Memorandum by the Secretary of State of a Conversation With Mr. Arthur Henderson at the American Embassy, Paris, July 15, 1931, at 6 p.m.

He61 came from a two-hour conference with Briand62 and Laval63 and told me that they had been discussing a loan to Germany. He said this would of course have to be a public loan and the French insisted that it should be a loan guaranteed by the three Powers, Britain, France and America, saying that otherwise they could not float it. I broke in with surprise and said that this was the first I had ever heard about a loan; that I had opposed the entire question now pending if relief to Germany was of relief in the shape of bank [Page 258] credits. Henderson said that Norman, head of the Bank of England, says he can’t lend any more from the bank. He saved the Anstalt Bank.64 He has lent money, I think, to Poland and he enumerated others and now he is afraid he will not get back all he has lent and claims he will not lend any more. The Bank of France takes the same position.

I at once said that, of course, our central bank would not lend any money under any such circumstances, if the Bank of England and the Bank of France would not, and I then cross-examined him about this loan which he had been discussing with the French. It was to be a long-term loan, if possible, and it was to be guaranteed, but when I came to press him on what he meant by guarantees he was very indefinite. He said he did not know enough about finance, that it was a matter for the Treasury. I told him I was very much surprised at the suggestion of a loan for the aid of Germany being guaranteed by France and Britain and America, and I asked whether he meant political guarantees, saying that we did not believe in mixing political guarantees with this rescue of Germany, and I told him the position I had taken with respect to the same subject when it had first come up from Italy.65 I said that we certainly would not go into a guarantee which related to a political question in Europe, as it would at once involve us in the kind of European problems we had always kept out of. I then asked him whether they could possibly have meant merely an investigation into the application of the loan with a view to its ultimate security, saying that I had heard that the French had criticised the improvidence with which loans were made by American banks between 1924 and 1929 and I did not blame them for seeking that kind of a guarantee if that was what he meant. He said it might be that, but I could see that he was not certain on that and that his whole mind was vague on the subject. He did mention that they had let drop the remark that they did not care to lend money to Bruening and then have it spent by Hitler. I took this to indicate that the French had in mind the importance of lending directly to the industries instead of to the Government of Germany, a point on which I have always felt sympathy with the French point of view even when I heard that it was in issue between Washington and Paris66 during my voyage over. Finally I asked him who could make clear to me what the character of the loan was which the French had in mind and also the character of the guarantees and he suggested that I talk it over with Flandin.67

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In the course of the talk he told me that Germany had been very foolish and stubborn in her attitude towards the French at the time of the President’s proposal and he told me that before the President’s proposal was made he had tried to get Germany voluntarily and as a generous gesture to give up her second battleship, the Deutschland. He mentioned incidentally that he thought she was going to give up the third one. I told him that I thoroughly sympathized with the desire to have Germany give up the battleship. I only objected to the method which the French were reported to have used, namely, of trying to force her to do it under the pressure of her financial distress. I said that these political questions which France was seeking to force a settlement of were of such importance and breadth that they must be settled by careful negotiations between competent negotiators and that a settlement made when one negotiator was under duress or strangled by his financial necessities would not be either permanent or lead to good results, that the most important thing in this whole situation was that France and Germany should come out of it closer together rather than farther apart, and that this was the ultimate aim which I had had in view throughout. He said he agreed with me perfectly and that he had the same view. I then told him confidentially of Grandi’s68 suggestion of a year’s holiday on the part of all countries in the laying down of warships69 and I said I thought that might offer a way of getting Germany to give up her battleship with honor and saving her face. I said I thought it was pretty hard for the most highly armed nation in Europe, France, to be seeking to use duress on the country which was already the most disarmed, viz. Germany. He seemed impressed by Grandi’s suggestion and I asked him to think it over and let me hear his views. He said that he would have to get the views of his naval people because they always wanted to keep their navy yards going. I said I knew that, but in this case they might solve that difficulty by making the suggestion apply only to the laying down of new ships, thus leaving the construction work on vessels already laid down to go on.

He told me that the French were insisting that he should go to Germany and then stop in Paris on his way back and report to them as to the conditions. I said I thought that was a pretty big order for him to assume and that I myself would not undertake any such responsibility. He said that he knew Germany pretty well, that he had kept a membership in the Internationale and knew all the Socialists and would see some of them over there. He told me that he wanted the French to invite Bruening and Curtius70 to come to Paris next [Page 260] week when he, Henderson, returns, in order that they might then have a conference, but so far he has failed to get them to agree to this. He then spoke of the Washington suggestion of a statesman’s conference, which I had just heard of in the cable from Washington to Paris, No. 354, of July 14. I found that Mr. Henderson knew more of the details of this than I myself had been given in the cable. I pulled the cable out of my pocket and he had evidently seen it. I pointed out that Norman’s suggestion of a meeting of the heads of States in which the whole question of reparations, including a reconsideration of the Young Plan should be discussed was one which my Government would never go into. He said he knew that and agreed that it was impossible at this time and he incidentally said that if the French knew any such proposition was even suggested they would have a fit, because they were more afraid of such a revision of the whole question than anyone else. But he was anxious that the second suggestion of a meeting of ministers limited to the sole purpose of considering the present emergency should take place and take place as soon as possible. But he said he had thus far been unable to persuade the French to agree to it. We separated, I telling him that I would try to find out from Flandin the details as to the kind of loan and guarantee which the French were thinking of before our conference with the French tomorrow at 11 o’clock.

  1. i. e., Mr. Henderson.
  2. Aristide Briand, French Minister for Foreign Affairs.
  3. Pierre Laval, President of the Council of Ministers of France.
  4. See pp. 21, 23, and 24.
  5. See pp. 219 ff.
  6. See pp. 42 ff.
  7. Pierre E. Flandin, French Minister of Finance.
  8. Dino Grandi, Italian Minister for Foreign Affairs.
  9. See pp. 440 ff.
  10. Julius Curtius, German Minister for Foreign Affairs.