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Imperialism
Second.

## XIII. <u>Armed Intervention</u>

### 1. <u>The Strategic Importance of the Caribbean Area to the United States</u>

Between spheres of influence like China and the Near East and outright colonial possessions like the Philippines and Porto Rico, stand the protectorates, which, though not owned by the United States, are under its political and economic control. Three of these protectorates—Santo Domingo, Haiti, and Nicaragua — have been acquired through armed intervention. All three are in the area around the Caribbean Sea, whose strategic and economic importance doomed it as an inevitable prey to American expansion.

The importance of the Caribbean region to the United States lies in its proximity, its commercial advantages as a source of raw materials and a market for manufactured goods, as a strategic military addition to the Panama Canal. The opening of the Panama Canal raised the Caribbean "to a commanding position among the trade routes of the world". (See Prof. Edward M. Borchard; "Commercial and Financial Interests of the United States in the Caribbean", p. 383 of Acad. of Pol. Sci. Pre. 1917-1918) Central America, President Woodrow Wilson declared, "is

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about to be touched by the great routes of the
world's trade and intercourse running free from
ocean to ocean at the Isthmus" (Address on Mexican
Affairs at a Joint Session of Congress, Aug. 27,
1913, - See "President Wilson's Foreign Policy"
messages and papers edited by James Brown Scott,
p. 2) In addition the Caribbean is the gateway
to the Panama Canal, and expansionists have ad-
vocated turning it into an "American lake". (See
Prof. William R. Shepherd, "The Attitude of the
United States Toward the Retention by European
Nations of Colonies In and Around the Caribbean".
Acad. Pel. Sci. 1917 page 203)

The strategic importance of the Caribbean
has impelled the United States to acquire naval
feetholds in that region. In addition to several
good harbors on the Gulf of Mexico and the naval
base at Key West, Florida, in its own territory,
it has acquired ports belonging to the little
republics to the south. (See Kirby Thomas: in
Mexico and the Caribbean, edited by George H.
Blakeslee, p. 320) From Guantanamo, Cuba, the
United States commands the windward passage be-
tween Cuba and Santo Domingo; from Porto Rico it
controls the Mona passage; by turning Haiti and
Santo Domingo into protectorates, the United
States has acquired the Mole St. Nicholas in the

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former, and Sanana Bay in the latter as first class
naval bases. A treaty with Nicaragua gives the
United States possession of the Great Corn and Little
Corn Islands and the right to build a naval station
on the Gulf of Fonseca. The Virgin Islands, ac-
quired from Denmark in 1917, also offer facilities
for an excellent naval base; while the Panama Canal
itself forms the center of American naval power.
(See Jacinto Lopes: "Mexico and the Caribbean,
edited by Blakeslee, pages 303-304)

In addition to these strategic considerations,
the outbreak of the World War forced the Caribbean
countries to turn to the United States for economic
relationships, not only in matters of trade but also
for loans. "In several cases our government has al-
ready taken a guiding hand in the negotiations.
Conferences for the adjustment of the debt of
Nicaragua, Haiti, and Santo Domingo have taken
place not in those countries, nor in the offices of
New York bankers, but in the Department of State
and the Bureau of Insular Affairs." (See Prof.
Edward M. Borchard: Acad. Pol. Sci. Proc. 1917-18,
p. 390)

One American authority has summarized the
matter by describing the Caribbean area as "a tropical
belt similar to that which European nations have ac-

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quired long ago in other parts of the world ....
They are so many natural markets lying upon one
of the greatest commercial highways of the present
and future - to and from the Panama Canal. From
them come raw materials and secondary foodstuffs
requisite for our factories and exchangeable for
our basic foodstuffs and manufactured articles.
They have become localities also for the investment
of American capital under circumstances that may
invite the excercize of political influence to a
greater or less degree." (See Prof. William R.
Shepherd: "Mexico and the Caribbean," edited by
Blakeslee, page 187)

The importance of the Caribbean economically
and strategically has caused it to be called "the
Mediterranean of the New World" and the countries
around it "the American tropics". The necessity
for expansion on the part of the United States,
and the need for the rapidly accumulating capital
of its financiers to find the nearest and easiest
possible outlet, gave rise to a diplomacy which in
one form or another has brought a number of the
Caribbean countries under the direct control of the
United States. "Cuba is no more independent than
Long Island. The island of San Domingo, with its
two Negro republics, is no more independent than

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and the Isthmus transit of commerce. It possesses the richest soil, the most capacious harbors, the most salubrious climate and the most valuable products of the forests, mines and soil of all the West Indian islands. Its possession by the United States will in a few years build up a coast-wise commerce of immense magnitude. . . In case of foreign war it will give us command of all the islands referred to and thus prevent an enemy from ever possessing herself of a rendezvous on our very coast." (See Samuel Guy Inman: "Problems in Pan-Americanism, p. 273)

In this case the bayonet followed the dollar as well as strategic considerations. In 1893 the San Domingo Improvement Company, an American concern with offices in New York, bought the debt of 170,000 which a Dutch company had loaned to the Dominican government, and with it the right to collect all customs revenues to satisfy this claim. (Caribbean Interests of the U.S." Chester Lloyd Jones, pages 110 ff.) In 1909 President Jimenez of the Dominican Republic appointed a board of his own to collect customs. The American company thereupon appealed to the State Department at Washington to protect its interests, and after negotiations the Dominican government was induced to offer to buy the company's debt for $4,500,000. On January 1, 1903 representatives of both governments signed a protocol providing for this settlement and for a board of arbitrators to fix the details of payment. It was also agreed that in case Santo Domingo failed to pay, the United

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States was to appoint a financial agent to take
over certain custom houses. This was the first
economic hold on the little republic. (for text of
Protocol see Senate Documents Vol. 47, Treaties
and Conventions, p. 414 entitled: "Protocol of an
agreement between the United States of America and
the Dominican Republic, for submission to arbitra-
tion of certain questions as to the payment of the
sum hereinafter agreed to be paid by the Dominican
Government to the Government of the United States
on account of the claims of the San Domingo Improve-
ment Co. of N.Y., a corporation under the laws of
the State of New Jersey and a citizen of the United
States and its allied companies.)

Financial difficulties prevented San Domingo
from paying its debts and reports were circulated
that French and Italian vessels were on their way
to the island to collect the debts by force. (See
Foreign Relations, 1905, p. 334) Taking advantage
of this opportunity, Secretary of State Hay in-
structed the American Minister, Thomas C. Dawson
to suggest to the Dominican government that it
"request" the United States to take over its customs
houses. (U.S. Foreign Relations 1905, p. 298. See
also pp. 334 and 342). Pressed on all sides by
foreign investors, President Morales had no choice
but to make that "appeal".

