over her oversea possessions"; that benefits accruing under said Treaty to the United States were confirmed by the Treaty between the United States and Germany of 1921; that the British Empire, France, Italy and Japan had agreed to confer on His Majesty the Emperor of Japan a Mandate over "all the former German islands, situated in the Pacific Ocean and lying north of the Equator." The seven articles of such agreement expressing the terms of such mandate and the rights and obligations of the Mandatory are also recited.

The Treaty adds:

Considering that the United States did not ratify the Treaty of Versailles and did not participate in the agreement respecting the aforesaid mandate; that the United States and Japan desiring to reach a definite understanding with regard to the rights of the two Governments and their respective nationals in the aforesaid islands, and in particular the Island of Yap, have resolved to conclude a convention for that purpose.

By Article I the United States consents to the administration of the said islands by Japan pursuant to the mandate but subject to certain conventions. By Article II the United States and its nationals are to receive all the benefits of Japan's engagements in Articles 3, 4 and 5 of the Mandate (which require suppression of the slave trade and forced labor, control of traffic in arms and ammunition, and prohibit supplying intoxicating liquor to the natives, limit military training of the natives except for internal police and local defense, forbid establishing military or naval bases or erecting fortifications in these islands, require the mandatory to ensure to the territory freedom of conscience and the free exercise of all forms of worship and that missionaries, nationals of any state member of the League of Nations, shall be allowed to enter into, travel and reside in the territory for the purpose of prosecuting their calling).

Japan further directly in this treaty insures in the islands "complete freedom of conscience and the free exercise of all forms of worship which are consonant with public order and morality," allows American missionaries free right to enter the islands, to travel and reside there, to acquire and possess property, to erect religious buildings and open schools, Japan, however, retaining such control as may be necessary for public order. It may be noted that no express right to transmit property on the part of our nationals in these islands by devise, descent or like means is guaranteed, and like omission appears in the article as to the Island of Yap. The treaty, however, further provides that vested American property rights are to be respected. Existing treaties between the two powers are applied to these islands. Japan agrees to furnish to the United States a duplicate of her annual report to the Council of the League of Nations and agrees that no modification of the mandate shall affect these conventions, unless expressly assented to by the United States.

As to the Island of Yap, the United States and its nationals are given free access on a footing of entire equality with those of Japan or any other nation in all matters relating to landing or operating the existing Yap-Guam cable or any cable laid or operated by the United States or its nationals connecting with said island. Like rights are extended to radio-telegraphic communication, provided that while Japan maintains thereon an adequate station and cooperates effectively with the cables and other radio stations on ship or shore, without discrimination or preference, the right of the United States or its nationals to establish such station is suspended.

Further, in connection with the above cable and radio rights, nationals of the United States have an unrestricted right to reside in the island and to acquire and hold, on an equality with Japanese nationals or those of any nation, all kinds of property, real or personal. It is observed again that no specific provision for the right to transmit by testament or descent such property interests is expressed. The question suggests itself: What becomes of a house or lot or storehouse on this island on the death of its American owner? Does the right to take and hold, on a parity with citizens of Japan or of any nation, carry the right to transmit on death to heirs, devisees or legatees? Such rights are in the main statutory, generally held not natural rights. It would seem more satisfactory if they had been expressly recognized and assured.

The treaty provides that nationals of the United States can not be required to obtain permits or licenses to land and operate cables or radiotelegraphic service or to enjoy any of the rights stipulated: that "no censorship or supervision shall be exercised over cable or radio messages or operations and the nationals of the United States shall have complete freedom of entry and exit for their persons and property; that no taxes or port, harbor or landing charges shall be levied as to operation of cables or radio stations or as to persons, property or vessels. No discriminating police regulations shall be enforced. Japan agrees to exercise its power of expropriation to get for the United States or its nationals property and facilities for electrical communication, but property of the United States or its nationals is expressly exempt from expropriation.

Earnest efforts were made in the Senate to carry an amendment or reservation making the United States itself the exclusive judge as to whether the government of Japan has maintained radio-telegraphic communication on the Island of Yap as required in the treaty. Senators Underwood and Lodge maintained that to be the true and plain meaning of the treaty proviso and opposed such modification. The attempt was defeated by a vote of 54 to 27. In this discussion, Senator Pittman, who proposed the modification, said: "I do not think for a moment we had any claim on Japan to make concessions in the matter when we refused to take our seat at the table in Paris after we had refused to ratify the treaty of Versailles." This view contravened that expressed by Mr. Secretary Colby for the administration of

President Wilson in his protest of February 22, 1921 to the Council of the League of Nations. That protest insisted that the approval of the United States was essential to the validity of any determination respecting mandates over the territory ceded by Germany. It equally contravenes the opinion of Mr. Secretary Hughes, speaking for the present administration, on April 5, 1921, in reply to the Japanese note. The views of Senator Pittman seem to have met the approval of only a small minority of his fellow Senators.

Public interest has been so centered upon the Four-Power Treaty that this important and gratifying agreement with Japan has commanded but little general attention. It has been mentioned almost exclusively as adumbrating the vote of the Senate by which the Four-Power Treaty might be expected to be ratified. It is, however, it is submitted, a remarkable and complete adjustment of a very troublesome and irritating question arising between ourselves and our imperial vis-a-vis on the other side of the Pacific. By skilful draftsmanship, the agreement imposes no humiliating repudiations upon Japan, but "desiring to reach a definite understanding with regard to the rights of the two governments and their respective nationals in the aforesaid islands," the plenipotentiaries proceeded to effect what was desired. Mr. Hughes is to be congratulated in that the treaty accords all that he or his predecessor claimed for this country, or its nationals, in the premises.

