The Secretary of the Treasury ( Morgenthau ) to the Secretary of State

My Dear Cordell: I am writing to confirm a decision with respect to the Brazilian debt negotiations of which Mr. Gaston7b advised Mr. Feis by telephone today. This decision is that the Treasury will not participate in the present deliberations and negotiations looking to a settlement of the Brazilian debt matter, but will, however, stand ready and willing to supply any technical assistance in the way of research or computations that the State Department may desire.

I am impelled to reach this decision by the history and present status of the Brazilian negotiations.

You will recall my telephone conversation with you on Thursday, in which I told you that we had been asked to give within a matter of a few minutes our approval or disapproval to a despatch which it was proposed to transmit that day to Ambassador Caffery for communication to the Brazilian government. This despatch was to inform the Brazilian government that an offer in certain terms for a temporary settlement of the Brazilian dollar obligations would be regarded by this government as a “step forward.”

It seemed to me clearly impossible, as I informed you then, for us to reach an intelligent decision on so important a matter in the time afforded, particularly in view of the fact that we had been so lately informed of the negotiations in which Ambassador Caffery was engaged. Since the offer under discussion affected the interests of private creditors, I also had in mind our obligation to the Bondholders’ Protective Council, the representative of those creditors. I was impressed, too, by the fact that the proposed despatch undertook to state the considered view of this government, which seemed to me to suggest that it ought to have the careful consideration of all of us who have been asked to confer together on these problems.

I therefore suggested that the matter should be given more mature consideration at a meeting on this subject already scheduled for that [Page 565] afternoon, at which Mr. Feis, Mr. Gaston and others were to be present. Mr. Feis was therefore advised that in advance of that meeting the Treasury could give no decision and make no comment on the proposed despatch to Rio. The matter being considered in the State Department to be urgent, the despatch was, however, sent and the Treasury Department so advised.

I am now informed that a reply has been received from Rio which calls for a new decision and that the Treasury is invited to participate in the consideration of what further steps are to be taken.

The negotiations are now quite obviously far advanced and their pattern has been set. Without implying any criticism of what has been done, I do not feel that the Treasury can contribute anything of value by entering into the discussions at this late stage.


Henry Morgenthau, Jr.
  1. Herbert E. Gaston, Assistant Secretary of the Treasury.