MAY 26 (calendar day, MAY 27), 1930.-Ordered to be printed Mr. SMOOT, from the Committee on Finance, submitted the following REPORT [To accompany H. R. 10480] The Committee on Finance, to whom was referred the bill (H. R. 10480) 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, having had the same under consideration, report it back to the Senate without amendment and recommend that the bill do pass. Following is a copy of the House report on the bill: [House Report No. 1089, Seventy-first Congress, second session] The Committee on Ways and Means, to whom was referred the bill (H. R. 10480) 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, having had the same under consideration, report it back to the House with an amendment, and recommend that as amended the bill do pass. The amendment is as follows: On page 3, line 18, after the word "of", strike out the remainder of the paragraph down to the period and insert, "1/2790 kilogram of fine gold". This amendment corrects a clerical error in the last sentence of the last section of the bill. The agreement authorized by the bill will be the first agreement between the United States and Germany for the liquidation of Germany's treaty obligations on account of (1) reimbursement to the United States for the expenses of its army of occupation, and (2) payment of the awards entered by the Mixed Claims Commission, United States and Germany, on behalf of the United States Government and its nationals. The law authorizing the German Government to execute the proposed agreement was approved by President Hindenberg on March 13, 1930. Under the terms of the armistice convention signed November 11, 1918, and of the treaty restoring friendly relations signed at Berlin, August 25, 1921, Germany is obligated to pay to the United States the costs of its army of occupation and the awards entered in favor of the United States Government and its nationals by the Mixed Claims Commission, United States and Germany, established pursuant to the agreement of August 10, 1922. Although payments have been received on account of these claims through arrangements which this Government has had with the principal allied creditor powers, the United States has had no direct arrangement with Germany for the liquidation of these obligations. Now that Germany has concluded negotiations with all the allied creditor powers for the final liquidation of her war debts to them, which will probably become effective early in May of this year and in which the United States has no participation, it becomes necessary, if the United States is to continue receiving payments on account of these claims against Germany, to provide for them by agreement with that Government. The Wadsworth agreement signed May 25, 1923, by the principal allied powers and the United States provided that the United States. should be reimbursed for the expenses of its army of occupation in 12 equal annual installments, the first to be paid on or before December 31, 1923. The United States was to be paid these annual installments out of funds to be collected by the allied powers from Germany. This agreement was never ratified, but certain funds aggregating $14,725,154.40 were set aside under it and were released to the United States upon the coming into force of the Paris agreement of January 14, 1925. In the fall of 1923, due to the unstable conditions in Germany, it was apparent that the payments demanded by the Allies from Germany far exceeded its immediate capacity to pay, and the whole question of the payment of Germany's war obligations came up for consideration. The Reparation Commission in its decision of Novenber 30, 1923, invited a committee of experts, headed by Gen. Charles G. Dawes, to consider the means of balancing the German budget and the measures to be taken to stabilize the currency of Germany as well as to determine what reparation payments might be made by Germany in the immediate future. This committee's report, generally referred to as the Dawes plan, was made in the spring of 1924. The United States was not a party to the arrangement establishing the Dawes plan, but since Germany was virtually in receivership and the payments provided for in the plan were designed to represent Germany's capacity to pay, the United States could not expect to receive the payment of any sum not included in the plan. In order to provide for the distribution of the Dawes annuities, representatives of all the creditor countries met and signed an agreement at Paris dated January 14, 1925. Under the terms of this agreement the United States was to receive on account of its claim for the expenses of its army of occupation the sum of 55,000,000 marks (about $13,000,000) per annum, beginning September 1, 1926, until the army costs should be fully liquidated. These payments were to constitute a first charge on cash made available for transfer out of the Dawes annuities after providing for the service of the German external loan of 1924 and expenses of certain commissions. The agreement also provided that the United States should receive on account of the awards of the Mixed Claims Commission 24 per cent of all receipts from Germany available for distribution as reparations, not to exceed, however, in any one year the sum of 45,000,000 marks (about $10,700,000). The Government of Germany was not a party to this agreement between the creditor powers, including the United States. The United States has received in full up to September 1, 1929, the amounts provided for it in the Paris agreement and set out in the statements of account below. When the Dawes plan was adopted, it was understood that it did not represent a permanent arrangement but only a plan of settlement intended to operate for a sufficient time to restore confidence and 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 reparation 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 à 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). Provost fines... Abandoned enemy war material. Spare parts for armistice trucks.......... Payments received: Under the army-cost agreement of May $37, 509, 605. 97 159, 033. 64 193, 936, 765. 20 Balance due as of Sept. 1, 1929. 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 a 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: 33, 981, 164. 73 256, 656, 713. 39 Estimated balance due as of Sept. 1, 1929.-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 claimants 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 cent. 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 STATEMENT OF UNDERSECRETARY OF THE TREASURY MILLS BEFORE THE WAYS AND MEANS COMMITTEE RELATING TO H. R. 10480, 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 |