3. AMERICAN COMMITTEE FOR STANDSTILL CREDITORS OF GERMANY

Mr. Andrew L. Gomory, vice president, Manufacturers Trust Co., 55 Broad Street, New York City.

Mr. Russel G. Smith, executive vice president, Bank of America, San Francisco, Calif. Mr. Ewen C. MacVeagh, member of the law firm of Davis, Polk, Wardwell, Sunderland & Kiendl, 15 Broad Street, New York City.

Mr. Erving H. Adler, assistant secretary, Manufacturers Trust Co., 55 Broad Street, New York City.

Mr. Avery Claflin, president, French-American Banking Corp., Nassau Street, New York City. Mr. William J. Hartney, vice president, Na

tional Shawmut Bank, Boston, Mass.

Mr. H. W. Auburn, European representative, Manufacturers Trust Co., 1 Carnhill, London, England, EC3.

Mr. WILEY. Mr. President, the record of the hearings also contains lists of the creditor delegations for the various governments. As I have said, 17 governments were interested in getting together for the purpose of endeavoring to devise some constructive method of solving the problems. If it is proposed as an alternative that the committee send Tom, Dick, and Harry out over the country for the purpose of ascertaining who owns the bonds, I may say for the committee that that proposal will not be

followed.

Mr. LONG. Mr. President, will the Senator yield for a question?

Mr. WILEY. I yield.

Mr. LONG. The Senator mentioned the name of the Honorable James Grafton Rogers as if he were a member of a Democratic administration. I under

stand he was a member of the Foreign Bondholders Protective Council. We are dealing with hundreds of millions of dollars in German war bonds, obligations of the previous German Government, rep

resenting, as I understand, money owing to the people of this Nation. Why should anyone want this Nation to redeem the old Weimar Republic bonds? Why the American taxpayer should not get some of his money back I cannot understand. Can the Senator from Wisconsin tell us the rate at which the Wei

mer bonds were selling? Were they sell

ing at par?

Mr. WILEY. I can tell the Senator from Louisiana nothing about the bonds of the Weimar Republic.

Mr. DOUGLAS. Mr. President, will the Senator yield for a question?

Mr. WILEY. I yield to the Senator from Illinois.

Mr. DOUGLAS. Is it not true that virtually all the issues have been selling probably at less than 10 percent in open market transactions, that they have been regarded as almost completely in default, and that they are now to be bought in at 100, plus accumulated interest?

Mr. WILEY. If the Senator from Louisiana will refer to the hearings before the Committee on Foreign Relations, at page 86, he will find information regarding the persons who participated in the London conference on German external debt on behalf of the United States creditors.

Mr. LONG. If the Democratic administration sent someone to agree to a very poor arrangement for the American people, does that mean that the Repuband make an agreement in the case of lican administration should take it over private bondholders on the basis of 100 cents on the dollar, merely because a Democratic official did something wrong? Speaking for myself, I cannot understand it. I do not see why the holders of defaulted German bonds should be given priority over American taxpayers. Does the Senator explain that that should be done merely because certain Democratic officials may have negotiated such an agreement? If I thought ated such an agreement? If I thought they had made such an agreement while Harry Truman was still in the White House, I still would vote against it.

Mr. WILEY. When I said the Democratic administration negotiated it, I meant it negotiated a good agreement, in view of all the facts and circumstances. They were dealing with a nation whose national and international or external debts were huge. With West Germany assuming the bonds of the whole nation, there came a time when nothing was paid on them. Then, too, nothing was paid on them. Then, too, it was a matter of dealing with a nation which had been split in two. Now its people have made a fine recovery, and are coming back. I refer to the West Germans. They want this agreement. The only argument the Senator has against it is that somebody may have bought some of those bonds at a discount, and may get paid for them.

Government bonds may be bought at a discount, and may be bought solely to make 10 points on them; but that does not make the one who buys them a crook. One may look so intently at the situation that he may overlook entirely the real

objective of the agreement.

The agreement is for the purpose of stabilizing the economic life of Germany. It is to get a settlement from Germany for this Government on a basis of 33% percent. When I was a youngster and engaged in the practice of law, I never knew of a single bankruptcy case in which the creditors were paid as much

as 33 percent. Consequently, when a nation such as Germany, which has gone

through hellfire and is trying to come back, to stabilize her currency and to get going, agrees to such a composition, it seems to me to be advisable to accept it. If Germany can get on her feet she will be able to obtain credit throughout the world. We say that we want Germany as a friend, and that we want to assist her. It is time that we came through, and did what we think the United States could reasonably do.

