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the world and say they were bankrupt, and wanted to go through bankruptcy, it is conceivable that morally they might be relieved and that we might cancel the debt. But they do not take that attitudenot at all.

Senator GORE. Mr. Simonds, you say we are not collecting, and they are not paying. That is true; and I do not fancy for a moment that they ever will pay. I do not think they ever will pay.

Mr. SIMONDS. The point is, is it better to cancel or is it better to let them repudiate?

Senator SHORTRIDGE. I do not think they will dare to stand before the world and repudiate.

Senator GORE. I think they will, Senator. I do not think they will pay, and if they repudiate the situation would be the same. They would not be paying in either contingency, but it might affect their credit in the future, so that easy marks like the United States would not advance credit in such large amounts.

Mr. SIMONDS. In the first place, Senator, I think that that would not last very long. For example, in the matter of Russia, France loaned Russia billions of dollars before the World War, and lost it all in Russia, and is now prepared to lend to countries in the same situation, or even to lend money to Russia again. I do not think that lasts very long.

My impression is, very strongly, that the only question that remains about the debts at the present time, is the question of whether the debtors can persuade us to cancel, or whether, as a choice between another payment and default, they will default. No more money will ever be paid on the debts, except what we lend.

Senator SHORTRIDGE. That is what France said a long time ago, but there was then, thank God, an Andrew Jackson, and he said to France, in the end, “ You pay," and France paid. You remember that, do you not, full well? 'If we had another Andrew Jackson to-day-I wish to God we had-we would not hear so much quibbling and talking about not paying that debt.

Senator HARRISON. This is a very admirable statement you have given to the committee, because of your great knowledge on this question from an international standpoint. Let me ask you, if you were in the position of President elect Roosevelt, or anyone else here that was going to negotiate upon this proposition, and try to effect a settlement on it and come to some terms of agreement that would meet the approval of the American people, with your knowledge of the sentiment in America, against cancellation, or any great modification of it, what would you suggest ? What kind of trade could we make?

Mr. SIMONDS. I do not think any trade can be made, Senator.

Senator HARRISON. You do not think anything can be done? It is just a question of cancellation or repudiation?

Mr. SIMONDS. If the Senator will permit me, the situation is very nearly on all fours with the situation in respect to the French people and reparations. The French people set out to collect their reparations, firmly convinced that they had a moral claim to them. No government, no prime minister, and nobody during a period of 10 years could have lived who endeavored to tell the French people that they could not collect. They went so far-Poincare being another Andrew Jackson-as to occupy the Ruhr, but, occupying the

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Ruhr, they did not get any money. All last summer, at the time of the conference of Lausanne, the French people at last realized that they could not get money. They could not get tariffs. They could not get securities, and then the public sentiment of France, recognizing the impossibility, the Government of France was told to make a realistic settlement, which was a practical cancellation, without any promise that amounted to anything about a return, because, if you will remember

Senator SHORTRIDGE. You draw a distinction between a demand for reparations and a bona fide equitable debt, do you not?

Mr. SIMONDS. The Senator asked me about giving the American state of mind. The French state of mind in connection with reparations was identical with the American state of mind. The French Government was unable to do anything until at last the French people appreciated that, while to their minds those were sacred claims, they could not by bayonets, they could not by threats, they could not by politics, get anything out of it, and so finally, after 10 or 12 years, you had the agreement of Lausanne, which recognized the impossibility of collecting the debts.

Senator HARRISON. You do not think, then, that in the negotiations you could get England to agree to take a certain percentage more of some of our raw products that they need, which are produced here, such as cotton, for instance, or some percentage more of our wheat, of which we have a surplus, or some other products, which I might enumerate, and agree upon their part to make certain agreements with reference to their going back upon the gold standard, involving the stabilization of exchanges, and some payment, probably, in silver ? You do not think that we would get anywhere upon any such proposition as that?

Mr. SIMONDS. You made two propositions, one about the tariffs, and one about the gold standard.

Senator HARRISON. I am just trying to get your viewpoint, as to whether or not there is any basis for a meeting of minds.

Mr. Simonds. Suppose, for example, the British do make certain tariff concessions that would allow us to sell more wheat, and so forth. It is still necessary for the British to get the necessary American exchange to pay for that. Senator HARRISON. But if they get back upon the gold standard

Mr. Simonds. If they go back on the gold standard, Senator, for the time being, they will sell less, not more, because they will lose this advantage that they now have.

Senator HARRISON. They would probably sell less.

Mr. SIMONDS. As to the gold standard, when our representatives go to talk with the British, the British will say, "The question of the debt was not responsible in any degree for our going off the gold standard, because at the time we went off the gold standard we were receiving, in reparations and our other debts, what we were paying you. We were driven off the gold standard by something quite different. Therefore, now to cancel the debt would not in any degree protect us against the things that drove us off before.”

Therefore, in the matter of tariffs, when you come to discuss tariffs, the British, French, and everybody else would say, "Yes, let us talk tariffs, but it must be a reciprocal concession.”

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When you come to the question of the gold undoubtedly the United States will be asked to associate itself with France in guaranteeing to sustain England on the gold standard if she is again assailed and finds herself in a difficult situation.

Senator GORE. And if we get a tariff concession from Great Britain, so that more of our goods could go in there, we would have to admit more of her goods into this country to pay for them.

Mr. Simonds. Certainly. With reference to practically everything that you admit, you are then up against the domestic question. What they pay us now is for what they take. You would have to make new business on both ends, not on one side. If you

made new business here, you would have to make new business to pay for it.

