The Counselor of Embassy in Spain (Thurston) to the Secretary of State

No. X–228

Sir: The publicity given to the activities in Washington of Mr. Miles M. Sherover in connection with the liquidation of blocked dollar exchange accounts in Spain, reported in the Embassy’s telegram number [Page 551] 776, of September 17,5 caused the London principals (National City Bank) of the International Banking Corporation to instruct their Barcelona branch to send a representative to Valencia to discuss the matter with the Spanish authorities. Mr. Benjamin Fulgenzi, the Bank official selected for this mission, called at the Embassy a few days ago seeking information with respect to the negotiations he presumed had already taken place. I suggested that it would probably clarify matters if he should first go to the Spanish authorities and thereafter speak with me. Mr. Fulgenzi accordingly called on the Director of the Exchange Control Bureau (Centro Oficial de Contratación de Moneda), and the Sub-Secretary of Finance (in the absence at Geneva of the Minister, Señor Negrín). Both professed (truthfully, I believe) to be entirely without information on the subject.

The attempt made by Mr. Sherover, mentioned in the Department’s telegraphic instruction 392, dated September 17, to obtain from the Secretary a statement in writing on this general subject, strengthens the impression I received from my conversations with him that the principal objective of these negotiations is to create a foundation for a new and appealing type of pro-Government propaganda. I have no doubt, however, that if the prospects for a successful campaign of propaganda should appear favorable, the Government would go so far as actually to negotiate with American creditors an arrangement for a “token payment” on their blocked accounts. In this connection, Mr. F. T. Caldwell, Vice President of the International Telephone and Telegraph Corporation (Spain), has informed me that during a recent conversation on the subject of his Corporation’s blocked accounts Señor Negrín bluntly stated that if he were convinced that the settlement of the account under discussion (approximately one million dollars) would produce a favorable reaction in the United States he would pay it.

Respectfully yours,

Walter C. Thurston
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