The Acting Secretary of State to the Ambassador in Germany (Sackett)
120. I have taken up your telegram No. 121 of July 11, 2 a.m.49 with Governor Harrison of the Federal Reserve Bank of New York and also with President Hoover. We are fully aware of the critical situation in Germany, but it ought to be realized in return by the Germans that the financial situation in this country is by no means easy, and that the claims of bankruptcy from Germany that are combined with continued appeals for aid make any assistance from here more difficult. The suggestion has been made here that if the Reichsbank, backed by a guarantee from German industry, would urge German citizens as a patriotic move to place all their foreign credits in the Reichsbank on promise that they would receive repayment in [Page 251] the same currency after 6 months or some such stipulated period, the Reichsbank might in this manner receive a large volume of foreign exchange. Public opinion would certainly be stirred against the flight of capital by such a patriotic appeal. A great deal of the difficulty which now exists is without doubt a result of the fact that 2 weeks ago the German Government failed to effect drastic restriction of credit. Harrison feels that this should be done at once and has probably given that opinion to Luther.50 It is now so late that it is probable that the evil cannot be remedied by such steps, but if this action is combined with the above appeal it would at least demonstrate to the Central Banks that the Germans are sincerely trying to help themselves. Political concessions are certainly many times more difficult as a result of Luther’s trip,51 which was apparently ill-advised, than they would have been if they had been made spontaneously after the President’s proposal was announced. The French deny that they suggested any political conditions to Luther. Even if they did he was not wise to make the fact known. If you consider it wise you may of course give the German Government in an informal way the suggestions set forth in the early part of this telegram. Any further message before tomorrow night will be telephoned to me here at the President’s camp.