Papers Relating to the Foreign Relations of the United States, The Paris Peace Conference, 1919, Volume II

Paris Peace Conf. 800.51/2: Telegram

The Acting Secretary of State to the Commission to Negotiate Peace

Washington , December 19, 1918—10 p.m.
[Received December 20—11:40 a.m.]

65. For the President from Glass.

• First. On assuming my duties as Secretary of the Treasury, situation regarding our foreign loans gives me grave concern.
• Second. Our loans to foreign governments now aggregate nearly eight billions of dollars and will probably approximate eight billion five hundred millions of dollars before declaration of peace, an account sufficient to pay all our governmental expenses for about eight years on the basis existing immediately preceding our entry into the war. Congress believes these loans are good and should be collected, and the possibility that the debts may be forgiven or exchanged for debts not as good is fomenting opposition to extending the authority of Treasury within the limits of the existing ten billions of dollars appropriation to make loans after the war to Allied Governments previously participating in the war against the enemies of the United States, for purchases in the United States for reconstruction purposes.
• Third. I judge from the recent semiofficial inquiries that European Allies may attempt to bring up at Peace Conference query concerning our foreign loans. You will recall speeches which Wickersham and Beck¹⁰ have made advocating our cancelling foreign obligations. An Associated Press despatch from Paris published December 17th, announces probable presentation by French Government to Chamber of Deputies a bill to establish an International Union to distribute the expenses of war already incurred and to be incurred between nations on basis of populations and power to contribute. Same despatch states similar plan under consideration by British Government, but no definite steps taken by it.
• Fourth. While British loans to the foreign governments exceed seven billion dollars including British loans to Russia of about two billion seven hundred million dollars, it might be that Great Britain would not be averse to cancelling war loans which it has made, in consideration of cancellation of perfectly good debt of British to United States, now about four billion dollars.
• Fifth. French Finance Minister has indicated that he does not think it desirable to discuss at this time converting French demand obligations held by United States into long-time obligations, as the maturities which French Government would consider as desirable and fair will depend upon moneys made available to them from Germany as a result of peace terms. As a few months ago Finance Minister strongly urged settlement of maturity dates, he had in mind the proposal of some plan permitting France to settle her debt to us by transferring a part of her claim for reparation against Germany.
• Sixth. From Treasury standpoint it would be distinctly advisable to keep all questions regarding our foreign loans out of discussions at Peace Conference in which event I can undertake definite settlement of these matters in Washington in such manner as to fully preserve the value of our foreign loans. If, however, Allied Governments are able to force discussion of these matters as a preliminary to or as part of peace agreement I recommend that Treasury be officially represented so that it may keep you advised of my views concerning these and any other financial questions arising, and be prepared to participate in such discussions as may be necessary. I feel that these financial questions are different in character from those with which existing Treasury representatives in Europe have been dealing and I agree with my predecessor’s instruction to them, not to participate in the pending peace discussions. If you should determine to have Treasury represented, trust you will notify me as far in advance as circumstances permit, so I may select and personally instruct my representatives and send them to Paris for this express purpose.

Polk

10. George Woodward Wickersham, Attorney General, 1909–1913, and James Montgomery Beck, New York lawyer and publicist, Assistant Attorney General, 1900–1903.