ABSTRACT
When President Harding’s Republican administration took office in March 1921 it was determined to break the impasse over war debts – particularly as it had been warned that some of its debtors were unable to meet their interest payments on obligations about to mature. Although Andrew Mellon, the new Treasury Secretary, believed he possessed sufficient powers to deal with these funding difficulties, his legal advisers disagreed. The President was thus presented with a draft Bill in June 1921 designed to confer blanket powers upon the Treasury Secretary to vary debt repayments and negotiate satisfactory settlements with European debtors experiencing problems. Despite the President’s appeal to Congress, however, these efforts were rejected after lengthy and acrimonious debate because of isolationist suspicions that the new administration intended either to waive these obligations or to accept German reparations bonds in lieu of payment – particularly as they also feared this was ‘the prelude to the return of the Versailles Treaty . . . minus the League of Nations . . . and that . . . in the name of stabilizing Europe [we] will be asked to ratify it’.1 Undeterred by this setback, on 6 December 1921 President Harding used his first State of the Union message to urge Congress to approve amended legislation designed to establish a commission to negotiate satisfactory settlements for these obligations. This Bill comfortably passed the House of Representatives on 25 October before the Senate eventually responded to this appeal by passing the World War Foreign Debt Commission Act on 31 January 1922.