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On February 4, 1905 a protocol was drawn up between the two governments by which the United States was to act as bankrupt's receiver for Santo Domingo, taking over all its customs houses, administering its finances, and settling the claims of foreign and domestic creditors. Of the revenues which the United States should collect, 55 percent was to be used for paying bondholders and the remainder was to be turned over to the Dominican government for administrative expenses. (For text of protocol see Foreign Relations of the United States 1905, page 342). The Senate at Washington, refused to ratify this drastic agreement providing for the financial annexation of Santo Domingo; but President Roosevelt entered into an "executive agreement" with the president of the Dominican Republic which achieved the same results. Under this agreement the customs collectors were to be American and to have the support of American warships (See Chester Lloyd Jones: "Caribbean Interests", p. 110 ff). In that same year an American receiver general named by President Roosevelt proceeded to collect customs "under the protection of the U.S. Navy" (J.H. Latane: "The United States and Latin America", p. 279) and to issue bonds for the purpose of paying foreign

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creditors. Roosevelt's tactics were severely criticized in and out of Congress, but finally the Senate decided to give the arrangement a coat of legality. On February 25, 1907 it ratified a revised treaty which provided: (1) that the President of the United States should appoint a customs collector for Santo Domingo and assistants, (2) that the United States government should afford them such protection as might be necessary, (3) the Dominican government could not increase its debts or lower its taxes without the consent of the United States. (See U.S. Foreign Relations, 1907).

By the provisions of this treaty the American receiver-general was to issue 20 billion dollars gold bonds for paying off Santo Domingo's public debt. The sum total of revenues collected was to be applied as follows: First, to paying the expenses of the receivership; Second, to paying the interest on the bonds; Third, to the payment of the annual sums provided for the amortization of the bonds; Fourth, to the purchase, cancellation and retirement of the bonds; Fifth, what was left was to be given to the Dominican government. The loan of 20 million dollars provided in the treaty was made by Kuhn, Loeb and Company. The treaty is still in force; and under its provisions the

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see U.S. Foreign Relations, 1913, pages 459 and 465) "in conformity to the Convention between the United States of America and the Dominican Republic ratified July 8, 1907, the payment of the principal and interest of which notes is secured by the pledge by the Republic of its customs revenues, subject to an existing charge thereon securing the $20,000,000 five per cent Customs Administration Sinking Fund Gold Loan of the Republic under and pursuant to the terms of the said convention" etc. The $20,000,000 loan which had first claim on the customs was the one issued by Kuhn, Loeb & Co. (see above p. 9).

The inauguration of Woodrow Wilson in 1913 did not change the attitude of Washington regarding government interference on behalf of American finance. On September 9, Secretary of State Bryan notified Santo Domingo that the influence of the United States would be exerted to discourage resolutions and to support the "lawful authorities". (See U.S. Foreign Relations, 1913 p.425) As revolutionary activities continued, the United States sent a warship, and Secretary Bryan notified the revolutionary elements that if they succeeded the State Department would not recognize them and "would withhold the portion of the customs collections belonging to Santo Domingo" (U.S. Foreign

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President Jiminez resigned and the Dominican congress elected Dr. Henriques y Carvajal temporary president. The State Department refused to recognize this legally chosen president unless he signed a treaty with the United States which Washington had been pressing on Santo Domingo since 1915. (Senate Hearings p. 93. See Current Hist. Vol. 15, March 1922, p. 894) This treaty was even more drastic than the one forced on the republic in 1907 and was similar in nature and intent to the one forced by the Wilson administration on Haiti. It called for the control by American officials of the Dominican customs, treasury, army and police. President Henriques be refused to be recognized by the State Department on such terms; whereupon on Oct. 17, following instructions from Washington, the American customs collector refused to pay the duly elected Dominican government the revenues to which it was entitled by law. (See official statement, Navy Dept. Senate Hearings, p. 93)

A deadlock ensued. The entire country rallied around the president; political differences were forgotten, and officials performed their duty without pay as far as they could, owing to the refusal of the American officials

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to turn their salaries over to them until the
treaty was signed. "The resistance to the American
demands though passive was general" (See Judge
Otto Schoenrich: Mexico and the Caribbean, edited
by G.H. Blakeslee, p. 208) This deadlock was
finally broken by the flourish of American rifles.
Captain H.S. Knapp, in command of the marines, de-
clared martial law, on November 29, 1916, ousted
the Dominican officials, dissolved the national
legislature, forbade elections and declared him-
self "supreme legislator, supreme judge, and
supreme executor", (See Senate Hearings, p. 51-52)
established a regime of military force and courts
martial, set up a rigid censorship, levied taxes
and increased the public debt. This military
dictatorship was, according to the official pro-
clemation of martial law (for text see Senate
Hearings, p. 93-94) set up under instructions from
Washington because the "United States government...
has urged upon Santo Domingo certain necessary
measures which that government has been unwilling
or unable to adopt." Thus the United States
frankly set up a military dictatorship for the
purpose of forcing Santo Domingo to sign a treaty
giving American investors complete control over
the finances and administration of the republic.

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destructive bombs were dropped from airplanes upon
towns and hamlets; every home was searched for arms,
weapons and implements; homes were burned; natives
were killed; tortures and cruelties committed; and
'Butcher Weyler's horrible concentration camps were
established..... Repressions and oppressions followed
in succession. When protests were made the pro-
testants were fined heavily and also imprisoned, and
when resistance or defense attempted bullets and
bayonets were used. Criticism of the acts of the
military government were not permitted.....and those
who violated the order were punished by fines and
imprisonment.... The Dominican people have been
'taxed without representation' and the money so
raised expended recklessly and without in any way
consulting them.... For five years this policy of
suppression, repression, oppression and maladminis-
tration has continued". (For this summary see
Senate Hearings, p. 50-51; for testimony backing
up these charges see Hearings)

The direct connection between American in-
vestments and the military regime is neatly shown
in the following circular issued by Speyer & Co.
and the Equitable Trust Company of New York on
June 20, 1931:

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4. American Bankers & Armed Intervention

"The United States Military Government of Santo Domingo issues in behalf of the Dominican Republic $2,500,000 four years customs administration 8% Sinking Fund gold bonds". The bonds, this circular said, will contain the following clause: "With the consent of the United States there is secured the acceptance of and validation of this bond issue by any government of the Dominican Republic as a legal, binding, and irrevocable obligation of the Dominican Republic, and the duties of the General Receiver of Customs as provided under the American-Dominican Convention of 1907 are extended to this bond issue." The circular adds this sentence: "UNTIL THESE BONDS SHALL HAVE BEEN REDEEMED THE DOMINICAN REPUBLIC AGREES NOT TO INCREASE ITS PUBLIC DEBT NOR TO MODIFY ITS CUSTOMS DUTIES WITHOUT THE PREVIOUS CONSENT OF THE UNITED STATES GOVERNMENT; AND ITS CUSTOMS REVENUES SHALL CONTINUE TO BE COLLECTED BY A GENERAL RECEIVER OF CUSTOMS APPOINTED BY AND RESPONSIBLE TO THE PRESIDENT OF THE UNITED STATES."

