ments to private individuals. In order to discharge the private claims the whole body of payments must be made. However, in seeking to reach agreement with the French Government on this matter, the American Government is ready to consider the French suggestion in any practicable form that enables the whole body of claims to be discharged. For example, a satisfactory solution would be for the German Government, instead of transmitting any funds to the American Treasury for the Special Deposit Account, to merely make payment in reichsmarks to the Reichsbank (for the credit of the Special Deposit Account) for the discharging of the claims of German nationals. If you find that there is a serious desire on the part of the French Government to work out a solution, you might make the above suggestion. CASTLE 462.11W892/1952: Telegram The Ambassador in France (Edge) to the Acting Secretary of State PARIS, September 2, 1931-8 p. m. [Received 8: 11 p. m.] 558. I saw the Prime Minister this afternoon. Flandin was not present having already conferred with him. Monsieur Laval elaborated the French proposal contained in my 555 of September 2, noon,16 as follows: "Germany shall request the authorization of France as one of the signatories of the Hague agreements to deposit the payments, made in accordance with the agreement between the United States and Germany, in the Bank of International Settlements to be held there for redistribution in accordance with the indications of the United States Treasury after 2 years in 10 equal installments in accordance with the arrangement contained in the Franco-American agreement of July 6." The Prime Minister assumed that this would not necessarily affect the payments by the United States to Germany and added that it would merely involve the question of the interpretation of the American law and that it would accord with the obligations of Germany in the Hague agreements and the subsequent exchange of notes. The Prime Minister insisted this would afford the American creditors absolute security since the sums would be on deposit in the Bank of International Settlements and would merely delay their distribution on the same basis as other creditors were treated under the Hoover plan. "Not printed. 17 I told him that I feared it would be impossible to work out such a plan in view of the provisions of the American law and I emphasized the points contained in your 429, September 1, 4 p. m.1 I even hinted that perhaps it would be possible for France in view of the mutual efforts to aid Germany merely to overlook the question and allow the payments to continue. To this he strenuously objected saying that it was a matter of principle for France with respect to the inviolability of the German commitments at The Hague and only a matter of arrangement and interpretation of law to America. Flandin leaves for Geneva tonight and in view of the position of the Council and Laval['s] unqualified agreement with his Finance Minister I do not believe further representations beyond clarification of details if the French proposal is at all practical would change their position. Notwithstanding every assurance that the subject matter of our conversations with French officials would not be publicly divulged I have been informed during the course of the preparation of this telegram by representatives of the press that they have received from French sources the subject [of] our discussion upon which I of course refused to comment. EDGE 462.11W892/1953: Telegram The Ambassador in France (Edge) to the Acting Secretary of State PARIS, September 4, 1931-11 a. m. [Received September 4-9: 18 a. m.] 562. Your 431, September 3, 6 p. m." I have this morning sent by hand to Prime Minister Laval the following note: "After our conversation Wednesday afternoon I submitted to my Government the suggestion which you and Monsieur Flandin had worked out with respect to the arrangement for the continuation of the payments under the German-American Mixed Claims awards due private citizens of both countries. You will recall that during our talk, without any effort to pass upon the proposal from a legal standpoint, it was my opinion that such a plan would not prove practical. This morning I have received word from my Government that your suggestion is unsatisfactory to the American Treasury. I am sure you share with me the feeling that unpleasant repercussions of this situation should be avoided and I am convinced that France does not wish to remain the only country in the world that fails to consider this transaction outside the year's debt suspension or to prevent German economy from receiving the much needed balance of these payments." EDGE 17 Not printed. 462.11W892/1953: Telegram The Secretary of State to the Ambassador in France (Edge) WASHINGTON, September 9, 1931-6 p. m. 440. You will notify the French Government that the American Government does not agree to the French position in respect of payments on account of mixed claims. In order to find a solution to this troublesome problem and to permit the private claimants to receive the sums due them the Government of the United States now intends to adopt the following policy: The Treasury has decided that if the German Government gives notice of postponement of payment to this country in accordance with Article 5 of the Agreement between the American and German Governments of June 23, 1930, the requirement of 90 days' advance notice will be waived. Germany would, under these circumstances, make no payment on September 30. But in virtue of the German notice of postponement, no default would arise. Therefore there would be no reason why payments could not be made in regular course to German claimants out of the Special Deposit Account. This contemplated procedure you will please communicate to the French Government without, however, seeking to elicit comment from them. STIMSON 462.00R296/5114 The Secretary of the Treasury (Mellon) to the Secretary of State WASHINGTON, September 23, 1931. MY DEAR MR. SECRETARY: I have Assistant