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Volume 74, June 23 – June 29, 1937
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Volume 74, June 23 – June 29, 1937
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 74
June 23 - June 29, 1937
Regraded Uclassified
- B -
Book Page
Banking Legislation
Taylor reports on meeting with FDR - 6/28/37
LXXIV 117
British Equalization Fund
See Stabilization
- C -
China
For resume' of conferences between HMr and Chinese
delegation, see Book LXXVIII, page 190
Kung wishes to pay his respects to Treasury group before
the dinner given by Chinese Ambassador - 6/28/37
92
- D -
Daily Treasury Statement
Bell reports on suggested revisions to 9:30 group -
6/28/37
86
DuPont (Ethel) - Roosevelt (FDJr) Wedding
Program BE worked out by Secret Service
3
- F - -
Foreign Capital: Restriction of Inflow
Eccles memorandum to HMJT stating Board's decision to favor
legislation granting additional power to absorb excess
reserves resulting from additions to stock of gold by
increasing reserve requirements on deposit balances
maintained in United States by non-resident aliens -
6/24/37
83
e) Brief summary of important provisions of suggested
bill
84
Conference; present: HMJr, Magill, Taylor, and Eccles -
6/28/37
101
Butterworth and Taylor discuss necessity of informing
British Treasury (under Tripartite Agreement) before
action is finally decided upon - 6/29/37
140
Resume of status of legislation given Eccles by HMJr - -
6/29/37
163
France
See also Stabilization
New Government: Reaction in London given by Butterworth -
6/23/37
18
Cochran report - 6/23/37
20
Regraded Uclassified
- G -
Book Page
Gold
See Stabilization
Phillips, Sir Frederick
- P -
For proposed visit, see Stabilization
Public Health
National Health Survey: possible lay-offs may cause
trouble - BO Miss Roche reports to 9:30 group -
6/28/37
LXXIV 88
- R
Russia
See U.S.S.R.
- S -
Stabilisation
Conference with Trentham (British Embassy) present:
Lochhead and Taylor - - 6/23/37
11
a) Reply from Chancellor of Exchequer to message
delivered verbally by Mallet (see Book LXXII,
page 35 - - 6/7/37) to the effect that just as
United States was ready to discuss question of
stabilization when world was ready, so now it
is prepared to discuss question of gold
1) Sir John Simon considers any marked
divergence in price of gold in United
States and England inadvisable since it
would lead to change of exchange rates
and give leverage on which deflationary
forces could act
2) Sir John Simon prepared to take public
action of character calculated to restore
confidence: submitting to Parliament
proposal for increasing resources of
exchange equalization account by & further
sum on £200 million; announcement to be
made on Friday
b) In connection with more personal contacts between
two Treasuries, when Phillips is in Canada in
September, Sir John Simon will arrange for him to
visit Washington, if acceptable to United States
Treasury
Taylor consults HMJr about reply to Simon message 6/24/37..
37
a) HMJr tells group to work out answer indicating
pleasure at receipt of news
b) Treasury will be delighted to receive Phillips in
c) Answer September as transmitted by Taylor to Trentham - - 6/24/37...
50
Regraded Jclassified
- 8 - (Continued)
Book
Page
Stabilization (Continued)
London press comment on Chancellor's proposal 18
fevorable - 6/26/37
LXXIV
75
Statement in House of Commons by Sir John Simon, in
connection with move to increase exchange stabilization
fund, that brief public statement will be made at end
of each June and December regarding amount of gold and
foreign exchange holdings of fund as of the previous
March and September; British fund now possesses
approximately 26,674,000 ounces of gold which, together
with that in Bank of England of 73,842,000 ounces,
makes total of 100,516,000 ounces worth over E700 million
6/28/37
109
France:
See Cochran resume 6/13/37-July, 1937 - Book LXXVI
Knoke-Bolton conversation - 6/23/37
1
a) French exchange fund entirely gone
b) British have taken as much 88 E8 million to
£9 million in B single day
c) In addition to fleeing from franc into sterling,
English feel French are now beginning to sell
their old dollar holdings against sterling
a) Present French flight of capital, Bolton thinks,
is one definitely into currencies and not into
commodities, stocks, et cetera
Cochran reports that Rist and Baudoin resigned from
Experts Committee, which advised French Stabilization
Fund, because their advice was not followed by
Government - 6/23/37
21
Tripartite Agreement absndonment by France rumored in
London - 6/24/37
25
Exchange market movements (Paris) resume - 6/24/37
53
e
"
-
a
n
- 6/25/37
66,71.72
"
"
"
"
"
- 6/26/37
73
"
"
#
#
n
- 6/28/37
112
Cochran reports on visit to Vinistry of Finance at
midnights Rueff reporte on bold program proposed by
Bonnet; if not accepted, Bonnet will return to
Washington; Bourse to be closed Tuesday, June 29th, when
Government asks for certain powers of control over
exchange situation - - 6/29/37
120
o) HMJr cells meeting in his rooms et Cerlton Hotel
following Kung dinner given by Chinese Ambassador;
present: HMJr, Ecclos, Taylor, Viner, Riefler,
White, Lochhead, and Feis
125
1) HMJr has asked Federal Reserve Bank of New York
to take appropriate steps to carry out French
request that New York banks do not engage in
transactions in French francs while Paris
Bourse is closed, 85 was done last September
2) Possibility of withdrawal by France from
Tripartite Agreement also discussed
0) Feis memorandum in furtherance of meeting - -
6/29/37
123
- S - (Continued)
Book Page
Statillsetion (Continued)
Fronce (Continued):
Cariguel Informs Knoke, Bunk of France has stated
willingness to convert into gold, on busis of
yesterday's rate, any francs which United States
might buy: "in other words, you see, Tripartite
Agreement remains in full force"; Cariguel also
states that British will make statement today
that in their opinion what France now plens is
within scope of Tripartite Agreement; it 1s hoped
HMJ: will make similar statement - 6/29/37
LXXIV 126
Butterworth reports Monick 18 pleasantly surprised
at boldness of Bonnet's proposal but apparently
expects & further crisis - 6/29/37
128
Butterworth-Taylor conversation - 6/29/37
130
a) Butterworth has Just returned from British
Treasury; HMJr's instinct "not to believe French
on stack of Bibles" is correct: British Treasury
has not, told Monick or anyone else that they think
French are still acting within Tripartite Agreement;
Sir John Simon asks that this be transmitted to HMJr
b) Treasury reports to Butterworth that Bank of England
has suspended quotations, that is, London is not
dealing in france but has arranged for Bank of France
to supply francs at 110.55 per pound; Bank of England
will not, on its own account, buy any francs at all
0) Chancellor of Exchequer gives two messages for HMJr:
1) He may be asked in Parlisment this evening
whether he regards decision of French Government
to suppress upper and lower gold limits as
departure from tripartite monetary agreement;
will reply that events have shown that re-
adjustment of franc in September, 1936, was not
entirely successful in re-establishing E lasting
equilibrium between economic systems of France
and those of United States and Great Britain;
has not been informed as to what limit French
Government hopes to establish franc; naturally,
time is required for thought and consultation;
for the moment, can only say that assurances
have been received from French Government, that
It is not their intention to limit franc
deposits, and that close cooperation with
Governments of United States and United Kingdom
is desired
2) Proposed interim reply by Chancellor of Exchequer
to French Government
(For actual messages, see page 142)
Regraded
Uclassified
- 8 - (Continued)
Book
Page
Stabilization (Continued)
France (Continued):
Meeting with regard to Chancellor of Exchequer's
two messages; present: HAJr, Taylor, Lochhead,
Viner, Riefler, Opper, White, and Eccles - 6/29/37 LXXIV
146
a) Conversation with Cochran, in which Knoke is
included
150
1) French officials have assured Cochran
changes which have been made by decree
and which are planned in the program
of the so-called Bonnet Government
will not affect technical arrangements
now in force between American and French
monetary authorities
2) Knoke satisfied with telegram from
Bank of France giving buying and selling
rate as of yesterday
3) HMJr will now talk to Sir John Simon and,
in meantime, ask Cochran to ascertein what
England, Belgium, Switzerlend, and the
Netherlands have done
4) "Monick, as usual, has just been lying";
HMJr tells Cochran best thing French
Government can do is get rid of him
b) Report of vote of confidence in French Government
393-142
176
o) (First) conversation with 31r John Simon and
Sir Frederick Phillips (Technical Adviser)
178
1) HMJr tells Simon, French have given
United States same technical arrangements
for today as for yesterday: buying rate
for franc at 4.46 end selling rate at
4.46, with right to convert these france
into gold; under these conditions,
United States Treasury feels France is
living up to Tripartite Agreement
2) Simon says France has not made similar
arrangements with Great Britain
3) AMJr tells Simon, Cochran has been directed
to inquire what arrangements France has
made with the other countries in Tripartite
Agreement
4) HMJr suggests to Simon that he (HMJr) make no
public statement until France has made similar
arrangements with Great Britain
5) After conference, Simon tells HMJr he does not
interpret situation in same way United States
Treasury does: in other words, France is making
day-to-day arrangements and no promise has been
given that France will hold by this arrengement
in the future
6) Simon thanks HWr most cordially for this
consultation and expresses appreciation if HMJ:
will refrain from public statement until recess
is upp Simon hopes it will not be necessary for
him to make any statements in House of Commons
today
Regraded Uclassified
- S - (Continued)
Book Page
Stabilization (Continued)
France (Continued):
French Government sends message via Jean Appert
(given to Taylor and Lochhead) - 6/29/37
LIXIV 199
a) French Government desires to take advantage
of paregraph 3 of Tripartite Agreement
which says that United States, Great Britain,
and France, when necessary, will arrange for
consultation
b) Bonnet reports that plan for financial
rehabilitation has been submitted from Council
of the Cabinet (headed by Premier) to Council
of the Minister (headed by President of Senate)
1) Steps provided to insure complete balance
of budget of 1937
2) Also provides for very large lessening of
the charge of the Treasury for new loans
from Bank of France to Government
3) Government has also decided not to allow
gold stock of Bank of France to decrease
further; consequently, it intends to
suppress limits which, in the French
monetary law, are made compulsory: exchange
rate of franc against gold between 49 and
43 milligrams
4) Movement of francs will be restrained by
Stabilization Fund and thus franc will be
able to find point of equilibrium better
suited to economic and financial condition
of the country
5) Immediate vote in both houses to be asked
for; security and commodity markets to be
closed today in order to prevent speculative
moves
6) French Government 1s not seeking in any of
these steps to take unreasonable exchange
advantage and intends to maintain with
American as well as British Government
close collaboration
7) Appert sake for report on reaction of
United States Government 6.8 soon as possible
Cochran reports conversation with Rueff in which he
reports talk with Monick: Monick says Chancellor of
Exchequer, if questioned in Parliament this afternoon,
will say French Government has consulted with British
Government in accordance with terms of third paragraph
of Tripartite Agreement; Rueff states French will such
appreciate similar statement by United States -
6/29/37
202
- S - (Continued)
Book
Page
Stabilization (Continued)
France (Continued)
Conference; present: HMJr, Viner, Taylor, Lochhead,
Riefler, and White - 6/29/37
LXXIV 204
a) Taylor reports on Appert's visit
b) HWr reports to FDR on steps which have been
taken
c) Taylor reads to group decrees as reported
by Appert from Journal Officiel
d) Lochhead says his worry is not for the fellow
trying to buy but rather for the fellow trying
to sell francs
Cochran sends translation of text of sole article of
Finance Bill as laid before Chamber this afternoon
by Chautemps Government: Government is authorized
until August 31, 1937, to take all measures necessary
to assist in repressing of attacks on credit, et cetera -
6/29/37
210
Cochran reports that Cariguel has stated he has telephoned
Central Banks of Netherlands, Belgium, and Switzerland
and has been in repeated conversation with Bank of England
and it is clearly understood that arrangements under
Tripartite Agreement and technical agreements subsequent
thereto are to be continued - 6/29/37
211
Cochran-HMJr telephone conversation - 6/29/37
217
a) Cochran reports bill was accepted by Chamber of
Finance Committee by one vote majority only
b) Cochran repests Rueff's assurances that arrangements
of Tripartite Agreement with all countries stand;
advance steps discussed, however, only with Great
Britain and United States
c) HMJr gives resume of eventa to Cochran, including
telephone conversation with Simon; tells Cochran
Simon was certainly prepared to issue pretty sharp
statement about French before HMJr had telephone
conversation with him
d) HMJr tells Cochran he's going to sit absolutely
tight, especially in view of United Press story
which has just come in stating that Bonnet expects
to devalue on account of tremendous loss of gold;
HMJr sorry every time French get in jam "they simply
will not play ball"
e) HMJr tells Cochran there was a desand today for
600,000 france which United States sold, and that's
the only business
- S - (Continued)
Book Page
Stabilization (Continued)
France (Continued):
HMJr-Butterworth telephone conversation 6/29/37
LEXIV 229
a) Massage from Simon: "There has been an agreed
quotation between our authorities and French
authorities down to yesterday but we have no
quotation for French francs today. British
market is closed today and tomorrow except for
clearing up a few old transactions. No indication
what quotation, if any, there will be for ensuing
days." British have now asked French Treasury
representative in London (Monick) when he will
have any information; Simon fears in meantime
franc may be allowed to float; Simon is completely
in dark as to how they can operate - thinks it
would be unfortunate to aver that Tripartite
Declaration is in full force - hopes for
consultation before any positive statement is made
by two Governments
(For actual message, see page 274)
Cochran cables that changes which have been effected by
decree today will not in any way affect technical
arrangements existing between American and French
monstary authorities 6/29/37
245
Press comment on French crisis - 6/29/37
277
- T -
Taxation
See Foreign Capital: Restriction of Inflow
- 0 -
Unemployment Relief
National Health Survey: possible lay-offs may cause trouble -
50 Miss Roche reports to 9:30 group - - 6/28/37
88
U.S.S.R.
For resume of conferences on gold, 4/11/37-7/17/37.
608 Book LXIV, page 79
Knoke informs Cariguel that Federal Reserve Bank of New York
has opened account for Russian State Bank - 6/24/37
24
American Embassy, Mossow, reports on production of Soviet
gold: has been diminishing rather than increasing during
last six to ten months due to executions, arrests, and
removals of competent engineers and specialists within the
industry - 6/22/37
62
- V -
Van Zeeland, Paul
HMJr tells 9:30 group FDR 10 taking Van Zeeland on boat trip -
6/23/37
9
FEDERAL RESERVE BANK
1
If NEW YORK
FICE CORRESPONDENCE
DATE June 23, 1937.
CONFIDENTIAL FILES
SUBJECT TELEPHONE CONVERSATION
L. W. Knoke
WITH BANK OF ENGLAND.
Mr. Bolton called me at 10:55 today to give me some sort
of idea of what was going on, BS he said. The French exchange fund
was gone. Its losses had recently been on a very large scale, the
British, without exageration, on several single days taking
£8,000,000 to £9,000,000 from them. The best that could be said was
that the movement at the moment was small in volume, with the French
losing £1,000,000 or so a day. With the British purchases from the
French and with all the rest of 1t, they (the British) had 8. feeling
of indigestion. What was of particular interest to the British was
that there was every appearance that the French, in addition to
fleeing from the franc into sterling, were now beginning to sell
their old dollar holdings against sterling (I suggested that this
was interesting indeed, but was not borne out by the figures reported
to us regularly which, at least up to a week ago, had shown a very
modning h hend
definite tendency on the part of foreigners to build up dollar bal-
ances here).
The reasons for the French sales of dollars, Bolton thought,
were twofold: Firstly, reports which had appeared twice during the
week in British and Continental newspapers that the American Treasury
had fixed up some arrangement with the French Treasury for the purpose
of exchanging information with regard to French capital in this market
end vice versa. If the French Government tried in this way to scare
hot money from New York back to France, the French hopes would not
materialize because, if the French felt it necessary to sell their
dollars, they would buy anything else except francs. The second reason,
FEDERAL RESERVE BANK
OF NEW YORK
TICE CORRESPONDENCE
DATE June 23, 1937.
CONFIDENTIAL FILES
SUBJECT TELEPHONE CONVERSATION WITH
L. W. Knoke
BANK OF ENGLAND.
- 2 -
Bolton thought, was our labor situation which most certainly had had
an effect on the investment world everywhere.
The present French flight of capital, Bolton thought, was
definitely one into currencies, not into commodities, nor stocks,
nor anything else. I asked whether they had noticed an increase of
hoarding of their banknotes and he thought that was difficult to
tell although it was probably correct to say that something like
£500,000 a day of notes was being shipped to France. I asked him
whether, in his opinion, anything was fundamentally changed in the
franc situation and he replied that he could not see any real relief.
LINK:KMC
Leave 7.49 an - 10.00
3
TREASURY DEPARTMENT
OFFICE OF THE SECRETARY
WASHINGTON
SECRET SERVICE DIVISION
June 23, 1937
MEMORANDUM
To:
The Secretary
From: Mr. Murphy, Secret Service
I received word from our Agent Montgomery that you desired to
know what would be expected of you at the Roosevelt--du Pont wedding.
There is attached E schedule of the President's trip to Wilming-
ton, and from there to Hyde Park and return, which hes not been approv-
ed by the President and is therefore subject to change.
I had Colonel Starling telephone to Mrs. Edward J. McMullen at
the Bellevue-Stratford Hotel, Philadelphia, as she is the social secre-
tery to the du Pont family, and from her learned that they are sending
to all Cabinet Members and other persons who have accepted the invite-
tions to the wedding B railroad card giving all information about trains,
etc. This card will advise Cebinet Members end others here to leave
Weshington on the P.R.R. train at 1:00 P.M., which arrives Wilmington
2:45 P.M., and any guests from New York City to leave New York on the
P.R.R. train departing at 12:30 P.M., and arriving Wilmington, at the
same station, 2:39 P.M. The du Ponts will have representatives meet the
guests at the station and provide necessary eutomobiles to take them di-
rect to the church, hoping to have all guests seated in the church about
3:30 P.M., before the arrival of the President at 3:50 P.M., (the wedding
to be at 4:00 P.M., 5:00 P.M. Daylight Savings Time).
After the wedding ceremony those invited will go to the du Pont home
for B. reception (buffet service) and may leave at any time.
Gueste should be "dressed" before leaving the train, as they will be
taken direct to the church. The men will be expected to wear summer
clothing-- white linen suits or white flannel trousers with blue coate, etc,
I reserved & drawing room for you on the train leaving here at 1:00
P.M., and one for Mrs. Morgenthau on the train leaving New York City at
12:30 P.M. on the 30th, through Mr. Carr, the local Pennsylvania Railroad
representative.
Colonel Sterling will be at Wilmington next Mondey, the 28th, to remain
until after the ceremony. We will have our agents meet you and Mrs. Morgen-
thau on arrival at Wilmington.
In the foregoing I have designeted reilroad time to avoid confusion
Jew
4
COPY
FOR Sec. McIntyre:
Tentative
Trip of the President to Wilmington, Del.,
Hyde Park, N. Y., and return.
June 30 - July ----, 1937.
WEDNESDAY, June 30.
Lv. Washington (B. and O.R.R.)
10:00 a.m.
Ar. Montchanin, Del. (Reading RR)
12:30 p.m.
Motor to Mr. du Pont's residence,
Owl's Nest, (3 miles) lunch.
Train squipment will be parked
Montchanin, for use of party during day.
After lunch, motor to train; rest;
50mg
dress for wedding - 5 o'clock.
Motor to Christ's Episcopal Church,
(1 1-2 miles).
After wedding, return to train, or
proceed to Mr. du Pont's residence
for reception.
(Will the President dine on train or
at residence??)
At 10:00 or 10:30 p.m., or at any hour
desired, entrain at Montchanin, or
Greenville for Hyde Park, N.Y.
THURSDAY, July 1.
Ar. Highland, N.Y. (N.Y.Cen.)
7:30 am. EST.
8:30 am. DST.
Return trip to Washington.
Lv. Highland, N.Y. (West Shore RR).
11:00 p.m. EST
12:00 a.m. DST
Ar. Washington (B. and O.R.R.)
8:30 a.m. EST.
Regraded Uclassifie
5
June 23, 1937.
9:27 a.m.
Magill:
to tell you if you wanted to tell him anything
why we could send for him.
H.M.Jr:
No, all I'll tell him is "Gesundheit".
M:
Yep.
H.M.Jr:
No, I have nothing.
M:
Oliphant, Lochhead - ah - Taylor, McReynolds,
Miss Chauncey and myself are here.
H.M.Jr:
Well who wants to say anything.
M:
I - they all seem ery reticent this morning.
H.M.Jr:
Well - ah - let - let me talk to Archie while some
of the others collect their thoughts after McReynolds'
party.
M:
(Laughs)
H.M.Jr:
What?
M:
(Still laughing)
Lochhead:
Good morning.
H.M.Jr:
Hello Archie.
L:
Well everything is good and quiet as usual for these
last two or three days. Ah - there doesn't appear
to be the same pressure on the Franc as there was.
H.M.Jr:
Good.
L:
They - they're not gaining anything but they're not
losing very much.
H.M.Jr:
All right.
L:
Ah - sterling is steady; the gold engagements are
working down slightly and that's about all there is
to say on it.
Regraded Uclassified
6
- 2 -
H.M.Jr:
Did you figure out that gold bar business?
L:
We have the chart all made up already; it's on my
desk now.
H.M.Jr:
Well mail it to me to the farm.
3
Mail it to you at the farm.
H.M.Jr:
Yes.
L:
All right then I'll do that to-day.
H.M.Jr:
Now let me hear McReynolds' voice - I want to hear -
I want to hear how he sounds.
L:
Oh it's all right, I took care of him last night;
I watched him.
H.M.Jr:
Did you?
Let me just hear him.
L:
Right.
McR:
Good morning boss.
H.M.Jr:
How was that 19th hole?
McR:
Not so bad.
H.M.Jr:
Not so bad.
MeR:
Not so bad. Ros and Herman came out but they didn't
stay; they're just old guys.
H.M.Jr:
They're sissies .
McR:
Yes, they came in - I'll tell you about that sissy
sometime.
H.M.Jr:
(Laughing) What?
McR:
I'll tell you about that sissy sometime.
H.M.Jr:
All right.
McR:
Ah - but they didn't stay very long.
Regraded Uclassified
7
K I I
McR:
They did lose their chauffeurs; we had a hard time
getting them away.
H.M.Jr:
They did.
McR:
Yes but - an - they finally got back. The party
started soon after they left. We had a good program;
I think everybody had fun; I told everybody that you
were sorry you couldn't come.
H.M.Jr:
That's right.
McR:
And - ah - and nobody had to be carried out.
H.M.Jr:
Good.
McR:
I didn't win any prizes but I made the boys pay my
expenses before I got through.
H.M.Jr:
You would.
Men:
(Laughs) Ah - I guess Wayne was the only one that
didn't show up. Archie stayed until the last horn
blew.
H.M.Jr:
Good for Archie.
McR:
I had a hard time keeping him on the right side of
the table when these girls were dancing.
H.M.Jr:
I see.
McR:
But he stayed; he - as long as he could kick over
his coat tails.
H.M.Jr:
Did he sit above the table?
MeR:
Yes, he kept his chin above the table.
H.M.Jr:
I see,
McR:
And everything was absolutely decent.
H.M.Jr:
Ah-ha.
McR:
We - we - the last number we had was a fan dance and
this girl got a little tired and waved the fans up
above her head instead of where they were supposed to
be but otherwise the thing was very decent. (Laughs)
8
- 4 -
H.M.Jr:
(Very hearty laughter)
VeB:
But everybody got away in good time and, as far as I
know, everybody is on the job feeling fresh this
morning.
H.M.Jr:
Well - ah good.
McR:
(Still laughing)
H.M.Jr:
I'm sorry I missed it; I'd like to have seen Arch
with his chin on the table.
MeR:
Yes (laughs) he - he really behaved himself pretty
well considering the fact he's just a young fellow.
H.M.Jr:
Well anybody there wants to "after McReynolds".
McR:
(Laughs) I don't think there's anybody.
H.M.Jr:
All right.
Magill:
Mac looks fine this morning; you'd be surprised.
H.M.Jr:
(Laughs) All right.
Magill:
Clear-headed and clear-eyed; his head only twice as
big as usual and looking swell.
H.M.Jr:
Maybe some good chaperones out there would have done
him good.
Magill:
I think that's where we made our mistake. (Laughs)
B.M.Jr:
(Laughs)
Magill:
Just a chaperone and a fan dancer and he's bound to
be fine. (Laughs)
H.M.Jr:
(Laughs)
MeR:
(Laughs)
I.M.Jr:
I'll call up tomorrow morning about this time but if
there's a real emergency, why the phone 1s Beacon 211.
Magill:
Righto.
Regraded Uclassified
9
5
N.M.Jr:
And - ah - I talked to the President and told him
that 1f there was anything on this foreign stuff he
could get ahold of Taylor and tax stuff - ah - he could
talk to Magill and I told him that we were on top of
the world and he had nothing to worry about. He said
he's not got anything to worry about. He's taking
Von Zeeland down the river to-night - this afternoon.
M:
Yes.
H.4.Jr:
God help Von Zeeland.
11:
I hope he's going to bring him back.
R.V.Jr:
I've got to tell you fellows this story. The President
said to me, "What's Von Zeeland's first name"?
(Laughs)
H.K.Tr:
So I said, "Well why". So he said, "Well after a half
an hour I want to call him by his first name".
N=
(Hearty laughter)
H.M.Jr:
So he said, "I'm going to ask him what his nickname
was at Princeton because after 30 minutes I'm going
to call him that".
M:
(Laughs) Probable "Tigue".
П.Ч. Jr:
(Laughs)
M:
(still laughing) Well -
H.M.Jr:
The President said there's nothing to worry about - so
ah - I guess we ought to hire that fan dancer the next
time that Eccles begins to argue.
Well I noticed that Wayne made a note of her address,
etc.
M.M.Jr:
Good.
No
So he'll have her in tow in case you need her.
In case Eccles gets into one of his seven hour trances.
Regraded Uclassified
10
$
- 6 -
M:
We don't need her
H.M.Jr:
Well
M:
He says - he said he planned to use her on the Brazilians
too.
H.M.Jr:
O.K. (Laughs)
M:
(Laughs)
H.M.Jr:
Well - carry on - I'll be back Monday.
M:
All right, good luck to you and get a good rest.
H.M.Jr:
Goodbye.
M:
So long.
McR:
Goodbye sir.
Regraded Uclassified
11
June 23, 1937
18 o'clock
Present (In Mr. Taylor's office):
Mr. Trentham
Mr. Lochhead
Mr. Trentham: Look here! Here is a thing from the
Chancellor and I brought a spare copy and before you start
reading it, may I read this prelude which Eden has sent:
"In conveying the following message from the Chancellor of
the Exchequer to Mr. Morgenthau, you may be able to bring
out its extremely confidential nature especially P.B. to action
to be taken in Parliament on Friday. An early favor of a
reply from Mr. Morgenthsu will be appreciated and you may
find opportunity to convey this." Then he goes on with the
text.
(Mr. Taylor and Mr. Lochhead read the message.)
Mr. Taylor: I take it you would like any comment that
we might wish to make on this proposal that is going to be
mede on Friday.
Mr. Trentham: It means, if you don't mind, sending some-
thing this afternoon.
Mr. Taylor: I would taink that we can handle that all
right and we will get in touch with you 25 soon as possible.
Mr. Trentham: If you could just send up to me the text
of B message you would like to send. And if you could, send
it up by hand. Can you arrange to do that before four o'clock?
Mr. Taylor: I think 50.
Mr. Trenthem: There 1s one subsidiary thing. I wonder
when Mr. Lorgenthau comes back on Monday he would want to give
de e. message to telegraph to the Treasury about his plans be-
suse they say in September Phillips plans to come here. But
I suppose he will weit until Congress adjourns?
Mr. Taylor: He will be back in September. Even If he
Regraded Uclassified
12
-2-
goes, he will be back, I would say, right after Labor Day.
Mr. Trentham: That's September lst?
Hr. Taylor: September 7th.
Mr Trentham: He will have e short vacation if he
write for Congress to adjourn.
Ifr. Taylor: He's talking the 15th.
Ur. Trentham: You might like to incorporate in what you
15y in reply to this that Mr. Morgenthau will be available
after tember 15th.
Mr. Lochhead: After 811, the last paragraph is not what
you want an answer on this afternoon.
Mr. Trentham: oh, no! Do you want a third copy?
Mr. Taylor: If you have B. spare one.
Mr. Trenthem: If you could have something around four,
I would shoot it off. Only one thing I want to ask you in
passing. Is there any chance of Brazil getting money from
this country for its Central Bank? I rather doubt it.
Mr. Taylor: We haven't talked to the Brazilian mission
yet. Preparation for that was that when the President was
on the South American trip, he had comparatively brief con-
versation with the President of Brazil and the Finance Minister
regarding their creating a Central Bank; its reorganizing the
banking system; possibly promoting some of the exchange control
mechanism which they have; and indicated that we would be more
than Fled to discuss that whole problem with them. That was
followed up by Dr. Welles, who had some other conversations
Along those lines. Then about a couple of months ago, within
the last two months, when the Ambassador came back here, he
resumed those conversations and we repeated, which you might
describe as the invitation, that we would be more than glad
to discuss with them, from the standpoint of giving them the
benefit of our experience, possible cooperation for & certain
loan, which you might describe 8.8 a gold loan, to the Central
Bank which would permit , let us say, earmarking, which would
be delivered on the installment plan over & rather long period.
Regraded Uclassified
13
-3-
Mr. Trenthem: Yes. Yes.
Mr. Taylor: We would be more than glad to discuss
Mr. Trentham: You would sponsor it, in a way?
Mr. Taylor: Might even do more than that. We have
mechanism in the Export-Import Bank, which has been utilized
in similar transactions and could be utilized again,
Mr. Trentham: Yes. Yes.
Mr. Taylor: And that's the background. We are more
than willing, in fact we would be glad to help out that situ-
Ation in any way that's possible to do it, but & direct, let's
say Government to Government loan at the minute has not been
discussed.
Mr. Trentham; No. I remember talking to Niemeyer who
went out to Brazil and he knew he was going to find a mees
and I read his report afterwards.
Mr. Taylor: His report might very well be, let's say,
the Jumping off point for any discussion, because that's the
last comprehensive report that has been made. A lot of things
have happened since then. Our impression 1s that the mission
is going to stay here quite B while; that they are not only
exploring banking possibilities, but taking this occasion for
going over the whole subject.
Mr. Trentham: Yes. Trade. Our poor fish merchants in
Newfoundland could not get any money for their fish.
Regraded Uclassified
7
Meesage from Chancellor of the Exchequer for
Secretary of the Treasury.
VERY CONFIDENTIAL.
Mr. Mallet has conveyed to me the message
which you entrusted to him and which I was very
glad to receive. You will appreciate that I
have been 80 short a time in my present office
that I have had really no opportunity to form
a considered judgment on many of these difficult
questions. But I on convinced that the most
important matter is that there should be no
set-back in progress towards reviving confidence.
In both our countries there has been remarkable
increase in the last two years in the national
income, in the spending power and welfare
of the people and in the volume of employ-
ment. It is worth the trouble and sacrifice to
ensure that this progress which has by no means
reached its limits should continue and I an
convinced that it can continue as 8 result of
our close cooperation,
As regards gold coming out of hoards we
cannot help ourselves no more than it was always
certain that hoards would gradually be dispersed
when /
Regraded Uclassified
15
when the hope of a further rise in the price
of gold had disappeared. The increase in the
output of new gold and the threat of a still
further increase later may present the world
with a troublesome problem, but it is not a
problem which would I think have caused much
anxiety at this time had it not been for the
further very large amounts of gold thrown on
the market by European countries particularly
France.
It appears to me inadvisable that
there should be any marked divergence in the
price of gold in our two countries, for such
an alteration would lead to a change of
exchange rates and give leverage on which
deflationary forces could act. Whether a
simultaneous reduction in the price of
gold by all the leading Powers will have
deflationary results is a matter on which
I have not yet come to any certain conclusion.
At the present moment however a large
section of the public seems to have formed the
opinion that doflation would be the result of
any /
Regraded Uclassified
any change in the gold price, however universal.
Even if it were wrons, the existence of this
opinion would have to be taken seriously into
account, since what the public thinks is going
to happen is itself an important factor in
bringing events about. For these reasons I
think that in the absence of a demonstrable
crisis we should work to provent a teo early
stirring up of this matter at any rate until
recovery 1a better assured than at present.
It happens that at this moment I an
presented with an opportunity of taking public
action of a character calculated to restore
confidence. The heavy flow of gold from
France in the last ten days, while It has
not exhausted our buying resources, has
brought the latter down to a figure at which
I think it would be undesirable to leave
them without addition. I am accordingly
taking steps to submit to Parliament 8
proposal for increasing the renources of
the Exchange Equalisation account by a further
sum of two hundred million pounds and I shell
be making an announcement to this effect on
Friday /
Regraded Uclassified
17
Friday of this week. I feel sure that this
course will be welcome to you and accord
with your general line of policy.
I have one thing to add, I have noted
and I cordially agree with your earlier suggestion
for more personal contacts between Treasuries.
31 F. Philips who specially concerns himself
with currency questions will be in Canada in
September For private reasons and if it is
acceptable to you 1 should be very happy indeed
to arrange for him to to to Washington for
discussions with the United States Treasury
both upon the gold question and generally
upon problems of mutual interest to us both,
I take it that you do not contemplate any
need for any kind of major modification of
policy before that time,
the 24th, 1937.
18
RB
PLAIN
London
Dated June 23, 1937
Rec'd 3:45 P. m.
Secretary of State
Washington.
401, June 23, 6 p. m.
FOR TREASURY FROM BUTTER ORTH.
In general the City's reaction to the new French
Government is as follows:
One. he Advent of Chautemps is welcomed in the
belief that he will take a firmer line against the Extremists
than Blum did.
Two. The appointment of Bonnet who has here, among
other things a reputation for veniality is deprecated.
Three. The new French Government is expected soon
to resort to the much discussed expedients which will
enable it to obtain sufficient funds to tide over the
summer but B. financial crisis which will drag in the
political is expected to recur in the early autumn. The
foreign exchanges were relatively quiet during most of the
day but towards the close the pressure on the franc definitely
increased. The three months futures rate for example went
from
19
RB
-2-#401, June 23, 6 p. m. from
London
from 5 bid to 6-3/8 offered. It is announced that the
Bank of England bought gold to the value of sterling
5,145,259 computed at the old rate.
BINGHAM
ALC
Regraded Uclassified
20
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: June 23, 1937, 4 p.m.
NO.: 844
FROM COOHRAN.
This morning at 11 a.m. I visited the Bank of France.
Yesterday evening the franc had strengthened when the
New York market opened and the rate was favorable here
when business started, but it moved to the former level
of 110.89 after gradual weakening. The French control
came into the market when it reached 110.89 and has had
a fairly busy day. 211,000,000 French france were lost
by the control yesterday. It is the impression of my
market contact (at 3:30 this afternoon) that today's
pressure on the French control 18 at least equivalent to
yesterday's pressure.
I learned this morning in strictest confidence
that during the last two or three days of the Blum Govern-
ment the Caisse des Depots et Consignations was called upon
by the Treasury to cover the overdrafts with the Bank of
France which the Treasury had made. This faot reveals
clearly that
END SECTION ONE.
BULLITT.
EA:LWW
Regraded Uclassified
21
PARTIAL PARAPHRASE OF SECTION TWO OF NO. 844 OF JUNE
23, 1937, FROM PARIS.
when the Government want out of power the Treasury WHB
empty.
A banker tells me that at least three members of the
Blum Government last week converted their own sterling
balances into francs, in anticipation of the expected action
of the Blum Government, had it remained in power, to foroe
In some way holders of foreign currency balances in French
banks to convert them into franos.
AGENCE ECONOMIQUE today carries the text of the letter
dated June 14th in which Rist and Baudoin submit ed their
resignations from the Experts Committee which advised the
French stabilization fund. This journal said the letter
was being published to contradict various market rumors to
the effect that the two experts had asked the Government to
proceed to a devaluation and to a forced conversion of
Government securities. The letter makes no startling reve-
Lation but confirms information which I have previously sub-
mitted to the effect that these experts had on various
occasions given advice to the Government which the latter
had not seen fit to follow. The most significant point is
that the two experts realizing the seriousness of the
financial situation
BULLITT
MA:DJW
Regraded Uclassified
22
PARTIAL PARAPHRASE
Section three, telegram No. 844, June 23, from Paris.
and the exhaustion of the gold and foreign exchange re-
sources of the stabilization fund were of the opinion that
the new taxes which the Government anticipated seeking
would not be in themselves sufficient to solve the crisis
and recommended a general program which would include
"8 wider liberty for movements of the franc". Full text
by mail.
With the demand for sterling continuing this afternoon
the three months discount on the franc widened to six and
an eithth with heavy offers of france. Dollars less
offered against sterling in view of potential danger of
LEIPZIG affair to British as well as continental finances.
French rentes opened lower but finished about even or
& shade better than yesterday.
Yesterday and today I spoke with several bankers.
As the above evidence indicates, market and banking
circles are not favorably impressed by the new Cabinet.
It is considered by them to be too identical with and
devoted to the principles of the outgoing Government
to take the economic and financial measures necessary to
recovery or to inspire *** confidence. Auriol's shift to
the Ministry of Justice they consider as a continuing
threat to returning capital. They do not think as well
of Bonnet as do certain journals which expect great things
of
Regraded
23
-2-
him as a result of the close friendships he is reported to
have established with officials of the United States.
Brunet, a law professor and member of the Chamber Finance
Committee who has recently headed a committee to study
the reorganization of the French credit system, is
scheduled to be Bonnet's Under Secretary of Finance.
END OF MESSAGE
BULLITT
EA:DJW
Uclassified
169 IN
CORRESPONDENCE
DATE June 24, 1927.
CONFIDENTIAL FILES
TELEPHONE CONVERSATION WITH
L. 1. Knoke
BANK OF FRANCE.
I called Mr. Cariguel at 10:55 today. I mentioned as of
possible interest to his that we had actually opened an account on
our books for the Bussien State Bank with several million dollars
received for it from the market. In discussing the foreign exchange
market I referred to the fact that forward francs were under heavy
pressure and Cariguel replied that he was fully aware of that. I
read the Paris dispatch to him to the effect that Boanet intended to
stabilize the frane at the lowest legal limit without delay and to
raise last year's income tax by 20%, and asked him whether, in his
opinion, in view of the fact that Bonnet was reported in constant
telephone connection with the French Cabinet, it was likely that
some such steps would be taken before he returned to Paris next
Tuesday. Cariguel seemed to have discussed this possibility himself;
at least he answered that they, at the Bank of France, did not think
no. He added that, of course, if the situation developed very badly
they might let the franc drop to that limit anyhow, and that, after
all, they did not have far to go. As regards the truth of these re-
ports about Bonnet's intentions, Cariguel said he had no information
because those decisions lay entirely outside the Bank.
They were under great pressure today, he continued, worse
then they had been for a long time. Up to 4:20 P. B., their time, they
had done £5,000,000, with almost two hours more to go, which night well
add snother million pounds. I ventured the thought that be had recently
lost more then that, which Cariguel admitted, adding, however, that the
larger figures included their dollar operations. Securities markeds ware
fire in Peris today, Carigual said; the rentes were up from yesterday.
LUE:ENC
Regraded Uclassified
25
PARTIAL PARAPHRASE OF TELEGRAM
RECEIVED
FROM: American Embassy, Paris
DATE: June 24, noon
NO.: 851.
Paris American banker learned by the telephone from
his London office at 11:15 that Reuter's ticker had just
reported that France would leave the tripartite agree-
ment as from tonight or tomorrow morning.
At 11:30 this morning I talked with the Bank of
France. Yesterday's losses were slightly more than they
were the previous day (211,000,000 francs). I was told
by my friend that the market was opening very badly this
morning and that the control was in heavily at 110.90.
He was uninformed on the above London report but realizes
such rumors will add to the strain.
According to my market contact, there is "terrific"
pressure on the franc. The forward discount for three
months sterling widened to eight with heavy offers of
franc and no counterpart on market talk that further
devaluation of the franc is inevitable.
Inasmuch as the Chautemps Ministry is awaiting
Bonnet's return on Monday before completing its program
for presentation to the Chamber Tuesday, there will be
these several days
& betrer display of uncertaintly which promises to cost
Bank of France a considerable amount of gold.
Uclassifi
26
June 24, 1937.
9:20 a.m.
H.N.Jr:
I suppose you've gotten through Cecil DeMille
Mucill:
(Laughs) Well Cecil was in a - Cecil was in a case
WG had in court and he - ah - the effect of his case,
which wasn't fully brought out till yesterday, was
simply to wreck the operation of one section of the
law.
S.V.Jr:
Well, according to his statement in to-day's paper by
DeMille, he says that the court sided with him.
Mapill:
That's right, they did.
E.V.Jr:
What?
=
That's right, they sided with him all right. We
brought that out but most of the newspapers don't
seem to have gotten it. The Wall Street Journal did.