This circular, explaining the reasons for an American customs receiver, also quotes a letter from Lieutenant Commander Arthur H. Mayo, U.S. Navy officer in charge of the Department of Finance and Commerce of the military government of Santo Domingo, which explains the purposes of the military regime. This letter is dated June 16, 1921 and is addressed to the Equitable Trust Co. and Spyer and Company.

"The military government will be withdrawn only upon the consummation of a treaty of evacuation between the Dominican Republic and the United States which shall contain among other provisions (a) ratifying all acts of the military government, (b) validating the above loan of $2,500,000,

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and (c) extending the duties and powers
of the General Receiver of Dominican
Customs until said bonds shall have
been paid...The bonds will be secured
by a charge upon the customs revenues
of the Dominican Republic."

Under the caption Purpose of Loan; the bankers' circular states: "The proceeds of this loan are to be used mainly for the completion of essential public works... and in part for the retirement of certificates of indebtedness. This work will be done under the supervision of American engineers, and such portion of the loan as is used for the purchase of supplies and equipment will be spent in the United States."

A similar circular was issued in 1922 by
Lee Higginson and Company, declaring that "act-
ing under the authority of the United States
Government the Military Government of Santo
Domingo issues on behalf of the Dominican Re-
public $6,700,000 twenty-year customs administra-
tion 5 1/2 percent Sinking Fund gold bonds..."
With the approval of the State Department the
bonds stated that the Military Government of
Santo Domingo guaranteed "the acceptance and
validation of this Bond issue by an government
of the Dominican Republic as a legal, binding,
and irrevocable obligation of the Dominican
Republic." In a letter to Lee Higginson and

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Company reproduced in the bankers' circular,
Lieutenant Commander D.W. Rose, U.S. naval officer
in charge of the Department of Finance and Commerce
of the military government of Santo Domingo again
assured the bankers that during the life of the
loan - which was to extend to March 1943 - the
Dominican customs duties would be collected by an
official appointed by the President of the United
States and that the loan "shall have a direct lien
on these customs revenues."

A plan for the withdrawal of American marines
from Santo Domingo was proposed by the Wilson ad-
ministration in December 1920, and a similar plan
by the Harding administration on June 14, 1921.
The plan made the military governor the provisional
Dominican executive, and gave him the power to call
elections. The Dominicans were to have this slight
measure of autonomy provided they drew up an agree-
ment with representatives of the American government
ratifying all acts of the American military occupa-
tion, and entrusting the command and organization
of Dominican forces to American officials. (See
Times Current History, Vol. 15, March 1922, page 895)
These proposals were turned down by the people of
Santo Domingo, who protested especially against the
loans floated in their name by the American military

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government with American bankers, for which Santo Domingo paid interest varying from 9 to 19 percent. (See Current History, ibid). Recently, however, it was reported in the press that the Congress of the Dominican Republic on June 26, 1924 "ratified the treaty with the United States providing for the evacuation of the Dominican Republic by American military forces which have been stationed there since 1916. Simultaneously, it was announced from Washington that the withdrawal of the 1800 marines in the Dominican Republic would be begun as soon as possible after July 10." (See Times Current History, Vol. XX, August 1924, page 845) Later it was announced in the press that "General Horacio Vasquez and Frederic Velasquez were formally inaugurated as President and Vice President, respectively, of the Dominican Republic on July 12. At the same time the American flag was lowered from the fort and the Dominican emblem was hoisted. These acts brought to an end the military administration of the United States in the Dominican Republic." (See Times Current History, Vol. XX, Sept. 1924, page 1011). If this evacuation has taken place under the conditions stipulated by the State Department, it means that Santo Domingo has been given a formal kind of partial independence in return for signing a treaty which makes her an actual protectorate.

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5. The Military Conquest of Haiti

To fully understand the military invasion of Haiti by the United States and the establishment of a virtual protectorate, it is necessary to follow briefly two parallel lines of policy, one political and one financial, which converged and became amalgamated in one unified policy carried out jointly by American financiers and the State Department.

A report of twenty-four distinguished American lawyers on Haiti (The Seizure of Haiti by the United States: A Report on the Military Occupation of Haiti and the History of the Treaty Forced Upon Her", Issued by the Foreign Policy Association, April 1922. The 24 lawyers who made the report were Frederick Bausman, Seattle; Alfred Bettman, Cincinnati; William H. Blynes, New Orleans; Charles C. Burlingham, New York; Zachariah Chafee, Jr., Cambridge; Michael Francis Doyle, Philadelphia; Walter L. Flory, Cleveland; Raymond B. Fosdick, New York; Felix Frankfurter, Cambridge; Herbert J. Friedman, Chicago; Frederick J. Henry, Cleveland; Jerome S. Hess, New York; William H. Holby, Chicago; Charles P. Howland, N.Y.; Francis Fisher Kane, Philadelphia; George W. Kirchway, New York; Louis Marshall, New York; Adelbert Moot, Buffalo; Jackson

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H. Ralston, Washington, D.C. & Nelson S. Spencer, New York; Moorfield Storey, Boston; Tyrell Williams, St. Louis) points out that Haiti was a sovereign state under a republican form of government from 1804 when she won her independence from France, until 1915 when the United States forced her to sign a treaty even more drastic than that foisted on Santo Domingo. Haiti has a population of three million people living under more or less primitive economic conditions and subject to occasional political disturbances. Despite these disturbances, the report declares, no American citizen has ever been injured in person or property, and even during revolutionary outbreaks no foreigner was molested. Foreign investments were at all times respected and the interest on Haiti's foreign debt scrupulously paid. "Her relations with other governments have been free from adverse criticism. She has never manifested hostility to us and has given no occasion for our intervention in her affairs". (See page of lawyers report).

America's political interest in Haiti came to the fore in 1847 when the United States attempted to obtain control of the harbors of Samana Bay, on the eastern coast of Santo Domingo and of Mole St. Nicholas, on the Northwest coast of Haiti for

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allowed use as naval bases. In 1891 the United
States sent Admiral Gherardi with a considerable
fleet to Port au Prince, capital of Haiti, to
negotiate for the cession of Mole St. Nicholas,
but the Haitian government refused to discuss
the matter and the fleet was recalled.

