matter in our conference with him and Mr. Casenave today, on the contrary thinks that the Schneiders would not participate in such commercial credit with the other industrial houses of France. We are not entirely certain how the matter will develop within the next day or so, but we are hoping before the day is out, to cable you. Faithfully, OBW/JH EXHIBIT No. 3579 BONBRIGHT & Co.. 12, Rue Halevy, Paris. (Copie de depeche recue le 19 Aout 1916-LCD-de Fischbon, New York) No. 198. Schneider market upset time being writing. Believe interests France best served by including Schneider for their requirements in larger commercial loans particularly as new form credit contemplated will enable American banks take part although already interested Schneider loan to their legal limits. Anticipating successful result negotiations we were taking steps organize syndicate for commercial loan when your 74 arrived. We never broke off negotiations only suspended them as our correspondence with you proves (see cables 157, 160; letters June 9th, July 5th). Guarantee Trust will undoubtedly cooperate with us. Will cable Monday. EXHIBIT No. 3580 (Cable to William P. Bonbright & Co., Inc., New York) [Translation of cable. 8/20/16, received from Paris office, at 9:50 a. m. 8/21/16] #78. Your 198. Communicated French M. of F. Homberg. They insist terribly for your doing immediately and temporarily forgetting everything else their firm offer for Schneider & Co. loan which it is utterly impossible include in large loan. Your refusal would be badly taken and would cause us greatest harm in all quarters. Nobody would understand that for technical reasons which are contested you would refuse smaller loan with French Government gold guarantee and bankers endorsements to offer larger loan without those advantages; please understand these no idle words. Situation most serious. We must rely upon supreme efforts. Commercial loan. From your 198 we have deducted that you had or were planning conversation with Guaranty Trust and have told so F. M. of F. Hombert. Please cable result this conference and it will be seen here how it will morally be possible to reserve you in this loan the place you believe you have right to claim. Cannot say more today. Let us handle and be hopeful. W. P. B. EXHIBIT No. 3581 BONBRIGHT & Co., (Copie de depeche recue le 24 Aout, 1916-Coded-de Fischbon, New York) No. 200. Your 78/ Schneider: we are most desirous serving; difficulty is not technical; it is result unsuccessful efforts other parties as well as saturation banks with that security, for which reason we originate idea commercial credit. HENRI FISHER, Esq., EXHIBIT No. 3582 #216-Shu September 11, 1916. 12 Rue Halevy, Paris, France. MY DEAR FISHER: Your letter of the 22nd August is before me. It contains your account of negotiations with Messrs. Malouin and Bergeron, with regard to the Schneider and Commercial Loans, as far as you had progressed to that time. This morning we are also in receipt of your cablegram of yesterday, informing us that you are much worried over the Schneider situation. For this we are particularly sorry, as we assumed from a conversation which we had with Mr. Bloch early last week (September 6th), this would have reached you through Mr. Bioch's cable to his principals. That meeting was attended by Messrs. Bloch, Caseneuve, Kent, I. W. B. [Irving Bouleright?], and myself. We went fully over the ground of the Schneider proposition and Messrs. Bloch and Caseneuve had obtained quite an accurate idea of the financial situation here and the loan possibilities through their contact with others in the banking business, as well as through us. At the close of that meeting, Mr. Bloch said that he would cable, advising that the Schneider business be left in our hands, with action deferred until after the large commercial loan should have been disposed of. There is one point strongly made by Mr. Kent which we think is probably little, if at all, understood by the officials in Paris, namely, that the funds available for acceptance loans in New York, and especially those of the large and influential institutions, have a trading value entirely disproportionate to their face amount in dollars. For instance, we will assume that Mr. De Neuflize recently obtained from various institutions here in New York, entirely or mostly without country participation, a total of $10,000,000 for various private concerns in France; this reduced by that much the funds available in New York for that character of business, bringing each bank involved in the transaction that much nearer their limit. Whereas the use of these same funds as subscriptions, by the New York banks, toward large loans, induce country-wide participation, with a result that each New York dollar secures anywhere from $2 to $10 from the outside when used in leadership. For instance, take the case of the Bankers Trust Company, and assume for a moment that their legal limit for foreign acceptance is $5,000,000; obviously if they had reached this, through participation in such business as Mr. De Neuflize negotiated, they would have lost their power not only as individual subscribers, but as leaders in influencing subscriptions from the chains of provincial institutions, as well as those in the big cities, like Philadelphia and Chicago, which require evidence of New York faith in these foreign loans, about which the outside country knows comparatively little. An illustration which came perhaps naturally to Irving and me as ardent fishermen is, that the New York funds should be regarded as precious and irreplaceable bait, each ounce of which is almost sure to catch, in the long run, a pound from the provinces. We are sorry that our long commercial loan cable was garbled in transmission, but the Cable Company has promised to repeat it to you in toto. With kindest regards from all, Sincerely yours, DEAR FISHER: As a result of your insistent cable (no. 89) received this morning, we have taken up the Schneider business as a matter of