863.51 Relief Credits/9
The Economic Adviser (Young) to the Secretary of State
Mr. Secretary: The New York Journal of Commerce of December 23 stated that “failure of Washington to approve the protocols under which the new Austrian $100,000,000 international reconstruction loan is to be issued is holding up the flotation of the bonds.”
Since it is possible that similar statements may be made in other papers, the following brief summary of the situation is furnished for your information:
The Austrian Government desires to float a loan of $100,000,000 for continuing the program of reconstruction by means of railway construction and other public works. The project has received the approval of the Committee of the States which guaranteed the international Austrian loan floated in 1923. Under the Lodge Resolution,2 the Secretary of the Treasury extended until 1943 the maturity of the $25,000,000 relief bond representing advances made immediately after the war. He also raised the liens which that bond enjoys to the extent necessary to permit the reconstruction loan of 1923.
Several weeks ago the Austrian Government asked the United States to extend the maturity of the relief bond until 1957 and also to release the liens in favor of the proposed new loan. The Secretary of the Treasury submitted to the Attorney General the question of his authority, and the ruling was that no further authority to act remained under the terms of the Lodge Resolution. The Austrian Government was so informed.
The Austrian Government has now proposed in principle to make an agreement for payment of the relief bond in 25 years beginning 1943. A similar proposal has been made to the other creditor governments. It is now learned informally that the International Relief Bonds Committee is at the present time meeting in London. At the invitation of that Committee, this Government at one time had arranged [Page 859] for a secretary of the Embassy at London to attend its meetings to keep the Department informed. We have not, however, been invited to participate in the present meetings.
The most recent Austrian proposal is being referred to the Treasury for comment.
In case any question is raised by the press, it might be well to state that it is not correct to say that the United States is holding up the matter. You could say that you understand Austria desires a loan of $100,000,000; that the matter is very complicated because of the liens of the relief bonds and the provisions of the treaty regarding Austrian reparations (whose amount has not been fixed); that various plans have been discussed for arranging the loan; and that you have not been advised that the other governments have accepted any particular plan covering these matters, and that the Department has not been informed that the Reparation Commission has taken any action in the matter with reference to the reparation claim against Austria.
It is my opinion that it would be desirable now to make a proper agreement covering the relief indebtedness of Austria. I should also like to see an arrangement made whereby the Executive Branch of our Government would not have to continue protecting liens which affect Austrian assets and revenues, since we have no interest in the situation which warrants maintaining such a degree of control over Austrian finances. Our position would be the more embarrassing if the other Governments should be willing to take action to facilitate a further reconstruction loan by Austria, but the Executive of the United States lacked authority to do so. I think we should have in mind this possibility, although I see nothing specific to be done until the situation develops further.
We have not had any inquiries from bankers as to our attitude on the proposed loan, which obviously is only at the preliminary stage, though J. P. Morgan and Company have indicated that they are interested in it.
- Ibid., 1922, vol. i, p. 618; also 42 Stat. 491.↩