, addressed to Mr. Miles.
I understand that it is the view of the Department of State that the amouns
due should be paid by the Shipping Board to the Russian embassy because of
political considerations the importance of which is appreciated by the Treasury,
and which led to the Treasury’s making no objection to the payment of interest
on the Russian bonds which became due on the 10th instant. Such being the
case, the Treasury makes no objection to the contemplated payment of the
Shipping Board to the Russian embassy which is now in question.
I am, my dear Mr. Polk,
Very truly, yours,
A

lbert

R

athbone.

Hon. F r a n k L. P o l k ,

Counselor State Department, Washington, D. C.

SECTION 77.
De Facto Ambassador Asks for Money from Fund to Pay for Upkeep of De
Facto Embassies in South America, but is Refused.
R

ussian

E

mbassy,

Washington, January 15, 1919.
S i r : Referring to your note of January 7, No. 69, with which you kindly
forwarded to me copy of a dispatch from the American legation, at Monte­
video, dated November 15, 1918, together with copy of a memorandum, dated
October 3, 1918, submitted by Mr. Alexandre Sclierbatskoy, the Russian minis­
ter at Montevideo, I have the honor to inform you that I consider it of great
importance to enable the Russian minister to Brazil, Chile, Uruguay, and
Paraguay to continue his functions, and think it desirable to open to the Rus­
sian legation at Montevideo the necessary small credit. Such credit could be
opened by me out of general Russian Government funds in this country. Pre­
vious to any action in this matter, I would, however, appreciate your views
on this question.
Accept, sir, the renewed assurance of my highest consideration.
S. U g h e t ,
Charge d’Affaires ad interim.
Hon. F r a n k L. P o l k ,
Acting Secretary of State, Department of State.

L egation

of t h e

U

nited

St a t e s

of

A

merica,

Montevideo, Uruguay, October 3, 1918.
(Memorandum.)
The Russian legation in Brazil, Chile, Uruguay, and Paraguay, which is
one single legation, has found itself deprived of resources since November, 1917.
It is likewise lacking such kind of emergency financial support as has been
afforded to Russian institutions in some countries, or created for them by
circumstances. The legation has, up to the present, been maintained upon the
personal means of the minister, now exhausted.



FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

139

Would the Government of the United States deem it possible to open to the
said Russian legation a small credit which would allow the continuance of
such limited functions as it actually performs in Brazil and Uruguay, pending
the constitution of a government in Russia?
Submitted by:
A

lexandre

Sc h e r b a t s k o y ,

Envoy & Extraordinaire et Ministre Plenipotentiare de Russie.

L egation

of t h e

U

nited

States

of

A

merica,

Montevideo, Uruguay, November 15, 1918.
The honorable the S e c r e t a r y

of

St a t e ,

Washington, D. G.
Si r : I have the honor to inclose herewith the original memorandum with
copies thereof, handed me by the Russian minister, who was accredited to
Brazil, Chile, Uruguay, and Paraguay by the Provisional Russian Government
and who is at present residing with his family in this capital, where he expects
to remain until such time of the reestablishment of a stable government for
Russia will enable him to take up the diplomatic representation o f his govern­
ment in the countries referred to.
The minister will find it impossible to maintain Russian representation in
South America any longer and as all means of communication are cut off to his
former sources of financial support he has very modestly suggested to me that
if some provision could be made for his temporary support by the United States
Government, that upon the reestablishment of his Government he could continue
as a diplomatic representative thereof.
The minister has been informed by the National City Bank of New York that
credit can not by it be extended to him without special authorization of the
United States Government.
I am authorized to say thnt he is personally well known to the Secretary of
State, having been connected with the Russian Embassey in Washington as
counsellor prior to his appointment as minister to South America. The minister
will appreciate a telegraphic reply to this communication.
I have the honor to be, sir,
Your obedient servant,
R

obert

E

mmett

Je f f e r y ,

Minister.
(Inclosures: Russian minister’s memorandum and copies; Russian minister’s
card.)
D

e p a r t m e n t of

St a t e ,

Washington, January 20, 1919.
The honorable The S e c r e t a r y o f t h e T r e a s u r y .
S ir : I have the honor to transmit herewith inclosed for your information and
recommendation copy of a dispatch number 408, dated November 15 last, from
the American Legation at Montevideo, Uruguay; also copy of an original mem­
orandum therewith handed to the American minister there by the Russian min­
ister, who was accredited to Brazil, Chile, Uruguay, and Paraguay by the Pro­
visional Russian Government and who is at present residing with his family in
Montevideo.
It will be noted from the memorandum that the minister. Mr. Alexandre
Scherbatskoy, desires to know if it would be possible for the Government of the
United States to open to the Russian Legation at Montevideo a small credit
which would allow the continuance of such limited functions as it actually per­
forms in Brazil and Uruguay, pending the organization o f a government in
Russia. A copy of these communications was referred to the Russian Embassy
on January 7 last, and a reply thereto, dated the 15th instant, has been re­
ceived, copy also of which is herewith inclosed.
I have the honor to be, sir,
Your obedient servant,
P r a n k L. P o l k ,

Acting Secretary of State.
(Inclosures: Copy o f dispatch number 408, dated November 15 last, from
American Legation at Montevideo, Uruguay; also copy of an original memo­
randum therewith handed to American minister there by Russian minister, and
reply from the Russian Embassy dated January 15, 1919.)



140

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

JANUARY 22, 1919.
Sir.: I have the honor to acknowledge the receipt of your letter of the 20tli
instant addressed to the Secretary of the Treasury, accompanied by the com­
munications therein referred to. all in relation to the desire of the Russian
minister accredited to Brazil, Chile, Uruguay, and Paraguay by the provi­
sional Russian Government to obtain a credt in order to allow the continuance
of limited functions by the Russian legation in Brazil and Uruguay pending the
organization of a government in Russia.
Under the terms and provisions of the bond acts the Secretary of the Treas­
ury in present circumstances would not have authority to open a new credit
to be place! at the disposal of the Russian minister accredited to the South
American Governments above mentioned.
In Minister Jeffery's communication of November 15, 1918, addressed to
the Secretary of State, reference is made to the possibility of an establishment
of a credit in favor of the Russian minister above referred to by the National
City Bank of New York. This department would have no objection to the
National City Bank of New York establishing from its own resources a moder­
ate credit in favor of the Russian minister above mentioned.
In Mr. Ughet’s letter to you of the 15th instant he suggests that the Rus­
sian ambassador to this country, from the funds at present at his disposal, open
n small credit in favor of the Russian minister to Brazil, Chile, Uruguay, and
Paraguay. From the Treasury standpoint, the available funds at the disposal
of the Russian ambassador to this country should be primarily devoted to
payment of the overdue interest upon the obligations of the Russian Govern­
ment held by the United States. The department realizes there may be politi­
cal considerations involved, but it is without information as to whether such
is the case or as to the importance attached by the Department of State to any
such considerations as may exist.
Respectfully, yours,

A

The honorable the xlcting S e c r e t a r y

of

lbert

R

athbone.

St a t e .

SECTION 78.
February 1,1919, Account.
Memorandum for Mr. Ughet.
Compte Cheques (Account C).
Balance July 1, 1917 (previous to first American credit)------------

$5, 018, 262. 32

Added to Compte Cheques from advances by American Govern­
ment between July 1, 1917, and Nov. 13, 1917----------------------From the above total the following sums were used for special
purposes and disbursed by direction of S. Ughet, Russian
financial attache:
1. Payment to Guaranty Trust Co., re:
Russo-Asia tic Bank m atter____________ $5,000, 000.00
2. Payment to Russian Supply Committee.
(S. Ughet, Russian financial attache) to
reimburse amount paid for interest and
con)mission of National City Bank on
$50,000,000 report operation July 10,
1917__________________________________
1, 750,000. 00
3. Sum of $5,000,0001 re: Rumanian matter
which was repaid to American Govern­
ment after Nov. 13, 1917--------------------- 5, 000,000. 00
----------------------

11,750,000.00

Net sum added to Compte Cheques from July 1, 1917, to Nov.
13, 1917, to increase the general balance___________________
Balance Nov. 13, 1917, Compte Cheques1
______________________

56, 050 000. 00
32, 820,632. 70

67,800,000.00

1 Actual balance was $37,820,032.70. The sum o f $5,000,000 is deducted to allow for
the return o f it to American Government on Dec. 3, 1917.




141

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Amount added to Compte Cheques from sums received for
sale of merchandise (account H ) from May 1, 1918, to Feb. 1,
1919_______________________________________________________ $3, 214,147. 40
Amount added to Compte Cheques from account A and B, being
“ unneeded balances” and accumulated interest, etc., from
Nov. 13, 1917, to Feb. 1, 19192
______________________________ 11,950, 598. 08
Amount added to Compte Cheques from accounts previously car­
ried at the National City Bank, as follows:
“ Buying
account— kroners ”
(American
credit)_________________________________ — $1.100,000. 00
923,304.55
“ Account No. 2 ” (other sources)--------------“ Account No. 3 ” (other sources)__________ 1,381,090.08
---------------------3, 404, 394. 63
Balance, Feb. 1, 1919_________________________________________
317,039. 59
Interest and commission on loans.
$50,000,000 report operation:
Interest due Jan. 10, 1918, July 10, 1918, and Jan. 10, 1919_
Commission due Jan. 10, 1918, April 10, 1918, July 10, 1918,
Oct. 10, 1918, and Jan. 10, 1919_________________________

$4, 875,000. 00

T otal__________ 1______________________________________
$25,000,000, 5£ per cent loan:
Interest due Dec. 1, 1917, June 1,1918, and Dec. 1, 1918____
Commission due June 1, 1917, Dec. 1, 1917, June 1, 1918,
and Dec. 1, 1918_______________________________________

625, 000. 00
5, 500, 000. 00
2,062, 500.00
3,437. 52

T ota l__________________________________________________

2, 065,937. 52

$11,000,000, loan:
Interest due May 1, 1918-------------------------------------------------Special segregation for interest due Nov. 1, 1918, and
May 1, 1919___________________________________________

275,000. 00

T ota l__________________________________________________

935, 000. 00

Coupons on war loans: Total payments, Jan. 1, 1918, to Feb. 1,
1919-----------------------------------------------------------------------------------

183, 587. 97

Grand total------------------------------------------------------------------

8, 684, 525. 49

Interest on advances by American Government:
Interest due Nov. 15, 1917________________________________
On account interest due May 15, 1918 (balance, viz,
$1,808,506 covered by sale of cargoes, steamships Oconee,
Pawnee, and D ora)------------------------------------------------------On account interest due Nov. 15, 1918___________________
T ota l---------------------------------------------------------------------------

660.000.00

1, 329, 761. 64
1,865.925.08
300,000. 00
3,495,6S6. 72

SECTION 79.
Russia Wants $20,000,000 Gold in the Form of New Loan, but is Refused.
[Telegram sent.]

D

e p a r t m e n t of

St a t e ,

Washington, March 19, 1919.

C o n s u l , VladivostoJc.
(For Stevens.)
Your March 15, through Gen. Graves, No. 210.
1.
Question of advancing twenty millions gold will be taken up by Govern­
ments concerned upon receiving formal recommendations from interallied com­
mittee.

A

merican

* American credit included in this total, $3,563,731.89.




142

FOREIGN LOAN'S AND AUTHORITY FOIl MAKING SAME.

2. Salaries and maintenance of technical board and experts staff should be
taken into consideration by interallied committee in recommendations for gen­
eral plan of financing.
3. Spare parts for locomotives and cars will be forwarded as soon as possible.
Conditions liere regarding locomotives and cars may demand early shipment in
order to avoid complications. If this proves to be the case, can they be taken
care of on reaching Vladivostok?
Please forward copy to Smith for his information.
P o l k , Acting.
[Paraphrase of a cable.]

(Referred for attention to Mr. Stanert.)
T o k i o , March 2 h 1919.
J
Referring to your telegram of March 39, S p. in., the interallied committee at
Vladivostok clearly understood that after their recommendation had been made
the Governments concerned would discuss and determine the question of finance.
Smith’s telegram confirmed the fact that the interallied committee has recom­
mended as preliminary to a detailed and final plan that $20,000,000 should be
made available so that the necessary improvements and purchases will not be
delayed until agreement can be reached on all the details. I presume that this
amount could be advanced as a credit by the interested powers to the inter­
allied committee in a manner similar to that of the million-dollar credit granted
temporarily to Stevens. The committee, I believe, feels that it will take several
months of examinations by experts before full official notes can be submitted,
and the railway needs are in the meantime imperative.
In regard to military control my understanding was that the allied com­
manders would determine the matter of troop distribution. I think, strictly
speaking, that the interallied committee is without jurisdiction over that ques­
tion provided the protection is adequate. Accordingly I agree with Matsu
Daira, and that is why I have suggested to Gen. Graves that he first discuss the
subject with the Japanese command and then with the others.
M

orris.

SECTION 80.
Cable from Basil Miles Requesting President Wilson’s Attitude on Russian
Finance and Giving Resume of Situation to Date March 21, 1919.
M
A

merican

M

arch

21, 1919.

i s s i o n , Paris

(For Mr. Lansing and McCormick).
Owing to his more pressing engagements I had no opportunity to discuss
with the President the question of the status of the Russian Embassy and the
funds and accumulated materials which the embassy controls. The situation
which is pressing, is as follows, figures being given in round numbers:
Cash standing to ambassador’s cliredit in City Bank______________ $3,400,000
Owed ambassador by Shipping Board for charter of Russian
steamers of the volunteer fleet_________________________________ 1,400,000
Owed ambassador by War Department for rails purchased________ 3,000,000
Together with lesser items the aggregate approximates
(cash)___________________________________________________ 8,000,000
Materials constitute additional assets, as follows:
Military supplies, as follows:
B oots________________________________________________________ $8,500,000
Sole leather__________________________________________________ 3, 500, 000
Horseshoes----------------------------------------------------------------------------200,000
Total---------------------------------------------------------------------------------- 12,200,000
Railway supplies, including 137 locomotives and 4,400 cars_________ 11,000,000
Miscellaneous_____________________________________________________ 2,000,000
25, 200, 000.
Aggregate assets of cash and materials_______________________ 33, 200, 00



FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

143

Against these assets of $8,000,000 cash and $25,200,000 materials, there are
the following major liabilities:
First. Interest on Government loans. Interest on demand obligations of Rus­
sia, held by the United States, as follow s:
Unpaid and past d u e____________________________________________ $4, 400, 000
Due May 15, 1919_______________________________________________
4, TO , 000
O
Total___________________________________ ____________________
Second. Obligations of Russian Government from private sources,
Russian treasury notes, maturing May 1, 1919, held by National
City and other banks__________________________________________
Interest thereon, secured by confirmed credit, due May 1, 1919______
6J per cent credit, advanced to Russia by City Bank in 1910, pay­
able June 18, 1919______________________________________________
Interest thereon, due June 18, 1919___________ .----- ------------------- ----Commission, due April 10, 1919___________________________________
Commission, due June 18, 1919___________________________________
Five-year note, payable, 1921-------------------------------------------------------Interest on these notes, due June 1, 1919---------------------------------------

9,100, 000
as follow s:
11,000,000
830,000
50, 000, 000
1,625, 000
1.25, 000
125,000
25, 000, 000
687,000

Total_______________________________________________________ 97, 992, 000
It is obvious that if the United States, or the private creditors, principally
the City Bank, collect their indebtedness when due the embassy will be bank­
rupt in May or June; furthermore, the supplies of boots, leather, and railway
materials, so urgently needed for economic relief or Russia, may be attached
and possibly sold.
The situation seems to me to require decision as to certain principles before
we can decide what measures it may be necessary to take, as follow s:
1. Does the President desire Russian assets of cash and railway supplies,
boots, etc., to be protected and used for the purpose for which they were origi­
nally obtained by the Russian Government, namely, for assistance to Russia?
2. Does the President desire Russian diplomatic and consular officials to con­
tinue to function in this country?
3. I f so, does he desire department to lend its good offices to assist the Rus­
sian ambassador in safeguarding Russian cash assets adequate for that purpose,
say, until July 1, 1920, in case such assistance proves requisite?
4. Does the President desire to postpone collection of interest on Russian obli­
gations held by Treasury Department? This will be necessary if he approves
1 and 2 above.
I am ascertaining just how we can effect the above if the President approves.
As a last resort, I believe the following procedure would be justified :
1. Have the War Department requisition all military and railway supplies not
shipped to Russia and arranged with the War Trade Board, Russian Bureau
(Inc.), for their shipment to Russia and disposal for the best advantage of
Russia.
2. That the cash assets of the Russian ambassador be disposed of as follow s:
Part deposited with the United States Shipping Board, as advance payments of
sea freights for Russian supplies, remaining in this country and available for
shipment to Russia; a second part deposited with the Railway Administration
o f the United States as advance payment for railway freight charges for above
supplies; and a third part to be deposited with the War Trade Board, Russian
Bureau (Inc.), or such other agency as the President may designate, for
contingencies and to defray charges and expenses designated by the Russian
ambassador and approved by the Department of State, including maintenance
and upkeep of Russian officials in this country.
The foregoing procedure is suggested as a last resort. I am hopeful that
other arrangements may prove possible. In the meanwhile, however, I can take
no effective action until the President approves the general question of principle
which I have outlined.
-------------------- - Acting.




144

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
SECTION 81.
Treasury Department Will Not Establish New Credit for Russia.

D

ear

M

r. U g h e t

A pri l 3, 1919.
: I have received your letter of April 2, 1919, in regard to

the withdrawal of the unexpended balance of the credits established in favor
of the provisional Government of Russia in the sum of $137,270,250, which has
not been available since November, 1917.
I am sorry that you should have obtained the impression that credits opened
by the United States Government in favor of the Governments associated with
the United States in the war would be formally stopped and the unexpended
balances withdrawn as soon as the formal peace treaty should be signed.
The authority conferred upon the Secretary of the Treasury by the Congress
authorizes the establishment of credits until the term!naton of the war (under
the provisions of the Victory Liberty loan act for certain restricted purposes
until 18 months after the termination of the war), and does not require the
Secretary of the Treasury to withdraw upon the termination of the war the
balance of credits previously established then remaining unavailed of.
The action of the Secretary of the Treasury regarding the withdrawal of
credits must depend upon the consideration governing each case. Heretofore
the unavailed of parts of credits previously established in favor o f certain of
the allied Governments have been withdrawn, and similarly the unexpended
balance of credits previously established in favor of the provisional Govern­
ment of Russia has been withdrawn, as the same has not been available sinr’e
November, 1917.
If by reason of changes in existing conditions the Secretary of the Treasury
should be authorized by law to make advances to Russia, any application made
for the establishment of new’ credits in its favor and for advances therefrom
would, of course, receive his consideration.
With regard to the establishment of a credit of $125,000,000, referred to in
Mr. McAdoo’s letter of November 1, 1917, to the Russian ambassador, devel­
opments in Russia immediately after the date of the letter were such as would
have rendered it unavailable in view of the conditions set out in said letter,
and the credit has never been regarded by the Treasury as effective. I had
assumed that the representatives of the Russian Government had been so
informed.
I am, my dear Mr. Ughet,
Very truly, yours,
A

lbert

R

athbone.

S. U gi- , Esq.,
iet
Flatiron Building, New York City. N. F.

SECTION 82.
April 19, 1919: Polk Refuses to Recognize Martens as Ambassador From
Russia, and States That Bakhmeteff Has Been Recognized as Such Am­
bassador Since July 5, 1917.
D

epartment

of

St a t e ,

Washington, April 19, 1919.
Mr. J. H. C a r t e r ,
Vice President National City Bank of New York,
New York City.
Si r : The department has received your letter of April 15, 1919, in respect
of the demand of Mr. L. A. Martens on the Russian ambassador to the United
States for all property in the United States under his control belonging to the
Russian Government. In reply I have to state that Mr. Boris Bakhmeteff pre­
sented his letters of credence to the President of the United States, and was
officially received by the President as ambassador extraordinary and pleni­
potentiary of Russia July 5, 1917, and that Ambassador Bakhmeteff has, accord­
ingly, since that date, been recognized by this Government as the ambassador
of Russia to this country. In a recent telegram from the Secretary of State,
in Paris, he states that the only Russian representative recognized by the



FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

145

United States is Mr. Bakhmeteff, and adds in effect that the claims to a repre­
sentative capacity put forth by Martens are not to be given credence. I may add
that the Government of the United States has not received or recognized Mr.
Martens in any representative capacity in the United States on behalf of the
Government of Russia, or of any other government, and, moreover, that the
department has received no authentic evidence that Mr. Martens is even the
representative in the United States of the so-called “ Russian Socialist Federal
Soviet Republic.” As you are no doubt also aware this Government has never
recognized the bolshevik regime as a Government, either de facto 01* de jure.
I am, sir,
Your obedient servant,
F r a n k L. P o l k ,

Acting Secretary of State.

SECTION 83.
Ughet, Russian De Facto Charge d’Affaires, Gives His I. O. U. to United
States for Interest $1,314,847.23.
R

ussian

E

mbassy,

Washington, May 1, 1919.
M y D e a r M r . R a t h b o n e : I beg to acknowledge receipt of your letter of April
25, with the inclosed statement setting forth the dates and principal amounts of
obligations of the Russian Government dated later than October 2, 1917, held by
the United States at the close of business on April 24, 1919, and showing inter­
est thereon due May 15,1919, in the amount of $1,314,847.23.
Further on you request payment of this interest to be made by check payable
to the order of the assistant treasurer of the United States, New York, for
credit general account of the Treasurer of the United States, to be delivered
to the assistant treasurer of the United States at the subtreasury in New York
on May 15, 1919.
Referring to this request, I desire to inform you that at the moment I have
not the cash available which will enable me to pay the interest in the amount
of $1,314,847.23, due 011 the 15th of this month.
However, I formally undertake 011 behalf of the Provisional Government of
Russia that the said Government promises to pay, for value received, to the
United States of America, or assigns, the sum of $1,314,847.23, on demand, made
at the Russian embassy in Washington, with interest from the date hereof at
the rate of 5 per cent per annum. Such principal sum and the interest
thereon will be paid without deduction for any Russian taxes, present or future,
in gold coin of the United States Government of the present standard, weight,
and fineness, at the subtreasury of the United States in New York or at the
option of the holder at the Treasury of the United States in Washington.
I am, my dear Mr. Rathbone,
Very truly, yours,
S. U g h e t ,
Charge d'Affaires ad interim of Russia.

SECTION 84.
May 12, 1919: No Russian Government Recognized by the United States at
That Time.
M

y

D

ear

M

r.

R

aymond

M a y 12, 1919.
: The Secretary has requested me to reply to your

interesting letter of the 7th instant making suggestions as to the payment of
the
per cent $50,000,000 loan and the 5i per cent $26,000,000 loan raised in
this country by the Russian Government before the United States entered the
war. The authority of the Secretary o f the Treasury to make loans to foreign
Governments is limited to Governments at war with enemies o f the United
States, and the purposes for which such loans are authorized to be made are the
prosecution of the war and also the sale o f property owned by the Government
o f the United States and not needed by it or the sale o f wheat owned by the
S. Doc. 86,67-2------10



146

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

United States or the price of which has been guaranteed by the United States.
At the present time there is in Russia no government which has been recog­
nized by the United States. Under these circumstances, there does not seem to
be any way for the Treasury to make advances for the purpose of meeting the
Russian maturities, even though it were considered desirable to do so. The
credits guaranteed the provisional government of Russia in 1917 were not
available to the Russians except to the extent to which advances under them
were made by the Treasury, and no such advances have been made since Novem­
ber 15, 1917. Inasmuch as under existing circumstances the Treasury was not
in a position to make advances under those credits, the unexpended balances
were withdrawn some time ago in order that there might be removed any confusion on the part of the public as to the possibility of making further advances
to Russia.
Yours, very truly,
A

lbert

R

athbone.

W. L. R a y m o n d , Esq.,
85 Congress Street, Boston, Mass.

SECTION 85.
Costs of Keeping Up Embassy.
May 22, 1919.
Memorandum for files:
On the list of deferred payments, May 20, 1919, submitted to me by Mr. Ughet
on May 21, appears an item “ Russian Embassy, additional amount for upkeep
of embassy and connected institutions, $90,275.” Mr. Ughet stated that this
was to cover for the period of four months, from May 1 to September 1, the
cost of the commercial attach^ and the cost of consulates. Mr. Ughet said that
these had by error been left out of the previous similar items. To-day I called
up Mr. Miles at the State Department about this item and asked him whether
to pass it. Mr. Miles said that until the question of the June 1 interest charge
was decided, items for the upkeep o f embassy and consulates should be passed
as heretofore. I thereupon told him that I would pass this item and he ap­
proved my doing so.

SECTION 86.
President Wilson O. K's Deferrment of Collection of United States Interest
so that Russian Embassy Can Be Kept Up.
Paraphrase of a telegram from the American mission at Paris, dated May 26,
1919, No. 2270, signed by Mr. Lansing and Mr. McCormick.
Utilization of Russian Embassy assets in the United States in order to meet
interest on maturing obligations and the postponement of the collection of
interest by the Treasury Department has been approved by the President.
Furthermore, the possibility of recognizing the Omsk government has so
much increase:! that in our opinion it appears more important than ever to
continue this policy and avoid any collapse of Russian finance in America at
the present time. In our opinion the administration will not be subjected to
any special criticism by adopting this policy, inasmuch as it will probably be
necessary to take a very similar position in respect of even the principal allied
Governments, where it will probably be necessary to provide some plan to defer,
for the present, collection of interest on their obligations by the Treasury,
while at the same time allowing these Governments to meet obligations held
by the public.

SECTION 87.
Kolchak Government Supported by Allies.
A

ssistant

Se c r e t a r y

of t h e

T reasury,

June 19, 1919.
Memorandum for Mr. Rathbone:
Mr. Ughet came in to see me and, referring to what has appeared in the
newspapers and his own advices concerning the agreement of the Allies to
support the Kolchak government, asked if we were in a position, under exist


FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

147

ing legislation, to establish credits for that government. He said he realized
that we should have to have advices from the State Department and that at
his request the State Department had cabled Paris for instructions. He said
that the Kolchak government was at war with Germany, since it had never
made peace. I referred him to you.
R. O. L.

SECTION 88.
United States Navy Department Pays for Ship Hire to Russian Ambassador
When Payment Should Have Been Made to the United States Treasury and
Credited on Russian Loan and Interest.
N

D

avy

epartment,

Washington, June 23, 1919.
T o : The honorable the Secretary of the Treasury.
Subject: Final payment for charter hire of steamers Spray (ID 2491) and
Foam (ID 2496).
References: (a) F. S. B., S. O. Reqn. No. 16 (1919. (b) F. S. B., S. O. Reqn.
No. 17 (1919). (c) Treasury Dept, letter October 15, 1918, to Secretary of
the Navy, (cl) Treasury Dept, letter May 29, 1919, to Secretary of the Navy.
Inclosures: Copies o f references (a), (b), (c ), and (d).
For the purpose of effecting final settlement for charter hire o f steamer
Spray (ID 2491) and steamer Foam (ID 2496) for the period January 29, 1919,
to February 28, 1919, inclusive, which vessels were taken over from the pro­
visional government of Russia, represented by Capt. G. T. Smirnoff, Flatiron
Building, New York City, under voluntary charter Form 4-C, and referred to in
Treasury Department communication referenced (c) above, information is re­
quested as to the proper official to whom this payment should be made.
In this connection attention is invited to a communication referenced (d)
above, covering final payment for charter of steamer Ripple, also referred to in
Treasury Department letter of October 16, 1918. It will be noted that payment
in this case to S. Ughet was authorized, provided the Department of State de­
sires such payment to be so made.
A prompt reply to this communication will be appreciated.
F r a n k l i n D. R

oosevelt,

Acting Secretary of the Navy.
Treasury D

epartment,

Washington, October 15, 1918.
S ir: Referring to your letter of September 24, 1918, in relation to the
charter hire for the steamers, Foam, Ripple, and Spray, chartered from the
provisional government of Russia, as stated in my reply of October 5, 1918, I
forwarded to the Department of State a copy of your letter and of said reply.
I am now in receipt of a letter from the Secretary of State under date of
October 10, 1918, in which he asks me to inform you that he knows o f no modi­
fication of our general relations with the Russian ambassador and sees no
objection whatever to payments due in this country to the Russian Government
being made to the Russian ambassador or to his duly constituted representa­
tive.
Respectfully, yours,
A

The honorable the S e c r e t a r y

of t h e

N

lbert

R

athbone.

avy.

SECTION 89.
Russian Financial Position June 1,1919.
Memorandum as to Russian financial position as of June 1, 1919.
Advances from United States Treasury---------------------------------- $187, 729, 750.00
Proceeds sale of rails and other merchandise-------------------------13,000,000.00




, ,

200 729 750.00

148

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Tlie reports of Russian expenditure show
itemized expenditures to Dec. 31, 1917,
amounting t o ------------------------------------------ $104, 600, 751. 46
For the 12 months of 1918__________________
34, 603,197. 20
For 5 months of the year 1919, to June 1_____
8, 396, 648. 30
------------------------- $147, 600, 596. 96
Deduct cash balance as at June 1_____________________________

53,129,153. 04
1,694,129.11

This leaves unaccounted for a balance o f (together with
such items as the Russian Government received by
way of interest on its bank balances and charter hire
for s h ip s )__________________________________________

51,435, 023. 93

Of the American credits certain advances were made as follow s:
For expenditure in Finland______________________________
For the purchase of Swedish exchange__________________
For the support of the Russian ministry of finance_______

50,000,000. 00
5,000,000.00
45, 000,000. 00

T o t a l_________________________________________________ 100,000,000. 00
If this $100,000,000 had all been spent outside of the United States the re­
sult would be that the difference between the remaining $100,729,750 made up
of the balance of United States advances and of the sale of merchandise and
the $147,600,596.96 accounted for must have been provided by the Russians
from other sources. It appears from Russian reports that the Russians had a
balance of about $21,000,000 on July 1, 1917, before American advances began
and that $1,100,000 of the American advance for the purchase of Swedish
kroner were not used for that purpose, but were applied by the Russians in
their general account. How much of the Russian free credits, amounting to
$45,000,000, and how much o f the $50,000,000 advance for the purchase of
Finnish marks were applied to the general balance of the Russians in this
country has not been ascertained from the Russian reports. The Russian charge
d’affaires insists that of their expenditures $32,001,108.33 were made out of
their general funds in anticipation of United States advances and that a con­
siderable part of these payments were made w^ith funds derived from British
credits or the sale of Russian bonds. The total sum paid by the Russians for
rails in 1917-18 amounted to about $25,000,000, of which slightly over $11,000,000
were paid out of American credits. Of the expenditures reported by the Rus­
sians $9,130,000 were for interest on Russian bonds privately held and slightly
over $750,000 were for commissions of the payment of interest. The amount
paid by the Russian Government to the United States for interest or deposited
with the Treasury to cover the payment of interest aggregates $5,637,717.72.
The amount of interest due the United States Treasury and unpaid and un­
secured by any deposit with the Treasury amounted, as of May 15, 1919, to
$8,196,580.10. For this, the Treasury holds undertakings by the Russian repre­
sentative that his Government will pay the amount with interest at 5 per cent.
Provisional Government o f Russia.
Accrued interest on Russian obligations held by
United States Treasury:
Nov. 15, 1917______________________________$1 329,761.64
May 15, 1918______________________________ 3, 674,431.08
Nov. 15,1918_______________________________ 4, 728,997. 60
Apr. 15, 1918______________________________ 2,786,260.27
May 15, 1919______________________________ 1,314,847. 23
$13,834,297.82
Payments of interest on Russian obligations:
Nov. 15, 1917_______________________________
July 3, 1918_______________________________
Aug. 17, 1918______________________________
Jan. 15, 1919______________________________




1,329,761. 64
1, 000, 000. 00
865,925.08
300,000.00
----------------------

3,495,686. 72

, ,

10 338 611.10

149

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
Proceeds from sale of Russian cargoes carried in Treasurer’s
special account No. 11 to be used to liquidate accrued interest
on Russian obligations_____________________________________

$2,142,031.00

Balance unpaid________________________________________
8,196,580.10
Interest paid by Russians on private obligations, $9,130,000; commissions,
$750,000.
PAYMENT OF INTEREST AND COMMISSIONS ON RUSSIAN BONDS AS
REPORTED BY MR. UGHET.

$11,000,000 5 per cent Russian internal bonds:
Apr. 29, 1918______________________________
Apr. 30, 1918 (Nov. 1, 1918, and May 1,
.1919)___________________________________
May 3, 1918 (increase from 5 per cent to 6
per cent_________________________________

$275,000.00
550,000.00
110,000. 00
----------------------

935,000.00

687,500.00
687,500.00
687, 500. 00
687,500. 00
----------------------

2, 750,000. 00

2,578.14
859.38
859.38
----------- ----------

4,296,90

1,625,000.00
1,625,000.00
1, 625,000.00
----------------------

4,875,000.00

125, 000. 00
125,000.00
125,000. 00
125, 000. 00
125, 000. 00
125. 000. 00
125, 000. 00
----------------------

875, 000. 00

T o t a l__________________________________________________

9, 439, 296. 90

$25,000,000 5-year 5| per cent bonds:
Dec. 1, 1917_______________________________
May 31,1918_______________________________
Nov. 30, 1918_______________________________
May 31,1919_______________________________
Commission on above:
June 21, 1918______________________________
Nov. 30, 1918______________________________
May 31, 1919______________________________
$50,000,000 3-year 6£ per cent bonds:
Jan. 7, 1918________________________________
July 8,1918________________________________
Jan. 7, 1919________________________________
Commission on above:
Oct. 10, 1917_______________________________
Jan. 7, 1918_______________________________
Apr. 10,1918_______________________________
July 8, 1918_______________________________
Oct. 11, 1918_______________________________
Jan. 10, 1919_______________________________
Apr. 14, 1919_______________________________

SUMMARY OF PAYMENTS REPORTED BY MR. UGHET.

Up to Oct. 1, 1917___________ _________________ $33,858, 668.13
October, 1917________________________________
19,949,782.07
November, 1917______________________________
27,360, 774. 74
December, 1917______________________________ 23,431,526. 52
----------------------- 104,600,751.46
January, 1918_______________________________
7,904,781.64
February, 1918_______________________________
2, 983, 650. 63
March, 1918__________________________________
3,842, 736. 90
April, 1918___________________________________
3,812,363.21
May, 1918____________________________________
2,475,425.98
June, 1918___________________________________
1,406, 622. 63
July, 1918___________________________________
3,538,396.59
August, 1918_________________________________
1,510,112.18
September, 1918______________________________
2,961,499. 78
October, 1918________________________________
1,645,713.07
November, 1918______________________________
1, 574,402. 20
December, 1918_______________________________
947,492.39
34 603 197.20



, ,

150

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

January, 1919.
February, 1919.
March, 1919---April, 1919____
May, 1919____

2, 475, 551. 64
1, 275, 496. 64
1, 543, 392. 58
1, 243, 928. 21
1, 858, 279. 23
-----------------

Total
c r e d it s

e s t a b l is h e d ,

$8, 896,648. 80
147, 600, 596. 96

cr e d its

w it h d r a w n ,

p r o v is io n a l

and

advances

made

in

fa v o r

of

GOVERNMENT OF RUSSIA.

Credits established:
May 16, 1917_________________________________ $100,000,000
July 17, 1917_________________________________
75,000,000
Aug. 23, 1917_________________________________ 100,000,000
Oct. 12, 1917__________________________________
50,000,000
_____________ $325,000,000
Credits withdrawn, Mar. 31, 1919_______________________________ 137,270,250
187, 729, 750
Advances:
July 6, 1917__________________________________
July 13, 1917_________________________________
Aug. 1, 1917__________________________________
Aug. 22, 1917_________________________________
Aug. 24, 1917_________________________________
Aug. 30, 1917_________________________________
Sept. 25, 1917_________________________________
Oct. 2, 1917___________________________________
Oct. 11, 1917__________________________________
Nov. 1, 1917__________________________________
Nov. 15, 1917_________________________________

85,000,000
10,000,000
2, 500,000
2,500,000
37, 500, 000
10,000,000
15,000,000
22, 200,000
20,000, 000
31,700,000
1,329,750

187, 729. 750
A conditional credit of $125,000,000 was established in favor of Russia
on November 1, 1917, but in view of the conditions to which the credit was sub­
ject and of subsequent developments in Russia the credit has never been
regarded by the Treasury as effective, and back entries showing its withdrawal
were made on December 28, 1917.
N

ote.
—

PAYMENTS OF INTEREST AND COMMISSIONS ON RUSSIAN BONDS AS REPORTED BY MR.
UGHET.

$11,000,000 5 per cent Russian internal bonds:
Apr. 29,1918__________________________________
Apr. 30, 1918 (Nov. 1, 1918, and May 1, 1919)_
_
May 3, 1918 (increase from 5 to 6 per cent)___
$25,000,000 5-year 51 per cent bonds:
Dec. 1, 1917__________________________________
May 31, 1918_________________________________
Nov. 30, 1918_________________________________
Mav 31, 1919_________________________________
Commission on above:
June 21. 1918_________________________________
Nov. 30, 1918_________________________________
May 31, 1919_________________________________

$275, 000. 00
550,000. 00
110, 000. 00
-------------------- $935,000.00
687,500.00
687, 500. 00
687,500.00
687, 500. 00
-------------------- 2, 750,000.00
2, 578.14
859. 38
859.38
--------------------

4,296.90
$50,000,000 5-year 6i per cent bonds:
Jan. 7, 1918__________________________________ 1,625,000.00
July 8, 1918__________________________________ 1,625,000.00
Jan. 7, 1919__________________________________ 1,625,000.00
-------------------- 4,875,000.00




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
Commission on above:
Oct. 10, 1917________________ _________________
Jan. 7, 1918________________________________—
Apr. 10, 1918_________________________________
July 9, 1918__________________________________
Oct. 11, 1918__________________________________
Jan. 10, 1919_________________________________
Apr. 14, 1919_________________________________

151

$125,000. 00
125,000.00
125,000.00
125,000.00
125,000. 00
125,000.00
125,000.00
$875,000.00

T ota l________________________________________________ 9, 439, 296.90

SECTION 90.
Great Britain Plans to Capture Russian Trade (This Should Probably Be Kept
Confidential).
D e p a r t m e n t of S t a t e ,
F oreign T rade A d v is e r ’ s O f f ic e ,
E c o n o m ic I n t e l l ig e n c e S e c t io n .
[Confidential.]
B r i t i s h P l a n s for R u s s ia n T rade ,
w a r n in g .

(By direction of the Second Assistant Secretary of State.)
This monograph has been prepared as a study, and has not been submitted
foi; the consideration or approval of the Secretary of State. It is not in any
sense official.
E. M. K ayden.
J u ly

29, 1919.
1. INTEREST i n RUSSIAN TRADE.

During the last two months of May and June the British press was unusually
interested in the question of Russia’s importance in the export trade of the
United Kingdom. It was felt that it is in Russia that defeated Germany will
seek an outlet for her industrial and commercial activities, and that here was
the danger of the recrudescence of the spirit of German economic aggressiveness.
“ No time is to be lost if British trade is to secure the benefit arising from the
fact that the Englishman is in business better liked and respected by the Rus­
sian than the German,” declared a leading article of the Times Trade Supplement
of May 17, 1919. Notwithstanding the difficulties in the way of normal trade
relations with Russia, such as the matter of ruble exchange, disorganization of
transport, absence of any assurance that if goods are misappropriated their
rightful owner will be able to make good his claim for their value, and also the
practical disappearance of credit on which modern commerce depends, trade
with Russia is not felt to be beyond the pale of possibility. The newspapers
assert that, unlike in any other country, the cooperative organizations of Russia,
with their network of producers’, consumers’, and mutual credit societies, are
at present the best agencies for the resumption of trade, and that what is wanted
is “ some machinery by which the risks attendant on trade ventures could be
shared between those embarking upon them.” In other words, there is need
for international cooperative effort in the field of foreign trade. The Times
closes its article of May 17 with this statement:
“ We are convinced that if something could be done on these lines (trade-risk
insurance) the benefit to British trade in the future would be incalculably
great * * *. We understand that the Government are fully alive to the
importance of Russia as a future field for British enterprise and that they are
at the present time discussing with the principal interests concerned the possible
lines of action that might be taken to revive and expand our trade with Russia.”




152

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
2. PROPOSAL OF THK DEPARTMENT OF OVERSEAS TRADE.

In the issue of May 24 the Times Trade Supplement outlined in brief the
scheme prepared by the department o f overseas trade for the promotion and
early resumption of trade with non-Bolshevist Russia. It was proposed that
arrangements be made, in cooperation with the war-risks office, to take up at
a reasonable rate any marine and war-risks insurance which the open market
can not absorb on goods passing to and from Britain and Russia, and also to
insure (cr) British goods from the time of discharge from the steamer and
whilst they are lying in a warehouse or store, wherever situated within the area
covered by the insurance policy, until the time of sale to the purchaser, and
(&) Russian export goods from the time of purchase until goods are loaded on
board ship at a Russian port. One of the main objects of the proposed insurance
is to enable banks to give advances in the ordinary way of business to traders
in respects of shipments between the two countries, and in order to facilitate
these advances it is suggested that British banks might perhaps cooperate by
opening branches in various parts of Russia.
The Times states that such a scheme will, of course, require legislative sanc­
tion, inasmuch as a substantial sum will be required to finance it, but that its
ultimate cost to the Government will be nil. The scheme has the advantage of
elasticity in that it could be put in operation at once and extended or contracted
as various parts of Russia are being opened up for commercial intercourse.
The matter was discussed at the third annual meeting of the Russo-British
Chamber of Commerce (the Times trade supplement, May 31), and the presi­
dent, Sir George Buchanan, and Sir Francis Barker cordially approved of the
project. In the same issue of the Times a letter, signed “ Traveler,” said in p a rt:
“ The Government of the United States have, with typical sagacity, already
voted something like £200,000,000 to financing their export trade. I f only the
same were done at once by our legislators, and suitable cargoes embarked for
the different Russian ports, north as well as south and west, bolshevism and all
the consequences it entails would collapse like some hideous nightmare.
“ Goods of the value of several million pounds could, I am assured on the best
o f authorities (the statements of the merchants themselves), be shipped to
Russia in the course of a few weeks. What is required o f the Government is
a generous guaranty and maritime protection, the instant raising of the block­
ade and more speedy release of personnel and tonnage for the great venture for
trade and civilization.”
At the request of Sir Arthur Steel-Maitland, parliamentary secretary for the
department of overseas trade, a meeting of the leading trade organizations was
called together in London for the purpose of discussion of ways and means for
the resumption of trade writh Russia. It was commonly held that one of the
most urgent needs was adequate insurance facilities not covered in the ordinary
insurance market, and that Government cooperation was essential. Sir Arthur
Steel-Maitland has been selected to pilot the bill through the House of Com­
mons. The b ill1 provided that merchants shall be furnished with commercial
information regarding R ussia; that regular sailings shall be arranged; that
goods shall be insured and that banks shall be enabled to make ordinary ad­
vances to traders. Banks could also issue warrants against collateral security
o f insured goods and the warrants would be valid only for purchase of British
goods; they would have a fixed value in British money.
The bill prepared for early submission to Parliament asked that a fund of
£25,000,000 be set aside to finance the insurance on the transportation of British
goods to Russia. Sponsors of the scheme pointed out that the Government prob­
ably would make a profit, as was the case with the war risks insurance scheme
which netted a profit of £17.000,000.2
The advantages claimed for the plan are that it calls for no allied consulta­
tion, raising no controversy as to allied political relationship with soviet
Russia, because it would only apply to territories freed from bolshevik rule;
that it could be instantly extended to any part of Russia that might be open
to commercial intercourse It was also claimed that the scheme could be put
in operation within two weeks, and so render possible the dispatch to Russia
of large quantities of British goods within a month of the date o f the approval
of the scheme.
1 Tribune, July 6, 1919.
*T he D aily Express, London, May 23, 1919.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

153

ARRANGEMENTS BY BOARD OF TRADE.

The Times Trade Supplement of June 21 announced that arrangements have
now been employed whereby the board of trade war-risk insurance office, 53
Cornhill, E. C., will be able to give facilities for the insurance o f the inland
risks upon British goods imported into Russia and goods bought by British
firms for export from Russia.
The insurance will cover the goods against loss or damage arising from war
risks, riots, civil commotions, and other risks usually feicluded in an ordinary
Lloyd’s policy. Policies will, in the first place, only be issued for the area in
southeastern Russia and the northern Caucasus, including the ports of Tagan­
rog, Rostov-on-Don, Novorossisk, and Tuapse.
Facilities for marine insurance will also be given in cases where this can
not be obtained through the ordinary channels. The Admiralty has issued in­
structions whereby vessels carrying cargo for the ports of Taganrog and
Rostov-on-Don will now be allowed to pass through the Ivertch Straits into
the Sea of Azov.
It was hoped that this new scheme of trade-risks insurance would lead to
cooperation by the banks in way of advances to traders in respect of shipments
from the United Kingdom to Russia and in respect of goods available for
export from Russia. Among the leading banks giving special consideration
to Russian trade development are the British Trade Corporation, Lloyds Bank,
the London Country and Westminster and Parrs’ Bank (Ltd.), and the
National Provincial and Union Bank of England (Ltd.), which have already
intimated that they are now prepared to consider applications for advances
against goods sent to Russia, and insured under this measure. The banks are
also considering the opening up of business in different parts of Russia.
It is appreciated that it is important that traders should be able to rely on
regular and adequate opportunities for shipment of their goods, and the fol­
lowing shipping companies have undertaken to provide sailings at least fort­
nightly and tonnage for all the cargo which may be forthcoming: The Cunard
Steamship Co. (Ltd.), the Ellerman Lines, James Moss & Co. (L td.), the Westcott & Laurance Line. The fortnightly service will be maintained, but this
can be extended to weekly or even more frequent sailings as soon as the need
arises.
C.
G. Jerram, of the salaried consular service, has recently proceeded to
Novorossisk to act as consul at that port. An economic mission under Lieut.
Col. Mac Alpine has already left this country to visit Ekaterinodar, and will
also visit other centers in the insurance area. W. S. Walton has been ap­
pointed as British vice consul at Rostov-on-Don, and will leave this country
immediately for that port. The question o f making other appointments is also
under consideration.

SECTION 91.
Complete Account Showing Over $1,400,000 Paid the De Facto Russian Am­
bassador by United States for Hire of Ships—Balance Due, $339,000.
D i v i s i o n o f O p e r a t io n s ,
U n it e d S t a t e s S h i p p i n g B oard E m e r g e n c y F le e t C o r p o r a t io n ,

Washington, August 14, 1919.
F rom : John J. Nevin, comptroller, Hooe-Iron Building, Washington, D. C.
T o: Mr. S. R. Cate, war loan staff, room 253, Treasury Department, Wash­
ington, D. C.
RUSSIAN CHARTER HIRE.
D e a r S i b : Referring to conversation held with you in my office yesterday
morning, I now beg to submit to you statement showing the status o f our
accounts with the Russian Government down to August 4, 1919, midnight.
You will note that the Russian Government, as represented by Mr. Bahkmeteff, representing the Kerensky regime, through Mr. S. Ughet, financial attach^,
have made payment to us in the sum o f $794,796.61, leaving balance due us of
$187,820.01, while the Shipping Board has paid to Mr. Ughet $1,406,788.98, leav­
ing balance due the Russians $339,219.09; net balance in favor of the Russian
Government being $151,399.08, as per recapitulation on statement.




154

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

It is well for me to say also that while the inclosed statement is an actual
transcript of our financial relations with the Russian provisional government at
the pi’esent time, there will be certain changes, due to the fact that the British
Government, during the winter 1917-18, seized certain of our ships chartered
to the Russians, as well as cargoes aboard them which belonged to the Russians,
upon their entrance into British ports, thus necessitating forced redeliveries by
the Russians, dates of which have not yet been determined, but which will in
all probability when determined result in our becoming debtors to the Russian
Government for some two hundred thousand odd dollars more than is shown on
the present statement.
Our payments to the Russian provisional government were made on instruc­
tions from Mr. Frank L. Polk, Acting Secretary of State, in order that certain
funds might be available to the representatives of stability and order in Russia.
We understand that all disbursements made from these funds by the embassy of
the Russian provisional government in Washington have been made under the
supervision of the Treasury Department.
I trust that this statement, together with the facts here presented, will be
of service to you before the congressional committee.
I beg also to attach hereto your written memorandum showing statement of
our Russian accounts as contained in your file, which you were good enough
to leave with me. I beg to advise that I have taken the liberty of making a
typewritten copy of same.
Very truly, yours,
John J. Nevin, Comptroller.
Russian statement, May 1, 1919.
Estimated gross income, as per bills already delivered, for charter
of Russian volunteer fleet steamers___________________________$1, 544,548.90
Estimated expense in connection with charter of Russian volun­
teer fleet steamers---------------------------------------------------------------290,826.61
Net amount due Russia as at May 1, 1919________________

1, 253,722.29

The Russian Government in account with United States Shipping Board Emer­
gency Fleet Corporation for charter hire, etc., to August 4 , 1919, midnight.

Balance.

Balance
Payments !
due
by Russian ; United
Govern­
States
ment.
Shipping
Board.
j

Steamship Dora.
Charter hire June 21,1917 to Mar. 17, 1918............... *756,111.11
1,040.00
Coal on delivery June 21,1917..................................
757,156.11
Coal on delivery to Publishers Paper Co.,
Nov. 22, 1917........................................ $4,455.00
Off-hire credits........................................ 76,907.65
Coal consumed during off-hire ............
1,375.00
Advance to captain, etc..........................
1,624.31
Cash paid................................................. 484,132.82

568,494.78

$188,661.33

$188,661.33

Steamship Ida.
Charter hire June 20,1917, to June 15, 1918.............
Coal on delivery............................... .......................
Water on delivery.....................................................

379,559.05
1,034.00
45.00
380,638.05

Coal on redelivery, etc............................ $4,620.00
Cash paid................................................. 296, &36.20
Off-hire credits........................................ 15,330.39
Advance to master..................................
376.50




316,363.15
64,275.80 i

64,275.80 ...................

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

155

The Russian Government in account with United States Shipping Board Ewergency Fleet Corporation for charter hire, etc.—Continued.

Balance.

Payments
by Russian
Govern­
ment.

Balance
due
United
States
Shipping
Board.

Steamship Isonomia.
Charter hire May 26, 1917, to Jan. 23, 1918...............
Coal on delivery........................................................

382,331.49
2,607.00
384,938.49

Coal on redelivery, etc............................ S3,608.00
Off-hire credits........................................ 41,346.44
Cash paid................................................. 301,490.94

346,445.58
$38,493.11

Charter hire July 7, 1917, to Mar. 9, 1918.................
Coal on delivery................................................ ........

$38,359.11

71,255.21

71,255.21

107,963.59

Steamship Oconee.

107,963.59

273,940.89

273,940.89

20,902.16

50,340.68

$134.00

259,756.04
1,386.00
261,142.04

Off-hire credits........................................ $17,303.17
Coal on redelivery and off-hire...............
2,563.00
Cash paid................................................. 168,839.10
Advance to master.................................. 1,181.56
189,886.83
Steamship Omsk.
Charter hire Apr. 4,1918, to May 22,1918..................
Steamship Pawnee.
Charter hire July 28,1917, to May 28,1918...............
Coal on board on delivery.........................................
Off-hire credits........................................ $71,193.63
Coal on redelivery and off-hire...............
1,996.50
Cash paid................................................. 246,948.87
Survey fees, etc........................................
53.33

592,494.22
1,639.00
594,133.22

320,192.33
Steamship Yucca.
Charter hire May 7, 1917, to Feb. 7,1918................. 365,982.68
Off-hire credits........................................ $89,405.13
Coal on redelivery...................................
594.00
Cash paid................................................. 253,037.66
Advance to captain.................................
2,043.73
345,080.52
Due Russian Government for repairs, as follows:
Steamship Nijni Novgorod...............................
D o.................................................................
Steamship Kishinev...........................................
Steamship Toula................................................
Steamship KishinevTime lost on charter and repairs to tank...
Loss of value in cargo..................................
Bill rendered by Quartermaster Depart­
ment for extra trucking............................
Steamship Nijni Novgorod, refund to be de­
ducted irom hire.............................................
Steamship Omsk, repairs per cable from Sims,
London............................................................
Steamship Irtysh—
Repairs.........................................................
Additional charges for watchman, etc........
Total..................................................................
i Credit Russian Government.




