Mr. LEA. In connection with valuing the mark, instead of using the original value of 23 cents and a fraction, they reduced it to 16 cents, did they not?

Mr. WINSTON. That was the value of the mark at the time we entered the war.

Mr. LEA. So that would be the actual reduction which they are making on those American claims so far as they were due in money? Mr. WINSTON. If an American lost a mark at the time of our entering the war, he lost a mark worth 16 cents and not 23 cents.

Mr. LEA. That was the theory of the reduction of the gold mark in making these settlements?

Mr. WINSTON. That is my understanding, that this is the theory in the Mixed Claims Commission.

Mr. MAPES. Have you been given the amount of the awards of the Mixed Claims Commission to American citizens for claims against the German Government?

Mr. WINSTON. The awards have not all been made, and I would like to have the Mixed Claims Commission give you the details, but the estimate of those awards plus accrued interest is between $180,000,000 and $190,000,000. I have used the figure of $190,000,000.

Mr. NEWTON. Which is somewhat less than they were estimated at three years ago. I think the estimate before our committee then was a billion dollars.

Mr. WINSTON. Considerably less. I think the commission has done very excellent work.

Mr. MAPES. How much in amount are the awards made to German citizens against the United States?

Mr. WINSTON. That is the figure which we put the upset price of $100,000,000 on. It depends principally on the value at which these ships are fixed.

Mr. MAPES. Are there no awards of the Mixed Claims Commission to the German citizens?

Mr. WINSTON. No; the Mixed Claims Commission was set up to determine the claims of American citizens against Germany, not of German citizens against the United States.

Mr. MAPES. It did not include both?

Mr. WINSTON. No.

Mr. LEA. Now, about the payment of interest to these American citizens on their claims against Germany, inasmuch as the general policy for over 50 years has not been to allow interest on claims for which the American Government is liable when we attempt to settle with those having claims not founded on any liability of our own Government, why should we pay interest on those claims?

Mr. WINSTON. The situation from the Treasury standpoint is simply that if we do not pay interest we would save about $50,000,000 in the amount advanced.

Mr. LEA. You would save $50,000,000 if you did not pay interest? Mr. WINSTON. I think the accrued interest is somewhere between $50,000,000 and $60,000,000 on the American claims.

Mr. LEA. This payment is based upon the beneficent attitude of the Government rather than upon the legal or moral liability. Would we not be justified in refusing to pay interest on the claims against Germany?

Mr. WINSTON. It is my personal opinion that you might. It is a question of policy for Congress to determine.

Mr. LEA. They have no ground for claiming a more favorable treatment than the ordinary American claimant against the American Government.

Mr. WINSTON. Except that their awards bear 5 per cent interest on the face.

Mr. LEA. Against Germany?

Mr. WINSTON. Against Germany.

Mr. HADLEY. Of course, they had three years' notice before we entered the war to get out of Germany with their property. They might not have been able to do it, but that is a feature that enters into the equities.

Mr. WINSTON. I think the claims arose because they could not get out.

Mr. HADLEY. I say that that is involved, but there is a question of fact there as to whether they might or might not have gotten out in those three years.

Mr. GARNER. The general theory of the Treasury Department was, I believe you stated, that interest should not be paid on claims of American citizens against our Government?

Mr. WINSTON. Yes.

Mr. GARNER. But in this instance we are holding funds due to American citizens by reason of acts of the German Government, and you want to reverse the rule. So far as the Treasury is concerned, you have said that it is just a question of about $50,000,000 by way of interest. Has the Treasury any policy to suggest with reference to this?

Mr. WINSTON. If they had a claim against the United States which bore interest, we would pay interest on it, of course; and in drawing this bill I have treated the awards at their face value, which is principal plus interest.

Mr. LEA. But if those claims had been determined in our Court of Claims they would not have borne interest; is not that true? Mr. WINSTON. It would have depended on the statute under which they were permitted to go before the Court of Claims.

Mr. LEA. The general statute prohibits the allowance of interest except where the law specifically authorizes it?

Mr. WINSTON. That is right.

I want to suggest three amendments. One of them is that on page 4, line 7: the date should be "May" instead of "March." Mr. OLDFIELD. May 12 instead of March 12?

