864.51/222
The Secretary of State to the Hungarian Chargé (Pelényi)
My Dear Mr. Chargé d’affaires: In reply to the Aide Memoire handed to me on January 3rd by Count Széchényi and containing the request of the Hungarian Government that the Government of the United States suspend during the twenty-year period of amortization of the proposed reconstruction loan for Hungary, the priority [Page 326] enjoyed by the Hungarian Relief Bond held by this Government, I desire to inform you that, while this Government, as in the case of Austria, would be ready to give sympathetic consideration to any appropriate plan for the financial rehabilitation of Hungary, it will be necessary to receive certain additional information and assurances before proceeding further in the matter.
I have noted your Government’s statement that in making this request it does not mean in any way to ask the Government of the United States to yield the privileged position of relief bond holders with respect to priority over reparation payments. It appears, however, that the proposed plan for the Hungarian Reconstruction Loan contemplates annual reparations payments by Hungary amounting to not more than ten million gold crowns and commencing after the year 1926, such payments to be made from revenues not specifically assigned to the service of the loan. Were such a plan put into operation and were the holders of Hungarian Relief Bonds to waive the priority enjoyed by such bonds for the full term of the reconstruction loan, it would appear that reparation payments would in fact be accorded a priority over relief bond obligations. This Government could not assent to such an arrangement and would not waive in favor of the proposed reconstruction loan the priority enjoyed by the relief bond which it holds, unless satisfied that its relief bond would at all times be entitled to priority over reparation payments in accordance with the original agreement under which relief advances were made to Hungary.
In this same connection permit me to call to your attention the assurances given in Mr. Daruváry’s Note of November 14, 1923,1 to the American Minister at Budapest with reference to the “error in connection with the interest due on the United States Relief Bond” to the effect that the Hungarian Government would inform the Finance Committee of the League of Nations that the proportion of back interest due the United States on its relief bond must be made a first charge against the proceeds of any foreign loan contemplated under the League of Nations’ plan. No information has reached this Department that the proposed League of Nations’ plan has made definite provision for the payment of this back interest. This Government feels, therefore, that it should be assured that this action which would place it on a basis of equality with other holders of Hungarian relief obligations has been taken and that the charge referred to has been created.
I should also be grateful if you would find it possible to inform me whether any special arrangements with other nations in respect of debts owed to private individuals or state claims arising out of [Page 327] the Treaty of Trianon have been made by Hungary and if so, whether they would in effect cause such creditors to receive payments from the Hungarian Government to the prejudice of the priority enjoyed by the terms of the relief bond held by this Government.
I might add for your information that this Government could in no case consider the waiver desired unless substantially all other creditor nations of Hungary having a lien upon either the assets or revenues of Hungary should take similar action with respect to their claims. Moreover, the period of the waiver could extend only to a date mutually agreed upon by substantially all the other creditor nations or until the date of repayment by Hungary of the proposed reconstruction loan, whichever date should be the earlier.
I am [etc.]
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