Mr. MALONE. Mr. President, will the Senator from Wisconsin yield?

Mr. WILEY. I yield to the Senator from Navada.

Mr. MALONE. We are making this decision to help Germany, are we not?

Mr. WILEY. I yield to the Senator from Louisiana.

notices were given.

Mr. MALONE. Does the Senator from Wisconsin remember that in 1945,

or following World War II, there was a plan known as the Morgenthau plan, designed to make an agrarian state out of Germany? Just who was it that kept Germany from effecting a recovery, as it should have, immediately following World War II?

Mr. WILEY. What is the question?

Mr. MALONE. That is my question. Who prevented recovery on the part of Germany? Was it attributable to the Morgenthau plan, which destroyed her industry following World War II, or was it on account of the inability of Germany to really reorganize its industry so that the nation could again become self-supporting through increased production?

Mr. WILEY. Following the peace, after the terrible holocaust which seared all of Europe and which seared the minds of the world, there was developed what was thought to be a desirable plan, which was called the Morgenthau plan. It was a plan intended to and which did in part take from Germany her productive capacity.

Mr. MALONE. After what the war did, the Morgenthau plan completed the destruction, did it not?

Mr. WILEY. It took a considerable portion of Germany's large industries.

Mr. MALONE. If the Senator will yield further, I will say that in 1947 the junior Senator from Nevada visited Germany's industries, including the steel plants and coal mines of the Ruhr, the chemical plants in Frankfurt, and the manufacturing districts generally of Germany.

On every hand there was evidence of the deliberate destruction and wrecking of German industry.

Germany was never to be allowed to recover as an industrial nation. Now, I would ask the distinguished senior Senator from Wisconsin, when did the change in United States policy take place, whereby we are again proposing to make Germany an industrial nation, able again to pay her debts? There was an entirely different condition at the time of my visit to Europe in 1947.

Mr. WILEY. What has that to do with the proposition which we are discussing, namely, the question of whether we will ratify these treaties or agreements?

Mr. MALONE. It has a great deal to do with it. We helped to wreck Germany's industrial production capacity. How do we know that our policy will not change again?

Mr. WILEY. What is the point? Is the Senator from Nevada in favor of ratifying the treaty?

Mr. MALONE. I need further information. We were following England and France's policy in the Morgenthau policy. They must have changed their minds-but how long will the present policy last? Does the Senator have information on that point?

Mr. WILEY. If I understand the Senator's question, I do not see how it relates to the matter of whether we are going to ratify this agreement.

Mr. MALONE. It certainly relates to the future value of German bonds. It relates to the administration's future attitude.

If the Senator will permit me to say again, the Morgenthau plan deliberately proceeded to wreck German industriesto make her purely an agrarian stateso that she would never be competitive in the industrial field again. That was asserted many times in Europe and by our administration leaders as well.

It was a policy derived from the fear of France and England and other European nations, of industrial Germany. Nevertheless, it was the policy which this Nation adopted and followed.

We are now following, as everyone must see, the English and French foreign policy. We are agreeing to the argument advanced by the nations that we must protect their interests in Malayan States and Indochina.

There is a conference in progress here today where England and France are advancing the argument that we must protect the colonial systems of those two nations.

How far are we going in the direction, of building up industrial Germany when both France and England want to hold Germany down in Europe? Both France and England say that they are more afraid of an industrially strong Germany than they are of Russia. If they prevail, I fear that German bonds will ultimately have little value.

Mr. WILEY. I am not recommending any bonds. I am trying to say that the Executive has sent the treaties to the Senate. They were negotiated by the previous administration, and the present administration has approved the action.

In my humble opinion, there is no sensible alternative to ratifying them. Whether they work out successfully is another question. It depends upon the imponderables of the future. What is going to happen tomorrow, I do not know.

Referring to the Morgenthau plan, let it be definitely stated so that there can be no question about it, that I never was in favor of the Morgenthau plan, and I am happy that we eventually came to a realization that it was not the plan to follow. We stopped to a considerable degree the removal of machinery from Germany. Indeed some of us who have been over there have seen many plants in operation in Germany. Germany has become tremendously energetic for a nation which was bombed almost to pieces.

The question is, having liquidated our claims down to $1 billion, shall we go ahead now and ratify the agreement, so Germany will be able to go into the markets of the world and get more credit to carry on developments?

