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the Austrian Government guaranteed twenty-five year loan maturing in 1943.

In response to my request of the Attorney General for his opinion as to whether under the Joint Resolution the Secretary of the Treasury might in his discretion further subordinate to the proposed new Austrian Federal Loan the lien given the United States by the terms of the Austrian Relief Bond No. 1, Series “B” of 1920, he stated that "the Secretary of the Treasury has no power to act further under this Resolution ...." 19 A copy of the opinion of the Attorney General, dated October 15, 1927, was transmitted to you by this Department under date of October 18, 1927.20 The basis given by the Attorney General for his opinion is that “There is nothing in the Resolution to indicate that the authority given the Secretary of the Treasury was to be a continuing one or was to be exercised after the lapse of years and under changed conditions.”

In my judgment the reasoning of the Attorney General in his opinion above referred to necessarily leads to the conclusion that without further authorization by Congress the Secretary of the Treasury has no authority to further extend the time of payment of the debt incurred by Austria for the purchase of flour from the United States Grain Corporation. Very truly yours,

A. W. MELLON

863.51/847 : Telegram

The Acting Secretary of State to the Minister in Austria (Washburn)

WASHINGTON, October 28, 1927–11 a. m. 20. Your 54, September 20, 10 a. m. and despatch 1532, September 20. In opinion of law officers of this Government, the Secretary of the Treasury has no power to act further under the Joint Resolution approved April 6, 1922, and a new enabling act of Congress would be necessary to enable him to take the suggested action.

OLDS

863.51/859

The Minister in Austria (Washburn) to the Secretary of State

No. 1585

VIENNA, October 29, 1927.

[Received November 14.] Sir: I have the honor to acknowledge receipt of the Department's telegram No. 20 of October 28th, 11 a. m., in response to my telegram No. 54 of September 20th, 10 a. m. and despatch No. 1532 of the

1 Omission indicated in the original letter. » Not printed.

20th ultimo, advising me in substance that in the opinion of the Attorney General the Secretary of the Treasury has no power to act further under the Joint Resolution approved April 6th, 1922 and that a new enabling act of Congress will therefore be necessary to enable him to take the action desired by the Austrian Government. I am today advising Chancellor Seipel in the sense of the foregoing. Especially in view of the formal request contained in my despatch No. 1573 of the 17th instant, it is superfluous to emphasize the desire of the Austrian Government for a new congressional enabling act and I am taking it for granted that the Department will at the proper time take appropriate action.

The decision set forth in the Department's telegram under reference makes it certain that the new loan will be on a 30-year basis, though Minister of Finance Kienböck told me only yesterday that if the Secretary of the Treasury were free to act under the Resolution of 1922 and cared to exercise his discretion, a shorter term would be most seriously considered. The Austrian Government had not definitely committed itself, though the discussions in London and Paris had proceeded on the 30-year theory. Dr. Kienböck intimated that he expects shortly favorable action from the Reparation Commission and that the negotiations with the Relief Credit Committee, acting for the Relief Credit states, of which the Englishman, Leith Ross is chairman, vice Niemeyer, are proceeding satisfactorily. I will of course keep the Department informed of developments.

In this connection I am enclosing herewith translations of two articles from the “Wiener Boersen-Kurier” of the 17th and 24th instant dealing with the loan flotation.21 I have [etc.]

ALBERT H. WASHBURN

863.51/859

The Secretary of State to the Secretary of the Treasury (Mellon)

WASHINGTON, November 28, 1927. SIR: With reference to this Department's letter of November 18,21 which transmitted a copy of the formal request of the Austrian Government to the United States Government 22 to grant postponement up to December 31, 1957, of the Austrian bond held by the United States Treasury, I have the honor to transmit for your information a copy of despatch No. 1585, dated October 29, 1927, from the American Minister at Vienna,22a with its enclosures, regarding the contemplated new Austrian loan.

81

Not printed.
See note from the Austrian Chancellor to the American Minister in Austria,

p. 448.

220

Supra.

You will note the Minister's statement that he is taking it for granted that the Department will at the proper time take appropriate action to obtain a new Congressional Enabling Act. The Department's only communication to the Minister on the matter has been that quoted in the Department's letter to you of November 18 to the effect that a new Enabling Act of Congress would be necessary.

I should be pleased to receive any comment you may care to make on this matter. I have [etc.]

For the Secretary of State:

W. R. CASTLE, Jr.

Assistant Secretary

863.51 Relief Credits/7

The Minister in Austria (Washburn) to the Secretary of State

No. 1629

VIENNA, November 30, 1927.