129.438.52

2,345.51
25,541.98
2,729.88
2,504.98
3,765.76
7,925.21
144.60
13,289.76
6,768.43
151,836.22
272.20

217.124.53

217,124.53
982,616.62

794,796.61

187,820.00

156

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

The Russian Government in account with United States Shipping Board Emer­
g en cy Fleet Corporation for charter hire, etc.— Continued.

Balance.

Payments
by United
States Ship­
ping Board.

Balance
due Rus­
sian Gov­
ernment.

Due the Russian Government by United States Shipping
Board as follows:
j
Charter hire, steamship Omsk, Apr. 4,1918, to
|
Aug. 4, 1919, midnight.....................................$793,480.00 '.
$595,110.00 $198,370.00
Charter hire, steamship Nijni Novgorod, Apr.
j
11, 1918, to Mar. 28, 1919 .................................. 210,086.05 !.
177,262.39
32,823.66
Charter hire, steamship Kishinev, Apr. 9, 1918,
I
to Mar. 7,1919, noon........................................ 141,541.68 .
126,204.47
15,337.21
Charter hire, steamship Irtysh, Apr. 20,1918, to
I
May 7.1919, 2 p. m .......................................... 369,867.60 :.
294,650.00
75,217.60
Charter nire, steamship Toula, Apr. 12,1918, to
j
Mar. 24, 1919, 5 p. m ........................................ 147,561.95 1
.
20,637.33
126,924.62
Steamship Irtysh, coal on delivery...................
581.25 I.
581.25
Supplies sold out of steamship Kishinev..........
194.44
194.44
86,637.50
Refund insurance, steamship Omsk.................
86,637.50
Pavment of our bill for supplies on steamship
\
yucca...............................................................
6,262.12
6,262.12
Payment of our bill in error, steamship Isonoliiia...................................................................
134.00
134.00
-.$1,756,346.59
Less half hire, steamship Kishinev, Feb. 21,
1919, 8 a. m., to Mar. 7, 1919, noon.................
3,275.53 !
Less half hire, steamship Toula, Mar. 12, 11.20
I
a. m., to Mar. 24, 5 p. m .................................
2,555.38 '
Less half hire, steamship Nijni Novgorod, Mar.
j
13, 8 a. m., to Mar. 28, 5 p. m .........................
4,507. 61 f
10,338.52 |
...................... 2 10,338.52
Total...................................................................................... 1,746,008.07

1,406,788.98

339,219.09

* Credit account off-hire.
RECAPITULATION.

Due Russian Government by United States Shipping Board..................................................... $339,219.09
Due United States Shipping Board by Russian Government..................................................... 187,820.01
Balanco in favor Russian Government................................................................................

151,399.08

SECTION 92.
Cost of United States Forces in Archangel, Russia, and Siberia, Russia.
W a r D e p a rtm e n t,

Washington, February 1, 1921.
Hon. J a m e s A. R e e d ,
United States Senate.
M y D e a r S e n a t o r : I desire to acknowledge the receipt of your letter of Janu­
ary 7, 1921, wherein you request a statement of the total cost to the United
States of the maintenance of our troops in Russia and Siberia during their tours
of duty in those countries. In reply thereto, I beg to inform you as follow s:
a r c h a n g e l fo r c e s .

The actual expenditures made by United States Army disbursing officers at
Archangel, August 1, 1918, to March 31, 1920, are as follow s:
Pay _______________________________________________1__________ $1,051,496.23M ileage_______________________________________________________
1,215.11
General appropriations, Quartermaster Corps__________________
86,323.19
Medical and hospital---------------------------------------------------------------2,031. 52
Signal Corps of the Army_____________________________________
23.97
Army deposit fund____________________________________________
816.10
Engineer operations in the field________________________________
69. 84
Horses for Cavalry____________________________________________
589.81
Construction and repair of hospitals___________________________
6,683.77
179.34
Barracks and quarters________________________________________
T o t a l___________________________________________________



1,149,428. 88

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

157

All supplies furnished in kind for this expeditionary force were obtained by
agreement from the British supply service in Russia. The claim submitted by
the British Government for furnishing these supplies amounted to £700,417
9s. 2d. Under the “ British-American final settlement, Burr-Niemeyer agree­
ment,” dated November 23, 1920, final settlement of this claim was made on
December 31, 1920, by paying the British Government the sum of £560,000.
The rate of exchange employed being $3.50f per pound sterling, the amount
thus paid equals $1,963,500, or a total cost of maintaining our troops in Archangel
during their tour in that country of $3,112,928.88.
SIBERIA FORCES.

Actual expenditures made by United States disbursing officer in Siberia in
connection with this expeditionary force, August 1, 1918, to August 24, 1920,
are as follows:
Pay __________________________________________________________ $5,519,493.62
M ileage_______________________________________________________
3,223. 73
General appropriations, Quartermaster Corps---------------------------- 2,321,435.68
Medical and hospital---------------------------------------------------------------(*)
(*)
Signal Corps of the Army----- --------------------------------------------------Army deposit funds----------------------------------------------------------------(*)
Engineer operations in the field----------------------------------------------(*)
Horses for Cavalry___________________________________________
(M
Construction and repair of hospitals---------------------------------------6,683. 77
Barracks and quarters-----------------------------------------------------------198,231. 51
T o t a l___________________________________________________ 8,049,068. 31
Supplies in kind furnished these troops were shipped from Manila and from
the United States, while some were procured in China. On the other hand,
large quantities thereof were brought back to the United States and to the
Philippine Islands, where they were continued in service, consumed, or salvaged.
There has not, however, been sufficient time available for the chiefs of the va­
rious supply branches to complete their office records with reference thereto, and
I regret that it is therefore impossible at this time to furnish you with detailed
information in this connection.
Cordially, yours,
N e w t o n D. B a k e r ,
Secretary of War.

SECTION 93.
Allies Recognition of Kolchak Provisional Government of Russia.
[Christian Science Monitor, Saturday, June 14, 1919.

By the Associated Press.]

ALLIES RECOGNIZE ADMIRAL KOLCHAK.
P a r is , F ran ce.

The reply sent by the council of four to-day to the note of Admiral Kolchak
extends to him and his associates in the All-Russian Government at Omsk the
support set forth in the original letter of the council to Admiral Kolchak.
This is interpreted here as meaning virtual recognition of the Omsk Government.
The text of the reply follows:
“ The allied and associated powers wish to acknowledge the receipt of Admiral
Kolchak’s reply to their note of May 26. They welcome the terms of that reply
which seem to them to be in substantial agreement with the propositions they
had made and to contain satisfactory assurances for the freedom, self-govern­
ment, and peace of the Russian people and their neighbors.
“ They are therefore willing to extend to Admiral Kolchak and his associates
the support set forth in their original letter.
“
“
“
“

L lo y d G eorge .
W il s o n .
C lem en c eau .
M a k i n o .”

It is understood that the support referred to involves the furnishing of
munitions and supplies for Admiral Kolchak’s campaign.
1 Nothing.




158

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
TEXT OF ORIGINAL DISPATCH.

Following is the text of the dispatch originally sent to Admiral Kolchak:
“ P a r i s , May 26, 1919.
“ The allied and associated powers feel that the time has come when it is
necessary for them once more to make clear the policy they propose to pursue
in regard to Russia.
“ It has always been a cardinal axiom of the allied and associated powers to
avoid interference in the internal affairs of Russia. Their original intention
was made for the sole purpose of assisting those elements in Russia which
wanted to continue the struggle against German autocracy and to free their
country from German rule and in order to rescue the Czecho-Slovaks from the
danger of annihilation at the hands of the bolslievist forces. Since the signature
of the armistice on November 11,1918, they have kept forces in various parts of
Russia. Munitions and supplies have been sent to assist those associated with
them at a very considerable cost. No sooner, however, did the peace conference
assemble than they endeavored to bring peace and order to Russia by inviting
representatives of all these warring governments within Russia to meet them
in the hope that they might be able to arrange a permanent solution of the
Russian problem.
“ This proposal and a later effort to relieve the distress among the suffering
millions of Russia broke down through the refusal of the soviet government
to accept the fundamental conditions of suspending hostilities while negotiations
for the work of relief were proceeding.
“ Some of the allied and associated governments are now being pressed to
withdraw their troops and to incur no further expense in Russia, on the ground
that continued intervention shows no prospect of producing an early settlement.
They are prepared, however, to continue their assistance on the lines laid down
below, provided they are satisfied that it will really help the Russian people
to liberty, self-government, and peace.
“ The allied and associated governments now wish to declare formally that
the object of their policy is to restore peace within Russia by enabling the
Russian people to resume control of their own affairs through the instrumen­
tality of a freely elected constituent assembly and to restore peace along its
frontiers by arranging for the settlement of disputes in regard to the boundaries
of the Russian State and its relations with its neighbors through the peaceful
arbitration of the League of Nations.
“ They are convinced by their experiences of the last 12 months that it is
not possible to attain these ends by dealings with the soviet government o f
Moscow. They are therefore disposed to assist the government of Admiral
Koltchak and his associates with munitions, supplies, and food to establish
themselves as the government of all Russia, provided they receive from them
definite guaranties that their policy has the same object in view as that of the
allied and associated powers.
“ With this object they would ask Admiral Koltchak and his associates
whether they will agree to the following as the conditions upon which they
would accept continued assistance from the allied and associated powers:
“ In the first place, that as soon as they reach Moscow they will summon a
constituent assembly elected by a free, secret, and democratic franchise as the
supreme legislature for Russia to which the Government of Russia must be
responsible, or, if at that time order is not sufficient restored, they will summon
the constituent assembly elected in 1917 to sit until such time as new elections
are possible.
“ Secondly, that throughout the areas which they at present control they will
permit free elections in the normal course £or all local and legally constituted
assemblies, such as municipalities, zemstvos, etc.
“ Thirdly, they will countenance no attempt to revive the special privilege
of any class or order in Russia.
“ The allied and associated powers have noted with satisfaction the solemn
declaration made by Admiral Koltchak and his associates that they have no
intention of restoring the former land system. They feel that the principles to
be followed in the solution of this and other internal questions must be left to
the free decision of the Russian constituent assembly; but they wish to be
assured that those whom they are prepared to assist stand for the civil and
religious liberty of all Russian citizens and will make no attempt to reintroduce
the regime which the revolution destroyed.



FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

159

Fourthly, that the independence of Finland and Poland be recognized, and
that in the event of frontiers and other relations between Russia and these
countries not being settled by agreement, they will be referred to the arbitration
of the League of Nations.
“ Fifthly, that if a solution of the relations between Eathonia, Letvia, Lithu­
ania, and the Caucasian and transcaspian territories and Russia is not speedily
reached by agreement, the settlement will be made in consultation and coopera­
tion with the League of Nations, and that until such settlement is made the
Government of Russia agrees to recognize these territories as autonomous and
to confirm the relations which may exist between their de facto governments
and the allied and associated governments.
“ Sixthly, that the right o f the peace conference to determine the future of
the Rumanian part of Bessarabia be recognized.
“ Seventhly, that as soon as a government for Russia has been constituted
on a democratic basis. Russia should join the League of Nations and cooperate
with the other members in the limitation o f armaments and of military organi­
zations throughout the world.
“ Finally, that they abide by the declaration made by Admiral Koltchak on
November 27,1918, in regard to Russia’s national debt.
“ The allied and associated powers will be glad to learn as soon as possible
whether the government of Admiral Koltchak and his associates are prepared to
accept these conditions, and also whether in the event o f acceptance they will
undertake to form a single government and army command as soon as the
military situation makes it possible.
“ G. C le m e n c e a t j .
“ L l o y d -G eorge .
“ Orlando.
‘ ‘ W oodrow W i l s o n .
“ SAIONJI.’ *
a d m ir a l k o l t c h a k ’ s r e p l y .

P a r is , F r a n c e .

Admiral Koltchak, the head of the All-Russian Government, at Omsk, in
his reply to the first letter from the allied and associated powers, which re­
sulted in a second letter, promising him allied support, declared that he did
not purpose to retain power longer than required by the interest o f the
country. He reaffirmed his intention to call elections for the constituent
assembly as soon as the bolsheviki have been crushed. The text o f the ad­
miral’s reply was made public to-night. The allied letted was handed to
Admiral Koltchak at Titmon by Mr. de Martel, the French charge d’affaires at
Omsk. The admiral’s reply was received in Paris on June 5. It reads:
“ The Government, over which I preside, has been happy to learn that the
policy of the allied and associated powers in regard to Russia is in perfect
accordance with the task which the Russian Government itself has undertaken.
That Government being anxious, above all things, to reestablish peace in the
country and to assure to the Russian people the right to decide their own
destiny in freedom by means of a constituent assembly. I appreciate highly
the interest shown by the powers as regards the national movement, and con­
sider their wish to make certain that the political conditions with which we
are inspired are legitimate. I am, therefore, ready to confirm once more my
previous declarations, which I have always regarded as irrevocable.
“ 1. On November 18, 1918, I assumed power, and I shall not retain that
power one day longer than required by the interest of the country. My first
though at the moment when the bolsheviki are definitely crushed will be to
fix the date for the election of the constituent assembly. A commission is now
at work on direct preparation for them on the basis of universal suffrage.
Considering myself as responsible for that constituent assembly, I shall hand
over to it all my powers in order that it may freely determine the system of
government; I have, moreover, taken the oath to do this before the supreme
Russian tribunal, the guardian of legality.
“ All my efforts are aimed at concluding the civil war as soon as possible
by crushing bolshevism in order to put the Russian people in a position to
express its free will. Any prolongation o f this struggle would only postpone
that moment; the Government, however, does not consider itself authorized
to substitute for the inalienable right of free and legal elections the mere
reestablishment of the assembly of 1917, which was elected under the regime




160

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

of bolshevist violence, and a majority o f whose members are now in the ranks
of the soviet. i t is through the legally elected constituent assembly alone,
which my Government will do its utmost to convoke properly, that there will
belong the the sovereign rights of deciding the problems of the Russian State,
both in the internal and external affairs of the country.
“ 2. We gladly consent to discuss at once with the powers all international
questions, and doing so shall aim at the free and peaceful development of
the peoples, the limitation o f armaments and the measures calculated to
prevent new wars, of which the League of Nations is the highest expression.
“ The Russian Government thinks, however, that it could recall the fact
that the final sanction of the decisions, wiiich may be taken in the name, Russia
will belong to the constituent assembly. Russia can not now and can not
in the future ever be anything but a democratic State where all questions in­
volving modifications o f the territorial frontiers and of external relations must
be ratified by a representative body which is the national expression o f the
people’s sovereignty.
“ 3. Considering the creation of a unified Polish State to be one o f the
chief of the normal and just consequences of the World War, the Government
thinks itself justified in confirming the independence of Poland, proclaimed by
the provisional Russian Government of 1917, all of the pledges and decrees
of which we have accepted. The final solution of the question of delimiting
the frontiers between Russia and Poland must, however, in conformity with
the principles set forth above, be postponed till the meeting of the constituent
assembly. We are disposed at once to recognize the de facto government of
Finland, but the final solution of the Finnish institution must belong to the
constituent assembly.
“ 4. We are fully disposed at once to prepare for the solution of the question
concerning the fate of the national groups in Esthonia, Letvia, Lithuania, and
of the Caucasian and trans-Caspian countries, and we have every reason to
believe that a prompt settlement will be made, seeing that the Government is
assuring as from the present time autonomy of the various nationalities. It
goes without saying that the limits and conditions of these autonomous institu­
tions will be settled separately as regards each.
“ Even in the case difficulties should arise in. regard to the solution of these
various institutions, the Government is ready to have recourse to the collabora­
tion and good offices of the League of Nations with a view to arriving at a
satisfactory settlement.
“ 5. The above principle, implying the satisfaction of the agreements by the
constituent assembly, should obviously be applied to the question of Bessarabia.
“ 6. The Russian Government once more repeats its declaration of November
27, 1918. by which it accepted the burden of the national debt of Russia.
“ 7. As regards the question of internal politics, which can only interest the
powers in so far as they reflect the political tendencies of the Russian Govern­
ment, I make a point of repeating that there can not be a return to the regime
which existed in Russia before February, 1917. The provisional solution which
my Government has adopted in regard to the agrarian question aims at satisfy­
ing the interests of the great mass of the population, and is inspired by the
conditions that Russia can only be flourishing and strong when the millions of
Russian peasants receive all guaranties for the possession of the land.
“ Similarly, as regards the regime to be applied to the liberated territories,
the Government, far from placing obstacles in the way of the free election of
local assemblies, municipalities, and zemstvos, regards the activities of these
bodies and also the development of the people in self-government as the neces­
sary conditions for the reconstruction of the country, and is already actually
giving them its support by all the means at its disposal.
“ 8. Having set ourselves the task of reestablishing order and justice and of
insuring individual security to the population, which is tired of trials and execu­
tions, the Government affirms the equality before the law of all citizens without
any special privilege. All shall receive, without distinction of origin or religion,
the protection of the State and o f the law.
“ The Government whose head I am is concentrating all the forces and all
the resources at its disposal in order to accomplish the task which it has set
itself; at this decisive hour I speak in the name of all National Russia. I am
confident that, bolshevism once crushed, satisfactory solutions will be found for
all questions which equally concern all those populations whose existence is
bound up with that of Russia.




“ K o l t c h a k .”

161

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
SECTION 94.

United States War Department Made Contract to Sell War Supplies to De
Facto Russian Government, Which Government Put Up $1,000,000 in Gold
as Forfeiture in San Francisco Mint—Contract Was Broken by Russians and
the War Department Turned Back to Them Over $400,000 of This Money,
Which Should Have Gone to the United States Treasury.
W a r D e p a rtm e n t,

Washington, November 5, 1919.
The honorable the S e c r e t a r y o f t h e T r e a s u r y .
S ir: Having received information that $1,000,000 worth of gold has just
arrived at San Francisco, Calif., from Vladivostok on the United States Army
transport Great Northern, I have the honor to request that you issue the neces­
sary instructions to the Subtreasury at San Francisco to accept this gold to be
held in safekeeping at the risk of and subject to final disposition by orders
from the Secretary of War. This gold is in the nature of a security to guarantee
payment by the Russian Government under a contract dated July 31, 1919,
whereby there was sold by the W ar Department to the Russian Government
T
Russian rifles and ammunition for the same. Under the terms of the contract
payment was to be made of 40 per cent on January 15, 1920, and payment of
60 per cent on July 15, 1920. In the event that payments, as stated, are made
by the Russian Government, this gold is to be returned in kind to the Russian
representatives.
For your information I am transmitting herewith a mimeographed copy of
the contract under which this gold is being received.
Very truly, yours,
N ew ton D . B a k e r ,

Secretary of War.
D e p a rtm e n t o f S ta te ,

Washington, August 6, 1920.
The Hon. N i c h o l a s K e l l e y ,
Assistant Secretary of the Treasury.
My D e a r M r. K e l l e y : Pursuant to the conference between Mr. Ughet, your­
self, and myself this morning, I wish to confirm our understanding of the
notification to Mr. Ughet that neither the State Department nor the Treasury
would approve the payment of the funds held by the War Department as security
for payments on the shipments of arms to Admiral Kolchak, under the terms
of the contract entered into between the W^ar Department and Mr. Ughet on
behalf of the Russian Government, unless the proceeds were deposited by Mr.
Ughet in the Russian liquidation account. The decision of the Departments o f
State and the Treasury has been communicated by telephone to Maj. Pierson,
of the War Department. I beg to suggest that the Treasury confirm by official
letter to the War Department the decision of the Departments of State and the
Treasury in this matter, and suggest such practical arrangements as you may
believe are necessary for carrying out this decision.
Cordially, yours,
V a n S. M e rl e -S m i t h .

Gold received by Assistant Treasurer at San Francisco for account of Russian
Government.
Face value.

Cash value.

Current gold.........................................................................................................
Uncurrent gold..................................... ..............................................................

$991,535.00
8,455.00

$991,535.00
8,410.42

$10 short in count..........................................................................................
To be paid to War Department.........................................................................

999,990.00

999,945.42
584,294.58

To be paid to National City Bank of New York for Russian Government_
_

S. Doc. 86, 67-2------11




415,650.84

162

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
SECTION 94-A.

Treasury Department Allowed the Payment of $1,239,000 Out of Liquidation
Fund for Printing of Paper Money for the Various De Facto Russian
Governments.
D e p a rtm e n t o f S ta te .

Washington, November 7, 1919.
The Hon. C a r t e r G l a s s ,
Secretary of the Treasury.
M y D e a r M r. S e c r e t a r y : In accordance with an agreement made between
the Russian ambassador and myself with regard to release of certain rouble
bank notes printed by the American Bank Note Co. for the Russian Government,
I wish to inform you that the Russian Embassy has informed me of the trans­
fers to account “ C ” of the Russian Government at the National City Bank,
New York, of sums totaling $1,239,000, equaling the original cost of print­
ing these notes paid from credits originally established by the United States
Government, the reason for the transfers referred to herein being to reimburse
the accounts from which originally paid.
I am, my dear Mr. Glass,
Very sincerely, yours,
R obert L a n s i n g .

SECTION 95.
December, 1919—Itemized Statement of Russian Account.
F i n a n c i a l A t t a c h e : to t h e R u s s i a n E m b a s s y ,

New York, December 3, 1919.
N. K e l l e y , E s q .,
Treasury Department,
Washington, D. C.
M y D e a r M r. K e l l e y : In accordance with your verbal request of some time
ago, I beg to send you inclosed herewith statement showing the amounts re­
ceived by the Russian Government from the United States Government for a
total amount of $187,729,750 ($192,729,750—$5,000,000), as well as summary of
payments on account of contracts approved by the War Industries Board and
Council of National Defense, and summary of payments, for which no special
credits have been granted by the Treasury Department, but being payments for
the old contracts placed before the first American credit became operative,
the necessary amounts have been granted, in accordance with the monthly
statements presented by the Russian Embassy from July up to November, 1917.
I am, my dear Mr. Kelley,
Yours, very truly,
S h y h i,

Russian Financial Attache.
Amounts received from the United States Government.
Supply
committee.
July 6, 1917—135,000,000 on account of the first $100,000,000 credit
opened May 16,1917:
Contracts and payments of supply committee..............................
Russian Government credit operations.........................................
Free credit at disposal of Russian ministry of finance..................
Contracts placed outside of supply committee ($4,500,000)—
a. Payments made by supply committee...............................
b. Payments made outside of supply committee....................
Upkeep of extraordinary mission...................................................
July 13,1917—$10,000,000 (on account of the $75,000,000 credit opened
July 17,1917) for Finland...................................................................
Aug. 1, 1917—$2,500,000 (on account of the first $100,000,000 credit
onened Mav 16,1917) for silver...........................................................
Aug. 22,1917—$2,500,000 (on account of the first $100,000,000 credit
opened May 16,1917) for silver..........................................................




Ministry of
finance.

$18,300,000.00
$7,000,000.00
5,000,000.00
3,225,723.23
1,274,276.77
200,000.00
10,000,000.00
2.500.000.00
2.500.000.00

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

163

Amounts received from the United States Government—Continued.
Supply
committee.
Aug. 24,1917—$37,500,000 on account of the second $100,000,000 credit
opened Aug. 23,1917:
Contracts and payments of supply committee
For payment to Remington Arms Co. for rifle
Free credit at disposal of Russian ministry of
For navmfints in Sweden___ ___ . . . .
For transportation _. ___ r. __________________ _____________
Aug. 30,1917—$10,000,000 (on account of the $75,000,000 credit opened
July 17,1917) for Finland...................................................................
Sept. 25,1917—$15,000,000 (on account of the $75,000,000 credit opened
.lnlv 17.1917^ for Finland..................................... ............................
e
Oct. 2,1917—$22,200,000, $2,413,750 on account of thL first $100,000,000
>100,000,000 credit:
credit and $19,786;250 on account of the second 3
Free credit at disposal of Russian ministry o f:finance..................
Contracts and payments of supply committee
Oct. 11, 1917—$5,000,000 (on account of the first i5100,000,000 credit
o-nenerl Mav 1fi. 1917'! for silver_______________
Oct. 11,1917—$15,000,000 (on account of the $75,000,000 credit opened
.Tnltr 17. 1917^ for Finland_______________________ ______ _______
Oct. 25,1917—$5,000,000 for operations with Ruma]
Nov. 1.1917—$31,700,000, $9,900,000 on account of thie first $100,000,000,
credit, $3,700,000 on account of the second $100,'000,000 credit and
$18,100,000 on account of the $50,000,000 credit:
Contracts and payments of supply committee
For payment to Remington Arms Co. for rifle;
..... : : : : : : : : : : : :
For T vment, t.o Westinchouse Co. for rifles 5
ifl
Free credit at disposal of Russian ministry of finance.................. !
Russian Government credit operations......................................... i
Nov. 15,1917—$1,329,750 for payment of interest to the United States
Government........................................................................................
Total.............................................................................................

Ministry of
finance.

7.900.000.00
8.000.000.00
15,000,000.00
5,000,000.00

1,600,000.00

10,000,000.00
15.000.000.00
15.000.000.00

17,200,000.00

2 5,000,000.00
215,000,000.00
*5,000,000.00

12,600,000.00
2.300.000.00
1.000.000.00
15,000,000.00
800,000.00
1,329,750.00
262,125,723.23 |

130,604,026.77

Grand total...................................................................................
*$5,000,000 received on Oct. 11,1917, for operations with Rumania
were refunded to the United States Treasury Department on Dec.
23,1917 ..............................................................................................

192,729,750.00

Total.............................................................................................

187,729,750.00

Originally
received.
1................................................................................
2................................................................................
3................................................................................

$5,000,000.00
15,000,000.00
62,125,723.23

5,000,000.00

Paid for direct
purposes.
$4,246,126.06
14,295,000.00
*59,298,873.07

Balance applied
to general liqui­
dation purposes.
$753,873.94
705,000.00
2,826,850.16

1 Out of this amount $1,000,000 was for payment to Westinghouse Co. for rifles.
2 These amounts were not used in their entirety for objects indicated, and were applied for general liqui­
dation purposes in accordance with the approval of the United States Treasury Department of the weekly
lists of deferred payments.
* Details of expenditures on account of this amount are shown in two explanatory statements.




Value.

250.000 pairs shoes..
125.000 pairs shoes..
750.000 pairs shoes..

$1,222,500.00 |
611,250.00
3,629,850.00

375,000 pairs shoes...
1,000,000 pairs shoes.

2.414.900.00
113.750.00
1.983.000.00
3.224.820.00
1.084.940.00
1.533.000.00
3.606.075.00
824.850.00
2.199.600.00
1.642.650.00
10,530,000.00
13.932.500.00
5.670.000.00
13.932.500.00

Payments from
other sourccs Payments from
American
outside of
American
credit.
credit.

1,814,925.00
4,829,800.0

500.000 pairs shoes...
1,000,000 horseshoes..
400.000 pairs shoes...
000,000 pairs shoes...

Amount
canceled.

Aug. 1,1917
Aug. 22,1917
Aug. 1,1917

131
132

RZ-21A
RZ-21

Aug. 22,1917
Aug. 1,1917

133
134
135
136

RZ-21
Gr.5
RZ-27
RZ-28

Aug.
July
Oct.
Oct.

137
138
139
140
141
142
12
13
14

RZ-29
RZ-30
RZ-23
RZ-24
RZ-25
RZ-26
350-C
347-C
346-C
349-C

----- d o ...........
. .... d o ...........
Oct. 19,1917
___ d o ...........
___ d o ...........
------d o ...........
July 11,1917
July 5,1917
July 25,1917
July 9,1917

15

360-C

Aug. 14,1917

947,187.38

947,187.38

16
17
18

359-C
369-C
372-C

. . . . d o ........... Baldwin Locomotive Works.
Sept. 11,1917 Andrew M. Feuss..................
Sept. 17,1917 Ingersoll Rand Co..................

623,636.50
6.265.00
39,270.60

2622,691.89
6,265.00
39,270.60

19

371-C
437-C

Sept. 12,1917
Dec. 6,1917

646.000.00
525.000.00

645,741.60
420,000.00

258.40
105.000.00

32,792.06
160.00
34.400.00

928.13
160.00
34,400.00

31,863.93

2.400.00
63.248.00

2,400.00

11

24
25

395-C Oct. 18,1917
396-C ----- d o ...........
399-C Oct. 20,1917

27

400-C
402-C




Oct. 22,1917
Oct. 25,1917

3,757,083.79

130,674.60

660,716.65

Spare parts for locomotives 'Decapode.”
.......do..............................................
1 generator and board....................
Spare parts for Vladivostok repair
shops.
Air brakes for 10,000 cars...............
Westinghouse Air Brake Co..
___ d o .....................................
500 sets for locomotive air-brake
equipment.
American Steel Export Co........... Galvanized pipes and rails............
Ingersoll Rand Co........................ Carbon............................................
F. C. Austin Drainage Excavator 4 ditchers and spares......................
Co.
Zin-Ho Manufacturing Co........... 2 pumping units..............
Ingersoll Rand Co........................ 500 hammers and spares .

$800,000.00

1,557,016.61

200.000 pairs shoes...............
300.000 pairs shoes...............
336.000 leather sides............
75,000! eather sides..............
200.000 leather sides............
160.000 leather sides............
6.500 closed cars..................
250 locomotive “ Decapode”
3.500 closed cars..................
250locomotive “ Decapode*’

$828,536.26

2,714,657.95

3,809,325.40

660,998.33
1,080,846.81

1,322,001.67
2,143,973.19

361,648.49
511,000.00
915,945.92
384,298.97
523,550.82
691,327.52
8.371.350.00
10.896.000.00
4.507.650.00
10.896.000.00

723,291.51
1, 022, 000.00
2,690,129.08
440,551.03
1,676,049.18
951,322.48
1,053,650.00
250.000.00
453,600.00
250.000.00

U13,181.27

63,248.00

1,105,000.00
2,78-*,500.00
708,750.00
2,786,500.00

SAME.

20

22,1917
31,1917
19,1917
24,1917

$205,213.74

AD
N

RZ-22
RZ-22
RZ-21A

LOANS

128
129
130

MAKING

W. H. McElwain Co....................
Option on preceding contract......
E. E. Taylor Co., L. Q. White
Shoe Co., Jos. M. Herman Shoe
Co.
Option on preceding contract----E. E. Taylor Co., L. Q. White
Shoe Co., Jos. M. Herman Shoe
Co.
Option on orecedingcontract.......
U. S. Horse Shoe Co.....................
F. M. Hoyt Shoe Co.....................
E. E. Taylor Co., Jos. M. Herman
Shoe Co., B. A. Corbin & Son.
----- d o............................................
W. H. McElwain Co....................
U. S. Leather Co.........................
Armour Leather Co......................
Howes Brothers Co......................
Proctor Ellison Co........................
American Car & Foundry Co......
Baldwin Locomotive Works-......
Standard Steel Car Co..................
American Locomotive Sales Cor­
poration.
___ d o ............................................

Object.

FK
O

Name of firm.

AUTHOKITY

Date of
contract.

FOREIGN

Ameri­
can Gov­ Contract num­
ernment
ber.
number.

164

Summary of payments on account of contracts confirmed by the War Industries Board and Council of National Defense, placed in America by the Russian
Government Supply Committee.

1,674.00
904.50
330.50
2,007.22
174,710.89
1,272.73

9.375.00
1.975.00

1,500,000.00
367,920.00
111, 132.00
49.500.00
49.500.00
5,992,318.86

10,300,000.00

4.000.000.00

2 000 000.00

8,680.00

, ,

4,650.00
<3,696.00
"14*475*00

SAME.

1.750.000.00

MAKING

, ,

2,830.57

FB
O

..
..

446.93
4,540.02
231.40
30,870.00
1,700.00
715.00
1,729.71

AUTHORITY
16,500.00

4$204 were rebated.

165




Cornell & Underhill..........
Erie Foundry Co...............
The Howe Scale Co...........
E. A. Woods Machine Co.
Ingersoll Rand Co.............
Taylor & Fenn..................
Andrew W. Fouss.............

AD
N

126

26,1917
15,1917
26,1917
11,1917
13,1917
11,1917
10,1917

LOANS

122
123
124
125

3.46
P ipes,etc........................................
450.39
89.98
Steam forging hammer..................
4.630.00
4 scales.............................................
231.40
1.00
31.500.00
Planners.........................................
Pneumatic riveting machine.........
1.700.00
715.00
2 grinding machines.......................
1,784.50
70 barrels oil and 2,900 pounds
54.79
metal.
381-C
.do.
1.330.00
1,330.00
Niles Bement Pond Co................ 1 steam hammer.............................
380-C
.do.
Westingh ouse Electric Manufac­ 42 rheostat motor pannels..............
2,830.57
turing Co.
379-C ....... d o ........... Greenlee Bros. Co........................ Drill machines................................
1.674.00
406-C Oct. 30,1917 Landis Machine Co....................... Lathes and accessories...................
904.50
407-C ....... d o ........... Jas. M. Mathews Co..................... 667 stamps......................................
10.00
340.50
409-C Nov. 1,1917 Monarch Engine Co..................... Tilting furnace...............................
.01
2,007.23
413-C Nov. 2,1917 Orton & Steinbrenner.................. 4 cranes and spare parts................
48,630.92
48,630.92
414-C ....... d o........... Baldwin Locomotive Works....... Construction of plant for erection
1,555,459.11
1,730,170.00
of locomotives at Vladivostok.
25.97
415-C Nov. 9,1917 Graton & Knight Co.................... Belts................................................
1,298.70
21,310.00
416-C ....... d o ........... Worthington Pump & Machine 32 pumps*.........................................
21.310.00
Co.
114,000.00
420-C Nov. 13,1917 Vernon Bridge Co......................... 20 deck turntables..........................
114,000.00
3,125.00
421-C Nov. 14,1917 Draper Manufacturing Co............ 20 pneumatic locomotive turn­
12.500.00
table motors.
gCj0S
a
»«
.
386-C Oct. 13,1917 Howe Scale Co.
1.975.00
1.302.00
387-C
d o............ Niles Bement Pond Co.
1.302.00
Lathes, Pratt & W hitney.............
9.100.00
425-C Nov. 16,1917 Ingersoll Rand Co.
__________________ _____
9.100.00
8 pneumatic machines..................
Special credit granted for sending American railway men to Russia, to apply on this credit the follow­
ing contract:
1.500.000.00
430-C .....................Nov. 6,1917 Western Electric Co.
Various telephone equipment
($136,676.19).
63 Aug. 16,1917 American Smelting & Refining 1,500 tons lead................................
367.920.00
Co.
1-625-69 Oct. 5,1917 The Wah Chung Mining & Smelt­ 405 tons antimony..
111, 132.00
ing Co.
2-4413-70 Oct
2,1917 L. Vogelstein & Co....................... 300 tons lead.......................
49.500.00
297,000.00
3-10-1048-71 ....... d o .......... . American Smelting & Refining 2,100 tons lead...................
346.500.00
Co.
8,707,681.14
Gr.2, No. 11 Sept. 10,1917 Remington Arms Union Metallic I,000,000 rifles....................
25.000.000.00
Cartridge Co.
12 000 000.00
6 000 000.00
Option contract between J. P. Option contract for 400,000
Morgan and Westinghouse.
4,250,000.00
6 000 000.00
.......d o............................................ Option contract for 200,000 rifles..
4.650.00
1 Gr. 556 July 16,1917 E. Landress & Co........................ 3.000 dozen files.............................
6,600.00
10.500.00
4 Gr. 555 July 20,1917 .......d o ........................................... 7.000 crosscut saws........................
27,570.00
36.250.00
3 Gr. 555 Aug. 3,1917 Sutton Vaughn Equipment Co.. 25.000 crosscut saws......................
15,000.00
525.00
2 Gr. 555 Aug. 7,1917 Jos. Ohlen «& Sons Saw Manu­ 10.000 crosscut saws......................
facturing Co.
1 Gr. 555 July 10,1917 Simonds Manufacturing Co......... II,000.crosscut saws......................
16.500.00
8 Additional for overplus 323 pounds of lead.
1$568.73 were rebated.
2Balance, $944.61, is not paid yet.
Oct.
Oct.
Oct.
Oct.
Oct.
Oct.
Oct.

FOREIGN

403-C
390-0
405-C
384-C
385-C
383-C
382-C

Date of
contract.

103
104
105
106
107
108
109

110
111
112

113
114
115
116
117
118
119
120
121

Sept. 15,1917
....... do............
Sept. 11,1917
Sept. 15,1917
Sept. 4,1917
....... d o............
Sept. 27,1917
....... d o............
....... do............

Bausch & Lom b...........................
B. D. Said.....................................
Austin Manufacturing Co............
Herbert & Huesgen......................
E. Landress& Co.........................
___ do.............................................
Tinius Olsen Testing Machine Co.
Fairbanks Morse Co......................
E. Landress & Co.........................




12.600 pairs shoes...........................
18,576 pairs shoes...........................
3,960 pairs shoes............................
1,032 pairs shoes............................
4,212 pairs shoes............................
12,662 pairs shoes...........................
40,200 pairs shoes...........................
8,220 pairs shoes............................
30,912 pairs shoes...........................
8,180 pairs shoes............................
92,450 pairs shoes...........................
10,701 pairs shoes...........................
21,664 pairs shoes...........................
4,303 pairs shoes............................
127,786 pairs shoes.........................
9,682 pairs shoes............................
2,859 pairs shoes............................
10,021 pairs shoes...........................
22,088 pairs shoes...........................
3,362 pairs shoes............................
3,535 pairs shoes.............................
3,517 pairs shoes.............................
63.600 pairs shoes...........................
Spare parts for 5-ton and 3-ton
White trucks.
300leases........................................
200 pairs driving chains.................
25 rollers........................................
Photo supplies..............................
600 rules and tapes.........................
6,500 files........................................
3 testing presses.............................
5electromotors..............................
8.000 drift pins................................

$854,080.00
$1,810.00

60.00
35.049.00
22.70
56,253.60
11.664.00
720.00
3.457.20 !
80. 10
12,720.96
38,551.25
95.970.00
49.95
25,322.30
103,806.40
1, O . 20
iO
23.774.00
11.40
249.620.00
1,007.50
25.018.80
54.40
65,446.05
220.05
12,536.20
342,347.64
29,020.55
8,636.65 ..............1,34*65*
24,304.50
l
57.382.80
9,960.05
30.95
6,830.50
8.640.20
180,232.80
138.90
48,82-4.70
49.600.00
6.642.00
82.646.81
616,355. 24
404.58
3, 443.14
825.00
2.339.00
800.00

i
:
i
:
!

45,337.50

i

733. 86

!
;
i

34.989.00
56,230.90
10.944.00
3,376.80
5,162.10
5 38,569.37
95,920.05
&100.00
248,612.50
24,964.40
65,226.00
6 12,585.65
6 343,310.3o
29,020.55
8,502.00
6 24,782.40
6 57,694.80
9,929.10
6,830.50
8,640.20
180,093.90

$7,558.8b
25,322.30
102,760.20
23,762.60
!
!
J
i
i
1
1
1
48,824. 70

4,252.50
162.00

6.642.00
82,646.81
16,455.24
404.58
2,709.28
825.00
2.339.00

500.00

SAME.

T-91
T-85
T-92
T-91
120-PRM-165
121-PRM-165
123-PRM-422
125-PRM-165
127-PRM-165

100
101
102

9,1917

FR
O

40
41
42
43
44
45
46
47
48
49
50
51
52
53
T-90

July 26,1917

MAKING

1,810.00

July

AUTHORITY

$854,080.00

1.000 dozen files.............................

3 Gr. 552

AD
N

68 locomotives...............................

Nov. 13,1917
....... d o............
....... d o ............
....... d o ............
....... d o ............
Nov. 9,1917
Nov. 13,1917
....... d o ............
....... d o ............
....... d o ............
....... d o............
....... d o ............
....... d o ............
Nov. 9,1917
....... d o . ! ........
Nov. 15,1917
Nov. 16,1917
....... d o............
....... d o............
....... do............
....... d o............
....... d o ............
....... d o ............
Sept. 27,1917

American Locomotive Sales Cor­
poration.
United States Machinery Export
Co.
Brown Shoe Co.............................
International Shoe Co..................
Beals & Torrey Shoe Co...............
Luedke, Shaper & Butler Co......
Milwakee Shoe Co........................
McElwain, Morse & Rogers........
Selz, Shwab & Co.........................
Weinberg Shoe Co........................
Harsh & Edmond Shoe Co........ .
A. H. Weinbrenner......................
Hamilton Brown Shoe Co.......... .
C. M. Brett Co..............................
Nunn & Bush Shoe Co.................
Nathaniel Fisher Co....................
Endicott Johnson Co....................
Franklin Shoe Co.........................
Winsh Bros. Co............................
W. H. Walker Co.........................
Interstate Shoe Co........................
Parker Holmes Co........................
M. Fincovitch (Inc.)....................
Graddock, Terry Shoe Co............
McElwain Barton Shoe Co..........
B. D. Said.....................................

Payments from Payments from
other sources
American
outside of
credit.
American
credit.

LOANS

Object.

2 Gr. 556

127

Amount
canceled.

Value.

Name of firm.

FOREIGN

Ameri­
can Gov­ Contract num­
ber.
ernment
number.

16
6

Summary of 'payments on account of contracts, confirmed by the War Industries Board and Council of National Defense, placed in America by the Russian
Government Supply Committee—Continued.

64
65

66

67

80

85
79

87

164-PRM-355
130-PRM-355
150-PRM-165
No. 1 Gr. 401
170-PRM-165

Nov.
Oct.
Nov.
Sept.
Nov.

14,1917
22,1917
8,1917
5,1917
9,1917

E. Landress & Co........................
Simonds Manufacturing Co....... .
Strong Kennard & Nut Co.........
Remington Typewriter Co.........
E. Landress & Co.......................

876.00
3.400.00
7.329.00

4.000 dozen files................... .
7 recording pressure gauges.

6.200.00
199.00

6.200.00
199.00

2 air valves...........................
2.000 Stoco safety goggles...
5,400 crosscut saws..............

83.00
1,125.00
5,575.50

3 NUo velocity meters...............
4 hydrometers............................
72 blacksmith's tools.................
Drill and 20 grinding wheels_
_
2 cutting machines....................
11 gross file handles...................
Anemometer..............................
10 hydrants................................
12 sets blacksmith’s tools, 200
dozen axes.
1.000 dozen files..........................
35.000 crosscut saws...................
300 adjustable goggles................
/105 typewriters...........................
\580 ribbons.................................
' 2,900 carbon twist drills and 36
carbon-steel bridge reamers.
1,200 dozen files.........................
312 dozen files............................
20 locomotive jacks....................
6.000.tons annealed wire............
500 long tons binder twine........
100 long tons wire......................

567.00
20.40
2,168. 94
350.00
1,040.00
32. 34
26.60
441. 50
248.00

1.25

60.68

6.40

1,550.00
52,500.00
5,250.00
208.25
10,468.00 } ...............
241.00
2,433.44
147.07
7,425.00
1,989. 85
671.00
62(5,976.00
216,720.00
11.424.00

626.976.00
216.720.00
118.42

567. 00
20. 40
2,108. 26
350.00
1,010.00
32. 34
28. 60
435.10
248.00
47,250.00
208.25

1,550.00
10,709.00

2,286.37
7,425.00
1,989.85
671.00
11,305.58
17,136.10
335,554.84
558,370.26

23.542.47
60', 500. (X
)
157,500.00
28,538.10
16,269.93

SAME.
167

17,136.10
63,000.00
63,000.00
944,032.32
608,477.48
65,851.02
65,851.02
1,100,000.00
518,087.27
11 automobiles, “ Pierce Arrow” . .
60.500.00
12,088.06
12,088.06
Spare parts for above................
50 automobiles, “ Federal” .......
157,500.00
2,961.90
31,500.00
Spare parts for above................
55.80
Spare parts for 8 motor launches..
16,325.73
« Paid above this amount $262.
150 long tons wire................. .
150 long tons binder twine....
2,200 long tons binder twine..
155 long tons binder twine....

81.75
1,125.00
5,575. 50

MAKING




&
Additional payments.

876.00
3.400.00
7.329.00

FR
O

171-PRM-459 .......do............
.do..
.do..
172-PRM-459 Nov. 10,1917
288 ; 153-PRM-165 .......do............ Duff Manufacturing Co..............
No. 1 Gr. 702 Sept. 6,1917 ! United States Steel Products Co.
4
No. 1 Gr. 703 Oct. 20,1917 | Peoria Cordage Co......................
5
No. 2 Gr. 702 ...... do............ 1 Gr. W einberg & Al. Posner Eng.
6
I Co.
do.
No. 3 Gr. 702 Nov. 1,1917
No. 3 Gr. 703 ___ do.......... . I Hooven Allison Co..................... .
No. 2 Gr. 703 ___ do............ J. A. Rosen (Gruindyke)........... .
No. 4 Gr. 902 Nov. 9,1917 Columbian Rope Co.....................
| Supplies for the Murman ports...
10
50
207-6A j Oct. 8,1917 j Pluym & Ochs Co........................
51
207-6B i .......do.......... . ;.......do............................................
52
207-4A | Sept. 15,1917 I.......do............................................
207-4B .......do.......... . !.......do............... ............................
53
54
213-25 I Sept. 13,1917 ] Duesenberg Motor Corp...............

3 electromotors.......
1 riveting machine.
7,200 crosscut saws.

AUTHORITY

81
84
82
83

8,294.72
7,507.50

AD
N

75
76
77
78

231.00
8,294.72
7,507. 50

LOANS

72
73
74

231.00

Balances, thermometers, etc.
10 electromotors.....................
7,800 crosscut saws.................

FOREIGN

70
71

128-PRM-165 ___ do............ Eimer & Amend Co......................
126-PRM-165 ----- do............ C. &C. Electric Manufacturing Co.
129-PRM-355 Oct. 13,1917 United Hardware & Tool Manu­
facturing Co. of America.
124-PRM-165 Sept. 27,1917 Crocker Wheeler Co.....................
134-PRM-317 Oct. 26,1917 Acme Machinery Co.....................
139-PRM-355 Oct. 29,1917 United Hardware & Tool Manu­
facturing Co.
131-PRM-355 Oct. 23,1917 E . Landress & Co.........................
142-PRM-165 Nov. 1,1917 Schaeffer & Budenberg Manufac­
turing Co.
143-PRM-165 .......do............ Simplex Valve & Motor Co..........
148-PRM-165 Nov. 7,1917 Standard Optical Co....................
154-PRM-355 Nov. 13,1917 United Hardware & Tool Manu­
facturing Co.
155-PRM-165 ___ d o.......... . Union Water Meter Co................
157-PRM-165 .......d o.......... . Taylor Instrument Co..................
149-PRM-165 Nov. 8,1917 Columbia Hardware Co...............
151-PRM-165 .......do.......... . W ilmarth & M orman Co.............
133-PRM-165 Oct. 26,1917 Hess Machinery Works................
144-PRM-165 Nov. 1,1917 E . Landress &‘Co.........................
152-PRM-165 Nov. 10,1917 Kaeffel & Esser Co.......................
156-PRM-165 Nov. 13,1917 Millard F. Smith Co.....................
159-PRM-165 Nov. 14,1917 E . Landress & Co.........................

Summary of payments on account of contracts, confirmed by the War Industries Board and Council of National Defense, placed in America by the Russian
Government Supply Committee—Continued.

168

Payments from Payments from
other sources
American
outside of
credit.
American
credit.

FOREIGN

Ameri­
can Gov­ Contract num-1
ernment
ber.
|
number.

Date of
contract.

211-16 Nov. 13,1917
207-5A

Nov. 14,1917

Value.

Object.

$6,354.17
6,600.00

126,375.00

101,178.75

25,196.25

66,644,162.39

38,961,692.48

$6,437.03
6,600.00

2,211.60

2,211.60

25,646,437.69

American
Govern­
ment No.

Contract No.

.

284




Apr. 25,1917
May 9,1917
Apr. 30,1917
. . . . . d o . . . .......
.do........
.do........
.do........
do...........
May 17,1917
May 2,1917
May 21 1917
do..........

Value.

Payments fro
American
credit.

j-Erection of stores for shells............................
Lathes.....................................
1 Norton lathe.................................................
4 lathes.............................................................
10 various lathes..............................................
4 lathes.............................................................
3 lathes.............................................................
14 lathes...........................................................
10 electromotors..............................................
3 saws...............................................................
5 spinders........................................................
2 lathes.............................................................
....... do...............................................................
1 lathe..............................................................
Spare parts for contract 57-PRM-202............

$400,000.00

$400,000.00

1,860.00
48,140.00
1.951.25
1,800.00
7.540.00
9.395.00
945.00
4.805.00
1,195.40
1.770.00
120.00
8.525.00
2.200.00
891.90
1,450.00
1.103.25

1,860.00
48,140.00
1.951.25
1,800.00
7.540.00
9.395.00
945.00
4.805.00
1,195.40
1.770.00
120.00
8.525.00
2 200.00
891.90
1,450.00
1.103.25

.

SAME.

273

...

_
53-PRM-206._
69-P R M -3........
fi7-PRM-2D2____
58-PRM-202..........
M-PRM-202___
60-PRM-202......
61-PRM-202A
62-P RM-202B
73-PRM-207........
63-PRM-140......
75-PRM-30......
76-PRM-202A
78-PRM-204......
85-PRM-202..........

Bethlehem Steel Co.....................................................
General Electric Co......................................................
American Can Co.........................................................
Iznoskolf Co ............................................................
Carbondale Machine Co...............................................
Iznoskoff & Co.............................................................
Davis Machine Tool Co................................................
Defiance Machine Works.............................................
....... do............................................................................
____ do............................................................................
....... do............................................................................
....... do............................................................................
....... do............................................................................
Pratt & Whitney Co...................................................
Walter H. Foster Co....................................................
American Machinery Syndicate.................................
American Wood W orking Machine Co.......................
Baker Bros...................................................................
Defiance Machine Works.............................................

Object.

MAKING

971

_

Name of firms.

FR
O

i
!

Date of
contract.

AUTHORITY

Summary of payments not covered by special credits allocated by the United States Government.

AD
N

Total...........

$82.86

131,251,801.07

C. & C. Sales Corp...................... . ___ do..................
Greenport Basin & Construction 3 wireless outfits.
Co.
Herz & Co..................................... 3,000 Herz plugs and 200 spare in­
sulators.
50 Sterling trucks, Army bodies,
Sterling Motor Co.
and headlight for same.

i

Amount
canceled.

LOANS

213-29 Oct. 18,1917
211-15 Oct. 19,1917

Name of firm.

180..
181..

188 .,

1,020.27
727.20
43.80
1 220.00
7,421.54
1.556.00
1,623.30
619.30
2.489.00

1 010.0 0

,

169

2 saws and 1 lathe............................................
16 electromotors..............................................
5 electromotors................................................
2 machines and spare parts.............................
2 saws and spare parts...................................
8 electromotors................................................

1,020.27
727.20
43.80
1,220.00
7.573.00
1.556.00
1,623.30
619.30
2,489.00

.
,

SAME.

Spare parts................................................
Rails and accessories......................................
Technical books for the Russian Railway
Mission.
49 belts............................................................. !
2 saws..............................................
. ...

MAKING

Chas. Shieren Co..............................
American Saw Mill Machinery Co..
Fairbanks Morse Co.........................
Fay & Egan Co...............................
C. & C. Electric Manufacturing Co.
J. G. White Engineering Co............
S. A. Woods Machinery Co.............
...... do.......................... ....................
J. G. White Engineering Co............

Switches............... .«........................
Steamfeeding pipe connections......................
Spare parts......................................................
.......do...............................................

FR
O




Mav 11,1917
May 14,1917
Mav 17,1917
May 22,1917
Apr. 27,1917
.......do............
May 9,1917
May 5,1917
May 7,1917

53 locomotives.................................................
978 trucks and spare parts..............................
Spare parts.......................................................
Crane...............................................................
12 jacks............................................................
Files.................................................................
Instruments.....................................................
Rails and accessories.......................................

