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eventually lead to a final and comprehensive agreement. Late in 1928 it seemed that conditions in Germany were such as to make it desirable to arrange for a definite settlement of the reparation question. On September 16, 1928, Germany, Belgium, France, Great Britain, Italy, and Japan agreed that a committee of financial experts to be appointed should be entrusted with the task of drawing up proposals for a complete and final settlement of the reparation problem. This committee held its first meeting in Paris on February 11, 1929, and elected Mr. Owen D. Young, an American citizen, chairman. After arduous and protracted deliberations, the committee on June 7, 1929, finally reached agreement on its report, which is generally known as the Young plan. The plan provides among other things that Germany shall pay an average annuity, exclusive of the annual sum required to meet the service of the German external loan of 1924, of 1,988,800,000 marks (about $473,000,000) over a period of 37 years, and varying annuities for 22 additional years. The committee recommended a division of these annuities among the several creditor governments in accordance with which the share allocated to the United States on account of its combined claims for Army costs and mixed claims was an average annuity of 66,100,000 marks (about $15,700,000) for 37 years and a flat annuity of 40,800,000 marks (about $9,700,000) for 15 years thereafter.

The Young plan, when adopted, will supersede the Dawes plan and the agreement of January 14, 1925. All the machinery through which payments have been collected from Germany and distributed to the creditor governments will be abolished. If, therefore, the United States was to receive any further payments in liquidation of Germany's treaty obligations, it was necessary either to join in the general European settlement by adopting the Young plan with its many complicated arrangements having no application to the United States, or to negotiate a simpler separate agreement with Germany alone. There seemed to be no justification at this late date for involving the United States in the responsibilities for collecting, mobilizing, and distributing réparation payments which the adoption of the Young plan and participation in the organization and management of the bank for international settlements would necessitate. With the approval of the President, the State and Treasury Departments therefore negotiated with the German Government a form of agreement under the terms of which it is proposed that the United States will receive from Germany on account of the costs of the United States army of occupation an average annuity of 25,300,000 marks (about $6,026,000) for a period of 37 years, and on account of the awards of the Mixed Claims Commission a flat annuity of 40,800,000 marks about $9,700,000) for a period of 52 years. Under the Young plan the Governments of France and Great Britain forego the collection of about 10 per cent of their total army costs. At a critical stage of the deliberations of the Young committee, the President, after a conference concerning the entire situation with leaders of both Houses of Congress, none of whom raised any objection, stated for the information of the Young committee that he was prepared to recommend to the Congress that it authorize the acceptance of the annuities allocated to the United States which involve a similar reduction of 10 per cent of our army costs..

A statement of the army cost account as of September 1, 1929, follows:

Army costs
Total army-cost charges (gross), including expenses of inter-

allied Rhineland High Commission (American department). $292, 663, 435. 79 Credits to Germany:

Armistice funds (cash requisitions on
German Government)

$37, 509, 605. 97
Provost fines.

159, 033. 64 Abandoned enemy war material.

5, 240, 759. 29 Armistice trucks.

1, 532, 088. 34 Spare parts for armistice trucks...

355, 546. 73 Coal acquired by army of occupation...

756. 33

44, 797, 790. 30

247, 865, 645. 49 Payments received:

Under the army-cost agreement of May

25, 1923, which was superseded by
agreement of Jan. 14, 1925..

14, 725, 154. 40
Under Paris agreement of Jan. 14, 1925. 39, 203, 725. 89

53, 928, 880. 29 Balance due as of Sept. 1, 1929...

193, 936, 765. 20 After allowing for the 10 per cent reduction, amounting to $29,266,343.58, the sum due on account of army costs will be $164,670,421.62. The United States will receive on account of this debt about $249,000,000 in varying annuities over a period of 37 years. The difference of about $85,000,000 is intended to compensate the United States for the deferment of its payments over a 37-year period rather than the 15-year period provided for under the Paris agreement, and represents interest at à rate of about 3% per cent per annum on such deferred payments.