I think we may be - ought to make a further statement
about it this morning.
H.M.Jr:
Who were the other sixteen babies?
#:
I don't know who they are, Henry, there - they simply
took as - as Helvering said the 17 cases that are pend-
ing there for disposition now.
B.M.Jr:
Well now is to-day the day that you bring out Mr. Hearst
and Mr. Roy Howard?
s
I don't know whether Hearst is in it or not but Howard,
I think, is.
H.4.Jr:
But not Hearst?
N:
I don't know whether he is or not.
H.M.Jr:
Ah-ha - I see,
If:
I think the New York Sun and Howard are the two principal
performers to-day. What's that?
S.M.Jr:
Hello
Regraded Uclassified
27
2
Ms
Hello
B.N.Jr:
New York Sun, you think?
Mt
I think they're in it too, yes.
R.
I see.
M:
Helvering is going on to-day and - and I think we've
got the thing worked up in good shape. We had a meet-
ing of the staff yesterday afternoon and I think we're
prepared for whatever comes which I think will be a hot
session to-day but I think we'll get through alive.
How do you feel physically?
M:
A good deal better; I feel a little tired to-day but
then - ah - we came along all right yesterday; I'll
get through all right.
E.M.Jr:
You're going home tonight?
M:
If it's all right with you, I'd like to.
H.M.Jr:
I think it would be a good idea.
B:
Well I think I will; I'd like to get 8 couple of nights
of Connecticut air.
B.M.Jr:
I think it would be a good night - good idea.
M:
Yes,
H.M.Jr:
Ah - anything you want to ask me?
M:
No I don't think so - ah - ah - we've got our program
pretty fully worked out from beginning to end now - this -
the last one of these lawyers we wanted - Rogge
is here; he looks like a good man and Yntema is here and
I think we've got a good staff now and ready to go.
H.M.Jr:
Have you thought - do you take Paul up with you?
E:
Ah - I don't think he's been up so far, we've been
trying to iron the situation out in his case a little;
there's some difficulties there.
B.W.Jr:
In his case?
Mr
Yes.
28
- 3 -
B.K.Jr:
What is it - salary?
He
No, no, no - Just as to - in connection with his
privute law practice and how he could work that out.
N.A.Jr:
Oh - oh.
Do you - do you want to laugh this morning?
H.M.Jr:
Very mich.
M:
I think it will give you one. Ah - I had a talk
with Doughton and Harrison yesterday morning before
we started in - very friendly and so on - and I -
Harrison said he thought we ought to call a few
witnesses after this party was over with. I said,
"All right, if you do that then - why we'll appreciate
having our lawyers to examine them" and Doughton said,
"Well you know Crawford Biggs was around to see me the
other day and he'd like to be Counsel for the Committee
and to serve without compensation and I just want to
suggest that".
M.M.Jr:
Be did?
M:
(Laughs) And Harrison said, "Well now you know, Bob,
he was fired out of here as being the most incompetent
Lawyer in Washington. (Laughs)
H.2.2r:
Well I'll be darned. Well I'm disappointed in Doughton.
It
(Hearty laughter)
Il.M.Jr:
Why don't he get Harry Dougherty, held be a good lawyer.
11:
He'd be good; I don't know - I think Biggs would be
better though - I don't think you could pick a better
one than Biggs.
H.M.Jr:
I don't know.
K:
He'd be my horse.
H.W.Jr:
Well my candidate is Harry Doughorty. Is he still
alive?
23
4
Mr
I don't know but I think you're wrong; I back Bates
to the limit. The next man would be Rush Holland who
served under Dougherty; he's pretty nearly as good as
Biggs, but not so prominent.
H.M.Jr:
I suppose it's funny but it sounds disgusting to me,
M:
(Laughs) Well (Laughs) I wouldn't have told it to you
1f I thought it would worry you.
H.M.Jr:
It is funny but
M:
It amused me down to the ground.
H.M.Jr:
I'm surprised at and disappointed in Doughton.
the
Yes.
1.5.Jr:
But that's life.
at:
That's life, all right.
R.M.Jr:
Now anybody else want to talk?
M:
Well the handsome Mr. Taylor is over here looking as
if he'd like to talk.
R.M.Jr:
All right.
M:
No, he says he wouldn't.
H.M.Jr:
Well I'd like to talk to him.
M:
All right, Wayne,
Taylor:
Hello
H:M.Jr:
I hear you exhausted the French Stabilization Fund.
I don't think that's nice of you.
T:
That what ?
H.M.Jr:
That you exhausted the French Stabilization Fund.
Hello
T:
Oh that was last week.
H.M.Jr:
Oh that was last week.
- 5 -
30
T:
Yes.
B.M.Jr:
What about Von Zeeland?
T:
Well he's been down the river.
H.N.Jr:
Yes.
T:
And was entertained at the White House.
H.M.Jr:
Ah-ha. Otherwise?
T:
Ah - well all quiet so far. We've got - ah - their
financial guy is coming in this morning at 11.
H.W.Jr:)
To see you ?
T:
Yes. He had a letter to you from Bill Bullitt.
H.U.Jr:
From the Ambassador et large, eh?
T:
Yes.
H.M.Jr:
Ah-ha.
T:
But - ah - I'm - I'm pinch hitting for you.
H.M.Jr:
Good.
T:
I don't know what he wants to talk about.
H.M.Jr:
Ah - you'll - you'll be amused - I was just talking
to Kieley and Dr. Kung only has nine people traveling
with him that's coming to my dinner.
T:
Just nine, eh.
E.M.Jr:
That's all.
T:
Ah - one of them by the way is our old friend, Kuo
H.M.Jr:
Oh really?
T:
Yes, he was down here yesterday doing a little scouting.
P.M.Jr:
Ah-ha.
31
- 6 -
And - ah - I put in quite a little time with him.
Jrt
Ah-ha. Well why don't you send them all out to
Fort Knox.
T:
(Very hearty laughter)
H.M.Jr:
I haven't heard you laugh like that in a long time.
T:
(Still laughing) Well the shipments have been com-
pleted. Do you think that we better wait until they
start some more shipments here or let them see it just
the way it's - when it's asleep?
H.M.Jr:
Ah - - how - your wife and daughter - I saw them for
five minutes; they look fine; very happy; they left
here at 4 o'clock for Chicago.
T:
Well the other troops left last night and Dot, and the
dog, left this morning so
H.K.Jr:
You must feel quite lonesome.
T1
Very.
H.M.Jr:
Now how is foreign - how many gold bars to-day.
T:
(Aside to someone: "How many gold bars"?)
B.M.Jr:
Hello
T:
151.
H.M.Jr:
I like that chart that Archie sent me. It's very
encouraging.
T:
Good.
U.M.Jr:
151 bars.
T:
Yes.
H.M.Jr:
All right. Everything quiet?
Regraded Uclassified
32
- 7 -
T1
Ah - yes, except - ah - the - ah - the boys are just
finding out that there's something wrong with France.
That broke out last night but not I mean that's nothing
new to you.
H.M.Jr:
Anything you want to ask me?
T:
Ah - not at the minute.
E.V.Jr:
Fine.
T:
I - Jake and Win worked all day yesterday; I think we're
coming along pretty well and they're leaving about noon
to-day
U.M.Jr:
Good.
T:
and will be back Monday.
B.M.Jr:
Fine. Now is - is Bell there or not?
T:
Yes.
H.M.Jr:
Let me talk to him.
Bell:
Good morning.
B.2.Jr:
Hello Dan. How - how are the tax figures?
B:
Ah - right - right on the dot; our estimate up to night
before last was 496 and the returns are 4978.
R.M.Jr:
Too good.
B:
We're a little - a million eight over.
IMP:
How are you feeling?
B:
Ah - I'm feeling pretty good. I'm on my way to the
White House in a few minutes to get some decisions on
the War Department bill.
H.M.Jr:
Ah - well
B:
I don't think it's serious.
Regraded Uclassified
33
- 8 -
H.M.Jrt
What?
I don't think they're serious, although the President
said he would veto the non
military bill if
they increased the second
H.W.Jr:
Yes.
B:
But I think that they've increased it in a way that we
probably can control it.
H.M.Jr:
Well he told me Monday at lunch that he would not veto
it; I asked him.
B:
He would not.
11.4.Jr:
No.
19
:
I see - well he's (laughs) changed his mind.
B.M.Jr:
What?
B:
He changed his mind.
H.N.Jr:
He said he thought they could handle it out of the
relief money.
B:
Yes, well they've got it in such shape that I think
we can handle it and my recommendation would be that
he not veto it.
Ah - Dan - in the paper it says 340 million for Public
Works - ah - how much of that is - is over the budget?
E
Ah - it would be about 40 million dollars over the
funds available - now available and how they arrived at
it is Hackett submitted to the committee a list of
projects totaling 132 million for which he has 95
million dollars in funds available.
H.M.Jr:
Yes.
B:
So they added the 37 million to complete the projects
and 2 million dollars for administrative expenses and
all those projects are not good and I expect maybe we
can cut that 132 million in half.
H.M.Jr:
I see.
Regraded Uclassified
- 9 -
34
B:
But the Hayden amendment is now in the relief bill -
is the worst one.
H.M.Jr:
Yes.
B:
That makes about 50-60 million dollars more money
available out of the RFC.
M.H.Jr:
Are you going to tell the President that?
-
I've already told the President and I've been to the
Capitol trying to get them to straighten it out
H.M.Jr:
Ah-ha.
B:
and asked them if they won't insert in the Relief
Bill the House Bill
H.M.Jr:
Ah-ha.
P:
and - now they may have difficulty doing that.
8.9.Jr:
I see.
B:
But - ah - I think if they can do that they will limit
the available funds to about 300 million dollars which
is about - ah - 17 or 18 million dollars more than the
funds now available.
I.H.Jr:
Ah-ha.
B:
So I don't think that would hurt us. And then, too,
we've got some control - if they changed their amendment,
to give Jesse Jones discretion in the purchase of
securities which he didn't have in the Hayden amendment
and if they give Jesse control of that why he won't
purchase all the different securities
R.M.Jr:
I see.
B:
and Viner won't get the money.
H.M.Jr:
I see.
B:
So I think it's under control if they'll do as we
ask them.
10 . .
35
H.M.Jr:
How is McReynolds Housing Bill.
B:
Funny - you'll have to ask Mac about that. I've been
sitting back taking it easy in the hopes that it would
fail somewhere along the line. He 's here. Do you
want to talk to him?
H.M.Jr:
Just say "Hello" to Mac.
MeR:
Good morning, Secretary.
H.M.Jr:
Hello Mac. Ah - Mac will you tell Joe Murphy that the
information which he sent me about the Roosevelt wedding
was just what I wanted and I want to thank him.
WeR:
Wait a minute.
I.M.Jr:
Hello.
McR:
Ah - ah - now I can hear you better.
H.M.Jr:
What?
McR:
I say I didn't hear you when you spoke before.
H.N.Jr:
I asked Joe Murphy to send me some information on
train schedules.
McR:
Yes, he showed me the memorandum he sent.
H.E.Jr:
And it's just exactly what I want and I wish you'd
thank him.
McR:
Yes, all right, I'll tell him.
H.M.Jr:
That's all I've got.
MCR:
All right,
H.M.Jr:
Mac, keep looking over my mail and keep it rolling, please.
McR:
Yes, we're doing that. Nell is bringing in everything
that comes in.
H.M.Jr:
I'll not call again to-day but if there's anything that's
really important why they can get me.
36
- 11 -
MeR:
O.K. Everything - everything is very quiet. I don't
think there's any occasion to bother you.
H.M.Jr:
The best time to call me - I'm going to talk daylight
saving
McR:
Yes.
H.M.Jr:
is a quarter of one
McB:
Yes.
H.M.Jr:
or at four o'clock.
McH:
A cuart of one or four o'clock; that would be a quarter
of two or quarter of twelve or three here.
H.M.Jr:
Good.
McR:
I've got it straight.
Magill:
I had to help him out though.
H.M.Jr:
What?
Magill:
I say I had to help him out and coach him.
H.M.Jr:
What?
Mch:
(Laughs) Ah - Ros is boasting.
H.M.Jr:
What's that?
McR:
I say Ros is just boasting that's all.
H.M.Jr:
What's he saying?
Mell:
He said he had to help me out; he had to coach me.
S.M.Jr:
Oh. Does Oliphant want anything?
McR:
Herman says he doesn't want a thing; he's perfectly
happy.
H.M.Jr:
Goo d for Herman. Well thank you all.
McR:
Goodbye.
Magill:
Good luck - goodbye.
37
June 24, 1937.
12:30 p.m.
H.M.Jr:
he refused to come across.
Taylor:
No this is just international.
H.W.Jr:
Oh.
T:
Trentham came in with a message from - to you from
the Chancellor - ah - which is
H.V.Jr:
Simple Simon?
e-
What?
0.M./r:
Simple Simon?
2:
Yep.
Yep.
And - ah - there are certuin aspects of it which they
would like to have our comment, if any,
H.M.Jr:
Yes.
T:
an - by 4 o'clock this afternoon.
H.N.Jr:
Well (laughs) I've started my week-end.
T:
Yes, they realize that.
E.M.JP:
Go ahead - shoot.
T:
Ah - I think I'll read it to you.
H.M.Jr:
Go ahead.
:
It's - ah - it's fairly long but there's only one
point in which we're called upon to comment on, I
think, at this time.
E.M.Jr:
Am I on the loud speaker?
T:
You are.
B.M.Jr:
Who's there?
38
2 -
Ah - Lochhead, Viner, Reifler, Haas, White, Miss Chauncey,
Opper and Taylor.
My golly, haven't you got anybody there from Public
Health?
No (1aughs)
All right.
Ah - background being emphasize the confidential nature,
etc.
All right, tell Chauncey not to tell anybody.
Yes. "Mr. Mallett has conveyed to me the message which
you intrusted to him and which I was very glad to receive".
Yes.
"You will appreciate that I have been so short a time in
my present office that I've had really no opportunity to
form a considerate judgement on many of these difficult
questions, but I am convinced that the most important
matter 15 that there should be no setback in progress
towards reviving confidence".
Just a minute - T. want to close the door - the children
are msking so much noise - just a minute - hello
Yep.
All right. I got "confidende".
Yes.
"In both our countries there has been
remarkable increase, in the last two years, in the
national income and the spending power and welfare
of the people and in the volume of employment".
H.K.Jr:
Sounds like Harry Hopkins.
Yes. "It is worth the trouble and sacrifice to insure
that this progress which has by no means reached its
limits should continue and I am convinced that that it
can continue as a result of our clòse cooperation. As
regards gold coming out of hoards, we cannot help ourselves
no more than it has - than it would always seem that
hoards would gradually be dispersed when the hope of a
further rise in the price of gold had disappeared. The
increase in the output of new gold and the threat of a
Regraded Uclassified
39
- 3 -
still further increase later may present the world
with a troublesome problem but It is not a problem
which would, I think, have caused much anxiety at
this time had it not been for the further very large
amounts of gold thrown on the markets by European
countries, particularly France. It appears to me
inadvisable
B.G.Jr:
A little bit louder please.
It appears to me inadvisable that there should
be any marked diversions in the price of gold in our
two countries for such an alteration would lead to
a change of exchunge rates and give leverage on which
deflationary forces could act."
E.K.Ap:
What kind of Forces?
Deflationary.
11.0.Jr:
Yes.
"Whether a simultaneous reduction in the price of gold
by all the leading powers would have a deflationary
result is a matter on which I have not yet come to any
certain conclusion. At the present moment, however,
a large section of the public seems to have formed the
opinion that deflation would be the result of any
change in the gold price, however universal. Even 1f
it were wrong, the existence of this opinion would have
to be taken seriously into account since what the
public thinks is going to happen is itself an important
factor in bringing events about. For these reasons I
think that in the absence of a. demonstrable crisis
!!
H.M.Jrs
A what?
T1
"in the absence of a demonstrable crisis
Yes.
TT
we should work to prevent a too early stirring
up of this matter at any rate until recovery is better
assured than at present. It happens that at this
moment (and this is the part where they want comment on)
I am presented with an opportunity of taking public
action of & character calculated to restore confidence.
The heavy flow of gold from France in the last ten days,
where it has not exhausted their buying resources, has
brought the latter down to a figure at which I think
Regraded Uclassified
40
4 -
it would be undesirable to leave them without
",
H.W.Jr:
Leave them what ?
T1
Without
T:
"I am accordingly taking steps to submit to Parliament
the proposal for increasing the resources of the exchange
equalization account by a further sum of 200 million
pounds and I shall be making an announcement to this
effect on Friday of this week. I feel sure that this
course will be welcome to you and accord with your
general line of policy. I have one thing to add. I have
noted
1.1.Jr:
Have or add?
T:
Add.
B.M.Jr:
A-d-d?
T:
That's it.
H.A.Jr:
Yes.
T:
"I have noted, and I cordially agree with your earlier
suggestion for more personal contacts between Treasuries.
Sir Prederic Phillips, who especially concerns himself
with currency questions, will be in Canada in September
for private reasons and, 1f it is acceptable to you, I
should be very happy indeed for him to go to Washington
for discussions with the United States Treasury, both
upon the gold question and generally upon problems of
mutual interest to us both. "
E.M.Jr:
May I interrupt you there?
:
Yes.
R.V.Jr:
I suggested that Phillips come over here about a month
ago.
T:
Yes.
H.M.Jr:
And Butterworth - "why it's perfectly ridiculous - they
couldn't - why that's the most ridiculous suggestion
he'd ever heard.
41
- 5 -
is
It isn't so ridiculous to-day.
U.K.Jr:
Well I suggested that over a month ago.
2:
Yes, I remember it.
E.K.Jr:
What?
I remember it well.
9,4.Jr:
Yes. Miss Chauncey might look it up over one of the
telephone conversations for me. But I remember dis-
tinetly suggesting that and Butterworth just laughing
about it.
T:
I remember it.
B.N.Jr:
Continue.
T:
upon problems of mutual interest to us both, I
take it that you do not contemplate any need for any
kind of major modification of policy before that time",
End of message.
H.M.Jr:
Well - ah - is there any doubt with anybody in the room
that - ah - where do they say they want a comment?
T:
The comment has to do with - ah - Friday's proposal.
S.M.Jr:
Well I mean how - I - I - didn't hear that in the
message.
T:
Well that was developed in conversation.
R.S.Jr:
Oh.
T:
That - ah
H.S.Jr:
Who came down?
T:
What?
H.M.Jr:
Who came down?
T:
Trentham came down.
H.M.Jr:
Yes.
T:
And - ah -
Regraded Uclassified
42
6 I 1
H.M.Jr:
Well - talking in my own mind - there's only one
answer - that we're delighted to see that the -
that they're going to get this increased authority.
Any difference of opinion? Have you worked out
something?
T:
Ah - no, we sent this to you right away, see?
H.K.Jr:
Oh.
T:
And wanted to get your ideas before we tried to
draft a message.
B.d.Jr:
Well - ah - I don't want to be called back again
on it.
T:
Yes.
E.M.Jr:
But I don't know whether the word is "delighted" - but -
gratified
T:
Well we - just offhand, why we're thinking of - ah -
we could say, if we do think so, that it is a very
constructive move and we think it should have a
good effect.
".M.Jr:
Well, of course, I'm not sure of that, see?
::
Yes.
H.W.Jr:
Because I think the people will be shocked to think
that they need additional authority but - ah - ah -
I'd simply - let me just think a minute.
Mt
Yes.
H.V.Ir:
Ah - has Viner or Reifler got a word to suggest?
T:
There's one thing in particular and I don't know
whether that is in this particular case - ah - I
don't think that it's necessary t take that up.
H.M.Jr:
About Fisher?
T:
No, this has to do with the last sentence in terms
of September.
H.M.Jr:
Oh, well I don't want to answer that now.
Regraded Uclassified
43
2. I I
T:
Yes, well that's what I thought. That we are to - we
are to indicate that
T.M.Jr:
Well I would say - hello
Tt
Yes.
N.V.Jr:
What I would say is this. I wouldn't give them
anything in writing. You could say that I'm away.
I don't know what they told the President - resting -
oh, till Monday - hello
T:
Yes.
B.H.Jr:
That you telephoned and that - ah - I haven't got the
message before me so I can't read it but that the
thought that they're going to extend the authority of
their Stabilization Fund by 200 million dollars is very
pleasing to me. Now what are the heads doing around
there - nodding or which way? And I'll take the rest
of the message.
T1
Ah - Dr. Viner isn't moving his one way or the other
and Dr. White isn't moving his one way or the other.
The rest of them nodded.
What's Reifler doing?
T:
He - I thought he nodded but now he's - he's (laughs)
gone still. Do you want to talk to them?
B.M.Jr:
No I don't. I mean I'm delight to talk but I can't
talk to each person.
7:
Yes.
H.N.Jr:
But something along that line. I mean I want to indicate
that I'm away and that's why it don't
the
rest of us.
T:
Yes, they - they know that.
H.M.Jr:
Well I just would say that. You don't have to deal
with any great problem - simply that they're going to
extend the Stabilization Fund - fine - we're delighted
to hear it - - that's all - work it out amongst you - I'll
be satis
Regraded Uclassified
44
- 8 -
T:
Yes, and then on - ah - as far as the rest of it goes
why you will answer it upon your return.
H.M.Jr:
I'll be back on Monday and I'll take it under con-
sideration.
T:
Yes.
B.H.Jr:
See?
T:
I get it.
H.V.Jr:
But - ah -
T:
I was delighted to have the news - ah -
H.M.Jr:
I wouldn't - use "pleased" - I wouldn't say "delighted".
T:
Yes, "Very pleased to received the news" - you don't
want to say whether it's constructive or not? What?
H.M.Jr:
I don't care.
T:
Viner says, "Yes" - White says, "No". Reifler says, "Yes".
H.M.Jr:
Who?
T:
Reifler and
H.2.Jr:
I'd simply say I'm pleased to receive the news.
T:
Yes,
H.M.Jr:
See?
I think it's enough.
T:
nh - the boys don't think so; that you ought to make
a - at least a comment along the line that it is - it
is constructive.
H.M.Jr:
All right - listen - there are five or six of you;
you've all got heads
T:
Yes, what?
H.M.Jr:
I've got complete confidence
T:
Yes.
Regraded Iclassifi
45
- 9 -
H.M.Jr:
fix it up and you don't even have to call me
back.
T:
Ah - you say not to call you back unless we disagree.
H.M.Jr:
No, I don't want you to call me back; you've got to
agree.
T:
All right.
H.M.Jr:
No.
T:
We'll agree.
H.M.Jr:
As my 14 year old daughter says, I'm in a very peculiar
mood. I says, "What's that, Joan"? "Things just don't
seem to matter to you, Daddy".
T:
(Laughs)
H.H.Jr:
And the mood I'm in one word seems very unimportant. Yes
I'm pleased. Whether you say it's constructive or
forward-looking
T:
Yes.
H.M.Jr:
it's immaterial.
T:
Yes, I guess not.
Note:
(Conversation aside with the group. Taylor to group:
"Well he says he doesn't want to argue about the
word - that he is pleased and let us work it out -
yes - yes).
T:
Ah - O.K. we'll work in some wording there.
H.M.Jr:
I would say this so they don't think there's any doubt,
see.
T:
Yes.
H.M.Jr:
I would say that of course, we'd be delighted to received
Mr. Phillips, see?
T:
Phillips, yes.
Regraded Uclassified
- 10 -
46
H.M.Jr:
See?
T:
Yes.
R.V.Jr:
And I don't want you to think that you have to think
that over.
T:
Oh no.
tell
R.M.Jr:
I would/them that, of course, we'd be delighted to
receive Mr. Fisher - Phillips, is it?
T:
Yes.
H.Y.Jr:
See?
T:
Yes. Include - include that in the message.
8.M.Jr:
Delighted to learn that Mr. Phillips is going to be
in Canada and that I look forward to seeing him.
T:
Yep - yep.
H.M.Jr:
See?
T:
Right.
H.M.Jr:
I mean I'd be enthusiastic about that.
T:
Yes.
H.M.Jr:
And - ah - ah
T:
O.K.
H.M.Jr:
Ah - no, I think that that's a very frank message
and I think they ought to be very much satisfied
with it.
T:
I do too. Ah - it's going right along.
H.M.Jr:
Ah-ha.
T:
Do you want me to get - ah - - ah - get Feis in on it?
H.M.Jr:
Yes, please.
T:
Right.
Regraded
- 11 -
47
H.M.Jr:
And the exchange is all right.
T:
Ah - is dead.
H.M.Jr:
What?
T:
Dead but a little more pressure on the franc.
H.M.Jr:
Anybody hear how the tax thing went?
T:
Nope.
H.M.Jr:
Let me just say "Hello" to Viner and Reifler just to
see what they still sound like.
Viner:
Hello
H.M.Jr:
Hello Jake?
V:
How are you, Henry?
H.M.Jr:
Oh getting along pretty well.
V:
Well I hope to see your Philippines on Monday?
H.M.Jr:
Well I hope so - ah - I think we're fortunate that
we've got a week sort of to think things out.
V:
Yep.
H.M.Jr:
These things never come out of a clear sky.
V:
No, but I think they're moving right.
H.M.Jr:
They're moving all right?
V:
Yes.
H.M.Jr:
All right, get a little rest yourself.
V:
All right, I'm leaving this afternoon.
H.M.Jr:
Good.
V:
Be back Monday morning.
Regraded Uclassified
48
- 12 -
H.M.Jr:
That's right.
V:
Here is Reifler.
Reifler:
Hello
11.M.Jr:
Hello Reifler?
R:
I think it a time for congratulation.
H.M.Jr:
What?
R:
And I plead I think it's a time for congratulations.
M.M.Jr:
On what?
R:
This message from the British.
H.M.Jr:
Oh you think SO.
B:
I think it's moving along just the way we wanted it.
H.M.Jr:
It's a nice message.
R:
I think it's an awfully nice message.
H.M.Jr:
And it - it shows me that Sir John Simon wants to
play ball just as much as Chamberlain did.
R:
Yes, and it's quite an advance in that sense.
H.M.Jr:
What?
R:
It's quite an advance in that sense.
H.M.Jr:
I don't hear you.
R:
It's quiet an advance.
H.M.Jr:
Weren't you terribly amused what happened to Cochran
when he went over there Monday?
R:
Wasn't it funny.
H.M.Jr:
What?
Regraded Uclassified
13 I I
49
R:
(Laughs) I can just imagine it.
R.M.Jr:
And poor old Cochran - I'll bet you he's still got
his jaw on his chest not knowing what happened yet.
R:
(Still laughing) And he'll find out soon now.
H.M.Jr:
I think it's terribly funny.
R:
So do I.
H.M.Jr:
You're going away
R:
I'm going away this afternoon - I'll be back Monday
morning.
H.M.Jr:
All right, goodbye.
R:
Goodbye. Anybody else?
H.H.Jr:
I'll just talk to Miss Spangler please.
Note:
Clicking receiver for Miss Spangler.
H.M.Jr:
If you hang up I think she'll come on.
0:
Operator.
Chauncey:
Will you talk to the Secretary; he wants you.
0 :
All right.
Regraded Uclassified
50
June 24, 1937
Dear Trentham:
I am enclosing a message which I
wish that you would be good enough to
transmit to the Chancellor of the Exchequer.
Yours sincerely,
(Signed) Vayab 0. Taylor
Assistant Secretary
Mr. B. N. R. Trenthem
The British Embassy
Washington, D. C.
Regraded Uclassified
51
Assistant Secretary Taylor telephoned the Chancellor's
mesage to Secretary Morgenthau who is absent from Washington
until Monday. Secretary Morgenthau asked Mr. Taylor to thank
Sir John Simon for his cordial mornage and to say that he will
communicate further when be has had an opportunity to consider
the full text.
Secretary Morgenthau asked Mr. Taylor, meanwhile, se
inform the Chanceller that be is glad to hear of the proposed
increase in the resources of the Exchange Equalisation Account.
In his opinion this action is well calculated to restore confidence.
Secretary Morgentham is delighted to hear of Sir. P. Phillips'
contemplated visit and looks forward to discussing our mutual
problems with him.
Regraded Regraded Uclassified Uclassified
52
JR
GRAY
London
Dated June 24, 1937
Rec'd 2:15 p.m.
Secretary of State,
Weshington.
405, June 24, 7 p.m.
FOR treasury FROM butterworth.
The city was somewhat surprised by the violent flight
from the franc which took place today. In London the
three months forward franc was at a nine point discount;
one month forward at 6-} discount. City hears from several
Paris sources that it is expected there that the franc
will be "unpessed" by Monday. It is not understood here
how this can be brought about without further legislation
or why it should take place before the new Minister of
Finance reaches Paris.
I had a word with the British Treasury who seemed
surprised by the sudden turn of events and whose only
comment was that the market appeared to share their opinion
of Bonnet. The British Treasury states they will communicate
with me tomorrow to fix a meeting.
BINGHAM
CSB
53
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris
DATE: June 24, 5 p.m.
NO.: 854
FROM COCHRAN
This afternoon both forward and spot franc continued
to be offered heavily. My market contact estimated that
the French stabilization fund had perhaps yielded between
five and six hundred million francs by 3 p.m. Yesterday
the Paris-American Bank contracted 57 and today 96 bars of
gold on the London market for shipment to the Belgian
National Bank. There was an increase today in French
rentes from 2.40 to 2.70. Principally this rise is attri-
outed to speculative buying on the prospect that the franc
may be destabilized.
The Bank of France statement as of June 17, as confi-
dentially anticipated, showed no loss of gold, although
we are aware that the fund took gold from the bank each
day irom June 14 to 17 inclusive and has BO continued
since that time. No new advances by the bank to the state
were shown by the statement.
END OF SECTION ONE
BULLITT
54
(-) apparent omission
SECTIONS TWO AND THREE.
There was 8 reduction in the Treasury's deposit to 43,759,000
francs, which as I have reported previously, has since been
exhausted and the Treasury has been dependent on the Caiese
des Depots et Consignations to cover its overdrafts at the
Bank of France.
Financial writers are commencing to realize that the
financial problem remains the same, even though the change
in government has taken place without endangering social
or political peace. Presumably, the more gold that is lost
between now and (*), the greater will be the pressure upon
the new government to take effective action. Either au-
thorization for new borrowing at the Bank of France or
steps toward definitely stabilizing and taking the profite
thereirom are generally expected since the treasury is empty.
Press reports indicate that a decree applying the 40 hour
legislation to the hotel industry will appear shortly,
thus indicating that the new government in the face of
a hotel strike is pursuing the same tendency as did the
Blum Government of broadening the application of the
social legislation.
The New Under Secretary of the Treasury, Brunet, took
charge when Auriol left yesterday. Boissanger, a capable
Treasury career official who served some time as head
of the Movement of Funds Section, has been chosen by
Bonnet as Chief of his Cabinet. It 16 hoped in some circles
that Bonnet will, as on previous occasions, be disposed to take
the technical advice of Professor Rist, his friend and counsellor
END OF MESSAGE
BULLITT
Regraded Uclassified
55
Assistent Secretary Taylor telephoned the Chancellor's
message to Secretary Morgesthau was is absent from Washington
until Monday. Secretary Morgentham asked Mr. Taylor to thank
Sir John Simon for his cordial message and to say that be will
communicate further when he has had an opportunity to consider
the full tert.
Secretary Morgenthau asked Mr. Taylor, meanwhile, to
inform the Chanceller that be is glad to hear of the proposed
increase in the resources of the Exchange Equalimation Account.
In his opinion this action is well calculated to restore confidence.
Secretary Morgenthau is delighted to hear of Sir. F. Phillips'
contemplated visit and looks forward to discussing our mutual
problems with him.
Regraded Uclassified
56
Excerpt:
June 24/37
12:30 p.m.
H.M.Jr:
Who came down?
Taylor:
Trannop (?) came down.
R.E.Jr:
Yes.
T:
And
B.V.Jr:
Well - talking in my own mind - there's only one
answer - that we're delighted to see that the -
that they're going to get this increased authority.
Any difference of opinion? Have you worked out
something?
::
Ah - no, we sent this to you right away, see,
E.V.Jr:
Oh.
T:
And wanted to get your ideas before we tried to
draft a message.
H.V.Jr:
Well - ah - I don't want to be called back again
on it
1:
Yes.
H.M.Jr:
but I don't know whether the word is "delighted"
but - gratified
Magill:
Well we - just offhand, why we're thinking of - ah -
we could say, if we do think so, that it is a very
constructive move and we think it should have a
good effect.
T.M.Jr:
Well, of course, I'm not sure of that, see?
V:
Yes.
E.V.Jr:
Because I think the people will be shocked to think
that they need additional authority but - ah - ah -
I'd simply - let me just think a minute.
M:
Yes.
Regraded Uclassified
57
- 2 -
N.E.Jr:
Ah - has Viner or Reifler got a word to suggest?
There's one thing in particular and I don't know
whether that is in this particular case - ah - I
don't think that'it's necessary to take that up.
E.M.Jr:
About Trentham?
No, this has to do with the last sentence in terms
of September.
Oh, well I don't want to answer that now.
Yes, well that's what I thought. That we are to - we
are to indicate that
N.V.Jr:
Well I would say - hello
Yes.
0.8.Jr:
What I would say is this. I wouldn't give them anything
in writing. You could say that I'm away. I don't know
what they told the President - resting - oh, till Monday -
hello
Yes.
That you telephoned and that - ah - I haven't got the
message before me so I can't read it but that the thought
that they're going to extend the authority of their
Stabilization Fund by 200 millión dollars is very pleasing
to me. Now what are the heads doing around there -
nodding or which way? And I'll take the rest of the
message.
Ah - Dr. Viner isn't moving his one way or he other
and Dr. White isn't moving his one way or the other.
The rest of them nodded.
S.M.Jr:
What's Reifler doing?
He - I thought he nodded but now he's - he's (laughs)
gone still. Do you want to talk to them?
Regraded
58
Message from Chancellor of the Exchequer for
Secretary of the Treasury.
VERY CONFIDENTIAL,
Mr. Mallet has conveyed to me the message
which you entrusted to him and which I was very glad
to receive. You will appreciate that I have been
30 short a time in my present office that I have had
really no opportunity to form a considered judgment
on many of these difficult questions. But I am
convinced that the most important matter is that
there should be no set-back in progress towards
reviving confidence. In both our countries there
has been remarkable increase in the last two years
in the national income, in the spending power and
welfare of the people and in the volume of employ-
ment. It is worth the trouble and sacrifice to
ensure that this progress which has by no means
reached its limits should continue and I am convinced
that it can continue as a result of our close
cooperation.
As regards gold coming out of hoards we
cannot help ourselves no more than it was always
certain that hoards would gradually be dispersed
when the hope of a further rise in the price
of gold had disappeared. The increase in the
output of new gold and the threat of a still
further/
a , I
59
further increase later may present the world with
a troublesome problem, but it is not a problem
which would I think have caused much anxiety at
this time had it not been for the further very
large amounts of gold thrown on the market by
European countries particularly France.
It appears to me inadvisable that there
should be any marked divergence in the price of
gold in our two countries, for such an alteration
would lead to a change of exchange rates and give
leverage on which deflationary forces could act,
Whether a simultaneous reduction in the price of
gold by all the leading Powers will have deflationary
results 1s a matter on which I have not yet come to
any certain conclusion,
At the present moment however 8. large
section of the public seems to have formed the
opinion that deflation would be the result of any
change in the gold price, however universal. Even
1f it were wrong, the existence of this opinion
would have to be taken seriously into account, since
what the public thinks is going to happen 1s itself
an important factor in bringing events about. For
these reasons I think that in the absence of B
demonstrable crisis we should work to prevent a
too early stirring up of this matter at any rate
until recovery is better assured than at present.
It happens that at this moment I am
presented with an opportunity of taking public
action /
Regraded Uclassified
-3-
60
action of a character calculated to restore
confidence. The heavy flow of gold from France
in the last ten days, while it has not exhausted
our buying resources, has brought the latter down
to a figure at which I think it would be undesirable
to leave them without addition, I am accordingly
taking steps to submit to Parliament a proposal
for increasing the resources of the Exchange
Equalisation account by a further sum of two
hundred million pounds and I shall be making an
announcement to this effect on Friday of this
week. I feel sure that this course will be welcome
to you and accord with your general line of policy.
I have one thing to add. I have noted
and I cordially agree with your earlier suggestion
for more personal contacts between Treasuries,
Sir F. Philips who specially concerns himself
with currency questions will be in Canada in
September for private reasons and if it is
acceptable to you I should be very happy indeed
to arrange for him to go to Washington for
discussions with the United States Treasury both
upon the gold question and generally upon problems
of mutual interest to us both. I take it that you
do not contemplate any need for any kind of major
modification of policy before that time.
June 24th, 1937.
Regraded Uclassified
LIFICIAL COMMUNICATIONS TO
61
THE SECRETARY OF STATE
WASHINGTON, D. D.C. c.
DEPARTMENT OF STATE
WASHINGTON
June 24, 1937
In ragly refer to
34: 801.51/2757
Strictly confidential
Ky dear Mr. Secretary:
I believe you will be interested in the
information contained in the enclosed copy of &
confidential telegram which has been received from
the Mubsesy in Moscow on the subject of the Soviet
old industry.
Sincerely yours,
Enclosure:
Parsphrase of
telegram as
stated above.
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
Regraded Uclassified
DEPARTMENT OF STATE
DIVISION (
WE
BUREAU (
ENCLOSURE
TO
LETTER DRAFTED 6/23
ADDRESSED TO
Secretary of Treasury.
Regraded Uclassified
62
PARAPHRASE OF TELEGRAM
FROM:
American Embassy, Moscow.
TO:
Secretary of State, Washington.
DATED:
June 22, 1937, 11 P. m.
NO.:
127.
lirictly confidential
It is believed that the Department would be
interested, in view of the recent activity in the
bullion market in London end the persistent rumors
confirming Soviet gold movements, to learn that the
Embessy has ascertained from & reliable source that
durine the past six to ten months production of Soviet
old has been diminishing rather than increasing. This
Secrease is attributed to the fact that the gold industry
In garticular and the mining industry in general have
been in the past, and still are, in E confusing state
due to the executions, arrests and removels of competent
engineers and specialists In these industries. From
the seme source it is reported that Serebrovsky, the
present Vice-Commissur for Heavy Industry in charge
of the non-ferrous metals section and previous head
of the gold trust is again under attack and it is
believed likely that he will be removed from his
post.
HENDERSON.
Regraded Uclassified
63
FEDERAL RESERVE AMR
JF NEW YOWL
CORRESPONDENCE
DATE June 25, 1987.
CONFIDENTIAL FILES
SueLDO
TELEPHONE CONVERSATION
L. U. Kanke
WITH BANK of HEGLAND.
Mr. Bolton called at 9:50 8. a. to tell me, as be said,
of the plan to increase the British foreign exchange equalization
fund by £200,000,000, of which 19 would read in this morning's papers.
There vas going to be an open debate in the House on Monday; it was
expected the motion would go through and the Chancellor would probably
zake a statement along the lines of his previous statements with the
additional comment that the present step was necessary to maintain
the British obligations under the tripartite agreement.
The position in Peris, Bolton continued, showed no improve-
sent. is a matter of fact, if snything at all, it was very much worse.
The amounts the French were losing daily were growing and were now quite
fentastic. Today they had already, by 2 P. m., done something over
£5,000,000. There was an enormous mount of speculation going on with
three-months franes offered at a 10 franc discount (that is about 20%
per annum); on france for Monday against Tuesday, they ware giving away
one frane (300% per ecous). The situation was thoroughly bad and it
was difficult to say what vas going to happen. There were no news from
Paris; the Bank of France did not know what was being planned. Bolton
attached no importance to the repeated TUMORS that Bonnet would propose
immediate devaluation to 125 france to the pound. As for as the Paris
market was conserned, it was quise obvious that 1t was not gasbling on
such a devaluation but rather on the flooting frame. That me the only
way to explain present forward quotations. I asked whether he thought
that definitive stabilization at the 45 milligrom level would any lenger
be a final soletion and Bolton replied he was quite sare 10 would not
Regraded Uclassifie
64
FEDERAL RESERVE BANK
OF NEW IC 35
ORRESPONDENCE
DATE June S5, 1937.
CONFIDENTIAL FILES
TELEPHONE CONVERSATION
L. 1. Knoke
e
NITH BANK OF ENGLAND.
- 2 -
because the market use BOW too much under the control of NO GROTHOUS
speculation which could no longer be frightened away by any such
thing as 8 maximum or minimum legal level. Be could not name any of
these speculators by name, he said, but thought that there were more
Frenchmen mong them then anybody else although the selling now
seesed to come from every quarter. The turnover in Paris at present
was much bigger than that in London.
Dollars bed been and continued to be strong against starling.
So far, they had sold $7,000,000. The Yokohame Specie Bank also had
been in the market as a seller. I sentioned to Bolton the information
Araki had given us two days ago about the contemplated shipment of a
further 50,000,000 yes and sbout the reasons for these shipments.
Bolton thought that the reasons advanced were convincing; the Japanese
credit facilities in Lendon had been a little strained and the Japanese
were probably enxious to pay off some of their more pressing needs.