Mr. MALONE. Mr. President, will the Senator from Wisconsin yield further? Mr. WILEY. I yield.

MORE AFRAID OF GERMANY THAN RUSSIA

Mr. MALONE. At the moment, reports come from Europe that France, at least, and probably other European nations are still more afraid of Germany's industrial recovery, than they are of Russia.

Therefore, if those nations are more afraid of Germany than they are of Russia, and continue to make more and more trade treaties with Russia and continue to perfect their cartels to prevent Germany from taking her rightful place in

Europe so far as trade is concerned, does the distinguished Senator from Wisconthe distinguished Senator from Wisconsin believe that the Germans will be able to meet any debts? Will she be able to meet any of her obligations?

Mr. WILEY. I am not a prophet nor the son of a prophet. France wants the treaty; Great Britain wants it; Germany wants it; the executive department wants it, but there are a few of us, apparently who do not want it.

Mr. MALONE. They also wanted the Morgenthau plan.

Mr. WILEY. It was not the present executive department that wanted the Morganthau plan. A great many persons in the previous executive department did not agree to it. We must remember that different conditions create different mental approaches. At that time, after the terrific attacks in the Second World War, after the tremendous crimes committed by Hitler, conditions in this country were such that there was no possibility of finding any love in the minds and hearts of anyone for the German people. The Morgenthau plan was the result of that very condition.

Since then we have found that hate begets hate and that injury begets injury. America has embarked on a program whereby she has become the great demonstrator of brotherhood. She has spent billions of dollars to try to resuscitate certain European nations.

When Adenauer visited this country he stated that never before in history was there a people who did what we have

done.

Previously, to the victor belongs the spoils was always the program. He stated that we have now reversed it.

I shall never forget that grand man. I think he is as fine a Christian statesman as can be found. To help him we should go ahead with these agreements.

Mr. MALONE. Mr. President, will the

Senator from Wisconsin further yield?
Mr. WILEY. I yield.

Mr. MALONE. I regret that it is necessary to ask these questions, but it seems that the Senator from Wisconsin, who is the chairman of the Committee on Foreign Relations, is the one who should have the necessary information.

It has been said that the reason why there were so many Communist sympathizers after the war was that communism seemed to be the thing to adopt. It was a state of mind to which many succumbed.

The Senator now says that

Most of us did not believe in either the Communist or the Morgenthau doctrine. The junior Senator from Nevada certainly did not believe either plan was good at that or any other time.

On one occasion I was at the lower level of a coal mine in the German Ruhr with a German "shifter" who spoke a little English, and I asked him why, if they wanted to produce more coal, they did not put in more coal cutters.

EUROPE MORE AFRAID OF GERMANY THAN RUSSIA

I told him that in my country, when we wanted to break down some more ore, we opened new faces on the drift when they were available and they certainly were available there as we both could see.

He said that they would like to open more faces and install more coal cutters, but that the only factory which produced the coal cutters was on the reparations list.

The opinion advanced and followed that we should make an agrarian nation out of a great industrial nation like Germany was silly on the face of it. It was worse than that; it was to destroy her as an industrial competitive nation in Europe. The reason was simple and there for all to see.

We as a nation now swing over and want to build up industrial Germany. We hear that European nations are more afraid of Germany than they are of Russia, and they, the European nations, are at this moment making additional trade treaties with Russia.

I should like to know whether the Senator is aware how strongly we believe in the treaty we now advocate-which certainly involves rebuilding Germany, or will we again change our minds and go along with England and France who now admittedly fear Germany more than they

fear Russia?

Mr. WILEY. If I correctly understand the Senator's question, it calls for what my belief is as to what we should do in relation to Germany. I have expressed it half a dozen times. Ratify the treaties. Once we get them ratified, we can go on to the next step.

Second, I do not believe it is the attitude of the people of the United States generally that we shall do a great deal more financing, unless circumstances require it, unless the imponderables of the future require a determination that it is necessary for our own security. Then we shall do whatever is essential, and I believe the United States will be ade

TAXPAYERS WILL TAKE OVER

Mr. WILEY. What opinion?

Mr. MALONE. That is did not seem to be so bad to be a Communist or a Communist sympathizer for a while following the war. I could cite editorials from a prominent Washington newspaper, and opinions from a very prominent lady columnist, if the Senator wishes to see them.

A few persons said the Morgenthau plan was the plan to follow; that Germany must not rise again.

