Mr. DAVIS. Yes. I am satisfied that all of the governments con cerned, especially those most greatly concerned, will soon realize tha it is very important to fix a definite amount and settle this definitely so that Germany and the world knows what is to be done. Senator MOSES. Particularly in Mr. Baruch's testimony, he say that Ge many can not pay. He says on page 41: Germany Because Germany can not pay the entire claim. Further down on the same page he says [reading]: The general view is that there will not be enough to go around: that Germany wi not be able to pay it. And then again he says: Germany will be unable to meet the bill that will be put against her. And he says further: Germany actually owes more than she can pay. Mr. DAVIS. I agree with what Mr. Baruch says, but there are other people that hold different views, Senator. I quite agree with his views, but there are people who hold other views. There were som representatives who thought that Germany could pay $100,000,000,000 which is more than Germany's national wealth. There was quite a difference of opinion, but I think that as a rule decidedly a very large majority of economists and financiers agreed substantially that Ger many can not pay what her bill will amount to. Senator MOSES. And Mr. Baruch said that up to the very last day the American commissioners sought to have a definite amount fixed. Mr. DAVIS. We did. Senator MOSES. But he gave no explanation as to why the American commissioners yielded that point. What was the real reason? Mr. DAVIS. Because it was not our party as much as it was that of the other Governments'. Senator MOSES. Upon the theory that we are not to participate in the reparation? Mr. DAVIS. I mean our participation is so infinitesimal, that it is not a vital question. Senator MOSES. Then, why take one-fifth of the responsibility? Mr. DAVIS. The results of it concerns the United States very much because the financial stability of the world concerns the United States even from a selfish standpoint,. Senator MOSES. We are one of the four permanent voting members of the reparation commission? Mr. DAVIS. Yes. Senator MOSES. Just why was that unique piece of mechanism set up in that way? Mr. DAVIS. Well, England, France, Italy, and Belgium have more material interest in what Germany pays than any other Government, very much more. They were the only ones that had very much to collect from Germany. Senator MOSES. Serbia? Mr. DAVIS. Serbia's bill is really more against Bulgaria. Senator WILLIAMS. And Austria. Mr. DAVIS. And Hungary and Austria. Those were the principal countries concerned. That is the reason. Senator MOSES. Then, why was not Belgium made a member? Senator MOSES. As far as her interest is concerned. Mr. DAVIS. Yes. Senator MOSES. We are made a permanent voting member? Mr. DAVIS. Germany was made jointly and severally liable for the damage done by her associates and allies, and Germany theoretically is liable for all the damage that Bulgaria and Austria-Hungary did to Serbia and Roumania, but it is hoped that they will collect most of their share from Bulgaria and Hungary. Senator WILLIAMS. Whatever they do collect will go as a credit? Mr. DAVIS. Absolutely. Senator MOSES. You seem to be missing the point. We would have an infinitesimal share in the reparation, but we are one of the four permanent voting members. Belgium has a larger share in the reparation, but is a member only as her interests are concerned. Why the distinction? Mr. DAVIS. Well, Belgium is of course a small power and does not have the world interests that a larger power has, but it was felt that Belgium's rights must be protected, and therefore that she should participate in voting on matters that concerned Belgium. But the larger powers are really more concerned with conditions throughout the world than a small power, because they can suffer more and they have more interests. Senator MOSES. The assumption being that every vote taken by the reparation commission is one that will interest us? Mr. DAVIS. Yes; the other powers were very anxious to have the United States come into the reparation commission. Senator MOSES. I have no doubt of that. Mr. DAVIS. Because they thought that our material and moral influence would be valuable. Senator POMERENE. May I suggest this, too, that while we may not have a very large part of the funds that are paid in reparation, we have a very positive interest in the financial condition of those nations which will receive this money, because they owe us about $10,000,000,000? Mr. DAVIS. I see every reason why we should go on the commission myself, and I see no reason, practically, why