852.51/299a: Telegram
The Secretary of State to the Ambassador in Spain (Bowers)
60. Your letter of August 7, 1935,19 regrettably mislaid. Cochran, First Secretary, Paris, acts as Special Observer for Treasury Department in a number of countries, and visited Spain in that capacity at the request of Secretary Morgenthau to make a general appraisal of the Spanish financial situation. He was entirely unauthorized to [Page 721] engage in any negotiations regarding either monetary or trade matters, and as far as the State Department’s knowledge goes, he engaged in none or in discussions that can be construed in any way as negotiations. He refrained from approaching the Bank of Spain through your Embassy in order to avoid giving the Spanish Government the impression that he was on an official mission to Spain with the attendant implication that he might have power to negotiate. I am sorry that there has been any misunderstanding.
The question of a loan was brought up by Pan,20 not by Cochran. I would not wish to be too conclusive in any statement at this time as to the possibility of credit arrangements helpful to the Spanish Government, but Certain limitations on the possibilities are plain and serious. The international credit arrangements entered into by the Federal Reserve System in the past have been limited to relatively short term arrangements with central banks; recently there have been no important transactions even of this character. Any direct loan by the American Government would of course require new legislation. Please informally make the situation clear to Señor Pan, adding at the same time that if, taking these observations into account, he should wish to visit the United States informally to discuss the matter with us, we would be glad to talk with him.
It seems important to the Department that the question of a commercial agreement with Spain should not be complicated in any way by the loan in question. It is not impossible that at a later time a plan might be worked out under which the Export-Import Bank could make loans or advances in modest amounts if they definitely served to stimulate Spanish-American import and export trade, and look towards a solution of the exchange difficulties faced by American trade and the possible ultimate disappearance of the exchange control in Spain. Any such possibility, however, would require very deliberate consideration and much interdepartmental consultation. For both of the preceding reasons the Department does not believe it advisable that it be discussed actively at this moment. It is afraid that it might complicate and retard the negotiations now proceeding, as well as encourage other governments to stipulate for credit in connection with trade agreements.
Therefore please endeavor to have discussion of all possibilities of financial arrangements deferred until the trade agreement negotiations are completed.