6. Enter the National City Bank

It was with the entrance of the National
City Bank into Haiti that American interference
became a definite policy. In 1881 the National
Bank of Haiti, founded with French capital, was
entrusted with the administration of the Haitian
treasury. In 1910 this bank was reorganized
in connection with a new government loan taken
by French bankers, and replaced by the National
Bank of the Republic of Haiti, which, like the
old institution was entrusted with the adminis-
tration of the Haitian treasury. Under the
contract with the French bankers the bank was
to make certain annual loans to the Haitian
government. (Senate Hearings, p. 105)

At this juncture the National City Bank
became interested, and Secretary of State Knox,
then riding the crest of his "Dollar Diplomacy"
wave, intervened in the matter and objected to
the contract saying that "some American banking

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interests ought to be represented". He called a
conference of New York bankers, with the result
that in 1911 the National City Bank, Speyer and
Company, Hallgarten and Company and Landenburg
and Company each became subscribers to 2000 shares
of the new bank. (See testimony of Roger L.
Farnham, vice-president of the National City Bank
before the Senate Committee investigating the
occupation of Haiti and Santo Domingo, 1921 (Hear-
ings 105) Shortly after the European War broke
out, Secretary of State Bryan in several inter-
views with the American bankers "suggested the
advisability of the American interests acquiring
the French shares in the bank and making it an
American bank. That suggestion was repeated
from time to time, and after some extended con-
ferences... the National City Bank purchased
the stock held by the other three American parties"
This was in 1917. Two years later, "after several
suggestions from the State Department... the
National City Bank purchased all the assets of the
French institution" for $1,400,000. (See Farnham's
testimony: Senate Hearings, page 106). Thus
the National Bank of Haiti became the property
of the National City Bank.

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The State Department began to take steps to insure the bankers' investment. On six occasions during 1914 and 1915 the government at Washington made direct overtures to Haiti to obtain control of the customs, internal political disturbances furnishing the pretext. In October 1914 Secretary of State Bryan wrote to President Wilson:

"It seems to me of first importance that the naval force in Haitian waters should be at once increased, not only for the purpose of protecting FOREIGN INTERESTS, but also as evidence of the earnest intention of this government to settle the unsatisfactory state of affairs which exists." (See report of 24 lawyers, page 4)

The State Department took advantage of a revolutionary outbreak in the north province to propose to President Zamor that he be kept in power provided he would sign a convention turning over the customs houses to American control. The President refused to compromise the independence of Haiti and resigned (Senate Hearings, p. 5). On December 10 the newly chosen president was formally presented with a similar proposal by the American minister in Haiti, and again the proposal was turned down.

(Senate Hearings, p.6)

One week later a contingent of United States marines landed in Port au Prince, proceeded to the vaults of the National Bank of Haiti, and in broad daylight forcibly seized $500,000 and carried it

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aboard the gunboat *Machina*. The money was trans-
ported to New York and deposited in the vaults
of the National City Bank. The money was the
property of the Haitian government and had been
deposited for the redemption of paper currency.
Haiti at once protested against this violation
of her sovereignty and her property rights and
requested an explanation from the United States.
None was ever given. (See Senate Hearings, page 6)
Also Times Current History, Vol. 15, March 1922,
p. 886)

According to the testimony of Roger L.
Parnham, vice-president of the National City
Bank, before a Senate Committee in 1921, this
raid of the marines was arranged by the State
Department and the National City Bank. (See
Senate Hearings, page 123). The Chief object
of the State Department and the bankers at this
time seems to have been to force the Haitian
government, by depriving it of ready money, to
sign a treaty turning over the customs houses
to American control. On January 28, 1915
Secretary of State Bryan wired via the Navy
Department to Admiral Caperton, in command of
American forces in Haitian waters, as follows:

"You will issue to that government a warn-
ing that any attempt that might be made
to remove the funds of the bank will

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compel you to take into consideration means
to prevent such violation of foreign stock-
holders rights." (Senate Hearings: page 292)

In March 1915 the United States sent the
Ford mission to negotiate with the Haitian govern-
ment for American control of the customs, and
again Haiti turned the proposal down. In May
another commission arrived and presented the
draft of an agreement providing for (1) military
protection and intervention by the United States,
(2) arbitration of claims made by foreigners,
(3) prohibition of the cession of Mole St. Nicholas
or its use to any other government. The last
clause would indicate that the political aims of
Washington and the financial aims of the National
City Banks were now fused into one project. (See
lawyers report p. 5)

7. The Marines Take Possession.

This proposal was being negotiated when on
July 27 a revolution broke out in Port au Prince.
President Guillaume fled to the French legation,
and on the same day a number of political
prisoners were massacred in the prison of Port
au Prince. On the morning of July 28 President
Guillaume was dragged out of hiding and killed.
During all these disturbances not a single
American or other foreigner was molested. (See

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report of 24 lawyers; also James Weldon Johnson, Self-Determining Haiti, p. 7) Nevertheless, on the afternoon of July 28 an American warship dropped anchor in the harbor of Port au Prince and marines landed by Admiral Caperton. (See U.S. Marine Corps report on affairs in Haiti. Oct. 11, 1920, p. 3; also Admiral Caperton's testimony, Senate Hearings, p. 306) The revolution was not the cause for landing marines but rely the "awaited opportunity" for the marines were landed "at the request of the State Department". (See Johnson, page 7; also Marine Corps Report, p. 4)

The Haitian legislature met to elect a new president to fill the vacancy caused by the assassination of Guillaume. Under orders from the State Department, Admiral Caperton forced the legislature to postpone the election until the American naval officers could canvass the situation. The purpose of this interference with the elections of a nominally independent republic is shown in the message sent by Admiral Caperton to the Navy Department on August 2, 1915--

"Large number Haitian revolutions largely due existing professional soldiers called Cacos... They have demanded election Bobo president... Stable government not possible in Haiti until Cacos are disbanded and power broken. Such action now imperative at

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Port au Prince if United States desires to negotiate treaty for financial control of Haiti. To accomplish this must have regiment of marines in addition to that on Connecticut... as future relations between United States and Haiti depend largely on course of action taken at this time earnestly request to be fully informed of policy of United States." (See Senate Hearings, p. 313).

Plainly this was the time to force through at the point of marine bayonets, the treaty which the State Department and the National City Bank had sought to obtain through negotiation and through financial pressure. The first step was to obtain a candidate who would be willing to serve American purposes. Such a candidate was found in the person of Sudre Dartiguenave, who offered, if elected president of Haiti, to accede to any terms made by the United States, including the surrender of customs control and the cession of Mole St. Nicholas. (See report of 24 lawyers, p. 6 and Senate Hearings, p. 315) Regarding this candidate Admiral Caperton wired the Navy Department at Washington on August 5, that he "has never been connected with any revolution" and "realizes Haiti must agree to any terms laid down by the United States. If elected must be sustained by American protection". (Senate Hearings, p. 312) Dartiguenave was acting not out of choice, but out of a realization that before the rifles

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of American marines Haiti was helpless. He begged
only "as far as possible to avoid humiliation".
(See Caperton's telegram, Senate Hearings p. 325)

Admiral Caperton, frankly protecting the
interests of the National City Bank, ordered the
government of Haiti to restore the treasury service
to the National Bank Haiti, which the government had
withdrawn in January when it discovered that it
could not draw money at its own discretion. (Senate
Hearings, p. 323. See above page 26 above.)