686.55
259.72
30.00
750.00
1,021.25
250.00
4,100.05
541.74
7, 12.818.15
771,886.27
137.584.00
315,000.00
643,387.50
483.00
102.40
1,237,700.00
1.992.00
13.751.15
122,440.84
13,413.60
2.497.00
13.500.00
20,822.50
3.080.00
34.300.00
278.530.00
144,997.64
6,415.17
10.500.00
202.56
663.18
861.60
3,537,532.10
2,495,879.81
610.245.00
696.89
520.58
12.988.00
1 200.00
124.99
5,115,761.96

AUTHORITY

70-PRM-16 5
71-PRM-165...
72-PRM-165...
36-PRM-165__
55-PRM-165...
56-PRM-16 5
68-PRM-165.. .
66-PRM-165__
65-PRM-165__

....... do...............................................................
Scythe blades..................................................
Agricultural machinery..................................
200 pairs driving chains..................................
2 lathes.............................................................
80 guns and 400,000 shells................................
Various instruments.......................................
Spare parts......................................................
10 cranes and spare parts................................
Air pumps.......................................................
Condenser........................................................
Engine............................
. .
Spare parts......................................................
Bandages for 10 cranes....................................

686.55
259.72
30.00
750.00
1,021.25
250.00
4,108.30
541.74
7,892,818.15
771,886.27
137,584.00
315,000.00
643,387.50
483.00
102.40
1,334,000.00
1.992.00
90.625.00
125,000.00
22.500.00
2.497.00
13.500.00
20,822.50
3.080.00
34.300.00
1,522,955.00
144,99-7.64
6,415.17
10.500.00
202.56
944.94
922.98
9,733,849.52
5,181,241.62
639,000.00
696.89
677.25
125,421.98
24,700.00
1,269.80
10,217,015.03
1,000.00

AD
N

190..
197..
198..
199..
202..

53-PRM-4
No. 6 Gr. 24___
291- C
168-C.................
238-C................
323-C................
364-C................
362-C................
328-C................
270- C
271- C
182 231- C
174-C................
20i* 202-C................
392-C................
*i94 294-C................
320 292- C
191 285-C................
183 157- C
184 158- C
207-C................
281-C................
193’ 199-C................
187 167-C................
200 201-C................
189 232-...................C
185 159- C

Spare parts for contract 60-PRM-202A.........
Spare parts for contract 62-PRM-202B.........
6 drills..............................................................
192 various instruments..................................
2 machines.......................................................
2 electromotors................................................
2 lathes.............................................................
32J dozen chisels..............................................
Agricultural machinery ......... ........................

LOANS

T oc

143..

June 11,1917 .......do............................................
.......do........... .......do............................................
June 23,1917 .......do............................................
June 25,1917 Walter H. Foster Co....................
June 28,1917 Greenlee Bros. Co.........................
July 30,1917 Fairbanks Morse Co.....................
June 2,1917 Keller Mechanical Engraving Co.
Aug. 20,1917 E. Landress & Co.........................
Aug. 18,1916 International Harvester Co..........
Massey Harris Co..........................
Noxon Co......................................
In Petrograd. American Steel Export Co............
Adriance Platt Co.........................
Oct. 15,1917 B. D. Said....................................
Mar. 27,1917 Cincinnati Electrical Tool Co.......
July 20,1917 Pool Engineering & Mach. Co. . . .
June 5,1917 Ingersoll Rand Co.........................
Nov. 11,1916 American Locomotive Works___
Mar. 28,1917 Orton & Steinbrenner Co.............
July 19,1917 Zin-Ho Manufacturing Co............
Aug. 21,1917 Andrew W. Feuss........................
.......do........... .......do............................................
July 26,1917 Flannery Bolt Co.........................
May 22,1917 American Car & Foundry Co.......
May 23,1917 American Steel Export Co...........
Apr. 5,1917 Baldwin Locomotive Works.......
Dec. 22,1916 Pressed Steel Car C o....................
Mar. 2(>,1917 Baldwin Locomo tive Works___
Oct. 17,1917 Andrew W. Feuss........................
June 14,1917 Norton & Co.................................
Young Corley & Diilon................
___ do............................................
July 22.1916 Allie l Contracting Co..................
July 25.1916 American Steel Expert Co...........
M.ay 8,1917 Allied Contracting Co..................
June 11.1917 Andrew W. Feuss........................
Mar. 25.1917 Ingersoll Rand Co.........................
Nov. 11.1916 Baldwin Locomotive Works.......
May 28.1917 ...... do............................................
Apr. 27.1917 Ingersoll Rand Co........................
June 23,1916 United States Steel Products Co..

FOREIGN

279.

86-PRM-202A..
87-P RM-202B..
88-P RM-202A..
90-PRM-140..........
97-P RM-202A..
112-PRM-202A___
81-PRM-205..........
122-P RM-202A___
No. 2 Gr. 701...
No. 1 Gr. 701...
No. 3 Gr. 701.........
No. 11 Gr. 701..
No. 4 Gr. 701...

Summary of payments not covered by special credits allocated by the United States Government—Continued.

Contract No.




Osgood Co.
Weston Electrical Instrument Co.
do.
Sterling Engine Co......................
Melchoir Armstrong & Dessau..
___ d o ..........................................
___ d o..........................................
___ d o..........................................
___ d o ..........................................
Duessenberg Motor Corporation.
___ d o..........................................
Goodrich Transit Co...................
Manitowoc Shipbuilding Co.......
___ d o..........................................

SAME.

*22i

4,1917

£236.38
8,006.00
6,808.00
1.289.94
1.149.00
706.00
1.896.20
101.25
3,934.50
834.00
3,792.40
1.117.00
438.00
1.507.00
1.687.25
752.00
176.40
2.747.00
49.50
750.00
740.00
376.00
851.58
399.86
1.551.20
227,500.00
869,567.83
900.00
8.075.00
7.500.00
7.912.95
2,149.29
22,141.69
37,828.80
9.371.25
54,719.30
8.280.00
62.624.00
89.100.00
8,490.24
455,000.00
4.900.00
7.328.00

MAKING

213
214
215
216
217

Apr. 13,1917
Feb. 16,1917
Mar. 26,1917
Feb. 21,1917
Feb. 20,1917
.......d o ..........
Feb. 21,1917
.......d o ..........
Mar. 10,1917
June 6,1917
Feb. 8,1917
Apr. 3,1917
Apr. 25,1917

$236.38
8,006.00
6,808.00
1.289.94
1.149.00
706.00
1.896.20
101.25
3,934.50
834.00
3,792.40
1.117.00
438.00
1.507.00
1,687.25
752.00
176.40
2.747.00
49.50
1.025.00
740.00
376.00
851.58
408.02
1.551.20
227.500.00
869,567.83
900.00
8.075.00
7.500.00
7.912.95
2,149.29
32,521.55
45.923.00
11.436.50
73.338.50
165.600.00
156.560.00
89.100.00
18,562.70
725,000.00
4.900.00
7.328.00

Payment sfrom
American
credit.

FR
O

212

June

49-PRM-210.
41-PRM-35..
213-16............
213-11............
213-19............
213-18............
213-7..............
213-9..............
213-15............
213-15A .........
212-7..............
217-7A...........
212-7A...........

1-ton galvanized iron.....................................
2 lathes...........................................................
2 fans..............................................................
Various spare parts.......................................
1 saw................................................................
2 saws.............................................................
1 lathe............................................................ .
.......do...............................................................
.......do...............................................................
1 saw................................................................
2 lathes............................................................
Spare parts......................................................
3 electromotors................................................
1 lathe..............................................................
.......do...............................................................
2 electromotors................................................
1 saw................................................................
2 exhausters, etc.............................................
18 grinders.......................................................
4 electromotors................................................
2 saws...............................................................
1 motor............................................................
33 various belts................................................
134 grinders.....................................................
3 electromotors................................................
2,000,000 horseshoes........................................
Supplies for Murman Railway......................
Additional payment for 600 saws................. .
Steam shovel...................................................
Expenses of sending workingmen to Russia.
Instruments....................................................
.......d o ..............................................................
Spare parts for 54 motors, Sterling................
Spare parts for 76 motors, Buffalo.................
Spare parts for 20 motors, Buffalo.................
Spare parts for 94 motors, Van Blerk............
30 motors, Van Blerk.....................................
76 motors, Buffalo..........................................
18 motors, Duessenberg..................................
Spare parts for above.....................................
Icebreaker, Nevada........................................
4 engines for above.........................................
Hose.................................................................

Value.

AUTHORITY

No. 1-555...
82-PRM-25.

American Rolling Mill Co.............
P. B. Yates Machine Co................
B. F. Sturtevant Co.......................
P. B. Yates Machine Co................
American Saw Mill Machinery Co.
Woods Machine Co.........................
Greenlee Bros. Co..........................
Smith Machine Co.........................
Woods Machine Co.........................
American Saw Mill Machinery Co.
Greenlee Bros. Co..........................
Woods Machine Co.........................
Washburn Shops of Worcester___
American Tool Works...................
Matt Co...........................................
Fairbanks Morse Co....................... .
Machinery Co. of America.............
B. F. Sturtevant Co.......................
Washburn Shops of Worcester___
White Engineering Corporation —
Greenlee Bros. Co..........................
Fairbanks Morse Co.......................
Chas. E. Shieren Co....................... .
Carborundum Co...........................
C. C. Electric Manufacturing Co—
Phonex Horse Shoe Co..................

Object.

AD
N

July 16,1917
Apr. 27,1917
June 26,1917
___ do...........
June 27,1917
...... d o ..........
June 28,1917
.......do.......... .
June 30,1917
June 29,1917
.......do...........
June 30,1917
July 10,1917
July 14,1917
July 18,1917
July 25,1917
July 26,1917
July 27,1917
July 30,1917
Aug. 2,1917
June 25,1917
Aug. 2,1917
July 9,1917
Aug. 20,1917
Aug. 2,1917
Aug. 27,1917

Name of firms.

LOANS

107-PRM-165.
93-PRM-165..
92-PRM-165..
94-PRM-165..
95-PRM-165..
96-PRM-165..
98-PRM-165...
99-PRM-165..
100-PRM-165.
101-PRM-165.
102-PRM-165.
103-PRM-165.
105-PRM-165.
106-PRM-165.
282 108-PRM-165.
109-PRM-165.
110-PRM-165.
111-PRM-165.
113-PRM-165.
283 114-PRM-165.
89-PRM-165..
115-PRM-165.
104r-PRM-165.
270 119-PRM-165.
280 116-PRM-165.
Gr. 4...............

261

Date of
contract.

FOREIGN

American
Govern­
ment No.

220
223
'226

218
227

----- do........................................
___ do........................................
Melchoir Armstrong & Dessau.
do.
American Chain Co...........................
C. D. Durkee Co................................
New London Ship & Engine Co.......
Electric Boat Co................................
Greenport Basin & Construction Co.

213-14.
208-5..

Oct. 16,1916
Apr. 21,1916

Melchoir, Armstrong & Dessau .
Moscow Machine Tool Works. ..

74-PRM-254.
80-PRM -41..
16-PRM-41..

May 18,1917
May 31,1917
Mar. 21,1918

Defiance Machine Tool Co......
Blanchard Machine Co............
American Tool Works Co.......
Gaston Williams & Wigmore..
Nankiwell, Dawson & Co.......

Total....................

1.500.00
216.00
5.920.00
13.200.00
27,275.13
33,192.50
7.250.00
185.625.00
158.400.00
988,430.70

150.000.00
4,834.95
141,516.29
12.623.00
171.00
7.367.00
233.600.00
237.341.00

88, 000.00
106.09
141,516.29
12.623.00
168.60
2.307.00
233.600.00
237.341.00

315.331.00
38,000.00
274.161.00

315.331.00
38,000.00
274.161.00

43.146.00
4,958,861.85

43.146.00
4,958,851.85

53,650,154.16

33,652,435.38

AUTHORITY

..do.
Freight, inspection, etc.

1.500.00
216.00
14.800.00
13.200.00
62.720.00
37.630.00
14.500.00
3,712,500.00
352.000.00
988,430.70

AD
N
FR
O
MAKING
SAME,




.do.
.do.
.do.

Spare parts......................................................
Sose connections............................................
8 motors, Buffalo............................................
10 starters........................................................
Chains.............................................................
Ship telegraphs...............................................
Air tanks.........................................................
5 submarines...................................................
8 launches.......................................................
Surplus expenses for repairs and supplies for
yachts and trawlers.
10 motors, Mietz.............................................
Instruments....................................................
Supplies for Murman port..............................
Machinery.......................................................
10 grinders.......................................................
Lathe...............................................................
50 trucks, Packard..........................................
20 automobiles, Pathfinder; 25 automobiles,
Chandler.
84 Glen trailers; 80 automobiles, Chandler...
Automobile machine shops............................
10 automobiles, Locomobile; 87 automobiles,
Chandler.
14 Glen trailers; 4 trucks, Lombard............. .

LOANS

Apr. 3,1917
Aug. 25,1917
Feb. 20,1917
In Petrograd.
Feb. 20,1917
Apr. 17,1917
Jan. 14,1916
Aug. 31,1917
Mar. 21,1917

FOREIGN

*232
233
234

212-7B.
212-7C .
213-20..
213-22..
218-4...
211-13..
215-2...
204-1...
211-14..

172

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
SECTION 96.

Interesting Epitome of Conference Between Ughet, of the Russian Embassy,
and Kelly, Assistant Secretary of State in Charge of Foreign Loans, on
Russian Finances and Conditions.
I first asked him for information regarding results of his trip abroad. He
stated that the Russian representatives had met and decided to continue aid to
Wrangel. In regard to the currency situation, Wrangel’s minister of finance
desired to know whether bank notes printed in America would be available for
Wrangel and had explained the plan of issuance of Wrangel treasury certificates
and at some later time retirement of these certificates and other currencies, in­
cluding bolshevik and foreign, all at some stated rate of exchange, and the
issuance of new bank notes. He said that the notes would not be issued except
in connection with this process of retirement.
I told him I wished to discuss frankly with him the general situation in regard
to Russian funds. I spoke somewhat as follow s:
Our understanding o f the fiction of the Russian Embassy was that it repre­
sented the “ Russian people ” at present submerged under a despotic minority.
WT had the deepest sympathy, regard for, and future faith in this Russian
e
people; that our steadfast feeling, without selfish political ends, I believed was
stronger than on the part of the Allies and was as strong to-day as ever. On
the basis of this feeling we had felt convinced of the wisdom of aiding the
continued existence and functioning of the embassy; that the way Bakmetief
and Ughet had acted in a difficult capacity had justified our reliance on them
to carry out this purpose and had given us material aid in the carrying out o f
the policy of preventing the dismemberment of the Russian heritage. We felt
that faith in Ughet and his square dealings justified perfect frankness on our
part, although with others we might fear that such funds might be absconded
with 01* dissipated in ways inconsistent with the policy of this Government.
The Kerensky regime, in which the Russian people had an opportunity for
expression, had been engulfed in the wave of bolshevism, and there had then
succeeded various phases—Denekin, Yudenich, Kolchak—through each of which
in turn it was hoped the Russian people would again find expression. Whether
a better result could have been obtained if these enterprises had been handled
differently from within or without is now academic. The facts show failure.
In the case of Kolchak the United States Government had approved the em­
bassy aiding him, hoping that his faction would gather to itself the Russian
people and the real Russia could be recognized through him.
Now, perhaps the situation has changed. As a matter of personal opinion I
felt that the possibility of factions entering from outside Russia, gathering to
themselves the nucleus of the Russian people, had become far remote, if not
entirely out of the realm of possibility. Aid from the Allies, coupled perhaps
with an impression that such aid was given for selfish purposes, plus the Polish
attack, had apparently raised a spirit of nationalism which very likely would
damn from the beginning the chances of any outside intervention being
received other than with mistrust.
As a matter of personal opinion I believed the hope and expression o f Russia
must now come from the inside— a result not at all impossible— perhaps by
an overthrow of bolshevism through the military organization. With this
possibility in the future the eventual accounting of the embassy to such result­
ing government, if it had the Russian people behind it, must be seriously con­
sidered by the embassy, and in this connection the department’s views as to
the functions of the embassy, i. e., a real representative of the Russian people,
must be regarded. Therefore it should be seriously considered whether— for
the accomplishment of the purpose to which I believed Ughet had sincerely
committed himself and carried out, and for his own eventual protection and
the ratification of his acts— it was not advisable for him to bring the Kolchak
funds, which I believed were based in the main on old Russian gold reserves,
property of the Russian people, under the supervision of our Government in a
manner perhaps somewhat similar to the present liquidation account.
I told him that the matter was under consideration merely by the department,
but I requested him to take the matter up with the ambassador and reach a
decision for the purpose of further discussion with Mr. Davis. This he agreed
to do without objection. I should judge that he had in his mind the possibility
of our taking such a position and that it was very possible that they would be
willing to take such a step.



FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

173

Mr. Ughet pointed out that before the dissolution of the Kolchak government
he had been authorized by that government to dispose of funds for purposes
helpful to Denekin or Wrangel in south Russia. I explained to him that we
doubted whether such authorization would protect him now that his former
principal, the Kolchak government, had dissolved.
I brought up the question of the million dollars held as security by the War
Department. I notified him that we considered that (1) these w
rere funds
brought officially to the notice of the Government on account of their having
been held by the Government, that (2) the contract was made in behalf of
the Russian Government, and (3) the situation had now changed and liis for­
merly existing principal, the Kolchak government, which we had approved,
had now dissolved. For these reasons we felt that the sum should be either
held by the War Department or deposited in the liquidation account. This was
accepted without any protest on his part.
With regard to the Shipping Board fund, I explained to him that this was
again a case where the funds were held by the Government and came within
our official notice. In addition, the volunteer fleet was a separate entity, and
we felt doubtful about the ability of the embassy to give a valid receipt to
the Shipping Board for the funds. And, therefore, it had been decided that:
the funds held by the Shipping Board should be retained until such time as
the Russian volunteer fleet should again come into official existence or some
other solution could be reached.
The question of the bank notes was discussed and it was pointed out that
after consideration o f the subject it w^as felt that the Government could not
avoid a certain measure of responsibility in regard to their issuance, and that,
therefore, it did not feel itself able to become a party to the issuance of the
notes unless surcharged with a statement that they were to be issued by
Wrangel’s government in order to avoid what might on their face appear a
fraud in that they purported to be obligations of the Russian State Bank.
He argued this point, stating that these bank notes were products o f addi­
tional contracts made entirely with Kolchak and paid with his funds, and that
the notes could be distinguished by the issue-letter designations, and that
they would be only issued for the purpose of redemption of present coinage.
I stated that was not sufficient reason to cause us to change our opinions
and we were convinced of the necessity of requiring a surcharge before per­
mitting exportation. He pointed out that as a practical matter, on account
of the cost and time required to surcharge, it might very probably make im­
practical the issue o f the notes. I told him that was to be regretted, but that
we would have to protect ourselves in view of our indirect responsibility.
The question of liquidation of railway rails in Yokohama and ports in China
was brought up. He stated that in view of the fact that there had been
certain delays in their shipment, perhaps involving claims against the British
and Japanese Governments, and that only about one-third of the rails had been
bought with United States credits, he was not inclined to take the responsi­
bility o f selling the rails at this time, which might involve impairing future
Russian claims against the British and Japanese Governments. He desired us
to sell the rails. Mr. Kelley told him the Treasury did not like to take such
responsibility. I left the matter with Mr. Kelley for further arrangements.
The War Department was notified by telephone of our views on the payment
of the million-dollar security fund to Ughet.
V an S. M.-S.

SECTION 97.
Agreement Between the United States Treasury and Russian Embassy on
Russian Finance.
SUMMARY OF MEMORANDUM ON AGREEMENT ENTERED INTO BY THE TREASURY DEPART­
MENT AND THE DEPARTMENT OF STATE WITH BAHKEMETEFF FOR CONTROL OF RUS­
SIAN EMBASSY FINANCES.

1. The Treasury Department and the Department o f State undertook to direct
the liquidation of the claims of American manufacturers against the Russian
Government growing out of the war contracts.
2. The Treasury Department undertook to exercise a negative control over the
expenditures from funds in the National City Bank, i. e., it did not direct or
supervise these expenditures, but all checks drawn upon these funds were sub­
mitted to the Treasury for vise, and the checks were not honored unless the
Treasury approved.



174

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

3. The purpose of the arrangement was, first, to insure the payment of the
just claims of American manufacturers against the Russian Government, and,
second, to prevent the payment of mony from the fund in the National City Bank
for purposes of which the Treasury did not approve.
4. It was evidently the intention not to create the impression that a forcible
receivership had been established, and care was taken, apparently, to avoid the
charge that, by interferring to too great an extent in the liquidation, this Govern­
ment had invalidated the claims against the Russian Government.

SECTION 98.
Answers to Senate Resolution, Page 6, Showing a Total of $11,047,346.20
Paid by United States War Department to De Facto Russian Ambassador
for Materials Purchased by United States War Department; This Also
Shows $1,921,597.48 Paid the De Facto Russian Government by the United
States Shipping Board for Ship Hire.
F e b r u a r y 25, 1921.
Sir : Pursuant to Senate resolution 417,1 have the honor to furnish the foliow^
ing information:
Question 1. Are funds of'the United States being used either directly or in­
directly to support or maintain an embassy in the city of Washington, D. C.,
representing the so-called Kerensky government of Russia, and if so, how much
money has been thus expended and what authority is there for such expenditure?
Answer. No funds of the United States have been so used. The funds of the
United States were used solely for the purchase of obligations of the Russ.an
Government in accordance with the Liberty loan acts. The funds paid by the
United States to the Russian Government to purchase its obligations became the
funds of the Russian Government. Among the expenditures of the Russian Gov­
ernment from its funds, as shown by the below-mentioned reports, are disburse­
ments to support or maintain the Russian Embassy in Washington.
Question 2. Was money advanced from the Treasury of the United States to
establish a credit on behalf of the Kerensky government, and if so, in what
amount, and for what purpose was it used?
Answer. As set forth in the Annual Report of the Secretary of the Treasury
for the fiscal year 1920, in pursuance of the authority o f the Liberty loan acts,
the Secretary of the Treasury did from time to time, with the approval of the
President, establish credits in favor of the provisional government of Russia,
but no such credits were established subsequent to the fall of the so-called K er­
ensky government in November, 1917. Advances were made to the said Russian
Government on the following dates and in the following amounts:
1917— October 2 _________$22, 200, 000
1917—July 6 ____________ $35, 000, 000
July 1 3 ___________
10, 000, 000
October 1 1 ________ 20,000,000
November 1 _______ 31, 700,000
2, 500, 000
August 1__________
November 1 5 ______
1,329, 750
August 22_________
2, 500, 000
August 24_________
37, 500, 000
August 30_________
10,000, 000
Total_______ 187,729,750
15,000,000
September 25---------

The proceeds of the advance of $1,329,750 made on November 15, 1917, were
simultaneously applied by the Russians to the payment of interest to the Gov­
ernment of the United States. No advances were made after November 15,1917.
As shown in Exhibits 26 and 28, on pages 338 and 342 of the Annual Report
of the Secretary of the Treasury for the fiscal year 1920, respectively, the
expenditures reported by the Russian Government for the period April 6 , 1917,
to December 31, 1917, were as follow s:
Expenditures.
Munitions, including remounts------------------------------------------------ $58, 698,646. 58
Exchange and cotton purchases----------------------------------------------- 53,186,352. 70
Other foods___________________________________________________
1 706,909. 48
>
Other supplies-----------------------------------------------------------------------49,338,982.34
Transportation________________________________________________
2,155,769. 40
Shipping-------------------------------------------------------------------------------1,324,678. 54
Interest---------------------------------------------------------------------------------4,129,761.64
Maturities------------------------------------------------------------------------------5,000,000.00
Miscellaneous_________________________________________________
3, 041, 568.89
T ota l__________________________________________________ 178, 582, < 9.57



FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

175

Subsequent to January 1, 1918, further expenditures for similar items were
reported to the amount of $50,058,684.89. The total expenditures reported for
the entire period from April 6 , 1917, to December 15, 1920, were, therefore,
$228,641,354.46. The Russian representatives have reported receipts since De­
cember 31, 1917, of $25,466,962.83. Certain of these are doubtless refunds of
payments included among the expenditures, and others may be the proceeds of
goods purchased by means of the expenditures. There is reason to believe,
however, that a large portion of the receipts are the proceeds of materials pur­
chased by the Russians out of resources other than United States advances.
Question S. What amount of money, if any, does the Kerensky government owe
to the Government o f the United States, how is it secured, what rate of interest
does it bear, and when does it mature?
Ansiver. For its advances to Russia, as stated on page 55 of the Annual Re­
port of the Secretary of the Treasury for the fiscal year 1920, the Secretary holds
obligations of the Russian Government corresponding in amount and bearing
the respective dates set forth in the foregoing table of advances. Said obliga­
tions are in the form of certificat3s of indebtedness payable to the United
States, without deduction as to prii cipal and interest, for taxes of the debtor
Government in gold coin of the United States of the present standard of weight
and fineness, at the Subtreasury of the United States in New York or at the
Treasury of the United States in Washington. They are signed in the name of
the provisional Government of Russia by a representative of that Government
designated to the Treasury by the Department of State as being uathorized to
sign them in the name and on behalf of that Government. Certain of the cer­
tificates were payable at fixed dates of maturity, all of which are now past,
so that they are now held as demand obligations.
The remainder were expressed to be payable on demand. Certain of them
were expressed to bear interest at the rate of 3£ per cent per annum and the
others at the rate o f 4£ per cent per annum, being the same rates borne by the
obligations issued at that time by the United States Government. By arrange­
ment similar to that made with other Governments, interest has been charged
on all Russian obligations since May 15, 1918, at a rate equivalent to 5 per cent
per annum on the total amount thereof. As stated on page 57 of my annual
report, the amount of interest heretofore paid on the above-mentioned Russian
obligations is $4,595,564.15, being the interest up to November 15, 1917, in full,
together with a partial payment of $1,865,925.08 on account of the interest which
became due May 15, 1918, and partial payments of $1,399,877.43 on account of
the interest which became due November 15, 1918. As stated on page 58 of the
annual report, the Secretary holds a special fund of $1,808,506, which is equal
to the unpaid balance of the interest matured on Russian obligations on May 15,
1918, and which, it is believed, ultimately can be applied in discharge of that
balance, and a similar fund of $335,095.07 which it is believed will be applicable
upon the unpaid balance of interest which became due November 15, 1918.
As shown at the same page o f the report, the interest accrued and remaining
unpaid on the above-mentioned Russian obligations for the half years ending
November 15, 1918, April 15, 1919, and May 15, 1919, October 15, 1919, and
November 15, 1919, April 15, 1920, and May 15, 1920, and October 15, 1920, and
November 15, 1920, amounts in all, after deduction of the special funds above
mentioned, to $21,187,741.90. For the interest which became due November 15,
1918, the Treasury holds an obligation of that date executed in the name o f the
provisional government of Russia, payable on demand with interest at the rate
of 5 per cent per annum, and for the interest which became due subsequently,
the Treasury holds formal undertakings executed by the Russian representatives
on behalf o f the provisional government o f Russia that said government promises
to pay the respective amounts so becoming due on demand, with interest at the
rate of 5 per cent per annum.
As shown on pages 65, 66 , and 67 of the report, the Treasury has received as
custodian from the Secretary of War on account o f sales o f surplus war supplies
a Russian obligation dated August 8 , 1919, for $406,082.30, payable June 30,
1922, with interest at 5 per cent, on which the sum of $10,179.87 has been re­
ceived on account of interest accrued for the period from June 30, 1919, to
December 30, 1919, and has also received from the American Relief Administra­
tion, on account of relief, pursuant to act approved February 25, 1919, Russian
obligations dated July 1, 1919, for $4,465,465.07, payable on June 30, 1921, with
interest. No interest has been paid on these obligations.
Question If. After the downfall of the Kerensky government, did the Govern­
ment of the United States purchase war material or other supplies from the



176

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

officials of the Kerensky government with funds of the United States and, if so,
what was the nature of the supplies, how much money was paid for the same,
and was the purchase made at a time when the Kerensky government was
indebted to the United States, and, if so, in what amount?
Answer. It is my understanding that subsequent to November 15, 1917, the
Government of the United States purchased through its various departments
and agencies certain materials from the Russian representatives. The corre­
spondence in my office indicates purchases as follow s:
Rails and accessories_________________________________________ $9,188,318. 92
Machine guns-------------------------------------------------------------------------- 1 , 572, 021.00
Motor trucks and parts_______________________________________
214,500.00
Lenses________________________________________________________
4,270. 00
Ammunition --------------------------------------------------------------------------68,236. 28
T o t a l___________________________________________________ 11, 047, 346. 20
I believe there were also other purchases, the total amount of which was only
a small fraction of the foregoing. This Government also paid the Russian rep­
resentatives $1,921,597.48 charter hire for ships. These items include, as I
understand it, substantially all the payments made by departments of this
Government. Exact figures can be obtained only by reference to the depart­
ments and agencies concerned. Such payments would appear in the Treasury
records only in the accounts presented to the auditor by the various disbursing
officers who made them and could be ascertained only by a physical examina­
tion of the accounts and vouchers. This would require months of work by
many people, is impracticable, and was not, as I understand it, contemplated
by the resolution. The funds mentioned above in this answer w^ere placed in
the liquidation account. The cargo of certain Russian ships diverted from
Murmansk and Archangel to England was sold in England and purchased in
part by and for the use of the American Expeditionary Forces. The special
funds referred to above as being held to cover interest payments are composed
of proceeds of these cargoes.
Question 5. Has the Government of the United States taken any steps to re­
imburse itself for money advanced or loaned to the Kerensky government?
Answer. Except to the extent above stated, I am not aware tliat the Govern­
ment of the United States has taken any steps to reimburse itself for money
advanced or loaned to the Russian Government.
As of December 1, 1917, the unpaid balance on contracts made by the Russian
Government with our people was something over $102,000,000. The contracts
were in all stages of performance. The funds on hand of the Russian Govern­
ment in the United States amounted to about $56,000,000. At the end of De­
cember, 1917, as a result of the payment, cancellation, or reduction of con­
tracts, the unpaid balance on contracts in America was reduced to less than
$50,000,000. The liquidation has since been completed, liability under said con­
tracts discharged, and a substantial amount of property shipped to Russians
in territory not under the control of the bolsheviks.
These matters were dealt with at length by Mr. Polk, then Undersecretary of
State, and Mr. Leffingwell, then Assistant Secretary of the Treasury, in hear­
ings before the Committee on Expenditures in the State Department of the
House of Representatives in the summer and autumn of 1919, and were also con­
sidered in the hearings on Russian propaganda before a subcommittee of the
Committee on Foreign Relations of the Senate in the winter and spring of 1920.
For the information of the Senate, copies of the statements by Mr. Polk and
Mr. Leffingwell are attached.
Respectfully,
D. F. H ouston.
The P b e s id e n t o f t h e S e n a t e .




GREECE

S. Doc. 86 , 67-2------ 12




177




SECTION 99.
Greece.

Under the various Liberty loan acts which provided that the Sec­
retary of the Treasury could, with the approval of the President,
make loans to foreign Governments then engaged in Avar with ene­
mies of the United States for the purpose of prosecution of the war,
there was a credit established for Greece of $48,236,629.05. Of this
credit there was advanced to Greece up to November 15, 1920, a total
of $15,000,000. There now remains on the books of the Treasury
Department a credit in favor of Greece for $33,236,629.05.
No money whatsoever was advanced to Greece during the actual
progress of the war. The first advance was made to Greece December
15, 1919. The next advance was January 16,1920, of $5,000,000. The
third advance was September 17,1920, of $5,000,000.
Loans were made to Greece under an entirely different plan and
system from those made to any of the other allies. In February, 1918,
fingland, France, and the TJnited States made an agreement with
Greece whereby these three countries agreed to underwrite a Greek
loan for 750,000,000 drachmas which have the same value as francs.
Each of the three countries agreed to make its share of one-third of
the loan. This 750,000,000 franc loan was the outside limit of the
loan to be made. That is, it was the maximum amount for the 1918
expenditures.
In pursuance to this loan Greece agreed to keep a certain number
of men in the field and make other military and naval operations.
This loan was to be paid to Greece upon certain conditions. Those
conditions were, first, the money was to be paid if at any time during
the war the credit of the National Bank of Greece fell below
100,000,000 francs. Second, if the money was not paid during the
war, then it was all to be due and payable six months after the con­
clusion of peace.
A further condition was added that in no case were the three
countries referred to to pay more than one-third of the expendi­
tures for 1918 as shown by vouchers from the Greek Treasury, which
vouchers were to be passed upon by the financial commission ap­
pointed for this purpose.
On the strength of this promised loan, the Greek Government
issued a bond issue which it sold to its own people.
The correspondence shows that this agreement was couched in such
vague terms that there was considerable dispute as to its actual
meaning.
The correspondence shows that though the United States has
up to date advanced $15,000,000 on this credit so established, neither
of the other countries have advanced any of their share. All that
they have done was to establish book credits.




179

180

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

The correspondence also shows that when our advances were
finally made, they were made not to take care of war purposes but
to rehabilitate Greece. In fact, all of the proposals for advances
mentioned the fact that the advances are to be used for rehabilita­
tion and relief purposes. The Treasury Department only agreed
to these advances when they were assured that they were to be made
for expenditure in the United States.
There is nothing in the correspondence on Greece showing any
itemized statement as to how this money was spent other than a
statement in French, giving merely the names of the parties who
received the money, no statement being given of what the money
was spent for.
It must also be borne in mind with reference to the Greek loan
that this loan was made to the Venizelos government, which govern­
ment has since collapsed, and the former King Constantine, who had
been ousted from the throne by Great Britain and France because
of his pro-German leaning, has been returned to the throne by a
popular plebiscite of Greece.
At the time of the political disturbances in Greece, just prior to
the return of Constantine, a fourth advance of $5,000,000 was asked,
but this request has never been granted by the Treasury Department.
The correspondence with the committee only runs to January 14,
1921, and it does not show a direct refusal on the part of the Treas­
ury Department of the United States of this request.
For a complete understanding of the political bearing on these
cash advances see the last subdivision of letters in the Greek file,
attached hereto.
Because of the United States Treasury’s refusal to release all or
a large part of the credit established for Greece, Greece adopted
retaliatory measures in the form of a high tariff on certain American
goods sold in Greece. It increased the tariff on oleomargarine 300
per cent.
The Treasury’s report shows that up to November 15, 1920, the
interest on the Greek advances were paid.
We hold no obligations of Greece for military supplies sold or
foodstuffs supplied by the American Belief Commission.

SECTION 99-A.
File Begins with the Three-Party Agreement Entered into at Paris Between
the Representatives of England, France, the United States, and Greece.
This Agreement Became the Basis for All Credits Established by the
Above-Named Countries with Greece and is Always Referred to in Sub­
sequent Correspondence Attached as the February 10, 1918, Agreement,
Although it is Headed as Entered into December 1, 1917. This Agreement
is Appended in the Original French as Well as in an English Rough Trans­
lation Made for the Treasury Department. To These Documents is Added
a Translation of Ratification of the Agreement by the Royal Greek Gov­
ernment.
S u n d e r la n d

H ou se,

London, February 20.
D e a r M r. S e c r e t a r y : In accordance with my telegram No. 77 of February 16
I am sending herewith the original and copy of translation of the agreement
executed between the Government of France, Great Britain, and the United
States on the one hand and the Greek Government on the other.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

181

Copies of my letter to the Greek minister in London in regard to a modifica­
tion of article 3 in so far as the Governments of France and Great Britain are
concerned, and of my supplement letter of instructions to the American
consul general at Athens, are also inclosed. The cable instructions given by
me to the consul general were repeated to you in my No. 77.
Sincerely, yours,*
O scar T. C rosby .
H on. W il l ia m G. M cAdoo,
Secretary of the Treasury, Washington. D. C., U. 8. A.
The financial delegates of the United States of America, Great Britain, and
France, as a consequence of the decision of the Supreme War Council, dated
December 1, 1917, the American delegates, ad referendum, have approved the
following agreement with the Greek Government:
ARTICLE 1.

The Governments of the United States of America, France, and Great Britain
agree to make advances to the Greek Government by equal shares during the
year 1918 in order to allow them to get in their own country the credits necessary
to provide:
1. For the settlement of arrears.
2. For expenses during 1918 of the Greek Army and Navy, the strength of
which having been increased as delineated in the military arrangements.
The latter expenses, including navy expenses, to be made in Greece, apply
to the following items:
(a) Pay and indemnities of the army.
(&) Separation allowances.
(c) Utilization of local resources.
(d ) Requisition of the animals and carts of the country.
(e ) Transports by sea and rail.
The advances mentioned in this article will be liable to come up to the amount
of francs 750,000,000, including the 50,000,000 about which the arrangement of
November 30, 1917, was made.
ARTICLE 2.

These advances will be dealt out to the Greek Government according to their
needs from time to time upon their asking and subject to the agreement of an
interallied financial commission, which will be created in Athens. This com­
mission will include delegates of the United States, France, Great Britain, and
Greece.
The employment of these credits will be controlled by the aforesaid commis­
sion as far as the arrears are concerned and by a similarly composed interallied
military commission, also meeting in Athens, which commission, previous to
the grant of advances meant for the organization and keeping of the army and
navy, will have given its advice to the financial commission.
ARTICLE 3.

These advances, granted in dollars, francs, and sterling, intended to be
security for issues of the National Bank of Greece to the same amount, will be
available during the war within the scope of needs by means of drafts on one
or the other of the lending countries in case the foreign balances of the Greek
treasury and the national bank should fall below 10 0 ,000,000 francs.
Six months after the conclusion of peace the balance of these advances will
be available without the restrictions of the first paragraph.
ARTICLE 4.

The advances will be represented by obligations of the Greek Government.
For each draft, and from the day on which it will have been made, these obli­
gations will yield interest at a rate determined with each of the Governments
concerned, and, save the right reserved by the Greek Government of beginning
the amortization in advance, will be redeemable by the end of the fifteenth year
following the cessation of hostilities. #
Until the redemption of the aforesaid obligations, no new security may be
used for an exterior loan without the assent o f the Governments o f the United
States of America, France, and Great Britain.



182

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
ARTICLE 5.

In consideration of the advances granted to them, the Greek Government
pledge themselves to take immediately the necessary steps to prevent in future
the granting in Greece of remittances upon foreign countries, unless it be for
legitimate needs, and upon production of documentary evidence.
Done in Paris, 1918, in four copies.
A . B onar L a w .

Lu et approuve:
L l . K lotz .

Approved ad referendum:
O scar T . C rosby .
GENNADIUS.

The above contract has been approved by the Government of the United States
of America with the following reservation:
The obligations given to the Government of the United States of America may
be redeemed within a lapse of time which will not exceed the maximum limit
allowed by the laws of the United States, but will never be longer than 15 years
from the date of the cessation of hostilities.
O scar T . C rosby .
F ebruary

13, 1918.

Les del£gues financiers des Etats-Unis, de la Grande-Bretagne et de la France
ont, en consequence de la decision du Comity supSrieur de guerre en date du le r
d§cembre 1917, donne leur approbation-les representants des Etats-Unis ad
referendum-^ l’aceord ci-dessous avec le Gouvernement hellenique:
article i .

Les Gouvernements des Etats-Unis, de la France et de la Grande Bretagne sont
d’accord pour consentir, par parts egales, au cours de l’annee 1918, au Gouverne­
ment hellenique, des avances destinees a permettre a celui-ci de se procurer les
ressources interieures nScessaires l°-k la liquidation de l’arriere, 2 °-aux d6
penses, pendant ladite annee 1918, de l’armee et de la marine hell£niques portSs
aux effectifs prevus dans les arrangements militaires. Ces derni£res dSpenses,
y compris celles de la marine a effectuer en Gr§ee, s’appliquent aux objets
suivants:
(a) Solde et ind£nmit6 de la troupe.
(Z>) Allocations aux families des nobilises.
(e) Exploitation des ressources locales.
( cl) Requisition des animaux et voitures du pays.
(e) Transports par voie ferree et de mer.
Les avances visees au present article seront susceptibles d’atteindre 750 mil­
lions de francs, y compris les cinquante millions qui ont fait l’objet de l’arrangement du 30 Novembre 1917.
ARTICLE 2.

Ces avances seront mises & la disposition du Gouvernement hellenique, au
fur et it mesure de ses besoins, sur sa demande et sur l’avis conforme d’une
Commission financiSre interalliee qui sera institute &Ath£nes. Cette Commission
comprendra des representants des Etats-Unis, de la France, de la GrandeBretagne et de la Gr£ce.
L’emploi de ces ressources sera suivi tant par ladite Commission en ce qui
concerne le paiement de l’arriere que par une Commission militaire interalliee
d’une composition semblable sie.cceant egalement k Ath^nes et qui, prealablement
^ Toctroi des avances ayant pour objet l’organisation et l’entretien d*e 1’arm^e
et de la marine, aura fourni son avis a la Commission financi6 re.
ARTICLE 3.

Ces avances, accordees en dollars, francs et livres sterling, destinies a gager
des Emissions de la Banque Nationale de Gr^ce pour des montants §gaux pourront, pendant la duree de la guerre, §tre u tilises dans la limite des besoins par
des tirages sur l’un ou l’autre des Etats pr^teurs dans le cas oft Tavoir disponible




183

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

k PEtranger du TrSsor hell6nique et de la Banque Nationale tomberait
audessous de 10 0 millions de francs.
Six mois apr§s la conclusion de la paix, le solde de ces avances pourra §tre
utilisS sans les restrictions de l’alin^a premier.
ARTICLE 4.

Les avances seront representees par des obligations du Gouvernement
hellSnique.
Pour chaque tirage et k dater du jour oft il aura eu lieu, ces obligations, pour
un montant 6 gal k celui du dit tirage deviendront productives d’inter£t k un
taux fixS respectivement avec les parties, et seront, sauf le droit que se reserve le
Gouvernement hell£nique de les amortir par anticipation, remboursables & la
fin d la quinzi£me annee qui suivra la cessation des hostility.
Jusqu’au remboursement des dites obligations aucun gage nouveau ne pourra
§tre affecte k un emprunt extSrieur sans l’assentiment des Gouvernement des
Etats-Unis, de France et de Grande Bretagne.
ARTICLE 5.

En consideration des avances qui lui sont accordSes, le Gouvernement hellgnique s’engage k prendre imm§diatement les mesures nScessaires pour qu’il
ne soit plus & l’avenir d61ivr6 en Gr£ce de remises sur l’etranger que pour des
besoins legitimes et sur production de documents justificatifs./.
Fait k Paris, le en quatre exemplaires.
A. B

onar

La

scar

T. C r o s b y .

w

.

Approuve ad referendum.
O
GENNADIUS.

Le contrat ci-dessus a 6 t6 approuv§ par le Gouvernement des Etats
la reserve suivante:
les obligations qui seront remises au Gouvernement des Etats Unis
ront un d61ai de remboursement qui ne pourra excSder le delai
autorisg par la legislation des Etats Unis, mais ne sera en aucun cas
k quince ans, k compter de la cessation des hostility.
O

scar

Unis sous
comportemaximum
superieur

T. C r o s b y .

F e b r u a r y 13, 1918.

Ratification o f the financial agreements signed January 28/February 10,
1918, between the Governments of France, England, and the United States on
the one hand and the Greek Government on the other. Also addition o f article
8 A to law GCMB of March 6/19, 1910.
L aw 1235.
We, Alexander, King of the Hellenes, in unanimity with the House of Parlia­
ment, have resolved and do decree:
ARTICLE 1.

The financial agreements signed January 28/February 10, 1918, between the
Governments of France, England, and the United States on the one hand and
the Greek Government on the other, including the supplements to such agree­
ments, are hereby ratified. The original and the translation of said agreements
read as follow s:
French.

Greek.

ARTICLE 2.

The minister of finance is empowered to sign or to intrust to his deputy to
sign the bonds (of article 4 of above agreement) for the payment of the
750,000,000 francs in advance.




184

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
ARTICLE 3.

Article 8 A is added to the law GCMB of March 6/19, 1910, concerning loan,
maximum 240,000,000, in gold drachmas, for abolishing compulsory circulation
and modifying the terms o f the regulation, ratified by law BFIT, of February
26, 1898, on international control, re redeemable and consolidated loans in gold
therein discussed. Article 8A runs as follow s:
“ ARTICLE 8 A.

“ The National Bank of Greece is authorized to issue bank notes according
to the provisions of the preceding article against credits made over by the
Greek treasury to the order of the bank at the exchequers of England, France,
and the United States of America, or against credits opened in favor of the bank
by the said exchequers at the banks of the said countries.
“ In case the foreign exchange is depreciated as regards the Greek drachma,
this exchange and the credits of the preceding paragraph are entered as assets
of the national bank at par, the difference between these credits and the bank
notes issued being entered as liabilities of the national bank under the title
‘ Exchange difference in independent account according to article 8 A of
law GCMB.’ ”
Possible gain or loss by reason of the exchange difference in the cases pro­
vided for by the first paragraph of this article are to be reckoned to the debit
or eredit of the Greek treasury.
The gain or the loss is determined at the moment of the realization o f the
credits by the national bank through sale of the corresponding bill of exchange
abroad.
The minister of finance can assure to the National Bank of Greece for the
expenditures of manufacture, transportation, substitution, etc., incident upon
management of the bank notes issued according to the present article, one-eighth
per cent annually on said bank notes.
This percentage will cease being paid by the treasury according to what
amount and for as long a time as the above credits of the Allies are interest
bearing.
ARTICLE 4.

The minister of finance is authorized to proceed without auction to leasing
buildings for the installation of the Interallied Financial and Military Commis­
sion, as also offices for the general accountant.
ARTICLE 5.

The Interallied Finance Commission and the Interallied Military Commission
are allowed expenditures for personnel and all other expenses by money orders
at the demand and in the name of the Interallied Finance Commission or agent
appointed by the same without further ceremony.
Five hundred drachmas monthly for expenses attendant upon representation
are granted to the Greek representative in the Interallied Finance Commission,
and 250 drachmas monthly for the same purpose to the Greek representative in
the Interallied Military Commission, said sums being paid to both at the begin­
ning of each month.
For payment of above expenditures an annual credit of 300,000 drachmas is
entered in the budget of expenditures of the ministry of finance.
The present law goes into force on December 1, 1917.
Let the present law, enacted by Parliament and confirmed by us to-day, be
published in the Government Gazette and be executed as a law of the State.
A lexan de r .
M il t ia d e s N e g r o p o n t is ,

Minister of Finance.
VisSed and the great seal of the State impressed.
I.
A th e n s,

April 4, 1918.




D. T s i r im o k o s ,
Minister of Justice.

FOREIGN LCANS AND AUTHORITY FOR MAKING SAME.

185

D e c e m b e r 8 , 1917.
I have received, through the State Department, a cable
from Assistant Secretary Crosby containing the following passage with ref­
erence to Greece:
Referring to Greece Supreme War Council at Versailles. Meeting concluded.
House voting affirmatively that it is of prime military importance that Venizelos should return to Greece. Satisfied with support Allies and asked finance
section of interallied conference to prepare plan for such support. After pro­
longed conference, following plan satisfactory to Venizelos and his finance min­
ister, Diomides, is unanimously recommended to Governments of United States,
France, and Great Britain military requirements o f Greece for coming year,
based on report of France finance and military missions, involving promptly
increasing active army from present three divisions to at least nine divisions,
will require about 600,000,000 francs for munitions and supplies for army and
navy herein called munition and supplies fund, and 750,000,000 francs for
payment of soldiers and sailors and other local military expenditures, including
certain arrears herein called military funds. France and Great Britain have
agreed to provide munition and supply fund, reserving for determination until
after conclusion of peace extent and manner of their reimbursement by Greece
in light of various considerations, including results of terms of peace to Greece.
I have declined to recommend participation by the United States in this
advance because of extent to which European political questions which do
not concern us may be involved in ultimate settlement. Representatives of
Great Britain and France recognize fairness of this position, but may later
urge that we share this burden. Conditioned upon this fund being supplied
by France, Great Britain recommends that United States join with France
and Great Britain in supplying military fund o f 750,000,000 francs upon
following terms: Advances to be provided as required under supervision of
military and financial commissions sitting at Athens, including representatives
of United States, France, and Great Britain, and Greece. I believe our present
minister and military attach^, if there is one, will be sufficient representation
for us in commissions above mentioned. Advances to take form of credits in
dollars, francs, and sterling, which will serve as basis for Greek bank notes,
Greece to have right actually to draw against these credits during the war
only in case balances abroad o f Greek treasury and National Bank should fall
below 100,000,000 francs. Six months after conclusion of peace, credit can be
drawn upon without restriction. The three powers joining in advances are to
receive Greek 5 per cent obligations, loan 15 years after cessation o f hostilities,
Greece agreeing that no pledges shall be created in favor of any subsequent
exterior loan without consent o f three leading Governments. So long as and
to extent that Greece does not draw against credits interest on obligations will
be remitted. Obligations to be received by United States to contain special
provisions meeting the requirements of our September law. Agreement con­
tains other details for protection of lenders. Col. House and Gen. Bliss join
in recommending our joining in support of Greece in view of urgent military
necessity and upon principle that we should join with Great Britain and France
in supporting military programs of weaker nations whose military cooperation
is important to aid in accomplishing desired victory, even though involving ad­
vance for expenditures outside our country. If plan approved will agree upon
precise amount, dollar credit to represent our third in the aggregate advance
herein for convenience expressed as 750,000,000 francs. Greek minister at
Washington will be authorized to sign obligations.
I am disposed to feel that, in view o f the joint recommendation o f Col.
House, Gen. Bliss, and Mr. Crosby, that this be done. We should join with
Great Britain and France and advance one-third o f the 750,000,000 francs to
Greece, although this does involve expenditures outside o f our country. If
you approve, may I ask that you indicate your approval upon this letter, carry­
ing as it will the establishment o f a credit for Greece of 250,000,000 francs, or
approximately $43,859,649.12 at the current rate of exchange.
Cordially, yours,
W . G. M c A d o o , Secretary.
The P r e s i d e n t ,
The White House.
D e a r M r. P r e s i d e n t :

T h e W h it e H ou se ,

Approved:



December, 1917.
W oodrow W il s o n .

186

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
SECTION 100.
Approval of Credits.

Operating under the general approval of credits to the amount of
approximately $44,000,000 by President Wilson, Secretary Lansing
(letter of June 17, 1918, to Secretary of Treasury) approved and
Assistant Secretary Leffingwell established a credit of $15,790,000,
which amount was the one-third share to be borne by the United
States of book credits to be opened by England, France, and the
United States of 150,000,000 francs and 120,000,000 francs by arrange­
ments of December 1,1918, and April 18, 1918, entered into by agents
of the four countries acting in pursuance to the three-party agree­
ment.
On June 20, 1918, the Treasury Department advised the Greek
minister at Washington by letter that the credit had been established.
Assistant Secretary of the Treasury, Mr. Leffingwell, in a letter dated
July 12, 1918, notified the Treasurer of the United States that on
June 21,1918, the credit ot$15,790,0001 had been established in favor
of the Royal Greek Government; that the obligation would bear
interest at rate of 5 per cent only upon such sums as were actually
advanced; and that the Treasurer should hold the credit available
to meet drafts drawn upon the Treasury by the National Bank of
Greece and presented by the Greek minister at Washington.
Upon investigation it was found that the British Government had
established credits with Greece on the gold-parity rate between
pounds sterling and francs, and the two American negotiators (Mr.
Crosby and Mr. Cravath) of the three-party agreement advised the
Treasury Department that it was the intention that credits estab­
lished in accordance therewith should be established at the goldparity rate.
Consequently, on November 25, 1918, Acting Secretary of State,
Mr. L. S. Eowe, addressed the President asking his approval of an
additional credit of $4,236,630. This was necessary to add to the
$44,000,000 already approved in order that the whole credit would
equal 250,000,000 francs at gold-parity rate, or the full share of the
United States under the three-party agreement.
N o v e m b e r 25, 1918.
Under date of December 10, 1917, you approved the
establishment in favor of the Greek Government of a credit of 250,000,000
francs, which in the request for your approval of the credit was stated to be at
the then rate of exchange equivalent to approximately $44,000,000, and the
credit which you approved has been since carried on the books of this department
at $44,000,000. Your approval of the establishment of this credit in favor of
the Greek Government was asked to enable this department to carry out its
part of the financial arrangement entered into about a year ago between the
British, French, and American Treasuries and the Greek Government which
provided for certain credits to be established against which bank notes of the
Greek National Bank were to be issued for the purpose of providing for certain
of the expenditures required to be made by the Government of Greece in the
prosecution of the war.
The Government of Greece has insisted that it was the purpose and intent of
the agreement referred to that the credits to be established thereunder should
be established at the gold-parity rate between francs and dollars. Upon inquiry
D e a r M r. P r e s i d e n t :

1 This credit o f $15,790,000 represented the equivalent o f 90,000,000 francs at the then
current rate o f exchange.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

187

it is found that the British Government has established under the said agree­
ment credits at the gold-parity rate between pounds and francs, and Mr. Crosby
and Mr. Cravath, who negotiated the agreement, advise that it was the intenttion that credits established in accordance therewith should be established at
the gold-parity rate.
Accordingly, your approval is now asked to the establishment in favor o f the
Greek Government of an additional credit in the amount of $4,236,630, which,
with the $44,000,000 credit you have already approved, will be the equivalent
at gold parity of 250,000,000 francs, the limit of the credit to be established by
the United States in favor of the Greek Government under the agreement afore­
said.
I f the establishment of this further credit meets with your approval, will you
be good enough to so indicate at the foot of this letter?
Cordially, yours,
L . S. R o w e ,
Acting Secretary.
The P r e s i d e n t ,
The White House.
T h e W h ite H ou se,

November 27, 1918.
Approved.
(Signed)

W oodrow t W ils o n .