Mr. MALONE. In answer to the Senator's statement, I do not believe the United States will do much more financing abroad, because I think the taxpayers of America will take over and straighten out the thinking of Congress before we can start the second session of the 83d Congress in January of 1954.

Mr. GILLETTE obtained the floor. Mr. GORE. Mr. President, will the Senator from Iowa yield so that I may suggest the absence of a quorum?

Mr. GILLETTE. Mr. President, I ask unanimous consent that I may yield for that purpose, without losing my right to the floor.

The

The motion was agreed to. The PRESIDING OFFICER. Sergeant at Arms will execute the order of the Senate.

After a little delay Mr. AIKEN, Mr. ANDERSON, Mr. BARRETT, Mr. BEALL, Mr. BENNETT, Mr. BRICKER, Mr. BRIDGES, Mr. BUSH, Mr. BUTLER of Nebraska, Mr. CAPEHART, Mr. CASE, Mr. CLEMENTS, Mr. CORDON, Mr. DUFF, Mr. EASTLAND, Mr. ELLENDER, Mr. FERGUSON, Mr. GOLDWATER, Mr. GRISWOLD, Mr. HAYDEN, Mr. HENNINGS, Mr. HILL, Mr. HOLLAND, Mr. IVES, Mr. JACKSON, Mr. JENNER, Mr. JOHNSTON of South Carolina, Mr. KEFAUVER, Mr. KENNEDY, Mr. KUCHEL, Mr. MANSFIELD, Mr. MCCARTHY, Mr. MILLIKIN, Mr. MUNDT, Mr. NEELY, Mr. POTTER, Mr. ROBERTSON, Mr. RUSSELL, Mr. SALTONSTALL, Mr. SMATHERS, Mrs. SMITH of Maine, Mr. SYMINGTON, Mr. THYE, Mr. WATKINS, Mr. WELKER, and Mr. YOUNG entered the Chamber and answered to their names.

The PRESIDING OFFICER. A quo-. rum is present.

Mr. GILLETTE. Mr. President, I do not wish to take more than a few minutes of the time of the Senate. I spoke at considerable length on this question when it was before the Senate last Thursday. I then covered in considerable detail the facts which I believe should be before the Senate in connection with the proposed agreement.

On that occasion I ventured the assertion that, because of lack of familiarity with the subject, not six Members of the United States Senate at that time felt themselves in a position to cast their votes, on the question of ratification of these agreements. At that time the hearings had not even been printed.

I believe the acting majority leader was quite correct in postponing until today action on the proposed agreements, thus giving the Senators who are interested in the subject matter time to study the hearings, in order to ascertain both what they contain and, as was said on Thursday by the Senator from Montana [Mr. MURRAY], what they do not contain.

Certain questions relative to the agreements have not been answered. The committee was not able to secure the answers. A vast sum of money is involved.

In my opinion the Senate has no right to approve the agreements until it is satisfied there is no doubt that the interests of both investors and the taxpayers have been fully protected.

The two principal questions relating to investors are these: (a) What, precisely, are the outstanding issues of German prewar debts which are being settled by these agreements? (b) Who, precisely, are the holders of the bonds?

The principal question relative to the taxpayers is this: By what right in law or in the Constitution can the Senate ratify agreements which scale down by the enormous sum of $2 billion the claims of the United States Government for postwar obligations, in order to make it possible to make payment in full of prewar private claims?

I believe I can best sum up my objections to the proposed settlement by quoting from the hearing, beginning on page 40, during the testimony of Mr. Riddleberger:

Senator GILLETTE. But what you have brought before us then, when it is reduced to its lowest terms, is an agreement under which you people represent the United States of America and agree to write off substantially $2 billion of obligations to the United States which, of course, will have to be made up by the taxpayers. There is no other way to make it up; and at the same time because Germany could not handle them all, Germany was not financially able to pay the postwar debts to the Government, and to pay these private investors that had taken their chances before, you consented to write off $2 billion of obligations so that these private creditors could be paid in full. Is that not a fact?

Mr. RIDDLEBERGER. Senator, may I reply to your question, to your remark, which I think is very accurately expressed by perhaps amplifying the reason why this is done?

**

The CHAIRMAN. I want to ask Senator GILLETTE a question.

If I get your position, you feel that the shaving down of the claim that the Federal Government has against the German Government is out of proportion and there has been no shaving down of the so-called Dawes and other loans owed to private individuals.