urgency, and waiving our own objections and sweeping aside those of our associates of the Bankers Trust Company, have pushed the Schneider negotiation to the front. In doing this, we have committed a violence to the best judgment of ourselves and associates (in which a few days ago Bloch concurred), and we only hope that its inevitable interference with the large commercial loan will not be fatal to the latter. After bringing Mr. Kent into reluctant consent, he has spent a day among the banks, and reports this evening that he has secured, firm, $3,000,000 of underwriting, with more in prospect. Of this approximately $1,700,000 was received from outside subscribers who under the last Schneider loan took a total of about $7,700,000. Frankly, we fail to get your point of view, and are at a loss to understand why the larger loan should be jeopardized for the smaller. We feel very disappointed and somewhat hurt that the earnest and wholly sincere efforts which we have made under the most adverse conditions (for which we were not at all responsible) have been so unappreciated as to make possible such a cablegram as we are now reviewing; the language employed, taken in conjunction with other similar reflections in recent cable correspondence, indicates that our friends, and possibly you yourself, have been led into the error of supposing that we were trying to evade the Schneider business, because of either pique or preference for the larger business (due to its greater profit) or both. This conclusion we reach most reluctantly, but cannot see that there is any other inference to be drawn from your reference to certain cables which, considered alone, and without a knowledge of our devotion to the cause and temperament, might lend themselves to the misconstructions our Paris friends seem to have placed upon them. Knowing as we do that we have not only used our best endeavors, but that we have offered to sacrifice to our associates every penny of profit in order to spur them to greater efforts to consummate the business; and realizing that we have exceeded ordinary business prudence in offering to guarantee against loss certain interests which felt unable to participate in the proposed new loan because of the large aggregate amount of previous loans already on their shelves, you can understand our profound unhappiness over the misapprehension that has been created. Our friends refused to accept our offer to concede to them the whole amount of our profit, but have accepted half of our former prospective compensation as a basis for today's efforts. We feel that we should again refer to and explain our cable (no. 9) reading, "We are working hopefully and rapidly," mentioned in your no. 89. This was sent the morning of the 30th of August, just after Kent had received two satisfactory replies from Philadelphia banks (as it happened practically the only favorable responses from that city); these subscriptions were a part of the $1,700,000 above referred to as having been received from the same banks who had subscribed about $7,700,000 to the second Schneider loan. Late this afternoon we met with a protest from the Guaranty Trust Company, who informed us that our efforts in the Schneider loan would be a deterrent, and possibly fatal to the commercial loan. We replied to this protest that we intended to finish the Schneider loan and get it out of the way before the commercial loan came along; but their answer was that the commercial loan would appear in time to be seriously affected, if not entirely blocked, by this very unwise Schneider appeal at the same time and necessarily to much the same group. Our letter of yesterday will throw some light upon their point of view, whichnaturally, did not surprise us. Our situation tonight is a very unpleasant one, full of uncertainties. We do not know whether we should continued to work upon the Schneider business or in view of this last serious protest from the Guaranty Trust Company, give it up. In favor of the former there are all the arguments that we have been using with you. As against those arguments, we have your insistent and imperative cable of this morning which impels us to sacrifice everything for the benefit of the Schneider loan, since you state that our standing, friendships, and practically everything that you and we have been working for in France, are hanging in the balance, depending upon the Schneider credit. The position is preposterous and would be impossible did you and Messrs. Malouin and Bergeron understand the situation. Mr. Bloch understood it a week ago and agreed to cable his conclusions strongly. This cable, explaining our own strongly expressed views we hoped, and I think without reason, would convince our friends of the futility and unwisdom of the efforts which you now so peremptorily have called upon us to make. We are making them, and the issue is in grave doubt. We will continue with our work and write you further in a day or two. I may say that the seriousness of this matter has brought into operation the services of my brother [Irving Bonbright], Mr Willcox, in concerted effort, and we have concentrated our time to the exclusion of practically all else in the conscientious desire to meet your views, although we do not agree with them. Sincerely yours, WPB/G SEPTEMBER 13, 1916. P. S.