I nantioned that the Russions had actually opened en account
with us, which Bolton thought should help the situation. He added that
they had found the Russians quite businesslike; that a month or 00 ago
they had fixed up a temporary arrengement under which they had taken
most of the Russian gold off the market. The Bussians now had "am 10-
count of corts" with the Bank of Nagland, in which they left seas funds
from time to time, if they had my. The shole thing could not, however,
be called & working central bank arregement. Nevertheless, it helped of
keep things in working order. I inquired about Bussion gold - the my
to Loaden and in the Lenden nerket, mé Belter replied that after the
Regraded Uclassified
FEDERAL RESERVE BANK
is
OF NEW YORK
FICE CORRESPONDENCE
DATE June 25, 1957.
CONFIDENTIAL FILES
SUBJECT: TELEPHONE CONVERSATION
L. E. Knoke
UITH BANK OF HUGLAND.
- 3 -
original £30,000,000 had arrived in London there me now nome on the
way coming as far as he knew, nor did the Bussions have any with any-
body in the London market, the £5,000,000 held for a while with the
Chase Bank in London having been sold. The Bank of Regland had had
about a million that they vere *leeking after in a temporary my,
which, in the last week in May, had been sold to the French. That
mIndor
vss the last Bussian gold, as for as he was aware.
LEX:ENC
Regraded Uclassified
66
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris
DATE: June 26, noon
NO.: 858
FROM COCHRAN.
This morning at 10:30 I called at the Bank of France.
Yesterday showed a loss in the stabilization fund of
approximately 750,000,000 francs. Up until my call, the
fund had already sold 350,000 pounds this morning with
the pressure thus developing at an early hour. In view
of the tightness of credit situation, I asked where so
many francs came from. By way of explanation I was told
that through its heavy disbursements the Treasury is putting
whichare
the francs into circulation in full (*) taking flight; it
is at present "tapping" various Government funds for its
immediate needs.
The Bank of France statement for the week ended
yesterday will show & gold loss. 'This statement will be
made public next Thursday. Whether to reveal the exact
amount which has been transferred to the stabilization
fund or to show a transfer of a round sum, say four or
five billion francs which would be sufficient to cover
the transfers to date and leave some margin, is 88 yet
undecided. Such a margin would be insufficient for many
days operations at the present rate of spending.
Regraded Uclassified
67
-2-
Since Bonnet is such a good friend of both Baudoin
and Rist who are now referring rather openly to Governor
Labeyrie's "incompetency", it is said that the Governor
is becoming nervous over his own position. (End Sections
1 and 2)
BULLITT
EA:DJW
Regraded Uclassified
68
PARAPHRASE OF SECTION THREE, NO. 858,
FROM PARIS.
Upon my return from the Bank I dropped in on Rueff at
the Treasury for a few minutes personal chat. He told me
that of course the Treasury and exchange situation was
very difficult. The permanent staff, together with Brunet
who has taken office, is busy in drawing up documents
for Bonnet's attention as soon as he arrives. Pending
Bonnet's arrival, Rueff said that Premier Chautemps was
iving his personal attention to the Ministry of Finance.
An effort is being made to impress the Premier with the
necessity of a comprehensive plan of action. Rueff also
said that the political aspects of the problem make it
still quite uncertain as to whether the plan would be
possible, but that Chautemps seemed personally disposed
to favor such a plan. Regarding the weekend, Rueff asked
if I would be in town and available.
Blum's
With regard to Blu (*) position, Rueff said that a
few days ago he had come to the point where he put up
certain conditions to Auriol upon which he would stay.
Inasmuch as these conditions were not met he said he
was ready to make way for whatever successor might be ap-
pointed when the Government fell. He is therefore con-
tinuing to function.
End of message.
BULLITT
EA:DJW
69
CORRECTION
RB
June 25, 1937
In telegram from Paris, from Cochran No. 858,
June 25, noon, (Section One) line ten delete "in full (*)"
and insert "which are".
DIVISION OF COMMUNICATIONS
AND RECORDS
Regraded Uclassified
70
E
GRAY
London
Dated June 25, 1937
Rec'd 10 a.m.
Secretary of State,
Washington.
406, June 25, 1 p.m.
FOR TREASURY FROM BUTTERWORTH.
British Treasury informs me that the Chancellor of the
Exche uer will make an important statement at half past
three in the House of Commons this afternoon. Unless
otherwise instructed I shall not telegraph text for the reason
that I was Also informed that this statement had been the
subject of firect exchanges between you and Simon. Likewise
the meeting referred to in my 405, June 24, 7 p.m., has been
deferred,
BINGHAM
MM:08B
Gray
71
PARIS
Dated June 25, 1937
Recd 5:27 p.m.
Secretary of State,
Washington.
861
816, June 25, 5 p.m.
FROM CD CHRAN
This afternoon continued to witness heavy pressure on franc
While French control held spot rate, futures widened further,
one month storling being 7 point 50. National Bank of Belgium
reported to have sold belgas and purchased gold in London.
French rentes gained slightly. Paris stock brokers today raised
orfinary margin requirements to 75 per cent of which 40 must be
in cash and 35 may be in securities; on government securities
margin of 30 ter cent of which 10 per cent must be cash.
Market flooded with gossip that Bank of France is prepar-
ing instructions to banks in regard to restricting their exchang
transactions that banks and market will be closed on Monday and
Tuesday, et cetera.
As franc rates indicate, there is a widespread belief that
the franc will be permitted to depreciate below the October
(much?)
limit. The observations of Rist and Baudoin are receiving must
attention. (Rist is away resting for ten days but will return to
Paris next Thursday.) This evening's press gives much space to
British plan to increase equalization fund by 200,000,000 pounds
AGENCE ECONOMIQUE carries interview of Assistant Secretary
Taylor on American policies with particular reference to
French needs.
BULLITT
NPL EMB
72
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris
DATE: June 26, noon
NO.: 864
STRICTLY CONFIDENTIAL
From Cochran's telebrams during the past few days
to the Treasury, you will have noted the extent of the
gold outflow.
Thoughtful observers express the opinion that the
country is far from appreciating just how serious the
financial situation really is and that it will prove a
shock to public opinion when the facts are disclosed as
must be the case before long.
BULLITT
EA:DJW
Regraded Jclassifie
73
PARAPHRASE OF TELEGRAM RECEIVED
No.:
865
From: American Embassy, paris
Date: June 26, 1937, noon.
FROM COCHRAN.
At 11:30 I had a conversation with the Bank of
France. The frano was being supported at London, since
the Paris market was closed. However, no reports of
very active operations had yet been received. The franc
had its worst day yesterday; almost one billion francs
was lost by the French stabilization fund. I was assured
by my contact that there would be no change in the mone-
tary or financial set-up in France over the week-end.
He informed me that they must await the arrival of
Bonnet, and he thought that even after that, 8 definite
plan could be decided upon only after some consultation.
The plan would then have to be approved by Parliament.
Although the 1088 of French gold to London has
undoubtedly been the main factor requiring the larger
fund, B. very favorable impression has been created in
Paris by the action of the British Government in seek-
ing an enlargement of its equalization fund. The action
is interpreted by the French as indicating that the
British are making preparations to keep the tripartite
arrangement
Regraded Uclassified
74
+
arrangement in operation no matter what difficulties may
be encountered by the franc. That the step is inter-
preted B.B indicating that the British will take gold
at its present price is also revealed by the rise in
gold shares.
I was told this morning by Pennachio, who has been
in close. touch with Rome by telephone, that the British
action is interpreted in exactly the above sense by
the Italian financial officials.
The French economic situation does not present
much that is new today with the exception of the prospect
of opposition by the hotel keepers to the application of
social legislation to their industry, which is apt to
take place at any time. The partial closing of hotels
may be the form their resistance will take.
BULLITT
EA: EB
Regraded Uclassified
75
JR
GRAY
London
Dated June 26, 1937
Rec'd 10 a.m.
Secretary of State,
Washington.
411, June 26, 1 p.m.
FOR TREASURY FROM BUTTERWORTH.
The London press has decidedly welcomed the Chancellor's
proposal to increase the resources of the exchange equaliza-
tion fund by further pounds 200,000,000. Most of the
editorials cover the same descriptive and analytical ground
and the following concluding paragraph of the FINANCIAL TIMES
is representative.
"President Roosevelt's administration is known to be
enxious about the influx of foreign funds, Discouraging
action is cuite on the cards, whether solely on American
account or in collaboration with France, as has been mooted.
France, of course, is desperately anxious to check the flight
of capital where it is needed for home business expansion.
It would be quite possible to arrange for some cooperative
(with?)
action which would not clash will the tripartite agreement
maintenance of which is a cardinal point of British policy.
This country's interests are involved since any threat to the
funds held in the United States would be likely to start a
return flow to London--in default of similar action here--
since French owners obviously have no incentive in the present
uncertain
Regraded Uclassified
76
-2-
JR #411, June 26, 1 p.m., from London.
uncertain conditions to take their money home. In such
circumstances the London fund clearly must be amply
provided if it is still to carry out its fundamental purpose
of safeguarding the exchange as far as possible against these
abnormal movements in the interests not only of British
but of all international trade".
Likevise the concluding position of Kiddy's comment in
the MORNTH PORT may be of interest:
For the moment, however, the currency crisis in France
is acute and having regard to all the circumstances, including
the tripartito agreement we think that the Government have
done well in secing to it that the exchange equalization
account has ample resources. Yesterday as will be seen from
our report of the foreign exchange market the forward rates
for the franc reflected almost panic conditions. The
situation is C difficult one but the combined resources on
our own exchange equalization account and those of the
United Statos -- the latter amounting to about 400,000,000
pounds -- should be equal to meet all requirements. Our own
fund was, of course, originally established to even out any
violent movements in the exchanges occasioned by abnormal
influences and while the pressure of events abroad has
involved a much greater use of the fund than could at first
have been anticipated there is little doubt that the net
result
77
-3-
JR #411, Juno 26, I p.m., from London.
result of the operations has been to impart a greater
steadiness to our foreign trade than could otherwise have
been possible.
Incidentally, the present development in 30 far as it
suggesta the likelihood of continued purchases of gold
should 60 for to remove expectations of any early reduction
in the buying price of the metal. Indeed it has always seemed
to those who have studied the matter more closely that
even should any adjustment of the price of gold be made it
must almost necessarily have to be effected at a time when
international financial and currency conditions were more
stable than at the present time. For the moment, however,
the trouble no doubt chiefly centers upon the French political
end financial crisis and favorable developments in that
direction would afford almost instant relief. Meanwhile
the proposed action by the Government should rolieve any
anxiety as to the ability of the authorities to deal even
with those abnormal influences which are affecting the
exchange and gold situation".
BINGHAM
KLP:CSB
Uclassifi
FEDERAL RESERVE BANK
78
OF NEW YORK
FFICE CORRESPONDENCE
DATE June 28, 1987.
CONFIDENTIAL FILES
SUBJECT: TELEPHONE CONVERSATION
10M
L. I. Knoke
WITH BANK OF FRANCE.
I called Rr. Cariguel at 10:45 today with reference to
his cable of today asking us to transfer $280,000 from account I
and pointed out to him that the balance in account = was $200,000
only. Cariguel requested that, under the circumstances, " re-
lease $250,000 worth of gold instead of $170,000 only, as requested.
I mentioned, for his information, that 447 7/8 had been
paid for francs for delivery tomorrow, obviously to cover short
sales made last week.
I inquired whether there was anything new in the situation
and he replied in the negative.
LWK:KMC
79
June 28, 1937.
4:08 p.m.
George
Harrison:
Good morning - good evening, Henry. I called
you to tell you I'm glad you're back, and I was
very sorry about your being knocked out last
week.
H.M.Jr:
Well, just a little bit tired.
H:
Yes - well I don't wonder. Feeling better?
H.M.Jr:
Yes, I'm, I feel fairly well. I feel
H:
Yes ...
H.M.Jr:
I can hang on until I get away now.
H:
Yes - when are you going to do that?
H.M.Jr:
I hope to - well - to get away the end of this
month.
H:
Good for you!
H.M.Jr:
Yeah.
That's fine. Well, that's gretty soon now.
Yes.
Tell, I don't know whether I'm going to see
you before that or not. I'm waiting now to
hear from Marriner - whether we ve got a
meeting tomorrow or not.
Well, I con't know but I certainly expect to
200 you before I CO because this French thing
will have to move one way or the other.
well, I think so too.
Yeah.
It's dreadful.
Regraded Uclassified
80
-2-
H.M.Jr:
And just 8.3 soon 68 we know what they're
going to do, then I want your advice and help.
Rell, I've been thinking 8 lot about the
so-called reserve requirement bills that
Marriner is working on and you're working on
And I'm getting more and more - while I appre-
ciate the reason for them - more and more
fearful.
11.9.Jo:
Yeah.
That the introduction of a bill about reserve
requirements now might be very deflationary.
I don t care if you put it off.
H.A.Jr:
Yean.
4llese Danks that nave got huge foreign balances,
If they see those bills about reserve require-
ments, might begin to liquidate Governments agein.
Yeah.
and we've não & lot of talk about what re-
serve requirements did to the bond market
For credit - he-hal !
M.M.Jr:
Yeah.
d:
and I nate to see it all over again.
Uh-hun.
And 1 think it's a pretty big risk to take
unless it's & last resort.
d.M.Jr:
Uh-huh.
ti:
Frankly. And I want to talk to Marriner
about that so I'm trying to get him now.
I think he ought to have a meeting of our
Executive Committee if we don't meet with
you tomorrow or Wednesday, say, anywey.
Regraded Uclassified
81
- 3 -
H.M.Jr.:
Yeah. But if you should come to Washington,
let me know. I'd like to see you.
R:
May I do that?
||. .Jr.:
If you please.
B:
All right, I'll let you know then.
Thank you very much.
00000
82
June 28, 1937
Excerpt from Memo of Mr. Magill to The Secretary.
4. Non-resident aliens
I found to my surprise that the members of the Treesury
group who have been working with the Federal Reserve and SEC
have not agreed among themselves as to the best method for
taxing non-resident aliens. After an hour's discussion with
ne they agreed to work on the question further with the under-
standing that some practicable solution would have to be given
de et once, since we are going to present the legislation to
the Committee within ten days.
Regraded Uclassifi
Mr. Eccles
for H.M. may
83
CONFIDENTIAL Handed to mi, at A.M. June 2 8,1937 6/34/37
by Cecles
In view of the fact that the gold inflow in recent months
has been exceptionally large end may continue, and in view of the
further fect that the inactive gold account of the Treasury is now
in excess of a billion dollers and the public debt has increased
sccordingly, the Board feels that the situation impels it to favor
legislation granting the Board additional power to absorb excess
reserves resulting from additions to the stock of gold by increas-
ing reserve requirements on deposit balances maintained in this
country by non-resident aliens.
The Board is of the opinion that the injurious effects
upon the domestic economy that would result from en unchecked in-
flow of gold would be such that the Board and the Treasury should
seek à solution of the aspects of the problem which affect the
domestic situation.
The Board fully realizes, however, the difficulty of
accomplishing the desired ends and considers it essential if the
Board is to employ effectively this additional power that:
(a) The Treasury maintain in its inactive
gold account approximately the present amount;
and
(b) Effective tax legislation be enacted
to discourage foreign investment in American
securities either through the inflow of new
capital or through the use of balances already
in this country.
Regraded Uclassified
Handed to me by
Coles 10. F . M. 6,1737 84
BRIEF SUMMARY OF IMPORTANT PROVISIONS OF BILL
TO REGULATE BANK RESERVES AGAINST FOREIGN
DEPOSITS
Reserves against Foreign Deposits
Every bank in the United States, having total deposits of
all kinds aggregating more than $10,000,000. would be required to
maintain against every deposit in excess of $7500 to the credit of
a foreign depositor a reserve balance with the Federal Reserve bank
equal to such percentage of its foreign deposits as the Board of
Governors of the Federal Reserve System may from time to time require.
The law would apply to both member and nonmember banks of
the Federal Reserve System having deposits of more than $10,000,000.
Reserve balances required against foreign deposite must
not exceed the amount of deposits against which they are required
and must be uniform as to all banks having foreign deposite.
Different reserve percentages may be prescribed, however,
against foreign demand deposits, savings deposits, and time deposits
and against foreign deposite of banks located in central reserve
cities, reserve cities, or claewhere.
A member bank of the Federal Reserve System which would be
required under the new law to meintain reserve balances against & for-
sign deposit exceeding 37500 would be excused from carrying reserves
against that deposit under the now existing reserve requirements
of the law. Against deposits of 1958 than 7500. however, B. member
bank would continue to carry reserves in accordance with now exist-
ing requirements (26 per cent in New York City against demand de-
posits).
Deposite of Foreign Central Banks and Foreign Governments
The Board of Governors would be given authority to require
that all deposit balances maintained in this country by foreign
central banks and foreign governments be carried in B. Federal Re-
serve bank, by prohibiting any other bank from receiving such deposits.
This authority could be exercised by the Board from time to time when-
ever it found it necessary to do so.
This provision would not affect banks having total deposits
of less than $10,000,000 and would not affect any deposit not in ex-
cess of 87500.
Regraded Uclassified
85
- 2 -
Obtaining Information as to Foreign Deposite
Each bank subject to the new law would be required to fur-
nish from time to time to the Federal Reserve bank such reports and
information as the Board may require with respect to the bank's de-
posits and depositors. In making such reports a bank would be en-
titled to rely upon information which it may obtain in good faith
from its foreign depositors or their representatives or agents.
Penalties
A bank would be subject to a penalty of $
per
day for violation of any provision of the new law and this amount
could be collected by the Federal Reserve bank. Also, B. Federal
Reserve bank could bring suit to onjoin 8. bank from violating the
law.
It would be punishable by fine for any depositor or rep-
resentative or agent thereof, with intent to deceive, to give false
information to any bank in connection with the now law..
Regraded Uclassified
86
GROUP MEETING
June 28, 1937
9:30 A.M.
Present:
Mr. Taylor
Mr. Magill
Mr. Oliphant
Mr. Hass
Dr. Viner
Miss Roche
Mr. Gibbons
Ar. Lochhead
Mr. Bell
Mr. Upham
Mr. McReynolds
Miss Chauncey
H...Jr:
Tho's got anything they want to ask me? - - Mac?
Anything you went to ask me?
Yes:
Nothing.
d.m.Jr:
Cy?
Upnam:
Press conference at three with you?
1.2.Jp:
Yes. who's manuling that, Schwarz?
Junes:
Caic 1s, yes.
Dan?
cell:
I have nothing special. I'm working on some revisions
of the daily statement for July 1; I don't know whether
you'll be interested in looking at them.
6.4.Jr:
Yes, and I'd like E revised statement of money till
the 15th of September - December 15.
Bell:
0.6.
A.M.Jr:
I'd like to have it Wednesday morning.
Sell:
All right.
G.M.Jr:
Huh?
Sell:
Yes, sir.
H.M.Jr:
And I think that before the statement comes out - I
think it would be helpful if you could give an
interpretation. The way e verybody today 1s trying
Regraded Uclassifie
87
-2-
to interpret it - you see, the Times had a story,
and some other papers - I mean their interpretetion,
I don't know whether - now, I read that we'll run
over on the expenditures.
0011:
Jh-hun. Kell, that's the June 30 statement. We'll
nave an explanation of that. But what I'm doing
is revising the daily statement.
on. Well, I meant the final
Julli
That's the June 30.
......:
Yes.
Dell:
that will be out Friday morning.
1.V.Jr:
Well, I think - when will It be in your hands?
Bell:
We ougnt to have a press release about 11 o'clock,
not later then 11.
e...Jr:
I think it would be good if you'd see the boys
yourself, run over it with them.
will:
Glad to.
Huh?
Dell:
Glad to.
Don't you think so? I think the thing that every-
body's overlooked is the way the emergency expendi-
tures are running down. I mean nobody mentions that
at ALL.
Bell:
or course, you <006 that this 150 million over is
all on two items.
H./.dm:
No, I don't know.
Bell:
Well, the R.F.C. and the Old Age Reserve.
1. . Jr:
well, that's interesting.
Bell:
That explains
Regraded Uclassified
88
-3-
d.S.Jr:
But I think if you'd see the boys yourself and
run over it - I think it would be very helpful.
What?
Bell:
Be delighted to.
H.V.Jr:
Then Wednesday morning you'll have something for
me?
Sell:
Yes, sir.
d.W.Jr:
Get your boys off, Arcnie?
Lochnead:
Yes. Now, the francs are holding.
...Jp:
I spoke
Vocaness:
You spoke to Knoke and It's continuing about that.
I was down at the train when I called.
M.Jr:
Excuse me?
Jochnesd:
I came in direct from the train down uere this
morning.
...Jr:
expecting to see me?
Cochheau:
well, I didn't know whether you called at the office
or
Gibbons:
Notning pressing.
doche:
Nothing very special, sir. Lay-offs on our
National Health Survey are being made and
H.M.Jr:
way-offs?
doche:
Ley-offs, yes, sir, under the reductions. We may
have some serious trouble; I hope not. I spent
most of Saturday and Sunday - a group came down to
see me; apparently the welfare situation is not
adequate there and jobs aren't opening up. They
had a couple people commit suicide when they got
the quit slips. But aside from that
E.M.Jr:
Well, I nappened to talk to E young man tast works
on this art oject in New York, and on a 25 percent
lay-off there's no discrimination of any kind; they
Just pick them out of 8 net - I mean
Regraded
Uclassi
89
-4-
13268:
"e naven't done that. We've tried to - worked out
as decent an agreement 85 could be worked out when
Lay-offs uappened, with the group themselves, in favor
of people that have children or families. But even
so, it's been
well, on the art project in New York there isn't any,
and they - under the Hopkins organization there is
na provision that people - they haven't checked their
nome conditions, SO people don't know.
come:
Nell, of course, what happened - one of these cases,
on illustration. They did try to keep the people
that had children, dependents. This young women got
ners; she nad 8 dependent father, end ne just turned
on the gas; ano she tried to commit suicide. Instances
of that sort. I suppose they're perfectly na tural.
we'll work It out the best way we can. I just thought
1f something got in the paper about it, I didn't want
you to think we nadn't been working on it.
What percentage are you cutting?
moche:
We're going down about 25J, following the schedule we
agreed upon.
H.W.Jr:
I don't snow what that is.
ne're about the NPA - slightly more than the WPA
percentage.
...Jp:
More than 25?
well, our work was supposed to be closed about
December, with no new projects to take their place,
ano there haven't been any new projects; so we're
just working on it the best we can.
I haven't talked to Hopkins on this thing since he's
back from Florida, 50 I know very little about it.
108;
I understand they're cutting all of the departmental
allotments 35 percent.
docue:
nell, ours is not that much because we have already
made some, you see.
Regraded Uclassified
30
-5-
H.M.Jr:
Well, Hopkins hasn't sought me out and I have had
no reason to seek trim out, 50 I haven't the slightest
1dea - I mean since now many - how Long is it since
ne went to Florida with Mr. Ickes? Must be what,
two months?
norms:
(Nords not understandable)
Huh?
meas:
Three hundred fifty thousand, approximately, I
understand.
Harry told me 1:st night that he ned his rolls down
to 1,662, 000 end they mere being lald off st the rate
or anywhere from fifty to seventy-five thousand a
1682, y.n. that by the middle of August ne'd have that
somewhere down in the neighborhood of B million and
B half. Inst's just his rolls and doesn't include
the departmental. And he also said that he dien't
intend to have my publicity about it et ell, and the
next morning it was all in the paper and there's been
deodlines ever since.
"ell, Miss Roche, if you have any difficulties
locue:
Yes, I just wanted to tell you roughly about it.
...Jr;
...wil you talk to Mac, if you ind it gets beyond
you, or even if you need assistance - put it that way.
What?
Assue:
Well, the only thing we could do, of course, would
be to keep the project going after it's through, so
I don't
STATE
Well, that's out.
Acche:
We may have to face that possibility and I would
like to feel free to call upon Mr. McReynolds if I
might; I would anyway.
M.K.Jr:
I mean we nave known now for over six months that
the Treasury would be out of the relief business.
Hoche:
Yes, it's moved right along on schedule.
Regraded Uclassified
91
-6-
At lesst six months, so - I mean it isn't as
though
modne!
It's just that other jobs naven't developed end
eople don't see the facts when they haven't any
place to go.
Ver:
nell, we've asked for reallotment of unexpended
balances; that N&S carried over because that is
to be reallotted when it runs over, SQ LS to carry
out projects. with one exception, that's all we've
taked for. inst exception is Revenue's job, end
we nave asked for continuance of two of those
because Hopkins' organization itself - not only do
we mage money out of it, but Hopkins' organization
itself didn't ano where to put those people, and
we just put it up to them.
which two, Mac?
not
The Liquor Dealers and Miscellaneous Tax. They're
cutting tast - on, I don't know - about E: couple
thousand.
vishe:
"e've Leid off about 532 the last month now.
R.d.Jr:
Anything else?
Hobite:
Notaing very special, except I'll be sending you
& memorandum some time the next week on some general
matters you've spoken to me sbout.
....Nr:
Jake?
Viner:
Nothing.
mede:
Pamily All Incated all right?
Viner:
Yes.
H.M.Jr:
what's your telephone number, if you don't mind,
up there?
Viner:
Bedford Village 7001, to be routed by - through
Mount Kisco.
H.M.Jr:
vill you (Miss Chauncey) tell the operator that?
"ill you get Mr. Riefler's also?
92
-7-
Viner:
That's also the only telegram wire address; has
to be phoned in from Mount Kisco.
m.d.Jr:
out if you call, what exchange do you call?
Viner:
Bedford Village 7001.
e...Jr:
And will you get dr. Riefler's too.
George?
I have nothing special this morning.
H...Jr;
wayne?
Toyior:
Nothing particular.
I didn't know Dr. Kung asked to pay nis respects
end see people; he'd like to do it before the dinner,
so we's coming - dropping in here about 11:30.
Itylor:
You're going to - no, you're not going to that lunch
today.
11.3p:
No, you going?
Inylor:
Yes.
:...Jr:
No. wid you go last night - Seturday night?
Toylor:
Yes.
B.M.Jr:
I had a nice note from Mrs. (Robert Wood) Bliss.
nas. It nice?
Taylor:
Yes, very nice. Very few people; only about - oh,
12 people.
H.M.Jp:
Did you have a chance to talk to nim?
Inylor:
Yes.
H.N.Jr:
I'll talk to you afterwards.
laylor:
He's very keen to talk to you.
H.M.Jr:
Well, that's set for tomorrow.
Regraded
93
-8-
Isylor:
Yes.
H.s.Jr:
Dia ne get down to business?
Isylor:
well, ae talked about the French situation more
than anything else.
H.I.Jr:
Well, I talked to Cochran yesterday end he said
that the program - that the French are supposed to -
new Parliament - new government is supposed to
submit E comprehensive plan to Parliament tomorrow.
And they give Bonnet from noon today until noon
tomorrow to nave a comprehensive plan; feel sorry
for nim.
Tell, you're - I'm seeing you and Marriner at ten,
am I?
Thylor:
(Nous yes)
U.V.Jp:
Now, BS far as our own crowd are concerned, is there
enything that I'm going to see Marriner about that
any of them have any doubts about?
Taylor:
well, George 1s not - he's been working on this tax
thing.
A.M.Jr:
No, I don't mean taxes; I mean on the hundred percent
reserve on foreign deposits.
Viner:
Has that draft been changed since we saw 1t?
Thylor:
There's been no - some minor changes.
Viner:
well, some were made nere. Have any been made over
there?
Twylor:
Yes. Ne naven't seen the final changes.
Viner:
out it doesn't change anything important.
laylor:
No, not as far as I know. He's bringing that over
this morning.
H.M.Jr:
All right, he's bringing something over to me.
Taylor:
He's bringing over to you E draft of the bill - the
action that his Board took.
94
-9-
_...Jr:
Well then, the move - proper move is that I want
to submit it to my crowd, give them a chance to
see it. They haven't seen it, have they?
Inylor:
They haven't seen the last draft.
Viner:
The very last stages.
H.2.Jr:
well, that gives me an out, doesn't it?
mylor:
Yes.
H.d.Jr:
I mean not be precipitous, nuh?
Iny Lor:
I told him that you had your schedule of lunch
today and one of the reasons for having it this
morning was
H...Jr:
well, I never know whether the President - I never
know until I hear what ne's - I mean that's not
B firm contract; that's on 8 weekly besis.
Viner:
Is the bill thing still in?
Taylor:
shet?
Viner:
is that bill provision, buying - direct purchase of
bills?
anyTor:
I don't know. I mean that was one of the things
that we said we didn't care about one way or the
other.
Viner:
That's his problem.
H.M.Jr:
I said to leave it in so that Glass would have
something to kick out that he didn't like, so as to
satisfy him. I said, "For Heaven's sake leave at
least one thing in there that Glass can kick out
ano feel happy about." My thought was to leave it
in, fight like the devil, and finally give in to
Glass about that. Right? But then, what I'm getting
at - I can say, "Now, Marriner, of course you don't
expect to me to say yes today because I want to
consult with my consultants." Is that proper?
Taylor:
We'll see how it goes.
Regraded Uclassifi
95
-10-
1.4.Jr:
All right.
78y10r:
I don't know now it's going to go.
a...Jr:
All right. What was your golf score? Then I can
tell who carried the ball.
reylar:
34. Couldn't meke it go in the hole; otherwise
it was all right.
Ulipmant:
One of the cases we're presenting on percentage
depletion - the Texas Company - (Mr. Oliphant's
words very muffled and not understandable) -
+
~ould you think there would be any suggestions?
41.1.Jr:
hs to the Texas Company?
111,hent:
Various controls of the Texas Company.
S.M.Jr:
I taink It's in the stockholders.
Clipmant:
well, I just wondered.
m...Jr:
I think it's like - my guess would be it's like the
Santa 16 Railroad.
Ollphant:
Chase?
Inylor:
No.
H.W.Jr:
My guess would be it's like the Santa Fe Railroad,
waylor:
Very widely held - oh, some big blocks, but no control.
B.K.Jr:
You see, & year or two ago the man who ran it, the
President, was kicked out - a complete reorganization.
I mean there WBS e man who dominated it; he was put
out about a year or 30 ago, But I would say that is
pretty well distributeo, isn't it?
TAYLOR:
(Nous yes)
Oliphant:
well, that apparently checks, but - with what - we
haven't been able to find it.
96
-11-
Taylor:
wee, there's never been one banking group that
held the financing - went from one to another.
Oliphant:
One of those managerial pictures. Well, that
checks with what we haven't been able to find.
H.M.Jr:
You (Miss Chauncey) might tell Mr. Shafroth if I'm
all right I'll see him st the hotel about six
o'clock tonight.
Cliauncey:
All right, sir.
Oliphant:
That's all.
(Secretary sends note to Miss Roche)
A.M.Jr:
DO you know that man?
noche:
Very well.
How do you rate him?
Roche:
I think I told you once.
H.W.Jr:
I want to ask you again. Do you mind?
Adene:
Just the same as I did before.
deside:
I don't remember.
doche:
Not very well, sir, no.
H.S.Jr:
I couldn't remember. It was brought to me again.
I couldn't remember.
Ruche:
I can give you some concrete instances, if you
care for them.
H.M.Jr:
It's enough.
Roche:
Thanks.
H.M.Jr:
What?
Aoche:
Thanks.
Magill:
Things seem to be coming along satisfactorily on
this inquiry. You noticed, of course, that the
nuisance tax bill passed.
Regraded Uclassified
97
-12-
And Railroad Retirement?
Finance Committee's taking that up this morning -
Carriers Tax.
Stenley need was over this morning and said ne'd
written you a letter regarding certain cases in
the supreme Court which involved the question of the
power of the states to levy E tax upon the gross
receipts or Income of companies which nave contracts
with the United States Government; :nd his interest
in it is not merely in the narrow problem of whether
or not on these particular cases the tax can be
imposed, out what policy the Federal Government
ougnt to adopt generally on that issue of the tax-
stion of these corporations carrying out Government
contracts End 50 on. Interior and Mar and some of
the other departments, he says, probably are
vicorously opposed to taxation on the ground that
it will raise the contract prices. His inclination
is tnst it would be better for all concerned if
these exemptions were eliminated, if theyexist.
Viner:
201 tre these corporations distinguisheu from
other corporations in the tax Law?
So far TS I - I don't quite get the force of the
Question - so for as I know, they are not - they
are not distinguished. Tnst is, here's some com-
pany tast's engaged in working on E dem for the
United States, and their contention is that the
State of washington cannot tax their gross profits
in building this dam, derived from
dave you (Miss Chauncey) resd enything
valuncer:
I have not seen it; it may have been routed elsewnere.
Toylor:
I think I've got It for the minute, unless they sent
it beck to you (Oliphant).
,ell, why don't the three of you (Magill, Oliphant,
Taylor) handle it?
Act:
Of course, there shouldn't be any such exemption.
Viner:
No, the Treasury ought to oppose the exemption.
Regraded Uclassified
98
-13-
Mogill:
It seems so to me very strongly. I'm personally
vigorously opposed to it.
B.M.Jr:
Listen, don't let's start anything new. We've
got enough on the griddle. But you three fellows
can handle it. What? How's that? - - I don't
want to take it up.
Diphent:
lie called me about two weeks ago on it.
H.M.Jr:
But I do say this, that It is so rare that the
Attorney General ever asks us anything that I
would like to give it - it should be ackhowledged.
I mean it's so rare that they ask us; we're elways
ssking them.
Megill:
I think from the way he talked that he really is
feeling his way, he really 00es want advice from
us.
H.S.Jr:
well, I'd be - as I say, we're always crowding them,
and so
Wegill:
And further, SO fer ES I can make out, his own view
accords with that expressed here.
H.M.Jr:
well, anything else?
angill:
(Nods no)
H.W.Jr:
what my schedule is - I got Kung at - let's see,
Accles at ten, Kung at 11:30. Don't know yet
when I'm going to see the President. Press
conference at three.
%
I went to ask who in this room is going up to the
Roosevelt-DuPont wedding? Are you (Roche) ?
hoche:
(Nods yes)
H.S.Jr:
Are you (Taylor):
Taylor:
(Nods no)
H.M.Jr:
Just you?
Roche:
I don't know.
Regraded Uclassifie
99
-14-
m.Jr:
I em. I mean I just wondered if I could help
anybody on arrangements.
Boche;
I'm going with Mr. West and nis wife and
A.A.Jr:
Nobody else going?
boylor:
(Bous no)
(Nous no)
Anche:
Thank you very much.
And you're going up with Mrs. West.
Now, one other thing. Who's going to be here in
July?
onll:
I BG.
(Locahesd and daas raise hands; Oliphant also)
nuo's going to be here in August?
(Gibbons, Hass, and McReynolds raise nands)
coche:
May be gone three or four days, not more.
....Jr:
mast you (Bell) going to be doing?
Bell:
I don't know what's going to happen. I think I'll
be here.
KCH:
Dan doesn't want to commit himself.
n...Jr:
well, Steve, what are your plans for July and
August?
Gibbons:
I haven't any. My wife and youngsters are going
over to the Hawaiian Islands, and - but I haven't
planned anything.
8.1.Jr:
When are they going?
Gibbons:
I think about July 10. When will Congress adjourn,
though? Just one of those things.
A.2.Jr:
weren't you at Jefferson Island?
100
-15-
Jiobons:
No.
E...Jr:
weitner was I.
dibbons:
Looks as though they wouldn't get away from here
very soon.
mi.Jr:
But you plan to be here. Miss Koche, you
I'll have to be away four days, possibly five,
during that time.
1.0.Jr:
Aren't you going to take any vacation?
addres
I'm going home for : few days - not more than four
0078 st most.
....Jr:
may don't you take an Lastern vacation?
-uclie:
I 1111, sround nere.
mat?
none:
Around here.
....Jr:
All right. Mac, you're going to be sway in August,
nuh?
Je.|:
I'll be here in August,
....Jr:
"wey in July?
208:
well, I don't know whether I can get away; I may be
Bay & week. But I'm going away for a couple weeks
after - from the time you get back until school
opens for the kid.
Gibbons:
Is your (H.M.Jr) youngster all right?
B.d.Jr:
Yes, she's all right.
All right.
Regraded
101
no. TAX LOOPHOLE AND FOREIGN BANK
June 28, 1937
LEGISLATION
3:25 P.O.
Present:
Mr. Magill
Mr. Taylor
dr. Eccles
Mrs Klotz
With corrections, suggestions, and interruptions
from these two gentlemen, I'll try to repest what the
President said to Eccles, Taylor, and myself. I
won't go into the background, because
You fellows
didn't go in to see him (Magill)?
The
190, ne had some people in there with him.
Tell, I'll give you the results first. Then if
you need explanations, my, mayne can give it to you.
The Presldent nould like you, if possible, to arrange
tast when you appear at 10 o'clock Thursday morning
On the Hill, either Mr. Harrison or Mr. Doughton will
38.y to you, "Non, Mr. Magill, these ne: rings have
been going slong for about two weeks. When will the
Treasury be ready to give this Committee the legis-
Intion necessary to correct tuese evils, which we
are pretty well familier with now? Do you think
you could give it to us so we'll have it within a
week. we've got this story pretty well now and
we'd like to have this thing within E week."
And your attitude - "Yes, Mr. Chalrman, the Treasury,
with the nelp of your staff, will be ready within a
week to ive you the legislation necessary to close
up these loopholes. But, Mr. Chairman, at this time
I would like to bring to your attention that, as a
companion piece or legislation, which, while I do not
believe it will go before this Committee, but it
fits right into this picture of alien money, and
tast is a piece of legislation which the Federal
Reserve nas worked out in njunction with the
Treasury
If - is tast the way you want to express
it?
accies:
I taink 50.
What?
I taink so, yes.
102
-2-
hundr:
"
which the Federal Reserve nas worked out
in conjunction with the Treasury, which nas to
do with
Il - would you use the word "not
money"?
Ko, I don't like that.
Allens?
Treatment of foreign belances.
seade:
"
treatment of foreign balances. But we
belleve that this will necessitate going before
another - before benking and Currency. But at
this time, inasmuch 1,5 you have seen fit to HSK
us whether ne'a be resay, we'd 11ke to say 'Yes,
but le nave another companion piece of legislation.
Then the program is that Lecles, Taylor and I will
have srrunged that Joe Aobinson and Wagner, the
Spenzer, Sam Reyburn, and Stengall will see us at
10:30, cnu at 10:30 Sarriner will go before them
and explain what this piece of legislation is, which
has to swith dealing with foreign balances. And
then na's sot to work this thing out very carefully
vne have A statement which no will give to Joe
with the hope that Le, Joe Hobinson, will
Five it to the press, the President's thought being
Critt 11 le 10 this taing taat within D
VEEK from Thursday we will have our legislation -
nave It Introduces CIRI get it on its way.
Haw, have I - have I - have I summed it up?
Leyles:
Yes, I think that covered it very well. There's
only one thought
1.1.Jr:
He (reporter) can give you (Magill) 8 copy of what
I'm saying.
Iceles:
There's only one thought that occurs to me. I
don't know whether this is important from Magill's
point of view. Aná that is, I would explain this
to Joe Robinson and would give his 1) statement
to release to the press which I - ES I understand
it, should be a joint statement by the Treasury and
the Reserve System; either tast or :- statement that
would possibly be approved by the Treasury. And it
seems to me, however, that there is the time to make
103
-3-
the joint statement.
Jr:
mere at, up on the H111?
in:Les:
That Joe Robinson would make - because I don't see
non he could make It purely with reference to banking
legislation alone; If I had à statement with reference
to bank legislation, and inasmuch as you're tying
It in with the tax legislation, which is prior, as
it should be, then I think We should give to Joe
Aobinson a joint statement, where he could say that
this banking legislation is for such and such E
purpose, to show how it ties into the tax program
Life sterilization program. That's B joint state-
ment we've got to work out.
Holl, will I have to - me day not on tast day be
resuy to give to Robinson the finished bill to
introduce.
well, tast doesn't make any difference.
It's such better not to.
169,
....Jr:
It's much better not to.
The l'inIshed bill which wil. be actually introduced
any come plang 8 few days later, just like your tax
DILL, ufter you make this statement, will come along.
But se have at least DEVEL the res for
The principles.
Luchasf
both the tax bill and the banking Bill, which
seen to be - the President WLS very anxious that it
be Code in just that wey, wasn't he?
Yes. He felt he's paved the way for this tax bill.
Now we're bringing something entirely new, s nd he
quesn't want this banking bill to stick out like a
sore thumb. He wents to tie It into the whole prob-
lem or nandling foreign money, loopholes, and the
mole business, making it all one thing. And - but
he feels that the time has - from what he's talked
down there, the time is getting so short now that
Regraded Uclassified
104
-4-
cord like to have all this legislation introduced
by next reek.
Let them KNOW now that it's coming.
1.4.dr:
ANG segin to wind this taing up - didn't suy so, but
1 got that impression - mich I thought vould be very
good news to you (Magill).
LEL:
Yea, tast's 2 good Idea, I think. I think KS for ES
he're concerned, after tomorrow ENA the next day,
when they'll get some more explosives that will
interest them - I think then it's shout time to jut
- period to it.
