Ambassadors work much like the Federal Reserve Bank in that they generate Diplomatic Capital without any tangible diplomacy advantages. They then use this diplomatic capital to take over portions of worthless minor factions from their leaders at full price, thereby acquiring toxic assets for you. The leaders of these factions then loan you diplomatic capital that is now washed, and can be used with major factions. You pay a very small diplomatic interest on these bonds, though the leaders are guaranteed something, rather than risk being overrun by other major factions. This is called Diplomatic Monetization.