Saturday, May 25, 2013
JP Morgan & Allies negotiate loan with Germans: "I suppose it sounds fantastic to lend to our enemies"
On this day in 1922, the New York Tribune reports "German Loan, If Protected, Now Likely." The Germans were seeking a loan to help pay World War I reparations, and the German Mark was showing signs of severe weakness. JP Morgan Jr., and his partner Thomas Lamont (acting as advisors) were eager to facilitate, as long as certain conditions were met, including Allied unanimity regarding the terms. France made sure such unanimity was never achieved.
It was understood, as far back as 1918, that Germany would not be able to repay her debts all at once, and a loan would most likely be necessary. Thomas Lamont told President Woodrow Wilson in 1918 that
"when the war is over, and Germany has to pay a big indemnity, you will find the allies lending the money to Germany to pay her indemnity...I suppose it sounds fantastic to say that we should lend our enemies the money, but that's what will happen. I have just been reading what occurred after the Franco-German war of 1870. At that time France had to pay Germany, and she borrowed the money and the investors in the other European countries, including Germany herself lent that money. It may not be popular to write about it now, but keep it in the back of your mind for future use."
David Lawrence wrote in the Evening World in May 1922,
"if Germany could have secured a loan immediately upon the close of the war she would not have been so adversely affected in the exchange market and she would have been able to purchase from American manufacturers much of their surplus stock of necessities. Germany would have gotten much of what she was deprived of through four years of a blockage and America would have captured an important market.
But instead Germany was treated as an isolated factor without thought of the effect of her economic condition on the rest of the world."
Image from Library of Congress: Delilah, representing the Republic of France, prepares to weaken Samson, resting on a pillow marked "Europe," by cutting his hair.