Memorandum of Conversation, by the Adviser on International Economic Affairs (Feis)

At the invitation of the Secretary of the Treasury, I was present this morning during a telephone conversation between him and Butterworth14 in London.

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It will be recalled that last evening the Secretary of the Treasury had informed him that this Government was considering a slight modification of its way of handling gold movements so that any future movements of gold into this country (or from domestic mines) up to the extent of $100,000,000 a year would not be sterilized but would be permitted to enter into the reserve of the Federal Reserve System. Mr. Butterworth had been instructed to inform the British Government that some such action was in contemplation and to state that the Treasury would be very pleased if the British Government could be considered as taking some parallel action or at least assuring the move a good reception in European markets.

Mr. Butterworth reported that he had spoken with Sir Frederick Phillips, Under Secretary of the Treasury, who had not yet been able to get in touch with the Chancellor of the Exchequer. Sir Frederick had himself expressed real interest in the idea, and while dwelling upon certain difficulties, had made an earnest request that the announcement should be postponed, at least until Monday, so that he might put the matter before the Chancellor of the Exchequer with the hope that the Chancellor would decide to support our action. Mr. Morgenthau stated that he would wait until the Chancellor had reached a decision.

In the course of his report Mr. Butterworth mentioned that among the matters that Sir Frederick Phillips had cited as indicating British policy was the fact that the British Government had during the past week taken the only immediate step that seemed available to it to implement the Van Zeeland report15—that is, to greatly relax the restrictions in the London market on foreign lending. Apropos of this remark I took the occasion to inquire of Mr. Butterworth whether the British Government had made any decisions as to further procedure or action on the Van Zeeland report. Mr. Butterworth said he knew of no such further decisions, but believed for one thing that the British Government was waiting to receive indications of our attitude in response to the note presented by Sir Ronald Lindsay16 and the approach made by Leith-Ross17 to himself.

I also took occasion to inform Mr. Butterworth that the press this morning had rumors to the effect that the British Cabinet was in discussion of a large sterling loan to the Italian Government. Mr. Butterworth stated that this was “bunk”.

He said that Eden18 had been talking to Grandi,19 and that there was active discussion, and possibly some real difference of opinion, [Page 263] within the Cabinet as to approaching the Italian and German Governments. But this was as far as the matter had progressed, he believed. He said that he would lunch with Waley of the Treasury on Tuesday, and check up.

In response to the Secretary’s inquiry as to the State Department’s attitude towards the discussions between himself and the British Treasury, I replied that we were entirely sympathetic.

  1. William W. Butterworth, Jr., Second Secretary of Embassy, who was charged with special duties in matters relating to the Treasury Department and the British Exchequer.
  2. See Foreign Relations, 1937, vol. i, pp. 671 ff., and British Cmd. 5648, Miscellaneous No. 1 (1938): Report Presented by Monsieur van Zeeland to the Governments of the United Kingdom and France … January 26, 1938.
  3. British Ambassador in the United States.
  4. Sir Frederick Leith-Ross, Chief British Economic Adviser.
  5. Anthony Eden, British Secretary of State for Foreign Affairs.
  6. Dino Grandi, Italian Ambassador in the United Kingdom.