Having found a candidate willing to accept
Washington's terms, the Navy Department wired on
August 10 that Admiral Caperton might "allow election
of president to take place whenever Haitians wish.
The United States prefers the election of

Dartiguenave.... The United States will insist that
the Haitian government will grant no territorial
concessions to any foreign governments. The govern-
ment of the United States will take up the question
of the cession of Mole St. Nicholas later along
with the other questions to be submitted to the re-
organized government." (Senate Hearings p. 315.

See also U.S. Marine Corps Report, Oct. 11, 1920, p. 19

These other questions referred to the control of
customs and the protection of the National City

Bank's investments. "In order that no misunderstand-

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ing can possibly occur after election", wired Secretary of State Lansing on the same day to the American Minister at Port au Prince, "it should be made perfectly clear to candidates, as soon as possible in advance of their election, that the United States expects to be entrusted with the practical control of the customs and such financial control over the affairs of the republic of Haiti as the United States may deem necessary for efficient administration". The message added, significantly, that the United States would support a government elected under these terms "as long as necessity may require". (See Senate Hearings page 315)

On the day on which the Haitian legislature voted for the new president, marines guarded the doors of the chamber and Admiral Caperton's chief of staff circulated among the congressmen. (Report of 24 lawyers, p. 6) Dartiguanave was elected.

## 8. Martial Law in Haiti

Two days after the election, Robert Beale Davis, American charge d'Affaires at Port au Prince submitted to the new Haitian government the draft of a treaty, accompanied by a memorandum stating that "the State Department at Washington expected that the National Haitian Assembly...

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would immediately pass a resolution authorizing
the President of Haiti to accept the proposed
treaty without modification" (Senate Hearings,
p. 8) This new draft, resting as it now did on
armed force, went much further than previous
drafts. Not only did it provide for American con-
trol of customs and finances, but in addition
called for a native constabulary to be "organized
and officered by Americans" and forbade Haiti to
sell or lease any of its territory to a foreign
government.

With these terms, Secretary Lansing ob-
served in his cablegram of August 24, the Haitian
government had been familiar for more than a year.
(Senate Hearings p 328) But Haiti was no more
willing than before to give up its life as an in-
dependent republic. The State Department seemed
to have been aware of this; to insure the accept-
ance of the treaty by the Haitian government
Admiral Caperton was ordered to seize ten of the
principle custom houses, to collect the customs
dues, to organize a constabulary and temporary
public works, and to support the new Haitian ad-
ministration (See report of 24 lawyers, p. 8.
See also Marine Corps Report, p. 19) That is,
he was to carry out the terms of the treaty before

-34-

American officer at the head. "Present is most
critical time in relations with Haiti", he cabled,
"and our decision now will, to a great extent,
determine future course. If military government
is established we should be bound not to abandon
Haitian situation until affairs of country are
set at right and pre-ominant interests of the
United States of America secured". (Senate
Hearings: page 338). These predominant interests
which were to be secured by a military dictator-
ship were embodied in the proposed treaty. To one
of his captains in Haitian waters Admiral Caperton
explained: "We are having our own troubles in
Port au Prince endeavoring to get the treaty
through. Things are not entirely satisfactory,
and I may be forced to establish a military govern-
ment here." (Senate Hearings p. 343).

By September the forces under Admiral Caperton were in complete control of Haiti, guarding all the principle towns, collecting and spending all revenues, and turning none of the money over to the Haitian government. "Public order and the public purse were altogether in the mastery of the Navy Department" (report of 34 lawyers, page 10). On September 3 martial law was formally declared. (See also Times Current History, vol. 15, March, 1922, p. 887). The object was, of course, to

-35-

push the treaty through. "Successful negotiation of treaty is predominant part of present mission" Admiral Caperton wired to the commanding officer of the battleship Connecticut in northern Haitian waters, "After encountering many difficulties treaty situation at present looks more favorable than usual. This has been effected by exercising military pressure at propitious moments in negotiations. Yesterday two members of Cabinet who have blocked negotiations here tofore resigned. President himself believed to be anxious to conclude treaty. At present am holding up offensive operations and allowing president time to complete cabinet and try again. Am therefore, not yet ready to begin offensive operations at Cape Haitian but will hold them in abeyance as additional pressure". (Senate Hearings, page 353).

As a result of this "additional pressure" the Haitian government signed the treaty without modification on September 16, 1915, and a modus vivendi was drawn up for its immediate application. But the work of Washington was not yet done. Under the Haitian constitution, as under that of the United States, no treaty is binding unless ratified by the Senate. The opposition there seemed to be irreconcilable to American conquest. Thereupon Admiral Caperton, acting under in-

-36-

instructions from Washington, seized a consignment of unsigned bank notes intended for the Haitian government and declared that they would be turned over to the Haitian authorities immediately after ratification of the convention. (See testimony of Admiral W.B. Caperton, Senate Hearings, pp. 379-383). On October 3, Secretary of the Navy Daniels authorized Admiral Caperton to arrange for the payment of a weekly amount to the Haitian government for current expenses, adding that "question payment back salary will be settled by Department immediately after ratification of treaty" (Senate Hearings, page 383).

On November 10, Secretary Daniels cabled Admiral Caperton a message which is the epitome of government support of American investments. It was in fact a naked ultimatum draped in the seven transparent veils of diplomatic jargon.

"Arrange with President Dartiguenave," the cable read, "that he call a cabinet meeting before the session of Senate which will pass upon ratification of treaty and request that you be permitted to appear before the meeting to make a statement to president and to members of cabinet. On your own authority state the following before these officers: 'I have the honor to inform the President of Haiti and the members of his cabinet that I am personally gratified that public sentiment continues favorable to the treaty; that there is a strong demand from all classes for immediate ratification and that the treaty will be ratified Thursday.' I am sure you gentlemen will

-38-

duties on imports and exports accruing at the
several customs-houses and ports of entry of the
Republic of Haiti". It also provided that
"the President of Haiti shall appoint, upon nombina-
tion of by the President of the United States,
a financial adviser who shall be an officer
attached to the ministry of finance to give effect
to whose proposals and labors the minister will
lend efficient aid".

Article Five provided that "all sums
collected and received by the general receiver
shall be applied, First, to the payment of the
salaries and allowances of the General Receiver,
his assistants and employees, and expenses of
Receivership, including the salary and expenses of
the Financial Adviser...Second, to the interest and
sinking fund of the public debt of the Republic
of Haiti; and Third, to the maintenance of the
constabulary ... and then the remainder to the
Haitian Government for the purposes of current
expenses".