A statement of the estimated amount still due from Germany as of September 1, 1929, on account of the awards of the Mixed Claims Commission follows:

Mired claims Principal of awards certified to Treasury for payment.---

$113, 295, 478. 68 Interest up to Aug. 31, 1929..

59, 407, 605. 03

$172, 703, 083. 71 Estimated principal amount of awards yet to be entered and certified..

32, 000, 000.00 Estimated interest up to Aug. 31, 1929.. 21, 000, 000.00

53, 000, 000.00 Awards to United States Government. 42, 034, 794. 41 Interest up to Aug. 31, 1929.

22, 900, 000.00

64, 934, 794. 41

290, 637, 878. 12

Received from Germany up to Aug. 31, 1929.
Earnings and profits on investments.

31, 831, 472. 03
2, 149, 692. 70

33, 981, 164. 73

Estimated balance due as of Sept. 1, 1929..

256, 656, 713. 39 Under the Paris Agreement the United States received during the standard Dawes year the sum of about $10,700,000 (45,000,000 marks) on account of mixed claims awards. The sum provided in the proposed agreement with Germany is an annual payment over 52 years of about $9,700,000 (40,800,000 marks). It is estimated that this latter annuity will pay in full all of the awards of the Mixed Claims Commission, United States and Germany, in favor of the United States and its nationals, with interest. On the basis of the annuity granted to the United States on this account under the Paris Agreement, it was estimated that the awards to private cluimants would have been paid in approximately 30 years and the awards to the Government in about 14 additional years. Under the proposed agreement it is estimated that the private claimants will be paid in full in about 35 years and that the Government will receive its payments in about 17 additional years with simple interest at 5 per

In other words, under the proposed agreement it will require approximately 5 additional years to pay off the private claimants and about 3 additional years to pay the Government's claims, all deferred payments, however, continuing to bear interest at the rate of 5 per cent per annum.

The proposed agreement follows in general those made with our other foreign debtors except that the obligations to be issued thereunder are payable in marks rather than dollars and are unassignable. The German Government, however, undertakes to maintain the mint parity of the mark.

As part of this report there is appended a copy of the statement made on March 10, 1930, by the Undersecretary of the Treasury before the committee. The President's message of March 4, 1930, inclosing a copy of the report dated March 3, 1930, from the Secretary of the Treasury, and a copy of the proposed agreement to be executed between the German Government and the United States will be found in Senate Document No. 95 (71st Cong., 2d sess.), copy of which is also attached.

APPENDIX

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STATEMENT OF UNDERSECRETARY OF THE TREASURY MILLS BEFORE THE WAYS AND

MEANS COMMITTEE RELATING TO I. R. 10180, A BILL TO AUTHORIZE THE SETTLEMENT OF THE INDEBTEDNESS OF THE GERMAN REICH TO THE UNITED STATES ON ACCOUNT OF THE AWARDS OF THE MIXED CLAIMS COMMISSION, UNITED STATES AND GERMANY, AND THE COSTS OF THE UNITED STATES ARMY OF OCCUPATION

The bill now before you for consideration authorizes the Secretary of the Treasury, with the approval of the President, to enter into an agreement with Germany as set out in general terms in the bill, providing for the complete and final discharge of the obligations of Germany to the United States in respect of the awards of the Mixed Claims Commission, United States and Germany, and the costs of the United States Army of occupation.

Under the terms of the armistice convention signed November 11, 1918, and of the treaty restoring friendly relations signed at Berlin August 25, 1921, which incorporated by reference certain provisions of the Versailles treaty, Germany is obligated to pay to the United States the costs of the United States army of occupation and to satisfy claims of the American Government or its nationals who have suffered loss, damage, or injury to their persons or property, directly or indirectly, since July 31, 1914, through the acts of the Imperial German Government or its agents.

