While my negotiations with Mr. Lansing in Washington for a simultaneous settlement of the _Arabic_ and _Lusitania_ questions were still in progress, a memorandum was handed to Mr. Gerard, the American Amba.s.sador in Berlin which purported to justify the action of the offending submarine commanders. Thus the situation once more became acute. The contents of this doc.u.ment were as follows:

"On August 19th a German submarine held up the English steamer _Dunele_ about sixty miles south of Kinsale, and having ordered the crew to leave the ship, were about to sink it by gun-fire when the commander observed a large steamer heading directly towards him. This latter, which afterwards proved to be the _Arabic_, bore no ensign, or other marks of neutrality, and was thus obviously an enemy. Approaching nearer, she altered her original course, and again made directly for the submarine thus leading the commander of the latter to suppose that she was about to attack and ram him.

In order to parry this attack, the submarine dived and fired a torpedo which struck the ship. The submarine commander observed that those on board got away in fifteen boats.

"According to his instructions, the German commander was authorized to attack the _Arabic_ without warning, and without allowing time for the rescue of her crew, in case of an attempt at flight or resistance. The action of the _Arabic_ undoubtedly gave him good grounds for supposing that an attack on him was intended. He was the more inclined to this belief, by the fact that a few days before, on the 14th, he had been fired at from long range by a large pa.s.senger steamer, apparently belonging to the British Royal Mail Steam Packet Company, which he saw in the Irish Sea, but which he had made no attempt to attack or hold up.

"The German Government deeply regrets that loss of life should have resulted from the action of this officer, and it desires that these sentiments should be conveyed more particularly to the Government of the United States, as American citizens were among the missing. No obligation to make compensation for the damage done can, however, be admitted, even on the hypothesis that the submarine commander mistook the intentions of the _Arabic_. In the event of an insoluble difference arising on this point between the German and American Governments, the German Government suggests that the matter in dispute should be referred to the Hague Tribunal as a question of international law, in accordance with Article 38 of the Hague convention for the peaceful solution of differences between nations; but it can do so only with this reservation, that the arbitrator's award shall not have the validity of a general decision as to the international legality or otherwise of the German submarine warfare."

The following three reports or telegrams dispatched by me to the Imperial Chancellor describe the situation in Washington at this juncture:

(1) CIPHER

"Washington, September 14th, 1915.

"Lansing has given me permission to wire you by this route, without the messages being seen by him; he will also forward your Excellency's reply, and from this it appears to be the Government's view, that any further exchange of Notes, the subsequent publication of which, in both countries, would merely involve further misunderstandings, is bound to lead to a breach. It considers the present system of confidential negotiations with me as the only promising method of arriving at an agreement. The memorandum on the _Arabic_ is not understood here, and in so far as it is understood, is considered to be a manifestation of German bad faith--a sign that we may perhaps give way in principle, but will always in practice seek to evade our obligations thus incurred.

"Lest this telegram should, by its length, give offence to the British, Mr. Lansing is forwarding the evidence in the _Arabic_ case to Mr. Gerard for transmission to your Excellency; he is himself quite convinced that the submarine commander was not compelled in self-defense to torpedo the _Arabic_, and that his action in so doing was therefore unjustified. He hopes that your Excellency will after study of the evidence, agree with him in this.

"To obtain full and complete agreement it is first of all necessary that I should be empowered to publish in full those instructions given to our submarine commanders in so far as these were not given in my previous summaries on the matter. If we still consider ourselves bound to maintain that the officer concerned in the _Arabic_ case was only obeying orders, we can never hope to come to an agreement, for no one can possibly feel any confidence in the sincerity of our intentions. In the meantime I shall try to reach a settlement on the matters now in dispute by means of arbitration. Finally, the question of compensation must, in accordance with my instructions for the _Lusitania_ case, be referred to the Hague Tribunal.

"I am quite certain that if we fail to reach an agreement, severance of diplomatic relations cannot but follow.

"Lansing will not reply to the _Arabic_ memorandum, and, as I said before, will conduct the diplomatic exchanges on this matter only through me. He considers this as the only possible course on the ground that Wilson and I are alike committed to the policy of 'the freedom of the seas.'

"Finally, I may observe that everyone here would be much gratified if we could see our way to extend the scope of our latest instructions to our submarines so as to include all merchant shipping. It is argued that these vessels are slow moving and could easily be warned; the advantage of acting without warning is only of importance in the case of swift pa.s.senger ships, which we have, none the less, undertaken not to attack without notice. The suggested proposal, therefore, could not harm us; it would, on the other hand, make us very popular here and give the United States a very strong position in her negotiations with England. Of course, I may be able to effect an agreement without this. The main point in dispute is the verdict on the action of the commander in the _Arabic_ case, because this involves the whole question of our good faith. Anyway, there is no doubt whatever that a second _Arabic_ case is bound to result in war."