Under Articles Eight and Nine, Haiti
was forbidden to increase its public debt or
modify its customs duties without the consent of
the United States. Article Ten called for "an
efficient constabulary, composed of native Haitians"
which shall be "organized and officered by

-39-

Americans" which shall, among other things super-
vise and control arms and ammunition and military
supplies. By Article Eleven Haiti was forbidden
to surrender by sale, lease or otherwise any of
its territory. The treaty was to remain in force
for ten years, and "further for another ten years
of either if the high contracting parties" should
find that its purpose "has not been fully accom-
plished.

The treaty was ratified by the United
States Senate in May 1916. It is still in force
and American marines still occupy Haiti. Credit
for its acceptance by Haiti is not entirely due
to the efforts of the Secretary of State Lansing,
Secretary of the Navy Daniels, and Admiral Caper-
ton. Roger L. Farnham, vice-president of the
National City Bank was "effectively instrumental
in bringing about American intervention in Haiti",
being transported in his goings and comings be-
tween New York and Port au Prince aboard vessels
of the United States Navy. (See James Weldon
Johnson, p. 20)

10. The Military Occupation

At the suggestion of Mr. Farnham of the
National City Bank, and upon nomination of Presi-
dent Woodrow Wilson of the United States, the

-41-

humble tributaries" of the National City Bank.

(See James Weldon Johnson, p. 45 for text of protest.) But the American Financial Adviser continued to press for the acceptance of this agreement by Haiti by withholding the salaries of Haitian officiels "by order of the American minister".

(See Johnson pages 45ff. for official correspondence)

The agreement, excluding the clause prohibiting the importation of foreign money, was signed on
(wrote Johnson)

While the Financial Adviser was riveting

the economic control of the National City Bank over
Haiti, the military authorities were fastening
political control. Under the eyes of American
marines Haiti adopted a new constitution on June
18, 1918 by which "all acts of the Government of the
United States during its military occupation in
Haiti are ratified and confirmed." The new con-
stitution also abolished one of Haiti's oldest safe-
guards which provided that foreigners could not hold
land. (See Johnson pages 8 and 38)

Charges of brutality have been made against
the American occupation in Haiti. Over 3000 "prac-
tically unarmed Haitians" have been killed by
American marines (See James Weldon Johnson: Self-

-42-

Determining Haiti, p. 13 See also U.S. Marine
Corps Report, p. 108 giving the number of Haitians
killed as 3,250 - "killed either by marines or by
the personnel of the gendarmes of Haiti") The
work of building a highway from Port au Prince to
Cape Haitian was in charge of an officer of Marines,
"who stands out even in that organization for his
treat 'em rough' methods. He discovered the ob-
solete Haitian corvée and decided to enforce it with
the most modern Marine efficiency. The corvée, or
road law, in Haiti provided that each citizen should
work a certain number of days on the public roads
to keep them in condition, or pay a certain sum of
money.... The Occupation seized men wherever it
could find them, and no able-bodied Haitian was
safe from such raids, which most closely resembled
the African slave raids of past centuries... And
slavery it was - though temporary. By day or by
night, from the bosom of their families, from their
little farms or while trudging peacefully on the
country roads, Haitians were seized and forcibly
taken to toil for months in far sections of the
country. Those who protested were beaten into sub-
mission... Those attempting to escape were shot..."

(See James Weldon Johnson: *The Self Determining of Haiti, p. 13*)

-43-

These atrocities resulted in a brief revolt led by an educated and cultured Haitian, Charlemagne Peralte, who had been forced to work in convict clothes on the streets of Capit Haitian. The revolt was crushed and Charlemagne Peralte was killed. "Not, however, in open fight or in attempt at his capture; but "while standing over his camp fire, he was shot in cold blood by an American Marine officer who stood concealed by the darkness, and who had reached the camp through bribery and trickery." (See James Weldon Johnson, p. 14. See also U.S. Marine Report, pp. 70-72.) A protest lodged by prominent Haitians with the Senate Committee of Inquiry into the occupation of Haiti in 1921 declares that the American Occupation "is the most terrible regime of military autocracy which has ever been carried on in the name of the great American democracy. The Haitian people, during these past five years, have passed through such sacrifices, tortures, destructions, humiliations and misery as have never before been known in the course of its unhappy history." (See Senate Hearings p. 33: for a detailed list of atrocities committed by American marines see pages 30-32 of Senate Hearings: for detailed list of military operations in "pacification" of Haiti, see U.S.

-44-

Marine Corps Report, Oct. 11, 1920, signed by Brig. Gen. George Barnett.) According to an American recently returning from a visit to Haiti in 1920, "if the United States should leave Haiti today, it would leave more than a thousand widows and orphans of its own making, more banditry than has existed for a century, resentment, hatred and despair in the heart of a whole people, to say nothing of the irreparable injury to its own tradition as the defender of the rights of man."
(James Weldon Johnson, p. 19)

While these atrocities were going on, American business and finance was profiting by the Occupation. The advantages of the treaty were thus described to the Senate Committee which investigated the occupation in 1921 by H.M. Pilkington, vice-president and manager of the American Development Company of Haiti.

"I next made it my business to come in contact with what we might call the ruling or political class of the country (Haiti), because, at basis, every industrial or other enterprise is fundamentally dependent upon the laws and execution of those laws in whatever country they may be concerned. The original financing of this Haitian-American Corporation was brought about and put to the public directly and definitely by competent people and competent officials that the treaty between the United States and Haiti was, in fact, to be a living thing. The large feature in the floating of the securities of this company.... was

-45-

predicated, one might say, wholly as to
security upon the implied bona fides of
the United States carrying out this treaty.
the basis of which was security to foreign
capital." (See Senate Hearings p. 789)

The National City Bank continued to tighten
its "economic stranglehold" on the little republic.

On June 22, 1920 the National Railroad of Haiti
comprising almost the entire railway system of the
island went into bankruptcy as a result of the
failure of Haitian government to pay the interest
and sinking fund charges on outstanding bonds.