ARMY COSTS

The total costs of the United States army of occupation amount to $292,663,435.79. Except for cash requisitions on the German Government for the use of the army of occupation aggregating $37,509,605.97 and certain other items, such as provost fines, abandoned enemy war material, etc., amounting to $7,288,184.33, the United States Government received no payments on account of Army costs up to May 25, 1923. On that date the United States and the principal allied powers signed the so-called Wadsworth agreement which provided that our Army costs should be divided into 12 annual installments, and should be, during the first 4 of the 12 years, a first charge on cash payments received from Germany after the expenses of the Reparation Commission and the current expenses of the allied armies of occupation, but during the last 8 years should be an absolute prior charge on all cash payments, except for the cost of the Reparation Commission. Ratifications of the Wadsworth agreement were

SR-71-2-VOL 2- 41

never exchanged but we received a payment under it of $14,725,154.40 in January, 1925. The agreement was superseded by the so-called Paris agreement of January 14, 1925, which also covered awards of the Mixed Claims Commission. This latter agreement was concluded at a meeting of representatives of the creditor powers, including the United States, called for the purpose of making distribution of the annuities provided for under the terms of the Dawes plan, which had been adopted in 1924. Under the provisions of the Paris agreement the United States was to receive on account of its Army costs, beginning September 1, 1926, the sum of 55,000,000 gold marks, or about $13,100,000 per annum, which payments were to constitute a first charge on cash made available for transfer by the transfer committee out of the Dawes annuities after the provision of the sums necessary for the service of the 800,000,000 gold mark German external loan of 1924 and for the costs of the reparation and other commissions. Under the provisions of the Wadsworth agreement our Army costs should have been liquidated by the end of 1935. Under the Paris agreement the payments would extend over a period of about 18 years, beginning September 1, 1926.

Up to the first of September, 1929, the United States had received on Army cost account $39,203,725.89 under the Paris agreement.

As of September 1, 1929, there was still due on account of Army costs $193,936,765.20.

MIXED CLAIMS

By virtue of an agreement entered into on August 10, 1922, by the United States and Germany, there was set up a Mixed Claims Commission charged with the duty of passing upon the claims of American citizens arising since July 31, 1914, in respect of damage to or seizure of their property, rights, and interets, and upon any other claims for loss or damage to which the United States or its nationals have been subject with respect to injuries to persons or to property, rights and interests since July 31, 1914, as a consequence of the war, and including debts owing to American citizens by the German Government or by German nationals.

The first meeting of the commission was held on October 9, 1922. Up to August 31, 1929, awards had been certified to the Treasury for payment which with interest to August 31, 1929, aggregated $172,703,083.71. It is estimated as of August 31, 1929, that the principal amount of awards yet to be entered and certified together with interest to that date, amount to $53,000,000, and in addition awards to the United States Government with interest to August 31, 1929, amount to $64,934,794.41. In other words, as of August 31, 1929, it is estimated that the total awards of the Mixed Claims Commission made and to be made aggregated with interest $290,637,878.12.

No provision for the payment of awards of the Mixed Claims Commission was made until the Paris agreement of January 14, 1925. The Paris agreement provided that the United States should receive 24 per cent of all receipts from Germany on account of the Dawes annuities available for distribution as reparations, provided that the annuity resulting from this percentage should not in any year exceed the sum of 45,000,000 gold marks. Up to September 1, 1929, the United States had received from Germany under the Paris agreement for account of mixed claims, $31,831,472.03, which with earnings and profits on investments amounting to $2,149,692.70, made available for distribution $33,981,164.73, and left $256,656,713.39 still to be provided for. It must be understood in this connection that the figures relating to the total amount finally awarded by the Mixed Claims Commission is necessarily only an estimate, since all of the awards have not as yet been made.

In the meanwhile, the Congress in March, 1928, enacted what is known as the settlement of war claims act of 1928. You gentlemen are too familiar with that act to make it necessary for me to describe it in detail. Suffice it to say that it made provision for the order of priority in which mixed claims should be paid, for the retention of part of the German property held by the Alien Property Custodian and part of the funds to be received on account of awards made by the arhiter to German nationals until a certain percentage of the American claims had been paid, and then for the ultimate return of the German property and funds to their owners. The act also covered the rate of interest to accrue on claims until their final liquidation. Any estimate of the total amount due from Germany on account of mixed claims must depend, therefore, not only on the awards of the Mixed Claims Commission but on the terms of the settlement of war claims act.

