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I shall, of course, be happy to furnish the committee with any information in my possession which might be of assistance in connection with the consideration of the proposed legislation, but in view of the fact that the questions involved are not strictly within the jurisdiction of the Department of State, I do not feel that it would be appropriate for me to express any opinion as to the general plan provided for therein.
The bill has been prepared by the Treasury Department, and during its preparation this department furnished the Treasury Department informally with certain facts bearing on the situation, and also brought certain considerations to the attention of that department. It is assumed that the Treasury and the legislative counsel of the House, who collaborated in the drafting of the bill gave due consideration to the data submitted by the department, and that the present draft represents the considered judgment of those responsible for the preparation and introduction of the bill. In these circumstances, and since this department does not feel that it can assume any responsibility for the form of the present draft, its legal sufficiency or the policy laid down therein, I prefer to make no comment on the bill now under consideration. If, however, there are any specific questions which your committee desires answered, and which can be answered from the information at the disposal of this department, I shall be happy to furnish you with such information, either in writing or by instructing an officer of the department to attend your committee at some specified time, as you may prefer.
I feel that you should be informed that the Austrian minister called at the department on April 1, 1926, and stated that by direction of his Government he would shortly present a note protesting against that provision of the bill which contemplates the utilization of all of the interest fund accumulated prior to March 4, 1923, in connection with the settlement between the United States and Germany provided for in the bill in question. Mr. Prochnik pointed out that a portion of this interest fund was earned by the property of the Austrian nationals and he expressed the view that such earnings should be excluded from the provisions of the present bill and retained intact for appropriate disposition in connection with any settlement which may be reached with respect to the Austrian claims. A copy of Mr. Prochnik's note on this subject will be forwarded to your committee as soon as it is received by the department.
I am, my dear Mr. Green, very sincerely yours,
Hon. WILLIAM R. GREEN,
Chairman Committee on Ways and Means,
FRANK B. Kellogg.
House of Representatives.
WASHINGTON, D. C., April 3, 1926.
Mr. CLAYTON F. MOORE,
Clerk Committee on Ways and Means,
House of Representatives.
MY DEAR SIR: In reply to your courteous letter of the 30th ultimo inviting me to express my views with respect to the bill H. R. 10820, to provide for the payment of the awards of this commission and for certain other purposes, permit me to say through you to the members of the subcommittee:
The function of the Mixed Claims Commission, United States and Germany, is to adjudicate claims presented to it and determine the amount which Germany is obligated to pay under the treaty of Berlin. The commission has nothing to do with the manner or time of payment. As the bill in question deals with problems of a political nature and my position as umpire requires that I at all times scrupulously maintain a strictly judicial attitude which knows no nationality as between the parties to the treaty, I submit that my position precludes my expressing any opinion with respect to the proposed legislation.
Very truly yours,
EDWIN B. PARKER, Umpire.
ALIEN PROPERTY CUSTODIAN,
Chairman Committee on Ways and Means,
Hon. WILLIAM R. GREEN,
House of Representatives, Washington, D. C.
MY DEAR CONGRESSMAN: I have the letter of March 30 from your committee, inclosing copy of H. R. 10820, introduced by Mr. Mills, and note that a subcom
mittee, of which Mr. Hawley is chairman, has been appointed to act in conjunction with the subcommittee appointed by the Committee on Interstate and Foreign Commerce, to hold hearings and take testimony on this bill. I shall be glad to have some one present at the meetings of the subcommittee, in order that you may be promptly furnished with any witnesses or information that you may need at any time during the progress of the hearings. Mr. Skinner will be in direct communication with this office and with you, and I assure you that our cooperation in this matter will be cordial and complete.
With reference to the merits of the bill H. R. 10820, I beg to say that I have studied the provisions of this bill very carefully, and have had same studied by the staff of this office, and in my opinion the bill is admirably conceived and drawn, and so far as it relates to this office, it accomplishes what it is desired to do in the simplest and most effective manner. I am glad to give my hearty approval to the bill, which, in my judgment, should be, by all means, promptly passed by both Houses of Congress, as the means of settling many open and at present troublesome questions.
I shall be glad to appear in person or by representatives before the subcommittee at any time this may be desired.