[Received December 16.) Sir: I have the honor to report that I have recently had conference with the Chancellor and Dr. Schüller, and I am enabled to state that the Austrian Government is on the verge of abandoning that part of its request contained in the Chancellor's letter to me transmitted with my despatch No. 1573 of October 17th, 1927, which has to do with the extension up to the 31st of December, 1957, of the time of payment of the principal and interest of the debt incurred by Austria for the purchase of flour from the United States Grain Corporation, leaving only to be dealt with by congressional resolution its request for the release of Austrian assets pledged for the payment of said debt, so as to subordinate them to the new contemplated federal loan. In stating this amended desire of the Austrian Government I have followed rather the phraseology found in the Joint Resolution of Congress approved April 6th, 1922, a copy of which was transmitted with my despatch No. 1037 of May 10th, 1926.28

Schüller is leaving today for London to attend the sessions of the Relief Credit Committee which meets on the 2nd proximo, and he will there make his amended announcement in harmony with the foregoing. The Austrian Government now has to all intents and purposes a postponement of its various relief credits until 1942 and upon further reflection it apparently deems it more prudent not to complicate matters by asking for a further postponement until 1957, as contemplated by the Chancellor's letter above mentioned. It does

* Not printed.

desire that Austrian assets pledged to the relief credits be released and subordinated in the manner indicated.

Secondly, Schüller has been authorized formally to state to the Relief Credit Committee in London that as soon as the new federal loan has been floated the Austrian Government desires to take up the question of entering into a general funding arrangement for the entire relief credits which amount to about £25,000,000. All the outstanding relief credit bonds provide that the terms of payment shall be the same in all cases and Austria must therefore make the same arrangement with the United States as is made with the other relief credit states. Schüller says that it is to the advantage of Austria to take up the question of a debt settlement at an early date and not wait until 1942. He has stated this to me before, as I have elsewhere reported. It is obvious that he hopes to eliminate or greatly curtail the payment of interest which is now technically running. Austria anticipates, as I gather, that her situation lays the foundation for the hope that she will receive at least as favorable treatment from the United States as Italy did. It is plain to me that the Austrian Government is especially anxious that the relief credit debt settlement shall not be harnessed up in any way with the new loan. If, as the Chancellor explained to me, the two matters were considered together, the Austrian public would deem the conditions too onerous. They would lump the interest and amortization charges of the new loan and the relief credit settlement together. Schüller goes so far as to say that the new loan would have to be abandoned. There have been apparently some disquieting rumors, traceable to banking circles in London and Vienna, to the effect that our Treasury Department or Congress might stipulate a relief credit settlement before taking favorable action upon the desired release of Austrian assets. Schüller does not want to appear to be forced into making an arrangement which he asserts his government desires to make voluntarily.

It is my understanding that Minister Prochnik has not been advised by cable of these developments, though he has recently had some telegraphic instructions about the disposition of alien property. I am therefore taking the precaution of briefly informing the Department of the existing situation by wire.

The government here seems to regard it as assured that J. P. Morgan & Company will undertake to float the new issue and that it will be the only firm with which the Austrian Government will directly deal, though a syndicate will doubtless be formed. I get the impression that the advice of Morgan and Montagu Norman will be followed throughout. I have [etc.]

ALBERT H. WASHBURN

863.51 Relief Credits/6: Telegram

The Minister in Austria (Washburn) to the Secretary of State

VIENNA, December 2, 1927-11 a. m.

[Received December 2–10:02 a. m.] 66. Enclosure 1 to my despatch 1573, October 17. Austrian Government abandons its request for extension until 1957 of time of payment of principal and interest, leaving only its request that assets pledged for payment of the United States Grain Corporation Loan may be subordinated to contemplated new Federal loan. See joint resolution of Congress April 6th, 1922, transmitted with my despatch No. 1037, May 10, 1926.24 Explanatory despatch 1629 mailed 30th ultimo.

WASHBURN

863.51 Relief Credits/1

The Austrian Minister (Prochnik) to the Secretary of State No. 2423/70

WASHINGTON, December 6, 1927. EXCELLENCY: The Federal Government of Austria after having with the proceeds of a loan, the so-called League of Nations Loan, successfully completed the reconstruction of its public household and finances, by stabilizing the country's currency, balancing the budget and accomplishing other measures provided for in an exhaustive restoration plan, is now anxious to likewise restore with the aid of a second loan private economics and business to a state of normalcy. In fact, my Government realize that the latter is an essential requisite for assuring a lasting duration of the first success.

Before the first referred to loan could be issued it was necessary that all countries holding a first lien on Austria's assets for relief credits defer this lien for a period of 20 years (the time fixed for the repayment of the said loan).

Also the United States of America, as Your Excellency are aware of, deferred with authorization of Congress (Lodge Resolution) their lien for twenty years, beginning from 1923.

As long as the relief credits are still outstanding against Austria, a similar action would be required to enable the issue of a second loan. With other words the Federal Government of Austria face the necessity of approaching the creditor nations again with a request for a further 10 year extension of the aforementioned period of deferment.

My Government, however, came to the conclusion that a settlement of the relief credits would be preferable to a further extension of

* Not printed.

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