It will be observed that the amounts received up to the present time, both on account of Army costs and mixed claims, have been paid, not by virtue of any agreement with Germany looking to the liquidation of its treaty obligations, but by virtue of an agreement with the creditor powers, under the terms of which they undertook to assign to the satisfaction of our claims a portion of the payments received through the agent general for reparation payments. This is an anomalous situation. In view of the fact that the other creditor powers have now reached an agreement with Germany for the final liquidation of their claims, the time has come for the United States to do likewise. "Two courses were open to us. We could either join with the other creditors in a general settlement, or rely on a separate agreement with Germany for the satisfaction of our claims. The course of events which led to the necessity for such a decision on our part was as follows:

THE YOUNG PLAN In 1928 the principal creditor powers agreed to set up a committee of independent financial experts to be entrusted with the task of drawing up proposals for the complete and final settlement of the reparation problem. The so-called Young plan is the report which this committee rendered under date of June 7, 1929. As a result of the Young committee's reappraisal of Germany's capacity to pay it recommended annuities smaller than the standard annuity of 2,500,000,000 gold marks ($595,000,000) in force under the Dawes plan. Beginning with 742,000,000 reichsmarks ($176,000,000) in the 7 months ending March 31, 1930, which are considered as the first Young plan year, the annuity is 1,707,900,000 reichsmarks ($406,000,000) in the year ending March 31, 1931, and increases gradually to the maximum of 2,428,800,000 reichsmarks ($578,000,000) in the year ending March 31, 1966, or an average of 1,988,800,000 reichsmarks ($473,000,000) for 37 years, and continues at about 1,600,000,000 reichsmarks ($381,000,000) to 1,700,000,000 reichsmarks ($405,000,000) for an additional 22 years.

It is obvious that the reduction in the annuities to be paid by Germany necessitated a scaling down of the amounts allocated to each of the creditor powers under the Dawes plan and the Paris agreement. The Young plan undertakes not only to fix the annuities to be paid by Germany but to allocate those annuities among the several creditor powers. The United States was allocated annuities averaging 66,100,000 reichsmarks ($15,700,000) for the first 37 years and a fixed annuity of 40,800,000 reichsmarks ($9,700,000) for 15 years thereafter.

The Young plan, with some modifications, which do not affect our position, was formally adopted by representatives of all the interested powers, with the exception of the United States, at The Hague in January, 1930, and the settlement there reached is now awaiting ratification by the governments and the enactment of certain necessary legislation by the German parliament.

Two questions present themselves for decision: First, are the annuities provided for the United States acceptable to us, and, in the second place, should we become parties to the Young plan agreement and receive payments through the machinery provided therein, or should we rely on a direct agreement with Germany for the satisfaction of our claims?

While it is true that under the so-called Dawes plan and the Paris agreement we were to receive on both accounts an annuity of 100,000,000 gold marks ($23,800,000) as contrasted with an average annuity of 66,100,000 reichsmark ($15,700,000) suggested under the Young plan, it should be pointed out that the so-called Dawes plan was a temporary measure and that no period was fixed during which the aforesaid annuities were to be paid. In other words, there was no assurance that we would continue to receive 100,000,000 gold marks a year until the claims on account of army costs and mixed claims had been completely discharged. Perhaps a better method of approach to the problem is to ascertain whether the proposed annuity involves any essential sacrifice in the satisfaction of our outstanding claims against Germany. In so far as mixed claims are concerned, if, as is provided in the bill now before you, 40,800,000 reichsmarks per annum are assigned to their payment, it is estimated that that amount will be adequate to discharge the mixed claims obligation in full over the period of years provided for, with interest at 5 per cent on unpaid amounts including the United States Government's claim. Whatever sacrifice is involved as compared with the Dawes annuity is in the time element. In other words, it is estimated that it will require 52 years to pay all claims, about 35 years to pay all of the private claims awarded to American citizens, including the return of the unallocated interest fund belonging to the German claimants, and about 17 years additional to liquidate the claims allowed the Government of the United States. On the

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