800.51W89 U.S.S.R./16: Telegram
The Acting Secretary of State to the Ambassador in Germany (Dodd)
Please give Bullitt43 following message from Moore and keep no copy for Embassy files: [Page 48]
“It would be helpful to our work if you could ascertain whether Soviet obligations falling due in Germany are payable in marks or in other foreign currency and what types of paper can be utilized by the Soviet Government without German consent in meeting these obligations. It is suggested that a discussion with the Soviet trade representative in Berlin upon your return from Moscow might yield some information which would be of assistance.
For your information Field has presented the following propositions with regard to the sale of the remaining $2,200,000 of the Lee Higginson credit held by the Bank of Manhattan Company. He believes that the other holders of the $50,000,000 held by large banks in the East would agree to these terms. First proposal is direct purchase with gold of participation certificates at 80 (last recorded sale was at 67). A thousand ounces of gold would purchase $41,250 in participation certificates which would yield 173,250 Reichsmarks, whereas the same amount of gold if used directly to purchase marks in Germany would yield only 86,594. Second proposal involves the sale at 90 of participation certificates for Soviet obligations payable in 2½ years with interest at 5 percent and amortization in semiannual payments. Third proposal is sale at par against five-year Soviet obligations on similar terms. Field stated that in the case of the second and third proposals the banks would desire to have Soviet obligations secured either by gold or by goods of some sort and believes banks would be unwilling to accept longer than five-year obligations. Field also stated that similar arrangements might be worked out for German industrial credits of which about $100,000,000 are now outstanding in the United States.
We feel that Field’s proposals represent only starting point for subsequent bargaining. However, they are not encouraging from point of view of long term operations. We are therefore considering possibility of setting up financial institution with combined public and private capital which could purchase American owned German obligations in the open market and accept long term Soviet obligations therefor.
Hancock of Lehman Brothers is looking into various possibilities particularly the question of the utilization of short term debts covered by the standstill agreement.44 An expert of the Federal Trade Commission is also conducting an investigation to ascertain whether we could make use of coupons of German dollar bonds. Approximately $37,000,000 remain unpaid at the present time and $75,000,000 become due next year. We are also looking into the possibility of utilizing the obligations of the German Government to the Government of the United States, $30,000,000 of which fall due early next year, in the event that the German Government should be unwilling or unable to pay them.”
- En route to his post as Ambassador to the Soviet Union.↩
- See section entitled “Postponement of German payments under the German-American debt agreement of June 23, 1930,” Foreign Relations, 1932, vol. ii, pp. 323 ff.↩