Memorandum by the Secretary of State

Governor Harrison1 called up to say that there was a serious situation in Austria; that one of their most important banks2 was in trouble. He said that the Austrian Government had a plan to put up 15 millions of dollars itself and about half of that by the Austrian National Bank and by Rothschild in addition; that, however, it was uncertain whether this government contribution was conditioned on finding it possible to raise the money by a sale of government notes. He said that financial circles are afraid that a breakdown in this Austrian matter might spread trouble to the rest of Europe; that already repercussions have been felt on the German exchange, which had fallen off six points yesterday; that this was below the gold export point to Germany and might lead to exportations of gold; and it was felt that a failure in the Austrian situation would add to Germany’s causes for seeking a postponement of the payment of its own reparation obligations. Harrison said that there was much concern also in London and Paris, and there were rumors that France had forced the situation in order to make Germany ask for loans, on the basis of which France would get assistance in a solution of the Customs Union problem3 which would be favorable to her.

I first asked Harrison who in Washington knew about this matter. He said Eugene Meyer4 knew about it, and I asked him whether he had any suggested remedy. He said that he had nothing for the immediate emergency—nothing except rather drastic general suggestions which he could not discuss over the telephone.

I then called up the President and told him of this. He said that he had been following the trouble in Austria for several days. I told [Page 2] him that we had received a confirmation of this from our Minister in Austria. He said that it was believed that a part of the recent liquidation on our stock market had come from the unloading of securities from Austria due to this situation.

H[enry] L. S[timson]
  1. George Harrison, Governor of the Federal Reserve Bank of New York.
  2. The Credit Anstalt.
  3. See pp. 565 ff.
  4. Governor of the Federal Reserve Board.