851.5151/1771

Memorandum by the Adviser on International Economic Affairs (Feis) to the Secretary of State

Mr. Secretary: Following up this morning’s discussion, Mr. Dunn25 and myself were present at 2:30 this afternoon when the Secretary of the Treasury talked with Mr. Cochran and Mr. Wilson26 at Paris over the telephone.

The Secretary of the Treasury began by requesting Mr. Wilson to make an immediate appointment for Mr. Cochran to see Mr. Blum in his role of Minister of Finance.

He then instructed Mr. Cochran to address the following statement—which the Secretary of the Treasury characterized as a question—to Mr. Blum:

Ask Mr. Blum whether he would care to have the following question addressed to him:

“We assume that in view of the foreign exchange developments of the past few days you have explored the possibility of imposing exchange control. If you feel that your internal situation can best be stabilized by the temporary imposition of exchange restrictions which will control capital movements, we are prepared to discuss this question immediately with you and the British Treasury to the end that every effort be made by our three Governments to cooperate under the Tripartite Agreement with your efforts to stabilize your internal situation by the imposition of certain exchange restrictions.”

This is a somewhat different procedure, and somewhat a differently phrased message than was reported to the Secretary of State this morning. The changes were made after a meeting between the President [Page 271]and the Secretary of the Treasury at luncheon. [The first procedure envisaged had been to ask Mr. Blum for information regarding the exchange developments and his plans, and to intimate to him that if it would be useful to him we would be willing to enter into discussion with the British authorities with a view of seeing whether it was not possible to say to him, Mr. Blum, that if the French Government decided to introduce restricted exchange control, we would make every effort to reconcile this with the continued operation of the Tripartite Agreement.]26a

When, after having delivered the above quoted instruction to Mr. Cochran, the Secretary of the Treasury—holding Mr. Cochran on the telephone—asked whether I had any comments, I said first, that not having been notified of this change of procedure I had not had the opportunity to report it to you. Mr. Morgenthau was surprised at this, having assumed that Mr. Taylor27 would have cleared it with me, for which omission Mr. Taylor later expressed regret to the Secretary of the Treasury.

I then said, however, that I had a more important preoccupation; to wit, I was not sure that the form of the message brought out clearly enough the fact to the French Government that if they did employ exchange control, it must not be used to restrict the purchase or payment of American goods and thus interfere with or impair the value of our trade agreement. After some discussion back and forth, the Secretary of the Treasury instructed Cochran, who had continued to hold the telephone, to add this as a verbal explanation to the message. I had pointed out that we had already expressed this view to the French Government periodically over the last two years, beginning with a visit I paid to Bonnet in the summer of 1936. In order to get this clarification of Cochran’s instruction, I had to be rather insistent, in which position Mr. Dunn was in agreement, and so confirmed to Mr. Wilson on the telephone.

The Secretary of the Treasury asked both Cochran and Wilson whether they had any comments to make. They both said that they doubted whether this was the moment to take this step. Cochran stated that in his judgment it was premature; he explained that there was much doubt as to whether the Blum Government could stay in office any substantial period of time, and whether it might not be premature to make this move in advance of the coming into existence of a more firmly situated national government. Mr. Wilson made the same point though more briefly. To the comments of both the Secretary of the Treasury replied as he had replied to me in the course of the morning’s discussion when I had raised the same point that the President and himself had decided that this was the moment. Cochran was instructed to move with great despatch.

[Page 272]

Mr. Morgenthau indicated in every sense that he felt his decision had been finally made. Thus when Mr. Dunn and I brought up the possibility that Blum might use this to justify controlling the exchanges, if internal controversy arose on the subject, the Secretary of the Treasury remarked that he was going ahead anyhow. He referred to the President’s sense of the timeliness and imperativeness of this initiative.

Later in the afternoon Mr. Taylor telephoned me to say again that he regretted very much that he had not checked with me before the meeting in the Secretary’s Office. He explained it by saying that he was confident there was no basic misunderstanding.

I thanked Mr. Taylor and said that I thought that particular phase of the difficulty (the guarding of our trade treaty) worked out all right through the supplementary explanations and instructions given to Cochran. I added that looking back over the day’s events, however, I felt dissatisfaction at having been put under the necessity of bringing before the Secretary of State a matter of such importance for decision and action all within three or four hours, and of finding myself participating in discussions under such circumstances of pressure. I went further and said that I would not do it again and that I did not mind if he repeated this remark to the Secretary of the Treasury.

I read to Mr. Taylor cable No. 39628 just received from Paris conveying the opinion of the Embassy that the Blum Government is likely to have a “very difficult and brief existence”. I said that this was in my mind and no doubt also in the Embassy’s mind when they raised with the Treasury the question of whether this was the proper time to make this move or whether it might not be premature. Mr. Taylor stated that it was his opinion that it could just as well be done now as later. At all events, the President and the Secretary of the Treasury had made the decision.

A copy of Mr. Cochran’s report of his talk with Mr. Blum is attached.29

  1. James Clement Dunn, Adviser on Political Relations.
  2. Edwin C. Wilson, Counselor of Embassy in France.
  3. Brackets appear in the original.
  4. Wayne Taylor, Assistant Secretary of the Treasury.
  5. Dated March 14, 4 p.m., not printed.
  6. Not printed.