Incidentally, the President said ne ITE-S very much
pleased the why things were going on the Hill.
Good.
-..,Jr;
(n) the only thing that W:S raised about the Tressury
ot the Islani - = few of them - Joe Robinson and 21
Ten or them got together and asked about the gold.
The President sail no wash't worried, England wasn't
worried, Van zeelano wasn't worried. They saiu,
" Aust sbout Aussis?" Be sald, "We've just opened
bocains Recount." when ne got through he said,
"Did I learn my lesson pretty well?" I stia, "Yes."
So ne told them tant he, the President, wasn't
worried, and ne said, "I left them perfectly quiet
and satisfied." J.S neorly as I could make out, that
NLS the only question raised about the Trensury in
three days.
Now, Marriner, would you - may I say this: We're
"11 available, see? Viner's here, Riefler's here,
we're Ell available to nelp, see? And It's on
you (Wegill) to see Harrison and Doughton About
usving the question popped Thursday.
# 111:
(Nods yes)
who will see Robinson about arrenging for the meeting?
I think it would be well for you to contact him. If
you want to, I will.
Regraded Uclassified
105
-5-
H.V.Jr:
No, I'll try; I'll try it tomorrow - tomorrow
morning.
Eveles:
Contact Robinson and let Robinson BSK the others.
...Jr;
Yes, that's a pretty good plan.
ecles:
Now, it occurs to me that you want Glass.
E.A.Jr:
Well, the way I did the last time, I told them what
we wanted, what it is; I said, "Now, Senator, you
know what It is and I'll Leave it to you, see?"
We don't invite the people. We don't invite them;
ne does. I don't even know whether ne's going to be
nere Thursday.
Lecles:
They had people there before really that wouldn't
lieve been there likely - there was no occasion for
it.
0.1.Jr:
I snos, but
(écles:
You can't tell.
....Jr;
....I Left it entirely to him.
decles:
It's his legislation; that will go before the Banking
and currency Committee.
d.s.Jr:
What about this informal committee on which Jesse
Jones one Crowley and all those fellows sit in? Do
we went that?
Recles:
I should say not; got enough trouble with reports
without having a committee besides that. Huh? Do
you (Taylor) agree?
H.M.Jr:
Just as soon as you have - are you going to draft
this statement - you will as to the reserves, I
suppose. Will you do it?
Bocles:
well, I'd like somebody working here; I mean I'd
like to work with them. Now, Wayne's got some ideas
on this thing from a standpoint of the international
aspect of it; I've got it with reference to the
domestic.
Regraded Uclassified
106
-6-
If I may say, we've got the best staff in the
Treasury we've ever had; we've got the best tech-
nicel help we've ever had. And on the tax thing
I won't worry about - there isn't anything to worry
about. This is all good news to you (Magill),
isn't it?
111=
Fine, yes, fine. Now, who's going to do the tax
part of this statement by Joe Robinson?
6,4,3r:
OH, де won't - are WE Loing to Incluie the tax
statement?
Lecies:
"ell, you won't include the the statement. All
you will do in reference to this banking legislation
tast is being introduced - you will tie it in.
will:
I thought you said E minute ago that in our state-
ment for Joe nobinson you were going to put in some-
thing shout taxes.
is is yart of the program.
Bot what the tax program is.
No detail, except to ssy they are tixes for the
purpose of dealing with foreign earnings so as to
ccomplish certain objectives.
H.2.Jr:
May I put it this way. I think se ought to have a
little - rollow the President's idea - E little
opening paragraph in order to show what this tax
thing is and what we are trying to accomplish; and
then say - then you come right in after that - "Now,
in connection with this program of the Federal Reserve
and the Treasury, we wish to accomplish certain things
that have to do with foreign balances. I mean just a
little opening, maybe 50 words, as to what we're
trying to 00 on the Hill in connection with aliens,
Magill:
Well, on the banks
E.V.Jr:
See, is that about right?
Burles:
Well, of course, your tax program involves a good deal
more than purely the alien problem, so it seems to
me that Robinson's statement that has to do with this
banking - this particular piece of legislation, which
Regraded Uclassifie
107
-7-
will 80 to the Banking and Currency Committee - that
ne states that tais is the intent of the legislation
and then he ties it into that part of the tex progrem
tast nas to do with it. I don't think you want to
tie it into ony other part. It seems to me that the
tring to do is to first point out the banking aspect
and then tie that into the particular part of the tax
legislation only that deals with aliens, because we
don't went to tie the tax legislation into - necessar-
11y into - I mean the whole banking legislation into
the whole tax program.
dogill has just got this thing. Let it circulate
through nis brain. I've told you word for word what
the President told me, see? He wants to tie this
_destion of excess reserves on foreign balances into
Like tax program. Now, you (Eccles) haven't had time
to think It over what statement we want to out into
the mouth of Joe Robinson to do this thing, and you
(dogill) naven't had time. Think It all over.
Then I can - in other words, ES for RS I'm concerned,
you'd like me to write 8 paragraph to tie in this
matter with
+ie it Into the original statement that went from the
Secretary to the White House to the Hill, in which it
is mentioned that the foreign - une, usl treatment
for foreigners NES one of the things which did cause
whatever it coes cause. I think that's obviously the
taing to tie It to, because there's your framework,
and this comes in.
That's right; that's what I would do.
Levles:
inen we're getting banking legislation so as to
increase reserves against foreign balances in case
additional capital comes here, or even in case it
doesn't come, to take care of some of the capital
that may siready be here.
Region:
It is e permanent improvement in our banking system,
which is E result of dealing with your foreign
balances, etc. - indicates that it is a desirable
thing.
Regraded Uclassified
108
-8-
madri
(on phone) Let me have his (Senstor Robinson)
secretary.
Vogill:
Tomorrow afternoon be time enough?
AS for BS I'm concerned. I think, Marriner - I
think ne's got this pretty fast. I think he wants
to
(On phone) Yes, hello. Hello? - - Henry
Morgenthau, Jr. - - Who is this, please? - -
Brewer, I'd like to see the Senstor on § very
important matter the first thing in the morning,
1f it is convenient for nim. what time 00 you....
- - My office? Well, I'm not going to be here
for more than 15 minutes, but
I
,
Well,
what
I'm going to - - Well, if he could see me
the first thing, and it would not take more than
five minutes. It will not take more than five
minutes. - - Thank you very much.
Telas:
Does Aobinson 883 about this stitement - I'm just
thinking, will this go before nim, banking legis-
lotion - stengall and
...Jr:
Don't worry about that - those boys. Listen, let's
let this thing simmer over the night. He's the
leader. Now, his only uestion that ne's going to
ruise 13, how about the Spenker. Now, it may be
El question of the Speaker saying, "Well, Joe, I may
went to make a "statement." But that's the - it's
Joe Robinson or the Speaker. But don't worry about
the other fellows, Marriner; don't worry about the
Hill. The President seia, "At politics I'm a past
master; take my word for it."
Scries:
I don't worry about the Aill except what they say end
the dica-back we get afterward.
All right. Have you (Magill) got It?
mgill:
Yes.
E.W.Jr:
Could you stay just one minute.
Regraded Uclassifie
103
LMS
GRAY
London
Dated June 28, 1937
Rec'd 2:45 p. m.
Secretary of State,
Washington,
412, June 28, 7 P. D1.
FOR TREASURY FROM BUTTERWORTH.
In the course of a speech in the House of Commons this
afternoon on the motion to increase the exchange equaliza-
tion fund by 200,000,000 counds Sir John Simon announced
that at the End of Each June and DECEMBER a brief public
statement would be made regarding the amount of the gold and
fortign Exchange holdings of the fund as of the previous
March and September, that is, for the six months period End-
ing three months before, In this connection hE indicated
that the British fund now possessed some 26,674,000 ounces
of gold which together with that in the Bank of England of
73,842,000 ounces, made & total of gold resources of
100,516,000 ounces which at prevailing prices was worth
over 700,000,000 pounds. Its foreign Exchange holdings he
indicated WETE now "trifling". HE also announced that the
Public Accounts Committee would bE allowed confidentially
at the end of January of each year to examine the state of
the fund's accounts as of the End of April and that the
committee
Regraded Uclassifi
110
LMS 2-No. 412, June 28, 7 p. m., from London.
committee would bE allowed to question confidentially a
Treasury official. Sir John Simon Explained the necessity
of keeping the current transactions of the British fund
secret and Emphasized that the above concessions WETE now
possible because of the inherent strength of the position
of the pound. HE also stated that the Treasury had con-
cluded that when all considerations are weighed "WE should
not consider the present gold holdings as EXCESSIVE and I
hope .t. is made quite plain that the action I am now pro-
posing and the terms of the resolution that will carry it
out do not indicate any change in our present policy". In
general Signon's speech was Elementary in substance and his
delivery of it indicated that he had but recently assumed
the office of Chancellor of the Exchequer.
DUE to Bank of France's request of the commercial banks
forward franc dealings have practically ceased, HOWEVER,
pressure on the spot franc was heavy again today. The
Belgian authorities again sold belgas heavily; by this
artificial selling the gold which would in the given circum-
stances automatically flow to Belgium is thus diverted to
the United States.
BINGHAM
KLP
Regraded
Uclassified
111
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: June 28, 1937, noon
NO.: 869
RUSH FROM COCHRAN.
At 11 o'clock I talked with the Bank of France. This
morning at an early hour the French control came into the
market with B. bold gesture of offering sterling at 110.55,
the equivalent of the rate to which the franc strengthened
on Saturday in New York. However my friend told me that
"he did not have much courage" since very heavy demands for
sterling were beginning to come in.
The big French banks were called to the Bank of
France on Friday for consultation as to how they were
to operate. Today a circular letter was received by
the Paris American banks from the Paris bankers' syndicate
in which reference is made to 8. similar communication
of May 1935, and asking that the banks refrain from oper-
stions in future exchange and foreign bank notes. There-
fore starting today local dealings in forward francs
are presumably disillusioning. However trading in London
reveals future franc more offered with one month discount
against sterling 8,1/2 and 3 months 10 3/4. At noon today
Bonnet arrives in Paris.
BULLITT.
EA:LWW
112
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris
NO.:
871
DATE: June 28, 4 p.m., 1937.
FROM COCHRAN.
The losses of the fund have again been tremendous
today in spite of the fact that the French control, in
an effort to give an impression of strength, has held
the sterling franc rate at 110,55. Exchange operators
have no confidence in the new government's ability to
settle the financial difficulties, and the market atmos-
phere is very bad, The operators think that unless gold
losses are stopped and 8, more constructive policy is pur-
sued than any which they expect from this new government,
further devaluation will be inevitable,
Bonnet and Chautemps lunched together this noon,
Bonnet is working with Treasury experts in preparation
for a Cabinet meeting which is to be held this afternoon
at five o'clock. It is planned that tomorrow the full
Council of Ministere will go over the declaration of
policy which it is expected the Government will present
to the Chamber Tuesday before three o'clook. Press
articles which are obviously inspired hint that with
reference
Regraded
113
-2-
reference to finances this statement will be quite gen-
eral and that the details of a plan will not be worked
out by Bonnet until the latter part of the week. In the
meantime, the Government will request exceptional powers
of Parliament, It is expected that there will be general
debate in that Chamber tomorrow evening.
Today at London where dollar is bid the National
Bank of Belgium is buying gold. There is no forward
quotation for the frano here but the rates in London are
7 and 9 now, French rentes are irregular.
BULLITT.
EA:EB
Regraded Uclassified
114
June 28, 1937.
4:08 p.m.
George
Barrison:
Good morning - good evening, Henry. I called
you to tell you I'm glad you're back, and I was
very sorry about your being knocked out last
week.
3.2.Jr:
well, just a little bit tired.
Yes - well I don't wonder. Feeling better?
H. .Jr:
Yes, I'm - I feel fairly well. I feel
...
... Yes
D.L.Jr:
I can hang on until I get away now.
E:
Yes - when are you going to do that?
H.W.Jr:
I nope to - well - to get away the end of this
month.
T:
Good for you!
A.V.Jr:
Yeah.
B:
That's fine. Well, that's pretty soon now.
H.M.Jr:
Yes.
4:
Well, I don't know whether I'm going to see
you before that or not. I'm waiting now to
hear from Marriner - whether we've got B1
meeting tomorrow or not.
Addr:
Well, I don't know but I certainly expect to
see you before I go because this French thing
will have to move one way or the other.
Well, I think so too.
H.E.Jr:
Yeah.
H:
It's dreadful.
115
-2-
H. . Jr.
And just as soon as we know what they're
going to do, then I want your advice and help.
Well, I've been thinking E lot about the
so-called reserve requirement bills that
Merriner is working on and you're working on
and I'm getting more and more - while I appreciate
the reason for them - more and more feerful.
E..Jr:
Yeah.
That the Introduction of 8 bill about reserve
requirements now might be very deflationary.
I don't care if you put it off.
Yeah.
These banks that have got huge foreign balances,
if they see those bills about reserve require-
ments, might begin to liquidate Governments again.
H.M.Jee
Yean.
in
And we've nad B lot of talk about what reserve
re uirements did to the bond MA rket for credit - he-hx!
Jr:
Yean.
And I hate to see it all over again.
Uh-huh.
And I think it's a pretty big risk to take unless
it's a last resort.
Jr:
Uh-huh.
H:
Frankly. and I want to talk to Marriner
about that 50 I'm trying to get him now.
I think he ought to have a meeting of our
Executive Committee if we don't meet with
you tomorrow or Wednesday, say, anyway.
Regraded Uclassifie
116
-3-
H.M.Jr:
Yeah. But if you should come to Washington,
let me know. I'd like to see you.
H:
May I do that?
H.M.Jr:
If you please.
H:
All right, I'll let you know then.
H.M.Jr:
Thank you very much.
117
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 28, 1937.
to
Secretary Morgenthau
FROM
Mr. Taylor
At the meeting with the President this afternoon in connection
with the proposed banking legislation, the President agreed that the
legislation was desirable and suggested that the way in which it should
be presented to Congress W&B that on Thursday Senator Harrison or
Representative Doughton make the following type of statement: That
he hearings were progressing satisfactorily but that naturally the
Treasury must be in a position to submit certain recommendations and
specific legislation which would meet the loophold problem; that the
Committee would like to have these recommendations as soon 88 possible.
Mr. Magill, in replying to this statement, would indicate that he would
be able to furnish specific recommendations in approximately B. week, but
that At this time it was necessary to indicate that one of the aspects
of the situation would involve banking legislation which had been studied
by the Treasury and the Federal Reserve Board and that this legislation
naturally would go to another Committee; that the Secretary and Mr. Ecoles
arrange with Senator Robinson end other Senate leaders to meet with them
immediately after Mr. Magill would have made this statement and explain to
the Senate leaders the purpose of the banking legislation and its relation-
ship to the taxation picture. It was also decided that, if possible,
Senstor Robinson should give out any statement which would be made.
Regraded Uclassified
118
- 2 -
There was considerable conversation about the possible handling
of incoming gold and the amount of gold now sterilized by the Treasury.
The general conclusion was that freedom of action and cooperation between
the Treasury and the Federal Reserve Foard should be emphasized but that
no very precise information on this subject should be given to Congress
or the banking community so that in the event that it proved desirable
to feed in additional amounts of gold into the banking system any such
setion would not be precluded by any assurances which might have been given.
The question of informing the members of the Tripartite Agreement
of the contemplated action was discussed and it was agreed that it would
be desirable to cable our representatives in Paris and London on Wednes-
day so that the information would be given to Tripartite members before
any statement appeared in the press.
After our return from the White House, in your office, Magill
W&S informed of the program and entrusted with the duty of writing the
section of the statement which should tie in with the tax legislation.
Marriner Sccles is to proceed with the work on the bill itself and
clearing the matter with the Board. The Treasury was given the duty
of preparing the first draft of the statement which should be utilized
by Senator Robinson, as well as the points to be brought out in the
statements to be made by Chairmen Eccles and other members of the Board
who might be called to appear and representatives of the Treasury who
wight be called on to appear before the Banking Committees or to comment
on the subject to the press; also to prepare the explanation to be con-
tained in the cables to London and Puris.
Regraded
Uclassifi
115
- 3 -
I called a meeting later in the afternoon and explained the
schedule to Messrs. Viner, Reifler, White and Haas. The first order
of business is the preparation of the statement of points to be covered.
As soon as this has been completed and agreed upon we will use it as
the basis for drafting the cables and for preparing a suggested statement
for Senator Robinson.
will
Regraded Uclassified
120
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris
DATE: June 29, 3 a.m.
DU.: 874
STRICTLY CONFIDENTIAL FROM COOHRAN.
I THE called to the Ministry of Finance at midnight
100% Rueff. He requested that I communicate to Mr. Morgenthau
live following information, in the spirit of consultation
envisaged by the tripartite agreement:
:
The Cabinet meeting which began Monday evening and
until late in the night was attended by Bonnet.
S was strongly in favor of a bold program and insisted
that he wanted to return to Washington if his colleagues
were unwilling to agree with him.
The plan that is to be presented to the Council of
!nisters on Tuesday morning brought forth unanimous
reament. Should the Council of Ministere approve the
lan drawn up in the Cabinet, the Government will present
its declaration before the Chamber at 3:00 o'clook Tuesday
afternoon. The Ministers believe they can procure the
approval to their plan of both the Senate and the Chamber.
It is the Ministers' idea to ask for full powers for the
Government to carry out financial measures by decree.
The Government will probably be willing to write into
the bill the main specific measures of authority which it
Resires, if objection thereto develops in the debate.
cowerer, they prefer to keep their plan secret. Following
:s the plan:
Regraded Uclassified
121
-2-
(1) To reduce importantly the expenses planned in
the extraordinary budget for 1937.
(2) To bring into balance the ordinary 1937 budget.
(3) To seek a credit from the Bank of France to tide
the Treasury over the present emergency. A specific
amount for the credit has not yet been decided.
(4) To suppress the limits of 43 and 49 milligrams
* gold fixed for the franc by the monetary law of October
I, 1936, which would then permit the franc to fluctuate,
and find its own level. The stabilization fund would be
retained and, since there would be no revaluation or
ctabilization for the present, no new profit would be taken.
No final rate for the franc can yet been be seen. Due
to Government disbursements and social legislation, the
increased charges upon French economy may make a cheaper
rane necessary. France will not endeavor to seek competi-
tive advantages in international exchange relationships.
(5) The Paris exchange and security markets will be
closed tomorrow in order to check the heavy outflow of
old and stop speculation, and will remain closed until
the enactment of legislation. However, the banks will stay
open.
(6) Request was made by the French Ministry of
Finance that American authorities limit in BO far as possible
and beginning Tuesday exchange operations in the French
franc
122
-3-
iranc on the American market as was done last September,
such control to continue until the passing of legislation.
(It is hoped by the Government to get legislation through
on Wednesday). The British were similarly requested to
cooperate.
Secretary Morgenthau is assured by the French Ministry
of Finance of its earnest desire to hold to the tripartite
agreement and to avoid exchange control. To prevent graver
dangers to the Franc, the Ministry considers the above
steps imperative.
Rueff told me his Ministry would naturally welcome any
reactions from the American Treasury to the plans of his
Government as now confidentially divulged and as may be
developed hereafter; he has promised to keep me informed of
further developments. END OF MESSAGE
BULLITT
EA:DJW
Regraded
STRICTLY CONFIDENTIAL.
123
DEPARTMENT OF STATE
OFFICE OF THE ECONOMIC ADVISER
MEMORANDUM
June 29, 1937, 8:30 a.m.
My dear Secretary Morgenthau:
Thinking over the conversation in your room late last
night I realize that I did not fully grasp all the circum-
stances bearing upon the question of advance notification
to the British Treasury of any moves that the American Treas-
ury might make affecting foreign deposits in this country.
Taking into account (1) the general shock arising from the
French action, (2) the fact, 8.8 you brought out at the end
of last night's talk, that action on our part will inevitably
be connected in the public mind with the French situation,
(3) the fact that the British Treasury has just augmented
ite stabilization fund as an indication of ite intention
of doing its full part in meeting the present gold situa-
tion, and (4) the potential importance of having complete
interchange and cooperation during these times, I think the
case becomes strongly weighted in favor of giving to the
British all possible information regarding prospective
action. This will give the sense to them not only of work-
ing in partnership but also an opportunity to work similar-
ly. I am confident that Secretary Hull will be of the same
opinion when I talk with him this morning.
Further,
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
Regraded Uclassifie
124
- 2 -
Further, if you will permit me to make what 1s prob-
ably an unnecessary comment, I should think it would be
to the mutual advantage to take as seriously as possible
the French affirmation in Cochran's cable that they wish
to remain in the Tripartite Agreement, and to continue to
treat them as though they were even though in the first
few days of their crisis there ie elight irregularity in
their action. I am not suggesting of course that the
American Treasury take substantial financial rieks. The
inducement for remaining a member of this Agreement may
be a most important factor in preventing or limiting
steps taken in the direction of exchange control.
I am reporting last night's meeting to the Secretary
of State, and thank you very muoh for the opportunity
of participating therein.
Sincerely yours,
H.Feis
Regraded
125
Tuesday, June 29, 1937
UPON prriving at the 'inner hiven by the Chinese Am-
for Dr. Kung last evening, the Secretary advised
Pressury officials present that he hadjust received B.
telephone call from Cochran that France would close the
Jourse this (Tuesday) morning and that the new Government
10 decided to ask for certain powers in order to control
100 exchange situation. The Secretary requested that
following the dinner a meeting be held in his
:1201 It the Sarlton Hotel to discuss the situation.
At 10:30 pm, last night, the following met with the
Secretary: Governor Ecoles, Mr. Taylor, Dr. Viner, Dr.
Refler, Dr. White, Dr. Feis and Mr. Lochhead. The Secre-
- ry rend to the group the memorandum he had written of his
telephone conversation with Cochran. (This conversation
2018 been confirmed by Cochren's cable No. 874, copy of which
17 attached hereto,
Cooliner told the Secretary that the French had asked
vest the New York benks be requested not to engage in trans-
netions in French france while the Paris Bouree was closed
in the seme manner 8.8 was followed last September.
HM, Jr. telephoned President Harrison of the Federal
Receive Bank of Yew York and Vice President Knoke, explain-
true the situation and asking that they take appropriate steps
cerry out this request. Knoke called back later and re-
that they had otten in touch with the majority of the
important Yew York banks and had made the request as desired
by the French.
HII, Jr also telephoned the President and crolained the
vituation to him,
There was some discussion among the group as to whether
LOP contemplated action by France would make it necessary for
Lmit Government to withdraw from the Tripartite Agreement.
TW we decided, however, that until it was definitely known
wintten the French parliament had granted or dented the neces-
no powers to the Minister of Finance, the United States
Diry The not in position to make B. decision.
Regraded Uclassified
FEDERAL RESERVE BANK
120
OF NEW YORK
OFFICE CORRESPONDENCE
DATE June 29, 1937.
To CONFIDENTIAL FILES
SUBJECT: TELEPHONE CONVERSATION
FROM
L. W. Knoke
WITH BANK OF FRANCE.
Mr. Cariguel called ne at 9:05 this morning. In order to
prevent I shortage of francs, he said, it would be in order for us
to sell for his account francs for prompt delivery on the basis of
110.55 to the pound as long as such franes were to cover legitimate
commercial requirements. The Bank of England, he said, was doing
the same thing in London. He would confirm this by cable later on.
I inquired whether there was anything he could tell ne
yet. Cariguel answered that in reply to a question raised by
Mr. Morgenthan the Bank of France had stated that they were willing
to convert into gold OD the basis of yesterday's rate any francs
which we might buy. He added, "In other words, you see, the tri-
partite agreement remains in full force." I thanked him for the
information and told his that I would keep in touch with his during
the day. Cariguel then mentioned that the British were going to
make a statement this afternoon to the effect that, in their
opinion, what France was planning now was within the scope of the
tripartite agreement. Mr. Morgenthau, Cariguel continued, had been
asked whether he would make a similar statement and had replied that
he would naturally first have to know whether he could buy gold from
the Bank of France as provided for under the agreement. The Bank
of France's unswer to this had been in the affirmative.
(m
LWK:ENC
Regraded
FEDERAL RESERVE BANK
127
OF NEW YORK
FFICE CORRESPONDENCE
DATEJURE 29, 1937.
CONFIDENTIAL FILES
SUBJECT: TELEPHONE CONVERSATION
L. #. Knoke
WITE BANK OF FRANCE.
I called Mr. Cariguel at 12:10 today.
I mentioned that our franc market here was lifeless and
asked whether, under his cable No. 343, it would be all right for
us to buy francs for him if offered to us. He replied that if "
bought he would give us gold without any question. I mentioned
that I understood the Standard 011 had offered a. small check for
about 100,000 francs, which they had received this morning from
one of their South American offices and inquired whether, in a case
like that, where the legitimate commercial nature of the transaction
was obvious, it would have been in order for us to make the purchase.
Cariguel thought, that in circumstances such as these, where we knew
the people well, we might buy for limited amounts. He cautioned no,
however, that what they of course wanted to svoid was that ye should buy
francs for him which might have come from France.
LWK:KNC
Regraded Uclassified
128
ISA
CRAY
London
Dated June 29, 1937
Rec'd 9:00 a. m.
Secretary /f State
"ashington
RUSS
415, June 29, 1 p. m.
20: TREASURY fro butteriorti.
Dritis's Treasury telephoned this morning and
informed ne that Bonnet late lant night had communicated
to Thohington and London his proposed measures. British
Treasury inquired whether by any chance I had received
any ronctions from Mashington thereto.
Shortly afterwards l'onick tolephoned and asked me to
muet with MA. He showed me the telegram which the French
Finance `inister had sent him last night, the substance of
which ho had conveyed to the British Treasury. Specking
personally and confidentially, he said that he was
ploasantly surprised at the boldness of Bonnet's
proposals and he obviously held the view that with a free
franc the French Government would have to frame its policy
and notions to maintain and to incroaso confidence for
otherwise 0.8 confidence ebbed SC the franc would docline
and 3% tic Government would fall. I gathored that Monicl:
looked
Regraded Uclassified
129
MA -2- 413, June 29, 1 P. m. from London
for one more crisis.
7 nich also in the course of our conversation
reforred t: the fact that the United States would now
be the only currency, with the exception of Bolgium which
did not count, on a fixed gold basis and therefore the
mont_od currencios could only thus be managed on the fixed
dollar. In fact hu went SC far as to admit that if the
United States should intimato that it vias no longer
pronared to memain in this uniquo position, then Franco
and england would have to agree to c. general atabilization.
In this codedation, reforence is made to Leith Ross's
remarks to be found in my 313, May 27, 6 2. in.
BIRGAN
Regraded Uclassified
130
June 29, 1937.
9:53 a.m.
Taylor:
dello.
Sutterworth: Hello.
Hello, Butterworth,
Yes, sir.
- This is Taylor.
on, nello Taylor. How are you?
Fine - and you?
Very well, thank you.
The Secretary is over - is out at the minute
and ne wants me to talk - me to talk to you.
"ight. Now I have just returned from the British
Treasury where I took up the question which Mr.
Morgenthau telephoned me about. An - his instinct
in not being willing to believe the French on a
stack of Bibles was correct.
20
Right.
The Treasury tell me that they have not made any
commitment to Monnick or anyone else
night.
that oir John Simon would make a statement
ISS,
that in nis opinion the French are still acting
under the Tripartite Agreement.
In nis coinion they still are?
No, he
Oh yes.
de has not agreed to make any such statement.
Right.
And Sir John Simon has asked me to tell
Mr. Morgenthau that this is completely untrue.
Regraded
Iclassified
131
-2-
wight.
according to the British Treasury what happened
was this. About half gast eleven last night
Monnick telephoned to Waley and informed him of
the French Government's proposal. Sir John Simon
mas not reached last night, but Waley and Phillips
met Monnick this morning and talked to him, but
before Sir John Simon nao reached the British
Treasury. In the course of their conversation
Monnick emphasized that the French Government had
no intention of going in for exchange
Going into what?
B:
Going in for exchange
Yes.
And said that he'd do nis utmost to depreciste
this statement.
and the
British considered that the French were still acting
within the Tripartite Agreement, Phillips then
stated that since the
Treaty
on stabilization of funds, which they again
discussed this afternoon at the
but that ne could not make any statement
I:
Yes.
But, my friends at the Treasury particularly
emphasized that no commitment had been made,
and that no commitment could have been made
because when Monnick talked with Phillips and
Waley
the Chancellor of the
Exchequer
that nothing had
happened out of place
Right.
Regraded
132
-3-
B:
And now this. The present question - on the
purchasing of gold, the British tell me -
Treasury tell me that the Bank of England has
suspended uotations
that is, London is not dealing at all in francs.
I:
Yes.
::
But have arranged for the Bank of France to
provide any francs
at the rete of 110.55 per pound.
T:
Yes.
But - that is, the Bank of France is supplying
the francs.
T:
I got it.
3:
They have, however, made it clear to the French
that while they are prepared to do this for today
and tomorrow, that they must not expect that they
will be willing to continue doing this; that they
do not intend to continue doing it beyond tomorrow.
Uh-huh. Just a minute. (Holds aside conversation)
Now has the Bank of England agreed to give gold
for any sterling balances which the French may
have acquired as a result - may acquire as a result
of sales of francs?
B:
Not yet.
T:
Not yet?
B:
The Bank of England will not, on its own account,
buy francs at all.
T:
Yes, but this is that - the French, you see, will
create possibly a sterling balance 65 a result of
sales.
3:
That's right.
1:
And no arrangements have been made with the Bank
of England by the French to furnish - to convert
that sterling into gold?
b:
Not as far as I know.
Regraded
133
::
Yes. I suppose with the London gold market there,
why, it's - it's an academic question.
el
Yes, that's right.
Right.
Now Taylor,
I was over at the Treasury and
they gave me two messages to the Secretary of
the Treasury. Now, have you got someone there
who can take them down?
?:
Yes.
B:
Am I going too fast?
T:
No, that's all right.
Now the first message is a personal message from
the whancellor of the Exchequer to Mr. Morgenthsu,
and on this message they'd like an answer - well,
as soon as possible.
Right.
Et
It reads as follows:
"I may be asked in Parliament this evening
whether I regard the decision of the French
Government to suppress the upper and lower
gold limits as a departure from the
tripartite monetary agreement."
Che under:
Repeat please.
3:
dello.
C:
Ask him to repeat it please.
1:
Can you repeat that last?
B:
"I may be asked in Parliament this evening
whether I regard the decision of the French
Government to suppress the upper and lower
gold limits as a departure from the
tripartite monetary agreement."
T:
Yes.
B:
"In that case, I snall reply that events have snown
that the read justment of the franc, September, 1936
Regraded Uclassifi
134
-0-
T:
Repeat.
Now repeat all - the sentence, "In that case,
I shall answer", start there.
B4
"In that case, I shall reply that evente
have shown that the readjustment of the
franc, September 1936,
T:
All right - "September 1936".
B1
Yes.
"was not entirely successful in re-
establishing a lasting equilibrium
between the economic system of France"
T:
Right.
8:
"and those of the United States and Great
Britain."
T:
The last - about, about the last ten words.
B:
"the readjustment of the frano, September
1936, Il
25
Yes.
in
"was not entirely successful in reestablish-
ing B lasting equilibrium between the
economic a
T:
Equilibrium.
8:
#
systems of France and those of the United
States and Great Britain."
T:
O.K.
in
O.K.?
T:
Yes.
3:
"I have not been informed at what limit
the French Government hopes to establish
the franc."
T:
Yes.
B:
"And naturally
T:
R- Repeat that - "I, I have not been informed
at what limit the French Government
135
-6-
"At what limit
If
T:
Yes. "The French Government wiehes to, in-
tende to reestablish the franc" - 16 that it?
That's the point.
2:
Yee.
"And naturally, a position of this mort
requires time for thought and consultation."
Yes.
Right?
Yes, that, that's
"For the moment I limit myself to saying
that I have been assured by the French
Government that it is not their intention
to limit franc deposite, and that they are
anxious to continue close cooperation with
the Government of the United States and
United Kingdom as called for by the
Monetary Agreement."
O.K.?
F:
Yes.
Now
Yes.
Now, the Chancellor of the Exchequer
that 18 going on about the equalization funá,
and it comes on about six o'clock our time.
Now it's about five minutes past four our time.
Right.
B:
That looks to me a pretty
kind of statement - a - so that no red light
will flash back right away if that's o -
T:
We, we, we'll give it to you as soon 8.8 we can.
It may, it may take half an hour, but we'll call
you back in time.
Et
Right. Now then, I've got another message.
T:
Go ahead.
8:
Now this message 18 the proposed reply which the
British wish to send to the French.
136
-7-
T:
Right.
B:
This is an interim reply.
T:
An interim reply?
B:
That's right.
T:
Yeah.
B:
Now then it reads as follows:
"I am eagerly awaiting information
as to the steps which the French
Government are taking
....
Regraded
Uclassifie
137
-8-
Butterworth:
"....to liquidate the budget dificit which our
own past experience has proved will be of
importance in restoring confidence."
Taylor:
Right.
B:
How's that?
Taylor:
That's all right.
#:
"I understand the intention of the French
Government will be to abandon their present
gold limits and not merely to suspend them,
subject to an application to return to them
later."
reylors
Subject to A what?
3:
An application - a-p-p-1-i-c-a-t-1-o-n.
Trylor:
Yes
B:
- - to return to them later.
"I note also their statement that the communi-
cation was made under paragraph three of the
Tripartite Agreement. But I do not see how
there can be any successful application at this
stage and a decision has been taken and is about
to be communicated to the French Parliament.
"Nevertheless, I shall now record my regret that
the decision has taken this
, whatever
grounds may exist. The present condition for
temporarily suspending those limits, I consider,
that their supersession - s-u-p-e-r-s-e-s-s-1-o-n
may have serious consequences.
Thylor:
I didn't quite get that last.
"
"I consider that their permanent supersession may
have serious consequences."
Taylor:
Supersession?
a:
Yes
Taylor:
I'll get a dictionary,
3
Yes (Laughs)
-9-
138
Taylor:
All right, go shead.
B:
er may have serious consequences and on your
part will consider the repercussion of the
decision on the Tripartite Agreement in con-
sultation with the United States Government,"
Taylor:
D. K.
n:
before saying in what form and under what
condition will be possible for it to remain.
Now that's the end of thatmessage.
Taylor:
Yes
B:
And John Simon said, at the same time, that he
has adopted this attitude - that -- he said
this to us, not the French.
Taylor:
Yes
=
He said
had adopted this attitude in view of the serious
situation in France and the uncertainty of why
they can support that decision and SO it has been
begun.
Taylor:
Yes
3:
And he said, "I shall be very glad to know
Mr. Morgenthau's general
feeling on the matter as soon 88 possible."
But now, Taylor -
Taylor:
Yes
:
The copies of these messages are going to go
through in the usual routine way with the
messages so that if you want to check on the
wording he said that you could check with him.
Taylor:
Right.
B:
But the urgent matter 1s the one for Perliament.
Taylor:
Yes, I get that.
Regraded
-10-
133
3:
Right.
Tsylor:
I gather that there's a - from the tone that -
of message number two, that there's a slight
scolding involved there.
%:
I beg pardon.
Is lor:
There's a slight scolding involved.
B:
Oh yes, I don't think they feel at all pleased
with -
Taylor:
Yeah.
B:
- the situation. I think there's a good deal
of irony in that message.
Taylor:
Yes. Well, we're - we're thinking it over.
B:
Oh, - I should think so, That second reply
needs a good deal of thought.
Tiglor:
No, I was thinking about the French situation.
And we will consult and give them comments on
both, and also - -
3#
You're going to take more time over the second
than over the first?
Taylor:
Oh yes, the first one is comperatively easy.
Now, while I've got you, on the telephone;
in one of your early cables, it's cable 313 of
May 27.
B:
Yes.
Taylor:
At the end of it you make this comment:
"The gold problem, they believe, is now
receiving active attention in Washington,"
B:
Yes
Taylor:
",. and the United States is in the process
of formulating the policy we'll follow."
D:
Yes
140
-11-
Taylor:
"I might add incidentally that any action
regarding "hot money" such as an increase
in the withholding tax
"
B:
Yes.
Taylor:
1f Washington took action without
prior consultive discussion with Great Britain.. "
B:
Yes.
Taylor:
11 would not in the given circumstances be
understood in London.
in
Yes.
Taylor:
Now, is that your personal comment or did you get
that pretty hard from somebody?
b:
That's my personal comment.
Taylor:
Yes.
BE
I think that this situation has changed perhaps
a little bit since that message was written, you
know.
Taylort
Yes.
St
There's the - there's the arious exchanges that
have gone forth between the two treasuries.
Taylor:
Yes. Well, that's just - I just wanted to check
on that, because -
B:
My personal hunch is that the Tripartite thing is
not just the paper it's written on; it's a kind
of glowing organism.
Taylor:
Right.
20
-
anything.
Taylor:
Yeah.
B:
And that we don't have to ask peoples' advice
always, but we should consult them prior to any
step, because, after all if we increase the tax
to such an extent that we don't just stop money
coming in but we force money to go out, well then,
I mean, it brings us the rate of exchange.
141
-12-
Taylor:
Yeah, yeah.
3.
I mean, it's just doing it in another way.
Taylor:
And under any circumstances it would be
advisable to give some advance notice.
B:
So that -
because
of common sense and we simply have to do small
things to imitate if we're playing for the
larger game.
Taylor:
Yeah. All right, fine, and I'll let you know
as soon as I can about the other one.
B:
Right.
Taylor:
Right.
B:
By the way, Taylor -
Taylor:
Yeah.
3:
Remember the letter that you wrote me about your
friend - who is coming over here to the garden
party?
Taylor:
Yeah.
R:
I haven't heard from her -
not at the
Embassy, but the garden party is on the - July
the twenty-second. Perhaps if she wants to
attend that she could drop us a line and tell
us when she's going to be here and whether she
wants to go.
Taylor:
All right, fine.
B:
Right.
Taylor:
Thank you.
B:
July twenty-second.
Ta lor:
Right.
B:
Goodbye.
Taylor:
Goodbye.
142
Message from the Chancellor of the Exchequer
to Mr. Morgenthau.
original -8.193
SECRET.
I may be asked in Parliament this evening
whether I regard the decision of the French Government
to suppress upper and lower gold limits as a departure
from tripartite monetary agreement. In that case I
shall reply that events have shown that readjustment
of franc in September 1936 was not entirely successful
in reestablishing a lesting equilibrium between economic
system in France and those of United States and Great
Britain. I have not been informed within what limits
French Government hope to establish frano and naturally
decisions of this importance require time for thought
and consultation. For the moment I limit myself to
saying that I have been assured by French Government
that it 18 not their intention to seek any exchange
advantage and that they are anxious to continue close
cooperation with Governments of United States and
United Kingdom as called for by monetary agreement.
June 29th, 1937.
Regraded Uclassified
Message from Chanceller of the Exchequer
143
to Mr. Morgenthau.
SECRET.
Uniginal M 8.194
In continuation of my immediately preceding
telegram the message from Chanceller to dr. Morgenthau
proceeds as follows:-
1 assume that you will have received a message
from the French Government in same terms as that which
has reached me. I note that they state that they have
decided not to allow reserves of Bank of France to be
further reduced. (Last published reserves of 57 milliard
franos must have been reduced substantially during the
past week and there is also a claim on them for four
milliards for the purpose of repaying next November
credit of French Government raised in London early
this year). I do not understand their statement
combined with further statement that fluctuations in
francs will continue to be smoothed out by equalisation
fund which everyone knows has no gold left. On the
contrary unless they are going to abandon for time
being all efforts to support franc they must transfer
more gold from Bank of France to equalisation fund.
Bank of England at the request of Bank of
France has suspended quotations and dealing in spot
francs in London and Rotterdam, informing National Bank
that it will be impossible to do this for more than
today and tomorrow.
Regraded Uclassified
I do not 100 any opinion can be formed as
144
to probable course of franc in near future until "
know details of French Government proposals for
liquidating budget deficit and improving position
of French Treasury and how these are received in
Paris.
I have sent interim reply privately to
French Government as follows: Begins, I am
eagerly awaiting information as to steps which
French Government are taking to liquidate budget
deficit which our own past experience has proved
to be all important in restoring confidence.
I understand the intention of the French
Government to be to abandon their present gold limits
and not merely to suspend them subject to an obligatory
return to them later. I note also their communication
was made under paragraph 3 of tripartite agreement
but I do not see how there can be any effective
consultation om this when a decision has been reached
and is about to be communicated to French Parliament.
Nevertheless I feel bound to record my regret that
decision has taken this form. Whatever grounds any
exist in present conditions for temporarily suspending
gold limits I consider their permanent supersession
may have serious consequences and I need time to
consider repercussion of decision on tripartite agreement
in consultation with United States Government before
saying in what form and under what conditions it will
be possible for it to remain in being.
Reply ends.
Regraded
Uclassified
145
I have adopted this attitude in view of serious
situation in France and uncertainty how far they
can enforce their decision once gold has been abandoned.
