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Mr. Dayis. Do you think it is advisable to state that? We have •got to have negotiations afterwards with the Germans. I have no objection to it, hut I am thinking about the advisability of stating it publicly, because they are to

Senator Moses. Is that contained in the memoranda to which you referred yesterday?

Mr. Davis. I am not positive.

Senator Johnson of California. I do not want to ask anything that ought not to be asked in that regard.

Senator Moses. Is there any way we could get that—in executive session?

Mr. Davis. Yes.

Senator Moses. I do not want to ask for it publicly, if you think it ought not to be so stated.

Mr. Davis. I would be glad to go into details with you.

Senator Moses. Will you state that in executive session before the committee?

Mr. Davis. Yes: I will be glad to.

Senator Johnson of California. You drew a distinction between the fixed amount and a reasonable amount, did you not?

Mr. Davis. What I meant by that was that the amount should be a reasonable amount, that is an amount which Germany could be reasonably expected to pay. No one can tell, of course, just what they could pay within one generation.

Senator Johnson of California. What do you estimate the wealth of Germany to be? I understood you yesterday to say about 100 billions.

Mr. Davis. No; before the war I estimated Germany's national wealth at $75,000,000,000.

Senator Johnson of California. When you say $75,000,000,000, what do you put in that? Do you mean within the confines of the European Empire?

Mr. Davis. Yes; that means her colonies, too.

Senator Johnson of California. Her colonies, too?

Mr. Davis. Yes.

Senator Johnson of California. Her wealth now you estimate to be what?

Mr. Davis. That depends upon whether you estimate it upon the inflated currency or on the gold basis. Values have increased so that probably Germany's national wealth, according to the present prices, might probably be, I should say would be, $100,000,000,000, less the value of such deductions as may be made, and her colonies less the value of such deductions as Alsace-Lorraine and her colonies. Her colonies were not worth much.

Senator Johnson of California. The reason of my question was to begin after your deductions. The Saar Yallev you estimated at what?

Mr. Davis. We estimated it at about $200,000,000.

Senator Johnson of California. And Alsace-Lorraine?

Mr. Davis. It is rather difficult. We did not get a specific estimate of Alsace-Lorraine, but the principal values, of course, are the ores there.

Senator Johnson of California. Yes.

Mr. Davis. But it was estimated at between 5 and 10 billions.

Senator Johnson of California. The amount that was taken from her in territory or in value would be about what?

Mr. Davis. My guess would be $15,000,000,000.

Senator Johnson of California. What would be the effect upon her of what has been taken from her, on her industries?

Mr. Davis. It will hamper her industries to a certain extent.

Senator Johnson of California. To a large or a small extent, or are vou unable to estimate?

Mr. Davis. I am unable to estimate that; but she will still have access to the ores from Alsace-Lorraine, because France is dependent on Germany for certain ores, and they will have to have an interchange of ores. They will not be deprived of that.

Senator Knox. If she gives 15 billions in bonds and 15 billions of territory, then she is giving 30 billions as the result of the war, is she not?

Mr. Davis. Practically; yes, sir.

Senator Knox. She is getting no credit for the value of her colonies or for Alsace-Lorraine—those are taken from her—plus this 15 billions of bonds?

Mr. Davis. Practically so. There are some credits.

Senator Hitchcock. How do you estimate her colonies as being of so little value?

Mr. Davis. I say I judged—my estimate was made—that the territory taken from her would be about $15,000,000,000.

Senator Hitchcock. Were not her colonies worth anything?

Mr. Davis. As I sav, they were not worth very much.

Senator Johnson of California. When you speak of the Saar Vallev, do you mean all the uses of the Saar Vallev for 15 vears? Was that it?

Mr. Davis. That is what it was estimated at.

Senator Johnson of California. Not the actual capital value?

Mr. Davis. The actual mines and the properties that were taken over.

Senator Johnson of California. They came to what?