Senator GILLETTE. That is substantially true, Mr. Chairman, and it points to the fact that the goal of these negotiations was to set the stage for payment of private obligations even if it had to be effectuated at the expense of the claims of the United States.

Mr. MORSE. Mr. President, will the Senator from Iowa yield at this point? Mr. GILLETTE. I am very glad to yield.

Mr. MORSE. Am I correct in drawing the conclusion, from the material the Senator from Iowa has just read, that if the figure of $2 billion is correct, the proposed agreement amounts, in effect, to authorizing, for the benefit of Germany, really in a mutual-aid program, the appropriation of approximating $2 billion that is not encompassed in any other foreign-aid program the Senate has been asked to approve?

Mr. GILLETTE. That is absolutely the case; that is what this agreement amounts to, in effect.

Mr. MORSE. Am I correct in inferring, from what the Senator from Iowa has said, that a part of the consideration in the negotiations was the agreement on the part of the negotiators that

private bondholders, who had invested in pre-Hitler bonds, and who might be said to have really invested in the rise of a dictator, are to be paid at 100 cents on the dollar?

Mr. GILLETTE. Yes; 100 cents on the dollar, with the exception that some concession was made in the matter of interest. Many of the obligations carried an interest rate of 72 percent.

Mr. MORSE. The security holders will, under the agreement, get back their investment, however, will they not?

Mr. GILLETTE. Yes; as the agreement is proposed, they will get back the face value of the bonds, plus 52 percent interest, accumulated over all these years.

Mr. MORSE. At the present time, no one knows what that amount will be; is that correct?

"The Senate Committee on Finance conducted hearings from December 18, 1931, to February 10, 1932, on the sale of foreign bonds and securities in the United States. According to information brought out at these hearings, the dollar issues of the Dawes and Young loans were marketed in the United States by about 150 banks and over 1,000 securities dealers."

ASCERTAINING WHO BONDHOLDERS ARE

Now, everyone who was alive at that time, knows the tainted atmosphere that permeated the Nation with reference to the handling of those bond sales.

Does the State Department know now who holds those bonds?

Mr. RIDDLEBERGER. Mr. Chairman, I could not say, sir, that we know the holders of every bond, and I think that is self-evident because there were transactions in these bonds, apart from the original issue that went in this country from the thirties—I beg pardon, the twenties

Senator GILLETTE. Then, have you no such

list?

Mr. RIDDLEBERGER. We have no such list. Senator GILLETTE. Don't you know where they are?

Mr. RIDDLEBERGER. The best information that we could get, Senator, was put together in this compilation that is based primarily on Treasury sources.

Senator GILLETTE. If you don't know where they are and where held and in what amount, how do you know that the amount was $546,600,000?

Mr. RIDDLEBERGER. We have to estimate on the basis of figures that are given to us what we think is the situation.

Senator GILLETTE. Given to you by whom? Mr. RIDDLEBERGER. By the Germans. Senator GILLETTE. The Germans? Mr. RIDDLEBERGER. And the trustees. Senator GILLETTE. Don't you bother with the organizations that you set up to protect American security holders? Didn't they furnish you with anything?

Mr. RIDDLEBERGER. Well, to the extent we can get information, of course, we try to get

it, but I cannot say that we have a list giving the present ownership of every bond under a number of issues that is now held in the United States.

That was the evidence all the way through.

Mr. MORSE. Mr. President, will the Senator from Iowa yield to permit me to ask several other questions?

Mr. GILLETTE. Of course.

Mr. MORSE. Then the Senator from Iowa does not know of anything in the record which would give us any assurance that speculators have not been at work in this field and may not have bought many of the bonds for almost token payments or at least for a few cents-in short, for a trifling part of their original face value?

Mr. GILLETTE. There is nothing in the record to assure us about that. When we interrogated some of the witnesses, they expressed a hope, and they said that, so far as they knew, speculators had not been at work.

Mr. MORSE. However, they did not know, did they?

Mr. GILLETTE. They did not know, and they do not know now.

Mr. MORSE. Does the Senator from Iowa know whether any United States law firm has been purporting to represent any group of the bondholders?

Mr. GILLETTE. I have information that is not in the record; and because it is not in the record, I would hesitate to present the information. However,

there is no question that there are law firms representing these groups. But that business is a legitimate one; those firms have a right to represent them.

Mr. MORSE. Mr. President, will the Senator from Iowa yield further to me? Mr. GILLETTE. Of course.

