SALE OF FOREIGN BONDS OR SECURITIES IN THE UNITED STATES TUESDAY, JANUARY 12, 1932 UNITED STATES SENATE, The committee met at 10 o'clock a. m., pursuant to adjournment on yesterday, January 11, 1932, in the committee hearing room in the Senate Office Building, Senator Reed Smoot presiding. Present: Senators Smoot (chairman), La Follette, Harrison, and Costigan. Present also: Senator Johnson. The CHAIRMAN. If the committee will come to order we will proceed with the testimony. TESTIMONY OF VICTOR SCHOEPPERLE, VICE PRESIDENT, NATIONAL CITY CO., NEW YORK, N. Y. (The witness was duly sworn by the Chairman of the Committee.) The CHAIRMAN. Mr. Schoepperle, you live in New York? Mr. SCHOEPPERLE. I live in Short Hills, New Jersey, Senator. The CHAIRMAN. Are you associated with the National City Bank? Mr. SCHOEPPERLE. I am a vice president of the National City Co., which is an affiliated corporation. Senator JOHNSON. With the National City Bank? Mr. SCHOEPPERLE. Yes, sir. Senator JOHNSON. How long have you been associated, please, with that company? Mr. SCHOEPPERLE. Since 1916. Senator JOHNSON. For how long a period have you held your present position? Mr. SCHOEPPERLE. Since 1927, as an officer in my present capacity. Senator JOHNSON. Will you state whether or not in 1930 you concluded an agreement with Colombia for the granting of short term credits to Colombia? sir. Mr. SCHOEPPERLE. We did conclude a tentative agreement; yes, Senator JOHNSON. What was the date of that agreement? Mr. SCHOEPPERLE. June 30, 1930. Senator JOHNSON. Have you a copy of that agreement? The CHAIRMAN. Make it a part of the record at this point. Mr. SCHOEPPERLE. May I say in this connection, Mr. Chairman, that the business which we are about to discuss is a business which has not as yet been finally concluded in the sense that the obligations incurred arising out of this agreement have not yet been paid. This agreement, therefore, in my opinion, stands as a confidential matter which, under the present circumstances, should not become a public record; although it is at the disposal of any member of the committee who wishes to examine it. Senator JOHNSON. I shall be very glad to have you explain on what theory you conclude that it is a confidential matter. Mr. SCHOEPPERLE. Partly on the ground that it represents a loan transaction between a group of bankers, of whom we are but one, and the Republic of Colombia represented by the President of the Republic of Colombia; and although there is nothing in this agreement which gives us the slightest embarrassment, we feel that it should not be made a public document without the consent of the Republic of Colombia or its president. Senator JOHNSON. Let us follow that out for just a moment, if you please. There was an agreement in respect to short term credits of Colombia, was there not? Mr. SCHOFPPERLE. There was a tentative agreement. Mr. SCHOEPPERLE. That is true. Senator JOHNSON. Has it been wholly executed as yet? Mr. SCHOEPPERLE. The agreement has been wholly executed in so far as the loans contemplated by the agreement have been made. Senator JOHNSON. Exactly. Mr. SCHOEPPERLE. But the agreement is not fully discharged except as those loans are paid. Senator JOHNSON. But the agreement has been executed by the parties to it; it has been consummated in accordance with its terms thus far, has it not? Mr. SCHOEPPERLE. That is substantially correct; but inasmuch as it was a tentative agreement I would hardly say it was a definitive agreement. The definitive contracts arising out of this agreement have, however, as you suggest, been duly executed. Senator JOHNSON. All right. Out of this agreement, which was a preliminary agreement, if you may term it such, or a tentative agreement as you describe it, came further agreement with Colombia; is that correct? Mr. SCHOEPPERLE. That is so; loan contracts. Senator JOHNSON. And those loan contracts are in existence at the present time? Mr. SCHOEPPERLE. They are. Senator JOHNSON. They are loan contracts by which securities of Colombia were taken by your institution and its associates? Mr. SCHOEPPERLE. Not securities, Senator. These are loan contracts which provide for banking credits, advances on the books of the various banks that constitute a group. But there are no securities of any kind issued in connection with these contracts or agreements. Senator JOHNSON. How long a period of time were you engaged in the execution or in the making of this preliminary contract? Mr. SCHOEPPERLE. Would you like me to relate the facts of this loan agreement with Colombia from the inception of the conversations? Senator JOHNSON. That is exactly what I am going to ask you to do and concerning which I am going to interrogate you. But I am now asking the question that I do because you assert that this particular tentative agreement is a privileged agreement which you do not wish to have made public. I cannot follow you in that matter. That is, however, a matter for this committee to determine, of course. Mr. SCHOEPPERLE. Before I relate the facts as you have very kindly permitted me to do, I would like to say in response to your question that I do not feel like making this agreement public because I have not the consent of the various parties who are affected by it. We have nothing to conceal. I will tell you everything that there is in the agreement if you like. I would read it to you if the reporters would agree not to take a transcript of it. Senator JOHNSON. Of course whatever is developed here the reporters will publish. That goes without saying. You want to keep that in mind. In the making of the contract, how long were you engaged? Mr. SCHOEPPERLE. May I relate the facts as you kindly permitted me to do? Senator JOHNSON. Oh, yes; but I want first, if you will, to have you answer a few questions so that the committee may have before it the question whether there is any privilege attaching to it. You were engaged in the making of the contract for a number of months? Mr. SCHOEPPERLE. Strictly speaking, we were engaged in arriving at this tentative agreement over a period of perhaps five weeks. Senator JOHNSON. During that period did you consult with the President of Colombia or the gentleman who subsequently became President of Colombia, in New York City? Mr. SCHOEPPERLE. During that period the