(2) CIPHER TELEGRAM

"Cedarhurst, September 22nd, 1915.

"As position is still very difficult, I am carrying on conversations in strict confidence through personal friend of Wilson's. Request, therefore, that no directions be sent as regards question of responsibility for _Arabic_ incident, till your Excellency hears again from me. Lansing at present gone on leave. Personally I do not believe that I shall manage to secure International Commission of Inquiry. According to present view, main point of dispute is question of disavowing action of submarine commander. I hope, however, that after reviewing American evidence, your Excellency will be able to find formula for such disavowal, agreeable to both Governments, especially if I can get concurrence of Wilson before press gets hold of it. Request, therefore, that American correspondents in Germany be told nothing more than that American evidence being carefully gone into in Berlin."

(3) CIPHER REPORT

"Cedarhurst, September 28th, 1915.

"The negotiations about the submarine campaign are at a standstill at present. From the fact that Lansing has not been recalled from leave and that President Wilson does not seem over-eager to give an opinion on the proposals which I have put forward for his consideration, I consider myself justified in concluding that the Americans do not consider the situation to be any longer critical.

Even the Press is no longer agitated, as in all recent cases of attack by German submarines. Their commanders have acted quite in accordance with our a.s.surances. Under these circ.u.mstances Mr. Wilson may possibly fall in with our proposal that the particular case of the _Arabic_ should be dealt with by an International Commission of Inquiry. In any case, some means must be found of finishing once for all with the _Arabic_ and _Lusitania_ incidents; only then shall we be in a position to see whether President Wilson will keep his word, and take energetic measures _vis a vis_ England.

"The Anglo-French Loan Commission, a.s.sisted by their agency, the Morgan group, are working at high pressure. Stories of Allied victories in Europe are sedulously spread abroad in order to enlist the support of public opinion. Despite these efforts the commission found Chicago so invincibly hostile that they were compelled to proceed there in person, but they will probably, in any case, manage to raise a loan, as the Morgan group are quite strong enough for the purpose.

The rate of interest they are demanding is very high, as up till now they have financed all English purchases here. By these means, they are, no doubt, making considerable profits, but in order to secure them, they will, of course consolidate their floating debt and unload it on to the public. The only question is to what extent they will be able to do this. Opinion varies as to the size of England's present debt; a prominent banker here, in close touch with the Morgan group, estimated the total to 500,000,000 dollars; if this estimate is correct, a loan of 500,000,000 dollars would only just cover the liabilities. .h.i.therto existing.

"The Morgan group certainly had to make two great concessions: first, that the proceeds of the new loan shall not be employed for the purchase of munitions, and second, that Russia shall be excluded from the loan; only by these means could they overcome the opposition of the German-Americans and the Jews. Our Jewish friends here are in no easy position. Their action, or rather inaction, takes the form of what is commonly known as 'egg-dancing,' or 'p.u.s.s.yfooting'; they wish to stand well with all sides, but have not the courage of their convictions, and are very anxious to make money. All this is very easily understood, when one remembers the ambiguous position of these gentlemen. A regular devil's dance around the 'Golden calf' is now going on here. All the European Governments are coming to buy in the American market, and usually paying double for their goods, as they only purchase what they urgently need. _One lesson_ we may learn for future reference from the present state of affairs, and that is that we must not allow ourselves again to be left to the tender mercies of the German-Jew bankers here. After the war, we must have branches of our large banks in New York just as we have in London. All evidence goes to show that New York will then be the center of world-finance, and we should, therefore, take all steps to act on this a.s.sumption as soon as possible."

The Foreign Office in Berlin, who naturally wished to avoid a rupture with the United States, accordingly dispatched to me the following telegraphic instructions:

"We have no doubt that in this instance submarine commander believed _Arabic_ intended to ram and had every reason for such belief. However, German Government prepared to give credence to sworn evidence of English officers of _Arabic_ and agree that in reality no such intention existed.

"Attack of submarine thus was unfortunately not in accordance with instructions; communication to this effect will be made to commander.

German Government is for sake of final settlement by friendly agreement prepared without admission of responsibility from point of view of international law, to give indemnification for death of American citizens. Your Excellency is empowered to notify American Government of above, and to negotiate with them in case of acceptance concerning amount of compensation, subject to our concurrence. Confidently expect that incident will thus be finally liquidated, as above is limit of possible concessions."