Mr. MORSE. As a lawyer, I would not for a moment question the legitimacy of having lawyers represent the bondholders. They ought to represent them. It is good legal business. It is nice practice if one can get it. But there ought to be a public disclosure, when a proposal comes before us making provision for the payment of their clients. There ought to be a public disclosure as to who the law firms are and as to how many bondholders they represent, and as to what the total amount of the bonds is. To be frank, before I vote for this treaty I want to know how many of the claimants are clients of Sullivan & Cromwell, and other Wall Street attorneys.

Mr. GILLETTE. I can understand the feeling of the Senator from Oregon, and it does him credit; but there is nothing on that point in the record at the present time, and there is nothing in the mind of the Senator from Iowa he feels at liberty to disclose, because such information as he may have was given to him in confidence.

Mr. LONG. Mr. President, will the Senator yield for a question?

Mr. GILLETTE. I am glad to yield to the Senator from Louisiana.

Mr. LONG. I regret I was called from the floor at the beginning of the Senator's statement. Can the Senator inform the Senate as to the percentage of the funds available? Have the other nations obtained settlements? Are the

bonds selling at 37 cents on the dollar, which is the percentage basis on which the United States is being asked to settle?

Mr. GILLETTE. Oh, no.

Mr. LONG. What are the percent ages?

Mr. GILLETTE. I shall be glad to put that information in the RECORD. Since the Senator has asked me the question, I want to refer to a statement which was made by the able chairman of the committee with reference to the fact that we should be willing to make concessions to Germany comparable to the concessions we made to other nations. I should like to read from the interrogation in the record of the hearings. I do not find it immediately, but I shall find it in a moment. However, I asked the representative of the State Department about it, when he made an allegation to the effect that we ought to be willing to make concessions like the concessions we made to others. I said, "Do you know of any case in which we made concessions on public debts to any nation whatever, in order that private investors might be paid 100 percent, or a substantially greater amount?" He replied, "No."

Mr. LONG and Mr. GORE addressed the Chair.

The PRESIDING OFFICER. Does the Senator from Iowa yield, and if so, to whom?

Mr. GILLETTE. I yield first to the Senator from Louisiana.

Mr. LONG. Are we to understand that the reason why this Nation conceded almost two-thirds of the $3 billion owing to it was in order that more money could be paid to private investors?

Mr. GILLETTE. There is not a particle of question about it. The evidence contained in the hearings so shows.

Mr. GORE. Mr. President, will the Senator yield?

Mr. GILLETTE. Let me further answer the Senator from Louisiana. I will yield to the Senator from Tennessee in a moment. Before I answer further the question of the Senator from Louisiana, I desire to call attention to who was representing the United States of America at the debt conference. I have in. my hand a report of the Foreign Bond Holders Protective Council, reporting on the Debt Conference which was held in Lancaster House, London, on February 28, from which I read:

The German Debt Conference, which has been in session at Lancaster House, London, since February 28, adjourned April 4 after five weeks of intensive work. The Conference will meet again on the 19th of May. In the meantime, the German delegation will prepare a basis for the settlement of Germany's external debts which will be presented at the Conference after the recess.

At the plenary meeting of the Conference held this morning, Sir George Rendel, the United Kingdom member of the Tripartite Commission on German Debts, who was in the chair, made a statement on the progress that had been made. He spoke of the variety and complexity of the interests affected by the proposed debt settlement, which had led the Conference to set up, at the outset, the machinery necessary for the establishment and assessment of available data and for reconciling the views and claims of the various creditor and debtor interests. Much

useful work had been done in this first stage, and the prospects for the work of the second session of the Conference were favorable.

M. F. D. Gregh, the French member of the Tripartite Commission, reported on the statements made before the Steering Committee concerning Germany's capacity to pay, and stressed the fact that, although there were some differences between the views of the debtors and of the creditors, the willingness expressed by the German delegation to insure the resumption of service on the debts, and the spirit of understanding shown on the creditors' side provided solid grounds for hope of a satisfactory settlement.

Ambassador Warren Lee Pierson, the United States member of the tripartite Commission, referring to the recess, stated that it will provide an opportunity not only for the Germans to formulate settlement proposals to be considered in May, but also would enable the creditor representatives to consult with their principals in the light of what had been achieved to date. The recess would thus be fully utilized to prepare for the final stage of the Conference.

Four negotiating committees, composed of creditor and debtor representatives, have held more than 40 meetings. In addition, innumerable informal discussions and meetings of various subcommittees have been held. Among the general topics considered have been Germany's capacity to renew service on her external obligations, Germany's economic prospects, and many technical questions concerning the status of various outstanding German obligations.