President of Colombianow President of Colombia; then the President-elect-consulted with us. Senator JOHNSON. In New York City? Mr. SCHOEPPERLE. In New York City. Senator JOHNSON. And during that period did you consult with any other person in New York City? Mr. SCHOEPPERLE. With reference to this agreement? Senator JOHNSON. Yes, sir. Mr. SCHOEPPERLE. Only with our associate, the First National Bank of Boston. Senator JOHNSON. Do you know Mr. Matthews of the State Department? Mr. SCHOEPPERLE. I do, very slightly. Senator JOHNSON. Was Mr. Matthews at any time with the President of Colombia in New York City? Mr. SCHOEPPERLE. He was not, as far as I know. Senator JOHNSON. At any time did Mr. Matthews talk to you concerning that particular agreement? Mr. SCHOEPPERLE. He never did prior to the execution of this tentative agreement. Senator JOHNSON. But after the execution of the tentative agreement did he talk to you concerning it? Mr. SCHOEPPERLE. Mr. Matthews came to see me. Senator JOHNSON. Where? Mr. SCHOEPPERLE. In New York. Senator JOHNSON. With whom? Mr. SCHOEPPERLE. With himself; nobody else. It was some time in the latter half of the year 1931. Senator JOHNSON. Was that the first time that you conversed with him concerning the matter? Mr. SCHOEPPERLE. It was the first time I ever conversed with Mr. Matthews on that or any other matter. Senator JOHNSON. Can you fix the time any better than the fashion that you have? Mr. SCHOEPPERLE (referring to memorandum). Some time in June, 1931. Senator JOHNSON. You said, the latter part of 1931. I thought you were in error about the date, and that is the reason I asked you. Mr. SCHOEPPERLE. I am relying entirely on my memory. Senator JOHNSON. Oh, that is all right; and I do not expect that one's memory can be exact as to dates. I know that mine is not. But some time in June, 1931, Mr. Matthews did call upon you in reference to this matter in New York City? Mr. SCHOEPPERLE. That is so; yes, sir. Senator JOHNSON. Subsequent to that time there were other agreements executed as the result of this tentative agreement? Mr. SCHOEPPERLE. I am thinking just how to answer that question, because I want to state it exactly. Senator JOHNSON. I simply am seeking the facts. Mr. SCHOEPPERLE. Subsequent to Mr. Matthews' call on me in June― (At this point Mr. Schoepperle's assistant, by reference to a file, said audibly that he thought the date of the call referred to must have been May 18, approximately.) Senator JOHNSON. Wait a moment. When? Mr. SCHOEPPERLE. About May 18. I am sorry; we have the record somewhat confused. Senator JOHNSON. The record then, as I take it, is that it was on May 18 that he called upon you? Mr. SCHOEPPERLE. About May 18. Senator JOHNSON. What is the date of that tentative agreement? Mr. SCHOEPPERLE. The tentative agreement is June 30, 1930. Senator JOHNSON. Subsequent to May 18 when Mr. Matthews called upon you, were there other agreements executed? Mr. SCHOEPPERLE. Subsequent to May 18, 1931, which is the approximate date of Mr. Matthews' call on me, there were no subsequent agreements executed except renewal agreements. Senator JOHNSON. Renewal agreements of this tentative agreement? Mr. SCHOEPPERLE. Agreements renewing loans made in connection with the tentative agreement. Senator JOHNSON. Did you have any correspondence with the State Department in reference to the transaction? Mr. SCHOEPPERLE. We never had any correspondence with the State Department of any kind on this subject. Senator JOHNSON. What did Mr. Matthews call upon you about? Mr. SCHOEPPERLE. One of the conditions which was suggested to the Government of Colombia in connection with the borrowings that arose out of this agreement and the subsequent contracts under which loans were put at the disposal of that Government one of the suggestions made by the bankers, was that they should keep their budget in balance. The budget of Colombia had been balanced on paper earlier that year. The bankers, under an arrangement made subsequently to the tentative agreement of June 30, had agreed to advance the Republic of Colombia $4,000,000 which was part of the amount of the loan contemplated by the original agreement of June 30, on the condition, among other things, that the budget for 1931 should be balanced. Senator JOHNSON. What other things? Mr. SCHOEPPERLE. The following: First, the passage of a law creating an internal loan of 6,000,000 Colombian pesos designed to take up part of the internal floating debt of Colombia; second, the passage of an organic budget law which relates to this question of keeping the budget in balance; third, the enactment of a controller's bill designed to put the accounting of Colombia on a business-like accounting basis; fourth, a bill or law revising the somewhat antiquated customs system of Colombia which contributes a great part to the governmental revenue. Those were the four conditions referred to which related to this $4,000,000 which was up for discussion at about the time that Mr. Matthews called on me. The purpose of his call was to discuss with us this question as to whether we, the bankers, were entirely right in certain technical constructions of this question of whether or not the Colombian budget was then in balance and whether the fact that it had been previously balanced in the early part of the year constituted a sufficient compliance with this condition of a balanced budget which related to these loans in general. Senator JOHNSON. Did you call upon the State Department with reference to any matters connected with your loan? Mr. SCHOEPPERLE. Never. Senator JOHNSON. Did anybody representing your house? Senator JOHNSON. So this was the only conversation you had with anybody representing the State Department respecting it? Mr. SCHOEPPERLE. It was the only conversation that I had with anybody from the State Department on Colombian matters of any kind. Senator JOHNSON. And no letters or any kind of communications of any sort passed between you and the State Department? Mr. SCHOEPPERLE. No letters; and when I say us "I mean the National City Co. and the National City Bank. I think I can speak for the bank on that matter. Senator JOHNSON. Do you know whether or not any letters or communications passed between any other persons and the State Department with respect to the matter? |