Senator HARRISON. In this country, for instance, we are trying to restrict the production of cotton. "We believe that is one of the ways to stabilize the price of cotton. We have too much of a surplus. Could not England use its good offices in some of the other countries with reference to the restriction of their cotton, so that they might take a little more of ours?

Mr. Simonds. They could not do that. To give you one example, the French are engaged down in Senegal trying to start a cotton industry of their own. There is nothing the British could do to persuade them to do it.

Senator HARRISON. It seems, from your viewpoint, that we would have to give everything up, and get nothing in return.

Mr. SIMONDS. Senator, the point I have tried to testify to was the fact that so far as I have yet been able to see, no one has found : means for taking payment on a debt, because none of them want to pay the taxes themselves. I have not tried to testify that I believe in cancellation. I have tried to testify that it seems to me that until we make up our minds whether we are going to cancel or make the changes in our own system that would permit us to collect, this great obstacle to talk about anything else is there. I do not believe there will be an enormous recovery when the debts are removed, and I do not believe there will be any effect from talking about it until this obstacle is removed.

Senator King. You have expressed your view as to the payment of debts by European nations. I suppose you referred to public debts, and not to private debts.

Mr. Simonds. I do not remember the connection in which I spoke, Senator.

Senator King. My recollection is you said you did not believe that European nations would pay their debts.

Senator HARRISON. Foreign debts.

Senator King. Pay their foreign debt to the United States. You referred to the debts which the nations owed the United States, and not the debt which individuals owe.

Senator HARRISON. The war debts.

Mr. SIMONDS. Senator, I do not think there is any difference. You have to invent some means of taking payment on your private debt, just as on your public debt.

Senator METCALF. Was there not a banker who came back a few years ago from Germany who said that our Government had to give up its debt so the private debts could be paid ?

Mr. SIMONDS. Giving up the governmental debt will not contribute the least bit to collecting the private debts--not the slightest degree. Both of them can be paid only in goods.

Senator KING. As you know, a number of the cities of Germany have floated their bonds in the United States, and those bonds have been purchased, in the main, by private individuals.

Mr. SIMONDS. Yes.

Senator King. Do you include, in your expression of your belief that the European debts will not be paid, the debts due from the municipalities to individuals who hold their bonds?

Mr. SIMONDS. With this qualification, Senator: I said I did not think they would be paid unless the United States provided some method of receiving; and in that I referred to everything, private and public, municipal and everything else that there is now standing to our account in Europe.

Senator King. I understand that we have loaned probably two or three billions to European private corporations and individuals.

Mr. SIMONDS. We have two and a half billion in Germany alone. Some of that is municipal, and some of it is industrial, but it is all there. Senator King. Then, you include in the category of nonpayment,

, not only public debts, but private debts?

Mr. ŠIMONDS. Everything that we do not, Senator, by some action of our own, provide a method of receiving. The whole problem, as I see it, is the problem of receipt.

Senator GORE. We have to be paid in goods or in gold. They have not the gold, and we will not let them send the goods in.

Senator SHORTRIDGE. What is the difference, Mr. Simonds, between these two suggested situations? Let us say that a municipality in Germany issues bonds which are sold in America, and are now held in America; and a municipality in California issues its bonds, which are held by the citizens of the State of New York. Is there any difference in the matter of payment?

Mr. SIMONDS. A complete difference, Senator. There is no resemblance.

Senator SHORTRIDGE. Where is the difference? Does the intervening water make the difference? Mr. SIMONDS. The intervening water in the money would.

Senator SHORTRIDGE. I grant you that. The debtor must find the money with which to pay the creditor, whether they be divided by a continent, or an ocean.

Mr. SIMONDS. The division has nothing to do with it, Senator. Senator King. They have free trade between California and New York, do they not?

Mr. SIMONDS. The American dollar has to be purchased by German money before the German can use it to pay his bills. If he tries to buy it with German money, the result would be to lower the value of the German money, so the German money will be steadily going down, so fast that he can not ever get the American money to pay.

Senator SHORTRIDGE. When the German municipality issued its bonds and sold them to American citizens, it carried the promise to pay, did it not?

to pay.

Mr. SIMONDS. Every borrowing carries the promise of the borrower

Senator SHORTRIDGE. At what juncture does the debtor have the right to talk about tariffs, or anything else?

Mr. SIMONDS. At the time when he is no longer able to pay, as the Senator said about the western situation.

Senator SHORTRIDGE. Oh, of course, if a given nation goes bankrupt and takes advantage of some international bankruptcy law, and becomes relieved from its obligation, that is one thing.

Senator KING. Is a nation bankrupt when it is producing large quantities of commodities for consumption by its own people; when it produces, likewise, large quantities of commodities which it has been in the habit of exporting, and from which it derived a profit, and all at once its export trade is absolutely cut off? It desires to trade. It has outstanding obligations with other countries. It can not get the gold exchange to pay the obligations. It has no gold. It has the same houses, the same lands, the same internal wealth as it always had. It is not bankrupt, is it? It may not be able to get the gold to pay.

Mr. SIMONDS. Only in the sense, Senator, that we have a new situation. We have not a new word, so we use the word “ bankruptcy."

Senator HARRISON. Thank you very much, Mr. Simonds.

The committee would like to have an executive session at this time.

(Whereupon, at 3.55 o'clock p. m., the subcommittee went into executive session, at the conclusion of which an adjournment was taken until to-morrow, February 22, 1933, at 10 o'clock a. m.)

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