As Mr. Albert W. Fox, in the Washington Post of March 2, 1922, the day after the final action by the Senate, said: "The ratification of the Yap treaty is important in this sense, that it ends a controversy with Japan by obtaining for the United States and its nationals such rights, relating to cables and radio communication, as have been contended for by the preceding and present administration." It is difficult to see how any Secretary for Foreign Affairs could do more or could do better.

The attitude of the Island Empire and its honored Ambassador was most admirable, the achievement for our own country complete and satisfactory. Mr. Hughes has shown with what promptness and adequacy international disputes can be solved when they are placed in the hands of an able, resourceful, straightforward and courageous lawyer, eager for the rights of his own country, but entirely just to those of others. He is entitled to, and enjoys, the gratitude of all who desire to see the good relations of mankind assured by wise and firm negotiations consummated by just agreements tainted by no enduring bitterness and endangered by the exaction of no humiliations. CHARLES NOBLE GREGORY.

THE DEPARTMENT OF STATE ON THE AMERICAN FLOTATION OF FOREIGN

PUBLIC LOANS

The Department of State, on March 3, 1922, made announcement of its policy of requesting of American bankers information concerning the terms of prospective foreign public loans to be negotiated and underwritten by them.

As the desirability of governmental cooperation had not appeared to be well understood in banking and investment circles, the official explanation was illuminating and reassuring.

It was declared that the flotation of foreign bond issues in the American market was assuming an increasing importance, and that "on account of the bearing of such operations upon the proper conduct of affairs" it was hoped that American concerns contemplating the making of foreign loans would inform the Department of State in due time of the essential facts and of subsequent developments of importance. Responsible American bankers would, it was said, be competent to determine what information should be furnished and when it should be supplied. It was announced that American concerns wishing to ascertain the attitude of the Department regarding any projected loan should request of the Secretary of State in writing, an expression of the Department's views. Assurance was given that the Department would then take the matter under consideration, and, in the light of the information in its possession, endeavor to say whether objection to the loan in question did or did not exist. The point was, however, emphasized that even though the Department might have been informed, silence on its part would not indicate either acquiescence or objection.

It was added that the Department could not, of course, require American bankers to consult it; and that it would not undertake to pass upon the merits of foreign loans as business propositions, nor assume any responsibility whatever in connection with loan transactions. Offers for such loans should not, therefore, it was declared, state or imply that they were contingent upon an expression of opinion regarding them; nor should any prospectus or contract refer to the attitude of the Government. Finally, the belief was expressed that "in view of the possible national interests involved," the Department should have the opportunity of saying to the underwriters concerned, should it appear desirable to do so, that there was or was not objection to any particular issue.

The reasonableness of the general policy thus announced ought to be apparent. It is due to the international and essentially public character of agreements providing for the flotation of foreign public bonds in America, and to the direct effect of such transactions upon both the economic and political relations of the United States with the governmental borrowers.

In giving fresh heed to such considerations the Department of State is following, somewhat conservatively, the avowed policies of numerous foreign States whose bankers have had funds available for foreign investment. It is understood that the governments, for example, of Great Britain, France, Germany and Japan, have always worked in cooperation with their respective bankers, influencing both the direction and nature of foreign loans, and oftentimes the terms of arrangements and the character of security. With respect to loans to certain States, particularly to those of neighboring countries under the wardship of the United States for purposes of financial

rehabilitation or otherwise, such as Cuba, Haiti, Nicaragua and the Dominican Republic, the Department of State has long exercised a large and perhaps decisive influence of incalculable benefit to American lenders. In at least one instance, a bond agreement has made definite reference of the absence of objection to the arrangement on the part of the Secretary of State to whom the document was submitted. On another occasion, the prospective American lender has conditioned its flotation of bonds upon the acceptance by the borrower of the terms of a particular convention with the United States establishing the basis of protection.2 The China Consortium Agreement of October 15, 1920, and the relation of the Department of State thereto, during the régimes of opposing political administrations, have revealed the closeness of the working arrangement that may under certain conditions be effected between the United States and American bankers.

The full significance of American governmental cooperation deserves consideration. To the lender, the known approval of its government is of distinct value because of the removal of possible obstacles which might otherwise supervene should the lender have cause to request diplomatic interposition, and because also of the salutary effect upon the mind of the borrower of entire harmony between the lender and its government. The favorable effect of that harmony upon the mind also of the American investor may be considerable. For that reason it is believed that when such a relationship does in fact exist, the lender may well be permitted to make formal announcement of it, and perhaps beyond the limitations contemplated by the Department of State in its cautious declaration of policy.

Real cooperation between the Department of State and American lenders ought to be productive of something more. It should, for example, serve to aid the lender in ascertaining the nature and extent of requirements essential to the validity of the transaction according to the local laws and institutions of the borrower, and to give warning when those requirements are not met. It should place within the reach of the banker fresh counsel as to the desirability or need of security, and as to the kind of security to be demanded of a particular applicant, as well as the means to be employed for its utilization. Necessary safeguards should be suggested and needless impediments discouraged. Thus the Government might well bring home to the attention of prospective lenders the insufficiency of pledges or hypothecations of assets not surrendered to the control of the lender or of an agency in its behalf. It might emphasize the impotence of a lender as against a foreign public

1 See Art. X of Bond and Fiscal Trust Agency Agreement between the Republic of Nicaragua and certain bankers, Oct. 5, 1920.

'Such was the attitude of certain American bankers in 1911, in negotiations with the Republic of Honduras. See in this connection U. S. Foreign Relations, 1912, p. 587.

For the text of the agreement, see this JOURNAL (Jan. 1922), Vol. XVI, Official Documents, p. 4. See also Geo. A. Finch, "American Diplomacy and the Financing of China," id., XVI, 25.