SECTION 101.
No Cash Advances Made to Greece Prior to Armistice.
[See note to follow ing statement.]
N o v e m b e r 30, 1918.
Complete statement of expenditures in the purchase of obligations o f foreign
Governments under acts September 24, 1917, April 4, 1918, and July 9, 1918.

Great B ritain____________________________________________ $2,641,000,000.00
France ___________________________________________________ 1,360,000,000.00
Italy _____________________________________________________
916,000, 000. 00
Belgium __________________________________________________
150,495,000.00
R ussia____________________________________________________
90,229,750.00
C u b a _____________________________________________________
10,000,000.00
S erb ia ____________________________________________________
9, C14, 697. 70
Czecho-Slovak National Council____________________________
5,000,000.00
T o t a l______________________________________________
5,182,039,447.70
credit in favor of the Greek Government o f $15,790,000 has been
formally established to meet drafts to be drawn on the Treasurer o f the United
States, but not yet presented, under arrangements heretofore entered into with
the Greek Government. There have been drawn upon the Treasurer o f the
United States, but not yet presented, drafts in the amount o f $5,000,000, the
status of which is not determined, in favor of the Rumanian Government.
N o t e . —A

SECTION 102.
Correspondence Establishing a Second Book Credit of $23,764,036 or an
Equivalent at Gold Parity of 115,000,000 Francs— Credit Established De­
cember 3, 1918.
D e c e m b e r 3, 1918.
: 1 have the honor to inform you that as contemplated by
the financial agreement entered into in Paris by the representative of your
Government and the financial representatives of the Governments of France,
Great Britain, and the United States, the Secretary of the Treasury has estab­
lished a credit in favor o f the Royal Greek Government in the amount o f
$23,764,036. This credit is in addition to the credit o f $15,790,000 heretofore
established in favor of your Government by the Secretary of the Treasury.
D e a r M r. M i n i s t e r




188

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

The sum of the two credits thus established in favor of your Government is
$39,554,036, the equivalent at gold parity of 205,000,000 francs. In establish­
ing the above credit of $23,764,036 in favor of your Government it is done on
the understanding that the British and French Governments have each estab­
lished credits in favor of your Government in pursuance of the financial agree­
ment before mentioned up to the equivalent at gold parity of 205,000,000 francs,
or that said Governments are each about to establish additional credits in
favor of your Government under said agreement which with the amounts pre­
viously established thereunder in favor of your Government by said Govern­
ments, respectively, will bring the total amounts of the credits established by
each of said Governments in favor of your Government under said agreement
up to the equivalent at gold parity of said amount of 205,000,000 francs.
The credit o f $23,764,036 will be made available against the duly executed
obligations of your Government in a corresponding amount and in a manner to
be arranged, to comply with the provisions and limitations of the Paris agree­
ment above mentioned.
I am, my dear Mr. Minister,
Yours, very truly,
A lb e r t R a t h b o n e .

Mr. G e o r g e R o u s s o s ,
Envoy Extraordinary and Plenipotentiary,
The Royal Greek Legation, Washington, D. C.

L e g a tio n

R o y a le

de G r e c e ,

Washington, December 3, 1918.
D e a r Mr. S e c r e t a r y : I acknowledge the receipt of the letter of Mr. Rath­
bone of even date advising of the establishment by the Secretary of the
Treasury of a credit in favor of the Royal Greek Government in the amount
of $23,764,036, which with the $15,790,000 credit previously established by
you in favor o f my Government is the equivalent of 205,000,000 francs at gold
parity.
I hand you herewith the obligation of my Government in the aggregate
amount of $23,764,036, which I have executed in the name of my Government
pursuant to the authority which it has conferred upon me, and pursuant to like
authority I am authorized to receive from you the advance to my Government
in a corresponding amount for the purpose of making it available for the use
contemplated by the financial agreement entered into in Paris by the repre­
sentative of my Government and the financial representatives of the Govern­
ments of France, Great Britain, and the United States. I shall be obliged,
however, if you will cause the above amount to be held by the Treasurer of
the United States to be paid by him only when and to the extent from time to
time that there shall be presented to him drafts drawn upon him by the
National Bank of Greece. I shall arrange to furnish you with the necessary
authorization from the National Bank of Greece and to its officers authorized
from time to time to execute these drafts in its behalf, and as well specimens
of their signatures, and shall also arrange that all such drafts presented to
the Treasurer of the United States shall bear a notation signed by the Greek
minister of finance in substantially the following w ords:
“ The draft upon which this notation is made is drawn under and in ac­
cordance with the provisions of the Paris financial agreement, dated Feb­
ruary 10, 1918.”
The authority hereby conferred upon the Treasurer of the United States to
pay drafts drawn by the National Bank of Greece is irrevocable. I understand
that the interest on the obligation of my Government handed to you herewith
will be remitted until payments are made against drafts of the National Bank
of Greece, each amount so paid to carry interest from the date o f its payment
by the Treasurer of the United States.
I am, my dear Mr. Secretary,
Yours, very truly.
G. Roussos.
The honorable the S e c r e t a r y o f t h e T r e a s u r y ,
Washington, D. C.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

189

D e c e m b e r 3, 1918.
: I acknowledge the receipt of your letter of even date
and, in accordance with your request, take pleasure in informing you that the
amount of the obligation of your Government handed me therewith, namely,
$23,764,036, will be held by the Treasurer of the United States and paid by
him, from time to time, only when and to the extent that there shall be pre­
sented to him drafts drawn upon him by the National Bank of Greece. I
note that you will furnish the Secretary of the Treasury the necessary authori­
zation from the National Bank of Greece as to the officers who may, from
time to time, execute such drafts and as well specimens of their signatures. I
also note that you will arrange that drafts drawn by the National Bank of
Greece when presented to the Treasurer o f the United States for payment will
bear notation as set forth in your letter of even date. While I understand
that the authority which you have given by your letter to niake payments of
such drafts so presented is irrevocable, the Secretary of the Treasury reserves
all rights conferred on the United States by the financial agreement of Paris
referred to in your letter above mentioned, and the arrangement made between
us is not intended as an extension o f the undertakings of the United States
Government, as set forth in such agreement, nor to commit the Secretary of
the Treasury or the Treasurer of the United States to make payment of drafts
except in the circumstances provided in the Paris financial agreement above
referred to. I take pleasure in confirming the understanding reached in Paris
that, although the obligation of the Royal Greek Government above referred
to by its terms bears interest from its date, the interest thereon will be re­
mitted to the extent necessary to the end that interest shall be collected on
such obligation only upon amounts which the Treasurer of the United States
shall actually pay upon drafts of the National Bank o f Greece and only from
the respective dates when such payments are made.
I am, my dear Mr. Minister,
Yours, very truly,
D e a r M r. M i n i s t e r

A lbe rt R a t h b o n e .
M r. G eorge R otjssos ,

Envoy Extraordinary and Minister Plenipotentiary,
The Royal Greek Legation, Washington, D. C.
D e c e m b e r 3, 1918.
Sir : Referring to my letter of July 12 last, on June 21, 1918, a credit of
$15,790,000 was established in favor o f the Royal Greek Government and
an obligation of that Government payable to the Government of the United
States in a like amount was transmitted to you to be placed in the vaults of
your office under your custody. To-day a further credit o f $23,764,036 was
established in favor of the Greek Government, making the total credits estab­
lished in favor of that Government $39,554,036, and a similar obligation,
dated to-day, in the sum of $23,764,036 was likewise transmitted to you to be
placed in the vaults of your office under your custody. These obligations by
their terms are stated to bear interest from their respective dates at the
rate of 5 per cent per annum, but by an understanding entered into in Paris the
interest on the obligations will be remitted to the extent necessary to the end
that interest shall be collected on such obligations only upon amounts which
shall actually be paid by you upon drafts of the National Bank o f Greece and
only from the respective dates when such payments are made.
Pursuant to the establishment of the credits referred to and in accordance
with the understanding between the Secretary o f the Treasury and the Royal
Greek Government it is expected that there will be drawn against the credits
from time to time drafts upon you by the National Bank o f Greece. The
Greek minister at this capital will furnish the necessary authorization from the
National Bank of Greece as to the officers authorized from time to time to
execute these drafts on its behalf and will provide specimens of their signa­
tures and will also arrange that all such drafts presented to you shall bear
a notation signed by the Greek Minister o f Finance in substantially the fol­
lowing words:
“ The draft upon which this notation is made is drawn under and in ac­
cordance with the provisions of the Paris financial agreement dated February
10 , 1918.”




190

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Please cause to be made upon your books the necessary entries opening said
credit in the amount of $39,554,036 in favor of the National Bank of Greece to
be availed of only as aforesaid. Before making any advances under said
credit or against the obligations, above mentioned or honoring any draft drawn
under or against the same please consult this office.
By direction of the secretary.
Respectfully,
A lbe rt R a t h b o n e .

The honorable the T r e a s u r e r o f t h e U n it e d S t a t e s .

SECTION 103.
Correspondence Relating to Establishing Third Book Credit of $3,858,930, or
an Equivalent of 20,000,000 Francs at Gold Parity— Credit Established
March 25, 1919.
L e g a t io n R o y a l e de G r e c e ,

Washington, January 13, 1919.
Mr. A l b e r t R a t h b o n e ,
Assistant Secretary to the Treasurer,
Treasury Department. Washington, D. C.
Dear S ir: With reference to our telephone conversation of even date, I
have the honor to inform you that my Government has telegraphed inquiring
about the further portion of 20 .000,000 francs which was to complete the
amount of 225,000,000, which, according to a financial agreement of February
10, 1918, the United States had agreed to loan to Greece.
The Governments of France, England, and the United States, having agreed
to advance 225,000,000 each, it seems that the British Government has already
put to the credit of the National Bank of Greece the 20,000,000 francs repre­
senting the last portion of their part of 225,000,000.
I would appreciate very much your informing us how this matter stands
with the United States Government.
Very sincerely, yours,
S. X. CONSTANTINIDI,
First Secretary, Greek Legation.
J a n u a r y 15, 1919.
I have the honor to acknowledge receipt of your letter of the
13th instant inquiring as to the establishing by the United States of a credit
in dollars equivalent to 20,000,000 francs in favor of the Greek Government,
thus bringing the total credit established by the United States in favor oj.
your Government to the dollar equivalent of 235,000,000 francs.
In this connection I am to-day cabling Mr. Norman H. Davis, the representa­
tive in Paris of the United States Treasury, for information as to whether
the French Government has established or agreed to establish an additional
credit in the amount of 20 ,000,000 francs, thus bringing the total credit estab­
lished by the French Government in favor of your Government up to the
amount of 225,000,000 francs, and also for information as to whether a report
has been received from Mr. Weddell in Athens upon certain inquiries previously
addressed to him concerning the establishment of the credit in question. This
department had previously cabled to Paris for information on the two points
above mentioned, and has for some time been expecting a reply.
Very truly, yours,
D ear

S ir :

A lbert R a t h b o n e .

Mr. S. X. C o n s t a n t i n i d i ,
First Secretary Greek Legation, Washington, D. C.
L e g a tio n R o y a le de G rece,

Washington, January 30, 1919.
Mr. A l b e r t R a t h b o n e ,
Assistant Secretary to the Treasury Department,
Washington, D. C.
D e a r S ir : Referring to your letter of January 15, 1919, the contents of which
I had brought to the knowledge o f the Royal Greek Government, I have the
honor to inform you that the minister of finance, by a new cablegram, requests



FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

191

me to proceed with the necessary steps in order that the amount of 20 ,000,000
francs should be placed to the credit of the National Bank of Greece.
This sum constitutes the part of the United States in the last credit of 69,000,000 francs made to Greece by the Allies, completing thus the amount of
225,000,000 which, according to the financial agreement of February 10, 1918,
the United States agreed to loan to Greece.
I would appreciate very much your informing us how this matter stands
now with the United States Government
Yours, very truly,
M. T sam ad os,
Charge d’Affaires of Greece.
J a n u a r y 31, 1919.
Si r : I have the honor to acknowledge the receipt of your letter of
the 30th instant and take pleasure in advising you that before establishing an
additional credit in favor of your Government in an amount equivalent to
20 ,000,000 francs this department is awaiting advices from the representative
of this Government at Athens as to whether the difference between the total
military and naval expenses for November and December, estimated by your
Government at 90,000,000 drachmas, and the credits to be established to the
equivalent of 60,000,000 francs by the Governments of Great Britain, France,
and the United States under the 3-party agreement, is amply sufficient to
permit of the restitution of the amount of certain emergency purchases of
wheat and tin during the year 1918 which were improperly charged to the
agreement above mentioned.
In order to make a credit so established effective in favor of the National
Bank o f Greece, as contemplated by the tri-party agreement above mentioned,
it is necessary that this department receive the duly executed obligation of
your Government in a corresponding amount. This department has received
advices from our Department of State as to the authority of the Greek minister
to execute in the name and on behalf o f your Government such obligations.
I was informed some days ago that the Greek minister was about to leave for
Europe, and I then addressed an inquiry to our Department of State asking
whether in his absence anyone else was authorized and empowered to execute
the necessary obligations in connection with the credit above mentioned in
the name and on behalf of your Government.
I am, my dear Mr. Tsamados,
Very truly, yours,
(Signed)
A lb e r t R a th b o n e .
Mr. M. T s a m a d o s ,
Charge d’Affaires of Greece, the Greek Legation,
1715 Massachusetts Avenue NW., Washington, D. C.
D ear

L e g a tio n R o y a l D e G rece,

Washington, March 20, 1919.
Mr. A l b e r t R a t h b o n e ,
Assistant Secretary, Treasury Department, Washington, D. C.
D e a r S i r : Referring to your letter of January 31, 1919, I beg to state that
the Royal Government of Greece requests me to give them any information con­
cerning the additional credit o f the equivalent of 20 ,000,000 francs in favor of
Greece.
The Greek Treasury Department’s cablegram states that the French and
British Governments have already credited the National Bank o f Greece with
their quota, and that the French Mission (I presume the French Military Mis­
sion), has assumed the task of furnishing the information for which the
United States is asking.
Would you kindly let me know how matters now stand?
Yours, very truly,
M. T s a m a d o s ,
Charg4 d'Affaires of Greece.
M a r c h 24, 1919.
I have received your letter of March 20, stating that your
Government requests information concerning the additional credit of the
equivalent of 20,000,000 francs in favor of Greece. On my return to Washing­
M y D ear S ir :




192

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

ton this morning I am in receipt of a cable from a representative of the
United States Treasury in Europe, giving the information needed by this de­
partment before establishing a further credit in favor of your Government.
I now take pleasure in informing you that, as contemplated by the financial
agreement entered into in Paris by the representative of your Government and
the financial representatives of the Governments of France, Great Britain, and
the United States, the Secretary of the Treasury has established a credit in
favor of the Royal Greek Government in the amount o f $3,858,930, equivalent
at gold parity to 20,000,000 francs. This credit will be made available against
the duly executed obligation of your Government in a corresponding amount,
and in a manner to be arranged to comply with the provisions and limitations
of the Paris agreement above mentioned.
I addressed a letter some time ago to our Department of State, asking
whether, in the absence of the Greek minister, any other representative of the
Royal Greek Government is authorized to execute obligations in its name and on
its behalf in favor of the Government of the United States. The Treasury
must receive advices from the Department of State as to the authority to sign
such obligations on behalf of the representatives of foreign Governments. I
understand that the Department of State has conferred with you in regard to
the matter of obtaining the authority needcl.
When the Treasury Department has been advised by the State Department
regarding such authority 1 should be pleased to arrange with the representa­
tives of your Government as to making available the credits above mentioned
in its favor, as contemplated by the Paris agreement.
I am, my dear Mr. Tsamados,
Very truly, yours,
A lbe rt R a t h b o n e .

Mr. M. T s a m a d o s ,
Charge d’Affaires of Greece, The Greek Legation, Washington, D. C.

M a y 24, 1919.
Sir : Referring to Mr. Leffingall’s letter of July 12 and my letter of December
6 , 1918, on March 24, 1919, a further credit of $3,858,820 was established in
favor of the Royal Greek Government, making the total credits established in
favor of that Government $45,412,966. On May 26, 1919, an obligation dated
May 24, 1919, of the Royal Greek Government, payable to the Government of
the United States, in the amount of $2,858,930 was transmitted to you to be
placed in the vaults of your office under your custody. This obligation by its
terms is stated to bear interest from its date at the rate of 5 per cent per
annum, but in accordance with the understanding entered into in Paris tlie in­
terest will be remitted to the extent necessary to the end that interest shall
be collected thereon only upon so much of the amount thereof as shall actually
be paid by you upon drafts of the National Bank of Greece, and only from
the respective dates when such payments are made.
Pursuant to the establishment of the credit referred to and in accordance
with the understanding between the Secretary of the Treasury and the Royal
Greek Government, it is expected that there will be drawn against this credit,
from time to time, drafts upon you by the National Bank o f Greece. The Greek
Legation at this Capital will furnish the necessary authorization from the
National Bank of Greece as to the officers authorized from time to time to
execute these drafts on its behalf, and will provide specimens of their signa­
tures, and will also arrange that all such drafts presented to you shall bear a
notation signed by the Greek Minister of Finance in substantially the follow­
ing words:
“ The draft upon which this notation is made is drawn under and in accord­
ance with the provisions of the Paris financial agreement dated February 10,
1918.”
Please cause to be made upon your books the necessary entries opening said
credit in the amount of $3,858,930 in favor of the National Bank of Greece, to
be availed of only as aforesaid. This credit, together with those as to which
you have already received instructions, will bring the total credits opened on
your books in favor of the National Bank of Greece to the amount of $43,412,-




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

193

966. Before making any advances under said credits or against the obligations
which have been delivered to you or honoring any draft drawn under or against
the same please consult this office.
By direction of the Secretary.
Respectfully,
A lbert R a t h b o n e .

The T r e a s u r e r o f t h e U n i t e d S t a t e s .

SECTION 104.
Correspondence Relating to Greek Politics and Attitude of Certain American
Officials Toward Establishing New Credits.
B r i t i s h D e l e g a t io n ,

Paris, March 2, 1919.
A conference took place this morning, which you were unable
to attend, between M. Sergent and myself on the question of financial assist­
ance to Greece in 1919.
I present to M. Sergent the statement set forth in the inclosed paper
It appeared that there was even more uncertainty than I supposed as regards
the exact amount of the surplus available from 1918, but apart from this the
paper was accepted as fairly representing the situation, and the proposals
therein received the concurrence of the French Treasury.
As regards the American position, I gave it to the conference as my personal
opinion that the evident reluctance of the American Government to share in the
advances was due to a belief on their part that the issues involved were more
political than financial, and that considerations were present to which it would
be difficult for them to be a party. This suspicion on the part of the American
administration was based on various projects and proposals which had been
in the air from time to time, and which had actually materialized in one case,
namely, in the dispatch of Greek troops to Odessa. I added that my Govern­
ment also was unwilling to afford financial assistance in this connection, and
that I had explicit instructions from the war cabinet that the British Govern­
ment could not make itself responsible for expenditure arising out of the ex­
pedition to Odessa. This point of view was accepted by the French treasury.
I continued that the British treasury recognized no liability except for expendi­
tures consequential on the operations of 1918 and involved in the question of
demobilization. I ventured to say further that I did not believe the United
States Treasury would adhere to their present attitude as soon as they were
perfectly satisfied that the expenditure proposed arose out of the operation of
1918, and was not connected with any new enterprises.
I hope after perusing the inclosed document that you may be able to present
the matter to your Government in this light. Unless some new element is in­
troduced, surely as great a moral obligation lies upon the United States Treas­
ury as upon the British or French Treasury to finance to a conclusion expenses
which were undertaken with their direct approval.
Gen. Bonnier, who was present, undertook to convey my propositions to M.
Venizelos, and to suggest to M. Venizelos that it was for him to take up with
Mr. Lansing the question of American assistance. I asked, however, that this
proposed communication to M. Venizelos should be postponed until I had had
an opportunity of writing this letter to you, to put you au courant with the
proceedings.
Sincerely, yours,
J. M. K e y n e s .
N o r m a n H. D a v is , Esq.,
American Peace Commission, Hotel CriUon, Paris.
D e a r D a v is :

DRAFT CABLE TO TREASURY.
J u n e 11, 1919.
My 285. Your 1043. Greek credit.
1.
Weddell advises that by June 30 vouchers covering proper expenditures
for 1918 will be aproved sufficient to bring total up to 750,000,000 drachmae,
excluding payments for foodstuffs, remittances abroad, and other doubtful items
referred to my D 285.
S. Doc. 86,67-2------ 13




194

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

2. Weddell also states that interallied financial mission at Athens has never
proceeded upon the assumption that obligation to make advances ceased Decem­
ber 31, 1918, but has felt that the agreement covered all expenditures within
its scope made during 1918 up to 750,000,000 drachmae although not vouchered
until after December 31, 1918.
3. British and French have each established credit for 250,000,000 drachmae.
I hare always opposed extending agreement to cotter expenditures after 1918,
but think it would be very unfortunate for us without very strong grounds to
give this agreement a construction different from that of the French and B r't;sh
after they have established credit for full amount to cover 1918 expenditures.
Weddell lias very strong feelings on this matter, and I myself think that if you
are unwilling to establish credit at present time you should at least reserve
25,000,000 drachmae for establishment later on when vouchers have been ap­
proved as stated your 1043, paragraph 4.
D a v is , American Mission.
T reasury D epartm en t,

Washington, June 13, 1919.
Memorandum for Mr. Kelley.
While I feel very reluctant to advance anything further to Greece under the
old Paris agreement, in view of Davis’s cable, 344, and the fact that the British
and French have construed that agreement to cover up to the total amount
of the credit therein stipulated for 1918 expenditures, whether or not made
during 1919, I feel inclined to establish the further credit equivalent to
25,000,000 francs at gold parity as before. If Mr. Leffingwell agrees as to this,
will you draft the papers the same as those used before and cable in reply to
Davis's 344?
A. R.
J u n e 26, 1919.
Paris.
For Davis from Rathbone. Treasury, 1125.
Mission’s 2511, June 11, 7 p. in. Your D-344.
As British and French have construed Paris agreement to cover up to the total
amount of the credit therein stipulated for 1918 expenditures, whether or not
made during 1919, and in view of your recommendation, Treasury prepared to
establish Greek credit of $4,823,663.05, equivalent at gold parity to 25,000,000
francs, upon receipt from Greek representative here of request for same.

A m e r ic a n M is s io n ,

A lb e r t R a th b o n e ,

Assistant Secretary of the Treasury.

SECTION 105.
Correspondence Relating to Establishment of Additional Credit of $4,823,863.05, or Equivalent at Gold Parity of 25,000,000 Francs— Credit Estab­
lished July 31, 1919.
No. 1667.

L e g a t i o n R o y a i.e d e G r e c e ,

A Washington, July 25, 1919.
: Complying with a telegraphic order of the Royal Gov­
ernment of Greece, I have the honor to request the honorable Treasury Depart­
ment to open in favor of the Greek treasury a credit in the amount of the
equivalent of 25,000,000 francs, at gold parity, this being the balance o f the
participation of the United States in the 150,000,000 francs loan to Greece. I
am ready to sign, as in the previous case, the necessary obligations in the
name of the Royal Government of Greece.
I am, my dear Mr. Secretary,
Yours, very truly,
D e a r M r. S e c r e t a r y

M. T sam ados,

Charge d*Affaires of Greece.
The S e c r e t a r y o f t h e T r e a s u r y ,
Washington, D. C.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

195

J u l y 31, 1919.
: I acknowledge receipt of your letter of even date,
addressed to the Secretary, and, in accordance with your request, take pleasure
in informing you that a sum of money equal to the amount of the obligation of
your Government handed me therewith, namely, $4,823,663.05, will be held by
the Treasurer of the United States and paid by him from time to time only
when and to the extent that there shall be presented to him drafts drawn upon
him by the National Bank of Greece. I note that you will furnish the Secre­
tary of the Treasury the necessary authorization from the National Bank of
Greece as to the officers who may from time to time execute such drafts, and
as well specimens of their signatures. I also note that you wT arrange that
ill
drafts drawn by the National Bank of Greece when presented to the Treasurer
of the United States for payment will bear notation as set forth in your letter
of even date. While I understand that the authority which you have given by
your letter to make payments of such drafts so presented is irrevocable, the
Secretary of the Treasury reserves all rights conferred on the United States
by the financial agreement of Paris, referred to in your letter above mentioned,
and the arrangement made between us is not intended as an extension of the
undertakings of the United States Government, as set forth in such agreement,
nor to commit the Secretary of the Treasury or the Treasurer of the United
States to make payment of drafts except in the circumstances provided in the
Paris financial agreement above referred to. It is to be understood that the
foregoing amount will not be available to meet drafts of the National Bank of
Greece until vouchers for expenditures prior to 1919 shall have been submitted
to and approved by Mr. Weddell, the American delegate to the interallied
financial commission, up to 750,000,000 francs. I take pleasure in confirming the
understanding reached in Paris that, although the obligation of the Royal
Greek Government above referred to by its terms bears interest from its date,
the interest thereon will be remitted to the extent necessary to the end that
interest shall be collected on such obligation only upon amounts which the
Treasurer of the United States shall actually pay upon drafts of the National
Bank of Greece and only from the respective dates when such payments are
made.
I am, my dear Mr. Tsamados,
Yours, very truly.
M y D e a r M r. T s a m a d o s

A lb e r t R a t h b o n e .

Mr. M. T s a m a d o s ,
Charge d'Affaires, Greek Legation,
1715 Massachusetts Avenue NW., Washington, I). C.

W a s h i n g t o n , D . C ., July S I , 1919.
Mr. S e c r e t a r y : I acknowledge the receipt of the letter of Mr. Rathbone of even date advising of the establishment by the Secretary of the Treas­
ury of a credit in favor of the Royal Greek Government in the amount of
$4,823,663.05, which, with the $43,412,966 credit previously established by you in
favor of my Government, is the equivalent of 250,000,000 francs at gold parity.
I hand you herewith the obligation of my Government in the amount of $4,823,663.05, which I have executed in the name of my Government pursuant to the au­
thority which it has conferred upon me, and pursuant to like authority I am
authorized to receive from you the advance to my Government in a corresponding
amount for the purpose of making it available for the use contemplated by the
financial agreement entered into in Paris by the representative of my GoVernment and the financial representatives of the Governments of France, Great
Britain, and the United States. I shall be obliged, however, if you will cause
the above amount to be held by the Treasurer of the United States to be paid
by him only when and to the extent that there shall be presented to him f,rom
time to time drafts drawn upon him by the National Bank of Greece. I shall
arrange to furnish you with the necessary authorization from the National Bank
of Greece as to its officers authorized from time to time to execute these drafts
in its behalf, and as well specimens of their signatures, and shall also arrange
that all such drafts presented to thg Treasurer of the United States shall bear
a notation signed by the Greek minister of finance in substantially the follow­
ing words:
D ear




196

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

“ The draft upon which this notation is made is drawn under and in accord­
ance with the provisions of the Paris financial agreement dated February 10,
1918.”
The authority hereby conferred upon the Treasurer of the United States to
pay drafts drawn by the National Bank of Greece is irrevocable. I understand
that the interest on the obligation of my Government, handed to you herewith,
will be remitted until payments are made against the drafts of the National
Bank of Greece, each amount so paid to carry interest from the date of its pay­
ment by the Treasurer of the United States.
I am, my dear Mr. Secretary,
Yours, very truly,
M. T s a m a d o s .
T h e Secretary o r t h e T r e a su r y.
J u l y 31, 1919.
: I take pleasure in informing you that, as contem­
plated by the financial agreement entered into in Paris by the representative of
your Government and the financial representatives of the Governments of
France, Great Britain, and the United States, the Secretary of the Treasury
has established a credit in favor of the Royal Greek Government in the amount
of $4,823,663.05, the equivalent at gold parity of 25,000,000 frances. This credit
will be made available against the duly executed obligation of your Govern­
ment in a corresponding amount and in a manner to be arranged to comply W
’ith
the provisions and limitations of the Paris agreement above mentioned, and
on the same terms as the previous credits, totaling $43,412,966, advanced to
your Government.
I am, my dear Mr. Tsamados,
Yours, very truly,
M y D e a r M r. T s a m a d o s

A lb e r t R a t h b o n e .

Mr. M. T s a m a d o s ,
Charge d’Affair&s Greek Legation, Washington D. C.
J u l y 31,1919.
Si r : Referring to Mr. Leffingwell’s letter of July 12 and my letters of
December 3, 1918, and May 24, 1919, on July 31, 1919, a further credit ot
$4,823,663.05 was established in favor of the Royal Greek Government, making
the total credits established in favor of that Government $48,236,629.05. On
July 31, 1919, an obligation dated July 31, 1919, of the Royal Greek Govern­
ment, payable to the Government of the United States, in the amount of
$4,823,663.05, was transmitted to you to be placed in the vaults of your office
under your custody. This obligation by its terms is stated to bear interest
from its date at the rate of 5 per cent per annum, but in accordance with the
understanding entered into in Paris the interest will be remitted to the extent
necessary to the end that interest shall be collected thereon only upon so
much of the amount thereof as shall actually be paid by you upon drafts of
the National Bank of Greece and only from the respective dates when such
payments are made.
Pursuant to the establishment of the credit referred to and in accordance
with the understanding between the Secretary of the Treasury and the Royal
Greek Government, it is expected that there will be drawn against this credit
from time to time drafts upon you by the National Bank o f Greece. The
Greek Legation at the capital will furnish the necessary authorization from
the National Bank of Greece as to the officers authorized from time to time
to execute these drafts on its behalf, and will provide specimens o f their signa­
tures and will also arrange that all such drafts presented to you shall bear a
notation signed by the Greek minister of finance in substantially the following
w ords:
“ The draft upon which this notation is made is drawn under and in ac­
cordance with the provisions of the Paris financial agreement dated February
10, 1918.”
Please cause to be made upon your books the necessary entries opening said
credit in the amount of $4,823,663.05 in favor of the National Bank of Greece,
to be availed of only as aforesaid. This credit, together with those as to which
you have already received instructions, will bring the total credits opened on




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

197

your books in favor of the National Bank of Greece to the amount of $48,236,629.05. Before making any advances under said credits or against the obliga­
tions or honoring any drafts drawn under or against the same, please consult
this office.
By direction of the Secretary.
Respectfully,
A lb e r t R a t h b o n e .
T h e T r e a s u r e r o r t h e U n it e d S t a t e s .

SECTION 106.
Annual United States Consular Report for 1918 of Greece, Showing (1) High
Public Debt $93.80 per Capita; (2) Inadequate Receipts and Revenues.

The Treasury Department as well as the State Department was in
possession of these and other facts and reliable information concern­
ing the situation of Greek fiscal and financial affairs before any cash
advances had been made.
Excerpt: Annual report on commerce and industries for 1918 for the Kingdom
of Greece.
F rom : Alexander W. Weddell, consul general.
Place: Athens, Greece.
Date: June 16, 1919.
Greece of to-day is a country of approximately 5,000,000 souls, in a territory
of about 44,700 square miles. The public debt on December 31, 1918, was
Drs. 2,431,925,845, or some Drs. 486—$93.80 per capita. In addition to this
heavy debt, there must sooner or later be added the outstanding Turkish debt
on the territories acquired as a result of the Balkan wars o f 1912-1913. The
above figures of public debt of 1918 represent a gain of 100 per cent over that
of 1913.
To meet present and future financial needs of the country the Government
has enacted within the 1 2 months a number of laws imposing fresh taxes or
increasing the scales of those already in force. Among these may be cited:
(a) Increase of tithes. Taxes on import permits. Taxes on revenues of
mines.
(b) Taxes on exportation o f tobacco. Taxes on tobacco production. Taxes
on wine-consumption, and consumption of spirits.
(c) Taxes on stock-exchange transactions. Stamp taxes on legal documents.
Taxes on consumption of electric current. Taxes on forest products. Taxes on
incomes from war-profits. (Taxes on incomes (augmenting).
It is anticipated that from these imposts the Government will receive for
1918 some 57.170,000 drachmas ($11,036 810) and for 1919, 69,795,000 drachmas
($13,470,435), with a natural tendency to a decline in the following years as
taxable war profits diminish following the dawn of peace.
Returning to the question of the public debt of Greece it is interesting to
recall that this is in large measure under the control of the International Finan­
cial Commission, created in 1898, following Greece’s disastrous war with
Turkey. This commission has under its control as monopolies of the Govern­
ment the sale of salt, kerosene, matches, playing cards, cigarette paper, emery;
various stamp taxes; the revenue of certain customhouses, and certain sur­
taxes on tobacco.
The year just closed was one of the most profitable in the history of the
commission, despite the existence o f war. The total receipts of the commission
amounted to 90.138,297.75 drachmas against 66,342,115 drachmas in 1917, and
55,021,654 drachmas in 1913.
Of the various monopolies only those of salt, playing cards, tobacco, and
stamped paper showed gains. The heavy advance record d was due in large
measure to receipts from the Piraeus customhouse, these amounting in 1918
to 31,185,798 drachmas, against 14,262,000 drachmas for the preceding 12
months, which, however, were marked by a blockade for half the period of
this and other important Greek ports.




198

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
SECTION 107.

First Demand by Greece for a Cash Advance— Cash Advance Made December
15, 1919.
(N o t e .— The Greek minister in the following letter does not base
his request on the three-party agreement, but rests his case “ on the
equities ” and he specifically states that the money so advanced would
be used “ to feed her [Greece’s] population, run her factories, and
provide for the needs of her economic life.” He says nothing about
money to be used to cover Greece’s 1918 expenditures or “ for the
prosecution of the war.” )
R o y a l L e g a t io n

of

G r eece ,

Washington, September 3, 1919.
Si r : The financial agreement, concluded in Paris on February 10, 1918, pro­
vided for a loan of 750,000,000 francs to be granted to Greece by the three
signatory powers of the agreement to w it: the United States of America, France,
and England.
The second paragraph of article 3 of this agreement stipulates that Greece
could not have recourse to these credits granted to her until six months after
the signature of peace.
However, the United States being the country having suffered least from the
ravages of the war as icell as the country producing everything required by the
allied nations, it is to her, very naturally, that Greece turns to procure all that
she needs to feed her population, to run her factories, and to provide for the
needs of her economic life (foodstuffs, agricultural implements, coal, etc., etc.).
In order to make the payment of all her orders without running the risk of
seeing her monetary unity depreciated, Greece has need of credits in the
United States.
It is for this reason, and by order of my Government, that I have the honor
to request the Government of the United States to take under consideration the
ct'itical situation of my country at the present time, and kindly agree that the
Greek Government may have recourse immediately to the credits arranged for
in the financial agreement of Paris, in order to be in the position to meet
the payment of debts incurred through large orders made and to be made in
the United States of America. The Greek Government, I am sure, will appre­
ciate very much this favor, relying on the friendly feelings that unite the two
countries.
The necessary obligations, in the amount of $48,286,629, constituting the
share of the United States, were signed at different periods by Mr. George
Roussos and myself.
Trusting that the request of the Royal Greek Government will be favorably
considered, I beg to remain,
Yours, very truly,
M. Ts am a d o s, Charge d’Affaires of Greece.
Hon. R o b e r t L a n s i n g ,
Secretary of State.
S e p te m b e r 10, 1919.
: I have the honor to acknowledge the receipt of your
communication of September 8 to the Secretary of the Treasury inclosing copy
of a note from the Greek charge d’affaires ad interim requesting that the Greek
Government may have recourse immediately to the credit established by the
United States Government in favor of Greece under the financial agreement
concluded in Paris on February 10, 1918, providing for a joint loan o f 750,000,000 francs by the three signatory powers—the United States, France, and
England.
While there are considerable limitations to the use of funds under this credit
until six months after the conclusion of peace, the Treasury will be glad to
discuss the matter with the Greek representative. . If, however, we should con­
sider it advisable to permit funds to be used before the expiration of the six
months’ period provided to cover such purchases and expenditures as may be
D e a r M r. P h i l l i p s




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

199

previously approved by the Treasury Department, we would not feel justified
in doing so without previous consultation with the French and British treas­
uries, who were parties to the agreement.
The Treasury will be glad to discuss the matter with the Greek representative
and to take it up with the British and French treasuries.
Very truly, yours,
(Signed)
A lb e r t R a th b o n e .
Hon. W i l l i a m P h i l l i p s ,
Acting Secretary of State.

L e g a tio n R o y a le de G re e ce ,

Washington, October 29, 1919,
or T r e a s u r y ,
Washington, D. C.
(Attention of Mr. Davis.)
D e a r S i r : Referring to our conversation of some time ago concerning the
use of the credits granted to Greece by the United States, in accordance with
the provisions of the financial agreement of Paris, I beg to inform you that in
a cablegram sent to me the treasury department of Greece states that the
Greek Government would greatly appreciate if credits in the amount of $10,000,000 would be placed at its disposition at the present time. It thinks, fur­
thermore, that $5,000,000 a month would be required to meet the needs in the
future. These monthly installments wrould not begin before the complete use
of the first $10 ,000 ,000 , and each o f the subsequent monthly installments is not
to be available until the precedent is entirely spent. This fact would be
brought to the knowledge of the United States Government by its representa­
tive at the interallied commission.
The treasury department in his above-mentioned cablegram adds that it is
not in the possibility to fix beforehand the goods that will be paid with the
credits, as this depends essentially of the needs of the country, but I think it
will be always possible to make a subsequent statement as to the use that has
been made of each of the precedent monthly installments.
I would be very glad to know your consideration on the above suggestions.
Yours, very truly,
M. T s a m a d o s ,
Charg6 d’Affaires of Greece.
D e p a rtm e n t

N ovember 3, 1919.

My Dear Mr. Tsamados : Your letter of October 29, addressed to Mr. Davis,
who is out of town, has been handed to me. I have pleasure in advising you
that the United States Treasury is prepared, to the extent necessary to cover
purchases which shall previously have been agreed upon by your Government
with the Treasury, to make available against drafts of the National Bank of
Greece, drawn as arranged in the previous correspondence, part of the credit
heretofore established in favor of your Government. I trust that your Govern­
ment, to the extent that it desires that this credit shall be availed of at this
time, may find itself able to determine the purchases which it desires to
make from the advances from the United States Treasury. The Treasury
is not prepared to make the credit available at this time, except to the extent
necessary to cover purchases which shall previously have been so agreed upon.
It is, of course, to be understood that, except in so far as the Secretary of
the Treasury shall consent to make advances at this time for purposes to be
agreed upon, as above set out, the Secretary of the Treasury reserves all rights
conferred upon the United States by the financial agreement entered into
in fi?aris by the representative of the Greek Government and the financial
representatives of the Governments of France, Great Britain, and the United
States. In no event can the total amount advanced by the United States
Treasury be in excess of one-third of the aggregate amount of the vouchers
submitted and approved for expenditures prior to 1919, in accordance with
the above-mentioned agreement of Paris. To the extent that the aggregate
amount of such vouchers is less than 750,000,000 francs and the share of the
United States Government is diminished accordingly, a corresponding amount




200

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

of the credit heretofore established in favor of your Government will be
withdrawn.
I am, my dear Mr. Tsamados,
Very truly, yours,
R . O. L e f f in g w e l l .

Mr. M . T s a m a d o s ,
Charge d’Affaires, the Greek Legation,
1715 Massachusetts Avenue NW.
L e g a t io n R o y a l e D e G r ece ,

Washington, November Uf, 1919.
T reasu ry D epartm en t,

Washington, D. C.
Attention of Mr. Davis.
D e a r S i r s : Referring to the letter of the Treasury Department, signed by
Mr. N. Leffingwell, dated November 5 (filed; should be Nov. 3 ), in which it is
stated that “ The Treasury is not prepared to make the credit available at this
time except to the extent necessary to cover purchases which shall previously
have been so agreed upon,” I beg your leave to explain at some length how
difficult it is for the Royal Greek Government to comply with this request, cer­
tainly not on account o f any lack of good will but merely on account of the
nature of the commercial transactions and the way they are affected nowadays.
The purchases which are to be paid with the credits in question are not pur­
chases of the Government, or at least not only of the Government. Purchases
made by a Government are, as a rule, very simple, and refer to a very small
number of articles, which are purchased in large quantities; it is, therefore,
always easy to know in advance what articles are to be purchased and what
are the credits required for that purpose. In the present case conditions are
quite different. All the foreign exchange— in this case the exchanges on the
United States—for all payments to be made in this country are to be pro­
vided by the National Bank of Greece (it has been necessary to adopt this
measure in order to prevent speculations on the fluctuations of the exchange) ;
all the merchants in Greece are, therefore, obliged to apply to that bank in
order to get the necessary exchange on the United States to be able to make
their transactions concerning all kinds of articles. It is already a well-known
fact that the most important articles, particularly coal, raw materials, manufac­
tured articles, agricultural implements, etc., etc., have to be imported to Greece
from the United States, and that, at least in Greece, a characteristic feature
of to-day’s transactions is a cash payment upon the opening of the necessary
credits in this country. On the other hand, the quantity of articles purchased
varies very much, causing a variation in the credits and the exchanges asked by
the merchants in Greece. Transactions can not be completed unless their value
can be paid immediately. This is why it is simply impossible to state before­
hand what articles will be purchased, in what quantities, and at what price.
I
understand from the Treasury Department’s letter that the United States
Government is anxious to see that the requested credits will be used only for
the purpose of paying purchases made in the United States. To this I can say
that the Royal Government of Greece is ready to promise that the credits
accorded will be used only to pay goods purchased in the United States and
destined to be consumed in Greece. Furthermore, the National Bank of Greece
will forward through this legation to the United States Government monthly
itemized statements showing how the credits have been used.
In order to prevent goods purchased with credits of the National Bank of
Greece from going to foreign countries, particularly to those with depreciated
currency, the Royal Government of Greece has already directed that merchants
or other persons asking for exchange in order to buy goods in the United
States (and other European countries) that it will be necessary for them to
make a deposit amounting to 10 per cent of the value of the goods as a guaranty
that these goods would be used for consumption in Greece.
Let me hope that after the above explanation the Treasury, taking into
consideration the particular circumstances under which the foreign trade of
Greece is being handled, will find the proper way to authorize the use o f the
credits granted to Greece according to the stipulations of the financial agree­
ment of Paris, and under the above-stated conditions.
Yours, very truly,
G e o r g e Roussos,
Minister o f Greece.



FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
L e g a t io n R o y a l e

de

201

G rece,

Washington, November 22, 1919.
(Attention Mr. Norman Davis.)
T reasury

D epartm ent,

Washington, D. C.
: The National Bank of Greece has cabled to me a letter addressed
to the Treasury Department of the United States, with a request to communicate
it to you.
1 take pleasure to enclose this letter, written in French, together with an
English translation.
Yours, very truly,
M. T s a m a d o s .
2 Enclosures.
D e a r S ir

L e g a t io n R o y a l e

de

G rece,

Washington, November 22, 1919.
[Translation o f cable.]
M i s t e r S e c r e t a r y : The available credits of the Hellenic Treasury and of the
National Bank of Greece, in foreign countries, has fallen below the sum of
100,000,000 francs; I beg therefore to request in accordance with article 3 of
the financial agreement made in Paris in February, 1918, between the United
States, France, and Great Britain on one hand, and the Government of Greece
on the other, that credits in the amount of $48,236,629 should be made available
to the National Bank of Greece through the National City Bank of New York
and the National Bank of Commerce, New York. This amount according to
the provision of the above said agreement is to be used by the National Bank
of Greece by way of draft to pay debts contracted in the United States.
Yours, very truly,
( S i g .)

D

io m e d e s.

N ovem ber 25, 1919.

Your letter of the 22d instant has been received
together with copies in French and in English, as therein stated, of a letter
from the National Bank of Greece stating that the available credits of the
Hellenic Treasury and of the National Bank of Greece in foreign countries
have fallen below the sum of 10 0 ,000,000 francs, and requesting that credits
in the amount of $48,236,629 should be made available to the National Bank of
Greece through the National City Bank of New York and the National Bank
of Commerce, New York. I assume that the arrangements referred to in the
minister’s letter of the 14th instant and my reply of to-day will meet the wishes
expressed by the Bank of Greece. Article 3 of the Paris agreement does not
appear in any event to contemplate that, upon the mere falling below the sum
of 100,000,000 francs of the foreign balances of the Greek Treasury and the
national bank, the entire credit established by the United States should im­
mediately become available. The letter of the bank does not indicate either
the amount by which the foreign balances have fallen below 10 0 ,000,000 francs
or the extent to which it is proposed that the credits established by the British
and French Governments under the Paris agreement are to be availed of.
I assume therefore that the letter of the bank is merely a formal notice of the
fact that the foreign balances have fallen below 10 0 ,000,000 francs.
I am, my dear Mr. Tsamados,
Yours, very truly,
N o r m a n H. D a v i s ,
Mr. M. T s a m a d o s ,
Charg6 d*Affaires, Greek Legation,
1838 Connecticut Ave., Washington, D. C.
M y D e a r M r. T sa m a d o s:

N o v e m b e r 2 5 , 1919.
Your letter of the 14th instant has been received.
I have pleasure in advising you that, in accordance with the request made by
M r . Tsamados, the Treasury is prepared against the credits heretofore estab­
lished in favor of your Government to make available forthwith to the National
M y D ea r M r. M in is t e r :




202

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Bank of Greece lip to the sum of .$5,000,000 upon the understandings herein­
after set out. Upon receipt of a cable request from the National Bank of
Greece, transmitted through the legation at Washington and accompanied by a
cable representation similarly transmitted from the Greek minister of finance,
that the transfer so requested is under and in accordance with the provisions
of the Paris financial agreement, dated February 10, 1918, the Treasury will
deposit the sum so requested up to $5,000,000 with such bank in New York
as shall be designated by the National Bank of Greece. The National Bank
of Greece and the Greek minister of finance, respectively, will by letters trans­
mitted to the Treasury through the legation in Washington confirm the request
and representation made by cable as above mentioned. It is understood that
the amount transferred by the United States Treasury to the credit o f the Na­
tional Bank of Greece, in accordance with this procedure, is to be used either
by the National Bank of Greece itself or by the parlies to whom the National
Bank of Greece may transfer such funds only for purchases in the United
States of goods to be consumed in Greece. It is further understood that
itemized semimonthly statements showing the purposes for which such funds
were used and the amounts will be furnished promptly through the legation
to the Treasury.
I shall be glad if you will confirm the foregoing understandings.
I am, my dear Mr. Minister,
Yours, very truly,
N o r m a n H. D a v is .
M r. G eorges R o u s s o s ,

Envoy Extraordinary and Minister Plenipotentiary,
the Greek Legation, 1838 Connecticut Avenue, Washington, D. C.
D ecem ber

13, 1919.

(Attention Mr. Davis.)
T reasury D epa rtm en t,

Washington, 1) C.
: I beg to inclose herewith certified copy of a cablegram concern­
ing the transfer of $5,000,000 to the National Bank of Commerce, New York
City, for the use of the National Bank of Greece, according to the financial
agreement concluded at Paris in February, 1918.
Yours, very truly,
M. T s a m a d o s .
G e n tle m e n

L e g a t io n R o y a l e de G rece ,

Washington, December 13, 1919.
[Copy o f cablegram.]

We transmit hereunder telegram national bank to you be communicated to
American Treasury Department. Please inform American Government that
transfer five millions from American Treasury to National Bank of Commerce
is effected, conformably financial agreement Paris. Hereunder text telegram
national bank as follows: “ Tsamados, minister Greek legation, for United
States Treasury. New York, kindly place our credit with National Bank Com­
merce, New York. $5,000,000. according Paris agreement 10th February, 1918,
account Greek Government, National Bank Greece.” Please cable, urgently,
results of your steps.
P o l it is .

I,
Michael Tsamados, ministre resident of Greece, do hereby certify that the
above is a true and correct copy of the cablegram received by this legation from
the ministry of finance in Athens, Greece.
[ s e a l .]
W a s h in g to n , D.

M . T sam ados.

C., December 13, 1919.

D e c e m b e r 15, 1919.
: Your letter of the 13th instant, file No. 2659, has
been received, inclosing a copy of a cablegram from the minister of finance in
Athens transmitting a message from the Greek National Bank requesting the
M y D e a r M r. T s a m a d o s




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

203

Treasury to place to their credit with the National Bank of Commerce, New
York, $5,000,000. The minister of finance states that the transfer is conformable
with the Paris financial agreement. I have pleasure in advising you that, in
accordance with the request contained in said cable and upon the understand­
ings set out in my letter of November 25, 1919, to the Greek minister, the Treas­
ury has to-day deposited with the National Bank of Commerce in New York, for
credit of the National Bank of Greece, the sum of $5,000,000. The abovementioned deposit of $5,000,000 is made against the obligation dated June 21,
1918, of your Government for $15,790,000 held by the United States Treasury,
and to the extent of $5,000,000 is in lieu of the arrangement referred to in Mr.
Crosby’s letter of June 21, 1918, for the presentation to the Treasury o f the
United States of drafts drawn by the National Bank of Greece on the Treasury
of the United States, and bearing the notation of the Greek minister of finance
in the form mentioned in said letter. In accordance with Mr. Crosby’s letter
interest will be charged, beginning to-day, upon $5,000,000 of said obligation of
your Government for $15,790,000.
I am, my dear Mr. Tsamados,
Very truly, yours,
Mr. M. T s a m a d o s ,
Charge d*Affaires, the Greek Legation,
1838 Connecticut Avenue, Washington, D. C.

L e g a t io n R o y a l e de G r e c e ,

Washington, December 16, 1919.
T reasu ry D epartm en t,

Washington, D. C.
(Attention of Mr. Davis.)
D e a r S i r s : A cablegram received from the Greek ministry of finance on De­
cember 5, 1919, states that the National Bank of Commerce, New York City, has
been appointed as the bank to which the transfer of $5,000,000 was to be made
by the United States Treasury Department and on which the National Bank of
Greece will issue its drafts. For each draft the national bank will cable to
this legation through the Greek treasury department, which will give the ap­
proval of the Greek Government to the purchases paid these drafts.
Sincerely, yours,
M. T s a m a d o s ,
Charge d'Affaires of Greece.

SECTION 108.
Retaliation by 300 Per Cent Increase on Tariff on Oleo by Greek Government
for Refusal of Treasury Department to Release All or a Considerable Part
of the Full $50,000,000 Credit.
[E xcerpts from paraphrase.!
D e c e m b e r 30, 1919.
From: Athens.
Dated: December 16, 1919.
Received: 17th, 6.20 p. m.
The import rate upon oleo oil w^as suddenly increased a few weeks ago by
the Greek Government through reclassifying this commodity. It was formerly
classed as fats and rated at 58 centimes to the oke of 2.82 pounds; it is now
classed as margarin and rated at 2.32 drachmas to the oke. Heavy stocks
of oleo oil were in transit from America, or had just arrived, when the re­
classification was made operative. The original classification had been in force
for more than 20 years.
Confidential.— (It is thought probable that this measure was taken as re­
taliation for the refusal of the Treasury Department to release all or a con­
siderable part of the $50,000,000 credit to Greece until six months after the
ratification of the peace treaty.)




A m e r ic a n L e g a t io n .

204

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
A th e n s,

S ecretary

of

December 16, 1919.

