851.5151/1924: Telegram

The Ambassador in France (Bullitt) to the Secretary of State


1256. For Treasury.…

. . . . . . . . . . . . . .

Following is memorandum of Ambassador’s conversation with Secretary Morgenthau by telephone August 11:36

“I telephoned to Secretary Morgenthau at 10:00 o’clock this morning and said to him approximately the following:

[‘]After talking with you yesterday afternoon I spent an hour with Marchandeau. He was most anxious to have you make some sort of statement. I told him that I thought the causes of the weakness of the franc were real and not the result of fantastic rumors and that I could see small utility in a statement. He was very insistent however and said that he hoped we would not underrate the critical condition of the franc. He had been losing more than 2,000,000 pounds a day from the equalization fund. He still had more than 13,000,000,000 francs in the fund but no fund could withstand the present drain. Furthermore unless he could renew his 3-months bonds, 7,000,000,000 francs of which would fall due in August, and if the holders of those bonds should demand gold, his position would become catastrophic this month.

I questioned him with regard to the amount of these bonds the holders of which might ask for gold. He admitted that about 3½ billions were held by Government institutions which would renew them and that only about 3½ billion francs were in the hands of private holders and might not be renewed.

I again recurred to the underlying causes of the weakness of the franc all of which you know and Marchandeau said that he agreed with me as to the basic causes of the weakness and said that all he was trying to do was stave off a collapse until the month of November. He would bring in a budget about September 15th which would be balanced except for amounts which could be covered by loans for the national defense. Otherwise he had no plans for attacking the fundamental difficulties. “I have to be modest” he said “and if I can live until November I shall be satisfied”.

[Page 287]

He then went on to describe the possibilities if the present flight from the franc should continue. Here he made a statement which was somewhat different from the statement reported by Cochran. He said that although as a theoretical possibility the Government might continue to let gold run out of the equalization fund and then summon Parliament and ask for the imposition of exchange control he would positively not consider taking this course.

On the contrary, if the flight from the franc should continue he would keep a large sum in the equalization fund and not use it and would let the franc fall to any point to which it might go down without support from the equalization fund. He then again said that he felt that the rumors about a joint devaluation of the dollar, pound, and franc having been arranged between Washington and London and by you in France were considerable contributing factor in the present demand for gold in France and urgently requested me to obtain some sort of a statement that would put an end to these rumors.

Your visit to Paris has done a great deal of good in the general political situation in Europe by reenforcing the impression of closer collaboration between the Government of the United States and the French Government and I am just as loath after talking with Marchandeau as before to jeopardize this impression in any way.

If you should wish to make a statement of the sort that Marchandeau wants there is perhaps a formula which I discussed with Marchandeau that would satisfy him and conceivably help somewhat without detracting in any way from the effect of your visit.

I have had many cordial and interesting conversations since my arrival in France. In no one of those conversations has devaluation of the franc, the pound, or the dollar been mentioned in any way.’

I added to the Secretary of the Treasury that if he should feel inclined to make such a statement I could give it out formally at the Embassy at Paris. Secretary Morgenthau replied that he did not wish to make any personal statement and that he felt if any statement was to be made, it should be made as a formal statement in Washington, London and Paris simultaneously.

I then said to the Secretary of the Treasury that I had made this suggestion yesterday to Marchandeau and that he had felt that a statement by Secretary Morgenthau would be sufficient. The Secretary of the Treasury asked me to send him a memorandum of my conversation with Marchandeau yesterday and above memorandum of our telephone conversation of this morning and to transmit both to the Treasury Department by telegraph. He also asked me to refer the suggestion of simultaneous statements in Washington, London, and Paris to Marchandeau.”

Following is memorandum of Ambassador’s telephone conversation with Minister of Finance Marchandeau August 11:

“Immediately after my conversation on the telephone this morning with Secretary Morgenthau I spoke with Marchandeau on the telephone and informed him that the Secretary of the Treasury did not wish to make any statement from the rocks at Antibes but that if Monsieur Marchandeau felt that these fantastic rumors were causing the present weakness of the franc he believed the Government of the United States might participate in a simultaneous statement in Washington, London, and Paris.

Monsieur Marchandeau said that he would get in touch with London at once and would let me hear from him later in the day.”

  1. In the course of a nonofficial trip to several countries of western Europe, Mr. Morgenthau had visited Paris and at this time was at Antibes, France.