462.00R296A1/157: Telegram

The Secretary of State to the Ambassador in Great Britain (Mellon)

163. It has come to my notice through various responsible, but unofficial sources, that one reason for the reported insistence of the British Government that German reparations be completely cancelled at the Lausanne Conference is because it is believed that this move would be welcomed in the United States. This is so totally contrary to the facts that I sent for the British Ambassador this morning and discussed the matter informally with him.16 I told him that it had been brought to my attention that the British Treasury was undertaking to represent our psychology in the matter to the French and read him a part of a letter in which the French Finance Minister was quoted as saying that the British gave as a reason for complete cancellation “their firm belief that if thereafter the Governments in Europe which were debtors to the American Government went with one accord to Washington, stating that they had completely wiped out the German reparations and that they [Page 674]would accept in their turn a complete cancellation of their obligations to Washington, the reception accorded to them would be much more cooperative than if they attempted to reach with Germany some settlement contemplating a later payment of a certain amount of reparations.” I told the Ambassador that I knew from many sources that the British Treasury was taking this position and that it was, in my opinion, the one most certain to affront American opinion and make subsequent adjustment impossible. I pointed out that, while these views were said to be held by Mr. Norman and various members of the Treasury, other British economists did not share them. I referred to the leading article in the Economist on May 14th17 as indicating a view which very nearly coincided with my own.

I informed the Ambassador that I understood that the interest of British bankers in German private credits was very large and that, judging from the views held by some American bankers similarly situated, I thought it likely that the views of these British bankers influenced the British Treasury, but I stated that the more farsighted American bankers held the opinion that cancellation which came by way of Germany’s repudiation of her reparations obligations would so upset German credit as to do much more harm than good to the private investments in Germany.

I reminded the Ambassador that, in making these statements to him, I was speaking solely from the stand point of the Executive and that, as he very well knew, I could not, even by implication, make any commitment except that as already shown by the President’s statements of last autumn, we would do our best to recommend a fair settlement, but that its ratification depended wholly upon Congress and that he knew the attitude last December. The Ambassador said he understood that perfectly.

We then briefly talked over, in general, the prospects of the Lausanne Conference. I called his attention to the Economist article which did contain a concrete program which seemed to me not very far distant from what I thought would be a wise course. I pointed out that, as regards the question of cancellation, I thought the British Treasury wrong and the French Treasury right, while as to the method of subsequently approaching this country we felt that the British stand for an individual approach was correct and the French stand for a joint approach incorrect.

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I asked the Ambassador that, in whatever report he might make of our conversation, to center it about the misrepresentation of our views by the British Treasury as explained above and stated that my object was to prevent misunderstanding between the two countries. He said he would do so.

I am very anxious to have these views fully understood by the British Treasury and as I understand that Mr. Atherton is a close personal friend of Sir Warren Fisher, it might well be that Atherton could explain the situation informally but clearly to him. Naturally I do not want to commit this Government to any specific plan and for that reason chose the article in the Economist as a British statement on the subject. The Ambassador will, of course, cable a summary of what I said to him, but, in order that there may be no mistake I should be glad to have you, in whatever manner you see fit, convey these views to the British Treasury.

  1. Mr. Stimson also discussed this subject with the French Ambassador; copies of the memoranda of conversations were sent to the American Embassies in France, Germany, and Great Britain.
  2. “Reparations and War Debts,” the second article in a series of four with the running-title “Factors in Recovery,” The Economist, vol. cxiv (May 14, 1932), p. 1059.