State,

Washington:
December 16, 9 p. m.
My 8 tli and my November 5, 8 p. m. I am having much trouble with the
Greek Government with regard to a sudden classification of oleo oil affecting
large stocks just arrived or afloat. Customs duty has been increased by
reclassification, without notice, from 58 centimes per oke to 2 drachams 32
centimes, though old classification was in operation over 20 years, involving
heavy losses to shippers. I am convinced there should be merely retaliation
for the delay in the $50,000,000 credit to be accorded Greece if the Greek
Government insists on this exorbitant rate. Is there any pressure, retaliatory
or otherwise, which the department can bring to bear as (corrective) ? In
the year 1909 the chamber of deputies proposed an increase of duty, but a
threat of tariff retaliation by our consul stopped it.
D r o pper s.

A th e n s,
S ecretary

of

November 5, 1919.

State,

Washington:
853, November 5, 8 p. m.
Greek Government has agreed to suddenly classify oleo oil as margarin,
thereafter increasing duty 300 per cent. Hitherto classified at fat. As large
stocks are on the way, this change means heavy loss to American importers.
Would like to have opinion on this point of Treasury Department experts.
D ro pper s.

D ecem ber
A

m e r ic a n

26, 1919.

L e g a t io n ,

Athens:
977.
Your December 16, 9 p. m.
Department assumes you are urging arguments of American friendship, Greek
consumers’ interests, and discouragement to Greek margarine industry. Also
argument that since oleo forms only one-third or less of margarine its classifica­
tion as margarine is unreasonable. Detailed technical data are being forwarded
by mail.
As hint, not threat, refer to the fact that thus far it has been deemed ex­
pedient by United States despite repeated protests of California raisin interests
to classify Zante currants as raw product paying 25 per cent less than other
raisins because much cleaning and packing necessary before Greek product is
salable.
Invite Americans injured by reclassification furnish department full informa­
tion through their American offices as to extend their loss on oleo in transit
when measure became operative. Cable quantities oleo Greece imported from
other countries and keep department informed by cable.
P o l k , Acting.

SECTION 109.
Second Cash Advance of $5,000,000—Advance Made January 16, 1920.
J a n u a r y 3 , 1920.
Attention Mr. Merle-Smith.
S i r : The National Bank of Greece, to which the Greek Government has ceded
the credit which was established by the Treasury in favor of the Greek Gov­
ernment, has asked that the entire amount of this credit be advanced now. As
you are aware, we did advance $5,000,000 on account of the credit on December
15, 1919, with the understanding that this advance would be employed for the
purchase of commodities in the United States for shipment to and consumption in
Greece. After the establishment of this credit, we received from the State De­
partment copy of a note from the American Minister to Greece, relating the in­
ability of Americans in Greece to purchase dollar drafts for remittance to cover




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

205

shipments from the United States to Greece. The representative of the National
Bank of Greece informs me that the bank refused to sell such drafts because
it had exhausted all its dollar balances.
The Treasury is considering the advance of an additional $5,000,000 to Greece,
but before doing so I should be pleased to know whether the National Bank
of Greece, which now has dollar funds from the advance already made by the
United States, is supplying dollar drafts to American applicants, and if not
whether you would care to have the Treasury stipulate any conditions in con­
nection with this additional advance, with a view to meeting the difficulty which
has been reported by our minister in Greece.
I am, my dear Mr. Secretary,
Very sincerely, yours,
N o rm an H . D a v is .

The S e c r e t a r y o f S t a t e ,
Washington, D. (7.
D e p a rtm e n t o f S ta te ,

Washington, January 9, 1920.
Confidential.
The S e c r e t a r y o f t h e T r e a s u r y .
Attention of Assistant Secretary Davis.
Sir : I have the honor to acknowledge the receipt of the letter from your de­
partment dated January 3 and signed by Assistant Secretary Davis, which
states that the Treasury now considers making an advance of $5,000,000 to
Greece in addition to the like sum advanced to that Government on December
15, 1919, and which inquires (1) whether the National Bank of Greece is still
refusing to sell dollar drafts to American applicants, and (2) whether this de­
partment would care to have the Treasury stipulate any conditions in connec­
tion with the additional advance now contemplated.
In reply thereto I have the honor to inform you that the American minister
cabled on December 12 that New York exchange had then been obtainable for
several days at approximately 6.60. As no further communication has been re­
ceived from the minister upon this matter, it is assumed that the situation of
which he complained has been remedied, for the time at least, by the action of
your department.
There is, however, one difference between our Government and the Hellenic
Government which might be adjusted to the benefit of American interests by
appealing to Greek reciprocity when your department takes up the question of
releasing additional funds to that Government. For more than 20 years oleo
oil was classified by the Greek Government as fat, but about November 1, 1919,
that Government suddenly classified oleo oil as margarine. The duty upon this
item of American exports was thereby increased from 58 centimes to 2.32
drachmas an oke. There are transmitted herewith copies o f two cablegrams
from the American Legation at Athens, dated November 5 and December 16,
also statistical material compiled in the foreign trade adviser’s office, all per­
taining to this matter. It will be noted therefrom that our exports of oleo oil
to Greece in 1918 totaled $228,809, and that the increase of duty upon the
amount, estimated at $100,000, would probably raise a prohibitive barrier. More­
over, the suddenness with which the reclassification became operative made the
enactment almost confiscatory as regards the stocks of American oleo oil in
Greek Government warehouses and occasioned large losses upon the stocks then
in transit. It is requested that effort be made by your department in con­
junction with this department to effect a repeal of this classification, which
appears indefensible alike upon technical and economic grounds, and possibly
to obtain compensation to Americans who suffered from the suddenness of the
enactment.
I should like further to bring to your attention that, in the opinion o f the
American minister at Athens, the reclassification of oleo oil and the refusal to
sell dollar drafts were conceived by the Greek Government as retaliation against
our Government on account of its interpretation of the Paris loan agreement.
In this connection I should like to inquire whether there are important fiscal
reasons against assuring the release of a specified amount to Greece at regular
intervals, say $5,000 000 every other month, until six months after the conclusion
o f peace. It is suggested that such a plan would create a stream o f dollar ex­
change, would facilitate importation from the United States into Greece, and by



206

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

relieving the anxiety o f the Greek Government, would remove the apparent de­
sire on its part to devise means of discriminating against us.
It is of importance to note the remarkable increase in our sales to Greece
since the war and the correspondingly increased need of Greece for large bal­
ances in this country to draw against. In 1914 our exports to Greece were
$1,123,511 and our imports were $3,860,594: during the first 10 months of 1919
our exports to that country were $31,712,425 and our imports were $24,665,578.
About 21 per cent of our exports to Greece consist of sugar, wheat, leather, and
kerosene—commodities which are at present purchased from our country chiefly
perhaps as a result of reconstruction conditions and which, therefore, will not
be regularly purchased from America in the future. Nevertheless, by far the
greater part of our exports to Greece consist of miscellaneous commodities
which can be regularly sold by our exporters and transported on our merchant
marine for years to come, particularly if now, during these crucial months, we
employ every legitimate means to enable our exporters to consolidate the new
position which they have won in the Greek market.
It is suggested, on the other hand, that if little or no more funds be advanced
to Greece to be deposited here for the financing of the imports of that country,
American business with Greece will suffer a serious check during the immediate
future, a vital period. Moreover, six months after tlie conclusion of peace,
Greece would draw its balance of approximately $43,000 000, perhaps distribut­
ing the major part of it among the financial centers o f other foreign countries,
thus encouraging the purchase of goods by Greece from the foreign trade rivals
of American merchants.
I have the honor to be, sir,
Your obedient servant,
R obert L a n s i n g .

L e g a tio n

R o y a le

de G r e c e ,

Washington, January 15, 1920.
Mr. N o r m a n D a v is ,
Treasury Department, Washington, D. C.
D e a r M r. D a v i s : I beg to inclose copy of cablegram received from the Na
tional Bank of Greece stating that the credit of $5,000,000 is exhausted and
requesting me to ask for a second credit of $5,000,000. The itemized statement
o f the use made of the first $5,000,000 is to be forwarded to this legation in the
immediate future.
Yours, very truly,
M. T s a m a d o s .
L e g a tio n

R o y a le

de G r £ c e ,

Washington, January 15, 1920.
Credit cinq millions dollars aupres Banque National Commerce epuise priens
intervenir Tresor Etats-Unis mettre notre disposition deuxieme credit cinq
millions dollars aupr&s m§me.
B a n q u e N a t io n a l e G r ece .
J a n u a r y 16, 1920.
: Two letters from Mr. Tsamados of the 15th instant
(your file No. 2) have been received, enclosing copies (in part in translation)
of a cablegram from the Greek Treasury, transmitting a message from the
Greek National Bank requesting the United States Treasury to place to their
credit with the National Bank of Commerce, New York, $5,000,000. The Greek
Treasury states that these $5,000,000 are the second instalment in accordance
with the Financial Agreement of Paris. I have pleasure in advising you that
in accordance with the request contained in said cable and upon the under­
standings set out in my letter to you of November 25. 1919, the Treasury has
to-day deposited with the National Bank of Commerce in New York for credit
of the National Bank of Greece the sum of $5,000,000. The above-mentioned
deposit of $5,000,000 is made against the obligation dated June 21, 1918, of
your Government for $15,790,000 held by the United States Treasury and to the
extent of $5,000,000 is in lieu of the arrangement referred to in Mr. Crosby’s
letter of June 21, 1918, for the presentation to the Treasury of the United States
o f drafts drawn by the National Bank of Greece on the Treasury o f the United
M y D e a r M r. M i n i s t e r




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
207
States and bearing the notation o f the Greek Minister of Finance in the form
mentioned in said letter. In accordance with Mr. Crosby’s letter, interest will
be charged beginning to-day, January 16, 1920, upon $5,000,000 o f said obliga­
tion of your Government for $15,790,000 in addition to the instalment of
$5,000,000 referred to in my letter to Mr. Tsamados of December 15, 1919.
This advance, together with the advance mentioned in my letter to Mr. Tsama­
dos of December 15, 1919, brings the total advances to your Government under
the above-mentioned arrangements to the sum of $1 0 ,000 ,000 . I trust that
the itemized statement of the use made of the first $5,000,000 will be forwarded
to us at once.
I am, my dear Mr. Minister,
Very truly yours,
N orman H. D avis .
Mr. G eorges R oussos,

Envoy Extraordinary and Minister Plenipotentiary,
The Greek Legation, 1838 Connecticut Avenue, Washington, D. C.
L egation R oyale

de

G r& ,
ce

Washington, January 17, 1920.
Mr. N orman D avis ,

Treasury Department, Washington, D. C.
D ear Mr . D avis : Referring to our conversation of yesterday, I beg to request

that the second installment of $5,000,000 should be placed at the disposal o f the
National Bank of Greece with the National Bank of Commerce, New York.
Yours, very truly,
M. T samados.

SECTION 110.
Correspondence Relating to Payment of Interest on the Cash Advances of
$10,000,000—Interest Due April 15, 1920—Interest Paid September 21,
1920.
A pril 6 , 1920.
M y D ear M inister : Referring to Mr. Davis’s letters of December 15, 1919, to
Mr. Tsamados and of January 16, 1920, to you in connection with the advances

of $5 ,000,000 each made on those respective dates against the obligation dated
June 21, 1918, of your Government for $15,790,000 held by the United States
Treasury, I inclose herewith a statement prepared under the direction of the
Treasurer of the United States, showing that interest in the amount of
$144,808.74 will be due on April .15, 1920, on said obligation, computed to said
date, as to $5,000,000 from December 15, 1919, and as to $5,000,000 additional
from January 16, 1920. Please make payment of the interest due on April 15
by check payable to the order o f “ Assistant Treasurer of the United States for
credit general account of Treasurer of the United States ” and deliver the same
to the Assistant Treasurer of the United States at the Subtreasury in New
York on April 15.
I am, my dear Mr. Minister,
Very truly, yours,
R. C. L effingwell.
Mr. G eorges R oussos,
Envoy Extraordinary and Minister Plenipotentiary,
The Greek Legation, 1838 Connecticut Avenue, Washington, D. C.
Interest on obligations of the Royal Greek Government, Oct. 15, 1919, to Apr.
15,1920, at 5 per cent, 366 days to the year.
I
Amount.

$5,000,000.00
June 21,1918 (face amount, $15,790,000)............... J 115,000,000.00
\
Total............................................................
Interest on $10,000,000 from date of ad­
vances to Apr. 15, 1920, at 5 per cent per
annum......................................................

i Part.




Interest from-

Number
of days.

Dec. 15,1919
Jan. 16,1920

122
90

Interest.

$83,333.33
61,475.41

10,000,000.00
144,808.74

208

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

No. 857.

L e g a tio n R o y a le de G re ce ,
Washington, May 4 , 1920.

T reasury D epa rtm en t,

Washington, D. C.
(Attention Mr. Norman Davis.)
D e a r S ir: In reply to your commun.cation o f tlie 6 th of April, relative to the
payment of the interest on the two amounts of $5,000,000 each, advanced re­
spectively to the Royal Government on December 15, 1919, and January 16,
1920, I have the honor to inform your excellency that my Government has
requested me to solicit from the Government of the United States the same
treatment as accorded to similar advances made to the other allied Govern­
ments; that is, to defer the payment of the interest for two years.
I sincerely trust that your excellency will give consideration to the request
of my Government.
I pray your excellency to kindly accept the assurances of my very high
consideration.
G. Roussos, Minister.
M a y 11, 1920.
: I have pleasure in acknowledging the receipt of your
letter No. 857 of the 4th instant concerning the payment of interest on the two
amounts of $5,000,000 each advanced by the Treasury to your Government on
December 15, 1919, and January 16. 1920, respectively. Since further advances
yet to be made against credits established in favor of your Government are
several times larger than the principal of the advances heretofore made, and
will make available for Greece an amount of dollars compared with which the
interest due upon the obligations of your Government held by the United States
is relatively insignificant, the Treasury has considered that your Government
is in a position with regard to dollar exchange such as clearly to distinguish
it from that of other Governments to which you doubtless refer. By reason of
the special circumstances in which the advances were made to your Govern­
ment, the Treasury is of the opinion that the considerations which may lead
to the postponement of the collection of interest upon the obligations of certain
of the Governments to which the United States has made advances do not apply
in the case of the Greek Government,
I am, my dear Mr. Minister,
Yours, very truly,
M y D e a r M r. M i n i s t e r

N orm an H . D a v is .

Hon. G e o r g e s Roussos,
Envoy Extraordinary and Minister Plenipotentiary,
The Greek Legation, 1838 Connecticut Avenue, Washington, D. C.
No. 912.

L e g a tio n R o y a le de G r£ ce ,

Washington, May 19, 1920.
T reasury D epartm en t,

Washington, D. C.
(Attention Mr. Norman Davis.)
D e a r Si r : In reply to your communication of May 11, 1920, in which you
informed me of the decision taken by your department in regard to the request
of the Greek Government concerning the granting of the same consideration
accorded to the other Allies—that is, to defer the payment of interests for two
years—I presume that there must be a misunderstanding existing.
You state that taking into consideration the amounts of the credits placed at
the disposal of the Royal Government would be larger than the interests due on
the amount already used, so that the payment of these interests would not
necessitate a payment, but is simply a question of balance.
But the Royal Government does not dispose of any amount o f the credits
opened by the Government of the United States as a result of the convention
of 1917. In reality the integral amount of these credits was transferred to the
National Bank of Greece, who, in accordance with the laws governing it, issued
bank notes and credited the Greek treasury with the amount of bank notes
issued. Thanks to these amounts, the Royal Greek Government could meet its
military expenses in 1917, 1918, so that it has not at its disposal any part of
these advances.



FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

209

To pay the interests on the amounts already transferred to the credit o f
the National Bank of Greece deposited to its correspondents in America, the
Greek Government must then proceed to send funds to America, buying ex­
change, and paying nearly 9 drachmas for $1 .
The favor accorded to the allied States who have already benefited of the
United States Government’s friendly measure was justified by the desire not
to affect their exchange which was already unfavorable. It is to be remarked
that the allied States having benefited from this measure are not mobilized
and have resumed their peaceful occupations. Greece finds herself not only
facing an unfavorable exchange but also still mobilized. The treaty of peace
with Turkey, which concerns her particularly, is not yet signed, and she is
obliged to maintain a large military contingent, and is deprived of her pro­
ductive strength. Consequently, she is justified, in every point of view, to be
treated with the same consideration as were the other allies who are in a
better condition.
I trust that if the above statements are taken into consideration, you shall
kindly reconsider your decision.
Yours, very truly,
G. Roussos, Minister.
M a y 21, 1920.
: I have pleasure in acknowledging the receipt of your
letter, No. 912, of the 19th instant. I ought to point out that the Treasury has
not as yet agreed with any Government to defer the interest payable by it on
obligations held by the United States Treasury, but that this matter is still the
subject of discussion. Assistant Secretary Rathbone, who has been in Europe
on behalf of the Treasury Department in connection with other matters, has had
this matter also in charge. Mr. Rathbone expects very shortly to sail for the
United States. I am, however, cabling him in regard to your letter, and shall
communicate with you further.
I am, my dear Mr. Minister,
Very truly, yours,
N o r m a n H. D a v is .
M r. G e o r g e s Roussos,
Envoy Extraordinary and Minister Plenipotentiary,
the Greek Legation, 1838 Connecticut Avenue. Washington, D. C.
M y D e a r M r. M i n i s t e r

No. 1650.

L e g a tio n R o y a le D e G rece,

Washington, September 15, 1920.
T reasu py D epartm en t,

Washington, I). C.
{Attention of Mr. Kelley.)
D e^r Si r : I take pleasure in informing you that, according to a cablegram
from our minister of finance, orders have been given so that the amount of
$144,808.74 be deposited with the National Bank of Greece. This amount is
equal to the interest due by the Greek Government to the United States
Treasury for the advance of $10,000,000.
Yours, very truly,
M. T s a m a d o s .
S e p te m b e r 16, 1920.
I have pleasure in acknowledging receipt o f your
letter of the 15th instant, No. 1650, and note that orders have been given by
your Government for the deposit with the National Bank of Greece of the sum
of $144,808.74, being the amount of the interest due by your Government to
April 15, 1920, on the obligations of your Government held by the Treasury.
I am, my dear Mr. Tsamados,
Yours, very truly,
N. K e l l e y .
Mr. M. T s a m a d o s ,
Charg6 d1
Affaires Greek Government,
.1838 Connecticut Avenue, Washington, D. C.
M y D e a r M r. T s a m a d o s :

S. Doc. 86,67-2------ 14



210

FOREIGN LOANS AND AUTHORITY FOE MAKING SAME.
T r e a s u r y D ep a rtm en t,

Washington, September 21, 1920.
The Hon. N . S. K e l l e y ,
Assistant Secretary of the Treasury,
Washington, D. C.
S i r : Please be advised that the Riggs National Bank, by direction of the
National City Bank of New York, has this day deposited $144,808.74 on account
of interest to April 15 on $10,000,000 loaned to the Greek Government, as evi­
denced by certificate of deposit No. 3S338.
Respectfully,
John B urke.

Treasurer.

SECTION 111.
Correspondence Relating to Third Cash Advance of $5,000,000 Made to Greece
on September 24, 1920.
No. 1516.
L e g a tio n R o y a l e de G re ce ,
T reasury D epa rtm en t,

Washington, August 18, 1920.

Washington, D. C.
Attention of Mr. Kelley.
M y D e a r M r. K e l l e y : I beg to inclose herewith copy of cablegram to this
legation, transmitting a message to the United States Treasury Department from
the National Bank of Greece and signed by the minister of finance who is thus
approving its contents. The National Bank of Greece asks that a third install­
ment of $5,000,000 should be placed to her credit with the National Bank o f
Commerce, New York, in accordance with the Paris financial agreement of
February, 191S, and for the account of the Greek Government.
Yours, very truly,
M.

Saw Mr. Collas regarding this August 20, 1920.
and about reports.

T sam ados.

Asked him about interest
N. K.

[Athens.

No. 102190.

Legation Grece, W ashington.]

No. 1516.
L e g a t i o n R o y a l e d e G r e c e , Washington.
Transmettons telegramme suivant national bank votre adresse approuve
gouvernement hellenique. His excellency Tsamados minister Greek Legation for
United States Treasury, Washington. Kindly place our credit with National
Bank Commerce New York $5,000,000 third payment on Paris agreement Feb­
ruary 10, 1918, account Greek Government. National bank.
N e g re p o n te ,

Minister Finances.
The above is a true and correct copy of cablegrams received by this legation
from Minister of Finances Negreponte.
W a s h i n g t o n , D. C., August 18, 1920.
S e p te m b e r 24, 1920.
D ear Mr. T samados : Referring to our conversation of to-day and to your
letter (No. 1516) of the 18th ultimo, inclosing a copy of a cablegram from the
Greek minister of finance transmitting a message from the Greek National Bank
requesting the United States Treasury to place to their credit with the National
Bank of Commerce, in New York, $5,000,000, and stating that these $5,000,000
are a third installment in accordance with the financial agreement in Paris, I
have pleasure in advising you that in accordnce with the request contained in
said cable and upon the understandings set out in Mr. Davis’s letter to the
minister of November 25, 1919, the Treasury has to-day deposited with the
National Bank of Commerce, in New York, for credit o f the National Bank of
Greece, the sum of $5,000,000 The above-mentioned deposit of $5,000 000 is
made against the obligation, dated June 21, 1918, of your Government for
$15,790,000, held by the United States Treasury and to the extent of $5,000,000,
My




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

211

is in lieu of the arrangement referred to in Mr. Crosby’s letter of June 21, 1918,
for the presentation to the Treasury of the United States of drafts drawn by the
National Bank of Greece on the Treasury of the United States and bearing the
notation of the Greek minister of finance in the form mentioned in said letter.
In accordance with Mr. Crosby’s letter interest will be charged beginning to-day,
September 24, 1920, upon $5,000,000 of said obligation of your Government for
$15,790,000, in addition to the two installments of $5,000,000, each referred to
in Mr. Davis’s letters of December 15, 1919, and January 16, 1920. This ad­
vance, together with the advances mentioned in Mr. Davis’s letters of December
15, 1919, and January 16, 1920, brings the total advances to your Government,
under the above-mentioned arrangements, to the sum of $15,000,000.
I am, my dear Mr. Tsamados,
Yours, very truly,
Mr. M. T s a m a d o s ,
Charg6 6?Affaires, the Greek Legation,
1838 Connecticut Avenue, Washington, D. C.
T r e a s u r y D ep a rtm en t,

Washington, September 24, 1920.
Memorandum for files:
Mr. Tsamados stated to-day that he would obtain by mail from the Greek
minister of finance a more specific statement that the third installment of
$5,000,000 requested in the message o f the Greek National Bank transmitted
by cable No. 102190 of the Greek minister of finance, copy of which was in­
closed in Mr. Tsamados’s letter of August 18, 1920, was requested under the
financial agreement of Paris. Mr. Tsamados stated also that he will arrange
with his Government so that future requests by the Greek National Bank will
be accompanied by more explicit statements from the Greek minister o f finance,
in accordance with the terms of Mr. Davis’s letter of November 25, 1919, to the
Greek minister.
N. K.
No. 1902.

L e g a tio n R o y a le de G rece,

Washington, October 26, 1920.
T reasury D epartm en t,

Washington, D. C.
(Attention of Mr. Kelley.)
M y D e a r M r. K e l l e y : Referring to my letter of August 18, 1920, No. 1516,
concerning a third advance of $5,000,000 against the $750,000,000 loan granted
to Greece according to the Paris financial agreement of 1918, I beg to inclose
copy of a cablegram received to-day from our minister of finance.
Yours, very sincerely,
M. T s a m a d o s .
No. 1902.
A t h e n s , October 26.
Yotre 1,725 onze septembre. Credit cinq millions? dollars mis disposition
National Bank const!tue troisieme remise participation Amerique emprunt
conformement agrement Paris, 1919.
N ig r o p o n t is .

SECTION 112.
Correspondence Relating to Payment of Interest on the Three Cash Advances
of $5,000,000 Each—Interest Due October 15, 1920—Interest Paid October
25, 1920.
S e p te m b e r 28, 1920.
Referring to M r. Davis’s letters o f December 15,
1919, and January 16,1920, and to my letter of September 24,1920, in connection
with the advances o f $5,000,000 each made on those respective dates against
the obligation dated June 2 1 , 1918, of your Government for $15,790,000 held by
the United States Treasury, I inclose herewith a statement prepared under the
M y D e a r M r. T s a m a d o s :




212

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

direction of the Treasurer of the United States, showing that interest in the
amount of $264,344.26 will be due on October 15, 1920, on said obligation com­
puted to said date from April 15, 3920, on the sum of $10,000,000, being the
amount of the advances made on December 15. 1919, and January 16, 1920, and
from September 24, 1920, on the sum of $5,000,000 advanced on that day. Please
make payment of the interest due on October 15 by check payable to the order
o f the “Assistant Treasurer of the United States for credit General Account of
Treasury of the United States ” and deliver the same to the Assistant Treasurer
of the United States at the subtreasury in New York on October 15.
I am, my dear Mr. Tsamados,
Very truly, yours,
N. K e l l e y .
Mr. M. T s a m a d o s ,
Charge d’Affaires, the Greek Legation, Washington, D. C.

Interest on obligations of the Royal Greek Government, Apr. 15, 1920, to Oct.
15,1920, at 5 per cent per annum, semiannual period of 18S days.
Date.

Date advanced.

Amount
advanced.

Dec. 15, 1919.......................... $5,000,000.00
Jan. 16,1920.......................... 5.000.000.00
Sept. 24, 1920......................... 5.000.000.00

June 21,1918 (face amount, $15,790,000).

15,000,000.00

Total.
Interest on $10,000,000 from Apr. 15, 1920, to Oct. 15,1920, at .
5 per cent per annum, amounts to.
Interest on $5,000,000 from Sept. 24, 1920, to Oct. 15,1920, at j.
5 per cent, amounts to.
j

250,000.00

Total................................................................................ ..

264,344.26

14,344.26

L e g a tio n R o y a le de G re ce ,

Washington, October 20, 1920.
Attention of Mr. Kelley.
T reasury D epa rtm en t,

Washington, D.C.
Referring to your letter of September 28, 1920, in
which was inclosed a statement showing that interest in the amount o f
$264,344.26 for $15,000,000 advanced to the Greek Government by the United
States against the obligation dated June 21, 1918, would be due on October 15,
I beg to inform you that according to a cablegram received to-day from our
department of finance, instructions had been given to place that amount at the
disposal of our national bank in order that it may effect the payment of the
interest.
Believe me, dear Mr. Kelley,
Yours, very truly,
M y D e a r M r. K e l l e y :

M. T sam ados.

No. 40184.
Treasury Department,
Office of the Treasurer of the United States.
Duplicate.

$264,344.60.
D. C., October 26, 1920.
I certify that the Greek Government has this day deposited to the credit of
the United States two hundred sixty-four thousand three hundred forty-four
60/100 dollars, on account of interest on obligations of the Greek Government,
to October 15, for which I have signed duplicate receipts.
W a s h in g to n ,

J. G. W a l l a c e ,

Acting Assistant Treasurer United States.
To be retained by the depositor.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

213

SECTION 113.
Correspondence Relating to Request of Greek Government for Fourth Cash
Advance of $5,000,000—This Cash Advance Was not Made—No Reply
From Treasury Department to Letter of Greek Minister of December 22,
1920—File Runs to February 15, 1921.

(For reasons why this loan was not made see sec. 115, containing
letters relating to Greek political situation.)
L e g a tio n R o y a le de G re ce ,

Washington, December 22,1920.
Attention Mr. Kelley.
T reasury D epartm en t,

Washington, D. C.
: Referring to the conversation which I had the pleasure
of having with you yesterday, I beg to inclose herewith a copy of the cablegram
to this legation transmitting a message to the United States Treasury Depart­
ment from the National Bank of Greece and signed by the new minister of
finance, M r. N. Calogeropoulos, thus approving its contents. The National Bank
of Greece asks that a fourth installment of $5,000,000 should be placed to its
credit with the National Bank of Commerce, New York, in accordance with the
Paris financial agreement of February, 1918, and for the account of the Greek
Government. In this same cablegram, it is said that the statements of the third
installment are sent through the ministry of finance.
Yours, very truly,
G. O. A r a c o p o u l o .
M y D e a r M r. K e l l e y

A th e n s , G reece,

December 19, 1920.

L e g a t io n H e l l e n iq u e A W a s h i n g t o n .

Credit cinq millions dollars auprSs National Bank of Commerce SpuisS, nous
prions Tr£sor Etats Unis mettre notre disposition 4§me credit cinq millions
dollars m£me Banque. Etat disposition 3§me credit sera adressS par l’interm§diaire Minist£re Finances. National Bank “ Calogeropoulos”

D ep a rtm e n t o f S ta te ,

Washington, December 31, 1920.
M y D e a r M r . K e l l e y : I beg to* acknowledge the receipt of your letter o f
December 27, referring to a request from the National Bank of Greece for a
fourth installment of $5,000,000 against the credit heretofore established in
favor of the Greek Government. You inquire whether there is any objection
from the point of view of the Department of State to the Treasury proceeding
to make the advance requested ; and if there is no objection, wT
hether Mr.
Dracopoulo is the authorized person in charge of the legation with whom the
Treasury may properly deal concerning the same.
The President was informed by letter, dated December 25, of the inquiry
made by the Treasury. He has expressed his concurrence in the recommenda­
tion made by this department that the credit obligation negotiated with the
Venizelos government (referring to the credit of $38,000,000) should be consid­
ered as still binding on this Government, and that the Greek charge d’affaires,
on proper application, should be recognized as representing the Government of
King Constantine.
Under the above authorization there would seem no objection to the continuance
o f informal negotiations with the Greek charge d’affaires in Washington with
regard to this matter. The Department of State, however, can not officially
inform you that Mr. Dracopoulo is the authorized person in charge of the
legation with whom the Treasury may officially deal, until he or some other is
accredited to this Government by the Constantine regime.
Very truly, yours,
V a n S. M e r l e -S m i t h .

The Hon. N i c h o l a s K e l l e y ,
Assistant Secretary of the Treasury.



214

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

J a n u a r y 13, 1921.
My Dear Mr. Davis : Referring to my letter of the 27th ultimo to Mr. MerleSmith, advising him that the Treasury had received from Mr. G. O. Dracopoulo,
of the Greek legation, an informal request for a fourth installment o f
$5,000,000 against the credit heretofore established in favor of the Greek Gov­
ernment, I understand from Mr. Merle-Smith’s reply o f the 31st ultimo that
the President has expressed his concurrence in the recommendation made by
the Department of State that the financial arrangements made with the Greek
Government early in 1918 should be considered as still binding on this Gov­
ernment and that the Greek charge d’affaires on proper application should be
recognized as representing the Government of King Constantine. Mr. MerleSmith added that under the above-mentioned authorization there would seem
to be no objection to the continuance of informal negotiations with the Greek
charge d’affaires in regard to the advance which has been requested. Until
the Department of State officially informs the Treasury that the present charge
d’affaires of the Greek legation is the authorized person in charge of the
legation with whom the Treasury may officially deal, as having been accredited
to this Government by the Constantine regime, the Treasury is not in a posi­
tion finally to complete arrangements for the advance. The Treasury has.
however, conferred informally with the charge d’affaires in order that pending
the receipt by the Treasury of advices from the Department o f State that he
has been duly accredited, he may inform the present Greek Government of the
steps necessary to be taken by it in order to meet, in connection with the
proposed advance [as might be made under the credit formally established in
favor of Greece] ,1 the requirements imposed by the arrangement between the
Treasury and the Greek Government made in November, 1919, pursuant to
which the three previous installments were advanced.
Very truly, yours,
N. K elley.

Hon. N o r m a n H. D a v is ,
Acting Secretary of State,
Department of State.
W a s h i n g t o n , January 14, 1921.
In acknowledging receipt of your letter of the 13th
instant I may say that I see no objection whatever to your continuing informal
negotiations with the Greek charge d’affaires in regard to the advances which
have been requested, in order that the Greek Government, when recognized,
may be conversant with the requirements of the Treasury. As soon as there
are any more definite developments I shall be glad to inform you. You are
correct in your understanding of the President’s views in respect to the finan­
cial arrangement made with the Greek Government early in 1918.
Very sincerely, yours,
N o r m a n H. D a v is .
The Hon. N i c h o l a s K e l l e y ,
Assistant Secretary of the Treasury.
M y D e a r M r. K e l l e y :

J a n u a r y 15, 1921.
: Referring to previous correspondence concerning advances
by the Treasury to the Greek Government under the credits established pur­
suant to the agreement of February 10, 1918, made in Paris by this Government
and the British and French Governments on one hand, and the Greek Govern­
ment on the other, for the making of loans to Greece by the three Governments
in equal amounts, not exceeding in the aggregate for the three Governments,
however, the equivalent of 750,000,000 francs, the Treasury will be glad to
learn whether it is correct in its understanding that up to date neither the
British nor French Government has made any advance to the Greek Govern­
ment under the arrangement.
Sincerely yours,
D e a r M r. D a v is

N . K elley.

Hon. N o r m a n H. D a v is ,
Acting Secretary of State,
Department of State.
1 Change suggested by Mr. Davis fo r the statement to be given to the press.
Mr. Kelley, Jan. 14, 1921.




O. K.d by

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME,

215

SECTION 114.
Statement From Greek Minister o f Finance, in French, o f Disposal o f the
First Two Cash Advances Made by the United States o f $5,000,000 Each.
(N o t e .— In accounting for these moneys onfy the names of the
recipients— individuals and banks— are given. The purpose of the
disbursements is not shown.)
L e g a tio n R o y a le de G re ce ,

Washington, September 21, 1920.
Attention of Mr. Kelly.
T reasu ry D e pa rtm en t,

Washington D. C.
Referring to my letter of September 15, 1920, No. 1650, I
take pleasure in informing you that a cablegram received to-day from Athens
advises that the statements concerning the disposal of the first two installments
of $5,000,000 each have been mailed to this legation and that the National
Bank of Greece has been ordered to pay the interest due for that amount.
I am, my dear Mr. Kelly,
Yours, very truly,
D e a r M r. K e l l y :

M. T sam ados.
L e g a tio n R o y a le de G re ce ,

Washington, October 29, 1920.
Attention o f Mr. Kelley.
T reasury D epartm en t,

Washington D. C.
Referring to my letter of September 21, 1920, No.
1691, I beg to inclose herewith the statements sent to this legation by the
ministry of finance concerning the use of the first $10 ,000,000 on the allied loan
of 750,000,000 francs to Greece in conformity with the financial agreement of
Paris of the year 1918.
Yours, very truly,
M y D e a r M r. K e l l e y :

M . T sam ad o s.

Relev6 de disposition des $10,000,000 avanc£s par le Tvtisor des Etats-Unis &
valoir sur les credits consentis par les Gouvemements Allies de Frs. 750,000,000.
1919:
Novem. 3-16. Decouvert au 10-23 Novembre------------------------------$225,876.00
Novem. 12-25. Cofits de Billets de Banque-----------------------------------200, 000.00
Novem. 13-26. Fournitures du Gouvernement___________________ 1,049,380.00
Decem. 17-20:
Succursale de Sparte----------------------------------------------------------600.00
Succursale du PirSe------------------------------------------------------------1,251.00
Succursale du Pir 6 e------------------------------------------------------------2, 298. 00
Succursale du Piree------------------------------------------------ -----------20,000.00
Succursale du Corfou----------------------------------------------------------4, 000. 00
Ch. Yerikios-----------------------------------------------------------------------20,000. 00
Caissier Central------------------------------------------------------------------81.00
Decem. 18-1:
Effets encaisses------------------------------------------------------------------22,622.00
Caissier Central-----------------------------------------------------------------821.00
Decem. 19-22. Effets encaisses__________________________________
4,254.00
Decem. 20-3:
K. Bastatzoglou------------------------------------------------------------------225,000.00
Succursale de Cefalonie------------------------------------------------------3,200.00
Succursale du PirSe------------------------------------------------------------7,664.00
Succursale de la Canee-------------------------------------------------------9,000.00
Effets encaisses------------------ ------------------------------------------------8,051.00
Effets encaisses------------------------------------------------------------------4 3 3 .00
E. Yichos___________________________________________________
2, 400.00
Al. Griescon________________________________________________
2,080.00
H. Ifoanos_________________________________________________
483.00
A. Ifoanos__________________________________________________
1 ,000.00



216

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Decem. 21-4:
Succursale du Piree________________________ ______________
Do_____________________________________________________
Effets encaisses____________________________________________
Fournitures du Gouvernement--------------------------------------------Credits Documentaires_____________________________________
Bourne & Cie______________________________________________
Effets encaisses------------------------------------------------------------------Decem. 23-5:
A. Viclios___________________________________________________
Succursale de Candie----------------------------------------------------------Succursale du Piree------------------------------------------------------------Credits Documentaires_____________________________________
Decem. 24-6:
Ministere de la Marine_____________________________________
Effets encaisses____________________________________________
Do_____________________________________________________
Caissier Central___________________________________________
Effets encaisses____________________________________________

$505.00
3, 539 .00
26, 369.00
12,405.00
6,195.00
20,000.00
1,763.00
30, 000. 00
7, 500.00
314.00
30,000.00
300,000.00
16,165.00
3, 743. 00
1,941.00
821.00

D appiti 97 _ •
Q

Succursale du Piree______ ’_________________________________
Jacharias & Cie------------------------------------------------------------------Effets encaisses____________________________________________
Decem. 28/10. Effets encaisses--------------------------------------------------Decem. 30/12:
Suc/le du Piree____________________________________________
Retour de cheque-----------------------------------------------------------------Caissier Central___________________________________________
B. Ipivelis__________________________________________________
Decem. 31/13: .
Succursale du Piree------------------------------------------------------------Do_____________________________________________________
Do_____________________________________________________
Caissier Central___________________________________________
1920:
Janv. 2-15:
H. Oeconomopoulos________________________________________
E. Isampourtjis______________________________ ______________
Banque d’Ath§nes__________________________________________
Janv. 3-16 :
P. Skiadaressis------------------------------------------------------------------Caissier Central___________________________________________
Banque de l’lndustrie______________________________________
D. Michailidis _____________________________________________
Banque de l’lndustrie______________________________________
Banque Olivier____________________________________________
Suc/le du Piree____________________________________________
Janv. 4-17:
Effets encaisses____________________________________________
Do-------------------------------------------------------------------------------Caissier Central___________________________________________
Banque du Piree___________________________________________
Effets encaisses____________________________________________
Do_____________________________________________________
Succursale de Yanina----------------------------------------------------------Succursale du Piree________________________________________
Do-------------------------------------------------------------------------------Janv. 7-20:
Succursale de Patras_______________________________________
Effets encaisses____________________________________________
Banque Populaire_________________________________________
Banque de l’lndustrie___________________ __________________
Banque du Piree___________________________________________
Janv. 8-21:
Ecole Charocopos__________________________________________
Bourne & Cie----------------------------------------------------------------------Banque de l’lndustrie______________________________________



5, 731.00
1,250.00
1 , 539. 00
1, 881.00
37,477.00
100.00
2,224. 00
150.00
5,460.00
35, 775. 00
21, 687. 00
2,490.00
150. 00
140. 00
199.00
434.00
10,000. 00
6 , 200.00
15.00
40. 796. 00
50. 00
6,008.00
4,624.00
14,487.00
192.00
31,020. 00
420.00
9,927.00
10,300. 00
10,951.00
41,947.00
5, 000.00
2,350.00
432. 00
5, 738.00
9,476.00
381. 00
20,000.00
15,875.00

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Janv. 9-22:
Suc/le du Piree___________________________________________
Suc/le de Salonique________________________________________
Suc/le de Patras----------------------------------------------------------------Caissier Central___________________________________________
I. Skinis________________________________ - _________________
Banque Populaire----------------------------------- --------------------------Banque du Piree___________________________________________
Banque d’Athenes__________________________________________
E. Dravantinos____________________________________________
Effets encaissSs____________________________________________
Janv. 10-23:
Banque Populaire---------------------------------------------------------------Do_____________________________________________________
Banque de l’lndustrie______________________________________
Banque Populaire__________________________________________
Banque de l’Economie Nationale-------------------------------------------Banque d’Athenes__________________________________________
Banque Populaire__________________________________________
Sucfle du Pir 6 e____________________________________________
Do______________________________________ - _____________
Banque Populaire---------------------------------------------------------------Banque du Piree-----------------------------------------------------------------Banque d’Athenes--------------- -----------------------------------------------Banque de l’lndustrie---------------------------------------------------------Do_____________________________________________________
Sucfle de Salonique------------------------------------------------------------Sucfle de Pyrgos__________________________________________
Y. Polamarkakis___________________________________________
Effets encaissets___________________________________________
Sucfle de Candie___________________________________________
Janv. 11-24:
Sucfle de Patras___________________________________________
Sucfle de Salonique________________________________________
Do_____________________________________________________
Banque de l’Eeonomie Nationale____________________________
Banque du Pir 6 e__________________________________________
Banque de l’lndustrie---------------------------------------------------------Banque Populaire---------------------------------------------------------------Sucfle du Pir 6 e------------------------------------------------------------------Caissier Central___________________________________________
Do___________________________________ _________________
Do_____________________________________________________
A. Slimann-------------------------------------------------------------------------Effets encaissets___________________________________________
Janv. 13-26:
Banque Lonienne---------------------------------------------------------------Banque de l’Economie Nationale____________________________
Banque Populaire__________________________________________
Banque de l’lndustrie__________ ^___________________________
Banque Lonienne__________________________________________
Do-------------------------------------------------------------------------------Do-------------------------------------------------------------------------------Do-------------------------- _— ---------------------------------------------Sucfle de Salonique---------------- ‘-------------------------------------------Sucfle de Patras-----------------------------------------------------------------Effets encaissets-----------------------------------------------------------------Do------------------------------------- :-----------------------------------------Sucfle de Patras___________________________________________
Janv. 14-27:
Sucfle du PirSe------------------------------------------------------------------Banque de l’lndustrie______________________________________
Banque Populaire---------------- ;--------------------------------------------Do-------------------------------------------------------------------------------Do-------------------------------------------------------------------------------Banque de l’Economie Nationale____________________________




217

$8,764.00
26,800. 00
33,000. 00
726.00
250. 00
8 , 041. 00
10,170.00
475.00
436.00
13,258.00
1,600. 00
120.00
47,500.00
8,135.00
50, 000.00
6,469.00
13,000. 00
526, 751.00
450. 00
35,502.00
31,625.00
19, 004.00
1,249.00
77, 500.00
91,000. 00
58.00
268.00
24,900. 00
15,790.00
16,000.00
60, 000. 00
3,807.00
89,851.00
46, 516.00
95,140. 00
45, 545. 00
17, 606. 00
306.00
600. 00
26. 00
140.00
8,905. 00
641.00
2,677.00
46, 804. 00
39,150. 00
200. 00
2, 870.00
7, 060. 00
8 ,000. 00
45,963.00
43,500.00
3,493.00
11,294.00
280. 00
30,403.00
22, 500. 00
10,651.00
48,821.00
4, 500. 00
9,082.00

218

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Janv. 14-27—Continued.
Banque du Piree-----------------------------------------------------------------Do_____________________________________________________
S. Aggelatos-----------------------------------------------------------------------Janv. 15-28:
Banque de l’lndustrie---------------------------------------------------------Banque d’Athenes__________________________________________
Banque du Piree-----------------------------------------------------------------Banque Populaire__________________________________________
Banque Lonienne------------------------------------------------ ,--------------Do_____________________________________________________
K. Macheras________________________________________________
Sucfle de Yolos____________________________________________
Effets encaissets___________________________________________
Do_____________________________________________________
Banque d’Ath£nes__________________________________________
Janv. 16-29:
Banque Panagiotopoulos------------------------------------------------------Banque d’AthSnes---------------------------------------------------------------Do_____________________________________________________
Sucfle de Patras___________________________________________
Do_____________________________________________________
Sucfle de Salonique________________________________________
Do___________________________________________________—
Caissier Central___________________________________________
Sucfle du Piree____________________________________________
Sucfle de Pyrgos___________________________________________
Janv. 17-20:
Banque Populaire---------------------------------------------------------------Do_____________________________________________________
Banque d’Athenes__________________________________________
Banque de l’lndustrie______________________________________
Do_____________________________________________________
Banque Gen£rale__________________________________________
1919:
Novem. 12-25. Coupons du Gouvernment------------------------------------Decem. 5-18. Coupons du Gouvernment--------------------------------------1920:
Janv. 16-29. Sucfle du Piree------------------------------------------------------Nov. 3: Banque Generale----------------------------------------------------------17-30: Sucfle de Salonique________________________________
Janv. 16/20:
Effets encaissets-----------------------------------------------------------------K. Georges-------------------------------------------------------------------------Effets encaissets-----------------------------------------------------------------Janv. 18-31:
Sucfle du Piree------------------------------------------------------------------Do_____________________________________________________
Janv. 20-3: Effets encaissets----------------------------------------------------Janv. 24-5:
Sucfle du Salonique------------------------------------------------------------Sucfle du Pir£e------------------------------------------------------------------Do-------------------------------------------------------------------------------Caissier Central-----------------------------------------------------------------Effets encaissets-----------------------------------------------------------------Janv. 22-4:
Sucfle du Pir§e-------------------------------------------------------------------Effels encaissSes----------------------------------------------------------------Janv. 23-5:
Sucfle du Piree-------------------------------------------------------------------Caissier Central-----------------------------------------------------------------Janv. 28-10:
Banque Populaire_________________________________________
Banque d’Athfcnes_________________________________________
Banque de 1’Industrie______________________________________
Banque lonienne____________________________________________




$23,943.00
1,700.00
72.00
9,933.00
9,095.00
25,000.00
3,000. 00
562.00
600.00
458. 00
50, 000. 00
17,240. 00
19, 875. 00
369.00
1,527.00
187.00
2, 345. 00
3, 500.00
38,000.00
30,000.00
34, 255. 00
4,780. 00
53,205. 00
500.00
11,877.00
23, 961.00
4,819.00
48,943.00
39, 356. 00
130,596.00
47,376.00
213,429. 00
29,512. 00
9,404.00
18,000 .00
10,933.00
208.00
9,636.00
60,637.00
34,955. 00
5,696.00
18,400.00
6,975.00
28,250. 00
440. 00
2,795.00
61,924.00
3,284.00
41, 753. 00
420.00
4,685.00
24,166.00
49,930.00
4,526.00

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
Janv. 28-10— Continued.
Banque Populaire__________________________________________
Banque d’Athenes-------------------------------------------------------------Banque d’Orient___________________________________________
Banque de l’Economie Nationale---------------------------------------Banque Populaire-------------------------------------------------------------Banque d’Atlienes-------------------------------------------------------------Banque de 1’Industrie---------------------------------------------------------Banque de l’Economie Nationale---------------------------------------Banque Commerciale---------------------------------------------------------Do_____________________________________________________
Banque de l’lndustrie-------------------------------------------------------Banque Populaire-------------------------------------------------------------Banque de l’Economie Nationale---------------------------------------Banque du Piree__________________________________________
Banque d’Athenes_________________________________________
Banque de l’lndustrie______________________________________
Banque d’Athenes_________________________________________
Banque du Piree___________________________________________
Banque Populaire_________________________________________
Do_____________________________________________________
Banque de l’lndustrie_____________________________________
Banque d’Orient___________________________________________
Banque d’Athenes_________________________________________
Banque d’Orient___________________________________________
Banque de l’lndustrie_____________________________________
Banque du Piree___________________________________________
Banque Populaire_________________________________________
Banque Ionienne__________________________________________
Janv. 29-11:
Banque du Piree__________________________________________
Banque de l’Economie Nationale___________________________
Fevr. 1-14:
Suefle de Salonique________________________________________
Do-------------------------------------------------------------------------------Do-------------------------------------------------------------------------------Do-------------------------------------------------------------------------------Do-------------------------------------------------------------------------------Banque de Navigation_____________________________________
Sucfle de Salonique----------------------------------------------------------Do-------------------------------------------------------------------------------Janv. 28/10:
Suc/le de la Canee__________________________________________
Effets eneaisses_____________________________________________
Janv. 29/11. Do________________________________________________
Janv. 30/12. Do------------------------------------------------------------------------Janv. 31/13:
Suc/le du Piree_____________________________________________
Effets eneaisses______________________ ______________________
M. Evlampios--------------------------------------------------------------------D o ------------------------------------------------------------------------------Fevr. 1-14:
Suc/le du Piree_____________________________________________
D o ------------------------------------------------------------------------------Caissier Central___________________________________________
Fevr. 3-16:
Suc/le du Piree_____________________________________________
D o ------------------------------------------------------------------------------Fevr. 4-17:
Caissier Central-----------------------------------------------------------------M. Evlampios______________________________________________
Fevr. 5-18:
G. Aravomtinos____________________________________________
Effets eneaisses_____________________________________________
Fevr. 6-19. Suc/le du Piree-------------------------------------------------------Fevr. 7-20. Prise Korgialenios---------------------------------------------------


219

$23,780.00
11> 877.00
6 , 600. 00
13,040. 00
10,741.00
4,974.00
37, 520.00
45,636.00
353. 00
1,956.00
50,414.00
6,260.00
7,659.00
10,200. 00
920.00
37,634.00
27, 624.00
33,400.00
210,358. 00
43,147.00
88,155.00
5,000.00
907.00
1,650.00
2,947.00
19,651. 00
15,000.00
61.00
800.00
11,500.00
33,150.00
23,018.00
1 1 2 ,200.00
110,451.00
37,964.00
4,300.00
5,600.00
1 0 , 500.00
60,000.00
7 , 1 3 3 .00
400.00
3,999.00
10,311.00
1,461.00
650. 00
1 ,000.00
7,500.00
00
6,718.00

4 ,260.

15,837.00
3, 500.00
9,137.00
1 ,100.00
363.00
5,445.00
16,230.00
114.00

220

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Fevr. 8-21:
Effets encaisses____________________________________________
D o ____________________________________________________
Fevr. 12-25. Suc/le du Piree____________________________________
Fevr. 13-26. Suc/le du Piree____________________________________
Fevr. 24-6. Credits Continues___________________________________
Fevr. 29/13. Effets encaisses____________________________________
Mars 2-15. Suc/le du Piree______________________ _______________
Fevr. 5-18:
Banque Ionienne___________________________________________
D o ____________________________________________________
D o ____________________________________________________
Fevr. 18/1. Banque de l’lndustrie_______________________________
Fevr. 19/2. Banque Ionienne____________________________________
Mars 2-15. Effets encaisses_____________________________________
Mars 4-17:
Suc/le de Pyrgos___________________________________________
Suc/le de Larissa__________________________ :_______________
Mars 5-18:
Dimaras Freres____________________________________________
Banque d’Athenes_________________________________________
Mars 10-23. Coupons du Gouvernement_________________________
Mars 18-30. Dimaras Freres____________________________________
Mars 21-3. Effets encaisses_____________________________________
Avril 2-15. Banque Commereiale_______________________________
Avril 13-26. Suc/le de Chios_____________________________________
Avril 15-28:
Banque Commereiale______________________________________
Effets encaisses_____________________________________________
Avril 16-29:
Frais de fabrication de Billets de Banque___________________
A. Launis__________________________________________________
Effets encaisses_____________________________________________
Mars 20-3:
Minist&re des Finances_____________________________________
Fournitures du Gouvernement______________________________
Mai 6-19. Banque Ionienne_____________________________________
Mai 27-9. Fournitures du Gouvernement________________________
Juin 25-7. Fournitures du Gouvernement-----------------------------------Juillet 14-27. Coupons du Gouvernement-----------------------------------Juillet 15-28. Fournitures du Gouvernement_____________________
Juillet 18-31. Coupons du Gouvernement_______________________
Juillet 23-6. Fournitures du Gouvernement--------------------------------Aout 11-24. Fournitures du Gouvernement_____________________
Aotit 28-10:
Ministere des Finances____________________________________
Ministere des Finances____________________________________
Ministere des Finances_____________________________________
Ministere des Finances____________________________________

$431.00
1 , 951. 00
2, 886 .00

2,302.00
3,967.00
5,977.00
675.00
1 0 , 731.00

621.00
00
1,406.00
4,835.00
9,000.00

8 , 350.