I should be very glad to learn your general feeling
on matter as soon as possible.
146
THE 82 FRENCH CRISIS
June 29, 1937
10:00 a.m.
Present:
Mr. Toylor
Mr. Lochhead
Dr. Viner
Sr. Riefler
Jr. Opper
Mr. Lecles
1c. waite
ANS Klotz
liss Chauncey
He's sent two messages.
mede:
was has?
Trylor:
Mr. John Simon, to you.
M..Jr:
Yes.
One of which requires more or less of an immediate
answer. That is B comparatively Innocuous statement
that ne NBS going to make in reply to 8 question
which ne expects will be made to him in Parliament.
Is it in writing?
4010r:
Miss Chauncey is doing it. That's comperatively
easy. (Dee Taylor's phone conversation with Butter-
worth at 9:53 a.m. today.)
The other one is en interim reply to the French.
which has lots of knobs on it.
1. . Jr:
Got that too?
Yes.
H...Jr:
Who gave you that?
Taylor:
Butterworth.
6.8.Jr:
When I get ready, I'm going to talk to Sir John
Simon direct. I've just been with the President.
Talk to nim direct.
Thylor:
The second reply shows considerable annoyance, but
willingness to play after you hear the whole story.
147
-2-
Viner:
But regrets that they have chosen this way.
Trylor:
hno that they have obviously formulated El program
which they are submitting to Chamberlain and that
it's a hell of a time to consult, after you've
Already formulated it.
(on phone) Hello.
Operator:
Operator.
Mrs. opengier?
Operator:
Yes, sir.
H. .Jr:
linat sbout this Cochran call?
@perator:
I'll try to get them now. I couldn't get them until
you quit talking to London.
They understand I want to tie up this line exclusively
for my use, don't they?
questor:
Yes, tney no.
A..Jr:
Are they doing
Vyerytor:
They're tying up this same line.
Yes, but when we don't talk, no pay.
Operator:
Oh yes, you have to pay for it anyway.
They will?
partor:
They haven't started charging us yet. They von't
start charging until
M.Jr:
You tell them that after I get through talking to
Cochran I want tuem to hold up the line.
uperator:
I see.
H. . Jr:
Because - you tell them that I wish to talk to Sir
John Simon, and they can start working on it and
get nim ready - Chencellor of the Exchequer, see,
in London at the British Treasury.
148
-3-
I see.
out I'll need at least five minutes interval. You
see, by the time I talk to Cochran.
See?
Yes, I understand.
....JR:
Explain to tue operator that ten minutes after I'm
through telking with Cocuran I'd like to be able
to talk to Sir John Simon, the Chancellor of the
Exchequer of the British Treasury. But I'd like
shout 0 ten-minute interval.
Operator:
All right.
But see?
0, er tor:
I understand.
So I won't - I'c rather pay for the line for those
ten minutes r/ther than have somebody else get in and
block me.
bar:
curely.
S...Jr:
I mean I'd rather pay for it. Do 0 little dealing
with them.
I "ill.
Cond of conversation with operator)
Let me just give Morriner what's happened this
morning - good morning - which has nothing to do
with this. (This discussion and all subse uent
discussion relating to legislation re foreign
balances transcribed separately).
-
....Jr:
Operator, listen, will you give me incever is in
charge of the overser telephone In New York, the
nead msn or yomin.
to
All right.
4.5.Jp:
I want to talk to them.
-
I'll have Mr. Cochran in about & minute. Do you
went nim first or not?
Regraded Iclassifie
143
-4-
H.D.Jr:
In 8 minute - so why all this nonsense about tying
this up? You going to have Cochran?
Operator:
I'll have nim in just a minute.
H.M.Jr:
O.K. Hello - and put the call through on Sir John
Simon.
Over: tor:
All right. I have Mr. Cochran now. Go ahead.
(Dictephone record of conversation follows:)
Regraded Uclassified
150
Tuesday
June 29, 1937
10:30 a.m. (approximately)
B.S.
Cochran:
Hello, Mr. Morgenthau.
MAJri
All right, now go ahead, Cochran.
8
After I talked with you I tried to get Rueff
and Cariguel.
HMJr:
Yeah.
C:
I did not get Rueff because he didn't return
to his office; he went directly to the Chamber
debate.
Wr:
Yeah.
C:
I talked with Cariguel and asked him to consult
with Fournier, the Under Governor. I put up
the question as to whether our fund could
convert into gold at the bank French francs
which it might buy.
HMJ::
Yes.
C:
If so, at what price.
HMJr:
Yes.
C:
They assured me that the changes which have been
made today
Mr:
Yes,
C:
- by decree and which are planned in their so-called
program will not in any way affect the technical
arrangement which we have had heretofore.
EMJr:
Now, repeat that again.
5
That the changes which have been affected by his
speech today -
(IMJ:
Yes.
C:
And which are planned in the program of the so-
called Bonnet Government..
HMJr:
Yes.
151
-2-
d:
- would in no manner affect the technical
arrangements -
Hadr:
-
Wait 8 minute, I'm writing this down.
"No manner affect the technical
"
:
arrangements -
H...Jr:
Il
arrangements
17
D:
which have heretofore
....Jr:
Just a minute.
"
have heretofore # - yes.
obtained
midr:
If
obtained "
0:
between the American and French monetary
authorities.
HAJP:
"
between U. 8, and French. 11 - Yes.
C;
ne said that since the French Stabilization Fund
would now be more anxious than ever to acquire
foreign exchange -
AMJr:
Yeah.
C:
- and nave the facilities for getting gold for it -
Hadr:
Yeah.
C:
- there would certainly be 8 willingness on the
part of the French to continue to give reciprocal
gold facilities to the United States.
HMJr:
Well now, repeat that again.
C:
de said that since the French Stabilization Fund
will now be more anxious than ever -
34Jr:
Yeah.
C:
- to acquire foreign exchange -
HMJr:
Yeeh.
Regraded Uclassified
152
-3-
8
- and have the facilities for obtaining gold
for that exchange -
Mudri
Yeah.
- there would certainly be willingness on the
part of the French to continue to give recipro-
cal gold facilities to the United States.
ddde:
well now, just 8 moment, wait 8 minute. Wait E.
winute. Just B moment. In other words, I
Interpret that to mean that we continue just as is.
is
Jes, that's his understanding after talking with
Foursier.
ENT:
ies, now, just a moment.
1
at this time.
aw:
No., writ E minute. (Pause) Now, nello?
Bello.
Archie Lochnetu says that a couple of hours Ego
anoke criled Cariguel.
Yes, ne called Cariguel while I was talking to
Cariguel.
n/Wr:
Yes, well now just please listen a minute, please.
Yes.
B/Jr:
and Cariguel gave Knoke a rate to buy francs at
four forty-six - to sell francs. Hello?
Yes.
Addr:
- to sell francs at four forty-six.
Yes.
HMJr:
But he gave - Cariguel gave Knoke no buying rate.
Do you get that?
For gold.
Regraded Uclassified
153
-4-
HWT:
No buying rate for francs.
C:
Yes, but he said that the rate for gold which
he had quoted yesterday was the same today and
until further notice. Cariguel read me the
telegram which he is sending to Knoke this after-
noon.
Jr:
Yes, well, Knoke - well, now, have you any
other message on that?
Just on that one point. This is a telegram
which Cariguel was sending to Knoke. It said:
"Confirming our telephone conversation
please sell francs for our "S" exchange
account If
DUE:
Yes,
C3
" on the basis of 110.55 the pound
sterling."
At the rate of exchange here yesterday. And he
said:
"We confirm that the prices for gold quoted
in our 337 yesterday are still effective
until further notice."
Mr:
I see. Now, it just came this second; it's just
come in this second. Now, just hold on. Just
stand by, will you please.
C:
He wanted to explain that message to me. He said,
"I assure you that the control will continue to
buy and sell gold as heretofore."
IBSr:
Yes, well now just stand by a moment please.
C:
All right.
(Pause)
RMJ:
(Spoken aside) (Tell Clarence Opper to come right
in here. Well now, any questions?)
V4.Jr:
Now, hello?
154
-5-
Ct
Yes.
RWr:
Just stay a minute. I'm going to try something;
I don't know whether I can do it or not, but I
am going to try while you're on the wire to get
hold of Knoke and see if he's satisfied. See?
D1
All right. Fine.
MJ::
Now just - just stay on a minute and we'll see
1f it's possible. I don't know whether it is or
not.
CI
All right. Luck to you.
EMJr:
Hello.
C:
Hello.
MJr:
Just stay there.
C:
Yes
Treve. Op.:
Yes, sir.
HMJr:
See if you can get Mr. Knoke in on this conver-
sation, will you?
T.O.:
Yes, sir.
UNr:
See - do you think that can be done?
T.O.:
Yes, it can be done; I don't know whether you can
hear or not but I'll find out.
HVJ:
Well, let's try it.
T.O.:
Right.
(Pause)
HAJe:
Cochran -
C:
Yes.
MJrs
On that basis - this telegram just came in
this second - I would say they're living up to
the Tripartite Agreement.
Regraded
155
-0-
Yes. Do you people see any question on that
basis? They 're in on that basis?
Viner:
still operating under the old terms.
(un phone) Cochran, on that basis - this telegram
just came in this second - I would say that they
are within the tripartite agreement.
Lor: I nave 2r. Knoke.
-
Kam west 2 minute. (Conversation with Knoke follows)
realnier of conversation with Jacaren)
Regraded Uclassified
156
-6-
T.O.:
I have Mr. Knoke.
C:
my understanding of it.
HMJr:
Yes. Now, wait a minute, Knoke.
7.0.:
Just a minute.
(IMJE:
Hello.
Knoke:
Hello, Mr. Secretary.
HMJr:
Knoke, can you hear Cochran, he's on this wire?
T.O.:
Go ahead.
C:
Hello.
HMJr:
Hello.
Knoke:
Yes.
HMJr:
Knoke -
Knoke:
Yes.
HMJr:
Now, this telegram which Just came in from the
Bank of France, is that satisfactory to you?
Knoke:
Which one was that?
HMJr:
Well, the one where they give you a buying and
selling rate as of yesterday.
Knoke:
Oh yes, that is - as long as they follow that
they are demonstrating the fact that they are
continuing or that they want to continue under
the Tripsrtite Agreement.
MJ::
You're entirely satisfied?
Knoke:
Well, I'm absolutely satisfied.
HRJr:
All right. Have you done any business?
Snoke:
No, there is no business.
HMJr:
There is no business?
Regraded Uclassified
157
-7-
Knoke:
No.
HW:
And are the banks - are they pressing you,
questioning you?
Knoker
Very little. We have probably called - oh,
twenty-five or thirty.
HMI:
Yes.
And everyone of them is - they immediately
say that they of course would promptly comply
with that.
Wr:
Yes.
Trake:
They asked us very few questions. Two or three
said they had some commercial trade for sale.
NATe:
Allright,
Cooke:
Why of course we buy them, and I told them
then we're
from the
French.
We:
Yeah.
And I told them all that we were ready at the
request of the Bank of France to give them
francs for tomorrow's delivery which is the end
of the half-year, you see?
We:
I see.
Knoker
In any contract falling due, as long AS the
francs were needed for commercial requirements,
MJ:
Yes, Well, now just & moment.
(Short Pause)
HAIP:
In view of this telegram from the Bank of France
don't you think you'll have to put in a buying
and selling order? Hello
Yes. Well I
Think that over.
Regraded Uclassified
158
- 8 -
X:
What?
R.M.Jr:
Think it over.
K:
Yes, I have thought of that but I - I - probably
mill know E. little more when the regular cable
comes in. I know Ceriguel this morning had no -
no such intention.
H.M.Jr:
I see.
K:
And I think as long ae the - as long 88 we have
requested that there be no operations I don't
think re should step into the market either.
H.V.Jr:
Well think it over.
a:
All right, sir.
Regraded Uclassifie
156
- Ba -
K.M.Jr:
Now - well just a minute - Cochran.
C:
Hello
H.M.Jr:
Could you hear that?
C:
No I couldn't hear him. I could get a word now
and then.
H.L.Jr:
All right, will you get off, Knoke, then?
K:
All right.
H.E.JP:
Hello
0:
Yes sir.
R.V.Jr:
Coohren.
C:
Yes
M.A.Jr:
Knoke is entirely satisfied with this arrangement
so what I'm doing is - I'm putting in a call for
Sir John Simon direct and I'm going to tell him
that with this - what we have - I will make a -
ready to make a public statement that the tri-partite
agreement is still in force.
C:
I Ree.
Regraded Uclassified
- 9 -
160
See ?
Yes.
And that - don't say anything - I will call you
back after I have talked with Sir John Simon.
I'm to say nothing now to the press.
Well you - I've got the call in - I'll have it
in about five minutes and I'm keeping the
trans-Atlantic wire open, see?
Yes.
After I've talked to him I'll call you right back.
Can you find out what they've done with the other
Club Members in the meantime?
That is - ah - you don't mean England - you mean
the three countries
All of them - the other four countries.
Belgium, Switzerland and The Wetherlands.
Yes, and England.
And England.
Yes, and your friend, Monnick, as usual - at -
has just been lying.
I - I sent you all of that dressed up a little bit.
Well they've checked up in England and he's just
been doing some lying again. The French govern-
ment - the best thing the French government they
can do for themselves is just to take that fellow
and "can him".
I told you about it.
Well you can tell them that I say so now.
Yes, I'll do that.
Regraded Uclassified
161
- 10 -
WNIT:
Well you can tell them that I say so now. As
long as they keep that fellow Monnick on they're
always going to find themselves in hot water.
CE
Ah-ha.
Mr:
He's just a plain God-dammed liar, that's all.
C:
I see, yes.
RMJ:
And I don't care how strong you put it.
C:
I, I'll be happy to do it.
RMde:
All right.
s
I just - I can only get in touch with Cariguel
while Rueff is in the Chamber. See? He's over
there at the debate ...
Well
C:
... which is going on.
MJrz
All right. You do the best you can.
C:
UNIT:
All right.
C:
And I - and what I've given you now I've con-
firmed in a wire which is being coded.
MMJr:
All right. Thank you.
C:
There hasn't been much trading on the Continent
in francs.
Nr.
Yeah.
Ct
On some of the
the rate has gone to
about one hundred and thirteen.
MJr:
Yeah. ...
C:
to the pound, as compared to one ten, fifty-five.
IMJr:
Well, see if you can find out what arrangements
they're making with England, Belgium, Holland and
Switzerland.
Regraded Uclassified
162
- 11 -
C:
I, I'll get on it right away and try to have it
when you call me back.
H.M.Jr:
All right.
Regraded I Uclassified
163
ON DREIGN BALANCES
June 29, 1937
from meeting re French
10:05 8.0.
arista)
act Ad just give Varriner mat's happened this
corning - cood morning - which has nothing to do
,1th tals.
At ten ainutes of nine (a.m.) I called on Sens
debinson and explained to aim chat the President
5010 bout this program for *nursday. Nom, when
Hobinson neeru tast, ne said, "Well, do you know
that RUIVE cleared tue decks for us to take up the
court plan, and while that's on nothing else can
come us without unanimous consent. 15 And he sald,
"Inis while is going to run for an inderIuite period.
ne sale, "Now, 85 far as I'm concerned - and he
crid, "be very popular on the Hill. - if the President
sonts this financial mtter to come first, we'll yut
the court mtter ssiúe ind let this tuing - give it
and right of say." And de daid, "It will make to lot
01° people very happy on the Hill."
nell, I explained to him very briefly what we more
trying to 00 on the taxes and about the excess reserves
on foreign deposits, and ne said, "Well, I'm all for
tast; it sounds good to me." So he said - "But," ne
says, "this is in understanding that I've got with
the President." So I sald, "Let's call him about
it." So about five minutes jast nine me got on the
wire and the President tolu nim Just word for word
want I told him. So the President insisted that we
20 forward on this thing Thursday.
Eo I then, after he hung up, explained to Joe and
sald, "I'm going to 60 down to see the President now
and strongly urge nim that he do one of two things.
If we announce it Thursday, then we can have right of
way enead of the court. If we can't get the right of
way shead of the court, then we should shandon this
thing, because it would be too unsettling to have
this thing hang over the market for E month, and it
would only give Senator Glass a chance to work up a
block proposition."
Regraded Uclassified
164
-2-
30 JOE said, "You've got to explain that to the
President. I'm ready to do either." Re said,
"I not only want the President to know it, but
I want you to tell it to him, but when you get
through vita the President you call me back again
yourself; I went to get it from you too. There's
been too much double-desling around here - none
from ne; none from you." de sald, "I'm willing to
10 either one the President says." "But," he says,
"I don't want it to go out of the country that I'm
the fellow to postpone the court plan. But I can
tell you It will make lot or people very hegpy
to postpone it."
30 I werrt cown to SEE Live President and the President
stid, "JOB seems to misunierstano this thing; there's
SQ06 mistake." I 9010, "No, he doesn't misunderstand
it." Thot's wast I told nim. I stio, "After 611,
WE talked two o'closk yesterday and I didn't know
tast the court plen dan the right of way. I also
don't the that the Frenco thing MSS going to break.
and I'm responsible for Joe toking the sttitude of
one or the other." and I saio, "Non, Mr. President,
1 urge you very strongly to make up your mind that
you want this financial legislation before the court
plan or postpons it until afterwards."
"Well," he salu, "We can't postpone the court plen;
that's all set." He 5510, "We'll do it next week."
"well," I 2010,
Noll, you could
.Jr:
att 8. minute; don't get nervous.
-8 could ::ot do it this week. So then my suggestion -
"Cell up Joe Robinson and you can talx to nim and
say to CO chetd with the court plan on Tuesday, and
then we'll postpone this financial thing until we
know more About it" - and that you (Eccles) were ready.
ina the President - "We won't tell this to Joe, but
if the thing gets bad enough, serious enough, we'll
just stop the whole thing on the Hill for one day and
put this legislation through."
"Well," I said, "the only thing I'm sorry about, Mr.
President - I think it would be a nice - a great
165
-3-
opportunity to demonstrate to the country that
you are ready in this emergency and take this one
worry out of the way and have this thing settled."
de said no, ne's got to go through with the court
plan, "2na I can't postpone it, but 1f it gets bed
enough we'll simply shove the court plan aside for
" Q&V and put this legislation through."
Non, that's what happened this morning.
hell, tast puts this off indefinitely then.
well, unless something happens.
y
The President wenting that program to 70 up
inursday - did you get the impression that he EX-
jected that it would merely 80 up and then nothing
would be done with 1t until after the court plan?
That Thursday stuff is off.
Listlest
Yes, Isno, but what I'm - what did he have in mind?
de wented to take it up Thursday ona apperently he
suld ne winted to take up the court plan too; there-
fore, why the point in sending up our bill?
won't question me too closely on this.
necles:
I just wondered if I missed some point.
You dion't miss any more than I missed.
cooles:
It just doesn't connect up. In other words, was he
merely thinking of in announcement that the program
would be in, one that then it would be there for a
month kicking sround? That wouldn't be so good.
& thing like - of this sort - when it goes up, ought
to be done just as Quickly BS possible.
#
Accles:
Jn this other thing, we'll just continue to work on
it; simply result in giving us more time.
Regraded
166
-4-
H.1.Jr:
Aren't you pleased - I mean that you have the time?
Eccles:
I'm pleased with it except that if this court thing
lasted 30 days up there, and then you've got to
bring up this - or even three weeks - then you've got
to bring new legislation into the mill, we may find
difficulty in getting it.
H...Jr:
True, but my hope is that this thing will get so bad
that the President will say, "I want it today."
arcles:
This means your tex program also.
Regraded I Jclassified
167
-5-
memes:
They have NOW got a telegram from the Bank of
France that the rate for buying and seling gold which
they gave yesterday is to continue for today 1/nd
until further notice. Non, that's all right. Kow,
for your information - they give the rate, of course,
at milligrams, etc., out it works out that we can buy
Irines at 446 and sell them 446;, 8 very norrow
ronge.
but still they nave done it?
They have done it, yes.
00 they are oll right.
1:
They are ALL right on the to basis; they have come
Itain the gola
Different from shat they did for the British,
@goorently.
nell his, is there any ,uestion?
dot if they give us that.
Doe, nello (on phone again to Cochran) Just stay
E minute. I'm goins to try something. I don't know
nother I can do it or not, but I'm going to try while
Du're on the wire to get nola of (noke (-nd see 1f
nets satisfied, see? Now, Just stay on. We'll see
if It's possible; I con't anow nether it is or not.
,
Its, it can be done. I don't ANON whether you can
near nim or not.
Is there any uestion in your minds that the thing
without
If they are giving us 8 buying and selling rate for
gold, they've complied with the
Viner:
Is there sention of notice to us?
Inej've seid that the rates of yesterday will con-
time today - the buying end selling rate - that is,
they have offered to buy gold une sell gold it fixed
rates to us.
(apper GOADE inj
168
-7-
.......
NON, what's this rate? What's this rate they've
given us?
mey sty that their buying rate and selling rate
of yesterouy's cable will continue.
Give me the buying.
I'm going to tronslate it. de can buy france at
440.
buying rate, mot?
suying rate, 446.
welling rate
4465.
jeiling rute, 446.
and we can convert eny transections lone at those
PATRS into 2014.
Convert any trunsactions
goud,
any transpetions into Fold.
-ac we love been Asked Informally to limit transactions.
I wonder If you could get this before you talk to
John Simon, because these are the two messages he
sent to you.
(ars Klots and Miss Chauncey
come in)
This is the first one right here.
(H. de Jr reads messages from Sir John Simon
as given by Butterworth in telephone
conversation)
H.S.Jr:
well, this is all superseded.
(On phone) Hello, operator. What about Sir John
Simon?
169
-8-
1001
I've placed the call. I expect to have him in about
seven or eight minutes. I talked to the London
chief operator st New York who handled these calls,
end she shid she could control the circuit SS fer AS
London but sne had nothing to do with the London and
Paris
one thinks they will cooperate.
out is she tying up the circuit for me?
Dor:
From here to London.
>nd don't Paint when you set the bill, hut don't
Dell me not It is.
All Fight, I mon't.
used, fil cignt, when it comes through let me know.
TOTAL
All right.
non listen, Marriner, any time that you - it's our
will gene - bny time you've got E usation, just
would you aind
11123 goda listener.
= are : atnt you here, and I Lake it - I'm moving,
200, terribly smally but LITY time you have ony
loubts just - like Payne, make funny feces at me.
I kLey OUT for 8 I went to get some
propost just went to call by office.
Is it necessary?
I nont to set those papers I prepared.
(Opper ções out and returns
shortly)
Mr. Morgenthou, It Looks to de as if the French have
taken steps to keep vitain the trigartite agreement
technically. They will buy and sell gold, but on the
other hand they are stopping transactions, in effect.
well, for the time being that means that ES for as
their interests between governments, they are still
on; US for S the public is concerned, 1t is not given
170
-9-
the Lavantage, and for the present technically
...
Inere's nothing that I can say. The fact that they've
given us this supersedes ¡ll this thing.
Inst's why it is so necessary to know whit they've
done in London, because the t doesn't tie up with
what we knew from Monnick when you first talked to
alim.
Clarence, get this thing. The French have given
un 8 buying rate of 440, a selling rate of 446%,
they will convert any of these transactions
into gold, and the technical arrangements are in
force; I sey, subject to your questioning it, that
is for as we are concerned the tripartite agreement
is still in force. I E-0) now calling up the Chancellor
of tue Exchequer end if they have given him the same
prongement then there is no resson why I shoulen't
say publicly tast, if NE are asked the Question,
"Yes, the tripartite agreement is in force."
Opport
(Nods yes)
Vinor:
LS 1'1 r LS the Government of the United States is
concerned.
well, there isn't snything else, Jake.
Viner:
Well, it WBS understood tust the pullic could
25, no. No, Jake, it's operating overnment to
government. The public can get their francs, yes.
To:
Can they?
sure, we'll sell them frencs at either rate. We'll
buy or sell at 446 or 446;.
Well, for commercial transactions. We wouldn't want
to engage in speculative transactions or transfers
of capital.
Merier:
It seems to me that this technical compliance post-
pones the necessity for making a decision
H...Jr:
Yes, but I ought to make a statement.
disfler:
for the present.
171
-10-
B.S.Jr:
and I would say that the technical arrangements
under which the tripartite agreement was set up
between France and ourselves - I nope I can sad "and
Great Britsin" - are still in force today 88 they
were yesterday.
recles:
That's right, today as they were yesterday.
L.,Jp:
Today 88 they were yesterday; - end that anybody
who had & legitimate commercial transaction and
can prove it -nd wants to buy and sell - ne can
COME in and do so through arrangements which we
have made with the French government.
I'd rather not have to add that last statement,
because you're going to get in & lot of controversy
«Ith the banks ES to what is legitimate and what
isn't.
Vener:
and also BS to wasther they really wanted anything
but governmental transactions.
well then, I can simply sey, "The technical arrange-
ments which were in force yesterday a re still in
force today, 25 between
"
Viner:
Treasuries.
"
as between the French Government and the United
States.
11
Viner:
18 between the Treasuries of the three governments.
And 1 поре I'll be able to say for Grest Britain.
Viner:
Ás between the Treasuries, stabilization and equal-
ization l'unds.
I say that all this (Butterworth's telephone messages
from Simon) is superseded.
Taylor:
Not necessarily, because of the point that ne makes
in his second message, which is the more important
one.
Jr:
I don't agree.
Regraded
172
-11-
sell, you don't have to ga :1ong with that; that's
the point. I taink that you ought to think now,
in these few minutes, whether you oughtn't to
suggest to nim that we're not prepared to make
is harsh € statement to the French DS that.
Until WE know more.
tot for the present they have made working arrange-
ments which keep them within the tripartite, the we
for our part are not disposed to make any such cold
or unsympt thetic statement to them. Do you (Teylor)
check on that?
That's the was I feel.
VENDOY
end no may be doing nim B Invor by giving nim the
suggestion that lie might think it over.
(On phone) Tell Chic benearz to come right in nere,
please.
Could Marriner have 8 look at that second cable?
Oh, I'm sorry. (Hands to Eccles)
Until you know what their Parliament is going to 00,
way, there is na point in our making any comment.
out there's no arm in making : statement to say that
the same technical arrangements
The british are taxing El much stronger stand than is
justified st this moment; it may be justified tonight
DE tomorrow marning.
(Sanwers comes in)
Chic?
02:
Yes, sir.
Je:
wast are the boys doing?
They 're nounding us, and they 're Ell outside right
now.
Regraded
173
-12-
well, boiling it cown - I cen't read 611 this stuff.
CARTE:
me just got El report of C vote of confidence - 393
to 142.
Viber:
That's good; that's a nigh vote. Thet's better than
Blum was getting. He had 185 ano 168 against.
(To Schwarz) well, I would just sit tight. And
we're working here.
I've been telling them that pending the - during
the debate over there it is not our osition to
comment on their own problems.
well, stick around. where are all the boys?
They are all right outside there in the corner.
0.1.Jr:
In my room?
No, in the corridor.
On, in the corridor?
Scantre:
Yes, sir.
1.1.Jr:
That's all right. O.M., that's all. Just wait;
you'll be available.
How is Herbert today?
Renearce
He's considerably better. I just spoke to him on the
ohone for a while.
(Schware goes out)
Toylor:
Where's Harry White?
Machhesd:
Yes, Harry White.
(On phone) Tell Harry White to come in here.
Now, what I'm going to do is, I'm going to take this
BS an oral examination. I'm going to ask oir John
Simon to tell me what he hes in mind, rather than to
go on this (messages via Butterworth), because most
likely he's got this streight now and why rub this
Regraded Uclassified
174
-13-
thing in and make mim back down? I'll say, "Sir
John, I'm calling you up - I just left the White
nouse and the President wanted me to get in touch
with you, and I'd like to know how does the thing
stand. This is the way it stands over here." Maybe
by then - I mean he doesn't have to reverse himself.
It makes it much essier.
Vinor:
would you tell nim you received the two messages?
no..dr:
Which messages?
Viner:
Inst ne sent you.
H...Jr:
Yes. but I
Stylor:
You're going - there's been ievelopments since then,
58 far as the French and ourselves are concerned.
You (Chauncey) have got 2/ full transcript of that
Butterworth?
Unsuncey:
Telephone conversation?
n/Ang:
Yes
Toundey:
No, not yet.
(White comes in)
\..Jr:
(Reading press dispatches) "Three thousand dealers
off the Bourse.' That's È good way to nandle.it.
I'm going to tell Jim Landis he's overlooked some-
thing.
This is: "Chairman Eccles of the Pederal Reserve
Board went over to see the Secretary of the
Treasury to tell nim how to conduct negotiations
with France. Secretary Morgentheu WES pleased to
receive all the suggestions from the Chairman."
recles:
OND did you have write that up?
H.V.Jr:
well now, listen, there it is.
decles:
Seems in good humor this morning anyway.
B.W.Jr:
I wish you would have seen the line the President
175
-14-
gave me last night. Did ne ride me last night
quarter past twelvel
(On phone) Operator, what about that call?
oper TOP:
Sir John Simon is in the Treasury, but they haven't
been able to locate nim yet.
A...Jr:
How long is it going to be?
Quator:
I don't know.
11. ,Jr:
Do we pay for this time?
Operator:
no, not till you start talking.
d...Jr:
ALL right. How Long will it take them to locate nim?
Operator:
She sald he N&B in the Treasury,
H...Jr:
Well, O.K. All right.
Hylor:
He's que at Parliament six o'clock their time - about
at. nour.
d. .Jr:
Does Harry know what's happened?
Wills:
Not since
.......
Cirrence, you're perfectly nappy about this thing,
aren't you?
on yes. There's been no ennouncement of the French
program, has there?
....Jr:
Yes, we have E cable.
I mean nothing further that would effect the tri-
partite agreement.
H. .Jr:
Riefler, when you stick around here you con't get
bored, do you?
Biefler:
Not so far.
what?
Regraded Uclassified
176
-15-
SINCEREL
Not so far.
If you get bored, we'll try to start something.
Viner:
I'd like to be bored for about a month or six
weeks.
You would. But you don't went me bored.
issuer:
lou're going to be at waikini Beach.
with
This 13 going to make it possible.
now -(E going to mindle Van Zeeland on this thing?
Not 2 date with nim at 11:30.
-
jion listen, I'm going to see nim. What's the little
French ttache's nome - Appert - if ne comes in any
more, "se President of France, ne liss E stomach sche,"
or something 11ke that - I warn you.
He isn't 12 objectionable à character às Mr. Wonnick,
but I don't think the frenen Government 1s very well
represented aare in these United States.
Well, they are ES well represented here as WE are
in London, with the exception of Butterworth. I
menn, excluding Butterworth, I'd say they a re as
well represented as we are.
"Paris - The Chamber of Deputies voted confidence
in the Popular Front Government tousy on its Jemand
for emergency powers to save the franc and fortify
the country's economic condition. The vote (123 393
to 142.
"MAILE Lebate was in progress in both the Chamber
of veputies and Senate, tue Covernment had foreibly
closed financial markets and suspended payments in
gold and foreign currency. After its vote, the
Chamber edjourned until 3 p.m. to allow the Finance
committee to consider the government projects. (Note:
E...Jr. read this "to allow the Finance Committee to
80 out for supper.")
1/7
-16-
MAda Treasury conference. In conference with
Secretary Morgenthau were Chairwan Eccles of the
Federal Reserve Board and Assistant Secretary of
Treasury Wayne C. Taylor, expert on international
l'inancial metters. (Note: H.M.Jr. reed this "were
!ssistant Secretary Wayne C. Taylor, Chairman
Lecles, Mrs. Klotz and Miss Chancey.")
"It letrned unofficially that the French were
regorded is still members of the tripartite monetary
agreement, (here 8.V.Jr. interposed "Mrs. Klotz
akjects" - is that right?) although not participating
notively. Officials nere, according to these sources,
regard the French measures as temporary, or rather
in the nature of B holiday."
Your General Counsel early this morning, while you
were bown on the Hill, decided that today Was the
same as Coristmas.
You nean
"Pittman on the French situation. Chairman Pittmen
of the Senate Foreign Relations Committee, today
prided France's action in suspending gold payment
and swin the move would tend to make the world
financial situation more satisfactory. Pittmen swid
The felt that no setion on the part of Congress NES
necessary or suvisable, but declineu to comment on
mether the Treasury would take any new action as a
result of France's move."
(On phone) iello?
Sir John Simon.
Jrt
Hello? (Conversation with Simon follows:)
Regraded Uclassified
178
June 29, 1937.
11:10 a.m.
Operator:
Sir John Simon.
H.R.Jr:
All right.
Oper tor:
Go ahead.
S.M.Jr:
Hello.
Sir John
Simon:
Hello.
H.M.Jr:
This is Henry Morgenthau, Jr.
S:
speeking?
8.3.Jr:
Hello.
S:
"ho is that?
...K.Je:
Henry Morgenthau, Jr.
S:
Benry Morgenthau, Jr.
H.A.Jr:
Yes. Is this Sir Jonn Simon?
S:
Sorry, Mr. Morgenthau.
H.V.Jr:
Is this Sir John Simon?
S:
Yes it is - I'm glad to greet you and to hear
your voice.
H...Jr:
Thank you, I'm glad to talk to you.
8:
(Laughter) Well, it's E grest way of making
contacts.
H.M.Jr:
Yes, it's & nice way to do it. Ah - Sir John,
things have been nappening so fast this morning
that when I got your message I thought it would
be best to talk to you directly.
8:
0.4.Jr:
Now, we have been in touch with the French, and
the French have made the same technical arrange-
ment with us for today as they did yesterday.
Regraded Uclassified
-2-
179
8:
I, I'm Just going to repeat it Mr. Morgenthau
to be sure that I get it rightly.
I'll do it
3:
the French
...
6.2.Jr:
The French have given us the same
technical errangements
D:
...
The French have given you the same
technical arrangements
..
\./.Jr:
...
for today
g:
...
Yes
m.d.Jr:
as we had yesterday
S:
...
that you had with them yesterday.
N...Jr:
Yes. They have iven us a buying rate for the
franc
...
8:
...
Have given you what?
H.W.Jr:
A buying rate - a rate at which to buy the
franc.
8:
Yes.
8.1.Jr:
Yes - at four forty-six.
E:
Four forty-six.
H...Jr:
Yes - and a selling rate at
S:
...
selling rate
n.w.Jr:
at - at four forty-six and one ,uarter.
:::
Four forty-six and a quarter.
d.V.Jr:
And any franc that we should buy, we have the
right
to convert these
2:
Yes.
H.2.Jr:
le have the right to convert these francs into
gold.
S:
have the right to
..
H.W.Jr:
to convert these francs into gold.
Regraded Uclassified
-3-
180
8:
You have the right to turn these francs into gold?
Yes, just - just the way we have right along.
:
you've been doing it right long.
A.S.Jr:
I - I mean in other - in other words, the arrange-
ments that we have with them today are exactly the
same as they were yesterday or the day before.
In other words, your arrengements today are exactly
the same as you h&d yesterday and the day before.
H.V.Jr:
Yes. Now under those circumstances - EN - an - we
feel that they are still in the Tripartite Agreement.
I - I didn't quite hear the beginning of that sen-
tence, Mr. Morgenthau.
I say, under those conditions
...
Yes, under those conditions
we feel
You feel - the American Government - the
Treasury feels
...
yes, that they are living 40 to the Tripartite
Agreement.
That they are doing what?
Living up to the Tripartite Agreement.
are tearing it up?
No, living it up - an - an - living up to it - an -
they - they're keeping it.
Dn yes, I see.
Yes.
You feel that they're keeping - keeping up the
Tripsrtite Agreement. Yes, yes, I see.
Yes. Now, I - I - I wondered wnether they had
made similer arrangements with you.
You wanted to know whether they had made similar
arrangements, as those you've described, with us.
Regraded Uclassified
181
-4-
H.A.Wr:
Yes.
ot
Well, the answer is "no."
The answer is "no".
Well
men did they first make these arrangements, Mr.
Morgenthau?
6.0.3r:
Pardon me?
"nen did they begin this arrangement with you?
H.4.Jr:
well, this - this srrangement came in by telephone
aná cable within the last hour.
Well, but I mean you say it is the same arrange-
ment as you had yesterday and the day before.
Aell, each day we get E cable from theu, and NC
get a cable from you
Each day you get cable from them and you get B
cable from us.
giving us a buying and selling rate
giving you B buying And selling rate
for the pound sterling and for the franc
for the pound sterling end for the franc.
Now, We got our cable from you, and we nave our
cable from the French.
6 cable from us and E cable from the French - yes.
Jr:
So we're in exactly the same position BS we've
always been.
S2
So you're in just the same position as you've always
been.
Jr:
Yes. (Pause) Now, I've asked our nan Cochran to
inquire what arrangements they made with the other
countries
8:
Yes.
in the Tripertite Agreement, and
. .
Regraded Uclassified
-5-
182
What you're really asking is whether they have
made a similar arrangement with us.
Right.
well, if that's it, the answer is, "No, they naven't."
n...Jr:
Well then, if you agree with me, I will withhold
making any statement until they do make such
srrangements.
S:
You - you're saying to me that if I agree, you will
withhold making any statement - I mean making any
public statement
H.M.Jr:
Yes.
I see
until they have made 8 similar arrange-
ment with us.
n.m.Jr:
night.
S:
Well, I shull need to continue that until
H.M.Jr:
Yes.
But the fact is, I think, apparently they haven't
made any such arrangements with us.
H.M.Jr:
Par- - pardon me - I - I didn't hear that.
I - I say that's a very technical thing.
H.4.Jr:
Yes,
81
I'll have to - have to consider that, you know.
H.M.Jr:
I understand.
8:
The fact is that up to the present they haven't
made any such arrangements with us.
H.M.Jr:
Well, this - this errangement just came in within
the last half hour.
S:
But they're today's arrangements.
H.2.Jr:
Yes.
S1
Came in within the last half hour.
Regraded
-6-
183
H.M.Jr:
Yes.
6:
Well now, look here, Mr. Morgenthau.
H.2.Jr:
Yes.
o:
I - I'll confer with somebody who is here in the
room with me, and just keep on the telephone
on the telephone.
H.A.Jr:
Yes.
S:
Is it clear?
Can you hear me?
H.M.Jr:
Yes, I hear you very well.
&
I near you very well - very well indeed.
H.W.Jr:
I - I will stay on the phone until you have
consulted with your associate.
S:
All right, thank you. That's very good.
H.M.Jr:
I will stay on the telephone.
(Long Pause)
(Unknown):
Yes, are you there?
H.C.Jr:
Hello.
(Unknown): Now wait a moment, here's Sir John Simon.
4.M.Jr:
Hello.
8:
Is this Mr. Morgenthau?
H.d.Jr:
Yes.
0:
I'm sorry to have kept you waiting.
S.M.Jr:
That's quite all right.
S:
It's Es good thing - about that
H.M.Jr:
Well, it's
...
S:
And it's not the way that that information strikes us.
Monsieur Bonnet
They don't understand
franc for the future
making
Regraded Uclassified
184
-7-
appearances for yesterday and today; you get a rate
for today and you may get it tomorrow and the day
after, until they've carried their legislation.
E.M.Jri
That's right.
well then, as soon 1.3 ever they've carried their
legislation, whatever it is, it's
then they may leave the franc,
may they not,
any level.
4.21 - I didn't - ao you aind repeating? I didn't
get that very well.
I say, you haven't got any promise from the Erench
that they will hold by this arrengement in the future.
No, what they said was - I've read over what - the
notes I made. They said that they would give us a
rate until further notice.
They would ¿ive you a rate
...
until further notice
till further notice.
Yes.
ies.
How tnat might be one day or two days. Hello?
...
would give you = rate until further notice.
Jr:
Yes.
Bell, what my - what my thought is
is this. That's all right for today and
perhaps for tomorrow
Yes,
But until further notice - but of course they can
stop it when they don't want to go on with it.
And they might not figure
that it shouldn't
go all over the place.
"ell, that - that - I taink your Interpretation is
quite reasonable.
Regraded Uclassified
185
-8-
S:
Yes, and we haven't got any such agreement with
them. We're clearing up, you know, some old - some
old odás and ends of exchange from the last few days,
but we've got no arrangement about the future.
Well, could - did - did they not give you an
srrengement today?
L.O, they have not.
and
I see.
=:
lio, they dion't. And Mr. Morgenthau, I'm going to get
Sir Frederick Puillips to speak to you, but I'd like
to say first that I'm most grateful to you
ies,
is
...
for being good enough to come and - to let me
know what was just said. You've been very helpful to
us, and we appreciate it very much indeed.
H.2.Jr:
Well, Sir John, may I say this? we feel here that
after ε11, this responsibility is going to rest on -
on your Government and ours, and we - se - we're - we
want to do everything we can to work ES closely
together with you 68 possible.
Well, I - I think - I appreciate that feeling, Mr.
Morgenthau, entirely.
And
St
on absolutely united basis, I'm sure of
tast. We've got to work together over this, so that
all
m.s.Jr:
+ut I'm afraid that in the final enalysis your
Government and ours will have to cerry this burden.
51
Well, it may be that
cerry 1t between us.
Right.
