765.84/3717: Telegram

The Ambassador in Italy (Long) to the Secretary of State

54. My 843, November 18, noon, paragraph 3.19 From a well-informed confidential unofficial source I learn that the Italian Government is undertaking to transfer from France, England, Switzerland and other countries in Europe to the United States money and securities which were appropriated by the Italian Government from its citizens. I am informed a small part is also being sent to the Argentine. The movement is alleged to be for the purpose of removing the physical control of the securities from the jurisdiction of sanctionist countries. Furthermore, there is no need in those countries of balances for trade purposes which precludes the idea of selling them there to establish credits.

As approximately 70 per cent of these securities owned abroad were physically within the United States at the time of appropriation, and I am recently informed that very few of these securities have been liquidated, I invite your attention to the large increase in the market [Page 189] value of the American securities listed on the New York Exchange. I still feel as expressed in my telegram under reference that some attention should be given to the possibility of their being dumped on the market in case the market should break but not for retaliatory reasons. Some months ago there was an alleged agreement between the Governments of France and Italy to the end that Italy would not dump on the French market French Government bonds but that liquidation if needed would take place gradually so as not to disturb the market. We have not been able to verify this agreement with France but we have sound reason to believe it is correct. I call it to your attention for possible guidance but I cannot recommend that we be supplicants to that extent.

However, there is the real danger that the Italian Government would attempt to dispose of its securities at the highest price obtainable if the market gave the appearance of breaking. And in addition to the potential danger which existed as of the time of my telegram under reference which contemplated only 70 per cent of Italian holdings abroad there is now the danger involved in the increased amount which will run probably as high as 90 per cent in the United States of securities held abroad by the Italian Government and all valued at a higher level.