One negotiating committee of the Conference has devoted its attention to the German public debt, including Reich, provincial, and municipal bonds. Another committee includes members whose principal interest is in the loans of German industrial enterprises. A third committee concentrates on the socalled "standstill" credits. The fourth negotiating committee has been established to consider the problems arising out of Germany's commercial and miscellaneous debts.

In the closing meetings of the Conference, Herr Hermann J. Abs, the head of the German delegation, emphasized again that it was the intention of his Government to reach a definitive and comprehensive settlement of Germany's external debts at the London Conference. He said that, during the recess, the German delegation would consult with the German Federal Government in order to formulate a basis for an expeditious settlement when the Conference resumes its work. Mr. James Grafton Rogers, president of the American Foreign Bondholders Protective Council, who is Chairman of the Creditors' Committee of the Conference drew attention to the progress made thus far. He said that the creditors had studied in detail the problems facing the debtors and assured the German Delegation that, if constructive proposals were put forward after the recess, they would find the creditors in a responsive frame of mind.

On January 15, 1952, the Tripartite Debt Commission announced that the three Governments had reached an agreement with Germany on the amounts Germany will be expected to pay for postwar economic assistance. The United States claim was to be reduced from $3.2 billion to $1.2 billion, payable in 35 years at 211⁄2 percent interest. The claim of the United Kingdom was to be reduced from £201 million to £150 million, and that of France from $15.7 million to $11.8 million, payable in francs. The French and United Kingdom debts are to be paid in 20 years without interest. The three Governments indicated their willingness to defer the priority asserted for these postwar debts if an acceptable pattern for the settlement of prewar debts is worked out between Germany and her creditors.

The bonds are to draw face value plus 52 percent interest over 25 or 30 years, and American taxpayers take a cut of $2 billion. The esteemed Senator from Wisconsin says they are getting something back. He said a person normally would be very glad to get back 33% percent. But some will get back 33% percent and others will get 100 percent. Did anyone ever hear of a bankruptcy proceeding conducted in that fashion?

Mr. GORE. Mr. President, will the Senator from Iowa yield?

Mr. GILLETTE.

I yield.

Mr. GORE. In response to the question of the distinguished junior Senator from Louisiana, I should like to read a sentence from page 11 of the committee report, beginning in the center of the second paragraph on that page:

The thought was expressed in the committee that the effect of this write-down was to make the American taxpayer who had put up money for postwar economic assistance bear the burden of payments to private American creditors.

Representatives of the executive branch of the Government recognized that this was the

case.

In answer to the inquiry of the distinguished junior Senator from Louisiana, that is in the committee report.

I should like to ask the Senator from Iowa this question:

Has the treatymaking power of the United States Government ever before in our history been used to effectuate this kind of an arrangement for the 100 percent liquidation of private debts?

Mr. GILLETTE. So far as I am aware, it has not; and I would venture the statement that if it ever had been attempted, there would have been an uproar on the floor of the Senate that would be a tempest compared with the discussion which is now taking place.

Mr. DOUGLAS. Mr. President, will the Senator from Iowa yield for a question?

Mr. GILLETTE. I yield.

Mr. DOUGLAS. Is it not true that the private holders would not have equality of treatment as compared with the taxpayers?

Mr. DOUGLAS. Mr. President, will the Senator from Iowa yield for a further question?

Mr. GILLETTE. I yield.

Mr. DOUGLAS. Is it not true that the State Department does not know how large the volume of these private corporate debts will be?

Mr. GILLETTE. They have not the slightest idea. They told us so. I will say to the Senator from Illinois that since I spoke on the floor of the Senate last Thursday, three Senators have come to me and told me they believed they held some of the bonds, but they do not recall whether they had written them off in their income-tax reports or whether they had used them for wallpaper. Two Members of the Senate have come to me and said they believed they could go through some old bureau drawers and dig up some of them.

But what about the people? Hundreds of them, undoubtedly, considering them worthless 20 or 25 years ago, threw them away. Yet some of them are going to be paid 100 percent.

A moment ago I said I could not find the matter in the hearings relative to settlement with other nations. I have now found it, and I should like to quote from the testimony of Mr. Riddleberger:

In so doing we tried to effect this settlement, as I think is shown in the last chart in the Senate document, in a way that is comparable to settlements that were made to other countries.