S1
fine.
we'd De ever obliged to you, Mr. Secretary, if you
won't make a public statement until recess La up.
Regraded Uclassified
+
186
We will not make a public statement until I hear
from you.
Very good.
Now, one other thing, if I may
in the House of Commons to make
any statement today at all.
6,2.30:
Pordon me?
I hope - I поре that it won't be necessary to
make any tements in the House of Commons tojay
Yes
at sll.
Right.
I expect that sometime tomorrow - tomorrow afternoon -
I may be asked for something.
I see.
But of course I will communicate with you, you know.
Yes.
because e want to keep in step.
Jr:
An - I think it's very important because - ah - en -
I - I don't like to say this, but again today I
talnk that both your Government and ours was told
information which was not correct as just to what
I AS генду to do BID what you were rendy to do.
You've got. the right engle altogether; I quite agree
with you.
And this
Now I'd like for you to speak to Sir
Frederick Pnillips.
Yes, I'd like to.
You can do that if you would. He's my technical auviser.
Yes, I'd be delighted to talk to him.
Regraded
-10-
187
3:
8.2.Jr:
Well that's fine.
Sir Frederick
Phillips:
Hello, Mr. Morgenthau.
H.M.Jr:
well, how-do-you-do, Sir Frederick.
AD - have I
made it
Hello?
P:
Sir Frederick Phillips speaking. Sir?
H.2.Jr:
Yes, yes, I - I hear you quite well.
P:
We - we did know that the Bank of France was
supplying the francs
at the old rate, but that the Bank of England
M.M.Jr:
I see.
P:
H.2.Jr:
I see.
n.
absolutely no arrangements with them at all
as to what happens after that.
B.2.Jr:
I see. I see. Well, they gave
...
2:
it is natural on that point to say
...
A.2.Jr:
Well
that we're not setisfied at the present moment.
...
M.V.Jr:
Pardon me?
lie couldn't possibly say we were satisfied at the
present moment.
..V.Jr:
You - you can say you're not satisfied?
P:
No, we sren't satisfied with it at all.
S.A.Jr:
No.
188
-11-
H...Jr:
Well, I - I wanted to give you the information
tast we nad and, ES a matter of fact, I don't
believe we've had any transactions take place in
the francs in our market today.
P:
I see.
Although, of course, we have this buying and
selling order
Yes.
H.M.Jr:
...
for the French Government.
Yes.
8.3.Jr:
But so far, up to & few minutes ago, no trans-
sctions had taken place. That - but that -
would you hold the wire just a minute please?
Windly.
(Pause)
4...Jr:
Ah - an - well, Sir Frederick? Hello? Hello? Hello?
Hello.
Sir Frederick?
Yes, speaking.
Well, if anything develops we'll let you know.
If anything develops you'll let us know.
Jr:
and would you mind asking Sir John Simon now late
it's convenient to have me call him, in case of en
emergency?
Yes.
(Pause) Any time at the Treasury this evening.
d.1.Jr:
Well, how late?
Regraded Uclassific
189
-12-
P:
An - that's
just one moment. It's half past
five here now.
E.M.Jr:
Yes.
P:
Any time within the next three hours.
H.M.Jr:
All right. Well, thank you very much.
P:
Thank you.
H.M.Jr:
Good-bye.
P:
Good-bye,
Regraded Uclassified
130
-17-
(While waiting between first and second portions
of conversation:)
n...Jr:
Has that conversation all right?
Fine.
R.H.Jr:
There's no use going into this whole business.
Viner:
This may be & way of disposing of that.
H. .Jr:
Listen, ne's & lawyer, I'm 8 farmer; between us,
de understand each other. I mean ne can under-
stand what I'm talking sbout; if he doesn't, ne's
got Sir warren Phillips in there.
Incidentally, Harry, look up whether Sir Warren
Phillips is the son of Sir Admirel Warren Phillips.
The permanent Under Secretary of the Treasury - Sir
worren, isn't it?
doller;
Frederick.
A...Jr:
Sir Frederick. Is he the son of somiral Phillips?
nulse:
hell, if ne 1s, Aumiral Pulllips must be pretty old.
The President knows this fellow - the President knew
the Admiral and when he comes over ne'd like to be
tible to say, "I knew your father."
Viner:
Get the no's Who.
-
He (white) has 8 way of coing it.
You (Viner) satisfied so far?
Yes, I'm all right.
I should 9DY, "Old top, by the way, We go rifty-fifty,
don't Ne?"
Yiner:
He's supposed to be 8 very icy, cold person.
8.8.Jr:
So am I (jocularly).
191
-13-
Viner:
So that just - he's got a bad reputation that WEY.
m...Jr:
So have I.
Viner:
And then afterwards ne's sick about it. He's always
getting in wrong; his neart seems to be in conflict
with nis manner.
name:
lle's also oily like 8 fish.
8.V.Jr:
You know, the President said - he said, "When you
trlk to Sir John Simon and you offer to carry this
load, make sure it's at least fifty-fifty."
(On phone) Hello (Second portion of conversation
with Simon, and conversation with Phillips, follow:)
Regraded Uclassified
Pex.
pm
192
-19-
All right? What?
Viner:
My guess is tast ne will not send that second
message today.
He said that he will make no statement.
Your:
No public statement.
......
And ne will answer no uestions in Perliament today.
were
=bout sending France that message.
he's thinking that over.
00,03$
de wan't send that without first communicating with
you again.
I think it's all right, don't you, Marriner?
wooks 611 right so far. Unusual situstion - orrange-
sents between us and France, but none between France
and Englind.
I tatak Archie's explonation 1.1 the right one.
I dion't want to say that (to Sir John Simon), Archie,
because what I'm trying to - is - I ant to sit back
1.8 long is possible an give Prince all the time
possible. Now, Liter All, this naturally will vanoy
the English and they will send and say, "Well, way
Jun't you lo :-3 well by us us you 10 by the Americans?"
Let then work it out.
Tust's right - let the French.
(on none) Hello.
DD you want me to continue to nolu that line?
welerse it. How weit $ minute, just N minute.
Do you (Taylor) want to tell Cochran what happened -
sur conversation? ..nat do you think?
Yes,
No, de NES going to find out
[To Operator) No,
release the wire.
c'll welt until WG neur from him.
Regraded
193
Message from the Chancellor of the Exchequer
to Mr. Morgenthau.
SECRET.
I may be asked in Parliament this evening
whether I regard the decision of the French Government
to suppress upper and lower gold limits as a departure
from tripartite monetary agreement. In that case I
shall reply that events have shown that readjustment
of franc in September 1936 was not entirely successful
in reestablishing a lesting equilibrium between economic
system in France and those of United States and Great
Britain. I have not been informed within what limits
French Government hope to establish franc and naturally
decisions of this importance require time for thought
and consultation, For the moment I limit myself to
saying that I have been assured by French Government
that it is not their intention to seek any exchange
advantage and that they are anxious to continue close
cooperation with Governments of United States and
United Kingdom as called for by monetary agreement.
June 29th, 1937.
Regraded Uclassified
Message from Chancellor of the Exchequer
194
to Mr. Morgenthau.
SECRET.
In continuation of my immediately preceding
telegram the message from Chancellor to Mr. Morgenthau
proceeds as follows:-
I assume that you will have received a message
from the French Government in same terms as that which
has reached me. I note that they state that they have
decided not to allow reserves of Bank of France to be
further reduced. (Last published reserves of 57 milliard
francs must have been reduced substantially during the
past week and there is also a claim on them for four
milliards for the purpose of repaying next November
credit of French Government raised in London early
this year). I do not understand their statement
combined with further statement that fluctuations in
francs will continue to be smoothed out by equalisation
fund which everyone knows has no gold left. On the
contrary unless they are going to abandon for time
being all efforts to support franc they must transfer
more gold from Bank of France to equalisation fund,
Bank of England at the request of Bank of
France has suspended quotations and dealing in spot
francs in London and Rotterdam, informing National Bank
that it will be impossible to do this for more than
today and tomorrow.
I/
Regraded Uclassified
/ 190
I do not see any opinion can be formed as
to probable course of franc in near future until we
know details of French Government proposals for
liquidating budget deficit and improving position
of French Treasury and how these are received in
Paris.
I have sent interim reply privately to
French Government as follows: Begins. I am
eagerly awaiting information as to steps which
?rench Government are taking to liquidate budget
deficit which our own past experience has proved
to be all important in restoring confidence.
I understand the intention of the French
Government to be to abandon their present gold limits
and not merely to suspend them subject to an obligatory
return to them later. I note also their communication
was made under paragraph 3 of tripartite agreement
but I do not see how there can be any effective
consultation on this when a decision has been reached
and is about to be communicated to French Parliament.
Nevertheless I feel bound to record my regret that
decision has taken this form. Whatever grounds may
exist in present conditions for temporarily suspending
gold limits I consider their permanent supersession
may have serious consequences and I need time to
consider repercussion of decision on tripartite agreement
in consultation with United States Government before
saying in what form and under what conditions it will
be possible for it to remain in being.
Reply ends.
Regraded Uclassified
196
I have adopted this attitude in view of serious
situation in France and uncertainty how far they
can enforce their decision once gold has been abandoned.
I should be very glad to learn your general feeling
on matter as soon as possible.
Regraded Uclassified
197
I'A
GRAY
Paris
Dated June 29, 1937
Rocid 10:13 A. m.
Decretary of State
Vashington
875, June 29, Noon.
PIO:
Journal Official this morning carries two financial
docrees. The first provides that
""2.0 stock and produce exchanges will bc closed
from June 29, 1937 until a date which will bc fixed by n.
ducision 62 the Finistor of Financo"
The succed docree providos that
"Articlo ono. The phyment of bills of exchange
and other commurcial engagements expressed in gold 07 in
foreign suprossion maturing from the date of Juno 29, 1937
may be upon the written request of the debtor;
the date from thich the payment may bo domanded will be
fixed by :- docroe of the Minister of Finance.
Article two. A protest MOT not be presented boforo
the anto fixed by the decision reforred to in the proceding
article as concerns commercial bills the payment of which
skell have boen postponed under the conditions laid down
in the saw article.
Article three. Durin] the same period the interest on
the
Regraded Uclassified
198
MA -2- 875, Juno 29, Moon, from Paris
the dobt corresponding to the commercial bills and other
commorcial ongagements reforred to in the procoding
articles will be calculated at the rato of discount of
the Bank of Franco. 11
Please inform Commerce.
-
BULLITT
CSB
Regraded
199
VROV I RENCH GOVERNMENT VIA
June 29, 1937
isux JEAN APPERT (given to Mr.
11:35 D.M.
302475 call Yr. Lochhead)
Can I go ahead?
168.
vell, ir. Taylor, I have been requested to - I Q&Ve
need ordereu by the cable which I received this
morning from the French Government, which I have
from .r. Georges Bonnet, to have with the American
Government some of this consultation which A&S been
provided for in the monetery agreement or September
26, sir. am paragraph three - you remember that
It the end of this paragraph it is saio that the
United States Government, the British, and the French
governments will arrange for such consultation 13
my prove necessary with the other two governments
one their designeted agencies. and I'll rive you -
the best I can do is to give you B translation,
EA abriugeu translation, of the cable I received
this morning.
Mr. Bonnet told me that the Council of the Winister
will examine this morning - it is now post - has
examined this morning E financial rehabilitation
ylen watch is to be submitted at the end of the
afternoon - no, which has been submitted yesterday
from the Council of the Cabinet. The Council of the
Cabinet Is headed by the Premier and the Cowncil of
the Minister is headed by the President or the Senste.
In order to carry un this program, the French Govern-
ment will ask this afternoon the Parliament for very
broad powers. This program provides steps in order
to insure the complete balance of the ordinary budget
31° 1937. It will provide also for É lessening - a
very large lessening of the charge of the Treasury
for new loans from the Bank of France to the Govern-
ment, The Government expects 8 § very important result
from these measures. nowever, it nas decided not to
allow the gold stock of the Bank of France to decrease
ENT more. Consequently, it intends to suppress the
limits which in the monetary law, the French monetary
law, are made compulsory - the exchange rate of the
franc against gold between 49 aná 43 milligrams of
gold. Also, the movement of the francs will be
200
-2-
restruined by the stabilization fund, vou the
franc will be sble to find a point of equilibrium
better suited to the economic condition in
financial condition of the country.
The wion secording full powers is going to be sub-
mitted Lo the Parllament this afternoon, and the
Government intenus to SSK for an immediate vote
in the two houses. In order to prevent speculative
aves, security and commodity exemenges *111 be
closea today.
They have been uested, ES it is provided in the
trigartite greewent of September 130, to approvch
without delsy the /merican Government to inform nim
=bout the intention of the French Government and
to :S& nim to let me snow want will be the position
of the American Government about this matter.
I wien to stress the feet that the French Government
La not seeking in any way in these steps to take an
unrepsonable excusige advantage. I wish to stress tirst
in cerrying on this particular program the French
Government intends to maintain with the American
Government, as well as with the British Government,
close colleburation, which nes been the дерог outcome
of the tripartite agreement, to which the French
Government feels more devoted 65 1 neighbor.
And that is about all the cable asked me to say.
so, Mr. Taylor, the French wovernment, at your
mercy, will await your answer, and I would like
you to carry this message to Mr. Morgenthau and
160 ain to consult the American Government the to
let us anow ES soon as possible, of course, st his
earilest convenience, which will be his position
in this matter. And any information you could require
I would be 62nd to give you, and telephone or cable to
:tris If you want to know anything - something more.
communication, naturally, and #e will comment on it
Tell, I think that
we're very glad to have the
ES soon 86 we are able to. (ie will undoubtedly consult
otner members of the tripartite agreement, and after
consultation, way, we will give you on answer as
quickly ES possible.
201
-3-
Appert:
Well, I see nothing else. I don't want to hurry
you in this matter, but the sooner is the best. I
suppose that in Paris they are very anxious.
Taylor:
Oh yes, as soon as we possibly can. It might be
that we will communicate by telephone, because
we will be talking to Cochran. We already have,
as a matter of fact. And it may be that we will
use that channel of communication. But if we do,
I'll tell you about it.
Apert:
Yes, thank you.
Regraded Iclassified
202
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: June 29, 1937, noon
NO.: 877
FROM COCHRAN.
This morning at 11:30 I had a telephone call from
Rueff. He said that he had just
comminicated with Monick, the French Financial Attache-
in London. The latter said that the British Chancellor
of the Exchequer thought that he might be questioned in
Parliament this afternoon regarding the Tripartite Agree-
ment and the situation in France. According to Monick,
the Chancellor intended to answer that the French Gov-
ernment had consulted with the British Government in
accordance with the terms of the third paragraph of the
Tripartite Agreement, and that the Tripartite Agreement
still stands. The British were making official inquiry
as to whether such a gratuitous statement by the Chancellor,
in the event that the direct question was not posed,
would be welcomed by the French. Rueff sent word that
the French would very much appreciate such & statement.
Rueff said that the French Financial Attache in London
was under the impression that efficials of the American
and British Treasuries were in communication. I was asked
by
Regraded Uclassified
203
- 2 -
by Rueff to inform the Secretary of the Treasury of the
above and also indicate to him that the French would con-
sider it very much to their advantage and would be muoh
gratified if the American Treasury might see fit to issue
some sort of a statement along the lines suggested by the
British.
BULLITT.
EA:LWW
Regraded Uclassified
204
will
June 29, 1937
12:30 0.0.
.ro alotz
> Viner
Jr. Tsylor
11. Lochness
12. \infler
In. Unite
anviour appert nao to sey practically what you got
INVO the list cable in the form of an official
mercunication, specifically referring to Paragraph
care,
that?
all, tast's the one about consulting. That's the
that Sir John Simon was kicking about. And we
Kr. Appert very much for nis communication
0014 that We would reply to it S.S. soon LS
out unububtedly would consult the other
maders of the tripartite agreement.
in group) WILL you arrange for me to talk to Mr.
N.A. turee and immediately after that, when
1 106 incough, I want Mr. Butterworth. Please.
t turee and immediately after that Butterworth.
nouse onone) President, please. - -
-- - Yes, because it will be one wey. -
House ;mone) Hello? Hello, de. President.
milz I OF through to Sir John Simon and I
11:00 tast the French finally made a buying end
with us. - - Yes, they came
- - well, or - to sell at 4.46 and buy
- - A.O is the top limit in
la the top eno 43 milligrams is the
lisit.
15.
smils DE 4.35, the lower limit, and the upper,
205
-2-
4.35 and 4.65.
(40 the President) The 43 and 49 - that's milli-
grass; but in cents it's 4.35 and 4.65. - - -
4.46 and 4.46; - in other words, one Quarter leeway,
- - No. And they selo it would be good until Cur-
Mer notice. - - Now, here's the interesting
I
-
Well, de was just dumfounded because He had
nu such srrongements. They had made no arrangement
with sin. So I tald nin that I would refrain from
maing any statement that the tripartite agreement
11:2 still in force until I negru from aim, end ne
tremenuously obliged and very much pleased, 1:00
is 0010 AM sould refrain from making any statement
to Partinment this afterbion until he consulted
Forther with ne. - - He's getting in touch with
the French. He sald that they nad some odus and
casa or foreign exchange which thes yere going to
to clean up out they has no such arrangement as
lb - - They would, yes. They'd deliver gold
to US. The technical arrangements doven't enanged D
bit. I mean they living ..... - - Irue, but
on the other arms, if ED Englishmen luis E contract
ona ne wants to buy franes, de can't buy any. I mean
it's stopped all business with England but our merchants
CPA still do business with them. TA will only give
anybody Crines today who has P commercial contract.
we won't ¿ive anybody - we control it intoly here.
DO it mema that in American business men can Locay
Jo business with France but ET. Englishmin cannot, so
the Avantage is ill ours, for once. - -
- - J.S for us I snow - I'll ESK Archie - #6 haven't
line by business today.
III
Tuere's a more Lorium.
--
we're wetching - we're seking prybody who has on
sotual commercial contract to come in to us.
But SC for no business?
Not SC far.
(Io the President) we nave taked LRY cusiness an THE
nas an open contract to come in to as and state nis
problem. 80 far nobody his done in.
Regraded Uclassified
206
-3-
Sequerd:
That's not public.
n...Jr:
(To the President) But that's not public. Ano
I've put in calls for Cochran and Butterworth
again et three. But Sir John Simon was just
tickled to desth. I don't think he had ever talked
ACPOSS the Atientic before. lie WBS just tickled, -
Yes. - - Unfortunately, I had to pay for the call,
though. I coulon't go fifty-fifty on that.
-
-
I'll 00 that. - - O... Thank you. (Lnd of
conversation with President).
be says next time reverse the charges.
500
here is something that throws some light on this
Business.
...Jr:
Don't throw any light on anything. I don't want
TAY light.
Wylar:
I'll read it to these mugs; then you can listen or
not is you see fit.
which side of the table is Mrs. Klotz?
M R1sts:
with the other mugs.
Jr:
he'll line out whether she's curious or not.
"Journal Officiel this morning
E little louder.
"birst, list stock 206 produce excludes will be closed
from June 29, 1937, until 0 date which will De fixed
by 8 decision 01' the Vinister of Finance." That's new.
"becond decree provides that: Article One. The payment
of bills of exchange and other commercial engagements
expressed in gold or in foreign currencies maturing
from the date of June 29, 1937, way be postponed upon
direct request of the debtor. The Date from which
the payment my be demanded will be fixed by a decree 11
of the Minister of Finance. Article Two.
You sound like 8 lawyer.
Regraded Uclassified
207
-4-
:vim:
"Protests may not be presented before the date fixed
by the decision referred to in the preceding article
12 concerns commercial bills,"
No, Wayne, you take them back in your room and read
them that junk.
The point is, one reason you haven't got any demand
for francs is because they've got BY moratorium on
the other end.
Knoke spoke to Cariguel again when he got his cable.
There:
inis protects the French webtor but still Leaves the
American debtor
I'm not worried about the fellow trying to buy but
about the fellow trying to sell francs. Knoke spoke
to Cariguel after he got the cable and ne said, "Now,
00 you really want to buy francs?" Cariguel said,
"No, I don't really want to buy francs." Knoke seid,
"Well, wast about if an American tries to sell his
francs?" He stid, "You're going to get your gold."
I told Snoke that he wants to waten out if there is
any commercial, and in feet I would really welcome
& moderate acunt of frones, Just to set it on the
record.
If the Standard 011, for instance, sold D illion
dollars worth of bil and it comes due on June - what's
today - June 30 - it comes que today and they want
Francs for it, there's no moratorium on that; they
present it and they get it.
Viner:
The French debtor doesn't have to pay.
litte:
But that's Standard 011.
Jr:
I'd like an American business men to come in with a
bill of a million dollars ano see
Locanesd:
On the other hands, if the French debtor owed a
million francs held pay B million francs over to the
American; the Standard 011 would have a million
francs. The question is, can the Standard 011 Company
sell that million franes to us today? The answer is
"Yes."
Regraded Uclassified
208
-5-
Well, listen, boys, if it's agreeable I'm going
to get a little to eat, then I'm going to lie down.
And if there's something - I'd like to let it go,
whatever happens, until three o'clock, unless there
is something that can't wait.
Toylor:
Fine.
And I'll tell Feeles he's to come back over at three.
I taink ne kind of likes It. I think he enjoyed it.
Stylem
I talked to Feis and brought nim generally up-to-date,
....Jr:
GOOD.
litte:
Becles talked to me a little on the way down. We
IV ppened to be Walking down the hall. And I would
substantiate that.
...Jr:
(On Jhone) Hello, Marriner. If you've got nothing
better to do, about three o'clock we're going to do
some more transatientic telephoning - if you'd like
to, drop over. - - That's right. - - That's
all. - - No, I would say all bets are off on the
Thursday stuff. - - No, it's all - Magill will
say nothing on Thursday. we've got until we run out
or Republican names; when We get down to Democratic
names, we'll call the hearing off. - - Anst? - -
On, your neighbors. - - All right. - - well,
listen, Marriner old man, when we're sitting sround
waiting for calls we can have a chit-chit. I'm
getting very Chinese - chit-chit. - - All right.
Aell, let's sajourn. You're (Taylor) keeping the
State Department happy?
Trylor:
.ell, I just told them in general what nao happened.
4...Jr:
Listen - weit E minute, Jake - everybody, you fellows
aren't worried about anything, are you? Anybody
worried? Everybody nappy? 0.X.
206 :
BC
Plain
London
Dated June 29,1937
RECEIVED 2:15 PM
Secretary of State,
cohington.
RUSE 416 June 29, 8 p.m.
FOR SECRETARY borgeptilu FROM BUTTER'/ORTH.
British Treasury has asked me to call at 8:30 peme
to obtain repult of their deliberations after your tele-
phone conversation with Sinon. I have indicated to
overseas telephone service that I will bE available for
a call from you at 9:15 p.m. and I vill then communicate
what I have obtained from British Treasury.
BINGHALI
CSB
Regraded
Jclassifie
210
LMS
GRAY
Paris
Dated June 29, 1937
Rec'd 2:30 P. m.
Secretary of State,
Washington.
881, June 29, 6 P. m.
FROM COCHRAN.
The following is a translation of the text as pub-
lished in the press of the sole article of the Finance
Bill laid before the Chamber this afternoon by the
Chautemps Government.
"The Government is authorized, until August 31, 1937,
to take by decree agreed to in Council of Ministers, all
measures of a nature to assist the repressing of attacks
on the credit of the state, the fight against speculation,
the economic restoration, the control of prices, the
equilibrium of the budget of the Treasury, and the defense,
without control of exchange, of the gold holdings of the
Bank of France".
BULLITT
CSD
211
RB
GRAY
Paris
Dated June 29, 1937
Rec'd 3 P. m.
Secretary of State
Washington.
RUSH.
832, June 29, 6 P. n. (SECTION ONE)
TROI COCHRAN.
At 4:45 p. m. I talked by telephone with Cariguel
at the Bank of France. I asked him if he had been in
contact with the central banks in the other club countries
today and if the technical monetary relations between
Prench and the others were being continued as heretofore.
lie told me that he had taken it upon himself this forenoon
to telerhone the central banks of the Netherlands, Belgium
and Switzerland. Furthermore, he had been in repeated
conversation with the Bank of England. He said that it
was clearly understood with each of these banks that the
arrangement which controlstheir relations under the tri-
partite agreement and the technical agreements subsequent
thereto would be continued. He said that England and
Belgium were the only ones of theEuropean club members
with which the French fund ordinarily has gold dealings.
At
212
RB
-2-#882, June 29, 6 p.m. from Paris
At 5 o'clock I got in touch with Rueff who was in
the Chamber where he had been following the procedure
this afternoon. I told him of my conversation with
Cariguel which was the subject of my
(END SECTION ONE)
BULLITT
KLP
Regraded Uclassified
213
MA
GRAY
Paris
Dated June 29, 1937
Roc'd 3:30 P. m.
Secretary of State
Mashington
RESIL
882, June 29, 6 P. m. (Section tvo)
879, June 20, 4 P. m. Ruoff confirmed completely what
Carigual and Mournier had assured me, in that there would
bo no change in the technical rolations between the French
and American stabilization fund and that reciprocal
gold facilition would continuo to be extended by Franco
to the United States.
I told Ruoff that the Secretary of the Treasury
had informed mo that full cooporation of the Amorican
banks had been obtained in the matter of rostricting franc
transactions. I told him further that the matter of
an American statement on the triportito agreement was
under considoration. I asked Ruoff if a statement from
any of the club countries other than the United States
and Crost Britain had boen sought. Rucff insisted that
the Frenci. had not sought a statement from the British
but that the latter had voluntarily indicated to Monick
thoir willingnoss to make a statement. Rucff said that
ho considered the situation of the three major powers
difforont
Regraded
214
MA -2- 882, June 29, 6 P. m., from Paris
different from that of the three countries which had
been added to the club, He said thorefore that exchange
of views had only been initiated by the French with
the American and British authorities. He added that
official instructions had been sent to French diplomatic
chiefs of mission in Belgium, Switzerland and the
Netherlands informing them of the present French situation.
They wore instructed to explain this to the respective
monotury authorities and to ask that the latter continue
to collaborate as heretofore with
BULLITT
HPD
Regraded Uclassified
215
RE
GRAY
Paris
Dated June 29, 1937
Rec'd 3:50 p. m.
Secretary of State
Washington.
RUSH.
082, June 20, 6 D. m. (SECTION THREE)
the French monetary authorities. The situation is there-
fore, according to Rueff, that the French have advised
the British and ourselves in advance and have sought our
reactions. On the other hand they have through their diplo-
matic officers informed the Governments of Belgium Switzer-
land and the Netherlands of the steps which France is taking
and have sought continuing collaboration on the part of
the monetary authorities of those countries on the same
lines as heretofore followed. They do not EXPECT any public
statements from the three minor powers.
ThE Chautemps Government received strong vote of con-
fidence in Chamber this afternoon. Financial blank was
referred to the Chamber Finance Committee. Chamber meets
at 9 or 9:30 tonight to study blank. Understood there was
an unpleasant incident when Blue Entered the Senate to read
the Government's blank to that body which resulted in Blum
retiring
Regraded
Uclassified
216
RB
-2-"882, June 29, 3 p. m. from
Paris SECTION TIREE
retiring and Sarraut taking his place to read the proposed
law. Too early to say whether this incident may have any
significant Effect upon relations between Socialists and
Radical Socialists in the Popular Front.
(END MESSAGE).
BULLITT
KLP
UPD
June 29, 1937.
217
3:05 p.m.
B.V.Jr:
Hello
Operator:
Mr. Cochran. Go ahead.
H.M.Jr:
Hello - hello
3
Hello Mr. Morgenthau.
H.W.Jr:
Hello Cochran.
C:
Yes.
3.9.Jr:
C:
What's that?
6.6.Jr:
C:
très bien, Monsieur.
E.W.Jr:
Good. Did you have a good dinner?
o:
Yes - had El good dinner.
All right.
X:
Sitting here at home.
Yes.
is
Just had word that the Chamber was meeting at
9 o'clock to go shead with the debate on this
bill.
H. . Jr:
Ah-ha.
C:
It was accepted by the Chamber Finance Committee.
H.M.Jr:
Yes, we got that.
is
So it got through the Committee.
H.d.Jr:
Yes, by one vote.
C:
Yes.
d.M.Jp:
Yes.
218
-2-
C:
I thought that W8S merely 8 mistske; I heard it over
the radio but that was your report too - just by
one vote?
H.M.Jri
One vote.
S:
Yes. There's no newspaper comes out later than six
o'clock here.
R.M.Jr:
Well now there's a long statement on the United Press
ticker by Bonnet where he gives all kinds of figures
and ends up by saying that "announcing further devalue-
tion of the franc, Bonnet told the Commission that the
government will decide to eliminate the lower limit
of franc - rete B,S fixed in the tripartite agreement."
5:
I see.
H.1.Jr:
And that's dated - on - 2:51 our time.
O:
Yes- yes.
H.S.Jr:
Now if you naven't got anything I've got something
to tell you.
C:
Well I have E couple of little things.
8.5.Jr:
Shoot.
C:
Well, after I talked with you I got D hold of Rueff.
H.M.Jr:
Yeah.
C:
- it the Chember. And I also got E hole of Cariguel
again.
8.4.Jr:
Yeah.
S
And I asked him if he had been in contact with the
Central Banks in the other Club countries.
H.M.Jr:
Yeah.
C:
And he said that ne had gotten in touch with them
on his own initistive, that is, with the Netherlands,
he had been in contact with the Bank of England all
Belgium and Switzerland before noon. But ne said
day.
Regraded
Iclassified
-3-
216
H.M.Jr:
Yeah.
And he said it was clearly understood with each of
these banks that the arrangements which controlled
their relations under the Tripartite Agreement and
the technical arrangements which followed would be
continued end then when I talked to Rueff - an - I
got him in the Chamber this afternoon - he confirmed
that information which Cariguel had given me earlier,
you know.
Yeah.
That is, ebout their willingness to give gold to us.
decour:
Ah-ha.
And Ruefi sald that the machinery would be Just the
same, b ut the rates would be different.
Yes.
And then I told - en - Rueff - that I had talked to
you and wanted to know if any statements were going
to be given out by any of these other countries
H.A.Jr:
Yes.
CE
and ne said that he didn't anticipate any by
the three smaller countries.
H.M.Jr:
He did not whet?
C:
Anticipate statements would be given out by the three
countries which were added to our tripartite.
S.I.Jr:
Ah-ha.
He said that - that while he nad given the British
and ourselves advance information and had discussed
the steps with us they were not giving - an - they
were not discussing with the other three.
H.S.Jr:
I see.
C:
But he said that they - he had - they had sent
instructions to their Diplomatic Officers in Belgium,
Switzerland and the Metherlends to inform their
respective monetary authorities about this step
that France is taking
H.M.Jr:
Yes.
220
-4-
....thd to ask these countries to continue to
have their central banks or monetary authorities
cooperate with the French as heretofore.
H..Jr:
Un huh. Well, now, are you through?
8:
Another thing I had was that at seven forty-five
this evening
H.H.Jr:
Yesh.
5
Rueff called me here. lie was in the Chamber then.
Yeah.
And ne said that they had telephoned him from
London
S.M.Jr:
Yeah.
-,
that you hao been in touch with the British.
R.V.Jr:
Yean.
C:
And that you had the impression that the price -
that the franc WBS going to be fixed at four
forty-six.
d.1.Jr:
Yeah.
0:
And that that rate would be continued but that
you wanted some assurance though that you would
be given twenty-four nours' notice if there are
to be any changes.
E.2.Jr:
And now, is that that fellow Monnick again?
C:
I - it must be - I can't understand any other way.
H.W.Jr:
Well -
C:
I told Rueff - I said I haven't said that four
forty-six was going to be retained.
Yes.
-5-
221
H
I said to Cariguel and I suppose he sent wires
across that that NES the rate which they were hold -
were offering to-day but that was yesterday's rate
and that that rate would be continued while - in
this period when there was no quotation.
J. .Jr:
Well now let me tell you what happened.
C:
All right.
8.7.Jr:
I haven't got the exact timing end all that but
sometime during this morning we certainly ¿ot the
impression here that the French 20 ave the impression
to the English that I WAS going to make B statement
to-day
Yes,
....Jr:
that - un - the tripsrtite agreement was still
on, see?
C:
Yes.
E.M.Jr:
Then the English were given the same impression by
the French - an - that I WES going to make : statement,
see?
::
Yes.
H.1.Jr:
Then, in the meantime, Sir John Simon sent over E13
proposed statement which ne was going to make this
afternoon.
C:
He sald that to you.
H.\.Jr:
"hat?
is
de said that to you?
8.2.Jr:
Yes.
¿
I see.
H.M.Jr:
Where he was going to send a pretty sharp tatement
over to the French.
5
I see.
H.W.Jr:
He WUS going to spank them.
D:
Yes.
222
-6-
And - an - when they got all this confusion, I
picked up the telephone and called John Simon and
spoke to him myself.
Yes.
Direct,
Yes.
I then told him about the rates which WE had
been given to operate on today by Cariguel, who
give us the buying and selling rate of 446 and
4461.
Yes.
See?
Yes.
8.2.Jr:
I then asked the British whether they had any
similar errangement with the French.
Yes.
H.M.Jr:
And the British had no such srrangement.
No.
8.9.Jr:
and they had not heard from the French and they
couldn't understand it. They said they were
trying to clean up some odds and ends of foreign
exchange which had been hanging over for several
days but they had no arrangement and no assurance
that if they did buy or sell francs that they could
convert into gold.
8
I know.
B.B.Jr:
Yeah. Then I assured John Simon that I would
not make any statement E bout the tripartite
agreement until I further consulted with him.
Ct
Yes, yes.
223
-7-
And then ne said he would try not to make any
statement nimself and would try to get them
not to ask him any questions in Parliament today.
I see.
And I gather that Parliament - at the time it
closed ne did not make any statement.
Yes.
H.d.Jr:
well, he hasn't up till now nyway.
C:
I neo an idea that he had.
a.7.Jr:
well, he NI S ready to make a very sharp statement
and they were very much put out and very much Ennoyed,
see?
Yes - yes.
S.L.Jr:
How, er - don't - an - and I - and as usual - I
mean you remember what the French tried to do when
they tried to get that dollar loan against - from
the banks over here.
H.V.Jr:
Yes. So I nad a direct contact with Sir John
Simon and SS a matter of fact their Embassy
just told me quietly that there's a long tatement
which is coming which will take them at least two
hours to decode and when it's in they're going to
send it down.
iou're going to what?
H.Z.Jr:
They're sending me D long statement - It's long
enough that it takes two hours to decode.
Yes, yes,
As a result of my conversation with Sir John
Simon. Now the British and ourselves under-
stand even other. There's no misunderstending.
No, no.
Regraded
224
-8-
And I've made no statement to the press today
and will make no statement.
Yes.
But the fact remains that the first thing
this morning they only gave us ET selling
rate st 446 - a buying rate, I mean.
Yes.
out they gave us no selling rate and no B ssurance
&8 to convertibility into gold.
No.
Aná that came along sround bout 12 clock our time.
AES, yes.
No.. that Is the whole tory what's na puened today.
Yes.
In the meantime I'm going to sit perfectly tight
and do nothing, especially in view of the United
Press story which came across about twenty-five
minutes 680 which said that Bonnet expects to devalue
and he said ne wants to devalue on account of the
tremendous loss of golo.
C:
Yes. Well, they certainly intend to let the franc
slip. I mean, it's going lower than it has been.
There's no question about that.
Jr:
Well, that's the point. And I'm sorry that every
time they get into É jam, they just don't play the
game, that's all.
and they did transmit that message to their Treasury
play one
against the other.
H.M.Jr:
Right. It Just doesn't work.
Regraded
225
-9-
Ct
No, and I have no way of checking that. I just
take what they say,
E.M.Jrl
well, that's the story and I'm not going to make
any statement unless the French treat the English
the same way they've treated us which they haven't
done so far.
3:
But the French didn't tell me that they had given
the British
out-and-out statement that
they had come to any formal exposure of the declare-
tion that nas just been going on and they say that
it is entirely the same arrangements that heretofore
existed.
n.J.Jr:
Well - now just nold the wire E minute. (Pouse;
aside conversation) Now the only business we
did - there was a demand today for 600,000 frunce
which we sold.
5
I see.
H.7.Jr.
That's the only business.
B
Yes,
....Jr:
Now, that's that, and we'll just sit tight now
and see, because as I say, there's E long cable
coming in.
Yes, because there's nothing - whetever you no
doesn't help in this tonight. The debate's today,
you see.
divide:
The debate is started now.
ij
Yes.
Well -
You haven't told me - you people of course under-
stand that they are trying to debate things shout
the triportite and it helps them politically very
much nere if they can give that impression.
Sure. Even though it isn't the truth.
226
-10-
If they couldn't say that they are still cooperating -
are still enjoying this cooperation
Sure.
with the other parties
Yes.
they would have less chance of holding the
franc then they have now.
1...Jr:
Yean.
out there's nothing you could do non to help them
in their debate tonight. There's such 0 thing as
moving too quickly I agree.
Yes. Well, all right. If it's important, call me,
but don't call me tonight efter 11 o'clock Washington
time unless it's swful important, see.
Oh no, no, no. You've had enough. I'm not
going to
I mean I don't mind being called up to 11 o'clock;
there's six hours' difference, you know.
Well, I'm not going to the Chamber tonight because
that will go on for some time, you see.
Jr:
All right.
C:
And there's no paper that comes out. And even when
you're there, it's pretty difficult to get
Yes, but if the French want something, you know,
at the last minute - they've got to have it in an
nour or so - use your head, and as I say, if it's
after 11 o'clock our time, just put it in E cable.
And if you think it's important enough, why, call
Lochhead. He'll keep our switchboard open tonight.
I see,
It will be open all night.
227
-11-
0:
If we call you, we'll call tonight. I'm not
going to call Rueff back on this business.
but I've just got a feeling he'll call you,
put something up to me.
He told me he'd be at the Chamber at five
but I can't call him now.
All right.
If ne does call me, I'll tell nim that I'm
going to advise you.
All right. what is up for advisement?
There's no business.
That's right.
C:
There's no statement, I meen.
H.".Jr:
That's right. Wait a minute. Just hold the
wire. Well, we'll weit and see what happens
in the French Parliament tonight.
0:
IES, of course, that incident in the Senate
gave B. very bad impression, you know.
what WBS that?
Blum went over to the Senate to read this
gentlemen's declaration.
Yes.
C:
And Chautemps was presenting it to the Chamber,
and they nao E disagreement over there when he
entered the place.
6.2.Jr:
He did.
we went out again with
before the
Senate could read it.
8.7.Jr:
I didn't know that.
Regraded Uclassified
228
-12-
B:
And Farreau, one of the radical Senators,
had to go over and read it in his place.
d.V.Jr:
I didn't know that.
C:
1 sent E cablegram telling you what I said
to Cariguel and to dueff and what they said
to me.
H.I.Jp:
O.K.
is
But this incident may be rather significent.
It looks like trouble may develop between
the radical socialists and the socialists.
I see. what is Blum?
8
Blum is a socialist.
1. . Jr:
I see. All right.
C:
The Ambassador W&S due to come back this evening
about seven or eight o'clock.
H.M.Jr:
Where has he been?
C:
He's been down south all the time.
H.Y.Jr:
No!
S
Down in southern France.
H.W.Jr:
Really?
-;
Yes, I told you one day he'd gone away.
H.M.Jr:
Yeah, well I took it that certainly he'd be
back; that's over ten days ego, isn't it?
C:
Yes, about ten days or two weeks now.
H.W.Jr:
Uh-huh.
C:
So ne's due back this evening some time.
E.V.Jp:
All right.
C:
All right. Good night.
H.M.Jr:
Good night.
Regraded
223
June 29, 1937
3:28 P.M.
11:10m
Butterworth: Hello.
@.M.Jr:
Hello, Butterworth.
B:
les, sir.
1
what's on your mind?
8:
I've been over to the British - you got my
telegram, sir?
S.2.Jr:
Yes.
B:
I've been over to the British Treasury and
there's a message for you. from Sir John Simon.
I shall read it to you. Shall I?
J.
How long is it?
:
It's not very long.
s.k.Jr:
All right.
"There has been an agreed quotation between our
authorities and French authorities down to
yesterday --"
M.M.Jr:
Repeat that please.
M:
"There has been an agreed quotation between
our authorities and French authorities down
to yesterday __"
5.2.Jr:
Yes.
D:
"But we liave no quotation for French francs today. "
Yes.
BI
"Stop. The market --"
....Jr:
Wait & minute.
" -- is closed today __"
Regraded
230
-2-
H.2.Jr:
wait E minute, I got that "we have no
quotation for French francs today." I
didn't get the rest.
B:
+nen "period."
H.M.Jr:
Yes.
B:
"The market is closed today and tomorrow except
for clearing up a few old transactions ...."
h.4.Jr:
That means the British market.
B:
That's right.
E.M.Jr:
Yes.
B:
"Quote stop." If
H.S.J.:
What?
B:
"Period."
H.V.Jr:
Oh.
B:
"Still less have we any indication -- to
HaV.Jr:
Say tost again.