-This morning I went to the Guaranty Trust Company and saw Mr. Sabin, to whom I presented your imperative demand that the Schneider loan be given right-of-way and precedence over the commercial credit. He relunctantly assented to this, realizing that under the circumstances, we could not do other. wise than accede. I told him how strongly we had represented the facts to you, and through you, to the French Minister, and that in spite of our advice the Schneider loan was being insisted upon. Thus we have their reluctant concent to proceed; as to their co-operation we are not sure, but hope to obtain that also. In conclusion we can only repeat that no effort will be spared to carry out the shes so strongly expressed of our friends, Messrs. Malouin and Bergeron. Sincerely, WPB G NOTE-Pencilled notations enclosed in brackets. EXHIBIT No. 3584 GUARANTY Trust Company OF NEW YORK, New York, 9/20/16. No. 9652. [Translation of cable received from Alexander Phillips (Bonbright)] Taken up by A. B. Entered by G. P. 26. Your 17. All terms accepted to Minister with following restrictions: First you must agree, whilst practical preparations under way, to advance 25.000.000 dollars October, 25,000,000 November, against guarantee fulfilment all conditions and deposit satisfactory collateral. It is expected here that in shortest time possible whole amount loan will be hundred millions. Secondly, Minister reserves opinion regarding collateral fearing that railroad securities thus deposited may hamper future loan in the States based on French railroad securities. Do you share Minister's views he is consulting Davison. In course of conservation as possible collateral were mentioned Credit Foncier bonds, Bank France shares, other bank shares, Japanese bonds. Try by all means reducting from hundred twenty percent to one hundred percent. [Extract from #17988 for J. P. Morgan and T. W. Lamont] Wish, without mentioning me, you would ascertain from Guaranty Trust Co. of New York whether absolutely impossible effect credit arrangement without collateral other than Government bonds. Ribot has asked my opinion about giving other collateral which it would embarrass him to do. I have advised him not to give this collateral at this juncture, fearing it would prejudice other operations and not avail of sufficient money. If, after London conference, we should be convinced that credit could not be made without collateral and say $100,000,000 could be arranged with collateral, they might be induced to put it up. To make clear my point is that requirements so large that we do not want to dao anything which will avail comparatively little and injure situation, and I would suppose that in this commercial credit, if there was hope of accomplishing anything important, it could be done upon credit of drawers backed by French Government. While we have never questioned credit, or position French Government, a few days here would give courage to the most timid and assure him that Allies will win war and the commercial and industrial institutions of France in general will live and prosper. H. P. Davison, Harjes. Mr. ALEXANDER PHILLIPS, EXHIBIT No. 3586 45 Boulevard Haussmann, Paris, France. SEPTEMBER 23RD, 1916. MY DEAR PHILLIPS: I am very sorry to state that I am not able to write you fully by this mail, as I was in conference most of the morning with Mr. Lamont, of Messrs. J. P. Morgan & Company's office. Mr. Davidson has cabled them about the industrial credit presently under negotiation, and after our conference it was decided that we could not change our terms. As far as I can see, the people with whom you are dealing do not seem to realize the exact conditions of the New York money market concerning foreign securities. Hoping that you are well and not discouraged by all the difficulties we are meeting, I remain, with kindest regards. AB/HB Yours very sincerely, (Initialed) A. B., Vice President. Alexander Phillips Foreign Representative EXHIBIT NO. 3587 [Pencilled notation: "Previously indexed"] Guaranty Trust Company of New York Industrial loan. 45 BOULEVARD HAUSSMANN, PARIS, le 23 Septembre, 1916. GUARANTY TRUST COMPANY OF NEW YORK, 140 Broadway, New York. (Attention Mr. Max May, vice president.) DEAR SIRS: I beg to confirm my letter of 16th inst. Since then, I received on the 18th inst. your message as follows: "17. Your 25. $100,000,000 possible before last secured French loan. Now impossible start with more than $50,000,000. Full amount available immediately after formation syndicate and signature contract. Full commission payable in advance. Discount payable nine months in advance. Proceeds deposited with Guaranty and Bankers Trust, New York, subject withdrawal according export requirements French industrial concerns, two percent being allowed on balances. Instead Bank France, Government guarantee deficiency satisfactory, provided legally drawn and no restrictions to exist concerning sale collateral in France or elsewhere if loan unpaid maturity. State Railroad bonds satisfactory, probably one third. Bonds P. L. M., Orleans, Midi also satisfactory. Suggest you and Fischer cabling Guaranty jointly instead separately except when opinions differ. Guaranty Bankers Bonbright." on the same day Mr. Fischer and myself had an interview with the Minister of Finance [Ribot] and cabled you: "26. Your 17. All terms acceptable to Minister with following restrictions: First, you must agree whilst practical preparations under way to advance twenty-five millions dollars October, twenty-five millions November, against guarantee fulfilment all conditions and deposit satisfactory collateral. It is expected here that in shortest time possible whole amount loan will be hundred millions. Secondly, Minister reserves opinion regarding collateral fearing that railroad securities thus deposited may hamper future loan in the States based on French railroad securities. Do you share Minister's views? He is consulting Davison. In course of conversation as possible collateral were mentioned Credit Foncier Bonds, Bank France shares, other bank shares, Japanese bonds. Try by all means reducing from hundred twenty percent to one hundred percent." On the 20th we were again called by the Minister and after our interview with him, sent you the following cable: "27. Seen Minister. He states that after conversation with party mentioned in our 26 he decides not to give railroad collateral for reasons explained our 26. He agrees with us that it would be great pity that all work has been done in vain and is open two following proposals: First, drawings as arranged with hundred percent Treasury gold notes and Guar antee Bank of France, which, however, must still be obtained but which |