Very truly yours,
Mr. HAWLEY. The Treasury Department submitted a statement in writing, but as Mr. Winston is here I will not offer that at this time for the record, but will allow him to offer it at the proper place in his remarks.
Mr. MILLS. Before hearing from Mr. Winston it seems to me that the Mixed Claims Commission should send a representative here, not to advise us as to the merits of the bill or the advisability of its adoption, but so that we may have first-hand knowledge as to the outstanding claims and the amounts involved, otherwise we shall have to rely on the Treasury Department to give us those figures, and the Treasury Department, in turn, gets those from the Mixed Claims Commission. It seems to me Mr. Parker ought to send some one here to tell us the number of claims already adjudicated, the number outstanding, and the time it will take to discharge them.
Mr. HAWLEY. The committee have heard Mr. Mills's suggestion; is that agreeable?
Mr. GARNER. Let Mr. Parker come himself, or send some one.
Mr. HAWLEY. The clerk will convey the request of the committee to the Mixed Claims Commission and ask them to send some one here to present information to us upon the various claims, those settled, those pending, and various other matters about which we shall need information.
Mr. Winston, we will be glad to hear you.
STATEMENT OF GARRARD B. WINSTON, THE UNDERSECRETARY OF THE TREASURY
Mr. WINSTON. Mr. Chairman, when this bill was prepared the Treasury Department made a press release summarizing the bill and giving its general views upon it. That is the statement you have referred to, Mr. Chairman, and I would like to have that considered and introduced in the record. A copy of it is before you.
Mr. HAWLEY. Without objection, it will be included in the record. (The statement above referred to is as follows:)
WASHINGTON, April 1, 1926. DEAR MR. CHAIRMAN: I have a letter from Mr. Moore, clerk of your committee, requesting an expression of the Treasury's views on H. R. 10820, a bill to
provide for the payment of awards of the Mixed Claims Commission, the payment of certain claims of German nationals against the United States, and the return to German nationals of property held by the Alien Property Custodian. The position of the Treasury with respect to this bill is stated in a press release given out by me on March 29, 1926, at the time this bill was introduced in the House, copy of which release is herewith inclosed. The release represents the Treasury's views on this legislation. The Treasury believes that the legislation is desirable and recommends its adoption.
I shall be glad to be present at the hearings of the subcommittee on this bill beginning at 10.30 a. m., Monday, April 5, and give the subcommittee such information as they may desire from the Treasury.
Very truly yours,
Hon. WILLIAM R. GREEN,
Chairman Committee on Ways and Means,
GARRARD B. WINSTON, Undersecretary of the Treasury.
House of Representatives.
(Acting Secretary of the Treasury Winston made the following statement on behalf of the Treasury:)
There have been introduced in this and the last Congress numerous bills for the return of alien property and for various amendments to the alien property act affecting particular interests, but no general plan has yet been presented for the disposition of alien property and for the final settlement of the other questions between Germany and the United States left over from the war. A mixed claims commission has been set up by the United States and Germany for the determination of American war losses. Claims have been presented to the commission and most of the awards have been made, but unless the United States Government intervenes the payment to private American claimants will be so long delayed as to make the awards of the commission illusory. There is also the liability of the United States for property of German nationals used by the United States, of which there is as yet no machinery for determination and no provision for settlement.
The Treasury has found it impracticable at this time to cover in the same plan similar questions in connection with Austria and Hungary. In the case of Germany the Mixed Claims Commission has been set up, the claims filed, most of them already adjudicated, and an estimate of the amount of the awards and the probable liability thereunder can be made. In the Austrian and Hungarian cases, while a commission has been constituted and claims are being received, the period of limitation for filing claims has not run and no estimate can be made of the total amount of claims which will be presented or the probable amount of awards thereunder. In addition, the Dawes plan provides for payments by Germany to the United States on account of the awards, but there is no like arrangement for payment by Austria or Hungary.
In order that the reasons which have influenced the Treasury in the preparation of a comprehensive plan for the disposition of these matters may be understood, it is desirable to review the existing situation.