:
"Still, 3-t-1-1-1 --"
H.V.J.:
Yes.
in
"Still less have we any indication ES to
what quotation there will be, if any, for
ensuing days."
E.S.J.:
For what?
B:
"For ensuing, e-n-s-u-i-n-g, following days."
H.M.J.:
Yes.
3:
"We have now asked French Treasury representative
in London" -- that is Monnick of course --
-}-
231
"whether he can give us any information or
assurance on this point. He is unable to
give a reply until tomorrow. The informa-
tion which reaches us from the Governor of
the Bank of France is that in the present
position no indication of future plans can
be given. "
H.9.Jr:
"ello.
if:
Hello.
O.W.Jr:
Yes. Go ahead.
S:
"Until the legislation is passed the nature
of the plans will not be known."
a.%.Jr:
Un-huh.
"If good progress is made with the legislation
it is hoped that some indication may be given
to us before the close of business tomorrow,
that is, Wednesday."
chad.Jr:
Yeah.
"In the meantime judging from the general
account which I have received from the
French Government my fear is that the franc
may be allowed to float." F-1-0-s-t.
H.M.Jr:
Yeah.
B:
"I cannot know whether we shall have any
quotations or if so whether the French au-
toorities will be ready to continue the
arrangement to turn daily surpluses of
francs to gold."
J.H.Jr:
Uh-huh.
a:
"I am completely in the dark as to now we
can operate."
H.W.Jr:
Yes.
B:
"It is no doubt true that the French Govern-
ment can continue to express concurrence in
the very general declarations which are
232
-4-
embodled in the tripartite agreement iself --"
Yeah.
Bt
" -- but I cannot nelp feeling that what has
especially attracted notice --"
Yes.
B:
" and especially is approved by public
opinion everywhere was the general character
of the administrative orrangements --"
callede:
Of the what?
n --the general cuaracter of the administra-
tive arrangements --"
Yean.
" -- concerted" c-o-n-c-e-r-t-e-d "concerted
et the time of that declaration and continued
since --"
Yes.
B:
" -- to give practical effect to the desire
to maintain the greatest possible stability
in exchanges.'
Jr:
Yeah.
"I am at present Itogether at loss to know
in wast way and to what extent or at what
level of the franc the French Government
порец to continue those practical arrange-
ments."
Jr:
Yeah.
B:
"It would I think be unfortunate to aver" 2-V-e-T T
"that the tripartite declaration --"
H.M.Jr:
Repeat that, I didn't get it. "I think it would
be unfortunate to" what?
"To aver. 11 a-v-e-r
233
-5-
H.M.Jr:
Yes.
in
A for Albert, V for Verne, E for Everett,
a for rice. " -- that the tripertite
declaration is in full force --"
M.M.Jr:
Is what?
B:
"Is in full force. If
H.M.dr:
"Is in full force, " yes.
B:
"In full force if and so long ES the
franc is moving quite erratically."
n...Jr:
"Quite" what?'
2:
"Quite erratically."
H.2.Jr:
I see.
#:
E-r-r-a-t-1-c-s-1-l-y
B.M.Jr:
Right.
B:
"For this reason it seems to me necessary
that we should wait for Ét short while in
order to ascertsin what is in fact going
to happen --"
6.4.Jp:
Yes.
B:
" -- and I hope then that we may consult
together as to the nature of any positive
statement to be made by our two Governments."
H.M.Jr:
Right. Period, paragraph.
B:
That was given to me by Phillips Just a short time
ago and --
H.K.Jr:
There was what?
B:
It was --
d.M.Jr:
What's that?
234
-6-
I say I was given this by Sir Frederick
Phillips and Valey just a few minutes
ago,
S.M.Jr:
Yeah.
B:
They had Just come out of E conference
with Sir John Simon at which this action
took place.
M.M.Jr:
Yes. Kell, I've got it now you put it on -
you cable it too.
3:
Right, sir. And -
Ind.Jr:
And will you send E copy by sir mail -
I beg your person?
s. . Jr:
Send a copy by air mail over to Cochran.
3:
Yes, I will.
H.W.Jr:
Tonight.
Right, I'll to that. Now likewise Lindsay
is being cabled this same message.
s...Jr:
What's tast?
in
Lindsay is being cabled this same message.
1.1.Jr:
Yeah, they've got it and they said it would
take them E couple of hours to decode it.
Is that the message?
B:
Yes, that's the message.
d.A.Jr:
Now do they expect any answer?
3:
hat's that?
S.M.Jr:
Do they expect any answer?
B:
Well, I shouldn't think so Directly, no.
Because their position is 85 outlined here.
Uclassified
235
-7-
H.S.Jr:
Yeah.
B:
Hope that Sir John will not have to make
any statement at all. He's going to do
nis best to avoid making any statement to
Parliament at all.
B.M.Jr:
Well --
5:
If ne does, we'll hedge.
Now I nad È very good conversation with
nim.
B:
Yes, I know, they left with me the copy
of your conversation.
A.M.Jr:
Was he pleased at my calling him?
B:
I couldn't gather very much.
H.R.Jr:
Rell, ne seemed to be very much pleased.
It was a very satisfactory conversation.
B:
Good.
H...Jr:
And I assured nim that I would not make
any statement without first consulting
with him.
B:
Yes, that's what I thered. As I sec it,
sir, would you like my personal nunch?
S.K.Jr:
I'd be glad to receive it.
B:
It's this - that this Government here is
allied with France but not with le front
populari.
H.M.Jr:
Is what?
in
I feel sure but not convinced.
G.M.Jr:
I didn't hear you.
B:
I say this Government here is allied with
France --
236
-8-
H.W.Jr:
Allied with what?
5:
with France, F-r-e-n-c-e.
....Jr:
Allied with France?
3:
Yes, with France.
H...Jr:
Yes.
But not with le front populaire.
I see.
And I don't think taat they are convinced that
this is the finel government.
I see.
And so I don't think they want to stick their
neck out.
Yeah.
B:
At the same time, they remember very definitely
today 127, when they allowed the franc to stabilize
st too high a rate.
....Jp:
Yeah.
They want to nold over the franc the - the club of
the tripartite agreement
1.1.Jr:
Yeah.
because they are not convinced that, whatever the
Intentions of the present French Government are,
that they will have the power, to be given as a dead
certainty, to enforce their desires.
I see.
B:
and therefore they don't want to
the credit
of the United States and Grest Britsin through
the mouth of the present French Government.
237
-9-
I see.
Now taat's my personal nunch IS I see it.
Jr:
Right.
I might be wrong there. I'm not expressing
either agreement or disagreement with their
views.
Jr:
Right. I understand.
I'm just giving you my impression of how they
feel.
I'm glad to receive that. Well, we're very
calm here. We've got - we're just sitting
here. k statement came out from the United
Press accredited to Bonnet that lie said he
is going to devalue further.
Uh-huh.
That ne nas to devalue further, and tast came
over just about an hour ago.
Yeah.
Jr:
And after they get through with their battle
in the Parliament, we'll know more tomorrow
morning and I don't think anything more will
happen tonight and --
I feel that these people here, whatever Bonnet
may say, I mean that he's not going to devalue
down to 124 or whatever figure it is, they are
not convinced that he is in 8 position to demand
this assurance.
I see.
I think they are rather skeptical about the
position.
Yeah.
E:
In other words they are not at all sure that
the
and not
are in the saddle.
Uclassified
238
-10-
H.d.dp:
Uh-huh, All right.
3:
Thank you, Mr. Secretary.
H...Jr:
All right. Well, I'm glad to get that and
I doubt if anything more will happen tonight.
8:
Right. Thank you, sir.
H.M.Jr:
Hello.
8:
Yes.
1.1.Jr:
You might be interested - the only thing that
happened here today was that we sold 600,000
francs today. That's all we did.
B:
600,000 francs.
H.M.Jr:
That's all.
in
Now are those frencs sup lled to you by the
Bank of France?
S. .Jr:
Well, we think so - yes.
::
You think SO.
H.s.Jr:
Yes.
8:
I see.
E. .Jr:
We sold tnem for the account of the Bank of
France.
in
The account of the bank of France.
H.M.Jr:
Yes. There was & demand that commercials
are buying and we supplied them and charged
them to the account of the Bank of France.
B:
Well, it's their account, then.
a...Jr:
Yeah.
B:
Well, thank you so much, sir.
H.M.Jr:
Not at all.
B:
Good night, sir.
235
LMS
GRAY
London
Dated June 29, 1937
Rec'd 3:30 D. m.
Secretary of State,
Washington.
415, June 29, 6 P. m.
FOR TREASURY FROM BUTTERWORTH.
The TIMES and other London papers in referring to the
debate, the first part of which was reported in my 412,
(June E, 7 p. m., mentioned the complaint of Sir Francis
Acland an opposition liberal that the news of the propose]
to increase the equalization fund had leaked out in New York
tefore it was announced in London. Acland's statement as
reported in Hansard is as follows: "I think everybody will
agree that the statement of the Chancellor of the Exchequer
at the end of last week with regard to this resolution
being mede when it was, did a greal deal of good and that
it was at once a sedative and & tonic. It evidently seemed
to finish off the last remains of the gold scare. It meant
that we were willing to help the United States and France
to hold their babies - those very different babies which
are only alike in that they are inconveniently heavy at
times. The news of it got out to the United States before
it did here. The considerable buying of gold mining shares
which
Regraded
240
Lt'S 2-No. 415, June 29, 6 P. m., from London.
which took place on Thursday after 4:30 on American orders
showed that that was 80. I know how difficult it is to
prevent but this is not the first time it has happened and
it would be a good thing if it could be prevented in future.'
Boothby (see next to last paragraph, my 266, Fay 4,
5 p. m.) made on behalf of city opinion a particularly strong
speech in which he took the view that there is no reason
whatover to suppose that if conditions were anything like
normal the available supplies of gold in the world today
for monetary purposes would be too great for the adequate
support of the credit structure and he deprecated the way
in which the gold scare was allowed to develop: "instead
of it being nipped in the bud no clear explicit statement
of policy was given either from the other side of the
Atlantic or from this side and the discount in relation
to the American shipping parity of gold was allowed by our
authorities to widen until on one day the difference was
something like 7 pence; and that caused many p:ople to
think that all effective cooperation between the Treasury
officials here and in Washington had for the time boing
como to an end. Nobody knew what was going to happen.
It may be that the reason why the discount became so wide
was that we had at the time insufficient sterling roservos
in the
Regraded
241
L/3 3-No. 415, June 29, 6 p. M., from London.
in the exchange equalization account; and that I believe
is one of the main reasons why the Chancellor of the Ex-
choquer has had to come to the House today to ask for
200 million pounds, E sum which I do not think will be too
much. But it just shows what confidence or the lack of
it can do. Immediately you had that uncortainty the trend
was reversed.
(uch?)
ust has been made of the fall in the value of
socuritios by between 20 and 30 percont. That is a tem-
porary thing, not vory sorious in itself, except for the
people who held the securities as a speculation and not
as investment; but much more serious was the temporery
but quite distinct reversal in the trend of commodity
prices which if it had been allowed to continue could have
landed us in very serious consequences. That is the
answer to those who maintain academically that a deliberate
alteration in the price of gold need not involve an altera-
tion in the level of compodity prices, a reduction in the
price of gold at the present time would be a signal to
the trading community that prices were going to fall and
would be so interpreted; and prices would fall. Of course
so long as gold is now allowed to effect the credit
structure
242
us E-VO. 415, June 29, 6 P. =1., from London.
structure for the time being and temporarily it need not
affect the price level; but that is an artificial con-
dition which is not desirable as a permanent feature of
policy.
If arising out of this proposal of the Chancellor of
the Exchequer there is to be increased cooperation between
the exchange equalization account of this country and that
of the United States we ought in my submission to bring
every prossure upon the United States Government to allow
some of the gold which has flowed into the United States
to influence the credit structure and to raise the commod-
ity price lovel over there. It is because commodity prices
in the United States are kopt so artificially low as to
b. out of alignment with the exchange value of the dollar
that the inflow of gold into America has boon aggravated
and with it the problem of maldistribution.
With rogard to the futuro I would say that this stop
of the right honorable gentloman is to bo welcomed not
only because it will be of such value in restoring con-
fidonce which should nover have boon lost but because it
18 e practical gesture far more powerful than any words
could be towards the Unitod Statos of Amorica. That is
n Doint of supreme importance. In the long run cooporation
betwoon
Regraded
Uclassified
243
LES 5-Fo. 415, Juno 29, 6. P. m., from London.
botwoon the "ritish Empiro and the Unitod States of Amorica
in the oconomic field is the bost hopo of the future and
indued of saving civilization. There may be groat tochni-
cal difficultios in the way of achieving a widor oconomic
agrooment; but they can and must be swopt away because the
basic interests of the United Statos and of this country
and th Dominions are identical, Separatoly WC can achieve
something porhaps; togother the United Status and the
British mpiro could use their natural resources and their
gold in fruitful cooporation to rostoro prospority to the
whole world".
BINGHAI
133
Regraded Uclassified
244
June 29, 1937
At two minutes of four I told Steve Early to keep the
President from saying anything about the Tripartite Agreement
at his press conference, which was held at four o'clock. I
promised Sir John that we would not say anything about it and
I Just wanted to make sure that the President would not dis-
cuss it at his press conference.
Regraded Uclassified
245
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris
DATE: June 29, 4 p.m.
NO.: 879
SECTION ONE FROM COOHRAN.
I refer to Secretary Morgenthau's telephonic inquiry
at 1:30 p.m. today as to whether under the new monetary
setup in France the American stabilization fund could
convert into gold at the Bank of France the French france
which it might buy and if 80 at what price could they be
bought.
I at once got in telephonic touch with Cariguel
end asked him the above questions. After consultation
with Under Governor Fournier, he assured me that the
changes which have been effected by decree today and which
are envisaged in the program of the Chautemps Government
in any way
would not/affect the technical arrangements which have
heretofore obtained between the American and French
monetary authorities. Cariguel said that since the
French stabilization fund would now be more anxious
than ever to acquire foreign exchange and have the
facility for
(END SECTION ONE)
BULLITT
EA:DJW
Regraded Uclassified
COPY FOR SECRETARY
246
PARAPHRASE OF SECTION TWO of No. 879 from Paris.
obtaining gold thereof there would certainly be willingness
on the part of France to continue to give reciprocal gold
incilities to the United States. Cariguel had to receive
a call from New York while he and I were talking
I talked with Cariguel again at 2:50 0.m. He told
de that Knoke had raised questions similar to mine.
The situation was explained over the phone by Dariguel
to Knoke. Cariguel told me that he was this afternoon
sending Knoke a cablegram confirming his conversation with
him. The substance of this cablegram was a request to
Knoke to sell francs for the account of the French stabili-
sation fund on the basis of yesterday's rate of 110.55
irancs to the pound. Cariguel said in this message that
the prices for gold quoted in his telegram of yesterday
were still effective until further notice is given. Assur-
ance is given us by Cariguel that the control will continue
to purchase and sell gold just as it has done before.
Cariguel said to me that when Knoke asked whether the
malance in French france which the American stabili ation
fund now holds could be converted into gold he, Cariguel,
unhesitatingly answered that such was the case.
I am not repeating this technical information, since
Cariguel tells me that he has given Knoke full details re-
garding franc transactions of which the French officials
would approve today on the market in the United States.
END MESSAGE.
BULLITT
2A:LWW
Regraded Uclassified
Pages 247 through 273
are dated June 29, 1938,
and have been placed in
June, 1938, book.
Regraded Uclassified
274
LMS
PLAIN
London
Dated June 29, 1937
Rec'd 6 P. m,
Secretary of State,
Maskington.
417, June 29, 11 P. m.
FOR SUGGETARY MORGENTHAU FRC's butter north.
As instructed I repeat the message for you which
was iven the RA result of your convorsation with Simon
of British ?reasury tonight:
"There has een an agreed quotation between our
authorities and French authorities down to yesterday but
ve have 11 custation for French francs today. The market
is closed to lay end tomorrow except for cleering up of e,
few >1d transactions. Still less have we any indication
as to that cuotation there will be, of any, for ensuing
days. " e have 2017 asked French Treasury representative
in London Thether he can give us any information or
assurance on this point. lie in unable to Give a reply
till to The information which reaches us from
Gover of Ban't of France is that in the present posi-
tion 42 indication of future lans can be given. Until
the legislation is passed the inture of plans will not
be if 3000 progress is stude with the legislation
it is
Regraded Uclassified
275
LMS 2-10. 417, June 29, 11 P. m,, from London.
it is hoped that some indication may be given to us before
the close of business tomorrow, Wednesday. In the mean-
while judging from the general account which I have re-
ceived from the French Government my fear is that the
franc may be allowed to float. I do not know whether we
shall have any quotations or if 20 whether the French
authorities will be ready to continue arrangement to turn
sur luses of francs into gold. I Fun completely in
the dark as to how we can operate. It is no doubt true
that the rench Government can continue to express con-
currence in the very general declarations which were em-
bodies in the triportite agreement itself but I cannot
help feolin) that what has especially attracted notice
and especially been approved by miblic opinion everywhere
was the general character of the administrative arrange-
mente ncerted at the time of that declaration and
continued since to give practical effect to the desire
to maintain the greatest possible stability in exchanges.
I am at present altogether at a loss to know in what way
and to what extent or at what level of the franc the
French Devernment hope to continue those practical
arrangements. It would I think be unfortunate to aver
that the tripartite declaration is in full force if and
so long
Regraded Uclassified
276
LMS 3-No. 417, June 29, 11 p. m., from London.
so long as the franc is moving quite erratically. For
this reason it seems to me necessary that we should wait
for a short while in order to ascertain what is in fact
going to happen and I hope then that we may consult to-
gether as to the nature of any positive statement to be
made by our two Governments."
BINGHAM
SMS:EMB
Regraded Uclassified
277
JUN 29 1937
9.20
FRANCE TEMPORARILY SUSPENDED FROM LIST OF
COUNTRIES TO WHICH UNITED STATES WILL SELL GOLD
WASHN - THE FRENCH THROUGH THEIR SUS-
PENSION OF GOLD PAYMENTS HAVE AUTOMATICALLY
SUSPENDED THEMSELVES FOR THE TIME BEING
FROM THE LIST OF COUNTRIES TO WHICH THE UNITED
STATES WILL SELL GOLD UNDER TERMS OF THE TRI- -
PARTITE AGREEMENT - IF THE FRENCH CHANGE THE
VALUE OF THEIR CURRENCY THE SECRETARY OF THE
TREASURY WILL BE REQUIRED TO ISSUE A NEW FIND-
ING OF FACT TO THE EFFECT THAT IT is -TO
THE PUBLIC INTEREST- TO BUY AND SELL GOLD
WITH FRANCE AT NEW NEW RATIO
NO FORMAL ANNOUNCEMENT TO THIS EFFECT HAS
BEEN ISSUED BUT THE TERMS OF THE TRI-PARTITE
AGREEMENT ARE SUCH THAT FRANCE IS AUTOMATICAL-
LY DROPPED FROM THE LIST OF GOLD EXCHANGE
COUNTRIES UNTIL SHE RESUMES GOLD PAYMENTS
HERSELF
SECY MORGENTHAU-S STATEMENT OF NOV 23
Regraded Iclassifie
278
IMPLEMENTING THE TRI-PARTITE AGREEMENT DE-
CLARES THAT THE U S WILL SELL GOLD TO THOSE
COUNTRIES WHOSE STABILIZATION FUNDS TREASUR-
IES OR FISCAL AGENTS -ARE LIKEWISE OFFERING TO
SELL GOLD TO THE UNITED STATES- - FRANCE NO
LONGER MEETS THIS QUALIFICATION AND THEREFORE
IS AUTOMATICALLY OUT OF THE TRI -PARTITE AGREE-
MENT DURING THE -HOLIDAY- WHICH NOW EXISTS
BECAUSE OF HER SUSPENSION OF GOLD PAYMENTS
WHAT THE STATUS OF FRANCE UNDER THE AGREE-
MENT WILL BE TOMORROW DEPENDS UPON WHAT ACTION
is TAKEN TODAY IN PARIS AND ON WHETHER THE
UNITED STATES DECIDES THAT GOLD DEALINGS WITH
FRANCE CAN BE RESUMED ON THE REVISED BASIS -
AMERICAN AUTHORITIES ARE WITHHOLDING COMMENT
AND PREDICTIONS SAYING THAT TODAY IS -A
SORT OF HOLIDAY-
MEANWHILE THE BURDEN OF CURRENCY STABILIZ-
ATION UNDER THE TRI PARTITE AGREEMENT RESTS
PRIMARILY ON THE U S AND ENGLAND ASSISTED BY
BELGIUM HOLLAND AND SWITZERLAND
-0-
Regraded Uclassifie
275
JUN 29 1937
U S TO HAVE STATEMENT ON MONETARY SITUATION
WASHN - THE UNITED STATES TREASURY PROB-
ABLY WILL HAVE A STATEMENT CLARIFYING THE
CURRENT INTERNATIONAL MONETARY SITUATION
FOLLOWING CONCLUSION OF THE FINANCIAL DEBATE
IN THE FRENCH PARLIAMENT TODAY IT WAS LEARN-
ED
THE STATEMENT PROBABLY WILL EXPLAIN THE
STATUS OF FRANCO-U S GOLD RELATIONS IN THE
LIGHT OF ANY ACTION TAKEN BY THE FRENCH PAR-
LIAMENT
THE SECRETARY OF TREASURY MUST DETERMINE
WHETHER IT IS IN THE INTERESTS OF THE U S TO
DEAL WITH FRANCE AGAIN ON WHATEVER REVISED
GOLD BASIS FRANCE ADOPTS
INDICATIONS ARE THAT THE FRENCH PLANS
INSOFAR AS THEY ARE KNOWN HERE ARE ACCEPTABLE
TO THIS COUNTRY AND THAT THEREFORE GOLD RELAT-
IONS BETWEEN THE TWO COUNTRIES WILL BE RESUM-
EO - IN THE MEANTIME HOWEVER FRANCE IS OUT
OF THE TRI-PARTITE AGREEMENT AS LONG AS HER
SUSPENSION OF GOLD PAYMENTS CONTINUES
Regraded Uclassified
ECCLES CONFERS WITH MORGENTHAU
1030
WASHN - CCHAIRMAN ECCLES OF THE FEDERAL
280
RESERVE BOARD CONFERRED WITH SECRETARY OF
TREASURY MORGENTHAU SHORTLY BEFORE
11 30 AM N Y TIME - UPON ENTERING THE
JUM 29 1937
SECRETARY-S OFFICE THE CHAIRMAN MADE NO
STATEMENT OF THE REASON FOR HIS VISIT BUT
IT IS BELIEVED TO BE THE INTERNATIONAL SITUAT-
ION
HE CONFERRED WITH THE SECRETARY LAST
NIGHT ON THIS SUBJECT
-0:-
ADD ECCLES AND MORGENTHAU CONFER
asil
JUN
WASHN- CONFERENCE BETWEEN SECY MORGENTHAU
AND CHAIRMAN ECCLES ADJOURNED AFTER ABOUT
HOUR- CHAIRMAN ECCLES SAID -MY TONGUE IS TIED-
-BEFORE THE CONFERENCE HAD ADJOURNED TWO
SPECIAL ADVISERS TO SECRETARY MORGENTHAU
PROFES OR WINFIELD RIEFLER AND PROFESSOR JACOB
VINER HAD JOINED THE GROUP
AT THE CONCLUSION OF THE CONFERENCE WITH
CHAIRMAN ECCLES SECY MORGENTHAU RECEIVED
PREMIER VAN ZEELAND OF BELGIUM AND JEAN APPERT
FRENCH FINANCIAL ATTACHE
ADD ECCLES AND MORGENTHAU CONFER
WASHN- ASST SECY TAYLOR HARRY D WHITE
JUN
TREASURY MONETARY EXPERT AND ARCHIE LOCHHE
AD
STABILIZATION FUND MANAGER JOINED THE CONFO
ENCE- THE SECRETARY CALLED FOR A STENOGRAPHER
-0-
1157
Regraded Uclassified
281
the School
EMERGENCY FRENCH FISCAL NEASURES TODAY BROUGHT TREASURY OFFICIALS
INTO HURRIED CONFERENCES TO STUDY EFFECTS ON THE TRI-PARTITE HONETARY
AGREEMENT BETWEEN GREAT BRITAIN, UNITED STATES AND FRANCE.
TREASURY OFFICIALS DECLINED TO COMMENT, BUT OBSERVERS BELIEVED
THE FRENCH ACTION PLACED THAT COUNTRY TECHNICALLY OUTSIDE THE TRI-
PARTITE AGREEMENT. THEY CITED TRAT PORTION OF THE AGREEMENT UNDER
WHICH ADHERENTS AGREE TO PAY FOREIGN OBLICATIONS IN COLD OR FOREIGN
EXCHANGE. UNDER THE DECREE ISSUED BY THE FRENCH GOVERNMENT, SUCH
PAYMENTS ARE SUSPENDED.
6/29-210404
ADD TREASURY CONFERENCE CTIMED 1040A)
IN CONFERENCE WITH SECRETARY MORCENTHAU WERE CHAIRMAN ECCLES OF THE
RESERVE BOARD AND ASSISTANT SECRETARY OF TREASURY WAYNE C. TAYLOR,
EXPERT ON INTERNATIONAL FINANCIAL MATTERS.
IT WAS LEARNED UNOFFICIALLY THAT THE FRENCH WERE RECARDED as STILL
MEMBERS OF THE TRI-PARTITE MONETARY AGREEMENT ALTHOUGH NOT PARTICIPATING
ACTIVELY. OFFICIALS HERE, ACCORDING TO THESE SOURCES, RECARD THE
FRENCH MEASURES AS TEMPORARY, OR RATHER IN THE NATURE OF A "NOLIBAY."
6/29--R1053A
Regraded Uclassified
282
JEANS APPERT, FINANCIAL ATTACHE OF THE FRENCH EMBASSY SAID TODAY
THAT FRANCE was STILL IN THE TRI-PARTITE NONETARY AGREEMENT AND WISNES
TO CONTINUE IN IT.
6/29-21132A
ADD TREASURY CONFERENCE
THE FINANCIAL ATTACHE, JEANS APPERT, OF THE FRENCH EMBASSY JOINED
THE CONFEREES AT THE TREASURY.
BE SAID HE HAD THE GREATEST CONFIDENCE IN THE RECOVERY OF THE
FINANCIAL SITUATION IN FRANCE.
"FRANCE IS A COUNTRY WHERE THE SITUATION CHANGES VERY
QUICKLY," ME ADDED. "WE ARE NEVER CLOSER TO RECOVERY THAN WHEN THINGS
SEEM DESPERATE."
6/29--R1146A
ADD TREASURY CONFERENCES
PREMIER VAN ZEELAND OF BELGIUM CONFERRED WITH MORGENTRAU AFTER
ECCLES AND APPERT LEFT.
6/29--31204P
ADD TREASURY CONFERENCES (TIME) 1146A)
APPERT SAID, AFTER CONFERRING WITH ASSISTANT SECRETARY OF TREASURY
WAYME TAYLOR AND ARCHIE LOCKHEAD OF THE U. 5. STABILIZATION FUND,
THAT FRANCE HAD NOT VIOLATED THE TRI-PARTITE ACREMENT IN ANY WAT.
6/29--TP129P
Regraded Uclassified
1230
JUN 29 1937
VAN ZEELAND SAYS TALK WITH MORGENTHAU -VERY
283
SATISFACTORY-
WASHN- PREMIER PAUL VAN ZEELAND OF BELGIUM
HAVING CONFERRED WITH SECY MORGENTHAU FOR
ABOUT AN HOUR SAID THAT HIS DISCUSSION WITH THE
SECRETARY WAS -VERY SATISFACTORY- BUT OF A
GENERAL NATURE
THE PREMIER INDICATED THAT HE MIGHT HAVE
A STATEMENT TO MAKE AFTER CONFERRING AGAIN WITH
PRESIDENT ROOSE VELT
JUN 22
1252
MORGENTHAU SAYS PROBABLY NO STATEMENT TODAY
WASHN- SECY MORGENTHAU SAID AT 12 30 TOD
-AY THAT HE HAD NO STATEMENT TO MAKE AT THAT
TIME ON THE INTERNATIONAL MONETARY SITUATION AND
THAT PROBABLY HE WOULD NOT MAKE ANY STATEMENT
TODAY
THE SECRETARY PROBABLY WILL WITHHOLD ANY
ANNOUNCEMENT UNTIL ACTION IN FRANCE IS COMPLETED
- THE STATEMENT THEREFORE PROBABLY WILL HAVE
TO BE WITHHELD UNTIL TOMORROW IN VIEW OF
ADJOURNMENT OF THE FRENCH SENATE UNTIL TOMORROW
MORNING
JUn 23 1937
ADD FRENCH FINANCIAL ATTACHE
WASHN - FOLLOWING A CONFERENCE WITH
ASST SECY OF TREASURY TAYLOR THE FRENCH
FINANCIAL ATTACHE SAID THAT FRANCE HAS DONE
NOTHING TO VIOLATE THE TRI -PARTITE AGREEMENT
BUT THE DECLINED TO SAY WHETHER HIS COUNTRY
COULD BE CONSIDERED ACTIVELY PARTICIPATING IN
THE AGREEMENT AT THIS TIME
&
Regraded Uclassified
284
CHAIRMAN PITTMAN OF THE SENATE FOREIGN RELATIONS COMMITTEE, TODAY
PRAISED FRANCE'S ACTION IN SUSPENDING GOLD PAYMENT AND SAID THE NOVE
YOULD TEND TO MAKE THE WORLD FINANCIAL SITUATION "MORE SATISFACTORY."
6/29--R1058A
ADD PITTMAN
PITTMAN SAID HE FELT THAT NO ACTION ON THE PART OF CONGRESS WAS
"NICESSARY OR ADVISABLE," BUT DECLINED TO COMMENT ON WHETHER THE
TREASURY WOULD TAKE ANY NEW ACTION AS A RESULT OF FRANCE'S MOVE.
HE ALSO DECLARED THAT NE BID NOT BELIEVE THE STEP WOULD RESULT IN
ENDING THE TRIPARTITE "GENTLEMAN"S AGREEMENT* BETWEEN FRANCE, CREAT
BRITAIN AND THE U.S. TO STABILIZE CURRENCIES.
"CREAT BRITAIN PROBABLY WILL HAVE TO SUPPORT THE FRANC FOR A SHORT
WHILE," FITTMAN SAID, ADDING THAT THERE WAS AMPLE AUTHORITY FOR THIS
COUNTRY TO JOIN IN THE SUPPORT IF IT WAS BEEMED WISE.
"THE FRANC, AFTER A SHORT TIME, PROBABLY WILL BE STABILIZED AT &
LOWER RATE. THE MORATORIUM ON COMMERCIAL PAPER WILL BE SHORT, AND
I BO NOT BELIEVE THERE WILL BE ANY DISCOUNT IN THE EVENTUAL PAY-OTT
IN THE NEW FRANC.
"I BELIEVE THAT FINANCIERS AND ECONOMISTS THROUGHOUT THE WORLD WILL
HAIL THE NOVE, AND I BELIEVE IT WILL TEND TO MAKE THE WORLD FINANCIAL
SITUATION MORE SATISFACTORY."
6/29--R1102A
Regraded Uclassified
285
JUN 29 1937
1052
SEN PITTMAN SAYS NO CONGRESSIONAL ACTION
NECESSARY ON FRENCH MONETARY SITUATION
WASHN-
1110
3ENATOR PITTMAN ON FRENCH MONETARY SITUATION
WASHN - SENATOR KEY PITTMAN CHAIRMAN OF
SENATE FOREIGN RELATIONS COMMITTEE SAID
THAT NO CONGRESSIONAL ACTION WAS NECESSARY
OF DESIRABLE IN THE PRESENT FRENCH MONETARY
SITUATION - HE DECLINED TO EXPRESS AN
OPINION AS TO POSSIBLE TREASURY MOVES BUT
SAID HE THOUGHT THE SUSPENSION OF GOLD
PAYMENTS BY THE FRENCH GOVERNMENT WAS
-AN EXCELLENT THING - I BELIEVE IT HAS
IMPROVED THE WORLD SITUATION- THE SENATOR
SAID - -1 THINK ECONOMISTS AND FINANCIERS
WILL WELCOME THE MOVE-
-0-
12.00 JUN 29 1937
ADD SEN PITTMAN
WASHN- THE CHAIRMAN OF THE SENATE FOREIGN
RELATIONS COMMITTEE ALSO SAID THAT HE EXPECTED
THAT THE FRANC WOULD BE PUT AT A CONSIDERABLY
LOWER LEVEL THAN THE OLD FRANC
-0-
Regraded Uclassified
286
NO MARKET IN FRENCH FRANCS
FOREIGN EXCHANGE DEALERS DO NOT EXPECT
ANY DEALINGS IN FRENCH FRANCS TODAY UNLESS
THERE IS SOME ACTION TAKEN BY THE VARIOUS
CONTROL FUNDS- THERE IS NO MARKET FOR FRANCS
IN PARIS AND LONDON
-0-
8205
JUN 29 1937
DOW JONES MORNING GOSSIP
WAL
8455
L
STREET DOES NOT EXPECT ANY IMMEDIATE
FRENCH SELLING OF OUR SECURITIES AS A RESULT
OF THE FINANCIAL MEASURES GOING FORWARD IN
FRANCE- AS A MATTER OF FACT FRENCH HOLDERS OF
JUN 29 1937
OUR SECURITIES ARE EXPECTED TO - - SIT TIGHT-
UNTIL -WHEN AS AND IF- LEGAL MEASURES FORCE THEM
TO SELL
- -
LONDON THIS MORNING SHOWS EASIER MARKETS
BUT INTERNATIONAL BROKERS SAY NEITHER AMERICAN
NOR LONDON BANKERS ARE SURPRISED BY THE COURSE
OF EVENTS IN FRANCE AND EXPECT SPEEDY DEVALUAT-
ION TO MAKE UP THE POLICY OF THE NEW FINANCIAL
MINISTRY IN FRANCE
WALL STREE BELIEVES THAT MUCH OF THE
5495
LATE SELLING OF OUR SECURITIES YESTERDAY CAME
FROM INTERNATIONAL SOURCES- IN ITS PRESENT
MOOD THE STREET IS EASILY VULNERABLE TO ANY
JUN 29 1937
SORT OF SELLING AND UNPLEASANT NEWS
Regraded Uclassified
2e7
(DJ 10:05. 6/29/37) Foreign Exchanges Quiet
Foreign exchange market is quiet pending further developments in France.
Following leed of Paris and London markets there 10 no business being done in
Fr. francs either in the spot or forward markets.
There is some activity in sterling where speculative selling has entered market
in addition to commercial offerings noted in first few days. Volume of business
so far is not heavy but at times this morning the Brit. Exch. Control has been
compelled to sell dollars to counter the trend. Sterling is currently quoted at
4.93-1/8. slightly below the earlier quotations but unchanged on the day.
Regraded Uclassified
288
FRANC SETTLEMENTS MADE
1130
JUNE 29 1937
THERE IS NO DIFFICULTY IN LIQUIDATION OF
FRANC CONTRACTS IN SPITE OF THE SUSPENSION OF
DEALINGS IN THE PARIS EXCHANGE MARKET IT IS
REPORTED IN THE LOCAL MARKET - EXCHANGE AUTH-
ORITIES ARE PREVENTING A SQUEEZE IN CONTRACTS
MATURING DURING THE PARIS HOLIDAY BY SUPPLY-
ING FRANCS
BANK OF ENGLAND IS UNDERSTOOD TO BE SUPPLY-
ING FRANCS FOR WEDNESDAY AND THURSDAY DELIVERY
AT 110 55 FRANCS TO THE POUND - THIS INDICATES
A QUOTATION SLIGHTLY OVER 4 46C IN NEW YORK
SOME SMALL BUSINESS IS BEING DONE IN THE
LOCAL MARKET FOR VARIOUS DATES ALTHOUGH TRAD-
ING 15 GREATLY RESTRICTED - A BID OF 4 46C HAS
BEEN HEARD FOR TOMORROW FRANCS AND 4 40C
FOR THURSDAY FRANCS - SOME SMALL BUSINESS
HAS BEEN DONE IN FRIDAY FRANCS AT 4 38 CENTS
AND A QUOTATION OF 4 3°C FOR JULY 12 HAS BEEN
HEARD
140
JUN 29 1937
FRENCH GOLD TO LONDON
BRITISH CUSTOMS RETURNS AFFORD PARTIAL
REFLECTION OF THE HEAVY PRESSURE LAST WEEK
ON THE FRENCH FRANC AS THE CRISIS GREW -
DURING THE FOUR DAYS ENDED MID DAY MONDAY
WOMETHING OVER 41 000 000 DLS OF GOLD
ARRIVED IN THE UNITED KINGDOM FROM FRANCE -
THIS is A DIRECT CONSEQUENCE OF THE
CONTINUED SUPPORT WHICH WAS NECESSARY FOR
THE FRANC
-0-
Regraded Uclassified
PARIS, TUESDAY--THE COVERNMENT EARLY TOBAY ORDERED THE CLOSING
OF THE SECURITY AND COMMODITY BOURSES, SUPPOSEBLY IN AN
EFFORT TO PREVENT UNCONTROLLABLE SPECULATION WHEN THE FINANCIAL
RELIEF MEASURES OF THE NEW CHAUTEMPS GOVERNMENT ARE ANNOUNCED IN
PARLIAMENT.
6/28--*TPE04P
ADD CHAUTEMPS, PARIS.
THE DECREE WAS TO BE PUBLISHED IN THE "OFFICIAL JOURNAL" AND IT
WAS INDICATED THAT THE CLOSING WOULD BE FOR TODAY ONLY.
PREMIER CAMILLE CHASTEMPS WILL 60 BEFORE THE CHAMBER OF DEPUTIES
SHORTLY AFTER MOON TO READ HIS "MINISTERIAL DECLARATION" AND
EXPLAIN NIS PLANS FOR SOLVING THE NATION'S FINANCIAL AND ECONOMIC
CRISIS,
THE SAME EXPLANATION WILL BE GIVEN IN THE SENATE BY LEON BLUM,
WHO WAS FORCED TO RESIGN THE PREMIERSHIP A WEEK ACO WHEN THE SENATE
DENIED HIM "DICTATORIAL" POWERS TO DEAL WITH THE SITUATION. BLUM
IS VICE-PREMIER.
CHAUTEMPS' POPULAR FRONT COVERNMENT WAS EXPECTED TO DEMAND THE
SAME BROAD POWERS FROM PARLIAMENT THAT BROUGHT ABOUT BLUN'S
BOWNFALL,
THE NEW CABINET, IN A MEETING THAT LASTED UNTIL LATE INTO THE MIGHT
APPROVED n PLAN OF SOLVING THE NATION'S FINANCIAL CRISIS
THAT BORE THE AUTHORSHIP OF GEORGES BONNET, WHO RUSHED BACK FROM
A SPECIAL AMBASSABORIAL POST IN WASHINGTON TO BECOME NEW FINANCE
MINISTER.
Regraded Uclassified
PARIS,-THE CHAMBER OF DEPUTIES VOTED CONFIDENCE IN THE POPULAR FRONT
GOVERNMENT TODAY ON ITS DEMAND FOR EMERGENCY POWERS TO SAVE THE
FRANC AND FORTIFY THE COUNTRY'S ECONOMIC CONDITION. THE VOTE WAS 393
TO 142.
WHILE BEBATE WAS IM PROGRESS IN BOTH THE CHAMBER OF DEPUTIES AND
SENATE, THE GOVERNMENT NAD FORCIBLY CLOSED FINANCIAL MARKETS AND
SUSPENDED PAYMENTS IM COLD AND FOREIGN CURRENCY.
AFTER ITS VOTE, THE CRAMBER ABJOURNED UNTIL , P.M. TO ALLOW THE
FINANCE COMMITTEE TO CONSIDER THE COVERNMENT PROJECTS.
6/29--R1055A
PARIS--THE FINANCE COMMISSION OF THE CHANDER OF DEPUTIES
VOTED FULL POWER TO THE POPULAR FRONT GOVERNMENT TO DEAL WITH THE
FINANCIAL CRISIS TOBAY BY A VOTE OF 17 TO 16.
6/29--TP124P
Regraded Uclassified
241
PARIS.--PREMIER CRAUTERPS TOOK TO PARLIAMENT TODAY HIS DEMAND FOR
EMERGENCY POWERS TO CONBAT A GRAVE CRISIS IN THE NATIONAL FINANCES,
AND AMNOUNCED KE WOULD BEMAND THAT BOTH HOUSES END THEIR DEBATE 05 HIS
PROPOSAL BY ROOM TONORROW.
IT was ANNOUNCED THAT CHAUTEMPS WOULD SEEK POWERS UNDER FIVE HEAD-
INGS:
1) TO RESTORE SOUNDNESS TO THE TREASURY.
2) TO FIGHT SPECULATION IN THE FRANC.
33 TO EFFECT ECONOMIC RECOVERY.
4) TO BALANCE THE BUDGET.
