The Chargé in Great Britain (Atherton) to the Acting Secretary of State
[Received July 22—1 a.m.]
258. From Stimson. The events of the day may be summarized as follows:
The result of the full Conference this morning was the appointment of a committee composed of the Finance Ministers to recommend forms of relief with special consideration to the plan of stabilizing at the present levels the short-term credits. This committee met and sat from 3:30 till 8 o’clock. The result of the meeting was the drafting of the following minute for the consideration of the full Conference tomorrow, Wednesday, but without making any recommendations. This minute reads as follows:
“The recent excessive withdrawals of capital from Germany have caused an acute financial crisis. These withdrawals have been caused by a lack of confidence, which is not justified by the economic situation of the country.
In order to insure the maintenance of the financial stability of Germany, which is essential in the interests of the whole world, the Governments represented at the Conference are ready to cooperate as far as lies within their power to restore confidence.
The Governments represented at the Conference are prepared to recommend to the financial institutions in their respective countries the following proposals for relieving the immediate situation:
- That the Central Bank credit of $100,000,000 recently granted to the Reichsbank under the auspices of the Bank for International Settlements should be renewed at maturity for a period of 3 months.
- That the Central Banks should be prepared at the request of Reichsbank and on conditions to be agreed with it to rediscount internal German commercial bills from the Reichsbank’s portfolio.
- That concerted measures should be taken by the financial institutions in the different countries with a view to maintaining the volume of the credits they have already extended to Germany.
The Conference considers that if these measures are carried through they will form a basis for more permanent action to follow”.
Bruening stated that if the three measures contained in the minute could be adopted he felt Germany might well pull through the present emergency but that all three would be necessary.
[Paraphrase.] From the discussions which took place concerning this draft it appeared that all countries would approve of point No. 1. [Page 306] Flandin and Snowden said relative to point No. 2 that they would raise at the full meeting certain reasonable objections which were not raised at the committee meeting because of the shortage of time. [End paraphrase.]
As to the third point Flandin and Mellon indicated that their Governments would agree and the British, while not saying definitely that they would not agree, had repeatedly stated in the meeting, first, that it was not clear that their banks could afford to maintain the present credits and Snowden even asked Flandin if France would take some of them over but Flandin refused; and second, Snowden had repeatedly during the meeting said that his Government felt that none of these measures went to the root of the German financial difficulty which was tremendous foreign obligations which she was not able to meet out of her own resources and had been meeting with borrowed money and that no permanent solution could be found unless this situation were revised.
[Paraphrase.] In private talks with us MacDonald has indicated that the British Government might have to take this position. We have already stated this to you over the telephone. [End paraphrase.]
As to No. 2 the Germans stated that the Reichsbank held 1½ billion marks or about 300 million dollars of German commercial paper which was free and had not been rediscounted and they also referred to the indemnity by a thousand industrial concerns as possible additional security. In answer to a question at the meeting Bruening admitted that France had made no withdrawals since June 20, and in fact had completed practically all of her withdrawals during the winter. [Stimson.]