The Versailles treaty provided for reparation but did not fix their amount. In the schedule of payments of May 5, 1921, the total reparation payments as fixed by the reparation Commission were notified to Germany in the amount of 132,000,000,000 gold marks, plus the Belgian debt (about 5,000,000,000 gold marks), less certain negligible credits, plus interest at 5 per cent on the capital sum until paid. The obligation of Germany to pay the American mixed claims is in the same category as Germany's obligation to pay reparations.
The amounts required of Germany are beyond its capacity. Unable to meet its treaty requirements, Germany in effect went into receivership and a reorganization was undertaken by the Dawes Commission. Under the plan adopted, the total which it was found that Germany can pay on all its treaty obligations arising out of the war was fixed, after a five-year recuperation period, at a maximum of 2,500,000,000 gold marks a year, subject to some adjustment under an index of prosperity. Since this is all Germany can pay, it is obvious that the United States, if it wished to receive anything from Germany, had to obtain a share in the total payments represented by the Dawes annuities.
Accordingly the United States became a party to the Paris agreement dividing the Dawes payments and received a share to repay our army of occupation costs at the rate of 55,000,000 gold marks, or about $12,000,000 a year. În addition, the share of the United States on account of the Mixed Claims Commission
awards was fixed at "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 shall not in any year exceed 45,000,000 gold marks." The United States, then, is to receive on its own account the $12,000,000 annuity in repayment of Army costs and on its own and for the benefit of the American private claimants the $11,000,000 annuity on account of the Mixed Claims. The awards of the Mixed Claims Commission, plus interest, are estimated at $60,000,000 to the United States and $190,000,000 to private American citizens.
The United States, under its war powers as a sovereign, seized enemy property through the Alien Property Custodian as a common law trustee. The Versailles treaty gave the allied and associated powers the right to dispose of enemy property and Germany agreed to compensate its own nationals for the seizure. The allied and associated powers were authorized to liquidate the property and to apply the proceeds to satisfy debts owed by enemy nationals to their nationals or as a credit on reparation account. Under the Berlin treaty, making peace between the United States and Germany, the United States received the benefit of these provisions of the Versailles treaty. But the joint resolution of Congress of July 2, 1921, and the Berlin treaty specifically provided that the property of enemy nationals "shall be retained by the United States of America and no disposition thereof made except as shall have been heretofore or specifically hereafter shall be provided by law until such time as the Imperial German Government * * * shall have * * * made suitable provision for the satisfaction of all claims against said Government" of American nationals. It was further provided that such property should be retained until the German Government should have "confirmed to the United States of America all fines, forfeitures, penalties, and seizures imposed or made by the United States of America during the war * * and shall have waived any and all pecuniary claims against the United States of America."
There has been no modification of the Versailles treaty or Berlin treaty with respect to the payments due from Germany, and the duration of the Dawes plan payments is not fixed. The practical effect of the Dawes plan is, however, that Germany's creditors have accepted a reorganization under which their rights are limited to their shares under the Paris agreement and an attempt to return to the original treaty requirements for payments would be useless. This is the general situation. Its application to the United States may be considered.
It is estimated that all the awards of the Mixed Claims Commission, which Germany is obligated to pay, will aggregate $190,000,000 of principal and $60,000,000 of accrued interest to January 1, 1926, or a total of $250,000,000. The awards bear 5 per cent interest. If no interest is to be paid upon accumulated interest, an annuity of $11,000,000 would pay current interest and pay the $60,000,000 accumulated interest in 40 years, and thereafter in 40 more years would amortize the principal of the awards, a total priod of 80 years. This is on the assumption that the Dawes plan continues for that length of time, and that each year Germany is able to pay to the transfer agent in Germany and the transfer agent is able to transfer into the currencies of the creditor nations 2,500,000,000 gold marks per year. While our Army costs repayments are preferred, the mixed claims belong in the general category of reparations without preference and any diminution in total payments will be felt by the mixed claims.