Senator GILLETTE. Can you give us a list of countries where you have made concessions under which private holders of securities would be paid prior to us?

Mr. RIDDLEBERGER. Well, sir, I cannot recall a case in which we have forbade the payment of private debts because we granted assistance.

Senator GILLETTE. No; but can you cite a case in which we have entered into an agreement whereby we subrogate our obligations or scale them down in order that private holders of securities could be paid before the United States Government?

Mr. RIDDLEBERGER. I can only answer that, Senator, by saying that the original theory of the priority of the governmental claim arose out of circumstances which did not exexist in other countries

This is a complete example of double talk

namely, the long controversy with the Soviet Union over, shall we call it, German economic unity and reparations, and it was for that reason and, in our opinion, most sensibly, that we insisted upon the priority of this claim. We think, sir, when we look back over the history and see what has happened in the Eastern Zone, we have to admit that this was a wise decision because otherwise there was no assurance that our aid

Mr. GILLETTE. That is correct. It is inequality of treatment. Senators will recall that when I spoke on the matter on Thursday, I invited attention to the fact that it was sought to effectuate this settlement by executive agreement. When I wrote to the State Department and asked under what authority, constitutional or otherwise, they saw fit to make a deal of this kind by executive agreement, to dispose of property of the United States, the reply was that they had reconsidered the matter; that might not simply be siphoned into the East. there was some difference of opinion in the legal department. Some thought it Some thought it could be done by executive agreement, and some thought it should be done by treaty, but they assured me that it would be by way of a treaty.

Mr. WILEY. Mr. President, may I interrupt to ask when the Senator wrote that letter?

Mr. GILLETTE. It was only a few days after the meeting in 1952.

Mr. WILEY. I was sure it was not in 1953.

Mr. GILLETTE. No.

Mr. DOUGLAS. Mr. President, will the Senator from Iowa yield further? Mr. GILLETTE. I yield.

Mr. DOUGLAS. Is there any relation between the reply of Mr. Riddleberger and the question which the Senator from Iowa addressed to him?

Mr. GILLETTE. I did not think so at the time, and I do not think so now. I said to Mr. Riddleberger:

I am not questioning the wisdom. I am questioning, or asking you to amplify your statement that this was in accordance with the policies that we had followed by writing

off or scaling down Government obligations in order that private holders could be paid. . Do you have any such instance to give us? I never received an answer to that question.

It has been said that we were granted an absolute priority for these postwar Government debts. It was granted by the German Government, but we have agreed to cancel a large amount. It is not a question of whether one group picking up these bonds at 2 cents on the dollar made an immense profit. That is not the point. The fact of the matter is that someone claiming to represent the taxpayers of the United States went to a conference which was controlled almost entirely by representatives of private holders of securities. Some of them were securities of the German Government, some were securities of German provinces, some of them were German bonds, and some of them were bonds of private corporations. They were held throughout the United States; no one knows by whom and no one knows where.

The eminent chairman of the committee said a while ago to the Senator from Louisiana [Mr. LONG], "What is your alternative?" It is not up to the Senate to offer an alternative. The treatymaking power is in the executive department, by and with the advice and consent of the Senate.

Mr. LONG. Mr. President, will the Senator from Iowa yield?

Mr. GILLETTE. I yield.

Mr. LONG. This agreement involves giving up $2 billion of claims for debts owed to the United States Government in order to have made obligations by a defunct German Government. The old government had gone out of business, but their bonds are here. Are the Hitler bonds included?

Mr. GILLETTE. No.

Mr. LONG. In order to make the agreement good, America has agreed to forego $2 billion worth of obligations due this country. The Bonn Government, the government in office now, owes that $2 billion.

Mr. GILLETTE. I thank the Senator. He is correct.

Mr. LEHMAN. Mr. President, will the Senator yield?

Mr. GILLETTE. I yield to the Senator from New York.

Mr. LEHMAN. I read from the report of the committee, page 11:

The thought was expressed in the committee that the effect of this writedown was to make the American taxpayer who had put up money for postwar economic assistance bear the burden of payments to private American creditors.

Representatives of the executive branch of the Government recognized that this was the case.

So it is perfectly evident that the American taxpayers are being asked to give up $2 billion of debts owed to them in order to secure concessions or full payments on $547 million of bonds which are believed-I emphasize the word "believed" to be held by American investors.

May I ask the distinguished. Senator from Iowa whether any proof whatsoever was adduced at the hearings to the