53 TO BEFEND THE FRANC.
CHAUTEMPS KEPT SECRET THE DETAILS OF THE PLANS ME AND HIS MINISTERS
WORKED OUT, AND AGREED UPON UNANIMOUSLY AT A MEETING BEFORE THE OPENING
OF THE DAY IM PARLIAMENT.
BUT IT WAS GOSSIPED WITHOUT CONFIRMATION THAT FOR OME THING THE
GOVERNMENT MIGHT IF NECESSARY LOWER THE VALUE OF THE FRANC TO 25 TO
THE BOLLAR. YESTERBAY'S RATE was 22.40 TO THE POLLAR.
STOCK AND COMMODITY EXCRANGES WERE CLOSED BY FINANCE MINISTRY
BECREE UNTIL FURTHER NOTICE. PAYMENTS IN COLD OR FOREIGN EXCHANGE WERE
SUSPENDED.
THE CABINET, MEETING IN A FORMAL COUNCIL OF MINISTERS UNDER
PRESIDENT ALBERT LEBRUM, APPROVED THE DETAILS OF THE EMERGENCY FINANCE-
POWERS BILL AS PERFECTED BY FINANCE MINISTER SEORGES BONNET.
A FOUR-PACE MINISTERIAL DECLARATION TO BE READ IN PARLIAMENT THIS
AFTERNOON ALSO WAS APPROVED.
Regraded Uclassified
29.
PARIS-THE FRANC WEST BE DEVALUED, CHORGES BONNET, FINANCE
MINISTER, TOLD THE FINANCE COMMISSION OF THE CHAMBER OF DEPUTIES
TOBAY.
6/29--TP140F
ADD BONNET, PARIS.
FRANCE HAS BEEN BRAINED OF COLD TO THE EXTENT OF BILLIONS OF
FRANCS AND IS IN A CRITICAL POSITION WHICH CALLS FOR DEVALUATION
OF THE FRANC FROM ITS PRESENT LEVEL, BONNET TOLD THE COMMISSION.
ME REVEALED THAT THE TREASURY IS IN DESPERATE STRAITS AND HAD TO
BORROW REAVILY FROM STATE FUNDS TO MEET ITS VEEK-IND COMMITTMENTS.
6/29--TP150P
ADD BONNET, PARIS.
BONNET REVEALED THAT NO MORE COLD REMAINS IN THE FRENCH EXCHANGE
EQUALIZATION FUND.
ALTHOUGH HE DID NOT SAY so AT THE MOMENT, RELIABLE SOURCES REPORTED
THAT HE WOULD ANNOUNCE TONIGHT FRANCE'S WITHDRAWAL FROM THE TRI-
PARTITE AGREEMENT UNDER WHICH THE FRANC IS LINKED FOR STABILITY WITH THE
BOLLAR AND THE POUND STERLING.
THE U.S. AND GREAT BRITAIN WERE SAID--WITHOUT AUTHORITATIVE
CONFIRMATION-TO HAVE AGREED TO THE LOWERING OF THE FRANC RATE. THE
SAME SOURCES SAID THAT THE BENUNCIATION OF THE TRI-POWER AGREEMENT WAS
DECIDED UPON WITH THE APPROVAL OF BRITISH PRIME MINISTER MEVILLE CHAN-
BERLAIN, AND UNITED STATES TREASURY SECRETARY HENRY MORGENTHAU, JR.
6/29--R202P
Regraded Uclassified
236
ADD BONNET, PARIS
BONNET REVEALED THAT THIS MORNING THE TREASURY HAD ONLY 20,000,000
FRANCS ($892,500) ON NAND FOR MONTH-END PAYMENTS DUE TOMORROW AND HAD TO
BORROW 400,000,000 FRANCS ($17,850,000) FROM THE STATE DEPOSIT FUND,
CAISSE BE DEPOT ET CONSIGNATION.
HE INSISTED THAT THE GOVERNMENT NEEDED FULL POWERS AND IT IS
IMPOSSIBLE TO BROOK DELAY.
6/29--2206P
ADD BONNET, PARIS
BONNET SPOKE IN THE FRANKEST TERMS TO THE FINANCE COMMISSION AND
GAVE STARTLING FIGURES OF FRANCE'S FINANCIAL PLICHT. WE REVEALED TRAT
BETWEEN JUNE 1 AND JUNE 22 OF THIS YEAR 5,200,000,000 FRANCE IM COLD
($232,050,000) HAD FLOWED OUT OF THE COUNTRY, AND THAT BETWEEN JUNE
23 AND TESTERBAY, 2,500,000,000 FRANCS ($111,562,500) MAD BEEN LOST.
THE NEW FINANCE MINISTER REVEALED THAT THE REGULAR BUBGET SHOWED
A DEFICIT OF BETWEEN 6,700,000,000 AND 2,000,000,000 FRANCS ($298,-
987,500 AND $357,000,000), WHICH HE PROPOSED TO COVER THROUGH NEW
TAXATION.
HE DECLARED THAT 17,000,000,000 FRANCS ($758,625,000) IN FRESH
CASH MUST BE RAISED BEFORE THE END OF THE YEAR.
6/29--R22P
ADD BONNET, PARIS
IN ABDITION TO THE DEFICIT IN THE ORDINARY BUDGET, BONNET SAID THE
EXTRAORDINARY BUBGET SHOWED A SHORTAGE OF 8,500,000,000 FRANCS
($379,312,500). IM ADDITION, TREASURY OBLIGATIONS WHICH MUST BE MET
BETWEEN NOV AND THE END OF THE YEAR TOTAL BETWEEN 16,000,000,000 AND
18,000,000,000 FRANCS ($714,000,000 AND $803,250,000).
ON OCT. 5, THE GOVERNMENT MUST NEET 5,400,000,000 FRANCS
($240,975,000), OF MATURING UNRENEWABLE BONDS, ISSUED BY THE FORMER
CERMAIN-MARTIN FINANCE MINISTRY.
ON DEC. 1 THE FIRST BRITISH LOAN MADE TO SUPPORT THE FRANCE IN ITS
EARLIER DIFFICULTIES IS DUE. IT AMOUNTS TO 4,400,000,000 FRANCS
($196,350,000). IN ADDITION, THE BONDS ISSUED UNDER THE VINCENT
AURIOL MINISTRY, AMOUNTING TO BETWEEN 7,000,000,000 AND 8,000,000,000
FRANCS, ($312,375,000 AND $357,000,000) MUST BE MET BURING THE YEAR.
BONNET EXPLAINED THAT FRANCE'S WITHDRAWAL FROM THE THREE-POVER
ACCORD ELIMINATES THE NECESSITY OF MAINTAINING THE EXCHANGE
EQUALIZATION FUND, WHICH AT PRESENT HAS 10,000,000,000 PAPER
FRANCS ($446,250,000) BUT NO COLD. THE BANK NOTES WOULD THUS REVENT
TO THE TREASURY TO AID THE GOVERNMENT IN MEETING ITS OBLIGATIONS.
BURING THE YEAR, BONNET SAID, TREASURY OBLIGATIONS WOULD BE NET
IN CREAT PART BY RAISING THE PAPER LIMIT OF THE GOVERNMENT'S CURRENT
ACCOUNT AT THE BANK OF FRANCE, PROBABLY BETWEEN 10,000,000,000 AND
15,000,000,000 FRANCS ($446,250,000 AND $669,375,000.)
IN ANNOUNCING FURTHER DEVALUATION OF THE FRANC, BONNET TOLD THE
COMMISSION THAT THE GOVERNMENT WILL DECIDE TO ELIMINATE THE LOWER
LIMIT OF THE FRANC RATE AS FIXED IN THE TRI-POWER AGREEMENT.
6/29-*12517
Regraded
295
FRE 29 A M
JUN 29 1937
FRENCH SITUATION
PARIS- MUCH TO ITS SURPRISE PARIS AWOKE
THIS MORNING TO FIND MARKETS FOR SECURITIES AND
EXCHANGES AND COMMODITIES CLOSED BY GOVERNMENT
DECREE UNTIL FURTHER ORDER- THE PUBLIC HOWEVER
WAS SO WELL AWARE OF THE CRITICAL FINANCIAL CON-
DITIONS THAT IT RECEIVED THE NEWS CALMLY
THERE IS GROUND FOR BELIEVING THAT ONLY
AT THE CABINET COUNCIL LAST NIGHT WAS THE
CLOSING OF THE MARKETS PERCEIVED AS NECESSARY
AND THIS FOR SEVERAL REASONS- FIRST BECAUSE
THERE WAS A DIFFERENCE OF OPINION WITHIN THE
CABINET ON FINANCE MINISTER BONNET-S FINANCIAL
MEASURES- SECONDLY EVEN IF THE CABINET WERE
ABLE TO AGREE ON THE TEXTS DEBATES THEREON IN
THE CHAMBER OF DEPUTIES AND SENATE WOULD HAVE
DEMANDED SEVERAL DAYS- THIROLY URGENT ACTION
WAS REQUIRED TO CHECK THE FLIGHT OF CAPITAL AND
DEFEND THE GOLD RESERVE- THE GOVERNMENT
THEREFORE DETERMINED TO PRESENT IMMEDIATELY
THE SPECIAL POWERS BILL FOR APPROVAL WITHIN 24
HOURS BY BOTH CHAMBERS- CLOSING OF ALI.
MARKETS IN THE MEANTIME NOT ONLY HALTS A
POSSIBLE PANIC BUT PRACTICALLY FORCES PARLIAMENT
TO ACT QUICKLY SINCE THE COUNTRY-S ACTIVITIES
Regraded Uclassified
296
CANNOT BE SUSPENDED INDEFINITELY WITHOUT THE
GRAVEST RESULTS
ALL BANKS RECEIVED ORDERS THIS MORNING TO
SELL FRANCS ONLY AGAINST FOREIGN BANK NOTES
TRAVELERS CHECKS OR LETTERS OF CREDIT IN ORDER
TO SATISFY TOURIST REQUIREMENTS EMENTS AT DOLLAR AND
STERLING RATES PREVAILING YESTERDAY NAMELY 22
41 AND 110 55- IT IS UNDERSTOOD THE BANK OF
ENGLAND IS ALSO SELLING FRANCS AT 110 55- ORDIN-
ARY CHECKS IN STERLING AND DOLLARS FOR EXCHANGE
INTO FRANCS ARE UNACCEPTABLE UNLESS WITH THE APP
-ROVAL OF THE BANK OF FRANCE- NATURALLY ALL
DEMANDS FOR STERLING AND DOLLARS AGAINST FRANCS
ARE REFUSED
NO INDICATION IS GIVEN OF THE GOVERNMENT-S
MONETARY PLANS AND PROBABLY THEY ARE NOT YET
DEFINITE- INDICATIONS ARE THAT THE GOVERNMENT
WILL IN ANY CASE DEMAND ADDITIONAL BORROWING
POWERS FROM THE BANK OF FRANCE AND ATTEMPT
FOR A WHILE TO AVOID STABILIZATION OF THE FRANC
WITHIN THE EXISTING LEGAL LIMITS OR A NEW LOW
LEVEL- EVEN STABILIZATION AT ANY LEVEL SEEMS
LESS LIKELY THAN ADOPTION OF A NEW FLOATING
FRANC WITHIN WIDER LIMITS AS RECOMMENDED
EXPRESSLY BY RIST AND BAUDOUIN- RESORT TO DEFIN-
ITE PERMANENT CONTROL OF EXCHANGES IS CONSIDERED
MOST IMPROBABLE SINCE BONNET IS AN INVETERATE
ADVOCATE OF MONETARY LIBERALISM
Regraded Uclassified
297
FRENCH FINANCIAL MEASURES
7.05
PARIS - PREMIER CAMILLE CHAUTEMPS TOOK
TO PARLIAMENT TODAY HIS DEMAND FOR EMERGENCY
POWERS TO COMBAT A GRAVE CRISIS IN THE
NATIONAL FINANCES AND ANNOUNCED HE WOULD
DEMAND THAT BOTH HOUSES END THEIR DEBATE ON
HIS PROPOSAL BY NOON TOMORROW
IT WAS ANNOUNCED THAT CHAUTEMPS NEW
LEADER OF THE POPULAR FRONT GOVERNMENT WOULD
SEEK POWERS UNDER FIVE HEADINGS-
I - TO RESTORE SOUNDNESS TO THE TREASURY
2 - TO FIGHT SPECULATION IN THE FRANC
3 - TO EFFECT ECONOMIC RECOVERY
4 - TO BALANCE THE BUDGET AND
JUN 29 1937
5 - TO DEFEND THE FRANC
CHAUTEMPS KEPT SECRET THE DETAILS OF THE
PLANS HE AND HIS MINISTERS WORKED OUT AND
AGREED UPON UNANIMOUSLY AT A MEETING BEFORE
THE OPENING OF THE DAY IN PARLIAMENT WHICH
MEETS 10 AM -EDT-
BUT IT WAS GOSSIPED WITHOUT CONFIRMATION
THAT FOR ONE THING THE GOVERNMENT MIGHT IF
NECESSARY LOWER THE VALUE OF THE FRANC TO
25 TO THE DOLLAR - YESTERDAY-S RATE WAS 22 40
TO THE DOLLAR
STOCK AND COMMODITY EXCHANGES WERE
CLOSED BY FINANCE MINISTRY DECREE UNTIL
FURTHER NOTICE PAYMENTS IN GOLD OR FOREIGN
EXCHANGE WERE SUSPENDED
THE CABINET MEETING IN A FORMAL COUNCIL
OF MINISTERS UNDER PRESIDENT ALBERT LEBRUN
APPROVED THE DETAILS OF THE EMERGENCY FINANCE-
Regraded Uclassified
298
POWERS BILL AS PERFECTED BY FINANCE MINISTER
GEORGES BONNETT
A FOUR-PAGE MINISTERIAL DECLARATION
TO BE READ IN PARLIAMENT THIS AFTERNOON ALSO
WAS APPROVED
IT WAS DECIDED TO ASK AUTOCRATIC FINAN-
CIAL POWERS UNTIL AUGUST 31 AND TO DEMAND
THAT THE CHAMBER REMAIN IN CONTINUOUS SESSION
UNTIL A VOTE WAS TAKEN ON THE PROJECT - A
NIGHTLONG SESSION WAS EXPECTED - THEN THE
SENATE WOULD ACT - ASSUMING THAT BOTH HOUSES
AGREED TO THE PROJECT CHAUTEMPS PROPOSED
TO SEND THEM ON AN INDEFINITE VACATION
BEGINNING NEXT WEEK
-0-
LONDON DEALINGS IN FRANCS SUSPENDED
LONDON - IN CONFORMITY WITH THE DECISION
OF FRENCH AUTHORITIES TO CLOSE THE PARIS
BOURSE DURING THE CONSIDERATION OF MEASURES
DEALING WITH THE COUNTRY-S FINANCIAL CRISIS
THE LONDON BANKERS COMMITTEE DECIDED TO
SUSPEND ALL DEALINGS IN FRENCH FRANCS UNTIL
FURTHER NOTICE
RULING RATES OF EXCHANGES AT 10 35 AM
FOLLOW - N Y CABLES 4 93 AMSTERDAM 8 965
ITALY 93 75 BERLIN 12 292 CANADA 4 93 3-4
RULING RATES AT 12 35 PM FOLLOW- N Y
CABLES 4 9335 AMSTERDAM 8 9850 ITALY 93 75
BERLIN 12 297 CANADA 4 94 1-8
-0-
Regraded Iclassified
299
ADD FRENCH FINANCIAL MEASURES
7.18
PARIS - THE BOURSE CLOSING DECREE IN
THE OFFICIAL JOURNAL READ-
--BY DECREE THE SECURITY AND COMMERCIAL
BOURSES ARE CLOSED BEGINNING JUNE 29 1937
UNTIL A DATE TO BE FIXED BY DECISION OF THE
MINISTER OF FINANCES
-BY DECREE-
-ARTICLE 1- PAYMENT OF COMMERCIAL BILLS
AND OTHER COMMERCIAL ENGAGEMENTS IN GOLD
DR FOREIGN CURRENCIES BECOMING DUE
BEGINNING JUNE 29 1937 MAY BE POSTPONED
ON WRITTEN DEMAND OF THE DEBTOR - THE DATE
1337 68 wor
ON WHICH PAYMENT MAY BE DEMANDED WILL BE
FIXED BY DECISION OF THE MINISTER OF FINANCE
-ARTICLE 2- PROTEST SHALL NOT BE MADE
BEFORE THE DATE FIXED BY THE DECISION FORESEEN
IN THE PREVIOUS ARTICLE CONCERNING COMMERCIAL
BILLS OF WHICH PAYMENT IS POSTPONED UNDER
CONDITIONS FIXED BY THE SAID ARTICLE
-ARTICLE 3- DURING THE SAME PERIOD
INTEREST ON DEBT CORRESPONDING TO BILLS AND
OTHER COMMERCIAL ENGAGEMENTS AFFECTED BY
THE PRECEDING ARTICLES WILL BE CALCULATED
AT THE REDISCOUNT RATE OF THE BANK OF
Regraded
300
FRANCE-
THE CHAUTEMPS-BONNET PLAN WAS SAID TO
ENVISAGE A SHARP REDUCTION IN GOVERNMENT
EXPENDITURES NEW INDIRECT TAXES A 25 PC
INCREASE IN RAILROAD FARES AS PART OF THE
WORK OF INCREASING CONFIDENCE RELIEVING THE
TREASURY SITUATION AND WINNING BACK TO
THE COUNTRY CAPITAL THAT HAS FLED ABROAD
CHAUTEMPS WAS REPRESENTED LAST NIGHT AS
SET AGAINST NEW DEVALUATION PROVIDED THAT
THE COUNTRY COOPERATED IN FINANCIAL RECOVERY
AND SPECULATION WAS HALTED IN CURRENCY
BUT THE ECHO DE PARIS AMONG OTHER
SOURCES REPORTED THAT THE LIMITS FIXED FOR
VARIATIONS OF THE FRANC BY THE MONETARY LAW
OF OCTOBER I UNDER THE TRIPARTITE AGREEMENT
WOULD BE LOWERED
-0-
IN PARIS POLICE MOVED ON THE BOURSE IN
STRONG NUMBERS TO ENFORCE THE ORDER CLOSING
EXCHANGES - THEY CHASED OFF 3 000 BROKERS
AGENTS WHO TRIED TO TRANSACT CURB TRANSACTIONS
TO BE NEGOTIATED BY LONDON REPRESENTATIVES
I I
7.75 JUN 29 1937
BY UP
301
FRENCH FINANCIAL MEASURES
7.05
PARIS- THE GOVERNMENT-S DECLARATION TO
JUN 29
PARLIAMENT SAID-
-THE MOST PRESSING DUTY AND RAISON D-ET
OF OUR GOVERNMENT IS TO TAKE WITHOUT DELAY
ENERGETIC MEASURES TENDING TO REPRESS INTOLER-
ABLE ABUSES OF SPECULATION SAVE THE GOLD
RESERVES OF THE BANK OF FRANCE COVER THE
TREASURY-S NEEDS SEEK A BALANCED BUDGET
WATCH OVER PRICES AND RE-KINDLE THE NATIONAL
ECONOMY
-THE TASK IS TO PRESENT TO PARLIAMENT A
VAST PLAN CAPABLE OF ASSURING THE PERMANENT
RESTORATION OF THE FINANCIAL AND ECONOMIC
SITUATION AND FORTIFYING THE INDISPENSABLE
CONFIDENCE OF THE COUNTRY IN ITSELF AND ITS
FUTURE
-TOWARDS THIS END THE MINISTER OF FINANCE
WILL IMMEDIATELY SUBMIT TO THE CHAMBER BILLS
OF CAPITAL IMPORTANCE CONFERRING ON THE GOVERN-
MENT THE NECESSARY POWERS TO ACT WITH ALL THE
PROMPTNESS AND FIRMNES WHICH THE PUBLIC INTER-
EST REQUIRES
-THE CABINET WILL NATURALLY ENGAGE ALL
ITS POLITICAL RESPONSIBILITY ON THESE BILLS
WHICH BOTH HOUSES SHOULD DISCUSS WITHOUT
INTERRUPTION-
THE DECLARATION PLEOGED CONTINUITY OF
FOREIGN POLICY PRLCLAIMING FRANCE TO BE
-PASSIONATELY ATTACHED TO THE SEARCH FOR
PEACE WITH ALL PEOPLES AND ONLY CONCEIVING IT
Regraded Uclassified
302
IN JUSTICE AND WITH RESPECT TO THE INDEPENDEN-
ENCE OF ALL COUNTRIES-
FRANCE THE DECLARATION SAID WILL REMAIN
FAITHFUL TO THE LEAGUE OF NATIONS AND HER
FRIENDS
-UNANIMOUS IN ITS PATRIOTIC SENTIMENTS-
IT CONTINUED -SURE OF HERSELF AND HER
FRIENDS FRANCE IS EQUALLY RESOLVED TO AB-
STAIN FROM SLL MENACES AND NOT TO SUFFER ANY
-PEACE CANNOT BE PURCHASED WITH SACRIFICES
THAT WOULD LEAD TO SERVITUDE AND WAR - PEACE
CAN ONLY BE ACHIEVED THROUGH THE PEOPLE-S
WILL TO DEFEND IT WITH ALL THEIR FORCES AND
SERVICE OF LAW
-WE WILL NOT NEGLECT ANYTHING IN THIS
RESPECT AND WILL MAINTAIN AT MAXIMUM STRENGTH
THE FORCES THAT PROTECT THE FATHERLAND-S
SECURITY
-WE ADDRESS A CORDIAL APPEAL TO ALL NATIONS
AND ALL GOVERNMENTS WITHOUT EXCEPTION IN ORDER
THAT THEIR SINCERE ADHERENCE TO THE REGIME OF
MUTUAL ECONOMIC AID AND ARMS LIMITATION
FINALLY WILL BRING FORTH HOPE OF PERMANENT
-OPERATION BETWEEN RECONCILED PEOPLES-
THE DECLARATION PLEDGES THE GOVERNMENT
NOT TO ALLOW EXISTING SOCIAL LEGISLATION TO
BE INFRINGED- THE PRESENT -PAUSE- IN LEGISLATION
WILL BE CONTINUED IT SAID BUT THAT DOES NOT
SIGNIFY REACTION BECAUSE NEW REFORMS MUST WAIT
ON FINANCIAL AND ECONOMIC RECOVERY
-0-
303
-BY U P -
Jute 29 1937
FRENCH PROGRAM BEFORE PARLIAMENT
PARIS- THE POPULAR FRONT GOVERNMENT DE-
MANDED EMERGENCY POWERS FROM PARLIAMENT TODAY
A GOVERNMENT DECLARATION OUTLINING THE
CABINET-S AIMS WAS READ TO THE CHAMBER OF
DEPUTIES AND SENATE- THE GOVERNMENT STAKED
ITS LIFE ON ADOPTION OF THE PROGRAM INSISTING
THAT IT BE APPROVED BY NOON TOMORROW
PREMIER CHAUTEMPS READ THE DECLARATION
IN THE CHAMBER AND VICE-PREMIER BLUM WHOM HE
SUCCEEDED REAT IT IN THE SENATE- IT WAS THE
SENATE WHICH CAUSED THE DOWNFALL OF BLUM-S
GOVERNMENT BY DEFEATING HIS REQUEST FOR MUCH
MILDER POWERS THAN NOW ASKED BY CHAUTEMPS
THE CHAMBER LISTENED COLOLY TO THE
DECLARATION ONLY THE RADICAL SOCIALISTS
-CHAUTEMPS PARTY- APPLAUDING
CHAUTEMPS PROVOKED AN IMMEDIATE BATTLE BY
DEMANDING A VOTE OF CONFIDENCE ON POSTPONEMENT
OF ALL INTERPELLATIONS UNTIL THE GOVERNMENT-S
FULL POWERS HAVE BEEN VOTED
304
FOREIGN EXCHANGES QUIET
PO
FOREIGN EXCHANGE MARKET IS QUIET PENDING
to
FURTHER DEVELOPMENTS IN FRANCE - FOLLOWING
1051
LEAD OF PARIS AND LONDON MARKETS THERE
is NO BUSINESS BEING DONE IN FRENCH FRANCS
EITHER IN THE SPOT OR FORWARD MARKETS
THERE IS SOME ACTIVITY IN STERLING WHERE
SPECULATIVE SELLING HAS ENTERED MARKET IN
ADDITION TO COMMERCIAL OFFERINGS NOTED IN FIRST
FEW DAYS - VOLUME OF BUSINESS SO FAR
IS NOT HEAVY BUT AT TIMES THIS MORNING THE
BRITISH EXCHANGE CONTROL HAS BEEN COMPELLED
TO SELL DOLLARS TO COUNTER THE TREND -
STERLING IS CURRENTLY QUOTED AT 4 93 1-8
SLIGHTLY BELOW THE EARLIER QUOTATIONS BUT
UNCHANGED ON THE DAY
BY UP
30m 20 1937
CHAUTEMPS GOVERNMENT GETS CONFIDENCE VOTE
ON INTERPELLATIONS
PARIS - THE GOVERNMENT WON THE INITIAL
SKIRMISH WHEN THE CHAMBER GAVE IT THE CON-
FIDENCE VOTE ON INTERPELLATIONS - THE COMMUN-
ISTS RALLIED TO THE SUPPORT OF THE POPULAR
FRONT
ALBERT SARRAUT ONE OF THE THREE MINISTERS
OF STATE READ THE DECLARATION IN THE SENATE -
VICE PREMIER LEON BLUM WAS SCHEDULED TO READ
IT IN THE SENATE BUT OBJECTED AT THE LAST
MINUTE TO DOING SO BEFORE THE BODY WHICH CAUS-
ED THE DOWNFALL OF HIS GOVERNMENT LAST WEEK
Regraded Uclassified
305
ADD FRENCH VOTE OF CONFIDENCE
115
JUN 29 1937
PARIS- THE VOTE WAS 393 TO 142
AFTER ITS VOTE THE CHAMBER ADJOURNED
UNTIL 9 PM TO ALLOW THE FINANCE COMMITTEE
TO CONSIDER THE GOVERNMENT PROJECTS
THE SENATE LISTENED TO THE DECLARATION
AND THEN ADJOURNED UNTIL 9 AM TOMORROW
-0-
1.00
JUN 29 1937
FRENCH SITUATION
PARIS- IT HAS BEEN CONFIRMED THAT THE
CRITICAL ATTITUDE ADOPTED BY THE COMMUNISTS
TOWARD THE GOVERNMENT-S PLANS IS CAUSING
HESITATION ON THE PART OF THE SOCIALISTS
IT HAS BEEN SUSPECTED THAT ADJOURNMENT
OF THE CHAMBER UNTIL 9 0-CLOCK THIS EVENING
WAS CAUSED BY UNCERTAINTY OVER THE SOCIALISTS
AND THAT THE INTERVAL IS BEING USED FOR
NEGOTIATIONS
COMMUNISTS OPPOSED THE PROSPECT OF A DRASTIC
ALL AROUND INCREASE IN INDIRECT TAXES- THEY
DEMAND TAXATION OF BIG FORTUNES AND REPRESSION
OF FISCAL FRAUD AND EXPORTATION OF CAPITAL
THE GOVERNMENT ARGUES THAT ITS PROGRAM
MUST BE CONSIDERED AS A WHOLE AND ALL MEASURES
MUST BE APPLIED SIMULTANEOUSLY
THE CHAMBER OF DEPUTIES IS EXPECTED TO DE-
BATE THE BILL THROUGHOUT THE NIGHT AND THE SENAT
-E TOMORROW AFTERNOON
CLOSING OF PARIS MARKETS TOMORROW THEREFORE
IS INEVITABLE
-0-
egraded Uclassified
3UE
-BY P
178
29 1937
CHAMBER FINANCE COMMISSION VOTES FULL POWER TO
CHAUTEMPS GOVERNMENT
PARIS- THE FINANCE COMMISSION OF THE
CHAMBER OF DEPUTIES VOTED FULL POWER TO THE
POPULAR FRONT GOVERNMENT TO DEAL WITH THE
FINANCIAL CRISIS BY A VOTE OF 17 TC 16
-0-
BONNET SAYS FRANC MUST BE DEVALUED
PARIS - UP- FRANCE HAS BEEN DRAINED OF
JUN 2.9 1937
GOLD TO THE EXTENT OF BILLIONS OF FRANCS AND IS
IN A CRITICAL POSITION WHICH CALLS FOR DEVALUA-
TION OF THE FRANC FROM ITS PRESENT LEVEL
GEORGES BONNET FINANCE MINISTER TOLD THE
FINANCE COMMISSION OF THE CHAMBER OF DEPUTIES
TODAY
BONNET REVEALED THAT THE TREASURY
HAD TO BORROW HEAVILY FROM STATE FUNDS TO MEET
ITS WEEK FND COMMITMENTS
-n-
-BY U P -
29 1937
ADD BONNETT ON FRANC
Y03
PARIS- BONNET REVEALED THAT NO MORE GOLD
REMAINS IN THE FRENCH EXCHANGE EQUALIZATION FUND
-0-
Uclassified
307
-BY U P-
Pia
ADD BONNET ON FRANC
JUN 29 1937
PARIS- BONNET TOLD THE COMMISSION IT IS
IMPOSSIBLE TO MAINTAIN THE FRANC AT THE PRESENT
RATE
HE REVEALED THAT THIS MORNING THE TREASURY
HAD ONLY 20 000 000 FRANCS ON HAND FOR MONTH-
END PAYMENTS DUE TOMORROW AND HAD TO BORROW
400 000 000 FRANCS FROM THE STATE DEPOSIT FUND
CAISSE DE DEPOT ET CONSIGNATION
HE INSISTED THAT THE GOVERNMENT NEEDED
FULL POWERS AND IT 15 IMPOSSIBLE TO BROOK DELAY
jou
ADD CHAMBER FINANCE COMMISSION VOTES POWERS
PARIS - IN THE CHAMBER-S FINANCE COMMIT-
TEE VOTE OF 17 AGAINST 16 ALL FIVE COMMUNIST
MEMBERS ABSTAINED AND THREE SOCIALISTS - THIS
INDICATES THE PROBABILITY OF THE COMMUNISTS
ABSTAINING BUT NOT OPPOSING THE CHAMBER
-0-
JUN 29 1937
Regraded Uclassified
308
BY UP
-
JUN 29 1937
ADD BONNET ON FRANC
PARIS - IN ADDITION TO THE DEFICIT IN
THE ORDINARY BUDGET BONNET SAID THE EXTRA-
ORDINARY BUDGET SHOWED A SHORTAGE OF 8 500 000
000 FRANCS - IN ADDITION TREASURY OBLIGAT-
IONS WHICH MUST BF MET BATWEEN NOW AND THE
END OF THE YEAR TOTAL BETWEEN 16 000 000 000
AND 18 000 000 080 FRANCS
ON OCT 5 THE GOVERNMENT MUST MEET 5 400
000 000 FRANCS OF MATURING UNRENEWABLE BONDS
ISSUED BY THE FORMER GERMAIN GERMAIN-MARTIN FINANCE
MINISTRY
ON DEC I THE FIRST BRITISH LOAN MADE
TO SUPPORT THE FRANC IN ITS EARLIER DIFFICUL-
TIES IS DUE - IT AMOUNTS TO 4 400 000
FRANCS - IN ADDITION THE BONDS is UED UNDER
THE VINCENT AURIOL MINISTRY AMOUNTING TO
BETWEEN 7 000 000 000 AND A 000 000 000 FRANCS
MUST BE MET DURING THE YEAR
-0-
BY UP
JUN 29 1937
AOD BONNET ON FRANC
PARIS - ON DEC I THE FIRST BRITISH LOAN MADE
TO SUPPORT THE FRANC IN ITS EARLIER DIFFICUL-
TIES IS DUE - IT AMOUNTS TO 4 400 000 000
FRANCS
-0-
309
,
-BY U P-
JUN 29 1937
BONNET ON FRANCS
PARIS- BONNET EXPLAINED THAT FRANCE-S WITH-
DRAWAL FROM THE THREE-POWER -POWER ACCORD WILL ELIMIN-
ATE THE NECESSIT OF MAINTAINING THE EXCHANGE
EQUALIZATION FUND WHICH AT PRESENT HAS 10 000
000 000 PAPER FRANCS BUT NO GOLD- THE BANK
NOTES WOULD THUS REVERT TO THE TREASURY TO AID
THE GOVERNMENT IN MEETING ITS OBLIGATIONS
DURING THE YEAR BONNET SAID TREASURY
OBLIGATIONS WOULD BE MET IN GREAT PART OF
RAISING THE UPPER LIMIT OF THE GOVERNMENT-S
CURRENT ACCOUNT AT THE BANK OF FRANCE PROBABLY
BETWEEN 10 000 000 000 AND 15 000 000 000 FRANCS
REGARDING FURTHER DEVALUATION OF THE FRANC
BONNET TOLD THE COMMISSION THAT THE GOVERNMENT
PLANS TO ELIMINATE THE LOWER LIMIT OF THE FRANC
RATE AS FIXED IN THE TRI-POWER AGREEMENT
-0-
-BY U P -
JUN 29 1937
ADO BONNET ON FRANC
PARIS- AFTER BONNET-S SPEECH THE
COMMISSION GAVE THE GOVERNMENT-S FINANCIAL
REHABILITATION PROGRAM ASKING EXTRAORDINARY
POWERS TO DEAL WITH THE SITUATION A FAVORABLE
BUT NARROW VOTE OF 17 TO 16
-0-
Regraded Uclassified
310
ADD BONNET ON FRANC
JUN 29 1937
PARIS - REUTERS - BONNET IS UNDERSTOOD
TO HAVE STATED TO THE FINANCE COMMISSION OF
THE CHAMBER THAT THE FRANC SHOULD BE ALLOWED
TO FIND ITS OWN LEVEL
-0-
-BY U P-
JUN 29 1937
ADD BONNET ON FRANC
PARIS- BONNET SPOKE IN THE FRANKEST TERMS
TO THE FINANCE COMMISSION AND GAVE FIGURES
OF FRANCE-S FINANCIAL PLIGHT- HE REVEALED THAT
BETWEEN JUNE I AND JUNE 22 OF THIS YEAR 5 200
000 000 FRANCS IN GOLD HAD FLOWED OUT OF THE
COUNTRY AND THAT BETWEEN JUNE 23 AND YESTERDAY
2 500 000 000 FRANCS HAD BEEN LOST
THE NEW FINANCE MINISTER REVEALED THAT
THE RFGULAR BUDGET SHOWED A DEFICIT OF BETWEEN
6 700 000 000 AND 8 000 000 FRANCS WHICH HE
PROPOSED TO COVER THROUGH NEW TAXATION
BONNET DECLARED THAT 17 000 000 000 FRANCS
FRESH CASH MUST BE RAISED BEFORE THE END OF THE
YEAR
-0-
Uclassified
311
June 29, 1937
(DJ 7:15 am)
London dealings in france Suspended.
London - In conformity with the decision of French authorities to
close the Paris Bourse during the consideration of measures dealing
with the country's financial crisis the London Bankers Committee
decided to suspend all dealings in French france until further notice.
Ruling rates of exchanges at 10:35 an follow. N.Y. cables 4.93,
Ameterdam 8.965, Italy 93.75, Berlin 12.292, Canada 4.93-3/4. Ruling
rates at 12.35 pm follow. N.Y. cables 4.9335, Amsterdam 8.9850, Italy
93.75, Berling 12.297, Canada 4.94-1/8.
graded Uclassified
312
DECISION TO CLOSE THE FRENCH BOURSE
AND THE TEMPORARY CESSATION OF DEALINGS IN
FRENCH FRANCS CAUSED FRESH UNCERTAINTY IN
02
LONDON STOCK MARKET AND ALTHOUGH THERE WAS
PRACTICALLY NO SELLING QUOTATIONS WERE
1937
MARKED DOWN AS A PRECAUTIONARY MEASURE - BRITISH
FUNDS WERE DULL WAR LOAN 3 I-25 BEING QUOTED
AT 99 15-16 - PDS - AMONG FOREIGN BONDS FRENCH
ISSUES WERE NOMINAL WITH THE 4S AROUND 14 1-4
PDS - GERMAN BONDS WERE STEADY WHILE CHINESE
BONDS WERE AGAIN SUPPORTED - KAFFIRS HAVE
BEEN SHARPLY MARKED DOWN ALTHOUGH THERE
WAS SOME RESISTANCE - WEST WITWATERSRAND WAS
QUOTED AT 8 3-4 POS AFTER SELLING AT 8 1-2 PDS -
COPPER ISSUES WERE EASIER WITH RIO TINTO
WEAK AT 19 PDS RHOKANA CORP 12 3-8 POS
AND DE BEERS DEFERRED 16 3-4 PDS AFTER
TOUCHING 16 1-2 PDS - INDUSTRIAL SHARES
WERE NEGLECTED WITH QUOTATIONS WHERE
CHANGED EASIER - MOTOR ISSUES AND THE
HEAVY INDUSTRY GROUP SHOWED A SMALL GENERAL
DECLINE - UNILEVER ISSUES WERE MARKED DOWN
ON OFFERINGS FROM AMSTERDAM - OIL SECURITIES
WERE DEPRESSED ON CONTINENTAL SELLING -
ROYAL OUTCH SOLD AT 46 1-2 POS SHELL
TRANSPORT & TRADING 5 15-32 PDS AND MEXICAN
EAGLE 185 - RUBBER ISSUES WERE DULL WITH
THE COMMODITY PRICE AT 9 9-160
- -
BY UP
Regraded Uclassified
936
LONDON.--IT WAS ANNOUNCED AT THE OPENING OF THE MARKETS TODAY THAT
THERE WOULD BE NO BEALINGS IN FRENCH FRANCS, DUE TO SUSPENSION OF
THE PARIS BOURSE.
THE AMERICAN DOLLAR OPENED AT $4.93-1/8 TO THE POUND AND HARBENED
TO $4.92-15/16.
SUSPENSION IN FRANC DEALINGS WAS ON AM INDEFINITE BASIS, ALL
DEALINGS BEING BANNED UNTIL FURTHER NOTICE.
6/29--R906A
Regraded Uclassified
314
LONDON EXCHANGE MARKET
JUN 29 1937
2th
LONDON - WITH DEALINGS IN FRENCH FRANCS
SUSPENDED CONSIDERABLY LESS TENSION PREVAILED
IN THE LONDON FOREIGN EXCHANGE MARKET AND
TURNOVER WAS SMALL
THERE WAS A FAIR DEMAND FOR AMERICAN
DOLLARS AND INTERMIT ENT SALES WERE REPORTED
TO HAVE BEEN MADE BY THE BRITISH CONTROL
TO COUNTER THE TREND
CONTINENTAL CURRENCIES MOVED ERRATICALLY -
DISAPPEARANCE OF FORWARD PREMIUMS ON BELGAS
AND SWIS FRANCS WAS EXPLAINED IN SOME
QUARTERS AS REFLECTING FEARS THAT IN THE EVENT
OF A FURTHER SHARP DEVALUATION OF THE
FRENCH FRANC SOME READJUSTMENT OF THESE
TWO CURRENCIES MIGHT BE NECESSARY
-0-
Regraded Uclassified
315
JUN 29 1937
OUTCH TO EASE FOREIGN CAPITAL ISSUE EMBARGO
AMSTERDAM - IT IS REPORTED FROM OFFICIAL
SOURCES THAT THE DUTCH AUTHORITIES INTEND TO
APPLY THE EMBARGO ON NEW FOREIGN CAPITAL
ISSUES IN HOLLAND IN A FAR MORE FLEXIBLE
MANNER
UNER THE NEW POLICY NEW ISSUES FROM
FOREIGN CORPORATIONS AND INSTITUTIONS WHOSE
BONDS OR SHARES ALREADY ARE QUOTED IN AMSTER-
DAM WILL NO LONGER BE FORBIDDEN IN PRINCIPLE
HOWEVER THE AUTHORITIES RESERVE THE RIGHT
TO JUDGE EACH SPECIAL CASE SEPARATELY
FROM THIS IT 15 NOT TO BE DEDUCED THAT
FOREIGN CORPORATIONS AND INSTITUTIONS WHICH DO
NOT HAVE BONDS OR SHARES QUOTED HERE WILL BE
BARRED ABSOLUTELY FROM FLOATING NEW ISSUES
IN THE CAPITAL MARKET HERE
-0-
Regraded Uclassified
3:6
PRESIDENT ROOSEVELT DECLARED TODAY THAT THE FRENCH HONETARY
CRISIS RAB HAB NO REFLECTION IN AMERICAN FISCAL AFFAIRS.
6/29--TP444P
AND ROOSEVELT, FRENCH FINANCE.
THE PRESIDENT WOULD NOT DISCUSS THE FRENCH MONETARY SITUATION
AND DEVALUATION OF THE FRANC, REFERRING PRESS CONFERENCE QUESTIONERS
TO THE TREASURY DEPARTMENT.
BE DID SAY, NOWEVER, THAT THERE WAS NO REFLECTION FROM THE
SITUATION IN WASHINGTON.
6/29--TP449P
Regraded Uclassified