If the Dawes plan fails and the United States resorts to its rights to demand payment of the mixed claims under the Berlin treaty, the Allies would seem to have a like right to ask payment of the 132,000,000 gold marks of reparations, plus 5 per cent per annum interest. This yearly interest alone is two and one-half times the total Dawes annuities. It seems impractical, therefore, to expect from Germany payment of the mixed claims except out of the 24 per cent annuity under the Dawes plan. While the annuity given the United States under the Paris agreement is a fair proportion of the total demands on Germany by all her creditors, still, in view of the length of time it will take for this annuity to pay the mixed claims, it must be recognized that the awards have little present value to the private American citizen unless some other means of immediate payment can be obtained.
It might be within the power of the United States under these provisions of the Versailles treaty to the benefit of which the United States is entitled under the Berlin treaty, to liquidate the private German property and to apply the proceeds to the payment of the mixed claims. The moral justification for such a proceeding 92108-26
is doubtful and, moreover, there is some question as to the constitutionality of such a procedure now we are at peace. The private German owners of the property are not likely to receive from their government adequate compensation for their property taken and used to pay the debts of their government. The proceeding would practically amount to confiscation of private property.
Looking at the matter from the standpoint of a great commercial nation, whose citizens now have enormous investments in foreign countries, it would appear sound policy for us to continue as we have in the past to recognize the sanctity of private property of other nationals. By such a policy the property of our nationals abroad may be saved from confiscation in the event of another war. Aside from the moral and commercial policy questions affecting the confiscation of the enemy property, doubt is raised by the Berlin treaty and the resolutions of Congress as to our legal authority to liquitade the property to pay the mixed claims. It is provided that the enemy property "shall be retained by the United States * * * until such time as the Imperial German Gov* shall have ernment * * made suitable provision for the satisfaction of the mixed claims of our nationals. If the provisions for a share in the Dawes annuities is a suitable provision, then the property ought to be returned. If it is not a suitable provision, then our right would seem to be to hold the property until the mixed claims are paid-at least 80 years, and most likely indefinitely. To keep property away from its owners and hold it in the hands of a Government trustee is a great economic loss. It is a vain thing, indeed, to insist on retaining title to property not our own indefinitely. Matters between nations should be settled and not permitted to be for many generations a source of friction.
* * *
The only other practical method of payment of the awards to the private American citizens is for the United States to advance the money necessary to pay the awards to its own citizens (estimated between $180,000,000 and $190,000,000), and to recoup the Treasury for this advancement out of all moneys received from Germany on account of mixed claims ($11,000,000 a year and Army costs $12,000,000 a year). If the United States should borrow the money at 334 per cent to pay the awards to American citizens, and use the $30,000,000 of earnings made by the Treasury out of money of the Alien Property Custodian on deposit with it prior to the Winslow Act which gives later earnings to the enemy nationals, and if the United States should receive all payments provided under the Dawes plan for both mixed claims and Army costs, the debt thus created would be retired with interest at 334 per cent in about eight years. In other words, the United States would be made whole out of payments due the American claimants and out of repayments by the United States for money spent in past years in a short period of time, and thereafter all payments would go into the Treasury. True the payment by the United States of the awards to American citizens would be an expenditure in the Government accounts in the year actually made and thus appear as an increase in governmental expenditures, but looking at the matter in another aspect, it might be fair to consider that the expenditure for payment of the mixed claims is in effect a capitalization to-day of certain payments due from Germany in the future.
To summarize: The only practical way for the American citizen to get compensation for his war loss is either for the United States to confiscate the property of German nationals and apply the proceeds or for the Treasury to advance the money and to recover it later from the Dawes payments. The Treasury is opposed to the confiscation of the private property of German nationals and believes also that the burden of war losses suffered by some of our citizens should be borne, not by them alone when they can be relieved by its temporary assumption by all of the people of the country, although this assumption carries with it some risk of loss.
In addition to the question of the payment of the mixed claims and the return of the alien property, there is a further matter between the United States and the German nationals which should be settled. During the war the United States seized and used ships, radio stations, and property belonging to German nationals. The Berlin treaty provides that Germany will make suitable provision for the satisfaction of all claims against the United States on account of such seizures, but the situation is like that with respect to the enemy property. We have taken the property of private citizens and used it for our own purposes. The relief from their own Government is inadequate. We have enjoyed the benefit and we ought to pay. This does not mean the creation of a new moral obligation on the part of the United States. but simply the recognition