Mr. Davis. $200,000,000 at an estimate. That has not been fixed yet. The reparation commission is to fix that finally, but that is the estimate that was fixed at the time, approximately $200,000,000.

Senator Harding. The use of that valley enters into the reparation payment?

Mr. Davis. That is credited to Germany's bill.

Senator Hitchcock. Did you make any estimate of what the German Government would save on account of the reduction of the army and navy expenditures as compared with prior to the war?

Mr. Davis. Yes; from $400,000,000 to $500,000,000 a year.

Senator Hitchcock. Are you estimating her prewar expenditures in that?

Mr. Davis. Her prewar expense was about $400,000,000 a year: and of course, theoretically, those materials and the labor would be devoted to industries, which would also increase her industrial output.

Senator Johnson of California. Did the American delegation take any particular position concerning the Saar Valley?

Mr. Davis. I was not on that commission, Senator, but the American delegation felt that it should be returned to Germany within, say. 15 years, or that the people would have a right to return to Germany.

Senator Johnson of California. Do I understand from that, that the provision for a plebiscite met the views of the American deletion in this treaty?

Mr. Davis. That is my impression; but, as I say. I was not on that commission.

Senator Johnson of California. So it would be futile to ask you concerning the details of that?

Mr. Davis. Yes; it would.

Senator Johnson of California. Do you know why it was that the reparation of Russia was reserved by the treaty?

Mr. Davis. There were several reasons. Russia had made a tremendous contribution toward winning this war before she went out of it, and it was felt that she had lost a great deal in the way of property and many lives, and it was felt that the door should not be closed entirely to Rusisa, once that her people have organized a government which can speak for them.

Senator Johnson of California. If finally a government shall be organized that will be recognized by the Allies, was it designed, as expressed by the commission, that Russia should be given reparation, too?

Mr. Davis. Yes.

Senator Johnson of California. That reparation would be very considerable, would it not?

Mr. Davis. Yes; it would.

Senator Johnson of California. So that that is another indeterminate sum that the reparation commission must consider?

Mr. Davis. Yes: but that would merely change the percentage of the division. It would not mean that any additional amounts would be collected from Germany, because Germany, irrespective of what the reparation commission may want to do, can not pay more. It is impossible to collect from Germany more than she can pay.

Senator Harding. How could you do that, when the treaty provides that the reparation fund shall be divided into five parts?

Mr. Davis. I do not think it says five parts.

Senator Hitchcock. Each nation shall have certificates which can be divided into five parts.

Mr. Davis. It is divided among the allied and associated powers in proportion to the ratio that shall be determined.

Senator Moses. Russia is not one of them, according to the treaty, Mr. Davis.

Mr. Davjs. But the general opinion was that the principal allied and associated powers would allow Russia to participate in this of their own free will and accord. They feel that they have no right to exclude Russia; and France, especially, has many investments in Russia, and I believe that they would not object to Russia participating, although it would reduce France's percentage of participation.

The Chairman. Does not Russia get considerable reparation by having repudiated all her bonds?

Mr. Davis. They do not seem to have made very much by that yet, Senator.

The Chairman. They have saved the interest.

Mr. Davis. It may be accumulating. I doubt if any Russian Government will ever be recognized by the principal powers of the world unless it assumes those obligations which have apparently been repudiated.

Senator Knox. Internal as well as external, you mean?

Mr. Davis. They would not be so much concerned with the internal. I do not know, Senator, about that.

Senator Knox. Have they repudiated their internal obligations?

Mr. Davis. I am not nositive.

Senator Hitchcock. No; I think not. Russia has not repudiated her internal obligations.

Senator Knox. It depends altogether on what you call "Russia." This Bolshevik government has.

Senator Hitchcock. I think they made some exception when they made their proclamation, in favor of their internal obligations, eertainly during certain periods.

The Chairman. They have repudiated the exterior debts, have they not?

Mr. Davis. They have—especially Trotski—signified their willingness to recognize their obligations.