Secretary White's letter (EA 462.00R296/5095) of September 15, 1931,19 enclosing two letters and copies of translations thereof, dated September 11, 1931, from the German Ambassador,19 giving notice to the United States that the payments due September 30, 1931, and March 31, 1932, on account of the awards of the Mixed Claims Commission, United States and Germany, and on account of the costs of the American Army of Occupation, as specified under paragraphs 1 (a) and (b), respectively, of the debt funding agreement between the Governments of the German Reich and the United States, dated June 23, 1930, will be postponed in accordance with paragraph 5 of that agreement. I shall appreciate it if you will be good enough to advise the German Ambassador that the Treasury of the United States takes due notice of his Government's action in this connection, and that the ninety days' advance notice required under the agreement is hereby 10 Not printed. waived with respect to the payment due September 30, 1931. You may also advise the Ambassador that the Treasury will recommend to the Congress that authority be granted to the Secretary of the Treasury to postpone the payments due during the year July 1, 1931 to June 30, 1932, on account of Army costs, and to execute an agreement for their repayment over a period of ten years beginning July 1, 1933. Very truly yours, A. W. MELLON NEGOTIATIONS FOR THE SALE OF SURPLUS AMERICAN WHEAT AND COTTON TO STRENGTHEN THE FINANCIAL POSITION OF GERMANY 811.61311 Germany/1 : Telegram The Acting Secretary of State to the Ambassador in Germany (Sackett) [Paraphrase] WASHINGTON, July 16, 1931—1 p. m. 123. 1. What follows is solely for your own consideration and your advice to the Department. No hint of it is to be given to the German Government, at the present time. Our intention is to inform you of a possible plan of ours whereby about $120,000,000 could be made available to the German people. At the same time this would assist the improvement of social conditions there, demonstrate our confidence in the future of Germany, and contribute to the restoration of confidence within Germany. 2. You are aware that the farm cooperatives are financed by the Farm Board. Our plan is to sell Germany about 1,100,000 bales of cotton and 70,000,000 bushels of wheat from the stocks of the cooperatives. 3. These supplies of wheat and cotton are for consumption exclusively within Germany. Payment will be made in dollar obligations of the German Government or some acceptable German institution. A period of 12 to 3 years may be granted for full payment. Payments in reduction of the obligations may be derived, under some arrangement, from a portion of the realizations upon reexported cotton goods. 4. Through our observers we have learned that, owing to import restrictions, the amount of wheat consumed by Germany is approximately 70,000,000 bushels under that of normal economic times. That is, much more wheat would be imported by Germany under normal conditions than at the current rate. According to our information the bread is of an inferior quality. This circumstance has a depressing effect upon the people. If the quality of the bread were raised to the normal level, the entire social situation would be sensibly strengthened. 5. Considerable amounts of immediate cash would be secured for the German Government by the purchase of wheat on such credit, by re-selling it plus the import duty to the population. 6. By selling cotton to the spinning industries, the German Government would also secure considerable cash for the Treasury. If the manufacturers were given time for payment, they, the manufacturers, would be able to grant their customers easier terms. 7. If any such proposal were feasible, the price would be the difficulty confronting us. Ten cents is approximately the current F. O. B. price of these more than average grades of cotton for which the cooperatives have paid about 18 cents a pound. The F. O. B. price of wheat is about $.55; and the cost approximately $1.10 per bushel. Temporary difficulties in Central Europe are partly responsible for this great decline in the current price which in itself is temporary. For our cooperatives to sell at the present price would be ruinous. Because present price levels throughout the world are rapidly decreasing the acreage the fall in world production of export wheat this year by 300,000,000 bushels and the shrinkage in cotton acreage by 10 to 20 percent-the prices of wheat and cotton are bound ultimately to rise. From this point of view, the cooperatives can hold until economic recovery. 8. It will be realized that sale upon such security is not very attractive now; furthermore, that there is a considerable element of risk involved. Moreover, it will be seen, too, that on time payments of commodities, commercial transactions with Germany now bring from 8 to 9 percent interest annually. Our contribution to the situation could be to make it possible for the cooperatives to set a low interest rate at a minimum of 42 percent per annum. This we could accomplish by making use of our governmental agencies. These price difficulties could be approached by devising a formula which took into consideration that current prices do not represent fair values nor values apt to maintain in the future. Such a formula might provide: (1) that the delivery of the commodities would be made in equal monthly amounts for a period of 1 year, or more rapidly if the buyer so desired; (2) that, for the year of delivery, the average of F. O. B. prices in the open market should be determined; that this be established at the end of the year; (3) that the original cost price of these commodities, plus carrying charges, should also be fixed; (4) that the original cost price less half the difference between these two prices should be paid by the buyer. This amount ought not to exceed some figure per unit to be agreed upon. 9. By declaring a fixed price now derangement of commodity markets would be avoided by such a formula. Both the purchaser and |
