862.51 P 95/42: Telegram
The Acting Secretary of State to the Ambassador in Germany (Schurman)
89. (1) This morning there appeared in the press a report, emanating from an unknown source, that Department objected to proposed Prussian financing. In response to inquiries the Department has informed the press that statement is incorrect; that the Department had stated orally to bankers, when question was first brought before it, that it believed they should consider carefully the special questions presented by German financing, including financing under article 248 of the Treaty of Versailles,14 but that the Department had sent no formal reply to the inquiry in view of fact that Department understood that certain questions in regard to loan had developed at Berlin.
(2) This morning, in the absence of the Secretary of State, the Chief of the Division of Western European Affairs informed the German Chargé of the foregoing and stated that in view of increased German borrowing it was becoming apparent that such borrowing is not being effectively controlled; that the Department perceives no ground of public policy, at present time, to object to these loans although it has serious doubts of their utility; that Department does not, of course, wish to place obstacles in way of American capital’s going into Germany to meet proper requirements of German industries and heartily favors industrial loans for productive purposes, but that it is Department’s feeling that many of the German loans, particularly those to German states whereby a question as to article [Page 729] 248 may be raised, are of doubtful utility; and that should German Government not check loans strictly, this Government might find itself obliged to consider seriously, both in its interest and in that of the general situation, measures designed to put a check on improvident borrowing. Mr. Castle added that the United States was anxious not to embarrass German Government and that this Government believed that best curb could and should be imposed by German Government itself; but the Chargé should explain to his Government that unless it were made evident that effective measures were being taken in Germany to the end desired, the Department would be compelled to consider even going as far as to place an embargo on state and municipal loans in the interest of citizens of this country.
(3) Give Gilbert15 paraphrase of this telegram and send copy to Edwin Wilson, Embassy, Paris.16 Make no written communication, of course, to German Government as matter has been dealt with here; if, however, German officials raise question, you may make statement orally in sense of foregoing paragraph.
- Malloy, Treaties, 1910–1923, vol. iii, p. 3329, 3439.↩
- S. Parker Gilbert, Agent General for Reparation Payments.↩
- Mr. Wilson was charged with the conduct of American interests before the Reparation Commission; see Foreign Relations, 1926, vol. i, pp. 120 ff.↩