we should not, because, as I say, while the other countries, England, France, Italy, and Belgium, expect to collect very much more from Germany and have a much larger claim than the United States-our claim is very small, even if we put it in-yet it would seem that we are vitally interested in the financial conditions of the world and of these countries. We are the creditors of the world. Senator BRANDEGEE. Do you know what portion of the records of the peace commission has arrived in this country? Mr. DAVIS. No; I do not. Senator BRANDEGEE. It has been a month since the President arrived here, and I wondered whether they were going to keep the records over there or send them here. Mr. DAVIS. I have not heard as to that. Senator WILLIAMS. He ought to have brought them in his valise. Senator BRANDEGEE. No; but in a month I thought they might have been brought over. Senator WILLIAMS. There are many of them coming every day. Senator BRANDEGEE. That is what I am trying to find out. I did not know whether they were coming or not. Senator MOSES. In naming fifteen billions as the amount of bonds to be issued, you had reference to the provisions at the bottom of page 267 and on page 269 of the committee print, did you not, paragraphs 1 and 2? Mr. DAVIS. Yes. Senator MOSES. Fifteen billions surely will be issued? Senator MOSES. And possibly ten billions more? Mr. DAVIS. Well, possibly. I hope that the financial condition of Germany will be so good that those can be delivered; but it entirely depends on that, because those $10,000,000,000 under (3) are not to be delivered until the reparation commission are unanimously of the opinion that Germany can meet the interest and sinking fund on these obligations. Senator POMERENE. May I ask a question there? Senator POMERENE. In view of certain suggestions which have been made, perhaps outside of the committee, I will ask you this question: You have called attention to the manner in which these bonds are to be trusteed, the manner in which the certificates are to be issued to the several parties. Is there anything in this treaty which makes the commissioners or the State or the Government which they represent individually or collectively liable for the redemption of either these bonds or the certificate? Mr. DAVIS. No: there is not. The CHAIRMAN. Does any other member of the committee desire to ask any questions? Senator SWANSON. Mr. Davis, let me ask you a question on something that we were discussing with Mr. Baruch. After this treaty is ratified, how will the trade relations between Germany and the United States and other allied countries be resumed? To what extent will the reparation commission have control of that? Mr. DAVIS. Theoretically they can come and trade. Anyone who has got the money to buy something-any German who has the money to buy something can come and get it. From a practical standpoint it will probably be rather difficult, for the first two years, without the permission of the reparation commission. If you can conceive of this reparation chapter as something that we were discussing pro and con for several months, you will understand that people's views changed, more and more as they got into the facts. It was first thought that Germany could pay $5,000,000,000 within the first two years, I personally, always contended that it would be impossible, or that if she did, she would not be able to pay anything else, because it would leave her so weak; it would just take all her capital they had; and that instead of Germany paying $5,000,000,000 the first two years, thought those Governments would have to help Germany; either land her money, or let her keep some capital which she had; and that unless Germany could get food and raw materials, they would not be able to do anything. So that, in substance, my interpretation of that first payment of $5,000,000,000 is that Germany shall pay to the reparation commission $5,000,000,000, less what she may require in food and raw materials during those first two years, which may perhaps mean that Germany can pay only $2,000,000,000; because, in addition to that, she has to pay the armies of occupation; and the United States will have a rather large bill there. Senator SWANSON. Let me ask you this question, for the understanding of the treaty. If a German factory or manufacturing establishment had the money, and desired to purchase raw material in this country, lumber or cotton, or elsewhere rubber, could she do it without the consent of the reparation commission? Mr. DAVIS. My judgment is, yes. Senator SWANSON. Mr. Baruch had an idea that she could not. Mr. DAVIS. Here is the