awards was fixed at "24 per cent of all receipts from Germany on account of the Dawes annuities available for distribution as reparations, provided that the annuity resulting from this percentage shall not in any year exceed 45,000,000 gold marks." The United States, then, is to receive on its own account the $12,000,000 annuity in repayment of Army costs and on its own and for the benefit of the American private claimants the $11,000,000 annuity on account of the Mixed Claims. The awards of the Mixed Claims Commission, plus interest, are estimated at $60,000,000 to the United States and $190,000,000 to private American citizens.

The United States, under its war powers as a sovereign, seized enemy property through the Alien Property Custodian as a common law trustee. The Versailles treaty gave the allied and associated powers the right to dispose of enemy property and Germany agreed to compensate its own nationals for the seizure. The allied and associated powers were authorized to liquidate the property and to apply the proceeds to satisfy debts owed by enemy nationals to their nationals or as a credit on reparation account. Under the Berlin treaty, making peace between the United States and Germany, the United States received the benefit of these provisions of the Versailles treaty. But the joint resolution of Congress of July 2, 1921, and the Berlin treaty specifically provided that the property of enemy nationals "shall be retained by the United States of America and no disposition thereof made except as shall have been heretofore or specifically hereafter shall be provided by law until such time as the Imperial German Government * * * shall have * * * made suitable provision for the satisfaction of all claims against said Government" of American nationals. It was further provided that such property should be retained until the German Government should have "confirmed to the United States of America all fines, forfeitures, penalties, and seizures imposed or made by the United States of America during the war * * * and shall have waived any and all pecuniary claims against the United States of America."

There has been no modification of the Versailles treaty or Berlin treaty with respect to the payments due from Germany, and the duration of the Dawes plan payments is not fixed. The practical effect of the Dawes plan is, however, that Germany's creditors have accepted a reorganization under which their rights are limited to their shares under the Paris agreement and an attempt to return to the original treaty requirements for payments would be useless.

This is the general situation. Its application to the United States may be considered.

It is estimated that all the awards of the Mixed Claims Commission, which Germany is obligated to pay, will aggregate $190,000,000 of principal and $60,000,000 of accrued interest to January 1, 1926, or a total of $250,000,000. The awards bear 5 per cent interest. If no interest is to be paid upon accumulated interest, an annuity of $11,000,000 would pay current interest and pay the $60,000,000 accumulated interest in 40 years, and thereafter in 40 more years would amortize the principal of the awards, a total priod of 80 years. This is on the assumption that the Dawes plan continues for that length of time, and that each year Germany is able to pay to the transfer agent in Germany and the transfer agent is able to transfer into the currencies of the creditor nations 2,500,000,000 gold marks per year. While our Army costs repayments are preferred, the mixed claims belong in the general category of reparations without preference and any diminution in total payments will be felt by the mixed claims.

If the Dawes plan fails and the United States resorts to its rights to demand payment of the mixed claims under the Berlin treaty, the Allies would seem to have a like right to ask payment of the 132,000,000 gold marks of reparations, plus 5 per cent per annum interest. This yearly interest alone is two and one-half times the total Dawes annuities. It seems impractical, therefore, to expect from Germany payment of the mixed claims except out of the 24 per cent annuity under the Dawes plan. While the annuity given the United States under the Paris agreement is a fair proportion of the total demands on Germany by all her creditors, still, in view of the length of time it will take for this annuity to pay the mixed claims, it must be recognized that the awards have little present value to the private American citizen unless some other means of immediate payment can be obtained.

It might be within the power of the United States under these provisions of the Versailles treaty to the benefit of which the United States is entitled under the Berlin treaty, to liquidate the private German property and to apply the proceeds to the payment of the mixed claims. The moral justification for such a proceeding

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is doubtful and, moreover, there is some question as to the constitutionality of such a procedure now we are at peace. The private German owners of the property are not likely to receive from their government adequate compensation for their property taken and used to pay the debts of their government. The proceeding would practically amount to confiscation of private property.

*

Looking at the matter from the standpoint of a great commercial nation, whose citizens now have enormous investments in foreign countries, it would appear sound policy for us to continue as we have in the past to recognize the sanctity of private property of other nationals. By such a policy the property of our nationals abroad may be saved from confiscation in the event of another war. Aside from the moral and commercial policy questions affecting the confiscation of the enemy property, doubt is raised by the Berlin treaty and the resolutions of Congress as to our legal authority to liquitade the property to pay the mixed claims. It is provided that the enemy property "shall be retained by the United States * * until such time as the Imperial German Government shall have * * * made suitable provision for the satisfaction of the mixed claims of our nationals. If the provisions for a share in the Dawes annuities is a suitable provision, then the property ought to be returned. If it is not a suitable provision, then our right would seem to be to hold the property until the mixed claims are paid—at least 80 years, and most likely indefinitely. To keep property away from its owners and hold it in the hands of a Government trustee is a great economic loss. It is a vain thing, indeed, to insist on retaining title to property not our own indefinitely. Matters between nations should be settled and not permitted to be for many generations a source of friction.

