Papers relating to the foreign relations of the United States, 1929, Volume II

462.00R294/693: Telegram

The Secretary of State to the Ambassador in Germany (Schurman)

[Paraphrase]

Washington, November 19, 1929—3 p.m.

84. For Wilson. Your No. 217, November 13, 3 p.m.

1. The Government of the United States cannot consider reallocation of annuities as between Army costs and mixed claims. You will recall that when questions of paying the Mixed Claims Commission awards and the return of German property were submitted to the Congress in 1926, the Treasury, with a view to facilitating payments to American claimants, recommended that the receipts on account of the Army costs be applied in the liquidation of the mixed claims. Congress took position, in rejecting the Treasury’s recommendation, that payments on account of Army costs had prior status, and that funds due this Government could not be used to pay private claims against Germany; consequently, Congress refused to approve recommendation, but enacted instead the Settlement of War Claims Act of 1928. It is our understanding that the 40,800,000 reichsmarks stipulated in the Young Plan is based on our rights under the Paris agreement of January 14, 1925, that is, 2¼ percent of the average annuity available for reparations.

2. With reference to the figure of $251,300,000 which was furnished you in our telegram No. 64, September 14, 2 p.m., as representing the amount of the mixed claims, it was, of course, only an estimate, and is believed to be a very conservative one; it included an estimate by the representatives of the Mixed Claims Commission of the awards which are yet to be entered. Because of complications of Settlement of War Claims Act of 1928 it is not practicable to furnish details by cable. Request of the German Government for detailed information may be satisfied by following revision of that Government’s estimated liability on account of the awards:⁷⁴

1.	Principal of awards certified to Treasury for payment	$113,295,478.68
	Interest up to August 31, 1929	59,407,605.03
			$172,703,083.71
2.	Estimated principal amount of awards yet to be entered and certified	32,000,000.00
	Estimated interest up to August 31, 1929	21,000,000.00
			53,000,000.00
3.	Awards to United States Government	42,034,794.41
	Interest up to August 31, 1929	22,900,000.00
			64,934,794.41
			290,637,878.12
	Received from Germany up to August 31, 1929	31,831,472.03
	Earnings and profits on investments	2,149,692.70
			33,981,164.73
			256,656,713.39

Acceding to request of the German Government for an addition to paragraph on “Amounts to be paid” of draft agreement, we suggest that following sentence be added at end paragraph:⁷⁵

“The obligations of Germany hereinabove set forth in this paragraph shall cease as soon as all of the payments contemplated by the Settlement of War Claims Act of 1928 have been completed and the bonds not then matured evidencing such obligations shall be canceled and returned to Germany.”

3. Although change does not seem to be necessary, considering that agreement carries express provision that the bonds are not to bear interest unless payment thereof is postponed pursuant to paragraph 4 of the agreement, you are authorized to acquiesce, if necessary, to having inserted after the word “interest” in paragraphs 3 and 5 of draft agreement the words “if any.”

4. War debt precedents by which debtors are permitted to make payment in obligations of the United States were made originally with reference to obligations intimately identified with Liberty bonds of the United States, which, in part, were issued for express purpose of satisfying credits established in favor of certain foreign governments.⁷⁶ The Liberty Bond Acts in fact require that payments which are received on accounts of the principal of cash advances must be used for retirement of outstanding bonds of the United States. These reasons are inapplicable to German payments, and it is believed that the Congress would raise objection to a provision of this kind respecting Army costs, while not under any circumstances could payments made in obligations of the United States be used in execution of the Settlement of War Claims Act of 1928. As the Government of the United States is acting, moreover, in a fiduciary capacity for its own citizens in receiving the German payments on account of mixed claims, it could not accept, therefore, its own, obligations in payment of the German Government’s obligations on this account.

5. Acquiescing in the German Government’s request that agreement contain provision for advance payments, following paragraph may be appropriately inserted in the draft agreement:⁷⁵

“Payments before maturity. Upon not less than ninety days’ advance notice in writing to the United States and the approval of the Secretary of the Treasury of the United States, Germany may, on March 31 or September 30 of any year, make advance payments on account of any bonds issued under this agreement and held by the United States. Any such advance payments shall be applied to the principal of such bonds as may be indicated by Germany at the time of the payment.”

6. Paragraph of draft agreement entitled “Compliance with legal requirements” was drawn up with view to having all legal requirements, of whatever nature, completed before execution of agreement. While it is unusual for creditor to be included in such requirements of debt agreements, the Government of the United States has no objection to suggestions made by Government of Germany that the clause should be made to read throughout “Germany and the United States.” The German Government must determine whether, under its constitution and laws, the Reichstag must ratify the agreement. If it must be ratified by the Reichstag, then this paragraph contemplates that such ratification shall have been completed before execution of the agreement. Under special authority from Congress, the World War Foreign Debt Commission executed French and Italian debt agreements before their approval either by Congress or by the respective foreign governments.⁷⁸ Consequently it was necessary to insert phrase “subject to ratification.” But as there is no authority to execute this agreement on behalf of this Government and as in granting such authority the Congress will be approving agreement before its execution, this Government must satisfy itself that all legal requirements have been fulfilled by the Government of the Reich as well as by the United States at time agreement is executed.

7. The United States acquiesces in German suggestion relative to paragraph entitled “Counterparts,” and suggests that it read as follows:

“Counterparts. This agreement shall be executed in two counterparts, each of which shall be in the English and German languages, both texts having equal force, and each counterpart having the force and effect of an original.”

8. Department does not understand why Germany should have any objection to use in bonds of the standard consideration phrase “for value received”. Should German Government insist, you are hereby authorized to substitute following for that phrase:⁷⁹

“In consideration of the premises and the mutual covenants contained in an agreement dated . . . . . . . . . . between it and the United States of America.”

Stimson

74. Tabular statement not paraphrased.
75. Quotation not paraphrased.
76. See Combined Annual Reports of the World War Foreign Debt Commission … Fiscal Years 1922, 1923, 1924, 1925, and 1926 (Exhibit 114): “Excerpts from the first Liberty Bond Act and the Act of July 9, 1918, and Acts of February 25, 1919, and March 30, 1920, which contain authority for acquiring obligations of foreign governments.”
75. Quotation not paraphrased.
78. Combined Annual Reports of the World War Foreign Debt Commission… pp. 256 and 221, respectively.
79. Quotation not paraphrased.