Mr. WINSTON. Yes.

And on page 7, line 24, I made use of the words "gold marks." "Gold marks" is a term used in the Dawes plan, but I do not know whether it is a legal term in Germany, and I would suggest a definition of gold marks to mean the currency accepted from the German Government by the transfer committee under the Dawes plan at the rate currently accepted.

In other words, we wanted the opportunity to use any money we got in Germany to help us in paying these claims, and whatever rate we get in Germany, whatever that currency is, ought to be used at that rate whether it is technically gold marks or whether it is Reichmarks with a gold value or not.

Mr. MILLS. Have you that amendment written out?*

Mr. WINSTON. Yes; I will give it to you.

I would like to insert, on page 11, line 18, after the word "authorized" the words “and directed."

It is the theory of this bill that the Treasury furnished the money in the first instance, but as we expect it to be in the main an advance to the American claimants it is proper to earmark the proceeds of these German payments to the reduction of our debt, and that is what the change does.

Mr. GARNER. You mean that, where it is proposed to authorize the Treasury Department to do a thing, you want to direct it? Mr. WINSTON. Yes.

Mr. GARNER. I congratulate you for suggesting for one time that the entire discretion be not left entirely with the Treasury Department. [Laughter.]

Mr. NEWTON. What jurisdiction is the comptroller going to have over these payments-so as to further slow up the payments?

Mr. WINSTON. If the comptroller were given jurisdiction over these payments, he would probably, if he acts as he has before, go into every claim and make us prove the whole case over again.

Mr. NEWTON. That is what I thought. How about the bill as drawn?

Mr. WINSTON. The bill is drawn to obviate that, and the awards are final. If we have an arbiter to determine the thing, we will let him determine it.

Mr. NEWTON. And the comptroller will not have anything to do with it?

Mr. WINSTON. No.

Mr. HAWLEY. You intend to make the conclusions of the arbiter, both as to law and fact, conclusive?

Mr. WINSTON. Yes. Of course, if there is fraud in arbitration, you can always stop it, because the awards are certified to the Secretary of State and by him to the Treasury and if there is fraud in an award he just will not certify it to the Treasury. I do not believe any court would compel him to certify it if you could show fraud.

Mr. HAWLEY. If the Government made the settlements in cash, would it issue bonds for that purpose to cover the amount needed in excess of the amount that you found from other sources?

Mr. WINSTON. We do not issue bonds for any specific purpose. We have a certain amount of cash in the Treasury.

Mr. HAWLEY. Would there have to be an issue of bonds?

Mr. WINSTON. There would not necessarily have to be an issue of bonds.

Mr. HAWLEY. Do you think that the surplus in the Treasury would be sufficient to make the payments?

Mr. WINSTON. It might be or it might not, but the cash that goes into the Treasury goes into one general pot. When we need more money, we borrow more money, and whether we need it for this purpose or for some other purpose authorized by Congress, it makes no difference.

Mr. HAWLEY. The point I have in mind is how much the passage of this bill will cost the Treasury.

Mr. WINSTON. Our accounts would show as follows: If the bill were passed now, we would take the American mixed claims so far

as they are adjudicated, and certified over to us before June 30, and pay them out of this fiscal year and to the extent that we did pay them, and the expenditure would come as an expense to the Government and would decrease our surplus to that extent in the fiscal year 1926. Going into the next fiscal year of 1927, I assume we would be able to clean up all of the American mixed claims. That would mean that we would have to find $190,000,000, of which we would find $90,000,000 from the unallocated interest

Mr. HAWLEY (interposing). Thirty million.

Mr. WINSTON. Thirty million, and about eight million from the Germans now, and in between now and the end of the fiscal year 1927 we would have had a total, including the $8,000,000, of $22,747,000 paid to us under the Dawes plan from Germany, so that would be $30,000,000 and $22,000,000, or $52,000,000 off or $128,000,000 which we would have charged against our expenditures for the fiscal years 1926 and 1927.

Mr. HAWLEY. Can the Treasury stand the withdrawal of that amount of money?

Mr. WINSTON. Receipts all go into one pot. If we pay $128,000,000, say, for this purpose, and we pay a lot of money for some other purposes and if on the whole we spend more money than we take in we have to borrow money.