* *

*

The only other practical method of payment of the awards to the private American citizens is for the United States to advance the money necessary to pay the awards to its own citizens (estimated between $180,000,000 and $190,000,000), and to recoup the Treasury for this advancement out of all moneys received from Germany on account of mixed claims ($11,000,000 a year and Army costs $12,000,000 a year). If the United States should borrow the money at 334 per cent to pay the awards to American citizens, and use the $30,000,000 of earnings made by the Treasury out of money of the Alien Property Custodian on deposit with it prior to the Winslow Act which gives later earnings to the enemy nationals, and if the United States should receive all payments provided under the Dawes plan for both mixed claims and Army costs, the debt thus created would be retired with interest at 334 per cent in about eight years. other words, the United States would be made whole out of payments due the American claimants and out of repayments by the United States for money spent in past years in a short period of time, and thereafter all payments would go into the Treasury. True the payment by the United States of the awards to American citizens would be an expenditure in the Government accounts in the year actually made and thus appear as an increase in governmental expenditures, but looking at the matter in another aspect, it might be fair to consider that the expenditure for payment of the mixed claims is in effect a capitalization to-day of certain payments due from Germany in the future.

In

To summarize: The only practical way for the American citizen to get compensation for his war loss is either for the United States to confiscate the property of German nationals and apply the proceeds or for the Treasury to advance the money and to recover it later from the Dawes payments. The Treasury is opposed to the confiscation of the private property of German nationals and believes also that the burden of war losses suffered by some of our citizens should be borne, not by them alone when they can be relieved by its temporary assumption by all of the people of the country, although this assumption carries with it some risk of loss.

In addition to the question of the payment of the mixed claims and the return of the alien property, there is a further matter between the United States and the German nationals which should be settled. During the war the United States seized and used ships, radio stations, and property belonging to German nationals. The Berlin treaty provides that Germany will make suitable provision for the satisfaction of all claims against the United States on account of such seizures, but the situation is like that with respect to the enemy property. We have taken the property of private citizens and used it for our own purposes. The relief from their own Government is inadequate. We have enjoyed the benefit and we ought to pay. This does not mean the creation of a new moral obligation on the part of the United States. but simply the recognition

of what we owe and the payment of fair compensation for property taken by the United States from others.

The Treasury having in mind these various related matters between the United States and Germany, presents for the consideration of Congress a plan to cover in one piece of legislation (1) payment of the mixed claims; (2) ascertainment and payment of compensation due private owners of German ships, radio stations, and patents taken and used by the United States; and (3) disposition of the German property. A bill embodying this plan has been introduced in the House of Representatives by Representative Mills, of New York.

The bill proposes:

(1) That awards to American citizens on the mixed claims shall be paid.

(2) That an arbiter, appointed by the President, shall award compensation due the German owners of ships, radio stations, and patents, taken and used by the United States, and that the United States shall pay these awards to an aggregate not exceeding $100,000,000.

(3) That the Treasury may borrow money to make such payments.

(4) That the property of German nationals in the hands of the Alien Property Custodian shall be returned.

(5) That the earnings prior to March 4, 1923, on moneys deposited by the Alien Property Custodian in the Treasury of the United States shall be retained by the United States and applied towards payments of the awards of the mixed Claims Commission. March 4, 1923, is the date of the Winslow Act giving similar earnings after that date to the enemy owners.

(6) That the United States shall pay up to the date of the Winslow Act interest at 4 per cent per annum on moneys of American citizens wrongfully seized by the Alien Property Custodian and deposited in the Treasury.

(7) That receipts by the United States from Germany on account of the Mixed Claims and the Army costs shall be applied by the United States to the payment of awards of the Mixed Claims Commission and of the arbiter, to interest on any debt created by the United States for moneys borrowed to make the payments required by the bill, and to the retirement of the public debt. The Treasury believes that the proposed bill is desirable for the reasons(a) It is a recognition of sound policy in the treatment of the war losses of our own citizens and of the property of enemy nationals;

(b) It is a comprehensive settlement of all the principal questions between the United States and Germany left from the war; and

(c) It is recognized on both sides as an equitable adjustment of our moral and legal obligations, is in conformity with our traditional principles of fair dealing, and will mean one more step toward the restoration of sound conditions in the world.

Mr. WINSTON. There were three general propositions which had been left undecided since the war, and it was the desire to get those three general propositions into one comprehensive plan and a bill covering them which inspired the Treasury Department to take up this matter and draft this bill. It probably is not strictly a Treasury matter, but it was essential that some attention be paid and some plan worked out.

The first of those three matters covers questions of alien property. During the war, under our war powers, we seized the property of alien enemies and held it, through the Alien Property Custodian, as trustee. In the act providing for the seizure of the property and in the debates preceding the enactment of that law, there was nothing said about confiscating the property and using it for our own purposes, but as I say, it was held by the Alien Property Custodian as trustee, subject to later disposition by Congress.