1, 040. 00
100. 00
60,000.00
50. 00
81, 782. 00
40,000.00
314,000. 00
200. 00
3,148.00
10. 00
509,858.00
263,624. 00
117.00
59.00
1, 255. 00
1,255. 00
10,000. 00
1,500.00
360,000.00
61,175.00
7,000.00
14,849.00
178,618.00
261.55
963, 200. 00
14,200.00
750. 00
144,808. 74
9, 995. 432. 29

Avance au 3/16 Decembre 1919________________________________ $5,000,000.00
Avance au 4/17 Janvier 1920---------------------------------------------------- 5,000,000.00
T otal___________________________________________________ 10,000,000.00
Pour copie conforme, Ath^nes, le 29/11 Sept., 1920, le chef de section.
C. W o l s k r s .

27, 1920.
: Referring to our recent conversations, I inclose for
your information a copy of a letter dated the 23d instant, No. 2242, which I
have received from Mr. G. O. Dracopoulo, of the Greek Legation, and of the copy
therewith inclosed of a cable from Mr. Calogoropoulos, whom I understand to
be the Greek minister of finance, to the Greek Legation in Washington trans­
mitting a request from the National Bank o f Greece for a fourth installment
D ecem ber

M y D e a r M e rle -S m ith




221

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

o f $5,000,000 against the credit heretofore established in favor o f the Greek
Government. The arrangement pursuant to which the three previous advances
were made requires that the request from the National Bank of Greece trans­
mitted through the legation at Washington shall be accompanied by a cable
representation similarly transmitted from the Greek minister of finance that
the transfer so requested is under and in accordance with the provisions o f
the Paris financial agreement dated February 10, 1918. You will observe that
the cable from the Greek minister of finance does not contain such a repre­
sentation. Under the arrangement the Greek Government undertook to supply
the Treasury with reports showing the purposes for which expenditures out
of the advances are used. The Treasury has not as yet received an itemized
report of the expenditure of the third installment. The reports covering the
first and second installments appear to show the persons to whom the dollars
were transferred, but not the purposes for which they were used. Before it
takes thesee matters up with Mr. Dracopoulo the Treasury will be glad to learn
whether, by reason of recent events in Greece, there is any objection from the
point of view of the Department of State to the Treasury’s proceeding to make
the advances now requested, and if not whether Mr. Dracopoulo is the authorized
person in charge of the legation with whom the Treasury may properly deal
concerning the same.
Very truly, yours,
M . K elley.

Hon. V a n S. M e r l e - S m i t h ,
Third Assistant Secretary of State, Washington, D. C.

SECTION 115.
Correspondence Relating to Greek Politics at the Close of 1919 and the
Consequent Financial Policy of the Allies Toward Greece.
[Paraphrase o f telegram received.]

From: American Legation, Athens.
Dated: December 12, 1920, 8 p. m.
Received: December 13, 9.55 a. m.
No. 265.
Fo$ your confidential information:
Great Britain iand France have notified the Greek Government that they will
not honor any further drafts upon the unused balances of the tripartite loan to
Greece still held in London and Paris. In discussing this withholding of
economic support from Greece in case of the return of King Constantine the
Government-controlled press speak with much confidence of the support ex­
pected from America, evidently meaning the American balance of the loan in
question.
From a conference which I had with the British minister yesterday I believe
that England hopes that the present reactionary movement in Greece will
be very short lived if she can prove to Greece that she can not fulfill her r61e in
the Near East without the good will and support of the associated powers.
Bankruptcy is impending and the strongest argument possible at this time
would be a financial one. Should the United States make any advances at
this time I believe they would be considered as a condemnation o f Venizelos
and that much publicity would be given them as supporting the incoming
administration. If the United States does not consider making such advances,
I think it would be very desirable to clearly indicate this to the Greek Govern­
ment. The French and British ministers are expecting to receive notifications
that they are recalled. Have you any instructions for me in the premises?
Capps.
U n it e d S t a t e s S e n a t e ,
C o m m i t t e e o n t h e U n iv e r s it y o f t h e U n it e d S t a t e s ,

January 13, 1921.
Hon. D a v id F. H o u s t o n ,
Secretary of the Treasury, Washington, D. C.
M y D e a r M r . H o u s t o n : I inclose you a copy of a letter that I wrote to the
State Department some time ago, and I also inclose the reply of the State De­



222

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

partment. I call your attention to the last part of the letter, and would like
to have such information and enlightenment as you can furnish me with.
I am, with every expression of regard,
Very truly, yours,
Jo h n Sh arp W

il l ia m s .

W a s h i n g t o n , D. C., January 5 , 1921.
Hon. N o r m a n H. D a v is ,
Acting Secretary of State, Washington, D. C.
M y D e a r M r . D a v i s ; I see in the paper some information, or quasi informa­
tion—I don’t know which—to tlie effect that the State Department first con­
strued its agreement with regard to the credit extended by the Allies of
$38,000,000 for Greece as contingent upon the ratification of the treaty of
Versailles, but that later the State Department construed the agreement to
permit them to advance $5,000,000, supposedly our share, regardless of the
ratification. If this be true, I think the department made a mistake in its
second ruling, and that now a splendid opportunity is presented to retire from
it and to avoid the criticism which necessarily will arise by refusing to ad­
vance the money to King Constantine. This refusal can well be based upon
the fact that wre were helping a friend, or a friendly government and people,
and that when an enemy has been substituted for the friend, we do not con­
sider ourselves compelled to extend any gratuity. It is a gratuity, although
the gratuity is expected to be paid back.
I am, with every expression of regard,
Very truly, yours,
Jo h n Sh arp W

il l ia m s .

P. S.—I write this to you in Mr. Colby’s absence, but, of course, would like
to have him read the letter when he returns. I don’t think that we ought to
interfere with the internal affairs of Greece. I f the people want King Con­
stantine back, that is their business and not ours; but helping him after he
gets back is another thing. Right now’ we need to economize, and we might
just as well put that.$5,000,000 to the credit side of the ledger and take it oft* the
debit side.
T

he

U nder Se cretary

of

State,

Washington, January 10, 1M0.
M y D e a r S e n a t o r W i l l i a m s : In acknowledging receipt of your letter of
January 5 relative to the credit extended to Greece, I may say that the Treasury
is more conversant with the details of that credit than I am, but the credit
extended by this Government to Greece was not contingent upon the ratifica­
tion of the treaty of Versailles. The credit extended to Greece, as I recall,
about two years ago was, upon the condition that it would be made available
upon the conclusion of peace, or whenever the foreign balances of the National
Bank of Greece should fall below 100,000,000 marks. I understand that the
Greek Government contended that both of those contingencies have arisen, and
that the Treasury finally agreed to let them have advances from time to time
for purchases of American commodities for consumption in Greece.
I f and when this Government extends recognition to King Constantine, or
continues relations with the Greek Government, I do not see how the Treasury
can legally or morally cancel its obligation to complete the advance to Greece
under the terms stipulated. As the Treasury, however, is more conversant
with this than I am, I suggest that you might communicate with the Secretary
o f the Treasury.
Sincerely, yours,
N o r m a n H. D a v is .
J a n u a r y 19, 1921.
Your letter o f the 13th instant has been
received, transmitting a copy of your letter o f the 5th to the Undersecretary
o f State, and a copy of his reply o f the 10th, concerning loans by the Treasury
to the Greek Government. Mr. Davis’s understanding of the situation regard­
ing loans to Greece, as stated in his letter, is substantially in accord with mine.
The question involved is the obligation of the Treasury under the arrangement
made as long ago as February, 1918. The Treasury, of course, does not desire
My

D ear




S en ator

W illia m s :

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

223

to pay out funds except to the extent necessary, and, in any case, is not in a
position to make advances to the Greek Government pending receipt from the
Department of State of advices as to the existence of relations between this
Government and the Greek Government. I return Mr. Davis’s letter.
Sincerely, yours,
D. F. H o u s t o n .
Hon. J o h n S h a r p W i l l i a m s ,
United States Senate, Washington, D. G.

T h e S e c r e t a r y of t h e T r e a s u r y ,

Washington, January 19, 1921.
Your letter of the 13th instant has been re­
ceived, transmitting a copy of your letter of the 5th to the Undersecretary o f
State and a copy of his reply of the 10th, concerning loans by the Treasury to
the Greek Government. In February, 1918, a special agreement was made in
Paris under which the United States, France, and Great Britain undertook to
lend to the Greek Government in equal shares in their respective currencies up
to the equivalent of 250,000,000 francs each. The loan was to be pledged by
the Greek Government to the National Bank of Greece against the issue of
bank notes to be used by the Greek Government in Greece for certain purposes
specified in the agreement. Credits and advances under the arrangement were
to be put at the disposal of the Greek Government as recommended and ap­
proved by an interallied financial commission to be established at Athens, and
the use of the resources was to be supervised by an interallied military com­
mission similarly established. During the war the loan could be availed of in
case the foreign balances of the Greek treasury and the Greek National Bank
fell below 100,000,000 francs, and it was provided that six months after the
conclusion of peace the balance of the loan could be availed of without restric­
tion. Pursuant to these arrangements, the Treasury established credits in
dollars up to the equivalent of 250,000,000 francs, upon the understanding, how­
ever, that this amount would not be available except to the extent o f one-third
of such amount of vouchers for expenditures by the Greek Government prior
to 1919 for the purposes specified in the Paris agreement as should have been
submitted to and approved by the American delegate to the interallied financial
commission.
It is the understanding of the Treasury that on the basis of the vouchers
approved by the commission the total amount of this Government’s share o f
the loan will probably not exceed $43,900,000. The obligation of the Treasury
under the Paris agreement to make advances does not appear to be contingent
upon anything except proof by the Greek Government to the satisfaction o f the
interallied commission o f expenditures by the Greek Government for the pur­
poses mentioned in the agreement. Under the terms of the agreement, however,
the time when the advances are to be made is contingent upon the lapse of six
months after the termination of the war and prior to such termination upon the
foreign balances of the Greek treasury and of the Greek National Bank falling
below 100,000,000 francs. In November, 1919, the Greek Government advised
the Treasury that the balances had fallen below that figure, but did not inform
the Treasury by how much or give it information which led the Treasury to
believe the advices more than a formal notice, as distinguished from a request
for an advance. The Greek Government had, in September, 1919, however,
made urgent request for leave to be permitted to anticipate the six months’
period after the termination o f the war and to use part or all of the dollars
which would be available to it under the Paris agreement. Late in November,
1919, the Treasury reached an agreement with the Greek representatives where­
by it agreed to make available against the credits established in favor of the
Greek Government the sum of $5,000,000, upon the understanding that said sum
was to be used either by the National Bank of Greece itself or by the parties
to whom that bank might transfer such funds only for the purchase in the
United States of goods to be consumed in Greece, and upon the further under­
standing that itemized statements showing the purposes for which such funds
were used would be furnished by the Treasury through the Greek Legation here.
Subsequently the further installments of $5,000,000 each were advanced. As­
suming that the Government of King Constantine is recognized by the political
departments of this Government as the same Government with which the Paris
agreement was made, or as the proper successor to that Government, I do not
M y D ea r S e n a to r W illia m s :




224

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

see how the Treasury can in honor refuse to perform its obligations under the
Paris agreement. Although it is doubtless open to the Treasury to stand upon
the terms of that agreement and to decline to make further advances until
after the lapse of six months after the termination by this Government of the
state of war, I do not see any advantage, in case the Government o f King
Constantine shall be recognized, in refusing to make advances in such install­
ments as Greece may require for the purposes for which the previous install­
ments were advanced.
Yours, very truly,
D . F . H o u ston .

Hon. J o h n S h a r p W i l l i a m s ,
United States Senate.
D e p a rtm e n t o f S ta te ,

Washington, February 3, 1921.
M y D e a r M r. K e l l e y : Referring to my letter of January 24, inclosing a copy
of a telegram from the American ambassador at London in regard to advance­
ments by the British Government to Greece under the Paris agreement of
February 10, 1918, I inclose herewith a copy of the confidential dispatch
referred to in the telegram mentioned.
Very truly, yours,
V a n S. M e rl e -S m i t h .

Hon. N i c h o l a s K e l l e y ,
Assistant Secretary of the Treasury, Washington, D. C.
No. 4108.
L o n d o n , January 21, 1921.
The S e c r e t a r y o f S t a t e ,
Washington.
Sir : I have the honor to refer to my telegram No. 69, under date of to-day,
in reply to the department’s telegraphic instructions No. 52, of January 20,
7 p. m., relative to the advances made by the British Government to the Greek
Government pursuant to the agreement of February 10, 1918, signed in Paris.
I was informed to-day by an official of the foreign office dealing with near
eastern affairs that in accordance with the agreement above mentioned the
British Government undertook to place to the favor of the Greek Government
a credit of £10,000,000 (the nominal equivalent of 250,000,000 francs), against
which sum the Greek Government might make purchases of merchandise in the
United Kingdom. I was further informed that up to the present date the
British Government had advanced approximately £6,500,000.
Owing to the decision reached a short time ago, that no further financial
assistance was to be given for the time being by the British Government to
the Greek Government because of King Constantine’s accession, the credit of
the remaining £3,500,000 is temporarily suspended.
I learn confidentially from the same source that when the Greek Government
approached the French Government with a view to obtaining an advance on
the credit allotted to Greece under the agreement of February 10, 1918, the
French Government stated that the Greek Government had obtained an errone­
ous impression with regard to the matter; that the agreement did not provide
for advances being made to Greece by France, but that the 250,000,000 francs
was to act as collateral against which the Greek Government might issue
notes. I was informed in this connection, in the strictest confidence, that the
British Government did not hold this view.
In this connection and with reference to my telegram No. 71 of January 21,
6 p. m., it appears that the British Government is forced to temporarily oppose
the recognition of King Constantine at the present time because of English
public opinion and the strong attitude of the French Government in this respect.
For the same reason that the British Government opposes the revision of the
treaty of Sevres, recognition of Constantine will be eventually given. It is
the belief of the Government that British interests in the Near East can best
be furnished by a strong Greece, and that one of the best means to better the
Greek situation is to tender moral and political support. Obviously this can
not be accomplished by continuing to refuse recognition of the Greek King. It
is probable that recognition will be requested and accorded soon after the
forthcoming Paris conference.
I have the honor to be, sir,
Your obedient servant,



J o h n W . D a v is .

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

225

D e p a rtm e n t o f S ta te ,

Washington, January 24, 1921.
M y D e a r M r . K e l l e y : I am inclosing herewith a copy of a telegram dated
January 21, 1921, from the American ambassador at London, England, in regard
to an advancement by the British Government of approximately £6,500,000
to the Greek Government to be used against purchases o f commodities by
Greece in England.
The substance of this telegram was communicated to your office by telephone
this morning.
Very sincerely, yours,
V a n S. M e rl e - S m i t h .

Hon. N i c h o l a s K e l l e y ,
Assistant Secretary of the Treasury, Washington, D. C.
L ondon,

January 21, 1921.

S ec r e t a r y of S t a t e ,

Washington D. C.:
Your 52, January 20, 7 p. m. Informed that British Government have ad­
vanced approximately £6,500,000 to the Greek Government to be used against
purchases of commodities by Greece in England. Credit of remaining £3,500,000
has been suspended temporarily on account of accession to the throne, Con­
stantine. Dispatch follows.
Repeated at Paris.
D a v is .

D e p a rtm e n t o f S ta te ,

Washington, January 26, 1921.
D e a r M r. K e l l e y : With reference to your letter of January 15, 1921, there
is inclosed herewith a copy of a telegram dated January 25, 1921, from the
American ambassador at Paris, France, in regard to a book credit for 250,000,000 francs, opened by the French Treasury in favor of Greece.
I sent you under date of January 24 a copy of the reply o f the American
ambassador at London to the department’s telegram of the 20th in this regard.
Very sincerely, yours,
V an

S. M e r l e -S m i t h .

P a r is ,

January 25, 1921.

Hon. N i c h o l a s K e l l e y ,
Assistant Secretary of the Treasury.

S e c r e t a r y of S t a t e ,

Washington, D. C.:
Referring to the department’s telegram of January 20, 7 p. in., to London,
transmitted to me mutatis mutandis. Foreign office states that a book credit
for 250,000,000 francs was opened by the Treasury in favor o f Greece and that
for various reasons Greece has not yet had an opportunity to draw upon this
credit, which has remained intact.
W allace.
D ep a rtm e n t o f S ta te ,

Washington, February 26, 1921.
The S e c r e t a r y o f ti-ie T r e a s u r y .
(Attention of Mr. Nicholas Kelley, Assistant Secretary.)
Sir : I have the honor to transmit herewith a copy of dispatch No. 2085, dated
January 26, 1921, from the American ambassador at Paris, and copies of the in­
closures thereto which contain information relative to the advances made by
France under the Franco-Anglo-American agreement with Greece, dated Febru­
ary 10, 1918.
I have the honor to be, sir,
Your obedient servant,
N o r m a n H. D a v is ,
Undersecretary.
(For the Secretary of State.)
S. Doc. 86, 87-2------15



226

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

No. 20S5.
P a r i s , January 26, 1921.
Tlie S e c r e t a r y o f S t a t e .
Washington.
S i r : In confirmation of my telegram No. 67, January 25, 5 p. m., transmitting
in substance the reply given by tlie foreign office in regard to the advances made
to date by the French Government pursuant to the agreement of February
10, 1918, I have the honor to inclose herewith copy and translation of the letter
received from Mr. A. Kammerer, director of political and commercial affairs at
the foreign office, in reply to tlie embassy’s informal inquiry, and on which my
above telegram was based.
I have the honor to be, sir,
Your obedient servant,
H u g h C. W a l l a c e .

D ir e c t r ox

des

A f f a ir e s

A f f a ir e s E n t r a n g e r e s ,
P o l it iq u e s et C o m m e r c ia l e s ,

25 Janvier, 1921.
de Peretti me dit que vous avez demand^ des chi fires
precis en ce qui concerne les credits mis par la France a la disposition de la
Grece en vertu de l’accord franco-anglo-americain avec la Grece du 10 fevrier
1921 (sic).
Je remarque d’abord que le credit total de £30,000 (sic) etait nn credit en
ecriture. Le Gouverenment franeais a ouvert pour sa part ce credit dans les
Ecritures de la Caisse Centrale du Tresor pour 250,000,000 Frs.
Mais pour diverses raisons tres compliqu6es, la Grece n’avait pas encore eu
l’opportunitG de tirer sur ces credits si bien qu’ils sont jusqu’ici restes intacts.
Yotre bien de vouG,
M on g h e r C o lle g u e : M.

A. K am m erer.

Monsieur H a r r i s o n ,
Conseiller de VAmbassadc des Etats-Unis, Paris.
F ore lg n A f f a ir e s ,
D e p a r t m e n t of P o l it ic a l a n d C o m m e r c ia l A f f a i r s ,

January 25, 1921.
My D e a r C o l l e g u e : Mr. de Peretti tells me that you have asked him to give
you exact figures as regards the credits placed by France at the disposal o f
Greece under the Franco-Anglo-American agreement with Greece, dated Feb­
ruary 10, 1921 (sic).
I observe first o f all that the total credit of £30,000 (sic) was a hook credit.
For its part the French Government has operated this credit in the books of the
central paying office of the treasury for 250,000,000 francs.
However, owing to various very complicated reasons, Greece has not yet had
the opportunity of drawing upon these credits, so that to this date they have
remained intact.
Faithfully, yours,
A . K a m m erer.
Mr. H a r r i s o n ,
Counselor of the American Embassy, Paris.




CZECHOSLOVAKIA




227




SECTION 116.
Czechoslovak] a.

Under the Liberty loan acts which authorized the Secretary of the
Treasury, with the approval of the President, to make loans to for*
eign Governments then engaged in war Avith enemies of the United
States for the purpose of prosecuting the war, the Treasury Depart­
ment made loans to Czechoslovakia in a total amount of $61,256,206.74. It established credits for Czechoslovakia in a total of $67,329,041.10. There now remains to the credit of Czechoslovakia in
the United States Treasury a sum of $6,072,834.36. There was no
credit established nor were there any cash advances made to Czecho­
slovakia prior to the termination of the war by the armistice of
November 11, 1918, although this money was to be loaned for war
purposes under the law. The first credit was established for Czecho­
slovakia on November 15,1918, four days after hostilities had ceased,
and it amounted to $7,000,000. The last credit was December 31,
1919, of $12,000,000. The first cash advance made to Czechoslovakia
was November 15, 1918, of $5,000,000. The last cash advance was
September 17, 1920, of $732,165.64.
In addition to these loans made under the Libert}^ loan acts, the
United States War Department sold to Czechoslovakia surplus war
material amounting to a total of $20,621,994.54. For this sum we
now hold the obligations of Czechoslovakia.
The American Relief Commission also sold to Czechoslovakia food­
stuffs, amounting in all to $6,348,653.56. We hold the obligations
of Czechoslovakia for this amount also. This makes a total of over
$88,225,000 that we have supplied to Czechoslovakia and for which
we have their demand paper.
In order to properly understand the letters which follow a brief
resume of the history of Czechoslovakia is necessary.
Czechoslovakia was a part of Austria-Hungary which contained a
large number of Slavic people. There were over 600,000 Czecho­
slovaks in the Austro-Hungarian Army. Shortly after the war be­
gan numerous efforts were made to get that portion of Austria-Hun­
gary to revolt and set up a government of its own.
When Russia finally quit the fight in November, 1917, there were
about 300,000 Czecho-Slovaks who had been taken as willing pris­
oners in Russia. Fighting contingents were made up of a number of
them and they aided the Allies to a certain extent.
France recognized Czechoslovakia as a nation on June 30, 1918.
Great Britain recognized her on August 13, 1918.
The United States recognized the Czechoslovakia National Council
as a “ de facto 'belligerent government clothed with the proper au­
thority to direct political and military affairs of the Czecho-Slovaks ”

on September 2, 1918.



229

230

FORETGX LOAXS AXD AUTHORITY FOR MAKTXG SAME.

The nation was not finally set up as a nation with definite boun­
daries and a parliamentary form of government until it was so cre­
ated and set up by the peace treaty, articles 80 to 86, concluded June
28, 1919, and finally ratified bv the various countries January 10,
1 9 2 °*

The attention of the committee is called to the fact that the Liberty
loan acts provide that the loans can be made to countries then engaged
in war with enemies of the United States for the purpose of prose­
cuting the war; that Czechoslovakia was not a country in the com­
mon sense of the word until it was established by the peace treaty on
June 28, 1919, and the money loaned Czechoslovakia could not have
been loaned them for the purpose of the prosecution of the war, as
the war had ceased, all hostilities W
'ere over, and Germany had com­
pletely capitulated four days before the first credit was established
for Czechoslovakia.
Attention is also called to the fact that throughout the Czecho­
slovakian correspondence attached hereto both the Treasury De­
partment and the Czechoslovakian representatives were aware of the
fact that loans could only be made for war purposes to countries then
engaged in war with enemies of the United States, and repeated
7
reference is made to this fact and effort made to circumvent the law
by making the statement that the loans are made to prevent the
spread of anarchy.
SECTION 116-A.
Recognition of Czechoslovakia National Council as a De Facto Belligerent
Government by United States State Department September 3, 1918.
[N ot to be used before 12 noon September 3, 1918.].
D e p a r t m e n t of S t a t e .

For the press:
The Secretary of State makes the following announcement:
The Czecho-Slovak peoples having taken up arms against the German and
Austro-Hungarian Empires, and having placed organized armies in the field,
which are waging war against those Empires under officers of their own na­
tionality and in accordance with the rules and practices of civilized nations;
and
The Czecho-Slovaks having, in prosecution o f their independent purposes in
the present war, confided supreme political authority to the Czechoslovak
National Council,
The Government of the United States recognizes that a state o f belligerency
exists between the Cziecho-Slovaks thus organized and the German and AustroHungarian Empires.
It also recognizes the Czechoslovak National Council as a de facto belligerent
government clothed with proper authority to direct the military and political
aifairs of the Czecho-Slovaks.
The Government o f the United States further declares that it is prepared to
enter formally into relations with the de facto government thus recognized for
the purpose of prosecuting the war against the common enemy, the Empires of
Germany and Austria-Hungary.
O ctober 2, 1918.

M y D e a r Mr. P r e s i d e n t : Mr. McCormick, Mr. Hurley, and I have been in­
vestigating further the problems involved in supplying the Czecho-Slovaks, and
after careful consideration we now have the following recommendations to sub­
mit to you.
1. The cost of purchasing those supplies which are admittedly required by
75,000 Czecho-Slovaks, and the purchase of which is approved by the War
Department, will very materially exceed $1,500,000, the sum which we pre­




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

231

viously mentioned to you. Our present estimate is $4,(M ),000, and an itemized
X
statement showing how this is reached is inclosed herewith. In addition to
the actual purchase price additional sums must be added for such items as
freight, insurance, etc., which will bring the total to about $5,000,0001 Our
experience of the past two weeks leads us to believe that further purchases
will develop as necessary or very desirable. We accordingly recommend in
order to avoid the necessity of troubling you personally whenever a new item
of expense may arise that the Treasury Department be authorized from time
to time to make advances to the Czechoslovak Government, represented by
Prof. Massaryk, of sums aggregating $7,000,000 each, such loan to be first
approved by Mr. McCormick, Mr. Hurley, and me, and the moneys to be spent
for the purchase and shipment of supplies for the Czechoslovak forces.
Very truly, yours,
B . M. B a r u c h .
The P r e s i d e n t ,
The White House, Washington, D. C.
O. K'd,
W. W.

SECTION 117.
Seven-Million-Dollar Loan Approved October 4, 1918.
O c t o b e r 4, 1918.
I understand that the Department of State has recog­
nized the Czechoslovak Government as a de facto belligerent Government at war
with Germany. As I have under consideration making advances to said Gov­
ernment under the authority of the second Liberty bond act and the acts
amendatory thereof and supplementary thereto, I shall be obliged if you will
advise me if my understanding as above stated is correct, and also whether
the Department of State can affirmatively advise me that, in its opinion, the
necessary formalities have been complied with, so that the obligations of the
Czechoslovak Government, when executed in conformity with the documents
furnished to you and by such person as you shall designate to the Treasury
Department, would be regarded by the Department of State as valid and bind­
ing internationally, and would have its sanction.
Cordially, yours,
W m . G. M c A d o o .
The S e c r e t a r y o f S t a t e .
D e a r M r. S e c r e t a r y :

O c t o b e r 4, 1918.
I understand that the Department of State has recog­
nized the Czecho-Slovak Government as a de facto belligerent government at
w
rar with Germany, and that said Government is urgently in need of funds to
make purchases in the United States for the purpose of prosecuting the war.
In order to enable me to make loans to the Czecho-Slovak Government for such
purpose I ask your authority for the establishment of a credit in its favor in
the amount of $7,000,000.
Cordially, yours,
W m . G. M c A d o o .
D e a r M r. P r e s i d e n t :

T h e P r e s id e n t ,

The White House.
T h e W h ite H ou se,

October, 1918.

Approved.
O c t o b e r 8, 1918.
The President has authorized the establishment of a
credit of $7,000,000 in favor of the Czecho-Slovak Government, and I understand
that you desire that the advances from that credit be made only after advices
from you, Mr. McCormick, and Mr. Hurley, so that you will have an oppor­
tunity to pass upon the proposed expenditures.
I understand that the following method of procedure, which we discussed the
other day, meets with your approval. After the Department o f State has
furnished the Treasury Department the advices necessary to enable the Treas­
ury to make the advances against the obligations of Czecho Slovak Government,
D e a r M r. B a r u c h :




232

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

as that Government desires round amounts of* cash advanced against Its obliga­
tions, you, Mr. MrOormiek, and Mr. Hurley, will advise tlu* Secretary of the
Treasury of your approval of su<*h request on the part of the Czeeho Slovak
Government.
The amounts advanced by the Secretary of the Treasury are to be deposited
by the Czeclio-Slovak Government with the banking institution which you have
designated, namely, the Central Union Trust Co. of New York, to be held and
paid out by it on the check of the Czeeho-Slovak Government or its representa­
tive, but only when bearing such countersignature or countersignatures as you
and your colleagues shall designate.
A purchasing agreement is being prepared for execution by the Czocho-Slovak
Government. I f there are any other points which it is desired should be covered
in the understanding between the Treasury and the Czeclio-Slovak Government,
will you kindly advise me. and I will appreciate it if you will inform me in due
course of the individual or individuals who are to countersign checks of the
Czeclio-Slovak Government drawn 011 the Central Union Trust Co. of New York.
Very truly, yours,
A lbe rt R a t h b o n e .

Mr. B e r n a r d H. B a r u c h ,
Chairman War Industries Board,
Council of National Defense Building, Washington, D. C.

D e p a rtm e n t o f

S ta te ,

Washington, November l ’i, 1918.
My D e a r Mr. S e c r e t a r y : In response to your letter of October 4, I take
pleasure in advising you that the United States Government on September 3,
1918, accorded recognition to the Czechoslovak National Council as a de facto
belligerent Government clothed with proper authority to direct the military
and political affairs of the Czecho-Slovaks. The Czechoslovak National Council
is, in the opinion of this department, a foreign Government engaged in war
with the enemies of the United States. I am of the opinion that obligations
executed at this time by President Massaryk in the name and on behalf of
the Czechoslovak National Council, purchased at par by the Secretary of the
Treasury under the authority of the Liberty bond acts, will be valid and
binding internationally, and such obligations will have the sanction of this
department.
I am, my dear Mr. Secretary,
Very sincerely, yours,
R obert L a n s i n g .
T h e S e c r e t a r y of t h e T r e a s u r y .

SECTION 118.
Treasury Department Doubted Its Legal Authority to Make Czechoslovakian
Loan, so Fixed Matter Up with President Wilson and State Department.
D e p a rtm e n t o f S ta te ,

Washington, November 2, 1918.
M y D e a r M r. S e c r e t a r y : I have received your letter of October 4, asking to
be advised if your understanding is correct that the Czechoslovak National
Council has been recognized as a de facto belligerent Government in the present
war, and whether the Department of State can affirmatively express its opinion
that the necessary formalities have been complied with so that the obligations
of the Czechoslovak Government when issued for advances made to that Gov­
ernment under the authority of tlie second Liberty bond act and acts amenda­
tory thereof and supplementary thereto would be regarded by this department
as valid and binding internationally, and would have its sanction.
In reply I have to advise you that 011 account of the delay which would
inevitably be consequent upon obtaining the necessary documents from Paris
in order to be in a position to make tlie statement which you desire, inquiry was
made of the President as to whether, pending the delay, he desired to direct
that preliminary advances be made as a matter of policy, pending the clearing
up of the legal situation. From his approval of your letter I understood that




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

233

tlie President preferred that the legal formalities he complied with before
advances were made, and I have Ihere fore delayed answering your letter until
the necessary information could be obtained from Paris. From the information
at hand I am in a position to make the following statement :
The Czechoslovak National Council, with headquarters at Paris, has been
recognized by France, Great Britain, Italy, and the United States. The recog­
nition by the United States was accorded 011 September 3, 1918, in a public
announcement issued by the Secretary of State (copy inclosed), in which it
was stated that the United States “ recognizes the Czechoslovak National Coun­
cil as a de facto belligerent Government, clothed with proper authority to
direct the military and political affairs of the Czechoslovaks.” From the
information at hand it appears that the Czechoslovak Army in Siberia and in
Europe recognize the authority of the Czechoslovak National Council as hav­
ing complete control over their organization and movements. The recognition
of the national council, the number and functions of its officers, and the au­
thority of President Massaryk to enter into loan obligations are set forth
in the inclosed telegrams of October 22 and 28 from Paris. While the docu­
ments set forth in these telegrams show that President Massaryk has the au­
thority to enter into loan engagements with foreign countries, yet it is neces­
sary to take into consideration the fact that the Czechoslovak National Coun­
cil, as it has been recognized, is merely a provisional government, and that
the Czechoslovak Nation has not as yet attained complete independence. Dur­
ing the present transitional stage of its existence, therefore, I am not in a
position to state more than that, in my opinion, the obligations entered into
by President Massaryk for the advances made by the Treasury Department
under the Liberty bond acts will in honor bind the present de facto belligerent
Czechoslovak Government to recognize these obligations as valid and binding
internationally, and to confirm recognition o f them by appropriate legal meas­
ures should the independence of the nation be hereafter established. On this
understanding the advances have the sanction of this department.
I am, my dear Mr. Secretary,
Very sincerely, yours,
R obert L a n s i n g .

The S e c r e t a r y o f t h e T r e a s u r y .
Memorandum re obligations of the Czecho-Slovak Government:
The Secretary of State the early part of September, 1918, on behalf o f the
United States Government, recognized that a state of belligerency existed be­
tween the Czecho-Slovaks, organized in such manner that supreme political
authority was confided in the Czecho-Slovak National Council and the German
arAl Austro-Hungarian Empires, and that the Czecho-Slovak National Council
was a de facto belligerent government clothed with proper authority to direct
the military and political affairs of the Czecho-Slovaks.
Apparently the Czecho-Slovak National Council, by action taken September
26, 1918, established itself or attempted to establish itself as the provisional
government of the Czecho-Slovak countries. The American ambassador in
Paris has received and forwarded to the Department of State all the docu­
ments and laws, including the constitution, pertaining to the subject of the
authority of the Czecho-Slovaks to contract foreign loans.
Apparently Prof. Masaryk was president of the council, and by decree of
February 10, 1916, as such was authorized to contract loans, to sign in the
name of the council all financial agreements and obligations, to receive all
funds and advances, and dispose of them in accordance with the decisions
already adopted. When the Czecho-Slovak provisional government was estab­
lished on September 26, 1918, Prof. Masaryk was made the president and
minister of finance, the special functions which previously belonged to the
president of the council, were vested in Prof. Masaryk as president and
minister of finance.
The national council having been merged into the provisional government,
it would seem that any advance made by the United States should be made
to the provisional government and not to the national council.
Whether a loan can be made depends 011 whether the Department o f State
can say it is of the opinion—
1. The Czecho-Slovak provisional government is a foreign government en­
gaged in war with the enemies of the United States.
2. That the obligations of that government wiien signed by the person
designated are valid and binding internationally and have the sanction of the
Department of State.



FOKKIGX LOANS AND AUTHORITY FOR MAKING SAME.
It would s(vin Unit, these questions are political and involve a determination
by the Department of State as to whether it is prepared to recognize the in­
dependence of the Ozecho-Slovak nation—irrespective of its boundaries—and
the provisional government. If so, in view of the telegrams received from
the American ambassador on the subject, there can be little doubt that the
authority to execute demand notes for money received is vested in Prof.
Masaryk. On the other hand, if the State Department is not prepared to give
the requisite recognition to the Czecho-Slovaks it would seem that the Treas­
ury is without power to purchase the obligations under the terms of the
bond act.
N o v e m b e r 14, 1918.
Memorandum for Mr. Rathbone:
The Secretary wants at once to send a letter to the President inclosing a
copy of the letter received from the Secretary of State concerning the OzechoSlovak Government, together with a brief statement of our minimum require­
ment. Will you please prepare such a letter for his signature?
R. C. L e f f i n g w e t x .
N o v e m b e r 14, 1918.
: I spoke to you yesterday about the character of letter
to be addressed by the State Department to the Treasury Department as a
basis for the proposed loans to the Czecho-Slovak National Council. I inclose
the desired form, marked “ Exhibit A.” I also inclose as “ Exhibit B ” a letter
addressed to me by the Secretary of State on November 2 (you need read only
the first, second, and last page), which is not, I regret to say, an opinion upon
which I would feel justified under the existing law in making advances to the
Czecho-Slovak National Council.
If you will be good enough to ask the Secretary of State to send me an
opinion along the lines of “ Exhibit A,” we can proceed, I think, with safety.
Cordially, yours,
D e a r M r. P r e s i d e n t

The P r e s i d e n t ,
The White House.
N o v e m b e r 14, 1918.
Draft of letter of Trcasuiy Department needs jn order to make advances to
Czechoslovak Provisional Government.
M y D e a r M r. S e c r e t a r y : In response to your letter of October 4 1 take
pleasure in advising you that the United States Government on September 3,
1918, accorded recognition to the Czechoslovak National Council as a de facto
belligerent government clothed with proper authority to direct the military
and political affairs of the Czechoslovaks. The Czechoslovak National Council
is, in the opinion of this department, a foreign Government engaged in war
with the enemies of the United States. I am of the opinion that obligations
executed at this time by President Mazaryk in the name and on behalf of the
Czechoslovak National Council, purchased at par by the Secretary of the
Treasury under the authority of the Liberty bond acts, will be valid and binding
internationally, and such obligations will have the sanction of this department.

Secretary of State.
D e p a rtm e n t o f S ta te ,

Washington, November 14, 1918.
M y D e a r Mr. S e c r e t a r y : In response to your letter of October 4, I take
pleasure in advising you that the United States Government on September 3,
1918, accorded recognition to the Czechoslovak National Council as a de facto
belligerent government clothed with proper authority to direct the military
and political affairs of the Czechoslovaks. The Czechoslovak National Council
is, in the opinion of this department, a foreign Government engaged in war with
the enemies of the United States. I am of the opinion that obligations executed
at this time by President Mazaryk in the name and on behalf o f the Czecho-




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

235

National Council, purchaser! at par by the ►Secretary of the Treasury
under the authority of the Liberty bond acts, will be valid and binding inter­
nationally, and such obligations will have the sanction of this department.
I am, my dear Mr. Secretary,
Very sincerely, yours,
S lov ak

R obert L a n s i n g .

The honorable the S e c r e t a r y o f t h e T r e a s u r y .

SECTION 119.
Treasury Department States Loan Can Only Be Made for War Purposes.
N o v e m b e r 1 5, 1 9 1 8 .

letter dated November 1 5, addressed to the Secretary
of the Treasury and signed by Mr. Baruch and Mr. McCormick, has been duly
received. The advance of $ 5 ,0 0 0 ,0 0 0 to Czechoslovak National Council has been
made. I desire, however, to call to your attention in this connection that under
the Liberty bond acts giving the Secretary of the Treasury authority to make
this advance the amounts advanced must be expended only for the purpose of
prosecuting the war. This department has made it plain in writing to Prof.
Mazaryk that the advance is to be spent only for the war purposes of the
Czechoslovak National Council, and I will be obliged if, so far as commitments
are made by Czechoslovak National Council under the direction of yourself,
Mr. McCormick, and Mr. Baruch, and so far as Czechoslovak National Council
checks are countersigned by the persons from time to time designated by your­
self, Mr. McCormick, and Mr. Baruch, you will see that no commitments to
be paid for out of this advance and no payments from said advance are made
for other than war purposes. The Secretary o f the Treasury has no authority
to make advances for reconstruction purposes, and no part of the sum advanced
can be used for such purpose.
For your information, I inclose herewith a copy of my letter of even date to
Prof. Mazaryk. I am writing a similar letter to Mr. McCormick and to Mr.
Baruch.
Very truly, yours,
D e ar M r. H

urley:

A

A lb e r t R a t h b o n e .

Mr. E d w a r d N . H u r l e y ,
Chairman Shipping Board,
1319 S Street NW., Washington, D. C.

SECTION

120.

Great Britain, a Heavy Debtor to the United States, Endeavors to Negotiate
a Loan to Czechoslovakia and Receive Certain Customs Concessions as
Security.
D e p a r t m e n t of S t a t e ,

Washington, May 19, 1919.
The Acting Secretary of State presents his compliments to the honorable
the Secretary of the Treasury and has the honor to transmit herewith a para­
phrased copy of a telegram from the American Mission at Paris, dated May 1 5 ,
embodying a message from the American consul at Prague regarding negotia­
tions for a loan to Czechoslovakia.
Inclosure: Paraphrase of telegram May 15, 1 9 1 9 , from American Mission at
Paris.
CABLE MESSAGE FROM THE AMERICAN MISSION AT PARIS NO. 2122, MAY 15, 191!),
6 P. M.
(PARAPHRASE.)

The telegram embodies a confidential message from the American consul at
Prague. Consul Young has learned that a representative of British banks is
endeavoring to negotiate a loan of £ 1 0 ,0 0 0 ,0 0 0 with the present Government.
He demanded, in addition to excellent securities, certain customs concessions,
but the latter proposition was refused. While the Government has not yet




23G

FORETC.X LOANS AND AUTHORITY FOR MAKING SAME.

reached an agreement with him, it is his impression dial the Government is
waiting in the hope of receiving monetary terms from other sources. This
representative advised Consul Young's informant, an American Army officer,
that it was the desire of the Government to obtain £25,000,000, but that tlie
representative's principles he! eve that an advance of 1on millions will be enough.
In the event that the Government of the United States is interested, Consul
Young desires to be informed in order that he may approach the minister of
finance.

SECTION 121.
Seven Million Dollars Credit Established and $5,000,000 Advance Made No­
vember 15, 1918.
( ’o x sftl National T ciiecoslovaque,

Washington, D. C., November 15, 1918.
The Secretary

of the

T reasury ,

Washington, D. C.
M y D ear M r. Secretary : I have the honor to request that a credit of

$7,000,000 be established in favor of my Government, and that against such
credit an advance in the amount of $5,000 000 be made on November 15, 1918, to
my Government, in order to enable it to make cash payments immediately re­
quired for the purchase and transport of supplies purchased in the United
States, by arrangements made with Messrs. Vance C. McCormick, Bernard M.
Baruch, and Edward N. Hurley, for the Czecho-Slovak forces now in Siberia.
Inclosed is a statement of the expenditures necessary forthwith to be made
out of said advance. My Government is at the present time without dollar funds
sufficient to meet any part of said expenditures. I have the honor to request
that said advance be deposited to the credit of the Czecho-Slovak National
Council, with Central Union Trust Co., of New York, to be withdrawn only by
checks bearing the counter-signature of the person or persons from time to tim-e
designated to said trust company by Messrs. McCormick, Baruch, and Hurley,
or any two of them, with whom arrangements have been made to make such
designation.
I am, my clear Mr. Secretary,
Very truly yours,
T. G. M asaryk .
N ovem ber

15, 1918.

D ear M r . M cCormick : Your letter of November 15 addressed to the Secretary
of the Treasury and signed by Mr. Barucli and yourself has been duly received.

The advance of $5,000,000 to Czecho-Slovak National Council has been made. I
desire, however, to call to your attention in this connection that under the Lib­
erty bond acts giving the Secretary of the Treasury authority to make this ad­
vance, the amounts advanced must be expended only for the purpose of prosecut­
ing the tear. This department has made it plain in writing to Prof. Masaryk
that the advance is to be spent only for the war purposes o f the Czecho-Slovak
National Council, and I will be obliged if so far as commitments are made by
Czecho-Slovak National Council under the direction of yourself, Mr. Baruch,
and Mr. Hurley, and so far as Czecho-Slovak National Council checks are coun­
tersigned by the persons from time to time designated by yourself, Mr. Baruch,
and Mr. Hurley, you will see that no commitments to be paid for out of this
advance and no payments from said advance are made for other than war pur­
poses. The Secretary of the Treasury has no authority to make advances for
reconstruction purposes, and no part of the sum advanced can be used for such
purpose.
For your information I inclose herewith a copy of my letter o f even date to
Prof. Masaryk. I am writing a similar letter to Mr. Baruch and to Mr. Hurley.
Very truly, yours.
A lbe rt R a t h b o n e .
M r. V a n c e C. M c C o r m i c k ,

War Trade Board. Washington, D. C.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

237

SECTION 122.
Ten Million Dollar Loan Asked, November 15, 1918.
Conseil N ational T checoslovaque,

Washington, D. G., November 15, 1918.
The Secretary

of the

T reasury,

Washington, D. G.
M y D ear M r. Secretary : I have tlie honor to request that a credit of

$10,000,000 be established in favor of my Government, in order to enable it to
have funds at its disposal for general war purposes, this to be in addition to
the $7,000,000 loan being requested by me eontemparaneonsly.
These funds supplied and made immediately available for the new political
entity will be of the greatest value to my Government in meeting its many and
complex problems. My Government is at the present time without dollar
funds sufficient to meet any part o f such expenditures.
I am, my dear Mr. Secretary,
Yours, very truly,
T. G. M asaryk .

SECTION 122-A.
Commission to Make Purchases Could Not Obligate the United States to Make
Advances or Establish Credits.
Memorandum of an arrangement entered into this loth day of November, 1918,
by the Secretary of the Treasury, with the approval of the President of the
United States, and Thomas G. Masaryk acting for and on behalf of the
Czecho-Slovak National Council, hereinafter called the Czecho-Slovak Gov­
ernment.
The following arrangement is entered into as one o f the arrangements neces­
sary or desirable for establishing such credits in the United States for the
Czecho-Slovak Government as may from time to time be determined by the
Secretary of the Treasury, with the approval of the President, under the
authority of the act of Congress approved April 24, 1917, and subsequent
similar acts:
1. Bernard M. Baruch and Robert S. Brookings are hereby designated a
commission through whom or with whose approval or consent all purchases in
the United States of materials and supplies by or on behalf of the Czecho­
slovak Government shall be made.
2. The Czecho-Slovak Government, from time to time, shall communicate its
requirements for materials and supplies to the commission, through such person
or persons as shall be from time to time designated to the commission as em­
powered by the Czecho-Slovak Government to make purchases on its behalf.
3. It shall be the duty of the commission to use their best efforts to obtain
offers of the materials and supplies, as shown to be required, at the best
obtainable prices and terms, of delivery and otherwise, and to submit the
same to the said person or persons representing the Czecho-Slovak Government,
but it shall be no part of the duty of the commission to prepare and sign
contracts, or to supervise their execution, or to determine technical details,
or to carry out the inspection of materials, all of which matters shall be the
concern of the Czecho-Slovak Government. Said Government shall be under
no obligation to make purchases of materials and supplies at the prices and
upon the terms so submitted by the commission, but it is agreed that it shall
not during the continuance of this arrangement make purchases in the United
States otherwise than through or with the approval or consent of the com­
mission. Such approval of the commission may be given from time to time,
according to the circumstances of each case, with reference to purchases o f a
specified general character, or specifically with reference to stated transactions;
and the commission may, according to the circumstances o f each case, deter­
mine from time to time to give its consent, with reference to purchases of a
specified general character or specifically with reference to stated transactions,
that the same be made without the intervention of the commission.




238

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

4. The commission shall determine tlieir own organization and rules and
methods of procedure, and may employ counsel and clerical assistance, all sub­
ject to the approval of the Secretary of the Treasury. The commission shall
be under no liability except in good faith to use tlieir best efforts as aforesaid.
The expenses of the commission and their compensation, which together shall
not exceed $150,000 per annum, shall be borne by the Czecho-Slovak Govern­
ment. It is understood that such expenses and compensations shall be borne
by the foreign Governments which have entered or may enter into similar
arrangements in proportion to tlieir respective purchases through the com­
mission.
5. Any or all members of the commission may be removed by the President
of the United States, who may from time to time fill vacancies and designate
an additional member or members of the commission or reduce the number of
members of the commission.
6. This arrangement shall continue until the expiration o f 90 days after
written notice shall have been given by the Secretary of the Treasury to the
Czecho-Slovak Government, or by the Czecho-Slovak Government to the Sec­
retary of the Treasury, of his or its desire to terminate the same; but in no
case shall this arrangement continue beyond the termination of the war between
the United States and its enemies.
7. Any notice hereunder to the Secretary of the Treasury shall be deemed
sufficiently given if delivered at the State Department in Washington for trans­
mission to the Secretary of the Treasury. Any notice hereunder to the Czecho­
slovak Government shall be deemed sufficiently given if delivered, addressed
to said Czecho-Slovak Government or to its agent designated as herein pro­
vided.
8. Nothing herein contained, expressed or implied, nor anything done or omit­
ted by the commission, shall impose any obligation or liability upon the United
States, ichether to advance moneys, to establish credits, or otherwise.
W. G. M cA doo.
T. G. M asa r yk .
P aris , December 19, 1918.
The S e c r e t a r y o f S t a t e ,
Washington.
Important 6870, December 19, 12 a. m.
Your 6546, December 16, 6 p. m. Am in receipt of a note from the ministry
of foreign affairs of the Czecho-Slovak Republic transmitting a copy of the
powers given to Mr. Charles Pergler, a close translation of which follow s:
“ Decisions of the Government of the Czecho-Slovak Republic o f December 11,
1918. The Government of the Czecho-Slovak Republic confers to Mr. Charles
Pergler the full powers to negotiate and conclude loans, to sign obligations,
and to receive the sums which may be advanced to him.
“ T. G. M a saryk ,
“ President of the Republic.
“ D octor E dward B enes,

“ Minister of Foreign A ffairs”
Dispatch follows.
S harp .

SECTION 123.
Ten Million Dollars Credit to Be Used for Civilian Foodstuffs and Not to
Prosecute the War.
Office

Czecho-S lovak N ational C ouncil ,
C ommissioner in the U nited States ,

of

Washington, D. C., January 13, 1919.
The S ecretary

of the

T reasury ,

Washington, D. G.
M y D ear Mr. Secretary : Referring to the $10,000,000 credit, the establish­

ment of which Prof. Masaryk requested in his letter addressed to the Secretary
of the Treasury dated November 15, 1918, I desire to ask that an immediate
advance be made from the United States Treasury of $4,800,000, and shall be




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

239

obliged if it is deposited in the Central Union Trust Co. of New York to the
credit of Czecho-Slovak Republic.
The money is to be used entirely to meet purchases and expenditures in the
United States. Arrangements are being made with the United States Food
Administration to ship to Czechoslovakia, for use in that country, pork and
pork products at an estimated cost of $3,878,000; condensed milk at a cost of
approximately $280,000. It is estimated that the freight and ocean charges on
the above, payable in dollars, will be $560,000. Insurance on the proposed
shipments is estimated at a cost of $47,000.
I estimate that the expenses connected with maintaining the legation in
Washington and administration charges for the period of three months next
ensuing will amount to approximately $50,000.
The pork, pork products, and milk that I have mentioned are urgently needed
for use in my country to prevent starvation or shortage of food which might
have serious consequences, and 1 trust that you will feel as a military measure
that this advance is essential to my Government, which has no other funds
available to defray the cost of same.
In addition to the expenditures above mentioned the representatives of my
Government in Europe are in negotiation with the American Expeditionary
Forces for the purchase of 20,000 military overcoats at a cost of approximately
$400,000. These overcoats are needed for the Czecho-Slovak Italian Army,
and as soon as the negotiations are concluded I am planning to request a
further advance from the Treasury in an amount sufficient to pay for the same.
This payment will be made in dollars to the proper representatives o f the War
Department. I should be glad if you could indicate to me whether the Treasury
is prepared to make an advance for this purpose.
I am, my dear Mr. Secretary,
Very truly, yours,
C hari .es P ergler.
J anuary 13, 1919.
M y D ear M r. P ergler : I have the honor to acknowledge the receipt of your

letter of even date addressed to the Secretary of the Treasury, and take pleas­
ure in advising you that the Secretary of the Treasury has established in
favor of the Czecho-Slovak Republic a credit in the amount of $10,000,000, to
be made available to your Government against its duly executed obligations in
a corresponding amount, to such extent, at such times and for such purposes as
may be hereafter agreed.
In accordance with the request contained in your letter above mentioned, the
Treasury will to-day advance to your Government, against its duly executed
obligation in a corresponding amount, the sum o f $4,800,000, on the understand­
ing that this amount will be expended wholly within the United States and for
the purposes set forth in your letter above referred to.
In regard to the negotiations now proceeding for the purchase o f 20,000 over­
coats from the American Expeditionary Forces for the use of the Czecho­
slovak Italian Army, the Treasury will be prepared out of the $10,000,000 credit
established in favor of your Government and against the duly executed obliga­
tion of your Government, to advance substantially the sum of $400,000 if and
when needed to make payment for the overcoats above mentioned, to be used
as indicated in your letter. This assurance is given you for your personal use
and for the use only of the representatives of your Government negotiating the
arrangement aforesaid, and the Treasury will not feel obligated to make an
advance for the purpose indicated unless required within the next 30 days. In
case it becomes apparent that the negotiations will not be concluded within that
time, I suggest that you bring the matter again to the Treasury’s attention in
order to ascertain whether in the light o f the circumstances as they then exist
the Treasury will be prepared to advance at a later date to your Government
the amount mentioned for the purpose aforesaid.
I am, my dear Mr. Pergler,
Very truly, yours,
A lbert R athbone .
C harles P ergler, Esq.,

Commissioner, Czechoslovak Republic, Washington, I). C.




