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 assumption
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 repetition 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 questio