The amount of property we seized has been variously estimated, but I think now the estimate is that there is about $300,000,000 of property in our hands, of which over 90 per cent is the property of Germans, and 10 per cent or less, the property of Austrians and Hungarians.

After we had taken that property over, as we say in the statement which has been presented to you, there were various bills passed affecting the property. The principal bill was an act effective March 4, 1923, which permitted the return to the owner of $10,000 in any one trust. If the trust was less than $10,000, the owner got all the property back; but if the property held by the Alien Property Custodian was more than $10,000, the owner got $10,000 of it back. That eliminated a great many small trusts, and it has cut down the amount of property in the hands of the Alien Property Custodian very materially.

Then by the terms of that bill the earnings made on investments of trust funds, which the Treasury made with the money deposited with the Treasury by the Alien Property Custodian and invested by the Treasury, after March 4, 1923, up to $10,000, go to the owner of the property. There is, of course, no obligation on the part of the United States to pay interest. We do not pay interest on any funds unless it is specifically provided for by law. Prior to March 4, 1923, whether the property held was property of alien enemies of anybody else, the United States would not have paid interest on it because a sovereign does not pay interest on money unless the statutes specifically so provide.

There have been numerous bills introduced in Congress providing for the return of this alien property, both in the last session and some in this session, but they confine themselves solely to the return of property, without taking care of any of the related questions which are really connected with it.

The next proposition is that during the war, immediately when we went into the war, we seized the enemy ships which were interned in our harbors, and we have since used them as ships of the United States. We paid no compensation for them.

The authority under which we seized them provided for an estimation of the value of these ships by the Secretary of the Navy, but it made no provision for the compensation so estimated to the owners of the ships.

At the same time, under various powers, we seized two radio stations that were owned by Germans, and we also seized and used a lot of patents; that is, the United States used the patents. Some of those patents were used without reference to the Alien Property Custodian and some were taken by the Alien Property Custodian and later sold to the United States.

Mr. HAWLEY. In connection with the matter of the ships, how many of them are in operation, and how many of them have been sold? Mr. WINSTON. Some of them have been lost and some of them have been sold.

Mr. HAWLEY. How many of them are in our possession now? Mr. WINSTON. They were all in our possession. The Leviathan is one of those ships.

Mr. HAWLEY. I understood you to say some of them were lost. Mr. WINSTON. We took possession of them. We have not returned them to their owners. Some of them have been sold, some of them have been lost, and some of them are still being operated by us. In any event, they have not been turned back to the people who owned them.

Mr. OLDFIELD. What do you mean by saying some of them were lost?

Mr. WINSTON. Lost at sea; some of them, I imagine, have been abandoned.

Mr. GARNER. How much did you say the Navy Department estimated their value to be?

Mr. WINSTON. I have the Navy Department's estimate here.
I assumed you would get it from the Navy Department in detail.
Mr. WYANT. That estimate was made at the time the ships were
taken?

Mr. WINSTON. It was an estimate made at that time.
Mr. MILLS. My recollection is it was $33,000,000.

Mr. WINSTON. It was about that amount.

Mr. GARNER. If it was $33,000,000, I wondered if we had been able to liquidate any of that upon the basis of their estimated value. Mr. WINSTON. I think it depends entirely upon when we sold the ships.

Mr. HADLEY. How much tonnage was there?

Mr. WINSTON. It is not aggregated here, either. That is a detail which the Navy Department has. I have a list of the ships, but the amounts are not added up.

Mr. NEWTON. In connection with this question of value, it should be borne in mind that some of the ships were badly damaged.

Mr. WINSTON. I would like to discuss the question of value a little later when we come to it in the bill.

The third proposition is these mixed claims.

Mr. MILLS. Did you mention patents?

Mr. WINSTON. Yes; I mentioned patents, generally.

Mr. HAWLEY. In the matter of patents, those of chief value were the chemical patents, were they not?

Mr. WINSTON. The chemical patents are not touched. The patents we sought to reach in this bill are patents that the United States have taken and used themselves. This is a bill providing for compensation by the United States to the owners; it has nothing to do with the Chemical Foundation, where the patents were taken and sold to private American citizens. That is their lawsuit.

Mr. MAPES. You distinguish between the United States and the Alien Property Custodian?

Mr. WINSTON. Yes. Where the patents were taken over direct by the United States, or through the Alien Property Custodian, we consider that a United States matter.

Mr. HADLEY. Are you confining the matter to those items taken under the authority of law?

Mr. WINSTON. They were all taken under the authority of law. Mr. HADLEY. Including the Alien Property Custodian patents? Mr. WINSTON. They were all taken under authority of law. Mr. HADLEY. How do you distinguish the question in connection with the chemical patents. Are they private transactions?

Mr. WINSTON. The chemical patents were taken by the Alien Property Custodian under the act, and then he sold them under the act to private people. We are not interested in that transaction. But if the Alien Property Custodian had licensed or sold some of these patents to the United States and the United States had used