No. 167 NAI DFA Secretary's Files P12/6

Confidential report from Michael MacWhite to Joseph P. Walshe (Dublin)
(1008/134/32) (Confidential)

Washington, 27 December 1932

A situation has developed here in the solution of which the Saorstát may be able to play an important part from which it may derive considerable advantages. The question of the settlement of the international war debt problem is causing much anxiety to the outgoing Administration and is likely to be equally embarrassing to the incoming one. It is generally realized that Europe is not in a position to make further payments to the United States on the old conditions without seriously endangering the world economic structure and that the United States by insisting on payment would isolate herself from the rest of the world and cut herself adrift from markets that now absorb much of her surplus raw material and manufactures. The United States Treasury believe the payments that fell due on December 15th, 1932, will be the last under present conditions.

At the National Democratic Convention at Chicago last June, a Resolution was unanimously adopted opposing any revision or scaling down of the war debts. A few politicians then foresaw the awkward consequences of this step but the feeling throughout the country on the question was so pronounced that opposition to it at the time would be futile. As a result, the hands of the President-elect are more or less tied. After Britain's plea for revision of the war debts five or six weeks ago, many of the Democratic leaders and nearly all the newly elected Members of Congress while registering opposition to the proposal insisted on adherence to party pledges. These pledges are easily forgotten in course of time but the question of the war debts must be settled somehow in the next three or four months. Roosevelt will be faced with it on entering the White House. In fact he is faced with it already.

The opinion prevails that the British have reached the last limit of their willingness to pay under present arrangements. Suggestions have been made in England that instead of fifty annual payments there should be a lump sum no bigger perhaps, than a single annual payment on present terms, or that Roosevelt should proclaim a moratorium on the debts for any three months to begin with, then extend it to six months and so on until the American public would have grown accustomed to it or forget about the debt question altogether. In whatever agreement is reached there is little doubt that the war debt payments will be scaled down to an infinitesimal part of the present figure.

Sympathy for the British has increased considerably since they agreed to make good the December 15th payment. This sympathy was accentuated by the default of France on the same occasion. As a consequence, in any settlement to be arrived at Britain is likely to be specially favoured. This settlement will not be confined to war debts alone; it is likely to cover economic questions, mutual tariff concessions, perhaps a demand for repudiation of the Ottawa Agreements and certainly a quick return to the Gold Standard in order that the inconveniences now caused to American trade by Britain's depreciated currency may be removed.

In general it may be stated that the forthcoming negotiations with the British on the war debt payments will necessarily embrace a multitude of other problems which can only be solved by a sympathetic Congress and well disposed Administration. As I have already stated, both the President-elect and Congress are hampered by party pledges. How to escape these pledges and at the same time increase their prestige without alienating any of their erstwhile supporters is a problem that will have to be solved by the new Administration. They could probably justify themselves in such a course of action by pretending they were forced to accept the inevitable, but such a step would make no appeal to public favour and would only embarrass those public men who have already made pronouncements to the contrary.

I have given much thought to this situation to see if we could not aid in furnishing a solution which would be most advantageous to ourselves, and I have arrived at a conclusion which is, in my opinion, worthy of the most serious consideration. Granted that it is of vital importance to England that her war debts be scaled down and some kind of an economic agreement effected with the United States. Granted also that the United States Government are anxious to meet England's wishes in these matters if an excuse were forthcoming likely to palliate an admittedly hostile opinion. This adverse opinion is most pronounced in districts where the population is made up of Irish elements. A considerable number of Congressional Representatives from these Districts are also of Irish origin and without exception I think they would like to do anything within reason that would help the Saorstát. It would give a sentimental satisfaction to themselves and still more to the voters who return them to office. By obtaining a guarantee from England that she would scale down her financial claims on the Saorstát in the same proportion as the United States scales down her own would, in my opinion, solve the difficulties which now confront the Administration. If England pays no more to the United States it would mean that her claims against the Saorstát would be wiped out. As a guarantee of her good faith, the special tariffs now imposed by England should be withdrawn in advance.

I feel that the President-elect is well disposed towards the Saorstát. I met him first in this country in 1918 when he was Assistant Secretary of the Navy. I renewed my acquaintanceship with him here in 1929. I visited him in Albany in 1931. A year ago he presented me with a volume of his public addresses on which he inscribed on the fly-leaf over his signature 'To my friend the Hon. Michael MacWhite'. His campaign manager, Mr. James Farley, who is likely to be a member of his Cabinet, is also an acquaintance of mine. I have close relations with Democratic party leaders here such as Senators Thomas J. Walsh and Key Pittman, etc. Many of his intimate associates are of Irish origin. I have no doubt but if properly approached they would appeal to him to obtain the guarantees from England I have suggested, and I am inclined to believe that he would not hesitate to do so as he would at the same time be enhancing his own popularity with the most active element amongst his supporters and solving an international problem that may have far-reaching consequences in regard to the restoration of prosperity to the United States and, perhaps, to the rest of the world.

If this suggestion is considered feasible, the greatest secrecy should be observed while it is being worked out. It would, of course, be necessary in the first place that friendly Senators should approach the President-elect to induce him to make his difficulties known to the British Ambassador,1 suggesting at the same time the means of solving them. Other outstanding Members of Congress might be induced to convey the same views to the Ambassador direct in order to convince him that no concessions could be granted to England unless England was prepared to make like concessions to the Saorstát.

Informal negotiations on the war debts are likely to take place before the inauguration of the new President. If it is decided to take advantage of the situation here outlined, I should have very definite information as early as possible so that I may be in a position to approach the people likely to be most helpful and give them all the explanations they desire.

[signed] M. MacWhite

1 Sir Ronald Charles Lindsay (1877-1945), British Ambassador to the United States of America (1930-39).

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