"The American Government during verbal negotiations with me on this matter considered it essential that a phrase expressing Germany's disapproval of the commander's action should be incorporated in the explanation which I proposed to publish. I was not sure whether I was really authorized by the above instructions to comply with this condition, but in view of the fact that it was the only hope of avoiding a breach and further delay in the negotiations would profit us nothing, as we were bound to make some sort of reply to the American demand within a certain definite time, I acted once more on my own responsibility and gave the following explanation to Mr. Lansing:

"The Government of his Majesty the Kaiser, in its orders with which I previously made you acquainted, has so framed its instructions to its submarine commanders as to avoid any repet.i.tion of incidents such as that of the _Arabic_. According to the report of the officer who sank the _Arabic_ and his sworn evidence, together with that of his crew, this commander believed that the _Arabic_ intended to ram the submarine. On the other hand, the Imperial Government does not desire to call in question the good faith of the English officers of the _Arabic_, who have given evidence on oath that the _Arabic_ had no intention of ramming. The action of the submarine was therefore contrary to orders, and the Imperial Government both disapproves of it and regrets it. A communication to this effect has been made to the officer in question. Under these circ.u.mstances my Government is prepared to give compensation for the lives of American subjects drowned, to their great regret, in the _Arabic_.

I am empowered to discuss with you the amount of this compensation."

The above explanation finally resolved the second crisis. The German naval authorities naturally complained of my action, as the "disapproval" stuck in their throats, and I was once more taken to task--a matter which weighed little with me. For I felt that my interpretation of the instructions from the Foreign Office was the only one which could have saved us from war, and that now the road was open for the final settlement of the _Lusitania_ incident and the discussion of the great question of "the freedom of the seas." The outlook for us was most promising. Opinion in America as a result of the solution of the _Arabic_ question was once more favorable to us. A leading American paper, the _New York Sun_, said at this time in its leading article:

"The successful issue of the conversations with Germany over the submarine campaign cannot fail to be of benefit to an nations, as a proof of the possibilities of diplomacy as against war. It has been a personal triumph for both the partic.i.p.ants, President Wilson and Count Bernstorff."

The position of both men has been much strengthened thereby, and what they have already achieved is no doubt only a presage of still greater results in the future.

The following four reports to the Foreign Office deal with the settlement of the _Arabic_ case:

(1) CIPHER

"Cedarhurst, October 6th, 1915.

"The settlement of the _Arabic_ case reported to your Excellency in my wire, has caused great satisfaction in all circles here. Of course a few avowedly Anglophile papers, such as the _New York Herald_ and the _New York Tribune_, reveal the cloven hoof, and are clearly disappointed that a rupture of diplomatic relations between America and Germany has been averted; for the rest, at no time since the outbreak of war have we had such a good Press as at this moment.

"History alone will be in a position to say whether the settlement of the _Arabic_ case really prevented a war with the United States or not; but your Excellency knows my views that without this settlement a conflict must eventually have become inevitable. I respectfully submit that the preservation of peace alone was a sufficient motive to induce us to come to terms; but you also know that this was by no means my sole object. I wished also to induce the Government of the United States to take energetic proceedings against England, with the object of translating into fact its idea of the freedom of the seas. I trust we shall not be disappointed in this regard, and I shall, certainly, leave no stone unturned to keep Mr. Wilson on the right path. Whatever may be one's personal opinion of the President, whether one believes him to be really neutrally-minded, or not, his great services to the cause of peace cannot be denied.

A Republican President would certainly not have stood up, as he has done, against the united forces of anti-Germanism represented by Wall Street, the Press, and so-called Society.

"At the present moment it looks as if the American Government are ready to let the _Lusitania_ matter drop altogether, provided we agree to refer the question of compensation to the Hague Tribunal after the war. The general belief here is that judicial proceedings are out of the question during the continuance of hostilities. At least I gather as much, indirectly, of course, from one of the President's friends."

(2) CIPHER

"Cedarhurst, October 15th, 1915.

"I much regret that owing to a mistake on the part of the State Department, your Excellency was not earlier informed of the settlement of the submarine question. Mr. Lansing left my letter, which should have accompanied the telegram, in his writing-table by mistake, for which oversight he afterwards apologized to me. The Imperial Emba.s.sy was in no way to blame.

"The importance attached by the President, from the very first, to those main points on which we were unable to make concessions rendered the task of arriving at an agreement by no means an easy one. Thus on three of the most important points no agreement has been reached and over these we must, for the present, draw the veil. Only a few of the most rabid of the pro-English papers venture openly to reproach President Wilson with having achieved nothing but the security of pa.s.senger-ships, but all Americans are prepared to admit in confidence that the Government has completely departed from its original position.

"The three important questions still in dispute, as mentioned above, are the following:

"(1) The German Government's responsibility for American lives lost in the torpedoing of British Ships.