POLAND ATTITUDE OF THE DEPARTMENT OF STATE TOWARD THE SALE OF POLISH LAND MORTGAGE BONDS IN THE UNITED STATES 860c.51/248 The Secretary of Commerce (Hoover) to the Secretary of State WASHINGTON, June 16, 1922. DEAR MR. SECRETARY: Please find enclosed memorandum on a transaction that is in progress. So far as I know the Irving National Bank has not asked the State Department for its views in this matter. The Proposal in this memorandum, of course, deals outside of the limits of governmental action and we are faced with the old quandary as to whether we have a moral responsibility of protection to the American public. Yours faithfully, [Enclosure] HERBERT HOOVER Memorandum by the Chief of the Eastern European Division, Department of Commerce (Durand) JUNE 13, 1922. SALE OF POLISH LAND MORTGAGE BONDS IN U. S. The Polish Land Bank is a long established institution somewhat similar to the Federal Land Bank. It issues collateral bonds against mortgages, especially on the large Polish estates. Its credit is undoubtedly good and although the division of the large estates, which is likely to take place in the future, may complicate the credit situation somewhat, it is very probable that the bonds will be good. This organization proposes to sell these bonds, expressed in terms of Polish marks, in the United States, thru the Irving National Bank, and the Union Bank of Co-operative Societies. Unlike more or less fraudulent schemes for selling foreign bonds at far above the current rate of exchange, they propose to sell the bonds at the Polish price (now somewhat below par), converted to dollars at the current rate of exchange. Nevertheless, the buyer runs the risk that when the bonds are paid for, the Polish currency will be worth less than at present. Although the Polish finances are improving, it is rather likely that the mark will gradually fall and if later on any re-valuation is made, it may very readily be at a lower basis than the present rate of exchange. Under these circumstances, it is hardly in the interests of the American Poles, to whom it is proposed chiefly to sell these bonds, that they should be offered. There is, of course, no way of preventing their sale but it may be that a hint to the Irving National Bank that the Government does not approve the transaction might be effective. Also it might be possible for Commercial Attaché Smith to suggest verbally to the Polish Land Bank itself that we should prefer not to see these bonds offered. I should be glad to have your instructions in the matter. E. D. DURAND 860c.51/248 The Secretary of State to the Secretary of Commerce (Hoover) WASHINGTON, July 24, 1922. MY DEAR MR. SECRETARY: I beg to acknowledge, with thanks, the receipt of your letter of June 16, 1922, with which you enclosed a copy of a memorandum concerning the sale of Polish Land Mortgage Bonds in the United States. I have given careful consideration to the point raised in the second paragraph of your letter in regard to the course of action of this Government in matters such as this which are "outside of the limits of governmental action." I realize fully the difficulty to which you allude, of determining just what degree of responsibility rests upon this Government in connection with international financial operations in which Americans desire to participate. Although it is not easy to define with precision the sphere of proper action by this Government in all such matters, in view of our international relations, it is apparent that it is a limited one. Transactions such as those referred to in Mr. Durand's memorandum, unless they contain elements that might be considered to run counter to the so-called "blue sky" legislation of certain of our States, appear to be entirely lawful transactions in which American citizens are fully entitled to engage, and over which Congress has not provided control. So far as foreign loans are concerned, the interest of this Department in being consulted arises primarily from its relation to the giving of diplomatic support in the event of future difficulties, and more broadly from the important bearing of these transactions upon the conduct of our foreign relations. For example, I am disposed to dis countenance loans to unrecognized governments, or loans sought by foreign governments for military purposes or for objects that appear to run counter to clearly defined policies of this Government. However, it is obvious that if this Department is to interpose objection in any given instance, such objection must have an adequate basis from the standpoint of its proper province. I feel that this Department would be going outside of its proper sphere of action if it should undertake to intervene in transactions such as the proposed importation of these Polish Land Mortgage Bonds, since such action could only be based upon considerations primarily of a business nature, such as matters of rates of exchange or the merits of an issue of bonds from the viewpoint of the investor. The public statement on "Flotation of foreign loans" issued by this Department on March 3, 1922,1 explained that this Department "will not pass upon the merits of foreign loans as business propositions." It is, of course, not difficult to formulate specific economic objections to various financial transactions. However, it is unnecessary to dwell upon the practical difficulties of undertaking to express such objections. If we express objection in one case, simply because of economic or business reasons bearing on the nature of the enterprise or the value of the security, we may soon be regarded as having no objection when we express none, or as having assumed a responsibility which is not placed upon the Department by law and which it would be impracticable for it to attempt to discharge. I am sure you will agree that, in view of the delicacy of these matters, we are not warranted in offering objection in any given instance unless it is absolutely clear that we are not undertaking to set up an authority that would not rest upon an adequate basis. I am [etc.] CHARLES E. HUGHES 1 1 Vol. 1, p. 557. PORTUGAL DISCOURTESY TO THE PORTUGUESE FLAG AT PROVIDENCE, R. I., AND EXPRESSIONS OF REGRET BY THE GOVERNOR OF THE STATE 853.015311/5 Memorandum by the Secretary of State of a Conversation with the Portuguese Minister (Alte), March 9, 1922 The Minister brought two matters to the attention of the Secretary: (1) That on February 22, Washington's birthday, the policeman at Providence, Rhode Island, had hauled down the Portuguese flag at the Vice Consulate's office. The policeman did not seem to understand that it was displayed in honor of Washington's birthday. Protests had been made by the Vice Consul and the Mayor had expressed his regret. There were, however, a very large number (100,000) Portuguese in Rhode Island, having their newspapers and who seemed to think that the indignity which, from an international standpoint, was a serious one, had not been sufficiently dealt with. It was suggested that the Governor might send his Military Secretary or representative to the Vice Consul with a statement of regret. The Minister said that he was being attacked for not defending the rights of Portugal and he desired to have everything done that was practicable. (2) The other matter was the case of a Portuguese who was killed at Pawtucket, R. I. The Minister left a communication upon the subject and requested that the Department request that suitable inquiry be made by local officials. The Secretary said that he would give attention to both matters. 853.015311/ The Secretary of State to the Governor of Rhode Island (San Souci) WASHINGTON, March 11, 1922. SIR: It has been brought to the attention of the Department that, on February 22 last, a police officer hauled down the Portuguese flag that was flying over the Vice-Consulate in Providence. I understand that representations in the matter were made by the Vice-Consul and that, through the Mayor of the City, an apology |