Memorandum by the Under Secretary of State (Cotton)

The subject matter of this cable21 was discussed fully by me with Mr. Durant of Lee, Higginson and Company, New York, several times in the last two days. It was later discussed by me with Dr. Burgess of the Reserve Bank and somewhat with Governor Young of the Reserve Board. I sent a copy of it to Young. He and Burgess discussed it and this morning he (Young) called up and told me that while his knowledge on the subject was a little sketchy, he saw no objection to it. In the course of my talk with Durant of Lee Higginson it appeared quite clear that Gilbert is wrong, in that the contract is conditional on the consent of the Department of State. Several cables have been sent by me to Gilbert via the Embassy in Berlin.

In my talks with Durant it became pretty clear to me that the French are trying for an independent advantage in the form of German participation in their own bond issue and if they got that they would withdraw objections to this loan. I am naturally amused and irritated to find Gilbert indirectly playing the game for a French quid pro quo and attempting to use us in the effort. I took the matter up in Cabinet this morning and stated my position—I feel it would be unwise to oppose this loan, first, because it means going in and attempting to control German action to put through the Young Plan, which I deem inadvisable; second, because it is unwise to attempt to control such a foreign loan, and third because I do not believe that in the present state of the money market this foreign loan would have any appreciable effect on domestic loan rates for local building, et cetera. The Cabinet position was indecisive. [Page 101] It was arranged that we should again ask the Reserve Board if they shared fully the opinion that the consent to this loan would be likely to have the result of injuriously affecting the domestic market. At the end of the Cabinet meeting, Mr. Mellon said he would talk to Governor Young about it and let me know.

J. P. C[otton]

[Note at end:] I have cleared this transaction to [Jerome D.] Green[e] of Lee Hig[ginson] at 6 p.m. March 25 J. P. C[otton].

  1. Telegram of March 22 from the Agent General for Reparation Payments, p. 96.