(World, Feb. 19, 1924) The concession was held
by a syndicate of which Roger L. Farnham was
president and which was financed by the National
City Bank. When the road failed, the United
States federal courts appointed Roger L. Farnham
receiver. (See N.Y. World, Feb. 19, 1924; See
also Senate Hearings, page 121) Farnham carried
on negotiations with bondholders, creditors and
stockholders, and also the National City Bank of
which he was vice-president, loaned the Haitian
government $16,000,000, thus intensifying the
control which the New York institution holds first
on the bank of Haiti, secondly on the railways
of Haiti. In floating this loan on October 9, 1922
the National City Bank circular called the at-

-46-

tention of investors to the fact that the loan
was being issued "with agreement of the President
of the United States in accordance with the treaty
of September 16, 1915" and adds that "the President
of the United States, under the treaty, has control
of any increase in the public debt of Haiti or any
reduction of customs duties." (See circular
Lewis Garnett has it.) The entire issue of the
loan was taken the day after it was floated, al-
though at the time Senator Borah openly stated
that probably not one-fifth of the money would
go toward the development of Haiti. (See Times
Current History, Vol. 17, Dec. 1922, p. 527)

Further steps to bring Haiti under American
economic control were taken in 1924 when the
Haitian Council of State created an Internal
Bureau of Revenue to collect all taxes except cus-
toms duties. This bureau is to be under the
supervision of the American Receiver General ap-
pointed under the treaty of 1915, who is to ap-
point another American as head of the new bureau.
On June 18, 1924 the State Department at Washington
announced the appointment of Dr. William E. Dunn,
aacting commercial attache of the American Embassy
at Lima, as director of the Bureau of Revenue.
(See Times Current History, Vol. XX, August 1924,
p. 845)

47-

## 11. The Nicaragua Protectorate

In Nicaragua, as in Santo Domingo and Haiti, the strategic interests of American diplomats and the financial interests of American bankers combined to produce first diplomatic and later military intervention. The strategic considerations centered around the notion of a United States naval base at Fonseca Bay, and, more important still, a canal route across Nicaragua to supplement the advantages of the Panama Canal.

The search for a canal route in Nicaragua is of long standing. (See Documents relating to the Interoceanic Canal, May 15, 1902, U.S. 57th Congress, 1st Session, Senate Document 357; Washington Govt. Print. Office) The treaty of 1850 between the United States and England (The Clayton-Bulwer) provided for a neutral canal across Nicaragua; later such a canal was seriously considered as an alternative to Panama. It will probably be built by the United States within the next thirty years. (See Cyrus F. Wicker, State Department representative in Panama and Nicaragua, Academy of Political Science Proceedings, 1917-18, Vol. VII, p. 426). The route over which the United States proposed to build the canal was, however, contested by other

-48-

Central American states; with the result that a
series of revolutions and wars broke out in 1906
until in the late summer of 1907 a general war in-
volving all five of the Central American republics
seemed imminent. President Roosevelt and President
Díaz of Mexico brought pressure to bear on the
several governments to cease hostilities and offered
to mediate the claims. (Dana G. Munro, "The Five
Republics of Central America", p. 208 ff.) Under
the guidance of the United States, delegates of
the five republics met in Washington in 1907 and
signed a series of eight conventions designed to
promote the unity/Central America. The most im-
portant of these agreements provided for a Central
American Court of Justice, composed of five members,
one from each state, to which all disputes would
be referred for final judgment. Although the United
States signed not a single one of the agreements, it
nevertheless proceeded to exercise the dominant role
under their provisions. Thus President Taft, in his
annual message to Congress in December 1909 stated
that "since the Washington Conventions in 1907 were
communicated to the Government of the United States
as a consulting and advising party, this Government
has been almost continually called upon by one or
another, and in turn by all of the five Central

-49-

American republics to exert itself for the main-
tenance of the conventions. Nearly every complaint
has been against the Zelaya government of
Nicaragua." (See U.S. Foreign Relations, 1907)

The government of President Jose Santos
Zelaya consistently opposed attempts on the part
of the United States to extend its control over
Nicaragua by obtaining Fonseca Bay and a canal
route, as well as attempts of American business
interests to establish themselves. In 1909 a
revolution against Zelaya broke out, and with it
Americas Nicaraguan adventure began in earnest.
The revolution was financed by Adolfo Dias, who
before the launching of this revolution was em-
ployed as a bookkeeper at $1000 a year by an
American mining company. Despite his poverty
and humble origin Dias was able to advance
$600,000 in gold to the revolution. (See John
Kenneth Turner, "Shall It be Again?" p. 351)

By some strange coincidence the American
consul at Bluefields, Thomas C. Moffat, knew
about the revolution in advance, wiring the State
Department on October 7 that it would break out
the next day and that the new government would
appeal "to Washington immediately for recognition".
He also was well informed about the secret troop

-50-

movements of the revolutionists and their
plans. (See U.S. Foreign Relations, 1909,
page 452. Five days later Moffat was able to
report to Washington that a provisional govern-
ment had been established General Juan Estrada
at the head and that this government was "friendly
to American interests" (See U.S. Foreign Relations
1909, p. 452) As the fighting between the Zelaya
government and the rebels grew sharper the
United States showed its hand more openly.

Steamers of the United Fruit Company and other
American vessels bearing the Nicaraguan flag
transported men and munitions for the revolution-
ists with the knowledge and assistance of the
State Department representatives in Central
America. (For documents proving this see J.S.
Zelaya, "The Revolution of Nicaragua and the
United States, pp. 26-40, published in 1910 by
B. Rodriguez, Madrid)

The pretext for an open break with the
Zelaya government came late in 1909 when two
American filibusterers, who had been caught
trying to dynamite a vessel loaded with Zelayas
men, were court-martialed and executed after a
confession. (See Foreign Relations, 1909. p. 447)
Though these filibusterers had enlisted in the

-51-

revolutionary forces and had thus assumed all the
responsibilities of war, Secretary of State Knox,
on December 1 sent the Nicaraguan Charge d'Affaires
at Washington a harsh note giving him his passports
and openly declaring that the United States was on
the side of the revolutionists. (See U.S. Foreign
Relations, 1909, p. 455). The note added: "Al-
though your diplomatic mission has terminated I
shall have much pleasure in receiving you as also
the representative of the revolutionist party, ...
as a means of non official communication between
the Government of the United States and the author-
ities de facto with whom I shall have to treat for
the protection of American interests." (U.S. Foreign
Relations, 1909, p. 455)

12. Protecting American Interests

Zelaya was forced to resign and flee the
country. As his successor the Nicaraguan Congress
elected Dr. Jose Madriz. Nevertheless the United
States continued to support the Estrada revolution
against the duly elected government. President
Madriz protested to President Taft against American
interference in the domestic affairs of the republic,
but the United States insisted that American ships
carrying arms and ammunition for the rebels be per-
mitted to pass through the blockade established

-52-

by the authorized government, and insisted further-
more that customs duties be paid to the revolution-
ists. (See U.S. For. Relations 1909, p. 752)

The regular government's forces took posses-
sion of the entire country with the exception of
the port of Bluefields, and bottled up part of the
insurgents there. American armed intervention took
place at this juncture. Marines were landed and
the government commander was prohibited from attack-
ing the revolutionists at Bluefields. (U.S. For.
Rel. 1910, p. 745-752). The revolution was reor-
ganized and with the support of American bayonets
was able to take power. (U.S. For. Rel. 1910 p. 760)