point. Germany can not export securities or gold during the first two years without the consent of the reparation commission. For instance, during the armistice period Germany could not export gold without the consent of the supreme economic council, which was the body that controlled such matters. Senator SWANSON. Nothing would prevent a foreign concern from extending credit to a German manufacturing establishment for raw materials? Mr. DAVIS. No. It might be possible, however, that anyone extending credit, in order to avoid any misunderstanding, would like to have the approval of the reparation commission. Senator KNOX. Are not the French selling to the Germans now? Mr. DAVIS. Yes; and I think that if any American wants to sell anything to a German, he will sell it to him and ship it to him. Senator WILLIAMS. You do not mean if it involves the export of gold or securities from Germany? Mr. DAVIS. No. If it does, it can not be done. Senator WILLIAMS. But if it involved some credit that a German bank could arrange with a bank in New Orleans which did not involve the export of gold or securities from Germany, then no consent of anybody would be necessary? Mr. DAVIS. My opinion is that it would not require the consent of anybody. Senator KNOX. That is, to-day, if the United States Steel Corporation wanted to sell to a German railroad 20,000 tons of steel rails, they could do it and give them credit for it? Mr. DAVIS. Yes. Senator WILLIAMS. Or if a New Orleans bank wanted to extend a credit to a Hamburg bank and the Hamburg bank wanted to buy cotton, that could be done? Mr. DAVIS. Yes. Senator WILLIAMS. It is only where gold or securities come into consideration that that becomes operative? Mr. DAVIS. That is perfectly true. It is I think, however, that a banking institution or an exporting house would like to know just what the reparation commission's policy is going to be before extending any very large line of credit. They might want to know that. Senator WILLIAMS. Undoubtedly, because any very large line of credit would have to be based, ultimately, upon gold or securities. Senator SWANSON. But there is nothing in the treaty to prohibit anything except the export of gold and securities? Mr. DAVIS. No. Senator KNOX. That might involve the policy of whether the reparation commission were going to permit the export of gold or securities in connection with that transaction. Senator WILLIAMS. In a transaction such as I have indicated in cotton, or in a steel products transaction such as Senator Knox indicated, a good deal of this payment would be made through clearinghouse balances, would it not clearances of one sort or anotherwithout resulting in the shipment of gold or securities? Mr. DAVIS. Yes. Senator WILLIAMS. Germany will be wanting to buy steel from us, and we will be wanting to buy a good deal from Germany, too, pretty soon. Mr. DAVIS. Yes. Senator KNOX. Is there any limitation upon the importation of gold into Germany? Mr. DAVIS. No, sir. Senator KNOX. So that if we wanted to buy now, and pay in gold. we could do it? Mr. DAVIS. Yes. Senator WILLIAMS. Yes; and that very gold might later be treated. as a part of a balance of trade settled by the reparation commission, as being in an exceptional attitude? Mr. DAVIS. Germany will want to withdraw the gold if she can. The CHAIRMAN. Are there any further questions to be asked Mr. Davis. If not, Mr. Davis, we will excuse you. Senator KNOX. Senator Johnson indicated that he would like to have Mr. Davis return to-morrow. He was compelled to leave, and he wanted to ask him some questions. The CHAIRMAN. Very well; then Mr. Davis will come back to morrow. The committee has said hitherto that they would like to hear the Secretary of State, and I think we can finish with Mr. Davis to-morrow and I could ask Mr. Lansing to come. Senator MOSES. To come on the following day, do you mean, Mr. Chairman ? The CHAIRMAN. No; to come to-inorrow. I do not know how long Senator Johnson desires to examine Mr. Davis. I will take the pleasure of the committee on that. Shall I ask the Secretary of State to appear the day after to-morrow? Senator SWANSON. I think it would be better. We sit only an hour and a half each morning. The CHAIRMAN. Very well; then I will ask the Secretary to come on Wednesday. There is no other witness to be heard this morning, that I am aware of. The committee will stand adjourned until to-morrow morning at half past 10, and I will ask you to be here then, Mr. Davis, if you can. Mr. DAVIS. Yes, sir. (Thereupon, at 11.55 o'clock a. m. the committee adjourned until to-morrow, Tuesday, August 5, 1919, at 10.30 o'clock a. m. |