INTRODUCTION 
the unforeseen possibility of hastening, through foreign help, the 
economic and financial rehabilitation, which for more than a 
year had been severely hampered by lack of funds, created an 
almost universal desire to borrow abroad. States, cities, church 
organizations, public, semi-public, and, most of all, private 
corporations sought the foreign credit market. Almost every 
week brought one or more new long-term loans. 
I. PUBLIC POLICY AND GERMAN LOANS 
The German government, on the whole, welcomed the foreign 
borrowings of private corporations but followed with a great 
deal of concern the increase of external public loans. Its point 
of view from the outset was expressed as follows: * 
In view of the great need of capital it was feared that the muni- 
cipalities would take undue advantage of the first opportunity 
offered by the opening of the foreign capital market, of acquir- 
ing long-term credits, and that they would fail to observe that 
restraint which consideration for the German balance of payments 
and consequently for the currency necessitated. Disregarding the 
great danger involved herein, there might in addition have arisen 
the handicap that the not unlimited resources of the foreign cap- 
ital market might be withheld from industry and agriculture, to 
find their way chiefly to municipalities and associations of munic- 
ipalities, inasmuch as the greater security insured by their taxing 
power made foreign investment more attractive in municipal 
than in private enterprises. 
Considerations similar to those in regard to municipalities pre- 
vailed in regard to the states. They too, after the long period of 
privation, felt a capital shortage the satisfaction of which was 
sought in foreign markets. In the case of some of the states they 
were, moreover, urged by small and medium-sized industries to 
borrow foreign money in order that it might be used as a loan to 
industrial enterprises. 
As early as November 1, 1924, the President of the Reich 
issued a decree which made it necessary that states, municipal- 
2 Denkschrift iiber das Arbeitsgebiet und die Titigkeit der Beratungsstelle 
fiir Auslandskredite vom 1. Januar 1925 bis zum 30. September 1926 
(published by the Reich Finance Minister), p. 3.