The object for which the United States was
thus openly aiding the revolution and for which
American armed forces invaded the independent republic
of Nicaragua was exposed on October 18, 1910. On that
day Thomas C. Dawson, U.S. minister to Panama was sent
that
to Nicaragua with orders"to rehabilitate the finances
and pay the legitimate foreign and domestic claims
it would be advisable to negotiate a loan secured by
a percentage of the customs revenues to be collected
according to agreement between the two governments,
but in such a way as will certainly secure the loan
and assure its object." (See U.S. Foreign Relations
1910, p. 763). In carrying out these instructions

-54-

but the ousted Liberals obtained a copy and published it (See Senate Hearings on Nicaraguan Affairs, 62nd Congress, 2nd Session, 1913, p.15)

The terms upon which General Estrada was supported by the United States aroused a storm of opposition in Nicaragua. Many patriotic elements saw in the Dawson pact, with its provisions for a loan and American control of customs, the establishment of a virtual protectorate. American control of elections aggravated the situation. In March, 1911, the American Minister in Nicaragua cabled to Secretary Knox that "the natural sentiment of an overwhelming majority of Nicaraguans is antagonistic to the United States, and even with some members of Estrada's cabinet I find a decided suspicion if not distrust of our motives."

President Estrada, he added, was "being sustained solely by the moral effect of our support and the belief that he would unquestionably have that support in case of trouble." (See U.S. Foreign Relations 1911, p. 655-656)

## 13. The Knox-Castrillo Convention of 1911

The chief object of supporting Estrada against the opposition of the Nicaraguan people was, of course, the floating of the loan and the control of customs to secure the loan. In April the

-55-

Nicaraguan National Assembly determined to adopt
a constitution guaranteeing the independence of
the republic and directed against foreign control
through loans. This constitution was opposed by
the American representatives, and when it was adopted
against their opposition, Estrada dissolved the
assembly and called for new elections. This step was
approved by the Department of State at Washington
(See For. Rel. 1911, p. 658, Knox note) These pro-
ceedings resulted in protests which led to the re-
signation of Estrada in favor of vice-president
Adolfo Dias. (See U.S. For. Rel. 1911, p. 660) But
Diaz, the former bookkeeper for an American company
who had helped launch the revolution, was no more
popular than Estrada, and American support was
necessary to put him in office. "I am assured,"
wrote the American minister to the State Department
on May 11, "that the Assembly will confirm Diaz
in the presidency according to any one of the ...
plans which the Department may indicate. A war
vessel is necessary for the moral effect." (U.S.
For. Rel. 1911, p. 661) A few days later he cabled
again that the Liberals, who were opposed to control
by American bankers, are "in such a majority over
the Conservatives" that he hastened to repeat the
suggestion "as to the advisability of stationing per-
manently at least until the loan has been put through

-56-

a war vessel at Corinto." Secretary Knox replied that Diaz should not be permitted to resign and that a warship had been ordered to Nicaragua.

(See U.S. Foreign Relations, 1911, p. 662)

Further correspondence between American agents in Nicaragua and the State Department at Washington continued to show that the United States was prepared to force political and financial control upon the little republic in the face of almost nation-wide opposition. On July 12 the American Charge d'Affaires notified Secretary Knox that "opinion generally expressed is that United States Government has repudiated its policy of protecting Nicaragua against foreigners holding rights in ruinous concessions or contracts.

I strongly urge that no further action be taken until Assembly approves the loan contract." A month later he cabled that the "opposition to these loan contracts and concessions is becoming more determined." (U.S. Foreign Relations 1911, p.639)

While the struggle between the people of Nicaragua and the American representatives was in progress, Secretary Knox signed a convention with the Nicaraguan representative of the American-controlled government at Washington. The Knox-Castrillo agreement of June 6, 1911 provided for

-57-

the floating of a $15,000,000 loan (See U.S. For. Relations 1913 p. 1040) to Nicaragua by American bankers and the control of Nicaraguan customs houses by the United States. Nicaragua also pledged itself not to alter the customs duties without Washington's consent and to submit financial reports to the State Dept. (For. Rel. 1912, p. 1074-1075. Also Philip Marshall Brown, former American Minister to Honduras, in "Latin America", edited by George H. Blakeslee, p. 246) At the same time, the State Department negotiated with the banking houses of Brown Brothers and Company, and J. & W. Seligman and Company for floating the loan, stipulating that the Knox-Castrillo convention should be made an integral part of the contract to be signed by the Nicaraguan government and the bankers.

Translated into practical terms, the Knox-Castrillo agreement authorized a loan of $15,000,000 none of which Nicaragua was to receive, but all of which the bankers were to spend. The sum was to be paid out by the American firms of Brown Brothers and J.W. Seligman as bankers to themselves as creditors of Nicaragua in the following: to liquidate claims which they would obtain; to establish a bank which they should own; to improve the national railway, which they should control,

-58-

operate and later own; to build a new railway upon
their own terms, a concession for which they were
to obtain from Nicaragua and which they were to
build with Nicaragua's money.

The United States Senate refused to ratify
the Knox-Castrillo agreement, turning it down
three separate times despite the special urging of
President Taft, (For. Rel. 1912, p. 1076) But the
State Department proceeded to put this piece of
"dollar diplomacy" into effect without the Senate's
consent. On September 1 the American-controlled
government of Nicaragua signed an agreement with
Brown Brothers and J & W. Seligman, based on the
unratified Knox-Castrillo pact, by which the bankers
made a temporary loan of $1,500,000 to Nicaragua.
(U.S. For. Rel. 1912, p. 1078-1079) The bankers
agreed to reorganize the National Bank, taking over
51% of the stock, and allowing Nicaragua to keep
49%. "In consideration of this extraordinary 'loan',
the bankers were given a mortgage on the govern-
ment's share of the bank, a mortgage on the govern-
ment's railway, a lien on the customs, authority to
negotiate the settlement of the Ethelburga 'debt',
a contract for the 'reform' of the currency, and
various other little things of solid financial
value." (Nation, May 31, 1922, page 647) The

-59-

customs were to be administered by an American appointed by the State Department, despite the fact that the Knox-Castrillo convention had no legal existence. (See U.S. For. Rel. 1912, p. 1079)

As a result of this agreement, there arrived in Nicaragua in December Mr. Charles A. Connant of New York to act as monetary expert and Col. Clifford D. Ham, State Department agent, to take over the customs houses. Colonel Ham was appointed by Secretary of State Knox upon the recommendation of Brown Brothers and Company and J. & W. Seligman and Company, who described him as a person "worthy of our confidence" (See U.S. For. Rel. 1912, p. 1079)

From December 11, on, Colonel Ham collected the entire amount of customs duties rendering an account to the government of Nicaragua. (See Pio Bolanos: "The Economical Situation of Nicaragua," p. 13, ex-consul general of Nicaragua in N.Y.: published New Orleans, 1916)