Mr. HAWLEY. What is your estimate of the condition of the Treasury on June 30, 1926? Suppose that this bill is passed-will there be a surplus or a deficit?

Mr. WINSTON. That depends not only on this bill, but it depends on other actions of Congress. This bill provides for a single expense; that is, it is not recurring. There are a lot of bills that provide for a recurring expense, like pensions and increases in salaries or a building bill, and whether we have enough money in the Treasury depends upon the extent to which Congress authorizes the expenditure of money and whether, on the other side of the ledger, the amount of receipts from taxes we receive.

Now, we have not estimated yet of the amount of tax we should receive in 1927, and until Congress adjourns we will not know what expenditures Congress will authorize for 1927.

Mr. HAWLEY. When we were making the revenue bill proposing reductions, this particular item was not suggested?

Mr. WINSTON. Was not considered.

Mr. HADLEY. You have no separate funds in the Treasury? It is all one fund, as I understand it?

Mr. WINSTON. Yes.

Mr. HADLEY. The general fund would be affected by this bill? Mr. WINSTON. Just like any other expenditure.

MI. GARNER. You can borrow money at the present time at 34 per cent, on a long-time loan.

MI. WINSTON. We have just borrowed $500,000,000 at 34 per cent, with a premium of one-half per cent.

Mr. GARNER. What objection would the Treasury offer to including this authorization of bonds in the bill, with a definite provision as to the rate of interest?

Mr. WINSTON. There is a limitation in the Liberty loan act of 44 per cent on bonds, but it is very difficult to determine what is the cheapest money you can get. It may be, when you come to

borrowing money in one of the four quarters of the year, that interest rates on short-time money are down, and rates are not down on longtime money and you may want to borrow for a year and expect to take a long-time loan at the expiration of that year. To put any limit on the Treasury means an additional expense to the Government, because it restricts the discretion of the Treasury in that respect. Mr. GARNER. You have heard some criticism with respect to the discretion given to the Treasury Department in respect to that?

Mr. WINSTON. I think that on a subject which changes as rapidly as the money market does, you must lodge discretion in somebody as to what securities you are going to issue and at what rates of interest. Mr. GARNER. What has been the history of bond issues in this country with respect to Congress directing the Treasury in regard to the rate of interest? Has it not always provided the rate of interest, or the limitation?

Mr. WINSTON. There is a limitation on the bonds, but not on our notes and certificates.

Mr. GARNER. I am talking about the history of the bond issues in this country. Has not Congress always been very jealous in its prerogatives in limiting the amount of interest and the time for which the loans would be made?

Mr. WINSTON. Not the time, that I know of.

Let me take this situation. In March we decided that we could float a 334 per cent long-time bond, and it would be a desirable bond to float, and we debated as to whether we could collect a premium on that bond or not-in other words, sell it on a better basis than 334, and this question was not determined until the day before those bonds were put out, and it was decided we could collect that premium of one-half per cent. per cent. That meant $2,500,000 in the Treasury.

If we had had a restriction that we must charge only a certain rate of interest and sell at a certain figure, we would not have had the flexibility.

Mr. LEA. On page 11 of the bill, subsection (c) is a provision that the Secretary of the Treasury may use the money received by the United States on account of payments for the army of occupation and the Mixed Claims Commission awards in satisfaction of the bonds. Would not the Secretary of the Treasury have the right to resort to those funds in the absence of this subsection in case the bill should otherwise be enacted?

Mr. WINSTON. This bid specifically earmarks the fund to debt reduction. If there were no provision, payments from Germany would go into the general fund of the Treasury and be used for any purpose. Mr. LEA. So that these funds would be subject to the payment of these bonds in the absence of this subsection?

Mr. WINSTON. The purpose of this section is to apply those funds direct without further appropriation.

Mr. LEA. But it does not devote those funds to this particular purpose nor prevent their use for other purposes?

Mr. WINSTON. I think it does. That is the way we intended it. Mr. LEA. The section states

The Secretary of the Treasury is authorized, under such terms and conditions as he may prescribe, to use any of the money

and so forth. Has he not that authority already?