Senator Williams. But they do not pay.

Mr. Davis. No; they.do not pay.

Senator Williams. They did that when they wanted to negotiate.

Senator Hitchcock. Have you any idea why it was provided that each of these certificates should be divided into live parts? Why was the number five selected?

Mr. Davis. We rather favored, at first, having only one certificate issued to each Government, really a trust certificate showing its ownership in an undivided amount of bonds; but some of the countries, espe: ially France, rather wanted those in smaller denominations, thinking that they might be able to use them, either to offset some other debt or to pledge them at their bank for additional credits, and so we finally agreed that they should have as many as five certificates, but that those should be in such large units that it would avoid any danger of having them get into the hands of the public: because there are two ways of looking at that. In the first place, assume that certificates were endorsed by a responsible government like France or England, who would have the largest units, and then assuming that they might be sold to a syndicate as Senator Moses thought might happen, then if that syndicate should issue debenture, against that certificate, there would not be the danger attached to it, because there would be an additional security back of it, by the endorsement of the French Government, and it would not increase the amount of securities floating in the world, or that would otherwise have been issued, because they would be used to take up some other obligations, or to take the place of obligations which would otherwise have been issued to meet their requirements; and assuming that one of the Governments might be a bankrupt Government, and that it should sell its certificates to speculators, it is rather difficult to conceive it as a fact that investors would purchase debentures issued against an ownership certificate representing bonds which the reparation commission had felt were not safe enough to distribute. I can not imagine any intelligent investor purchasing a debenture of that kind.

Senator Hitchcock. Do I understand you to say that the amount «f these bonds represented by these certificates in the- aggregate is $15,000,000,000?

Mr. Davis. Yes: that is the amount of the original

Senator Hitchcock. Deposit?

Mr. Davis. Deposit, except the additional amount which will be issued to Belgium, which would possibly not exceed $900,000,000 or a billion.

Senator Johnson of California. Is it not a fact that Europeans have been fed up upon the idea of a tremendous bill, and that is the reason that the thing is there left indefinite?

Mr. Davis. Their people have expected a great dc.d.

Senator Johnson of California. That is the reason you speak of the reason for certain indefinite provisions of the treaty being political?

Mr. Davis. Well, I hardly know how to answer that, Senator.

Senator Johnson of California. You used that term several times yesterday.

Mr. Davis. Yes.

Senator Johnson of California. What did you mean when you used that term "political'?

Mr. Davis. I mean that the people in Europe are still shell shocked.

Senator Johnson of California. I think you can include us, too.

Mr. Davis. And they have been carrying tremendous burdens, and they have expected to get a certain relief from those burdens, and they were in different ways led to believe that Germany would assume a great portion of those; and they were even led to believe that they would collect from Germany even more than the amount of Germany's bill which will be defined under the categories: and it will take some time, probably, for them to realize how much Germany can pay and how much they really can afford to have Germany pay.

Senator Johnson of California. And for that reason, for the reason that you state, the matter was left in indefinite shape?

Mr. Davis. That was probably one of the reasons why we could not come to a satisfactory agreement for fixing a definite amount.

Senator Harding. Now, getting back for a moment to the question which I asked you in rather unhappy language: Referring to article 237, in which it is provided that these payments by Germany shall be divided by the allied and associated powers into portions which have been determined upon by them in advance, has there been any determined amount for Russia?

Mr. Davis. No; there has not been for anybody yet.

Senator Harding. What does it mean, then, when it says "have been determined upon"?

Mr. Davis. That seems to be a rather unfortunate wording.

Senator Brandegee. It means "which shall have been determined upon," does it not?

Mr. Davis. Yes; that is what it does mean, as I recall now.

Senator Williams. It speaks of the date of the ratification of the treaty.

Senator Harding. That is not clear to me. It says, "which have been determined upon."

Senator Moses. "Seront repartis" is the French future.

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