Memorandum from General George C. Marshall to President Harry S. Truman

TOP OECRET THE SECRETARY OF STATE WASHINGTON September 2, 1948 BRIEF FOR THE PRESIDENT Subject: Difficulties Encountered in Technical Discussions by the Military Governors in Berlin The Military Governors who are attempting to work out the practical arrangements under the directive sent them by the four governments have run into difficulties concerning the relationship of the proposed quadripartite financial commission and the German Bank of Emission of the Soviet Zone. Our interpretation of the directive is that the financial commission will have powers of supervision over that portion of the Bank's operation dealing with the issue and circulation of currency in the city of Berlin through the Stadtkontor and the various cre- dit institutions. This interpretation has been specifically con- firmed by Stalin and Molotov. Sokolovsky, however, professes ignorance of any such confirmation by Stalin and Molotov and contends that the directive does not expressly state this power of the financial commission. The issue is complicated by the fact that the German Bank of Emission of the Soviet Zone would issue currency for the whole Soviet Zone as well as for Berlin under the proposed arrangement. We have not contended that the financial commission for Berlin should have control powers over the bank in SO far as currency for the Soviet Zone is con- cerned but only over the handling of the Soviet mark in the city of Berlin. Sokolovsky's attitude is characteristic of Soviet tactics, which were fully anticipated during the Moscow discussions. We were strongly in favor of a definite reference, in the di- rective itself, to the powers of the financial commission over the German bank, but we could not get the British to go along with us. They seemed to feel, together with the French, that the definite statements of interpretation by Molotov and Stalin were adequate. The matter is of central importance and may prove to be the breaking point of the discussions. We have, DECLASSIFIED E. O. 11652, Sec. 3(E) and 5(D) or (E) 7-1575 Dept. of State letter, Aug.9,1973 By NLT. HC NARS Date 1-1176 TOP SECRET