837.51/884: Telegram
The Representative on Special Mission in Cuba (Crowder) to the Secretary of State
[Received 10:45 p.m.]
76. Reference to your urgent number 80, November 9, and letter of Mr. White November 2. Loan situation may be briefly summarized as follows: Mr. Morrow and associates representing Morgan and Company here on special invitation of President Zayas to advise the Government as to the general terms and conditions upon which the proposed Cuban loan should be offered under the discretionary powers given the President by the loan statute. President Zayas during the past week has been quite ill, in fact unable to see even the members of his Cabinet. Mr. Morrow however has discussed the whole problem in several interviews with me and Governor Harding and has had several conferences with Secretary of the Treasury. In his first interview with me last Monday he stated that despite the fact [Page 1051] that the contract of October 7th, 1921, for the $5,000,000 temporary loan provided that such loan was made as part of a larger loan to be negotiated with his firm after the budget was balanced he was willing to waive any of the obligations the Cuban Government expressed or implied in that contract. He further advised me that under the anomalous situation in Cuba at the present time due to the radical Cabinet changes made in June it is his opinion that the President of Cuba, subject to the approval of the United States Government, should determine all the conditions of the loan, including rate of interest, sinking fund, security etc., and that the loan should then be offered for open competitive bidding of the type followed by New York and other municipalities in the United States. The Secretary of the Treasury is considering this advice but has not yet had an opportunity to see the President. Mr. Morrow has emphasized strongly to me and to the Secretary of the Treasury of Cuba that inasmuch as $44,000,000 of the proposed $50,000,000 loan is in reality to take care of deficits and losses incurred during the Menocal administration and the period of confusion that followed and only $6,000,000 is for new public works, there should be as rapid an amortization of the loan during the early years as the Cuban budget will permit. While the exact method of disposing of the loan cannot be definitely determined until President Zayas either recovers or can be persuaded to delegate the matter to the Secretary of the Treasury, I am personally of the opinion that Mr. Morrow’s advice is sound in principle. I think that there are great disadvantages in having competitive bidding by private negotiations. It will almost certainly result in some bankers suggesting terms with reference to lifting amortization of the debt that might interfere substantially with the plans for economy. Especially will this be true if the bankers are either unfamiliar with or indifferent to the public aspects of the United States position here.
If this view is ultimately adopted there will be full advertisements and a chance for everyone to compete openly. Lee, Higginson and Company and others should be encouraged to send representatives here but I should appreciate it if the Department would say a word of caution to them about avoiding any advice as to the character of the loan which would lead the Cuban Government to relax the very great efforts which are being made under the new Cabinet for strongest economies. There is no objection to communicating so much of the contents of this message as you desire to Lee, Higginson and Company.
Representatives of Speyer and Company and Blair and Company arrived this morning and I will present them to Secretary Despaigne this afternoon.