240

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
SECTION 124.

Four Million Five Hundred Thousand Dollars Used for Pork and Milk for
Civilians; $50,000 to Be Used for Office Expenses in United States.
Office

of

T he Czecho-S lovak R epublic,
C ommissioner in the United S tates ,

Washington, D. C., February 17, 1919.
Mr. A lbert R athbone ,
Assistant Secretary, Treasury Department,
Washington, D. J.
M y D ear M r. R athbone : I have just been informed by the Food Administra­
tion that they have received the following cablegram :
“ Czecho-Slovak Governments have purchased additional 10,000 tons flour,
3,500 tons pork products, 400 tons milk. Have asked them cable their repre­
sentative turn over to you additional $4,500,000.”
Owing to the fact that I am leaving to-night with Mr. Capek. my other
secretary, for Richmond, and will be back in the evening of the 19th, I am
having my secretary, Miss Kazamek, submit this to you at once, so as to advise
you of the situation. It was my original intention to write you a letter along
the lines of the one dated January 13. 1919. But it occurred to me that perhaps
you would desire a special wording, and for that reason I am not writing it at
the present time, and am leaving the matter for the morning of the 20th, be­
cause the preparation of the letter of itself is a mere formality.
On the morning of the 20th, assuming you will find it possible to grant me
an appointment. I shall submit-to you also a statement of the present condition
of our account, which I am turning over also to Mr. May. As usual in such
cases where there is not sufficient experience to base estimates upon, my esti­
mates have been fairly low, and I trust the Treasury will find it possible to
grant me another $50,000 for administration purposes in this country. With
your assent, I would include this request in the present transaction, so as to
avoid the necessity of asking specially for $50,000 later on.
This cablegram caught me just before leaving for Richmond, and that ac­
counts for the crudity of the letter, which I trust you will pardon.
Will you kindly have your secretary notify my office, the phone being Colum­
bia 2264, whether I can see j'ou on the morning of the 20th, and of the time?
Thanking you in advance, I am,
Very truly, yours,
C harles P ergler, Commissioner.

SECTION 124-A.
Loan Requested Not to Prosecute the War But to Prevent Anarchy Locally.
O ffice

of

T he Czecho-Slovak R epublic,
C ommissioner in the U nited States ,

February 20, 1919.
D ear Mr. R athbone : Supplementing my letter to you of the 17th instant, I

am submitting to you herewith a statement of the account of my Government
dealing with the advance made to my Government by the Secretary of the
Treasury on January 13, 1919. in the amount of $4,800,000. As you will per­
ceive. there remains an unexpended balance of this fund of $296,178.40. My
Government will be required to make at once payment to the United States
Food Administration to cover the cost of 10,000 tons of flour, 3,500 tons of
pork products, 400 tons of milk, and insurance, freight, and other charges in
connection therewith of $4,500,000.
In order to meet the requirements above mentioned I request the United
States Treasury on February 21, 1919, to advance to my Government the sum
of $4,300,000 out of the unexpended balance of the $10,000,000 credit pre­
viously established in favor of my Government. Upon receipt of the amount
o f such advance I will a( once turn over to the Food Administration Grain
Corporation $4,500,000 in order to obtain the delivery of the flour, pork prducts,
and milk hereinbefore mentioned. These commodities are urgently needed for
use in my country as a military necessity in order to prevent anarchy.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

241

My Government is without resources to meet its requirements above men­
tioned other than by means of the advance requested of the United States
Treasury.
Please accept my assurance that this advance, if made, as well as the ad­
vances heretofore made my Government by the United States Treasury, will
be used only to pay for expenditures in the United States which have been
previously approved by the United States Treasury, and if it should transpire
that the advances made are more than sufficient in amount to provide for
such approved requirements of my Government in the United States my Gov­
ernment will, upon the request of the Secretary o f the Treasury, make payment
to him of any balance remaining of such advances to be applied as a partial
payment on account of any of the obligations of my Government held by the
United States Government.
There remains an unexpended balance of the $5,000,000 advanced to my
Government by the United States Treasury on November 15, 1981. This
balance is held for the use of the military forces of my Government now in
Russia or Siberia. This fund can only be disbursed with the consent o f the
representative of Messrs. Baruch, Hoover, and McCormick.
Very truly, yours,
C harles P ergler.

Hon. A lbert R athbone ,
Assistant Secretary of the Treasury,
Washington, D. C.
F ebruary 20, 1919.
D ear M r. P ergler : I take pleasure in acknowledging receipt of your letters

of the 17th and 19th instant asking for a further advance to your Government
from the unexpended balance of the credit established in its favor by the Sec­
retary of the Treasury in the amount of $10,000,000 on the 21st instant the
sum of $4,800,000.
The Treasury will be prepared to advance to your Government said amount
on the date above mentioned against its duly executed obligation in a corre­
sponding amount for the purposes and on the understandings set forth in your
letter of February 19 above referred to.
I am, my dear Mr. Pergler,
Very truly, yours,
A lbert R athbone .

Mr. C harles P ergler,
Commissioner Czech o-Slo va k Repu blic,
Washington, D. 0.

SECTION 125.
United States State Department Admits That Authority to Make Foreign
Loans Only Extends to National Defense and Prosecution of the War.
PARAPHRASE OF CABLEGRAM NO. 777, FROM AMERICAN MISSION AT PARIS, FRANCE,
DATED FEBRUARY 16 AT 5 P. M.

The following is from Lansing:
A communication dated 11th of February has been received from Benes, Czecho­
slovak minister of foreign affairs, in which lie requests a loan of $100,000,000
from the Government o f the United States. In his note of three and a half
pages, the minister outlines the reasons for this request, as follow s:
1. On account of the exhaustion of the previous loan of $20,000,000 from the
United States.
2. It is impossible to obtain without a loan the necessary food and raw mate­
rial for 13,000,000 people.
3. England and France are unable to make a loan to the Czecho-Slovak State,
as both of these countries are themselves demanding money from the Govern­
ment of the United States.
4. The 15,000,000.000 Austrian crowns in circulation at the present time in
Czecho-Sla via have to a large extent lost their value and will be wholly worth­

S. Doc. 86, 07-2----- 10



242

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

less if an attempt is made by the State to use them as security for foreign
purchases.
5. The State will fall into a financial and economic crisis if it does not receive
foreign credit, and it loUl not be possible for it to escape from this crisis.
Mr. Benes is being advised that his request is being submitted to the State
Department for its consideration.
It is my desire that the matter in question be taken up through the regularity
of the State Department and the Treasury Department. However, the repre­
sentatives of the Treasury Department in Paris at the present time are being
furnished with a copy of this note and it is being sent to you by courier.
A dmission .
F ebruary 20, 1919.
Si b : I have the honor to acknowledge the receipt from the Department of
State of a paraphrase of a cable (No. 777), dated February 16, from Secretary
Lansing regarding a communication received from Mr. Benes, Checho-Slovak
minister of foreign affairs, in which a loan o f $100,000,000 is requested from
the Government of the United States. Mr. Pergler, the representative here of
the Czeclio-Slovak Government, spoke to me this morning in regard to such
a loan.
I explained to Mr. Pergler that the Secretary of the Treasury was authorized,
only to make loans for the purpose of the national security and defense and
the prosecution of the tear, and suggested to him the advisability of ascer­
taining from his Government its immediate requirements in this country which
could properly come within that limitation. I also endeavored to impress on Mr.
Pergler the necessity of his Government making commercial arrangements to
care for such credits as his Government required in the United States to deal
with purchases required for the economic reconstruction o f his country.
I desire to call attention to item 3 in the cable above mentioned, reading as
follow s: “ England and France are unable to make a loan to the Czeclio-Slovak
State, as both of these countries are themselves demanding money from the
Government of the United States.” You will appreciate that because England
and France require credits to enable them to make purchases in the United
States does not in any way prevent these countries from making advances to
the Czeclio-Slovak Government to cover such purchases as that Government
may desire to make within the British Empire or in France.
In view of the demands which are being made upon the United States Treas­
ury and the large amounts which this Government is obliged to raise by
taxation and the issue of its bonds or other obligations, the Treasury has
taken the position that the foreign Governments should not ask advances from
the United States for purposes other than the expenditure thereof within the
United States and for products of the United States.
Respectfully, yours,
A lbert R athbone .
T he A cting Secretary

of

State .

SECTION 126.
Eighteen Million Dollars Asked for Feeding the Civilian Population—This
O. K’d by Hoover.
O ffice

of

T he C zecho-S lovak R epublic,
Commissioner in the U nited States ,

March 3, 1919.
My D ear Mr. Secretary : The minister of foreign affairs of the Czecho­
slovak Republic informs me that he has agreed icith Mr. Herbert Hoover, director general of the American Relief Administration, upon a plan of food
supplies and payments therefor, and it is believed that the sum of $18,000,000
will prove sufficient to meet the needs of the population of the Republic for the
months of March and April of this year. This information is contained in a
cablegram dated February 28, 1919, addressed to me, and prior to that I had
another cablegram from the minister of foreign affairs to the effect that without
this aid the Czecho-Slovak Republic would be in extreme difficulties, in view
of the necessity for immediate payments for food supplies which are needed as
a military necessity in order to prevent: anarchy.



FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

243

I have, therefore, the honor respectfully to ask that a credit of $18,000,000 be
established in favor o f my Government in order to enable it to have funds at
its disposal for the purpose of purchasing food supplies necessary to provide for
the needs of the Czecho-Slovak Republic as above indicated. My Government
is without resources to meet its requirements above mentioned, other than by
means of a credit as requested.
I am, my dear Mr. Secretary,
Your obedient servant,
C h a r l e s P e r g l e r , Commissioner.
The S e c r e t a r y o r t h e T r e a s u r y ,
Washington, D. C.
M arch 3, 1919.

Mr. P e r g l e r : I have the honor to acknowledge receipt of your letter of
the 3d instant asking the establishment of a further credit in favor of your
Government by the Secretary o f the Treasury in the amount of $18,000,000.
I note that this amount is estimated to be sufficient to meet the needs of the
population of your country for food for the months of March and April of this
year, and that this food is needed as a military measure in order to prevent
anarchy.
I take pleasure in informing you that the Secretary of the Treasury has
established a credit in favor of your Government in the sum of $18,000,000, to
be advanced from time to time against the duly executed obligations of your
Government in such amounts and to such extent as the Secretary of the Treasury
shall determine.
I am, my dear Mr. Pergler,
Very truly, yours,
D ear

A lbe r t R a t h b o n e .

Mr. C h a r l e s P e r g l e r ,
Commissioner Czecho-Slovak Republic,
Washington, D. C.
M a r c h 8, 1919.
Mr. P e r g l e r : I have just received a cable from Europe which indicates
that in the opinion of Mr. McCormick and Mr. Baruch there is no reason why
the unexpended balance remaining in your account with the Central Union
Trust Co. should not be used for the purpose of providing for the food supplies
which, with the approval of this department, may be purchased o f the Food
Administration for use in your country. Messrs. McCormick and Baruch take
the same view as to the $2,000,000 of the $7,000,000 credit which has not yet
been advanced to your Government.
In view of this information, when arrangements are made for the supply
o f additional food to your Government, I think it would be advisable that your
Government should use the unexpended balance of the account above men­
tioned before resorting to the new credit recently established in favor of your
Government and designed to meet its food requirements for March and April,
1919. I f the course thus suggested is followed there should remain at the end
of the 2-months’ period credits in favor of your Government which have not
been availed of. This department will then be prepared to discuss with you
whether to withdraw these credits or to make them available to cover required
food purchases in the United States for a further period.
I am, my dear Mr. Pergler, very truly, yours,
D ear

A lb e r t R a t h b o n e .

Mr. C h a r l e s P e r g l e r ,
Commissioner Czecho-Slovak Republic.

m e m o r a n d u m r e g a r d in g c r e d its a n d a d v a n c e s to c z e c h o - s l o v a k s .

T reasury D epartm en t,

Washington, March 18, 1919.
Credits have been established in favor of the Czeeho-Slovaks in the amount
o f $35,000,000. Twenty-eight million dollars of such credits were established for
the purpose of providing for food to be funri <hed in Czechoslovakia through the



244

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

month of April, 1919. Of that $28,000,000 of credits there has been advanced
$9,100,000. The remaining credit established in favor of the Czecho-Slovaks,
$7,000,000, was established for the purpose of caring for their military expedi­
tion in Siberia. Of this amount $5,000,000 has been advanced.
Of the amounts advanced the Czecho-Slovaks for their Siberian purposes, the
Treasury is informed that there has been actually spent and that commitments
have been made up to something under $4,000,000, leaving $1,000,000 unex­
pended, and as to which no obligations have been made. It is expected there
will be no further need for this cash or this additional credit, except the matter
of transporting certain invalid soldiers now in Siberia to Trieste has just come
up as an emergency matter. The War Trade Board advises that the probabili­
ties are that this can be done without resorting to the cash heretofore advanced
the Czecho-Slovaks for use in Siberia, or the balance of the credit established
for Siberian purposes, but that there is a possibility that there may be some
cost involved in this transaction. At the outside, in the judgment of the War
Trade Board, this cost will not amount to more than $1,000,000, and the War
Trade Board will be able, in the course o f a short time, to give more definite
figures as to this possible outside cost.
So far as the credits established for Siberian uses and the cash advanced
for that purpose is not required for this purpose, or for commitments already
made in regard to expenses in Siberia, it is designed to use the same for food
purposes during the period up to May 1; the credit heretofore established for
food purchases being reduced by a corresponding amount; that is. it is not
intended by the use of these unexpended funds or credits established for the
Siberian purpose to increase the amount of food to be purchased for Czecho­
slovakia up to May 1. In order to deal with the situation the Treasury pro­
poses, in case the War Trade Bgard intends to undertake the movement of
invalid soldiers to Trieste, to leave a credit on its books of $1,000,000 to be later
reduced to such figure as the War Trade Board may show as the outside ex­
penses in connection with moving the soldiers above mentioned, so that the
Czecho-Slovaks will be able to obtain out of such credit any amount that may be
necessary to pay for the transportation of the soldiers. The remainder of the
Siberian credit and substantially all the cash available out of the amounts
heretofore advanced to Czechoslovakia for use in Siberia is to be devoted to
the purchase of food for use in Bohemia.
A. R.

Office

of

T he C zecho-S lovak R epublic*
Commissioner in the U nited States ,

March 19,1919.
My Dear Mr. Rathbone : My Government is required to make at once pay­
ment to the American Relief Administration to cover the cost of 25,000 tons of
wheat flour. 15,000 tons of rye flour, 1,000 tons of pork products and 500 tons of
milk, all of which have now been delivered or are in process of being delivered
to my Government, together with insurance, freight, and other charges in con­
nection therewith of $9,350,000. In order to meet this payment, I request the
United States Treasury to advance to my Government on March 19 the sum of
$8,250,000 out of the unexpended balance of credit previously established in
favor of my Government. Upon receipt of the amount of such advance I shall
at once turn over to the American Relief Administration said sum together with
the sum of $1,100,000 out of the balance of the advance made to my Government
on November 15 last against the credit of $7,000,000 established on that day,
making a total payment of $9,350,000. The commodities above set out are
urgently needed for use in my country as a military necessity in order to prevent
anarchy.
My Government is without resources to meet the requirements above men­
tioned other than by means of the advance requested of the United States
Treasury. Please accept my assurance that this advance, if made, as well as
the advances heretofore made my Government by the United States Treasury
will be used only to pay for expenditures in the United States previously ap­
proved by the United States Treasury, and if it should transpire that the
advances made are more than sufficient in amount (o provide for such approved
requirements of my Government in the United States, my Government will upon
the request of the Secretary of the Treasury make payment to him of any




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

245

balance remaining of sncli advances to be applied as a partial payment 011
account of any of the obligations of my Government held by the United States
Government.
Yours, very truly,
C harles P ergler.

Hon. A lbebt R athbone ,
Assistant Secretary of the Treasury,
Washington, D. C.

SECTION 127.
Food Supplies Sent Civilian Population.
A m e r ic a n R e l ie f A d m i n i s t r a t i o n ,

New York City, April //, 1919,
M r. A lb e r t R a t h b o n e ,

Treasury Department, Washington, D. C.
: The following is a summary of the Czechoslovakia food
deliveries as of March 27, 1919, based on a cable received by us, and of which
you have a cop y:
Delivered f. o. b. outgoing vehicles, Trieste:
26,263 tons wheat Hour____________________ $5, 789, 678. 35
2,935 tons rye_____________________________ 3,726,270.45
1,045 tons milk____________________________
519, 270. 95
---------------------- $10, 035,219. 75
In passage to Trieste 011 c. i. f. basis:
22,900 tons wheat flour____________________ 4, 609,344. 87
3,302 tons rye_____________________________
493,097.66
400 tons pork_ ___________________________
_
296, 516. 00
300 tons milk______________________________
144, 939.00
100 tons cocoa_____________________________
46, 021. 00
---------------------5, 589,918. 53
In passage to Hamburg, thence by Kibe River to Czechoslovakia:
16,726 tons wheat flour___________________ 3,134, 285.14
10,927 tons rye------------------------------------------ 1,390,897.83
3,921 tons pork____________________________ 2, 809,357. 29
2,519 tons wheat flour_____________________
522,415. 41
63 tons pork----------------------------------------------47, 594. 61
---------------------7, 904, 550. 28
Assigned to Czechoslovakia from cargoes now loading:
5.000 tons wheat flour_____________________
936,950. 00
18.000 tons rye____________________________ 2, 467, 540.00
1,500 tons milk-----------------------------------------595, 829. 00
---------------------4, 000,319.00
D e a r M r. R a t h b o n e

27, 530, 007. 56
We are to-day writing to the Czechoslovakia Government commissioner ask­
ing that he kindly arrange with you for disbursement to us next Tuesday of
$8,650,000, which amount represents the undrawn balance of $27,000,000 al­
located to Czechoslovakia for the months of February, March; and April.
We are also asking him if he can kindly arrange with you for a $9,000,000
allocation for the month of May. This request is based on the cable advice that
foodstuffs have already been allocated to Czechoslovakia in excess of the pres­
ent funds available. After the establishing of this credit, additional quantities
will be put in transit for Czechoslovakia.
Very truly, yours,




A merican R elief A dministration ,

By R oger S herman ,
Assistant to Joint Director.

246

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
SECTION 128.

Money Used for Civilian Feeding— $25,000 to $35,000 to be Used for Ex­
penses of New York City Consulate.
Office

of

T he Czecho-S lovak R epublic,
C ommissioner in the U nited States ,

April 8, 1919.
Si r : I have been advised by the American Relief Administration that there
has been delivered to the Czecho-Slovak Republic or in transit assigned to my
Government foodstuffs for which there is payable by my Government the sum
of $27,830,007.56. Of this sum I have already paid the American Relief Ad­
ministration out of advances from the United States Treasury the sum of
$18,350,000. I request that you advance to my Government on April 8, 1919,
the further sum of $8,650,000 to enable me to make payment of a corresponding
amount to the American Relief Administration. When this sum has been ad­
vanced it will complete the advances which will then have been made to my
Government by the United States Treasury at the rate of $9,000,000 per month
for the months of February, March, and April, 1919, to provide food and food
products required as a military measure to prevent the spread o f anarchy.
I also desire to ask for the establishment of a further credit in behalf o f my
Government. Food and food products are still urgently needed in Czecho­
slovakia as a military measure to prevent the spread of anarchy, and I trust
that you will feel it possible to continue for the month o f May an extension of
credit in the same amount, $9,000,000, as was extended for the months of
February, March, and April, respectively, to provide for this purpose. From
information I have received, I do not think it is possible to accomplish the end
desired by any diminution in the amount of food and food products to be
furnished my Government during the month of May from that furnished over
the previous months. During the month of April my Government will require
$195,186.99 to pay the interest then due on the obligations of my Government
held by the United States, as set forth in your letter to me o f April 1. On May
15 a further payment o f interest will become due from my Government on its
obligations held by the United States, which I estimate in the amount of about
$108,000. My Government is in c u rrin g certain expenses through the establish­
ment of consulates of my Government in New York and Chicago and probably
elsewhere in the United States, and I estimate the aggregate of these amounts
up to June 1 from $25,000 to $35,000, and it is necessary that I make arrange­
ments to assure the provision of this sum before these consulates are established.
My Government has no dollar fund available at this time to take care of
these expenses, or any of them, except a balance in Central Union Trust Co.
to cover commitments heretofore made by my Government with the approval
of Messrs. Baruch, McCormick, and Hurley, or their representatives. Of
the credits heretofore established in favor of nry Government by the Secretary
of the Treasury there remain unadvanced $12,650,000. The advance of
$8,650,000 I am asking on April 8 should be charged against this credit, leaving
a balance of $4,000,000. Of this credit balance $1,000,000 should be reserved
to care for any expenses that may be incurred, with the approval of Messrs.
Baruch, McCormick, and Hurley or their representatives in transporting in­
valid Czecho-Slovak troops from Siberia to Trieste, but the balance of $3,000,000
o f such credits is available, with tlie consent of the Secretary o f the Treasury,
for use for the purposes mentioned in this letter. I therefore ask for the
establishment of further credits in favor of my Government in the aomunt of
$6,330,000 in order to make the total credits remaining in favor of my Govern­
ment after the aforesaid advance o f $8,350,000, $10,330,000. No part o f such
credit will be needed by my Government as an advance before May 1, 1919,
except (a) to meet any expenses necessary before that date for the transporta­
tion o f the invalid troops before mentioned and (6) to provide for April in­
terest and consulate expenses not to exceed $220,000.
It may be possible to temporarily provide all or some part of such expenses
from the account of my Government with Central Union Trust Co., before
mentioned.
I am, sir, your obedient servant,
C harles P ergler, Commissioner.
The Secretary of the T reasury,
Washington, D. C.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

247

A p r i l 8, 1910.
The Treasury will be pre­
pared to advance to your Government on April 8, 1919, against its duly executed
obligation in a corresponding amount the sum of $8,650,000, on the understand­
ing that this sum will be turned over to American Relief Administration to
cover purchases of food and food products for your Government in the United
States up to May 1, 1919.
I take pleasure in informing you that the Secretary of the Treasury has
established a further credit in favor of your Government in the sum o f
$6,330,000, which credit, together with the unexpended balances of credits pre­
viously established by the Secretary of the Treasury in favor of your Govern­
ment, are to be availed of against duly executed obligations of your Government
to such extent, for such purposes, and upon such conditions as the Secretary
of the Treasury shall from time to time determine.
The unexpended credit balance remaining in favor of your Government after
the establishment of such additional credit and making the advance to your
Government already mentioned will amount to $10,330,000.
<5ne million dollars of this remaining credit is to be set aside for use to the
extent determined necessary with the prior approval of the Secretary of the
Treasury only for the transportation of invalid soldiers from Siberia to Trieste.
Nine million dollars of this remaining credit is to be set aside for use after
April 30, 1919, to the extent determined necessary, with the prior approval
of the Secretary of tlie Treasury, only for the purchase in the United States
of food and food products through American Relief Administration and in
accordance with its May program.
In regard to any advances that may be necessary from the remaining por­
tion of such credits during the month of April I await further information
from you as to the exact amount required, the purposes thereof, the amount
of the bank balances of your Government in the United States, the outstanding
commitments to be paid therefrom, and the dates when payment for such
commitments is expected to be made.
Very truly, yours,

D ear S ir : I have received your letter of April 7.

A lbert R athbone .

Mr. C harles P ergler,
Commissioner Czecho-Slovak Republic,
Washington, D. C.

SECTION 129.
United States Loans Money to Pay the Interest on Obligations Due It.
T he Czecho-S lovak R epublic,
C ommissioner in the U nited States,

April 14, 1919.
The Secretary

of the

T reasury ,

Washington, D. C.
S ir: On the loans heretofore extended to my Government, for war purposes
and to prevent disorder and anarchy, there will be due on April 15,1919, interest
in the amount of $195,136.99, upon the payment of which my Government has
available at the present time, in my hands, the sum of $5,136.99, my Govern­
ment being at the present time without any funds to meet the sum o f $190,000.
I therefore have the honor to ask that the United States Treasury advance
the sum o f $190,000 against the duly executed obligations o f my Government
to meet such interest.
I am, sir,
Your obedient servant,
C harles P ergler, Commissioner.




248

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
T h e C z e c h o s l o v a k H eim iil ic ,
C o m m i s s io n e r in t h e U n it e d S t a t e s ,

April 21, 1019.

The Secretary

of the

T reasury ,

Washington, J). C.
Si r : I have been advised by the American Relief Administration that in

order to complete the foodstuff program for the Czecho-Slovak Republic, as
arranged by the American Relief Administration, a credit of $9,000,000 in
addition to the money already advanced and credits established will be needed.
I therefore respectfully ask for the establishment of a further credit of
$9,000,000 in behalf of my Government. Food and food products are still
urgently needed in Czechoslovakia, as a 'military measure to prevent the spread
of anarchy, and 1 trust that you will feel it possible to continue for the month
of June an extension of credit in the same amount, $9,000,000, as was extended
for the months of February, March, April, and May, respectively, to provide
for this purpose. It is my understanding that the establishment of this credit
is necessary to provide for the food necessities of the Czecho-Slovak Republic
for the month of June, 1919.
From information I have received I do not think it is possible to accomplish
the end desired by any diminution in the amount of food and food products
to be furnished my Government dui ing the month of June from that furnished
over the previous months.
I am, sir,
Your obedient servant,
C harles P ergler, Commissioner.
A pril 21, 1919.
D ear M r . P ergler : I have received your letter of the 21st instant asking for

an additional credit in favor of the Czecho-Slovak Government in the amount
of $9,000,000 to provide for food purchases in the United States through the
American Relief Administration for the month o f June, 1919. This application
will receive the careful and sympathetic consideration of tlie Secretary of the
Treasury.
I am, m y dear M r. Pergler,
Very truly, yours,

A lbert R athbone .
Mr. C harles P ergler,

Commissioner Czecho-Slovak Republic,
Washington, D. C.
M ay 14, 1919.
D ear M r. P ergler: Referring to your letter of April 8, 1919, and my reply

of the same date, $110,000 of the credit referred to in my letter as having
been established in favor of your Government was for the purpose of enabling
your Government to pay the interest due May 15, 1919, on the obligations of
your Government held by the United States. If such interest payment is made
by your Government to-morrow by check drawn against the account of your
Government with the Central Union Trust Co., of New York, subject to the
countersignature of the representative of the committee composed of Mr.
McCormick, Mr. Hurley, and Mr. Baruch, the Treasury is prepared to advance
to your Government against its duly executed obligation in a corresponding
amount at such time as the above-mentioned account with the Central Union
Trust Co. shall require replenishment an amount equal to this interest payment
on the understanding that such advance shall be deposited with the Central
Union Trust Co. in the above-mentioned account and subject to countersignature in accordance with the arrangements heretofore made.
I am, dear Mr. Pergler,
Yours, very truly,
A lbert R athbone .
M r. C harles P ergler,

Commissioner Czecho-Slovak Republic,
Washington, D. C.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

249

SECTION 130.
Foodstuffs Program.
A merican R elief A dministration ,

New York City, May 15, 1919.
Mr. A lbert R athbone ,
Treasury Department, Washington, D. C.
D ear M r. R athbone : The following is a summary of the Czechoslovakia food
deliveries to date, based on cable received by us from Mr. Hoover :
Deliveries to Apr. 1:
34,870 tons of wheat flour_______________________ $7, 322, 700
5,088 tons pork__________________________________ 3, 358, 080
730 tons milk____________________________________
341, 640
----------------- $11,022,420
Deliveries in A pril:
35,523 tons wheat flour__________________________ 7,026, 622
27,662 tons rye___________________________________ 3,483,400
4,003 tons pork__________________________________ 2,641,980
3,921 pounds lard substitute--------------------------------- 2,423,178
987 tons milk____________________________________
458, 774
100 tons cocoa___________________________________
42,000
2,337 tons wheat________________________________
315,495
----------------- 16,391,449
Total deliveries to May 1__________________________________
Deliveries reported in May :
1,500 tons wheat flour____________________________
300,000
1,042 tons corn flour_____________________________
187, 560
6,666 tons wheat_________________________________
899,910
-----------------

27,413, 869

Deliveries to May 9_______________________________________
A float:
2,204 tons wheat flour____________________________
407, 740
998 tons corn flour_______________________________
164,835
30,610 tons rye--------------------------------------------------- 3,673,200
1,899 tons bacon________________________________ 1,300,815
5,996 tons wheat_________________________________
809,460
-----------------

28,801, 339

Delivered and afloat______________________________________
Assigned afloat:
13,923 tons wheat flour___________________________ 2,575, 755
21,414 tons rye___ ^______________________________ 2,569,680
-----------------

35,157,389

T ota l_____________________________________________________
Received from Treasury--------------------------------------------------------------

40, 302,824
27,000,000

1,387,470

6, 356, 050

5,145,435

Total_____________________________________________________
13,302,824
We are to-day sending a copy of this letter to Mr. Pergler, asking that he
kindly arrange with you for the deposit of $13,302,824 to our account with the
Chase National Bank, New York City.
Yours, very truly,
T he A merican R elief A dministration ,

By R oger S herman ,
Assistant to Joint Manager.
M a y 19,-1919.
D ear Mr. R ickard : Referring to the inquiry contained in your letter of the

19th instant, regarding an additional credit of $5,000,000 for the Czecho-Slovaks,
the demands upon the talance of the appropriation for foreign loans are now
very great. The Treasury has not been able to establish credits to meet the
food program for any country beyond June. The Treasury has established, or




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FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

will establish when requested, the credits necessary to complete the food pro­
gram for the Czeclio-Slovaks in accordance with the estimates of the American
Relief Administration that the needs of this country would be covered by five
instalments of $9,000,000 each, the last being for the month of June. At the
present time the Treasury is not in a position to undertake to establish a
further credit to cover purchases of food for the Czecho-Slovaks.
Very truly, yours,
A lbert R athbone .
E egar R ickard , Esq.,

American Relief Administration,
New York City.
M a y 19, 1919.
D ear Mr. S herman : Your letters of the 15th and 17th instant have been

been received, setting forth a summary of the deliveries of food to the Czecho­
slovaks to date, based on a cable received from Mr. Hoover. I note that you
are asking Mr. Pergler to deposit $13,372,824 with the Chase National Bank of
New York for the American Relief Administration. I am to-day in receipt
of a letter from Mr. Rickard, stating that it will not be necessary to
establish the fourth and fifth credits for Serbia to cover purchases for food for
the months of May and June. Upon the understanding that such credits are
not to be established and upon the further understanding that the food for
which you are requesting payment from Mr. Pergler has been loaded and as­
signed to the Czecho-Slovak Republic and completes the program for May and
part of the program for June, the Treasury is prepared to entertain a request
from Mr. Pergler that it establish a credit of $9,000,000 to cover purchases of
food for June, and that it advance his Government $13,350,000, of which
$9,000,000 are to be charged against the credit heretofore established for May,
and $4,350,000 are to be charged against the credit requested to be established
for June. If in accordance with a request which shall be received from Mr.
Pergler, the above-mentioned credit is established for June and the abovementioned advance is made, the balance of the June credit against which ad­
vances for the remainder of the June food program can be made will amount to
but $4,650,000. It may be that the Czecho-Slovak Government has available
for temporary use certain dollar funds. In that case the above-mentioned
advance from the Treasury will be reduced by an amount equal to such pay­
ment as may be made to the American Relief Administration from such other
funds, and the credits of the Czecho-Slovak Government with the Treasury to
a corresponding amount will be held available only for the replenishment o f
such other moneys so used.
In view of the overpurchase for Belgian account of pork products, I presume
that if any further purchases of pork products are contemplated by the Ameri­
can Relief Administration for the account of the Czecho-Slovak Government
or for other Governments, the surplus now held for Belgian account will be
taken over. The Treasury must urge most strongly that such course be fol­
lowed if practicable, and I shall be glad to be advised whether further pur­
chases of pork products are contemplated by the American Relief Association,
and if so, whether the Belgian oversupply will be availed of.
Yours, very truly,
A lbert R athbone .

Mr. R oger S herm an ,
Assistant to Joint Manager,
the American Relief Administration,
New York City.

T he Czecho-S lovak R epublic
C ommissioner in the U nited States ,

Washington, D. C., May 22, 1919.
My D ear Mr. Secretary : Referring to my communication to you of April
21, 1919, I respectfully renew my request of that date for the establishment of
a further credit o f $9,000,000 in behalf of my Government. As stated in the
letter above referred to, this amount is required in order to complete the food­
stuff program for the Czecho-Slovak Republic as arranged by the American
Relief Administration.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

251

Food and food products are still urgently needed in Czechoslovakia as a
military measure to prevent the spread of anarchy, and I take the liberty
again to express the hope that you will feel it possible to continue for the
month o f June an extension of credit in the same amount, $9,000,000, as was
extended for the months of February, March, April, and May, respectively, to
provide for this purpose. It is my understanding that the establishment of
this credit is necessary to provide for the food necessities of the Czecho­
slovak Republic for the month of June, 1919.
From the information now available I take the liberty to say again that I
do not think it is possible to accomplish the end desired by any diminution o f
the amount of food and food products to be furnished my Government during
the month of June from that furnished over the previous months.
I have been advised by the American Relief Administration that there have
been delivered to the Czecho-Slovak Republic, or are in transit assigned to
my Government, foodstuffs for which there is payable by my Government the
sum of $40,302,824. Of this sum I have already paid the American Relief
Administration, out o f advances from the United States Treasury, the sum of
$27,000,000. I shall draw a check for $1,500,000 upon the Central Union Trust
Co. of New York, upon the funds on deposit there, with the understanding
that when it is necessary to replenish this deposit the United States Treasury
will advance to my Government a corresponding amount from the credits es­
tablished for food purposes, such advance to be deposited in said account,
subject to countersignature as heretofore arranged. I respectfully ask that
you advance to my Government on May 22 the further sum of $11,850,000 to
be applied by my Government on the balance due to the American Relief Ad­
ministration for food delivered, or in transit, as above mentioned.
I am, sir, your obedient servant,
C harles P ergler, Commissioner.
The Secretary of the T reasury,
Washington, D. C.
M a y 22, 1919.
D ear M r . P ergler : I take pleasure in advising you that in accordance with

your request the Secretary of the Treasury has established a further credit in
favor o f your Government in the amount of $9,000,000. This credit is to be
made available to your Government against its duly executed obligations in
a corresponding amount, to such extent and at such times as the Secretary of
the Treasury may determine, in order to meet food purchases of your Govern­
ment in the United States through the American Relief Administration. I
understand from you that this food is urgently needed in your country in order
to maintain order and to prevent the spread of anarchy, and that your Govern­
ment has no dollar resources from which to defray the cost of the same other
than advances which may be made to it by the Secretary o f the Treasury.
I am, dear Mr. Pergler,
Very truly, yours,
A lbert R athbone .
Mr. C harles P ergler,

Commissioner Czecho-Slovak Republic,
Washington, D. C.
M a y 22, 1919.
D ear M r. P ergler : Your letter of the 22d instant has been received in which

you request that the United States Treasury advance to your Government the
sum of $11,850,000, in order to enable your Government to pay said amount to
the American Relief Administration for food and food products delivered to
your Government or loaded for such delivery. I have pleasure in advising you
that the United States Treasury has this day advanced to your Government
said sum of $11,850,000 against the duly executed obligation o f your Government
in a corresponding amount, upon the understanding that said sum is to be paid
to the American Relief Administration for food and food products heretofore
delivered to your Government or loaded for such delivery as above mentioned.
Nine million dollars of such advance has been charged against the credit hereto­
fore established in favor of your Government, to cover the purchase of food
through the American Relief Administration during the month of May, and




252

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

$2,850,000 has been charged against the credit of $9,000,000 established to cover
such purchases for the month of June, thus reducing the balance o f said credit
available for further advances to the slim of $6,150,000.
I am, dear Mr. Pergler,
Yours, very truly,
A lbert R athbone .
C harles P ergler, Esq.,

Commissioner Czecho-Slova k Republic,
Washington, D. C.
M ay 22, 1919.
D ear Mr. P ergler : Supplementing my letter of to-day and in further reply to

your letter of to-day, I have pleasure in advising you that if your Government
on the 24th instant makes a payment to the American Relief Administration
of $1,500,000 by check drawn against the account of your Government with the
Central Union Trust Co. of New York, subject to the counter-signature of the
representatives of the committee composed of Mr. McCormick, Mr. Hurley, and
Mr. Baruch, the Treasury is prepared to advance to your Government against
its duly executed obligation in a corresponding amount at such time as the
above-mentioned account with the Central Union Trust Co. shall require
replenishment an amount equal to such payment, on the understanding that
such advance shall be charged against the credit of $9,000,000 to-day established
in favor of your Government for the purpose of covering purchases of food
through the American Relief Administration for the month of June, and shall
be deposited with the Central Union Trust Co. in the above-mentioned amount
and subject to countersignature in accordance with the arrangement hereto­
fore made.
I am, dear Mr. Pergler,
Yours, very truly,
A lbert R athbone.
C harles P ergler, Esq.,

Commissioner Czechoslovak Republic,
Washington. D. C.

A merican R elief A dministration ,

Netv York City, May 29, 1919.
Mr. A lbert R athbone ,

Treasury Department, Washington, D. C.
D ear M r. R athbone : We are advised by cable that the following allocations

of food have been made to Czechoslovakia:
27,587 tons ry e ___________________________________________________ $3, 310,440
715,950
3,870 tons wheat flour------------------------------------------------------------------4,026,390
In our letter of May, 15 we asked for------------------------------------------- 13,372,824
Total___________________________________ I __________________ 17,399,214
May 22 received from United States Treasury---------- $11,850,000
May 28 received from Mr. Pergler------------------------------1, 500,000
------------------- 13,350,000
Total_______________________________________________________ 4,049,214
We are sending a copy of this letter to Mr. Pergler, asking that he kindly
arrange with you for the deposit of $4,049,214 to our account with the Chase
National Bank, New York City.
Yours, very truly,




T he A merican R elief A dministration .

By R oger S h erm an ,
Assistant to Joint Director.

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

253

SECTION 131.
Twenty-five Thousand Dollars for Cost of Keeping Up New York City Con­
sulate Approved by United States Treasury June 4, 1919.
J une 4, 1919.
D ear M r. P ergler : I have pleasure in advising you that to the extent not

exceding $25,000 that your Government meets the expenses up to June 30, 1919,
of maintaining its consulate at New York by checks drawn against the account of
your Government with the Central Union Trust Co. o f New l rork, subject to the
countersignature of the representative of the committee composed of Mr. Mc­
Cormick, Mr. Hurley, and Mr. Baruch, the Treasury is prepared to advance to
your Government, against its duly executed obligation in a corresponding
amount, at such a time as the above-mentioned account with the Central Union
Trust Co. shall require replenishment, an amount equal to such payments, not
exceeding $25,000, on the understanding that such advance shall be charged
against the credit referred to in my letter to you of April 8 as having been
established by the Secretary of the Treasury in favor of your Government in
the amount of $6,330,000, and shall be deposited with the Central Union Trust
Co. in the amount above mentioned and subject to the countersignature, in
accordance with the arrangement heretofore made.
I am, dear Mr. Pergler,
Yours, very truly,
A lbert R athbone .
C harles P ergler, Esq.,

Commissioner Czecho-Slovak Republic,
Washington, D. C.

SECTION 132.
Credit to Return Troops from Siberia.
D epartment

of

State .

Washington, D. C., September 19, 1919.
My D ear M r. Secretary : I am inclosing a copy of a telegram I have received
from Mr. Polk which bears on the very urgent problem which this department
has been trying to solve for several months, namely, the repatriation o f the
Czecho-Slovak forces now in Siberia.
I regard the matter of such importance that I hope it will be possible for
you to grant to the Czecho-Slovak Republic an additional credit up to $12,000,000 to defray the expenses of moving these troops. I am requesting the
President to direct the Shipping Board to supply the necessary tonnage, pro­
vided he approves your granting the credit.
If a favorable decision is reached in regard to the matter of the loan and
also the necessary tonnage, I shall cable Mr. Polk the result, but shall urge
him to insist that the British and French Governments shall each contribute
one-fourth of the expenses involved and shall suggest that Mr. Polk point out
not only the very great part which has been played by the United States in
general relief measures but also the definite interest which both Great Britain
and France have in stabilizing conditions in Czechoslovakia.
In order that you may be fully informed of all the measures which are being
taken I am inclosing herewith a copy of the telegram which I am sending to
the President to-day at San Diego, Calif.
I am, my dear Mr. Glass,
Very sincerely, yours,
W illiam P h illips .
Hon. C arter G lass ,
Secretary of the Treasury.
PARAPHRASE OF CABLE FROM MR. POLK AT PARTS, DATED SEPTEMBER 17.

Mr. Polk refers to previous correspondence in which both he and the depart­
ment were agreed upon tlie great urgency of getting the Czecho-Slovak forces
home from Siberia. Mr. Polk says:
“ Benes, Czecho-Slovak foreign minister, has made urgent representations
to the American mission on the subject of Czecho-Slovak troops in Siberia,



254

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

stating that the situation has now become exceedingly grave from two points
of view: First, the condition of these 60,000 troops is pitiful as to morale as
they look with despair upon another possible winter in Siberia. Their reten­
tion might be an actual source of danger rather than protection. Second, the
return of these troops has become a burning political question. Benes states
that if he can not give any hope to the hundreds of thousands of persons inter­
ested at home in the return of these troops, an overthrow of the Government
is possible if not probable. The powers have every interest in preventing this.
“ Benes points out that the important matter is that the movement should
begin at once so that he can inform his people that it is proceeding under a
definite promise from the powders.
“ The American mission is strongly of the opinion that all possible effort
should be made on our part to provide transportation and such financial as­
sistance as may be practicable, which Benes agrees to reimburse in due time.
“ Please reply at earliest possible moment, stating definitely what can be
done on these two points. On receiving department’s reply the matter will be
at once brought up again before the supreme council.”
N ote.—The Department of State feels that the United States has a definite
moral obligation in regard to the repatriation of these forces and has been in
correspondence on this subject, without result, for several months. It is de­
sired to recommend to the President that he authorize the Secretary of the
Treasury to make additional advances to Czechoslovakia, up to $12,000,000,
to start the movement to get these men home, and also have the President
direct the Shipping Board to provide the necessary tonnage. In the mean­
while the department will proceed with negotiations with the other powers to
ascertain whether some division of the expenses can not be reached. The
department considers it vital, however, that the movement get started and that
details in dispute be left to subsequent adjustment.
September 19, 1919.
The P resident,
San Diego, Calif.:
I have received a cable from Mr. Polk emphasizing the very urgent necessity
for immediate measures to repatriate the Czecho-Slovak forces now in Siberia.
First, because they look with despair upon the possibility of another winter
in Siberia, and in these circumstances their retention might prove a source
of danger rather than a protection. Second, because their return has become
a burning political question in Czechoslovakia, upon which the overthrow of
the Government is possible if not probable.
The department has for some months been in correspondence upon this
subject, because it has considered that, beginning with our sending of troops
to Siberia, we have had a definite moral obligation to the Czecho-Slovak armies
of Siberia. Accordingly I have to-day written the Secretary of the Treasury,
urging him to advance additional credits to the Czecho-Slovak Government up
to $12,000,000, which is the estimated cost of repatriating 50,000 men. I have
informed Mr. Glass that if such a credit is granted, I will, if you so desire,
urge Mr. Polk to insist that Great Britain and France each bear one-fourth
of such a loan in view of the burden assumed by the United Europe, and also
because o f the special interest which Great Britain and France have in main­
taining stable conditions in Czechoslovakia.
I f the additional credit, to which I refer is approved, I would also urgently
request your authorization to have the Shipping Board set aside the tonnage
necessary for this movement, it being understood that economy of tonnage
will have every consideration. In conclusion allow me to add that the im­
portance of repatriating the Czecho-Slovak forces has been brought to the
attention of the department from various sources and has been particularly
emphasized by Ambassador Morris in his reports from Siberia. I believe
considerations of very great weight urge our starting this movement and hope
you will see your way clear to authorizing the necessary credits and tonnage.
Allow me to add in regard to the question of tonnage that, while there is
urgent command on commercial routes for the vessels which have been en­
gaged in returning our troops from France, I believe the political and moral
considerations in this particular instance are paramount.
W i txtam P hitj/i ps, .4eting.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

255

September 19, 1919.
Si r : I have the honor to acknowledge the receipt o f Mr. Phillips’s letter of
the 19th instant, addressed to the Secretary of the Treasury, transmitting a
paraphrase of a telegram from Mr. Polk relative to the repatriation of the
Czecho-Slovak forces now in Siberia, and requesting the Secretary o f the
Treasury to establish, in favor o f the Czecho-Slovak Republic, an additional
credit up to $12,000,000 to defray the expenses of moving these troops. Mr.
Phillips also transmitted a copy of his telegram sent to the President at
San Diego on this subject. In accordance with the request of your department,
and in order to expedite the matter in so far as possible, in view of the state­
ment of your department as to its military and political importance, the Secre­
tary of the Treasury has sent to the President a telegram requesting his ap­
proval of the establishment of a credit in favor of the Czecho-Slovak Republic
up to $12,000,000 for the purpose mentioned in Mr. Phillips’s letter. Before
establishing any part of such credit as the President may authorize, the Sec­
retary of the Treasury would wish to discuss with the Treasuries of Great
Britain and France the extent to which they are prepared to make to the
Czecho-Slovak Republic advances for this purpose.
Respectfully,
A lbert R athbone .

The Secretary

of

State .

T reasury D epartment T elegram,

Washington, D. C., September 25, 1919.
The P resident,
Pueblo, Colo.:
Czecho-Slovak Republic has applied through American mission and Depart­
ment of State for additional loan from United States of $12,000,000 to re­
patriate Czecho-Slovak troops now in Siberia. Department of State urges
military and political importance of return o f these troops. Your approval is
therefore requested of establishment of credit for this purpose in favor of
Czecho-Slovak Republic up to $12,000,000. If you approve establishment of
credit Treasury will discuss with treasuries of Great Britain and France the
proportions to be borne by them of the necessary advances. To extent of such
participation by them advances made by our Treasury will be reduced below
amount for which your approval is requested.
C arter G lass .
[Telegram .]

L a J unta , Colo.,

September 25, 1919—10.58 p. m.
Hon. Carter Glass ,
Secretary of the Treasury, Washington, D. C.:
Entirely approve loan to Czecho-Slovak Republic under conditions named ia
your telegram of to-day.
W oodrow W ilson .

SECTION 133.
Owing to the Length of Time Since the Armistice the Treasury Department
Refuses to Establish New Credit to Pay for Automobiles, March, 1920.
T he C zecho-S lovak L egation ,

February J 1920.
h
Mr. D ewitt P oole,

Per Russian Division, Department of State, Washington, 1). C.
M y D ear M r. P oole : In June, 1918, we were compelled to disarm the Vladi­

vostok Soviet, and to get bold of Vladivostok our army was in sore need of
transportation facilities. By order o f our army commander in Vladivostok then*
were requisitioned some automobles from the Vladivostok port, which had been
shipped there by different American firms in 1916 and which were lying there
without use. Particularly there were requisitioned 65 Pathfinder automobiles,



256

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

belonging to the linn of John McGregor Grant, of New York, with 14 cases of
spare parts belonging to these cars; also 14 Pathfinder automobiles and 14
cases of spare parts belonging to Mr. Claude M. Nankivel, of New York. These
last 14 were in Vladivostok under the care of the firm o f Jourovette.
Notwithstanding that this requisition has been carried out not quite regularly
and the greater part of these automobiles were not assigned to our army but dis­
tributed among the Russians, French, and Chinese contingents, our army com­
mander and our authorities in Siberia—after numerous conferences, in which
the American consul general in Vladivostok participated—recognized the respon­
sibility for this requisition and assumed the obligation of payment. On account
of the near impossibility to pay in foreign money this obligaton, the whole
transacton has been referred by our Siberian authorities to me for payment
out of the sum which was loaned for supplies for our Siberian army.
In taking up this matter with the firms referred to, I declared that I am
willing to pay for these automobiles if the United States authorities recognize
this item as being for supplies for our army in Siberia. But I made objection
to the amount asked for by these firms and which—by not being well informed
about conditions— our authorities in Vladivostok accepted.
Both firms claimed the price of one car $3,649.54, in which amount is included
6 per cent interest from January 10, 1917, 5 per cent commission, and other
different expenses. To this sum they claim should be added 6 per cent interest
from January 10, 1919, to January 10, 1920.
In the conference which I had yesterday with the representative of John
McGregor Grant, Mr. Andrew Ivalpaschnikoff, and Mr. Claude M. Nankivel, I
succeeded in cutting dowr the price by 26 per cent, viz, the 10 per cent interest,
n
the 5 per cent commisson, and 8 per cent for depreciation of value of the cars
while lying two years in Vladivostok. The original claim of Mr. Nankivel was
$71,000.12 and of McGregor Grant $257,126 (to which has not been added the
6 per cent for the last year). The reductions amount o f $14,200.02 from the
Nankivel claim and $51,425.33 (20 per cent, since the last 6 per cent was not
included in the claims), making the sums which I agreed upon $56,800.10 for
the claim of Mr. Nankivel and $205,701.33 for the firm of McGregor Grant.
Before issuing the necessary checks in payment I beg you to take the neces­
sary steps to ascertain that the firm of John McGregor Grant and Mr. Claude
M. Nankivel are the legal proprietors of said material, as I have been informed
that this matter has been referred to the Department of State by the consul
general at Vladivostok, also by these firms themselves, that this formal ques­
tion can be settled easily. It would be also very useful to have a confirmation
from the American consul general at Vladivostok that in the meantime other
arrangements for payment have not been made.
Concerning the amounts available for this purpose, I should like to call your
attention to the fact that in figuring out our needs wT did not count upon this
e
expense, and part of the funds were used for food supplies, which the Treasury
was supposed to reimburse, but did not because there appeared to be sufficient
funds without this sum. But it would now seem that in order to meet the obli­
gation for these automobiles we shall require a reimbursement from the Treas­
ury for part of this amount. I am inclosing a statement showing funds avail­
able for military supplies and outstanding obligations, exclusive of these auto­
mobiles, which you will note shows a margin of $131,000 with which to meet
the payment of $262,500 for the automobiles.
As I mentioned before, out of these 79 automobiles there are in our posses­
sion only 34. The rest have been transferred mostly to the Russians, who re­
ceived 39 cars; the French 4 ; and the Rumanians 2. We have receipts from
the Russian authorities for part of the cars, but not for all; for instance,
Seminoff, who took over 7 automobiles, has not given receipts for them, although
requested to do so. Also, Gen. Chorvat failed to give receipts. The reason I
am mentioning these facts is that perhaps it wr
ould be possible to secure some
reference from the Russians here in America as to whether any funds are under
control of the United States Government. I should be obliged if you would
inform me about this, as to what can be done in this line, because it is most
unjust that we have to pay for material transferred by good will to the Rus­
sians, for which they did not pay on account of chaotic conditions.
Very truly, yours.
Col. V. S. H crban,
Military Attache.
L a f a y e t t e H o t e l , Washington.




