William Jennings Bryan to Woodrow Wilson

I have been in conference with the Nicaraguan Minister and Financial Agent and also with some parties who are negotiating with them for a loan. In conferring with them I have learned something more in regard to the hardships under which the small Latin–American countries labor. Ecuador, for instance, made a loan a few years ago at 22–1/2% and it was an attempt to make a still larger one at the same rate that caused a revolution there which resulted in the loss of some eight thousand lives.
I heard of one firm in New York that was considering a proposition that would call for 36% interest. The way they do it is this: They will make a short time loan, say for six months, at 6% and place a discount on the amount,— in one case that I heard of it was 15%. 15% on a six months’ loan would be at the rate of 30% a year, and the 6% added would make it 36%.
The Nicaragua people owe Brown Brothers about$711,000 and as security they have given not only customs, returns from their railroad, etc., but they have given an option on 51% of the stock of their government railroad, and this at a figure that would amount to a profit of something like a million and a half. Brown Brothers are willing to increase the loan to about two million on a 6% basis, but they want an option on the entire railroad which would mean a profit of about three millions.
I mention this to illustrate what I said in a letter the other day about our being in the position of a Good Samaritan and helping those who have fallen among thieves. I feel that we have an opportunity to help these nations in a disinterested way that will cement them to us and give us a standing among the Latin–American countries which no outside influence can shake.
Nicaragua needs some$750,000 to get rid of the Brown Brothers loan and free their railroad. They need some more for the purpose of paying off present indebtedness. They would use a part of the money from the Canal option to discharge these liabilities, but now that nothing can be done for a while on that subject they are urged to meet this Brown Brothers debt which comes due in October. Have you sufficiently considered the proposition which I laid before you to be able to decide upon its merits? I have no doubt that we can provide that if we hereafter purchase the Canal and the naval base in Fonseca Bay, the money paid by us can be used first in liquidating any loans for which we are security. My recommendation is that we propose to the Nicaraguan Government that we loan them a million and a half or two million –– whatever sum to you may seem proper –– on the basis that I outlined a few weeks ago, namely, that we take from them 4–1/2% bonds for the amount and hold them as security for 3% bonds of our own, with the understanding that, if their bonds are paid, principal and interest, as due, xxx 1–1/2% of the interest will be used as a sinking fund to retire the principal. This would give them at this time a saving of 1–1/2% over anything they can possibly do outside, and in addition to that it would use 1–1/2% more of the interest to retire the principal, so that at the end of a time that could be easily calculated, their debt would be extinguished. I believe that we can do this with perfect safety, and that it would not even be necessary to stipulate for the appointment of an American to collect and disburse the taxes, for the payment of the interest, although there is no reason why they should not agree to this. I believe, however, that our position is such that this need not be put into the contract. I have no doubt that they would, without any such provision in the contract, invite us to send an official there to act as auditor.
I believe that such a proposition would be acted upon favorably by Congress. If we find that there was enough opposition to prevent the authorization of the loan at this special session, it could go over to the winter session and we would have the immediate benefit of the offer. I think, too, that it would help us in Mexico, for it would be a complete answer to any question that might be raised as to our disinterestedness.
In bringing the subject of Nicaragua before you again, I do not mean to withdraw my suggestion in regard to Ecuador –– one does not interfere with the other. Nicaragua, however, is the more pressing, and while in the case of Ecuador we could emphasize our immediate interest in the sanitation of Guayaquil, in the case of Nicaragua we could point to the fact that the Committee on Foreign Relations had formally endorsed the purchase of the Nicaragua site and the Fonseca naval base, so that it will be merely advancing money which will soon be covered by a payment which we expect to make.
I beg pardon for bringing this subject to your attention again, but it is pathetic to see Nicaragua struggling in the grip of an oppressive financial agreement. As I think I have stated in a former letter, we see in these transactions a perfect picture of dollar diplomacy. The financiers charge excessive rates on the ground that they must be paid for the risk that they take and as soon as they collect their pay for the risk they then proceed to demand of the respective governments that the risk shall be eliminated by governmental coercion. No wonder the people of these little republics are aroused to revolution by what they regard as a sacrifice of their interests.
With assurances of respect, etc., I am, my dear Mr. President,The President, The White House.