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

257

M arch 22,1920.
Sir : Referring to your letter of the 4th instant and tlie copy therein incloseu
of a letter from Col. V. S. Hurban, dated the 4th ultimo, concerning 79 auto­
mobiles requisitioned by the Czecho-Slovak troops in Siberia in June, 1918, and
said to have been the property of parties in New York, the Treasury sees no
objection to the use for the payment for such automobiles of funds heretofore
advanced against the credit of $5,000,000 established in favor of the Czecho­
slovak National Council on November 15, 1918, provided the Department of
State approves and the Czecho-Slovak Government has available any of the
such funds against which no other commitments have been made. The pur­
poses for which the Treasury was authorized to establish credits and make
advances were the national security and defense and the prosecution of the war.
In view of the time which has elapsed since the cessation of hostilities and the
even longer time since the automobiles in question were requisitioned, and in
view of the fact that no commitment was incurred by this Government to make
advances to pay for these automobiles, the Treasury is not able to establish a
new credit or to make new advances for that purpose.
Very truly, yours,
N orman H. D avis .
Hon. F rank L. P olk ,
Undersecretary of State.
D e p a rtm e n t o f S ta te ,

Washington, D. C., April 3, 1020.
T h e S e c r e t a r y of t h e T r e a s u r y .
S ir : Referring to your letter of March 22, 1920, in which you state that the
Treasury sees no objection to the use for the payment for automobiles, requisi­
tioned at Vladivostok by the Czecho-Slovak authorities, of funds heretofore
advanced against the credit o f $5,000,000 established in favor o f the Czecho­
slovak National Council on November 15, 1918, provided that the Department
of State approves and the Czecho-Slovak Government has available any o f such
funds against which no other commitments have been made, I have the honor
to call your attention to the statement submitted by Col. Hurban, of the Czecho­
slovak Government, a copy o f which was inclosed in my letter o f March 4, 1920.
It will be seen from this statement that the $5,000,000 advance to which you
refer is listed, and that an additional advance o f $1,000,000 is also listed. From
this $6,000,000 the disbursements are indicated, leaving a balance, but it can not
be determined from the statement whether the balance is a remainder of the
$5 000,000 advance or o f the $1,000,000 advance, or both.
Under such circumstances I would be pleased to receive a letter from you
stating whether the Treasury Department sees any objection to the use for the
payment for such automobiles of funds heretofore advanced against any credits
established in favor of the Czecho-Slovak National Council, provided the Czecho­
slovak Government has available any of such funds against which no other
commitments have been made.
I have the honor to be, sir, for the Secretary of State,
Your obedient servant,
F ran k L. P olk , Undersecretary.

A pril 7, 1920.
S ir : Your letter of the 3d instant has been received, in which you again refer

to the statement submitted by Col. Hurban, o f the Czecho-Slovak Government,
with his letter to you of February 4, 1920, copy of which was inclosed in your
letter of March 4, 1920. The Treasury does not, however, understand Col. Hurban’s reference to the advance o f $1,000,000, which he indicates as having been
made in addition to the previous advance of $5,000,000 against the credit o f
$7,000,000 established in favor o f the Czecho-Slovaks for the purpose of caring
for their military expedition in Siberia. All advances made by the Treasury
against such credit beyond the first advance of $5,000,000 were, by arrange­
ment with the Czecho-Slovak Government, made for the purchase in the United
States of food, and were used for that purpose. No part o f them, therefore, is
now available for the purpose mentioned in your letter. The Treasury sees no
S. Doc. 86, 67-2------17




258

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

objection to the use for the payment for the automobiles mentioned in your
letter of funds heretofore advanced by the Treasury against any credits estab­
lished in favor o f the Czecho-Slovak National Council or the Czecho-Slovak
Government other than the credit of $12,000,000 established for the purpose of
the repatriation of troops from Siberia, provided the Czecho-Slovak Government
has available any of such funds against which no other commitments have been
made.
Respectfully,
N o r m a n H. D a v is .
The S e c r e t a r y o f S t a t e .







FRANCE




SECTION 134.
France.

Under the four Liberty loan acts which authorized the Secretary
of the Treasury to make loans to foreign Governments then engaged
in war ivith enemies of the United States for the 'purpose of prose­
cuting the ivar, the Treasury Department established credits for
France to the extent of $3,047,974,777.24. The Treasury Department
made advances on these credits so established of $2,997,477,800, leav­
ing a balance now existing under established credit in favor of
France of $50,496,977.24. On November 15, 1920, France was in­
debted to the United States for interest on the above loan to the
extent of $211,524,703.02. Credit to the extent of $435,000,000 was
established for France after the date of the armistice on November
11,1918.
According to Andre Tarclieu, former French high commissioner
to the United States, this sum of approximately 15,000,000,000
francs which we loaned to France actually amounted to about 45,T
000,000,000 francs according to the actual exchange rate at the time.
The War Department sold to France surplus war materials in a
total sum of $400,000,000. Summing up these two items it appears
that France is still indebted to the United States to the extent of
approximately $3,500,000,000. Prior to our entrance into the war
a number of private loans were floated in this country for France.
It appears from the data attached hereto that France paid off some
of the private loans made in this country with the money loaned
her for the prosecution of the war.
The correspondence attached hereto shows that Secretary McAdoo
was aware of the fact that under the Liberty loan act he had no
authority to continue granting of credit to France for reconstruc­
tion purposes after hostilities had ceased.
The correspondence shows no proposal by the French Govern­
ment for cancellation of the loans. There is, however, attached the
correspondence relating to the funding of the debt the attitude of
France to treat the debt as an international question instead of a
question between the United States and France, and the possible
attitude of France toward the cancellation of debt owed to it by
Italy, Rumania, and other countries, which would lead to the infer­
ence that if these debts due France were canceled, then the United
States should cancel the debts due from France.
Attached hereto will be found the correspondence relative to the
loan of $16,000,000 to France for the purpose of reloaning it to Aus­
tria for relief purposes. This roundabout method was pursued in
order to evade the law, which provided that the loans should be
made to countries then engaged in Avar with enemies of the United



261

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

262

States for the purpose of tlie prosecution of the war. Under such an
act, of course, no money could be loaned to Austria, one of our
enemies.
SECTION 134.
[Translated from a series o f articles by Andre Tardieu in the Illustration, The Problem
o f Reparations. Oct. 20, 1920.]

Financial Solidarity.
Besides guaranties levied directly against Germany, others were conceived in
reason and conscience, founded on the solidarity of the Allies. Union in war—
union in peace. Could not the sacrifices supported in common include the
expenses of the settlement— after the great losses of life and treasure— the
richer aiding the less rich to carry his part of the burden? A grand and noble
idea of which the French people, less because of their enormous obligations
than from their passion for justice, had appreciated the harmony.
To properly set out the problem, which has often been confusedly presented,
it should be stated the financial regulation of the war was accompanied by
certain burden and possible risk to the conquerors—a certain burden in that
the treaty did not impose on the conquered the reimbursement for the price of
victory (700,000,000,000 francs) ; a possible risk in the event of nonpayment
by Germany of all or part o f the reparation debt (about 350,000,000,000 francs),
which she was bound to acquit. It is to these two kinds of responsibilities, the
one ineluctable, the other eventual, that the principle of solidarity (on a basis
to be later determined) could have been applied.
*

*

*

*

*

*

*

Nothing simpler, it seemed, and nothing more just. And without considering
the men of partisan motives, whose criticism does not count, impartial minds
were astounded that this solution did not prevail.
Thus Prof. Charles Gide wrote in an article on the League of Nations:
“ The favorable moment has been let pass * * * the solution probably
would have been easy if the powers had given it a thought during the war.
When they resolved in May, 1918, to have only one army and one commander in
chief it would not have been difficult to persuade them that they should have
but one bank.”
If M. Gide had been in charge of the tremendous difficulties of either, he
would certainly not have written the above. Unity o f command? Forty-five
months of war and tlie menace of disaster had to occur before that was even
theoretically accepted. And once accepted, it was only by laborious steps that
it became a fact.
If M. Cleinenceau did not mention financial unity in the debates on military
unity, it was only because he knew how well it would irrevocably compromise
the military issue upon w hich the war depended. He knew that, particularists
in matter of command, the Allies were still more so in finance, and that to the
end of hostilities the treasuries of each country would remain the impregnable
fortress of national individualism.
I do not wish to retrace the financial history of the war, but I do wish to
explain my proposition by certain facts.
Consider France and the LTnited States. I have often reminded my fellow
citizens as a striking example of American solidarity o f the 15,000,000,000 francs
(45,000,000,000 according to the actual exchange) which the United States
Treasury loaned us. l"et how many difficulties had to be overcome by daily
practice to gain this generous cooperation? Remember that at no time did
America consent to any general commitment, either to France or to any of our
allies.
An advance of $100,000,000 had been accorded to M. Viviani during the last
of April, 1917, without promise of renewal. This, on my arrival in Washington
the 15th of May following, was my first care. Then from month to month—
often from fortnight to fortnight— my allied colleagues and I obtained the
indispensable credits. Each time the negotiations of these credits demanded
long explanations.
As to France, one part of them were used to pay for Government purchases
m America, and there was no objection on that score. But we were obliged to
retrocede another part to England for payments in dollars which she effected
for us outside America, and to turn a third part over to the order of the Bank




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

263

of France to be changed for private purchases. To the end of the war tlies©
provoked the inquietude and protestations of the Treasury Department. In
January, 1918, the fact that our moneys on hand revealed an excess over our
disbursements let us in for severe reproaches. A little later I encountered the
most serious obstacles to repaying, thanks to American dollars, certain of our
borrowings of 1915 and 1916, the renewal of which would have been, however,
pure folly.
On all these occasions the Treasury Department, frightened by the immensity
of its task, careful not to exceed the limits of the authorizations provided by
Congress, hesitated sometimes for weeks to allow allied operations which
conformed to the general interest.
We worked from day to day, nearly always getting results, but without being
able to embrace this unsystematic and cordial collaboration in the outlines of
a general system.
There was another question— that of “ cessions.” America had bought war
material of us. Moreover, her troops were becoming more and more numerous
in France, gave rise to a need for French francs (more than 800,000,000 in
May, 1918), which the French treasury supplied against payment furnished in
dollars and not without a heavy burden on circulation. Our minister of finance
considered that the dollars were our property and that the United States
Treasury should continue to advance us credits for our purchases in the United
States, as they did to the other allies, without deducting from that amount
dollars supplied by the cessions either of materials or of francs. The American
Secretary of the Treasury, on the contrary, insisted that, in view of the crushing
burdens put on him, the dollars, wherever they came from, should be applied
without distinction of origin where they were necessary. He did not admit that
France was able on the one hand to build up a reserve and on the other to draw
advances from the Treasury. It was his understanding that the said advances
were strictly limited to the difference between the amount of our purchases in
the United States and the disposed moneys resulting from the cessions for mate­
rials, francs, etc.
This disagreement was the beginning of an epic controversy. As always with
the Americans, we arrived at a transaction in fact, but without succeeding to
agree in principles.
We obtained in July, 1918, a supplementary credit of $200,000,000 and in the
following November a setting out of a draft for proposed legislation authorizing
advances for our purchases for reconstruction.
But on principle— “ compensation ” or “ no compensation ”—the two treasuries
remained invariably unable to agree, both standing on their respective doc­
trines of financial autonomy. They did their most to aid the war, but they
abandoned not a whit of their opposed theses.
All this to demonstrate how eagerly the United States Treasury, in spite of
the splendid cooperation it gave associates in the war, desired to do nothing
upon which could be placed the construction of a general engagement either for
peace or war.
Freed from the mask of words and translated into figures, the idea of financial
solidarity among the Allies to liquidate the war debts, had only one meaning—an
appeal to the American Treasury in the event of an acceptance by it of an addi­
tional burden. The facts which I have just stated prove that such appeal
would have had no chance to be heard before the armistice. It had still less
chance after that date.
The war had cost America, who demanded nothing for reparations, nearly
$35,000,000,000. Congress found that it was dear at that price and was not dis­
posed to go further. Since the November elections in 1918 the policy of non­
intervention in the affairs of Europe answered at the same time the spontaneous
tendency of a part of public opinion and also the deliberate will to checkmate
the President.
Moreover, the laws of arithmetic would have obliged the United States, if
she were to fulfill this solidarity, to pay not only for France but for Great
Britain as well. The Americans were not so disposed.
In brief, if the thesis of financial unity was just or logical and if it is regretted
that financial unity did not triumph, I dare state without fear of being contra­
dicted by anyone who, like myself, was a member of the Government during
the war, that only to present such a theory would have been enough to have
sustained a reverse whose consequences would have been disastrous.
Both by members of the peace conference from the beginning and others out­
side, this question of solidarity has been studied under diverse forms.



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FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

I can not outer into a detailed examination here of these different projects
which, as we shall see. a common fate awaited.
One o f the interesting schemes, elaborated by a French banker, M. BouillouxLafont, proposed the creation of a general financial office of the nations. This
international financial office could utter bank notes, 3 per cent debentures re­
deemable in six months, and 4A per cent redeemable bonds. The Allies were to
receive for the indemnities due them (which were estimated by the author of
this scheme at 300.000,000,000 francs), an equal amount—half in notes and half
in bonds. An annuity charged to Germany, Austria, etc., was to cover tlie inter­
est on the bonds as well as the retirement o f them and the bank notes. To take
care of the war expenses (700,000,000,000 francs), tlie belligerents were to re­
ceive as a set off an income o f 4-h per cent, which interest would be assured by
world-wide taxes on transportation, customs, production of raw materials, etc.
These taxes were to be quintupled for the Central Powers * * *.
Other such theories have been suggested.
The first twT fundamental objections to these theories upon application are
o
that, first, certain countries, including France, by this system or any other simi­
lar one, wT
ould thus place a part of their own burdens on the shoulders of other
allies and neutrals whose consent would have to be obtained; second, since these
notes, debentures, and bonds must bear the collective signatures of all the
participants, two alternatives are presented, either signature does not signify
that the parties are severally liable, and in that event it is senseless, or it im­
plies several liabilitity and in that event what minister of finance would put his
signature to an issue of bonds of a thousand billion francs?
❖

*

*

❖

*

*

❖

Other solutions have been prepared which by other paths tend to the same
end. For example, we studied a plan to lump the costs, whatever they might be,
of the war in one sum, basing responsibility on the population and national
wealth of each country. This scheme would have reduced France’s war debt
from 30.2 per cent to 11.4. per cent; that of Great Britain. 31.1 per cent to 20.2
per cent; that of Belgium*, from 5.4 per cent to 1.7 per cen t; that of Serbia from
4.6 per cent to 0.8 per cent. On the contrary, it w ould have increased the United
T
States obligations 29 per cent, that of Japan 6 per cent, that of Italy 6 per cent,
that of Canada 1 per cent, that of the Union of Souh Africa 1.4 per cent, etc.
This percentage increase represented in round numbers 250,000,000,000 francs
for the United States, 65.000.000,000 for Japan, 9,000,000,000 for Canada, 12,000,000,000 for the Union of South Africa. The simple statement of these fig­
ures provoked absolute protest from those countries whose debts were to be so
increased.
The same fate attended another scheme, which was equally officially sub­
mitted to the allied delegations and which used as a basis for the share in the
war debts the war dead of the several countries, as compared with the total
population of the Allies. This assumed that these dead were the most irrep­
arable injuries that the countries sustained.
The adoption of this calculation would have reduced the debt of France by
about 30,000,000,000 francs. But many others would have suffered; Belgium,
for instance, by reason of the small number of her dead would have scarcely
reduced her indebtedness at all.
In every case, no matter what was the method applied to the solution of
financial unity, those who w
’ere called upon to pay for the others or to pledge
themselves for others affirmed the doctrine of financial autonomy so jealously
safeguarded during the war. To each of these schemes the same invariable
principle remained.
We shall see this affirmed with emphasis:
Toward the beginning of March, 1919, a rumor was spread around Washington
that tlie apportionment of the reparations had been effected at Paris, and on
the 8th of March I received from M. Edouard de Billy, who had succeeded me
as French high commissioner, a cable giving me a part o f a letter received by
him the same day from Mr. Rathbone, Assistant Secretary of the Treasury.
This letter, after recalling that in one of the commission’s meetings M. Kiotz
had supported the proposition of apportioning among the Allies the total amount
of the war debts, concluded:
“ I wish to clearly inform you that the Treasury Department of the United
States, which, as you know, has absolute authority, conferred by Congress, in
the matter of loans allowed by it to foreign governments, will not consent to
any discussion, at the peace conference or elsewhere, of a plan or project having




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

2G5

for object the liberation, the consolidation, or new division of the obligations of
foreign governments held by the United States.
“ You will appreciate also that the Treasury Department will be unable to
continue advances to any allied government that favors any plan which would
result in reducing the certainty of payment on maturity of the advances allowed
by the United States Treasury.
“ I will highly appreciate it if you will communicate the decision of the
Treasury Department to your Government. I shall impatiently await your
reply.”
The allied governments, who all most urgently required the continuance of
American advances and none of whom were ready to repay their anterior
cred tors, could not go beyond the terms of this letter. In a very precise reply
I claimed again the right of the French Government to have and to defend
whatever opinion it deemed proper, after its enormous sacrifices. Mr. Rathbone
remained in accord with that and the incident was closed.
I have cited the above only to show in what degree, after the armistice as
well as before, the touchiness of the treasuries remained watchful when they
feared that an international agreement would operate to increase the already
heavy burdens which their parliaments had authorized.
It was under these conditions that the plan of the financial section of the
League of Nations, usefully presented by M. Klotz, was sent to the executive
council for examination, still in a vague form which the recent conference
at Brussels has not succeeded in concretizing. (It should be stated that many
of the powers, attributed to the Klotz plan, have been effectively conferred by
the treaty to the Commission on Reparations.)
The hour for solidarity had not sounded. Any pressure to hasten it would
have precipitated conflict where union was desired.
Long and prudent preparation was necessary, especially in America, where,
as I have demonstrated, success depended. To organize this preparation Presi­
dent Wilson and his colleagues, struck by our anxieties and our desires, largely
consecrated their last days in Paris.

SECTION 134.
Correspondence Relating to Settlements, Cancellations, Repayment, and Fund
ing of Interest of French Debt.
[Correspondence covers a period from Oct. 25, 1018, to Jan. 27, 1921.]
P a r is ,

October 25, 1918.

S e c r e t a r y of S t a t e ,

Washington, D. C.:
Urgent.
5574, October 25, 6 p. m.
For McAdoo from Crosby, 625. Tardieu will probably show you letter from
me concerning supply of francs for our purposes after the war. This letter
resulted from numerous informal conversations begun when peace looked much
further off than now, and also before full appreciation of the importance of
obtaining assurance of francs after the war. Though the controlling conditions
which led to the suggestions may now be somewhat modified, they still, in my
opinion, warrant my recommendations. Following explanations will aid in
interpreting letter:
One. The principal objective is to secure francs after the war.
Two. Another objective is to aid in giving needed support to the Bank of
France during the war and during the trying period of three after the war in
the purchase of foodstuffs and raw materials, particularly, those required for
rebuilding the devastated provinces.
Four. Theoretically it might be held that all francs after the war should be
purchased by cancellation of existing French obligation. Practically I do not
believe you can rely on this to a great extent. The Technical on demand
maturity of obligations held by us will not secure their payment. No court
exists to enforce payment and the French Finance Minister continually holds
that even with respect to obligations signed after the twenty-fourth September,
1917, we can not justly claim that they are actually payable on demand and that
they could not make such payment save in small part, which in any case they




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FOREIGN LOANS AND A U T H O R IT Y FOE M A K IN G SAM E.

will make from time to time when judged possible. Should the French insist
upon this point of view, the absolute necessity of our depositing francs during
the period of the withdrawal of troops might result in a gold demand upon
us and the arrangement contemplated is simply a substitution of other materials
through a friendly understanding between the two Governments instead of
leaving the matter as a subject of possible unfriendly controversy at the time
when our needs would be so imperious that we should be at a disadvantage.
The special credit suggested is in fact the purchase price of francs required by
us after the tear.
Fifth. In suggesting the proportion sixty forty and seventy-five twenty-five.
I was moved by consideration of the fact that some proportion seemed desirable
to be provisionally adopted in view of immediate excesses of our expenditures
in France over the French expenditures in the United States, and further,
because the particular ratio sixty-the had been strongly urged by Klotz and it
w as represented by Tardieu that if were adopted even temporarily as a recom­
T
mendation by me it would result in the immediate undertaking of negotiations
between the French and British treasuries for after the war credits to France.
The letter plainly shows, however, that this ratio is not considered important
by me as a part of my recommendation and that it is presumed to be subject to
change at any time 011 the motion of either finance minister concerned. While
it is true that the French Treasury, according to my views, should have under­
taken the British negotiations earlier and without waiting for my recommenda­
tions, yet, inasmuch as considerable feeling had been developed 011 this point, I
deem it worth while to expose myself to the embarrassment of having my recom­
mendations entirely renounced rather than to continue indefinitely a stale mate
situation in the negotiations between Paris and London which are now under
way. Incidentally it appears that for the next few months it is probable that
40 per cent of the dollar value of francs furnished to the American Government
represent the excess over French expenditures in the United States.
Six. The undertaking of the French Government to supply us with francs
may go far beyond the figure of a billion and a half dollars, as the arrangement
proposes that all United States expenditures in France growing out of the war
are thus to be covered. While the rapid progress in military events may dimin­
ish our expenditures in France as compared with first estimates, it remains
that in the opinion o f Stettinius a 'billion and a half dollars seems a conservative
rather than unconservative estimate of our expenditures here after the tear.
Seven. In paragraph II of the letter it is provided that the French Government
can not use the materials purchased in the United States for manufacture and
resale to third parties, it is clear that to express such a thing in precise terms
would be difficult without putting in the hands of the American Government the
power of parcelling French export trade. It will [not] serve, however, when
properly drafted as a protection for our industries.
Eight. No specific mention is made in the letter of furnishing francs for
American nationals, but their interests are protected by the provision that funds
made available to the French can not be used if the dollar is at less than gold
parity. It does not seem that we can legitimately ask for anything more than
(? ) of exchange after the war, since if we exclude the theory of obtaining a
billion and a half dollars' worth of francs by cancellation of existing obligations
the franc might at normal times go to a premium over the dollar. The burden
of maintaining the dollar at a gold parity is substantially thrown upon the
French if they are to enjoy the funds 111 question.
Nine. While I had myself at first urged that some formula relating to the con­
dition of the Bank of France should determine credits to be established in favor
of the French Government, I am convinced that any such formula will include
doubtful elements, which, however, lead to vexatious discussion between the
Governments, and perhaps eventually to a refusal on the part of the French Gov­
ernment after the war to accept our views.
Ten. Moreover, no consideration of the condition of the Bank of France alone
will include the satisfaction of our mutual requirements during the past war.
This overestimating of need is the basis of the arrangement suggested. The
limiting figure suggested is less by six billion francs than the amount submitted
by Tardieu as that which his Government would require for all purposes in the
United States during three years.
Eleven. If an indemnity should be obtained from Germany applicable to recon­
struction in France, the proportion of francs paid for by goods would be auto­
matically diminished and applied to cancellation of French debt. French minis­
ters assure me they expect to obtain indemnity from Germany for all damages




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

267

suffered by them. Estimate of this damage is being prepared and will be fur­
nished me in about 10 days. It will be much larger than the total credit men­
tioned in my letter.
Twelve. The value of French exports to the United States during the first
three years after the war will probably be less than the sum of the interest
charges on the debt of France to the United States, plus the debt to our citizens
maturing during the same period. In so far as any deficiency in respect to these
two items may be made up out of the limiting amount named in the letter, the
amount for raw materials will be correspondingly diminished, and therefore
probably not amount to more than $^00,000,000 a year. This is less than onelialf the amount that France has been drawing annually from the United States
since our entrance into the war.
elemental advises me that prewar exports from France to America may be
largely increased, but only on condition that our policy through importation of
wines and our import duties on other luxuries must be radically modified.
Thirteen. Munitions contracts usually provide that in case of peace the mate­
rials involved may be changed in character so as to be useful for other purposes
than those originally intended. As our loans for war purposes must cease with
the conclusion of peace, the values involved must be in some way provided for
now unless the Government placing the orders can find means independently to
pay for the material or make an absolute cancellation, which would probably
work a hardship upon our manufacturers. The arrangement proposed would
cover this case, and the amount involved at any one time on orders outstanding
would probably amount to more than $100,000,000.
Fourteen. Although, through oversight, no mention is made in the letter of the
condition that if the lijniting amount mentioned therein shall not be spent during
the three years the balance shall be applied to the canceling of French debt, yet
this understanding was perfectly distinct by the last conversation with Mr.
Tardieu and will not be questioned by him.
Fifteen. While it is uncertain that an arrangement of the kind indicated in
the letter to Mr. (Letcher t ) between the French and the British, yet it is not
improbable that, having now some basis of discussion, an arrangement may be
effected by which France will be able to obtain coal and other British supplies
of which she wT stand in great need for a considerable period after the war.
ill
I am informed by Tardieu, and it is a matter of public statement now in France,
that the principal mining fields in French territory will not be available inside
of two years and will not be completely eight or ten years.
Sixteen. It seems not improbable that French governmental finances will be
more embarrassed at the end of the war than during the war unless they con­
tinue to borrow from their public at extraordinary high rates. The disappear­
ance of war motive inspiring the purchase of national obligations will doubtless
make it extremely difficult, even if it were otherwise desirable, to obtain neces­
sary funds by borrowing. On the other hand their expenditures, including
interest on public debt, will amount approximately to 18,000,000,000 francs per
annum. This is more by nearly 10,000,000,000 francs than the present amount
obtained by taxation. No plan has been evolved to meet the situation, and the
rapid movement of the war does not give time for the evolution of a satisfactory
plan. Thoughtful men here believe that serious troubles are ahead of France in
this respect. Our continued demand for francs, while benefiting individuals, will
increase difficulties of the Treasury. Their situation will, of course, be eased by
the resale of materials purchased as francs advanced to us, but even with this
relief their future is extremely grave. It is not improbable that even the most
cold-blooded consideration by us as a creditor of France would lead to a helpful
attitude on our part, somewhat along the lines of the suggested arrangement,
which, however, must constantly be contemplated as directed toward the ac­
quirement by us of francs for removing our Army from France and the settle­
ment of unknown claims against us. While our interest in obtaining francs is
the dominant one involved in the suggestions made, it is also true that such
American sentiment as may favor the aiding of France
( N o t e . —Balance of letter not furnished committee.)
O c t o b e r 16, 1918.
I shall endeavor in the following pages to make the
slight modifications which we discussed in our last interview of the arrange­
ment shown in some earlier letters from me to you, to indicate one or two
points that have occurred to me since then, and in this letter to place in your
M y D e a r M r. T a r d i e u :




268

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

hands a substitute for all of the papers which have passed between us on the
subject, under discussion.
After due consideration it does not seem to me very important as to whether
the proportion of the dollar equivalent of francs advanced by your Government
to the United States should be divided for the purposes we have had in view"
on the basis of 60-40 or on the basis of 75-25.
If the Secretary of the Treasury is willing at all 1o make an arrangement
along the lines we have discussed, I should personally be quite content to see
the matter left in this shape, namely, that, beginning now with 60-40, the
arrangement should be permitted to run on that basis until either party desires
to make a change, with the understanding that it could then be brought to
some new7 ratio, say 75-25, until the limiting amount should be reached. I
make this comment in connection with the matter, and ask that the ratio 60-40
appearing below’ should be interpreted, so far as my view- is concerned, in the
light of wrhat has just been said.
As to limiting the amount of the special credit in view, I have written in
$1,500,000,000. This sum has been reached from my consideration of the mat­
ter by assuming that it is somewhat larger than (40 per cent of) the amount that
will be expended by the United States in France for war purposes after the
close of hostilities. If the dollar equivalent of advances made by your Govern­
ment to meet such expenditures on our part were entirely given over to meet
your needs in the United States during that period, and, say, some extension
of it up to three years, we would have substantially a state of affairs that
the subjoined plan would give, with this modification involved in the said
plan, namely, that a portion of the credit in question would be established for
the purpose of strengthening the Bank of France at an earlier date than the
cessation of hostilities.
Correspondingly, a portion of the dollars advanced
for francs after the cessation of hostilities would go directly to the prepayment
of your existing obligations.
I need scarcely repeat here wiiat is so w
rell understood between us, namely,
that in all these transactions it is supposed that some arrangement similar to
the one that might eventually be made between the United States Treasury
and the French Treasury will be made between the French and British
Treasuries.
As I have explained to you, a reference to the condition of the Bank of
France may be quite necessary from a technical as wT as a practical point of
ell
view, if the Secretary of the Treasury should enter into an arrangement of
the kind contemplated by us. This arrangement, in fact, contemplates the es­
tablishment of credits which could not be immediately useful to you, nor needed
by you, save for the purposes of the Bank of France, and I believe it must be
considered from that point of view. What I now hold as compared with my
earlier position is this— that it will be simpler to leave this whole matter of
determining the needs of the Bank of France to your Treasury rather than set
up a formula concerning which there might be some difference of view in an
endeavor to apply it to future situations.
It must be presumed that if, before the end of the war, the French Treasury
does not hold that it is important to strengthen the Bank of France by fresh
credits, then notice would be given to that effect to the Secretary of the Treasury,
and there wr
ould be a suspension of these special credits from funds advanced
before the end of the war. This w
’ould not defeat the ultimate obtainment
of whatever is accepted to be the limiting amount available for your pur­
chasers in the United States after the war.
Finally, I should add that, with respect to the cardinal points involved in the
arrangement outlined between us, it may be that the Secretary of the Treasury
will have entirely different views from mine. I have already wrritten him to
such effect that the expression of my own views, if found to be different from
his, will be in no way whatever an embarrassment in the determination for
which he alone is finally responsible.
The direct and simple treatment of the case arising benveen the two Gov­
ernments would normally suppose that your existing obligations would be
diminished as far as possible for them to be diminished and would not take
account wiiat shall be the debt in franc advances immediately to be made to
the United States—that is, whether before the war or after the war. Nor­
mally, I repeat, that any franc advances which your Government could make
to that of the United States, and in excess of its owrn present needs for carrying
on the war, would be applied to the reduction of the existing indebtedness of
your Government to that of the United States. In agreeing with you that a




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

269

modification of this strict rule might be found wise, I have done so after
weighing a great many different considerations affecting the problem. It is
not easy to explain in writing. Some days ago, however, I w
’rote at some length
to the Secretary of the Treasury on this subject, and shall further endeavor to
set forth the reasons that have led my own judgment to a conclusion which
might seem at first glance to depart from that which is usually sound and
prudent in the conduct of money matters.
With these statements I add now a general outline of arrangements which
have been discussed between us.
(1) Mutual undertaking on the part o f the French and American Treasuries
to supply each to the other the franc and dollar funds, respectively, required
for their war expenditures, including expenditures incident to the removal of
the American troops and their equipment from France after the war and other
expenditures of the American Government in France due to and growing out
of the war.
(2) Until peace shall have been established between either the United States
01* France and the German Empire there shall be an agreement that 60 per
cent, or as much thereof as may be necessary, of the dollar equivalent o f francs
advanced to the United States according to the provisions of paragraph (1)
shall be applicable to your current expenditures in the United States.
(3) During the period defined in paragraph (2) it should be agreed that 40
per cent of the said dollar equivalent, plus any portion of the said 60 per cent not
needed for your current expenditures in the United States, shall be represented
by a special credit in the United States Treasury, available to the French
treasury during the period of from one to three years after the war, to cover
purchases of materials in the United States other, than gold, all substantially
in accordance with the conditions relating to the recently established special
credit of $200,000,000, and set forth in the letter of the Secretary of the
Treasury dated August 16, 1918; the amount of the special credit herein men­
tioned, including the $200,000,000 special credit already established, shall be
limited to $1,500,000,000.
(4) When the United States shall have made peace with the German Empire,
and during the removal of its troops and their equipment from France, then
the total dollar equivalent of franc advances made to the United States during
such period shall be available to the French Government for purchases in the
United States and for the establishment of special credits as mentioned in
paragraph (3) until the sum of such special credits plus the sum o f the ex­
penditures made from dollar equivalents herein considered shall have equaled
$1,500,000,000. Thereafter the dollar equivalent of francs advanced to the
United States for the purposes herein mentioned shall be applied to the can­
cellation of your existing debt.
(5) I f before the making of peace between the United States and the German
Empire the sum of $1,500,000,000 shall have been reached by the establishment
o f special credits as provided for in paragraph (3), then thereafter the dollar
equivalent of the francs advanced to the United States by the French treasury
shall be applied to the cancellation of the existing debt to the United States.
(6) If subsequently agreed upon, instead of canceling the debt, a portion of
the amount that might be absolutely canceled may be represented by obligations
of one to the other, equal in amount, maturity, rate of interest, etc., so that
there would be an automatic cancellation of the maturity of these obligations
instead of at ftie moment when the funds would otherwise be available for
such purposes.
(7) That any such obligations given by one Government to the other shall
carry the provision that they are payable in the corresponding obligations of the
other party.
(8) That any sum remaining due from one Government to the other at the
end of the transactions herein referred to shall be represented by long-term
obligations.
(9) The rate of expenditure o f the special credit of $1,500,000,000 should
be fixed at some average monthly rate convenient to both parties, and, further,
it should be conditioned that it should not be used if at any time the dollar is
at a discount below its gold parity in the Newr York-Paris exchange quotations.
(10) It would also be necessary to assume that the dollar equivalent of franc
advances shall be established at rates o f exchange agreed upon from time to
time between the two treasuries.
(11) It is understood that the funds to be advanced to the United States by
France as at present and as contemplated by this memorandum are for the pur­



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FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

pose of meeting the expenditures of the United States Government in its war
against Germany, as indicated in paragraph (1 ), and that the dollar equiva­
lent of francs thus advanced and made available to the Government o f France
in the form of special credits, are to be expended for necessary purchases of
foodstuffs for the French population, material for her manufacturers, and ma­
terial for reconstructing the devastated provinces, and not for purchase and
resale to third parties either in raw or manufactured state.
(12)
In case a war indemnity be collected from Germany for purposes of
reconstruction o f French territory, the amount o f such indemnity thus col­
lected, when made available during the first three years after the end o f the
war, shall be deducted from the amount of the special credits herein presumed,
and the amount thus deducted shall be applied to the cancellation of your debt.
This form of undertaking leaves very much less fa* future determination
and interpretation than any other form which we have thus far discussed. It
approaches very nearly the arrangement which I think Mr. Klotz had in view
from the beginning.
In closing, I trust, my dear Tardieu, that you may have a very pleasant and
safe voyage to America.
Cordially, yours,
Cro sby,

Special United States Commissioner of Finance in Europe.
His Excellency M.

A

ndre

T a r d ie u ,

French High Commissioner.
P. S.—Time has been lacking to give proper turn to loose phrases and to
clear up some doubts. Before you have occasion to show this in Washington I
shall have cabled explanations.
M a r c h 8 , 1910.
: I learn that at a meeting of the financial drafting
committee appointed by the executive council o f 10 at the peace conference one
of the allied Governments having proposed as one of the financial questions
affecting peace the reapportionment and consolidation o f w
rar debts, this pro­
posal was strongly supported by the representatives o f your Government, Mr.
Klotz taking the position that this question must be discussed while the dele­
gates of all the powers are in Paris. While I understand that the drafting
committee did not report this question as one to be dealt with in the peace
treaty, I understand that it did report to the executive council as a question
which had been raised, “ interallied agreements as to the consolidation, reapportionment. and reassumption of war debts.”
I need not dwell on my surprise at the position taken by Mr. Klotz on behalf
of your Government, particularly in view of your letters of December 27, 1918,
and February 5, 1919, as to which I testified before the Ways and Means
Committee of the House of Representatives of the Congress at the reeent
hearing on the Victory Liberty bond bill.
I have, however, to state most emphatically that the Treasury, which, as you
are awrare, is clothed by the Congress with full authority to deal with foreign
loans which it has made, will not assent to any discussion at the peace con­
ference, or elsewhere, of any plan or arrangement for the release, consolidation,
or reapportionment of the obligations of foreign governments held by the United
States.
You will appreciate also that the Treasury can not contemplate continuance
of advances to any allied Government which is lending its support to any plan
winch would create uncertainty as to its due repayment o f advances made to
it by the United States Treasury.
I should be obliged if you would communicate to your Government the views
o f the Treasury as expressed above, and I shall be anxious to receive its reply.
I am, my dear Mr. de Billy,
Very truly, your,
M y D e a r M r.

de

B il l y

A lbert R a t h b o n e .
M r . E douard

de

B il l y ,

French Deputy High Commissioner,
Fifteenth and M Streets NW., Washington, D. C.




271

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.
F rench H

ig h

C o m m is s io n

in

the

U n it e d S t a t e s ,

Washington, D. C., March 18, 1919.
Hon. A l b e r t R a t h b o n e ,
Assistant Secretary of the Treasury, Washington, D. C.
My D e a r Mr. R a t h b o n e : By your letter of March 8 you informed me that
at a meeting of the financial drafting committee in Paris one of the allied Gov­
ernments having proposed, as one o f the questions affecting peace, the reappor­
tionment and consolidation of war debts, this proposal was strongly supported
by the representatives of the French Government.
You expressed your surprise at the position taken by Mr. Klotz, and you
requested me to communicate to my Government the views of the Treasury con­
cerning this question.
I have just received an answer from Mr. Klotz by cable, the gist of which
I give you below:
The proposition referred to was presented to the commission encharged by the
executive committee with the study of the financial questions, at a time when
the rOle of this commission was reduced to the establishment of a list of the
questions to be submitted to the executive committee, which had subsequently to
decide which questions should be retained and, in such case, to whom their
examination should be confided. The Italian delegation of the said commission
having proposed that the question of the division among the Allies of the total
of the war expenses be inscribed on this list and a discussion having begun on
this point, the French delegate asked that the Italian proposition be not dis­
carded a priori.
The purpose of the commission was purely and simply to make a list of the
questions which the representatives of the powers now assembled in Paris
might find it expedient to consider either in the general meetings or in meetings
limited to the Governments directly interested; the inscription of the Italian
proposition on this list would not in any way preclude the decision o f the
executive committee.
Furthermore, Mr. Klotz points out that with reference to the attitude of the
French officials toward the principle involved in this question, the French
Government never made any declaration favoring either the Italian proposi­
tion or any other similar proposition reproduced in the press or in the French
Chambers.
I am, my dear Mr. Rathbone,
Very truly, yours,
B il l y .
M a y 25, 1920.
I see in the papers that the Franco-British con­
ference at Hythe has provoked in the United States rather unfavorable com­
ments. Permit me to give you in a friendly and personal way certain infor­
mation which I hope will permit you to better appreciate the facts. We regret
very much that circumstances will not allow us at this time a direct collabora­
tion with you, so as not to have the great anxiety of avoiding false interpre­
tation and misunderstanding.
You know how the question of Germany’s reparation debt was officially
raised at San Remo. They considered the difficulty of reviving international
credit if the amount of this debt must remain indefinite until the month of
May, 1921. They decided to offer the Germans an opportunity, in a conference
at Spa, to make the proposals for fixing it provided for in the protocol attached
to the treaty. And finally they realized through simple conversations the
opportunity of according to Germany the means of liberating herself by a
certain number of annuities.
Of all that nothing was formal except the call to Spa. The British Govern­
ment was anxious not to approach this conference without having defined a
little further the intentions of the Allies, so as not to be taken unaware by
possible offers o f the parties at the conference, but, on the contrary, to have
prepared roughly in advance a common program by which to judge tliese offers.
Such was the object of the economic and financial interview at Hythe.
It could hardly be a question of determining figures there, but simply bring­
ing up general ideas.
First. In going deeper into the subject, everybody agreed that it was neces­
sary to determine the manner of settling the German debt, so as to obtain as
promptly as possible actual resources for reparations. This will tend to put
D e a r M r, N o r m a n D a v i s :




272

FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

Germany as soon as possible in a position to negotiate loans intended to
free her from her reparation debt and the political and other restrictions con­
nected therewith much quicker than would be the case by simple annuities.
Whatever the outside difficulties may be for the moment, the success of the
first German loan, even of moderate amount, appears as one of the most prac­
tical things for reestablishing international credit. It is self-evident that
such a loan should be intended to provide in a certain measure for the revitualing of Germany and the payment of her other debts, and at the same
time to begin the payment of her debt of reparation.
Second. In the second place, it has been shown by the conversations at Hythe
that in regard to the general improvement of the financial condition of Europe
it w’as not sufficient to take into consideration only the debt of reparation of
Germany. The international charges left by the war are represented on one
side by this debt of reparation and 011 the other side by the war debts of the
Allies. The one and the other weigh equally on the future and are a cause of
apprehension for financiers. The British and French premiers expressed
their opinion that there was occasion to size up the situation as a whole and to
seek a parallel method of settlement. They have ordered the experts of both
treasuries to continue their studies on those general bases.
No figure has been fixed upon. No definite procedure, such as the assign­
ment of claims against Germany in payment of the war debts, has been
adopted. All that the papers have printed in this respect is without foun­
dation.
I am of the impression that as a matter of fact the British and French
Governments have taken the trouble to meet together before the conference in
Brussels to clear up the financial situation as far as they are able so that
the adjustments following the war may operate without hindrance to the very
necessary recovery of commerce (trade). For that purpose it will necessarily
follow that Germany be given, without losing sight of the princ'ples of the
treaty, a settlement which will not discourage her from working and which,
similarly, Great Britain will accord to her debtors (among whom we are),
just as V e will allow our debtors (Italy, Rumania, Serbia, etc.) delays and
conditions of interest—perhaps even annulment of debts such as will enable
them to pull through. The only manner in which to arrange all that with
desirable promptness and other than by acts of charity which are very unfavor­
able to the credit of those who accept them is to make a regulation in common
where each will put a little bit of his own.
As this does not only concern France and Great Britain, they will try to
bring to the same points of view the other allied Governments.
I understand very wy the difficulties which at present America experiences
ell
in taking part in such agreements. Is it not possible in some manner? At
any rate, I will be happy if you will not disapprove efforts which are made
in "a spirit of moderation and good faith to put our affairs in shape, and you
would infinitely oblige me if you could in an entirely personal manner let me
know wiiat you think of it. You know how much I appreciate the support of
your friendship and your counsel.
Receive, dear Mr. Norman Davis, the expression of my profound sentiments
and devotions.
C e l ie r .

J uly 28, 1020.
Monsieur C e l ie r ,
Care of the Ministry of Finance, Paris, France.
M y D e a r M o n s i e u r C e l i e r : Although my delay in replying to your letters of
May 25 and June 24 would not so indicate, I was delighted to hear from you.
Up to the present my new’ duties have left no time for anything except most
urgent matters.
You, of course, realize that articles in the newspapers 011 various questions
do not as a rule represent the official position or view’s of this Government. It
is true there were many articles in the papers relating to the alleged decisions
of the tvvo premiers at: Hythe. As a matter of fact, none of the accounts of what
took place there was sufficiently clear and definite to necessitate or justify form­
ing an opinion.
I am glad to note, however, that the necessity of a constructive settlement of
German reparations is now more fully realized.
I may say, howrever, that the vague reports to the effect that it had been
decided that the various intergovernmental debts and the settlement thereof




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

273

would be made to depend directly upon the settlement of collection from German
reparation appeared to have a rather adverse reaction here.
It is felt here that the obligation on the part of debtor countries to liquidate
war debts is a matter entirely independent o f the reparation problem. The
moneys were loaned before the question of reparations from Germany could be
considered. It is, of course, realized that the ability to pay these war debts in
full will in some cases depend upon the economic recovery of the debtor country,
and that the amount received by way of reparation will be one of the elements
in such recovery. It is hard for the people o f this country, however, to see the
justification for any plan of assignment of German reparation obligations in
payment of war debts, or the using of reparation payments as a controlling
index of payments to be required on war loans, when these loans and reparation
obligations have no connection and receipts from reparations have at best only
an indirect and partial relation to the ability o f the debtor nations to pay.
It would be impossible for me to express a personal opinion on any contemplated
settlement of the reparations problem without more specific information than
it contained in your letter. If the Secretary of the Treasury were inclined to
tie up the reparation question with intergovernmental indebtedness, which I
believe is not the case, it would be impossible for him to do so without congres­
sional approval, which, in my judgment, is out of the question. Under existing
circumstances I fear that any agitation along this line will simply be mis­
leading and make it more difficult eventually for this country to participate and
cooperate with other countries in the adjustment of existing economic problems.
As to the distinct problem of reparations, I may frankly say that my own
personal view is that if the German indemnity is reduced and fixed at an
amount which Germany may reasonably be expected to pay, and which the
investors of the world will think that Germany can pay, the results to France
will be greater and her ability to recuperate and liquidate all o f her obligations
increased, much more surely than would be the case if the question is left in
an indefinite state in an endeavor to collect from Germany the full amount of
her debt.
With regard to the liquidation of the United States loan to France, I am no
longer at the Treasury and can not speak for the Sercetary of the Treasury.
As you are aware, he expressed a willingness to negotiate with the allied Gov­
ernments for the funding of their demand obligations held by this Government
into long-time obligations, and as a part of and in connection with such funding
arrangements to provide for the postponement of interest accruing during three
years. The Secretary of the Treasury, however, is empowered to make this
concession as to postponement of interest only as part of a comprehensive and
final funding agreement, which must be consummated if the Allies desire to
take advantage of such a concession. In case such an arrangement is arrived
at, the allied powers would have about two more years before interest payments
would begin, during which time at least their indebtedness to the United States
would not be any burden on them.
I do not believe that the United States ivill ever be an harassing creditor, but
in substance I may say it appears to me that the ultimate American opinion
will be that in time the Allies will be able to pay what they owe to the United
States and for the sake of their financial credit will desire fully to fulfill their
obligations; but that if they do not recuperate as expected and it is later found
necessary to make some adjustment, then will be the time to consider such a
question solely on its merits upon the basis of the general economic and
financial situation.
I have more fully explained my personal views in a conversation to Ambas­
sador Jusserand, who has just gone to France, and have suggested to him that
he have a talk with you. I regret that I can not have an opportunity myself
to see you and renew our cordial and satisfactory conversations.
With very best wishes and regards, I am, as ever,
Cordnilly, yours,
N o r m a n H. D a v i s .
T reasury D epartm en t,

Washington, December 15, 1920.
Memorandum for files:
Pursuant to a request which I made of Mr. Casenave over the telephone about
10 days ago, Mr. de Sieyes came to see me to-day. It is my understanding that
Mr. Casenave is in Canada temporarily.
S. Doc. SO 67-2------38
,



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FOREIGN LOANS ANI) AUTHORITY FOR MAKING SAME.
FRENCH SETTLEMENT.

As to this Mr. de Sieyes said that Mr. Dietrich had been working for some
time on the figures which are now ready. I do not understand just what
figures these are, as substantially all the figures had been agreed upon by the
liquidation commission. He stated that prior to the payment of the AngloFrench loan the French Government had been most anxious to complete the set­
tlement in the hope that there would result funds available for use upon the
loan. Mr. de Sieyes and Mr. Casenave, however, came to the conclusion that
no available funds would result from the settlement and impressed this upon
their Government. Consequently the French Government, although desirous
of disposing of the matter, has lost the incentive for haste. Apparently delay
has also resulted from the reluctance of Mr. Casenave to take the responsibility
for the settlement wiiich he thinks may in any case arouse criticism in
France. He believes that in making the settlement he would be assuming re­
sponsibility not only for what he has done since he has been in charge, but
for whatever was done in the past by the French representatives, including
Tardieu, both in Paris and here. I told Mr. de Sieyes that it is highly desirable
that the settlement be made during the present administration, in view of the
practical certainty that after its close there will not be anybody in the Treasury
familiar with the matter. I pointed out also that anybody who is not familiar
with it would, in all probability, as a matter of self protection, consider him­
self bound to deal with the French Government at arm’s length and would be
unable to accept a result as advantageous to France as might be agreed upon
by somebody who had been familiar with the financial arrangements between
the two Governments during the past two and one-half years. I stated, further,
that the great fall in French exchange since the end of November, 1919, when
Mr. Rathbone discussed the settlement with Mr. Bloch, has greatly altered the
situation. The fact that exchange for many months has been worse than 14
francs to the dollar, and that there is no prospect of any great appreciation o f
francs for some time to come, has entirely changed the plane upon which figures
can be discussed in arriving at the rate or rates of exchange to be applied in
the settlement, and has imposed a heavy responsibility on the representative of
our Treasury who undertakes to apply a rate other than the new current rate.
Mr. de Sieves replied that he appreciated the force of these circumstances; that
he was sure a settlement could be effected, and that he and Mr. Casenave would
press the matter forthwith to the end that it may be disposed of before the 4th
of March.
EXCHANGE OF OBLIGATIONS.

I stated to Mr. de Sieyes that a most serious situation is arising by reason
of the facts that the exchange by his Government of long-time obligations for
the demand obligations now held by us has not been made, that our only
authority to defer the interest is in connection with the exchange of obligations,
and that a political discussion of the whole matter may be precipitated at any
moment. I called to his attention the present depressed business conditions
in this country, the great desire of our people for relief from taxation, and the
consequent heavy pressure upon Congress to relieve the national finances. I
pointed out that in these circumstances there is little likelihood that the new
administration, not having had a part in the making of the loans and being
under both partisan and general pressure to ameliorate our finances, would be
disposed to grant terms as favorable as those which have been proposed. I
also stated that, in the opinion of the Treasury, it would be greatly to the advan­
tage of each of the foreign Governments to have completed arrangements for
the exchange of obligations. This would insure the deferring of interest for
the whole of the tliree-year period and would put off the maturity of the prin­
cipal for a substantial period of time. It would also indicate that the Govern­
ment concerned had done all it could in present circumstances to deal with its
indebtedness. If at the end of the period of deferment conditions have im­
proved, the French Government might well be eager to begin paying annual
interest.
If, on the other hand, recovery had been disappointing and the French Gov­
ernment; did not consider itself able to pay interest, it would be in a much
better position lo discuss with this Government some further arrangements
than ii will be in if it merely lets matters drift. Public opinion and opinion
in Congress are opposed to laying further burdens on our people in connection




FOREIGN LOANS AND AUTHORITY FOR MAKING SAME.

275

with European matters. Mr. de Sieves said his Government views the exchange
of foreign obligations as an international matter, and that it is unlikely that
any progress can be made for the present. I replied that it had always been
the Treasury’s view that the loans of United States to each Government con­
cerned only that Government and should be dealt with separately. Mr. de
Sieyes replied that unfortunately the* meeting of a loan from another Gov­
ernment is not considered as urgent as the payment of a loan privately made,
such as the Anglo-French. I called to his attention, however, the public feel­
ing in France toward the Russians by reason o f their failure to deal with
their indebtedness to France. Mr. de Sieves admitted that the bitterness
in France toward Russia on this account is very great and said that it would
be most unfortunate if corresponding feeling should arise in this country. 1
stated that the best means of preventing such a feeling would be for the for­
eign Governments to proceed with the arrangements for the exchange of
obligations, as they would in that way show that they were prepared to do
all that could be done in the circumstances. Mr. de Sieyes replied that he
was inclined to agree with this view but considered that it was a much more
difficult matter than the winding up of the liquidation commission settlement.
REPAYMENT OF $17,000,000 ON ACCOUNT OF BELGIAN RELIEF.

I suggested that, as a part of clearing up the foreign-loan business, it is
desirable that this sum be applied on French obligations held by the United
States in accordance with my earlier letters to Mr. Casenave. Mr. de Sieyes
said that, inasmuch as the French Government now realizes that the fund can
not be made available to it in cash, he thinks all that is holding the matter
up is the belief of the French Government that assent to the application of
this sura on its obligations would be an assent to the accounts of the C. R. B.
The French Government is not in the position of withholding its assent to
those accounts, but desires further information regarding them, particularly
on the question whether part of the balance was not derived from other cur­
rencies than dollars. I replied that this Government can not go into the
matter of the account between the O. R. B. and the French Government, and
that, in view of the circumstances in which our loans for relief were made to
France and the circumstances in which the fund was paid into the Treasury
by Mr. Hoover, this Government is bound to assume that it is entitled to the
funds. Mr. de Sieyes seemed to think this is a matter that can be disposed
of before the end of the present administration.
PURCHASES IN THIS MARKET.

Mr. de Sieyes said his Government, through its own purchasing agent, is
buying wT
heat in the United States. The total amount expected to be pur­
chased from November, 1920, to April, 1921, is $25,000,000. The French Gov­
ernment is no longer purchasing copper, cotton, coal, or any commodity in the
United States other than wheat.
FRENCH FINANCES IN THE UNITED STATES.

Mr. de Sieyes told me that in the next 12 months the French Government
must find about $225,000,000. The requirements to be covered a re:
City of Paris loan----------------------------------------------------------------------$50,000, 000
Amount which French Government undertook to purchase from
Three Cities Syndicate (the syndicate was able to dispose of only
$25,000,000 out of $45,000,000)_________________________________ 20, 000, 000
W h ea t_________________________________________________________ _ 25, 000,000
Interest on obligations held by the United States on account of the
sale to France of surplus property_____________________________ 20,000,000
Maturing Treasury bills-------------------------------------------------------------- 60,000, 000
Total______________________________________________________ 175, 000, 000
In addition, there is the service of the $100,000,000 loan, and there are also
other matters which Mr. de Sieyes did not specify. He stated that, in the
opinion of his Government, the city o f Paris should finance its own maturity
of $50,000,000. The French Government hopes to float another loan next spring
for about $100,000,000. The balance of its requirements i